##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
 (Mark One)
 o
    
    Registration statement pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934
 or
 þ
    
    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934

for the fiscal year ended December 31, 2010.
 or
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 o
    
    Shell company report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
 Commission file number 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)
  Title of Each Class
    
    Name of Each Exchange on Which RegisteredOrdinary Shares, par value US$0.00005 per share
    
    Nasdaq Global Market
   
 (Title of Class)
   
 (Title of Class)
  677,934,625 Ordinary Shares
 
  þ o
  o þ
   þ o
 o o
  Large accelerated filer þ   
    Accelerated filer o
    Non-accelerated filer o
    Smaller reporting company o(Do not check if a smaller reporting company)
  þ
 o
  o þ
  o þ
 (APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS.)
  o o




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##### 



FOCUS MEDIA HOLDING LIMITED
 FORM 20-F ANNUAL REPORT
FISCAL YEAR ENDED DECEMBER 31, 2010
 Table of Contents
 PageSUPPLEMENTAL INFORMATION
    
    
    2FORWARD-LOOKING STATEMENTS IN THIS ANNUAL REPORT MAY NOT BE REALIZED
    
    
    2PART I
    
    
    3ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
    
    
    3ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    3ITEM 3. KEY INFORMATION
    
    
    3ITEM 4. INFORMATION ON THE COMPANY
    
    
    36ITEM 4A. UNRESOLVED STAFF COMMENTS
    
    
    54ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    54ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    86ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    93ITEM 9. THE OFFER AND LISTING
    
    
    99ITEM 10. ADDITIONAL INFORMATION
    
    
    100ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    109ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    110PART II
    
    
    110ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    110ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    111ITEM 15. CONTROLS AND PROCEDURES
    
    
    112ITEM 16.
    
    
    114ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    114ITEM 16B. CODE OF ETHICS
    
    
    114ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    114ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    114ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
    
    
    115ITEM 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
    
    
    115ITEM 16G. CORPORATE GOVERNANCE
    
    
    115PART III
    
    
    116ITEM 17. FINANCIAL STATEMENTS
    
    
    116ITEM 18. FINANCIAL STATEMENTS
    
    
    116EX-10.190EX-10.191EX-10.192EX-12.1EX-12.2EX-13.1EX-13.2EX-21.1Ex-23.1EX-23.2EX-23.3
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##### Table of Contents



SUPPLEMENTAL INFORMATION
  
    
    the terms we, us, our company, our and Focus Media refer to Focus Media
Holding Limited, its predecessor entities and subsidiaries, and, in the context of
describing our operations, also include our affiliated Chinese entities;
    
    shares and ordinary shares refer to our ordinary shares, par value $0.00005,
ADSs refers to our American depositary shares, each of which represents five ordinary
shares, and ADRs refers to the American depositary receipts which evidence our ADSs;
    
    China and PRC refer to the Peoples Republic of China, excluding Taiwan, Hong
Kong and Macau;
    
    all references to RMB are to the legal currency of China and all references to
U.S. dollars, US$, dollars and $ are to the legal currency of the United
States. Any discrepancies in any table between the amounts identified as total amounts
and the sum of the amounts listed therein are due to rounding;
    
    Framedia refers to Infoachieve Limited and its consolidated subsidiaries and
affiliates, which we acquired in January 2006;
    
    Target Media refers to Target Media Holdings Limited and its consolidated
subsidiaries and affiliates, which we acquired in February 2006;
    
    Focus Media Wireless refers to Dotad Media Holdings Limited, and its consolidated
subsidiary and affiliate, which we acquired in March 2006 and renamed Focus Media
Wireless. We terminated our mobile handset advertising business, including Focus Media
Wireless, in December 2008;
    
    Allyes refers to Allyes Information Technology Company Limited, and its
consolidated subsidiaries and affiliates, which we acquired in March 2007 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, 2008, 2009 and 2010, and as of December 31,
2009 and 2010.
 
 FORWARD-LOOKING STATEMENTS IN THIS ANNUAL REPORT
MAY NOT BE REALIZED
  
    
    our goals and strategies;
    
    our future business development, financial condition and results of operations;
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##### Table of Contents




    
    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 Form F-3 as amended;
and
    
    those other risks identified in Item 3. Key InformationD. Risk Factors of this
annual report.
   
 PART I
 
 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  
 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3. KEY INFORMATION
 A. Selected Financial Data
  3




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##### Table of Contents



For the years ended December 312006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010(In thousands of U.S. Dollars, except share and per share data)Selected Consolidated Statements of Operations
Data:Net revenues: (1)LCD displays
    
    $
    141,472
    
    
    $
    183,528
    
    
    $
    240,918
    
    
    $
    208,499
    
    
    $
    297,403In-store
    
    
    26,907
    
    
    
    27,444
    
    
    
    60,719
    
    
    
    30,346
    
    
    
    37,777Poster frame
    
    
    40,904
    
    
    
    85,472
    
    
    
    146,751
    
    
    
    98,962
    
    
    
    121,893Movie theatre and traditional outdoor billboard
    
    
    690
    
    
    
    37,305
    
    
    
    77,178
    
    
    
    59,057
    
    
    
    59,003Other (2)
    
    
    1,932
    
    
    
    1,115
    
    
    
    3,622
    
    
    
    300
    
    
    
    239Total net revenues
    
    
    211,905
    
    
    
    334,864
    
    
    
    529,188
    
    
    
    397,164
    
    
    
    516,315Cost of revenues:LCD displays
    
    
    48,128
    
    
    
    51,850
    
    
    
    78,728
    
    
    
    76,128
    
    
    
    67,374In-store
    
    
    18,106
    
    
    
    23,502
    
    
    
    61,834
    
    
    
    24,170
    
    
    
    23,432Poster frame
    
    
    13,621
    
    
    
    28,086
    
    
    
    59,815
    
    
    
    95,401
    
    
    
    84,487Movie theatre and traditional outdoor billboard
    
    
    760
    
    
    
    28,496
    
    
    
    56,944
    
    
    
    45,085
    
    
    
    46,258Other (2)
    
    
    765
    
    
    
    798
    
    
    
    1,723
    
    
    
    290
    
    
    
    139Total cost of revenues
    
    
    81,380
    
    
    
    132,732
    
    
    
    259,044
    
    
    
    241,074
    
    
    
    221,690Gross profit
    
    
    130,525
    
    
    
    202,132
    
    
    
    270,144
    
    
    
    156,090
    
    
    
    294,625Operating expenses:General and administrative
    
    
    25,723
    
    
    
    42,452
    
    
    
    79,162
    
    
    
    88,833
    
    
    
    79,760Selling and marketing
    
    
    25,762
    
    
    
    53,523
    
    
    
    82,258
    
    
    
    79,787
    
    
    
    103,722Impairment loss
    
    
    
    
    
    
    
    
    
    
    377,629
    
    
    
    63,646
    
    
    
    5,736
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For the years ended December 312006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010(In thousands of U.S. Dollars, except share and per share data)Other operating expenses (income), net
    
    
    (1,051
    )
    
    
    (7,615
    )
    
    
    183,113
    
    
    
    13,111
    
    
    
    (14,144
    )Total operating expenses
    
    
    50,434
    
    
    
    88,360
    
    
    
    722,162
    
    
    
    245,377
    
    
    
    175,074Income (loss) from operations
    
    
    80,091
    
    
    
    113,772
    
    
    
    (452,018
    )
    
    
    (89,287
    )
    
    
    119,551Investment loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,288Interest income
    
    
    4,255
    
    
    
    9,239
    
    
    
    7,130
    
    
    
    4,946
    
    
    
    7,260Interest expense
    
    
    
    
    
    
    (17
    )
    
    
    
    
    
    
    
    
    
    
    Income (loss) from continuing operations before
income taxes
    
    
    84,346
    
    
    
    122,994
    
    
    
    (444,888
    )
    
    
    (84,341
    )
    
    
    125,523Income taxes
    
    
    1,044
    
    
    
    5,912
    
    
    
    25,278
    
    
    
    13,780
    
    
    
    22,336Net income (loss) from continuing operations
    
    
    83,302
    
    
    
    117,082
    
    
    
    (470,166
    )
    
    
    (98,121
    )
    
    
    103,187Net income (loss) from discontinued operations,
net of tax
    
    
    
    
    
    
    28,048
    
    
    
    (300,672
    )
    
    
    (111,612
    )
    
    
    83,078Net income (loss)
    
    
    83,302
    
    
    
    145,130
    
    
    
    (770,838
    )
    
    
    (209,733
    )
    
    
    186,265Less: Net income (loss) attributable to
noncontrolling interests
    
    
    105
    
    
    
    694
    
    
    
    (150
    )
    
    
    3,524
    
    
    
    1,991Net income (loss) attributable to Focus Media
Holdings Limited Shareholders
    
    $
    83,197
    
    
    $
    144,436
    
    
    $
    (770,688
    )
    
    $
    (213,257
    )
    
    $
    184,274Income (loss) per share from continuing
operations  basic
    
    $
    0.16
    
    
    $
    0.20
    
    
    $
    (0.73
    )
    
    $
    (0.15
    )
    
    $
    0.15Income (loss) per share from continuing
operations  diluted
    
    $
    0.16
    
    
    $
    0.19
    
    
    $
    (0.73
    )
    
    $
    (0.15
    )
    
    $
    0.14Income (loss) per share from discontinued
operations  basic
    
    $
    0.00
    
    
    $
    0.05
    
    
    $
    (0.47
    )
    
    $
    (0.17
    )
    
    $
    0.12Income (loss) per share from discontinued
operations  diluted
    
    $
    0.00
    
    
    $
    0.05
    
    
    $
    (0.47
    )
    
    $
    (0.17
    )
    
    $
    0.11Income (loss) per share  basic
    
    $
    0.16
    
    
    $
    0.24
    
    
    $
    (1.20
    )
    
    $
    (0.33
    )
    
    $
    0.26Income (loss) per share  diluted
    
    $
    0.16
    
    
    $
    0.24
    
    
    $
    (1.20
    )
    
    $
    (0.33
    )
    
    $
    0.25Shares used in calculating basic income (loss)
per share
    
    
    505,411,079
    
    
    
    590,387,396
    
    
    
    643,989,522
    
    
    
    651,654,345
    
    
    
    707,846,570Shares used in calculating diluted income (loss)
per share
    
    
    521,536,381
    
    
    
    608,326,450
    
    
    
    643,989,522
    
    
    
    651,654,345
    
    
    
    731,658,265As of December 312006
    
    2007
    
    2008
    
    2009
    
    2010(In thousands of U.S. Dollars)Consolidated Balance Sheet Data:Cash and cash equivalents
    
    $
    164,611
    
    
    $
    450,416
    
    
    $
    142,434
    
    
    $
    568,159
    
    
    $
    454,476Other current assets(3)
    
    
    78,712
    
    
    
    431,043
    
    
    
    665,137
    
    
    
    269,279
    
    
    
    397,885Non-current assets
    
    
    862,919
    
    
    
    1,258,079
    
    
    
    724,723
    
    
    
    556,005
    
    
    
    531,799Total assets
    
    
    1,106,242
    
    
    
    2,139,538
    
    
    
    1,532,294
    
    
    
    1,393,443
    
    
    
    1,384,160Total current liabilities
    
    
    51,837
    
    
    
    276,287
    
    
    
    318,864
    
    
    
    197,056
    
    
    
    172,719Total non-current liabilities
    
    
    3,303
    
    
    
    6,394
    
    
    
    13,540
    
    
    
    5,435
    
    
    
    9,998Total liabilities
    
    
    55,140
    
    
    
    282,681
    
    
    
    332,404
    
    
    
    202,491
    
    
    
    182,717Ordinary shares ($0.00005 par value;
19,800,000,000 shares authorized in 2006,
2007, 2008, 2009 and 2010; 534,896,873,
640,230,852, 646,081,710, 725,278,005 and
677,934,610 shares issued and outstanding in
2006, 2007, 2008, 2009 and 2010,
respectively)
    
    
    27
    
    
    
    32
    
    
    
    32
    
    
    
    36
    
    
    
    34Other  equity
    
    
    1,050,717
    
    
    
    1,854,912
    
    
    
    1,197,752
    
    
    
    1,189,088
    
    
    
    1,200,445Total Focus Media Holdings Limited
shareholders equity
    
    
    1,050,744
    
    
    
    1,854,944
    
    
    
    1,197,784
    
    
    
    1,189,124
    
    
    
    1,200,479Noncontrolling interests
    
    
    358
    
    
    
    1,913
    
    
    
    2,106
    
    
    
    1,828
    
    
    
    964Total equity
    
    
    1,051,102
    
    
    
    1,856,857
    
    
    
    1,199,890
    
    
    
    1,190,952
    
    
    
    1,201,443Selected Operating Data:(4)Number of displays in our commercial
location network:Our direct cities
    
    
    80,263
    
    
    
    107,533
    
    
    
    122,597
    
    
    
    125,595
    
    
    
    157,916Our regional distributors(5)
    
    
    5,197
    
    
    
    4,765
    
    
    
    5,436
    
    
    
    5,411
    
    
    
    6,659Total
    
    
    85,460
    
    
    
    112,298
    
    
    
    128,033
    
    
    
    131,006
    
    
    
    164,575
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As of December 312006
    
    2007
    
    2008
    
    2009
    
    2010(In thousands of U.S. Dollars)Number of displays in our in-store network(6)
    
    
    38,742
    
    
    
    49,452
    
    
    
    42,824
    
    
    
    44,517
    
    
    
    48,179Number of stores in our in-store network(6)
    
    
    3,898
    
    
    
    4,063
    
    
    
    3,275
    
    
    
    3,097
    
    
    
    2,858Number of installed frames in our poster
frame network(7)
    
    
    99,784
    
    
    
    190,468
    
    
    
    324,364
    
    
    
    261,076
    
    
    
    335,822
 
 (1)
    
    Advertising service revenue is presented net of business tax. Business tax on advertising
service revenue from our LCD display network amounted to $14.4 million, $20.3 million, $24.7
million, $20.6 million and $31.0 million in 2006, 2007, 2008, 2009 and 2010, respectively.
Business tax on advertising service revenue from our in-store network amounted to $2.8
million, $2.8 million, $6.3 million, $3.2 million and $4.0 million for 2006, 2007, 2008, 2009
and 2010, respectively. Business tax on advertising service revenue from our poster frame
network amounted to $4.0 million, $7.9 million,
$13.9 million, $9.6 million and $12.2 million,
for 2006, 2007, 2008, 2009 and 2010, respectively. Business tax on advertising service revenue
from our movie theater and traditional outdoor billboards amounted to
 $2.8
million, $1.5 million and $2.8 million for 2008, 2009 and 2010, respectively. Business tax
includes aggregating business tax and surtax of 5.55% and cultural industries tax ranging from
0% to 4.0% of our gross advertising service revenue. Commencing from January 1, 2011, the
maximum cultural industries tax levied was reduced from 4% to 3%.(2)
    
    Other revenue and cost is related to sale of advertising equipment to business partners and
is combined in revenue and cost of LCD displays network in Note 18, Segment Information, to
consolidated financial statements under Item 18.(3)
    
    Other current assets  equal to total current assets less cash and cash equivalents.(4)
    
    Operating data presented includes operating data for discontinued operations except as noted
below.(5)
    
    Data that has been provided by our regional distributors is based on the results of surveys
we requested them to provide to us and it is possible such data is not entirely accurate.(6)
    
    Operating data for our in-store network does not include data from CGENs business and
operations.(7)
    
    Number of installed frames includes frames we currently market and frames that have been
installed, for instance, in buildings that are still under construction and which we have not
yet begun to market. Data includes both traditional poster frames and, for periods starting
from June 30, 2007, digital frames. Currency Translations and Exchange Rates
  6




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RENMINBI PER U.S. EXCHANGE RATEAVERAGE
    
    HIGH
    
    LOW
    
    PERIOD-END2006
    
    
    7.9579
    
    
    
    8.0702
    
    
    
    7.8041
    
    
    
    7.80412007
    
    
    7.5806
    
    
    
    7.8127
    
    
    
    7.2946
    
    
    
    7.29462008
    
    
    6.9193
    
    
    
    7.2946
    
    
    
    6.7800
    
    
    
    6.82252009
    
    
    6.8295
    
    
    
    6.8470
    
    
    
    6.8176
    
    
    
    6.82592010
    
    
    6.7603
    
    
    
    6.8330
    
    
    
    6.6000
    
    
    
    6.6000November
    
    
    6.6538
    
    
    
    6.6892
    
    
    
    6.6330
    
    
    
    6.6670December
    
    
    6.6497
    
    
    
    6.6745
    
    
    
    6.6000
    
    
    
    6.60002011 (through June 3)
    
    
    6.5283
    
    
    
    6.6364
    
    
    
    6.4780
    
    
    
    6.4796January
    
    
    6.5964
    
    
    
    6.6364
    
    
    
    6.5809
    
    
    
    6.6017February
    
    
    6.5761
    
    
    
    6.5965
    
    
    
    6.5520
    
    
    
    6.5713March
    
    
    6.5645
    
    
    
    6.5743
    
    
    
    6.5483
    
    
    
    6.5483April
    
    
    6.5267
    
    
    
    6.5477
    
    
    
    6.4900
    
    
    
    6.4900May
    
    
    6.4957
    
    
    
    6.5073
    
    
    
    6.4786
    
    
    
    6.4786June (through June 3)
    
    
    6.4800
    
    
    
    6.4824
    
    
    
    6.4780
    
    
    
    6.4796
 B. Capitalization and Indebtedness
  C. Reasons for the Offer and Use of Proceeds
  D. 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.
 7




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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.
    If the PRC government finds that the ownership structure of our operating subsidiaries or our
operation affiliates, or the agreements that establish the structure for operating our China
business do not comply with
 8




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PRC governmental restrictions on foreign investment in the advertising industry, we could be
subject to severe penalties.
      9




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
    
    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 would result in a material and adverse
effect on our ability to conduct our business.
 If the PRC government finds that the ownership structure of our operation 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.
    
    
    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.
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
    
    The imposition of any of these penalties would result in a material and adverse
effect on our ability to conduct our business.
 We use contractual arrangements with our PRC operating affiliates and their shareholders for a
significant 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.
    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.
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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.
   PRC regulation of loans and direct investment by offshore holding companies to PRC entities may
delay or prevent us from making loans or additional capital contributions to our PRC operating
subsidiaries and affiliates.
  
    
    loans by us to our foreign invested enterprises to finance their respective
activities cannot exceed statutory limits and must be registered with the PRC State
Administration of Foreign Exchange or its local counterpart; and
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
    
    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.
   We may be deemed a PRC resident enterprise under the PRC Enterprise Income Tax Law and be subject
to the PRC taxation on our worldwide income.
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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.
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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 citizens may subject such employees or us to fines and legal or
administrative sanctions.
  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.
  Some of our business operations have a limited operating history, which may make it difficult for
you to evaluate our business and prospects.
  We derive a substantial majority of our revenues from the provision of advertising services, and
advertising is particularly sensitive to changes in economic conditions and advertising trends.
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
    
    a general decline in economic conditions;
    
    a decline in economic conditions in the particular cities where we conduct business;
    
    a decision to shift advertising expenditures to other available advertising media;
    
    a decline in advertising spending in general; or
    
    a decrease in demand for advertising media in general and for our advertising
services in particular would materially and adversely affect our ability to generate
revenue from our advertising services, and our financial condition and results of
operations.
  Our quarterly operating results are difficult to predict and may fluctuate significantly from
period to period in the future.
  Our failure to maintain existing relationships or obtain new relationships with businesses that
allow us to place our LCD flat-panel displays and advertising poster frames in their buildings and
other commercial locations and to lease outdoor traditional and LED digital billboards placed in
desirable locations would harm our business and prospects.
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If we are unable to obtain or retain desirable placement locations for our LCD 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.
   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.
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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.
   There may be unknown risks inherent in the acquisitions we have made.
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Our strategic alliances and partnerships may not succeed or yield the benefits we anticipated which
could materially and adversely affect our business and results of operations.
  One or more of our regional distributors could engage in activities that are harmful to our
reputation in the industry and to our business.
  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.
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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.
   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.
  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,
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one of our largest shareholders, and our business and growth prospects may be severely disrupted if
we lose his services.
  We may need additional capital and we may not be able to obtain it, which could adversely affect
our liquidity and financial position.
   
    
    investors perception of, and demand for, securities of alternative advertising
media companies;
    
    conditions of the U.S. and other capital markets in which we may seek to raise
funds;
    
    our future results of operations, financial condition and cash flows;
    
    PRC governmental regulation of foreign investment in advertising services companies
in China;
    
    economic, political and other conditions in China; and
    
    PRC governmental policies relating to foreign currency borrowings.
  If we are unable to adapt to changing regulatory requirements or advertising trends and the
technology needs of advertisers and consumers, we will not be able to compete effectively and we
will be unable to increase or maintain our revenues which may materially and adversely affect our
business prospects and revenues.
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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.
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We may be subject to intellectual property infringement claims, which may force us to incur
substantial legal expenses and, if determined adversely against us, may materially disrupt our
business.
  Unauthorized use of our intellectual property by third parties, and the expenses incurred in
protecting our intellectual property rights, may adversely affect our business.
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We face significant competition, and if we do not compete successfully against new and existing
competitors, we may lose our market share, and our profitability may be adversely affected.
    We do not maintain any business liability disruption or litigation insurance coverage for our
operations, and any business liability, disruption or litigation we experience might result in our
incurring substantial costs and the diversion of resources.
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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.
  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.
  Our business operations may be affected by legislative or regulatory changes.
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Risks Relating to the Peoples Republic of China
  The PRCs economic, political and social conditions, as well as governmental policies, could affect
the financial markets in China and our liquidity and access to capital and our ability to operate
our business.
   The PRC legal system embodies uncertainties which could limit the legal protections available to
you and us.
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If tax benefits currently available to us in PRC were no longer available, our effective income tax
rates for our PRC operations could increase.
         Dividends we receive from our operating subsidiaries located in the PRC may be subject to PRC
withholding tax.
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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.
   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.
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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.
   A PRC rule on mergers and acquisitions may subject us to sanctions, fines and other penalties and
affect our future business growth through acquisition of complementary business.
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Restrictions on currency exchange may limit our ability to utilize our revenues effectively.
  Fluctuations in exchange rates could result in foreign currency exchange losses.
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Our financial and operating performance may be adversely affected by epidemics, natural disasters
and other catastrophes
   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.
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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.
  We have in the past failed to comply with Nasdaq Listing Rules, including the timely filing of our
annual report and maintaining a majority of independent directors on our board of directors.
   A significant percentage of our outstanding ordinary shares is beneficially owned by 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.
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Anti-takeover provisions in our charter documents may discourage any hostile acquisition attempt by
a third party, which could limit our shareholders opportunity to sell their shares at a premium.
    We are a Cayman Islands company and, because judicial precedent regarding the rights of
shareholders is more limited under Cayman Islands law than under U.S. law, you may have less
protection of your shareholder rights than you would under U.S. law.
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Judgments obtained against us by our shareholders may not be enforceable.
  The voting rights of holders of ADSs are limited by the terms of the deposit agreement.
  The depositary for our ADSs will give us a discretionary proxy to vote our ordinary shares
underlying your ADSs if you do not vote at shareholders meetings, except in limited circumstances,
which could adversely affect your interests.
  
    
    we have failed to timely provide the depositary with our notice of meeting and
related voting materials;
    
    we have instructed the depositary that we do not wish a discretionary proxy to be
given;
    
    we have informed the depositary that there is substantial opposition as to a matter
to be voted on at the meeting;
    
    a matter to be voted on at the meeting would have a material adverse impact on
shareholders; or
    
    voting at the meeting is made on a show of hands.
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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.
  You may be subject to limitations on transfer of your ADSs.
  
 ITEM 4. INFORMATION ON THE COMPANY
 A. History and Development of the Company
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B. Business Overview
  
    
    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
    
    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.
   
    
    our LCD display network, which refers to our network of flat-panel television
displays placed in high-traffic areas of commercial and public buildings marketed to
advertisers as a network or as seven
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separate channels targeting different types of consumersour premier A and B office
building channels, travel, fashion, elite and IT mall channels;
 
    
    our poster frame network, which refers to our network of traditional and digital
advertising poster frames placed mainly in the elevators and public areas of
residential complexes which we market under the brand name Framedia;
 
    
    our in-store network, which refers to our network of flat-panel television displays
placed in specific product areas inside stores with high-traffic concentrations such as
selected consumer product sections, the main aisles and check-out lines in large-scale
chain retail stores, or hypermarkets, as well as inside selected supermarkets and
convenience stores;
 
    
    our traditional billboard network, which refers to our network of large outdoor
poster billboards installed on street-sides in major shopping districts and other
locations with heavy pedestrian traffic in Shanghai, Beijing, Guangzhou, Shenzhen and
other cities in China; and
 
    
    our movie theater advertising network, which refers to our right to sell advertising
time on movie screens for the three minutes prior to movie screenings at movie theaters
in China.
   For and as of the three months endedMarch 31,
    
    June 30,
    
    September
    
    December
    
    March 31,
    
    June 30,
    
    September
    
    December2009
    
    2009
    
    30, 2009
    
    31, 2009
    
    2010
    
    2010
    
    30, 2010
    
    31, 2010LCD display network:Number of displays:Our direct cities
    
    
    125,796
    
    
    
    128,089
    
    
    
    125,467
    
    
    
    125,595
    
    
    
    126,289
    
    
    
    137,701
    
    
    
    144,392
    
    
    
    157,916Our regional distributors(1)
    
    
    5,423
    
    
    
    5,425
    
    
    
    5,423
    
    
    
    5,411
    
    
    
    6,196
    
    
    
    5,234
    
    
    
    5,521
    
    
    
    6,659Total
    
    
    131,219
    
    
    
    133,514
    
    
    
    130,890
    
    
    
    131,006
    
    
    
    132,485
    
    
    
    142,305
    
    
    
    149,913
    
    
    
    164,575In-store network:(2)Number of displays in our
in-store network
    
    
    42,340
    
    
    
    44,783
    
    
    
    45,195
    
    
    
    44,517
    
    
    
    40,848
    
    
    
    45,686
    
    
    
    45,613
    
    
    
    48,179Number of stores in our
in-store network
    
    
    3,171
    
    
    
    3,209
    
    
    
    3,265
    
    
    
    3,097
    
    
    
    2,772
    
    
    
    2,845
    
    
    
    2,587
    
    
    
    2,858Poster frame network:Number of frames installed
in our poster frame
network(3)
    
    
    327,969
    
    
    
    284,988
    
    
    
    262,301
    
    
    
    261,076
    
    
    
    270,759
    
    
    
    274,524
    
    
    
    312,487
    
    
    
    335,822
 
 (1)
    
    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
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(2)
    
    In the first quarter of 2010, the decline in number of displays and stores of our in-store
network was due to the termination of rental contracts with two major chain stores but one of
them was subsequently renewed in the second quarter of 2010 at a lower price.(3)
    
    Includes both traditional poster frames and, for periods starting from June 30, 2007, digital
frames. LCD display network
       Traditional billboard network
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Movie theater advertising network
  In-store Network
   Poster Frame Network
  Advertising Clients, Sales and Marketing
 Our Advertising Clients
  Sales
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Advertising Contracts
   Network Monitoring and Media Measurement
   Programming
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Pricing
  Relationships with Location Providers
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Technology and Suppliers
    Competition
  
    
    attain high market share;
    
    offer relatively fixed costs that allow us to leverage our earnings on revenue
growth; and
    
    maintain relative control over our rental costs.
 Facilities
  Regulatory Matters
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Limitations on Foreign Ownership in the Advertising Industry
  
    
    The Catalogue for Guiding Foreign Investment in Industry (2007); and
    
    The Administrative Regulations on Foreign-invested Advertising Enterprises (2008).
   
    
    we are able to exert effective control over our PRC operating affiliates;
    
    a substantial portion 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.
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
    
    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.
  Regulation of Advertising Services
 Business License for Advertising Companies
  
    
    The Advertising Law (1994);
    
    The Advertising Administrative Regulations (1987); and
    
    The Implementing Rules for the Advertising Administrative Regulations (2004).
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Advertising Content
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Outdoor Advertising
  
    
    utilize traffic safety facilities and traffic signs;
    
    impede the use of public facilities, traffic safety facilities and traffic signs;
    
    obstruct commercial and public activities or create an eyesore in urban areas;
    
    be placed in restrictive areas near government offices, cultural landmarks or
historical or scenic sites; and
    
    be placed in areas prohibited by the local governments from having outdoor
advertisements.
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Print Advertising
  Regulation of Foreign Exchange in Certain Onshore and Offshore Transactions
    
    
    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.
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Regulation of Equity Pledge
   C. Organizational Structure
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Our Corporate Structure and Contractual Arrangements
  
    
    with regard to the operation of our commercial location 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, one of our 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 Yangshi Sanwei
Advertisement Co., Ltd. and Shanghai Zhenhao Advertising Co., Ltd., two subsidiaries
with majority ownership held by Focus Media Advertisement.
   
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(1)
    
    Loans used to capitalize our PRC operating companies and to facilitate our control over them.(2)
    
    Agreements that give us effective control over our PRC operating affiliates.(3)
    
    Agreements that ensure a substantial portion of the economic benefits of our operations in
the PRC are maintained by our PRC operating subsidiaries, as described in Related Party
Transactions.(4)
    
    Focus Media Advertisement is 85% owned by Jason Nanchun Jiang and 15% owned by Jimmy Yu.(5)
    
    The Focus Media directly or indirectly WFOE operating subsidiaries include the WFOE operating
subsidiaries (i) relating to our out-of-home television network operations include but not
limited to Focus Media Technology, Focus Media Digital , FM China Technology and Focus Media
Defeng Advertisement, and (ii) relating to our poster frame network operations.(6)
    
    These consist of subsidiaries of Focus Media Advertisement, which holds between 50% and 100%
of the subsidiaries, with the remaining minority interest held by individual or entity
designated by us or unrelated third parties, which operate our out-of-home television network,
poster frame network, and movie theatre advertising business.(7)
    
    Other Focus Media operating subsidiaries include those directly or indirectly owned by Focus
Media Digital, which operate a portion of our-of-home television network and poster frame
network.(8)
    
    Hua Kuang operating subsidiaries include those directly or indirectly owned by Hua Kuang
Advertising Company Ltd.    52




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
    
    we are able to exert effective control over our PRC operating affiliates;
    
    a substantial portion 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.
   
    
    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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Subsidiaries of Focus Media Holding Limited
  D. Property, Plants and Equipment
  
 ITEM 4A. UNRESOLVED STAFF COMMENTS
  
 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
  Overview
   
    
    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. After this acquisition, we acquired ten entities
providing wireless advertising service in 2007.   The business model of these wireless
advertising services had been based on sending both solicited and unsolicited
advertisements via short messaging service, or SMS, to mobile phone users.   In March
2008, there was extensive negative media coverage on this form of advertising, and
shortly thereafter, the Ministry of Information Industry, or MII, the national regulating
authority of the telecom industry, ordered all local telecom regulators and telecom
operators at all levels to strengthen regulations over SMS advertisements, in particular
so-called spam or unsolicited advertisements and messages.    As a result, several local
telecom regulators and operators adopted policies restricting short message advertising
activities by limiting the number of such advertisements or prohibiting companies from
engaging in unsolicited short messaging advertising activities. In light of this sudden
adverse change in the legal, regulatory and publicity environment, in December 2008, we
discontinued operations of our mobile handset advertising network, and sought to
dispose of this business. The original owners of our mobile handset business were still
our key competitors with respect to this business, and as such, there was a limited choice
of potential purchasers. We negotiated with the original owners of the mobile handset
business to terminate the purchase agreements and return each business to the original
owners, which were more willing to accept the risks associated with the change in the
legal, regulatory and publicity environment.    In exchange, the original owners waived
their right to future earn-out payments due to them under the purchase agreement or paid
a purchase price that was significantly less than the price we paid to acquire the business
before the change in the business environment.. This business has been accounted for as
discontinued operations for all the periods presented in accordance with U.S. GAAP.
    
    On March 28, 2007, we acquired Allyes Information Technology Company Limited, and
its consolidated subsidiaries and affiliates, the leading Internet advertising company in
China. We also acquired ten other entities that provided Internet advertising service
during 2007 and 2008.  We believed that as a result of those acquisitions we would be
in a better position to negotiate pricing with internet property owners and rebate rates
with 4A agencies, while promoting Allyes Smart Trades advertising performance
tracking platform and facilitating cross-sales between our other internet businesses and
other business lines. However, the acquisition did not result in these synergies anticipated due to the expansion of the Chinese internet advertising market, which
permitted international agencies determined to enter the market to reduce their reliance
on local agencies.  As such, rebate rates from 4A agencies did not increase by as much
as we had originally expected. Furthermore, major internet property owners were
reluctant to lower their inventory prices due to the strong demand
for their inventories. For these reasons, Allyes and most of the internet businesses that we acquired have seen
their gross margins and operating profits steadily decline from 2007 to 2010 and the
number of days outstanding for account receivables increased to a level that was
inconsistent with our other lines of business. Since our internet advertising business, as a
whole had been an underperforming unit, we decided to refocus our growth strategy on
the organic growth of our core businesses, namely advertising through LCD display
poster frame, in-store and movie theater networks. We first disposed of the six acquired
internet subsidiaries because the earn-out periods for each of these acquisitions were still
in effect.    However, due to significant accrued and potential contingent payments of
those subsidiaries we could not locate a buyer willing to purchase these subsidiaries.
Therefore, we negotiated with the respective original owners of these subsidiaries, who
were the incumbent management, to cancel the accrued and potential contingent
payments owed to them pursuant to the terms of the respective purchase agreements in
exchange for returning the business to them. The operations of these disposed
subsidiaries are accounted for as discontinued operations for all the periods presented in
accordance with U.S. GAAP.
    
    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. One of the primary reasons for the acquisition of CGEN was to consolidate
the in-store advertising market with the hope of reducing rental fees paid to
chain-store owners. However, this acquisition did not result in chain-stores lowering
their rental fees as expected. Instead, the chain-stores expected we would maintain
the multi-year rental fee agreements entered into by CGEN prior to the acquisition and
expected we would pay for CGENs overdue rental fees, which amounted to RMB110 million
immediately prior to the disposition. Given these circumstances, we decided to dispose
of one of CGENs PRC operating affiliates, CGEN Media Advertising Co., Ltd., or CGEN
Media, to avoid being required to pay CGEN Medias overdue rental fees and to possibly
influence the chain-stores to renegotiate rental agreements on more favorable terms.
Based on the above considerations, we terminated the share purchase agreement and sold
CGEN Media, including all accounts receivables and account payables, to a third party,
who is neither related to us nor the original owners, for zero consideration. After the
disposal of CGEN Media in December 2008, the Company negotiated new rental agreements
with two primary chain-stores in China in April 2009 and April 2010, respectively,
thereby reducing rental fee levels by 73% and 81% respectively. Despite the
disposition of CGEN Media, we retained CGENs in-store monitors for future similar use.
We also began to negotiate leases with the existing location providers of CGEN in order
to conduct similar advertising business. We concluded that these constituted migration
of revenue and continuing involvement. As such, the result of CGENs operations was
accounted for as part of results from continuing operations in the year ended December
31, 2008.
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##### Table of Contents




    
    On December 22, 2008, we entered into an asset purchase agreement with SINA
Corporation, pursuant to which we agreed to sell substantially all of the assets of our
LCD display network, poster frame network and in-store network. The assets and
liabilities were presented as held for sale as of December 31, 2008. However, the
transaction was terminated on September 30, 2009 jointly by both parties as SINAs
application to MOFCOM for review under the PRC Anti-Monopoly Law was not accepted for
review by MOFCOM and the parties would not be able to pursue and complete that process
within the time period for consummation set forth in the agreement. Accordingly, we
continue to own and operate the assets that were the subject of the original purchase
and sale agreement. The assets and liabilities have been reclassified in 2009 in the
balance sheet as held for use and the results have been reclassified from discontinued
operations to continuing operations for all periods presented.
    
    In October 2007, we acquired Zong Heng Pin Yu, which owned an advertising license
for use on the Huangpu River in Shanghai, from an unrelated third party. After the
acquisition, we purchased a boat as the adverting platform on the Huangpu River and
commenced commercial operations in January 2008. On January 4, 2009, the Shanghai
Municipality Government amended its regulations governing outdoor advertisements to
prohibit non-passenger and non-cargo boats from engaging in advertising activities on
all rivers within Shanghai until December 31, 2010. We believed there was a high
likelihood that the regulation would remain effective indefinitely. Since the license
we obtained through the acquisition of Zong Heng Pin Yu could only be utilized for
advertising on the Huangpu River and it was not commercially viable to use the boat for
any other purpose, 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. As a result, we fully
impaired the long-lived assets associated with our boat-based advertising platform in
2009, recording an aggregate impairment loss of $36.9 million for the year ended
December 31, 2009.
    
    During 2009, we discontinued operations of certain poor performing subsidiaries in
our Internet advertising business.
    
    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. We entered into this
arrangement to incentivize the Allyes management in order to try to maximize the
operations and value of Allyes. 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.
    
    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. 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. 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
excellent value to our company and our shareholders.
    
    On March 7, 2011, as part of our continued effort to divest non-core business, we entered into a definitive equity transfer agreement, as amended on May 30, 2011,
with GBL III Limited, an entity controlled by Goldman Sachs and entities (the Management Entities) controlled by certain employees, directors and management members of us and Shanghai
Hua Guang Chuanzhi OOH Ltd. (OOH), our outdoor media subsidiary, in which Goldman Sachs will acquire a 30% equity interest in OOH from us for US$21 million, and the
Management Entities will purchase an aggregate 19% equity interest in OOH from us for US$13.3 million. GBL III Limited will be entitled to nominate one designee to OOHs board
of directors and will extend a loan to the Management Entities under certain loan documents to be entered into between GBL III Limited and the Management Entities. Upon completion of these transactions,
we will hold a 51% indirect equity interest in OOH. We believe this partial stake disposal allows us to recoup a majority of the investments in OOH while retaining upside potential in the business.
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##### Table of Contents



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 requirement. The
discontinued operations of these subsidiaries are classified as discontinued operations
for all periods presented.
  
    
    Overall economic growth in China, which we expect to contribute to an increase in
advertising spending in major urban areas in China where consumer spending is
concentrated;
    
    Our ability to increase sales of advertising time slots and extend the duration of
our advertising cycle on our LCD display networks, in-store networks and movie theater
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 new LCD display network;
    
    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
   56




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##### Table of Contents



Revenues
  For the year ended December 31,2008
    
    2009
    
    2010% of total
    
    
    
    
    
    % of total
    
    
    
    
    
    % of total$
    
    revenues
    
    $
    
    revenues
    
    $
    
    revenues(in thousands of U.S. dollars, except percentages)Net revenues:LCD display network
    
    
    240,918
    
    
    
    45.5
    %
    
    
    208,499
    
    
    
    52.5
    %
    
    
    297,403
    
    
    
    57.6
    %In-store network
    
    
    60,719
    
    
    
    11.5
    %
    
    
    30,346
    
    
    
    7.6
    %
    
    
    37,777
    
    
    
    7.3
    %Poster frame network
    
    
    146,751
    
    
    
    27.7
    %
    
    
    98,962
    
    
    
    24.9
    %
    
    
    121,893
    
    
    
    23.6
    %Movie theater and
traditional outdoor
billboards
    
    
    77,178
    
    
    
    14.6
    %
    
    
    59,057
    
    
    
    14.9
    %
    
    
    59,003
    
    
    
    11.4
    %Advertising service revenue
    
    
    525,566
    
    
    
    99.3
    %
    
    
    396,864
    
    
    
    99.9
    %
    
    
    516,076
    
    
    
    99.9
    %Other revenue
    
    
    3,622
    
    
    
    0.7
    %
    
    
    300
    
    
    
    0.1
    %
    
    
    239
    
    
    
    0.1
    %Total revenues
    
    
    529,188
    
    
    
    100.0
    %
    
    
    397,164
    
    
    
    100.0
    %
    
    
    516,315
    
    
    
    100.0
    %
 
 (1)
    
    Advertising service revenue is presented net of business tax. Business tax on advertising
service revenue from our LCD display network amounted to $24.7 million, $20.6 million and
$31.0 million in 2008, 2009 and 2010 respectively. Business tax on advertising service revenue
from our in-store network amounted to $6.3 million, $3.2 million and $4.0 million for 2008,
2009 and 2010, respectively. Business tax on advertising service revenue from our poster frame
network amounted to $13.9 million, $9.6 million and $12.2 million, for 2008, 2009 and 2010,
respectively. Business tax on advertising service revenue from our movie theater and
traditional outdoor billboards amounted to $2.8 million, $1.5 million and $2.8 million for
2008, 2009 and 2010, respectively.   For the year ended December 31,2008
    
    2009
    
    2010(in thousands of U.S. dollars, except percentages)Gross Revenue:LCD display network Unrelated parties
    
    
    264,182
    
    
    
    49.9
    %
    
    
    228,541
    
    
    
    57.6
    %
    
    
    326,834
    
    
    
    63.3
    % Related parties
    
    
    1,403
    
    
    
    0.3
    %
    
    
    582
    
    
    
    0.1
    %
    
    
    1,519
    
    
    
    0.3
    %Total LCD display network
    
    
    265,585
    
    
    
    50.2
    %
    
    
    229,123
    
    
    
    57.7
    %
    
    
    328,353
    
    
    
    63.6
    %In-store network Unrelated parties
    
    
    67,038
    
    
    
    12.7
    %
    
    
    33,538
    
    
    
    8.4
    %
    
    
    41,740
    
    
    
    8.1
    % Related parties
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %Total in-store network
    
    
    67,038
    
    
    
    12.7
    %
    
    
    33,538
    
    
    
    8.4
    %
    
    
    41,740
    
    
    
    8.1
    %Poster frame network Unrelated parties
    
    
    160,526
    
    
    
    30.3
    %
    
    
    108,379
    
    
    
    27.3
    %
    
    
    133,792
    
    
    
    25.9
    % Related parties
    
    
    88
    
    
    
    0.1
    %
    
    
    147
    
    
    
    0.0
    %
    
    
    294
    
    
    
    0.1
    %Total Poster frame network
    
    
    160,614
    
    
    
    30.4
    %
    
    
    108,526
    
    
    
    27.3
    %
    
    
    134,086
    
    
    
    26.0
    %Movie theater and traditional
outdoor billboards Unrelated parties
    
    
    78,250
    
    
    
    14.8
    %
    
    
    60,132
    
    
    
    15.2
    %
    
    
    61,476
    
    
    
    11.9
    %
 57




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##### Table of Contents



For the year ended December 31,2008
    
    2009
    
    2010(in thousands of U.S. dollars, except percentages) Related parties
    
    
    1,773
    
    
    
    0.3
    %
    
    
    412
    
    
    
    0.1
    %
    
    
    302
    
    
    
    0.1
    %Total Movie theater and
traditional outdoor billboards
    
    
    80,023
    
    
    
    15.1
    %
    
    
    60,544
    
    
    
    15.3
    %
    
    
    61,778
    
    
    
    12.0
    %Gross Advertising Services Revenue:
    
    
    573,260
    
    
    
    108.3
    %
    
    
    431,731
    
    
    
    108.7
    %
    
    
    565,957
    
    
    
    109.6
    %Less: Sales taxes:LCD display network
    
    
    24,668
    
    
    
    4.7
    %
    
    
    20,624
    
    
    
    5.2
    %
    
    
    30,950
    
    
    
    6.0
    %In-store network
    
    
    6,319
    
    
    
    1.2
    %
    
    
    3,192
    
    
    
    0.8
    %
    
    
    3,963
    
    
    
    0.8
    %Poster frame network
    
    
    13,863
    
    
    
    2.6
    %
    
    
    9,564
    
    
    
    2.4
    %
    
    
    12,193
    
    
    
    2.4
    %Movie theater and traditional
outdoor billboards
    
    
    2,844
    
    
    
    0.5
    %
    
    
    1,487
    
    
    
    0.4
    %
    
    
    2,775
    
    
    
    0.5
    %Total sales taxes
    
    
    47,694
    
    
    
    9.0
    %
    
    
    34,867
    
    
    
    8.8
    %
    
    
    49,881
    
    
    
    9.7
    %Net Advertising Service Revenue
    
    
    525,566
    
    
    
    99.3
    %
    
    
    396,864
    
    
    
    99.9
    %
    
    
    516,076
    
    
    
    99.9
    %Add:Other revenue:
    
    
    3,622
    
    
    
    0.7
    %
    
    
    300
    
    
    
    0.1
    %
    
    
    239
    
    
    
    0.1
    %Net revenues:
    
    
    529,188
    
    
    
    100.0
    %
    
    
    397,164
    
    
    
    100.0
    %
    
    
    516,315
    
    
    
    100.0
    %
 Advertising Service Revenue
 Sources of Revenues
   Factors that Affect Our Advertising Service Revenue.
 LCD display Network
  58




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##### Table of Contents



In-store Network
  Poster Frame Network
  
    
    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;
    
    the average price we charge for frame space on a per frame basis, after taking into
account any discount offered, which varies significantly from city to city as income
levels, standards of living and general economic conditions vary significantly from
region to region in China; 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
  Traditional Outdoor Billboard Networks
  Seasonality
 59




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Revenue Recognition
    Cost of Revenues
   For the year ended December 31,2008
    
    
    2009
    
    
    2010% of total
    
    
    
    
    
    
    % of total
    
    
    
    
    
    
    % of total$
    
    
    revenues
    
    
    $
    
    
    revenues
    
    
    $
    
    
    revenues(in thousands of U.S. dollars, except percentages)Total revenues
    
    $
    529,188
    
    
    
    100.0
    %
    
    $
    397,164
    
    
    
    100.0
    %
    
    $
    516,315
    
    
    
    100.0
    %Cost of revenues:Net advertising service cost:LCD display network
    
    
    78,728
    
    
    
    14.9
    %
    
    
    76,128
    
    
    
    19.2
    %
    
    
    67,374
    
    
    
    13.0
    %In-store network
    
    
    61,834
    
    
    
    11.7
    %
    
    
    24,170
    
    
    
    6.1
    %
    
    
    23,432
    
    
    
    4.5
    %Poster frame network
    
    
    59,815
    
    
    
    11.3
    %
    
    
    95,401
    
    
    
    24.0
    %
    
    
    84,487
    
    
    
    16.4
    %Movie theater and
traditional outdoor
billboards
    
    
    56,944
    
    
    
    10.8
    %
    
    
    45,085
    
    
    
    11.4
    %
    
    
    46,258
    
    
    
    9.0
    %Advertising service cost
    
    
    257,321
    
    
    
    48.7
    %
    
    
    240,784
    
    
    
    60.7
    %
    
    
    221,551
    
    
    
    42.9
    %Other cost
    
    
    1,723
    
    
    
    0.3
    %
    
    
    291
    
    
    
    0.0
    %
    
    
    139
    
    
    
    0.0
    %Total cost of revenues
    
    
    259,044
    
    
    
    49.0
    %
    
    
    241,074
    
    
    
    60.7
    %
    
    
    221,690
    
    
    
    42.9
    %Gross profit
    
    $
    270,144
    
    
    
    51.0
    %
    
    $
    156,090
    
    
    
    39.3
    %
    
    $
    294,625
    
    
    
    57.1
    %
 Advertising Service Costs
   60




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##### Table of Contents




    
    rental fees and one-time signing payments we pay to landlords, property managers and
stores pursuant to the display placement agreements we enter into with them;
    
    commissions and public relations 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.
   LCD display Network
 In-store Network
 Poster Frame Network
 Movie Theatre & Traditional Outdoor Billboard Networks
 Operating Expenses and Net Income
  61




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For the year ended December 31,2008
    
    
    2009
    
    
    2010% of total
    
    
    
    
    
    
    % of total
    
    
    
    
    
    
    % of total$
    
    
    revenues
    
    
    $
    
    
    revenues
    
    
    $
    
    
    revenues(in thousands of U.S. dollars, except percentages)Gross profit
    
    $
    270,144
    
    
    
    51.0
    %
    
    $
    156,090
    
    
    
    39.3
    %
    
    $
    294,625
    
    
    
    57.1
    %Operating expenses:General and administrative
    
    
    79,162
    
    
    
    15.0
    %
    
    
    88,833
    
    
    
    22.4
    %
    
    $
    79,760
    
    
    
    15.5
    %Selling and marketing
    
    
    82,258
    
    
    
    15.5
    %
    
    
    79,787
    
    
    
    20.1
    %
    
    
    103,722
    
    
    
    20.1
    %Impairment loss
    
    
    377,629
    
    
    
    71.4
    %
    
    
    63,646
    
    
    
    16.4
    %
    
    $
    5,736
    
    
    
    1.1
    %Other operating (income) expenses
    
    
    183,113
    
    
    
    34.6
    %
    
    
    13,111
    
    
    
    2.9
    %
    
    
    (14,144
    )
    
    
    (2.7
    %)Total
    
    
    722,162
    
    
    
    136.5
    %
    
    
    245,377
    
    
    
    61.8
    %
    
    
    175,074
    
    
    
    33.9
    %Income (loss) from operations
    
    $
    (452,018
    )
    
    
    (85.5
    %)
    
    $
    (89,287
    )
    
    
    (22.5
    %)
    
    $
    119,551
    
    
    
    23.2
    %
 General and Administrative
 Selling and Marketing
 Impairment Loss for goodwill
  Long-lived asset Impairment
 62




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##### Table of Contents



Share-based Compensation.
    Options granted to employees:
    
    2008
    
    2009Risk-free rate of return
    
    
    1.59%-3.2
    %
    
    
    0.87
    %Weighted average expected option life
    
    
    2.5 to 4 years
    
    
    
    2.5 yearsVolatility rate
    
    
    53%-68.88
    %
    
    
    88.32
    %Dividend yield
    
    
    0
    %
    
    
    0
    %
    63




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##### Table of Contents



For the years ended December 31,2008
    
    
    2009
    
    
    2010Cost of sales
    
    $
    1,469,847
    
    
    $
    1,504,092
    
    
    $
    976,822General and administrative
    
    
    22,890,581
    
    
    
    26,037,349
    
    
    
    40,272,194Selling and marketing
    
    
    15,814,828
    
    
    
    12,221,732
    
    
    
    4,342,602Net income
(loss) from discontinued operations
    
    
    2,439,910
    
    
    
    26,739,961
    
    
    
    Total
    
    $
    42,615,166
    
    
    $
    66,503,134
    
    
    $
    45,591,618
 Amortization of Acquired Intangibles
 For the years ended December 31,2008
    
    
    2009
    
    
    2010Cost of revenues
    
    $
    20,085,255
    
    
    $
    14,282,389
    
    
    $
    12,734,069Selling and marketing
    
    
    7,556,965
    
    
    
    4,664,850
    
    
    
    4,106,231Net income (loss) from discontinued operations
    
    
    12,446,394
    
    
    
    8,331,505
    
    
    
    765,859Total
    
    $
    40,088,614
    
    
    $
    27,278,744
    
    
    $
    17,606,159
  Critical Accounting Policies
  Revenue Recognition
    64




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Accounts Receivable
   Share-based Compensation
   65




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##### Table of Contents



Income Taxes
  Goodwill Impairment
  
    
    a significant adverse change in the business climate or legal factors;
    
    an adverse action or assessment by a regulator;
    
    unanticipated competition;
    
    loss of key personnel;
    
    the likelihood that a reporting unit or a significant portion of a reporting unit
will be sold or disposed of;
    
    change in reportable segments; and/or
    
    results of testing for recoverability of a significant asset group within a
reporting unit.
   66




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##### Table of Contents



Movie theaterPoster
    
    
    
    
    
    
    & traditionalLCD display
    
    
    frame
    
    
    Internet
    
    
    outdoornetwork
    
    
    network
    
    
    advertising
    
    
    billboards
    
    
    TotalBalance as of January
1, 2009
    
    $
    
    
    
    $
    
    
    
    $
    30,699,525
    
    
    $
    
    
    
    $
    30,699,525Goodwill acquired
during the year
    
    
    1,100,903
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,100,903Goodwill recorded as a
result of contingent
consideration resolved
    
    
    1,992,683
    
    
    
    30,396,719
    
    
    
    16,208,898
    
    
    
    33,249,508
    
    
    
    81,847,808Modification of
original purchase price
allocation
    
    
    
    
    
    
    
    
    
    
    193,266
    
    
    
    
    
    
    
    193,266Goodwill impairment
    
    
    
    
    
    
    (30,396,719
    )
    
    
    (23,961,974
    )
    
    
    (33,249,508
    )
    
    
    (87,608,201
    )Reclassified from
assets held for sale
    
    
    402,742,395
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    402,742,395Disposal of subsidiaries
    
    
    
    
    
    
    
    
    
    
    (18,867,217
    )
    
    
    
    
    
    
    (18,867,217
    )Translation adjustments
    
    
    260,212
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    260,212Balance as of December
31, 2009
    
    
    406,096,193
    
    
    
    
    
    
    
    4,272,498
    
    
    
    
    
    
    
    410,368,691Goodwill acquired
during the year
    
    
    
    
    
    
    3,958,444
    
    
    
    
    
    
    
    
    
    
    
    3,958,444Goodwill recorded as a
result of contingent
consideration resolved
    
    
    5,038,676
    
    
    
    15,551,019
    
    
    
    
    
    
    
    
    
    
    
    20,589,695Goodwill impairment
    
    
    
    
    
    
    (5,736,134
    )
    
    
    
    
    
    
    
    
    
    
    (5,736,134
    )Disposal of subsidiaries
    
    
    
    
    
    
    
    
    
    
    (4,272,498
    )
    
    
    
    
    
    
    (4,272,498
    )Translation adjustments
    
    
    399,355
    
    
    
    27,079
    
    
    
    
    
    
    
    
    
    
    
    426,434Balance as of December
31, 2010
    
    $
    411,534,224
    
    
    $
    13,800,408
    
    
    $
    
    
    
    $
    
    
    
    $
    425,334,632
  Goodwill impairment in 2009
   67




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##### Table of Contents



Goodwill impairment in 2010
   Long-lived Asset Impairment
  68




---



##### Table of Contents



Impairment of long-lived assets in 2009
    Impairment of long-lived assets in 2010
  Taxation
 Cayman Islands, the British Virgin Islands and Hong Kong.
  Taxable Presence Exposure in the PRC
  69




---



##### Table of Contents



PRC
      70




---



##### Table of Contents



Recently Issued Accounting Standards
    Acquisitions
   71




---



##### Table of Contents



2009 acquisitions:
  2010 acquisitions:
   Disposition
   2009
   Date of
    
    Business
    
    
    
    
    
    Date ofAcquisitions
    
    acquisition
    
    segment
    
    Proceeds paid
    
    Disposal
    
    Loss on disposal1.
    
    Catchstone
    
    
    2007-4-16
    
    
    Internet advertising
    
    $
    14,489,647
    
    
    
    2009-12-22
    
    
    $
    11,560,6172.
    
    WonderAd
    
    
    2007-9-15
    
    
    Internet advertising
    
    $
    14,926,003
    
    
    
    2009-11-30
    
    
    $
    14,926,0033.
    
    Jiahua
    
    
    2007-8-15
    
    
    Internet advertising
    
    $
    7,659,158
    
    
    
    2009-12-1
    
    
    $
    7,659,1584.
    
    Wangmai
    
    
    2007-9-1
    
    
    Internet advertising
    
    $
    2,749,158
    
    
    
    2009-12-14
    
    
    $
    2,749,1585.
    
    Jichuang
    
    
    2007-12-1
    
    
    Internet advertising
    
    $
    366,032
    
    
    
    2009-8-24
    
    
    $
    366,0326.
    
    1024
    
    
    2008-3-1
    
    
    Internet advertising
    
    $
    3,397,124
    
    
    
    2009-12-18
    
    
    $
    3,397,1247
    
    Dongguan Yaya
    
    
    2007-10-1
    
    
    Mobile handset advertising services
    
    $
    1,540,612
    
    
    
    2009-2-28
    
    
    $
    1,588,110
       2010 Disposition
  72




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##### Table of Contents



Quarterly Results of Operation
  For the three months endedConsolidated Statement
    
    March 31,
    
    
    June 30,
    
    
    September
    
    
    December
    
    
    March 31,
    
    
    June 30,
    
    
    September
    
    
    Decemberof Operations Data
    
    2009
    
    
    2009
    
    
    30, 2009
    
    
    31, 2009
    
    
    2010
    
    
    2010
    
    
    30, 2010
    
    
    31, 2010(in thousands of U.S. dollars)Net revenues:LCD display network (1)
    
    $
    34,323
    
    
    $
    54,250
    
    
    $
    55,810
    
    
    $
    64,116
    
    
    $
    50,100
    
    
    $
    72,387
    
    
    $
    82,894
    
    
    $
    92,022In-store network (1)
    
    
    6,344
    
    
    
    8,967
    
    
    
    7,646
    
    
    
    7,389
    
    
    
    7,662
    
    
    
    10,868
    
    
    
    9,408
    
    
    
    9,839Poster frame network (1)
    
    
    23,537
    
    
    
    26,499
    
    
    
    22,129
    
    
    
    26,797
    
    
    
    24,799
    
    
    
    25,238
    
    
    
    32,227
    
    
    
    39,629Movie theatre and traditional
outdoor billboards (1)
    
    
    19,211
    
    
    
    14,762
    
    
    
    12,487
    
    
    
    12,597
    
    
    
    14,138
    
    
    
    13,873
    
    
    
    12,818
    
    
    
    18,174Total advertising service revenue
    
    
    83,415
    
    
    
    104,478
    
    
    
    98,072
    
    
    
    110,899
    
    
    
    96,699
    
    
    
    122,366
    
    
    
    137,347
    
    
    
    159,664Other revenues
    
    
    3
    
    
    
    95
    
    
    
    197
    
    
    
    5
    
    
    
    55
    
    
    
    143
    
    
    
    5
    
    
    
    36Total revenues
    
    
    83,418
    
    
    
    104,573
    
    
    
    98,269
    
    
    
    110,904
    
    
    
    96,754
    
    
    
    122,509
    
    
    
    137,352
    
    
    
    159,700Cost of revenues:LCD display network
    
    
    11,678
    
    
    
    11,194
    
    
    
    38,636
    
    
    
    14,620
    
    
    
    14,945
    
    
    
    14,377
    
    
    
    19,022
    
    
    
    19,030In-store network
    
    
    4,267
    
    
    
    6,025
    
    
    
    11,490
    
    
    
    2,388
    
    
    
    5,219
    
    
    
    6,123
    
    
    
    5,996
    
    
    
    6,094Poster frame network
    
    
    12,345
    
    
    
    12,858
    
    
    
    52,550
    
    
    
    17,648
    
    
    
    18,448
    
    
    
    19,298
    
    
    
    21,670
    
    
    
    25,071Movie theatre and traditional
outdoor billboards
    
    
    14,164
    
    
    
    10,884
    
    
    
    9,486
    
    
    
    10,551
    
    
    
    9,922
    
    
    
    10,833
    
    
    
    10,597
    
    
    
    14,906Advertising service cost:
    
    
    42,454
    
    
    
    40,961
    
    
    
    112,162
    
    
    
    45,207
    
    
    
    48,534
    
    
    
    50,631
    
    
    
    57,285
    
    
    
    65,101Other costs
    
    
    
    
    
    
    93
    
    
    
    194
    
    
    
    3
    
    
    
    
    
    
    
    110
    
    
    
    1
    
    
    
    28Total cost of revenues
    
    
    42,454
    
    
    
    41,054
    
    
    
    112,356
    
    
    
    45,210
    
    
    
    48,534
    
    
    
    50,741
    
    
    
    57,286
    
    
    
    65,129Gross profit (loss)
    
    
    40,964
    
    
    
    63,519
    
    
    
    (14,087
    )
    
    
    65,694
    
    
    
    48,220
    
    
    
    71,768
    
    
    
    80,066
    
    
    
    94,571Operating expenses:General and administrative
    
    
    17,358
    
    
    
    22,988
    
    
    
    16,125
    
    
    
    32,362
    
    
    
    21,318
    
    
    
    16,737
    
    
    
    24,942
    
    
    
    16,763Selling and marketing
    
    
    15,574
    
    
    
    23,938
    
    
    
    21,137
    
    
    
    19,138
    
    
    
    20,592
    
    
    
    28,729
    
    
    
    24,474
    
    
    
    29,927Impairment loss
    
    
    9,271
    
    
    
    24,145
    
    
    
    16,203
    
    
    
    14,027
    
    
    
    5,736
    
    
    
    
    
    
    
    
    
    
    
    Other operating (income) expenses
    
    
    (2,671
    )
    
    
    3,489
    
    
    
    15,861
    
    
    
    (3,568
    )
    
    
    (3,796
    )
    
    
    (1,353
    )
    
    
    (2,699
    )
    
    
    (6,296
    )Total operating expenses
    
    
    39,532
    
    
    
    74,560
    
    
    
    69,326
    
    
    
    61,959
    
    
    
    43,850
    
    
    
    44,113
    
    
    
    46,717
    
    
    
    40,394Income (loss) from operations
    
    
    1,432
    
    
    
    (11,041
    )
    
    
    (83,413
    )
    
    
    3,735
    
    
    
    4,370
    
    
    
    27,655
    
    
    
    33,349
    
    
    
    54,177Interest income
    
    
    1,413
    
    
    
    1,215
    
    
    
    981
    
    
    
    1,337
    
    
    
    1,717
    
    
    
    1,064
    
    
    
    2,667
    
    
    
    1,812Investment loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,288
    )
    
    
    
    
    
    
    
    
    
    
    Income (loss) from continuing
operations before income taxes
    
    
    2,845
    
    
    
    (9,826
    )
    
    
    (82,432
    )
    
    
    5,072
    
    
    
    4,799
    
    
    
    28,719
    
    
    
    36,016
    
    
    
    55,989Provision for income taxes
    
    
    2,445
    
    
    
    5,107
    
    
    
    (4,819
    )
    
    
    11,047
    
    
    
    6,194
    
    
    
    4,850
    
    
    
    2,561
    
    
    
    8,731Net income (loss) from
continuing operations
    
    
    400
    
    
    
    (14,933
    )
    
    
    (77,613
    )
    
    
    (5,975
    )
    
    
    (1,395
    )
    
    
    23,869
    
    
    
    33,455
    
    
    
    47,258Net income (loss) from
discontinued operations, net of
tax
    
    
    (6,073
    )
    
    
    (7,816
    )
    
    
    (47,028
    )
    
    
    (50,695
    )
    
    
    804
    
    
    
    2,933
    
    
    
    79,341
    
    
    
    Net income (loss)
    
    
    (5,673
    )
    
    
    (22,749
    )
    
    
    (124,641
    )
    
    
    (56,670
    )
    
    
    (591
    )
    
    
    26,802
    
    
    
    112,796
    
    
    
    47,258Net income (loss) attributable
to noncontrolling interests
    
    
    19
    
    
    
    223
    
    
    
    2,958
    
    
    
    324
    
    
    
    363
    
    
    
    1,465
    
    
    
    59
    
    
    
    104Net income (loss) attributable
to Focus Media Holdings Limited
shareholders
    
    $
    (5,692
    )
    
    $
    (22,972
    )
    
    $
    (127,599
    )
    
    $
    (56,994
    )
    
    $
    (954
    )
    
    $
    25,337
    
    
    $
    112,737
    
    
    $
    47,154
 
 (1)
    
    Advertising service revenue is presented net of sales taxes. The following tables present
the unaudited quarterly sales taxes information: 73




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##### Table of Contents



For the three months endedConsolidated Statement
    
    March 31,
    
    
    June 30,
    
    
    September
    
    
    December 31,
    
    
    March 31,
    
    
    June 30,
    
    
    September
    
    
    December 31,of Operations Data
    
    2009
    
    
    2009
    
    
    30, 2009
    
    
    2009
    
    
    2010
    
    
    2010
    
    
    30, 2010
    
    
    2010(in thousands of U.S. dollars)Sales taxes:LCD display network
    
    $
    3,987
    
    
    $
    5,597
    
    
    $
    4,502
    
    
    $
    6,539
    
    
    $
    5,273
    
    
    $
    7,526
    
    
    $
    8,755
    
    
    $
    9,397In-store network
    
    
    671
    
    
    
    933
    
    
    
    804
    
    
    
    784
    
    
    
    826
    
    
    
    1,129
    
    
    
    981
    
    
    
    1,026Poster frame network
    
    
    2,271
    
    
    
    2,755
    
    
    
    2,025
    
    
    
    2,513
    
    
    
    2,614
    
    
    
    2,386
    
    
    
    3,269
    
    
    
    3,925Movie theatre and
traditional outdoor
billboards
    
    
    635
    
    
    
    268
    
    
    
    316
    
    
    
    270
    
    
    
    534
    
    
    
    506
    
    
    
    845
    
    
    
    890Total
    
    $
    7,564
    
    
    $
    9,553
    
    
    $
    7,647
    
    
    $
    10,106
    
    
    $
    9,247
    
    
    $
    11,547
    
    
    $
    13,850
    
    
    $
    15,238
  1)
    
    In the third and fourth quarters of 2009, we reduced our equity interests in certain
underperforming subsidiaries in our Internet segment and subsequently completely disposed of
our interest in those subsidiaries in the fourth quarter of 2009. The results of operations of
these subsidiaries have been accounted for as discontinued operations in accordance with U.S.
GAAP for all periods presented; and2)
    
    Subsequent to the filing of our fourth quarter 2009 results in the Form 6-K furnished to the
SEC on March 16, 2010, PRC State Tax Bureau released a circular numbered 2010[157] on April
21, 2010, which clarified preferential tax holiday treatments for those who also qualified as
HNTE. According to this circular, companies qualified as HNTE can either enjoy a 50% reduction
off the tax rate from 2009 through 2011 based on the transitional rule, or enjoy an EIT rate
of 15%. In no cases can companies enjoy the preferential tax rate of 7.5%, which is a 50%
deduction of 15%. Accordingly, income tax of $0.5 million was additionally provided
subsequently to reflect the difference between 7.5%, the rate previously utilized, and 10%,
which is the rate applied according to the transitioning rules.3)
    
    Subsequent to the filing of our fourth quarter 2009 results in the Form 6-K furnished to the
SEC on March 16, 2010, the Company recognized additional $4.0 million share-based compensation
expenses in its financial results for the third quarter 2009, due to the Companys private
equity placement of 75 million of its ordinary shares with JJ Media Investment Holding, a
British Virgin Island company established and controlled by Jiang Nan Chun, CEO and Chairman
of the Company. The $4.0 million share-based compensation expense represents the average
closing price of the shares during the twenty consecutive trading days preceding the signing
of the definitive agreement.4)
    
    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.
   74




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##### Table of Contents



For the three months endedConsolidated Statement
    
    March 31,
    
    June 30,
    
    September
    
    December
    
    March 31,
    
    June 30,
    
    September
    
    Decemberof Operations Data
    
    2009
    
    2009
    
    30, 2009
    
    31, 2009
    
    2010
    
    2010
    
    30, 2010
    
    31, 2010Net revenues:LCD display network (1)
    
    
    41.1
    %
    
    
    51.9
    %
    
    
    56.8
    %
    
    
    57.8
    %
    
    
    51.8
    %
    
    
    59.1
    %
    
    
    60.4
    %
    
    
    57.6
    %In-store network (1)
    
    
    7.6
    %
    
    
    8.6
    %
    
    
    7.8
    %
    
    
    6.7
    %
    
    
    7.9
    %
    
    
    8.9
    %
    
    
    6.8
    %
    
    
    6.2
    %Poster frame network (1)
    
    
    28.2
    %
    
    
    25.3
    %
    
    
    22.5
    %
    
    
    24.2
    %
    
    
    25.6
    %
    
    
    20.6
    %
    
    
    23.5
    %
    
    
    24.8
    %Movie theatre and traditional
outdoor billboards (1)
    
    
    23.1
    %
    
    
    14.1
    %
    
    
    12.7
    %
    
    
    11.3
    %
    
    
    14.6
    %
    
    
    11.3
    %
    
    
    9.3
    %
    
    
    11.4
    %Other revenues
    
    
    0.0
    %
    
    
    0.1
    %
    
    
    0.2
    %
    
    
    0.0
    %
    
    
    0.1
    %
    
    
    0.1
    %
    
    
    0.0
    %
    
    
    0.0
    %Total revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues:LCD display network
    
    
    14.0
    %
    
    
    10.7
    %
    
    
    39.3
    %
    
    
    13.2
    %
    
    
    15.4
    %
    
    
    11.7
    %
    
    
    13.8
    %
    
    
    11.9
    %In-store network
    
    
    5.1
    %
    
    
    5.8
    %
    
    
    11.7
    %
    
    
    2.2
    %
    
    
    5.4
    %
    
    
    5.0
    %
    
    
    4.4
    %
    
    
    3.8
    %Poster frame network
    
    
    14.8
    %
    
    
    12.3
    %
    
    
    53.5
    %
    
    
    15.9
    %
    
    
    19.1
    %
    
    
    15.8
    %
    
    
    15.8
    %
    
    
    15.7
    %Movie theatre and traditional
outdoor billboards
    
    
    17.0
    %
    
    
    10.4
    %
    
    
    9.6
    %
    
    
    9.5
    %
    
    
    10.3
    %
    
    
    8.8
    %
    
    
    7.7
    %
    
    
    9.4
    %Other costs
    
    
    0.0
    %
    
    
    0.1
    %
    
    
    0.2
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.1
    %
    
    
    0.0
    %
    
    
    0.0
    %Total cost of revenues
    
    
    50.9
    %
    
    
    39.3
    %
    
    
    114.3
    %
    
    
    40.8
    %
    
    
    50.2
    %
    
    
    41.4
    %
    
    
    41.7
    %
    
    
    40.8
    %Gross profit (loss)
    
    
    49.1
    %
    
    
    60.7
    %
    
    
    (14.3
    %)
    
    
    59.2
    %
    
    
    49.8
    %
    
    
    58.6
    %
    
    
    58.3
    %
    
    
    59.2
    %Operating expenses:General and administrative
    
    
    20.8
    %
    
    
    22.0
    %
    
    
    16.4
    %
    
    
    29.2
    %
    
    
    22.0
    %
    
    
    13.7
    %
    
    
    18.2
    %
    
    
    10.5
    %Selling and marketing
    
    
    18.7
    %
    
    
    22.9
    %
    
    
    21.5
    %
    
    
    17.3
    %
    
    
    21.3
    %
    
    
    23.4
    %
    
    
    17.8
    %
    
    
    18.7
    %Impairment loss
    
    
    11.1
    %
    
    
    23.1
    %
    
    
    16.5
    %
    
    
    12.6
    %
    
    
    5.9
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Other operating (income) expenses
    
    
    (3.2
    %)
    
    
    3.3
    %
    
    
    16.1
    %
    
    
    (3.2
    %)
    
    
    (3.9
    %)
    
    
    (1.1
    %)
    
    
    (2.0
    %)
    
    
    (3.9
    %)Total operating expenses
    
    
    47.4
    %
    
    
    71.3
    %
    
    
    70.5
    %
    
    
    55.9
    %
    
    
    45.3
    %
    
    
    36.0
    %
    
    
    34.0
    %
    
    
    25.3
    %Income (loss) from operations
    
    
    1.7
    %
    
    
    (10.6
    %)
    
    
    (84.8
    %)
    
    
    3.3
    %
    
    
    4.5
    %
    
    
    22.6
    %
    
    
    24.3
    %
    
    
    33.9
    %Interest income
    
    
    1.7
    %
    
    
    1.2
    %
    
    
    1.0
    %
    
    
    1.2
    %
    
    
    1.8
    %
    
    
    0.9
    %
    
    
    1.9
    %
    
    
    1.1
    %Investment loss
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    (1.3
    %)
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Income (loss) from continuing
operations before income taxes
    
    
    3.4
    %
    
    
    (9.4
    %)
    
    
    (83.8
    %)
    
    
    4.5
    %
    
    
    5.0
    %
    
    
    23.5
    %
    
    
    26.2
    %
    
    
    35.0
    %Provision for income taxes
    
    
    2.9
    %
    
    
    4.9
    %
    
    
    (4.9
    %)
    
    
    10.0
    %
    
    
    6.4
    %
    
    
    4.0
    %
    
    
    1.9
    %
    
    
    5.5
    %Net income (loss) from continuing
operations
    
    
    0.5
    %
    
    
    (14.3
    %)
    
    
    (78.9
    %)
    
    
    (5.5
    %)
    
    
    (1.4
    %)
    
    
    19.5
    %
    
    
    24.3
    %
    
    
    29.5
    %Net income (loss) from
discontinued operations, net of
tax
    
    
    (7.3
    %)
    
    
    (7.5
    %)
    
    
    (47.9
    %)
    
    
    (45.7
    %)
    
    
    0.8
    %
    
    
    2.4
    %
    
    
    57.8
    %
    
    
    0.0
    %Net income (loss)
    
    
    (6.8
    %)
    
    
    (21.8
    %)
    
    
    (126.8
    %)
    
    
    (51.2
    %)
    
    
    (0.6
    %)
    
    
    21.9
    %
    
    
    82.1
    %
    
    
    29.5
    %Net income (loss) attributable to
noncontrolling interests
    
    
    0.0
    %
    
    
    0.2
    %
    
    
    3.0
    %
    
    
    0.3
    %
    
    
    0.4
    %
    
    
    1.2
    %
    
    
    0.0
    %
    
    
    0.1
    %Net income (loss) attributable to
Focus Media Holdings Limited
shareholders
    
    
    (6.8
    %)
    
    
    (22.0
    %)
    
    
    (129.8
    %)
    
    
    (51.5
    %)
    
    
    (1.0
    %)
    
    
    20.7
    %
    
    
    82.1
    %
    
    
    29.4
    %
 
 (1)
    
    Advertising service revenue is presented net of sales taxes. The following table presents
the unaudited quarterly percentage of sales taxes against gross revenues: For the three months endedMarch 31,
    
    June 30,
    
    September
    
    December
    
    March 31,
    
    June 30,
    
    September
    
    December2009
    
    2009
    
    30, 2009
    
    31, 2009
    
    2010
    
    2010
    
    30, 2010
    
    31, 2010Sales taxes:LCD display network
    
    
    10.4
    %
    
    
    9.4
    %
    
    
    7.5
    %
    
    
    9.3
    %
    
    
    9.5
    %
    
    
    9.4
    %
    
    
    9.6
    %
    
    
    9.3
    %In-store network
    
    
    9.6
    %
    
    
    9.4
    %
    
    
    9.5
    %
    
    
    9.6
    %
    
    
    9.7
    %
    
    
    9.4
    %
    
    
    9.4
    %
    
    
    9.4
    %Poster frame network
    
    
    8.8
    %
    
    
    9.4
    %
    
    
    8.4
    %
    
    
    8.6
    %
    
    
    9.5
    %
    
    
    8.6
    %
    
    
    9.2
    %
    
    
    9.0
    %Movie theatre and
traditional outdoor
billboards
    
    
    3.2
    %
    
    
    1.8
    %
    
    
    2.5
    %
    
    
    2.1
    %
    
    
    3.6
    %
    
    
    3.5
    %
    
    
    6.2
    %
    
    
    4.7
    %Total
    
    
    8.3
    %
    
    
    8.4
    %
    
    
    7.2
    %
    
    
    8.4
    %
    
    
    8.7
    %
    
    
    8.6
    %
    
    
    9.2
    %
    
    
    8.7
    %
 A. Operating Results
 Results of Operations
 Year Ended December 31, 2010 Compared to Year Ended December 31, 2009
 Total Revenues
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
    
    LCD Display Network.Advertising service revenue from our LCD display network
increased 42.6% from $208.5 million in 2009 to $297.4 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 39% 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 and Traditional Outdoor Billboards.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. 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
 
    
    Cost of revenues  LCD display network.Our net advertising service cost for LCD display
network declined from $76.1 million in 2009 to
$67.4 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 and traditional outdoor billboards.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. 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.
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billboards, 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
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Year ended December 31,2008
    
    
    2009
    
    
    2010US$000
    
    
    US$000
    
    
    US$000Gross profitLCD display network
    
    $
    162,190
    
    
    $
    132,371
    
    
    $
    230,029In-store network
    
    
    (1,115
    )
    
    
    6,176
    
    
    
    14,345Poster frame network
    
    
    86,936
    
    
    
    3,561
    
    
    
    37,406Movie theatre and traditional outdoor billboards
    
    
    20,234
    
    
    
    13,972
    
    
    
    12,745Others
    
    
    1,898
    
    
    
    10
    
    
    
    100Total
    
    $
    270,143
    
    
    $
    156,090
    
    
    $
    294,625Gross marginLCD display network
    
    
    67.3
    %
    
    
    63.5
    %
    
    
    77.3
    %In-store network
    
    
    (1.8
    %)
    
    
    20.4
    %
    
    
    38.0
    %Poster frame network
    
    
    59.2
    %
    
    
    3.6
    %
    
    
    30.7
    %Movie theatre and traditional outdoor billboards
    
    
    26.2
    %
    
    
    23.7
    %
    
    
    21.6
    %Others
    
    
    52.4
    %
    
    
    3.2
    %
    
    
    42.1
    %Total
    
    
    51.0
    %
    
    
    39.3
    %
    
    
    57.1
    %
  Operating Expenses
 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.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.
 
 78




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Loss from Operations
 Interest income
 Income from continuing operations before income tax
 Income Taxes
 Net income (loss) from continuing operations
 Net income (loss) from discontinued operations, net of tax
 Net income (loss) attributable to Focus Media Holding Limited
 Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
 Total Revenues
 
    
    LCD Display Network. Advertising service revenue from our LCD display network
declined 13.4% from $240.9 million in 2008 to $208.5 million in 2009. The decline was
primarily attributable to contracting demand from advertisers under unfavorable macro
economic conditions. Advertisers from certain industries, such as automobile and
financial services, significantly reduced their advertising budgets in 2009 amid the
financial crisis that started in late 2008. As a result, the utilization of the
network capacity had  experienced a significant decline from 49% in 2008 to 39% in 2009 respectively,
along with declines in the actual pricing of the broadcasting time.
    
    In-store Network.Advertising service revenue from our in-store network declined
50.1% to $30.3 million in 2009 from $60.7 million in 2008. This decline was primarily
attributable to our restructuring of CGEN in December 2008. In January 2008, we
acquired CGEN, which was our biggest competitor in in-store advertising segment.
Subsequently, on December 10, 2008, we announced the disposition of the part of
in-store advertising business acquired from CGEN and termination of CGEN acquisition
agreement.
    
    Poster Frame Network.Advertising service revenue from our poster frame network
declined 32.6% from $146.8 million in 2008 to $99.0 million in 2009. The poster frame
network generated a significant portion of its 2008 and 2009 revenue from cyclical
industries including automobile, financial services and real estate, which in aggregate
accounted for 54% and 53% of 2008 and 2009 revenue, respectively. This decline in
revenue was primarily attributable to contracting demand from advertisers in these
industries, which were significantly affected by the global financial crisis and as a
result, significantly reduced their advertising budget. In addition, we faced more
intense competition in 2009 compared to 2008 as a result of contracting market demand.
As a result, the annual average
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utilization rate of our network capacity, calculated by averaging quarterly utilization
rates, decreased from 39% in Top 4 cities in 2008 to 29% in 2009. Actual pricing has
also experienced a decline from RMB 724 per frame per month in 2008 to RMB 640 per
frame per month in 2009 as a result of unfavorable macro economic conditions and
increased competition.
    
    Movie Theatre and Traditional Outdoor Billboards.Advertising service revenue
generated by our traditional outdoor billboards network declined 25.7% from $66.8
million in 2008 to $49.6 million in 2009. This was primarily attributable to our
disposition of a subsidiary in traditional outdoor billboard business in April
2009. Also the advertising service revenue derived from  our movie theatre network declined 8.7%
from $10.3 million in 2008 to $9.4 million in 2009.
 Cost of Revenues
 
    
    Cost of revenues  LCD display network.Our net advertising service cost for LCD
display network declined from $78.7 million in 2008 to $76.1 million in 2009. This
decline was due to the fact that we dismantled some of the LED screens installed in
certain commercial districts in Shanghai in the second quarter of 2009 and, therefore,
no longer incurred location rental.
    
    Cost of revenues  In-store network.We incurred $24.2 million in net advertising
service cost for our in-store network in 2009 compared to $61.8 million in 2008. The
significant decline is primarily due to restructuring of CGEN we acquired in January,
2008 and to a minor degree due to our cost reduction initiatives taken since late 2008.
    
    Cost of revenues  Poster frame network.Our net advertising service cost for our
poster frame network increased significantly to $95.4 million in 2009 compared to $59.8
million in 2008. The increase is mostly attributable to (1) a $27.0 million impairment
charge to our idle fixed assets, mostly digital poster frame; and (2) an increase in
rental and depreciation in 2009 due to a significant increase in the number of digital
poster frames at the beginning of the year and more intense competition from our
competitors for desirable buildings to place our poster frames.
    
    Cost of revenues  Movie theatre and traditional outdoor billboards.In 2009, we
recognized advertising service cost of $38.0 million in our traditional outdoor
billboards network, a 32% decline from $50.3 million in 2008, primarily due to our
disposition of a subsidiary in the traditional outdoor billboard business in April
2009. We incurred net advertising service cost of $7.1 million in our movie theatre
business in 2009, a 7.6% decline from $6.6 million in 2008.
 Gross Profit
  Operating Expenses
 General and Administrative. General and administrative expenses increased from $79.2
million in 2008 to $88.8 million in 2009 mainly due to the significant increase in bad
debt reserve for account receivables from $15.8 million in 2008 to $29.1 million in
2009, which was caused by unfavorable macro economic conditions that led more
advertisers to delay or default on their payments for advertising services we rendered.
 80




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Selling and Marketing. Selling and marketing expenses declined from $82.3 million in
2008 to $79.8 million in 2009 due to the decrease in share-based compensation expenses
from $15.7 million in 2008 to $12.2 million in 2009 by $3.5M.Impairment Loss. We incurred $65.3 million of 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. In 2008, we incurred a
$377.6 million goodwill impairment loss in 2008, which was mostly related to our poster
frame reporting unit.Other operating expenses (income), net. Other operating expenses (income), net included
gain or loss on disposal of subsidiaries, government subsidies, loss on disposal of
equipment, impairment of other long lived assets, and penalty for termination of
contract. We incurred other operating expenses of $183.1 million in 2008, primarily
consisting of the loss on the disposal of CGEN of $192.5 million, partially offset by
$13.5 million government subsidies. We recorded other operating expenses of $13.1
million in 2009, which primarily consisted of 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 subsidies of $11.1
million.
 Loss from Operations
 Interest income
 Loss from continuing operations before income tax
 Income Taxes
 Net loss from continuing operations
 Loss from discontinued operations
 Net loss attributable to Focus Media Holding Limited
 Liquidity and Capital Resources
 Cash Flows and Working Capital
  81




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For the year ended December 31,2008
    
    
    2009
    
    
    2010(in thousands of U.S. dollars)Net cash provided by operating activities
    
    $
    168,441
    
    
    $
    160,723
    
    
    $
    185,222Net cash (used) in investing activities
    
    
    (145,794
    )
    
    
    (158,248
    )
    
    
    (90,602
    )Net cash provided by financing activities
    
    
    (66,616
    )
    
    
    144,499
    
    
    
    (222,600
    )Effect of exchange rate changes
    
    
    16,469
    
    
    
    (1,730
    )
    
    
    14,297Net increase in cash and cash equivalents
    
    
    (27,500
    )
    
    
    145,244
    
    
    
    (113,683
    )
  82




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83




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##### Table of Contents



Transactions with Related Parties
  Capital Expenditures
  For the year ended December 31,2008
    
    2009
    
    2010(in thousands of U.S. dollars)Total capital expenditure
    
    $
    72,876
    
    
    $
    10,655
    
    
    $
    18,693
  Restricted Net Assets
  B. Research, Development, Patents and Licenses, etc.
 Research and Development
  Patents and Trademarks
  84




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##### Table of Contents



C. Trend Information
  D. Off-balance Sheet Arrangements
  E. Tabular Disclosure of Contractual Obligations
  Payments due December 312015 andTOTAL
    
    2011
    
    2012
    
    2013
    
    2014
    
    ThereafterDisplay and poster frame
placement agreement obligations
    
    
    134,024
    
    
    
    90,097
    
    
    
    34,307
    
    
    
    6,939
    
    
    
    2,589
    
    
    
    92Office premise lease obligations
    
    
    9,241
    
    
    
    5,021
    
    
    
    2,902
    
    
    
    736
    
    
    
    242
    
    
    
    340Total contractual obligations
    
    
    143,265
    
    
    
    95,118
    
    
    
    37,209
    
    
    
    7,675
    
    
    
    2,831
    
    
    
    432
   85




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##### Table of Contents



ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A. Directors and Senior Management
  Name
    
    Age
    
    PositionJason Nanchun Jiang
    
    
    38
    
    
    Chief Executive Officer and Chairman of the Board of DirectorsFumin Zhuo(1)
    
    
    59
    
    
    DirectorNeil Nanpeng Shen(2)
    
    
    43
    
    
    DirectorCharles Cao
    
    
    45
    
    
    DirectorDaqing Qi(3)
    
    
    48
    
    
    DirectorDavid Ying Zhang(4)
    
    
    37
    
    
    DirectorYing Wu (5)
    
    
    52
    
    
    DirectorKit Leong Low
    
    
    40
    
    
    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
 Fumin Zhuo
 86




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##### Table of Contents



Neil Nanpeng Shen
 Charles Cao
 Daqing Qi
 David Ying Zhang
 Ying Wu
 Kit Leong Low
 87




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##### Table of Contents



Duties of Directors
  
    
    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
  Share Option and Restricted Shares Plans
   88




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Options granted to employees:
    
    2008
    
    2009Risk-free rate of return
    
    
    1.59%-3.2
    %
    
    
    0.87
    %Weighted average expected option life
    
    
    2.5 to 4 years
    
    
    2.5 yearsVolatility rate
    
    
    53%-68.88
    %
    
    
    88.32
    %Dividend yield
    
    
    0
    %
    
    
    0
    %
      89




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##### Table of Contents



Number of
    
    Exerciserestricted
    
    pershares issued
    
    ordinary share
    
    Date of grant
    
    Date of expiration(in U.S. dollars)Jason Nanchun Jiang
    
    
    19,500,000
    
    
    $nil
    
    October 1, 2009
    
    September 30, 2019Fuming Zhuo
    
    
    *
    
    
    $nil
    
    October 1, 2009
    
    September 30, 2019Neil Nanpeng Shen
    
    
    *
    
    
    $nil
    
    October 1, 2009
    
    September 30, 2019Charles Cao
    
    
    *
    
    
    $nil
    
    October 1, 2009
    
    September 30, 2019Daqing Qi
    
    
    *
    
    
    $nil
    
    October 1, 2009
    
    September 30, 2019David Ying Zhang
    
    
    *
    
    
    $nil
    
    October 1, 2009
    
    September 30, 2019Ying Wu
    
    
    *
    
    
    $nil
    
    October 1, 2009
    
    September 30, 2019Alex Deyi Yang(1)
    
    
    *
    
    
    $nil
    
    October 1, 2009
    
    September 30, 2019Kit Leong Low
    
    
    *
    
    
    $nil
    
    January 15, 2010
    
    September 30, 2019
 
 *
    
    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
  Board Committees
  Audit Committee
  
    
    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;
 90




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##### Table of Contents




    
    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
  
    
    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;
 91




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
    
    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
  Foreign Private Issuer Home Country Practice.
 D. Employees
  Number ofemployees (1)
    
    PercentageSales and marketing
    
    
    1,263
    
    
    
    24.5
    %Operations
    
    
    3,138
    
    
    
    60.9
    %Management and administration
    
    
    750
    
    
    
    14.6
    %Total number of employees
    
    
    5,151
    
    
    
    100.0
    %
 
 (1)
    
    This excludes employees our regional distributors and agents who are not directly under
our employ.   E. Share Ownership
  92




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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 A. Major Shareholders
  each person known to us to own beneficially more than 5% of our ordinary shares and
 each of our directors and executive officers who beneficially
own our ordinary shares.
  Shares beneficially ownedNumber
    
    PercentPrincipal ShareholdersFosun International Limited(1)
    
    
    140,646,335
    
    
    
    21.05JJ Media Investment Holding Ltd. (2)
    
    
    100,586,135
    
    
    
    15.05
    %Directors and Executive Officers (3)JJ Media Investment Holding Ltd./ Jason Nanchun Jiang (4)
    
    
    100,586,135
    
    
    
    15.05
    %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 13D filed on September 27, 2010 on behalf of Fosun
International Limited. Includes 140,646,335 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)
    
    Information based on the amended Schedule 13D filed on September 10, 2010 on behalf of Jason
Nanchun Jiang and JJ Media Investment Holding Limited. Includes 100,586,135 ordinary shares
beneficially owned by JJ Media Investment Holding Ltd. 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.(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. 93




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B. Related Party Transactions
  Year ended December 31,Name of related parties
    
    Director interested
    
    2008
    
    
    2009
    
    
    2010Shanghai Everease Advertising &
Communication Ltd.
    
    Jason Nanchun Jiang
    
    $
    (132,116
    )
    
    $
    
    
    
    $
    CTV Golden Bridge International
Media Co., Ltd.
    
    Daqing Qi
    
    
    
    
    
    
    277,749
    
    
    
    Sina.com
    
    Charles Cao
    
    
    1,637,297
    
    
    
    548,988
    
    
    
    1,034,741Sohu.com
    
    Daqing Qi
    
    
    2,002,839
    
    
    
    438,536
    
    
    
    738,947China Vanke Co., Ltd.
    
    Daqing Qi
    
    
    909,775
    
    
    
    459,376
    
    
    
    465,998Home-Inn
    
    Neil Nanpeng Shen
    
    
    256,690
    
    
    
    89,076
    
    
    
    Ctrip.com
    
    Neil Nanpeng Shen
    
    
    69,863
    
    
    
    486,263
    
    
    
    79,60151.com
    
    Neil Nanpeng Shen
    
    
    718
    
    
    
    
    
    
    
    22,993Qihoo.com
    
    Neil Nanpeng Shen
    
    
    48,385
    
    
    
    38,008
    
    
    
    17,461UUSEE
    
    Neil Nanpeng Shen
    
    
    78,572
    
    
    
    
    
    
    
    Aikong.com
    
    Jason Nanchun Jiang
    
    
    56,190
    
    
    
    
    
    
    
    Giant Interactive Group Inc.
    
    Jason Nanchun Jiang
    
    
    4,153,948
    
    
    
    368,242
    
    
    
    385,720Beijing Huayi Brothers
    
    Jason Nanchun Jiang
    
    
    43,561
    
    
    
    
    
    
    
    StormNet Information Technology
    
    David Zhang
    
    
    
    
    
    
    
    
    
    
    2,569Tea Care Group Ltd.
    
    Fuming Zhuo
    
    
    
    
    
    
    292,606
    
    
    
    697,071Yadu Huang Ke Technology Co., Ltd.
    
    Fuming Zhuo
    
    
    87,638
    
    
    
    
    
    
    
    Focus Technology Co., Ltd.
    
    Fuming Zhuo
    
    
    
    
    
    
    43,200
    
    
    
    Total
    
    
    
    
    
    $
    9,213,360
    
    
    $
    3,042,044
    
    
    $
    3,445,101
  Year ended December 31,Name of related parties
    
    Director interested
    
    2008
    
    
    2009
    
    
    2010Sina.com
    
    Charles Cao
    
    $
    50,294,367
    
    
    $
    28,635,023
    
    
    $
    11,655,724Sohu.com
    
    Daqing Qi
    
    
    39,061,219
    
    
    
    17,208,874
    
    
    
    8,047,723Bona Film Group Ltd.
    
    Daqing Qi
    
    
    
    
    
    
    
    
    
    
    359,287Ctrip.com
    
    Neil Nanpeng Shen
    
    
    343,546
    
    
    
    146,356
    
    
    
    130,25151.com
    
    Neil Nanpeng Shen
    
    
    887,603
    
    
    
    195,376
    
    
    
    7,968Qihoo.com
    
    Neil Nanpeng Shen
    
    
    847,021
    
    
    
    109,564
    
    
    
    UUSEE
    
    Neil Nanpeng Shen
    
    
    306,899
    
    
    
    
    
    
    
    StormNet Information Technology
    
    David Zhang
    
    
    
    
    
    
    21,928
    
    
    
    27,266Total
    
    
    
    
    
    $
    91,740,655
    
    
    $
    46,317,121
    
    
    $
    20,228,219
 94




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##### Table of Contents



December 31Name of related parties
    
    Note
    
    Director interested
    
    2009
    
    
    2010Sina.com
    
    
    (a
    )
    
    Charles Cao
    
    
    570,113
    
    
    
    89,897Sohu.com
    
    
    (a
    )
    
    Daqing Qi
    
    
    2,685,730
    
    
    
    Bona Film Group Ltd.
    
    
    (a
    )
    
    Daqing Qi
    
    
    
    
    
    
    21,139Ctrip.com
    
    
    (a
    )
    
    Neil Nanpeng Shen
    
    
    (293
    )
    
    
    Tea Care Group Ltd.
    
    
    (a
    )
    
    Fuming Zhuo
    
    
    21,475
    
    
    
    345,297China Vanke Co., Ltd.
    
    
    (a
    )
    
    Daqing Qi
    
    
    7,379
    
    
    
    13,041Total
    
    
    
    
    
    
    
    
    
    $
    3,284,404
    
    
    $
    469,374
  Note (a)  These amounts represent trade receivables for advertising services provided or
advances paid for advertising space leased.
  December 31,Name of related parties
    
    Note
    
    Director interested
    
    2009
    
    
    2010Sina.com
    
    
    (b
    )
    
    Charles Cao
    
    $
    2,126,612
    
    
    $
    1,811,950China Vanke Co., Ltd.
    
    
    (b
    )
    
    Daqing Qi
    
    
    
    
    
    
    28,68951.com
    
    
    (b
    )
    
    Neil Nanpeng Shen
    
    
    32,871
    
    
    
    StormNet Information Technology
    
    
    (b
    )
    
    David Zhang
    
    
    54,376
    
    
    
    Qihoo.com
    
    
    (b
    )
    
    Neil Nanpeng Shen
    
    
    158
    
    
    
    Arcom
    
    
    (b
    )
    
    David Zhang
    
    
    
    
    
    
    7,550Ctrip.com
    
    
    (b
    )
    
    Neil Nanpeng Shen
    
    
    16,877
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    $
    2,230,894
    
    
    $
    1,848,189
  Note (b)  The amounts represent trade payables for advertising services purchased or
advances received for advertising services sold.
 Other Related Party Transactions
 Loans to Shareholders of Our PRC Operating Affiliates
  Share Subscription by JJ Media Investment Holding Limited
  Transactions with Entities Affiliated with Jimmy Wei Yu
  Management Buy-in To Internet Division
  95




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Sale of Shares by JJ Media Investment Holding Limited
  Agreements among Us, Our PRC Operating Subsidiaries, Our PRC Operating Affiliates and Their
Shareholders
   Transfer of Ownership When Permitted By Law
  Voting Arrangements
  Equity Pledge Agreements
  96




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C. Interests of Experts and Counsel
  ITEM 8. FINANCIAL INFORMATION
 A. Consolidated Statements and Other Financial Information
  Legal Proceedings
   97




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##### Table of Contents



Dividend Policy
   B. Significant Changes
  
    
    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. VisionChina Media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. This minority investment in
VisionChina Media 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;
    
    On March 7, 2011, as part of our continued effort to divest non-core business, we entered into a definitive equity transfer agreement, as amended on May 30, 2011,
with GBL III Limited, an entity controlled by Goldman Sachs and entities (the Management Entities) controlled by certain employees, directors and management members of us
and Shanghai Hua Guang Chuanzhi OOH Ltd. (OOH), our outdoor media subsidiary, in which Goldman Sachs will acquire a 30% equity interest in OOH from us for US$21 million,
and the Management Entities will purchase an aggregate 19% equity interest in OOH from us for US$13.3 million. GBL III Limited will be entitled to nominate one designee to OOHs board
of directors and will extend a loan to the Management Entities under certain loan documents to be entered into between GBL III Limited and the Management Entities. Upon completion of
these transactions, we will hold a 51% indirect equity interest in OOH. We believe this partial stake disposal allows us to recoup a majority of the investments in OOH while retaining
upside potential in the business;
    
    In May 2011, we appointed Kit Leong Low as our executive director while Alex Yang resigned his positions as our director and general manager; and
    
    In the second half of 2011, we plan to make an initial investment of approximately $1.5 million in exchange for a 15% stake in Enjoy China Technology Development
Company Limited (Enjoy). At the same time, we also plan to enter into a service exchange contract with Enjoy. The service exchange contract will be negotiated on an arms-length
basis and will be approved by our audit committee. We will have the first right of refusal to purchase an additional Enjoy stake in the event other shareholders decide to sell
down their stake at an arms-length market price. We will also have the first right of refusal to participate in future rounds of financing by Enjoy. JJ Media Investment
Holding Limited is also anticipated to have 34% stake in Enjoy. The remaining stakes are expected to be owned by two independent third parties.
 98




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ITEM 9. THE OFFER AND LISTING
 A. Offer and Listing Details
 Market Price Information for Our American Depositary Shares
  SALE PRICEHIGH
    
    
    LOWUS$
    
    
    US$2006
    
    
    36.56
    
    
    
    17.262007
    
    
    66.30
    
    
    
    33.502008
    
    
    59.37
    
    
    
    6.182009
    
    
    10.35
    
    
    
    4.84First Quarter
    
    
    17.88
    
    
    
    12.26Second Quarter
    
    
    9.39
    
    
    
    6.20Third Quarter
    
    
    11.54
    
    
    
    7.37Fourth Quarter
    
    
    17.49
    
    
    
    10.432010
    
    
    27.27
    
    
    
    12.26First Quarter
    
    
    18.72
    
    
    
    12.26Second Quarter
    
    
    18.48
    
    
    
    14.36Third Quarter
    
    
    24.68
    
    
    
    14.94Fourth Quarter
    
    
    27.27
    
    
    
    20.60November
    
    
    27.27
    
    
    
    23.01December
    
    
    24.38
    
    
    
    20.602011(through June 7)
    
    
    37.58
    
    
    
    21.91January
    
    
    24.92
    
    
    
    21.91February
    
    
    27.48
    
    
    
    23.93March
    
    
    30.73
    
    
    
    26.05April
    
    
    36.40
    
    
    
    29.67May
    
    
    37.58
    
    
    
    30.87June (through June 7)
    
    
    32.18
    
    
    
    27.98
  B. Plan of Distribution
  99




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C. Markets
  D. Selling Shareholders
  E. Dilution
  F. Expenses of the Issue
  
 ITEM 10. ADDITIONAL INFORMATION
 A. Share Capital
  B. Memorandum and Articles of Association
  C. Material Contracts
  Management Buy-in To Allyes
  Sale of Allyes
  100




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Share Repurchase from Fosun
  Share Purchase of VisionChina
  Disposal of 49% Interest in Traditional Outdoor Billboard Division
  Control Over Acquired Entities
  Share Subscription by JJ Media Investment Holding Limited
  D. Exchange Controls
  101




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
    
    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.
   102




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E. Taxation
 Cayman Islands Taxation
    (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 on the shares, debentures or other obligations of the Company.
  Peoples Republic of China Taxation
   103




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United States Federal Income Taxation
  
    
    a bank;
    
    a dealer in securities or currencies;
    
    a financial institution;
    
    a regulated investment company;
    
    a real estate investment trust;
    
    an insurance company;
    
    a tax-exempt organization;
    
    a person holding our ordinary shares or ADSs as part of a hedging, integrated or
conversion transaction, a constructive sale or a straddle;
    
    a trader in securities that has elected the mark-to-market method of accounting for
your securities;
    
    a person liable for alternative minimum tax;
    
    a United States expatriate or a person treated as a resident of more than one
country;
    
    a person who owns or is deemed to own 10% or more of our voting stock;
    
    a partnership or other pass through entity for United States federal income tax
purposes or a person holding our ordinary shares or ADSs through any such entity; or
    
    a person whose functional currency is not the United States dollar.
 IF YOU ARE CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF OUR ORDINARY SHARES OR
ADSS, YOU SHOULD CONSULT YOUR OWN TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES TO
 104




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YOU IN LIGHT OF YOUR PARTICULAR SITUATION AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS
OF ANY OTHER TAXING JURISDICTION
  
    
    an individual citizen or resident of the United States;
    
    a corporation (or other entity treated as a corporation for United States federal
income tax purposes) created or organized in or under the laws of the United States,
any state thereof or the District of Columbia;
    
    an estate the income of which is subject to United States federal income taxation
regardless of its source; or
    
    a trust which either (1) is subject to the primary supervision of a court within the
United States and one or more United States persons have the authority to control all
substantial decisions of the trust or (2) has a valid election in effect under
applicable United States Treasury regulations to be treated as a United States person.
  ADSs
   Taxation of Dividends
  105




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Passive Foreign Investment Companies
   
    
    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.
  106




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
    
    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.
     107




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Taxation of Capital Gains
  Information Reporting and Backup Withholding
     108




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F. Dividends and Paying Agents
  G. Statement by Experts
  H. Documents on Display
      I. Subsidiary Information
  
 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
  109




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Foreign Currency Risk
  Inflation
  
 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
 A. Debt securities
  B. Warrants and Rights
  C. Other securities
  D. American Depositary Shares
   
 PART II
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  110




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##### Table of Contents



ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 A. Modifications of Rights
  
    
    any of our shareholders representing a majority of the ordinary shares converted
from the Series A convertible redeemable preference shares;
    
    any of our shareholders representing a majority of the ordinary shares converted
from the Series B convertible redeemable preference shares;
    
    any of our shareholders representing 20% of the ordinary shares converted from the
Series C convertible redeemable preference shares; and
    
    since the closing of our acquisition of Target Media, any of the former Target Media
shareholders representing 25% of the ordinary shares issued to them as a group as
consideration in connection with our acquisition of Target Media;
    
    
    prior to September 18, 2009 or prior to the time when the shares proposed to be sold
by the former Allyes shareholders may be sold in a 90-day period under Rule 144, any
former Allyes shareholders holding 3 million of our ordinary shares may request that we
effect the registration of the ordinary shares held by them using our existing
registration statement on Form F-3ASR, provided that if the offering is part of an
underwritten offering, the expected proceeds from such an offering would not be less
than US$40 million; we are obligated to effect up to three such registrations; and
    
    certain of the former Allyes shareholders, on a date at least 150 days and no more
than 330 days following March 28, 2007, may request that we effect the registration of
the ordinary shares held by them using our existing registration statement on Form
F-3ASR; we are obligated to effect only one such registration.
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B. Use of Proceeds
  
 ITEM 15. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Managements Annual Report on Internal Control Over Financial Reporting.
     112




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Internal Control  Integrated
Framework
    Internal Control
 Integrated Framework
     113




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ITEM 16.
 
 ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B. CODE OF ETHICS
  
 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  For the year ended December 31,2009
    
    
    2010(in thousands, US dollar)Audit Fees (1)
    
    $
    1,260
    
    
    $
    1,400Audit-related Fees (2)
    
    
    174
    
    
    
    131Tax Fees (3)
    
    
    364
    
    
    
    150All Other Fees (4)
    
    
    
    
    
    
    Total
    
    $
    1,798
    
    
    $
    1,681
 
 (1)
    
    Audit fees consist of fees associated with the annual audit, the reviews of our quarterly
financial statements and statutory audits required internationally. They also include fees
billed for those services that are normally provided by the independent accountants in
connection with statutory and regulatory filings.(2)
    
    Audit-related fees consist of fees billed for assurance and related services that are
reasonably related to the performance of the audit or review of our financial statements but
not described in footnote (1) above. These services include consultations concerning financial
accounting and reporting standards and review of capitalization of retained earnings,
financial covenants in loan agreements, and our affiliates financial information.(3)
    
    Tax fees include fees billed for professional services rendered by Deloitte Touche Tohmatsu
CPA Ltd., primarily in connection with our transfer study activities.(4)
    
    All other fees comprise fees for all other services provided by Deloitte Touche Tohmatsu CPA
Ltd., other than those services covered in footnotes (1) to (3) above.  
 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
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ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
 Total Number of
    
    ApproximateADSs Purchased as
    
    Dollar Value ofPart of Publicly
    
    ADSs that May YetTotal Number of
    
    Average Price Paid
    
    Announced
    
    Be PurchasedPeriod
    
    ADSs Repurchased
    
    per ADS(2)
    
    Program(1)
    
    Under the ProgramAugust 2008
    
    
    680,973
    
    
    $
    29.35
    
    
    
    680,973
    
    
    $
    80,002,102September 2008
    
    
    405,654
    
    
    $
    24.63
    
    
    
    1,086,627
    
    
    $
    70,002,136October 2008
    
    
    501,715
    
    
    $
    19.91
    
    
    
    1,588,342
    
    
    $
    60,002,149November 2008
    
    
    1,000,000
    
    
    $
    7.48
    
    
    
    2,588,342
    
    
    $
    52,499,789May 2010
    
    
    2,392,134
    
    
    $
    15.36
    
    
    
    2,393,134
    
    
    $
    163,255,127September 2010
    
    
    9,523,810
    
    
    $
    21.00
    
    
    
    11,915,944
    
    
    $
    63,255,117December 2010
    
    
    134,842
    
    
    $
    22.25
    
    
    
    12,050,786
    
    
    $
    60,255,139
 
 (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 subsequently increased to US$300 million in August 2010. 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. we expects to implement this share repurchase program over the course of the next 12
months, effective immediately, in a manner consistent with market conditions and the interest
of the shareholders and in compliance with the companys securities trading policy. Focus
Medias board of directors will review the share repurchase program periodically, and may
authorize adjustment of its terms and size accordingly. Focus Media plans to fund repurchases
made under this program from its available cash balance.(2)
    
    The average price paid per ADS is calculated using the execution price for each repurchase
excluding commissions paid to brokers. 
 ITEM 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
  
 ITEM 16G. CORPORATE GOVERNANCE
  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
 115




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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 17. FINANCIAL STATEMENTS
  
 ITEM 18. FINANCIAL STATEMENTS
  PageReport of Independent Registered Public Accounting
    
    F-2Consolidated Balance Sheets as of December 31, 2009 and 2010
    
    F-3Consolidated Statements of Operations for each of the years ended December 31, 2008, 2009
and 2010
    
    F-5Consolidated Statements of Changes in Shareholders Equity and Comprehensive Income
(Loss) for the years ended December 31, 2008, 2009 and 2010
    
    F-6Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2009 and 2010
    
    F-7Notes to the Consolidated Financial Statements
    
    F-9
 
 ITEM 19. EXHIBITS
 ExhibitNumber
    
    Description of Exhibits3.1
    *
    
    Amended and Restated Memorandum and Articles of Association of Focus Media Holding Limited.4.1
    *
    
    Specimen Ordinary Share Certificate.4.2
    **
    
    Amended and Restated Shareholders Agreement of Focus Media Holding Limited, dated December 2,
2004, among Focus Media Holding Limited, its subsidiaries, its ordinary shareholders, its
preferred shareholders and the investors named therein.4.3
    
    
    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.
 116




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ExhibitNumber
    
    Description of Exhibits10.4
    **
    
    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., Ltd10.6
    **
    
    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.)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.)
 117




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ExhibitNumber
    
    Description of Exhibits10.20
    **
    
    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.
 118




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ExhibitNumber
    
    Description of Exhibits10.84∞
    
    Acknowledgement Letter of Participation of
Shareholders Voting Rights Proxy Agreement,
dated May 22, 2006, of Shanghai Perfect Media
Advertising Agency Co., Ltd.10.85α
    
    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.10.98β
    
    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.10.168γ
    
    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.10.181
    γ
    
    Asset Purchase Agreement, dated as of December 22, 2008, between Focus Media Holding Limited and
SINA Corporation.10.182α
    
    2010 Employee Share Option Plan.10.183α
    
    Subscription Agreement, dated as of September 23, 2009, between Focus Media Holding Limited and
JJ Media Investment Holding Limited.10.184α
    
    Restricted ADS Facility Letter, dated as of November 19, 2009, between Focus Media Holding
Limited and Citibank, N.A., as depositary.10.185α
    
    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.10.186α
    
    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.10.187δ
    
    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, 2010.10.188Ω
    
    Indemnity Agreement, dated September 7, 2010, between JJ Media Investment Holding Limited and
Focus Media Holding Limited.10.189ε
    
    Securities Purchase Agreement between Fosun International Limited and Focus Media Holding
Limited, dated September 20, 2010.10.190
    
    
    Securities Purchase Agreement by and among VisionChina Media Inc., Focus Media Holding Limited and the other investors named therein, dated December 30, 2010.10.191
    
    
    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, 2011.10.192
    
    
    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.
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ExhibitNumber
    
    Description of Exhibits13.1
    
    
    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.
 
 *
    
    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.α
    
    Previously filed with the Companys annual report on Form
20-F for the year ended December 31, 2009 and incorporated
by reference herein.β
    
    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.γ
    
    Previously filed with the Companys annual report on Form
20-F for the year ended December 31, 2008 and incorporated
by reference herein.δ
    
    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.ε
    
    Previously filed with the Companys amendment to the annual report on Form 20-F for the year ended December 31, 2009 dated November 5, 2010 and incorporated by reference herein.Ω
    
    Previously filed with the Companys report on Form 6-K (File
No.: 000-51387), dated September 8, 2010 and incorporated by
reference herein.
    
    Confidential treatment requested for certain portions of
this Exhibit pursuant to Rule 24b-2 promulgated under the
Securities Exchange Act, which portions are omitted and
filed separately with the Securities and Exchange
Commission. 
 120




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SIGNATURES
  Focus Media Holding LimitedBy:
    /s/ Jason Nanchun JiangName:
    Jason Nanchun JiangTitle:
    Chairman and Chief Executive Officer  121




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
 PagesReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2009 and 2010
    
    
    F-3Consolidated Statements of Operations for the Years Ended December 31, 2008, 2009 and 2010
    
    
    F-5Consolidated Statements of Changes in Equity and Comprehensive Income (Loss) for the
Years Ended December 31, 2008, 2009 and 2010
    
    
    F-7Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2009 and 2010
    
    
    F-8Notes to the Consolidated Financial Statements
    
    
    F-10
 F-1




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




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
 
 CONSOLIDATED BALANCE SHEETS
 December 31,2009
    
    
    2010(In U.S. Dollars, except share and per sharedata, unless otherwise stated)AssetsCurrent assets:Cash and cash equivalents
    
    $
    568,159,372
    
    
    $
    454,475,593Investments
    
    
    29,290,296
    
    
    
    137,551,150Accounts receivable, net of allowance for doubtful accounts of $33,596,096 and $21,088,503 in 2009 and 2010, respectively
    
    
    172,752,473
    
    
    
    157,328,743Prepaid expenses and other current assets
    
    
    29,451,741
    
    
    
    54,759,866Deposits paid for acquisition of subsidiaries
    
    
    4,860,406
    
    
    
    1,162,668Amounts due from related parties
    
    
    3,284,404
    
    
    
    469,374Rental deposits
    
    
    29,639,716
    
    
    
    46,613,780Total current assets
    
    
    837,438,408
    
    
    
    852,361,174Rental deposits
    
    
    1,570,337
    
    
    
    5,681,865Equipment, net
    
    
    77,661,147
    
    
    
    68,886,796Acquired intangible assets, net
    
    
    51,777,215
    
    
    
    24,162,043Goodwill
    
    
    410,368,691
    
    
    
    425,334,632Other long-term assets
    
    
    14,627,502
    
    
    
    7,733,029Total assets
    
    $
    1,393,443,300
    
    
    $
    1,384,159,539Liabilities and equityCurrent liabilities:Accounts payable (including accounts payable of the consolidated VIEs without recourse to the Group of $4,410,602 and $4,340,424 as of December 31, 2009 and 2010, respectively)
    
    $
    53,340,007
    
    
    $
    16,589,293Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of the consolidated VIEs without recourse to the Group of $7,234,408 and $10,635,394 as of December 31, 2009 and 2010, respectively)
    
    
    101,870,170
    
    
    
    121,763,522Income taxes payable (including income taxes payable of the consolidated VIEs without recourse to the Group of $2,976,916 and $2,914,969 as of December 31, 2009 and 2010, respectively)
    
    
    27,537,785
    
    
    
    8,890,191Amounts due to related parties
    
    
    2,230,894
    
    
    
    1,848,189Deferred tax liabilities (including deferred tax liabilities of the consolidated VIEs without recourse to the Group of $277,406 and $1,820,531 as of December 31, 2009 and 2010, respectively)
    
    
    12,077,282
    
    
    
    23,627,893Total current liabilities
    
    
    197,056,138
    
    
    
    172,719,088Deferred tax liabilities (including deferred tax liabilities of the consolidated VIEs without recourse to the Group of $1,406,095 and $710,252 as of December 31, 2009 and 2010, respectively)
    
    
    5,435,178
    
    
    
    9,997,511Total liabilities
    
    $
    202,491,316
    
    
    $
    182,716,599Commitments and contingencies (Note 17)EquityOrdinary shares ($0.00005 par value; 19,800,000,000 shares authorized in 2009 and 2010; 725,278,005 and 677,934,625 shares issued and outstanding in 2009 and 2010, respectively)
    
    
    36,287
    
    
    
    33,920Additional paid-in capital
    
    
    1,875,304,804
    
    
    
    1,685,148,851Subscription receivable
    
    
    (3,081,726
    )
    
    
    (90,984
    )Retained earnings (deficit)
    
    
    (747,226,391
    )
    
    
    (562,952,914
    )Accumulated other comprehensive income
    
    
    64,090,691
    
    
    
    78,339,729
 F-3




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##### Table of Contents



December 31,2009
    
    
    2010(In U.S. Dollars, except share and per sharedata, unless otherwise stated)Total Focus Media Holdings Limited shareholders equity
    
    $
    1,189,123,665
    
    
    $
    1,200,478,602Noncontrolling interests
    
    
    1,828,319
    
    
    
    964,338Total equity
    
    $
    1,190,951,984
    
    
    $
    1,201,442,940Total liabilities and equity
    
    $
    1,393,443,300
    
    
    $
    1,384,159,539
  F-4




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FOCUS MEDIA HOLDING LIMITED
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the years ended December 31,2008
    
    
    2009
    
    
    2010(In U.S. Dollars, except share and per share data,unless otherwise stated)Net revenues:Advertising service revenue
    
    $
    525,565,494
    
    
    $
    396,863,987
    
    
    $
    516,075,284Other revenues
    
    
    3,621,880
    
    
    
    300,535
    
    
    
    239,413Total net revenues
    
    
    529,187,374
    
    
    
    397,164,522
    
    
    
    516,314,697Cost of revenues:Advertising service cost
    
    
    257,320,504
    
    
    
    240,782,540
    
    
    
    221,551,334Other costs
    
    
    1,722,996
    
    
    
    290,663
    
    
    
    138,700Total cost of revenues
    
    
    259,043,500
    
    
    
    241,073,203
    
    
    
    221,690,034Gross profit
    
    
    270,143,874
    
    
    
    156,091,319
    
    
    
    294,624,663Operating expenses:General and administrative
    
    
    79,162,336
    
    
    
    88,833,305
    
    
    
    79,759,757Selling and marketing
    
    
    82,258,177
    
    
    
    79,786,861
    
    
    
    103,722,237Impairment loss
    
    
    377,629,012
    
    
    
    63,646,227
    
    
    
    5,736,134Other operating expenses (income), net
    
    
    183,113,307
    
    
    
    13,111,043
    
    
    
    (14,143,945
    )Total operating expenses
    
    
    722,162,832
    
    
    
    245,377,436
    
    
    
    175,074,183Income (loss) from operations
    
    
    (452,018,958
    )
    
    
    (89,286,117
    )
    
    
    119,550,480Interest income
    
    
    7,130,080
    
    
    
    4,945,946
    
    
    
    7,259,508Investment loss
    
    
    
    
    
    
    
    
    
    
    1,287,881Income (loss) from continuing operations before income taxes
    
    
    (444,888,878
    )
    
    
    (84,340,171
    )
    
    
    125,522,107Income taxes
    
    
    25,278,127
    
    
    
    13,780,065
    
    
    
    22,335,579Net income (loss) from continuing operations
    
    
    (470,167,005
    )
    
    
    (98,120,236
    )
    
    
    103,186,528Net income (loss) from discontinued operations, net of tax
    
    
    (300,670,962
    )
    
    
    (111,612,420
    )
    
    
    83,077,575Net income (loss)
    
    
    (770,837,967
    )
    
    
    (209,732,656
    )
    
    
    186,264,103Less: Net income (loss) attributable to noncontrolling interests
    
    
    (150,441
    )
    
    
    3,524,388
    
    
    
    1,990,626Net income (loss) attributable to Focus Media Holding Limited Shareholders
    
    $
    (770,687,526
    )
    
    $
    (213,257,044
    )
    
    $
    184,273,477Income (loss) per share from continuing
operations  basic
    
    $
    (0.73
    )
    
    $
    (0.15
    )
    
    $
    0.15Income (loss) per share from continuing
operations  diluted
    
    $
    (0.73
    )
    
    $
    (0.15
    )
    
    $
    0.14Income (loss) per share from discontinued
operations  basic
    
    $
    (0.47
    )
    
    $
    (0.17
    )
    
    $
    0.12Income (loss) per share from discontinued
operations  diluted
    
    $
    (0.47
    )
    
    $
    (0.17
    )
    
    $
    0.11
 F-5




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##### Table of Contents



For the years ended December 31,2008
    
    
    2009
    
    
    2010(In U.S. Dollars, except share and per share data,unless otherwise stated)Income (loss) per share  basic
    
    $
    (1.20
    )
    
    $
    (0.33
    )
    
    $
    0.26Income (loss) per share  diluted
    
    $
    (1.20
    )
    
    $
    (0.33
    )
    
    $
    0.25Shares used in calculating basic income (loss) per share
    
    
    643,989,522
    
    
    
    651,654,345
    
    
    
    707,846,570Shares used in calculating diluted income (loss) per share
    
    
    643,989,522
    
    
    
    651,654,345
    
    
    
    731,658,265
  F-6




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITYAND COMPREHENSIVE INCOME (LOSS)
 (In U.S. Dollars, except share and per share data, unless otherwise stated)
 AccumulatedRetained earning
    
    
    otherOrdinary shares
    
    
    Additional paid-in
    
    
    Subscription
    
    
    (accumulated
    
    
    comprehensive
    
    
    Noncontrolling
    
    
    
    
    
    
    ComprehensiveOrdinary shares
    
    
    Amount
    
    
    capital
    
    
    receivables
    
    
    deficit)
    
    
    income
    
    
    interests
    
    
    Total equity
    
    
    income (loss)Balance at January 1, 2008
    
    
    640,230,852
    
    
    $
    32,020
    
    
    $
    1,581,579,792
    
    
    
    
    
    
    $
    236,718,179
    
    
    $
    36,614,206
    
    
    $
    1,913,248
    
    
    $
    1,856,857,445
    
    
    $
    Issuance of ordinary shares in connection with acquisitions
    
    
    9,718,588
    
    
    
    486
    
    
    
    72,426,852
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,427,338
    
    
    
    Issuance of ordinary shares pursuant to share option plans
    
    
    9,073,980
    
    
    
    468
    
    
    
    10,710,833
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,711,301
    
    
    
    Stock repurchase
    
    
    (12,941,710
    )
    
    
    (647
    )
    
    
    (47,499,564
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (47,500,211
    )
    
    
    Share-based compensation expense
    
    
    
    
    
    
    
    
    
    
    42,615,166
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,615,166
    
    
    
    Unrealized loss on available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,967,393
    )
    
    
    
    
    
    
    (1,967,393
    )
    
    
    (1,967,393
    )Capital injection from noncontrolling interest holders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    213,706
    
    
    
    213,706
    
    
    
    Cumulative translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,241,171
    
    
    
    129,277
    
    
    
    37,370,448
    
    
    
    37,370,448Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (770,687,526
    )
    
    
    
    
    
    
    (150,441
    )
    
    
    (770,837,967
    )
    
    
    (770,837,967
    )Balance at December 31, 2008
    
    
    646,081,710
    
    
    $
    32,327
    
    
    $
    1,659,833,079
    
    
    
    
    
    
    $
    (533,969,347
    )
    
    $
    71,887,984
    
    
    $
    2,105,790
    
    
    $
    1,199,889,833
    
    
    $
    (735,434,912
    )Issuance of ordinary shares pursuant to share option plans
    
    
    4,196,295
    
    
    
    210
    
    
    
    5,155,541
    
    
    $
    (3,081,726
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,074,025
    
    
    
    Issuance of ordinary shares
    
    
    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
    )Issuance of ordinary shares pursuant to share option plans
    
    
    12,910,550
    
    
    
    646
    
    
    
    596,821
    
    
    
    2,990,742
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,588,209
    
    
    
    Stock 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
    
    
    
    22,024,104Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    184,273,477
    
    
    
    
    
    
    
    1,990,626
    
    
    
    186,264,103
    
    
    
    186,264,103Balance 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
  F-7




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the years ended December 31,2008
    
    
    2009
    
    
    2010(In U.S. dollars)Operating activities:Net income (loss)
    
    
    (770,837,967
    )
    
    
    (209,732,656
    )
    
    
    186,264,103Adjustments to reconcile net income (loss) to net cash provided by operating activities:Bad debt expenses
    
    
    15,767,332
    
    
    
    29,076,504
    
    
    
    454,624Share-based compensation
    
    
    42,615,166
    
    
    
    66,503,134
    
    
    
    45,591,618Depreciation and amortization
    
    
    71,852,826
    
    
    
    62,728,660
    
    
    
    45,876,222Unrealized gain on available-for-sale securities
    
    
    (408,387
    )
    
    
    
    
    
    
    Loss from equity method investees
    
    
    9,557
    
    
    
    
    
    
    
    (Gain)/loss on disposal of equity interest of subsidiaries and impairment of other long-lived assets
    
    
    282,567,020
    
    
    
    66,180,083
    
    
    
    (76,167,018
    )Loss on disposal of equipment
    
    
    697,909
    
    
    
    1,346,489
    
    
    
    318,815Impairment loss for goodwill
    
    
    596,069,011
    
    
    
    87,608,201
    
    
    
    5,736,134Impairment loss for acquired intangible assets
    
    
    4,810,987
    
    
    
    25,437,087
    
    
    
    Impairment loss for equipment
    
    
    18,562,323
    
    
    
    40,318,817
    
    
    
    Changes in assets and liabilities, net of effects of acquisitions:Accounts receivable
    
    
    (124,577,341
    )
    
    
    929,044
    
    
    
    (38,969,202
    )Inventories
    
    
    126,858
    
    
    
    202,090
    
    
    
    (68,030
    )Prepaid expenses and other current assets
    
    
    (28,802,626
    )
    
    
    (3,794,689
    )
    
    
    3,247,428Amounts due from related parties
    
    
    (4,545,372
    )
    
    
    6,405,746
    
    
    
    2,407,864Rental deposits
    
    
    1,712,586
    
    
    
    1,327,564
    
    
    
    (27,688,926
    )Accounts payable
    
    
    45,099,316
    
    
    
    23,202,611
    
    
    
    11,318,600Accrued expenses and other current liabilities
    
    
    9,135,910
    
    
    
    (23,325,332
    )
    
    
    47,409,016Amounts due to related parties
    
    
    2,625,515
    
    
    
    (13,356,596
    )
    
    
    (513,469
    )Income tax payable
    
    
    15,462,823
    
    
    
    (1,199,784
    )
    
    
    (19,090,163
    )Deferred taxes
    
    
    (9,502,842
    )
    
    
    866,257
    
    
    
    (905,898
    )Net cash provided by operating activities
    
    $
    168,440,604
    
    
    $
    160,723,230
    
    
    $
    185,221,718Investing activities:Purchase of equipment and other long-term assets
    
    $
    (72,875,855
    )
    
    $
    (10,654,598
    )
    
    $
    (18,692,608
    )Cash of disposed subsidiary
    
    
    (11,693,755
    )
    
    
    (27,315,949
    )
    
    
    (40,805,068
    )Proceeds from sale of subsidiaries
    
    
    
    
    
    
    
    
    
    
    116,872,231Acquisition of intangible assets
    
    
    (1,766,633
    )
    
    
    
    
    
    
    Purchase of subsidiaries and earn-out payment paid to acquire subsidiaries, net of cash acquired
    
    
    (133,347,771
    )
    
    
    (92,411,545
    )
    
    
    (40,186,684
    )Investment in a joint venture
    
    
    (2,970,000
    )
    
    
    
    
    
    
    Deposit (paid)/refunded to acquire subsidiaries
    
    
    (14,270,053
    )
    
    
    329,516
    
    
    
    Proceeds from disposal of fixed assets
    
    
    
    
    
    
    196,115
    
    
    
    471,128Cash paid for purchases of debt and equity securities
    
    
    
    
    
    
    (29,257,303
    )
    
    
    (137,551,150
    )Cash received from sale of debt and equity securities
    
    
    91,129,763
    
    
    
    865,589
    
    
    
    29,290,296Net cash used in investing activities
    
    $
    (145,794,304
    )
    
    $
    (158,248,175
    )
    
    $
    (90,601,855
    )
 F-8




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##### Table of Contents



For the years ended December 31,2008
    
    
    2009
    
    
    2010(In U.S. dollars)Financing activities:Proceeds from issuance of ordinary shares
    
    $
    
    
    
    $
    142,425,000
    
    
    $
    Proceeds from issuance of ordinary shares pursuant to share option plans
    
    
    10,711,301
    
    
    
    2,074,025
    
    
    
    3,588,209Proceeds from short-term loans
    
    
    370,423
    
    
    
    
    
    
    
    Repayment of short-term loans
    
    
    (30,411,521
    )
    
    
    
    
    
    
    Capital injection from minority shareholders
    
    
    213,706
    
    
    
    
    
    
    
    Proceeds from partial disposal of subsidiaries
    
    
    
    
    
    
    
    
    
    
    10,980,282Share repurchase
    
    
    (47,500,211
    )
    
    
    
    
    
    
    (237,168,910
    )Net cash provided by (used) in financing activities
    
    $
    (66,616,302
    )
    
    $
    144,499,025
    
    
    $
    (222,600,419
    )Effect of exchange rate changes
    
    
    16,469,125
    
    
    
    (1,730,212
    )
    
    
    14,296,777Net increase (decrease) in cash and cash equivalents
    
    $
    (27,500,877
    )
    
    $
    145,243,868
    
    
    $
    (113,683,779
    )Cash and cash equivalents, beginning of year
    
    
    450,416,381
    
    
    
    142,434,073
    
    
    
    568,159,372Add/(less): cash and cash equivalents in assets held-for-sale
    
    
    (280,481,431
    )
    
    
    280,481,431
    
    
    
    Cash and cash equivalents, end of year
    
    $
    142,434,073
    
    
    $
    568,159,372
    
    
    $
    454,475,593Supplemental disclosure of cash flow information
Income taxes paid
    
    $
    23,712,147
    
    
    $
    12,965,179
    
    
    $
    32,031,106Interest paid
    
    $
    
    
    
    $
    
    
    
    $
    SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIESNon-cash investing activities:Acquisition of subsidiaries:Value of ordinary shares issued
    
    $
    72,427,338
    
    
    $
    
    
    
    $
    Accounts payable
    
    $
    60,501,181
    
    
    $
    20,326,014
    
    
    $
    4,920,493Liabilities recorded as a result of contingent consideration
    
    $
    13,510,310
    
    
    $
    
    
    
    $
    Non-cash financing activities:Payable for share repurchase
    
    $
    
    
    
    $
    
    
    
    $
    2,996,074Proceeds from partial disposal of subsidiaries offset against other payables
    
    $
    
    
    
    $
    
    
    
    $
    3,209,661
  F-9




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 (In U.S. dollars except share data and unless otherwise stated)
 1. Organization and Principal Activities
   2. Summary of Significant Accounting Policies
 (a) Basis of Presentation
  (b) Basis of Consolidation
  (c) Cash and Cash Equivalents
  (d) Use of Estimates
  (e) Investments
  F-10




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 (In U.S. dollars except share data and unless otherwise stated)
    (f) Investment in equity affiliates
  (g) Equipment, Net
  Media display equipment
    
    5 yearsComputers and office equipment
    
    5 yearsVehicles
    
    5 yearsLeasehold improvements
    
    lesser of the term of the lease or the estimated useful lives of the assets
  (h) Acquired Intangible Assets, net
  (i) Impairment of Long-Lived Assets
  F-11




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 (In U.S. dollars except share data and unless otherwise stated)
  (j) Impairment of Goodwill
  (k) Revenue Recognition
       (l) Operating Leases
  F-12




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 (In U.S. dollars except share data and unless otherwise stated)
 (m) Advertising Costs
  (n) Foreign Currency Translation
  (o) Income Taxes
   (p) Comprehensive Income (Loss)
  (q) Fair Value of Financial Instruments
   F-13




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 (In U.S. dollars except share data and unless otherwise stated)
     (r) Share-based Compensation
    For the years ended December 31,2008
    
    
    2009
    
    
    2010Cost of sales
    
    $
    1,469,847
    
    
    $
    1,504,092
    
    
    $
    976,822General and administrative
    
    
    22,890,581
    
    
    
    26,037,349
    
    
    
    40,272,194Selling and marketing
    
    
    15,814,828
    
    
    
    12,221,732
    
    
    
    4,342,602Net income (loss) from discontinued operations
    
    
    2,439,910
    
    
    
    26,739,961
    
    
    
    Total
    
    $
    42,615,166
    
    
    $
    66,503,134
    
    
    $
    45,591,618
 (s) Income (Loss) per Share
  F-14




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 (In U.S. dollars except share data and unless otherwise stated)
 (t) Non-controlling Interest
   For the years ended December 31,2008
    
    
    2009
    
    
    2010Net income (loss) attributable to Focus Media
    
    $
    (770,687,526
    )
    
    $
    (213,257,044
    )
    
    $
    184,273,477Transfers (to) from the non-controlling interest:Increase in Focus Medias additional paid-in capital due to partial disposal subsidiaries
    
    
    
    
    
    
    1,391,800
    
    
    
    3,817,579Net transfers (to) from non-controlling interest
    
    
    
    
    
    
    1,391,800
    
    
    
    3,817,579Change from net income attributable to Focus Media and transfers (to) from noncontrolling interest
    
    $
    (770,687,526
    )
    
    $
    (211,865,244
    )
    
    $
    188,091,056
 (u) Government grants
  (v) Recently Issued Accounting Standards
    F-15




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 (In U.S. dollars except share data and unless otherwise stated)
  3. Variable Interest Entities
   Transfer of Ownership When Permitted By Law
  Voting Arrangements
  Equity Pledge Agreements
  Loan Agreements
   F-16




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 (In U.S. dollars except share data and unless otherwise stated)
  As at December 31,2009
    
    
    2010Cash and cash equivalents
    
    $
    30,303,514
    
    
    $
    10,835,318Accounts receivable, net of allowance for doubtful accounts of $2,831,648 and $1,044,492 in 2009 and 2010, respectively
    
    
    3,325,186
    
    
    
    9,127,339Rental deposits
    
    
    2,350,506
    
    
    
    10,412,099Other current assets
    
    
    2,226,423
    
    
    
    2,363,218Total current assets
    
    $
    38,205,629
    
    
    $
    32,737,974Rental deposits
    
    
    606,662
    
    
    
    1,466,145Equipment, net
    
    
    1,863,087
    
    
    
    2,158,832Acquired intangible assets, net
    
    
    4,917,618
    
    
    
    3,523,586Goodwill
    
    
    395,414,397
    
    
    
    397,840,137Other long-term assets
    
    
    523,297
    
    
    
    1,079,410Total long-term assets
    
    $
    403,325,061
    
    
    $
    406,068,110Total assets
    
    $
    441,530,690
    
    
    $
    438,806,084Accounts payable
    
    
    4,410,602
    
    
    
    4,340,424Accrued expenses and other current liabilities
    
    
    7,234,408
    
    
    
    10,635,394Income taxes payable
    
    
    2,976,916
    
    
    
    2,914,969Deferred tax liabilities
    
    
    277,406
    
    
    
    1,820,531Total current liabilities
    
    
    14,899,332
    
    
    
    19,711,318Total long-term liabilities
    
    $
    1,406,095
    
    
    $
    710,252Total liabilities
    
    $
    16,305,427
    
    
    $
    20,421,570
 For the year ended December 31,2008
    
    
    2009
    
    
    2010Net revenues
    
    $
    16,975,524
    
    
    $
    12,837,242
    
    
    $
    21,491,910Gross profit (loss)
    
    
    (10,840,893
    )
    
    
    (11,114,534
    )
    
    
    (19,019,078
    )Net loss
    
    $
    (39,360,463
    )
    
    $
    (30,533,871
    )
    
    $
    (35,930,035
    )
 4. Acquisitions
 2009 acquisitions:
  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, 2008, 2009 AND 2010
 (In U.S. dollars except share data and unless otherwise stated)
 2010 acquisitions:
   5. Disposition
 2009 Disposition
   2010 Disposition
   Cash and cash equivalents
    
    $
    40,665,131Accounts receivable, net of allowance for doubtful accounts of $3,312,436
    
    
    59,394,176Other current assets
    
    
    8,942,748Total current assets
    
    
    109,002,055Acquired intangible assets, net
    
    
    12,003,843Goodwill
    
    
    4,272,498Other long-term assets
    
    
    2,903,049Total long-term assets
    
    
    19,179,390
 F-18




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 (In U.S. dollars except share data and unless otherwise stated)
 Total assets
    
    
    128,181,445Accounts payable
    
    
    49,745,765Accrued expenses and other current liabilities
    
    
    14,283,603Income taxes payable
    
    
    4,105,786Total current liabilities
    
    
    68,135,154Total long-term liabilities
    
    
    1,704,794Total liabilities
    
    
    69,839,948Noncontrolling interest
    
    
    15,992,898Accumulated
other comprehensive income
    
    
    4,729,725
 6. Fair Value Measurement
   7. Accounts Receivable, Net
  December 31,2009
    
    
    2010Billed receivable
    
    $
    120,340,073
    
    
    $
    83,892,036Unbilled receivable
    
    
    52,412,400
    
    
    
    73,436,707Total
    
    $
    172,752,473
    
    
    $
    157,328,743
   2009
    
    
    2010Balance at beginning of year
    
    $
    4,395,022
    
    
    $
    33,596,096Bad debt expenses
    
    
    29,076,504
    
    
    
    454,624
 F-19




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 (In U.S. dollars except share data and unless otherwise stated)
 2009
    
    
    2010Recoveries and (write-offs), net
    
    
    (6,047,299
    )
    
    
    (10,393,667
    )Reclassified from assets held-for-sale
    
    
    9,617,466
    
    
    
    Disposition of subsidiaries
    
    
    (3,425,810
    )
    
    
    (3,312,436
    )Effect of exchange rate changes
    
    
    (19,787
    )
    
    
    743,886Balance at end of year
    
    $
    33,596,096
    
    
    $
    21,088,503
 8. Equipment, Net
  December 31,2009
    
    
    2010Media display equipment
    
    $
    165,254,415
    
    
    $
    191,447,959Computers and office equipment
    
    
    9,887,787
    
    
    
    10,315,385Leasehold improvements
    
    
    1,558,213
    
    
    
    2,025,582Vehicles
    
    
    974,293
    
    
    
    1,245,472Total
    
    
    177,674,708
    
    
    
    205,034,398Less: accumulated depreciation and amortization
    
    
    (100,013,561
    )
    
    
    (136,147,602
    )Total
    
    $
    77,661,147
    
    
    $
    68,886,796
     9. Acquired Intangible Assets, Net
  December 31,2009
    
    
    2010Cost:Operation & broadcasting rights
    
    $
    11,115,667
    
    
    $
    11,460,583Lease agreements
    
    
    51,712,154
    
    
    
    54,460,034Customer base
    
    
    24,730,269
    
    
    
    24,013,585Trademark
    
    
    9,608,110
    
    
    
    1,145,303Acquired technology
    
    
    1,130,605
    
    
    
    Others
    
    
    11,421,391
    
    
    
    4,559,702Total
    
    
    109,718,196
    
    
    
    95,639,207
 F-20




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 (In U.S. dollars except share data and unless otherwise stated)
 December 31,2009
    
    
    2010Accumulated amortization:Operation & broadcasting rights
    
    
    (3,552,675
    )
    
    
    (6,166,809
    )Lease agreements
    
    
    (31,854,695
    )
    
    
    (43,298,789
    )Customer base
    
    
    (12,708,565
    )
    
    
    (16,338,269
    )Trademark
    
    
    (1,110,834
    )
    
    
    (1,145,303
    )Acquired technology
    
    
    (602,990
    )
    
    
    Others
    
    
    (8,111,222
    )
    
    
    (4,527,994
    )Total
    
    
    (57,940,981
    )
    
    
    (71,477,164
    )Intangible assets, net
    
    $
    51,777,215
    
    
    $
    24,162,043
  For the years ended December 31,2008
    
    
    2009
    
    
    2010Cost of revenues
    
    $
    20,085,255
    
    
    $
    14,282,389
    
    
    $
    12,734,069Selling and marketing
    
    
    7,556,965
    
    
    
    4,664,850
    
    
    
    4,106,231Gain or (loss) from discontinued operations
    
    
    12,446,394
    
    
    
    8,331,505
    
    
    
    765,859Total
    
    $
    40,088,614
    
    
    $
    27,278,744
    
    
    $
    17,606,159
    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, 2008, 2009 AND 2010
 (In U.S. dollars except share data and unless otherwise stated)
  10. Goodwill
  Movie theaterPoster
    
    
    
    
    
    
    & traditionalLCD display
    
    
    frame
    
    
    Internet
    
    
    outdoornetwork
    
    
    network
    
    
    advertising
    
    
    billboards
    
    
    TotalBalance as of January 1, 2009
    
    $
    
    
    
    $
    
    
    
    $
    30,699,525
    
    
    $
    
    
    
    $
    30,699,525Goodwill acquired during the year
    
    
    1,100,903
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,100,903Goodwill recorded as a result of contingent consideration resolved
    
    
    1,992,683
    
    
    
    30,396,719
    
    
    
    16,208,898
    
    
    
    33,249,508
    
    
    
    81,847,808Modification of original purchase price allocation
    
    
    
    
    
    
    
    
    
    
    193,266
    
    
    
    
    
    
    
    193,266Goodwill impairment
    
    
    
    
    
    
    (30,396,719
    )
    
    
    (23,961,974
    )
    
    
    (33,249,508
    )
    
    
    (87,608,201
    )Reclassified from assets held for sale
    
    
    402,742,395
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    402,742,395Disposal of subsidiaries
    
    
    
    
    
    
    
    
    
    
    (18,867,217
    )
    
    
    
    
    
    
    (18,867,217
    )Translation adjustments
    
    
    260,212
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    260,212Balance as of December 31, 2009
    
    
    406,096,193
    
    
    
    
    
    
    
    4,272,498
    
    
    
    
    
    
    
    410,368,691Goodwill acquired during the year
    
    
    
    
    
    
    3,958,444
    
    
    
    
    
    
    
    
    
    
    
    3,958,444Goodwill recorded as a result of contingent consideration resolved
    
    
    5,038,676
    
    
    
    15,551,019
    
    
    
    
    
    
    
    
    
    
    
    20,589,695Goodwill impairment
    
    
    
    
    
    
    (5,736,134
    )
    
    
    
    
    
    
    
    
    
    
    (5,736,134
    )Disposal of subsidiaries
    
    
    
    
    
    
    
    
    
    
    (4,272,498
    )
    
    
    
    
    
    
    (4,272,498
    )Translation adjustments
    
    
    399,355
    
    
    
    27,079
    
    
    
    
    
    
    
    
    
    
    
    426,434Balance as of December 31, 2010
    
    $
    411,534,224
    
    
    $
    13,800,408
    
    
    $
    
    
    
    $
    
    
    
    $
    425,334,632
  Movie theaterPoster
    
    
    
    
    
    
    & traditionalLCD display
    
    
    frame
    
    
    Internet
    
    
    outdoornetwork
    
    
    network
    
    
    advertising
    
    
    billboards
    
    
    TotalGoodwill, gross
    
    $
    406,158,216
    
    
    
    402,660,409
    
    
    $
    245,368,810
    
    
    $
    24,836,040
    
    
    $
    1,079,023,475Accumulated impairment losses
    
    
    (62,023
    )
    
    
    (402,660,409
    )
    
    
    (241,096,312
    )
    
    
    (24,836,040
    )
    
    
    (668,654,784
    )Balance as of December 31, 2009
    
    $
    406,096,193
    
    
    $
    
    
    
    $
    4,272,498
    
    
    $
    
    
    
    $
    410,368,691
 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, 2008, 2009 AND 2010
 (In U.S. dollars except share data and unless otherwise stated)
 Movie theaterPoster
    
    
    
    
    
    
    & traditionalLCD display
    
    
    frame
    
    
    Internet
    
    
    outdoornetwork
    
    
    network
    
    
    advertising
    
    
    billboards
    
    
    TotalGoodwill, gross
    
    $
    411,596,247
    
    
    
    422,196,951
    
    
    $
    
    
    
    $
    24,836,040
    
    
    $
    858,629,238Accumulated 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
  Goodwill impairment in 2009
     F-23




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars except share data and unless otherwise stated)
     Goodwill impairment in 2010
   11. Accrued Expenses and Other Current Liabilities
  December 31,2009
    
    
    2010Accrued sales commissions and rebate payable
    
    $
    18,690,726
    
    
    $
    45,623,926Other accrued expenses
    
    
    3,348,885
    
    
    
    4,152,385Other taxes payable
    
    
    16,514,074
    
    
    
    25,587,764Advance from customers
    
    
    27,807,586
    
    
    
    26,292,405Accrued employee payroll and welfare
    
    
    6,047,975
    
    
    
    5,492,293Payables related to acquisitions
    
    
    20,326,014
    
    
    
    4,920,493Withholding individual PRC income tax
    
    
    1,115,360
    
    
    
    1,155,464Accrual for litigation (see Note 17)
    
    
    5,500,000
    
    
    
    Payables related to share repurchase
    
    
    
    
    
    
    2,996,074Others
    
    
    2,519,550
    
    
    
    5,542,718Total
    
    $
    101,870,170
    
    
    $
    121,763,522
 F-24




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars except share data and unless otherwise stated)
 12. Other operating (income) expenses, net
  For the years ended December 31,2008
    
    
    2009
    
    
    2010Loss on disposal of subsidiaries
    
    $
    192,529,635
    
    
    $
    7,411,454
    
    
    $
    1,544,922Government subsidy income
    
    
    (13,542,415
    )
    
    
    (11,122,063
    )
    
    
    (14,706,120
    )Loss on disposal of equipment
    
    
    2,302,294
    
    
    
    
    
    
    
    248,785Impairment of other long lived assets
    
    
    
    
    
    
    14,714,157
    
    
    
    Penalty for termination of contract
    
    
    
    
    
    
    1,872,155
    
    
    
    Other income
    
    
    (5,307,652
    )
    
    
    (5,199,764
    )
    
    
    (1,771,691
    )Other expenses
    
    
    7,131,445
    
    
    
    5,435,104
    
    
    
    540,159Total
    
    $
    183,113,307
    
    
    $
    13,111,043
    
    
    $
    (14,143,945
    )
 13. Share-based Compensation
 Share-based Compensation Plans for the Group
      F-25




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars except share data and unless otherwise stated)
  Options granted to employees:
    
    2008
    
    
    2009Risk-free rate of return
    
    
    1.59%-3.2
    %
    
    
    0.87
    %Weighted average expected option life
    
    
    2.5 to 4 years
    
    
    2.5 yearsVolatility rate
    
    
    53%-68.88
    %
    
    
    88.32
    %Dividend yield
    
    
    0
    %
    
    
    0
    %
   RemainingweightedWeighted
    
    
    Weighted
    
    
    average
    
    
    AggregateNumber
    
    
    average
    
    
    contract term
    
    
    intrinsicof shares
    
    
    exercise price
    
    
    (in years)
    
    
    valueOptions outstanding at January 1, 2010
    
    
    15,642,620
    
    
    $
    4.75Forfeited
    
    
    (3,261,095
    )
    
    $
    5.28Exercised
    
    
    (419,480
    )
    
    $
    1.24Options outstanding at December 31, 2010
    
    
    11,962,045
    
    
    $
    4.33
    
    
    
    5.31
    
    
    $
    9,440,167Options exercisable at December 31, 2010
    
    
    11,962,045
    
    
    $
    4.33
    
    
    
    5.31
    
    
    $
    9,440,167Options vested or expected to vest at
December 31, 2010
    
    
    11,962,045
    
    
    $
    4.33
    
    
    
    5.31
    
    
    $
    9,440,167
  Weighted
    
    
    WeightedNumber
    
    
    Averageof shares
    
    
    Fair valueRestricted shares unvested at January 1, 2010
    
    
    36,448,980
    
    
    $
    2.24Granted
    
    
    15,000,000
    
    
    $
    4.24Vested
    
    
    (12,491,055
    )
    
    $
    2.24Restricted shares unvested at December 31, 2010
    
    
    38,957,925
    
    
    $
    3.00
   Private equity placement with JJ Media Investment Holding
 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, 2008, 2009 AND 2010
(In U.S. dollars except share data and unless otherwise stated)
  14. Income Taxes
 Cayman Islands
  British Virgin Islands
  Hong Kong
  PRC
    F-27




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars except share data and unless otherwise stated)
     Balance at January 1, 2008
    
    $
    8,232,713Settlements
    
    
    (3,080,251
    )Gross increases-interest accrual
    
    
    101,926Transfer to liabilities held for sale
    
    
    (4,723,905
    )Translation adjustment
    
    
    25,286Balance at December 31, 2008
    
    $
    555,769Transfer from liabilities held for sale
    
    
    4,723,905Settlements
    
    
    (592,525
    )Disposition of subsidiaries
    
    
    (342,250
    )Translation adjustment
    
    
    167,054Balance at December 31, 2009
    
    $
    4,511,953Translation adjustment
    
    
    140,005Balance at December 31, 2010
    
    $
    4,651,958
  Composition of income tax expense
  For the years ended December 31,2008
    
    
    2009
    
    
    2010Current income tax expense
    
    $
    32,133,257
    
    
    $
    8,390,910
    
    
    $
    21,970,299Deferred income tax expense (benefit)
    
    
    (6,855,130
    )
    
    
    5,389,155
    
    
    
    365,280$
    25,278,127
    
    
    $
    13,780,065
    
    
    $
    22,335,579
 F-28




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars except share data and unless otherwise stated)
  For the years ended December 31,2008
    
    
    2009
    
    
    2010Statutory rate
    
    
    25.00
    %
    
    
    25.00
    %
    
    
    25.00
    %Effect of different tax rate of group entities operation in other
jurisdiction
    
    
    (3.17
    %)
    
    
    (16.73
    %)
    
    
    10.90
    %Effect of different tax rate applicable to the subsidiaries and VIEs
    
    
    0.96
    %
    
    
    4.49
    %
    
    
    (4.75
    %)Effect of tax holiday
    
    
    3.30
    %
    
    
    3.46
    %
    
    
    (13.22
    %)Effect of non-deductible expenses
    
    
    (33.38
    %)
    
    
    (36.07
    %)
    
    
    11.04
    %Change in valuation allowance
    
    
    1.47
    %
    
    
    2.82
    %
    
    
    (11.18
    %)Additional tax paid due to conclusion of tax audit
    
    
    (0.51
    %)
    
    
    
    
    
    
    Others
    
    
    0.65
    %
    
    
    0.70
    %
    
    
    Effective tax rate
    
    
    (5.68
    %)
    
    
    (16.33
    %)
    
    
    17.79
    %
  December 31,2008
    
    
    2009
    
    
    2010Tax holiday effect
    
    $
    16,460,124
    
    
    $
    3,142,974
    
    
    $
    16,593,568Net income from continuing operations per share effect  basic
    
    $
    0.03
    
    
    $
    0.01
    
    
    $
    0.02Net income from continuing operations per share effect  diluted
    
    $
    0.03
    
    
    $
    0.01
    
    
    $
    0.02
  December 31,2009
    
    
    2010Deferred tax assets:Net operating loss carry forwards
    
    $
    11,710,958
    
    
    $
    4,677,149Accrued expenses temporarily non-deductible
    
    
    6,181,962
    
    
    
    14,078,803Bad debt provision
    
    
    2,220,947
    
    
    
    3,297,574Difference in fixed assets basis
    
    
    11,056,535
    
    
    
    8,379,571Others
    
    
    1,152,928
    
    
    
    4,915,559Total Deferred Tax Assets
    
    
    32,323,330
    
    
    
    35,348,656Valuation allowance on deferred tax assets
    
    
    (18,278,239
    )
    
    
    (5,183,171
    )Net deferred tax assets
    
    $
    14,045,091
    
    
    $
    30,165,485Classified as:Current deferred tax assets
    
    
    3,651,221
    
    
    
    22,979,021Non-current deferred tax assets
    
    
    10,393,870
    
    
    
    7,186,464Deferred tax liabilities:Difference in intangible asset basis
    
    
    2,839,571
    
    
    
    1,361,645Unbilled revenue
    
    
    10,881,604
    
    
    
    20,651,695Interest or subsidy income receivables
    
    
    2,583,580
    
    
    
    8,666,757Others
    
    
    1,207,705
    
    
    
    2,945,307Total deferred tax liabilities
    
    $
    17,512,460
    
    
    $
    33,625,404Classified as:Current deferred tax liabilities
    
    
    12,077,282
    
    
    
    23,627,893Non-current deferred tax liabilities
    
    
    5,435,178
    
    
    
    9,997,511
 F-29




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars except share data and unless otherwise stated)
    15. Net Income (loss) per Share
  Years ended December 31,2008
    
    
    2009
    
    
    2010Income (numerator):Net income (loss) from continuing operations
    
    $
    (470,167,005
    )
    
    $
    (98,120,236
    )
    
    $
    103,186,528Net income (loss) from discontinued operations
    
    
    (300,670,962
    )
    
    
    (111,612,420
    )
    
    
    83,077,575Income attributable to Focus Media Holding Limited Shareholders
    
    $
    (770,687,526
    )
    
    $
    (213,257,044
    )
    
    $
    184,273,477Shares (denominator):Weighted average ordinary shares outstanding used in computing
basic income per share
    
    
    643,989,522
    
    
    
    651,654,345
    
    
    
    707,846,570Plus incremental weighted average ordinary shares from assumed
conversions of stock options and restricted shares using
treasury stock method
    
    
    
    
    
    
    
    
    
    
    23,811,695Weighted average ordinary shares outstanding used in computing
diluted income per share
    
    
    643,989,522
    
    
    
    651,654,345
    
    
    
    731,658,265Income (loss) per share from continuing operations  basic
    
    $
    (0.73
    )
    
    $
    (0.15
    )
    
    $
    0.15Income (loss) per share from continuing operations  diluted
    
    $
    (0.73
    )
    
    $
    (0.15
    )
    
    $
    0.14Income (loss) per share from discontinued operations  basic
    
    $
    (0.47
    )
    
    $
    (0.17
    )
    
    $
    0.12Income (loss) per share from discontinued operations  diluted
    
    $
    (0.47
    )
    
    $
    (0.17
    )
    
    $
    0.11Net income per share  basic
    
    $
    (1.20
    )
    
    $
    (0.33
    )
    
    $
    0.26Net income per share  diluted
    
    $
    (1.20
    )
    
    $
    (0.33
    )
    
    $
    0.25
  F-30




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars except share data and unless otherwise stated)
 16. Mainland China Contribution Plan and Profit Appropriation
    17. Commitments and Contingencies
 {a}Leases commitments
   For the year endedDecember 31,2011
    
    $
    95,118,1202012
    
    
    37,208,7002013
    
    
    7,675,4972014
    
    
    2,831,2272015 and thereafter
    
    
    431,061Total
    
    $
    143,264,605
 {b} Legal proceedings
  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.
 F-31




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars except share data and unless otherwise stated)
 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.
   18. Segment Information
    F-32




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars except share data and unless otherwise stated)
 2010:
 Movie theaterandPoster
    
    
    traditionalframe
    
    
    outdoorLCD
    
    
    In-store
    
    
    network
    
    
    billboards
    
    
    Eliminations
    
    
    TotalNet revenue 
external
    
    $
    297,641,916
    
    
    $
    37,777,154
    
    
    $
    121,893,079
    
    
    $
    59,002,548
    
    
    $
    
    
    
    $
    516,314,697Net revenue 
intersegment
    
    
    6,521,946
    
    
    
    2,583,932
    
    
    
    9,534,713
    
    
    
    4,590,394
    
    
    
    (23,230,985
    )
    
    
    Total net revenues
    
    
    304,163,862
    
    
    
    40,361,086
    
    
    
    131,427,792
    
    
    
    63,592,942
    
    
    
    (23,230,985
    )
    
    
    516,314,697Total cost of
revenue
    
    
    83,244,151
    
    
    
    23,432,008
    
    
    
    88,328,571
    
    
    
    49,916,289
    
    
    
    (23,230,985
    )
    
    
    221,690,034Gross profit
    
    $
    220,919,711
    
    
    $
    16,929,078
    
    
    $
    43,099,221
    
    
    $
    13,676,653
    
    
    $
    
    
    
    $
    294,624,663
 F-33




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars except share data and unless otherwise stated)
 2009:
 Movie theaterandPoster
    
    
    traditionalframe
    
    
    outdoorLCD
    
    
    In-store
    
    
    network
    
    
    billboards
    
    
    Eliminations
    
    
    TotalNet revenue 
external
    
    $
    208,799,072
    
    
    $
    30,346,185
    
    
    $
    98,962,486
    
    
    $
    59,056,779
    
    
    $
    
    
    
    $
    397,164,522Net 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
    
    
    
    60,113,522
    
    
    
    (31,957,996
    )
    
    
    397,164,522Total cost of
revenue
    
    
    99,191,242
    
    
    
    24,169,858
    
    
    
    102,728,558
    
    
    
    46,941,541
    
    
    
    (31,957,996
    )
    
    
    241,073,203Gross profit
    
    $
    135,991,128
    
    
    $
    9,700,146
    
    
    $
    (2,771,936
    )
    
    $
    13,171,981
    
    
    $
    
    
    
    $
    156,091,319
 2008:
 Movie theaterandPoster
    
    
    traditionalframe
    
    
    outdoorLCD
    
    
    In-store
    
    
    network
    
    
    billboards
    
    
    Eliminations
    
    
    TotalNet revenue 
external
    
    $
    244,539,461
    
    
    $
    60,719,416
    
    
    $
    146,750,583
    
    
    $
    77,177,914
    
    
    $
    
    
    
    $
    529,187,374Net revenue 
intersegment
    
    
    78,267,843
    
    
    
    
    
    
    
    2,812,586
    
    
    
    
    
    
    
    (81,080,429
    )
    
    
    Total net revenues
    
    
    322,807,304
    
    
    
    60,719,416
    
    
    
    149,563,169
    
    
    
    77,177,914
    
    
    
    (81,080,429
    )
    
    
    529,187,374Total cost of
revenue
    
    
    139,315,984
    
    
    
    61,833,679
    
    
    
    80,804,333
    
    
    
    58,169,933
    
    
    
    (81,080,429
    )
    
    
    259,043,500Gross profit
    
    $
    183,491,320
    
    
    $
    (1,114,263
    )
    
    $
    68,758,836
    
    
    $
    19,007,981
    
    
    $
    
    
    
    $
    270,143,874
 Major Customers
  Major Service lines
  For the years ended December 312008
    
    
    2009
    
    
    2010% of total
    
    
    
    
    
    
    % of total
    
    
    
    
    
    
    % of total$
    
    
    revenue
    
    
    $
    
    
    revenue
    
    
    $
    
    
    revenue(in thousand of U.S. dollars, except percentages)Net revenueLCD display network
    
    $
    240,917,581
    
    
    
    45.5
    %
    
    $
    208,498,537
    
    
    
    52.5
    %
    
    $
    297,402,503
    
    
    
    57.6
    %In-store network
    
    
    60,719,416
    
    
    
    11.5
    %
    
    
    30,346,185
    
    
    
    7.6
    %
    
    
    37,777,154
    
    
    
    7.3
    %Poster frame network
    
    
    146,750,583
    
    
    
    27.7
    %
    
    
    98,962,486
    
    
    
    24.9
    %
    
    
    121,893,079
    
    
    
    23.6
    %Movie theater &
Traditional outdoor
billboards
    
    
    77,177,914
    
    
    
    14.6
    %
    
    
    59,056,779
    
    
    
    14.9
    %
    
    
    59,002,548
    
    
    
    11.4
    %Advertising service revenue
    
    
    525,565,494
    
    
    
    99.3
    %
    
    
    396,863,987
    
    
    
    99.9
    %
    
    
    516,075,284
    
    
    
    99.9
    %Equipment revenue
    
    
    1,760,697
    
    
    
    0.3
    %
    
    
    300,535
    
    
    
    0.1
    %
    
    
    239,413
    
    
    
    0.1
    %Franchise revenue
    
    
    1,861,183
    
    
    
    0.4
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total net revenue
    
    $
    529,187,374
    
    
    
    100.0
    %
    
    $
    397,164,522
    
    
    
    100.0
    %
    
    $
    516,314,697
    
    
    
    100.0
    %
 F-34




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars except share data and unless otherwise stated)
 19. Related Party Transactions
  Year ended December 31,Name of related parties
    
    Director interested
    
    2008
    
    
    2009
    
    
    2010Shanghai Everease Advertising &
    
    Jason Nanchun Jiang
    
    $
    (132,116
    )
    
    $
    
    
    
    $
    Communication Ltd.CTV Golden Bridge International Media Co., Ltd.
    
    Daqing Qi
    
    
    
    
    
    
    277,749
    
    
    
    Sina.com
    
    Charles Cao
    
    
    1,637,297
    
    
    
    548,988
    
    
    
    1,034,741Sohu.com
    
    Daqing Qi
    
    
    2,002,839
    
    
    
    438,536
    
    
    
    738,947China Vanke Co., Ltd.
    
    Daqing Qi
    
    
    909,775
    
    
    
    459,376
    
    
    
    465,998Home-Inn
    
    Neil Nanpeng Shen
    
    
    256,690
    
    
    
    89,076
    
    
    
    Ctrip.com
    
    Neil Nanpeng Shen
    
    
    69,863
    
    
    
    486,263
    
    
    
    79,60151.com
    
    Neil Nanpeng Shen
    
    
    718
    
    
    
    
    
    
    
    22,993Qihoo.com
    
    Neil Nanpeng Shen
    
    
    48,385
    
    
    
    38,008
    
    
    
    17,461UUSEE
    
    Neil Nanpeng Shen
    
    
    78,572
    
    
    
    
    
    
    
    Aikong.com
    
    Jason Nanchun Jiang
    
    
    56,190
    
    
    
    
    
    
    
    Giant Interactive Group Inc.
    
    Jason Nanchun Jiang
    
    
    4,153,948
    
    
    
    368,242
    
    
    
    385,720Beijing Huayi Brothers
    
    Jason Nanchun Jiang
    
    
    43,561
    
    
    
    
    
    
    
    StormNet Information Technology
    
    David Zhang
    
    
    
    
    
    
    
    
    
    
    2,569Tea Care Group Ltd.
    
    Fuming Zhuo
    
    
    
    
    
    
    292,606
    
    
    
    697,071Yadu Huang Ke Technology Co., Ltd.
    
    Fuming Zhuo
    
    
    87,638
    
    
    
    
    
    
    
    Focus Technology Co., Ltd.
    
    Fuming Zhuo
    
    
    
    
    
    
    43,200
    
    
    
    Total
    
    
    
    $
    9,213,360
    
    
    $
    3,042,044
    
    
    $
    3,445,101
  Year ended December 31,Name of related parties
    
    Director interested
    
    2008
    
    
    2009
    
    
    2010Sina.com
    
    Charles Cao
    
    $
    50,294,367
    
    
    $
    28,635,023
    
    
    $
    11,655,724Sohu.com
    
    Daqing Qi
    
    
    39,061,219
    
    
    
    17,208,874
    
    
    
    8,047,723Bona Film Group Ltd.
    
    Daqing Qi
    
    
    
    
    
    
    
    
    
    
    359,287Ctrip.com
    
    Neil Nanpeng Shen
    
    
    343,546
    
    
    
    146,356
    
    
    
    130,25151.com
    
    Neil Nanpeng Shen
    
    
    887,603
    
    
    
    195,376
    
    
    
    7,968Qihoo.com
    
    Neil Nanpeng Shen
    
    
    847,021
    
    
    
    109,564
    
    
    
    UUSEE
    
    Neil Nanpeng Shen
    
    
    306,899
    
    
    
    
    
    
    
    StormNet Information Technology
    
    David Zhang
    
    
    
    
    
    
    21,928
    
    
    
    27,266Total
    
    
    
    $
    91,740,655
    
    
    $
    46,317,121
    
    
    $
    20,228,219
  December 31Name of related parties
    
    Note
    
    Director interested
    
    2009
    
    
    2010Sina.com
    
    (a)
    
    Charles Cao
    
    
    570,113
    
    
    
    89,897Sohu.com
    
    (a)
    
    Daqing Qi
    
    
    2,685,730
    
    
    
    Bona Film Group Ltd.
    
    (a)
    
    Daqing Qi
    
    
    
    
    
    
    21,139Ctrip.com
    
    (a)
    
    Neil Nanpeng Shen
    
    
    (293
    )
    
    
    Tea Care Group Ltd.
    
    (a)
    
    Fuming Zhuo
    
    
    21,475
    
    
    
    345,297China Vanke Co., Ltd.
    
    (a)
    
    Daqing Qi
    
    
    7,379
    
    
    
    13,041Total
    
    
    
    
    
    $
    3,284,404
    
    
    $
    469,374
 F-35




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(In U.S. dollars except share data and unless otherwise stated)
 
   December 31,Name of related parties
    
    Note
    
    Director interested
    
    2009
    
    
    2010Sina.com
    
    (b)
    
    Charles Cao
    
    $
    2,126,612
    
    
    $
    1,811,950China Vanke Co., Ltd.
    
    (b)
    
    Daqing Qi
    
    
    
    
    
    
    28,68951.com
    
    (b)
    
    Neil Nanpeng Shen
    
    
    32,871
    
    
    
    StormNet Information Technology
    
    (b)
    
    David Zhang
    
    
    54,376
    
    
    
    Qihoo.com
    
    (b)
    
    Neil Nanpeng Shen
    
    
    158
    
    
    
    Arcom
    
    (b)
    
    David Zhang
    
    
    
    
    
    
    7,550Ctrip.com
    
    (b)
    
    Neil Nanpeng Shen
    
    
    16,877
    
    
    
    Total
    
    
    
    
    
    $
    2,230,894
    
    
    $
    1,848,189
 
  Other related party transactions
   20. Subsequent Events
 {a} Investment in VisionChina Media Inc. (VisionChina Media)
    {b} Partial disposal of equity interest in Shanghai Hua Guang Chuanzhi OOH Ltd (OOH)
  F-36