UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, 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 1934orý

Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2012.oro

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from
 too

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


Commission file number 001-34990



Bona Film Group Limited(Exact Name of Registrant as Specified in Its Charter)



Cayman Islands(Jurisdiction of Incorporation or Organization) 11/F, Guan Hu Garden 3
105 Yao Jia Yuan Road, Chaoyang District
Beijing 100025, People's Republic of China(Address of Principal Executive Offices)

Mr. Dong Yu
Chief Executive Officer
Tel:(86 10) 5928 3663
11/F, Guan Hu Garden 3
105 Yao Jia Yuan Road, Chaoyang District
Beijing 100025, People's Republic of China
Email: ir@bonafilm.cn(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

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

Title of Each Class

Name of Each Exchange On Which RegisteredAmerican Depositary Shares, each two representing one Ordinary Shares

The NASDAQ Stock Market LLCOrdinary Shares, par value US$0.0005 per share*

(The NASDAQ Select Global Market)The NASDAQ Stock Market LLC(The NASDAQ Select Global Market)


*Not
for trading, but only in connection with the registration of American Depositary Shares representing such Ordinary Shares pursuant to the requirements of
the Securities and Exchange Commission.


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

None

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

None

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

30,402,346 Ordinary Shares were issued and outstanding as of December 31, 2012



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

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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).    Yes  ý    No  o

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

Large accelerated filer o

Accelerated filer ý

Non-accelerated filer o


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

International Financial Reporting Standards as issued by the International Accounting Standards
Board  o    Other o

If "Other" has been checked in responses to the previous question, indicate check mark which financial statement item the registrant has elected to follow. Item 17
o Item 18 o

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act
of 1934).    Yes  o    No ý

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

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





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Table of Contents



BONA FILM GROUP LIMITED    FORM 20-F ANNUAL REPORT  FISCAL YEAR ENDED DECEMBER 31, 2012    TABLE OF CONTENTS



PageConventions That Apply To This Annual Report on Form 20-F

3PART IItem 1.

Identity of Directors, Senior Management and Advisers

5Item 2.

Offer Statistics and Expected Timetable

5Item 3.

Key Information

5Item 4.

Information on the Company

49Item 4A.

Unresolved Staff Comments

81Item 5.

Operating and Financial Review and Prospects

82Item 6.

Directors, Senior Management and Employees

124Item 7.

Major Shareholders and Related Party Transactions

134Item 8.

Financial Information

139Item 9.

The Offer and Listing

140Item 10.

Additional Information

141Item 11.

Quantitative and Qualitative Disclosures About Market Risk

148Item 12.

Description of Securities Other Than Equity Securities

149PART IIItem 13.

Defaults, Dividend Arrearages and Delinquencies

151Item 14.

Material Modifications to the Rights of Security Holders and Use of Proceeds

151Item 15.

Controls and Procedures

152Item 16A.

Audit Committee Financial Expert

154Item 16B.

Code of Ethics

154Item 16C.

Principal Accountant Fees and Services

154Item 16D.

Exemptions from the Listing Standards for Audit Committees

155Item 16E.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

155Item 16F.

Change in Registrant's Certifying Accountant

155Item 16G.

Corporate Governance

155PART IIIItem 17.

Financial Statements

155Item 18.

Financial Statements

155Item 19.

Exhibit Index

156


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Table of Contents

Conventions That Apply To This Annual Report on Form 20-F

Except where the context otherwise requires and for purposes of this annual report on
Form 20-F only:



This
annual report on Form 20-F contains statistical data that we obtained from various government and private publications. We have not independently verified the
data in these reports. Statistical data in these publications also include projections based on a number of assumptions. If any one or more of the assumptions underlying the statistical data turns out
to be incorrect, actual results

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Table of Contents

may
differ from the projections based on these assumptions. In particular, this annual report on Form 20-F contains statistical data provided to us by EntGroup International
Consulting (Beijing) Co. Ltd., or EntGroup, a PRC consulting and market research firm specializing in the film and
entertainment industry, for a fee that is more than nominal. This annual report on Form 20-F includes our audited consolidated financial statements for the years ended
December 31, 2010, 2011 and 2012 and as of December 31, 2011 and 2012.

Our
ADSs are listed on the NASDAQ Select Global Market, or NASDAQ, under the symbol "BONA."

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Table of Contents

PART I

Item 1.    Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2.    Offer Statistics and Expected Timetable

Not applicable.

Item 3.    Key Information



The selected financial data shown below should be read in conjunction with "Item 5. Operating and Financial Review and Prospects," and the financial
statements and the notes to those statements included elsewhere in this annual report on Form 20-F. The selected statement of income data for the years ended December 31,
2010, 2011 and 2012 and the selected balance sheet data as of December 31, 2011 and 2012 have been derived from our audited financial statements included elsewhere in this annual report on
Form 20-F. The selected statement of income data for the years ended December 31, 2008 and 2009 and the selected balance sheet data as of December 31, 2008, 2009 and
2010 have been derived from our audited financial statements not included in this annual report on Form 20-F.

For the years ended December 31,2008

2009

2010

2011

2012(US$)

(US$)

(US$)

(US$)

(US$)Consolidated Statement of Operations DataNet revenues


23,396,442


38,372,551


52,819,786


126,161,270


142,282,919Cost of revenues


12,706,866


19,888,461


26,501,853


66,458,217


86,085,046Operating expenses


6,979,288


12,922,235


17,215,013


47,198,859


60,819,133Government subsidies








88,147


220,559


3,866,700Operating income


3,710,288


5,561,855


9,191,067


12,724,753


(754,560
)Other income (loss):Changes in fair value of warrants


(306,050
)

119,451








Changes in fair value of derivatives


(1,994,000
)

90,000


(14,528,000
)




Other


308,238


(145,767
)

1,193,672


2,318,103


502,942Net income (loss)(1)


440,955


5,459,665


(4,223,060
)

14,572,376


(1,568,382
)Net income (loss) attributable to the non-controlling interests


199,225


(168,429
)

(131,686
)

140,295


(284,500
)Deemed dividend on Series A and Series B convertible redeemable preferred shares


873,652


1,394,985


2,150,146





Undistributed earnings allocated to holders of participating Series A and Series B convertible redeemable preferred shares





1,947,831








Net (loss) income attributable to holders of ordinary shares of Bona Film Group Limited


(631,922
)

2,285,278


(6,241,520
)

14,432,081


(1,283,882
)Net (loss) income per ordinary share:Basic


(0.07
)

0.27


(0.49
)

0.49


(0.04
)Diluted


(0.07
)

0.27


(0.49
)

0.48


(0.04
)Shares used in computation of net income per ordinary share:Basic


9,051,563


8,453,842


12,758,575


29,353,936


29,514,979Diluted


9,051,563


8,518,402


12,758,575


29,844,462


29,514,979


(1)As
a supplement to net income, we use a non-GAAP financial measure of net income that is adjusted from results based on U.S. GAAP to
exclude share-based compensation, changes in fair value of warrants and changes in fair value of derivatives and adjusted EBITDA, non GAAP further excludes interest, taxes and


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non-cash
depreciation and amortization charges. This non-GAAP financial measure is provided as additional information to help our investors compare business trends among different
reporting periods on a consistent basis and to enhance investors' overall understanding of our current financial performance and prospects for the future. This non-GAAP financial measure
should be considered in addition to results prepared in accordance with U.S. GAAP, but should not be considered a substitute for or superior to U.S. GAAP results. In addition, our
definition of non-GAAP net income may be different from the definitions used by other companies, and therefore comparability may be limited.




For the years ended December 31,2008

2009

2010

2011

2012(US$)

(US$)

(US$)

(US$)

(US$)Net income (loss)


440,955


5,459,665


(4,223,060
)

14,572,376


(1,568,382
)Adjustment for share-based compensation





132,902


447,345


3,647,144


4,803,163Adjustment for changes in fair value of warrants


306,050


(119,451
)







Adjustment for changes in fair value of derivatives


1,994,000


(90,000
)

14,528,000





Adjusted net income (non-GAAP)


2,741,005


5,383,116


10,752,285


18,219,520


3,234,781Adjustment for interest


(37,226
)

25,298


(463,314
)

200,022


152,896Adjustment for taxes


1,071,610


338,647


91,053


473,542


1,322,368Adjustment for depreciation & amortization


172,700


143,001


1,074,059


2,711,958


4,370,679Adjusted EBITDA (non-GAAP)


3,948,089


5,890,062


11,454,083


21,605,042


9,080,724




As of December 31,2008

2009

2010

2011

2012(US$)

(US$)

(US$)

(US$)

(US$)Consolidated Balance Sheet DataCash


4,771,897


7,418,213


84,247,984


20,107,349


23,227,922Accounts receivable, net of allowance for doubtful accounts


4,673,515


19,491,100


15,225,792


41,642,787


40,307,672Total current assets


13,567,290


33,940,357


118,052,862


100,616,945


93,271,124Distribution rights


3,847,906


5,550,394


2,265,601


3,663,966


11,406,692Production costs


3,785,691


19,528,560


64,815,878


69,844,822


90,345,409Total assets


24,923,695


67,028,414


231,216,536


273,751,929


316,565,660Accounts payable


4,237,192


8,902,182


9,533,672


27,807,118


35,257,660Current bank borrowings





6,590,317


22,012,560


12,561,806


12,542,161Other borrowings





6,089,373


1,445,150


1,831,658


8,671,050Current film participation financing liabilities


351,154


8,337,483


10,209,351


16,224,219


15,086,892Non-current film participation financing liabilities


994,938


1,562,304


6,306,818





Derivatives


2,692,000


2,903,000








Non-current bank borrowings














18,025,553Total liabilities


15,681,869


46,859,438


71,144,370


90,957,784


126,920,070Net assets


9,241,826


20,168,976


160,072,166


182,794,145


189,645,590Series A convertible redeemable preferred shares


8,434,379


9,727,866








Series B convertible redeemable preferred shares





9,074,270








Total equity


807,447


1,366,840


160,072,166


182,794,145


189,645,590




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Renminbi per U.S. Exchange RateAverage

Low

High

Period-end2008


6.9193


6.7800


7.2946


6.82252009


6.8295


6.8176


6.8470


6.82592010


6.7603


6.6000


6.8330


6.60002011


6.4630


6.2939


6.6364


6.29392012


6.3088


6.2221


6.3879


6.2301October


6.2627


6.2372


6.2877


6.2372November


6.2338


6.2221


6.2454


6.2265December


6.2328


6.2251


6.2502


6.23012013January


6.2215


6.2134


6.2303


6.2186February


6.2323


6.2213


6.2438


6.2213March


6.2154


6.2105


6.2246


6.2108April (through April 19, 2013)


6.1927


6.1720


6.2078


6.1772


(1)Source:
The source of the exchange rate is: (i) with respect to any period ending on or prior to December 31, 2008, the Federal Reserve Bank
of New York, and (ii) with respect to any period ending on or after January 1, 2009, the H.10 statistical release of the Federal Reserve Board.(2)Annual
averages are calculated from month-end rates. Monthly averages are calculated using the average of the daily rates during the relevant
period.




Not applicable.



Not applicable.



Our business and operations are subject to various risks, many of which are beyond our control. If any of the risks described below actually occurs, our business,
financial condition or results of operations could be seriously harmed.

Risks Relating to Our Business and Industry

Our success is largely dependent on a limited number of film releases each year and factors in the film
industry that are difficult to predict, and accordingly our results of operations may vary widely from period to period.

Our
top five films for 2010, 2011 and 2012 accounted for 53.5%, 58.3% and 37.4% of our net revenue in each of those respective years. We generally distribute between 16 and
20 films theatrically each year on average. Because we distribute a limited number of films, the success or failure of a small

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number
of these films could have a significant impact on our business, financial condition and results of operations in both the year of release and in the future.

In
general, the economic success of a film is largely determined by the appeal of the film to a broad audience and by the effectiveness of the marketing of the film. We cannot precisely
predict the economic success of any of the films we distribute or invest in because a film's acceptance by the public cannot be predicted with certainty. If we do not accurately judge audience
acceptance in selecting the films for which we acquire the distribution rights or in which we invest, or if we do not market the film effectively, we may not recoup our costs or realize our
anticipated profits. In addition, the economic success of a film depends upon the public's acceptance of competing films, the availability of alternative forms of entertainment and
leisure-time activities, general economic conditions and other tangible and intangible factors, all of which can change and none of which can be predicted with certainty. Accordingly, our
net revenue and other results of operations may fluctuate significantly from period to period, and the results of any one period may not be indicative of the results for any future periods.

Due to the risks inherent in producing and distributing films, we may be unable to recoup advances paid for or investments in films.

Our most significant costs and cash expenditures relate to acquiring film distribution rights and investing in films for which we also
secure distribution rights. Many of our
agreements to acquire distribution rights require up-front payments. We determine the amount of the payments or investment we are willing to make based on our estimate of the economic
success of the film. Although these estimates are based on our knowledge of industry trends, market conditions and the market potential of the film, actual results may ultimately differ from
our estimates.

The
production and distribution of films are subject to a number of uncertainties, including delays and increased expenditures due to creative differences among key cast members and
other key creative personnel or other disruptions or events beyond our control. Risks such as illness, disability or death of star performers, technical complications with special effects or other
aspects of production, shortages of necessary equipment, damage to film negatives, master tapes and recordings or adverse weather conditions may cause cost overruns and delay or frustrate completion
of a production. In China, directors tend to hold substantial control over the production of films, and this may aggravate our ability to control the production schedule and budget. In addition, when
we co-invest in a film, we generally have less control over the investment and production processes, than when we are lead investor in a film.

If
a film production in which we have invested incurs substantial budget overruns, we may be required to seek additional financing from outside sources to complete production. Such
financing may not be available on terms acceptable to us, and failure to complete a film due to the lack of such financing could have a material adverse effect on our business, financial condition and
results of operations. In addition, we may not be able to recoup our investment as a result of increased costs from budget overruns. Increased costs may also delay the release of a film to a less
favorable time, which could hurt its box office performance and thus our revenue from the distribution of the film and its overall financial success.

If
a film fails to perform to our original estimates or expectations, we may (i) fail to realize the expected economic return from a film, (ii) fail to recoup advances we
paid or investments we made or (iii) record accelerated amortization and/or fair value write downs of capitalized film production costs or distribution rights. Any of these events may adversely
impact our business, financial condition and results of operations.

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The production and distribution of films are capital-intensive processes, and our capacity to generate cash or obtain financing on favorable terms may be insufficient to
meet our anticipated cash requirements.

The costs to develop, produce and distribute a film are substantial. In 2010, 2011 and 2012, for example, our cost of revenue
(excluding the movie theater segment) amounted to US$21.5 million, US$57.3 million and US$69.1 million, respectively, accounting for 51.7%, 57.2% and 68.7% of our net revenue
(excluding the movie theater segment), respectively. We are required to fund our costs for film-related activities and other commitments with cash retained from operations, including the
proceeds of films that generate revenue from theatrical and non-theatrical channels, as well as from bank and other borrowing and participation by other investors. If our films fail to
perform, we may be forced to seek substantial sources of outside financing. Such financing may not be available in sufficient amounts for us to continue to make substantial investments in the
production of new films or may be available only on terms that are disadvantageous to us, either of which could have a material adverse effect on our growth or our business.

We
believe that as a common industry practice, film producers often agree to pledge their interests in the copyrights in a film as collateral for loans to finance the production of that
film. We have agreed, and may in the future agree, to use our interests in film copyrights to secure loans for productions of films. If we are unable to repay such loans, the lenders may foreclose on
the collateral securing such loans and take possession of the pledged copyright, which in turn could adversely affect our ability to distribute the corresponding films.

Moreover,
the costs of producing and distributing films have increased in recent years and may further increase in the future, which may make it more difficult for a film we distribute
or have invested in to generate a profit or compete against other films. For example, compensation for star performers and other key creative personnel has increased recently. As a result, we may need
to rely on revenue from television and digital distribution or continue to expand internationally or into other distribution channels such as home video products in order for a film to be profitable
to us, and there can be no assurance that revenue from such sources would be sufficient to offset increases in the cost of film production and distribution or that any such expansion would
be successful.

We depend substantially on the continuing efforts of our senior executives and key personnel, and our business and prospects may be severely disrupted if we lose
their services.

Our future success depends on the continued services of the key members of our management team, in particular, the continued service of
Mr. Dong Yu, our founder, chairman and chief executive officer, Mr. Jeffrey Chan, our director and chief operating officer, Mr. Hao Zhang, the general manager of our domestic
distribution business, and Ms. Amy Xu, our chief financial officer. Our consultant and former director, Nanshun Shi, also provides valuable service to us, including as an advisor to our
strategy committee. Our film distribution and film investment and production businesses
are highly reliant on the personal instincts, tastes and market experiences of Mr. Dong Yu, Mr. Jeffrey Chan and Mr. Hao Zhang, and the loss of any one of these individual may
have a material negative effect on our business.

In
addition, our ability to attract and retain other key personnel is a critical aspect of our competitiveness. We face competition for personnel from other film distribution and
production companies and other organizations. Competition for these individuals could require us to offer higher compensation and other benefits in order to attract and retain them, which would
increase our operating expenses and, in turn, could materially and adversely affect our business, financial condition and results of operations. We may be unable to attract or retain the personnel
required to achieve our business objectives, and failure to do so could severely disrupt our business and prospects. In addition, as we expect to continue to expand our operations and expand the scope
of our services, we will need

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to
continue attracting and retaining experienced management in the relevant businesses. Our business requires specialized skills and the Chinese market has a limited supply of persons qualified for
such positions. Therefore, the process of hiring suitable qualified personnel is often lengthy. If our recruitment and retention efforts are unsuccessful in the future, it may be more difficult for us
to execute our business strategy. In addition, the loss of any of our key employees could adversely affect our services as well as our marketing efforts or adversely impact the perception of us by our
clients, media and investors. Our business may also be severely disrupted as our senior executives may have to divert their attention to recruiting replacements for key personnel.

We
do not maintain key-person insurance for members of our management team. If we lose the services of any senior management, we may not be able to locate suitable or
qualified replacements, and we may incur additional expenses to recruit and train new personnel, which could severely disrupt our business and prospects. Further, if any of our executive officers
joins a competitor or forms a competing company, we may lose a significant number of our clients, which would have an adverse effect on our business and revenue. Although certain of our
executive officers, including Mr. Dong Yu, have entered into a confidentiality and non-competition agreement with us regarding their employment, disputes may arise between our
executive officers and us, and, in light of uncertainties associated with the PRC legal system, these agreements may not be enforced in accordance with their terms.

Accounting practices used in our industry may aggravate fluctuations in operating results that result from the cyclical nature of the film industry.

In accordance with U.S. GAAP and as is standard for our industry, we amortize film costs using the
"individual-film-forecast" method. Under this accounting method, we amortize film costs for each film based on the following ratio:

Revenue
earned by title in the current period
Estimated total future revenue that will be earned by title

We
regularly review our revenue estimates on a title-by-title basis and revise them when necessary. Our review generally takes into account estimated future
revenue from international distribution, non-theatrical channels and other potential revenue that a film may generate. Any reviews subsequent to the initial review may result in a change
in the rate of amortization and/or a write-down of the film asset to its estimated fair value. Results of operations in future years depend upon our amortization of our film costs.
Periodic adjustments in amortization rates may significantly affect these results. In 2012, we decreased the estimate of the ultimate overseas revenue expected to be realized from certain films and
television series based on their levels of economic performance and public acceptance, and as a result incurred additional amortization of US$3.8 million. In addition, we are required to
expense film advertising costs as incurred. Any fluctuations we experience in our operating results as a result of these accounting practices could also cause corresponding fluctuations in the trading
price of our ADSs and negatively affect the value of your investment in our ADSs.

Failure to manage the expansion of our operations could strain our management and personnel, operational, technological and other resources, which could materially and
adversely affect our business and prospects.

We have experienced substantial growth since our inception. We increased our net revenue from US$23.4 million in 2008 to
US$142.3 million in 2012, and we intend to continue to expand our operations. This expansion has placed, and will continue to place, substantial demands on our managerial, operational,
technological and other resources. In particular, the management of our growth will require, among other things:



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As
we execute our growth strategy, we may incur substantial costs and expend substantial resources. We may not be able to manage our current or future operations effectively and
efficiently or compete effectively in new markets that we may enter. If we are not able to manage our growth successfully, our business, financial condition and results of operations would be
materially and adversely affected.

We may encounter difficulties as we continue to expand our movie theater network in existing and new markets.

We began operating our movie theater business in 2010 following our acquisition of Beijing Bona International Cineplex
Investment & Management Co., Ltd., or Beijing Bona Cineplex, and Beijing Bona Youtang Cineplex Management Co., Ltd., or Beijing Bona Youtang. We further expanded our
movie theater business by acquiring a 100% equity interest in Beijing Bona Starlight Cineplex Management Co., Ltd., or Bona Starlight, an affiliated company of our company focused
primarily on the operation of movie cinemas in China, in July 2011 and by developing new theaters. The number of movie theaters we operate grew from six as of December 31, 2010 to
20 as of December 31, 2012. Our movie theater business generated revenue of US$11.3 million, US$26.0 million and US$41.7 million in 2010, 2011 and 2012,
respectively, accounting for 21.5%, 20.6% and 29.3% of our net revenues in the same respective periods, and generated segment profit of US$6.0 million, US$14.6 million and
US$23.6 million in the same respective periods. We intend to increase the number of movie theaters we operate to approximately 30 to 40 by the end of 2014, primarily by developing new
theaters. We may also consider acquiring movie theater businesses.

We
may not be able to realize the intended benefits from our development and acquisitions of new theaters, or otherwise successfully operate our movie theaters as a result of numerous
factors, some of which are beyond our control. These factors include, among other things:



We
face particular challenges when we open movie theaters in new areas, including unfamiliarity with new local markets, inability to precisely determine market potential in new areas,
market barriers such as strong local competitors that have prime locations and local know-how, difficulties in finding suitable locations, difficulties in hiring, motivating, training and
retaining qualified employees and

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higher
operating costs. Moreover, developing new theaters requires a significant amount of time and resources and poses a number of risks. We develop new theaters by renting a piece of property
(for example, in a shopping mall) and then refurbishing and installing movie theater equipment in the property. Developing new theaters may result in delays, cost overruns and unanticipated
expenses related to zoning, tax and other government requirements for construction. We may also encounter difficulties in managing the refurbishment and installation process, including managing
subcontractors who we hire to do this work. Since we generally begin to recognize refurbishment expenses for a new movie theater before the revenues generated from such movie theater begin to ramp up,
expansion of our movie theater business may cause our results of operation to experience a certain degree of fluctuation.

We
cannot assure you that we will be able to successfully expand and operate our movie theater business. If we acquire movie theater business in the future, we may not be able to
successfully integrate such newly acquired business with our operations. If our movie theater business is not successful or does not produce its intended benefits, our business, results of operations,
financial condition and prospects could be materially and adversely affected.

The expansion and operation of our movie theater business is capital-intensive and if the development of our movie theater business is not successful, our cash flow may be
negatively affected.

The acquisition, refurbishment and construction of movie theaters, as well as the rental expenses for our movie theaters, has increased
our cash requirements in 2010, 2011 and 2012, and our plan to continue to expand our movie theater business will continue to increase our cash requirements going forward. In addition to the increasing
scale of our movie theater business, a number of other factors could cause acquisition, refurbishment or rental expenses to increase in the future. For example, rental expenses related to our movie
theater business may increase due to increased competition in the movie theater industry and greater saturation in the relevant real estate markets. In addition, our movie theater refurbishment
expenses may increase as Chinese audiences increasingly demand state-of-the-art audio-visual effects and inflation or other market factors could cause rental rates
to increase. We intend to continue to finance our movie theater business, in part, with bank loans. However, it may be difficult for us to obtain bank loans to finance our movie theaters because banks
may not accept leased property as mortgage for loans. Due to the capital intensive nature of the movie theater business, if the expansion of our movie theater business is not successful, our cash flow
may be negatively affected. This, in turn, could have a material adverse effect on our business, financial condition and results of operations.

Movie theaters in China are subject to a range of regulatory requirements, including regulations relating to advertising, hygiene and food licensing. Some of our movie
theaters sell unpackaged foods without the requisite permits to do so. The failure of our movie theaters to comply with applicable regulations may subject us to fines and penalties, including the
suspension of our movie theater operations.

Operation of movie theaters subjects us to additional regulatory requirements, including complying with pre-screening film
advertising regulations and obtaining and maintaining licenses to exhibit movies and sell concessions.

Each
movie theater is required to obtain a public facility hygiene permit. Movie theaters selling food or beverages to their audiences must also obtain certain food hygiene permits and
comply with hygiene and food safety-related requirements. Pursuant to the Food Safety Law of the PRC, which took effect from June 1, 2009, sale of food or beverages requires a Food Distribution
Permit issued by the relevant administration for industry and commerce, and catering services require a Catering Service Permit issued by the relevant food and drug administration authorities. Some of
our movie theaters sell both packaged and unpackaged foods while they have obtained a permit to sell only packaged foods.

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Failure
to obtain a public facility hygiene permit may result in fines of up to RMB3,000. Failure to obtain food hygiene permits may result in penalties, including confiscation of food, income and
equipment, and fines of five to ten times the value of the food sold if the value exceeds RMB10,000 or fines from RMB2,000 to RMB50,000 if the value of the food sold is below RMB10,000.

In
addition, while all of our movie theaters maintain the film exhibition licenses required for exhibiting films, they have not obtained the requisite certificates for technical
qualification of exhibition equipment required to exhibit digital films. If the lack of certificates is deemed by relevant PRC regulatory authorities to constitute the exhibition of films without the
applicable approval, they may impose penalties on us, including confiscation of the relevant films, equipment or income, suspension of operations and fines of five to ten times of the violator's
income if such income exceeds RMB50,000 or fines from RMB200,000 to RMB500,000 if such income is below RMB50,000.

If
we fail to obtain any of the business permits or licenses required for the operation of our business, we may be ordered to cease the applicable activities, have our income from such
activities or tools, equipment, raw materials, products and other property that are used for such activities confiscated and be subject to fines of up to RMB500,000.

Our movie theater business has substantial lease obligations, which could impair our financial condition.

Our movie theater business, which we initially acquired in April 2010, has substantial lease obligations. In 2010, 2011 and
2012, the total rent expense in our movie theater business was approximately US$2.8 million, US$5.7 million and US$10.8 million, respectively. As of December 31, 2010, 2011
and 2012, our movie theater business had lease obligations totaling approximately US$51.5 million, US$105.3 million and US$231.7 million, respectively, throughout the terms of the
leases which range from 10 to 20 years. Lease obligations as of December 31, 2012 included lease obligations for five new theaters for which we had signed lease contracts and which will
begin operations in 2013. As we plan to grow the number of movie theaters we operate significantly in 2013, we expect our rent expenses and lease obligations to increase. If we are unable to meet our
lease obligations, we could be forced to restructure our obligations and seek additional funding from other sources, or sell assets. We may be unable to restructure our lease obligations and obtain
additional funding or sell assets on satisfactory terms or at all. As a result, inability to meet our lease obligations could cause us to default on those lease obligations. Many of our lease
agreements contain restrictive covenants that limit our ability to take specific actions or require us not to allow specific events to occur. Under the lease agreements, our movie theaters have agreed
to use the premises for theater-related operations, to maintain the premises in accordance with the provisions of the leases, to comply with regulatory requirements relating to matters such as
sanitary standards, fire protection and public security, to pay the lease payments on time and not to sub-lease the premises without the prior consent of the lessor. If our movie theaters
were to breach any of these obligations, subject in some cases to a materiality threshold or an opportunity to cure, the lessor could terminate the lease agreement and require our theaters to hand
over the leased premises and pay all outstanding expenses and damages. If we violate the restrictive covenants, we would be in default under that lease, which could, in turn, result in defaults under
other leases. Any such default could materially impair our financial condition and liquidity. If any of these lease agreements is terminated, our movie theater business, financial condition and
results of operations may be materially and adversely affected. Moreover, if our movie theater business does not generate sufficient revenue to service our payment obligations under these leases, our
business, financial condition and results of operations could be materially and adversely affected. In addition, there may be defects in the titles to some of the properties that our landlords lease
to us, as a result of which our rights under the lease agreements may be materially and adversely affected.

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Any non-compliance of our loan agreements could result in significant liquidity problems and have a material adverse effect on our business and financial
condition.

As of the date of this annual report on Form 20-F, we had outstanding loans from East West Bank, CITIC Bank
International Limited, Bank of Beijing and Industrial Commercial Bank of China. For more information about our borrowings, see "Item 5. Operating and Financial Review and
ProspectsB. Liquidity and Capital Reserves." Under the East West Loan Agreement, as amended, we agreed to certain financial covenants, including to maintain minimum cash assets of
$5.0 million at all times during the effective period of the East West Loan Agreement, as well as to maintain a ratio of total liabilities to tangible net worth of no more than 2:1 and a ratio
of maximum total funded debt to EBITDA no greater than 3.8:1, or the EBITDA covenant, in each case on a quarterly basis calculated based on average consolidated balance sheet figures of our company
for the most recent four quarters in accordance with the definitions set forth in the loan agreement. We also agreed to comply with all terms and conditions of all other agreements between us and any
other party, and that our company and its subsidiaries (excluding for this purpose our affiliated consolidated entities and their subsidiaries) will not incur or assume indebtedness other than
indebtedness to East West Bank and trade debt incurred in the ordinary course of business without East West Bank's prior written consent, among other covenants.

We
obtained waivers from East West Bank for non-compliance with the EBITDA covenant as of December 31, 2012 and March 31, 2013. This non-compliance
resulted from our lower-than-expected financial results as of and for the three months ended December 31, 2012. If we do not comply with the financial or other covenants
in the East West loan agreement or otherwise trigger an event of default thereunder and fail to timely remedy a curable event of default, or if we default on any of our other outstanding loans, the
relevant lenders would have the right to accelerate the amounts due thereunder and we would be obligated to pay default rates of interest. In addition, our loan agreements with East West Bank, Bank of
Beijing and Industrial Commercial Bank of China contain cross-default clauses, which would enable the relevant lenders to accelerate loan payments when certain of our group companies default under
other loan agreements. Therefore, if we do not comply with our loan agreements we could experience significant liquidity problems and our business and financial could be materially and adversely
affected.

We may not successfully expand into existing or emerging non-theatrical distribution channels.

A substantial portion of net revenue from the films we distribute or have invested in have historically been derived from our share of
box office receipts, with only a small portion of our net revenue generated from non-theatrical distribution channels, such as home video products, digital distribution (including
Internet) and television. We are continuing to expand our distribution business into non-theatrical distribution channels through strategic collaborations with third parties. Historically,
the box office success of a film has been a key factor in predicting revenue from non-theatrical distribution channels. We can make no assurances that the historical correlation between
box office success and success of other non-theatrical distribution channels, which can provide a stable, long-term
source of revenue, will subsist in the future. In addition, we can make no assurances that the prices for films on non-theatrical distribution channels can be maintained at current levels
due to market or other factors. Internet companies have become an increasingly important distribution channel for our company. We cannot assure you that we will be able to maintain good relationships
with major Internet companies in China. The Internet industry is relatively new and evolving and we may not able to successfully navigate its development and competitive environment. We cannot assure
you that our expansion into non-theatrical distribution channels will be successful.

Moreover,
emerging non-theatrical distribution channels resulting from technological developments may significantly change the film industry in China. Due to shifting
consumer tastes, we cannot

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accurately
predict the overall effect that emerging distribution channels may have on the potential revenue from and profitability of the films we distribute or invest in. For example, improvements in
the quality of home entertainment systems may reduce the demand to see films in the theaters. Moreover, a material reduction in the length of time between the theatrical release of a film and the
availability of the film on non-theatrical distribution channels could significantly dilute the consumer appeal of in-theater film offerings. In addition, we may not be able to
accurately predict which existing non-theatrical distribution channels consumers will continue to use or which emerging distribution channels will be broadly accepted by the public.

If
some non-theatrical distribution channels are broadly accepted by the public, we cannot assure you that we will be successful in exploiting such channels or that such
channels will provide commercially feasible business models. Moreover, to the extent that emerging non-theatrical distribution channels gain popular acceptance, it is possible that demand
for existing distribution channels, such as DVD and other home video products, Internet and other digital distribution, in-flight entertainment and television, will decrease, which could
adversely affect our ability to generate revenue from existing distribution channels. In addition, emerging distribution channels may prove to be less profitable than existing distribution channels.
If we are unable to successfully expand into non-theatrical distribution channels or adapt to emerging distribution channels, our business, financial condition or results of operations
could be materially and adversely affected.

Our business depends on our relationships with theater circuits.

Under PRC regulations, we are required to distribute films through theater circuits, which act as intermediaries between film
distributors and movie theater operators.
Theater circuits negotiate the terms of arrangements for the exhibition of films and provide film prints to movie theater operators. As a result, our film distribution business depends on maintaining
relationships with these theater circuits. There can be no assurance that we will be able to maintain these relationships and that theater circuits will continue to enter into arrangements with us on
favorable terms or at all. In addition, any deterioration in our relationships with the theater circuits could require us to enter into arrangements with alternative theater circuits. If alternative
theater circuits do not provide us with comparable services at favorable terms or at all, we may not be able to maintain the scale or quality of our film distribution services, which in turn could
materially and adversely affect our business, financial condition and results of operations.

We face risks relating to the international distribution of our films and related products.

In 2012, we derived approximately 7.5% of our net revenue from the monetization of our films outside of China. In addition, we entered
into an agreement to acquire a strategic equity stake in China Lion Entertainment Limited in November 2011 in order to strengthen our distribution capabilities in the U.S. and Canada. As
we expand the distribution of our films overseas, our business will be increasingly subject to risks inherent in international trade, many of which are beyond our control. These
risks include:



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Events
or developments related to these and other risks associated with international trade could adversely affect our revenue from non-PRC sources, which could have a
material adverse effect on our business, financial condition and results of operations.

Our advertising operations are sensitive to changes in economic conditions and advertising trends.

Demand for advertising on the films we distribute and in movie theaters we operate, and the resulting advertising spending by
advertisers, are particularly sensitive to changes in general economic conditions. For example, advertising expenditures typically decrease during periods of economic downturn. Advertisers may reduce
their spending to advertise through us for a number of reasons, including:



A
decrease in demand for advertising media in general, and for advertising in the films we distribute in particular, could materially and adversely affect our ability to generate
advertising revenue from our films, and could have a material and adverse effect on our business, financial condition and results of operations.

If advertisers or the viewing public do not accept, or lose interest in, pre-screening or in-film advertising, our revenue may be negatively affected
and our business may not expand or be successful.

The market for pre-screening and in-film advertising in China is relatively new and its potential is uncertain.
We compete for advertising revenue with many forms of more established advertising media. Our success depends on the acceptance of pre-screening and in-film advertising by
advertisers and their continuing interest in this medium as part of their advertising strategies. Our success also depends on the viewing public's continued receptiveness towards our advertising
model. Advertisers may elect not to use our services if they believe that viewers are not receptive to our advertising model or that our advertising services do not provide sufficient value as an
effective advertising medium. Likewise, if viewers find some element of our advertising model, such as the length of the advertising segments prior to a film or product placement in films, to be
disruptive or intrusive, film producers and movie theater operators may not want advertising. As a result, advertisers may reduce their spending on pre-screening or in-film
advertising. If a substantial number of advertisers lose interest in these forms of advertising for these or other reasons, our business, financial condition and results of operations could be
materially and adversely affected.

We may not successfully comply with regulations governing the placement of pre-screening advertising.

PRC regulations specifically applicable to pre-screening and in-film advertising are less extensive than those
relating to other segments of the advertising industry. Currently, only a few regulations have been issued particularly for pre-screening advertising, including the Circular on
Strengthening of Administration of Film Pre-screening Advertising, effective on June 25, 2004, and the Circular on

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Further
Regulation of Film Pre-screening Advertising, effective on February 10, 2009. Pursuant to these regulations, consent of the copyright owners of the film is needed for the
placement of pre-screening advertisements and film distributors and exhibitors may not delete or replace any pre-screening advertisement without the consent of the copyright
owners. There can be no assurance that our advertising clients have always obtained or will always obtain the consent of the copyright owners for the pre-screening advertisements that we
have been engaged to place. Our movie theaters, acting as the advertising distributors, may be held jointly liable in the event that our advertising clients fail to obtain such consents.

Our business may suffer reputational injury if we do not effectively manage our selection of products for use in our in-film advertisements. In addition, we may
be subject to, and may expend significant resources in defending against, government actions based on the advertising services we provide and advertising content we disseminate.

We engage in the in-film advertising and pre-screening advertising businesses. We generate revenue from
in-film advertising by charging advertising commissions for featuring certain third-party products in our movies. If we do not effectively manage our selection of products for our
in-film advertisements, our reputation may be harmed. For example, if we feature any products in our films that later turn out to be defective and cause significant harm to the public, the
reputation of the film featuring such product and the reputation of our company would suffer injury. Any harm to our films' or our company's reputation would have a material adverse effect on our
business, financial condition and results of operations.

In
addition, PRC advertising laws and regulations require advertisers, advertising operators and advertising distributors, including businesses such as ours, to ensure that the content
of the advertisements they prepare or distribute is true to facts, lawful, in compliance with relevant laws and
regulations, does not contain any false information or cheat or mislead consumers. Violation of these laws, rules or regulations may result in penalties, including fines of one to five times
advertising fees, confiscation of advertising fees, orders to cease dissemination of the advertisements and orders to publish advertisements correcting the misleading information. In circumstances
involving serious violations, the PRC government may revoke a violator's business license. In circumstances where the interests of consumers are harmed, the advertisers may bear civil liabilities and
the advertising operators and advertising distributors may be held jointly liable. In cases of serious violations, criminal liabilities may be prosecuted.

As
an operator of an advertising medium, we are obligated under PRC laws, rules and regulations to monitor the advertising content for compliance with applicable laws. In addition, we
are required to confirm that the advertisers have obtained requisite government approvals including the advertisers' operating qualifications, proof of quality inspection of the advertised products,
and government pre-approval of the advertisement contents relating to certain specific types of products and services, such as pharmaceuticals, medical facilities, agricultural chemical
and veterinary chemicals. We endeavor to comply with such requirements, including by requesting relevant documents from the advertisers. We employ, and our affiliated consolidated entities are
required by the applicable PRC laws, rules and regulations to employ, qualified advertising inspectors who are trained to review advertising content for compliance with applicable PRC laws, rules and
regulations. Our reputation will be tarnished and our results of operations may be adversely affected if pre-screening or in-film advertisements shown are provided to us by our
advertisers in violation of relevant PRC content laws and regulations, or if the supporting documentation and government approvals provided to us by our advertising clients in connection with such
advertising content are not complete or if the advertisements are not content compliant.

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Our talent agency business is subject to a range of factors, which may lead to fluctuations in revenue from this business and make it difficult to predict the performance of
this aspect of our business.

The success of our talent agency business is highly dependent on our ability to attract and retain high-profile movie stars
and other artists with high earning potential, the popularity of positive public image of the artist we choose to represent, our ability to successfully procure lucrative contracts and engagements for
the artists we represent, and the box office performance of the films and performances in which the artists we represent appear, among other factors. The earnings of the artists we represent may vary
significantly from year to year depending on these and other factors. In addition, we may lose the earnings generated by an artist as a result of the artist suffering injury, disease or death,
performing in a country outside the scope of our agreed upon representation, or due to other circumstances. Although our agency agreements provide for penalties upon early termination of the contract
by the artists we represent, if any such artist terminates his or her contract prior to its agreed upon term, whether to move to another talent agency or for any other
reason, we may lose the revenue streams generated by that artist in the future, and the penalty amount we are entitled to may be substantially less than we would have earned were the contract
performed in full. As a result, the revenue generated by our talent agency may fluctuate significantly from period to period, and the results of any one period may not be indicative of the results for
any future periods.

Our failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.

We are required by PRC laws and regulations to participate in various government sponsored employee benefit plans, including social
insurance funds (namely a pension contribution plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan and a maternity insurance plan) and a
housing provident fund and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of our employees up to a maximum amount specified by the local
government from time to time at locations where we operate our businesses. Employers who fail to report and pay social insurance funds in accordance with the relevant rules may be ordered to rectify
the problem and pay the social insurance funds within a stipulated deadline. According to the Interim Regulation on the Collection and Payment of Social Insurance Premiums, if payment of certain
social insurance funds is not made by the stipulated deadline, the relevant authority can charge a late fee payment of 0.2% per day from the original due date and fine the responsible persons of the
employer up to RMB10,000. If an employer is found to be concealing the actual number of employees or the total amount of salaries from competent social insurance authorities, the employer may be
subject to a fine ranging from one to three times of the amount of salaries concealed. According to the Social Insurance Law, which became effective on July 1, 2011, if employers fail to
register or pay social insurance in accordance with the relevant rules, they may be ordered to rectify the problem and be subject to a late fee payment of 0.05% per day from the due date; if employers
fail to comply with such orders, they may be subject to a fine ranging from one to three times of the unpaid amount. According to relevant PRC laws, for the failure of to register or open housing
provident fund accounts for employees, the employer may be required to rectify such breach within certain period and if such breach persists after such period, the employer may be subject to a fine
ranging from RMB10,000 to RMB50,000. For the failure of payment of housing provident fund and failure to rectify such breach within certain period prescribed by the relevant authorities, the relevant
housing provident fund authorities may apply for a court order requiring employers to make such payment.

Our
PRC subsidiary and affiliated consolidated entities and their subsidiaries have not fully paid the contributions for such plans, as required by applicable PRC regulations. As of
December 31, 2012, our PRC subsidiary and affiliated consolidated entities and their subsidiaries, excluding those engaged in our movie theater business, owed contributions to social insurance
funds and the housing provident

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fund
of RMB1.1 million (US$0.2 million). As of December 31, 2012, our affiliated consolidated entities and their subsidiaries engaged in our movie theater business owed
contributions to social insurance funds and the housing provident fund of RMB2.0 milion (US$0.3 million). These amounts have been accrued as a liability in our consolidated financial
statements. In addition, there can be no assurance that our affiliated consolidated entities did not owe additional contributions prior to their acquisition by us in April 2010 and in 2011
respectively.

If,
as a result of our failure to make adequate contributions to employee benefit plans, we are required to pay the outstanding social insurance funds and housing provident fund and are
subject to fines or other penalties, our business, financial condition, results of operations and prospects would be adversely affected.

The discontinuation or withdrawal of any of the preferential tax treatments, government subsidies or tax concessions we have enjoyed or currently available to us in the PRC
could materially and adversely affect our financial condition and results of operations.

Under PRC laws and regulations, we had enjoyed preferential tax benefits afforded to the cultural industry and motion picture
enterprises. Pursuant to applicable PRC regulations, cultural enterprises established between January 1, 2004 and December 31, 2008 are exempted from enterprise income tax for three
years after establishment or for a period from their establishment to December 31, 2010, whichever ends earlier. Zhejiang Bona Film and Television Production Co., Ltd. was
established in December 2008 as a cultural enterprise and was exempted from income tax for the years 2009, 2010 and 2011 pursuant to an approval by the relevant tax authority in
June 2009. Starting on January 1, 2012, Zhejiang Bona Film and Television Production Co., Ltd. was subject to the standard enterprise income tax rate of 25%. Without our
preferential tax holidays and concessions, we would have had to pay additional amounts of approximately US$3.2 million, US$5.1 million and US$0.4 million in 2010, 2011 and 2012,
respectively.

Each
of Zhejiang Bona Film and Television Production Co., Ltd. and Tianjin Bona Film Culture Media Co., Ltd. has obtained a government approval to
receive a government subsidy in 2013 based on a certain percentage of its income tax assessed for the taxable year 2012. The amounts and timing of receiving these subsidies, however, are uncertain.

Distribution
revenue earned by film distributors from theater exhibitions is exempt from business tax from January 1, 2004 to December 31, 2013. Currently, distribution
revenue obtained by our affiliated consolidated entities, Beijing Baichuan Film Distribution Co., Ltd. and Zhejiang Bona Film and Television Production Co., Ltd., is exempt
from business tax from 2004 to 2013.

If
the PRC government phases out preferential tax benefits, if the rules or policies under which we enjoy preferential tax treatments are abolished or altered, if the tax authorities'
interpretation of such rules change or if these approvals by local tax authorities of special concession income taxes rates are challenged by the relevant higher level tax authorities and withdrawn in
the future, we could be subject to the standard statutory income tax rate and our effective income tax rate would increase. We also cannot assure you that we will be able to continue to receive
government subsidies or when or in what amount we may receive them. Loss of these preferential tax treatments and subsidies could have material and adverse effects on our business, financial condition
and results of operations.

We face substantial competition in most aspects of our business.

The film industry in China is fragmented and highly competitive. Our competitors include not only privately owned companies, but also
state-owned enterprises, which have historically dominated, and have in recent years continued to play a prominent role in, the PRC film industry. Moreover, two state-owned film distributors have the
exclusive right to distribute the stipulated number of foreign films, mainly Hollywood blockbusters that may be exhibited in China on a box office sharing basis. Such foreign films which these two
state-owned enterprises are exclusively eligible to distribute each year increased substantially from 20 films to 34 films because the PRC government agreed, in February 2012 in
connection with a World Trade Organization dispute settlement, to increase the number of foreign premium format films, such as 3-D or IMAX films, that may be imported into China by
14 films per year.

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The number of films distributed by competitors, particularly films from major Chinese and foreign film studios, may create an oversupply of films in the market
and make it more difficult for the films we distribute to succeed or to be successfully exhibited in movie theaters at desirable times. Oversupply may become most pronounced during peak release times,
such as holidays and the summer release season, when theater attendance is traditionally highest. Although we seek to release our films during peak release times, we may not be able to release all of
our films during those times and, therefore, may potentially receive lower gross box-office receipts. In addition, a significant number of the movie theaters in China typically are
committed at any one time to only 10 to 15 films distributed nationally, including U.S. and other foreign-produced films. As a result, we must identify and compete for the distribution of the
most promising films. If our competitors increase the number of films available for distribution while the number of movie theaters remains unchanged, it could be more difficult for us to release our
films during optimal release periods or to obtain the most desirable screen allocations and times. In addition, production or other delays that might cause us to alter our distribution schedule and
any such change could adversely impact a film's financial performance. The increased quota of foreign premium films that our state-owned competitors will be able to distribute each year is expected to
heighten the competition we face for film distribution, especially given that we may not be able to share in the distribution business for such foreign films.

In
film production, we compete primarily with large Chinese movie production companies for access to a limited pool of high quality directors, actors and other production team members.
If our competitors are more successful than us in securing high quality production teams for their film productions, the members of these teams may have limited or no availability to work on our
movies, and the quality of our production teams and, consequently, the quality of our films, may be negatively affected. Any
deterioration in the quality of the films we produce would have a material negative effect on our business, financial condition and results of operations. In addition, such competition places upward
pressure on the costs for securing directors, actors and other production team members, which may have a negative impact on our gross margin.

Movie
theaters operated by national theater circuits, property developers and small independent exhibitors compete with our movie theaters, particularly with respect to attracting
patrons and developing new theater sites. Moviegoers are generally not brand conscious and usually choose a theater primarily based on its location, the films showing there, the quality of its
facilities and price. If other movie theater operators choose to build and operate theaters in the markets where our movie theaters are located, or secure more prime locations than we do, including by
building movie theaters in prime urban real estate that they already own, the performance of our movie theaters in these markets may be significantly and negatively impacted. The foregoing could have
a material adverse effect on our business, financial condition and results of operations.

We may face increased competition in the future from foreign films, as a result of changes in PRC regulation or other factors, and we may not be able to compete effectively.

Current PRC laws and regulations limit the number of foreign films that may be imported into China and, at present, only one
state-owned film import company has the right to import foreign films into China. In addition, under current PRC regulations, only two state-owned film distributors have the right to distribute
foreign films in China. Imported foreign films may involve larger budgets, more recognized stars, more established brands or otherwise have greater access to other resources than domestic PRC films.
We do not have the right to distribute foreign films and it may be difficult for our films to compete successfully against foreign films, which may be preferred by our target audiences.

The
PRC government agreed, in February 2012 in connection with a World Trade Organization dispute settlement, to increase the number of foreign premium format films, such as
3-D or IMAX

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films,
that may be imported into China by 14 films per year. This change may increase the supply of foreign films in the PRC and competition in the PRC film industry.

As
China develops economically and politically, the PRC government may feel increased pressure from, for example, PRC audiences or international organizations, to further relax rules
restricting the import of foreign films. In addition, as the PRC film market becomes more attractive over time, foreign film makers may expend greater resources to attract PRC audiences, which would
further increase competitive pressure. The films we invest in and/or distribute may not be able to compete successfully against foreign films, which may materially and adversely affect our business,
financial condition and results of operations.

The film industry is regulated extensively in China, and our production, distribution and exhibition of films are subject to various PRC laws, rules and regulations.

In accordance with the Regulations on Administration of Films which became effective on February 1, 2002 and the Interim
Provisions on Business Access Qualification for Film Enterprises which became effective on November 10, 2004, production, distribution, import and exhibition of films are subject to licenses
issued by the State Administration of Press, Publication, Radio, Film and Television (formerly the State Administration of Radio, Film and Television), or SAPPRFT, and/or its local counterparts. A
Film Production License or a Film Production License (Single Film) is required for production of films in China. If a PRC producer cooperates with a foreign producer to produce a film, an additional
License for Sino-foreign Cooperation in Film Production must be obtained. A film distribution company in China must obtain a Film Distribution License and only entities approved by SAPPRFT
may be engaged in import of foreign films. Movie theaters must obtain a Film Exhibition License for exhibition of films. In addition, existing PRC law requires movie theaters to obtain a Certificate
for Digital Films Exhibition Equipment and Technology for exhibition of digital films. However, based on verbal consultations with SAPPRFT, we understand that SAPPRFT is not enforcing the regulation,
is not requiring movie theaters to obtain a Certificate for Technical Qualification of Digital Film Exhibition Equipment for the exhibition of digital films and had not issued and is not currently
issuing such certificate to any movie theater. In addition, other aspects of the film industry, including the contents of films and scripts, the foreign investment in the industry, the exhibition time
for different types of films by movie theaters, and the distributions of films through the Internet or other media, are also subject to detailed and extensive regulations.

If
we are found to be in violation of these laws, rules or regulations, PRC governmental authorities could impose penalties on us, including fines of five to ten times income or up to
RMB500,000, confiscation of relevant films, equipment or income and suspension of operations. In circumstances of serious violations, the PRC government may revoke a violator's license and criminal
liabilities may be prosecuted. If we cannot maintain or renew licenses we have already obtained or cannot obtain necessary licenses for individual films, such as Film Distribution Licenses, our
business will be materially and adversely affected.

The production and distribution of television programs is regulated extensively in China, and our production and distribution of Television Series are subject to various PRC
laws, rules and regulations.

In accordance with the Administrative Regulations on Radio and Television effective on September 1, 1997, the Administrative
Regulations on the Production and Operation of Radio and Television Program effective on August 20, 2004, the Administrative Regulations on Content of Television Series effective on
July 1, 2010, which superseded and replaced the Administrative Regulations on the Examination of Television Series effective on October 20, 2004, and its supplementary regulations, and
other regulations issued based on the foregoing regulations, television

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series
can only be produced by entities that hold either a Film Production License or a License for the Production and Operation of Radio and Television Program or by qualified broadcasters. Licenses
for the Production and Operation of Radio and Television Program are issued to entities which meet requirements set forth in the Administrative Regulations on the Production and Operation of Radio and
Television Program and pass the examination of SAPPRFT or its provincial counterparts. In addition to the Film Production License or the Operating License for the Production of Radio and Television
Program, the television series producers must obtain either a Multiple Television Series Production License or a Single Television Series Production License for the shooting and production of
television series. The Multiple Television Series Production License has an effective term of two years and may be applied to all television series produced by the holder during the effective term.
The Single Television Series Production License only applies to the specific television series, as indicated in such license.

Under
the Administrative Regulations on Content of Television Series effective on July 1, 2010, a filing with, and announcement by, SAPPRFT or its provincial counterparts is
required before production of any television series. Television series will be subject to censorship by SAPPRFT or its provincial counterparts, which will issue a Television Series Distribution
License for television series passing their examination. No television series may be distributed or broadcasted without a Television Series Distribution License. However, SAPPRFT may, according to
public interest require editing of or terminate distribution or broadcasting of television series which have been granted with a Television Series Distribution License.

If
we are found to be in violation of these laws, rules or regulations, this violation may result in penalties, including fines from RMB10,000 to RMB50,000, confiscation of income or
equipment and orders to cease operations. In circumstances of serious violations, the PRC government may revoke a violator's license and criminal liabilities may be prosecuted.

Piracy of films and television series, including digital and Internet piracy, may reduce the gross receipts from the exploitation of our films and television series.

Film piracy is extensive in many parts of the world and is made easier by technological advances and the conversion of films into
digital formats. In particular, unauthorized copying and piracy are prevalent in China and other countries in Asia, whose legal systems may make it difficult for us to enforce our intellectual
property rights. As a result, the creation, transmission and sharing of high quality unauthorized copies of films or television prior to, during or after theatrical release, or in the case of
television series, broadcast, has proliferated. This proliferation has had and will likely continue to have an adverse effect on our business, because these products reduce the revenue we receive from
our investment in or the distribution or exhibition of films and television series. Additionally, in order to contain this problem, we may have to implement elaborate and costly security and
anti-piracy measures, which could result in significant expenses and loss of revenue. We cannot assure you that even the highest levels of security and anti-piracy measures
will prevent piracy.

Failure to protect our intellectual property rights could have a negative impact on our business.

We believe our brand, trade names, trademarks and other intellectual property are critical to our success. The success of our business
depends substantially upon our continued ability to use our brand, trade names and trademarks to increase brand awareness and to further develop our brand. The unauthorized reproduction of our
trademarks could diminish the value of our brand and its market acceptance, competitive advantages or goodwill. In addition, our proprietary information, which has not been patented or otherwise
registered as our property, is a component of our competitive advantage and our growth strategy.

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Monitoring
and preventing the unauthorized use of our intellectual property is difficult. The measures we take to protect our brand, trade names, trademarks and other intellectual
property rights may not be adequate to prevent their unauthorized use by third parties. In addition, the application of laws governing intellectual property rights in China and abroad is uncertain and
evolving, and could involve substantial risks to us. If we are unable to adequately protect our brand, trade names, trademarks and other intellectual property rights, we may lose these rights and our
business may suffer materially. Further, unauthorized use of our brand, trade names or trademarks could cause brand confusion among our clients and harm our reputation. If our brand recognition
decreases, we may lose clients
and fail in our expansion strategies, and our business, financial condition and results of operations could be materially and adversely affected.

Third parties may assert intellectual property infringement claims against us.

One of the risks of the film industry is the possibility that others may claim that we distribute or own the copyright for films that
misappropriate or infringe upon the intellectual property rights of third parties with respect to their previously developed films, stories, characters, other entertainment or intellectual property.
We have been subject to claims of infringement or misappropriation of other persons' proprietary rights in the past and we may be subject to such claims in the future. Any such assertions or claims
may materially and adversely affect our business, financial condition and results of operations. Irrespective of the validity or the successful assertion of such claims, we could incur significant
costs and diversion of resources in defending against them, which could have a material adverse effect on our business, financial condition and results of operations. If any claim or action is
asserted against us, we may seek to settle such claim by obtaining a license from the plaintiff covering the disputed intellectual property rights. We cannot provide any assurances, however, that
under such circumstances such license, or any other form of settlement, would be available on reasonable terms or at all.

Our talent agency business is subject to various PRC laws, rules and regulations

In accordance with the Administrative Regulation on the Commercial Performance effective on September 1, 2005 and last amended
on July 22, 2008, and its implementing rules effective on October 1, 2009, the Broker Administrative Measures effective on August 28, 2004, a brokerage company, including talent
agency, must specify the manner and the category of the brokerage business conducted by it in its business license and file relevant information of the brokers engaged by it with the local
administration for industry and commerce. In addition, talent agencies engaged in (i) organization, production or promotion of commercial performance, (ii) agency or brokerage for
commercial performance, which refers to on-site public performances for profit, or (iii) agency or promotion of artists must obtain a Commercial Performance License from the
competent culture authorities at provincial level, and must have at least three professional performance brokers. Our affiliated consolidated entity Bona Film Group Co., Ltd. (PRC)
(formerly known as Beijing Bona Film and Culture Communications Co., Ltd.) has obtained a Commercial Performance License with an effective term until July 25, 2014. Bona Film
Group Co., Ltd. (PRC), Zhejiang Bona Film and Television Production Co., Ltd. and Beijing Bona Xingyi Culture Agency Co., Ltd. have also filed the agency
certificates and other information of relevant brokers with the local administration for industry and commerce. There is uncertainty whether Zhejiang Bona Film and Television
Production Co., Ltd. and Beijing Bona Xingyi Culture Agency Co., Ltd., whose representations of artists are not in connection with on-site art performances for
the public, are required to obtain a Commercial Performance License from the relevant culture authorities. If Zhejiang Bona Film and Television Production Co., Ltd. and Beijing Bona
Xingyi Culture Agency Co., Ltd. are required to obtain such license, failure to obtain such license may result in penalties, including fines of eight to ten times the violator's income
if such income exceeds RMB10,000 or fines from RMB50,000 to RMB100,000 if such

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income
is below RMB10,000, confiscation of income and equipment. Violation of other provisions of those laws may also result in penalties, including fines up to ten times the violator's income or
RMB100,000, confiscation of income and orders to cease operations. In circumstances of serious violations, the PRC government may revoke a violator's license and criminal liabilities may be
prosecuted. In addition, if we fail to obtain any of the business permits or licenses required for the operation of our business, we may be ordered to cease the applicable activities, have our income
from such activities or tools, equipment, raw materials, products and other property that are used for such activities confiscated and be subject to fines of up to RMB500,000.

We may be subject to, and may expend significant resources in defending against government actions based on the content of the films we produce, distribute
or exhibit.

PRC laws and regulations require producers, including businesses such as ours, and foreign film importers to ensure that the content of
the films they produce or imports is in full compliance with applicable laws, rules and regulations and to apply for examination and approval of the content of the films by competent governmental
authorities. The requirements on content of films are set forth in the Regulations on Administration of Films which became effective on February 1, 2002, the Provisions on the Filing of Film
Scripts (Abstracts) and the Administration of Films, which superseded the Interim Provisions on Project Initiation of Film Scripts (Abstracts) and the Examination of Films and became effective on
June 22, 2006, the Notice regarding the Improvement of the Filing of Film Scripts (Abstracts), the Administration of Films, which became effective on February 4, 2010, and certain other
circulars issued by SAPPRFT. These regulations require producers to examine film scripts or abstracts in accordance with such requirements first and then file them with SAPPRFT and/or its local
counterparts before putting them into production. If the content or main characters of the film involve issues related to national security, foreign relations, peoples, religion, military, public
security, judicial matters, historical celebrities or sensitive historical events, the film scripts shall be approved by provincial level administrative authorities in charge of the relevant fields
before they are filed with SAPPRFT and/or its local counterpart. After completion of film production, producers are required to submit the film to SAPPRFT and/or its local counterparts for examination
and approval. In the case of foreign films, importers must apply for the examination and approval of the films to be imported. Films passing the examination will be granted a License for Public Film
Screening and may be distributed, exhibited, imported and exported. Distributors and exhibitors are prohibited from distributing or exhibiting any film without a License for Public Film Screening, nor
may such films be imported into or exported out of China. In addition, as to a film for which the License for Public Film Screening has been procured, SAPPRFT may, under special circumstances, decide
to suspend its distribution or public screening or to allow its continued distribution or public screening only after revisions have been made thereto. Violation of these laws, rules or regulations
may result in penalties, including fines, confiscation of income, orders to cease distribution or exhibition of the films and fines of five to ten times the violator's income if such income exceeds
RMB50,000 or fines from RMB200,000 to RMB500,000 if such income is below RMB50,000. In circumstances of serious violations, the PRC
government may revoke a violator's license for its business operations and prosecute the violator for any criminal wrongdoing.

Our business involves risks of liability claims for media content in both films and advertising, which could adversely affect our business, results of operations and
financial condition.

As a producer and distributor of films and an advertising services company, we may face potential
liability for:



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These
types of claims have been brought, sometimes successfully, against producers and distributors of films and advertising service companies. In addition, if viewers find the content
displayed on our advertising network to be offensive, movie theaters may seek to hold us responsible for any claim by audiences or they may terminate their relationships with us. Any imposition of
liability could have a material adverse effect on our business, financial condition and results of operations.

An economic downturn could materially and adversely affect our business by reducing consumer spending on movie attendance and other film related expenditures.

We depend on consumers voluntarily spending discretionary funds on leisure activities. Motion picture theater attendance may be
affected by economic downturns, which may adversely affect consumer spending.

The
global financial markets experienced significant disruptions in 2008 and the United States, Europe and other economies went into recession. The recovery from the lows of 2008
and 2009 was uneven and is facing new challenges, including the escalation of the European sovereign debt crisis since 2011. While leading European nations have implemented a series of financial
support measures, it is still unclear whether the European debt crisis can be contained and what effects it may have. Economic conditions in the PRC are sensitive to macroeconomic conditions. In part
due to lower export demand resulting from slow economic recoveries in the United States and Europe and a weak economic environment in Japan, China's GDP growth decelerated during the first
three quarters in 2012. In addition, there is uncertainty regarding the scale and the effects of a real estate bubble alleged by some to have reached a critical stage in the PRC.

While
we cannot predict the timing or duration of any economic downturns, a decrease in economic activity in China or in other regions of the world in which we do business could
adversely affect demand for our films, thus reducing our revenue and earnings. A decline in economic conditions could reduce the number of, or attendance at, our film screenings. In addition, an
increase in price levels generally could result in a shift in consumer demand away from the entertainment we offer, which could also adversely affect our revenue and, at the same time, increase our
costs. Moreover, financial institution failures may cause us to incur increased expenses or make it more difficult either to utilize our existing debt capacity or otherwise obtain financing for our
operations or investing activities (including the financing of any future acquisitions). Our business, financial condition and results of operations may be materially and adversely affected by any
economic downturns in China or globally.

Acquisitions are expected to continue to be a part of our growth strategy, and could expose us to significant business risks.

In April 2010, we started our movie theater business through the acquisition of six movie theaters in commercial districts and
residential areas in major cities in China to support our film distribution business. In July 2011, we acquired 100% of the equity interests in Alpha Speed Limited and Bona Starlight to further
expand our movie theater business. In addition, in November 2011, we entered into an agreement to acquire a strategic equity stake in China Lion Entertainment Limited in order to

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strengthen
our U.S. and Canadian distribution capabilities. To grow our business, we may continue to pursue acquisition opportunities that are complementary to our business. However, we may not be
able to identify and secure suitable acquisition opportunities. Our ability to consummate and effectively integrate any future acquisitions on terms that are favorable to us may be limited by a number
of factors, such as attractive acquisition targets and, to the extent necessary, our ability to obtain financing on satisfactory terms, if at all.

Moreover,
even if an acquisition candidate is identified, we may fail to enter into an acquisition or purchase agreement for the candidate on commercially reasonable terms, or at all,
due to a variety of reasons. The negotiation and completion of potential acquisitions, whether or not ultimately consummated, could significantly divert management's time and resources and potentially
disrupt our existing business. Further, the expected synergies from future acquisitions may not actually materialize. In addition, future acquisitions could result in the incurrence of additional
indebtedness, costs and contingent liabilities. Future acquisitions may also expose us to potential risks, including risks associated with:



Any
of the above risks could significantly impair our ability to manage our business and materially and adversely affect our business, results of operations and financial condition.

We do not maintain business liability or disruption, litigation or property insurance, and any business liability or disruption, litigation or property damage we experience
might result in substantial costs to us and the diversion of our resources.

The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited business
disruption, business liability or similar business insurance products. We have determined that the risks of disruption or liability from our business, the loss or damage to our property, including our
facilities, equipment and office furniture, the cost of obtaining insurance coverage for these risks and the difficulties associated with obtaining such insurance on commercially reasonable terms make
it impractical for us to have such insurance. As a result, we do not have any business liability, disruption, litigation or property insurance coverage for our operations in China. Any occurrence of
an uninsured loss or damage to property, or litigation or business disruption may result in substantial costs to us and the diversion of our resources, which could have an adverse effect on our
operating results.

If we fail to maintain an effective system of internal control over financial reporting, our ability to accurately and timely report our financial results or prevent fraud
may be adversely affected, as a result, investor confidence in our company and the market price of our ADSs may be adversely affected.

We are subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act requires that we include a report from
management on the effectiveness of our internal control over financial reporting in our annual report beginning with our annual report for the
fiscal year ended December 31, 2012. In addition, our independent registered public accounting firm must report on the effectiveness of our internal control over financial reporting. Our
management concluded that our internal control over

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financial
reporting was effective as of December 31, 2012, the end of the period covered by this annual report on Form 20-F, and our independent registered public accounting
firm opined that we maintained effective internal control over financial reporting on the same date.

In
the event of any failure to maintain effective internal controls over financial reporting in the future, we and our independent registered public accounting firm may not be able to
conclude that we have effective internal control over financial reporting. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent
registered public accounting firm may disagree. If such independent registered public accounting firm is not satisfied with our internal control or the level at which our control is documented,
designed, operated or reviewed, or if it interprets the relevant requirements differently from us, then it may not be able to issue an unqualified opinion. In addition, our reporting obligations as a
public company may place a significant strain on our management, operational and financial resources and systems for the foreseeable future.

In
addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not
be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. If we fail to achieve and maintain an effective internal
control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our
reported financial information. This could harm our operating results and lead to a decline in the market price of our ADSs. Additionally, ineffective internal control over financial reporting could
expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal
sanctions.

Our founder, chairman and chief executive officer, Mr. Dong Yu, as the single largest holder of our outstanding share capital, has substantial influence over our
company and his interests may not be aligned with your interests.

As of the date of this annual report on Form 20-F, Mr. Dong Yu, our founder, chairman and chief executive
officer, through Skillgreat Limited, beneficially owned 30.14% of our outstanding share capital. Consequently, Mr. Yu has substantial influence over our business, including decisions regarding
mergers, consolidations and the sale of all or substantially all of
our assets, election of directors, declaration of dividends and other significant corporate actions. This concentration of ownership may discourage, delay or prevent a change in control of our
company, which could deprive you of an opportunity to receive a premium for your ADSs as part of a sale of our company and may reduce the price of our ADSs.

In
addition, pursuant to the investor rights agreement dated as of May 21, 2012, by and among Mr. Dong Yu, Skillgreat Limited, our company and NCIH, Inc., a Delaware
corporation, NCIH, Inc. agrees to vote, until May 21, 2013, a certain number of the ordinary shares held by it in accordance with the instructions of Mr. Dong Yu with respect to a
qualified public offering by our company and the re-election of Mr. Dong Yu to our board of directors. This voting agreement, if exercised by Mr. Dong Yu before
May 21, 2013, would provide Mr. Dong Yu with up to 33.4% of our total voting power as of the record date fixed for the matter subject to shareholder vote described above.

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Our founder, chairman and chief executive officer, Mr. Dong Yu, has provided personal guarantees to secure our obligations under certain credit facilities and may
continue to grant additional guarantees in the future. Defaults under these credit facilities could result in a sale of a significant portion of Mr. Dong Yu's equity interest in our company.

From time to time, our founder, chairman and chief executive officer. Mr. Dong Yu, has provided personal guarantees in order to
help enable us to procure bank borrowings. As of the date of this annual report on Form 20-F, Mr. Yu is providing a personal guarantee in respect of a term loan facility from
Bank of Beijing under which Bona Film Group Co., Ltd. (PRC) has a loan with principal amount of approximately RMB50.0 million (US$8.0 million) outstanding. This term loan
facility is jointly guaranteed by Beijing Bona Cineplex and Zhejiang Bona Film and Television Production Co., Ltd. together with Mr. Yu. Mr. Yu is also providing, as of the
date of this annual report on Form 20-F, a personal guarantee in respect of a fixed asset loan facility provided by Industrial Commercial Bank of China to Bona Film
Group Co., Ltd. (PRC), which currently has a principal amount of approximately RMB50.0 million (US$8.0 million) outstanding. Zhejiang Bona Film and Television
Production Co., Ltd. is providing a joint guarantee with Mr. Yu for this loan. Mr. Yu may, in the future, provide additional guarantees for our bank borrowings.

If
Bona Film Group Co., Ltd. (PRC) defaults on either of these loans, the relevant bank would have the rights to accelerate and declare immediately due and payable all
debts outstanding thereunder and enforce upon the guarantees, among other measures. Events of default under the terms of the loans include failure to make principal, interest or other payments under
the loan when they become due, breach of any representation, warranty or undertaking under the loan agreement, failure to meet debt payment obligations under other agreements (subject to certain
conditions), and deterioration in the
borrower's financial or operation condition that adversely affects its debt repayment ability, among others.

If
events of default occur under these loans, and the banks accelerate the loans and enforce upon Mr. Yu's personal guarantees, Mr. Yu's personal property, including his
equity interest in our company may be subject to an auction or forced sale, or Mr. Yu may need to sell his equity interest in our company in order to satisfy his guarantee obligations. A sale
of a significant portion of Mr. Yu's equity interest in our company would likely cause a significant drop in the price of our ADSs, and could also adversely affect our business operations and
our relationships in the film industry. Moreover, if Mr. Yu's beneficial ownership in us is substantially reduced, he may have little or no stake or interest in the business operations of our
company, and he may leave the company or not perform his duties as diligently as he otherwise might have.

Risks Relating to Our Corporate Structure

If the PRC government determines that the agreements that establish the structure for operating our China business otherwise do not comply with applicable PRC laws, rules
and regulations, we could be subject to severe penalties.

Foreign investment in the businesses we operate, including film production, distribution and exhibition, television production, movie
theater operation and talent agency services, is currently prohibited or restricted in China. As a Cayman Islands corporation, we are restricted or prohibited from directly owning all the equity
interests in PRC companies engaged in these businesses. In addition, foreign investment in the advertising industry requires the foreign investor to possess certain qualifications that we do not have.
See "Item 4. Information on the CompanyB. Business OverviewRegulations of Our Industry." As a result, our business in China is operated by our affiliated consolidated
entities and their subsidiaries through contractual arrangements with our PRC subsidiary. Each of our affiliated consolidated entities and their subsidiaries is currently owned by PRC citizens

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and/or
PRC companies and holds the relevant licenses and permits to provide film production, distribution or exhibition, television production, movie theater operation, talent agency or advertising
services in China. The shareholders of our affiliated consolidated entities are set forth in "Item 4. Information on the CompanyC. Organizational StructureOur
Corporate Structure." We have been and expect to continue to be dependent on affiliated consolidated entities and their subsidiaries to operate our film production, distribution and exhibition,
television production, movie theater operation, talent agency and advertising businesses. We do not have any equity interest in any of the affiliated consolidated entities but control their operations
and receive substantially all the economic benefits and bear substantially all the economic risks through a series of contractual arrangements. For more information regarding these contractual
arrangements, see "Item 4. Information on the CompanyC. Organizational StructureContractual Arrangements with Our Affiliated Consolidated Entities."

There
are uncertainties regarding the interpretation and application of current and future PRC laws, rules and regulations, including but not limited to the laws, rules and regulations
governing the validity and enforcement of our contractual arrangements with the affiliated consolidated entities and the laws, rules and regulations setting forth the prohibitions or restrictions on
foreign investments in film, television production, film distribution and exhibition, movie theater operation and talent agency services and qualification requirements for foreign investments in
advertising industries. Although we have been advised by our PRC counsel, Han Kun Law Offices, that the structure for operating our business in China (including our corporate structure and contractual
arrangements with the affiliated consolidated entities) complies, and immediately after the completion of our initial public offering continued to comply, with all applicable PRC laws, rules and
regulations, and does not violate, breach, contravene or otherwise conflict with any applicable PRC laws, rules or regulations, we cannot assure you that the PRC regulatory authorities will take the
same view.

If
we, any of the affiliated consolidated entities or any of their current or future subsidiaries are found to be in violation of any existing or future PRC laws or regulations or fail
to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion in dealing with such violations,
including:



The
imposition of any of these penalties could result in a material and adverse effect on our ability to conduct our business, financial condition and results of operations. If any of
these penalties results in our inability to direct the activities of our affiliated consolidated entities that most significantly impact their economic performance, and/or our failure to receive the
economic benefits from our affiliated consolidated entities, we may not be able to consolidate our affiliated consolidated entities and their subsidiaries in our consolidated financial statements in
accordance with U.S. GAAP.

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We rely on contractual arrangements with our affilaited consolidated entities and their shareholders for our business operations, which may not be as effective in providing
operational control as direct ownership.

We rely on and expect to continue to rely on contractual arrangements with our affiliated consolidated entities in China and their
respective shareholders to operate our film production, distribution and exhibition, television production, movie theater operation, talent agency and advertising businesses in China. For more
information about the terms of these contractual arrangements, see "Item 4. Information on the CompanyC. Organizational StructureOur Corporate Structure." In 2010,
2011 and 2012, net revenues of our affiliated consolidated entities and their subsidiaries accounted for 83.9%, 92.7% and 93.1%, respectively, of our consolidated net revenues, and as of
December 31, 2010, 2011 and 2012, total assets of our affiliated consolidated entities and their subsidiaries accounted for 47.9%, 57.0% and 70.8% of our consolidated total assets,
respectively. These contractual arrangements may not be as effective in providing us with control over the affiliated consolidated entities and enabling us to derive economic benefits from the
operations of the affiliated consolidated entities as ownership of controlling equity interests would be. If we had direct ownership of the affiliated consolidated entities, we would be able to
exercise our rights as a shareholder to (i) effect changes in the board of directors of those entities, which in turn could effect changes, subject to any applicable fiduciary obligations, at
the management level, and (ii) derive economic benefits from the operations of those entities by causing them to declare
and pay dividends. However, under the current contractual arrangements, as a legal matter, if any of the affiliated consolidated entities or any of their shareholders fails to perform its, his or her
respective obligations under these contractual arrangements, we may have to incur substantial costs and resources to enforce such arrangements, and rely on legal remedies available under PRC laws,
including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective. For example, if shareholders of an affiliated consolidated entity were
to refuse to transfer their equity interests in such affiliated consolidated entity to us or our designated persons when we exercise the purchase option pursuant to these contractual arrangements, we
may have to take a legal action to compel them to fulfill their contractual obligations.

If
(i) the relevant PRC authorities invalidate these contractual arrangements for violation of PRC laws, rules and regulations, (ii) any affiliated consolidated entity or
its shareholders terminate the contractual arrangements or (iii) any affiliated consolidated entity or its shareholders fail to perform their obligations under these contractual arrangements,
our business operations in China would be adversely and materially affected, and the value of your ADSs would substantially decrease. Further, if we fail to renew these contractual arrangements upon
their expiration, we would not be able to continue our business operations unless the then-current PRC law allowed us to directly operate the relevant businesses in China.

In
addition, if any of our affiliated consolidated entities or all or part of their assets become subject to liens or rights of third-party creditors, we may be unable to continue some
or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. If any of our affiliated consolidated entities undergoes a
voluntary or involuntary liquidation proceeding, its shareholders or unrelated third-party creditors may claim rights to some or all of its assets, thereby hindering our ability to operate our
business, which could materially and adversely affect our business, our ability to generate revenue and the market price of your ADSs. All of these contractual arrangements are governed by PRC law and
provide for the resolution of disputes through arbitration in the PRC. The legal environment in the PRC is not as developed as in some other jurisdictions, such as the United States. As a
result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. In the event we are unable to enforce these contractual arrangements, we may not be
able to exert effective control over our operating entities, our ability to conduct our business may be negatively affected and we may not be able to consolidate the

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financial
results of our affiliated consolidated entities and subsidiaries into our consolidated financial statements in accordance with U.S. GAAP.

Our ability to enforce the equity pledge agreements between Bona New World and the shareholders of each of our affiliated consolidated entities may be subject to
limitations based on PRC laws and regulations.

Pursuant to the equity pledge agreements among Bona New World and each of the shareholders of our respective affiliated
consolidated entities, such shareholders have pledged their equity interests in our respective affiliated consolidated entities to Bona New Word to secure the performance by our affiliated
consolidated entities of their obligations under the respective exclusive technology and consulting service agreements. An equity pledge agreement becomes effective among the parties upon execution,
but according to the PRC Property Rights Law, an equity pledge is not perfected as a security property right unless it is registered with the relevant local administration for industry and commerce.
The pledge relating to each of Beijing Baichuan Film Distribution Co., Ltd. and Beijing Bona Advertising Co., Ltd (PRC) has been duly registered with the relevant local
administration for industry and commerce, while we are in the process of registering the amended pledge relating to Bona Film Group Co., Ltd. (PRC) after capital increase of Bona Film
Group Co., Ltd. (PRC). Prior to the completion of the registration, we may not be able to successfully enforce the equity pledge against any third parties who have acquired property
right interests in good faith in the increased equity interests in Bona Film Group Co., Ltd. (PRC).

According
to the PRC Property Law and PRC Guarantee Law, a pledgee and pledgor are prohibited from making an agreement prior to the expiration of the debt performance period to transfer
the ownership of the pledged equity to the pledgee when the obligor fails to pay the debt due. Under the PRC Property Law, when an obligor fails to perform its obligations, the pledgee may choose to
either conclude an agreement with the pledgor to obtain the pledged equity or seek payment of proceeds throght an auction sale or forced sale of the pledged equity interests. Therefore, if a
shareholder of an affiliated consolidated entity defaults on its obligations under the relevant exclusive technology and service agreement and pledge thereby becomes enforceable, one remedy available
to Bona New World would be to require the pledgor to sell the equity interests of the affiliated consolidated entities in an auction or private sale and remit the proceeds to Bona
New World, net of related taxes and expenses. In the event of such a default, our preferred approach, however, would likely be to designate another PRC person or entity to replace the existing
shareholders of the relevant affiliated consolidated entity pursuant to the direct transfer option we have under the relevant voting trust and equity purchase option agreements.

In
addition, when registering the equity pledge of our affiliated consolidated entities with the relevant local administration for industry and commerce, we were or will be required to
fill in the specific amounts of secured liabilities in the registration forms. Given that the amounts written in these forms are fixed and subject to scrutiny by the relevant government authorities,
they may ultimately be less than the actual aggregate secured amounts, namely all of the liabilities owed by our affiliated consolidated entities to Bona New World under the exclusive
technology and consulting service agreements. Although the equity pledge agreements provide that the pledged equity interest shall secure all of the liabilities owed to by our affiliated consolidated
entities to Bona New World, it is possible that PRC courts may take the position that the amounts written on the equity pledge registration forms represent the full amount of the liabilities
that the pledge secures. If this is the case, the obligations that are meant to be secured in the equity pledge agreements in excess of the aggregate amounts listed on the equity pledge registration
forms could be determined by PRC courts to be unsecured liabilities. As such, rather than enforcing the pledge, our preferred approach would likely be
to designate another PRC person or entity to replace the existing respective shareholders of our affiliated consolidated entities pursuant to the direct transfer option we have under the voting trust
and equity purchase option agreements.

In
addition, we do not have agreements that pledge the assets of our affiliated consolidated entities and their subsidiaries for the benefit of Bona New World.

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Public shareholders of China-based, U.S.-listed companies and other market participants may no longer have access to a wide array of corporate records of such listed
companies' PRC entities filed with relevant administration for industry and commerce in China. Loss of, or limits on, the access to such information may adversely affect overall investor confidence in
the reported results or other disclosures of China-based, U.S.-listed companies, including those of our company, and may cause the trading price of our ADSs to decline.

Our PRC companies, including Bona New World, our affiliated consolidated entities and their subsidiaries, maintain corporate
records and filings with relevant administration for industry and commerce in the cities where such PRC entities are registered. Information contained in such corporate records and filings includes,
among others, business address, registered capital, business scope, articles of association, equity interest holders, legal representative, changes to the above information, annual financial reports,
matters relating to termination or dissolution, information relating to penalties imposed, and annual inspection records.

Various
government authorities in China have promulgated regulations that govern public access to corporate records and filings. Under the Measures for Accessing Corporate Records and
Filings, promulgated on December 16, 1996 by the SAIC, as amended in 2000 and in 2003 respectively, or the SAIC measures, a wide range of basic corporate records, except for certain restricted
information such as business results and financial reports, can be freely inspected by the public. Under the SAIC
measures, a company's restricted information can only be inspected by authorized government officers and officials from judicial authorities or lawyers involved in pending litigation relating to such
company who have court-issued proof of such litigation. In practice, local administration for industry and commerce in different cities have adopted various regional regulations which impose more
stringent restrictions than the SAIC measures by expanding the scope of restricted information that the public cannot freely access. Many local administrations for industry and commerce only allow
free public access to such basic corporate information as the name, legal representative, registered capital and business scope of a company. Under these local regulations, access to the other
corporate records and filings (many of which are not restricted information under the SAIC measures) is only granted to authorized government officers and officials from judicial authorities or
lawyers involved in pending litigation relating to such company who have court-issued proof of such litigation.

However,
neither the SAIC nor the local administration for industry and commerce were reported to have strictly implemented the restrictions under either the SAIC measures or the various
regional regulations before early 2012. As a result, before early 2012, the public, including public shareholders of China-based, U.S.-listed companies and other market participants, such as lawyers
and research firms, were reported to be able to access all or most corporate records and filings of these listed companies' PRC entities maintained with the relevant administration for industry and
commerce administration. Such records and filings were reported to have formed important components of research reports on certain China-based, U.S.-listed companies, which claimed to have uncovered
wrongdoings and fraud committed by certain such companies. Such claims were generally mad on the basis of (i) disparities found between the listed companies' reported results and their PRC
entities' financial reports filed with relevant administration for industry and commerce, and (ii) information on material changes of the PRC entities, such as transfers of equity interests of
significant PRC subsidiaries, that were filed with the relevant administration for industry and commerce but were allegedly not properly disclosed by such listed companies as required under the
U.S. securities law and the SEC's disclosure requirements. The significant disparities found between (i) certain China-based, U.S.-listed companies' reported results and other disclosure
and (ii) their PRC entities' financial reports and other records filed with relevant administration for industry and commerce were also reported to have formed the basis of several class
actions against certain such companies.

It
was reported that, since the first half of 2012, local administration for industry and commerce in a number of cities in China had started strictly implementing the above restrictions
and significantly

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curtailing
public access to corporate records and filings. It is also reported that only the limited scope of basic corporate records and filings are still accessible by the public, and much of the
previously publically accessible information, such as financial reports and changes to equity interests, now can only be accessed by the parties specified in, and in strict accordance with the
restrictions under, the various regional regulations. Such reported limitation on the public access to corporate records and filings and the resulting concerns over the loss of, or limits on, an
otherwise available source of information to verify and evaluate the soundness of China-based, U.S.-listed companies' business operations in China may have a significant adverse effect on overall
investor confidence in the reported results or other
disclosures of China-based, U.S.-listed companies, including those of our company, and may cause the trading price of our ADSs to decline.

Mr. Dong Yu, as the nominee shareholder of Bona Film Group Co., Ltd., may have potential conflicts of interest with us.

Mr. Yu is the majority nominee shareholder of Bona Film Group Co., Ltd., and is also the chairman and chief
executive officer and a major shareholder of our company. The interests of Mr. Yu as the nominee shareholder of Bona Film Group Co., Ltd. may differ from the interests of our
company, and we cannot assure you that when conflicts of interest arise, Mr. Yu will act in the best interests of our company, or that conflicts of interest will be resolved in our company's
favor. Currently, we do not have existing arrangements to address potential conflicts of interests Mr. Yu may encounter in his capacity as the nominee shareholder, on the one hand, and as the
chairman, chief executive officer and a major shareholder of our company, on the other hand. Mr. Yu is party to our contractual arrangements with Bona Film Group Co., Ltd. and the
voting trust and option purchase agreements provide us with a mechanism to remove Mr. Yu as the nominee shareholder of Bona Film Group Co., Ltd. should he act to the detriment of
our company. We rely on Mr. Yu, as the chairman and chief executive officer of our company, to fulfill his fiduciary duties and abide by laws of the PRC and the Cayman Islands and act in the
best interests of our company. The potential exists, however, for conflicts of interests to arise. Mr. Yu may breach or cause Bona Film Group Co., Ltd. to breach the contractual
arrangements, which would have an adverse effect on our ability to effectively control the affiliated consolidated entities and receive economic benefits from them. In any such case, we may need to
rely on legal proceedings to resolve any disputes, the outcome of which is uncertain and which could be materially disruptive to our business.

The contractual arrangements with the affiliated consolidated entities and other transactions among our PRC subsidiary, the affiliated consolidated entities and their
subsidiaries may be subject to scrutiny by the PRC tax authorities and may result in a finding that we owe additional taxes or are ineligible for tax exemption, or both, which could substantially
increase our taxes owed and thereby reduce our net income.

Under applicable PRC laws, rules and regulations, arrangements and transactions between related parties may be subject to audits or
challenges by the PRC tax authorities. If any of the transactions that have been entered into between our wholly owned subsidiary in China and our affiliated consolidated entities and other
transactions among our PRC subsidiary, the affiliated consolidated entities and their subsidiaries are determined by the PRC tax authorities not to be on an arm's length basis, or are found to result
in an impermissible reduction in taxes under applicable PRC laws, rules and regulations, the PRC tax authorities may adjust the profits and losses of such affiliated consolidated entity and assess
more taxes on it. In addition, the PRC tax authorities may impose late payment fees and other penalties to such affiliated consolidated entity for under-paid taxes. Our net income may be
adversely and materially affected if the tax liabilities of any of the affiliated consolidated entities increase or if it is found to be subject to late payment fees or other penalties.

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

Our company is a holding company. If our company requires cash, including funds necessary to pay dividends to our shareholders or
service offshore debt we incur we may rely on dividends and other distributions on equity paid by Bona New World, our PRC subsidiary, for our cash requirements. If Bona New World incurs
debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us. In addition, the PRC tax authorities may require
us to adjust our taxable income under the contractual arrangements Bona New World currently has in place with the affiliated consolidated entities in a manner that would materially and
adversely affect the ability of Bona New World to pay dividends and other distributions to us. Further, relevant PRC laws, rules and regulations permit payments of dividends by Bona
New World only out of its retained earnings, if any, determined in accordance with accounting standards and regulations of China. Under PRC laws, rules and regulations, Bona New World is
also required to set aside a portion of its net income each year to reserve funds and staff incentive and welfare funds. Bona New World must set aside at least 10% of after-tax
income each year to reserve funds prior to payment of dividends until the cumulative fund reaches 50% of the registered capital. As for staff incentive and welfare funds, the contribution percentage
is to be decided by Bona New World on its own discretion. As a result of these PRC laws, rules and regulations, Bona New World is restricted from transferring a portion of its net assets
to us in the form of dividends. Any limitation on the ability of our operating subsidiary to pay dividends to us could materially and adversely limit our ability to grow, make investments or
acquisitions that could be beneficial to our businesses, pay dividends or otherwise fund and conduct our business.

The approval of the Ministry of Commerce may be required in connection with the establishment of our contractual arrangements with the affiliated consolidated entities. Our
failure to obtain this approval, if required, could have a material adverse effect on our business, results of operations, reputation and trading price of our ADSs.

On August 8, 2006, six PRC regulatory authorities, including the CSRC, jointly promulgated the Regulations on Mergers and
Acquisitions of Domestic Enterprises by Foreign Investors in the People's Republic of China, or the 2006 M&A Rules, which were later amended on June 22, 2009. The 2006 M&A Rules provide that
approval by the Ministry of Commerce is required prior to a foreign company acquiring a PRC domestic company where the foreign company and the domestic company have the samede
factocontrolling persons that are PRC individuals or enterprises.
The applicability of the 2006 M&A Rules with respect to the Ministry of Commerce's approval is unclear. If the Ministry of Commerce subsequently determines that its prior approval was required for our
contractual arrangements with the affiliated consolidated entities, we may face regulatory actions or other sanctions from the Ministry of Commerce or other PRC regulatory agencies. These regulatory
agencies may impose fines and penalties on us and the affiliated consolidated entities, require us to restructure our ownership structure or operations, limit our operations, delay or restrict our
sending the proceeds from our initial public offering into China, or take other actions. These regulatory actions could have a material adverse effect on our business, financial condition, results of
operations, reputation and prospects, as well as the trading price of our ADSs.

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

The PRC Enterprise Income Tax Law, or the EIT Law, provides that a maximum income tax rate of 20% may be applicable to dividends
payable to non-PRC investors that are "non-resident enterprises," to the extent such dividends are derived from sources within the PRC, and the State Council of the PRC has
reduced such rate to 10% through the implementation regulations. We are a Cayman Islands holding company and substantially all of our income may be derived from dividends we receive from our
subsidiary located in the PRC. Thus, dividends paid to us by our subsidiary in China may be subject to the 10% income tax if we are considered as a "non-resident enterprise" under the EIT
Law. If we are required under the EIT Law to pay income tax for any dividends we receive from our subsidiary in China, it would materially and adversely affect the amount of dividends, if any, we may
pay to our shareholders and ADS holders.

If we lose control over the chops, seals and/or business licenses of our affiliated consolidated entities and their subsidiaries, our business and operations could be
materially and adversely affected.

Similar to other PRC companies, our affiliated consolidated entities and their subsidiaries have as chops, seals and their business
licenses, for entering into contracts, dealing with banks and taking certain official actions, including registering any change to the composition of the board or senior management team with relevant
PRC authorities.

Under
PRC law, legal documents for various transactions, including government filings, agreements and contracts, are executed using chops or seals of the signing entity or with the
signature of the legal representative whose designation is registered and filed with the relevant administration for industry and commerce. We generally execute legal documents by affixing chops or
seals, rather than having the designated legal representatives sign the documents. Our affiliated consolidated entities and their subsidiaries' business licenses are required to be presented for
(i) annual inspection by the relevant administration for industry and commerce or the civil affairs administration authorities, as applicable, in order to maintain valid existence;
(ii) application, registration and modification of other licenses and qualifications; (iii) opening bank accounts and (iv) purchase of real properties or motor vehicles.

Under
the internal policies adopted by us for our affiliated consolidated entities and their subsidiaries, we have procedures in place to control and regulate the use of chops and and
seals and ensure the safe keep of the business licenses. However, these procedures and measures may not be sufficient to prevent all instances of abuse or unauthorized actions. If we fail for any
reason to maintain effective control over the chops, seals or business licenses, or if any of the chops, seals or business licenses are misused or misappropriated by the authorized users, whether as a
result of labor disputes or other disputes, such persons' malfeasance or any other reason, the chops, seals or business licenses could be used to commit fraudulent acts, such as transferring assets,
legally binding the affected companies to contracts against our interests, and obstructing the affected companies' cash flows, among other acts, that would have a mterial adverse impact on
our business.

Risks Relating to the PRC

Adverse changes in political and economic policies of the PRC government could have a material adverse effect on the overall economic growth of China, which could reduce the
demand for our services and materially and adversely affect our competitive position.

Since substantially all of our business operations are conducted in China, our business, financial condition, results of operations and
prospects are affected significantly by economic, political and legal

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developments
in China. The Chinese economy differs from the economies of most developed countries in many respects, including:



While
the Chinese economy has grown significantly in the past 30 years, the growth has been uneven, both geographically and among various sectors of the economy. The PRC
government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may negatively
affect our business. For example, our business, financial condition and results of operations may be materially and adversely affected by government control over capital investments or changes in tax
regulations that are applicable to us.

The
Chinese economy has been transitioning from a planned economy to a more market-oriented economy. Although the PRC government has in recent years implemented measures emphasizing
reliance on market forces, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of the productive
assets in China is still owned by the PRC government. The PRC government also exercises significant control over China's economic growth through the allocation of resources, controlling payment of
foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. From late 2003 to mid-2008, the PRC government
implemented a number of measures, such as increasing the People's Bank of China's reserve requirement ratio and imposing commercial bank lending guidelines that had the effect of slowing the growth of
credit. In response to the recent global and Chinese economic downturn, the PRC government promulgated several measures aimed at expanding credit and stimulating economic growth. Beginning in
September 2008, the People's Bank of China decreased the reserve requirement ratio and lowered benchmark interest rates several times in response to the global downturn. Subsequently, from
early 2010 to mid-2011, the People's Bank of China increased the reserve requirement ratio in order to control China's rapid growth. It is unclear whether PRC economic policies will be
effective in sustaining stable economic growth in the future. In addition, other economic measures, as well as future actions and policies of the PRC government, could also materially affect our
liquidity and access to capital and our ability to operate our business.

Uncertainties with respect to the PRC legal system could limit the protections available to you and us.

We conduct substantially all of our business through our subsidiary and affiliated consolidated entities and their subsidiaries
established in China. The PRC legal system is a civil law system based on written statutes. Unlike in the common law system, prior court decisions may be cited for reference but have limited
precedential value. Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, since the PRC legal
system continues to evolve rapidly, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involve uncertainties, which may

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limit
legal protections available to us. For example, we may have to resort to administrative and court proceedings to enforce the legal protection that we enjoy either by law or contract. However,
since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of Chinese
administrative and court proceedings and the level of legal protection we enjoy in China than in more developed legal systems. These uncertainties may impede our ability to enforce the contracts we
have entered into with our business partners, customers and suppliers. In addition, such uncertainties, including the inability to enforce our contracts, could materially and adversely affect our
business and operations. Furthermore, intellectual property rights and confidentiality protections in China may not
be as effective as in the United States or other countries. Moreover, we cannot predict the effect of future developments in the PRC legal system, including the promulgation of new laws,
changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. These uncertainties could limit the legal protections available to us
and other foreign investors, including you.

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China, based on United States or
other foreign laws, against us, our management or the experts named in this annual report on Form 20-F.

We conduct substantially all of our operations in China and substantially all of our assets are located in China. In addition, a
majority of our senior executive officers reside within China. As a result, it may not be possible to effect service of process within the United States or many other countries outside China
upon our senior executive officers, including with respect to matters arising under U.S. federal securities laws and applicable United States state securities laws. China does not have
treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States, the United Kingdom, Japan and many other countries. As a result, it may
not be possible for investors to serve process upon us or those persons in China, or to enforce against us or them in China, any judgments obtained from non-PRC courts.

The audit report included in this annual report on Form 20-F are prepared by auditors who are not inspected by the Public Company Accounting Oversight
Board and, as such, you are deprived of the benefits of such inspection

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

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

The
inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our auditor's audit procedures or quality control
procedures as compared

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to
auditors outside of China that are subject to PCAOB inspections. Investors may lose confidence in our reported financial information and procedures and the quality of our financial statements.

The SEC's recent administrative proceedings against five PRC-based accounting firms, including our independent registered public accounting firm, may affect our
ability to meet our reporting obligations as a reporting company.

Recently, the SEC commenced administrative proceedings under Rule 102(e) of its Rules of Practice and also under the SOX against
the Chinese affiliates of the "big four" accounting firms, including our auditor, and also against BDO China Dahua. The Rule 102(e) proceedings initiated by the SEC related to these firms'
failure to produce documents, including audit work papers, at the request of the SEC pursuant to Section 106 of the SOX, as the auditors located in the PRC are not in a position lawfully to
produce documents directly to the SEC because of restrictions under PRC law and specific directives issued by the CSRC. As the administrative proceedings are ongoing, it is impossible to determine
their outcome or the consequences thereof to us. The issues raised by the proceedings are not specific to our auditor, or to us, but affect equally all audit firms based in China and all China-based
businesses with securities listed in the United States. However, if the administrative judge were to find in favor of the SEC under the proceeding and depending upon the remedies sought by the
SEC, these audit firms could be barred from practicing before the SEC. As a result, listed companies in the United States with major PRC operations may find it difficult or impossible to retain
auditors in respect of their operations in the PRC, which may result in their delisting. Moreover, any negative news about the proceedings against these audit firms may erode investor confidence in
China-based, United States listed companies and the market price of our ADSs may be adversely affected.

PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds from our offshore credit facility
with East West Bank to make loans or additional capital contributions to our PRC subsidiary and affiliated consolidated entities.

In utilizing the proceeds from our revolving credit facility with East West Bank, we may make loans to our PRC subsidiary and
affiliated consolidated entities, or we may make additional capital contributions to our PRC subsidiary. Any loans to our subsidiary or affiliated
consolidated entities in China are subject to PRC regulations, including registration and approval requirements. For example, loans by us to our affiliated consolidated entities must be approved by
the relevant government authorities and registered with the State Administration of Foreign Exchange, or SAFE, or its local counterpart.

Capital
contributions to our PRC subsidiary must be approved by the Ministry of Commerce or its local counterpart. Because our affiliated consolidated entities are domestic PRC
enterprises, we are not likely to finance their activities by means of capital contributions due to regulatory issues relating to foreign investment in domestic PRC enterprises, as well as the
licensing and other regulatory issues.

We
cannot assure you that we can obtain the required government registrations or approvals on a timely basis, if at all, with respect to future loans or capital contributions by us to
our PRC subsidiary or any of the affiliated consolidated entities. If we fail to receive such registrations or approvals, our ability to use the proceeds from our offshore credit facility with East
West Bank and to fund our operations in China would be negatively affected, which would adversely and materially affect our liquidity and our ability to expand our business.

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PRC regulations relating to offshore investment activities by PRC residents may increase our administrative burden and restrict our overseas and cross-border investment
activity. If our shareholders 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.

SAFE issued a public notice in October 2005, or the SAFE notice, and several implementation rules requiring PRC residents to
register with the competent local SAFE branch in connection with establishing or controlling any company outside of China for the purpose of capital financing with assets or equities of PRC companies,
referred to in the notice as an "offshore special purpose company." The SAFE notice and its implementation rules further requires amendment to the registration in the event of any significant changes
with respect to the offshore special purpose company, including an initial public offering by such company. With respect to any of such signficiant changes, we are also obligated to coordinate with
the shareholders in respect of their SAFE registration amendments. Our shareholders who are PRC residents, Mr. Dong Yu, Mr. Hai Yu and Mr. Zhong Jiang have registered with the
local SAFE branch for the foreign exchange registrations of overseas investments and have amended such registrations to reflect some developments of our company and our PRC subsidiary, including the
initial public offering of our ADSs. Some of our shareholders who are PRC residents are also required to amend their registration to reflect the developments of our company and our PRC subsidiary
since our initial public offering. However, we cannot ensure that our shareholders will always amend their registrations as required.We may not be fully informed of the identities of all of our
beneficial owners who are PRC residents, and we do not have control over our
beneficial owners. Any failure of our beneficial owners to amend their SAFE registrations in a timely fashion pursuant to the SAFE notice and its implementation rules or the failure of future
beneficial owners of our company who are PRC residents to comply with the registration procedures set forth in the SAFE notice and its implementation rules may subject such beneficial owners to fines
and legal sanctions and may also limit our ability to contribute additional capital to our PRC subsidiary, limit the ability of our PRC subsidiary to distribute dividends to our company or otherwise
materially and adversely affect our business.

Any failure to comply with PRC regulations regarding the registration requirements for employee incentive plans may subject the PRC plan participants or us to fines and
other legal or administrative sanctions.

Under the applicable PRC regulations, PRC residents who participate in an employee incentive plan in an overseas publicly-listed
company are required to register with SAFE and complete certain other procedures. These participants should retain a PRC agent, which can be a subsidiary of the overseas listed company in China or
other qualified institution selected by such PRC subsidiary to handle various foreign exchange matters associated with these plans. The PRC agents should, on behalf of the PRC residents, apply
annually to SAFE or its competent local branches for a quota for the conversion and/or payment of foreign currencies in connection with the PRC residents' participation in the employee stock incentive
plan. We and our PRC resident employees who participate in an employee stock incentive plan are subject to these regulations. Our 2010 share incentive plan has been registered with the local authority
of SAFE. However, we cannot assure you that the the holders of options issued by our company can succesfully amend the registration with SAFE in full compliance with the relevant PRC rules and
regulations. If we or our PRC optionees fail to comply with these regulations, we or our PRC optionees may be subject to fines and other legal or administrative sanctions. See "Item 4.
Information on the CompanyB. Business OverviewRegulations of Our IndustryRegulations on Employee Stock Option Granted by Offshore Listed Companies."

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The approval of the China Securities Regulatory Commission, or the CSRC, may have been required in connection with our initial public offering. Our failure to obtain this
approval, if required, could have a material adverse effect on our business, results of operations, reputation and trading price of our ADSs.

According to the 2006 M&A Rules, an offshore special purpose vehicle, or SPV, refers to an overseas company controlled directly or
indirectly by domestic companies or individuals for purposes of overseas listing of equity interests in domestic companies (defined as
enterprises in the PRC other than foreign-invested enterprises). If an SPV purchases, for the purpose of overseas listing, the equity interests of any PRC company that are held by PRC companies or
individuals controlling such SPV, then the overseas listing by the SPV must be approved by the CSRC. However, the applicability of the 2006 M&A Rules with respect to CSRC approval is unclear. The CSRC
currently has not issued any definitive rule concerning whether offerings like our initial public offering in December 2010 are subject to the 2006 M&A Rules.

Our
PRC counsel, Han Kun Law Offices, had advised us at the time of our initial public offering that the 2006 M&A Rules do not require that we obtain prior CSRC approval for the listing
and trading of our ADSs on the NASDAQ, given that:



However,
if the CSRC subsequently determines that its prior approval is required, we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory agencies. These
regulatory agencies may impose fines and penalties on our operations, limit our operating privileges, delay or restrict our sending the proceeds from our initial public offering into China, or take
other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ADSs.

We
cannot predict when the CSRC may promulgate additional rules or other guidance, if at all. Implementing rules or guidance, to the extent issued, may fail to resolve current
ambiguities under the 2006 M&A Rules. Uncertainties or negative publicity regarding the 2006 M&A Rules could have a material adverse effect on the trading price of our ADSs.

PRC laws and regulations establish more complex procedures for some acquisitions of PRC companies by foreign investors, which could make it more difficult for us to pursue
growth through acquisitions in China.

PRC laws and regulations, such as the 2006 M&A Rules, the Anti-Monopoly Law and the national security review rules issued
by the PRC governmental authorities in 2011, or the Security Review Rules, have established additional procedures and requirements that make or are expected to make merger and acquisition activities
in China by foreign investors more time-consuming and complex. Such procedures and requirements include, for example, requirements in some instances that the Ministry of Commerce of the
PRC, or MOFCOM, be notified in advance of any concentrations of undertakings, if certain thresholds are triggered, or that the approval from the MOFCOM be obtained in circumstances where overseas
companies established or controlled by PRC enterprises or residents acquire affiliated

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domestic
companies. The Security Review Rules further provide that acquisitions by foreign investors of domestic companies engaged in military-related or certain other industries that are crucial to
national security shall be subject to prior security review. The Security Review Rules stipulate that the principle of substance over form should be applied in determining whether a specific merger or
acquisition of a domestic enterprise by foreign investors is subject to security review by MOFCOM, and foreign investors are prohibited from bypassing the security review requirement by structuring
transactions through proxies, trusts, indirect investments, leases, loans, control through contractual arrangements or offshore transactions. If the business of any target company that we plan to
acquire falls within the ambit of security review, we may not be able to successfully acquire such company either by equity or asset acquisition, capital contribution or through any contractual
arrangement. We may grow our business in part by acquiring other companies operating in our industry. Complying with the requirements of the relevant regulations to complete such transactions could be
time-consuming, and any required approval processes, including approval from the MOFCOM, may delay or inhibit our ability to complete such transactions, which could affect our ability to
expand our business or maintain our market share.

Governmental control of currency conversion may affect the value of your investment and limit our foreign exchange transactions, including dividend payments on
our ADSs.

The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance
of foreign currency out of China. We receive substantially all of our revenues in Renminbi. Under our current corporate structure, our income is primarily derived from dividend payments from our PRC
subsidiary. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiary to remit sufficient foreign
currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency-denominated obligations. Under existing PRC foreign exchange regulations, payments of current account
items, including profit distributions, interest payments and expenditures from trade related transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain
procedural requirements. However, approval from SAFE or its local branch is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as
the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access to foreign currencies for current account transactions in the future. If the
foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our shareholders,
including holders of our ADSs.

Fluctuations in exchange rates of the Renminbi could materially affect our reported results of operations.

The exchange rates between the Renminbi and the U.S. dollar, the Euro and other foreign currencies is affected by, among other
things, changes in China's political and economic conditions. In July 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar, and the
Renminbi was permitted to fluctuate within a band against a basket of certain foreign currencies. As a result, the Renminbi appreciated more than 20% against the U.S. dollar over the following
three years. However, the People's Bank of China regularly intervenes in the foreign exchange market to limit fluctuations in Renminbi exchange rates and achieve policy goals. For almost two years
after July 2008, the Renminbi traded within a very narrow range against the U.S. dollar, remaining within 1% of its July 2008 high. As a consequence, the Renminbi fluctuated
significantly during that period against other freely traded currencies, in tandem with the U.S. dollar. In June 2010, the PRC government announced that it would increase the exchange
rate flexibility of the Renminbi, and in April 2013, a deputy governor of the People's Bank of China was reported to have stated that the exchange rate fluctuation band would be widened soon.
However, it remains unclear when this

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flexibility
may be implemented. In 2012, the RMB appreciated 0.25% against the U.S. dollar. There remains significant international pressure on the PRC government to adopt a more flexible
currency policy, which could result in a further and more significant appreciation of the Renminbi against the U.S. dollar.

As
we may rely on dividends and other fees paid to us by our subsidiary and affiliated consolidated entities in China, any significant revaluation of the Renminbi may materially and
adversely affect our cash flows, revenue, earnings and financial position, and the value of, and any dividends payable on, our ADSs in U.S. dollars. To the extent that we need to convert
U.S. dollars we received from our initial
public offering into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion.
Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or ADSs or for other business purposes, appreciation
of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us. In addition, since our functional and reporting currency is the
U.S. dollar while the functional currency of our subsidiary and affiliated consolidated entities in China is Renminbi, appreciation or depreciation in the value of the Renminbi relative to the
U.S. dollar would have a positive or negative effect on our reported financial results, which may not reflect any underlying change in our business, financial condition and results
of operations.

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

The EIT Law also provides that enterprises established outside of China whose "de facto management bodies" are located in China are
considered "resident enterprises" and are generally subject to the uniform 25% enterprise income tax rate as to their worldwide income as well as PRC enterprise income tax reporting obligations. Under
the implementation regulations for the EIT Law issued by the PRC State Council, "de facto management body" is defined as a body that has material and overall management and control over the
manufacturing and business operations, personnel and human resources, finances and treasury, and acquisition and disposition of properties and other assets of an enterprise. Although substantially all
of our operational management is currently based in the PRC, it is unclear whether PRC tax authorities would require (or permit) us to be treated as a PRC resident enterprise. If we are treated
as a resident enterprise for PRC tax purposes, we will be subject to PRC tax on our worldwide income at the 25% uniform tax rate, which could have an impact on our effective tax rate and an adverse
effect on our net income and results of operations, as well as PRC enterprise income tax reporting obligations.

Dividends payable by us to our foreign investors and gain on the sale of our ADSs or ordinary shares may become subject to taxes under PRC tax laws.

Under the EIT Law and implementation regulations issued by the State Council, PRC withholding tax at the rate of 10% is applicable to
dividends payable to investors that are "non-resident enterprises," which do not have an establishment or place of business in the PRC, or which have such establishment or place of
business but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends have their sources within the PRC. Similarly, any gain realized
on the transfer of ADSs or shares by such investors is also subject to 10% PRC income tax if such gain is regarded as income derived from sources within the PRC. The implementation regulations of the
EIT Law set forth that, (i) if the enterprise that distributes dividends is domiciled in the PRC, or (ii) if gains are realized from transferring equity interest of enterprises domiciled
in the PRC, then such dividends or capital gains are treated as China-sourced income. It is not clear how "domicile" may be interpreted under the EIT Law, and it may be interpreted as the

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jurisdiction
where the enterprise is a tax resident. Therefore, if we are considered a PRC "resident enterprise," the dividends we pay with respect to our ordinary shares or ADSs, or the gain you may
realize from the transfer of our ordinary shares or ADSs, may be treated as income derived from sources within the PRC and be subject to PRC withholding tax at a rate of 10%. Furthermore, it is
unclear in these circumstances whether holders of our ordinary shares or ADSs would be able to claim the benefit of income tax treaties entered into between China and other countries or regions. If we
are required under the EIT Law to withhold PRC income tax on dividends payable to our non-PRC investors that are "non-resident enterprises," or if you are required to pay PRC
income tax on the transfer of our ordinary shares or ADSs, the value of your investment in our ordinary shares or ADSs may be materially and adversely affected.

Furthermore,
if we are considered a "resident enterprise" and relevant PRC tax authorities consider dividends we pay with respect to our ADSs or ordinary shares and the gains realized
from the transfer of our ADSs or ordinary shares to be income derived from sources within the PRC, such gains earned by non-resident individuals may be subject to PRC withholding tax at a
rate of 20%. See "Item 4. Information of the CompanyB. Business OverviewRegulations of Our IndustryRegulations Regarding the Enterprise Income Tax and
Dividend Withholding Tax." If we are required under PRC law to withhold PRC income tax on dividends payable to our non-PRC investors that are non-resident individuals or if you
are required to pay PRC income tax on the transfer of our ordinary shares or ADSs, the value of your investment in our ordinary shares or ADSs may be materially and adversely affected.

We may be required to register our operating offices outside of our residence addresses as branch companies under PRC law.

Under PRC law, a company setting up premises outside its residence address for business operations must register such operating offices
with the relevant local administration for industry and commerce at the place where such premises are located as branch companies and shall obtain business licenses for such branches. Our PRC
subsidiary and certain affiliated consolidated entities and their subsidiaries have operations at locations outside of their respective residence addresses. If the PRC regulatory authorities determine
that we are in violation of relevant laws and regulations, we may be subject to relevant penalties, including fines, confiscation of income, and suspension of operation. If we are subject to these
penalties, our business, results of operations, financial condition and prospects could be materially and adversely affected.

Our quarterly revenues and operating results may fluctuate, which makes our results of operations difficult to predict and may cause our quarterly results of operations to
fall short of expectations.

Our quarterly revenues and operating results have fluctuated in the past and may continue to fluctuate depending upon a number of
factors, many of which are out of our control. For these reasons, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on
our past results as an indication of our future performance. Our quarterly and annual net revenues and costs and expenses as a percentage of our net revenues may be significantly different from our
historical or projected rates. Our operating results in future quarters may fall below expectations. Any of these events could cause the price of our ADSs to fall. Other factors that may affect our
financial results include, among others:



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Our
operating results tend to be seasonal, such as due to holidays and the summer release season when movie theater attendance has traditionally been highest. In addition, consumer
spending on discretionary items, including entertainment, can be affected by overall economic conditions as well as consumers' budgeting and buying patterns.

Recent press reports concerning possible increased scrutiny by Chinese authorities of the variable interest entity, or VIE, structure used by us and various other Chinese
companies publicly-traded in the United States appear to have created concern among investors and caused the price of our common stock to drop, and such reports may have such an effect in
the future.

We operate a VIE structure in which substantially all of our operations in China are conducted by our affiliated consolidated entities,
in which we do not own any equity interest, through our contractual arrangements. In the recent past, various prominent Western news outlets reported that the PRC Ministry of Commerce and the China
Securities Regulatory Commission, among other Chinese regulatory authorities, may be considering increased scrutiny or enhanced regulation of Chinese companies that use VIE structures to conduct
certain businesses in which foreign investment is prohibited or restricted under PRC law, including film and entertainment businesses in which we are
engaged. Some of such news reports have also sought to draw a connection between recent widely reported accounting issues at certain Chinese companies and the use of VIE structures. Such news reports
appear to have had the effect of causing significant drops in the market prices of the shares of several Chinese companies, including us, that are publicly-traded in the United States. We
believe even if any such Chinese regulatory authorities were to increase scrutiny of VIE structures or adopt regulations specifically governing their use, the possibility is remote that any such
scrutiny would have a material adverse impact on us or cause us to change our existing operational structure in any materially adverse way. However, it is possible that there will be such increased
scrutiny or enhanced regulation in the future. In addition, while we are not aware of any causal connection between the reported accounting scandals and the use of VIE structures, it is possible that
investors in our common stock will believe that such a connection exists. Any of such circumstances could lead to further loss of investor confidence in Chinese companies such as ours and cause
fluctuations in the market prices of our common stock and, if such prices were to drop sharply, could subject us to shareholder litigation, which could cause the price for our shares to
drop further.

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Risks Relating to our ADSs

The market price for our ADSs has experienced volatility since our ADSs began trading on NASDAQ and may be subject to fluctuations in the future. Any such volatility could
result in a loss to you.

The trading price of our ADSs has been and may continue to be subject to wide fluctuations. Our ADSs were first traded on the NASDAQ
under the symbol "BONA" on December 9, 2010. During the period from December 9, 2010 until April 24, 2013, the trading prices of our ADSs ranged from US$3.50 to US$8.50 per ADS
and the closing sale price on April 24, 2013 was US$4.01 per ADS.

The
trading price for our ADSs may continue to be volatile and subject to wide fluctuations in response to various factors, including but not
limited to:



We
cannot assure you that the price of our ADSs will not decline.

Future equity issuances, substantial future sales or perceived sales of our equity securities could cause the price of our equity securities to decline.

Future equity issuances, sales of our equity securities or the perception that these sales could occur, could cause the market price of
our equity securities to decline. We cannot assure you that our substantial shareholders will not dispose of the equity securities held by them or
that we will not issue equity securities in the future. We cannot predict the effect, if any, that any future sales of equity securities by our substantial shareholders, or the availability of equity
securities for sale by our substantial shareholders, or the issuance of equity securities by our company may have on the market price of our equity securities. Sales or issuance of substantial amounts
of equity securities by the substantial shareholders or us, or the market perception that such sales or issuance may occur, could materially and adversely affect the prevailing market price of
our ADSs.

As
of April 15, 2013, we had 30,402,346 ordinary shares issued and outstanding, including 9,663,843 ordinary shares represented by
19,327,686 ADSs. All ADSs sold in our initial public offering are freely transferable without restriction or additional registration under the Securities Act of 1933 of the
United States, as amended, or the Securities Act. In addition, ordinary shares that certain option holders will receive when they exercise their share options will not be available for sale
until the expiration of any relevant lock-up periods, subject to volume and other restrictions that may be applicable under Rule 144 and Rule 701 under the Securities Act. We
cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the
market price of our ADSs.

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In
addition, certain of our shareholders or their transferees and assignees will have the right to cause us to register the sale of their shares with the Securities and Exchange
Commission of the United States under the Securities Act upon the occurrence of certain circumstances. See "Item 7. Major Shareholders and Related Party TransactionsPrivate
Placements." Registration of these shares under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness
of the registration. Sales of these registered shares in the public market could cause the price of our ADSs to decline.

Anti-takeover provisions in our memorandum and articles of association may discourage a third party from offering to acquire our company, which could limit your
opportunity to sell your ADSs at a premium.

Our second amended and restated memorandum and articles of association which became effective upon completion of our initial public
offering includes provisions that could limit the ability of others to acquire control of us or modify our structure. These provisions could have the effect of depriving our shareholders of an
opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of us in a tender offer or similar transaction.

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

You may experience dilution because of the issuance of shares pursuant to the awards or options granted under the share incentive plans.

We have granted share options to eligible participants under the 2009 share incentive plan and 2010 share incentive plan, including
employees and non-employees of our Company and our subsidiaries. Further details of the share incentive plans are summarized in "Item 6. Directors, Senior Management and
EmployeesB. Compensation of Directors, Supervisors and Executive OfficersShare Incentive Plans". The granting of shares under the share incentive plans and the exercise of
share options by the eligible grantees would result in an increase in the number of shares in issue, and may result in dilution to the percentage of ownership of our shareholders, and the earnings per
ordinary share or ADS and the net asset value per ordinary share or ADS.

We may be classified as a passive foreign investment company, or PFIC, which could result in adverse United States federal income tax consequences to
U.S. investors.

Based upon the past and projected composition of our income and valuation of our assets, including any goodwill, we do not believe we
were a passive foreign investment company, or PFIC, for our taxable year ending December 31, 2012 and we do not expect to become one for the current year or in the future, although there can be
no assurance in this regard. If, however, we were a PFIC, such characterization could result in adverse United States federal income tax consequences to you if you are a U.S. investor.
For example, if we are a PFIC, our U.S. investors may become subject to increased tax liabilities under United States federal income tax laws and regulations and will become subject to
burdensome reporting requirements. The determination of whether or not we are a PFIC is made on an annual basis and will depend on the composition of our income and assets from time to time.
Specifically, we will be classified as a PFIC for United States federal income tax purposes if either:

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(i) 75%
or more of our gross income in a taxable year is passive income, or (ii) the average percentage of our assets by value in a taxable year which produce or are held for the
production of passive income (which includes cash) is at least 50%. The calculation of the value of our assets will be based, in part, on the then market value of our ADSs, which is subject to change.
We cannot assure you that we were not a PFIC for 2012 or that we will not be a PFIC for this or any future taxable year. Moreover, the determination of our PFIC status is based on an annual
determination that cannot be made until the close of a taxable year and involves extensive factual investigation. This investigation includes ascertaining the fair market value of all of our assets on
a quarterly basis and the character of each item of income we earn, which cannot be completed until the close of a taxable year, and therefore, our U.S. counsel expresses no opinion with
respect to our PFIC status. See "Item 10. Additional InformationE. TaxationUnited States Federal Income Tax ConsequencesPassive Foreign Investment
Company."

We are a Cayman Islands company and, because judicial precedent regarding the rights of shareholders is more limited under Cayman Islands law than under U.S. law, you
may have less protection of your shareholder rights than you would under U.S. law.

Our corporate affairs are governed by our memorandum and articles of association as amended and restated from time to time, the Cayman
Islands Companies Law (as amended) and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary
responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from
comparatively limited judicial precedent in the Cayman Islands as well as that from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of
our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions
in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. In addition, some U.S. states, such as Delaware, have
more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. Furthermore, Cayman Islands companies may not have standing to initiate a shareholder derivative action
in a federal court of the United States. As a result, public shareholders may have more difficulties in protecting their interests in the face of actions taken by management, members of the
board of directors or controlling shareholders than they would as shareholders of a Delaware company.

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

We are a Cayman Islands company and substantially all of our assets are located outside of the United States. Substantially all
of our current operations are conducted in the
PRC. In addition, most of our directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons are located
outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons. It may also be difficult for you to enforce
in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors. Moreover,
there is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of United States courts against us or such persons predicated upon the civil
liability provisions of the securities laws of the United States or any state. In addition, there is uncertainty as to whether such Cayman Islands or PRC courts would be competent to hear
original actions brought in the Cayman Islands or the PRC against us or such persons predicated upon the securities laws of the United States or any state.

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Holders of ADSs must act through the depositary to exercise their rights as shareholders of our company.

Holders of our ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the
underlying ordinary shares in accordance with the provisions of the deposit agreement for the ADSs. Under our second amended and restated memorandum and articles of association, the minimum notice
period required to convene a general meeting is seven days. When a general meeting is convened, holders of our ADSs may not receive sufficient notice of a shareholders' meeting to permit them to
withdraw their ordinary shares to allow them to cast their vote with respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders
of our ADSs or carry out their voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of our ADSs in a timely manner,
but we cannot assure them that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, the depositary and its agents will not be
responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, holders of our ADSs may not be able to
exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested. In addition, in the capacity as an ADS holder, they will not be able to call a shareholders'
meeting.

The depositary for our ADSs will give us a discretionary proxy to vote our ordinary shares underlying ADSs if a holder of our ADSs does not vote at shareholders' meetings,
except in limited circumstances, which could adversely affect their interests.

Under the deposit agreement for the ADSs, the depositary will give us a discretionary proxy to vote our ordinary shares underlying ADSs
at shareholders' meetings if a holder of our ADSs does not vote, unless:



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

Holders of our ADSs may be subject to limitations on transfers of ADSs.

ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to
time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the
books of the depositary are
closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement,
or for any other reason.

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The rights of holders of our ADSs to participate in any future rights offerings may be limited, which may cause dilution to their holdings and they may not receive cash
dividends if it is impractical to make them available to them.

We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make
rights available to holders of our ADSs in the United States unless we register the rights and the securities to which the rights relate under the Securities Act or an exemption from the
registration requirements is available. Also, under the deposit agreement, the depositary will not make rights available to holders of our ADSs unless either both the rights and any related securities
are registered under the Securities Act, or the distribution of them to ADS holders is exempted from registration under the Securities Act. We are under no obligation to file a registration
statement with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective. Moreover, we may not be able to establish an exemption from
registration under the Securities Act. Accordingly, holders of our ADSs may be unable to participate in our rights offerings and may experience dilution in their holdings.

In
addition, the depositary has agreed to pay to holders of our ADSs the cash dividends or other distributions it or the custodian receives on our ordinary shares or other deposited
securities after deducting its fees and expenses. Holders of our ADSs will receive these distributions in proportion to the number of ordinary shares their ADSs represent. However, the depositary may,
at its discretion, decide that it is inequitable or impractical to make a distribution available to any holders of ADSs. For example, the depositary may determine that it is not practicable to
distribute certain property through the mail, or that the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may decide not to distribute such
property and holders of our ADSs will not receive any such distribution.

Item 4.    Information on the Company



Our affiliated consolidated entity, Beijing Baichuan Film Distribution Co., Ltd., a PRC company whose primary business was the distribution of films
and related activities, was established in 2003. To facilitate investments by financial investors and as part of the reorganization we subsequently conducted in 2007, we incorporated Bona
International Film Group Limited in the British Virgin Islands on December 13, 2006, which became the parent company of Bona New World, our wholly owned subsidiary in the PRC. On
July 8, 2010, we incorporated Bona Film Group Limited in the Cayman Islands as a listing vehicle for our initial public offering. Bona Film Group Limited became our ultimate holding company
when it issued one preferred or ordinary share to existing shareholders of Bona International Film Group Limited on November 10, 2010, in exchange for every 16 of the respective preferred or
ordinary shares that these shareholders held in Bona International Film Group Limited.

We
currently conduct substantially all of our operations through our subsidiaries in the PRC and Hong Kong and our affiliated consolidated entities and their subsidiaries in
the PRC.

We
operate our businesses in China through our affiliated consolidated entities due to PRC regulations that prohibit or restrict foreign investments in the film, television program and
talent agency industries and impose qualifications for foreign investors in the advertising industry. We have three affiliated consolidated entities in China that operate our businesses in China, each
of which is an entity duly formed under PRC law. All of the outstanding equity interests in our affiliated consolidated entities are held by Mr. Dong Yu, his brother Mr. Hai Yu and
another affiliated consolidated entity, with the exception of Beijing Bona Advertising Co., Ltd., 3% of the outstanding equity interest of which is held by Mr. Zhong Jiang, our
independent director.

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In
July 2007, Bona New World, our PRC subsidiary, entered into a series of contractual arrangements with each of the affiliated consolidated entities and their respective
shareholders (other than with Poly Film Investment Co., Ltd., an unaffiliated third party that had then held 10% of the equity interest in Beijing Baichuan Film
Distribution Co., Ltd.) to govern our relationships with the affiliated consolidated entities. These contractual arrangements allow us to effectively control the affiliated consolidated
entities and to derive substantially all of the economic benefits from them. See "C. Organizational StructureContractual Arrangements with Our Affiliated Consolidated
Entities" below. Accordingly, we treat these companies as variable interest entities and have consolidated their historical financial results in our financial statements in accordance with
U.S. GAAP.

In
April 2010, we entered into a series of transactions to acquire Beijing Bona Cineplex and Beijing Bona Youtang, two companies focused on the movie theater business in the PRC.
These companies were beneficially owned by Mr. Dong Yu, our chairman and chief executive officer, and his immediate family member. The total consideration comprised 5,810,320 newly
issued ordinary shares and the settlement of US$5.3 million that Mr. Dong Yu owed to us.

On
December 14, 2010, we completed our initial public offering, in which we offered and sold 5,870,000 ordinary shares in the form of ADSs, raising US$92.8 million
in proceeds before expenses to us.

In
July 2011, we entered a series of agreements to acquire Alpha Speed Limited, a British Virgin Islands company and Bona Starlight, a PRC company which held five subsidiaries at
the time of the acquisition primarily focused on the movie theater business in the PRC. Prior to the acquisitions, Alpha Speed Limited was owned 51% by Skillgreat Limited, which is wholly owned by
Mr. Dong Yu, and Bona Starlight was also owned 51% by Mr. Dong Yu. We acquired Alpha Speed Limited and Bona Starlight with total cash consideration of US$30.9 million, of which
US$3.1 million was settled as an offset against the amount that our Company was owed by Mr. Dong Yu, and the remaining amount of which had been fully paid as of December 31, 2012.
After the acquisition, we developed and opened nine new movie theaters, Beijing Bona Jingpin Cineplex Management Co., Ltd., Beijing Bona Tianshi Cineplex
Management Co., Ltd., Dongguan Bona Dongsheng Cineplex Investment Co., Ltd., Tianjin Nongken Bona Film Investment Co., Ltd., Fenghua Bona Cineplex
Management Co., Ltd., Shenzhen Bona Shidai Cinema Investment Management Co., Ltd. Longgang Branch, Suzhou Bona Lifeng Cineplex Management Co., Ltd., Shanghai
Bona Zhongyuan Management and Consulting Co., Ltd. and Shijiazhuang Bona Cinema Investment Management Co., Ltd. Hefei Branch.

In
November 2011, we entered into an agreement to acquire up to 500,000 Series A preferred shares of China Lion Entertainment Limited, representing 20% of the
company's total issued shares, for a total consideration of US$1.7 million. As of the date of this annual report on Form 20-F, we have purchased
352,941 Series A preferred shares of China Lion Entertainment Limited for an aggregate consideration of US$1.2 million. The purchase of this strategic equity stake complements our
international distribution capabilities in U.S. and Canada.

On
May 13, 2012, Mr. Dong Yu, Skillgreat Limited, our company and NCIH, Inc. entered into a share purchase agreement, or the NCIH share purchase agreement, pursuant
to which Skillgreat Limited sold to NCIH, Inc. a total of 6,050,067 ordinary shares at a purchase price of US$11.40 per ordinary share for an aggregate of approximately
US$69.0 million. The sale of the ordinary shares was consummated through four closings from May 21, 2012 to May 25, 2012. In connection with the NCIH share purchase agreement, on
May 21, 2012, Mr. Dong Yu, Skillgreat Limited, our company and NCIH, Inc. entered into an investor rights agreement, which is further described in "Item 7. Major
Shareholders and Related Party TransactionsB. Related Party TransactionsAgreements with Affiliates of News CorporationInvestor Rights Agreement with NCIH." As of
April 15, 2013, NCIH, Inc. owned approximately 19.90% of our outstanding share capital.

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In
order to remain a major shareholder of our company, Skillgreat Limited entered into four separate securities transfer agreements, each dated as of May 11, 2012, with Sequoia
Funds, SIG China Investments One, Ltd., Matrix Partners China Funds and Eagle Power Group Limited (each an existing security holder of our company), or the selling shareholders, respectively,
pursuant to which Skillgreat Limited purchased from the selling shareholders an aggregate of 3,550,067 ordinary shares for consideration of US$11.40 per ordinary share, or approximately
US$40.5 million in total.

Our
principal executive offices are located at 11/F, Guan Hu Garden 3, 105 Yao Jia Yuan Road, Chaoyang District, Beijing 100025, People's Republic of China, and our phone number
is +(86) 10 5928 3663. Effective as of May 1, 2013, our principal executive offices will be located at 18/F, Tower 1, U-town Office Building,
No. 1 San Feng Bei Li, Chaoyang District, Beijing 100020, People's Republic of China, and our phone number will change to +(86) 10 5631 0700.



Overview

We are a leading film distributor in China. A small number of our films, typically ones that are released during the peak seasons,
account for a substantial portion of our net revenue each year. Our remaining films generate lower net revenue but generally have lower costs for the acquisition of distribution rights or production.
Our top five films each year in 2010, 2011 and 2012 accounted for 53.5%, 58.3% and 37.4% of our net revenue in those respective years. From our inception in November 2003 to December 31,
2012, we distributed 171 films (including 47 films internationally), and we generally distribute between 16 and 20 films theatrically each year on average.

We
believe that our brand name and reputation in the film industry, our experience in film distribution and marketing, our collaborations with other domestic and international film
industry players, and our management's access to key industry participants enable us to identify and secure distribution rights for promising film projects.

We
distribute films through virtually all of the theater circuits in China. We are able to gain distribution rights to a wider selection of films in China through joint distribution
arrangements with industry participants such as the state-owned China Film Group Corporation. We have also distributed 35 Chinese films (including Hong Kong films) internationally since the
beginning of 2009, and we generated US$5.7 million, US$10.7 million and US$10.7 million in net revenue from international distribution of Chinese films (including Hong Kong films)
in 2010, 2011 and 2012, respectively. Although our international film distribution business has not historically made a significant contribution to our results of operations, it has accounted for an
increasing proportion of our net revenue. We believe that we are well positioned to take advantage of the increasing popularity of Chinese films abroad, given our track record of international
distribution, the distribution arrangements we have established with film distributors in markets including Korea, Japan and Southeast Asia, as well as a letter of intent for film
co-development, co-production and co-distribution we entered into with Fox International Productions (Greater China) Limited in October 2012 and a
co-production term sheet we entered into with Universal Studios and Working Title Films in the fourth quarter 2012. We have also expanded into non-theatrical distribution
channels, including home video products, digital distribution and television. As films continue to generate an increasing proportion of our revenue from non-theatrical sources, we expect
to continue to develop new and existing relationships to maximize the value of our distribution business and our film portfolio.

In
addition to our film distribution and film and television production operations, we owned and operated 20 movie theaters in commercial districts and residential areas in
several major cities in China as of December 31, 2012. Our movie theaters are affiliated with leading theater circuits in China and provide our audiences with modern facilities. Theater
circuits are mandated by PRC laws and regulations to negotiate the terms of arrangements for the exhibition of films and provide film prints to

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movie
theaters. Consistent with industry practice in China, these theater circuits charge an industry standard rate for their services, and we as film distributors are responsible for making and
delivering film prints of both digital and traditional films to them. We began operating our movie theater business in 2010 and we increased the number of movie theaters we operate from six as of
April 30, 2010 to 20 as of December 31, 2012. Our movie theater business generated net income of US$0.4 million from April 23 to December 31, 2010, net loss
of US$0.2 million for 2011 and net loss of US$1.6 million for 2012. Our talent agency business leverages our relationships in the film and entertainment industry and gives us additional
insight into upcoming film projects, while providing us with another source of promising film opportunities. We leverage our films and movie theater operations to attract advertisers. We also believe
that our movie theaters under the "Bona" brand, our ability to sell advertising in the films we exhibit and our representation of artists through our talent agency add to the strength of our business
and assist in building a brand which we believe is synonymous with high quality films in China.

We
generated net revenue of US$52.8 million, US$126.2 million and US$142.3 million in 2010, 2011 and 2012, respectively. We had a net loss of US$4.2 million
in 2010, net income of US$14.6 million in 2011 and net loss of US$1.6 million in 2012. Our net loss in 2010 included a loss of US$14.5 million from changes in fair value of
derivatives. Excluding share-based compensation, changes in fair value of warrants and changes in fair value of derivatives, our non-GAAP net income for 2010, 2011 and 2012, was
US$10.8 million, US$18.2 million and US$3.2 million, respectively. For a reconciliation of our non-GAAP net income to the U.S. GAAP net income, see
footnote (1) to our summary consolidated statement of operations data included in "Item 3. Key InformationA. Selected Financial Data.". The redemption terms of our
preferred shares were amended in August 2010, and as a result, we have ceased to recognize derivative liabilities and change in fair value of derivatives from the date of such amendment.

Film Distribution

Our core business is the distribution of films produced in China and Hong Kong to theater circuits in China. From our inception in
November 2003 to December 31, 2012, we distributed 171 films, including 47 films internationally. The films we distributed have earned numerous industry awards, including
Hong Kong Film Awards and Golden Horse Awards, and received recognition at prominent international film festivals, including the Venice International Film Festival and the Berlin Film Festival. We
distribute (i) films produced by third-party production studios for which we have distribution rights and (ii) films we produced and in which we hold ownership interests in the
copyright. We generally distribute between 16 and 20 films theatrically per year on average. In 2012, we distributed 15 films theatrically, three of which we own all of the copyright and
four of which we own part of the copyright through our participation in the financing of the film. In 2010, 2011 and 2012, we distributed 13, 15 and 17 films, representing box receipts of
RMB450.5 million, RMB1,158.9 million and RMB686.7 million (US$108.9 million), respectively.

Our
film distribution activities primarily consist of (i) film sourcing, which includes identifying quality film projects with commercial potential and securing film distribution
rights, (ii) print and marketing, which includes coordinating the distribution of film prints to theater circuits, as well as conducting marketing and publicity campaigns to promote the films
to their target audiences, (iii) exhibition, which includes negotiating the terms of exhibitions of films in domestic and international movie theaters as well as through
non-theatrical distribution channels, and (iv) film advertising, which includes the sale of approximately three minutes advertising time immediately prior to the start of the
theatrical screening of a film, in-film product placements and cross-promotion campaigns.

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The following table lists a selection of the films we distributed since January 1, 2010, including in the case of foreign films, those of which we assisted
in marketing:

Title

Release Date

Principal Cast

Genre

Revenue
Sources

Domestic
Gross Box
Office(RMB
millions)Princess and Seven Kungfu Masters CHINESE_TEXT

March 8, 2013

Sammo Hung, Eric Tsang, Sandra Ng CHINESE_TEXT

Comedy

Copyright/Distribution


66.7The Flying Machine CHINESE_TEXT

February 2, 2013

Lang Lang, Heather Graham CHINESE_TEXT

Animation

Copyright/Distribution


0.7Bring Happiness Home CHINESE_TEXT

January 15, 2013

He Jiong, Orfila Wu, Nana Xie CHINESE_TEXT

Comedy

Distribution


153.5The Grandmasters CHINESE_TEXT

January 8, 2013

Tony Leung, Ziyi Zhang CHINESE_TEXT

Martial Arts

Participation/Distribution


287.1The Last Tycoon CHINESE_TEXT

December 18, 2012

Chow Yun-Fat, Sammo Hung CHINESE_TEXT

Drama

Copyright/Distribution


149.2The Next 11 Days CHINESE_TEXT

November 1, 2012

Yuanzheng Feng CHINESE_TEXT

Drama

Copyright/ Distribution


6.7The Cold Light of Day CHINESE_TEXT

October 12, 2012

Henry Cavill, Bruce Willis, Sigourney Weaver

Action/Thriller

Distribution


8.2The Lion Roars 2 CHINESE_TEXT

August 17, 2012

Cecilia Cheung, Shenyang Xiao CHINESE_TEXT

Action/Comedy

Copyright/Distribution


71.1Naked Weapon CHINESE_TEXT

July 13, 2012

Sammo Hung, Jennifer Tse CHINESE_TEXT

Action

Distribution


4.6Seafood CHINESE_TEXT

June 28, 2012



Animation

Distribution


2.2The Three Musketeers CHINESE_TEXT

May 15, 2012

Logan Lerman, Milla Jovovich, Orlando Bloom

Action/Adventure

Distribution


39.6Snowfall in Taipei CHINESE_TEXT

April 1, 2012

Berlin Chen, Yao Tong CHINESE_TEXT

Drama

Copyright/Distribution


1.9A Simple Life CHINESE_TEXT

March 8, 2012

Andy Lau, Deannie Yip CHINESE_TEXT

Drama

Copyright/Distribution


70.8Truth or Dare CHINESE_TEXT

February 14, 2012

Zhang Wen, Weide Huang, Pu Miao CHINESE_TEXT

Romantic Comedy

Distribution


15.3Pleasant Goat and Big Big Wolf 4 CHINESE_TEXT

January 12, 2012



Animation

Distribution


48.1The Great Magician CHINESE_TEXT

January 12, 2012

Tony Leung, Xun Zhou, Ching Wan Lau CHINESE_TEXT

Historical Drama

Copyright/Distribution


174.1Flying Swords of Dragon Gate CHINESE_TEXT

December 15, 2011

Jet Lee, Xun Zhou, Kun Chen, Lun Mei Kwai CHINESE_TEXT

3D martial Arts

Copyright/Distribution


557.4


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Title

Release Date

Principal Cast

Genre

Revenue
Sources

Domestic
Gross Box
Office(RMB
millions)The Sorcerer and the White Snake CHINESE_TEXT

September 28, 2011

Jet Lee, Shengyi Huang, Charlene Choi, Raymond Lam CHINESE_TEXT

Martial Arts

Distribution


205.2Source Code CHINESE_TEXT

August 30, 2011

Jake Gyllenhaal, Vera Farmiga, Michelle Monaghan

Action/Thriller

Distribution


69.9Overheard 2 CHINESE_TEXT

August 18, 2011

Ching Wan Lau, Louis Koo, Daniel Wu CHINESE_TEXT

Crime Thriller

Copyright/Distribution


214.0Night Market Hero CHINESE_TEXT

July 12, 2011

Lan Chin Lung CHINESE_TEXT

Comedy

Distribution


1.3Treasure Inn CHINESE_TEXT

June 28, 2011

Nicholas Tse, Nick Cheung, Charlene Choi CHINESE_TEXT

Martial Arts Comedy

Copyright/Distribution


101.1Pleasant Goat and Big Big Wolf 3 CHINESE_TEXT

January 21, 2011



Animation

Distribution


40.6A Beautiful Life CHINESE_TEXT

May 13, 2011

Ye Liu, Qi Shu CHINESE_TEXT

Drama

Copyright/Distribution


20.0What Women Want CHINESE_TEXT

February 2, 2011

Andy Lau, Gong Li, Li Yuan CHINESE_TEXT

Romantic Comedy

Copyright/Distribution


63.8The Road Less Travelled CHINESE_TEXT

December 31, 2010

Louis Koo, Karen Mok, Yi Huang CHINESE_TEXT

Drama

Copyright/Distribution


6.7Just Call Me Nobody CHINESE_TEXT

December 3, 2010

Benshan Zhao, Shenyang Xiao, Kelly Lin CHINESE_TEXT

Martial Arts Comedy

Copyright/Distribution


151.0Triple Tap CHINESE_TEXT

July 2, 2010

Louis Koo, Daniel Wu, Li Bing Bing, Charlene Choi, Chapman To, Alex Fong, Andrew Lin, Lam Suet, Michael Wong CHINESE_TEXT

Action

Copyright/Distribution


126.4Fire of Conscience CHINESE_TEXT

April 1, 2010

Leon Lai, Richie Ren CHINESE_TEXT

Action

Primary Distribution


18.4My Iz Budushchego (Russia) CHINESE_TEXT

March 5, 2010

Boris Galki, Daniil Strakhov, Yekaterina Klimova

Action/Drama

Marketing Assistance


11.4Like a Dream CHINESE_TEXT

February 2, 2010

Daniel Wu, Quan Yuan CHINESE_TEXT

Drama

Copyright/Distribution


0.8Pleasant Goat and Big Big Wolf 2 CHINESE_TEXT

January 29, 2010



Animation

Distribution


21.7


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The following table lists a selection of unreleased films in our pipeline.

Title

Director

Principal Cast

GenreChristmas Rose(1) CHINESE_TEXT

Charlie Yeung CHINESE_TEXT

Aaron Kwok, Lunmei Kwa CHINESE_TEXT

DramaTo Love Somebody(1) CHINESE_TEXT

Francis Sung CHINESE_TEXT

Blue Lan, Tong Lei CHINESE_TEXT

DramaMy Lucky Star(1) CHINESE_TEXT

Dennie Gordon

Ziyi Zhang
Leehom Wang CHINESE_TEXT

Romantic ComedyMortitian(1) CHINESE_TEXT

Cub Chin Kong-Hon CHINESE_TEXT

Beier Bao, Ruiwen Zhan CHINESE_TEXT

ThrillerKuiba II(1) CHINESE_TEXT

Chuan Wang CHINESE_TEXT

NA

AnimationUnbeatable(1) CHINESE_TEXT

Dante Lam CHINESE_TEXT

Nick Cheung, Eddie Peng CHINESE_TEXT

ActionInferno(1) CHINESE_TEXT

Oxide Pang, Danny Pang CHINESE_TEXT

Sean Lau, Louis Koo CHINESE_TEXT

3D Action ThrillerThe Cartel War(1) CHINESE_TEXT

Benny Chan CHINESE_TEXT

Sean Lau, Louis Koo CHINESE_TEXT

Police ActionThe White-Haired Witch(1) CHINESE_TEXT

Jacob Cheung CHINESE_TEXT

Bingbing Fan, Xiaoming Huang CHINESE_TEXT

Martial Arts/3DOverheard 3(2) CHINESE_TEXT

Alan Mak, Felix Chong CHINESE_TEXT

Sean Lau, Louis Koo CHINESE_TEXT

Crime ThrillerTracks in the Snowy Forest(3) CHINESE_TEXT

Tsui Hark CHINESE_TEXT

To be determined

3D Epic Drama


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Title

Director

Principal Cast

GenreFromVegas to Macau(3) CHINESE_TEXT

Wong Jing CHINESE_TEXT

To be determined

DramaMoscow Mission(3) CHINESE_TEXT

Dante Lim CHINESE_TEXT

To be determined

DramaSunspot(3) CHINESE_TEXT

Baoping Cao CHINESE_TEXT

To be determined

Drama


(1)Planned
2013 release, in production or post production(2)Tentatively
slated for 2013 release, in pre-production(3)Tentatively
planned projects


Film Sourcing

Film project identification.We identify promising film projects through a variety of sources, including collaboration with industry
players, our
management's relationships, and contacts in the film and entertainment industry. We believe that our brand name and reputation in the film industry, our experience in film distribution and marketing
in China, our collaborations with other domestic and industry players and our management's access to key industry participants enable us to identify and secure distribution rights for promising
film projects.

Distribution rights acquisition.The decision to acquire distribution rights is made collectively by our senior management, supported
by analysis
based on a variety of factors, which typically include a film's expected critical reception, marketability and potential for box office success, as well as the cost to acquire the film, the estimated
distribution and marketing expenses required to bring the film to its widest possible target audience and ancillary market potential post theatrical release.

We
seek to structure our distribution arrangements to achieve the desired balance of risk and benefits of the commercial success of a film. We may acquire distribution rights through a
variety of arrangements, including (i) buy-off distribution arrangements, in which we pay a fixed amount to producer upfront to acquire the distribution rights with no obligation to
share box office proceeds with the producer, (ii) commission-based distribution arrangements, in which we do not pay any fixed amount to the producer, but instead share a proportion of the box
office proceeds with the producer, and (iii) minimum guarantee distributions, in which we receive a higher proportion of the box office proceeds, subject to paying the producer the amount of
any shortfalls from a minimum amount.

We
typically enter into distribution agreements during the post-production stage of a film, which improves our ability to evaluate the market potential of the film, reduces
the risk of delays in the film's completion and enables us to evaluate the optimal distribution arrangement for the film. However, we may enter into distribution arrangements prior to the production
of certain films, such as big budget blockbusters or where certain high-profile actors or directors are involved, or films of which we invest in production. We generally seek to acquire
full distribution rights that cover movie theater distribution, international distribution, as well as distribution through home video products, digital distribution, television and other channels. We
generally seek arrangements where we are reimbursed by film producers for the expenses we incur in marketing and promoting their films, and agree to waive such reimbursements in limited circumstances.

In
addition to exclusive distribution arrangements, we also selectively enter into a range of joint distribution arrangements that significantly increase our exposure to high quality
films and enhance our distribution opportunities, and by which we share the risks inherent in film distribution. For example, we collaborated with Huaxia Film Distribution Co., Ltd. to
jointly distributeThe Three Musketeersin 2012.

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Print and Marketing

We coordinate the printing and distribution of film prints to theater circuits in China. We also conduct cost-effective
marketing and publicity campaigns to promote the films to their target audiences by integrating a broad spectrum of advertising media, including television, print, billboards and the Internet. As part
of our marketing work, we also organize appearances of the actors and directors of the films on television programs and at other events to promote the films.

Under
our distribution agreements, we are reimbursed by film producers for the expenses we incur in the printing, marketing and promotion of their films, and agree to waive such
reimbursements in limited circumstances. The reimbursement is done by deducting costs incurred in printing, marketing and a film from the box office receipts of the film, prior to the calculation of
our fee or of the remaining box office receipts to which we are entitled or that we share with the producers of the film.

Distribution Channels

Domestic.We generally pace the release of films we distribute to avoid scheduling conflicts with other films we have agreed to
distribute and time
the release of these films during favorable time periods, such as holiday seasons. We configure release schedules taking into account moviegoer attendance patterns and competition from other
distributors' scheduled theatrical releases. We grant exhibition rights of the films we distribute to theater circuits throughout China on a film-by-film basis. We typically
give a theater circuit the right to exhibit the film in exchange for a fixed percentage of the box office receipts they generate. Ticket prices are typically set based on the city and district where a
theater is located, the appeal and marketability of the film, and other competitive and market factors, such as its proximity to other theaters. Our agreements with the theater circuits will also
specify the period during which they may exhibit the film, which will generally depend on the box office performance of each film. Marketable films that are expected to have high box office admissions
revenue will generally have longer licensing terms compared to films with more uncertain performance potential and popularity. We have exhibition arrangements with virtually all theater circuits in
China, including Wanda, China Film Group Digital Circuits, Shanghai United, Beijing New Film and China Film South. We distributed 11, 11 and 12 domestic films (including Hong Kong films)
in 2010, 2011 and 2012, respectively.

We
have maintained good relationships with leading theater circuits, not only through our film distribution business as a supplier, but also through our movie theater business as a
customer. We believe theater circuits value their relationships with us because we offer them access to our pipeline of approximately 16 to 20 films annually on average in a variety of genres
as well as a share of revenue from our movie theaters, which in turn enhances our ability to negotiate desirable exhibition schedules and screen runs, as well as prominent positions in marketing and
publicity campaigns for our films. In addition, through our interactions with theater circuits as both a supplier and customer, we believe we gain better insight into the pipeline of competing films
to help us optimize our film release schedule accordingly.

The
number of certain foreign films that may be exhibited in China on a box office sharing basis is limited by the PRC central government to approximately 20 films per year. In
addition, there are separate quotas for films imported through the buy-off distribution method each year mainly from countries other than the United States and for 3-D
films. The PRC government agreed, in February 2012 in connection with a World Trade Organization dispute settlement, to increase the number of foreign premium format films, such as
3-D or IMAX films,
that may be imported into China by 14 films per year. Only China Film Group Film Distribution & Exhibition Corporation and Huaxia Film Distribution Co., Ltd., which are
both state owned enterprises, are currently licensed to distribute foreign films in China, but companies like ourselves can enter into marketing assistance agreements with the state-owned enterprises
to provide marketing assistance for such foreign films. Films produced in Hong Kong, Macau and Taiwan (subject to certain requirements) do not fall within the foreign film quota limitation but are
considered foreign films for purposes of government review and approval processes. We assisted in the marketing of two, one and two foreign films (excluding Hong Kong films) in 2010, 2011 and 2012,
respectively, with China Film Group Film Distribution & Exhibition

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Corporation
and Huaxia Film Distribution Co., Ltd. We are also one of the most prominent distribution partners for leading players in the Hong Kong film industry, such as Derek Yee, Tsui
Hark and Wong Jing. We believe our brand name and track record will position us to participate in foreign film distribution in China if current regulatory restrictions on who may distribute foreign
films are eased or eliminated.

Our
distribution of films in domestic theater circuits also includes exhibition through our own movie theaters. See "Movie Theater Operations" below.

International.We conduct the international distribution of films on a territory-by-territory and
film-by-film basis through cooperation with local third parties. Our international film distribution activities primarily consist of the licensing and sale of rights to
distribution for films for which we have full distribution rights as well as films we produce or in which we have a partial or full interest in the copyright. Our licensing agreements with overseas
partners, typically based on the Independent Film and Television Alliance standard form, set forth the relevant terms, including the distribution period, geographic area, licensing fees and scope of
rights, such as distribution for theatrical screening only or including other exhibition methods such as DVD and other home video products, Internet and other digital distribution,
in-flight entertainment and television.

We
distribute films internationally, primarily in regions with large Chinese speaking populations, such as Hong Kong, Singapore, Malaysia, Macau, and Taiwan, as well as in other Asian
countries such as Thailand, Indonesia, Vietnam, Korea and Japan generally through local distributors. We also arrange to distribute films that have broad box office appeal due to the involvement of
internationally known directors and actors in the United States and Europe. In November 2011, we entered into an agreement to acquire a strategic equity stake in China Lion Entertainment
Limited, which we believe will complement our film distribution capabilities in the United States and Canada. Based on our track record of distributing Chinese films internationally, we have
cultivated relationships with distributors for
foreign markets, including the CJ Group for Korea and Japan and Celestial Tiger Entertainment Limited for Southeast Asia. Our foreign distribution arrangements are on a
film-by-film basis and typically provide us with a share of the overseas revenue of our films, subject to a minimum guarantee or advances payable to us. For certain regions and
films, we may license or sell our foreign distribution rights for a share of the overseas revenue without a minimum guarantee or at fixed amount, with no share of the overseas revenue. In addition, we
may also directly distribute the films to theater circuits in Hong Kong. In recent years, we have collaborated with 133 foreign distributors, to expand our distribution reach overseas. We
categorize film distribution to Hong Kong, Macau and Taiwan as part of our international distribution operations.

Non-theatrical channels.As consumer preferences have developed and technological changes have increased the channels through which
films
may be distributed, we have expanded into non-theatrical distribution channels through our relationships with third parties. Our arrangements with non-theatrical distributors
are typically made on a film-by-film basis. For films exhibited in movie theaters, our agreements typically establish an initial theater exhibition period during which no
distribution other than through movie theaters may be made. Following the expiration of the theater exhibition period, we commence distribution of films through other channels. We also distribute
films we produce through non-theatrical channels on a similar schedule.

Our
primary non-theatrical distribution channels, in order of general timing of release, consist of:



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As
films continue to generate an increasing proportion of revenue from sources other than box office sales, we expect to continue to develop new and existing relationships to maximize
the value of our distribution rights.

Film Advertising

The theatrical screening of a film generally includes over two minutes of advertising immediately prior to the start of the film. As
the film's distributor, we are typically entitled, subject to the consents of the copyright owners, to sell approximately three minutes of the advertising time closest to the start of the film, while
the remaining advertising time is sold by the movie theater operator (including by the movie theaters we operate). We generally sell time slots using a scaled pricing system with progressively more
expensive slots, since audience attendance and attention tend to increase as the start of the film approaches. The number of advertising slots that can be shown will depend on the expected popularity
of the film, the film screening schedule at the theater and the consent of the copyright owner. Popular and widely publicized films account for a disproportionate amount of advertising revenue, and
there is considerably less demand for advertising time for other films.

Our
distribution rights may entitle us to place in-film advertisements in the films we distribute, or license product placements in or cross promotion rights to these films.
These advertising and promotional services are made on a film-by-film basis, with pricing determined by the popularity of the director and actors involved in the film, the
expected box office appeal of the movie and the prominence and length of the advertisement or product placement, as applicable. As these advertising and promotional services are tailored to the
individual client's needs, they are accordingly negotiated on a case-by-case basis.

Other Operations Along the Film Value Chain

Production

We invest in the production of domestic and Hong Kong films principally with the goal of obtaining distribution rights for movie
theater and non-theatrical channels, including home video, digital media and television, both domestically and internationally.

Film production.We began investing in film production in 2007 and had partial or full copyrights in six, nine and seven films in 2010,
2011 and
2012, respectively. By acquiring the distribution rights in addition to investing in film production, we gain greater control over the marketing and screening of the films and may reap additional
share of the box office success of and revenue from non-theatrical channels from these films. In addition, by investing in film production, we may also provide input on key aspects of the
film, such as the selection of the director and principal cast. The process of deciding to invest in a film is similar to that used in deciding whether to acquire distribution rights of a film. The
decisions are made by senior management, who will consider factors such as a film's expected critical reception, marketability and potential for box office success, as well as the size of the
investment, the timing of required cash outlays for production, the estimated distribution and marketing expenses required to bring the film to its widest possible target audience, and ancillary
market potential after its theatrical release. We generally make the decision whether to invest in a film in the pre-production stage as a means of procuring distribution rights. We have
invested in a total of 47 films that have been released as of December 31, 2012.

Collaborations.We also develop potential film production projects through collaborations with established and up-and-coming
producers and directors. For example, we formed Cinema Popular with

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Peter
Chan, one of the most experienced and recognized producers and directors in the Chinese industry to co-produceBodyguards and
Assassins, a top box office performer in 2009 and winner of 19 nominations and eight awards at the 29th Hong Kong Film Festival. We believe these collaborative
efforts and partnerships provide us with additional opportunities to identify and source potentially lucrative films for production or distribution, while also strengthening our brand
and reputation.

Film financing.Film production and, to a lesser extent, distribution is a capital intensive activity. We fund the production and
distribution of
films through cash flow from our business, short-term loans as well as through syndication to other investors and producers. We manage the risks associated with committing to capital
intensive film production projects in a number of ways. We limit the films we invest in to an appropriate proportion of the films we distribute. We determine this proportion based on a number of
factors, including each film's likely box office appeal based on the director and actors participating in the film, its genre and subject matter, the amount of capital we have committed to other
investment projects at that time and the availability of funding from bank borrowings and film participations. We do not limit our investment in films to a specific percentage or number of films but
evaluate investment opportunities on a film-by-film basis while concentrating on diversifying our capital-at-risk. We either take the role of lead
investor or co-investor with respect to a particular film. The role of lead investor generally entails a greater investment amount and therefore greater risk, but can also give us greater
control over the production process and typically enables us to acquire copyrights to the film. In the role of lead investor, we typically syndicate our investment in film production to other
investors who share the investment risk. We also include a portion of the total estimated production budget of the film as an administration fee from participating investors to cover costs we incur to
manage the production process of the film. Alternatively, we also co-invest in films. Co-investment generally entails less risk than the lead investment role. We typically
obtain distribution rights to films in which we co-investment, but do not obtain copyrights to these films.

We
have access to bank borrowings for the financing of our film projects. Under our loan agreements with Beijing Dongcheng branch of the Industrial and Commercial Bank of
China Ltd., we had obtained loans with an aggregate principal amount of RMB50.0 million (US$8.0 million) outstanding as of December 31, 2012. We also had a term loan under
our credit facility with CITIC Bank International Limited with principal amount of RMB27.8 million (US$4.5 million) outstanding as of December 31, 2012, which we repaid in full in
January 2013. In addition, we have a revolving line of credit of US$20 million from East West Bank from which we drew down a principal amount of US$10 million in
November 2012 and a principal amount of US$10 million in the first quarter of 2013.

Television series.Where our investment in film productions provides us with ownership of the copyright for the films, this enables us
to extend the
franchise of the films, such as through the development of television series based on the film script. For example, the television series we are currently producing include series based on our film The Flying Swords of Dragon
Gate, which is expected to be completed in 2013. While most of our television series are thematically based on our most
popular films, we also produce television series that are independent of our films. For example, our television series,The King's Battles,premiered on
December 28, 2012 and aired on four popular satellite TV stations, Beijing TV, Tianjin TV, Zhejiang TV and Anhui TV with industry leading rating performance. We generally collaborate with
industry players, including artists, television channels and television production studios to develop our television series. Due to the fragmentation of the Chinese television industry, we often sell
a single television series to multiple television stations, and PRC rules and regulations currently permit us to sell first-round broadcasting rights for each of our television series to up to four
satellite television stations.



We operated 20 movie theaters, with 163 screens, in 12 cities in China as of December 31, 2012. The number of
movie theaters we operated grew from six as of April 30, 2010 to 20 as of December 31, 2012, through the acquisition of Bona Starlight in July 2011 and the development of

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nine new
movie theaters, including our first IMAX theater, which we opened in Tianjin in October 2012. We are currently in the process of developing six to eight new movie theaters in
2013. We intend to further increase the number of movie theaters we operate to approximately 30 to 40 by the end of 2014, primarily by developing new movie theaters. We develop new theaters by
renting a piece of property (for example, in a shopping mall) and then refurbishing and installing movie theater equipment in the property.

Our
movie theaters generate revenue primarily through sales of admissions, concessions and advertising prior to the start of each film and within the theater. We believe that our
audiences are attracted to our movie theaters by the films we exhibit, the locations of our movie theaters and the overall entertainment experience we offer. Our movie theaters are located in major
commercial districts or residential areas and provide our audiences with facilities and features such as stadium seating and state of the art projection and sound technologies. They are affiliated
with leading theater circuits in China.

The
following table sets forth details of our movie theaters as of December 31, 2012.

Movie Theater

City/District

Screens

Total Seating
Capacity

Location DetailsBeijing Bona Shunjing Cineplex

Beijing


10


1,236

Located in central Shunyi commercial district.Beijing Bona Huixin Cineplex

Beijing


11


1,263

Located in one of the most populated areas in Beijing; local population of over one million residents.Tianjin Bona Jinkang Cineplex

Tianjin


11


1,625

Located in one of the largest shopping malls in Tianjin near numerous major corporate offices; covers neighborhood with
population of approximately 500,000.Chongqing Bona Yuexin Cineplex

Chongqing


9


1,082

Located in rapidly developing commercial district; local population of over one million residents.Changsha Mango Bona Cineplex

Changsha, Hunan Province


10


1,037

Located in central Changsha commercial district nearby numerous major international and domestic businesses and major office
buildings.Bona Red Sparrow International Cineplex

Xi'an, Shaanxi Province


7


1,605

Located in second largest shopping mall in Xi'an near numerous major corporate offices; covers neighborhood with population of
approximately 500,000.Bona Xintiandi International Cineplex

Xi'an, Shaanxi Province


9


1,932

Located in university district with over 40 colleges and universities; covers areas with population of approximately
500,000.Beijing Bona Youtang Cineplex

Beijing


7


1,161

Located in central Chaoyang commercial district nearby numerous major international and domestic businesses and major office
buildings; one of the major meeting places for businesspeople and professionals.


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Movie Theater

City/District

Screens

Total Seating
Capacity

Location DetailsShanghai Bona Yinxing Cinema

Shanghai


5


767

Located in rapidly developing commercial district; local population of over one million residents.Shijiazhuang Bona Cinema

Shijiazhuang, Hebei Province


7


1,133

Located in large urban area otherwise underserved by theater facilities; total urban population of 2.3 million with over
400,000 neighborhood residents.Shenzhen Bona Shidai Cinema

Shenzhen, Guangdong Province


9


1,355

Located in central northern commercial district with daily pedestrian traffic of over 500,000.Beijing Bona Tianshi Cinema

Beijing


5


612

Located in the densely populated Tongzhou area on the south side of Beijing with over one million residents and mostly young
professionals.Beijing Bona Jingpin Cinema

Beijing


6


810

Located in a large shopping mall on the west side of Beijing near rapidly developing districts with strong consumption
power.Dongguan Bona Dongsheng Cinema

Dongguan, Guangdong Province


7


1,022

Located in downtown Dongguan, one of the most economically developed cities in Guangdong Province with over eight million
residentsTianjin Bona Nongken Cinema

Tianjin


10


2,095

Located in the heart of a multi-purpose sports & recreational center and near a busy shopping area.Zhejiang Bona Fenghua Cinema

Fenghua, Zhejiang Province


6


811

Located in one of the largest and densely populated shopping malls in Fenghua, a historical town with a population of over
500,000.Shenzhen Bona Longgang Cinema

Shenzhen, Guangdong Province


8


1,409

Located in one of the largest shopping malls of the Longgang District of the city of Shenzhen.Suzhou Bona Lifeng Cinema

Suzhou, Jiangsu Province


8


1,072

Located in the heart of the central business district of Suzhou, a famous historical town and popular tourist destination with
over 10 million residents.Shanghai Bona Zhongyuan Cinema

Shanghai


9


1,477

Located near densely populated high-end neighborhoods on the northeastern side of Shanghai.Hefei Bona Yintai Cinema

Hefei, Anhui Province


9


1,010

Located in the heart of Hefei's premium commercial center with hotels and corporate offices nearby.


Film Exhibitions.Our movie theaters exhibit desirable domestic, Hollywood and other foreign films licensed from state-owned and non
state-owned
distributors. Due to PRC regulations, movie theaters must be affiliated with a theater circuit and rely on theater circuits to negotiate the terms of agreements with film distributors and to provide
the films that they exhibit. The terms of the agreements under which our movie theaters exhibit films are made on a chain-by-chain and film-by-film
basis and depend on the expected performance of each film. Desirable films that are expected to have

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high
box office admission revenue will generally have longer license terms than movies with more uncertain performance and popularity.

Concessions.We operate concession stands in all our movie theaters that sell snacks and drinks as well as film-related memorabilia and
collectables. We continually seek to increase concessions sales by revising our product mix, introducing special promotions from time to time and offering employee training and incentive programs to
up-sell and cross-sell products.

Advertising.Our movie theaters sell advertising through a number of channels and media, including advertising time prior to the
screening of all
films exhibited in our movie theaters and the sale of advertising poster and frame space in our movie theaters. As a movie theater operator, we are typically entitled, subject to the consent of the
copyright owners, to sell a portion of the over two minutes of advertising time available at the start of a film. We generally utilize third party advertising service providers to sell time slots
using a scaled pricing system with progressively more expensive slots the closer the slot is to the screening of the film. The film distributor (which in some cases may also be us) is entitled,
subject to the consent of the copyright owners, to sell the time slots immediately preceding the screening of the film. The number of advertising slots will depend on the expected popularity of the
film, as well as the film screening schedule at the movie theater. In addition, we also provide promotion sponsorships and sell advertising poster and digital frame space, typically for periods of one
month or more, primarily to film producers to market their films, as well as to other companies, such as food and beverage companies, that want to target audiences that attend our
movie theaters.

Talent Agency Services

We operate a talent agency business that represented approximately 20 artists as of December 31, 2012. Our agency
contracts are negotiated on a case-by-case basis. In most arrangements we act as an agent and are entitled to a percentage of an artist's fees for their roles in all artistic
performances we procure for them during the term of the contract, including television advertising engagements, performances in films, television programs and concerts and other appearances. We may
also act as agent for an artist for a single performance. In other arrangements, we act as the primary obligor and recognize revenue on a gross basis. The level of commission we receive is linked to
the stage of the career and level of fame of the artist, with higher commissions agreed to with newer, less established artists and lower commissions agreed to with more famous and established
artists. The agency contracts generally have terms of between three and ten years, with scheduled penalties if the artist terminates the contract prior to the agreed term.

Our
talent agency business leverages our relationships in the film and entertainment industry and gives us additional insight into upcoming film projects, while providing us with another
source of promising films for distribution. Our talent agency also attracts high profile as well as up-and-coming talent who desire access to our pipeline of high box office
potential film projects.

Competition

The film industry is a highly competitive business. We face competition for audiences from companies within the entertainment business
and from alternative forms of leisure entertainment, such as sporting events, outdoor recreation, video games, the Internet and other cultural and computer-related activities.

The
films we distribute and invest in compete for audience acceptance and exhibition outlets with films produced and distributed by other companies. Our primary competitors in film
distribution and production include state-owned enterprises such as China Film Group and non state-owned companies such as Huayi Brothers. State-owned enterprises have historically dominated and have
in recent years continued to play a prominent role in the PRC film industry. The top three state-owned film
distributors, China Film Group Corporation, Huaxia Film Distribution Co., Ltd. and Shanghai Film Group, together accounted for between approximately 30.8% and 22.2% of the total domestic
films' box office between 2010 and 2012, according to EntGroup. Moreover, two state-owned film distributors

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have
the exclusive right to distribute the limited number of foreign films that may be exhibited in China on a box office sharing basis. Non state-owned film distributors have increasingly captured a
sizeable share of the market for distribution of domestic films. Our company and Huayi Brothers are the top two non state-owned film distributors. Our company accounted for approximately 7.6%, 16.5%
and 7.3% of the total domestic films' box office in 2010, 2011 and 2012, respectively, and Huayi Brothers accounted for approximately 15.3%, 2.33% and 21.1% during the same respective years, according
to EntGroup. Recently, certain films made by smaller film companies have also begun to capture market share.

Domestically,
we compete with production and distribution companies for the acquisition of literary and film properties, the services of performing artists, directors, producers and
other creative and technical personnel and production financing, all of which are essential to the success of our business. Furthermore, the international film industry, particularly in more developed
markets such as the United States, competes directly with our film production business through marketing efforts aimed at the Chinese and Greater China markets. As a result, the success of any
of our films is dependent not only on the quality and acceptance of a particular film, but also on the quality and acceptance of other competing films released into the marketplace at or near the
same time.

The
market for movie theaters is highly fragmented and intensely competitive. Our movie theaters compete with other movie theater operators for audience acceptance on the basis of the
films we exhibit, the location of our movie theaters, and seating comfort, theater capacity, ticket prices, projection and sound systems that influence the audiences' experience. Our competitors in
the movie theater business include property developers who run their own movie theaters in their properties in prime locations. Our movie theaters also compete to enter into agreements with theater
circuits and secure film exhibitions offered by theater circuits based on factors such as the location, condition and capacity of the theater, revenue potential and licensing terms and a theater
operator's ability to attract and license desirable films. We compete for new theater sites with other theater operators as well as other entertainment venues.

The
talent agency services industry is highly fragmented, with numerous agencies of varying sizes and reputations existing across China. Our talent agency competes against other talent
agencies on the basis of our brand name, reputation for access to industry participants and desirable film and television projects as well as pricing.

Intellectual Property

Our intellectual property assets include copyrights in films, trademarks in names, logos and characters, domain names, and licenses of
intellectual property rights of various kinds, primarily in the films we distribute.

We
had full ownership of the copyright to 12 films, partial ownership of the copyright to 18 films and participation in financing of two film productions without
distribution rights or copyright as of December 31, 2012. We primarily derive value from our copyrights and film distribution licenses through the theatrical release of films and the
distribution and licensing of our films to movie theaters. We also monetize our film rights through distribution of our films on broadcast television and cable network, Internet and digital
distribution, and through the sale of home video products, such as DVDs and Blu-ray discs.

We
devote significant resources to protecting our intellectual property in China and other key territories. We rely upon a combination of copyright, trademark and Internet/domain name
statutes and laws and contract provisions to protect our intellectual property. However, there can be no assurance of the degree to which these measures will be successful in any given case. Policing
unauthorized use of our film rights and related intellectual property is often difficult and the steps taken may not in every case prevent the infringement by unauthorized third parties of our
intellectual property. We seek to limit that threat through a combination of approaches, including offering legitimate market alternatives, deploying digital rights management technologies, pursuing
legal sanctions for infringement under

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domestic
and foreign laws and under international treaties, and enhancing public awareness of the meaning and value of intellectual property and intellectual property laws. Copyright protection is a
serious problem in the film distribution, production and exhibition industries because of the ease with which films may be duplicated and distributed illegally. Film piracy is widespread in China and
other Asian countries to a greater extent that in the United States and Europe. Film piracy continues to be prevalent across the entertainment industry. See "Item 3. Key
InformationD. Risk FactorsRisks Relating to Our Business and IndustryPiracy of films and television series, including digital and Internet piracy, may reduce the
gross receipts from the exploitation of our films and television series." We have taken legal actions to enforce copyright protection when necessary.

Third
parties may challenge the validity or scope of our intellectual property from time to time, and such challenges could result in the limitation or loss of intellectual property
rights. Irrespective of their
validity, such claims may result in substantial costs and diversion of resources that could have an adverse effect on our operations. Moreover, effective intellectual property protection has
historically been weaker in China than in more developed countries such as the United States, and it may be either unavailable or limited in other foreign territories.

Our
trademarks include "Bona," which we have registered in the PRC within the entertainment sector category, and the Chinese characters for Bona, " LOGO," which we have registered in the PRC within the talent agency sector category. We regard our trademarks as valuable assets and believe that our trademarks are an important
factor in marketing our products. We also hold various domain names relating to our trademarks and service marks, includingwww.bonafilm.cn. We do not
know if the trademarks for which we have submitted registration applications will obtain registrations with the scope of commercial coverage that we seek, if at all, or whether any trademark we have
registered or may receive registration in the future will be challenged or invalidated. See "Item 3. Key InformationD. Risk FactorsRisks Relating to Our Business and
IndustryFailure to protect our intellectual property rights could have a negative impact on our business."

Employees

As of December 31, 2010, 2011 and 2012, we had 458, 765 and 984 full-time employees, respectively. The
following table sets forth the number of full-time staff by business area as of December 31, 2012:

Number of
employeesFilm related


47Talent agency


11Management and administration


70Movie theater


856Total


984


We
plan to hire additional employees in all functions as we grow our business. None of our employees are represented by a labor union or other collective bargaining agreements. Since our
inception, we have never experienced a strike or other disruption of employment. We believe our relationships with our employees are good.

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The remuneration package of our employees includes salary, bonus, stock options, other cash benefits and benefits in kind. In accordance with applicable
regulations in China, we participate in social insurance funds, including a pension contribution plan, a medical insurance plan, an unemployment insurance plan, a work-related injury
insurance plan and a maternity insurance plan, as well as a housing provident fund for the benefit of our employees. Our total contribution for such employee benefits required by applicable
regulations amounted to US$0.6 million, US$0.9 million and US$1.5 million for 2010, 2011 and 2012, respectively. We have not fully paid the required contributions to the social
insurance funds or housing provident fund. See "Item 3. Key InformationD. Risk FactorsRisks Relating to Our Business and IndustryOur failure to make
adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties."

Facilities

Our principal executive offices are located at our headquarters at 11/F, Guan Hu Garden 3, 105 Yaojiayuan Road, Beijing 100025,
People's Republic of China. In aggregate, we maintained a total of approximately 3,120 square meters for our offices as of December 31, 2012 and leased all of our facilities. We believe
that our leased facilities are adequate to meet our needs for the
foreseeable future, and that we will be able to obtain adequate facilities, principally through leasing of additional properties, to accommodate our future expansions.

Insurance

We do not maintain any property insurance policies covering equipment and facilities for losses due to fire, earthquake, flood or any
other disaster. Consistent with customary industry practice in China, we do not maintain business interruption insurance or key employee insurance for our executive officers. Uninsured damage to any
of our equipment or buildings could have a material adverse effect on our results of operations. See "Item 3. Key InformationD. Risk FactorsRisks Relating to Our
Business and IndustryWe do not maintain business liability or disruption, litigation or property insurance, and any business liability or disruption, litigation or property damage we
experience might result in substantial costs to us and the diversion of our resources."

Legal and Administrative Proceedings

We are subject to legal proceedings and claims incidental to the conduct of our business from time to time. From January 1, 2012
to March 31, 2013, we have been named as a defendant or co-defendant in six legal proceedings in the PRC, four of which had been concluded as of the date of this annual report on
Form 20-F. Of these concluded legal proceedings, we settled three, and one was withdrawn. The settlements we paid in respect of individual proceedings ranged from approximately
RMB8,000 to approximately RMB880,000.

Regulations of Our Industry

This section sets forth a summary of the most significant regulations or requirements that affect our business activities in China or
our shareholders' rights to receive dividends and other distributions from us.

As
the film industry is at an early stage of development in China, new laws and regulations may be adopted from time to time that will require us to obtain additional licenses and
permits in addition to those that we currently have, and will address new issues that arise from time to time. As a result,
substantial uncertainties exist regarding the interpretation and implementation of current and any future Chinese laws and regulations applicable to the film industry, including the film and
television

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production,
distribution, exhibition and talent agency businesses. See "Item 3. Key InformationD. Risk FactorsRisks Relating to the PRC."

Regulations on Film Industry

Our core business is the distribution of films in China. In addition, we also engaged in film production and exhibition activities,
which complement our film distribution business. Our operations in the film industry are mainly regulated by the Film Administrative Regulations, or the Film Regulations, effective on
February 1, 2002, the Interim Provisions on the Qualifications for a Film Enterprise's Access to Commencement of Operation, or the Film Enterprise Qualification Provisions, effective on
November 10, 2004, the Provisions on the Filing of Film Scripts (Abstracts) and the Administration of Films, or the Film Filing Provisions, effective on June 22, 2006, the Regulations on
the Sino-foreign Cooperation in Film Production, or the Sino-foreign Cooperation Regulations, effective on August 10, 2004, and other rules and regulations issued based
on the foregoing regulations. Pursuant to those regulations, production, distribution, exhibition and import of films are subject to special licenses or approvals issued by SAPPRFT and/or its local
counterparts as follows: (i) Film Production License or Film Production License (Single Film), as applicable, for production of films in China; (ii) License for Sino-foreign
Cooperation of Films for joint production of films by PRC and foreign entities; (iii) Film Distribution License for distribution of films; (iv) Film Exhibition License for exhibition of
films and Certificate for Technical Qualification of Exhibition Equipment of Digital Film for exhibition of digital films; and (v) License for Film Public Screening for any film exhibited in,
imported into or exported out of China.

Regulations on Film Distribution

Pursuant to the Film Regulations and the Film Enterprise Qualification Provisions, distribution of films in two or more provinces,
autonomous regions, and/or municipalities directly under the central government requires a Film Distribution License issued by SAPPRFT and distribution of films within one province, autonomous region,
and/or municipality directly under the central government may be approved by the local counterpart of SAPPRFT in such region at the
provincial level. Film Distribution Licenses issued by SAPPRFT are subject to inspection by SAPPRFT every two years and those issued by the local counterparts of SAPPRFT at the provincial level are
subject to inspection annually. In practice, SAPPRFT issues Film Distribution Licenses with an effective term of two years and application for extension of the term must be made to SAPPRFT before
expiration of the term. Distribution of foreign films is subject to special approval by SAPPRFT. Currently China Film Group Film Distribution & Exhibition Corporation and Huaxia Film
Distribution Co. Ltd. are the only two enterprises which are licensed to distribute foreign films in China. Our affiliated consolidated entities Zhejiang Bona Film and Television
Production Co., Ltd., Tianjin Bona Culture Media Co., Ltd. and Beijing Baichuan Film Distribution Co., Ltd. each currently holds a Film Distribution License,
issued by SAPPRFT, for distribution of films throughout China, which has an effective term until February 23, 2014, January 17, 2015 and March 12, 2015, respectively.

Film
distributors may not distribute any film that has not received a License for Film Public Screening. Under current PRC regulations, film distributors must distribute films to theater
circuits instead of individual movie theaters.

Regulations on Film Production

Pursuant to the Film Regulations and the Film Enterprise Qualification Provisions, production of films in China requires either a Film
Production License or a Film Production License (Single Film). The Film Production License (Single Film) is granted on a film-by-film basis and will expire after the exhibition
of the film. A company will not be qualified for a Film Production License unless it has

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produced
two or more films under Film Production Licenses (Single Film). A Film Production License is subject to inspection by SAPPRFT every two years. In practice, SAPPRFT issues Film Production
Licenses with an effective term of two years and application for extension of the term must be made to SAPPRFT before expiration of the term. A duly approved film producer may produce film(s), make
copies of, distribute within China and export film(s) produced by it subject to relevant laws and regulations. In accordance with the PRC Copyright Law, effective on June 1, 1991 and latest
amended on February 26, 2010, film producers own copyrights to the films produced by them, while playwrights, directors, cinematographers, lyricists, composers and other authors enjoy the right
of authorship and is entitled to receive remuneration pursuant to the contract concluded with the producers. Authors of the film scripts, musical works and other works that are included in a film and
that can be separately exploited are entitled to exercise their copyrights to such works independently.

Under
the Film Regulations and the Sino-foreign Cooperation Regulation, no organizations or individuals from abroad may independently make films within China, and cooperation
between a PRC entity and a foreign entity in film production inside or outside China is subject to the approval of SAPPRFT on a film-by-film basis. Only PRC producers with a
Film Production License or a Film Production License (Single Film) may cooperate with foreign producers in the film production. Sino-foreign cooperation in film production include the
following models: (i) Joint Production whereby PRC and foreign parties jointly invest in and produce films, and share profits and risks; (ii) Co-production through synergy,
whereby the investments are made by the foreign parties, the films are shot in China and the Chinese parties are responsible for providing equipments, services, facilities or other assistance for a
fee; and (iii) Co-production through commission, whereby the PRC party is entrusted by a foreign party to shoot films in China. Approval by SAPPRFT will be evidenced by a License
for Sino-foreign Cooperation in Film Production for Joint Production model or an approval certificate for the other two models. The License for Sino-foreign Cooperation in Film
Production has an effective term of two years.

Our
affiliated consolidated entity Bona Film Group Co., Ltd. (PRC) holds a Film Production License with an effective term of two years that ends on March 8, 2014.
Our affiliated consolidated entities have also obtained a Film Production Licenses (Single Film) and/or Licenses for Sino-foreign Cooperation in Film Production for films they produced or
are producing.

Regulations on Film Exhibition

Pursuant to the Film Regulations, the establishment of a film exhibitor is subject to the approval of the local film administration
authority at the county or municipal level and a Film Exhibition License will be issued to the successful applicant. The Film Exhibition License is subject to annual inspection of the issuing
authority. Exhibition of digital films further requires a Certificate for Technical Qualification of Exhibition Equipment of Digital Films. Movie theaters operated by our affiliated consolidated
affiliates are equipped to display both non-digital films and digital films, and have obtained Film Exhibition Licenses. However, they have not yet obtained the requisite Certificate for
Technical Qualification of Digital Film Exhibition Equipment to exhibit digital films. Based on verbal consultations with SAPPRFT, we understand that SAPPRFT is not enforcing the regulation, is not
requiring movie theaters to obtain a Certificate for Technical Qualification of Digital Film Exhibition Equipment for the exhibition of digital films and had not issued and is not currently issuing
such certificate to any movie theater. However, there can be no assurance that SAPPRFT will continue to permit movie theaters to exhibit digital films without the Certificate for Technical
Qualification of Digital Film Exhibition Equipment or that our movie theaters would be able to obtain such certificate if so required by SAPPRFT.

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Movie
theaters may not exhibit any film that has not received a License for Film Public Screening. Movie theaters are required to exhibit domestic films for at least two thirds of the
total exhibition time every year.

Regulations on Film Import and Export

Pursuant to the Film Regulations, import of foreign films can only be conducted by entities designated by SAPPRFT. Currently, China
Film Group Film Import & Export Corporation is the only entity designated to import foreign films into China. Imported foreign films can only be distributed in China by the entities designated
by SAPPRFT and currently China Film Group Film Distribution & Exhibition Corporation and Huaxia Film Distribution Co., Ltd. are the only two entities allowed to distribute
imported foreign films. Where a film is to be imported for public exhibition, it shall be submitted to the film censorship authority for censorship prior to its import. For a film that is submitted to
the film censorship authority for censorship, the importer of the film usually presents the customs authorities with the approval for temporary import issued by SAPPRFT.

A
film that has been imported on a temporary basis and passed the censorship and for which the License for Film Public Screening and approval for import have been issued, the film
importer typically presents the approvals to customs authorities. Under Appendix 9 of Protocol on the Accession of the People's Republic of China to the World Trade Organization, China has
agreed to import 20 box-office-earnings-sharing films for theatrical release each year, without prejudice to compliance with China's regulations on the administration of films. In
February 2012, the PRC government agreed to increase the number of foreign premium format films, such as 3-D or IMAX films, that may be imported into China by 14 films per
year. Chinese-language films produced by film producers established under laws of Hong Kong, Macau or Taiwan are not subject to the foreign film quota limitation, provided that 50% or more of the
interests in the copyright of such films are owned by the film producers established under Hong Kong, Macau or Taiwan law and 50% or more of the members of the production team are Hong Kong, Macau or
Taiwan citizens. Films that are produced by film producers established under Hong Kong law and meeting these requirements will not be subject to the quota restrictions imposed on the exhibition time
between imported films and domestic films. However, such films are deemed to be foreign films for the purposes of import and distribution procedures.

PRC
film producers must receive a License for Film Public Screening to export films produced by themselves or jointly with foreign entities. Exhibition of domestic films in overseas film
exhibitions and film festivals must be approved by SAPPRFT.

Scripts and Film Examination System

Films are subject to examination and approval by SAPPRFT and/or its local counterparts.

In
accordance with Film Filing Provisions and circulars issued by SAPPRFT, film scripts and abstracts and films are subject to filing requirement and censorship. Film producers must file
film abstracts of film scripts with SAPPRFT and/or its provincial counterparts before filming. Upon completion of production, film producers must apply for examination of such films by SAPPRFT and/or
its local counterparts at provincial level. Importers must apply for the examination and approval of foreign films to be imported. Films passing the examination will be granted a License for Film
Public Screening by SAPPRFT and may be distributed, exhibited, imported into or exported out of China. However, SAPPRFT may, under special circumstances, terminate distribution and exhibition of films
which have received Licenses for Film Public Screening or require editing of such films first and terminate their distribution or exhibition after the required editing is rejected by the film
copyright owners.

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The Draft Film Industry Promotion Law

On December 15, 2011, the PRC State Council issued a draft of the Film Industry Promotion Law, or the Draft Law, for public
comment. The Draft Law sets forth laws relating to specific areas of film-making, such as creation, production, distribution and exhibition of films, provides for financial support
measures and preferential tax treatment for the film industry and stipulated legal liabilities for non-compliance. In accordance with the Draft Law, a company that has produced two or more
publicly exhibited films will be qualified to apply for a Film Production License, and such company will not be required to have a sponsor organization and administration authority approved by
SAPPRFT, which are required under current law. The Draft Law provides that pre-screening advertisements shall be displayed before the screening time as stated on movie tickets. In the
event of non-compliance, a movie theater may be subject to a fine ranging from RMB10,000 to RMB200,000 and be ordered to remedy such non-compliance within a certain time
period. Any failure to comply with any such order may lead to a revocation of the movie theater's Film Exhibition License. The Draft Law also provides that a Sino-foreign
co-production film shall be considered to be a domestic film if a PRC film producer owns the copyright to such film. In addition, the Draft Law provides more detailed legal liabilities for
the certain non-compliance matters than those provided under current regulations. For example, if any license of a company has been revoked in
accordance the Draft Law, such company will be prohibited from applying for such license for five years from the date of revocation. As of the date hereof, the Film Industry Promotion Law has not been
officially promulgated and it is uncertain whether and how the provisions in the final Film Industry Promotion Law will differ from those in the Draft Law.

Regulations on Sales of Food and Beverage in Movie Theaters

Sales of food and beverages to audiences in movie theaters must comply with laws and regulations regarding food hygiene and safety.
Pursuant to the Food Safety Law of the PRC, which took effect from June 1, 2009, sale of food or beverages requires a Food Distribution Permit issued by the relevant administration for industry
and commerce, and catering services require a Catering Service Permit issued by the relevant food and drug administration authorities. Companies having the Catering Service Permit are allowed to sell
food and beverages made by them at their place of operation without the Food Distribution Permit. Before the Food Safety Law of the PRC took effect on June 1, 2009, sale of food and beverages
and the provision of catering services required food hygiene permits issued by the relevant hygiene administration authorities. Companies which had obtained food hygiene permits for selling food and
beverages or the provision of catering services prior to June 1, 2009 may continue to use such permits during their effective terms and are only required to obtain a Food Distribution Permit or
Catering Service Permit upon expiration of the relevant food hygiene permits. Each of our movie theaters have obtained the relevant Food Distribution Permits for packaged foods, which will expire
between May 23, 2013 and January 22, 2016. However, the permits obtained by some of these theaters do not cover unpackaged foods sold by such theaters. The laws and regulations governing
the issuances of Food Distribution Permits for unpackaged foods are not specific to movie theaters and impose qualifications and requirements that movie theaters generally do not meet. We believe that
movie theaters in China typically do not obtain Food Distribution Permits for unpackaged foods as an industry practice. However, there can no assurance that our movie theaters will not be deemed to be
in violation of the Food Safety Law of the PRC by the relevant authorities. See "Item 3. Key InformationD. Risk FactorsRisks Relating to Our Business and
IndustryMovie theaters in China are subject to a range of regulatory requirements, including regulations relating to advertising, hygiene and food licensing. Some of our movie theaters
sell unpackaged foods without the requisite permits to do so. The failure of our movie theaters to comply with applicable regulations may subject us to fines and penalties, including the suspension of
our movie theater operations."

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Regulations on Television Program Production and Distribution

Television program production and distribution businesses are mainly regulated by the Administrative Regulations on Radio and
Television effective on September 1, 1999, the Administrative Regulations on the Production and Operation of Radio and Television Program effective on August 20, 2004, the Administrative
Regulations on Content of Television Plays effective on July 1, 2010 which superseded and replaced the Administrative Regulations on the Examination of Television Plays effective on
October 20, 2004 and its supplementary regulations effective on January 1, 2007. Pursuant to those regulations, television plays can only be produced by television stations at the
municipal level or above and entities with either a Film Production License or a License for the Production and Operation of Radio and Television Program. Licenses for the Production and Operation of
Radio and Television Program are issued to entities which meet requirements set forth in the Administrative Regulations on the Production and Operation of Radio and Television Program and pass the
examination of SAPPRFT or its provincial counterparts. In addition to the Film Production License or the License for the Production and Operation of Radio and Television Program, the television play
producers must obtain either a Multiple Television Play Production License or a Single Television Play Production License for the shooting and production of television plays. The Multiple Television
Play Production License has an effective term of two years and may apply to all television plays produced by the holder during the effective term. The Single Television Play Production License only
applies to a single television play and the producer must apply for another Single Television Play Production License for the shooting and production of another television play as indicated in
such license.

Under
the Administrative Regulations on Content of Television Plays effective on July 1, 2010, a television play must be filed with and announced to the public by SAPPRFT or its
provincial counterparts before it is shot or produced. Television plays are subject to censorship by SAPPRFT or its provincial counterparts, which will issue Television Play Distribution Licenses for
television plays passing their censorships. No television play may be distributed or broadcasted without the Television Play Distribution License. However, SAPPRFT may, under certain circumstances,
based on the public interest, terminate distribution and exhibition of television plays which have received Television Play Distribution Licenses or require editing of such television plays. On an
ongoing basis, the content of the television series we produce are submitted for review to the relevant local branches of SAPPRFT and we also apply for Single Television Play Production Licenses for
each television series we produce.

Foreign
investments in television program production companies are prohibited; foreign investments in television program production projects are restricted, and such investments may only
take the form of Sino-foreign cooperation.

Regulations on Talent Agencies

Performance talent agency industry is mainly regulated by the Administrative Regulation on the Commercial Performances effective on
September 1, 2005 and latest amended on July 22, 2008, and its implementation rules latest amended on September 3, 2009 and effective on October 1, 2009, the Administrative
Measures for Brokers effective on August 28, 2004, and other regulations issued based on the foregoing regulations. Pursuant to those regulations, a brokerage company, including talent agency,
shall specify the method and category of brokerage business conducted by it in its business license and file relevant information of the brokers engaged or dismissed by it with the local
administration for industry and commerce. In addition, talent agencies engaged in (i) organization, production or market promotion of commercial performance, which term refers to the
on-site art performance for the public for the purpose of making profits, (ii) intermediation, agency or brokerage for commercial performance, or (iii) entering into agency
contracts with, agency for or promotion of artists must obtain a Commercial Performance License from the competent culture authorities at provincial level, and must have at least three
full-time performance brokers. Our affiliated consolidated

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entity
Bona Film Group Co., Ltd. (PRC) has obtained a Commercial Performance License with an effective term until July 25, 2014. Bona Film Group Co., Ltd. (PRC),
Zhejiang Bona Film and Television Production Co., Ltd. and Beijing Bona Xingyi Culture Agency Co., Ltd. have also filed the agency certificates and other information for
the relevant brokers with the local administration for industry and commerce. Zhejiang Bona Film and Television Production Co., Ltd. and Beijing Bona Xingyi Culture
Agency Co., Ltd. have not obtained Commercial Performance Licenses, as their representations of artists are not in connection with on-site art performances for the public,
although there is uncertainty as to whether such license is required.

Foreign
investments in performance talent agencies are restricted under PRC law and may only take the form of Sino-foreign joint ventures in which Chinese parties should
maintain a controlling stake.

Regulations on the Advertising



The State Administration for Industry and Commerce, the SAIC, is responsible for the supervision and regulation of advertising
activities. The Advertising Law adopted by the Tenth Session of the Standing Committee of the Eighth National People's Congress which became effective on February 1, 1995, the Regulations on
the Administration of Advertisements promulgated by the State Council in October 1987 and Rules for the Implementation of the Regulations on the Administration of Advertisements issued by the
SAIC in November 2004 outline the regulatory framework of the advertising industry. Pursuant to these regulations, companies engaged in advertising activities must obtain from the SAIC or its
local counterparts a business license which specifically includes advertising services within its business scope.



PRC advertising laws, rules and regulations set forth certain requirements on the content of advertisements in China. The content of an
advertisement is subject to the following restrictions:



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Advertisements
for special drugs like anesthetic, psychotropic, toxic or radioactive drugs are prohibited. There are also specific restrictions and requirements regarding advertisements
that relate to matters such as patented products or processes, pharmaceutical products, medical procedures, foods, alcohol, tobacco, and cosmetics. In addition, all advertisements relating to
pharmaceuticals, medical procedures, agrochemicals and veterinary pharmaceuticals, together with any other advertisements which are subject to censorship by administrative authorities in accordance
with relevant laws or regulations, are subject to content censorship by relevant regulatory authorities prior to dissemination.

Advertisers,
advertising operators, including advertising agencies, and advertising disseminators are liable for the truthfulness of the content of the advertisements. Under the
applicable laws and regulations, advertising operators and advertising disseminators must review and examine the supporting documents for advertisements provided by advertisers and verify that the
content of the advertisements complies with applicable PRC laws and regulations. Prior to publishing advertisements
that are subject to government censorship and approval, advertising disseminators are obligated to verify that such censorship has been performed and the approval has been obtained.

Violation
of these regulations may result in penalties, including fines, confiscation of advertising income, orders to cease dissemination of the advertisements and orders to publish an
advertisement to correct the misleading information. In circumstances of severe violations, the SAIC or its local counterparts may cease their advertising business to rectify, or revoke violators'
licenses or permits for their advertising business operations and they may be subject to criminal prosecution if their activities constitute a crime. Furthermore, advertisers, advertising operators or
advertising distributors may be subject to civil liability if they infringe the legal rights and interests of third parties in the course of their advertising business.



Under the Administrative Provisions on Foreign Investment in the Advertising Enterprises latest amended on August 22, 2008 and
effective on October 1, 2008, foreign investors can invest in PRC advertising industry either through wholly owned enterprises or joint ventures with Chinese parties. However, to invest in the
advertising industry, foreign investors, if investing with Chinese partners, must (1) be engaged in advertising business, (2) have been operating for at least two years, and
(3) have a track record of advertising business, and if investing by itself or with other foreign investors, must have at least three years of operation and have advertising as their
core business.



Currently only a few regulations have been issued specifically for the administration and regulation of pre-screening
advertising, including the Circular on Strengthening of Administration of Pre-screening Advertising effective on June 25, 2004 and the Circular on Further Regulation of
Pre-screening Advertising effective on February 10, 2009. Pursuant to those regulations, consent of the copyright owner of the film is needed for placing pre-screening
advertisements before the screening of the relevant film; no entities including film distributors and exhibitors can delete or replace any pre-screening advertisement without consent of
the relevant film copyright owner. In addition, pre-screening advertisements shall be displayed before the License for Public Screening of Films and the screening time as stated in the
tickets. Violation of those regulations may result in public condemnation or, in case of serious violation, suspension of supply of films or suspension of exhibition.

Regulations on Foreign Investment in Film-related Enterprises

Foreign investment in film companies is restricted or prohibited under PRC law. Pursuant to Certain Opinions on Foreign Investment in
Culture Industry which became effective on July 6, 2005,

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the
Catalogue for the Guidance of Foreign Investment Industries (Amended in 2011), the Interim Provisions on Foreign Investments in Cinemas effective on January 1, 2004 and its two
supplementary regulations, the Supplementary Regulation to the Film Enterprise Qualification Provisions, foreign investors are prohibited from holding any equity interest in any PRC film production
company, distribution company or theater circuit; foreign investments in movie production projects are restricted, and such investments may only take the form of Sino-foreign cooperative
joint ventures; foreign investors may not hold more than 49% of the equity interests in any PRC movie theater company. Notwithstanding the foregoing, "Hong Kong or Macau service providers" are allowed
to set up wholly foreign owned enterprises engaged in film distribution or exhibition. "Hong Kong or Macau service providers" refer to Hong Kong or Macau citizens or entities incorporated under Hong
Kong or Macau law, having business operations in Hong Kong or Macau for at least three years and meeting certain other requirements under the relevant arrangements between the PRC and each of Hong
Kong or Macau, respectively. In March 2013, Bona Entertainment Company Limited became qualified as a "Hong Kong service provider."

Regulations on Foreign Exchange Registration of Overseas Investment by PRC Residents

The Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents to Engage in Overseas Financing and
Round Trip Investment via Overseas Special Purpose Vehicles, or Circular 75, issued by SAFE and effective on November 1, 2005, and the latest implementation rules relating to the
Circular 75 issued on May 20, 2011, regulates the foreign exchange matters in relation to the use of a "special purpose vehicle" by PRC residents to seek offshore equity financing and
conduct a "round trip investment" in China. Under Circular 75, a "special purpose vehicle" refers to an offshore entity directly established or indirectly controlled by PRC resident natural or
legal persons ("PRC residents") for the purpose of seeking offshore equity financing using assets or interests owned by such PRC residents in onshore companies, while "round trip investment"
refers to the direct investment in China by such PRC residents through the "special purpose vehicles," including, without limitation, establishing foreign-invested enterprises and using such
foreign-invested enterprises to purchase or control onshore assets through contractual arrangements.
Circular 75 and its implementation rules require that, before the completion of a round-trip investment or the overseas equity financing through a "special purpose vehicle",
PRC residents and PRC entities are required to complete a foreign exchange registration with the competent local branches of SAFE for their overseas investments. After the completion of a
round-trip investment or the overseas equity financing, the PRC residents are required to go through foreign exchange registration alteration formalities of overseas investment in respect
of net assets of special purpose vehicles that such PRC residents hold and the variation thereof.

In
addition, an amendment to the registration is required if there is a material change in the "special purpose vehicle," such as increase or reduction of share capital and transfer of
shares. With respect to any of such material change, we are also obligated to coordinate with the shareholders in respect of their SAFE registration amendments. Failure to comply with the registration
procedures set forth in Circular 75 and its implementation rules may result in restrictions on the foreign exchange activities of the relevant foreigninvested enterprises,
including the payment of dividends and other distributions, such as proceeds from any reduction in capital, share transfer or liquidation, to its offshore parent or affiliate and the capital inflow
from the offshore parent, and may also subject the relevant PRC residents to penalties under PRC foreign exchange administration regulations.

We
conduct businesses in China primarily through our PRC affiliated consolidated entities. We enter into contractual arrangements with our PRC affiliated consolidated entities and their
respective shareholders including Mr. Dong Yu, Mr. Hai Yu and Mr. Zhong Jiang, who are PRC residents and also shareholders of our company. Mr. Dong Yu, Mr. Hai Yu
and Mr. Zhong Jiang have registered with the local SAFE branch for the foreign exchange registrations of overseas investments and have

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amended
their registrations to reflect some developments of our company and our PRC subsidiary, including the initial public offering of our ADSs. Some of our shareholders who are PRC residents are
also required to amend their registration to reflect the developments of our company and our PRC subsidiary since our initial public offering of our ADSs. However, we cannot ensure that our
shareholders will always amend their registrations as required. We may not be fully informed of the identities of all of our beneficial owners who are PRC residents, and we do not have control over
our beneficial owners. See "Item 3. Key InformationD. Risk FactorsRisks Relating to the PRC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 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."

Regulations on Employee Stock Option Granted by Offshore Listed Companies

The Notices on Issues concerning the Foreign Exchange Administration For Domestic Individuals Participating in Stock Incentive Plan of
Overseas Publicly-Listed Company, or the Stock Option Rules, issued in February 2012, which replaced previous rules issued in March 2007, regulate the foreign exchange matters associated
with the employee stock incentive plans granted to PRC individuals by companies whose shares are listed on overseas stock exchanges. Domestic residents who are granted shares by companies listed on
overseas stock exchanges based on the company's employee share incentive plan are required to register with SAFE or its local counterparts. Pursuant to Stock Option Rules, PRC residents participating
in the employee stock incentive plans of the overseas listed companies must retain a domestic agent, which can be a subsidiary of the overseas listed company in China or other qualified institution
selected by such PRC subsidiary to handle various foreign exchange matters associated with their employee incentive plans. The PRC agents must, on behalf of the domestic residents who have the right
to exercise the employee stock options, apply annually to SAFE or its local competent branches for a quota for the conversion and/or payment of foreign currencies in connection with the domestic
residents' exercise of the employee stock options. The foreign exchange proceeds received by the domestic residents from sale of shares under the stock incentive plans granted by the overseas listed
companies must be remitted into the bank accounts in China opened by the PRC agents.

Our
board of directors and shareholders adopted our 2009 share incentive plan on June 1, 2009 and our 2010 share incentive plan on June 1, 2010. Pursuant to these plans, we
may issue employee stock options to our qualified employees and non-employees on a regular basis. As required under Circular 75, Mr. Dong Yu, Mr. Hai Yu and
Mr. Zhong Jiang has registered their SAFE registration to reflect that approximately 16.2% of the share capital of our company on a fully diluted basis that has been reserved for employee stock
options and service incentive shares. As of the date hereof, we have granted employee stock options under our 2009 and 2010 share incentive plans. Our 2010 share incentive plan has been registered
with the local authority of SAFE. However, we cannot assure that the holders of options issued by our company can successfully amend the registration with SAFE in full compliance with Stock Option
Rules. The failure of our stock options holders to amend their SAFE registration pursuant to Stock Option Rules and other SAFE requirements may subject these PRC individuals to fines and legal
sanctions and may also limit our ability to contribute additional capital into our PRC subsidiary, limit our PRC subsidiary's ability to distribute dividends to us or otherwise materially adversely
affect our business.

Further,
in 2005 and 2006, the Ministry of Finance and the State Administration of Taxation jointly issued notices concerning the individual income tax on earnings from employee stock
options. The notice requires PRC companies that implement employee share option programs in the PRC, under which the shares issuable are the shares of listed companies (domestic or overseas) to
(i) file the employee share option plans and other relevant documents to the local taxation departments having

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jurisdiction
over them before implementation of such employee share option plans; and (ii) file share option exercise notices and other relevant documents with the local taxation departments
having jurisdiction over them before exercise by the employees of the share options. To comply with the requirement, we have filed our 2009 share incentive plan and 2010 share incentive plan with
Beijing Local Taxation Bureau.

M&A Regulations and Overseas Listings

On August 8, 2006, six PRC regulatory authorities, including the CSRC, promulgated the 2006 M&A Rules, which were later amended
on June 22, 2009. Pursuant to the 2006 M&A Rules, an offshore special purpose vehicle, or SPV, refers to an overseas company controlled directly or indirectly by PRC domestic companies or
individuals for purposes of overseas listing of equity interests in domestic companies (defined as enterprises in the PRC other than foreign-invested enterprises). If an SPV purchases, for the purpose
of overseas listing, equity interests of any PRC company that are held by PRC companies or individuals controlling such SPV, then the overseas listing by the SPV must obtain the approval of the CSRC.
However, it remains unclear whether the 2006 M&A Rules and the requirement of the CSRC approval apply to the listing of our company in December 2010. Up to the date of this annual report on
Form 20-F, the CSRC has not issued any rules or written interpretation clarifying whether offerings like our initial public offering would have been are subject to this
new procedure.

Our
PRC counsel, Han Kun Law Offices, advised us that the 2006 M&A Rules did not require that we obtain prior CSRC approval for the listing and trading of our ADSs on the NASDAQ in
December 2010, given that:



Regulations on Foreign Currency Exchange

Pursuant to applicable PRC regulations on foreign currency exchange, the Renminbi is freely convertible only to the extent of current
account items, such as trade- related receipts and payments, interest and dividends. Capital account items, such as direct equity investments, loans and repatriation of investment, require the prior
approval from SAFE or its local branch for conversion of Renminbi into a foreign currency, such as U.S. dollars. Payments for transactions that take place within the PRC must be made in
Renminbi. Domestic companies or individuals can repatriate foreign currency payments received from abroad into the PRC, or deposit these payments abroad subject to compliance with the requirement as
promulgated by SAFE. Foreign currencies received for current account items can be either retained or sold to financial institutions that have foreign exchange settlement or sales business without
prior approval from SAFE, subject to certain regulations. Foreign exchange income under capital account can be retained or sold to financial institutions that have foreign exchange settlement and
sales business, with prior approval from SAFE, unless otherwise provided.

In
addition, another notice issued by SAFE, or Circular 142, regulates the conversion by foreign-invested enterprises of foreign currency into Renminbi by restricting how the
converted Renminbi may

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be
used. Circular 142 requires that Renminbi converted from the foreign currency-dominated capital of a foreign- invested enterprise may only be used for purposes within the business scope
approved by the relevant government authority and may not be used to make equity investments in PRC, unless specifically provided otherwise. SAFE further strengthened its oversight over the flow and
use of Renminbi funds converted from the foreign currency-dominated capital of a foreign-invested enterprise. The use of such Renminbi may not be changed without approval from SAFE, and may not be
used to repay Renminbi loans if the proceeds of such loans have not yet been used. Furthermore, another circular issued by SAFE, Circular 59, tightens the regulation over settlement of net
proceeds from overseas offerings and requires that the settlement of net proceeds must be consistent with the description in the prospectus for the offering. SAFE also promulgated a
Circular 45, which, among other things, restricts a foreign-invested enterprise from using RMB converted from its registered capital to provide entrusted loans or repay loans between
non-financial enterprises. Violations of these circulars may result in severe penalties, including substantial fines.

Regulations on Dividend Distribution

Under applicable PRC laws and regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated
profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, wholly foreign-owned enterprises in China are required to allocate to reserve funds and staff
incentive and welfare funds. Wholly foreign-owned enterprises shall contribute at least 10% of their respective accumulated profits each year, if any, to fund statutory reserve funds unless these
reserves have reached 50% of the registered capital of the respective enterprises. As for staff incentive and welfare funds, the contribution percentage is to be decided by the foreign-owned
enterprise on its own discretion. These reserves are not distributable as cash dividends.

Regulations Regarding the Enterprise Income Tax and Dividend Withholding Tax

The EIT Law, effective on January 1, 2008, imposes a uniform enterprise income tax at the rate of 25% on all domestic
enterprises, including foreign- invested enterprises unless they qualify for certain exceptions, and terminates most of the tax exemptions, reductions and preferential treatments available under
previous tax laws and regulations. Under the EIT Law and a notice issued by the PRC State Council on transition preferential policies, commencing January 1, 2008, (i) those enterprises
that were established before March 16, 2007 and were formerly entitled to preferential policies of lower taxation will undergo a gradual transition to statutory tax rates within five years; and
(ii) those enterprises that were established before March 16, 2007 and were formerly entitled to preferential income tax reductions such as "two-years exempt and three-years
halved" and "five-years exempt and five-years halved" shall continue to enjoy such preferential policies as stipulated in the former taxation laws, administrative regulations
and relevant documents until the completion of the lifetime of said policies, provided however that for those enterprises not profitable enough to enjoy the said tax preferences, the preference time
limits shall commence from 2008.

Pursuant
to the EIT Law and its implementation rules, an enterprise established outside of China with "de facto management bodies" within China is considered a "resident enterprise" for
PRC enterprise income tax purposes. The term "de facto management body" is defined as the management body that exercises substantial and comprehensive control and overall management over the business,
productions, personnel, finance and properties of an enterprise. Pursuant to a circular issued by the State Administration of Taxation, a foreign enterprise controlled by a PRC company or a PRC
company group will be classified as a "resident enterprise" with its "de facto management bodies" located within China if the following requirements are satisfied: (i) the place where the
senior management and core management departments that are in charge of its daily operations perform their duties is mainly located in the PRC; (ii) its financial and human resources decisions
are made by or are subject to

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approval
by persons or bodies in the PRC; (iii) its major assets, accounting books, company seals, and minutes and files of its board and shareholders' meetings are located or kept in the PRC;
and (iv) more than half of the enterprise's directors or senior management with voting rights frequently reside in the PRC. In addition, the SAT issued a bulletin on July 27, 2011,
effective September 1, 2011, providing more guidance on the implementation of Circular 82 and clarifying matters including resident status determination,
post-determination administration and competent tax authorities. Although both the circular and the bulletin only apply to offshore enterprises controlled by PRC enterprises and not those
controlled by PRC individuals or foreigners, it is believed that the determining criteria set forth in the circular and the bulletin may reflect the State Administration of Taxation's general position
on how the "de facto management body" test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, individuals
or foreigners. However, it remains uncertain how tax authorities will determine tax residency based on the facts of each case, given that the EIT Law is relatively new and ambiguous in terms of some
definitions, requirements and detailed procedures.

Furthermore,
the EIT Law and its implementation rules provide that the "non-resident enterprises" are subject to the enterprise income tax rate of 10% on their income sourced
from China, if such "non-resident enterprises" (i) do not have establishments or premises of business in China or (ii) have establishments or premises of business in China,
but the relevant income does not have actual connection with their establishments or premises of business in China. Such income tax may be exempted or reduced by the PRC State Council or pursuant to a
tax treaty with China that provides for a different withholding agreement between China and the jurisdictions in which the non-resident enterprise reside. The Cayman Islands, where we are
incorporated, does not have such tax treaty with China.

Moreover,
non-resident individual investors may be required to pay PRC individual income tax at a rate of 20% on interest or dividends payable to the investors or any capital
gains realized from the transfer of ADSs or ordinary shares if such gains are deemed income derived from sources within the PRC. Under the PRC Individual Income Tax Law, or IIT Law,
"non-resident individual" refers to an individual who has no domicile in China and does not stay in the territory of China or who has no domicile in China and has stayed in the territory
of China for less than one year. Pursuant to the IIT Law and its implementation rules, for purposes of the PRC capital gains tax, taxable income is the balance of the total income obtained from the
transfer of the ADSs or ordinary shares minus all the costs and expenses that are permitted under PRC tax laws to be deducted from the income. Therefore, if we are considered a PRC "resident
enterprise" and the relevant competent PRC tax authorities consider dividends we pay with respect to our ADSs or ordinary shares and the gains realized from the transfer of our ADSs or ordinary shares
income derived from sources within the PRC, such gains earned by non-resident individuals may also be subject to PRC withholding tax at a rate of 20%.

If
the PRC tax authorities determine that our Cayman Islands holding company is a "resident enterprise" for PRC enterprise income tax purposes, a number of unfavorable PRC tax
consequences could follow: (i) we may be subject to enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations;
(ii) a 10% withholding tax may be imposed on dividends we pay to our shareholders who are non-resident enterprises and gains derived by them from transferring our shares or ADSs, if
such income is considered as PRC-sourced income by relevant PRC authorities; and (iii) a potential 20% withholding tax may be imposed on dividends we pay to our shareholders who are
non-resident individuals and gains derived by them from transferring our shares or ADSs, if such income is considered as PRC-sourced income by relevant PRC authorities.

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Our Corporate Structure

The following diagram illustrates our shareholding and corporate structure as of the date of this annual report on
Form 20-F, including our subsidiaries, affiliated consolidated entities and their subsidiaries:

GRAPHIC

Contractual Arrangements with Our Affiliated Consolidated Entities

Foreign investment in the film and entertainment industries is currently prohibited or restricted in China. As a Cayman Islands
corporation, we do not qualify to conduct these businesses under PRC regulations. In addition, foreign investment in the advertising industry requires the foreign investor to possess certain
qualifications, which we do not have. See "B. Business OverviewRegulations of Our Industry." As a result, our business in China is operated through contractual arrangements
with our affiliated consolidated entities. These contractual arrangements enable us to exercise effective control over these entities and receive substantially all of the economic benefits from them.
These agreements are effective until either the dissolution of either Bona New World or the affiliated consolidated entity, the affiliated consolidated entity being no longer liable to us under
the agreement, or the termination of other contractual arrangements, as described under "Agreements that Transfer Economic Benefits to Us" and "Agreements that Provide Us
with Effective Control."

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Exclusive Technology and Consulting Service Agreements.Under the exclusive technology and consulting service agreements between Bona
New World and each of the affiliated consolidated entities, Bona New World provides film investment consulting, operations management and marketing strategy consulting services to the
affiliated consolidated entities, in exchange for a service fee to Bona New World that is no less than 100% of their net profit before tax, except that the service fee with respect to Beijing
Baichuan Film Distribution Co., Ltd. is no less than 90% of its net profit before tax.
The service fee is payable at such time as agreed between Bona New World and the affiliated consolidated entity and approved by the board of such affiliated consolidated entity. The term of
each exclusive technology and consulting service agreement is from the effective date until the dissolution of either Bona New World or the affiliated consolidated entity. Bona New World
has the right to terminate the exclusive technology and consulting service agreement (i) at any time by giving 30 days' prior written notice to the affiliated consolidated entity, or
(ii) immediately by sending written notice to the affiliated consolidated entity if either the affiliated consolidated entity is in substantial default of the agreement and has failed to cure
such default within 30 days of receipt of notice from Bona New World, or the affiliated consolidated entity enters into liquidation or similar judicial procedures. The affiliated
consolidated entity has no right to terminate the exclusive technology and consulting service agreement prior to its expiration date.

Equity Pledge Agreements.Bona New World has entered into an equity pledge agreement with the shareholders of each affiliated
consolidated
entity. Under each equity pledge agreement, the shareholders have pledged their respective equity interests in the affiliated consolidated entity to Bona New World (other than 10% of the
outstanding equity interests of Beijing Baichuan, which was purchased by Bona Film Group Co., Ltd. (PRC) in December 2010 from an unaffiliated third party, Poly Film
Investment Co., Ltd.) to secure the obligations of the affiliated consolidated entity under its exclusive technology and consulting service agreement with Bona New World. In
addition, the shareholders have agreed not to transfer, sell, pledge, or create any encumbrance on their equity interests in the affiliated consolidated entity except for a transfer in accordance with
the voting trust and equity purchase option agreement or between shareholders which does not affect the validity of the equity pledge. The term of each equity pledge agreement is from the effective
date until the termination of the corresponding exclusive technology and consulting service agreement. In addition, upon full payment of all liabilities and termination of all obligations of the
affiliated consolidated entity under the exclusive technology and consulting service agreement, Bona New World shall terminate the agreement as soon as reasonably practicable.



Voting Trust and Equity Purchase Option Agreements.The shareholders of each affiliated consolidated entity have signed voting trust
and equity
purchase option agreements, pursuant to which the shareholders have granted Bona New World, or a person designated by Bona New World, the right to exercise all of the voting rights of
the shareholders of the affiliated consolidated entity. We have an exclusive option to purchase, or to designate other persons to purchase, to the extent permitted by applicable PRC laws, rules and
regulations, up to 100% of the equity interest in the affiliated consolidated entities from the shareholders. The purchase price for the entire equity interest is to be calculated based on the net
value of the affiliated consolidated entity or the minimum price permitted by applicable PRC laws, rules and regulations, whichever is higher, except that the purchase price for
the equity interest held by Mr. Dong Yu in Bona Film Group Co., Ltd. (PRC) shall be equal to the principal of the loan outstanding under the loan agreement described below, unless
otherwise required by applicable PRC laws, rules and regulations. Each affiliated consolidated entity covenants that without prior consent of Bona International Film Group Limited, it will not
distribute any dividends.

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The
term of each voting trust and equity purchase option agreement is from the effective date until termination of the corresponding exclusive technology and consulting service agreement.

Loan Agreement.Mr. Dong Yu, has entered into a loan agreement with Bona New World, under which Bona New World has
granted an
interest-free loan of RMB10 million to Mr. Dong Yu solely for purposes of Mr. Yu's increased capital contributions to Bona Film Group Co., Ltd. (PRC).
The loan has a term of 10 years and may be extended upon mutual written consent of the parties. Any proceeds generated from the transfer of equity interests held by Mr. Dong Yu in Bona
Film Group Co., Ltd. (PRC) to us shall be used to repay the loan and the loan can only be repaid using such proceeds. The loan agreement contains a number of covenants that restrict the
actions that Mr. Dong Yu may take or cause the Bona Film Group Co., Ltd. (PRC) to take. For example, Mr. Dong Yu (i) shall not transfer, sell, mortgage, dispose of,
or encumber his equity interest in Bona Film Group Co., Ltd. (PRC) except in accordance with the Equity Pledge Agreement discussed above, (ii) without Bona New World's
prior written consent, shall not take actions or omissions that may have a material impact on the assets, business and liabilities of Bona Film Group Co., Ltd. (PRC), (iii) shall
cause the shareholders' meeting and/or the board of directors of Bona Film Group Co., Ltd. (PRC) not to approve the merger or consolidation of Bona Film Group Co., Ltd.
(PRC) with any person, or any acquisition or investment in any person, without Bona New World's prior written consent, and (iv) shall appoint any director candidates nominated by Bona
New World.

We
have been advised by our PRC legal counsel, Han Kun Law Offices, that the structure for operating our business in China (including our corporate structure and our contractual
arrangements with our affiliated consolidated entities) complies with all applicable PRC laws, rules and regulations, and does not violate any applicable PRC laws, rules or regulations. However, there
are uncertainties regarding the interpretation and application of the relevant PRC laws, rules and regulations. Accordingly, there can be no assurance that the PRC regulatory authorities will not take
a view that is contrary to the opinion of our PRC legal counsel. Our PRC legal counsel has further advised that if a PRC government authority determines that our corporate structure, the contractual
arrangements or the reorganization to establish our current corporate structure violates any applicable PRC laws, rules or regulations, the contractual arrangements may become invalid or
unenforceable, and we could be subject to severe penalties and required to obtain additional governmental approvals from the PRC regulatory authorities. See "Item 3. Key
InformationD. Risk FactorsRisks Relating to Our Corporate StructureIf the PRC government determines that the agreements that establish the structure for
operating our China business otherwise do not comply with applicable PRC laws, rules and regulations, we could be subject
to severe penalties" and "Risks Relating to the PRCUncertainties with respect to the PRC legal system could limit the protections available to you and us."

Our Contractual Arrangement with Cinema Popular Limited

In October 2008, we entered into an agreement with Hurry Up Limited, the holder of the remaining 50% equity interest of Cinema
Popular Limited, under the terms of which we control the board of directors of Cinema Popular Limited and absorb all of the expected losses of Cinema Popular Limited. Hurry Up Limited is controlled by
Peter Chan, a producer and director of Chinese films. Accordingly, we treat Cinema Popular Limited as a variable interest entity and have consolidated its historical financial results in our financial
statements in accordance with U.S. GAAP.



See "B. Business OverviewFacilities."

Item 4A.    Unresolved Staff Comments

None.

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Item 5.    Operating and Financial Review and Prospects

Unless stated otherwise, the discussion and analysis of our financial condition and results of operations in this section apply to our
financial information as prepared according to U.S. GAAP. You should read the following discussion of our financial condition and results of operations together with the financial statements
and the notes to these statements included in this annual report on Form 20-F. This discussion may contain forward-looking statements based upon current expectations that involve
risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under
"Item 3. Key InformationD. Risk Factors" or in other parts of this annual report on Form 20-F.

Overview

We are a leading film distributor in China. A small number of our films, typically ones that are released during the peak seasons,
account for a substantial portion of our net revenue each year. Our remaining films generate lower net revenue but generally have lower costs for the acquisition of distribution rights or production.
Our top five films each year in 2010, 2011 and 2012 accounted for 53.5%, 58.3% and 37.4% of our net revenue in those respective years. From our inception in November 2003 to December 31,
2012, we distributed 171 films (including 47 films internationally), and we generally distribute between 16 and 20 films theatrically each year on average.

We
believe that our brand name and reputation in the film industry, our experience in film distribution and marketing, our collaborations with other domestic and international film
industry players, and our management's access to key industry participants enable us to identify and secure distribution rights for promising film projects.

We
distribute films through virtually all of the theater circuits in China. We are able to gain distribution rights to a wider selection of films in China through joint distribution
arrangements with industry participants such as the state-owned China Film Group Corporation. We have also distributed 35 Chinese films (including Hong Kong films) internationally since the
beginning of 2009, and we generated US$5.7 million, US$10.7 million and US$10.7 million in net revenue from international distribution of Chinese films (including Hong Kong films)
in 2010, 2011 and 2012, respectively. Although our international film distribution business has not historically made a significant contribution to our results of operations, it has accounted for an
increasing proportion of our net revenue. We believe that we are well positioned to take advantage of the increasing popularity of Chinese films abroad, given our track record of international
distribution and the distribution arrangements we have established with film distributors in markets including Korea, Japan and Southeast Asia. We have also expanded into non-theatrical
distribution channels, including home video products, digital distribution and television. As films continue to generate an increasing proportion of our revenue from non-theatrical
sources, we expect to continue to develop new and existing relationships to maximize the value of our distribution business and our film portfolio.

In
addition to our film distribution and film and television production operations, we owned and operated 20 movie theaters in commercial districts and residential areas in
several major cities in China as of December 31, 2012. Our movie theaters are affiliated with leading theater circuits in China and provide our audiences with modern facilities. Theater
circuits are mandated by PRC laws and regulations to negotiate the terms of arrangements for the exhibition of films and provide film prints to movie theaters. Consistent with industry practice in
China, these theater circuits charge an industry standard rate for their services, and we as film distributors are responsible for making and delivering film prints of both digital and traditional
films to them. We began operating our movie theater business in 2010 and we increased the number of movie theaters we operate from six as of April 30, 2010 to 20 as of
December 31, 2012. Our movie theater business generated net income of US$0.4 million from April 23 to December 31, 2010, net loss of US$0.2 million for 2011 and net
loss of US$1.6 million for 2012. Our talent agency business leverages our relationships in the film and entertainment industry and

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gives
us additional insight into upcoming film projects, while providing us with another source of promising film opportunities. We leverage our films and movie theater operations to attract
advertisers. We also believe that our movie theaters under the "Bona" brand, our ability to sell advertising in the films we exhibit and our representation of artists through our talent agency add to
the strength of our business and assist in building a brand which we believe is synonymous with high quality films in China.

Factors Affecting Our Results of Operations

Our business, results of operations and financial condition are significantly affected by a number of factors, many of which are beyond
our control. We expect our future growth to be affected by a number of factors and trends, including:

Our Ability to Identify and Secure Distribution Rights for Films on Favorable Terms

We must identify promising films from among the many films that are produced in China and overseas each year and secure distribution
rights for these films on terms that offer us attractive returns, including securing distribution rights through investment in the production of the film. In exceptional instances, we may participate
in the financing of a film without acquiring distribution rights or copyright. We believe that our brand name and reputation in the Chinese film industry, our experience in film distribution and
marketing in China, our collaborations with other
domestic and international film industry players, and our management's access to key industry participants and relationships with industry talent and artists enable us to identify and secure
distribution rights for or invest in promising film projects.

The
decision to distribute or invest in the production of a film, or both, is made by our senior management, supported by analysis of factors such as a film's expected critical reception
and marketability, as well as the cost to acquire the distribution rights or to finance the film production, the estimated distribution and marketing expenses required to bring the film to its widest
possible target audience, and ancillary market potential of the film after its theatrical release. We typically negotiate with film producers on a film-by-film basis to
determine the cost of the distribution rights or the film production. If we do not accurately judge the commercial viability of a film, or if the commercial arrangement through which we agree to
distribute and/or invest in the production of the film turns out not to be appropriate to the film's market potential or is otherwise not favorable, we may not recoup the cost we incurred to acquire
the distribution right, to finance film production or to distribute and market the film, or alternatively, we may fail to capture the potential benefits from the commercial success of the film. In
particular, the type of arrangements we enter into may affect our ability to profitably exploit the film. For example, our ability to profit from film with similar box office performances may vary
considerably depending on whether we enter into (i) a buy-off distribution arrangement, in which we pay a fixed amount to producer upfront to acquire the distribution rights with no
obligation to share box office proceeds with the producer, (ii) a commission-based distribution arrangement, in which we do not pay any fixed amount to the producer, but instead share a
proportion of the box office proceeds with the producer, or (iii) a minimum guarantee distribution in which case we would receive a higher proportion of the box office proceeds, subject to
paying the producer the amount of any shortfalls from a minimum amount. In each case, we strive to align the key terms of our distribution agreements to the estimated box office potential of
each film.

The Box Office Success of Our Films

The commercial success of a film is largely determined by its success at the box office, which is a key factor in estimating revenue
from other distribution channels. Box office earnings are largely determined by the appeal of the film to a broad audiencewhether owing to its storyline or the quality of its directors
and actorsand by effective marketing of the film, and depends primarily upon its acceptance by the public and similar unpredictable factors. The box office earnings of a film also

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depends
upon the release period of the film, the length of time that the film is in theaters, the release schedule of potentially competing films and other factors. A film's commercial success at the
box office
is also contingent upon it being exhibited on a sufficiently large number of screens at movie theaters to meet demand.

If
we are unable to accurately judge audience acceptance of films or to effectively market the films we distribute, the economic success of the film will be in doubt, which could result
in costs not being recouped or anticipated profits not being realized. Moreover, a particular feature film may not generate enough revenue to offset its distribution and marketing costs, in which case
we may incur a loss for such film. In addition, we generally distribute a limited number of films per year, historically approximately 16 to 20 films on average. As a result, a small number of
films could account for a significant impact on our results of operations in both the year of release and in the future. Historically, our net revenues have been largely dependent on the commercial
success of a relatively small number of films. For instance, our top five films each year in 2010, 2011 and 2012 accounted for 53.5%, 58.3% and 37.4% of our net revenues in those respective years.
Accordingly, our results of operations are highly contingent upon our ability to identify and secure distribution rights to a small number of films with high commercial potential.

The
potential box office appeal of a film, a film's genre and the length and timing of its release period, among other factors, may also affect the revenue we can derive from ancillary
sources such as advertising services and distribution overseas and to non-theatrical channels.

Our Ability to Secure Funding for Films on Favorable Terms and Effectively Control Costs

Film production and, to a lesser extent, film distribution, are capital intensive activities. We fund the acquisition of distribution
rights of films and investment in film production through cash flow from our operations, debt financing and syndication to other investors and film producers. The type of financing we use will affect
the economic return we are able to derive from each film. Principal and interest payments on loans and film participation expenses paid to other investors in order to fund film productions affect our
profitability and results of operations.

We
manage the risks associated with committing to capital intensive film production projects in a number of ways. We may syndicate our investment in film production to other investors
who share the investment risk. When we act as the lead investor in a film, we include in the total estimated production budget of the film an administration fee from participating investors to cover
costs we incur to manage the production process of the film.

We
manage the risks associated with the distribution of films by aligning the key terms of our distribution agreements to the estimated box-office potential of each film. We
generally seek arrangements where we are reimbursed by film producers for the expenses we incur in the marketing and promotion of their films, and agree to waive such reimbursements only in limited
circumstances. We have also maintained good relationships with leading theater circuits not only through our film distribution business as a supplier, but also through our movie theater business as a
customer. We believe that theater circuits value a relationship with us as we offer them access to our pipeline of approximately 16 to 20 films annually on average in a variety of genres as
well as a share of revenues from our movie theaters, which in turn enhances our ability to negotiate desirable exhibition schedules and screen runs as well as prominent positions in marketing and
publicity campaigns for our films. In addition, through our interactions with theater circuits as both a supplier and customer, we believe we gain better insight into the pipeline of competing films
to help us optimize our film release schedule accordingly.

By
managing investment risk and actively endeavoring to control our financing costs, we attempt to increase the profitability of our business.

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Our Ability to Maximize the Value of Our Films

We rely on theater circuits and operators to exhibit our films in movie theaters. Domestically, we grant exhibition rights to the films
we distribute to theater circuits throughout China on a film-by-film basis. We have, historically, entered into exhibition arrangements with virtually all theater circuits in
China. We believe that our ability to maintain favorable arrangements with theater circuits is attributable to the quality of the films we distribute, our track record and scale, and our brand
and reputation.

Our
results of operations are also affected by our ability to exploit our distribution rights internationally and through non-theatrical channels. We typically sell or
license our distribution rights to our films for exhibition and distribution overseas on a territory by territory basis. The licensing agreement with the overseas partner, typically based on the
Independent Film and Television Alliance standard form, sets the relevant terms including the distribution period, geographic area, licensing fees and scope of rights, such as distribution for
theatrical screening only or including other distribution channels such as DVD and other home video products, Internet and other digital distribution, in-flight entertainment and
television. The terms of the arrangement for a particular film are typically dependent on the domestic box office success of the film and the demand for Chinese films in the particular
geographic area.

We
utilize our strategic relationships to distribute our films on non-theatrical distribution channels and platforms, including DVD and other home video products, Internet
and other digital
distribution, in-flight entertainment and television. Our ability to maintain and expand the distribution of our films on non-theatrical distribution channels is also affected
by our ability to expand our portfolio of high quality films, as well as the demand for films in non-theatrical distribution channels.

Box Office Trends Driven by Consumer Spending Patterns and Film Infrastructure Growth

The commercial potential of the film industry in general will also continue to depend upon consumer spending patterns as well as box
office trends. As a result of rapid economic development in China, urban households have developed discretionary spending power, with per capita annual disposable income of urban households in China
increasing from RMB13,786 in 2007 to RMB24,464 in 2012, according to the National Bureau of Statistics of China. With increasing affluence and disposable income, the Chinese population
is increasingly able to spend a larger portion of their income on cultural activities and entertainment, including the viewing of films.

Rapid
urbanization and increases in discretionary spending have led to increasing investment in film infrastructure such as modern multiplex movie theaters. Newly built movie theaters
are generally equipped with modern visual and audio exhibition facilities, which improve the audience experience. According to EntGroup, the number of newly built movie theaters in China increased
from 102 in 2007 to 880 in 2012, while the total number of movie theaters grew from 1,427 to 3,680 during the same period. Our results of operations are and will continue to be
affected by the expansion of movie theaters in China, which will enable us to expand our distribution and will provide greater opportunities to capture the discretionary spending of China's growing
affluent class.

We
believe the increasing spending power of a larger consumer base, higher quality and increasing numbers of movie theaters and a greater range of available films have supported higher
rates and frequency of movie attendance. We believe our results of operations will be driven primarily by growing numbers of movie theaters, a growing number of movie viewers and increased frequency
of movie attendance. These ongoing box office trends will affect our profitability and results of operations.

Although
box office receipts have grown in China during the recent global financial crisis, a prolonged decline in economic conditions could reduce screenings of and attendance at our
film releases or demand for our films through non-theatrical distribution channels. In addition, the increasing availability of movies through non-theatrical distribution
channels, for example through

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digital
distribution, could result in a shift in consumer demand away from the movie theater as the immediate source of film revenues. If we are unable to generate sufficient revenues from or reduce
our costs incurred in distributing our films through non-theatrical distribution channels in response to any such shift in consumer demand, our results of operations may be adversely
affected. Our results of operations may also be affected by the prevalence of intellectual property violations in China, which may enable viewers to circumvent movie theaters and other legitimate
revenue-generating distribution channels from which we derive revenues.

Our
revenues are also affected by seasonal fluctuations, such as due to holidays and the summer release season, when movie theater attendance has traditionally been highest. As a result,
our quarterly results of operations may fluctuate significantly from period to period.

Effect of Regulatory Developments on the Film Industry

The film distribution business is greatly affected by regulations governing the type, number and sources of films, among other factors.
For example, the number of foreign films that may be exhibited in China on a box-office-earnings- sharing basis is limited by the PRC central government to 20 films per year. In
addition, there are separate quotas for films imported through buy-off distribution methods each year, mainly from countries other than the United States and for 3-D
films. The PRC government agreed, in February 2012 in connection with a World Trade Organization dispute settlement, to increase the number of foreign premium format films, such as
3-D or IMAX films, that may be imported into China by 14 films per year. Only China Film Group Film Distribution & Exhibition Corporation and Huaxia Film
Distribution Co., Ltd., both state owned enterprises, are currently licensed to distribute foreign films in China.

The
easing or elimination of the current regulatory restrictions, including the above-mentioned recent agreement to increase the number of foreign premium films, could create an
oversupply of films in China, reduce our share of box office receipts and make it more difficult for our films to succeed commercially. While non state-owned companies such as our company can
currently provide marketing assistance to state-owned enterprises for foreign films, the easing or elimination of regulations restricting the distribution of foreign films could also increase our
opportunities to further leverage our established brand name and proven track to further participate in foreign film distribution in China when current regulatory restrictions are eased
or eliminated.

These
and other potential regulatory changes have and could continue to have an impact on our results of operations.

Net Revenues

We generated net revenues of US$52.8 million, US$126.2 million and US$142.3 million in 2010, 2011 and 2012,
respectively.

We
deduct business taxes that our PRC subsidiary, affiliated consolidated entities and their subsidiaries are subject to on certain types of services and related revenues in the
presentation of our net revenues.

We
generate net revenues from our share of the box office proceeds of the films we distribute. Where we are the principal distributor of the film we receive our share of the box office
proceeds after the deductions by movie theaters and theater circuits of their shares in the box office sales, and taxes and other governmental charges. In addition, we cooperate with other
distributors to distribute films as a non-principal distributor and receive as revenue a fixed percentage of the distribution fees received by the principal distributor.

We
also generate net revenues by licensing or selling distribution rights and broadcast rights internationally and to non-theatrical distribution channels.

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We
also sell pre-screening advertising time before the start of films for which we have acquired the distribution rights and generate net revenues from other miscellaneous
advertising services such as "in-film" advertising, selling posters and promotions of films.

Where
we hold the copyright or a copyright interest in a film we also generate revenue from the licensing of our copyrights to other sales channels, including television, Internet
distribution companies and overseas distributors. We also enter into arrangements where we participate in the financing of film production without receiving distribution rights or copyrights, and
receive a percentage of the net profit of the film which we recognize as revenue.

We
also derive net revenue from our talent agency services, primarily from performance contracts for the artists we represent. Our agency contracts are negotiated on a
case-by-case basis. The net revenues we generate from our representation of an artist are linked to the stage of the career and level of fame of the artist.

We
also generate revenues from our movie theater business, primarily from ticket sales and concession sales.

Cost of Revenues

Our cost of revenues amounted to US$26.5 million, US$66.5 million and US$86.1 million in 2010, 2011 and 2012,
respectively.

Cost
of revenues for our film-related revenues primarily consist of: (1) the amortization of any upfront amount we have incurred to acquire distribution rights,
(2) the amortization of any upfront amount we have incurred to acquire copyrights or a proportionate interest therein, (3) the amortization of any production cost we have incurred where
we are the producer of a film, (4) the amount that we remit to producers or participating distributors when they are entitled to share the box office sales based on the distribution arrangement
(including cases where we guarantee the film producer a minimum amount and, if the box office sales are lower than the minimum amount, pay the difference to the film producer) and (5) other
expenses in our film-related business.

Cost
of revenues for our talent-agency services primarily consists of (1) compensation paid to artists and (2) other expenses in the related business.

Cost
of revenues for our movie theater business primarily consists of the box office split with theater circuits.

Gross Margin

Our cost of revenues, and accordingly our gross margins and gross profit of our film-related business, are largely a
function of the type of contractual arrangement we enter into and the extent of our economic rights and obligations in a particular film. For instance, in cases where we are a principal distributor,
our revenues from film distribution include
all of the box office receipts after deductions by movie theaters and theater circuits of their shares in the box office receipts and taxes and other governmental charges, and the share of box office
receipts that we remit to the film producers or owner of the copyright or participating distributors is recorded under cost of revenues. In contrast, for films where we are not the principal
distributor but own a percentage of the economic interest in the film, we receive a share of the net profits of the film. Therefore, the gross margins and gross profit may vary significantly as a
result of the type of contractual arrangement underlying the various distribution and production arrangements we enter into during each period.

The
gross margin of our movie theater business is mainly derived from the box office split with theater circuits.

We
do not believe a discussion of these figures on a consolidated basis is meaningful to investors. However, we believe segment profit and segment margin provide a more meaningful
perspective on our

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results
of operations and therefore we discuss these figures in the section titled "Discussion of Segment Operations" below.

Operating Expenses

Our operating expenses consist of film participation expenses, selling and marketing expenses and general and administrative expenses.
The following table sets forth our operating expenses, divided into their major categories by amount for the periods indicated.

For the years ended December 31,2010

2011

2012(US$)

(US$)

(US$)Operating expenses:Film participation expenses


696,101


321,100


438,636Selling and marketing expenses


7,213,519


18,506,262


18,490,433General and administrative expenses


9,305,393


28,371,497


41,890,064Total operating expenses


17,215,013


47,198,859


60,819,133


Film Participation Expenses.Our film participation expenses accounted for 1.3%, 0.3% and 0.3% of our net revenues in 2010, 2011
and 2012,
respectively. Film participation expenses are the share of the respective film worldwide revenue to which a film participant is entitled for a certain period of time and is recorded based on an
effective interest rate method on an individual film-by-film basis.

Selling and Marketing Expenses.Our selling and marketing expenses primarily consist of print and marketing expenses of films we
distribute, salaries
and benefits for our sales staff, marketing and promotional expenses, business development expenses and other costs related to supporting our sales force. Selling and marketing expenses accounted for
13.7%, 14.7% and 13.0% of our net revenues in 2010, 2011 and 2012, respectively. Selling and marketing expenses are mainly incurred for film distribution, investment and production. 2012 revenue
(excluding the movie theater segment) amounted to US$100.6 million, with 2011 revenue (excluding the movie theater segment) amounted to US$100.1 million, selling and marketing expenses
accounted for 18.5% and 18.4% of revenue (excluding the movie theater segment) in 2011 and 2012, respectively.

General and Administrative Expenses.Our general and administrative expenses primarily consist of salaries and benefits for
management, accounting
and administrative personnel, rentals, depreciation of equipment, professional service fees, maintenance, utilities and other miscellaneous office expenses. General and administrative expenses
accounted for 17.6%, 22.5% and 29.4% of our net revenues in 2010, 2011 and 2012, respectively, due to the expansion of our movie theater business.

Other Income (Loss)

Our other income (loss) reflects interest income, interest expense of bank borrowings and other borrowings, exchange rate gains or
losses, changes in fair value of warrants and the changes in fair value of derivatives. The change in fair value of derivatives we recorded in 2010 reflected changes in connection with embedded
derivative features of our preferred shares. Our net loss in 2010 included a loss of US$14.5 million, from changes in fair value of derivatives. The redemption terms of our preferred shares
were amended in August 2010, and as a result, we ceased to recognize derivative liabilities and change in fair value of derivatives on the date of such amendment. Our other income in 2011 was
mainly due to the exchange gain of US$1.7 million. The exchange gain was primarily attributable to several of our films, including the blockbuster filmThe Flying Swords
of Dragon Gate, for which production costs were largely incurred in Hong Kong dollars, and distribution business revenues were primarily denominated in RMB. Our other income in
2012 included interest income from bank deposits, interest expense of bank borrowing and other borrowings and other income.

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Equity in Earnings of Equity Method Investments

We record our investments in affiliates using the equity method of accounting, and the profit or loss from the affiliates is presented
as "Equity in earnings of equity method investments" in our statement of operations.

Taxation

Cayman Islands

We are incorporated in the Cayman Islands. Under the current law of the Cayman Islands, we are not subject to income or capital gains
tax in the Cayman Islands. In addition, our payment of dividends, if any, is not subject to withholding tax in the Cayman Islands.

PRC

Business tax.Currently, our subsidiary and affiliated consolidated entities and their subsidiaries in China are subject to a 3%
to 5% business tax
in connection with certain types of services, plus related surcharges.

Income tax.Pursuant to the EIT Law, which became effective on January 1, 2008, a uniform 25% enterprise income tax rate is
generally applied
to both foreign-invested enterprises and domestic
enterprises, except where a special preferential rate applies. Our subsidiary and affiliated consolidated entities and their subsidiaries in China are subject to enterprise income tax at a statutory
rate of 25% with the following exception:



Income
tax is assessed and paid at subsidiary level. Therefore, the net loss from operations generated by a particular entity cannot be transferred to or utilized by other entities
within our consolidated company.

Without
our preferential tax holidays and concessions, we would incur approximately an additional tax expense of US$3.2 million, US$5.1 million and US$0.4 million in
2010, 2011 and 2012, respectively.

Each
of Zhejiang Bona Film and Television Production Co., Ltd. and Tianjin Bona Film Culture Media Co., Ltd. has obtained a governmental approval to receive a
government subsidy in 2013 based on a certain percentage of its income tax assessed for the taxable year 2012.

Under
the EIT Law, enterprises that are established under the laws of foreign countries or regions and whose "de facto management bodies" are located within the PRC territory may be
deemed by the PRC tax authorities as PRC resident enterprises, and will be subject to the PRC enterprise income tax at the rate of 25% on their worldwide income. Under the detailed implementation rule
of the EIT Law, "de facto management bodies" is defined as bodies that have material and overall management and control over the business, personnel, accounts and assets of the enterprise. Although
substantially all of our operational management is currently based in the PRC, it is unclear whether PRC tax authorities would require (or permit) us to be treated as a PRC resident enterprise.
To our knowledge, there is a lack of clear guidance regarding the criteria pursuant to which the PRC tax authorities will determine the tax residency of a company under the EIT Law. Despite the
present uncertainties as a result of limited guidance from PRC tax authorities on the issue, we do not believe that our legal entities organized outside of the PRC should be treated as residents under
the EIT Law. If we and our offshore holding companies are considered to be PRC resident enterprises, we would be subject to the PRC enterprise income tax at the rate of 25% on our worldwide income. In
such cases, however, there is no guarantee that the preferential treatments to PRC tax residents will automatically apply to us, such as the withholding tax exemption on dividends between PRC resident
companies.

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Critical Accounting Policies

The preparation of our consolidated financial statements and related notes requires us to make judgments, estimates and assumptions
that affect the reported amounts of assets, liabilities, net sales and expenses, and related disclosure of contingent assets and liabilities. We have based our estimates on historical experience and
on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that
are not readily apparent from other sources. Our management has discussed the development, selection and disclosure of these estimates with our board of directors. Actual results may differ from these
estimates under different assumptions or conditions.

An
accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate
is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the
consolidated financial statements. We believe that the following critical accounting policies are the most sensitive and require more significant estimates and assumptions used in the preparation of
our consolidated financial statements. You should read the following descriptions of critical accounting policies, judgments and
estimates in conjunction with our consolidated financial statements and other disclosures included in this annual report on Form 20-F.

Consolidation of Variable Interest Entities

We are a holding company with no material operations of our own. Foreign investment in the film and entertainment industries is
currently prohibited or restricted in China. As a Cayman Islands company, we do not qualify to conduct these businesses under PRC regulations. To comply with the PRC laws and regulations, we conduct
substantially all of our film production, distribution and exhibition, television production, movie theater operation and talent agency services business in China through contractual arrangements with
our affiliated consolidated entities, namely Beijing Baichuan Film Distribution Co., Ltd., Bona Film Group Co., Ltd. (PRC) and Beijing Bona
Advertising Co., Ltd., and their subsidiaries and shareholders. See "Item 4. Information on the CompanyC. Organizational StructureContractual
Arrangements with Our Affiliated Consolidated Entities" for a summary of these contractual arrangements. In 2010, 2011 and 2012, our affiliated consolidated entities and their subsidiaries contributed
in aggregate 83.9%, 92.7% and 93.1%, respectively, of our consolidated net revenues. As of the December 31, 2011 and 2012, our affiliated consolidated entities and their subsidiaries accounted
for an aggregate of 57.0% and 70.8%, respectively, of our total assets, and 84.6% and 79.7%, respectively, of our total liabilities. The terms of the voting trust and equity purchase option agreements
give us the right to exercise the voting and other rights of the shareholders of the affiliated consolidated entities. We also have substantive kick-out rights as per the equity purchase
option under the Voting Trust and Equity Purchase Option Agreements. Therefore, we have the power to control the shareholders of the affiliated consolidated entities. Moreover, we believe that the
consideration for the equity purchase option pursuant to the voting trust and equity purchase option agreements does not represent a financial barrier or disincentive for us to exercise our kick-out
rights. Therefore, we believe we have the power to direct the activities that most significantly impact the economic performance of the affiliated consolidated entities. Our ability to exercise
effective control, together with the exclusive technology and consulting service agreements and the equity pledge agreements, give us the rights to receive substantially all of the economic benefits
from our affiliated consolidated entities and their subsidiaries in consideration for the services provided by our wholly owned subsidiary in China, Bona New World, to our affiliated consolidated
entities. Accordingly, as the primary beneficiary of our affiliated consolidated entities and their subsidiaries and in accordance with U.S. GAAP, we consolidate their financial results and
assets and liabilities in our consolidated financial statements.

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As
advised by Han Kun Law Offices, our PRC counsel, our corporate structure in China complies with all existing PRC laws and regulations. However, our PRC legal counsel has also advised
us that as there are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, and we cannot assure you that the PRC government would agree that our corporate
structure or any of
the above contractual arrangements comply with current or future PRC laws or egulations. PRC laws and regulations governing the validity of these contractual arrangements are uncertain and the
relevant government authorities may have broad discretion in interpreting these laws and regulations. See "Item 3. Key InformationD. Risk factorsRisks Relating to Our
Corporate StructureIf the PRC government determines that the agreements that establish the structure for operating our China business do not comply with applicable PRC laws, rules and
regulations, we could be subject to severe penalties," "Item 3. Key InformationD. Risk factorsRisks Relating to Our Corporate StructureWe rely on
contractual arrangements for our affiliated consolidated entities and their shareholders for our business operations, which may not be as effective in providing operational control as direct
ownership," "Item 3. Key InformationD. Risk FactorsRisks Relating to Our Corporate StructureOur ability to enforce the equity pledge agreements between
Bona New World and the shareholders of each of our affiliated consolidated entities may be subject to limitations based on PRC laws and regulations."

Revenue Recognition

We make certain judgments regarding the method of recognizing revenue and costs.

(i)    Distribution Revenues

We acquire film distribution rights as the principal or a participating distributor in China and overseas from film producers.

As
the principal distributor, we recognize distribution revenues when the films are exhibited in movie theaters. After the payments by the movie theaters of taxes and other governmental
charges and deductions by movie theaters and theater circuits of their respective shares of the box office sales, the remaining amount, or the Distributable Amount, is remitted to us which we account
for as our distribution revenues.

We
then share the Distributable Amount with the film producer, other participating distributors or both, pursuant to the terms of the distribution agreement under which we are typically
entitled to a fixed percentage of the Distributable Amount as our fees, or the Distribution Fees. The Distributable Amount, after further deductions of the Distribution Fees and print and marketing
expenses, except in rare cases where not reimbursable by the producer, is paid or payable to the producer, and is accounted for as a cost of distribution revenues.

We
evaluate such arrangements to determine whether to recognize revenue on a gross basis or net of payments paid to the film producers or other distributors, i.e., whether to recognize the Distributable
Amount or the Distribution Fees as revenue.

The
determination is based upon an assessment of whether we act as a principal or agent when providing the distribution services. In these arrangements, we recognize the Distributable
Amount as revenue and show the amount we owe to the producer as part of cost of sales. Our determination is based on the following factors:



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We
also cooperate with other distributors to distribute films as a participating distributor but are not the primary obligor under the distribution arrangement. For such arrangements, we
share a fixed percentage of the distribution fees received by the principal distributor as our commissions and record these commissions as our distribution revenues.

We
also generate revenues from advertising services such as "in-film" advertising, pre-screening advertising, selling poster space and promotions of films.
Revenues from advertising services are recognized as advertisement is shown or upon services provided. Cost of advertising services primarily consists of the cost of acquiring advertising airtime.

For
certain films the distribution rights of which are acquired by us, we sub-license such rights to international third-party distributors and domestic and international
non-theatrical channels including television and Internet companies for a particular term. Revenues from such sub-licensing arrangements are recognized when the following
criteria are met: (i) an arrangement has been signed with a customer, (ii) the customer's right to use or otherwise exploit the intellectual property has commenced and there is no
requirement for significant continued performance by us, (iii) licensing fees are either fixed or determinable and (iv) collectability of the fee is reasonably assured.

(ii)   Copyright and Participation Revenues

When we are not the principal distributor, but participate in the financing of film production in which we may also acquire all, a portion or none of the legal
copyright in relation to the film, and bear a portion of the costs of financing, production, prints, promotion and advertising pursuant to the terms of the agreement for the production of the film, we
generate revenues from such film production participation as follows.



In
addition, we also act as a talent agent for certain artists, where in certain cases we sign the service contract with a third party and in other cases, we, the artist together sign
the service contract with the
third party. We determine whether to record our revenue at the gross amount billed to the third party or the amount net of the payments to the relevant artists. The determination of whether revenue
should be reported gross or net is based on an assessment of whether we are acting as a principal or an agent in the transaction. In arrangements where we sign the service contract with third parties
and are the primary obligor, we are acting as a principal and report the gross amount of the service as revenue. In arrangements where we and the artist together sign the contract with a third party,
we are acting as an agent, so we report revenue at the total service amount net of the payment to the artist. For arrangements where we record the gross amount as our revenue, cost of talent agency
service primarily consists of compensation paid to artists.

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Amortization of the Cost of Distribution Rights and Production Cost

Distribution rights include the unamortized costs of films' distribution rights, including completed films and films in production.
Production costs include expenditures for the production and acquisition of proportional economic interest in films by us. Production costs also include costs of productions of films which have been
completed and costs of productions which are still in production.

Costs
of distribution rights and production cost are amortized using the individual-film-forecast method from the commencement of the initial exhibition of the
film in movie theaters.

Under
the individual-film-forecast method, the costs are amortized in the proportion that current year's revenue bears to management's current estimate of
ultimate revenue expected to be recognized from the exhibition or sub-licensing of the films.

Film
ultimate revenues include estimates of revenues from all markets and territories where persuasive evidence exists that such revenue will occur, including revenues associated with
theatrical release and non-theatrical distribution of the film.

Film
ultimate revenues forecasts are limited to our estimates of revenue over a period not exceeding ten years following the date of the film's initial release.

We
assess the length of the period over which the revenue is expected to be generated based on our past experience for similar films with equivalent production values, the likely
popularity of the stories and the artists in the regions where we expect to distribute the film and the competitive dynamics in the target exhibition slots in those regions.

We
start to estimate revenue streams as soon as we incur production or investments costs. Since the revenue is generated from distribution in the domestic and international markets, we
estimate the revenue for each market separately. In the domestic market, after the initial showing of the films in the theaters, we believe that our forecasts of revenues are generally robust. For the
films we distributed in 2009, 2010 and 2011, the majority of the forecast revenue was generated within the first three months of the initial exhibition and typically after nine months, approximately
90% of the total estimated domestic revenue will have been realized. As a result, the related film production, investment or distribution rights costs will have been amortized to a corresponding
degree.

We
typically expect a relatively small percentage of the total forecast revenues to come from international distribution. We expect the international revenue to be generated over a
longer time period than the domestic revenue. We closely monitor the revenue performance in the international market to continuously refine our estimate of total estimated revenue. In 2011, we
decreased the estimate of the ultimate overseas revenue expected to be realized from certain films and television series based on their levels of economic performance and public acceptance, and as a
result incurred additional amortization of US$3.8 million.

Impairment of Distribution Rights and Production Costs

We review the distribution rights and production costs for impairment at least annually or whenever events or changes in circumstances
indicate that the carrying amount of the distribution rights and production costs may be impaired. The valuation of distribution rights and production costs is reviewed on a
title-by-title basis. The excess of the carrying value above the fair value is written off and the amount is classified as costs of revenues in the consolidated statements of
operations. We base these fair value measurements on unobservable inputs derived from our assumptions about how market participants would price the asset. Due to the nature of these assets, market
data for similar assets is not available. Key assumptions used in such fair value measurements include: (1) the discount rate applied to future cash flow streams, which is based on a
risk-free rate plus a risk premium representing the risk associated with the type of property being exploited and (2) the number of years over which we

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estimate
future net cash flows. We consider the sensitivity of these inputs in assessing its assumptions. Additionally, on occasion, we may change the creative direction of, or abandon, one or more of
our films after being placed into production. As a result, amounts previously capitalized as distribution rights and production costs may be expensed. We will not subsequently restore any amounts
written off in previous fiscal years.

No
impairment loss was recorded in 2010 and 2011. In 2012, as a result of lower-than-expected revenue performance of certain films and TV series, the Group
determined the unamortized production costs were impaired by $2,280,198. Key assumptions used in the fair value measurement were discount rates ranging from 15% to 16% and estimated remaining cash
flows over a period of 10 years from a title's initial release. A change in the discount rate of 1.0% would change the impairment loss measurement by $51,349.

Impairment of Long-lived Assets and Intangible Assets with Definite Life other than Distribution Rights and Production Costs

Long-lived assets, such as property and equipment and definite-lived intangible assets, other than distribution rights and
production costs, are stated at cost less accumulated depreciation or amortization. We evaluate the recoverability of long-lived assets, including identifiable intangible assets with
determinable useful lives, other than distribution rights and production costs, whenever events or changes in circumstances indicate that a long-lived asset's carrying amount may not be
recoverable. We measure the carrying amount of long-lived asset against the estimated undiscounted future cash flows associated with it. Impairment exists when the sum of the expected
future net cash flows is less than the carrying value of the asset being evaluated. Impairment loss is calculated as the amount by which the carrying value of the asset exceeds its fair value. Fair
value is estimated based on various valuation techniques, including the discounted value of estimated future cash flows. The evaluation of asset impairment requires us to make assumptions about future
cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts.

Impairment of Goodwill

The excess of the purchase price over the fair value of net assets acquired is recorded on the consolidated balance sheet as goodwill.
Goodwill is not amortized but is evaluated annually or more frequently if event and circumstances indicate that they might be impaired.

When
we evaluate goodwill impairment, we first assess qualitative factors to determine whether it is "more likely than not" that the fair value of a reporting unit is less than its
carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test.

If
we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we will perform a two-step goodwill impairment test.
The first step compares the fair value of each reporting unit to its carrying amount, including goodwill.

If
the fair value of a reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a
reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit's goodwill. The implied fair value of goodwill is
determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit.
The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. An impairment loss is recognized for any excess in the
carrying value of goodwill over the implied fair value of goodwill. Estimating fair value is performed by utilizing various valuation techniques.

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In
determining the fair values of our movie theatre reporting unit as of December 31, 2012, we considered the discounted cash flow method, or DCF method, of the income approach to
be more reliable than other approaches. The discounted cash flow for the reporting unit was projected based on financial forecast developed by management for planning purposes. Cash flows beyond the
forecast periods were estimated using a terminal value calculation, which incorporated historical and forecasted financial trends for the reporting unit. Specifically, the income approach valuation
included a revenue projection with the compound annual growth rate of 36.9% during the years from 2013 to 2017, a cash flow discount rate at 19%, and a terminal value growth rate at 3.0%. Publicly
available information regarding the market capitalization of the Group was also considered in assessing the reasonableness of the fair value of the reporting unit estimated using the income approach
valuation methodology. Based
on the result of goodwill impairment test as of December 31, 2012, no impairment of goodwill was identified.

The
valuations are based on information available as of the impairment review date and are based on expectations and assumptions that have been deemed reasonable by the management. Any
changes in key assumptions, including unanticipated events and circumstances, may affect the accuracy or validity of such estimates and could potentially result in additional impairment charge.

Film Production Financing

To fund production of our films and lower our own risks, we obtain financing through bank borrowings, and a variety of arrangements
with other third-party finance providers.

If
we guarantee the third-party finance providers a fixed rate of return on the principal over a fixed term of period, the cash received from these investors is accounted for on our
balance sheet as "other borrowings" and is treated no differently from any other debt where the lender receives a pre-determined rate of return. We accrue interest expense on other
borrowings using a fixed rate of return.

For
other financing, where we give the third-party investor a fixed percentage of the film's worldwide revenue, or a fixed percentage of the film's worldwide revenue with guarantee of
minimum rate of return on the principal, the cash received from these investors is accounted for as film participation financing liabilities. We retain copyrights of the films and the arrangements do
not involve sale of a proportionate undivided interest in the copyright to the third-party participants.

Under
those arrangements where the participant is entitled to a share of the respective film's worldwide revenue, we record the participant's share of revenue as film participation
expense based on an effective interest rate method on an individual film-by-film basis. We start to accrue for participation expense from the initial exhibition of the film.
The effective interest rate is calculated based on the initial investments by the third party participants and a series of future cash outflows to the participants estimated by management using the
same estimates of revenue determined in using the individual-film-forecast method as discussed above under amortization of production cost.

Estimates
of the effective interest rate result from a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions at a point in time.
The judgments made in determining an estimate of the effective interest rate can materially impact our results of
operations. The estimated effective interest rates are based on information available as of each reporting period end date and are based on expectations and assumptions that have been deemed
reasonably by management. Any changes in key assumptions, including unanticipated events and circumstances, may affect the accuracy or validity of such estimates and could potentially result in change
of the accrued participation expense.

Because
film participation expense is unlike debt financing with a specified rate of return we do not regard such expense as akin to interest and therefore do not regard it as eligible
for capitalization

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under
the rules in U.S. GAAP relating to the capitalization of interest. Instead, we reflect this expense in film participation expense on our income statement.

If
a film underperforms the final redemption amount is estimated to be lower than the amount originally invested by third-party participants, a negative effective interest rate is
calculated and applied to the outstanding film participation financing liabilities balance to determine the current period's reduction of film participation expense.

Under
those arrangements where the participant is entitled to a share of the respective film worldwide revenue with guarantee of a minimum rate of return on the principal, if at any
point of time, we determine that the accrued film participation financing liability is not sufficient to cover the guaranteed minimum rate, an additional liability will be accrued based on the
guaranteed minimum rate of return.

For
some third party financing, we and the investors co-own the copyright and share the profit or loss of the film. The form of the arrangement is the sale of an economic
interest in a film to an investor. We record the amount received from the investor as a reduction of our capitalized full costs, as the investor assumes full risk for that portion of the film asset
acquired in these transactions.

Income Taxes

As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the
jurisdictions in which we operate. This process involves us estimating our actual current tax exposure together with assessing temporary
differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated
balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we must establish
a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a certain period, we must include an expense within the tax provision in the statement
of operations.

Significant
management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net
deferred tax assets. The valuation allowance is based on our estimates of taxable income by jurisdiction in which we operate and the period over which our deferred tax assets will be recoverable. In
the event that actual results differ from these estimates or we adjust these estimates in future periods, we may need to establish an additional valuation allowance, which could materially impact our
financial position and results of operations.

U.S. GAAP
requires that the impact of an uncertain income tax position on the income tax return be recognized at the largest amount that is more likely than not to be sustained
upon audit by the relevant tax authority. If we ultimately determine that the payment of these liabilities will be unnecessary, we will reverse the liability and recognize a tax benefit during that
period. Conversely, we record additional tax charges in a period in which we determine that a recorded tax liability is less than we expect the ultimate assessment to be.

Uncertainties
exist with respect to how the EIT Law applies to our overall operations, and more specifically, with regard to our tax residency status. The EIT Law includes a provision
specifying that legal entities organized outside of the PRC will be considered residents for Chinese income tax purposes if the place of effective management or control is within the PRC. The
implementation rules to the EIT Law provide that non-resident legal entities will be considered PRC residents if substantial and overall management and control over the manufacturing and
business operations, personnel, accounting and properties occurs within the PRC. On April 22, 2009, the SAT issued the Notice Regarding the Determination of ChineseControlled
Offshore Incorporated Enterprises as PRC Tax

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Resident
Enterprises on the Basis of De Facto Management Bodies, or Circular 82, which provides certain specific criteria for determining whether the "de facto management body" of a
Chinese-controlled offshore-incorporated enterprise is located in China. In addition, on August 3, 2011, the SAT issued a bulletin to make clarifications in the areas of resident status
determination, post-determination administration, as well as competent tax authorities. We do not believe that our legal entities organized outside of the PRC should be treated as
residents for EIT law purposes. However, if the PRC tax authorities subsequently determine that our legal entities registered outside the PRC should be deemed resident enterprises, these entities will
be subject to the PRC
income taxes, at a rate of 25% and the impact would adversely affect our results of operation. See "Item 3. Key InformationD. Risk FactorsRisks Relating to the
PRCWe may be deemed a PRC resident enterprise under the EIT Law and be subject to the PRC taxation on our worldwide income."

Fair Value of Our Ordinary Shares

Prior to our initial public offering, we were a private company with no quoted market prices for our ordinary shares. We therefore
needed to make estimates of the fair value of our ordinary share at various dates for the following purposes:



Following
our initial public offering, the fair value of our ordinary shares is determined by reference to the trading prices of our ADSs on the NASDAQ.

The
following table sets forth the fair value of our ordinary shares estimated at different times prior to the completion of our initial public offering.

Date

Class of Shares

Fair Value

Purpose of Valuation

DLOM

Discount RateApril 23, 2010

Ordinary Shares

US$
4.50

Acquisition of Bona Cineplex


16%


22%June 1, 2010

Ordinary Shares

US$
4.75

Valuation of share-based compensation


11%


19%July 26, 2010

Ordinary Shares

US$
5.66

Assessment of beneficial conversion feature upon issuance of Series B-3 preferred shares and valuation of share-based compensation


10%


17%


When estimating the fair value of the ordinary shares, our management considered a number of factors, including the result of a third-party
appraisal and equity transactions of our company, while taking into account standard valuation methods and the achievement of certain events.

The
fair value of the ordinary shares was determined with the assistance of American Appraisal China Limited, or AA, an independent third-party valuation firm. The valuation reports from
AA have been used as part of our analysis in reaching our conclusion on share values. We reviewed the valuation methodologies used by AA and believe the methodologies used are appropriate and the
valuation results are representative of the fair value of our ordinary shares.

AA
considered two generally accepted valuation approaches: market and income. In 2010, the comparability of earnings multiples of publicly traded film production and distribution
companies and

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hence
the reliability of market approach was low because most publicly traded film production and distribution companies operate in the United States and Japan and their market capitalization
fluctuated significantly as a result of the global financial crisis while our operation and long term forecast had not been impacted by the same degree during this period. Therefore, AA used the
discounted cash flow, or DCF, method of the income approach to assess the fair value of ordinary shares in 2010. The determination of the fair value of our ordinary shares requires complex and
subjective judgments to be made regarding our projected financial and operating results, our unique business risks, the liquidity of our shares and our operating history and prospects at the time
of valuation.

The
major assumptions used in calculating the fair value of ordinary shares include:

Weighted average cost of capital, or WACC:WACCs of 22%, 19% and 17% were used for dates as of April 23, 2010, June 1, 2010
and
July 26, 2010, respectively. The WACCs were determined by using the capital asset pricing model, or CAPM, a method that market participants commonly use to price securities. Under CAPM, the
discount rate was estimated based on a consideration of the factors including risk-free rate, comparative industry risk, equity risk premium, company size, the company's state of
development and company-specific factors as of the valuation date. The decrease in WACCs from April to July 2010 was due to the combined results of the following
factors:



Comparable companies:In deriving the WACCs, which are used as the discount rates under the income approach, certain publicly traded
companies in the
film production and distribution industry were selected for reference as our guideline companies.

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To
reflect the operating environment in China and the general sentiment in the U.S. capital markets towards the film production and distribution industry, the guideline companies
were selected with
consideration of the following factors: (i) the comparable companies should operate film production and distribution business; and (ii) the comparable companies should either have their
principal operations in Asia Pacific, as we mainly operate in China, or are publicly listed in the United States, as we are a public company in the United States.

Discount for lack of marketability, or DLOM:AA quantified DLOM using the Black-Scholes option pricing model. Under this option-pricing
method, the
cost of the put option, which can hedge the price change before the privately held shares can be sold, was considered as a basis to determine the DLOM. This option pricing method is one of the methods
commonly used in estimating DLOM as it can take into consideration factors like timing of a liquidity event (such as an initial public offering) and estimated volatility of equity securities. The
farther the valuation date is from an expected liquidity event, the higher the put option value and thus the higher the implied DLOM.

The
DLOMs were estimated to be 16%, 11% and 10% as of April 23, 2010, June 1, 2010 and July 26, 2010, respectively. The lower DLOM is used for the valuation,
the higher is the determined fair value of the ordinary shares. In the first quarter of 2010, we started the preparation for our initial public offering. Because of the proximity of the expected time
of the offering, DLOM decreased from 16% for the valuation as of April 23, 2010, to 11% for the valuation as of June 1, 2010 and to 10% for the valuation as of
July 26, 2010.

The
income approach involves applying appropriate discount rates to estimated cash flows that are based on earnings forecasts. However, the fair values are inherently uncertain and
highly subjective. The assumptions used in deriving the fair values are consistent with our business plan.

These
assumptions include: no material changes in the existing political, legal and economic conditions in China; our ability to retain competent management, key personnel and staff to
support our ongoing operations; and no material deviation in market conditions from economic forecasts.

These
assumptions are inherently uncertain. The risks associated with achieving our forecasts were assessed in selecting the appropriate discount rates, which ranged from 17%
to 29%.

AA
used the option-pricing method to allocate enterprise value to preferred and ordinary shares, taking into account the guidance prescribed by the Practice Aid. The method treats common
stock and preferred stock as call options on the enterprise's value, with exercise prices based on the liquidation preference of the preferred stock.

The
option-pricing method involves making estimates of the anticipated timing of a potential liquidity event, such as a sale of our company or an initial public offering, and estimates
of the volatility of our
equity securities. The anticipated timing is based on the plans of our board of directors and management. Estimating the volatility of the share price of a privately held company is complex because
there is no readily available market for the shares. We estimated the volatility of our shares to range from 39% to 74% based on the historical volatilities of comparable publicly traded companies
engaged in similar lines of business. Had we used different estimates of volatility, the allocations between preferred and ordinary shares would have been different.

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The determined fair value of our ordinary shares increased from US$4.50 per share as of April 23, 2010 to US$4.75 per share as of June 1, 2010 and
to US$5.66 as of July 26, 2010. We believe the increase in the fair value of our ordinary shares is primarily attributable to the following factors:



We
considered the guidance prescribed by the Practice Aid in determining the fair value of our ordinary shares as of various dates before our initial public offering. A detailed
description of the valuation method used and the factors contributing to the changes in the fair value of our ordinary shares through July 26, 2010 is set out above. Paragraph 113 of the
Practice Aid states that "the ultimate IPO price itself also is generally not likely to be a reasonable estimate of the fair value for pre-IPO equity transactions of the enterprise." We
therefore believe that the ultimate price of the initial public offering was generally not likely to be a reasonable estimate of the fair value of our ordinary shares as of various dates before the
initial public offering.

Nevertheless,
we believe that the increase in fair value of our ordinary shares from US$5.66 per ordinary share as of July 26, 2010 to US$17.00 per ordinary share, the initial
public offering price, was primarily attributable to the following factors:



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Share-based Compensation

Our share-based payment transactions with employees are measured based on the grant date fair value of the equity instrument we issued
and recognized as compensation expense over the requisite service period based on a graded vesting attribution method, with a corresponding impact reflected in additional paid-in capital.

The
fair values of our option awards granted to employees and non-employees were estimated on the date of grant or the date of vesting using the binomial option pricing model
based on the following assumptions.

June 1,
2010

July 26,
2010

March 23,
2011

November 13,
2011

December 31,
2012Risk-free interest rate


4.36%


1.26%


2.89%


2.78%


2.08%Expected dividend yield


nil


nil


nil


nil


nilExpected volatility


44%


44%


44%


44%


42%Exercise multiple


2.00


2.00


2.00 and 2.30


2.00


2.00Fair value of the underlying ordinary shares

US$
4.75

US$
5.66


US$12.37

US$
8.88

US$
9.84


The risk-free rate is based on the implied yield of PRC international bonds denominated in U.S. dollars with maturity similar
to the expected life of the option as of the valuation date. As we expected to grow the business with internally generated cash, we did not expect to pay dividends in the foreseeable future. Because
we do not maintain an internal market for our ordinary shares, the expected volatility was based on the historical volatilities of comparable publicly traded companies engaged in similar businesses.
Exercise multiple represents the value of the underling share as a multiple of the exercise price of the option which, if achieved, results in exercise of the option of the option. The exercise
multiple of the options was estimated based on an empirical study conducted by a third party.

In
determining the fair value of the share options granted prior to the completion of our initial public offering in December 2010, we used the fair value of our ordinary shares
as determined through retrospective valuations prepared with the assistance of AA. For more information, see "Fair Value of our ordinary shares." Following our initial public offering in
December 2010, the fair value of our ordinary shares has been determined by reference to the trading prices of our ADSs on the NASDAQ Stock Market as of the grant date of the
share options.

Share-based
compensation expense, based on the estimated fair value of share awards granted and the estimated forfeiture rate, will be recorded over vesting periods after the grant date
on a straight-line basis with the amount of compensation expenses recognized in any period not less than the portion of the grant date fair value of the share awards vested during
that period.

The
estimate of forfeiture rate is reviewed and adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimate.
Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change.

We
recorded share-based compensation of US$0.4 million, US$3.6 million and US$4.8 million for options granted to employees and non-employees for the
years ended December 31, 2010, 2011 and 2012, respectively according to the graded vesting schedule on a straight-line basis with the amount of compensation expenses recognized in
any period not less than the portion of the grant date fair value of the options vested during that period. As of December 31, 2012, we had a total of US$7.9 million in

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unrecognized
compensation expense related to unvested share options. The expense is expected to be recognized over a weighted-average period of 1.7 years according to the graded vesting
schedule.

Fair value of Derivative Liabilities

We determined the fair value of the derivative liabilities associated with the issuances of our preferred shares with the assistance of
AA. We used a "with-and-without" approach which takes into consideration the fair value increment between the scenario where the conversion option is not in place and the
scenario where the conversion option is in place.

The
first step of this approach was to determine the fair value of our equity interest as of various valuation dates. In determining the fair values of our equity interest, we considered
both market approach and income approach, and selected the methodology that was most indicative of our fair value in an orderly transaction between market participants as of the measurement dates. For
more information regarding the main inputs and assumptions used in the determination of our equity interest, see "Fair value of our ordinary shares."

The
equity value was then allocated using option pricing method among the different classes of shares of our company to determine the fair value of ordinary shares and preferred shares
under the scenario where the conversion option is not in place and the scenario where the conversion is in place, taking into account the guidance prescribed by the Practice Aid.

The
option pricing model considers our Series A preferred shares, Series B preferred shares, and ordinary shares as call options on our company's equity value, with strike
prices based on the redemption price of our Series A preferred shares and Series B preferred shares. Under the scenario where the conversion option is not in place, if, at the time of
redemption occurs, the value of equity interest exceed the sum of redemption price of the preferred shares, the holders of preferred shares would only receive an amount up to the redemption price and
each dollar of value in excess of the total redemption price should be distributed to holders of ordinary shares. Under the scenario where the conversion is in place, if, at the time redemption
occurs, the value of equity interest goes up further to a point (the "Conversion Point") that the interest shared by the holders of preferred shares exceeds the redemption price when they
select to convert the preferred shares into ordinary shares, each dollar of value in excess of the Conversion Point shall be distributed to the holders of preferred shares on as-converted
basis. The analysis also incorporated estimates of probabilities of the events, such as an initial public offering, that will trigger the exercise of the conversion right.

The
key assumptions used in valuation of the derivative liabilities are summarized in the following table:

June
2010

July
2010

August
2010Total fair value of equity interest (US$ in millions)


131.7


136.7


138.7Expected life (years)(1)


3.0


3.0


2.9Expected volatility(2)


51
%

48
%

48
%Risk free interest rate(3)


2.1
%

2.0
%

2.0
%Minimum redemption price of the preferred shares


140% of original issuance price plus any declared but unpaid dividendEstimated probability of events that trigger the exercise of conversion option(4)


50
%

60
%

60
%


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From June 2010 to August 2010, the fair value of the embedded conversion options associated with our Series A and
Series B preferred shares increased by US$1.8 million, of which an increase of US$0.5 million was due to the issuance of our Series B-3 preferred shares and
US$1.3 million was due to the increase of the probability of exercise of conversion feature from 50% to 60%. We believe the changes in the fair value of the embedded derivatives of our
Series A preferred shares, Series B-1 preferred shares and Series B-2 preferred shares were due to the net effect of the following: (i) the first
confidential submission of our registration statement in July 2010 relating to our December 2010 initial public offering increased the estimated probabilities of the events that will
trigger the exercise of conversion right; (ii) the proceeds of the ordinary shares and Series B-3 preferred shares issued in July 2010 increased our total equity
interest and (iii) the ordinary shares and Series B-3 preferred shares issued in July 2010 had a dilutive effect on the conversion option associated with our
Series A preferred shares, Series B-1 preferred shares and Series B-2 preferred shares.

On
August 1, 2010, all the Series A and Series B shareholders and the board of directors passed resolutions to amend the redemption term of the preferred shares. The
resolutions changed the redemption price of our preferred shares to be 140% of the issuance price plus any declared but unpaid dividends, instead of the higher of 140% of the issuance price or the
fair market value of the preferred shares upon redemption. As a result of this amendment, the redemption price of our preferred shares was no longer linked to the fair value of the underlying
preferred shares, and therefore the conversion features of our preferred shares did not meet the net settlement criterion of a derivative. Accordingly, the separate accounting at fair value for the
conversion features was no longer required. The related derivative liabilities were eliminated against additional paid-in capital on the date of amendment.

Acquisition of Movie Theaters

In April 2010, we entered into a series of transactions to acquire Beijing Bona Cineplex and Beijing Bona Youtang, two companies
that focus on the movie theater business in the PRC. These companies are beneficially owned by Mr. Dong Yu, our chairman and chief executive officer, and his immediate family member. The total
consideration comprised 5,810,320 newly issued ordinary shares and the settlement of US$5.3 million that Mr. Dong Yu owed to us.

We
have accounted for these transactions as a purchase and not as a reorganization of entities under common control. Pursuant to our articles of association that were effective prior to
the completion of our initial public offering, the following matters among others needed to be approved by the Series A preferred shareholders: (1) the adoption of the annual budget of
any of our subsidiaries or affiliated entities; (2) the appointment or removal or settlement of the terms of appointment of any senior manager (including any chief financial officer, chief
operating officer or chief technology officer) of any of our subsidiaries or affiliated entities; and (3) approval, or making adjustment or modifications

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to
the terms of transactions involving the interest of any director, shareholder or related party any of our subsidiaries or affiliated entities, including but not limited to the making of any loans
or advances, whether directly or indirectly, or the provision of any guarantee, indemnity or security for or in connection with any indebtedness of liabilities of any director or shareholder of any of
our subsidiaries or affiliated entities. In July 2009, upon the issuance of Series B preferred shares, the Series B shareholders had the same rights. These rights allowed the
noncontrolling shareholders to participate in decisions that relate to the ordinary course of our business and prevented the majority ordinary shareholder, Mr. Dong Yu, from exercising control
over our operating and financial policy decisions. As a result, Mr. Dong Yu lost control of Bona Film Group Limited upon the issuance of Series A preferred shares in July 2007.

In
July 2011, we entered a series of agreements to acquire Alpha Speed Limited, a British Virgin Islands company and Bona Starlight, a PRC company which held five subsidiaries at
the time of the acquisition primarily focused on the movie theater business in the PRC. Prior to the acquisitions, Alpha Speed Limited was owned 51% by Skillgreat Limited, which is wholly owned by
Mr. Dong Yu, and Bona Starlight was also owned 51% by Mr. Dong Yu. We acquired Alpha Speed Limited and Bona Starlight with total cash consideration of US$30.9 million, of which
US$3.1 million was settled as an offset against the amount that our Company was owed by Mr. Dong Yu, and the remaining amount of which had been fully paid as of
December 31, 2012.

In
the acquisition, we determined the fair value and useful life of the intangible assets acquired based on the following:



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Selected consolidated financial information

The following table sets forth selected consolidated operating income information as a percentage of our net revenues for the relevant
periods:

For the years ended December 31,2010

2011

2012US$

% of
revenues

US$

% of
revenues

US$

% of
revenuesNet revenues


52,819,786


100.0
%

126,161,270


100.0
%

142,282,919


100.0
%Cost of revenues


26,501,853


50.2
%

66,458,217


52.7
%

86,085,046


60.5
%Operating expenses:Film participation expenses


696,101


1.3
%

321,100


0.3
%

438,636


0.3
%Selling and marketing expenses


7,213,519


13.7
%

18,506,262


14.7
%

18,490,433


13.0
%General and administrative expenses


9,305,393


17.6
%

28,371,497


22.5
%

41,890,064


29.4
%Total operating expenses


17,215,013


32.6
%

47,198,859


37.4
%

60,819,133


42.7
%Government subsidies


88,147


0.2
%

220,559


0.2
%

3,866,700


2.7
%Operating income


9,191,067


17.4
%

12,724,753


10.1
%

(754,560
)

(0.5
)%Changes in fair value of derivatives


(14,528,000
)

(27.5
)%










Other income


1,193,672


2.3
%

2,318,103


1.8
%

502,942


0.4
%(Loss) income before income tax and equity in earnings of equity method investments, net of tax


(4,143,261
)

(7.8
)%

15,042,856


11.9
%

(251,618
)

(0.2
)%Provision for income taxes


91,053


0.2
%

473,542


0.4
%

1,322,368


0.9
%Equity in earnings of equity method investments, net of tax


11,254


0.0
%

3,062


0.0
%

5,604


0.0
%Net (loss) income(1)


(4,223,060
)

(8.0
)%

14,572,376


11.6
%

(1,568,382
)

(1.1
)%Net (loss) income attributable to holders of ordinary shares of Bona Film Group Limited


(6,241,520
)

(11.8
)%

14,432,081


11.4
%

(1,283,882
)

(0.9
)%Net (loss) income per ordinary share:Basic


(0.49
)




0.49





(0.04
)Diluted


(0.49
)




0.48





(0.04
)Shares used in computation of net income per share:Basic


12,758,575





29,353,936





29,514,979Diluted


12,758,575





29,844,462





29,514,979


(1)As
a supplement to net income, we use a non-GAAP financial measure of net income that is adjusted from results based on U.S. GAAP to
exclude share-based compensation, changes in fair value of warrants and changes in fair value of derivatives and adjusted EBITDA, non-GAAP excludes interest, taxes and non-cash depreciation and
amortization charges. This non-GAAP measure is provided as additional information to help our investors compare business trends among different reporting periods on a consistent basis and
to enhance investors' overall understanding of our current financial performance and prospects for the future. This non-GAAP financial measure should be considered in addition to results
prepared in accordance with U.S. GAAP, but should not be considered a substitute for or superior to U.S. GAAP results. In addition, our


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definition
of non-GAAP net income may be different from the definitions used by other companies, and therefore comparability may be limited.




For the years ended December 31,2010

2011

2012(US$)

(US$)

(US$)Net income (loss)


(4,223,060
)

14,572,376


(1,568,382
)Adjustment for share-based compensation


447,345


3,647,144


4,803,163Adjustment for changes in fair value of derivatives


14,528,000





Adjusted net income (non-GAAP)


10,752,285


18,219,520


3,234,781Adjustment for interest


(463,314
)

200,022


152,896Adjustment for taxes


91,053


473,542


1,322,368Adjustment for depreciation & amortization


1,074,059


2,711,958


4,370,679Adjusted EBITDA (non-GAAP)


11,454,083


21,605,042


9,080,724




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Segment Cost of Revenues

Film distribution.Cost of revenues for our film distribution segment include (1) the amortization of the cost of acquiring
distribution
rights and participation rights where we cooperate with other distributors to distribute films as a participating distributor but is not the primary obligor; (2) the amount we remit to
participating distributors when we are the principal but not sole distributor; (3) the amount we remit to film producers when they are entitled to share the box office sales with us based on
the distribution arrangement; (4) where we produce the film, this amount includes any amount paid by our film distribution operations to our film investment and production operations; and
(5) costs incurred in providing film-related advertising services.

Film investment and production.Cost of revenues for our film investment and production segment include the amortization of production
costs for
films of which we have invested in the production.

Talent agency.Cost of revenues for our talent agency segment primarily consists of compensation paid to artists.

Movie theater.Cost of revenue for our movie theater business primarily consists of box office split with theater circuits.

The
following tables set forth our revenues from external customers, cost of revenues and segment profit. Segment profit is gross profit less film participation expenses by segments for
the periods indicated.

For the year ended December 31, 2012Film
distribution

Film
investment
and
production

Talent
agency

Movie
theater

Intersegment
elimination

Consolidated(US$)

(US$)

(US$)

(US$)

(US$)

(US$)Revenues from external customers


62,929,581


37,022,215


610,707


41,720,416





142,282,919Intersegment revenues


1,135,944


36,708,717








(37,844,661
)

Total revenues


64,065,525


73,730,932


610,707


41,720,416


(37,844,661
)

142,282,919Cost of revenues


(38,937,435
)

(66,875,543
)

(24,097
)

(18,092,632
)

37,844,661


(86,085,046
)Film participation expenses





(438,636
)










(438,636
)Segment profit


25,128,090


6,416,753


586,610


23,627,784





55,759,237




For the year ended December 31, 2011Film
distribution

Film
investment
and
production

Talent
agency

Movie
theater

Intersegment
elimination

Consolidated(US$)

(US$)

(US$)

(US$)

(US$)

(US$)Revenues from external customers


92,598,838


6,176,820


1,349,186


26,036,426





126,161,270Intersegment revenues


2,246,219


44,298,547








(46,544,766
)

Total revenues


94,845,057


50,457,367


1,349,186


26,036,426


(46,544,766
)

126,161,270Cost of revenues


(57,979,720
)

(43,480,636
)

(117,487
)

(11,425,140
)

46,544,766


(66,458,217
)Film participation expenses





(321,100
)










(321,100
)Segment profit


36,865,337


6,673,631


1,231,699


14,611,286





59,381,953


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For the year ended December 31, 2010Film
distribution

Film
investment
and
production

Talent
agency

Movie
theater

Intersegment
elimination

Consolidated(US$)

(US$)

(US$)

(US$)

(US$)

(US$)Revenues from external customers


36,260,981


3,089,161


2,136,451


11,333,193





52,819,786Intersegment revenues


279,560


17,211,668








(17,491,228
)

Total revenues


36,540,541


20,300,829


2,136,451


11,333,193


(17,491,228
)

52,819,786Cost of revenues


(22,129,328
)

(15,375,079
)

(1,172,549
)

(5,316,125
)

17,491,228


(26,501,853
)Film participation expenses





(696,101
)










(696,101
)Segment profit


14,411,213


4,229,649


963,902


6,017,068





25,621,832


Year Ended December 31, 2012 Compared to Year Ended December 31, 2011

Net Revenues.Our net revenues increased by 12.8% from US$126.2 million in 2011 to US$142.3 million in 2012. This
increase was largely
attributable to increased revenues from the Company's film investment and production and movie theater segments, partially offset by a decline in film distribution revenue.



Segment revenues from our film distribution segment decreased by 32.5% from US$94.8 million in 2011 to US$64.1 million in
2012. During 2012, we distributed 15 new films
theatrically, including two imported films for which we assisted in the marketing. In addition, we recognized incremental revenue fromThe Flying Swords of Dragon
Gate, our December 2011 blockbuster, in the first quarter of 2012. The decrease in net revenues from the film distribution segment was mainly due to the
lower-than-expected box office performance ofThe Last Tycoon.

Segment
revenues from our film investment and production segment increased by 46.1% from US$50.5 million in 2011 to US$73.7 million in 2012. This increase was primarily
attributable to the success of our TV series,The King's Battles.

Segment
revenues from our talent agency segment decreased from US$1.3 million in 2011 to US$0.6 million in 2012.

Segment
revenues from our movie theater segment increased by 60.2% from US$26.0 million in 2011 to US$41.7 million in 2012. This increase was primarily attributable to the
increase in the number of theaters and screens resulting from our strategic expansion efforts. We owned and operated 20 theaters as of December 31, 2012, compared with 11 as of
December 31, 2011.

Cost of Revenues.Our cost of revenues increased by 29.5% from US$66.5 million in 2011 to US$86.1 million in 2012,
primarily as a
result of increased theater segment cost of revenues due to the nine new movie theaters we began operating during 2012.



Segment cost of revenues from our film distribution segment decreased by 32.8% from US$58.0 million in 2011 to
US$38.9 million in 2012 mainly due to the decrease in remittances to producers in connection with films, such asThe Last Tycoon, comparing with
films in 2011, such asThe Flying Swords of Dragon Gate.

Segment
cost of revenues from our film investment and production segment increased by 53.8% from US$43.5 million in 2011 to US$66.9 million in 2012. This increase was
primarily due to the acceleration of the amortization of production costs based on the economic performance and public

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acceptance
of certain films, impairment of production costs using a discounted cash flow approach, and cost of revenues of our TV seriesThe
King's Battles.

Segment
cost of revenues from our talent agency segment decreased from US$0.1 million in 2011 to US$0.02 million in 2012.

Segment
cost of revenues from our movie theater segment increased by 58.4% from US$11.4 million in 2011 to US$18.1 million in 2012. The increase was primarily attributable
to the increase in the number of theaters and screens we operated as a result of our strategic expansion efforts. We owned and operated 20 theaters as of December 31, 2012, compared with
11 as of December 31, 2011.

Film Participation Expenses.Our film participation expenses were US$0.3 million and US$0.4 million in 2011 and 2012,
respectively. Our
participation expenses in 2012 were primarily incurred in connection with the syndication of film participation interests in the filmThe Flying Swords of
Dragon Gate.



Segment profit from our film distribution segment decreased by 31.8% from US$36.9 million in 2011 to US$25.1 million in
2012, mainly due to the lower-than-expected box office performance ofThe Last Tycoon, with segment profit margin increasing
slightly over the same period from 38.9% to 39.2%.

Segment
profit from our film investment and production segment decreased by 3.8% from US$6.7 million in 2011 to US$6.4 million in 2012, with segment profit margin
decreasing over the same period from 13.2% to 8.7%, largely due to the unpredictable nature of the film production and investment business.

Segment
profit from our talent agency segment decreased from US$1.2 million in 2011 to US$0.6 million in 2012 with segment profit margin increasing over the same period
from 91.3% to 96.1%.

Segment
profit from our movie theater segment increased by 61.7% from US$14.6 million in 2011 to US$23.6 million in 2012 as a result of the increase in the number of
theaters and screens we operated as a result of our strategic expansion efforts. We owned and operated 20 theaters as of December 31, 2012, compared with 11 as of
December 31, 2011. Segment profit margin increased from 56.1% in 2011 to 56.6% in 2012.

Other Operating Expenses.Our operating expenses increased by 28.8% from US$46.9 million in 2011 to US$60.4 million
in 2012.



Operating Income (Loss).As a result of the foregoing, our operating income decreased by 105.9% from US$12.7 million in 2011
to an operating
loss of US$0.8 million in 2012.

Other Income.We generated other income of US$2.3 million and US$0.5 million in 2011 and 2012, respectively.

Tax Provision.We made provisions for income taxes of US$0.5 million and US$1.3 million in 2011 and 2012, respectively.

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Equity in Earnings of Equity Method Investments.We recorded equity in earnings of affiliated companies of US$3,062 in 2011 and
US$5,604 in 2012
primarily in connection with Beijing Bona Meitao Culture and Media Co. Ltd.

Net Income (Loss).As a result of the foregoing, we generated net income of US$14.6 million in 2011 and net loss of
US$1.6 million in
2012. Excluding share-based compensation, changes in fair value of warrants and changes in fair value of derivatives, our non-GAAP net income was US$18.2 million and
US$3.2 million in 2011 and 2012, respectively. Further excluding interest, taxes and non-cash depreciation and amortization charges, our EBITDA, non-GAAP was
US$21.6 million and US$9.1 million in 2011 and 2012, respectively. See footnote (1) in our selected consolidated operating income information set forth in "Results of
OperationsSelected consolidated financial information."

Net Loss Attributable to Non-controlling Shareholders.Net loss attributable to non-controlling shareholders represents
non-controlling shareholders' share of our net income based on their equity interest in Cinema Popular Limited, Distribution Workshop (BVI) Ltd., Distribution Workshop
(HK) Ltd. Beijing Baichuan Film Distribution Co., Ltd, Shanghai Bona Yinxing Cinema, Changsha Mango Bona Cineplex, Tianjin Bona Nongken Cinema, Tianjin Bona Jinkang Cinema. Net
loss attributable to non-controlling shareholders was net income US$0.1 million in 2011 and net loss US$0.3 million in 2012.

Net Income (Loss) Attributable to Our Company.As a result of the foregoing, net income attributable to our company amounted to
US$14.4 million in 2011, and net loss attributable to our company of US$1.3 million in 2012.

Net Income (Loss) Attributable to Holders of Our Ordinary Shares.As a result of the foregoing, net income attributable to
holders of our ordinary
shares was US$14.4 million in 2011, and net loss of US$1.3 million in 2012.

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

Net Revenues.Our net revenues increased by 138.9% from US$52.8 million in 2010 to US$126.2 million in 2011. This
increase was mainly
attributable to an increase in net revenues from film distribution and film investment and production of US$59.4 million due mainly to the newly released filmsOverheard
2,The Sorcerer and the White SnakeandThe Flying Swaords of Dragon Gate, as
well as to our movie theater business. The acquisition of Bona Starlight in July 2011 and the net revenues of the movie theaters we acquired in 2010 also contributed to the increase in
net revenues.



Segment revenues from our film distribution segment increased by 159.6% from US$36.5 million in 2010 to US$94.8 million
in 2011. The increase was mainly due to the releases of films such asOverheard 2,The Sorcerer and the White
SnakeandThe Flying Swords of Dragon Gate.

Segment
revenues from our film investment and production segment increased by 148.6% from US$20.3 million in 2010 to US$50.5 million in 2011. This increase was primarily
due to inter-segment revenues from the release of our blockbuster filmThe Flying Swords of Dragon Gatefor which we were the lead distributor.

Segment
revenues from our talent agency segment decreased by 36.8% from US$2.1 million in 2010 to US$1.3 million in 2011. In 2011, we signed a greater portion of our talent
agency contracts together with the artist and the third party, and therefore recognized a greater portion of our talent agency revenues net of the payment to the artists, rather than on a gross basis,
which caused our revenues from our talent agency segment to decrease from 2010 to 2011.

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Segment
revenues from our movie theater segment increased by 129.7% from US$11.3 million in 2010 to US$26.0 million in 2011. This increase was primarily due to the
acquisition of Bona Starlight in July 2011 and net revenues generated by the movie theaters we acquired in 2010.

Cost of Revenues.Our cost of revenues increased by 150.8% from US$26.5 million in 2010 to US$66.5 million in 2011,
primarily as a
result of the acquisition of the movie theaters previously owned by Bona Starlight, and an increase in amortization of production costs of films in which we were a lead investor, in particular The Flying Swords of
Dragon Gate.



Segment cost of revenues from our film distribution segment increased by 162.0% from US$22.1 million in 2010 to
US$58.0 million in 2011 mainly due to the increase in remittances to producers in connection with films having high box office receipts, such asThe Sorcerer and the
White Snakeand our blockbuster filmThe Flying Swords of Dragon Gate.

Segment
cost of revenues from our film investment and production segment increased by 182.8% from US$15.4 million in 2010 to US$43.5 million in 2011, primarily as a result
of increased amortization of production costs of films in which we were a lead investor, such asOverheard 2andThe Flying
Swords of Dragon Gate.

Segment
cost of revenues from our talent agency segment decreased by 90.0% from US$1.2 million in 2010 to US$0.1 million in 2011, primarily because we recognized a greater
portion of our talent agency revenues net of the payment to the artists in 2011 and therefore recognized a smaller portion of payments to artists in segment cost of revenues.

Segment
cost of revenues from our movie theater segment increased by 114.9% from US$5.3 million in 2010 to US$11.4 million in 2011, primarily due to the acquisition of Bona
Starlight, as well as costs incurred by the movie theaters we acquired in 2010.

Film Participation Expenses.Our film participation expenses were US$0.7 million in 2010 and US$0.3 million in 2011.
Our film
participation expenses in 2011 were primarily incurred in connection
with the syndication of film participation interests in the filmsWhat Women WantandThe Flying Swords of
Dragon Gate.



Segment profit from our film distribution segment increased by 155.8% from US$14.4 million in 2010 to US$36.9 million in
2011, with segment profit margin decreasing slightly over the same period from 39.4% to 38.9%. The increase in segment profit was largely attributable to higher box office receipts of the films we
distributed in 2011, such asOverheard 2,The Sorcerer and the White Snakeand The Flying Swords of Dragon Gate.

Segment
profit from our film investment and production segment increased by 57.8% from US$4.2 million in 2010 to US$6.7 million in 2011, primarily due to higher box office
receipts of films we invested in and produced in 2011, such asOverheard 2andThe Flying Swords of Dragon
Gate. Segment profit margin decreased over the same period from 20.8% to 13.2%, primarily due to the unpredictable nature of the film production and investment business.

Segment
profit from our talent agency segment increased from US$1.0 million in 2010 to US$1.2 million in 2011 as a result of the representation of an increased number of
new artists, with segment profit margin increasing over the same period from 45.1% to 91.3% largely due to more talent agency segment revenue being booked on a net basis instead of a
gross basis.

Segment
profit from our movie theater segment increased by 142.8% from US$6.0 million in 2010 to US$14.6 million in 2011 as a result of increased segment revenues, with
segment profit margin

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increasing
over the same period from 53.1% to 56.1% largely due to the box office earning maturity of movie theaters that we acquired in 2010.

Other Operating Expenses.Our operating expenses increased by 183.8% from US$16.5 million in 2010 to US$46.9 million
in 2011.



Operating Profit.As a result of the foregoing, our operating profit increased by 38.4% from US$9.2 million in 2010 to
US$12.7 million
in 2011.

Other Income (Loss).We generated other loss of US$13.3 million in 2010 and other income of US$2.3 million in 2011. We
did not
recognize any change in fair value of derivatives in 2011 because the redemption terms of our preferred shares were amended in August 2010, and as a result we had ceased to recognize derivative
liabilities and change in fair value of derivatives from the date of such amendment.

Tax Provision.We made provisions for income taxes of US$0.1 million and US$0.5 million in 2010 and 2011, respectively.
The change in
income tax provision from 2010 to 2011 was mainly due to the increase in net income before income tax provision generated by our Hong Kong entities subject to 16.5% income tax rate and our movie
theaters subject to 25% income tax rate in 2011.

Equity in Earnings of Equity Method Investments.We recorded equity in earnings of affiliated companies of US$11,254 in 2010 and
US$3,062 in 2011
primarily in connection with Beijing Bona Meitao Culture and Media Co, Ltd.

Net Income (Loss).As a result of the foregoing, we generated net loss of US$4.2 million in 2010 and net income of
US$14.6 million in
2011. Excluding share-based compensation, changes in fair value of warrants and changes in fair value of derivatives, our non-GAAP net income was US$10.8 million and
US$18.2 million in 2010 and 2011, respectively. Further, excluding interest, taxes and non-cash depreciation and amortization charges, our EBITDA, non-GAAP was US$11.5 million and
US$21.6 million in 2010 and 2011, respectively. See footnote (1) in our selected consolidated operating income information set forth in "Results of
OperationsSelected consolidated financial information."

Net Income (Loss) Attributable to Non-controlling Shareholders.Net income (loss) attributable to non-controlling
shareholders represents non-controlling shareholders' share of our net income based on their equity interest in Cinema Popular Limited, Distribution Workshop (BVI) Ltd.,
Distribution Workshop (HK) Ltd., Beijing Baichuan Film Distribution Co., Ltd. (before the year 2011), Xi'an Huitong Bona Film Culture Media Co, Ltd., Shanghai Bona Yinxing
Cinema Development Co., Ltd. and Changsha Mango Bona Cineplex Management Co., Ltd. We recorded net loss attributable to non-controlling shareholders of
US$0.1 million in 2010 and net income of US$0.1 million in 2011.

Net Income (Loss) Attributable to Our Company.As a result of the foregoing, net loss attributable to our company of
US$4.1 million in 2010,
and net income attributable to our company of US$14.4 million in 2011.

Net Income (Loss) Attributable to Holders of Our Ordinary Shares.As a result of the foregoing, net loss attributable to holders
of our ordinary
shares was US$6.2 million in 2010, and net income attributable to holders of our ordinary shares of US$14.4 million in 2011.

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Our primary sources of liquidity have historically been proceeds from issuances of convertible notes and warrants and issuances of preferred shares, net proceeds
from our initial public offering, proceeds from bank and other borrowings, and film financing participations. As of December 31, 2012, we had approximately US$23.2 million in cash and
cash equivalents. Our cash and cash equivalents generally consist of bank deposits and liquid investments with maturities of three months or less.

We
require cash to acquire film distribution rights, fund film and television series productions and undertake distribution and marketing activities in connection with film
distributions. We also require cash for other working capital needs for our daily operations, salary and benefits and other cash needs. We generally fund such cash needs through a
combination of:



In
addition, we require cash to operate and expand our movie theater business. We funded the expansion of our movie theater business in 2010, 2011 and 2012 using cash from operations and
proceeds from initial public offering. We intend to significantly increase the number of movie theaters that we operate in the coming years. We intend to fund such growth with cash generated by our
existing movie theater business and films that we distribute, as well as additional future bank loans.

As
we have expanded our business, increased the amount of our financing of film productions and grown our movie theater business, our cash requirements for each of 2010, 2011 and 2012
have correspondingly increased. Our net cash from operations became positive in 2011 but our cash requirements exceeded the cash generated from our operations for 2012. This change was primarily due
to increased investment in films.

We
believe that our cash and cash equivalents, our anticipated cash flow from operations, our credit facilities and the net proceeds we received from our initial public offering will be
sufficient to meet our anticipated cash needs for the next 12 months. For the next 12 to 24 months, we expect to meet our anticipated cash needs through bank loans and from funds
provided by films in which we are the lead
investor and from which we receive film participation fees from other investors, our film distribution business and our movie theater business.

East West Bank Credit Facility.On November 20, 2012, Bona Entertainment Company Limited, our wholly owned Hong Kong
subsidiary, entered into
a loan agreement with East West Bank (NASDAQ: EWCB), or the East West Loan Agreement. On the same date, Bona Entertainment Company Limited requested, and East West Bank agreed to provide, a variable
rate revolving line of credit in the amount of $20.0 million. As of the date of this annual report on Form 20-F, we had an aggregate principal amount of $20.0 million
outstanding under this credit facility. The purpose of the credit line is to pay for operational needs, for example, to fund upcoming productions and acquire distribution rights to international films
in China. Bona Entertainment Company Limited is obligated to repay the outstanding principal in full plus all accrued unpaid interest on November 20, 2015. In

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addition,
Bona Entertainment Company Limited shall make monthly payments of interest during the term of the loan, which shall accrue at the rate of LIBOR plus 0.25% but in no event less than 3.5% per
annum. Under the East West Loan Agreement, as amended, we agreed to certain financial covenants, including to maintain minimum cash assets of $5.0 million at all times during the effective
period of the East West Loan Agreement, as well as to maintain a ratio of total liabilities to tangible net worth of no more than 2:1 and a ratio of maximum total funded debt to EBITDA no greater than
3.8:1, or the EBITDA covenant, in each case on a quarterly basis calculated based on average consolidated balance sheet figures of our company for the most recent four quarters in accordance with the
definitions set forth in the loan agreement. We also agreed to comply with all terms and conditions of all other agreements between us and any other party, and that our company and its subsidiaries
(excluding for this purpose our affiliated consolidated entities and their subsidiaries) will not to incur or assume indebtednes, other than indebtedness to East West Bank and trade debt incurred in
the ordinary course of business without East West Bank's prior written consent, among other covenants.

Events
of default under the East West Loan Agreement include: (i) failure to make any payment when due under the East West Loan Agreement; (ii) failure to comply with or
perform any other term, obligation, covenant or condition of the East West Loan Agreement, the security and guarantee agreements and other agreements related to the East West Loan Agreement, and any
other agreement between us and East West Bank; (iii) default by us on any other agreement in favor of any other person that may materially affect any of our property or our ability to repay the
loan or perform our obligations under the East West Loan Agreement and related agreements, among other events of default. Other than a default on indebtedness or any other default with respect to
which we have received a notice of similar default in the preceding 12 months, we shall have 15 days to cure a default or, if the cure requires more time, 15 days to initiate
steps that East West Bank deems in its discretion to be sufficient to cure the default. Upon a default, the interest rate of the loan shall immediately increase by an additional five percentage
points.

Bona
Entertainment Company Limited granted to East West Bank a security interest in all of Bona Entertainment Company Limited's assets and property to secure the indebtedness under the
East West Loan Agreements. Bona International Film Group Limited, our wholly owned British Virgin Islands subsidiary, has provided a full and unconditional guarantee for full and punctual payment of
the indebtedness under the East West Loan Agreement and the performance of all of our obligations under the East West Loan Agreement and related agreements.

We
obtained waivers from East West Bank for non-compliance with the EBITDA covenant as of December 31, 2012 and March 31, 2013. This non-compliance
resulted from our lower-than-expected financial results as of and for the three months ended December 31, 2012. For more information about risks related to our credit
facilities, see "Item 3. Key InformationD. Risk FactorsRisks Relating to Our Business and IndustryAny non-compliance of our loan agreements
could result in significant liquidity problems and have a material adverse effect on our business and financial condition."

CITIC Credit Facility.On August 3, 2012, our company entered into a facility letter, or the CITIC facility letter, with
CITIC Bank
International Limited, or CITIC International, pursuant to which CITIC International has agreed to provide to our company a credit facility for term loans up to $16 million, or the CITIC credit
facility. The purpose of loans granted pursuant to the CITIC credit facility shall be for general working capital, and the loan proceeds shall not be repatriated into the PRC. Such loans shall have a
term of one year, with principal repayable on the final maturity date. Interest at the rate of LIBOR plus 2.95% per annum shall be payable at the end of each interest period. In accordance with the
CITIC facility letter, Bona Film Group Co., Ltd. (PRC) entered into a standby letter of credit issuance agreement with CITIC Bank International (China) Co., Ltd., or CITIC
China, on August 13, 2012. Pursuant to this agreement, CITIC China agreed to grant a standby letter of credit to CITIC International to guarantee the obligations of our company under the CITIC
facility letter. As a condition to CITIC China's granting of any letter of credit, Bona Film Group Co., Ltd. (PRC) agreed to open a term deposit account with CITIC China, or the CITIC
account, and maintain

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a
balance in the CITIC account of no less than the amount of outstanding standby letters of credit issued by CITIC China. In addition, Bona Film Group Co., Ltd. (PRC) entered into a
deposit pledge agreement dated August 13, 2012 with CITIC China pursuant to which Bona Film Group Co., Ltd. (PRC) granted a security interest in the certificate of deposit with
respect to the CITIC account to CITIC China to secure Bona Film Group Co., Ltd.'s obligations under the standby letter of credit issuance agreement. Defaults under the standby letter of
credit include (i) failure by Bona Film Group Co., Ltd. (PRC) to repay the amount of a drawdown of a letter of credit and the related fee on the date of such drawdown,
(ii) failure by Bona Film Group Co., Ltd. (PRC) to reimburse CITIC China for any expenses incurred under the standby letter of credit issuance agreement and the deposit pledge
agreement, and
(iii) any breach by Bona Film Group Co., Ltd. (PRC) of any representation, warranty, covenant or agreement under the standby letter of credit issuance greement and the deposit
pledge agreement. We drew down two loans under the CITIC in 2012 with aggregate principal amount of approximately US$8.9 million. We repaid one of these loans in December 2012. The
remaining loan had a principal amount of approximately US$4.5 million as of December 31, 2012. We repaid this loan in January 2013.

ICBC Fixed Asset Term Loans.From time to time, we obtain term loans from Industrial and Commercial Bank of China. These loans
are typically fixed
asset loans the proceeds of which must be used to finance a particular film or television series. Typically, we must open a supervised account with the lender into which we must deposit the proceeds
from the project financed by the loan (such as box office receipts), and from which may not withdraw any amounts without the written consent of the lender before repayment of the loan. The timing of
drawdowns are in accordance with the shooting process of the financed project. Generally, defaults under these loans include failure to pay to make principal, interest or other payments under the loan
when they become due, breach of any representation, warranty or undertaking under the loan agreement, failure to settle other payable debts or perform our obligations under other agreements which
failure affects or likely to affect our performance of our obligations thereunder, or the deterioration of our financial or operating condition which affects or is likely to affect performances of our
obligations thereunder, among others. If we default on the loan, the lender is entitled to directly deduct all amounts due and payable from the supervised account. As of the date of this annual report
on Form 20-F, we had one such loan with an outstanding principal amount of RMB50.0 million (US$8.0 million).

Zhejiang
Bona Film and Television Production Co., Ltd. and Mr. Dong Yu have provided joint guarantees for this loan. For information about risks involved with
Mr. Yu's personal guarantees of our bank borrowings, see "Item 3. Key InformationD. Risk FactorsRisks Relating to Our Business and IndustryOur
founder, chairman and chief executive officer, Mr. Dong Yu, has provided personal guarantees to secure our obligations under certain credit facilities and may continue to grant additional
guarantees in the future. Defaults under these credit facilities could result in a sale of a significant portion of Mr. Dong Yu's equity interest in our company."

Cash Flow

The following table sets forth a summary of our cash flows for the periods indicated:

For the years ended December 31,2010

2011

2012(US$)

(US$)

(US$)Net cash (used in) provided by operating activities


(32,394,544
)

2,239,544


(9,646,869
)Net cash used in investing activities


(8,429,118
)

(48,826,052
)

(12,180,458
)Net cash provided by (used in) financing activities


117,424,948


(17,640,985
)

24,993,729Effect of foreign exchange rate changes


228,485


86,858


(227,829
)Net increase (decrease) in cash


76,829,771


(64,140,635
)

3,120,573Cash at the beginning of the year


7,418,213


84,247,984


20,107,349Cash at the end of the year


84,247,984


20,107,349


23,227,922


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Each
of the 20 theaters we operated as of December 31, 2012 has entered into a lease agreement for the use of the premises where the movie theater is
located. These lease agreements are for periods ranging from 10 to 20 years. Our lease agreements also usually provide us with an initial six-month rent free period. Under the lease
agreements, our movie theaters have agreed to use the premises for theater-related operations, to maintain the premises in accordance with provisions of the leases, to comply with regulatory
requirements such as sanitary standards, fire protection and public security, pay the lease payments by time, and not to sub-lease the premises without the prior consent of the lessor. If
our movie theaters were to breach any of these obligations, subject in some cases, to a materiality threshold or an opportunity to cure, the lessor may terminate the lease agreement, require our
theaters to return the leased premises and pay all outstanding expenses and damages. If any of these lease agreements is terminated, our movie theater business, financial condition and results of
operations will be materially and adversely affected. In addition, if our movie theater business does not generate sufficient revenues to service our payment obligations under these leases, our
financial condition and results of operations could be materially and adversely affected. See "Item 3. Key InformationD. Risk FactorsRisks Relating to Our
Business and IndustryOur movie theater business has substantial lease obligations, which could impair our financial condition."

Operating Activities

Our net cash used in operating activities was US$9.5 million in 2012. We had net loss of US$1.6 million, production costs
of US$64.8 million, mainly attributable to the filmsThe Last TycoonandThe White-Haired Witch,
and decrease in distribution rights of US$9.7 million, mainly due to the filmInferno.These items were partially offset by the
add-back of certain non-cash items, including amortization of production costs, premarily related to the filmThe Flying Swords of Dragon
Gateand the television seriesThe King's Battles, share based compensation expense of US$4.8 million, and depreciation
and amortization of US$4.4 million, as well as an increase in accounts payable of US$4.0 million primarily due to profit sharing payments to producers of the films and television we
distributed, such asThe Flying Swords of Dragon GateandThe King's Battles.

Our
net cash provided by operating activities amounted to US$2.2 million in 2011. We had an amortization of production costs of US$37.1 million, an increase in accounts
payable of US$13.1 million and an increase of US$9.8 million in accrued expenses and other current liabilities. The amortization of production costs were mainly related to the films we
distributed and produced, such asOverheard 2and the blockbuster filmThe Flying Swords of Dragon Gate.
The increase of accounts payable was mainly related to profit sharing payments to film-producers of the films we distributed, such asThe Sorcerer and the White
Snake. The increase of accrued expenses and other current liabilities are mainly attributable to the advance we received from network broadcasting sales of The Flying Swords of Dragon
Gateand television station broadcasting sales of our distributed and invested television series, The King's Battles. These increases were partly offset by production costs of
US$40.4 million, an increase in accounts receivable of
US$25.6 million, prepaid expenses and other current assets of US$14.0 million. We incurred production costs primarily in connection with our increased investments in film projects as a
lead investor. The increase in accounts receivable was mainly due toThe Flying Swords of Dragon Gate,which was released on December 15, 2011. A
substantial portion of the box office receipts ofThe Flying Swords of Dragon Gatewere remitted to us in the first quarter of year 2012.

Our
net cash used in operating activities amounted to US$32.4 million in 2010. We had an increase in production costs of US$61.5 million due to the fact that we have been
increasingly investing in film projects as a lead investor. This is partly offset by the amortization of distribution rights and production costs amounting to US$19.7 million in relation to the
blockbuster films we distributed and produced likeBodyguards and Assassins,Just Call Me Nobody, and Triple Tap. Our decrease in accounts payable of US$3.3 million was largely attributable to the repayment of liabilities in connection with the
capital expenditure of the cinema business we acquired in April 2010. This was partly offset by a decrease in accounts receivable of US$4.9 million, primarily attributable to Bodyguards and Assassins,

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which
was initially exhibited in theaters on December 18, 2009, but for which a substantial portion of the box office receipts were remitted to us in 2010.

Investing Activities

Our net cash used in investing activities was US$12.2 million in 2012. This was primarily due to purchase of property and
equipment of US$17.6 million, primarily attributable to purchases of leasehold improvements and equipment such as computers and operating equipment, partially offset by a decrease in term
deposit of US$6.0 million.

Our
net cash used in investing activities amounted to US$48.8 million in 2011. Our net cash used in investing activities in 2011 was primarily due to (i) acquisition of
business of US$24.2 million, which largely related to our acquisition of Alpha Speed Limited and Bona Starlight, (ii) purchase of property and equipment of US$9.7 million related
mostly to purchases of leasehold improvements and equipment such as computers and operating equipment, (iii) an increase in term deposit of US$6.0 million; (iv) an increase in
restricted cash of US$4.1 million and (v) loans to related parties of US$4.0 million, which primarily related to loans we made to Bona Starlight before the acquisition of such
company. This was partly offset by the proceeds of US$2.6 million from repayment of loans to third parties.

Our
net cash used in investing activities amounted to US$8.4 million in 2010. Our net cash used in investing activities in 2010 was primarily due to (i) loans to third
parties of US$3.9 million, which primarily related to an entrusted loan with Industrial and Commercial Bank of China Limited, (ii) loans to related parties of US$1.7 million,
which primarily related to Beijing Bona Xingguang Cinema Investment Company, (iii) purchase of property and equipment of US$2.7 million mostly related to purchases of leasehold
improvements and equipment such as computers and operating equipment, and investments in affiliates and (iv) loans to a television series producer of US$1.2 million. This was partly
offset by cash acquired on the acquisition of our movie theater business of US$1.5 million.

Financing Activities

In 2012, we had net cash provided by financing activities of US$25.0 million. This was primarily due to proceeds from bank
borrowings of US$39.0 million, and proceeds from other borrowings of US$6.2 million attributable to loans from third party investors for financing the television series The King's Battlesand
the filmMy Lucky Star, partially offset by payments of bank borrowings of
US$21.1 million.

In
2011, we had net cash used in financing activities of US$17.6 million, which was primarily due to (i) payments of bank borrowings of US$22.6 million related to
loans for our films, includingJust Call Me Nobody,What Women WantandThe
Flying Swords of Dragon Gate, (ii) repayments of US$6.7 million of loans from related parties and third parties, and (iii) payment of film participation
liabilities principal of US$4.8 million, which mainly resulted from the repayment to film participants for our joint investment in films, such asBodyguards and
AssassinsandThe Road Less Travelled, partly offset by proceeds from bank borrowing of US$12.3 million.

In
2010, we had net cash provided by financing activities of US$117.4 million, which was primarily due to (i) net proceeds from initial public offering in
December 2010 of US$90.8 million, (ii) proceeds from bank borrowing of US$22.3 million, (iii) proceeds from issuance of Series B-3 preferred
shares of US$5.0 million, (iv) proceeds from film participation of US$10.8 million mainly from our joint investment in the filmThe Flying Swords of Dragon
Gatewhich is expected to be released at the end of 2011, (v) proceeds from exercise of a share option of US$2.0 million, (vi) proceeds from other
borrowings of US$1.3 million and (vii) loans from third parties and related parties of US$3.2 million for the financing of operating cashflow. This was partly offset by
(a) payments of bank borrowing of US$8.1 million,
(b) payments of other borrowings of US$5.9 million and (c) payments of principal of film participation liabilities of US$4.4 million.

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Inflation

Inflation in China has not materially impacted our results of operations in recent years. According to the National Bureau of
Statistics of China, the consumer price index in China increased by 4.0% from 2009 to 2010, increased by 2.0% from 2010 to 2011 and increased by 2.6% from 2011 to 2012. The monthly consumer price
index in China for January increased by 3.3% from 2010 to 2011, and decreased by 0.4% from 2011 to 2012.

Dividend Payments

Our company, Bona Film Group Limited, is a holding company. To date, our wholly owned subsidiary in China, Bona New World, has
not paid dividends to its offshore parent company as we have historically re-invested our retained earnings in our operations in China. However, if our company requires cash for our cash
and financing requirements, including the funds necessary to, for example, pay dividends and other cash distributions to our shareholders, or service any offshore debt it incurs, our company may rely
principally on dividends and other distributions from our wholly owned subsidiary in China, Bona New World, for its cash requirements. Relevant PRC laws, rules and regulations permit our PRC
subsidiary to pay dividends to its offshore parent company only out of its distributable retained earnings, if any, determined in accordance with Chinese accounting standards and regulations. For more
information about other PRC laws, rules and regulations that have the effect of restricting our PRC subsidiaries from transferring a portion of their assets to us in the form of dividends, see
"Item 3. Key InformationD. Risk FactorsRisks Relating to Our Corporate StructureIn the future we may rely on dividends and other distributions on equity
paid by our wholly owned operating subsidiary to fund any cash and financing requirements we may have, and any limitation on the ability of our operating subsidiary to pay dividends to us could have a
material adverse effect on our ability to conduct our business." Any limitations on the ability of our PRC subsidiary to transfer funds to us could materially and adversely limit our ability to grow,
make investments or acquisitions that could be beneficial to our business, pay dividends and otherwise fund and conduct our business.

We
receive economic benefits generated from our affiliated consolidated entities in China through various contractual arrangements entered into by Bona New World, our wholly owned
PRC subsidiary, and the affiliated consolidated entities. Such contractual arrangements include exclusive technology and consulting services agreements with our respective affiliated consolidated
entities. Under these contractual arrangements, our affiliated consolidated entities pay to Bona New World a percentage of their annual revenues in the form of service fees. Conducting our
operations through contractual arrangements with our affiliated consolidated entities entails a risk that we may lose the power to direct the activities that most significantly affect the economic
performance of our affiliated consolidated entities and their subsidiaries, which may result in our being unable to consolidate their financial results with our results and may impair our access to
their cash flow from operations and thereby reduce our liquidity. See "Item 3. Key InformationD. Risk FactorsRisks Relating to Our Corporate Structure" for more
information.

Recently Adopted Accounting Pronouncements

In May 2011, the FASB issued an authoritative pronouncement on fair value measurement. The guidance is the result of joint
efforts by the FASB and IASB to develop a single, converged fair value framework. The guidance is largely consistent with existing fair value measurement principles in U.S. GAAP. The guidance
expands the existing disclosure requirements for fair value measurements and makes other amendments, mainly including:



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The
guidance is to be applied prospectively and effectively for interim and annual periods beginning after December 15, 2011, for public entities. Early application by public
entities is not permitted. We adopted this pronouncement effective January 1, 2012, which did not have a significant effect on the Company's consolidated financial statements.

In
June 2011, the FASB issued an authoritative pronouncement to allow an entity the option to present the total of comprehensive income, the components of net income, and the
components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to
present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive
income. The guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in shareholders' equity. These amendments do not change the items
that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The guidance should be applied retrospectively. For public
entities, the amendments are effective for fiscal years and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. In December 2011, the FASB
issued a further authoritative pronouncement, Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items out of Accumulated Other Comprehensive Income. Under the
amendments, entities are required to present reclassification adjustments and the effect of those reclassification adjustments on the face of the financial statements where net income is presented, by
component of net income, and on the face of the financial statements where other comprehensive income is presented, by component of other comprehensive income. In addition, the amendments require that
reclassification adjustments be presented in interim financial periods. The amendments supersede changes to those paragraphs that pertain to how, when, and where reclassification adjustments are
presented. The amendments in this update are effective for public entities for fiscal years beginning after December 15, 2011. We adopted this pronouncement effective January 1, 2012,
and presented comprehensive income in two separate but consecutive statements.

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In September 2011, the FASB has issued an authoritative pronouncement related to testing goodwill for impairment. The guidance is intended to simplify how
entities, both public and nonpublic, test goodwill for impairment. The pronouncement permits an entity to first assess qualitative factors to determine whether it is "more likely than not" that the
fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The guidance is
effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. We adopted this pronouncement effective
January 1, 2012, which did not have a significant effect on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In July 2012, the FASB has issued an authoritative pronouncement related to testing indefinite-lived intangible assets, other
than goodwill, for impairment. Under the pronouncement, entities testing indefinite-lived intangible assets for impairment would have the option of performing a qualitative assessment before
calculating the fair value of the asset. If an entity determines, on the basis of qualitative factors, that the indefinite-lived intangible asset is not more likely than not impaired, a quantitative
fair value calculation would not be needed. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after
September 15, 2012. We will adopt this pronouncement on January 1, 2013 which is not expected to have a significant impact on its financial condition or results of operations.

In
October 2012, the FASB has issued an authoritative pronouncement related to impairment analysis of unamortized film costs. The amendments in this ASU eliminate the rebuttable
presumption that the conditions leading to the writeoff of unamortized film costs after the balance sheet date existed as of the balance sheet date. The amendments also eliminate the requirement that
an entity incorporate into fair value measurements used in the impairment tests the effects of any changes in estimates resulting from the consideration of subsequent evidence if the information would
not have been considered by market participants at the measurement date. For SEC filers, the amendments are effective for impairment assessments performed on or after December 15, 2012. Early
adoption is permitted. We will adopt this pronouncement on January 1, 2013 which is not expected to have a significant impact on its financial condition or results of operations.

In
February 2013, the FASB has issued an authoritative pronouncement related to reporting of amounts reclassified out of accumulated other comprehensive income, to improve the
transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are
later reclassified out of accumulated other comprehensive income into net income. The amendments in this ASU do not change the current requirements for reporting net income or other comprehensive
income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP.

The
new amendments will require an organization to:



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The
amendments are effective for reporting periods beginning after December 15, 2012. We will adopt this pronouncement on January 1, 2013 which is not expected to have a significant
impact on its financial condition or results of operations.

In
March 2013, the FASB has issued an authoritative pronouncement related to parent's accounting for the cumulative translation adjustment upon derecognition of certain
subsidiaries or groups of assets within a foreign entity or of an investment in a foreign entity. When a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or
group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a foreign entity, the parent is required
to release any related cumulative translation adjustment into net income. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in
the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided.

For
an equity method investment that is a foreign entity, the partial sale guidance still applies. As such, a pro rata portion of the cumulative translation adjustment should be
released into net income upon a partial sale of such an equity method investment. However, this treatment does not apply to an equity method investment that is not a foreign entity. In those
instances, the cumulative translation adjustment is released into net income only if the partial sale represents a complete or substantially complete liquidation of the foreign entity that contains
the equity method investment.

Additionally,
the amendments in this pronouncement clarify that the sale of an investment in a foreign entity includes both: (1) events that result in the loss of a controlling
financial interest in a foreign entity (i.e., irrespective of any retained investment); and (2) events that result in an acquirer obtaining control of an acquiree in which it held an
equity interest immediately before the acquisition date (sometimes also referred to as a step acquisition). Accordingly, the cumulative translation adjustment should be released into net income upon
the occurrence of those events. The amendments in this pronouncement are effective prospectively for fiscal years (and interim reporting periods within those years) beginning after
December 15, 2013. The amendments should be applied prospectively to derecognition events occurring after the effective date. Prior periods should not be adjusted. We will adopt this
pronouncement on January 1, 2014 which is not expected to have a significant impact on its financial condition or results of operations.



None.



Please refer to "A. Operating Results" for a discussion of the most significant recent trends in our services, sales and marketing since the end of
2012. In addition, please refer to such Item for a discussion of known trends, uncertainties, demands, commitments or events that we believe are reasonably likely to have a material effect on our net
sales or operating revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of
future operating results or financial condition.

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



Other than such obligations and the contractual obligations described below, we have no other long-term contractual obligations or commercial
commitments as of December 31, 2012:

Payments Due by PeriodTotal

2013

2014

2015

2016

2017 and
thereafter(US$)Borrowings(1):Principal


38,560,131


20,534,578


8,025,553


10,000,000





Interest


678,633


678,633











Film participation liabilities(2)


15,086,892


15,086,892











Operating lease obligations(3)


235,232,646


14,614,384


16,512,082


16,442,854


15,811,512


171,851,814Total


289,558,302


50,914,487


24,537,635


26,442,854


15,811,512


171,851,814


(1)Borrowings
are primarily related to borrowings from banks and third parties.(2)Film
participation obligations are primarily related to funds received from third-party provider to finance the production of films.(3)Operating
lease obligations are primarily related to the minimum lease payments until 2027 under non-cancellable operating leases entered into
by 25 movie theaters, including five movie theaters that we had not yet opened as of December 31, 2012.




This annual report on Form 20-F contains forward-looking statements that involve risks and uncertainties. All statements other than statements
of historical facts are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to
be materially different from those expressed or implied by the forward-looking statements.

You
can identify these forward-looking statements by words or phrases such as "aim," "anticipate," "believe," "estimate," "expect," "intend," "likely to," "may," "plan," "will" or other
similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our
financial condition, results of operations, business strategy and financial needs. These forward-looking statements include:



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The
forward-looking statements made in this annual report on Form 20-F relate only to events or information as of the date on which the statements are made in this
annual report on Form 20-F. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or
otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this annual report on Form 20-F and the
documents that we reference in this annual report on Form 20-F and have filed as exhibits to the registration statement that includes this annual report on
Form 20-F with the understanding that our actual future results may be materially different from what we expect. You should not rely upon forward-looking statements as predictions
of future events.

Other
sections of this annual report on Form 20-F include additional factors that could adversely impact our business and financial performance. Moreover, we operate
in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the
impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking
statements.

Item 6.    Directors, Senior Management and Employees



The following table sets forth information regarding our executive officers and directors as of the date of this annual report on Form 20-F.

Directors and Executive Officers

Age

Position/TitleDong Yu


42

Chairman of the board of directors and chief executive officerDr. Jack Q. Gao


55

DirectorJeffrey Chan


53

Director, chief operating officerZhong Jiang


44

Independent directorDaqing Dave Qi


48

Independent directorJie Lian


39

Independent directorPeixin Xu


42

Independent directorAmy Xu


46

Chief financial officerHao Zhang


47

General manager, domestic distribution


Dong Yuis the founder, chairman and chief executive officer of our company. Mr. Yu has over 16 years of experience in film
distribution and received numerous recognitions such as "The Most Influential Asian Film Producer" by The Hollywood Reporter in November 2006 and "Outstanding Figure of the Year in Chinese
Creative Enterprises" by Chinese Creative Enterprises in 2008. Before he founded our predecessor company in 2000, Mr. Yu held positions at China Film Group Corporation from 1999 to 2000 and at
Beijing Film Studio from 1994 to 1999. Mr. Yu is also the vice president of the Youth Film Participant Committee of the China Film Association, a standing director of the China Film Producer
Association and a director of the China Film Distribution and Exhibition Association.

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Mr. Yu
received his bachelor's degree in film management from the Beijing Film Academy and his MBA degree from Cheung Kong Graduate School of Business.

Dr. Jack Q. Gaohas over 20 years of experience in software, media and entertainment, and venture capital. He currently
serves as senior vice president of News Corporation, chief executive officer of News Corporation China Investments and chief representative of the News Corporation Beijing Representative Office. Prior
to joining News Corporation in 2006, Dr. Gao was corporate vice president and president of emerging markets of Autodesk, a multinational 3D design, engineering and entertainment software
company, where he oversaw Autodesk's emerging markets business with a focus on Greater China and India. Previously, he was president and general manager of Microsoft (China) Ltd. Co.,
where he was responsible for operations, sales and marketing, government relations and business development. Dr. Gao also served as a general partner of Walden International, a venture capital
fund, and Asia distribution manager at MSC Software. Dr. Gao holds a PhD, Masters and B.S. in Engineering from Harbin Institute of Technology and University of California, Los Angeles,
and is a PhD candidate of University of Iowa.

Jeffrey Chanhas been our chief operating officer since 2008 and our director since 2009. Mr. Chan has over 20 years of
experience in the film distribution and entertainment industry. Before joining our company, Mr. Chan served as the distribution and sales manager of Media Asia Holdings Limited from 2002 to
2007, a vice president in charge of media, content strategy and special projects of PCCW/Cable & Wireless Ltd. from 1999 to 2002 and a program controller at Asia Television Limited from
1993 to 1999. Mr. Chan holds a bachelor's degree in philosophy from the Chinese University of
Hong Kong, a master's degree in philosophy from the University of Tasmania, Australia, a master's degree in electronic commerce and internet technology from the University of Hong Kong and an MBA
degree from the University of Hong Kong.

Zhong Jianghas been our independent director since December 2010. Mr. Jiang has been a general manager at Hengji Jintai
Real Estate Brokerage Co., Ltd., a subsidiary of Vantage Holdings Group, a provider of real estate marketing and brokerage services, since 2008, where his responsibilities include the
development of projects. Mr. Jiang was an assistant general manager at Beijing Wanjing Real Estate Brokerage Co., Ltd., a real estate development company, from 2006 to 2008 and a
general manager at Beijing Shiji Hengfeng Decoration Co., Ltd, a company engaged in the building decorative works business, from 2004 to 2006. Mr. Jiang received his executive MBA
degree from Cheung Kong Graduate School of Business.

Daqing Dave Qihas been our independent director since December 2010. Dr. Qi is a professor of accounting and associate dean
of the Cheung Kong Graduate School of Business, where he has taught since 2002. From 1996 until 2002, Dr. Qi was an associate professor in the School of Accountancy at the Chinese University of
Hong Kong. Dr. Qi also has extensive experience in providing executive training and consulting services in accounting and corporate finance to government departments and private companies,
including the PRC Ministry of Information Industries, the Shanghai Municipal Government, China Mobile, China Unicom, China Telecom, China Netcom, Nokia and Ericsson. Dr. Qi also serves as a
director of Daqo New Energy Corp., a New York Stock Exchange-listed company, Focus Media Holdings Limited, a NASDAQ-listed company, AutoNavi Holdings Limited, a NASDAQ-listed company,
Sohu.com, a NASDAQ-listed company, Honghua Group Limited, a company listed on the Hong Kong Stock Exchange, SinoMedia Holding Limited, a company listed on the Hong Kong Stock Exchange, China
Vanke Co., Ltd, a company listed on the Shenzhen Stock Exchange and Focus Technology, a company listed on the Shenzhen Stock Exchange. Dr. Qi received his B.S. degree in
biophysics and his B.A. degree in international journalism from Fudan University, his MBA degree from the University of Hawaii Manoa with a concentration in accounting and finance and his
Ph.D. degree in accounting from the Eli Broad Graduate School of Management of Michigan State University.

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Jie Lianhas been our independent director since November 2011. Mr. Lian is currently a partner in the Primavera Capital
Group, a China-focused private equity firm. He also serves on the boards of various Primavera Capital Group-invested portfolio companies, including Halogen Limited, a China- based specialty chemical
company, and China XLX Fertiliser Ltd., a company listed on the Hong Kong Stock Exchange and the Singapore Stock Exchange. From October 2009 through September 2010,
Mr. Lian was a managing director in the investment banking division of China International Capital Corporation in Hong Kong. From March 2009 through August 2009, he was chief
financial officer of Ambow Education Holding Ltd., a China-based education company listed on the NASDAQ. Prior to that, Mr. Lian held various positions at Goldman Sachs, including
managing director in the investment banking division in
Hong Kong, where he worked from 2001 to 2009. Mr. Lian has an MBA from the Tuck School of Management at Dartmouth College.

Peixin Xuhas been our independent director since November 2011. Mr. Xu is currently chairman of Huasheng Taitong Media
Investment Co., Ltd., a TV production company. He is also founder and chairman of Beijing Redbaby Info-Tech Co., Ltd., a B2C e-commerce company
mainly focusing on the maternal and infant products, a partner of venture capital fund New Enterprise Associates, and a researcher at Peking University. Prior to his current positions,
Mr. Xu was a manager for new business at Beijing Northstar Industrial Group, a state-owned comprehensive real estate development and services business group. Mr. Xu has a B.A. in
business administration from the Tianjin University of Commerce.

Amy Xuhas served as our Chief Financial Officer since June 2012. Prior to joining us, Ms. Xu served as a head of accounting
at Hony Capital, where she played an important role in accounting operations, internal controls and policy establishment. From 2007 to 2011, Ms. Xu was chief financial officer at Star
China Ltd., a media content and service platform. Prior to that, Ms. Xu served as finance director for Autodesk Software (China) Ltd. (APAC Emerging) from July 2004 to
July 2007, finance controller of Microsoft China Corporation Ltd. from December 2000 to July 2004, finance, human resources and administration manager for Northwest
Airlines Inc. from April 1999 to November 2000, and financial and administrative manager for Sunwing Energy Ltd. from 1997 to February 1999. Additionally,
Ms. Xu spent eight years in various roles at Deloitte Touche Tohmatshu LLP, including two years as an audit manager. She received a B.A. in Accounting and Economics from Queens College,
City University of New York in 1989, and holds a C.P.A. license in the State of New York.

Hao Zhanghas been the general manager of our domestic distribution business since 2009. From 2005 to 2009, Mr. Zhang was the
executive deputy manager of our domestic distribution business. From 1987 until joining our company, Mr. Zhang served in a number of positions in distribution and film operations at the Xi'an
Film Corporation and as vice general manager at the Xi'an Chang'an Cinema Chain. From 1982 through 1986, Mr. Zhang served in the air force of the People's Liberation Army.



For the year ended December 31, 2012, we paid an aggregate of approximately US$0.7 million in cash to our executive officers, two of whom also
served as directors. We did not pay our independent directors any cash compensation in 2012.

Share Incentive Plans

In each of June 2009 and June 2010, we adopted the 2009 share incentive plan and 2010 share incentive plan, respectively,
to attract and retain the best available personnel, provide additional incentives to our employees, directors and consultants, and promote the success of our business. The share incentive plans
provide for the grant of options, restricted shares and restricted share units,

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collectively
referred to as "awards." Our board of directors has authorized the issuance of up to 209,163 and 5,410,650 ordinary shares upon exercise of awards granted under the 2009 share
incentive plan and 2010 share incentive plan, respectively.

Plan Administration.The compensation committee of our board of directors will administer the share incentive plans. The
compensation committee or
the full board of directors, as appropriate, will determine the participants to receive awards, the type and number of awards to be granted and the terms and conditions of each award grant.

Award Agreements.Awards granted under the share incentive plans are evidenced by an award agreement that sets forth the terms,
conditions and
limitations for such grant, which may include the term of the awards, the provisions applicable in the event of termination of the grantee's employment or service, and our authority to unilaterally or
bilaterally amend, modify, suspend, cancel or rescind the awards.

Transfer Restrictions.The right of a grantee in an award granted under the share incentive plans may not be transferred in any
manner by the grantee
other than as permitted by the administrator of the share incentive plans or by will or the laws of succession and, with limited exceptions, may be exercised during the lifetime of the grantee only by
the grantee.

Option Exercise.The term of options granted under the share incentive plans may not exceed ten years from the date of grant.
The consideration to be
paid for our ordinary shares upon exercise of an option may include cash, check or other cash-equivalent, ordinary shares, consideration received by us in a cashless exercise, or any
combination of the foregoing methods of payment.

Acceleration upon a Change of Control.The award agreement may provide for acceleration of the vesting of the awards in the event
of a change of
control of our company pursuant to its terms. Our compensation committee or our board of directors may (i) cancel the awards for fair market value, (ii) provide for issuance of
substitute awards or (iii) provide that for at least 15 days prior to the change of control the awards shall be exercisable as to all shares subject thereto and such awards shall
terminate after the change of control.

Termination and Amendment.Unless terminated earlier, the share incentive plans will expire after ten years. Our board of
directors has the authority
to amend or terminate the share incentive plans subject to shareholder approval to the extent necessary to comply with applicable law.

Our
board of directors has granted options to participants in the share incentive plans. As of April 15, 2013, there were 3,772,161 ordinary shares issuable upon the
exercise of outstanding share options at a weighted average exercise price of US$7.81 per share, and there were 1,847,652 ordinary shares available for future issuance upon the exercise of
future grants under the share incentive plans. The following table summarizes the outstanding options our directors and executive officers beneficially

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owned
under our share incentive plans as of March 31, 2013, without giving effect to options that were exercised or terminated.

Name

Options or
Restricted Shares
Awarded

Exercise Price or
Purchase Price
(US$/Share)

Date of Grant

Date of ExpirationDong Yu


138,850

US$
3.36


June 1, 2009


May 31, 201926,991

US$
6.31


June 1, 2010


May 31, 2020435,774

US$
6.31


March 23, 2011


March 22, 2021500,000

US$
10.96


April 2, 2012


April 1, 2022Amy Xu


*

US$
10.96


April 2, 2012


April 1, 2022Jeffrey Chan


*

US$
8.62


November 14, 2011


November 13, 2021Hao Zhang


*

US$
3.44


June 1, 2010


May 31, 2020Zhong Jiang


*

US$
11.56


March 23, 2011


March 22, 2021*

US$
8.62


November 14, 2011


November 13, 2021Jie Lian


*

US$
8.62


November 14, 2011


November 13, 2021Daqing Dave Qi


*

US$
11.56


March 23, 2011


March 22, 2021*

US$
8.62


November 14, 2011


November 13, 2021Peixin Xu


*

US$
8.62


November 14, 2011


November 13, 2021*

US$
10.96


April 2, 2012


April 1, 2022Total


1,731,066


*Upon
exercise of all options granted, would beneficially own less than 1% of our outstanding ordinary shares.


As
of the date of April 15, 2013, other individuals as a group held options to purchase 2,041,095 ordinary shares of our company, with exercise prices ranging from US$3.36
to US$10.96 per ordinary share.



Board of Directors

Our board of directors currently consists of seven directors. Our second amended and restated memorandum and articles of association,
provides that our board of directors will consist of at least two directors. Our directors will be elected by the holders of our ordinary shares.

A
director is not required to hold any shares in the company by way of qualification. A director may vote with respect to any contract, proposed contract or arrangement in which he or
she is materially interested. A director may exercise all the powers of our company to borrow money, mortgage its undertaking, property and uncalled capital, and issue debentures or other securities
whenever money is borrowed or as security for any obligation of our company or of any third party.

Committees of the Board of Directors

We have three committees under the board of directors: the audit committee, the compensation committee and the corporate governance and
nominating committee. We have adopted a charter for each of the three committees. Each committee's members and functions are described below.

Audit Committee.Our audit committee consists of Daqing Dave Qi, Zhong Jiang and Jie Lian. Our board of directors has determined that
each of Daqing
Dave Qi, Zhong Jiang and Jie Lian

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satisfies
the "independence" requirements of Rule 10A-3 under the Securities Exchange Act of 1934, as amended, and Rule 5605(a)(2) of the NASDAQ Listing Rules. Daqing
Dave Qi is the chairman of our audit committee and meets the criteria of an audit committee financial expert as set forth under the applicable rules of the SEC. Our audit committee oversees our
accounting and financial reporting processes and the audits of the financial statements of our company. The audit committee is responsible for, among
other things:



Compensation Committee.Our compensation committee consists of Jie Lian, Peixin Xu and Zhong Jiang. Our board of directors has
determined that each
of Jie Lian, Peixin Xu and Zhong Jiang satisfies the "independence" requirements of Rule 5605(a)(2) of the NASDAQ Listing Rules. Jie Lian is the chairman of our compensation committee. Our
compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our founder,
chairman and chief executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation committee is responsible for, among
other things:



Corporate Governance and Nominating Committee.Our corporate and nominating committee consists of Zhong Jiang, Peixin Xu and Jie Lian.
Zhong Jiang is
the chairman of our corporate governance and nominating committee. Our corporate governance and nominating committee assists the board of directors in selecting individuals qualified to become our
directors and in determining the

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composition
of the board and its committees. The corporate governance and nominating committee is responsible for, among other things:



Strategy Committee.Our strategy committee consists of Peixin Xu and Dong Yu. In addition Nansun Shi, our consultant and former
director, serves as
an advisor to this committee. Peixin Xu is the chairman of our strategy committee. Our strategy committee assists the board of directors in the formulation and execution of the Company's
mid- to long-term strategy.

Duties of Directors

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

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



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Terms of Directors and Officers

Our officers are elected by and serve at the discretion of the board of directors. Our directors are not subject to a term of office
and hold office until such time as they are removed from office by an ordinary resolution of shareholders. A director will be removed from office automatically if, among other things, the director
(i) becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors; or (ii) dies or is found by our company to be or becomes of
unsound mind.



See "Item 4. Information of the CompanyB. Business OverviewEmployees."



The following table sets forth information with respect to the beneficial ownership, within the meaning of Rule 13d-3 under the Exchange
Act, of our ordinary shares, as of April 15, 2013:



The
calculations in the table below assume there are 30,402,346 ordinary shares issued and outstanding as of April 15, 2013. Beneficial ownership is determined in
accordance with Rule 13d-3 of the General Rules and Regulations under the Exchange Act. In computing the number of shares beneficially owned by a person and the percentage ownership
of that person, we have included shares that the person has the right to acquire within 60 days of this date of this annual report on Form 20-F, including through the
exercise of any option, warrant or other right or the conversion of any other

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security.
These shares, however, are not included in the computation of the percentage ownership of any other person.

Shares Beneficially
OwnedNumber

%Directors and Executive Officers:Dong Yu(1)


9,278,383


30.14Dr. Jack Q. Gao





Jeffrey Chan


497,589


1.63Zhong Jiang


353,031


1.16Daqing Dave Qi


*


*Amy Xu


*


*Jie Lian


*


*Peixin Xu


862,123


2.83Hao Zhang


*


*All Directors and Executive Officers as a Group


11,205,485


36.47Principal Shareholders:Skillgreat Limited


8,594,065


28.27NCIH, Inc.(2)


6,050,067


19.90Sequoia Funds(3)


1,646,362


5.42SIG China Investments One, Ltd.(4)


2,019,744


6.64Matrix Partners China Funds(5)


1,327,025


4.36Tremblant Capital Group(6)


852,614


2.80SAIF Partners IV L.P.(7)


1,708,754


5.62


*Less
than 1%.(1)Includes
8,594,065 ordinary shares held by Skillgreat Limited, 644,107 ordinary shares underlying options held by Mr. Dong Yu, and
159,656 ordinary shares underlying options held by Skillgreat Limited on behalf of Mr. Dong Yu. Excludes 194,345 ordinary shares held by Skillgreat Limited on behalf of others.
Skillgreat Limited purchased an aggregate of 3,550,067 ordinary shares from certain existing security holders of our company and sold 6,050,067 ordinary shares to NCIH, Inc., each
in May 2012. In addition, Skillgreat Limited purchased an aggregate of 149,800 ADSs in 2011 and 2012, representing 74,900 ordinary shares, at an average price of US$4.64 per ADS through
open-market transactions. For more information, see "Item 4. Information on the CompanyA. History and Development of the Company." Skillgreat Limited is a limited
liability company organized under the laws of the British Virgin Islands and its address is P.O. Box 957, Offshore Incorporations Center, Road Town, Tortola, British
Virgin Islands.(2)Information
based on the Schedule 13D filed by NCIH, Inc., a Delaware corporation, and News Corporation, a Delaware corporation, with the
Securities and Exchange Commission on May 30, 2012, and the share ownership percentage based on 30,402,346 shares of the Company outstanding as of April 15, 2013. Includes
6,050,067 ordinary shares held by NCIH, Inc. NCIH, Inc. is an indirectly wholly-owned subsidiary of News Corporation, a Delaware corporation. The business address of
NCIH, Inc. is 1211 Avenue of the Americas, New York, New York 10036. Each of NCIH, Inc. and News Corporation has the sole power to dispose, or to direct the
disposition of, 6,050,067 ordinary shares, and sole power to vote, or to direct the vote of, 6,050,067 ordinary shares.(3)Information
based on the amended Schedule 13G filed on February 12, 2013 on behalf of Sequoia Capital China I L.P., Sequoia Capital
China Partners Fund I L.P., Sequoia Capital China Principals


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Fund
I L.P., Sequoia Capital China Management I, L.P., SC China Holding Limited, SNP China Enterprises Limited and Nan Peng Shen. Includes (i) 1,296,678 ordinary shares held by
Sequoia Capital China I L.P.; (ii) 148,993 ordinary shares held by Sequoia Capital China Partners Fund I L.P.; and (iii) 200,691 ordinary shares held by Sequoia Capital
China Principals Fund I L.P. The general partner of each of the Sequoia Funds is Sequoia Capital China Management I, L.P., whose general partner is SC China Holding Limited, a company
incorporated in the Cayman Islands. SC China Holding Limited is wholly owned by SNP China Enterprises Limited, a company wholly owned by Neil Nanpeng Shen. Neil Nanpeng Shen disclaims beneficial
ownership in all securities shown except to the extent of his pecuniary interests therein. The principal business office address of the Sequoia Funds is 3000 Sand Hill Road, 4-250,
Menlo Park, CA 94025. (4)Information
based on the Schedule 13G filed on February 13, 2013 on behalf of SIG China Investments One, Ltd. and SIG Asia Investment,
LLLP. SIG Asia Investment, LLLP, the investment manager of SIG China Investments One, Ltd., has discretionary authority to vote and dispose of the shares held by SIG China Investments
One, Ltd. The principal business office address of SIG China Investments One, Ltd. is One Capital Place, P.O. Box 1787 GT, Grand Cayman, Cayman Islands, and the principal
business office address of SIG Asia Investment, LLLP is One Commerce Center, 1201 N. Orange Street, Suite 715, Wilmington DE 19801.(5)Information
based on the Schedule 13G filed on February 6, 2013 on behalf of Matrix Partners China I, L.P. and Matrix Partners China
I-A, L.P. Includes (i) 1,204,933 ordinary shares held by Matrix Partners China I L.P.; and (ii) 122,092 ordinary shares held by Matrix Partners China
I-A L.P. The general partner of the Matrix Partners China Funds is Matrix China Management I, L.P. whose general partner is Matrix China I GP GP, Ltd.
Yibo Shao is a director of Matrix China I GP GP, Ltd. Pursuant to the operating agreements of Matrix China I GP GP, Ltd., voting and dispositive decisions
with respect to portfolio company securities of Matrix Partners China I, L.P. and Matrix Partners China I-A, L.P. require Mr. Shao's consent and, as such,
Mr. Shao may be deemed to share voting and dispositive power over these ordinary shares. The principal business office address of the Matrix Partners China Funds is Maples Corporate Services
Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.(6)Information
based on the Schedule 13G filed on February 14, 2013 on behalf of Tremblant Capital Group. Includes 1,705,228 American
Depositary Shares, each two American Depositary Shares representing one ordinary share. The principal business office address of Tremblant Capital Group is 767 Fifth Avenue, New York,
New York 10153, United States.(7)Information
based on the Schedule 13G filed on January 25, 2013 on behalf of SAIF Partners IV L.P. Includes 3,417,508 ADSs,
representing 1,708,754 ordinary shares held by SAIF Partners IV L.P. The sole general partner of SAIF Partners IV L.P. is SAIF IV GP, L.P., whose sole general
partner is SAIF IV GP Capital Ltd., a Cayman Islands company. Andrew Y. Yan is the sole director and shareholder of SAIF IV GP Capital Ltd. Pursuant to Section 13(d)
of the Exchange Act, Mr. Yan may be deemed to beneficially own all of the ADSs held by SAIF Partners IV L.P. Mr. Yan disclaims such beneficial ownership. The registered address of
SAIF Partners IV L.P. is c/o Maples Corporate Services Limited, P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.


One
of our shareholders, SIG China Investments One, Ltd., has informed us that it is affiliated with registered broker-dealers. SIG China Investments One, Ltd. was not
affiliated or otherwise related to us prior to its purchase of our Series A preferred shares. It purchased our Series A preferred shares, which were converted into ordinary shares upon
the closing of our initial public offering, directly from us in the ordinary course of business and at the time of the purchase, SIG China Investments One, Ltd. had no agreements or
understandings, directly or indirectly, with any person to distribute Series A preferred shares.

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As
of April 15, 2013, 9,663,843 ordinary shares or 31.8% of our outstanding ordinary shares in the form of ADSs are held by one record holder in the United States.
Because many of these shares are held by brokers or other nominees, we cannot ascertain the exact number of beneficial shareholders with addresses in the United States.

None
of our existing shareholders has different voting rights from other shareholders. We are not aware of any arrangement that may, at a subsequent date, result in a change of control
of our company.

Item 7.    Major Shareholders and Related Party Transactions



See "Item 6. Directors, Senior Management and EmployeesE. Share Ownership"



Transactions Related to Our Corporate Structure

To comply with the applicable PRC laws, rules and regulations, we conduct our operations in China through contractual arrangements
between our wholly owned PRC subsidiary, Bona New World, and our affiliated consolidated entities. See "Item 4. Information of the CompanyC. Organizational
StructureContractual Arrangements with Our Affiliated Consolidated Entities."

Private Placements

Issuances of Ordinary Shares

On December 13, 2006, we issued six ordinary shares to Ms. Nansun Shi upon the establishment of our company in the
British Virgin Islands.

In
July 2007, we issued 5,828,119, 140,625, 187,500 and 93,750 ordinary shares to Mr. Dong Yu, Mr. Hai Yu, Ms. Nansun Shi and Mr. Huang
Hsin-Mao respectively, for no consideration as a result of recapitalization from capital reserve.

In
June 2009, we issued 2,609,269 ordinary shares at par value of US$0.0005 per share to Mr. Dong Yu. In addition, we issued an aggregate of 194,345 ordinary
shares for the benefit of other shareholders. These shares are held by Skillgreat Limited.

In
July 2010, Jeffrey Chan purchased 317,072 of our ordinary shares at a price per share equal to the per-share price of our Series B-3 preferred
shares.

Issuance and Sale of Series A Preferred Shares and Repurchase of Ordinary Shares

In May 2007 and June 2007, we issued convertible notes in the aggregate principal amount of US$3,000,000 to SIG China
Investment One, Ltd. and the Sequoia Funds under the terms of secured convertible note and warrant purchase agreements. In addition, we also issued warrants to purchase
87,888 Series A preferred shares at a purchase price of US$2.56 per share, which was adjusted to US$1.39 per share pursuant to the secured convertible note and warrant purchase
agreements. In July 2007, all of the outstanding principal amount and accrued interest were converted and we issued 1,171,875 Series A preferred shares to SIG China Investment
One, Ltd. and the Sequoia Funds as a result. In June 2009, all of the warrants were exercised and we issued 50,631 Series A preferred shares to SIG China Investment
One, Ltd. and the Sequoia Funds as a result.

In
July 2007, in connection with the conversion of our convertible notes into Series A preferred shares, we issued an aggregate of 1,953,125 Series A
preferred shares to SIG China Investment One, Ltd. and the Sequoia Funds for an aggregate consideration of US$5,000,000 under the terms a

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share
purchase agreement. In addition, we repurchased 585,937 ordinary shares from Mr. Dong Yu for an aggregate consideration of US$1,500,000.

The
Series A preferred shares were automatically converted into our ordinary shares upon the completion of our initial public offering. Each of our Series A preferred
shares is convertible into approximately 1.8421 ordinary shares, subject to certain anti-dilution adjustments.

Issuance and Sale of Series B Preferred Shares and Repurchase of Ordinary Shares

In July 2009, we issued an aggregate of 1,241,958 shares of Series B-1 preferred shares to Matrix
Partners China Funds, the Sequoia Funds and SINA Hong Kong Limited for an aggregate consideration of US$3,500,000 and an aggregate of 1,655,939 shares of Series B-2 preferred
shares to Matrix Partners China Funds, the Sequoia Funds, SINA Hong Kong Limited, Zero2IPOChina Fund II L.P. and Wayford Enterprises Limited for an aggregate consideration of US$6,000,000. In
addition, we repurchased 1,241,958 ordinary shares from Mr. Dong Yu for an aggregate consideration of US$3,500,000.

In
July 2010, we issued a total of 792,680 Series B-3 preferred shares to Matrix Partners China Funds, the Sequoia Funds, SIG China Investment
One, Ltd., Zero2IPOChina Fund II L.P., Wayford Enterprises Limited and Blooming Capital Limited for an aggregate consideration of US$5,000,000.

The
Series B preferred shares were automatically converted into our ordinary shares upon the completion of our initial public offering.

Share Exchange

In November 2010, Bona Film Group Limited entered into a share exchange agreement with the then shareholders of Bona
International Film Group, under the terms of which Bona Film Group Limited issued one preferred or ordinary share in exchange for every 16 of the
respective preferred or ordinary shares that these shareholders held in Bona International Film Group Limited. As a result of the share exchange, Bona Film Group Limited became our ultimate holding
company.

Shareholders' Agreement

In connection with our Series A preferred shares private placement in July 2007, we and our shareholders entered into a
shareholders' agreement, which was amended and restated in connection with our Series B preferred shares private placements in July 2009 and July 2010 and further amended and
restated in November 2010 in connection with the 16 to 1 share exchange of preferred and ordinary shares of Bona International Film Group Limited for preferred and ordinary shares of
our company.

Under
the amended and restated shareholders' agreement, the investors in the private placement of our Series A preferred shares and Series B preferred shares are entitled
to certain registration rights, including demand registration, Form F-3 registration and piggyback registration.

Except
for the registration rights, the shareholders' rights under the amended and restated shareholders' agreement have terminated automatically upon the closing of our initial public
offering. In addition, we have agreed to deliver annual reports and quarterly and interim reports and all other filings with any regulatory agency and securities exchange to the investors in the
private placement of our Series A preferred shares and Series B preferred shares after our initial public offering.

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Agreements with Affiliates of News Corporation

Investor Rights Agreement with NCIH

As a closing condition to the NCIH share purchase agreement pursuant to which NCIH, Inc., a Delaware corporation, purchased from
Skillgreat Limited an aggregate of 6,050,067 ordinary shares, our company, Mr. Dong Yu, Skillgreat Limited and NCIH, Inc. entered into an investor rights agreement on
May 21, 2012.

Under
the investor rights agreement, NCIH, Inc. agrees to vote, until May 21, 2013, such number of ordinary shares as determined below, or the voting shares, in accordance
with the instructions of Skillgreat Limited with respect to (i) the re-election of the Mr. Dong Yu to the board of directors of our company and (ii) the first public
offering of ordinary shares by our company after May 21, 2012, provided that such public offering meets certain conditions specified in the investor rights agreement. In addition, until
May 21, 2013, neither NCIH, Inc. nor its controlled affiliates may purchase a number of ordinary shares equal to or greater than the number of the voting shares or a majority of the
assets of our company or acquire our company by merger, scheme of arrangement, amalgamation, or consolidation, except with the written consent of Skillgreat Limited.

Pursuant
to the investor rights agreement, the number of the voting shares means the lesser of (i) all of the ordinary shares held by NCIH, Inc. as of the record date for
voting on the voting events described in the preceding paragraph and (ii) that number of ordinary shares equal to (a) 33.4% of the total number of our outstanding ordinary shares as of
such record date minus (b) the number of ordinary shares beneficially owned by Mr. Dong Yu and his affiliates immediately after May 25, 2012, the date of the final closing under
the NCIH share purchase agreement, reduced by any increase in the number of ordinary shares beneficially owned by Mr. Dong Yu and his affiliates from May 25, 2012 through such
record date.

Pursuant
to the investor rights agreement, NCIH, Inc. is entitled to Form F-3 registration and piggyback registration rights. NCIH, Inc. also has a right
to purchase its pro rata share of any securities to be offered or sold by our company.

In
addition, pursuant to the investor rights agreement, our company agrees to nominate and recommend one candidate nominated by NCIH, Inc. for election to our board of directors,
and Skillgreat Limited agrees, and Mr. Dong Yu agrees to cause Skillgreat Limited to, vote our ordinary shares held by Skillgreat Limited to elect NCIH, Inc.'s nominee to our board of
directors. If no NCIH, Inc.'s nominee serves on our board of directors, NCIH, Inc. has the right to designate one non-voting observer to our board of directors. The foregoing
rights and obligations will continue until NCIH, Inc., together with its affiliates, no longer holds at least 50% of the ordinary shares it purchased under the NCIH share purchase agreement. On
August 23, 2012, our company appointed Dr. Jack Q. Gao, Senior Vice President of News Corporation and Chief Executive Officer of News Corporation's China Investments, to our board of
directors effective September 10, 2012.

The
investor rights agreement also includes a non-binding statement of intent between our company and NCIH, Inc. or its affiliates to explore potential cooperation
opportunities with respect to one or more projects in the film industry. For as long as NCIH, Inc., together with its affiliates, continues to hold at least 50% of the ordinary shares it
purchased under the NCIH share purchase agreement, NCIH, Inc. also has the right to designate and appoint, by written notice to our company, one vice president of our company, responsible for
assisting in the development of any such potential projects.

Letter of Intent with Fox International Productions (Greater China) Limited

On October 23, 2012, Bona Film Group Co., Ltd. (PRC) and Fox International Productions (Greater China) Limited, a
wholly-owned subsidiary of News Corporation, entered into a letter of

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intent
for co-production and closer partnership. The letter of intent relates to a multiphase-project for Chinese language films which are qualified as co-productions in the
PRC. The parties agreed to explore mutual development, production, marketing and distribution of feature-length Chinese-language films. In addition, the parties agree to explore more
long-term opportunities regarding Chinese-language theatrical motion pictures.

Acquisition of Movie Theater Business

In July 2011, we entered a series of agreements to acquire Alpha Speed Limited, a British Virgin Islands company and Bona
Starlight, a PRC company which held five subsidiaries at the time of the acquisition primarily focused on the movie theater business in the PRC. Prior to the acquisitions, Alpha Speed Limited was
owned 51% by Skillgreat Limited, which is wholly owned by Mr. Dong Yu, and Bona Starlight was also owned 51% by Mr. Dong Yu. We acquired Alpha Speed Limited and Bona Starlight with total
cash consideration of US$30.9 million, of which US$3.1 million was settled as an offset against the amount that our Company was owed by Mr. Dong Yu, the remaining amount of which
has been fully paid as of December 31, 2012.

In
April 2010, we entered into a series of transactions to acquire Beijing Bona Cineplex and Beijing Bona Youtang, two companies that focus on the movie theater business in the
PRC. At the time of the acquisition, these companies were beneficially owned by Mr. Dong Yu, our chairman and chief executive officer, and his immediate family member. The total consideration
comprised 5,810,320 newly issued ordinary shares with a fair value of US$4.50 per share as of the acquisition date and the settlement of US$5.3 million that Mr. Dong Yu owed
to us.

Related Party Loans and Other Payments

As of December 31, 2010, 2011 and 2012, we had amounts outstanding totaling US$6,213, US$0.1 million and nil,
respectively, for payments of Mr. Dong Yu's individual income tax and loans to Mr. Dong Yu, our chairman and chief executive officer. As of December 31, 2010, 2011 and 2012, we
owed nil, nil and nil, respectively, to Mr. Dong Yu for operating expenses and purchases made by him on behalf of us and declared dividends to him.

As
of December 31, 2010, 2011 and 2012, we had amounts outstanding totaling US$0.8 million, US$0.8 million and nil, respectively, for distribution receivables and
loans to Bona Meitao Culture Media Co., Ltd. An amount of US$0.8 million was settled with Bona Meitao Culture Media Co., Ltd. in April 2012.

As
of December 31, 2010, there were amounts outstanding of US$1.7 million from Bona Starlight for payments of working capital we paid on behalf of this entity. The amount
due from Bona Starlight was eliminated as inter-company transactions on our consolidated financial statement following the acquisition of Bona Starlight in July 2011.

We
had amounts due from affiliates of Cinema Popular Limited of US$0.3 million, US$0.2 million and US$0.3 million as of December 31, 2010, 2011 and 2012,
respectively, in connection with receivables from affiliates for operations.

As
of December 31, 2010, 2011 and 2012, we had outstanding loan amounts from to Hubei Film Distribution, a non-controlling shareholder of one of our movie theater
companies, of US$0.3 million, US$0.5 million and US$0.5 million, respectively.

As
of December 31, 2010, 2011 and 2012, we owed payables in the amounts of US$0.6 million, US$0.8 million and US$0.8 million, respectively, to Wuhan Lianzhong
Digital Film Technology Co., Ltd., our cost method investee, for film projection equipment we purchased from it.

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As
of December 31, 2011 and 2012, we had outstanding loan amounts of US$0.2 million and US$0.2 million, respectively, from Hunan Xiaoxiang Cineplex Investment
Management Co., Ltd., a non-controlling shareholder of Changsha Mango Bona Cineplex Management Co., Ltd.

As
of December 31, 2011, we owed payables of US$0.3 million to Zhongda Helian Marketing Consulting Co., Ltd., a cost-method investee of our
company, for film marketing and consulting expenses. These payables were settled in 2012.

As
of December 31, 2011 and 2012, we had outstanding loan amounts of US$0.4 million and US$0.4 million, respectively, from Mr. Xiaojian Xu, a
non-controlling shareholder of Xi'an Huitong.

As
of December 31, 2011 and 2012, we owed payables of US$0.4 million and US$0.7 million, respectively, to Film Workshop Co., Ltd. for film production
services. Nansun Shi, a consultant and former director of our company, is a principal shareholder of Film Workshop Co., Ltd.

As
of December 31, 2011 and 2012, respectively, we had outstanding loan amounts of US$0.5 million and US$0.5 million, respectively, from Ms. Xiang Li, a
non-controlling shareholder of Changsha Mango Bona Cineplex Management Co., Ltd.

In
April 2012, we entered into a rental agreement with Tianjin Nongken Group Culture Investment Co., Ltd., a company in which Tianjin Nongken Group Real Estate
Development Co., Ltd. has an equity interest, to lease a piece of property for movie theatre. Tianjin Nongken Group Real Estate Development Co., Ltd. is the noncontrolling
shareholder of Tianjin Nongken Bona Film Investment Ltd., a subsdiary of one of our affiliated consolidated entities. As of December 31, 2012, we owed US$0.7 million for rental
expenses payable to Tianjin Nongken Group Culture Investment Co., Ltd.

As
of December 31, 2012, we had outstanding payables in the amount of US$2.0 million in respect of a loan from Nongken Group Real Estate Development Co., Ltd.

From
time to time, our founder, chairman and chief executive officer, Mr. Dong Yu, has provided personal guarantees in order to help enable us to procure bank borrowings. As of
the date of this
annual report on Form 20-F, Mr. Dong Yu is providing a personal guarantee in respect of a term loan facility from Bank of Beijing under which Bona Film
Group Co., Ltd. (PRC) has a loan with principal amount of approximately RMB50.0 million (US$8.0 million) outstanding. This term loan facility is jointly guaranteed by
Beijing Bona Cineplex and Zhejiang Bona Film and Television Production Co., Ltd. together with Mr. Dong Yu. Mr. Dong Yu is also providing, as of the date of this annual
report on Form 20-F, a personal guarantee in respect of a fixed asset loan facility provided by Industrial Commercial Bank of China to Bona Film Group Co., Ltd. (PRC),
which currently has a principal amount of approximately RMB50.0 million (US$8.0 million) outstanding. Zhejiang Bona Film and Television Production Co., Ltd. is providing a
joint guarantee with Mr. Dong Yu for this loan. For information about the risks involved in Mr. Dong Yu's personal guarantees of our bank borrowings, see "Item 3. Key
InformationD. Risk FactorsRisks Relating to Our Business and IndustryOur founder, chairman and chief executive officer, Mr. Dong Yu, has provided
personal guarantees to secure our obligations under certain credit facilities and may continue to grant additional guarantees in the future. Defaults under these credit facilities could result in a
sale of a significant portion of Mr. Dong Yu's equity interest in our company."

Other Related Party Transactions

In September 2010, our affiliated consolidated entity, Beijing Bona Cineplex, entered into a management service agreement with
Bona Starlight, a development stage movie theater operator in the PRC whose principal shareholders include Mr. Dong Yu. Under the terms of this agreement, we licensed our "Bona" brand to Bona
Starlight and became the exclusive provider of management services for its current and future movie theaters. We are also entitled to receive a share of the box

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office
receipts and advertising revenues of Bona Starlight's movie theaters. This agreement was terminated in June 2011.

In
November 2010, we entered into a separate agreement with Bona Starlight, we have a right of first refusal with respect to transfers of movie theaters developed by Bona
Starlight and right of first refusal with respect to transfers of shares of Bona Starlight. This agreement was terminated in July 2011.

Share Incentive Plans

See "Item 6. Directors, Senior Management and EmployeesB. Compensation of Directors, Supervisors and Executive
OfficersShare Incentive Plans."



Not applicable.

Item 8.    Financial Information



Please refer to Item 18 for a list of all financial statements filed as part of this annual report on Form 20-F.



See "Item 4. Information on the CompanyB. Business OverviewLegal and Administrative Proceedings."



Our board of directors has complete discretion as to whether to distribute dividends. Even if our board of directors decides to pay
dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors
that our board of directors may deem relevant.

In
2007, one of our affiliated consolidated entities declared a dividend of US$0.2 million to a non-controlling shareholder, which dividend remains outstanding. In
2008, our affiliated consolidated entities declared a dividend of US$0.3 million to Mr. Dong Yu, our chairman and chief executive officer, which was paid in 2008, and
US$0.2 million to a non-controlling shareholder, which remains outstanding. We have no present plan to declare and pay any dividends on our ordinary shares or ADSs in the near
future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.

We
are a holding company incorporated in the Cayman Islands. We may rely on dividends from our subsidiary in China, which in turn relies on the payments received from our affiliated
consolidated entities in China pursuant to the contractual arrangements that established our corporate structure. Current PRC laws, rules and regulations permit our PRC subsidiary to pay dividends to
us only out of its accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, our subsidiary in China is required to set aside a certain amount
of its accumulated after-tax profits each year to fund statutory reserves. These reserves may not be distributed as cash dividends. Further, if our subsidiary in China incurs debt on its
own behalf, the instruments governing the debt may restrict its ability to pay dividends or make other payments to us.

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If
we pay any dividends, we will pay our ADS holders to the same extent as holders of our ordinary shares, subject to the terms of the deposit agreement, including the fees and expenses
payable thereunder. Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.



We have not experienced any significant changes since the date of our audited financial statements included in this annual report on Form 20-F.

Item 9.    The Offer and Listing



Our ADSs, two ADSs representing one ordinary share, have been listed on the NASDAQ since December 9, 2010 under the symbol "BONA". The table below shows,
for the periods indicated, the high and low market prices on the NASDAQ.

Market Price for Each ADSHigh

LowUS$

US$Annual highs and lows2011


7.89


3.502012


6.50


3.86Quarterly highs and lowsSecond quarter 2011


6.90


3.50Third quarter 2011


5.00


3.55Fourth quarter 2011


4.70


3.73First quarter 2012


6.09


3.86Second quarter 2012


6.50


5.00Third quarter 2012


6.10


4.87Fourth quarter 2012


5.48


4.13First quarter 2013


5.30


4.53Second quarter 2013 (through April 24, 2013)


4.63


3.92Monthly highs and lowsOctober 2012


5.42


4.85November 2012


5.48


4.85December 2012


5.28


4.13January 2013


5.30


4.79February 2013


5.16


4.80March 2013


5.12


4.53April 2013 (through April 24)


4.63


3.92


Source:
NASDAQ Stock Exchange. (1)As
reported.




Not applicable.

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Our ADSs, each representing two of our ordinary shares, have been listed on the NASDAQ since December 9, 2010 under the symbol "BONA."



Not applicable.



Not applicable.



Not applicable.

Item 10.    Additional Information



Not applicable.



We incorporate by reference into this annual report on Form 20-F the description of our second amended and restated memorandum of association
contained in our registration statement under the heading "Description of Share Capital" on Form F-1 (File No. 333-170657), as amended, initially filed with the
SEC on November 17, 2010. Our shareholders adopted our second amended and restated memorandum of association by unanimous resolution on November 17, 2010.



In the past three fiscal years, we have not entered into any material contracts other than in the ordinary course of business or other than those described below
and elsewhere in this annual report on Form 20-F.



See "Item 4. Information on the CompanyB. Business OverviewRegulations of Our Industry."



Cayman Islands Taxation

The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there
is no taxation in the nature of inheritance tax or estate duty. There are no other taxes levied by the Government of the Cayman Islands that are likely to be material to holders of ADSs or ordinary
shares. The Cayman Islands is not party to any double tax treaties. There are no exchange control regulations or currency restrictions in the Cayman Islands.

Pursuant
to Section 6 of the Tax Concessions Law (1999 Revision) of the Cayman Islands, we have obtained an undertaking from the
Governor-in-Council:



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The
undertaking for us is for a period of twenty years from July 20, 2010.

People's Republic of China Taxation

The EIT Law provides that enterprises established outside of China whose "de facto management bodies" are located in China are
considered "resident enterprises" of China. Under the implementation regulations for the EIT Law issued by the PRC State Council, "de facto management body" is defined as a body that has material and
overall management and control over the manufacturing and business operations, personnel and human resources, finances and treasury, and acquisition and disposition of properties and other assets of
an enterprise. Although substantially all of our operational management is currently based in the PRC, it is unclear whether PRC tax authorities would require (or permit) us to be treated as a
PRC resident enterprise.

Under
the EIT Law and implementation regulations issued by the State Council, PRC withholding tax at the rate of 10% is applicable to dividends payable to investors that are
"non-resident enterprises," which do not have an establishment or place of business in the PRC, or which have such establishment or place of business but the relevant income is not
effectively connected with the establishment or place of business, to the extent such dividends have their sources within the PRC. Similarly, any gain realized on the transfer of our ordinary shares
or ADSs by such investors is also subject to 10% PRC income tax if such gain is regarded as income derived from sources within the PRC. The implementation regulations of the EIT Law set forth that,
(i) if the enterprise that distributes dividends is domiciled in the PRC, or (ii) if gains are realized from transferring equity interests of enterprises domiciled in the PRC, then such
dividends or capital gains are treated as China-sourced income. It is not clear how "domicile" may be interpreted under the EIT Law, and it may be interpreted as the jurisdiction where the enterprise
is a tax resident. Therefore, if we are considered a PRC "resident enterprise," dividends we pay with respect to our ordinary shares or ADSs, or the gain you may realize from the transfer of our
ordinary shares or ADSs, may be treated as income derived from sources within the PRC and be subject to PRC tax. It is unclear whether, if we are considered a PRC "resident enterprise," holders of our
ordinary shares or ADSs might be able to claim the benefit of income tax treaties entered into between China and other countries.

Moreover,
non-resident individual investors may be required to pay PRC individual income tax at a rate of 20% on interest or dividends payable to the investors or any capital
gains realized from the transfer of ADSs or ordinary shares if such gains are deemed income derived from sources within the PRC. Under the IIT Law, non-resident individual refers to an
individual who has no domicile in China and does not stay in the territory of China or who has no domicile in China and has stayed in the territory of China for less than one year. Pursuant to the IIT
Law and its implementation rules, for purposes of the PRC capital gains tax, the taxable income will be the balance of the total income obtained from the transfer of the ADSs or ordinary shares minus
all the costs and expenses that are permitted under PRC tax laws to be deducted from the income. Therefore, if we are considered as a PRC "resident enterprise" and dividends we pay with respect to our
ADSs or ordinary shares and the gains realized from the transfer of our ADSs or ordinary shares are considered income derived from sources within the PRC by relevant competent PRC tax authorities,
such gains earned by non-resident individuals may also be subject to PRC withholding tax at a rate of 20%.

United States Federal Income Tax Consequences

The following discussion describes the material United States federal income tax consequences of the ownership of our ordinary
shares and ADSs as of the date hereof. The discussion is applicable only to United States Holders (as defined below) who hold our ordinary shares or ADSs as capital assets.

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As
used herein, the term "United States Holder" means a beneficial owner of an ordinary share or ADS that is for United States federal income
tax purposes:



This
discussion does not represent a detailed description of the United States federal income tax consequences applicable to you if you are subject to special treatment under the
United States federal income tax laws, including if you are:



The
discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), and regulations, rulings and judicial decisions thereunder as of
the date hereof, which are subject to differing interpretations or change (possibly with retroactive effect) so as to result in United States federal income tax consequences different from
those discussed below. In addition, this discussion is based, in part, upon representations made by the depositary to us and assumes that the deposit agreement, and all other related agreements, will
be performed in accordance with their terms.

If
a partnership holds ordinary shares or ADSs, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a
partnership or a partner in such partnership that holds our ordinary shares or ADSs, you should consult your tax advisors.

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This
discussion does not contain a detailed description of all the United States federal income tax consequences to you in light of your particular circumstances and does not
address the effects of any state, local or non-United States tax laws.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.

ADSs

If you hold ADSs, for United States federal income tax purposes, you generally will be treated as the owner of the underlying
ordinary shares that are represented by such ADSs. Accordingly, deposits or withdrawals of ordinary shares for ADSs will not be subject to United States federal income tax.

Taxation of Dividends

Subject to the discussion under "Passive Foreign Investment Company" below, the gross amount of cash distributions on the
ADSs or ordinary shares (including any amounts withheld to reflect PRC withholding taxes) will be taxable as dividends, to the extent paid out of our current or accumulated earnings and profits, as
determined under United States federal income tax principles. Such income (including withheld taxes) will be includable in your gross income as ordinary income on the day actually or
constructively received by you, in the case of the ordinary shares, or by the depositary, in the case of ADSs. Such dividends will not be eligible for the dividends received deduction allowed to
corporations under the Code.

With
respect to non-corporate United States Holders, certain dividends received from a "qualified foreign corporation" generally will be subject to reduced rates of
taxation rather than the marginal tax rates generally applicable to ordinary income. A non-United States corporation is treated as a qualified foreign corporation with respect to
dividends paid by that corporation on shares (or ADSs backed by such shares) that are readily tradable on an established securities market in the United States. U.S. Treasury
Department guidance indicates that our ADSs, which are listed on the NASDAQ, are regarded as readily tradable on an established securities market
in the United States. Thus, we believe that dividends we pay on our ordinary shares that are represented by ADSs, but not on our ordinary shares that are not so represented, meet such
conditions required for the reduced tax rates. There can be no assurance that our ADSs will be considered readily tradable on an established securities market in later years. A qualified foreign
corporation also includes a foreign corporation that is eligible for the benefits of certain income tax treaties with the United States. In the event that we are deemed to be a PRC "resident
enterprise" under the PRC tax law (see discussion under "`Item 10. Additional InformationE. TaxationPeople's Republic of China Taxation"), we may be eligible
for the benefits of the income tax treaty between the United States and the PRC, and if we are eligible for such benefits, dividends we pay on our ordinary shares, regardless of whether such
shares are represented by ADSs, would be subject to the reduced rates of taxation. Non-corporate United States Holders that do not meet a minimum holding period requirement during
which they are not protected from the risk of loss or that elect to treat the dividend income as "investment income" pursuant to Section 163(d)(4) of the Code will not be eligible for the
reduced rates of taxation regardless of our status as a qualified foreign corporation. In addition, the rate reduction will not apply to dividends if the recipient of a dividend is obligated to make
related payments with respect to positions in substantially similar or related property. This disallowance applies even if the minimum holding period has been met. Furthermore,
non-corporate United States Holders will not be eligible for reduced rates of taxation on any dividends received from us if we are a passive foreign investment company
(as discussed below under "Passive Foreign Investment Company") in the taxable year in which such dividends are paid or in the preceding taxable year. You should consult your own
tax advisors regarding the application of these rules given your particular circumstances.

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In
the event that we are deemed to be a PRC "resident enterprise" under the PRC tax law and dividends paid to you with respect to the ADSs or ordinary shares are considered as
PRC-sourced income by relevant PRC authorities, you will generally be subject to PRC withholding taxes on such dividends at a rate of 10% if you are deemed to be a non-resident
enterprise or at a rate of 20% if you are deemed to be a non-resident individual. See "Item 4. Information of the CompanyB. Business OverviewRegulations of
Our IndustryRegulations Regarding the Enterprise Income Tax and Dividend Withholding Tax." In that case, however, you may be able to obtain a reduced rate of PRC withholding taxes under
the treaty between the United States and the PRC if certain requirements are met. In addition, subject to certain conditions and limitations, PRC withholding taxes on dividends, if any, may be
treated as foreign taxes eligible for credit against your United States federal income tax liability. For purposes of calculating the foreign tax credit, dividends paid to you with respect to
our ordinary shares or ADSs will be treated as income from sources outside the United States and will generally constitute passive category income. Furthermore, in certain circumstances, if you
have held our ordinary shares or ADSs for less than a specified minimum period during which you are not protected from risk of loss, or are obligated to make payments related to the dividends, you
will not be allowed a foreign tax credit for any PRC withholding taxes imposed on dividends paid on our ordinary shares or ADSs. The rules governing eligibility for the benefits of the income tax
treaty and the foreign tax credit are complex, and will depend upon your particular circumstances. Accordingly, you are urged to consult your tax advisors regarding the availability of the benefits of
the income tax treaty and foreign tax credit under your particular circumstances.

To
the extent that the amount of the distribution exceeds our current and accumulated earnings and profits for a taxable year, as determined under United States federal income tax
principles, the distribution will be treated first as a tax-free return of your tax basis in your ADSs or ordinary shares, and to the extent the amount of the distribution exceeds your tax
basis, the excess will be taxed as capital gain recognized on a sale or exchange. We do not expect to keep earnings and profits in accordance with United States federal income tax principles.
Therefore, you should expect that a distribution will generally be reported as a dividend (as discussed above).

Passive Foreign Investment Company

Based upon the past and projected composition of our income and valuation of our assets, including goodwill, we do not believe we were
a "passive foreign investment company," or PFIC, for our taxable year ending December 31, 2012, and we do not expect to become one in the current year or in the future, although there can be no
assurance in this regard. Moreover, the determination of our PFIC status is based on an annual determination that cannot be made until the close of a taxable year and involves extensive factual
investigation. This investigation includes ascertaining the fair market value of all of our assets on a quarterly basis and the character of each item of income we earn, which cannot be completed
until the close of a taxable year, and therefore, our U.S. counsel expresses no opinion with respect to our PFIC status.

In
general, we will be a PFIC for any taxable year in which:



For
this purpose, passive income generally includes dividends, interest, royalties and rents (other than royalties and rents derived in the active conduct of a trade or business and not
derived from a related person). If we own at least 25% (by value) of the stock of another corporation, we will be treated, for purposes of the PFIC tests, as owning our proportionate share of
the other corporation's assets and receiving our proportionate share of the other corporation's income. However, it is not entirely clear how the contractual arrangements between us and our affiliated
consolidated entities will

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be
treated for purposes of the PFIC rules. If it is determined that we do not own the stock of the affiliated consolidated entities for United States federal income tax purposes
(for instance, because the relevant PRC authorities do not respect these arrangements), we would likely be treated as a PFIC.

The
determination of whether we are a PFIC is made annually. Accordingly, it is possible that we may become a PFIC in the current or any future taxable year due to changes in our asset
or income composition. Because we have valued our goodwill based on the market value of our equity, a decrease in the price of our ADSs may also result in our becoming a PFIC. If we are a PFIC for any
taxable year during which you hold our ADSs or ordinary shares, we generally will continue to be treated as a PFIC for all succeeding years during which you hold our ADSs or ordinary shares.

If
we are a PFIC for any taxable year during which you hold our ADSs or ordinary shares, you will be subject to special tax rules with respect to any "excess distribution" received and
any gain realized from a sale or other disposition, including a pledge, of ADSs or ordinary shares. Distributions received in a taxable year that are greater than 125% of the average annual
distributions received during the shorter of the three preceding taxable years or your holding period for the ADSs or ordinary shares will be treated as excess distributions. Under these special
tax rules:



In
addition, non-corporate United States Holders will not be eligible for reduced rates of taxation on any dividends received from us (as described under
"Taxation of Dividends"
above) if we are a PFIC in the taxable year in which such dividends are paid or in the preceding taxable year. You will be required to file Internal Revenue Service Form 8621 if you hold our
ADSs or ordinary shares in any year in which we are classified as a PFIC. Furthermore, under enacted legislation, if you hold ADSs or ordinary shares in any year in which we are a PFIC, you are
required to file an annual report containing such information as the U.S. Treasury may require.

If
we are a PFIC for any taxable year during which you hold our ADSs or ordinary shares and any of our non-United States subsidiaries is also a PFIC, a
United States Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these rules. You are
urged to consult your tax advisors about the application of the PFIC rules to any of our subsidiaries.

In
certain circumstances, in lieu of being subject to the excess distribution rules discussed above, you may make an election to include gain on the stock of a PFIC as ordinary income
under a mark-to-market method, provided that such stock is regularly traded on a qualified exchange. Under current law, the mark-to-market election may
be available to holders of ADSs because the ADSs are listed on the NASDAQ, which constitutes a qualified exchange, although there can be no assurance that the ADSs are or will be "regularly traded"
for purposes of the mark-to-market election. It should also be noted that only the ADSs and not our ordinary shares are listed on the NASDAQ. Consequently, if you are a holder
of ordinary shares that are not represented by ADSs, you generally will not be eligible to make a mark-to-market election if we are or become a PFIC.

If
you make an effective mark-to-market election, you will include in each taxable year that we are a PFIC as ordinary income the excess of the fair market value
of your ADSs at the end of the year over your adjusted tax basis in the ADSs. You will be entitled to deduct as an ordinary loss each year

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the
excess of your adjusted tax basis in the ADSs over their fair market value at the end of the year, but only to the extent of the net amount previously included in income as a result of the
mark-to-market election. If you make an effective mark-to-market election, in each year that we are a PFIC any gain you recognize upon the sale or other
disposition of your ADSs will be treated as ordinary income and any loss will be treated as ordinary loss, but only to the extent of the net amount previously included in income as a result of the
mark-to-market election.

Your
adjusted tax basis in the ADSs will be increased by the amount of any income inclusion and decreased by the amount of any deductions under the mark-to-market
rules. If you make a mark-to-market election it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the ADSs are no
longer regularly traded on a qualified exchange or the Internal Revenue Service consents to the revocation of the election. You are urged to consult your tax advisor about the availability of the
mark-to-market election, and whether making the election would be advisable in your particular circumstances.

Subject
to certain limitations, you may also avoid the rules described above with respect to the stock you own in a PFIC by electing to treat such PFIC as a "qualified electing fund"
under Section 1295 of the Code. However, this option is not available to you because we do not intend to comply with the requirements necessary to permit you to make this election. You are
urged to consult your tax advisors concerning the United States federal income tax consequences of holding ADSs or ordinary shares if we are considered a PFIC in any taxable year.

Taxation of Capital Gains

For United States federal income tax purposes, you will recognize taxable gain or loss on any sale or exchange of ADSs or
ordinary shares in an amount equal to the difference between the amount realized for the ADSs or ordinary shares and your tax basis in the ADSs or ordinary shares. Subject to the discussion under
"Passive Foreign Investment Company" above, such gain or loss will generally be capital gain or loss. Capital gains of individuals derived with respect to capital assets held for more
than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. Any gain or loss recognized by you will generally be treated as
United States source gain or loss. Consequently, you may not be able to use the foreign tax credit arising from any PRC tax imposed on the disposition of our ADSs or ordinary shares unless such
credit can be applied (subject to applicable limitations) against tax due on other income treated as derived from foreign sources. You are urged to consult your tax advisors regarding the tax
consequences if a foreign withholding tax is imposed on a disposition of ADSs or ordinary shares, including the availability of the foreign tax credit under your particular circumstances.

Information Reporting and Backup Withholding

In general, information reporting will apply to dividends in respect of our ADSs or ordinary shares and the proceeds from the sale,
exchange or redemption of our ADSs or ordinary shares that are paid to you within the United States (and in certain cases, outside the United States), unless you are an exempt
recipient. A backup withholding tax may apply to such payments if you fail to provide a taxpayer identification number or certification of other exempt status or fail to report in full dividend and
interest income.

Any
amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your United States federal income tax liability provided the required
information is timely furnished to the Internal Revenue Service.

YOU
SHOULD CONSULT WITH YOUR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION AS WELL AS ANY ADDITIONAL TAX
CONSEQUENCES

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RESULTING
FROM PURCHASING, HOLDING OR DISPOSING OF ORDINARY SHARES OR ADSS, INCLUDING THE APPLICABILITY AND EFFECT OF THE TAX LAWS OF ANY STATE, LOCAL OR FOREIGN JURISDICTION, AND ANY ESTATE, GIFT OR
INHERITANCE LAWS.



Not applicable.



Not applicable.



We have filed this annual report on Form 20-F, including exhibits, with the SEC. As allowed by the SEC, in Item 19 of this annual report
on Form 20-F, we incorporate by reference certain information we filed with the SEC. This means that we can disclose important
information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this annual report on
Form 20-F.

You
may read and copy this annual report on Form 20-F, including the exhibits incorporated by reference in this annual report on Form 20-F, at the
SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 and at the SEC's regional offices in New York, New York, and Chicago, Illinois. You can also
request copies of this annual report on Form 20-F, including the exhibits incorporated by reference in this annual report on Form 20-F, upon payment of a
duplicating fee, by writing to the SEC's Public Reference Room for information.

The
SEC also maintains a website at www.sec.gov that contains reports, proxy statements and other information regarding registrants that file electronically with the SEC. Our annual
report and some of the other information submitted by us to the SEC may be accessed through this website.



Not applicable.

Item 11.    Quantitative and Qualitative Disclosures About Market Risk

Foreign Exchange Risk

The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things,
changes in China's political and economic conditions. The conversion of Renminbi into foreign currencies, including U.S. dollars, has been based on rates set by the People's Bank of China. In
July 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar, and the Renminbi was permitted to fluctuate within a band against a basket of
certain foreign currencies. As a result, the Renminbi appreciated
more than 20% against the U.S. dollar over the following three years. However, the People's Bank of China regularly intervenes in the foreign exchange market to limit fluctuations in Renminbi
exchange rates and achieve policy goals. For almost two years after July 2008, the Renminbi traded within a very narrow range against the U.S. dollar, remaining within 1% of its
July 2008 high. As a consequence, the Renminbi fluctuated significantly during that period against other freely traded currencies, in tandem with the U.S. dollar. In June 2010,
the PRC government announced that it would increase the exchange rate flexibility of the Renminbi, though it did not specify how the increased flexibility would be implemented. In April 2013,
the People's Bank of China announced that it would expand the floating range of the trading price of the Renminbi against the U.S. dollar from 0.5% to 1.0%, beginning on April 16, 2012.
In 2012, the Renminbi appreciated 1.02% against the U.S. dollar. There remains significant international pressure

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on
the PRC government to adopt a more flexible currency policy, which could result in a further and more significant appreciation of the Renminbi against the U.S. dollar.

We
use the U.S. dollar as our functional and reporting currency for our financial statements. All transactions in currencies other than the U.S. dollar during the year are
re-measured at the exchange rates prevailing on the respective relevant dates of such transactions. Monetary assets and liabilities existing at the balance sheet date denominated in
currencies other than the U.S. dollar are re-measured at the exchange rates prevailing on such date. Exchange differences are recorded in our consolidated income statement. The
financial records of our PRC subsidiary and affiliated consolidated entities are maintained in local currency, the Renminbi, which is their functional currency. Assets and liabilities are translated
at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange rates and revenues, expenses, gains and losses are translated using the average rate for the
year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of accumulated other comprehensive income in the statement of changes in equity.
Transaction gains and losses are recognized in the statements of operations in other income (expenses).

Fluctuations
in exchange rates also affect our balance sheet. For example, to the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the
Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount that we receive from the conversion. Conversely, if we decide to convert our Renminbi into
U.S. dollars for the purpose of paying dividends on our ordinary shares or ADSs or for other business purposes, depreciation of the Renminbi against the U.S. dollar would have a negative
effect on the corresponding U.S. dollar amount available to us. Considering the amount of our cash and cash equivalents as of December 31, 2012, a 1% change in the exchange rates between
the Renminbi and the U.S. dollar would result in an increase or decrease of approximately US$0.1 million to our total cash.

Interest Rate Risk

Our exposure to interest rate risk primarily relates to the interest rates for our outstanding debt and the interest income generated
by excess cash invested in liquid investments with original maturities of three months or less. As of December 31, 2012, our total outstanding loans amounted to US$30.6 million with
interest rates of ranging from 3.18% to 7.20%. Assuming the same principal amount, a 1% increase in each applicable interest rate would have added US$0.06 million to our interest expense in
2012. We have not used any derivative financial instruments to manage our interest risk exposure. Variable interest-earning instruments carry a degree of interest rate risk.

We
have not been exposed to material risks due to changes in interest rates. However, our future interest income may be lower than expected due to changes in market
interest rates.

Item 12.    Description of Securities Other Than Equity Securities



Not applicable.



Not applicable.



Not applicable.

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Fees and Charges

As an ADS holder, you will be required to pay the following service fees to the depositary bank:

Service:

Fee:Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property

Up to $0.05 per ADS issuedCancellation of ADSs, including in the case of termination of the deposit agreement

Up to $0.05 per ADS cancelledDistribution of cash dividends or other cash distributions

Up to $0.05 per ADS heldDistribution of ADSs pursuant to share dividends, free share distributions or exercise of rights

Up to $0.05 per ADS heldDistribution of securities other than ADSs or rights to purchase ADSs additional ADSs

A fee equivalent to the fee that would be payable if securities distributed to you had been ordinary shares and the ordinary shares had been deposited for issuance of ADSsDepositary services

Up to $0.05 per ADS held on the applicable record date(s) established by the depositary bankTransfer of ADRs

$1.50 per certificate presented for transfer


As
an ADS holder, you will also be responsible to pay certain fees and expenses incurred by the depositary bank and certain taxes and governmental charges
such as:



The
depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary bank by the brokers (on behalf of their clients) receiving the newly
issued ADSs from the depositary bank and by the brokers (on behalf of their clients) delivering the ADSs to the depositary bank for cancellation. The brokers in turn charge these fees to their
clients. Depositary fees payable in connection with distributions of cash or securities to ADS holders and the depositary services fee are charged by the depositary bank to the holders of record of
ADSs as of the applicable ADS record date.

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The
depositary fees payable for cash distributions are generally deducted from the cash being distributed or by selling a portion of distributable property to pay the fees. In the case
of distributions other than cash (i.e., share dividends, rights), the depositary bank charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case of
ADSs registered in the name of the investor (whether certificated or uncertificated in direct registration), the depositary bank sends invoices to the applicable record date ADS holders. In the case
of ADSs held in brokerage and custodian accounts (via DTC), the depositary bank generally collects its fees through the systems
provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients'
ADSs in DTC accounts in turn charge their clients' accounts the amount of the fees paid to the depositary banks.

In
the event of refusal to pay the depositary fees, the depositary bank may, under the terms of the deposit agreement, refuse the requested service until payment is received or may set
off the amount of the depositary fees from any distribution to be made to the ADS holder.

The
depositary has agreed to reimburse us for a portion of certain expenses we incur that are related to establishment and maintenance of the ADR program, including investor relations
expenses. There are limits on the amount of expenses for which the depositary will reimburse us, but the amount of reimbursement available to us is not related to the amounts of fees the depositary
collects from investors. Further, the depositary has agreed to reimburse us certain fees payable to the depositary by holders of ADSs. Neither the depositary nor we can determine the exact amount to
be made available to us because (i) the number of ADSs that will be issued and outstanding, (ii) the level of service fees to be charged to holders of ADSs and (iii) our
reimbursable expenses related to the program are not known at this time.

Payments by Depositary

As of the date of this annual report on Form 20-F, we have received payments in the aggregate amount of
US$1.0 million from Deutsche Bank Trust Company Americas, the depositary bank for our ADR program for reimbursement of investor relations expenses and other program related expenses.

PART II

Item 13.    Defaults, Dividend Arrearages and Delinquencies

None of these events occurred in any of the years ended December 31, 2010, 2011 and 2012.

Item 14.    Material Modifications to the Rights of Security Holders and Use of Proceeds

See "Item 10. Additional InformationB. Memorandum and Articles of Association" for a description of the rights of
securities holders, which remain unchanged.

On
December 14, 2010, we completed our initial public offering, in which we offered and sold 11,740,000 ordinary shares in the form of ADSs, raising US$92.8 million
in proceeds to us before expenses but after underwriting discounts and commissions. In connection with our initial public offering, we incurred total expenses of US$10.5 million, including
US$7.0 million in underwriting discounts and commissions and US$3.5 of other expenses.

The
effective date of our registration statement on Form F-1 (File number: 333-170657) was December 8, 2010.

For
the period from the effective date to December 31, 2012, we used all of the net proceeds from our initial public offering. We used approximately US$33.7 million to
invest in film productions,

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US$4.4 million
to acquire distribution rights, US$26.6 million for the acquisitions of Alpha Speed Limited and Bona Starlight and US$24.6 million to invest in
movie theaters.

Item 15.    Controls and Procedures



We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer
and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rules 13a-15(e)
promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2012, our
disclosure controls and procedures were effective.



Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is
defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended, for our company. Internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with generally accepted accounting principles and includes
those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of a company's assets,
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting
principles, and that a company's receipts and expenditures are being made only in accordance with authorizations of a company's management and directors, and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of a company's assets that could have a material effect on the consolidated financial statements.

Because
of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance with respect to consolidated financial statement
preparation and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As
required by Section 404 of the Sarbanes-Oxley Act of 2002 and related rules promulgated by the Securities and Exchange Commission, our management assessed the effectiveness of
internal control over financial reporting as of December 31, 2012 using the criteria set forth in the report "Internal ControlIntegrated Framework" published by the Committee of
Sponsoring Organizations of the Treadway Commission (known as COSO). Based on this evaluation, management concluded that our internal control over financial reporting was effective as of
December 31, 2012.



The effectiveness of our internal control over financial reporting as of December 31, 2012 has been audited by Deloitte Touche
Tohmatsu Certified Public Accountants LLP, an independent registered public accounting firm, who has audited the financial statements for the year ended December 31, 2012 included in
this annual report on Form 20-F.

To
the Board of Directors and Shareholders of Bona Film Group Limited,

We
have audited the internal control over financial reporting of Bona Film Group Limited, its subsidiaries, its variable interest entities ("VIEs") and its VIEs' subsidiaries
(collectively the "Group") as of December 31, 2012, based on the criteria established in Internal ControlIntegrated Framework

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issued
by the Committee of Sponsoring Organizations of the Treadway Commission. The Group's management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility
is to express an opinion on the Group's internal control over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or
persons performing similar functions, and effected by the company's board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material
misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to
future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, the Group maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on the criteria established in
Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the
year ended December 31, 2012 of the Group and our report dated April 29, 2013 expressed an unqualified opinion on those financial statements and included an explanatory paragraph
regarding the Group's adoption of the authoritative guidance on the presentation of comprehensive income.

Deloitte
Touche Tohmatsu Certified Public Accountants LLP
Beijing, the People's Republic of China
April 29, 2013

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Two significant deficiencies were disclosed in our Form 20-F for 2011 as follows: (i) lack of sufficient
accounting personnel with appropriate accounting knowledge to achieve and maintain work efficiency, and (ii) operating ineffectiveness of controls in relation to customers background review for
significant sales contracts.

We
have taken the following remedial measures to address the significant deficiencies:



As
of December 31, 2012, our management concluded that the aforementioned significant deficiencies had been remediated.

Except
for the remedial measures described above, there have been no significant changes in our internal control over financial reporting during the year ended December 31, 2012
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 16A.    Audit Committee Financial Expert

Daqing Dave Qi is our audit committee financial expert and an independent director. See "Item 6. Directors, Senior Management
and EmployeesC. Board PracticesCommittees of the Board of Directors."

Item 16B.    Code of Ethics

We have adopted a code of ethics which applies to our directors, employees and officers, including our Chief Executive Officer and
Chief Financial Officers. No changes have been made to the code of ethics since its adoption and no waivers have been granted therefrom to our directors or employees. We have filed this code of ethics
as an exhibit to this annual report on Form 20-F, and a copy is available to any shareholder upon request. This code of ethics is also available on our website at
http://ir.bonafilm.cn/governance.cfm.

Item 16C.    Principal Accountant Fees and Services

At the direction of the government of the People's Republic of China in accordance with the Scheme of the Localization Restructuring of
Chinese-Foreign Cooperative Accounting Firms, Deloitte Touche Tohmatsu CPA Limited, our principal external auditors, has restructured to a new partnership and changed its name to Deloitte Touche
Tohmatsu Certified Public Accountants LLP, effective from January 1, 2013. Deloitte Touche Tohmatsu Certified Public Accountants LLP has succeeded Deloitte

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Touche
Tohmatsu CPA Limited for all purposes and assumed all of the obligations and rights of Deloitte Touche Tohmatsu CPA Limited with effect from January 1, 2013. Deloitte Touche Tohmatsu CPA
Limited and Deloitte Touche Tohmatsu Certified Public Accountants LLP are hereinafter referred to as "Deloitte". Deloitte has served as our independent public accountant for each of the fiscal
years in the three-year period ended December 31, 2012, for which audited financial statements appear in this annual report on Form 20-F.

The
following table presents the aggregate fees for professional services and other services rendered by Deloitte to us in 2011 and 2012.

2011

2012US$
(in thousands)

US$
(in thousands)Audit Fees(1)


1,010


1,070Total


1,010


1,070


(1)Audit
fees consist of fees billed for the audit or review of our annual financial statements, internal control over financial reporting, quarterly financial
statements, and related statutory and regulatory filings.




Our audit committee is responsible for the oversight of our independent accountants' work. The policy of our audit committee is to
pre-approve all audit and non-audit services provided by Deloitte including audit services, audit-related services, tax services and other services, as described above.

All
audit and non-audit services performed by Deloitte must be pre-approved by the Audit Committee.

Item 16D.    Exemptions from the Listing Standards for Audit Committees

None.

Item 16E.    Purchase of Equity Securities by the Issuer and Affiliated Purchasers

None.

Item 16F.    Change in Registrant's Certifying Accountant

Not applicable.

Item 16G.    Corporate Governance

The Company's corporate governance practices have generally followed the requirements of NASDAQ market rules and Sarbanes-Oxley Act
with respect to corporate governance.

PART III

Item 17.    Financial Statements

We have elected to provide the financial statements and related information specified in Item 18.

Item 18.    Financial Statements

The consolidated financial statements of Bona Film Group Limited are included at the end of this annual report on
Form 20-F.

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EXHIBIT INDEX

Exhibit
Number

Description of Exhibits1.1

Second Amended and Restated Memorandum of Association and Articles of Association of Bona Film Group Limited (incorporated by reference to Exhibit 3.2 to our Registration Statement on Form F-1 (File
No. 333-170657), as amended, initially filed with the Securities and Exchange Commission on November 17, 2010), as amended by a resolution approved at the 2012 annual general meeting of the Company on December 28, 2012.2.1

Registrant's Specimen American Depositary Receipt (incorporated by reference to Exhibit 4.1 to our Registration Statement on Form F-1 (File No. 333-170657), as amended, initially filed with the
Securities and Exchange Commission on November 17, 2010).2.2

Registrant's Specimen Certificate for Ordinary Shares (incorporated by reference to Exhibit 4.2 to our Registration Statement on Form F-1 (File No. 333-170657), as amended, initially filed with the
Securities and Exchange Commission on November 17, 2010).2.3

Form of Deposit Agreement between the Registrant, the depositary and holders of the American Depositary Receipts (incorporated by reference to Exhibit 4.3 to our Registration Statement on Form F-1 (File
No.333-170657), as amended, initially filed with the Securities and Exchange Commission on November 17, 2010).2.4

Subscription Agreement, dated as of July 10, 2007, in respect of the issuance and sale of the Series A preferred shares of predecessor of Bona International Film Group Limited (incorporated by reference to
Exhibit 4.4 to our Registration Statement on Form F-1 (File No. 333-170657), as amended, initially filed with the Securities and Exchange Commission on November 17, 2010).2.5

Subscription Agreement, dated as of July 7, 2009, in respect of the issuance and sale of the Series B-1 preferred shares and B-2 preferred shares of Bona International Film Group Limited (incorporated
by reference to Exhibit 4.5 to our Registration Statement on Form F-1 (File No. 333-170657), as amended, initially filed with the Securities and Exchange Commission on November 17, 2010).2.6

Subscription Agreement, dated as of June 28, 2010, in respect of the issuance and sale of the Series B-3 preferred shares of Bona International Film Group Limited (incorporated by reference to
Exhibit 4.6 to our Registration Statement on Form F-1 (File No. 333-170657), as amended, initially filed with the Securities and Exchange Commission on November 17, 2010).2.7

Amended and Restated Shareholders' Agreement, dated as of November 8, 2010, by and among the Registrant and the other parties thereto (incorporated by reference to Exhibit 4.7 to our Registration
Statement on Form F-1 (File No. 333-170657), as amended, initially filed with the Securities and Exchange Commission on November 17, 2010).2.8

Investor Rights Agreement, dated May 21, 2012, by and among Mr. Dong Yu, Skillgreat Limited, Bona Film Group Limited and NCIH, Inc. (incorporated by reference to Exhibit 99.3 to the
Schedule 13D filed by Skillgreat Limited and Mr. Dong Yu with the Securities and Exchange Commission on May 25, 2012).4.1

Registrant's 2009 Share Incentive Plan (incorporated by reference to Exhibit 10.1 to our Registration Statement on Form F-1 (File No. 333-170657), as amended, initially filed with the Securities
and Exchange Commission on November 17, 2010).


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Exhibit
Number

Description of Exhibits4.2

Registrant's 2010 Share Incentive Plan (incorporated by reference to Exhibit 10.2 to our Registration Statement on Form F-1 (File No. 333-170657), as amended, initially filed with the Securities and
Exchange Commission on November 17, 2010).4.3

Form of Indemnification Agreement with the Registrant's directors (incorporated by reference to Exhibit 10.3 to our Registration Statement on Form F-1 (File No. 333-170657), as amended, initially
filed with the Securities and Exchange Commission on November 17, 2010).4.4

Form of Employment Agreement between the Registrant and an Executive Officer of the Registrant (incorporated by reference to Exhibit 10.4 to our Registration Statement on Form F-1 (File
No. 333-170657), as amended, initially filed with the Securities and Exchange Commission on November 17, 2010).4.5

English translation of Form of Exclusive Technology and Consulting Service Agreement by and between Beijing Bona New World Media Technology Co., Ltd. and the affiliated consolidated entity (incorporated
by reference to Exhibit 10.5.1 to our Registration Statement on Form F-1 (File No. 333-170657), as amended, initially filed with the Securities and Exchange Commission on November 17, 2010).4.6

English translation of Form of Amendment to Exclusive Technology and Consulting Service Agreement by and between Beijing Bona New World Media Technology Co., Ltd. and the affiliated consolidated entity
(incorporated by reference to Exhibit 10.5.2 to our Registration Statement on Form F-1 (File No. 333-170657), as amended, initially filed with the Securities and Exchange Commission on November 17, 2010).4.7

English translation of Form of Voting Trust and Equity Purchase Agreement by and between Bona International Film Group Limited, Beijing Bona New World Media Technology Co., Ltd., the affiliated
consolidated entity, Mr. Dong Yu and the shareholders of the affiliated consolidated entity (incorporated by reference to Exhibit 10.5.3 to our Registration Statement on Form F-1 (File No. 333-170657), as amended, initially
filed with the Securities and Exchange Commission on November 17, 2010).4.8

English translation of Form of Equity Interest Pledge Agreement by and among Beijing Bona New World Media Technology Co., Ltd., Mr. Dong Yu and other the shareholders of the affiliated consolidated
entity (incorporated by reference to Exhibit 10.5.4 to our Registration Statement on Form F-1 (File No. 333-170657), as amended, initially filed with the Securities and Exchange Commission on November 17, 2010).*4.9

English translation of Loan Agreement, dated as of May 32, 2011, between Dong Yu and Beijing Bona New World Media Technology Co., Ltd.4.10

English translation of Form of Confidentiality, Non-Competition and Intellectual Property Rights Agreement between the Beijing Bona New World Media Technology Co., Ltd. and an employee of thereof
(incorporated by reference to Exhibit 10.6 to our Registration Statement on Form F-1 (File No. 333-170657), as amended, initially filed with the Securities and Exchange Commission on November 17, 2010).4.11

English translation of Form of Fixed Assets Loan Contract, between Industrial and Commercial Bank of China, Dongcheng Branch and Bona Film Group Co., Ltd. (PRC) (incorporated by reference to
Exhibit 10.9 to our Registration Statement on Form F-1 (File No. 333-170657), as amended, initially filed with the Securities and Exchange Commission on November 17, 2010).


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Exhibit
Number

Description of Exhibits*4.12

Schedule of material differences between (i) Exhibit 4.11 above, and (ii) the 2012 Form of Fixed Assets Loan Contract, between Industrial and Commercial Bank of China, Dongcheng Branch and Bona Film
Group Co., Ltd. (PRC).4.13

English translation of General Credit Facility Grant Contract, dated as of September 15, 2010, between Bank of Beijing, Chaowai Branch and Bona Film Group Co., Ltd. (PRC) (incorporated by reference to
Exhibit 10.7 to our Registration Statement on Form F-1 (File No. 333-170657), as amended, initially filed with the Securities and Exchange Commission on November 17, 2010).4.14

English translation of Guarantee, dated as of September 15, 2010, between Bank of Beijing, Chaowai Branch and Mr. Dong Yu (incorporated by reference to Exhibit 10.8 to our Registration Statement on
Form F-1 (File No. 333-170657), as amended, initially filed with the Securities and Exchange Commission on November 17, 2010).4.15

Share Purchase Agreement, dated May 13, 2012, by and among Mr. Dong Yu, Skillgreat Limited, Bona Film Group Limited and NCIH, Inc. (incorporated by reference to Exhibit 99.2 to the
Schedule 13D filed by Skillgreat Limited and Mr. Dong Yu with the Securities and Exchange Commission on May 25, 2012).*4.16

Business Loan Agreement, dated November 20, 2012, between Bona Entertainment Company Limited and East West Bank.*4.17

Modification to the Loan Agreement, dated as of April 9, 2013, between Bona Entertainment Company Limited and East West Bank.*4.18

Promissory Note, dated November 20, 2012, for loan issued by East West Bank to Bona Entertainment Company Limited under the Business Loan Agreement filed as Exhibit 4.9 to this annual report on
Form 20-F.*4.19

Commercial Security Agreement, dated November 20, 2012, between Bona Entertainment Company Limited and East West Bank.*4.20

Commercial Guaranty, dated November 20, 2012, between Bona Entertainment Company Limited and East West Bank.*4.21

Facility Letter, dated August 3, 2012, between CITIC Bank International Limited and Bona Film Group.*4.22

English translation of Standby Letter of Credit Issuance Agreement, dated August 13, 2012, between CITIC Bank International (China) Co., Ltd. and Bona Film Group Co., Ltd (PRC).*4.23

English translation of Deposit Pledge Agreement, dated August 13, 2012, between CITIC Bank International (China) Co., Ltd. and Bona Film Group Co., Ltd (PRC).*8.1

List of Significant Subsidiaries of Bona Film Group Limited.11.1

Code of Business Conduct and Ethics of the Registrant (incorporated by reference to Exhibit 99.1 to our Registration Statement on Form F-1 (File No. 333-170657), as amended, initially filed with
the Securities and Exchange Commission on November 17, 2010).*12.1

Certification of our Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*12.2

Certification of our Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


158

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Table of Contents

Exhibit
Number

Description of Exhibits*13.1

Certification by our Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*13.2

Certification by our Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*15.1

Consent of Independent Registered Accounting Firm.*15.2

Consent of Han Kun Law Offices.


*filed
herewith.


159

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Table of Contents

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has
duly caused and authorized the undersigned to sign this annual report on Form 20-F on its behalf.

BONA FILM GROUP LIMITEDBy:

/s/ Amy XuName:

Amy XuTitle:

Chief Financial Officer


Date:
April 29, 2013

160

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Table of Contents

BONA FILM GROUP LIMITED        INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



Contents

Page(s)REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


F-2CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2011 AND 2012


F-3CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012


F-5CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012


F-6CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012


F-7CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012


F-8NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


F-10


F-1

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Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO
THE BOARD OF DIRECTORS AND SHAREHOLDERS OFBONA FILM GROUP LIMITED

We
have audited the accompanying consolidated balance sheets of Bona Film Group Limited, its subsidiaries, its variable interest entities ("VIEs"), and its VIEs' subsidiaries
(collectively, the "Group") as of December 31, 2011 and 2012, and the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows for each of the
three years in the period ended December 31, 2012. These consolidated financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2011 and 2012 and the
results of its operations and its cash flows for each of the three years in the period ended December 31, 2012, in conformity with accounting principles generally accepted in the
United States of America.

As
discussed in Note 2 to the consolidated financial statements, such statements have been adjusted for the retrospective application of the authoritative guidance
regarding the presentation of comprehensive income, which was adopted by the Group on January 1, 2012.

We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Group's internal control over financial reporting as
of December 31, 2012, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report
dated April 29, 2013 expressed an unqualified opinion on the Group's internal control over financial reporting.

/s/
Deloitte Touche Tohmatsu Certified Public Accountants LLP
Beijing, the People's Republic of China
April 29, 2013

F-2

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Table of Contents



BONA FILM GROUP LIMITED

CONSOLIDATED BALANCE SHEETS

(In U.S. dollars, except share and per share data)

December 31,2011

2012AssetsCurrent assetsCash and cash equivalents


20,107,349


23,227,922Term deposits


6,038,107


Restricted cash


4,066,162


4,815,332Accounts receivable, net of allowance for doubtful accounts of $697,246 and $737,741 as of December 31, 2011 and 2012, respectively


41,642,787


40,307,672Prepaid expenses and other current assets


27,335,348


23,329,262Amounts due from related parties, net of allowance for doubtful accounts of $174,819 and nil as of December 31, 2011 and 2012,
respectively


1,183,083


343,817Current deferred tax assets


15,697


970,683Inventories


228,412


276,436Total current assets


100,616,945


93,271,124Distribution rights


3,663,966


11,406,692Production costs


69,844,822


90,345,409Prepaid film costs


6,340,770


7,426,915Property and equipment, net


40,208,447


60,208,609Acquired intangible assets, net


3,993,152


3,189,481Non-current deferred tax assets


320,670


311,102Cost method investments


95,330


1,296,307Equity method investments


55,340


Goodwill


48,612,487


49,110,021Total assets


273,751,929


316,565,660Accounts payable (including accounts payable of the consolidated variable interest entities without recourse to Bona Film Group Limited of $26,499,111 and
$30,597,371 as of December 31, 2011 and 2012, respectively)


27,807,118


35,257,660Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of the consolidated variable interest entities
without recourse to Bona Film Group Limited of $22,689,668 and $24,589,125 as of December 31, 2011 and 2012, respectively)


27,239,987


28,145,099Amounts due to related parties-current (including amounts due to related parties of the consolidated variable interest entities without recourse to Bona
Film Group Limited of $2,621,348 and $5,084,036 as of December 31, 2011 and 2012, respectively)


3,027,872


5,746,328Income tax payable (including income tax payable of the consolidated variable interest entities without recourse to Bona Film Group Limited of $593,802 and
$2,201,399 as of December 31, 2011 and 2012, respectively)


795,229


2,420,443Bank borrowing (including bank borrowing of the consolidated variables interest entities without recourse to Bona Film Group Limited of $9,361,543 and
$8,058,291 as of December 31, 2011 and 2012, respectively)


12,561,806


12,542,161Other borrowing (including other borrowing of the consolidated variable interest entities without recourse to Bona Film Group Limited of $1,831,658 and
$8,671,050 as of December 31, 2011 and 2012, respectively)


1,831,658


8,671,050Current film participation financing liabilities (including current film participation financing liabilities of the consolidated variable interest entities
without recourse to Bona Film Group Limited of $12,942,687 and $13,640,385 as of December 31, 2011 and 2012, respectively)


16,224,219


15,086,892Total current liabilities


89,487,889


107,869,633


The accompanying notes are an integral part of these consolidated financial statements.

F-3

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Table of Contents

BONA FILM GROUP LIMITED

CONSOLIDATED BALANCE SHEETS (Continued)

(In U.S. dollars, except share and per share data)

December 31,2011

2012Bank borrowings (including bank borrowings of the consolidated variable interest entities without recourse to Bona Film Group Limited of nil and $8,025,553
as of December 31, 2011 and 2012, respectively)





18,025,553Deferred income (including deferred income of the consolidated variable interest entities without recourse to Bona Film Group Limited of nil and $42,720 as
of December 31, 2011 and 2012, respectively)


1,056,676


813,681Deferred tax liability (including deferred tax Liabilities of the consolidated variable interest entities without recourse to Bona Film Group Limited of
$413,219 and $211,203 as of December 31, 2011 and 2012, respectively)


413,219


211,203Total liabilities


90,957,784


126,920,070Commitments and contingencies (Note 27)EquityBona Film Group Limited's ordinary shares ($0.0005 par value; 85,000,000 shares authorized, 30,402,346 and 29,389,089 shares issued and
outstanding respectively as of December 31, 2011 and 30,402,346 and 29,737,257 shares issued and outstanding as of December 31, 2012)


14,695


14,869Additional paid-in capital


169,519,847


176,134,737Statutory reserves


2,044,870


2,543,272Accumulated profit


2,332,802


550,518Accumulated other comprehensive income


5,436,305


6,465,090Total Bona Film Group Limited's equity


179,348,519


185,708,486Noncontrolling interests


3,445,626


3,937,104Total equity


182,794,145


189,645,590Total liabilities and equity


273,751,929


316,565,660


The accompanying notes are an integral part of these consolidated financial statements.

F-4

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Table of Contents



BONA FILM GROUP LIMITED

CONSOLIDATED STATEMENT OF OPERATIONS

(In U.S. dollars, except share and per share data)

Years ended December 31,2010

2011

2012Net revenue


52,819,786


126,161,270


142,282,919Cost of revenue


26,501,853


66,458,217


86,085,046Gross profit


26,317,933


59,703,053


56,197,873Operating expenses:Film participation expenses


696,101


321,100


438,636Selling and marketing expenses


7,213,519


18,506,262


18,490,433General and administrative expenses


9,305,393


28,371,497


41,890,064Total operating expenses


17,215,013


47,198,859


60,819,133Government subsidies


88,147


220,559


3,866,700Operating income (loss)


9,191,067


12,724,753


(754,560
)Other income:Interest income from bank deposits


16,125


248,266


246,423Interest income from loan to producer of TV series


856,788


141,545


Interest expenses


(409,599
)

(589,833
)

(399,319
)Gain on extinguishment of liability


488,799





Exchange gain


16,464


1,748,044


373,265Loss on disposal of an equity method investment








(5,584
)Other income


225,095


770,081


288,157Changes in fair value of derivatives


(14,528,000
)




(Loss) income before income tax and equity in earnings of equity method investments, net of tax


(4,143,261
)

15,042,856


(251,618
)Provision for income taxes


91,053


473,542


1,322,368Equity in earnings of equity method investments, net of tax


11,254


3,062


5,604Net (loss) income


(4,223,060
)

14,572,376


(1,568,382
)Less: Net (loss) income attributable to the noncontrolling interests


(131,686
)

140,295


(284,500
)Net (loss) income attributable to Bona Film Group Limited


(4,091,374
)

14,432,081


(1,283,882
)Deemed dividend on Series A convertible redeemable preferred shares


1,053,766





Deemed dividend on Series B convertible redeemable preferred shares


1,096,380





Net (loss) income attributable to holders of ordinary shares of Bona Film Group Limited


(6,241,520
)

14,432,081


(1,283,882
)Net (loss) income per ordinary shareBasic


(0.49
)

0.49


(0.04
)Diluted


(0.49
)

0.48


(0.04
)Weighted average shares used in calculating net income per ordinary shareBasic


12,758,575


29,353,936


29,514,979Diluted


12,758,575


29,844,462


29,514,979Share-based compensation expensesSelling and marketing expenses


40,418





General and administrative expenses


406,927


3,647,144


4,803,163


The accompanying notes are an integral part of these consolidated financial statements.

F-5

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Table of Contents



BONA FILM GROUP LIMITED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In U.S. dollars, except share and per share data)

Years ended December 31,2010

2011

2012Net (loss) revenue


(4,223,060
)

14,572,376


(1,568,382
)Other comprehensive income, net of taxForeign currency translation adjustments


1,566,000


3,449,951


1,030,733Comprehensive (loss) income


(2,657,060
)

18,022,327


(537,649
)Less: comprehensive (loss) income attributable to the noncontrolling interests


(124,925
)

188,095


(282,552
)Comprehensive (loss) income attributable to Bona Film Group Limited


(2,532,135
)

17,834,232


(255,097
)


The accompanying notes are an integral part of these consolidated financial statements.

F-6

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Table of Contents



BONA FILM GROUP LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In U.S. dollars, except share and per share data)

Bona Film Group Limited's shareholders'Ordinary shares







Accumulated
other
comprehensive
incomeAdditional
paid-in
capital

Statutory
reserves

Accumulated
profit
(deficit)

Total Bona
Film Group
Limited's equity

Noncontrolling
interests

Total
equityShares

AmountBalance at January 1, 2010


7,811,656


3,906


4,103,847


1,748,455


(5,561,344
)

474,915


769,779


597,061


1,366,840Issuance of ordinary shares for acquisition of movie theaters


5,810,320


2,905


26,120,287











26,123,192





26,123,192Exercise of options


317,072


158


1,999,842











2,000,000





2,000,000Elimination of derivatives liabilities








17,907,000











17,907,000





17,907,000Conversion of series A preferred shares to ordinary shares


5,849,856


2,926


10,778,706











10,781,632





10,781,632Conversion of series B preferred shares to ordinary shares


3,690,577


1,845


14,692,691











14,694,536





14,694,536Issuance of ordinary shares on initial public offering ("IPO") (net of issuance cost of US$3,559,581)


5,870,000


2,935


89,242,184











89,245,119





89,245,119Deemed dividend of Series A preferred shares














(1,053,766
)




(1,053,766
)




(1,053,766
)Deemed dividend of Series B preferred shares














(1,096,380
)




(1,096,380
)




(1,096,380
)Net loss














(4,091,374
)




(4,091,374
)

(131,686
)

(4,223,060
)Share-based compensation








447,345











447,345





447,345Transfer to statutory reserves











227,260


(227,260
)










Foreign currency translation adjustments

















1,559,239


1,559,239


6,761


1,566,000Acquisition of movie theaters























2,071,408


2,071,408Capital contribution by a noncontrolling shareholder























364,421


364,421Acquisition of equity interests from a noncontrolling shareholder








683,434











683,434


(805,555
)

(122,121
)Balance at December 31, 2010


29,349,481


14,675


165,975,336


1,975,715


(12,030,124
)

2,034,154


157,969,756


2,102,410


160,072,166IPO cost








(350,000
)










(350,000
)




(350,000
)Exercise of options


39,608


20


247,367











247,387





247,387Net income














14,432,081





14,432,081


140,295


14,572,376Share-based compensation








3,647,144











3,647,144





3,647,144Transfer to statutory reserves











69,155


(69,155
)










Foreign currency translation adjustments

















3,402,151


3,402,151


47,800


3,449,951Noncontrolling interests resulted from acquisition of movie theaters























1,155,121


1,155,121Balance at December 31, 2011


29,389,089


14,695


169,519,847


2,044,870


2,332,802


5,436,305


179,348,519


3,445,626


182,794,145Exercise of options


348,168


174


1,811,727











1,811,901





1,811,901Net loss














(1,283,882
)




(1,283,882
)

(284,500
)

(1,568,382
)Share-based compensation








4,803,163











4,803,163





4,803,163Transfer to statutory reserves











498,402


(498,402
)










Foreign currency translation adjustments

















1,028,785


1,028,785


1,948


1,030,733Capital contribution by noncontrolling shareholders























774,030


774,030Balance at December 31, 2012


29,737,257


14,869


176,134,737


2,543,272


550,518


6,465,090


185,708,486


3,937,104


189,645,590


The accompanying notes are an integral part of these consolidated financial statements.

F-7

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Table of Contents



BONA FILM GROUP LIMITED        CONSOLIDATED STATEMENTS OF CASH FLOWS        (In U.S. dollars, except share and per share data)

Years ended December 31,2010

2011

2012Cash flows from operating activities:Net (loss) income


(4,223,060
)

14,572,376


(1,568,382
)Adjustments to reconcile net (loss) income to net cash used in operating activitiesEquity in earnings of equity method investment


(11,254
)

(3,062
)

(5,604
)Loss on disposal of an equity method investment








5,584Changes in fair value of derivatives


14,528,000





Share-based compensation


447,345


3,647,144


4,803,163Provision for bad debt


690


826,078


33,279Other income





(285,714
)

(285,714
)Depreciation and amortization


1,074,059


2,711,958


4,370,679Loss from disposal of property and equipment





191,705


2,265Amortization of distribution rights


3,233,192


2,331,266


2,792,844Amortization of production costs


16,502,364


37,116,065


41,774,480Impairment of production costs








2,280,198Changes in assets and liabilities:Accounts receivable


4,861,044


(25,593,187
)

1,543,005Prepaid expenses and other current assets


(2,075,312
)

(13,991,376
)

1,163,197Distribution rights


105,155


(3,643,433
)

(9,731,283
)Production costs


(61,507,608
)

(40,367,979
)

(64,758,806
)Inventories


161


(47,732
)

(45,047
)Amounts due from related parties


(5,572,960
)

1,289,087


47,019Accounts payable


(3,339,904
)

13,062,884


4,048,508Deferred income





939,673


42,031Accrued expenses and other current liabilities


(388,702
)

9,773,047


3,019,017Amounts due to related parties


4,255,386


(674,011
)

579,148Income taxes payable


(723,163
)

396,418


1,587,546Deferred income taxes


(65,296
)

(88,364
)

(1,146,761
)Film participation financing liabilities


505,319


76,701


(15,235
)Net cash (used in) provided by operating activities


(32,394,544
)

2,239,544


(9,464,869
)Cash flows from investing activities:Acquisition of business, net of cash acquired of US$2,221,266, US$1,379,343 and nil, as of December 31, 2010, 2011 and 2012, respectively


1,778,462


(24,205,450
)

Purchase of property and equipment


(2,729,922
)

(9,722,708
)

(17,582,818
)Deposits paid for acquisition of property and equipment





(2,478,320
)

Prepayment for an cost method investment





(1,200,000
)

Purchase of cost method investment





(62,909
)

Disposal of an equity method investment








55,020Acquisition of noncontrolling interests of Baichuan


(762,098
)




Loan to a producer of TV series


(1,168,683
)

386,835


Amounts loaned to third parties


(3,878,796
)

2,571,208


(90,469
)Amounts loaned to related parties


(1,668,081
)

(4,010,439
)

(Purchase) maturity of term deposit





(6,038,107
)

6,037,761Deposit of restricted cash





(4,066,162
)

(599,952
)Net cash used in investing activities


(8,429,118
)

(48,826,052
)

(12,180,458
)


The accompanying notes are an integral part of these consolidated financial statements.

F-8

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Table of Contents

BONA FILM GROUP LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In U.S. dollars, except share and per share data)

Years ended December 31,2010

2011

2012Cash flows from financing activities:Proceeds from IPO


92,804,700





Payment of issuance cost in connection with IPO


(1,989,843
)

(350,000
)

Proceeds from exercise of options


2,000,000


172,324


1,822,937Proceeds from issuance of Series B convertible preferred shares


4,999,886





Payment of payable for acquisition of business








(2,378,008
)Amount due to related parties and third parties


3,237,497


(6,690,382
)

2,009,793Proceeds from bank borrowing


22,303,808


12,302,434


38,974,694Repayments of bank borrowing


(8,113,214
)

(22,566,691
)

(21,142,272
)Proceeds from film participation


10,772,250


3,998,964


293,288Repayments of film participation financing liabilities principal


(4,354,761
)

(4,849,323
)

(1,510,889
)Proceeds from other borrowings


1,342,799


1,572,723


6,150,156Repayments of other borrowings


(5,942,595
)

(1,231,034
)

Capital contribution by a noncontrolling shareholder


364,421





774,030Net cash provided by (used in) financing activities


117,424,948


(17,640,985
)

24,993,729Effect of foreign exchange rate changes


228,485


86,858


(227,829
)Net increase (decrease) in cash


76,829,771


(64,140,635
)

3,120,573Cash, beginning of year


7,418,213


84,247,984


20,107,349Cash, end of year


84,247,984


20,107,349


23,227,922Supplement disclosure of cash flow informationIncome taxes paid


858,322


196,565


730,709Interests paid


999,247


1,502,957


967,100Film participation expenses paid


190,782


244,399


132,223Supplement disclosure of non-cash investing activities:Ordinary shares issued in connection with business acquisition (Note 3(a))


26,123,194





Cash consideration for business acquisition settled as an offset against the amount due from Mr. Dong Yu (Note 3(a) & (d))


5,337,243


3,064,993


Outstanding consideration payable for business acquisition (Note 3(d))





2,383,260


Payable for purchase of property and equipment


1,792,983


5,668,211


8,842,796


The accompanying notes are an integral part of these consolidated financial statements.

F-9

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Table of Contents



BONA FILM GROUP LIMITED        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012        (In U.S.
dollars, except share and per share data)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

Introduction

Bona International Film Group Limited ("Bona International") was incorporated in British Virgin Islands ("BVI") on December 13,
2006. Bona International, together with its subsidiaries, variable interest entities (the "VIEs") and VIEs' subsidiaries, are engaged in film related activities and a talent agency business in
the People's Republic of China (the "PRC").

Bona
Film Group Limited (the "Company") was established in the Cayman Islands in July 2010, which became the holding company of Bona International upon the completion of a
16 to 1 share exchange on November 10, 2010 with the existing shareholders of Bona International for all shares of equivalent classes. This share exchange was treated as a reorganization
of entities under common control in a manner akin to a pooling-of-interest as if the Company had always existed and owned Bona International since the establishment of Bona
International. The share capital after the share exchange has been reflected retrospectively as if it were the historical share capital for all the periods presented. The Company together with its
VIEs and subsidiaries are referred to as the "Group".

Subsidiaries, VIEs and VIEs' subsidiaries

As of December 31, 2012, the Company's subsidiaries, VIEs and VIEs' subsidiaries included the following entities:

Date of
incorporation/
acquisition

Place of
incorporation

Percentage
of legal
ownershipSubsidiaries:Bona International Film Group Limited ("Bona International")

December 13, 2006

BVI


100%Alpha Speed Limited

July 1, 2011

BVI


100%Beijing Bona New World Media Technology Co., Ltd. ("Bona New World")

June 7, 2007

PRC


100%Bona Entertainment Co., Ltd. ("Bona Entertainment")

July 1, 2008

Hong Kong


100%Distribution Workshop (BVI) Ltd. ("Distribution Workshop BVI")

June 29, 2007

BVI


51%Distribution Workshop (HK) Ltd. ("Distribution Workshop HK")

May 31, 2007

Hong Kong


51%Bona Production Co., Ltd. ("Bona Production")

July 21, 2010

Hong Kong


100%Film Investments Limited

October 29, 2012

Hong Kong


100%DW2 Limited

October 29, 2012

Hong Kong


100%


F-10

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES  continued

Date of
incorporation/
acquisition

Place of
incorporation

Percentage
of legal
ownershipVIEs:Beijing Baichuan Film Distribution Co., Ltd. ("Baichuan") (previously named "Beijing PolyBona Film Distribution Co. Ltd.")

November 18, 2003

PRC


0%Bona Film Group Co., Ltd. (PRC) ("Bona Film") (previously named "Beijing Bona Film and Culture Communication Co., Ltd.")

August 1, 2003

PRC


0%Beijing Bona Advertising Co., Ltd. ("Bona Advertising")

April 28, 2005

PRC


0%Cinema Popular Limited ("Cinema Popular")

October 15, 2008

Hong Kong


50%VIEs' subsidiaries:Zhejiang Bona Film and Television Production Co., Ltd. ("Zhejiang Bona")

December 5, 2008

PRC


0%Beijing Bona Xingyi Culture Agency Co., Ltd. ("Bona Xingyi") (previously named "Beijing Bona Yinglong Culture Agency Co., Ltd.")

June 25, 2008

PRC


0%Beijing Bona International Cineplex Investment and Management Co., Ltd. ("Beijing Bona Cineplex")

November 14, 2005

PRC


0%Beijing Bona Youtang Cineplex Management Co., Ltd. ("Bona Youtang")

April 13, 2009

PRC


0%Shijiazhuang Bona Cinema Investment Management Co., Ltd. ("Shijiazhuang Cinema")

August 27, 2009

PRC


0%Shenzhen Bona Shidai Cinema Investment Management Co., Ltd. ("Shenzhen Cinema")

December 11, 2009

PRC


0%Shanghai Bona Yinxing Cinema Development Co., Ltd. ("Shanghai Cinema")

March 5, 2008

PRC


0%Xi'an Huitong Bona Film Culture Media Co., Ltd. ("Xi'an Huitong")

October 18, 2010

PRC


0%Beijing Bona Starlight Cineplex Management Co., Ltd. ("Bona Starlight")

July 1, 2011

PRC


0%Beijing Bona Shunjing Cineplex Management Co., Ltd. ("Shunjng Cinema")

July 1, 2011

PRC


0%Beijing Bona Huixin Cineplex Management Co., Ltd. ("Huixin Cinema")

July 1, 2011

PRC


0%Tianjin Bona Jinkang Cineplex Management Co., Ltd. ("Jinkang Cinema")

July 1, 2011

PRC


0%


F-11

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES  continued

Date of
incorporation/
acquisition

Place of
incorporation

Percentage
of legal
ownershipChongqing Bona Yuexin Cineplex Management Co., Ltd. ("Yuexin Cinema")

July 1, 2011

PRC


0%Changsha Mango Bona Cineplex Management Co., Ltd. ("Mangguo Cinema")

July 1, 2011

PRC


0%Beijing Bona Jingpin Cineplex Management Co., Ltd. ("Jingpin Cinema")

November 8, 2011

PRC


0%Beijing Bona Tianshi Cineplex Management Co., Ltd. ("Tianshi Cinema")

November 29, 2011

PRC


0%Dongguan Bona Dongsheng Cineplex Investment Co., Ltd. ("Dongsheng Cinema")

December 1, 2011

PRC


0%Tianjin Nongken Bona Film Investment Co., Ltd. ("Tianjin Nongken")

April 20, 2012

PRC


0%Shanghai Bona Zhongyuan Management and Consulting Co., Ltd. ("Shanghai Zhongyuan")

May 24, 2012

PRC


0%Suzhou Bona Lifeng Cineplex Management Co., Ltd. ("Suzhou Lifeng")

June 27, 2012

PRC


0%Tianjin Bona Culture Media Co., Ltd. ("Bona Tianjin")

July 18, 2012

PRC


0%Fenghua Bona Cineplex Management Co., Ltd. ("FengHua Bona")

August 17, 2012

PRC


0%


The VIE arrangements

The Group operates its businesses in the PRC through its affiliated entities due to the PRC regulations that restrict foreign
investments in the film, television program, movie theaters, talent agency and advertising industries (the "Restricted Business"). As a Cayman Islands corporation, the Company is deemed a
foreign legal person under PRC laws. Accordingly the Company is not allowed to directly own and operate the Restricted Business in the PRC.

The
Company therefore conducts substantially all of its Restricted Business in the PRC through contractual arrangements with its VIEs and VIEs' subsidiaries. The VIEs and VIEs'
subsidiaries hold the requisite license and permits necessary to conduct the Restricted Business in the PRC. In addition, the VIEs and VIEs' subsidiaries hold leases and other assets necessary to
operate the Restricted Business in the PRC and generate substantially all of the Company's revenue in the PRC. The Group has three affiliated consolidated entities that operate its businesses in the
PRC, each of which is an entity duly formed under PRC law.

F-12

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES  continued

These
affiliated consolidated entities were established in the years set forth below:

Year of establishment

PRC affiliated entities

Principal activities2003

Beijing Baichuan Film
    Distribution Co., Ltd.

Films distribution2003

Bona Film Group Co., Ltd. (PRC)

Movie theater business, talent agency
    services and television production2005

Beijing Bona Advertising Co., Ltd.

Film related advertising sales


To
provide the Company the power to control and the ability to receive substantially all of the expected residual returns of the VIEs, Bona New World entered into a series of
contractual arrangements with the VIEs and their shareholders in July 2007.



F-13

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES  continued



F-14

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES  continued



Corporate reorganization

At the time that the Company's wholly-owned subsidiary, Bona New World, entered into below series of contractual arrangements
with the Company's VIEs, the Company was controlled (and had been since incorporation) by Mr. Dong Yu who held 93.5% of the issued equity. Immediately before entering into the
contractual arrangements, the VIEs were also controlled by Mr. Dong Yu. This was therefore a transaction between entities under common control. Accordingly, the consolidated financial
statements of the Company have been prepared as if the Company had been in existence and was the primary beneficiary of the VIEs throughout the periods presented.

Cinema Popular

In October 2008, Bona Entertainment entered an agreement with Hurry Up Limited, a Hong Kong based company engaged in film
production, to set up Cinema Popular Limited ("Cinema Popular") in Hong Kong to invest in films and hold copyright of films (the "Joint-venture Agreement"). Bona Entertainment and Hurry Up
Limited each own 50% of the equity interest in Cinema Popular.

Through
its control of the board of directors of Cinema Popular, Bona Entertainment controls Cinema Popular. As Bona Entertainment controls Cinema Popular and absorbs all of the expected
losses of Cinema Popular, Bona Entertainment is the primary beneficiary of Cinema Popular and therefore has consolidated Cinema Popular.

Risks in relation to the VIEs' structure

The Company believes that Bona New World's contractual arrangements with the VIEs and its shareholders are in compliance with
existing PRC laws and regulations and are valid, binding and enforceable and will not result in any violation of PRC laws or regulations currently in effect. The shareholders of the VIEs are also
shareholders of the Company, therefore have no current interest in seeking to act contrary to the contractual arrangements. However, substantial uncertainties exist regarding the interpretation of
current and future PRC laws or regulations and the PRC regulations authorities may take a contrary view. If the legal structure and contractual arrangements were found to be in violation of any
existing PRC laws or regulations, the regulations authorities may exercise their discretion and:

F-15

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES  continued

The
imposition of any of these penalties may result in a material adverse effect on the Group's ability to conduct its business. In addition, if the imposition of any of these penalties
causes the Group to lose the rights to direct the activities of the VIEs and their subsidiaries or the right to receive their economic benefits, the Group would no longer be able to consolidate the
financial results of the VIEs.

The
Company's ability to control the VIEs depends on the right Bona New World has under the voting trust and equity purchase option agreements to vote on all matters requiring
shareholder approval in the VIEs. As noted above, the Group believes this power of attorney is valid, building and enforceable under existing PRC laws and regulations but may not be as effective as
direct equity ownership.

In
addition, Mr. Yu is the major nominee shareholder of Bona Film, and is also a beneficial owner of the Company. The interests of Mr. Yu as the major nominee shareholder
of Bona Film may differ from the interests of the Company as a whole, the Company cannot assure that when conflicts of interest arise, Mr. Yu will act in the best interests of the Company or
that conflicts of interests will be resolved in the Company's favor. Currently, the Company does not have existing arrangements to address potential conflicts of interest Mr. Yu may encounter
in his capacity as the major nominee shareholder of Bona Film, on the one hand, and as a beneficial owner and director of the Company, on the other hand. The Company believes Mr. Yu will not
act contrary to any of the contractual arrangements and the exclusive option agreement provides the Company with a mechanism to remove Mr. Yu as the major nominee shareholder of Bona Film
should he act to the detriment of the Company. The Company relies on Mr. Yu, as a director and executive officer of the Company, to fulfill his fiduciary duties and abide by laws of the PRC and
Cayman Islands and act in the best interest of the Company. If the Company cannot resolve any conflicts of interest or disputes between the Company and Mr. Yu, the Company would have to rely on
legal proceedings, which could result in disruption of its business, and there is substantial uncertainty as to the outcome of any such legal proceedings.

F-16

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES  continued

The
following consolidated information of the VIEs and their subsidiaries was included in the accompanying consolidated financial statements with intercompany balance eliminated:

December 31,2011

2012Cash and cash equivalents


5,919,594


14,691,945Accounts receivable, net


40,710,735


37,626,422Prepaid expense and other current assets


11,454,369


14,626,701Total current assets


59,616,184


73,351,336Distribution rights


1,609,455


491,723Production costs


44,264,090


53,248,207Property and equipment, net


40,100,479


60,147,104Total non-current assets


96,409,193


150,879,449Total assets


156,025,377


224,230,785Total current liabilities


76,539,817


92,841,657Total non-current liabilities


413,219


8,279,476Total liabilities


76,953,036


101,121,133




Years ended December 31,2010

2011

2012Net revenue


44,326,027


116,911,572


132,455,191Net income


11,210,654


18,046,991


5,358,332




Years ended December 31,2010

2011

2012Net cash (used in) provided by operating activities


(17,350,381
)

33,427,159


17,747,686Net cash used in investing activities


(3,245,910
)

(17,137,921
)

(22,238,836
)Net cash provided by (used in) financing activities


19,006,317


(12,406,973
)

13,263,501


There
are no consolidated VIEs' assets that are collateral for the VIE's obligations and can only be used to settle the VIEs' obligations. There are no creditors (or beneficial
interest holders) of the VIEs that have recourse to the general credit of the Company or any of its consolidated subsidiaries. There are no terms in any arrangements, considering both explicit
arrangements and implicit variable interests, which require the Company or its subsidiaries to provide financial support to the VIEs. However, if the VIEs ever need financial support, the Company or
its subsidiaries may, at its option and subject to statutory limits and restrictions, provide financial support to its VIEs through loans to the shareholder of the VIEs or entrustment loans to
the VIEs.

F-17

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The
consolidated financial statements of the Group have been prepared in accordance with accounting principles generally accepted in the United States of America
("US GAAP").

The
Group's consolidated financial statements included the financial statements of Bona Film Group Limited, its subsidiaries, VIEs and VIEs' subsidiaries. All intercompany transactions
and balances were eliminated in consolidation.

The
preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and revenue and expenses in the consolidated financial statements and accompanying notes. Significant accounting estimates reflected in the Group's consolidated financial statements
include fair value of the Company's ordinary shares, impairment of property and equipment and intangible assets, impairment of goodwill, impairment of distribution rights and production costs,
valuation allowance for deferred tax assets, film participation financing liabilities, film participation expense, amortization of distribution rights and production costs, share-based compensation,
and purchase price allocation for business acquisition.

The
Group evaluates each lease for classification as either a capital lease or an operating lease. The Group assesses a lease to be a capital lease if substantially all of the benefits
and risks of ownership have been transferred to the lessee at its inception. The Group performs this evaluation at the inception of the lease and when a modification is made to a lease. If the lease
agreement calls for a scheduled rent increase during the lease term, the Group recognizes the lease expense on a straight-line basis over the lease term as deferred lease expense. The
Group determines the straight-line rent expense impact of an operating lease upon inception of the lease. In leases containing both scheduled rent increases and contingent rents on the box
office sales, only the fixed component of the lease payments are recognized on a straight-line basis over the lease term. Contingent rents are expensed or accrued in the period when the
box office sales are recognized.

Cash
and cash equivalents consist of cash on hand and highly liquid investments which are unrestricted as to withdrawal or use, or have original maturities of three months or less
when purchased.

Term
deposits consist of deposits placed with financial institutions with original maturity terms of greater than three months but less than one year.

F-18

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continued

Restricted
cash is related to the box office receipts from certain films deposited in specific accounts required by the banks as guarantees for short-term loans with
the banks.

Distribution
rights include the unamortized costs of films for which the Group has acquired distribution rights, including completed films and films in production. In certain cases, the
Group also shares the net profit of the film with the producers but does not receive any proportionate interest in the copyright of the film.

Costs
of acquiring film distribution rights are amortized using the individual-film-forecast method, whereby these costs are amortized in the proportion that
current year's revenue bears to management's current estimate of ultimate revenue expected to be recognized from the exhibition or sub-licensing of the films.

Film
ultimate revenues include estimates of revenues from all markets and territories, including revenues associated with theatrical release of the film, revenues associated with home
video sales, licensing sales to broadcast or cable networks. Film ultimate revenues forecasts include estimates over a period not to exceed ten years following the date of the film's initial release.
Estimated ultimate revenues are revised at least annually.

Production
costs include expenditures for the production and acquisition of proportional copyright of films by the Group. The production costs are stated at the lower of cost less
accumulated amortization, or fair value. Production costs include costs of productions and acquired proportional copyright of films which have been completed and costs of productions which are still
in production. For films completed and on release, the related capitalized costs are amortized using the individual-film-forecast method, whereby these costs are amortized in
the proportion that current year's revenue bears to management's current estimate of ultimate revenue expected to be recognized from the exhibition or licensing of the films.

Most
of the Group's bank borrowing and other borrowings are dedicated to fund the production of its films. Capitalization of interest costs commences when a film is set for production
and ends when a film is substantially complete and ready for distribution. The interest eligible for capitalization includes interest expense on bank borrowing and other borrowing.

The
Group enters into arrangements with third parties to jointly finance the production of some of its films and the Group distributes the film. The Group and the investors
co-own the copyright and share the profit or loss of the film. The form of the arrangement is the sale of an economic interest in a film to an investor. The Group records the amount
received from the investor as a reduction of its capitalized film costs, as the investor assumes full risk for that portion of the film asset acquired in these transactions.

F-19

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continued

The
Group reviews the distribution rights and production costs for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the
distribution rights and production costs may be impaired. The valuation of distribution rights and production costs is reviewed on a title-by-title basis. The excess of the
carrying value above the fair value is written off and the amount is classified as costs of revenues in the consolidated statements of operations. The Company bases these fair value measurements on
unobservable inputs derived from the Company's assumptions about how market participants would price the asset. Due to the nature of these assets, market data for similar assets is not available. Key
assumptions used in such fair value measurements include: (1) the discount rate applied to future cash flow streams, which is based on a risk-free rate plus a risk premium
representing the risk associated with the type of property being exploited and (2) the number of years over which the Company estimates future net cash flows. The Company considers the
sensitivity of these inputs in assessing its assumptions.
Additionally, on occasion, the Company may change the creative direction of, or abandon, one or more of the Company's films after being placed into production. As a result, amounts previously
capitalized as production costs may be expensed. The Group will not subsequently restore any amounts written off in previous fiscal years.

Property
and equipment, net are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated on a straight-line basis over the
following estimated useful lives:

Film projection equipment

15 yearsFurniture and office equipment

5 yearsTransportation equipment

5 yearsLeasehold improvements

lesser of original lease term orestimated useful life


Acquired
identifiable intangible assets with definite lives are carried at cost less accumulated amortization. Amortization of definite-lived intangible assets is computed based on the
straight-line method over the following estimated weighted average useful lives, which are as follows:

Membership


1.8 yearsFavorable lease


1-4.5 years


If
an acquired intangible asset is determined to have an indefinite life, it should not be amortized until its useful life is determined to be no longer indefinite. An intangible asset
that is not subject to amortization is evaluated annually or more frequently if event and circumstances indicate that it might be impaired. Such impairment test consists of comparing the fair values
of assets with their carrying

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continued

value
amounts and an impairment loss is recognized if and when the carrying amounts exceed the fair values. The estimates of fair values of intangible assets not subject to amortization are determined
using discounted cash flow method. Significant assumptions are inherent in this process, including estimates of discount rates. Intangible assets with indefinite life represent movie theater licenses
acquired through business acquisition of 10 movie theaters.

Long-lived
assets, such as property and equipment and definite-lived intangible assets, other than distribution rights and production costs, are stated at cost less
accumulated depreciation or amortization. The Group evaluates the recoverability of long-lived assets, including identifiable intangible assets, with determinable useful lives, other than
distribution rights and production costs, whenever events or changes in circumstances indicate that a long-lived asset's carrying amount may not be recoverable. The Group measures the
carrying amount of long-lived asset against the estimated undiscounted future cash flows expected to result from the use and eventual disposition of the asset. Impairment exists when the
sum of the expected future net cash flows is less than the carrying value of the asset being evaluated. Impairment loss is calculated as the amount by which the carrying value of the asset exceeds its
fair value. Fair value is estimated based on various valuation techniques, including the discounted value of estimated future
cash flows. The evaluation of asset impairment requires the Group to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment
and actual results may differ from assumed and estimated amounts.

For
investment in an investee over which the Group does not have a significant influence, the Group carries the investment at cost and recognizes as income dividends received that are
distributed from net accumulated earnings of the investee since the date of acquisition by the investor. The Group reviews the cost method investment for impairment whenever events or changes in
circumstances indicate that the carrying amount of the investment may be impaired. An impairment loss is recognized when the decrease in fair value of the investment is other than temporary, for the
amount equal to the difference between the investment's carrying amount and its fair value at the balance sheet date of the reporting period for which the assessment is made. The fair value of the
investment would then become the new cost basis of the investment.

A
company that is not consolidated, but over which the Group exercises significant influence, is accounted for under the equity method of accounting. Whether or not the Group exercises
significant influence with respect to an affiliate depends on an evaluation of several factors including, among others, representation on the affiliated company's board of directors, impact of
commercial arrangements, and ownership level, which is generally a 20% to 50% interest in the voting securities of the affiliated company. Under the equity method of accounting, the affiliated
company's accounts are not reflected within the Group's consolidated balance sheets and statements of operations; however,

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continued

the
Group's share of the earnings or losses of the affiliated company is reflected in the caption "Equity in (loss) earnings of affiliated companies" in the consolidated statements
of operations.

When
the Group's carrying value in an equity method affiliated company is reduced to zero, no further losses are recorded in the Group's consolidated financial statements unless the
Group guaranteed obligations of the affiliated company or has committed additional funding. When the affiliated company
subsequently reports income, the Group will not record its share of such income until it equals the amount of its share of losses not previously recognized.

An
impairment charge is recorded when the carrying amount of the investment exceeds its fair value and this condition is determined to be other-than-temporary.

The
excess of the purchase price over the fair value of net assets acquired is recorded on the consolidated balance sheet as goodwill. Goodwill is not amortized but is evaluated annually
or more frequently if event and circumstances indicate that they might be impaired.

When
evaluating the goodwill impairment, the Group first assess qualitative factors to determine whether it is "more likely than not" that the fair value of a reporting unit is less than
its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test.

If
the Group assesses that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Group will perform a two-step goodwill
impairment test. The first step compares the fair values of each reporting unit to its carrying amount, including goodwill. If the fair value of each reporting unit exceeds its carrying amount,
goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value
of goodwill to the carrying value of a reporting unit's goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of
the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and
liabilities is the implied fair value of goodwill. An impairment loss is recognized for any excess in the carrying value of goodwill over the implied fair value of goodwill.

To
fund production of its films, the Group obtains financing through bank borrowings, and a variety of arrangements with other investors which are described below.

Other borrowings

If the Group guarantees the third party provider of financing a fixed rate of return on the principal over a fixed term of period, the
cash received from these investors is classified on the balance sheet as other borrowings. The Group accrues interest expense on other borrowings using the fixed rate of return.

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continued

Film participation financing liabilities

For other financing, where the Group gives the third party provider of finance a fixed percentage of the film's worldwide net income,
or a fixed percentage of the film's worldwide net income with guarantee of minimum rate of return on the principal, the cash received from these investors is accounted for as film participation
financing liabilities, as the Group retains copyrights of the films and the arrangements do not involve sale of a proportionate undivided interest in the copyright to the third party participants.

Under
those arrangements where the participant is entitled to a share of the respective film worldwide net income, the Group records the participant's share of net income in film
participation expense based on an effective interest rate method on an individual film-by-film basis. The Group starts to accrue for participation expense from the initial
exhibition of the film. The effective interest rate is calculated based on the initial investments by the third party participants and a series of future cash outflows to the participants estimated by
the Group using the same estimates of revenue determined in using the individual-film-forecast method as discussed above under amortization of its own production costs. The
rate is then applied to the outstanding film participation financing liabilities balance specific to the film to determine the current period's film participation expense related to that film.

If
a film underperforms, the final redemption amount is estimated to be lower than the amount originally invested by third party participants. A negative effective interest rate is
calculated and applied to the outstanding film participation financing liabilities balance to determine the current period's reduction of film participation expense.

Under
those arrangements where the participant is entitled to a share of the respective film worldwide net income with guarantee of a minimum rate of return on the principal, if at any
point of time, the management determines that the accrued film participation financing liability is not sufficient to cover the guaranteed minimum rate, an additional liability will be accrued based
on the guaranteed minimum rate of return.

Film
participation financing liabilities that are expected to be paid in one year after the period end are classified as current liabilities. The remaining film participation financing
liabilities are classified as non-current liabilities.

The
Group recognizes film-related revenues from the arrangements described as follows:

Film Distribution revenues

The Group acquires film distribution rights as the principal or a participating distributor in mainland China and overseas from
film producers.

As
the principal distributor, the Group recognizes distribution revenues when the films are exhibited in movie theaters. After the payments by the movie theaters of taxes and other
governmental charges and deductions by movie theaters and theater circuits of their respective shares of the box

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continued

office
sales, the remaining amount (the "Distributable Amount") is remitted to the Group which the Group accounts for as its distribution revenues.

The
Group then shares the Distributable Amount with the film producer pursuant to the terms of the distribution agreement under which the Group is typically entitled to a fixed
percentage of the Distributable Amount as its fees (the "Distribution Fees"). The Distributable Amount, after further deductions of the Distribution Fees and print and marketing expenses,
except in rare cases where not reimbursable by the producer, is paid or payable to the producer and is accounted for as a cost of distribution revenues.

The
Group also generates revenues from advertising services such as "in-film" advertising, pre-screening advertising, selling poster space and promotions of
films. Revenues from advertising services are recognized as advertisement is shown or upon services provided. Cost of advertising services primarily consists of the cost of acquiring advertising
airtime.

The
Group also cooperates with other distributors to distribute films as a participating distributor but is not the primary obligor under the distribution arrangement and shares a fixed
percentage of the distribution fees received by the principal distributor as the Group's commissions pursuant to its arrangement with the principal distributor. The Group records these commissions as
its distribution revenues.

For
certain films the distribution rights of which are acquired by the Group, the Group sub-licenses such rights to international third party distributors and domestic and
international non-theatrical channels including television and Internet companies for a particular term. Revenues from such sub-licensing arrangements are recognized when the
following criteria are met: (i) an arrangement has been signed with a customer, (ii) the customer's right to use or otherwise exploit the intellectual property has commenced and there is
no requirement for significant continued performance by the Group, (iii) licensing fees are either fixed or determinable and (iv) collectability of the fee is reasonably assured.

Copyright and participation revenues

When the Group is not the principal distributor, but participates in the financing of film production in which the Group may also
acquire all, a portion or none of the legal copyright in relation to the film, and bears a portion of the costs of financing, production, prints, promotion and advertising pursuant to the terms of the
agreement for the production of the film, it generates revenues from such film production participation as follows:



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BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continued



Talent agency revenues

The Group also acts as a talent agent for certain artists, where in certain cases the Group signs the service contract with the third
party and in other cases, the Group and the artist together sign the service contract with the third party.

Where
the Group signs the service contract with third parties and is the primary obligor, the Group reports the gross amount of the service as revenue. Where the Group and the artist
together sign the contract with a third party, the Group reports revenue at the total service amount net of the payment to the artist. For arrangements where the Group records the gross amount as its
revenue, cost of talent agency service primarily consists of compensation paid to artists.

Movie theater revenues

Revenues are recognized when admissions and concession sales are received at the box office. Other revenues primarily consist of screen
advertising. Screen advertising revenues are recognized over the period that the related advertising is delivered on-screen or in-theatre. The Group records proceeds from the
sale of prepaid membership cards and other prepaid certificates in deferred revenues and recognizes admissions revenue and concession revenue when the card or certificate is consumed. The Group
recognizes unredeemed prepaid certificates as revenue upon expiration of the membership cards or certificates.

The
costs of printing, advertising and marketing related to the exploitation of feature films are expensed as incurred by the Company.

From
2004 to 2012, Baichuan and Zhejiang Bona's share of movie theaters' box office revenues in the PRC are exempted from business tax. The Group's other PRC subsidiaries, VIEs and VIEs'
subsidiaries are subject to business taxes at the rate of 3.3%-5.5% on certain types of services and the related revenues are presented net of business taxes incurred. Business taxes
deducted in arriving net revenue for the years ended December 31, 2010, 2011 and 2012 totaled $1,012,573, $2,076,930 and $3,552,059, respectively.

In
addition, movie theater revenues is subject to mandatory contribution to film industry development fund levied at the rate of 5% on box office receipts and the related revenues are
presented net of mandatory contribution to film industry fund incurred. Film industry development fund deducted in arriving net revenue during 2010, 2011 and 2012 totaled $533,209, $1,230,836 and
$1,995,813, respectively.

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BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continued

Current
income taxes are provided for in accordance with the laws of the relevant tax authorities. Deferred income taxes are provided using the asset and liability method. Under this
method, deferred income taxes are recognized for tax credits and net operating losses available for carry-forwards and significant temporary differences. Deferred tax assets and liabilities are
classified as current or non-current based upon the classification of the related asset or liability in the financial statements or the expected timing of their reversal if they do not
relate to a specific asset or liability. A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion of, or all of the
deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws and regulations applicable to the Group as enacted by the relevant tax authorities.

The
impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than not to be sustained upon
audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Interest and penalties on income taxes will be
classified as a component of the provisions for income taxes. The Group did not recognize any income tax due to uncertain tax position or incur any interest and penalties related to potential
underpaid income tax expenses for the years ended December 31, 2010, 2011 or 2012, respectively.

Comprehensive
income includes net income and foreign currency translation adjustments. Beginning on January 1, 2012, the Group presents the components of net income, the
components of other comprehensive income and total comprehensive income in two separate but consecutive statements approach. The consolidated financial statements for prior periods have been adjusted
for the retrospective application of the authoritative guidance regarding presentation of comprehensive income.

The
functional currency of the Company is the United States dollar ("U.S. dollars"). The financial records of the Group's subsidiaries and VIEs located in the PRC and Hong
Kong are maintained in their local currencies, the Renminbi ("RMB"), and Hong Kong Dollar ("HK$"), respectively, which are also the functional currencies of these entities.

Monetary
assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at the rates of exchange ruling at the balance
sheet date. Transactions in currencies other than the functional currency during the year are converted into functional currency at the applicable rates of exchange prevailing when the transactions
occurred. Transaction gains and losses are recognized in the statements of operations.

The
Group's entities with functional currency of RMB and HK$ translate their operating results and financial position into the U.S. dollar, the Company's reporting currency.
Assets and liabilities are translated using the exchange rates in effect on the balance sheet date. Revenues, expenses, gains and losses are translated using the average rate for the year. Translation
adjustments are reported as

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BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continued

cumulative
translation adjustments and are shown as a separate component of other comprehensive income.

RMB
is not a freely convertible currency. The State Administration for Foreign Exchange, under the authority of the People's Bank of China, controls the conversion of RMB into foreign
currencies. The value of RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange
Trading System market. The cash and cash equivalents, term deposits and restricted cash of the Group included aggregate amounts of $7,624,166 and $19,508,508, which were denominated in RMB, at
December 31, 2011 and 2012, respectively, representing 25% and 70% of the cash and cash equivalents, term deposits and restricted cash at December 31, 2011 and 2012, respectively.

Share-based
payment transactions with employees, such as share options are measured based on the grant date fair value of the equity instrument. The Group recognizes the compensation
costs net of an estimated forfeiture rate using the straight-line method, over the requisite service period of the award, which is generally the vesting period of the award. The estimate
of forfeitures will be adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be
recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of stock compensation expense to be recognized in future periods.

Share-based
payments issued to non-employees, such as advisors, are measured at fair value at the earlier of the commitment date or the date the service is completed and
recognized over the period the service is provided.

Financial
instruments that potentially expose the Group to concentrations of credit risk consist primarily of cash and accounts receivable. The Group places its cash and cash equivalents
and term deposits with financial institutions located in the PRC and Hong Kong.

The
Group conducts credit evaluations of its customers and generally does not require collateral or other security from them. The Group establishes an allowance for doubtful accounts
primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers. Information relating to the Group's major customers is summarized in Note 25.

Basic
net income (loss) per ordinary share is computed by dividing net income (loss) attributable to ordinary shareholders of the Company by the weighted average number of ordinary
shares outstanding during the period.

Diluted
net income (loss) per ordinary share reflects the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised or converted into
ordinary shares.

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continued

The
Group had share options, which could potentially dilute basic earnings per share. To calculate the number of shares for diluted income per share the effect of the stock options is
computed using the treasury stock method.

Fair
value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When
determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would
transact and it considers assumptions that market participants would use when pricing the asset or liability.

Authoritative
literature provides a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The level in the
hierarchy within which the fair value measurement in its entirety falls is based upon the lowest level of input that is significant to the fair value measurement
as follows:



Financial
instruments include cash and cash equivalents, term deposit, restricted cash, accounts receivable, cost method investment, equity method investment, accounts payable, amounts
due from/to related parties, bank borrowings, other borrowings and film participation financing liabilities.

The
carrying values of cash and cash equivalents, term deposit, restricted cash, accounts receivable, accounts payable and amounts due from/to related parties approximate their fair
values due to short-term maturities. The fair value of bank borrowings, other borrowings and film participation financing liabilities approximates their carrying value. Estimates of fair
values of cost and equity method investments other than those subjected to other than temporary impairment are not readily available.

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BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continued

Business
combinations are recorded using the acquisition method of accounting. Acquisition costs are allocated to the assets and liabilities the Group acquired based on their fair values
with goodwill being the excess value over the net identifiable assets acquired.

The
assets acquired, the liabilities assumed, and any noncontrolling interest of the acquiree at the acquisition date, if any, are measured at their fair values as of that date. Goodwill
is recognized and measured as the excess of the total consideration transferred plus the fair value of any noncontrolling
interests of the acquiree, if any, at the acquisition date over the fair values of the identifiable net assets acquired.

Common
forms of the consideration made in acquisitions include cash and common equity instruments. Consideration transferred in a business acquisition is measured at the fair value as at
the date of acquisition. For shares issued in a business combination, the Company has estimated the fair value as of the date of acquisition.

Where
the consideration in an acquisition includes contingent consideration the payment of which depends on the achievement of certain specified conditions post-acquisition,
the contingent consideration is recognized and measured at its fair value at the acquisition date and if recorded as a liability it is subsequently carried at fair value with changes in fair value
reflected in earnings.

In
May 2011, the FASB issued an authoritative pronouncement on fair value measurement. The guidance is the result of joint efforts by the FASB and IASB to develop a single,
converged fair value framework. The guidance is largely consistent with existing fair value measurement principles in U.S. GAAP. The guidance expands the existing disclosure requirements for
fair value measurements and makes other amendments, mainly including:

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BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continued

The
guidance is to be applied prospectively and effectively for interim and annual periods beginning after December 15, 2011, for public entities. Early application by public
entities is not permitted. The Group adopted this pronouncement effective January 1, 2012, which did not have a significant effect on the Company's consolidated financial statements.

In
June 2011, the FASB issued an authoritative pronouncement to allow an entity the option to present the total of comprehensive income, the components of net income, and the
components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to
present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive
income. The guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in shareholders' equity. These amendments do not change the items
that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The guidance should be applied retrospectively. For public
entities, the amendments are effective for fiscal years and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. In December 2011, the FASB
issued a further authoritative pronouncement, Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items out of Accumulated Other Comprehensive Income. Under the
amendments, entities are required to present reclassification adjustments and the effect of those reclassification adjustments on the face of the financial statements where net income is presented, by
component of net income, and on the face of the financial statements where other comprehensive income is presented, by component of other comprehensive income. In addition, the amendments require that
reclassification adjustments be presented in interim financial periods. The amendments supersede changes to those paragraphs that pertain to how, when, and where reclassification adjustments are
presented. The amendments in this Update are effective for public entities for fiscal years beginning after December 15, 2011. The Group adopted this pronouncement effective January 1,
2012, and presented comprehensive income in two separate but consecutive statements.

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continued

In
September 2011, the FASB has issued an authoritative pronouncement related to testing goodwill for impairment. The guidance is intended to simplify how entities, both public
and nonpublic, test goodwill for impairment. The pronouncement permits an entity to first assess qualitative factors to determine whether it is "more likely than not" that the fair value of a
reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The guidance is effective for annual
and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. The Group adopted this pronouncement effective January 1,
2012, which did not have a significant effect on the Company's consolidated financial statements.

In
July 2012, the FASB has issued an authoritative pronouncement related to testing indefinite-lived intangible assets, other than goodwill, for impairment. Under the
pronouncement, entities testing indefinite-lived intangible assets for impairment would have the option of performing a qualitative assessment before calculating the fair value of the asset. If an
entity determines, on the basis of qualitative factors, that the indefinite-lived intangible asset is not more likely than not impaired, a quantitative fair value calculation would not be needed. The
amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The Group will adopt this pronouncement on January 1, 2013
which is not expected to have a significant impact on its financial condition or results of operations.

In
October 2012, the FASB has issued an authoritative pronouncement related to impairment analysis of unamortized film costs. The amendments in this ASU eliminate the rebuttable
presumption that the conditions leading to the write off of unamortized film costs after the balance sheet date existed as of the balance sheet date. The amendments also eliminate the requirement that
an entity incorporate into fair value measurements used in the impairment tests the effects of any changes in estimates resulting from the consideration of subsequent evidence if the information would
not have been considered by market participants at the measurement date. For SEC filers, the amendments are effective for impairment assessments performed on or after December 15, 2012. Early
adoption is permitted. The Group will adopt this pronouncement on January 1, 2013 which is not expected to have a significant impact on its financial condition or results of operations.

In
February 2013, the FASB has issued an authoritative pronouncement related to reporting of amounts reclassified out of accumulated other comprehensive income, to improve the
transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are
later reclassified out of accumulated other comprehensive income into net income. The amendments in this ASU do not change the current requirements for reporting net income or other comprehensive
income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP.

The
new amendments will require an organization to:



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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  continued



The
amendments are effective for reporting periods beginning after December 15, 2012. The Group will adopt this pronouncement on January 1, 2013 which is not expected to
have a significant impact on its financial condition or results of operations.

In
March 2013, the FASB has issued an authoritative pronouncement related to parent's accounting for the cumulative translation adjustment upon derecognition of certain
subsidiaries or groups of assets within a foreign entity or of an investment in a foreign entity. When a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or
group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a foreign entity, the parent is required
to release any related cumulative translation adjustment into net income. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in
the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided.

For
an equity method investment that is a foreign entity, the partial sale guidance still applies. As such, a pro rata portion of the cumulative translation adjustment should be
released into net income upon a partial sale of such an equity method investment. However, this treatment does not apply to an equity method investment that is not a foreign entity. In those
instances, the cumulative translation adjustment is released into net income only if the partial sale represents a complete or substantially complete liquidation of the foreign entity that contains
the equity method investment.

Additionally,
the amendments in this pronouncement clarify that the sale of an investment in a foreign entity includes both: (1) events that result in the loss of a controlling
financial interest in a foreign entity (i.e., irrespective of any retained investment); and (2) events that result in an acquirer obtaining control of an acquiree in which it held an
equity interest immediately before the acquisition date (sometimes also referred to as a step acquisition). Accordingly, the cumulative translation adjustment should be released into net income upon
the occurrence of those events. The amendments in this pronouncement are effective prospectively for fiscal years (and interim reporting periods within those years) beginning after
December 15, 2013. The amendments should be applied prospectively to derecognition events occurring after the effective date. Prior periods should not be adjusted. The Group will adopt this
pronouncement on January 1, 2014 which is not expected to have a significant impact on its financial condition or results of operations.

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BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

3. ACQUISITION

On
April 23, 2010, the Group, through Bona Film and Culture, acquired Beijing Bona International Cineplex Investment & Management Co., Ltd. ("Beijing Bona
Cineplex"), a PRC based company which holds three subsidiaries and focuses on cineplex business in the PRC. Beijing Bona Cineplex holds 60% of the equity of one of the subsidiaries, Shanghai Bona
Yinxing Cinema Development Co., Ltd., and 100% of the equity of the other two subsidiaries. At the same time, the Group acquired Beijing Bona Youtang Cineplex
Management Co., Ltd. ("Bona Youtang"), which also focuses on cineplex business in the PRC. Both Beijing Bona Cineplex and Bona Youtang were owned by Skillgreat Limited, which is 100%
owned by the Group's primary shareholder, Mr. Dong Yu. The total consideration comprised of 5,810,320 ordinary shares of the Company with a fair value of $4.50 per share as of the
acquisition date, which were issued to Skillgreat Limited in 2010 and cash of $5,337,243 which was settled as an offset against the amount that the Company was owed by Mr. Dong Yu. The
acquisition-related transaction costs of $20,000 were expensed as general and administrative expenses when incurred.

The
fair value of the Company's ordinary shares as of the date of acquisition was estimated by management with the assistance of American Appraisal China Limited, an independent valuer.
The discounted cash flow method of the income approach was used to assess the fair value of the Company's ordinary shares as of the date of acquisition. The determination of the fair value of the
Company's ordinary shares requires complex and subjective judgments to be made regarding the Company's projected financial and operating results, unique business risks, the liquidity of the ordinary
shares, and operating history and prospects at the time of valuation.

The
major assumptions used in calculating the fair value of ordinary shares as of the date of acquisition of $4.50 per ordinary share included:

Weighted average cost of capital, or WACC


22%Discount for lack of marketability, or DLOM


16%


The income approach involves applying appropriate discount rates to estimated cash flows that are based on earnings forecasts. The assumptions
used in deriving the fair values are consistent with the Company's business plan. These assumptions include: no material changes in the existing political, legal and economic conditions in China; the
Company's ability to retain competent management, key personnel and staff to support its ongoing operations; and no material deviation in market conditions from economic forecasts. These assumptions
are inherently uncertain. The risk associated with achieving the Company's forecasts were assessed in selecting the appropriate discount rates.

The
acquisitions were completed in April 2010 and the results of Beijing Bona Cineplex and Bona Youtang have been included in the Group's consolidated financial statements since
the acquisition date. A net revenue of $11,333,193 and a net income of $388,985 generated by the acquired movie theaters after the acquisition date were included in the Group's consolidated financial
statements for the year ended December 31, 2010.

The
Group has accounted for these transactions as an acquisition and not as a reorganization of entities under common control. Pursuant to the Company's articles of association, the
following matters

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BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

3. ACQUISITION  continued

among
others need to be approved by the Series A preferred shareholders: (1) the adoption of the annual budget of any of the Company's subsidiaries or affiliated entities; (2) the
appointment or removal or settlement of the terms of appointment of any senior manager (including any chief financial officer, chief operating officer or chief technology officer) of any of the
Company's subsidiaries or affiliated entities; (3) approval, or making adjustment or modifications to the terms of transactions involving the interest of any director, shareholder or related
party any of the Company's subsidiaries or affiliated entities, including but not limited to the making of any loans or advances, whether directly or indirectly, or the provision of any guarantee,
indemnity or security for or in connection with any indebtedness of liabilities of any director or shareholder of any of the Company's subsidiaries or affiliated entities. In July 2009, upon
the issuance of Series B preferred shares, the Series B shareholders had the same rights. These rights allow the noncontrolling shareholders to participate in decisions that relate to
the ordinary course of the Company's business and prevent the majority ordinary shareholder, Mr. Yu, from exercising control over the Company's operating and financial policy decisions. As a
consequence, Mr. Dong Yu lost control of the Company upon the issuance of Series A preferred shares in July 2007.

Total purchase price:Cash consideration


5,337,243Fair value of shares issued


26,123,19431,460,437




Estimated
useful lifeCash and cash equivalents


1,483,252Inventory


93,832Current liabilities


(10,661,554
)Property and equipment, net


12,714,8666 movie theater licenses


1,911,290

IndefiniteMembership


58,651

1.8 yearsFavorable lease


557,185

2 yearsNon-current deferred tax liability


(153,959
)Total net assets acquired


6,003,563Noncontrolling interests


(2,071,408
)Goodwill


27,528,282


In the acquisition, the Group determined the fair value and useful life of the intangible assets acquired based on
the following:



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BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

3. ACQUISITION  continued



The
goodwill is mainly attributable to intangible assets that cannot be recognized separately as identifiable assets under U.S. GAAP, and comprise (a) group of customers
(most movie theater customers are walk-in) that are not known or identifiable to Beijing Bona Cineplex and Bona Youtang; (b) presence in geographic market and locations. The
acquired goodwill is not deductible for tax purposes.

On
July 28, 2010, to further expand the Group's talent agency business the Group through Bona Film and Culture acquired the remaining 60% equity interest of Beijing Bona Yinglong
Culture Agency Company Ltd. ("Bona Yinglong", has been renamed to Beijing Bona Xingyi Culture Agency Company Ltd.) with a total cash consideration of $442,804 (equivalent to
RMB3 million) paid in 2010. After the acquisition, it became a 100% consolidated VIE's subsidiary of the Group. A net revenue of

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BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

3. ACQUISITION  continued

nil
and a net loss of $1,242 generated by Bona Yinglong after the acquisition date were included in the Group's consolidated financial statements for the year ended December 31, 2010.

The
purchase price allocation of the transaction was determined by the Group, and the following table summarizes the fair values of the assets acquired and liabilities assumed at the
date of acquisition.

Total purchase price:Cash consideration


442,804Fair value of investment in Yinglong


203,130645,934Cash and cash equivalents


738,014Other receivable


6,839Current liabilities


(230,309
)Total net assets acquired


514,544Goodwill


131,390


On
November 22, 2010, the Group acquired the remaining 10% equity interest in Baichuan with a total cash consideration of $762,098 (equivalent to RMB 5,061,400) which resulted in
an increase of $683,434 in additional paid-in capital and after the acquisition, it became a 100% consolidated VIE of the Group.

On
July 1, 2011, the Group, through the Company and Beijing Bona Cineplex, acquired Alpha Speed Limited, a BVI company and Bona Starlight, a PRC company which holds five
subsidiaries and focuses on cineplex business in the PRC with a total cash consideration of $30,938,201, of which $3,064,993 was settled as an offset against the amount that the Group was owed by
Mr. Dong Yu and $2,383,260 was paid in 2012. Prior to the acquisition, Alpha Speed Limited was 51% owned by Skill Great Limited, which is 100% owned by the Group's primary shareholder,
Mr. Dong Yu, and Bona Startlight was also 51% owned by the Group's primary shareholder, Mr. Dong Yu. After the acquisition, The Group holds 100% of the equity interest of
Alpha Speed Limited and Bona Starlight, which holds 51% of the equity of one of the subsidiaries, Mangguo Cinema, and 100% of the equity of the other four subsidiaries.

The
Group has accounted for these transactions as a business acquisition. A net revenue of $5,207,607 and a net loss of $2,286,838 generated by the acquired movie theaters after the
acquisition date were included in the Group's consolidated financial statements for the year ended December 31, 2011.

The
following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:

Total purchase price:Cash consideration


30,938,201


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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

3. ACQUISITION  continued

Estimated
useful lifeCash and cash equivalents


1,379,343Net current liabilities


(7,912,067
)Construction in Progress


1,831,707Property and equipment, net


16,758,4004 movie theater licenses


417,666

IndefiniteFavorable lease


1,902,699

1-4.5 yearsNon-current deferred tax liability


(475,675
)Total net assets acquired


13,902,073Noncontrolling interests


(1,160,492
)Goodwill


18,196,620


In the acquisition, the Group determined the fair value and useful life of the intangible assets acquired based on
the following:



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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

3. ACQUISITION  continued

The
goodwill is mainly attributable to intangible assets that cannot be recognized separately as identifiable assets under U.S. GAAP, and comprise (a) group of customers
(most movie theater customers are walk-in) that are not known or identifiable to Bona Starlight; (b) presence in geographic market and locations. The acquired goodwill is not
deductible for tax purposes.

4. ACCOUNTS RECEIVABLES

Net accounts receivable consists of the following as of December 31, 2011 and 2012:

December 31,2011

2012Accounts receivable


42,340,033


41,045,413Allowance for doubtful accountsBeginning balance as of January 1


22,727


697,246Reversal of allowance against profit and loss





(317
)Additional allowance during the year


673,414


33,596Exchange effect


1,105


7,216Less: ending balance of allowance for doubtful accounts


697,246


737,741Accounts receivable, net


41,642,787


40,307,672


As
the Group generally does not have credit risk in movie theaters box office sales, allowance for doubtful accounts primarily relates to accounts receivable from film licensing
revenues, advertising and talent agency services.

5. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following at:

December 31,2011

2012Amounts due from third parties


5,690,605


4,050,954Prepaid film costs on behalf of other investors


6,370,486


7,491,375Prepaid film costs


1,319,074


2,844,172Deposits paid for acquisition of property and equipment


2,478,320


248,975Rental deposits and prepaid rental expenses


2,667,121


3,221,226Loans and interest receivable from producers of TV series and films


1,811,278


2,515,208Promotion and print costs paid on behalf of film producers


2,264,984


744,561Advances to employees


849,191


733,430Prepaid advertising expenses


1,122,180


770,760Prepaid business tax


447,514


90,468Interests receivable


171,861


52,034Prepayment for an investment


1,200,000


Deposit for acquisition


317,768


Other prepaid expenses


624,966


566,099Total


27,335,348


23,329,262


F-38

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

5. PREPAID EXPENSES AND OTHER CURRENT ASSETS  continued

Amounts
due from third parties represent receivables from third parties for working capitals and expenses the Group paid on behalf of an independent third party. Prepaid film costs on
behalf of other investors represent amounts paid for film production which will be reimbursed from other co-investors. Prepaid film costs represent amounts paid to secure the service of
individuals to be the directors or actors or actresses of films over the next year. Prepaid film costs will be included in the production cost and amortized on a film-by-film
basis upon the completion of related films. Loans and interest receivables from producers of TV series and films represent the Group's investments in TV series and films, which currently have fixed
rate of returns. Deposit for acquisition is the deposit paid in November 2010 for acquiring the remaining 10% equity interest in Baichuan from Poly Film Investment Co., Ltd. and
was returned in 2012.

6. DISTRIBUTION RIGHTS

2011

2012Released:Beginning balance as of January 1


850,155


291,043Addition


1,744,977


2,985,347Amortization


(2,331,266
)

(2,792,844
)Exchange difference


27,177


3,811Ending balance as December 31


291,043


487,357In production and not released


3,372,923


10,919,335Total


3,663,966


11,406,692


In
the year 2012, based on the economic performance and public acceptance of the films, the management decreased the estimate of the ultimate oversea revenue expected to be realized for
certain TV series, as a result, the Group incurred additional amortization of $120,223 for the year ended December 31, 2012. The portion of the costs of the completed films that are expected to
be amortized during the twelve months after December 31, 2012 is $441,915, and the Group expects to amortize 100% of such costs within three years from December 31, 2012.

The
Group evaluates its distribution rights on a title-by-title basis to determine whether the unamortized capitalized costs of any titles have a fair value that
is less than its carrying value at least annually or whenever events or changes in circumstances indicate that the carrying amount of the distribution rights may be impaired. The Group has had no
impairment loss recorded on the distribution rights.

F-39

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

7. PRODUCTION COSTS

2011

2012Beginning balance for completed films as of January 1


7,714,809


28,825,639Addition


57,705,841


49,918,921Amortization


(37,116,065
)

(41,774,480
)Impairment loss





(2,280,198
)Exchange difference


521,054


21,734Subtotal for completed films


28,825,639


34,711,616Beginning balance for films in production and not released as of January 1


57,101,069


41,019,183Addition


40,236,802


64,466,725Transfer to completed films


(57,705,841
)

(49,918,921
)Exchange difference


1,387,153


66,806Subtotal for films in production and not released


41,019,183


55,633,793Ending balance as December 31


69,844,822


90,345,409


In
the year 2012, based on the economic performance and public acceptance of the films, the management decreased the estimate of the ultimate oversea revenue expected to be realized for
certain films and TV series. As a result, the Group incurred additional amortization of $3,659,240 for the year ended December 31, 2012. The portion of the costs of the completed films that are
expected to be amortized during the twelve months after December 31, 2012 is $18,040,174, and the Group expects to amortize 80% of such costs within three years from
December 31, 2012.

The
Group evaluates its production costs on a title-by-title basis to determine whether the unamortized capitalized costs of any titles have a fair value that is
less than its carrying value at least annually or whenever events or changes in circumstances indicate that the carrying amount of the production costs may be impaired. No impairment loss was recorded
in 2010 and 2011. In 2012, as a result of lower-than-expected revenue performance of certain films and TV series, the Group determined the unamortized production costs were
impaired by $2,280,198. Key assumptions used in the fair value measurement were discount rates ranging from 15% to 16% and estimated remaining cash flows over a period of 10 years from a
title's initial release. A change in the discount rate of 1.0% would change the impairment loss measurement by $51,349.

F-40

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

8. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following at:

December 31,2011

2012Film projection equipment


14,326,138


24,841,457Furniture and office equipment


1,153,175


1,668,538Transportation equipment


670,068


761,874Leasehold improvements


26,015,895


41,664,49542,165,276


68,936,364Less: accumulated depreciation


(5,113,981
)

(8,766,890
)37,051,295


60,169,474Construction in progress


3,157,152


39,135Property and equipment, net


40,208,447


60,208,609


Depreciation
expense for the years ended December 31, 2010, 2011 and 2012 was $840,677, $2,032,836 and $3,555,734, respectively.

9. COST METHOD INVESTMENTS

In April 2008, the Group invested $28,565 for 16.67% of equity interest in Wuhan Lianzhong Digital Film Technology Co., Ltd. ("Wuhan Lianzhong"), a company
established in the PRC that is mainly engaged in digital film production and distribution. In October 2011, the Group invested $62,909 for 10% of equity interest in Zhongda Helian Marketing
Consulting Co., Ltd. ("Zhongda Helian"), a company established in the PRC that is mainly engaged in economic and trade advisory. In January 2012, the Group invested $1,200,000 for
15.67% of equity interest in China Lion Entertainment Limited ("China Lion"), a company established in the United States that is mainly engaged in film distribution in North America. The
investments are accounted for using the cost method of accounting as the Group has no significant influence over the operation of Wuhan Lianzhong, Zhongda Helian, and China Lion. There was no
impairment of the cost method investment recognized for the years ended December 31, 2010, 2011 and 2012.

F-41

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

10. INVESTMENT IN EQUITY AFFILIATES

The Group's equity method investees include:

Investee

Amount
invested

Legal
ownership

Date
invested

BusinessWisdom Sea Group Limited (BVI)(1)

$
4


40%


January 2008

Shell companyBeijing Bona Yinglong Culture Agency Company Limited ("Bona Yinglong")(2)

$
289,737


40%


June 2008

Artist agencyBeijing Bona Meitao Culture and Media Company Limited ("Bona Meitao")(3)

$
573,235


51%


June 2008

Artist agency, film and television and television content production


(1)Wisdom
Sea Group Limited was dissolved in July 2010.(2)In
July 2010, Bona Film and Culture acquired the remaining 60% equity shares of Bona Yinglong with consideration of $440,736 (equivalent to
RMB3 million). As a result, Bona Yinglong became a subsidiary of the Group, and is consolidated in the consolidated financial statements starting from the year ended December 31, 2010.
The fair value of the investment in 40% equity interest as of the acquisition date of the remaining 60% equity interest approximated its carry amount, and therefore, no remeasurement gains or losses
were recognized in earnings.(3)As
51% shareholder, the Group is entitled to nominate three out of five board members of Bona Meitao. However any significant board resolutions related to
operating and financing activities of Bona Meitao need two-third board members' approval. The Group concludes it does not have control over Bona Meitao, and has accounted for this
investment on the equity basis. The Group disposed the equity of Bona Meitao in April 2012 for cash consideration of $55,020. A loss on disposal of $5,584 is recognized in the year ended
December 31, 2012.


The Group's share of the equity method investees' profit or loss and distributions in 2011 and 2012 are as below:

Bona MeitaoBalance as of January 1, 2011


231,854Share of profit for the year ended December 31, 2011


3,062Distribution


(185,712
)Exchange difference


6,136Balance as of December 31, 2011


55,340Share of profit for the year ended December 31, 2012


5,604Disposal


(60,604
)Exchange difference


(340
)Balance as of December 31, 2012





F-42

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

11. ACQUIRED INTANGIBLE ASSETS, NET

The Group's acquired intangible assets were generated from the acquisition of 100% equity interest in Beijing Bona Cineplex on April 23, 2010 and Alpha Speed Limited and Bona
Starlight on July 1, 2011 (Note 3). Acquired intangible assets, net consist of the following:

December 31,2011

2012Gross
carrying
amount

Accumulated
amortization

Exchange
difference

Net
carrying
amount

Gross
carrying
amount

Accumulated
amortization

Exchange
difference

Net
carrying
amountAcquired intangible assets with definite livesMembership


58,651


(57,022
)




1,629


58,651


(58,651
)




Favorable lease


2,459,884


(855,482
)

46,844


1,651,246


2,459,884


(1,668,799
)

53,726


844,811Total intangible assets with definite lives


2,518,535


(912,504
)

46,844


1,652,875


2,518,535


(1,727,450
)

53,726


844,811Acquired intangible assets with indefinite livesMovie theater licenses


2,328,956





11,321


2,340,277


2,328,956





15,714


2,344,670Total


4,847,491


(912,504
)

58,165


3,993,152


4,847,491


(1,727,450
)

69,440


3,189,481


The amortization expenses for the years ended December 31, 2010, 2011 and 2012 were $233,382, $679,122 and $814,945 respectively. The Group
expects to record amortization expenses of $752,984 and $91,827 for the years ended December 31, 2013 and 2014, respectively. The Group has had no impairment losses recorded on acquired
intangible assets.

12. GOODWILL

Changes in the carrying amount of goodwill by reporting units, which are the same as reportable segments, for the years ended December 31, 2011 and 2012 were as follows:

Film
distribution

Film
production

Talent
agency

Movie
theaters

TotalGross balance as of January 1, 2011





34,765


134,873


28,366,772


28,536,410Goodwill acquired during the period











18,196,620


18,196,620Exchange difference due to translation





66


6,560


1,872,831


1,879,457Gross goodwill carrying amount





34,831


141,433


48,436,223


48,612,487Less: accumulated impairment of goodwill














Net goodwill carrying amount at December 31, 2011





34,831


141,433


48,436,223


48,612,487Gross balance as of December 31, 2011





34,831


141,433


48,436,223


48,612,487Exchange difference due to translation





69


1,448


496,017


497,534Gross goodwill carrying amount





34,900


142,881


48,932,240


49,110,021Less: accumulated impairment of goodwill














Net goodwill carrying amount at December 31, 2012





34,900


142,881


48,932,240


49,110,021


F-43

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

12. GOODWILL  continued

The
Group performed its annual goodwill impairment tests on December 31 of each year and has not recorded any impairment loss of goodwill. In the goodwill impairment test, the
Group used the income approach, which it believed to be more reliable than the market approach in determining the fair value of the Group's reporting unit. Accordingly, it adopted a discounted cash
flow method under the income approach, which considers a number of factors that include expected future cash flows, growth rates and discount rates and requires the Group to make certain assumptions
and estimates regarding industry economic factors and future profitability of its reporting unit. The assumptions are inherently uncertain and subjective. The cash flow projections were based on
five-year financial forecasts developed by management that included revenue projections, capital spending trends, and investments in working capital to support anticipated
revenue growth. The Group has had no impairment losses recorded on goodwill.

13. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following at:

December 31,2011

2012Advance from customers


16,369,726


9,564,598Payables for rental expenses


4,348,253


6,740,257Business taxes and other tax payable


1,457,394


3,488,952Payable of distribution and promotion fee





1,800,597Other accounts payable to third parties


571,292


1,787,963Payable of advertising fee





1,765,970Accrued payroll, welfare and other social expenses


1,198,252


1,575,937Accrued professional fee


832,368


814,966Payable of production fee





525,603Advance from third parties


79,442


80,256Payables for acquisition of Alpha Speed Limited and Bona Starlight


2,383,260


Total


27,239,987


28,145,099


Advance
from customers represents upfront payments received from customers for licensing fees. Other accounts payable to third parties primarily represents payables to other suppliers.
Payables for rental expenses represent rental expense payable for cinemas. Accrued payroll, welfare and other social expenses represent the payments of miscellaneous welfare expense, pension, and
other social insurance to employees of the Group. Accrued professional fee mainly represents amounts payable to auditors and lawyers for professional services.

14. BANK BORROWINGS

In March 2010, the Group borrowed a bank loan with a principal of $544,758 (equivalent of RMB3.7 million) from a PRC commercial bank. The loan was repaid in
March 2011. The annual interest rate is 6.37%. Mr. Dong Yu pledged his personal property for this loan.

F-44

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

14. BANK BORROWINGS  continued

During
May to December 2010, the Group borrowed bank loans with a total principal of $22,303,808 (equivalent of RMB151.3 million) from two PRC commercial banks on the
condition that the loans would be invested in six specific films. These loans were fully repaid in 2011. The annual interest rate is from 5.94% to 6.97% and from 5.94% to 7.27% for the year ended
December 31, 2010 and 2011, respectively. The loans were repaid on a first priority basis with the box office receipts from such films and personally guaranteed by the Company's principal
shareholder, Mr. Dong Yu.

During
January to February 2011, the Group borrowed bank loans with a total principal of $2,584,254 (equivalent of RMB17 million) from a PRC commercial bank on the
condition that the loans would be invested in a film. These loans were repaid in January and February 2012. The annual interest rate is from 6.97% to 7.87%. The loans were repaid on a first
priority basis with the box office receipts from such film and personally guaranteed by the Company's principal shareholder, Mr. Dong Yu.

In
May 2011, the Group borrowed a bank loan with a principal of $3,077,586 (equivalent of RMB20 million) from a PRC commercial bank on the condition that the loan would be
used for building cineplex. The loan was repaid in May 2012. The annual interest rate is from 6.31% to 6.56%. The loan is guaranteed by the Bona Culture and $4 million of the Company's
term deposit.

In
August 2011, the Group borrowed a bank loan with a principal of $4,676,175 (equivalent of RMB30 million) from a PRC commercial bank on the condition that the loan would
be invested in a film. $31,454 (equivalent of RMB0.2 million) of the loan was repaid in December 2011, and the remaining amount was repaid in April 2012. The annual interest rate
is 7.32%. The loan was repaid on a first priority basis with the box office receipts from such film and guaranteed by the Company's principal shareholder, Mr. Dong Yu, and Zhejiang Bona.

In
December 2011, the Group borrowed a bank loan with a principal of $1,887,267 (equivalent of RMB12 million) from a PRC commercial bank on the condition that the loan
would be invested in a TV series. The loan was repaid in December 2012. The annual interest rate is 7.87%. The loan is guaranteed by the Company's principal shareholder, Mr. Dong Yu,
Zhejiang Bona and Beijing Bona Cineplex.

During
March to September 2011, the Group borrowed bank loans with a total principal of $77,152 (equivalent of RMB0.5 million) from PRC commercial banks on the condition
that the loans would be used for daily operation. These loans were all repaid by October 11, 2011. The annual interest rate is from 6.44% to 6.71%.

In
January 2012, the Group borrowed a bank loan with a principal of $3,170,678 (equivalent of RMB20 million) from a PRC commercial bank on the condition that the loan would
be invested in a TV series. The loan was repaid in December 2012. The annual interest rate is 7.87%. The loan was guaranteed by the Company's principal shareholder, Mr. Dong Yu, Zhejiang
Bona and Beijing Bona Cineplex.

During
January and February 2012, the Group borrowed a bank loan with a principal of $976,922 (equivalent of RMB6,162,226) from a PRC commercial bank on the condition that the
loan would be paid for the selling and marketing expenses of a specific film. The loan was repaid in April, 2012. The annual interest rate is 6.71%. The loan is guaranteed by the Company's principal
shareholder, Mr. Dong Yu and Bona Film.

F-45

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

14. BANK BORROWINGS  continued

In
June 2012, the Group borrowed a bank loan with a principal of $16,990(equivalent of RMB107,557) from a PRC commercial bank on the condition that the loan would be paid for the
selling and marketing expenses of a specific film. The loan was repaid in July 2012. The annual interest rate is 6.44%. The loan is guaranteed by the Company's principal shareholder,
Mr. Dong Yu and Bona Film.

In
July 2012, the Group borrowed a bank loan with a principal of $7,872,032 (equivalent of RMB50 million) from a PRC commercial bank on the condition that the loan would be
invested in a specific film. The loan is due on July 25, 2013. The annual interest rate is 7.20%. The loan is guaranteed by the Company's principal shareholder, Mr. Dong Yu, Zhejiang
Bona and Beijing Bona Cineplex.

During
August and September 2012, the Group borrowed two bank loans with a total principal of $8,930,000 from a overseas commercial bank on the condition that the loan would be
used for US dollar settlement. The annual interest rate is 3.18% and 3.19%, respectively. The loans are guaranteed by $9,446,439 (equivalent of RMB60 million) of the Company's term
deposit. The Company repaid $4.465 million in December 2012. The remaining amount of the loan is due on September 7, 2013.

During
November to December 2012, the Group borrowed a bank loan with a principal of $8,008,072 (equivalent of RMB50 million) from a PRC commercial bank on the condition
that the loan would be invested in a film. The annual interest rate is 6.15%. The loan is guaranteed by the Company's principal shareholder, Mr. Dong Yu and Zhejiang Bona.

In
December 2012, the Group borrowed a bank loan with a principal of $10,000,000 from an overseas commercial bank. The annual interest rate is 3.5%. The loan is secured and is
guaranteed by Bona International. The Group agreed to certain financial covenants (among other covenants), including to maintain minimum cash assets of $5.0 million at all times during the term
of the loan, as well as to maintain a ratio of maximum total funded debt to earnings before interest, tax, depreciation and amortization ("the "EBITDA Ratio") no greater than 3.8:1
(the "EBITDA Ratio Covenant") and a ratio of total liabilities to tangible net worth of no more than 2:1, in each case calculated using average quarterly figures based on the consolidated
balance sheets of the Group for the most recent four quarters. Any failure to comply with such financial covenants (among other things) would constitute an event of default under the agreement. If the
Group fails to timely remedy a curable event of default within the applicable cure period or obtain a waiver, the bank would have the right to accelerate the loan and charge a default rate of
interest. Based on the average EBITDA Ratios for the four quarters ended December 31, 2012, which was 4.32, the Group was not in compliance with the EBITDA Ratio covenant, and this
noncompliance constituted an event of default under the terms of the loan agreement. The bank has waived the event of default as of December 31, 2012 and March 31, 2013, and the Group
does not expect the repayment of the loan will be accelerated within the 12 months following December 31, 2012. As a result, the loan is classified as long-term liability as
of December 31, 2012.

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

14. BANK BORROWINGS  continued

Changes
in the balances of bank borrowings for the years ended December 31, 2011 and 2012 are as follows.

2011

2012Beginning balances as of January 1


22,012,560


12,561,806Additional bank borrowings


12,302,434


38,974,694Accrued interest


1,376,547


976,738Payments of principal during the year


(22,566,691
)

(21,142,272
)Payments of interest during the year


(1,379,854
)

(967,100
)Exchange difference


816,810


163,848Ending balances as of December 31


12,561,806


30,567,714


Interest
expenses accrued for loans were $592,349, $1,376,547 and $976,738 for years ended December 31, 2010, 2011 and 2012, respectively, in which $403,795, $1,081,178 and
$586,841 were capitalized to production costs as of December 31, 2010, 2011 and 2012, respectively.

15. OTHER BORROWINGS

In June 2010, the Company entered into a film financing agreement with a third party investor. Under the agreement, the investor invested $1,175,295 (equivalent of
RMB8 million) and the Company guaranteed a return of 10% on the investment. The Group accrued an interest of $54,298 and $57,676 on this borrowing for the year ended December 31, 2010
and 2011, respectively using the effective interest rate of 10%. The loan and related interest was fully repaid in June 2011.

In
December 2010, the Group entered into a film financing agreement with a third party investor. Under the agreement, the investor paid $167,504 (equivalent of RMB1,115,075) to
invest in production of a film and the investor will share the awards bonus related to the film with the Company as the investment return. There is no interest on this borrowing in 2011.

The
Company also entered into two similar agreements with other investors in October 2011. Under the agreements, the investors paid a total amount of $1,572,723 (equivalent of
RMB10 million) to invest in production of a TV series for one-year term. The Group guaranteed a return of 15% to 20% on the investment and accrued interest of $64,984 and $211,236 on this
borrowing in 2011 and 2012, respectively.

The
Company entered into two similar agreements with other investors in March 2012 and May 2012. Under the agreements, the investors paid a total amount of $3,001,343
(equivalent of RMB19 million) to invest in production of a TV series, which shall be repaid by the Company within one year. The Group guaranteed a return of 15% on the investment. The Group
accrued an interest of $278,499 on this borrowing for the year ended December 31, 2012.

In
September 2012, the Company entered into a film financing agreement with a third party investor. Under the agreement, the investor invested $3,148,813 (equivalent of
RMB20 million) and the

F-47

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

15. OTHER BORROWINGS  continued

Company
guaranteed a return of 8% on the investment with one-year term. The Group accrued an interest of $64,065 on this borrowing for the year ended December 31, 2012.

Changes
in the balances of other borrowings for the years ended December 31, 2011 and 2012 are as follows.

2011

2012Beginning balance as of January 1


1,445,150


1,831,658Received from investors


1,572,723


6,150,156Accrued interest


122,660


553,800Payments of principal made during the year


(1,231,034
)

Payments of interest made during the year


(123,103
)

Exchange difference


45,262


135,436Ending balances as of December 31


1,831,658


8,671,050


Interest
expenses accrued for the other borrowing were $271,654, $122,660 and $553,800 for years ended December 31, 2010, 2011 and 2012, respectively, in which $50,740, $64,984
and $549,841 were capitalized to production costs as of December 31, 2010, 2011 and 2012, respectively.

16. FILM PARTICIPATION FINANCING LIABILITIES

In the film production financing arrangements, the initial participation amounts provided by the third party investor for a fixed percentage of the film's worldwide net income of the
invested film for 10 years from the initial exhibition of the film in the mainland China, and the amounts are reflected as a film participation liability. A film's worldwide net income is
defined as the film's distribution revenue, less promotion and print costs, and distribution fees. The difference between the ultimate film participation expenses expected to be paid to participants
and the amount provided by participants is amortized as a charge to or a reduction of film participation expense under the individual film-forecast method.

The
table below summarizes the movement of film participation financing liabilities:

2011

2012Beginning balance as of January 1


16,516,169


16,224,219Received from participants


3,998,964


293,288Film participation expenses


321,100


438,636Payments made during the year


(5,093,722
)

(1,643,112
)Withholding tax


(118,721
)

(44,391
)Exchange difference


600,429


(181,748
)Ending balances as of December 31


16,224,219


15,086,892


F-48

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

16. FILM PARTICIPATION FINANCING LIABILITIES  continued

Film
participation expenses accrued for the years ended December 31, 2010, 2011 and 2012 were $696,101, $321,100 and $438,636, respectively.

Payments
made during the year ended December 31, 2011 included film participation expenses of $244,399 and principal of $4,849,323. Payments made during the year ended
December 31, 2012 included film participation expenses of $132,223 and principal of $1,510,889. The Group expects to pay $15,086,892 of the film participation financing liabilities during the
twelve months after December 31, 2012.

17. INCOME TAXES

The current and deferred components of income tax expenses (benefits) are as follows:

For the years ended December 31,2010

2011

2012Income taxes expenses/(benefits):CurrentPRC


64,453


462,022


2,279,819Hong Kong


91,966


99,884


153,311DeferredPRC


(65,366
)

(88,364
)

(1,110,762
)91,053


473,542


1,322,368


Cayman Islands

The Company is a tax-exempt entity incorporated in the Cayman Islands.

British Virgin Islands

Under the current BVI law, income from Bona International is not subject to taxation.

Hong Kong

Hong Kong adopts a territorial source principle of taxation. Only profits sourced in Hong Kong are taxable and those sourced elsewhere
are not subject to Hong Kong Profits Tax. Provision of $91,966, $99,884 and $153,311 for Hong Kong Profits Tax were made for the years ended December 31, 2010, 2011 and 2012 at the Hong Kong
profit tax rate of 16.5%, respectively.

PRC

The enterprise income tax ("EIT") law applies a uniform 25% EIT rate to both foreign invested enterprises and domestic enterprises. The
EIT rate for the Group's entities operating in the PRC was 25% with the following exceptions.

F-49

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

17. INCOME TAXES  continued

Zhejiang
Bona was established in Zhejiang in December 2008 as a cultural enterprise and it was exempted from income tax for the years of 2009, 2010 and 2011 pursuant to an
approval by the relevant local tax authority in June 2009.

Xi'an
Huitong is established in the western regions of PRC. In 2011, Xi'an Huitong has obtained an approval from its local tax authority for a preferential tax rate of 15% effective from
2011 through 2020.

The
principle components of the Group's deferred income tax assets and liabilities are as follows:

December 31,2011

2012Deferred tax assetsAllowance for doubtful accounts


218,016


177,225Accrued Payroll


105,718


143,474Advertisement Fee





1,029Impairment of production cost





330,061Net operating losses carry forwards





393,366Less: valuation allowance


(308,037
)

(74,472
)Total current deferred tax assets


15,697


970,683Property and equipment


31,560


16,800ADR reimbursement


317,003


231,288Net operating loss carry forwards


2,373,502


2,774,644Less: valuation allowance


(2,401,395
)

(2,711,630
)Total non-current deferred tax assets


320,670


311,102Deferred tax liabilitiesAcquired intangible assets


413,219


211,203Total non-current deferred tax liabilities


413,219


211,203


The
Group had net operating losses of $10,497,931 and $10,735,545 from the Group's PRC and Hong Kong entities as of December 31, 2011 and 2012, respectively. The net operating
loss carry forwards generated by a particular entity in the Group cannot be transferred or utilized by other entities within the Group. As of December 31, 2011and 2012, valuation allowance was
$2,373,502 and $2,698,322, respectively, which were provided against deferred tax assets arising from net operating losses of certain PRC and Hong Kong entities due to the uncertainty
of realization.

The
net operating loss carry forwards for the Group's PRC entities as of December 31, 2012 will expire on various dates through 2017. The net operating loss generated by the
Group's Hong Kong entities as of December 31, 2012 will be carried forward permanently.

F-50

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

17. INCOME TAXES  continued

A
reconciliation between the provision for income tax computed by applying statutory PRC enterprise income tax rate of 25%, and the actual provision of income taxes is as follows:

For the years ended December 31,2010

2011

2012Net income (loss) before income tax provision


(4,143,261
)

15,042,856


(251,618
)Statutory tax rate in the PRC


25
%

25
%

25
%Income tax expense (benefit) at statutory tax rate in the PRC


(1,035,815
)

3,760,714


(62,905
)Non-deductible expenses


4,023,013


(296,707
)

87,516Effect of tax holidays and concessions


(3,245,281
)

(5,113,717
)

(388,904
)Effect of income tax rate difference in other jurisdictions


169,024


1,298,988


1,609,991Changes in valuation allowance


180,112


824,264


76,670Income tax expenses


91,053


473,542


1,322,368


If
the tax holidays and concessions primarily including tax exemption and preferential tax rate granted to Zhejiang Bona and Xi'an Huitong were not available, changes in provisions for
income taxes and net income per share would have been as follows:

For the years ended December 31,2010

2011

2012Changes in income tax expenses


3,245,281


5,113,717


388,904Decrease in net income (increase in net loss) per ordinary sharebasic


0.25


0.17


(0.01
)Decrease in net income (increase in net loss) per ordinary sharediluted


0.25


0.17


(0.01
)


There
are no ongoing examinations by taxing authorities at this time. Tax years of each of the Group's PRC entities from 2007 through 2012 remain subject to review and potential recourse
by the PRC tax authorities.

The
Group did not identify significant unrecognized tax benefits for the years ended December 31, 2010, 2011 and 2012. The Group did not incur any interest and penalties related
to potential underpaid income tax expenses and also does not anticipate any significant change in unrecognized tax benefits within 12 months from December 31, 2012.

Tax
uncertainties exist with respect to how the current income tax law in the PRC applies to the Group's overall operations, and more specifically, with regard to tax residency status.
The EIT Law includes a provision specifying that legal entities organized outside of the PRC will be considered residents for Chinese Income tax purposes if the place of effective management or
control is within the PRC. The implementation rules to the New EIT Law provide that non-resident legal entities will be

F-51

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

17. INCOME TAXES  continued

considered
PRC residents if substantial and overall management and control over the manufacturing and business operations, personnel, accounting and properties occurs within the PRC. On
April 22, 2009, the State Administration of Taxation (the "SAT") issued the Notice Regarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises as PRC Tax Resident
Enterprises on the Basis of De Facto Management Bodies, or Circular 82, which provides certain specific criteria for determining whether the "de facto management body" of a Chinese-controlled
offshore-incorporated enterprise is located in China. In addition, on August 3, 2011, the SAT issued a bulletin to made clarification in the areas of resident status determination,
post-determination administration, as well as competent tax authorities. The Group does not believe that the legal entities organized outside of the PRC within the Group should be treated
as residents for EIT law purposes. However, if the PRC tax authorities subsequently determine that the Company and its subsidiaries registered outside the PRC should be deemed resident enterprises,
the Company and its subsidiaries registered outside the PRC will be subject to the PRC income taxes, at a rate of 25%.

If
any entity within the Group that is outside the PRC were to be a non-resident for PRC tax purpose, dividends paid to it out of profits earned after January 1, 2008
would be subject to a withholding tax at a rate of 10%, subject to reduction by an applicable tax treaty with the PRC. Aggregate undistributed earnings of the Company's subsidiaries located in the PRC
that are available for distribution to the Company of approximately $39,476,170 as of December 31, 2012 are considered to be indefinitely reinvested under authoritative pronouncement, because
the Company does not have any present plan to pay any cash dividends on its ordinary shares in the foreseeable future and intends to retain most of its available funds and any future earnings for use
in the operation and expansion of its business. Accordingly, no provision has been made for the Chinese dividend withholding taxes that would be payable upon the distribution of those amounts to the
Company. Distributions made out of pre January 1, 2008 retained earnings will not be subject to the withholding tax.

Zhejiang
Bona, as a cultural enterprise, was exempted from income tax for the year of 2011 as approved by a local tax authority in June 2009. However, according to a notice issued
by the State Administration of Taxation, the tax exemptions for cultural enterprises were terminated on December 31, 2010. The Group has confirmed with the local tax authority that the tax
exemption approval obtained from them is legally valid and therefore the Group believes this tax exemption benefit is more likely than not to be sustained upon examination and did not recognize any
tax expense for Zhejiang Bona for 2011.

18. CONVERTIBLE REDEEMABLE PREFERRED SHARES

In July 2007, the Holders of the Convertible Notes converted $3,000,000 in principal and $21,499 in accrued interest into 1,171,875 shares of Series A convertible
redeemable preferred shares ("Series A preferred shares"). The Company also issued 1,953,125 shares of Series A preferred shares at $2.56 per share to the Holders for $5,000,000
of cash before issuance costs of $112,845.

In
July 2009, the Company issued a total of 2,897,897 Series B convertible redeemable preferred shares ("Series B preferred shares"), in which
1,241,958 shares of Series B-1 preferred shares at the price of $2.82 per share for a cash consideration of $3,500,000, and 1,655,939 shares of
Series B-2 preferred shares at the price of $3.62 per share for a cash consideration of $6,000,000, respectively. The issuance cost was $546,316.

F-52

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

18. CONVERTIBLE REDEEMABLE PREFERRED SHARES  continued

In
July 2010, the Company issued a total of 792,680 Series B-3 convertible redeemable preferred shares ("Series B-3 preferred shares")
at the price of $6.31 per share for a total cash consideration of $5,000,000.

In
December 2010, upon the completion of the Company's IPO, Each Series A convertible redeemable preferred shares had been automatically converted into
1.8421 ordinary shares and each Series B convertible redeemable preferred shares had been automatically converted into one ordinary share.

The
significant terms of the Series A and B preferred shares during the periods when they were outstanding are summarized as follows:

Voting rights

The Series A and B preferred shares voted together with the ordinary shares on an as-converted basis, and not
as a separate class.

Dividends

No dividend could be paid on ordinary shares at a rate greater than the rate at which dividends were paid on Series A
and B preferred shares. Series A and B preferred shares were participating securities.

Liquidation preference

In the event of any liquidation, dissolution or winding up of the Company, Series B preferred shareholders had preference to
Series A preferred shareholders. Out of the proceeds, Series B preferred shareholders would first receive an amount equal to 150% of Series B original issue price and all declared
but unpaid dividends, then Series A preferred shareholders would receive an amount equal to 150% of Series A original issue price and all declared but unpaid dividends. The remaining
balance of any proceeds would be distributed ratably among the holders of the ordinary shares and the holders of the Series A and B preferred shares (on an
as-converted basis).

Conversion



F-53

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

18. CONVERTIBLE REDEEMABLE PREFERRED SHARES  continued



Redemption rights

At any time on or after 48 months from July 2007 ("Maturity Date") or 48 months from the Series B original
issue date in the case of Series B preferred shares, and in the event that a Qualified IPO had not occurred prior to such date, the Series A or B preferred shares holders
had the right to request the Company to redeem all of the Series A or B preferred shares for an aggregate consideration, equal to the higher of: (i) 140% of the issuance price,
plus any declared but unpaid dividends, or (ii) the fair market value of the Series A or B preferred shares (exclusive of liquidity event, fire sale or minority ownership
discounts) as determined by an independent appraiser mutually agreeable to the Company and the lead investor.

Because
the redemption price of Series A preferred shares and Series B preferred shares was linked to the fair value of the underlying preferred shares, the conversion
feature was a derivative and required to be bifurcated from Series A preferred shares and Series B preferred shares, and recognized at fair value.

The
following table summarizes the bifurcated derivative liabilities at the issuance date of Series A and Series B preferred shares:

Derivative liabilitiesRelating to Series A preferred shares issuance on July 10, 2007


729,000Relating to Series B-1 and B-2 preferred shares issuance on July 7, 2009


301,000Relating to Series B-3 preferred shares issuance on July 26, 2010


476,000


Change
in fair value of $14,528,000 was recorded in the consolidated statements of operations for the year ended December 31, 2010.

F-54

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

18. CONVERTIBLE REDEEMABLE PREFERRED SHARES  continued

The
ability of holders to redeem Series A preferred shares and Series B preferred shares on or after July 2011 and July 2013, respectively, was contingent
upon a Qualified IPO not occurring in four years after issuance date of such shares. Because the exercise of the redemption rights was outside of the control of the Company, the Group deemed
redemption to be probable and was accreted the Series A preferred shares and Series B preferred shares to their redemption value. Management elected to recognize the change in the
redemption value over the period from the date of issuance to the earliest redemption date of the Series A preferred shares and Series B preferred shares using the effective interest
rate method. As a result, during the year ended December 31, 2010, the Group recognized $1,053,766 as deemed dividends on Series A preferred shares and $1,096,380 as deemed dividends on
Series B preferred shares, which reflects the accretion changes in redemption value assuming the redemption value is 140% of the issuance price.

19. FAIR VALUE MEASUREMENTS

There is no financial asset or liability measured at fair value on recurring basis as of December 31, 2011 and 2012.

Measured
at fair value on nonrecurring basis

The
Group measured fair value of assets and liabilities acquired in business acquisitions using various valuation methods, primarily consisting of the "cost,"
"income approachexcess earnings" and "with & without" valuation methods. These purchased assets and liabilities are considered Level 3 assets and liabilities because the
Company used unobservable inputs, reflecting the Company's assessment of the assumptions that market participants would use in valuing these assets and liabilities (Note 3).

The
Group measured the equity method investments and cost method investments at fair value on a nonrecurring basis when it wrote down the carrying amounts of the investments to their
fair value as a result of the impairment assessments (Note 9 and Note 10). The determination of fair value of the investment involves judgment as to the severity and duration of the
decline below fair value. The fair value was determined using models with significant unobservable inputs (Level 3 inputs), primarily the management estimation on the future performance of the
investees and the recoverability of the investment.

The
Group measured the intangible assets at fair value on a nonrecurring basis as results of the impairment assessment when the carrying amount of an asset may no longer be recoverable
(Note 11). The fair value was determined using models with significant unobservable inputs (Level 3 inputs), primarily the management projection on the discounted future cash flow and
the discount rate.

The
Group measured the goodwill at fair value on a nonrecurring basis when it is annually evaluated or whenever events or changes in circumstances indicate that carrying amount of a
reporting unit exceeds its fair value as a result of the impairment assessments (Note 12). The fair value was determined using models with significant unobservable inputs (Level 3
inputs), primarily the management projection on the discounted future cash flow and the discount rate.

F-55

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

20. GOVERNMENT SUBSIDIES

For the years ended December 31, 2010, 2011 and 2012, the Group received $88,147, $220,559, $3,866,700 of government subsidies, respectively, mainly include subsidy from a
government authority to encourage the Company's production in specific film and to encourage the Movie Theater. There is no limitation on the use of the subsidies and the receipt of such subsidies
does not subject the Group to any additional governmental regulations or future obligations. These amounts are recognized as subsidy income when received.

21. ORDINARY SHARES

In April 2010, the Company issued 5,810,320 ordinary shares with a fair value of $4.50 per share as part of the acquisition consideration of movie theaters
(Note 3(a)).

In
July 2010, the Company issued 317,072 ordinary shares to Mr. Jeffrey Chan for a total cash consideration of $2,000,000 due to the exercise of his options.

Upon
the completion of the Company's IPO in December 2010, 11,740,000 American Depositary Shares (representing 5,870,000 ordinary shares) were issued with proceeds
of US$89,245,119 (net of issuance cost of 3,559,581). At the same time, 3,175,631 Series A convertible redeemable preferred shares and 3,690,577 Series B convertible
redeemable preferred shares were automatically converted into 5,849,856 and 3,690,577 ordinary shares at the conversion ratio of 1:1.8421 and 1:1, respectively.

On
June 10, 2011, the Company issued a total of 1,052,865 ordinary shares which are held by a depositary bank for future delivery to the employees and
non-employees upon exercise of vested share options or vesting of nonvested shares granted. The issued ordinary shares are not considered as outstanding shares until they are delivered to
the employees or non-employees upon exercise of vested share options or vesting of nonvested shares granted. During the years ended December 31, 2011 and December 31, 2012,
39,608 and 348,168 ordinary shares out of such 1,052,865 shares had been delivered to the employees upon exercise of their share options. As a result, 1,013,257 and 665,089 issued
ordinary shares were excluded from the outstanding shares as of December 31, 2011 and December 31, 2012, respectively, and also were excluded from the computation of basic and
diluted EPS.

22. SHARE-BASED COMPENSATION

Options
to employees

On
June 1, 2009, the Group's board of directors approved the Bona Film Group Limited 2009 Stock Incentive Plan (the "2009 Plan"). The maximum
number of ordinary shares that may be granted under this plan is 209,163 shares. Upon the approval of the 2009 Plan, the Group granted 209,163 share options to purchase ordinary shares
to an officer and an employee on June 1, 2009. 69,721 options vested on the date of grant. The remaining options vest ratably over 32 months from the date of grant and are
exercisable up to 10 years from the date of grant. The exercise price is $3.36 per share. The estimated fair value of the options granted was $1.47 on the date of grant using the Binomial
option pricing model. A zero forfeiture rate was estimated.

F-56

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

22. SHARE-BASED COMPENSATION  continued

On
June 1, 2010, the Group's board of directors approved the Bona Film Group Limited 2010 Stock Incentive Plan (the "2010 Plan"). The maximum number of ordinary shares that
may be granted under this plan is 5,410,650 shares. Upon the approval of the 2010 Plan, the Group granted 324,245 share options to three officers of the Group, and 650,631 share
options to purchase ordinary shares to 49 employees on June 1, 2010. 35,671 options granted to one officer vested on the closing of the IPO of the Company. 5,615 options
granted to the officer vested on the date of grant, and 196,518 options granted to the officer vest ratably over 35 months from the date of grant. 14,117 options granted to the
other officers and employees vested on the date of grant, and the remaining 722,955 options vest ratably over 47 months from the date of grant. The contract life was 10 years from
the date of grant. The
exercise price was $3.44 or $6.31 per share. The weighted average grant-date fair value of options granted during 2010 was $2.26 per share. A zero forfeiture rate was estimated.

In
July 2010, the Group issued an option to Mr. Jeffrey Chan, the chief operation officer of the Group, to purchase a total of 317,072 ordinary shares at an exercise
price of $6.31 per share. The option could be exercised within five business days after the option issuance date. The fair value of the option was determined to be $616 which was recognized as
share-based compensation cost in July 2010. The option was exercised by Mr. Jeffrey Chan in July 2010.

In
March 2011, under the 2010 Plan, the Group granted 435,774 share options to an officer of the Group, 125,708 share options to an artist and 110,000 share
options to two independent directors of the Group with exercise prices of $6.31, $6.31 and $11.56, respectively. 236,687 options granted to the officer, the artist and two independent directors
vested on the date of grant, and the remaining 434,795 options vest ratably over the range from 20 to 22 months from the date of grant. The contract life was 10 years from the
date of grant. The weighted average grant-date fair value of options granted during 2011 was $6.97 per share. A zero forfeiture rate was estimated.

In
November 2011, under the 2010 Plan, the Group granted 135,000 share options to four independent directors of the Group, 150,000 share options to two directors of
the Group, and 289,000 share options to 34 employees with exercise prices of $8.62. 14,424 options vested on the date of grant, and the remaining 559,576 options vest
ratably over the range from 23 to 47 months. The contract life was 10 years from the date of grant. The weighted average grant-date fair value of options granted during 2011
was $4.13 per share. The forfeiture rate of 11.3% was estimated for the options granted to the 35 employees and a zero forfeiture rate was estimated for the rest options.

In
April 2012, under the 2010 Plan, the Group granted 950,000 share options to five officers and 100,000 share options to 9 employees with exercise prices of
$10.96. 28,472 options vested on the date of grant, and the remaining 1,021,528 options vest ratably over the range from 35 to 47 months. The contract life was 10 years
from the date of grant. The weighted average grant-date fair value of options granted during 2012 was $5.58 per share. The forfeiture rate of 11.3% was estimated for the options granted to
the 9 employees and a zero forfeiture rate was estimated for the rest options.

The
total intrinsic value of options exercised during the year ended December 31, 2010, 2011 and 2012 were $nil, $53,632 and $1,614,902, respectively.

F-57

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

22. SHARE-BASED COMPENSATION  continued

The
Group recognizes compensation cost on the options using the straight-line attribution method. Total share-based compensation cost recognized was $3,560,194 and $4,234,386
for the years ended 2011 and 2012, respectively.

Options
to non-employees

In
November 2011, under the 2010 Plan, the Group granted 470,000 to eight consultants with exercise prices of $8.62. 13,056 options vested on the
date of grant, and the remaining 456,944 options vest ratably over 35 months from the date of grant on a monthly basis. The contract life was 10 years from the date of grant. The
weighted average grant-date fair value of options granted during 2011 was $3.33 per share. A zero forfeiture rate was estimated. No option to non-employees was exercised for the
three years ended December 31, 2010, 2011, and 2012.

The
Group recognizes compensation cost on the options using the straight-line attribution method. Total share-based compensation cost recognized was nil, $86,950 and
568,778 for the years ended December 31, 2010, 2011 and 2012, respectively.

With
the assistance of American Appraisal China Limited, an independent valuer, the fair value of each option granted to employees was estimated on the date of grant and the fair value
of each option granted to non-employees was estimated on the date of vesting. The fair value of each option granted to employees and non-employees was determined using the
Binomial option pricing model with the following assumptions for the years ended December 31, 2010, 2011 and 2012:

June
2010

July
2010

March
2011

November
2011

December
2011

April
2012

December
2012Expected volatility(1)


44
%

44
%

44
%

44
%

44
%

43
%

42
%Risk-free interest rate(2)


4.36
%

1.26
%

2.89
%

2.78
%

2.77
%

2.73
%

2.08
%Expected dividend yield(3)


0
%

0
%

0
%

0
%

0
%

0
%

0
%Exercise multiple(4)


2.00


2.00


2.00 and 2.30


2.00


2.00


2.80


2.00Fair value of the underlying ordinary shares(5)


4.75


5.66


12.37


8.88


7.60


10.96


9.84


(1)Volatility The volatility of the underlying ordinary shares during the life of the options was estimated based on average historical volatility of listed comparable
companies for the period before the valuation date with lengths equal to the contractual life of the options. (2)Risk-free
interest rate
Risk
free interest rate is estimated based on the yield to maturity of PRC international government bonds with maturity term close to the contractual life of the options.(3)Dividend
yield
The
dividend yield was estimated by the Group based on its expected dividend policy over the contractual life of the options.


F-58

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

22. SHARE-BASED COMPENSATION  continued

(4)Exercise
multiple
Exercise
multiple represents the value of the underlying share as a multiple of exercise price of the option which, if achieved, results in exercise of the option. The exercise multiple of the options
was estimated based on empirical study conducted by the third party.(5)Fair
value of underlying ordinary shares
When
estimating the fair value of the ordinary shares on the grant dates before the Company's IPO, management has considered a number of factors, including the result of a third-party appraisal and
equity transactions of the Group, while taking into account standard valuation methods and the achievement of certain events. After the IPO, the closing market price of the Company's ordinary shares
as of the grant date was used as the fair value of the underlying ordinary shares on that date.


Summary of share options to employees and non-employees

A
summary of option activity, including grants to both employees and non-employees, under the 2009 Plan and 2010 Plan as of December 31,
2012, and the changes during the year then ended is presented below:

Options

Number of
share options

Weighted
average
exercise
price

Weighted
average
remaining
contractual life

Aggregate
intrinsic
valueOutstanding as of January 1, 2012


2,821,518


6.72


9.1


3,976,157Granted


1,050,000


10.96


9.3Exercised


(348,168
)

5.20


7.5Expired


(2,339
)

6.64


7.6Forfeited


(42,298
)

5.71


7.9Outstanding as at December 31, 2012


3,478,713


8.17


7.9


7,187,931Exercisable as at December 31, 2012


1,702,431


7.23


6.9


4,890,031Expected to vest at December 31, 2012


1,575,561


9.06


8.8


2,038,236


As
of December 31, 2012, there was $7,922,842 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the
2009 Plan and 2010 Plan. That cost is expected to be recognized over a weighted-average period of 1.67 years.

F-59

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

23. NET INCOME (LOSS) PER SHARE

The calculation of the net income (loss) per share is as follows:

For the years ended December 31,2010

2011

2012Numerator used in basic and diluted net income (loss) per share:Net income (loss) attributable to Bona Film Group Limited


(4,091,374
)

14,432,081


(1,283,882
)Deemed dividend on Series A convertible redeemable preferred shares


(1,053,766
)




Deemed dividend on Series B convertible redeemable preferred shares


(1,096,380
)




Net (loss) income attributable to ordinary shareholders for computing basic net income (loss) per ordinary share


(6,241,520
)

14,432,081


(1,283,882
)Shares (denominator):Weighted average ordinary shares outstanding used in computing basic net income per ordinary share


12,758,575


29,353,936


29,514,979Employee share options (treasury effect)





490,526Weighted average ordinary shares outstanding used in computing diluted net income (loss) per ordinary share


12,758,575


29,844,462


29,514,979Net income (loss) per ordinary sharebasic


(0.49
)

0.49


(0.04
)Net income (loss) per ordinary sharediluted


(0.49
)

0.48


(0.04
)


The
Group had securities outstanding which could potentially dilute basic net income per share in the future, but were excluded from the computation of diluted net income per share as
their effects would have been anti-dilutive. Such securities consisted of 1,184,039, 1,715,482 and 3,478,713 options outstanding as of December 31, 2010, 2011 and 2012,
respectively.

24. STATUTORY RESERVES

As stipulated by the relevant laws and regulations in the PRC, each PRC entity of the Group is required to maintain non-distributable reserves which include a statutory
surplus reserve and a statutory public welfare reserve. Subject to certain cumulative limits, the statutory surplus reserve requires annual appropriations of 10% of profit after taxes as reported in
company statutory financial statements prepared under accounting principle general accepted in PRC. An amount to be appropriated to the statutory public welfare reserve is to be determined at the
discretion of the
Group's boards of directors. These reserves can only be used for the specified purposes and once appropriated, the amounts are not

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

24. STATUTORY RESERVES  continued

available
for future distribution to owners. The statutory surplus reserve may be applied against prior year losses, if any, and may be applied to increase capital upon the boards of directors'
approval.

Total
amount appropriated to statutory reserves were $227,260, $69,155 and $498,402 for the years ended December 31, 2010, 2011 and 2012, respectively. As of December 31,
2012, the aggregate amounts of capital and statutory reserves restricted which represented the amount of net assets of the relevant subsidiaries, VIEs and VIEs' subsidiary in the Group not available
for distribution was $13,044,215.

25. CUSTOMER INFORMATION

There was no customer who accounted for 10% or more of net revenue for the years 2010, 2011 and 2012.

Details
of customers accounting for 10% or more of accounts receivable were as follows:

December 31,2011

2012A(1)


52.93
%

13.09
%B(2)



*

16.64
%C(3)



*

14.16
%


(1)A
is a theater circuit that is responsible for collecting the Group's distribution revenue from certain other theater circuits and then remitting the
collected amount to the Group. Accordingly, accounts receivable with A relate to distribution revenue generated by both A and certain other theater circuits.(2)B
is one of the Group's co-investor which is responsible for distributing one television series of 2012 and collecting the revenue from other
TV stations.(3)C
is a TV station which purchased the copyright of the television series from the Group.*Less
than 10%


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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

26. NONCONTROLLING INTEREST

Baichuan

Workshop
(BVI&HK)

Cinema
Popular

Xi'an
Huitong

Shanghai
Cinema

Mango
Cinema

Tianjin
(Nongken&Jin'ao)

TotalBalance as of January 1, 2010


886,153


(45,384
)

(243,708
)













597,061Acquisition of Beijing Bona Cineplex (Note 3(a))














2,071,408








2,071,408Acquisition of 10% equity interest of Baichuan (Note 3(c))


(805,555
)



















(805,555
)Capital injection in Xi'an Huitong(1)











364,421











364,421Foreign currency translation adjustment





(480
)

1,014


6,703


(476
)







6,761Net income (loss)


(80,598
)

182,468


(74,806
)

(10,264
)

(148,486
)







(131,686
)Balance as of December 31, 2010





136,604


(317,500
)

360,860


1,922,446








2,102,410Acquisition of Alpha Speed Limited and Bona Starlight (Note 3(d))

















1,155,121





1,155,121Foreign currency translation adjustment





1,459


(614
)

15,355


(792
)

32,392





47,800Net income (loss)





505,742


(5,430
)

(90,727
)

29,324


(298,614
)




140,295Balance as of December 31, 2011





643,805


(323,544
)

285,488


1,950,978


888,899





3,445,626Capital injection in Tianjin Nongken(2)




















774,030


774,030Foreign currency translation adjustment





1,411


(20,272
)

3,290


888


9,777


6,854


1,948Net income (loss)





(4,203
)

(8,300
)

56,379


105,157


193,005


(626,538
)

(284,500
)Balance as of December 31, 2012





641,013


(352,116
)

345,157


2,057,023


1,091,681


154,346


3,937,104


---

27. COMMITMENTS AND CONTINGENCIES

The Group has a number of operating leases for its facilities and offices. Rental expenses under operating leases for the years ended December 31, 2010, 2011, and 2012 were
$3,433,603, $6,913,422 and $12,009,087, respectively. The group recognized rent expenses under such arrangements on a

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

27. COMMITMENTS AND CONTINGENCIES  continued

straight-line
basis over the term of the lease. The future aggregate minimum lease payments under non-cancelable operating lease agreements are as follows:

Years ending December 31:2013


14,614,3842014


16,512,0822015


16,442,8542016


15,811,5122017 and thereafter


171,851,814Total


235,232,646


The
Group is a party in potential claims arising in the ordinary course of business. The Group does not believe that the resolution of these matters will have a material effect on its
financial position or results of operations.

28. EMPLOYEE BENEFIT PLAN

Full time PRC employees of the Group are eligible to participate in a government-mandated defined contribution plan under which certain pension benefits, medical care, unemployment
insurance, employee housing fund and other welfare benefits are provided to these employees. The PRC labor regulations require the Group to accrue for these benefits based on a percentage of each
employee's salary. Total provisions for employee benefits were $587,714, $873,744 and $1,483,281 for the years ended December 31, 2010, 2011 and 2012, respectively, which were reported as a
component of general and administrative expense when incurred.

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

29. RELATED PARTY BALANCES AND TRANSACTIONS

Nature of the relationships with related parties:

Name

Relationship with the GroupMr. Dong Yu

Chairman, CEO and principal shareholderMr. Zhong Jiang

Independent DirectorHubei Film Distribution and Exhibition Co., Ltd. ("Hubei Film Distribution")

Noncontrolling shareholderWuhan Lianzhong

Cost method investeeZhongda Helian

Cost method investeeMs. Xiang Li

Noncontrolling shareholderHunan Xiaoxiang Cineplex Investment Management Co., Ltd. ("Hunan Xiaoxiang")

Noncontrolling shareholderFilm Workshop Co., Ltd. ("Film Workshop")

A company majority-owned by a consultant and a former directorMr. Xiaojian Xu

Noncontrolling shareholderTianjin Nongken Group Real Estate Development Co., Ltd. ("Nongken Real Estate")

Noncontrolling shareholderTianjin Nongken Group Culture Investment Co., Ltd. ("Nongken Group")

A company majority-owned by a noncontrolling shareholder


As
well as being the Group's Chairman and CEO, Mr Dong Yu is the Group's founder and therefore has substantial influence over the Group's business, including decisions regarding
mergers, consolidations and the sale of all or substantially all of the Group's assets, election of directors, declaration of dividends and other significant corporate actions. Mr. Dong Yu also
provided personal guarantees in order to enable the Company to procure certain bank borrowings for the three years ended December 31, 2010, 2011 and 2012. (See note 14)

As
of December 31, 2011 and 2012, the following balances were due from the related parties:

December 31,2011

2012Amounts due from Mr. Dong Yu(i)


116,827


Amounts due from affiliates of Cinema Popular(ii)


219,135


343,817Amounts due from Bona Meitao(iii)


847,121


1,183,083


343,817


(i)The
amounts represent payments of individual income tax on behalf of Mr. Dong Yu and loans to him, which were settled in 2012.(ii)The
amounts represent the Cinema Popular's receivables from affiliates for operation.(iii)The
amounts represent distribution receivables from Bona Meitao and loan to Bona Meitao for producing a TV series, which were settled in 2012.


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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

29. RELATED PARTY BALANCES AND TRANSACTIONS  continued

(iv)All
the amounts due from related parties are unsecured and non-interest bearing.


As
of December 31, 2011 and 2012, the following balances were due to the related parties:

December 31,2011

2012Amounts due to Hunan Xiaoxiang(i)


238,326


240,766Amounts due to Zhongda Helian(ii)


285,991


Amounts due to Mr. Xiaojian Xu(i)


389,266


393,252Amounts due to Film Workshop(iii)


406,524


662,293Amounts due to Hubei Film Distribution(i)


476,652


481,533Amounts due to Ms. Xiang Li(i)


476,652


481,533Amounts due to Wuhan Lianzhong(iv)


754,461


762,187Amounts due to Tianjin Nongken Group Culture Investment Co., Ltd.(v)





679,853Amounts due to Tianjin Nongken Group Real Estate Development Co., Ltd.(vi)





2,044,9113,027,872


5,746,328


(i)The
amounts represent loans from the noncontrolling shareholders for operations.(ii)The
amounts represent payables for film marketing and consulting service provided by Zhongda Helian.(iii)The
amounts represent payables for film production service provided by Film Workshop.(iv)The
amounts represent payables for film projection equipment purchased from Wuhan Lianzhong.(v)The
amounts represent payables for rental expenses.(vi)The
amounts represent payables for loan from Nongken Group.


All
the amounts due to related parties are unsecured and non-interest bearing.

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

29. RELATED PARTY BALANCES AND TRANSACTIONS  continued

Other
related parties transactions during the years ended December 31, 2010, 2011 and 2012 include:

2010

Acquisition of Beijing Bona Cineplex (see Note 3(a))In September 2010, Beijing Bona Cineplex entered into a management service agreement with Bona Starlight, a development
stage movie theater operator in the PRC whose principal shareholders include Mr. Dong Yu. Under the terms of this agreement, the Group licensed the "Bona" brand to Bona Starlight and became the exclusive provider of management services for its
current and future movie theaters. The Group is also entitled to receive a share of the box office receipts and advertising revenues of Bona Starlight's movie theaters. For the years ended December 31, 2010 and 2011 before the acquisition of
Bona Starlight, the Group generated revenue of nil and $84,439, respectively, under this agreement (see Note 3(a)).Acquisition of the remaining 10% equity interest in Baichuan (see Note 3(c))2011

Acquisition of Alpha Speed Limited and Bona Starlight (see Note 3(d))2012

In April 2012, the Group entered into a rental agreement with Nongken Group to rent a piece of property for movie theatre.
The Group incurred rental expenses of $672,019 under this rental agreement in 2012.


30. SEGMENT INFORMATION

The Group's chief operating decision maker ("CODM") is the Chief Executive Officer who as of December 31, 2012 reviews the results of four operating segments when making decisions
about allocating resources and assessing performance. The segments are film distribution, film investment and production, movie theater, and talent agency.

The
film distribution segment generates revenue from external customers. Its revenues comprise the Group's share of movie theater box office sales for the Group's distribution services
and, to the extent the Group has distribution rights outside the PRC, the revenues the Group derives from those arrangements.

Its
cost of revenues includes:



The
film investment and production segment generates revenues both from external customers and, through inter-segment transactions, from the Group's own distribution entities.

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

30. SEGMENT INFORMATION  continued

The
film investment and production segment generates revenues from external customers where the Group invests in a film but does not act as the principal distributor. For films in which
the Group acquires all or part of the copyright, these include revenues from the sale of distribution rights and licensing fees to third-party distributors. For films in which the Group does not
acquire any copyright, these include revenues from the Group's share of the net profit from distribution agreements with third-party producers.

Revenue
from internal customers comprises revenues received from the distribution entities within the Group who distribute the film.

Its
cost of revenues includes the amortization of production costs.

The
talent agency segment generates revenues from external customers for its talent agency related business. The movie theater segment generates admissions and concession revenues at the
box office from external customer, and other revenues which primarily consist of screen advertising revenues. Its cost of revenue mainly includes film rental costs.

The
profitability measure employed by the Group and its CODM for making decisions about allocating resources to segments and assessing segment performance is gross profit less film
participation expense. Segments follow the same accounting policies as those described in Note 2.

The
Group's CODM does not assign assets to these segments. Currently, it is not practical to show assets by reportable segments.

The
following table presents selected financial information relating to the Group's segments:

For the year ended December 31, 2010Film
distribution

Film
investment
and production

Talent
agency

Movie
theater

Intersegment
elimination

ConsolidatedRevenues from external customers


36,260,981


3,089,161


2,136,451


11,333,193





52,819,786Intersegment revenues


279,560


17,211,668








(17,491,228
)

Cost of revenues


(22,129,328
)

(15,375,079
)

(1,172,549
)

(5,316,125
)

17,491,228


(26,501,853
)Film participation expenses





(696,101
)










(696,101
)Segment profit


14,411,213


4,229,649


963,902


6,017,068





25,621,832


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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

30. SEGMENT INFORMATION  continued



For the year ended December 31, 2011Film
distribution

Film
investment
and production

Talent
agency

Movie
theater

Intersegment
elimination

ConsolidatedRevenues from external customers


92,598,838


6,176,820


1,349,186


26,036,426





126,161,270Intersegment revenues


2,246,219


44,298,547








(46,544,766
)

Cost of revenues


(57,979,720
)

(43,480,636
)

(117,487
)

(11,425,140
)

46,544,766


(66,458,217
)Film participation expenses





(321,100
)










(321,100
)Segment profit


36,865,337


6,673,631


1,231,699


14,611,286





59,381,953




For the year ended December 31, 2012Film
distribution

Film
investment
and production

Talent
agency

Movie
theater

Intersegment
elimination

ConsolidatedRevenues from external customers


62,929,581


37,022,215


610,707


41,720,416





142,282,919Intersegment revenues


1,135,944


36,708,717








(37,844,661
)

Cost of revenues


(38,937,435
)

(66,875,543
)

(24,097
)

(18,092,632
)

37,844,661


(86,085,046
)Film participation expenses





(438,636
)










(438,636
)Segment profit


25,128,090


6,416,753


586,610


23,627,784





55,759,237


Reconciliation from consolidated segment profit to consolidated financial statements:

For the years ended December 31,2010

2011

2012Consolidated segment profit


25,621,832


59,381,953


55,759,237Sales and marketing


(7,213,519
)

(18,506,262
)

(18,490,433
)General and administrative


(9,305,393
)

(28,371,497
)

(41,890,064
)Government subsidies


88,147


220,559


3,866,700Net interest and exchange loss


(377,010
)

1,406,477


220,369Gain on extinguishment of liability


488,799





Interest income from TV series investment


856,788


141,545


Other income


225,095


770,081


288,157Changes in fair value of derivatives


(14,528,000
)




Loss on disposal of an equity method investment








(5,584
)Income (loss) before income tax provision


(4,143,261
)

15,042,856


(251,618
)




The Group operates in the PRC and all of the Group's long lived assets are located in the PRC.

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Table of Contents

BONA FILM GROUP LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

FOR THE YEARS ENDED DECEMBER 31, 2010, 2011 AND 2012

(In U.S. dollars, except share and per share data)

30. SEGMENT INFORMATION  continued

Revenues,
classified by the major geographic areas in which the Group's customers are located (based on the address of the customer who contracted with the Group), were
as follows:

For the years ended December 31,2010

2011

2012Revenues from the PRC


47,153,418


115,478,174


131,609,354Revenues from countries other than the PRC


5,666,368


10,683,096


10,673,565Total


52,819,786


126,161,270


142,282,919


31. SUBSEQUENT EVENTS

During the first quarter of 2013, the Group drew down an aggregate principal amount of $10,000,000 from a revolving credit line with an overseas commercial bank. The loan is guaranteed
by Bona International, with annual interest rate of 3.5%, and will be due on November 20, 2015.

F-69

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