##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
 (Mark One)
 o
    
    Registration statement pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934
 or
 þ
    
    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the
fiscal year ended December 31, 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 001-
 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. Alex Deyi Yang
Acting 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
   þ o
  o þ
   þ o
 o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  þ
 o
  o þ
  o þ
 (APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS.)
  o o




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##### 



FOCUS MEDIA HOLDING LIMITED
 FORM 20-F ANNUAL REPORT
FISCAL YEAR ENDED DECEMBER 31, 2009
Table of Contents
 SUPPLEMENTAL INFORMATION
    
    
    1DISCONTINUED OPERATIONS AND BASIS OF PRESENTATION
    
    
    1FORWARD-LOOKING STATEMENTS IN THIS ANNUAL REPORT MAY NOT BE REALIZED
    
    
    2PART I
    
    
    3ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
    
    
    3ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    3ITEM 3. KEY INFORMATION
    
    
    3ITEM 4. INFORMATION ON THE COMPANY
    
    
    33ITEM 4A. UNRESOLVED STAFF COMMENTS
    
    
    51ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
    51ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
    83ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    91ITEM 8. FINANCIAL INFORMATION
    
    
    96ITEM 9. THE OFFER AND LISTING
    
    
    98ITEM 10. ADDITIONAL INFORMATION
    
    
    99ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    109ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
    109PART II
    
    
    110ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
    110ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
    110ITEM 15. CONTROLS AND PROCEDURES
    
    
    111ITEM 16.
    
    
    114ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
    
    
    114ITEM 16B. CODE OF ETHICS
    
    
    114ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    114ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
    
    
    114ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
    
    
    115ITEM 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
    
    
    115ITEM 16G. CORPORATE GOVERNANCE
    
    
    115PART III
    
    
    116ITEM 17. FINANCIAL STATEMENTS
    
    
    116ITEM 18. FINANCIAL STATEMENTS
    
    
    116ITEM 19. EXHIBITS
    
    
    116EX-10.182EX-10.183EX-10.184EX-10.185EX-10.186EX-12.1EX-12.2EX-13.1EX-13.2EX-15.1EX-15.2EX-15.3EX-21.1
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##### Table of Contents



SUPPLEMENTAL INFORMATION
  
    
    the terms we, us, our company, our and Focus Media refer to Focus
Media Holding Limited, its predecessor entities and subsidiaries, and, in the
context of describing our operations, also include our affiliated Chinese entities;
    
    shares and ordinary shares refer to our ordinary shares, par value $0.00005,
ADSs refers to our American depositary shares, each of which represents five
ordinary shares, and ADRs refers to the American depositary receipts which
evidence our ADSs;
    
    China and PRC refer to the Peoples Republic of China, excluding Taiwan,
Hong Kong and Macau;
    
    all references to RMB are to the legal currency of China and all references to
U.S. dollars, US$, dollars and $ are to the legal currency of the United
States. Any discrepancies in any table between the amounts identified as total
amounts and the sum of the amounts listed therein are due to rounding;
    
    Framedia refers to Infoachieve Limited and its consolidated subsidiaries and
affiliates, which we acquired in January 2006;
    
    Target Media refers to Target Media Holdings Limited and its consolidated
subsidiaries and affiliates, which we acquired in February 2006;
    
    Focus Media Wireless refers to Dotad Media Holdings Limited, and its
consolidated subsidiary and affiliate, which we acquired in March 2006 and renamed
Focus Media Wireless. We terminated our mobile handset advertising business,
including Focus Media Wireless, in December 2008;
    
    Allyes refers to Allyes Information Technology Company Limited, and its
consolidated subsidiaries and affiliates, which we acquired in March 2007;
    
    CGEN refers to CGEN Digital Media Company Limited, and its consolidated
subsidiaries and affiliates, which we acquired in January 2008 and disposed of in
December 2008; and
    
    This annual report on Form 20-F includes our audited consolidated financial
statements for the years ended December 31, 2007, 2008 and 2009, and as of December
31, 2008 and 2009.
 BASIS OF PRESENTATION
   1




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##### Table of Contents



FORWARD-LOOKING STATEMENTS IN THIS ANNUAL REPORT
MAY NOT BE REALIZED
  
    
    our goals and strategies;
    
    our future business development, financial condition and results of operations;
    
    projected revenues, profits, earnings and other estimated financial information;
    
    our plans to expand our advertising network into new cities and regions in China
    
    the growth of our LCD display network, poster frame network, in-store network,
movie theater and traditional outdoor billboards and our online advertising
services business;
    
    our plan to identify and create additional advertising platforms that target
specific consumer demographics, which could allow us to increase our advertising
revenue;
    
    competition in the PRC advertising industry;
    
    the expected growth in the urban population, consumer spending, average income
levels and advertising spending levels;
    
    PRC governmental policies and regulations relating to the advertising industry
and regulations and policies promulgated by the State Administration of Foreign
Exchange;
    
    other risks outlined in our filings with the Securities and Exchange Commission,
including our registration statements on Form F-1, as amended, and Form F-3 as
amended; and
    
    those other risks identified in Item 3. Key InformationD. Risk Factors of
this annual report.
   2




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##### Table of Contents



PART I
 
 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  
 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3. KEY INFORMATION
 A. Selected Financial Data
       For the 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
    
    
    
    98,962
 3




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##### Table of Contents



For the years ended December 312005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009(In thousands of
U.S. Dollars, except share and per share data)Movie 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
    
    
    
    75,467In-store
    
    
    7,423
    
    
    
    18,106
    
    
    
    23,502
    
    
    
    61,834
    
    
    
    24,170Poster frame
    
    
    
    
    
    
    13,621
    
    
    
    28,086
    
    
    
    59,815
    
    
    
    95,401Movie 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
    )
 4




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##### Table of Contents



For the years ended December 312005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009(In thousands of
U.S. Dollars, except
share and per share data)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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##### Table of Contents



As of December 312005
    
    2006
    
    2007
    
    2008
    
    2009Selected 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. 6




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##### Table of Contents



Currency Translations and Exchange Rates
    RENMINBI PER U.S. EXCHANGE RATEAVERAGE
    
    HIGH
    
    LOW
    
    PERIOD-END2002
    
    
    8.2770
    
    
    
    8.2800
    
    
    
    8.2669
    
    
    
    8.28002003
    
    
    8.2770
    
    
    
    8.2800
    
    
    
    8.2272
    
    
    
    8.27692004
    
    
    8.2768
    
    
    
    8.2774
    
    
    
    8.2764
    
    
    
    8.27652005
    
    
    8.1940
    
    
    
    8.2765
    
    
    
    8.0702
    
    
    
    8.07022006
    
    
    7.9723
    
    
    
    8.0702
    
    
    
    7.8041
    
    
    
    7.80872007
    
    
    7.6072
    
    
    
    7.8127
    
    
    
    7.2946
    
    
    
    7.29462008
    
    
    6.9477
    
    
    
    7.2946
    
    
    
    6.7800
    
    
    
    6.82252009
    
    
    6.8409
    
    
    
    6.8436
    
    
    
    6.8226
    
    
    
    6.82822010
(through June 18)
    
    
    6.8272
    
    
    
    6.8330
    
    
    
    6.8229
    
    
    
    6.8267January
    
    
    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
(through June 18)
    
    
    6.8298
    
    
    
    6.8323
    
    
    
    6.8267
    
    
    
    6.8267
 7




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##### Table of Contents



B. Capitalization and Indebtedness
  C. Reasons for the Offer and Use of Proceeds
  D. Risk Factors
 Our business and operations are subject to various risks, many of which are beyond our
control. If any of the risks described below actually occurs, our business, financial condition or
results of operations could be materially harmed.
 Risks Relating to Our Business and Industry
 We have been named as a defendant in certain purported shareholder class action lawsuits that could
have a material adverse impact on our operating results and financial condition.
  Some of our business operations have a limited operating history, which may make it difficult for
you to evaluate our business and prospects.
  We derive a substantial majority of our revenues from the provision of advertising services, and
advertising is particularly sensitive to changes in economic conditions and advertising trends.
  
    
    a general decline in economic conditions;
    
    a decline in economic conditions in the particular cities where we conduct
business;
    
    a decision to shift advertising expenditures to other available advertising
media;
    
    a decline in advertising spending in general; or
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
    
    a decrease in demand for advertising media in general and for our advertising
services in particular would materially and adversely affect our ability to
generate revenue from our advertising services, and our financial condition and
results of operations.
  Our quarterly operating results are difficult to predict and may fluctuate significantly from
period to period in the future.
  Our failure to maintain existing relationships or obtain new relationships with businesses that
allow us to place our LCD flat-panel displays and advertising poster frames in their buildings and
other commercial locations and to lease outdoor traditional and LED digital billboards placed in
desirable locations would harm our business and prospects.
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If we are unable to obtain or retain desirable placement locations for our LCD displays,
advertising poster frames and outdoor traditional and LED billboards movie theater advertising
slots on commercially advantageous terms or if the supply of desirable locations diminishes or
ceases to expand, we could have difficulty in maintaining or expanding our network, our operating
margins and earnings could decrease and our results of operations could be materially and adversely
affected.
   If we are unable to attract advertisers to advertise on our networks, we will be unable to maintain
or increase our advertising fees and the demand for time on our networks, which could negatively
affect our ability to grow revenues.
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Acquisitions we have made, and any future acquisitions may expose us to potential risks and have an
adverse effect on our ability to manage our business.
   There may be unknown risks inherent in the acquisitions we have made.
   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.
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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.
  
    
    failure to reach traditional advertisers and to take advantage of marketing
networks through our existing business;
    
    the performance and reliability of the Internet infrastructure; and
    
    the continued growth of the Internet industries.
 One or more of our regional distributors could engage in activities that are harmful to our
reputation in the industry and to our business.
  If we fail to maintain an effective system of internal control over financial reporting, we may not
be able to accurately report our financial results or prevent fraud.
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Failure to manage our growth and operations could strain our management, operational and other
resources and we may not be able to achieve anticipated levels of growth in the new networks and
media platforms we operate, either of which could materially and adversely affect our business and
growth potential.
   If advertisers or the viewing public do not accept, or lose interest in, our out-of-home
advertising network, our revenues may be negatively affected and our business may not expand or be
successful.
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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.
  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.
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
    
    our failure to anticipate changes in clients requirements;
    
    our competitors introduction of new services and technologies ahead of our new
services and technologies, or their introduction of superior or less expensive
services and technologies;
    
    our failure to adapt to Internet advertising technology trends and evolving
industry standards; and
    
    delays or difficulties in technology integration, customization or development.
 The business and prospects of our online advertising agency business could be harmed if
click-through fraud is not detected.
  System failures could significantly disrupt the operations of our online advertising agency
business, which would cause us to lose clients or ad inventory.
  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.
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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.
  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.
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We may need additional capital and we may not be able to obtain it, which could adversely affect
our liquidity and financial position.
  
    
    Our ability to obtain additional capital on acceptable terms is subject to a
variety of uncertainties, including:
    
    investors perception of, and demand for, securities of alternative advertising
media companies;
    
    conditions of the U.S. and other capital markets in which we may seek to raise
funds;
    
    our future results of operations, financial condition and cash flows;
    
    PRC governmental regulation of foreign investment in advertising services
companies in China;
    
    economic, political and other conditions in China; and
    
    PRC governmental policies relating to foreign currency borrowings.
  If we are unable to adapt to changing regulatory requirements or advertising trends and the
technology needs of advertisers and consumers, we will not be able to compete effectively and we
will be unable to increase or maintain our revenues which may materially and adversely affect our
business prospects and revenues.
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We may be subject to, and may expend significant resources in defending against, government actions
and civil suits based on the content and services we provide through our advertising networks or
Internet advertising services network.
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We may be subject to intellectual property infringement claims, which may force us to incur
substantial legal expenses and, if determined adversely against us, may materially disrupt our
business.
  Unauthorized use of our intellectual property by third parties, and the expenses incurred in
protecting our intellectual property rights, may adversely affect our business.
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We face significant competition, and if we do not compete successfully against new and existing
competitors, we may lose our market share, and our profitability may be adversely affected.
    We do not maintain any business liability disruption or litigation insurance coverage for our
operations, and any business liability, disruption or litigation we experience might result in our
incurring substantial costs and the diversion of resources.
  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.
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Risks Relating to Regulation of Our Business and to Our Structure
 If the PRC government finds that the agreements that establish the structure for operating our
China business do not comply with PRC governmental restrictions on foreign investment in the
advertising industry, we could be subject to severe penalties.
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
    
    revoking the business and operating licenses of our PRC subsidiaries and
affiliates;
    
    discontinuing or restricting our PRC subsidiaries and affiliates operations;
    
    imposing conditions or requirements with which we or our PRC subsidiaries and
affiliates may not be able to comply;
    
    requiring us or our PRC subsidiaries and affiliates to restructure the relevant
ownership structure or operations; or
    
    restricting or prohibiting our use of the proceeds of this offering to finance
our business and operations in China.
  We use contractual arrangements with our PRC operating affiliates and their subsidiaries and
shareholders for a significant portion of our China operations, which may not be as effective in
providing operational control as direct ownership.
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Contractual arrangements we have entered into among our subsidiaries and affiliated entities may be
subject to scrutiny by the PRC tax authorities and a finding that we owe additional taxes or are
ineligible for our tax exemption, or both, could substantially increase our taxes owed, and reduce
our net income and the value of your investment.
    Our business operations may be affected by legislative or regulatory changes.
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PRC regulation of loans and direct investment by offshore holding companies to PRC entities may
delay or prevent us from making loans or additional capital contributions to our PRC operating
subsidiaries and affiliates.
  
    
    loans by us to our foreign invested enterprises to finance their respective
activities cannot exceed statutory limits and must be registered with the PRC State
Administration of Foreign Exchange or its local counterpart; and
    
    loans by us to our PRC operating affiliates or their respective subsidiaries,
which are domestic PRC enterprises, must be approved by the relevant government
authorities and must also be registered with the PRC State Administration of
Foreign Exchange or its local counterpart.
  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.
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The PRC legal system embodies uncertainties which could limit the legal protections available to
you and us.
  If tax benefits currently available to us in PRC were no longer available under the new Enterprise
Income Taxes (EIT) law which became effective on January 1, 2008, our effective income tax rates
for our PRC operations could increase.
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Dividends we receive from our operating subsidiaries located in the PRC may be subject to PRC
withholding tax.
  We may be deemed a PRC resident enterprise under the New Law and be subject to the PRC taxation on
our worldwide income.
  Dividends payable by us to our foreign investors and gain on the sale of our ADSs or ordinary
shares may become subject to taxes under PRC tax laws.
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Recent PRC regulations relating to offshore investment activities by PRC residents may increase our
administrative burden and restrict our overseas and cross-border investment activity. If our
shareholders who are PRC residents fail to make any required applications and filings under such
regulations, we may be unable to distribute profits and may become subject to liability under PRC
laws.
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The PRC tax authorities may require us to pay additional taxes in connection with our acquisitions
of offshore entities that conducted their PRC operations through their affiliates in China.
  A PRC rule on mergers and acquisitions may subject us to sanctions, fines and other penalties and
affect our future business growth through acquisition of complementary business.
   Restrictions on currency exchange may limit our ability to utilize our revenues effectively.
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Fluctuations in exchange rates could result in foreign currency exchange losses.
   Our financial and operating performance may be adversely affected by epidemics, natural disasters
and other catastrophes
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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.
   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 of private placements of shares at a price less than the greater of book value
and market value . 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.
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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.
  Anti-takeover provisions in our charter documents may discourage any hostile acquisition attempt by
a third party, which could limit our shareholders opportunity to sell their shares at a premium.
    We are a Cayman Islands company and, because judicial precedent regarding the rights of
shareholders is more limited under Cayman Islands law than under U.S. law, you may have less
protection of your shareholder rights than you would under U.S. law.
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Judgments obtained against us by our shareholders may not be enforceable.
  The voting rights of holders of ADSs are limited by the terms of the deposit agreement.
  The depositary for our ADSs will give us a discretionary proxy to vote our ordinary shares
underlying your ADSs if you do not vote at shareholders meetings, except in limited circumstances,
which could adversely affect your interests.
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
    
    we have failed to timely provide the depositary with our notice of meeting and
related voting materials;
    
    we have instructed the depositary that we do not wish a discretionary proxy to
be given;
    
    we have informed the depositary that there is substantial opposition as to a
matter to be voted on at the meeting;
    
    a matter to be voted on at the meeting would have a material adverse impact on
shareholders; or
    
    voting at the meeting is made on a show of hands.
  You may not receive distributions on our ordinary shares or any value for them if it is illegal or
impractical to make them available to you.
  You may be subject to limitations on transfer of your ADSs.
  
 ITEM 4. INFORMATION ON THE COMPANY
 A. History and Development of the Company
 www.focusmedia.cn
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B. Business Overview
  
    
    Continued growth of the Chinese advertising market driven by the increasing
urban population and the increasing disposable income of the Chinese population
impelled by continued moderate to high speed GDP growth in China
    
    The philosophy that the evolution of the Chinese urban population lifestyle
triggers the evolution of the advertising spending pattern in China and hence
presents market opportunities for the company to capture the shift in advertising
spending. As the Chinese urban population lifestyle changes, consumers become
increasingly more elusive to advertisers, and have over time resulted in making
traditional media such as television and newspapers advertising increasingly
ineffective and inefficient. As a result, the Company has and will continue to seek
to build dominant market
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share in media platforms that are more effective and efficient in capturing the
attention of the Chinese urban population.
   
    
    our LCD display network,which refers to our network of flat-panel television
displays placed in high-traffic areas of commercial and public buildings marketed
to advertisers as a network or as seven separate channels targeting different types
of consumersour premier A and B office building channels, travel, fashion, elite
and IT mall channels;
    
    our poster frame network, which refers to our network of traditional and digital
advertising poster frames placed mainly in the elevators and public areas of
residential complexes which we market under the brand name Framedia;
    
    our in-store network, which refers to our network of flat-panel television
displays placed in specific product areas inside stores with high-traffic
concentrations such as selected consumer product sections, the main aisles and
check-out lines in large-scale chain retail stores, or hypermarkets, as well as
inside selected supermarkets and convenience stores;
    
    our Internet advertising services network, which refers to our Internet
advertising agency and advertising services technology, including performance-based
software suites.
    
    our traditional billboard network, which refers to our network of large outdoor
poster billboards installed on street-sides in major shopping districts and other
locations with heavy pedestrian traffic in Shanghai, Beijing, Guangzhou, Shenzhen
and other cities in China; and
    
    our movie theater advertising network, which refers to our right to sell
advertising time on movie screens for the three minutes prior to movie screenings
at movie theaters in China.
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For and as of the three months endedMarch 31,
    
    June 30,
    
    September
    
    December
    
    March 31,
    
    June 30,
    
    September
    
    December2008
    
    2008
    
    30, 2008
    
    31, 2008
    
    2009
    
    2009
    
    30, 2009
    
    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
    (5)
    
    
    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
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Traditional billboard network
 2 2
 Movie theater advertising network
  In-store Network
   Poster Frame Network
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Internet Advertising Services Network
   Advertising Clients, Sales and Marketing
 Our Advertising Clients
  Sales
 Advertising Contracts
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Network Monitoring and Media Measurement
   Programming
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Pricing
  Relationships with Location Providers
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Technology and Suppliers
    Competition
  
    
    attain high market share;
    
    offer relatively fixed costs that allow us to leverage our earnings on revenue
growth; and
    
    provides us with relative control over our rental costs.
 Facilities
  Regulatory Matters
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Limitations on Foreign Ownership in the Advertising Industry
  
    
    The Catalogue for Guiding Foreign Investment in Industry (2007); and
    
    The Administrative Regulations on Foreign-invested Advertising Enterprises
(2008).
   
    
    we are able to exert effective control over our PRC operating affiliates and
their respective subsidiaries;
    
    a substantial portion of the economic benefits of our PRC operating affiliates
and their respective subsidiaries will be transferred to us; and
    
    we have an exclusive option to purchase all or part of the equity interests in
our PRC operating affiliates and all or part of the equity interests in our PRC
operating affiliates subsidiaries that are owned by our PRC operating affiliates
or its nominee holders, as well as all or a part of the assets of our PRC operating
affiliates, in each case when and to the extent permitted by PRC law.
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
    
    the respective ownership structures of our PRC operating subsidiaries and their
respective PRC affiliates and subsidiaries are in compliance with existing PRC laws
and regulations;
    
    the contractual arrangements among our PRC operating subsidiaries and their
respective PRC affiliates, subsidiaries and PRC shareholders of their PRC
affiliates, in each case governed by PRC law are valid, binding and enforceable,
and will not result in any violation of PRC laws or regulations currently in
effect; and
    
    the PRC business operations of our PRC operating subsidiaries and their
respective affiliates and subsidiaries as described in this annual report, are in
compliance with existing PRC laws and regulations in all material respects.
  Regulation of Advertising Services
 Business License for Advertising Companies
  
    
    The Advertising Law (1994);
    
    The Advertising Administrative Regulations (1987); and
    
    The Implementing Rules for the Advertising Administrative Regulations (2004).
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Advertising Content
    Outdoor Advertising
  
    
    utilize traffic safety facilities and traffic signs;
    
    impede the use of public facilities, traffic safety facilities and traffic
signs;
    
    obstruct commercial and public activities or create an eyesore in urban areas;
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
    
    be placed in restrictive areas near government offices, cultural landmarks or
historical or scenic sites; and
    
    be placed in areas prohibited by the local governments from having outdoor
advertisements.
     Print Advertising
  Regulation of Foreign Exchange in Certain Onshore and Offshore Transactions
    
    
    prior to establishing or assuming control of an offshore company for the purpose
of financing that offshore company with assets or equity interests in an onshore
enterprise in the PRC, each PRC
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resident, whether a natural or legal person, must complete the overseas investment
foreign exchange registration procedures with the relevant local SAFE branch;
    
    an amendment to the registration with the local SAFE branch is required to be
filed by any PRC resident that directly or indirectly holds interests in that
offshore company upon either (1) the injection of equity interests or assets of an
onshore enterprise to the offshore company, or (2) the completion of any overseas
fund raising by such offshore company; and
    
    an amendment to the registration with the local SAFE branch is also required to
be filed by such PRC resident when there is any material change involving a change
in the capital of the offshore company, such as (1) an increase or decrease in its
capital, (2) a transfer or swap of shares, (3) a merger or division, (4) a long
term equity or debt investment, or (5) the creation of any security interests over
the relevant assets located in China.
    C. Organizational Structure
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Our Corporate Structure and Contractual Arrangements
  
    
    with regard to the operation of our commercial location and in-store network,
through Focus Media Technology, our indirect wholly-owned subsidiaries in China,
Focus Media Digital, a 90%-owned subsidiary of Focus Media Technology, and New
Focus Media Advertisement, New Focus Media Agency, Focus Media Defeng
Advertisement, all of which are 90%-owned subsidiaries of Focus Media Digital, and
through our contractual arrangements with several of our consolidated affiliated
entities in China, including Focus Media Advertisement, and its subsidiaries (Focus
Media Advertisement owns the remaining 10% equity interest in Focus Media Digital
and, through Focus Media Digital, the remaining 10% equity of New Focus Media
Advertisement, New Focus Media Agency, Focus Media Defeng Advertisement);
    
    with regard to the operation of our poster frame network, through Framedia
Advertisement and New Structure Advertisement, each of which is 90% owned by Focus
Media Advertisement and 10% owned by Focus Media Advertising Agency, respectively;
    
    with regard to the operation of the Internet advertising marketing agency
business of Allyes, through New Allyes Information Technology Co., Ltd., our
indirectly wholly-owned subsidiary in China, and through our contractual
arrangements with a group of PRC operating companies, which we refer to as the
Allyes operating affiliates, each of which is owned by PRC citizens and entities;
    
    with regard to our outdoor traditional billboard network, , through Shanghai OOH
Advertisement Co., Beijing Chuanzhi Huaguang Advertising Co., Ltd, Shanghai
Chuanzhi Advertising Co., Ltd, Shanghai Ruili Advertising Co., Ltd, and Shanghai
Chuanrui Advertising Co., Ltd, all of which are 100% owned, directly or indirectly
by Hua Kuang Advertising Company Limited, and through our contractual arrangements
with the Huaguang operating affiliate; and
    
    with regard to our movie theater advertising network, through our contractual
arrangements with the Yangshi Sanwei operating affiliates.
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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 and their
respective subsidiaries.(3)
    
    Agreements that transfer a substantial portion of the economic benefits of our PRC operating
affiliates and their respective subsidiaries to us, as described in Related Party
Transactions.(4)
    
    Each of our PRC operating affiliates is owned by PRC shareholders consisting of either (i)
one or more PRC citizen or citizens designated by us, or (ii) one or more PRC entity or
entities owned by our subsidiaries or by our designated appointees, or (iii) a combination of
PRC citizens designated by us and entities owned by our subsidiaries or by our designated
appointees.(5)
    
    The Focus Media directly or indirectly wholly-owned subsidiaries relating to our out-of-home
television network operations include but not limited not Focus Media Technology, Focus Media
Digital , New Focus Media Technology and Shanghai Focus Media Defeng Advertisement.(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 Jimmy Wei Yu, Focus Media
Advertising Agency or unrelated third parties.(7)
    
    Framedia Affiliates include those (i) 100% held by Focus Media Digital, (ii) 100% held by our
designated PRC citizen s and (iii) between 90%-100% held by Focus Media Advertisement.   49




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
    
    we are able to exert effective control over our PRC operating affiliates;
    
    a substantial portion of the economic benefits of our PRC operating affiliates
will be transferred to us; and
    
    each of our PRC operating subsidiaries or non-PRC subsidiaries or their
respective designees has an exclusive option to purchase all or part of the equity
interests in our PRC affiliated entities or their respective nominee holders, or,
in some cases, all or part of the assets of our PRC affiliated entities, in each
case when and to the extent permitted by PRC law.
   
    
    the respective ownership structures of our PRC operating subsidiaries and their
respective PRC affiliates and subsidiaries are in compliance with existing PRC laws
and regulations;
    
    the contractual arrangements among our PRC operating subsidiaries and their
respective PRC affiliates, subsidiaries and PRC shareholders of their PRC
affiliates, in each case governed by PRC law are valid, binding and enforceable,
and will not result in any violation of PRC laws or regulations currently in
effect; and
    
    the PRC business operations of our PRC operating subsidiaries and their
respective affiliates and subsidiaries as described in this annual report, are in
compliance with existing PRC laws and regulations in all material respects.
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Subsidiaries of Focus Media Holding Limited
  D. Property, Plants and Equipment
  
 ITEM 4A.  UNRESOLVED STAFF COMMENTS
  
 ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS
  Overview
   
    
    In March 2006, we acquired Dotad Media Holdings, which operates a mobile-phone
advertising service in China through China Mobile and China Unicoms mobile phone
networks. Following the acquisition of Dotad Media Holdings, we renamed the acquired
company Focus Media Wireless Co., Ltd., which is also referred to as Focus Media
Wireless throughout this annual report. In December 2008, we discontinued operations of
our mobile handset advertising network, and this business has
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been accounted for as discontinued operations for all the periods presented in
accordance with U.S. GAAP.
    
    On March 28, 2007, we acquired Allyes, the leading Internet advertising company in
China. We also acquired ten other entities that provided Internet advertising service
during 2007 and 2008. In the third and fourth quarter of 2009, we disposed certain
underperforming subsidiaries engaged in Internet advertising business. The operations
of these disposed subsidiaries are accounted for as discontinued operations for all the
periods presented in accordance with U.S. GAAP.
    
    On January 2, 2008, we completed the acquisition of CGEN Digital Media Company
Limited, or CGEN. In accordance with the share purchase agreement entered into on
December 10, 2007, we made a cash payment of US$168.4 million to the former CGEN
shareholders and the former CGEN shareholders delivered 100% of the equity interest in
CGEN to us. In December 2008, we announced the restructuring of our in-store
advertising business and disposal of CGEN including termination of the CGEN share
purchase agreement. This business was accounted for as part of results from continuing
operations in the year ended December 31, 2008 as we retained certain assets for future
similar-use.
    
    On December 22, 2008, we entered into an asset purchase agreement with SINA
Corporation, pursuant to which we agreed to sell substantially all of the assets of our
LCD display network, poster frame network and in-store network. The transaction was
terminated in September 30, 2009 jointly by both parties. The assets and liabilities
were presented as held for sale as of December 31, 2008, but have been reclassified in
2009 in the balance sheet as held for use. The results have been included in
continuing operations for all periods presented.
    
    In 2009, in response to a regulation promulgated by Shanghai Municipality Government
in early 2009, the Group ceased the operation of its boat-based advertising platform on
the Huangpu River.
    
    During 2009, we discontinued operations of certain poor performing subsidiaries in
our Internet advertising business and they are classified as discontinued operations
for all periods presented.
  
    
    Overall economic growth in China, which we expect to contribute to an increase in
advertising spending in major urban areas in China where consumer spending is
concentrated;
    
    Our ability to increase sales of advertising time slots and extend the duration of
our advertising cycle on our LCD display networks, in-store networks and movie theater
network;
    
    Our ability to expand our client base through promotion of our services and
cross-selling;
    
    Our ability to identify and create new advertising channels by establishing separate
advertising networks that enable advertisers to target a diverse range of consumer
groups with specific demographic profiles;
    
    Our ability to successfully operate and market our new LCD display network;
    
    Our ability to successfully operate and market our new Internet advertising
marketing and technology agency; and
    
    Our ability to increase sales of advertising space and increase the length of
advertising campaigns on our traditional billboard network.
    
    Our ability to integrate the companies we acquired in the previous years
 52




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##### Table of Contents



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. 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.
  53




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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
    % 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
 54




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Factors that Affect Our Advertising Service Revenue.
 LCD display Network
  In-store Network
  Poster Frame Network
  
    
    the number of frames in our poster frame network. We sell frame space on our poster
frame network on a per frame basis. Increasing the number of residential and other
locations on our poster frame network allows us to increase the number of frames on our
network, thereby increasing the available frame space for sale to advertisers;
    
    the average price we charge for frame space on a per frame basis, after taking into
account any discount offered, which varies significantly from city to city as income
levels, standards of living and general economic conditions vary significantly from
region to region in China; and
    
    our ability to effectively compete with smaller competitors in the sector. During
the past few quarters, we have been facing intense competitions from those competitors
in two key areas: securing desirable locations for our poster frames and pricing
 55




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##### Table of Contents



Internet Advertising Service Revenues
  
    
    the number of customers who purchase agency services from us. We agree to provide
advertising agency services and technology, and we charge fees based on the size and
duration of the advertising campaign and the number of daily impressions or hits on
the Internet advertisement; and
    
    our ability to identify relevant Internet user traffic and deliver effective
advertisements for our advertising clients
 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.We typically sign standard advertising contracts with our advertising
clients, which require us to run the advertisers advertisements on our network in
specified cities for a specified period, typically from four to twelve weeks. We
recognize advertising service revenue ratably over the performance period of the
advertising contract, so long as collection of our fee remains probable.
    
    Revenue recognition for Internet advertising network.Revenues primary consist of
revenues from advertising and advertising-related services and revenues from sales of
Adforward software. Advertising revenues, net of agency rebates, are recognized ratably
over the period in which the advertisement is displayed. We sell Adforward
subscriptions and perpetual licenses. Revenues are recognized for subscription
arrangements ratably over the subscription period for those with fixed fees and as
earned (based on actual usage) under our variable fee arrangements. Under perpetual
license
 56




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##### Table of Contents



agreements, revenue recognition is generally commenced when delivery has occurred,
software has been installed and training has been provided as we do not currently have
vendor-specific objective evidence of fair value, or VSOE, for either installation or
training services.
   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
   57




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
    
    rental fees and one-time signing payments we pay to landlords, property managers and
stores pursuant to the display placement agreements we enter into with them;
    
    commissions and public relations expenses we incur in connection with developing and
maintaining relationships with landlords and property managers; and
    
    maintenance fees for keeping our displays in proper operating condition.
   LCD display Network
 In-store Network
 Poster Frame Network
 Internet Advertising Services Network
 Movie Theatre & Traditional Outdoor Billboard Networks.
 58




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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
    %)
 General and Administrative.
 Selling and Marketing.
 Impairment Loss for goodwill
 59




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##### Table of Contents



Long-lived asset Impairment.
 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
    %
 60




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##### 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
  61




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Revenue Recognition
        Accounts Receivable
   62




---



##### Table of Contents



Share-based Compensation
   Income Taxes
  Goodwill Impairment
  
    
    a significant adverse change in the business climate or legal factors;
    
    an adverse action or assessment by a regulator;
    
    unanticipated competition;
    
    loss of key personnel;
    
    the likelihood that a reporting unit or a significant portion of a reporting
unit will be sold or disposed of;
 63




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##### Table of Contents




    
    a change in reportable segments; and/or
    
    results of testing for recoverability of a significant asset group within a
reporting unit.
   Goodwill impairment in 2008
    Goodwill impairment in 2009
  64




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##### Table of Contents



Long-lived asset Impairment
  Impairment of long-lived assets in 2008
   65




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Impairment of long-lived assets in 2009
   Taxation
 Cayman Islands, the British Virgin Islands and Hong Kong.
  Taxable Presence Exposure in the PRC
  66




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PRC
      67




---



##### Table of Contents



Recently Issued Accounting Standards
      68




---



##### Table of Contents



Acquisitions
   2008 acquisitions:
     69




---



##### Table of Contents



2009 acquisitions:
  Disposition
 2008 Disposition
   2009 Disposition
   Quarterly Results of Operation
  70




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##### Table of Contents



For the three months endedConsolidated Statement
    
    March 31,
    
    
    June 30,
    
    
    September
    
    
    December
    
    
    March 31,
    
    
    June 30,
    
    
    September
    
    
    Decemberof Operations Data
    
    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
    )
 71




---



##### 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, 2009(in thousands of U.S. dollars)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: For the three months endedMarch 31,
    
    
    June 30,
    
    
    September
    
    
    December
    
    
    March 31,
    
    
    June 30,
    
    
    September
    
    
    December2008
    
    
    2008
    
    
    30, 2008
    
    
    31, 2008
    
    
    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; and2)
    
    Subsequent to the filing of our fourth quarter 2009 results in the Form 6-K furnished to the
SEC on March 16, 2010, PRC State Tax Bureau released a circular numbered 2010[157] on April
21, 2010, which clarified preferential tax holiday treatments for those who also qualified as
HNTE. According to this circular, companies qualified as HNTE can either enjoy a 50%
reduction off the tax rate from 2009 through 2011 based on the transitional rule, or enjoy an
EIT rate of 15%. In no cases can companies enjoy the preferential tax rate of 7.5%, which is
a 50% deduction of 15%. Accordingly, income tax of $0.5 million was additionally provided
subsequently to reflect the difference between 7.5%, the rate previously utilized, and 10%,
which is the rate applied according to the transitioning rules.3)
    
    Subsequent to the filing of our fourth quarter 2009 results in the Form 6-K furnished to the
SEC on March 16, 2010, the Company recognized additional $4.0 million share-based compensation
expenses in its financial results for the third quarter 2009, due to the Companys private
equity placement of 75 million of its ordinary shares with JJ Media Investment Holding, a
British Virgin Island company established and controlled by Jiang Nan Chun, CEO and Chairman
of the Company. The $4.0 million share-based compensation expense represents the average
closing price of the shares during the twenty consecutive trading days preceding the signing
of the definitive agreement.
 72




---



##### 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
    %
 73




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##### Table of Contents



For the three months endedConsolidated Statement
    
    March 31,
    
    June 30,
    
    September
    
    December
    
    March 31,
    
    June 30,
    
    September
    
    Decemberof Operations Data
    
    2008
    
    2008
    
    30, 2008
    
    31, 2008
    
    2009
    
    2009
    
    30, 2009
    
    31, 2009Net 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 31,
    
    June 30,
    
    September
    
    December
    
    March 31,
    
    June 30,
    
    September
    
    December2008
    
    2008
    
    30, 2008
    
    31, 2008
    
    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
 Total Revenues.
 
    
    LCD Display Network. Advertising service revenue from our LCD display network
declined 12.9% from $239.5 million in 2008 to $208.5 million in 2009. The decline
was primarily attributable to contracting demand from advertisers under unfavorable
macro economic conditions. Advertisers from certain industries, such as automobile
and financial services, significantly reduced their advertising budgets in 2009
amid the financial crisis that started in late 2008.
    
    In-store Network. Advertising service revenue from our in-store network declined
50.1% to $30.3 million in 2009 from $60.7 million in 2008. This decline was
primarily attributable to our restructuring of CGEN in December 2008. In January
2008, we acquired CGEN, which was our biggest competitor in in-store advertising
segment. Subsequently, on December 10, 2008, we announced the disposition of the
part of in-store advertising business acquired from CGEN and termination of CGEN
acquisition agreement.
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##### Table of Contents




    
    Poster Frame Network. Advertising service revenue from our poster frame network
declined 32.6% from $146.8 million in 2008 to $99.0 million in 2009. This decline
in revenue is primarily attributable to contracting demand from advertisers under
unfavorable macro economic conditions, more intense pricing pressures from our
competitors and our disposition of two subsidiaries acquired in previous years.
    
    Internet Advertising Service.Advertising service revenue from our Internet
advertising service network declined 5.9% from $114.6 million in 2008 to $107.9
million in 2009. The decline is primarily attributable to contracting demand from
advertisers under unfavorable macro economic conditions.
    
    Movie Theatre and Traditional Outdoor Billboards.Advertising service revenue
declined 23.5.0% from $77.2 million in 2008 to $59.1 million in 2009. This is
primarily attributable to our disposition of a subsidiary in traditional outdoor
billboard business in April 2009.
 Cost of Revenues.
 
    
    Cost of revenues  LCD display network. Our net advertising service cost for LCD
display network declined from $79.6 million in 2008 to $75.8 million in 2009. This
decline was due to the fact that we dismantled some of the LED screens installed in
certain commercial districts in Shanghai in the second quarter of 2009 and,
therefore, no longer incurred location rental.
    
    Cost of revenues In-store network. We incurred $24.2 million in net advertising
service cost for our in-store network in 2009 compared to $61.8 million in 2008.
The significant decline is primarily due to restructuring of CGEN we acquired in
January, 2008 and to a minor degree due to our cost reduction initiatives taken
since late 2008.
    
    Cost of revenues  Poster frame network. Our net advertising service cost for
our poster frame network increased significantly to $95.4 million in 2009 compared
to $59.8 million in 2008. The increase is mostly attributable to (1) a $27.0
million impairment charge to our idle fixed assets, mostly digital poster frame;
and (2) an increase in rental and depreciation in 2009 due to a significant
increase in the number of digital poster frames at the beginning of the year and
more intense competition from our competitors for desirable buildings to place our
poster frames.
    
    Net advertising service cost  Internet advertising service network. We incurred
net advertising service costs of $98.7 million in 2009, a slight increase from
$89.1 million in 2008.
    
    Net advertising service cost- Movie theater and traditional outdoor billboards.
We incurred net advertising service cost of $45.1 million in 2009, a 21% decline
from $56.9 million in 2008. The decline is primarily due to our disposition of a
subsidiary in the traditional outdoor billboard business.
    
    Gross Profit.As a result of the foregoing, our gross profit declined by 43.8%
from $295.1 million in 2008 to $165.9 million in 2009. Our overall gross margin
decreased during the same period from 45.9% in 2008 to 32.8% primarily due to a
significant decline in revenues from our LCD display networks and poster frame
networks as well as significant impairment charges to our idle equipment. Our
gross margins for each of our businesses during these periods are presented in the
following table:
 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
    )
    
    
    6,176
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Year ended December 31,2007
    
    
    2008
    
    
    2009US$000
    
    
    US$000
    
    
    US$000Poster 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. General and administrative expenses increased
substantially from $90.2 million in 2008 to $120.2 million in 2009 mainly due to
(1) an increase in share-based compensation expenses in 2009 following the
Companys decision to cancel the 2007 employee share option plan and replace it
with 2009 Replacement restricted shares as well as the compensation charge on the
private placement of 75 million shares with Jason Nanchun Jiang; and (2) a
significant increase in bad debt reserve for account receivables under unfavorable
macro economic conditions, which caused more advertisers to delay or default on
their payments for advertising services we rendered.
    
    Selling and Marketing. Selling and marketing expenses increased from $95.4
million in 2008 to $107.2 million in 2009 due to (1) an increase in share-based
compensation expenses in 2009 following the Companys decision to cancel the 2007
employee share option plan and replace it with 2009 Replacement restricted shares;
and (2) a significant increase in spending in marketing and promotional expenses as
a percentage of total revenue to counter contracting demand for our advertising
service by advertisers under unfavorable macro economic conditions.
    
    Impairment Loss.The Company incurred $86.3 million of goodwill impairment loss
in 2009, which was mostly attributable to payment of contingent consideration to
original owners of the subsidiaries acquired by us prior to 2009. These
subsidiaries mostly belong to the poster frame network and traditional outdoor
billboard business. In 2008, the Company incurred a $596.1 million goodwill
impairment loss in 2008, which was mostly related to our poster frame reporting
unit and Internet advertising reporting unit.
    
    Other operating expenses (income) net.Other operating expenses, net represented
the loss from equity investment in some subsidiaries in our Internet advertising
business and bad debt reserves related to amounts due from original owners of some
of the subsidiaries we acquired prior to 2009. Other operating expenses were
partially offset by other operating income of $17.1 million, which primarily
consist of government subsidies. The Company incurred other operating expenses of
$182.5 million in 2008 primarily represents the loss incurred when we restructuring
CGEN, which
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was partially offset by $19.5 million other operating income, which primarily
consist of government subsidies.
 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.Advertising service revenue from our LCD display network
increased 30.5% from $183.5 million in 2007 to $239.5 million in 2008. The increase
was primarily attributable to: (1) favorable macro economic conditions; (2)
continued acceptance of our media by an increasing number of advertising clients;
(3) the steady expansion of our media network, including the number of LCD displays
and LED billboards on our network; and (4) the sale of tailored advertising
packages including the seven specialized channels on our commercial location
network and by targeting advertising campaigns on specific lists of buildings
requested by advertising clients, which enables us to charge those advertising
clients a premium.
    
    In-store network. Advertising service revenue from our in-store network
increased 121.5% to $60.7 million in 2008 from $27.4 million in 2007. This increase
was primarily attributable to our acquisition of CGEN, our biggest competitor in
in-store advertising business in January 2008.
    
    Poster frame network. Advertising service revenue from our poster frame network
increased 71.7% to $146.8 million in 2008 from $85.5 million in 2007. This
increase in revenue is primarily due to robust sales under favorable macro economic
conditions and significant expansion of our networks. The total number of frames
installed increased from 190,468 as of December 31, 2007 to 324,364 as of December
31, 2008, including 34,195 digital frames. The expansion of our networks was
accomplished partially through organic growth and partially through acquiring
competitors.
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##### Table of Contents




    
    Internet advertising service.Advertising service revenue from our Internet
advertising service network increased 52.0% to $114.6 million in 2008 from $75.4
million in 2007. The increase is primarily attributable to favorable macro
economic conditions and growing acceptance of the Internet as an effective media by
advertisers in China.
    
    Movie theatre and traditional outdoor billboards.Advertising service revenue
more than doubled from $37.3 million in 2007 to $77.2 million in 2008, primarily
due to the following two reasons: (1) Huaguang and Tuojia, which were operating the
traditional billboard business, were acquired in the first half of 2007. We
consolidated their 2007 revenue only after the acquisitions were consummated, while
in 2008 we consolidated their full year revenues; and (2) the significant increase
in the number of our movies theater customers from 71 in 2007 to 141 in 2008.
 Cost of Revenues.
 
    
    Cost of revenuesLCD display Network. Our net advertising service cost for LCD
display network increased significantly from $52.6 million in 2007 to $79.6 million
in 2008. This increase was primarily attributable to the following factors: (1) a
significant expansion of our network. The number of LCD displays we own and
operate directly increased from 107,553 as of December 31, 2007 to 122,597 as of
December 31, 2008. As a result, we incurred more location costs, depreciation
costs and network maintaining costs in 2008 than in 2007; and (2) $15.6 million
impairment charge on fixed assets incurred in 2008.
    
    Cost of revenues in-store network. We incurred $61.8 million in net advertising
service cost for our in-store network in 2008 compared to $23.5 million in 2007.
The significant increase is primarily due to our acquisition of CGEN, our biggest
competitor in the in-store advertising business.
    
    Cost of revenues  poster frame network. Our net advertising service cost for
our poster frame network increased significantly to $59.8 million in 2008 from
$28.1 million in 2007, attributable to increased location costs and depreciation
costs relating to the installation and maintenance of poster frames on our network
as (1) we significantly increased the number of traditional poster frames on our
network through organic expansion and acquisition of competitors and (2) beginning
in June 2007, we began to incur location costs and depreciation cost associated
with the purchase and installation of digital poster frames. In 2008, we installed
approximately 34,000 digital poster frames as compared to approximately 11,000 such
frames installed in 2007.
    
    Net advertising service cost-Internet advertising service.Internet advertising
service cost increased significantly from $51.7 million in 2007 to $89.1 million in
2008. The increase was primarily driven by higher acquisition cost for advertising
space from website owners.
    
    Net advertising service cost- movie theatre and traditional outdoor billboards.
We incurred advertising service cost of $56.9 million in 2008, a 99.6% increase
from $28.5 million in 2007. The increase is primarily due to (1) our acquisition
of Huaguang, the subsidiary operating the traditional billboard business in 2007.
We consolidated Huaguangs results of operation only after the acquisition was
consummated, while in 2008 we consolidated their full year costs of revenues; (2)
the increase in the number of billboards leased from 492 in 2007 to 542 in 2008 in
response to greater customer demand; and (3) increased leasing costs associated
with time we rent on movie theatre screens as a result of an increase in the number
of theaters we leased in our network from 10,930 in 2007 to 27,164 in 2008.
 Gross Profit.
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##### Table of Contents



Operating Expenses.
 
    
    General and Administrative. General and administrative expenses increased
substantially from $45.6 million in 2007 to $90.2 million in 2008 mainly due to an
increase in the size of our administrative staff and related salary and benefits
(particularly an increase of share-based compensation expenses. There was also a
corresponding increases in expenses for utilities, office rental, and professional
service fees,
    
    Selling and Marketing. Selling and marketing expenses increased 57.1% from $60.7
million in 2007 to $95.4 million in 2008. Such increase was in proportion to the
increase of our net revenue by 56.6% from $410.2 million in 2007 to 642.3 million
in 2008.
    
    Impairment loss.We incurred a $596.1 million goodwill impairment loss in 2008,
which was mostly related to our poster frame business and Internet advertising
business.
    
    Other operating expenses.Other operating expenses of $182.5 million in 2008
primarily represents the loss incurred when we restructuring CGEN, which was
partially offset by $19.5 million other operating income, which primarily consist
of government subsidies.
    
    Loss from continuing operations before income tax.As a result of the foregoing
and interest income of $7.5 million, we had loss from continuing operations before
income tax of $661.6 million in 2008 compared to income of $136.7 million in 2007.
    
    Provision for income taxes.Provision for income taxes was $26.8 million in 2008
as compared to $8.3 million in 2007. This significant increase was primarily
driven by significantly more taxable income for the Company in 2008 than in 2007.
For PRC corporate income tax purposes, many expenses, such as share-based
compensation expenses, goodwill impairment loss and impairment of acquired
intangible assets, etc, are not deductible when calculating taxable income.
    
    Net loss from continuing operations.As a result of the foregoing, we had a Net
loss from continuing operations of $688.3 million as compared to a net income from
continuing operations of $128.3 million in 2007.
    
    Net loss from discontinued operations, net of tax.In March, 2008 the Company
announced restructuring its mobile handset advertising business. Subsequently the
Company announced termination the business completely in December 2008. In
accordance to US GAAP, the business was classified as discontinued operations in
both 2008 and 2007. We incurred $82.5 million loss from the business as compared
to a net income of $16.8 million in 2007.
    
    Net loss attributable to Focus Media Holdings Limited.As result of the
foregoing, we had a net loss attributable to Focus Media Holdings limited of $770.7
million in 2008 as compared to a net income attributable to Focus Media Holdings
Limited of $144.4 million in 2007.
 Liquidity and Capital Resources
 Cash Flows and Working Capital
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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
   80




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##### 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
  81




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##### Table of Contents



Restricted Net Assets
  B. Research, Development, Patents and Licenses, etc.
 Research and Development
  Patents and Trademarks
    C. Trend Information
  82




---



##### Table of Contents



D. Off-balance Sheet Arrangements
  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
 th
 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
    
    
    Director
 83




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##### Table of Contents



Name
    
    Age
    
    PositionYing Wu (5)
    
    
    51
    
    
    DirectorAlex Deyi Yang
    
    
    34
    
    
    General Manager and Director (and Acting Chief Financial Officer for the period covered by this annual report)Kit Leong Low
    
    
    39
    
    
    Chief Financial Officer (since January 2010)
 
 (1)
    
    Independent director, chairman of the compensation committee and member of the audit
committee and the nominations committee.(2)
    
    Independent director and chairman of the nominations committee.(3)
    
    Independent director, chairman of the audit committee and member of the compensation
committee and nominations committee.(4)
    
    Independent director and member of the compensation committee.(5)
    
    Independent director and member of the audit committee. Jason Nanchun Jiang
 Fumin Zhuo
 Neil Nanpeng Shen
 Charles Cao
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##### Table of Contents



Daqing Qi
 David Ying Zhang
 Ying Wu
 Alex Deyi Yang
 Kit Leong Low
  Duties of Directors
  85




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##### Table of Contents




    
    convening shareholders meetings and reporting its work to shareholders at such
meetings;
    
    implementing shareholders resolutions;
    
    determining our business plans and investment proposals;
    
    formulating our profit distribution plans and loss recovery plans;
    
    determining our debt and finance policies and proposals for the increase or
decrease in our registered capital and the issuance of debentures;
    
    formulating our major acquisition and disposition plans, and plans for merger,
division or dissolution;
    
    proposing amendments to our amended and restated memorandum and articles of
association; and
    
    exercising any other powers conferred by the shareholders meetings or under our
amended and restated memorandum and articles of association.
 B. Compensation
  Share Option and Restricted Shares Plans
    86




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##### Table of Contents



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
    %
    87




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##### Table of Contents



Number ofrestricted
    
    Exercise pershares issued
    

ordinary share
    
    Date of grant
    

Date of expiration(in U.S. dollars)Jason Nanchun Jiang
    
    
    19,500,000
    
    
    $nil
    
    October 1, 2009
    
    September 30, 2019Fuming Zhuo
    
    
    *
    
    
    $nil
    
    October 1, 2009
    
    September 30, 2019Neil Nanpeng Shen
    
    
    *
    
    
    $nil
    
    October 1, 2009
    
    September 30, 2019Charles Cao
    
    
    *
    
    
    $nil
    
    October 1, 2009
    
    September 30, 2019Daqing Qi
    
    
    *
    
    
    $nil
    
    October 1, 2009
    
    September 30, 2019David Ying Zhang
    
    
    *
    
    
    $nil
    
    October 1, 2009
    
    September 30, 2019Ying Wu
    
    
    *
    
    
    $nil
    
    October 1, 2009
    
    September 30, 2019Alex Deyi Yang
    
    
    *
    
    
    $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
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##### Table of Contents



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



Compensation Committee
  
    
    determining and recommending the compensation of our chief executive officer;
    
    reviewing and making recommendations to our board of directors regarding our
compensation policies and forms of compensation provided to our directors and
officers;
    
    reviewing and determining bonuses for our officers;
    
    reviewing and determining share-based compensation for our directors and
officers;
    
    administering our equity incentive plans in accordance with the terms thereof;
and
    
    such other matters that are specifically delegated to the compensation committee
by our board of directors from time to time.
 Nominations Committee
  Foreign Private Issuer Home Country Practice
 D. Employees
  Number ofemployees (1)
    
    PercentageSales and marketing
    
    
    1,594
    
    
    
    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.  90




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E. Share Ownership
  
 ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 A. Major Shareholders
  
    
    each person known to us to own beneficially more than 5% of our ordinary shares
and
    
    each of our directors and executive officers who beneficially own our ordinary
 shares.
  Shares beneficially ownedNumber
    
    PercentPrincipal ShareholdersJJ Media Investment Holding Ltd. (1)
    
    
    141,086,135
    
    
    
    19.33
    %Directors and Executive Officers (2)JJ Media Investment Holding Ltd./ Jason Nanchun Jiang (3)
    
    
    141,086,135
    
    
    
    19.33
    %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 13G filed on February 12, 2009 on behalf of Jason
Nanchun Jiang and JJ Media Investment Holding Limited. Includes 141,086,135 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,
28-30/F, Zhao Feng World Trade Building, 369 Jiangsu Road, Shanghai, China 200050. 91




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(2)
    
    The address of our current directors and executive officers is c/o Focus Media Holding
Limited, 28F, Zhao Feng World Trade Building, 369 Jiangsu Road, Shanghai 200050, China.(3)
    
    See note 2.    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
 92




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##### Table of Contents



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
    
    
    
    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. 93




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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
  Agreements among Us, Our PRC Operating Subsidiaries, Our PRC Operating Affiliates and Their
Shareholders and Subsidiaries
   94




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Transfer of Ownership When Permitted By Law
  Voting Arrangements
  Equity Pledge Agreements
  95




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Equity Trust Agreements
  Cooperation Agreements
  Asset Transfer Agreement
  Technology Transfer Agreement
  Exclusive Services Agreement
  C. Interests of Experts and Counsel
  
 ITEM 8. FINANCIAL INFORMATION
 A. Consolidated Statements and Other Financial Information
  96




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Legal Proceedings
 In re Focus Media Holding Limited Litigation
   Dividend Policy
   B. Significant Changes
  97




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
    
    In January 2010, we appointed Kit Leong Low as our chief financial officer and
Alex Yang as our general manager;
    
    In January 2010, certain Allyes employees and management and directors and
certain members of our management and directors entered into a definitive agreement
with us and Allyes to purchase an aggregate 38% interest in Allyes from us.
Pursuant to the terms of the agreements, the purchasing Allyes and Group management
members paid an aggregate $13.3 million for a 38% interest of Allyes. The Group
performed a valuation of Allyes as of the closing date of the transaction and
determined that the price paid to acquire the interest approximated fair value.
The
transaction was approved by all independent directors on the board. This
transaction was part of initiatives we are taking to incentivize management to
enhance the future business model of Allyes and thereby to seek long term
sustainable growth for the Group and investors.
    
    In February 2010, we announced that our board of directors approved a share
repurchase program of up to $200 million, which we expect to implement over the
course of the 12 month period following the announcement in a manner consistent
with market conditions and the interest of the shareholders and in compliance with
our securities trading policy. Our board of directors will review the share
repurchase program periodically and may authorize adjustment of its terms and size
accordingly. We plan to fund repurchases made under this program from our available
cash balance.
  
 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
    
    
    
    12.26
 98




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SALE PRICEHIGH
    
    LOWUS$
    
    US$February
    
    
    15.69
    
    
    
    12.82March
    
    
    18.72
    
    
    
    14.35April
    
    
    18.48
    
    
    
    16.68May
    
    
    17.18
    
    
    
    14.36June
(through June 25)
    
    
    17.40
    
    
    
    14.60
  B. Plan of Distribution
  C. Markets
  D. Selling Shareholders
  E. Dilution
  F. Expenses of the Issue
  
 ITEM 10. ADDITIONAL INFORMATION
 A. Share Capital
  B. Memorandum and Articles of Association
  C. Material Contracts
  99




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Allyes
   Purchase Price
 Representations and Warranties
 Covenants
 Indemnification
     100




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Management Buy-in To Allyes
  Control Over Acquired Entities
  Share Subscription by JJ Media Investment Holding Limited
  D. Exchange Controls
    101




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
    
    prior to establishing or assuming control of an offshore company for the purpose
of financing that offshore company with assets or equity interests in an onshore
enterprise in the PRC, each PRC resident, whether a natural or legal person, must
complete the overseas investment foreign exchange registration procedures with the
relevant local SAFE branch;
    
    an amendment to the registration with the local SAFE branch is required to be
filed by any PRC resident that directly or indirectly holds interests in that
offshore company upon either (1) the injection of equity interests or assets of an
onshore enterprise to the offshore company, or (2) the completion of any overseas
fund raising by such offshore company; and
    
    an amendment to the registration with the local SAFE branch is also required to
be filed by such PRC resident when there is any material change involving a change
in the capital of the offshore company, such as (1) an increase or decrease in its
capital, (2) a transfer or swap of shares, (3) a
merger or division, (4) a long term equity or debt investment, or (5) the creation
of any security interests over the relevant assets located in China.
    E. Taxation
 Cayman Islands Taxation
   102




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(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
  
    
    a bank;
    
    a dealer in securities or currencies;
 103




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##### Table of Contents




    
    a financial institution;
    
    a regulated investment company;
    
    a real estate investment trust;
    
    an insurance company;
    
    a tax-exempt organization;
    
    a person holding our ordinary shares or ADSs as part of a hedging, integrated or
conversion transaction, a constructive sale or a straddle;
    
    a trader in securities that has elected the mark-to-market method of accounting
for your securities;
    
    a person liable for alternative minimum tax;
    
    a United States expatriate or a person treated as a resident of more than one
country;
    
    a person who owns or is deemed to own 10% or more of our voting stock;
    
    a partnership or other pass through entity for United States federal income tax
purposes or a person holding our ordinary shares or ADSs through any such entity;
or
    
    a person whose functional currency is not the United States dollar.
 IF YOU ARE CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF OUR ORDINARY SHARES OR
ADSS, YOU SHOULD CONSULT YOUR OWN TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES TO YOU IN LIGHT OF YOUR PARTICULAR SITUATION AS WELL AS ANY CONSEQUENCES ARISING UNDER
THE LAWS OF ANY OTHER TAXING JURISDICTION
  
    
    an individual citizen or resident of the United States;
    
    a corporation (or other entity treated as a corporation for United States
federal income tax purposes) created or organized in or under the laws of the
United States, any state thereof or the District of Columbia;
    
    an estate the income of which is subject to United States federal income
taxation regardless of its source; or
    
    a trust which either (1) is subject to the primary supervision of a court within
the United States and one or more United States persons have the authority to
control all substantial decisions of the trust or (2) has a valid election in
effect under applicable United States Treasury regulations to be treated as a
United States person.
 104




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ADSs
   Taxation of Dividends
   105




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Passive Foreign Investment Companies
   
    
    at least 75% of our gross income is passive income, or
    
    at least 50% of the value (determined on a quarterly basis) of our assets is
attributable to assets that produce or are held for the production of passive
income.
    
    
    the excess distribution or gain will be allocated ratably to each day in your
holding period for the ordinary shares or ADSs,
 106




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
    
    the amount allocated to the current taxable year, and any taxable year prior to
the first taxable year in which we were a PFIC, will be treated as ordinary income,
and
    
    the amount allocated to each other year will be subject to tax at the highest
tax rate in effect for that year and the interest charge applicable to
underpayments of tax will be imposed on the resulting tax attributable to each such
year.
        Taxation of Capital Gains
  107




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Information Reporting and Backup Withholding
    F. Dividends and Paying Agents
  G. Statement by Experts
  H. Documents on Display
     108




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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
  109




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C. Other securities
  D. American Depositary Shares
 Fees and Charges Our ADS holders May Have to Pay
  
 PART II
 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 A. Modifications of Rights
  
    
    any of our shareholders representing a majority of the ordinary shares converted
from the Series A convertible redeemable preference shares;
    
    any of our shareholders representing a majority of the ordinary shares converted
from the Series B convertible redeemable preference shares;
    
    any of our shareholders representing 20% of the ordinary shares converted from
the Series C convertible redeemable preference shares; and
    
    since the closing of our acquisition of Target Media, any of the former Target
Media shareholders representing 25% of the ordinary shares issued to them as a
group as consideration in connection with our acquisition of Target Media;
  110




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
    
    prior to September 18, 2009 or prior to the time when the shares proposed to be
sold by the former Allyes shareholders may be sold in a 90-day period under Rule
144, any former Allyes shareholders holding 3 million of our ordinary shares may
request that we effect the registration of the ordinary shares held by them using
our existing registration statement on Form F-3ASR, provided that if the offering
is part of an underwritten offering, the expected proceeds from such an offering
would not be less than US$40 million; we are obligated to effect up to three such
registrations; and
    
    certain of the former Allyes shareholders, on a date at least 150 days and no
more than 330 days following March 28, 2007, may request that we effect the
registration of the ordinary shares held by them using our existing registration
statement on Form F-3ASR; we are obligated to effect only one such registration.
   B. Use of Proceeds
  
 ITEM 15. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  Managements Annual Report on Internal Control Over Financial Reporting.
  111




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112




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Internal Control
 Integrated Framework
     113




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ITEM 16.
 
 ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B. CODE OF ETHICS
  
 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  For the year ended December 31,2008
    
    
    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
  114




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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
    
    
    $
    163,255,127
 
 (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 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.(3)
    
    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
  
    
    The Nasdaq Listing Rules require shareholder approval for the issuance of shares
in a private placement at a price less than the greater of book value and market
value. The corporate governance practice in our home country, the Cayman Islands,
does not require shareholder approval for the issuance of shares in a private
placement at a price less than the greater of book value and market value, provided
that the directors consider the issue price represents fair value for the shares
being issued. We currently rely upon the relevant home country exemption in lieu
of the requirement for shareholder approval of such share issuances.
 115




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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-5Consolidated Statements of Changes in Shareholders Equity and Comprehensive Income
(Loss) for the years ended December 31, 2006, 2007 and 2008
    
    
    F-6Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2007 and 2008
    
    
    F-7Notes to the Consolidated Financial Statements
    
    
    F-9Additional Information  Financial Statement Schedule 1
    
    
    F-40
 
 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*
    
    Deposit Agreement dated July 18, 2005 among the Registrant, Citibank, N.A. and holders of
the American Depositary Receipts (incorporated by reference to the registration statement
on Form F-6 (File No. 333-126011) filed with the Securities and Exchange Commission with
respect to American Depositary Shares representing ordinary shares).5.1*
    
    Form of opinion of Conyers Dill & Pearman, Cayman Islands special counsel to the
registrant, regarding the validity of the ordinary shares being registered.5.2*
    
    Form of opinion of Global Law Office, counsel as to PRC law to the registrant, regarding
the validity of (i) the corporate structure of Focus Media Technology (Shanghai) Co., Ltd.
and Shanghai Focus Media Advertisement Co., Ltd. and contractual arrangements among Focus
Media Technology (Shanghai) Co., Ltd., Shanghai Focus Media Advertisement Co., Ltd. and its
subsidiaries, Jason Nanchun Jiang and Jimmy Wei Yu, (ii) the corporate structure of
Framedia Investment and Shanghai Framedia Advertisement Development Co., Ltd. and
contractual arrangements among Framedia Investment and Shanghai Framedia Advertisement
Development Co., Ltd. and its subsidiaries, Jason Nanchun Jiang and Jimmy Wei Yu and (iii)
the corporate structure of Shanghai Focus Media Advertisement Co., Ltd., Shanghai Focus
Media Advertising Agency Co., Ltd., Beijing Dotad Technology Co., Ltd., Beijing Focus Media
Wireless Technology Co., Ltd., Jason Nanchun Jiang and Jimmy Wei Yu.8.1*
    
    Form of opinion of Conyers Dill & Pearman, special Cayman Islands tax counsel to the
registrant, regarding tax matters.
 116




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.1*
    
    Rules of the 2003 Employee Share Option Scheme and form of grant letter.10.2*
    
    Technology License and Service Agreement, dated March 28, 2005, by and among Focus Media
Digital Information Technology (Shanghai) Co., Ltd., Shanghai Focus Media Advertisements
Co., Ltd. and the subsidiaries of Shanghai Focus Media Advertisement Co., Ltd.10.3*
    
    Business Cooperation Agreement, dated March 28, 2005, by and among Shanghai Focus Media
Advertisement Co., Ltd., Shanghai Focus Media Advertising Agency Co., Ltd. and the
subsidiaries of Shanghai Focus Media Advertisement Co., Ltd.10.4*
    
    Equity Pledge Agreement, dated March 28, 2005, by and among Jason Nanchun Jiang, Jimmy Wei
Yu, Shanghai Focus Media Advertisement Co., Ltd., Focus Media Technology (Shanghai) Co.,
Ltd., Focus Media Digital Information Technology (Shanghai) Co., Ltd. and the subsidiaries
of Shanghai Focus Media Advertisement Co., Ltd.10.5*
    
    Call Option Agreement, dated March 28, 2005, among Jason Nanchun Jiang, Jimmy Wei Yu,
Shanghai Focus Media Advertisement Co., Ltd. and Focus Media Technology (Shanghai) Co.,
Ltd.10.6*
    
    Shareholders Voting Rights Proxy Agreement, dated March 28, 2005, among Jason Nanchun
Jiang, Jimmy Wei Yu, Shanghai Focus Media Advertisement Co., Ltd., Focus Media Technology
(Shanghai) Co., Ltd. and the subsidiaries of Shanghai Focus Media Advertisement Co., Ltd.10.7*
    
    Trust Agreement, dated March 28, 2005, by and between Shanghai Focus Media Advertisement
Co., Ltd. and Focus Media Technology (Shanghai) Co., Ltd.10.8*
    
    Trademark License Agreement, dated March 28, 2005, by and among Focus Media Technology
(Shanghai) Co., Ltd., Shanghai Focus Media Advertisement Co., Ltd. and its subsidiaries.10.9*
    
    Loan Agreement, dated June 10, 2003, among Focus Media Holding Limited, Jason Nanchun
Jiang, Jimmy Wei Yu, Yuanzhe Fu, Yibing Zhou and Yiqing Hou.10.10*
    
    Loan Agreement, dated March 28, 2005, by and between Jason Nanchun Jiang and Focus Media
Technology (Shanghai) Co., Ltd.10.11*
    
    Loan Agreement, dated March 28, 2005, by and among Jimmy Wei Yu, Focus Media Technology
(Shanghai) Co., Ltd. and Shanghai Focus Media Advertisement Co., Ltd.10.12*
    
    Form of Employment Agreement of Focus Media Technology (Shanghai) Co., Ltd.10.13*
    
    Manager Non-Competition Agreement entered into by Focus Media Holding Limited and Jason
Nanchun Jiang on November 29, 2004.10.14*
    
    Technology Transfer Agreement entered into by Jimmy Wei Yu and Focus Media Digital
Information (Shanghai) Co., Ltd., dated November 1, 2004.10.15*
    
    Asset and Business Acquisition Agreement between Shanghai Everease Communication Company
and Shanghai Focus Media Advertisement Co., Ltd. dated July 1, 2003.10.16*
    
    Everease Non-competition Agreement between Focus Media Holding Limited and Shanghai
Everease Communication Company, dated as of November 2004.10.17*
    
    Sales Contract between Shanghai Everease Communication Company and Shanghai Focus Media
Advertisement Co., Ltd., dated May 2003.
 117




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.18*
    
    Project Cooperation Framework Agreement between Shanghai Everease Communication Company and
Beijing Suodi Advertising Co., Ltd., dated February, April and June 2003.10.19*
    
    Transfer Agreement on Project Cooperation Framework Agreement between Shanghai Focus Media
Advertisement Co., Ltd. and Beijing Suodi Advertising Co., Ltd., dated August 28, 2003.10.20*
    
    Business Agency Agreement between Shanghai On-Target Advertising Co., Ltd. and Shanghai
Focus Media Advertisement Co., Ltd.10.21*
    
    Agreement between Shanghai On-Target Advertising Co., Ltd., Jimmy Wei Yu, Shanghai Focus
Media Advertisement Co., Ltd., Union Enterprise Holding Co., Ltd. and Shenlong Lin, dated
October 15, 2003.10.22*
    
    Acknowledgement Letter entered into as of March 28, 2005 by and among Shanghai Focus Media
Advertisement Co., Ltd., Focus Media Technology (Shanghai) Co., Ltd., Focus Media Digital
Information Technology (Shanghai) Co., Ltd. and subsidiaries of Shanghai Focus Media
Advertisement Co., Ltd.10.23*
    
    Share Option Plan 2005.10.24*
    
    Acknowledgement Letter for Participation of Equity Pledge Agreement, dated January 13,
2006, of Shanghai Focus Media Advertisement Co., Ltd. and Fuzhou Fukesi Advertisement Co.,
Ltd.10.25*
    
    Acknowledgement Letter for Participation of Equity Pledge Agreement, dated January 13,
2006, of Shanghai Focus Media Advertisement Co., Ltd. and Hefei Fukesi Advertisement Co.,
Ltd.10.26*
    
    Acknowledgement Letter for Participation of Equity Pledge Agreement, dated January 13,
2006, of Shanghai Focus Media Co., Ltd. and Hefei Fukesi Advertisement Co., Ltd.10.27*
    
    Acknowledgement Letter for Participation of Equity Pledge Agreement, dated January 13,
2006, of Shanghai Focus Media Advertisement Co., Ltd. and Shenyang Focus Media
Advertisement Co., Ltd.10.28*
    
    Acknowledgement Letter for Participation of Equity Pledge Agreement, dated January 13,
2006, of Shanghai Focus Media Advertisement Co., Ltd. and Shenzhen Bianjie Building
Advertisement Co., Ltd.10.29*
    
    Acknowledgement Letter for Participation of Equity Pledge Agreement, dated January 13,
2006, of Shanghai Focus Media Co., Ltd. and Shenzhen Bianjie Building Advertisement Co.,
Ltd.10.30*
    
    Acknowledgement Letter for Participation of Call Option Agreement, dated January 13, 2006,
of Shanghai Focus Media Advertisement Co., Ltd. and Fuzhou Fukesi Advertisement Co., Ltd.10.31*
    
    Acknowledgement Letter for Participation of Call Option Agreement, dated January 13, 2006,
of Shanghai Focus Media Advertisement Co., Ltd. and Hefei Fukesi Advertisement Co., Ltd.10.32*
    
    Acknowledgement Letter for Participation of Call Option Agreement, dated January 13, 2006,
of Shanghai Focus Media Co., Ltd. and Hefei Fukesi Advertisement Co., Ltd.10.33*
    
    Acknowledgement Letter for Participation of Call Option Agreement, dated January 13, 2006,
of Shanghai Focus Media Advertisement Co., Ltd. and Shenyang Focus Media Advertisement Co.,
Ltd.10.34*
    
    Acknowledgement Letter for Participation of Call Option Agreement, dated January 13, 2006,
of Shanghai Focus Media Advertisement Co., Ltd. and Shenzhen Bianjie Building Advertisement
Co., Ltd.
 118




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.35*
    
    Acknowledgement Letter for Participation of Call Option Agreement, dated January 13, 2006,
of Shanghai Focus Media Co., Ltd. and Shenzhen Bianjie Building Advertisement Co., Ltd.10.36*
    
    Acknowledgement Letter for Participation of Shareholders Voting Rights Proxy Agreement,
dated January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and Fuzhou Fukesi
Advertisement Co., Ltd.10.37*
    
    Acknowledgement Letter for Participation of Shareholders Voting Rights Proxy Agreement,
dated January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and Hefei Fukesi
Advertisement Co., Ltd.10.38*
    
    Acknowledgement Letter for Participation of Shareholders Voting Rights Proxy Agreement,
dated January 13, 2006, of Shanghai Focus Media Co., Ltd. and Hefei Fukesi Advertisement
Co., Ltd.10.39*
    
    Acknowledgement Letter for Participation of Shareholders Voting Rights Proxy Agreement,
dated January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and Shenyang Focus
Media Advertisement Co., Ltd.10.40*
    
    Acknowledgement Letter for Participation of Shareholders Voting Rights Proxy Agreement,
dated January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and Shenzhen
Bianjie Building Advertisement Co., Ltd.10.41*
    
    Acknowledgement Letter for Participation of Shareholders Voting Rights Proxy Agreement,
dated January 13, 2006, of Shanghai Focus Media Co., Ltd. and Shenzhen Bianjie Building
Advertisement Co., Ltd.10.42*
    
    Equity Pledge Agreement, dated January 13, 2006, by and among Shanghai Focus Media
Advertisement Co., Ltd., Shanghai Focus Media Co., Ltd., Shanghai Framedia Investment
Consultancy Co., Ltd. and the Local Advertisement Companies named therein.10.43*
    
    Call Option Agreement, dated January 13, 2006, by and among Shanghai Focus Media
Advertisement Co., Ltd., Shanghai Focus Media Co., Ltd., Shanghai Framedia Investment
Consultancy Co., Ltd. and the Local Advertisement Companies named therein.10.44*
    
    Shareholders Voting Rights Proxy Agreement, dated January 13, 2006, by and among Shanghai
Focus Media Advertisement Co., Ltd., Shanghai Focus Media Co., Ltd., Shanghai Framedia
Investment Consultancy Co., Ltd. and the Local Advertisement Companies named therein.10.45*
    
    Equity Pledge Agreement, dated January 13, 2006, by and among Lei Liu, Yong Shi, Shanghai
Framedia Investment Consultancy Co., Ltd. and Guangdong Century Shenghuo Advertisement Co.,
Ltd.10.46*
    
    Call Option Agreement, dated January 13, 2006, by and among Lei Liu, Yong Shi, Shanghai
Framedia Investment Consultancy Co., Ltd. and Guangdong Century Shenghuo Advertisement Co.,
Ltd.10.47*
    
    Shareholders Voting Rights Proxy Agreement, dated January 13, 2006, by and among Lei Liu,
Yong Shi, Shanghai Framedia Investment Consultancy Co., Ltd. and Guangdong Century Shenghuo
Advertisement Co., Ltd.10.48*
    
    Share Purchase Agreement, dated October 15, 2005, as amended and supplemented, among Focus
Media Holding Limited, Infoachieve Limited, Total Team Investments Limited and the other
Infoachieve parties named therein.
 119




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.49*
    
    Share Purchase Agreement, dated as of January 7, 2006, among Focus Media Holding Limited,
Target Media Holdings Limited and Its Shareholders.10.50*
    
    Asset Transfer Agreement, dated December 31, 2005, by and between Focus Media Digital
Information Technology (Shanghai) Co., Ltd. and Shanghai New Focus Media Advertisement Co.,
Ltd.10.51*
    
    Share Purchase Agreement, dated March 7, 2006, by and among Focus Media Holding Limited and
Dotad Wireless Holdings Co., Ltd.10.52*
    
    Equity Pledge Agreement, dated May 22, 2006, by and among Shanghai Focus Media
Advertisement Co., Ltd., Shanghai Focus Media Advertising Agency Co., Ltd., Beijing Dotad
Technology Co., Ltd and Beijing Focus Media Wireless Co., Ltd.10.53*
    
    Call Option Agreement, dated May 22, 2006, by and among Shanghai Focus Media Advertisement
Co., Ltd., Shanghai Focus Media Advertising Agency Co., Ltd., Beijing Dotad Technology Co.,
Ltd and Beijing Focus Media Wireless Co., Ltd.10.54*
    
    Shareholders Voting Rights Proxy Agreement, dated May 22, 2006, by and among Shanghai FocusMedia Advertisement Co., Ltd., Shanghai Focus Media Advertising Agency Co., Ltd., Beijing
Dotad Technology Co., Ltd and Beijing Focus Media Wireless Co., Ltd.10.55*
    
    Equity Pledge Agreement, dated May 22, 2006, by and among Shanghai Focus Media
Advertisement Co., Ltd., Shanghai Focus Media Advertising Agency Co., Ltd., Shanghai
Framedia Investment Consulting Co., Ltd. and Guandong Shiji Shenghuo Advertisement Co.,
Ltd.10.56*
    
    Call Option Agreement, dated May 22, 2006, by and among Shanghai Focus Media Advertisement
Co., Ltd., Shanghai Focus Media Advertising Agency Co., Ltd., Shanghai Framedia Investment
Consulting Co., Ltd. and Guandong Shiji Shenghuo Advertisement Co., Ltd.10.57*
    
    Shareholders Voting Rights Proxy Agreement, dated May 22, 2006, by and among Shanghai
Focus Media Advertisement Co., Ltd., Shanghai Focus Media Advertising Agency Co., Ltd.,
Shanghai Framedia Investment Consulting Co., Ltd. and Guandong Shiji Shenghuo Advertisement
Co., Ltd.10.58*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of
Shanghai New Focus Media Advertisement Co., Ltd.10.59*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of
Shanghai New Focus Media Advertisement Co., Ltd.10.60*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights Proxy Agreement,
dated May 22, 2006, of Shanghai New Focus Media Advertisement Co., Ltd.10.61*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of
Shanghai New Focus Media Advertising Agency Co., Ltd.10.62*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of
Shanghai New Focus Media Advertising Agency Co., Ltd.10.63*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights Proxy Agreement,
dated May 22, 2006, of Shanghai New Focus Media Advertising Agency Co., Ltd.
 120




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.64*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of
Shanghai Target Media Co., Ltd.10.65*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of
Shanghai Target Media Co., Ltd.10.66*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights Proxy Agreement,
dated May 22, 2006, of Shanghai Target Media Co., Ltd.10.67*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of
Dongguan Focus Media Advertisement Co., Ltd.10.68*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of
Dongguan Focus Media Advertisement Co., Ltd.10.69*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights Proxy Agreement,
dated May 22, 2006, of Dongguan Focus Media Advertisement Co., Ltd.10.70*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of
Fuzhou Fukesi Advertising Co., Ltd.10.71*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of
Fuzhou Fukesi Advertising Co., Ltd.10.72*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights Proxy Agreement,
dated May 22, 2006, of Fuzhou Fukesi Advertising Co., Ltd.10.73*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of
Hefei Fukesi Advertising Co., Ltd.10.74*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of
Hefei Fukesi Advertising Co., Ltd.10.75*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights Proxy Agreement,
dated May 22, 2006, of Hefei Fukesi Advertising Co., Ltd.10.76*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of
Shanghai On-Target Advertisement Co., Ltd.10.77*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of
Shanghai On-Target Advertisement Co., Ltd.10.78*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights Proxy Agreement,
dated May 22, 2006, of Shanghai On-Target Advertisement Co., Ltd.10.79*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of
Shanghai Jiefang Focus Media Advertisement Co., Ltd.10.80*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of
Shanghai Jiefang Focus Media Advertisement Co., Ltd.10.81*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights Proxy Agreement,
dated May 22, 2006, of Shanghai Jiefang Focus Media Advertisement Co., Ltd.
 121




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.82*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of
Shanghai Perfect Media Advertising Agency Co., Ltd.10.83*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of
Shanghai Perfect Media Advertising Agency Co., Ltd.10.84*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights Proxy Agreement,
dated May 22, 2006, of Shanghai Perfect Media Advertising Agency Co., Ltd.10.85*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of
Shenzhen E-Time Commercial Consulting Co., Ltd.10.86*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of
Shenzhen E-Time Commercial Consulting Co., Ltd.10.87*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights Proxy Agreement,
dated May 22, 2006, of Shenzhen E-Time Commercial Consulting Co., Ltd.10.88*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of
Shenzhen Bianjie Building Advertisement Co., Ltd.10.89*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of
Shenzhen Bianjie Building Advertisement Co., Ltd.10.90*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights Proxy Agreement,
dated May 22, 2006, of Shenzhen Bianjie Building Advertisement Co., Ltd.10.91*
    
    Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of
Shenyang Focus Media Advertising Co., Ltd.10.92*
    
    Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of
Shenyang Focus Media Advertising Co., Ltd.10.93*
    
    Acknowledgement Letter of Participation of Shareholders Voting Rights Proxy Agreement,
dated May 22, 2006, of Shenyang Focus Media Advertising Co., Ltd.10.94*
    
    Cooperation Agreement, dated May 22, 2006, by and among Shanghai Focus Media Advertisement
Co. Ltd. and its local advertising subsidiaries named therein and Shanghai New Focus Media
Advertisement Co. Ltd.10.95*
    
    Technology Transfer Agreement, dated as of May 22, 2006, by and between Focus Media Digital
Information Technology (Shanghai) Co., Ltd. and Shanghai New Focus Media Advertisement Co.,
Ltd.10.96*
    
    Advertisement Dissemination Agreement, dated May 22, 2006, by and between Shanghai Focus
Media Advertising Agency Co., Ltd. and Shanghai New Focus Media Advertisement Co., Ltd.10.97*
    
    2006 Share Option Plan.10.98*
    
    Share Purchase Agreement, dated as of February 28, 2007, among Allyes Information
Technology Company Limited, the selling shareholders named therein and Focus Media Holding
Limited.10.99*
    
    Asset Transfer Agreement, dated as of January 30, 2003, among Shanghai Allyes Advertisement
Co., Ltd., New Allyes Information Technology (Shanghai) Co., Ltd., Xiangdong Xiong and
Jiangang Wang.
 122




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.100*
    
    Call Option Agreement, dated as of January 30, 2003, among Jiangang Wang, New Allyes
Information Technology (Shanghai) Co., Ltd. and Shanghai Allyes Advertisement Co., Ltd.10.101*
    
    Call Option Agreement, dated as of January 30, 2003, among Xiangdong Xiong, new Allyes
Information Technology (Shanghai) Co., Ltd. and Shanghai Allyes Advertisement Co., Ltd.10.102*
    
    Equity Interests Pledge Agreement, dated as of January 30, 2003, between New Allyes
Information Technology (Shanghai) Co., Ltd. and Jianggang Wang.10.103*
    
    Equity Interests Pledge Agreement, dated as of January 30, 2003, between New Allyes
Information Technology (Shanghai) Co., Ltd. and Xiangdong Xiong.10.104*
    
    Exclusive Service Agreement, dated as of January 20, 2003, by and among Shanghai Allyes
Advertisement Co., Ltd. and New Allyes Information Technology (Shanghai) Co., Ltd.10.105*
    
    Loan Agreement, dated as of January 10, 2003, by and among New Allyes Information
Technology (Shanghai) Co., Ltd. and Jiangang Wang.10.106*
    
    Loan Agreement, dated as of January 10, 2003, by and among New Allyes Information
Technology (Shanghai) Co., Ltd. and Xiangdong Xiong.10.107*
    
    Shareholders Voting Rights Proxy Agreement, dated as of January 30, 2003, among Xiangdong
Xiong, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Allyes
Advertisement Co., Ltd.10.108*
    
    Call Option Agreement, dated November 1, 2004, among Jiangang Wang, New Allyes Information
Technology (Shanghai) Co., Ltd. and Shenzhen Baifen Creation Advertisement Co., Ltd.10.109*
    
    Call Option Agreement, dated November 1, 2004, among Xiangdong Xiong, New Allyes
Information Technology (Shanghai) Co., Ltd. and Shenzhen Baifen Creation Advertisement Co.,
Ltd.10.110*
    
    Equity Interests Pledge Agreement, dated November 1, 2004, by and between New Allyes
Information Technology (Shanghai) Co., Ltd. and Jiangang Wang.10.111*
    
    Equity Interests Pledge Agreement, dated November 1, 2004, by and between New Allyes
Information Technology (Shanghai) Co., Ltd. and Xiangdong Xiong.10.112*
    
    Exclusive Service Agreement, dated as of November 1, 2004, by and among Shenzhen Baifen
Creation Advertisement Co., Ltd. and New Allyes Information Technology (Shanghai) Co., Ltd.10.113*
    
    Loan Agreement, dated as of November 1, 2004, by and among New Allyes Information
Technology (Shanghai) Co., Ltd. and Jiangang Wang.10.114*
    
    Loan Agreement, dated as of November 1, 2004, by and among New Allyes Information
Technology (Shanghai) Co., Ltd. and Xiangdong Xiong.10.115*
    
    Shareholders Voting Rights Proxy Agreement, dated as of November 1, 2004, among Jiangang
Wang, New Allyes Information Technology (Shanghai) Co., Ltd. and Shenzhen Baifen Creation
Advertisement Co., Ltd.10.116*
    
    Shareholders Voting Rights Proxy Agreement, dated as of November 1, 2004, among Xiangdong
Xiong, New Allyes Information Technology (Shanghai) Co., Ltd. and Shenzhen Baifen Creation
Advertisement Co., Ltd.
 123




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.117*
    
    Asset Transfer Agreement, dated November 30, 2004, among Shanghai Huxin Advertisement Co.,
Ltd., New Allyes Information Technology (Shanghai) Co., Ltd., Suyang Zhang and Hailong Zhu.10.118*
    
    Call Option Agreement, dated November 30, 2004, among Suyang Zhang, New Allyes Information
Technology (Shanghai) Co., Ltd. and Shanghai Huxin Advertisement Co., Ltd.10.119*
    
    Call Option Agreement, dated November 30, 2004, among Hailong Zhu, New Allyes Information
Technology (Shanghai) Co., Ltd. and Shanghai Huxin Advertisement Co., Ltd.10.120*
    
    Equity Interests Pledge Agreement, dated November 30, 2004, by and between New Allyes
Information Technology (Shanghai) Co., Ltd. and Suyang Zhang.10.121*
    
    Equity Interests Pledge Agreement, dated November 30, 2004, by and between New Allyes
Information Technology (Shanghai) Co., Ltd. and Hailong Zhu.10.122*
    
    Exclusive Service Agreement, dated as of November 11, 2004, by and among Shanghai Huxin
Advertisement Co., Ltd. and New Allyes Information Technology (Shanghai) Co., Ltd.10.123*
    
    Loan Agreement, dated as of November 1, 2004, by and among New Allyes Information Technology
(Shanghai) Co., Ltd. and Suyang Zhang.10.124*
    
    Loan Agreement, dated as of November 1, 2004, by and among New Allyes Information
Technology (Shanghai) Co., Ltd. and Hailong Zhu.10.125*
    
    Shareholders Voting Rights Proxy Agreement, dated as of November 30, 2004, among Suyang
Zhang, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Huxin
Advertisement Co., Ltd.10.126*
    
    Shareholders Voting Rights Proxy Agreement, dated as of November 30, 2004, among Hailong
Zhu, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Huxin
Advertisement Co., Ltd.10.127*
    
    Asset Transfer Agreement, dated as of November 30, 2004, among Shanghai MSN Advertisement
Co., Ltd., New Allyes Information Technology (Shanghai) Co., Ltd., Suyang Zhang and Hailong
Zhu.10.128*
    
    Call Option Agreement, dated November 30, 2004, among Suyang Zhang, New Allyes Information
Technology (Shanghai) Co., Ltd. and Shanghai MSN Advertisement Co., Ltd.10.129*
    
    Call Option Agreement, dated November 30, 2004, among Hailong Zhu, New Allyes Information
Technology (Shanghai) Co., Ltd. and Shanghai MSN Advertisement Co., Ltd.10.130*
    
    Equity Interests Pledge Agreement, dated November 30, 2004, by and between New Allyes
Information Technology (Shanghai) Co., Ltd. and Suyang Zhang.10.131*
    
    Equity Interests Pledge Agreement, dated November 30, 2004, by and between New Allyes
Information Technology (Shanghai) Co., Ltd. and Hailong Zhu.10.132*
    
    Exclusive Service Agreement, dated as of November 3, 2004, by and among Shanghai MSN
Advertisement Co., Ltd. and New Allyes Information Technology (Shanghai) Co., Ltd.10.133*
    
    Loan Agreement, dated as of November 1, 2004, by and among New Allyes Information
Technology (Shanghai) Co., Ltd. and Hailong Zhu.
 124




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.134*
    
    Loan Agreement, dated as of November 1, 2004, by and among New Allyes Information
Technology (Shanghai) Co., Ltd. and Suyang Zhang.10.135*
    
    Shareholders Voting Rights Proxy Agreement, dated as of November 30, 2004, among Suyang
Zhang, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai MSN
Advertisement Co., Ltd.10.136*
    
    Shareholders Voting Rights Proxy Agreement, dated as of November 30, 2004, among Hailong
Zhu, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai MSN Advertisement
Co., Ltd.10.137*
    
    Asset Transfer Agreement, dated as of May 17, 2005, among Shanghai Quanshi Advertisement
Co., Ltd., New Allyes Information Technology (Shanghai) Co., Ltd., Suyang Zhang and Hailong
Zhu.10.138*
    
    Call Option Agreement, dated May 17, 2005, among Hailong Zhu, New Allyes Information
Technology (Shanghai) Co., Ltd. and Shanghai Quanshi Advertisement Co., Ltd.10.139*
    
    Call Option Agreement, dated May 17, 2005, among Hailong Zhu, New Allyes Information
Technology (Shanghai) Co., Ltd. and Shanghai Quanshi Advertisement Co., Ltd.10.140*
    
    Equity Interests Pledge Agreement, dated May 17, 2005, by and between New Allyes
Information Technology (Shanghai) Co., Ltd. and Suyang Zhang.10.141*
    
    Equity Interests Pledge Agreement, dated May 17, 2005, by and between New Allyes
Information Technology (Shanghai) Co., Ltd. and Hailong Zhu.10.142*
    
    Exclusive Service Agreement, dated as of April 20, 2005, by and among Shanghai Quanshi
Advertisement Co., Ltd. and New Allyes Information Technology (Shanghai) Co., Ltd.10.143*
    
    Loan Agreement, dated as of April 20, 2005, by and among New Allyes Information Technology
(Shanghai) Co., Ltd. and Suyang Zhang.10.144*
    
    Loan Agreement, dated as of April 20, 2005, by and among New Allyes Information Technology
(Shanghai) Co., Ltd. and Hailong Zhu.10.145*
    
    Shareholders Voting Rights Proxy Agreement, dated as of May 17, 2005, among Suyang Zhang,
New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Quanshi Advertisement
Co., Ltd.10.146*
    
    Shareholders Voting Rights Proxy Agreement, dated as of May 17, 2005, among Hailong Zhu,
New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Quanshi Advertisement
Co., Ltd.10.147*
    
    Supplemental Agreement for Loan Agreement, dated as of March 20, 2006, by and among New
Allyes Information Technology (Shanghai) Co., Ltd. and Suyang Zhang.10.148*
    
    Supplemental Agreement for Loan Agreement, dated as of March 20, 2006, by and among New
Allyes Information Technology (Shanghai) Co., Ltd. and Hailong Zhu.10.149*
    
    Call Option Agreement, dated July 1, 2006, among Hailong Zhu, New Allyes Information
Technology (Shanghai) Co., Ltd. and Shanghai Kuantong Advertisement Co., Ltd.10.150*
    
    Call Option Agreement, dated July 1, 2006, among Hailong Zhu, New Allyes Information
Technology (Shanghai) Co., Ltd. and Shanghai Kuantong Advertisement Co., Ltd.
 125




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.151*
    
    Equity Interests Pledge Agreement, dated July 1, 2006, by and between New Allyes
Information Technology (Shanghai) Co., Ltd. and Jiangang Wang.10.152*
    
    Equity Interests Pledge Agreement, dated July 1, 2006, by and between New Allyes
Information Technology (Shanghai) Co., Ltd. and Suyang Zhang.10.153*
    
    Exclusive Service Agreement, dated as of July 1, 2006, by and among Shanghai Kuantong
Advertisement Co., Ltd. and New Allyes Information Technology (Shanghai) Co., Ltd.10.154*
    
    Loan Agreement, dated as of June 20, 2006, by and among New Allyes Information Technology
(Shanghai) Co., Ltd. and Jiangang Wang.10.155*
    
    Loan Agreement, dated as of June 20, 2006, by and among New Allyes Information Technology
(Shanghai) Co., Ltd. and Suyang Zhang.10.156*
    
    Shareholders Voting Rights Proxy Agreement, dated as of July 1, 2006, among Jiangang Wang,
New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Kuantong Advertisement
Co., Ltd.10.157*
    
    Shareholders Voting Rights Proxy Agreement, dated as of July 1, 2006, among Suyang Zhang,
New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Kuantong Advertisement
Co., Ltd.10.158*
    
    Share Purchase Agreement, dated as of July 21, 2006, among EFT Partners Limited, Focus
Media Holdings Limited, Appreciate Capital Ltd., Zhang Qingyong and Wang Yongmei.10.159*
    
    Registration Rights Agreement, dated as of March 28, 2007, by and among Focus Media Holding
Limited and Persons who represent certain former shareholders, warrant holders and options
holders of Allyes Information Technology Company Limited.10.160*
    
    Shareholders Voting Rights Proxy Agreement, dated as of January 30, 2003, among Jiangang
Wang, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Allyes
Advertisement Co., Ltd.10.161*
    
    2007 Share Option Plan10.162*
    
    Share Purchase Agreement, dated as of December 8, 2007, among Focus Media Holding Limited,
CGEN Digital Media Company Limited and the selling shareholders and other parties named
therein.10.163*
    
    Registration Rights Agreement, dated as of January 2, 2008, among Focus Media Holding
Limited and the former shareholders of CGEN Digital Media Company Limited named therein.10.164*
    
    Equity Pledge Agreement, dated as of January 5, 2008, among Shanghai Focus Media
Advertisement Co., Ltd, Shanghai Focus Media Advertising Agency Co., Ltd., CGEN Digital
Technology (Shanghai) Company Ltd. And Shanghai CGEN Culture Communication Company Ltd.10.165*
    
    Call Option Agreement, dated as of January 5, 2008, among Shanghai Focus Media
Advertisement Co., Ltd, Shanghai Focus Media Advertising Agency Co., Ltd., CGEN Digital
Technology (Shanghai) Company Ltd. And Shanghai CGEN Culture Communication Company Ltd10.166*
    
    Shareholders Voting Rights Proxy Agreement, dated as of January 5, 2008, among Shanghai
Focus Media Advertisement Co., Ltd, Shanghai Focus Media Advertising Agency Co., Ltd., CGEN
Digital Technology (Shanghai) Company Ltd. And Shanghai CGEN Culture Communication Company
Ltd10.167*
    
    Exclusive Technology and Consulting Agreement, dated as of January 16, 2006, among CGEN
Digital Technology (Shanghai) Company Ltd. And Shanghai CGEN Culture Communication Company
Ltd
 126




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.168*
    
    Termination and Release Agreement, dated as of December 8, 2008, among Focus Media Holding
Limited, CGEN Digital Media Company Limited, Chan Yi Sing (individually and as
representative of all CGEN selling shareholders), Guanyong Tian and Mei Lijun.10.169*
    
    Equity Pledge Agreement, dated as of April 28 2007, among Shanghai OOH Advertising Co.,
Ltd, Liu Yi Nuo and Shanghai Chuanzhi Advertisement Co., Ltd.10.170*
    
    Shareholders Voting Rights Proxy Agreement, dated as of April 28, 2007, among Shanghai OOH
Advertising Co., Ltd, Liu Yi Nuo and Shanghai Chuanzhi Advertisement Co., Ltd.10.171*
    
    Equity Pledge Agreement, dated as of April 28 2007, among Shanghai OOH Advertising Co.,
Ltd, Pan Ze Xin and Shanghai Chuanzhi Advertisement Co., Ltd.10.172*
    
    Shareholders Voting Rights Proxy Agreement, dated as of April 28, 2007, among Shanghai OOH
Advertising Co., Ltd, Pan Ze Xin and Shanghai Chuanzhi Advertisement Co., Ltd.10.173*
    
    Equity Pledge Agreement, dated as of April 28 2007, among Shanghai OOH Advertising Co.,
Ltd, Liu Yi Nuo and Shanghai Ruili Advertisement Co., Ltd.10.174*
    
    Shareholders Voting Rights Proxy Agreement, dated as of April 28, 2007, among Shanghai OOH
Advertisement Co., Ltd, Liu Yi Nuo and Shanghai Ruili Advertisement Co., Ltd.10.175*
    
    Equity Pledge Agreement, dated as of April 28, 2007, among Shanghai OOH Advertising Co.,
Ltd, Ni He Ping and Shanghai Ruili Advertisement Co., Ltd.10.176*
    
    Shareholders Voting Rights Proxy Agreement, dated as of April 28, 2007, among Shanghai OOH
Advertising Co., Ltd, Ni He Ping and Shanghai Ruili Advertisement Co., Ltd.10.177*
    
    Equity Pledge Agreement, dated as of April 28 2007, among Shanghai OOH Advertising Co.,
Ltd, Liu Yi Nuo and Shanghai Xinnuo Advertisement Co., Ltd.10.178*
    
    Shareholders Voting Rights Proxy Agreement, dated as of April 28, 2007, among Shanghai OOH
Advertising Co., Ltd, Liu Yi Nuo and Shanghai Xinnuo Advertisement Co., Ltd.10.179*
    
    Equity Pledge Agreement, dated as of April 28 2007, among Shanghai OOH Advertising Co.,
Ltd, Pan Ze Xin and Shanghai Xinnuo Advertisement Co., Ltd.10.180*
    
    Shareholders Voting Rights Proxy Agreement, dated as of April 28, 2007, among Shanghai OOH
Advertising Co., Ltd, Pan Ze Xin and Shanghai Xinnuo Advertisement Co., Ltd.10.181*
    
    Asset Purchase Agreement, dated as of December 22, 2008, between Focus Media Holding
Limited and SINA Corporation.10.182
    
    2010 Employee Share Option Plan.10.183
    
    Subscription Agreement, dated as of September 23, 2009, between Focus Media Holding Limited
and JJ Media Investment Holding Limited.10.184
    
    Restricted ADS Facility Letter, dated as of November [9], 2009, between Focus Media Holding
Limited and Citibank, N.A., as depositary.10.185
    
    Purchase and Sale Agreement, dated as of January 1, 2010, among Focus Media Holding
Limited, Allyes and the purchasers named therein with regard to certain assets outside
China.
 127




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.186
    
    Purchase and Sale Agreement, dated as of January 1, 2010, among Focus Media Holding
Limited, Allyes and the purchasers named therein with regard to certain assets inside
China.12.1
    
    Certificate of Chief Executive Officer.12.2
    
    Certificate of Chief Financial Officer.13.1
    
    Certification of Periodic Financial Report.13.2
    
    Certification of Periodic Financial Report.15.1
    
    Consent of Conyers Dill & Pearman.15.2
    
    Consent of Global Law Office.15.3
    
    Consent of Deloitte Touche Tohmatsu CPA Ltd.21.1
    
    List of Subsidiaries.
 
 *
    
    Previously filed.
    
    Confidential treatment requested for certain portions of this Exhibit pursuant to Rule 24b-2
promulgated under the Securities Exchange Act, which portions are omitted and filed separately
with the Securities and Exchange Commission. 128




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##### Table of Contents



SIGNATURES
  Focus Media Holding LimitedBy:
    /s/ Jason Nanchun JiangName:
    Jason Nanchun JiangTitle:
    Chairman and Chief Executive Officer  129




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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-5Consolidated Statements of Changes in Equity and
Comprehensive Income (Loss) for the Years Ended December 31,
2007, 2008 and 2009
    
    
    F-6Consolidated Statements of Cash Flows for the Years Ended
December 31, 2007, 2008 and 2009
    
    
    F-7Notes to the Consolidated Financial Statements
    
    
    F-9Additional Information  Financial Statement Schedule I
    
    
    F-40
 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 share data, 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)
 F-3




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##### Table of Contents



December 31,2008
    
    
    2009(In U.S. Dollars, except
share and per share data, unless otherwise stated)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-4




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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-5




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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)
 Retained
    
    
    AccumulatedOrdinary
    
    
    Additional
    
    
    
    
    
    
    earning
    
    
    othershares
    
    
    paid-in
    
    
    Subscription
    
    
    (accumulated
    
    
    comprehensive
    
    
    Noncontrolling
    
    
    Total
    
    
    ComprehensiveOrdinary shares
    
    
    Amount
    
    
    capital
    
    
    receivables
    
    
    deficit)
    
    
    income
    
    
    interests
    
    
    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-6




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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-7




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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-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)
 1. Organization and Principal Activities
    F-9




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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-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)
 (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-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)
 (k) Revenue Recognition
        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)
 (l) Operating Leases
  (m) Advertising Costs
  (n) Foreign Currency Translation
  (o) Income Taxes
   (p) Comprehensive Income (Loss)
  (q) Fair Value of Financial Instruments
  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)
        (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
 F-14




---



##### 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)
 (s) Income (loss) per Share
  (t) Non-controlling interest
   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  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)
 (v) Recently Issued Accounting Standards
      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)
 3. Acquisitions
 2008 acquisitions:
   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
     F-17




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
 2009 acquisitions:
  4. Disposition
 2008 Disposition
    F-18




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
  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
    
    $
    1,066,194,681Accounts 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
    )
 F-19




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
 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
   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
 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)
 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
    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
    )
 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)
 December 31,2008
    
    2009Customer 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
     9. Goodwill
  F-22




---



##### 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
    
    
    
    
    
    
    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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    128,201,852Goodwill 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
    
    
    $
    
    
    
    $
    410,368,691The gross amount and accumulated impairment losses by segment as of December 31, 2007,
2008 and 2009 are as follows:Movie theater& traditionalLCD display
    
    
    In-store
    
    
    Poster frame
    
    
    Mobile 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
 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)
 Movie theater& traditionalLCD display
    
    
    In-store
    
    
    Poster frame
    
    
    Mobile handset
    
    
    Internet
    
    
    outdoornetwork
    
    
    network
    
    
    network
    
    
    advertising
    
    
    advertising
    
    
    billboards
    
    
    TotalGoodwill, gross
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    249,139,525
    
    
    $
    
    
    
    $
    249,139,525Accumulated
impairment losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (218,440,000
    )
    
    
    
    
    
    
    (218,440,000
    )Balance as of
December 31, 2008
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    30,699,525
    
    
    $
    
    
    
    $
    30,699,525Movie theaterPoster
    
    
    
    
    
    
    
    
    
    
    & traditionalLCD display
    
    
    In-store
    
    
    frame
    
    
    Mobile 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
    )Balance as of
December 31, 2009
    
    $
    406,096,193
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    $
    4,272,498
    
    
    $
    
    
    
    $
    410,368,691
  Goodwill impairment in 2008
    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)
 Goodwill impairment in 2009
        10. Accrued Expenses and Other Current Liabilities
  F-25




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##### Table of Contents



FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2008 AND 2009
(In U.S. dollars except share data and unless otherwise stated)
 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-26




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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
  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
 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)
    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-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)
  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-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)
     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
  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
 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)
  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
    
    
    
    2,839,571
 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)
 December 31,2008
    
    
    2009Unbilled 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-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)
 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
    )
  15. Mainland China Contribution Plan and Profit Appropriation
   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)
   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-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)
  17. Segment Information
    2009:
 Movie theaterandPoster
    
    
    
    
    
    
    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
 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)
 2008:
 Movie theaterandPoster
    
    
    
    
    
    
    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 theaterandPoster
    
    
    
    
    
    
    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-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)
 Major Service lines
  For the years ended December 312007
    
    
    2008
    
    
    2009$
    
    
    % of total
    
    
    $
    
    
    % of total
    
    
    $
    
    
    % of totalrevenue
    
    
    
    
    
    
    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
 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)
  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 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. 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)
  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
   19. Subsequent Events
 Management Buy-In to Internet Division
  F-39




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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-40




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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-41




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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 year ended December 312007
    
    
    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
 F-42




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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)
 
 Note to Schedule 1
  F-43