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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Amendment No. 4
to
 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, 2009.
 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)
  725,278,005 Ordinary Shares
  o þ
  o þ
   þ o
 o o
  Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o  þ
 o
  o þ
  o þ
 (APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS.)
  o o




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##### 



FOCUS MEDIA HOLDING LIMITED
 FORM 20-F ANNUAL REPORT
FISCAL YEAR ENDED DECEMBER 31, 2009
  
 Table of Contents
 Table of Contents
 PageSUPPLEMENTAL INFORMATION
    
    
    1FORWARD-LOOKING STATEMENTS IN THIS ANNUAL REPORT MAY NOT BE REALIZED
    
    
    2PART I
    
    
    2ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
    
    
    2ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    3ITEM 3. KEY INFORMATION
    
    
    3ITEM 4. INFORMATION ON THE COMPANY
    
    
    38ITEM 4A. UNRESOLVED STAFF COMMENTS
    
    
    56ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    56ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    91ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    98ITEM 9. THE OFFER AND LISTING
    
    
    105ITEM 10. ADDITIONAL INFORMATION
    
    
    106ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    116ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    116PART II
    
    
    117ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    117ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    117ITEM 15. CONTROLS AND PROCEDURES
    
    
    118ITEM 16.
    
    
    121ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    121ITEM 16B. CODE OF ETHICS
    
    
    121ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    121ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    121ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
    
    
    122ITEM 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
    
    
    122ITEM 16G. CORPORATE GOVERNANCE
    
    
    122PART III
    
    
    123ITEM 17. FINANCIAL STATEMENTS
    
    
    123ITEM 18. FINANCIAL STATEMENTS
    
    
    123ITEM 19. EXHIBITSEX-12.1EX-12.2EX-13.1EX-13.2EX-23.1EX-23.2EX-23.3
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SUPPLEMENTAL INFORMATION
            BASIS OF PRESENTATION
    1




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##### Table of Contents



FORWARD-LOOKING STATEMENTS IN THIS ANNUAL REPORT
MAY NOT BE REALIZED
               
 PART I
 
 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  2




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ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3. KEY INFORMATION
 A. Selected Financial Data
       For the years ended December 312005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009(In thousands of U.S. Dollars, except share and per share data)Selected Consolidated Statements of Operations
Data:Net revenues: (1)LCD displays
    
    $
    61,435
    
    
    $
    141,472
    
    
    $
    183,528
    
    
    $
    239,505
    
    
    $
    208,499In-store
    
    
    5,469
    
    
    
    26,907
    
    
    
    27,444
    
    
    
    60,719
    
    
    
    30,346Poster frame
    
    
    
    
    
    
    40,904
    
    
    
    85,472
    
    
    
    146,751
    
    
    
    98,962Movie theatre and traditional outdoor billboard
    
    
    
    
    
    
    690
    
    
    
    37,305
    
    
    
    77,178
    
    
    
    59,057Internet advertising
    
    
    
    
    
    
    0
    
    
    
    75,364
    
    
    
    114,560
    
    
    
    107,871Other (2)
    
    
    1,325
    
    
    
    1,932
    
    
    
    1,115
    
    
    
    3,622
    
    
    
    300Total net revenues
    
    
    68,229
    
    
    
    211,905
    
    
    
    410,228
    
    
    
    642,335
    
    
    
    505,035Cost of revenues:LCD displays
    
    
    18,325
    
    
    
    48,128
    
    
    
    51,850
    
    
    
    77,866
    
    
    
    75,467
 3




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For the years ended December 312005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009(In thousands of U.S. Dollars, except share and per share data)In-store
    
    
    7,423
    
    
    
    18,106
    
    
    
    23,502
    
    
    
    61,834
    
    
    
    24,170Movie theatre and traditional outdoor billboard
    
    
    
    
    
    
    760
    
    
    
    28,507
    
    
    
    56,944
    
    
    
    45,085Internet advertising
    
    
    
    
    
    
    
    
    
    
    51,722
    
    
    
    89,052
    
    
    
    98,721Other (2)
    
    
    976
    
    
    
    765
    
    
    
    798
    
    
    
    1,723
    
    
    
    290Total cost of revenues
    
    
    26,724
    
    
    
    81,380
    
    
    
    184,465
    
    
    
    347,234
    
    
    
    339,134Gross profit
    
    
    41,505
    
    
    
    130,525
    
    
    
    225,763
    
    
    
    295,101
    
    
    
    165,901Operating expenses:General and administrative
    
    
    9,120
    
    
    
    25,723
    
    
    
    45,641
    
    
    
    90,194
    
    
    
    120,191Selling and marketing
    
    
    9,599
    
    
    
    25,762
    
    
    
    60,708
    
    
    
    95,400
    
    
    
    107,184Impairment loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    596,069
    
    
    
    86,303Other operating expenses (income), net
    
    
    161
    
    
    
    (1,051
    )
    
    
    (7,645
    )
    
    
    182,522
    
    
    
    10,848Total operating expenses
    
    
    18,880
    
    
    
    50,434
    
    
    
    98,704
    
    
    
    964,185
    
    
    
    324,526Income (loss) from operations
    
    
    22,625
    
    
    
    80,091
    
    
    
    127,059
    
    
    
    (669,084
    )
    
    
    (158,625
    )Interest income
    
    
    1,762
    
    
    
    4,255
    
    
    
    9,632
    
    
    
    7,528
    
    
    
    5,261Interest expense
    
    
    
    
    
    
    
    
    
    
    (25
    )
    
    
    
    
    
    
    Income (loss) from continuing operations before
income taxes
    
    
    24,387
    
    
    
    84,346
    
    
    
    136,666
    
    
    
    (661,556
    )
    
    
    (153,364
    )Income taxes
    
    
    694
    
    
    
    1,044
    
    
    
    8,326
    
    
    
    26,784
    
    
    
    9,855Net income (loss) from continuing operations
    
    
    23,693
    
    
    
    83,302
    
    
    
    128,340
    
    
    
    (688,340
    )
    
    
    (163,219
    )Net income (loss) from discontinued operations,
net of tax
    
    
    0
    
    
    
    0
    
    
    
    16,790
    
    
    
    (82,498
    )
    
    
    (46,514
    )Net income (loss)
    
    
    23,693
    
    
    
    83,302
    
    
    
    145,130
    
    
    
    (770,838
    )
    
    
    (209,733
    )Less: Net income (loss) attributable to
noncontrolling interests
    
    
    145
    
    
    
    105
    
    
    
    694
    
    
    
    (150
    )
    
    
    3,524Net income (loss) attributable to Focus Media
Holdings Limited Shareholders
    
    $
    23,548
    
    
    $
    83,197
    
    
    $
    144,436
    
    
    $
    (770,688
    )
    
    $
    (213,257
    )Income (loss) per share from continuing
operations  basic
    
    $
    0.09
    
    
    $
    0.16
    
    
    $
    0.22
    
    
    $
    (1.07
    )
    
    $
    (0.25
    )Income (loss) per share from continuing
operations  diluted
    
    $
    0.06
    
    
    $
    0.16
    
    
    $
    0.21
    
    
    $
    (1.07
    )
    
    $
    (0.25
    )Income (loss) per share from discontinued
operations  basic
    
    $
    
    
    
    $
    
    
    
    $
    0.02
    
    
    $
    (0.13
    )
    
    $
    (0.07
    )Income (loss) per share from discontinued
operations  diluted
    
    $
    
    
    
    $
    
    
    
    $
    0.03
    
    
    $
    (0.13
    )
    
    $
    (0.07
    )Income (loss) per share  basic
    
    $
    0.09
    
    
    $
    0.16
    
    
    $
    0.24
    
    
    $
    (1.20
    )
    
    $
    (0.33
    )Income (loss) per share  diluted
    
    $
    0.06
    
    
    $
    0.16
    
    
    $
    0.24
    
    
    $
    (1.20
    )
    
    $
    (0.33
    )Shares used in calculating basic income (loss)
per share
    
    
    252,128,545
    
    
    
    505,411,079
    
    
    
    590,387,396
    
    
    
    643,989,522
    
    
    
    651,654,345Shares used in calculating diluted income (loss)
per share
    
    
    365,938,094
    
    
    
    521,536,381
    
    
    
    608,326,450
    
    
    
    643,989,522
    
    
    
    651,654,345
 As of December 312005
    
    2006
    
    2007
    
    2008
    
    2009(In thousands of U.S. Dollars)Consolidated Balance Sheet Data:Cash and cash equivalents
    
    $
    36,653
    
    
    $
    164,611
    
    
    $
    450,416
    
    
    $
    142,434
    
    
    $
    568,159Other current assets(3)
    
    
    104,988
    
    
    
    78,712
    
    
    
    431,043
    
    
    
    665,137
    
    
    
    269,279Non-current assets(4)
    
    
    70,713
    
    
    
    862,919
    
    
    
    1,258,079
    
    
    
    724,723
    
    
    
    556,005Total assets
    
    
    212,354
    
    
    
    1,106,242
    
    
    
    2,139,538
    
    
    
    1,532,294
    
    
    
    1,393,443Total current liabilities
    
    
    20,694
    
    
    
    51,837
    
    
    
    276,287
    
    
    
    318,864
    
    
    
    197,056Total non-current liabilities
    
    
    
    
    
    
    3,303
    
    
    
    6,394
    
    
    
    13,540
    
    
    
    5,435Total liabilities
    
    
    20,694
    
    
    
    55,140
    
    
    
    282,681
    
    
    
    332,404
    
    
    
    202,491Ordinary shares ($0.00005 par value;
19,800,000,000 shares authorized in 2007,
2008 and 2009; 378,306,000, 534,896,873,
640,230,852, 646,081,710 and 725,278,005
shares issued and outstanding in 2005, 2006,
2007, 2008 and 2009, respectively)
    
    
    19
    
    
    
    27
    
    
    
    32
    
    
    
    32
    
    
    
    36Other shareholders equity
    
    
    191,396
    
    
    
    1,050,717
    
    
    
    1,854,912
    
    
    
    1,197,752
    
    
    
    1,189,088Total Focus Media Holdings Limited
shareholders equity
    
    
    191,415
    
    
    
    1,050,744
    
    
    
    1,854,944
    
    
    
    1,197,784
    
    
    
    1,189,124Noncontrolling interests
    
    
    245
    
    
    
    358
    
    
    
    1,913
    
    
    
    2,106
    
    
    
    1,828Total equity
    
    
    191,660
    
    
    
    1,051,102
    
    
    
    1,856,857
    
    
    
    1,199,890
    
    
    
    1,190,952
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As of December 312005
    
    2006
    
    2007
    
    2008
    
    2009(In thousands of U.S. Dollars)Selected Operating Data:(5)Number of displays in our commercial
location network:Our direct cities
    
    
    45,049
    
    
    
    80,263
    
    
    
    107,533
    
    
    
    122,597
    
    
    
    125,595Our regional distributors(6)
    
    
    3,177
    
    
    
    5,197
    
    
    
    4,765
    
    
    
    5,436
    
    
    
    5,411Total
    
    
    48,226
    
    
    
    85,460
    
    
    
    112,298
    
    
    
    128,033
    
    
    
    131,006Number of displays in our in-store network(7)
    
    
    27,849
    
    
    
    38,742
    
    
    
    49,452
    
    
    
    42,824
    
    
    
    44,517Number of stores in our in-store network(7)
    
    
    4,130
    
    
    
    3,898
    
    
    
    4,063
    
    
    
    3,275
    
    
    
    3,097Number of installed frames in our poster
frame network(8)
    
    
    0
    
    
    
    99,784
    
    
    
    190,468
    
    
    
    324,364
    
    
    
    261,076
 
 (1)
    
    Advertising service revenue is presented net of business tax. Business tax on advertising
service revenue from our LCD display network amounted to $6.0 million, $14.4 million, $20.3
million, $24.7 million and $20.6 million in 2005, 2006, 2007, 2008 and 2009, respectively.
Business tax on advertising service revenue from our in-store network amounted to $0.5
million, $2.8 million, 2.8 million, $6.3 million and $3.2 million for 2005, 2006, 2007, 2008
and 2009, respectively. Business tax on advertising service revenue from our poster frame
network amounted to $0, $4.0 million, $7.9 million, $13.9 million and $9.6 million, for 2005,
2006, 2007, 2008 and 2009, respectively. Business tax on Internet advertising service revenue
amounted to $5.0 million, $6.1 million and $5.3 million for 2007, 2008 and 2009, respectively.
Business tax on advertising service revenue from our movie theater and traditional outdoor
billboards amounted to $1.3 million, $2.8 million and $1.5 million for 2007. 2008 and 2009,
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.(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 17, Segment Information, to
consolidated financial statements under Item 18.(3)
    
    Other current assets are equal to total current assets less cash and cash equivalents.(4)
    
    Non-current assets are equal to total assets less total current assets.(5)
    
    Operating data presented includes operating data for discontinued operations except as noted
below.(6)
    
    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.(7)
    
    Operating data for our in-store network does not include data from CGENs business and
operations.(8)
    
    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
  5




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RENMINBI PER U.S. EXCHANGE RATEAVERAGE
    
    HIGH
    
    LOW
    
    PERIOD-END2002
    
    
    8.2770
    
    
    
    8.2800
    
    
    
    8.2669
    
    
    
    8.28002003
    
    
    8.2770
    
    
    
    8.2800
    
    
    
    8.2272
    
    
    
    8.27692004
    
    
    8.2768
    
    
    
    8.2774
    
    
    
    8.2764
    
    
    
    8.27652005
    
    
    8.1940
    
    
    
    8.2765
    
    
    
    8.0702
    
    
    
    8.07022006
    
    
    7.9723
    
    
    
    8.0702
    
    
    
    7.8041
    
    
    
    7.80872007
    
    
    7.6072
    
    
    
    7.8127
    
    
    
    7.2946
    
    
    
    7.29462008
    
    
    6.9477
    
    
    
    7.2946
    
    
    
    6.7800
    
    
    
    6.82252009
    
    
    6.8409
    
    
    
    6.8436
    
    
    
    6.8226
    
    
    
    6.82822010
(through December 3)
    
    
    6.7785
    
    
    
    6.8330
    
    
    
    6.6233
    
    
    
    6.6628January
    
    
    6.8347
    
    
    
    6.8383
    
    
    
    6.8280
    
    
    
    6.8369February
    
    
    6.8377
    
    
    
    6.8436
    
    
    
    6.8281
    
    
    
    6.8367March
    
    
    6.8359
    
    
    
    6.8378
    
    
    
    6.8236
    
    
    
    6.8361April
    
    
    6.8329
    
    
    
    6.8380
    
    
    
    6.7756
    
    
    
    6.8358May
    
    
    6.8364
    
    
    
    6.8408
    
    
    
    6.8273
    
    
    
    6.8403June
    
    
    6.8184
    
    
    
    6.8323
    
    
    
    6.7815
    
    
    
    6.7815July
    
    
    6.7762
    
    
    
    6.7807
    
    
    
    6.7709
    
    
    
    6.7807August
    
    
    6.7873
    
    
    
    6.8069
    
    
    
    6.7680
    
    
    
    6.8069September
    
    
    6.7396
    
    
    
    6.8102
    
    
    
    6.6869
    
    
    
    6.6905October
    
    
    6.6675
    
    
    
    6.6912
    
    
    
    6.6397
    
    
    
    6.6705November
    
    
    6.6537
    
    
    
    6.6906
    
    
    
    6.6233
    
    
    
    6.6670December
(through December 3)
    
    
    6.6622
    
    
    
    6.6630
    
    
    
    6.6609
    
    
    
    6.6628
 
 B. Capitalization and Indebtedness
  C. Reasons for the Offer and Use of Proceeds
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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
   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,.
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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 PRC governmental restrictions on foreign investment in the advertising
industry, we could be subject to severe penalties.
 
  
 
  
 
  
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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.
 
 
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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.
 
  
 
  
 11




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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.
  
 
   12




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We may be deemed a PRC resident enterprise under the New Law and be subject to the PRC taxation on
our worldwide income.
    PRC regulations relating to offshore investment activities by PRC residents may increase our
administrative burden and restrict our overseas and cross-border investment activity. A failure by
us or our shareholders or beneficial owners who are PRC citizens or residents in China to comply
with such regulations could restrict our ability to distribute profits, restrict our overseas and
cross-border investment activities or subject us to liability under PRC laws, which could adversely
affect our business and financial condition.
  13




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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.
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We derive a substantial majority of our revenues from the provision of advertising services, and
advertising is particularly sensitive to changes in economic conditions and advertising trends.
  
 
 
 
 
  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.
  16




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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.
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If we are unable to attract advertisers to advertise on our networks, we will be unable to maintain
or increase our advertising fees and the demand for time on our networks, which could negatively
affect our ability to grow revenues.
    Acquisitions we have made, and any future acquisitions may expose us to potential risks and have an
adverse effect on our ability to manage our business.
   There may be unknown risks inherent in the acquisitions we have made.
  18




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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.
  Our entry into new types of advertising services through acquisitions may expose us to risks
associated with operating in the Internet industries in China which could materially affect our
financial condition or results of operation.
  
 
 
 One or more of our regional distributors could engage in activities that are harmful to our
reputation in the industry and to our business.
  19




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If we fail to maintain an effective system of internal control over financial reporting, we may not
be able to accurately report our financial results or prevent fraud.
    Failure to manage our growth and operations could strain our management, operational and other
resources and we may not be able to achieve anticipated levels of growth in the new networks and
media platforms we operate, either of which could materially and adversely affect our business and
growth potential.
  20




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If advertisers or the viewing public do not accept, or lose interest in, our out-of-home
advertising network, our revenues may be negatively affected and our business may not expand or be
successful.
  If the Internet and, in particular, Internet marketing are not broadly adopted in China, our
ability to generate revenue and sustain profitability from Allyes could be materially and adversely
affected.
  If the delivery of ads or the use of cookies is limited or blocked, our ability to update and
expand our user data would be hindered and demand for our Internet marketing solutions could
decline.
  Our role through Allyes as a supplier of ad space may harm our reputation as an independent
purchasing agent and the reputation of our performance-based advertising network as a marketplace
for ad space.
  21




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Our Internet advertising business could be materially and adversely affected if we are unable to
introduce new or enhanced Internet marketing services and technologies that meet our clients
requirements.
  
 
 
 
 The business and prospects of our online advertising agency business could be harmed if
click-through fraud is not detected.
  System failures could significantly disrupt the operations of our online advertising agency
business, which would cause us to lose clients or ad inventory.
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If our Internet marketing technologies contain design or performance defects, our reputation and
business may be harmed and we may need to expend significant resources to address liability.
   We may be liable for content that we serve onto Web publishers websites, which could increase our
expenses.
  The successful operation of our business depends upon the performance and reliability of the
Internet infrastructure and fixed telecommunications networks in China.
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We depend on the leadership and services of Jason Nanchun Jiang, who is our founder, executive
chairman, chief executive officer and, through JJ Media Investment Holdings Limited, a wholly owned
holding company, one of our largest shareholders, and our business and growth prospects may be
severely disrupted if we lose his services.
  We may need additional capital and we may not be able to obtain it, which could adversely affect
our liquidity and financial position.
   
 
 
 
 
 
  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.
  24




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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.
   25




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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.
  27




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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.
  28




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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.
  30




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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.
   33




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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.
   36




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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.
  
 
 
 
 
  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.
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You may be subject to limitations on transfer of your ADSs.
  
 ITEM 4. INFORMATION ON THE COMPANY
 A. History and Development of the Company
     38




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B. Business Overview
      our LCD display network
 our poster frame network
 40




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our in-store network
 our Internet advertising services network
 our traditional billboard network
 our movie theater advertising network
   For and as of the three months endedMarch 31, 2008
    
    June 30, 2008
    
    September 30, 2008
    
    December 31, 2008
    
    March 31, 2009
    
    June 30, 2009
    
    September 30, 2009
    
    December 31, 2009LCD display network:Number of displays:Our direct cities
    
    
    114,426
    
    
    
    117,440
    
    
    
    114,300
    
    
    
    122,597
    
    
    
    125,796
    
    
    
    128,089
    
    
    
    125,467
    
    
    
    125,595Our regional distributors(1)
    
    
    4,814
    
    
    
    5,700
    
    
    
    5,831
    
    
    
    5,436
    
    
    
    5,423
    
    
    
    5,425
    
    
    
    5,423
    
    
    
    5,411Total
    
    
    119,240
    
    
    
    123,140
    
    
    
    120,131
    
    
    
    128,033
    
    
    
    131,219
    
    
    
    133,514
    
    
    
    130,890
    
    
    
    131,006In-store network:(2)Number of displays in our
in-store network
    
    
    61,420
    
    
    
    58,493
    
    
    
    56,614
    
    
    
    42,824
    
    
    
    42,340
    
    
    
    44,783
    
    
    
    45,195
    
    
    
    44,517Number of stores in our
in-store network
    
    
    3,874
    
    
    
    3,609
    
    
    
    3,479
    
    
    
    3,275
    
    
    
    3,171
    
    
    
    3,209
    
    
    
    3,265
    
    
    
    3,097Poster frame network:Number of frames installed
in our poster frame
network(3) (4)
    
    
    246,920
    
    
    
    275,985
    
    
    
    303,359
    
    
    
    324,364
    
    
    
    327,969
    
    
    
    284,988
    
    
    
    262,301
    
    
    
    261,076
 
 (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
accurate(2)
    
    After December 31, 2008, no longer includes CGEN, whose operations we terminated in December
2008.(3)
    
    Includes both traditional poster frames and, for periods starting from June 30, 2007, digital
frames.(4)
    
    Decline primarily attributable to continuing optimization of our network. LCD display network
 41




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Traditional billboard network
  42




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Movie theater advertising network
  In-store Network
   Poster Frame Network
  Internet Advertising Services Network
   43




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Advertising Clients, Sales and Marketing
 Our Advertising Clients
  Sales
 Advertising Contracts
   Network Monitoring and Media Measurement
 44




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Programming
   Pricing
  Relationships with Location Providers
    45




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Technology and Suppliers
    46




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Competition
  
 
 
 Facilities
  Regulatory Matters
   Limitations on Foreign Ownership in the Advertising Industry
  
 
   47




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48




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Regulation of Advertising Services
 Business License for Advertising Companies
  
 
 
  Advertising Content
  49




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Outdoor Advertising
  
 
 
 
 
 50




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Print Advertising
  Regulation of Foreign Exchange in Certain Onshore and Offshore Transactions
    
 51




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Regulation of Equity Pledge
   52




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C. Organizational Structure
    Our Corporate Structure and Contractual Arrangements
  
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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 subsidiaires, 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)
    
    Huaguang operating subsidiaries include those directly or indirectly owned by Hua Kuang
Advertising Company Ltd.
  54




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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
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Revenues
  For the year ended December 31,2007
    
    2008
    
    2009% of total
    
    
    
    
    
    % of total
    
    
    
    
    
    % of total$
    
    revenues
    
    $
    
    revenues
    
    $
    
    revenues(in thousands of U.S. dollars, except percentages)Net revenues:LCD display network
    
    
    183,528
    
    
    
    44.7
    %
    
    
    239,505
    
    
    
    37.3
    %
    
    
    208,499
    
    
    
    41.3
    %In-store network
    
    
    27,444
    
    
    
    6.7
    %
    
    
    60,719
    
    
    
    9.5
    %
    
    
    30,346
    
    
    
    6.0
    %Poster frame network
    
    
    85,472
    
    
    
    20.8
    %
    
    
    146,751
    
    
    
    22.8
    %
    
    
    98,962
    
    
    
    19.6
    %Internet Advertising Network
    
    
    75,364
    
    
    
    18.4
    %
    
    
    114,560
    
    
    
    17.8
    %
    
    
    107,871
    
    
    
    21.4
    %Movie theatre & traditional
outdoor billboards
    
    
    37,305
    
    
    
    9.1
    %
    
    
    77,178
    
    
    
    12.0
    %
    
    
    59,057
    
    
    
    11.6
    %Advertising service revenue
    
    
    409,113
    
    
    
    99.7
    %
    
    
    638,713
    
    
    
    99.4
    %
    
    
    504,735
    
    
    
    99.9
    %Other revenue
    
    
    1,115
    
    
    
    0.3
    %
    
    
    3,622
    
    
    
    0.6
    %
    
    
    300
    
    
    
    0.1
    %Total revenues
    
    
    410,228
    
    
    
    100.0
    %
    
    
    642,335
    
    
    
    100.0
    %
    
    
    505,035
    
    
    
    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 $20.3 million, $24.7 million and
$20.6 million in 2007, 2008 and 2009 respectively. Business tax on advertising service revenue
from our in-store network amounted to $2.8 million, $6.3 million and $3.2 million for 2007,
2008 and 2009, respectively. Business tax on advertising service revenue from our poster frame
network amounted to $7.9 million, $13.9 million and $9.6 million, for 2007, 2008 and 2009,
respectively. Business tax on Internet advertising service revenue amounted to $5.0 million,
$6.1 million and $5.3 million for 2007, 2008 and 2009, respectively. Business tax on
advertising service revenue from our movie theater & traditional outdoor billboards amounted
to $1.3 million, $2.8 million and $1.5 million for 2007, 2008 and 2009, respectively.   For the year ended December 31,2007
    
    
    2008
    
    
    2009(in thousands of U.S. dollars, except percentages)Gross Revenue:LCD display
network  Unrelated parties
    
    $
    201,210
    
    
    
    49.0
    %
    
    $
    262,754
    
    
    
    40.9
    %
    
    $
    228,541
    
    
    
    45.3
    %
 60




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For the year ended December 31,2007
    
    
    2008
    
    
    2009(in thousands of U.S. dollars, except percentages) Related parties
    
    
    2,583
    
    
    
    0.6
    %
    
    
    1,403
    
    
    
    0.2
    %
    
    
    582
    
    
    
    0.1
    %Total LCD display network
    
    
    203,793
    
    
    
    49.6
    %
    
    
    264,157
    
    
    
    41.1
    %
    
    
    229,123
    
    
    
    45.4
    %In-store Network Unrelated parties
    
    
    28,987
    
    
    
    7.1
    %
    
    
    67,038
    
    
    
    10.4
    %
    
    
    33,538
    
    
    
    6.6
    % Related parties
    
    
    1,300
    
    
    
    0.3
    %
    
    
    
    
    
    
    0.0
    %
    
    
    
    
    
    
    0.0
    %Total in-store network
    
    
    30,287
    
    
    
    7.4
    %
    
    
    67,038
    
    
    
    10.4
    %
    
    
    33,538
    
    
    
    6.6
    %Poster Frame Network Unrelated parties
    
    
    93,158
    
    
    
    22.7
    %
    
    
    160,526
    
    
    
    25.0
    %
    
    
    108,379
    
    
    
    21.5
    % Related parties
    
    
    243
    
    
    
    0.1
    %
    
    
    88
    
    
    
    0.0
    %
    
    
    147
    
    
    
    0.0
    %Total Poster Frame Network
    
    
    93,401
    
    
    
    22.8
    %
    
    
    160,614
    
    
    
    25.0
    %
    
    
    108,526
    
    
    
    21.5
    %Internet Advertising Network Unrelated parties
    
    
    79,256
    
    
    
    19.3
    %
    
    
    114,750
    
    
    
    17.9
    %
    
    
    111,282
    
    
    
    22.0
    % Related parties
    
    
    1,140
    
    
    
    0.3
    %
    
    
    5,950
    
    
    
    0.9
    %
    
    
    1,901
    
    
    
    0.4
    %Total Internet Advertising network
    
    
    80,396
    
    
    
    19.6
    %
    
    
    120,700
    
    
    
    18.8
    %
    
    
    113,183
    
    
    
    22.4
    %Movie theatre & Traditional
outdoor billboards Unrelated parties
    
    
    38,558
    
    
    
    9.4
    %
    
    
    78,250
    
    
    
    12.2
    %
    
    
    60,132
    
    
    
    11.9
    % Related parties
    
    
    
    
    
    
    0.0
    %
    
    
    1,773
    
    
    
    0.3
    %
    
    
    412
    
    
    
    0.1
    %Total Movie theatre & Traditional
outdoor billboards
    
    
    38,558
    
    
    
    9.4
    %
    
    
    80,023
    
    
    
    12.5
    %
    
    
    60,544
    
    
    
    12.0
    %Gross Advertising Services Revenue:
    
    
    446,435
    
    
    
    108.8
    %
    
    
    692,532
    
    
    
    107.8
    %
    
    
    544,914
    
    
    
    107.9
    %Less: Sales taxes:LCD display network
    
    
    20,265
    
    
    
    5.0
    %
    
    
    24,652
    
    
    
    3.8
    %
    
    
    20,624
    
    
    
    4.1
    %In-store Network
    
    
    2,843
    
    
    
    0.7
    %
    
    
    6,319
    
    
    
    1.0
    %
    
    
    3,192
    
    
    
    0.6
    %Poster Frame Network
    
    
    7,929
    
    
    
    1.9
    %
    
    
    13,863
    
    
    
    2.2
    %
    
    
    9,564
    
    
    
    1.9
    %Internet Advertising Network
    
    
    5,032
    
    
    
    1.2
    %
    
    
    6,140
    
    
    
    1.0
    %
    
    
    5,312
    
    
    
    1.1
    %Movie theatre & Traditional
outdoor billboards
    
    
    1,253
    
    
    
    0.3
    %
    
    
    2,845
    
    
    
    0.4
    %
    
    
    1,487
    
    
    
    0.3
    %Total sales taxes
    
    
    37,322
    
    
    
    9.1
    %
    
    
    53,819
    
    
    
    8.4
    %
    
    
    40,179
    
    
    
    8.0
    %Net Advertising Service Revenue
    
    
    409,113
    
    
    
    99.7
    %
    
    
    638,713
    
    
    
    99.4
    %
    
    
    504,735
    
    
    
    99.9
    %Add:Other revenue:
    
    
    1,115
    
    
    
    0.3
    %
    
    
    3,622
    
    
    
    0.6
    %
    
    
    300
    
    
    
    0.1
    %Net revenues:
    
    $
    410,228
    
    
    
    100.0
    %
    
    $
    642,335
    
    
    
    100.0
    %
    
    $
    505,035
    
    
    
    100.0
    %
 
   
 Advertising Service Revenue
 Sources of Revenues
  61




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Factors that Affect Our Advertising Service Revenue.
 LCD display Network
  In-store Network
  Poster Frame Network
  
 
 
 Internet Advertising Service Revenues
  
 
 62




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##### Table of Contents



Movie Theatre and Traditional Outdoor Billboard Networks
   Seasonality
 Revenue Recognition
  Revenue recognition for adverting service from LCD display network, Poster Frame
network, In-store networks and Movie Theatre and Traditional Outdoor Billboard networks
 Revenue recognition for Internet advertising network
   63




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Cost of Revenues
   For the year ended December 31,2007
    
    
    2008
    
    
    2009% of total
    
    
    
    
    
    
    % of total
    
    
    
    
    
    
    % of total$
    
    
    revenues
    
    
    $
    
    
    revenues
    
    
    $
    
    
    revenues(in thousands of U.S. dollars, except percentages)Total revenues
    
    $
    410,228
    
    
    
    100.0
    %
    
    $
    642,335
    
    
    
    100
    %
    
    $
    505,035
    
    
    
    100
    %Cost of revenues:Net advertising service cost:LCD display network
    
    
    51,850
    
    
    
    12.7
    %
    
    
    77,866
    
    
    
    12.1
    %
    
    
    75,467
    
    
    
    15.0
    %In-store network
    
    
    23,502
    
    
    
    5.7
    %
    
    
    61,834
    
    
    
    9.6
    %
    
    
    24,170
    
    
    
    4.8
    %Poster frame network
    
    
    28,086
    
    
    
    6.8
    %
    
    
    59,815
    
    
    
    9.3
    %
    
    
    95,401
    
    
    
    18.9
    %Internet advertising network
    
    
    51,722
    
    
    
    12.7
    %
    
    
    89,052
    
    
    
    13.9
    %
    
    
    98,721
    
    
    
    19.5
    %Movie theatre & traditional
outdoor billboards
    
    
    28,507
    
    
    
    6.9
    %
    
    
    56,944
    
    
    
    8.9
    %
    
    
    45,085
    
    
    
    8.9
    %Advertising service cost
    
    
    183,667
    
    
    
    44.8
    %
    
    
    345,511
    
    
    
    53.8
    %
    
    
    338,844
    
    
    
    67.1
    %Other cost
    
    
    798
    
    
    
    0.2
    %
    
    
    1,723
    
    
    
    0.3
    %
    
    
    290
    
    
    
    0.1
    %Total cost of revenues
    
    $
    184,465
    
    
    
    45.0
    %
    
    $
    347,234
    
    
    
    54.1
    %
    
    $
    339,134
    
    
    
    67.2
    %Gross profit
    
    $
    225,763
    
    
    
    55.0
    %
    
    $
    295,101
    
    
    
    45.9
    %
    
    $
    165,901
    
    
    
    32.8
    %
 Advertising Service Costs
   
 
 
  64




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##### Table of Contents



LCD display Network
 In-store Network
 Poster Frame Network
 Internet Advertising Services Network
 Movie Theatre & Traditional Outdoor Billboard Networks
 Operating Expenses and Net Income
  For the year ended December 31,2007
    
    2008
    
    2009% of total
    
    
    
    
    
    % of total
    
    
    
    
    
    % of total$
    
    revenues
    
    $
    
    revenues
    
    $
    
    revenues(in thousands of U.S. dollars, except percentages)Gross profit
    
    $
    225,763
    
    
    
    55.0
    %
    
    $
    295,101
    
    
    
    45.9
    %
    
    $
    165,901
    
    
    
    32.8
    %Operating expenses:General and administrative
    
    
    45,641
    
    
    
    11.1
    %
    
    
    90,194
    
    
    
    14.0
    %
    
    
    120,191
    
    
    
    23.8
    %Selling and marketing
    
    
    60,708
    
    
    
    14.8
    %
    
    
    95,400
    
    
    
    14.9
    %
    
    
    107,184
    
    
    
    21.2
    %Impairment loss
    
    
    
    
    
    
    0.0
    %
    
    
    596,069
    
    
    
    92.8
    %
    
    
    86,303
    
    
    
    17.1
    %Other operating income
    
    
    (7,645
    )
    
    
    (1.9
    )%
    
    
    182,522
    
    
    
    28.4
    %
    
    
    10,848
    
    
    
    2.2
    %Total
    
    
    98,704
    
    
    
    24.0
    %
    
    
    964,185
    
    
    
    150.1
    %
    
    
    324,526
    
    
    
    64.3
    %Income from operations
    
    
    127,059
    
    
    
    31.0
    %
    
    
    (669,084
    )
    
    
    (104.2
    )%
    
    
    (158,625
    )
    
    
    (31.5
    )%
 65




---



##### Table of Contents



General and Administrative
 Selling and Marketing
 Impairment Loss for goodwill
  Long-lived asset Impairment
 66




---



##### Table of Contents



Share-based Compensation
   Options granted to employees andnon-employees:
    
    2007
    
    2008
    
    2009Risk-free rate of return
    
    
    4.02% - 4.68
    %
    
    
    1.59%-3.2
    %
    
    
    0.87
    %Weighted average expected option life
    
    2 years
    
    
    2.5 to 4 years
    
    
    2.5 yearsVolatility rate
    
    
    50.61%-53.05
    %
    
    
    53%-68.88
    %
    
    
    88.32
    %Dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
   67




---



##### Table of Contents



For the years ended December 31,2007
    
    
    2008
    
    
    2009Cost of sales
    
    $
    980,488
    
    
    $
    1,469,847
    
    
    $
    1,504,092General and administrative
    
    
    11,307,664
    
    
    
    24,510,009
    
    
    
    43,839,566Selling and marketing
    
    
    9,166,146
    
    
    
    16,635,310
    
    
    
    21,159,476Total
    
    $
    21,454,298
    
    
    $
    42,615,166
    
    
    $
    66,503,134
 Amortization of Acquired Intangibles
 For the years ended December 31,2007
    
    
    2008
    
    
    2009Cost of revenues
    
    $
    16,113,970
    
    
    $
    26,419,547
    
    
    $
    18,628,185Selling and marketing
    
    
    8,639,094
    
    
    
    13,669,067
    
    
    
    8,650,559Total
    
    $
    24,753,064
    
    
    $
    40,088,614
    
    
    $
    27,278,744
  Critical Accounting Policies
  Revenue Recognition
    68




---



##### Table of Contents



Accounts Receivable
   
   
 Share-based Compensation
   69




---



##### Table of Contents



Income Taxes
  Goodwill Impairment
  
 
 
 
 
 
 
   Movie theaterPoster
    
    
    Mobile
    
    
    
    
    
    
    & traditionalLCD display
    
    
    
    
    
    
    frame
    
    
    handset
    
    
    Internet
    
    
    outdoornetwork
    
    
    In-store network
    
    
    network
    
    
    advertising
    
    
    advertising
    
    
    billboards
    
    
    TotalBalance as of
January 1, 2008
    
    $
    396,428,510
    
    
    $
    
    
    
    $
    337,320,124
    
    
    $
    43,003,566
    
    
    $
    166,646,082
    
    
    $
    
    
    
    $
    943,398,282Goodwill acquired
during the year
    
    
    
    
    
    
    127,752,752
    
    
    
    449,100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    128,201,852
 70




---



##### Table of Contents



Movie theaterPoster
    
    
    Mobile
    
    
    
    
    
    
    & traditionalLCD display
    
    
    
    
    
    
    frame
    
    
    handset
    
    
    Internet
    
    
    outdoornetwork
    
    
    In-store network
    
    
    network
    
    
    advertising
    
    
    advertising
    
    
    billboards
    
    
    TotalGoodwill
recorded as a result of
contingent
consideration
resolved
    
    
    4,901,109
    
    
    
    
    
    
    
    38,971,908
    
    
    
    1,122,670
    
    
    
    76,595,733
    
    
    
    
    
    
    
    121,591,420Modification of
original purchase
price allocation
    
    
    
    
    
    
    17,834,158
    
    
    
    
    
    
    
    
    
    
    
    5,897,710
    
    
    
    857,390
    
    
    
    24,589,258Goodwill
impairment
    
    
    
    
    
    
    
    
    

    (376,771,621
    )
    
    
    
    
    
    
    (218,440,000
    )
    
    
    (857,390
    )
    
    
    (596,069,011
    )Disposal of
subsidiaries
    
    
    
    
    
    
    (145,586,910
    )
    
    
    
    
    
    
    (44,126,236
    )
    
    
    
    
    
    
    
    
    
    
    (189,713,146
    )Reclassified to
assets held for
sale
    
    
    (402,742,395
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (402,742,395
    )Translation
adjustments
    
    
    1,412,776
    
    
    
    
    
    
    
    30,489
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,443,265Balance as of
December 31, 2008
    
    $
    
    
    
    $
    
    
    

    $
    
    
    

    $
    
    
    
    $
    30,699,525
    
    

    $
    
    
    
    $
    30,699,525Goodwill 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
    
    
    $
    
    
    
    $
    410,368,691
 
  Goodwill impairment in 2008
   
    
  71




---



##### Table of Contents



Goodwill impairment in 2009
 
  
 
  
     72




---



##### Table of Contents



Long-lived asset Impairment
  Impairment of long-lived assets in 2008
  
  
    73




---



##### Table of Contents



Impairment of long-lived assets in 2009
    Taxation
 Cayman Islands, the British Virgin Islands and Hong Kong.
  Taxable Presence Exposure in the PRC
  74




---



##### Table of Contents



PRC
      75




---



##### Table of Contents



Recently Issued Accounting Standards
      76




---



##### Table of Contents



Acquisitions
   2008 acquisitions:
     77




---



##### Table of Contents



In-store network
    
    Poster frame network
    
    Internet advertising
    
    TotalContingent payments
expected to be
earned in 2009
    
    $90.8 million
    
    $13.3 million
    
    $3.0 million
    
    $107.1 millionContingent payments
expected to be
earned in future
periods
    
    Nil
    
    $32.0 million
    
    $6.8 million
    
    $38.8 million
  Poster frame network
    
    
    Internet advertising
    
    
    TotalActual contingent
considerations
earned in 2009Sichuan Framedia
    
    $4.4 million
    
    
    
    
    
    $4.4 millionChangsha Framedia
    
    $4.2 million
    
    
    
    
    
    $4.2 million1024
    
    
    
    
    
    $1.9 million
    
    $1.9 million$8.6 million
    
    $1.9 million
    
    $10.5 million
 
 2009 acquisitions:
  Disposition
 
   
 2008 Disposition
  
  
 
  Acquisitions
    
    
    Date of acquisition
    
    
    Proceeds paid
    
    
    Date of Disposal
    
    
    Loss on disposal1
    
    Beijing Yitong
    
    
    2007-3-1
    
    
    $
    1,973,334
    
    
    
    2008-4-30
    
    
    $
    2,456,4032
    
    Guangzhou Xuanwu
    
    
    2007-3-1
    
    
    $
    6,559,550
    
    
    
    2008-4-30
    
    
    $
    6,483,1573
    
    Zhengzhou Meihe
    
    
    2007-3-1
    
    
    $
    6,750,909
    
    
    
    2008-4-30
    
    
    $
    5,846,5184
    
    Shenzhen Julan
    
    
    2007-3-1
    
    
    $
    6,576,027
    
    
    
    2008-4-30
    
    
    $
    6,190,7555
    
    Shenhzhen Mengwang
    
    
    2007-3-1
    
    
    $
    4,497,825
    
    
    
    2008-4-30
    
    
    $
    2,589,4766
    
    Beijing Shiji
    
    
    2007-4-1
    
    
    $
    8,106,166
    
    
    
    2008-4-30
    
    
    $
    10,552,695Zhongkai7
    
    Jingzhun
    
    
    2007-4-1
    
    
    $
    9,089,616
    
    
    
    2008-4-30
    
    
    $
    14,377,2728
    
    Zhongyi Ruantong
    
    
    2007-10-1
    
    
    $
    1,191,833
    
    
    
    2008-4-30
    
    
    $
    912,312
  
 2009 Disposition
  
  Acquisitions
    
    
    Date of acquisition
    
    
    Business segment
    
    
    Proceeds paid
    
    
    Date of 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
     
 78




---



##### 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
    
    2008
    
    
    2008
    
    
    30, 2008
    
    
    31, 2008
    
    
    2009
    
    
    2009
    
    
    30, 2009
    
    
    31, 2009(in thousands of U.S. dollars)Net revenues:LCD display network (1)
    
    $
    46,077
    
    
    $
    61,485
    
    
    $
    73,479
    
    
    $
    58,464
    
    
    $
    34,324
    
    
    $
    54,250
    
    
    $
    55,810
    
    
    $
    64,115In-store network (1)
    
    
    17,271
    
    
    
    17,020
    
    
    
    16,765
    
    
    
    9,663
    
    
    
    6,344
    
    
    
    8,967
    
    
    
    7,646
    
    
    
    7,389Poster frame network (1)
    
    
    29,179
    
    
    
    37,313
    
    
    
    43,962
    
    
    
    36,297
    
    
    
    23,537
    
    
    
    26,499
    
    
    
    22,130
    
    
    
    26,796Internet advertising network (1)
    
    
    26,304
    
    
    
    32,689
    
    
    
    31,659
    
    
    
    23,908
    
    
    
    21,288
    
    
    
    24,967
    
    
    
    28,171
    
    
    
    33,445Movie theatre & Traditional
outdoor billboards (1)
    
    
    16,378
    
    
    
    19,629
    
    
    
    19,609
    
    
    
    21,562
    
    
    
    19,211
    
    
    
    14,762
    
    
    
    12,487
    
    
    
    12,597Total advertising service revenue
    
    
    135,209
    
    
    
    168,136
    
    
    
    185,474
    
    
    
    149,894
    
    
    
    104,704
    
    
    
    129,445
    
    
    
    126,244
    
    
    
    144,342Other revenue
    
    
    3,090
    
    
    
    171
    
    
    
    234
    
    
    
    127
    
    
    
    2
    
    
    
    95
    
    
    
    197
    
    
    
    6Total revenues
    
    
    138,299
    
    
    
    168,307
    
    
    
    185,708
    
    
    
    150,021
    
    
    
    104,706
    
    
    
    129,540
    
    
    
    126,441
    
    
    
    144,348Cost of revenues:LCD display network
    
    
    14,700
    
    
    
    14,760
    
    
    
    16,792
    
    
    
    31,614
    
    
    
    11,626
    
    
    
    10,585
    
    
    
    38,636
    
    
    
    14,620In-store network
    
    
    17,243
    
    
    
    18,428
    
    
    
    13,098
    
    
    
    13,065
    
    
    
    4,267
    
    
    
    6,025
    
    
    
    11,490
    
    
    
    2,388Poster frame network
    
    
    11,646
    
    
    
    15,666
    
    
    
    16,766
    
    
    
    15,737
    
    
    
    12,345
    
    
    
    12,858
    
    
    
    52,550
    
    
    
    17,648Internet advertising network
    
    
    20,542
    
    
    
    25,946
    
    
    
    23,536
    
    
    
    19,028
    
    
    
    17,414
    
    
    
    22,505
    
    
    
    31,135
    
    
    
    27,667Movie theatre & Traditional
outdoor billboards
    
    
    12,516
    
    
    
    15,696
    
    
    
    13,531
    
    
    
    15,201
    
    
    
    14,164
    
    
    
    10,885
    
    
    
    9,486
    
    
    
    10,550Advertising service cost:
    
    
    76,647
    
    
    
    90,496
    
    
    
    83,723
    
    
    
    94,645
    
    
    
    59,816
    
    
    
    62,858
    
    
    
    143,297
    
    
    
    72,873Other cost
    
    
    1,303
    
    
    
    162
    
    
    
    222
    
    
    
    36
    
    
    
    
    
    
    
    93
    
    
    
    194
    
    
    
    3Total cost of revenues
    
    
    77,950
    
    
    
    90,658
    
    
    
    83,945
    
    
    
    94,681
    
    
    
    59,816
    
    
    
    62,951
    
    
    
    143,491
    
    
    
    72,876Gross profit
    
    
    60,349
    
    
    
    77,649
    
    
    
    101,763
    
    
    
    55,340
    
    
    
    44,890
    
    
    
    66,589
    
    
    
    (17,050
    )
    
    
    71,472Operating expenses:General and administrative
    
    
    17,259
    
    
    
    19,133
    
    
    
    24,177
    
    
    
    29,625
    
    
    
    23,722
    
    
    
    27,578
    
    
    
    23,665
    
    
    
    45,226Selling and marketing
    
    
    19,898
    
    
    
    23,267
    
    
    
    26,022
    
    
    
    26,213
    
    
    
    19,440
    
    
    
    26,380
    
    
    
    32,948
    
    
    
    28,416Impairment loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    596,069
    
    
    
    9,271
    
    
    
    25,773
    
    
    
    37,232
    
    
    
    14,027Other operating income
    
    
    (2,007
    )
    
    
    (3,991
    )
    
    
    (3,950
    )
    
    
    192,470
    
    
    
    (3,349
    )
    
    
    243
    
    
    
    15,364
    
    
    
    (1,410
    )Total operating expenses
    
    
    35,150
    
    
    
    38,409
    
    
    
    46,249
    
    
    
    844,377
    
    
    
    49,084
    
    
    
    79,974
    
    
    
    109,209
    
    
    
    86,259Income (loss) from operations
    
    
    25,199
    
    
    
    39,240
    
    
    
    55,514
    
    
    
    (789,037
    )
    
    
    (4,194
    )
    
    
    (13,385
    )
    
    
    (126,259
    )
    
    
    (14,787
    )Interest income
    
    
    2,348
    
    
    
    1,150
    
    
    
    1,718
    
    
    
    2,312
    
    
    
    1,576
    
    
    
    1,292
    
    
    
    1,012
    
    
    
    1,381Income (loss) from continuing
operations before income taxes
    
    
    27,547
    
    
    
    40,390
    
    
    
    57,232
    
    
    
    (786,725
    )
    
    
    (2,618
    )
    
    
    (12,093
    )
    
    
    (125,247
    )
    
    
    (13,406
    )Provision for income taxes
    
    
    4,820
    
    
    
    7,855
    
    
    
    7,142
    
    
    
    6,967
    
    
    
    2,983
    
    
    
    5,849
    
    
    
    (4,833
    )
    
    
    5,856Net income (loss) from
continuing operations
    
    
    22,727
    
    
    
    32,535
    
    
    
    50,090
    
    
    
    (793,692
    )
    
    
    (5,601
    )
    
    
    (17,942
    )
    
    
    (120,414
    )
    
    
    (19,262
    )Net income (loss) from
discontinued operations, net of
tax
    
    
    (76,339
    )
    
    
    4,594
    
    
    
    2,161
    
    
    
    (12,914
    )
    
    
    (73
    )
    
    
    (4,806
    )
    
    
    (8,201
    )
    
    
    (33,434
    )Net income (loss)
    
    
    (53,612
    )
    
    
    37,129
    
    
    
    52,251
    
    
    
    (806,606
    )
    
    
    (5,674
    )
    
    
    (22,748
    )
    
    
    (128,615
    )
    
    
    (52,696
    )Net income (loss) attributable
to noncontrolling interests
    
    
    198
    
    
    
    999
    
    
    
    900
    
    
    
    (2,247
    )
    
    
    19
    
    
    
    223
    
    
    
    2,958
    
    
    
    324Net income (loss) attributable
to Focus Media Holdings Limited
shareholders
    
    $
    (53,810
    )
    
    $
    36,130
    
    
    $
    51,351
    
    
    $
    (804,359
    )
    
    $
    (5,693
    )
    
    $
    (22,971
    )
    
    $
    (131,573
    )
    
    $
    (53,020
    )
 
 (1)
    
    Advertising service revenue is presented net of sales taxes. The following tables present
the unaudited quarterly sales taxes information: 79




---



##### Table of Contents



For the three months endedConsolidated Statement
    
    March
    
    
    June 30,
    
    
    September
    
    
    December
    
    
    March
    
    
    June 30,
    
    
    September
    
    
    Decemberof Operations Data
    
    31, 2008
    
    
    2008
    
    
    30, 2008
    
    
    31, 2008
    
    
    31, 2009
    
    
    2009
    
    
    30, 2009
    
    
    31, 2009(in thousands of U.S. dollars)Sales taxes:LCD display network
    
    $
    4,979
    
    
    $
    5,263
    
    
    $
    7,789
    
    
    $
    6,621
    
    
    $
    3,987
    
    
    $
    5,597
    
    
    $
    4,502
    
    
    $
    6,538In-store network
    
    
    1,806
    
    
    
    1,777
    
    
    
    1,748
    
    
    
    988
    
    
    
    671
    
    
    
    933
    
    
    
    804
    
    
    
    784Poster frame network
    
    
    2,662
    
    
    
    3,450
    
    
    
    4,226
    
    
    
    3,525
    
    
    
    2,271
    
    
    
    2,755
    
    
    
    2,025
    
    
    
    2,513Internet advertising network
    
    
    1,360
    
    
    
    1,588
    
    
    
    1,625
    
    
    
    1,567
    
    
    
    1,198
    
    
    
    1,430
    
    
    
    1,266
    
    
    
    1,418Movie theatre & Traditional
outdoor billboards
    
    
    697
    
    
    
    733
    
    
    
    680
    
    
    
    735
    
    
    
    635
    
    
    
    268
    
    
    
    315
    
    
    
    269Total
    
    $
    11,504
    
    
    $
    12,811
    
    
    $
    16,068
    
    
    $
    13,436
    
    
    $
    8,762
    
    
    $
    10,983
    
    
    $
    8,912
    
    
    $
    11,522
  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; and
 2)
    
    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.
  80




---



##### Table of Contents



For the three months endedConsolidated Statement
    
    March 31,
    
    
    June 30,
    
    
    September
    
    
    December
    
    
    March 31,
    
    
    June 30,
    
    
    September
    
    
    Decemberof Operations Data
    
    2008
    
    
    2008
    
    
    30, 2008
    
    
    31, 2008
    
    
    2009
    
    
    2009
    
    
    30, 2009
    
    
    31, 2009Net revenues:LCD display network (1)
    
    
    33.3
    %
    
    
    36.5
    %
    
    
    39.6
    %
    
    
    39.0
    %
    
    
    32.8
    %
    
    
    41.9
    %
    
    
    44.1
    %
    
    
    44.4
    %In-store network (1)
    
    
    12.5
    %
    
    
    10.1
    %
    
    
    9.0
    %
    
    
    6.4
    %
    
    
    6.1
    %
    
    
    6.9
    %
    
    
    6.0
    %
    
    
    5.1
    %Poster frame network (1)
    
    
    21.1
    %
    
    
    22.2
    %
    
    
    23.7
    %
    
    
    24.2
    %
    
    
    22.5
    %
    
    
    20.5
    %
    
    
    17.5
    %
    
    
    18.6
    %Internet advertising network (1)
    
    
    19.0
    %
    
    
    19.4
    %
    
    
    17.0
    %
    
    
    15.9
    %
    
    
    20.3
    %
    
    
    19.3
    %
    
    
    22.3
    %
    
    
    23.2
    %Movie theatre & Traditional
outdoor billboards (1)
    
    
    11.8
    %
    
    
    11.7
    %
    
    
    10.6
    %
    
    
    14.4
    %
    
    
    18.3
    %
    
    
    11.3
    %
    
    
    9.9
    %
    
    
    8.7
    %Other revenues
    
    
    2.3
    %
    
    
    0.1
    %
    
    
    0.1
    %
    
    
    0.1
    %
    
    
    0.0
    %
    
    
    0.1
    %
    
    
    0.2
    %
    
    
    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
    
    
    10.6
    %
    
    
    8.8
    %
    
    
    9.0
    %
    
    
    21.1
    %
    
    
    11.1
    %
    
    
    8.2
    %
    
    
    30.6
    %
    
    
    10.1
    %In-store network
    
    
    12.5
    %
    
    
    10.9
    %
    
    
    7.1
    %
    
    
    8.7
    %
    
    
    4.1
    %
    
    
    4.7
    %
    
    
    9.1
    %
    
    
    1.7
    %Poster frame network
    
    
    8.4
    %
    
    
    9.3
    %
    
    
    9.0
    %
    
    
    10.5
    %
    
    
    11.8
    %
    
    
    9.9
    %
    
    
    41.6
    %
    
    
    12.2
    %Internet advertising network
    
    
    14.9
    %
    
    
    15.4
    %
    
    
    12.7
    %
    
    
    12.7
    %
    
    
    16.6
    %
    
    
    17.3
    %
    
    
    24.6
    %
    
    
    19.2
    %Movie theatre & Traditional
outdoor billboards
    
    
    9.0
    %
    
    
    9.3
    %
    
    
    7.3
    %
    
    
    10.1
    %
    
    
    13.5
    %
    
    
    8.4
    %
    
    
    7.4
    %
    
    
    7.3
    %Other costs
    
    
    0.9
    %
    
    
    0.1
    %
    
    
    0.1
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.1
    %
    
    
    0.2
    %
    
    
    0.0
    %Total cost of revenues
    
    
    56.3
    %
    
    
    53.8
    %
    
    
    45.2
    %
    
    
    63.1
    %
    
    
    57.1
    %
    
    
    48.6
    %
    
    
    113.5
    %
    
    
    50.5
    %Gross profit
    
    
    43.7
    %
    
    
    46.2
    %
    
    
    54.8
    %
    
    
    36.9
    %
    
    
    42.9
    %
    
    
    51.4
    %
    
    
    (13.5
    )%
    
    
    49.5
    %Operating expenses:General and administrative
    
    
    12.5
    %
    
    
    11.4
    %
    
    
    13.0
    %
    
    
    19.7
    %
    
    
    22.7
    %
    
    
    21.3
    %
    
    
    18.7
    %
    
    
    31.3
    %Selling and marketing
    
    
    14.4
    %
    
    
    13.8
    %
    
    
    14.0
    %
    
    
    17.5
    %
    
    
    18.6
    %
    
    
    20.4
    %
    
    
    26.0
    %
    
    
    19.7
    %Impairment loss
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    397.3
    %
    
    
    8.8
    %
    
    
    19.9
    %
    
    
    29.4
    %
    
    
    9.7
    %Other operating income
    
    
    (1.5
    )%
    
    
    (2.4
    )%
    
    
    (2.1
    )%
    
    
    128.3
    %
    
    
    (3.2
    )%
    
    
    0.1
    %
    
    
    12.2
    %
    
    
    (1.0
    )%Total operating expenses
    
    
    25.4
    %
    
    
    22.8
    %
    
    
    24.9
    %
    
    
    562.8
    %
    
    
    46.9
    %
    
    
    61.7
    %
    
    
    86.3
    %
    
    
    59.7
    %Income (loss) from operations
    
    
    18.3
    %
    
    
    23.4
    %
    
    
    29.9
    %
    
    
    (525.9
    )%
    
    
    (4.0
    )%
    
    
    (10.3
    )%
    
    
    (99.8
    )%
    
    
    (10.2
    )%Interest income
    
    
    1.7
    %
    
    
    0.7
    %
    
    
    0.9
    %
    
    
    1.5
    %
    
    
    1.5
    %
    
    
    1.0
    %
    
    
    0.8
    %
    
    
    1.0
    %Income (loss) from continuing
operations before income taxes
    
    
    20.0
    %
    
    
    24.1
    %
    
    
    30.8
    %
    
    
    (524.4
    )%
    
    
    (2.5
    )%
    
    
    (9.3
    )%
    
    
    (99.0
    )%
    
    
    (9.2
    )%Provision for income taxes
    
    
    3.5
    %
    
    
    4.7
    %
    
    
    3.8
    %
    
    
    4.6
    %
    
    
    2.8
    %
    
    
    4.5
    %
    
    
    (3.8
    )%
    
    
    4.1
    %Net income (loss) from
continuing operations
    
    
    16.5
    %
    
    
    19.4
    %
    
    
    27.0
    %
    
    
    (529.0
    )%
    
    
    (5.3
    )%
    
    
    (13.8
    )%
    
    
    (95.2
    )%
    
    
    (13.3
    )%Net income (loss) from
discontinued operations, net of
tax
    
    
    (55.3
    )%
    
    
    2.7
    %
    
    
    1.2
    %
    
    
    (8.7
    )%
    
    
    (0.1
    )%
    
    
    (3.7
    )%
    
    
    (6.5
    )%
    
    
    (23.2
    )%Net income (loss)
    
    
    (38.8
    )%
    
    
    22.1
    %
    
    
    28.2
    %
    
    
    (537.7
    )%
    
    
    (5.4
    )%
    
    
    (17.5
    )%
    
    
    (101.7
    )%
    
    
    (36.5
    )%Net income (loss) attributable
to noncontrolling interests
    
    
    0.1
    %
    
    
    0.6
    %
    
    
    0.5
    %
    
    
    (1.5
    )%
    
    
    0.0
    %
    
    
    0.2
    %
    
    
    2.3
    %
    
    
    0.2
    %Net income (loss) attributable
to Focus Media Holdings Limited
shareholders
    
    
    (38.9
    )%
    
    
    21.5
    %
    
    
    27.7
    %
    
    
    (536.2
    )%
    
    
    (5.4
    )%
    
    
    (17.7
    )%
    
    
    (104.0
    )%
    
    
    (36.7
    )%
 
 (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
    
    
    June 30,
    
    
    September
    
    
    December
    
    
    March
    
    
    June 30,
    
    
    September
    
    
    December31, 2008
    
    
    2008
    
    
    30, 2008
    
    
    31, 2008
    
    
    31, 2009
    
    
    2009
    
    
    30, 2009
    
    
    31, 2009Sales taxes:LCD display network
    
    
    9.8
    %
    
    
    7.9
    %
    
    
    9.6
    %
    
    
    10.2
    %
    
    
    10.4
    %
    
    
    9.4
    %
    
    
    7.5
    %
    
    
    9.3
    %In-store network
    
    
    9.5
    %
    
    
    9.5
    %
    
    
    9.4
    %
    
    
    9.3
    %
    
    
    9.6
    %
    
    
    9.4
    %
    
    
    9.5
    %
    
    
    9.6
    %Poster frame network
    
    
    8.4
    %
    
    
    8.5
    %
    
    
    8.8
    %
    
    
    8.8
    %
    
    
    8.8
    %
    
    
    9.4
    %
    
    
    8.4
    %
    
    
    8.6
    %Internet advertising network
    
    
    4.9
    %
    
    
    4.6
    %
    
    
    4.9
    %
    
    
    6.2
    %
    
    
    5.3
    %
    
    
    5.4
    %
    
    
    4.3
    %
    
    
    4.1
    %Movie theatre & Traditional
outdoor billboards
    
    
    4.1
    %
    
    
    3.6
    %
    
    
    3.4
    %
    
    
    3.3
    %
    
    
    3.2
    %
    
    
    1.8
    %
    
    
    2.5
    %
    
    
    2.1
    %Total
    
    
    7.8
    %
    
    
    7.1
    %
    
    
    8.0
    %
    
    
    8.2
    %
    
    
    7.7
    %
    
    
    7.8
    %
    
    
    6.6
    %
    
    
    7.4
    %
 A. Operating Results
 Results of Operations
 Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
 81




---



##### Table of Contents



Total Revenues
 LCD Display Network
 In-store Network
 Poster Frame Network
 Internet Advertising Service
 Movie Theatre and Traditional Outdoor Billboards
 Cost of Revenues
 Cost of revenues  LCD display network
 Cost of revenues In-store network
 Cost of revenues  Poster frame network
 82




---



##### Table of Contents



Net advertising service cost  Internet advertising service network
 Net advertising service cost- Movie theater and traditional outdoor billboards
 Gross Profit As a result of the foregoing, our gross profit declined by 43.8%
 Year ended December 31,2007
    
    
    2008
    
    
    2009US$000
    
    
    US$000
    
    
    US$000Gross profitLCD display network
    
    $
    131,679
    
    
    $
    161,639
    
    
    $
    133,033In-store network
    
    
    3,942
    
    
    
    (1,115
    )
    
    
    6,176Poster frame network
    
    
    57,386
    
    
    
    86,936
    
    
    
    3,561Internet advertising network
    
    
    23,642
    
    
    
    25,508
    
    
    
    9,150Movie theatre & traditional outdoor billboards
    
    
    8,798
    
    
    
    20,234
    
    
    
    13,972Others
    
    
    316
    
    
    
    1,899
    
    
    
    10Total
    
    $
    225,763
    
    
    $
    295,101
    
    
    $
    165,902Gross marginLCD display network
    
    
    71.7
    %
    
    
    67.5
    %
    
    
    63.8
    %In-store network
    
    
    14.4
    %
    
    
    (1.8
    )%
    
    
    20.4
    %Poster frame network
    
    
    67.1
    %
    
    
    59.2
    %
    
    
    3.6
    %Internet advertising network
    
    
    31.4
    %
    
    
    22.3
    %
    
    
    8.5
    %Movie theatre & traditional outdoor billboards
    
    
    23.6
    %
    
    
    26.2
    %
    
    
    23.7
    %Others
    
    
    28.4
    %
    
    
    52.4
    %
    
    
    3.2
    %Total
    
    
    55.0
    %
    
    
    45.9
    %
    
    
    32.8
    %
  Operating Expenses
 General and Administrative
 Selling and Marketing
 83




---



##### Table of Contents



Impairment Loss
 Other operating expenses (income) net
 Loss from Operations
 Interest income (expense)
 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
 Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
 Total Revenues
 LCD display networks
 84




---



##### Table of Contents



In-store network
 Poster frame network
 Internet advertising service
 Movie theatre and traditional outdoor billboards
 Cost of Revenues
 Cost of revenuesLCD display Network
 Cost of revenues in-store network
 Cost of revenues  poster frame network
 Net advertising service cost-Internet advertising service
 85




---



##### Table of Contents



Net advertising service cost- movie theatre and traditional outdoor billboards
 Gross Profit
 Operating Expenses
 General and Administrative
 Selling and Marketing
 Impairment loss
 Other operating expenses
 Loss from continuing operations before income tax
 Provision for income taxes
 Net loss from continuing operations
 Net loss from discontinued operations, net of tax
 86




---



##### Table of Contents



Net loss attributable to Focus Media Holdings Limited
 Liquidity and Capital Resources
 Cash Flows and Working Capital
  
  
  87




---



##### Table of Contents



For the year ended December 31,2007
    
    
    2008
    
    
    2009(in thousands of U.S. dollars)Net cash provided by operating activities
    
    $
    166,960
    
    
    $
    168,441
    
    
    $
    160,723Net cash (used) in investing activities
    
    
    (342,881
    )
    
    
    (145,794
    )
    
    
    (158,248
    )Net cash provided by financing activities
    
    
    442,976
    
    
    
    (66,616
    )
    
    
    144,499Effect of exchange rate changes
    
    
    18,750
    
    
    
    16,469
    
    
    
    (1,730
    )Net increase in cash and cash equivalents
    
    
    285,805
    
    
    
    (27,500
    )
    
    
    145,244
     88




---



##### Table of Contents



Transactions with Related Parties
  Capital Expenditures
  For the year ended December 31,2007
    
    2008
    
    2009(in thousands of U.S. dollars)Total capital expenditure
    
    $
    59,451
    
    
    $
    72,876
    
    
    $
    10,655
  Restricted Net Assets
 
  
 B. Research, Development, Patents and Licenses, etc.
 Research and Development
  89




---



##### Table of Contents



Patents and Trademarks
    C. Trend Information
  D. Off-balance Sheet Arrangements
  90




---



##### Table of Contents



E. Tabular Disclosure of Contractual Obligations
  Payments due December 312014 andTOTAL
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    ThereafterDisplay and poster frame
placement agreement obligations
    
    
    90,712
    
    
    
    57,462
    
    
    
    22,004
    
    
    
    6,989
    
    
    
    2,430
    
    
    
    1,827Office premise lease obligations
    
    
    6,143
    
    
    
    4,528
    
    
    
    1,223
    
    
    
    383
    
    
    
    4
    
    
    
    5Total contractual obligations
    
    
    96,855
    
    
    
    61,990
    
    
    
    23,227
    
    
    
    7,372
    
    
    
    2,434
    
    
    
    1,832
   
 ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 A. Directors and Senior Management
  Name
    
    Age
    
    PositionJason Nanchun Jiang
    
    
    37
    
    
    Chief Executive Officer and Chairman of the Board of DirectorsFumin Zhuo(1)
    
    
    58
    
    
    DirectorNeil Nanpeng Shen(2)
    
    
    42
    
    
    DirectorCharles Cao
    
    
    44
    
    
    DirectorDaqing Qi(3)
    
    
    47
    
    
    DirectorDavid Ying Zhang(4)
    
    
    36
    
    
    DirectorYing Wu (5)
    
    
    51
    
    
    DirectorAlex Deyi Yang
    
    
    34
    
    
    General Manager and DirectorKit Leong Low
    
    
    39
    
    
    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
 91




---



##### Table of Contents



Fumin Zhuo
 Neil Nanpeng Shen
 Charles Cao
 Daqing Qi
 David Ying Zhang
 92




---



##### Table of Contents



Ying Wu
 Alex Deyi Yang
 Kit Leong Low
  Duties of Directors
   
 
 
 
 
 
 
 
 93




---



##### Table of Contents



B. Compensation
  Share Option and Restricted Shares Plans
       94




---



##### Table of Contents



Options granted to employees and non-employees:
    
    2007
    
    2008
    
    2009Risk-free rate of return
    
    
    4.02%  4.68
    %
    
    
    1.59%3.2
    %
    
    
    0.87
    %Weighted average expected option life
    
    2 years
    
    

    2.5 to 4 years
    

    
    2.5 yearsVolatility rate
    
    
    50.61%53.05
    %
    
    
    53%68.88
    %
    
    
    88.32
    %Dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
      ExerciseNumber of
    
    perrestricted
    
    ordinaryshares issued
    
    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, 2019
 95




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##### Table of Contents



ExerciseNumber of
    
    perrestricted
    
    ordinaryshares issued
    
    share
    
    Date of grant
    
    Date of expiration(in U.S. dollars)Ying Wu
    
    
    *
    
    
    $nil
    
    October 1, 2009
    
    September 30, 2019Alex Deyi Yang
    
    
    *
    
    
    $nil
    
    October 1, 2009
    
    September 30, 2019Kit Leong Low
    
    
    *
    
    
    $nil
    
    October 1, 2009
    
    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. C. Board Practices
  Board Committees
  Audit Committee
  
 
 
 
 
 
 
 96




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##### Table of Contents



Compensation Committee
  
 
 
 
 
 
 Nominations Committee
 97




---



##### Table of Contents



Foreign Private Issuer Home Country Practice
 D. Employees
  Number ofemployees (1)
    
    
    PercentageSales and marketing
    
    
    1,594
    
    
    
    33.2
    %Operations
    
    
    2,277
    
    
    
    47.4
    %Management and administration
    
    
    929
    
    
    
    19.4
    %Total number of employees
    
    
    4,800
    
    
    
    100.0
    %
 
 (1)
    
    This excludes employees our regional distributors and agents who are not directly under
our employ.   E. Share Ownership
  
 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 A. Major Shareholders
    98




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##### Table of Contents



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
    
    
    *
    
    
    
    *Alex Deyi Yang
    
    
    *
    
    
    
    *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.    99




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##### Table of Contents



B. Related Party Transactions
  Year ended December 31,Name of related parties
    
    Director interested
    
    2007
    
    
    2008
    
    
    2009Shanghai Everease Advertising &
Communication Ltd.
    
    Jason Nanchun Jiang
    
    $
    3,132,954
    
    
    $
    (132,116
    )
    
    $
    Multimedia Park Venture Capital
    
    Jimmy Wei Yu
    
    
    104
    
    
    
    
    
    
    
    Shanghai Shengchu Advertising
Agency Co., Ltd.
    
    Jimmy Wei Yu
    
    
    44,542
    
    
    
    
    
    
    
    CTV Golden Bridge International
Media Co., Ltd.
    
    Daqing Qi
    
    
    
    
    
    
    
    
    
    
    277,749Sina.com
    
    Charles Cao
    
    
    1,095,814
    
    
    
    1,637,297
    
    
    
    548,988Sohu.com
    
    Daqing Qi
    
    
    608,150
    
    
    
    2,002,839
    
    
    
    438,536Home-Inn
    
    Neil Nanpeng Shen
    
    
    82,356
    
    
    
    256,690
    
    
    
    89,076Ctrip.com
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    69,863
    
    
    
    486,26351.com
    
    Neil Nanpeng Shen
    
    
    19,611
    
    
    
    718
    
    
    
    Qihoo.com
    
    Neil Nanpeng Shen
    
    
    12,151
    
    
    
    48,385
    
    
    
    38,008UUSEE
    
    Neil Nanpeng Shen
    
    
    27,789
    
    
    
    78,572
    
    
    
    Aikong.com
    
    Jason Nanchun Jiang
    
    
    
    
    
    
    56,190
    
    
    
    Giant Interactive Group Inc.
    
    Jason Nanchun Jiang
    
    
    
    
    
    
    4,153,948
    
    
    
    368,242China Vanke Co., Ltd.
    
    Daqing Qi
    
    
    
    
    
    
    909,775
    
    
    
    459,376Beijing Huayi Brothers
    
    Jason Nanchun Jiang
    
    
    
    
    
    
    43,561
    
    
    
    Tea Care Group Ltd.
    
    Fuming Zhuo
    
    
    
    
    
    
    
    
    
    
    292,606Yadu Huang Ke Technology Co., Ltd.
    
    Fuming Zhuo
    
    
    243,628
    
    
    
    87,638
    
    
    
    Focus Technology Co., Ltd.
    
    Fuming Zhuo
    
    
    
    
    
    
    
    
    
    
    43,200Total
    
    
    
    $
    5,267,099
    
    
    $
    9,213,360
    
    
    $
    3,042,044
  Year ended December 31,Name of related parties
    
    Director interested
    
    2007
    
    2008
    
    2009Sina.com
    
    Charles Cao
    
    $
    24,755,004
    
    
    $
    50,294,367
    
    
    $
    28,635,023Sohu.com
    
    Daqing Qi
    
    
    14,596,893
    
    
    
    39,061,219
    
    
    
    17,208,874Ctrip.com
    
    Neil Nanpeng Shen
    
    
    130,230
    
    
    
    343,546
    
    
    
    146,35651.com
    
    Neil Nanpeng Shen
    
    
    204,612
    
    
    
    887,603
    
    
    
    195,376Qihoo.com
    
    Neil Nanpeng Shen
    
    
    305,413
    
    
    
    847,021
    
    
    
    109,564UUSEE
    
    Neil Nanpeng Shen
    
    
    15,929
    
    
    
    306,899
    
    
    
    E-House(China) Holdings Limited
    
    Neil Nanpeng Shen
    
    
    2,008
    
    
    
    
    
    
    
    StormNet Information Technology
    
    David Zhang
    
    
    
    
    
    
    
    
    
    
    21,928Total
    
    
    
    $
    40,010,089
    
    
    $
    91,740,655
    
    
    $
    46,317,121
  December 31,Name of related parties
    
    Note
    
    Director interested
    
    2008
    
    
    2009Shanghai Everease Advertising &
Communication Ltd.
    
    (a)
    
    Jason Nanchun Jiang
    
    $
    4,136
    
    
    $
    Multimedia Park Venture Capital
    
    (a)
    
    Jimmy Wei Yu
    
    
    232,399
    
    
    
    Sina.com
    
    (a)
    
    Charles Cao
    
    
    2,183,809
    
    
    
    570,113Sohu.com
    
    (a)
    
    Daqing Qi
    
    
    4,905,642
    
    
    
    2,685,730Ctrip.com
    
    (a)
    
    Neil Nanpeng Shen
    
    
    49,401
    
    
    
    (293
    )51.com
    
    (a)
    
    Neil Nanpeng Shen
    
    
    215,854
    
    
    
    UUSEE
    
    (a)
    
    Neil Nanpeng Shen
    
    
    18,937
    
    
    
    Tea Care Group Ltd.
    
    (a)
    
    Fuming Zhuo
    
    
    
    
    
    
    21,475China Vanke Co., Ltd.
    
    (a)
    
    Daqing Qi
    
    
    
    
    
    
    7,379Home-Inn
    
    (a)
    
    Neil Nanpeng Shen
    
    
    23,838
    
    
    
    
 100




---



##### Table of Contents



December 31,Name of related parties
    
    Note
    
    Director interested
    
    2008
    
    
    2009Yadu Huang Ke Technology Co., Ltd.
    
    (a)
    
    Fuming Zhuo
    
    
    146,033
    
    
    
    Qihoo.com
    
    (a)
    
    Neil Nanpeng Shen
    
    
    53,724
    
    
    
    Giant Interactive Group, Inc.
    
    (a)
    
    Jason Nanchun Jiang
    
    
    174,079
    
    
    
    Total
    
    
    
    
    
    $
    8,007,852
    
    
    $
    3,284,404
   December 31,Name of related parties
    
    Note
    
    Director interested
    
    2008
    
    
    2009Sina.com
    
    (b)
    
    Charles Cao
    
    $
    11,586,228
    
    
    $
    2,126,612Sohu.com
    
    (b)
    
    Daqing Qi
    
    
    3,039,075
    
    
    
    51.com
    
    (b)
    
    Neil Nanpeng Shen
    
    
    554,326
    
    
    
    32,871UUSEE
    
    (b)
    
    Neil Nanpeng Shen
    
    
    151,197
    
    
    
    Home-Inn
    
    (b)
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    StormNet Information Technology
    
    (b)
    
    David Zhang
    
    
    
    
    
    
    54,376Qihoo.com
    
    (b)
    
    Neil Nanpeng Shen
    
    
    129,427
    
    
    
    158Giant Interactive Group Inc.
    
    (b)
    
    Jason Nanchun Jiang
    
    
    146,314
    
    
    
    Ctrip.com
    
    (b)
    
    Neil Nanpeng Shen
    
    
    80,543
    
    
    
    16,877Total
    
    
    
    
    
    $
    15,687,110
    
    
    $
    2,230,894
 Note (b)  The amounts represent trade payables for advertising services purchased.
 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
  101




---



##### Table of Contents



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
  102




---



##### Table of Contents



C. Interests of Experts and Counsel
  ITEM 8. FINANCIAL INFORMATION
 A. Consolidated Statements and Other Financial Information
  Legal Proceedings
    Dividend Policy
   103




---



##### Table of Contents



B. Significant Changes
  
 
 
 
  104




---



##### Table of Contents



ITEM 9. THE OFFER AND LISTING
 A. Offer and Listing Details
 Market Price Information for Our American Depositary Shares
 
  
 
 SALE PRICEHIGH
    
    LOWUS$
    
    US$MONTHLY HIGHS AND LOWS2009(starting April 1)April
    
    
    7.33
    
    
    
    6.20May
    
    
    8.83
    
    
    
    6.30June
    
    
    9.39
    
    
    
    6.52July
    
    
    8.98
    
    
    
    7.37August
    
    
    9.95
    
    
    
    8.35September
    
    
    11.54
    
    
    
    8.59October
    
    
    15.31
    
    
    
    10.43November
    
    
    14.29
    
    
    
    12.07December
    
    
    17.49
    
    
    
    12.652010January
    
    
    17.88
    
    
    
    12.26February
    
    
    15.69
    
    
    
    12.82March
    
    
    18.72
    
    
    
    14.35April
    
    
    18.48
    
    
    
    16.68May
    
    
    17.18
    
    
    
    14.36June
    
    
    17.40
    
    
    
    14.60July
    
    
    18.21
    
    
    
    14.82August
    
    
    19.49
    
    
    
    17.38September
    
    
    24.68
    
    
    
    19.00October
    
    
    25.54
    
    
    
    22.41November
    
    
    27.27
    
    
    
    23.01December
(through December 7)
    
    
    24.12
    
    
    
    22.97
 
  B. Plan of Distribution
  C. Markets
  D. Selling Shareholders
  105




---



##### Table of Contents



E. Dilution
  F. Expenses of the Issue
  
 ITEM 10. ADDITIONAL INFORMATION
 A. Share Capital
  B. Memorandum and Articles of Association
  C. Material Contracts
  Allyes
   Purchase Price
 Representations and Warranties
 Covenants
 Indemnification
 106




---



##### Table of Contents



Management Buy-in To Allyes
  Sale of Allyes
  107




---



##### Table of Contents



Share Repurchase from Fosun
  Control Over Acquired Entities
  Share Subscription by JJ Media Investment Holding Limited
  D. Exchange Controls
    108




---



##### Table of Contents



E. Taxation
 Cayman Islands Taxation
  109




---



##### Table of Contents



(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
   United States Federal Income Taxation
  110




---



##### Table of Contents



IF YOU ARE CONSIDERING THE
PURCHASE, OWNERSHIP OR DISPOSITION OF OUR ORDINARY SHARES OR ADSS, YOU SHOULD CONSULT YOUR OWN TAX
ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO YOU IN LIGHT OF YOUR
PARTICULAR SITUATION AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING
JURISDICTION
  
 
 
 
 111




---



##### Table of Contents



ADSs
   Taxation of Dividends
   112




---



##### Table of Contents



Passive Foreign Investment Companies
   
 
    
 113




---



##### Table of Contents



Taxation of Capital Gains
  114




---



##### Table of Contents



Information Reporting and Backup Withholding
    F. Dividends and Paying Agents
  G. Statement by Experts
  H. Documents on Display
     115




---



##### Table of Contents



I. Subsidiary Information
  
 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
  Foreign Currency Risk
  Inflation
  
 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
 A. Debt securities
  B. Warrants and Rights
  116




---



##### Table of Contents



C. Other securities
  D. American Depositary Shares
   
 PART II
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 A. Modifications of Rights
  
 
 
 
   117




---



##### Table of Contents



B. Use of Proceeds
  
 ITEM 15. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
 
  
 Managements Annual Report on Internal Control Over Financial Reporting.
  118




---



##### Table of Contents



119




---



##### Table of Contents



Internal Control
 Integrated Framework
     120




---



##### Table of Contents



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 31,2008
    
    
    2009(in thousands, US dollar)Audit Fees (1)
    
    $
    1,950
    
    
    $
    1,260Audit-related Fees (2)
    
    
    850
    
    
    
    174Tax Fees (3)
    
    
    453
    
    
    
    364All Other Fees (4)
    
    
    
    
    
    
    Total
    
    $
    3,253
    
    
    $
    1,798
 
 (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
  121




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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
    
    
    2,393,134
    
    
    $
    15.33
    
    
    
    2,393,134
    
    
    $
    163,255,127September 2010


11,915,944


$
19.86



14,309,078


$
26,555,127
 
 (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
   122




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##### Table of Contents



PART III
 
 ITEM 17. FINANCIAL STATEMENTS
  
 ITEM 18. FINANCIAL STATEMENTS
  PageReport of Independent Registered Public Accounting
    
    
    F-2Consolidated Balance Sheets as of December 31, 2007 and 2008
    
    
    F-3Consolidated Statements of Operations for each of the years ended December 31, 2006, 2007
and 2008
    
    
    F-4Consolidated Statements of Changes in Shareholders Equity and Comprehensive Income
(Loss) for the years ended December 31, 2006, 2007 and 2008
    
    
    F-5Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2007 and 2008
    
    
    F-6Notes to the Consolidated Financial Statements
    
    
    F-8Additional Information  Financial Statement Schedule 1
    
    
    F-37
 
 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.
 123




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##### Table of Contents



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.)10.20**
    
    Business Agency Agreement between Shanghai On-Target Advertising Co., Ltd. and Shanghai Focus
 124




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##### Table of Contents



ExhibitNumber
    
    Description of ExhibitsMedia
Advertisement Co., Ltd. (Previously filed as Exhibit 10.23 to the Companys registration statement on
Form F-1 (File No.: 333-125785), dated June 14, 2005.)10.21**
    
    Agreement between Shanghai On-Target Advertising Co., Ltd., Jimmy Wei Yu, Shanghai Focus Media
Advertisement Co., Ltd., Union Enterprise Holding Co., Ltd. and Shenlong Lin, dated October 15, 2003.
(Previously filed as Exhibit 10.24 to the Companys registration statement on Form F-1 (File No.:333-125785), dated June 14, 2005.)10.22*
    
    Acknowledgement Letter entered into as of March 28, 2005 by and among Shanghai Focus Media Advertisement
Co., Ltd., Focus Media Technology (Shanghai) Co., Ltd., Focus Media Digital Information Technology
(Shanghai) Co., Ltd. and certain then subsidiaries of Shanghai Focus Media Advertisement Co., Ltd.
(Previously filed as Exhibit 10.13 to the Companys registration statement on Form F-1 (File No.:333-146913), dated October 24, 2007.)10.48*
    
    Share Purchase Agreement, dated October 15, 2005, as amended and supplemented, among Focus Media Holding
Limited, Infoachieve Limited, Total Team Investments Limited and the other Infoachieve parties named
therein. (Previously filed as Exhibit 10.98 to the Companys registration statement on Form F-1 (File
No.: 333-146913), dated October 24, 2007.)10.49*
    
    Share Purchase Agreement, dated as of January 7, 2006, among Focus Media Holding Limited, Target Media
Holdings Limited and Its Shareholders. (Previously filed as Exhibit 10.97 to the Companys registration
statement on Form F-1 (File No.: 333-146913), dated October 24, 2007.)10.50***
    
    Asset Transfer Agreement, dated December 31, 2005, by and between Focus Media Digital Information
Technology (Shanghai) Co., Ltd. and Shanghai New Focus Media Advertisement Co., Ltd.10.51*
    
    Share Purchase Agreement, dated March 7, 2006, by and among Focus Media Holding Limited and Dotad Media
Holdings Co., Ltd. (Previously filed as Exhibit 10.24 to the Companys registration statement on Form
F-1 (File No.: 333-146913), dated October 24, 2007.)10.70∞
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement,
dated May 22, 2006, of Fuzhou Fukesi Advertising Co., Ltd.10.71∞
    
    Acknowledgement Letter of Participation of Call Option Agreement,
dated May 22, 2006, of Fuzhou Fukesi Advertising Co., Ltd.10.72∞
    
    Acknowledgement Letter of Participation of Shareholders Voting
Rights Proxy Agreement, dated May 22, 2006, of Fuzhou Fukesi
Advertising Co., Ltd.10.79∞
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement,
dated May 22, 2006, of Shanghai Jiefang Focus Media Advertisement
Co., Ltd.10.80∞
    
    Acknowledgement Letter of Participation of Call Option Agreement,
dated May 22, 2006, of Shanghai Jiefang Focus Media Advertisement
Co., Ltd.10.81∞
    
    Acknowledgement Letter of Participation of Shareholders Voting
Rights Proxy Agreement, dated May 22, 2006, of Shanghai Jiefang
Focus Media Advertisement Co., Ltd.10.82∞
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement,
dated May 22, 2006, of Shanghai Perfect Media Advertising Agency
Co., Ltd.10.83∞
    
    Acknowledgement Letter of Participation of Call Option Agreement,
dated May 22, 2006, of Shanghai Perfect Media Advertising Agency
Co., Ltd.10.84∞
    
    Acknowledgement Letter of Participation of Shareholders Voting
Rights Proxy Agreement, dated
 125




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##### Table of Contents



ExhibitNumber
    
    Description of ExhibitsMay 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.10.181γ
    
    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, 2010.10.188 Ω
    
    Indemnity Agreement, dated
September 7, 2010, between JJ
Media Investment Holding
Limited and Focus Media
Holding Limited.10.189α
    
    Securities Purchase Agreement between Fosun International Limited and Focus Media Holding Limited, dated
September 20, 2010.12.1
    
    Certificate of Chief Executive Officer.12.2
    
    Certificate of Chief Financial Officer.13.1
    
    Certification of Periodic Financial Report.13.2
    
    Certification of Periodic Financial Report.21.1α
    
    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.
 
 126




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##### Table of Contents



*
    
    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 registration
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 dated September 7,
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. 
 SIGNATURES
  Focus Media Holding LimitedBy:
    /s/ Jason Nanchun JiangName:
    Jason Nanchun JiangTitle:
    Chairman and Chief Executive Officer  127




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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, 2008 and 2009
    
    
    F-3Consolidated Statements of Operations for the Years Ended December 31, 2007, 2008 and 2009
    
    
    F-4Consolidated Statements of Changes in Equity and Comprehensive Income (Loss) for the Years Ended December 31, 2007, 2008 and 2009
    
    
    F-5Consolidated Statements of Cash Flows for the Years Ended December 31, 2007, 2008 and 2009
    
    
    F-6Notes to the Consolidated Financial Statements
    
    
    F-8Additional Information  Financial Statement Schedule I
    
    
    F-37
 F-1




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##### Table of Contents



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 31,2008
    
    
    2009(In U.S. Dollars, except share and per sharedata, unless otherwise stated)AssetsCurrent assets:Cash and cash equivalents
    
    $
    142,434,073
    
    
    $
    568,159,372Investments
    
    
    
    
    
    
    29,290,296Accounts receivable, net of allowance for doubtful
accounts of $4,395,022 and $33,596,096 in 2008 and
2009, respectively
    
    
    135,270,359
    
    
    
    172,752,473Prepaid expenses and other current assets
    
    
    15,142,147
    
    
    
    29,451,741Deposits paid for acquisition of subsidiaries
    
    
    29,675,790
    
    
    
    4,860,406Amounts due from related parties
    
    
    7,913,125
    
    
    
    3,284,404Rental deposits
    
    
    10,089,633
    
    
    
    29,639,716Assets held for sale-current
    
    
    467,045,566
    
    
    
    Total current assets
    
    
    807,570,693
    
    
    
    837,438,408Rental deposits
    
    
    133,362
    
    
    
    1,570,337Equipment, net
    
    
    6,292,294
    
    
    
    77,661,147Acquired intangible assets, net
    
    
    77,712,847
    
    
    
    51,777,215Goodwill
    
    
    30,699,525
    
    
    
    410,368,691Other long-term assets
    
    
    10,736,177
    
    
    
    14,627,502Assets held for sale-non current
    
    
    599,149,115
    
    
    
    Total assets
    
    $
    1,532,294,013
    
    
    $
    1,393,443,300Liabilities and equityCurrent liabilities:Accounts payable
    
    $
    67,904,888
    
    
    $
    53,340,007Accrued expenses and other current liabilities
    
    
    61,911,260
    
    
    
    101,870,170Income taxes payable
    
    
    12,622,191
    
    
    
    27,537,785Amounts due to related parties
    
    
    15,687,110
    
    
    
    2,230,894Liabilities held for sale-current
    
    
    160,738,638
    
    
    
    Deferred tax liabilities
    
    
    
    
    
    
    12,077,282Total current liabilities
    
    
    318,864,087
    
    
    
    197,056,138Liabilities held for sale-non current
    
    
    1,959,412
    
    
    
    Deferred tax liabilities
    
    
    11,580,681
    
    
    
    5,435,178Total liabilities
    
    $
    332,404,180
    
    
    $
    202,491,316Commitments and contingencies (Note 16)EquityOrdinary shares ($0.00005 par value; 19,800,000,000
shares authorized in 2008 and 2009; 646,081,710 and
722,249,544 shares issued and outstanding in 2008 and
2009, respectively)
    
    
    32,327
    
    
    
    36,287Additional paid-in capital
    
    
    1,659,833,079
    
    
    
    1,875,304,804Subscription receivable
    
    
    
    
    
    
    (3,081,726
    )Retained earnings (deficit)
    
    
    (533,969,347
    )
    
    
    (747,226,391
    )Accumulated other comprehensive income
    
    
    71,887,984
    
    
    
    64,090,691Total Focus Media Holdings Limited shareholders equity
    
    $
    1,197,784,043
    
    
    $
    1,189,123,665Noncontrolling interests
    
    
    2,105,790
    
    
    
    1,828,319Total equity
    
    $
    1,199,889,833
    
    
    $
    1,190,951,984Total liabilities and equity
    
    $
    1,532,294,013
    
    
    $
    1,393,443,300
  F-3




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the years ended December 31,2007
    
    
    2008
    
    
    2009(In U.S. Dollars, except share and per share data,unless otherwise stated)Net revenues:Advertising service revenue
    
    $
    409,113,436
    
    
    $
    638,713,153
    
    
    $
    504,734,936Other revenues
    
    
    1,114,384
    
    
    
    3,621,880
    
    
    
    300,535Total net revenues
    
    
    410,227,820
    
    
    
    642,335,033
    
    
    
    505,035,471Cost of revenues:Advertising service cost
    
    
    183,667,144
    
    
    
    345,511,045
    
    
    
    338,843,490Other costs
    
    
    797,717
    
    
    
    1,722,996
    
    
    
    290,663Total cost of revenues
    
    
    184,464,861
    
    
    
    347,234,041
    
    
    
    339,134,153Gross profit
    
    
    225,762,959
    
    
    
    295,100,992
    
    
    
    165,901,318Operating expenses:General and administrative
    
    
    45,641,232
    
    
    
    90,193,964
    
    
    
    120,190,943Selling and marketing
    
    
    60,708,275
    
    
    
    95,399,913
    
    
    
    107,183,854Impairment loss
    
    
    
    
    
    
    596,069,011
    
    
    
    86,303,556Other operating expenses (income), net
    
    
    (7,645,203
    )
    
    
    182,521,832
    
    
    
    10,847,655Total operating expenses
    
    
    98,704,304
    
    
    
    964,184,720
    
    
    
    324,526,008Income (loss) from operations
    
    
    127,058,655
    
    
    
    (669,083,728
    )
    
    
    (158,624,690
    )Interest income
    
    
    9,632,614
    
    
    
    7,528,380
    
    
    
    5,260,910Interest expense
    
    
    (25,231
    )
    
    
    
    
    
    
    Income (loss) from continuing operations
before income taxes
    
    
    136,666,038
    
    
    
    (661,555,348
    )
    
    
    (153,363,780
    )Income taxes
    
    
    8,325,705
    
    
    
    26,784,730
    
    
    
    9,854,972Net income (loss) from continuing operations
    
    
    128,340,333
    
    
    
    (688,340,078
    )
    
    
    (163,218,752
    )Net income (loss) from discontinued
operations, net of tax
    
    
    16,789,586
    
    
    
    (82,497,889
    )
    
    
    (46,513,904
    )Net income (loss)
    
    
    145,129,919
    
    
    
    (770,837,967
    )
    
    
    (209,732,656
    )Less: Net income (loss) attributable to
noncontrolling interests
    
    
    694,370
    
    
    
    (150,441
    )
    
    
    3,524,388Net income (loss) attributable to Focus
Media Holdings Limited Shareholders
    
    $
    144,435,549
    
    
    $
    (770,687,526
    )
    
    $
    (213,257,044
    )Income (loss) per share from continuing
operations  basic
    
    $
    0.22
    
    
    $
    (1.07
    )
    
    $
    (0.25
    )Income (loss) per share from continuing
operations  diluted
    
    $
    0.21
    
    
    $
    (1.07
    )
    
    $
    (0.25
    )Income (loss) per share from discontinued
operations  basic
    
    $
    0.03
    
    
    $
    (0.13
    )
    
    $
    (0.07
    )Income (loss) per share from discontinued
operations  diluted
    
    $
    0.03
    
    
    $
    (0.13
    )
    
    $
    (0.07
    )Income (loss) per share  basic
    
    $
    0.24
    
    
    $
    (1.20
    )
    
    $
    (0.33
    )Income (loss) per share  diluted
    
    $
    0.24
    
    
    $
    (1.20
    )
    
    $
    (0.33
    )Shares used in calculating basic income
(loss) per share
    
    
    590,387,396
    
    
    
    643,989,522
    
    
    
    651,654,345Shares used in calculating diluted income
(loss) per share
    
    
    608,326,450
    
    
    
    643,989,522
    
    
    
    651,654,345
  F-4




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
 
 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 
AND COMPREHENSIVE INCOME (LOSS)
 (In U.S. Dollars, except share and per share data, unless otherwise stated)
 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, 2007
    
    
    534,896,873
    
    
    $
    26,745
    
    
    $
    947,075,726
    
    
    $
    
    
    
    $
    96,194,969
    
    
    $
    7,446,551
    
    
    $
    357,814
    
    
    $
    1,051,101,805
    
    
    $
    Issuance of ordinary shares upon
follow-on offering on January 25,
2008, net of issuance cost of
$672,289
    
    
    15,000,000
    
    
    
    750
    
    
    
    114,869,653
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114,870,403
    
    
    
    Issuance of ordinary shares upon
follow-on offering on November 7,
2008, net of issuance cost of
$1,463,191
    
    
    25,000,000
    
    
    
    1,250
    
    
    
    312,573,058
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    312,574,308
    
    
    
    Issuance of ordinary shares in
connection with acquisitions
    
    
    57,299,699
    
    
    
    2,865
    
    
    
    166,047,247
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    166,050,112
    
    
    
    Issuance of ordinary shares
pursuant to share option plans
    
    
    8,034,280
    
    
    
    410
    
    
    
    19,559,810
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,560,220
    
    
    
    Adjustment upon adoption of
ASC740-10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,912,339
    )
    
    
    
    
    
    
    
    
    
    
    (3,912,339
    )
    
    
    Share-based compensation expense
    
    
    
    
    
    
    
    
    
    
    21,454,298
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,454,298
    
    
    
    Unrealized gain on
available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,967,393
    
    
    
    
    
    
    
    1,967,393
    
    
    
    1,967,393Cumulative translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,200,262
    
    
    
    114,269
    
    
    
    27,314,531
    
    
    
    27,314,531Capital injection from
noncontrolling interest holders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136,914
    
    
    
    136,914
    
    
    
    Acquisition of subsidiaries with
noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    609,881
    
    
    
    609,881
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    144,435,549
    
    
    
    
    
    
    
    694,370
    
    
    
    145,129,919
    
    
    
    145,129,919Balance at December 31, 2007
    
    
    640,230,852
    
    
    $
    32,020
    
    
    $
    1,581,579,792
    
    
    
    
    
    
    $
    236,718,179
    
    
    $
    36,614,206
    
    
    $
    1,913,248
    
    
    $
    1,856,857,445
    
    
    $
    174,411,843Issuance 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
    )
  F-5




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the years ended December 31,2007
    
    
    2008
    
    
    2009(In U.S. dollars)Operating activities:Net income (loss)
    
    
    145,129,919
    
    
    
    (770,837,967
    )
    
    
    (209,732,656
    )Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Bad debt expenses
    
    
    3,655,448
    
    
    
    15,767,332
    
    
    
    29,076,504Share-based compensation
    
    
    21,454,298
    
    
    
    42,615,166
    
    
    
    66,503,134Depreciation and amortization
    
    
    44,197,504
    
    
    
    71,852,826
    
    
    
    62,728,660Unrealized gain on available-for-sale securities
    
    
    
    
    
    
    (408,387
    )
    
    
    Loss from equity method investees
    
    
    
    
    
    
    9,557
    
    
    
    Loss on disposal of equity interest of subsidiaries and
impairment of other long-lived assets
    
    
    
    
    
    
    282,567,020
    
    
    
    66,180,083Loss on disposal of equipment
    
    
    3,674,886
    
    
    
    697,909
    
    
    
    1,346,489Impairment loss for goodwill
    
    
    
    
    
    
    596,069,011
    
    
    
    87,608,201Impairment loss for acquired intangible assets
    
    
    
    
    
    
    4,810,987
    
    
    
    25,437,087Impairment loss for equipment
    
    
    
    
    
    
    18,562,323
    
    
    
    40,318,817Changes in assets and liabilities, net of effects of
acquisitions:Accounts receivable
    
    
    (92,171,199
    )
    
    
    (124,577,341
    )
    
    
    929,044Inventories
    
    
    (1,113,692
    )
    
    
    126,858
    
    
    
    202,090Prepaid expenses and other current assets
    
    
    (904,345
    )
    
    
    (28,802,626
    )
    
    
    (3,794,689
    )Amounts due from related parties
    
    
    (5,762,593
    )
    
    
    (4,545,372
    )
    
    
    6,405,746Rental deposits
    
    
    (22,231,398
    )
    
    
    1,712,586
    
    
    
    1,327,564Accounts payable
    
    
    11,670,114
    
    
    
    45,099,316
    
    
    
    23,202,611Accrued expenses and other current liabilities
    
    
    37,678,359
    
    
    
    9,135,910
    
    
    
    (23,325,332
    )Amounts due to related parties
    
    
    12,631,368
    
    
    
    2,625,515
    
    
    
    (13,356,596
    )Income tax payable
    
    
    10,033,244
    
    
    
    15,462,823
    
    
    
    (1,199,784
    )Deferred taxes
    
    
    (982,272
    )
    
    
    (9,502,842
    )
    
    
    866,257Net cash provided by operating activities
    
    $
    166,959,641
    
    
    $
    168,440,604
    
    
    $
    160,723,230Investing activities:Purchase of equipment and other long-term assets
    
    $
    (59,450,942
    )
    
    $
    (72,875,855
    )
    
    $
    (10,654,598
    )Cash of disposed subsidiaries
    
    
    
    
    
    
    (11,693,755
    )
    
    
    (27,315,949
    )Acquisition of intangible assets
    
    
    (105,049
    )
    
    
    (1,766,633
    )
    
    
    Purchase of subsidiaries and earn-out payment paid to
acquire subsidiaries, net of cash acquired
    
    
    (81,779,531
    )
    
    
    (133,347,771
    )
    
    
    (92,411,545
    )Investment in a joint venture
    
    
    
    
    
    
    (2,970,000
    )
    
    
    Deposit (paid)/refunded to acquire subsidiaries
    
    
    (83,367,278
    )
    
    
    (14,270,053
    )
    
    
    329,516Proceeds from disposal of fixed assets
    
    
    
    
    
    
    
    
    
    
    196,115Cash paid for purchases of debt and equity securities
    
    
    (88,177,967
    )
    
    
    
    
    
    
    (29,257,303
    )Cash received from sale of debt and equity securities
    
    
    
    
    
    
    91,129,763
    
    
    
    865,589Issuance of loan receivable to CGEN
    
    
    (30,000,000
    )
    
    
    
    
    
    
    Net cash used in investing activities
    
    $
    (342,880,767
    )
    
    $
    (145,794,304
    )
    
    $
    (158,248,175
    )
 F-6




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##### Table of Contents



For the years ended December 31,2007
    
    
    2008
    
    
    2009(In U.S. dollars)Financing activities:Proceeds from issuance of ordinary shares, net of issuance
costs of $6,207,107, $2,135,480 and $nil in 2007, 2008 and
2009, respectively
    
    $
    427,444,711
    
    
    $
    
    
    
    $
    142,425,000Proceeds from issuance of ordinary shares pursuant to share
option plans
    
    
    19,560,220
    
    
    
    10,711,301
    
    
    
    2,074,025Proceeds from short-term loans
    
    
    
    
    
    
    370,423
    
    
    
    Repayment of short-term loans
    
    
    (4,165,716
    )
    
    
    (30,411,521
    )
    
    
    Capital injection from minority shareholders
    
    
    136,914
    
    
    
    213,706
    
    
    
    Share repurchase
    
    
    
    
    
    
    (47,500,211
    )
    
    
    Net cash provided by (used) in financing activities
    
    $
    442,976,129
    
    
    $
    (66,616,302
    )
    
    $
    144,499,025Effect of exchange rate changes
    
    
    18,750,436
    
    
    
    16,469,125
    
    
    
    (1,730,212
    )Net increase (decrease) in cash and cash equivalents
    
    $
    285,805,439
    
    
    $
    (27,500,877
    )
    
    $
    145,243,868Cash and cash equivalents, beginning of year
    
    
    164,610,942
    
    
    
    450,416,381
    
    
    
    142,434,073Add/(less): cash and cash equivalents in assets held-for-sale
    
    
    
    
    
    
    (280,481,431
    )
    
    
    280,481,431Cash and cash equivalents, end of year
    
    $
    450,416,381
    
    
    $
    142,434,073
    
    
    $
    568,159,372Supplemental disclosure of cash flow informationIncome taxes paid
    
    $
    1,247,277
    
    
    $
    23,712,147
    
    
    $
    12,965,179Interest paid
    
    $
    13,897
    
    
    $
    
    
    
    $
    SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING
ACTIVITIESNon-cash investing activities:Acquisition of subsidiaries:Value of ordinary shares issued
    
    $
    166,047,247
    
    
    $
    72,427,338
    
    
    $
    Ordinary share consideration to be issued
    
    $
    
    
    
    $
    
    
    
    $
    Accounts payable
    
    $
    17,873,584
    
    
    $
    60,501,181
    
    
    $
    20,326,014Liabilities recorded as a result of contingent consideration
    
    $
    72,902,515
    
    
    $
    13,510,310
    
    
    $
    
  F-7




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
 (In U.S. dollars except share data and unless otherwise stated)
 1. Organization and Principal Activities
    F-8




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
 2. Summary of Significant Accounting Policies
 (a) Basis of Presentation
  (b) Basis of Consolidation
  (c) Cash and Cash Equivalents
  (d) Use of Estimates
  (e) Investments
   (f) Investment in equity affiliates
  F-9




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
  (g) Equipment, Net
  Media display equipment
    
    5 yearsComputers and office equipment
    
    5 yearsVehicles
    
    5 yearsLeasehold improvements
    
    lesser of the term of the lease or the estimated useful lives of the assets
  (h) Acquired Intangible Assets, net
  (i) Impairment of Long-Lived Assets
  (j) Impairment of Goodwill
  F-10




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
 (k) Revenue Recognition
        (l) Operating Leases
  (m) Advertising Costs
  (n) Foreign Currency Translation
  F-11




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
  (o) Income Taxes
   (p) Comprehensive Income (Loss)
  (q) Fair Value of Financial Instruments
     F-12




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
    (r) Share-based Compensation
    For the years ended December 31,2007
    
    
    2008
    
    
    2009Cost of sales
    
    $
    980,488
    
    
    $
    1,469,847
    
    
    $
    1,504,092General and administrative
    
    
    11,307,664
    
    
    
    24,510,009
    
    
    
    43,839,566Selling and marketing
    
    
    9,166,146
    
    
    
    16,635,310
    
    
    
    21,159,476Total
    
    $
    21,454,298
    
    
    $
    42,615,166
    
    
    $
    66,503,134
 (s) Income (loss) per Share
  (t) Non-controlling interest
  F-13




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
   For the years ended December 31,2007
    
    
    2008
    
    
    2009Net income (loss) attributable to Focus Media
    
    $
    144,435,549
    
    
    $
    (770,687,526
    )
    
    $
    (213,257,044
    )Transfers (to) from the non-controlling interest:Increase in Focus Medias additional paid-in
capital due to partial disposal subsidiaries
    
    
    
    
    
    
    
    
    
    
    1,391,800Net transfers (to) from non-controlling interest
    
    
    
    
    
    
    
    
    
    
    1,391,800Change from net income attributable to Focus
Media and transfers (to) from noncontrolling
interest
    
    $
    144,435,549
    
    
    $
    (770,687,526
    )
    
    $
    (211,865,244
    )
 (u) Government grants
  (v) Recently Issued Accounting Standards
   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, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
     3. Acquisitions
 2008 acquisitions:
  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, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
  AmortizationValue
    
    
    PeriodNet liabilities acquired
    
    $
    (19,595,660
    )Intangible assetsLease agreements
    
    
    13,475,000
    
    
    10 yearsCustomer base
    
    
    10,106,250
    
    
    7 yearsContract backlog
    
    
    336,875
    
    
    1 yearsTrademark
    
    
    8,421,875
    
    
    
    N/AAcquired technology
    
    
    10,106,250
    
    
    6 yearsGoodwill
    
    
    145,586,910Total
    
    $
    168,437,500
     2009 acquisitions:
 
  
 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, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
 4. Disposition
 2008 Disposition
     December 31, 2008Cash and cash equivalents
    
    $
    280,481,431Available for sale investments
    
    
    745,421Accounts receivable, net
    
    
    143,582,195Prepaid expenses and other current assets
    
    
    13,928,477Deposits paid for acquisition of subsidiaries
    
    
    8,182,540Amounts due from related parties
    
    
    1,811,144Rental deposits
    
    
    18,314,358TOTAL CURRENT ASSETS
    
    
    467,045,566Rental deposits
    
    
    4,700,653Equipment, net
    
    
    112,596,540Intangible assets, net
    
    
    43,344,576Goodwill
    
    
    402,742,394Other long-term assets
    
    
    35,764,952TOTAL ASSETS
    
    $
    1,066,194,681
 F-17




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##### Table of Contents



December 31, 2008Accounts payable
    
    $
    (16,621,278
    )Accrued expenses and other current liabilities
    
    
    (120,201,129
    )Income taxes payable
    
    
    (4,607,749
    )Deferred tax liabilities
    
    
    (19,308,482
    )TOTAL CURRENT LIABILITIES
    
    
    (160,738,638
    )Deferred tax liabilities
    
    
    (1,959,412
    )TOTAL LIABILITIES
    
    $
    (162,698,050
    )
 2009 Disposition
   5. Fair Value Measurement
   6. Accounts Receivable, Net
  December 31,2008
    
    
    2009Billed receivable
    
    $
    103,410,041
    
    
    $
    120,340,073Unbilled receivable
    
    
    31,860,318
    
    
    
    52,412,400Total
    
    $
    135,270,359
    
    
    $
    172,752,473
 F-18




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
   2008
    
    
    2009Balance at beginning of year
    
    $
    5,310,835
    
    
    $
    4,395,022Bad debt expenses
    
    
    15,767,332
    
    
    
    29,076,504Recoveries and (write-offs), net
    
    
    (7,065,679
    )
    
    
    (6,067,086
    )Reclassified to assets held-for-sale
    
    
    (9,617,466
    )
    
    
    Reclassified from assets held-for-sale
    
    
    
    
    
    
    9,617,466Disposition of subsidiaries
    
    
    
    
    
    
    (3,425,810
    )Others
    
    
    
    
    
    
    Balance at end of year
    
    $
    4,395,022
    
    
    $
    33,596,096
 7. Equipment, Net
  December 31,2008
    
    
    2009Media display equipment
    
    $
    6,889,401
    
    
    $
    165,254,415Computers and office equipment
    
    
    4,196,246
    
    
    
    9,887,787Leasehold improvements
    
    
    231,954
    
    
    
    1,558,213Vehicles
    
    
    635,528
    
    
    
    974,293Total
    
    
    11,953,129
    
    
    
    177,674,708Less: accumulated depreciation and amortization
    
    
    (5,843,000
    )
    
    
    (100,013,561
    )Subtotal
    
    
    6,110,129
    
    
    
    77,661,147Assembly in progress
    
    
    182,165
    
    
    
    Total
    
    $
    6,292,294
    
    
    $
    77,661,147
     F-19




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
 8. Acquired Intangible Assets, Net
  December 31,2008
    
    
    2009Cost:Operation & broadcasting rights
    
    $
    
    
    
    $
    11,115,667Lease agreements
    
    
    34,686,741
    
    
    
    51,712,154Customer base
    
    
    34,612,676
    
    
    
    24,730,269Trademark
    
    
    11,992,070
    
    
    
    9,608,110Acquired technology
    
    
    14,600,562
    
    
    
    1,130,605Others
    
    
    12,182,490
    
    
    
    11,421,391Total
    
    
    108,074,539
    
    
    
    109,718,196Accumulated amortization:Operation & broadcasting rights
    
    
    
    
    
    
    (3,552,675
    )Lease agreements
    
    
    (9,724,796
    )
    
    
    (31,854,695
    )Customer base
    
    
    (10,859,434
    )
    
    
    (12,708,565
    )Trademark
    
    
    
    
    
    
    (1,110,834
    )Acquired technology
    
    
    (4,303,411
    )
    
    
    (602,990
    )Others
    
    
    (5,474,051
    )
    
    
    (8,111,222
    )Total
    
    
    (30,361,692
    )
    
    
    (57,940,981
    )Intangible assets, net
    
    $
    77,712,847
    
    
    $
    51,777,215
  For the years ended December 31,2007
    
    
    2008
    
    
    2009Cost of revenues
    
    $
    16,113,970
    
    
    $
    26,419,547
    
    
    $
    18,628,185Selling and marketing
    
    
    8,639,094
    
    
    
    13,669,067
    
    
    
    8,650,559Total
    
    $
    24,753,064
    
    
    $
    40,088,614
    
    
    $
    27,278,744
   F-20




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
   9. Goodwill
  
 Movie theaterPoster
    
    
    Mobile
    
    
    
    
    
    
    & traditionalLCD display
    
    
    In-store
    
    
    frame
    
    
    handset
    
    
    Internet
    
    
    outdoornetwork
    
    
    network
    
    
    network
    
    
    advertising
    
    
    advertising
    
    
    billboards
    
    
    TotalBalance as of
January 1, 2008
    
    $
    396,428,510
    
    
    $
    
    
    
    $
    337,320,124
    
    
    $
    43,003,566
    
    
    $
    166,646,082
    
    
    $
    
    
    
    $
    943,398,282Goodwill acquired
during the year
    
    
    
    
    
    
    127,752,752
    
    
    
    449,100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    128,201,852Goodwill recorded
as a result of
contingent
consideration
resolved
    
    
    4,901,109
    
    
    
    
    
    
    
    38,971,908
    
    
    
    1,122,670
    
    
    
    76,595,733
    
    
    
    
    
    
    
    121,591,420Modification of
original purchase
price allocation
    
    
    
    
    
    
    17,834,158
    
    
    
    
    
    
    
    
    
    
    
    5,897,710
    
    
    
    857,390
    
    
    
    24,589,258Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    (376,771,621
    )
    
    
    
    
    
    
    (218,440,000
    )
    
    
    (857,390
    )
    
    
    (596,069,011
    )Disposal of
subsidiaries
    
    
    
    
    
    
    (145,586,910
    )
    
    
    
    
    
    
    (44,126,236
    )
    
    
    
    
    
    
    
    
    
    
    (189,713,146
    )Reclassified to
assets held for
sale
    
    
    (402,742,395
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (402,742,395
    )Translation
adjustments
    
    
    1,412,776
    
    
    
    
    
    
    
    30,489
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,443,265Balance as of
December 31, 2008
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    30,699,525
    
    
    $
    
    
    
    $
    30,699,525Goodwill 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
    
    
    $
    
    
    
    $
    410,368,691
 
 F-21




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
  Movie theaterPoster
    
    
    Mobile
    
    
    
    
    
    
    & traditionalLCD display
    
    
    In-store

    
    
    frame
    
    
    handset
    
    
    Internet
    
    
    outdoornetwork
    
    
    network
    
    
    network
    
    
    advertising
    
    
    advertising
    
    
    billboards
    
    
    TotalGoodwill, gross
    
    $
    396,428,510
    
    
    $
    
    
    
    
    337,320,124
    
    
    $
    43,003,566
    
    
    $
    166,646,082
    
    
    $
    
    
    
    $
    943,398,282Accumulated
impairment losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance as of
December 31., 2007
    
    $
    396,428,510
    
    
    $
    
    
    
    
    337,320,124
    
    
    $
    43,003,566
    
    
    $
    166,646,082
    
    
    $
    
    
    
    $
    943,398,282
 Movie theaterPoster
    
    
    Mobile
    
    
    
    
    
    
    & traditionalLCD display
    
    
    In-store

    
    
    frame
    
    
    handset
    
    
    Internet
    
    
    outdoornetwork
    
    
    network
    
    
    network
    
    
    advertising
    
    
    advertising
    
    
    billboards
    
    
    TotalGoodwill, gross
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    249,139,525
    
    
    $
    
    
    
    $
    249,139,525Accumulated
impairment losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (145,586,910
    )Balance as of
December 31, 2008
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    30,699,525
    
    
    $
    
    
    
    $
    30,699,525
 Movie theaterPoster
    
    
    Mobile
    
    
    
    
    
    
    & traditionalLCD display
    
    
    In-store

    
    
    frame
    
    
    handset
    
    
    Internet
    
    
    outdoornetwork
    
    
    network
    
    
    network
    
    
    advertising
    
    
    advertising
    
    
    billboards
    
    
    TotalGoodwill, gross
    
    $
    551,683,103
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    4,272,498
    
    
    $
    
    
    
    $
    555,955,601Accumulated
impairment losses
    
    
    (145,586,910
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (145,586,910
    )
    
    
    (145,586,910
    )Balance as of
December 31, 2009
    
    $
    406,096,193
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    4,272,498
    
    
    $
    
    
    
    $
    410,368,691
  Goodwill impairment in 2008
   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, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
  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, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
   10. Accrued Expenses and Other Current Liabilities
  December 31,2008
    
    
    2009Accrued sales commissions
    
    $
    2,994,203
    
    
    $
    16,297,023Other accrued expenses
    
    
    3,191,340
    
    
    
    3,297,180Other taxes payable
    
    
    9,165,972
    
    
    
    16,514,074Advance from customers
    
    
    9,892,844
    
    
    
    27,807,586Accrued employee payroll and welfare
    
    
    6,248,358
    
    
    
    6,047,975Payables related to acquisitions
    
    
    21,343,231
    
    
    
    20,326,014Withholding individual PRC income tax
    
    
    
    
    
    
    1,115,360Accrual for litigation (see Note 17)
    
    
    7,562,633
    
    
    
    5,500,000Others
    
    
    1,512,679
    
    
    
    4,964,958Total
    
    $
    61,911,260
    
    
    $
    101,870,170
 11. Other operating (income) expenses, net
  For the years ended December 31,2007
    
    
    2008
    
    
    2009Loss on disposal of subsidiaries
    
    $
    
    
    
    $
    192,529,635
    
    
    $
    7,411,454Government subsidy income
    
    
    (5,276,456
    )
    
    
    (13,864,411
    )
    
    
    (14,024,545
    )Loss on disposal of equipment
    
    
    
    
    
    
    2,302,294
    
    
    
    Impairment of other long lived assets
    
    
    
    
    
    
    
    
    
    
    14,714,157Penalty for termination of contract
    
    
    
    
    
    
    
    
    
    
    1,872,155Other income
    
    
    (3,550,451
    )
    
    
    (5,594,049
    )
    
    
    (5,199,764
    )Other expenses
    
    
    1,181,704
    
    
    
    7,148,363
    
    
    
    6,074,198Total
    
    $
    (7,645,203
    )
    
    $
    182,521,832
    
    
    $
    10,847,655
 12. Share-based Compensation
 Share-based Compensation Plans for the Group
   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, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
    Options granted to employees:
    
    2007
    
    2008
    
    2009Risk-free rate of return
    
    
    4.02% - 4.68
    %
    
    
    1.59%-3.2
    %
    
    
    0.87
    %Weighted average expected option life
    
    2 years
    
    
    
    2.5 to 4 years
    
    
    
    2.5 yearsVolatility rate
    
    
    50.61%-53.05
    %
    
    
    53%-68.88
    %
    
    
    88.32
    %Dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
   RemainingweightedWeighted
    
    Weighted
    
    average
    
    AggregateNumber
    
    average
    
    contract term
    
    intrinsicof shares
    
    exercise price
    
    (in years)
    
    valueOptions outstanding at January 1, 2009
    
    
    32,840,540
    
    
    $
    3.43Granted
    
    
    Forfeited
    
    
    (3,674,476
    )
    
    $
    2.44Exercised
    
    
    (4,196,295
    )
    
    $
    1.46Cancelled
    
    
    (9,327,149
    )
    
    $
    2.44Options outstanding at December 31, 2009
    
    
    15,642,620
    
    
    $
    4.75
    
    
    
    6.46
    
    
    $
    3,372,651Options exercisable at December 31, 2009
    
    
    15,528,731
    
    
    $
    4.73
    
    
    
    6.45
    
    
    $
    3,372,651Options vested or expected to vest at
December 31, 2009
    
    
    15,642,620
    
    
    $
    4.75
    
    
    
    6.46
    
    
    $
    3,372,651
 F-25




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
  Weighted
    
    
    WeightedNumber
    
    
    Averageof shares
    
    
    Fair valueRestricted shares unvested at January 1, 2009
    
    
    
    
    
    $
    Granted
    
    
    36,485,980
    
    
    $
    2.24Forfeited
    
    
    (37,000
    )
    
    $
    2.19Restricted shares unvested at December 31, 2009
    
    
    36,448,980
    
    
    $
    2.24
    Private equity placement with JJ Media Investment Holding
  Stock-based Compensation Plan for Internet Advertising Services Segment
   Options granted to employees
    
    2008Risk-free rate of return
    
    
    5.14
    %Weighted average expected option life
    
    6.1 yearsVolatility rate
    
    
    50
    %Dividend yield
    
    
    0
    %
  F-26




---



##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
    WeightedaverageExerciseShares
    
    PriceOptions outstanding at January 1, 2009
    
    
    13,320,810
    
    
    $
    4.28Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Cancelled
    
    
    (13,320,810
    )
    
    $
    4.28Outstanding at December 31, 2009
    
    
    
    
    
    $
    
  13. 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, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
     Balance at January 1, 2009
    
    $
    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
    
    $
    4,511,953
  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, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
 Composition of income tax expense
  For the years ended December 31,2007
    
    
    2008
    
    
    2009Current income tax expense
    
    $
    9,170,173
    
    
    $
    37,959,329
    
    
    $
    9,365,324Deferred income tax expense (benefit)
    
    
    (844,468
    )
    
    
    (11,174,599
    )
    
    
    489,648Income tax expense
    
    $
    8,325,705
    
    
    $
    26,784,730
    
    
    $
    9,854,972
  For the years ended December 31,2007
    
    2008
    
    2009Statutory rate
    
    
    33.00
    %
    
    
    25.00
    %
    
    
    25.00
    %Effect of different tax rate of group entities operation in other
jurisdiction
    
    
    5.96
    %
    
    
    (2.15
    %)
    
    
    (9.43
    %)Effect of different tax rate applicable to the subsidiaries and VIEs
    
    
    (0.36
    %)
    
    
    0.71
    %
    
    
    2.80
    %Effect of tax holiday
    
    
    (38.61
    %)
    
    
    2.52
    %
    
    
    1.38
    %Effect of non-deductible expenses
    
    
    2.72
    %
    
    
    (31.19
    %)
    
    
    (27.79
    %)Change in valuation allowance
    
    
    1.08
    %
    
    
    0.97
    %
    
    
    1.03
    %Additional tax paid due to conclusion of tax audit
    
    
    
    
    
    
    (0.34
    %)
    
    
    Others
    
    
    2.31
    %
    
    
    0.44
    %
    
    
    0.41
    %Effective tax rate
    
    
    6.10
    %
    
    
    (4.04
    %)
    
    
    (6.60
    %)
  December 31,2007
    
    
    2008
    
    
    2009Tax holiday effect
    
    $
    52,766,757
    
    
    $
    16,671,194
    
    
    $
    2,345,404Net income from continuing operations per share effect  basic
    
    $
    0.09
    
    
    $
    0.03
    
    
    $
    0.01Net income from continuing operations per share effect  diluted
    
    $
    0.09
    
    
    $
    0.03
    
    
    $
    0.01
  December 31,2008
    
    
    2009Deferred tax assets:Net operating loss carry forwards
    
    $
    4,421,599
    
    
    $
    11,710,958Accrued expenses temporarily non-deductible
    
    
    1,267,493
    
    
    
    6,181,962Bad debt provision
    
    
    1,459,406
    
    
    
    2,220,947Difference in fixed assets basis
    
    
    
    
    
    
    11,056,535Others
    
    
    
    
    
    
    1,152,928Total Deferred Tax Assets
    
    
    7,148,498
    
    
    
    32,323,330Valuation allowance on deferred tax assets
    
    
    (5,881,005
    )
    
    
    (18,278,239
    )Net deferred tax assets
    
    $
    1,267,493
    
    
    $
    14,045,091Classified as:Current deferred tax assets
    
    
    483,504
    
    
    
    3,651,221Non-current deferred tax assets
    
    
    783,989
    
    
    
    10,393,870Deferred tax liabilities:Difference in intangible asset basis
    
    
    11,580,681
    
    
    
    2,839,571Unbilled revenue
    
    
    
    
    
    
    10,881,604Interest or subsidy income receivables
    
    
    
    
    
    
    2,583,580Others
    
    
    
    
    
    
    1,207,705Total deferred tax liabilities
    
    $
    11,580,681
    
    
    $
    17,512,460Classified as:Current deferred tax liabilities
    
    
    
    
    
    
    12,077,282Non-current deferred tax liabilities
    
    
    11,580,681
    
    
    
    5,435,178
 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, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
    14. Net Income (loss) per Share
  Years ended December 31,2007
    
    
    2008
    
    
    2009Income (numerator):Net income (loss) from continuing operations
    
    $
    128,340,333
    
    
    $
    (688,340,078
    )
    
    $
    (163,218,752
    )Net income (loss) from discontinued operations
    
    
    16,789,586
    
    
    
    (82,497,889
    )
    
    
    (46,513,904
    )Income attributable to Focus Media Holdings Limited Shareholders
    
    $
    144,435,549
    
    
    $
    (770,687,526
    )
    
    $
    (213,257,044
    )Shares (denominator):Weighted average ordinary shares outstanding used in computing
basic income per share
    
    
    590,387,396
    
    
    
    643,989,522
    
    
    
    651,654,345Plus incremental weighted average ordinary shares from assumed
conversions of stock option using treasury stock method
    
    
    17,939,054
    
    
    
    
    
    
    
    Weighted average ordinary shares outstanding used in computing
diluted income per share
    
    
    608,326,450
    
    
    
    643,989,522
    
    
    
    651,654,345Income (loss) per share from continuing operations  basic
    
    $
    0.22
    
    
    $
    (1.07
    )
    
    $
    (0.25
    )Income (loss) per share from continuing operations  diluted
    
    $
    0.21
    
    
    $
    (1.07
    )
    
    $
    (0.25
    )Income (loss) per share from discontinued operations  basic
    
    $
    0.03
    
    
    $
    (0.13
    )
    
    $
    (0.07
    )Income (loss) per share from discontinued operations  diluted
    
    $
    0.03
    
    
    $
    (0.13
    )
    
    $
    (0.07
    )Net income per share  basic
    
    $
    0.24
    
    
    $
    (1.20
    )
    
    $
    (0.33
    )Net income per share  diluted
    
    $
    0.24
    
    
    $
    (1.20
    )
    
    $
    (0.33
    )
  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, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
  15. Mainland China Contribution Plan and Profit Appropriation
  
  
 
  
 16. Commitments and Contingencies
 {a}Leases commitments
   For the year endedDecember 31,2010
    
    $
    61,990,5012011
    
    
    23,226,9582012
    
    
    7,372,1802013
    
    
    2,433,9902014 and thereafter
    
    
    1,831,639Total
    
    $
    96,855,268
 {b} Legal proceedings
   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, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
    17. 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, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
 2009:
 Movie theaterPoster
    
    
    
    
    
    
    and traditionalframe
    
    
    Internet
    
    
    outdoorLCD
    
    
    In-store
    
    
    network
    
    
    Advertising
    
    
    billboards
    
    
    Eliminations
    
    
    TotalNet revenue 
external
    
    $
    208,799,072
    
    
    $
    30,346,185
    
    
    $
    98,962,486
    
    
    $
    107,870,949
    
    
    $
    59,056,779
    
    
    $
    
    
    
    $
    505,035,471Net 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
    
    
    
    107,870,949
    
    
    
    60,113,522
    
    
    
    (31,957,996
    )
    
    
    505,035,471Total cost of revenue
    
    
    98,531,333
    
    
    
    24,169,858
    
    
    
    102,728,558
    
    
    
    98,720,859
    
    
    
    46,941,541
    
    
    
    (31,957,996
    )
    
    
    339,134,153Gross profit
    
    
    136,651,037
    
    
    
    9,700,146
    
    
    
    (2,771,936
    )
    
    
    9,150,090
    
    
    
    13,171,981
    
    
    
    
    
    
    
    165,901,318
 2008:
 Movie theaterPoster
    
    
    
    
    
    
    and traditionalframe
    
    
    Internet
    
    
    outdoorLCD
    
    
    In-store
    
    
    network
    
    
    Advertising
    
    
    billboards
    
    
    Eliminations
    
    
    TotalNet revenue 
external
    
    $
    243,126,818
    
    
    $
    60,719,416
    
    
    $
    146,750,583
    
    
    $
    114,560,302
    
    
    $
    77,177,914
    
    
    $
    
    
    
    $
    642,335,033Net revenue 
intersegment
    
    
    78,503,687
    
    
    
    
    
    
    
    2,812,586
    
    
    
    
    
    
    
    
    
    
    
    (81,316,273
    )
    
    
    Total net revenues
    
    
    321,630,505
    
    
    $
    60,719,416
    
    
    
    149,563,169
    
    
    
    114,560,302
    
    
    
    77,177,914
    
    
    
    (81,316,273
    )
    
    
    642,335,033Total cost of revenue
    
    
    138,454,375
    
    
    $
    61,833,679
    
    
    
    80,804,333
    
    
    
    89,287,994
    
    
    
    58,169,933
    
    
    
    (81,316,273
    )
    
    
    347,234,041Gross profit
    
    
    183,176,130
    
    
    
    (1,114,263
    )
    
    
    68,758,836
    
    
    
    25,272,308
    
    
    
    19,007,981
    
    
    
    
    
    
    
    295,100,992
 2007:
 Movie theaterPoster
    
    
    
    
    
    
    and traditionalframe
    
    
    Internet
    
    
    outdoorLCD
    
    
    In-store
    
    
    network
    
    
    Advertising
    
    
    billboards
    
    
    Eliminations
    
    
    TotalNet revenue 
external
    
    $
    184,642,588
    
    
    $
    27,444,339
    
    
    $
    85,471,959
    
    
    $
    75,363,964
    
    
    $
    37,304,970
    
    
    $
    
    
    
    $
    410,227,820Net revenue 
intersegment
    
    
    741,764
    
    
    
    
    
    
    
    770,168
    
    
    
    
    
    
    
    
    
    
    
    (1,511,932
    )
    
    
    Total net revenues
    
    
    185,384,352
    
    
    
    27,444,339
    
    
    
    86,242,127
    
    
    
    75,363,964
    
    
    
    37,304,970
    
    
    
    (1,511,932
    )
    
    
    410,227,820Total cost of revenue
    
    
    53,418,168
    
    
    
    23,502,160
    
    
    
    28,086,215
    
    
    
    52,463,441
    
    
    
    28,506,809
    
    
    
    (1,511,932
    )
    
    
    184,464,861Gross profit
    
    
    131,966,184
    
    
    
    3,942,179
    
    
    
    58,155,912
    
    
    
    22,900,523
    
    
    
    8,798,161
    
    
    
    
    
    
    
    225,762,959
 Major Customers
  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, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
 Major Service lines
  For the years ended December 312007
    
    
    2008
    
    
    2009% of total
    
    
    
    
    
    
    % of total
    
    
    
    
    
    
    % of total$
    
    
    revenue
    
    
    $
    
    
    revenue
    
    
    $
    
    
    revenue(in thousand of U.S. dollars, except percentages)Net revenueLCD display network
    
    $
    183,528,204
    
    
    
    44.7
    %
    
    $
    239,504,938
    
    
    
    37.3
    %
    
    $
    208,498,537
    
    
    
    41.3
    %In-store network
    
    
    27,444,339
    
    
    
    6.7
    %
    
    
    60,719,416
    
    
    
    9.5
    %
    
    
    30,346,185
    
    
    
    6.0
    %Poster frame network
    
    
    85,471,959
    
    
    
    20.8
    %
    
    
    146,750,583
    
    
    
    22.8
    %
    
    
    98,962,486
    
    
    
    19.6
    %Internet advertising
    
    
    75,363,964
    
    
    
    18.4
    %
    
    
    114,560,302
    
    
    
    17.8
    %
    
    
    107,870,949
    
    
    
    21.4
    %Movie theater &
Traditional outdoor
billboards
    
    
    37,304,970
    
    
    
    9.1
    %
    
    
    77,177,914
    
    
    
    12.0
    %
    
    
    59,056,779
    
    
    
    11.6
    %Advertising service revenue
    
    
    409,113,436
    
    
    
    99.7
    %
    
    
    638,713,153
    
    
    
    99.4
    %
    
    
    504,734,936
    
    
    
    99.9
    %Equipment revenue
    
    
    774,404
    
    
    
    0.2
    %
    
    
    1,760,697
    
    
    
    0.3
    %
    
    
    300,535
    
    
    
    0.1
    %Franchise revenue
    
    
    339,980
    
    
    
    0.1
    %
    
    
    1,861,183
    
    
    
    0.3
    %
    
    
    
    
    
    
    Total net revenue
    
    $
    410,227,820
    
    
    
    100.0
    %
    
    $
    642,335,033
    
    
    
    100.0
    %
    
    $
    505,035,471
    
    
    
    100.0
    %
 18. Related Party Transactions
  Year ended December 31,Name of related parties
    
    Director interested
    
    2007
    
    
    2008
    
    
    2009Shanghai Everease Advertising & Communication Ltd.
    
    Jason Nanchun Jiang
    
    $
    3,132,954
    
    
    $
    (132,116
    )
    
    $
    Multimedia Park Venture Capital
    
    Jimmy Wei Yu
    
    
    104
    
    
    
    
    
    
    
    Shanghai Shengchu Advertising Agency Co., Ltd.
    
    Jimmy Wei Yu
    
    
    44,542
    
    
    
    
    
    
    
    CTV Golden Bridge International Media Co., Ltd.
    
    Daqing Qi
    
    
    
    
    
    
    
    
    
    
    277,749Sina.com
    
    Charles Cao
    
    
    1,095,814
    
    
    
    1,637,297
    
    
    
    548,988Sohu.com
    
    Daqing Qi
    
    
    608,150
    
    
    
    2,002,839
    
    
    
    438,536Home-Inn
    
    Neil Nanpeng Shen
    
    
    82,356
    
    
    
    256,690
    
    
    
    89,076Ctrip.com
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    69,863
    
    
    
    486,26351.com
    
    Neil Nanpeng Shen
    
    
    19,611
    
    
    
    718
    
    
    
    Qihoo.com
    
    Neil Nanpeng Shen
    
    
    12,151
    
    
    
    48,385
    
    
    
    38,008UUSEE
    
    Neil Nanpeng Shen
    
    
    27,789
    
    
    
    78,572
    
    
    
    Aikong.com
    
    Jason Nanchun Jiang
    
    
    
    
    
    
    56,190
    
    
    
    Giant Interactive Group Inc.
    
    Jason Nanchun Jiang
    
    
    
    
    
    
    4,153,948
    
    
    
    368,242China Vanke Co., Ltd.
    
    Daqing Qi
    
    
    
    
    
    
    909,775
    
    
    
    459,376Beijing Huayi Brothers
    
    Jason Nanchun Jiang
    
    
    
    
    
    
    43,561
    
    
    
    Tea Care Group Ltd.
    
    Fuming Zhuo
    
    
    
    
    
    
    
    
    
    
    292,606Yadu Huang Ke Technology Co., Ltd.
    
    Fuming Zhuo
    
    
    243,628
    
    
    
    87,638
    
    
    
    Focus Technology Co., Ltd.
    
    Fuming Zhuo
    
    
    
    
    
    
    
    
    
    
    43,200Total
    
    
    
    $
    5,267,099
    
    
    $
    9,213,360
    
    
    $
    3,042,044
  Year ended December 31,Name of related parties
    
    Director interested
    
    2007
    
    
    2008
    
    
    2009Sina.com
    
    Charles Cao
    
    $
    24,755,004
    
    
    $
    50,294,367
    
    
    $
    28,635,023Sohu.com
    
    Daqing Qi
    
    
    14,596,893
    
    
    
    39,061,219
    
    
    
    17,208,874Ctrip.com
    
    Neil Nanpeng Shen
    
    
    130,230
    
    
    
    343,546
    
    
    
    146,35651.com
    
    Neil Nanpeng Shen
    
    
    204,612
    
    
    
    887,603
    
    
    
    195,376Qihoo.com
    
    Neil Nanpeng Shen
    
    
    305,413
    
    
    
    847,021
    
    
    
    109,564UUSEE
    
    Neil Nanpeng Shen
    
    
    15,929
    
    
    
    306,899
    
    
    
    E-House(China) Holdings Limited
    
    Neil Nanpeng Shen
    
    
    2,008
    
    
    
    
    
    
    
    StormNet Information Technology
    
    David Zhang
    
    
    
    
    
    
    
    
    
    
    21,928Total
    
    
    
    $
    40,010,089
    
    
    $
    91,740,655
    
    
    $
    46,317,121
 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, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
  December 31Name of related parties
    
    Note
    
    Director interested
    
    2008
    
    
    2009Shanghai Everease Advertising & Communication Ltd.
    
    (a)
    
    Jason Nanchun Jiang
    
    $
    4,136
    
    
    $
    Multimedia Park Venture Capital
    
    (a)
    
    Jimmy Wei Yu
    
    
    232,399
    
    
    
    Sina.com
    
    (a)
    
    Charles Cao
    
    
    2,183,809
    
    
    
    570,113Sohu.com
    
    (a)
    
    Daqing Qi
    
    
    4,905,642
    
    
    
    2,685,730Ctrip.com
    
    (a)
    
    Neil Nanpeng Shen
    
    
    49,401
    
    
    
    (293
    )51.com
    
    (a)
    
    Neil Nanpeng Shen
    
    
    215,854
    
    
    
    UUSEE
    
    (a)
    
    Neil Nanpeng Shen
    
    
    18,937
    
    
    
    Tea Care Group Ltd.
    
    (a)
    
    Fuming Zhuo
    
    
    
    
    
    
    21,475China Vanke Co., Ltd.
    
    (a)
    
    Daqing Qi
    
    
    
    
    
    
    7,379Home-Inn
    
    (a)
    
    Neil Nanpeng Shen
    
    
    23,838
    
    
    
    Yadu Huang Ke Technology Co., Ltd.
    
    (a)
    
    Fuming Zhuo
    
    
    146,033
    
    
    
    Qihoo.com
    
    (a)
    
    Neil Nanpeng Shen
    
    
    53,724
    
    
    
    Giant Interactive Group, Inc.
    
    (a)
    
    Jason Nanchun Jiang
    
    
    174,079
    
    
    
    Total
    
    
    
    
    
    $
    8,007,852
    
    
    $
    3,284,404
 
 Note (a)  These amounts represent trade receivables for advertising services provided.  December 31,Name of related parties
    
    Note
    
    Director interested
    
    2008
    
    
    2009Sina.com
    
    (b)
    
    Charles Cao
    
    $
    11,586,228
    
    
    $
    2,126,612Sohu.com
    
    (b)
    
    Daqing Qi
    
    
    3,039,075
    
    
    
    51.com
    
    (b)
    
    Neil Nanpeng Shen
    
    
    554,326
    
    
    
    32,871UUSEE
    
    (b)
    
    Neil Nanpeng Shen
    
    
    151,197
    
    
    
    Home-Inn
    
    (b)
    
    Neil Nanpeng Shen
    
    
    
    
    
    
    StormNet Information Technology
    
    (b)
    
    David Zhang
    
    
    
    
    
    
    54,376Qihoo.com
    
    (b)
    
    Neil Nanpeng Shen
    
    
    129,427
    
    
    
    158Giant Interactive Group Inc.
    
    (b)
    
    Jason Nanchun Jiang
    
    
    146,314Ctrip.com
    
    (b)
    
    Neil Nanpeng Shen
    
    
    80,543
    
    
    
    16,877Total
    
    
    
    
    
    $
    15,687,110
    
    
    $
    2,230,894
 
 Note (b)  The amounts represent trade payables for advertising services purchased. Other related party transactions
   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, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
 19. Subsequent Events
 Management Buy-In to Internet Division
  F-36




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
 
 Additional Information  Financial Statement Schedule 1
 FOCUS MEDIA HOLDING LIMITED
  Financial Information of Parent Company
 BALANCE SHEETS
 December 31,2008
    
    
    2009AssetsCurrent assets:Cash and cash equivalents
    
    $
    72,670,590
    
    
    $
    121,751,810Prepaid expenses and other current assets
    
    
    6,163,714
    
    
    
    232,731Amounts due from subsidiaries and affiliates
    
    
    106,931,089
    
    
    
    87,375,297Total current assets
    
    
    185,765,393
    
    
    
    209,359,838Acquired intangible assets, net
    
    
    7,729,055
    
    
    
    8,547,879Investments in subsidiaries and affiliates
    
    
    1,077,519,470
    
    
    
    998,241,571Total assets
    
    $
    1,271,013,918
    
    
    $
    1,216,149,288Liabilities and shareholders equityCurrent liabilities:Accrued expenses and other current liabilities
    
    
    73,229,875
    
    
    
    27,025,623Total current liabilities
    
    $
    73,229,875
    
    
    $
    27,025,623Shareholders equityOrdinary shares ($0.00005 par value;
19,800,000,000 shares authorized in 2007, 2008
and 2009; 640,230,852, 646,081,710 and
722,249,544 shares issued and outstanding in
2007, 2008 and 2009, respectively)
    
    
    32,327
    
    
    
    36,287Additional paid-in capital
    
    
    1,659,833,079
    
    
    
    1,875,304,804Subscription receivable
    
    
    
    
    
    
    (3,081,726
    )Retained earnings (accumulated deficit)
    
    
    (533,969,347
    )
    
    
    (747,226,391
    )Accumulated other comprehensive income
    
    
    71,887,984
    
    
    
    64,090,691Total equity
    
    $
    1,197,784,043
    
    
    $
    1,189,123,665Total liabilities, mezzanine equity and equity
    
    $
    1,271,013,918
    
    
    $
    1,216,149,288
 F-37




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
 Financial Information of Parent Company
 STATEMENTS OF OPERATIONS
 For the years ended December 31,2007
    
    
    2008
    
    
    2009(In U.S. dollars)Net revenues:
    
    $
    339,980
    
    
    $
    27,117,808
    
    
    $
    26,875,974Cost of revenues:
    
    
    980,488
    
    
    
    1,453,800
    
    
    
    1,504,012Gross (loss) profit
    
    
    (640,508
    )
    
    
    25,664,008
    
    
    
    25,371,962Operating expenses:General and administrative
    
    
    16,385,897
    
    
    
    31,324,034
    
    
    
    27,975,996Selling and marketing
    
    
    9,166,146
    
    
    
    15,691,901
    
    
    
    12,221,986Amortization of acquired intangible assets
    
    
    635,662
    
    
    
    718,159
    
    
    
    2,484,457Other expense
    
    
    6,652
    
    
    
    442,075
    
    
    
    22,404,467Total operating expenses
    
    
    26,194,357
    
    
    
    48,176,169
    
    
    
    65,086,906Loss from operations
    
    
    (26,834,865
    )
    
    
    (22,512,161
    )
    
    
    (39,714,944
    )Interest income
    
    
    2,326,143
    
    
    
    1,924,349
    
    
    
    241,821Equity in earnings (losses) of
subsidiaries and equity affiliates
    
    
    168,944,271
    
    
    
    (750,099,714
    )
    
    
    (170,953,413
    )Income (loss) before income taxes
    
    
    144,435,549
    
    
    
    (770,687,526
    )
    
    
    (210,426,536
    )Income tax expenses
    
    
    
    
    
    
    
    
    
    
    2,830,508Net income (loss)
    
    $
    144,435,549
    
    
    $
    (770,687,526
    )
    
    $
    (213,257,044
    )
 F-38




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
 Financial Information of Parent Company
 STATEMENTS OF CASH FLOWS
 For the years ended December 31,2007
    
    
    2008
    
    
    2009(In U.S. dollars)Operating activities:Net income (loss)
    
    $
    144,435,549
    
    
    $
    (770,687,526
    )
    
    $
    (213,257,044
    )Adjustments to reconcile net income to net cash provided by
(used in) operating activities:Share-based compensation
    
    
    21,454,298
    
    
    
    42,615,166
    
    
    
    66,503,134Amortization of intangibles
    
    
    640,311
    
    
    
    718,159
    
    
    
    2,484,457Loss on disposal of an equity method investment
    
    
    
    
    
    
    430,438
    
    
    
    Equity in earnings (losses) of subsidiaries and affiliates
    
    
    (168,944,271
    )
    
    
    750,099,714
    
    
    
    170,953,413Settlement of disputed liabilities
    
    
    
    
    
    
    
    
    
    
    (2,067,350
    )Changes in assets and liabilities:Prepaid expenses and other current assets
    
    
    (4,067
    )
    
    
    (4,988,211
    )
    
    
    5,930,983Amounts due from related parties
    
    
    (214,163,151
    )
    
    
    220,239,255
    
    
    
    19,555,792Accrued expenses and other current liabilities
    
    
    2,888,470
    
    
    
    (18,909,819
    )
    
    
    (41,508,783
    )Net cash (used in) provided by operating activities
    
    $
    (213,692,861
    )
    
    $
    219,517,176
    
    
    $
    8,594,602Investing activities:Investments in subsidiaries and affiliates
    
    
    (100,154,828
    )
    
    
    (169,274,112
    )
    
    
    (100,210,612
    )Deposit paid to acquire subsidiaries
    
    
    (69,268,608
    )
    
    
    (12,155,299
    )
    
    
    Purchase of intangibles
    
    
    
    
    
    
    
    
    
    
    (3,801,795
    )Issuance of loan receivable
    
    
    (30,000,000
    )
    
    
    
    
    
    
    Net cash used in investing activities
    
    $
    (199,423,436
    )
    
    $
    (181,429,411
    )
    
    $
    (104,012,407
    )Financing activities:Proceeds from issuance of ordinary shares, net of issuance
costs of $6,207,107, $2,135,480 and $nil in 2007, 2008 and
2009, respectively
    
    $
    427,444,711
    
    
    $
    
    
    
    $
    142,425,000Proceeds from issuance of ordinary shares pursuant to share
option plans
    
    
    19,560,220
    
    
    
    10,711,301
    
    
    
    2,074,025Share repurchase
    
    
    
    
    
    
    (47,500,211
    )
    
    
    Net cash provided by financing activities
    
    $
    447,004,931
    
    
    $
    (36,788,910
    )
    
    $
    144,499,025Net increase in cash and cash equivalents
    
    
    33,888,634
    
    
    
    1,298,855
    
    
    
    49,081,220Cash and cash equivalents, beginning of year
    
    
    37,483,101
    
    
    
    71,371,735
    
    
    
    72,670,590Cash and cash equivalents, end of year
    
    $
    71,371,735
    
    
    $
    72,670,590
    
    
    $
    121,751,810
 
 Note to Schedule 1Schedule 1 has been provided pursuant to the requirements of Rule 12-04(a) and 4-08(e)(3) of
Regulation S-X, which require condensed financial information as to the financial position,
results of operations of a parent company as of the same dates and for the same periods for
which audited consolidated financial statements have been presented when the restricted net
assets of consolidated and unconsolidated subsidiaries together exceed 25% of consolidated
net assets as of the end of the most recently completed fiscal year. As of December 31,
2009, $789,603,518 was not available for distribution and as such, the condensed financial
information of Focus Media Holding Limited has been presented for the year ended December
31, 2009. F-39