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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 20-F

(Mark One)



| ̈ | Registration statement pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934
|- | ------------------------------------------------------------------------------------------------

or



|x | Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2011.
|- | ---------------------------------------------------------------------------------------------------------------------------------

or



| ̈ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from              to



| ̈ | Shell company report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
|- | --------------------------------------------------------------------------------------------

Commission file number 000-51387





Focus Media
Holding Limited

(Exact Name of Registrant as Specified in Its Charter)





Cayman Islands

(Jurisdiction of Incorporation or Organization)

Unit No. 1, 20th
Floor, The Centrium

60 Wyndham Street, Central, Hong Kong

(Address of Principal Executive Offices)

Contact Person: Mr. Kit Leong Low

Chief Financial Officer

Phone: +852-3752-8009

Facsimile: +852-3583-0082

Address: Unit No. 1, 20th Floor, The
Centrium

60 Wyndham Street, Central, Hong Kong

*(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)





Securities registered or to be registered pursuant to Section 12(b) of the Act:



|                                                |  |                                          
|----------------------------------------------- |  | -----------------------------------------
|Title of Each Class                             |  | Name of Each Exchange on Which Registered
|                                                | 
|Ordinary Shares, par value US$0.00005 per share |  | Nasdaq Global Market                     

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the Issuers classes of capital or common stock as of the close of the period covered by the
annual report.

646,452,740 Ordinary Shares





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.  Yes x  No  ̈

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934.  Yes  ̈  No x

Note  Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those
Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registration was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days.  Yes x  No  ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No  ̈

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):



|                           |  |                      |  |                                               |  |                             
|-------------------------- |  | -------------------- |  | --------------------------------------------- |  | ----------------------------
|Large accelerated filer  x |  | Accelerated filer   ̈ |  | Non-accelerated filer   ̈                      |  | Smaller reporting company   ̈
|                           |  |                      |  | (Do not check if a smaller reporting company) |  |                             

Indicate by check mark which basis of accounting the registrant has used to prepare the financial
statements included in this filing:



|             |  |                                                                                                          |  | 
|------------ |  | -------------------------------------------------------------------------------------------------------- |  | 
|U.S. GAAP  x |  | International Financial Reporting Standards as issued
by the International Accounting Standards Board   ̈ |  | 

Indicate by check mark which financial statement item the registrant has elected to
follow.  Item 17   ̈ Item 18  x

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).  Yes  ̈  No x

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS.)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution
of securities under a plan confirmed by a court.  Yes  ̈  No  ̈









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FOCUS MEDIA HOLDING LIMITED

FORM 20-F ANNUAL REPORT

FISCAL YEAR ENDED DECEMBER 31, 2010

Table of Contents



|                                                                                      |  |      |     | 
|------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                      |  | Page |    
|SUPPLEMENTAL INFORMATION                                                              |  |      | 1   | 
|FORWARD-LOOKING STATEMENTS IN THIS ANNUAL REPORT MAY NOT BE REALIZED                  |  |      | 1   | 
|PART I                                                                                |  |      | 2   | 
|ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                         |  |      | 2   | 
|ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE                                       |  |      | 2   | 
|ITEM 3. KEY INFORMATION                                                               |  |      | 2   | 
|ITEM 4. INFORMATION ON THE COMPANY                                                    |  |      | 35  | 
|ITEM 4A. UNRESOLVED STAFF COMMENTS                                                    |  |      | 61  | 
|ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                  |  |      | 61  | 
|ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                    |  |      | 94  | 
|ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                             |  |      | 99  | 
|ITEM 8. FINANCIAL INFORMATION                                                         |  |      | 106 | 
|ITEM 9. THE OFFER AND LISTING                                                         |  |      | 107 | 
|ITEM 10. ADDITIONAL INFORMATION                                                       |  |      | 108 | 
|ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   |  |      | 118 | 
|ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       |  |      | 118 | 
|PART II                                                                               |  |      | 118 | 
|ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              |  |      | 118 | 
|ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |  |      | 119 | 
|ITEM 15. CONTROLS AND PROCEDURES                                                      |  |      | 120 | 
|ITEM 16.                                                                              |  |      | 122 | 
|ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT                                            |  |      | 122 | 
|ITEM 16B. CODE OF ETHICS                                                              |  |      | 122 | 
|ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                      |  |      | 122 | 
|ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                  |  |      | 122 | 
|ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS       |  |      | 123 | 
|ITEM 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT                                |  |      | 124 | 
|ITEM 16G. CORPORATE GOVERNANCE                                                        |  |      | 124 | 
|PART III                                                                              |  |      | 124 | 
|ITEM 17. FINANCIAL STATEMENTS                                                         |  |      | 124 | 
|ITEM 18. FINANCIAL STATEMENTS                                                         |  |      | 124 | 
|ITEM 19. EXHIBITS                                                                     |  |      | 125 | 
|INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                                            |  |      | F-1 | 



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SUPPLEMENTAL INFORMATION

In this annual report, unless otherwise indicated:



| |  |  | the terms we, us, our company, our and Focus Media refer to Focus Media Holding Limited,
its subsidiaries and its consolidated affiliated 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 and subsequently disposed of in 2010;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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, 2009, 2010 and 2011, and
as of December 31, 2010 and 2011.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

FORWARD-LOOKING STATEMENTS IN THIS
ANNUAL REPORT

MAY NOT BE REALIZED

This annual report on Form 20-F contains forward-looking statements that are based on our current expectations, assumptions, estimates and projections about us and our industry. All statements other than
statements of historical fact in this annual report are forward-looking statements. These forward-looking statements can be identified by words or phrases such as may, will, expect, anticipate,
estimate, plan, believe, is/are likely to or other similar expressions. The forward-looking statements included in this annual report relate to, among others:



| |  |  | our goals and strategies;
| | - |  | -------------------------



| |  |  | our future business development, financial condition and results of operations;
| | - |  | -------------------------------------------------------------------------------



| |  |  | projected revenues, profits, earnings and other estimated financial information;
| | - |  | --------------------------------------------------------------------------------



| |  |  | our plans to expand our advertising network into new cities and regions in China
| | - |  | --------------------------------------------------------------------------------



| |  |  | the growth of our LCD display network, poster frame network, in-store network, movie theater and traditional outdoor billboards;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | our plan to identify and create additional advertising platforms that target specific consumer demographics, which could allow us to increase our
advertising revenue;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | those other risks identified in Item 3. Key Information  D. Risk Factors of this annual report.
| | - |  | --------------------------------------------------------------------------------------------------

These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these
forward-looking statements are reasonable, we cannot assure you that our expectations will turn out to be correct. Our actual results could be materially different from or worse than our expectations.



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The forward-looking statements made in this annual report relate only to events or
information as of the date on which the statements are made in this annual report. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect
the occurrence of unanticipated events.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

A. Selected Financial Data

The following selected consolidated statement
of operations data for the years ended December 31, 2009, 2010 and 2011 and the consolidated balance sheet data as of December 31, 2010 and 2011 have been derived from our audited consolidated financial statements, which are included
elsewhere in this annual report. Our consolidated financial statements are prepared and presented in accordance with U.S. GAAP. The historical results are not necessarily indicative of results to be expected in any future period.

Our selected consolidated statement of operations data for the years ended December 31, 2007 and 2008 and our consolidated balance
sheets as of December 31, 2007, 2008 and 2009 have been derived from our audited consolidated financial statements, which are not included in this annual report.

The selected consolidated financial information for the periods and as of the dates indicated should be read in conjunction with our financial statements and the accompanying notes and Item 5.
Operating and Financial Review and Prospects.

In April 2005, we commenced commercial operations of our in-store network
and through our acquisition of Framedia, we commenced operation of our poster frame network on January 1, 2006. In February 2006, we acquired Target Media and in March 2006, we acquired Focus Media Wireless. In March 2007, we acquired Allyes.
In January 2008, we acquired CGEN.

In December 2008, we disposed of our in-store advertising operations of CGEN, which
resulted in a $190.5 million disposal loss, which includes the write-off of the carrying value of intangible assets and goodwill of $39.5 million and $145.6 million, respectively. This disposal loss was recorded as other operating expense in the
consolidated statement of operations. Also in 2008, the disposal of our mobile handset advertising business due to changes in market conditions and the regulatory environment resulted in a loss from disposal of $92.1 million. In September 2009, we
terminated our agreement of December 2008 to sell substantially all of the assets of our advertising networks using LCD displays, in-store and poster frame to SINA. In 2008, these assets were accounted for as assets-held-for-sale and their results
were presented as discontinued operations. Following the termination of the agreement in September 2009, these assets have been reclassified as assets-held-for-use and the results have been presented as continuing operations for all periods
presented.

In the third and fourth quarters of 2009, we restructured continuing operations and disposed of interests in
certain subsidiaries in our Internet segment. The results of these companies were accounted for as discontinued operations for all periods presented in accordance with U.S. GAAP.

In January 2010, certain employees and management of Allyes and certain members of the Companys management and directors entered
into a definitive agreement with the Company and Allyes to buy-out an aggregate 38% interest in Allyes from the Company for a cash consideration of $13.3 million, which was determined based on the estimated fair value of $35 million as of
January 1, 2010 which was derived from an income approach methodology. On July 30, 2010, the Company further sold its entire remaining 62% ownership to Silver Lake, a third party investor, at a cash consideration of $124 million.
Therefore, the results of Allyes and its consolidated subsidiaries and affiliates have been classified as discontinued operations for all the periods presented.



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|                                                                            |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|--------------------------------------------------------------------------- |  | --------------------------------------------------------------- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | - |  | ---- | ----------- | - |  | - | ----------- | -
|                                                                            |  | For the years ended December 31                                 |            
|                                                                            |  | 2007                                                            |             |   | 2008 |   |             | 2009 |  |   | 2010        |   |  | 2011 |            
|                                                                            |  | (In thousands of U.S. Dollars, except share and per share data) |            
|Selected Consolidated Statements of Operations Data:                        |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|Net revenues:(1)                                                            |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|LCD displays                                                                |  | $                                                               | 184,643     |   |      | $ | 244,540     |      |  | $ | 208,799     |   |  | $    | 297,642     |   |  | $ | 444,365     |  
|In-store                                                                    |  |                                                                 | 27,444      |   |      |   | 60,719      |      |  |   | 30,346      |   |  |      | 37,777      |   |  |   | 56,374      |  
|Poster frame(2)                                                             |  |                                                                 | 85,472      |   |      |   | 146,751     |      |  |   | 98,962      |   |  |      | 121,893     |   |  |   | 185,449     |  
|Movie theatre                                                               |  |                                                                 | 5,259       |   |      |   | 10,335      |      |  |   | 9,436       |   |  |      | 18,095      |   |  |   | 50,835      |  
|Traditional outdoor billboard                                               |  |                                                                 | 32,046      |   |      |   | 66,843      |      |  |   | 49,621      |   |  |      | 40,908      |   |  |   | 55,597      |  
|                                                                            |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|Total net revenues                                                          |  |                                                                 | 334,864     |   |      |   | 529,188     |      |  |   | 397,164     |   |  |      | 516,315     |   |  |   | 792,620     |  
|                                                                            |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|Cost of revenues:                                                           |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|LCD displays                                                                |  |                                                                 | 52,648      |   |      |   | 80,451      |      |  |   | 76,418      |   |  |      | 67,513      |   |  |   | 85,847      |  
|In-store                                                                    |  |                                                                 | 23,502      |   |      |   | 61,834      |      |  |   | 24,170      |   |  |      | 23,432      |   |  |   | 20,582      |  
|Poster frame(2)                                                             |  |                                                                 | 28,086      |   |      |   | 59,815      |      |  |   | 95,401      |   |  |      | 84,487      |   |  |   | 110,370     |  
|Movie theatre                                                               |  |                                                                 | 2,941       |   |      |   | 6,598       |      |  |   | 7,063       |   |  |      | 13,849      |   |  |   | 25,753      |  
|Traditional outdoor billboard                                               |  |                                                                 | 25,555      |   |      |   | 50,346      |      |  |   | 38,022      |   |  |      | 32,409      |   |  |   | 47,092      |  
|                                                                            |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|Total cost of revenues                                                      |  |                                                                 | 132,732     |   |      |   | 259,044     |      |  |   | 241,074     |   |  |      | 221,690     |   |  |   | 289,644     |  
|                                                                            |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|Gross profit                                                                |  |                                                                 | 202,132     |   |      |   | 274,144     |      |  |   | 156,090     |   |  |      | 294,625     |   |  |   | 502,976     |  
|                                                                            |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|Operating expenses:                                                         |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|General and administrative                                                  |  |                                                                 | 42,452      |   |      |   | 79,162      |      |  |   | 88,833      |   |  |      | 79,760      |   |  |   | 127,013     |  
|Selling and marketing                                                       |  |                                                                 | 53,523      |   |      |   | 82,258      |      |  |   | 79,787      |   |  |      | 103,722     |   |  |   | 147,717     |  
|Impairment loss                                                             |  |                                                                 |            |   |      |   | 377,629     |      |  |   | 63,646      |   |  |      | 5,736       |   |  |   |            |  
|Other operating expenses (income), net                                      |  |                                                                 | (7,615      | ) |      |   | 183,113     |      |  |   | 13,111      |   |  |      | (14,144     | ) |  |   | (16,138     | )
|                                                                            |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|Total operating expenses                                                    |  |                                                                 | 88,360      |   |      |   | 722,162     |      |  |   | 245,377     |   |  |      | 175,074     |   |  |   | 258,592     |  
|                                                                            |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|Income (loss) from operations                                               |  |                                                                 | 113,772     |   |      |   | (452,018    | )    |  |   | (89,287     | ) |  |      | 119,551     |   |  |   | 244,384     |  
|Investment loss                                                             |  |                                                                 |            |   |      |   |            |      |  |   |            |   |  |      | 1,288       |   |  |   |            |  
|Interest income                                                             |  |                                                                 | 9,239       |   |      |   | 7,130       |      |  |   | 4,946       |   |  |      | 7,260       |   |  |   | 15,539      |  
|Interest expense                                                            |  |                                                                 | 17          |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   | 717         |  
|                                                                            |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|Income (loss) from continuing operations before income taxes                |  |                                                                 | 122,994     |   |      |   | (444,888    | )    |  |   | (84,341     | ) |  |      | 125,523     |   |  |   | 259,206     |  
|Income taxes                                                                |  |                                                                 | 5,912       |   |      |   | 25,278      |      |  |   | 13,780      |   |  |      | 22,336      |   |  |   | 54,761      |  
|Loss from equity method investee                                            |  |                                                                 |            |   |      |   |            |      |  |   |            |   |  |      |            |   |  |   | 43,633      |  
|                                                                            |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|Net income (loss) from continuing operations                                |  |                                                                 | 117,082     |   |      |   | (470,166    | )    |  |   | (98,121     | ) |  |      | 103,187     |   |  |   | 160,812     |  
|Net income (loss) from discontinued operations, net of tax                  |  |                                                                 | 28,048      |   |      |   | (300,672    | )    |  |   | (111,612    | ) |  |      | 83,078      |   |  |   |            |  
|                                                                            |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|Net income (loss)                                                           |  |                                                                 | 145,130     |   |      |   | (770,838    | )    |  |   | (209,733    | ) |  |      | 186,265     |   |  |   | 160,812     |  
|Less: Net income (loss) attributable to noncontrolling interests            |  |                                                                 | 694         |   |      |   | (150        | )    |  |   | 3,524       |   |  |      | 1,991       |   |  |   | (1,865      | )
|                                                                            |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|Net income (loss) attributable to Focus Media Holdings Limited Shareholders |  | $                                                               | 144,436     |   |      | $ | (770,688    | )    |  | $ | (213,257    | ) |  | $    | 184,274     |   |  | $ | 162,677     |  
|                                                                            |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|Income (loss) per share from continuing operations  basic                  |  | $                                                               | 0.20        |   |      | $ | (0.73       | )    |  | $ | (0.15       | ) |  | $    | 0.15        |   |  | $ | 0.24        |  
|                                                                            |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|Income (loss) per share from continuing operations  diluted                |  | $                                                               | 0.19        |   |      | $ | (0.73       | )    |  | $ | (0.15       | ) |  | $    | 0.14        |   |  | $ | 0.23        |  
|                                                                            |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|Income (loss) per share from discontinued operations  basic                |  | $                                                               | 0.05        |   |      | $ | (0.47       | )    |  | $ | (0.17       | ) |  | $    | 0.12        |   |  | $ |            |  
|                                                                            |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|Income (loss) per share from discontinued operations  diluted              |  | $                                                               | 0.05        |   |      | $ | (0.47       | )    |  | $ | (0.17       | ) |  | $    | 0.11        |   |  | $ |            |  
|                                                                            |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|Income (loss) per share  basic                                             |  | $                                                               | 0.24        |   |      | $ | (1.20       | )    |  | $ | (0.33       | ) |  | $    | 0.26        |   |  | $ | 0.24        |  
|                                                                            |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|Income (loss) per share  diluted                                           |  | $                                                               | 0.24        |   |      | $ | (1.20       | )    |  | $ | (0.33       | ) |  | $    | 0.25        |   |  | $ | 0.23        |  
|                                                                            |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|Shares used in calculating basic income (loss) per share                    |  |                                                                 | 590,387,396 |   |      |   | 643,989,522 |      |  |   | 651,654,345 |   |  |      | 707,846,570 |   |  |   | 671,401,000 |  
|                                                                            |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  
|Shares used in calculating diluted income (loss) per share                  |  |                                                                 | 608,326,450 |   |      |   | 643,989,522 |      |  |   | 651,654,345 |   |  |      | 731,658,265 |   |  |   | 693,971,258 |  
|                                                                            |  |                                                                 |             |   |      |   |             |      |  |   |             |   |  |      |             |   |  |   |             |  



|                                                                                                                                                                                                                                                             |  |                                |           |  |      |   |           |      |  |   |           |  |  |      |           |  |  |   |           | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------ | --------- |  | ---- | - | --------- | ---- |  | - | --------- |  |  | ---- | --------- |  |  | - | --------- | 
|                                                                                                                                                                                                                                                             |  | As of December 31              |          
|                                                                                                                                                                                                                                                             |  | 2007                           |           |  | 2008 |   |           | 2009 |  |   | 2010      |  |  | 2011 |          
|                                                                                                                                                                                                                                                             |  | (In thousands of U.S. Dollars) |          
|Consolidated Balance Sheet Data:                                                                                                                                                                                                                             |  |                                |           |  |      |   |           |      |  |   |           |  |  |      |           |  |  |   |           | 
|Cash and cash equivalents                                                                                                                                                                                                                                    |  | $                              | 450,416   |  |      | $ | 142,434   |      |  | $ | 568,159   |  |  | $    | 454,476   |  |  | $ | 331,218   | 
|Other current assets(3)                                                                                                                                                                                                                                      |  |                                | 431,043   |  |      |   | 665,137   |      |  |   | 269,279   |  |  |      | 397,885   |  |  |   | 701,665   | 
|Non-current assets                                                                                                                                                                                                                                           |  |                                | 1,258,079 |  |      |   | 724,723   |      |  |   | 556,005   |  |  |      | 531,799   |  |  |   | 708,554   | 
|Total assets                                                                                                                                                                                                                                                 |  |                                | 2,139,538 |  |      |   | 1,532,294 |      |  |   | 1,393,443 |  |  |      | 1,384,160 |  |  |   | 1,741,437 | 
|Total current liabilities                                                                                                                                                                                                                                    |  |                                | 276,287   |  |      |   | 318,864   |      |  |   | 197,056   |  |  |      | 172,719   |  |  |   | 364,410   | 
|Total non-current liabilities                                                                                                                                                                                                                                |  |                                | 6,394     |  |      |   | 13,540    |      |  |   | 5,435     |  |  |      | 9,998     |  |  |   | 104,205   | 
|Total liabilities                                                                                                                                                                                                                                            |  |                                | 282,681   |  |      |   | 332,404   |      |  |   | 202,491   |  |  |      | 182,717   |  |  |   | 468,615   | 
|Ordinary shares ($0.00005 par value; 19,800,000,000 shares authorized in 2007, 2008, 2009, 2010 and 2011; 640,230,852,
646,081,710, 725,278,005, 677,934,625 and 646,452,740 shares issued and outstanding in 2007, 2008, 2009, 2010 and 2011, respectively) |  |                                | 32        |  |      |   | 32        |      |  |   | 36        |  |  |      | 34        |  |  |   | 32        | 
|Other equity                                                                                                                                                                                                                                                 |  |                                | 1,854,912 |  |      |   | 1,197,752 |      |  |   | 1,189,088 |  |  |      | 1,200,445 |  |  |   | 1,253,138 | 
|Total Focus Media Holdings Limited shareholders equity                                                                                                                                                                                                      |  |                                | 1,854,944 |  |      |   | 1,197,784 |      |  |   | 1,189,124 |  |  |      | 1,200,479 |  |  |   | 1,253,170 | 
|Noncontrolling interests                                                                                                                                                                                                                                     |  |                                | 1,913     |  |      |   | 2,106     |      |  |   | 1,828     |  |  |      | 964       |  |  |   | 19,652    | 
|Total equity                                                                                                                                                                                                                                                 |  |                                | 1,856,857 |  |      |   | 1,199,890 |      |  |   | 1,190,952 |  |  |      | 1,201,443 |  |  |   | 1,272,822 | 



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|(1) | Advertising service revenue is presented net of business tax. Business tax on advertising service revenue from our LCD display network amounted to $20.3 million, $24.7
million, $20.6 million, $31.0 million and $42.2 million in 2007, 2008, 2009, 2010 and 2011, respectively. Business tax on advertising service revenue from our in-store network amounted to $2.8 million, $6.3 million, $3.2 million, $4.0 million and
$5.3 million for 2007, 2008, 2009, 2010 and 2011, respectively. Business tax on advertising service revenue from our poster frame network amounted to $7.9 million, $13.9 million, $9.6 million, $12.2 million and $17.1 million, for 2007, 2008, 2009,
2010 and 2011, respectively. Business tax on advertising service revenue from our movie theater network amounted to $0.3 million, $0.6 million, $0.3 million, $1.9 million and $2.5million for 2007, 2008, 2009, 2010 and 2011, respectively. Business
tax on advertising service revenue from our traditional outdoor billboards amounted to $1.0 million, $2.2 million, $1.2 million, $0.8million and $1.1 million for 2007, 2008, 2009, 2010 and 2011, respectively. Business tax includes aggregating
business tax and surtax of 5.55% and cultural industries tax ranging from 0% to 3.0% of our gross advertising service revenue. Commencing from January 1, 2011, the maximum cultural industries tax levied was reduced from 4% to 3%.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The net revenues and cost of revenues from our poster frame network include the respective net revenues and cost of revenues derived from our LCD 1.0 picture frame
devices in Tianjin, Kunming and Shijiazhuang.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Other current assets equal to total current assets less cash and cash equivalents.
|--- | ----------------------------------------------------------------------------------

In our earnings release for the fourth quarter and full year 2011 released on March 19, 2012, we announced a change in
classification of the LCD 1.0 picture frame devices from the LCD display network division into the poster frame network division, and we are now revising the data for years 2007, 2008, 2009, 2010 and 2011 to reflect this change in categorization and
thereby align our operating and financial data with respect to the LCD 1.0 picture frame devices. In order to help investors gain a better understanding of our media platform and the differentiations between different types of devices, and to
align this operating metric with our internal financial reporting, starting from the fourth quarter of 2011 the Company has decided, for screen count purposes, to re-categorize the LCD 1.0 picture frame devices from the LCD display network into the
poster frame network. Historically, for screen count purposes the Company categorized the LCD 1.0 picture frame devices in the division of LCD display network because those devices were developed by the Companys LCD display network
team. For financial reporting purposes, revenues and costs attributable to such LCD 1.0 picture frame devices have been and continue to be categorized under the poster frame network.

We are providing the following breakdown of operating data to clarify these changes and will use this method of classification going
forward.



|                                                             |  |                   |         |  |      |  |         |      |  |  |         |  |  |      |         |  |  |  |         | 
|------------------------------------------------------------ |  | ----------------- | ------- |  | ---- |  | ------- | ---- |  |  | ------- |  |  | ---- | ------- |  |  |  | ------- | 
|                                                             |  | As of December 31 |        
|                                                             |  | 2007              |         |  | 2008 |  |         | 2009 |  |  | 2010    |  |  | 2011 |        
|                                                             |  | (In thousands)    |        
|                                                             |  |                   |         |  |     
|Selected Operating Data:                                     |  |                   |         |  |      |  |         |      |  |  |         |  |  |      |         |  |  |  |         | 
|Number of LCD screens in our LCD display network:            |  |                   |         |  |      |  |         |      |  |  |         |  |  |      |         |  |  |  |         | 
| Our direct cities(1)                                       |  |                   | 82,375  |  |      |  | 86,961  |      |  |  | 90,645  |  |  |      | 96,506  |  |  |  | 113,859 | 
| Our regional distributors(2)                               |  |                   | 4,765   |  |      |  | 5,436   |      |  |  | 5,411   |  |  |      | 6,659   |  |  |  | 8,256   | 
|                                                             |  |                   |         |  |      |  |         |      |  |  |         |  |  |      |         |  |  |  |         | 
|Total number of LCD screens(1)                               |  |                   | 87,140  |  |      |  | 92,397  |      |  |  | 96,056  |  |  |      | 103,165 |  |  |  | 122,115 | 
|Number of LCD 2.0 digital picture screens                    |  |                   | 20,210  |  |      |  | 26,291  |      |  |  | 26,337  |  |  |      | 33,333  |  |  |  | 33,636  | 
|                                                             |  |                   |         |  |      |  |         |      |  |  |         |  |  |      |         |  |  |  |         | 
|Total displays in the LCD display network(1)                 |  |                   | 107,350 |  |      |  | 118,688 |      |  |  | 122,393 |  |  |      | 136,498 |  |  |  | 155,751 | 
|                                                             |  |                   |         |  |      |  |         |      |  |  |         |  |  |      |         |  |  |  |         | 
|Number of displays in our in-store network(3)                |  |                   | 49,452  |  |      |  | 42,824  |      |  |  | 44,517  |  |  |      | 48,179  |  |  |  | 50,076  | 
|                                                             |  |                   |         |  |      |  |         |      |  |  |         |  |  |      |         |  |  |  |         | 
|Number of stores in our in-store network(3)                  |  |                   | 4,063   |  |      |  | 3,275   |      |  |  | 3,097   |  |  |      | 2,858   |  |  |  | 2,801   | 
|                                                             |  |                   |         |  |      |  |         |      |  |  |         |  |  |      |         |  |  |  |         | 
|Number of installed frames in our poster frame network(1)(4) |  |                   |         |  |      |  |         |      |  |  |         |  |  |      |         |  |  |  |         | 
|Frame 1.0 picture frames(1)                                  |  |                   | 184,597 |  |      |  | 299,514 |      |  |  | 233,717 |  |  |      | 328,089 |  |  |  | 445,126 | 
|Frame 2.0 digital picture screens                            |  |                   | 10,819  |  |      |  | 34,195  |      |  |  | 35,972  |  |  |      | 35,810  |  |  |  | 35,050  | 
|                                                             |  |                   |         |  |      |  |         |      |  |  |         |  |  |      |         |  |  |  |         | 
|Total displays in the poster frame network(1)                |  |                   | 195,416 |  |      |  | 333,709 |      |  |  | 269,689 |  |  |      | 363,899 |  |  |  | 480,176 | 
|                                                             |  |                   |         |  |      |  |         |      |  |  |         |  |  |      |         |  |  |  |         | 



|(1) | Pursuant to the re-classification described above, the data presented here reflect the re-classification of 4,948, 9,345, 8,613, 28,077 and 30,804 LCD 1.0 picture frame
devices as of December 31, 2007, 2008, 2009, 2010 and 2011, respectively, from the LCD display network to the poster frame network under Frame 1.0 picture frames to align our operational and financial data.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Operating data for our in-store network does not include data from CGENs business and operations.
|--- | --------------------------------------------------------------------------------------------------

|(4) | 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.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Currency Translations and Exchange Rates

Our operating businesses are currently conducted in China and substantially all of our revenues and expenses are denominated in Renminbi.
The Peoples Bank of China, or PBOC, sets and publishes daily a base exchange rate with reference primarily to the supply and demand of Renminbi against a basket of currencies in the market during the prior day. The PBOC also takes into account
other factors, such as the general conditions existing in the international foreign exchange markets. Since 1994, the conversion of Renminbi into foreign currencies, including Hong Kong dollars and U.S. dollars, has been based on rates set by the
PBOC, which are set daily based on the previous days inter-bank foreign exchange market rates and current exchange rates in the world financial markets. From 1994 to July 20, 2005, the official exchange rate for the conversion of Renminbi
to U.S. dollars was generally stable. Although PRC governmental policies were introduced in 1996 to reduce restrictions on the convertibility of Renminbi into foreign currency for current account items, conversion of Renminbi into foreign exchange
for capital items, such as foreign direct investment, loans or securities, requires the approval of the State Administration for Foreign Exchange and other relevant authorities. On July 21, 2005, the PRC government introduced a managed floating
exchange rate system to allow the value of the Renminbi to fluctuate within a regulated band based on market supply and demand and by reference to a basket of currencies. On the same day, the value of the Renminbi appreciated by 2.0% against the
U.S. dollar. Since then, the PRC government has made, and may in the future make, further adjustments to the exchange rate system. The PBOC announces the closing price of a foreign currency traded against the Renminbi in the inter-bank foreign
exchange market after the closing of the market on each working day, and makes it the central parity for the trading against the Renminbi on the following working day.



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##### Table of Contents

For all dates and periods through December 31, 2008, exchange rates of Renminbi into
U.S. dollars are based on the noon buying rate in The City of New York for cable transfers of Renminbi as certified for customs purposes by the Federal Reserve Bank of New York. For January 1, 2009 and all later dates and periods, the exchange
rate refers to the exchange rate as set forth in the H.10 statistical release of the Federal Reserve Board. For your convenience, this annual report contains translations of Renminbi at $1.00 to RMB6.2939, which was the prevailing rate on
December 30, 2011. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated below, or at all. The PRC
government imposes controls over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on foreign trade.

The following table sets forth information concerning exchange rates between the Renminbi and the U.S. dollar for the periods indicated.
These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in this annual report or will use in the preparation of our periodic reports or any other information to be provided to you.



|                         |  |                                 |        |  |      |  |        |     |  |  |            |  |  |  |        | 
|------------------------ |  | ------------------------------- | ------ |  | ---- |  | ------ | --- |  |  | ---------- |  |  |  | ------ | 
|                         |  | RENMINBI PER U.S. EXCHANGE RATE |       
|                         |  | AVERAGE                         |        |  | HIGH |  |        | LOW |  |  | PERIOD-END | 
|2007                     |  |                                 | 7.5806 |  |      |  | 7.8127 |     |  |  | 7.2946     |  |  |  | 7.2946 | 
|2008                     |  |                                 | 6.9193 |  |      |  | 7.2946 |     |  |  | 6.7800     |  |  |  | 6.8225 | 
|2009                     |  |                                 | 6.8295 |  |      |  | 6.8470 |     |  |  | 6.8176     |  |  |  | 6.8259 | 
|2010                     |  |                                 | 6.7603 |  |      |  | 6.8330 |     |  |  | 6.6000     |  |  |  | 6.6000 | 
|2011                     |  |                                 | 6.4475 |  |      |  | 6.6364 |     |  |  | 6.2939     |  |  |  | 6.2939 | 
|October                  |  |                                 | 6.3710 |  |      |  | 6.3825 |     |  |  | 6.3534     |  |  |  | 6.3547 | 
|November                 |  |                                 | 6.3564 |  |      |  | 6.3839 |     |  |  | 6.3400     |  |  |  | 6.3765 | 
|December                 |  |                                 | 6.3482 |  |      |  | 6.3733 |     |  |  | 6.2939     |  |  |  | 6.2939 | 
|2012 (through April 20)  |  |                                 | 6.3018 |  |      |  | 6.3330 |     |  |  | 6.2935     |  |  |  | 6.3080 | 
|January                  |  |                                 | 6.3119 |  |      |  | 6.3330 |     |  |  | 6.2940     |  |  |  | 6.3080 | 
|February                 |  |                                 | 6.2997 |  |      |  | 6.3120 |     |  |  | 6.2935     |  |  |  | 6.2935 | 
|March                    |  |                                 | 6.3125 |  |      |  | 6.3315 |     |  |  | 6.2975     |  |  |  | 6.2975 | 
|April (through April 20) |  |                                 | 6.3052 |  |      |  | 6.3150 |     |  |  | 6.2975     |  |  |  | 6.3080 | 

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

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 materially harmed.

Risks
Relating to Compliance with PRC Law

Our failure to comply with certain aspects of applicable PRC laws and regulations could
adversely affect our business operations and corporate structure.

In order to conduct our business operations through
our indirectly wholly-owned operating subsidiaries in China, which we collectively refer to as our PRC operating subsidiaries, and our consolidated affiliated entities in China, which we collectively refer to as our PRC operating affiliates, also
referred to as our variable interest entities, or VIEs, we are required to comply with a range of PRC laws and regulations, including laws and regulations applicable to contractual arrangements among our operating subsidiaries and affiliates,
requirements to register the equity pledges relating to those contractual arrangements, other registration requirements under State Administration for Industry and Commerce, or SAIC, rules and regulations, and obligations by us, our management and
our PRC shareholders or beneficial owners to comply with the State Administration of Foreign Exchange, or SAFE, registration and disclosure requirements.

Due to uncertainties in the law, the lack of implementing regulations and, in some instances, our delay in complying with some of these rules, there is a risk that we could be found to have violated rules
and regulations relating to our corporate structure, SAFE and SAIC registration and PRC foreign exchange rules. As detailed in the risk factor paragraphs below, if we are found to have failed to comply with or breached PRC laws and regulations
applicable to us and our PRC operating subsidiaries and affiliates we could be subject to, among other things, penalties including fines, revocation of business licenses of the PRC entities or requirements to restructure our business operations. Our
failure to comply with PRC laws and regulations relating to the registration of equity pledges under our contractual arrangements with our PRC operating affiliates could also render the equity pledge, and the structure, unenforceable.



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##### Table of Contents

As of December 31, 2010, our PRC operating affiliates accounted for $438.8 million of
our assets, of which $397.8 million consisted of goodwill associated with acquisitions conducted in the early stages of our corporate history. Excluding goodwill, assets of our PRC operating affiliates accounted for 3.3% of our total assets as of
December 31, 2010, composed primarily of cash and cash equivalents, rental deposits and accounts receivable.

Currently,
our consolidated variable interest entities hold less than 20% of the leases used in the operation of our LCD display network, in-store network and movie theater network. Net revenues generated by our PRC operating affiliates accounted for
approximately 1.5% of our net revenues in 2011. In the event of such deconsolidation, to continue operating the businesses currently conducted by our consolidated variable interest entities, we may need to take certain actions, for example,
transferring the equity ownership of our consolidated variable interest entities from our nominee shareholders to our PRC operating subsidiaries which are directly owned by non-PRC subsidiaries of ours, which we collectively refer to as
wholly-foreign owned, or WFOE operating subsidiaries, which may result in additional administrative and legal costs, less favorable business relationships or other regulatory burdens or otherwise materially and adversely affect our business. If we
are unable to continue operating the businesses using the leases held by our PRC operating affiliates and unable to renegotiate new leases through our PRC operating subsidiaries, we may not be able to collect the 1.5% of our net revenues currently
derived from our PRC operating affiliates. In addition, we may lose access to the assets of our PRC operating affiliates, excluding goodwill, which represent 3.3% of our total assets

Further, if our consolidated variable interest entities are deconsolidated and the PRC authorities did not allow us to transfer the
operational assets of our consolidated variable interest entities to our WFOE operating subsidiaries, in order to continue operating the businesses of our consolidated variable interest entities, our consolidated variable interest entities may need
to terminate the leases they hold and we may need to negotiate new leases for the underlying properties through our WFOE operating subsidiaries. Such termination and renegotiation may entail additional administrative and legal costs and we may not
be able to obtain similarly favorable terms for such properties.

Furthermore, advertising businesses conducted by our WFOE
operating subsidiaries are subject to certain risks associated with PRC laws and regulations on foreign investment in the advertising businesses in China. See If the PRC government determines that the ownership structure of our operating
subsidiaries or our operating affiliates, or the agreements that establish the structure for operating our China business do not comply with current or future PRC governmental restrictions on foreign investment in the advertising industry, we could
be subject to penalties which may materially and adversely affect our business or financial condition. Increasing the proportion of our business conducted by our WFOE operating subsidiaries increases our exposure to certain risks associated
with such laws and regulations while mitigating other risks.

If we were subject to any such penalties or negative
consequences, our business and operations could be materially and adversely affected.

If Jason Nanchun Jiang, our founder, chairman and
chief executive officer, were to breach any of his contractual or fiduciary obligations to us and our affiliated consolidated entities, we could be subject to regulatory penalties and sanctions and our operations could be materially adversely
affected.

Jason Nanchun Jiang, as the 85% holder of Shanghai Focus Media Advertisement Co., Ltd., or Focus Media
Advertisement, entered into contractual agreements among us, our PRC operating subsidiaries, and our PRC operating affiliates. See Item 7.B Major Shareholders and Related Party Transaction  Related Party Transactions  Agreements
among Us, Our PRC Operating Subsidiaries, Our PRC Operating Affiliates and Their Shareholders. Under those agreements, Jason Nanchun Jiang is obligated to procure the consummation of the transactions contemplated thereunder, to maintain the
valid existence of and obtainment and maintenance of all the requisite operation licenses by the relevant PRC operating affiliates, and to prevent the PRC operating affiliates from entering into any transaction that jeopardizes the assets, business
operation, ownership structure and other rights of the PRC operating affiliates. As our chairman and chief executive officer, he also has fiduciary obligations to us under Cayman Islands law.

Due to uncertainties in the implementation of PRC laws and regulations, we may be put at risk from failures to comply with all such laws.
See  We use contractual arrangements with our PRC operating affiliates and their shareholders for a portion of our China operations, and uncertainties in the PRC legal system could limit our ability to enforce these contractual
arrangements and thus our ability to conduct our business relating to the failure to register the equity pledges,  PRC regulations relating to offshore investment activities by PRC residents may increase our administrative burden
and restrict our overseas and cross-border investment activity. A failure by us or our shareholders or beneficial owners who are PRC citizens or residents in China to comply with such regulations could restrict our ability to distribute profits,
restrict our overseas and cross-border investment activities or subject us to liability under PRC laws, which could adversely affect our business and financial condition relating to Jason Nanchun Jiangs failure to complete subsequent
registrations with the SAFE, and Our PRC operating subsidiaries and operating affiliates may have engaged in business activities without the necessary registration with local authorities. This could subject us to fines or other penalties,
which could negatively impact our revenues or interfere with our ability to operate our business relating to the failure of some of our indirect operating subsidiaries or our operating affiliates to register with the relevant local branch of
SAIC for their expansion of business or for their branch offices in each of the cities where we operate.



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##### Table of Contents

Neither we, our operating subsidiaries, operating affiliates or Jason Nanchun Jiang has been
subject to fines, sanctions or penalties as a result of these legal compliance matters. Nevertheless, if we, our operating subsidiaries, operating affiliates or Jason Nanchun Jiang are subject to such fines, sanctions or penalties resulting from any
such non-compliance, our business operations could be materially adversely affected.

If the PRC government determines that the
ownership structure of our operating subsidiaries or our operating affiliates, or the agreements that establish the structure for operating our China business do not comply with current or future PRC governmental restrictions on foreign investment
in the advertising industry, we could be subject to severe penalties.

Substantially all of our operations are or will
be conducted through our PRC operating subsidiaries and through our contractual arrangements with our consolidated affiliated entities in China. PRC regulations require any foreign entities that invest directly in the advertising services industry
to have at least two years of direct operations in the advertising industry outside of China. Since December 10, 2005, foreign investors have been allowed to own directly 100% of PRC companies operating an advertising business if the foreign
entity has at least three years of direct operations in the advertising business outside of China or less than 100% if the foreign investor has at least two years of direct operations in the advertising industry outside of China. Generally we do not
currently directly operate an advertising business outside of China and our non-PRC subsidiaries cannot qualify under PRC regulations for direct investment in the advertising industry. Thus, our non-PRC subsidiaries and our WFOE operating
subsidiaries are ineligible to apply for the required licenses for providing advertising services in China. Our non-PRC subsidiaries are ineligible to apply for such required licenses too. However, current PRC regulations do not restrict domestic
companies controlled by WFOEs through contractual arrangements from operating advertising businesses. As such, in the early stages of our corporate history, our advertising businesses were initially provided, and most businesses we acquired from
third parties were provided, through contractual arrangements between our WFOE operating subsidiaries and our PRC operating affiliates. Nevertheless, PRC governmental authorities may in the future deem that such business operations by domestic
companies controlled by WFOEs evade the qualifications requirements on foreign investment in the advertising industry, and thus, restrict our business operations.

However, despite these restrictions, the PRC restriction on foreign investment in the advertising industry does not expressly apply to the investment activities of WFOEs, and starting from late 2007, the
advertising industry has been re-classified from a restricted area to a permitted area for foreign investment. Thus, WFOEs may establish subsidiaries in China to operate advertising business directly in China. As such,
certain of our indirect PRC operating subsidiaries succeeded in obtaining the required licenses for providing advertising services in China. However, the PRC governmental authority may determine in the future that such indirect investments evade the
qualification requirements on foreign investment in the advertising industry and thus bans such investment activities.

For
the year ended December 31, 2011, approximately 98.5% of our net revenue was generated by our indirect PRC operating subsidiaries, in which we hold equity interests through our WFOEs, and 1.5% of our net revenue was generated by our PRC
operating affiliates, which we control through contractual arrangements. All of the revenues generated by our indirect PRC operating subsidiaries may be distributed to our WFOEs as dividends without reliance on contractual arrangements between any
of our entities. Such revenues may then be further distributed to offshore entities, including Focus Media Holding Limited, by our WFOEs following the applicable SAFE registrations and procedures. All of the revenues generated by our PRC operating
affiliates are available to us for general business operations in China. Although we have been migrating business from the PRC operating affiliates to our indirect PRC operating subsidiaries and intend to reduce our reliance on our contractual
relationships with our PRC operating affiliates and increase the portion of our advertising revenues generated from our indirect PRC operating subsidiaries, we expect to continue to rely on our PRC operating affiliates, to operate a portion of our
advertising business for the foreseeable future, given the time and financial costs required for converting these PRC operating affiliates into our indirect subsidiaries or transferring their business to our PRC operating subsidiaries. We currently
do not have any plans to terminate existing contractual relationships with our PRC operating affiliates, although our reliance on such relationships has decreased over time. As of December 31, 2011, our PRC operating affiliates accounted for
$461.7 million of our assets, including $399.1 million in goodwill associated with acquisitions conducted in the early stages of our corporate history, as well as $5.5 million in goodwill associated with our acquisition in 2011 of a controlling
interests in Shanghai Enjoy Media Advertising & Broadcasting Co., Ltd , or Enjoy Media, which we operate through a VIE structure, because Enjoy Media distributes electronic coupons via Q.com.cn which may require an Internet content
provider, or ICP, license in the future and because it operates in an area in which direct foreign ownership is subject to certain conditions and restrictions. Excluding goodwill, assets of our PRC operating affiliates accounted for
approximately 3.3% of our total assets excluding goodwill as of December 31, 2011.

Accordingly, our advertising services
are currently conducted by (i) our indirect PRC operating subsidiaries and (ii) our PRC operating affiliates, including Focus Media Advertisement and its subsidiaries. Our PRC operating affiliates, which we control through contractual
relationships are owned by either (i) one or more individuals designated by us, (ii) one or more PRC entities owned by other PRC operating affiliates or (iii) a combination of individuals and PRC entities owned by other PRC operating
affiliates. We have entered into contractual arrangements with certain of PRC operating affiliates and their respective shareholders pursuant to which we, through our PRC operating subsidiaries, cooperate with, and provide technical support services
to, our PRC operating affiliates. In addition, we have entered into agreements with certain of our PRC operating affiliates and each of their shareholders which provide us with the substantial ability to control these affiliates and their existing
and future subsidiaries.



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If we, our existing or future PRC operating subsidiaries and operating affiliates or their
ownership structure or the contractual arrangements are found to be in violation of any existing or future PRC laws or regulations, or our existing or future PRC operating subsidiaries or operating affiliates fail to obtain or maintain any of the
required permits or approvals, the relevant PRC regulatory authorities, including the State Administration for Industry and Commerce, or SAIC, which regulates advertising companies, and the Ministry of Commerce, which regulates foreign investments
in China, would have broad discretion in dealing with such violations, including:



| |  |  | imposing fines or other monetary penalties on our PRC subsidiaries or affiliates;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | revoking the business and operating licenses of our PRC subsidiaries and affiliates;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | discontinuing or restricting our PRC subsidiaries and affiliates operations;
| | - |  | ------------------------------------------------------------------------------



| |  |  | 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 any offering or from other sources to finance our business and operations in China.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------

The imposition of any of these penalties could result in additional administrative and legal costs, less
favorable business relationships or other regulatory burdens or otherwise materially and adversely affect our business.

If the PRC
government finds that the ownership structure of our operating affiliates violates PRC laws as a result of the change in Jason Nanchun Jiangs citizenship, we could be subject to severe penalties, and our ability to conduct our business may be
affected in a material and adverse way.

Jason Nanchun Jiang, who is one of the shareholders of Focus Media
Advertisement, one of our major PRC operating affiliates, which owns all other PRC operating affiliates that hold the advertising operating licenses connected with our operating businesses, completed naturalization procedures to become a citizen of
Singapore in the second quarter of 2009 for personal reasons.

The Provisions regarding Mergers and Acquisitions of
Domestic Enterprises by Foreign Investors, or the New M&A Rule, promulgated by six PRC government and regulatory authorities, including the PRC Ministry of Commerce and the Chinese Securities Regulatory Commission, or the CSRC, which
became effective on September 8, 2006 and was revised in 2009, provides that change in the citizenship of a shareholder of a PRC domestic company does not change the nature of such PRC domestic company. Further, based on our enquiries and
discussions with the relevant official of the local branch of the SAIC in Shanghai, we have also been orally informed that Jason Nanchun Jiangs change in citizenship does not change the nature of our PRC operating affiliates. However, there is
no guarantee that governmental authorities, mainly including the SAIC and the Ministry of Commerce, will not challenge such status due to change in law or change in implementation of relevant laws or for any other reason.

If the ownership structure of our PRC operating affiliates is found to be in violation of any existing or future PRC laws or regulations,
the relevant PRC regulatory authorities, mainly including the SAIC and the Ministry of Commerce, would have broad discretion in dealing with such violations, including:



| |  |  | imposing fines or other monetary penalties on our PRC operating affiliates;
| | - |  | ---------------------------------------------------------------------------



| |  |  | revoking the business and operating licenses of our PRC operating affiliates;
| | - |  | -----------------------------------------------------------------------------



| |  |  | discontinuing or restricting our PRC operating affiliates operations;
| | - |  | ----------------------------------------------------------------------



| |  |  | requiring our PRC operating affiliates to restructure the relevant ownership structure or operations.
| | - |  | -----------------------------------------------------------------------------------------------------

The imposition of any of these penalties could result in additional administrative and legal costs, less favorable business relationships
or other regulatory burdens or otherwise materially and adversely affect our business.

We use contractual arrangements with our PRC
operating affiliates and their shareholders for a portion of our China operations, and uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements and thus our ability to conduct our business.

We have in the past used contractual arrangements with our PRC operating affiliates and their respective shareholders
to operate a portion of our advertising business. We have transferred the majority of our operations to our subsidiaries since 2009. For a description of these contractual arrangements, see the sections titled Organizational Structure
Business Overview  Recent Developments in Item 4. Information on the Company and Item 7.  Major Shareholders and Related Party Transactions.

Many of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through either arbitration or
litigation in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in other
jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements.



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For example, the PRC Property Rights Law that was promulgated on March 16, 2007 and
became effective on October 1, 2007 requires that registration with the local SAIC is necessary to create security interest on equity interest in a PRC company, which means that before the equity pledge is duly registered with the local SAIC,
the equity pledge is unenforceable even though the relevant equity pledge agreement is still binding. Almost all our existing equity pledge agreements between certain of our operating subsidiaries and certain of our operating affiliates and their
shareholders were signed before the PRC Property Rights Law took effect. The relevant PRC operating affiliates registered the equity pledges on their registry of shareholders according to then applicable law. The Company attempted to register the
relevant equity pledges after the PRC Property Rights Law became effective and we have successfully registered the equity pledge in connection with Focus Media Advertisement, one of our major PRC operating affiliates, which owns all other PRC
operating affiliates that hold the advertising operating licenses connected with our operating businesses in December 2010 and certain other PRC operating affiliates with the local SAIC. However, the implementation rules were not promulgated until
late 2008 and in some cities late 2009, and the practices taken by the local SAIC authorities vary from city to city. Thus, we are still in the process of applying for registration of other relevant equity pledges and there is no assurance that we
can have these equity pledges registered on time or at all. We have completed the registration of four pledges with the local counterparts of the SAIC, and are in the process of registering an additional nine pledges. Considering that we have not
registered some of these existing equity pledges, and may fail to register future equity pledges, with the local SAIC, any equity pledge created under these equity pledge agreements may be considered unenforceable. In the event we are unable to
enforce these contractual arrangements, we may not be able to exert effective control over our operating affiliates, and our ability to conduct our business may be negatively affected.

Non-performance of the contractual arrangements with our PRC operating affiliates and their shareholders will result in material and adverse effect in our corporate structure and our business
operation.

Although we operate a substantive portion of our advertising business through contractual arrangements
with our PRC operating affiliates and their respective shareholders, these contractual arrangements may not be as effective in providing us with control over our PRC operating affiliates as direct ownership. If we had direct ownership of our PRC
operating affiliates, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of those companies, which in turn could effect changes, subject to any applicable fiduciary obligations, at the management
level. However, under the current contractual arrangements, as a legal matter, if our PRC operating affiliates or any of their shareholders fails to perform its or his respective obligations under these contractual arrangements, we may have to incur
substantial costs and resources to enforce such arrangements, and rely on legal remedies under PRC law, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you to be effective. For example, if
any individual designated by us as the shareholder were to refuse to transfer his equity interest in any of our PRC operating affiliates to us or our designee when we exercise the purchase option pursuant to these contractual arrangements, or if the
individual shareholder were otherwise to act in bad faith toward us, or if the individual or entity designated by us failed to cause the unrelated third parties holding minority interests in certain of our PRC operating affiliates to waive their
right of first refusal or to cooperate with him or it to fulfill his or its contractual obligations, then we may have to take legal action to compel him to fulfill his or its contractual obligations. Accordingly, it may be difficult for us to change
our corporate structure or to bring claims against our PRC operating affiliates or its shareholders if they do not perform their obligations under their contracts with us or if any individual who holds the equity interest in our PRC operating
affiliates does not cooperate with any such actions.

We may rely principally on dividends and other distributions on equity paid by our
WFOE operating subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our operating subsidiary to pay dividends to us could have a material adverse effect on our ability to conduct our business.

We are a holding company, and we may rely principally on dividends and other distributions on equity paid by our WFOE
operating subsidiaries for our cash requirements, including the funds necessary to service any debt we may incur. If any of our WFOE operating subsidiaries incurs debt on its own behalf, the instruments governing the debt may restrict their ability
to pay dividends or make other distributions to us. In addition, the PRC tax authorities may require us to adjust our taxable income under the contractual arrangements our WFOE operating subsidiaries currently have in place with our PRC operating
affiliates in a manner that would materially and adversely affect our WFOE operating subsidiaries ability to pay dividends and other distributions to us. Furthermore, relevant PRC laws and regulations permit payments of dividends by our PRC
operating subsidiaries only out of their retained earnings, if any, determined in accordance with PRC accounting standards and regulations.



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Under PRC laws and regulations, each of our PRC operating subsidiaries is also required to
set aside a portion of its net income each year to fund specific reserve funds. These reserves are not distributable as cash dividends. In particular, subject to certain cumulative limits, the statutory general reserve fund requires annual
appropriations of 10% of after-tax income to be set aside prior to payment of dividends. Our WFOE operating subsidiaries have allocated annual after-tax profits to each of their respective reserve funds in compliance with these laws and regulations.
For the years ended December 31, 2009, 2010 and 2011, we made total appropriations of $10,765,735, $21,211,346 and $10,214,705 respectively, including the reserve funds of our PRC operating subsidiaries and PRC operating affiliates. As a result
of these PRC laws and regulations, our PRC operating subsidiaries and our PRC operating affiliates are restricted in their ability to transfer a portion of their net assets to us in the form of dividends, loans or advances. As of December 31,
2011, the amount of these restricted portions was approximately $234.1 million. Our PRC operating affiliates have historically not paid dividends to us from their accumulated profits, as we do not own any direct equity interest in these operating
affiliates and we do not intend for our operating affiliates to pay dividends to us in the foreseeable future. All of the reserve funds of our PRC operating subsidiaries and affiliates are generally available to us to use in expanding our
business in China. Any limitation on the ability of our WFOE operating subsidiaries to receive distributions from their respective subsidiaries or pay dividends to us could materially and adversely limit our ability to grow, make investments or
acquisitions that could be beneficial to our businesses, pay dividends, or otherwise fund and conduct our business. See Risk Factors  PRC regulations relating to offshore investment activities by PRC residents may increase our
administrative burden and restrict our overseas and cross-border investment activity. A failure by our shareholders or beneficial owners who are PRC citizens or residents in China to comply with such regulations could restrict our ability to
distribute profits, restrict our overseas and cross-border investment activities or subject us to liability under PRC laws, which could adversely affect our business and financial condition.

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.

As an offshore holding company of our PRC
operating subsidiaries and affiliates, we may make loans to our PRC subsidiaries and consolidated PRC affiliated entities, or we may make additional capital contributions to our WFOE operating subsidiaries. Any loans to our PRC subsidiaries or
consolidated PRC affiliated entities are subject to PRC regulations and approvals. For example:



| |  |  | 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 in foreign exchange to our PRC operating affiliates and our PRC operating subsidiaries owned by our WFOE operating 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. In practice, it is very difficult if not impossible in most
cases, to obtain the approval of or complete the registration regarding our loan to any PRC operating affiliate.
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We may also determine to finance our PRC foreign invested enterprises by means of capital
contributions. These capital contributions must be approved by the PRC Ministry of Commerce or its local counterpart. Because our PRC operating affiliates and our PRC operating subsidiaries owned by our WFOE operating subsidiaries are domestic PRC
enterprises, we are not likely to finance their activities by means of direct capital contributions due to regulatory issues relating to foreign investment in domestic PRC enterprises, as well as the licensing and other regulatory issues discussed
in Business Overview  Regulatory Matters of Item 4. Information on the Company of this annual report. We cannot assure you that we can obtain these government registrations or approvals on a timely basis, if at
all, with respect to future loans or capital contributions by us to our PRC operating affiliates and our PRC operating subsidiaries owned by our WFOE operating subsidiaries. If we fail to receive such registrations or approvals, our ability to
capitalize our PRC operations would be negatively affected which would adversely and materially affect our liquidity and our ability to expand our business.

Furthermore, on August 29, 2008, State Administration of Foreign Exchange, or SAFE, promulgated the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the
Payment and Settlement of Foreign Currency Capital of Foreign Invested Enterprises, or SAFE Circular 142, a notice regulating the conversion by a foreign-invested company of foreign currency into Renminbi by restricting how the converted Renminbi
may be used. When applying for conversion of foreign exchange in capital account, such as foreign exchange received from capital contribution or loans, into Renminbi, the company is required, except for small amount conversion not
exceeding US$50,000 for daily expenses, submit to the bank the relevant documents supporting such conversion, such as the business contracts, related Renminbi payment notice, and documents evidencing the use of funds previously converted from
foreign exchange in its capital account. Further, SAFE Circular 142 requires that Renminbi converted from the foreign currency-denominated registered capital of a foreign-invested company may only be used for purposes within the companys
business scope approved by the applicable governmental authority, which is typically the Ministry of Commerce or its local counterparts, and registered with the local SAIC authority, and may not be used for equity investments within the PRC unless
specifically provided for otherwise in its business scope. In addition, SAFE strengthened its oversight of the flow and use of Renminbi funds converted from the foreign currency denominated registered capital of a foreign-invested company. The use
of such Renminbi may not be changed without approval from SAFE, and may not in any case be used to repay Renminbi loans if the proceeds of such loans have not yet been used. Violations of SAFE Circular 142 may result in severe penalties, including
substantial fines as set forth in the Foreign Exchange Administration Regulations. As a result, SAFE Circular 142 may significantly limit our ability to effectively use the net proceeds from future offerings of our ADRs through our PRC operating
subsidiaries as our PRC WFOE operating subsidiaries may not convert the funds received from us or our non-PRC subsidiaries in foreign exchange into Renminbi to invest in or acquire any other PRC company or finance the operation or development of our
PRC operating affiliates. While the Company is pursuing and will continue pursuing a strategy of development partly through acquisition of other advertising companies, SAFE Circular 142 may adversely affect our liquidity and our liability to fund
and expand our business in the PRC.



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We may be deemed a PRC resident enterprise under the PRC Enterprise Income Tax Law and be subject to
PRC taxation on our worldwide income.

The PRC Enterprise Income Tax Law, or the New Law, and the implementation
regulations to the New Law issued by the PRC State Council, became effective as of January 1, 2008. The New Law provides that enterprises established outside of China whose de facto management bodies are located in China are
considered resident enterprises and are generally subject to the uniform 25% enterprise income tax rate as to their worldwide income. Under the implementation regulations for the New Law issued by the PRC State Council, de facto
management body is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and treasury, and acquisition and disposition of properties and
other assets of an enterprise. Further, on April 22, 2009, the State Administration of Tax (SAT) issued a Tax Circular, Guoshuifa [2009] No. 82 on Certain Issues regarding the Determination of Offshore Companies Controlled by
PRC Companies as Resident Enterprises pursuant to De Facto Management Bodies Standard, or Circular 82, which took effect on January 1, 2008. According to Circular 82, any company established pursuant to laws and regulations other
than PRC laws but that is controlled by companies or company groups within China shall be deemed as a resident enterprise for PRC tax purposes if all the following conditions are met: (i) the senior management in charge of the daily operation
and management of the company is based within China or the premises where the senior management performs its duties are located within China; (ii) the financial matters (such as raising funds, financing or financial risk management) and human
resources matters (such as appointment and dismissal of employees or their payrolls) are decided by companies or individuals within China or require approval from companies or individuals within China; (iii) primary property, books and
accounts, company seals and board and shareholder meeting minutes are kept or placed within China; and (iv) 50% or more of the directors with voting rights or senior management habitually reside within China. According to Circular 82, in
determining the location of de facto management, substance over form principle should be followed. On July 27, 2011, SAT issued a notice of Interim Measures on Corporate Income Tax of Offshore Companies Controlled by PRC Companies as
Resident Enterprises, which took effect on September 1, 2011. It further implements Circular 82 in detail, as well as clarifying that SAT or its local competent branch shall investigate an entity once it discovers such entity may satisfy the
conditions set out in Circular 82, including requesting such entity to provide all relevant materials requested. Although Circular 82 was issued to regulate the PRC tax resident judgment of companies established overseas and controlled by PRC
companies, which is not applicable in our case, the criteria in Circular 82 and the investigating approach SAT may take as set out in its implementation measures may be used as references to the SATs view on this issue.

Most of our major board decisions, such as those relating to strategic planning, significant investments, raising fund and all matters
related to capital market activities are made outside of the PRC. We have an office in Hong Kong and appointed a General Manager of Sales in July 2010, who habitually resides in Hong Kong. Our Chief Financial Officer, appointed in January 2010, also
spends most of his time in our office located in Hong Kong and is in charge of the Companys investments, financial management, internal control and compliance. In addition, our senior management spends a significant amount of time outside of
the PRC developing and managing investor relations. As such, we believe that the de facto management body of the Company is located outside of the PRC, and, accordingly, we believe the risk of being deemed a PRC tax resident is low. However, there
is uncertainty regarding whether PRC tax authorities would deem us to be a PRC resident enterprise. If we are treated as a resident enterprise for PRC tax purposes, we will be subject to PRC tax on our worldwide income, which would have an adverse
effect on our effective tax rate and net income.

PRC regulations relating to offshore investment activities by PRC residents may
increase our administrative burden and restrict our overseas and cross-border investment activity. A failure by us or our shareholders or beneficial owners who are PRC citizens or residents in China to comply with such regulations could restrict our
ability to distribute profits, restrict our overseas and cross-border investment activities or subject us to liability under PRC laws, which could adversely affect our business and financial condition.

The PRC National Development and Reform Commission, or NDRC, and SAFE promulgated regulations that require PRC residents and PRC
corporate entities to register with and obtain approvals from relevant PRC government authorities in connection with their direct or indirect offshore investment activities and subsequent round trip investment into China. These regulations apply to
our shareholders who are PRC residents and may apply to any offshore acquisitions that we make in the future.

Under such SAFE
regulations, PRC residents who make, or have previously made, direct or indirect investments in offshore companies will be required to register those investments. In addition, any PRC resident who is a direct or indirect shareholder of an offshore
company is required to file with the local branch of SAFE, with respect to that offshore company, any material change involving capital variation, such as an increase or decrease in capital, transfer or swap of shares, merger, division, long term
equity or debt investment or creation of any security interest over the assets located in China. The SAFE regulations also impose obligations on onshore subsidiaries of the offshore special purpose company to coordinate with and supervise the
beneficial owners of the offshore entity who are PRC residents to complete the SAFE registration process. If any PRC resident fails to comply with such SAFE regulations, the PRC subsidiaries of that offshore parent company may be prohibited from
distributing their profits and the proceeds from any reduction in capital, share transfer or liquidation, to their offshore parent company, and the offshore parent company may also be prohibited from injecting additional capital into their PRC
subsidiaries. Moreover, failure to comply with the various SAFE registration requirements described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions, such as fines.

As a Cayman Islands company, and therefore a foreign entity, PRC residents who are beneficial holders of our shares are required to
register with SAFE in connection with their investment in us. Moreover, if we purchase the assets or equity interest of company owned by PRC residents in exchange for our equity interests, such PRC residents will be subject to the registration
procedures described in such SAFE regulations.



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These regulations may affect our financial status, business operations or strategies. For
example, our present or future PRC subsidiaries ability to conduct foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, may be subject to compliance with such SAFE registration requirements
by relevant PRC residents, over whom we have no control. We require our shareholders who are PRC residents or have PRC residents as its beneficial owner to comply with these SAFE regulations. However, we may not be fully informed of the identities
of all our beneficial shareholders who are PRC citizens or residents, and we cannot compel our beneficial shareholders to comply with SAFE regulations. We cannot assure you that all of our shareholders or beneficial owners who are PRC residents have
complied or will comply with our request to make or obtain any registrations or approvals required under these regulations or other related legislation. Furthermore, much uncertainty remains concerning the reconciliation of these regulations with
other approval requirements. It is unclear how these regulations, and any future legislation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities.

Jason, Nanchun Jiang, who is a major beneficial owner of our company and a PRC resident under these SAFE regulations, has completed
initial registration with SAFE. Due to frequent acquisitions and dispositions by the Company of its businesses which trigger the requirement on the subsequent registrations and filings with SAFE in accordance with these regulations, the complexity
in registration requirements and time required for such registration and filing procedures, it is difficult to complete all the subsequent registrations and filings in a timely manner. As a result, Jason Nanchun Jiang has in the past failed and may
fail in the future, to make subsequent registrations and filings for some of subsequent investments and other material changes in the offshore company in accordance with these regulations.

One primary legal consequence of failure to make SAFE registration is the restriction by SAFE on the remittance of funds between onshore
PRC entities to offshore non-PRC entities. Such activities are most commonly conducted by direct subsidiaries of offshore non-PRC entities. Indirect subsidiaries that are owned by other PRC entities are not likely to engage in such fund
transfers, and accordingly SAFE registration is not always carried out by indirect PRC subsidiaries that will not engage in fund remittances involving offshore non-PRC entities. In the past five years, we have made acquisitions of approximately 60
legal entities, including the conversion of some of our former PRC operating affiliates to indirect PRC operating subsidiaries, which may require registration or filing with the local SAFE. Among these acquisitions, 12 have been registered or filed
with the local authority of SAFE, and most of the significant acquisitions with transaction values over US$50 million have been registered or filed. As most of the acquired legal entities that have not completed SAFE registration became indirect PRC
operating subsidiaries directly owned by our other PRC operating subsidiaries, they will only distribute dividends directly to PRC entities. While it is difficult to predict if SAFE will strengthen the enforcement of its regulations in the future to
include dividend distributions from PRC entities to PRC entities who are ultimately owned by offshore holding companies, we believe that onshore dividend distributions are unlikely to be subject to SAFEs scrutiny and, therefore, penalties from
SAFE.

Four of our active WFOE operating subsidiaries are directly owned by overseas parent companies and may distribute
dividends to them from time to time. Two of these four active WFOE operating subsidiaries have already been registered or filed with the local authority of SAFE. We also intend to register or file Focus Media (China) Information Technology Co., Ltd.
and Chizhong Information Technology (Shanghai) Co., Ltd. with the local authority of SAFE in the future to comply with SAFE regulations and facilitate dividend distributions from the active WFOE operating subsidiaries to their respective offshore
parent companies.

Furthermore, relevant SAFE implementation rules promulgated in 2007, as revised in 2011, require
foreign-invested enterprises to disclose the ultimate ownership in them by PRC resident shareholders or beneficial owners to SAFE when they apply for the initial foreign exchange registration. In practice, SAFE may require foreign-invested
enterprises to make such disclosure as well when they make subsequent foreign exchange registration in relation to their capital increase. Given these requirements, we typically engage an outside agent for the purposes of filing foreign exchange
registrations on behalf of our subsidiaries. Despite these efforts, such disclosure was not made when one of our WFOE operating subsidiaries applied for its initial foreign exchange registration and when another WFOE operating subsidiary filed a
subsequent foreign exchange registration in relation to its capital increase. The existing and future failures by our WFOE operating subsidiaries to make such disclosure may inhibit their ability to pay dividends to us.

The failure or inability of us or our PRC resident shareholders or beneficial owners to comply with these regulations may subject us to
fines and other legal sanctions although no legal or administrative sanctions have been taken against us so far. In particular, regarding the dividends distributed by our WFOE operating subsidiaries prior to the completion of subsequent
registrations by our PRC resident shareholders or beneficial owners, SAFE may, at its discretion, choose to order our PRC resident shareholders or beneficial owners to complete the necessary subsequent registration, to order our WFOE operating
subsidiaries to procure the wiring of the foreign exchange back to the PRC in an amount equal to the dividends previously distributed, and to impose monetary fines in an amount up to that of the dividends so distributed. If any of such penalties are
imposed, our business operations and financial status could be adversely affected. Furthermore, the non-compliance may also restrict our overseas or cross-border investment activities, limit our ability to inject additional capital into our PRC WFOE
subsidiaries and the ability of our PRC WFOE subsidiaries, to make distributions or pay dividends, or materially and adversely affect our ownership structure in which case, our acquisition strategy, business operations and financial status and our
ability to distribute profits to you could be materially and adversely affected. And such SAFE regulations may restrict our ability to implement our acquisition strategy and adversely affect our business and prospects.

See Exchange Controls in Item 10. Additional Information in this annual report.



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A failure to comply with PRC regulations regarding the registration of shares and share options held
by our employees who are PRC residents may subject such employees or us to fines and legal or administrative sanctions.

State Administration of Foreign Exchange, or SAFE promulgated regulations that require PRC residents who are granted shares or share
options by an overseas-listed company according to its employee share option or share incentive plan, through such overseas-listed companys PRC subsidiary or branch located in the PRC, any other PRC entity that is under control of such
overseas-listed company or other qualified PRC agents, or collectively the PRC agent, to register with SAFE and complete certain other procedures related to the share option or other share incentive plan and to open a special foreign currency
account and apply for fund transfer and conversion into RMB. More specifically, the PRC agent will have to apply for the annual quota of fund transfer and currency conversion, including transferring of overseas share sale proceeds to the PRC and
converting such proceeds from US dollars to RMB. In addition, an offshore entity is required to be appointed to act as trustee to handle share transfer transactions or options exercises relating to the share option or other share incentive plan. We
and our PRC resident employees who have been granted share options, or PRC option holders, are subject to these rules. We attempted to comply with these rules. The initial SAFE registration of the share option or other share incentive plan was
completed in April 2011 with quota for the year ended December 31, 2011 being granted by the SAFE at the same time. We are currently in the process of applying for quota for the year ended December 31, 2012. If we or our PRC option holders fail to
comply with these rules in a timely manner or at all, we or our PRC option holders may be subject to fines and other legal sanctions.

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

We are incorporated in the Cayman Islands and the authority of persons to execute contracts on our behalf is subject to our memorandum and articles of association. No person may execute contracts on our
behalf unless authorized to do so by our board of directors or someone who had been delegated power by the board to provide authorizations on the boards behalf. Our company seal is held by our legal department. In the event that our company
seal is used to execute a contract without our boards authorization, we may still be bound by the contract on the basis that the person who executed the contract had implied or ostensible authority to execute the contract on our behalf as he
possessed our company seal. In the event that our company seal becomes lost, this would not prevent us from being able to execute contracts as there is no requirement under Cayman Islands law for our contracts to be executed under seal. However, if
the company seal were lost we would need to apply for a replacement.

Under PRC law, legal documents for corporate
transactions, including contracts such as the leases and sales contracts that our business relies on, are executed using the chops or seal of the signing entity or with the signature of a legal representative whose designation is registered and
filed with Administration of Industry and Commerce, or AIC. We generally execute legal documents with chops or seals, rather than the signatures of the designated legal representatives.

We generally use corporate chops for executing documents to be submitted to government agencies, including in applications for changing
business scope, directors, or company name, and for legal letters. We generally use contract chops for executing leases, and supply and sales contracts. We generally use finance chops for making and collecting payments, including, but not limited to
issuing invoices. Use of corporate chops and contract chops for our company, our PRC operating subsidiaries and our PRC operating affiliates must be approved by our legal department in Shanghai. Use of finance chops for our company, our PRC
operating subsidiaries and our PRC operating affiliates must be approved by our finance department in Shanghai.

The chops of
our PRC operating subsidiaries and PRC operating affiliates incorporated in Shanghai are generally held by the legal and finance departments in Shanghai. The chops of our PRC operating subsidiaries and PRC operating affiliates incorporated in other
cities in China are generally held locally by the finance department of the relevant entities so that original documents can be executed locally.

Although we usually utilize chops to enter into contracts, the registered legal representatives of each of our PRC operating subsidiaries and our PRC operating affiliates have the apparent authority to
enter into contracts on behalf of such entities without chops. All designated legal representatives of our PRC subsidiaries and PRC affiliates are members of our senior management team who owe us fiduciary duties.

Accordingly, there is a risk that employees in our legal or finance department or the relevant designated legal representatives could
abuse their authority, for example, by binding the company with contracts against the companys interest or intentions which could result in economic harm or damages as a result of any contractual obligations, or resulting disputes, that might
arise. If the party contracting with the company did not act in good faith under such circumstances, then we could incur costs to nullify such contracts.

In order to maintain the physical security of our chops, they are generally stored in secured locations accessible only by the authorized personnel in the legal or finance departments. Our designated
legal representatives generally do not have access to the chops, but if such designated legal representatives were to obtain the chops, in spite of these protections, then we may encounter difficulties in maintaining control over the relevant
entities. Although we monitor such employees and the designated legal representatives, such procedures may not be able to prevent all instances of abuse or negligence. If the designated legal representative obtains control of the chop in an effort
to obtain control over the entity, we would need to pass a new shareholder or board resolution to designate a new legal representative and we would need to take legal action to seek the return of the chops, apply for a new chop with the relevant
authorities (when relevant authorities accept our application of their discretion), or otherwise seek legal redress for the violation of their fiduciary duties to us.



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We rely on the company seals, financial chops and business licenses of our PRC entities or
our legal representatives for entering into contracts, conducting banking business, or taking official corporate action of any sort including registering any change to the composition of the board or management with the relevant PRC authorities.
Accordingly, if any of our legal representatives obtained and misused or misappropriated our corporate chops, seals, business licenses or other controlling intangible assets, whether as a result of an employment or other dispute, such persons
malfeasance or any other reason, we could incur economic damage and disruption to our operations that may necessitate corporate or legal action. Such corporate or legal action could involve significant time and resources to resolve while distracting
management from our operations. In particular, during any period where we lose effective control of the corporate activities as a result of such misuse or misappropriation, the business activities of the affected entity could be disrupted and we
could lose the economic benefits of that aspect of our business which may negatively impact our business and reputation.

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.

We will have to defend against lawsuits
described in Item 8 of this annual report, Financial Information  Consolidated statements and other financial information  Legal Proceedings, including any appeals of such lawsuits should our initial defense be successful. We
are currently unable to estimate the possible loss or possible range of loss, if any, associated with the resolution of these lawsuits. An unfavorable outcome from the lawsuits, including any plaintiffs appeal of the judgment in these
lawsuits, could have a material adverse effect on our consolidated financial position, results of operations, or cash flows in the future. The litigation process may utilize a material portion of our cash resources and divert managements
attention from the day-to-day operations of our company, all of which could harm our business. There can be no assurance that we will prevail in any such appeal and any adverse outcome of these cases could have a material adverse effect on our
business or results of operations.

Our business may be negatively affected by adverse publicity.

Adverse publicity and damage to our reputation arising from our failure or perceived failure to comply with legal and regulatory
requirements, alleged financial reporting irregularities, increasing regulatory and law enforcement scrutiny, and regulatory action or litigation that arises from the failure or perceived failure by us to comply with legal, regulatory and compliance
requirements, could result in adverse publicity. For instance, in late 2011 and early 2012 we were subject to significant negative publicity resulting from reports published by a short seller of our ADSs. This negative publicity resulted in
significant volatility in the trading price of our ADSs and also led to the filing of a shareholder class action lawsuit against us alleging that our filings and earnings releases contained certain material misstatements and omissions. Such adverse
publicity could result in reputational harm, lead to increased regulatory supervision, affect our ability to attract and retain customers, affect our ability to attract and retain key personnel, affect our ability to maintain access to the capital
markets, or have other material adverse effects on us in ways that are not predictable.



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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.

Demand for
advertising time slots and advertising frame space on our networks, and the resulting advertising spending by our clients, is particularly sensitive to changes in general economic conditions and advertising spending typically decreases during
periods of economic downturn. Advertisers may reduce the money they spend to advertise on our networks for a number of reasons, including:



| |  |  | 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.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Since the second half of 2008, global credit and capital markets, particularly in the United States and Europe, have experienced
difficult conditions. Although there have been signs of recovery in the United States in early 2012, since late 2009, there have also been growing concerns of another global economic downturn triggered by the failure of certain European countries to
finance their budget deficits or service their debt levels. In addition, in early March 2012, China pared its economic growth target to 7.5% from an 8% goal that has been in place since 2005. As a result of such economic downturns, growth in
consumer spending in China slowed which resulted in a corresponding slowdown in advertising spending growth. If there is another deterioration in economic conditions, our revenues, net income and results of operations could be materially adversely
affected.

Our quarterly operating results are difficult to predict and may fluctuate significantly from period to period in the future.

Our quarterly operating results are difficult to predict and may fluctuate significantly from period to period based
on the seasonality of consumer spending and corresponding advertising trends in China. In addition, advertising spending generally tends to decrease during January and February each year due to the Chinese Lunar New Year holiday. Factors that are
likely to cause our operating results to fluctuate, such as the seasonality of advertising spending in China, the effect of the global economic downturn on spending in China, a further deterioration of economic conditions in China and potential
changes to the regulation of the advertising industry in China, are discussed elsewhere in this annual report. If our revenues for a particular quarter are lower than we expect, we may be unable to reduce our operating expenses for that quarter by a
corresponding amount, which would harm our operating results for that quarter relative to our operating results from other quarters.

Our failure to maintain existing relationships or obtain new relationships that allow us to place our flat-panel digital displays, advertising
poster frames and outdoor traditional and LED digital billboards in desirable locations would harm our business and prospects.

Our ability to generate revenues from advertising sales depends largely upon our ability to provide large networks of flat-panel digital displays, advertising poster frames (including digital poster
frames), and large outdoor traditional and LED digital billboards, in desirable locations throughout major urban areas in China. We also depend on the ability of our third-party location provider to secure desirable traditional and LED digital
billboard locations for our outdoor traditional and LED network. This, in turn, requires that we develop and maintain business relationships with real estate developers, landlords, property managers, hypermarkets, retailers and other businesses and
locations in which we rent space for our displays and billboards. Although a majority of our display placement agreements and advertising frame placement agreements have terms ranging from one to five years, and upon expiration give us the right to
renew the agreement on terms no less favorable than those offered by competing bidders, we may not be able to maintain our relationships with them on satisfactory terms, or at all. If we fail to maintain our relationships with landlords and property
managers, or if a significant number of our existing display or advertising frame placement agreements are terminated or not renewed or if we fail to maintain our relationship with our location provider of traditional and LED billboard space,
advertisers may find advertising on our networks unattractive and may not wish to purchase advertising time slots or advertising frame space on our networks, which would cause our revenues to decline and our business and prospects to deteriorate.

Under some of our display placement agreements in Guangzhou, Shenzhen, Dalian and Chongqing, the property manager has the
right to terminate the agreement if landlords or tenants in the building lodge complaints about our flat-panel digital displays. In addition, some of our display placement agreements in other cities allow the property manager to terminate the
agreement if we fail to keep each flat-panel digital display operational for a minimum amount of time each year. If these tenants complain about our displays, or if the property manager claims we have failed to keep the flat-panel digital displays
operational for the stipulated number of days each year, we may be required to remove our panels from these locations.



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In accordance with PRC Property Law, landlords enjoy property rights over public areas or
facilities of residential or commercial properties. In substantially all cases, we obtain prior approval from relevant landlords or property managers, before installing any of our advertising equipment in a location. For office buildings, in
substantially all cases, we obtain prior approval directly from landlords, and only execute placement agreements with property managers that such landlords authorized and designated to us. For supermarkets and convenience stores, in substantially
all cases, we obtain consents from and execute placement agreements directly with the market or store owners who have the exclusive right to operate the site. For residential locations, in a majority of cases, we execute placement agreements with
property managers and, in a minority of cases, property owners committees.

If we execute placement agreements with
property managers, we require that such property managers obtain proper authorization from the relevant property owners committees before we execute such placement agreements. If property managers fail to obtain prior approval from the
relevant property owners committees and misrepresent such authorization in our placement agreements, we could be required to obtain the approval of the landlord or remove our advertising equipment at our own cost. Since our founding, we have
not incurred material costs, fees or penalties as a result of failing to obtain any such approvals prior to installing our advertising equipment nor have we been party to any material dispute or litigation as a result of any such failure.

We may not be able to successfully expand our LCD display network, poster frame network and in-store network into new regions
or diversify our network into new advertising networks or media platforms, which could harm or reverse our growth potential and our ability to increase our revenues.

If we are unable to obtain or retain desirable placement locations for our flat-panel digital displays, advertising poster frames and outdoor traditional and LED billboards movie theater advertising
slots 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.

Our location costs, which include lease payments to landlords
and property managers under our display placement agreements, maintenance and monitoring fees and other associated costs, comprise a significant portion of our cost of revenues. For 2009, 2010 and 2011, our location costs accounted for 48.9%, 60.7%
and 64.6% of our cost of revenues and 29.7%, 26.1% and 23.6% of our total revenues, respectively. In the future, we may need to increase our expenditures on our display and frame placement agreements to obtain new and desirable locations, to renew
existing locations, and to secure favorable exclusivity and renewal terms. In addition, lessors of space for our flat-panel digital displays, advertising poster frames and traditional and LED billboards may charge increasingly higher display
location lease fees, or demand other compensation arrangements, such as profit sharing. If we are unable to pass increased location costs on to our advertising clients through rate increases, our operating margins and earnings could decrease and our
results of operations could be materially and adversely affected. In addition, in more developed cities, it may be difficult to increase the number of desirable locations in our network because most such locations have already been occupied either
by us or by our competitors, or in the case of outdoor traditional and LED billboards, because the placement of outdoor installments may be limited by municipal zoning and planning policies. In recently developing cities, the supply of desirable
locations may be small and the pace of economic development and construction levels may not provide a steadily increasing supply of desirable commercial and residential locations. If, as a result of these possibilities, we are unable to increase the
placement of our advertising networks into commercial and residential locations that advertisers find desirable, we may be unable to expand our client base, sell advertising time slots and poster frame space on our network or increase the rates we
charge for time slots and poster frame space, which could decrease the value of our network to advertisers.

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.

The amounts of fees we can charge advertisers for time slots on our LCD display network, movie theatre advertising network and
traditional billboard network depend on the size and quality of these networks and the demand by advertisers for advertising time on these networks. Advertisers choose to advertise on these networks in part based on the size of the networks and the
desirability of the locations where we have placed our flat-panel digital displays and where we lease traditional and LED digital billboards as well as the quality of the services we offer. If we fail to maintain or increase the number of locations,
displays and billboards in our networks, diversify advertising channels in our networks, or solidify our brand name and reputation as a quality provider of advertising services, advertisers may be unwilling to purchase time on our networks or to pay
the levels of advertising fees we require to remain profitable.

In addition, the fees we can charge advertisers for frame
space on our poster frame network depends on the quality of the locations in which we place advertising poster frames, demand by advertisers for frame space and the quality of our service. If we are unable to continue to secure the most desirable
locations for deployment of our advertising poster frames, we may be unable to attract advertisers to purchase frame space on our poster frame network.

Our failure to attract advertisers to purchase time slots and frame space on our networks will reduce demand for time slots and frame space on our networks and the number of time slots and amount of frame
space we are able to sell, which could necessitate lowering the fees we charge for advertising time on our network and could negatively affect our ability to increase revenues in the future.



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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.

Our integration of acquired entities into our business may not
be successful and may not enable us to expand into new advertising platforms as well as we expect. This would significantly affect the expected benefits of these acquisitions. For example, in 2008, we disposed of CGENs in-store advertising
operations, and discontinued the operations of Focus Media Wireless, both of which were recent acquisitions. These two transactions resulted in impairments losses to our 2008 results of operations. In addition, we discontinued or disposed of certain
of our Internet operations in 2009 which resulted in losses to our 2009 results of operations. Moreover, the integration of acquired entities into our operations has required, and will continue to require, significant attention from our management.
Future acquisitions will also likely present similar challenges.

The diversion of our managements attention and any
difficulties encountered in any integration process could have an adverse effect on our ability to manage our business. In addition, we may face challenges trying to integrate new operations, services and personnel with our existing operations. Our
recent acquisitions and possible future acquisitions may also expose us to other potential risks, including risks associated with unforeseen or hidden liabilities, the diversion of resources from our existing businesses and technologies, our
inability to generate sufficient revenue to offset the costs, expenses of acquisitions and potential loss of, or harm to, relationships with employees and advertising clients as a result of our integration of new businesses and new regulations
governing cross-border investment by PRC residents. In addition, we cannot assure you that we will be able to realize the benefits we anticipate from acquiring companies, or that we will not incur costs, including those relating to intangibles or
goodwill, in excess of our projected costs for these transactions. The occurrence of any of these events could have a material and adverse effect on our ability to manage our business, our financial condition and our results of operations.

There may be unknown risks inherent in the acquisitions we have made.

Although we have conducted due diligence with respect to the major acquisitions we have undertaken and undertake, we may not be aware of
all of the risks associated with the targets of such acquisitions we have made. Any discovery of adverse information concerning any company we have acquired since we acquired such entity could have a material adverse effect on our business,
financial condition and results of operations. While we are entitled to seek indemnification in certain circumstances, successfully asserting indemnification or enforcing such indemnification could be costly and time consuming or may not be
successful at all.

In addition, even if we are able to evaluate such risks, entities we acquire may not perform as we
expected due to a range of factors, many of which are beyond our ability to assess or predict. In some instances we may determine to write-off or dispose of acquired entities that underperform. For example, in 2009 we disposed of certain
underperforming entities that operated in our Internet division. We may conduct additional such dispositions or write-offs in the future which could have a material and adverse effect on our business, financial condition and results of operations.



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One or more of our regional distributors could engage in activities that are harmful to our reputation
in the industry and to our business.

As of December 31, 2011, we covered approximately 33 out of the
approximately 114 cities where we provide our LCD display network through contractual arrangements with regional distributors. Under these arrangements, we provide our business model and operating expertise to local advertising companies in exchange
for their acting as regional distributors of our advertising services. We also sell our flat-panel digital displays to our regional distributors, who are responsible for developing and maintaining an advertising network in office buildings and other
commercial locations in the respective cities where they operate. We also grant our regional distributors the right to use our Focus Media, Framedia and other brand names and logos. However, our contractual arrangements with
our regional distributors do not provide us with control or oversight over their everyday business activities, and one or more of our regional distributors may engage in activities that violate PRC laws and regulations governing the advertising
industry and advertising content, or other PRC laws and regulations generally. Some of our regional distributors may not possess all the licenses required to operate an advertising business, or may fail to maintain the licenses they currently hold,
which could result in local regulators suspending the operations of the network in those cities. In addition, we do not independently review the advertising content that our regional distributors display on the portion of our LCD display network
that they operate independently, and our regional distributors may include advertising content on their part of the LCD display network and violate PRC advertising laws or regulations or expose them and us to lawsuits or result in the revocation of
their business license. If any of these events occurs, it could harm our reputation in the industry.

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.

We are subject to reporting obligations under the U.S. securities laws. The SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, adopted rules requiring every
public company to include a management report on such companys internal control over financial reporting in its annual report, which contains managements assessment of the effectiveness of the companys internal control over
financial reporting. In addition, an independent registered public accounting firm for a public company must attest to and report on the effectiveness of the companys internal control over financial reporting. Accordingly, our management
assessed our effectiveness of internal control over financial reporting as of December 31, 2011 using the criteria set forth in the report Internal Control  Integrated Framework published by the Committee of Sponsoring
Organizations of the Treadway Commission, or COSO.

Our management has concluded that our internal control over financial
reporting was effective as of December 31, 2011. Nevertheless, we cannot assure you that any significant deficiency or material weakness in our internal control over financial reporting will not be identified in the future. If, however, we fail
to maintain the adequacy of our internal control, we may not be able to conclude that we have effective internal control over financial reporting. Furthermore, effective internal control over financial reporting is necessary for us to produce
reliable financial reports and is important to help us to manage the company effectively and prevent fraud. If we are unable to implement solutions to any deficiencies in our existing internal controls and procedures, or if we fail to maintain an
effective system of internal controls in the future, we may be unable to accurately report our financial results or prevent fraud and investor confidence and the market price of our ADSs may be adversely impacted.

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.

To manage our growth and operations, we must develop and improve our existing administrative and operational systems and our financial
and management controls and further expand, train and manage our work force. As we continue this effort, we may incur substantial costs and expend substantial resources in connection with any such expansion or to react to more challenging market
conditions, due to, among other things, different technology standards, legal considerations and cultural differences. We may not be able to manage our current or future international operations effectively and efficiently or compete effectively in
such markets. We cannot assure you that we will be able to efficiently or effectively manage the growth or changes in our operations, recruit top talent and train our personnel. Any failure to efficiently manage our expansion or changes in
operations may materially and adversely affect our business and future growth.



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As we continue to expand into new networks and new media platforms, we expect the percentage
of revenues derived from our LCD display network to decline. However, the new advertising networks and media platforms we pursue may not present the same opportunities for growth that we have experienced with our LCD display network and,
accordingly, we cannot assure you that the level of growth of our networks will not decline over time. Moreover, we expect the level of growth of our LCD display network to decrease as many of the more desirable locations have already been leased by
us or our competitors.

We rely on a small number of suppliers for our LCD display network equipment.

We rely on a small number of suppliers for certain of the equipment used in our LCD display network. In 2011, the majority of our LCD
display equipment, in terms or dollars spent, was purchased from one supplier. If, as a result of a change our relationship with our suppliers, for any reason, we can no longer obtain LCD display equipment in the same quantities, or at all, or on
favorable terms, we will need to find other suppliers for our LCD display equipment. Such alternative suppliers may not be able to provide equipment of the same or comparable quality as our existing suppliers, may not be as reliable or responsive to
our purchase orders and requests, or may otherwise not provide the same level of service as our existing suppliers. As a result, if we are no longer able to source equipment from our current suppliers, our maintenance, enhancement and expansion of
our business may be adversely affected.

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.

The
market for out-of-home advertising networks in China is relatively new and its potential is uncertain. We compete for advertising spending with many forms of more established advertising media. Our success depends on the acceptance of our
out-of-home advertising network by advertisers and their continuing interest in these mediums as components of their advertising strategies. Our success also depends on the viewing public continuing to be receptive towards our advertising network.
Advertisers may elect not to use our services if they believe that consumers are not receptive to our networks or that our networks do not provide sufficient value as effective advertising mediums. Likewise, if consumers find some element of our
networks, such as the audio feature of our LCD display, in-store, movie theater and outdoor traditional and LED billboard networks, to be disruptive or intrusive, commercial locations, stores and movie theaters may decide not to place our flat-panel
digital displays in their properties or lease us time in movie theaters and advertisers may view our advertising network as a less attractive advertising medium compared to other alternatives. In that event, advertisers may determine to reduce their
spending on our advertising network. If a substantial number of advertisers lose interest in advertising on our advertising network for these or other reasons, we will be unable to generate sufficient revenues and cash flow to operate our business,
and our advertising service revenue, liquidity and results of operations could be negatively affected.

We depend on the leadership and
services of Jason Nanchun Jiang, who is our founder, executive chairman, chief executive officer and, through JJ Media Investment Holdings Limited, a wholly owned holding company, one of our largest shareholders, and our business and growth
prospects may be severely disrupted if we lose his services.

Our future success is dependent upon the continued
service of Jason Nanchun Jiang, our founder, executive chairman, chief executive officer and, through JJ Media Investment Holdings Limited, one of our largest shareholders. We rely on his industry expertise and experience in our business operations,
and in particular, his business vision, management skills, and working relationships with our employees, our other major shareholders, many of our clients and landlords and property managers of the locations in our network. We do not maintain
key-man life insurance for Mr. Jiang. If he was unable or unwilling to continue in his present position, or if he joined a competitor or formed a competing company in violation of his employment agreement and noncompetition agreement, we
may not be able to replace him easily or at all. As a result, our business and growth prospects may be severely disrupted if we lose his services.



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We may need additional capital and we may not be able to obtain it, which could adversely affect our
liquidity and financial position.

We believe that our current cash and cash equivalents and cash flow from operations
will be sufficient to meet our anticipated cash needs including for working capital and capital expenditures, for the foreseeable future. We may, however, require additional cash resources due to changed business conditions or other future
developments. If these sources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of convertible debt securities or additional equity securities, could
result in additional dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity.

Our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including:



| |  |  | 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.
| | - |  | ------------------------------------------------------------------

We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise
additional funds on terms favorable to us could have a material adverse effect on our liquidity and financial condition.

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.

The market for advertising requires us to
continuously identify new advertising trends and the technology needs of advertisers and consumers, which may require us to develop new features and enhancements for our advertising network. The majority of our displays use 21-inch and17-inch liquid
crystal displays screens. We also have a growing number of displays that use larger LCD and plasma screens as well as large size LED digital billboards. We also upgraded portions of our poster frame network with digital poster LCD displays. Our
movie theater network provides advertising time prior to movie screenings by leasing screen time. In the future, subject to relevant PRC laws and regulations, we may use other technology, such as cable or broadband networking, advanced audio
technologies and high-definition panel technology. We may be required to incur development and acquisition costs in order to keep pace with new technology needs but we may not have the financial resources necessary to fund and implement future
technological innovations or to replace obsolete technology. Furthermore, we may fail to respond to these changing technology needs. For example, if the use of broadband networking capabilities on our advertising network becomes a commercially
viable alternative and meets all applicable PRC legal and regulatory requirements, and we fail to implement such changes on our network or fail to do so in a timely manner, our competitors or future entrants into the market who do take advantage of
such initiatives could gain a competitive advantage over us. In addition, the local authorities may issue temporary restriction or prohibition on outdoor advertising at the regional level in light of public events of large scale held locally. For
example, the Shanghai local government issued certain local regulations that prohibit advertising on ships (other than cargo ships and ferries) on the Huangpu River and Suzhou Creek area and restrictive rules for applying for outdoor advertising for
the period of preparation and hosting of World EXPO 2010, which ended on October 31, 2010. If we cannot succeed in complying with new regulatory requirements or developing and introducing new features on a timely and cost-effective basis,
advertiser demand for our advertising networks may decrease and we may not be able to compete effectively or attract advertising clients, which would have a material and adverse effect on our business prospects and revenues.

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 advertising networks or Internet advertising services network.

PRC advertising laws
and regulations require advertisers, advertising operators and advertising distributors, including businesses such as ours, to ensure that the content of the advertisements they prepare or distribute is fair and accurate and is in full compliance
with applicable law. Violation of these laws or regulations may result in penalties, including fines, confiscation of advertising fees, orders to cease dissemination of the advertisements and orders to publish an advertisement correcting the
misleading information. In circumstances involving serious violations, the PRC government may revoke a violators license for advertising business operations.



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As an advertising service provider, we are obligated under PRC laws and regulations to
monitor the advertising content that is shown on our advertising networks for compliance with applicable law. In addition, each of our regional distributors is obligated under PRC laws and regulations to monitor the advertising content shown on the
portion of our LCD display network each of them operates. In general, the advertisements shown on our advertising network and the portion of our advertising network operated by our regional distributors have previously been broadcast over public
television networks and have been subjected to internal review and verification of such networks. We and our regional distributors are still separately required to independently review and verify these advertisements for content compliance before
displaying the advertisements. In addition, where a special government review is required for specific product advertisements before broadcasting, we and our regional distributors are separately obligated to confirm that such review has been
performed and approval has been obtained. We employ, and our regional distributors are required under the terms of our agreements with them to employ, qualified advertising inspectors who are trained to review advertising content for compliance with
relevant PRC laws and regulations. In addition, for advertising content related to specific types of products and services, such as alcohol, cosmetics, pharmaceuticals and medical procedures, we and our distributors are required to confirm that the
advertisers have obtained requisite government approvals including the advertisers operating qualifications, proof of quality inspection of the advertised products, government pre-approval of the contents of the advertisement and filing with
the local authorities. We endeavor to comply, and encourage our regional distributors to take measures to comply, with such requirements, including by requesting relevant documents from the advertisers. Starting in January 2006, we began to operate
a network of advertising poster frames placed primarily in elevators and public areas of residential complexes. The advertisements shown on our poster frame network are defined as print advertisements under PRC laws and regulations and are also
subject to the same legal requirements as advertisements shown on our LCD display network. Our reputation will be tarnished and our results of operations may be adversely affected if advertisements shown on our LCD display network, poster frame
network, movie theater or outdoor traditional or LED billboard network are provided to us by our advertising clients in violation of relevant PRC advertising laws and regulations or that the supporting documentation and government approvals provided
to us by our advertising clients in connection with such advertising content are not complete or that the advertisements that our regional distributors have procured for broadcasting on our network have not received required approval from the
relevant local supervisory bodies or are not content compliant. In addition, we commenced operation of our traditional billboard network in January 2007. The placement and installation of traditional billboards are subject to municipal zoning
requirements and governmental approvals, including application for an outdoor advertising registration certificate for each traditional billboard subject to a term of use for a period of time, which is typically no more than two years for
traditional billboards. If the existing traditional billboards placed by our location provider or us are required to be removed, the attractiveness of this portion of our advertising network will be diminished. Moreover, failure by an owner of
traditional billboards to maintain outdoor advertising registration certificates would result in the inability to lease or market such space for the placement of advertisements.

China has also enacted regulations governing telecommunication service providers and the distribution of news and other information. In
the past, the Chinese government has stopped the distribution of information over the Internet and telecommunications networks that it believes to violate Chinese law, including content that is pornographic or obscene, incites violence, endangers
national security, is contrary to the national interest or is defamatory. If any of the content that we deliver through our Internet advertising network is found to violate Chinese laws and regulations, we could be subject to fines or suspensions.

Moreover, civil claims may be filed against us for fraud, defamation, subversion, negligence, copyright or trademark
infringement or other violations due to the nature and content of the information displayed on our advertising network. If consumers find the content displayed on our advertising network to be offensive, landlords, property managers, other location
providers or telecommunication network operators may seek to hold us responsible for any consumer claims or may terminate their relationships with us.

In addition, if the security of our content management system is breached through the placement of unauthorized compact flash, or CF cards in our flat-panel digital displays and unauthorized images, text
or audio sounds are displayed on our advertising network, viewers or the PRC government may find these images, text or audio sounds to be offensive, which may subject us to civil liability or government censure despite our efforts to ensure the
security of our content management system. Any such event may also damage our reputation. If our advertising viewers do not believe our content is reliable or accurate, our business model may become less appealing to viewers in China and our
advertising clients may be less willing to place advertisements on our advertising network.

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.

We cannot be certain that our advertising displays or other aspects of our business do not or will not infringe upon patents, copyrights or other intellectual property rights held by third parties.
Although we are not aware of any such claims, we may become subject to legal proceedings and claims from time to time relating to the intellectual property of others in the ordinary course of our business. If we are found to have violated the
intellectual property rights of others, we may be enjoined from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives. In addition, we may incur substantial expenses in defending against these third
party infringement claims, regardless of their merit. Successful infringement or licensing claims against us may result in substantial monetary liabilities, which may materially and adversely disrupt our business.



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Unauthorized use of our intellectual property by third parties, and the expenses incurred in
protecting our intellectual property rights, may adversely affect our business.

We regard our copyrights, trademarks,
trade secrets and other intellectual property as critical to our success. Unauthorized use of the intellectual property used in our business may adversely affect our business and reputation.

We have historically relied on a combination of trademark and copyright law, trade secret protection and restrictions on disclosure to
protect our intellectual property rights. We enter into confidentiality and invention assignment agreements with all our employees. We cannot assure you that these confidentiality agreements will not be breached, that we will have adequate remedies
for any breach, or that our proprietary technology will not otherwise become known to, or be independently developed by, third parties.

We are in the process of registering in China many of the trademarks used in our business. We cannot assure you that any of our trademark applications will ultimately proceed to registration or will
result in registration with scope adequate for our business. Some of our pending applications or registrations may be successfully challenged or invalidated by others. If our trademark applications are not successful, we may have to use different
marks for affected services or technologies, or enter into arrangements with any third parties who may have prior registrations, applications or rights, which might not be available on commercially reasonable terms, if at all.

In addition, policing unauthorized use of our proprietary technology, trademarks and other intellectual property is difficult and
expensive, and litigation may be necessary in the future to enforce our intellectual property rights. Future litigation could disrupt our business, as well as have a material adverse effect on our financial condition and results of operations.

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 compete with other advertising companies in China. We
compete for advertising clients primarily on the basis of network size and coverage, location, price, the range of services that we offer and our brand name. We also face competition from other out-of-home television advertising network operators
for access to the most desirable locations in cities in China. Individual buildings, hotels, restaurants and other commercial locations and hypermarket, supermarket and convenience store chains may also decide to independently, or through
third-party technology providers, install and operate their own flat-panel television advertising screens. Our in-store network faces competition with similar networks operated by domestic out-of-home advertising companies. We also compete for
overall advertising spending with other alternative advertising media companies, such as Internet, wireless communications, street furniture, billboard, frame and public transport advertising companies, and with traditional advertising media, such
as newspapers, television, magazines and radio.

In the future, we may also face competition from new entrants into the
out-of-home television advertising sector. Our sector is characterized by relatively low fixed costs and, as is customary in the advertising industry, we do not have exclusive arrangements with our advertising clients. In addition, since
December 10, 2005, wholly foreign-owned advertising companies are allowed to operate in China, which may expose us to increased competition from international advertising media companies attracted to opportunities in China.

Increased competition could reduce our operating margins and profitability and result in a loss of market share. Some of our existing and
potential competitors may have competitive advantages, such as significantly greater financial, marketing or other resources, or exclusive arrangements with desirable locations, and others may successfully mimic and adopt our business model.
Moreover, increased competition will provide advertisers with a wider range of media and advertising service alternatives, which could lead to lower prices and decreased revenues, gross margins and profits. We cannot assure you that we will be able
to successfully compete against new or existing competitors.

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.

The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited business insurance
products and do not, to our knowledge, offer business liability insurance. While business disruption insurance is available to a limited extent in China, we have determined that the risks of disruption, cost of such insurance and the difficulties
associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. As a result, we do not have any business liability, disruption or litigation insurance coverage for our operations in China.
Any business disruption or litigation may result in our incurring substantial costs and the diversion of resources.



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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.

Based upon the past and projected composition of our income
and valuation of our assets, including goodwill, we believe we were not a passive foreign investment company, or PFIC, for 2011, we do not expect to be a PFIC for 2012, and we do not expect to become one in the future, although there can be no
assurance in this regard. If, however, we were a PFIC, such characterization could result in adverse United States federal income tax consequences to you if you are a U.S. investor. For example, if we are a PFIC, our U.S. investors will become
subject to increased tax liabilities under United States federal income tax laws and regulations and will become subject to burdensome reporting requirements. The determination of whether or not we are a PFIC is made on an annual basis and will
depend on the composition of our income and assets from time to time. Specifically, we will be classified as a PFIC for United States federal income tax purposes if either: (i) 75% or more of our gross income in a taxable year is passive
income, or (ii) the average percentage of our assets by value in a taxable year which produce or are held for the production of passive income (which includes cash) is at least 50%. The calculation of the value of our assets will be based, in
part, on the then market value of our ADSs, which is subject to change. Furthermore, it is not entirely clear how the contractual arrangements between us and our consolidated VIEs will be treated for the purpose of the PFIC rules. If it is
determined that we do not own the stock of our consolidated variable interest entities for United States federal income tax purposes (for instance, because the relevant PRC authorities do not respect these arrangements), we would likely be treated
as a PFIC. Accordingly, we cannot assure you that we will not be a PFIC for 2012 or any future taxable year. For more information on PFICs, see Item 10.E Additional Information  Taxation  United States Federal Income
Taxation.

Risks Relating to Regulation of Our Business and to Our Structure

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.

Under PRC law, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. If
any of the transactions we have entered into among our subsidiaries and operating affiliates are found not to be on an arms-length basis, or to result in an unreasonable reduction in tax under PRC law, the PRC tax authorities have the
authority to disallow our tax savings, adjust the profits and losses of our respective PRC entities and assess late payment interest and penalties. See Item 5. Operating and Financial Review and Prospects  Taxation for a discussion
of the transactions referred to above. In compliance with existing PRC law, our PRC operating subsidiaries and affiliates have filed with the relevant tax authorities on an annual basis a report disclosing any related party transactions. As of the
date of this Form 20-F, we have not received any order or notice from the PRC tax authorities requiring an upward adjustment of our tax liability or otherwise challenging any related party transaction.

However, there can be no assurance that the PRC tax authorities will not conduct an audit or issue any negative order with respect to any
related party transaction in the future. A finding by the PRC tax authorities that any of our PRC operating subsidiaries or affiliated entities are ineligible for their tax exemptions or an order by the PRC tax authorities that requires an upward
adjustment on taxation or any interest on late payments or other penalties should be imposed would substantially increase our taxes owed and reduce our net income and the value of your investment. As a result of this risk, you should evaluate our
results of operations and financial condition without regard to these tax savings.

Our business operations may be affected by
legislative or regulatory changes.

There are no existing PRC laws or regulations that specifically define or regulate
out-of-home digital media. Changes in laws and regulations or the enactment of new laws and regulations governing placement or content of out-of-home advertising, our business licenses or otherwise affecting our business in China may materially and
adversely affect our business prospects and results of operations. An example of regulatory changes that affected our business was the introduction of anti-spam rules governing the sending of SMS messages without a users consent.
These changes in rules governing wireless services contributed to a market environment that eventually contributed to our decision to terminate our mobile handset advertising network in April and December 2008. Further, in 2009, in response to a
regulation promulgated by Shanghai Municipality Government in early 2009, regarding the operation of boat-based advertising platform on the Huangpu River, we suspended operation of the LED billboard aboard a boat we had purchased as an advertising
platform on the Huangpu River. Accordingly, we recorded an aggregate impairment loss of $12.7 million for the year ended December 31, 2009, consisting of a $3.2 million impairment of acquired intangible assets and a $9.5 million impairment of
the boat and LED equipment, as, following renovations and outfitting of the boat for non-passenger and non-cargo services and an eight-month solicitation effort to use the boat for advertising purposes in other markets, we were unable to find a
suitable alternative market where the boat could be put to active use.

Risks Relating to the Peoples Republic of China

Substantially all of our assets are located in China and substantially all of our revenues are derived from our operations
in China. Accordingly, our business, financial condition, results of operations and prospects are subject, to a significant extent, to economic, political and legal developments in China.



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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 economy differs from the economies of most developed countries in many respects, including the amount of government involvement,
level of development, growth rate, control of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth over the past, growth has been uneven, both geographically and among various sectors of the economy.
The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall PRC economy, but may also have a negative effect on us. For example, under current PRC
regulations, since December 10, 2005, foreign entities have been allowed to directly own 100% of a PRC advertising business if the foreign entity has at least three years of direct operations of an advertising business outside of China, or to
directly own less than 100% of a PRC advertising business if the foreign entity has at least two years of direct operations of an advertising business outside of China. This may encourage foreign advertising companies with more experience, greater
technological know-how and more extensive financial resources than we have to compete against us and limit the potential for our growth. Moreover, our financial condition and results of operations may be adversely affected by government control over
capital investments or changes in tax regulations that are applicable to us.

The PRC economy has been transitioning from a
planned economy to a more market-oriented economy. Although the PRC government has implemented measures since the late 1970s emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and
the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating
industry development by imposing industrial policies. The PRC government also exercises significant control over Chinas economic growth through the allocation of resources, controlling payment of foreign currency- denominated obligations,
setting monetary policy and providing preferential treatment to particular industries or companies. Since late 2003, the PRC government implemented a number of measures, such as raising bank reserves against deposit rates to place additional
limitations on the ability of commercial banks to make loans and raise interest rates, in order to slow down specific segments of Chinas economy which it believed to be overheating. These actions, as well as future actions and policies of the
PRC government, could materially affect 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.

The PRC legal system
is a civil law system based on written statutes. Unlike common law systems, it is a system in which decided legal cases have little precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations
governing economic matters in general. The overall effect of legislation since then has significantly enhanced the protections afforded to various forms of foreign investment in China. Each of our PRC operating subsidiaries and affiliates is subject
to PRC laws and regulations. However, these laws, regulations and legal requirements change frequently, and their interpretation and enforcement involve uncertainties. For example, we may have to resort to administrative and court proceedings to
enforce the legal protection that we enjoy either by law or contract. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to
evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. These uncertainties may impede our ability to enforce the contracts we have entered into with our operating
affiliates. In addition, such uncertainties, including the inability to enforce our contracts, could materially and adversely affect our business and operation. In addition, intellectual property rights and confidentiality protections in China may
not be as effective as in the United States or other countries. Accordingly, we cannot predict the effect of future developments in the PRC legal system, particularly with regard to the advertising industry, including the promulgation of new laws,
changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. These uncertainties could limit the legal protections available to us, including our ability to enforce our agreements
with Focus Media Advertisement and its subsidiaries and shareholders, and other foreign investors, including you.

If tax benefits
currently available to us in PRC were no longer available, our effective income tax rates for our PRC operations could increase.

We are incorporated in the Cayman Islands where no income taxes are imposed.

We
generated substantially all our net income from our PRC operations. Our China operations are conducted through various subsidiaries and operating affiliates. Prior to January 1, 2008, pursuant to the PRC Income Tax Laws, our subsidiaries and
operating affiliates were generally subject to EIT at a statutory rate of 33%.



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The PRC Enterprise Income Tax Law, or the New Law, and the implementation regulations to the
New Law issued by the PRC State Council, became effective as of January 1, 2008. Under the New Law, China adopted a uniform tax rate of 25% for all enterprises (including domestically-owned enterprises and foreign-invested
enterprises) and revoked the previous tax exemption, reduction and preferential treatments applicable to foreign-invested enterprises. There is a transition period for enterprises, whether foreign-invested or domestic, which received preferential
tax treatments granted by relevant tax authorities prior to January 1, 2008. Enterprises that were subject to an enterprise income tax rate lower than 25% prior to January 1, 2008 may continue to enjoy the lower rate and gradually
transition to the new tax rate within five years after the effective date of the New Law subject to relevant transaction rules. Enterprises that were entitled to exemptions or reductions from the standard income tax rate for a fixed term prior to
January 1, 2008 may continue to enjoy such treatment until the fixed term expires. Preferential tax treatments may be granted to industries and projects that are strongly supported and encouraged by the state, and enterprises that qualify as
High and New Technology Enterprise (HNTE) are entitled to a 15% enterprise income tax rate.

Further,
Notice of the State Council concerning Implementation of Transitional Tax Incentives for HNTE newly-established in Special Economic Zones and Shanghai Pudong New Area (Circular 40) allows high tech companies established in the Special
Economic Zones and Shanghai Pudong New Area to enjoy enterprise income tax exemption for the first to second year and half-rate of 25% statutory rate for the third to fifth year.

Most of the Companys PRC operating subsidiaries and affiliates have completed transition from 33% to 25% starting from
January 1, 2008. Those that enjoyed a lower tax rate of 15% before January 1, 2008 will gradually transition to the uniform tax rate of 25% from 2008 to 2012 unless they obtain the HNTE status under the New Law.

Among the subsidiaries and VIEs, Beijing Focus Media Wireless Co., Ltd. was qualified for the transitional rule under Circular 39 and
thus enjoyed 0% for 2008 and enjoy a 50% reduction off the tax rate from 2009 through 2011. Accordingly, for the years ended December 31, 2009, 2010 and 2011, Beijing Focus Media Wireless Co., Ltd., was subject to a preferential tax rate of
10%, 11% and 12%, respectively.

Focus Media (China) Information Technology Co., Ltd. was incorporated on August 22, 2008
in one of the specific areas designated by the State Council, and obtained the HNTE qualification on June 22, 2010. Therefore, Focus Media (China) Information Technology Co., Ltd. is exempted from the EIT for the two years ended
December 31, 2010 and 2011 and will enjoy a 50% tax deduction for the next three years.

We cannot assure you that the
tax authorities will not, in the future, discontinue any of our preferential tax treatments, potentially with retroactive effect. The discontinuation of our preferential tax treatments or the change of the applicable preferential tax rate could
materially increase our tax obligations.

Dividends we receive from our operating subsidiaries located in the PRC may be subject to PRC
withholding tax.

The New Law, and the implementation regulations for the New Law issued by the PRC State Council,
became effective as of January 1, 2008. The New Law provides that a maximum income tax rate of 20% will be applicable to dividends payable to non-PRC investors that are non-resident enterprises, to the extent such dividends are
derived from sources within the PRC, and the State Council has reduced such rate to 10% through the implementation regulations. Pursuant to the New Law, dividends generated after January 1, 2008 and payable by a foreign-invested enterprise in
China to its foreign investors will be subject to a 10% withholding tax, unless any such foreign investors jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement.

We are a Cayman Islands holding company and substantially all of our income may be derived from dividends and royalty fees we receive
from our operating subsidiaries located in the PRC. Thus, dividends paid to us by our WFOE operating subsidiaries in China are subject to the 10% withholding tax if we are considered as a non-resident enterprise under the New Law. If we
are required under the New Law to pay income tax for any dividends we receive from our subsidiaries, it will materially and adversely affect the amount of dividends, if any, we may pay to our shareholders and ADS holders. Furthermore, the State
Administration of Taxation promulgated the Notice on How to Understand and Determine the Beneficial Owners in Tax Agreement in October 2009, or Circular 601, which provides guidance for determining whether a resident of a contracting state is the
beneficial owner of an item of income under Chinas tax treaties and tax arrangements with other countries or regions. According to Circular 601, a beneficial owner generally must be engaged in substantive business activities. An
agent or conduit company will not be regarded as a beneficial owner and, therefore, will not qualify for treaty benefits. The conduit company normally refers to a company that is set up for the purpose of avoiding or reducing taxes or transferring
or accumulating profits. We cannot assure you that any dividends to be distributed by our WFOE operating subsidiaries to our non-PRC subsidiaries who are their respective overseas parent companies, will be entitled to the benefits under the relevant
tax treaties or other similar tax arrangements.



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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.

Under the New Law and implementation regulations issued by the State
Council, PRC income tax at the rate of 10% is applicable to dividends payable to investors that are non-resident enterprises, which do not have an establishment or place of business in the PRC, or which have such establishment or place
of business but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends have their sources within the PRC. Similarly, any gain realized on the transfer of ADSs or shares by such
investors is also subject to 10% PRC income tax if such gain is regarded as income derived from sources within the PRC. It is unclear whether dividends we pay with respect to our ordinary shares or ADSs, or the gain you may realize from the transfer
of our ordinary shares or ADSs, would be treated as income derived from sources within the PRC and be subject to PRC tax. If we are required under the New Law to withhold PRC income tax on dividends payable to our non-PRC investors that are
non-resident enterprises, or if you are required to pay PRC income tax on the transfer of our ordinary shares or ADSs, the value of your investment in our ordinary shares or ADSs may be materially and adversely affected.

The New Law also provides that dividend income between qualified resident enterprises is exempted income, which may imply
that dividends we receive from our PRC subsidiaries would be exempt from income tax if we are treated as a PRC resident enterprise for tax purposes, but we cannot assure you that we will be able to obtain such treatment for dividends paid to us by
our PRC subsidiaries. Moreover, if we are deemed to be a PRC resident enterprise under the New Law, a foreign investor in us may be able to claim the benefits of any income tax treaty between his or her resident country and China. We cannot assure
you, however, that treaty benefits will be available to you (for example with respect to the withholding tax rate on dividends) even if we are deemed a PRC resident enterprise.

Our PRC operating subsidiaries and operating affiliates may have engaged in business activities without the necessary registration with local authorities. This could subject us to fines or other
penalties, which could negatively impact our revenues or interfere with our ability to operate our business.

According to relevant PRC laws, a company shall conduct business within its business scope and make supplementary registration with the
relevant company registration authority if the company expands or changes its business operation. Furthermore, a company that sets up a branch to conduct an advertising business in a location where it is not registered must register with the local
branch of the SAIC. As our business expands, some of our indirect operating subsidiaries or our operating affiliates may fail to register with the relevant local branch of SAIC for their expansion of business or for their branch offices in each of
the cities where we operate and, as a result, we may be subject to administrative order for rectification and penalties for failing to register. These penalties may include, fines, disgorgement of profits or revocation of business license of our
operating subsidiaries or our operating affiliates, although we believe that, as a matter of practice, the authorities typically impose an extreme penalty only after repeated warnings are ignored or where a violation is blatant and continuous.
Because of the discretionary nature of regulatory enforcements in the PRC, we cannot assure you that we will not be subject to these penalties as a result of violations of the requirement to register with the local branches of SAIC for our local
branch offices or for our expansion of business, or that these penalties would not substantially inhibit our ability to operate our business.

We may in the future need to procure an Internet content provider, or ICP, license in connection with the operations of our newly acquired
operating affiliate, Enjoy Media. If it is determined that such license is required and we are unable to successfully procure such license, we may be subject to fines, penalties or other sanctions

In 2011, we acquired a controlling interest in Enjoy Media, a start-up company that is mainly engaged in the research and development of
Q.com.cn (which focuses on distribution of electronic coupons), and related mobile phone applications. Under applicable PRC regulations relating to Internet information services, an ICP is required either (i) to obtain an ICP license from the
Ministry of Industry and Information Technology, or MIIT, if it engages in a profitable online service, or (ii) to make a filing with the MIIT if it engages in a non-profitable online service. As of the date of this annual report, no significant
revenue has been generated by Enjoy Media. As a result, we made the requisite filing with the MIIT in 2011 with respect to Q.com.cn. However, the distinction between profitable and non-profitable online service is unclear in practice and our
online distribution of electronic coupons may be deemed as a profitable online service by the relevant authorities. In addition, our future business plan for Enjoy Media may involve businesses which are more commonly regarded as profitable online
services. To ensure full compliance with PRC laws and regulations, we will apply for an ICP license if the authorities deems us to be a profitable ICP or our future business direction requires us to. If we are required to apply for an ICP license
and are not successful in acquiring such license, Enjoy Media could face fines or other sanctions.

The strengthened scrutiny over
acquisition and disposition transactions by the PRC tax authorities may have a negative impact on us or your disposition of our ordinary shares or ADSs.

Our operations and transactions are subject to review by the PRC tax authorities pursuant to relevant PRC laws and regulations. However, these laws,
regulations and legal requirements change frequently, and their interpretation and enforcement involve uncertainties. For example, in connection with the New Law, the Ministry of Finance and State Administration of Taxation jointly issued, on
April 30, 2009, the Notice on Issues Concerning Process of Enterprise Income Tax in Enterprise Restructuring Business, or Circular 59. On December 10, 2009, the State Administration of Taxation issued the Notice on Strengthening the
Management on Enterprise Income Tax for Non-resident Enterprises Equity Transfer, or Circular 698. Both Circular 59 and Circular 698 became effective retroactively on January 1, 2008. Under the two circulars, we and certain of our subsidiaries
and affiliates may be subject to additional income tax on capital gains generated from their disposition of relevant equity interests in 2009 and 2010. The PRC tax authorities have the discretion under Circular 59 and Circular 698 to make
adjustments to the taxable capital gains based on the difference between the fair value of the equity interests transferred and the cost of investment. If the PRC tax authorities make such adjustment, our income tax costs will be increased.



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By promulgating and implementing the circulars, the PRC tax authorities have strengthened
their scrutiny over the direct or indirect transfer of equity interests in a PRC resident enterprise by a non-resident enterprise. For example, Circular 698 specifies that the PRC State Administration of Taxation is entitled to redefine the nature
of an equity transfer where offshore holding vehicles are interposed for tax-avoidance purposes and without reasonable commercial purpose and thus impose PRC income tax to a transfer of equity in an offshore company. Further, non-resident
enterprises may be required to file with the PRC tax authorities to report their indirect transfer of equity interests in a PRC resident company if the transferred offshore holding vehicles are incorporated in a tax jurisdiction where the effective
income tax rate is less than 12.5% or if the income of its residents derived outside of such jurisdiction is free of income tax. It is not clear to what extent the holders of our shares or ADS will be subject to these requirements. We have conducted
and may conduct acquisitions and dispositions involving complex corporate structures, but we may not be able to make timely filing with the PRC tax authorities as requested. The PRC tax authorities may, at their discretion, impose or adjust the
capital gains on us for any of our historical or future acquisitions and dispositions or on the holders of our shares or ADSs for their disposition of our shares or ADSs or request us or the holders of our shares or ADSs to submit additional
documentation for their review in connection with any relevant acquisitions or disposition, and cause us or the holders of our shares or ADSs to incur additional costs.

PRC rules on mergers and acquisitions may subject us to sanctions, fines and other penalties and affect our future business growth through acquisition of complementary business.

On August 8, 2006, six PRC government and regulatory authorities, including the PRC Ministry of Commerce and the Chinese Securities
Regulatory Commission, or the CSRC, promulgated a rule entitled Provisions regarding Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the New M&A Rule, which became effective on September 8, 2006 and was
revised in 2009. The New M&A Rule, among other things, requires that an offshore special purpose vehicle, or SPV, formed for the listing purpose through acquisition of a PRC domestic entity and controlled by PRC residents should obtain approval
from the CSRC prior to publicly listing its securities on an overseas stock market. Based on consultation with the International Department of the CSRC regarding its interpretation of the New M&A Rule, our PRC counsel, Global Law Office, advised
us that the CSRC approval was not required for the listing of our ADSs on Nasdaq Global Market and subsequent offerings. However, we cannot assure you that the relevant PRC government agency, including the Ministry of Commerce or other applicable
departments of the CSRC, would reach the same conclusion as our PRC counsel. If the CSRC or other PRC regulatory body subsequently determines that the CSRCs approval was, or will be, required for future offerings of our ADSs on Nasdaq Global
Market, and we may face sanctions by the CSRC or other PRC regulatory agencies. In such event, these regulatory agencies may impose fines and penalties on our operations in the PRC, limit our operating privileges in the PRC, delay or restrict the
repatriation of the proceeds from any offering of our ADSs into the PRC, or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading
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The New M&A Rule also established additional procedures and requirements that could make
merger and acquisition activities by foreign investors more time-consuming and complex, including requirements in some instances that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor
takes control of a PRC domestic enterprise. In addition, on August 25 2011, the PRC Ministry of Commerce promulgated the Rules of the Ministry of Commerce on the Implementation of the Security Review System for Mergers and Acquisitions of Domestic
Enterprises by Foreign Investors, or the Ministry of Commerce Security Review Rules, to implement the Notice of the General Office of the State Council on Establishing Security Review System for Mergers and Acquisitions of Domestic Enterprises by
Foreign Investors promulgated on February 3, 2011, or Circular 6. Under the Ministry of Commerce Security Review Rules, a national security review is required for certain mergers and acquisitions by foreign investors that raise concerns regarding
national defense and security. Foreign investors are prohibited from circumventing the national security review requirements by structuring transactions through proxies, trusts, indirect investments, leases, loans, control through contractual
arrangements or offshore transactions. The application and interpretation of the Ministry of Commerce Security Review Rules remain unclear. In the future, we may grow our business in part by acquiring complementary businesses, although we do not
have any plans to do so at this time. Complying with the requirements of the New M&A Rule and Ministry of Commerce Security Review Rules to complete such transactions could be time-consuming, and any required approval processes, including
obtaining approval from the Ministry of Commerce, may delay or inhibit the completion of such transactions, which could affect our ability to expand our business or maintain our market share.

Restrictions on currency exchange may limit our ability to utilize our revenues effectively.

Substantially all of our revenues and operating expenses are denominated in Renminbi. The Renminbi is currently convertible under the current account, which includes dividends, trade and
service-related foreign exchange transactions, but not under the capital account, which includes foreign direct investment and loans. Currently, each of our WFOE operating subsidiaries may purchase foreign exchange for settlement of
current account transactions, including payment of dividends to us, without the approval of SAFE. However, we cannot assure you that the relevant PRC governmental authorities will not further limit or eliminate our ability to purchase
foreign currencies in the future. Since a significant amount of our future revenues will be denominated in Renminbi, any existing and future restrictions on currency exchange may limit our ability to utilize revenues generated in Renminbi to fund
our business activities outside China, if any, or expenditures denominated in foreign currencies. Foreign exchange transactions under the capital account are still subject to limitations and require approvals from, or registration with, the State
Administration of Foreign Exchange and other relevant PRC governmental authorities. This could affect the ability of each of WFOE operating subsidiaries to obtain foreign exchange through debt or equity financing, including by means of loans or
capital contributions from us. It may also restrict our ability to remit amounts overseas including to our Cayman Islands holding company. If we transfer amounts to overseas accounts, it may be deemed a dividend paid on profits which is subject to
PRC taxation, which could affect the feasibility and efficiency of conducting actions overseas, such as issuing dividends to shareholders, conducting share repurchase programs or otherwise.

Fluctuations in exchange rates could result in foreign currency exchange losses.

Appreciation or depreciation in the value of the Renminbi relative to the U.S. dollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our
business or results of operations. Since July 2005, the Renminbi is no longer pegged solely to the U.S. dollar. Instead, it is reported to be pegged against a basket of currencies, determined by the Peoples Bank of China, against which it can
rise or fall by as much as 0.3% each day. This change in policy has resulted in the gradual increase in the value of the Renminbi against the U.S. dollar over time. As of December 30, 2011, the Renminbi had appreciated approximately 31.5%
against the U.S. dollar since July 21, 2005. On April 20, 2012, the Renminbi was valued against the U.S. dollar at approximately RMB6.3080 to the U.S. dollar. The Renminbi may appreciate or depreciate significantly in value against the U.S.
dollar in the long term, depending on the fluctuation of the basket of currencies against which it is currently valued or it may be permitted to enter into a full float, which may also result in a significant appreciation or depreciation of the
Renminbi against the U.S. dollar. Fluctuations in the exchange rate will also affect the relative value of any dividend we issue in the future which will be exchanged into U.S. dollars and earnings from and the value of any U.S. dollar-denominated
investments we make in the future.

Very limited hedging transactions are available in China to reduce our exposure to
exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and
effectiveness of these hedges may be limited and we may not be able to successfully hedge our exposure at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert
Renminbi into foreign currency.

Our financial and operating performance may be adversely affected by epidemics, natural disasters and
other catastrophes

From December 2002 to June 2003, China and other countries
experienced an outbreak of a new and highly contagious form of atypical pneumonia now known as severe acute respiratory syndrome, or SARS. On July 5, 2003, the World Health Organization declared that the SARS outbreak had been contained. Since
September 2003, however, a number of isolated new cases of SARS have been reported, most recently in central China in April 2004. During May and June of 2003, many businesses in China were closed by the PRC government to prevent transmission of
SARS. In addition, many countries, including China, have encountered incidents of the H5N1 strain of bird flu, or avian flu. This disease, which is spread through poultry populations, is capable in some circumstances of being transmitted to humans
and is often fatal. In April 2009, an outbreak of the H1N1 virus, also commonly referred to as swine flu, occurred in Mexico and spread to other countries. Cases of swine flu were reported in Hong Kong and mainland China. A new outbreak
of SARS or an outbreak of avian or swine flu may result in health or other government authorities requiring the closure of our offices or other businesses, including office buildings, retail stores and other commercial venues, which comprise the
primary locations where we provide our LCD display and poster frame advertising services. Any recurrence of the SARS outbreak, an outbreak of avian or swine flu or a development of a similar health hazard in China, may deter people from congregating
in public places, including a range of commercial locations such as office buildings and retail stores. Such occurrences could severely impact the value of our LCD display and poster frame networks to advertisers, significantly reduce the
advertising time purchased by advertisers and severely disrupt our business and operations. In addition, losses caused by epidemics, natural disasters and other catastrophes, including earthquakes or typhoons, are either uninsurable or too expensive
to justify insuring against in China.



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Similarly, war (including the potential of war), terrorist activity (including threats of
terrorist activity), natural disasters, social unrest, geopolitical uncertainty or international conflict may also have a material adverse effect on our business and results of operations. In addition, we may not be adequately prepared in
contingency planning or recovery capability in relation to a major incident or crisis, and as a result, our operational continuity may be adversely and materially affected and our reputation may be harmed.

The audit report included in this annual report are prepared by auditors who are not inspected by the Public Company Accounting Oversight Board
and, as such, you are deprived of the benefits of such inspection

The independent registered public accounting firm
that issues the audit reports included in our annual reports filed with the US Securities and Exchange Commission, as auditors of companies that are traded publicly in the United States and a firm registered with the US Public Company Accounting
Oversight Board (United States) (the PCAOB), is required by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and professional standards. Because
our auditors are located in the Peoples Republic of China, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Chinese authorities, our auditors are not currently inspected by the PCAOB.

Inspections of other audit firms that the PCAOB has conducted outside China have identified deficiencies in those firms
audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. This lack of PCAOB inspections in China prevents the PCAOB from regularly evaluating our auditors
audits and its quality control procedures. As a result, investors in our ADSs may be deprived of the benefits of PCAOB inspections of our auditors.

The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our auditors audit procedures or quality control procedures as
compared to auditors outside of China that are subject to PCAOB inspections. As a result, investors in our ADSs may lose confidence in our reported financial information and procedures and the quality of our financial statements.

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.

The trading price of our ADSs has been and may continue to be subject to wide fluctuations. From July 13, 2005 to April 26, 2012,
the closing prices of our ADSs on the Nasdaq Global Market has ranged from a low of $5.12 to a high of $65.10 per ADS and the last reported sale price on April 26, 2012 was $23.72. From July 13, 2005 until April 10, 2007, we used an
ADS-to-share ratio of one-to-10. Starting April 11, 2007, we reduced this ratio to five-to-one. All ADS trading prices on the Nasdaq set forth in this annual report, including historical trading and closing prices, have been adjusted to reflect
the new ADS-to-share ratio of one-to-five. Our ADS price may fluctuate in response to a number of events and factors. The financial markets in general, and the market prices for many PRC companies in particular, have experienced extreme volatility
that often has been unrelated to the operating performance of such companies.

In addition to market and industry factors, the
price and trading volume for our ADSs may be highly volatile for specific business reasons. Factors such as variations in our revenues, earnings and cash flow, announcements of new investments, cooperation arrangements or acquisitions, and
fluctuations in market prices for our advertising network could cause the market price for our ADSs to change substantially. Any of these factors may result in large and sudden changes in the volume and price at which our ADSs will trade. We cannot
give any assurance that these factors will not occur in the future.

As a foreign private issuer, we are permitted to, and we will, rely
on exemptions from certain Nasdaq corporate governance standards applicable to U.S. issuers, including the requirement for shareholder approval for the issuance of shares to officers or directors in a private placement at a price less than market
value of the shares, which is considered a form of equity compensation. This may afford less protection to holders of our ordinary shares and ADSs.



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The Nasdaq Listing Rules in general require listed companies to follow a stipulated set of
corporate governance practices. As a foreign private issuer, we are permitted to, and we will, follow home country corporate governance practices instead of certain requirements of the Nasdaq Listing Rules, including, among others, the shareholder
approval rules. Under Nasdaq Listing Rule 5635(c), shareholder approval is required prior to the issuance of securities when a stock option or purchase plan is to be established or materially amended or other equity compensation arrangement made or
materially amended, pursuant to which stock may be acquired by officers, directors, employees, or consultants, subject to certain exceptions. This includes the issuance of shares to officers or directors in a private placement at a price less than
market value, which is considered a form of equity compensation. The corporate governance practice in our home country, the Cayman Islands, does not require shareholder approval for the issuance of shares to officers or directors in a private
placement at a price less than the greater of book value and market value, provided that the directors consider the issue price represents fair value for the shares being issued. We currently rely upon the relevant home country exemption in lieu of
the requirement for shareholder approval of such share issuances. For example, in connection with the subscription for our ordinary shares by JJ Media Investment Holding Limited (an entity owned by Jason Nanchun Jiang) in September 2009, our audit
committee approved a price equal to the per-share equivalent average trading price of our ADSs during the twenty days prior to the subscription date, which in the event was slightly lower than market value but which our directors considered to
represent fair value. As a result, you may receive less shareholder protection from dilution and other matters than if we were not a foreign private issuer.

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.

Our failure to timely file our 2006 annual report on Form 20-F subjected us to delisting review by the Nasdaq Listing
Qualifications Panel. In addition, in the past we previously failed to maintain a majority of independent directors on our board of directors, which put us out of compliance with Nasdaq Listing Rule 5605. See Management. On
October 4, 2007, we received a letter from Nasdaq Listing Qualifications notifying us that we had regained compliance with all Nasdaq listing qualifications by filing our annual report for 2006.

Our historical failure to comply with Nasdaq Listing Rules has on one occasion subjected us to delisting review. If for any reason we
fail to maintain compliance with Nasdaq Listing Rules in the future, we could be subject to additional delisting procedures and sanctions, which could affect our reputation and the market value of our securities, and could result in shareholder
litigation, which may divert the attention of our management and force us to expend resources to defend against such claims. Any litigation may have a material and adverse effect on our business and future results of operations.

A significant percentage of our outstanding ordinary shares is beneficially owned by JJ Media Investment Holding Limited, an entity 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.

Jason Nanchun Jiang beneficially owns approximately 17.9% of our outstanding ordinary shares through his investment
entity JJ Media Investment Holding Limited. Accordingly, Jason Nanchun Jiang has significant influence in determining the outcome of any corporate transaction or other matter submitted to the shareholders for approval, including mergers,
consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions.

In addition, Mr. Jiang has historically entered into agreements involving shares in Focus Media. For instance, on September 10, 2010, Mr. Jiang (through his wholly-owned subsidiary JJ Media
Investment Holding Limited, or JJ Media) entered into three Capped Call Transactions, which transactions were subsequently amended on June 22, 2011, September 22, 2011 and November 25, 2011. Mr. Jiang (through JJ Media)
entered into the Capped Call Transactions in order to gain synthetic economic exposure to Focus Media shares over time. Such Capped Call Transactions are cash-settled and settlement will not affect Mr. Jiang or JJ Medias ownership of
shares. Concurrently with entering into such Capped Call Transactions, JJ Media received aggregate proceeds of approximately $153.1 million as the selling shareholder in an underwritten public offering of 8.1 million ADSs, representing
approximately 5.7% of our total outstanding share capital at the time. Mr. Jiang also made an US$11.0 million block trade purchase of our ADSs on November 22, 2011, representing approximately 0.5% of our total outstanding share capital at
the time. Accordingly, Mr. Jiang has historically entered, and may continue to enter, into transactions relating to his holdings in Focus Media in connection with his personal investments and financing activities. Mr. Jiang has repeatedly
affirmed his commitment to Focus Media and we expect that he will remain a major shareholder in Focus Media. All transactions he enters into are made pursuant to our securities trading policy and relevant U.S. securities laws and are disclosed in
Mr. Jiangs filings under Form 13D to provide relevant disclosure to investors.



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Further, Jason Nanchun Jiang is also one of three shareholders of certain of our affiliated
PRC entities with which we have contractual arrangements that are essential to our business. The continuing cooperation of these PRC affiliated entities, and their shareholders, branches and subsidiaries, is important to our business. Without Jason
Nanchun Jiangs consent, we could be prevented from entering into transactions or conducting business that could be beneficial to us. Accordingly, Mr. Jiangs control of Focus Media Advertisement could hinder any change in control of
our business, particularly where such change of control would benefit shareholders other than Mr. Jiang. It would be difficult for us to change our corporate structure if any disputes arise between us and Mr. Jiang or if he fails to carry
out his contractual and fiduciary obligations to us.

Thus, Jason Nanchun Jiangs interests as an officer and employee
may differ from his interests as a shareholder or from the interests of our other shareholders, including you.

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.

Our amended and restated memorandum and articles of association include provisions that could limit the ability of others to acquire
control of us, modify our structure or cause us to engage in change-of-control transactions. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by
discouraging third parties from seeking to obtain control of us in a tender offer or similar transaction.

For example, our
board of directors will have the authority, without further action by our shareholders, to issue preference shares in one or more series and to fix the powers and rights of these shares, including dividend rights, conversion rights, voting rights,
terms of redemption and liquidation preferences, any or all of which may be greater than the rights associated with our ordinary shares. Preference shares could thus be issued quickly with terms calculated to delay or prevent a change in control or
make removal of management more difficult. In addition, if the Board of Directors issues preference shares, the market price of our ordinary shares may fall and the voting and other rights of the holders of our ordinary shares may be adversely
affected.

In addition, some actions require the approval of a supermajority of at least two thirds of our board of directors
which, among other things, would allow our non-independent directors to block a variety of actions or transactions, such as a merger, asset sale or other change of control, even if all of our independent directors unanimously voted in favor of such
action, further depriving our shareholders of an opportunity to sell their shares at a premium. In addition, our directors serve terms of three years each, which terms are not staggered. The length of these terms could present an additional obstacle
against the taking of an action, such as a merger or other change of control, which could be in the interest of our shareholders.

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.

Our corporate affairs are governed by our amended and restated memorandum and articles of association, the Cayman
Islands Companies Law and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are
to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which has persuasive,
but not binding, authority on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial
precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. In addition, some U.S. states, such as Delaware, have more fully developed and judicially
interpreted bodies of corporate law than the Cayman Islands.

As a result of all of the above, public shareholders may have
more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a U.S. company.



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Judgments obtained against us by our shareholders may not be enforceable.

We are a Cayman Islands company and substantially all of our assets are located outside of the United States. All of our current
operations are conducted in the PRC. In addition, most of our directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons are located outside the United States.
As a result, it may be difficult for you to effect service of process within the United States upon these persons. It may also be difficult for you to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions
of the U.S. federal securities laws against us and our officers and directors, most of whom are not resident in the United States and the substantial majority of whose assets are located outside of the United States. In addition, there is
uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of United States courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States
or any state. In addition, there is uncertainty as to whether such Cayman Islands or PRC courts would be competent to hear original actions brought in the Cayman Islands or the PRC against us or such persons predicated upon the securities laws of
the United States or any state.

We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we
are exempt from certain provisions applicable to U.S. domestic public companies, including reporting requirements under Section 16 of the Exchange Act.

Because we qualify as a foreign private issuer under the Securities Exchange Act of 1934, as amended, or the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in
the United States that are applicable to U.S. domestic issuers, including:



| |  |  | the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the
Exchange Act;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the sections of the Exchange Act, including Section 16, requiring insiders to file public reports of their stock ownership and trading activities
and liability for insiders who profit from trades made in a short period of time; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the selective disclosure rules by issuers of material non-public information under Regulation FD.
| | - |  | -------------------------------------------------------------------------------------------------

We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to
publish our results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of Nasdaq. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the
information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or
information that would be made available to you were you investing in a U.S. domestic issuer.

The voting rights of holders of ADSs are
limited by the terms of the deposit agreement.

Holders of our ADSs may only exercise their voting rights with respect
to the underlying ordinary shares in accordance with the provisions of the deposit agreement. Upon receipt of voting instructions from a holder of ADSs in the manner set forth in the deposit agreement, the depositary will endeavor to vote the
underlying ordinary shares in accordance with these instructions. Under our amended and restated memorandum and articles of association and Cayman Islands law, the minimum notice period required for convening a general meeting is ten days. When a
general meeting is convened, you may not receive sufficient notice of a shareholders meeting to permit you to withdraw your ordinary shares to allow you to cast your vote with respect to any specific matter at the meeting. In addition, the
depositary and its agents may not be able to send voting instructions to you or carry out your voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to you in a timely manner, but
we cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares. Furthermore, the depositary and its agents will not be responsible for any failure to carry out any
instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, you may not be able to exercise your right to vote and you may lack recourse if your ordinary shares are not voted as you requested.



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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.

Under the deposit agreement for the ADSs, the depositary will give us a discretionary proxy to vote our ordinary shares underlying your ADSs at shareholders meetings if you do not vote, unless:



| |  |  | 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.
| | - |  | -------------------------------------------------

The effect of this discretionary proxy is that you cannot prevent our ordinary shares underlying your ADSs from being voted, absent the situations described above, and it may make it more difficult for
shareholders to influence the management of our company. Holders of our ordinary shares are not subject to this discretionary proxy.

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.

The depositary of our ADSs has agreed to pay you the cash dividends or other distributions it or the custodian for
our ADSs receives on our ordinary shares or other deposited securities after deducting its fees and expenses. You will receive these distributions in proportion to the number of our ordinary shares your ADSs represent. However, the depositary is not
responsible if it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the
Securities Act but that are not properly registered or distributed pursuant to an applicable exemption from registration. The depositary is not responsible for making a distribution available to any holders of ADSs if any government approval or
registration required for such distribution cannot be obtained after reasonable efforts made by the depositary. We have no obligation to take any other action to permit the distribution of our ADSs, ordinary shares, rights or anything else to
holders of our ADSs. This means that you may not receive the distributions we make on our ordinary shares or any value for them if it is illegal or impractical for us to make them available to you. These restrictions may have a material and adverse
effect on the value of your ADSs.

You may be subject to limitations on transfer of your ADSs.

Your ADSs represented by American Depositary Receipts are transferable on the books of the depositary. However, the depositary may close
its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including in connection with corporate events such as
a rights offering, during which time the depositary needs to maintain an exact number of ADS holders on its books for a specified period. The depositary may also close its books in emergencies, and on weekends and public holidays. The depositary may
refuse to deliver, transfer or register transfers of our ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law or any
government or governmental body, or under any provision of the deposit agreement, or for any other reason.

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

Our legal and commercial name is
Focus Media Holding Limited. Our principal executive offices are located at Unit No. 1 on the 20th Floor of The Centrium, 60 Wyndham Street, Central, Hong Kong, and our telephone number is +852-3752-8009. Our Internet website address is
www.focusmedia.cn. Our predecessor company, Shanghai Aiqi Advertisement Co., Ltd., or Aiqi Advertisement, was established by immediate family members of Jason Nanchun Jiang in September 1997 and operated as an advertising agency. In May 2003, Aiqi
Advertisement discontinued its advertising agency business, was renamed Shanghai Focus Media Advertisement Co., Ltd., or Focus Media Advertisement, commenced operation of our out-of-home digital advertising network in China and reorganized its
shareholdings. At the same time, we entered into arrangements with Focus Media Advertisement that resulted in the consolidation of Focus Media Advertisement. Following this reorganization Jason Nanchun Jiang continued to hold a controlling interest
in Focus Media Advertisement.



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In conjunction with the change in our business model in May 2003 and to facilitate foreign
investment in our company, we established our offshore holding company, Focus Media Holding Limited as a company registered in the British Virgin Islands. On April 1, 2005, we completed the process of changing Focus Media Holding Limiteds
corporate domicile to the Cayman Islands and we are now a Cayman Islands company. On July 13, 2005, our ADSs were listed for quotation on the Nasdaq Global Market and on July 19, we and certain of our shareholders completed an initial
public offering and sale of 11,615,000 ADSs.

In January 2006, we acquired Infoachieve Limited which is also referred to as
Framedia throughout this annual report, which operates a network of advertising poster frames placed primarily in elevators and public areas of residential complexes in China.

In January 2006, we and certain of our shareholders completed a public offering and sale of 7,415,389 ADSs.

In February 2006, we acquired Target Media, which operated an out-of-home advertising network using flat-panel digital displays placed in elevator lobbies, elevators and other public areas in commercial
buildings, hospitals, hotels, banks, residential buildings, convenience stores and other locations in cities in China. Since the completion of the acquisition of Target Media, the legal entities of Target Media and its affiliates and subsidiaries
have been dissolved and their operations have been integrated with our operations.

In March 2006, we acquired Dotad Media
Holdings, which operates a mobile-phone advertising service in China through China Mobile and China Unicoms mobile phone networks. Following the acquisition of Dotad Media Holdings, we renamed the acquired company Focus Media Wireless Co.,
Ltd., which is also referred to as Focus Media Wireless throughout this annual report. In December 2008, we discontinued operations of our mobile handset advertising network, and this business is accounted for as a discontinued operation.

On June 21, 2006, we and certain of our shareholders completed a public offering and sale of 7,700,000 ADSs.

In September 2006, we completed the acquisition of 70% of the equity interest in Appreciate Capital Limited, or ACL, a British Virgin
Islands company. ACL, through its affiliated PRC entity, leases screen time from movie theaters in cities in China, which it then sells as screen time slots to advertisers.

In September 2006, certain of our shareholders completed a public offering and sale of 2,459,345 ADSs.

In September 2006, Jason Nanchun Jiang (through his entity JJ Media Investment Holding Limited), our chairman, entered into a variable pre-paid forward contract with Credit Suisse, pursuant to which JJ
Media Investment Holding Limited pledged and monetized 20 million of our ordinary shares held by JJ Media Investment Holding Limited.

During the fourth quarter of 2006, we completed the acquisition of Fengjing Advertisement. We signed a definitive term sheet to acquire 95% of Fengjing Advertisement Company (Fengjing) in July
2006 to further expand our outdoor LED network in Shanghai.

In March 2007, we completed the acquisition of Allyes Information
Technology Company Limited, or Allyes, a Cayman Islands company, which operates an Internet advertising marketing agency and technology services company through its PRC affiliated entities.

In June 2007, we acquired Hua Kuang Advertising Company Limited, a Hong Kong company, and its PRC subsidiary, which operates a
traditional billboard network through its PRC affiliates.



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On November 13, 2007, we and certain of our shareholders, primarily consisting of the
former shareholders of Framedia, Dotad and Allyes, completed a public offering and sale of 13,720,873 ADSs, representing 68,604,365 ordinary shares.

On January 2, 2008, we completed the acquisition of CGEN Digital Media Company Limited, or CGEN. In accordance with the share purchase agreement entered into on December 10, 2007, we made a cash
payment of US$168.4 million to the former CGEN shareholders and the former CGEN shareholders delivered 100% of the equity interest in CGEN to us. In December 2008, we disposed of CGEN, and no longer receive revenues from this business.

On March 20, 2008, our executive chairman Jason Nanchun Jiang, through his entity JJ Media Investment Holding Limited, purchased
100,000 Focus Media ADSs at an average price of USD 34.19 per ADS in the open market.

On July 16, 2008, we
announced the implementation of a share repurchase program of up to $100 million, pursuant to which we repurchased approximately 2,588,342 of our ADSs on the open market for approximately $47.5 million.

On September 23, 2009, Jason Nanchun Jiang, through JJ Media Investment Holding Limited, subscribed for 75 million ordinary
shares to be newly issued by the Company. The shares were issued on November 18, 2009.

In January 2010, certain Allyes
employees and management and directors and certain members of our management and directors entered into a definitive agreement with us and Allyes to buy-out an aggregate 38% interest in Allyes from us. Pursuant to the terms of the agreements, the
purchasing Allyes and Company management members paid an aggregate $13.3 million for a 38% interest of Allyes.

In February
2010, we announced the implementation of a share repurchase program of up to $200 million over the next twelve months which we increased to up to $300 million in August 2010. We repurchased approximately 12,050,786 of our ADSs for approximately
$239.7 million up to May 31, 2011, which included a privately negotiated repurchase of 9,523,810 ADSs from Fosun International for $200 million.

On September 13, 2010, Jason Nanchun Jiang, through JJ Media Investment Holding Limited, sold 8,100,000 of our ADSs at a price of $18.90 per ADS.

On November 22, 2011, Mr. Jiang made an US$11.0 million block trade purchase of our ADSs, representing approximately 0.5% of
our total outstanding share capital at the time.

On December 30, 2010, we signed an agreement to purchase, and on
January 13, 2011, we paid approximately $61.0 million for, 15,331,305, or approximately 15%, of the outstanding shares of VisionChina Media Inc. (VisionChina) (Nasdaq: VISN), one of Chinas largest out-of-home digital
television advertising networks on mass transportation systems. The purchase price was calculated as the greater of (1) the average closing price of VisionChina ADSs in the 20 trading days preceding the purchase plus $0.10 per share and
(2) the closing price of VisionChina ADSs on the date immediately preceding the purchase plus $0.05 per share, which resulted in a per-share purchase price of $3.979.

On June 22, 2011, we announced an increase in the size of our share repurchase program to US$450 million and to extend the termination date of the repurchase plan to December 31, 2013. On
October 3, 2011, we announced our intention to increase the size of the share repurchase program from US$450 million to US$650 million while keeping the termination date of the repurchase plan at December 31, 2013. As
of April 27, 2012, approximately $171 million remained available for the repurchase program.

In December 2011,
Shanghai Focus Media Defeng Advertisement Co., Ltd., or Focus Media Defeng Advertisement, acquired control of Shanghai Enjoy Media Advertising & Broadcasting Co., Ltd., or Enjoy Media, for RMB5.1 million. Enjoy Media is start-up company
that is mainly engaged in the research and development of Q.com.cn (which focuses on distribution of electronic coupons), and related mobile phone application. As of the date of this annual report, no significant revenue has been generated by
Enjoy Media. Enjoy Medias results are included within our LCD display business. Focus Media Defeng Advertisement effectively obtained a 51% controlling interest in Enjoy Media through a series of contractual arrangements with Enjoy Media,
whereby July Lilin Wang, our financial controller, serves as our nominee shareholder of record for the 51% equity interest in Enjoy Media. For a description of these contractual arrangements, see Item 7. Major Shareholders and Related Party
Transactions  B. Related Party Transactions  Agreements among Us, Our PRC Operating Subsidiaries, Our PRC Operating Affiliates and Their Shareholders.

On January 10, 2012, we announced a policy starting from 2012 to issue a recurring dividend with payments expected to equal approximately 25% of our annual non-GAAP net income of the
preceding fiscal year. Non-GAAP net income is calculated excluding share-based compensation expenses, amortization of acquired intangible assets, loss from equity method investee, impairment charges of goodwill, loss from the write-off of certain
assets of previously acquired subsidiaries and the profit from the disposal of the previously acquired business. A dividend of $17.9 million, or $0.0274 per ordinary share, was paid out on April 16, 2012 to the shareholders of record on
March 30, 2012. Dividends will also be paid out on a quarterly basis in the calendar year to shareholders of record as of June 30, September 30 and December 31 respectively. The dividend payments commence in 2012 in respect
of our non-GAAP net income for 2011.

For a description of our principal capital expenditures and divestitures, see
Acquisitions and Capital Expenditure in Item 5. Operating and Financial Review and Prospects  Acquisitions and  B. Liquidity and Capital Resources  Capital Expenditures.

B. Business Overview

The Company is founded on two major premises:



| |  |  | Continued growth of the Chinese advertising market driven by the increasing urban population and the increasing disposable income of the Chinese
population impelled by continued moderate to high speed GDP growth in China
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | The philosophy that the evolution of the Chinese urban population lifestyle triggers the evolution of the advertising spending pattern in China and
hence presents market opportunities for the company to capture the shift in advertising spending. As the Chinese urban population lifestyle changes, consumers become increasingly more elusive to advertisers, and have over time resulted in making
traditional media such as television and newspapers advertising increasingly ineffective and inefficient. As a result, the Company has and will continue to seek to build dominant market share in media platforms that are more effective and efficient
in capturing the attention of the Chinese urban population.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We are now Chinas leading multi-platform
digital media company, operating the largest LCD display network in China using audiovisual digital displays in commercial and residential locations, based on the number of locations and number of flat-panel digital displays in our network, the
largest poster frame network, based on the number of locations and number of traditional poster frames and digital poster frames in our network, and the largest LCD display network in China using audiovisual digital displays in supermarkets and
hypermarkets.

The following is a summary description of the networks we operate:



| |  |  | our LCD display network, which refers to our network of flat-panel digital displays placed in high-traffic areas of commercial, residential and
public buildings, such as malls, hotels and the lobbies of apartment buildings, marketed to advertisers as separate channels targeting different types of consumers, including our premier A1 channel, premier A2 channel, and LCD 2.0 digital picture
screens channel;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our poster frame network, which refers to our network of traditional picture and digital advertising poster frames placed mainly in the
elevators and public areas of commercial or residential buildings;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our in-store network, which refers to our network of flat-panel digital displays placed in specific product areas inside stores with
high-traffic concentrations such as selected consumer product sections and the main aisles in large-scale chain retail stores, or hypermarkets, as well as inside selected supermarkets and convenience stores;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our movie theater advertising network, which refers to our right to sell advertising time on movie screens prior to movie screenings at movie
theaters in China; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our traditional outdoor billboards, which refers to a traditional advertising business of large outdoor billboards. This portion of our network
is operated by Hua Kuang Advertising Company Limited (Hua Kuang), Shanghai OOH Advertisement Co., Ltd. and other PRC subsidiaries under Hua Kuang (collectively referred to as OOH). The OOH business consists of advertising
services focused on giving advertisers access to traditional outdoor billboards. OOH owns or leases the billboards from landlords and other agencies, and provides such billboards to the advertisers who want to put advertisements in such spaces. As
we have historically been primarily a digital outdoor advertising company that places advertising assets in innovative locations, such as office lobbies and elevator banks, that target specific demographics and a company that directly owns (not
leases) its outdoor media assets, the business of OOH is not considered a part of our core business.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Since
we commenced our current business operations in May 2003, we have experienced significant growth in our network and in our financial results. As of December 31, 2011, we operated our LCD display network directly in approximately 81 major cities
throughout China, including Beijing, Shanghai, Guangzhou and Shenzhen. As of December 31, 2011, we covered approximately 33 additional cities through contractual arrangements with regional distributors. Between January 1, 2011 and
December 31, 2011, the number of displays in our LCD display network increased from 136,498 to 155,751. As of December 31, 2011, our in-store network covered 1,576 hypermarkets, 217 supermarkets and 1,008 convenience stores. The number of
displays installed in our in-store network was 50,076 as of December 31, 2011. The total number of non-digital frames and LCD 1.0 picture frame devices available for sale on our poster frame network was 445,126 in aggregate as of
December 31, 2011, as well as 35,050 digital frames as of the same date, mainly in Beijing, Shanghai, Guangzhou and Shenzhen. For our movie theater network, we leased screen time in approximately 316 movie theaters (consisting 2,190 screens) in
cities across China as of December 31, 2011.

In our earnings release for the fourth quarter and full year 2011 released
on March 19, 2012, we announced a change in classification of the LCD 1.0 picture frame devices from the LCD display network division into the poster frame network division, and we are now reconciling the data for each quarters of 2010 and 2011
to reflect this change in categorization and thereby align our operating and financial data with respect to the LCD 1.0 picture frame devices. In order to help investors gain a better understanding of our media platform and the differentiations
between different types of devices, and to align this operating metrics with our internal financial reporting, starting from the fourth quarter of 2011 we have decided, for screen count purposes, to re-categorize the LCD 1.0 picture frame devices
from the division of LCD display network into the division of poster frame network. Historically, for screen count purposes we categorized the LCD 1.0 picture frame devices in the division of LCD display network because those devices were
developed by our LCD display network team. For financial reporting purposes, revenues and costs attributable to such LCD 1.0 picture frame devices have been and continue to be categorized under the poster frame network.



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We are providing the following breakdown of operating data to clarify these changes and will
use this method of classification going forward.



|                                           |  |                                      |         |  |              |  |         |                   |  |  |                  |  |  |               |         |  |              |  |         |                   |  |  |                  |  |  |  |         |  |  |  |         | 
|------------------------------------------ |  | ------------------------------------ | ------- |  | ------------ |  | ------- | ----------------- |  |  | ---------------- |  |  | ------------- | ------- |  | ------------ |  | ------- | ----------------- |  |  | ---------------- |  |  |  | ------- |  |  |  | ------- | 
|                                           |  | For and as of the three months ended |        
|                                           |  | March 31,2010                        |         |  | June 30,2010 |  |         | September 30,2010 |  |  | December 31,2010 |  |  | March 31,2011 |         |  | June 30,2011 |  |         | September 30,2011 |  |  | December 31,2011 | 
|                                           |  | (In thousands)                       |        
|LCD display network:                       |  |                                      |         |  |              |  |         |                   |  |  |                  |  |  |               |         |  |              |  |         |                   |  |  |                  |  |  |  |         |  |  |  |         | 
|Number of LCD screens                      |  |                                      |         |  |              |  |         |                   |  |  |                  |  |  |               |         |  |              |  |         |                   |  |  |                  |  |  |  |         |  |  |  |         | 
| Our direct cities(1)                     |  |                                      | 90,858  |  |              |  | 82,270  |                   |  |  | 85,627           |  |  |               | 96,506  |  |              |  | 99,823  |                   |  |  | 103,354          |  |  |  | 107,454 |  |  |  | 113,859 | 
| Our regional distributors(2)             |  |                                      | 6,196   |  |              |  | 5,234   |                   |  |  | 5,521            |  |  |               | 6,659   |  |              |  | 7,195   |                   |  |  | 7,554            |  |  |  | 8,572   |  |  |  | 8,256   | 
|                                           |  |                                      |         |  |              |  |         |                   |  |  |                  |  |  |               |         |  |              |  |         |                   |  |  |                  |  |  |  |         |  |  |  |         | 
|Total number of LCD screens(1)             |  |                                      | 97,054  |  |              |  | 87,504  |                   |  |  | 91,148           |  |  |               | 103,165 |  |              |  | 107,018 |                   |  |  | 110,908          |  |  |  | 116,026 |  |  |  | 122,115 | 
|                                           |  |                                      |         |  |              |  |         |                   |  |  |                  |  |  |               |         |  |              |  |         |                   |  |  |                  |  |  |  |         |  |  |  |         | 
|Number of LCD 2.0 digital picture screens  |  |                                      | 26,329  |  |              |  | 31,630  |                   |  |  | 32,491           |  |  |               | 33,333  |  |              |  | 32,491  |                   |  |  | 31,363           |  |  |  | 32,478  |  |  |  | 33,636  | 
|                                           |  |                                      |         |  |              |  |         |                   |  |  |                  |  |  |               |         |  |              |  |         |                   |  |  |                  |  |  |  |         |  |  |  |         | 
|Total displays in LCD display network      |  |                                      | 123,383 |  |              |  | 119,134 |                   |  |  | 123,639          |  |  |               | 136,498 |  |              |  | 139,509 |                   |  |  | 142,271          |  |  |  | 148,504 |  |  |  | 155,751 | 
|                                           |  |                                      |         |  |              |  |         |                   |  |  |                  |  |  |               |         |  |              |  |         |                   |  |  |                  |  |  |  |         |  |  |  |         | 
|                                           |  |                                      |         |  |              |  |         |                  
|In-store network:                          |  |                                      |         |  |              |  |         |                   |  |  |                  |  |  |               |         |  |              |  |         |                   |  |  |                  |  |  |  |         |  |  |  |         | 
|Number of displays in our in-store network |  |                                      | 40,848  |  |              |  | 45,686  |                   |  |  | 45,613           |  |  |               | 48,179  |  |              |  | 48,826  |                   |  |  | 50,129           |  |  |  | 50,696  |  |  |  | 50,076  | 
|                                           |  |                                      |         |  |              |  |         |                   |  |  |                  |  |  |               |         |  |              |  |         |                   |  |  |                  |  |  |  |         |  |  |  |         | 
|Number of stores in our in-store network   |  |                                      | 2,772   |  |              |  | 2,845   |                   |  |  | 2,587            |  |  |               | 2,858   |  |              |  | 2,777   |                   |  |  | 2,837            |  |  |  | 2,841   |  |  |  | 2,801   | 
|                                           |  |                                      |         |  |              |  |         |                   |  |  |                  |  |  |               |         |  |              |  |         |                   |  |  |                  |  |  |  |         |  |  |  |         | 
|Poster frame network:(1)                   |  |                                      |         |  |              |  |         |                   |  |  |                  |  |  |               |         |  |              |  |         |                   |  |  |                  |  |  |  |         |  |  |  |         | 
| Frame 1.0 picture frames (1)(3)          |  |                                      | 244,262 |  |              |  | 261,860 |                   |  |  | 302,778          |  |  |               | 328,089 |  |              |  | 373,323 |                   |  |  | 382,472          |  |  |  | 421,182 |  |  |  | 445,126 | 
| Frame 2.0 digital picture screens        |  |                                      | 35,599  |  |              |  | 35,835  |                   |  |  | 35,983           |  |  |               | 35,810  |  |              |  | 35,685  |                   |  |  | 35,217           |  |  |  | 34,711  |  |  |  | 35,050  | 
|                                           |  |                                      |         |  |              |  |         |                   |  |  |                  |  |  |               |         |  |              |  |         |                   |  |  |                  |  |  |  |         |  |  |  |         | 
|Total displays in poster frame network     |  |                                      | 279,861 |  |              |  | 297,695 |                   |  |  | 338,761          |  |  |               | 363,899 |  |              |  | 409,008 |                   |  |  | 417,689          |  |  |  | 455,893 |  |  |  | 480,176 | 
|                                           |  |                                      |         |  |              |  |         |                   |  |  |                  |  |  |               |         |  |              |  |         |                   |  |  |                  |  |  |  |         |  |  |  |         | 



|(1) | Pursuant to the re-classification described above, the data presented here reflect the re-classification of 9,102, 23,171, 26,274, 28,077, 30,595, 27,527, 29,878 and
30,804 LCD 1.0 picture frame devices from the LCD display network to the poster frame network under frame 1.0 picture frames for and as of the periods ended March 31, June 30, September 30 and December 31, 2010 and
March 31, June 30, September 30 and December 31, 2011, respectively.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes both traditional poster frames and digital frames that carry the Framedia logo, as well as LCD 1.0 picture frame devices that carry the Focus Media logo.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of December 31, 2011, our LCD display network was comprised of 155,751 display devices, consisting of
122,115 LCD screens and 33,636 LCD 2.0 digital picture screens, and our poster frame network was comprised of 480,176 poster frames, consisting of 35,050 digital poster frames and 445,126 traditional picture frames, including 30,804 LCD 1.0 picture
frame devices re-categorized from the LCD display network.

LCD display network

As of December 31, 2011, approximately 32% (LCD television screens only) and 42% (LCD television screens plus LCD digital 2.0 picture
screens) of the displays in the LCD display network were located in commercial office buildings. The locations in our LCD display network also include shopping malls, banks, hotels and other public areas. We market our LCD display network to
advertisers of consumer products and services, such as fast moving consumer goods, automobiles, home electronics, mobile communications devices and services, cosmetics, health products, financial services, etc. As of December 31, 2011, our LCD
display network, including the portions of our LCD display network operated by our regional distributors, was comprised of 155,751 flat-panel digital displays placed in approximately 114 cities throughout China. These data take into consideration
the re-classification described in the operating data tables presented above. Our LCD display network consists of flat-panel digital displays, including LCD screens, LCD 2.0 digital picture screens that carry the Focus Media logo. The display
devices on our LCD display network have the technical capacity to show video images as well as fixed images. We operate our LCD display network directly in approximately 81 cities and indirectly through contractual arrangements with regional
distributors in approximately 33 additional cities. Although the substantial majority of our operations are located in China, we have established distributors in countries and regions outside of mainland China, including Hong Kong, Taiwan,
Singapore, etc.



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As we expand the number of venues in our LCD display network, we continue to separate
certain types of venues into distinct stand-alone channels of this network. Starting from January 1, 2011, we restructured our premier office building A channel and our premier office building B channel into our premier A1 channel and premier
A2 channel, respectively. As of December 31, 2011, we had stand-alone channels that are marketed as separate focused channels of our LCD display network, including our premier A1 channel, premier A2 channel, and LCD 2.0 digital picture screens
channel.

A majority of the content displayed on our LCD display and in-store networks and on our outdoor LED billboard
network consists of advertisements which are broadcast repeatedly throughout a day.

We believe that by increasingly offering
new advertising channels on our LCD display network, we will be able to offer advertisers more targeted and effective audience reach, thereby enabling us to increase our advertising rates.

Expanding our network through regional distributors enables us to provide our advertisers with broader nationwide coverage and to test,
develop and evaluate these regional advertising markets without our having to incur start-up and ongoing expenses at the early stages of their development. We also seek to acquire our regional distributors when we believe it is more likely for us to
benefit economically from the full integration of their operations into our network. We do not have the contractual right to purchase our regional distributors, and any such acquisition must be negotiated with each regional distributor separately.



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Each of our regional distributors operates independently from us and is responsible for
independently complying with all relevant PRC laws and regulations including those related to advertising. We periodically monitor our regional distributors to ensure they have obtained all required licenses and are complying with regulations
relating to advertising content. See Item 3D Risk Factors  Risks Relating to Our Business and Industry  One or more of our regional distributors could engage in activities that are harmful to our reputation in the industry and to
our business.

Movie theater advertising network

We operate our movie theater advertising network by selling leased screen time as time slots to advertisers. We have the right to screen time prior to the screening of each movie shown in the theater. As
of December 31, 2011, we had rights to lease advertising time on screens in 316 movie theaters (consisting 2,190 screens) in cities across China.

In-store Network

As part of our growth strategy, we commenced
operations of our in-store network in April 2005. As of December 31, 2011, we had placed 50,076 flat-panel digital displays in 1,576 hypermarkets, 217 supermarkets and 1,008 convenience stores throughout China. We believe the rapid expansion of
hypermarkets and other chain retail stores in China provides opportunities and incentives for advertisers to take advantage of in-store television advertising networks such as our in-store network. Our in-store network primarily attracts advertisers
of food and beverage products, cosmetics, household, kitchen, bathroom products, etc.

Poster Frame Network

We own and operate a network of traditional and digital advertising poster frames deployed primarily in the elevator lobbies, elevators
and public areas of residential and commercial buildings as well as other public locations. We place advertising frames in elevators in which we lease space and sell frame space to advertising clients on a per frame basis for periods of one week or
longer. As of December 31, 2011, we had installed 414,322 traditional poster frames and 35,050 digital poster frames in cities throughout China as well as 30,804 LCD 1.0 picture frame devices in Tianjin, Kunming and Shijiazhuang. These data
take into consideration the re-classification described in the operating data tables presented above. Our digital frames use high-resolution LCD displays. Our advertising posters include both traditional printed posters as well as digital LCD poster
frames placed in elevators and public areas in residential complexes and commercial locations. Generally several advertising poster frames can be placed in each elevator.

Traditional billboard network

We also operate an advertising
business for traditional outdoor billboards. The network consists of outdoor billboards in high-traffic areas in Beijing, Shanghai, Guangzhou and most tier 2 cities, as well as, traditional poster billboards installed by the roadsides of national
and provincial highways and on the top side of building structures, as well as advertisement light boxes installed inside large, public buildings. Our subsidiary OOH, leases the billboards from landlords or other billboard advertising operators, and
provides such billboards to the advertisers who want to put advertisements in such spaces.

We have historically been
primarily an advertising company that targets specific demographics using innovative digital advertising media in innovative locations, using assets we own. The media assets of our core businesses, such as our LCD display network and poster frame
network, tend to be placed in locations such as commercial and residential buildings, whose individual landlords may not control a sufficient number of advertising locations to attract advertisers. Thus, in order to attract advertisers, landlords
generally need to connect with us, and we may place advertisements on a large number of flat-panel digital displays and poster frames installed in the lobbies of such buildings across neighborhoods, entire cities or even nationwide. In addition, our
core businesses primarily utilize digital media assets that can easily accommodate multiple advertisements in a given time period.

OOH is primarily an advertising company that targets a broader demographic with traditional advertising assets such as large traditional billboards placed on roads and streets. The assets of OOH tend to
be much larger outdoor assets that individually may attract advertisers looking for a particular location for long stretches of time. OOH primarily relies on traditional media assets that only allow for one advertisement for a given time period.



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Accordingly, our core LCD display, poster frame, in-store networks and movie theatre network
serve a distinct purpose and attract advertisers with different needs than those who use the OOH assets. These distinctions between our core businesses, such as our LCD display network and poster frame network, and the traditional billboard network
operated by OOH also result in a significantly different cost structures, with the OOH business having much lower gross margins due to greater competition and diffusion of control in the traditional outdoor billboard market.

Advertising Clients, Sales and Marketing

Our Advertising Clients. The quality and coverage of our network has attracted a broad base of international and domestic advertising clients. Our advertising clients include leading
international and domestic brand name advertisers such as Mengniu Dairy, LOreal China, Yili Dairy, P&G China, Beingmate, Dongfeng Yueda Kia, Volkswagen Shanghai, Dongfeng Automobile, FAW Volkswagen and Yum! China, which together accounted
for approximately 14.2% of our aggregate revenue for continuing operations in 2011.

No single direct advertising client
accounted for more than 3% of our revenues in 2011. We believe the appeal and effectiveness of our advertising network is largely evidenced by the number of advertising clients who place multiple advertising campaigns on our network, which is
reflected in the percentage increase of advertising fees we receive from clients over time.

Sales. We employ an
experienced advertising sales force in each city in which we operate. We provide in-house education and training to our sales force to ensure they provide our current and prospective clients with comprehensive information about our services, the
advantages of using our advertising networks as marketing channels, and relevant information regarding the advertising industry. Our sales team is organized by city and client accounts. We also market our advertising services from time to time by
placing advertisements on third-party media, including primarily movie theater advertising networks and traditional poster frames operated by third parties. We maintain separate sales teams for our LCD display network, in-store network, poster frame
network, movie theater advertising network and traditional outdoor billboard network. We have begun engaging in limited cross-selling initiatives to enable existing and potential advertising clients to take advantage of our multi-platform
advertising network.

Advertising Contracts. We mainly offer advertisers five-, fifteen- or thirty-second time
slots on our LCD display (for LCD screens), in-store, outdoor LED and movie theater advertising networks. For our LCD display network, our standard advertising package includes a time slot on our entire network or a particular building channel in
each city in which the advertiser wishes to display the advertisement. For our traditional billboard network, we provide billboard space on a monthly basis. For our movie theater advertising network, time slots are sold on a regional or entire
network basis. Our advertising rates vary by city and by the number of cities in which the advertisement is placed, as well as by the length of the time slot purchased and the duration of the advertising campaign. We generally require our clients to
submit advertising content at least seven days prior to the campaign start date. We also reserve the right to refuse to disseminate advertisements that are not in compliance with content requirements under PRC laws and regulations.

Advertising contracts for our in-store network, outdoor LED network and movie theater advertising network are substantially similar to
those used for our LCD display network. Advertising clients generally purchase time slots on our in-store network on a chain-by-chain basis and regional basis, while time slots on the outdoor LED network cover the entire network and contracts on our
movie theater advertising network are done on a regional or entire network basis.

For our LCD 2.0 digital picture screens on
our LCD display network and our digital poster frame network, we offer advertisers time slots that vary according to length, number of repeated broadcasts per day and number of locations in which they appear. For our traditional poster frame network
and our LCD 1.0 picture frame devices, advertising clients purchase frame space on a per-frame basis for terms of one week or more.

Network Monitoring and Media Measurement. We provide a number of services in connection with each clients advertising campaign following the sales process. Our network operations team
monitors the displays in our network on a weekly basis. They are also responsible for compiling reports that are supplied under some of our agreements to clients as evidence of the broadcast of their advertisements on our network. The report
generally includes a list of buildings where our clients advertisements were broadcast as well as photographs of representative flat-panel digital displays showing their advertisements being displayed. The reports we provide to our clients may
also contain portions prepared by independent third-party research companies that verify the proper functioning of our flat-panel digital displays and the proper dissemination of the advertisement, by conducting on-site evaluations and polls to
analyze the effectiveness of and public reaction to the advertisement.

Aside from third-party verification services, we and
our regional distributors conduct substantially all client services using our own employees or the employees of the relevant regional distributor. In Beijing, Guangzhou and Shandong province, we contract some of these
services to third-party agents. These agents provide us with network development, installation, maintenance, monitoring and reporting services.



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We believe our advertising clients derive substantial value from our ability to provide
advertising services targeted at specific segments of consumer markets. Market research is an important part of evaluating the effectiveness and value of our business to advertisers. We conduct market research, consumer surveys, demographic analysis
and other advertising industry research for internal use to evaluate new and existing advertising channels. We also purchase or commission studies containing relevant market study data from reputable third-party market research firms, such as
Nielsen Media Research, CTR Market Research and Sinomonitor. We typically consult such studies to assist us in evaluating the effectiveness of our network to our advertisers. A number of these studies contain research on the numbers and
socio-economic and demographic profiles of the people who visit the locations of our network.

Programming

Substantially all of the content on our out-of-home digital advertising network consists of audiovisual advertising provided to us by our
advertising clients. We also provide a limited amount of time for landlords and property managers to display location-specific information, building announcements and related promotional material on our network. We typically do not produce or create
the advertising content shown on our network, except our own marketing content. All of the advertising content displayed on the portion of the network we operate directly is reviewed by qualified members of our staff to ensure compliance with PRC
laws and regulations, while our agreements with our regional distributors require each of them to review the contents shown on the portion of the network they operate for compliance with PRC laws and regulations. See Item 4.B Information on
the Company  Business Overview  Regulatory Matters  Regulation of Advertising Services  Advertising Content.

Advertisements on our poster frame network and LCD 1.0 picture frame devices consist of full-color glossy advertising posters designed and provided by our advertising clients.

Pricing

For information
regarding factors affecting our pricing, refer to Factors that Affect Our Advertising Service Revenue in Item 5  Operating and Financial Review and Prospects.

Relationships with Location Providers

We install our flat-panel
digital displays in selected spaces we lease in office buildings and other commercial locations, hypermarkets, supermarkets, convenience stores and other locations. We install our advertising poster frames in elevators and other public areas in
residential and commercial locations. Establishing and maintaining long-term relationships with landlords and property managers is a critical aspect of our business. We employ a team of location relationship personnel in each city in which we
operate directly who are responsible for identifying desirable locations, negotiating display and frame placement agreements and engaging in ongoing site placement relations.



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In addition to helping us to expand our network, our location relationship personnel ensure
that the needs and concerns of landlords and property managers are being met and addressed effectively and on a timely basis. These concerns generally include ensuring that the flat-panel digital displays are properly installed and are in proper
working condition. We undertake to landlords and property managers in our network to maintain the proper operation of our flat-panel digital displays. We generally rely on our own employees to install, maintain, monitor and repair our flat-panel
digital displays and advertising poster frames. A portion of our LCD display network in Beijing is inspected by our service provider, Beijing Suodi Advertisement Co., Ltd., and also uses a similar agent for a portion of the network in Guangzhou and
Shandong province, while Focus Media owns all such portions of the network and holds all of the rights and obligations of lessee under its LCD display network lease agreements including those portions for which these agents act as a service
provider. Our regional distributors are responsible for inspecting the displays owned and operated by those regional distributors.

We inspect our various display devices periodically, generally on a weekly basis and often in conjunction with updating our advertising content. As advertising content is updated on a weekly basis by
means of physically changing the flash cards in display devices or the posters in poster frames, the display devices and poster frames can be inspected as advertising content is updated.

We enter into display placement agreements with individual landlords, property managers, hotels, shopping malls and chain store companies
under which we generally pay a fixed annual rent in exchange for the right to display advertising and commercial media in lobby and elevator areas in the case of our LCD display network and in specific product areas in selected consumer product
sections and the main aisles in hypermarkets, supermarkets and convenience stores in the case of our in-store network. In Beijing, Guangzhou and Shandong province, we contract a portion of the location development, monitoring and maintenance work to
local agents. We attempt to maintain terms favorable to our network operations in our display placement agreements, such as long-term leases and exclusivity provisions. We are not reliant on any one landlord or property manager for a material
portion of our network coverage. As hypermarkets, supermarkets and convenience stores have control over multiple locations, a smaller number of display placement agreements and contractual arrangements account for a larger percentage of our in-store
network coverage.

In connection with certain of our display placement agreements, we agree to provide concessions and
services, such as displaying building-related notifications, publicity and other information provided by the landlord or property manager or granting time slots to the landlord or property manager for their own promotional purposes.

A majority of our display placement agreements have initial terms ranging anywhere from one to five years. As of December 31, 2011,
under the majority of our display placement agreements, we had the right to renew the display placement agreements provided that the terms offered by us are no less favorable than those offered by competing bidders. The rental terms and fees under
our display placement agreements vary considerably depending on the city, location of the building, size of the building and number of flat-panel digital displays that may be installed. Under our display placement agreements, we retain ownership of
most of the flat-panel digital displays.

We enter into similar frame and billboard placement agreements for the deployment of
our advertising poster frames in elevators and public areas of residential complexes and commercial buildings and for traditional outdoor billboards. The majority of our frame placement agreements have terms of one to three years, and contain
exclusivity and best offer renewal rights.

In substantially all cases, we obtain prior approval from relevant landlords or
property managers, before installing any of our advertising equipment in a location. For office buildings, in substantially all cases, we obtain prior approval directly from landlords, and only execute placement agreements with property managers
that such landlords authorized and designated to us. For supermarkets and convenience stores, in substantially all cases, we obtain consents from and execute placement agreements directly with the market or store owners who have the exclusive right
to operate the site. For residential locations, in a majority of cases, we execute placement agreements with property managers and, in a minority of cases, property owners committees.

If we execute placement agreements with property managers, we require that such property managers obtain proper authorization from the
relevant property owners committees before we execute such placement agreements. If property managers fail to obtain prior approval from the relevant property owners committees and misrepresent such authorization in our placement
agreements, we could be required to obtain the approval of the landlord or remove our advertising equipment at our own cost. Since our founding, we have not incurred material costs, fees or penalties as a result of failing to obtain any such
approvals prior to installing our advertising equipment nor have we been party to any material dispute or litigation as a result of any such failure.

Technology and Suppliers

Out-of-home television advertising is a
relatively new advertising medium that owes its development in large part to the emergence of new technologies, such as low-cost, light-weight, flat-panel television displays and compact storage technology. The primary hardware required for the
operation of our business consists of components that comprise the flat-panel digital displays we use in our advertising network. We also develop and install software in our flat-panel digital displays to assist us with the configuration, editing
and operation of our advertising content cycles. Maintaining a steady supply of our proprietary flat-panel digital displays is important to our operations and the growth of our advertising network.



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We specifically design the distinctive shape of our flat-panel digital displays, identify
suppliers of component parts used in our displays and contract the assembly of our flat-panel digital displays to third-party contract assemblers. Our contract assemblers are responsible for purchasing the component parts from suppliers we identify
each month and assembling the flat-panel digital displays according to our specifications using components purchased in off-the-shelf form from wholesale distributors. We select component suppliers based on price and quality. As there are many
qualified alternative suppliers for our equipment, our obligation to our current contract assemblers is not exclusive, although for certain equipment in our LCD display network, we rely on a small number of suppliers. See Risk
FactorsRisks Relating to Our Business-- We rely on a small number of suppliers for our LCD display equipment. As there are a large number of potential suppliers for the equipment we use, and we maintain a sufficient quantity of inventory
in our warehouses, we do not believe we would experience any material delays or hindrances to our business if we are required to find alternative suppliers. We have not experienced any material delay or interruption in the supply of our flat-panel
digital displays.

Competition

We compete with other advertising companies in China including television broadcasters, newspapers and magazines as well as companies that operate outdoor and out-of-home or telecommunications-based
advertising media networks, such as JCDecaux, ClearMedia, SearchMedia, AirMedia and VisionChina. We purchased approximately 15% of VisionChinas outstanding shares in January 2011. We compete for advertising clients primarily on the basis of
our strength of our sales force, network size and coverage, location, price, the range of services that we offer and our brand name. We also compete for overall advertising spending with other alternative advertising media companies, such as
Internet, street furniture, billboard, frame and public transport advertising companies, and with traditional advertising media, such as newspapers, television, magazines and radio. We have developed a business model that we believe enables us to:



| |  |  | attain high market share; and
| | - |  | -----------------------------



| |  |  | maintain relative control over our rental costs.
| | - |  | ------------------------------------------------

Facilities

We currently maintain our headquarters at Unit No. 1, 20th
Floor, The Centrium, 60 Wyndham Street, Central, Hong Kong. We also have operating companies and offices in more than 50 other cities in China.

Regulatory Matters

We
operate our business in China under a legal regime consisting of the State Council, which is the highest authority of the executive branch of the PRC central government, and several ministries and agencies under its authority including the State
Administration for Industry and Commerce, or SAIC.

Chinas Advertising Law was promulgated in 1994. In addition, the
State Council, SAIC and other ministries and agencies have issued regulations that regulate our business, which are discussed below.

Limitations on Foreign Ownership in the Advertising Industry

The principal regulations governing foreign ownership in the advertising industry in China include:



| |  |  | The Catalogue for Guiding Foreign Investment in Industry (2007); and
| | - |  | --------------------------------------------------------------------



| |  |  | The Administrative Regulations on Foreign-invested Advertising Enterprises (2008).
| | - |  | ----------------------------------------------------------------------------------

These regulations require foreign entities that directly invest in the advertising industry to have at least two years of direct
operations in the advertising industry outside of China. Since December 10, 2005, foreign investors have been permitted to own directly a 100% interest in advertising companies in China, but such foreign investors are also required to have at
least three years of direct operations in the advertising industry outside of China. PRC laws and regulations do not permit the transfer of any approvals, licenses or permits, including business licenses containing a scope of business that permits
engaging in the advertising business. In the event we are able to qualify to acquire the equity interest of our PRC operating affiliates under the rules allowing complete foreign ownership, our PRC operating subsidiaries would continue to exist as
the holders of the required advertising licenses consistent with current regulatory requirements.



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Since we have not been involved in advertising outside of China for the required number of
years, our WFOE operating subsidiaries, which are directly owned by non-PRC subsidiaries of ours, are currently ineligible to apply for the required advertising services licenses in China. Our non-PRC subsidiaries are ineligible to apply for such
required licenses too. As such, our advertising business is currently provided partly through contractual arrangements between certain of our WFOE operating subsidiaries and our consolidated affiliated entities in China, which we collectively refer
to as our PRC operating affiliates, including Shanghai Focus Media Advertisement Co., Ltd. and its subsidiaries with regard to our out-of-home digital network and movie theatre advertising network. Our poster frame network, traditional billboard
network and a portion of our LCD display network are conducted by our indirect PRC subsidiaries owned by our WFOE operating subsidiaries. Accordingly, our advertising services are currently conducted by (i) our indirect PRC operating
subsidiaries and (ii) our PRC operating affiliates. Our PRC operating affiliates are owned or controlled by (i) one or more individuals designated by us, (ii) one or more PRC entities owned by other PRC operating affiliates or
(iii) a combination of individuals and PRC entities owned by other PRC operating affiliates. Certain of our PRC operating affiliates and certain of our indirect PRC operating subsidiaries hold the requisite licenses to provide advertising
services in China. Our PRC operating subsidiaries have entered into a series of contractual arrangements with certain of our PRC operating affiliates and their respective shareholders under which:



| |  |  | we are able to exert effective control over our PRC operating affiliates;
| | - |  | -------------------------------------------------------------------------



| |  |  | substantially all of the economic benefits of our PRC operating affiliates will be maintained by us; and
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | we have an exclusive option to purchase all or part of the equity interests in our PRC operating affiliates that are owned by the individuals or
entities designated by us, 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.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We currently do not have any plans to terminate any existing contractual relationships with our PRC operating affiliates, although we expect to continue to migrate our business operations to entities that
are held by our indirect PRC operating subsidiaries and will continue to reduce our reliance on our contractual relationships with our PRC operating affiliates, with the exception of Enjoy Media, which distributes electronic coupons via
Q.com.cn. Under applicable PRC regulations relating to Internet information services, an ICP is required either (i) to obtain an ICP license from the Ministry of Industry and Information Technology, or MIIT, if it engages in a profitable
online service, or (ii) to make a filing with the MIIT if it engages in a non-profitable online service. As of the date of this annual report, no significant revenue has been generated by Enjoy Media. As a result, we made the requisite filing with
the MIIT in 2011 with respect to Q.com.cn. However, the distinction between profitable and non-profitable online service is unclear in practice and our online distribution of electronic coupons may be deemed as a profitable online service by
the relevant authorities. In addition, our future business plan for Enjoy Media may venture us into businesses which are more commonly regarded as profitable online services. To ensure full compliance with PRC laws and regulations, we will apply for
an ICP license if the relevant authorities deem us to be a profitable ICP or our future business direction otherwise requires us to. However, applying for an ICP license for foreign invested PRC entities is subject to strict conditions, including
that foreign ownership may not exceed 50% and that any foreign shareholder have sufficient business experience and performance in operating value-added online service. As we do not intend to engage a third party PRC operator nor do we have past
experience in operating a value-added online service, we intend to operate Enjoy Media through a VIE structure.. See Item 4.C Information on the Company  Organizational Structure and Item 7.B Major Shareholders and Related
Party Transactions  Related Party Transactions.

Current PRC regulations, however, do not treat an indirect PRC
subsidiary of a foreign entity as a foreign invested enterprise where such PRC subsidiary is owned directly by a PRC entity. As such, our indirect PRC operating subsidiaries which are directly owned by our WFOE operating subsidiaries are
not expressly subject to the restrictions on foreign investment in the advertising industry and are eligible to apply for the required licenses for providing advertising services in China. Several of our indirect PRC operating subsidiaries, such as
Shanghai Focus Media Defeng Advertisement Co., Ltd., or Focus Media Defeng Advertisement, have obtained such licenses and a portion of our commercial location network advertising business is carried out through such indirect PRC operating
subsidiaries.

In the opinion of Global Law Office, our PRC legal counsel,



| |  |  | 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, save that equity pledge created under equity pledge agreements are unenforceable
before the relevant equity pledge registration with the local SAIC is duly completed; 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.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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We have been advised by our PRC legal counsel, however, that there are substantial
uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, there can be no assurance that the PRC regulatory authorities, in particular the SAIC which regulates advertising companies, will
not in the future take a view that is contrary to the opinion of our PRC legal counsel. We have been further advised by our PRC counsel that if the PRC government determines that the agreements establishing the structure for operating our PRC
advertising business do not comply with PRC government restrictions on foreign investment in the advertising industry, we could be subject to severe penalties and we may be required to restructure our business operations, which may require us to
deconsolidate our consolidated variable interest entities. In the event of such deconsolidation, to continue operating the businesses currently conducted by our consolidated variable interest entities, we may need to take actions that result in
additional administrative and legal costs, less favorable business relationships or other regulatory burdens. See Item 3.D Key Information  Risk Factors  Risks Relating to Compliance with PRC Law  Our failure to comply with
certain aspects of applicable PRC laws and regulations could adversely affect our business operations and corporate structure,  If the PRC government determines that the ownership structure of our operating subsidiaries or our
operating affiliates, or the agreements that establish the structure for operating our China business do not comply with current or future PRC governmental restrictions on foreign investment in the advertising industry, we could be subject to severe
penalties,  If the PRC government finds that the ownership structure of our operating affiliates violates PRC laws as a result of the change in Jason Nanchun Jiangs citizenship, we could be subject to severe penalties, and
our ability to conduct our business may affected in a material and adverse way, and  We use contractual arrangements with our PRC operating affiliates and their shareholders for a portion of our China operations, and uncertainties
in the PRC legal system could limit our ability to enforce these contractual arrangements and thus our ability to conduct our business.

Regulation of Advertising Services

Business License for Advertising Companies

The principal regulations governing advertising businesses in China include:



| |  |  | The Advertising Law (1994);
| | - |  | ---------------------------



| |  |  | The Advertising Administrative Regulations (1987); and
| | - |  | ------------------------------------------------------



| |  |  | The Implementing Rules for the Advertising Administrative Regulations (2004).
| | - |  | -----------------------------------------------------------------------------

These regulations stipulate that companies that engage in advertising activities must obtain from the SAIC or its local branches a
business license which specifically includes operating an advertising business within its business scope. Companies conducting advertising activities without such a license may be subject to penalties, including fines, confiscation of advertising
income and orders to cease advertising operations. The business license of an advertising company is valid for the duration of its existence, unless the license is suspended or revoked due to a violation of any relevant law or regulation. We do not
expect to encounter any difficulties in maintaining our business licenses. Our PRC operating affiliates, certain of their respective subsidiaries and certain of our indirect PRC operating subsidiaries have obtained, or in the case of some of our new
directly-operated cities, are in the process of obtaining such a business license from the local branches of the SAIC as required by the existing PRC regulations. Some of our regional distributors may not possess all the licenses required to operate
an advertising business, or may fail to maintain the licenses they currently hold. We periodically monitor our regional distributors to ensure they have obtained all required licenses and are complying with regulations relating to advertising
content, although it is possible that one or more of our regional distributors may not be in compliance with all PRC regulations at all times. To our knowledge, all of our regional distributors have received, or are in the process of obtaining, the
licenses required to operate an advertising business. If we learn that any of our regional distributors are not in compliance with applicable terms and regulations we notify such regional distributors of the need to complete any necessary procedures
and to report any developments to us. If a regional distributor fails to complete the steps necessary to receive the required licenses, we will take steps to terminate the contract with such regional distributor. See Item 3.D Key Information
 Risk Factors  Risks Relating to Our Business and Industry  One or more of our regional distributors could engage in activities that are harmful to our reputation in the industry and to our business.



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Advertising Content

PRC advertising laws and regulations set forth certain content requirements for advertisements in China, which include prohibitions on, among other things, misleading content, superlative wording,
socially destabilizing content or content involving obscenities, superstition, violence, discrimination or infringement of the public interest. Advertisements for anesthetic, psychotropic, toxic or radioactive drugs are prohibited. It is prohibited
to disseminate tobacco advertisements via broadcast or print media. It is also prohibited to display tobacco advertisements in any waiting lounge, theater, cinema, conference hall, stadium or other public area. There are also specific restrictions
and requirements regarding advertisements that relate to matters such as patented products or processes, pharmaceuticals, medical instruments, agrochemicals, foodstuff, alcohol and cosmetics. In addition, all advertisements relating to
pharmaceuticals, medical instruments, agrochemicals and veterinary pharmaceuticals advertised through radio, film, television, newspaper, magazine, out-of-home and other forms of media, together with any other advertisements which are subject to
censorship by administrative authorities according to relevant laws and administrative regulations, must be submitted to the relevant administrative authorities in charge of administrating relevant industries for content approval prior to
dissemination. Detailed requirements on the aforesaid content approval vary based on the type of the advertised commodity under various special advertising regulations. In general, the relevant governmental authorities will review the supporting
documents evidencing that the relevant advertisement clients have obtained requisite industry licenses or qualifications for their business operation and sufficient permits required for specific type of the communities, and the supporting documents
justifying the accuracy of the advertisement contents such as certificates of patents as described by relevant advertisements. Upon the approval, the relevant approval authorities usually issue certificates or permits evidencing the approval. We do
not believe that advertisements containing content subject to restriction or censorship comprise a material portion of the advertisements shown on our network.

Advertisers, advertising operators and advertising distributors are required by PRC advertising laws and regulations to ensure that the content of the advertisements they prepare or distribute are true
and in full compliance with applicable law. In providing advertising services, advertising operators and advertising distributors must employ qualified advertising inspectors to review the prescribed supporting documents provided by advertisers for
advertisements and to verify that the content of the advertisements comply with applicable PRC laws and regulations as well as to ensure such advertisement content as a whole will not result in any misunderstanding. We also design our advertising
contracts terms to provide us with the contractual rights to early terminate the agreements and cancel the advertisement dissemination plan in case the advertisement contents contradict the content requirements under the PRC laws. In addition, prior
to distributing advertisements for certain commodities and services which are subject to government censorship and approval, advertising distributors are obligated to ensure that such censorship has been performed and approval has been obtained. For
example, for those subject to prior content approval such as health foods, medical instruments, medical treatments, pharmaceuticals, veterinary pharmaceuticals and pesticides, the advertising distributors are obligated to review the prior content
approval certificate or permits. For certain other types of advertisements such as those on foodstuffs, cosmetics, real properties, alcohol, and cultural performances, the advertising distributors are required to review special supporting documents
evidencing the accuracy of the advertisement contents, including without limitation proof of quality inspection of the advertised products or services. Violation of these regulations may result in penalties, including fines, confiscation of
advertising income, orders to cease dissemination of the advertisements and orders to publish an advertisement correcting the misleading information. In circumstances involving serious violations, the SAIC or its local branches may revoke
violators licenses or permits for advertising business operations. Furthermore, advertisers, advertising operators or advertising distributors may be subject to civil liability if they infringe on the legal rights and interests of third
parties such as the intellectual property rights of the other parties or the reputation of our clients competitors in the course of their advertising business.



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Our sales function is separate from our legal and compliance function, but we train all of
our sales staff to be aware and knowledgeable about government rules and regulations relating to advertising content. We do not generally produce or generate advertising content ourselves, but disseminate advertising content that has already been
produced and been through the necessary review and approval processes, and do not believe there are significant conflicts between our staffs sales role and the need to review for legal compliance. Our legal and compliance function separately
reviews content for compliance with relevant laws. In additional, as we generally do not produce advertising content but display advertising produced by our clients or their advertising agents, we require our clients to provide advertising content
that has been reviewed by the relevant authorities and received the relevant approvals.

Outdoor Advertising

The Advertising Law stipulates that the exhibition and display of outdoor advertisements must not:



| |  |  | 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.
| | - |  | ------------------------------------------------------------------------------------------

In additional to the Advertising Law, the SAIC promulgated the Outdoor Advertising Registration Administrative Regulations on
May 22, 2006, which governs the outdoor advertising industry in China.

Outdoor advertisements in China must be
registered with the local SAIC before dissemination. The advertising distributors are required to submit a registration application form and other supporting documents for registration. After review and examination, if an application complies with
the requirements, the local SAIC will issue an Outdoor Advertising Registration Certificate for such advertisement. The content, format, specification, dissemination period, and location of the outdoor advertisement must be submitted for filing with
the local SAIC.

The placement and installation of LED billboards are subject to municipal zoning requirements and
governmental approvals, including application for an outdoor advertising registration certificate for each LED billboard, which may be subject to a term of use that is governed by local outdoor advertising regulations and varies accordingly. We use
Beijing and Shanghai, which are our major operation locations, as examples. In Beijing, the maximum length of such term of use for a LED billboard is of four years while it is of six years in Shanghai. If the existing LED billboards placed by our
LED location provider or us are required to be removed, the attractiveness of this portion of our advertising network will be diminished. Moreover, failure by an owner of LED billboards to maintain outdoor advertising registration certificates would
result in the inability to lease or market such space for the placement of advertisements.

The local authorities may issue
temporary restriction or prohibitions on outdoor advertising at the regional level in light of public events of large scale held locally. The Shanghai local government issued certain local regulations that prohibit advertising on ships (other than
cargo ships and ferries) on the Huangpu River and Suzhou Creek area and more restrictive rules for applying for outdoor advertising for the period of preparation and hosting of World EXPO 2010, which ended on October 31, 2010.

Print Advertising

Following our acquisition of Framedia on January 1, 2006, we also operate a network of advertising poster frames placed primarily in
the elevators and public areas of residential complexes. The advertisements shown on our poster frame network are defined as normal print advertisements under the Print Advertisements Administrative Regulations promulgated by the SAIC on
January 13, 2000, as amended on November 30, 2004, or the Print Advertisements Regulations. Under these regulations, print advertisements must not be placed in areas prohibited by laws or regulations from posting print advertisements.

Regulation of Foreign Exchange in Certain Onshore and Offshore Transactions

In January and April 2005, the PRC State Administration of Foreign Exchange, or SAFE, issued two rules that require PRC residents to
register with and receive approvals from SAFE in connection with their offshore investment activities. SAFE has announced that the purpose of these regulations is to achieve the proper balance of foreign exchange and the standardization of the
cross-border flow of funds.



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On October 21, 2005, SAFE issued the Notice on Issues Relating to the Administration of
Foreign Exchange in Fund-raising and Reverse Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies, or Notice 75, which became effective as of November 1, 2005. Notice 75 replaced the two rules issued by
SAFE in January and April 2005 mentioned above.

According to Notice 75 and other relevant SAFE regulations:



| |  |  | 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;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a PRC enterprise indirectly invested by such PRC resident through the offshore company is required to disclose to the local SAFE branch the ultimate
ownership in it by such PRC resident when applying for or updating its foreign exchange registration, and cooperate with and supervise the PRC resident to complete the registration with SAFE in accordance with Notice 75.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Moreover, Notice 75 applies retroactively. As a result, PRC residents who have established or acquired
control of offshore companies that have made onshore investments in the PRC in the past are required to complete the relevant overseas investment foreign exchange registration procedures by March 31, 2006. Under the relevant rules, failure to
comply with the registration procedures set forth in Notice 75 may result in restrictions being imposed on the foreign exchange activities of the relevant onshore company, including the payment of dividends and other distributions to its offshore
parent or affiliate and the capital inflow from the offshore entity, and may also subject relevant PRC residents and PRC enterprises to penalties under PRC foreign exchange administration regulations.

As a Cayman Islands company, and therefore a foreign entity, if we purchase the assets or equity interest of a company owned by PRC
residents in exchange for our equity interests, such PRC residents will be subject to the registration procedures described in Notice 75. Moreover, PRC residents who are beneficial holders of our shares are required to register with SAFE in
connection with their investment in us.

These regulations may affect our business operations or strategies. For example, our
present or future PRC subsidiaries ability to conduct foreign exchange activities, such as remittance of dividends and foreign-currency- denominated borrowings, may be subject to compliance with such SAFE registration requirements by relevant
PRC residents, over whom we have no control. In addition, we cannot assure you that any such PRC residents will be able to complete the necessary approval and registration procedures required by the SAFE regulations. We require all the shareholders
in Focus Media Holding Limited who are PRC residents or have PRC residents as its beneficial owners to comply with any SAFE registration requirements, but we have no control over either our beneficial owners or the outcome of such registration
procedures. Such uncertainties may restrict our ability to implement our acquisition strategy and adversely affect our business and prospects.

Regulation of Equity Pledge

The PRC Property Rights Law that was promulgated on March 16, 2007 and became effective on October 1, 2007 requires that registration with the local SAIC authorities is necessary to create a
security interest on an equity interest in a PRC company, which means that before the equity pledge is duly registered with the local SAIC authorities, the equity pledge is unenforceable even though the relevant equity pledge agreement is still
binding.

Almost all our existing equity pledge agreements between certain of our operating subsidiaries and certain of our
operating affiliates and their shareholders were signed before the PRC Property Rights Law took effect. The relevant PRC operating affiliates registered the equity pledges on their register of shareholders according to then applicable law. The
Company attempted to register the relevant equity pledges after the PRC Property Rights Law became effective and we have successfully registered the equity pledge in connection with Focus Media Advertisement, one of our major PRC operating
affiliates, which owns all other PRC operating affiliates that hold the advertising operating licenses connected with our operating businesses in December 2010 and certain other PRC operating affiliates with the local SAIC. However, the
implementation rules were not promulgated until late 2008 and in some cities late 2009, and the practices taken by the local SAIC authorities vary from city to city. Thus, we are still in the process of applying for registration of other relevant
equity pledges and there is no assurance that we can have these equity pledges registered on time or at all. Considering that we have not registered some of these existing equity pledges, and may fail to register future equity pledges, with the
local SAIC, any equity pledge created under these equity pledge agreements may be considered unenforceable. See Risk Factors  Risks Relating to Compliance with PRC Law  We use contractual arrangements with our PRC operating
affiliates and their shareholders for a portion of our China operations, and uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements and thus our ability to conduct our business.



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C. Organizational Structure

Our predecessor company, Shanghai Aiqi Advertisement Co., Ltd., or Aiqi Advertisement, was established by immediate family members of Jason Nanchun Jiang in September 1997 and operated as an advertising
agency. In May 2003, Aiqi Advertisement discontinued its advertising agency business, was renamed Shanghai Focus Media Advertisement Co., Ltd., or Focus Media Advertisement, commenced operation of our out-of-home digital advertising network in China
and reorganized its shareholdings. At the same time, we entered into arrangements with Focus Media Advertisement that resulted in the consolidation of Focus Media Advertisement. Following this reorganization Jason Nanchun Jiang continued to hold a
controlling interest in Focus Media Advertisement.

In conjunction with the change in our business model in May 2003 and to
facilitate foreign investment in our company, we established our offshore holding company, Focus Media Holding Limited as a company registered in the British Virgin Islands in April 2003. In April 2005, we completed the process of changing Focus
Media Holding Limiteds corporate domicile to the Cayman Islands and we are now a Cayman Islands company. On July 13, 2005, our ADSs were listed for quotation on the Nasdaq Global Market.

In January 2006, we acquired Framedia and E-Times, which operate networks of advertising poster frames placed primarily in elevators and
public areas of residential complexes in China. In February 2006, we acquired Target Media. Target Media operated an out-of-home advertising network using flat-panel digital displays placed in elevator lobbies, elevators and other public areas in
commercial buildings, hospitals, hotels, banks, residential buildings, convenience stores and other locations in cities in China. Following the acquisition of Target Media, we combined Target Medias network into our existing commercial
location and in-store networks. Other than holding their existing contracts, the former Target Media entities no longer conduct any operations, and the combined network is operated through our existing corporate entities. In March 2006, we acquired
Focus Media Wireless, which operates a WAP-based advertising delivery platform on the mobile telecommunications networks of China Mobile and China Unicom. In 2008, we terminated our mobile handset advertising business and it is accounted for as a
discontinued operation. In the first quarter of 2007, we acquired Homesky Investment Ltd., which operates a traditional billboard network through its PRC affiliates. In March 2007, we acquired Allyes, which operates an Internet advertising marketing
services and technology business. We made a number of additional smaller Internet advertising companies in 2007 and 2008, and subsequently reorganized all such acquired entities to be included within the operations of Allyes, although certain such
acquired Internet advertising businesses were disposed of or discontinued in 2009. In June 2007, we acquired Hua Kuang Advertising Company Limited and its PRC subsidiary, which operates a traditional billboard network through its PRC affiliates. In
January 2008, we acquired CGEN, which operates digital advertising displays in large chain stores in China. In December 2008, we announced disposal of certain subsidiaries acquired from CGEN. In January 2010, certain Allyes employees and management
and directors and certain members of our management and directors entered into a definitive agreement with us and Allyes in January 2010 to buy-out an aggregate 38% interest in Allyes from us, including certain offshore and onshore interests. In
July 2010, we sold our entire remaining 62% ownership interest in Allyes.

Our Corporate Structure and Contractual Arrangements

Most of our major board decisions, such as those relating to strategic planning, significant investments, raising fund and
all matters related to capital market are made outside of the PRC, while substantially all of our business operations are conducted in China as follows:



| |  |  | with regard to the operation of our LCD display network and in-store network, through (i) our indirect operating subsidiaries such as Focus Media
Technology (Shanghai) Co., Ltd., or Focus Media Technology, Focus Media (China) Information Technology Co., Ltd., or FM China Information, for non-advertising ancillary business operation, (ii) Shanghai Focus Media Advertisement Co., Ltd., or
Focus Media Advertisement, Shanghai Enjoy Media Advertising & Broadcasting Co., Ltd., or one of our other operating affiliates, and (iii) certain subsidiaries of Focus Media Advertisement and Focus Media Digital Information Technology
(Shanghai) Co., Ltd., or Focus Media Digital, for advertising business operation;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | with regard to the operation of our poster frame network, through (i) our indirect operating subsidiaries such as Shanghai On-Target Advertisement
Co., Ltd., or Shanghai On-Target, and certain other subsidiaries of Focus Media Digital and (ii) certain subsidiaries of Focus Media Advertisement;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | with regard to our outdoor traditional billboard network, through our indirect subsidiaries 100% owned, directly or indirectly by Hua Kuang Advertising
Company Limited; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | with regard to our movie theater advertising network, through Beijing Yangshisanwei Advertisement Co., Ltd. and Shanghai Zhenhao Advertising Co., Ltd.,
two subsidiaries with majority ownership held by Focus Media Advertisement, and Shanghai Focus Media Jingshi Advertisement Co., Ltd., an indirect subsidiary 100% owned, directly or indirectly by Focus Media Digital Information Technology (Shanghai)
Co., Ltd.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Certain of our PRC operating subsidiaries and certain of our affiliated entities and their
shareholders have entered into contractual arrangements substantially similar to those control agreements entered into among Focus Media Technology, Focus Media Digital, Focus Media Advertisement and its shareholders. See Item 7.B Major
Shareholders and Related Party Transaction  Related Party Transactions  Agreements among Us, Our PRC Operating Subsidiaries, Our PRC Operating Affiliates and Their Shareholders. As of December 31, 2010 and 2011, the assets
operated by our PRC operating affiliates amounted to approximately $438.8 million and $461.7 million, respectively, consisting of $397.8 million and $404.6 million of goodwill, respectively, associated with acquisitions conducted in the early stages
of our corporate history. Excluding goodwill, assets of our PRC operating affiliates accounted for 3.3% of our total assets as of December 31, 2011. All of the revenues generated by our PRC operating affiliates are generally available for us
for general business operations in China. Accordingly, we have become increasingly less reliant on the entities that we control through contractual arrangements, and the substantial majority of our revenues and profits are currently generated
through entities that are our indirect subsidiaries.



52



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The following chart shows our organizational structure of our material subsidiaries and
affiliates.



LOGO



|* | Shanghai Focus Media Defeng Advertisement Co., Ltd., or Focus Media Defeng Advertisement, acquired control of Shanghai Enjoy Media Advertising & Broadcasting
Co., Ltd., or Enjoy Media, for RMB5.1 million in December 2011. Enjoy Media is now a part of our LCD display network. Focus Media Defeng Advertisement controls Enjoy Media through a series of contractual arrangements with Enjoy Media and July Lilin
Wang, our financial controller and the 51% holder of Enjoy Media. See Item 7. Major Shareholders and Related Party Transactions  B. Related Party Transactions  Agreements among Us, Our PRC Operating Subsidiaries, Our PRC Operating
Affiliates and Their Shareholders.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(1) | Please see the table immediately following these footnotes for more a complete list of the relevant subsidiaries under the appropriate headings.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Loans used to capitalize our PRC operating companies and to facilitate our control over them. As Focus Media Advertisement is established and directly owned by three
individuals and the other PRC operating affiliates are established and directly owned by Focus Media Advertisement, we partially capitalize these entities by lending money to Jason Nanchun Jiang and Jimmy Wei Yu pursuant to a loan agreement. We also
partially capitalize Enjoy Media by lending money to Ms. Wang. As of December 31, 2011, the aggregate amount of the loans provided to these three individuals was RMB56.5 million (US$9.0 million).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Agreements that give us effective control over our PRC operating affiliates, consisting of call option agreements and voting rights proxy agreements. See Item 7.
Major Shareholders and Related Party Transactions  B. Related Party Transactions  Other Related Party Transactions and  Agreements among Us, Our PRC Operating Subsidiaries, Our PRC Operating Affiliates and Their
Shareholders.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Equity pledge agreements secure our shareholders obligations under the call option agreements and voting rights proxy agreements. Under the equity pledge
agreements, we are entitled to the economic benefits of Focus Media Advertisement and the other PRC operating affiliates. See Item 7. Major Shareholders and Related Party Transactions  B. Related Party Transactions  Agreements
among Us, Our PRC Operating Subsidiaries, Our PRC Operating Affiliates and Their Shareholders.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table sets
forth a list of the material entities described in the chart above. It includes our active entities based in China.



|                                                                |  |                                                                                                            |  |                                                                                                                                             
|--------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|Company Name                                                    |  | Shareholding                                                                                               |  | Business Line                                                                                                                               
|FOCUS MEDIA HONG KONG OPERATING SUBSIDIARIES                   
|                                                                |  |                                                                                                           
|Chizhong Information Technology (Shanghai) Co., Ltd.            |  | Focus Media (China) Holding Limited: 100%                                                                  |  | Providing technical support for the LCD display, in-store and poster frame advertising business                                             
|                                                                |  |                                                                                                           
|Focus Media (China) Information Technology Co., Ltd.            |  | Focus Media (China) Holding Limited: 100%                                                                  |  | Providing technical support for the LCD display, in-store and poster frame advertising business                                             
|                                                                |  |                                                                                                           
|Focus Media Technology (Shanghai) Co., Ltd.                     |  | Focus Media (China) Holding Limited: 100%                                                                  |  | Being the holding company of our indirect PRC operating subsidiaries through Focus Media
Digital Information Technology (Shanghai) Co., Ltd.
|                                                                |  |                                                                                                           
|Focus Media Digital Information Technology (Shanghai) Co., Ltd. |  | Focus Media Technology (Shanghai) Co., Ltd.: 90% Focus Media (China) Information Technology Co., Ltd.: 10% |  | Being the holding company of our indirect PRC operating subsidiaries                                                                        



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|                                                                                      |  |                                                                                                                                              |  |                                                                                                
|------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------
|Company Name                                                                          |  | Shareholding                                                                                                                                 |  | Business Line                                                                                  
|Shanghai Focus Media Defeng Advertisement Co., Ltd.(1)                                |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                        |  | LCD display, in-store and poster frame advertising business                                    
|                                                                                      |  |                                                                                                                                             
|Shanghai Yuanchi Advertisement Co., Ltd.                                              |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                        |  | Poster frame advertising business                                                              
|                                                                                      |  |                                                                                                                                             
|Focus Media Culture Communication Co., Ltd.                                           |  | Shanghai Focus Media Defeng Advertisement Co., Ltd.: 100%                                                                                    |  | LCD display, in-store and poster frame advertising business                                    
|                                                                                      |  |                                                                                                                                             
|Shanghai Yuanchi Culture Communication Co., Ltd.                                      |  | Shanghai Yuanchi Advertisement Co., Ltd.: 100%                                                                                               |  | Poster frame advertising business                                                              
|                                                                                     
|Other Subsidiaries of Focus Media Digital Information Technology (Shanghai) Co., Ltd.
|                                                                                      |  |                                                                                                                                             
|Beijing Focus Media Wireless Co., Ltd.                                                |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                        |  | Providing technical support for the LCD display, in-store and poster frame advertising business
|                                                                                      |  |                                                                                                                                             
|Changsha Framedia Advertisement Co., Ltd.                                             |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                        |  | Poster frame advertising business                                                              
|                                                                                      |  |                                                                                                                                             
|Chongqing Geyang Focus Media Culture & Broadcasting Co., Ltd.                         |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                        |  | LCD display and in-store advertising business                                                  
|                                                                                      |  |                                                                                                                                             
|Foshan Ruoqian Advertisement Co., Ltd.                                                |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                        |  | LCD display and in-store advertising business                                                  
|                                                                                      |  |                                                                                                                                             
|Guizhou Focus Media Advertisement Co., Ltd.                                           |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                        |  | LCD display and in-store advertising business                                                  
|                                                                                      |  |                                                                                                                                             
|Haerbin Focus Media Advertisement Co., Ltd.                                          |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                        |  | LCD display and in-store advertising business                                                  
|                                                                                      |  |                                                                                                                                             
|Haerbin Jingshi Advertisement Co., Ltd.                                              |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                        |  | Poster frame advertising business                                                              
|                                                                                      |  |                                                                                                                                             
|Haerbin Xingaoduan Culture Co., Ltd.                                                 |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                        |  | Poster frame advertising business                                                              
|                                                                                      |  |                                                                                                                                             
|Hebei Focus Media Advertisement Co., Ltd.                                             |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 63% Hebei Life Fashion Advertisement Co., Ltd.: 37% (unrelated third party) |  | LCD display and in-store advertising business                                                  
|                                                                                      |  |                                                                                                                                             
|Huichun Focus Media Advertisement Co., Ltd.                                           |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 85% Jilin Tianzhifeng Communications Co., Ltd.: 15% (unrelated third party) |  | LCD display and in-store advertising business                                                  
|                                                                                      |  |                                                                                                                                             
|Jilin Focus Media Advertisement Co., Ltd.                                             |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 85% Jilin Tianzhifeng Communications Co., Ltd.: 15% (unrelated third party) |  | LCD display and in-store advertising business                                                  
|                                                                                      |  |                                                                                                                                             
|Jilin Guanghua Advertisement Co., Ltd.                                                |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 85%
Jilin Tianzhifeng Communications Co., Ltd.: 15% (unrelated third party) |  | LCD display and in-store advertising business                                                  
|                                                                                      |  |                                                                                                                                             
|Jinan Framedia Advertisement Co., Ltd.                                                |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                        |  | Poster frame advertising business                                                              



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|                                                                      |  |                                                                                                                                                                                                                                       |  |                                                            
|--------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------
|Company Name                                                          |  | Shareholding                                                                                                                                                                                                                          |  | Business Line                                              
|Lanzhou Focus Media Advertisement Co., Ltd.                           |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                                 |  | LCD display and in-store advertising business              
|                                                                      |  |                                                                                                                                                                                                                                      
|Liaoning Framedia Advertisement Co., Ltd.                             |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                                 |  | Poster frame Advertising business                          
|                                                                      |  |                                                                                                                                                                                                                                      
|Ningbo Jiangdong Longdi Culture Co., Ltd.                             |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                                 |  | Poster frame advertising business                          
|                                                                      |  |                                                                                                                                                                                                                                      
|Qingdao Mubiao Advertisement Co., Ltd.                                |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                                 |  | Poster frame advertising business                          
|                                                                      |  |                                                                                                                                                                                                                                      
|Shanghai Chizhong Advertisement Co., Ltd.                             |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                                 |  | LCD display, in-store and poster frame advertising business
|                                                                      |  |                                                                                                                                                                                                                                      
|Shanghai Dahan Advertisement Co., Ltd.                                |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                                 |  | Poster frame advertising business                          
|                                                                      |  |                                                                                                                                                                                                                                      
|Shanghai On-Target Advertisement Co., Ltd.                            |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                                 |  | LCD display, in-store and poster frame advertising business
|                                                                      |  |                                                                                                                                                                                                                                      
|Shanghai Focus Media Jingshi Advertisement Co., Ltd.                  |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                                 |  | Movie theatre advertising business                         
|                                                                      |  |                                                                                                                                                                                                                                      
|Shanghai Framedia Advertising Development Co., Ltd.                   |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                                 |  | Poster frame advertising business                          
|                                                                      |  |                                                                                                                                                                                                                                      
|Shanghai Honghao Advertisement Co., Ltd.                              |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                                 |  | Poster frame advertising business                          
|                                                                      |  |                                                                                                                                                                                                                                      
|Shanghai Jiefang Focus Media Advertisement & Communications Co., Ltd. |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 60%; Shanghai Jiefang Media Investment Co., Ltd.: 15% (unrelated third party) Shanghai Yuxuan
Enterprise Investment Management Co., Ltd: 25% (unrelated third party) |  | LCD display and in-store advertising business              
|                                                                      |  |                                                                                                                                                                                                                                      
|Shanghai Jingxuan Advertisement Co., Ltd.                             |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                                 |  | Poster frame advertising business                          
|                                                                      |  |                                                                                                                                                                                                                                      
|Shanghai Lizhu Advertisement Co., Ltd.                                |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                                 |  | Poster frame advertising business                          
|                                                                      |  |                                                                                                                                                                                                                                      
|Shanghai New Focus Media Advertisement Co., Ltd.                      |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                                 |  | LCD display and in-store advertising business              
|                                                                      |  |                                                                                                                                                                                                                                      
|Shanghai New Structure Advertisement Co., Ltd.                        |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                                 |  | Poster frame advertising business                          
|                                                                      |  |                                                                                                                                                                                                                                      
|Shanghai Zhiyi Advertisement Co., Ltd.                                |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                                 |  | Poster frame advertising business                          
|                                                                      |  |                                                                                                                                                                                                                                      
|Shanghai Zhuosheng Advertisement Co., Ltd.                            |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                                 |  | Poster frame advertising business                          
|                                                                      |  |                                                                                                                                                                                                                                      
|Shanxi Focus Media Advertisement Co., Ltd.                            |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                                 |  | LCD display and in-store advertising business              
|                                                                      |  |                                                                                                                                                                                                                                      
|Shenyang Wanhai Qianzhou Advertisement Co., Ltd.                      |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                                 |  | Poster frame advertising business                          
|                                                                      |  |                                                                                                                                                                                                                                      
|Shijiazhuang Framedia Zhonglian Advertisement Co., Ltd.               |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                                 |  | Poster frame advertising business                          



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|                                                           |  |                                                                                                                                                                                                                             |  |                                              
|---------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------
|Company Name                                               |  | Shareholding                                                                                                                                                                                                                |  | Business Line                                
|Sichuan Focus Media Advertising Communications Co., Ltd.   |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                       |  | LCD display and in-store advertising business
|                                                           |  |                                                                                                                                                                                                                            
|Sichuan Framedia Advertisement Co., Ltd.                   |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                       |  | Poster frame advertising business            
|                                                           |  |                                                                                                                                                                                                                            
|Suzhou Huayun Media Culture Co., Ltd.                      |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                       |  | Poster frame advertising business            
|                                                           |  |                                                                                                                                                                                                                            
|Taiyuan Framedia Juzhong Advertisement Co., Ltd.           |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                       |  | Poster frame advertising business            
|                                                           |  |                                                                                                                                                                                                                            
|Tianjin Focus Media Tongsheng Advertisement Co., Ltd.      |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                       |  | LCD display and in-store advertising business
|                                                           |  |                                                                                                                                                                                                                            
|Xiamen Hongxin Coastline Advertisement Co., Ltd.           |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                       |  | Poster frame advertising business            
|                                                           |  |                                                                                                                                                                                                                            
|Zhengzhou Framedia Advertisement Co., Ltd.                 |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                       |  | Poster frame advertising business            
|                                                           |  |                                                                                                                                                                                                                            
|Zhongshan Ruoqian Advertisement Co., Ltd.                  |  | Focus Media Digital Information Technology (Shanghai) Co., Ltd.: 100%                                                                                                                                                       |  | LCD display and in-store advertising business
|                                                          
|HUA KUANG ADVERTISING COMPANY LTD. OPERATING SUBSIDIARIES 
|                                                           |  |                                                                                                                                                                                                                            
|Shanghai OOH Advertisement Co., Ltd.                       |  | Hua Kuang Advertising Company Ltd.: 100%                                                                                                                                                                                    |  | Outdoor billboard advertising                
|                                                           |  |                                                                                                                                                                                                                            
|Shanghai Chuanrui Advertisement Co., Ltd.                  |  | Shanghai OOH Advertisement Co., Ltd.: 100%                                                                                                                                                                                  |  | Outdoor billboard advertising                
|                                                          
|Other Subsidiaries of Shanghai OOH Advertisement Co., Ltd.
|                                                           |  |                                                                                                                                                                                                                            
|Beijing Chuanzhi OOH Advertisement Co., Ltd.               |  | Shanghai OOH Advertisement Co., Ltd.: 100%                                                                                                                                                                                  |  | Outdoor billboard advertising                
|                                                           |  |                                                                                                                                                                                                                            
|Shanghai Chuanxin Software Technology Co., Ltd.            |  | Shanghai OOH Advertisement Co., Ltd.: 100%                                                                                                                                                                                  |  | Outdoor billboard advertising                
|                                                           |  |                                                                                                                                                                                                                            
|Shanghai Chuanzhi Advertisement Co., Ltd.                  |  | Shanghai OOH Advertisement Co., Ltd.: 100%                                                                                                                                                                                  |  | Outdoor billboard advertising                
|                                                           |  |                                                                                                                                                                                                                            
|Shanghai Ruili Advertisement Co., Ltd.                     |  | Shanghai OOH Advertisement Co., Ltd.: 100%                                                                                                                                                                                  |  | Outdoor billboard advertising                
|                                                          
|Subsidiaries of Shanghai Chuanrui Advertisement Co., Ltd. 
|                                                           |  |                                                                                                                                                                                                                            
|Nanjing Boxintong Culture & Communication Co.,
Ltd.        |  | Shanghai Chuanrui Advertisement Co., Ltd.: 51% Chang Yao: 49%
(unrelated third party)                                                                                                                                       |  | Outdoor billboard advertising                
|                                                           |  |                                                                                                                                                                                                                            
|Nanchang Yujin Chuanzhi Advertisement Co., Ltd.            |  | Shanghai Chuanrui Advertisement Co., Ltd.: 51% Nanchang Heli Education Consulting Co., Ltd.: 49% (an unrelated third party)                                                                                                 |  | Outdoor billboard advertising                
|                                                           |  |                                                                                                                                                                                                                            
|Suzhou Chuanri New Concept Co., Ltd.                       |  | Shanghai Chuanrui Advertisement Co., Ltd. : 51% Suzhou Industry Park New Concept Advertising Co., Ltd. : 24.99% (an unrelated third party) Suzhou Qihang Culture
Communication Co., Ltd. :24.01% (an unrelated third party) |  | Outdoor billboard advertising                



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|                                                                                     |  |                                                                                                                                                                                                 |  |                                                            
|------------------------------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------
|Company Name                                                                         |  | Shareholding                                                                                                                                                                                    |  | Business Line                                              
|Qingdao Aohai Ruizhi Advertisement Co., Ltd.                                         |  | Shanghai Chuanrui Advertisement Co., Ltd.: 51% Lewei Li: 16% (unrelated third party)
Yong Han: 18% (unrelated third party) Deliang Ding: 15% (unrelated third party)                            |  | Outdoor billboard advertising                              
|                                                                                    
|FOCUS MEDIA ADVERTISEMENT OPERATING AFFILIATES                                      
|                                                                                     |  |                                                                                                                                                                                                
|Shanghai Focus Media Advertisement Co., Ltd. (Focus Media
Advertisement)           |  | Jason Nanchun Jiang: 85% (designated by us) Jimmy Wei Yu: 15% (designated by us)                                                                                                                |  | LCD display and in-store advertising business              
|                                                                                     |  |                                                                                                                                                                                                
|Shanghai Focus Media Advertising Agency Co., Ltd. (Focus Media
Advertising Agency) |  | Focus Media Advertisement: 90% Jimmy Wei Yu: 10% (designated by us)                                                                                                                             |  | LCD display and in-store advertising business              
|                                                                                    
|Other Subsidiaries of Focus Media Advertisement                                     
|                                                                                     |  |                                                                                                                                                                                                
|Beijing Yangshisanwei Advertisement Co., Ltd.                                        |  | Focus Media Advertisement: 70% Shanghai Puyun Investment Management Co., Ltd.: 18% (unrelated third party) Yongmei Wang: 10% (unrelated third party) Qingyong Zhang: 2% (unrelated third party) |  | Movie theatre advertising business                         
|                                                                                     |  |                                                                                                                                                                                                
|Changsha Focus Media Shiji Advertisement Co., Ltd.                                   |  | Focus Media Advertisement: 90% Jimmy Wei Yu: 10% (designated by us)                                                                                                                             |  | LCD display and in-store advertising business              
|                                                                                     |  |                                                                                                                                                                                                
|Dalian Focus Media Advertising Co., Ltd.                                             |  | Focus Media Advertisement: 90% Jimmy Wei Yu: 10% (designated by us)                                                                                                                             |  | LCD display and in-store advertising business              
|                                                                                     |  |                                                                                                                                                                                                
|Fuzhou Focus Media Advertising Co., Ltd.                                             |  | Focus Media Advertisement: 70% Fuzhou Mingzheng Culture & Communication Co., Ltd.: 30% (unrelated third party)                                                                                  |  | LCD display and in-store advertising business              
|                                                                                     |  |                                                                                                                                                                                                
|Nanjing Focus Media Advertising Co., Ltd.                                            |  | Focus Media Advertisement: 90% Biao Wang: 10% (unrelated third party)                                                                                                                           |  | LCD display and in-store advertising business              
|                                                                                     |  |                                                                                                                                                                                                
|Qingdao Focus Media Advertisement Co., Ltd.                                          |  | Focus Media Advertisement: 90% Jimmy Wei Yu: 10% (designated by us)                                                                                                                             |  | LCD display and in-store advertising business              
|                                                                                     |  |                                                                                                                                                                                                
|Shanghai Zhenhao Advertisement Co., Ltd.                                             |  | Focus Media Advertisement: 70% Shanghai Puyun Investment Management Co., Ltd.: 18% (unrelated third party) Yongmei Wang: 12% (unrelated third party)                                            |  | Movie theatre advertising business                         
|                                                                                     |  |                                                                                                                                                                                                
|Suzhou Focus Media Communication and Advertisement Co., Ltd.                         |  | Focus Media Advertisement: 100%                                                                                                                                                                 |  | LCD display and in-store advertising business              
|                                                                                     |  |                                                                                                                                                                                                
|Xian Focus Media Advertising & Information Company Ltd.                             |  | Focus Media Advertisement: 70% Junrong Zhang: 30% (unrelated third party)                                                                                                                       |  | LCD display, in-store and poster frame advertising business
|                                                                                     |  |                                                                                                                                                                                                
|Zhuhai Focus Media Culture and Communication
Company Ltd.                            |  | Focus Media Advertisement: 90% Jimmy Wei Yu: 10% (designated by us)                                                                                                                             |  | LCD display and in-store advertising business              
|                                                                                    
|Subsidiaries of Focus Media Advertisement and Focus Media Advertising Agency        
|                                                                                     |  |                                                                                                                                                                                                
|Dongguan Focus Media Advertisement & Communications Co., Ltd.                        |  | Focus Media Advertisement: 90% Focus Media Advertising Agency: 10%                                                                                                                              |  | LCD display and in-store advertising business              



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|                                                                  |  |                                                                        |  |                                              
|----------------------------------------------------------------- |  | ---------------------------------------------------------------------- |  | ---------------------------------------------
|Company Name                                                      |  | Shareholding                                                           |  | Business Line                                
|Hefei Fukesi Advertising Co., Ltd.                                |  | Focus Media Advertisement: 90% Focus Media Advertising Agency: 10%     |  | LCD display and in-store advertising business
|                                                                  |  |                                                                       
|Jinan Focus Media Advertising Co., Ltd.                           |  | Focus Media Advertisement: 80% Focus Media Advertising Agency: 20%     |  | LCD display and in-store advertising business
|                                                                  |  |                                                                       
|Shenyang Focus Media Advertising Co., Ltd.                        |  | Focus Media Advertisement: 70% Focus Media Advertising Agency: 30%     |  | LCD display and in-store advertising business
|                                                                  |  |                                                                       
|Wuhan Geshi Focus Media Advertising Co., Ltd.                     |  | Focus Media Advertisement: 75% Focus Media Advertising Agency: 25%     |  | LCD display and in-store advertising business
|                                                                  |  |                                                                       
|Xiamen Focus Media Advertising Company Ltd.                       |  | Focus Media Advertisement: 90% Focus Media Advertising Agency: 10%     |  | LCD display and in-store advertising business
|                                                                  |  |                                                                       
|Yunnan Focus Media Co., Ltd.                                      |  | Focus Media Advertisement: 89.5% Focus Media Advertising Agency: 10.5% |  | LCD display and in-store advertising business
|                                                                  |  |                                                                       
|Zhejiang Ruihong Focus Media Advertising Communications Co., Ltd. |  | Focus Media Advertisement: 80% Focus Media Advertising Agency: 20%     |  | LCD display and in-store advertising business
|                                                                  |  |                                                                       
|Zhengzhou Focus Media Advertisement & Communications Co., Ltd.    |  | Focus Media Advertisement: 85% Focus Media Advertising Agency: 15%     |  | LCD display and in-store advertising business



|* | Certain operating affiliates are held by persons designated by us, including Jason Nanchun Jiang and Jimmy Wei Yu. Mr. Jiang is our founder, chairman and chief
executive officer. Mr. Yu was the chairman and chief executive officer of United Capital Investment (China) Limited, which was one of our principal investors during our early stages. He was also the Chief Representative of Softbank China
Venture Capital, which was the management company of SB China Holdings Pte. Ltd., one of our founding investors. Mr. Yu served as our director from May 2003 until September 2009.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In the early stages of our corporate history, our PRC operating subsidiaries could not make direct investments in the advertising industry
in China and, consequently, we relied on a series of contractual arrangements with our PRC operating affiliates, including Focus Media Advertisement and Focus Media Advertising, and their shareholders to operate our advertising businesses in China.
As Mr. Jiang and Mr. Yu were both heavily involved in our daily operations in our early stages of growth, we chose to designate them as the nominee shareholders of certain PRC operating affiliates, including Focus Media Advertisement and
Focus Media Advertising. Since the execution of the contractual agreements, Mr. Jiang and Mr. Yu have been in full compliance with these contractual agreements, and the contractual relationship created thereunder has been established and
stable. Moreover, under the terms of the relevant call option agreement, we have the right to exercise a call option to force Mr. Jiang or Mr. Yu to sell their equity interests in these entities to a third party designated by us, who
effectively replaces Mr. Jiang or Mr. Yu as nominee shareholder of these entities. Accordingly, for the time being we do not intend to make any changes to the VIE structure or nominee shareholders.

Starting from late 2007, the advertising industry has been re-classified from a restricted area to a permitted
area for foreign investment. Thus, we have been migrating our business from our PRC operating affiliates to our PRC operating subsidiaries. See Item 4. Information on the Company  B. Business Overview  Regulatory Matters
 Limitations on Foreign Ownership in the Advertising Industry.

Our PRC operating affiliates, the relevant PRC
operating subsidiaries and both Mr. Jiang and Mr. Yu have agreed to the aforementioned series of contractual arrangements, which entitle us to the economic benefits of our PRC operating affiliates and give us effective control over our PRC
operating affiliates, including the right to purchase all or part of the equity interests in the relevant PRC operating affiliates. See Item 7.B Major Shareholders and Related Party Transaction  Related Party Transactions
 Agreements among Us, Our PRC Operating Subsidiaries, Our PRC Operating Affiliates and Their Shareholders. We have not transferred the equity interests from Mr. Jiang and Mr. Yu to our PRC operating subsidiaries, as we have
been migrating and will continue to migrate the businesses operated by our PRC operating affiliates to our PRC operating subsidiaries. In addition, as the business operated by the PRC operating affiliates continue to be party to lease agreements
relating to certain of our displays and frames, we have kept the VIE contractual arrangements in place to continue to take advantage of those lease arrangements.



|** | Minority equity interests in certain subsidiaries of Shanghai Focus Media Advertisement Co., Ltd. and Focus Media Digital Information Technology (Shanghai) Co., Ltd.
are held by unrelated third parties. Certain of these unrelated third parties hold minority interests because they were the original shareholders of our acquired entities and wished to retain an equity interest to share in the future growth of the
relevant businesses. Other unrelated third parties hold minority interests because we believe that they have valuable skills or resources and we would like to align their interests with ours. In all such cases, any after-tax profits generated by
such entities, after any applicable statutory deductions, are distributed in proportion with our shareholding percentage, pursuant to the terms of the relevant articles of associations, subject to an appropriate shareholder resolution. There is no
separate agreement with regard to the dividend distribution of such entities.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(1) | Shanghai Focus Media Defeng Advertisement Co., Ltd., or Focus Media Defeng Advertisement, acquired control of Shanghai Enjoy Media Advertising & Broadcasting Co.,
Ltd., or Enjoy Media, for RMB5.1 million in December 2011. Enjoy Media is now a part of our LCD display network. Focus Media Defeng Advertisement controls Enjoy Media through a series of contractual arrangements with Enjoy Media and July Lilin Wang,
our financial controller and the 51% holder of Enjoy Media. The remaining shares of Enjoy Media are held by unrelated third parties. 47% of Enjoy Medias shares are held by Acer Jiawei Zhang and 2% of Enjoy Medias shares are held by Lili
Lu. See Item 7. Major Shareholders and Related Party Transactions  B. Related Party Transactions  Agreements among Us, Our PRC Operating Subsidiaries, Our PRC Operating Affiliates and Their Shareholders.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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In connection with its entry into the World Trade Organization, China is required to relax
restrictions on foreign investment in the advertising industries in China. Accordingly, PRC regulations stipulate that starting from December 10, 2005, foreign investors are allowed to directly own 100% of PRC companies operating an advertising
business if the foreign entity has at least three years of direct operations in the advertising business outside of China or to directly own less than 100% if the foreign entity has at least two years of direct operations in the advertising business
outside of China. Generally we do not currently directly operate an advertising business outside of China and our non-PRC subsidiaries cannot qualify under PRC regulations for direct investment in the advertising industry. It may be burdensome or
not cost effective for us to reorganize in accordance with the criteria for direct ownership. We intend to explore the commercial feasibility of changing our current structure, including possibly direct ownership of our PRC operating affiliates,
taking into consideration relevant cost, market, competitive and other factors. In the event we take such steps, we cannot assure you that any restructuring we may undertake to facilitate direct ownership will be successful.

Our advertising business is currently provided partly through contractual arrangements with our consolidated affiliated entities in
China, including Focus Media Advertisement, certain of its subsidiaries and their respective shareholders designated by us. A substantial portion of the operations of our LCD display network, poster frame network and traditional billboard network
are conducted by our indirect PRC subsidiaries owned by our WFOE operating subsidiaries, and accordingly are not reliant on the contractual arrangements described herein. Accordingly, our advertising services are currently conducted by our indirect
PRC operating subsidiaries and our PRC operating affiliates which are currently owned or controlled by (i) individuals designated by us, or (ii) one or more PRC entity or entities owned by our other consolidated affiliates or (iii) a
combination of individuals designated by us and entities owned by our other consolidated affiliates. Our PRC operating affiliates and certain of our indirect PRC operating subsidiaries hold the requisite licenses to provide advertising services in
China. For the year ended December 31, 2011, approximately 98.5% of our net revenue was generated by our indirect PRC operating subsidiaries, in which we hold equity interests through our WFOEs, and 1.5% of our net revenue was generated by our
PRC operating affiliates, which we control through contractual arrangements.

While certain of our indirect PRC operating
subsidiaries are eligible for the required licenses for providing advertising services in China and some of our indirect PRC operating subsidiaries have obtained such licenses, we use certain our PRC operating affiliates to operate a portion of our
advertising business until we acquire them as our wholly-owned subsidiaries. Certain of our PRC operating subsidiaries have entered into contractual arrangements with their respective PRC operating affiliates and shareholders, pursuant to which:



| |  |  | we are able to exert effective control over our PRC operating affiliates;
| | - |  | -------------------------------------------------------------------------



| |  |  | substantially all of the economic benefits of our PRC operating affiliates are maintained by us; and
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | each of our PRC operating subsidiaries or their respective designees has an exclusive option to purchase all or part of the equity interests in our PRC
affiliated entities 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.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Each of our contractual arrangements with our PRC affiliated entities and their respective shareholders can only be amended with the approval of our audit committee or another independent body of our
board of directors. See Item 7.B Major Shareholders and Related Party Transactions  Related Party Transactions for further information on our contractual arrangements with these parties.

In the opinion of Global Law Office, our PRC legal counsel:



| |  |  | 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, save that equity pledge created under equity pledge agreements is unenforceable
before the equity pledge registration is duly completed with the local SAIC; 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.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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We have been advised by our PRC legal counsel, however, that there are substantial
uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, there can be no assurance that the PRC regulatory authorities, in particular the SAIC which regulates advertising companies, will
not in the future take a view that is contrary to the above opinion of our PRC legal counsel. We have been further advised by our PRC counsel that if the PRC government finds that the agreements that establish the structure for operating our PRC
advertising business do not comply with PRC government restrictions on foreign investment in advertising businesses, we could be subject to severe penalties. See Item 3.D Key Information  Risk Factors  Risks Relating to Regulation
of Our Business and to Our Structure  If the PRC government determines that the ownership structure of our operating subsidiaries or our operating affiliates, or the agreements that establish the structure for operating our China business do
not comply with current or future PRC governmental restrictions on foreign investment in the advertising industry, we could be subject to severe penalties,  If the PRC government finds that the ownership structure of our operating
affiliates violates PRC laws as a result of the change in Jason Nanchun Jiangs citizenship, we could be subject to severe penalties, and our ability to conduct our business may affected in a material and adverse way, and  We
use contractual arrangements with our PRC operating affiliates and their shareholders for a portion of our China operations, and uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements and thus our
ability to conduct our business.

We periodically reevaluate the degree to which we will exert more direct control over
our advertising operations and intend to rely less on contractual arrangements in the future. The steps we may take to achieve a greater degree of direct control over our operations could include (i) continuing to increase the portion of our
business operations conducted through our indirect PRC subsidiaries rather than through contractual arrangements with our affiliates, (ii) exercising the call option under the contractual arrangements our subsidiaries have entered into with the
shareholders of our PRC operating affiliates or (iii) transferring the equity interests held by the individuals who are shareholders of our PRC operating affiliates to (A) a foreign entity that is qualified under PRC regulations for 100%
direct ownership an advertising business or (B) one of our indirect PRC subsidiaries.

Subsidiaries of Focus Media Holding Limited

An exhibit containing a list of our direct subsidiaries has been filed with this annual report.

D. Property, Plants and Equipment

Please refer to  B. Business Overview  Facilities for a discussion of our property, plants and equipment.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not
applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our
consolidated financial statements and the related notes included elsewhere in this annual report. Our consolidated financial statements have been prepared in accordance with U.S. GAAP. In addition, our consolidated financial statements and the
financial data included in this annual report reflect our reorganization and have been prepared as if our current corporate structure had been in place throughout the relevant periods. The following discussion and analysis contain forward-looking
statements that involve risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. For additional information regarding these risks and uncertainties, see Item 3.D Key Information
 Risk Factors.

Overview

We are Chinas leading multi-platform digital media company, operate the largest LCD display advertising network, in-store advertising network and poster frame advertising network, as well as movie
theatre and traditional outdoor billboards advertising network in China.

We have executed a number of strategic and
operational reorganizations in 2011, as described below:



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| |  |  | On January 13, 2011, the Company purchased 15,331,305, or approximately 15%, of the outstanding shares of VisionChina Media Inc.
(VisionChina) (Nasdaq: VISN), one of Chinas largest out-of-home digital television advertising networks on mass transportation systems at a price of US$3.979 per share, equivalent to US$3.979 per ADS, for total cash consideration
of $61,003,263. As of December 31, 2011, all the consideration has been paid. The Company is the second largest shareholder of VisionChina and also holds a directorship in VisionChinas board during the year ended December 31, 2011.
Therefore, the investment is accounted for using the equity method. An impairment analysis was performed for the carrying amount of the investment in VisionChina for the year ended December 31, 2011 based on the extent and duration of the
decrease in the underlying share price since the date of acquisition. As a result of the review, the difference between the carrying amount and the market value amounting to $38.3 million was considered an other-than-temporary loss, and the
impairment was recorded.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In December 2011, Shanghai Focus Media Defeng Advertisement Co., Ltd., or Focus Media Defeng Advertisement, acquired control of Shanghai Enjoy Media
Advertising & Broadcasting Co., Ltd., or Enjoy Media, a startup company mainly engaged in the research and development of Q.com.cn, (which focuses on distribution of electronic coupons), and related mobile phone applications, for RMB5.1
million, through a series of contractual arrangements with Enjoy Media, whereby July Lilin Wang, our financial controller, serves as our nominee shareholder of record for the 51% equity interest in Enjoy Media. As of the date of this annual report,
no significant revenue has been generated by Enjoy Media. Enjoy Medias results are included within our LCD display business.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We determine whether a subsidiary is underperforming based on certain metrics, including the subsidiarys (i) current and potential gross profit, (ii) current and potential operating profit
and (iii) current and potential working capital requirements.

We expect our future growth to be driven by a number of
factors and trends including:



| |  |  | 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 the selling rates on our LCD display network, in-store network, movie theater network and outdoor billboards;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our ability to increase the sale of frame spaces and the duration of our advertising campaigns on our poster frame network;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | Our ability to expand our client base through promotion of our services and cross-selling;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | 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;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our ability to successfully operate and market our LCD display network;
| | - |  | -----------------------------------------------------------------------



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| |  |  | Our ability to increase sales of advertising space and increase the length of advertising campaigns on our traditional billboard network; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our ability to integrate the companies we acquired in the previous years.
| | - |  | -------------------------------------------------------------------------

Because our primary source of revenue is our advertising service revenue, we focus on factors that directly affect our advertising
service revenue such as the number of advertising time slots and the number of frames and outdoor billboards that we have available for sale and the price we charge for our advertising time slots sold per network, per frame or per billboard over a
specified time period after taking into account any discounts.

As we continue to expand our network, we expect to face a
number of challenges. We have expanded our LCD display network, in-store network and poster frame network rapidly, and we, as well as our competitors, have occupied many of the most desirable locations in Chinas major cities. For the
traditional billboard advertising network, we need to adapt to the operation of a more traditional advertising medium that is competing with numerous other service providers as well as with numerous other advertising media. For the movie theater
portion of our advertising network, we face the challenge of continuing to expand our network while attracting interest from advertisers and acceptance from consumers of this relatively new advertising medium in China. In order to continue expanding
our network in a manner that is attractive to potential advertising clients, we may continue to enter into new advertising media platforms and to establish additional networks that provide effective channels for advertisers.

Revenues

In 2009, 2010
and 2011, we had total net revenues of $397.2 million, $516.3 million and $792.6 million, respectively. The following table sets forth a breakdown of our total revenues for the periods indicated:



|                               |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  
|------------------------------ |  | -------------------------------------------------- | ------- |  | ------------------- |  | ----- | ---- |  | - | ------------------- |  |  | - | ----- | - | ------------------- | - | ------- |  |  |  | ----- | -
|                               |  | For the year ended December 31,                    |        
|                               |  | 2009                                               |         |  | 2010                |  |       | 2011 | 
|                               |  | $                                                  |         |  | % of 
totalrevenues |  |       | $    |  |   | % of 
totalrevenues |  |  | $ |       |   | % of 
totalrevenues |  
|                               |  | (in thousands of U.S. dollars, except percentages) |        
|LCD display network            |  | $                                                  | 208,799 |  |                     |  | 52.6  | %    |  | $ | 297,642             |  |  |   | 57.7  | % |                     | $ | 444,365 |  |  |  | 56.1  | %
|In-store network               |  |                                                    | 30,346  |  |                     |  | 7.6   | %    |  |   | 37,777              |  |  |   | 7.3   | % |                     |   | 56,374  |  |  |  | 7.1   | %
|Poster frame network(1)        |  |                                                    | 98,962  |  |                     |  | 24.9  | %    |  |   | 121,893             |  |  |   | 23.6  | % |                     |   | 185,449 |  |  |  | 23.4  | %
|Movie theater                  |  |                                                    | 9,436   |  |                     |  | 2.4   | %    |  |   | 18,095              |  |  |   | 3.5   | % |                     |   | 50,835  |  |  |  | 6.4   | %
|Traditional outdoor billboards |  |                                                    | 49,621  |  |                     |  | 12.5  | %    |  |   | 40,908              |  |  |   | 7.9   | % |                     |   | 55,597  |  |  |  | 7.0   | %
|                               |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  
|Total net revenues             |  | $                                                  | 397,164 |  |                     |  | 100.0 | %    |  | $ | 516,315             |  |  |   | 100.0 | % |                     | $ | 792,620 |  |  |  | 100.0 | %
|                               |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  



|* | Advertising service revenue is presented net of business tax. Business tax on advertising service revenue from our LCD display network amounted to $20.6 million, $31.0
million and $42.2 million in 2009, 2010 and 2011, respectively. Business tax on advertising service revenue from our in-store network amounted to $3.2 million, $4.0 million and $5.3 million for 2009, 2010 and 2011, respectively. Business tax on
advertising service revenue from our poster frame network amounted to $9.6 million, $12.2 million and $17.1 million, for 2009, 2010 and 2011, respectively. Business tax on advertising service revenue from our movie theater network amounted to $0.3
million, $1.9 million and $2.5million for 2009, 2010 and 2011, respectively. Business tax on advertising service revenue from our traditional outdoor billboards amounted to $1.2 million, $0.8million and $1.1 million for 2009, 2010 and 2011,
respectively.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(1) | The net revenues from our poster frame network include the net revenues derived from our LCD 1.0 picture frame devices in Tianjin, Kunming and Shijiazhuang.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

Business tax includes aggregating business tax and surtax of 5.55% and cultural industries tax ranging from 0%
to 3.0% of our gross advertising service revenue. Commencing from January 1, 2011, the maximum cultural industries tax levied was reduced from 4% to 3%.



63



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##### Table of Contents

We also break down our total revenues into related-party and unrelated-party sources. The
following table presents a more detailed breakdown of our gross revenues and its component parts:



|                                     |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  
|------------------------------------ |  | -------------------------------------------------- | ------- |  | ------------------- |  | ----- | ---- |  | - | ------------------- |  |  | - | ----- | - | ------------------- | - | ------- |  |  |  | ----- | -
|                                     |  | For the year ended December 31,                    |        
|                                     |  | 2009                                               |         |  | 2010                |  |       | 2011 | 
|                                     |  | $                                                  |         |  | % of 
totalrevenues |  |       | $    |  |   | % of 
totalrevenues |  |  | $ |       |   | % of 
totalrevenues |  
|                                     |  | (in thousands of U.S. dollars, except percentages) |        
|Gross Revenue:                       |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  
|LCD display network                  |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  
| Unrelated parties                  |  | $                                                  | 228,841 |  |                     |  | 57.7  | %    |  | $ | 327,073             |  |  |   | 63.4  | % |                     | $ | 475,302 |  |  |  | 60.0  | %
| Related parties                    |  |                                                    | 582     |  |                     |  | 0.1   | %    |  |   | 1,519               |  |  |   | 0.3   | % |                     |   | 11,248  |  |  |  | 1.4   | %
|                                     |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  
|Total LCD display network            |  |                                                    | 229,423 |  |                     |  | 57.8  | %    |  |   | 328,592             |  |  |   | 63.7  | % |                     |   | 486,550 |  |  |  | 61.4  | %
|                                     |  |                                                    |         |  |                     | 
|In-store network                     |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  
| Unrelated parties                  |  |                                                    | 33,538  |  |                     |  | 8.4   | %    |  |   | 41,740              |  |  |   | 8.1   | % |                     |   | 61,669  |  |  |  | 7.8   | %
| Related parties                    |  |                                                    |        |  |                     |  | 0.0   | %    |  |   |                    |  |  |   | 0.0   | % |                     |   |        |  |  |  | 0.0   | %
|                                     |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  
|Total in-store network               |  |                                                    | 33,538  |  |                     |  | 8.4   | %    |  |   | 41,740              |  |  |   | 8.1   | % |                     |   | 61,669  |  |  |  | 7.8   | %
|                                     |  |                                                    |         |  |                     | 
|Poster frame network                 |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  
| Unrelated parties                  |  |                                                    | 108,379 |  |                     |  | 27.3  | %    |  |   | 133,792             |  |  |   | 25.9  | % |                     |   | 200,208 |  |  |  | 25.3  | %
| Related parties                    |  |                                                    | 147     |  |                     |  | 0.0   | %    |  |   | 294                 |  |  |   | 0.1   | % |                     |   | 2,340   |  |  |  | 0.3   | %
|                                     |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  
|Total Poster frame network           |  |                                                    | 108,526 |  |                     |  | 27.3  | %    |  |   | 134,086             |  |  |   | 26.0  | % |                     |   | 202,548 |  |  |  | 25.6  | %
|                                     |  |                                                    |         |  |                     | 
|Movie theatre network                |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  
| Unrelated parties                  |  |                                                    | 9,747   |  |                     |  | 2.5   | %    |  |   | 20,028              |  |  |   | 3.9   | % |                     |   | 53,133  |  |  |  | 6.7   | %
| Related parties                    |  |                                                    |        |  |                     |  | 0.0   | %    |  |   |                    |  |  |   | 0.0   | % |                     |   | 197     |  |  |  | 0.0   | %
|                                     |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  
|Total movie theater                  |  |                                                    | 9,747   |  |                     |  | 2.5   | %    |  |   | 20,028              |  |  |   | 3.9   | % |                     |   | 53,330  |  |  |  | 6.7   | %
|                                     |  |                                                    |         |  |                     | 
|Traditional outdoor billboards       |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  
| Unrelated parties                  |  |                                                    | 50,385  |  |                     |  | 12.7  | %    |  |   | 41,448              |  |  |   | 8.0   | % |                     |   | 55,839  |  |  |  | 7.0   | %
| Related parties                    |  |                                                    | 412     |  |                     |  | 0.1   | %    |  |   | 302                 |  |  |   | 0.1   | % |                     |   | 811     |  |  |  | 0.1   | %
|                                     |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  
|Total traditional outdoor billboards |  |                                                    | 50,797  |  |                     |  | 12.8  | %    |  |   | 41,750              |  |  |   | 8.1   | % |                     |   | 56,650  |  |  |  | 7.1   | %
|                                     |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  
|                                     |  |                                                    |         |  |                     | 
|Total Gross Revenue:                 |  |                                                    | 432,031 |  |                     |  | 108.8 | %    |  |   | 566,196             |  |  |   | 109.7 | % |                     |   | 860,747 |  |  |  | 108.6 | %
|                                     |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  
|Less: Sales taxes:                   |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  
|LCD display network                  |  |                                                    | 20,624  |  |                     |  | 5.2   | %    |  |   | 30,950              |  |  |   | 6.0   | % |                     |   | 42,185  |  |  |  | 5.3   | %
|In-store network                     |  |                                                    | 3,192   |  |                     |  | 0.8   | %    |  |   | 3,963               |  |  |   | 0.8   | % |                     |   | 5,295   |  |  |  | 0.7   | %
|Poster frame network                 |  |                                                    | 9,564   |  |                     |  | 2.4   | %    |  |   | 12,193              |  |  |   | 2.4   | % |                     |   | 17,099  |  |  |  | 2.2   | %
|Movie theater                        |  |                                                    | 311     |  |                     |  | 0.1   | %    |  |   | 1,933               |  |  |   | 0.4   | % |                     |   | 2,495   |  |  |  | 0.3   | %
|Traditional outdoor billboards       |  |                                                    | 1,176   |  |                     |  | 0.3   | %    |  |   | 842                 |  |  |   | 0.1   | % |                     |   | 1,053   |  |  |  | 0.1   | %
|                                     |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  
|Total sales taxes                    |  |                                                    | 34,867  |  |                     |  | 8.8   | %    |  |   | 49,881              |  |  |   | 9.7   | % |                     |   | 68,127  |  |  |  | 8.6   | %
|                                     |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  
|Net revenues:                        |  | $                                                  | 397,164 |  |                     |  | 100.0 | %    |  | $ | 516,315             |  |  |   | 100.0 | % |                     | $ | 792,620 |  |  |  | 100.0 | %
|                                     |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  

Advertising Service Revenue

Sources of revenues. We derive most of our net revenues from the sale of advertising time slots on our LCD display network, in-store network, movie theatre and traditional outdoor billboards, and
frame space on poster frame network to unrelated third parties and, to a very limited extent, certain related parties. Our advertising services to related parties, which represented 1.4% of our total net revenues in 2011, were provided in the
ordinary course of business on the same terms as those provided to our unrelated advertising clients on an arms-length basis.



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Our advertising service revenue is recorded net of any sales discounts and agency rebates
from our standard advertising rate cards that we may provide to our advertising clients. These discounts include volume discounts and other customary incentives offered to our advertising clients, including additional broadcast time for their
advertisements if we have unused time slots available in a particular citys advertising cycle, and represent the difference between our standard rate card and the amount we charge our advertising clients. Our advertising clients include
advertisers that directly engage in advertisement placements with us and advertising agencies retained by some advertisers to place advertisements on the advertisers behalf. We expect that our advertising service revenue will continue to be
the primary source, and constitute the substantial majority of, our revenues for the foreseeable future.

Our advertising
service revenue is also presented net of business taxes and related surcharges. Our advertising service revenues are subject to a business tax and surtax totaling 5.55% plus a cultural industries tax ranging from 0% to 3.0% on revenues earned from
their advertising services provided in China. We deduct these amounts from our advertising service revenues to arrive at our total revenues attributable to advertising services.

Factors that Affect Our Advertising Service Revenue.

Prices for
advertising services on our advertising networks vary significantly from city to city as income levels, standards of living and general economic conditions vary significantly from region to region in China, which in turn affect the advertising rates
we are able to charge to our customers.

LCD Display Network

Our advertising service revenue derived from our LCD display network is directly affected by the average price we charge for the advertising package provided to our customers, after taking into account
any discount offered and the number of flat-panel digital displays in our network and the desirability, quality and pedestrian traffic of the locations where we are able to lease space to install our flat-panel digital displays.

In-store Network

Our
advertising service revenue derived from our in-store network is directly affected by the number of flat-panel digital displays in our network, the number of hypermarkets, supermarkets and convenience stores in the network, and the average price we
charge for the advertising package provided to our customers after taking into account any discount offered.

Poster Frame Network

Our advertising service revenue derived from our poster frame network is directly affected by:



| |  |  | the number of frames in our poster frame network. We sell frame space on our poster frame network on a per frame basis. Increasing the number of
residential and other locations on our poster frame network allows us to increase the number of frames on our network, thereby increasing the available frame space for sale to advertisers; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to effectively compete with smaller competitors in the sector. During the past few quarters, we have been facing intense competitions from
those competitors in two key areas: securing desirable locations for our poster frames and pricing
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Movie Theatre Network

Our advertising revenue derived from our movie theatre advertising network is directly affected by the number of movie
theaters in which we have leased screen time, our expansion into additional theaters, and the length of the leased screen time.

Traditional Outdoor Billboard

Our advertising revenue derived from our traditional outdoor billboard networks is directly affected by the number of outdoor billboards which we have leased and our expansion into additional locations.
The assets of OOH tend to be much larger outdoor assets that individually may attract advertisers looking for a particular location for long stretches of time. By contrast, our core businesses tend to target specific demographics in innovative
locations, whose individual landlords may not control a sufficient number of advertising locations to attract advertisers. These distinctions between our core businesses and the traditional billboard network operated by OOH result in significantly
different cost structures, with the OOH business having much lower gross margins due to greater competition and diffusion of control in the traditional outdoor billboard market.



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Seasonality.

Our advertising service revenue is subject to key factors that affect the level of advertising spending in China generally. In addition to
fluctuations in advertising spending relating to general economic and market conditions, advertising spending is also subject to fluctuations based on the seasonality of consumer spending. In general, a disproportionately larger amount of
advertising spending is concentrated on product launches and promotional campaigns prior to the holiday season in December. In addition, advertising spending generally tends to decrease in China during January and February each year due to the
Chinese Lunar New Year holiday as office buildings and other commercial venues in China tend to be closed during the holiday. We believe this effect will be less pronounced with regard to advertising spending on our in-store network, as we believe
commercial activity in hypermarkets and supermarkets is stable or even enhanced during the period of Chinese Lunar New Year. We also experience a slight decrease in revenues during the hot summer months of July and August each year, when there is a
relative slowdown in overall commercial activity in urban areas in China. Our past experience, although limited, indicates that our revenues would tend to be lower in the first quarter and higher in the fourth quarter of each year, assuming other
factors were to remain constant, such as our advertising rates and the number of available time slots on our network.

Revenue
Recognition

Advertising revenues are recognized when all four of the following criteria are met: (i) persuasive
evidence of agreement exists; (ii) delivery of service has occurred; (iii) the price is both fixed and determinable; and (iv) collection of the resulting receivable is reasonably assured. We typically sign standard advertising
contracts with our advertising clients, which require us to run the advertisers advertisements on our network in specified cities for a specified period, typically from four to twelve weeks. We recognize advertising service revenue ratably
over the performance period of the advertising contract, so long as collection of our fee remains probable.

We generally
collect our advertising service fees by billing our advertising clients within 60 to 90 days after completion of the advertising contract and book these unbilled or unpaid amounts as accounts receivable until we receive payment or determine the
account receivable to be uncollectible.

Our accounts receivable are general unsecured obligations of our advertising clients
and we do not receive interest on unpaid amounts. We make specific reserves for accounts that we consider to be uncollectible. We also provide a general reserve for uncollectible accounts that we reassess on an annual basis. In 2009, 2010 and 2011,
we made provision of $29.1 million, $0.5 million and $16.0 million, respectively, for accounts receivable. The significant reduction in bad debt provision in 2010 was primarily attributable to reversal of bad debt provisions we made for specific
over-due account receivables incurred in 2008 and 2009, which were subsequently collected, and strong collection of account receivables incurred in 2010 under favorable macro-economic conditions. The increase in bad debt provision in 2011 was mainly
from the specific provision made for e-commerce and group-buying customers due to their tougher financing environment. We do not anticipate significant future reversals of bad debt provisions to accounts receivable incurred in 2011. Generally, we
expect to see bad debt provision to increase in absolute dollar terms in a manner consistent with our change in revenues.

Cost of Revenues

Our cost of revenues consists of costs directly related to the offering of our advertising services.



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The following table sets forth our cost of revenues, divided into its major components, by
amount and percentage of our total revenues for the periods indicated:



|                               |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  
|------------------------------ |  | -------------------------------------------------- | ------- |  | ------------------- |  | ----- | ---- |  | - | ------------------- |  |  | - | ----- | - | ------------------- | - | ------- |  |  |  | ----- | -
|                               |  | For the year ended December 31,                    |        
|                               |  | 2009                                               |         |  | 2010                |  |       | 2011 | 
|                               |  | $                                                  |         |  | % of 
totalrevenues |  |       | $    |  |   | % of 
totalrevenues |  |  | $ |       |   | % of 
totalrevenues |  
|                               |  | (in thousands of U.S. dollars, except percentages) |        
|Total revenues                 |  | $                                                  | 397,164 |  |                     |  | 100.0 | %    |  | $ | 516,315             |  |  |   | 100.0 | % |                     | $ | 792,620 |  |  |  | 100.0 | %
|Cost of revenues:              |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         | 
|Net cost:                      |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         | 
|LCD display network            |  |                                                    | 76,418  |  |                     |  | 19.2  | %    |  |   | 67,513              |  |  |   | 13.0  | % |                     |   | 85,847  |  |  |  | 10.8  | %
|In-store network               |  |                                                    | 24,170  |  |                     |  | 6.1   | %    |  |   | 23,432              |  |  |   | 4.5   | % |                     |   | 20,582  |  |  |  | 2.6   | %
|Poster frame network(1)        |  |                                                    | 95,401  |  |                     |  | 24.0  | %    |  |   | 84,487              |  |  |   | 16.4  | % |                     |   | 110,370 |  |  |  | 13.9  | %
|Movie theater                  |  |                                                    | 7,063   |  |                     |  | 1.8   | %    |  |   | 13,849              |  |  |   | 2.7   | % |                     |   | 25,753  |  |  |  | 3.3   | %
|Traditional outdoor billboards |  |                                                    | 38,022  |  |                     |  | 9.6   | %    |  |   | 32,409              |  |  |   | 6.3   | % |                     |   | 47,092  |  |  |  | 5.9   | %
|                               |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  
|Total cost of revenues         |  |                                                    | 241,074 |  |                     |  | 60.7  | %    |  |   | 221,690             |  |  |   | 42.9  | % |                     |   | 289,644 |  |  |  | 36.5  | %
|                               |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  
|                               |  |                                                    |         |  |                     | 
|Gross profit                   |  | $                                                  | 156,090 |  |                     |  | 39.3  | %    |  | $ | 294,625             |  |  |   | 57.1  | % |                     | $ | 502,976 |  |  |  | 63.5  | %
|                               |  |                                                    |         |  |                     |  |       |      |  |   |                     |  |  |   |       |   |                     |   |         |  |  |  |       |  



|(1) | The cost of revenues from our poster frame network includes the cost of revenue derived from out LCD 1.0 picture frame devices in Tianjin, Kunming and Shijiazhuang.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

Advertising Service Costs

Our cost of revenues related to the offering of our advertising services on our advertising network consists of location costs, flat-panel digital display depreciation costs and other cost items,
including salaries for and travel expenses incurred by our network maintenance staff and costs for materials. In 2009, 2010 and 2011, our costs of revenue also include impairment charges of equipment amounting to $40.3 million, nil and nil,
respectively, and impairment charges for acquired intangible assets amounting to $3.2 million, nil and nil, respectively.

Location costs for our LCD display network, in-store network, poster frame network and movie theatre & traditional outdoor
billboard networks consist of:



| |  | rental fees we pay to landlords, property managers and stores pursuant to the display placement agreements we enter into with them;
|- |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  | fees and expenses we incur in connection with developing and maintaining relationships with landlords and property managers; and
|- |  | --------------------------------------------------------------------------------------------------------------------------------



| |  | maintenance fees for keeping our displays in proper operating condition.
|- |  | ------------------------------------------------------------------------

Generally, we capitalize the cost of our media displays and recognize depreciation costs on a straight-line basis over the term of their
useful lives, which we estimate to be five years. The primary factors affecting our depreciation costs are the number of flat-panel digital displays in our network and the unit cost for those displays, as well as the remaining useful life of the
displays. Beginning in 2006, our results of operations have been negatively affected by the amortization of intangible assets in relation to, among other things, material contracts and customer lists as a result of several acquisitions, particularly
the acquisition of Framedia, Target Media and CGEN. The amortization of acquired intangible assets charged to cost of advertising services amounted to $14.3 million, $12.7 million and $11.4 million for 2009, 2010 and 2011, respectively.

Our other cost of revenues consists of salary for and travel expenses incurred by our network maintenance staff and costs for materials
and maintenance in connection with the upkeep of our advertising network. The primary factor affecting our other costs of revenues is the size of our network maintenance staff.



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LCD display Network. Location costs are the largest component of our cost of revenues
for our commercial location network. The primary factors affecting the amount of our location costs include the number of display placement agreements we enter into and the rental fees we pay under those agreements. We expect these costs to decrease
as a percentage of our advertising service revenue for our commercial location network in the future, as our advertising service revenue for our commercial location network is expected to increase faster than the additional cost we incur from
entering into new display placement agreements and any increases we may experience in renewing existing display placement agreements. However, when our display placement agreements expire, we may be unable to renew these agreements on favorable
terms and the rental fee portion of our location costs attributable to these existing locations could increase. As we continue to increase the size of our network and as we update and replace our existing displays with new technology, our
depreciation costs in connection with our commercial location network are expected to increase.

In-store Network. The
primary costs of revenues connected with our in-store network are location costs resulting from rental and maintenance fees and depreciation costs for our displays. We expect these costs to be lower as a percentage of the revenue in near future
compared to 2011.

Poster Frame Network. The primary costs of revenues connected with our poster frame network are
location costs resulting from rental fees. Depreciation costs for our frames and other costs for salary and maintenance fees also account for a significant portion of cost of revenues for our poster frame network. We expect these costs to increase
in 2012 and years after because of expansion of the poster frame network and continuing competition from our competitors for desirable locations.

Movie Theatre NetworkThe primary costs of revenue connected with movie theater advertising network are advertising time slot leasing costs charged by the movie operators and film makers. We expect
these costs to increase in 2012 and years after because of expansion of the movie theatre network and continuing competition from our competitors for desirable locations

Traditional Outdoor Billboards. The primary costs of revenue connected with traditional outdoor billboards are advertising space leasing costs charged by billboard owners, landlords and other
billboard advertising operators.

Operating Expenses and Net Income

Our operating expenses consist of general and administrative, selling and marketing expenses and amortization of acquired intangible
assets. In 2009, 2010 and 2011, our operating expenses also included a goodwill impairment loss of $63.6million, $5.7million and nil, respectively. The following table sets forth our operating expenses, divided into their major categories by amount
and as a percentage of our total revenues for the periods indicated.



|                                       |  |                                                    |         |   |                     |  |       |      |  |   |                     |   |  |   |      |    |                     |   |         |   |  |  |      |   
|-------------------------------------- |  | -------------------------------------------------- | ------- | - | ------------------- |  | ----- | ---- |  | - | ------------------- | - |  | - | ---- | -- | ------------------- | - | ------- | - |  |  | ---- | --
|                                       |  | For the year ended December 31,                    |        
|                                       |  | 2009                                               |         |   | 2010                |  |       | 2011 | 
|                                       |  | $                                                  |         |   | % of 
totalrevenues |  |       | $    |  |   | % of 
totalrevenues |   |  | $ |      |    | % of 
totalrevenues |  
|                                       |  | (in thousands of U.S. dollars, except percentages) |        
|Gross profit                           |  | $                                                  | 156,090 |   |                     |  | 39.3  | %    |  | $ | 294,625             |   |  |   | 57.1 | %  |                     | $ | 502,976 |   |  |  | 63.5 | % 
|Operating expenses:                    |  |                                                    |         |   |                     |  |       |      |  |   |                     |   |  |   |      |    |                     |   |         |   |  |  |      |   
|General and administrative             |  |                                                    | 88,833  |   |                     |  | 22.4  | %    |  |   | 79,760              |   |  |   | 15.5 | %  |                     |   | 127,013 |   |  |  | 16.0 | % 
|Selling and marketing                  |  |                                                    | 79,787  |   |                     |  | 20.1  | %    |  |   | 103,722             |   |  |   | 20.1 | %  |                     |   | 147,717 |   |  |  | 18.6 | % 
|Impairment loss                        |  |                                                    | 63,646  |   |                     |  | 16.4  | %    |  |   | 5,736               |   |  |   | 1.1  | %  |                     |   |        |   |  |  | 0.0  | % 
|Other operating expenses (income), net |  |                                                    | 13,111  |   |                     |  | 2.9   | %    |  |   | (14,144             | ) |  |   | (2.7 | )% |                     |   | (16,138 | ) |  |  | (2.0 | )%
|                                       |  |                                                    |         |   |                     |  |       |      |  |   |                     |   |  |   |      |    |                     |   |         |   |  |  |      |   
|Total operating expenses               |  |                                                    | 245,377 |   |                     |  | 61.8  | %    |  |   | 175,074             |   |  |   | 33.9 | %  |                     |   | 258,592 |   |  |  | 32.6 | % 
|                                       |  |                                                    |         |   |                     |  |       |      |  |   |                     |   |  |   |      |    |                     |   |         |   |  |  |      |   
|Income (loss) from operations          |  | $                                                  | (89,287 | ) |                     |  | (22.5 | )%   |  | $ | 119,551             |   |  |   | 23.2 | %  |                     |   | 244,384 |   |  |  | 30.9 | % 
|                                       |  |                                                    |         |   |                     |  |       |      |  |   |                     |   |  |   |      |    |                     |   |         |   |  |  |      |   

General and Administrative.General and administrative expenses primarily
consist of salary and benefits for management and finance and administrative staff personnel, share-based compensation expenses, bad debt expenses, business tax mainly relating to tax planning charges paid by our affiliated PRC companies, office
rental, maintenance and utilities expenses, depreciation of office equipment, other office expenses and professional services fees. Excluding the bad debt provisions, general and administrative expenses accounted for 15.0%, 15.4% and 14.0% of our
total revenues in 2009, 2010 and 2011, respectively.

Selling and Marketing. Our selling and marketing expenses
primarily consist of salaries and benefits, including share-based compensation expense for our sales staff, marketing and promotional expenses, and other costs related to supporting our sales force. Selling and marketing expenses accounted for
20.1%, 20.1% and 18.6% of our total revenues in 2009, 2010 and 2011, respectively.



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Impairment Loss for goodwill. The companys goodwill is tested for
impairment annually or more frequently if significant events or changes indicate possible impairment. The first step of the goodwill impairment test compares the fair value of each reporting unit to its carrying amount, including goodwill. If the
fair value of a reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied
fair value of goodwill to the carrying value of a reporting units goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined
in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only
performed for purposes of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or liabilities. An impairment loss is recognized for any excess in the carrying value of goodwill over the implied fair value
of goodwill. We performed an annual goodwill impairment test for each of our reporting units as of December 31, 2009, 2010 and 2011 or when a triggering event indicated that it was probable that the carrying amount of a reporting unit may have
exceeded its fair value. As a result, we recorded a goodwill impairment loss of $87.6 million, $5.7 million and nil for the year ended December 31, 2009, 2010 and 2011, respectively, of which $24.0 million, nil and nil was related to
discontinued operations of our internet advertising business.

The timing of an impairment test may result in charges to our
statements of operations in our current reporting period that could not have been reasonably foreseen in prior periods. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets
and liabilities to the reporting units, assigning goodwill to reporting units and estimating the fair value of each reporting unit. Estimates of fair value of each reporting unit are significantly affected by assumptions such as future revenue
growth rates, gross margin percentages, operating margin percentages, effective tax rates, terminal growth rates, discount rate, working capital requirements and capital expenditures. Changes in these estimates and assumptions could materially
affect the determination of fair value of each reporting unit which could trigger impairment.

Long-lived asset
Impairment. We test long-lived assets for possible impairment if an event occurs or circumstances change that would more likely than not reduce the fair value of an asset group below its carrying amount. Asset recoverability is an area
involving management judgment, requiring assessment as to whether the carrying value of assets can be supported by the undiscounted future cash flows. In calculating the future cash flows, certain assumptions are required to be made in respect of
highly uncertain matters such as revenue growth rates, gross margin percentages, terminal growth rates and the economic

life
of the long-lived assets. As a result of impairment tests performed, we recognized impairment losses on long-lived assets of $65.7 million, nil and nil in 2009, 2010 and 2011, respectively, of which $21.5 million was related to our discontinued
operations of internet advertising business.

Share-based Compensation.On September 22,
2009, as a result of performance evaluations, 1,776,300 previously granted options under 2007 Plan were cancelled and previously unrecognized compensation cost of $2,587,993 was recognized on the cancellation date. In addition, 7,550,849 previously
granted options under 2007 Plan, associated with 300 employees, were cancelled and replaced by an equivalent number of unvested restricted shares (2009 Replacement). This was accounted for as a modification with the incremental compensation
cost of $8,122,206, which was measured as the excess of the fair value of the restricted shares over the fair value of the cancelled options at the cancellation date. Further, restricted shares to obtain 28,935,131 ordinary shares were granted to
employees in 2009. The restricted shares generally vest over a period of two to three years.

On December 28, 2010 and
November 25, 2011, restricted shares to obtain 15,000,000 and 17,711,500 ordinary shares were granted to employees, officers, consultants and directors under the 2010 Plan, respectively. These restricted shares will vest over a period of three
years.

Under the terms of each plan, options are generally granted at prices equal to the fair market value of the ordinary
shares at the date of grant whereas restricted shares are granted without exercise price, expire 10 years from the date of grant and generally vest over two to four years with certain options vesting over one year. As of December 31, 2011,
11,156,760 options and 38,169,245 restricted shares were outstanding. The fair value of restricted shares was determined to be the market value of the ordinary shares on the date of grant whereas the fair value of options granted to employees was
estimated on the date of grant using the Black-Scholes option-pricing model. The expected volatilities were estimated based on historical volatility. The expected term of options granted represents the period of time that options granted are
expected to be outstanding. The risk-free interest rate assumption is determined using the Federal Reserve nominal rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award. No options were granted
during the years ended December 31, 2009, 2010 and 2011.

The weighted average grant date fair value of restricted shares
granted for the years ended December 31, 2009, 2010 and 2011 were $2.24, $4.24 and $3.54, respectively.



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On September 23, 2009, the Company entered into a definitive agreement for a private
equity placement of 75 million of its ordinary shares with JJ Media Investment Holding (JJ Media), a British Virgin Island company controlled by Jiang Nan Chun, the Groups Chief Executive Officer and Chairman, for a purchase
price of $1.899 per share, representing the average closing price of the shares during the twenty consecutive trading days preceding the signing of the definitive agreement. On November 18, 2009, the private equity placement was consummated and
the Company received gross proceeds of $142,425,500. The shares issued to JJ Media are subject to a six month lock-up and have customary registration rights pursuant to a registration rights agreement entered into between the Company and JJ Media.
This transaction resulted in share based compensation expense of $4.0 million, which represents the excess of the fair value of the Companys shares over the purchase price. The fair value of the Companys shares reflects the
Companys closing share price on the trading day immediately preceding the signing date of the definitive agreement.

The
following table summarizes the share-based compensation recognized in the consolidated statements of operations:



|                                               |  |                                  |        |  |      |   |        |      |  |   |        | 
|---------------------------------------------- |  | -------------------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                               |  | For the years ended December 31, |       
|                                               |  | 2009                             |        |  | 2010 |   |        | 2011 | 
|                                               |  | (in thousands of U.S. dollars)   |       
|Cost of sales                                  |  | $                                | 1,504  |  |      | $ | 977    |      |  | $ | 879    | 
|General and administrative                     |  |                                  | 26,037 |  |      |   | 40,272 |      |  |   | 57,119 | 
|Selling and marketing                          |  |                                  | 12,222 |  |      |   | 4,343  |      |  |   | 3,803  | 
|Net income (loss) from discontinued operations |  |                                  | 26,740 |  |      |   |       |      |  |   |       | 
|                                               |  |                                  |        |  |      |   |        |      |  |   |        | 
|Total                                          |  | $                                | 66,503 |  |      | $ | 45,592 |      |  | $ | 61,801 | 
|                                               |  |                                  |        |  |      |   |        |      |  |   |        | 

Amortization of Acquired Intangibles. Our amortization of acquired intangibles consists of
the amortized portion of intangible assets we acquired through our acquisition of other companies and assets. The Group recorded amortization expense as follows:



|                                               |  |                                  |        |  |      |   |        |      |  |   |        | 
|---------------------------------------------- |  | -------------------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                               |  | For the years ended December 31, |       
|                                               |  | 2009                             |        |  | 2010 |   |        | 2011 | 
|                                               |  | (in thousands of U.S. dollars)   |       
|Cost of revenues                               |  | $                                | 14,282 |  |      | $ | 12,734 |      |  | $ | 11,359 | 
|Selling and marketing                          |  |                                  | 4,665  |  |      |   | 4,106  |      |  |   | 4,639  | 
|Net income (loss) from discontinued operations |  |                                  | 8,332  |  |      |   | 766    |      |  |   |       | 
|                                               |  |                                  |        |  |      |   |        |      |  |   |        | 
|Total                                          |  | $                                | 27,279 |  |      | $ | 17,606 |      |  | $ | 15,998 | 
|                                               |  |                                  |        |  |      |   |        |      |  |   |        | 

The Group expects to record amortization expense of $10.9 million, $5.5 million, $4.0 million, $3.9
million, and $3.1 million for the years ending December 31, 2012, 2013, 2014, 2015 and 2016, respectively.

Critical Accounting
Policies

We prepare our financial statements in conformity with U.S. GAAP, which requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the financial reporting period.
We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Since the use of
estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We consider the policies
discussed below to be critical to an understanding of our financial statements as their application places the most significant demands on our managements judgment.

Consolidation

The Group conducts substantially all of its
operations through its PRC operating subsidiaries. In the past, due to PRC government restrictions that apply to foreign investment in Chinas advertising industry, the Group established separate legal entities through which it conducts its
advertising business in China by the use of nominee shareholders. The Company established a controlling financial interest in the entities through a series of contractual arrangements pursuant to which the nominal shareholders of the entities have
assigned all of their voting rights and economic interests underlying their equity interests to the PRC operating subsidiaries. See Item 4.C Business  Overview  Our Corporate Structure and Contractual Arrangements and
Item 7.B Major Shareholders and Related Party Transaction  Related Party Transactions  Agreements among Us, Our PRC Operating Subsidiaries, Our PRC Operating Affiliates and Their Shareholders.



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As a result of these contractual arrangements the Company has the ability and intention to
exercise control over the entities and the right and obligation to absorb substantially all of their profits and losses. Therefore, we have concluded that we are the primary beneficiary of the entities and have consolidated the entities since the
date of execution of the contractual arrangements. This conclusion is predicated on the assumption that the contractual arrangements are legally enforceable, which the Company has determined based on the advice of legal counsel. However, there are
substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. See Item 3.D Key Information  Risk Factors  Risks Relating to Compliance with PRC Law. Should the
government find that the contractual arrangements that establish the structure for operating our PRC advertising business do not comply with PRC laws and regulations applicable to us and our PRC operating subsidiaries and affiliates, we could be
subject to severe penalties and would need to consider the impact on our ability to control and thus consolidate the entities.

Since 2009, we have been migrating the businesses operated by our consolidated PRC operating affiliates into our PRC operating
subsidiaries, primarily through assigning new or renewed advertising contracts and leasing contracts to the PRC operating subsidiaries. By doing so, the revenues generated from the advertising contracts and costs derived from the leasing
arrangements are recorded on the books of the PRC operating subsidiaries, and no longer accounted for on the books of the PRC operating affiliates once they cease to be the legal entity named in the contracts. In some cases, the advertising
contracts and/or the leasing contracts may continue to be executed in the name of the PRC operating affiliate.

The goodwill
initially recorded in the books of PRC operating affiliates is not reassigned to the PRC operating subsidiaries, which became the legal entity of record for much of the business, because both entities are within the same reporting unit for purposes
of goodwill impairment testing, and as such, the migration from PRC operating affiliates to PRC operating subsidiaries is not deemed to be a reorganization of the reporting structure.

As of December 31, 2011, approximately 87.6% of the assets in the PRC operating affiliates pertained to goodwill. Excluding
goodwill, the remaining operating assets in the PRC operating affiliates, including cash and cash equivalents, accounts receivable, rental deposit, equipment, and acquired intangible assets, accounted for 3.3% of our total assets. See Note 3 to the
consolidated financial statements.

Revenue Recognition

The Groups revenues are primarily derived from advertising services.

Revenues from advertising services are recognized when (i) persuasive evidence of an arrangement exists; (ii) delivery of the
products and/or services has occurred and risks and rewards of ownership have passed to the customer; (iii) the selling price is both fixed and determinable; and (iv) collection of the resulting receivable is reasonably assured.

The Group generates advertising service revenues from the sale of advertising time slots in the LCD display network, the
sales of frame space on the poster frame network and advertising time slots on big screen networks leased from movie theatres and on traditional billboard networks. In the majority of advertising arrangements, the Group acts as a principal in the
transaction and records advertising revenues on a gross basis. The associated expenses are recorded as cost of revenues. In some instances the Group is considered an agent and recognizes revenue on a net basis. Revenues from advertising services are
recognized, net of agency rebates, ratably over the period in which the advertisement is displayed, assuming all other revenue recognition criteria have been met.

Prepayments for advertising services are deferred and recognized as revenue when the advertising services are rendered.



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Long-term investments

Investments in affiliates

Affiliated companies are entities over which the
Group has significant influence, but which it does not control. Investments in equity affiliates are accounted for by the equity method of accounting. Under this method, the Groups share of the post-acquisition profits or losses of affiliated
companies is recognized in the consolidated statement of operations and its shares of post-acquisition movements in other comprehensive income are recognized in other comprehensive income. When the Groups share of losses in an affiliated
company equals or exceeds its interest in the affiliated company, the Group does not recognize further losses, unless the Group has incurred obligations or made payments on behalf of the affiliated company, which to date the Company has not. As of
December 31, 2011, based on the duration and severity of the decline in the market price of the equity affiliates shares, the Company concluded that there has been a loss in value of the investment that is other-than-temporary and recorded an
impairment loss of $38.3 million.

Other investments

Investments in private companies with an ownership interests less than 20% in which the Group does not have significant influence, are accounted for by the cost method of accounting and are recorded at
the lower of cost or fair market value.

Share-based Compensation

Share-based compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the
employees requisite service period. Our share-based compensation plans are described in Note 13 to our consolidated financial statements and above in the section Item 5. Operating and Financial Review and Prospects  Share-based
Compensation.

The fair value of restricted shares is the market value of the ordinary shares on the date of grant
whereas the fair value of options granted to both employees is estimated on the date of grant using the Black-Scholes-Merton option pricing model, which requires the input of highly subjective assumptions, including the estimated expected life of
the share options, and the price volatility of the underlying shares. The assumptions used in calculating the fair value of share options represent managements best estimates, but these estimates involve inherent uncertainties and the
application of management judgment. As a result, if factors change and we use different assumptions, our share-based compensation expense could be materially different in the future. In addition, we estimate our expected forfeiture rate and
recognize the expense only for those shares expected to vest. These estimates are based on past employee retention rates and our expectations of future retention rates. We will prospectively revise our estimated forfeiture rates based on actual
history. Our compensation expense may change based on changes to our actual forfeitures of these share-based compensation.

Income Taxes

We record a valuation allowance to reduce our deferred tax assets to the amount that we believe is more likely than
not to be realized. In the event we determine that we will be able to realize our deferred tax assets in the future, in excess of their recorded amount, an adjustment to our deferred tax assets would increase our income in the period such
determination was made. Likewise, if we determine that we will not be able to realize all or part of our net deferred tax assets in the future, an adjustment to our deferred tax assets would decrease our income in the period such determination was
made. We record income tax expense on our taxable income using the balance sheet liability method at the effective rate applicable to each of our affiliated entities in China in our consolidated statements of operations and comprehensive income. In
2010, one of our subsidiaries obtained HNTE status in China. This tax status, along with the applicable tax holidays, allows the subsidiary to benefit from a tax exemption for the two years ended December 31, 2011.



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Purchase Price Allocation

We account for business acquisitions using the purchase method of accounting. We allocate the total purchase price of an acquisition to
the fair values of the tangible and intangible assets acquired and liabilities assumed at the date of acquisition, with the excess purchase price recorded as goodwill. As part of this allocation process, we must identify and attribute values and
estimated lives to the intangible assets acquired. We adjust the preliminary purchase price allocation, as necessary, after the acquisition closing date through the end of the measurement period of one year or less as we finalize valuations for the
assets acquired and liabilities assumed.

Purchase price allocations are determined based on a number of factors, including a
valuation support provided by third party appraisal firms in some cases. The valuation analysis normally utilizes and considers appropriate valuation methodologies such as the income, market, cost and actual transaction of our shares approach. We
incorporate certain assumptions, which include projected cash flows and replacement costs in the valuation analysis.

In the
valuation of intangible assets, including operating lease agreements, customer bases, and contract backlogs, and indication of value was developed through the application of a form of income approach, known as multi-period excess earnings method.
The first step to apply the multi-period excess earnings method is to estimate the future debt-free net income attributable to the intangible assets. The resulting debt-free net income is then reduced by an estimated fair rate of return on
contributory assets necessary to realize the projected earnings attributable to the intangible assets. These assets include fixed assets, working capital and other intangible assets.

Valuation of the trademarks is based on the relief from royalty method whereby an asset is valued based upon the after-tax cash flow
savings accruing to the owner by virtue of the fact that the owner does not have to pay a fair royalty to a third party for the use of that asset. Accordingly, a portion of the owners earnings, equal to the after-tax royalty that
would have been paid for use of the asset can be attributed to that asset. The value of the asset depends on the present worth of future after-tax royalties attributable to the asset to their present worth at market-derived rates of return
appropriate for the risks of that particular asset.

The valuation of non-compete agreements is determined based on estimated
losses attributable to potential competition, should the non-compete clause not exist.

Goodwill Impairment

We test goodwill for possible impairment on an annual basis as of December 31 of each year and at any other time if an event occurs
or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Circumstances that could trigger an impairment test between annual tests include, but are not limited to:



| |  |  | 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;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | change in reportable segments; and/or
| | - |  | -------------------------------------



| |  |  | results of testing for recoverability of a significant asset group within a reporting unit.
| | - |  | -------------------------------------------------------------------------------------------

The timing of an impairment test may result in charges to our statements of operations in our current reporting period that could not
have been reasonably foreseen in prior periods. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to the reporting units, assigning goodwill to reporting
units and estimating the fair value of each reporting unit. Estimates of fair value of each reporting unit is significantly affected by assumptions such as future revenue growth rates, gross margin percentages, operating margin percentages,
effective tax rates, terminal growth rates, discount rates, working capital requirements and capital expenditures. Changes in these estimates and assumptions could materially affect the determination of fair value of each reporting unit which could
trigger impairment.



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As of December 31, 2009, 2010 and 2011, we had a goodwill balance of $410.4 million,
$425.3 million and $459.1 million, respectively. Our goodwill primarily arises from the initial consideration paid and subsequent settlement of contingent consideration of our business acquisitions. The following table presents the changes in our
goodwill balance by reporting unit for the years ended December 31, 2010 and 2011:



|                                                                   |  |                                |         |  |                    |   |        |                     |  |   |                              |   |  |       |        |  |  |   |         |  
|------------------------------------------------------------------ |  | ------------------------------ | ------- |  | ------------------ | - | ------ | ------------------- |  | - | ---------------------------- | - |  | ----- | ------ |  |  | - | ------- | -
|                                                                   |  | LCD displaynetwork             |         |  | Posterframenetwork |   |        | Internetadvertising |  |   | Traditionaloutdoorbillboards |   |  | Total |       
|                                                                   |  | (in thousands of U.S. dollars) |        
|Balance as of January 1, 2010                                      |  | $                              | 406,096 |  |                    | $ |       |                     |  | $ | 4,272                        |   |  | $     |       |  |  | $ | 410,368 |  
|Goodwill acquired during the year                                  |  |                                |        |  |                    |   | 3,958  |                     |  |   |                             |   |  |       |       |  |  |   | 3,958   |  
|Goodwill recorded as a result of contingent consideration resolved |  |                                | 5,039   |  |                    |   | 15,551 |                     |  |   |                             |   |  |       |       |  |  |   | 20,590  |  
|Goodwill impairment                                                |  |                                |        |  |                    |   | (5,736 | )                   |  |   |                             |   |  |       |       |  |  |   | (5,736  | )
|Disposal of subsidiaries                                           |  |                                |        |  |                    |   |       |                     |  |   | (4,272                       | ) |  |       |       |  |  |   | (4,272  | )
|Translation adjustments                                            |  |                                | 399     |  |                    |   | 27     |                     |  |   |                             |   |  |       |       |  |  |   | 426     |  
|                                                                   |  |                                |         |  |                    |   |        |                     |  |   |                              |   |  |       |        |  |  |   |         |  
|Balance as of December 31, 2010                                    |  |                                | 411,534 |  |                    |   | 13,800 |                     |  |   |                             |   |  |       |       |  |  |   | 425,334 |  
|Goodwill acquired during the year                                  |  |                                | 6,045   |  |                    |   | 2,176  |                     |  |   |                             |   |  |       | 19,731 |  |  |   | 27,952  |  
|Goodwill recorded as a result of contingent consideration resolved |  |                                | 1,271   |  |                    |   | 3,211  |                     |  |   |                             |   |  |       |       |  |  |   | 4,482   |  
|Translation adjustments                                            |  |                                | 700     |  |                    |   | 259    |                     |  |   |                              |   |  |       | 386    |  |  |   | 1,345   |  
|                                                                   |  |                                |         |  |                    |   |        |                     |  |   |                              |   |  |       |        |  |  |   |         |  
|Balance as of December 31, 2011                                    |  | $                              | 419,550 |  |                    | $ | 19,446 |                     |  | $ |                             |   |  | $     | 20,117 |  |  | $ | 459,113 |  
|                                                                   |  |                                |         |  |                    |   |        |                     |  |   |                              |   |  |       |        |  |  |   |         |  

The contingent consideration for our reporting units were each calculated at multiples of approximately 1
to 17.5 of the specified earning targets for each individual entity, which were determined at the time of the acquisitions. In contrast, the goodwill impairment test was performed at the reporting unit level, as opposed to the individual entity
level. Further, the reporting units fair value is based on projected performance as opposed to historical performance.

Goodwill
impairment in 2009

On September 28, 2009, the Company and SINA jointly decided to abort the proposed acquisition
announced on December 22, 2008. As such, the assets classified as held-for-sale as of December 31, 2008 were reclassified as assets to be held and used. At the time of reclassification, the assets were required to be measured at the lower
of (1) their carrying amount before they were classified as held-for-sale, adjusted for any depreciation or amortization that would have been recognized had the assets been continuously classified as held and used or (2) their fair value
at the date of reclassification. Certain of the reclassified assets had a fair value lower than their carrying value, which the Group believed was a goodwill impairment indicator. Accordingly, the Group performed an impairment test using the income
approach valuation method on the two reporting units subject to reclassification, LCD display network and poster frame network. The analysis resulted in an impairment of $16.4 million, representing all of the poster frame reporting units
remaining goodwill. This goodwill was the result of the settlement of contingent consideration while the associated reporting unit was classified as held-for-sale. The LCD display reporting unit passed the first step of the impairment test with fair
value exceeding the carrying amount by a substantial margin and therefore, incurred no impairment loss.

In the fourth quarter
of 2009, the Group paid further contingent consideration of $14.0 million related to the poster frame network reporting unit. The contingent consideration for the poster frame units was calculated based on multiples of 1 to 2 of the achieved
earnings target, which were determined at the time of the acquisitions. This amount was recorded as additional goodwill and was immediately impaired as there had been no material changes in the fair value of the reporting unit subsequent to
September 28, 2009, the most recent impairment analysis date before December 31, 2009. The impairment test for goodwill arising from poster frame acquisitions was performed for the whole reporting unit rather than for each individual
subsidiary. As a result, when the reporting units fair value, which is based on managements forecasted operating results for the reporting unit as a whole, declined significantly due to contracting customer demand caused by the financial
crisis and increased competition, the additional goodwill arising from such contingent consideration was impaired even though individual subsidiaries were able to meet their respective earnings targets. The balance of goodwill for the poster frame
reporting unit remained at zero at December 31, 2009.

The annual impairment test for the LCD display network at
December 31, 2009 did not result in additional goodwill impairment as there had been no material changes in the fair value of this unit subsequent to the date of the last impairment test on September 28, 2009.



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In August 2009, the Group started to negotiate with the ex-shareholders of various
subsidiaries within the Internet advertising segment to sell back part of the equity interests held by the Group in those entities, in exchange for the reduction of future earn-out payments stated in the original purchase agreements. These
transactions were considered a triggering event for performing an impairment test for the Internet advertising reporting unit, which was the reporting unit for the purpose of the goodwill impairment test. As a result of the test, the Group recorded
a goodwill impairment of $24.0 million using an income approach. Subsequently, the Group disposed of these subsidiaries, which resulted in a de-recognition of goodwill amounting to $18.9 million. These amounts, along with all operations of these
subsidiaries, have been classified as a component of loss from discontinued operations in the consolidated statements of operations.

As of December 31, 2009, the Internet advertising reporting unit had a goodwill balance of $4.3 million. The Group performed its annual impairment test at the end of the year, which indicated that
the fair value exceeded the carrying amount by a significant margin and, therefore, no further goodwill impairment was recognized.

We settled contingent purchase consideration of $33.2 million associated with the movie theatre and traditional outdoor billboard reporting unit during the year ended December 31, 2009. The entire
$33.2 million related to the traditional outdoor billboard portion of this unit. This amount was recorded as additional goodwill and was immediately impaired as there had been no material changes in the fair value of the reporting unit subsequent to
the December 31, 2008, the most recent impairment analysis date, which was still lower than the carrying amount of the reporting unit on December 31, 2009. As the balance of goodwill remained at zero at December 31, 2009, no annual
impairment test for movie theatre and traditional outdoor billboard reporting unit was required.

Goodwill impairment in 2010

The Group settled contingent purchase consideration of $5.7 million associated with the poster frame network reporting
unit during the three months ended March 31, 2010. The amount was recorded as additional goodwill and was immediately impaired as there had been no material changes in the fair value of the poster frame network reporting unit subsequent to
December 31, 2009, the most recent impairment analysis date, which was still lower than the carrying amount of the poster frame network reporting unit on March 31, 2010.

The Group further settled contingent purchase consideration of $5.0 million and $9.8 million associated with the LCD display network and
poster frame reporting units during 2010. The Groups annual impairment test was performed for both reporting units using the income approach valuation method as of December 31, 2010, which indicated that the fair value of both reporting
units significantly exceeded their carrying amounts. Therefore, no goodwill impairment was recognized.

Goodwill impairment in 2011

The Group did not incur any goodwill impairment for the year ended December 31, 2011.

Long-lived Asset Impairment

We test long-lived assets for possible impairment if an event occurs or circumstances change that would more likely than not reduce the fair value of an asset group below its carrying amount. Asset
recoverability is an area involving management judgment, requiring assessment as to whether the carrying value of assets can be supported by the undiscounted future cash flows. In calculating the undiscounted future cash flows and fair value,
certain assumptions are required to be made in respect of highly uncertain matters such as revenue growth rates, gross margin percentages, net operating margin percentages, effective tax rates, and terminal growth rates and the economic life of each
long-lived asset.



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Impairment of long-lived assets in 2009

During the first quarter of 2009, we announced that we would cease expansion of our digital poster frame network and, in response to a
regulation promulgated by Shanghai Municipality Government in early 2009, the operation of our boat-based advertising platform on the Huangpu River. As part of the assets to be sold to SINA, both digital poster frames and boat-based advertising
platform on the Huangpu River were classified as assets held-for-sale until September 2009. In accordance with U.S. GAAP, such assets were not depreciated or amortized nor were they subject to the same impairment analysis as assets held and used.
With the termination of the agreement with SINA in the third quarter of 2009, the Company decided that the chances of fully utilizing the majority of our digital frames or selling them to third parties in the future were remote as manifested by
deteriorating quarterly revenue and gross profit performances since the beginning of 2009. As a result, the Company recorded an impairment loss of $27.0 million, which represents the excess of carrying amount of those digital frames over their fair
value, representing the estimated salvage value of those digital frames that could be utilized as spare parts for the equipment already installed and in use as of March 31, 2009. The Company also decided that the chances of resuming operation
of the boat-based advertising platform on the Huangpu River were remote and that it was not be economically viable to operate the platform on other rivers in China and, therefore, recorded an impairment loss of equipment and intangible assets
associated with the platform of $9.5 million and $3.2 million, respectively.

In August 2009, the Company started to negotiate
with the ex-shareholders of various subsidiaries within the Internet segment to sell back part of the equity interests held by the Company in those entities in exchange for the reduction of future earn-out payments. Some of these partial equity
disposal transactions were closed towards the end of August. Subsequently the Company completely disposed of its remaining equity interests in those subsidiaries within the Internet businesses during the quarter ended December 31, 2009. As a
result, the Company recorded an impairment loss of the disposal of intangible assets of $19.0 million within the loss from discontinued operations.

In addition, a $22.2 million impairment loss was recorded for the acquired intangible assets for certain subsidiaries in our internet advertising business that was underperforming. The impaired intangible
assets primarily consisted of technology, lease agreements, customer base and trademark. We also recorded a $1.5 million impairment loss on equipment related to the discontinuation of our mobile handset advertising business and a $2.3 million
impairment loss on equipment from the disposal of CGEN.

Impairment of long-lived assets in 2010 and 2011

Other than the impairment of the investment in affiliates discussed above, the Group did not incur impairment loss on equipment nor
acquired intangible assets for the years ended December 31, 2010 and 2011.

Taxation

Cayman Islands, the British Virgin Islands and Hong Kong.

Under the current laws of the Cayman Islands and the British Virgin Islands, none of Focus Media Holding Limited, and its subsidiaries incorporated in Cayman Islands or the British Virgin Islands, is
subject to tax on its income or capital gains. Focus Media Hong Kong, and Hua Kuang Advertising Company Limited, our wholly owned subsidiaries incorporated in Hong Kong, are subject to profits tax rate of 16.5% on their assessable profits, yet
interest derived from deposits placed in Hong Kong with authorized institutions is exempted from the Hong Kong profits tax. In addition, payment of dividends by either company is not subject to withholding tax in those jurisdictions.

Taxable Presence Exposure in the PRC

The Enterprise Income Tax Law and its implementation regulations, as discussed below, provides that enterprises established under the laws of foreign countries or regions whose de facto management
bodies are located within the PRC are considered PRC resident enterprises and will be subject to the PRC Enterprise Income Tax at the rate of 25% on their worldwide income. Under the Implementation Rules of the PRC Enterprise Income Tax Law,
as discussed below, a de facto management body is defined as a body that has material and overall management and control over manufacturing and business operations, personnel and human resources, finances and treasury, and acquisition
and disposition of properties and other assets of an enterprise. Although our main management and investment functions are performed outside of China, there is uncertainty regarding whether PRC tax authorities would deem us to be a PRC resident
enterprise. If we are treated as a resident enterprise for PRC tax purposes, we will be subject to PRC tax on our worldwide income at the 25% tax rate, which would have an impact on our effective tax rate. Additionally, under such circumstances,
dividends distributed from our PRC subsidiaries to our BVI company and ultimately to our Cayman Islands company, could be exempt from Chinese dividend withholding tax, and dividends from our Cayman Islands company to ultimate shareholders would be
subject to Chinese withholding tax at 10% or a lower treaty rate.



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PRC

On January 1, 2008, a new EIT law (New Law) in China took effect. The New Law applies a uniform 25% EIT rate to both foreign invested enterprises and domestic enterprises. The New Law
provides a five-year transition period from its effective date for those enterprises which were established before the promulgation date of the New Law and which were entitled to preferential tax treatment under the PRC Income Tax Laws, such as a
reduced tax rate or a tax holiday.

On December 26, 2007, the State Council issued the Notice of the State Council
Concerning Implementation of Transitional Rules for Enterprise Income Tax Incentives (Circular 39). Based on Circular 39, certain specifically listed categories of enterprises which enjoyed a preferential tax rate of 15% are eligible for
a graduated rate increase to 25% over the 5-year period beginning from January 1, 2008. Specifically, the applicable rates under such an arrangement for such enterprises would be 18%, 20%, 22%, 24% and 25% for 2008, 2009, 2010, 2011, 2012 and
thereafter, respectively. Preferential tax treatments will continue to be granted to industries and projects that are strongly supported and encouraged by the state, and enterprises that qualify as new and high technology enterprises strongly
supported by the state (HNTE) under the New Law will be entitled to a 15% preferential EIT rate.

On the same
date, the State Council also issued the Notice of the State Council concerning Implementation of Transitional Tax Incentives for HNTE newly-established in Special Economic Zones and Shanghai Pudong New Area (Circular 40), which provides
guidance of the income tax incentives for high tech companies established in the Special Economic Zones and Shanghai Pudong New Area, which enterprise income tax is exempted for the first and second year and levied at half-rate of 25% statutory rate
from the third to fifth year.

Most of the Companys subsidiaries and VIEs transitioned from 33% to 25%, effective
January 1, 2008. Those that enjoyed a lower tax rate of 15% as high-tech companies under the PRC Income Tax Laws will transition to the uniform tax rate of 25% from 2008 unless they obtain the HNTE status under the New Law. The Group has thus
generally applied the 25% rate in calculating its deferred tax balances. Subsidiaries and VIEs with temporary differences reversing during the holiday period have used the reduced rates in calculating their deferred tax balance.

Among the subsidiaries and VIEs, Beijing Focus Media Wireless Co., Ltd. qualified for the transitional rule under Circular 39 and thus
enjoyed a 50% reduction off the transitional tax rate from 2009 through 2011 based on the transitional rule under the New Law. The Companys 100% owned subsidiary, Focus Media (China) Information Technology Co., Ltd. was incorporated on
August 22, 2008 in Shanghai Pudong New Area, and obtained the HNTE qualification on June 22, 2010. Therefore, Focus Media (China) Information Technology Co., Ltd. is exempted from EIT for the two years ended December 31, 2010 and 2011
and enjoys a 50% reduction off the statutory rate from 2012 through 2014.

The Group classifies interest and penalties
relating to income tax matters within income tax expense. The amount of penalties and interest recorded as of December 31, 2009, 2010 and 2011 are immaterial. The Group did not increase or decrease its liabilities for unrecognized tax benefits
during the years ended December 31, 2010 and 2011, respectively, and does not anticipate any significant increases or decreases to its liability for unrecognized tax benefits within the next 12 months.

Recently Issued Accounting Standards

In May 2011, the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update (ASU) 2011-04, Amendments to Achieve Common Fair Value Measurement and
Disclosure Requirements in U.S. GAAP and IFRSs (ASU 2011-04). ASU 2011-04 amended the FASB Accounting Standards Codification 820, Fair Value Measurements and Disclosures (ASC 820) to converge the fair value
measurement guidance in U.S. generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRSs). Some of the amendments clarify the application of existing fair value measurement
requirements, while other amendments change particular principles in ASC 820. In addition, ASU 2011-04 requires additional fair value disclosures. ASU 2011-04 is effective for fiscal years beginning after December 15, 2011 and should be applied
prospectively. The Group does not expect that ASU 2011-04 will have a significant impact on its consolidated results of operations or financial position.



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In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220):
Presentation of Comprehensive Income (ASU 2011-05). ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders equity and requires an entity to
present items of net income, other comprehensive income and total comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In December 2011, the FASB issued ASU
2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update
No. 2011-05 (ASU 2011-12). ASU 2011-12 defers the effective date of the changes in ASI 2011-05 that relate to the presentation of reclassification adjustments for each component of other comprehensive income in both net income
and other comprehensive income. The amendments in the ASUs do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. ASU 2011-05 and ASU
2011-12 are both effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 and must be applied retrospectively. The Group will be required to adopt ASU 2011-05 and ASU 2011-12 no later than the
quarter beginning January 1, 2012. As the ASUs require additional presentation only, there will be no impact to the Groups consolidated results of operations or financial position.

In September 2011, the FASB issued ASU No. 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for
Impairment (ASU 2011-08). ASU 2011-08 gives an entity the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis
for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. Previous guidance required an entity to test goodwill for impairment by first comparing the fair value of a reporting unit with its
carrying amount. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Group will be required to adopt ASU 2011-08 as of January 1, 2012 and does not
expect that ASU 2011-08 will have a significant impact on its consolidated results of operations or financial position.

Acquisitions

Since we commenced our current business operations in May 2003, we have acquired numerous companies to expand the coverage
of our network in China and to acquire businesses that are complementary to our operations. See Item 10.C Additional Information  Material Contracts.

Some of the businesses we acquired had entities located both in and outside of China. The consideration we paid for these businesses was made in two parts, one part for the entity located in China, and
the other part for the entity located outside of China. For consideration paid to acquire entities located in China, we withheld on behalf of sellers who are natural persons 20% of the amount by which the acquisition price exceeded the registered
capital of such PRC entity as required under the PRC Individual Income Tax Law and related implementation rules. We were not required to and did not withhold any tax in connection with payments made to acquire the entities located outside of China.
See Item 3.D Key Information  Risk Factors  Risks Relating to the Peoples Republic of China  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.

2009 acquisitions:

We did not make any significant acquisitions in 2009. We made aggregate cash payment of $92.4 million during the year as the result of
consideration made to acquire the noncontrolling interests of certain subsidiaries in the current year, as well as resolved contingent considerations for prior year acquisitions. We recorded additional goodwill for resolved contingent consideration
of $81.8 million during the year ended December 31, 2009, of which $10.5 million was related to 2008 acquisition.

In
January 2009, the Company had approximately $400 million cash and cash equivalents, of which approximately $200 million could be used for future settlement of acquisition related costs. As of December 31, 2008, approximately 27 acquisitions had
an aggregate estimated maximum earn-out contingent consideration of approximately $223 million. See the following table. The aggregate estimated potential earn-outs for the six underperforming internet advertising companies, the three
underperforming subsidiaries in the poster frame segment, Dongguan Yaya and Tuo Jia amounted to approximately $85.5 million. The Company made the decision to dispose of these eleven subsidiaries to eliminate the need to pay potential earn-outs for
these underperforming companies and in line with our strategy of returning focus on our core business.



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The following table sets forth the details of the purchase price and contingent
consideration relating to acquired entities as well as loss on disposal of entities disposed. The metric used to calculate the potential earn-out payments in each case was the after-tax net profits of the relevant entity.



|                                                                                                     |  |                       |                   |  |                    |  |                  |                                                                               |  |  |                      |  |  |                                                                              |        |  |                        |  |       |                                                                             |  |  |                    |  |  |                                                                              |       |  |                                                                                               |  |   |                 |  |  |                   |  |  |  |        |  |  |  |        |  |  |                          
|---------------------------------------------------------------------------------------------------- |  | --------------------- | ----------------- |  | ------------------ |  | ---------------- | ----------------------------------------------------------------------------- |  |  | -------------------- |  |  | ---------------------------------------------------------------------------- | ------ |  | ---------------------- |  | ----- | --------------------------------------------------------------------------- |  |  | ------------------ |  |  | ---------------------------------------------------------------------------- | ----- |  | --------------------------------------------------------------------------------------------- |  | - | --------------- |  |  | ----------------- |  |  |  | ------ |  |  |  | ------ |  |  | -------------------------
|                                                                                                     |  |                       |                   |  |                    |  |                  |                                                                               |  |  | 2009                 |  |  | 2010                                                                         |        |  | 2011                   |  |       |                                                                             |  |  |                    |  |  |                                                                             
|Acquired entity                                                                                      |  | Dateof
acquisition    |                   |  | Date ofdisposition |  |                  | Estimatedmaximumamount 
ofearn-outconsiderationprovisionas ofDecember 31,2008 |  |  | Amountpaidduring2009 |  |  | Acquisition(withearn-outarrangement)
payableoutstandingas ofDecember 31,2009 |        |  | Amount paidduring 2010 |  |       | Acquisition(withearn-outarrangement)payableoutstandingas ofDecember 31,2010 |  |  | Amount paidin 2011 |  |  | Acquisition(with
earn-outarrangement)payableoutstandingas ofDecember 31,2011 |       |  | Resolvedcontingentconsideration(up to
date ofdisposalorup toDecember
31,2011 whereapplicable) |  |   | Loss ondisposal |  |  | Area ofoperations
|                                                                                                     |  | (in thousands of US$)
|Directvantage Limited (also known as Dongguan Yaya)                                                  |  |                       | October 01,2007   |  |                    |  | February 28,2009 |                                                                               |  |  | 3,739                |  |  |                                                                              | 146    |  |                        |  | 69    |                                                                             |  |  | 69                 |  |  |                                                                              |      |  |                                                                                               |  |  |                 |  |  |                  |  |  |  | 1,541  |  |  |  | 1,588  |  |  | Mobile handsetadvertising
|Catch Stone Advertising (Beijing) Co., Ltd.                                                          |  |                       | April 16,2007     |  |                    |  | December 22,2009 |                                                                               |  |  | 4,579                |  |  |                                                                              | 4,579  |  |                        |  |      |                                                                             |  |  |                   |  |  |                                                                              |      |  |                                                                                               |  |  |                 |  |  |                  |  |  |  | 14,490 |  |  |  | 11,561 |  |  | InternetAdvertising      
|Shanghai Wangmai Advertisement Co., Ltd.                                                             |  |                       | September 01,2007 |  |                    |  | December 14,2009 |                                                                               |  |  | 11,270               |  |  |                                                                              |       |  |                        |  |      |                                                                             |  |  |                   |  |  |                                                                              |      |  |                                                                                               |  |  |                 |  |  |                  |  |  |  | 2,749  |  |  |  | 2,749  |  |  | InternetAdvertising      
|Beijing Wonderad Advertisement Co., Ltd.                                                             |  |                       | September 15,2007 |  |                    |  | November 30,2009 |                                                                               |  |  | 24,500               |  |  |                                                                              | 4,500  |  |                        |  |      |                                                                             |  |  |                   |  |  |                                                                              |      |  |                                                                                               |  |  |                 |  |  |                  |  |  |  | 14,926 |  |  |  | 14,926 |  |  | InternetAdvertising      
|Beijing Jiahuahengshun Media Advertisement Co., Ltd. & Beijing Jiahuazhongwang Advertising Co., Ltd. |  |                       | August 15,2007    |  |                    |  | December 01,2009 |                                                                               |  |  | 8,640                |  |  |                                                                              | 1,880  |  |                        |  |      |                                                                             |  |  |                   |  |  |                                                                              |      |  |                                                                                               |  |  |                 |  |  |                  |  |  |  | 7,659  |  |  |  | 7,659  |  |  | InternetAdvertising      
|Multibillion International Limited (also known as Jichuang)                                          |  |                       | December 01,2007  |  |                    |  | August 24,2009   |                                                                               |  |  | 2,523                |  |  |                                                                              | 366    |  |                        |  |      |                                                                             |  |  |                   |  |  |                                                                              |      |  |                                                                                               |  |  |                 |  |  |                  |  |  |  | 366    |  |  |  | 366    |  |  | InternetAdvertising      
|1024 Interactive Marketing Consultant (Beijing) Co., Ltd.                                            |  |                       | March 01,2008     |  |                    |  | December 18,2009 |                                                                               |  |  | 8,489                |  |  |                                                                              |       |  |                        |  |      |                                                                             |  |  |                   |  |  |                                                                              |      |  |                                                                                               |  |  |                 |  |  |                  |  |  |  | 3,397  |  |  |  | 3,397  |  |  | InternetAdvertising      
|Beijing Tuojiachengyuan Advertisement Co., Ltd.                                                      |  |                       | February 28,2007  |  |                    |  | August 30,2009   |                                                                               |  |  | 18,000               |  |  |                                                                              |       |  |                        |  |      |                                                                             |  |  |                   |  |  |                                                                              |      |  |                                                                                               |  |  |                 |  |  |                  |  |  |  | 7,958  |  |  |  | 3,636  |  |  | OutdoorBillboard         
|Zhuhai Framedia Advertisement Co., Ltd.                                                              |  |                       | January 01,2008   |  |                    |  | July 31, 2009    |                                                                               |  |  | 3,807                |  |  |                                                                              | 3,393  |  |                        |  |      |                                                                             |  |  |                   |  |  |                                                                              |      |  |                                                                                               |  |  |                 |  |  |                  |  |  |  | 3,394  |  |  |  | 2,769  |  |  | Poster Frame             
|Highmark Asia Limited (also known as Beijing Campus Media)                                           |  |                       | December 31,2006  |  |                    |  | March 30,2009    |                                                                               |  |  |                     |  |  |                                                                              |       |  |                        |  |      |                                                                             |  |  |                   |  |  |                                                                              |      |  |                                                                                               |  |  |                 |  |  |                  |  |  |  | 1,407  |  |  |  | 563    |  |  | Poster Frame             
|Centramax Enterprises Limited (also known as Shantou Framedia)                                       |  |                       | January 01,2008   |  |                    |  | January 30,2009  |                                                                               |  |  |                     |  |  |                                                                              | 293    |  |                        |  |      |                                                                             |  |  |                   |  |  |                                                                              |      |  |                                                                                               |  |  |                 |  |  |                  |  |  |  | 379    |  |  |  | 241    |  |  | Poster Frame             
|Advantage Way Limited (also known as iResearch)                                                      |  |                       | May 01, 2007      |  |                    |  | July 31, 2010    |                                                                               |  |  | 2,250                |  |  |                                                                              |       |  |                        |  |      |                                                                             |  |  |                   |  |  |                                                                              |      |  |                                                                                               |  |  |                 |  |  |                  |  |  |  | 6,767  |  |  |  | N/A    |  |  | (4) InternetAdvertising  
|Hua Kuang Advertising Company Limited(1)                                                             |  |                       | May 15, 2007      |  |                    |  | N/A              |                                                                               |  |  | 22,821               |  |  |                                                                              | 22,821 |  |                        |  |      |                                                                             |  |  |                   |  |  |                                                                              |      |  |                                                                                               |  |  |                 |  |  |                  |  |  |  | 47,449 |  |  |  | N/A    |  |  | OutdoorBillboard         
|Appreciate Capital Ltd.(2)                                                                           |  |                       | September 30,2006 |  |                    |  | N/A              |                                                                               |  |  |                     |  |  |                                                                              |       |  |                        |  |      |                                                                             |  |  |                   |  |  |                                                                              |      |  |                                                                                               |  |  |                 |  |  |                  |  |  |  | 2,804  |  |  |  | N/A    |  |  | Movie Theatre            
|Richcrest Pacific Limited (also known as Huangzhou Framedia)(1)                                      |  |                       | January 31,2007   |  |                    |  | N/A              |                                                                               |  |  | 13,623               |  |  |                                                                              | 8,534  |  |                        |  | 1,366 |                                                                             |  |  | 3,867              |  |  |                                                                              | 1,154 |  |                                                                                               |  |  |                 |  |  |                  |  |  |  | 21,179 |  |  |  | N/A    |  |  | Poster Frame             



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|                                                                      |  |                       |                   |  |                    |  |     |                                                                              |  |  |                        |  |  |                                                                             |        |  |                        |  |        |                                                                             |  |  |                        |  |  |                                                                               |       |  |                                                                                               |  |       |                 |  |  |                   |  |  |  |        |  |  |  |     |  |  |             
|--------------------------------------------------------------------- |  | --------------------- | ----------------- |  | ------------------ |  | --- | ---------------------------------------------------------------------------- |  |  | ---------------------- |  |  | --------------------------------------------------------------------------- | ------ |  | ---------------------- |  | ------ | --------------------------------------------------------------------------- |  |  | ---------------------- |  |  | ----------------------------------------------------------------------------- | ----- |  | --------------------------------------------------------------------------------------------- |  | ----- | --------------- |  |  | ----------------- |  |  |  | ------ |  |  |  | --- |  |  | ------------
|                                                                      |  |                       |                   |  |                    |  |     |                                                                              |  |  | 2009                   |  |  | 2010                                                                        |        |  | 2011                   |  |        |                                                                             |  |  |                        |  |  |                                                                              
|Acquired entity                                                       |  | Dateof
acquisition    |                   |  | Date ofdisposition |  |     | Estimatedmaximumamount
ofearn-outconsiderationprovisionas ofDecember 31,2008 |  |  | Amountpaidduring 
2009 |  |  | Acquisition(withearn-outarrangement)payableoutstandingas ofDecember 31,2009 |        |  | Amountpaidduring 
2010 |  |        | Acquisition(withearn-outarrangement)payableoutstandingas ofDecember 31,2010 |  |  | Amountpaidduring 
2011 |  |  | Acquisition(with 
earn-outarrangement)payableoutstandingas ofDecember 31,2011 |       |  | Resolvedcontingentconsideration(up to
date ofdisposalorup
toDecember 31,2011 whereapplicable) |  |       | Loss ondisposal |  |  | Area ofoperations
|                                                                      |  | (in thousands of US$)
|Wealthstar Holdings Limited (also known as Jiangsu Framedia)(1)       |  |                       | December 31,2006  |  |                    |  | N/A |                                                                              |  |  | 13,088                 |  |  |                                                                             | 7,478  |  |                        |  | 3,609  |                                                                             |  |  | 5,610                  |  |  |                                                                               |      |  |                                                                                               |  |      |                 |  |  |                  |  |  |  | 18,998 |  |  |  | N/A |  |  | Poster Frame
|Plantiworth Holdings Limited (also known as Liaoning Framedia)(3)     |  |                       | December 31,2006  |  |                    |  | N/A |                                                                              |  |  | 9,312                  |  |  |                                                                             | 7,374  |  |                        |  | 1,053  |                                                                             |  |  |                       |  |  |                                                                               |      |  |                                                                                               |  |      |                 |  |  |                  |  |  |  | 13,325 |  |  |  | N/A |  |  | Poster Frame
|Directwealth Holdings Limited (also known as Wuhan Framedia)(3)       |  |                       | December 31,2006  |  |                    |  | N/A |                                                                              |  |  | 7,261                  |  |  |                                                                             | 4,303  |  |                        |  | 1,720  |                                                                             |  |  | 1,720                  |  |  |                                                                               |      |  |                                                                                               |  |      |                 |  |  |                  |  |  |  | 9,441  |  |  |  | N/A |  |  | Poster Frame
|Sky Max Global Limited (also known as Zhonglian Framedia).(3)         |  |                       | September 01,2007 |  |                    |  | N/A |                                                                              |  |  | 17,665                 |  |  |                                                                             | 12,943 |  |                        |  | 2,565  |                                                                             |  |  | 10,920                 |  |  |                                                                               |      |  |                                                                                               |  |      |                 |  |  |                  |  |  |  | 24,622 |  |  |  | N/A |  |  | Poster Frame
|Brilliant Top Investment Limited (also known as Sichuan Framedia)(3)  |  |                       | January 01,2008   |  |                    |  | N/A |                                                                              |  |  | 10,546                 |  |  |                                                                             | 6,350  |  |                        |  | 1,318  |                                                                             |  |  | 1,318                  |  |  |                                                                               |      |  |                                                                                               |  |      |                 |  |  |                  |  |  |  | 8,770  |  |  |  | N/A |  |  | Poster Frame
|Fully Ascend Limited (also known as Zhengzhou Framedia)(1)            |  |                       | September 30,2007 |  |                    |  | N/A |                                                                              |  |  | 6,973                  |  |  |                                                                             | 636    |  |                        |  | 1,402  |                                                                             |  |  | 1,227                  |  |  |                                                                               |       |  |                                                                                               |  | 1,010 |                 |  |  |                  |  |  |  | 3,282  |  |  |  | N/A |  |  | Poster Frame
|Securacom Limited (also known as Changsha Framedia)(1)                |  |                       | January 01,2008   |  |                    |  | N/A |                                                                              |  |  | 18,987                 |  |  |                                                                             | 6,640  |  |                        |  | 6,495  |                                                                             |  |  | 9,762                  |  |  |                                                                               |      |  |                                                                                               |  | 1,305 |                 |  |  |                  |  |  |  | 20,071 |  |  |  | N/A |  |  | Poster Frame
|Crownsky Limited (also known as Haerbin Focus Media)(1)              |  |                       | March 01,2007     |  |                    |  | N/A |                                                                              |  |  | 4,452                  |  |  |                                                                             | 2,381  |  |                        |  |       |                                                                             |  |  | 1,061                  |  |  |                                                                               | 35    |  |                                                                                               |  |      |                 |  |  |                  |  |  |  | 4,205  |  |  |  | N/A |  |  | LCD         
|Bestwin Partners Limited (also known as Zhengzhou Focus Media)(1)     |  |                       | October 01,2006   |  |                    |  | N/A |                                                                              |  |  | 3,357                  |  |  |                                                                             | 1,564  |  |                        |  | 220    |                                                                             |  |  | 1,297                  |  |  |                                                                               | 1,125 |  |                                                                                               |  | 759   |                 |  |  | 1,183             |  |  |  | 6,073  |  |  |  | N/A |  |  | LCD         
|Glomedia Holdings Limited (also known as Shijiazhuang Focus Media)(1) |  |                       | December 01,2006  |  |                    |  | N/A |                                                                              |  |  | 2,635                  |  |  |                                                                             | 1,755  |  |                        |  | 251    |                                                                             |  |  |                       |  |  |                                                                               | 259   |  |                                                                                               |  | 159   |                 |  |  | 750               |  |  |  | 3,945  |  |  |  | N/A |  |  | LCD         
|Pear Commercial Inc. (also known as Jilin Focus Media)(1)             |  |                       | January 15,2007   |  |                    |  | N/A |                                                                              |  |  | 2,661                  |  |  |                                                                             | 1,287  |  |                        |  | 184    |                                                                             |  |  |                       |  |  |                                                                               | 611   |  |                                                                                               |  | 365   |                 |  |  | 262               |  |  |  | 3,498  |  |  |  | N/A |  |  | LCD         
|First Star Investment Limited (also known as Lanzhou Focus Media)(1)  |  |                       | September 15,2007 |  |                    |  | N/A |                                                                              |  |  | 1,867                  |  |  |                                                                             | 547    |  |                        |  |       |                                                                             |  |  |                       |  |  |                                                                               |      |  |                                                                                               |  |      |                 |  |  |                  |  |  |  | 614    |  |  |  | N/A |  |  | LCD         
|                                                                      |  |                       |                   |  |                    |  |     |                                                                              |  |  |                        |  |  |                                                                             |        |  |                        |  |        |                                                                             |  |  |                        |  |  |                                                                               |       |  |                                                                                               |  |       |                 |  |  |                   |  |  |  |        |  |  |  |     |  |  |             
|                                                                      |  |                       |                   |  |                    |  |     |                                                                              |  |  | 223,045                |  |  |                                                                             | 99,770 |  |                        |  | 20,252 |                                                                             |  |  | 36,851                 |  |  |                                                                               | 3,184 |  |                                                                                               |  | 3,598 |                 |  |  | 2,195             |  |  |  |        |  |  |  |     |  |  |             
|                                                                      |  |                       |                   |  |                    |  |     |                                                                              |  |  |                        |  |  |                                                                             |        |  |                        |  |        |                                                                             |  |  |                        |  |  |                                                                               |       |  |                                                                                               |  |       |                 |  |  |                   |  |  |  |        |  |  |  |     |  |  |             



|(1) | Not terminated nor re-negotiated.
|--- | ---------------------------------

|(2) | No contingent consideration is estimated as ACL was loss making.
|--- | ----------------------------------------------------------------

|(3) | Renegotiated.
|--- | -------------

|(4) | A gain on disposal resulted from the disposition
|--- | ------------------------------------------------



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2010 acquisitions:

We acquired five entities in the poster-frame advertising business for fixed cash consideration of $5.3 million in aggregate in 2010. There were no contingent considerations related to these acquisitions.
We recognized acquired intangible assets of $1.2 million and recognized goodwill of $4.0 million, which was assigned to poster frame reporting unit.

2011 acquisitions:

The Group acquired four entities in the traditional
outdoor billboards advertising business for cash consideration $4.4 million in aggregate in 2011. The contingent consideration related to these acquisitions is $15.5 million which is based on the achievement of certain earnings targets. The
acquisition was recorded using the purchase method of accounting and, accordingly, the acquired assets and liabilities were recorded at their fair market value at the date of acquisition as follows:



|                                                                    |  |                                     |         |   |                     |           
|------------------------------------------------------------------- |  | ----------------------------------- | ------- | - | ------------------- | ----------
|                                                                    |  | Value(in thousandsof 
U.S. dollars) |         |   | Amortization period
|Net liabilities acquired                                            |  | $                                   | 467     |   |                     |           
|Intangible assets                                                   |  |                                     |         |   |                     |           
|Lease agreement                                                     |  |                                     | 17,484  |   |                     | 7-9 years 
|Customer base                                                       |  |                                     | 6,170   |   |                     | 5-10 years
|Trademark                                                           |  |                                     | 855     |   |                     | N/A       
|Non-compete agreement                                               |  |                                     | 254     |   |                     | 3 years   
|Goodwill                                                            |  |                                     | 19,731  |   |                     |           
|Less: Noncontrolling interest                                       |  |                                     | (19,102 | ) |                     |           
|Deferred tax liabilities associated with acquired intangible assets |  |                                     | (5,977  | ) |                     |           
|                                                                    |  |                                     |         |   |                     |           
|                                                                    |  |                                    
|Total                                                               |  | $                                   | 19,882  |   |                     |           
|                                                                    |  |                                     |         |   |                     |           

In addition, the Group acquired four entities in the LCD business and three entities in the poster-frame
advertising business for fixed cash consideration of $1.9 million and $2.4 million in aggregate, respectively, in 2011. There was no contingent consideration related to these acquisitions. The Group recognized acquired intangible assets of $0.2
million and $0.5 million respectively, and recognized goodwill of $6.0 million and $2.2 million respectively.

Dispositions

We use a number of quantitative and qualitative factors in assessing performance. Quantitative factors primarily include: (i) current
and, more importantly projected, gross profit as compared with other segments; (ii) current and projected operating profit compared with other segments; and (iii) current and projected working capital requirements compared with other
segments. Qualitative factors include, but are not limited to: strategic fit of a particular segment to our overall strategies; synergies of a particular business with other segments; and the industry dynamics a segment has encountered or may
encounter in the future.

Once an underperforming segment or a subsidiary is identified, we further evaluate whether or not
the segment or subsidiary should be disposed. This determination is also based on a number of quantitative and qualitative factors, such as how quickly or easily the segment or subsidiary can be turned around, the degree of difficulty expected in
selling the segment or subsidiary to a third party, the financial burden we would bear if the segment or subsidiary in retained and the overall effect retention would have on the profitability, working capital, cash flow and share price of the
company as a whole.

2009 Disposition

In 2009, we aborted a contemplated initial public offering for its Internet advertising segment due to the economic recession in late 2008. As a result, between August and December 2009, we disposed of
six underperforming subsidiaries in that segment through a series of individual transactions with their respective original owners. Each of the subsidiaries was considered a component of our company, and their results have been included in
discontinued operations in the consolidated statements of operations. The results of discontinued operations include net revenues and pretax losses of $127.6 million and $45.4 million, respectively, related to these subsidiaries. We recorded a loss
on disposal of $44.1 million.



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The following table summarizes the acquired subsidiaries in the mobile handset advertising
services segment and Internet advertising segment that were sold back to their original owners in 2009:



|   |  |                  |  |                    |           |  |                  |                                     |               |   |            |                 |  |  |                 |  |  |   |            | 
|-- |  | ---------------- |  | ------------------ | --------- |  | ---------------- | ----------------------------------- | ------------- | - | ---------- | --------------- |  |  | --------------- |  |  | - | ---------- | 
|   |  | Acquisitions     |  | Date ofacquisition |           |  | Business segment |                                     | Proceeds paid |   |            | Date ofDisposal |  |  | Loss ondisposal | 
|1. |  | Catchstone(1)    |  |                    | 2007-4-16 |  |                  | Internet advertising                |               | $ | 14,489,647 |                 |  |  | 2009-12-22      |  |  | $ | 11,560,617 | 
|2. |  | WonderAd(2)      |  |                    | 2007-9-15 |  |                  | Internet advertising                |               | $ | 14,926,003 |                 |  |  | 2009-11-30      |  |  | $ | 14,926,003 | 
|3. |  | Jiahua(3)        |  |                    | 2007-8-15 |  |                  | Internet advertising                |               | $ | 7,659,158  |                 |  |  | 2009-12-1       |  |  | $ | 7,659,158  | 
|4. |  | Wangmai(4)       |  |                    | 2007-9-1  |  |                  | Internet advertising                |               | $ | 2,749,158  |                 |  |  | 2009-12-14      |  |  | $ | 2,749,158  | 
|5. |  | Jichuang(5)      |  |                    | 2007-12-1 |  |                  | Internet advertising                |               | $ | 366,032    |                 |  |  | 2009-8-24       |  |  | $ | 366,032    | 
|6. |  | 1024(6)          |  |                    | 2008-3-1  |  |                  | Internet advertising                |               | $ | 3,397,124  |                 |  |  | 2009-12-18      |  |  | $ | 3,397,124  | 
|7. |  | Dongguan Yaya(7) |  |                    | 2007-10-1 |  |                  | Mobile handset advertising services |               | $ | 1,540,612  |                 |  |  | 2009-2-28       |  |  | $ | 1,588,110  | 



|(1) | The original sellers which subsequently repurchased Catchstone were Only Education Holding Limited and Maxnew Holdings Limited, BVI companies owned by a single PRC
individual unrelated to our company.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The original seller which subsequently repurchased WonderAd was Megajoy Pacific Limited, a BVI company ultimately owned by seven PRC individuals unrelated to our
company.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The original sellers which subsequently repurchased Jiahua were two PRC individuals unrelated to our company.
|--- | -------------------------------------------------------------------------------------------------------------

|(4) | The original seller which subsequently repurchased Jichuang was Richcom International Limited, a BVI company owned by a single PRC individual unrelated to our company.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | The original sellers which subsequently repurchased Keylink Global Limited were four PRC individuals unrelated to our company.
|--- | ------------------------------------------------------------------------------------------------------------------------------

|(6) | The original sellers which subsequently repurchased 1024 were two PRC individuals unrelated to our company.
|--- | -----------------------------------------------------------------------------------------------------------

|(7) | The original sellers which subsequently repurchased Dongguan Yaya were Sinoalpha Limited and Max Planet Limited, BVI companies each of which is owned by a separate
single PRC individual unrelated to our company.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2010 Disposition

In January 2010, certain employees and management of Allyes and certain members of the Companys management and directors entered
into a definitive agreement with the Company and Allyes to buy-out an aggregate 38% interest in Allyes from the Company for a cash consideration of $13.3 million. On July 30, 2010, the Company further entered into a definitive share purchase
agreement with Asteroid Media Holdings Limited, a wholly-owned investment vehicle of Silver Lake Management, L.L.C., or Silver Lake, pursuant to which the Company sold to Silver Lake the Companys entire remaining 62% ownership interest in
Allyes at a cash consideration of $124 million. Following the disposition of Allyes, the Group is no longer engaged in the internet advertising business and therefore, the results of internet advertising business have been included in discontinued
operations in the consolidated statements of operations for all periods presented. The results of discontinued operations include net revenues and profit before tax of $80.6 million and $5.2 million, respectively, related to Allyes and its
subsidiaries and affiliates. We recorded a gain on disposal of $79.0 million.

2011 Disposition

The Group did not make significant disposition in 2011.

Quarterly Results of Operation

The following table presents unaudited
consolidated quarterly financial data for each of the eight quarters in the period from January 1, 2010 to December 31, 2011. You should read the following table in conjunction with our audited consolidated financial statements and related
notes included elsewhere in this Form 20-F. We have prepared the unaudited consolidated quarterly financial information on substantially the same basis as our audited consolidated financial statements and using information derived from our unaudited
consolidated financial statements which are not included in this Form 20- F. The following information contains normal recurring adjustments which are, in the opinion of our management, necessary for a fair presentation of the results for such
unaudited period. Our operating results for any quarter are not necessarily indicative of results that may be expected for any future period.



82



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|                                                                            |  |                                |        |   |              |   |         |                   |  |   |                  |   |  |               |         |   |              |   |         |                   |  |   |                  |   |  |   |         |   |  |   |         |  
|--------------------------------------------------------------------------- |  | ------------------------------ | ------ | - | ------------ | - | ------- | ----------------- |  | - | ---------------- | - |  | ------------- | ------- | - | ------------ | - | ------- | ----------------- |  | - | ---------------- | - |  | - | ------- | - |  | - | ------- | -
|                                                                            |  | For the three months ended     |       
|Consolidated Statement
of Operations Data                                   |  | March 31,2010                  |        |   | June 30,2010 |   |         | September 30,2010 |  |   | December 31,2010 |   |  | March 31,2011 |         |   | June 30,2011 |   |         | September 30,2011 |  |   | December 31,2011 |  
|                                                                            |  | (in thousands of U.S. dollars) |       
|Net revenues:                                                               |  |                                |        |   |              |   |         |                   |  |   |                  |   |  |               |         |   |              |   |         |                   |  |   |                  |   |  |   |         |   |  |   |         |  
|LCD display network(1)                                                      |  | $                              | 50,155 |   |              | $ | 72,530  |                   |  | $ | 82,899           |   |  | $             | 92,058  |   |              | $ | 82,505  |                   |  | $ | 103,890          |   |  | $ | 120,560 |   |  | $ | 137,410 |  
|In-store network(1)                                                         |  |                                | 7,662  |   |              |   | 10,868  |                   |  |   | 9,408            |   |  |               | 9,839   |   |              |   | 9,512   |                   |  |   | 14,936           |   |  |   | 15,871  |   |  |   | 16,055  |  
|Poster frame network(1)/(2)                                                 |  |                                | 24,799 |   |              |   | 25,238  |                   |  |   | 32,227           |   |  |               | 39,629  |   |              |   | 36,079  |                   |  |   | 38,178           |   |  |   | 46,644  |   |  |   | 64,547  |  
|Movie theatre (1)                                                           |  |                                | 5,470  |   |              |   | 3,524   |                   |  |   | 3,877            |   |  |               | 5,224   |   |              |   | 7,957   |                   |  |   | 9,105            |   |  |   | 12,991  |   |  |   | 20,783  |  
|Traditional outdoor billboards(1)                                           |  |                                | 8,668  |   |              |   | 10,349  |                   |  |   | 8,941            |   |  |               | 12,950  |   |              |   | 10,522  |                   |  |   | 12,853           |   |  |   | 14,596  |   |  |   | 17,626  |  
|                                                                            |  |                                |        |   |              |   |         |                   |  |   |                  |   |  |               |         |   |              |   |         |                   |  |   |                  |   |  |   |         |   |  |   |         |  
|Total net revenues                                                          |  |                                | 96,754 |   |              |   | 122,509 |                   |  |   | 137,352          |   |  |               | 159,700 |   |              |   | 146,575 |                   |  |   | 178,962          |   |  |   | 210,662 |   |  |   | 256,421 |  
|                                                                            |  |                                |        |   |              |   |         |                  
|Cost of revenues:                                                           |  |                                |        |   |              |   |         |                   |  |   |                  |   |  |               |         |   |              |   |         |                   |  |   |                  |   |  |   |         |   |  |   |         |  
|LCD display network                                                         |  |                                | 14,945 |   |              |   | 14,487  |                   |  |   | 19,023           |   |  |               | 19,058  |   |              |   | 19,625  |                   |  |   | 18,630           |   |  |   | 22,363  |   |  |   | 25,227  |  
|In-store network                                                            |  |                                | 5,219  |   |              |   | 6,123   |                   |  |   | 5,996            |   |  |               | 6,094   |   |              |   | 5,701   |                   |  |   | 5,774            |   |  |   | 5,849   |   |  |   | 3,258   |  
|Poster frame network (3)                                                    |  |                                | 18,448 |   |              |   | 19,298  |                   |  |   | 21,670           |   |  |               | 25,071  |   |              |   | 25,705  |                   |  |   | 27,098           |   |  |   | 28,056  |   |  |   | 29,511  |  
|Movie theatre                                                               |  |                                | 2,635  |   |              |   | 2,651   |                   |  |   | 3,528            |   |  |               | 5,035   |   |              |   | 6,188   |                   |  |   | 5,984            |   |  |   | 6,601   |   |  |   | 6,980   |  
|Traditional outdoor billboards                                              |  |                                | 7,287  |   |              |   | 8,182   |                   |  |   | 7,069            |   |  |               | 9,871   |   |              |   | 9,135   |                   |  |   | 9,724            |   |  |   | 12,233  |   |  |   | 16,002  |  
|                                                                            |  |                                |        |   |              |   |         |                   |  |   |                  |   |  |               |         |   |              |   |         |                   |  |   |                  |   |  |   |         |   |  |   |         |  
|Total cost of revenues                                                      |  |                                | 48,534 |   |              |   | 50,741  |                   |  |   | 57,286           |   |  |               | 65,129  |   |              |   | 66,354  |                   |  |   | 67,210           |   |  |   | 75,102  |   |  |   | 80,978  |  
|                                                                            |  |                                |        |   |              |   |         |                   |  |   |                  |   |  |               |         |   |              |   |         |                   |  |   |                  |   |  |   |         |   |  |   |         |  
|Gross profit                                                                |  |                                | 48,220 |   |              |   | 71,768  |                   |  |   | 80,066           |   |  |               | 94,571  |   |              |   | 80,221  |                   |  |   | 111,752          |   |  |   | 135,560 |   |  |   | 175,443 |  
|                                                                            |  |                                |        |   |              |   |         |                  
|Operating expenses:                                                         |  |                                |        |   |              |   |         |                   |  |   |                  |   |  |               |         |   |              |   |         |                   |  |   |                  |   |  |   |         |   |  |   |         |  
|General and administrative                                                  |  |                                | 21,318 |   |              |   | 16,737  |                   |  |   | 24,942           |   |  |               | 16,763  |   |              |   | 26,624  |                   |  |   | 30,240           |   |  |   | 32,588  |   |  |   | 37,561  |  
|Selling and marketing                                                       |  |                                | 20,592 |   |              |   | 28,729  |                   |  |   | 24,474           |   |  |               | 29,927  |   |              |   | 31,201  |                   |  |   | 33,079           |   |  |   | 32,594  |   |  |   | 50,843  |  
|Impairment loss                                                             |  |                                | 5,736  |   |              |   |        |                   |  |   |                 |   |  |               |        |   |              |   |        |                   |  |   |                 |   |  |   |        |   |  |   |        |  
|Other operating (income) expenses                                           |  |                                | (3,796 | ) |              |   | (1,353  | )                 |  |   | (2,699           | ) |  |               | (6,296  | ) |              |   | (4,705  | )                 |  |   | (1,209           | ) |  |   | (2,052  | ) |  |   | (8,172  | )
|                                                                            |  |                                |        |   |              |   |         |                   |  |   |                  |   |  |               |         |   |              |   |         |                   |  |   |                  |   |  |   |         |   |  |   |         |  
|Total operating expenses                                                    |  |                                | 43,850 |   |              |   | 44,113  |                   |  |   | 46,717           |   |  |               | 40,394  |   |              |   | 53,120  |                   |  |   | 62,110           |   |  |   | 63,130  |   |  |   | 80,232  |  
|                                                                            |  |                                |        |   |              |   |         |                   |  |   |                  |   |  |               |         |   |              |   |         |                   |  |   |                  |   |  |   |         |   |  |   |         |  
|Income from operations                                                      |  |                                | 4,370  |   |              |   | 27,655  |                   |  |   | 33,349           |   |  |               | 54,177  |   |              |   | 27,101  |                   |  |   | 49,642           |   |  |   | 72,430  |   |  |   | 95,211  |  
|Interest income                                                             |  |                                | 1,717  |   |              |   | 1,064   |                   |  |   | 2,667            |   |  |               | 1,812   |   |              |   | 2,360   |                   |  |   | 3,147            |   |  |   | 5,395   |   |  |   | 4,637   |  
|Interest expense                                                            |  |                                |       |   |              |   |        |                   |  |   |                 |   |  |               |        |   |              |   |        |                   |  |   |                 |   |  |   | 133     |   |  |   | 584     |  
|Investment loss                                                             |  |                                | 1,288  |   |              |   |        |                   |  |   |                 |   |  |               |        |   |              |   |        |                   |  |   |                 |   |  |   |        |   |  |   |        |  
|                                                                            |  |                                |        |   |              |   |         |                   |  |   |                  |   |  |               |         |   |              |   |         |                   |  |   |                  |   |  |   |         |   |  |   |         |  
|Income from continuing operations before income taxes                       |  |                                | 4,799  |   |              |   | 28,719  |                   |  |   | 36,016           |   |  |               | 55,989  |   |              |   | 29,461  |                   |  |   | 52,789           |   |  |   | 77,692  |   |  |   | 99,264  |  
|Income taxes                                                                |  |                                | 6,194  |   |              |   | 4,850   |                   |  |   | 2,561            |   |  |               | 8,731   |   |              |   | 6,908   |                   |  |   | 8,935            |   |  |   | 14,042  |   |  |   | 24,876  |  
|Loss from equity methodinvestment (4)                                       |  |                                |       |   |              |   |        |                   |  |   |                 |   |  |               |        |   |              |   | 2,774   |                   |  |   | 992              |   |  |   | 984     |   |  |   | 38,883  |  
|                                                                            |  |                                |        |   |              |   |         |                   |  |   |                  |   |  |               |         |   |              |   |         |                   |  |   |                  |   |  |   |         |   |  |   |         |  
|Net income (loss) from continuing operations                                |  |                                | (1,395 | ) |              |   | 23,869  |                   |  |   | 33,455           |   |  |               | 47,258  |   |              |   | 19,779  |                   |  |   | 42,862           |   |  |   | 62,666  |   |  |   | 35,505  |  
|Net income (loss) from discontinued operations, net of tax                  |  |                                | 804    |   |              |   | 2,933   |                   |  |   | 79,341           |   |  |               |        |   |              |   |        |                   |  |   |                 |   |  |   |        |   |  |   |        |  
|                                                                            |  |                                |        |   |              |   |         |                   |  |   |                  |   |  |               |         |   |              |   |         |                   |  |   |                  |   |  |   |         |   |  |   |         |  
|Net income (loss)                                                           |  |                                | (591   | ) |              |   | 26,802  |                   |  |   | 112,796          |   |  |               | 47,258  |   |              |   | 19,779  |                   |  |   | 42,862           |   |  |   | 62,666  |   |  |   | 35,505  |  
|Net income (loss) attributable to noncontrolling interests                  |  |                                | 363    |   |              |   | 1,465   |                   |  |   | 59               |   |  |               | 104     |   |              |   | (768    | )                 |  |   | 59               |   |  |   | 437     |   |  |   | (1,593  | )
|                                                                            |  |                                |        |   |              |   |         |                   |  |   |                  |   |  |               |         |   |              |   |         |                   |  |   |                  |   |  |   |         |   |  |   |         |  
|Net income (loss) attributable to Focus Media Holdings Limited shareholders |  | $                              | (954   | ) |              | $ | 25,337  |                   |  | $ | 112,737          |   |  | $             | 47,154  |   |              | $ | 20,547  |                   |  | $ | 42,803           |   |  | $ | 62,229  |   |  | $ | 37,098  |  
|                                                                            |  |                                |        |   |              |   |         |                   |  |   |                  |   |  |               |         |   |              |   |         |                   |  |   |                  |   |  |   |         |   |  |   |         |  



83



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|(1) | Advertising service revenue is presented net of sales taxes. The following tables present the unaudited quarterly sales taxes information:
|--- | ------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The net revenues from our poster frame network include the net revenues derived from LCD 1.0 picture frame devices in Tianjin, Kunming and Shijiazhuang.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The cost of revenues from our poster frame network includes the cost of revenues derived from LCD 1.0 picture frame devices in Tianjin, Kunming and Shijiazhuang.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Following the furnishing of the Form 6-K on March, 19, 2012 related to the financial information for the fourth quarter and full year ended December 31, 2011, an
impairment loss of $38.3 million has been recorded with respect to the Companys equity method investment in VisionChina as of December 31, 2011. On the basis of the duration and severity of the decline in the market price of the equity method
investments shares, the Company concluded that there has been a loss in value of the investment that is other-than-temporary and recorded an impairment loss of $38.3 million. This impairment loss relates to the decline in share price of
VisionChina in which we have held a stake of approximately 15,331,305 ordinary shares since January 13, 2011. The impairment loss represents a non-cash charge.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                               |  |                                |       |  |              |   |        |                   |  |   |                  |  |  |               |        |  |              |   |        |                   |  |   |                  |  |  |   |        |  |  |   |        | 
|------------------------------ |  | ------------------------------ | ----- |  | ------------ | - | ------ | ----------------- |  | - | ---------------- |  |  | ------------- | ------ |  | ------------ | - | ------ | ----------------- |  | - | ---------------- |  |  | - | ------ |  |  | - | ------ | 
|                               |  | For the three months ended     |      
|                               |  | March 31,2010                  |       |  | June 30,2010 |   |        | September 30,2010 |  |   | December 31,2010 |  |  | March 31,2011 |        |  | June 30,2011 |   |        | September 30,2011 |  |   | December 31,2011 | 
|                               |  | (in thousands of U.S. dollars) |      
|Sales taxes:                   |  |                                |       |  |              |   |        |                   |  |   |                  |  |  |               |        |  |              |   |        |                   |  |   |                  |  |  |   |        |  |  |   |        | 
|LCD display network            |  | $                              | 5,273 |  |              | $ | 7,526  |                   |  | $ | 8,755            |  |  | $             | 9,397  |  |              | $ | 7,519  |                   |  | $ | 9,628            |  |  | $ | 11,995 |  |  | $ | 13,044 | 
|In-store network               |  |                                | 826   |  |              |   | 1,129  |                   |  |   | 981              |  |  |               | 1,026  |  |              |   | 893    |                   |  |   | 1,403            |  |  |   | 1,496  |  |  |   | 1,504  | 
|Poster frame network           |  |                                | 2,614 |  |              |   | 2,386  |                   |  |   | 3,269            |  |  |               | 3,925  |  |              |   | 3,203  |                   |  |   | 3,470            |  |  |   | 4,379  |  |  |   | 6,048  | 
|Movie theatre                  |  |                                | 182   |  |              |   | 351    |                   |  |   | 651              |  |  |               | 579    |  |              |   | 477    |                   |  |   | 519              |  |  |   | 623    |  |  |   | 875    | 
|Traditional outdoor billboards |  |                                | 352   |  |              |   | 155    |                   |  |   | 194              |  |  |               | 311    |  |              |   | 100    |                   |  |   | 237              |  |  |   | 290    |  |  |   | 426    | 
|                               |  |                                |       |  |              |   |        |                   |  |   |                  |  |  |               |        |  |              |   |        |                   |  |   |                  |  |  |   |        |  |  |   |        | 
|Total                          |  | $                              | 9,247 |  |              | $ | 11,547 |                   |  | $ | 13,850           |  |  | $             | 15,238 |  |              | $ | 12,192 |                   |  | $ | 15,257           |  |  | $ | 18,783 |  |  | $ | 21,897 | 
|                               |  |                                |       |  |              |   |        |                   |  |   |                  |  |  |               |        |  |              |   |        |                   |  |   |                  |  |  |   |        |  |  |   |        | 

Certain quarterly financial information related to each fiscal quarter of the fiscal years ended
December 31, 2010 and 2011 have been restated and differ from previously announced information in the Forms 6-K furnished to the SEC as a result of the following:



| |  |  | In July 2010, we completely exited the internet advertising business by selling all our equity ownership in Allyes to a third party investor.
Therefore, the results of Allyes and its consolidated subsidiaries and affiliates have been classified as discontinued operations for all the periods presented.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Following the filing of Form 6-K filed on March 19, 2012 related to the financial information for quarter ended December 31, 2011, an impairment loss
of $38.3 million has been recorded as of December 31, 2011 as described in footnote (4) to the consolidated statement of operations data table above.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The following table presents our unaudited consolidated quarterly financial data as a
percentage of our total revenues for the periods indicated.



|                                                                            |  |                            |       |    |              |  |       |                   |  |  |                  |    |  |               |       |    |              |  |       |                   |  |  |                  |    |  |  |       |    |  |  |       |   
|--------------------------------------------------------------------------- |  | -------------------------- | ----- | -- | ------------ |  | ----- | ----------------- |  |  | ---------------- | -- |  | ------------- | ----- | -- | ------------ |  | ----- | ----------------- |  |  | ---------------- | -- |  |  | ----- | -- |  |  | ----- | --
|                                                                            |  | For the three months ended |      
|Consolidated Statement
of Operations Data                                   |  | March 31,2010              |       |    | June 30,2010 |  |       | September 30,2010 |  |  | December 31,2010 |    |  | March 31,2011 |       |    | June 30,2011 |  |       | September 30,2011 |  |  | December 31,2011 |   
|Net revenues:                                                               |  |                            |       |    |              |  |       |                   |  |  |                  |    |  |               |       |    |              |  |       |                   |  |  |                  |    |  |  |       |    |  |  |       |   
|LCD display network(1)                                                      |  |                            | 51.9  | %  |              |  | 59.2  | %                 |  |  | 60.4             | %  |  |               | 57.7  | %  |              |  | 56.3  | %                 |  |  | 58.1             | %  |  |  | 57.3  | %  |  |  | 53.5  | % 
|In-store network(1)                                                         |  |                            | 7.9   | %  |              |  | 8.9   | %                 |  |  | 6.8              | %  |  |               | 6.2   | %  |              |  | 6.5   | %                 |  |  | 8.3              | %  |  |  | 7.5   | %  |  |  | 6.3   | % 
|Poster frame network(1)                                                     |  |                            | 25.6  | %  |              |  | 20.6  | %                 |  |  | 23.5             | %  |  |               | 24.8  | %  |              |  | 24.6  | %                 |  |  | 21.3             | %  |  |  | 22.1  | %  |  |  | 25.2  | % 
|Movie theatre (1)                                                           |  |                            | 5.6   | %  |              |  | 2.9   | %                 |  |  | 2.8              | %  |  |               | 3.3   | %  |              |  | 5.4   | %                 |  |  | 5.1              | %  |  |  | 6.2   | %  |  |  | 8.1   | % 
|Traditional outdoor billboards(1)                                           |  |                            | 9.0   | %  |              |  | 8.4   | %                 |  |  | 6.5              | %  |  |               | 8.0   | %  |              |  | 7.2   | %                 |  |  | 7.2              | %  |  |  | 6.9   | %  |  |  | 6.9   | % 
|                                                                            |  |                            |       |    |              |  |       |                   |  |  |                  |    |  |               |       |    |              |  |       |                   |  |  |                  |    |  |  |       |    |  |  |       |   
|Total net revenues                                                          |  |                            | 100.0 | %  |              |  | 100.0 | %                 |  |  | 100.0            | %  |  |               | 100.0 | %  |              |  | 100.0 | %                 |  |  | 100.0            | %  |  |  | 100.0 | %  |  |  | 100.0 | % 
|                                                                            |  |                            |       |    |              |  |       |                  
|Cost of revenues:                                                           |  |                            |       |    |              |  |       |                   |  |  |                  |    |  |               |       |    |              |  |       |                   |  |  |                  |    |  |  |       |    |  |  |       |   
|LCD display network                                                         |  |                            | 15.4  | %  |              |  | 11.8  | %                 |  |  | 13.8             | %  |  |               | 11.9  | %  |              |  | 13.5  | %                 |  |  | 10.6             | %  |  |  | 10.7  | %  |  |  | 9.9   | % 
|In-store network                                                            |  |                            | 5.4   | %  |              |  | 5.0   | %                 |  |  | 4.4              | %  |  |               | 3.8   | %  |              |  | 3.9   | %                 |  |  | 3.2              | %  |  |  | 2.8   | %  |  |  | 1.3   | % 
|Poster frame network                                                        |  |                            | 19.1  | %  |              |  | 15.8  | %                 |  |  | 15.8             | %  |  |               | 15.7  | %  |              |  | 17.5  | %                 |  |  | 15.1             | %  |  |  | 13.3  | %  |  |  | 11.5  | % 
|Movie theatre                                                               |  |                            | 2.8   | %  |              |  | 2.1   | %                 |  |  | 2.6              | %  |  |               | 3.2   | %  |              |  | 4.2   | %                 |  |  | 3.3              | %  |  |  | 3.1   | %  |  |  | 2.7   | % 
|Traditional outdoor billboards                                              |  |                            | 7.5   | %  |              |  | 6.7   | %                 |  |  | 5.1              | %  |  |               | 6.2   | %  |              |  | 6.2   | %                 |  |  | 5.4              | %  |  |  | 5.8   | %  |  |  | 6.2   | % 
|                                                                            |  |                            |       |    |              |  |       |                   |  |  |                  |    |  |               |       |    |              |  |       |                   |  |  |                  |    |  |  |       |    |  |  |       |   
|Total cost of revenues                                                      |  |                            | 50.2  | %  |              |  | 41.4  | %                 |  |  | 41.7             | %  |  |               | 40.8  | %  |              |  | 45.3  | %                 |  |  | 37.6             | %  |  |  | 35.7  | %  |  |  | 31.6  | % 
|                                                                            |  |                            |       |    |              |  |       |                  
|Gross profit                                                                |  |                            | 49.8  | %  |              |  | 58.6  | %                 |  |  | 58.3             | %  |  |               | 59.2  | %  |              |  | 54.7  | %                 |  |  | 62.4             | %  |  |  | 64.3  | %  |  |  | 68.4  | % 
|Operating expenses:                                                         |  |                            |       |    |              |  |       |                   |  |  |                  |    |  |               |       |    |              |  |       |                   |  |  |                  |    |  |  |       |    |  |  |       |   
|General and administrative                                                  |  |                            | 22.0  | %  |              |  | 13.7  | %                 |  |  | 18.2             | %  |  |               | 10.5  | %  |              |  | 18.2  | %                 |  |  | 16.9             | %  |  |  | 15.5  | %  |  |  | 14.6  | % 
|Selling and marketing                                                       |  |                            | 21.3  | %  |              |  | 23.4  | %                 |  |  | 17.8             | %  |  |               | 18.7  | %  |              |  | 21.3  | %                 |  |  | 18.5             | %  |  |  | 15.5  | %  |  |  | 19.8  | % 
|Impairment loss                                                             |  |                            | 5.9   | %  |              |  | 0.0   | %                 |  |  | 0.0              | %  |  |               | 0.0   | %  |              |  | 0.0   | %                 |  |  | 0.0              | %  |  |  | 0.0   | %  |  |  | 0.0   | % 
|Other operating (income) expenses                                           |  |                            | (3.9  | )% |              |  | (1.1  | )%                |  |  | (2.0             | )% |  |               | (3.9  | )% |              |  | (3.2  | )%                |  |  | (0.7             | )% |  |  | (1.0  | )% |  |  | (3.2  | )%
|                                                                            |  |                            |       |    |              |  |       |                   |  |  |                  |    |  |               |       |    |              |  |       |                   |  |  |                  |    |  |  |       |    |  |  |       |   
|                                                                            |  |                            |       |    |              |  |       |                  
|Total operating expenses                                                    |  |                            | 45.3  | %  |              |  | 36.0  | %                 |  |  | 34.0             | %  |  |               | 25.3  | %  |              |  | 36.3  | %                 |  |  | 34.7             | %  |  |  | 30.0  | %  |  |  | 31.2  | % 
|                                                                            |  |                            |       |    |              |  |       |                   |  |  |                  |    |  |               |       |    |              |  |       |                   |  |  |                  |    |  |  |       |    |  |  |       |   
|Income from operations                                                      |  |                            | 4.5   | %  |              |  | 22.6  | %                 |  |  | 24.3             | %  |  |               | 33.9  | %  |              |  | 18.4  | %                 |  |  | 27.7             | %  |  |  | 34.3  | %  |  |  | 37.2  | % 
|Interest income                                                             |  |                            | 1.8   | %  |              |  | 0.9   | %                 |  |  | 1.9              | %  |  |               | 1.1   | %  |              |  | 1.6   | %                 |  |  | 1.8              | %  |  |  | 2.6   | %  |  |  | 1.8   | % 
|Interest expense                                                            |  |                            | 0.0   | %  |              |  | 0.0   | %                 |  |  | 0.0              | %  |  |               | 0.0   | %  |              |  | 0.0   | %                 |  |  | 0.0              | %  |  |  | 0.1   | %  |  |  | 0.2   | % 
|Investment loss                                                             |  |                            | (1.3  | )% |              |  | 0.0   | %                 |  |  | 0.0              | %  |  |               | 0.0   | %  |              |  | 0.0   | %                 |  |  | 0.0              | %  |  |  | 0.0   | %  |  |  | 0.0   | % 
|                                                                            |  |                            |       |    |              |  |       |                   |  |  |                  |    |  |               |       |    |              |  |       |                   |  |  |                  |    |  |  |       |    |  |  |       |   
|Income from continuing operations before income taxes                       |  |                            | 5.0   | %  |              |  | 23.5  | %                 |  |  | 26.2             | %  |  |               | 35.0  | %  |              |  | 20.0  | %                 |  |  | 29.5             | %  |  |  | 36.8  | %  |  |  | 38.8  | % 
|Income taxes                                                                |  |                            | 6.4   | %  |              |  | 4.0   | %                 |  |  | 1.9              | %  |  |               | 5.5   | %  |              |  | 4.7   | %                 |  |  | 5.0              | %  |  |  | 6.7   | %  |  |  | 9.7   | % 
|Loss from equity method investment                                          |  |                            | 0.0   | %  |              |  | 0.0   | %                 |  |  | 0.0              | %  |  |               | 0.0   | %  |              |  | 1.9   | %                 |  |  | 0.6              | %  |  |  | 0.5   | %  |  |  | 15.2  | % 
|                                                                            |  |                            |       |    |              |  |       |                   |  |  |                  |    |  |               |       |    |              |  |       |                   |  |  |                  |    |  |  |       |    |  |  |       |   
|Net income (loss) from continuing operations                                |  |                            | (1.4  | )% |              |  | 19.5  | %                 |  |  | 24.3             | %  |  |               | 29.5  | %  |              |  | 13.4  | %                 |  |  | 23.9             | %  |  |  | 29.6  | %  |  |  | 13.9  | % 
|Net income (loss) from discontinued operations, net of tax                  |  |                            | 0.8   | %  |              |  | 2.4   | %                 |  |  | 57.8             | %  |  |               | 0.0   | %  |              |  | 0.0   | %                 |  |  | 0.0              | %  |  |  | 0.0   | %  |  |  | 0.0   | % 
|                                                                            |  |                            |       |    |              |  |       |                   |  |  |                  |    |  |               |       |    |              |  |       |                   |  |  |                  |    |  |  |       |    |  |  |       |   
|Net income (loss)                                                           |  |                            | (0.6  | )% |              |  | 21.9  | %                 |  |  | 82.1             | %  |  |               | 29.5  | %  |              |  | 13.4  | %                 |  |  | 23.9             | %  |  |  | 29.6  | %  |  |  | 13.9  | % 
|Net income (loss) attributable to noncontrolling interests                  |  |                            | 0.4   | %  |              |  | 1.2   | %                 |  |  | 0.0              | %  |  |               | 0.1   | %  |              |  | (0.5  | )%                |  |  | 0.1              | %  |  |  | 0.2   | %  |  |  | (0.6  | )%
|                                                                            |  |                            |       |    |              |  |       |                   |  |  |                  |    |  |               |       |    |              |  |       |                   |  |  |                  |    |  |  |       |    |  |  |       |   
|Net income (loss) attributable to Focus Media Holdings Limited shareholders |  |                            | (1.0  | )% |              |  | 20.7  | %                 |  |  | 82.1             | %  |  |               | 29.4  | %  |              |  | 13.9  | %                 |  |  | 23.8             | %  |  |  | 29.4  | %  |  |  | 14.5  | % 
|                                                                            |  |                            |       |    |              |  |       |                   |  |  |                  |    |  |               |       |    |              |  |       |                   |  |  |                  |    |  |  |       |    |  |  |       |   



|(1) | Advertising service revenue is presented net of sales taxes. The following table presents the unaudited quarterly percentage of sales taxes against gross revenues:
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|                               |  |                            |      |   |               |  |     |                    |  |  |                   |   |  |                |      |   |               |  |     |                    |  |  |                   |   |  |  |     |   |  |  |     |  
|------------------------------ |  | -------------------------- | ---- | - | ------------- |  | --- | ------------------ |  |  | ----------------- | - |  | -------------- | ---- | - | ------------- |  | --- | ------------------ |  |  | ----------------- | - |  |  | --- | - |  |  | --- | -
|                               |  | For the three months ended |     
|                               |  | March 31,
2010             |      |   | June 30, 2010 |  |     | September 30,
2010 |  |  | December 31,
2010 |   |  | March 31,
2011 |      |   | June 30, 2011 |  |     | September 30,
2011 |  |  | December 31,
2011 |  
|Sales taxes:                   |  |                            |      |   |               |  |     |                    |  |  |                   |   |  |                |      |   |               |  |     |                    |  |  |                   |   |  |  |     |   |  |  |     |  
|LCD display network            |  |                            | 10.4 | % |               |  | 9.4 | %                  |  |  | 7.5               | % |  |                | 9.3  | % |               |  | 9.5 | %                  |  |  | 9.4               | % |  |  | 9.6 | % |  |  | 9.3 | %
|LCD display network            |  |                            | 9.5  | % |               |  | 9.4 | %                  |  |  | 9.6               | % |  |                | 9.3  | % |               |  | 8.4 | %                  |  |  | 8.5               | % |  |  | 9.0 | % |  |  | 8.7 | %
|In-store network               |  |                            | 9.7  | % |               |  | 9.4 | %                  |  |  | 9.4               | % |  |                | 9.4  | % |               |  | 8.6 | %                  |  |  | 8.6               | % |  |  | 8.6 | % |  |  | 8.6 | %
|Poster frame network           |  |                            | 9.5  | % |               |  | 8.6 | %                  |  |  | 9.2               | % |  |                | 9.0  | % |               |  | 8.2 | %                  |  |  | 8.3               | % |  |  | 8.6 | % |  |  | 8.6 | %
|Movie theatre                  |  |                            | 6.0  | % |               |  | 9.1 | %                  |  |  | 14.4              | % |  |                | 10.0 | % |               |  | 5.7 | %                  |  |  | 5.4               | % |  |  | 4.6 | % |  |  | 4.0 | %
|Traditional outdoor billboards |  |                            | 2.1  | % |               |  | 1.5 | %                  |  |  | 2.1               | % |  |                | 2.3  | % |               |  | 0.9 | %                  |  |  | 1.8               | % |  |  | 1.9 | % |  |  | 2.4 | %
|                               |  |                            |      |   |               |  |     |                    |  |  |                   |   |  |                |      |   |               |  |     |                    |  |  |                   |   |  |  |     |   |  |  |     |  
|Total                          |  |                            | 8.7  | % |               |  | 8.6 | %                  |  |  | 9.2               | % |  |                | 8.7  | % |               |  | 7.7 | %                  |  |  | 7.9               | % |  |  | 8.2 | % |  |  | 7.9 | %
|                               |  |                            |      |   |               |  |     |                    |  |  |                   |   |  |                |      |   |               |  |     |                    |  |  |                   |   |  |  |     |   |  |  |     |  

A. Operating Results

Results of Operations

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

Total Revenues. Our total revenues from continuing operations increased
substantially from $516.3 million in 2010 to $792.6 million in 2011 due primarily to an increase in our advertising service revenue.



| |  |  | LCD Display Network.Advertising service revenue from our LCD display network increased 49.3% from $297.6 million in 2010 to $444.4 million in
2011. Our core businesss value proposition to advertisers is gaining momentum as the strength and effectiveness of our core business is becoming increasingly recognized by advertisers, especially the LCD display network. Meanwhile, the
aggressive ad price hikes of traditional TV broadcasters have presented exciting growth opportunities to us. As a result, the 49.3% increase is primarily contributed by: a) the average selling price we charged to our customers increased by
approximately 20%  30% in our tier-1 and tier-2 cities in 2011 compared to that of 2010; and b) the average utilization rate(1) of the LCD display network capacity has experienced an increase from 52% in 2010 to 56% in 2011.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Note (1): Average utilization rate = total advertising service revenue / the aggregate theoretical
revenue (i.e. standard price x no. of time slots for sale x average sales discount)



| |  |  | In-store Network. Advertising service revenue from our in-store network increased 49.2% to $56.4 million in 2011 from $37.8 million in 2010.
This increase was primarily attributable to a) the total number of hypermarkets sold, which our in-store network revenue derived from, increased by approximately 10.8% compared to that of 2010; and b) the average unit selling price per store for
hypermarkets increased by over 30% compared to that of 2010.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Poster Frame Network.Advertising service revenue from our poster frame network increased 52.1% from $121.9 million in 2010 to $185.4 million in
2011. Similar to the LCD display network, the advertising revenue derived from our poster frame network also rebounded in 2011 as compared to 2010, especially for those cyclical industries such as automobile, financial services and personal
products. As a result, the annual average utilization rate of our network capacity, increased to 45.0% in Top 4 cities in 2011 from 37.8% in 2010.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Movie Theatre Network.Advertising service revenue derived from movie theatre network increased by 180.7% from $18.1 million in 2010 to $50.8
million in 2011 as the effectiveness of this media is becoming increasingly recognized by our customers, especially for those automobile, telecom, diary and personal products customers.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Traditional Outdoor Billboard.Advertising service revenue derived from traditional outdoor billboard increased 35.9% from $40.9 million in 2010
to $55.6 million in 2011. This is partially attributable to 11.4% of our revenue contributed by the four newly acquired entities in the traditional outdoor billboards advertising business, as well as the expansion of the traditional outdoor
billboards network we operate.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Cost of Revenues. Our cost of revenues increased from $221.7 million in 2010
to $289.6 million in 2011.



| |  |  | Cost of revenues  LCD display network.Our net advertising service cost for LCD display network increased from $67.5 million in 2010 to
$85.8 million in 2011. This is primarily attributable to: a) the rental cost increased by $7.8 million due to media platform development in 2011 and the incremental average rental cost; and b) the location maintenance, utility and transportation,
salary and benefits increased by approximately $8.5 million as compared to that of 2010.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cost of revenues In-store network.We incurred $20.6 million in advertising service cost for our in-store network in 2011 as
compared to $23.4 million in 2010. The decrease is primarily attributable to depreciation expenses for equipment installed in in-store network which decreased by approximately $1.9 million as the equipment that we installed in 2006 became fully
depreciated in 2010.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cost of revenues  Poster frame network.Our advertising service cost for our poster frame network increased to $110.4 million in 2011
compared to $84.5 million in 2010. The incremental cost of revenues are mainly attributable to: a) rental cost increased by $21.5 million, which is a result of the incremental number of frames installed and the average rental cost; and b) other
costs, including salary and benefits and, location maintenance costs, which increased by approximately $4.4 million.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cost of revenues  Movie theater Network. In 2011, we incurred $25.8 million advertising service cost in movie theatre network,
which mainly represents the advertising time slot leasing costs charged by movie operators, an increase of 87.0% from $13.8 million in 2010 due to significant expansion of the movie theatre network.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cost of revenues  traditional outdoor billboards. The advertising service cost incurred for traditional outdoor billboards in 2011 was
$47.1 million, an increase of 45.4% from $32.4 million in 2010 due to expansion of traditional outdoor billboards network and the additional approximately $4.3 million costs associated with the four entities acquired in 2011.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Gross Profit. As a result of the foregoing, our gross profit increased by 70.7% from $294.6
million in 2010 to $503.0 million in 2011. Our overall gross margin increased from 57.1% in 2010 to 63.5% in 2011 primarily due to increasing utilization rate as well as average selling price in our core business (i.e. LCD display network, in-store
network, poster frame network, and movie theater network) which led to a higher margin as the advertising service costs for these core businesses are generally not variable along with the fluctuation of revenue.



|                               |  |                                                    |         |  |              |  |      |      |  |   |              |  |  |   |      |   |              |   |         |  |  |  |      |  
|------------------------------ |  | -------------------------------------------------- | ------- |  | ------------ |  | ---- | ---- |  | - | ------------ |  |  | - | ---- | - | ------------ | - | ------- |  |  |  | ---- | -
|                               |  | For the year ended December 31,                    |        
|                               |  | 2009                                               |         |  | 2010         |  |      | 2011 | 
|Gross profit:                  |  | $                                                  |         |  | Gross margin |  |      | $    |  |   | Gross margin |  |  | $ |      |   | Gross margin |  
|                               |  | (in thousands of U.S. dollars, except percentages) |        
|LCD display network            |  | $                                                  | 132,381 |  |              |  | 63.4 | %    |  | $ | 230,129      |  |  |   | 77.3 | % |              | $ | 358,518 |  |  |  | 80.7 | %
|In-store network               |  |                                                    | 6,176   |  |              |  | 20.4 | %    |  |   | 14,345       |  |  |   | 38.0 | % |              |   | 35,792  |  |  |  | 63.5 | %
|Poster frame network           |  |                                                    | 3,561   |  |              |  | 3.6  | %    |  |   | 37,406       |  |  |   | 30.7 | % |              |   | 75,079  |  |  |  | 40.5 | %
|Movie theater                  |  |                                                    | 2,373   |  |              |  | 25.1 | %    |  |   | 4,246        |  |  |   | 23.5 | % |              |   | 25,082  |  |  |  | 49.3 | %
|Traditional outdoor billboards |  |                                                    | 11,599  |  |              |  | 23.4 | %    |  |   | 8,499        |  |  |   | 20.8 | % |              |   | 8,505   |  |  |  | 15.3 | %
|                               |  |                                                    |         |  |              |  |      |      |  |   |              |  |  |   |      |   |              |   |         |  |  |  |      |  
|Total                          |  | $                                                  | 156,090 |  |              |  | 39.3 | %    |  | $ | 294,625      |  |  |   | 57.1 | % |              |   | 502,976 |  |  |  | 63.5 | %
|                               |  |                                                    |         |  |              |  |      |      |  |   |              |  |  |   |      |   |              |   |         |  |  |  |      |  

In the future, our gross margin may fluctuate depending on the respective financial performance and stage
of development of each of our networks as well as the relative contribution to our revenues and costs of each network.

Operating Expenses. Our operating expenses increased significantly from $175.1 million in 2010 to $258.6 million in 2011.

General and Administrative. General and administrative expenses increased from $79.8 million in 2010 to $127.0 million
in 2011. This was mainly due to: a) increase of bad debt expenses by $15.5 million as compared to that of 2010, which was primarily attributable to an additional 30%-100% specific provision for our e-commerce and group-buying customers; b) increase
of share-based compensation expense by approximately $16.2 million, as we granted 15,000,000 and 17,711,500 restricted shares in December 2010 and November 2011, respectively, which resulted in higher charges in 2011 as compared to 2010; and c)
increase of tax planning related cost and legal fees and payments by approximately $9.4 million in 2011 compared to those in 2010.

Selling and Marketing. Selling and marketing expenses increased from $103.7 million in 2010 to $147.7 million in 2011. This was mainly due to: a) a 50% increase in net revenues from 2010 to 2011;
and b) the increase in the marketing and promotional expenses.

Impairment Loss. We incurred $5.7 million of goodwill
impairment loss in 2010, which was mostly attributable to the poster frame network. We did not incur goodwill impairment loss in 2011.

Other operating expenses (income) net. In 2011, we had operating income of $16.1 million as compared to net other operating income of $14.1 million in 2010. The increase was mainly attributable to
increase of government subsidies of $4.1 million compared to that in 2010, net of fixed assets disposal charge in $1.6 million due to interactive screen upgrade in 2011.



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Income from Operations. As a result of the foregoing, income from operations
increased from $119.6 million in 2010 to $243.7 million in 2011.

Interest income. Interest income increased
from $7.3 million in 2010 to $15.5 million in 2011, primarily due to the increase in our average balance of cash and cash equivalents, restricted cash and short term investments during 2011.

Income from continuing operations before income tax. As a result of the foregoing, income from continuing operations before
income tax increased from $125.5 million in 2010 to $259.2 million in 2011.

Income Taxes. Our income taxes were
$54.8 million in 2011 compared to $22.3 million in 2010. The increase in income tax in 2011 compared to 2010 was primarily due to the increase in taxable income in 2011. In 2011, the income taxes included a $6.0 million withholding dividend tax
provision for the $60.0 million dividends to be received from our PRC subsidiaries.

Loss from equity method
investee. We invested in VisionChina Media Inc. (VisionChina) for a total cash consideration of $61 million for an effective stake of 15%, the acquisition was closed on January 14, 2011. As a result of the severity and duration
of the share price decline of VisionChina, an impairment analysis was performed on the carrying amount of the investment in VisionChina for the year ended December 31, 2011 and the difference between the carrying amount and the market value of $19.0
million basing on the closing price of $1.24 at December 30, 2011 was determined to be other-than-temporary. Accordingly, an impairment loss of $38.3 million was recorded. We account for the investment in VisionChina using the equity method of
accounting. In 2011, the loss from equity method investee, including the impact of the impairment loss, was $43.6 million.

Net income from continuing operations. As a result of the foregoing, the net income from continuing operations increased
from $103.2 million in 2010 to $160.8 million in 2011.

Net income from discontinued operations, net of tax. Net
income from discontinued operations in 2010 of $83.1 million mainly represented the gain on disposal of Allyes in the amount of $79.0 million and the net income of Allyes from January 1, 2010 till the date our interest in it was disposed. There
was no net income from discontinued operations in 2011.

Net income attributable to Focus Media Holding Limited.
As a result of the foregoing and a net loss of $1.9 million attributable to a non- controlling interests in our subsidiaries, net income attributable to Focus Media Holding Limited was $162.7 million in 2011 as compared to $184.3 million in 2010.

Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

Total Revenues. Our total revenues from continuing operations increased substantially from $397.2 million in 2009 to $516.3
million in 2010 due primarily to an increase in our advertising service revenue.



| |  |  | LCD Display Network.Advertising service revenue from our LCD display network increased 42.5% from $208.8 million in 2009 to $297.6 million in
2010. 2010 was a year of strong and robust recovery in the advertising market compared to that of 2009. Our core businesss value proposition to advertisers is gaining momentum as the strength and effectiveness of our core business is becoming
increasingly recognized by advertisers, especially the LCD display network. Meanwhile, the aggressive ad price hikes of traditional TV broadcasters have presented exciting growth opportunities to us. As a result, the 42.6% increase is primarily
contributed by: a) the average selling price we charged to our customers increased by approximately 30% in our tier-1 cities and 10%  15% in our tier-2 cities in 2010 compared to that of 2009; and b) the average utilization rate(1) of the LCD
display network capacity has experienced a significant increase from 46% in 2009 to 52% in 2010.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Note
(1): Average utilization rate = total advertising service revenue / the aggregate theoretical revenue (i.e. standard price x no. of time slots for sale x average sales discount)



| |  |  | In-store Network.Advertising service revenue from our in-store network increased 24.8% to $37.8 million in 2010 from $30.3 million in 2009.
This increase was primarily attributable to a) the average selling price we charged to our customer increased by approximately 10% in 2010 compared to that of 2009; and b) we have expanded our in-store network since Wal-Mart has been added to our
in-store network in April 2010;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Poster Frame Network.Advertising service revenue from our poster frame network increased 23.1% from $99.0 million in 2009 to $121.9 million in
2010. Similar to the LCD display network, the advertising revenue derived from our poster frame network also rebounded in 2010 as compared to 2009, especially for those cyclical industries such as automobile, financial services and personal
products. As a result, the annual average utilization rate of our network capacity, increased from 29% in Top 4 cities in 2009 to 37% in 2010.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Movie Theatre Network. Advertising service revenue derived from movie theatre increased by 90.5% from $9.5 million in 2009 to $18.1 million in
2010 as the effectiveness of this media is becoming increasingly recognized by our customers, especially for those engaged in automobile, telecom, diary and personal products.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Traditional Outdoor Billboards.Advertising service revenue derived from traditional outdoor billboard declined 17.5% from $49.6 million in 2009
to $40.9 million in 2010. This is primarily attributable to our disposition of a subsidiary in the traditional outdoor billboard business in April 2009.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cost of Revenues. Our cost of revenues declined from $241.1 million in 2009 to $221.7 million in 2010.



| |  |  | Cost of revenues  LCD display network.Our net advertising service cost for LCD display network declined from $76.4 million in 2009 to
$67.5 million in 2010. As discussed in page 70, Impairment of long-lived assets in 2009, the cost of revenues in 2009 included an impairment loss of equipment and intangible assets associated with the boat-based advertising LED
platform on the Huangpu River of $9.5 million and $3.2 million, respectively. Excluding the $12.7 million impairment loss in 2009, the cost of revenues of LCD display network would have increased from $63.4 million in 2009 to $67.4 million in 2010,
which is primarily attributable to: a) the cost of rental, location maintenance, utility and transportation, salary and benefits increased by approximately $9.5 million as compared to that of 2009; and b) our not incurring any impairment in 2010,
compared to our impairment of $12.6 million of fixed assets and intangible assets reflected in our cost of revenues for 2009.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cost of revenues In-store network.We incurred $23.4 million in advertising service cost for our in-store network in 2010 as
compared to$24.2 million in 2009. The depreciation expenses for equipment installed in in-store network decreased by approximately $1.0 million as the equipment that we installed in 2005 became fully depreciated in 2010.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cost of revenues  Poster frame network.Our advertising service cost for our poster frame network declined to $84.5 million in 2010
compared to $95.4 million in 2009. The $95.4 million costs incurred in 2009 included an impairment loss of $27.0 million, which represented the excess of carrying amount of the digital frames over their fair value that we determined in the third
quarter of 2009.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Excluding the impairment loss, the cost of revenues incurred in 2010 would have increased by $16 million as compared to that of 2009, or $68.4 million.
The incremental cost of revenues are mainly attributable to: a) rental cost increased by $11.8 million, which is led by incremental number of frames installed and the average rental cost; and b) other costs, including salary and benefits and,
location maintenance costs, which increased by approximately $4.9 million.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cost of revenues  Movie theater network. In 2010, we incurred $13.8 million advertising service cost in movie theatre network, which
mainly represents the advertising time slot leasing costs charged by movie operators, an increase of 96.1% from $7.1 million in 2009 due to significant expansion of the movie theatre network.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cost of revenues  Traditional outdoor billboards. The advertising service cost incurred for traditional outdoor billboards in 2010 was
$32.4 million, a 14.8% decline from $38.0 million in 2009. The decline is primarily due to our disposition of a subsidiary in the traditional outdoor billboard business.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Gross Profit. As a result of the foregoing, our gross profit increased by 88.7% from $156.1 million in 2009 to $294.6
million in 2010. Our overall gross margin increased from 39.3% in 2009 to 57.1% in 2010 primarily due to: a) increasing utilization rate as well as average selling price in our core business (i.e. LCD display network, in-store network and poster
frame network) which led to a higher margin as the advertising service costs for these core businesses are rather fixed; and b) there was no impairment charges for long lived assets in 2010 whereas in 2009, impairment charges included in the cost of
revenues of our LCD display network and poster frame network amounted to $12.7 million and $27.0 million, respectively.

In
the future, our gross margin may fluctuate depending on the respective financial performance and stage of development of each of our networks as well as the relative contribution to our revenues and costs of each network.

Operating Expenses. Our operating expenses declined significantly from $245.4 million in 2009 to $175.1 million in 2010.
The decline in operating expenses was primarily due to less impairment loss and other operating expenses we incurred in 2010 compared to 2009.

General and Administrative. General and administrative expenses declined from $88.8 million in 2009 to $79.8 million in 2010. This was mainly due to: a) decrease of bad debt expenses by
approximately $28.6 million which was primarily attributable to reversal of bad debt provisions we made for over-due accounts receivable as of December 31, 2009 and strong collection of accounts receivable during 2010 under favorable macro-
economic conditions; and b) increase of share-based compensation expense by approximately $14.2 million, as we granted over 36,000,000 restricted shares in September 30, 2009, which resulted in higher amortization charges in 2010 as compared to
2009.

Selling and Marketing. Selling and marketing expenses increased from $79.8 million in 2009 to $103.7 million in
2010. This was mainly due to: a) a 30% increase in net revenues from 2009 to 2010; and b) the increase in the percentage of marketing and promotional expenses against the net revenue by approximately 3%.

Impairment Loss. We incurred $5.7 million of goodwill impairment loss in 2010, which was mostly attributable to the poster frame
network. We incurred a $63.6 million goodwill impairment loss in 2009, which was mostly attributable to payment of contingent consideration to original owners of the subsidiaries acquired by us prior to 2009. These subsidiaries mostly belong to the
poster frame network and traditional outdoor billboard business.



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Other operating expenses (income) net. In 2010, we had operating income of $14.1
million, primarily consisting of government subsidies, as compared to net other operating expense of $13.1 million in 2009, which primarily consisted of a loss of $7.4 million that we incurred an disposal of some subsidiaries in our poster frame and
traditional outdoor billboard businesses, impairment of other long lived assets and penalty for termination of contract in the amount of $16.6 million, partially offset by government subsidy of $11.1 million.

Loss from Operations. As a result of the foregoing, we had a gain from operations of $119.6 million in 2010 compared to a
loss from operations of $89.3 million in 2009.

Interest income. Interest income increased from $4.9 million in
2009 to $7.3 million in 2010, primarily due to the increase in our average balance of cash and cash equivalents during 2010.

Income from continuing operations before income tax. As a result of the foregoing, we had a gain from continuing operations
before income tax of $125.5 million in 2010, compared to a loss from continuing operations before income tax of $84.3 million in 2009.

Income Taxes. Our income taxes were $22.3 million in 2010 compared to $13.8 million in 2009. The increase in income tax in 2010 compared to 2009 was primarily due to the increase in taxable
income in 2010. In 2010, we also benefited from a lower effective tax rate, as one of our PRC subsidiaries was granted HNTE status and thus was exempted from enterprise income tax in 2010.

Net income (loss) from continuing operations. As a result of the foregoing, we had a net income from continuing operations
of $103.2 million in 2010 as compared to a net loss from continuing operations of $98.1 million in 2009.

Net income
(loss) from discontinued operations, net of tax. Net income from discontinued operations in 2010 of $83.1 million mainly represented the gain on disposal of Allyes in the amount of $79.0 million and the net income of Allyes from
January 1, 2010 till the date our interest in it was disposed. The net loss from discontinued operations of $111.6 million in 2009 mostly represented the net loss generated by our subsidiaries in the Internet advertising business, loss from
disposal of some of these subsidiaries in 2009 as well as impairment charges incurred.

Net income (loss) attributable
to Focus Media Holding Limited. As a result of the foregoing and a net income of $2.0 million attributable to a non- controlling interests in our subsidiaries, net income attributable to Focus Media Holding Limited was $184.3 million in 2010
as compared to a net loss of $213.3 million in 2009.

Liquidity and Capital Resources

Cash Flows and Working Capital

To date, we have financed our operations primarily through cash generated from operating activities and sales of equity in private and public transactions. As of December 31, 2011, we had approximately
$331.2 million in cash and cash equivalents. In June and October 2011, we announced our plan to expand the size of the share-repurchase program to purchase up to $450 million and $650 million worth of issued and outstanding ADRs, respectively. In
January 2012, we also announced that we are implementing a policy starting from 2012 to issue a recurring dividend with payments expected to equal approximately 25% of our annual non-GAAP net income of the preceding fiscal year. The dividends will
be paid out on a quarterly basis in the calendar year to shareholders of record as of March 31, June 30, September 30 and December 31 respectively. The dividend payments will commence in 2012 in respect of our non-GAAP net income for 2011. Starting
from 2012, we will consider up to an additional 30% of our annual non-GAAP net income of the preceding fiscal year as additional funds that may be used, at our discretion, to increase the dividend payment or the size of the our share repurchase
program in effect at that time. The dividend and share repurchase funding policies will be reviewed by the board and management on an annual basis.

Under PRC laws and regulations, each of our PRC operating subsidiaries is also required to set aside a portion of its net income each year to fund specific reserve funds. These reserves are not
distributable as cash dividends. In particular, subject to certain cumulative limits, the statutory general reserve fund requires annual appropriations of 10% of after-tax income to be set aside prior to payment of dividends. Our WFOE operating
subsidiaries have allocated annual after-tax profits to each of their respective reserve funds in compliance with these laws and regulations. For the years ended December 31, 2009, 2010 and 2011, we made total appropriations of $10,765,735,
$21,211,346, and $10,214,705 respectively.



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Further, as a result of PRC laws and regulations, our PRC operating subsidiaries and our PRC
operating affiliates are restricted in their ability to transfer a portion of their net assets to us whether in the form of dividends, loans or advances. As of December 31, 2011, the amount of these restricted portions was approximately $234.1
million. The assets attributable to our PRC operating affiliates primarily relate to operations conducted early in our corporate history in light of limitations on foreign ownership in the advertising industry. During that period, we conducted
significant acquisitions through our PRC operating affiliates. As of December 31, 2011, the assets associated with such affiliates totaled $461.7 million, of which goodwill associated with such acquisitions was $404.6 million. Subsequently,
over time, our indirect PRC operating subsidiaries obtained the requisite licenses to operate in the advertising industry. Accordingly, we gradually shifted our business and most of the operating contracts for our business, including certain
revenue-generating advertising contracts, to entities in which we hold equity interests, our indirect PRC operating subsidiaries. As a result, the PRC operating affiliates now account for 1.5% of our revenue and, excluding goodwill, assets of our
PRC operating affiliates account for 3.3% of our total assets. This has allowed us to significantly reduce our exposure to risks associated with our PRC operating affiliate structure. Our PRC operating affiliates have historically not paid dividends
to us from accumulated profits, as we do not own any direct equity interests in these operating affiliates, and we do not intend for our operating affiliates to pay dividends to us in the foreseeable future, See Risk Factors  We may rely
principally on dividends and other distributions on equity paid by our WFOE operating subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our operating subsidiary to pay dividends to us could
have a material adverse effect on our ability to conduct our business.

We expect to require cash in order to fund our
ongoing business needs, particularly the location costs connected with the placement of our displays, to fund the ongoing expansion of our network and for payments in connection with our acquisitions. Other possible cash needs may include the
upgrading of technology on our network as well as any payment of claims that could be made against us. We have not encountered any difficulties in meeting our current cash needs.

The following table shows our cash flows with respect to operating activities, investing activities and financing activities in 2009,
2010 and 2011:



|                                                     |  |                                 |          |   |      |   |          |      |  |   |          |  
|---------------------------------------------------- |  | ------------------------------- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                     |  | For the year ended December 31, |         
|                                                     |  | 2009                            |          |   | 2010 |   |          | 2011 | 
|Net cash provided by operating activities            |  | $                               | 160,723  |   |      | $ | 185,222  |      |  | $ | 280,158  |  
|Net cash used in investing activities                |  |                                 | (158,248 | ) |      |   | (90,602  | )    |  |   | (383,881 | )
|Net cash provided by (used in) financing activities  |  |                                 | 144,499  |   |      |   | (222,600 | )    |  |   | (39,708  | )
|Effect of exchange rate changes                      |  |                                 | (1,730   | ) |      |   | 14,297   |      |  |   | 20,174   |  
|                                                     |  |                                 |          |   |      |   |          |      |  |   |          |  
|                                                     |  |                                 |         
|Net increase (decrease) in cash and cash equivalents |  | $                               | 145,244  |   |      | $ | (113,683 | )    |  | $ | (123,257 | )
|                                                     |  |                                 |          |   |      |   |          |      |  |   |          |  

Cash provided by operating activities was $280.2million in 2011 compared to $185.2 million in 2010. This
increase was primarily attributable to improved cash collection of our accounts receivables in 2011. Days outstanding in accounts receivable for 2011 (defined as 365 days multiplied by the ending accounts receivable balance and divided by gross
revenue) improved to 86 days from 100 days for 2010. For a detailed reconciliation of our net income to net cash provided by operating activities, please refer to our consolidated cash flow statements contained in ITEM 18. Generally, payment of
rental related expenses, income and other taxes and operating accrued liabilities, such as selling expenses, will have a material impact on our operating cash flow.

We had net cash used in investing activities of $383.9 million in 2011, primarily consisting of the following: (1) increase in Renminbi restricted term deposits by approximately $199.3 million which
serves as collateral for a stand-by letter of credit issued on our behalf in connection with our $200 million US dollar bank loan facilities; (2) $61.0 million was paid to invest in VisionChina for an effective stake of 15%; (3) net cash
paid for short-term investments amounting to $79.4 million; (4) $13.2 million paid to acquire subsidiaries, net of cash acquired and earn-out payment for previous acquisitions; (5) $38.9 million paid to purchase equipment and other
long-term assets. Partially offset by (6) $7.3 million received from disposition of Allyes and $0.7 million proceeds from disposition of equipment.

We had net cash used in investing activities of $90.6 million in 2010, which primarily consisting of the following: (1) net cash paid for short-term investments amounting to $108.3 million;
(2) $40.8 million paid to acquire subsidiaries and earn-out payments for previous acquisitions, net of cash acquired; (3) $18.7 million paid to purchase equipment and other long-term assets. Partially offset by (4) $76.1 million (net
of cash disposed) received from disposition of Allyes and $0.5 million proceeds from disposition of equipment.

We had $39.7
million net cash outflow from financing activities in 2011, primarily consisted of $213.4 million share repurchase, $0.4 million repayment to non-controlling interest shareholders, offset by net cash received from bank loan amounting to $171.0
million and $3.1 million proceeds from issuance of ordinary shares pursuant to share option plans. We had $222.6 million net cash outflow from financing activities in 2010, which primarily consisted of $237.2 million in share repurchases offset by
$3.6 million proceeds from issuance of ordinary shares pursuant to share option plans as well as a $11.0 million proceeds from the Allyes MBO plan.



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Our objective is to maintain the safety and liquidity of our cash. Therefore we intend to
keep our cash and cash equivalents in bank deposits and other risk-free short-term investments. We believe that our current cash and cash equivalents, cash flow from operations, including for working capital and capital expenditures, for the
foreseeable future. However, as a result of the foreign currency controls imposed by the PRC government, we may not be able to convert the cash and cash equivalents generated from our operations, which is mainly denominated in Renminbi, into US
dollars to fulfill the cash needs for our share repurchase program as frequent as needed. The additional cash needs may also include costs associated with the expansion of our network, such as the purchase of flat-panel digital displays, and
increased location cost, and a $15.5 million payment of contingent considerations related to the acquisition in our outdoor billboard business, as well as possible acquisitions of our regional distributors. We are also required under PRC law to set
aside 10% of our after-tax profits into a general reserve fund. We expect that revenues from operation of our advertising network will be sufficient to cover any such obligations. We may, however, require additional cash resources due to changed
business conditions or other future developments. If these sources are insufficient to satisfy our cash requirements, we may seek to sell debt securities or additional equity securities or obtain a credit facility. The sale of convertible debt
securities or additional equity securities could result in additional dilution to our shareholders. The incurrence of indebtedness would result in debt service obligations and could result in operating and financial covenants that would restrict our
operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.

From
time to time, we evaluate possible investments, acquisitions or divestments and may, if a suitable opportunity arises, make an investment or acquisition or conduct a divestment.

Transactions with Related Parties

Our transactions with related parties
have been conducted on arms length terms. See Item 7. Major Shareholders and Related Party Transactions  B. Related Party Transactions and Note 18 to our audited consolidated financial statements included in this annual
report.

Capital Expenditures

The following table sets forth our historical capital expenditures for the periods indicated. Actual future capital expenditures may differ from the amounts indicated below.



|                          |  |                                 |        |  |      |   |        |      |  |   |        | 
|------------------------- |  | ------------------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                          |  | For the year ended December 31, |       
|                          |  | 2009                            |        |  | 2010 |   |        | 2011 | 
|                          |  | (in thousands of U.S. dollars)  |       
|                          |  |                                 |       
|Total capital expenditure |  | $                               | 10,655 |  |      | $ | 18,693 |      |  | $ | 38,918 | 

Our capital expenditures were made primarily to acquire and upgrade the flat-panel digital displays and
digital frames for our advertising network. Our capital expenditures are primarily funded by net cash provided from operating activities. We expect our capital expenditures in 2012, in an amount of approximately $40 million, to primarily consist of
upgrading our flat-panel digital displays as we continue to expand our commercial location network, in-store network and poster frame network we also plan to launch our next generation of screens in approximately 20 cities in the second half of
2012. We believe these next generation screens will equip us with capabilities to provide interactive, measurable, location-based search services to advertisers, which we believe is of great importance for our next era of growth. We believe that we
will be able to fund these upgrades and equipment purchases through the revenues we generate, and do not anticipate that these obligations will have a material impact on our liquidity needs.

Restricted Net Assets

Relevant PRC laws and regulations permit payments of
dividends by our PRC subsidiaries only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. In addition, PRC laws and regulations require that annual appropriations of 10% of after-tax
income for our general reserve fund should be set aside prior to payment of dividends. As a result of these PRC laws and regulations, our PRC subsidiaries and our affiliated PRC entities are restricted in their ability to transfer a portion of their
net assets to us whether in the form of dividends, loans or advances. As of December 31, 2011, the amount of our restricted net assets was approximately $256.0 million.



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B. Research, Development, Patents and Licenses, etc.

Research and Development

We do not incur significant research and development expenditures.

Patents and Trademarks

We believe that the value of our advertising network derives from its effectiveness in reaching a large number of
consumers with higher-than-average disposable incomes in urban areas. To a great extent, our business model does not rely on advanced or sophisticated technology or on proprietary trade secrets because our flat-panel digital displays are assembled
with components purchased in off-the-shelf form from wholesale distributors. We endeavor to protect certain of the designs and operating software we use in each generation of our flat-panel digital displays. We currently hold design patents for our
new model of flat-panel digital display and our software. We have the right to use several trademarks relating to the Focus Media brand name in China, South Korea, Taiwan, Japan, Singapore, India and Indonesia. We also have the right to
use several trademarks relating to the Framedia brand name and chuanzhi (or OOH) brand name in China.

We do not know if our trademark applications will lead to registered trademarks with the scope of the goods and services we seek, if at all, or whether any trademark we have registered or may receive
registration in the future will be challenged or invalidated. See Item 3.D Risk Factor  Risks Relating to Our Business and Industry  Unauthorized use of our intellectual property by third parties, and the expenses incurred in
protecting our intellectual property rights, may adversely affect our business. We have also obtained copyright registration for a number of our software. We will continue to assess appropriate occasions for seeking trademark, copyright and other
intellectual property protections for those aspects of our business that we believe provide significant competitive advantages.

C. Trend
Information

Please refer to  Overview for a discussion of the most significant recent trends in our
production, sales, costs and selling prices. In addition, please refer to discussions included in this Item for a discussion of known trends, uncertainties, demands, commitments or events that we believe are reasonably likely to have a material
effect on our net operating revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial
condition.

D. Off-balance Sheet Arrangements

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are
indexed to our own shares and classified as shareholders equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated
entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing,
hedging or research and development services with us.



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E. Tabular Disclosure of Contractual Obligations

The following table sets forth our contractual obligations and commitments with definitive payment terms on a consolidated basis which
will require significant cash outlays in the future as of December 31, 2011.



|                                                         |  |                                |         |  |      |   |         |      |  |   |        |  |  |      |        |  |                    |   |        |  |  |   |        | 
|-------------------------------------------------------- |  | ------------------------------ | ------- |  | ---- | - | ------- | ---- |  | - | ------ |  |  | ---- | ------ |  | ------------------ | - | ------ |  |  | - | ------ | 
|                                                         |  | Payments due December 31,      |        
|                                                         |  | TOTAL                          |         |  | 2012 |   |         | 2013 |  |   | 2014   |  |  | 2015 |        |  | 2016 andThereafter |  
|                                                         |  | (in thousands of U.S. dollars) |        
|Display and poster frame placement agreement obligations |  | $                              | 240,545 |  |      | $ | 128,573 |      |  | $ | 55,803 |  |  | $    | 26,421 |  |                    | $ | 15,911 |  |  | $ | 13,837 | 
|Office premise lease obligations                         |  |                                | 15,007  |  |      |   | 5,264   |      |  |   | 5,023  |  |  |      | 2,598  |  |                    |   | 987    |  |  |   | 1,135  | 
|Equipment purchase obligations                           |  |                                | 13,594  |  |      |   | 13,594  |      |  |   |       |  |  |      |       |  |                    |   |       |  |  |   |       | 
|Bank loan repayment obligations                          |  |                                | 171,000 |  |      |   | 100,000 |      |  |   | 17,750 |  |  |      | 53,250 |  |                    |   |       |  |  |   |       | 
|                                                         |  |                                |         |  |      |   |         |      |  |   |        |  |  |      |        |  |                    |   |        |  |  |   |        | 
|Total contractual obligations                            |  | $                              | 440,146 |  |      | $ | 247,431 |      |  | $ | 78,576 |  |  | $    | 82,269 |  |                    | $ | 16,898 |  |  | $ | 14,972 | 
|                                                         |  |                                |         |  |      |   |         |      |  |   |        |  |  |      |        |  |                    |   |        |  |  |   |        | 

A portion of the purchase consideration for certain acquisitions we made, such as Framedia and
traditional outdoor billboards, is contingent and based on earnings targets for two to three years subsequent to the acquisition, subject further to the attainment of certain operational targets. The maximum amount of such contingent payments for
2012 and thereafter is $15.5 million in aggregate. As of December 31, 2011, other than such contingent earn-out payments and potential liabilities relating to litigation in which we are involved described under  Legal
Proceedings, we had no other indebtedness, material contingent liabilities, or material mortgages or liens. We intend to meet our future funding needs primarily through net cash provided from operating activities.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management

The following table sets forth certain
information relating to our directors and executive officers. The business address of each of our directors and executive officers is Unit No.1, 20th Floor, The Centrium, 60 Wyndham Street, Central, Hong Kong.



|                     |  |     |  |                                                               
|-------------------- |  | --- |  | --------------------------------------------------------------
|Name                 |  | Age |  | Position                                                      
|Jason Nanchun Jiang  |  | 39  |  | Chief Executive Officer and Chairman of the Board of Directors
|Fumin Zhuo(1)        |  | 60  |  | Director                                                      
|Neil Nanpeng Shen(2) |  | 44  |  | Director                                                      
|Charles Cao          |  | 46  |  | Director                                                      
|Daqing Qi(3)         |  | 49  |  | Director                                                      
|David Ying Zhang(4)  |  | 38  |  | Director                                                      
|Ying Wu(5)           |  | 53  |  | Director                                                      
|Kit Leong Low        |  | 41  |  | Chief Financial Officer                                       



|(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, our founder, has served as the chairman of our board of directors since May 2003 and our chief executive officer from May 2003 to March 2008. Mr. Jiang resumed his
position as chief executive officer in January 2009. Starting in 2003, Mr. Jiang was general manager of Aiqi Advertising, an advertising company founded by his immediate family members in 1997 which was renamed Focus Media Advertisement in May
2003 in connection with the establishment of our current business operations. In December 2003, Mr. Jiang was selected by China News Publishers Media magazine as one of the Media People of the Year. In September 2003,
Mr. Jiang was selected by the Television and Newspaper Committees of the China Advertising Commission as one of its contemporary outstanding advertising media personalities. Mr. Jiang received a Bachelor of Arts degree in
Chinese language and literature from Huadong Normal University in 1995.

Fumin Zhuohas served as our director
since December 2004 and has more than 27 years of experience in investment and corporate management. Mr. Zhuo has also served as a general partner in SIG Capital Limited since July 2005. Prior to this, Mr. Zhuo served as chairman and chief
executive officer of Vertex China Investment Company (VCI), a company concentrating in investments in the Greater China region, since he joined the fund in July 2002. From 1995 to July 2002, Mr. Zhuo was chief executive officer of Shanghai
Industrial Holding Ltd. and chairman of SIIC Medical Science & Technology (Group). Prior to this, starting in 1987, Mr. Zhuo served as chief assistant officer of the Shanghai Economic System Reform Committee. Mr. Zhuo has
extensive experience in venture capital fund formation, mergers and acquisitions, and investment management. Mr. Zhuo graduated from Shanghai Jiaotong Universitys Electrical Engineering School with a degree in enterprise management and
also holds a Masters degree in economics from Fudan University.



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Neil Nanpeng Shenhas served as our director since December 2004.
Mr. Shen is the founding managing partner of Sequoia Capital China, or Sequoia China, a China-focused venture capital fund which was established in August 2005. Prior to founding Sequoia China, Mr. Shen was president and chief financial
officer of Ctrip.com International Limited, or Ctrip, a Nasdaq-listed on-line travel services company he co-founded and for which he continues to serve as a director. Prior to founding Ctrip, Mr. Shen worked for more than eight years in the
investment banking industry in New York and Hong Kong. He was a director at Deutsche Bank Hong Kong where he worked from 1996 to 1999. Prior to 1996, he worked at Chemical Bank, Lehman Brothers and Citibank in various investment banking positions.
Mr. Shen is also co-founder and co-chairman of Home Inns & Hotels Management (Hong Kong) Limited. Mr. Shen received his Masters degree from the School of Management at Yale University and his Bachelors degree from
Shanghai Jiaotong University.

Charles Caowas appointed as our director in November 2005 to replace Ted Tak Dee
Sun who passed away in September 2005. Mr. Cao is president and chief executive officer of SINA Corporation, an online media company listed on the Nasdaq Global Market. Before he joined SINA Corporation in September 1999, Mr. Cao served as
an experienced audit manager with PricewaterhouseCoopers LLP, providing auditing and business consulting services for high tech companies in Silicon Valley, California. Mr. Cao received his master of professional accounting from University of
Texas at Austin. He also holds an MA degree in journalism from University of Oklahoma and a BA degree in Journalism from Fudan University in Shanghai, China. Mr. Cao is a certified public accountant and a member of the American Institute of
Certified Public Accountants.

Daqing Qiwas appointed as our director on February 28, 2006 upon the
closing of our acquisition of Target Media. Professor Qi is professor of accounting and associate dean of the Cheong Kong Graduate School of Business, where he has taught since 2002. From 1996 until 2002, Professor Qi was an associate professor in
the School of Accountancy at the Chinese University of Hong Kong. Professor Qi also has extensive experience in providing executive training and consulting services in accounting and corporate finance to government departments and private companies,
including the Ministry of Information Industries of the Peoples Republic of China, the Shanghai Municipal Government, China Mobile, China Unicom, China Telecom, China Netcom, Nokia and Ericsson. Professor Qi also serves on the board of
directors of Sohu.com, a Nasdaq-listed company that provides online services in China. Professor Qi holds a B.S. degree in biophysics and a B.A. degree in journalism from Fudan University, an MBA degree from the University of Hawaii Manoa with a
concentration in accounting and finance and a Ph.D. degree in accounting from the Eli Broad Graduate School of Management of Michigan State University.

David Ying Zhangwas appointed as our director on September 28, 2007. Mr. Zhang is the managing director and head of the Beijing office of WI Harper, a private equity investment
fund. Mr. Zhang joined WI Harper in late 2001 in the San Francisco office and moved back to China in early 2003. Prior to joining WI Harper, Mr. Zhang was a senior venture associate with ABN AMRO Capital focusing on the life sciences,
information technology, and Internet sectors. Before joining ABN AMRO Capital, Mr. Zhang worked at Salomon Smith Barney. At WI Harper, Mr. Zhang has been responsible for investments in a number of companies including Pollex, Cardiva,
Celestry Designs, Focus Media and iKang Healthcare. Mr. Zhang was born in Shanghai, grew up in the United States and holds a M.S. degree in biotechnology and business from Northwestern University and a B.S. in biology and chemistry from
California State University, San Francisco.

Ying Wuwas appointed our director in May 2008. Starting in 2008,
has been a partner of CTC Venture Capital, of which he is a founder. Prior to 2008, Mr. Wu was a founder, chief executive officer and president of UTStarcom since 1995 and has many years of experience in managing investments in the media and
telecommunications industry.



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Kit Leong Lowwas appointed our chief financial officer in January 2010 and
our director in May 2011. Prior to joining Focus Media, Mr. Low was an executive director of a Greater China entertainment conglomerate, eSun Holdings, from June 2007 to January 2010. Prior to that, from June 2003, he was an executive director
at the Goldman Sachs Asia-Pacific Research Media and Internet team whose coverage included media and Internet companies in Greater China. Before joining Goldman Sachs, starting 1993 he worked as a program manager for Johnson Controls Inc., managing
Toyota vehicles interior development in the United States. He subsequently joined Sybase Inc., an enterprise software company in the United States, as a Program Manager in its Global Products Group in 2000. He received his Bachelor of Science degree
in Industrial Engineering and Motion Picture Production from the University of Wisconsin-Madison, and his MBA from Columbia Business School in the United States.

We increased our board of directors from five to seven members when we completed our acquisition of Target Media, and further to nine members in 2007.

Duties of Directors

Under Cayman Islands law, our directors have a duty of loyalty to act honestly in good faith with a view to our best interests. Our
directors also have a duty to exercise the care, diligence and skills that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our amended and
restated memorandum and articles of association. A company has the right to seek damages if a duty owed by our directors is breached.

The functions and powers of our board of directors include, among others:



| |  |  | 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.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------

B. Compensation

In 2011, we paid aggregate cash compensation of approximately $352,270 to our directors and executive officers as a group. In 2009, 2010 and 2011, we granted selected directors, officers, employees and
external consultants restricted shares to obtain 36,485,980, 15,000,000 and 17,711,500 ordinary shares, respectively. We have no service contracts with any of our directors or executive officers that provide benefits to them upon termination. We do
not pay or set aside any amounts for pension, retirement or other benefits for our officers and directors.

Share Option and Restricted
Shares Plans

Share-based Compensation Plans for the Group

In November 2007, the Groups 2007 Employee Share Option Scheme (2007 Plan) was authorized, under which the Group is
authorized to grant options or share appreciation rights or restricted shares to purchase up to 5% of the Groups issued and outstanding ordinary shares from time to time in the three years following the date of enactment of 2007 Plan. In
December 2010, the 2010 Employee Share Option Plan (2010 Plan) was authorized, under which the Group may issue incentive shares equal to no more than 5% of the issued share capital of the Company, outstanding from time to time, including
stock options and restricted shares to Companys employees, officers, consultants and directors.

On September 22,
2009, as a result of performance evaluations, 1,776,300 previously granted options under 2007 Plan were cancelled and previously unrecognized compensation cost of $2,587,993 was recognized on the cancellation date. In addition, 7,550,849 previously
granted options under 2007 Plan, associated with 300 employees, were cancelled and replaced by an equivalent number of unvested restricted shares (2009 Replacement). This was accounted for as a modification with the incremental compensation
cost of $8,122,206, which was measured as the excess of the fair value of the restricted shares over the fair value of the cancelled options at the cancellation date. Further, restricted shares to obtain 28,935,131 ordinary shares were granted to
employees in 2009. The restricted shares generally vest over a period of two to three years.

On December 28, 2010 and
November 25, 2011, restricted shares to obtain 15,000,000 and 17,711,500 ordinary shares were granted to employees, officers, consultants and directors under the 2010 Plan, respectively. These restricted shares will vest over a period of three
years.



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Under the terms of each plan, options are generally granted at prices equal to the fair
market value of the ordinary shares at the date of grant whereas restricted shares are granted without exercise price, expire 10 years from the date of grant and generally vest over two to four years with certain options vesting over one year. As of
December 31, 2011, 11,156,760 options and 38,169,245 restricted shares were outstanding. The fair value of restricted shares was determined to be the market value of the ordinary shares on the date of grant whereas the fair value of options
granted to employees was estimated on the date of grant using the Black-Scholes option-pricing model. The expected volatilities were estimated based on historical volatility. The expected term of options granted represents the period of time that
options granted are expected to be outstanding. The risk-free interest rate assumption is determined using the Federal Reserve nominal rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award. No
options were granted during the years ended December 31, 2009, 2010 and 2011.

The weighted average grant date fair value
of restricted shares granted for the years ended December 31, 2009, 2010 and 2011 were $2.24, $4.24 and $3.54, respectively.

Our compensation committee, which administers our option plans, has wide discretion to award options. Subject to the provisions of our option plans and the above allocation targets, our committee that
administers our option plans determines who will be granted options, the type and timing of options to be granted, vesting schedules and other terms and conditions of options, including the exercise price. Any of our employees may be granted
options. The number of options awarded to a person, if any, is based on the persons potential ability to contribute to our success, the persons position with us and other factors chosen by our board of directors.

Generally, to the extent an outstanding option granted under our option plans has not become vested on the date the grantees
employment by or service with us terminates, the option will terminate and become unexercisable.

Our board of directors may
amend, alter, suspend, or terminate each of our option plan at any time, provided, however, that in order to increase the limit of 20% of our share capital that may be granted as options, our board of directors must first seek the approval of our
shareholders and, if such amendment, alteration, suspension or termination would adversely affect the rights of an optionee under any option granted prior to that date, the approval of such optionee. Without further action by our board of directors,
our 2010 Option Plan will terminate in December 2020.

The table below sets forth the restricted share grants made to our
directors and executive officers pursuant to our option plans as of December 31, 2011.



|                    |  |                                  |            |  |                           |   |     |                   |  |  |                   | 
|------------------- |  | -------------------------------- | ---------- |  | ------------------------- | - | --- | ----------------- |  |  | ----------------- | 
|                    |  | Number ofrestrictedshares issued |            |  | Exerciseperordinary share |   |     | Date of grant     | 
|                    |  |                                  |            |  |                           |   |     | (in U.S. dollars) | 
|Jason Nanchun Jiang |  |                                  | 20,000,000 |  |                           | $ | nil |                   |  |  | October 1, 2009   | 
|                    |  |                                  | 10,100,000 |  |                           | $ | nil |                   |  |  | December 28, 2010 | 
|                    |  |                                  | 10,075,000 |  |                           | $ | nil |                   |  |  | November 25, 2011 | 
|Fumin Zhuo          |  |                                  | *          |  |                           | $ | nil |                   |  |  | October 1, 2009   | 
|                    |  |                                  | *          |  |                           | $ | nil |                   |  |  | December 28, 2010 | 
|                    |  |                                  | *          |  |                           | $ | nil |                   |  |  | November 25, 2011 | 
|Neil Nanpeng Shen   |  |                                  | *          |  |                           | $ | nil |                   |  |  | October 1, 2009   | 
|                    |  |                                  | *          |  |                           | $ | nil |                   |  |  | December 28, 2010 | 
|                    |  |                                  | *          |  |                           | $ | nil |                   |  |  | November 25, 2011 | 
|Charles Cao         |  |                                  | *          |  |                           | $ | nil |                   |  |  | October 1, 2009   | 
|                    |  |                                  | *          |  |                           | $ | nil |                   |  |  | December 28, 2010 | 
|                    |  |                                  | *          |  |                           | $ | nil |                   |  |  | November 25, 2011 | 
|Daqing Qi           |  |                                  | *          |  |                           | $ | nil |                   |  |  | October 1, 2009   | 
|                    |  |                                  | *          |  |                           | $ | nil |                   |  |  | December 28, 2010 | 
|                    |  |                                  | *          |  |                           | $ | nil |                   |  |  | November 25, 2011 | 
|David Ying Zhang    |  |                                  | *          |  |                           | $ | nil |                   |  |  | October 1, 2009   | 
|                    |  |                                  | *          |  |                           | $ | nil |                   |  |  | December 28, 2010 | 
|                    |  |                                  | *          |  |                           | $ | nil |                   |  |  | November 25, 2011 | 
|Ying Wu             |  |                                  | *          |  |                           | $ | nil |                   |  |  | October 1, 2009   | 
|                    |  |                                  | *          |  |                           | $ | nil |                   |  |  | December 28, 2010 | 
|                    |  |                                  | *          |  |                           | $ | nil |                   |  |  | November 25, 2011 | 
|Alex Deyi Yang(1)   |  |                                  | *          |  |                           | $ | nil |                   |  |  | October 1, 2009   | 
|                    |  |                                  | *          |  |                           | $ | nil |                   |  |  | December 28, 2010 | 
|Kit Leong Low       |  |                                  | *          |  |                           | $ | nil |                   |  |  | January 15, 2010  | 
|                    |  |                                  | *          |  |                           | $ | nil |                   |  |  | December 28, 2010 | 
|                    |  |                                  | *          |  |                           | $ | nil |                   |  |  | November 25, 2011 | 



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|* | 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.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(1) | Alex Deyi Yang resigned his position as our general manager and director as of May 24, 2011.
|--- | --------------------------------------------------------------------------------------------

C. Board Practices

Each
of our directors holds office until a successor has been duly elected and qualified unless the director was appointed by our board of directors, in which case such director holds office until the next following annual meeting of shareholders at
which time such director is eligible for reelection. All of our executive officers are appointed by and serve at the discretion of our board of directors. Neither we nor any of our subsidiaries has entered into a contract with any of our directors
by which our directors are expected to receive benefits upon termination of their employment.

Board Committees

Our board of directors has established an audit committee, a compensation committee and a nominations committee.

Audit Committee. Our audit committee currently consists of Daqing Qi, Ying Wu and Fumin Zhuo. Mr. Qi is the chairman
of our audit committee. Our board of directors has determined that all of our audit committee members are independent directors within the meaning of Nasdaq Listing Rule 5605(a)(2) and meet the criteria for independence set forth in
Section 10A(m)(3) of the U.S. Securities Exchange Act of 1934, or the Exchange Act.

Our audit committee is responsible
for, among other things:



| |  |  | 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. Our current compensation committee consists of Fumin Zhuo, Daqing Qi and David Ying Zhang. Mr. Zhuo is the chairman of our compensation committee. Our board of
directors has determined that all of our compensation committee members are independent directors within the meaning of Nasdaq Listing Rule 5605(a)(2).



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Our compensation committee is responsible for:



| |  |  | 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. Our current nominations committee consists of Neil Nanpeng Shen,
Daqing Qi and Fumin Zhuo. Mr. Shen is the chairman of our nominations committee. Our board of directors has determined that all of our nominations committee members are independent directors within the meaning of Nasdaq Listing Rule
5605(a)(2).

Our nominations committee is responsible for, among other things, selecting and recommending the appointment of
new directors to our board of directors.

Foreign Private Issuer Home Country Practice.The NASDAQ Marketplace
Rules in general require listed companies to follow a stipulated set of corporate governance practices. As a foreign private issuer, we are permitted to, and we will, follow home country corporate governance practices instead of certain requirements
of the NASDAQ Marketplace Rules, including, among others, the shareholder approval rules. The corporate governance practice in our home country, the Cayman Islands, does not require shareholder approval for the issuance of shares in a private
placement at a price less than the greater of book value and market value, provided that the directors consider the issue price represents fair value for the shares being issued. We currently rely upon the relevant home country exemption in lieu of
the requirement for shareholder approval of such share issuances.

D. Employees

As of December 31, 2011, we had a total of 6,351 full-time employees and no part-time employees. The following table sets out the
number of staff by business area as of December 31, 2011:



|                              |  |                       |       |  |            |  |       |  
|----------------------------- |  | --------------------- | ----- |  | ---------- |  | ----- | -
|                              |  | Number ofemployees(1) |       |  | Percentage | 
|Sales and marketing           |  |                       | 1,580 |  |            |  | 24.9  | %
|Operations                    |  |                       | 3,929 |  |            |  | 61.9  | %
|Management and administration |  |                       | 842   |  |            |  | 13.2  | %
|                              |  |                       |       |  |            |  |       |  
|Total number of employees     |  |                       | 6,351 |  |            |  | 100.0 | %
|                              |  |                       |       |  |            |  |       |  



|(1) | This excludes employees our regional distributors and agents who are not directly under our employ.
|--- | ---------------------------------------------------------------------------------------------------

As required by PRC regulations, we participate in various employee benefit plans that are organized by municipal and provincial
governments, including pension, work-related injury benefits, maternity insurance, medical and unemployment benefit plans. We are required under PRC law to make contributions to the employee benefit plans at specified percentages of the salaries,
bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time to time. Members of the retirement plan are entitled to a pension equal to a fixed proportion of the salary prevailing at the
members retirement date.

Generally we enter into a three-year standard employment contract with our officers and
managers and a one-year standard employment contract with other employees. According to these contracts, all of our employees are prohibited from engaging in any activities that compete with our business during the period of their employment with
us. Furthermore, the employment contracts with officers or managers include a covenant that prohibits officers or managers from engaging in any activities that compete with our business for two years after the period of their employment with us.

E. Share Ownership

Please see Item 6.B. and Item 7.

ITEM 7. MAJOR
SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

The following table sets forth information with respect to the beneficial ownership, within the meaning of Rule 13d-3 under the Exchange
Act, of our ordinary shares, as of April 24, 2012:

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.



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Beneficial ownership includes voting or investment power with respect to the securities.
Except as indicated below, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all ordinary shares shown as beneficially owned by them. The number of our ordinary
shares outstanding used in calculating the percentage for each listed person includes our ordinary shares underlying options held by such person that are exercisable within 60 days of April 24, 2012, but excludes ordinary shares underlying
options held by any other person. Percentage of beneficial ownership is based on 646,452,740 ordinary shares outstanding as of April 24, 2012.



|                                                         |  |                           |             |  |         |  |      |  
|-------------------------------------------------------- |  | ------------------------- | ----------- |  | ------- |  | ---- | -
|                                                         |  | Shares beneficially owned |            
|                                                         |  | Number                    |             |  | Percent | 
|Principal Shareholders                                   |  |                           |             |  |         |  |      |  
|Fosun International Limited(1)                           |  |                           | 111,078,220 |  |         |  | 17.2 | %
|JJ Media Investment Holding Ltd.(2)                      |  |                           | 115,985,090 |  |         |  | 17.9 | %
|                                                         |  |                          
|Directors and Executive Officers(3)                      |  |                           |             |  |         |  |      |  
|JJ Media Investment Holding Ltd./ Jason Nanchun Jiang(4) |  |                           | 115,985,090 |  |         |  | 17.9 | %
|Neil Nanpeng Shen                                        |  |                           | *           |  |         |  | *    |  
|Charles Chao                                             |  |                           | *           |  |         |  | *    |  
|Fumin Zhuo                                               |  |                           | *           |  |         |  | *    |  
|Daqing Qi                                                |  |                           | *           |  |         |  | *    |  
|David Ying Zhang                                         |  |                           | *           |  |         |  | *    |  
|Ying Wu                                                  |  |                           | *           |  |         |  | *    |  
|Kit Leong Low                                            |  |                           | *           |  |         |  | *    |  



|* | 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 February 13, 2011 on behalf of Fosun International Limited. Includes 111,078,220 ordinary shares
beneficially owned by Fosun International Limited. The business address of Fosun International Limited is Room 808, ICBC Tower, 3 Garden Road, Hong Kong, China.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes 113,501,185 ordinary shares beneficially owned by JJ Media Investment Holding Ltd and 2,483,905 shares owned by JJ Media Investment Holding Ltds
wholly-owned subsidiary, Target Sales International Limited. The ordinary shares held by Target Sales represent the portion of restricted shares that were granted to Jason Nanchun Jiang under our share option and restricted share plan that have
vested. The business address of JJ Media Investment Holding Limited and Jason Nanchun Jiang is c/o Focus Media Holding Limited, Unit No.1, 20th Floor, The Centrium, 60 Wyndham Street, Central, Hong Kong. The business address of Target Sales
International Limited is 28-30/F, Zhao Feng World Trade Building, 369 Jiangsu Road, Shanghai 200050, China. Mr. Jiang has historically entered into agreements involving shares in Focus Media. For instance, on September 10, 2010,
Mr. Jiang (through his wholly-owned subsidiary JJ Media Investment Holding Limited, or JJ Media) entered into three Capped Call Transactions, which transactions were subsequently amended on June 22, 2011, September 22, 2011 and
November 25, 2011. Mr. Jiang (through JJ Media) entered into the Capped Call Transactions in order to gain synthetic economic exposure to Focus Media shares over time. Following the expiration date for each component of each Capped Call
Transaction, upon settlement of such component, JJ Media has the right to receive an amount in cash representing any excess of the lesser of the agreed-upon cap price and the volume-weighted average price of the ADSs for the applicable expiration
date over the agreed-upon strike price for the Capped Call Transaction. The cash amount receivable by JJ Media pursuant to the Options Agreements is subject to certain anti-dilution and other adjustments and modifications, including, without
limitation, adjustments to the number of capped call options upon the occurrence of certain corporate events involving the Issuer or the ADSs. Under the original Options Agreements, such cash amount (in the aggregate for all components) is paid by
Goldman Sachs International, the counterparty to the Options Agreements, to JJ Media on the third business day following the expiration date for the last component. The amendments to these transactions had the effect of changing the timing of, and
amount due upon, settlement of various components of the Capped Call Transactions. Since such Capped Call Transactions are cash-settled, settlement will not affect Mr. Jiang or JJ Medias ownership of shares. Concurrently with entering
into such Capped Call Transactions, JJ Media received aggregate proceeds of approximately $153.1 million as the selling shareholder in an underwritten public offering of 8.1 million ADSs, representing approximately 5.7% of our total outstanding
share capital at the time. Mr. Jiang also made an US$11.0 million block trade purchase of our ADSs on November 22, 2011, representing approximately 0.5% of our total outstanding share capital. For additional information on these
transactions and the related documentation, please refer to the Form 13D, as amended, filed by Mr. Jiang on April 18, 2012.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The address of our current directors and executive officers is c/o Focus Media Holding Limited, Unit No.1, 20th Floor, The Centrium, 60 Wyndham Street, Central, Hong
Kong.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | See note 2.
|--- | -----------

None of our major
shareholders have different voting rights from those of our other shareholders. To the best of our knowledge, we are not directly or indirectly controlled by another corporation, by any foreign government or by any other natural or legal person
severally or jointly.



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We are not aware of any arrangement that may, at a subsequent date, result in a change of
control of our company.

For information regarding our shares held or beneficially owned by persons in the United States, see
Item 9. The Offer and Listing  Market Price Information for Our American Depositary Shares in this annual report.

B.
Related Party Transactions

Details of advertising service revenue from related parties for the years ended December 31, 2009, 2010
and 2011 for the Group are as follows:



|                                                |  |                     |  |                         |           |  |      |   |           |      |  |   |            | 
|----------------------------------------------- |  | ------------------- |  | ----------------------- | --------- |  | ---- | - | --------- | ---- |  | - | ---------- | 
|                                                |  |                     |  | Year ended December 31, |          
|Name of related parties                         |  | Director interested |  | 2009                    |           |  | 2010 |   |           | 2011 | 
|CTV Golden Bridge International Media Co., Ltd. |  | Daqing Qi           |  | $                       | 277,749   |  |      | $ |          |      |  | $ |           | 
|Sina.com                                        |  | Charles Cao         |  |                         | 548,988   |  |      |   | 1,034,741 |      |  |   | 1,466,979  | 
|Sohu.com                                        |  | Daqing Qi           |  |                         | 438,536   |  |      |   | 738,947   |      |  |   |           | 
|China Vanke Co., Ltd.                           |  | Daqing Qi           |  |                         | 459,376   |  |      |   | 465,998   |      |  |   | 909,109    | 
|Home-Inn                                        |  | Neil Nanpeng Shen   |  |                         | 89,076    |  |      |   |          |      |  |   |           | 
|Ctrip.com                                       |  | Neil Nanpeng Shen   |  |                         | 486,263   |  |      |   | 79,601    |      |  |   |           | 
|51.com                                          |  | Neil Nanpeng Shen   |  |                         |          |  |      |   | 22,993    |      |  |   |           | 
|Qihoo.com                                       |  | Neil Nanpeng Shen   |  |                         | 38,008    |  |      |   | 17,461    |      |  |   |           | 
|Giant Interactive Group Inc.                    |  | Jason Nanchun Jiang |  |                         | 368,242   |  |      |   | 385,720   |      |  |   | 13,911     | 
|StormNet Information Technology                 |  | David Zhang         |  |                         |          |  |      |   | 2,569     |      |  |   |           | 
|Tea Care Group Ltd.                             |  | Fumin Zhuo          |  |                         | 292,606   |  |      |   | 697,071   |      |  |   | 5,461      | 
|Fosun International Limited                     |  | Major Shareholder   |  |                         |          |  |      |   |          |      |  |   | 4,613,446  | 
|Focus Technology Co., Ltd.                      |  | Fumin Zhuo          |  |                         | 43,200    |  |      |   |          |      |  |   |           | 
|Joyyoung, Inc.                                  |  | Ying Wu             |  |                         |          |  |      |   |          |      |  |   | 13,313     | 
|Shen Yin Wan Guo Securities Co., Ltd.           |  | Fumin Zhuo          |  |                         |          |  |      |   |          |      |  |   | 5,661      | 
|Redbaby.com                                     |  | Jason Nanchun Jiang |  |                         |          |  |      |   |          |      |  |   | 4,465,478  | 
|Tuan800.com                                     |  | Jason Nanchun Jiang |  |                         |          |  |      |   |          |      |  |   | 468,410    | 
|Juewei Foods, Inc.                              |  | Jason Nanchun Jiang |  |                         |          |  |      |   |          |      |  |   | 544,106    | 
|Bona Film Group Ltd.                            |  | Daqing Qi           |  |                         |          |  |      |   |          |      |  |   | 2,089,420  | 
|                                                |  |                     |  |                         |           |  |      |   |           |      |  |   |            | 
|Total                                           |  |                     |  | $                       | 3,042,044 |  |      | $ | 3,445,101 |      |  | $ | 14,595,294 | 
|                                                |  |                     |  |                         |           |  |      |   |           |      |  |   |            | 

Details of advertising space leasing costs charged, net of rebates, to the Group by related parties for the years ended
December 31, 2009, 2010 and 2011 are as follows:



|                                |  |                     |  |                         |            |  |      |   |            |      |  |   |           | 
|------------------------------- |  | ------------------- |  | ----------------------- | ---------- |  | ---- | - | ---------- | ---- |  | - | --------- | 
|                                |  |                     |  | Year ended December 31, |           
|Name of related parties         |  | Director interested |  | 2009                    |            |  | 2010 |   |            | 2011 | 
|Sina.com                        |  | Charles Cao         |  | $                       | 28,635,023 |  |      | $ | 11,655,724 |      |  | $ |          | 
|Sohu.com                        |  | Daqing Qi           |  |                         | 17,208,874 |  |      |   | 8,047,723  |      |  |   |          | 
|Bona Film Group Ltd.            |  | Daqing Qi           |  |                         |           |  |      |   | 359,287    |      |  |   | 2,996,195 | 
|Ctrip.com                       |  | Neil Nanpeng Shen   |  |                         | 146,356    |  |      |   | 130,251    |      |  |   |          | 
|51.com                          |  | Neil Nanpeng Shen   |  |                         | 195,376    |  |      |   | 7,968      |      |  |   |          | 
|Qihoo.com                       |  | Neil Nanpeng Shen   |  |                         | 109,564    |  |      |   |           |      |  |   |          | 
|StormNet Information Technology |  | David Zhang         |  |                         | 21,928     |  |      |   | 27,266     |      |  |   |          | 
|                                |  |                     |  |                         |            |  |      |   |            |      |  |   |           | 
|Total                           |  |                     |  | $                       | 46,317,121 |  |      | $ | 20,228,219 |      |  | $ | 2,996,195 | 
|                                |  |                     |  |                         |            |  |      |   |            |      |  |   |           | 

Details of amounts due from related parties representing trade receivables for advertising services provided or advances
paid for advertising space leased as of December 31, 2010 and 2011 are as follows:



|                            |  |                     |  |             |         |  |      |   |           | 
|--------------------------- |  | ------------------- |  | ----------- | ------- |  | ---- | - | --------- | 
|                            |  |                     |  | December 31 |        
|Name of related parties     |  | Director interested |  | 2010        |         |  | 2011 |  
|Sina.com                    |  | Charles Cao         |  | $           | 89,897  |  |      | $ |          | 
|Bona Film Group Ltd.        |  | Daqing Qi           |  |             | 21,139  |  |      |   | 305,928   | 
|Tea Care Group Ltd.         |  | Fumin Zhuo          |  |             | 345,297 |  |      |   | 61,803    | 
|China Vanke Co., Ltd.       |  | Daqing Qi           |  |             | 13,041  |  |      |   | 160,013   | 
|Redbaby.com                 |  | Jason Nanchun Jiang |  |             |        |  |      |   | 1,021,150 | 
|Juewei Foods, Inc.          |  | Jason Nanchun Jiang |  |             |        |  |      |   | 108,985   | 
|Fosun International Limited |  | Major Shareholder   |  |             |        |  |      |   | 166,557   | 
|                            |  |                     |  |             |         |  |      |   |           | 
|Total                       |  |                     |  | $           | 469,374 |  |      | $ | 1,824,436 | 



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Details of amounts due to related parties representing trade payables for advertising services purchased or
advances received for advertising services sold as of December 31, 2010 and 2011 are as follows:



|                            |  |                     |  |              |           |  |      |   |           | 
|--------------------------- |  | ------------------- |  | ------------ | --------- |  | ---- | - | --------- | 
|                            |  |                     |  | December 31, |          
|Name of related parties     |  | Director interested |  | 2010         |           |  | 2011 |  
|Sina.com                    |  | Charles Cao         |  | $            | 1,811,950 |  |      | $ |          | 
|China Vanke Co., Ltd.       |  | Daqing Qi           |  |              | 28,689    |  |      |   | 25,617    | 
|Arcom                       |  | David Zhang         |  |              | 7,550     |  |      |   |          | 
|Fosun International Limited |  | Major Shareholder   |  |              |          |  |      |   | 1,313,482 | 
|Bona Film Group Ltd.        |  | Daqing Qi           |  |              |          |  |      |   | 755,712   | 
|Redbaby.com                 |  | Jason Nanchun Jiang |  |              |          |  |      |   | 55,659    | 
|Juewei Foods, Inc.          |  | Jason Nanchun Jiang |  |              |          |  |      |   | 45,434    | 
|                            |  |                     |  |              |           |  |      |   |           | 
|                            |  |                     | 
|Total                       |  |                     |  | $            | 1,848,189 |  |      | $ | 2,195,904 | 
|                            |  |                     |  |              |           |  |      |   |           | 

Other related party transactions

Loans to Shareholders of Our PRC Operating Affiliates

Pursuant to
loan agreements entered into by the relevant PRC operating subsidiaries and the individual shareholders of certain of our PRC operating affiliates, respectively, such shareholders obtained a loan of the registered capital of the relevant PRC
operating affiliate from the relevant WFOE operating subsidiaries for the sole purpose of establishing or increasing, as the case may be, the registered capital of each such PRC operating affiliate. As of December 31, 2011, the full amounts of
the loans to these shareholders remained outstanding. The relevant PRC operating subsidiary granted these loans without interest.

Share
Subscription by JJ Media Investment Holding Limited

As described in Item 5. Operating and Financial Review and
Prospects  Share-based Compensation, on November 18, 2009, the Company issued 75 million ordinary shares to Jason Nanchun Jiang through JJ Media Investment Holding Limited, for proceeds of $142,425,000.

Transactions with Entities Affiliated with Jimmy Wei Yu

Jimmy Yu resigned his directorship in September 2009. For the nine months ended September 30, 2009, office rentals paid to Multimedia Park Venture Capital, of which Mr. Yu was the CEO, amounted
to $612,817.

Management Buy-in To Internet Division

In January 2010, certain Allyes employees and management and directors and certain members of our management and directors entered into a definitive agreement with us and Allyes to purchase an aggregate
38% interest in Allyes from us. In order to encourage Allyes Online management to invest (and thus remain with the business), Jason Jiang and Kit Low, who was already active with Focus Media and was in the process of being appointed its chief
financial officer, offered to invest their own capital in Allyes under the same terms that Focus Media was offering to Allyes management. By making this offer, Messrs. Jiang and Low attempted to show their confidence in Allyes business,
so that they could encourage the remaining Allyes team to invest, stay in their positions, and commit to Allyes success. Pursuant to the terms of the agreements, the purchasing Allyes and Group management members paid an aggregate $13.3
million for a 38% interest of Allyes. The Group performed a valuation of Allyes as of the closing date of the transaction and determined that the price paid to acquire the interest approximated fair value. The transaction was approved by all
independent directors on the board. This transaction was part of initiatives we are taking to incentivize management to enhance the future business model of Allyes and thereby to seek long term sustainable growth for the Group and investors.

Sale of Shares by JJ Media Investment Holding Limited

As described in Item 4. Information on the Company  History and Development of the Company elsewhere in this annual report, on September 13, 2010, Jason Nanchun Jiang, through JJ Media
Investment Holding Limited, sold 8,100,000 of our ADSs at a price of $18.90 per ADS.



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Concurrent with the pricing of the public offering, JJ Media entered into three capped call
transaction confirmations (the Options Agreements) pursuant to which, JJ Media purchased call options relating to 10,100,000 ADSs with a hedge reference price of $19.25 per ADS. These Option Agreements were subsequently amended on
June 22, 2011, September 30, 2011 and November 22, 2011 which had the effect of amending the applicable strike and cap prices, and changing the timing of, and amount due upon, settlement of various components of the capped call
transactions to May and June 2012.

On September 7, 2010, JJ Media also entered into a share swap transaction
confirmation (the Swap Agreement), with a maturity date on or about October 28, 2010, pursuant to which variable price seller acquired long exposure, and JJ Media acquired short exposure, to 2,000,000 ADSs.
The notional amount of the swap was based on such number of ADSs and an initial price of $18.90 per ADS. Under a pledge and security agreement (the Pledge Agreement), JJ Media pledged 2,000,000 ADSs (the Pledged Shares) to
secure its obligations under the Swap Agreement. On the same date, JJ Media also entered into a share sale plan (the Sales Plan) in reliance on Rule 144 under the Securities Act and Rule 10b5-1 under the Exchange Act with a
broker-dealer affiliated with Goldman Sachs International (the seller). Under the Sales Plan, the seller sold on behalf of JJ Media up to a maximum of 2,000,000 ADSs subject to the conditions and terms of the Sales Plan. The dates of the
sales under the Sales Plan were intended to coincide with the valuation period under the Swap Agreement. All sales occurred during the period between October 7, 2010 to October 22, 2010. These sales resulted in net proceeds of US$47.8
million under the Sales Plan which, less US$10.0 million in swap payments under the swap unwinds during that period, resulted in a total settlement amount to JJ Media of US$37.8 million.



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On September 7, 2010, Mr. Jason Nanchun Jiang entered into a Guaranty (the
Guaranty) in favor of GSI. The Guaranty was entered into to guarantee the payment of all amounts, and the performance of all obligations, by JJ Media under the Capped Call Options, Swap and the other transaction documents relating to the
Capped Call Options and Swap. Documentation relating to these transactions has been filed by JJ Media in a Form 13D, as amended.

Agreements among Us, Our PRC Operating Subsidiaries, Our PRC Operating Affiliates and Their Shareholders

The following is a summary of the material provisions of these agreements. For more complete information you should read these agreements
in their entirety. Directions on how to obtain copies of these agreements are provided in this annual report under Item 10.H Additional Information  Documents on Display and Item 19. Exhibits.

We have entered into a series of contractual arrangements with certain of our PRC operating affiliates and their respective shareholders,
including contracts relating to the provision of services and certain shareholder rights and corporate governance matters if the PRC operating affiliates are owned by individuals or entities other than our 100% indirect subsidiaries or 100%
consolidated operating affiliates. The PRC operating affiliates will be subject to administrative penalties if they fail to renew their respective licenses before the end of its operating term. However, the expiration of the operating term will not
automatically invalidate the PRC operating affiliates or limit their respective capacity to perform their respective contractual obligations.

Each of our contractual arrangements with our PRC operating affiliates and their respective shareholders may only be amended with the approval of our audit committee or another independent body of our
board of directors. Such agreements may be terminated by an agreement of all parties thereto. None of these arrangements provide our PRC operating affiliates with a right to exit with the payment of termination fees. Global Law Office, our PRC
counsel, has advised us that, except for the occurrence of an event of force majeure, under the PRC Contract Law, the shareholders of the PRC operating affiliates or their shareholders with whom the VIE contract arrangements have been entered into
will not have automatic statutory rights of unilateral termination, unless we fail to fulfill our obligations under the VIE contract arrangements to such extent that will trigger such rights. We have the capacity and every intention to fulfill each
of our obligations under the VIE contract arrangements to ensure that these contracts are not unilaterally terminable by the other parties. In addition, subject to varied interpretation of laws, the shareholders of the PRC operating affiliates could
be deemed to have the right to unilaterally terminate the voting rights proxy, provided that sufficient compensation is paid to the PRC operating subsidiary for its loss.

Transfer of Ownership When Permitted By Law

Pursuant to call option
agreements, including in certain cases subsequent participation letters by our new PRC operating affiliates, by and among certain of our PRC operating subsidiaries, our PRC operating affiliates, and their respective shareholders, the shareholders of
each of our relevant PRC operating affiliates, which shareholders are individuals or entities designated by us, such PRC operating affiliates and their respective shareholders have granted the relevant PRC operating subsidiary or its designee an
exclusive option to purchase all or part of their equity interests in the relevant PRC operating affiliate, or all or part of the assets of the relevant PRC operating affiliate, in each case, at any time determined by the relevant PRC operating
subsidiary and to the extent permitted by PRC law.

The shareholders of the PRC operating affiliates agree that without the
prior written consent of the relevant PRC operating subsidiary, they will not:



| |  |  | transfer, assign, pledge or otherwise dispose of their interest in the relevant PRC operating affiliate;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | increase or decrease the registered capital of the relevant PRC operating affiliate;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | dispose or cause the management to dispose any asset of the PRC operating affiliate except in ordinary course of business;
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | terminate or cause the management to terminate, or enter into any other agreements in conflict with the existing material contracts of the PRC
operating affiliate;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | cause the PRC operating affiliate to conduct any transactions that may substantively affect the asset, liability, business operation, equity structure,
and other legal rights (except those occurring during the arms length operations or daily operation, or having been disclosed to and approved by the relevant PRC operating subsidiary in writing);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | appoint or cancel or replace any directors, supervisors or any other senior management personnel of the PRC operating affiliate;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | declare or receive any distribution of the dividends of any PRC operating affiliate;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | amend the articles of association of the PRC operating affiliate; or
| | - |  | --------------------------------------------------------------------



| |  |  | allow the PRC operating affiliate to lend or borrow any money, or provide guarantees or engage in the provision of security in any other forms, or bear
any substantial obligations other than on the arms length basis.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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They also agree that they will ensure that the respective PRC operating affiliate validly
exists and prevent it from being terminated, liquidated or dissolved and that they will make best efforts to develop the business of the relevant PRC operating affiliate, and ensure that the operations of the PRC operating affiliate are legal and in
compliance with the regulations and that it does not engage in any actions or omissions which might harm the PRC operating affiliates assets or its goodwill or affect the validity of the operation permits of the PRC operating affiliate.

The relevant PRC operating affiliates and their respective shareholders are not allowed to unilaterally terminate the
agreement, unless otherwise permitted by law or the agreement. The agreement shall terminate with respect to a given shareholder when all the equity of the PRC operating affiliates held by him is legally transferred to the relevant PRC operating
subsidiary or another entity or individual designated by the relevant PRC operating subsidiary in accordance with the provisions of the agreement. After the termination of the agreement in respect to such shareholder, the agreement continues to be
fully valid in respect to other shareholders of the PRC operating affiliates. The agreement provides the relevant parties with the following contractual right of termination: in case of any substantial breach by any party of any covenants or
obligations under the agreement, the non-breaching party which has suffered damages is entitled to terminate the agreement, if the breaching party fails to rectify the breach or take any remedial actions within 10 days after the non-breaching party
notifies the breaching party and requests for rectification. The relevant PRC operating subsidiary is not bound by material obligations or material covenants under the agreement.

Voting Arrangements

Pursuant to voting rights proxy agreements and
in certain cases subsequent participation letters by our PRC operating affiliates, by and among certain of PRC operating subsidiaries, the PRC operating affiliates and their shareholders designated by us, the respective shareholders of the PRC
operating affiliates have granted an individual designated by the PRC operating subsidiaries the right to appoint all of the directors and senior management of the PRC operating affiliates and all of their other voting rights as shareholders of the
PRC operating affiliates, as provided under the articles of association of each such entity, such as matters related to the appointment of directors and senior management of the PRC operating affiliates, the transfer of their respective equity
interests in the PRC operating affiliates, distributing dividends or other proceeds from the PRC operating affiliates, formulating the business plans and investment plans of the PRC operating affiliates, increasing or decreasing the capital of the
PRC operating affiliates, the issuance of corporate bonds, mergers, divisions, change of corporate forms, dissolution or liquidation of the PRC operating affiliates and amendments to the articles of incorporation of the PRC operating affiliates.
Under the voting rights proxy agreement, there are no restrictions on the number, to the extent allowed under the respective articles of association of the PRC operating affiliates, or identity of those persons we can appoint as directors and
officers. In addition, the PRC operating affiliates have an obligation to provide the individual designated by the PRC operating subsidiaries with access to and the ability to inspect records of certain information, including information regarding
the PRC operating affiliates operation, business, clients, and finance.

The relevant PRC operating affiliates and their
respective shareholders are not allowed to unilaterally terminate the agreements before expiry of their terms, unless otherwise permitted by law or the agreement. The term of the agreements shall be automatically renewed on an annual basis unless
the relevant PRC operating subsidiary issues a prior notice in writing to other parties of the cancellation of such renewal. The agreements provide the relevant parties with the following contractual right of termination: in case of any substantial
breach by any party of any covenants or obligations under the agreement, the non-breaching party which has suffered damages is entitled to terminate the agreement, if the breaching party fails to rectify the breach or take any remedial actions
within 10 days after the non-breaching party notifies the breaching party and requests for rectification. The relevant PRC operating subsidiary is not bound by material obligations or material covenants under the agreement.

Equity Pledge Agreements

Pursuant to equity pledge agreements and, in certain instances, subsequent participation letters by certain of our new PRC operating affiliates, by and among the relevant PRC operating subsidiaries, the
relevant PRC operating affiliates, the relevant shareholder of the relevant PRC operating affiliates has pledged his equity interest in the relevant PRC operating affiliates, to certain of the PRC operating subsidiaries to secure his obligations
under certain of the relevant contractual control agreements to which each is a party, such as the obligations of the relevant PRC operating affiliates and the relevant shareholders under the call option agreements and voting rights proxy
agreements, as the case may be, and the obligation of each shareholder of the PRC operating affiliates under the respective loan agreements between the relevant shareholder and PRC operating subsidiary, for the sole purpose of contributing or
increasing the registered capital of the PRC operating affiliates, as the case may be and acquiring certain of our regional distributors, respectively. See  Loans to the Shareholders of the PRC Operating Affiliates. Under
these equity pledge agreements, each relevant shareholder has agreed not to transfer, assign, pledge or otherwise dispose of their interest in the relevant PRC operating affiliate, without the prior written consent of the relevant PRC operating
subsidiary. The equity pledge agreements may not be enforceable until we complete registration procedures with the local SAIC. Under the equity pledge agreements, the pledgers have contractual obligations to use their best effort to register, and
the relevant PRC operating affiliates have contractual obligations to use their best effort to cooperate with the pledgers in registering, the relevant equity pledges under each of the equity pledge agreements at applicable local branches of the
SAIC. There is no separate other agreement with respect to the registration of the equity pledge agreements. See Risk Factors  We use contractual arrangements with our PRC operating affiliates and their shareholders for a portion of our
China operations, and uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements and thus our ability to conduct our business elsewhere in this annual report.



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The respective shareholders of the PRC operating affiliates, who act as borrowers under the
agreements, do not have unilateral termination rights. The relevant PRC operating subsidiary, who acts as lender, may unilaterally demand that the relevant shareholders of the PRC operating affiliates repay the loan before expiry of the 10-year loan
term. However, the respective loans cannot be repaid by the borrower before their respective maturities without written approval from the lenders.

C. Interests of Experts and Counsel

Not applicable.

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements and Other Financial Information

Please refer to
Item 20 for a list of our annual consolidated financial statements filed as part of this annual report.

Legal Proceedings

The Group is a defendant in ongoing lawsuits as described below:



|a) | November 2007 Follow-on Offering Case
|-- | -------------------------------------

1)
On November 27, 2007, Eastriver Partners, Inc. filed a purported class action lawsuit in the United States District Court for the Southern District of New York against the Group and the underwriters of the Groups offering filed in
November 2007.

2) On December 21, 2007, Scott Bauer filed a purported class action lawsuit in the United States District Court for the
Southern District of New York against the Group, certain of the Groups officers and directors, and the underwriters of the Groups offering filed in November 2007.

Both complaints allege that the Groups registration statement on Form F-1 on November 1, 2007 as amended, and the related prospectus contained inaccurate statements of material fact. The Group
has meritorious defenses to the claims alleged and intends to defend against these lawsuits vigorously. On March 29, 2010, the court issued an opinion granting the Groups motion to dismiss. On March 30, 2010, the court entered a
judgment dismissing the case. The plaintiffs filed a notice of appeal on April 29, 2010 appealing the judgment granting our motion to dismiss. On September 26, 2011, the plaintiffs and the Group entered into a settlement agreement, under
which the Company will contribute $2 million for settlement (the Settlement Agreement). On December 16, 2011, the Settlement Agreement was preliminarily approved by the court and the court scheduled a settlement hearing for
March 30, 2012. By order dated April 24, 2012, the Court gave final approval to the settlement.



|b) | Palny Case
|-- | ----------

On
December 12, 2011, Tom Palny filed a putative class action in the United States District Court for the Southern District of New York against the Group and certain of the current or former officers and directors. The complaint relates to certain
allegations made by the firm Muddy Waters about the Company is a series of releases in November 2011, and alleges that the Companys public filings, including the Companys 2006, 2007, 2008, 2009 and 2010 Form 20-Fs, the Form F-1 and
Prospectus filed in connection with the Companys November 2007 Follow-on Offering, and third quarter 2011 earnings press release, contain material misstatements and omissions. The complaints allegations, include, but are not limited to,
alleged misrepresentations relating to the Companys acquisition, write-down and divestiture of certain assets (including, without limitation, Allyes, OOH, and certain mobile handset companies), and the size and composition of the
Companys LCD display network. On March 30, 2012, the Court appointed Xuechen Yang as lead plaintiff. Defendants have not yet been served with the complaint. The Company intends to defend itself vigorously against these allegations as the
Group believes they have meritorious defenses to the alleged claims. However, there can be no assurance that we will prevail in the lawsuit and any adverse outcome could have a material adverse effect on our business or results of operations.



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Dividend Policy

We did not declare any dividends from our founding to January 10, 2012.

On
January 10, 2012, we announced a policy starting from 2012 to issue a recurring dividend with payments expected to equal approximately 25% of our annual non-GAAP net income of the preceding fiscal year. A dividend of $17.9 million, or $0.0274
per ordinary share, was paid out on April 16, 2012 to the shareholders of record on March 30, 2012. The dividends will be paid out on a quarterly basis in the calendar year to shareholders of record as of June 30, September 30 and
December 31 respectively. The dividend payments commence in 2012 in respect of our non-GAAP net income for 2011.

In
addition, we will consider up to an additional 30% of our annual non-GAAP net income of the preceding fiscal year (starting from 2012 earnings) as funds that may be used, at our discretion, to increase the dividend payment or the size of our share
repurchase program in effect at that time. The dividend and share repurchase fund policies will be reviewed by the board and management on an annual basis.

Future cash dividends will continue to be at the discretion of our board of directors and will depend upon our future operations and earnings, capital requirements and surplus, general financial
condition, shareholders interests, contractual restrictions and other factors as our board of directors may deem relevant. In addition, we can pay dividends only out of our profits or other distributable reserves. Any dividend we declare will
be paid to the holders of ADSs, subject to the terms of the deposit agreement, to the same extent as holders of our ordinary shares, less the fees and expenses payable under the deposit agreement. Other distributions, if any, will be paid by the
depositary to holders of our ADSs in any means it deems legal, fair and practical. Any dividend will be distributed by the depositary, in the form of cash or additional ADSs, to the holders of our ADSs. Cash dividends on our ADSs, if any, will be
paid in U.S. dollars.

B. Significant Changes

Since the date of the audited financial statements included as a part of this annual report, the following significant changes have occurred:



| |  |  | On January 10, 2012, we announced a policy starting from 2012 to issue a recurring dividend with payments expected to equal approximately 25% of
our annual non-GAAP net income of the preceding fiscal year. A dividend of $17.9 million, or $0.0274 per ordinary share, was paid out on April 16, 2012 to the shareholders of record on March 30, 2012. The dividends will be paid out on a quarterly
basis in the calendar year to shareholders of record as of June 30, September 30 and December 31 respectively. The dividend payments commence in 2012 in respect of our non-GAAP net income for 2011.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Starting from 2012, we are also reserving up to an additional 30% of our annual non-GAAP net income of the preceding fiscal year as funds
that may be used, at our discretion, to increase the dividend payment or the size of our share repurchase program in effect at that time. The dividend and share repurchase fund policies will be reviewed by the board and management on an annual
basis.

Please see the section titled Material Contracts of Item 10.C. Additional information.

ITEM 9. THE OFFER AND LISTING

A. Offer and Listing Details

Market Price Information for Our American Depositary
Shares

Our ADSs have been listed on the Nasdaq Global Market since July 13, 2005. Our ADSs trade under the symbol
FMCN. From July 13, 2005 until April 10, 2007, each of our ADSs represented ten of our ordinary shares. Starting April 11, 2007, we reduced this ratio to one-to-five. All ADS trading prices on the Nasdaq Global Market set
forth in this annual report, including historical trading and closing prices, have been adjusted to reflect the new ADS-to-share ratio of one-to-five. For the period from April 26, 2010 to April 26, 2012 the trading price of our ADSs on the
Nasdaq Global Market has ranged from a low of US$8.79 to a high of US$37.58 per ADS. The following table provides the high and low trading prices for our ADSs on the Nasdaq Global Market for the five most recent full financial years, each full
financial quarter for the two most recent full financial years and each month since September 2011.



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|                         |  |            |       |  |     |  |       | 
|------------------------ |  | ---------- | ----- |  | --- |  | ----- | 
|                         |  | SALE PRICE |      
|                         |  | HIGH       |       |  | LOW | 
|                         |  | US$        |       |  | US$ | 
|2007                     |  |            | 66.30 |  |     |  | 33.50 | 
|2008                     |  |            | 59.37 |  |     |  | 6.18  | 
|2009                     |  |            | 17.49 |  |     |  | 4.84  | 
|2010                     |  |            | 27.27 |  |     |  | 12.26 | 
|First Quarter            |  |            | 18.72 |  |     |  | 12.26 | 
|Second Quarter           |  |            | 18.48 |  |     |  | 14.36 | 
|Third Quarter            |  |            | 24.68 |  |     |  | 14.94 | 
|Fourth Quarter           |  |            | 27.27 |  |     |  | 20.60 | 
|2011                     |  |            | 37.58 |  |     |  | 8.79  | 
|First Quarter            |  |            | 30.73 |  |     |  | 21.91 | 
|Second Quarter           |  |            | 37.58 |  |     |  | 25.77 | 
|Third Quarter            |  |            | 34.51 |  |     |  | 26.82 | 
|Fourth Quarter           |  |            | 32.93 |  |     |  | 8.79  | 
|October                  |  |            | 27.91 |  |     |  | 15.76 | 
|November                 |  |            | 28.60 |  |     |  | 8.79  | 
|December                 |  |            | 22.87 |  |     |  | 18.11 | 
|2012 (through April 26)  |  |            | 30.08 |  |     |  | 18.03 | 
|January                  |  |            | 22.98 |  |     |  | 18.03 | 
|February                 |  |            | 24.89 |  |     |  | 20.24 | 
|March                    |  |            | 30.08 |  |     |  | 23.54 | 
|April (through April 26) |  |            | 25.98 |  |     |  | 22.54 | 

As of April 2, 2012, a total of 130,926,042 ADSs were outstanding. As of April 2, 2012,
654,630,210 shares were registered in the name of a nominee of Citibank, N.A., the depositary under the deposit agreement. We have no further information as to shares held, or beneficially owned, by U.S. persons.

B. Plan of Distribution

Not applicable.

C. Markets

Our ADSs, each representing five of our ordinary shares, have been trading on the Nasdaq Global Market since July 13,
2005 under the symbol FMCN.

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

We incorporate by reference into this annual report the description of our amended and restated memorandum and articles of association
contained in our Form F-1 registration statement (File No. 333-134714), as amended, first filed with the Commission on June 2, 2006.

C. Material Contracts

In the past three fiscal years, we have not entered into any material contracts other than in the ordinary course of business or other
than those described below and elsewhere in this annual report.



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Management Buy-in To Allyes

See Item 17.B  Related Party Transactions  Other Related Party Transactions.

Sale of Allyes

On July 30, 2010, we entered into a definitive share purchase agreement with Asteroid Media Holdings Limited, a wholly-owned
investment vehicle of Silver Lake Management, L.L.C., or Silver Lake, pursuant to which we sold to Silver Lake our entire remaining 62% ownership interest in our former Internet business, Allyes Online Media Holdings Limited and its consolidated
subsidiaries and affiliates, collectively Allyes. Upon the closing of the transaction on August 3, 2010, Silver Lake paid us US$124 million, in exchange for the remaining equity ownership of Allyes held by Focus Media. Simultaneous with the
signing of the agreement, certain other shareholders of Allyes also sold their interest in Allyes to Silver Lake, so that, following the series of transactions, Silver Lake owns a controlling stake in Allyes. We no longer hold any ownership interest
in Allyes nor conduct any Internet advertising operations. Prior to voting on the transaction, the board considered an opinion of a third-party advisor stating that the deal was fair to shareholders from a financial perspective.

We sold our remaining interest in Allyes to Silver Lake to maximize value for our shareholders as we believe that the interests of our
business were best served by focusing on our core out-of-home advertising network and selling the Allyes business at a price that we believe provided fair value to our company and our shareholders.

Share Repurchase from Fosun

On September 20, 2010, we repurchased approximately 11,915,944 of our ADS for approximately $236.7 million up to September 20, 2010, which included a privately negotiated repurchase of 9,523,810
ADSs from Fosun International for $200 million. On July 6, 2011, we announced that we entered into an agreement with Fosun International to further repurchase approximately 1,956,310 of our ADSs for approximately $60 million.

Share Purchase of VisionChina

On January 13, 2011, we purchased approximately 15,331,305 newly issued common shares of VisionChina at a price of US$3.979 per share, equivalent to US$3.979 per ADS. The purchase price was
calculated as the greater of (1) the average closing price of VisionChina ADSs in the 20 trading days preceding the purchase plus $0.10 per share and (2) the closing price of VisionChina ADSs on the date immediately preceding the purchase
plus $0.05 per share, which resulted in a per-share purchase price of $3.979. VisionChinas mass transportation mobile television network and our office, residential, hypermarket and supermarket television networks and theater network are
highly complementary to each other, which we believe will offer opportunities to bring integrated media solutions and greater media value to advertisers. The equity method investment in VisionChina is very much in line with our established
development strategy of focusing on growing and investing in our core businesses while reducing our non-core businesses, and does not indicate any change in our existing stated direction.

Control Over Acquired Entities

We have entered into a series of agreements
with the subsidiaries, affiliated entities and nominee shareholders of such affiliated entities of each of Target Media and Framedia that provide us with effective control over each of their respective affiliated entities while enabling the their
businesses to be consolidated with the respective Cayman holding company of each such business and with us. See Item 4.C Information on Our Company  Organizational Structure  Our Corporate Structure and Contractual
Arrangements and  Item 7.B Major Shareholders and Related Party Transactions  Related Party Transactions  Agreements Among Us, Our PRC operating subsidiaries, Our PRC Operating Affiliates and Their Shareholders.

Share Subscription by JJ Media Investment Holding Limited

See Item 7.B  Related Party Transactions  Other Related Party Transactions.



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D. Exchange Controls

Our operating businesses are currently conducted in China and substantially all of our revenues and expenses are denominated in Renminbi. The Peoples Bank of China, or PBOC, sets and publishes daily
a base exchange rate with reference primarily to the supply and demand of Renminbi against a basket of currencies in the market during the prior day. The PBOC also takes into account other factors, such as the general conditions existing in the
international foreign exchange markets. Since 1994, the conversion of Renminbi into foreign currencies, including Hong Kong dollars and U.S. dollars, has been based on rates set by the PBOC, which are set daily based on the previous days
inter-bank foreign exchange market rates and current exchange rates in the world financial markets. From 1994 to July 20, 2005, the official exchange rate for the conversion of Renminbi to U.S. dollars was generally stable. Although PRC
governmental policies were introduced in 1996 to reduce restrictions on the convertibility of Renminbi into foreign currency for current account items, conversion of Renminbi into foreign exchange for capital items, such as foreign direct
investment, loans or securities, requires the approval of the State Administration for Foreign Exchange and other relevant authorities. On July 21, 2005, the PRC government introduced a managed floating exchange rate system to allow the value
of the Renminbi to fluctuate within a regulated band based on market supply and demand and by reference to a basket of currencies. On the same day, the value of the Renminbi appreciated by 2.0% against the U.S. dollar. Since then, the PRC government
has made, and may in the future make, further adjustments to the exchange rate system. The PBOC announces the closing price of a foreign currency traded against the Renminbi in the inter-bank foreign exchange market after the closing of the market
on each working day, and makes it the central parity for the trading against the Renminbi on the following working day.

In
January and April 2005, the PRC State Administration of Foreign Exchange, or SAFE, issued two rules that require PRC residents to register with and receive approvals from SAFE in connection with their offshore investment activities. SAFE has
announced that the purpose of these regulations is to achieve the proper balance of foreign exchange and the standardization of the cross-border flow of funds.

On October 21, 2005, SAFE issued the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-raising and Reverse Investment Activities of Domestic Residents Conducted via Offshore
Special Purpose Companies, or Notice 75, which became effective as of November 1, 2005. Notice 75 replaced the two rules issued by SAFE in January and April 2005 mentioned above.

According to Notice 75:



| |  |  | 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.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Moreover, Notice 75 applies
retroactively. As a result, PRC residents who have established or acquired control of offshore companies that have made onshore investments in the PRC in the past are required to complete the relevant overseas investment foreign exchange
registration procedures by March 31, 2006. Under the relevant rules, failure to comply with the registration procedures set forth in Notice 75 may result in restrictions being imposed on the foreign exchange activities of the relevant onshore
company, including the payment of dividends and other distributions to its offshore parent or affiliate and the capital inflow from the offshore entity, and may also subject relevant PRC residents to penalties under PRC foreign exchange
administration regulations.



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These regulations will affect our financial status, business operations or strategies. For
example, as a Cayman Islands company, and therefore a foreign entity, if Focus Media Holding purchases the assets or equity interest of a company owned by PRC residents in exchange for our equity interests, such PRC residents will be subject to the
registration procedures described in Notice 75. Moreover, PRC residents who are beneficial holders of our shares are required to register with SAFE in connection with their investment in us. Our present or future PRC subsidiaries ability to
conduct foreign exchange activities, such as remittance of dividends and foreign-currency- denominated borrowings, may be subject to compliance with such SAFE registration requirements by relevant PRC residents, over whom we have no control. In
addition, we cannot assure you that any such PRC residents have completed or will complete the necessary approval and registration procedures required by the SAFE regulations. We require all the shareholders in Focus Media Holding who are PRC
residents or have PRC residents as their beneficial owners to comply with any SAFE registration requirements, but we have no control over either our beneficial owners or the outcome of such registration procedures. As our WFOE operation subsidiaries
distribute dividends to their overseas parent companies from time to time, we may be penalized by SAFE if we are found that any of such distribution is made before our beneficial owners, who are PRC residents, fully complete their registrations and
filings with SAFE. Such uncertainties may restrict our ability to implement our acquisition strategy and adversely affect our financial status, business and prospects.

E. Taxation

Cayman Islands Taxation

The following discussion of the material Cayman Islands tax consequences of an investment in our ordinary shares or ADSs is based upon
laws and relevant interpretations thereof in effect as of the date of this annual report, all of which are subject to change, possibly with retroactive effect. This discussion does not deal with all possible tax consequences relating to an
investment in our ADSs, such as the tax consequences under state, local and other tax laws in other jurisdictions outside Cayman Islands. To the extent that the discussion relates to matters of Cayman Islands tax law, it represents the opinion of
Conyers Dill & Pearman, our special Cayman Islands counsel.

The Cayman Islands currently levies no taxes on
individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty or withholding tax applicable to us or to any holder of ADS, or ordinary shares. There are no
other taxes likely to be material to us levied by the Government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or after execution brought within the jurisdiction of the Cayman Islands. No stamp
duty is payable in the Cayman Islands on transfers of shares of Cayman Islands companies except those which hold interests in land in the Cayman Islands. The Cayman Islands is not party to any double taxation treaties. There are no exchange control
regulations or currency restrictions in the Cayman Islands.

Pursuant to Section 6 of the Tax Concessions Law (1999
Revision) of the Cayman Islands, we have obtained an undertaking from the Governor-in-Council:



| | (1) | that no law which is enacted in the Cayman Islands imposing any tax to be levied on profits or income or gains or appreciation shall apply to us or our operations; and
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | that the aforesaid tax or any tax in the nature of estate duty or inheritance tax shall not be payable (i) on the shares, debentures or other obligations of the
Company; or (ii) by way of withholding in whole or in part of any relevant payment as defined in Section 6(3) of the Tax Concessions Law (1999 Revision).
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The undertaking for us is for a period of twenty years from May 3, 2005.

Peoples Republic of China Taxation

The PRC Enterprise Income Tax
Law, or the EIT Law, and the implementation regulations for the EIT Law issued by the PRC State Council, became effective as of January 1, 2008. The EIT Law provides that enterprises established outside of China whose de facto management
bodies are located in China are considered resident enterprises and are generally subject to the uniform 25% enterprise income tax rate as to their worldwide income. Under the implementation regulations for the EIT Law issued by
the PRC State Council, de facto management body is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and treasury, and
acquisition and disposition of properties and other assets of an enterprise. Although substantially all of our operational management is currently based in the PRC, it is unclear whether PRC tax authorities would require (or permit) us to be treated
as a PRC resident enterprise.



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Under the EIT Law and implementation regulations issued by the State Council, PRC income tax
at the rate of 10% is applicable to dividends payable to investors that are non-resident enterprises, which do not have an establishment or place of business in the PRC, or which have such establishment or place of business but the
relevant income is not effectively connected with the establishment or place of business, to the extent such dividends have their sources within the PRC. Similarly, any gain realized on the transfer of ADSs or shares by such investors is also
subject to 10% PRC income tax if such gain is regarded as income derived from sources within the PRC. If we are considered a PRC resident enterprise, it is unclear whether dividends we pay with respect to our ordinary shares or ADSs, or
the gain you may realize from the transfer of our ordinary shares or ADSs, would be treated as income derived from sources within the PRC and be subject to PRC tax. It is also unclear whether, if we are considered a PRC resident
enterprise, holders of our ordinary shares or ADSs might be able to claim the benefit of income tax treaties entered into between China and other countries.

United States Federal Income Taxation

The following discussion describes
certain United States federal income tax consequences of the ownership of our ordinary shares and ADSs as of the date hereof. Except where noted, it deals only with ordinary shares and ADSs held as capital assets. This discussion does not represent
a detailed description of the United States federal income tax consequences applicable to you if you are subject to special treatment under the United States federal income tax laws, including if you are:



| |  |  | 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;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | 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.
| | - |  | ---------------------------------------------------------------------



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Furthermore, the discussion below is based upon the provisions of the Internal Revenue Code
of 1986, as amended (the Code), and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked or modified so as to result in United States federal income tax consequences
different from those discussed below. In addition, this summary is based, in part, upon representations made by the depositary to us and assumes that the deposit agreement, and all other related agreements, will be performed in accordance with their
terms. 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.

As used herein, the term
United States Holder means a beneficial holder of an ordinary share or ADS that is for United States federal income tax purposes:



| |  |  | 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.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If a partnership holds our ordinary shares or ADSs, the tax treatment of a partner will depend upon the status of the partner and the
activities of the partnership. If you are a partner of a partnership holding our ordinary shares or ADSs, you should consult your tax advisors.

ADSs

If you hold ADSs,
for United States federal income tax purposes, you generally will be treated as the owner of the underlying ordinary shares that are represented by such ADSs. Accordingly, deposits or withdrawals of ordinary shares for ADSs will not be subject to
United States federal income tax.

Taxation of Dividends

Subject to the discussion below under Passive Foreign Investment Companies, the gross amount of distributions on our ordinary
shares or ADSs (including amounts withheld to reflect PRC withholding taxes) will be taxable as dividends, to the extent paid out of our current or accumulated earnings and profits, as determined under United States federal income tax principles.
Such income (including any withheld taxes) will be includable in your gross income as ordinary income on the day actually or constructively received by you, in the case of ordinary shares, or by the depositary, in the case of ADSs. Such dividends
will not be eligible for the dividends received deduction allowed to corporations under the Code. With respect to non-corporate United States investors, certain dividends received in taxable years beginning before January 1, 2013 from a
qualified foreign corporation may be subject to reduced rates of taxation. A foreign corporation is treated as a qualified foreign corporation with respect to dividends paid by that corporation on shares (or ADSs backed by such shares) that are
readily tradable on an established securities market in the United States. United States Treasury Department guidance indicates that our ADSs, which are listed on the Nasdaq Global Market, but not our ordinary shares, are readily tradable on an
established securities market in the United States. Thus, we believe that dividends we pay on our ordinary shares that are represented by ADSs, but not our ordinary shares that are not so represented, currently meet such conditions required for the
reduced tax rates. There can be no assurance that our ADSs will be considered readily tradable on an established securities market in later years. A qualified foreign corporation also includes a foreign corporation that is eligible for the benefits
of certain income tax treaties with the Unites States. In the event that we are deemed to be a PRC resident enterprise under PRC tax law (see discussion under Taxation  Peoples Republic of China Taxation), we may
be eligible for the benefits of the income tax treaty between the Unites States and the PRC, and if we are eligible for such benefits, dividends we pay on our ordinary shares, regardless of whether such shares are represented by ADSs, would be
subject to the reduced rates of taxation. Non-corporate holders that do not meet a minimum holding period requirement during which they are not protected from the risk of loss or that elect to treat the dividend income as investment
income pursuant to section 163(d)(4) of the Code will not be eligible for the reduced rates of taxation regardless of our status as a qualified foreign corporation. In addition, the rate reduction will not apply to dividends if the recipient
of a dividend is obligated to make related payments with respect to positions in substantially similar or related property. This disallowance applies even if the minimum holding period has been met. You should consult your own tax advisors regarding
the application of this legislation to your particular circumstances.



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In the event that we are deemed to be a PRC resident enterprise under PRC tax
law (see discussion under Taxation  Peoples Republic of China Taxation, you may be subject to PRC withholding taxes on dividends paid to you with respect to our ordinary shares or ADSs. In that case, however, you may be
able to obtain a reduced rate of PRC withholding taxes under the treaty between the United States and the PRC if certain requirements are met. In addition, subject to certain conditions and limitations, PRC withholding taxes on dividends, if any,
may be treated as foreign taxes eligible for credit against your United States federal income tax liability. For purposes of calculating the foreign tax credit, dividends paid to you with respect to our ordinary shares or ADSs will be treated as
income from sources outside the United States and will generally constitute passive category income.

Furthermore, in certain
circumstances, if you have held the ordinary shares or ADSs for less than a specified minimum holding period during which you are not protected from risk of loss, or are obligated to make payments related to the dividends, you will not be allowed a
foreign tax credit for any PRC withholding taxes imposed on dividends paid on the ordinary shares or ADSs. The rules governing the foreign tax credit are complex. You are urged to consult your tax advisors regarding the availability of the foreign
tax credit under your particular circumstances.

To the extent that the amount of any distribution exceeds our current and
accumulated earnings and profits for a taxable year, as determined under United States federal income tax principles, the distribution will first be treated as a tax-free return of capital, causing a reduction in the adjusted basis of our ordinary
shares or ADSs (thereby increasing the amount of gain, or decreasing the amount of loss, to be recognized by you on a subsequent disposition of our ordinary shares or ADSs), and the balance in excess of adjusted basis will be taxed as capital gain
recognized on a sale or exchange. However, we do not expect to keep earnings and profits in accordance with United States federal income tax principles. Therefore, you should expect that a distribution will generally be treated as a dividend (as
discussed above).

Passive Foreign Investment Companies

We operate an active advertising business in China and based on the past and projected composition of our income and valuation of our assets, including goodwill, we believe we were not a passive foreign
investment company for 2011, we do not expect to be a passive foreign investment company (PFIC), for 2012, and we do not expect to become one in the future, although there can be no assurance in this regard because the analysis depends
on factual determinations.

We will be a PFIC for any taxable year in which:



| |  |  | 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.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

For this purpose, passive income includes dividends, interest, royalties and rents (other
than royalties and rents derived in the active conduct of a trade or business and not derived from a related person). If we own at least 25% (by value) of the stock of another corporation, we will be treated, for purposes of the PFIC tests, as
owning our proportionate share of the other corporations assets and receiving our proportionate share of the other corporations income. However, it is not entirely clear how the contractual arrangements between us and our consolidated
variable interest entities will be treated for purposes of the PFIC rules. If it is determined that we do not own the stock of our consolidated variable interest entities for United States federal income tax purposes (for instance, because the
relevant PRC authorities do not respect these arrangements), we would likely be treated as a PFIC.

The determination of
whether we are a PFIC is made annually for each taxable year of our company. Accordingly, it is possible that we may become a PFIC in the current or any future taxable year due to changes in our asset or income composition. We could become a PFIC,
for example though a decrease in the price of our ADSs (resulting in a decrease in the value of our goodwill, an active asset). If we are a PFIC for any taxable year during which you hold our ordinary shares or ADSs, you will be subject to special
tax rules discussed below.



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If we are a PFIC for any taxable year during which you hold our ordinary shares or ADSs, you
will be subject to special tax rules with respect to any excess distribution received and any gain realized from a sale or other disposition, including a pledge, of ordinary shares or ADSs. Distributions received in a taxable year that
are greater than 125% of the average annual distributions received during the shorter of the three preceding taxable years or your holding period for the ordinary shares or ADSs will be treated as excess distributions. Under these special tax rules:



| |  |  | 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.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition,
non-corporate United States Holders will not be eligible for reduced rates of taxation on any dividends received from us in taxable years beginning before January 1, 2013, if we are a PFIC in the taxable year in which such dividends are paid or
in the preceding taxable year. You will be required to file Internal Revenue Service Form 8621 if you hold our ordinary shares or ADSs in any year in which we are classified as a PFIC.

If we are a PFIC for any taxable year during which you hold our ordinary shares or ADSs and any of our non-United States subsidiaries is
also a PFIC, a United States Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these rules. You are urged to consult your tax advisors about the application of
the PFIC rules to any of our subsidiaries.

If you make an effective mark-to-market election, you will include in each year as
ordinary income the excess of the fair market value of your ADSs at the end of the year over your adjusted tax basis in the ADSs. You will be entitled to deduct as an ordinary loss each year the excess of your adjusted tax basis in the ADSs over
their fair market value at the end of the year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. If you make an effective mark-to-market election, any gain you recognize upon the sale
or other disposition of your ADSs, will be treated as ordinary income and any loss will be treated as ordinary loss, but only to the extent of the net amount previously included in income as a result of the mark-to-market election.

Your adjusted tax basis in the ADSs will be increased by the amount of any income inclusion and decreased by the amount of any deductions
under the mark-to-market rules. If you make a mark-to-market election it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the ADSs are no longer regularly traded on a qualified exchange or
the Internal Revenue Service consents to the revocation of the election. You are urged to consult your tax advisor about the availability of the mark-to-market election, and whether making the election would be advisable in your particular
circumstances.

Alternatively, you can sometimes avoid the rules described above by electing to treat us as a qualified
electing fund under section 1295 of the Code. This option is not available to you because we do not intend to comply with the requirements necessary to permit you to make this election.

You are urged to consult your tax advisors concerning the United States federal income tax consequences of holding our ordinary shares or
ADSs if we are considered a PFIC in any taxable year.



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Taxation of Capital Gains

Subject to the discussion above under Passive Foreign Investment Companies, for United States federal income tax purposes, you
will recognize taxable gain or loss on any sale or exchange of our ordinary shares or ADSs in an amount equal to the difference between the amount realized for the ordinary shares or ADSs and your adjusted tax basis in the ordinary shares or ADSs.
Your adjusted tax basis will generally equal the amount you paid for the ordinary shares or ADSs. Any gain or loss you recognize will generally be capital gain or loss. Capital gains of individuals derived with respect to capital assets held for
more than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. Any gain or loss recognized by you will generally be treated as United States source gain or loss. However, in the event
that we are deemed to be a PRC resident enterprise under PRC tax law (see discussion under Taxation  Peoples Republic of China Taxation) and PRC tax were imposed on any gain, and if you are eligible for the
benefits of the income tax treaty between the United States and the PRC, you may elect to treat such gain as PRC source gain. If you are not eligible for the benefits of the treaty or you fail to make the election to treat any gain as PRC source,
then you may not be able to use the foreign tax credit arising from any PRC tax imposed on the disposition of our ADSs or ordinary shares unless such credit can be applied (subject to applicable limitations) against tax due on other income derived
from foreign sources. You are urged to consult your tax advisors regarding the tax consequences if a foreign withholding tax is imposed on a disposition of ordinary shares or ADSs, including the availability of the foreign tax credit under your
particular circumstances.



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Information Reporting and Backup Withholding

Information reporting will apply to dividends in respect of our ordinary shares or ADSs and the proceeds from the sale, exchange or
redemption of our ordinary shares or ADSs that are paid to you within the United States (and in certain cases, outside the United States), unless you are an exempt recipient such as a corporation. A backup withholding tax may apply to such payments
if you fail to provide a taxpayer identification number or certification of other exempt status or fail to report in full dividend and interest income.

Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your United States federal income tax liability provided the required information is timely
furnished to the Internal Revenue Service.

Certain United States Holders are required to report information relating to ADSs
or ordinary shares, subject to certain exceptions (including an exception for ADSs or ordinary shares held in accounts maintained by certain financial institutions), by attaching a complete IRS Form 8938, Statement of Specified Foreign Financial
Assets, with their tax return for each year in which they hold ADSs or ordinary shares. You are urged to consult your own tax advisors regarding information reporting requirements relating to your ownership of the ADSs or ordinary shares.

PROSPECTIVE PURCHASERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE UNITED STATES FEDERAL
INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY ADDITIONAL TAX CONSEQUENCES RESULTING FROM PURCHASING, HOLDING OR DISPOSING OF ORDINARY SHARES OR ADSS, INCLUDING THE APPLICABILITY AND EFFECT OF THE TAX LAWS OF ANY STATE, LOCAL OR
FOREIGN JURISDICTION, INCLUDING ESTATE, GIFT OR INHERITANCE LAWS.

F. Dividends and Paying Agents

See Item 3. Key Information  D. Risk Factors  Dividends we receive from our operating subsidiaries located in the PRC
may be subject to PRC withholding tax., See Item 8. Financial Information  A. Consolidated Statements and Other Financial Information  Dividend Policy. See Item 10. Additional Information  E. Taxation.

Citibank N.A., as depositary of the ADSs, has agreed to pay to the holders of ADSs the cash dividends or other distributions
it or the custodian receives on shares or other deposited securities, after deducting $0.02 per ADSs.

On January 10, 2012, we
announced a policy starting from 2012 to issue a recurring dividend with payments expected to equal approximately 25% of our annual non-GAAP net income of the preceding fiscal year. A dividend of $17.9 million, or $0.0274 per ordinary share, was
paid out on April 16, 2012 to the shareholders of record on March 30, 2012.

G. Statement by Experts

Not applicable.

H.
Documents on Display

We have filed this annual report on Form 20-F, including exhibits, with the SEC. As allowed by the
SEC, in Item 19 of this annual report, we incorporate by reference certain information we filed with the SEC. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The
information incorporated by reference is considered to be part of this annual report.

We have previously filed with the
Commission our registration statements on Form F-1 and F-3ASR and prospectuses and prospectus supplements under the Securities Act of 1933, as amended, with respect to our ADSs.

The SEC also maintains a website that contains reports, proxy statements and other information about issuers, such as us, who file
electronically with the SEC. The address of that website is http://www.sec.gov. The information on that website is not a part of this annual report.

We will furnish to Citibank, N.A., as depositary of our ADSs, our annual reports. When the depositary receives these reports, it will upon our request promptly provide them to all holders of record of
ADSs. We will also furnish the depositary with all notices of shareholders meetings and other reports and communications in English that we make available to our shareholders. The depositary will make these notices, reports and communications
available to holders of ADSs and will upon our request mail to all holders of record of ADSs the information contained in any notice of a shareholders meeting it receives.

We are subject to periodic reporting and other informational requirements of the Exchange Act, as applicable to foreign private issuers.
Accordingly, we are required to file reports, including annual reports on Form 20-F, and other information with the SEC. As a foreign private issuer, we are exempt from the rules of the Exchange Act prescribing the furnishing and content of proxy
statements to shareholders under the federal proxy rules contained in Sections 14(a), (b) and (c) of the Exchange Act, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit
recovery provisions contained in Section 16 of the Exchange Act. The registration statements, reports and other information so filed can be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E.,
Washington, D.C. 20549. You can request copies of these documents upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms.

I. Subsidiary Information

Not applicable.



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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our exposure to interest rate risk primarily relates to interest expenses under our short-term and long-term bank loans, as well as interest income generated by excess cash, which is mostly held in
interest-bearing bank deposits and short-term investments such as debt securities. We have not used derivative financial instruments in our investment portfolio. Interest earning instruments carry a degree of interest rate risk. We have not been
exposed nor do we anticipate being exposed to material risks due to changes in market interest rates. However, our future interest income may fall short of expectations due to changes in market interest rates.

Foreign Currency Risk

Substantially all our revenues and expenses are denominated in Renminbi. We have not had any material foreign exchange gains or losses. Although in general, our exposure to foreign exchange risks should
be limited, the value of your investment in our ADSs will be affected by the foreign exchange rate between U.S. dollars relative to the Renminbi because the value of our business is effectively denominated in Renminbi, while the ADSs will be traded
in U.S. dollars. Furthermore, a decline in the value of the Renminbi could reduce the U.S. dollar equivalent of the value of the earnings from, and our investments in, our subsidiaries and PRC-incorporated affiliates in China. In addition,
appreciation or depreciation in the value of the Renminbi relative to the U.S. dollar would affect our reported financial results in U.S. dollar terms. See Item 3.B.  Risk Factors  Risks Relating to the Peoples Republic of
China  Fluctuations in exchange rates could result in foreign currency exchange losses.

Inflation

In recent years, China has not experienced significant inflation, and thus inflation has not had a significant effect on our business
historically. According to the National Bureau of Statistics of China, the change in the Consumer Price Index in China was 5.9% negative 0.7%, and 3.3% in 2008, 2009 and 2010, respectively.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

A. Debt securities

Not applicable.

B. Warrants and Rights

Not applicable.

C. Other
securities

Not applicable.

D. American Depositary Shares

Fees and Charges our ADS
holders may have to pay

As an ADS holder, you will be required to pay the following service fees to the
depositary bank:



|                                                                                                 |  |                                                                                                                                                         
|------------------------------------------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
|Service                                                                                          |  | Fees                                                                                                                                                    
|Issuance of ADSs                                                                                 |  | Up to U.S. 5¢ per ADS issued                                                                                                                            
|Cancellation of ADSs                                                                             |  | Up to U.S. 5¢ per ADS canceled                                                                                                                          
|Distribution of cash dividends or other cash distributions                                       |  | Up to U.S. 2¢ per ADS held                                                                                                                              
|Distribution of ADSs pursuant to share dividends, free share distributions or exercise of rights |  | Up to U.S. 5¢ per ADS issued                                                                                                                            
|Distribution of securities other than ADSs or rights to purchase additional ADSs                 |  | Up to U.S. 5¢ per share (or share equivalent) distributed                                                                                               
|Annual Depositary Services Fee                                                                   |  | Annually up to U.S. 2¢ per ADS held at the end of each calendar year, except to the extent of any cash dividend fee(s) charged during such calendar year
|Transfer of ADRs                                                                                 |  | U.S. $1.50 per certificate presented for transfer                                                                                                       

As an ADS holder you will also be responsible to pay certain fees and expenses incurred by the depositary
bank and certain taxes and governmental charges such as:



| |  |  | Fees for the transfer and registration of ordinary shares charged by the registrar and transfer agent for the ordinary shares in the Cayman Islands
(i.e., upon deposit and withdrawal of ordinary shares).
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expenses incurred for converting foreign currency into U.S. dollars.
| | - |  | --------------------------------------------------------------------



| |  |  | Expenses for cable, telex and fax transmissions and for delivery of securities.
| | - |  | -------------------------------------------------------------------------------



| |  |  | Taxes and duties upon the transfer of securities (i.e., when ordinary shares are deposited or withdrawn from deposit).
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | Fees and expenses incurred in connection with the delivery or servicing of ordinary shares on deposit.
| | - |  | ------------------------------------------------------------------------------------------------------

We have agreed to pay certain other charges and expenses of the depositary bank. Note that the fees and charges you may be required to
pay may varyover time and may be changed by us and by the depositary bank. You will receive prior notice of such changes.

Fees and other payments made by the depositary to us

Citibank N.A., as depositary, has agreed to reimburse us for a portion of certain expenses we incur that are related to establishment and
maintenance of the ADR program, including investor relations expenses. There are limits on the amount of expenses for which the depositary will reimburse us, but the amount of reimbursement available to us is not related to the amounts of fees the
depositary collects from investors. Further, the depositary has agreed to reimburse us certain fees payable to the depositary by holders of ADSs. For the year ended December 31, 2011, we have not received any payment, directly or indirectly,
from the depositary in connection with the establishment and maintenance of the ADR program.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None of these events occurred in any of fiscal 2009, 2010 and 2011.



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ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE
OF PROCEEDS

A. Modifications of Rights

On April 11, 2007, we effected a change of the ratio of our ADSs to ordinary shares from one (1) ADS representing ten (1) ordinary shares to one (1) ADS representing five
(5) ordinary shares.

B. Use of Proceeds

Not applicable.



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|ITEM 15. | CONTROLS AND PROCEDURES
|-------- | -----------------------

Disclosure
Controls and Procedures

Under the supervision and with the participation of our management, including our chief executive
officer and our chief financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation,
our chief executive officer and chief financial officer concluded that, as of December 31, 2011, our disclosure controls and procedures were effective.

Managements Annual Report on Internal Control Over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as
amended, for our company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with
generally accepted accounting principles and includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of a companys
assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that a companys receipts and
expenditures are being made only in accordance with authorizations of a companys management and directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of a
companys assets that could have a material effect on the consolidated financial statements.

Because of its inherent
limitations, a system of internal control over financial reporting can provide only reasonable assurance with respect to consolidated financial statement preparation and presentation and may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As required by Section 404 of the Sarbanes-Oxley Act of 2002 and related rules promulgated by the Securities and Exchange
Commission, our management assessed the effectiveness of internal control over financial reporting as of December 31, 2011 using the criteria set forth in the report Internal Control  Integrated Framework published by the
Committee of Sponsoring Organizations of the Treadway Commission (known as COSO). Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2011.

The effectiveness of internal control over financial reporting as of December 31, 2011 has been audited by Deloitte Touche Tohmatsu
CPA Ltd., an independent registered public accounting firm, who has also audited our consolidated financial statements for the year ended December 31, 2011.



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Focus Media Holding Limited

We have audited the internal control over financial reporting of Focus Media Holding Limited and subsidiaries (the Group) as of December 31, 2011, based on criteria established in Internal
Control  Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. The Groups management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Managements Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Groups
internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A companys internal control over financial reporting is a process designed by, or under the supervision of, the companys principal executive and principal financial officers, or persons
performing similar functions, and effected by the companys board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or
fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Group
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control  Integrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated financial statements as of and for the year ended December 31, 2011 of the Group and our report dated April 27, 2012 expressed an unqualified opinion on those financial statements.

/s/ DELOITTE TOUCHE TOHMATSU CPA LTD.

Shanghai, China

April 27, 2012



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ITEM 16.

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Our Board of Directors has determined that Daqing Qi, who is an independent director, qualifies as an audit committee financial expert as
defined in Item 16A of the instruction to Form 20-F.

ITEM 16B. CODE OF ETHICS

Our board of directors adopted a code of business conduct and ethics on April 16, 2005, which is applicable to our directors,
officers and employees. Our code of business conduct and ethics is publicly available on our website at: http://nocache.corporate-ir.net/media_files/irol/19/190067/corp_gov/Conduct_and_Ethics.pdf.



|ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|--------- | --------------------------------------

The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by Deloitte Touche Tohmatsu CPA Ltd., our independent registered
public accounting firm, for the years indicated.



|                      |  |                                 |       |  |      |   |       | 
|--------------------- |  | ------------------------------- | ----- |  | ---- | - | ----- | 
|                      |  | For the year ended December 31, |      
|                      |  | 2010                            |       |  | 2011 |  
|                      |  | (in thousands, US dollar)       |      
|Audit Fees(1)         |  | $                               | 1,400 |  |      | $ | 1,600 | 
|Audit-related Fees(2) |  |                                 | 131   |  |      |   |      | 
|Tax Fees(3)           |  |                                 | 150   |  |      |   | 100   | 
|All Other Fees(4)     |  |                                 |      |  |      |   |      | 
|                      |  |                                 |       |  |      |   |       | 
|Total                 |  | $                               | 1,681 |  |      | $ | 1,700 | 
|                      |  |                                 |       |  |      |   |       | 



|(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.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

Prior to forming an audit committee, our board of directors is responsible for the oversight of
our independent registered public accounting firm. The policy of our board of directors is to pre-approve all audit and non-audit services provided by Deloitte Touche Tohmatsu CPA Ltd., including audit services, audit-related services, tax services
and other services, as described above.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEES

None.



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ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS



|               |  |                                 |           |  |                              |   |       |                                                                     |  |  |                                                                          |  |  |   |             | 
|-------------- |  | ------------------------------- | --------- |  | ---------------------------- | - | ----- | ------------------------------------------------------------------- |  |  | ------------------------------------------------------------------------ |  |  | - | ----------- | 
|Period         |  | Total Number ofADSs Repurchased |           |  | Average Price Paidper ADS(2) |   |       | Total Number ofADSs Purchased asPart of
PubliclyAnnouncedProgram(1) |  |  | ApproximateDollar Value ofADSs that May YetBe
PurchasedUnder the Program | 
|August 2008    |  |                                 | 680,973   |  |                              | $ | 29.35 |                                                                     |  |  | 680,973                                                                  |  |  | $ | 80,002,102  | 
|September 2008 |  |                                 | 405,654   |  |                              | $ | 24.63 |                                                                     |  |  | 1,086,627                                                                |  |  | $ | 70,002,136  | 
|October 2008   |  |                                 | 501,715   |  |                              | $ | 19.91 |                                                                     |  |  | 1,588,342                                                                |  |  | $ | 60,002,149  | 
|November 2008  |  |                                 | 1,000,000 |  |                              | $ | 7.48  |                                                                     |  |  | 2,588,342                                                                |  |  | $ | 52,499,789  | 
|May 2010       |  |                                 | 2,392,134 |  |                              | $ | 15.36 |                                                                     |  |  | 2,393,134                                                                |  |  | $ | 163,255,127 | 
|September 2010 |  |                                 | 9,523,810 |  |                              | $ | 21.00 |                                                                     |  |  | 11,915,944                                                               |  |  | $ | 63,255,117  | 
|December 2010  |  |                                 | 134,842   |  |                              | $ | 22.25 |                                                                     |  |  | 12,050,786                                                               |  |  | $ | 60,255,139  | 
|July 2011      |  |                                 | 1,956,310 |  |                              | $ | 30.67 |                                                                     |  |  | 14,007,096                                                               |  |  | $ | 150,255,111 | 
|August 2011    |  |                                 | 209,901   |  |                              | $ | 28.56 |                                                                     |  |  | 14,216,997                                                               |  |  | $ | 144,253,957 | 
|September 2011 |  |                                 | 484,107   |  |                              | $ | 28.41 |                                                                     |  |  | 14,701,104                                                               |  |  | $ | 134,969,511 | 
|October 2011   |  |                                 | 2,016,758 |  |                              | $ | 19.70 |                                                                     |  |  | 16,717,862                                                               |  |  | $ | 294,909,027 | 
|November 2011  |  |                                 | 3,206,859 |  |                              | $ | 17.56 |                                                                     |  |  | 19,924,721                                                               |  |  | $ | 238,612,748 | 
|December 2011  |  |                                 | 2,243,454 |  |                              | $ | 19.88 |                                                                     |  |  | 22,168,175                                                               |  |  | $ | 194,018,605 | 
|April 2012     |  |                                 | 979,745   |  |                              | $ | 23.30 |                                                                     |  |  | 23,147,920                                                               |  |  | $ | 171,191,184 | 



|(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, made from time to time on the open market at prevailing market prices and have been made subject to restrictions relating to volume, price and timing. This share
repurchase program was implemented 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 reviewed the share repurchase program periodically,
and may authorize adjustment of its terms and size accordingly. At the end of this program, we cumulatively repurchased 2,588,342 ADSs in the amount of US$47.5 million.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On February 2, 2010, we announced that our board of directors has approved a share repurchase program. Under the terms of the
approved program, we may repurchase up to US$200 million worth of our issued and outstanding ADSs. The repurchases will be made from time to time on the open market at prevailing market prices or in block trades. The authorized repurchase amount was
The authorized repurchase amount was subsequently increased to US$300 million in August 2010, US$450 million in June 2011 and US$650 million in October 2011. The repurchases will be made on the open market at prevailing market prices, in block
trades, other privately negotiated transactions or otherwise in accordance with applicable laws and regulations. The purchases will be made subject to restrictions relating to volume, price and timing. The timing and extent of any purchases will
depend upon market conditions, the trading price of its ADSs and other factors.

|(2) | The average price paid per ADS is calculated using the execution price for each repurchase excluding commissions paid to brokers.
|--- | ---------------------------------------------------------------------------------------------------------------------------------



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ITEM 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT

None.

ITEM 16G. CORPORATE GOVERNANCE

We are a foreign private issuer (as such term is defined in Rule 3b-4
under the Exchange Act), and our ADSs, each representing five ordinary shares, are listed on the Nasdaq Global Market, or Nasdaq. Under Section 5615 of the Nasdaq Listing Rules, Nasdaq-listed companies that are foreign private issuers are
permitted to follow home country practice in lieu of the corporate governance provisions specified by the Nasdaq with limited exceptions. The following summarizes some significant ways in which our corporate governance practices differ from those
followed by domestic companies under the listing standards of the Nasdaq.

Under Nasdaq Listing Rule 5635(c), shareholder
approval is required prior to the issuance of securities when a stock option or purchase plan is to be established or materially amended or other equity compensation arrangement made or materially amended, pursuant to which stock may be acquired by
officers, directors, employees, or consultants, subject to certain exceptions. This includes the issuance of shares to officers or directors in a private placement at a price less than market value, which is considered a form of equity compensation.
The corporate governance practice in our home country, the Cayman Islands, does not require shareholder approval for the issuance of shares in a private placement at a price less than the greater of book value and market value, provided that the
directors consider the issue price represents fair value for the shares being issued. We currently rely upon the relevant home country exemption in lieu of the requirement for shareholder approval of share issuances to officers or directors in
private placements at a price less than the market value of the shares.

PART III

ITEM 16H. MINE SAFETY DISCLOSURE

Not applicable.

ITEM 17. FINANCIAL STATEMENTS

The Registrant has elected to provide the financial statements and related information specified in Item 18.

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.



|                                                                                                                                   |  |       |     | 
|---------------------------------------------------------------------------------------------------------------------------------- |  | ----- | --- | 
|                                                                                                                                   |  | Pages |    
|Report of Independent Registered Public Accounting Firm                                                                            |  |       | F-2 | 
|Consolidated Balance Sheets as of December 31, 2010 and 2011                                                                       |  |       | F-3 | 
|Consolidated Statements of Operations for the Years Ended December 31, 2009, 2010 and
2011                                         |  |       | F-4 | 
|Consolidated Statements of Changes in Equity and Comprehensive Income (Loss) for the Years Ended December 31,
 2009, 2010 and 2011 |  |       | F-5 | 
|Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2010 and
2011                                         |  |       | F-6 | 
|Notes to the Consolidated Financial Statements for the Years Ended December 31, 2009, 2010 and
2011                                |  |       | F-8 | 



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ITEM 19. EXHIBITS



|               |  |                                                                                                                                                                                                                                                                                                                                                                       
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
Number |  | Description of Exhibits                                                                                                                                                                                                                                                                                                                                               
|               | 
|3.1*           |  | 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           |  | Amended and Restated Deposit Agreement dated April 9, 2007 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. 333-142820) 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 the corporate structure under PRC law.                                                                                                                                                                                                                       
|               | 
|8.1*           |  | Form of opinion of Conyers Dill & Pearman, special Cayman Islands tax counsel to the registrant, regarding tax matters.                                                                                                                                                                                                                                               
|               | 
|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 certain 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., Focus Media Technology (Shanghai) Co., Ltd. and
certain subsidiaries of Shanghai Focus Media Advertisement 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 certain subsidiaries of Shanghai Focus Media Advertisement Co., Ltd.                                                                                        
|               | 
|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. (Previously filed as Exhibit 10.10 to the Companys
registration statement on Form F-1 (File No.: 333- 146913), dated October 24, 2007.)                                                                                                  
|               | 
|10.14*         |  | Technology Transfer Agreement entered into by Jimmy Wei Yu and Focus Media Digital Information (Shanghai) Co., Ltd., dated November 1, 2004. (Previously filed as Exhibit 10.11 to
the Companys registration statement on Form F-1 (File No.: 333-146913), dated October 24, 2007.)                                                                                  
|               | 
|10.15*         |  | Asset and Business Acquisition Agreement between Shanghai Everease Communication Company and Shanghai Focus Media Advertisement Co., Ltd. dated July 1, 2003. (Previously filed as
Exhibit 10.93 to the Companys registration statement on Form F-1 (File No.: 333-146913), dated October 24, 2007.)                                                                 
|               | 
|10.16*         |  | Everease Non-competition Agreement between Focus Media Holding Limited and Shanghai Everease Communications Company, dated as of November 2004. (Previously filed as Exhibit 10.12 to
the Companys registration statement on Form F-1 (File No.: 333-125785), dated June 14, 2005.)                                                                                  
|               | 
|10.17**        |  | Sales Contract between Shanghai Everease Communication Company and Shanghai Focus Media Advertisement Co., Ltd., dated May 2003. (Previously filed as Exhibit 10.20 to the
Companys registration statement on Form F-1 (File No.: 333-125785), dated June 14, 2005.)                                                                                                 



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|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
Number |  | Description of Exhibits                                                                                                                                                                                                                                                                                                                                                                                                                               
|               | 
|10.18**        |  | Project Cooperation Framework Agreement between Shanghai Everease Communication Company and Beijing Suodi Advertising Co., Ltd., dated February, April and June 2003. (Previously
filed as Exhibit 10.21 to the Companys registration statement on Form F-1 (File No.: 333-125785), dated June 14, 2005.)                                                                                                                                            
|               | 
|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.
(Previously filed as Exhibit 10.22 to the Companys registration statement on Form F-1 (File No.: 333-125785), dated June 14, 2005.)                                                                                                                               
|               | 
|10.20**        |  | Business Agency Agreement between Shanghai On-Target Advertising Co., Ltd. and Shanghai Focus Media Advertisement Co., Ltd. (Previously filed as Exhibit 10.23 to the Companys
registration statement on Form F-1 (File No.: 333-125785), dated June 14, 2005.)                                                                                                                                                                                      
|               | 
|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. (Previously filed as Exhibit 10.24 to the Companys registration statement on Form F-1 (File No.: 333-125785), dated June 14, 2005.)                                                                                                             
|               | 
|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 certain then subsidiaries of Shanghai Focus Media Advertisement Co., Ltd. (Previously filed as Exhibit 10.13 to the Companys registration statement on Form F-1 (File No.: 333-146913), dated
October 24, 2007.)
|               | 
|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. (Previously filed as Exhibit 10.98 to the Companys registration statement on Form F-1 (File No.: 333-146913), dated October 24, 2007.)                                                                                        
|               | 
|10.49*         |  | Share Purchase Agreement, dated as of January 7, 2006, among Focus Media Holding Limited, Target Media Holdings Limited and Its Shareholders. (Previously filed as Exhibit 10.97 to
the Companys registration statement on Form F-1 (File No.: 333-146913), dated October 24, 2007.)                                                                                                                                                                 
|               | 
|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 Media Holdings Co., Ltd. (Previously filed as Exhibit 10.24 to the Companys
registration statement on Form F-1 (File No.: 333-146913), dated October 24, 2007.)                                                                                                                                                                                    
|               | 
|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.                                                                                                                                                                                                                                                                                                                          
|               | 
|10.72¥         |  | Acknowledgement Letter of Participation of Shareholders Voting Rights Proxy Agreement, dated May 22, 2006, of Fuzhou Fukesi Advertising 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.                                                                                                                                                                                                                                                                                    



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|               |  |                                                                                                                                                                                                                                                                                         
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
Number |  | Description of Exhibits                                                                                                                                                                                                                                                                 
|               | 
|10.85a         |  | Confirmation Letter, dated as of August 30, 2010, among Shanghai Focus Media Advertisement Co., Ltd., Jimmy Wei Yu, Shanghai Perfect Media Advertising Agency Co., Ltd., Focus
Media Technology (Shanghai) Co., Ltd. and Focus Media Digital Information Technology (Shanghai) Co., Ltd.
|               | 
|10.98ß         |  | 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.                                                                                                   
|               | 
|10.168g        |  | 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.                                
|               | 
|10.181g       |  | Asset Purchase Agreement, dated as of December 22, 2008, between Focus Media Holding Limited and SINA Corporation.                                                                                                                                                                      
|               | 
|10.182a        |  | 2010 Employee Share Option Plan.                                                                                                                                                                                                                                                        
|               | 
|10.183a        |  | Subscription Agreement, dated as of September 23, 2009, between Focus Media Holding Limited and JJ Media Investment Holding Limited.                                                                                                                                                    
|               | 
|10.184a        |  | Restricted ADS Facility Letter, dated as of November 19, 2009, between Focus Media Holding Limited and Citibank, N.A., as depositary.                                                                                                                                                   
|               | 
|10.185a        |  | Shares Purchase and Sales Agreement, dated as of January 1, 2010, among Focus Media Holding Limited, Allyes Online Media Holdings Ltd. and the purchasers named
therein.                                                                                                                
|               | 
|10.186a        |  | Equity Transfer Agreement, dated as of January 1, 2010, among Allyes Shanghai Investment Management Services Shanghai, Smartmedia Investment Management Services and Allyes (China)
Holdings Limited and the purchasers named therein.                                                  
|               | 
|10.187d        |  | Share Purchase Agreement By and Among Focus Media Holding Limited, Asteroid Media Holding Limited, and Focus Media Holding Limited, as representative and attorney-in-fact, dated as
of July 30, 2010.                                                                                  
|               | 
|10.188W        |  | Indemnity Agreement, dated September 7, 2010, between JJ Media Investment Holding Limited and Focus Media Holding Limited.                                                                                                                                                              
|               | 
|10.189d        |  | Securities Purchase Agreement between Fosun International Limited and Focus Media Holding Limited, dated September 20, 2010.                                                                                                                                                            
|               | 
|10.190V        |  | Securities Purchase Agreement by and among VisionChina Media Inc., Focus Media Holding Limited and the other investors named therein, dated December 30, 2010.                                                                                                                          
|               | 
|10.191V        |  | Shareholders Agreement by and among Focus Media Holding Limited, JJ Media Investment Holding Limited, Front Lead Investments Limited, Limin Li and VisionChina Media Inc., dated
January 13, 2011.                                                                                      
|               | 
|10.192V        |  | Registration Rights Agreement by and among VisionChina Media Inc., Focus Media Holding Limited, JJ Media Investment Holding Limited and Front Lead Investments Limited, dated January
13, 2011.                                                                                         
|               | 
|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.                                                                                                                                                                                                                                             
|               | 
|21.1           |  | List of Subsidiaries.                                                                                                                                                                                                                                                                   
|               | 
|23.1           |  | Consent of Global Law Office.                                                                                                                                                                                                                                                           
|               | 
|23.2           |  | Consent of Conyers Dill & Pearman.                                                                                                                                                                                                                                                      
|               | 
|23.3           |  | Consent of Deloitte Touche Tohmatsu CPA Ltd.                                                                                                                                                                                                                                            



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|* | Previously filed with the Companys registration statement on Form F-1 (File No.: 333-146913), dated October 24, 2007 and incorporated by reference herein.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|** | Previously filed with the Companys registration statement on Form F-1 (File No.: 333-125785), dated June 14, 2005 and incorporated by reference herein.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------

| | Previously filed with the Companys negotiation statement on Form F-6 (File No. 333-142820), dated April 2, 2007.
|- | -----------------------------------------------------------------------------------------------------------------

|*** | Previously filed with the Companys amended registration statement on Form F-1/A (File No.: 333-131065), dated January 23, 2006 and incorporated by reference
herein.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|¥ | Previously filed with the Companys registration statement on Form F-1 (File No.: 333-134714), dated June 2, 2006 and incorporated by reference herein.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------

|a | Previously filed with the Companys annual report on Form 20-F for the year ended December 31, 2009 and incorporated by reference herein.
|- | -----------------------------------------------------------------------------------------------------------------------------------------

|ß | Previously filed with the Companys annual report on Form 20-F for the year ended December 31, 2006 and incorporated by reference herein and incorporated by
reference herein.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|g | Previously filed with the Companys annual report on Form 20-F for the year ended December 31, 2008 and incorporated by reference herein.
|- | -----------------------------------------------------------------------------------------------------------------------------------------

|d | Previously filed with the Companys amendment to the annual report on Form 20-F for the year ended December 31, 2009 dated September 7, 2010 and
incorporated by reference herein.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|V | Previously filed with the Companys annual report on Form 20-F for the year ended December 31, 2010 and incorporated by reference herein.
|- | -----------------------------------------------------------------------------------------------------------------------------------------

|W | Previously filed with the Companys report on Form 6-K (File No.: 000-51387), dated September 8, 2010 and incorporated by reference
|- | -----------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.



Focus Media Holding LimitedBy:

/s/ Jason Nanchun JiangName: Jason Nanchun Jiang Title: Chairman and Chief Executive Officer


Date: April 27, 2012



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS



|                                                                                                                                   |  |       |     | 
|---------------------------------------------------------------------------------------------------------------------------------- |  | ----- | --- | 
|                                                                                                                                   |  | Pages |    
|Report of Independent Registered Public Accounting Firm                                                                            |  |       | F-2 | 
|Consolidated Balance Sheets as of December 31, 2010 and 2011                                                                       |  |       | F-3 | 
|Consolidated Statements of Operations for the Years Ended December 31, 2009, 2010 and
2011                                         |  |       | F-4 | 
|Consolidated Statements of Changes in Equity and Comprehensive Income (Loss) for the Years Ended December 31,
 2009, 2010 and 2011 |  |       | F-5 | 
|Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2010 and
2011                                         |  |       | F-6 | 
|Notes to the Consolidated Financial Statements for the Years Ended December 31, 2009, 2010 and
2011                                |  |       | F-8 | 



F-1



---

##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Focus Media Holding Limited

We have audited the accompanying consolidated balance sheets of
Focus Media Holding Limited and subsidiaries (the Group) as of December 31, 2010 and 2011, and the related consolidated statements of operations, changes in equity and comprehensive income (loss), and cash flows for each of the
three years in the period ended December 31, 2011. These financial statements are the responsibility of the Groups management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Focus
Media Holding Limited and subsidiaries as of December 31, 2010 and 2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011, in conformity with accounting principles
generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the Groups internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control  Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated April 27, 2012 expressed an unqualified opinion on the Groups internal control over financial reporting.

/s/ DELOITTE TOUCHE TOHMATSU CPA LTD.

Shanghai, China

April 27, 2012



F-2



---

##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                                                                                               |  |                                                                           |               |   |      |   |               |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------- | ------------- | - | ---- | - | ------------- | -
|                                                                                                                                                                                                                                               |  | December 31,                                                              |              
|                                                                                                                                                                                                                                               |  | 2010                                                                      |               |   | 2011 |  
|                                                                                                                                                                                                                                               |  | (In U.S. Dollars, except shareand per share data, unlessotherwise stated) |              
|Assets                                                                                                                                                                                                                                         |  |                                                                           |               |   |      |   |               |  
|Current assets:                                                                                                                                                                                                                                |  |                                                                           |               |   |      |   |               |  
|Cash and cash equivalents                                                                                                                                                                                                                      |  | $                                                                         | 454,475,593   |   |      | $ | 331,218,497   |  
|Restricted cash                                                                                                                                                                                                                                |  |                                                                           |              |   |      |   | 99,673,063    |  
|Short-term investments                                                                                                                                                                                                                         |  |                                                                           | 137,551,150   |   |      |   | 226,047,469   |  
|Accounts receivable, net of allowance for doubtful accounts of $21,088,503 and $31,068,977 in 2010 and 2011,
respectively                                                                                                                      |  |                                                                           | 157,328,743   |   |      |   | 249,206,254   |  
|Prepaid expenses and other current assets                                                                                                                                                                                                      |  |                                                                           | 31,780,845    |   |      |   | 34,085,560    |  
|Deferred tax assets                                                                                                                                                                                                                            |  |                                                                           | 22,979,021    |   |      |   | 29,914,442    |  
|Deposits paid for acquisition of subsidiaries                                                                                                                                                                                                  |  |                                                                           | 1,162,668     |   |      |   |              |  
|Amounts due from related parties                                                                                                                                                                                                               |  |                                                                           | 469,374       |   |      |   | 1,824,436     |  
|Rental deposits                                                                                                                                                                                                                                |  |                                                                           | 46,613,780    |   |      |   | 60,913,252    |  
|                                                                                                                                                                                                                                               |  |                                                                           |               |   |      |   |               |  
|                                                                                                                                                                                                                                               |  |                                                                          
|Total current assets                                                                                                                                                                                                                           |  |                                                                           | 852,361,174   |   |      |   | 1,032,882,973 |  
|                                                                                                                                                                                                                                               |  |                                                                          
|Restricted cash, non-current                                                                                                                                                                                                                   |  |                                                                           |              |   |      |   | 99,673,063    |  
|Rental deposits, non-current                                                                                                                                                                                                                   |  |                                                                           | 5,681,865     |   |      |   | 4,046,749     |  
|Equipment, net                                                                                                                                                                                                                                 |  |                                                                           | 68,886,796    |   |      |   | 79,042,120    |  
|Acquired intangible assets, net                                                                                                                                                                                                                |  |                                                                           | 24,162,043    |   |      |   | 35,025,435    |  
|Goodwill                                                                                                                                                                                                                                       |  |                                                                           | 425,334,632   |   |      |   | 459,112,676   |  
|Equity method investment                                                                                                                                                                                                                       |  |                                                                           |              |   |      |   | 19,010,818    |  
|Cost method investment                                                                                                                                                                                                                         |  |                                                                           |              |   |      |   | 1,523,592     |  
|Other long-term assets                                                                                                                                                                                                                         |  |                                                                           | 7,733,029     |   |      |   | 11,119,725    |  
|                                                                                                                                                                                                                                               |  |                                                                           |               |   |      |   |               |  
|Total assets                                                                                                                                                                                                                                   |  | $                                                                         | 1,384,159,539 |   |      | $ | 1,741,437,151 |  
|                                                                                                                                                                                                                                               |  |                                                                           |               |   |      |   |               |  
|                                                                                                                                                                                                                                               |  |                                                                          
|Liabilities and equity                                                                                                                                                                                                                         |  |                                                                           |               |   |      |   |               |  
|Current liabilities:                                                                                                                                                                                                                           |  |                                                                           |               |   |      |   |               |  
|Short -term bank loan                                                                                                                                                                                                                          |  | $                                                                         |              |   |      | $ | 100,000,000   |  
|Accounts payable (including accounts payable of the consolidated VIEs without recourse to the Group of $4,340,424 and $4,321,376
as of December 31, 2010 and 2011, respectively)                                                               |  |                                                                           | 16,589,293    |   |      |   | 19,448,258    |  
|Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of the consolidated VIEs
without recourse to the Group of $10,635,394 and $16,878,170 as of December 31, 2010 and 2011, respectively) |  |                                                                           | 121,763,522   |   |      |   | 173,753,526   |  
|Income taxes payable (including income taxes payable of the consolidated VIEs without recourse to the Group of $2,914,969 and
$3,051,811 as of December 31, 2010 and 2011, respectively)                                                       |  |                                                                           | 8,890,191     |   |      |   | 35,462,590    |  
|Amounts due to related parties                                                                                                                                                                                                                 |  |                                                                           | 1,848,189     |   |      |   | 2,195,904     |  
|Deferred tax liabilities (including deferred tax liabilities of the consolidated VIEs without recourse to the Group of $1,820,531
and $1,753,744 as of December 31, 2010 and 2011, respectively)                                               |  |                                                                           | 23,627,893    |   |      |   | 33,550,044    |  
|                                                                                                                                                                                                                                               |  |                                                                           |               |   |      |   |               |  
|                                                                                                                                                                                                                                               |  |                                                                          
|Total current liabilities                                                                                                                                                                                                                      |  |                                                                           | 172,719,088   |   |      |   | 364,410,322   |  
|Long -term debt                                                                                                                                                                                                                                |  |                                                                           |              |   |      |   | 71,000,000    |  
|Acquisition purchase price payable                                                                                                                                                                                                             |  |                                                                           |              |   |      |   | 13,106,060    |  
|Deferred tax liabilities (including deferred tax liabilities of the consolidated VIEs without recourse to the Group of $710,252
and $791,750 as of December 31, 2010 and 2011, respectively)                                                   |  |                                                                           | 9,997,511     |   |      |   | 20,099,000    |  
|                                                                                                                                                                                                                                               |  |                                                                           |               |   |      |   |               |  
|                                                                                                                                                                                                                                               |  |                                                                          
|Total liabilities                                                                                                                                                                                                                              |  | $                                                                         | 182,716,599   |   |      | $ | 468,615,382   |  
|                                                                                                                                                                                                                                               |  |                                                                           |               |   |      |   |               |  
|                                                                                                                                                                                                                                               |  |                                                                          
|Commitments and contingencies (Note 20)                                                                                                                                                                                                        |  |                                                                           |               |   |      |   |               |  
|                                                                                                                                                                                                                                               |  |                                                                          
|Equity                                                                                                                                                                                                                                         |  |                                                                           |               |   |      |   |               |  
|Ordinary shares ($0.00005 par value; 19,800,000,000 and 19,800,000,000 shares authorized in 2010 and 2011; 677,934,625 and
646,452,740 issued and outstanding in 2010 and 2011, respectively)                                                  |  | $                                                                         | 33,920        |   |      | $ | 32,346        |  
|Additional paid-in capital                                                                                                                                                                                                                     |  |                                                                           | 1,685,148,851 |   |      |   | 1,533,617,339 |  
|Subscription receivable                                                                                                                                                                                                                        |  |                                                                           | (90,984       | ) |      |   |              |  
|Accumulated deficit                                                                                                                                                                                                                            |  |                                                                           | (562,952,914  | ) |      |   | (400,275,876  | )
|Accumulated other comprehensive income                                                                                                                                                                                                         |  |                                                                           | 78,339,729    |   |      |   | 119,795,537   |  
|                                                                                                                                                                                                                                               |  |                                                                           |               |   |      |   |               |  
|                                                                                                                                                                                                                                               |  |                                                                          
|Total Focus Media Holdings Limited shareholders equity                                                                                                                                                                                        |  | $                                                                         | 1,200,478,602 |   |      | $ | 1,253,169,346 |  
|Noncontrolling interests                                                                                                                                                                                                                       |  |                                                                           | 964,338       |   |      |   | 19,652,423    |  
|                                                                                                                                                                                                                                               |  |                                                                           |               |   |      |   |               |  
|                                                                                                                                                                                                                                               |  |                                                                          
|Total equity                                                                                                                                                                                                                                   |  | $                                                                         | 1,201,442,940 |   |      | $ | 1,272,821,769 |  
|                                                                                                                                                                                                                                               |  |                                                                           |               |   |      |   |               |  
|                                                                                                                                                                                                                                               |  |                                                                          
|Total liabilities and equity                                                                                                                                                                                                                   |  | $                                                                         | 1,384,159,539 |   |      | $ | 1,741,437,151 |  
|                                                                                                                                                                                                                                               |  |                                                                           |               |   |      |   |               |  

The accompanying notes are an integral part of these consolidated financial statements.



F-3



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS



|                                                                           |  |                                                                            |              |   |      |   |             |      |  |   |             |  
|-------------------------------------------------------------------------- |  | -------------------------------------------------------------------------- | ------------ | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                                           |  | For the years ended December 31,                                           |             
|                                                                           |  | 2009                                                                       |              |   | 2010 |   |             | 2011 | 
|                                                                           |  | (In U.S. Dollars, except share and per share data,unless otherwise stated) |             
|Net revenues                                                               |  | $                                                                          | 397,164,522  |   |      | $ | 516,314,697 |      |  | $ | 792,620,177 |  
|                                                                           |  |                                                                            |              |   |      |   |             |      |  |   |             |  
|Cost of revenues                                                           |  |                                                                            | 241,073,203  |   |      |   | 221,690,034 |      |  |   | 289,644,266 |  
|                                                                           |  |                                                                            |              |   |      |   |             |      |  |   |             |  
|Gross profit                                                               |  |                                                                            | 156,091,319  |   |      |   | 294,624,663 |      |  |   | 502,975,911 |  
|                                                                           |  |                                                                            |              |   |      |   |             |      |  |   |             |  
|Operating expenses:                                                        |  |                                                                            |              |   |      |   |             |      |  |   |             |  
|General and administrative                                                 |  |                                                                            | 88,833,305   |   |      |   | 79,759,757  |      |  |   | 127,012,894 |  
|Selling and marketing                                                      |  |                                                                            | 79,786,861   |   |      |   | 103,722,237 |      |  |   | 147,716,437 |  
|Impairment loss                                                            |  |                                                                            | 63,646,227   |   |      |   | 5,736,134   |      |  |   |            |  
|Other operating expenses (income), net                                     |  |                                                                            | 13,111,043   |   |      |   | (14,143,945 | )    |  |   | (16,137,695 | )
|                                                                           |  |                                                                            |              |   |      |   |             |      |  |   |             |  
|Total operating expenses                                                   |  |                                                                            | 245,377,436  |   |      |   | 175,074,183 |      |  |   | 258,591,636 |  
|                                                                           |  |                                                                            |              |   |      |   |             |      |  |   |             |  
|Income (loss) from operations                                              |  |                                                                            | (89,286,117  | ) |      |   | 119,550,480 |      |  |   | 244,384,275 |  
|Interest income                                                            |  |                                                                            | 4,945,946    |   |      |   | 7,259,508   |      |  |   | 15,538,943  |  
|Interest expense                                                           |  |                                                                            |             |   |      |   |            |      |  |   | 716,956     |  
|Investment loss                                                            |  |                                                                            |             |   |      |   | 1,287,881   |      |  |   |            |  
|                                                                           |  |                                                                            |              |   |      |   |             |      |  |   |             |  
|Income (loss) from continuing operations before income taxes               |  |                                                                            | (84,340,171  | ) |      |   | 125,522,107 |      |  |   | 259,206,262 |  
|Income taxes                                                               |  |                                                                            | 13,780,065   |   |      |   | 22,335,579  |      |  |   | 54,761,394  |  
|Loss from equity method investment                                         |  |                                                                            |             |   |      |   |            |      |  |   | 43,632,613  |  
|                                                                           |  |                                                                            |              |   |      |   |             |      |  |   |             |  
|Net income (loss) from continuing operations                               |  |                                                                            | (98,120,236  | ) |      |   | 103,186,528 |      |  |   | 160,812,255 |  
|Net income (loss) from discontinued operations, net of tax                 |  |                                                                            | (111,612,420 | ) |      |   | 83,077,575  |      |  |   |            |  
|                                                                           |  |                                                                            |              |   |      |   |             |      |  |   |             |  
|Net income (loss)                                                          |  |                                                                            | (209,732,656 | ) |      |   | 186,264,103 |      |  |   | 160,812,255 |  
|Less: Net income (loss) attributable to noncontrolling interests           |  |                                                                            | 3,524,388    |   |      |   | 1,990,626   |      |  |   | (1,864,783  | )
|                                                                           |  |                                                                            |              |   |      |   |             |      |  |   |             |  
|Net income (loss) attributable to Focus Media Holding Limited Shareholders |  | $                                                                          | (213,257,044 | ) |      | $ | 184,273,477 |      |  | $ | 162,677,038 |  
|                                                                           |  |                                                                            |              |   |      |   |             |      |  |   |             |  
|Income (loss) per share from continuing operations  basic                 |  | $                                                                          | (0.15        | ) |      | $ | 0.15        |      |  | $ | 0.24        |  
|                                                                           |  |                                                                            |              |   |      |   |             |      |  |   |             |  
|Income (loss) per share from continuing operations  diluted               |  | $                                                                          | (0.15        | ) |      | $ | 0.14        |      |  | $ | 0.23        |  
|                                                                           |  |                                                                            |              |   |      |   |             |      |  |   |             |  
|Income (loss) per share from discontinued operations  basic               |  | $                                                                          | (0.17        | ) |      | $ | 0.12        |      |  | $ |            |  
|                                                                           |  |                                                                            |              |   |      |   |             |      |  |   |             |  
|Income (loss) per share from discontinued operations  diluted             |  | $                                                                          | (0.17        | ) |      | $ | 0.11        |      |  | $ |            |  
|                                                                           |  |                                                                            |              |   |      |   |             |      |  |   |             |  
|Income (loss) per share  basic                                            |  | $                                                                          | (0.33        | ) |      | $ | 0.26        |      |  | $ | 0.24        |  
|                                                                           |  |                                                                            |              |   |      |   |             |      |  |   |             |  
|Income (loss) per share  diluted                                          |  | $                                                                          | (0.33        | ) |      | $ | 0.25        |      |  | $ | 0.23        |  
|                                                                           |  |                                                                            |              |   |      |   |             |      |  |   |             |  
|Shares used in calculating basic income (loss) per share                   |  |                                                                            | 651,654,345  |   |      |   | 707,846,570 |      |  |   | 671,401,000 |  
|                                                                           |  |                                                                            |              |   |      |   |             |      |  |   |             |  
|Shares used in calculating diluted income (loss) per share                 |  |                                                                            | 651,654,345  |   |      |   | 731,658,265 |      |  |   | 693,971,258 |  
|                                                                           |  |                                                                            |              |   |      |   |             |      |  |   |             |  

The accompanying notes are an integral part of these consolidated financial statements.



F-4



---

##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

AND COMPREHENSIVE INCOME (LOSS)

(In U.S. Dollars, except share and per share data, unless otherwise stated)



|                                                                                    |  |                |             |   |                      |   |        |                          |  |   |                         |   |  |                                     |            |   |                                     |   |              |                         |  |   |              |   |  |                            |             |   |  |   |               |   |  |   |              |  
|----------------------------------------------------------------------------------- |  | -------------- | ----------- | - | -------------------- | - | ------ | ------------------------ |  | - | ----------------------- | - |  | ----------------------------------- | ---------- | - | ----------------------------------- | - | ------------ | ----------------------- |  | - | ------------ | - |  | -------------------------- | ----------- | - |  | - | ------------- | - |  | - | ------------ | -
|                                                                                    |  | Ordinaryshares |             |   | OrdinarysharesAmount |   |        | Additionalpaid-incapital |  |   | Subscriptionreceivables |   |  | Retainedearning(accumulateddeficit) |            |   | Accumulatedothercomprehensiveincome |   |              | Noncontrollinginterests |  |   | Total equity |   |  | Comprehensiveincome (loss) |            
|Balance at January 1, 2009                                                          |  |                | 646,081,710 |   |                      | $ | 32,327 |                          |  | $ | 1,659,833,079           |   |  | $                                   |           |   |                                     | $ | (533,969,347 | )                       |  | $ | 71,887,984   |   |  | $                          | 2,105,790   |   |  | $ | 1,199,889,833 |   |  |   |              |  
|Issuance of ordinary shares pursuant to share option plans                          |  |                | 4,196,295   |   |                      |   | 210    |                          |  |   | 5,155,541               |   |  |                                     | (3,081,726 | ) |                                     |   |             |                         |  |   |             |   |  |                            |            |   |  |   | 2,074,025     |   |  |   |             |  
|Share issuance                                                                      |  |                | 75,000,000  |   |                      |   | 3,750  |                          |  |   | 142,421,250             |   |  |                                     |           |   |                                     |   |             |                         |  |   |             |   |  |                            |            |   |  |   | 142,425,000   |   |  |   |             |  
|Share-based compensation expense                                                    |  |                |            |   |                      |   |       |                          |  |   | 66,503,134              |   |  |                                     |           |   |                                     |   |             |                         |  |   |             |   |  |                            |            |   |  |   | 66,503,134    |   |  |   |             |  
|Changes in equity ownership on partial disposal of subsidiaries                     |  |                |            |   |                      |   |       |                          |  |   | 1,391,800               |   |  |                                     |           |   |                                     |   |             |                         |  |   |             |   |  |                            | 839,704     |   |  |   | 2,231,504     |   |  |   |             |  
|Disposal of subsidiaries                                                            |  |                |            |   |                      |   |       |                          |  |   |                        |   |  |                                     |           |   |                                     |   |             |                         |  |   | (782,940     | ) |  |                            | (4,647,028  | ) |  |   | (5,429,968    | ) |  |   |             |  
|Cumulative translation adjustments                                                  |  |                |            |   |                      |   |       |                          |  |   |                        |   |  |                                     |           |   |                                     |   |             |                         |  |   | (7,014,353   | ) |  |                            | 5,465       |   |  |   | (7,008,888    | ) |  |   | (7,008,888   | )
|Net loss                                                                            |  |                |            |   |                      |   |       |                          |  |   |                        |   |  |                                     |           |   |                                     |   | (213,257,044 | )                       |  |   |             |   |  |                            | 3,524,388   |   |  |   | (209,732,656  | ) |  |   | (209,732,656 | )
|                                                                                    |  |                |             |   |                      |   |        |                          |  |   |                         |   |  |                                     |            |   |                                     |   |              |                         |  |   |              |   |  |                            |             |   |  |   |               |   |  |   |              |  
|Balance at December 31, 2009                                                        |  |                | 725,278,005 |   |                      | $ | 36,287 |                          |  | $ | 1,875,304,804           |   |  | $                                   | (3,081,726 | ) |                                     | $ | (747,226,391 | )                       |  | $ | 64,090,691   |   |  | $                          | 1,828,319   |   |  | $ | 1,190,951,984 |   |  | $ | (216,741,544 | )
|                                                                                    |  |                |             |   |                      |   |        |                          |  |   |                         |   |  |                                     |            |   |                                     |   |              |                         |  |   |              |   |  |                            |             |   |  |   |               |   |  |   |              |  
|Comprehensive loss attributable to Focus Media Holding Limited Shareholders         |  |                |             |   |                      |   |        |                          |  |   |                         |   |  |                                     |            |   |                                     |   |              |                         |  |   |              |   |  |                            |             |   |  |   |               |   |  | $ | (220,271,397 | )
|                                                                                    |  |                |             |   |                      |   |        |                          |  |   |                         |   |  |                                     |            |   |                                     |   |              |                         |  |   |              |   |  |                            |             |   |  |   |               |   |  |   |              |  
|Comprehensive income attributable to Noncontrolling interests                       |  |                |             |   |                      |   |        |                          |  |   |                         |   |  |                                     |            |   |                                     |   |              |                         |  |   |              |   |  |                            |             |   |  |   |               |   |  | $ | 3,529,853    |  
|                                                                                    |  |                |             |   |                      |   |        |                          |  |   |                         |   |  |                                     |            |   |                                     |   |              |                         |  |   |              |   |  |                            |             |   |  |   |               |   |  |   |              |  
|Issuance of ordinary shares pursuant to share option plans                          |  |                | 12,910,550  |   |                      |   | 646    |                          |  |   | 596,821                 |   |  |                                     | 2,990,742  |   |                                     |   |             |                         |  |   |             |   |  |                            |            |   |  |   | 3,588,209     |   |  |   |             |  
|Share repurchase                                                                    |  |                | (60,253,930 | ) |                      |   | (3,013 | )                        |  |   | (240,161,971            | ) |  |                                     |           |   |                                     |   |             |                         |  |   |             |   |  |                            |            |   |  |   | (240,164,984  | ) |  |   |             |  
|Share-based compensation expense                                                    |  |                |            |   |                      |   |       |                          |  |   | 45,591,618              |   |  |                                     |           |   |                                     |   |             |                         |  |   |             |   |  |                            |            |   |  |   | 45,591,618    |   |  |   |             |  
|Changes in equity ownership on partial disposal of subsidiaries                     |  |                |            |   |                      |   |       |                          |  |   | 3,817,579               |   |  |                                     |           |   |                                     |   |             |                         |  |   | (2,901,251   | ) |  |                            | 13,273,615  |   |  |   | 14,189,943    |   |  |   |             |  
|Disposal of subsidiaries                                                            |  |                |            |   |                      |   |       |                          |  |   |                        |   |  |                                     |           |   |                                     |   |             |                         |  |   | (4,729,725   | ) |  |                            | (16,272,312 | ) |  |   | (21,002,037   | ) |  |   |             |  
|Cumulative translation adjustments                                                  |  |                |            |   |                      |   |       |                          |  |   |                        |   |  |                                     |           |   |                                     |   |             |                         |  |   | 21,880,014   |   |  |                            | 144,090     |   |  |   | 22,024,104    |   |  |   | 22,024,104   |  
|Net income                                                                          |  |                |            |   |                      |   |       |                          |  |   |                        |   |  |                                     |           |   |                                     |   | 184,273,477  |                         |  |   |             |   |  |                            | 1,990,626   |   |  |   | 186,264,103   |   |  |   | 186,264,103  |  
|                                                                                    |  |                |             |   |                      |   |        |                          |  |   |                         |   |  |                                     |            |   |                                     |   |              |                         |  |   |              |   |  |                            |             |   |  |   |               |   |  |   |              |  
|Balance at December 31, 2010                                                        |  |                | 677,934,625 |   |                      | $ | 33,920 |                          |  | $ | 1,685,148,851           |   |  | $                                   | (90,984    | ) |                                     | $ | (562,952,914 | )                       |  | $ | 78,339,729   |   |  | $                          | 964,338     |   |  | $ | 1,201,442,940 |   |  | $ | 208,288,207  |  
|                                                                                    |  |                |             |   |                      |   |        |                          |  |   |                         |   |  |                                     |            |   |                                     |   |              |                         |  |   |              |   |  |                            |             |   |  |   |               |   |  |   |              |  
|Comprehensive income attributable to Focus Media Holding Limited Shareholders       |  |                |             |   |                      |   |        |                          |  |   |                         |   |  |                                     |            |   |                                     |   |              |                         |  |   |              |   |  |                            |             |   |  |   |               |   |  | $ | 206,153,491  |  
|                                                                                    |  |                |             |   |                      |   |        |                          |  |   |                         |   |  |                                     |            |   |                                     |   |              |                         |  |   |              |   |  |                            |             |   |  |   |               |   |  |   |              |  
|Comprehensive income attributable to Noncontrolling interests                       |  |                |             |   |                      |   |        |                          |  |   |                         |   |  |                                     |            |   |                                     |   |              |                         |  |   |              |   |  |                            |             |   |  |   |               |   |  | $ | 2,134,716    |  
|                                                                                    |  |                |             |   |                      |   |        |                          |  |   |                         |   |  |                                     |            |   |                                     |   |              |                         |  |   |              |   |  |                            |             |   |  |   |               |   |  |   |              |  
|Issuance of ordinary shares pursuant to share option plans                          |  |                | 19,100,060  |   |                      |   | 955    |                          |  |   | 2,971,393               |   |  |                                     | 90,984     |   |                                     |   |             |                         |  |   |             |   |  |                            |            |   |  |   | 3,063,332     |   |  |   |             |  
|Share repurchase                                                                    |  |                | (50,581,945 | ) |                      |   | (2,529 | )                        |  |   | (216,338,600            | ) |  |                                     |           |   |                                     |   |             |                         |  |   |             |   |  |                            |            |   |  |   | (216,341,129  | ) |  |   |             |  
|Share-based compensation expense                                                    |  |                |            |   |                      |   |       |                          |  |   | 61,801,912              |   |  |                                     |           |   |                                     |   |             |                         |  |   |             |   |  |                            |            |   |  |   | 61,801,912    |   |  |   |             |  
|Noncontrolling interests arising from acquisition of subsidiaries                   |  |                |            |   |                      |   |       |                          |  |   |                        |   |  |                                     |           |   |                                     |   |             |                         |  |   |             |   |  |                            | 20,553,531  |   |  |   | 20,553,531    |   |  |   |             |  
|Changes in equity ownership on partial disposal of subsidiaries                     |  |                |            |   |                      |   |       |                          |  |   | 33,783                  |   |  |                                     |           |   |                                     |   |             |                         |  |   |             |   |  |                            | (298,110    | ) |  |   | (264,327      | ) |  |   |             |  
|Cumulative translation adjustments                                                  |  |                |            |   |                      |   |       |                          |  |   |                        |   |  |                                     |           |   |                                     |   |             |                         |  |   | 39,815,355   |   |  |                            | 373,535     |   |  |   | 40,188,890    |   |  |   | 40,188,890   |  
|Disposal of subsidiaries                                                            |  |                |            |   |                      |   |       |                          |  |   |                        |   |  |                                     |           |   |                                     |   |             |                         |  |   |             |   |  |                            | (76,088     | ) |  |   | (76,088       | ) |  |   |             |  
|Share of post-acquisition movements in equity investees other comprehensive income |  |                |            |   |                      |   |       |                          |  |   |                        |   |  |                                     |           |   |                                     |   |             |                         |  |   | 1,640,453    |   |  |                            |            |   |  |   | 1,640,453     |   |  |   | 1,640,453    |  
|Net income                                                                          |  |                |            |   |                      |   |       |                          |  |   |                        |   |  |                                     |           |   |                                     |   | 162,677,038  |                         |  |   |             |   |  |                            | (1,864,783  | ) |  |   | 160,812,255   |   |  |   | 160,812,255  |  
|                                                                                    |  |                |             |   |                      |   |        |                          |  |   |                         |   |  |                                     |            |   |                                     |   |              |                         |  |   |              |   |  |                            |             |   |  |   |               |   |  |   |              |  
|Balance at December 31, 2011                                                        |  |                | 646,452,740 |   |                      | $ | 32,346 |                          |  | $ | 1,533,617,339           |   |  | $                                   |           |   |                                     | $ | (400,275,876 | )                       |  | $ | 119,795,537  |   |  | $                          | 19,652,423  |   |  | $ | 1,272,821,769 |   |  | $ | 202,641,598  |  
|                                                                                    |  |                |             |   |                      |   |        |                          |  |   |                         |   |  |                                     |            |   |                                     |   |              |                         |  |   |              |   |  |                            |             |   |  |   |               |   |  |   |              |  
|Comprehensive income attributable to Focus Media Holding Limited Shareholders       |  |                |             |   |                      |   |        |                          |  |   |                         |   |  |                                     |            |   |                                     |   |              |                         |  |   |              |   |  |                            |             |   |  |   |               |   |  | $ | 204,132,846  |  
|                                                                                    |  |                |             |   |                      |   |        |                          |  |   |                         |   |  |                                     |            |   |                                     |   |              |                         |  |   |              |   |  |                            |             |   |  |   |               |   |  |   |              |  
|Comprehensive loss attributable to Noncontrolling interests                         |  |                |             |   |                      |   |        |                          |  |   |                         |   |  |                                     |            |   |                                     |   |              |                         |  |   |              |   |  |                            |             |   |  |   |               |   |  | $ | (1,491,248   | )
|                                                                                    |  |                |             |   |                      |   |        |                          |  |   |                         |   |  |                                     |            |   |                                     |   |              |                         |  |   |              |   |  |                            |             |   |  |   |               |   |  |   |              |  

The accompanying notes are an integral part of these consolidated financial statements.



F-5



---

##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                                 |  |                                  |              |   |      |   |              |      |  |   |                |  
|------------------------------------------------------------------------------------------------ |  | -------------------------------- | ------------ | - | ---- | - | ------------ | ---- |  | - | -------------- | -
|                                                                                                 |  | For the years ended December 31, |             
|                                                                                                 |  | 2009                             |              |   | 2010 |   |              | 2011 | 
|                                                                                                 |  | (In U.S. dollars)                |             
|Operating activities:                                                                            |  |                                  |              |   |      |   |              |      |  |   |                |  
|Net income (loss)                                                                                |  | $                                | (209,732,656 | ) |      | $ | 186,264,103  |      |  | $ | 160,812,255    |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities:         |  |                                  |              |   |      |   |              |      |  |   |                |  
|Bad debt expenses                                                                                |  |                                  | 29,076,504   |   |      |   | 454,624      |      |  |   | 16,013,208     |  
|Share-based compensation                                                                         |  |                                  | 66,503,134   |   |      |   | 45,591,618   |      |  |   | 61,801,912     |  
|Depreciation and amortization                                                                    |  |                                  | 62,728,660   |   |      |   | 45,876,222   |      |  |   | 44,784,923     |  
|Loss from equity method investment                                                               |  |                                  |             |   |      |   |             |      |  |   | 43,632,613     |  
|(Gain)/loss on disposal of equity interest of subsidiaries                                       |  |                                  | 66,180,083   |   |      |   | (76,167,018  | )    |  |   |               |  
|Loss on disposal of equipment                                                                    |  |                                  | 1,346,489    |   |      |   | 318,815      |      |  |   | 1,910,363      |  
|Impairment loss for goodwill                                                                     |  |                                  | 87,608,201   |   |      |   | 5,736,134    |      |  |   |               |  
|Impairment loss for acquired intangible assets                                                   |  |                                  | 25,437,087   |   |      |   |             |      |  |   |               |  
|Impairment loss for equipment                                                                    |  |                                  | 40,318,817   |   |      |   |             |      |  |   |               |  
|Changes in assets and liabilities, net of effects of acquisitions:                               |  |                                  |              |   |      |   |              |      |  |   |                |  
|Accounts receivable                                                                              |  |                                  | 929,044      |   |      |   | (38,969,202  | )    |  |   | (97,987,412    | )
|Prepaid expenses and other current assets                                                        |  |                                  | (3,592,599   | ) |      |   | 3,179,398    |      |  |   | (13,713,455    | )
|Amounts due from related parties                                                                 |  |                                  | 6,405,746    |   |      |   | 2,407,864    |      |  |   | (1,691,586     | )
|Rental deposits                                                                                  |  |                                  | 1,327,564    |   |      |   | (27,688,926  | )    |  |   | (9,808,859     | )
|Accounts payable                                                                                 |  |                                  | 23,202,611   |   |      |   | 11,318,600   |      |  |   | (3,399,172     | )
|Accrued expenses and other current liabilities                                                   |  |                                  | (23,325,332  | ) |      |   | 47,409,016   |      |  |   | 42,712,434     |  
|Amounts due to related parties                                                                   |  |                                  | (13,356,596  | ) |      |   | (513,469     | )    |  |   | 225,614        |  
|Income tax payable                                                                               |  |                                  | (1,199,784   | ) |      |   | (19,090,163  | )    |  |   | 26,348,666     |  
|Deferred taxes                                                                                   |  |                                  | 866,257      |   |      |   | (905,898     | )    |  |   | 8,516,251      |  
|                                                                                                 |  |                                  |              |   |      |   |              |      |  |   |                |  
|Net cash provided by operating activities                                                        |  | $                                | 160,723,230  |   |      | $ | 185,221,718  |      |  | $ | 280,157,755    |  
|                                                                                                 |  |                                  |              |   |      |   |              |      |  |   |                |  
|                                                                                                 |  |                                  |             
|Investing activities:                                                                            |  |                                  |              |   |      |   |              |      |  |   |                |  
|Purchase of equipment                                                                            |  | $                                | (10,654,598  | ) |      | $ | (18,692,608  | )    |  | $ | (38,918,317    | )
|Cash of disposed subsidiary                                                                      |  |                                  | (27,315,949  | ) |      |   | (40,805,068  | )    |  |   |               |  
|Proceeds from sale of a subsidiary                                                               |  |                                  |             |   |      |   | 116,872,231  |      |  |   | 7,296,097      |  
|Purchase of subsidiaries and earn-out payment paid to acquire subsidiaries, net of cash acquired |  |                                  | (92,411,545  | ) |      |   | (40,186,684  | )    |  |   | (13,228,135    | )
|Investment in an equity method investee                                                          |  |                                  |             |   |      |   |             |      |  |   | (61,003,263    | )
|Deposit refunded to acquire subsidiaries                                                         |  |                                  | 329,516      |   |      |   |             |      |  |   |               |  
|Proceeds from disposal of fixed assets                                                           |  |                                  | 196,115      |   |      |   | 471,128      |      |  |   | 671,950        |  
|Increase in restricted cash                                                                      |  |                                  |             |   |      |   |             |      |  |   | (199,346,126   | )
|Cash paid for short-term investments                                                             |  |                                  | (29,257,303  | ) |      |   | (137,551,150 | )    |  |   | (1,124,033,872 | )
|Sale of short-term investments                                                                   |  |                                  | 865,589      |   |      |   | 29,290,296   |      |  |   | 1,044,680,415  |  
|                                                                                                 |  |                                  |              |   |      |   |              |      |  |   |                |  
|Net cash used in investing activities                                                            |  | $                                | (158,248,175 | ) |      | $ | (90,601,855  | )    |  | $ | (383,881,251   | )
|                                                                                                 |  |                                  |              |   |      |   |              |      |  |   |                |  



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                             |  |                                  |             |   |      |   |              |      |  |   |              |  
|---------------------------------------------------------------------------- |  | -------------------------------- | ----------- | - | ---- | - | ------------ | ---- |  | - | ------------ | -
|                                                                             |  | For the years ended December 31, |            
|                                                                             |  | 2009                             |             |   | 2010 |   |              | 2011 | 
|                                                                             |  | (In U.S. dollars)                |            
|Financing activities:                                                        |  |                                  |             |   |      |   |              |      |  |   |              |  
|Proceeds from short-term bank loans                                          |  | $                                |            |   |      | $ |             |      |  | $ | 175,000,000  |  
|Repayment of short-term bank loans                                           |  |                                  |            |   |      |   |             |      |  |   | (75,000,000  | )
|Proceeds from long-term bank loans                                           |  |                                  |            |   |      |   |             |      |  |   | 71,000,000   |  
|Repayment of capital to noncontrolling interests                             |  |                                  |            |   |      |   |             |      |  |   | (396,720     | )
|Proceeds from partial disposal of subsidiaries                               |  |                                  |            |   |      |   | 10,980,282   |      |  |   |             |  
|Proceeds from issuance of ordinary shares                                    |  |                                  | 142,425,000 |   |      |   |             |      |  |   |             |  
|Proceeds from issuance of ordinary shares pursuant to share option plans     |  |                                  | 2,074,025   |   |      |   | 3,588,209    |      |  |   | 3,063,332    |  
|Share repurchase                                                             |  |                                  |            |   |      |   | (237,168,910 | )    |  |   | (213,374,682 | )
|                                                                             |  |                                  |             |   |      |   |              |      |  |   |              |  
|Net cash provided by (used) in financing activities                          |  | $                                | 144,499,025 | ) |      | $ | (222,600,419 | )    |  | $ | (39,708,070  | )
|                                                                             |  |                                  |             |   |      |   |              |      |  |   |              |  
|Effect of exchange rate changes                                              |  |                                  | (1,730,212  | ) |      |   | 14,296,777   |      |  |   | 20,174,470   |  
|                                                                             |  |                                  |             |   |      |   |              |      |  |   |              |  
|Net increase (decrease) in cash and cash equivalents                         |  | $                                | 145,243,868 |   |      | $ | (113,683,779 | )    |  | $ | (123,257,096 | )
|Cash and cash equivalents, beginning of year                                 |  |                                  | 142,434,073 |   |      |   | 568,159,372  |      |  |   | 454,475,593  |  
|Add/(less): cash and cash equivalents in assets held-for-sale                |  |                                  | 280,481,431 |   |      |   |             |      |  |   |             |  
|                                                                             |  |                                  |             |   |      |   |              |      |  |   |              |  
|Cash and cash equivalents, end of year                                       |  | $                                | 568,159,372 |   |      | $ | 454,475,593  |      |  | $ | 331,218,497  |  
|                                                                             |  |                                  |             |   |      |   |              |      |  |   |              |  
|Supplemental disclosure of cash flow information                             |  |                                  |             |   |      |   |              |      |  |   |              |  
|Income taxes paid                                                            |  | $                                | 12,965,179  |   |      | $ | 32,031,106   |      |  | $ | 27,582,188   |  
|                                                                             |  |                                  |             |   |      |   |              |      |  |   |              |  
|Interest paid                                                                |  | $                                |            |   |      | $ |             |      |  | $ | 665,635      |  
|                                                                             |  |                                  |             |   |      |   |              |      |  |   |              |  
|SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES      |  |                                  |             |   |      |   |              |      |  |   |              |  
|Non-cash investing activities:                                               |  |                                  |             |   |      |   |              |      |  |   |              |  
|Investment in a cost method investee                                         |  | $                                |            |   |      | $ |             |      |  | $ | 1,523,592    |  
|Acquisition of subsidiaries:                                                 |  |                                  |             |   |      |   |              |      |  |   |              |  
|Acquisition payable                                                          |  | $                                | 20,326,014  |   |      | $ | 4,920,493    |      |  | $ | 4,068,490    |  
|Liabilities recorded as a result of contingent consideration                 |  | $                                |             |   |      | $ |             |      |  | $ | 15,515,662   |  
|Non-cash financing activities:                                               |  |                                  |             |   |      |   |              |      |  |   |              |  
|Payable for share repurchase                                                 |  | $                                |            |   |      | $ | 2,996,074    |      |  | $ | 5,962,521    |  
|Proceeds from partial disposal of subsidiaries offset against other payables |  | $                                |            |   |      | $ | 3,209,661    |      |  | $ |             |  

The accompanying notes are an integral part of these consolidated financial statements.



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars except share data and unless otherwise stated)

1. Organization and Principal Activities

Focus Media Holding Limited (Focus Media Holding or the Company) and all of its subsidiaries and consolidated
variable interest entities (VIEs) are collectively referred to as the Group. The Group is mainly engaged in selling out-of-home advertising time slots on its network of flat-panel digital advertising (LCD)
displays located in high traffic areas and in-store network. The Group is also engaged in providing advertising services on poster frames, on screens in movie theatres and on traditional outdoor billboards.

In January 2010, certain employees and management of Allyes Information Technology Company Limited, and its consolidated subsidiaries and affiliates
(collectively, Allyes) and certain members of the Companys management and directors entered into a definitive agreement with the Company and Allyes to buy-out an aggregate 38% interest in Allyes from the Company for a cash
consideration of $13.3 million, which was determined based on the estimated fair value of $35 million as of January 1, 2010 and was derived from an income approach methodology. On July 30, 2010, the Company further sold its remaining 62%
ownership to Silver Lake, a third party investor, at a cash consideration of $124 million. Therefore, the results of Allyes and its consolidated subsidiaries and affiliates have been classified as discontinued operations for all the periods
presented.

2. Summary of Significant Accounting Policies

(a) Basis of Presentation

The consolidated financial statements of the Group have been prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP).

(b) Basis of Consolidation

The
consolidated financial statements include the financial statements of Focus Media Holding, its majority-owned subsidiaries, its VIEs and their majority-owned subsidiaries. All inter-company transactions and balances have been eliminated upon
consolidation.

A subsidiary is an entity in which the Company, directly or indirectly, controls more than one half of the voting power or has
the power to: appoint or remove the majority of the members of the board of directors; cast a majority of votes at the meeting of the board of directors; or govern the financial and operating policies of the investee under a statute or agreement
among the shareholders or equity holders.

US GAAP provides guidance on the identification and financial reporting for entities over
which control is achieved through means other than voting interests, which requires certain VIEs to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. Through the contractual arrangements between the Company and the VIEs, the
Company controls the operating activities and holds all the beneficial interests of the VIEs and has been determined to be the primary beneficiary of the VIEs. The Company has concluded that such contractual arrangements are legally enforceable (see
Note 3 for related risks and uncertainties).

Net income or loss of a subsidiary is attributed to the Company and to the noncontrolling
interests either on the basis of relative ownership interest or in accordance with contractual agreements that specify a different allocation, such as in the case of VIEs. Noncontrolling interests in subsidiaries are presented separately from the
Groups equity therein.

(c) Cash and Cash Equivalents and Restricted Cash

Cash and cash equivalents consist of cash on hand and highly liquid investments which are unrestricted as to withdrawal or use, and which have original
maturities of three months or less when purchased.

Restricted cash is deposited in bank accounts as security for bank borrowings. These
deposits carry fixed interest rates and are released when the related bank borrowings are settled by the Group.



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



(d) Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenue and
expenses in the financial statements and accompanying notes. Actual results could differ from such estimates. Significant accounting estimates reflected in the Groups financial statements include allowance for doubtful accounts, useful lives
of long-lived assets, assumptions utilized in accrual of promotion and marketing expenses, the impairment of long-lived assets, equity method investment and goodwill, the recognition and measurement of current and deferred income tax assets,
valuation of financial instruments, and the valuation and recognition of share-based compensation. The actual results experienced by the Group may differ from managements estimates.

(e) Short-term investments

The Group enters into asset management agreements to
invest in debt securities with commercial banks from time to time. Certain asset management agreements have a definite investment period. When the Group has both the positive intent and ability to hold these debt investments to maturity, it
classifies them as held-to-maturity and records them at amortized cost. All held-to-maturity investments have remaining maturities of less than one year.

Certain asset management agreements may not have a definite investment period. The Group classifies these investments in debt and equity securities as available-for-sale securities, which are stated at
fair market value with unrealized gains and losses recorded in accumulated other comprehensive income. All available-for-sale debt investments have remaining maturities of less than one year. The Group routinely reviews available-for-sale and
held-to-maturity investments for other-than-temporary declines in fair value below the cost basis, and when events or changes in circumstances indicate the carrying value of an asset may not be recoverable, the investments are written down to fair
value.

As of December 31, 2010 and 2011, all the investments of the Group were classified as held-to-maturity and recorded at amortized
costs.

(f) Long-term investments

Investments in affiliates

Affiliated companies are entities over which the Group has
significant influence, but which it does not control. Investments in equity affiliates are accounted for by the equity method of accounting. Under this method, the Groups share of the post-acquisition profits or losses of affiliated companies
is recognized in the consolidated statement of operations and its shares of post-acquisition movements in other comprehensive income are recognized in other comprehensive income. When the Groups share of losses in an affiliated company equals
or exceeds its interest in the affiliated company, the Group does not recognize further losses, unless the Group has incurred obligations or made payments on behalf of the affiliated company, which to date the Company has not. As of December 31,
2011, on the basis of the duration and severity of the decline in the market price of the equity affiliates shares, the Group concluded that there has been a loss in value of the investment that is other-than-temporary and recorded an impairment
loss of $38,265,294.

Other investments

Investments in private companies with an ownership interests less than 20% in which the Group does not have significant influence, are accounted for by the cost method of accounting and are recorded at
the lower of cost or fair market value.

(g) Equipment, Net

Equipment, net is carried at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the following estimated useful lives:



|                               |  |                                                                            
|------------------------------ |  | ---------------------------------------------------------------------------
|Media display equipment        |  | 5 years                                                                    
|Computers and office equipment |  | 5 years                                                                    
|Vehicles                       |  | 5 years                                                                    
|Leasehold improvements         |  | lesser of the term of the lease or the estimated useful lives of the assets

Gains and losses from the disposal of property and equipment are included in income from operations.



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



(h) Acquired Intangible Assets, net

Acquired intangible assets, which consist of operation and broadcasting rights, lease agreements, customer bases, customer backlogs, trademarks,
non-compete agreements, and acquired technology are valued at cost less accumulated amortization. Amortization of acquired intangible assets (except for certain customer bases) is calculated using the straight-line method over their expected useful
lives of one to ten years. Amortization of certain customer bases are calculated using an accelerated method over the expected useful lives of the underlying customers.

(i) Impairment of Long-Lived Assets

The Group evaluates its long-lived assets for
impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. When these events occur, the Group measures impairment by comparing the carrying amount of the assets to the future
undiscounted cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the future undiscounted cash flow is less than the carrying amount of the assets, the Group recognizes an impairment loss equal to
the excess of the carrying amount over the fair value of the assets.

(j) Impairment of Goodwill

The Group tests goodwill for possible impairment on an annual basis as of December 31 of each year and at any other time if an event occurs or
circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Two-step impairment test is performed. The first step compares the fair value of each reporting unit to its carrying amount,
including goodwill. If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the
second step compares the implied fair value of goodwill to the carrying value of a reporting units goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of
the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of
goodwill. This allocation process is only performed for purposes of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or liabilities. An impairment loss is recognized for any excess in the carrying
value of goodwill over the implied fair value of goodwill.

(k) Revenue Recognition

The Groups revenues are primarily derived from advertising services.

Revenues from advertising services are recognized when (i) persuasive evidence of an arrangement exists; (ii) delivery of the products and/or services has occurred and risks and rewards of
ownership have passed to the customer; (iii) the selling price is both fixed and determinable; and (iv) collection of the resulting receivable is reasonably assured.

The Group generates advertising service revenues from the sale of advertising time slots in its various networks, including the LCD display network, the in-store network, the poster frame network, movie
theatre network, which represents big screen space leased from movie theatres and on traditional billboard network. The Group determines the services are delivered when the advertisements are broadcasted according to the contracts, which set forth
the type of device, the number of devices, location and number of buildings, broadcasting period, length of the advertisement and frequency of the advertisement to be broadcasted. In the majority of advertising arrangements, the Group acts as a
principal in the transaction and records advertising revenues on a gross basis. The associated expenses are recorded as cost of revenues. In some instances the Group is considered an agent and recognizes revenue on a net basis. Revenues from
advertising services are recognized, net of agency rebates and sales taxes, ratably over the period in which the advertisement is displayed, assuming all other revenue recognition criteria have been met. Sales taxes incurred during the years ended
December 31, 2009, 2010 and 2011 were $34,867,970, $49,881,754 and $68,126,870, respectively.

Prepayments for advertising services are
deferred and recognized as revenue when the advertising services are rendered.



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



(l) Operating Leases

Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company are accounted for as operating leases. Payments made under operating leases are charged to the
consolidated statements of operations on a straight-line basis over the lease periods.

(m) Advertising Costs

The Group expenses advertising costs as incurred. Total advertising expenses were $559,612, $718,877 and $753,650 for the years ended December 31,
2009, 2010, and 2011, respectively, and have been included in general and administrative expenses.

(n) Foreign Currency Translation

The functional and reporting currency of Focus Media Holding is the United States dollar (US dollar). Monetary assets and
liabilities denominated in currencies other than the US dollar are translated into the US dollar at the rates of exchange in effect at the balance sheet date. Transactions in currencies other than the US dollar during the year are converted into US
dollar at the applicable rates of exchange prevailing at the transactions date. Transaction gains and losses are recognized in other operating income (expenses), net. The financial records of the Groups subsidiaries and its VIEs are maintained
in its local currency, the Renminbi (RMB), which is the functional currency. Assets and liabilities are translated at the exchange rates at the balance sheet date. Equity accounts are translated at historical exchange rates and revenues,
expenses, gains and losses are translated using the average rate for the year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive income in the statements of equity
and comprehensive income (loss).

(o) Income Taxes

Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities determined based on recognition and measurement requirements for tax position and their
reported amounts in the financial statements, net operating loss carry forwards and credits by applying enacted statutory tax rates applicable to future years when the reported amount of the assets or liabilities are recovered or settled,
respectively. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are
provided for in accordance with the laws of the relevant taxing authorities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based upon the classification of the related asset or
liability in the financial statements or the expected timing of their reversal if they do not relate to a specific asset or liability.

The
Group only recognizes tax benefits related to uncertain tax positions when such positions are more likely than not of being sustained upon examination. For such position, the amount of benefit the Group recognizes is the largest amount of tax
benefit that is more than fifty percent likely of being sustained upon the ultimate settlement of such uncertain position.

(p)
Comprehensive Income (Loss)

Comprehensive income (loss) includes net income (loss), foreign currency translation adjustments and
unrealized gains (losses) on investments classified as available-for-sale. Comprehensive income is reported in the consolidated statements of changes in equity and comprehensive income (loss).

(q) Purchase Price Allocation

Business acquisitions are accounted for using the purchase method of accounting. The Group allocates the total purchase price of an acquisition to the
fair values of the tangible and intangible assets acquired and liabilities assumed at the date of acquisition, with the excess purchase price recorded as goodwill. As part of this allocation process, the intangible assets acquired are identified,
the values are attributed and the useful lives are estimated. The preliminary purchase price allocation is adjusted, as necessary, after the acquisition closing date through the end of the measurement period of one year or less as when the
valuations for the assets acquired and liabilities assumed is finalized.

Purchase price allocations are determined based on a number of
factors, including a valuation support provided by third party appraisal firms in some cases. The valuation analysis normally utilizes and considers appropriate valuation methodologies such as the income, market, cost and actual transaction of the
Groups shares approach. Certain assumptions, which include projected cash flows and replacement costs in the valuation analysis are incorporated in the valuation.

In the valuation of intangible assets, including operating lease agreements, customer bases, and contract backlogs, and indication of value is developed through the application of a form of income
approach, known as multi-period excess earnings method. The first step to apply the multi-period excess earnings method is to estimate the future debt-free net income attributable to the intangible assets. The resulting debt-free net income is then
reduced by an estimated fair rate of return on contributory assets necessary to realize the projected earnings attributable to the intangible assets. These assets include fixed assets, working capital and other intangible assets.

Valuation of the trademarks is based on the relief from royalty method whereby an asset is valued based upon the after-tax cash flow savings accruing to
the owner by virtue of the fact that the owner does not have to pay a fair royalty to a third party for the use of that asset. Accordingly, a portion of the owners earnings, equal to the after-tax royalty that would have been paid
for use of the asset can be attributed to that asset. The value of the asset depends on the present worth of future after-tax royalties attributable to the asset to their present worth at market-derived rates of return appropriate for the risks of
that particular asset.

The valuation of non-compete agreements is determined based on estimated losses attributable to potential competition,
should the non-compete clause not exist.



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



(r) Fair Value of Financial Instruments

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would
transact and it considers assumptions that market participants would use when pricing the asset or liability.

The Group applies a fair value
hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instruments categorization within the fair value hierarchy is based upon the lowest
level of input that is significant to the fair value measurement. Under this hierarchy, there are three levels of inputs that may be used to measure fair value:

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets
or liabilities in active markets; quoted prices for identical asset or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model- derived valuations in which significant inputs are observable or can
be derived principally from, or corroborated by, observable market data.

Level 3 applies to asset or liabilities for which there are
unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The
Group did not have any financial instruments that were required to be measured at fair value on a recurring basis as of December 31, 2010 and 2011. The carrying values of financial instruments, which consist of cash and cash equivalents,
short-term investments, accounts receivable, prepaid expenses and other current assets, deposits paid for acquisition of subsidiaries, amount due from and due to related parties, bank loans and accounts payable. Except for long-term bank loan and
acquisition purchase price payable, the fair value of financial instruments approximates their carrying value as of December 31, 2010 and 2011 due to their short-term nature. The fair value of long term bank loan and acquisition purchase price
payable also approximates its fair value as the interest rate on the debt is close to prevailing market rate as of December 31, 2011 and the assumptions used in assessing the fair value of the acquisition purchase price payable remain unchanged. The
Group does not use derivative instruments to manage risks.

(s) Share-based Compensation

The Companys share-based compensation with employees, such as restricted shares and share options, is measured at the grant date, based on the fair
value of the award, and is recognized as expense over the requisite service period. The Company has made an estimate of expected forfeitures and is recognizing compensation cost only for those equity awards expected to vest.

The Groups total share-based compensation expense for the years ended December 31, 2009, 2010 and 2011 was $66,503,134, $45,591,618 and
$61,801,912, respectively.

The following table summarizes the share-based compensation recognized in the consolidated statements of
operations:



|                                               |  |                                  |            |  |      |   |            |      |  |   |            | 
|---------------------------------------------- |  | -------------------------------- | ---------- |  | ---- | - | ---------- | ---- |  | - | ---------- | 
|                                               |  | For the years ended December 31, |           
|                                               |  | 2009                             |            |  | 2010 |   |            | 2011 | 
|Cost of sales                                  |  | $                                | 1,504,092  |  |      | $ | 976,822    |      |  | $ | 879,413    | 
|General and administrative                     |  |                                  | 26,037,349 |  |      |   | 40,272,194 |      |  |   | 57,119,416 | 
|Selling and marketing                          |  |                                  | 12,221,732 |  |      |   | 4,342,602  |      |  |   | 3,803,083  | 
|Net income (loss) from discontinued operations |  |                                  | 26,739,961 |  |      |   |           |      |  |   |           | 
|                                               |  |                                  |            |  |      |   |            |      |  |   |            | 
|Total                                          |  | $                                | 66,503,134 |  |      | $ | 45,591,618 |      |  | $ | 61,801,912 | 
|                                               |  |                                  |            |  |      |   |            |      |  |   |            | 

(t) Income (Loss) per Share

Basic income (loss) per share is computed by dividing income attributable to Focus Media Holdings Limited shareholders by the weighted average number of ordinary shares outstanding during the year.
Diluted income (loss) per ordinary share reflects the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised or converted into ordinary shares and is calculated using the treasury stock method
for stock options and unvested shares. Common equivalent shares for which the exercise price exceeds the average market price over the period have an anti-dilutive effect on income per share and, accordingly, are excluded from the calculation.
Common equivalent shares are also excluded from the calculation in loss periods as their effects would be anti-dilutive.



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



(u) Non-controlling Interest

As of December 31, 2010 and 2011, the majority of the Groups noncontrolling interest is attributable to the LCD display segment.

The following schedule shows the effects of changes in Focus Medias ownership interest in its subsidiaries on equity attributable to Focus Media:



|                                                                                                   |  |                                  |              |   |      |   |             |      |  |   |             | 
|-------------------------------------------------------------------------------------------------- |  | -------------------------------- | ------------ | - | ---- | - | ----------- | ---- |  | - | ----------- | 
|                                                                                                   |  | For the years ended December 31, |             
|                                                                                                   |  | 2009                             |              |   | 2010 |   |             | 2011 | 
|Net income (loss) attributable to Focus Media                                                      |  | $                                | (213,257,044 | ) |      | $ | 184,273,477 |      |  | $ | 162,677,038 | 
|                                                                                                   |  |                                  |              |   |      |   |             |      |  |   |             | 
|Transfers (to) from the non-controlling interest:                                                  |  |                                  |              |   |      |   |             |      |  |   |             | 
|Increase in Focus Medias additional paid-in capital due to partial disposal of subsidiaries       |  |                                  | 1,391,800    |   |      |   | 3,817,579   |      |  |   | 33,783      | 
|                                                                                                   |  |                                  |              |   |      |   |             |      |  |   |             | 
|Net transfers (to) from non-controlling interest                                                   |  |                                  | 1,391,800    |   |      |   | 3,817,579   |      |  |   | 33,783      | 
|                                                                                                   |  |                                  |              |   |      |   |             |      |  |   |             | 
|Change from net income attributable to Focus Media and transfers (to) from noncontrolling interest |  | $                                | (211,865,244 | ) |      | $ | 188,091,056 |      |  | $ | 162,710,821 | 
|                                                                                                   |  |                                  |              |   |      |   |             |      |  |   |             | 

(v) Government grants

Unrestricted government subsidies from local governmental agencies, which allow the Group full discretion in utilizing the funds, were $14,024,545, $15,797,209 and $19,937,901 for the years ended
December 31, 2009, 2010 and 2011, respectively, of which, $11,122,063, $14,706,120 and $19,937,901 was recorded as other operating income in the consolidated statements of operations and $2,902,482, $1,091,089 and nil was related to
discontinued operations.

(w) Related parties

Affiliates of the enterprise; entities for which investments are accounted for by the equity method by the enterprise; trusts for the benefit of employees, such as pension and profit-sharing trusts that
are managed by or under the trusteeship of management; principal owners of the enterprise; its management; members of the immediate families of principal owners of the enterprise and its management; and other parties with which the enterprise may
deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. Another party also is a
related party if it can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or
more of the transacting parties might be prevented from fully pursuing its own separate interests.

(x) Recently Issued Accounting
Standards

In May 2011, the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update
(ASU) 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASU 2011-04). ASU 2011-04 amended the FASB Accounting Standards Codification
(ASC) 820, Fair Value Measurements and Disclosures to converge the fair value measurement guidance in US GAAP and International Financial Reporting Standards (IFRSs). Some of the amendments clarify the application of
existing fair value measurement requirements, while other amendments change particular principles in ASC 820. In addition, ASU 2011-04 requires additional fair value disclosures. ASU 2011-04 is effective for fiscal years beginning after
December 15, 2011 and should be applied prospectively. The Group does not expect that ASU 2011-04 will have a significant impact on its consolidated results of operations or financial position.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income (ASU
2011-05). ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders equity and requires an entity to present items of net income, other comprehensive
income and total comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220): Deferral of
the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (ASU 2011-12). ASU 2011-12 defers the effective
date of the changes in ASI 2011-05 that relate to the presentation of reclassification adjustments for each component of other comprehensive income in both net income and other comprehensive income. The amendments in the ASUs do not change the
items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. ASU 2011-05 and ASU 2011-12 are both effective for fiscal years, and interim periods within those years,
beginning after December 15, 2011 and must be applied retrospectively. The Group will be required to adopt ASU 2011-05 and ASU 2011-12 no later than the quarter beginning January 1, 2012. As the ASUs require additional presentation only,
there will be no impact to the Groups consolidated results of operations or financial position.

In September 2011, the FASB issued ASU
No. 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment (ASU 2011-08). ASU 2011-08 gives an entity the option to first assess qualitative factors to determine whether it is more
likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. Previous guidance required an entity
to test goodwill for impairment by first comparing the fair value of a reporting unit with its carrying amount. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15,
2011. The Group will be required to adopt ASU 2011-08 as of January 1, 2012 and does not expect that ASU 2011-08 will have a significant impact on its consolidated results of operations or financial position.



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



3. Variable Interest Entities

The Group conducts substantially all of its operations through Focus Media Technology (Shanghai) Co., Ltd. and its subsidiaries
(hereinafter collectively referred as the PRC operating subsidiaries). Due to PRC government restrictions that apply to foreign investment in Chinas advertising industry, prior to the PRC operating subsidiaries obtaining the
required licenses, the Groups advertising business was historically conducted through contractual arrangements among the PRC operating subsidiaries and the VIEs, and their respective shareholders. Each of the contractual arrangements with the
VIEs and their respective shareholders may only be amended with the approval of the Companys audit committee or another independent body of the board of directors of the Company, and may be terminated by an agreement of all parties thereto.
Revenues attributable to VIEs accounted for 3.2%, 4.2%, and 1.5% of the Companys consolidated net revenues for the year ended December 31, 2009, 2010 and 2011, respectively.

The following is a summary of the material provisions of these agreements.

Transfer of
Ownership When Permitted By Law

The equity owners of the relevant VIEs have granted the relevant PRC operating subsidiary or its
designee an exclusive option to purchase all or part of their equity interests in the relevant VIEs, or all or part of the assets of the relevant VIEs, for a purchase price equal to the registered capital of the relevant VIEs, or such higher price
as required under PRC laws at the time of such purchase, at any time determined by the relevant PRC operating subsidiary and to the extent permitted by PRC law. The call option agreement will terminate when the equity interests in the VIEs is
legally transferred to the relevant PRC operating subsidiaries.

Voting Arrangements

The equity owners of the VIEs have granted an individual designated by the relevant PRC operating subsidiaries the right to appoint all of the directors
and senior management of the VIEs and all of their other voting rights as shareholders of the VIEs, as provided under the articles of association of each such entity, to vote on their behalf on all matters, including matters related to the transfer
of their respective equity interests in the VIEs and distributing dividends or other proceeds from the VIEs. The agreement is valid for twenty years and shall be automatically renewed for another one year when the term (whether original or extended,
if applicable) of the agreement is due.

Equity Pledge Agreements

The equity owners pledge their respective equity interest in the relevant VIEs, to certain of the PRC operating subsidiaries to secure their obligations under the respective loan agreements between the
relevant shareholder and PRC operating subsidiary, for the sole purpose of contributing or increasing the registered capital of the VIEs, and acquiring certain of the Companys regional distributors, respectively. Under these equity pledge
agreements, each relevant shareholder has agreed not to transfer, assign, pledge or otherwise dispose of their interest in the relevant VIE, without the prior written consent of the relevant PRC operating subsidiary. The equity pledge agreement is
continuously effective until the full performance of the contractual obligations or the full repayment of the guaranteed liabilities as described in such agreement.

Loan Agreements

Loans were provided to the equity owners of the VIEs solely for the
purpose of establishing or increasing the registered capital of the VIEs. The loans were granted without interest. The loans have 10-year or 15-year duration and cannot be repaid before maturity without written approval from the lenders.

Risks in Relation to the VIE Structure

The Company has concluded that these contractual arrangements are legally enforceable and provide the Company with effective control of the VIEs. However, the aforementioned contractual arrangements with
the VIEs and their respective shareholders are subject to risks and uncertainties:



| |  | The VIEs and their respective shareholders may have or develop interests that conflict with the Groups interests, which may lead them to pursue
opportunities in violation of the aforementioned contractual arrangements.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The VIEs or their shareholders could fail to obtain the proper operating licenses or fail to comply with other regulatory requirements. As a result,
the PRC government could impose fines, new requirements or other penalties on the VIEs or the Group, mandate a change in ownership structure or operations for the VIEs or the Group, restrict the VIEs or the Groups use of financing sources or
otherwise restrict the VIEs or the Groups ability to conduct business.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The aforementioned contractual agreements may be unenforceable or difficult to enforce. The equity pledge agreements may not be properly registered or
may be deemed improperly registered or the VIEs or the Group may fail to meet other requirements. Even if the agreements are enforceable, they may be difficult to enforce given the uncertainties in the PRC legal system.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



| |  | The PRC government may declare the aforementioned contractual arrangements invalid. They may modify the relevant regulations, have a different
interpretation of such regulations, or otherwise determine that the Group or the VIEs have failed to comply with the legal obligations required to effectuate such contractual arrangements.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | It may be difficult to finance the VIEs by means of loans or capital contributions. Loans from the Groups offshore parent company to the VIEs
must be approved by the relevant PRC government body and such approval may be difficult or impossible to obtain. Because the VIEs are domestic PRC enterprises owned by nominee shareholders, the Groups not likely to finance their activities by
means of direct capital contributions as well.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

These contractual agreements provide the Company effective control over the
VIEs.

The call option agreements and voting arrangements provide the PRC Operating Subsidiaries effective control over the VIEs, while the
equity pledge agreements secure the equity owners obligations under the relevant agreements. Because the Company, through its PRC Operating Subsidiaries, has (1) the power to direct the activities of the VIE that most significantly affect
the entitys economic performance and (2) the right to receive benefits from the VIE, it has been deemed to be the primary beneficiary of the VIEs and has consolidated the respective VIEs since the date of execution of such agreements.

The Company has not provided financial or other support during the periods presented to the VIEs that was not previously contractually
required to provide.

Summary financial information of the VIEs included in the accompanying consolidated financial statements is as follows:



|                                                                                                                        |  |                    |             |  |      |   |             | 
|----------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ----------- |  | ---- | - | ----------- | 
|                                                                                                                        |  | As at December 31, |            
|                                                                                                                        |  | 2010               |             |  | 2011 |  
|Cash and cash equivalents                                                                                               |  | $                  | 10,835,318  |  |      | $ | 31,489,211  | 
|Accounts receivable, net of allowance for doubtful accounts of $1,044,492 and $1,189,024 in 2010 and 2011,
respectively |  |                    | 9,127,339   |  |      |   | 4,465,802   | 
|Rental deposits                                                                                                         |  |                    | 10,412,099  |  |      |   | 7,890,513   | 
|Other current assets                                                                                                    |  |                    | 2,363,218   |  |      |   | 1,607,836   | 
|                                                                                                                        |  |                    |             |  |      |   |             | 
|Total current assets                                                                                                    |  | $                  | 32,737,974  |  |      | $ | 45,453,362  | 
|Rental deposits                                                                                                         |  |                    | 1,466,145   |  |      |   | 2,799,863   | 
|Equipment, net                                                                                                          |  |                    | 2,158,832   |  |      |   | 5,874,342   | 
|Acquired intangible assets, net                                                                                         |  |                    | 3,523,586   |  |      |   | 2,366,486   | 
|Goodwill                                                                                                                |  |                    | 397,840,137 |  |      |   | 404,623,715 | 
|Other long-term assets                                                                                                  |  |                    | 1,079,410   |  |      |   | 630,394     | 
|                                                                                                                        |  |                    |             |  |      |   |             | 
|Total long-term assets                                                                                                  |  | $                  | 406,068,110 |  |      | $ | 416,294,800 | 
|Total assets                                                                                                            |  | $                  | 438,806,084 |  |      | $ | 461,748,162 | 
|                                                                                                                        |  |                    |             |  |      |   |             | 
|Accounts payable                                                                                                        |  |                    | 4,340,424   |  |      |   | 4,321,376   | 
|Accrued expenses and other current liabilities                                                                          |  |                    | 10,635,394  |  |      |   | 16,878,170  | 
|Income taxes payable                                                                                                    |  |                    | 2,914,969   |  |      |   | 3,051,811   | 
|Deferred tax liabilities                                                                                                |  |                    | 1,820,531   |  |      |   | 1,753,744   | 
|                                                                                                                        |  |                    |             |  |      |   |             | 
|Total current liabilities                                                                                               |  |                    | 19,711,318  |  |      |   | 26,005,101  | 
|Total long-term liabilities                                                                                             |  | $                  | 710,252     |  |      | $ | 791,750     | 
|                                                                                                                        |  |                    |             |  |      |   |             | 
|Total liabilities                                                                                                       |  | $                  | 20,421,570  |  |      | $ | 26,796,851  | 
|                                                                                                                        |  |                    |             |  |      |   |             | 



|             |  |                                 |             |   |      |   |             |      |  |   |             |  
|------------ |  | ------------------------------- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|             |  | For the year ended December 31, |            
|             |  | 2009                            |             |   | 2010 |   |             | 2011 | 
|Net revenues |  | $                               | 12,837,242  |   |      | $ | 21,491,910  |      |  | $ | 11,550,022  |  
|Gross loss   |  |                                 | (11,114,534 | ) |      |   | (19,019,078 | )    |  |   | (22,512,385 | )
|Net loss     |  | $                               | (30,533,871 | ) |      | $ | (35,930,035 | )    |  | $ | (41,077,487 | )
|             |  |                                 |             |   |      |   |             |      |  |   |             |  



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



4. Acquisitions

2009 acquisitions:

The Group did not make any significant acquisitions in 2009. The Group made aggregate cash payment of $92,411,545 during the year ended December 31, 2009
as the result of consideration made to acquire the noncontrolling interests of certain subsidiaries in the year ended December 31, 2009, as well as resolved contingent considerations for prior year acquisitions. The Group recorded additional
goodwill for resolved contingent consideration of $81,847,808 during the year ended December 31, 2009, of which $10.5 million was related to 2008 acquisitions.

2010 acquisitions:

The Group acquired five entities in the poster-frame advertising
business for fixed cash consideration of $5,347,562 in aggregate in 2010. There was no contingent consideration related to these acquisitions. The Group recognized acquired intangible assets of $1,192,206 and recognized goodwill of $3,958,444, which
was assigned to the poster frame reporting unit.

2011 acquisitions:

The Group acquired four entities in the traditional outdoor billboards advertising business for total estimated consideration of $19,881,929, of which $4,366,267 was paid in 2011 and the remaining
acquisition purchase price payable of $15,515,662 is unpaid, of which $2,409,602 was current and $13,106,060 was non-current. The acquisition was recorded using the purchase method of accounting and, accordingly, the acquired assets and liabilities
were recorded at their fair market value at the date of acquisition as follows:



|                                                                    |  |       |             |   |                    |  |            | 
|------------------------------------------------------------------- |  | ----- | ----------- | - | ------------------ |  | ---------- | 
|                                                                    |  | Value |             |   | Amortizationperiod | 
|Net assets acquired                                                 |  | $     | 466,809     |   |                    |  |            | 
|Intangible assets                                                   |  |       |             |   |                    |  |            | 
|Lease agreement                                                     |  |       | 17,484,332  |   |                    |  | 7-9 years  | 
|Customer base                                                       |  |       | 6,170,136   |   |                    |  | 5-10 years | 
|Trademark                                                           |  |       | 855,131     |   |                    |  | N/A        | 
|Non-compete agreement                                               |  |       | 253,628     |   |                    |  | 3 years    | 
|Goodwill                                                            |  |       | 19,731,162  |   |                    |  |            | 
|Less: Noncontrolling interest                                       |  |       | (19,102,245 | ) |                    |  |            | 
|Deferred tax liabilities associated with acquired intangible assets |  |       | (5,977,024  | ) |                    |  |            | 
|                                                                    |  |       |             |   |                    |  |            | 
|Total                                                               |  | $     | 19,881,929  |   |                    |  |            | 
|                                                                    |  |       |             |   |                    |  |            | 

In addition, the Group acquired four entities in the LCD business and three entities in the poster-frame advertising
business for cash consideration of $1,893,888 and $2,412,618 in aggregate, respectively, in 2011. There are no contingent consideration provisions related to these acquisitions. The Group recognized acquired intangible assets of $241,742 and
$527,342 respectively, and recognized goodwill of $6,044,821 and $2,175,992, respectively.

Pro forma results have not been shown for the
years ended December 31, 2009, 2010 and 2011 as the acquisitions occurring during those periods, both individually and in the aggregate are not material to the consolidated statements of operations for the relevant periods.

5. Disposition

2009 Disposition

In
2009, the Group aborted a contemplated initial public offering for its internet advertising segment due to the economic recession in late 2008. As a result, between August and December 2009, the Group disposed of six underperforming subsidiaries in
that segment through a series of individual transactions with their respective original owners. Each of the subsidiaries was considered a component of the Group and their results have been included in discontinued operations in the consolidated
statements of operations. The results of discontinued operations include net revenues and pretax losses of $127,611,538 and $45,384,077, respectively, related to these subsidiaries. The Group recorded a loss on disposal of $44,054,471.

In 2009, the Group also disposed of five underperforming subsidiaries engaged in poster frame, LCD display and traditional outdoor billboard advertising
services segments, none of which were considered a component of the Group. As such, all results of operations were included in operating activities for all periods presented. The Group recorded a loss on disposal of $7,411,454.

2010 Disposition

In January 2010,
certain employees and management of Allyes and certain members of the Companys management and directors entered into a definitive agreement with the Company and Allyes to buy an aggregate 38% interest in Allyes from the Company for cash
consideration of $13.3 million. On July 30, 2010, the Company sold its remaining 62% interest to a third party investor for cash consideration of $124 million. Following the disposition of Allyes, the Group is no longer engaged in the internet
advertising business and, therefore, the results of the internet advertising segment have been included in discontinued operations in the consolidated statements of operations for all periods presented. The results of discontinued operations include
net revenues and profit before tax of $80,599,956 and $5,150,739, respectively, related to Allyes and its subsidiaries and affiliates. The Group recorded a gain on disposal of $78,999,821 (net of $2,763,041 transaction cost), which has been included
as a component of discontinued operations. There were no remaining assets or liabilities associated with discontinued operations in the consolidated balance sheet as of December 31, 2010 and 2011.



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



Summary balance sheet information of Allyes as of the disposal date is as follows:



|                                                                          |  |   |             | 
|------------------------------------------------------------------------- |  | - | ----------- | 
|Cash and cash equivalents                                                 |  | $ | 40,665,131  | 
|Accounts receivable, net of allowance for doubtful accounts of $3,312,436 |  |   | 59,394,176  | 
|Other current assets                                                      |  |   | 8,942,748   | 
|                                                                          |  |   |             | 
|Total current assets                                                      |  |   | 109,002,055 | 
|                                                                          |  |   |             | 
|Acquired intangible assets, net                                           |  |   | 12,003,843  | 
|Goodwill                                                                  |  |   | 4,272,498   | 
|Other long-term assets                                                    |  |   | 2,903,049   | 
|                                                                          |  |   |             | 
|Total long-term assets                                                    |  |   | 19,179,390  | 
|                                                                          |  |   |             | 
|Total assets                                                              |  |   | 128,181,445 | 
|                                                                          |  |   |             | 
|Accounts payable                                                          |  |   | 49,745,765  | 
|Accrued expenses and other current liabilities                            |  |   | 14,283,603  | 
|Income taxes payable                                                      |  |   | 4,105,786   | 
|                                                                          |  |   |             | 
|Total current liabilities                                                 |  |   | 68,135,154  | 
|Total long-term liabilities                                               |  |   | 1,704,794   | 
|Total liabilities                                                         |  |   | 69,839,948  | 
|                                                                          |  |   |             | 
|Noncontrolling interest                                                   |  |   | 15,992,898  | 
|Accumulated other comprehensive income                                    |  |   | 4,729,725   | 

2011 Disposition

The Group did not dispose of any significant subsidiaries in 2011.

6. Fair Value Measurement

The Group did not have any assets or liabilities measured at fair value on a recurring basis subsequent to initial recognition as of
December 31, 2010 or 2011. The Groups assets measured at fair value on a non-recurring basis included acquired intangible assets and goodwill in impairment test for the year ended December 31, 2010 and equity method investment impairment
test for the year ended December 31, 2011.

The fair value measurements for acquired intangible assets and goodwill are classified as Level 3
measurements. Determining the appropriate fair value model and calculating the fair value of these instruments requires the input of significant estimates and assumptions, some of which are unobservable. The estimates and assumptions include
business assumptions, terminal value, discount rate, and tax amortization benefit. The fair value measurement for equity method investment, which investment is in the form of marketable securities, is classified as Level 1 measurement.



F-17



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



7. Accounts Receivable, Net

Accounts receivable, net of allowance for doubtful accounts of $21,088,503 and $31,068,977 for the years ended December 31, 2010
and 2011, respectively, consists of following:



|                    |  |              |             |  |      |   |             | 
|------------------- |  | ------------ | ----------- |  | ---- | - | ----------- | 
|                    |  | December 31, |            
|                    |  | 2010         |             |  | 2011 |  
|Billed receivable   |  | $            | 83,892,036  |  |      | $ | 156,633,471 | 
|Unbilled receivable |  |              | 73,436,707  |  |      |   | 92,572,783  | 
|                    |  |              |             |  |      |   |             | 
|Total               |  | $            | 157,328,743 |  |      | $ | 249,206,254 | 
|                    |  |              |             |  |      |   |             | 

Unbilled receivables represent amounts earned under advertising contracts in progress but not billable at the respective
balance sheet dates. These amounts become billable according to the contract term. The Group anticipates that substantially all of such unbilled amounts will be billed and collected within twelve months of the balance sheet dates.

An analysis of allowance for doubtful accounts for the years ended December 31, 2010 and 2011 is as follows:



|                                 |  |      |             |   |      |   |            |  
|-------------------------------- |  | ---- | ----------- | - | ---- | - | ---------- | -
|                                 |  | 2010 |             |   | 2011 |  
|Balance at beginning of year     |  | $    | 33,596,096  |   |      | $ | 21,088,503 |  
|Bad debt expenses                |  |      | 454,624     |   |      |   | 16,013,208 |  
|Recoveries and (write-offs), net |  |      | (10,393,667 | ) |      |   | (7,254,193 | )
|Disposition of subsidiaries      |  |      | (3,312,436  | ) |      |   |           |  
|Effect of exchange rate changes  |  |      | 743,886     |   |      |   | 1,221,459  |  
|                                 |  |      |             |   |      |   |            |  
|Balance at end of year           |  | $    | 21,088,503  |   |      | $ | 31,068,977 |  
|                                 |  |      |             |   |      |   |            |  

8. Equipment, Net

Equipment, net consists of the following:



|                                                |  |              |              |   |      |   |              |  
|----------------------------------------------- |  | ------------ | ------------ | - | ---- | - | ------------ | -
|                                                |  | December 31, |             
|                                                |  | 2010         |              |   | 2011 |  
|Media display equipment                         |  | $            | 191,447,959  |   |      | $ | 232,824,888  |  
|Computers and office equipment                  |  |              | 10,315,385   |   |      |   | 13,163,322   |  
|Leasehold improvements                          |  |              | 2,025,582    |   |      |   | 2,745,253    |  
|Vehicles                                        |  |              | 1,245,472    |   |      |   | 2,437,679    |  
|                                                |  |              |              |   |      |   |              |  
|Total                                           |  |              | 205,034,398  |   |      |   | 251,171,142  |  
|Less: accumulated depreciation and amortization |  |              | (136,147,602 | ) |      |   | (172,129,022 | )
|                                                |  |              |              |   |      |   |              |  
|Total                                           |  | $            | 68,886,796   |   |      | $ | 79,042,120   |  
|                                                |  |              |              |   |      |   |              |  

The majority of the Groups display equipment is installed on the premises of its lessors from whom space is rented,
such as residential complexes and commercial locations.

Depreciation expense for the years ended December 31, 2009, 2010 and 2011 was
$35,004,686, $28,270,063 and $28,787,221, respectively, of which $724,515, $355,004 and nil was related to discontinued operations.

In 2009,
the Group determined that it would cease expansion of its digital poster frame network and, in response to a regulation promulgated by Shanghai Municipality Government in early 2009, the operation of its boat-based advertising platform on the
Huangpu River. The Group recorded an aggregated impairment loss of $40,318,817 of related equipment for the year ended December 31, 2009.

The Group did not incur any impairment loss on equipment for the years ended December 31, 2010 and 2011.



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



9. Acquired Intangible Assets, Net

As of December 31, 2010 and 2011, acquired intangible assets, net were comprised of the following:



|                                |  |              |             |   |      |   |             |  
|------------------------------- |  | ------------ | ----------- | - | ---- | - | ----------- | -
|                                |  | December 31, |            
|                                |  | 2010         |             |   | 2011 |  
|Cost:                           |  |              |             |   |      |   |             |  
|Operation & broadcasting rights |  | $            | 11,460,583  |   |      | $ | 12,045,898  |  
|Lease agreements                |  |              | 54,460,034  |   |      |   | 75,849,900  |  
|Customer base                   |  |              | 24,013,585  |   |      |   | 31,524,825  |  
|Trademark                       |  |              | 1,145,303   |   |      |   | 2,076,687   |  
|Others                          |  |              | 4,559,702   |   |      |   | 5,051,269   |  
|                                |  |              |             |   |      |   |             |  
|Total                           |  |              | 95,639,207  |   |      |   | 126,548,579 |  
|                                |  |              |             |   |      |   |             |  
|Accumulated amortization:       |  |              |             |   |      |   |             |  
|Operation & broadcasting rights |  |              | (6,166,809  | ) |      |   | (9,518,838  | )
|Lease agreements                |  |              | (43,298,789 | ) |      |   | (54,117,372 | )
|Customer base                   |  |              | (16,338,269 | ) |      |   | (21,858,528 | )
|Trademark                       |  |              | (1,145,303  | ) |      |   | (1,203,796  | )
|Others                          |  |              | (4,527,994  | ) |      |   | (4,824,610  | )
|                                |  |              |             |   |      |   |             |  
|Total                           |  |              | (71,477,164 | ) |      |   | (91,523,144 | )
|                                |  |              |             |   |      |   |             |  
|Intangible assets, net          |  | $            | 24,162,043  |   |      | $ | 35,025,435  |  
|                                |  |              |             |   |      |   |             |  

The Group recorded amortization expense as follows:



|                                            |  |                                  |            |  |      |   |            |      |  |   |            | 
|------------------------------------------- |  | -------------------------------- | ---------- |  | ---- | - | ---------- | ---- |  | - | ---------- | 
|                                            |  | For the years ended December 31, |           
|                                            |  | 2009                             |            |  | 2010 |   |            | 2011 | 
|Cost of revenues                            |  | $                                | 14,282,389 |  |      | $ | 12,734,069 |      |  | $ | 11,359,056 | 
|Selling and marketing                       |  |                                  | 4,664,850  |  |      |   | 4,106,231  |      |  |   | 4,638,646  | 
|Gain or (loss) from discontinued operations |  |                                  | 8,331,505  |  |      |   | 765,859    |      |  |   |           | 
|                                            |  |                                  |            |  |      |   |            |      |  |   |            | 
|Total                                       |  | $                                | 27,278,744 |  |      | $ | 17,606,159 |      |  | $ | 15,997,702 | 
|                                            |  |                                  |            |  |      |   |            |      |  |   |            | 

In 2009, in response to a regulation promulgated by Shanghai Municipality Government in early 2009, the Group determined
to cease the operation of its boat-based advertising platform on the Huangpu River. Accordingly, the Group recorded an impairment loss of $3,168,472 to write off the associated operating and broadcasting rights of its LCD display segment. In
addition, a $22,268,615 impairment loss was recorded for the acquired intangible assets for certain subsidiaries in internet advertising segment that were underperforming. The impaired intangible assets primarily consisted of technology, lease
agreements, customer base and trademark. The valuation of technology, lease agreements, and customer base was developed through the application of a form of income approach, known as the excess earnings method. The first step in applying the excess
earnings method was to estimate the future debt-free net income attributable to the intangible asset. The resulting debt-free net income was then reduced by an estimated fair rate of return on contributory assets necessary to realize the projected
earnings attributable to the intangible asset. These assets include fixed assets, working capital and other intangible assets. The valuation of the trademark was based on the relief from royalty method whereby an asset is valued based upon the
after-tax cash flow savings accruing to the owner by virtue of the fact that the owner does not have to pay a fair royalty to a third party for the use of that asset. Accordingly, a portion of the owners earnings, equal to the
after-tax royalty, would have been paid for use of the asset that can be attributed to the asset. The value of the asset depends on the present worth of future after-tax royalties attributable to the asset to their present worth at market-derived
rates of return appropriate for the risks of that particular asset.

Total impairment loss recorded for the year ended December 31, 2009
amounted to $25,437,087, of which $21,459,807 was related to discontinued operations. The Group did not incur impairment loss on acquired intangible assets for the years ended December 31, 2010 and 2011.

The Group expects to record amortization expense of $10,902,778, $5,481,036, $3,985,039, $3,896,574, and $3,082,812 for the years ending
December 31, 2012, 2013, 2014, 2015 and 2016, respectively.



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



10. Goodwill

The Groups goodwill primarily arises from the initial consideration paid and, for those acquisitions made prior to
January 1, 2009, subsequent settlement of contingent consideration of the acquisitions. The changes in the carrying amount of goodwill by segment for the years ended December 31, 2010 and 2011 are as follows:



|                                                                   |  |                    |             |  |                    |   |            |                     |  |   |                              |   |  |       |            |  |  |   |             |  
|------------------------------------------------------------------ |  | ------------------ | ----------- |  | ------------------ | - | ---------- | ------------------- |  | - | ---------------------------- | - |  | ----- | ---------- |  |  | - | ----------- | -
|                                                                   |  | LCD displaynetwork |             |  | Posterframenetwork |   |            | Internetadvertising |  |   | Traditionaloutdoorbillboards |   |  | Total |           
|Balance as of January 1, 2010                                      |  | $                  | 406,096,193 |  |                    | $ |           |                     |  | $ | 4,272,498                    |   |  | $     |           |  |  | $ | 410,368,691 |  
|Goodwill acquired during the year                                  |  |                    |            |  |                    |   | 3,958,444  |                     |  |   |                             |   |  |       |           |  |  |   | 3,958,444   |  
|Goodwill recorded as a result of contingent consideration resolved |  |                    | 5,038,676   |  |                    |   | 15,551,019 |                     |  |   |                             |   |  |       |           |  |  |   | 20,589,695  |  
|Goodwill impairment                                                |  |                    |            |  |                    |   | (5,736,134 | )                   |  |   |                             |   |  |       |           |  |  |   | (5,736,134  | )
|Disposal of subsidiaries                                           |  |                    |            |  |                    |   |           |                     |  |   | (4,272,498                   | ) |  |       |           |  |  |   | (4,272,498  | )
|Translation adjustments                                            |  |                    | 399,355     |  |                    |   | 27,079     |                     |  |   |                             |   |  |       |           |  |  |   | 426,434     |  
|                                                                   |  |                    |             |  |                    |   |            |                     |  |   |                              |   |  |       |            |  |  |   |             |  
|Balance as of December 31, 2010                                    |  |                    | 411,534,224 |  |                    |   | 13,800,408 |                     |  |   |                             |   |  |       |           |  |  |   | 425,334,632 |  
|Goodwill acquired during the year                                  |  |                    | 6,044,821   |  |                    |   | 2,175,992  |                     |  |   |                             |   |  |       | 19,731,162 |  |  |   | 27,951,975  |  
|Goodwill recorded as a result of contingent consideration resolved |  |                    | 1,270,599   |  |                    |   | 3,211,257  |                     |  |   |                             |   |  |       |           |  |  |   | 4,481,856   |  
|Translation adjustments                                            |  |                    | 699,894     |  |                    |   | 258,614    |                     |  |   |                              |   |  |       | 385,705    |  |  |   | 1,344,213   |  
|                                                                   |  |                    |             |  |                    |   |            |                     |  |   |                              |   |  |       |            |  |  |   |             |  
|Balance as of December 31, 2011                                    |  | $                  | 419,549,538 |  |                    | $ | 19,446,271 |                     |  | $ |                             |   |  | $     | 20,116,867 |  |  | $ | 459,112,676 |  
|                                                                   |  |                    |             |  |                    |   |            |                     |  |   |                              |   |  |       |            |  |  |   |             |  

The gross amount and accumulated impairment losses by segment as of December 31, 2010 and 2011 are as follows:



|                                |  |                    |             |   |                    |   |              |                              |  |   |             |   |  |   |              |  
|------------------------------- |  | ------------------ | ----------- | - | ------------------ | - | ------------ | ---------------------------- |  | - | ----------- | - |  | - | ------------ | -
|                                |  | LCD displaynetwork |             |   | Posterframenetwork |   |              | Traditionaloutdoorbillboards |  |   | Total       |  
|Goodwill, gross                 |  | $                  | 411,596,247 |   |                    |   | 422,196,951  |                              |  | $ | 24,836,040  |   |  | $ | 858,629,238  |  
|Accumulated impairment losses   |  |                    | (62,023     | ) |                    |   | (408,396,543 | )                            |  |   | (24,836,040 | ) |  |   | (433,294,606 | )
|                                |  |                    |             |   |                    |   |              |                              |  |   |             |   |  |   |              |  
|Balance as of December 31, 2010 |  | $                  | 411,534,224 |   |                    | $ | 13,800,408   |                              |  | $ |            |   |  | $ | 425,334,632  |  
|                                |  |                    |             |   |                    |   |              |                              |  |   |             |   |  |   |              |  



|                                |  |                    |             |   |                    |   |              |                              |  |   |             |   |  |   |              |  
|------------------------------- |  | ------------------ | ----------- | - | ------------------ | - | ------------ | ---------------------------- |  | - | ----------- | - |  | - | ------------ | -
|                                |  | LCD displaynetwork |             |   | Posterframenetwork |   |              | Traditionaloutdoorbillboards |  |   | Total       |  
|Goodwill, gross                 |  | $                  | 419,611,561 |   |                    |   | 427,842,814  |                              |  | $ | 44,952,907  |   |  | $ | 892,407,282  |  
|Accumulated impairment losses   |  |                    | (62,023     | ) |                    |   | (408,396,543 | )                            |  |   | (24,836,040 | ) |  |   | (433,294,606 | )
|                                |  |                    |             |   |                    |   |              |                              |  |   |             |   |  |   |              |  
|Balance as of December 31, 2011 |  | $                  | 419,549,538 |   |                    | $ | 19,446,271   |                              |  | $ | 20,116,867  |   |  | $ | 459,112,676  |  
|                                |  |                    |             |   |                    |   |              |                              |  |   |             |   |  |   |              |  

Management performs a goodwill impairment test for each of its reporting units as of December 31 of each year or
when there is a triggering event causing management to believe it is more likely than not that the carrying amount of goodwill may be impaired. As a result of impairment tests, the Group recorded a goodwill impairment loss of $5,736,134 and nil for
the years ended December 31, 2010 and 2011, respectively.

Goodwill impairment in 2010

The Group settled contingent purchase consideration of $5,736,134 associated with the poster frame network reporting unit during the three months ended
March 31, 2010. The amount was recorded as additional goodwill and was immediately impaired as there had been no material changes in the fair value of the poster frame network reporting unit subsequent to December 31, 2009, the most recent
impairment analysis date, which was still lower than the carrying amount of the poster frame network reporting unit on March 31, 2010.

The Group further settled contingent purchase consideration of $5,038,676 and $9,814,885 associated with the LCD display network and poster frame
reporting units during 2010. The Groups annual impairment test was performed for both reporting units using the income approach valuation method as of December 31, 2010, which indicated that the fair value of both reporting units
significantly exceeded their carrying amounts. Therefore, no goodwill impairment was recognized.

Goodwill impairment in 2011

The Groups annual impairment test was performed for three reporting units using the income approach valuation method as of
December 31, 2011, which indicated that the fair value of all the three reporting units significantly exceeded their carrying amounts. Therefore, no goodwill impairment was recognized.



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



11. Equity Method Investment

On January 13, 2011, the Company purchased 15,331,305, or approximately 15%, of the outstanding shares of VisionChina Media Inc.
(Vision China) (Nasdaq: VISN), one of Chinas largest out-of-home digital television advertising networks on mass transportation systems, at a price of US$3.979 per share, equivalent to US$3.979 per ADS, for total cash consideration
of $61,003,263. As of December 31, 2011, all the consideration has been paid.

The Company is the second largest shareholder of Vision
China and also holds a directorship in Vision Chinas board during the year ended December 31, 2011. Therefore, the investment is accounted for using the equity method of accounting.

As of December 31, 2011, the carrying amount of the investment in Vision China consisted of:



|                                |  |                  |             |  
|------------------------------- |  | ---------------- | ----------- | -
|                                |  | December 31,2011 |            
|Underlying equity in net assets |  | $                | 16,559,187  |  
|Acquired intangible assets, net |  |                  | 38,614,111  |  
|Goodwill                        |  |                  | 2,102,814   |  
|                                |  |                  |             |  
|                                |  |                  | 57,276,112  |  
|Impairment loss                 |  |                  | (38,265,294 | )
|                                |  |                  |             |  
|Total carrying amount           |  | $                | 19,010,818  |  
|                                |  |                  |             |  
|Quoted market price             |  | $                | 1.24        |  
|Aggregate market value          |  | $                | 19,010,818  |  
|                                |  |                  |             |  

Impairment analysis was performed for the carrying amount of the investment in Vision China for the year ended
December 31, 2011 and the difference between the carrying amount and the market value was considered an other-than-temporary loss, and the impairment was recorded.

12. Cost Method Investment

On December 7, 2010, the Company entered into a subscription agreement to subscribe 4,716 Class B ordinary shares, or 1.61% of the
then outstanding ordinary shares of a private company, which is engaged in the up-market travel consolidator businesses including but not limited to online airline and hotel ticketing business and other related services, for a consideration of
approximately $1.5 million. In January 2011, it was further agreed that the consideration would be settled through the provision of advertising services by one of the PRC operating subsidiaries of the Group to this investee. As of December 31,
2011, the advertising services have been provided and investment is accounted for using the cost method.

The Group did not incur any
impairment loss on cost method investment for the year ended December 31, 2011.

13. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:



|                                                                   |  |              |             |  |      |   |             | 
|------------------------------------------------------------------ |  | ------------ | ----------- |  | ---- | - | ----------- | 
|                                                                   |  | December 31, |            
|                                                                   |  | 2010         |             |  | 2011 |  
|Accrued promotion and marketing expenses and agency rebate payable |  | $            | 45,623,926  |  |      | $ | 66,325,090  | 
|Other accrued expenses                                             |  |              | 4,152,385   |  |      |   | 5,027,684   | 
|Other taxes payable                                                |  |              | 25,587,764  |  |      |   | 33,859,333  | 
|Advance from customers                                             |  |              | 26,292,405  |  |      |   | 31,442,821  | 
|Accrued employee payroll and welfare                               |  |              | 5,492,293   |  |      |   | 9,359,197   | 
|Payables related to acquisitions                                   |  |              | 4,920,493   |  |      |   | 6,478,092   | 
|Withholding individual PRC income tax                              |  |              | 1,155,464   |  |      |   | 1,155,464   | 
|Accrual for litigations (see Note 20)                              |  |              |            |  |      |   | 2,000,000   | 
|Payables related to share repurchase                               |  |              | 2,996,074   |  |      |   | 5,962,521   | 
|Amount due to noncontrolling interest shareholders                 |  |              |            |  |      |   | 5,475,408   | 
|Others                                                             |  |              | 5,542,718   |  |      |   | 6,667,916   | 
|                                                                   |  |              |             |  |      |   |             | 
|Total                                                              |  | $            | 121,763,522 |  |      | $ | 173,753,526 | 
|                                                                   |  |              |             |  |      |   |             | 



F-21



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



14. Bank Loans



|                                                |  |       |  |                  |             | 
|----------------------------------------------- |  | ----- |  | ---------------- | ----------- | 
|                                                |  | Notes |  | December 31,2011 |            
|Short -term revolving loan                      |  | a)    |  | $                | 100,000,000 | 
|Long -term revolving loan                       |  | b)    |  |                  | 71,000,000  | 
|                                                |  |       |  |                  |             | 
|Total                                           |  |       |  | $                | 171,000,000 | 
|                                                |  |       |  |                  |             | 
|                                                |  |      
|Additional available long -term loan facilities |  | b)    |  | $                | 29,000,000  | 
|                                                |  |       |  |                  |             | 



|a) | The short-term revolving loan is denominated in U.S. Dollars, was obtained from a large commercial institution outside of the PRC (Bank A), and is secured
by a stand-by letter of credit issued by PRC based financial institution (Bank B). The stand-by letter of credit is secured by short-term deposits of RMB628,030,000 (equivalent to $99,673,063), which is recorded as restricted cash on the
Groups balance sheet. The Group paid RMB 4,095,000 (equivalent to $649,907) to Bank B to issue the stand-by letter of credit to Bank A. The short-term revolving loan bears interest, which is payable monthly, at the rate of two-week LIBOR plus
2.1% per annum. The weighted average interest rate of this loan for the year ended December 31, 2011 was approximately 2.4%. The short-term loan is payable in November 2012.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b) | The long -term revolving loan is denominated in U.S. Dollars, was obtained from Bank A, and is secured by a stand-by letter of credit issued by Bank B. The stand-by
letter of credit is secured by restricted long-term deposits of RMB 628,030,000 (equivalent to $99,673,063) deposited in Bank B, The deposit is recorded as restricted cash on the Groups balance sheet. The Group paid RMB 3,965,000 (equivalent
to $629,275) to Bank B to issue the stand-by letter of credit required by Bank A, The costs incurred in connection with the stand-by letter of credit are being amortized to interest expense over the term of the loan. The loan bears interest, which
is payable monthly, at the rate of two-week LIBOR plus 2.1%, 2.4% and 2.7% per annum for each of the twelve months ending December 8, 2012, 2013 and 2014, respectively. The weighted average interest rate of this loan for the year ended
December 31, 2011 was about 2.4%. The principal of the loan is payable in two installments of $17,750,000 and $53,250,000, which are due in December 2013 and December 2014, respectively.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Neither the short-term or long-term bank loan contains financial covenants.

15. Other operating (income) expenses, net

Other operating (income) expenses, net consists the following:



|                                      |  |                                  |             |   |      |   |             |      |  |   |             |  
|------------------------------------- |  | -------------------------------- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                      |  | For the years ended December 31, |            
|                                      |  | 2009                             |             |   | 2010 |   |             | 2011 | 
|Loss on disposal of subsidiaries      |  | $                                | 7,411,454   |   |      | $ | 1,544,922   |      |  | $ |            |  
|Government subsidy income             |  |                                  | (11,122,063 | ) |      |   | (14,706,120 | )    |  |   | (19,937,901 | )
|Loss on disposal of equipment         |  |                                  |            |   |      |   | 248,785     |      |  |   | 1,910,363   |  
|Impairment of other long lived assets |  |                                  | 14,714,157  |   |      |   |            |      |  |   |            |  
|Penalty for termination of contract   |  |                                  | 1,872,155   |   |      |   |            |      |  |   |            |  
|Other income                          |  |                                  | (5,199,764  | ) |      |   | (1,771,691  | )    |  |   | (2,194,020  | )
|Other expenses                        |  |                                  | 5,435,104   |   |      |   | 540,159     |      |  |   | 4,083,863   |  
|                                      |  |                                  |             |   |      |   |             |      |  |   |             |  
|Total                                 |  | $                                | 13,111,043  |   |      | $ | (14,143,945 | )    |  | $ | (16,137,695 | )
|                                      |  |                                  |             |   |      |   |             |      |  |   |             |  



F-22



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



16. Share-based Compensation

Share-based Compensation Plans for the Group

In November 2007, the Groups 2007 Employee Share Option Scheme (2007 Plan) was authorized, under which the Group is authorized to grant options or share appreciation rights or restricted
shares to purchase up to 5% of the Groups issued and outstanding ordinary shares from time to time in the three years following the date of enactment of 2007 Plan. In December 2010, the 2010 Employee Share Option Plan (2010 Plan)
was authorized, under which the Group may issue incentive shares equal to no more than 5% of the issued share capital of the Company, outstanding from time to time, including stock options and restricted shares to Companys employees, officers,
consultants and directors.

On September 22, 2009, as a result of performance evaluations, 1,776,300 previously granted options under
2007 Plan were cancelled and previously unrecognized compensation cost of $2,587,993 was recognized on the cancellation date. In addition, 7,550,849 previously granted options under 2007 Plan, associated with 300 employees, were cancelled and
replaced by an equivalent number of unvested restricted shares (2009 Replacement). This was accounted for as a modification with the incremental compensation cost of $8,122,206, which was measured as the excess of the fair value of the
restricted shares over the fair value of the cancelled options at the cancellation date. Further, restricted shares to obtain 28,935,131 ordinary shares were granted to employees in 2009. The restricted shares generally vest over a period of two to
three years.

On December 28, 2010 and November 25, 2011, restricted shares to obtain 15,000,000 and 17,711,500 ordinary shares were
granted to employees, officers, consultants and directors under the 2010 Plan, respectively. These restricted shares will vest over a period of three years.

Under the terms of each plan, options are generally granted at prices equal to the fair market value of the ordinary shares at the date of grant whereas restricted shares are granted without exercise
price, and generally vest over two to four years with certain options vesting over one year. Options are expiring in 10 years from the date of grant. As of December 31, 2011, 11,156,760 options and 38,169,245 restricted shares were outstanding.
The fair value of restricted shares was determined to be the market value of the ordinary shares on the date of grant whereas the fair value of options granted to employees was estimated on the date of grant using the Black-Scholes option-pricing
model. No options were granted during the years ended December 31, 2009, 2010 and 2011.

The expected volatilities were estimated based on
historical volatility. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free interest rate assumption is determined using the Federal Reserve nominal rates for U.S.
Treasury zero-coupon bonds with maturities similar to those of the expected term of the award.

A summary of the share option activities for
the year ended December 31, 2011 is as follows:



|                                                        |  |                         |            |   |                               |   |      |                                                 |  |  |                         |  |  |   |           | 
|------------------------------------------------------- |  | ----------------------- | ---------- | - | ----------------------------- | - | ---- | ----------------------------------------------- |  |  | ----------------------- |  |  | - | --------- | 
|                                                        |  | WeightedNumberof shares |            |   | Weightedaverageexercise price |   |      | Remainingweightedaveragecontract term(in years) |  |  | Aggregateintrinsicvalue | 
|Options outstanding at January 1, 2011                  |  |                         | 11,962,045 |   |                               | $ | 4.33 |                                                 |  |  |                         |  |  |   |           | 
|Forfeited                                               |  |                         | (53,775    | ) |                               | $ | 5.72 |                                                 |  |  |                         |  |  |   |           | 
|Exercised                                               |  |                         | (751,510   | ) |                               | $ | 6.17 |                                                 |  |  |                         |  |  |   |           | 
|                                                        |  |                         |            |   |                               |   |      |                                                 |  |  |                         |  |  |   |           | 
|Options outstanding at December 31, 2011                |  |                         | 11,156,760 |   |                               | $ | 4.39 |                                                 |  |  | 4.33                    |  |  | $ | 6,432,607 | 
|                                                        |  |                         |            |   |                               |   |      |                                                 |  |  |                         |  |  |   |           | 
|Options exercisable at December 31, 2011                |  |                         | 11,156,760 |   |                               | $ | 4.39 |                                                 |  |  | 4.33                    |  |  | $ | 6,432,607 | 
|Options vested or expected to vest at December 31, 2011 |  |                         | 11,156,760 |   |                               | $ | 4.39 |                                                 |  |  | 4.33                    |  |  | $ | 6,432,607 | 

The total intrinsic value of options exercised during the years ended December 31, 2009, 2010 and 2011 was
$4,086,489, $1,283,299, and $2,194,710, respectively.



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



A summary of the restricted share activities for the year ended December 31, 2011 is as follows:



|                                                |  |                         |             |   |                                       |   |      | 
|----------------------------------------------- |  | ----------------------- | ----------- | - | ------------------------------------- | - | ---- | 
|                                                |  | WeightedNumberof shares |             |   | WeightedAverage 
Grant-DateFair value |  
|Restricted shares unvested at January 1, 2011   |  |                         | 38,957,925  |   |                                       | $ | 3.00 | 
|Granted                                         |  |                         | 17,711,500  |   |                                       | $ | 3.54 | 
|Vested                                          |  |                         | (18,348,550 | ) |                                       | $ | 2.78 | 
|Forfeited                                       |  |                         | (151,630    | ) |                                       | $ | 2.95 | 
|                                                |  |                         |             |   |                                       |   |      | 
|Restricted shares unvested at December 31, 2011 |  |                         | 38,169,245  |   |                                       | $ | 3.36 | 
|                                                |  |                         |             |   |                                       |   |      | 

The weighted average grant-date fair value of restricted shares granted for the years ended December 31, 2009, 2010
and 2011 were $2.24, $4.24 and $3.54, respectively. Total fair value of share vested during 2009, 2010 and 2011 was nil, $27,979,963, and $64,154,920, respectively.

As of December 31, 2011, there was $88,131,222 in total unrecognized compensation expense related to unvested share-based compensation arrangements which is expected to be recognized over a
weighted-average period of 2.50 years.

Private equity placement with JJ Media Investment Holding

On September 23, 2009, the Company entered into a definitive agreement for a private equity placement of 75 million of its ordinary shares with
JJ Media Investment Holding (JJ Media), a British Virgin Island company controlled by Jiang Nan Chun, the Groups Chief Executive Officer and Chairman, for a purchase price of $1.899 per share, representing the average closing price
of the shares during the twenty consecutive trading days preceding the signing of the definitive agreement. On November 18, 2009, the private equity placement was consummated and the Company received gross proceeds of $142,425,500. The shares
issued to JJ Media are subject to a six month lock-up and have customary registration rights pursuant to a registration rights agreement entered into between the Company and JJ Media. This transaction resulted in share based compensation expense of
$4.0 million, which represents the excess of the fair value of the Companys shares over the purchase price. The fair value of the Companys shares reflects the Companys closing share price on the trading day immediately preceding
the signing date of the definitive agreement.



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



17. Income Taxes

Cayman Islands

Under
the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. In addition, upon payment of dividends by the Company to its shareholders, no Cayman Islands withholding tax will be imposed.

British Virgin Islands

The
Companys subsidiaries incorporated in the BVI are not subject to taxation.

Hong Kong

Focus Media (China) Holding Ltd. is subject to Hong Kong profit tax at a rate of 16.5% on its assessable profit. No Hong Kong profit tax has been provided
as the Group does not have assessable profit that is earned in or derived from Hong Kong during the years presented.

PRC

On January 1, 2008, a new EIT law (New Law) in the PRC took effect. The New Law applies a uniform 25% EIT rate to both foreign invested
enterprises and domestic enterprises. The New Law provides a five-year transition period from its effective date for those enterprises which were established before the promulgation date of the New Law and which were entitled to a preferential tax
treatment under the PRC Income Tax Laws, such as a reduced tax rate or a tax holiday.

On December 26, 2007, the State Council issued the
Notice of the State Council Concerning Implementation of Transitional Rules for Enterprise Income Tax Incentives (Circular 39). Based on Circular 39, certain specifically listed categories of enterprises which enjoyed a preferential tax
rate of 15% are eligible for a graduated rate increase to 25% over the 5-year period beginning from January 1, 2008. Specifically, the applicable rates under such an arrangement for such enterprises would be 18%, 20%, 22%, 24% and 25% for 2008,
2009, 2010, 2011, 2012 and thereafter, respectively. Preferential tax treatments will continue to be granted to industries and projects that are strongly supported and encouraged by the state, and enterprises that qualify as new and high
technology enterprises strongly supported by the state (HNTE) under the New Law will be entitled to a 15% preferential EIT rate.

On the same date, the State Council also issued the Notice of the State Council concerning Implementation of Transitional Tax Incentives for HNTE
newly-established in Special Economic Zones and Shanghai Pudong New Area (Circular 40), which provides guidance of the income tax incentives for high tech companies established in the Special Economic Zones and Shanghai Pudong New Area,
which enterprise income tax is exempted for the first and second year and levied at half-rate of 25% statutory rate from the third to fifth year.

Most of the Companys PRC operating subsidiaries and VIEs transitioned from 33% to 25%, effective January 1, 2008. Those that enjoyed a lower tax rate of 15% as high-tech companies under the PRC
Income Tax Laws will transition to the uniform tax rate of 25% from 2008 unless they obtain the HNTE status under the New Law. The Group has thus generally applied the 25% rate in calculating its deferred tax balances. Subsidiaries and VIEs with
temporary differences reversing during the holiday period have used the reduced rates in calculating their deferred tax balance.

Beijing
Focus Media Wireless Co., Ltd. qualified for the transitional rule under Circular 39 and thus enjoyed a 50% reduction off the transitional tax rate from 2009 through 2011 based on the transitional rule under the New Law. The Companys 100%
owned subsidiary, Focus Media Information Technology (China) Co., Ltd. was incorporated on August 22, 2008 in Shanghai Pudong New Area, and obtained the HNTE qualification on June 22, 2010. Therefore, Focus Media Information Technology
(China) Co., Ltd. is exempted from EIT for the two years ended December 31, 2010 and 2011 and enjoys a 50% reduction off the statutory rate from 2012 through 2014.

The Group classifies interest and penalties relating to income tax matters within income tax expense. The amount of penalties and interest recorded for the years ended December 31, 2010 and 2011 was
immaterial. The Group decreased its liabilities for unrecognized tax benefits by $592,525 in connection with effective settlement of prior-year tax uncertainties during the year ended December 31, 2009, and did not increase or decrease its
liabilities for unrecognized tax benefits during the years ended December 31, 2010 and 2011, respectively. The Group does not anticipate any significant increases or decreases to its liability for unrecognized tax benefits within the next
12 months.



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



|                             |  |   |           |  
|---------------------------- |  | - | --------- | -
|Balance at January 1, 2009   |  | $ | 5,279,674 |  
|Settlements                  |  |   | (592,525  | )
|Disposition of subsidiaries  |  |   | (342,250  | )
|Translation adjustment       |  |   | 167,054   |  
|                             |  |   |           |  
|Balance at December 31, 2009 |  | $ | 4,511,953 |  
|Translation adjustment       |  |   | 140,005   |  
|                             |  |   |           |  
|Balance at December 31, 2010 |  | $ | 4,651,958 |  
|Translation adjustment       |  |   | 237,584   |  
|                             |  |   |           |  
|Balance at December 31, 2011 |  | $ | 4,889,542 |  
|                             |  |   |           |  

According to the PRC Tax Administration and Collection Law, the statute of limitations is generally three years if the
underpayment of taxes is due to computational errors made by the taxpayer. The statute of limitations will be extended to five years under special circumstances, which are not clearly defined, but an underpayment of tax liability exceeding
RMB100,000 (approximately $16,000 as of December 31, 2011) is specifically listed as a special circumstance. In the case of a transfer pricing related adjustment, the statute of limitations is 10 years. There is no statute of limitations in the case
of tax evasion. The status of limitations in Hong Kong is six years.

Composition of income tax expense

All of the Groups income subject to income tax is generated within the PRC. The current and deferred portion of income tax expense included in the
consolidated statements of operations is as follows:



|                            |  |                                  |            |  |      |   |            |      |  |   |            | 
|--------------------------- |  | -------------------------------- | ---------- |  | ---- | - | ---------- | ---- |  | - | ---------- | 
|                            |  | For the years ended December 31, |           
|                            |  | 2009                             |            |  | 2010 |   |            | 2011 | 
|Current income tax expense  |  | $                                | 8,390,910  |  |      | $ | 21,970,299 |      |  | $ | 46,332,564 | 
|Deferred income tax expense |  |                                  | 5,389,155  |  |      |   | 365,280    |      |  |   | 8,428,830  | 
|                            |  |                                  |            |  |      |   |            |      |  |   |            | 
|                            |  | $                                | 13,780,065 |  |      | $ | 22,335,579 |      |  | $ | 54,761,394 | 
|                            |  |                                  |            |  |      |   |            |      |  |   |            | 

A reconciliation of the differences between statutory tax rate and the effective tax rate is as follows:



|                                                                                            |  |                                  |        |    |      |  |        |      |  |  |        |   
|------------------------------------------------------------------------------------------- |  | -------------------------------- | ------ | -- | ---- |  | ------ | ---- |  |  | ------ | --
|                                                                                            |  | For the years ended December 31, |       
|                                                                                            |  | 2009                             |        |    | 2010 |  |        | 2011 | 
|Statutory rate                                                                              |  |                                  | 25.00  | %  |      |  | 25.00  | %    |  |  | 25.00  | % 
|Effect of different tax rate of group entities operating in other jurisdiction              |  |                                  | (16.73 | )% |      |  | 10.90  | %    |  |  | 7.59   | % 
|Effect of different tax rate applicable to the subsidiaries and VIEs                        |  |                                  | 4.49   | %  |      |  | (4.75  | )%   |  |  | (4.61  | )%
|Effect of tax holiday                                                                       |  |                                  | 3.46   | %  |      |  | (13.22 | )%   |  |  | (12.11 | )%
|Effect of non-deductible expenses                                                           |  |                                  | (36.07 | )% |      |  | 11.04  | %    |  |  | 2.34   | % 
|Change in valuation allowance                                                               |  |                                  | 2.82   | %  |      |  | (11.18 | )%   |  |  | 0.58   | % 
|Effect of withholding income tax on dividends proposed to be received from PRC subsidiaries |  |                                  |       |    |      |  |       |      |  |  | 2.34   | % 
|Others                                                                                      |  |                                  | 0.70   | %  |      |  |       |      |  |  |       |   
|                                                                                            |  |                                  |        |    |      |  |        |      |  |  |        |   
|Effective tax rate                                                                          |  |                                  | (16.33 | )% |      |  | 17.79  | %    |  |  | 21.13  | % 
|                                                                                            |  |                                  |        |    |      |  |        |      |  |  |        |   



F-26



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



The following table sets forth the effects of the tax holidays granted to the entities of the Group for
the periods presented:



|                                                                 |  |              |           |  |      |   |            |      |  |   |            | 
|---------------------------------------------------------------- |  | ------------ | --------- |  | ---- | - | ---------- | ---- |  | - | ---------- | 
|                                                                 |  | December 31, |          
|                                                                 |  | 2009         |           |  | 2010 |   |            | 2011 | 
|Tax holiday effect                                               |  | $            | 3,142,974 |  |      | $ | 16,593,568 |      |  | $ | 30,742,016 | 
|Net income from continuing operations per share effect  basic   |  | $            | 0.01      |  |      | $ | 0.02       |      |  | $ | 0.05       | 
|Net income from continuing operations per share effect  diluted |  | $            | 0.01      |  |      | $ | 0.02       |      |  | $ | 0.04       | 

The principal components of the Groups deferred income tax assets and liabilities are as follows:



|                                            |  |              |            |   |      |   |            |  
|------------------------------------------- |  | ------------ | ---------- | - | ---- | - | ---------- | -
|                                            |  | December 31, |           
|                                            |  | 2010         |            |   | 2011 |  
|Deferred tax assets:                        |  |              |            |   |      |   |            |  
|Net operating loss carry forwards           |  | $            | 4,677,149  |   |      | $ | 4,813,056  |  
|Accrued expenses temporarily non-deductible |  |              | 14,078,803 |   |      |   | 18,889,739 |  
|Bad debt provision                          |  |              | 3,297,574  |   |      |   | 7,324,158  |  
|Difference in fixed assets basis            |  |              | 8,379,571  |   |      |   | 5,620,343  |  
|Others                                      |  |              | 4,915,559  |   |      |   | 3,859,498  |  
|                                            |  |              |            |   |      |   |            |  
|Total Deferred Tax Assets                   |  |              | 35,348,656 |   |      |   | 40,506,794 |  
|Valuation allowance on deferred tax assets  |  |              | (5,183,171 | ) |      |   | (5,091,664 | )
|                                            |  |              |            |   |      |   |            |  
|                                            |  |             
|Net deferred tax assets                     |  | $            | 30,165,485 |   |      | $ | 35,415,130 |  
|                                            |  |              |            |   |      |   |            |  
|                                            |  |             
|Classified as:                              |  |              |            |   |      |   |            |  
|Current deferred tax assets                 |  |              | 22,979,021 |   |      |   | 29,914,442 |  
|Non-current deferred tax assets             |  |              | 7,186,464  |   |      |   | 5,500,688  |  
|                                            |  |             
|Deferred tax liabilities:                   |  |              |            |   |      |   |            |  
|Difference in intangible asset basis        |  |              | 1,361,645  |   |      |   | 6,702,694  |  
|Unbilled revenue                            |  |              | 20,651,695 |   |      |   | 24,252,501 |  
|Interest or subsidy income receivables      |  |              | 8,666,757  |   |      |   | 15,727,129 |  
|Others                                      |  |              | 2,945,307  |   |      |   | 6,966,720  |  
|                                            |  |              |            |   |      |   |            |  
|                                            |  |             
|Total deferred tax liabilities              |  | $            | 33,625,404 |   |      | $ | 53,649,044 |  
|                                            |  |              |            |   |      |   |            |  
|                                            |  |             
|Classified as:                              |  |              |            |   |      |   |            |  
|Current deferred tax liabilities            |  |              | 23,627,893 |   |      |   | 33,550,044 |  
|Non-current deferred tax liabilities        |  |              | 9,997,511  |   |      |   | 20,099,000 |  

As of December 31, 2011, the Group had net operating loss carry forwards of $19,252,222 that can be used against
future taxable income. The net operating loss carry forwards will expire if unused in the years ending December 31, 2012 through 2016. The Group operates through multiple subsidiaries and the valuation allowance is considered on an individual
subsidiary basis. Where a valuation allowance was not recorded, the Group believes that there was sufficient positive evidence to support its conclusion not to record a valuation allowance as it expects to generate sufficient taxable income in the
future.

The valuation allowance in 2011 has decreased compared with that of 2010 as the Group has generated taxable income to utilize certain
deferred tax assets for the year ended December 31, 2011 and expects to utilize them in the coming years.

Of the undistributed earnings
of the Groups PRC subsidiaries and PRC affiliates of approximately $847 million at December 31 2011, approximately $787 million are considered to be permanently reinvested and accordingly, no provision for PRC dividend withholding tax has
been made thereon. The Group will distribute approximately $60 million of PRC subsidiaries 2011 earnings in 2012, as part of the dividend policy it is implementing starting in 2012, a PRC dividend withholding tax of $6 million has been
provided thereon.



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



18. Net Income (loss) per Share

The following table sets forth the computation of basic and diluted income per share for the years indicated:



|                                                                                                                                              |  |                          |              |   |      |   |             |      |  |   |             | 
|--------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ------------ | - | ---- | - | ----------- | ---- |  | - | ----------- | 
|                                                                                                                                              |  | Years ended December 31, |             
|                                                                                                                                              |  | 2009                     |              |   | 2010 |   |             | 2011 | 
|Income (numerator):                                                                                                                           |  |                          |              |   |      |   |             |      |  |   |             | 
|Net income (loss) from continuing operations                                                                                                  |  | $                        | (98,120,236  | ) |      | $ | 103,186,528 |      |  | $ | 162,677,038 | 
|Net income (loss) from discontinued operations                                                                                                |  |                          | (111,612,420 | ) |      |   | 83,077,575  |      |  |   |            | 
|                                                                                                                                              |  |                          |              |   |      |   |             |      |  |   |             | 
|Income attributable to Focus Media Holding Limited Shareholders                                                                               |  | $                        | (213,257,044 | ) |      | $ | 184,273,477 |      |  | $ | 162,677,038 | 
|                                                                                                                                              |  |                          |              |   |      |   |             |      |  |   |             | 
|Shares (denominator):                                                                                                                         |  |                          |              |   |      |   |             |      |  |   |             | 
|Weighted average ordinary shares outstanding used in computing basic income per share                                                         |  |                          | 651,654,345  |   |      |   | 707,846,570 |      |  |   | 671,401,000 | 
|Plus incremental weighted average ordinary shares from assumed conversions of stock options and restricted shares using treasury
stock method |  |                          |             |   |      |   | 23,811,695  |      |  |   | 22,570,258  | 
|                                                                                                                                              |  |                          |              |   |      |   |             |      |  |   |             | 
|Weighted average ordinary shares outstanding used in computing diluted income per share                                                       |  |                          | 651,654,345  |   |      |   | 731,658,265 |      |  |   | 693,971,258 | 
|                                                                                                                                              |  |                          |              |   |      |   |             |      |  |   |             | 
|Income (loss) per share from continuing operations  basic                                                                                    |  | $                        | (0.15        | ) |      | $ | 0.15        |      |  | $ | 0.24        | 
|                                                                                                                                              |  |                          |              |   |      |   |             |      |  |   |             | 
|Income (loss) per share from continuing operations  diluted                                                                                  |  | $                        | (0.15        | ) |      | $ | 0.14        |      |  | $ | 0.23        | 
|                                                                                                                                              |  |                          |              |   |      |   |             |      |  |   |             | 
|Income (loss) per share from discontinued operations  basic                                                                                  |  | $                        | (0.17        | ) |      | $ | 0.12        |      |  | $ |            | 
|                                                                                                                                              |  |                          |              |   |      |   |             |      |  |   |             | 
|Income (loss) per share from discontinued operations  diluted                                                                                |  | $                        | (0.17        | ) |      | $ | 0.11        |      |  | $ |            | 
|                                                                                                                                              |  |                          |              |   |      |   |             |      |  |   |             | 
|Net income per share  basic                                                                                                                  |  | $                        | (0.33        | ) |      | $ | 0.26        |      |  | $ | 0.24        | 
|                                                                                                                                              |  |                          |              |   |      |   |             |      |  |   |             | 
|Net income per share  diluted                                                                                                                |  | $                        | (0.33        | ) |      | $ | 0.25        |      |  | $ | 0.23        | 
|                                                                                                                                              |  |                          |              |   |      |   |             |      |  |   |             | 

For the years ended December 31, 2009, 2010 and 2011 the Group had 15,642,620, 7,036,260 and 5,304,495 share options
and 36,448,980, 13,620,000 and nil restricted shares outstanding, respectively, which could potentially dilute basic earnings per share in the future, but which were excluded from the computation of diluted net income per share in the years
presented, as their effects would have been anti-dilutive.

19. Mainland China Contribution Plan and Profit Appropriation

Full time employees of the Group in the PRC participate in a government-mandated multiemployer defined contribution plan pursuant to
which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. PRC labor regulations require the Group to accrue for these benefits based on certain percentages of
the employees salaries. The total contribution for such employee benefits was $8,873,914, $8,298,074 and $12,614,542 for the years ended December 31, 2009, 2010 and 2011, respectively, including $2,681,155, $1,103,397, and nil from
discontinued operations.

Pursuant to laws applicable to entities incorporated in the PRC, the Groups PRC subsidiaries and PRC
affiliates are prohibited from distributing their statutory capital and must make appropriations from after-tax profit to non-distributable reserve funds. These reserve funds include one or more of the following: (i) a general reserve,
(ii) an enterprise expansion fund and (iii) a staff bonus and welfare fund. Subject to certain cumulative limits, the general reserve fund requires annual appropriations of 10% of after-tax profit (as determined under accounting principles
generally accepted in the PRC at each year-end) until such cumulative appropriation reaches 50% of the registered capital; the other fund appropriations are at the Groups discretion. These reserve funds can only be used for specific purposes
of enterprise expansion and staff bonus and welfare and are not distributable as cash dividends. The Groups subsidiaries and affiliates have allocated annual after-tax profits to each of their respective funds in compliance with these laws and
regulations. For the years ended December 31, 2009, 2010 and 2011, the Group made total appropriations of $10,765,735, $21,211,346 and $10,214,705, respectively.

As a result of these PRC laws and regulations, as of December 31, 2011, the Groups PRC subsidiaries and PRC affiliates are restricted in their ability to transfer $234,110,610 of their net
assets to Focus Media Holding in the form of dividends, loans or advances.



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



20. Commitments and Contingencies

{a} Leases commitments

The Group has entered into certain leasing arrangements relating to the placement of the flat-panel digital screens, poster frames and outdoor billboards
in various locations, as well as advertisement time slots on movie screens prior to movie screening, where the Group operates the networks and in connection with the lease of the Groups office premises. Rental expense under operating leases
for the years ended December 31, 2009, 2010 and 2011 were $117,914,221, $134,658,367 and $187,101,004, respectively.

Future minimum
lease payments under non-cancelable operating lease agreements were as follows:



|                    |  |                                 |             | 
|------------------- |  | ------------------------------- | ----------- | 
|                    |  | For the year endingDecember 31, |            
|2012                |  | $                               | 133,837,219 | 
|2013                |  |                                 | 60,826,323  | 
|2014                |  |                                 | 29,019,843  | 
|2015                |  |                                 | 16,897,988  | 
|2016 and thereafter |  |                                 | 14,971,826  | 
|                    |  |                                 |             | 
|Total               |  | $                               | 255,553,199 | 
|                    |  |                                 |             | 

{b} Purchase commitments

As of December 31, 2011, commitments outstanding for the purchase of equipment were $13,593,547, majority of which will be fulfilled in 2012.

{c} Legal proceedings

The Group is a defendant in ongoing lawsuits as described below:



|a) | November 2007 Follow-on Offering Case
|-- | -------------------------------------



| | 1) | On November 27, 2007, Eastriver Partners, Inc. filed a purported class action lawsuit in the United States District Court for the Southern District of New York
against the Group and the underwriters of the Groups offering filed in November 2007.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2) | On December 21, 2007, Scott Bauer filed a purported class action lawsuit in the United States District Court for the Southern District of New York against the
Group, certain of the Groups officers and directors, and the underwriters of the Groups offering filed in November 2007.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Both complaints allege that the Groups registration statement on Form F-1 on November 1, 2007 as amended, and the related prospectus contained inaccurate statements of material fact. The Group
has meritorious defenses to the claims alleged and intends to defend against these lawsuits vigorously. On March 29, 2010, the court issued an opinion granting the Groups motion to dismiss. On March 30, 2010, the court entered a
judgment dismissing the case. The plaintiffs filed a notice of appeal on April 29, 2010 appealing the judgment granting the Groups motion to dismiss. On September 26, 2011, the plaintiffs and the Group entered into a settlement agreement,
under which the Company would contribute $2 million for settlement (the Settlement Agreement), which was accrued as of December 31, 2011. On April 24, 2012, the settlement was finalized as previously agreed.



|b) | Palny Case
|-- | ----------

On December 12, 2011, Tom Palny
filed a putative class action in the United States District Court for the Southern District of New York against the Group and certain of the current or former officers and directors. The complaint relates to certain allegations made by the firm
Muddy Waters about the Company in a series of releases in November 2011, and alleges that the Companys public filings, including the Companys 2006, 2007, 2008, 2009 and 2010 Form 20-Fs, the Form F-1 and Prospectus files in connection
with the Companys November 2007 Follow-on Offering, and third quarter 2011 earnings press release, contain material misstatements and omissions. The court has scheduled an initial status conference for March 9, 2012. The Company intends to
defend itself vigorously against these allegations as the Company believes they have meritorious defenses to the alleged claims. As of December 31, 2011, the Company does not believe the outcome of the case is probable or reasonably estimable.

21. Segment Information

The Group is mainly engaged in selling advertising time slots on its network of flat-panel digital advertising displays located in high
traffic areas such as commercial locations and residential complexes. The Group is also engaged in providing advertising services on poster frames, on screens in movie theatres and on traditional outdoor billboards.

The Groups chief operating decision maker (CODM) has been identified as the Chief Executive Officer, who reviews consolidated results
when making decisions about allocating resources and assessing performance of the Group. The Group uses the management approach to determine the operating segments. The management approach considers the internal organization and reporting used by
the Groups CODM for making decisions, allocating resources and assessing the performance. The Group has determined that it has five reportable segments, which are LCD display network, in-store network, poster frame network, movie theater
network and traditional outdoor billboards. These segments all derive their revenues from the sale of advertising services. Prior to the disposition of Allyes in 2010, as described in Note 1, the Group had an additional reportable segment, internet
advertising, which was reclassified to discontinued operations for all periods presented. The movie theater and traditional outdoor billboards segments were combined in prior years, but have been separately disclosed for all periods presented.



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##### Table of Contents

The Groups CODM does not assign assets to these segments. Consequently, it is not practical to show
assets by reportable segment. The following table presents selected financial information relating to the Groups segments:

2011:



|                           |  |                    |             |  |                 |   |            |                     |  |   |                      |  |  |                              |            |  |              |   |            |       |  |   |             |   |  |   |             | 
|-------------------------- |  | ------------------ | ----------- |  | --------------- | - | ---------- | ------------------- |  | - | -------------------- |  |  | ---------------------------- | ---------- |  | ------------ | - | ---------- | ----- |  | - | ----------- | - |  | - | ----------- | 
|                           |  | LCD displaynetwork |             |  | In-storenetwork |   |            | Poster framenetwork |  |   | Movie theaternetwork |  |  | Traditionaloutdoorbillboards |            |  | Eliminations |   |            | Total | 
|Net revenue  external     |  | $                  | 444,364,783 |  |                 | $ | 56,374,245 |                     |  | $ | 185,448,868          |  |  | $                            | 50,835,068 |  |              | $ | 55,597,213 |       |  | $ |            |   |  | $ | 792,620,177 | 
|Net revenue  intersegment |  |                    | 6,414,251   |  |                 |   | 1,641,886  |                     |  |   | 46,523,931           |  |  |                              | 2,520,355  |  |              |   | 2,876,701  |       |  |   | (59,977,124 | ) |  |   |            | 
|                           |  |                    |             |  |                 |   |            |                     |  |   |                      |  |  |                              |            |  |              |   |            |       |  |   |             |   |  |   |             | 
|Total net revenues         |  |                    | 450,779,034 |  |                 |   | 58,016,131 |                     |  |   | 231,972,799          |  |  |                              | 53,355,423 |  |              |   | 58,473,914 |       |  |   | (59,977,124 | ) |  |   | 792,620,177 | 
|Total cost of revenue      |  |                    | 139,221,013 |  |                 |   | 20,582,255 |                     |  |   | 113,126,927          |  |  |                              | 26,010,980 |  |              |   | 50,680,215 |       |  |   | (59,977,124 | ) |  |   | 289,644,266 | 
|                           |  |                    |             |  |                 |   |            |                     |  |   |                      |  |  |                              |            |  |              |   |            |       |  |   |             |   |  |   |             | 
|Gross profit               |  | $                  | 311,558,021 |  |                 | $ | 37,433,876 |                     |  | $ | 118,845,872          |  |  | $                            | 27,344,443 |  |              | $ | 7,793,699  |       |  | $ |            |   |  | $ | 502,975,911 | 
|                           |  |                    |             |  |                 |   |            |                     |  |   |                      |  |  |                              |            |  |              |   |            |       |  |   |             |   |  |   |             | 

2010:



|                           |  |                    |             |  |                 |   |            |                     |  |   |                      |  |  |                              |            |  |              |   |            |       |  |   |             |   |  |   |             | 
|-------------------------- |  | ------------------ | ----------- |  | --------------- | - | ---------- | ------------------- |  | - | -------------------- |  |  | ---------------------------- | ---------- |  | ------------ | - | ---------- | ----- |  | - | ----------- | - |  | - | ----------- | 
|                           |  | LCD displaynetwork |             |  | In-storenetwork |   |            | Poster framenetwork |  |   | Movie theaternetwork |  |  | Traditionaloutdoorbillboards |            |  | Eliminations |   |            | Total | 
|Net revenue  external     |  | $                  | 297,641,916 |  |                 | $ | 37,777,154 |                     |  | $ | 121,893,079          |  |  | $                            | 18,094,945 |  |              | $ | 40,907,603 |       |  | $ |            |   |  | $ | 516,314,697 | 
|Net revenue  intersegment |  |                    | 6,521,946   |  |                 |   | 2,583,932  |                     |  |   | 9,534,713            |  |  |                              | 1,923,070  |  |              |   | 2,667,324  |       |  |   | (23,230,985 | ) |  |   |            | 
|                           |  |                    |             |  |                 |   |            |                     |  |   |                      |  |  |                              |            |  |              |   |            |       |  |   |             |   |  |   |             | 
|                           |  |                    |             |  |                 |   |           
|Total net revenues         |  |                    | 304,163,862 |  |                 |   | 40,361,086 |                     |  |   | 131,427,792          |  |  |                              | 20,018,015 |  |              |   | 43,574,927 |       |  |   | (23,230,985 | ) |  |   | 516,314,697 | 
|Total cost of revenue      |  |                    | 83,244,151  |  |                 |   | 23,432,008 |                     |  |   | 88,328,571           |  |  |                              | 13,882,121 |  |              |   | 36,034,168 |       |  |   | (23,230,985 | ) |  |   | 221,690,034 | 
|                           |  |                    |             |  |                 |   |            |                     |  |   |                      |  |  |                              |            |  |              |   |            |       |  |   |             |   |  |   |             | 
|                           |  |                    |             |  |                 |   |           
|Gross profit               |  | $                  | 220,919,711 |  |                 | $ | 16,929,078 |                     |  | $ | 43,099,221           |  |  | $                            | 6,135,894  |  |              | $ | 7,540,759  |       |  | $ |            |   |  | $ | 294,624,663 | 
|                           |  |                    |             |  |                 |   |            |                     |  |   |                      |  |  |                              |            |  |              |   |            |       |  |   |             |   |  |   |             | 

2009:



|                           |  |                    |             |  |                 |   |            |                     |  |   |                     |   |  |                              |           |  |              |   |            |       |  |   |             |   |  |   |             | 
|-------------------------- |  | ------------------ | ----------- |  | --------------- | - | ---------- | ------------------- |  | - | ------------------- | - |  | ---------------------------- | --------- |  | ------------ | - | ---------- | ----- |  | - | ----------- | - |  | - | ----------- | 
|                           |  | LCD displaynetwork |             |  | In-storenetwork |   |            | Posterframe network |  |   | Movietheaternetwork |   |  | Traditionaloutdoorbillboards |           |  | Eliminations |   |            | Total | 
|Net revenue  external     |  | $                  | 208,799,072 |  |                 | $ | 30,346,185 |                     |  | $ | 98,962,486          |   |  | $                            | 9,435,983 |  |              | $ | 49,620,796 |       |  | $ |            |   |  | $ | 397,164,522 | 
|Net revenue  intersegment |  |                    | 26,383,298  |  |                 |   | 3,523,819  |                     |  |   | 994,136             |   |  |                              |          |  |              |   | 1,056,743  |       |  |   | (31,957,996 | ) |  |   |            | 
|                           |  |                    |             |  |                 |   |            |                     |  |   |                     |   |  |                              |           |  |              |   |            |       |  |   |             |   |  |   |             | 
|Total net revenues         |  |                    | 235,182,370 |  |                 |   | 33,870,004 |                     |  |   | 99,956,622          |   |  |                              | 9,435,983 |  |              |   | 50,677,539 |       |  |   | (31,957,996 | ) |  |   | 397,164,522 | 
|Total cost of revenue      |  |                    | 99,191,242  |  |                 |   | 24,169,858 |                     |  |   | 102,728,558         |   |  |                              | 7,063,102 |  |              |   | 39,878,439 |       |  |   | (31,957,996 | ) |  |   | 241,073,203 | 
|                           |  |                    |             |  |                 |   |            |                     |  |   |                     |   |  |                              |           |  |              |   |            |       |  |   |             |   |  |   |             | 
|Gross profit / (loss)      |  | $                  | 135,991,128 |  |                 | $ | 9,700,146  |                     |  | $ | (2,771,936          | ) |  | $                            | 2,372,881 |  |              | $ | 10,799,100 |       |  | $ |            |   |  | $ | 156,091,319 | 
|                           |  |                    |             |  |                 |   |            |                     |  |   |                     |   |  |                              |           |  |              |   |            |       |  |   |             |   |  |   |             | 



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



Major Customers

As of and for the years ended December 31, 2009, 2010 and 2011, there were no customers who accounted for 10% or more of the Groups net revenues or accounts receivables.

Major Service lines

The Group derives
revenues from the following major service lines:



|                               |  |                                                   |             |  |                  |  |       |      |  |   |                  |  |  |   |       |   |                  |   |             |  |  |  |      |  
|------------------------------ |  | ------------------------------------------------- | ----------- |  | ---------------- |  | ----- | ---- |  | - | ---------------- |  |  | - | ----- | - | ---------------- | - | ----------- |  |  |  | ---- | -
|                               |  | For the years ended December 31                   |            
|                               |  | 2009                                              |             |  | 2010             |  |       | 2011 | 
|                               |  | $                                                 |             |  | % oftotalrevenue |  |       | $    |  |   | % oftotalrevenue |  |  | $ |       |   | % oftotalrevenue |  
|                               |  | (in thousand of U.S. dollars, except percentages) |            
|Net revenue:                   |  |                                                   |             |  |                  |  |       |      |  |   |                  |  |  |   |       |   |                  |   |             |  |  |  |      |  
|LCD display network            |  | $                                                 | 208,799,072 |  |                  |  | 52.6  | %    |  | $ | 297,641,916      |  |  |   | 57.7  | % |                  | $ | 444,364,783 |  |  |  | 56.1 | %
|In-store network               |  |                                                   | 30,346,185  |  |                  |  | 7.6   | %    |  |   | 37,777,154       |  |  |   | 7.3   | % |                  |   | 56,374,245  |  |  |  | 7.1  | %
|Poster frame network           |  |                                                   | 98,962,486  |  |                  |  | 24.9  | %    |  |   | 121,893,079      |  |  |   | 23.6  | % |                  |   | 185,448,868 |  |  |  | 23.4 | %
|Movie theater network          |  |                                                   | 9,435,983   |  |                  |  | 2.4   | %    |  |   | 18,094,945       |  |  |   | 3.5   | % |                  |   | 50,835,068  |  |  |  | 6.4  | %
|Traditional outdoor billboards |  |                                                   | 49,620,796  |  |                  |  | 12.5  | %    |  |   | 40,907,603       |  |  |   | 7.9   | % |                  |   | 55,597,213  |  |  |  | 7.0  | %
|                               |  |                                                   |             |  |                  |  |       |      |  |   |                  |  |  |   |       |   |                  |   |             |  |  |  |      |  
|Total net revenue              |  | $                                                 | 397,164,522 |  |                  |  | 100.0 | %    |  | $ | 516,314,697      |  |  |   | 100.0 | % |                  | $ | 792,620,177 |  |  |  | 100  | %
|                               |  |                                                   |             |  |                  |  |       |      |  |   |                  |  |  |   |       |   |                  |   |             |  |  |  |      |  



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



22. Related Party Transactions

Details of advertising service revenue from related parties for the years ended December 31, 2009, 2010 and 2011 for the Group is
as follows:



|                                                |  |                     |  |                         |           |  |      |   |           |      |  |   |            | 
|----------------------------------------------- |  | ------------------- |  | ----------------------- | --------- |  | ---- | - | --------- | ---- |  | - | ---------- | 
|                                                |  |                     |  | Year ended December 31, |          
|Name of related parties                         |  | Director interested |  | 2009                    |           |  | 2010 |   |           | 2011 | 
|CTV Golden Bridge International Media Co., Ltd. |  | Daqing Qi           |  | $                       | 277,749   |  |      | $ |          |      |  | $ |           | 
|Sina.com                                        |  | Charles Cao         |  |                         | 548,988   |  |      |   | 1,034,741 |      |  |   | 1,466,979  | 
|Sohu.com                                        |  | Daqing Qi           |  |                         | 438,536   |  |      |   | 738,947   |      |  |   |           | 
|China Vanke Co., Ltd.                           |  | Daqing Qi           |  |                         | 459,376   |  |      |   | 465,998   |      |  |   | 909,109    | 
|Home-Inn                                        |  | Neil Nanpeng Shen   |  |                         | 89,076    |  |      |   |          |      |  |   |           | 
|Ctrip.com                                       |  | Neil Nanpeng Shen   |  |                         | 486,263   |  |      |   | 79,601    |      |  |   |           | 
|51.com                                          |  | Neil Nanpeng Shen   |  |                         |          |  |      |   | 22,993    |      |  |   |           | 
|Qihoo.com                                       |  | Neil Nanpeng Shen   |  |                         | 38,008    |  |      |   | 17,461    |      |  |   |           | 
|Giant Interactive Group Inc.                    |  | Jason Nanchun Jiang |  |                         | 368,242   |  |      |   | 385,720   |      |  |   | 13,911     | 
|StormNet Information Technology                 |  | David Zhang         |  |                         |          |  |      |   | 2,569     |      |  |   |           | 
|Tea Care Group Ltd.                             |  | Fumin Zhuo          |  |                         | 292,606   |  |      |   | 697,071   |      |  |   | 5,461      | 
|Fosun International Limited                     |  | Major Shareholder   |  |                         |          |  |      |   |          |      |  |   | 4,613,446  | 
|Focus Technology Co., Ltd.                      |  | Fumin Zhuo          |  |                         | 43,200    |  |      |   |          |      |  |   |           | 
|Joyyoung, Inc.                                  |  | Ying Wu             |  |                         |          |  |      |   |          |      |  |   | 13,313     | 
|Shen Yin Wan Guo Securities Co., Ltd.           |  | Fumin Zhuo          |  |                         |          |  |      |   |          |      |  |   | 5,661      | 
|Redbaby.com                                     |  | Jason Nanchun Jiang |  |                         |          |  |      |   |          |      |  |   | 4,465,478  | 
|Tuan800.com                                     |  | Jason Nanchun Jiang |  |                         |          |  |      |   |          |      |  |   | 468,410    | 
|Juewei Foods, Inc.                              |  | Jason Nanchun Jiang |  |                         |          |  |      |   |          |      |  |   | 544,106    | 
|Bona Film Group Ltd.                            |  | Daqing Qi           |  |                         |          |  |      |   |          |      |  |   | 2,089,420  | 
|                                                |  |                     |  |                         |           |  |      |   |           |      |  |   |            | 
|Total                                           |  |                     |  | $                       | 3,042,044 |  |      | $ | 3,445,101 |      |  | $ | 14,595,294 | 
|                                                |  |                     |  |                         |           |  |      |   |           |      |  |   |            | 

Details of advertising space leasing costs charged, net of rebates, to the Group by related parties for the years ended
December 31, 2009, 2010 and 2011 were as follows:



|                                |  |                     |  |                         |            |  |      |   |            |      |  |   |           | 
|------------------------------- |  | ------------------- |  | ----------------------- | ---------- |  | ---- | - | ---------- | ---- |  | - | --------- | 
|                                |  |                     |  | Year ended December 31, |           
|Name of related parties         |  | Director interested |  | 2009                    |            |  | 2010 |   |            | 2011 | 
|Sina.com                        |  | Charles Cao         |  | $                       | 28,635,023 |  |      | $ | 11,655,724 |      |  | $ |          | 
|Sohu.com                        |  | Daqing Qi           |  |                         | 17,208,874 |  |      |   | 8,047,723  |      |  |   |          | 
|Bona Film Group Ltd.            |  | Daqing Qi           |  |                         |           |  |      |   | 359,287    |      |  |   | 2,996,195 | 
|Ctrip.com                       |  | Neil Nanpeng Shen   |  |                         | 146,356    |  |      |   | 130,251    |      |  |   |          | 
|51.com                          |  | Neil Nanpeng Shen   |  |                         | 195,376    |  |      |   | 7,968      |      |  |   |          | 
|Qihoo.com                       |  | Neil Nanpeng Shen   |  |                         | 109,564    |  |      |   |           |      |  |   |          | 
|StormNet Information Technology |  | David Zhang         |  |                         | 21,928     |  |      |   | 27,266     |      |  |   |          | 
|                                |  |                     |  |                         |            |  |      |   |            |      |  |   |           | 
|Total                           |  |                     |  | $                       | 46,317,121 |  |      | $ | 20,228,219 |      |  | $ | 2,996,195 | 
|                                |  |                     |  |                         |            |  |      |   |            |      |  |   |           | 



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##### Table of Contents

FOCUS MEDIA HOLDING LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009, 2010 AND 2011

(In U.S. dollars
except share data and unless otherwise stated)



Details of amounts due from related parties representing advertising services provided or advances paid
for advertising space leased as of December 31, 2010 and 2011 are as follows:



|                            |  |                     |  |             |         |  |      |   |           | 
|--------------------------- |  | ------------------- |  | ----------- | ------- |  | ---- | - | --------- | 
|                            |  |                     |  | December 31 |        
|Name of related parties     |  | Director interested |  | 2010        |         |  | 2011 |  
|Sina.com                    |  | Charles Cao         |  |             | 89,897  |  |      |   |          | 
|Bona Film Group Ltd.        |  | Daqing Qi           |  |             | 21,139  |  |      |   | 305,928   | 
|Tea Care Group Ltd.         |  | Fumin Zhuo          |  |             | 345,297 |  |      |   | 61,803    | 
|China Vanke Co., Ltd.       |  | Daqing Qi           |  |             | 13,041  |  |      |   | 160,013   | 
|Redbaby.com                 |  | Jason Nanchun Jiang |  |             |        |  |      |   | 1,021,150 | 
|Juewei Foods, Inc.          |  | Jason Nanchun Jiang |  |             |        |  |      |   | 108,985   | 
|Fosun International Limited |  | Major Shareholder   |  |             |        |  |      |   | 166,557   | 
|                            |  |                     |  |             |         |  |      |   |           | 
|Total                       |  |                     |  | $           | 469,374 |  |      | $ | 1,824,436 | 
|                            |  |                     |  |             |         |  |      |   |           | 



Details
of amounts due to related parties representing trade payables for advertising services purchased or advances received for advertising services sold as of December 31, 2009 and 2010 are as follows:



|                            |  |                     |  |              |           |  |      |   |           | 
|--------------------------- |  | ------------------- |  | ------------ | --------- |  | ---- | - | --------- | 
|                            |  |                     |  | December 31, |          
|Name of related parties     |  | Director interested |  | 2010         |           |  | 2011 |  
|Sina.com                    |  | Charles Cao         |  | $            | 1,811,950 |  |      | $ |          | 
|China Vanke Co., Ltd.       |  | Daqing Qi           |  |              | 28,689    |  |      |   | 25,617    | 
|Arcom                       |  | David Zhang         |  |              | 7,550     |  |      |   |          | 
|Fosun International Limited |  | Major Shareholder   |  |              |          |  |      |   | 1,313,482 | 
|Bona Film Group Ltd.        |  | Daqing Qi           |  |              |          |  |      |   | 755,712   | 
|Redbaby.com                 |  | Jason Nanchun Jiang |  |              |          |  |      |   | 55,659    | 
|Juewei Foods, Inc.          |  | Jason Nanchun Jiang |  |              |          |  |      |   | 45,434    | 
|                            |  |                     |  |              |           |  |      |   |           | 
|Total                       |  |                     |  | $            | 1,848,189 |  |      | $ | 2,195,904 | 
|                            |  |                     |  |              |           |  |      |   |           | 



Other related party transactions

Jimmy
Yu resigned his directorship in September 2009. For the nine months ended September 30, 2009, office rentals paid to Multimedia Park Venture Capital, of which Mr. Yu was the CEO, amounted to $612,817.

In January 2010, certain Allyes employees and management and directors and certain members of the Groups management and directors entered into a
definitive agreement with the Group and Allyes to purchase an aggregate 38% interest in Allyes from the Group. In order to encourage Allyes Online management to invest (and thus remain with the business), Jason Jiang and Kit Low, who was already
active with the Group and was in the process of being appointed its chief financial officer, offered to invest their own capital in Allyes under the same terms that the Group was offering to Allyes management. By making this offer, Messrs.
Jiang and Low attempted to show their confidence in Allyes business, so that they could encourage the remaining Allyes team to invest, stay in their positions, and commit to Allyes success. Pursuant to the terms of the agreements, the
purchasing Allyes and Group management members paid an aggregate $13.3 million for a 38% interest of Allyes. The Group performed a valuation of Allyes as of the closing date of the transaction and determined that the price paid to acquire the
interest approximated fair value. The transaction was approved by all independent directors on the board. This transaction was part of initiatives the Group was taking to incentivize management to enhance the future business model of Allyes and
thereby to seek long term sustainable growth for the Group and investors.

As described in Note 16, on November 18, 2009, the Company
issued 75 million ordinary shares to Jason Nanchun Jiang for proceeds of $142,425,000.

23. Subsequent Events

On January 31, 2012, the Company further obtained an uncommitted $100 million revolving term loan facility which bears an interest rate
of 2-weeks or 1-month LIBOR plus 2.1% per annum. Till the date of this report, the Company has not drawn down any amounts under this facility agreement.

On January 10, 2012, the Group announced a policy starting from 2012 to issue a recurring dividend. A dividend of $17.9 million, or $0.0274 per ordinary share, was paid out on April 16, 2012 to the
shareholders of record on March 30, 2012.



F-33