##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
    Form 20-F
    (Mark One)o

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR
    12(g)  OF THE SECURITIES EXCHANGE ACT OF 1934orþ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2008.oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from                    tooro

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934Date of event requiring this
    shell company report   Commission file
    number: 001-33328
  XINHUA SPORTS &
    ENTERTAINMENT LIMITED
 (formerly Xinhua Finance Media
    Limited)
    (Exact name of Registrant as
    specified in its charter)
  N/A
  (Translation of
    Registrants name into English)
  Cayman Islands
  (Jurisdiction of incorporation
    or organization)
  2201, Tower D, Central
    International Trade Center,
    6A Jian Wai Avenue, Chaoyang District,
    Beijing, 100022, Peoples Republic of China
   (Address of principal executive
    offices)
   Fredy Bush
    Chief Executive Officer
    2201, Tower D, Central International Trade Center,
    6A Jian Wai Avenue, Chaoyang District,
    Beijing, 100022, Peoples Republic of China
    Tel: +86-10-8567-6000
    Fax: +86-10-6448-0585
    Email: info@xsel.com
      (Name, Telephone,
    E-mail
    and/or Facsimile number and Address of the 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
    representing two class A common shares, par
    value US$0.001 per share

The NASDAQ Stock Market LLC
    (The NASDAQ Global Market)       Securities registered or to be
    registered pursuant to Section 12(g) of the Act:
    None
    (Title of Class)
      Securities for which there is a
    reporting obligation pursuant to Section 15(d) of the
    Act:
    None
 (Title of Class)
       146,914,667 class A common shares, par value US$0.001
    per share as of December 31, 2008.
 o þ
 o þ
 þ o
 Regulation S-T o o
 Rule 12b-2
 o þ o
 þ o o
 o o
 Rule 12b-2 o þ
  o o




---



##### 





TABLE OF
    CONTENTS
   
 Item 1


Identity of Directors, Senior Management and
    Advisers


2Item 2


Offer Statistics and Expected Timetable


2Item 3


Key Information


2Item 4


Information on the Company


28Item 4A


Unresolved Staff Comments


62Item 5


Operating and Financial Review and Prospects


62Item 6


Directors, Senior Management and Employees


94Item 7


Major Shareholders and Related Party
    Transactions


104Item 8


Financial Information


110Item 9


The Offer and Listing


111Item 10


Additional Information


112Item 11


Quantitative and Qualitative Disclosures About
    Market Risk


118Item 12


Description of Securities Other Than Equity
    Securities


119Item 13


Defaults, Dividend Arrearages and
    Delinquencies


119Item 14


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


119Item 15


Controls and Procedures


119Item 16A


Audit Committee Financial Expert


121Item 16B


Code of Ethics


121Item 16C


Principal Accountant Fees and Services


121Item 16D


Exemptions From The Listing Standards For Audit
    Committees


121Item 16E


Purchases of Equity Securities By The Issuer And
    Affiliated Purchasers


122Item 16F


Change In Registrants Certifying
    Accountant


122Item 16G


Corporate Governance


122Item 17


Financial Statements


122Item 18


Financial Statements


122Item 19


Exhibits


122EX-4.49EX-4.50EX-4.51EX-4.52EX-4.53EX-4.54EX-4.55EX-4.56EX-4.57EX-4.58EX-4.59EX-4.60EX-4.61EX-8.1EX-12.1EX-12.2EX-13.1EX-13.2EX-15.1   i




---



##### Table of Contents



INTRODUCTION
    
    we, us, our company,
    our, XSEL and Xinhua
    Sports & Entertainment refer to Xinhua
    Sports & Entertainment Limited, formerly known as
    Xinhua Finance Media Limited, and its subsidiaries,
    including direct subsidiaries and affiliated entities, except
    where the context requires otherwise;
    production of or to produce drama series
    refer to co-production with third parties who hold drama
    series production licenses or to cooperate with
    third parties who hold drama series production licenses to
    produce;
    shares or common shares refers to our
    class A common shares;
    ADSs refers to our American depositary shares, each
    of which represents two class A common shares, and
    ADRs refers to the American depositary receipts that
    evidence our ADSs;
    China or PRC refers to the Peoples
    Republic of China, excluding, for the purpose of this annual
    report on
    Form 20-F
    only, Taiwan, Hong Kong and Macau;
    GAAP refers to general accepted accounting
    principles in the United States;
    all references to RMB or Renminbi are to
    the legal currency of China, all references to $,
    dollars, US$, USD and
    U.S. dollars are to the legal currency of the
    United States and all references to HK$ are to the
    legal currency of Hong Kong;
    all discrepancies in any table between the amounts identified as
    total amounts and the sum of the amounts listed therein are due
    to rounding; and
    the conversion of RMB into U.S. dollars in this annual
    report is based on the noon buying rate in The City of New York
    for cable transfers of RMB as certified for customs purposes by
    the Federal Reserve Bank of New York. Unless otherwise noted,
    all translations from RMB to U.S. dollars and from
    U.S. dollars to RMB in this annual report were made at a
    rate of RMB6.8225 to $1.00, the noon buying rate in effect as of
    December 31, 2008.  Form 20-F
    FORWARD-LOOKING
    INFORMATION
  Form 20-F
  
    our goals and strategies;
    our plans to expand our business to extend our focus to sports
    and entertainment;
    our future business development, financial condition and results
    of operations;
    projected revenues, profits, earnings and other estimated
    financial information;
    our plans to expand our Internet presence, and expand into new
    media, such as, broadband wireless and Internet television;
    the growth or acceptance of our integrated platform;




---



##### Table of Contents




    our plans to identify and create new advertising networks that
    target specific consumer demographics, which could allow us to
    charge a separate fee;
    competition in the PRC media and advertising industries; and
    the expected growth in advertising spending levels.      PART I
  Item 1.
    Identity
    of Directors, Senior Management and Advisers    Item 2.
    Offer
    Statistics and Expected Timetable    Item 3.
    Key
    Information  A.
    Selected
    Financial Data        2




---



##### Table of Contents



Period from



Period fromYear Ended


January 1,



May 26,December 31,


2005 to



2005(1) to


Year Ended


Year Ended


Year Ended2004


May 25, 2005



December 31,


December 31,


December 31,


December 31,(Predecessor)


(Predecessor)



2005


2006


2007


2008(In thousands, except for share data)Selected consolidated statement of operations dataNet revenues:Advertising services

$
301


$
53



$
580


$
44,862


$
86,681


$
107,892Content production











3,641



6,545



7,681



12,372Advertising sales


48



240




387



6,691



39,282



65,356Publishing services


52



55




787



868



1,195



411Total net revenues


401



348




5,395



58,966



134,839



186,031Cost of revenues:Advertising services


248



66




154



27,654



58,048



74,735Content production











651



2,829



3,707



7,522Advertising sales


35



42




85



1,912



19,490



30,756Publishing services


325



347




534



1,386



854



1,479Total cost of revenues


608



455




1,424



33,781



82,099



114,492Operating expenses:Selling and distribution


418



322




293



5,277



14,877



22,946General and administrative(2)


608



456




1,248



12,840



24,349



52,068Impairment charges























232,598Loss on disposal of subsidiaries























4,721Total operating expenses


1,026



778




1,541



18,117



39,226



312,333Other operating income



















2,262



1,499Income (loss) from operations


(1,233
)


(885
)



2,430



7,068



15,776



(239,295
)Other income (expense), net


(10
)


(3
)



(21
)


(898
)


1,340



(32,582
)Provision for income taxes (benefit)


5



(4
)



929



1,070



(12,226
)


2,354Minority interest











129



1,704



1,303



641Equity in loss of an Investment















52







Net income (loss)

$
(1,248
)

$
(884
)


$
1,351


$
3,344


$
28,039


$
(274,872
)Deemed dividend on redeemable convertible preferred shares















(2,157
)






Dividends declared to redeemable convertible preferred shares















(5,335
)


(1,338
)


(2,000
)Net income (loss) attributable to holders of common shares


(1,248
)


(884
)



1,351



(4,148
)


26,701



(276,872
)Net income (loss) per share:Basic  Class A common share

$



$




$



$
(0.08
)

$
0.23


$
(2.04
) 3




---



##### Table of Contents



Period from



Period fromYear Ended


January 1,



May 26,December 31,


2005 to



2005(1) to


Year Ended


Year Ended


Year Ended2004


May 25, 2005



December 31,


December 31,


December 31,


December 31,(Predecessor)


(Predecessor)



2005


2006


2007


2008(In thousands, except for share data)Basic  Class B common share

$
(13.13
)

$
(7.85
)


$
0.03


$
(0.08
)

$
0.23


$
(2.04
)Diluted  Class A common share

$



$




$



$
(0.08
)

$
0.21


$
(2.04
)Diluted  Class B common share

$
(13.13
)

$
(7.85
)


$
0.03


$
(0.08
)

$
0.21


$
(2.04
)Shares used in computation:Basic  Class A common share















5,084



66,166



85,927Basic  Class B common share


95



113




42,613



44,693



50,055



49,917Diluted  Class A common share















5,084



86,315



85,927Diluted  Class B common share


95



113




42,613



44,693



50,055



49,917Dividend per redeemable convertible preferred share














$
0.34


$
0.08


$
6.67     (1)
    
    Date XFL acquired 60% of EconWorld Media Limited, which equity
    interest was transferred to us on January 12, 2006.(2)
    
    Includes share-based compensation expense of $2.4 million,
    $3.1 million and $12.5 million for the years ended
    December 31, 2006, 2007 and 2008, respectively.  As ofDecember 31,

As of


As of

As of

As of2004

December 31,


December 31,

December 31,

December 31,(Predecessor)

2005


2006

2007

2008(In thousands)Selected consolidated balance sheet dataCash and cash equivalents

$
21


$
2,081



$
36,354


$
44,436


$
54,089Goodwill






4,070




83,670



180,125



46,993Intangible assets






628




176,202



233,506



200,529Total assets


198



10,306




399,450



650,802



508,250Total current liabilities


1,269



8,579




175,067



79,214



106,275Convertible loan











14,017







33,200Total owners and shareholders (deficiency) equity


(1,071
)


1,353




101,250



466,636



235,620   Exchange
    Rate Information
   4




---



##### Table of Contents



Noon Buying RatePeriodPeriod

End

Average(1)

Low

High2004


8.2765



8.2768



8.2774



8.27642005


8.0702



8.1826



8.2765



8.07022006


7.8041



7.9579



8.0702



7.80412007


7.2946



7.5806



7.8127



7.29462008


6.8225



6.9193



7.2946



6.7800October


6.8388



6.8358



6.8521



6.8171November


6.8254



6.8281



6.8373



6.8220December


6.8225



6.8539



6.8842



6.82252009January


6.8392



6.8360



6.8403



6.8225February


6.8395



6.8363



6.8470



6.8241March


6.8329



6.8360



6.8438



6.8240April (through April 24, 2009)


6.8250



6.8318



6.8361



6.8250     (1)
    
    Annual averages are calculated from month-end rates. Monthly
    averages are calculated using the average of the daily rates
    during the relevant period.  B.
    Capitalization
    and Indebtedness    C.
    Reasons
    for the Offer and Use of Proceeds    D.
    Risk
    Factors  Risks
    related to our business
  Our
    limited operating history and successive acquisitions make
    evaluating our business and prospects difficult.
    
    successfully integrate the recently acquired companies;
    navigate the regulatory landscape and respond to changes in the
    regulatory environment;
    offer new and innovative products and services to attract and
    retain an audience and readers;
    attract additional advertisers and increase advertising fees;
    increase awareness of our branded media platforms;
    respond to competitive market conditions;
    manage risks associated with intellectual property rights;
    maintain effective control of our costs and expenses; 5




---



##### Table of Contents




    raise sufficient capital to sustain and expand our
    business; and
    attract, retain and motivate qualified personnel.    We are
    in the process of expanding our scope of operations to include
    sports and entertainment media. Failure to successfully
    implement these new business strategies could have an adverse
    effect on our financial condition, results of operations and
    cashflow from operations.
    We may
    not be able to achieve the benefits we expect from recent and
    future acquisitions, and recent and future acquisitions may have
    an adverse effect on our ability to manage our
    business.
       6




---



##### Table of Contents



We
    rely on key contracts and business relationships, and if our
    current or future business partners or contracting
    counterparties fail to perform, or terminate, any of their
    contractual arrangements with us for any reason or cease
    operations, or should we fail to adequately identify key
    business relationships, our business could be disrupted, our
    reputation may be harmed and we may have to resort to litigation
    to enforce our rights, which may be time-consuming and
    expensive.
          We are
    not a party to some of the key contracts on which we rely.
    Instead, we have contracts with companies which in turn have
    these key contracts with third parties. If the third parties
    fail to perform or terminate any of these key contracts for any
    reason or cease operations, our business could be disrupted, our
    reputation may be harmed and we will not be able to enforce our
    rights in court.
     7




---



##### Table of Contents



Our
    business has been impacted by global economic conditions and a
    corresponding decrease in global advertising spending, which may
    adversely affect our financial condition, results of operations
    and cashflow from operations.
      Our
    business could be materially and adversely affected if our
    target audience and readers do not continue to accept our
    programs and content or if we do not continue to produce and
    purchase programs that generate high ratings.
      
    identifying popular programming and content;
    competing with and adapting to new technological innovations,
    including Internet television, portable entertainment systems,
    and others; 8




---



##### Table of Contents




    attracting viewers, listeners and readers amidst the
    proliferation of television, radio, magazines and newspapers in
    China; and
    controlling programming and content sourcing costs.    Our
    future success depends on attracting advertisers who will
    advertise across our various platforms. If we fail to attract a
    sufficient number of advertisers, our operating results and
    revenues may not meet expectations.
    We
    have sustained net losses in the past and may continue to
    sustain net losses in the future or may not grow as
    expected.
    We
    derive a substantial proportion of our revenues from
    advertising, and the advertising market is particularly
    volatile.
    
    a downturn in economic conditions in China or around the globe;
    a decision to shift advertising expenditure to other media and
    platforms;
    a deterioration of the ratings of our programs;
    a change of government policy with regard to the types of
    programs that can be broadcast; or
    a decline in advertising spending in general.   9




---



##### Table of Contents



The
    market for most of our operating groups is concentrated in a few
    major cities in China, and if advertising spending decreases in
    any of these cities, our operating results and revenues could be
    adversely affected.
    Our
    business could suffer if we do not successfully manage current
    growth and potential future growth.
      
    develop new and enhance existing product and services, obtain
    new customers, and retain existing customers;
    maintain adequate control of our expenses;
    attract and retain qualified personnel; and
    respond to competitive market conditions.    Our
    operating results may fluctuate, which makes our results
    difficult to predict and could cause our results to fall short
    of expectations.
      If we
    do not maintain and develop our brands and those of our
    strategic partners, we will not be able to attract an audience
    and readers to the media platforms we use.
  Fortune
    China Economic Observer Money Journal Chinese Venture
 10




---



##### Table of Contents



If we
    do not compete successfully against new and existing
    competitors, we may lose our market share, and our operating
    results may be adversely affected.
      Our
    business depends substantially on the continuing efforts of our
    key executives. Our business may be severely disrupted if we
    lose their services.
     11




---



##### Table of Contents



Our
    senior management and employees have worked together for a short
    period of time, which may make it difficult for you to evaluate
    their effectiveness and ability to address
    challenges.
    If we
    are unable to attract, train and retain key individuals, highly
    skilled employees and important talent, our business may be
    adversely affected.
  Fortune China
  We may
    not be able to prevent others from using our intellectual
    property, which may harm our business and expose us to
    litigation.
          Failure
    to achieve and maintain effective internal controls could have a
    material and adverse effect on the trading price of our
    ADSs.
   12




---



##### Table of Contents



Form 20-F
  Form 20-F,
    We may
    need additional capital to finance future acquisitions and we
    may not be able to obtain it.
    We
    have substantial indebtedness and may incur substantial
    additional indebtedness in the future, which could adversely
    affect our financial health and our ability to generate
    sufficient cash to satisfy our outstanding and future debt
    obligations.
    
    limit our ability to satisfy our obligations under our debt;
    increase our vulnerability to adverse general economic and
    industry conditions;
    require us to dedicate a substantial portion of our cashflow
    from operations to servicing and repaying our indebtedness,
    thereby reducing the availability of our cashflow to fund
    working capital, capital expenditures and other general
    corporate purposes;
    limit our flexibility in planning for or reacting to changes in
    our businesses and the industry in which we operate;
    place us at a competitive disadvantage compared to our
    competitors that have less debt; and
    increase the cost of additional financing.   13




---



##### Table of Contents



We
    have recorded significant charges to earnings because our
    goodwill or acquired intangible assets were determined to be
    impaired and we may be required to do so again in the
    future.
        Our
    strategy of expanding our Internet and new media presence may
    not be well received or may be more expensive than we
    expected.
   14




---



##### Table of Contents




    sufficient demand for these services from our existing and
    potential audience and readers, and sufficient advertising
    revenues from customers, to offset the substantial investment we
    will make in order to provide them;
    our ability to compete effectively with other providers of these
    services;
    our ability to adapt and develop our products and services in
    order to conform to market conditions and customer
    needs; and
    our ability to form, acquire or cooperate with Internet content
    and service providers and obtain the appropriate licenses to
    conduct this business.    We are
    subject to a class action complaint alleging that we failed to
    disclose certain information in our initial public offering
    registration statement. If the class action is successful, it
    may have an adverse effect on our financial condition and
    operating results.
    Risks
    related to the regulation of our business and to our
    structure
  If the
    PRC government finds that the agreements that establish the
    structure for operating our China businesses do not comply with
    PRC governmental restrictions on foreign investment in the
    media, market research and telecommunications industries, or if
    these regulations or the interpretation of existing regulations
    change in the future, we could be subject to severe penalties or
    be forced to relinquish our interests in those
    operations.
     15




---



##### Table of Contents




    revoking the business and operating licenses of our PRC
    subsidiaries or affiliates;
    confiscating relevant income and imposing fines and other
    penalties;
    discontinuing or restricting our PRC subsidiaries or
    affiliates operations;
    requiring us or our PRC subsidiaries or affiliates to
    restructure the relevant ownership structure or
    operations; or
    imposing conditions or requirements with which we or our PRC
    subsidiaries or affiliates may not be able to comply.        We
    rely on contractual arrangements with our PRC operating
    affiliates and their subsidiaries and shareholders for our China
    operations, which may not be as effective in providing
    operational control as direct ownership.
     16




---



##### Table of Contents



The
    shareholders of our PRC affiliated entities may breach our
    agreements with them or may have potential conflicts of interest
    with us, and we may not be able to enter further agreements to
    extract economic benefits from these entities, which may
    materially and adversely affect our business and financial
    condition.
      Contractual
    arrangements we have entered into with our subsidiaries and
    affiliated entities or acquisitions of offshore entities that
    conduct PRC operations through affiliates in China may be
    subject to scrutiny by the PRC tax authorities, and we may have
    to pay additional taxes or be found ineligible for a tax
    exemption.
   17




---



##### Table of Contents



Certain
    of our PRC operating companies or strategic partners have
    previously engaged or may currently engage in activities without
    appropriate licenses or approvals or outside the authorized
    scope of their business licenses or permitted activities. This
    could subject those companies to fines and other penalties,
    which could have a material adverse effect on our
    business.
      Any
    limitation on the ability of our subsidiaries and affiliated
    entities to make dividend or distribution payments to us could
    have a material adverse effect on our ability to conduct our
    business.
    We may
    be treated as a resident enterprise for PRC tax purposes and our
    global income may be subject to PRC tax under the new PRC tax
    law, which would have a material adverse effect on our results
    of operations.
   18




---



##### Table of Contents



Our
    foreign ADS holders may be subject to PRC withholding tax on
    dividends payable by us and on gains realized on the sale of our
    ADSs, if we are classified as a PRC resident
    enterprise.
    The
    PRC government may prevent us or our strategic partners from
    producing or distributing, and we or they may be subject to
    liability for, content that it believes is
    inappropriate.
     19




---



##### Table of Contents



We may
    be subject to litigation for information provided in our
    products and services, which may be time-consuming and costly to
    defend.
          If the
    PRC government finds that the financial data and media services
    we provide do not comply with PRC laws and regulations relating
    to the provision of securities investment advisory services, we
    may suffer severe disruption to our business operations and lose
    a substantial portion of our revenue.
    Control
    or significant influence by our existing shareholders may limit
    your ability to affect the outcome of decisions requiring the
    approval of shareholders.
   20




---



##### Table of Contents



Risks
    Related to Doing Business in China
  Adverse
    changes in economic and political policies of the PRC government
    could have a material adverse effect on the overall economic
    growth of China, which could adversely affect our
    business.
      Uncertainties
    with respect to the PRC legal system could adversely affect
    us.
     21




---



##### Table of Contents



We
    face risks related to health epidemics and other outbreaks, or
    acts of terrorism, which could result in reduced demand for
    advertising or disrupt our operations.
    The
    regulations on mergers and acquisitions of PRC enterprises may
    delay or inhibit our ability to complete certain mergers and
    acquisitions and expand our business or maintain our market
    shares.
       22




---



##### Table of Contents



Recent
    PRC regulations relating to offshore investment activities by
    PRC residents may increase our administrative burden and
    restrict our domestic, overseas and cross-border investment
    activity. If our shareholders who are PRC residents fail to make
    any required applications and filings under such regulations, we
    may be unable to distribute profits and may become subject to
    liability under PRC laws.
        Restrictions
    on currency exchange may limit our ability to utilize our
    revenues effectively.
   23




---



##### Table of Contents



Fluctuation
    in the value of RMB may have a material adverse effect on your
    investment.
      We
    have limited insurance coverage in China.
    Risks
    Related to the ADSs
  The
    market price for our ADSs may be volatile.
    
    announcements of technological or competitive developments;
    regulatory developments in our target markets affecting us, our
    customers or our competitors;
    announcements of studies and reports relating to the
    circulation, ratings, audience or readership size or
    composition, quality or effectiveness of our and our strategic
    partners products and services or those of our competitors;
    actual or anticipated fluctuations in our quarterly operating
    results;
    changes in financial estimates by securities research analysts;
    changes in the economic performance or market valuations of
    other media and advertising companies;
    addition or departure of our executive officers and key
    personnel;
    fluctuations in the exchange rates between the U.S. dollar
    and RMB;
    release or expiration of
    lock-up or
    other transfer restrictions on our outstanding ADSs; and
    sales or perceived sales of additional ADSs. 24




---



##### Table of Contents



Our
    ADSs are currently at risk for delisting from the Nasdaq Global
    Market. Delisting could adversely affect the liquidity of our
    ADSs and the market price of our ADSs could decrease, and our
    ability to obtain adequate financing for the continuation of our
    operations would be substantially impaired.
    Substantial
    future sales or perceived sales of our ADSs in the public market
    could cause the price of our ADSs to decline.
    You
    may not have the same voting rights as the holders of our common
    shares and may not receive voting materials in time to be able
    to exercise your right to vote.
    Your
    right to participate in any future rights offerings may be
    limited, which may cause dilution to your holdings and you may
    not receive cash dividends if it is impractical to make them
    available to you.
   25




---



##### Table of Contents



We are
    a Cayman Islands company and, because judicial precedent
    regarding the rights of shareholders is more limited under
    Cayman Islands law than that under U.S. law, you may have less
    protection for your shareholder rights than you would under U.S.
    law.
      Our
    memorandum and articles of association contain anti-takeover
    provisions that could adversely affect the rights of holders of
    our common shares and ADSs.
      
    Our board of directors has the authority to establish from time
    to time one or more series of preferred shares without action by
    our shareholders and to determine, with respect to any series of
    preferred shares: the terms and rights of that series, including
    the designation of the series; the number of shares of the
    series; the dividend rights, dividend rates, conversion rights,
    voting rights; and the rights and terms of redemption and
    liquidation preferences.
    Our board of directors may issue series of preferred shares
    without action by our shareholders to the extent available
    authorized but unissued preferred shares exist. Accordingly, the
    issuance of preferred shares may adversely affect the rights of
    the holders of the common shares. Issuance of preference shares
    may dilute the voting power of holders of common shares.
    Subject to applicable regulatory requirements, our board of
    directors may issue additional common shares without action by
    our shareholders to the extent available authorized but unissued
    shares exist. 26




---



##### Table of Contents



You
    may have difficulty enforcing judgments obtained against
    us.
    We may
    be classified as a passive foreign investment company, which
    could result in adverse U.S. federal income tax consequences to
    U.S. Holders of our ADSs or common shares.
  non-U.S. corporation
  We
    incur increased costs as a result of being a public
    company.
   27




---



##### Table of Contents



Item 4.
    Information
    on the Company  A.
    History
    and Development of the Company      86-10-8567-6000.
  1-800-SEC-0330.
  Form 20-F
  B.
    Business
    Overview          
    Broadcast, which refers to the sale of advertising and the
    production of content for and the distribution of our
    programming through television and radio channels, as well as
    the new media mobile value-added services we provide to mobile
    phone users in China. Our media platforms include Inner Mongolia
    Satellite 28




---



##### Table of Contents



Television, the Shaanxi Satellite TV Channel, EasyFM 91.5 of
    Beijing and other radio channels throughout China. Our Broadcast
    Group also produces Fight Weekend, The Sceneand the
    Fortune Chinaseries and engages in the production and
    distribution of bilingual radio content. With our business
    partners, we are in the process of building four premium tier
    digital pay television channels to tap into the rapidly growing
    digital Chinese television market;  
    Print, which refers to our exclusive rights to sell advertising
    for and provide management and information consulting services
    to the magazines Money Journaland Chinese Ventureand the newspaper the Economic Observer; and
    Advertising, which refers to our advertising agency that plans,
    creates and places advertising for websites, television, print
    media, radio, campus billboards and outdoor media, as well as
    online advertising sales, our provision of below-the-line
    marketing services, and our research services on products,
    advertisements and markets.    Name
    change and our sports and entertainment strategies
        Sports
  
    We were the only media outlet to offer a nationwide, free to
    air, live broadcast of the National Football League (NFL)
    Superbowl XLII in February 2008;
    We obtained the exclusive China media rights for the UEFA Europa
    League (formerly the UEFA Cup) during the
    2009-2012
    period;
    We purchased an equity stake in the All Sports Network,
    ASN, giving us exclusive distribution rights via
    mobile, television, Internet and radio for ASNs content in
    China. ASNs content includes National Collegiate Athletic
    Association (NCAA), National Hockey League (NHL), extreme
    sports, motor racing and other top quality sports programming;
    We are in the process of acquiring four premium PayTV channels,
    with two of the channels to be repositioned as premium tier
    sports channels;
    We signed a long-term advertising and content agreement with
    Shaanxi TV Station in relation to Shaanxi Satellite TV Channel,
    which we expect to use for sports programming; and
    We entered into a long term contract with CSI Sports for
    Fight Sportsprogramming giving us exclusive rights in
    China to their library. CSI Sports is the owner of one of the
    largest fight libraries in the world with a wide variety of
    fight programs worldwide.  Entertainment
  
    We founded a subsidiary, Xinhua Media Entertainment, which will
    structure, finance and execute co-production films deals in
    China in association with China Film Group and major Hollywood
    studios;
    We announced a slate of five films due to be co-produced in the
    next three years; 29




---



##### Table of Contents




    We entered a cooperative agreement with Youth Media Hong Kong to
    deploy and market a campus network for distribution of video
    material, including sports content, to colleges and universities
    throughout China; and
    We acquired
    20-year
    exclusive advertising rights, with an option to extend for an
    additional
    10-years, to
    the China Youth Net web portal, www.youth.cn, one of
    Chinas top youth websites, and 50 associated sites to
    which we plan to contribute sports video,
    e-commerce
    and career advertisements.  Our
    products and services
  Broadcast
  Television
        Sports
    Programming
    Fight Sports Fight Sports
  2009-2010, 2010-2011 2011-2012.
  The
    Scene
  The Scene The
    Scene
 30




---



##### Table of Contents



Fortune
    China programs
  Fortune China Fortune China Fortune China
  Radio
    Mobile
    interactive service
      Television
    production
  three-hour
  Film
    co-production
  Bullet Run The Cage The Hunted High Stakes Mulan
  Television
    channel packaging services
   31




---



##### Table of Contents



PayTV
    Fight Sports
    Print
  Newspaper
  Economic Observer Economic Observer Economic Observer
  Economic Observer Economic Observer
  Economic Observers Economic Observer Economic Observer Economic Observer Economic Observer
  Investor Journal
  Magazines
  Money Journal Chinese Venture Money Journal
 32




---



##### Table of Contents



Chinese Venture Funds Observer Funds Observer Money Journal
    Advertising
      e-commerce.
    Economic Observer Beijing Evening News Beijing Youth Daily
     33




---



##### Table of Contents



Arrangements
    with partners and suppliers
    Agreements regarding Shanghai Camera.
          My Blue Home
 34




---



##### Table of Contents



Fortune China Warrior Access Hollywood: China
  The Scene East Meets West
  Agreement regarding our radio broadcast
    business.
          Our Print Groups relationship with Dow
    Jones. Money Journal Money Journal
 35




---



##### Table of Contents



Money Journal
  Our Print Groups services for Money
    Journal. Money Journal
  Our Print Groups services for Chinese
    Venture. Weekly Journal Weekly Journals Chinese Venture Weekly
    Journals
  Agreements regarding the Economic
    Observer. Economic Observer
    
    a business cooperation agreement, as amended, entered into by
    Shandong Sanlian Group, Shandong Economic Observer, Economic
    Observer Press Office and Economic Observer Advertising. The
    term of the agreement is 50 years, expiring on May 9,
    2056. It automatically renews thereafter. Under this business
    cooperation agreement, Economic Observer Advertising has the
    exclusive rights to sell advertising for the Economic
    Observerand pays Economic Observer Press Office an
    advertising agency fee. Economic ObserverAdvertising has
    the right to acquire the intellectual property assets of the
    Economic Observerto the extent permissible under
    applicable law, provides management and information consulting
    services on the distribution of the Economic Observerand
    assists Economic Observer Press Office in the management of the
    printing of the Economic Observer. Economic Observer
    Press Office may terminate the agreement by paying for losses
    incurred by Economic Observer Advertising due to the
    termination, including future losses resulting from such
    termination. Economic Observer Advertising may unilaterally
    terminate and may terminate and seek damages including future
    losses upon certain breaches by Economic Observer Press Office;
    an agreement on organizing an information consultation committee
    entered into by Shandong Sanlian Group, XFL Economic Observer
    Press Office, and Economic Observer Advertising. Shandong
    Sanlian Group and XFL agreed to establish an eight-member
    committee with four members appointed by Shandong Sanlian Group
    and four members, including the chairman of the committee,
    appointed by XFL. The committee is to provide proposals and
    views on the editing, content, appearance, and format of the
    Economic Observer, hold discussions with Economic
    Observer Press Office and provide consultancy to Economic
    Observer Press Office. Economic Observer Press Office retains
    final editing rights. The parties assume their 36




---



##### Table of Contents



own costs in operating the committee, and there are otherwise no
    payment terms. None of the parties may unilaterally terminate
    the agreement; and  
    a business cooperation agreement, as amended, entered into by
    Economic Observer Press Office, Economic Observer Advertising,
    Guangzhou Jingshi, which is our affiliated entity, and Beijing
    Jingshi Jingguan Advertising Co., Ltd., or Jingshi Jingguan, a
    joint venture between Guangzhou Jingshi and Economic Observer
    Advertising. Jingshi Jingguan operates as the advertising agent
    in relation to advertisements placed by financial institutions
    for the Economic Observerand conducts events-related
    businesses. No party may unilaterally terminate the agreement.  Agreements by our Advertising Group securing advertising
    agency arrangements.
  
    an advertising agent contract between Shangtuo Zhiyang
    International Advertising (Beijing) Co., Ltd., or Shangtuo
    Zhiyang, a subsidiary of our affiliated entity, Beijing Taide,
    and Beijing Yi Sheng Le Ju Information Service Ltd., a sina.com
    company. Pursuant to the contract, Shangtuo Zhiyang served as
    the advertising agent for sina.com with respect to the real
    estate advertisements in Beijing and Tianjin. The contract
    initially covered the period from January 1, 2008 and
    December 31, 2008, and it was amended and restated to cover
    the period from January 1, 2009 and December 31, 2009.
    an advertising agent contract between Shangtuo Zhiyang and
    Beijing Sohu New Media Information Technology Ltd., a sohu.com
    company. Pursuant to the contract, Shangtuo Zhiyang served as
    the advertising agent for sohu.com and its affiliated websites.
    The contract initially covered the period from January 1,
    2008 and December 31, 2008, and it was amended and restated
    to cover the period from January 1, 2009 and
    December 31, 2009.  Agreement regarding China Youth League and associated
    websites. e-commerce.
  Our
    customers
    Broadcast
       37




---



##### Table of Contents



Print
      Advertising
  Wal-Mart.
      Distribution
    Fortune China
  Funds
    Observer Chinese Venture, Money Journal the
    Economic Observer
  Our sales
    and marketing team
   38




---



##### Table of Contents



Seasonality
    Competition
    Broadcast
    Fortune China
      Print
  Economic Observer Investor Journal 21st Century Business
    Herald First Financial Daily China Business
    Journal
  Money Journal Funds Observer Chinese
    Venture Caijing Magazine New Fortune Chinese Entrepreneur Business Week Fortune Forbes
  Advertising
     39




---



##### Table of Contents



Intellectual
    property
      Regulation
    Regulatory
    authorities
    
    the National Peoples Congress;
    the State Council;
    the National Development & Reform Commission (formerly
    the State Development and Planning Commission);
    the Ministry of Commerce, a combination of the former Ministry
    of Foreign Trade and Economic Co-operation, the State Economy
    and Trade Commission, and the State Development and Planning
    Commission;
    the State Administration for Industry and Commerce;
    the Ministry of Culture;
    the State Administration of Radio, Film & Television;
    the General Administration for Press and Publication (formerly
    the State Press and Publications Administration);
    the National Bureau of Statistics; and
    the Ministry of Industry & Information Technology
    (formerly the Ministry of Information Industry). 40




---



##### Table of Contents



Regulatory
    framework
    
    laws and regulations restricting and governing investments of
    private capital in general and foreign capital in particular.
    For purposes of these restrictions under PRC laws,
    foreign investment includes investment from Hong
    Kong, Taiwan and Macau. As a result of these restrictions on
    investments of foreign and private capital, we conduct our
    businesses in China substantially through contractual
    arrangements with our affiliated PRC entities. To further comply
    with these restrictions, our affiliated PRC entities in our
    Print and Broadcasting Groups operate through contractual
    arrangements with our business partners, including a television
    station, radio stations, a newspaper press office and a magazine
    press office;
    industry specific laws and regulations that govern the entities
    and business activities within the specified industry;
    copyright and trademark protection and domain name registration
    regulations, which we and our affiliated entities use to protect
    our and their intellectual property;
    regulations on foreign currency exchange; and
    regulations on tax.    Regulations
    on investment of foreign and private capital in the media,
    advertising, market research and telecommunications
    industries
    
    the Foreign Investment Industrial Guidance Catalog, or the
    Catalog, jointly promulgated by the National
    Development & Reform Commission and the Ministry of
    Commerce on October 31, 2007 and which became effective as
    of December 1, 2007;
    the Several Decisions on the Entry of Private Capital into the
    Culture Industry, or the Decisions, issued by the State Council
    on April 13, 2005;
    the Several Opinions on Foreign Investment in the Culture
    Sector, or the Opinions, jointly issued by the State
    Administration of Radio, Film and Television, the Ministry of
    Culture, the General Administration for Press and Publication,
    the National Development & Reform Commission and the
    Ministry of Commerce on July 6, 2005; and
    the Regulations for the Administration of Foreign-Invested
    Telecommunications Enterprises, or the Regulations, issued by
    the State Council on December 11, 2001 and revised on
    September 10, 2008.       41




---



##### Table of Contents



Regulations
    on television, radio and movie industry
  Television
    and radio stations.
          Radio
    and television program production
   42




---



##### Table of Contents



Movie
    industry
       43




---



##### Table of Contents



Import
    and Broadcasting of Overseas TV Programs
            Regulations
    on the publication industry
  Newspapers
    and magazines
  Publication of newspapers or magazines.
   44




---



##### Table of Contents



Economic Observer Investor Journal Money Journal Chinese Venture Investor Journal
  Distribution.
  Money
    Journal Chinese Venture the Economic Observer Investor Journal
  Printing
    of publications
     45




---



##### Table of Contents



Money Journal Chinese Venture Economic Observer
  Money
    Journal Chinese Venture Economic Observer Investor Journal
  Distribution
    of publications
    Money Journal Chinese Venture Economic
    Observer Money Journal
  Regulations
    on the advertising industry
  Establishment
    of advertising entities
    
    the Advertising Law promulgated by the National Peoples
    Congress on October 27, 1994;
    the Administration Regulations of Advertising Industry,
    promulgated by the State Council on October 26, 1987;
    the Implementation Rule of Advertising Industry Administration,
    or the Implementation Rule, promulgated by the State
    Administration for Industry and Commence on January 9,
    1988, amended in 1998, 2000 and 2004, and effective as of
    January 1, 2005; and
    the Measures on Administration of Advertising Operation
    Licenses, promulgated by the State Administration for Industry
    and Commence on November 30, 2004.   46




---



##### Table of Contents



Advertising
    content
   47




---



##### Table of Contents



Operational
    matters of the advertising business
      Outdoor
    advertising
      
    utilize traffic safety facilities and traffic signs;
    impede the use of public facilities, traffic safety facilities
    and traffic signs;
    obstruct commercial and public activities or damage the urban
    area landscape; 48




---



##### Table of Contents




    be placed in restricted areas near government offices, cultural
    landmarks or historical or scenic sites; or
    be placed in areas prohibited by the local governments from
    having outdoor advertisements.        Marketing
    services
      Regulations
    on the market research industry
       49




---



##### Table of Contents



Regulations
    on the telecommunications industry
    
    the Regulation on Telecommunications promulgated by the State
    Council on September 25, 2000;
    the Administrative Measures for Telecommunications Business
    Operating License promulgated by the Ministry of Information
    Industry on December 26, 2001; and
    The Catalogue of Classes of Telecommunications Businesses
    promulgated by the Ministry of Information Industry on
    February 21, 2003.        
    oppose the fundamental principles determined in the PRC
    Constitution;
    compromise state security, divulges state secrets, subvert state
    power or damage national unity;
    harm the dignity or interests of the state;
    incite ethnic hatred or racial discrimination or damage
    inter-ethnic unity;
    sabotage Chinas religious policy or propagate heretical
    teachings or feudal superstitions;
    deliver rumors, disturb social order or disrupt social stability;
    propagate obscenity, pornography, gambling, violence, murder or
    fear or incite the commission of crimes;
    insult or slander a third party or infringe upon the lawful
    rights and interests of a third party; or
    include other content prohibited by laws or administrative
    regulations.     50




---



##### Table of Contents



Regulations
    on intellectual property protection
    Copyright
      Economic Observer Fortune China Money Journal
  Trademark
    Money Journal The Economic Observer
   51




---



##### Table of Contents



Domain
    names
      Regulations
    on foreign currency exchange
  Foreign
    currency exchange
      Foreign
    exchange registration of offshore investment by PRC
    residents
       52




---



##### Table of Contents



Dividend
    distribution
    
    The Wholly Foreign Owned Enterprise Law, promulgated by the
    National Peoples Congress on April 12, 1986 and
    amended on October 31, 2000;
    The Wholly Foreign Owned Enterprise Law Implementing Rules,
    promulgated by the National Peoples Congress on
    December 12, 1990 and amended on April 12, 2001;
    The Enterprise Income Tax Law, promulgated by the National
    Peoples Congress on March 16, 2007; and
    The Implementation Rules on Enterprise Income Tax Law,
    promulgated by the State Council on December 6, 2007.          Tax
    C.
    Organizational
    Structure  Our
    corporate structure and contractual arrangements
    
    Broadcast 53




---



##### Table of Contents




    Beijing Pioneer Media Advertising Co., Ltd., a wholly-owned
    subsidiary of Shanghai Yuan Zhi Advertising Co., Ltd., our
    affiliated entity, that acts as the exclusive external
    advertising agent for Shanghai Camera Media Investment Co.,
    Ltd., or Shanghai Camera;
    Beijing Perspective, an affiliated entity that primarily engages
    in producing the Fortune Chinaseries of television
    programming;
    Beijing Century Advertising Co., Ltd., or Century Media
    Advertising, an affiliated entity that has the exclusive rights
    to sell advertising for and provides non-news content to China
    Radio Internationals EasyFM stations in Beijing and
    Shanghai;
    Beijing Mobile Interactive Co., Ltd, or M-in, an affiliated
    entity with mobile service provider licenses to operate wireless
    Mobile Value-Added Service (MVAS) platforms nationwide in China;
    Guangzhou Singshine Communication Co., Ltd, or Singshine
    Communication, an affiliated entity that places advertisements,
    provides advertising, design and production services to
    customers, and has exclusive rights to sell advertising for and
    to provide content to channel FM103.6, FM90.0 and FM107.7 of the
    Guangdong Peoples Radio Station;
    Beijing Century Media, a wholly-owned subsidiary of Beijing
    Taide, our affiliated entity, that holds a group of subsidiaries
    primarily engaging in producing entertainment programming
    content for television stations, creating three-dimensional
    animations and special effects and providing broadcast design
    for television channels; and
    Shanghai Renhe Movie and Television Intermediary Co., Ltd., or
    Shanghai Renhe, an affiliated entity that principally engages in
    investment in the production and distribution of television
    drama series.  
    Print  
    Guangzhou Jingshi Culture Intermediary Co., Ltd., or Guangzhou
    Jingshi, an affiliated entity that has the exclusive rights to
    sell advertising for and provides management and information
    consulting services to Money Journalmagazine. Beijing
    Qiannuo Advertising Co., Ltd., a subsidiary of Guangzhou
    Jingshi, has the exclusive rights to sell advertising for and
    provide management and information consulting services to the
    Chinese Venturemagazine; and
    Economic Observer Advertising, a wholly-owned subsidiary of
    Beijing Taide, our affiliated entity, that has the exclusive
    rights to sell advertising for, and provide consulting services
    to, the Economic Observer, a financial newspaper.
    Economic Observer Advertising also subcontracts events-related
    business to and serves as advertising agent for financial
    institution advertisers of the Economic Observerthrough
    Beijing Jingshi Jingguan Advertising Co., Ltd., its joint
    venture with Guangzhou Jingshi. Economic Observer Advertising
    also had the exclusive right during 2008 to sell advertising to
    the Investor Journal, a financial newspaper.  
    Advertising  
    Shenzhen Active Trinity Advertising Co., Ltd., or Shenzhen
    Trinity, an affiliated entity that carries out advertising
    services;
    Beijing Taide Advertising Co., Ltd., or Beijing Taide, an
    affiliated entity whose subsidiaries include Chinese advertising
    agencies that also produce advertising;
    Beijing Xintai Huade Advertising Co., Ltd., or Xintai Huade, an
    affiliated entity that carries out advertising services;
    Shanghai Singshine Marketing Service Co., Ltd., or Shanghai
    Singshine Marketing, an affiliated entity that principally
    engages in below-the-line marketing;
    Beijing Jinjiu Tianyi Tianjiu Lianhe Advertising Co., Ltd., an
    affiliated entity that primarily engages in online advertising;
    Shanghai IF Advertisement Design and Production Co., Ltd., an
    affiliated entity that primarily engages in below-the-line
    marketing; 54




---



##### Table of Contents




    Shanghai Yifu Advertising Design and Promotion Co., Ltd., an
    affiliated entity that primarily engages in below-the-line
    advertising; and
    Shanghai Hyperlink Market Research Co., Ltd., or Hyperlink, a
    subsidiary of Beijing Taide that primarily engages in market
    research in China and provides services including overall market
    evaluation, consumer analysis, brand analysis and product
    evaluation.    
    Broadcast  
    Jia Luo Business Consulting (Shanghai) Co., Ltd., or Jia Luo,
    which provides consulting services and advisory services to
    Shanghai Camera;
    New China Media (Shanghai) Co., Ltd., or New China, which
    primarily engages in providing services to Century Media
    Advertising;
    Small World Television Ltd., or Small World, which primarily
    engages in the production of television programs and also offers
    television channel packaging services; and
    Xinhua Media Entertainment, which engages in the development,
    production and pre-production of film entertainment content.  
    Print  
    EconWorld (Shanghai) Co., Ltd., or EconWorld Shanghai, which
    primarily engages in organizing events in China.  
    Advertising  
    Active Advertising (Guangzhou) Co., Ltd., or Active Guangzhou,
    which primarily operates as advertising agent for PRC customers.    
    Print  
    Money Journal Publication Limited, or Money Journal Publication
    Hong Kong, which engages primarily in providing management and
    information consulting services, including with respect to
    distribution, to Money Journaland its 100% owned
    subsidiary, Money JournalAdvertising Company Limited, or
    Money JournalAdvertising Hong Kong, which engages
    primarily in advertising for Money Journal in Hong Kong.  
    Advertising  
    Active Advertising Agency Limited, or Active Advertising Hong
    Kong, which primarily operates as an advertising agent to place
    advertising on media in Hong Kong; and
    JTT Advertising Limited, or JTT, which primarily engages in
    below-the-line marketing in Hong Kong. 55




---



##### Table of Contents





56




---



##### Table of Contents





(1)
    
    The remaining 25% equity interest in Xinhua Media Entertainment
    Limited is 17% owned by Leeding Media, LLC, a company owned by
    David U. Lee, and 8% owned by K-Jam Media, Inc., a company owned
    by Kia Jam.(2)
    
    Contractual agreements consist of a secured loan agreement
    entered into by New China Media Co., Ltd., or New China and Wang
    Yonghong, a member of the management team of and the 50%
    shareholder of Beijing Century Media Advertising Co., Ltd., or
    Century Media Advertising, an exclusive equity purchase option
    agreement, an equity pledge agreement and a subrogation
    agreement entered into among New China, Century Media
    Advertising, and Wang Yonghong; a secured loan agreement entered
    into by New China and Kuang Peiyue, the 50% shareholder of
    Century Media Advertising, an exclusive equity purchase option
    agreement, an equity pledge agreement and a subrogation
    agreement entered into among Kuang Peiyue, New China and Century
    Media Advertising.(3)
    
    Contractual agreements consist of a secured loan agreement
    entered into by Wuxianshijie (Beijing) Information Technology
    Co. Ltd, or Wuxianshijie and Gao Fei, the 50% shareholder of
    Beijing Mobile Interactive Co., Ltd, or M-in, an exclusive
    equity purchase option agreement, an equity pledge agreement and
    a subrogation agreement entered into among M-In, Wuxianshijie
    and Gao Fei; a secured loan agreement entered into by
    Wuxianshijie and Xue Donghua, the 50% shareholder of M-in, an
    exclusive equity purchase option agreement, an equity pledge
    agreement and a subrogation agreement entered into among M-in,
    Wuxianshijie and Xue Donghua.(4)
    
    Contractual agreements consist of a secured loan agreement
    entered into among Active Advertising (Guangzhou) Co., Ltd., or
    Active Guangzhou, An Lizhang and Zhang Wenjin, the two
    individual shareholders each holding 50% of the equity interest
    in Shenzhen Active Trinity Advertising Co., Ltd., or Shenzhen
    Trinity, an exclusive equity purchase option agreement, an
    equity pledge agreement and a subrogation agreement entered into
    among Active Guangzhou, Shenzhen Trinity, An Lizhang and Zhang
    Wenjin.(5)
    
    Contractual agreements consist of a secured loan agreement
    entered into among Active Guangzhou, An Lizhang and Wang
    Yonghong, the two individual shareholders each holding 50% of
    the equity interest in Beijing Taide Advertising Co., Ltd., or
    Beijing Taide, an exclusive equity purchase option agreement, an
    equity pledge agreement and a subrogation agreement entered into
    among Active Guangzhou, Beijing Taide, An Lizhang and Wang
    Yonghong.(6)
    
    Contractual agreements consist of a secured loan agreement
    entered into by Active Guangzhou and Kuang Peiyue, the 50%
    shareholder of Beijing Xintai Huade Advertising Co., Ltd., or
    Xintai Huade, an exclusive equity purchase option agreement, an
    equity pledge agreement and a subrogation agreement entered into
    among Xintai Huade, Active Guangzhou and Kuang Peiyue, a secured
    loan agreement entered into by Active Guangzhou and Wang Yue,
    the 50% shareholder of Xintai Huade, an exclusive equity
    purchase option agreement, an equity pledge agreement and a
    subrogation agreement entered into among Xintai Huade, Active
    Guangzhou and Wang Yue.(7)
    
    Contractual agreements consist of a secured loan agreement
    entered into among Jia Luo, Wan Jun, the 51% shareholder of
    Shanghai Yuan Zhi Advertising Co., Ltd., or Yuan Zhi, and Li
    Guang Jie, the 49% shareholder of Yuan Zhi, an exclusive equity
    purchase option agreement, an equity pledge agreement and a
    subrogation agreement entered into among Jia Luo, Yuan Zhi, Wan
    Jun and Li Guang Jie.(8)
    
    Contractual agreements consist of a secured loan agreement
    entered into by Guangzhou Excellent Consulting Service Co., Ltd,
    or Guangzhou Excellent, and Kuang Peiyue, the 50% shareholder of
    Shanghai Singshine Marketing Service Co., Ltd., or Shanghai
    Singshine Marketing, an exclusive equity purchase option
    agreement, an equity pledge agreement and a subrogation
    agreement entered into among Kuang Peiyue, Shanghai Singshine
    Marketing and Guangzhou Excellent; a secured loan agreement
    entered into by Guangzhou Excellent and Guo Jingjing, the 50%
    shareholder of Shanghai Singshine Marketing, an exclusive equity
    purchase option agreement, an equity pledge agreement and a
    subrogation agreement entered into among Guo Jingjing, Shanghai
    Singshine Marketing and Guangzhou Excellent.(9)
    
    Contractual agreements consist of a secured loan agreement
    entered into by EconWorld (Shanghai) Co., Ltd., or EconWorld
    Shanghai, and Fang Quan, the 50% shareholder of Guangzhou
    Jingshi Culture Intermediary Co., Ltd., or Guangzhou Jingshi, an
    exclusive equity purchase option agreement, an equity pledge
    agreement and a subrogation agreement entered into among
    EconWorld Shanghai, Guangzhou Jingshi and Fang Quan; a 57




---



##### Table of Contents



secured loan agreement entered into by EconWorld Shanghai and
    Wang Yonghong, the 50% shareholder of Guangzhou Jingshi, an
    exclusive equity purchase option agreement, an equity pledge
    agreement and a subrogation agreement entered into among
    EconWorld Shanghai, Guangzhou Jingshi and Wang Yonghong.(10)
    
    Shanghai Singshine Marketing owns 60% of the equity interest in
    Shanghai Liangdian Zhongduan Zhanshi Co., Ltd., or Shanghai
    Liangdian, a PRC company. The remaining 40% of the equity
    interest in Shanghai Liangdian is owned as to 23% by Wu Xiuhui,
    7% by Leng Liming, 5% by Hu Shengzhong and 5% by Yin Zijian.(11)
    
    The remaining 20% equity interest of Shangtuo Zhiyang
    International Advertising (Beijing) Co., Ltd., or Shangtuo
    Zhiyang, is held by Wang Xiao Yu. Wang Xiao Yu is a manager of
    Shangtuo Zhiyang.(12)
    
    In the first quarter of 2009, we signed an agreement to sell
    Hyperlink, together with its equity interests in Guangzhou
    Hyperlink Market Research Co., Ltd., for approximately
    $10.7 million. We are in the process of closing this
    transaction.(13)
    
    Contractual agreements consist of a secured loan agreement
    entered into by Beijing Century Media Culture Co., Ltd, or
    Beijing Century Media, and Xue Donghua, the 50% shareholder of
    Shanghai Renhe Movie and Television Intermediary Co., Ltd., or
    Shanghai Renhe, an exclusive equity purchase option agreement,
    an equity pledge agreement and a subrogation agreement entered
    into among Shanghai Renhe, Beijing Century Media and Xue
    Donghua; a secured loan agreement entered into by Beijing
    Century Media and Wang Lingjun, the 50% shareholder of Shanghai
    Renhe, an exclusive equity purchase option agreement, an equity
    pledge agreement and a subrogation agreement entered into among
    Shanghai Renhe, Beijing Century Media and Wang Lingjun.(14)
    
    Shanghai IF Advertisement Design and Production Co., Ltd., or
    Shanghai IF, has entered into contractual arrangements with Wang
    Yue that give us effective control over Shanghai Yifu
    Advertisement Design and Production Co., Ltd., or Shanghai Yifu.
    The contractual agreements consist of a secured loan agreement
    entered into by Shanghai IF and Wang Yue, the 100% shareholder
    of Shanghai Yifu, an exclusive equity purchase option agreement,
    an equity pledge agreement and a subrogation agreement entered
    into among Shanghai Yifu, Shanghai IF and Wang Yue.      
    exercise effective control over these affiliated entities and
    their respective subsidiaries;
    in the case of Century Media Advertising, to receive a
    substantial portion of the economic benefits from the affiliated
    entity and its subsidiaries in consideration for the services
    provided by our subsidiary, New China; and 58




---



##### Table of Contents




    have an exclusive option to purchase all or part of the equity
    interests in the various affiliated entities and certain of
    their subsidiaries in each case when and to the extent permitted
    by PRC law.    Agreements
    that provide effective control over our affiliated
    entities
    Loan agreement.
    
    a loan agreement in the amount of RMB100,000 ($14,000), entered
    into between Wan Jun, the 51% shareholder of Yuan Zhi and Li
    Guang Jie, the 49% shareholder of Yuan Zhi, as borrowers, and
    Jia Luo, as lender;
    a loan agreement in the amount of RMB5.0 million
    ($0.7 million), entered into between Wang Yong Hong, the
    50% shareholder of Century Media Advertising, as borrower, and
    New China, as lender;
    a loan agreement in the amount of RMB5.0 million
    ($0.7 million), entered into between Kuang Peiyue, the 50%
    shareholder of Century Media Advertising, as borrower, and New
    China, as lender;
    a loan agreement in the amount of RMB0.5 million ($69,000),
    entered into between Fang Quan, the 50% shareholder of Guangzhou
    Jingshi, as borrower, and EconWorld Shanghai, as lender;
    a loan agreement in the amount of RMB0.5 million ($69,000),
    entered into between Wang Yong Hong, the 50% shareholder of
    Guangzhou Jingshi, as borrower, and EconWorld Shanghai as lender;
    a loan agreement in the amount of RMB0.3 million ($41,000),
    entered into between Zhang Wen Jin and Eric An, each a 50%
    shareholder of Shenzhen Trinity, as borrowers, and Active
    Guangzhou, as lender;
    a loan agreement in the amount of RMB10.0 million
    ($1.4 million), entered into between Eric An and Wang Yong
    Hong, each a 50% shareholder of Beijing Taide, as borrowers, and
    Active Guangzhou, as lender;
    a loan agreement in the amount of RMB2.5 million
    ($0.3 million), entered into between Kuang Peiyue, the 50%
    shareholder of Xintai Huade, as borrower, and Active Guangzhou,
    as lender;
    a loan agreement in the amount of RMB2.5 million
    ($0.3 million), entered into between Wang Yue, the 50%
    shareholder of Xintai Huade, as borrower, and Active Guangzhou,
    as lender; 59




---



##### Table of Contents




    a loan agreement in the amount of RMB5.0 million
    ($0.7 million), entered into between Gao Fei, the 50%
    shareholder of M-in, as borrower, and Wuxianshijie (Beijing)
    Information Technology Co., Ltd., as lender;
    a loan agreement in the amount of RMB5.0 million
    ($0.7 million), entered into between Xue Donghua, the 50%
    shareholder of M-in, as borrower, and Wuxianshijie (Beijing)
    Information Technology Co., Ltd., as lender;
    a loan agreement in the amount of RMB0.5 million ($70,000),
    entered into between Kuang Peiyue, the 50% shareholder of
    Shanghai Singshine Marketing, as borrower, and Guangzhou
    Excellent Consulting Service Co., Ltd., as lender;
    a loan agreement in the amount of RMB0.5 million ($70,000),
    entered into between Guo Jingjing, the 50% shareholder of
    Shanghai Singshine Marketing, as borrower, and Guangzhou
    Excellent Consulting Service Co., Ltd., as lender;
    a loan agreement in the amount of RMB1.5 million
    ($0.2 million), entered into between Xue Donghua, the 50%
    shareholder of Shanghai Renhe, as borrower, and Beijing Century
    Media Culture Co., Ltd., as lender;
    a loan agreement in the amount of RMB1.5 million
    ($0.2 million), entered into between Wang Lingjun, the 50%
    shareholder of Shanghai Renhe, as borrower, and Beijing Century
    Media Culture Co., Ltd., as lender;
    a loan agreement in the amount of RMB0.5 million ($70,000),
    entered into between Wang Yue, the 100% shareholder of Shanghai
    Yifu, as borrower, and Shanghai IF, as lender; and
    a loan agreement in the amount of RMB0.5 million ($70,000),
    entered into between Li Quan, the 100% shareholder of Hantang
    Yueyi, as borrower, and Taihui, as lender.  Equity pledge agreement.
  Subrogation agreement.
  Agreements
    that provide the option to purchase the equity interest in the
    affiliated entity
   60




---



##### Table of Contents



30-day
  Agreements
    that transfer economic benefits to us
  Service agreement.
      
    the ownership structures of our affiliated entities, Yuan Zhi,
    Century Media Advertising, Beijing Taide, Shenzhen Trinity,
    Xintai Huade, Guangzhou Jingshi, M-in, Shanghai Singshine
    Marketing, Singshine Communication, and Shanghai Renhe, and our
    subsidiaries in China, comply in all material respects with all
    existing PRC laws and regulations;
    the contractual arrangements among our PRC subsidiaries,
    affiliated entities and their shareholders governed by PRC law
    are valid, binding and enforceable, and will not result in any
    violation of PRC laws or regulations currently in
    effect; and
    the business operations of our subsidiaries in China and our
    affiliated entities and their respective subsidiaries comply in
    all material respects with existing PRC laws and regulations.       61




---



##### Table of Contents



D.
    Property,
    Plants and Equipment    Item 4A.
    Unresolved
    Staff Comments    Item 5.
    Operating
    and Financial Review and Prospects  Form 20-F. Form 20-F.
  A.
    Operating
    Results    Fortune China
  Acquisitions
      Broadcast.
  
    Upper Step.  We signed a series of agreements
    pursuant to which we acquired 19.0% of the equity of Upper Step
    on February 28, 2006, at an initial price of
    $5.1 million. This amount was paid by Xinhua Financial
    Network and included in our promissory notes to Xinhua Financial
    Network and XFL. As part of the same series of agreements, Sino
    Investment Holdings Limited, or Sino Investment, also purchased
    37.0% of 62




---



##### Table of Contents



Upper Step. We also injected an additional $3.2 million
    into Upper Step. Of that amount, $2.0 million was a loan
    from us paid by Xinhua Financial Network, and we subsequently
    repaid Xinhua Financial Network. On September 22, 2006, we
    acquired an additional 37.0% of the equity of Upper Step from
    Sino Investment for a consideration of 6,478,437 class A
    common shares, $9.1 million paid by XFL and 4,099,968
    warrants to purchase our class A common shares at $3.659
    per share. The warrants are immediately exercisable and valid
    for five years. In addition, Sino Investment issued a demand
    promissory note to us in the amount of $7.9 million as part
    of this transaction. On October 24, 2006, we made an
    additional payment of $10.0 million partially under our
    obligations for the purchase of 19.0% of Upper Step and
    partially to meet the obligations of Sino Investment for its
    purchase of 37.0% of Upper Step. On November 1, 2006, we
    acquired the remaining 44.0% of the equity of Upper Step from
    Honour Rise Services Limited, or Honour Rise, a wholly-owned
    subsidiary of Wai Gao Qiao, for 6,407,018 class A common shares.
    Primarily through Upper Steps subsidiaries and affiliated
    entities, we have our strategic partnership with Shanghai Camera
    Media Investment Co., Ltd., or Shanghai Camera, the content and
    advertising provider to Inner Mongolia Satellite Television.
    Until Upper Step entered into this strategic partnership, it had
    no operations.  
    Beijing Perspective.  Through Beijing Century
    Media, an affiliated entity, we acquired 51.0% of the equity of
    Beijing Perspective Orient Movie and Television Intermediary
    Co., Ltd., or Beijing Perspective, on July 28, 2006. Xinhua
    Financial Network financed the purchase price for this
    acquisition. On November 13, 2007, we acquired the
    remaining 49% of the equity of Beijing Perspective for
    approximately $10.5 million, of which approximately
    $8.3 million was settled by the issuance of 2,043,347 of
    our class A common shares valued at $4.06 per share.
    Beijing Perspective engages in the production, distribution and
    syndication of Fortune China.
    Accord Group.  We acquired 19.0% of the equity
    of Accord Group on January 23, 2006 at a price of $440,000,
    which was paid by Xinhua Financial Network. This amount was
    included in our promissory notes to Xinhua Financial Network and
    XFL. On September 22, 2006, we acquired 61.0% of the equity
    of Accord Group from Sino Investment by issuing 451,107 of our
    class A common shares to Sino Investment. On
    November 1, 2006, we acquired the remaining 20.0% of the
    equity of Accord Group from Honour Rise for 125,053 of our
    class A common shares. Through Accord Group and its
    affiliated entity, Century Media Advertising, we have a
    partnership with China Radio Internationals exclusive
    advertising agent to provide content to and exercise the
    exclusive right to sell advertising for the EasyFM stations of
    Beijing and Shanghai.
    M-in.  We acquired 100% of the ordinary shares
    of East Alliance Limited on June 4, 2007 at an initial
    price of approximately $9.5 million. East Alliance Limited
    is an investment holding company for its wholly-owned
    subsidiaries and VIEs, collectively M-in. In addition to the
    initial consideration, the equity owners of M-in are entitled to
    additional consideration, 60% payable in cash and 40% in our
    common shares, based on a predetermined earn-out formula applied
    to aggregate audited operating results through December 31,
    2007 and 2008. M-in is a mobile service provider that provides
    mobile value added services such as wireless application
    protocol, or WAP, text messaging, multimedia messaging service,
    or MMS, and color ring back tone variously supported by major
    mobile telecommunication operators in China. M-in also has
    marketing and distribution channels including television, print,
    Internet and other media, and creates and manages a wide range
    of mobile and online interactive products. Based on M-ins
    audited operating results through December 31, 2007, we
    paid additional consideration totaling $11.9 million for
    the year ended December 31, 2008, which resulted in
    additional goodwill of $11.9 million. The additional
    consideration paid consisted of a cash payment of
    $7.1 million, with the remaining $4.7 million settled
    by the issuance of 3,261,670 of our class A common shares.
    Beijing Century Media.  XFL, through a
    subsidiary, lent funds to two PRC citizens, who used the funds
    to buy a combined 100% equity interest in Beijing Century Media
    on September 9, 2005. On the same day, the subsidiary of
    XFL entered into a set of agreements with these two PRC citizens
    to give XFL effective control over Beijing Century Media. XFL
    transferred its control of Beijing Century Media to us through
    one of our affiliated entities on March 16, 2006 at a price
    of $11.4 million. This amount was included in our
    promissory notes to XFL and Xinhua Financial Network. In 2007,
    we recorded additional consideration of $7.4 million
    pursuant to a predetermined earn-out formula applied to
    aggregate audited operating results through December 31,
    2006. This amount was settled on our behalf by XFL company
    through an issuance of XFLs 63




---



##### Table of Contents



shares. For the year ended December 31, 2008, based on the
    relevant income level Beijing Century Media reported
    through December 31, 2007, we paid additional consideration
    of $8.7 million which resulted in additional goodwill of
    $8.7 million. Additional consideration of $3.2 million
    was paid in cash by XFL on our behalf, and the remaining
    $5.5 million was settled by the issuance of 156,316 XFL
    shares.  
    Xinhua Media Entertainment.  We established
    Xinhua Media Entertainment Limited, or Xinhua Media
    Entertainment, in April of 2008 and hold 75% of its equity
    interest.  Print.
  
    Economic Observer Advertising.  Through Beijing
    Taide Advertising Co., Ltd., or Beijing Taide, an affiliated
    entity, we acquired 50.0% of the equity of Beijing Jingguan
    Xincheng Advertising Co., Ltd., or Economic Observer
    Advertising, on June 8, 2006. XFL financed the purchase
    price for this acquisition, and we subsequently issued 5,761,317
    class B common shares to XFL as consideration (note these
    class B common shares converted to class A common
    shares on December 31, 2008). We acquired the remaining
    50.0% of the equity of Economic Observer Advertising through
    Beijing Taide on September 15, 2006. In 2007, we recorded
    additional consideration of $9.3 million pursuant to a
    predetermined earn-out formula applied to aggregate audited
    operating results through December 31, 2006. This amount
    was settled on our behalf by XFL. Economic Observer Advertising
    has the exclusive rights to sell advertising for and provides
    advisory services and other management consulting services to
    the Economic Observernewspaper.
    EconWorld Media.  XFL subscribed for 60.0% of
    the equity of EconWorld Media Limited, or EconWorld Media, on
    May 26, 2005 at an initial price of $1.5 million and
    transferred that interest to us on January 12, 2006. On
    June 8, 2006, we subscribed to one additional share of
    EconWorld Media at a price of $2.8 million in fulfillment
    of an earn-out obligation, which was paid by XFL. We issued one
    share to XFL as consideration, which was subsequently divided
    into 1,000 shares. We acquired another 12.0% of the equity
    of EconWorld Media on June 21, 2006 at a price of
    $1.1 million, which was also paid by XFL. On
    December 28, 2006, we acquired the remaining 28.0% at a
    price of $5.0 million, which was paid by XFL. EconWorld
    Media operates the magazine business of our Print Group and is
    our predecessor.  Advertising.
  
    Xinhua Finance Advertising.  XFL acquired 100%
    of the equity in Ming Shing at a cost of $29.0 million plus
    a series of earn-out obligations, which, together with the first
    payment, were estimated to be $80.5 million, on
    January 12, 2006 and subsequently transferred Ming Shing to
    us on March 16, 2006, at a price of $80.5 million. XFL
    is responsible for the future earn-out payments. This amount was
    included in our promissory notes to XFL and Xinhua Financial
    Network. Ming Shing subsequently changed its name to Xinhua
    Finance Advertising Limited on June 19, 2006. Xinhua
    Finance Advertising and certain of its subsidiaries and
    affiliated entities are engaged in advertising design,
    production and placement services for television, print media
    and outdoor billboards on university campuses to customers in
    the PRC and Hong Kong. Based on Xinhua Finance
    Advertisings audited operating results through
    December 31, 2005, we paid additional consideration
    totaling $31.4 million during the year ended
    December 31, 2006, which resulted in additional goodwill of
    $31.4 million. In 2007, we recorded additional
    consideration of $25.0 million pursuant to a predetermined
    earn-out formula applied to aggregate audited operating results
    through December 31, 2006. This amount was settled on our
    behalf by XFL, partially through an issuance of XFLs
    shares. For the year ended December 31, 2008, based on
    Xinhua Finance Advertisings audited operating results
    through December 31, 2007, we paid additional consideration
    totaling $35.4 million which resulted in additional
    goodwill of $35.4 million. XFL paid additional
    consideration of $17.7 million on our behalf, which was
    settled through the issuance of 289,481 XFL shares.
    Singshine Marketing.  We acquired 100% of
    Singshine (Holdings) Hongkong Ltd.s ordinary shares, and
    its subsidiaries and VIEs, collectively Singshine Marketing, on
    June 11, 2007 for an initial price of approximately
    $6.4 million. In addition, the shareholders of Singshine
    Marketing are entitled to additional cash consideration based on
    a predetermined earn-our formula applied to aggregate audited
    operating results through December 31, 2007, 2008 and 2009.
    Singshine Marketing is engaged in below-the-line marketing
    services. For the year ended December 31, 2008, based on
    Singshine Marketings audited operating results through
    December 31, 2007, we paid additional cash consideration
    totaling $5.4 million and have finalized 64




---



##### Table of Contents



the purchase price allocation on the assets acquired and
    liabilities assumed pursuant to this transaction. This resulted
    in additional goodwill of $6.6 million for the year ended
    December 31, 2008.  
    JCBN China.  We acquired 100% of the ordinary
    shares of Shanghai Paxi Advertising Co. Ltd. and its
    subsidiaries, collectively JCBN China, on November 27, 2007
    for an initial price of approximately $40.8 million. In
    addition, the equity owners of JCBN China are entitled to
    additional consideration, 60% payable in cash and 40% in our
    common shares based on a predetermined earn-out formula applied
    to aggregate audited operating results through December 31,
    2008 and 2009. JCBN China is a leading advertising agency in
    Chinas online property and imported spirits sectors.
    JCBN Hong Kong.  We acquired 100% of the
    ordinary shares of Profitown Development Ltd. and its
    subsidiaries, collectively JCBN Hong Kong, on November 27,
    2007 for an initial price of approximately $2.2 million. In
    addition to the initial consideration, the equity owners of JCBN
    Hong Kong are entitled to additional consideration, 60% payable
    in cash and 40% in our common shares, based on a predetermined
    earn-out formula applied to aggregate audited operating results
    through December 31, 2008 and 2009. JCBN Hong Kong is
    principally engaged in below-the-line marketing.
    Hyperlink.  Through Beijing Taide, an
    affiliated entity, we acquired 51.0% of the equity of Hyperlink
    on August 1, 2006. XFL financed the purchase price for this
    51.0% equity, and we subsequently issued 1,679,012 class B
    common shares to XFL as consideration (note these class B
    common shares converted to class A common shares on
    December 31, 2008). On September 18, 2006, we acquired
    the remaining 49.0% of the equity of Hyperlink through Beijing
    Taide. Based on Hyperlinks audited operating results
    through June 30, 2007, we paid additional consideration
    totaling $2.8 million for the year ended December 31,
    2008, which resulted in additional goodwill of
    $2.8 million. XFL paid this amount in cash on our behalf.
    In the first quarter of 2009, we signed an agreement to sell
    Hyperlink for approximately $10.7 million.
    China Youth League.  Pursuant to an agreement
    we entered into in December 2008 with YMHK, and several
    other parties, we obtained the right to act as an exclusive
    advertising agent for Chinas university intranet portal
    and we agreed to provide working capital to YMHK in accordance
    with business plans and budgets to be agreed by all investors in
    YMHK and us. Such working capital is repayable upon demand by us
    with twelve months notice. The earliest date of repayment
    is January 1, 2011. This agreement builds upon the
    30-year
    cooperation agreement YMHK entered into with three Chinese
    government controlled companies to develop and operate a campus
    network in China. Chinas university intranet
    fiberoptically links nearly 2,000 university campuses throughout
    China with a local intranet platform, and serves an addressable
    student market of 30 million.  General
    factors affecting our results of operations
     65




---



##### Table of Contents



Specific
    factors affecting our results of operations
    
    the quality of the content and ratings of our strategic
    partners broadcast programs;
    the reach and timing of our strategic partners broadcast;
    the circulation numbers, the quality of the content of, and the
    composition and location of the readership of, our strategic
    partners publications;
    the quality of the advertising we produce for advertisers;
    the quality of the research services that we offer to
    advertisers;
    the pricing of our advertising;
    the pricing and quality of our marketing services, including
    events organization;
    the quality of the programming we create;
    the popularity of the programs; and
    the pricing of our television programs and production services.  Our
    revenues
  Net revenues.
    
    advertising services, including our below-the-line services,
    which accounted for 76.1%, 64.3% and 58.0% of our total net
    revenues for the years ended December 31, 2006, 2007 and
    2008, respectively;
    content production and sales, which accounted for 11.1%, 5.7%
    and 6.7% of our total net revenues for the years ended
    December 31, 2006, 2007 and 2008, respectively;
    advertising sales, which accounted for 11.3%, 29.1% and 35.1% of
    our total net revenues for the years ended December 31,
    2006, 2007 and 2008, respectively; and
    publishing services, which accounted for 1.5%, 0.9% and 0.2% of
    our total net revenues for the years ended December 31,
    2006, 2007 and 2008, respectively.  Advertising services revenues.
  
    Advertising and user service fees for mobile value-added
    services (by the Broadcast Group).We generate
    revenues by providing mobile value-added services. We recognize
    these revenues when services are delivered to mobile users. In
    June 2007, we began recognizing revenues from advertising and
    user service fees for mobile value-added services. Our
    consolidated results of operations for year ended
    December 31, 2006 did not include these revenues as we
    acquired our mobile value-added services operations in June
    2007. Our consolidated results of operations for the years ended
    December 31, 2007 and 2008 included these revenues from the
    date we acquired M-in.
    Marketing services, primarily for online real estate, spirits
    and events organization (by the Broadcast Group, the Print Group
    and the Advertising Group).Our marketing
    services are provided by our Broadcast, Print and Advertising
    Groups. The fees we charge for marketing services vary,
    depending primarily on competition and our estimated costs of
    providing the services. We recognize these revenues when the
    services are provided. Our consolidated results of operations
    for the years ended December 31, 2006, 2007 and 2008 also
    included marketing services revenues generated by the newspaper
    and magazine operations of our Print Group, our Advertising
    Group and our Broadcast Group. 66




---



##### Table of Contents




    Acting as Advertising agent to place advertisements on
    certain programs aired by various television stations, on
    billboards on some university campuses in Shanghai and in
    certain print and electronic media (by the Advertising
    Group).In the year ended December 31, 2006,
    we generated advertising services revenues from advertising,
    sponsorship and sponsored programming on Inner Mongolia
    Satellite Television through our strategic partnership with
    Shanghai Camera. In that same period, we also generated revenues
    based on our provision of consulting and advisory services to
    Shanghai Camera. In January 2007, we began recognizing revenues
    from advertising, sponsorship and sponsored programming directly
    rather than through Shanghai Camera, and at that point we began
    to categorize our revenues for advertising, sponsorship and
    sponsored programming in relation to Inner Mongolia Satellite
    Television as advertising sales revenues. However, we continue
    to categorize our revenues for providing consulting and advisory
    services and provision of content as advertising services
    revenues.
    Designing and producing television, radio, print and
    billboard advertisements (by the Advertising
    Group).We generate revenues from advertising
    broadcast on various television stations during certain
    programs. We also generate revenues from advertising on
    billboards placed on some university campuses in Shanghai and
    from advertising in certain print and electronic media. We may
    also provide additional services in relation to the placement
    and sales of advertisements, including the creation of the
    advertising or research services as part of our service package.
    We recognize these revenues when the related advertisements are
    aired on television, placed on the billboards or published in
    the print or electronic media, respectively. Our consolidated
    results of operations for the year ended December 31, 2006
    included these revenues from January 12, 2006, the date XFL
    acquired Xinhua Finance Advertising. Our consolidated results of
    operations for the years ended December 31, 2007 and 2008
    included these advertising services revenues.
    Research services (by the Advertising
    Group).  We generate revenues for providing
    research services to companies relating to market
    characteristics, consumer preferences and opinions with respect
    to advertising and media content, as well as business and
    technology issues if needed for each project. The fees we charge
    for research projects vary, depending on competition and our
    estimated costs for providing the research services. We
    recognize these revenues when the reported data is accepted by
    the customer. Our consolidated results of operations for the
    year ended December 31, 2006 included these revenues from
    the date we acquired a majority interest in Hyperlink. Our
    consolidated results of operations for the years ended
    December 31, 2007 and 2008 include these research service
    revenues.    Content production revenues.
   67




---



##### Table of Contents



Advertising sales revenues.
  
    Inner Mongolia Satellite Television (by the Broadcast
    Group).  Primarily through Upper Steps
    subsidiaries and affiliated entities, we have a strategic
    partnership with Shanghai Camera, the content and advertising
    provider to Inner Mongolia Satellite Television. In December
    2006, we began recognizing revenues from advertising sales,
    sponsorship and sponsored programs directly, rather than through
    Shanghai Camera, as the services were performed, which revenues
    are categorized as advertising sales revenues. In the year ended
    December 31, 2008, we generated revenues from advertising
    sales, sponsorship and sponsored programming on Inner Mongolia
    Satellite Television through our strategic partnership with
    Shanghai Camera, which has the exclusive rights to sell
    advertising for Inner Mongolia Satellite Television.
    China Radio Internationals EasyFM stations in Beijing
    and Shanghai (by the Broadcast Group).  We
    generate revenues from selling advertising time slots and
    sponsorship on China Radio Internationals EasyFM stations
    in Beijing and Shanghai. We recognize these revenues when the
    related advertisements are broadcast. Our consolidated results
    of operations for the years ended December 31, 2006, 2007
    and 2008 included these revenues from the date of our
    acquisition of a majority interest in the Accord Group.
    Channel FM107.7, FM103.6 and FM90.0 of the Guangdong
    Peoples Radio Station (by the Broadcast
    Group).We generate revenues from selling
    advertising time slots and sponsorships on several radio
    channels of the Guangdong Peoples Radio Station, including
    FM107.7, FM103.6 and FM90.0. We recognize these revenues when
    the related advertisements are broadcast. Our consolidated
    results of operations for the year ended December 31, 2006
    did not include these revenues as we acquired Singshine
    Communication, which has the exclusive rights to sell
    advertising for and the rights to provide content to channel
    FM107.7 on June 11, 2007. Our consolidated results of
    operations for the years ended December 31, 2007 and 2008
    included these revenues from the date of our acquisition of
    Singshine Communication. Our consolidated results of operations
    for the years ended December 31, 2006 and 2007 did not
    include revenues from FM103.6 and FM90.0 as FM103.6 and FM90.0
    first began to generate revenue on January 1, 2008
    Economic Observer (by the Print Group).  We
    generate revenues from selling advertising space in the
    Economic Observer. We have the exclusive rights to sell
    advertisements for the Economic Observer, and typically
    other advertising agents engage us to place advertisements on
    its pages. We receive payments through these agents or, when an
    advertiser directly advertises with us, from the advertiser. We
    recognize these revenues when the related advertisements are
    published. Our consolidated results of operations for the years
    ended December 31, 2006, 2007 and 2008 included these
    revenues from the date of the acquisition.
    Money Journal and Chinese Venture (by the Print
    Group).We generate revenues from selling
    advertising space in the Money Journal and Chinese
    Venture. Most advertisements placed in these magazines
    result in revenues to us, except for those advertisements placed
    in Money Journalby Dow Jones, most of which result in
    revenues to Dow Jones. See Item 4.B. Information on
    the Company  Business overview 
    Arrangements with partners and suppliers  Our Print
    Groups relationship with Dow Jones. We generate some
    advertising sales revenues directly from advertisers, and some
    through agents. We recognize these revenues when the related
    advertisements are published. Our consolidated results of
    operations for the years ended December 31, 2006, 2007 and
    2008 included revenues generated by Money Journalas XFL
    acquired a controlling interest in the Money Journaloperations in September 2005. Our consolidated results of 68




---



##### Table of Contents



operations for the years ended December 31, 2007 and 2008
    included revenues generated by Chinese Ventureas this
    magazine first began to generate revenues in January 2007.  
    Outdoor advertising (by the Advertising
    Group).  We generate revenues from selling
    advertising space on traditional outdoor billboards, large-scale
    visual displays on architectural surfaces and inflatable
    billboards. We have the exclusive rights to sell advertisements
    on these surfaces, and typically other advertising agents engage
    us to place such advertisements. We receive payments through
    these agents or, when an advertiser directly advertises with us,
    from the advertiser. We recognize these revenues when the
    related advertisements are displayed. Our consolidated results
    of operations for the year ended December 31, 2006 did not
    include these revenues as we acquired Convey, a major outdoor
    advertising operator in Hong Kong and across southern China, on
    July 2, 2007. Our consolidated results of operations for
    the years ended December 31, 2007 and 2008 included these
    revenues from the date of the acquisition. We disposed of Convey
    on December 31, 2008.    Publishing services revenues. Money Journal Money
    Journal
  Money
    Journal Money Journal Money Journal Money
    Journal
  Chinese Venture Beijing
    Review
   69




---



##### Table of Contents



Operating
    costs and expenses
    Year Ended December 31,

Year Ended December 31,

Year Ended December 31,2006

2007

2008$

%

$

%

$

%(In thousands, except percentages)Total net revenues


58,966



100.0



134,839



100.0



186,031



100.0Operating costs and expenses:Cost of revenuesAdvertising services


27,654



46.9



58,048



43.0



74,735



40.2Content production


2,829



4.8



3,707



2.7



7,522



4.0Advertising sales


1,912



3.2



19,490



14.5



30,756



16.5Publishing services


1,386



2.4



854



0.6



1,479



0.8Selling and distribution


5,277



8.9



14,877



11.0



22,946



12.3General and administrative


12,840



21.8



24,349



18.1



52,068



28.0Impairment charges


















232,598



125.0Loss on disposal of subsidiaries


















4,721



2.5Total operating costs and expenses


51,898



88.0



121,325



89.9



426,825



229.3   Cost of revenues.
  
    Advertising services.  Advertising services
    costs primarily consist of our direct costs to secure
    advertising time or space with various broadcast and print
    media, costs to produce advertisements, mobile value-added
    services costs, marketing services costs and research costs.
    Mobile value-added services costs represent our direct costs of
    providing mobile value-added services. Marketing services costs
    represent our direct costs of providing marketing services,
    including events organization. Research costs are the direct
    costs relating to providing research services to companies that
    hire us to conduct market research for them including costs for
    conducting interviews and holding focus groups.
    Content production.  Content production costs
    are primarily direct costs we incur in producing television
    programs, including production overhead, development costs and
    pre-production costs, the cost of purchasing distribution rights
    of programs produced by other production companies, salaries and
    purchases of software and hardware.
    Advertising sales.  Advertising sales costs
    primarily consist of (1) the fees we pay to our strategic
    partners, and amortization of these fees, in return for
    advertising revenues generated from Inner Mongolia Satellite
    Television, China Radio Internationals EasyFM station in
    Beijing and Shanghai, channel FM107.7, FM103.6 and FM90.0 of the
    Guangdong Peoples Radio Station, Money Journal,
    Chinese Venture and the Economic Observer;
    (2) costs to maintain and operate our outdoor advertising
    network; (3) program production costs for the Fortune
    Chinaand other programs and (4) royalties to Dow Jones.
    Publishing services.  Publishing services costs
    primarily represent our costs incurred relating to the
    publication and distribution of Money Journaland certain
    books.    Selling and distribution expenses.
 70




---



##### Table of Contents



General and administrative expenses.
  Impairment charges.
  Loss on disposal of subsidiaries.
  Share-based compensation expenses.
     71




---



##### Table of Contents



and/or
    
    We granted the following restricted class A common shares
    to our Chief Executive Officer:  Number of



Fair Value ofCommon

Share Purchase

Non-vested

Type ofGrant Date

Shares Granted

Price

Shares

ValuationJune 13, 2006


11,050,000



Par value


$
0.60



Market approach   
    We granted the following restricted class A common shares
    to certain executives and employees:  Number of



Fair Value ofCommon

Share Purchase

Restricted Class A

Type ofGrant Date

Shares Granted

Price

Common Shares

ValuationJanuary 23, 2008


5,536,000



Par value


$
2.24



Market approach  72




---



##### Table of Contents




    We granted options to our employees and consultants as follows:  Number ofCommon





Fair Value ofShares


Option


Underlying


Fair Value ofUnderlying


Exercise


Common Shares at


Option at


Type ofGrant Date

Options Granted


Price


Grant Date


Grant Date


ValuationJuly 11, 2006


11,198,180
(1)

$
0.78


$
0.60


$
0.14



Market ApproachApril 25, 2007


90,000



6.50



5.20



1.85



Market ApproachSeptember 26, 2007


120,000



4.39



4.39



1.85



Market ApproachApril 1, 2008


400,000



1.325



1.62



0.97



Market ApproachApril 30, 2008


60,000



1.64



2.075



1.39



Market ApproachJune 13, 2008


120,000



1.265



1.265



0.77



Market ApproachJanuary 8, 2009


1,000,000



0.305



0.305



0.18



Market Approach     (1)
    
    Total number of options granted in 2006 was 11,198,180 of which
    an aggregate of 3,072,596 options were exercised during 2007 and
    2008 while 1,625,921 options lapsed during 2006, 2007 and 2008,
    mostly due to termination of employment.      Taxation
    The
    British Virgin Islands and Hong Kong
  2008-2009
  PRC
       73




---



##### Table of Contents



74




---



##### Table of Contents



Critical
    Accounting Policies
    Revenue
    recognition
    Money Journal Chinese
    Venture
         75




---



##### Table of Contents



Impairment
    of goodwill and long-lived assets
            Impairment
    of other assets
      E-data E-data), E-datas
    Income
    taxes
   76




---



##### Table of Contents



Valuation
    of share-based compensation
        Results
    of Operations
   77




---



##### Table of Contents



Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2006


2007


2008(In thousands, except per share data)Net revenues:Advertising services

$
44,862


$
86,681


$
107,892Content production


6,545



7,681



12,372Advertising sales


6,691



39,282



65,356Publishing services


868



1,195



411Total net revenues


58,966



134,839



186,031Cost of revenues:Advertising services


27,654



58,048



74,735Content production


2,829



3,707



7,522Advertising sales


1,912



19,490



30,756Publishing services


1,386



854



1,479Total cost of revenues


33,781



82,099



114,492Operating expenses:Selling and distribution


5,277



14,877



22,946General and administrative(1)


12,840



24,349



52,068Impairment charges










232,598Loss on disposal of subsidiaries










4,721Total operating expenses


18,117



39,226



312,333Other operating income






2,262



1,499Income (loss) from operations


7,068



15,776



(239,295
)Other income (expense), net


(898
)


1,340



(32,582
)Provision for income taxes (benefit)


1,070



(12,226
)


2,354Minority interest


1,704



1,303



641Equity loss of an investment


52







Net income (loss)

$
3,344


$
28,039


$
(274,872
)Deemed dividend on redeemable convertible preferred shares


(2,157
)






Dividends declared to redeemable convertible preferred shares


(5,335
)


(1,338
)


(2,000
)Net income (loss) attributable to holders of common shares

$
(4,148
)

$
26,701


$
(276,872
)Net income (loss) per share:Basic  class A common share

$
(0.08
)

$
0.23


$
(2.04
)Basic  class B common share

$
(0.08
)

$
0.23


$
(2.04
)Diluted  class A common share

$
(0.08
)

$
0.21


$
(2.04
)Diluted  class B common share

$
(0.08
)

$
0.21


$
(2.04
)Shares used in computation:Basic  class A common share


5,084



66,166



85,927Basic  class B common share


44,693



50,055



49,917Diluted  class A common share


5,084



86,315



85,927Diluted  class B common share


44,693



50,055



49,917     (1)
    
    Includes share-based compensation expenses of $2.4 million,
    $3.1 million and $12.5 million for the years ended
    December 31, 2006, 2007 and 2008, respectively. 78




---



##### Table of Contents



Year
    ended December 31, 2008 Compared to Year Ended
    December 31, 2007
  Net revenues.
  
    Advertising Services.  Our net revenues from
    advertising services were $86.7 million and
    $107.9 million, and constituted 64.3% and 58.0% of our
    total net revenues, for the years ended December 31, 2007
    and 2008, respectively. Our advertising services for 2007 and
    2008 were derived primarily from advertising agency services for
    print, television, billboard and website advertising medium,
    sales of research services and mobile value-added services, and
    marketing services, including event organization, visual design
    and production. Our advertising services revenue increased by
    $21.2 million between 2007 and 2008 primarily due to an
    increase in the number of mobile users in China, full year
    operation of our subsidiaries acquired in 2007, an increase in
    sales for our advertising platforms and the growth of our
    business generally. Our advertising service revenues as a
    percentage of total net revenues decreased primarily due to
    greater growth in other parts of our business.
    Content production.  Our net revenues from
    content production were $7.7 million and
    $12.3 million, and constituted 5.7% and 6.7% of our total
    net revenues, for the years ended December 31, 2007 and
    2008, respectively. Our content production revenues for 2007 and
    2008 represented primarily revenues from the production and
    distribution of drama series and other television programs,
    graphic design services, provision of post-production services
    and animation. Our content production revenues increased by
    $4.6 million between 2007 and 2008 mainly due to increased
    production of drama series and television programs and a
    packaging and animation contract with the Beijing Organizing
    Committee for the Games of the XXIX Olympiad in connection with
    the 2008 Beijing Olympics. Our content production revenues as a
    percentage of total net revenues decreased primarily due to
    greater growth in other parts of our business and in particular
    due to our acquisition of entities that produce revenues from
    other sources.
    Advertising sales.  Our net revenues from
    advertising sales were $39.3 million and
    $65.4 million, and constituted 29.1% and 35.1% of our total
    net revenues, for the years ended December 31, 2007 and
    2008, respectively. Our advertising sales revenues for 2007 and
    2008 included advertising revenues generated by Money
    Journal, Funds Observer, Chinese Venture, Weather
    Forecastand billboard advertising, the provision of content
    and sales of advertising to radio stations, sales of advertising
    and sponsorship on Inner Mongolia Satellite Television and sales
    of advertising and sponsorship in our Fortune Chinaprograms. Our advertising sales revenues increased by
    $26.1 million between 2007 and 2008 mainly due to increased
    sales for the advertising platforms described above, growth of
    our existing business, full year operation of Convey which we
    acquired in 2007 and our newly acquired exclusive right to sell
    advertising for, and the right to provide content to, radio
    channels FM103.6 and FM90.0.
    Publishing services.  Our net revenues from
    publishing services were $1.2 million and
    $0.4 million, and constituted 0.9% and 0.2% of our total
    net revenues, for the years ended December 31, 2007 and
    2008, respectively. Our publishing service revenues for 2007 and
    2008 primarily consisted of subscription fees and retail sales
    of Money Journal, Funds Observerand China
    Venture. Our publishing service revenues decreased by
    $0.8 million between 2007 and 2008 primarily due to a
    decrease in magazine circulation as a result of decreased demand
    for financial publications in light of the global economic
    crisis.  Cost of revenues.
  
    Advertising services.  Our advertising service
    costs of $58.0 million and $74.7 million accounted for
    70.7% and 65.3% of our total cost of revenues for the years
    ended December 31, 2007 and 2008, respectively. Our
    advertising service costs in 2007 and 2008 were derived
    primarily from advertising agency services for print,
    television, billboard and website advertising medium, sales of
    research services and mobile value-added services, and marketing
    services, including event organization, visual design and
    production. Our advertising service costs increased by
    $16.7 million between 2007 and 2008 primarily due to the
    growth of our business generally. Our advertising service costs
    as a percentage of total cost of revenues fell in line with the
    decrease in revenues attributable to advertising services as a
    percentage of total net revenues. 79




---



##### Table of Contents




    Content production.  Our content production
    costs of $3.7 million and $7.5 million constituted
    4.5% and 6.5% of our total cost of revenues for the years ended
    December 31, 2007 and 2008, respectively, and represented
    primarily the cost of purchasing distribution rights of
    programs, development costs, pre-production costs, production
    overhead and purchases of software and hardware. Our content
    production costs increased by $3.8 million between 2007 and
    2008 primarily due to the increase in content production
    revenues.
    Advertising sales.  Our advertising sales costs
    of $19.5 million and $30.8 million constituted 23.8%
    and 26.9% of our total cost of revenues for the years ended
    December 31, 2007 and 2008, respectively. Our advertising
    sales costs in 2007 and 2008 primarily consists of amortization
    of advertising rights in relation to the Economic
    Observer, production fees for our Fortune Chinaoperations, costs to secure advertising time from radio
    stations, and costs associated with Funds Observer,
    Chinese Venture, Weather Forecastand our outdoor
    advertising network. Our advertising sales costs increased by
    $11.3 million between 2007 and 2008 primarily due to the
    growth of our business, full year operation of Convey which we
    acquired in 2007 and costs incurred to secure newly acquired
    exclusive right to sell advertising for, and the right to
    provide content to, radio channels FM103.6 and FM90.0.
    Publishing services.  Our publishing service
    costs of $0.9 million and $1.5 million constituted
    1.0% and 1.3% of our total cost of revenues for the years ended
    December 31, 2007 and 2008, respectively, and primarily
    consists of cost incurred relating to the publication and
    distribution of Money Journal, Funds Observer, China Ventureand certain books. Our publishing service costs increased by
    $0.6 million between 2007 and 2008 primarily due to an
    increase in printing costs.  Operating expenses.
  
    Selling and distribution expenses.  Our selling
    and distribution expenses of $14.9 million and
    $22.9 million, representing 37.9% and 7.3% of our total
    operating expenses for the years ended December 31, 2007
    and 2008, respectively. Our selling and distribution expenses
    increased by $8.0 million between 2007 and 2008 primarily
    due to an increase in amortization expense of $3.1 million,
    an increase in staff cost of $3.0 million and an increase
    in marketing cost of $1.7 million. Our selling and
    distribution expenses as a percentage of our total operating
    expenses decreased between 2007 and 2008 primarily due to a
    significant increase in other operating expenses, such as
    impairment charges and loss on disposal of subsidiaries.
    General and administrative expenses.  Our
    general and administrative expenses of $24.3 million and
    $52.1 million, or 62.1% and 16.7% of our total operating
    expenses for the years ended December 31, 2007 and 2008,
    respectively. Our general and administrative expenses increased
    by $27.7 million between 2007 and 2008 primarily due to an
    increase in staff cost of $6.6 million, an increase in
    share based compensation expenses of $9.4 million, an
    increase in legal and professional fees of $3.2 million and
    an increase of rental expense of $1.5 million. Our general
    and administrative expenses as a percentage of our total
    operating expenses decreased between 2007 and 2008 primarily due
    to a significant increase in other operating expenses, such as
    impairment charges and loss on disposal of subsidiaries.
    Impairment charges.  We had impairment charges
    of $232.6 million, or 74.5% of our total operating expenses
    for the year ended December 31, 2008, primarily due to
    impairment of goodwill and intangible assets in connection with
    our acquisitions of Xinhua Finance Advertising, Beijing Century
    Media, JCBN China, M-In, Singshine Communication, EconWorld
    Media, Small World and Accord Group. The impairment of goodwill
    of $180.8 million and intangible assets of
    $25.6 million was a result of (i) the decrease in the
    fair value of the reporting unit affected by the slowdown in the
    global economy and the repositioning of our business to sports
    and entertainment, (ii) allowance for doubtful debts of
    $10.4 million as the amounts are not expected to be
    recovered, (iii) impairment of content production cost of
    $3.1 million which was the result of our determination to
    terminate the re-runs of related television programs in the
    future, and (iv) impairment of a promissory note issued by
    Sino Investment with accrued interest of in the aggregate of
    $8.5 million due to the Sino Investments default with
    respect to interest payments.
    Loss on disposal of subsidiaries.  We had a
    loss on disposal of subsidiaries of $4.7 million, or 1.5%
    of our total operating expenses for the year ended
    December 31, 2008, due to loss on disposal of our 85%
    equity 80




---



##### Table of Contents



interest in Convey. On December 31, 2008 we entered into an
    agreement with Pariya Holdings Limited for the sale of Convey.
    Pursuant to the terms of the agreement, the total consideration
    to be paid for the asset transfer is $85.0 million and is
    subject to deduction of an earn-out payment, which is estimated
    to be approximately $10.6 million. The consideration will
    be paid in six interest-free installment payments from the date
    of disposal through the end of 2012. Should the actual net
    income of Convey for the 2008 earn out period be lower or higher
    than currently estimated, there would be a corresponding impact
    on the loss. The range of this potential impact ranges from a
    reduction of the loss by approximately $11.0 million, thus
    becoming a gain on disposal of the subsidiary of
    $7.0 million, to an additional loss of approximately
    $29.0 million.  Other operating income.
  Other income (expense), net.
  Provision for income taxes (benefit).
  Minority interest.
  Net income (loss).
 81




---



##### Table of Contents



Year
    ended December 31, 2007 Compared to Year Ended
    December 31, 2006
  Net revenues.
  
    Advertising Services.  Our net revenues from
    advertising services were $44.9 million and
    $86.7 million, and constituted 76.1% and 64.3% of our total
    net revenues, for the years ended December 31, 2006 and
    2007, respectively. Our advertising service revenues for 2006
    and 2007 were derived primarily from advertising agency services
    for print and television for advertising, marketing services,
    including events organization, visual design and production,
    advertising services for billboards and websites and research
    services. Our advertising sales costs increased by
    $41.8 million between 2006 and 2007 primarily due to
    increased sales from the preceding revenue sources due to the
    growth of our business as well as increased revenues due to
    acquisitions, which includes sales of mobile value-added
    services.
    Content production.  Our net revenues from
    content production were $6.5 million and $7.7 million,
    and constituted 11.1% and 5.7% of our total net revenues, for
    the years ended December 31, 2006 and 2007, respectively.
    Our content production revenues for 2006 and 2007 represented
    primarily revenues from the production and distribution of drama
    series and other television programs, graphic design services,
    provision of post-production services and animation. Our content
    production revenues increased by $1.2 million between 2006
    and 2007 mainly due to the growth of our business. Although our
    content production revenues increased between 2006 and 2007, our
    revenues from content production as a percentage of total net
    revenues decreased due primarily to greater growth in other
    parts of our business and in particular to our acquisition of
    entities that produce revenues from other sources.
    Advertising sales.  Our net revenues from
    advertising sales were $6.7 million and $39.3 million,
    and constituted 11.3% and 29.1% of our total net revenues, for
    the years ended December 31, 2006 and 2007, respectively.
    Our advertising sales revenues for 2006 primarily consisted of
    advertising sales generated by the Economic Observerand
    Money Journal, provision of content and sales of
    advertising in relation to radio, sales of advertising and
    sponsorship on our Fortune Chinaprograms and our
    agreement with Shanghai Camera. Our advertising sales revenues
    for 2007 primarily consisted of advertising revenues generated
    from magazine and newspaper sales, such as Funds
    Observer, Chinese Ventureand Weather
    Forecast, our outdoor advertising network, provision of
    content and sales of radio advertising services, sales of
    advertising and sponsorship on our Fortune Chinaprograms
    and our agreement with Shanghai Camera. Our advertising sales
    revenues increased by $32.6 million between 2006 and 2007
    primarily due to the growth of our business as well as an
    increase in revenue from our acquisitions related to our outdoor
    advertising network and the provision of content and advertising
    sales to channel FM107.7 of the Guangdongs Peoples
    Radio Station.
    Publishing services.  Our net revenues from
    publishing services were $0.9 million and
    $1.2 million, and constituted 1.5% and 0.9% of our total
    net revenues, for the years ended December 31, 2006 and
    2007, respectively. Our publishing service revenues for 2006
    primarily consisted of subscription fees and retail sales of
    Money Journalwhile our publishing service revenues for
    2007 primarily consisted of subscription fees and retail sales
    of Money Journal, Funds Observerand China
    Venture. Our publishing service revenue increased by
    $0.3 million between 2006 and 2007 primarily due to a full
    year of operation of EconWorld Media. Our publishing service
    revenues as a percentage of total net revenues decreased due
    primarily to greater growth in other parts of our business and
    in particular to our acquisition of entities that produce
    revenues from other sources.  Cost of revenues.
  
    Advertising services.  Our advertising services
    cost of $27.7 million and $58.0 million accounted for
    81.9% and 70.7% of our total cost of revenues for the years
    ended December 31, 2006 and 2007, respectively. Our cost of
    revenues from advertising services in 2006 was incurred
    primarily in connection 82




---



##### Table of Contents



with the purchase of advertising time or space from various
    media and events organization cost. Our advertising service
    costs increased by $30.3 million between 2006 and 2007
    primarily due to the growth of our business and cost
    attributable to our acquisitions, including cost associated with
    our provision of mobile value-added services. Our advertising
    service costs as a percentage of total cost of revenues fell
    approximately in line with the decrease in revenues attributable
    to advertising services as a percentage of total net revenues.  
    Content production.  Our content production
    costs of $2.8 million and $3.7 million constituted
    8.4% and 4.5% of our total cost of revenues for the years ended
    December 31, 2006 and 2007, respectively, and represented
    primarily costs of purchasing distribution rights of programs,
    development costs, pre-production costs, production overhead and
    purchases of software and hardware. Our content production costs
    increased by $0.9 million between 2006 and 2007 primarily
    due to our increase in content production revenues. Our content
    production costs as a percentage of total cost of revenues
    decreased due primarily to greater growth in other parts of our
    business and in particular to our acquisition of entities that
    produce other types of revenues.
    Advertising sales.  Our advertising sales costs
    of $1.9 million and $19.5 million constituted 5.6% and
    23.8% of our total cost of revenues for the years ended
    December 31, 2006 and 2007, respectively. Our advertising
    sales costs in 2006 primarily consisted of amortization of
    advertising rights in relation to the Economic Observer,
    production fees for our Fortune Chinaoperations, and
    costs to secure advertising time for radio. Our advertising
    sales costs in 2007 included the preceding costs as well as
    increased costs due to the growth of our business, including
    costs associated with Funds Observer, Chinese Ventureand Weather Forecast, and costs attributable to our
    acquisitions, including costs associated with our outdoor
    advertising network and the provision of content and sales of
    advertising in relation to channel FM107.7 of the Guangdong
    Peoples Radio Station. Our advertising sales costs
    increased by $17.6 million between 2006 and 2007 primarily
    due to the growth of our business and acquisitions as described
    above.
    Publishing services.  Our publishing service
    costs of $1.4 million and $0.9 million constituted
    4.1% and 1.0% of our total cost of revenues for the years ended
    December 31, 2006 and 2007, respectively, and primarily
    consisted of costs incurred relating to the publication and
    distribution of Money Journaland certain books as well
    as, for 2007, costs incurred relating to the publication and
    distribution of Funds Observerand China Venture.
    Our publishing service costs decreased by $0.5 million
    between 2006 and 2007 primarily due to the allocation of a part
    of our publishing service costs to advertising service costs in
    2007.  Operating expenses.
  
    Selling and distribution expenses.  Our selling
    and distribution expenses of $5.3 million and
    $14.9 million, representing 29.1% and 37.9% of our total
    operating expenses for the years ended December 31, 2006
    and 2007, respectively, primarily consisted of amortization of
    intangible assets, salaries and benefits for our sales and
    marketing personnel, and promotional and marketing expenses. Our
    selling and distribution expense increased by $9.6 million
    between 2006 and 2007 primarily due to an increase in
    amortization expenses of $1.8 million, an increase in
    marketing costs of $5.1 million and an increase in staff
    costs of $2.4 million.
    General and administrative expenses.  Our
    general and administrative expenses of $12.8 million and
    $24.3 million, or 70.9% and 62.1% of our total operating
    expenses for the years ended December 31, 2006 and 2007,
    respectively, primarily consisted of compensation and benefits
    of our administrative staff, rental and travel expenses. Our
    general and administrative expenses increased by
    $11.5 million between 2006 and 2007 primarily due to an
    increase in staff costs of $2.3 million, an increase in
    rental expense of $2.2 million and an increase in audit
    fees of $1.3 million. Our general and administrative
    expenses as a percentage of our total operating expenses
    decreased between 2006 and 2007 as we benefited from greater
    economies of scale.  Other operating income.
 83




---



##### Table of Contents



Other expense, net.
  Provision for income taxes.
  Minority interest.
  Net income.
  Discussion
    of Segment Operations
    84




---



##### Table of Contents



Year Ended


Year Ended


Year EndedDecember 31, 2006


December 31, 2007


December 31, 2008(In thousands)Net revenues of reportable segments:Print

$
13,589


$
19,757


$
16,458Advertising


37,431



79,187



114,243Broadcast


7,946



35,895



55,330Total net revenues of our company


58,966



134,839



186,031Cost of revenues and other operating expenses excluding
    depreciation and amortization:Print


7,112



8,786



22,896Advertising


27,257



61,045



235,003Broadcast


4,527



16,645



106,867XSEL Corporate


7,767



12,401
(1)


35,428Total cost of revenues and other operating expenses excluding
    depreciation and amortization


46,663



98,877



400,194Depreciation and amortization:Print


795



1,831



2,105Advertising


2,599



3,984



7,928Broadcast


1,834



14,233



16,276XSEL Corporate


7



138



323Total depreciation and amortization


5,235



20,186



26,632Other operating income (loss):Print


5,682



9,140



29Advertising


7,575



14,158



886Broadcast


1,585



5,017



582XSEL Corporate


(7,774
)


(12,539
)


2Total other operating income

$
7,068


$
15,776


$
1,499     (1)
    
    This amount has been offset by $2,261,788 in other operating
    income due to reimbursement of initial public offering expenses
    by the depositary bank pursuant to a deposit agreement in March
    2007. Those initial public offering expenses had been recorded
    in the 2006 income statement as operating expenses because they
    were not considered to be directly related to the sale of
    securities.  Year
    ended December 31, 2008 Compared to Year Ended
    December 31, 2007
  Net Revenues.
  
    Print.  Our net revenues from the Print Group
    were $19.8 million and $16.5 million, and constituted
    14.7% and 8.9% of our total net revenues, for the years ended
    December 31, 2007 and 2008, respectively, were derived
    primarily from marketing services, including event organization,
    advertising sales relating to the Economic Observerand
    Money Journal, and publishing revenues. Our revenues from
    the Print Group decreased between 2007 and 2008 partly due to
    the decrease in magazine and newspaper circulation.
    Advertising.  Our net revenues from the
    Advertising Group were $79.2 million and
    $114.2 million, representing 58.7% and 61.4% of our total
    net revenues, for the years ended December 31, 2007 and
    2008, respectively. Our net revenues from the Advertising Group
    in 2007 and 2008 primarily consisted of 85




---



##### Table of Contents



advertising sales revenues generated by billboard advertising,
    advertising service revenues derived from advertising agency
    services for print, television, billboard and website
    advertising medium, revenues derived from marketing services,
    including event organization, visual design and research
    services. The increase in 2008 in our net revenues from the
    Advertising Group was primarily attributable to an increase in
    the number of mobile users in China, full year operation of our
    subsidiaries acquired in 2007, an increase in sales from our
    advertising platforms and the growth of our business generally.  
    Broadcast.  Our net revenues from the Broadcast
    Group were $35.9 million and $55.3 million, and
    constituted 26.6% and 29.7% of our total net revenues, for the
    years ended December 31, 2007 and 2008, respectively. Our
    net revenues from the Broadcast Group in 2007 and 2008 primarily
    consisted of provision of content and sales of advertising in
    relation to radio stations, sales of advertising and sponsorship
    on Inner Mongolia Satellite Television, sales of advertising and
    sponsorship on our Fortune Chinaprograms, and sales of
    mobile value-added services. Our net revenues from the Broadcast
    Group increased between 2007 and 2008 primarily due to the
    growth of our existing business as well as revenue attributed to
    our newly acquired exclusive right to sell advertising for, and
    the right to provide content to, radio channels FM103.6 and
    FM90.0.  Cost of revenues and other expenses excluding depreciation
    and amortization.
  
    Print.  Print Group costs of $8.8 million
    and $22.9 million, or 8.9% and 5.7% of our total cost of
    revenues and other operating expenses excluding depreciation and
    amortization for the years ended December 31, 2007 and
    2008, were incurred primarily from event organization cost,
    including booking venues, printing material and purchasing
    flight tickets for certain guests, cost incurred relating to the
    publication and distribution of Money Journal, Funds
    Observer, Chinese Ventureand certain books and sales
    commissions. Our cost of revenues attributable to the Print
    Group grew between 2007 and 2008 primarily due to an increase in
    asset impairment charge of $12.5 million.
    Advertising.  Advertising Group costs of
    $61.0 million and $235.0 million, representing 61.7%
    and 58.7% of our total cost of revenues and other operating
    expenses excluding depreciation and amortization for the years
    ended December 31, 2007 and 2008, primarily consisted of
    the purchase of advertising time or space from various media
    outlets, events organization cost, salaries and allowances,
    marketing cost, sales commissions, cost for outsourcing
    research, translation cost and transportation cost. Our cost of
    revenues attributable to the Advertising Group grew between 2007
    and 2008 primarily due to the growth of our existing business,
    an increase in loss on our disposal of Convey of
    $4.7 million and an increase in assets impairment charge of
    $142.9 million.
    Broadcast.  Broadcast Group costs of
    $16.6 million and $106.9 million constituted 16.9% and
    26.7% of our total cost of revenues and other operating expenses
    excluding depreciation and amortization for the years ended
    December 31, 2007 and 2008, respectively. Broadcast Group
    costs in 2007 and 2008 primarily consisted of production fees,
    salaries and allowances, the cost of purchasing distribution
    rights for programs, development cost, pre-production cost,
    production overhead, purchases of software and hardware and cost
    associated with operation of our mobile value-added services
    system. Our cost of revenues attributable to the Broadcast Group
    grew between 2007 and 2008 primarily due to the growth of our
    existing business, cost associated with securing our newly
    acquired exclusive right to sell advertising for, and the right
    to provide content to, radio channels FM103.6 and FM90.0, and an
    increase in assets impairment charge of $68.7 million.
    XSEL corporate.  Corporate costs of
    $12.4 million and $35.4 million constituted 12.5% and
    8.9% of our total cost of revenues and other operating expenses
    excluding depreciation and amortization for the years ended
    December 31, 2007 and 2008, respectively, and consisted
    primarily of staff benefits, staff salary, auditor remuneration
    and legal and professional fees. Our cost of revenues
    attributable to XSEL corporate grew between 2007 and 2008
    primarily due to our increased size due to the growth of our
    existing business and an impairment charge on a promissory note
    of $8.5 million. 86




---



##### Table of Contents



Year
    ended December 31, 2007 Compared to Year Ended
    December 31, 2006
  Net Revenues.
  
    Print.  Net revenues of $13.6 million and
    $19.8 million from the Print Group, or 23.0% and 14.7% of
    our total net revenues for the years ended December 31,
    2006 and 2007, respectively, were derived primarily from
    marketing services, including events organizing, advertising
    sales relating to the Economic Observer and Money
    Journal, and publishing revenues. Although our revenues from
    the Print Group increased between 2006 and 2007 partly due to
    publishing the new magazines Funds Observerand
    Chinese Venture, our revenues from the Print Group as a
    percentage of total net revenues decreased due primarily to
    acquisitions and greater growth in other operating groups.
    Advertising.  Our net revenues from the
    Advertising Group were $37.4 million and
    $79.2 million, representing 63.5% and 58.7% of our total
    net revenues, for the years ended December 31, 2006 and
    2007, respectively. Our net revenues from the Advertising Group
    in 2006 primarily consisted of advertising service revenues
    derived from advertising agency services for print and
    television, revenues derived from marketing services, including
    events organization, visual design, and advertising services for
    billboard and websites. Increases in our net revenues for the
    Advertising Group in 2007 primarily consisted of the growth of
    our existing business in addition to revenues attributed to our
    acquisitions of Singshine Marketing, Convey, JCBN China and JCBN
    Hong Kong.
    Broadcast.  Our net revenues from the Broadcast
    Group were $7.9 million and $35.9 million and
    constituted 13.5% and 26.6% of our total net revenues for the
    years ended December 31, 2006 and 2007, respectively. Our
    net revenues from the Broadcast Group in 2006 primarily
    consisted of provision of content and sales of advertising in
    relation to radio, sales of advertising and sponsorship on Inner
    Mongolia Satellite Television sales of advertising and
    sponsorship on our Fortune Chinaprograms, production and
    distribution of drama series and other television programs,
    animation, graphic design services and provision of
    post-production services. Increases in our net revenues for the
    Broadcast Group in 2007 primarily consisted of the growth of our
    existing business as well as revenues attributed to our
    acquisitions of M-in and Singshine Communication.  Cost of revenues and other expenses excluding depreciation
    and amortization
  
    Print.  Print Group costs of $7.1 million
    and $8.8 million, or 15.2% and 8.9% of our total cost of
    revenues and other operating expenses excluding depreciation and
    amortization for the years ended December 31, 2006 and
    2007, were incurred primarily from event organization costs,
    including booking venues, printing material and purchasing
    flight tickets for certain guests, costs incurred relating to
    the publication and distribution of Money Journaland
    certain books and sales commissions. Our cost of revenues
    attributable to the Print Group grew between 2006 and 2007
    primarily due to the growth of our existing business while cost
    of revenues as a percentage of total cost of revenues decreased
    primarily due to greater growth in cost of revenues in other
    operating groups.
    Advertising.  Advertising Group costs of
    $27.3 million and $61.0 million, representing 58.4%
    and 61.7% of our total cost of revenues and other operating
    expenses excluding depreciation and amortization for the years
    ended December 31, 2006 and 2007, primarily consisted of
    the purchase of advertising time or space from various media
    outlets, events organization costs, salaries and allowances,
    marketing costs, sales commissions, costs for outsourcing
    research, translation costs and transportation costs. Our cost
    of revenues attributable to the Advertising Group grew between
    2006 and 2007 primarily due to the growth of our existing
    business and increased costs due to our acquisitions of
    Singshine Marketing, Convey, JCBN China and JCBN Hong Kong while
    cost of revenues as a percentage of total cost of revenues
    decreased primarily due to greater growth in cost of revenues in
    other operating groups.
    Broadcast.  Broadcast Group costs of
    $4.5 million and $16.6 million constituted 9.7% and
    16.9% of our total cost of revenues and other operating expenses
    excluding depreciation and amortization for the years ended
    December 31, 2006 and 2007, respectively. Broadcast Group
    costs in 2006 primarily consisted of 87




---



##### Table of Contents



production fees, salaries and allowances, costs of purchasing
    distribution rights of programs, development costs,
    pre-production costs, production overhead and purchases of
    software and hardware. Broadcast Group costs in 2007 primarily
    consisted of the same costs as well as cost associated with our
    operation of our mobile value-added services system. Our cost of
    revenues attributable to the Broadcast Group grew between 2006
    and 2007 primarily due to the growth of our existing business
    and increased costs due to acquisitions while cost of revenues
    as a percentage of total cost of revenues increased primarily
    due to costs attributed to our acquisitions of M-in and
    Singshine Communication.  
    XSEL corporate.  Corporate costs of
    $7.8 million and $12.4 million constituted 16.7% and
    12.5% of our total cost of revenues and other operating expenses
    excluding depreciation and amortization for the years ended
    December 31, 2006 and 2007, respectively, and consisted
    primarily of staff benefits, staff salary, auditor remuneration
    and legal and professional fees. Our cost of revenues
    attributable to the XSEL corporate grew between 2006 and 2007
    primarily due to our increased size from the growth of our
    existing business and acquisitions while cost of revenues as a
    percentage of total cost of revenues decreased primarily due to
    our benefiting from increased economies of scale.  B.  Liquidity
    and Capital Resources
        2003-1, 2005-1, 2003-1, 2005-1,
 88




---



##### Table of Contents



Year Ended


Year Ended


Year EndedDecember 31, 2006


December 31, 2007


December 31, 2008(In thousands)Net cash (used in) provided by operating activities

$
(4,463
)

$
20,293


$
14,982Net cash used in investing activities


(32,214
)


(164,922
)


(54,466
)Net cash provided by financing activities


70,104



151,259



46,521Effect of exchange rate changes


846



1,452



2,616Net increase in cash


34,273



8,082



9,653Cash and cash equivalents at beginning of period


2,081



36,354



44,436Cash and cash equivalents at end of period

$
36,354


$
44,436


$
54,089   Operating
    activities
       89




---



##### Table of Contents



Investing
    activities
        Financing
    activities
       90




---



##### Table of Contents



Lender

Principal

Date of Loan

Due Date

Interest RateBank loan

RMB20.0 million ($2.9 million)

January 28, 2008

January 27, 2009

6.72%

per yearBank loan

RMB18.0 million ($2.6 million)

May 13, 2008

May 12, 2009

6.72%

per yearBank loan

RMB19.8 million ($2.9 million)

May 13, 2008

May 12, 2009

6.72%

per yearBank loan

RMB18.9 million ($2.8 million)

May 14, 2008

May 13, 2009

6.72%

per yearBank loan

RMB20.0 million ($2.9 million)

May 15, 2008

May 14, 2009

6.72%

per yearBank loan

$14.0 million

July 2, 2008

July 1, 2009

3.61%

per yearBank loan

RMB20.0 million ($2.9 million)

September 9, 2008

September 8, 2009

6.72%

per yearBank loan

RMB19.0 million ($2.8 million)

October 17, 2008

April 16, 2009

5.51%

per yearConvertible loan

$33.2 million

October 21, 2008

October 21, 2012

LIBOR
    + 6.00%

per yearBank loan

RMB18.0 million ($2.6 million)

December 11, 2008

December 10, 2009

5.58%

per year     Capital
    expenditures
    Recent
    Accounting Pronouncements
  06-11 Accounting for the Income Tax Benefits of Dividends on
    Share-Based Payment Awards (EITF 06-11). EITF 06-11 EITF 06-11
  07-3, Accounting for Nonrefundable Advance Payments for Goods
    or Services Received for Use in Future Research and Development
    Activities (EITF 07-3). EITF 07-3
  Business Combination Accounting for Costs Associated with Exit or Disposal
    Activities
 91




---



##### Table of Contents



Accounting for Contingencies
  Noncontrolling Interest in Consolidated Financial
    Statements Consolidated Financial
    Statements
  Disclosures about Derivative Instruments and Hedging
    Activities
  SFAS 142-3, Determination of the Useful Life of Intangible
    Assets Goodwill and Other
    Intangible Assets FAS 142-3.
  Accounting for Convertible Debt Instruments That May Be
    Settled in Cash upon Conversion (Including Partial Cash
    Settlement) No. 14-1), Accounting for Convertible Debt
    and Debt Issued with Stock Purchase Warrants No. 14-1 No. 14-1.
  07-5, Determining Whether an Instrument (or Embedded Feature)
    Is Indexed to an Entitys Own Stock (EITF 07-5). 07-5 07-5 07-5.
  08-6, Equity Method Investment Accounting
    Considerations (EITF 08-6).
 92




---



##### Table of Contents



08-6 08-6.
  08-7, Accounting for Defensive Intangible Assets (EITF 08-7). EITF 08-7 08-7 08-7.
  C.
    Research
    and Development    D.
    Trend
    Information    E.
    Off-Balance
    Sheet Arrangements    F.
    Contractual
    Obligations and Commercial Commitments    Less Than


1-3


3-5


More ThanPayment Due by December 31

Total


1 Year


Years


Years


5 Years(In thousands)Debt obligations(1)

$
36,374


$
36,374


$



$



$
Interest related to short-term debt obligations(2)


856



856











Operating lease obligations


5,480



3,584



1,894



1



1Purchase obligations(3)


92,393



8,796



20,648



13,144



49,805Other long-term liabilities reflected on the balance sheet(4)


78,669



10,364



13,490



10,076



44,739Capital Obligations(5)(6)


5,000



5,000











Convertible loan


33,200











33,200



Total

$
251,972


$
64,974


$
36,032


$
56,421


$
94,545     (1)
    
    Mainly represents loans from UBS AG, New York Branch, Shenzhen
    Development Bank, Shanghai Pudong Development Bank and China
    Merchants Bank. See Item 5.B.  Operating
    and Financial Review and Prospects  Liquidity and
    Capital Resources  Financing activities. 93




---



##### Table of Contents



(2)
    
    Interest on short-term debt is calculated based on the interest
    rates under the relevant loans, ranging from 3.6% to 6.7%. The
    loans are the loans mentioned above under Item 5.B.
    Operating and Financial Review and Prospects 
    Liquidity and Capital Resources  Financing
    activities for UBS AG, New York Branch, Shenzhen
    Development Bank, Shanghai Pudong Development Bank and China
    Merchants Bank.(3)
    
    Represents obligations to purchase advertising airtime from
    radio stations and to pay for obtaining advertising production
    and network services from various services providers.(4)
    
    Mainly represents commitments under contracts in relation to our
    newspaper operations and securing advertising rights in relation
    to Shanghai Camera and Guangdong Radio Station.(5)
    
    Represents obligations under a purchase agreement we entered
    into on October 9, 2008 with Prime Day Management Limited,
    or Prime Day, and certain other parties to acquire a 100% equity
    interest in Starease Limited, which has interest in operating
    four digital pay channels in the PRC. As of December 31,
    2008, we have paid $10.0 million as a deposit and made an
    advance of $4.2 million to Prime Day under the agreement.
    These amounts are refundable unless certain closing conditions
    are met. As of the date of this annual report, there were
    uncertainties as to whether certain closing condition can be
    met. The amount noted in the table above does not include the
    value of our common shares.(6)
    
    We entered into an agreement with YMHK and several other parties
    on December 18, 2008. Pursuant to the terms of the
    agreement, we agreed to provide working capital to YMHK in
    accordance with business plans and budgets which must be agreed
    to by all investors in YMHK and us. As of December 31,
    2008, the business plans have not yet been finalized and agreed
    to by all investors in YMHK and us. Once provided, the working
    capital we provide to YMHK will be refunded on demand with
    twelve months notice.  Item 6.
    Directors,
    Senior Management and Employees  A.
    Directors
    and Senior Management    Directors and Executive Officers

Age

PositionFredy Bush

50

Chairman of Board of Directors and Chief Executive OfficerZhu Shan

40

Chief Operating Officer and DirectorAndrew Chang

39

Chief Financial OfficerGraham Earnshaw

56

President and DirectorStephen Xie Wei

39

President of Research GroupChen Hui

48

President of Print Group (Newspaper)Joseph Chan

47

President of Advertising GroupXu Lang

42

Vice President, Broadcast GroupFang Quan

46

Vice President, Print Group (Magazine)Richard Young

39

Managing Director, Xinhua SportsAloysius T. Lawn(1)(4)

50

Independent DirectorJohn H. Springer(1)(2)(3)

52

Independent DirectorZhao Li

38

DirectorLong Qiu Yun

45

Independent DirectorDavid Olson(3)(4)

53

Independent DirectorLarry Kramer(2)(3)

59

Independent DirectorSteve Richards(1)

40

Independent DirectorLi Shantong

64

Independent DirectorDavid Green(2)(4)

60

Independent Director     (1)
    
    Member of the audit committee.(2)
    
    Member of the compensation committee.(3)
    
    Member of the nominating and corporate governance committee.(4)
    
    Member of the investment committee. 94




---



##### Table of Contents



Directors
  Fredy Bush
    Zhu Shan China Business
  Graham Earnshaw Editor-in-Chief
  Aloysius T. Lawn
  John H. Springer
  Zhao Li Investor Journal Economic
    Observer
 95




---



##### Table of Contents



Long Qiu Yun
  David Olson
  Larry Kramer
  Steve Richards
  Li Shantong
  David Green
  Executive
    officers
  Andrew Chang
 96




---



##### Table of Contents



Joseph Chan
  Chen Hui Economic Observer Economic Observer Science & Technology Daily Editor-in-Chief
  Stephen Xie Wei
  Xu Lang
  Fang Quan Editor-in-Chief Capital Week
  Richard H. Young cum laude
  B.
    Compensation
    of Directors and Executive Officers  Cash
    compensation
    Share
    options
   97




---



##### Table of Contents



CommonSharesUnderlying

ExerciseGranted

Price



ExpirationOptions

($/share)

Grant Date

DateName:Fredy Bush






N/A



N/A



N/AZhu Shan


700,000



0.78



July 11, 2006



July 10, 2011Graham Earnshaw


700,000



0.78



July 11, 2006



July 10, 2011Andrew Chang


900,000



0.78



July 11, 2006



July 10, 2011Chen Hui


79,460



0.78



July 11, 2006



July 10, 2011Stephen Xie Wei


335,260



0.78



July 11, 2006



July 10, 2011Teddy Liu Weidong


136,860



0.78



July 11, 2006



July 10, 2011Yu Gang


540,982



0.78



July 11, 2006



July 10, 2011Other individuals as a group


7,692,442



0.78



July 11, 2006



July 10, 2011Aloysius T. Lawn


30,000



6.50



April 25, 2007



April 24, 201730,000



1.64



April 30, 2008



April 29, 2018John H. Springer


30,000



6.50



April 25, 2007



April 24, 201730,000



1.64



April 30, 2008



April 29, 2018Zhao Li


113,176



0.78



July 11, 2006



July 10, 2011Long Qiu Yun


30,000



6.50



April 25, 2007



April 24, 201720,000



1.265



June 13, 2008



June 12, 2018David Olson


30,000



4.39



September 26, 2007



September 25, 201720,000



1.265



June 13, 2008



June 12, 2018Larry Kramer


30,000



4.39



September 26, 2007



September 25, 201720,000



1.265



June 13, 2008



June 12, 2018Steve Richards


30,000



4.39



September 26, 2007



September 25, 201720,000



1.265



June 13, 2008



June 12, 2018Li Shantong


30,000



4.39



September 26, 2007



September 25, 201720,000



1.265



June 13, 2008



June 12, 2018David Green


20,000



1.265



June 13, 2008



June 12, 2018David U. Lee


400,000



1.325



April 1, 2008



December 31, 2011500,000



0.305



January 8, 2009



January 8, 2014Richard Young


500,000



0.305



January 8, 2009



January 8, 2014Total


12,988,180  98




---



##### Table of Contents



Termination of options.
  Administration.
  Vesting schedule.
  Option agreement.
  Option exercise.
  Third-party acquisition.
  Termination of plan.
    Termination of options.
  Administration.
  Vesting schedule.
  Option exercise.
  Third-party acquisition.
  Termination of grant.
 99




---



##### Table of Contents



C.
    Board
    Practices  Board of
    Directors
    Committees
    of the Board of Directors
    Audit
    committee
  Rule 10A-3
  
    appointing, retaining and overseeing the work of the independent
    auditors, including resolving disagreements between the
    management and the independent auditors relating to financial
    reporting;
    pre-approving all auditing and non-auditing services permitted
    to be performed by the independent auditors;
    reviewing annually the independence and quality control
    procedures of the independent auditors;
    discussing material off-balance sheet transactions, arrangements
    and obligations with the management and the independent auditors;
    reviewing and approving all proposed related party transactions;
    discussing the annual audited financial statements with the
    management;
    annually reviewing and reassessing the adequacy of our audit
    committee charter;
    meeting separately with the independent auditors to discuss
    critical accounting policies, management letters,
    recommendations on internal controls, the auditors
    engagement letter and independence letter and other material
    written communications between the independent auditors and the
    management; and
    attending to such other matters that are specifically delegated
    to our audit committee by our board of directors from time to
    time.  Compensation
    committee
    
    reviewing and approving executive compensation;
    reviewing periodically and managing any long-term incentive
    compensation plans, share option plans, annual bonuses, employee
    pension and welfare benefit plans; 100




---



##### Table of Contents




    determining our policy with respect to change of control or
    parachute payments; and
    managing and reviewing director and executive officer
    indemnification and insurance matters.  Nominating
    and corporate governance committee
    
    recommending to the board nominees for election or re-election
    to the board or for appointments to fill any vacancies;
    reviewing annually the performance of each incumbent director in
    determining whether to recommend such director for an additional
    term;
    overseeing the board in the boards annual review of its
    own performance and the performance of the management; and
    considering, preparing and recommending to the board such
    policies and procedures with respect to corporate governance
    matters as may be required to be disclosed under the applicable
    laws or otherwise considered to be material.  Investment
    committee
    
    reviewing acquisition strategies with management and
    investigating acquisition candidates on our behalf;
    recommending acquisition strategies and candidates to the board
    of directors;
    authorizing and approving acquisitions and investments by us
    valued in an amount not to exceed, for any particular
    acquisition or investment, $5.0 million in cash, stock or a
    combination thereof; and
    approving any bank loan, pledge, mortgage or charge of property
    and assets (whether present or future), guarantees or similar
    transactions entered into by the Company or its subsidiaries in
    the ordinary course of business, provided that the total
    financing obligations of the Company or its subsidiaries in each
    such transaction shall not exceed $10.0 million.  Terms of
    Directors and Executive Officers
    Employment
    Agreement with Fredy Bush
   101




---



##### Table of Contents



D.
    Employees    Function

Headquarters

Print

Advertising

Broadcast

TotalAdministration


25



14



106



85



230Finance


34



11



56



33



134General management


5



2



17



14



38Information technology


6



1



19



21



47Miscellaneous






1







22



23Pre-/post-production(1)


1



22



229



171



423Sales and marketing


7



98



283



111



499Total


78



149



710



356



1,394     (1)
    
    Pre-/post-production includes our analyst, design, content
    production and research functions.      E.
    Share
    Ownership    
    each of our current directors and executive officers; and
    each person known to us to own beneficially more than 5.0% of
    our shares.  Shares Beneficially Owned(1)(2)Number

%Directors and Executive Officers:Fredy Bush(3)


9,930,000



6.5Zhu Shan


*



*Graham Earnshaw


*



*Andrew Chang


*



*Joseph Chan


*



*Chen Hui


*



*Stephen Xie Wei(4)


1,508,614



1.0Xu Lang


*



*Aloysius T. Lawn


*



*John H. Springer


*



* 102




---



##### Table of Contents



Shares Beneficially Owned(1)(2)Number

%Zhao Li


*



*Long Qiu Yun


*



*David Olson


*



*Larry Kramer


*



*Steve Richards


*



*Li Shantong


*



*David Green


*



*Fang Quan


*



*All directors and executive officers as a group(5)


14,904,836



9.8Principal Shareholders:Xinhua Finance Limited(6)


50,054,618



32.9Patriarch Partners Media Holdings, LLC(7)


10,139,655



6.7Dragon Era Group Limited(8)


8,830,000



5.8Yucaipa Global Partnership Fund L.P.(9)


21,006,759



13.8Chung Cheng Co., Ltd.(10)


8,000,000



5.3     *
    
    Upon exercise of all options granted, would beneficially own
    less than 1.0% of our outstanding common shares.  (1)
    
    Beneficial ownership is determined in accordance with
    Rule 13d-3
    of the General Rules and Regulations under the Securities
    Exchange Act of 1934, as amended, and includes voting or
    investment power with respect to the securities.(2)
    
    Percentage of beneficial ownership of each listed person is
    based on 152,000,667 common shares outstanding as of
    March 31, 2009, as well as the class A common shares
    underlying share options and warrants exercisable by such person
    or group within 60 days of the date of this annual report.(3)
    
    Includes 8,825,000 class A common shares owned by Dragon
    Era Group Limited that are restricted and held in the form of
    ADR evidencing 4,412,500 ADSs, and 5,000 class A common
    shares. Dragon Era Group Limited is wholly-owned by Super Tiger
    Limited, which in turn is wholly-owned by The Fredy Bush Trust,
    an irrevocable discretionary trust of which Ms. Bush is
    settlor. Also includes 440,000 class A common shares that
    are owned by The Fredy Bush Family Trust in the form of ADR
    evidencing 220,000 ADSs, and 660,000 class A common shares.
    Ms. Bush disclaims beneficial ownership of all of our
    shares held by The Fredy Bush Family Trust. The business address
    of Ms. Bush is 31/F, The Center, 99 Queens Road,
    Central, Hong Kong.(4)
    
    Includes 1,424,799 class A common shares held as nominee
    for members of the management team of Hyperlink. Also includes
    83,815 vested options. Does not include a further 20,000
    restricted shares that will vest on March 31, 2010. The
    business address of Mr. Xie is 12th Floor, Xincheng
    Building, No. 167 Jiangning Road, Shanghai, Peoples
    Republic of China.(5)
    
    Includes class A common shares held by all of our directors
    and executive officers as a group and common shares issuable
    upon the exercise of all of the options within 60 days of
    the date of this annual report held by all of our directors and
    executive officers.(6)
    
    Shares are class A common shares. Xinhua Finance Limited is
    a public company listed on the Mothers Board of the Tokyo Stock
    Exchange. The business address of Xinhua Finance Limited is
    Suite 2103-4, Vicwood Plaza, 199 Des Voeux Road, Central,
    Hong Kong. The holdings of XFL in our shares have decreased from
    100% at our founding.(7)
    
    Includes 10,139,655 class A common shares beneficially
    owned by Patriarch Partners Media Holdings LLC, of which
    10,139,654 are restricted and held in restricted ADR form. Does
    not include a $57.8 million convertible loan held by its
    affiliates that may be converted into class A common shares
    as of October 21, 2009. The business address of Patriarch
    Partners is 40 Wall Street, 25th Floor, New York, NY 10005. 103




---



##### Table of Contents



(8)
    
    Includes 8,825,000 class A common shares that are
    restricted and held in the form of ADR evidencing 4,412,500
    ADSs, and 5,000 class A common shares. Dragon Era Group
    Limited is wholly-owned by Super Tiger Limited, which in turn is
    wholly-owned by The Fredy Bush Trust, an irrevocable
    discretionary trust of which Fredy Bush, our chairman and chief
    executive officer, is settlor. The business address of Dragon
    Era Group Limited is 31/F, The Center, 99 Queens Road,
    Central, Hong Kong.(9)
    
    Includes 2,400,000 class A common shares that are held in
    the form of ADR evidencing 1,200,000 ADSs, and 6,174,022
    class A common shares. Also includes 320,000 series B
    convertible preferred shares held by Yucaipa Global Partnership
    Fund L.P. and its related entities, YGOF GP Ltd., Yucaipa
    Global Holdings G.P. and RDBI LLC that may be converted into
    14,830,337 class A common shares at any time. See
    Item 7.B. Major shareholders and related party
    transactions  Related Party Transactions 
    Transactions with Yucaipa for additional information on
    our agreements with Yucaipa. Yucaipa Global Partnership
    Fund L.P. is controlled by Ronald W. Burkle and its
    business address is 9130 W. Sunset Boulevard, Los
    Angeles, CA 90069.(10)
    
    Shares are 8,000,000 class A common shares. Chung Cheng
    Co., Ltd. is ultimately owned by Hseng-Lin Cheng. Hseng-Lin
    Cheng disclaims beneficial ownership of the shares held by Chung
    Cheng Co., Ltd. except to the extent of her pecuniary interest
    therein. The business address of Chung Cheng Co., Ltd. is
    9130 10F., No. 136, Roosevelt Road, Sec. 2,
    Taipei, Taiwan 100.        Item 7.
    Major
    Shareholders and Related Party Transactions  A.
    Major
    Shareholders    B.
    Related
    Party Transactions  Contractual
    arrangements with our affiliated entities and their
    shareholders
   104




---



##### Table of Contents



Transactions
    with XFL or its subsidiaries
    Contracts
    between us and XFL or its subsidiaries
          Loan
    agreements and foreign currency agreement between us and XFL or
    its subsidiaries
         105




---



##### Table of Contents



Transactions
    involving our acquisitions
    Transactions
    with David U. Lee, Leeding Media LLC, K-Jam Media Inc. and Kia
    Jam
      Transactions
    with Shanghai Wai Gao Qiao (Group) Co., Ltd.
        Agreements
    regarding Shanghai Camera Media Investment Co.,
    Ltd.
     106




---



##### Table of Contents



Transactions
    with Sino Investment Holdings
    Transactions
    with Patriarch Partners
      Proxy
    agreement and amendment to our Memorandum and Articles of
    Association
    Share
    purchase agreement between us and Patriarch
    Partners
      Investor
    rights agreement among us, Patriarch Partners and
    XFL
   107




---



##### Table of Contents



Form F-3
    Credit
    agreement among us, Patriarch Partners, Patriarch Partners
    Agency Services, LLC and our direct subsidiaries, as
    guarantors
    2008
    convertible loan facility agreement among us, Zohar CDO
    2003-1,
    Limited and Zohar II
    2005-1,
    Limited, together with Patriarch Partners Agency Services
    LLC
  2003-1, 2005-1,
  Transactions
    with Yucaipa
  Share
    purchase agreement between us and Yucaipa
     108




---



##### Table of Contents



Shareholders
    agreement among us, Yucaipa and XFL
    Registration
    rights agreement between us and Yucaipa
    Transactions
    with Hunan Television & Broadcast Intermediary Co.,
    Ltd.
      Share
    restructuring
   109




---



##### Table of Contents



Employment
    agreements
    Share
    option agreements
    C.
    Interests
    of Experts and Counsel    Item 8.
    Financial
    Information  A.
    Consolidated
    Statements and Other Financial Information    Legal
    Proceedings
      Dividend
    Policy
   110




---



##### Table of Contents



B.
    Significant
    Changes    Item 9.
    The
    Offer and Listing  A.
    Offering
    and Listing Details      Sales PriceHigh


LowAnnual High and Low2007 (from March 9, 2007)

$
13.00


$
5.062008


6.28



0.31 111




---



##### Table of Contents



Sales PriceHigh


LowQuarterly Highs and LowsFourth Quarter 2007


10.34



5.60First Quarter of 2008


6.28



2.02Second Quarter of 2008


4.40



2.11Third Quarter of 2008


3.07



1.22Fourth Quarter of 2008


1.59



0.31First Quarter of 2009


0.79



0.22Monthly Highs and LowsNovember 2008


1.48



0.31December 2008


0.71



0.49January 2009


0.79



0.50February 2009


0.63



0.41March 2009


0.64



0.22April 2009 (through April 24, 2009)


0.61



0.45   B.
    Plan
    of Distribution    C.
    Markets    D.
    Selling
    Shareholders    E.
    Dilution    F.
    Expenses
    of the Issue    Item 10.
    Additional
    Information  A.
    Share
    Capital    B.
    Memorandum
    and Articles of Association  No. 333-140808)
  C.
    Material
    Contracts  Form 20-F.
 112




---



##### Table of Contents



D.
    Exchange
    Controls    E.
    Taxation    Cayman
    Islands Taxation
    United
    States Federal Income Taxation
      
    banks;
    insurance companies;
    regulated investment companies;
    real estate investment trusts;
    broker-dealers;
    traders that elect to mark to market;
    U.S. expatriates;
    tax-exempt entities;
    persons liable for alternative minimum tax;
    persons holding an ADS or common share as part of a straddle,
    hedging, conversion or integrated transaction;
    persons that actually or constructively own 10% or more of the
    total combined voting power of all classes of our voting stock;
    persons who acquired ADSs or common shares pursuant to the
    exercise of any employee share option or otherwise as
    compensation; or
    persons holding ADSs or common shares through partnerships or
    other pass-through entities.  INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE
    APPLICATION OF THE U.S. FEDERAL TAX RULES TO THEIR
    PARTICULAR CIRCUMSTANCES AS WELL AS THE
 113




---



##### Table of Contents



STATE, LOCAL,
    NON-U.S. AND
    OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
    DISPOSITION OF ADSs OR COMMON SHARES.
    
    an individual who is a citizen or resident of the United States;
    a corporation (or other entity taxable as a corporation for
    U.S. federal income tax purposes) created or organized in
    the United States or under the laws of the United States, any
    State thereof or the District of Columbia;
    an estate, the income of which is subject to U.S. federal
    income taxation regardless of its source; or
    a trust that (1) is subject to the primary supervision of a
    court within the United States and the control of one or more
    U.S. persons for all substantial decisions or (2) has
    a valid election in effect under applicable U.S. Treasury
    regulations to be treated as a U.S. person.      Taxation
    of dividends and other distributions on the ADSs or common
    shares
     114




---



##### Table of Contents



Taxation
    of disposition of ADSs or common shares
    Passive
    foreign investment company
  non-U.S. corporation
  
    at least 75% of its gross income for such year is passive
    income; or
    at least 50% of the value of its assets (based on an average of
    the quarterly values of the assets) during such year is
    attributable to assets that produce passive income or are held
    for the production of passive income. 115




---



##### Table of Contents




    the excess distribution or gain will be allocated ratably over
    your holding period for the ADSs or common shares;
    the amount allocated to the current taxable year, and any
    taxable years in your holding period prior to the first taxable
    year in which we were a PFIC, will be treated as ordinary
    income; and
    the amount allocated to each other taxable year will be subject
    to the highest tax rate in effect for individuals or
    corporations, as applicable, for each such year and the interest
    charge generally applicable to underpayments of tax will be
    imposed on the resulting tax attributable to each such year.       116




---



##### Table of Contents



non-U.S. corporation
    You are strongly urged to consult your tax advisor regarding
    the application of the PFIC rules to your investment in ADSs or
    common shares.
  Information
    reporting and backup withholding
  Form W-9.
    F.
    Dividends
    and Paying Agents    G.
    Statement
    by Experts    H.
    Documents
    on Display  Form F-1,
 117




---



##### Table of Contents



Form F-6
  Form 20-F, 1-800-SEC-0330
  I.
    Subsidiary
    Information    Item 11.
    Quantitative
    and Qualitative Disclosures About Market Risk    Interest
    rate risk
    Foreign
    currency risk
     118




---



##### Table of Contents



Inflation
    Item 12.
    Description
    Of Securities Other Than Equity Securities    PART II
  Item 13.
    Defaults,
    Dividend Arrearages And Delinquencies    Item 14.
    Material
    Modifications To The Rights Of Security Holders And Use Of
    Proceeds    Item 15.
    Controls
    And Procedures  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15(e) Rule 13a-15(b)
    Managements
    Annual Report on Internal Control over Financial
    Reporting
  Rule 13a-15(f) Rule 13a-15(c)
     119




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm  To the Board
    of Directors and the Shareholders of
    Xinhua Sports & Entertainment Limited (formerly Xinhua
    Finance Media Limited):
  Internal Control  Integrated Framework
        Internal Control  Integrated Framework
    /s/ DELOITTE
    TOUCHE TOHMATSU
    Hong Kong
    April 30, 2009
 120




---



##### Table of Contents



Changes
    in Internal Control over Financial Reporting
  Form 20-F
  Item 16A.
    Audit
    Committee Financial Expert    Item 16B.
    Code
    Of Ethics  Form F-1 (No. 333-140808).
  Item 16C.
    Principal
    Accountant Fees and Services    2007


2008Audit fees(1)

$
1,440,000


$
1,880,000Audit-related fees(2)

$
2,870,000


$
788,000Tax fees(3)





$
3,000     (1)
    
    Audit fees means the aggregate fees billed in each
    of the fiscal years listed for professional services rendered by
    our principal auditors for the audits of our annual financial
    statements in 2007 and 2008 and the audit of internal control
    over financial reporting in 2008.(2)
    
    Audit-related fees means the aggregate fees billed
    in each of the fiscal years listed for assurance and related
    services by our principal auditors that are reasonably related
    to the performance of the audit or review of our financial
    statements and are not reported under Audit Fees.
    Services comprising the fees disclosed under the category of
    Audit-Related Fees in 2007 involve principally the
    issue of comfort letters, rendering of listing advice in
    connection with our initial public offering and interim review.
    Services comprising the fees disclosed under the category of
    Audit-Related Fees in 2008 involve principally the
    interim review.(3)
    
    Tax fees means the fees billed for tax compliance
    services, including the preparation of tax returns and tax
    consultations, such as tax advice related to employee
    share-based compensation.    Item 16D.
    Exemptions
    From The Listing Standards For Audit Committees   121




---



##### Table of Contents



Item 16E.
    Purchases
    Of Equity Securities By The Issuer And Affiliated
    Purchasers    Total Number of


ApproximateShares


Dollar Value ofPurchased as


Shares that MayPart of Publicly


yet BeTotal Number of


Average Price


Announced


PurchasedPeriod

Shares Purchased


Paid per Share(1)


Plan(2)


Under the Plan(1)June 12  June 19, 2007


1,932,000


$
4.47



1,932,000


$
41,371,946March 19  March 31, 2008


2,034,236


$
1.42



2,034,236


$
38,489,716May 14  June 20, 2008


1,382,654


$
1.44



1,382,654


$
36,494,234Total


5,348,890


$
2.52



5,348,890


$
36,494,234     (1)
    
    Each of our ADSs represents two class A common shares.(2)
    
    The repurchase plan was publicly announced on May 29, 2007
    and provides for the repurchase of up to $50.0 million of
    our common shares.  Item 16F.
    Change
    In Registrants Certifying Accountant    Item 16G.
    Corporate
    Governance    Item 17.
    Financial
    Statements    Item 18.
    Financial
    Statements    Item 19.
    Exhibits  ExhibitNumber

Description of Document1
.1

Amended and Restated Memorandum and Articles of Association
    (incorporated by reference to Exhibit 3.2 from our F-1
    registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).2
.1

Registrants Specimen American Depositary Receipt
    (incorporated by reference to Exhibit 4.1 from our F-1
    registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).2
.2

Registrants Specimen Certificate for Common Shares
    (incorporated by reference to Exhibit 4.2 from our F-1
    registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).2
.3

Form of Deposit Agreement among the Registrant, the depositary
    and holders of the American depositary receipts (incorporated by
    reference to Exhibit 4.3 from our F-1 registration
    statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007). 122




---



##### Table of Contents



ExhibitNumber

Description of Document4
.1

Share Purchase Agreement, dated as of March 16, 2006,
    amended as of March 16, 2006, between the Registrant and
    Patriarch Partners Media Holdings LLC (incorporated by reference
    to Exhibit 4.5 from our F-1 registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.2

Investor Rights Agreement, dated as of March 16, 2006,
    among the Registrant, Xinhua Finance Limited and Patriarch
    Partners Media Holdings LLC (incorporated by reference to
    Exhibit 4.6 from our F-1 registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.3

Series B Preferred Share Purchase Agreement between Yucaipa
    Global Partnership Fund L.P. and the Registrant, dated as
    of February 18, 2008 (incorporated by reference to
    Exhibit 4.57 from our annual report on
    Form 20-F
    (File
    No. 001-33328),
    filed with the Commission on May 19, 2008).4
.4

Shareholders Agreement among Yucaipa Global Partnership
    Fund L.P., Xinhua Finance Limited and the Registrant, dated
    as of February 28, 2008 (incorporated by reference to
    Exhibit 4.58 from our annual report on
    Form 20-F
    (File
    No. 001-33328),
    filed with the Commission on May 19, 2008).4
.5

Registration Rights Agreement between the Registrant and Yucaipa
    Global Partnership Fund L.P., dated as of February 28,
    2008 (incorporated by reference to Exhibit 4.59 from our
    annual report on
    Form 20-F
    (File
    No. 001-33328).4
.6

2007 Share Option Plan (incorporated by reference to
    Exhibit 10.1 from our F-1 registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.7

Form of Indemnification Agreement with the Registrants
    directors (incorporated by reference to Exhibit 10.2 from
    our F-1 registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.8

Form of Employment Agreement between the Registrant and a Senior
    Executive Officer of the Registrant (incorporated by reference
    to Exhibit 10.3 from our F-1 registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.9

Trademark License Agreement, dated as of September 21,
    2006, between the Registrant and Xinhua Financial Network
    Limited (incorporated by reference to Exhibit 10.4 from our
    F-1 registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.10

English translation of Business Cooperation Agreement, amended
    and restated as of November 6, 2006, among Economic
    Observer Press Office, Guangzhou Jingshi Culture Intermediary
    Co., Ltd., Beijing Jingguan Xincheng Advertising Co., Ltd and
    Beijing Jingshi Jingguan Advertising Co., Ltd. (incorporated by
    reference to Exhibit 10.5 from our F-1 registration
    statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.11

Form of Stock Option Agreements (incorporated by reference to
    Exhibit 10.6 from our F-1 registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.12

Consulting Agreement, dated as of November 1, 2006, between
    Jia Luo Business Consulting (Shanghai) Co., Ltd. and Shanghai
    Camera Media Investment Co., Ltd. (incorporated by reference to
    Exhibit 10.12 from our F-1 registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.13

Strategic Partnership Agreement, dated and supplemented as of
    June 15, 2006, among Beijing Century Media Culture Co.,
    Ltd., Hunan Television & Broadcast Intermediary Co.,
    Ltd., Shenzhen Ronghan Investment Co., Ltd. and Beijing
    Perspective Orient Movie & Television Intermediary
    Co., Ltd. (incorporated by reference to Exhibit 10.13 from
    our F-1 registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.14

Advertising Services Agreement, dated as of December 23,
    2006, between Beijing Pioneer Media Advertising Co., Ltd. and
    Shanghai Media Investment Co., Ltd. (incorporated by reference
    to Exhibit 10.15 from our F-1 registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007). 123




---



##### Table of Contents



ExhibitNumber

Description of Document4
.15

Cooperation Agreement, dated as of November 1, 2006,
    between Beijing Century Media Culture Co., Ltd. and Shanghai
    Camera Media Investment Co., Ltd. (incorporated by reference to
    Exhibit 10.16 from our F-1 registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.16

Cooperation Agreement, dated as of June 5, 2006, between
    the Registrant and Small World Television (incorporated by
    reference to Exhibit 10.17 from our F-1 registration
    statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.17

English translation of Call Option Agreement regarding Economic
    Observer Press Office, dated as of November 6, 2006, among
    Shandong Sanlian Group, Shandong Economic Observer Co., Ltd.,
    Economic Observer Press Office and Beijing Jingguan Xincheng
    Advertising Co., Ltd. (incorporated by reference to
    Exhibit 10.19 from our F-1 registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.18

English translation of Exclusive Advertising Agreement regarding
    Beijing FM91.5 and Shanghai FM87.9 of China Radio International,
    amended and restated as of November 28, 2006, between
    Beijing Guoguang Guangrong Advertising Co., Ltd. and Beijing
    Century Advertising Co., Ltd. (incorporated by reference to
    Exhibit 10.20 from our F-1 registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.19

English translation of Money Journal Cooperation Agreement,
    amended and restated as of September 20, 2006, among Hunan
    Television and Broadcasting Intermediary Co., Ltd., Money
    Journal Press Office and Guangzhou Jingshi Culture Intermediary
    Co., Ltd. (incorporated by reference to Exhibit 10.21 from
    our F-1 registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.20

English Translation of Cooperation Agreement, dated as of
    September 25, 2005, between Guangzhou Jingyu Culture
    Development Co., Ltd. and Beijing Qiannuo Advertising Co., Ltd.
    (incorporated by reference to Exhibit 10.22 from our F-1
    registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.21

Information Consulting Committee Organization Agreement, amended
    and restated as of November 6, 2006, among Shandong Sanlian
    Group, Xinhua Finance Limited, Economic Observer Press Office
    and Beijing Jingguan Xincheng Advertising Co., Ltd.
    (incorporated by reference to Exhibit 10.23 from our F-1
    registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.22

English Translation of Business Cooperation Agreement, amended
    and restated as of November 6, 2006, among Shandong Sanlian
    Group, Shandong Economic Observer Co., Ltd., Economic Observer
    Press Office and Beijing Jingguan Xincheng Advertising Co., Ltd.
    (incorporated by reference to Exhibit 10.24 from our F-1
    registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.23

Cooperation Agreement in relation to Economic Observer, dated as
    of April 20, 2006, among Xinhua Finance Limited, Shandong
    Economic Observer Co., Ltd., Shandong Sanlian Group and Beijing
    Jingguan Xincheng Advertising Co., Ltd. (incorporated by
    reference to Exhibit 10.25 from our F-1 registration
    statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.24

Form of Equity Pledge Agreement among the affiliated entity, the
    shareholder of the affiliated entity and WFOE (incorporated by
    reference to Exhibit 10.26 from our F-1 registration
    statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.25

Form of Exclusive Equity Purchase Option Agreement between WFOE
    and shareholder of affiliated entity (incorporated by reference
    to Exhibit 10.27 from our F-1 registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.26

Form of Subrogation Agreement among the affiliated entity, the
    shareholder of the affiliated entity and the WFOE (incorporated
    by reference to Exhibit 10.28 from our F-1 registration
    statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.27

Service Agreement, dated as of January 23, 2006, between
    New China Media Co., Ltd. and Beijing Century Advertising Co.,
    Ltd. (incorporated by reference to Exhibit 10.29 from our
    F-1 registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007). 124




---



##### Table of Contents



ExhibitNumber

Description of Document4
.28

Form of Deed of Non-Competition Undertaking and Release between
    shareholder and the Registrant (incorporated by reference to
    Exhibit 10.31 from our F-1 registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.29

Form of Share Subscription Agreement dated as of
    September 22, 2006 (incorporated by reference to
    Exhibit 10.32 from our F-1 registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.30

Agreement for the Sale and Purchase of Equity Interest and
    Subscription in Shanghai Hyperlink Market Research Co., Ltd.,
    dated as of June 14, 2006, among Stephen Xie Wei, Lu
    Qinyong, Win Jei-Ching, Yang Jing, Shi Hui, Pang Lu, Yang
    Weidong, Xinhua Finance Limited, Beijing Taide Advertising Co.,
    Ltd., and Shanghai Hyperlink Market Research Co., Ltd.
    (incorporated by reference to Exhibit 10.34 from our F-1
    registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.31

Loan and Share Purchase Agreement in respect of shares in the
    capital of Upper Step Holdings Limited, dated as of
    February 28, 2006, among the Registrant, Sino Investment
    Holdings Limited and Sungolden Limited. (incorporated by
    reference to Exhibit 10.36 from our F-1 registration
    statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.32

Promissory Note dated as of November 10, 2006 issued by
    Sino Investment Holdings Limited in favor of the Registrant
    (incorporated by reference to Exhibit 10.46 from our F-1
    registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.33

Share Purchase Agreement in respect of shares in the capital of
    EconWorld Media Limited, dated as of December 18, 2006,
    among the Registrant, Fan Cho Tak Alex and others (incorporated
    by reference to Exhibit 10.47 from our F-1 registration
    statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.34

Form of Employment Agreement between the Registrant and a Chief
    Officer of the Registrant (incorporated by reference to
    Exhibit 10.48 from our F-1 registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.35

English translation of Strategic Cooperation Agreement, dated as
    of December 18, 2003 and supplemented as of
    November 30, 2005, between Inner Mongolia Television
    Station and Shanghai Camera Media Investment Co., Ltd.
    (incorporated by reference to Exhibit 99.2 from our F-1
    registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.36

English translation of Zhou Mo Wen Hui Cooperation Agreement
    dated as of August 8, 2005, between Zhou Mo Wen Hui Press
    Office and Guangzhou Jingyu Culture Development Co., Ltd.
    (incorporated by reference to Exhibit 99.3 from our F-1
    registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.37

Content License Agreement, dated as of December 15, 2001,
    between China Economic Information Service of Xinhua News Agency
    and Xinhua Financial Network Limited (incorporated by reference
    to Exhibit 99.4 from our F-1 registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).4
.38

Form of loan agreement between a wholly foreign-owned entity and
    a shareholder of an affiliated entity (incorporated by reference
    to Exhibit 4.55 from our annual report on
    Form 20-F
    (File
    No. 001-33328),
    filed with the Commission on May 19, 2008).4
.39

Waiver of loan issued by Xinhua Finance Limited to the
    Registrant, dated as of June 30, 2007 (incorporated by
    reference to Exhibit 4.56 from our annual report on
    Form 20-F
    (File
    No. 001-33328),
    filed with the Commission on May 19, 2008).4
.40

Share subscription agreement in respect of shares in the capital
    of Xinhua Finance Media Limited, between Whole Fortune Limited
    and Xinhua Finance Media Limited, dated as of October 31,
    2007 (incorporated by reference to Exhibit 4.60 from our
    annual report on
    Form 20-F
    (File
    No. 001-33328),
    filed with the Commission on May 19, 2008). 125




---



##### Table of Contents



ExhibitNumber

Description of Document4
.41

Equity transfer agreement in respect of shares in Beijing
    Perspective Orient Movie and Intermediary Co., Ltd., between
    Hunan Television & Broadcast Intermediary Co., Ltd.
    and Beijing Century Culture Co., Ltd., dated as of
    October 31, 2007 (incorporated by reference to
    Exhibit 4.61 from our annual report on
    Form 20-F
    (File
    No. 001-33328),
    filed with the Commission on May 19, 2008).4
.42

Purchase agreement in respect of shares in the capital of
    Profitown Development Limited and other assets therein, among
    Xinhua Finance Media Limited, Flash Star Worldwide Limited,
    Profitown Development Limited and Chow Chi Yan, dated as of
    November 26, 2007 (incorporated by reference to
    Exhibit 4.62 from our annual report on
    Form 20-F
    (File
    No. 001-33328),
    filed with the Commission on May 19, 2008).4
.43

Purchase agreement in respect of shares in the capital of East
    Alliance Limited and other assets therein, among Xinhua Finance
    Media Limited, East Alliance Limited and other parties set out
    herein, dated as of June 4, 2007 (incorporated by reference
    to Exhibit 4.63 from our annual report on
    Form 20-F
    (File
    No. 001-33328),
    filed with the Commission on May 19, 2008).4
.44

Purchase agreement in respect of Convey Advertising Group, among
    Xinhua Finance Media Limited, Pariya Holdings Limited and Good
    Speed Holdings Limited, dated as of June 29, 2007
    (incorporated by reference to Exhibit 4.64 from our annual
    report on
    Form 20-F
    (File
    No. 001-33328),
    filed with the Commission on May 19, 2008).4
.45

Purchase agreement in respect of shares in the capital of
    Singshine (Holdings) Hongkong Limited and other assets set out
    herein, among Xinhua Finance Media Limited, Singshine (Holdings)
    Hongkong Limited, Zhang Jingyu, Hu Shengzhong, He Zhihao, Lu
    Qibo, Chen Hao and Lu Hang, dated as of June 11, 2007
    (incorporated by reference to Exhibit 4.65 from our annual
    report on
    Form 20-F
    (File
    No. 001-33328),
    filed with the Commission on May 19, 2008).4
.46

Cooperation agreement between Zhoumo Wen Hui Press Office and
    Beijing Qiannuo Advertising Co., Ltd., dated as of
    November 10, 2006 (incorporated by reference to
    Exhibit 4.66 from our annual report on
    Form 20-F
    (File
    No. 001-33328),
    filed with the Commission on May 19, 2008).4
.47

Advertising agency agreement between Guangdong Peoples
    Radio Station and Guangzhou Singshine Communication Co., Ltd.,
    dated as of December 14, 2007 (incorporated by reference to
    Exhibit 4.67 from our annual report on
    Form 20-F
    (File
    No. 001-33328),
    filed with the Commission on May 19, 2008).4
.48

Cooperation agreement between Guangdong Peoples Radio
    Station and Guangzhou Singshine Communication Co., Ltd., dated
    as of November 1, 2006 (incorporated by reference to
    Exhibit 4.68 from our annual report on
    Form 20-F
    (File
    No. 001-33328),
    filed with the Commission on May 19, 2008).4
.49

English Translation of Equity Call Option Agreement, dated as of
    December 10, 2008, between Shanghai Wai Gao Qiao (Group)
    Co., Ltd and Jia Luo Business Consulting (Shanghai) Co., Ltd.4
.50

Agreement relating to the sale and purchase of 85% of the issued
    share capital of Xinhua Finance Media (Convey) Limited, dated as
    of December 31, 2008, between the Registrant and Pariya
    Holdings Limited.4
.51

Escrow Agreement, dated as of December 31, 2008, among the
    Registrant, Pariya Holdings Limited and K&L Gates.4
.52

Sale and Purchase Agreement, dated as of March 13, 2009,
    among the Registrant, Beijing Taide Advertising Co., Ltd.,
    INTAGE Inc. and INTAGE Marketing Consulting (Shanghai) Co., Ltd.4
.53

Credit Agreement among the Registrant, Patriarch Partners Agency
    Services, LLC and the Lenders party thereto, dated as of
    October 21, 2008.4
.54

Investor and Registration Rights Agreement among the Registrant,
    Xinhua Finance Media Limited and the Investors party thereto,
    dated as of October 21, 2008.4
.55

Security Agreement between the Registrant and Patriarch Partners
    Agency Services, LLC, dated as of October 21, 2008.4
.56

Consent, Waiver and First Amendment to Credit Agreement, dated
    as of February 20, 2009, among the Registrant, Patriarch
    Partners Agency Services, LLC and the Lenders party thereto.4
.57

Purchase Agreement in respect of shares in the capital of
    Starease Limited and other assets set out therein, dated as of
    October 9, 2008, among the Registrant, Prime Day Management
    Limited, Starease Limited and Ge Zhijun.4
.58

Master Agreement in respect of Certain Advertising Business,
    dated as of September 30, 2008, between Registrant and
    Chung Cheng Co., Ltd. 126




---



##### Table of Contents



ExhibitNumber

Description of Document4
.59

Purchase Agreement, dated as of March 6, 2009, among the
    Registrant, Parkwood Asia Limited and Everfame Development
    Limited.4
.60

English Translation of Cooperation Agreement, dated as of
    March 12, 2009, between Shaanxi TV Station and Beijing
    Hantang Yueyi Culture Media Co., Ltd.4
.61

English Translation of Strategic Cooperation Agreement, dated as
    of March 12, 2009, among Beijing Keying & CCTV
    Culture Development Co., Ltd., Beijing Linghang Dongli
    Advertising Co., Ltd. and Beijing Science & Education
    Film Studio.8
.1

List of subsidiaries.11
.1

Code of Business Conduct and Ethics of the Registrant
    (incorporated by reference to Exhibit 99.1 from our F-1
    registration statement (File
    No. 333-140808),
    as amended, initially filed with the Commission on
    February 21, 2007).12
.1

CEO Certification Pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002.12
.2

CFO Certification Pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002.13
.1

CEO Certification Pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.13
.2

CFO Certification Pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.15
.1

Consent of Deloitte Touche Tohmatsu.     
    
    Filed with this Annual Report on
    Form 20-F 127




---



##### Table of Contents



SIGNATURES
  Form 20-F
    By:
    /s/  Fredy
    Bush   Title:
    Chairman and Chief Executive Officer  Date:
    April 30, 2009
 128




---



##### 



Xinhua
    Sports & Entertainment Limited
    (formerly Xinhua Finance Media Limited)
    Index to consolidated financial statements
  PageReport of independent registered public
    accounting firm


F-2Consolidated balance sheets as of
    December 31, 2007 and 2008


F-3Consolidated statements of operations for the
    years ended December 31, 2006, 2007 and 2008


F-5Consolidated statements of shareholders
    equity and comprehensive income (loss) for the years ended
    December 31, 2006, 2007 and 2008


F-7Consolidated statements of cash flows for the
    years ended December 31, 2006, 2007 and 2008


F-10Notes to consolidated financial statements


F-13   F-1




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm  To the Board
    of Directors and the Shareholders of
    Xinhua Sports & Entertainment Limited (formerly Xinhua
    Finance Media Limited):
          Internal Control  Integrated Framework
   /s/ DELOITTE
    TOUCHE TOHMATSU
    Hong Kong
    April 30, 2009
 F-2




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited



Consolidated
    balance sheets  December 31,


December 31,2007


2008(In U.S. dollars,except for share data)ASSETSCurrent assets:Cash and cash equivalents

$
44,436,087


$
54,088,842Short term deposits






2,940,051Restricted cash


47,252,191



37,510,000Accounts receivable, net of allowance for doubtful debts of
    $301,217 in 2007 and $9,169,667 in 2008


45,706,766



44,762,902Deposits for program advertising right


6,752



2,125,330Prepaid advertising program space and airtime


5,382,498



198,923Prepaid expenses


2,777,025



3,053,099Amounts due from related parties, current portion


7,389,211



6,547,636Promissory note receivable  related party, current
    portion


722,038



Consideration receivable from disposal of subsidiaries






36,970,590Deferred tax assets, current portion


22,634



1,042,379Other current assets


5,361,890



4,259,056Total current assets


159,057,092



193,498,808Capitalized content production costs, net


8,855,896



Property and equipment, net


9,191,959



6,590,790License agreements, net


98,490,161



99,148,017Exclusive advertising agreement, net  Economic
    Observer Advertising


71,886,011



74,267,216Other intangible assets, net


63,129,741



27,113,350Goodwill


180,125,488



46,992,724Investment


500,000



13,508,239Deposits for acquisition of subsidiaries


25,634,000



Deposit for investment






14,174,566Deferred tax assets, non-current portion


94,598



Principal protected note


24,909,929



Promissory note receivable  related party,
    non-current portion


7,900,000



Consideration receivable from disposal of subsidiaries






28,285,035Amount due from a related party, non-current portion






1,506,137Other long term assets


1,027,338



3,165,454Total assets

$
650,802,213


$
508,250,336  F-3




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Consolidated
    balance sheets  (continued)
  December 31,


December 31,2007


2008(In U.S. dollars,except for share data)LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS
    EQUITYCurrent liabilities:Accounts payable

$
8,126,537


$
5,375,281Accrued expenses and other payables


19,201,194



42,243,279Amounts due to Parent and its affiliates


5,251,224



1,131,050Amounts due to other related parties


602,698



2,215,122Capital lease obligations, current portion


188,590



Long term payables, current portion


4,564,177



10,363,762Bank overdraft


960,157



Bank borrowings, current portion


33,780,188



36,374,198Income taxes payable


6,538,946



8,571,848Total current liabilities


79,213,711



106,274,540Deferred tax liabilities


37,741,579



31,679,491Convertible loan






33,200,000Bank borrowings, non-current portion


75,436



Long term payables, non-current portion


65,066,299



68,305,496Capital lease obligations, non-current portion


8,875



Total liabilities


182,105,900



239,459,527Commitments and contingency (Note 30)Minority interests


2,060,745



2,565,177Mezzanine equitySeries B redeemable convertible preferred shares (stated
    value $100; 320,000 shares authorized; 314,000 issued and
    outstanding as of December 31, 2008; liquidation value of
    $63,400,000 as of December 31, 2008)






30,605,591Shareholders equity:Class A common shares and non-vested shares (par value
    $0.001; 143,822,874 as of December 31, 2007 and 343,822,874
    as of December 31, 2008 shares authorized; 90,061,269
    as of December 31, 2007 and 146,914,667 as of
    December 31, 2008 shares issued and outstanding)


90,061



104,302Class B common shares (par value $0.001; 50,054,619 as of
    December 31, 2007 and December 31, 2008 shares
    authorized; 50,054,618 as of December 31, 2007 and nil as
    of December 31, 2008 shares issued and outstanding)


7,442



Treasury stock (800,000 and 1,310,000 shares as of
    December 31, 2007 and 2008, respectively)


(800
)


(1,310
)Additional paid-in capital


439,517,774



481,319,655Retained earnings (accumulated deficit)


23,903,560



(252,968,439
)Accumulated other comprehensive income


3,117,531



7,165,833Total shareholders equity


466,635,568



235,620,041Total liabilities, minority interests, mezzanine equity and
    shareholders equity

$
650,802,213


$
508,250,336    F-4




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited



Consolidated
    statements of operations  Year Ended


Year Ended


Year EndedDecember 31, 2006


December 31, 2007


December 31, 2008(In U.S. dollars, except for share data)Net revenues:Advertising services

$
44,861,952


$
86,681,143


$
107,891,719Content production


6,545,148



7,680,580



12,371,911Advertising sales


6,691,543



39,281,540



65,355,685Publishing services


867,789



1,195,427



411,637Total net revenues


58,966,432



134,838,690



186,030,952Cost of revenues:Advertising services


27,653,769



58,047,996



74,735,032Content production


2,829,311



3,707,062



7,521,948Advertising sales


1,912,260



19,490,013



30,756,279Publishing services


1,386,162



854,020



1,479,005Total cost of revenues


33,781,502



82,099,091



114,492,264Operating expenses:Selling and distribution


5,276,751



14,876,682



22,945,933General and administrative(1)


12,840,202



24,348,827



52,068,821Impairment loss on goodwill










180,841,091Impairment loss on intangible assets










25,562,095Provision for doubtful debts










10,427,114Impairment loss on promissory note and accrued interest income










8,521,483Loss on disposal of subsidiaries










4,720,705Impairment loss on capitalized content production costs










3,085,850Impairment loss on property and equipment










2,438,818Provision for amount due from a related party










1,721,306Total operating expenses


18,116,953



39,225,509



312,333,216Other operating income






2,261,788



1,499,381Income (loss) from operations


7,067,977



15,775,878



(239,295,147
)Other income (expense):Interest expense


(2,618,398
)


(6,627,685
)


(8,077,229
)Interest income


1,743,368



6,264,103



1,738,282Impairment loss on principal protected note










(24,909,929
)Impairment loss on other investments










(1,333,066
)Other (expense) income, net


(22,621
)


1,703,693



Income (loss) before provision for income taxes, equity in loss
    of an investment and minority interest


6,170,326



17,115,989



(271,877,089
)Provision for income taxes (tax benefit)


1,069,537



(12,225,650
)


2,354,442  F-5




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Consolidated
    statements of operations  (continued)
  Year Ended


Year Ended


Year EndedDecember 31, 2006


December 31, 2007


December 31, 2008(In U.S. dollars, except for share data)Net income (loss) before minority interest and equity in loss of
    an investment


5,100,789



29,341,639



(274,231,531
)Minority interest, net of taxes


1,704,287



1,302,634



640,468Equity in loss of an investment, net of taxes


52,211







Net income (loss)

$
3,344,291


$
28,039,005


$
(274,871,999
)Deemed dividends on redeemable convertible preferred shares


(2,157,301
)






Dividends declared on redeemable convertible preferred shares


(5,335,000
)


(1,338,333
)


Dividends declared on series B redeemable convertible
    preferred shares










(2,000,000
)Net (loss) income attributable to holders of common shares

$
(4,148,010
)

$
26,700,672


$
(276,871,999
)Net (loss) income per share:Basic  Class A common share

$
(0.08
)

$
0.23


$
(2.04
)Basic  Class B common share

$
(0.08
)

$
0.23


$
(2.04
)Diluted  Class A common share

$
(0.08
)

$
0.21


$
(2.04
)Diluted  Class B common share

$
(0.08
)

$
0.21


$
(2.04
)Weighted average number of common shares used in computation:Basic  Class A common share


5,084,366



66,165,765



85,926,895Basic  Class B common share


44,693,266



50,054,618



49,917,482Diluted  Class A common share


5,084,366



86,314,773



85,926,895Diluted  Class B common share


44,693,266



50,054,618



49,917,482     (1)
    
    Includes share-based compensation expense of $2,293,240,
    $3,071,531 and $12,476,894 for the years ended December 31,
    2006, 2007 and 2008, respectively.   F-6




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited



Consolidated
    statements of shareholders equity and comprehensive income
    (loss)  Class A


Class B








Convertible





Retained


Accumulatedcommon shares


common shares


Non-vested shares


preferred shares


Additional


earnings


otherNumber of





Number of





Number of





Number of





paid-in


(accumulated


comprehensive





Comprehensiveshares


Amount


shares


Amount


shares


Amount


shares


Amount


capital


deficit)


income


Total


income(In U.S. dollars, except for share data)Balance, December 31, 2005





$




1,000


$
1






$







$



$



$
1,350,898


$
2,173


$
1,353,072Issuance of common shares in a stock split










42,612,289



































Issuance of common shares arising from acquisitions of
    subsidiaries


20,961,154



20,961



























32,815,563











32,836,524Issue of common shares to parent










7,441,329



7,441



















8,176,923











8,184,364Issuance of non-vested shares


















11,050,000



11,050











(11,050
)










Reclassification of preferred shares from mezzanine equity


























16,404,926



16,404



62,140,897











62,157,301Redemption of redeemable convertible preferred shares


























(819,672
)


(819
)


(3,104,870
)










(3,105,689
)Gain on redemption of redeemable convertible preferred shares


































105,688











105,688Issuance of warrants


































739,000











739,000Dividends declared on redeemable convertible preferred shares






































(5,335,000
)






(5,335,000
)Deemed dividends on redeemable convertible preferred shares






































(2,157,301
)






(2,157,301
)Share-based compensation


































2,293,240











2,293,240Foreign currency translation gain










































834,232



834,232


$
834,232Net income






































3,344,291







3,344,291



3,344,291Balance, December 31, 2006


20,961,154


$
20,961



50,054,618


$
7,442



11,050,000


$
11,050



15,585,254


$
15,585


$
103,155,391


$
(2,797,112
)

$
836,405


$
101,249,722


$
4,178,523  F-7




---



##### Table of Contents



Xinhua
    Sports and Entertainment Limited
  Consolidated
    statements of shareholders equity and comprehensive income
    (loss)  (continued)
  Class A


Class B








Convertible








Retained


Accumulatedcommon shares


common shares


Non-vested shares


preferred shares


Additional





earnings


otherNumber of





Number of





Number of





Number of





paid-in


Treasury


(accumulated


comprehensive





Comprehensiveshares


Amount


shares


Amount


shares


Amount


shares


Amount


capital


stock


deficit)


income


Total


income(In U.S. dollars, except for share data)Balance, December 31, 2006


20,961,154


$
20,961



50,054,618


$
7,442



11,050,000


$
11,050



15,585,254


$
15,585


$
103,155,391


$



$
(2,797,112
)

$
836,405


$
101,249,722Issuance of common shares arising from acquisitions of
    subsidiaries


2,639,595



2,640



























10,230,881















10,233,521Issuance of shares for future exercises of share options


2,000,000



2,000































(2,000
)










Issuance of common shares for share option plan


1,587,019



1,587



























2,171,088



1,200











2,173,875Issuance of common shares upon initial public offering, net of
    issuance cost of $24,740,470


34,615,846



34,616



























200,227,913















200,262,529Conversion of preferred shares into common shares


15,585,254



15,585



















(15,585,254
)


(15,585
)


















Conversion of convertible loan into common shares


3,554,401



3,554



























14,281,197















14,284,751Transfer of non-vested shares into common shares


1,500,000



1,500











(1,500,000
)


(1,500
)


























Share-based compensation


































3,071,573















3,071,573Repurchase and cancellation of common shares


(1,932,000
)


(1,932
)


























(8,628,054
)














(8,629,986
)Waiver of amounts due to Parent and its affiliates


































115,007,785















115,007,785Dividends declared on redeemable convertible preferred shares










































(1,338,333
)






(1,338,333
)Foreign currency translation gain














































2,281,126



2,281,126


$
2,281,126Net income










































28,039,005







28,039,005



28,039,005Balance, December 31, 2007


80,511,269


$
80,511



50,054,618


$
7,442



9,550,000


$
9,550






$



$
439,517,774


$
(800
)

$
23,903,560


$
3,117,531


$
466,635,568


$
30,320,131  F-8




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Consolidated
    statements of shareholders equity and comprehensive income
    (loss)  (continued)
  Class A


Class B








Convertible








Retained


Accumulatedcommon shares


common shares


Non-vested shares


preferred shares


Additional





earnings


otherNumber of





Number of





Number of





Number of





paid-in


Treasury


(accumulated


comprehensive





Comprehensiveshares


Amount


shares


Amount


shares


Amount


shares


Amount


capital


stock


deficit)


income


Total


loss(In U.S. dollars, except for share data)Balance, December 31, 2007


80,511,269


$
80,511



50,054,618


$
7,442



9,550,000


$
9,550






$



$
439,517,774


$
(800
)

$
23,903,560


$
3,117,531


$
466,635,568Issuance of common shares arising from acquisitions of
    subsidiaries


3,311,670



3,312



























4,933,068















4,936,380Issuance of shares for future exercise of share options


2,000,000



2,000































(2,000
)










Issuance of common shares for share option plan


604,000



604



























177,749



1,490











179,843Issuance of common shares for acquiring intangible assets


4,000,000



4,000



























2,656,000















2,660,000Issuance of common shares for professional services


300,000



300



























368,700















369,000Transfer of non-vested shares into common shares


9,550,000



9,550











(9,550,000
)


(9,550
)


























Share-based compensation


































12,323,144















12,323,144Repurchase and cancellation of common shares


(3,416,890
)


(3,417
)


























(4,959,721
)














(4,963,138
)Transfer from Class B common shares to Class A common
    shares


50,054,618



7,442



(50,054,618
)


(7,442
)


































Waiver of amounts due to Parent and its affiliates


































26,302,941















26,302,941Dividends declared on redeemable convertible preferred shares










































(2,000,000
)






(2,000,000
)Foreign currency translation gain














































4,048,302



4,048,302


$
4,048,302Net loss










































(274,871,999
)






(274,871,999
)


(274,871,999
)Balance, December 31, 2008


146,914,667


$
104,302






$







$







$



$
481,319,655


$
(1,310
)

$
(252,968,439
)

$
7,165,833


$
235,620,041


$
(270,823,697
)    F-9




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited



Consolidated
    statements of cash flows  Year Ended


Year Ended


Year EndedDecember 31,  2006


December 31, 2007


December 31, 2008(In U.S. dollars)Cash flows from operating activities:Net (loss) income attributable to holders of common shares

$
(4,148,010
)

$
26,700,672


$
(276,871,999
)Dividends declared on series B redeemable convertible
    preferred shares










2,000,000Deemed dividends on redeemable convertible preferred shares


2,157,301







Dividends declared on redeemable convertible preferred shares


5,335,000



1,338,333



Net income (loss)


3,344,291



28,039,005



(274,871,999
)Adjustments to reconcile net income to net cash (used in)
    provided by operating activities:Minority interests


1,704,287



524,569



640,468Share-based compensation


2,404,240



3,071,573



12,476,894Amortization of discount on convertible loan


1,017,289



267,462



Depreciation and amortization


5,235,852



20,185,864



26,631,650Impairment loss on intangible assets










25,562,095Impairment loss on goodwill










180,841,091Impairment loss on capitalized content production costs










3,085,850Impairment loss on cost method investment










1,333,066Impairment loss on promissory note and accrued interest income










8,521,483Impairment loss on property and equipment










2,438,818Release of lease liability upon early termination of lease
    agreement










(844,388
)Provision for amount due from a related party










1,721,306Allowance for doubtful debts










10,427,114Provision for principal protected note










24,909,929Loss on disposal of subsidiaries










4,720,705Amortized issuance cost of convertible loan










199,471Equity in loss of an investment


52,211







Imputed interest on long term payables


792,872



4,496,020



5,045,122(Gain) loss on disposal of property and equipment


(620
)


49,410



(63,290
)Deferred income taxes


(700,740
)


(15,518,106
)


(4,365,037
)Unrealized loss on principal protected note






90,076



Realized gain on currency linked note






(668,280
)


Changes in operating assets and liabilities (net of effects of
    acquisitions and disposal):Accounts receivable


(11,073,471
)


(18,163,199
)


(23,612,506
)Capitalized content production costs


(4,457,065
)


(4,503,725
)


1,880,989Prepaid advertising programme space and airtime


(2,336,744
)


(1,962,891
)


4,746,733Prepaid expenses and other current assets


(3,774,437
)


(6,167,982
)


(4,069,364
)Amounts due from related parties


(526,174
)


11,616



(2,773,886
)Accounts payable


777,419



473,450



(1,011,631
)Accrued expenses and other payables


1,726,560



8,266,160



7,469,106Interest income from promissory note receivable






(722,038
)


Income taxes payable


1,351,661



2,524,239



3,941,808Net cash (used in) provided by operating activities


(4,462,569
)


20,293,223



14,981,597  F-10




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Consolidated
    statements of cash flows  (continued)
  Year Ended


Year Ended


Year EndedDecember 31, 2006


December 31, 2007


December 31, 2008(In U.S. dollars)Cash flows from investing activities:Purchases of property and equipment


(2,097,795
)


(4,504,811
)


(3,047,106
)Purchase and deposit for acquisition of intangible assets


(4,226,056
)






(3,888,741
)(Advance to) repayment from an independent third party


(4,603,493
)


4,603,493



Loans to related parties


(3,550,668
)


(3,263,687
)


(192,657
)Amount paid for cost method investment


(500,000
)






(2,000,000
)Proceeds from disposal of property and equipment


92,854



456,781



435,418Amount paid for construction in progress










(153,303
)(Decrease) increase in restricted cash and short term deposits


(9,446,274
)


(34,672,369
)


6,802,140Cash paid for acquisition of subsidiaries, net of cash received


(7,882,839
)


(103,209,310
)


(35,763,784
)Cash paid for deposit for investment










(14,174,566
)Decrease in cash balance as a result of disposal of subsidiaries










(2,483,619
)Investment in currency linked note






(40,000,000
)


Investment in principal protected note






(25,000,005
)


Proceeds from disposal of currency linked note






40,668,280



Net cash used in investing activities


(32,214,271
)


(164,921,628
)


(54,466,218
)Cash flows from financing activities:Advance from related parties


434,242



9,822,237



2,068,744Repayment to related parties






(58,204,939
)


Proceeds from issuance of convertible loan


10,000,000







33,200,000Transaction cost of issuance of convertible loan










(2,542,457
)Proceeds from issuance of redeemable convertible preferred shares


60,000,000







30,000,000Transaction cost of issuance of redeemable convertible preferred
    share










(794,409
)Contribution from minority interests










130,355Issuance of shares for share option plan






2,170,288



179,843Repurchase of common shares






(8,629,986
)


(4,963,138
)Proceeds from public offering






225,002,999



Expenses on public offering


(2,283,138
)


(22,360,852
)


(116,000
)Bank borrowings and overdraft raised


5,621,934



48,743,861



40,333,520Bank borrowings and overdraft repaid






(25,772,569
)


(35,541,106
)Payment of long term payables






(16,487,283
)


(15,433,903
)Dividends paid to minority interest


(20,810
)






Dividends paid on redeemable convertible preferred shares


(3,648,333
)


(3,025,000
)


  F-11




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Consolidated
    statements of cash flows  (continued)
  Year Ended


Year Ended


Year EndedDecember 31, 2006


December 31, 2007


December 31, 2008(In U.S. dollars)Redemption of redeemable convertible preferred shares


(1
)






Net cash provided by financing activities


70,103,894



151,258,756



46,521,449Effect of exchange rate changes


845,747



1,452,189



2,615,927Net increase in cash and cash equivalents


34,272,801



8,082,540



9,652,755Cash and cash equivalents, beginning of the year


2,080,746



36,353,547



44,436,087Cash and cash equivalents, end of the year

$
36,353,547


$
44,436,087


$
54,088,842Supplemental disclosure of cash flow information:Income taxes paid

$
164,087


$
768,216


$
3,708,284Interest paid

$
1,825,526


$
1,864,203


$
2,776,738Supplemental schedule of non-cash investing and financing
    activities:Issuance of common shares for acquisitions of subsidiaries

$
28,284,605


$
10,233,521


$
4,936,380Issuance of warrants for acquisitions of subsidiaries


628,000







Issuance of common shares for acquisitions of intangible assets










2,660,000Issuance of preferred shares for settlement of dividends on
    redeemable convertible preferred shares










1,400,000Consideration payable for acquisition of subsidiaries






2,607,715



21,837,635Conversion of preferred shares into common shares






15,585



Conversion of convertible loan into common shares






14,284,751



Waiver of amount due to a shareholder






1,500,000



Consideration payable by Xinhua Finance Limited
    (XFL) and its affiliates on behalf of the Company
    and subsequently waived by XFL and its affiliates






113,507,785



26,302,941  F-12




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited



Notes to
    consolidated financial statements

(In U.S.
    dollars)  1.
    Organization
    and principal activities          and/or Consolidation of Variable
    Interest Entities  an Interpretation of ARB
    No. 51
  and/or
     F-13




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
        2006


2007


2008Total assets

$
220,249,961


$
300,356,736


$
318,273,081Total liabilities


142,765,680



153,983,859



179,924,080Total net revenues


41,287,316



117,162,467



152,403,284Total operating expenses


7,878,997



19,766,126



70,712,519Net income (loss)


9,548,238



35,697,419



(22,433,408
)   2.
    Summary
    of principal accounting policies  (a)  Basis
    of presentation
    (b)  Basis
    of consolidation
      (c)  Use
    of estimates
    (d)  Revenue
    recognition
   F-14




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
                (e)  Restricted
    cash
    (f)  Capitalized
    content production costs
   F-15




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    (g)  Investment
    (h)  Principal
    protected note
    (i)  Property
    and equipment, net
    Leasehold improvements

Lesser of 5 years or lease termBillboards and lampposts

10 yearsFurniture, fixtures and equipment

4-5 yearsMotor vehicles

5 years   (j)  Intangible
    assets
   F-16




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    Advertising agency right

6.5 yearsBacklog order

1 yearCustomer base

5 yearsDistribution network

8.5 yearsExclusive advertising agreements

40.5 yearsLicense agreements

20 yearsLicense rights

3.5 yearsNoncompete agreements

3.5 yearsPublishing title

8 yearsRadio advertising agency right

10 yearsResearch customer relationship

4 yearsTrademark

10 yearsIndefinite life trademark

IndefiniteOthers

5 years   (k)  Goodwill
          (l)  Capital
    lease obligations
   F-17




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
  (m)  Impairment
    or disposal of long-lived assets
    (n)  Mezzanine
    equity
    (o)  Income
    taxes
    Accounting for Uncertainty
    in Income Taxes  an interpretation of FASB Statement
    No. 109
  (p)  Foreign
    currency translation
        (q)  Net
    income (loss) per share
   F-18




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
      (r)  Share-based
    compensation
      (s)  License
    agreements
    (t)  Fair
    value of financial instruments
          157-2, FSP 157-2
   F-19




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
  and/or
  Fair
    Value Hierarchy
          FSP 157-3, Determining the Fair Value of a Financial Asset When
    the Market for That Asset Is Not Active (FSP 157-3). FSP 157-3 FSP 157-3 FSP 157-3
  (u)  Recent
    accounting pronouncements
  06-11, Accounting for the Income Tax Benefits of Dividends on
    Share-Based Payment Awards (EITF 06-11). EITF 06-11 EITF 06-11
  07-3, Accounting for Nonrefundable Advance Payments for Goods
    or Services Received for Use in Future Research and Development
    Activities (EITF 07-3). EITF 07-3
  Business Combination
 F-20




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
  Accounting for
    Costs Associated with Exit or Disposal Activities Accounting
    for Contingencies
  Noncontrolling Interest in Consolidated Financial
    Statements  An Amendment of ARB No. 51 Consolidated
    Financial Statements
  Disclosures about Derivative Instruments and Hedging
    Activities
  SFAS 142-3, Determination of the Useful Life of Intangible
    Assets Goodwill and Other Intangible
    Assets 142-3.
  Accounting for Convertible Debt Instruments That May Be
    Settled in Cash upon Conversion (Including Partial Cash
    Settlement) No. 14-1), Accounting for Convertible Debt
    and Debt Issued with Stock Purchase Warrants FSP 14-1 FSP 14-1.
  07-5, Determining Whether an Instrument (or Embedded Feature)
    Is Indexed to an Entit Own Stock (EITF 07-5). 07-5
 F-21




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
  07-5 07-5.
  08-6, Equity Method Investment Accounting
    Considerations (EITF 08-6). 08-6 08-6.
  08-7, Accounting for Defensive Intangible Assets (EITF 08-7). EITF 08-7 08-7 08-7.
  3.
    Concentration
    of risk  Concentration
    of credit risk
            Concentration
    of location
    F-22




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
  4.
    Acquisitions  (a)  East
    Alliance Limited
          Assets acquired:Cash

$
1,087,862Accounts receivable


2,318,995Prepaid expenses and other current assets


321,849Property and equipment


234,966Total


3,963,672Liabilities assumed:Accounts payable


600,932Accrued expenses and other payables


344,036Amounts due to related parties


1,242,141Deferred tax liability


1,148,951Income taxes payable


65,339Total


3,401,399Intangible assets


9,592,000Net assets acquired


10,154,273Initial cash consideration in 2007

$
10,154,273   F-23




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
  AmortizationPeriod(Years)Intangible assets comprised of:License rights

$
9,372,000



3.5Noncompete agreement


220,000



1Total

$
9,592,000     2006


2007Pro forma net revenues

$
69,323,445


$
139,344,314Pro forma income from operations


8,183,010



16,563,288Pro forma net income


4,522,290



28,733,810Pro forma net income per share


0.09



0.25   (b)  Guangzhou
    Singshine Communication Co., Ltd.
         F-24




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    Assets acquired:Cash

$
40,689Accounts receivable


60,189Prepaid expenses and other current assets


88,616Amounts due from related parties


2,336Property and equipment


101,687Total


293,517Liabilities assumed:Accounts payable


144,684Accrued expenses and other payables


125,487Amounts due to related parties


71,506Long term payables


5,540,927Deferred tax liabilities


497,827Total


6,380,431Intangible assets


7,706,220Net assets acquired


1,619,306Consideration  cash


1,603,958Consideration  issuance of XSELs shares


390,000Goodwill(1)

$
374,652     (1)
    
    The excess of the cost of
    acquisition over the fair value of the net tangible and
    intangible assets acquired and liabilities assumed is recorded
    as goodwill. The Company expected that the economic benefit from
    the acquired subsidiaries outweighed the cost of the acquired
    subsidiaries.  AmortizationPeriod(Years)Intangible assets comprised of:Radio advertising agency right

$
7,029,220



7.6Indefinite life trademark


457,000



IndefiniteNoncompete agreement


220,000



3.8Total

$
7,706,220     2006


2007Pro forma net revenues

$
61,556,741


$
135,337,304Pro forma income from operations


7,096,300



15,511,283Pro forma net income


3,363,416



27,619,188Pro forma net income per share


0.07



0.24  F-25




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
  (c)  Singshine
    (Holdings) Hongkong Ltd.
          Assets acquired:Cash

$
1,140,230Accounts receivable


1,567,372Prepaid expenses and other current assets


306,557Property and equipment


364,782Other long term assets


131,456Total


3,510,397Liabilities assumed:Accounts payable


97,905Accrued expenses and other payables


589,048Amounts due to related parties


424,197Income taxes payable


94,941Amounts due to former shareholders


125,722Deferred tax liabilities


567,827Total


1,899,640Intangible assets


3,767,000Net assets acquired


5,377,757Initial cash consideration


6,637,325Goodwill(1)

$
1,259,568     (1)
    
    The excess of the cost of
    acquisition over the fair value of the net tangible and
    intangible assets acquired and liabilities assumed is recorded
    as goodwill. The Company expected that the economic benefit from
    the acquired subsidiaries outweighed the cost of the acquired
    subsidiaries.  F-26




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
  AmortizationPeriod(Years)Intangible assets comprised of:Indefinite life trademark

$
1,584,000



IndefiniteCustomer base


1,588,000



4.5Noncompete agreement


595,000



3.8Total

$
3,767,000     2006


2007Pro forma net revenues

$
68,075,090


$
138,410,203Pro forma income from operations


9,767,616



16,068,832Pro forma net income


5,696,314



28,275,790Pro forma net income per share


0.11



0.24   (d)  Xinhua
    Finance Media (Convey) Ltd
         F-27




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    Assets acquired:Accounts receivable

$
1,536,045Prepaid expenses and other current assets


771,307Property and equipment


495,722Other assets


64,263Total


2,867,337Liabilities assumed:Accounts payable


527,558Accrued expenses and other payables


1,237,539Bank overdraft.


319,050Bank loans


125,580Capital lease obligations


496,494Amounts due to related parties


79,073Income taxes payable


17,263Deferred tax liabilities


3,130,977Total


5,933,534Intangible assets


17,415,579Net assets acquired


14,349,382Initial cash consideration


33,257,411Goodwill(1)

$
18,908,029     (1)
    
    The excess of the cost of
    acquisition over the fair value of the net tangible and
    intangible assets acquired and liabilities assumed is recorded
    as goodwill. The Company expected that the economic benefit from
    the acquired subsidiaries outweighed the cost of the acquired
    subsidiaries.  AmortizationPeriod(Years)Intangible assets comprised of:Indefinite life trademark

$
8,059,482



IndefiniteDistribution network


5,402,375



9Customer base


3,702,354



15Backlog order


251,368



1Total

$
17,415,579  F-28




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    2006


2007Pro forma net revenues

$
68,870,950


$
139,395,603Pro forma income from operations


6,964,711



15,247,143Pro forma net income


3,094,579



27,473,952Pro forma net income per share


0.06



0.24   (e)
    Small
    World Television Ltd.         F-29




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    As ofAugust 22, 2007Assets acquired:Cash

$
320,060Prepaid expenses and other current assets


168,957Property and equipment


66,194Total


555,211Liabilities assumed:Accounts payable


28,075Accrued expenses and other current liabilities


Deferred tax liabilities


254,154Total


282,229Minority interest


158,141Intangible assets


1,452,311Net assets acquired


1,567,152Purchase consideration  cash


5,081,162Purchase consideration  issuance of XSELs shares


1,742,531Goodwill(1)

$
5,256,541     (1)
    
    The excess of the cost of
    acquisition over the fair value of the net tangible and
    intangible assets acquired and liabilities assumed is recorded
    as goodwill. The Company expected that the economic benefit from
    the acquired subsidiaries outweighed the cost of the acquired
    subsidiaries.  As of


AmortizationAugust 22, 2007


Period(Years)Intangible assets comprised of:Alliance agreement

$
953,984



5Distribution right


155,698



5Noncompete agreement


281,219



3Noncompete agreement


61,410



1Total

$
1,452,311  F-30




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
     2006


2007Pro forma net revenues

$
58,966,432


$
134,838,690Pro forma income from operations


6,992,271



15,293,839Pro forma net income


3,300,569



27,565,535Pro forma net income per share


0.07



0.24   (f)
    Shanghai
    Paxi Advertising Co. Ltd.       F-31




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    Assets acquired:Cash

$
947,777Accounts receivable


4,609,190Prepaid expenses and other current assets


784,533Amounts due from related parties


133,141Property and equipment


143,616Total


6,618,257Liabilities assumed:Accounts payable


2,279,020Accrued expenses and other payables


534,984Amounts due to related parties


91,821Income taxes payable


1,038,571Deferred tax liabilities


2,761,298Total


6,705,694Intangible assets


10,951,764Net assets acquired


10,864,327Initial purchase consideration


41,627,662Goodwill(1)

$
30,763,335     (1)
    
    The excess of the cost of
    acquisition over the fair value of the net tangible and
    intangible assets acquired and liabilities assumed is recorded
    as goodwill. The Company expected that the economic benefit from
    the acquired subsidiaries outweighed the cost of the acquired
    subsidiaries  AmortizationPeriod(Years)Intangible assets comprised of:Customer base

$
8,824,516



5Exclusive advertising agreement


75,350



1Noncompete agreement


1,655,221



5Backlog order


35,940



1Distribution network


360,737



5Total

$
10,951,764  F-32




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    2006


2007Pro forma net revenues

$
73,599,532


$
140,925,473Pro forma income from operations


10,229,885



16,959,460Pro forma net income


7,322,114



28,889,087Pro forma net income per share


0.15



0.25   (g)
    Profitown
    Development Limited       F-33




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    Assets acquired:Cash

$
66,689Accounts receivable


48,143Prepaid expenses and other current assets


9,873Amounts due from related parties


217,115Property and equipment


24,064Total


365,884Liabilities assumed:Accounts payable


33,519Accrued expenses and other payables


12,690Income tax payables


48,114Bank overdraft.


22,768Capital lease obligations


13,034Deferred tax liabilities


271,650Total


401,775Intangible assets


1,552,285Net assets acquired


1,516,394Initial purchase consideration


2,319,189Goodwill(1)

$
802,795     (1)
    
    The excess of the cost of
    acquisition over the fair value of the net tangible and
    intangible assets acquired and liabilities assumed is recorded
    as goodwill. The Company expected that the economic benefit from
    the acquired subsidiaries outweighed the cost of the acquired
    subsidiaries  AmortizationPeriod(Years)Intangible assets comprised of:Customer base

$
1,339,657



5Noncompete agreement


191,319



5Backlog order


21,309



1Total

$
1,552,285  F-34




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    2006


2007Pro forma net revenues

$
60,688,264


$
135,520,288Pro forma income from operations


7,131,611



15,977,328Pro forma net income


3,366,152



28,223,719Pro forma net income per share


0.07



0.24   (h)
    EconWorld
    Media              (i)
    Beijing
    Century Media   F-35




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
                  (j)
    Xinhua
    Finance Advertising Limited   F-36




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
          (k)
    Beijing
    Jingguan Xincheng Advertising Co., Ltd.         F-37




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
  (l)
    Accord
    Group Investments Ltd.          (m)
    Beijing
    Perspective Orient Movie and Television Intermediary Co.,
    Ltd.        (n)
    Shanghai
    Hyperlink Market Research Co., Ltd       F-38




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    (o)
    Upper
    Step Holdings Ltd        5.
    Accounts
    receivable, net of allowance for doubtful debts  At December 31, 2007


At December 31, 2008Accounts receivable

$
46,007,983


$
53,932,569Less: Allowance for doubtful debts


(301,217
)


(9,169,667
)Total

$
45,706,766


$
44,762,902   2007


2008Movements in allowance for doubtful debtsBalance at the beginning of the year

$



$
301,217Add: Amount charged to expenses


301,217



10,427,114Exchange realignments






97,244Less: Written off of allowance for doubtful debts






(601,054
)Disposal of subsidiaries






(1,054,854
)Balance at the end of the year

$
301,217


$
9,169,667   6.
    Investment   F-39




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    E-data E-data
  7.
    Deposits
    for acquisition of subsidiaries    8.
    Capitalized
    content production costs, net    At December 31, 2007


At December 31, 2008Television programs:Released

$
11,099,159


$
11,349,086In production


3,204,099



1,583,637Total


14,303,258



12,932,723Less: Accumulated amortization


5,447,362



9,846,873Less: Impairment loss






3,085,850Capitalized content production costs, net

$
8,855,896


$
     9.
    Other
    current assets    At December 31, 2007


At December 31, 2008Advances to employees

$
1,321,150


$
1,225,066Rent deposits


141,711



471,978Interest income receivable


623,016



245,784Others


3,276,013



2,316,228Total

$
5,361,890


$
4,259,056    F-40




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
  10.
    Deposit
    for investment    11.
    Property
    and equipment, net    At December 31, 2007


At December 31, 2008Leasehold improvements

$
1,809,461


$
2,003,777Billboards and lampposts


2,954,557



2,749,421Furniture, fixtures and equipment


6,100,742



7,925,794Motor vehicles


785,455



696,387Total


11,650,215



13,375,379Less: Impairment loss






2,438,818Accumulated depreciation and amortization


2,458,256



4,499,074Total


9,191,959



6,437,487Construction in progress






153,303Property and equipment, net

$
9,191,959


$
6,590,790    F-41




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
  12.
    Intangible
    assets, net  At December 31, 2007


At December 31, 2008License agreements in Upper Step License agreement

$
36,493,488


$
38,834,305 Television advertising services contract


67,591,471



71,926,980104,084,959



110,761,285Less: Accumulated amortization License agreement


1,618,850



2,970,461 Television advertising services contract


3,975,948



8,642,8075,594,798



11,613,268$
98,490,161


$
99,148,017Exclusive advertising agreement in Economic Observer Advertising

$
73,846,560


$
77,922,407Less: Accumulated amortization


1,960,549



3,655,191$
71,886,011


$
74,267,216Other intangible assets, net consisted of the following:Advertising agency right

$
4,730,000


$
8,590,721Backlog order


578,617



340,089Customer base


20,124,779



16,663,921Distribution network


5,774,424



203,769Exclusive advertising agreement


1,302,613



11,845,287License rights


9,372,000



9,373,959Noncompete agreements


5,422,795



5,619,660Publishing title


187,249



189,354   F-42




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
  At December 31, 2007


At December 31, 2008Radio advertising agency rights


11,176,731



11,920,134Research customer relationship


405,548



405,548Trademark


12,181,758



4,220,142Others


2,540,532



4,907,042Total

$
73,797,046


$
74,279,626Less: Accumulated amortizationAdvertising agency right

$
1,496,400


$
2,366,251Backlog order


327,249



340,089Customer base


2,831,293



6,367,502Distribution network


308,556



45,311Exclusive advertising agreement


390,549



641,394License rights


1,562,000



4,240,604Noncompete agreements


1,410,317



2,709,330Publishing title


35,508



80,270Radio advertising agency rights


1,872,632



3,171,750Research customer relationship


138,173



241,673Trademark


201,377



528,154Others


93,251



871,853Total accumulated amortization


10,667,305



21,604,181Less: Impairment loss






25,562,095Other intangible assets, net

$
63,129,741


$
27,113,350      F-43




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
  13.
    Goodwill    Print


Advertising


Broadcasting


TotalBalance as of December 31, 2007

$
6,566,376


$
135,531,566


$
38,027,546


$
180,125,488Add: Finalization of earnout consideration






86,751,419



20,562,708



107,314,127Less: Modification due to finalization of purchase price
    allocation






(148,332
)


(739,366
)


(887,698
)Less: Release related to disposal of subsidiaries






(58,718,102
)






(58,718,102
)Less: Impairment loss


(6,566,376
)


(128,113,244
)


(46,161,471
)


(180,841,091
)Balance as of December 31, 2008

$



$
35,303,307


$
11,689,417


$
46,992,724     14.
    Principal
    protected note     F-44




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
  15.
    Accrued
    expenses and other payables    At December 31, 2007


At December 31, 2008Accrued salary and welfare

$
2,378,594


$
2,771,726Other taxes payable


4,201,560



4,397,486Consideration payables for acquisition of subsidiaries


2,607,715



21,837,635Receipt in advance


3,342,152



3,357,461Deferred revenue


824,990



595,871Audit and audit related fees


1,045,423



1,789,117Other


4,800,760



7,493,983Total

$
19,201,194


$
42,243,279   16.
    Long term
    payables  At December 31, 2007


At December 31, 2008Long term payables, current portion

$
4,564,177


$
10,363,762Long term payables, non-current portion


65,066,299



68,305,496Total

$
69,630,476


$
78,669,258         2009

$
10,363,7622010


7,209,9412011


6,279,6972012


5,116,8292013


4,959,387After 2013


44,739,642Total

$
78,669,258Less: current portion


10,363,762Non-current portion

$
68,305,496   17.
    Capital
    lease obligations   F-45




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    18.
    Bank
    borrowings      19.
    Convertible
    securities  (a)
    Redeemable
    convertible preferred shares    The key terms of the Preferred Shares are as follows:
  Dividends.
  Conversion.
    Voting rights.
  Redemption.
 F-46




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
  Liquidation preference.
          Conversion.
  Voting rights.
  Dividends.
  Liquidation preference.
           F-47




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
  The key
    terms of the Convertible Redeemable Preferred Shares are as
    follows:
  Dividends.
  Conversion. payment-in-kind
  Realization events.
  Redemption.
  Voting rights.
  Liquidation preference.
 F-48




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
      (b)
    Convertible
    loan            The key
    terms of the Convertible Loan are as follows:
  Maturity date.
  Interest.
  Conversion.
 F-49




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
  Optional prepayment.
  Mandatory prepayment.
  20.
    Non-vested
    shares  5-year
    Number of Non-Vested


Fair Value ofGrant Date

Shares Issued


Common SharesJune 13, 2006


11,050,000


$
0.6
*     *
    
    The fair value was determined based on a valuation made by an
    independent appraiser.        Number of Non-Vested Shares2007


2008Outstanding as of January 1


11,050,000



9,550,000Vested during the year


(1,500,000
)


(9,550,000
)Outstanding as of December 31


9,550,000



     21.
    Warrants  5-year lock-up
 F-50




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    Warrant to Sino


Warrant toInvestment


ConsultantExpected price volatility range


45
%


44
%Risk-free interest rate


5.11
%


4.91
%Contractual life of the warrant


5 years



5 yearsExpected dividends


0
%


0
%         Exercise price

$
5.00Expected price volatility


44
%Risk-free interest rate


5.06
%Contractual life of the warrant


1 yearExpected dividends


0
%         Number of Warrants2007


2008Outstanding as of January 1


4,729,968



4,951,248Expired during the year






(221,280
)Granted during the year


221,280



Outstanding as of December 31


4,951,248



4,729,968  F-51




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
  winding-up
  22.
    Share
    options                  Exercise price

$
0.78Expected life


3.61 yearsAssumed volatility


38.3
%Risk-free interest rate


5.68
%Expected dividends


0
%    F-52




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    <1>

<1>Date of grant

April 25, 2007

September 26, 2007

April 1, 2008

April 30, 2008

June 13, 2008Number of options granted

90,000

120,000

400,000

60,000

120,000Grantees

3 independent directors

4 independent directors

A consultant

2 independent directors

6 independent directorsWeighted average fair value of the options at date of grant

$1.85

$1.85

$0.97

$1.39

$0.77Exercise price

$6.5

$4.39

$1.325

$1.64

$1.265Term of options

May not exceed 10 years from the date of grant

May not exceed 10 years from the date of grant

May not exceed 3.75 years from the date of grant

May not exceed 10 years from the date of grant

May not exceed 10 years from the date of grantVesting period  one third of total number of options
    will vest upon each of:

March 8, 2008

September 26, 2008

December 31, 2008

April 30, 2009

June 13, 2008March 8, 2009

September 26, 2009

December 31, 2009

April 30, 2010

June 13, 2009March 8, 2010

September 26, 2010

December 31, 2010

April 30, 2011

June 13, 2010Expiration date of options

April 24, 2017

September 25, 2017

December 31, 2011

April 29, 2018

June 12, 2018     <1>
    
    The dates of Board of
    Directors or of the compensation committees
    resolution for those share options granted as of April 1,
    2008 and April 30, 2008 were as of March 7, 2008 and
    April 25, 2008, respectively.      April 25,

September 26,

April 1,

April 30,

June 13,Date of Grant

2007

2007

2008

2008

2008Exercise price

$
6.5


$
4.39


$
1.325


$
1.64


$
1.265Expected price volatility range


44
%


44
%


89
%


88
%


93
%Contractual life


10 years



10 years



3.75 years



10 years



10 yearsRisk-free interest rate


4.66
%


4.63
%


2.295
%


3.770
%


4.270
%Expected dividends


0
%


0
%


0
%


0
%


0
%Trigger price multiple


1.5 times



1.5 times



2 times



2 times



2 times    F-53




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    Weighted AverageNumber of


Weighted-Average


Grant-Date FairShare Option


Exercise Price


ValueOutstanding as of January 1, 2008


7,678,727


$
0.90


$
0.19Granted during the year


580,000


$
1.35


$
0.97Lapsed during the year


(774,402
)

$
0.78


$
0.14Exercised during the year


(194,662
)

$
0.78


$
0.14Outstanding as of December 31, 2008


7,289,663


$
0.96


$
0.26Vested and expected to be vested as of December 31, 2008


7,287,439


$
0.96


$
0.26Exercisable as of December 31, 2008


5,986,160


$
0.85


$
0.18     Options Outstanding


Options ExercisableWeighted-











Weighted-Weighted-


Average


Weighted-





Weighted-


Average


Weighted-Average


Remaining


Average





Average


Remaining


AverageNumber of


Exercise


Contractual


Intrinsic


Number of


Exercise


Contractual


IntrinsicOutstanding


Price


Life


Value


Exercisable


Price


Life


ValueDate of grant:July 11, 2006


6,499,663


$
0.78



2.5


$




5,742,827


$
0.78



2.5


$
April 25, 2007


90,000


$
6.50



8.3


$




30,000


$
6.50



8.3


$
September 26, 2007


120,000


$
4.39



8.7


$




40,000


$
4.39



8.7


$
April 1, 2008


400,000


$
1.33



3.0


$




133,333


$
1.33



3.0


$
April 30, 2008


60,000


$
1.64



9.3


$







$







$
June 13, 2008


120,000


$
1.27



9.5


$




40,000


$
1.27



9.5


$
7,289,663


$
0.96



2.9


$




5,986,160


$
0.85



2.6


$
     23.
    Restricted
    share units     F-54




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
                    Number of Shares2008Granted during the period


5,536,000Vested during the period


(2,946,400
)Lapsed during the period


(578,800
)Outstanding as of December 31


2,010,800   winding-up
    24.
    Capital
    Structure         F-55




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    winding-up
                         F-56




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
                              25.
    Provision
    for income taxes       F-57




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
        2008-09
         F-58




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
  and/or
    For the Year Ended


For the Year Ended


For the Year EndedDecember 31, 2006


December 31, 2007


December 31, 2008Current tax

$
1,770,278


$
3,292,456


$
6,719,479Deferred tax


(700,741
)


(15,518,106
)


(4,365,037
)Total

$
1,069,537


$
(12,225,650
)

$
2,354,442  F-59




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    For the Year Ended


For the Year Ended


For the Year EndedDecember 31, 2006


December 31, 2007


December 31, 2008Net income (loss) before provision for income taxes

$
6,170,326


$
17,115,989


$
(271,877,089
)PRC statutory tax rate


33
%


33
%


25
%Income tax at statutory tax rate


2,036,208



5,648,276



(67,969,272
)Expenses not deductible for tax purposes:Entertainment


87,524



132,158



169,079Salaries and employees benefits


468,998



1,096,777



3,119,224Impairment loss on goodwill










45,210,272Impairment loss on Principle Protected Note










6,227,482Impairment loss on promissory note receivable and accrued
    interest income










2,130,371Loss on disposal of subsidiaries










1,180,176Allowance for inter-company balance


163,481







Other


75,830



203,999



151,861Non-taxable income






(471,094
)


(89,955
)Effect of income tax rate differences in other jurisdictions


2,319,620



1,130,641



3,636,183Changes in valuation allowances


705,553



131,802



9,813,055Foreign income taxes


183,797



28,932



Effect of tax exemptions


(4,997,098
)


(8,398,360
)


(1,050,962
)Effect of change in tax rate






(11,263,434
)


(198,787
)Overprovision in prior years






(395,474
)


Other


25,624



(69,873
)


25,715Provision for income taxes

$
1,069,537


$
(12,225,650
)

$
2,354,442    F-60




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    At December 31,


At December 31,2007


2008Deferred tax assets:Capitalized content production cost

$
22,634


$
Property and equipment






547,018Provision for amount due from a related party






430,327Allowance for doubtful debts






1,761,113Net operating losses


3,569,824



11,636,501Other intangible assets


94,598



50,299Total


3,687,056



14,425,258Less: Valuation allowance, current portion






(769,033
)Valuation allowance, non-current portion


(3,569,824
)


(12,613,846
)Deferred tax assets, net


117,232



1,042,379Deferred tax liability:Intangible assets

$
37,741,579


$
31,679,491Total

$
(37,624,347
)

$
(30,637,112
)Reported as:Deferred tax assets, current portion

$
22,634


$
1,042,379Deferred tax assets, non-current portion

$
94,598


$
Deferred tax liabilities, non-current portion

$
(37,741,579
)

$
(31,679,491
)Total

$
(37,624,347
)

$
(30,637,112
)        F-61




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
  26.
    Related
    party transactions      At December 31,


At December 31,2007


2008Due from related parties:Due from affiliates(a)

$
2,499,907


$
1,048,108Due from directors(b)


210,868



119,092Due from minority shareholders of subsidiaries(f)






55,646Due from related companies(c)


4,678,436



5,324,790Total

$
7,389,211


$
6,547,636Due to related parties:Due to affiliates(d)


376,838



1,583,229Due to related companies(c)






24,615Due to directors(b)


72,465



7,278Due to a shareholder(e)






600,000Due to minority shareholders of subsidiaries(f)


153,395



Total

$
602,698


$
2,215,122Due to Parent and its affiliates(g)

$
5,251,224


$
1,131,050Interest receivable on promissory note receivable, current
    portion

$
722,038


$
Promissory note receivable, non-current portion

$
7,900,000


$
Due from a related party, non-current portion(h)

$



$
1,506,137     (a)
    
    Amounts due from affiliates as of December 31, 2007 and
    2008 principally represented advance to former shareholders of
    subsidiaries. The amounts are non-interest bearing and repayable
    on demand.In 2007, additional amount of $1,200,000 was advanced to a
    former shareholder and a fixed interest of $450,000 was mutually
    agreed to be charged on the outstanding balance. All the
    outstanding balance and the interest were fully settled in 2007.In 2008, the Company advanced to a former shareholder of
    $1,721,306 and full provision was recognized for the amount
    advanced to this former shareholder based on estimation of
    future cash flow from this former shareholder.(b)
    
    Amounts due from and to directors represented advance from and
    to directors of the Company and directors of subsidiaries and
    are non-interest bearing and repayable on demand.(c)
    
    Amounts due from and to related companies as of
    December 31, 2007 included advances of $1,713,806 to a
    company owned by one of the Companys shareholders which is
    non-interest bearing and repayable within one year. The
    repayment terms of this advance was renewed in 2007. This
    related company has also repaid $2,000,000 for a loan borrowed
    in 2006 that was secured by the registered capital of the
    borrower. In 2007, the Company sold television program to this
    related company amounting to $1,863,318, of which $900,943 was
    included in amounts due from related companies as of
    December 31, 2007. There is no repayment from this related
    company in 2008 and additional $317,803 was advanced to this
    related company. F-62




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
   The balance as of December 31, 2007 also included an
    entrusted loan of $2,063,687 provided to a shareholder through a
    bank. The entrusted loan is unsecured, non-interest bearing and
    repayable within one year. The entrusted loan was repaid in 2008.The balance as of December 31, 2008 included an entrusted
    loan of $2,256,344 provided to a company owned by one of the
    Companys shareholders in 2008 through a bank. The
    entrusted loan is unsecured, non-interest bearing and repayable
    on demand.The balance as of December 31, 2008 also included an
    advance of $135,895 to a cost method investee. The advance is
    unsecured, non-interest bearing and repayable on demand.(d)
    
    Amounts due to affiliates as of December 31, 2007
    principally represented advance from former shareholders of
    subsidiaries and are non-interest bearing and repayable on
    demand. The amounts as of December 31, 2008 principally
    represented advance from former shareholders of subsidiaries and
    are non-interest bearing and repayable on demand.(e)
    
    Amount due to a shareholder represented accrued dividends on
    Series B Preferred Shares issued in February 2008.(f)
    
    Amount due to and from minority shareholders of subsidiaries as
    of December 31, 2007 and 2008 were non-interest bearing and
    due on demand.(g)
    
    Amounts due to Parent and its affiliates represented amounts
    borrowed from XFL and subsidiaries of XFL (collectively,
    XFL Group) which are not members of the Company and
    are due on demand. As of December 31, 2007, the balance
    mainly represented 2007 earn-out consideration of $4,947,039 for
    the acquisition of Economic Observer Advertising in June 2006.
    For the year ended December 31, 2008, XFL Group has paid on
    behalf of XSEL for 2007 earn-out considerations of $2,825,188,
    $4,459,256, $14,028,846 for the acquisition of Shanghai
    Hyperlink, Beijing Century Media and XFA, respectively. As of
    December 31, 2008, payable of $26,302,941, included
    earn-out consideration of $4,947,039, $2,825,188, $4,459,256 and
    $14,028,846 for the acquisition of Economic Observer
    Advertising, Shanghai Hyperlink, Beijing Century Media and XFA,
    respectively, has been waived by XFL Group. The amount waived
    was then recorded as a shareholders contribution and
    included in additional paid-in capital within the
    shareholders equity section.(h)
    
    Amount due from its affiliate, non-current, in 2008 represented
    the long term receivable from a former shareholder of a
    subsidiary which is unsecure, interest-free and repayable in
    2 years.       F-63




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
             F-64




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
        27.
    Dividends        28.
    Disposal
    of Convey     F-65




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    Accounts receivable

$
10,746,845Cash


2,483,619Other current assets


887,140Other intangible assets


15,992,297Goodwill


58,718,102Other non-current assets


2,319,873Total assets

$
91,147,876Accounts payable

$
(1,171,307
)Income taxes payable


(1,959,126
)Other current liabilities


(2,970,620
)Deferred tax liabilities


(2,723,628
)Other non-current liabilities


(47,832
)Total liabilities

$
(8,872,513
)Net assets

$
82,275,363Other investment (15% interests retained)


(12,341,305
)Net assets disposed (85% equity interest)

$
69,934,058     Net revenue

$
21,598,870Net income

$
6,462,136     29.
    Fair
    value disclosure       F-66




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    At December 31, 2008Balance as of January 1, 2008

$
24,909,929Impairment loss included in net income


(24,909,929
)Transfer in and/or out of Level 3


Balance as of December 31, 2008

$
   30.
    Commitments
    and contingency  (a)
    Operating
    leases      2009

$
3,584,4762010


1,410,8582011


483,1072012


2912013


291After 2013


1,473Total

$
5,480,496   (b)
    Other
    commitment      30-year
   F-67




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    (c)
    Contingency      31.
    Segment
    information     F-68




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    XSELPrint


Advertising


Broadcasting


Corporate


TotalNet revenues:Media production

$



$



$
6,545,148


$



$
6,545,148Advertising sales


6,303,646







387,897







6,691,543Advertising services


6,418,279



37,430,934



1,012,739







44,861,952Publishing services


867,789















867,789Total net revenues

$
13,589,714


$
37,430,934


$
7,945,784


$



$
58,966,432Depreciation and amortization


795,398



2,599,131



1,834,692



6,631



5,235,852Cost of revenues and operating expenses excluding depreciation
    and amortization


7,111,971



27,256,394



4,526,722



7,767,516



46,662,603Operating income (loss)


5,682,345



7,575,409



1,584,370



(7,774,147
)


7,067,977Other expenses, net


















897,651Income before provision for income taxes and minority interest


















6,170,326Provision for income taxes


















1,069,537Net income before minority interest


















5,100,789Minority interest


1,495,008



769,461



(560,182
)






1,704,287Equity in loss of an investment










52,211







52,211Net income

















$
3,344,291Total assets, excluding goodwill

$
71,892,068


$
29,770,401


$
129,025,142


$
85,092,679


$
315,780,290Goodwill

$
6,566,376


$
58,636,458


$
18,467,176


$



$
83,670,010Capital expenditure

$
1,963,144


$
477,526


$
3,801,302


$
81,879


$
6,323,851  F-69




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    XSELPrint


Advertising


Broadcasting


Corporate


TotalNet revenues:Media production

$



$



$
7,680,580


$



$
7,680,580Advertising sales


12,866,941



8,140,717



18,273,882







39,281,540Advertising services


5,694,620



71,046,713



9,939,810







86,681,143Publishing services


1,195,427















1,195,427Total net revenues

$
19,756,988


$
79,187,430


$
35,894,272


$



$
134,838,690Depreciation and amortization


1,831,138



3,983,490



14,233,050



138,186



20,185,864Cost of revenues and operating expenses excluding depreciation
    and amortization


8,785,767



61,045,984



16,644,386



14,662,599



101,138,736Other operating income














2,261,788



2,261,788Operating income (loss)


9,140,083



14,157,956



5,016,836



(12,538,997
)


15,775,878Other incomes, net


















1,340,111Income before provision for income taxes and minority interest


















17,115,989Tax benefit


















(12,225,650
)Net income before minority interest


















29,341,639Minority interest






919,957



382,677







1,302,634Net income

















$
28,039,005Total assets, excluding goodwill

$
87,188,203


$
116,976,266


$
171,427,721


$
95,084,535


$
470,676,725Goodwill

$
6,566,376


$
135,531,566


$
38,027,546


$



$
180,125,488Capital expenditure

$
391,137


$
2,474,168


$
1,505,332


$
839,075


$
5,209,712  F-70




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
    XSELPrint


Advertising


Broadcasting


Corporate


TotalNet revenues:Media production

$



$



$
12,371,911


$



$
12,371,911Advertising sales


13,647,245



21,911,519



29,796,921







65,355,685Advertising services


2,398,746



92,331,776



13,161,197







107,891,719Publishing services


411,637















411,637Total net revenues

$
16,457,628


$
114,243,295


$
55,330,029


$



$
186,030,952Depreciation and amortization


2,104,603



7,927,470



16,276,345



323,232



26,631,650Cost of revenues and operating expenses excluding depreciation
    and amortization


22,895,658



235,002,966



106,867,375



35,427,831



400,193,830Other operating income


29,312



886,481



581,413



2,175



1,499,381Operating income (loss)


(8,513,321
)


(127,800,660
)


(67,232,278
)


(35,748,888
)


(239,295,147
)Other expenses, net


















32,581,942Income before provision for income taxes and minority interest


















(271,877,089
)Provision for income taxes


















2,354,442Net income before minority interest


















(274,231,531
)Minority interest


(131,089
)


582,057



189,500







640,468Net income

















$
(274,871,999
)Total assets, excluding goodwill

$
83,200,125


$
129,209,336


$
175,175,442


$
73,672,709


$
461,257,612Goodwill

$



$
35,303,307


$
11,689,417


$



$
46,992,724Capital expenditure

$
665,751


$
4,911,259


$
989,726


$
369,111


$
6,935,847      F-71




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
  32.
    Net
    (loss) income per share    For the Year


For the Year


For the YearEnded


Ended


EndedDecember 31,


December 31,


December 31,2006


2007


2008Numerator:Net (loss) income

$
(4,148,010
)

$
26,700,672


$
(276,871,999
)Adjustment to net (loss) incomeDividends declared on redeemable convertible preferred shares






1,338,333



Interest expenses for convertible loan






267,464



Numerator used for diluted net (loss) income per Class A
    and Class B common shares

$
(4,148,010
)

$
28,306,469


$
(276,871,999
)Denominator:Weighted average of issued shares outstanding


49,777,632



116,220,383



135,844,377   For the Year


For the Year


For the YearEnded


Ended


EndedDecember 31,


December 31,


December 31,2006


2007


2008Effect of dilutive securities:Employee share options






7,290,608



Non-vested Shares






8,748,080



Warrants






282,390



Convertible loan






710,880



Redeemable convertible preferred shares






3,117,051



Total effect of dilutive securities






20,149,009



Denominator used for diluted net (loss) income per Class A
    and Class B common shares


49,777,632



136,369,392



135,844,377Basic net (loss) income per Class A common shares

$
(0.08
)

$
0.23


$
(2.04
)Basic net (loss) income per Class B common shares

$
(0.08
)

$
0.23


$
(2.04
)Diluted net (loss) income per Class A common share

$
(0.08
)

$
0.21


$
(2.04
)Diluted net (loss) income per Class B common share

$
(0.08
)

$
0.21


$
(2.04
)      F-72




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
  33.
    Employee
    benefit plans        34.
    Statutory
    reserves    35.
    Subsequent
    events           F-73




---



##### Table of Contents



Xinhua
    Sports & Entertainment Limited
  Notes to
    consolidated financial statements 
    (continued)
      Current assets

$
4,453,439Non-current assets


4,592,178Total assets

$
9,045,617Current liabilities

$
(2,371,516
)Net assets

$
6,674,101      F-74