20-F

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

o Registration statement pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934

or

þ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2007.

or

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ____________ to ____________

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

Commission file number 001-

Focus Media Holding Limited

(Exact Name of Registrant as Specified in Its Charter)

Cayman Islands
(Jurisdiction of Incorporation or Organization)

28-30/F, Zhao Feng World Trade Building
369 Jiangsu Road, Shanghai 200050, PRC
(Address of Principal Executive Offices)

Contact Person: Mr. Daniel Wu
Chief Financial Officer
Phone: +86 21 3212 4661
Facsimile: +86 21 5240 0228
Address: 28-30/F, Zhaofeng World Trade Building
369 Jiangsu Road, Shanghai 200050, P.R.C.
*(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

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

Title of Each Class	Name of Each Exchange on Which Registered
Ordinary Shares, par value US$0.00005 per share	Nasdaq National Market Inc.

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)

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

643,144,062 Ordinary Shares

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

     Yes o           No þ

     If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

     Yes o           No þ

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

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registration was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

     Yes þ           No o

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

Large accelerated filer o Accelerated filer o Non-accelerated filer þ

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

     U.S. GAAP þ

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

     Indicate by check mark which financial statement item the registrant has elected to follow.

     Item 17 o           Item 18þ

     If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

     Yes o           Noþ

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

     Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

     Yes o           Noo

FOCUS MEDIA HOLDING LIMITED

FORM 20-F ANNUAL REPORT
FISCAL YEAR ENDED DECEMBER 31, 2007
Table of Contents

SUPPLEMENTAL INFORMATION	1
FORWARD-LOOKING STATEMENTS IN THIS ANNUAL REPORT MAY NOT BE REALIZED	1
PART I	3
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	3
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE	3
ITEM 3. KEY INFORMATION	3
ITEM 4. INFORMATION ON THE COMPANY	31
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS	53
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	79
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	88
ITEM 8. FINANCIAL INFORMATION	95
ITEM 9. THE OFFER AND LISTING	96
ITEM 10. ADDITIONAL INFORMATION	97
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	111
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	111
PART II	111
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	111
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	111
ITEM 15. CONTROLS AND PROCEDURES	113
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT	113
ITEM 16B. CODE OF ETHICS	113
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES	113
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	114
ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	114
PART III	114
ITEM 17. FINANCIAL STATEMENTS	114
ITEM 18. FINANCIAL STATEMENTS	114
ITEM 19. EXHIBITS	116
EX-10.161 2007 SHARE OPTION PLAN
EX-10.162 SHARE PURCHASE AGREEMENT
EX-10.163 REGISTRATION RIGHTS AGREEMENT
EX-10.164 EQUITY PLEDGE AGREEMENT
EX-10.165 CALL OPTION AGREEMENT
EX-10.166 SHAREHOLDERS' VOTING RIGHTS AGREEMENT
EX-10.167 TECHNOLOGY AND CONSULTING AGREEMENT
EX-12.1 CERTIFICATE OF CHIEF EXECUTIVE OFFICER
EX-12.2 CERTIFICATE OF CHIEF FINANCIAL OFFICER
EX-13.1 CERTIFICATION OF PERIODIC FINANCIAL REPORT
EX-13.2 CERTIFICATION OF PERIODIC FINANCIAL REPORT
EX-15.1 CONSENT OF CONYERS, DILL & PEARMAN
EX-15.2 CONSENT OF GLOBAL LAW OFFICE
EX-21.1 LIST OF SUBSIDIARIES

SUPPLEMENTAL INFORMATION

     In this annual report, unless otherwise indicated:

• the terms “we,” “us,” “our company,” “our” and “Focus Media” refer to Focus Media Holding Limited, its predecessor entities and subsidiaries, and, in the context of describing our operations, also include our affiliated Chinese entities;

• “shares” and “ordinary shares” refer to our ordinary shares, par value $0.00005, “ADSs” refers to our American depositary shares, each of which represents five ordinary shares, and “ADRs” refers to the American depositary receipts which evidence our ADSs;

• “China” and “PRC” refer to the People’s Republic of China, excluding Taiwan, Hong Kong and Macau;

• all references to “RMB” are to the legal currency of China and all references to “U.S. dollars,” “US$,” “dollars” and “$” are to the legal currency of the United States. Any discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding;

• “Framedia” refers to Infoachieve Limited and its consolidated subsidiaries and affiliates, which we acquired in January 2006;

• “Target Media” refers to Target Media Holdings Limited and its consolidated subsidiaries and affiliates, which we acquired in February 2006;

• “Focus Media Wireless” refers to Dotad Media Holdings Limited, and its consolidated subsidiary and affiliate, which we acquired in March 2006 and renamed Focus Media Wireless;

• “Allyes” refers to Allyes Information Technology Company Limited, and its consolidated subsidiaries and affiliates, which we acquired in March 2007;

• “CGEN” refers to CGEN Digital Media Company Limited, and its consolidated subsidiaries and affiliates, which we acquired in January 2008; and

• This annual report on Form 20-F includes our audited consolidated financial statements for the years ended December 31, 2005, 2006 and 2007, and as of December 31, 2006 and 2007.

     We and certain selling shareholders of our company completed an initial public offering on July 19, 2005, and our ADSs have been listed on the Nasdaq National Market, or Nasdaq, under the symbol “FMCN” since July 13, 2005.

FORWARD-LOOKING STATEMENTS IN THIS ANNUAL REPORT
MAY NOT BE REALIZED

     This annual report on Form 20-F contains forward-looking statements that are based on our current expectations, assumptions, estimates and projections about us and our industry. All statements other than statements of historical fact in this annual report are forward-looking statements. These forward-looking statements can be identified by words or phrases such as “may”, “will”, “expect”, “anticipate”, “estimate”, “plan”, “believe”, “is/are likely to” or other similar expressions. The forward-looking statements included in this annual report relate to, among others:

• our goals and strategies;

• our future business development, financial condition and results of operations;

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• projected revenues, profits, earnings and other estimated financial information;

• our ability to complete acquisitions we have entered into and costs related to and potential liabilities resulting from completing such acquisitions and integrating the acquired companies into our business;

• achieving anticipated or potential synergies with companies we acquire or have acquired, including Framedia, Target Media, Focus Media Wireless, Allyes and CGEN;

• our plans to expand our advertising network into new cities and regions in China and diversify into new networks and advertising channels such as airports, hospitals and other possible commercial locations;

• the growth or acceptance of our in-store network, our outdoor LED network, Framedia’s poster frame network, our movie theater advertising network, our wireless advertising services network and our online advertising services business;

• our plan to develop our business into a multi-platform out-of-home advertising network, including through operation of Focus Media Wireless’s mobile phone network advertising services and through Internet advertising channels such as through Allyes;

• our plan to identify and create additional advertising channels that target specific consumer demographics, which could allow us to increase our advertising revenue, including Internet advertising channels;

• competition in the PRC advertising industry;

• the expected growth in the urban population, consumer spending, average income levels and advertising spending levels;

• PRC governmental policies and regulations relating to the advertising industry and regulations and policies promulgated by the State Administration of Foreign Exchange;

• other risks outlined in our filings with the Securities and Exchange Commission, including our registration statements on Form F-1, as amended, and Form F-3 as amended; and

• those other risks identified in “Item 3. Key Information—D. Risk Factors” of this annual report.

     These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, we cannot assure you that our expectations will turn out to be correct. Our actual results could be materially different from or worse than our expectations.

     The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.

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PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

     Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

     Not applicable.

ITEM 3. KEY INFORMATION

A. Selected Financial Data

     The following selected consolidated financial information has been derived from our consolidated financial statements. Our consolidated financial statements are prepared by including the financial statements of Focus Media Advertisement, formerly Aiqi Advertising, through May 2003 and our consolidated financials, which include the consolidation of Focus Media Advertisement as a variable interest entity, thereafter and presented in accordance with U.S. GAAP. Our consolidated statements of operations for the years ended December 31, 2005, 2006 and 2007 and our consolidated balance sheets as of December 31, 2005, 2006 and 2007 have been audited by Deloitte Touche Tohmatsu CPA Ltd., an independent registered public accounting firm. The report of Deloitte Touche Tohmatsu CPA Ltd. on those financial statements is included elsewhere in this annual report.

     Our selected consolidated financial information for the years ended December 31, 2003 and 2004 have been derived from Focus Media Advertisement audited consolidated financial statements, which are not included in this annual report.

     Our historical results for any prior period are not necessarily indicative of results to be expected for any future period. The selected consolidated financial information for the periods and as of the dates indicated should be read in conjunction with our financial statements and the accompanying notes and “Item 5. Operating and Financial Review and Prospects”.

     Prior to May 2003, we operated as an advertising agency, the operations and services of which differ markedly from our current business. As an advertising agency, we assisted media companies in selling their advertising time or space to companies seeking to advertise in exchange for a commission. In May 2003, we ceased acting as an advertising agency and commenced our current business as an operator of an out-of-home advertising network, consisting first of our commercial location network. In April 2005, we commenced commercial operations of our in-store network and through our acquisition of Framedia, we commenced operation of our poster frame network on January 1, 2006. In February 2006, we acquired Target Media and in March 2006, we acquired Focus Media Wireless. In March 2007, we acquired Allyes. In January 2008, we acquired CGEN,

	For the year ended December 31,
	2003		2004		2005		2006		2007
	(in thousands of U.S. dollars)
Selected Consolidated Statements of Operations Data:
Gross revenues	$	3,671	$	29,109	$	73,419	$	231,186	$	543,879
Net revenues:
Commercial location network(1)	$	3,369	$	26,321	$	61,435	$	132,061	$	220,683
In-store network(1)		—		—		5,469		26,907		27,444
Poster frame network(1)		—		—		—		40,904		85,472
Mobile Handset Advertising network(1)		—		—		—		10,101		46,909
Internet advertising		—		—		—		—		124,938
Advertising service revenue(1)		3,369		26,321		66,904		209,973		505,446
Other revenues		389		2,889		1,325		1,932		1,114
Total net revenues		3,758		29,210		68,229		211,905		506,560
Cost of revenues:

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	For the year ended December 31,
	2003			2004			2005			2006			2007
	(in thousands of U.S. dollars)
Net advertising service cost:
Commercial location network		1,566			6,804			18,325			42,836			79,625
In-store network		—			—			7,423			18,106			23,502
Poster frame network		—			—			—			13,621			28,086
Mobile Handset Advertising Network		—			—			—			6,052			23,193
Internet advertising		—			—			—			—			93,238
Advertising service cost		1,566			6,804			25,748			80,615			247,644
Other costs		275			1,934			976			765			798
Total cost of revenues		1,841			8,738			26,724			81,380			248,442
Gross profit		1,917			20,472			41,505			130,525			258,118
Operating expenses:
General and administrative		985			3,988			9,120			25,723			49,456
Selling and marketing		407			3,473			9,599			25,762			69,931
Other operating income		—			—			—			(1,338	)		(5,124	)
Total operating expenses		1,392			7,519			18,719			50,147			114,263
Income from operations		525			12,953			22,786			80,378			143,855
Interest income net		1			10			1,762			4,255			9,752
Other income (expenses), net		(9	)		(4	)		(161	)		(287	)		2,568
Change in fair value of derivative liability associated with Series B convertible redeemable preference shares		—			(11,692	)		—			—			—
Income before income taxes and minority interest		517			1,267			24,387			84,346			156,175
Total income taxes		482			908			694			1,044			11,045
Minority interest		(8	)		(13	)		145			105			694
Equity loss of affiliates		(18	)		—			—			—			—
Net income	$	25		$	372		$	23,548		$	83,197		$	144,436

	For the year ended December 31,
	2003		2004			2005		2006		2007
	(in thousands of U.S. dollars, except share and per share data)
Earnings per share data:
Deemed dividend on Series A convertible redeemable preference shares(2)		—		(8,308	)		—		—		—
Deemed dividend on Series B convertible redeemable preference shares(2)		—		(2,191	)		—		—		—
Deemed dividend on Series C-1 convertible redeemable preference shares(2)		—		(13,356	)		—		—		—
Premium of Series B convertible redeemable preference shares		—		12,906			—		—		—
Income (loss) attributable to holders of ordinary shares	$	25	$	(10,577	)	$	23,548	$	83,197	$	144,436
Income (loss) per share — basic	$	0.00	$	(0.07	)	$	0.09	$	0.16	$	0.24
Income (loss) per share — diluted	$	0.00	$	(0.07	)	$	0.06	$	0.16	$	0.24
Shares used in calculating basic income per share		144,657,600		160,998,600			252,128,545		505,411,079		590,387,396
Shares used in calculating diluted income per share		144,657,600		160,998,600			365,938,094		521,536,381		608,326,450

	As of December 31,
	2003		2004		2005		2006		2007
	(in thousands of U.S. dollars, except share data)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	716	$	22,669	$	36,653	$	164,611	$	450,416
Other current assets(3)		1,902		12,713		104,988		78,712		431,043
Non-current assets(4)		2,688		21,033		70,713		862,919		1,258,079
Total assets		5,306		56,415		212,354		1,106,242		2,139,538
Total current liabilities		4,119		8,634		20,694		51,837		276,287
Total non-current liabilities		—		—		—		3,303		6,394
Total liabilities		4,119		8,634		20,694		55,140		282,681
Minority interest		4		81		245		358		1,913
Mezzanine equity		—		53,273		—		—		—

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	As of December 31,
	2003		2004			2005		2006		2007
	(in thousands of U.S. dollars, except share data)
Ordinary shares (200,000,000, 142,464,600, 378,306,000, 534,896,873,and 640,230,852 shares issued and outstanding in 2003, 2004, 2005, 2006 and 2007, respectively)		10		7			19		27		32
Other shareholders’ equity (deficiency)		1,173		(5,580	)		191,396		1,050,717		1,854,912
Total shareholders’ equity (deficiency)	$	1,183	$	(5,573	)	$	191,415	$	1,050,744	$	1,854,944

	As of December 31,
	2005		2006		2007
Selected Operating Data:
Number of displays in our commercial location network:
Our direct cities		45,049		80,263		107,533
Our regional distributors(5)		3,177		5,197		4,765
Total		48,226		85,460		112,298
Number of displays in our in-store network(6)		27,849		38,742		49,452
Number of stores in our in-store network(6)		4,130		3,898		4,063
Number of installed frames in our poster frame network(7)		—		99,784		190,468

(1)	Advertising service revenue is presented net of business tax. Business tax on advertising service revenue from our commercial location network amounted to $6.0 million, $13.6 million and $19.9 million in 2005, 2006 and 2007, respectively. Business tax on advertising service revenue for our in-store network amounted to $2.8 million and $2.8 million in 2006 and 2007, respectively. Business tax on advertising service revenue for our poster frame network amounted to $4.0 million and $7.9 million for 2006 and 2007, respectively. Business tax on advertising service revenue for our mobile handset advertising network amounted to $0.8 million and $1.6 million in 2006 and 2007, respectively. Business tax for our Internet advertisings service revenue amounted to $5.0 million in 2007. Business tax includes business tax ranging from 3% to 5.55% and cultural industries tax ranging from 0% to 4.0% of our gross advertising service revenue.
(2)	We are no longer required to record deemed dividends prospectively following conversion at the closing of our initial public offering of our Series A, Series B, Series C-1 and Series C-2 convertible redeemable preference shares into ordinary shares.
(3)	Other current assets are equal to total current assets less cash and cash equivalents.
(4)	Non-current assets are equal to total assets less total current assets.
(5)	Data that has been provided by our regional distributors is based on the results of surveys we requested them to provide to us and it is possible such data is not entirely accurate or exact.
(6)	As we completed our acquisition of CGEN on January 2, 2008, operating data for our in-store network as of December 31, 2007 does not include data from CGEN’s business and operations.
(7)	Number of installed frames includes frames we currently market and frames that have been installed, for instance, in buildings that are still under construction and which we have not yet begun to market. Data includes both traditional poster frames and, for periods starting from June 30, 2007, digital frames.

Currency Translations and Exchange Rates

     Our operating businesses are currently conducted in China and substantially all of our revenues and expenses are denominated in Renminbi. The People’s Bank of China, or PBOC, sets and publishes daily a base exchange rate with reference primarily to the supply and demand of Renminbi against a basket of currencies in the market during the prior day. The PBOC also takes into account other factors, such as the general conditions existing in the international foreign exchange markets. Since 1994, the conversion of Renminbi into foreign currencies, including Hong Kong dollars and U.S. dollars, has been based on rates set by the PBOC, which are set daily based on the previous day’s inter-bank foreign exchange market rates and current exchange rates in the world financial markets. From 1994 to July 20, 2005, the official exchange rate for the conversion of Renminbi to U.S. dollars was generally stable. Although PRC governmental policies were introduced in 1996 to reduce restrictions on the convertibility of Renminbi into foreign currency for current account items, conversion of Renminbi into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of the State Administration for Foreign Exchange and other relevant authorities. On July 21, 2005, the PRC government introduced a managed floating exchange rate

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system to allow the value of the Renminbi to fluctuate within a regulated band based on market supply and demand and by reference to a basket of currencies. On the same day, the value of the Renminbi appreciated by 2.0% against the U.S. dollar. Since then, the PRC government has made, and may in the future make, further adjustments to the exchange rate system. The PBOC announces the closing price of a foreign currency traded against the Renminbi in the inter-bank foreign exchange market after the closing of the market on each working day, and makes it the central parity for the trading against the Renminbi on the following working day.

     The conversion of Renminbi 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 Renminbi as certified for customs purposes by the Federal Reserve Bank of New York. For your convenience, this annual report contains translations of Renminbi at $1.00 to RMB7.2946, which was the prevailing rate on December 31, 2007. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated below, or at all. The PRC government imposes controls over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on foreign trade.

     The following table sets forth information concerning exchange rates between the Renminbi and the U.S. dollar for the periods indicated. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in this annual report or will use in the preparation of our periodic reports or any other information to be provided to you.

	RENMINBI PER U.S. DOLLAR NOON BUYING RATE
	AVERAGE		HIGH		LOW		PERIOD-END
2002		8.2770		8.2800		8.2669		8.2800
2003		8.2770		8.2800		8.2272		8.2769
2004		8.2768		8.2774		8.2764		8.2765
2005		8.1940		8.2765		8.0702		8.0702
2006		7.9723		8.0702		7.8041		7.8087
2007		7.6072		7.8127		7.2946		7.2946

B. Capitalization and Indebtedness

     Not applicable.

C. Reasons for the Offer and Use of Proceeds

     Not applicable.

D. Risk Factors

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

Risks Relating to Our Business and Industry

We have been named as a defendant in certain purported shareholder class action lawsuits that could have a material adverse impact on our operating results and financial condition.

     We are currently a defendant in ongoing lawsuits as described in Item 8 of this annual report, “Financial Information—Consolidated statements and other financial information—Legal Proceedings.” We are currently unable to estimate the possible loss or possible range of loss, if any, associated with the resolution of these lawsuits. An unfavorable outcome from these lawsuits could have a material adverse effect on our consolidated financial position, results of operations, or cash flows in the future. The litigation process may utilize a material portion of our cash resources and divert management’s attention from the day-to-day operations of our company, all of which could harm our business.

We have a limited operating history, which may make it difficult for you to evaluate our business and prospects.

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     We began operations of our commercial location network in May 2003. In addition, we have operated our in-store network since April 2005 and acquired and began to operate our poster frame network from January 2006 under the brand name “Framedia”. In March 2006, September 2006 and March 2007, respectively, we added a mobile handset advertising network, an outdoor LED billboard advertising network, a movie theater advertising network and an Internet advertising services network to our business. Accordingly, we have a very limited operating history for our current operations upon which you can evaluate the viability and sustainability of our business and its acceptance by advertisers and consumers. It is also difficult to evaluate the viability of our use of audiovisual advertising displays in commercial buildings, hypermarkets, supermarkets and convenience stores and other out-of-home commercial locations and our use of advertising poster frames in residential complexes, SMS-, MMS- and WAP-based mobile handset advertising and Internet advertising services as a business model because we do not have sufficient experience to address the risks frequently encountered by early stage companies using new forms of advertising media and entering new and rapidly evolving markets. These circumstances may make it difficult for you to evaluate our business and prospects.

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

     Demand for advertising time slots and advertising frame space on our networks, and the resulting advertising spending by our clients, is particularly sensitive to changes in general economic conditions and advertising spending typically decreases during periods of economic downturn. Advertisers may reduce the money they spend to advertise on our networks for a number of reasons, including:

• a general decline in economic conditions;

• a decline in economic conditions in the particular cities where we conduct business;

• a decision to shift advertising expenditures to other available advertising media;

• a decline in advertising spending in general; or

• a decrease in demand for advertising media in general and for our advertising services in particular would materially and adversely affect our ability to generate revenue from our advertising services, and our financial condition and results of operations.

Our quarterly operating results are difficult to predict and may fluctuate significantly from period to period in the future.

     Our quarterly operating results are difficult to predict and may fluctuate significantly from period to period based on the seasonality of consumer spending and corresponding advertising trends in China. In addition, advertising spending generally tends to decrease during January and February each year due to the Chinese Lunar New Year holiday. We also experience a slight decrease in revenues during the hot summer months of July and August each year, when there is a relative slowdown in overall commercial activity in urban areas in China. As a result, you may not be able to rely on period to period comparisons of our operating results as an indication of our future performance. Factors that are likely to cause our operating results to fluctuate, such as the seasonality of advertising spending in China, a deterioration of economic conditions in China and potential changes to the regulation of the advertising industry in China, are discussed elsewhere in this annual report. If our revenues for a particular quarter are lower than we expect, we may be unable to reduce our operating expenses for that quarter by a corresponding amount, which would harm our operating results for that quarter relative to our operating results from other quarters.

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Our failure to maintain existing relationships or obtain new relationships with businesses that allow us to place our flat-panel displays and advertising poster frames in their buildings and other commercial locations and to lease outdoor LED digital billboards placed in desirable locations would harm our business and prospects.

     Our ability to generate revenues from advertising sales depends largely upon our ability to provide large networks of flat-panel displays placed in desirable building, commercial and store locations, of advertising poster frames placed in residential complexes, and to secure desirable locations of large outdoor LED digital billboards, throughout major urban areas in China. We also depend on the ability of our third-party location provider to secure desirable LED digital billboard locations for our outdoor LED network. This, in turn, requires that we develop and maintain business relationships with real estate developers, landlords, property managers, hypermarkets, retailers and other businesses and locations in which we rent space for our displays and digital billboards. Although a majority of our display placement agreements and advertising frame placement agreements have terms ranging from three to five years and two to three years, respectively, and upon expiration give us the right to renew the agreement on terms no less favorable than those offered by competing bidders, we may not be able to maintain our relationships with them on satisfactory terms, or at all. If we fail to maintain our relationships with landlords and property managers, or if a significant number of our existing display or advertising frame placement agreements are terminated or not renewed or if we fail to maintain our relationship with our location provider of LED billboard space, advertisers may find advertising on our networks unattractive and may not wish to purchase advertising time slots or advertising frame space on our networks, which would cause our revenues to decline and our business and prospects to deteriorate.

     Under some of our display placement agreements in Guangzhou, Shenzhen, Dalian and Chongqing, the property manager has the right to terminate the agreement if landlords or tenants in the building lodge complaints about our flat-panel displays. In addition, some of our display placement agreements in other cities allow the property manager to terminate the agreement if we fail to keep each flat-panel display operational for a minimum amount of time each year. If these tenants complain about our displays, or if the property manager claims we have failed to keep the flat-panel displays operational for the stipulated number of days each year, we may be required to remove our panels from these commercial locations.

     In accordance with PRC real estate laws and regulations, prior consent of landlords and property managers is required for any commercial use of the public areas or facilities of residential properties. With regard to our network of advertising poster frames and some of our flat-panel displays placed in the elevators and public areas of residential complexes, we have entered into frame or display placement agreements with property managers and landlords. For those frame or display placement agreements entered into with property managers, we intend to obtain or urge property managers to obtain consents from landlords. However, if the landlords of a residential complex object to our placing advertising poster frames or flat-panel displays in the elevators and public areas of the complex, we may be required to remove our advertising poster frames or flat-panel displays from the complex and may be subject to fines. We may not be able to successfully expand our out-of-home advertising network into new regions or diversify our network into new advertising networks or media platforms, which could harm or reverse our growth potential and our ability to increase our revenues.

If we are unable to obtain or retain desirable placement locations for our flat-panel displays, advertising poster frames and outdoor LED billboards on commercially advantageous terms or if the supply of desirable locations diminishes or ceases to expand, we could have difficulty in maintaining or expanding our network, our operating margins and earnings could decrease and our results of operations could be materially and adversely affected.

     Our location costs, which include lease payments to landlords and property managers under our display placement agreements, maintenance and monitoring fees and other associated costs, comprise a significant portion of our cost of revenues. In 2006, our location costs accounted for 66.2% of our cost of revenues and 24.3% of our total revenues, respectively. For 2007, our location costs accounted for 40.9% of our cost of revenues and 20.0% of our total revenues, respectively. In the future, we may need to increase our expenditures on our display and frame placement agreements to obtain new and desirable locations, to renew existing locations, and to secure favorable exclusivity and renewal terms. In addition, lessors of space for our flat-panel displays, advertising poster frames and LED billboards may charge increasingly higher display location lease fees, or demand other compensation arrangements, such as profit sharing. If we are unable to pass increased location costs on to our advertising clients through rate increases, our operating margins and earnings could decrease and our results of operations could be materially and adversely affected.

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     In addition, in more developed cities, it may be difficult to increase the number of desirable locations in our network because most such locations have already been occupied either by us or by our competitors, or in the case of outdoor LED billboards, because the placement of outdoor installments may be limited by municipal zoning and planning policies. In recently developing cities, the supply of desirable locations may be small and the pace of economic development and construction levels may not provide a steadily increasing supply of desirable commercial and residential locations. If, as a result of these possibilities, we are unable to increase the placement of our out-of-home television and poster frame advertising networks into commercial and residential locations that advertisers find desirable, we may be unable to expand our client base, sell advertising time slots and poster frame space on our network or increase the rates we charge for time slots and poster frame space, which could decrease the value of our network to advertisers.

If we are unable to attract advertisers to advertise on our networks, we will be unable to maintain or increase our advertising fees and the demand for time on our networks, which could negatively affect our ability to grow revenues.

     The amounts of fees we can charge advertisers for time slots on our out-of-home television networks depend on the size and quality of our out-of-home television networks and the demand by advertisers for advertising time on our out-of-home television networks. Advertisers choose to advertise on our out-of-home television networks in part based on the size of the networks and the desirability of the locations where we have placed our flat-panel displays and where we lease LED digital billboards as well as the quality of the services we offer. If we fail to maintain or increase the number of locations, displays and billboards in our networks, diversify advertising channels in our networks, or solidify our brand name and reputation as a quality provider of advertising services, advertisers may be unwilling to purchase time on our networks or to pay the levels of advertising fees we require to remain profitable.

     In addition, the fees we can charge advertisers for frame space on our poster frame network depends on the quality of the locations in which we place advertising poster frames, demand by advertisers for frame space and the quality of our service. If we are unable to continue to secure the most desirable residential locations for deployment of our advertising poster frames, we may be unable to attract advertisers to purchase frame space on our poster frame network.

     Our failure to attract advertisers to purchase time slots and frame space on our networks will reduce demand for time slots and frame space on our networks and the number of time slots and amount of frame space we are able to sell, which could necessitate lowering the fees we charge for advertising time on our network and could negatively affect our ability to increase revenues in the future.

Our acquisitions of Framedia, Target Media, Focus Media Wireless, Allyes, CGEN, any smaller acquisitions we have made, and any future acquisitions may expose us to potential risks and have an adverse effect on our ability to manage our business.

     Selective acquisitions, such as our recent acquisitions of Framedia, Target Media, Focus Media Wireless, Allyes, CGEN as well as smaller acquisitions, form part of our strategy to further expand our business. If we are presented with appropriate opportunities, we may acquire additional businesses, services or products that are complementary to our core business. Our integration of the acquired entities into our business may not be successful and may not enable us to expand into new advertising platforms as well as we expect. This would significantly affect the expected benefits of these acquisitions. Moreover, the integration of Framedia, Target Media, Focus Media Wireless, Allyes, CGEN and other smaller acquisitions into our operations have required, and will continue to require, significant attention from our management. Future acquisitions will also likely present similar challenges.

     The diversion of our management’s attention and any difficulties encountered in any integration process could have an adverse effect on our ability to manage our business. In addition, we may face challenges trying to integrate new operations, services and personnel with our existing operations. Our recent acquisitions and possible future acquisitions may also expose us to other potential risks, including risks associated with unforeseen or hidden liabilities, the diversion of resources from our existing businesses and technologies, our inability to generate sufficient revenue to offset the costs, expenses of acquisitions and potential loss of, or harm to, relationships with employees and advertising clients as a result of our integration of new businesses and new regulations governing cross-border investment by PRC residents. In addition, we cannot assure you that we will be able to realize the benefits we

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anticipate from acquiring Framedia, Target Media, Focus Media Wireless, Allyes, CGEN and other companies, or that we will not incur costs, including those relating to intangibles or goodwill, in excess of our projected costs for these transactions. The occurrence of any of these events could have a material and adverse effect on our ability to manage our business, our financial condition and our results of operations.

There may be unknown risks inherent in our acquisitions of Framedia, Target Media, Focus Media Wireless, Allyes, CGEN and smaller acquisitions we have made.

     Although we have conducted due diligence with respect to the major acquisitions we have undertaken and undertake, we may not be aware of all of the risks associated with the targets of such acquisitions including Framedia, Target Media, Focus Media Wireless, Allyes, CGEN and other smaller acquisitions we have made. Any discovery of adverse information concerning Framedia, Target Media, Focus Media Wireless, Allyes, CGEN or other company we have acquired since we acquired these entities could have a material adverse effect on our business, financial condition and results of operations. While we are entitled to seek indemnification in certain circumstances, successfully asserting indemnification or enforcing such indemnification could be costly and time consuming or may not be successful at all.

Our strategic alliances and partnerships may not succeed or yield the benefits we anticipated, which could materially and adversely affect our business and results of operations.

     We have recently entered into strategic alliances and partnerships with other companies, including Yanhuang Health Media Limited and Dentsu Group, and we may continue to enter into additional alliances and partnerships in the future. However, we cannot assure you that these alliances and partnerships will succeed or result in the benefits we anticipated when we entered into them. For instance, under the terms of our alliance with Yanhuang Health Care, we transferred ownership and operation of the LED displays from the healthcare channel portion of our commercial location network to Yanhuang Health Care. Accordingly, we cannot control Yanhuang Health Care’s management and operation of the healthcare channel or ensure that they will be able to successfully attract advertising customers as we might were we in direct control of that channel. If the strategic alliances and partnerships we have entered into, or may in the future enter into, do not succeed, our business and results of operations could be materially adversely affected.

Our recent entry into mobile handset advertising and Internet advertising services through our acquisitions of Focus Media Wireless, Allyes and other smaller acquisitions, respectively, may expose us to risks associated with operating in the telecommunications and Internet industries in China which could materially affect our financial condition or results of operation.

     In March 2006, we completed our acquisition of Focus Media Wireless, which operates a mobile handset WAP-based advertising service over China Mobile’s and China Unicom’s mobile telecommunications networks. As a result, we now operate a portion of our advertising network on mobile telecommunications networks and are subject to risks associated with operations in the telecommunications sector in China. In addition, in March 2007, we acquired Allyes, which operates an Internet advertising agency and service technology business. We have also made a number of smaller acquisitions in the mobile handset and Internet advertising areas. Our operation of the Internet advertising business subjects us to risks associated with operations in the Internet sector in China. These potential risks include:

• loss or deterioration of our relationship with China Mobile or China Unicom, the two primary mobile telecommunications operators in China that currently provide wireless value-added services to mobile phone users;

• loss or deterioration of our relationship with Internet service providers who use our WAP-based advertisement platform;

• failure to reach traditional advertisers and to take advantage of marketing networks through our existing business;

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• changes in operating policies or guidelines by mobile telecommunications operators applicable to all wireless value-added service providers using their platforms or which restrict content supplied by others to us;

• if regulations changes in the future, regulation of the telecommunications sector in China that could impose burdensome approval, licensing, technical or other requirements on value-added service providers such as advertising companies that sell advertising time on mobile telecommunications networks;

• a decision by either or both China Mobile and China Unicom to directly enter into the WAP-based advertising business or other businesses directly competing with us;

• consumer dissatisfaction with, or any related regulations restricting, the use or “pushing” of unsolicited advertisements, commonly known as “spam”;

• the performance and reliability of the Internet infrastructure; and

• the continued growth of the Internet and e-commerce industries.

     Since March 2008, the Ministry of Information Industry, or MII, the national regulatory authority of the telecom industry has ordered all local telecom regulators and telecom operators at all levels to tighten up regulation of short messaging services, in particular so-called “spam”, or unsolicited, advertisements and messages. It has been reported that several local telecom regulators and operators adopted policies restricting short message advertising activities by limiting the number of such advertisements or disallowing companies from engaging in unsolicited short messaging advertising activities. It has also been reported that the MII, together with other national authorities, is drafting new regulations governing the short messaging business, and that the new regulations are expected to impose strict technical requirements and standards requiring short message advertisements to be sent following the consent of the relevant mobile phone user.

     As a result of any such change or event, the operation of our advertising network using the mobile telecommunications networks of the mobile telecommunications operators in China may be disrupted, which could in turn lower our advertising revenues or result in higher operating costs to us, and we cannot assure you that our financial condition and results of operation would not be materially adversely affected.

     In addition, under PRC law, the services offered by Focus Media Wireless may be deemed value-added telecommunication services, which requires an operation permit that has a valid period of five years. Focus Media Wireless has been granted the operation permit for its wireless advertising operations. If the permit is revoked or if we are unable to renew the operation permit upon expiration, we will be required to suspend our services relating to our mobile handset advertising network, and our advertising service revenue derived from this portion of our network would be adversely affected.

One or more of our regional distributors could engage in activities that are harmful to our reputation in the industry and to our business.

     As of December 31, 2007, we covered approximately 40 out of the approximately 90 cities where we provide our commercial location network through contractual arrangements with regional distributors. Under these arrangements, we provide our business model and operating expertise to local advertising companies in exchange for their acting as regional distributors of our advertising services. We also sell our flat-panel displays to our regional distributors, who are responsible for developing and maintaining an advertising network in office buildings and other commercial locations in the respective cities where they operate. We also grant our regional distributors the right to use our “Focus Media” brand name and logo. However, our contractual arrangements with our regional distributors do not provide us with control or oversight over their everyday business activities, and one or more of our regional distributors may engage in activities that violate PRC laws and regulations governing the advertising industry and advertising content, or other PRC laws and regulations generally. Some of our regional distributors may not possess all the licenses required to operate an advertising business, or may fail to maintain the licenses they currently hold, which

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could result in local regulators suspending the operations of the network in those cities. In addition, we do not independently review the advertising content that our regional distributors display on the portion of our commercial location network that they operate independently, and our regional distributors may include advertising content on their part of the commercial location network and violate PRC advertising laws or regulations or expose them and us to lawsuits or result in the revocation of their business license. If any of these events occurs, it could harm our reputation in the industry.

Failure to manage our growth could strain our management, operational and other resources and we may not be able to achieve anticipated levels of growth in the new networks and media platforms we are beginning to operate, either of which could materially and adversely affect our business and growth potential.

     We have been rapidly expanding, and plan to continue to rapidly expand, our operations in China. We must continue to expand our operations to meet the demands of advertisers for larger and more diverse network coverage and the demands of current and future landlords and property managers for installing and configuring flat-panel displays, advertising poster frames and outdoor LED billboards in our existing and future commercial, store, residential and curbside locations. This expansion has resulted, and will continue to result, in substantial demands on our management resources. It has also increased our need for a reliable supply of equipment, particularly flat-panel displays and large LED digital billboards for our out-of-home television networks which are manufactured by a few third-party contract assemblers according to our specifications. To manage our growth, we must develop and improve our existing administrative and operational systems and, our financial and management controls and further expand, train and manage our work force. We have also commenced providing advertising services to mobile phone users through our recent acquisition of Focus Media Wireless. As we continue this effort, we may incur substantial costs and expend substantial resources in connection with any such expansion due to, among other things, different technology standards, legal considerations and cultural differences. We may not be able to manage our current or future international operations effectively and efficiently or compete effectively in such markets. We cannot assure you that we will be able to efficiently or effectively manage the growth of our operations, recruit top talent and train our personnel. Any failure to efficiently manage our expansion may materially and adversely affect our business and future growth.

     As we continue to expand into new networks and new media platforms, we expect the percentage of revenues derived from our commercial location network to decline. However, the new advertising networks and media platforms we pursue may not present the same opportunities for growth that we have experienced with our commercial location network and, accordingly, we cannot assure you that the level of growth of our networks will not decline over time. Moreover, we expect the level of growth of our commercial location network to decrease as many of the more desirable locations have already been leased by us or our competitors.

If advertisers or the viewing public do not accept, or lose interest in, our out-of-home advertising network, our revenues may be negatively affected and our business may not expand or be successful.

     The market for out-of-home advertising networks in China is relatively new and its potential is uncertain. We compete for advertising spending with many forms of more established advertising media. Our success depends on the acceptance of our out-of-home advertising network by advertisers and their continuing interest in these mediums as components of their advertising strategies. Our success also depends on the viewing public continuing to be receptive towards our advertising network. Advertisers may elect not to use our services if they believe that consumers are not receptive to our networks or that our networks do not provide sufficient value as effective advertising mediums. Likewise, if consumers find some element of our networks, such as the audio feature of our commercial location, in-store and outdoor LED networks, to be disruptive or intrusive, commercial locations and stores may decide not to place our flat-panel displays in their properties and advertisers may view our advertising network as a less attractive advertising medium compared to other alternatives. In that event, advertisers may determine to reduce their spending on our advertising network. If a substantial number of advertisers lose interest in advertising on our advertising network for these or other reasons, we will be unable to generate sufficient revenues and cash flow to operate our business, and our advertising service revenue, liquidity and results of operations could be negatively affected.

If the Internet and, in particular, Internet marketing are not broadly adopted in China, our ability to generate revenue and sustain profitability from Allyes could be materially and adversely affected.

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     Our future revenues and profits from our online advertising agency business we operate through Allyes are dependent in part upon advertisers in China increasingly accepting the use of the Internet as a marketing channel, which is at an early stage in China. Penetration rates for personal computers, the Internet and broadband in China are all relatively low compared to those in more developed countries. Furthermore, many Chinese Internet users are not accustomed to using the Internet for e-commerce or as a medium for other transactions. Many of our current and potential clients have limited experience with the Internet as a marketing channel, and have not historically devoted a significant portion of their marketing budgets to Internet marketing and promotion. As a result, they may not consider the Internet as effective in promoting their products and services as traditional print and broadcast media.

The growth of our online advertising agency business is substantially dependent on the acceptance of the cost-per-thousand-impressions, or CPM Internet advertising sales model, and certain performance-based Internet advertising sales models, including CPC and CPA models, by industry participants in China.

     The most prevalent Internet advertising sales model in China currently is cost-per-day, whereby Web publishers are paid based on the number of days an Internet ad is on display without regard to the ad’s effectiveness or the number of times the ad is displayed. We believe that the full advantages of Internet marketing in general and our Internet marketing solutions specifically can only be fully realized when more sophisticated Internet advertising sales models such as cost-per-thousand-impressions, or CPM, cost-per-click, or CPC, and cost-per-action, or CPA, are used to purchase ad space. If CPM, CPC and CPA fail to gain acceptance in China, our Internet marketing solutions will be less attractive to industry participants, and the market for those solutions may develop more slowly than we expect or even decline, which would materially and adversely affect our prospects and our business. In addition, if industry participants in China favor other newly-developed Internet advertising sales models incompatible with CPM, CPC or CPA, sales of our Internet marketing solutions may suffer and our revenue and profitability may be materially and adversely affected.

If the delivery of ads or the use of cookies is limited or blocked, our ability to update and expand our user data would be hindered and demand for our Internet marketing solutions could decline.

     Our business may be adversely affected by practices and technologies that impair or undermine the performance of our Internet marketing solutions. For example, Internet users may use software designed to filter or prevent the delivery of Internet ads, including pop-up and pop-under ads; block, disable or remove cookies used by our Internet marketing technologies; or misrepresent measurements of advertising effectiveness. In particular, because we rely on cookies to obtain data about Internet users for our database of user information, widespread usage of software in China that disables or removes cookies would limit our ability to update and expand our user information and hinder our ability to provide effective targeted Internet marketing solutions to our clients. We cannot assure you that the proportion of Internet users who employ these or other similar technologies will not increase, thereby diminishing the efficiency of our Internet marketing solutions and causing demand for those solutions to decline.

Our role through Allyes as a supplier of ad space may harm our reputation as an independent purchasing agent and the reputation of our performance-based advertising network as a marketplace for ad space.

     We currently participate in both the purchase and supply of Internet ad space through our online advertising agency business. We also facilitate purchases by our clients of ad space on our performance-based advertising network and may act as sales representative to other Web publishers in the future. In addition, we supply ad space that we purchase from Web publishers on our performance-based advertising network from time to time to advertisers. Our role as a supplier of ad space might harm both our reputation as an independent purchasing agent and the reputation of our performance-based advertising network as a marketplace for ad space. If our reputation as an independent purchasing agent or the reputation of our performance-based advertising network is harmed, our clients may not purchase ad space from us and our business, financial condition and results of operations could be materially and adversely affected.

Our Internet advertising business could be materially and adversely affected if we are unable to introduce new or enhanced Internet marketing services and technologies that meet our clients’ requirements.

     Our future success depends in part upon our ability to enhance and integrate our existing Internet marketing services and technologies that we provide through Allyes and to introduce new, competitively priced services and

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technologies with features that meet evolving client requirements, all in a timely and cost-effective manner. A number of factors, including the following, could have a negative impact on the success of our services and technologies:

• our failure to anticipate changes in clients’ requirements;

• our competitors’ introduction of new services and technologies ahead of our new services and technologies, or their introduction of superior or cheaper services and technologies;

• our failure to adapt to Internet advertising technology trends and evolving industry standards; and

• delays or difficulties in technology integration, customization or development.

The business and prospects of our online advertising agency business could be harmed if “click-through” fraud is not detected.

     We are exposed to the risk of fraudulent clicks on ads posted on the performance-based advertising network of Allyes by individuals seeking to increase the advertising fees paid to our Web publishers. We may in the future have to refund revenue that our advertisers have paid to us and that was later attributed to click-through fraud. Click-through fraud occurs when an individual clicks on an ad displayed on a website for the sole intent of generating the revenue share payment to the publisher rather than to view the underlying content. From time to time we have experienced fraudulent clicks on the performance-based advertising network of Allyes and we do not allow our advertisers to be charged for such fraudulent clicks. This negatively affects the profitability of our online advertising agency business, and this type of fraudulent act could hurt our brand. If fraudulent clicks are not detected, the affected advertisers may experience a reduced return on their investment in our performance-based advertising network, which could lead the advertisers to become dissatisfied with our online advertising agency business, and in turn lead to loss of advertisers and the related revenue. Furthermore, fraudulent clicks directed at our performance-based advertising network or at other performance-based advertising platforms might encourage the perception among advertisers in China that performance-based sales models like CPC and CPA are not effective, which could slow or even reverse the development of those sales models in China. This could adversely affect our business and our prospects.

System failures could significantly disrupt the operations of our online advertising agency business, which would cause us to lose clients or ad inventory.

     Our ability to successfully provide clients with Internet marketing services and our performance-based advertising network, and our ability to access user information depends on the continuing and uninterrupted performance of our systems. Sustained or repeated system failures that interrupt our ability to provide services to clients, including failures affecting our ability to deliver ads quickly and accurately and to access our user information base to provide targeted solutions, would reduce significantly the attractiveness of our services to advertisers and Web publishers. Our online advertising agency business could be materially and adversely affected by any damage or failure that impacts data integrity or interrupts or delays our operations. Our computer systems are vulnerable to damage from a variety of sources, including telecommunications failures, power outages, malicious or accidental human acts, and natural disasters. Moreover, despite network security measures, our servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems in part because we cannot control the maintenance and operation of our third-party data centers. Despite the precautions taken, unanticipated problems affecting our systems could cause interruptions in the delivery of our solutions in the future and our ability to provide a record of past transactions. Our data centers and systems incorporate varying degrees of redundancy. All data centers and systems may not automatically switch over to their redundant counterpart. We carry no business insurance policies to compensate us for losses that could occur due to any failures in our systems.

If our Internet marketing technologies contain design or performance defects, our reputation and business may be harmed and we may need to expend significant resources to address liability.

     Technologies as complex as ours may contain design and/or performance defects which are not detectable even after extensive internal testing. Such defects may become apparent only after widespread commercial use. Any design or performance defects in our Internet marketing technologies could have a material and adverse effect on our reputation and business. It is not clear whether China’s existing product liability laws apply to technology products

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like ours. We cannot assure you that if our Internet marketing technologies are found to have design or performance defects, we will not be liable for product liability claims in China. We do not carry any product liability insurance. Our contracts with our clients currently do not contain provisions to completely limit our exposure to liabilities resulting from product liability claims. Although we have not experienced any product liability claims to date, we cannot assure you that we will not do so in the future.

     Additionally, we rely on our Internet marketing technologies (particularly our ad serving technology) to enhance our Internet marketing services and our performance-based advertising network. Any defect in those technologies could hinder the effectiveness of our Internet marketing services and our performance-based advertising network, which would have a material and adverse effect on our competitiveness, business and future prospects.

We may be liable for content that we serve onto Web publishers’ websites, which could increase our expenses.

     We purchase ad space and then serve our clients’ ads into that ad space. We are liable under PRC law to ensure that the content of the ads that we serve is fair and accurate and is in full compliance with applicable law. Additionally, we may be liable to third-parties for content in our clients’ ads that we serve on Web publishers’ websites or deliver through our performance-based advertising network if those ads contain artwork, text or other content that violates third-parties’ copyrights, trademarks, or other intellectual property rights or if the content is defamatory. We typically indemnify Web publishers against liability arising from the content or nature of ads that we serve on their websites. Any claims or counterclaims against us could harm our reputation, be time-consuming, could result in costly litigation and could divert management’s attention.

The successful operation of our business depends upon the performance and reliability of the Internet infrastructure and fixed telecommunications networks in China.

     Our business depends on the performance and reliability of the Internet infrastructure in China. Almost all access to the Internet is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the Ministry of Information Industry of China. In addition, the national networks in China are connected to the Internet through international gateways controlled by the PRC government. These international gateways are the only channels through which a domestic user can connect to the Internet. We cannot assure you that a more sophisticated Internet infrastructure will be developed in China. We or our clients may not have access to alternative networks in the event of disruptions, failures or other problems with China’s Internet infrastructure. In addition, the Internet infrastructure in China may not support the demands associated with our growth strategies. For example, we intend to expand our sales of rich media technologies, which are bandwidth-intensive. Limited bandwidth in China may hamper the effectiveness of our rich media technologies, which could harm our prospects and business and require us to purchase additional servers in our content distribution network.

We depend on the leadership and services of Jason Nanchun Jiang, who is our founder, executive chairman and our largest shareholder, and our business and growth prospects may be severely disrupted if we lose his services.

     Our future success is dependent upon the continued service of Jason Nanchun Jiang, our founder, executive chairman and our largest shareholder. We rely on his industry expertise and experience in our business operations, and in particular, his business vision, management skills, and working relationships with our employees, our other major shareholders, many of our clients and landlords and property managers of the locations in our network. We do not maintain key-man life insurance for Mr. Jiang. If he was unable or unwilling to continue in his present position, or if he joined a competitor or formed a competing company in violation of his employment agreement and noncompetition agreement, we may not be able to replace him easily or at all. As a result, our business and growth prospects may be severely disrupted if we lose his services.

We may need additional capital and we may not be able to obtain it, which could adversely affect our liquidity and financial position.

     We believe that our current cash and cash equivalents and cash flow from operations will be sufficient to meet our anticipated cash needs including for working capital and capital expenditures, for the foreseeable future. We may, however, require additional cash resources due to changed business conditions or other future developments. If

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these sources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of convertible debt securities or additional equity securities, could result in additional dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity.

     Our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including:

• investors’ perception of, and demand for, securities of alternative advertising media companies;

• conditions of the U.S. and other capital markets in which we may seek to raise funds;

• our future results of operations, financial condition and cash flows;

• PRC governmental regulation of foreign investment in advertising services companies in China;

• economic, political and other conditions in China; and

• PRC governmental policies relating to foreign currency borrowings.

     We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us could have a material adverse effect on our liquidity and financial condition.

If we are unable to adapt to changing regulatory requirements or advertising trends and the technology needs of advertisers and consumers, we will not be able to compete effectively and we will be unable to increase or maintain our revenues which may materially and adversely affect our business prospects and revenues.

     The market for out-of-home advertising requires us to continuously identify new advertising trends and the technology needs of advertisers and consumers, which may require us to develop new features and enhancements for our advertising network. The majority of our displays use 17-inch liquid crystal displays screens. We also have a growing number of displays that use larger LCD and plasma screens as well as large size LED digital billboards. Portions of our poster frame network are being upgraded to use digital poster LCD displays. Through our recent acquisition of Focus Media Wireless, we now also provide advertising services to mobile phone users over the mobile phone networks of China Mobile and China Unicom, while Allyes provides online advertising services to advertising customers. In the future, subject to relevant PRC laws and regulations, we may use other technology, such as cable or broadband networking, advanced audio technologies and high-definition panel technology. We may be required to incur development and acquisition costs in order to keep pace with new technology needs but we may not have the financial resources necessary to fund and implement future technological innovations or to replace obsolete technology. Furthermore, we may fail to respond to these changing technology needs. For example, if the use of wireless or broadband networking capabilities on our advertising network becomes a commercially viable alternative and meets all applicable PRC legal and regulatory requirements, and we fail to implement such changes on our commercial location network and in-store network or fail to do so in a timely manner, our competitors or future entrants into the market who do take advantage of such initiatives could gain a competitive advantage over us. The PRC telecom regulatory authorities and operators have tightened up, and are expected to continue to tighten up, regulations relating to advertising services provided through short messaging services to mobile phone users via mobile phone networks. If we cannot succeed in complying with new regulatory requirements or developing and introducing new features on a timely and cost-effective basis, advertiser demand for our advertising networks may decrease and we may not be able to compete effectively or attract advertising clients, which would have a material and adverse effect on our business prospects and revenues.

We may be subject to, and may expend significant resources in defending against, government actions and civil suits based on the content and services we provide through our digital out-of-home advertising networks mobile handset advertising network or Internet advertising services network.

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     PRC advertising laws and regulations require advertisers, advertising operators and advertising distributors, including businesses such as ours, to ensure that the content of the advertisements they prepare or distribute is fair and accurate and is in full compliance with applicable law. Violation of these laws or regulations may result in penalties, including fines, confiscation of advertising fees, orders to cease dissemination of the advertisements and orders to publish an advertisement correcting the misleading information. In circumstances involving serious violations, the PRC government may revoke a violator’s license for advertising business operations.

     As an out-of-home advertising service provider, we are obligated under PRC laws and regulations to monitor the advertising content that is shown on our out-of-home advertising networks for compliance with applicable law. In addition, each of our regional distributors is obligated under PRC laws and regulations to monitor the advertising content shown on the portion of our out-of-home television advertising network each of them operates. In general, the advertisements shown on our out-of-home television advertising network and the portion of our advertising network operated by our regional distributors have previously been broadcast over public television networks and have been subjected to internal review and verification of such networks. We and our regional distributors are still separately required to independently review and verify these advertisements for content compliance before displaying the advertisements. In addition, where a special government review is required for specific product advertisements before broadcasting, we and our regional distributors are separately obligated to confirm that such review has been performed and approval has been obtained. We employ, and our regional distributors are required under the terms of our agreements with them to employ, qualified advertising inspectors who are trained to review advertising content for compliance with relevant PRC laws and regulations. In addition, for advertising content related to specific types of products and services, such as alcohol, cosmetics, pharmaceuticals and medical procedures, we and our distributors are required to confirm that the advertisers have obtained requisite government approvals including the advertiser’s operating qualifications, proof of quality inspection of the advertised products, government pre-approval of the contents of the advertisement and filing with the local authorities. We endeavor to comply, and encourage our regional distributors to take measures to comply, with such requirements, including by requesting relevant documents from the advertisers. Starting in January 2006, we began to operate a network of advertising poster frames placed primarily in elevators and public areas of residential complexes. The advertisements shown on our poster frame network are defined as print advertisements under PRC laws and regulations and are also subject to the same legal requirements as advertisements shown on our out-of-home television advertising networks. Outdoor advertisements must be registered with the local branch of the State Administration for Industry and Commerce, or SAIC, before dissemination, and advertising distributors are required to submit a registration application form and the content of the advertisement to the local SAIC and receive an advertising registration certificate from the local SAIC. Our reputation will be tarnished and our results of operations may be adversely affected if advertisement shown on our out-of-home television advertising networks, poster frame network or outdoor LED network is provided to us by our advertising clients in violation of relevant PRC advertising laws and regulations or that the supporting documentation and government approvals provided to us by our advertising clients in connection with such advertising content are not complete or that the advertisements that our regional distributors have procured for broadcasting on our network have not received required approval from the relevant local supervisory bodies or are not content compliant.

     In addition, we commenced operation of our outdoor LED billboard network in April 2006. The placement and installation of LED billboards are subject to municipal zoning requirements and governmental approvals, including application for an outdoor advertising registration certificate for each LED billboard subject to a term of use of no more than six years for each LED billboard. If the existing LED billboards placed by our LED location provider or us are required to be removed, the attractiveness of this portion of our advertising network will be diminished. Moreover, failure by an owner of LED billboards to maintain outdoor advertising registration certificates would result in the inability to lease or market such space for the placement of advertisements.

     China has also enacted regulations governing telecommunication service providers and the distribution of news and other information. In the past, the Chinese government has stopped the distribution of information over the Internet and telecommunications networks that it believes to violate Chinese law, including content that is pornographic or obscene, incites violence, endangers national security, is contrary to the national interest or is defamatory. China Unicom and China Mobile also have their own policies regarding the distribution of inappropriate content by wireless value-added service providers and have punished certain providers for distributing inappropriate content, including the imposition of fines and service suspensions. Focus Media Wireless undertakes to the telecommunication operators which grant us access to their mobile phone networks that we will not distribute any advertisements with illegal content. We require the Internet service providers which use our mobile handset

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advertising platform to provide us the same undertaking, but we cannot completely control the content of their advertisements. If any of the content that we deliver through our mobile handset advertising network is found to violate Chinese laws and regulations or the policies of China Mobile and China Unicom, we could be subject to fines or suspensions.

     Moreover, civil claims may be filed against us for fraud, defamation, subversion, negligence, copyright or trademark infringement or other violations due to the nature and content of the information displayed on our advertising network. If consumers find the content displayed on our advertising network to be offensive, landlords, property managers, other location providers or telecommunication network operators may seek to hold us responsible for any consumer claims or may terminate their relationships with us.

     In addition, if the security of our content management system is breached through the placement of unauthorized compact flash, or CF’ cards in our flat-panel displays and unauthorized images, text or audio sounds are displayed on our advertising network, viewers or the PRC government may find these images, text or audio sounds to be offensive, which may subject us to civil liability or government censure despite our efforts to ensure the security of our content management system. Any such event may also damage our reputation. If our advertising viewers do not believe our content is reliable or accurate, our business model may become less appealing to viewers in China and our advertising clients may be less willing to place advertisements on our advertising network.

We may be subject to intellectual property infringement claims, which may force us to incur substantial legal expenses and, if determined adversely against us, may materially disrupt our business.

     We cannot be certain that our advertising displays or other aspects of our business do not or will not infringe upon patents, copyrights or other intellectual property rights held by third parties. Although we are not aware of any such claims, we may become subject to legal proceedings and claims from time to time relating to the intellectual property of others in the ordinary course of our business. If we are found to have violated the intellectual property rights of others, we may be enjoined from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives. In addition, we may incur substantial expenses in defending against these third party infringement claims, regardless of their merit. Successful infringement or licensing claims against us may result in substantial monetary liabilities, which may materially and adversely disrupt our business.

Unauthorized use of our intellectual property by third parties, and the expenses incurred in protecting our intellectual property rights, may adversely affect our business.

     We regard our copyrights, trademarks, trade secrets and other intellectual property as critical to our success. Unauthorized use of the intellectual property used in our business may adversely affect our business and reputation.

     We have historically relied on a combination of trademark and copyright law, trade secret protection and restrictions on disclosure to protect our intellectual property rights. We enter into confidentiality and invention assignment agreements with all our employees. We cannot assure you that these confidentiality agreements will not be breached, that we will have adequate remedies for any breach, or that our proprietary technology will not otherwise become known to, or be independently developed by, third parties.

     We are in the process of registering in China many of the trademarks used in our business. We cannot assure you that any of our trademark applications will ultimately proceed to registration or will result in registration with scope adequate for our business. Some of our pending applications or registration may be successfully challenged or invalidated by others. If our trademark applications are not successful, we may have to use different marks for affected services or technologies, or enter into arrangements with any third parties who may have prior registrations, applications or rights, which might not be available on commercially reasonable terms, if at all.

     In addition, policing unauthorized use of our proprietary technology, trademarks and other intellectual property is difficult and expensive, and litigation may be necessary in the future to enforce our intellectual property rights. Future litigation could result in substantial costs and diversion of our resources, and could disrupt our business, as well as have a material adverse effect on our financial condition and results of operations.

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We face significant competition, and if we do not compete successfully against new and existing competitors, we may lose our market share, and our profitability may be adversely affected.

     We compete with other advertising companies in China. We compete for advertising clients primarily on the basis of network size and coverage, location, price, the range of services that we offer and our brand name. We also face competition from other out-of-home television advertising network operators for access to the most desirable locations in cities in China. Individual buildings, hotels, restaurants and other commercial locations and hypermarket, supermarket and convenience store chains may also decide to independently, or through third-party technology providers, install and operate their own flat-panel television advertising screens. Our in-store network faces competition with similar networks operated by domestic out-of-home advertising companies. Our Internet advertising services compete with those provided by domestic and international advertising agencies, including the WPP Group. We also compete for overall advertising spending with other alternative advertising media companies, such as Internet, wireless communications, street furniture, billboard, frame and public transport advertising companies, and with traditional advertising media, such as newspapers, television, magazines and radio.

     In the future, we may also face competition from new entrants into the out-of-home television advertising sector. Our sector is characterized by relatively low fixed costs and, as is customary in the advertising industry, we do not have exclusive arrangements with our advertising clients. In addition, since December 10, 2005, wholly foreign-owned advertising companies are allowed to operate in China, which may expose us to increased competition from international advertising media companies attracted to opportunities in China.

     Increased competition could reduce our operating margins and profitability and result in a loss of market share. Some of our existing and potential competitors may have competitive advantages, such as significantly greater financial, marketing or other resources, or exclusive arrangements with desirable locations, and others may successfully mimic and adopt our business model. Moreover, increased competition will provide advertisers with a wider range of media and advertising service alternatives, which could lead to lower prices and decreased revenues, gross margins and profits. We cannot assure you that we will be able to successfully compete against new or existing competitors.

We do not maintain any business liability disruption or litigation insurance coverage for our operations, and any business liability, disruption or litigation we experience might result in our incurring substantial costs and the diversion of resources.

     The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited business insurance products and do not, to our knowledge, offer business liability insurance. While business disruption insurance is available to a limited extent in China, we have determined that the risks of disruption, cost of such insurance and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. As a result, we do not have any business liability, disruption or litigation insurance coverage for our operations in China. Any business disruption or litigation may result in our incurring substantial costs and the diversion of resources.

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

     Based upon the past and projected composition of our income and valuation of our assets, including goodwill, we believe we were not a passive foreign investment company, or PFIC, for 2007, we do not expect to be a PFIC for 2008, and we do not expect to become one in the future, although there can be no assurance in this regard. If, however, we were a PFIC, such characterization could result in adverse United States federal income tax consequences to you if you are a U.S. investor. For example, if we are a PFIC, our U.S. investors will become subject to increased tax liabilities under United States federal income tax laws and regulations and will become subject to burdensome reporting requirements. The determination of whether or not we are a PFIC is made on an annual basis and will depend on the composition of our income and assets from time to time. Specifically, we will be classified as a PFIC for United States federal income tax purposes if either: (i) 75% or more of our gross income in a taxable year is passive income, or (ii) the average percentage of our assets by value in a taxable year which produce or are held for the production of passive income (which includes cash) is at least 50%. The calculation of the value of our assets will be based, in part, on the then market value of our ADSs, which is subject to change. We cannot assure you that we will not be a PFIC for

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2008 or any future taxable year. For more information on PFICs, see “Item 10.E Additional Information — Taxation — United States Federal Income Taxation”.

Risks Relating to Regulation of Our Business and to Our Structure

If the PRC government finds that the agreements that establish the structure for operating our China business do not comply with PRC governmental restrictions on foreign investment in the advertising industry, we could be subject to severe penalties.

     Substantially all of our operations are or will be conducted through Focus Media Technology (Shanghai) Co., Ltd., or Focus Media Technology, Framedia Investment and Beijing Dotad Technology Co., Ltd., or Dotad Technology, our indirectly wholly-owned operating subsidiaries in China, Focus Media Digital Information Technology (Shanghai) Co., Ltd., or Focus Media Digital, a 90%-owned subsidiary of Focus Media Technology, New Allyes Information Technology Co., Ltd., or New Allyes Technology, and CGEN Digital Technology (Shanghai) Co., Ltd., or CGEN Digital, which we collectively refer to as our PRC operating subsidiaries, and through our contractual arrangements with several of our consolidated affiliated entities in China. PRC regulations require any foreign entities that invest in the advertising services industry to have at least two years of direct operations in the advertising industry outside of China. Since December 10, 2005, foreign investors have been allowed to own directly 100% of PRC companies operating an advertising business if the foreign entity has at least three years of direct operations in the advertising business outside of China or less than 100% if the foreign investor has at least two years of direct operations in the advertising industry outside of China. We do not currently directly operate an advertising business outside of China and cannot qualify under PRC regulations any earlier than two or three years after we commence any such operations outside of China or until we acquire a company that has directly operated an advertising business outside of China for the required period of time. Accordingly, our PRC operating subsidiaries are currently ineligible to apply for the required licenses for providing advertising services in China. Substantially all of our advertising business is currently provided through our contractual arrangements with our PRC operating subsidiaries’ consolidated affiliated entities in China, which we collectively refer to as our PRC operating affiliates, including Focus Media Advertisement and its subsidiaries with regard to our out-of-home television networks, Framedia Advertisement, Guangdong Framedia and New Structure Advertisement with regard to our poster frame network, Focus Media Wireless with regard to our mobile handset advertising network, and seven PRC companies with regard to our online advertising agency business which operate the business of Allyes, and which we refer to as the Allyes operating affiliates. Our PRC operating affiliates are currently owned in each case either (i) by two PRC citizens designated by us or (ii) by two PRC entities owned by our subsidiaries or by our designated appointees. Our PRC operating affiliates and certain of their respective subsidiaries hold the requisite licenses to provide advertising services in China. Our PRC operating affiliates and their respective subsidiaries directly operate our advertising network. We have been and are expected to continue to be dependent on these PRC operating affiliates and their subsidiaries to operate our advertising business for the foreseeable future. We have entered into contractual arrangements with PRC operating affiliates and their respective subsidiaries, pursuant to which we, through our PRC operating subsidiaries, provide technical support and consulting services to our PRC operating affiliates and their subsidiaries. In addition, we have entered into agreements with our PRC operating affiliates and each of their shareholders which provide us with the substantial ability to control these affiliates and their existing and future subsidiaries.

     If we, our existing or future PRC operating subsidiaries and affiliates are found to be in violation of any existing or future PRC laws or regulations or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities, including the State Administration for Industry and Commerce, or SAIC, which regulates advertising companies, would have broad discretion in dealing with such violations, including:

• revoking the business and operating licenses of our PRC subsidiaries and affiliates;

• discontinuing or restricting our PRC subsidiaries’ and affiliates’ operations;

• imposing conditions or requirements with which we or our PRC subsidiaries and affiliates may not be able to comply;

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• requiring us or our PRC subsidiaries and affiliates to restructure the relevant ownership structure or operations; or

• restricting or prohibiting our use of the proceeds of this offering to finance our business and operations in China.

     The imposition of any of these penalties would result in a material and adverse effect on our ability to conduct our business.

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.

     We have in the past relied, and to a lesser but significant extent will continue in the future to rely, on contractual arrangements with our PRC operating affiliates and their respective subsidiaries and shareholders to operate our advertising business. For a description of these contractual arrangements, see the sections titled “Organizational Structure” “Business Overview — Recent Developments” in Item 4. “Information on the Company” and “Item 7. — Major Shareholders and Related Party Transactions”. These contractual arrangements may not be as effective in providing us with control over our PRC operating affiliates and their subsidiaries as direct ownership. If we had direct ownership of our PRC operating affiliates and their respective subsidiaries, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of those companies, which in turn could effect changes, subject to any applicable fiduciary obligations, at the management level. However, under the current contractual arrangements, as a legal matter, if our PRC operating affiliates or any of their subsidiaries and shareholders fails to perform its or his respective obligations under these contractual arrangements, we may have to incur substantial costs and resources to enforce such arrangements, and rely on legal remedies under PRC law, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you to be effective. For example, if Jason Nanchun Jiang were to refuse to transfer his equity interest in Focus Media Advertisement to us or our designee when we exercise the purchase option pursuant to these contractual arrangements, or if Mr. Jiang were otherwise to act in bad faith toward us, then we may have to take legal action to compel him to fulfill his contractual obligations. In addition, Focus Media Advertisement, which holds certain of the business licenses required to operate our advertising network in China, is jointly owned and effectively managed by Mr. Jiang and Mr. Yu. Similarly, each of the Allyes operating affiliates, which hold the licenses necessary to operate the business of Allyes, is jointly owned by a set of two PRC nationals. Accordingly, it may be difficult for us to change our corporate structure or to bring claims against our PRC operating affiliates if they do not perform their obligations under its contracts with us or if any of the PRC citizens who hold the equity interest in our PRC operating affiliates do not cooperate with any such actions.

     Many of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through either arbitration or litigation in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. In the event we are unable to enforce these contractual arrangements, we may not be able to exert effective control over our operating entities, and our ability to conduct our business may be negatively affected.

Contractual arrangements we have entered into among our subsidiaries and affiliated entities may be subject to scrutiny by the PRC tax authorities and a finding that we owe additional taxes or are ineligible for our tax exemption, or both, could substantially increase our taxes owed, and reduce our net income and the value of your investment.

     Under PRC law, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. If any of the transactions we have entered into among our subsidiaries and affiliated entities are found not to be on an arm’s-length basis, or to result in an unreasonable reduction in tax under PRC law, the PRC tax authorities have the authority to disallow our tax savings, adjust the profits and losses of our respective PRC entities and assess late payment interest and penalties. See “Item 5. Operating and Financial Review and Prospects — Taxation” for a discussion of the transactions referred to above. A finding by the PRC tax authorities that Focus Media Digital, Shanghai Focus Media Advertising Agency Co., Ltd., or Focus Media Advertising Agency, New Focus Media

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Advertisement, New Focus Media Agency, Focus Media Defeng Advertisement or New Structure Advertisement are ineligible for their tax exemptions, would substantially increase our taxes owed and reduce our net income and the value of your investment. As a result of this risk, you should evaluate our results of operations and financial condition without regard to these tax savings.

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

     We are a holding company, and we rely principally on dividends and other distributions on equity paid by our PRC operating subsidiaries for our cash requirements, including the funds necessary to service any debt we may incur. If any of our PRC operating subsidiaries incurs debt on its own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us. In addition, the PRC tax authorities may require us to adjust our taxable income under the contractual arrangements our PRC operating subsidiaries currently have in place with our PRC operating affiliates and their respective subsidiaries in a manner that would materially and adversely affect our PRC operating subsidiaries’ ability to pay dividends and other distributions to us. Furthermore, relevant PRC laws and regulations permit payments of dividends by our PRC operating subsidiaries only out of their retained earnings, if any, determined in accordance with PRC accounting standards and regulations. Under PRC laws and regulations, each of our PRC operating subsidiaries is also required to set aside a portion of its net income each year to fund specific reserve funds. These reserves are not distributable as cash dividends. In addition, subject to certain cumulative limits, the statutory general reserve fund requires annual appropriations of 10% of after-tax income to be set aside prior to payment of dividends. As a result of these PRC laws and regulations, our PRC operating subsidiaries and our PRC operating affiliates are restricted in their ability to transfer a portion of their net assets to us whether in the form of dividends, loans or advances. As of December 31, 2007, the amount of these restricted portions was approximately $447.6 million. Any limitation on the ability of our PRC operating subsidiaries to pay dividends to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends, or otherwise fund and conduct our business.

Our business operations may be affected by legislative or regulatory changes.

     There are no existing PRC laws or regulations that specifically define or regulate out-of-home television or mobile handset advertising. Changes in laws and regulations or the enactment of new laws and regulations governing placement or content of out-of-home advertising or distribution of mobile handset advertising, our business licenses or otherwise affecting our business in China may materially and adversely affect our business prospects and results of operations. For example, the PRC government has promulgated regulations allowing foreign companies to hold a 100%-interest in PRC advertising companies starting from December 10, 2005. We are not certain how the PRC government will implement this regulation or how it could affect our ability to compete in the advertising industry in China.

PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our PRC operating subsidiaries and affiliates.

     In utilizing the proceeds of this offering, as an offshore holding company of our PRC operating subsidiaries and affiliates, we may make loans to our PRC subsidiaries and consolidated PRC affiliated entities, or we may make additional capital contributions to our PRC subsidiaries. Any loans to our PRC subsidiaries or consolidated PRC affiliated entities are subject to PRC regulations and approvals. For example:

• loans by us to our foreign invested enterprises to finance their respective activities cannot exceed statutory limits and must be registered with the PRC State Administration of Foreign Exchange or its local counterpart; and

• loans by us to our PRC operating affiliates or their respective subsidiaries, which are domestic PRC enterprises, must be approved by the relevant government authorities and must also be registered with the PRC State Administration of Foreign Exchange or its local counterpart.

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     We may also determine to finance our PRC foreign invested enterprises by means of capital contributions. These capital contributions must be approved by the PRC Ministry of Commerce or its local counterpart. Because our PRC operating affiliates and their respective subsidiaries are domestic PRC enterprises, we are not likely to finance their activities by means of capital contributions due to regulatory issues relating to foreign investment in domestic PRC enterprises, as well as the licensing and other regulatory issues discussed in “Business Overview — Regulatory Matters” of Item 4. “Information on the Company” of this annual report. We cannot assure you that we can obtain these government registrations or approvals on a timely basis, if at all, with respect to future loans or capital contributions by us to Focus Media Technology, Focus Media Digital, New Focus Media Advertisement, New Focus Media Agency, Focus Media Defeng Advertisement, Framedia Investment, Focus Media Advertisement, Dotad Technology, New Allyes Technology or any of their respective subsidiaries. If we fail to receive such registrations or approvals, our ability to use the proceeds of this offering and to capitalize our PRC operations would be negatively affected which would adversely and materially affect our liquidity and our ability to expand our business.

Risks Relating to the People’s Republic of China

     Substantially all of our assets are located in China and substantially all of our revenues are derived from our operations in China. Accordingly, our business, financial condition, results of operations and prospects are subject, to a significant extent, to economic, political and legal developments in China.

The PRC’s economic, political and social conditions, as well as governmental policies, could affect the financial markets in China and our liquidity and access to capital and our ability to operate our business.

     The PRC economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth over the past, growth has been uneven, both geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall PRC economy, but may also have a negative effect on us. For example, under current PRC regulations, starting December 10, 2005, foreign entities are allowed to directly own 100% of a PRC advertising business if the foreign entity has at least three years of direct operations of an advertising business outside of China, or to directly own less than 100% of a PRC advertising business if the foreign entity has at least two years of direct operations of an advertising business outside of China. This may encourage foreign advertising companies with more experience, greater technological know-how and larger financial resources than we have to compete against us and limit the potential for our growth. Moreover, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations that are applicable to us.

     The PRC economy has been transitioning from a planned economy to a more market-oriented economy. Although the PRC government has implemented measures since the late 1970s emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over China’s economic growth through the allocation of resources, controlling payment of foreign currency- denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Since late 2003, the PRC government implemented a number of measures, such as raising bank reserves against deposit rates to place additional limitations on the ability of commercial banks to make loans and raise interest rates, in order to slow down specific segments of China’s economy which it believed to be overheating. These actions, as well as future actions and policies of the PRC government, could materially affect our liquidity and access to capital and our ability to operate our business.

The PRC legal system embodies uncertainties which could limit the legal protections available to you and us.

     The PRC legal system is a civil law system based on written statutes. Unlike common law systems, it is a system in which decided legal cases have little precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past 26 years has significantly enhanced the protections afforded to various forms of foreign

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investment in China. Each of our PRC operating subsidiaries and affiliates is subject to PRC laws and regulations. However, these laws, regulations and legal requirements change frequently, and their interpretation and enforcement involve uncertainties. For example, we may have to resort to administrative and court proceedings to enforce the legal protection that we enjoy either by law or contract. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. For example, these uncertainties may impede our ability to enforce the contracts we have entered into with Focus Media Advertisement and its subsidiaries. In addition, such uncertainties, including the inability to enforce our contracts, could materially and adversely affect our business and operation. In addition, intellectual property rights and confidentiality protections in China may not be as effective as in the United States or other countries. Accordingly, we cannot predict the effect of future developments in the PRC legal system, particularly with regard to the advertising industry, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. These uncertainties could limit the legal protections available to us, including our ability to enforce our agreements with Focus Media Advertisement and its subsidiaries, and other foreign investors, including you.

If tax benefits currently available to us in PRC were no longer available under the new Enterprise Income Taxes (“EIT”) law which became effective on January 1, 2008, our effective income tax rates for our PRC operations could increase.

     We are incorporated in the Cayman Islands where no income taxes are imposed.

     We generated substantially all our net income from our PRC operations. Our China operations are conducted through various subsidiaries and variable interest entities, or VIEs. Prior to January 1, 2008, pursuant to the PRC Income Tax Laws, our subsidiaries and VIEs were generally subject to EIT at a statutory rate of 33%, which comprised 30% national income tax and 3% local income tax. Some of the Company’s subsidiaries and VIEs were newly incorporated enterprises engaged in advertising industry which were entitled to a two-year tax exemption holiday, commencing from the first operating year. One of our VIEs, Beijing Focus Media Wireless Co., Ltd., was a qualified new technology enterprise and under PRC Income Tax Laws was subject to a preferential tax rate of 15%, plus a three-year tax exemption followed by three years with a 50% reduction in the tax rate, commencing from the first profitable year.

     The newly enacted PRC Enterprise Income Tax Law, or the EIT Law, and the implementation regulations to the EIT Law issued by the PRC State Council, became effective as of January 1, 2008. Under the EIT Law, China adopted a uniform tax rate of 25% for all enterprises (including domestically-owned enterprises and foreigninvested enterprises) and revoked the previous tax exemption, reduction and preferential treatments applicable to foreign-invested enterprises. There is a transition period for enterprises, whether foreign-invested or domestic, which received preferential tax treatments granted by relevant tax authorities prior to January 1, 2008. Enterprises that were subject to an enterprise income tax rate lower than 25% prior to January 1, 2008 may continue to enjoy the lower rate and gradually transition to the new tax rate within five years after the effective date of the new law. Enterprises that were entitled to exemptions or reductions from the standard income tax rate for a fixed term prior to January 1, 2008 may continue to enjoy such treatment until the fixed term expires. Preferential tax treatments may continue to be granted to industries and projects that are strongly supported and encouraged by the state, and enterprises that qualify as “new and high technology enterprises strongly supported by the state” are entitled to a 15% enterprise income tax rate.

     Most of the Company’s subsidiaries and VIEs are expected to transition from 33% to 25% starting from January 1, 2008. Those that currently enjoy a lower tax rate of 15% will gradually transition to the uniform tax rate of 25% from 2008 to 2012 unless the company obtains the “new and high technology enterprise” status under the new tax law.

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

The newly enacted PRC Enterprise Income Tax Law, or the EIT Law, and the implementation regulations for the EIT Law issued by the PRC State Council, became effective as of January 1, 2008. The EIT Law provides that a maximum income tax rate of 20% may be applicable to dividends payable to non-PRC investors that are “non-resident enterprises,” to the extent such dividends are derived from sources within the PRC, and the State Council has reduced such rate to 10% through the implementation regulations. We are a Cayman Islands holding company and substantially all of our income may be derived from dividends we receive from our operating subsidiaries located in the PRC. Thus, dividends paid to us by our subsidiaries in China may be subject to the 10% income tax if we are considered as a “non-resident enterprise” under the EIT Law. If we are required under the EIT Law to pay income tax for any dividends we receive from our subsidiaries, it will materially and adversely affect the amount of dividends, if any, we may pay to our shareholders and ADS holders.

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

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

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

Under the EIT Law and implementation regulations issued by the State Council, PRC income tax at the rate of 10% is applicable to dividends payable to investors that are “non-resident enterprises,” which do not have an establishment or place of business in the PRC, or which have such establishment or place of business but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends have their sources within the PRC. Similarly, any gain realized on the transfer of ADSs or shares by such investors is also subject to 10% PRC income tax if such gain is regarded as income derived from sources within the PRC. If we are considered a PRC “resident enterprise,” it is unclear whether dividends we pay with respect to our ordinary shares or ADSs, or the gain you may realize from the transfer of our ordinary shares or ADSs, would be treated as income derived from sources within the PRC and be subject to PRC tax. If we are required under the EIT Law to withhold PRC income tax on dividends payable to our non-PRC investors that are “non-resident enterprises,” or if you are required to pay PRC income tax on the transfer of our ordinary shares or ADSs, the value of your investment in our ordinary shares or ADSs may be materially and adversely affected.

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

     The PRC National Development and Reform Commission, or NDRC, and SAFE recently promulgated regulations that require PRC residents and PRC corporate entities to register with and obtain approvals from relevant PRC government authorities in connection with their direct or indirect offshore investment activities. These regulations apply to our shareholders who are PRC residents and may apply to any offshore acquisitions that we make in the future.

     Under the SAFE regulations, PRC residents who make, or have previously made, direct or indirect investments in offshore companies will be required to register those investments. In addition, any PRC resident who is a direct or indirect shareholder of an offshore company is required to file with the local branch of SAFE, with respect to that offshore company, any material change involving capital variation, such as an increase or decrease in capital, transfer or swap of shares, merger, division, long term equity or debt investment or creation of any security interest over the assets located in China. If any PRC shareholder fails to make the required SAFE registration, the PRC subsidiaries of that offshore parent company may be prohibited from distributing their profits and the proceeds from any reduction in capital, share transfer or liquidation, to their offshore parent company, and the offshore parent company may also be prohibited from injecting additional capital into their PRC subsidiaries. Moreover, failure to comply with the various SAFE registration requirements described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.

     We cannot assure you that all of our shareholders who are PRC residents will comply with our request to make or obtain any registrations or approvals required under these regulations or other related legislation. Furthermore, as the regulations are relatively new, the PRC government has yet to publish implementing rules, and much uncertainty remains concerning the reconciliation of the new regulations with other approval requirements. It is unclear how these regulations, and any future legislation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. The failure or inability of our PRC resident shareholders to comply with these regulations may subject us to fines and legal sanctions, restrict our overseas or cross-border investment activities, limit our ability to inject additional capital into our PRC subsidiaries and the ability of Focus Media Technology, Focus Media Digital, New Focus Media Advertisement, New Focus Media Agency, Focus Media Defeng Advertisement, Framedia Investment or New Allyes Technology, our PRC subsidiaries, to make distributions or pay dividends, or materially and adversely affect our ownership structure. If any of the foregoing events occur, our acquisition strategy and business operations and our ability to distribute profits to you could be materially and adversely affected. See “Exchange Controls” in Item 10. “Additional Information” in this annual report.

The PRC tax authorities may require us to pay additional taxes in connection with our acquisitions of offshore entities that conducted their PRC operations through their affiliates in China.

     Our operations and transactions are subject to review by the PRC tax authorities pursuant to relevant PRC laws and regulations. However, these laws, regulations and legal requirements change frequently, and their interpretation and enforcement involve uncertainties. For example, in the case of some of our acquisitions of offshore entities that conducted their PRC operations through their affiliates in China, we cannot assure you that the PRC tax authorities will not require us to pay additional taxes in relation to such acquisitions, in particular where the PRC tax authorities take the view that the previous taxable income of the PRC affiliates of the acquired offshore entities needs to be adjusted and additional taxes be paid. In the event that the sellers failed to pay any taxes required under PRC law in connection with these transactions, the PRC tax authorities might require us to pay the tax, together with late-payment interest and penalties. See “Item 5. Operating and Financial Review and Prospects — Acquisitions”.

A new PRC rule on mergers and acquisitions may subject us to sanctions, fines and other penalties and affect our future business growth through acquisition of complementary business.

     On August 8, 2006, six PRC government and regulatory authorities, including the PRC Ministry of Commerce and the Chinese Securities Regulatory Commission, or the CSRC, promulgated a rule entitled “Provisions

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regarding Mergers and Acquisitions of Domestic Enterprises by Foreign Investors,” or the New M&A Rule, which became effective on September 8, 2006. The New M&A Rule, among other things, requires that an offshore specific purpose vehicle, or SPV, formed for the listing purpose through acquisition of PRC domestic entity and controlled by PRC residents should obtain approval from the CSRC prior to publicly listing its securities on an overseas stock market. Based on consultation with the International Department of the CSRC regarding its interpretation of the New M&A Rule, our PRC counsel, Global Law Offices, advised us that the CSRC approval was not required for this offering. However, we cannot assure you that the relevant PRC government agency, including the Ministry of Commerce or other applicable departments of the CSRC, would reach the same conclusion as our PRC counsel. If the CSRC or other PRC regulatory body subsequently determines that the CSRC’s approval was required for this offering, we may face sanctions by the CSRC or other PRC regulatory agencies. In such event, these regulatory agencies may impose fines and penalties on our operations in the PRC, limit our operating privileges in the PRC, delay or restrict the repatriation of the proceeds from this offerring into the PRC, or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ADSs.

     The New M&A Rule also established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex, including requirements in some instances that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise. In the future, we may grow our business in part by acquiring complementary businesses, although we do not have any plans to do so at this time. Complying with the requirements of the New M&A Rule to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from the Ministry of Commerce, may delay or inhibit the completion of such transactions, which could affect our ability to expand our business or maintain our market share.

Restrictions on currency exchange may limit our ability to utilize our revenues effectively.

     Substantially all of our revenues and operating expenses are denominated in Renminbi. The Renminbi is currently convertible under the “current account”, which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital account”, which includes foreign direct investment and loans. Currently, each of Focus Media Technology and Framedia Investment may purchase foreign exchange for settlement of “current account transactions”, including payment of dividends to us, without the approval of SAFE. However, we cannot assure you that the relevant PRC governmental authorities will not further limit or eliminate our ability to purchase foreign currencies in the future. Since a significant amount of our future revenues will be denominated in Renminbi, any existing and future restrictions on currency exchange may limit our ability to utilize revenues generated in Renminbi to fund our business activities outside China, if any, or expenditures denominated in foreign currencies. Foreign exchange transactions under the capital account are still subject to limitations and require approvals from, or registration with, the State Administration of Foreign Exchange and other relevant PRC governmental authorities. This could affect the ability of each of Focus Media Technology and Framedia Investment to obtain foreign exchange through debt or equity financing, including by means of loans or capital contributions from us.

Fluctuations in exchange rates could result in foreign currency exchange losses.

     Because our earnings and cash and cash equivalent assets are denominated in Renminbi and the net proceeds from this offering will be denominated in U.S. dollars, fluctuations in exchange rates between U.S. dollars and Renminbi will affect the relative purchasing power of these proceeds and our balance sheet and earnings per share in U.S. dollars following this offering. In addition, appreciation or depreciation in the value of the Renminbi relative to the U.S. dollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations. Since July 2005 the Renminbi is no longer pegged solely to the U.S. dollar. Instead, it is reported to be pegged against a basket of currencies, determined by the People’s Bank of China, against which it can rise or fall by as much as 0.3% each day. For example, on April 30, 2008 the Renminbi was revalued against the U.S. dollar to approximately RMB6.9870 to the U.S. dollar. The Renminbi may appreciate or depreciate significantly in value against the U.S. dollar in the long term, depending on the fluctuation of the basket of currencies against which it is currently valued or it may be permitted to enter into a full float, which may also result in a significant appreciation or depreciation of the Renminbi against the U.S. dollar. Fluctuations in the exchange rate will also affect the relative value of any dividend we issue in the future which will be exchanged into U.S. dollars and earnings from and the value of any U.S. dollar-denominated investments we make in the future.

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     Very limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to successfully hedge our exposure at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency.

Any future outbreak of severe acute respiratory syndrome or avian flu in China, or similar adverse public health developments, may severely disrupt our business and operations.

     From December 2002 to June 2003, China and other countries experienced an outbreak of a new and highly contagious form of atypical pneumonia now known as severe acute respiratory syndrome, or SARS. On July 5, 2003, the World Health Organization declared that the SARS outbreak had been contained. Since September 2003, however, a number of isolated new cases of SARS have been reported, most recently in central China in April 2004. During May and June of 2003, many businesses in China were closed by the PRC government to prevent transmission of SARS. In addition, many countries, including China, have encountered incidents of the H5N1 strain of bird flu, or avian flu. This disease, which is spread through poultry populations, is capable in some circumstances of being transmitted to humans and is often fatal. A new outbreak of SARS or an outbreak of avian flu may result in health or other government authorities requiring the closure of our offices or other businesses, including office buildings, retail stores and other commercial venues, which comprise the primary locations where we provide our out-of-home television and poster frame advertising services. Any recurrence of the SARS outbreak, an outbreak of avian flu or a development of a similar health hazard in China, may deter people from congregating in public places, including a range of commercial locations such as office buildings and retail stores. Such occurrences would severely impact the value of our out-of-home television and poster frame advertising networks to advertisers, significantly reduce the advertising time purchased by advertisers and severely disrupt our business and operations.

Risks Relating to Our ADSs and Our Trading Markets

The price of our ADSs has been volatile and may continue to be volatile, which may make it difficult for holders to resell the ADSs when desired or at attractive prices.

     The trading price of our ADSs has been and may continue to be subject to wide fluctuations. Since July 13, 2005, the closing prices of our ADSs on the Nasdaq National Market has ranged from a low of $9.50 to a high of $65.88 per ADS and the last reported sale price on May 1 was $38.64. From July 13, 2005 until April 10, 2007, we used an ADS-to-share ratio of 10-to-one. Starting April 11, 2007, we reduced this ratio to five-to-one. All ADS trading prices on the Nasdaq set forth in this annual report, including historical trading and closing prices, have been adjusted to reflect the new ADS-to-share ratio of five-to-one. Our ADS price may fluctuate in response to a number of events and factors. The financial markets in general, and the market prices for many PRC companies in particular, have experienced extreme volatility that often has been unrelated to the operating performance of such companies.

     In addition to market and industry factors, the price and trading volume for our ADSs may be highly volatile for specific business reasons. Factors such as variations in our revenues, earnings and cash flow, announcements of new investments, cooperation arrangements or acquisitions, and fluctuations in market prices for our advertising network could cause the market price for our ADSs to change substantially. Any of these factors may result in large and sudden changes in the volume and price at which our ADSs will trade. We cannot give any assurance that these factors will not occur in the future.

We have in the past failed to comply with Nasdaq Marketplace Rules, including the timely filing of our annual report and maintaining a majority of independent directors on our board of directors.

     Our failure to timely file our 2006 annual report on Form 20-F subjected us to delisting review by the Nasdaq Listing Qualifications Panel. See “—Our failure to timely file the 2006 annual report on Form 20-F as a result of allegations raised by an anonymous investor holding a short position in our ADSs may subject us to shareholder litigation and delisting review, either of which may materially and adversely affect our business”. In addition, in the past we previously failed to maintain a majority of independent directors on our board of directors, which put us out of compliance with Nasdaq Marketplace Rule 4350. See “Management”. On October 4, 2007, we received a letter from

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Nasdaq Listing Qualifications notifying us that we had regained compliance with all Nasdaq listing qualifications by filing our annual report for 2006.

     Our historical failure to comply with Nasdaq Marketplace Rules has on one occasion subjected us to delisting review. If for any reason we fail to maintain compliance with Nasdaq Marketplace Rules in the future, we could be subject to additional delisting procedures and sanctions, which could affect our reputation and the market value of our securities, and could result in shareholder litigation, which may divert the attention of our management and force us to expend resources to defend against such claims. Any litigation may have a material and adverse effect on our business and future results of operations.

A significant percentage of our outstanding ordinary shares is beneficially owned by Jason Nanchun Jiang, our founder and chairman, and as a result, he may have significantly greater influence on us and our corporate actions by nature of the size of his shareholdings relative to our public shareholders.

     Jason Nanchun Jiang beneficially owns approximately 10.55% of our outstanding ordinary shares. Accordingly, Jason Nanchun Jiang has significant influence in determining the outcome of any corporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. Further, Jason Nanchun Jiang is also one of two shareholders of our affiliated PRC entity, Focus Media Advertisement, with which we have contractual arrangements that are essential to our business. The continuing cooperation of Focus Media Advertisement, and its shareholders, branches and subsidiaries, is important to our business. Without Jason Nanchun Jiang’s consent, we could be prevented from entering into transactions or conducting business that could be beneficial to us. Accordingly, Mr. Jiang’s control of Focus Media Advertisement could hinder any change in control of our business, particularly where such change of control would benefit shareholders other than Mr. Jiang. It would be difficult for us to change our corporate structure if any disputes arise between us and Mr. Jiang or if he fails to carry out his contractual and fiduciary obligations to us. Thus, Jason Nanchun Jiang’s interests as an officer and employee may differ from his interests as a shareholder or from the interests of our other shareholders, including you.

Anti-takeover provisions in our charter documents may discourage any hostile acquisition attempt by a third party, which could limit our shareholders’ opportunity to sell their shares at a premium.

     Our amended and restated memorandum and articles of association include provisions that could limit the ability of others to acquire control of us, modify our structure or cause us to engage in change-of-control transactions. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of us in a tender offer or similar transaction.

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

     In addition, some actions require the approval of a supermajority of at least two thirds of our board of directors which, among other things, would allow our non-independent directors to block a variety of actions or transactions, such as a merger, asset sale or other change of control, even if all of our independent directors unanimously voted in favor of such action, further depriving our shareholders of an opportunity to sell their shares at a premium. In addition, our directors serve terms of three years each, which terms are not staggered. The length of these terms could present an additional obstacle against the taking of action, such as a merger or other change of control, that could be in the interest of our shareholders.

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

     Our corporate affairs are governed by our amended and restated memorandum and articles of association, the Cayman Islands Companies Law and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. In addition, some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands.

     As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a U.S. company.

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

     We are a Cayman Islands company and substantially all of our assets are located outside of the United States. All of our current operations are conducted in the PRC. In addition, most of our directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons are located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons. It may also be difficult for you to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, most of whom are not resident in the United States and the substantial majority of whose assets are located outside of the United States. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of United States courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state. In addition, there is uncertainty as to whether such Cayman Islands or PRC courts would be competent to hear original actions brought in the Cayman Islands or the PRC against us or such persons predicated upon the securities laws of the United States or any state.

The voting rights of holders of ADSs are limited by the terms of the deposit agreement.

     Holders of our ADSs may only exercise their voting rights with respect to the underlying ordinary shares in accordance with the provisions of the deposit agreement. Upon receipt of voting instructions from a holder of ADSs in the manner set forth in the deposit agreement, the depositary will endeavor to vote the underlying ordinary shares in accordance with these instructions. Under our amended and restated memorandum and articles of association and Cayman Islands law, the minimum notice period required for convening a general meeting is ten days. When a general meeting is convened, you may not receive sufficient notice of a shareholders’ meeting to permit you to withdraw your ordinary shares to allow you to cast your vote with respect to any specific matter at the meeting. In addition, the depositary and its agents may not be able to send voting instructions to you or carry out your voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to you in a timely manner, but we cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares. Furthermore, the depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, you may not be able to exercise your right to vote and you may lack recourse if your ordinary shares are not voted as you requested.

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The depositary for our ADSs will give us a discretionary proxy to vote our ordinary shares underlying your ADSs if you do not vote at shareholders’ meetings, except in limited circumstances, which could adversely affect your interests.

     Under the deposit agreement for the ADSs, the depositary will give us a discretionary proxy to vote our ordinary shares underlying your ADSs at shareholders’ meetings if you do not vote, unless:

• we have failed to timely provide the depositary with our notice of meeting and related voting materials;

• we have instructed the depositary that we do not wish a discretionary proxy to be given;

• we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting;

• a matter to be voted on at the meeting would have a material adverse impact on shareholders; or

• voting at the meeting is made on a show of hands.

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

You may not receive distributions on our ordinary shares or any value for them if it is illegal or impractical to make them available to you.

     The depositary of our ADSs has agreed to pay you the cash dividends or other distributions it or the custodian for our ADSs receives on our ordinary shares or other deposited securities after deducting its fees and expenses. You will receive these distributions in proportion to the number of our ordinary shares your ADSs represent. However, the depositary is not responsible if it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act but that are not properly registered or distributed pursuant to an applicable exemption from registration. The depositary is not responsible for making a distribution available to any holders of ADSs if any government approval or registration required for such distribution cannot be obtained after reasonable efforts made by the depositary. We have no obligation to take any other action to permit the distribution of our ADSs, ordinary shares, rights or anything else to holders of our ADSs. This means that you may not receive the distributions we make on our ordinary shares or any value for them if it is illegal or impractical for us to make them available to you. These restrictions may have a material and adverse effect on the value of your ADSs.

You may be subject to limitations on transfer of your ADSs.

     Your ADSs represented by American Depositary Receipts are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including in connection with corporate events such as a rights offering, during which time the depositary needs to maintain an exact number of ADS holders on its books for a specified period. The depositary may also close its books in emergencies, and on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of our ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law or any government or governmental body, or under any provision of the deposit agreement, or for any other reason.

Dividends payable by us to our foreign investors may become subject to withholding taxes under PRC tax laws.

     Under the EIT Law and implementation regulations issued by the State Council, interest and dividends payable to foreign investors which are “derived from sources within the PRC” are subject to income tax at the rate of 10% by way of withholding. Since we are a holding company and substantially all of our income will come from

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dividends that we receive from our PRC subsidiaries, dividends that we declare from such income may be deemed “derived from sources within the PRC” for purposes of the EIT Law and therefore subject to a 10% withholding tax.

     The EIT Law also provides that dividend income between “qualified resident enterprises” is exempted income, which may imply that dividends we receive from our PRC subsidiaries would be exempt from tax, but we cannot assure you that we will be able to obtain such treatment for dividends paid to us by our PRC subsidiaries. Moreover, if we are deemed to be a PRC resident enterprise under the EIT law, a foreign investor in us may be able to claim the benefits of any income tax treaty between his or her resident country and China. We cannot assure you, however, that treaty benefits will be available to you (for example with respect to the withholding tax rate on dividends) even if we are deemed a PRC resident enterprise.

     If we are required under the EIT Law to withhold PRC income tax on our dividends payable to our foreign shareholders and ADSs holders, the value of your investment in our ADSs may be materially and adversely affected.

Gains on the sales of our shares or ADSs may become subject to PRC income taxes.

     Under the EIT Law and implementation regulations issued by the State Council, our foreign corporate shareholders and corporate ADSs holders may be subject to a 10% income tax upon any gains they realize from the transfer of their shares or ADSs, if such income is regarded as income from “sources within the PRC.” What will constitute “sources within the PRC” and whether or not there will be any exemption or reduction in taxation for our foreign corporate investors, however, are unclear. If our foreign shareholders and ADSs holders are required to pay PRC income tax on the transfers of their shares or ADSs, the value of your investment in our ADSs may be materially and adversely affected.

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

     Our legal and commercial name is Focus Media Holding Limited. Our principal executive offices are located at 28-30/F, Zhao Feng World Trade Building, 369 Jiangsu Road, Shanghai 200050 PRC, and our telephone number is 86-21-3212-4661. Our Internet website address is www.focusmedia.cn. Our predecessor company, Shanghai Aiqi Advertisement Co., Ltd., or Aiqi Advertisement, was established by immediate family members of Jason Nanchun Jiang in September 1997 and operated as an advertising agency. In May 2003, Aiqi Advertisement discontinued its advertising agency business, was renamed Shanghai Focus Media Advertisement Co., Ltd., commenced operation of our out-of-home television advertising network in China and reorganized its shareholdings. At the same time, we entered into arrangements with Focus Media Advertisement that resulted in the consolidation of Focus Media Advertisement. Following this reorganization Jason Nanchun Jiang continued to hold a controlling interest in Focus Media Advertisement.

     In conjunction with the change in our business model in May 2003 and to facilitate foreign investment in our company, we established our offshore holding company, Focus Media Holding Limited as a company registered in the British Virgin Islands. On April 1, 2005, we completed the process of changing Focus Media Holding Limited’s corporate domicile to the Cayman Islands and we are now a Cayman Islands company. On July 13, 2005, our ADSs were listed for quotation on the Nasdaq National Market and on July 19, we and certain of our shareholders completed an initial public offering and sale of 11,615,000 ADSs.

     In January 2006, we acquired Infoachieve Limited which is also referred to as Framedia throughout this annual report,, which operates a network of advertising poster frames placed primarily in elevators and public areas of residential complexes in China.

     In January 2006, we and certain of our shareholders completed a public offering and sale of 7,415,389 ADSs.

     In February 2006, we acquired Target Media. Target Media operates an out-of-home advertising network using flat-panel displays placed in elevator lobbies and other public areas in commercial buildings, hospitals, hotels, banks, residential buildings, convenience stores and other locations in cities in China. Since the completion of the

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acquisition of Target Media, the legal entities of Target Media and its affiliates and subsidiaries have been dissolved and their operations have been integrated with our operations.

     In March 2006, we acquired Dotad Media Holdings, which operates a mobile-phone advertising service in China through China Mobile and China Unicom’s mobile phone networks. Following the acquisition of Dotad Media Holdings, we renamed the acquired company Focus Media Wireless Co., Ltd., which is also referred to as Focus Media Wireless throughout this annual report.

     On June 21, 2006, we and certain of our shareholders completed a public offering and sale of 7,700,000 ADSs.

     In August 2006, we acquired Pinone Advertisement Co., Ltd., or Pinone, a British Virgin Islands company which operates an advertising poster frame network in Shanghai through its PRC affiliated entity similar to our poster frame advertising network.

     In September 2006, we completed the acquisition of 70% of the equity interest in Appreciate Capital Limited, or ACL, a British Virgin Islands company. ACL, through its affiliated PRC entity, leases screen time from movie theaters in cities in China, which it then sells as screen time slots to advertisers.

     In September 2006, certain of our shareholders completed a public offering and sale of 2,459,345 ADSs.

     In September 2006, Jason Nanchun Jiang, our chairman, entered into a variable pre-paid forward contract with Credit Suisse, pursuant to which he pledged and monetized 20 million of our ordinary shares held by him.

     During the fourth quarter of 2006, we completed the acquisition of Fengjing Advertisement. We signed a definitive term sheet to acquire 90% of Fengjing Advertisement Company (“Fengjing”) in July 2006 to further expand our outdoor LED network in Shanghai.

     In March 2007, we completed the acquisition of Allyes Information Technology Company Limited, or Allyes, a Cayman Islands company, which operates an Internet advertising marketing agency and technology services company through its PRC affiliated entities. Allyes is the largest Internet advertising agency and provider of Internet advertising technology in China. Its proprietary software application suite, ‘AdForward’, which covers all aspects of online ad publishing, creative production, tracking, targeting, and performance analysis, is used by a majority of independent commercial websites and ad agencies in China. Under the terms of the agreement, Focus Media acquired a 100% equity stake of Allyes for US$70.0 million in cash and US$155.0 million in the form of Focus Media ordinary shares (valued at US$38.81 per ADS, each of which represents five Focus Media ordinary shares), and an additional payment of up to US$75.0 million in Focus Media ordinary shares (valued at US$38.81 per ADS) contingent upon Allyes meeting certain earnings targets during the twelve month period from April 1, 2007 to March 31, 2008. David Zhu, the founder, chairman and chief executive officer of Allyes, signed an employment agreement with Focus Media and remains in his position as chief executive officer of Allyes.

     On November 13, 2007, we and certain of our shareholders, primarily consisting of the former shareholders of Framedia, Dotad and Allyes, completed a public offering and sale of 13,720, 873 ADSs, representing 68,604,365 ordinary shares.

     On January 2, 2008, we completed the acquisition of CGEN Digital Media Company Limited, or CGEN. In accordance with the share purchase agreement entered into on December 10, 2007, we made a cash payment of US$168.4 million to the former CGEN shareholders and the former CGEN shareholders delivered 100% of the equity interest in CGEN to us.

     On March 20, 2008, our executive chairman Jason Jiang purchased 100,000 Focus Media ADSs at an average price of USD 34.19 per ADS in the open market.

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     For a description of our principal capital expenditures and divestitures, see “Acquisitions” and “Capital Expenditure” in “Item 5. Operating and Financial Review and Prospects—Acquisitions” and “—B. Liquidity and Capital Resources—Capital Expenditures”.

B. Business Overview

     We are China’s leading multi-platform digital media company, operate the largest out-of-home advertising network in China using audiovisual digital displays, based on the number of locations and number of flat-panel television displays in our network, and also are a leading provider of Internet marketing solutions in China. It is our goal to create the largest multi-platform digital advertising network in China, reaching urban consumers at strategic locations and point-of-interests over a number of media formats, including audiovisual television displays in buildings and stores, advertising poster frames and other new and innovative media, such as outdoor LED digital billboard, mobile handset advertising networks and Internet advertising platforms. As of December 31, 2007, our out-of-home advertising network consists of our digital out-of-home advertising network, our mobile handset advertising network and our Internet advertising services:

Our Digital Out-of-home Advertising Network which focuses on providing out-of-home advertising through LCD flat-panel televisions displays, LED billboards, movie screens, and poster and digital frames, includes our commercial location network, in-store network and poster frame network:

• our commercial location network, consisting of:

• our LCD display network—,which refers to our network of flat-panel television displays placed in high-traffic areas of commercial and public buildings marketed to advertisers as a network or as seven separate channels targeting different types of consumers—our premier A and B office building channels, travel, fashion, elite, IT mall and, though our strategic investment in Yanhuang Health Media Limited, healthcare channels;

• our outdoor LED billboard network, which refers to our network of leased 5’ x 5’ LED digital billboards installed on the street-sides in major shopping districts and other locations with high pedestrian traffic in Shanghai; and

• our movie theater advertising network, which refers to our right to sell advertising time on movie screens for the three minutes prior to movie screenings at movie theaters in China.

• our in-store network, which refers to our network of flat-panel television displays placed in specific product areas inside stores with high-traffic concentrations such as selected consumer product sections, the main aisles and check-out lines in large-scale chain retail stores, or hypermarkets, as well as inside selected supermarkets and convenience stores; and

• our poster frame network, which refers to our network of traditional and digital advertising poster frames placed mainly in the elevators and public areas of residential complexes which we market under the brand name Framedia;

Our Mobile Handset Advertising Network, which refers to our mobile handset advertising services using wireless access protocol-, or WAP, short messaging service, or SMS, and mixed messaging services, or MMS, offered on the mobile telecommunications networks of China Mobile Communications Corporation, or China Mobile, and China United Telecommunications Corporation, or China Unicom; starting in April 1, 2008, we now send advertising to consumers only with their explicit consent and now focus our mobile advertising business on a “pull”, rather than “push” advertising services model ; and

Our Internet Advertising Services Network, which refers to our Internet advertising agency and advertising services technology, including performance-based software suites.

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We derive revenue principally by:

• selling advertising time slots on our commercial location, in-store, outdoor LED and movie theater networks, which we refer to collectively as our out-of-home television advertising networks;

• selling frame space on our poster frame network;

• through March 31, 2008, selling advertisements on our WAP-based mobile handset advertising network, and starting April 1, 2008, providing advertising services to customers who provide mobile content to handset users; and

• following our acquisition of Allyes in March 2007, providing advertising agency and technology services for on-line advertising through Allyes.

     A majority of the content displayed on our commercial location and in-store networks consists of advertisements which are broadcast repeatedly approximately 60 times throughout a day. Advertisements on our outdoor LED billboard network are broadcast repeatedly approximately 120 times throughout a day.

     Our poster frame network consists of advertising poster frames placed in elevators and public areas in residential complexes and commercial locations. Our advertising posters include both traditional printed posters as well as digital LCD poster frames with integrated sound, all-angle and remote control technologies. Generally two or three advertising poster frames can be placed in each elevator.

     Our Internet advertising services network, which we acquired through our acquisition of Allyes in March 2007, uses proprietary software applications to provide online ad publishing, creative production, tracking, targeting, and performance analysis. We also provide performance-based online advertising services providing advertisers with pay by CPA (cost-per-action), directly link advertising cost with performance. Our Internet advertising services network has integrated advertising resources from over 5,000 popular websites, making it the largest performance-based online advertising network in China.

     Our five largest advertising clients in terms of revenue, which include leading international and domestic brand name advertisers, were China Mobile, Dong Feng Auto (including joint venture brands with Toyota and Peugeot), ,Mazda, Meng Niu Diary and Toyata, which together accounted for approximately 9.4% of our revenue in 2007.

     Our network has the following key features:

• Substantially all of the content we broadcast or place on our digital out-of-home advertising network consists of advertisements.

• The advertising cycle on our commercial location network consists of advertising content broadcast repeatedly and is sold to advertising clients according to advertising packages purchased from us, and for three minutes before the screening of each showing of a film in the case of our movie theater advertising network.

• The advertising cycle of our out-of-home television advertising networks is broadcast repeatedly for approximately twelve-hours per day.

• The majority of our flat-panel displays contain LCD screens, while the remainder contains larger-sized plasma or LCD screens.

• Over 190,000 450 mm x 600 mm advertising poster frames, including approximately 10,000 digital poster frames have been installed in elevators on our poster frame network.

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• Approximately 200 5’ x 5’ LED digital billboards that we lease from a third party and that are installed on the street-sides in major shopping districts and other locations with high pedestrian traffic in Shanghai.

• An Internet advertising services network that offers performance-based advertising services and Internet advertising publishing software suites.

     Since we commenced our current business operations in May 2003, we have experienced significant growth in our network and in our financial results. As of December 31, 2007, we operated our commercial location network directly in over fifty major cities throughout China, including Beijing, Shanghai, Guangzhou and Shenzhen. As of December 31, 2007, we covered approximately 40 additional cities through contractual arrangements with regional distributors. Between January 1, 2006 and December 31, 2007, the number of displays in our commercial location network increased from 85,460 to 112,298. As of December 31, 2007, our outdoor LED billboard network consisted of over 200 leased 5’ x 5’ digital billboards placed along curbsides in high-pedestrian traffic areas in Shanghai and 1,500 square foot digital LED billboard operated on a boat navigating roundtrip along the bund area in Shanghai. In addition, as of the same date, the installed base of our hypermarkets network was 1,398 stores. Our in-store network also covered 638 supermarkets and 2,027 convenience stores as of December 31, 2007. The number of displays installed in our in-store network increased to 49,452 as of December 31, 2007. The total number of non-digital frames available for sale on our poster frame network was 179,649 as of December 31, 2007. In addition, as of December 31, 2007, we had installed 10,819 digital frames on our poster frame network, mainly in Beijing, Shanghai, Guangzhou and Shenzhen.

     The following table sets forth operating data related to our network for the periods indicated:

	For and as of the three months ended
	March 31,		June 30,		September 30,		December 31,		March 31,		June 30,		September 30,		December 31,
	2006		2006		2006		2006		2007		2007		2007		2007
Commercial location network:
Number of displays:
Our direct cities		71,230		69,446		68,723		80,263		83,256		85,010		90,375		107,533
Our regional distributors(1)		3,779		3,712		5,290		5,197		4,010		4,677		5,023		4,765
Total		75,009		73,158		74,013		85,460		87,296		89,687		95,398		112,298
In-store network:
Number of displays in our in- store network		33,765		35,511		36,387		38,742		40,736		41,322		43,315		49,452
Number of stores in our in-store network		5,218		4,174		3,894		3,898		3,935		3,995		4,041		4,063
Poster Frame Network:
Number of frames installed in our poster frame network (2)		74,353		82,200		95,878		99,784		124,542		161,435		170,605		190,468

(1)	Data that has been provided by our regional distributors is based on the results of surveys we requested them to provide to us and it is possible such data is not entirely accurate or exact.
(2)	Includes both traditional poster frames and, for periods starting from June 30, 2007, digital frames.

Our Competitive Strengths

     We believe we have the following competitive strengths:

Effective and Focused Advertising Network Accepted by Both Advertisers and Consumers.

     Since commencing our current business operations in May 2003, we have created an advertising network that:

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• Targets Segmented Consumer Groups. Our flat-panel displays, LED billboards and poster frames are primarily placed in venues that have a high concentration of consumers with higher-than-average disposable incomes or that have a high concentration of consumers who are likely to be interested in particular types of products and services. As a result, our network enables advertisers to target consumers with demographic profiles attractive to them. Moreover, our network allows advertisers to further segment these consumers through separate specified advertising channels, such as our premier A and B office building, travel, fashion, elite, IT mall, and, through our strategic alliance with Yanhuang Health Media Limited, healthcare channels, which are marketed as stand-alone channels of our commercial location network. Because our network is able to target specific consumer groups, it allows advertisers to more cost-effectively reach consumers with demographic profiles desirable to them.

• Reaches Captive Viewers in Low Distraction Environments. Our displays are placed in lobbies, near elevator banks, in elevators, on high-traffic urban curbsides and in other environments where there are few broadcast or display media competing for viewers’ attention, which we believe increases the effectiveness of our network.

• Tailored advertising solutions. Through the various media platforms and specialized channels on our network, we are able to offer tailored advertising solutions to our customers to enable them to target the consumers and locations that are most important to them. For example, we are increasingly providing custom advertising packages to our customers that focus exclusively on a certain suite of buildings, networks and channels accordingly to their requests and needs.

     We believe these characteristics and advantages of our business model have made us an effective and well-accepted alternative advertising medium with a strong market position that enables us to compete successfully in China’s advertising market.

The Largest Digital Out-of-home Advertising Network in China with Nation-wide Coverage

     We believe we operate the largest digital out-of-home advertising network in China based on the number of locations and the number of displays in our network. As of December 31, 2007, we operated:

• 107,533 flat-panel displays installed in over 90 cities in China, and through our regional distributors, we also operated approximately 4,765 flat-panel displays in approximately 40 cities in China;

• 49,452 flat-panel displays installed in 1,398 hypermarkets, 638 supermarkets and 2,027 convenience stores in cities in China; and

• 179,649 poster frames available for sale installed in elevators primarily in residential buildings. As of December 31, 2007, our poster frame network also included 10,819 digital poster frames;

• over 200 5’ by 5’ LED digital billboards placed in high pedestrian traffic outdoor locations in Shanghai and one 1,500 square foot digital LED billboard on a boat navigating roundtrips along the Bund area of Shanghai; and

• the right to broadcast advertising on movie theater screens for three minutes prior to the screening of each movie in major cities in China.

Out-of-home Advertising Network with Multiple Media Platforms Provides Advertisers with Complementary and Reinforcing Avenues to Reach Targeted Consumers

     Our network provides advertisers with multiple advertising media to reach their target audience. Our network currently enables advertisers to reach (1) consumers with higher than average incomes through our commercial location network, (2) consumers at the point-of-purchase through our in-store network, (3) consumers as they leave and return home through our poster frame network, (4) mobile handsets users throughout the day via our mobile handset advertising network, (5) urban consumers throughout the day via our strategically placed outdoor LED

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billboards in shopping and high pedestrian traffic areas in Shanghai and (6) internet users through our performance-based Internet advertising services and software suites. By offering advertisers a range of advertising media that can reach consumers during different times of the day in a wide variety of locations, we believe our network has enhanced appeal to advertisers over competitors who offer limited advertising media or channels to advertisers. We believe that by offering multiple advertising media platforms, we enable advertisers to reach a wide range of consumers with complementary and mutually reinforcing advertising campaigns and are better able to attract advertisers who want to reach targeted consumer groups through a number of different advertising media in different venues and at different times of the day.

Sustainable Competitive Advantages through the Size of Our Network and Our Exclusive, Renewable Agreements.

     We believe the following factors provide us with a sustainable business advantage over existing and prospective competitors:

• Early Market Presence and Coverage in Many of the Most Desirable Locations. We were one of the first companies to establish a large-scale out-of-home television advertising network in commercial buildings and other commercial locations in China. By recognizing this market opportunity and entering this sector early, we have occupied many of the most desirable locations and have grown the size of our network, which we believe has created high barriers to entry for potential competitors. We believe that we have secured a high percentage of the most desirable locations in many of China’s major urban centers, and that this early market presence advantage is important because landlords and building managers typically permit only one out-of-home television advertising network operation in each building. We believe that, through our acquisition of Target Media, we have enhanced these advantages. Through our acquisition of Framedia, we also gain a strong market presence in the poster frame advertising market in residential complexes. We also believe we have established the first outdoor LED digital billboard advertising network in China, currently comprising approximately 200 5’ x 5’ LED digital billboards placed in high pedestrian traffic outdoor locations in Shanghai and one 1,500 square foot digital LED billboard on a boat navigating roundtrips along the Bund area of Shanghai.

• Large-scale Network that Attracts Advertising Clients. Our multi-platform out-of-home advertising network includes flat-panel displays located in a wide range of commercial, retail locations and in-store locations in over 90 cities in China, poster frames placed in residential complexes in cities in China, LED digital billboards placed in high pedestrian curbside locations in Shanghai, and advertising services provided to mobile handset users. We believe the extent of our network coverage makes us more attractive to advertising clients than competing networks. Through the number of advertising media platforms we operate and the national scope of our network, we enable advertising clients to reach a wide audience in urban consumer markets across China. We believe the size and scope of our network has attained a scale that draws advertising clients to our network and gives us a competitive edge over competing networks as well as over many traditional advertising media.

• Exclusive and Renewable Display Placement Agreements. The majority of our display placement agreements on our out-of-home television advertising networks give us the exclusive right to place our flat-panel displays in the elevator and lobby areas of the locations in which we operate and, in the cities we operate directly, give us the right to renew the contract under terms that are no less favorable than those offered by competing bidders, enabling us to maintain exclusive coverage of many of the most desirable locations in our network for significant lengths of time.

     We believe our high market share of desirable locations in key cities in China, the wide extent of our network coverage and the exclusivity and renewal terms contained in the majority of our display placement agreements with landlords and property managers create higher barriers to entry for potential competitors than other out-of-home and outdoor advertising business models, such as billboards.

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Our Brand Name And Reputation Have Attracted A Large Base Of Leading Advertising Clients.

     We believe we are building a respected brand name in the advertising industry in China by developing a reputation for innovative and effective delivery of large-scale yet focused high-quality television advertising to consumers with desirable demographic profiles. This has enabled us to develop a strong client base consisting of major international and brand name advertisers such as hina Mobile, Dong Feng Auto (including joint venture brands with Toyota and Peugeot), ,Mazda, Meng Niu Diary and Toyata, which together accounted for approximately 9.4% of our revenue in 2007.. The strength and depth of our client base enhance our reputation in the industry and position us to further expand our advertising network.

     We believe our acquisitions of Framedia, Focus Media Wireless, Allyes and CGEN have further enhanced our brand name as a leading digital media company in China.

Strong Management and Sales Team with Extensive Industry Experience.

     We have assembled a management and sales team with extensive experience in China’s advertising industry. Jason Nanchun Jiang, our founder, chairman and a principal shareholder, has over 12 years of experience in China’s advertising industry, including his previous experience until 2003 as chief executive officer of Shanghai Everease Advertising Corporation, or Everease, one of China’s top 50 advertising agencies. Zhi Tan, our chief executive officer, who was chairman and chief executive officer of Framedia, president of Focus Media prior to his current appointment and extensive experience with multinational and Internet companies, including Tom.com, 8848.net and Microsoft. Daniel Wu, our chief financial officer, has over six years of experience in investment banking, including for Merrill Lynch and Lehman Brothers, and served as chief financial officer of Harbour Networks, a telecommunications equipment provider in China. Following our acquisition of Target Media, David Yu, the founder and former chairman and chief executive officer of Target Media, continues to act as co-chairman. Following our acquisition of Allyes, David Zhu, the founder, chairman and chief executive officer of Allyes, had added his entrepreneurial and management expertise and remains on as vice president — internet advertising. In addition, we employ experienced and knowledgeable managers to run operations in each of the cities we operate directly. Our marketing managers have many years of experience in the advertising industry in China and have worked for a number of major domestic and international advertising firms in China. We believe the strength and experience of our management and sales teams have enabled us to expand our advertising Network, enhance our reputation in our industry and build up a strong client base.

Our Strategies

     Our objective is to become the number one digital media company in China. We intend to achieve this objective by implementing the following strategies:

Enhance Our Market Position and Revenues by Expanding Our Networks.

     We intend to aggressively expand our out-of-home digital media networks in order to erect barriers to expansion and entry by current and prospective competitors, enhance critical mass appeal to our advertisers, and increase our fee rates and revenues. To achieve this goal, we intend to increase the number of locations and flat-panel and poster frame displays in our network. We intend to aggressively enter into new display and poster frame placement agreements to increase the number of locations in which we install our flat-panel displays and poster frames in order to enhance our current position in many of the most desirable locations in key urban areas in China.

Identify And Create New Networks and Advertising Channels that Target Specific Consumer Demographics and Expand Network Capacity.

     In-store Network. We commenced commercial operations of our in-store network in April 2005, enabling our advertising clients to target consumers at the time and place where consumers are likely to purchase a range of consumer and household products. As of December 31, 2007, we had placed 49,452 flat-panel displays in 4,063 locations on our in-store network. We intend to expand this network and will continue to strengthen efforts to enter into long-term and exclusive relationships with hypermarkets, supermarkets and convenience stores and to market this

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service to advertisers. For example, in January 2008, we completed our acquisition of CGEN, significantly expanding our in-store network.

     Targeted Advertising Channels. We have placed flat-panel television displays in office buildings, shopping malls, restaurants, beauty parlors, golf country clubs, automobile repair shops, banks, pharmacies, airports, hospitals and other commercial locations. As many of these venues are suitable for targeting specific consumer groups, we have begun to separate some of them into distinct stand-alone networks and to market them to specific advertising clients who wish to advertise their products and services to targeted consumer groups. Currently, our premier A and B office building, travel, fashion, elite and IT mall channels are marketed as independent channels of our commercial location network, while our healthcare channel is now operated through our strategic alliance with Yanhuang Health Media Limited. We believe these channels are attractive to a diverse range of advertisers who wish to target consumers likely to frequent these venues. We believe our ability to identify and create focused advertising networks distinguishes us from our competitors and attracts additional advertising clients who will use our services to reach their target consumers in a more effective manner.

     Complementary Advertising Media Platforms. We intend to continue expanding the scope of our advertising activities and type of media platforms we employ by entering into new types of advertising media businesses, such as large-size outdoor LED digital billboards, telecommunications channels such as Focus Media Wireless, and online opportunities such as Allyes. We believe by expanding our business into complementary media businesses that focus on venues and at periods of the day less comprehensively covered by traditional advertising media, we will enhance the value of our advertising services to advertisers and provide us with a competitive advantage over existing and potential competitors. We intend to continue expanding into new and complementary advertising media platforms, which will enable us to provide advertisers with additional advertising platforms to reach targeted consumers.

Promote Our Brand Name and Augment Our Service Offerings to Attract a Wider Client Base and Increase Revenues.

     Enhancing our brand name in the industry will allow us to solidify and broaden our client base by enhancing market awareness of our services and our ability to target discrete consumer groups more effectively than mass media. We believe the low cost of reaching consumers with higher-than-average disposable incomes through our network and our development of additional advertising media platforms and channels within our network we plan to develop in the future can enable advertisers to reach that goal. As we increase our advertising client base and increase sales, demand for and sale of time slots and frame space on our network will grow.

Continue to Explore New Digital Media Opportunities to Target Segmented Consumer Groups.

     Consumer acceptance of technology-driven advertising and entertainment media, including the Internet and advanced mobile communications systems, is a feature of the advertising industry in China. We intend to identify and take advantage of new opportunities in the PRC advertising market in order to enhance our ability to target segmented consumer groups through innovative advertising techniques and media. As new opportunities that fit our brand image and business model present themselves, we expect to expand our operations and continue to pursue innovative advertising techniques and media that provide effective solutions to advertising clients and target consumers with desirable demographic profiles as we have already done with our acquisitions of Focus Media Wireless and Allyes.

Our Network

     Our network includes:

• our digital out-of-home advertising network, including our commercial location network (LCD display, outdoor LED billboard and movie theater advertising networks), in-store network and poster frame network;

• our mobile handset advertising services network; and

• our Internet advertising services network.

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Digital Out-of-home Advertising Networks

Commercial Location Network

     LCD display network. The majority of displays on our LCD display network are currently placed in high-traffic areas of commercial office buildings. The locations in our LCD display network also include shopping malls, banks and hotels as well as more specialized locations such as hospitals, beauty parlors and golf country clubs. We market our LCD display network to advertisers of consumer products and services, such as automobiles, home electronics, mobile communications devices and services, cosmetics, health products and financial services. As of December 31, 2007, our LCD display network, including the portions of our LCD display network operated by our regional distributors, was comprised of approximately 112,298 flat-panel displays placed in over 90 cities throughout China. We operate our LCD display network directly in approximately 50 cities and indirectly through contractual arrangements with regional distributors in approximately 40 additional cities. We have established joint ventures in several cities outside of mainland China, including Hong Kong, Taipei and Singapore through contracts with local operators which operate local commercial location networks and which license our brand name. None of these arrangements outside of China currently constitutes a material part of our business.

     As we expand the number of venues in our LCD display network, we continue to separate certain types of venues into distinct stand-alone channels of this network. As of December 31, 2007, we had established seven such stand-alone channels that are marketed as separate focused channels of our LCD display network: our premier office building A and B, travel, fashion, elite and IT mall channels. Starting in January 2008, operation of our former healthcare channel has been carried out through a strategic investment in Yanhuang Health Media Limited, or Yanhuang Health Media. We transferred ownership of our installed healthcare channel base of approximately 2,461 LCD screens in 31 citis in China to Yanhuang Health Care in exchange for a 20% equity interest in Yanhuang Health Care. Yanhuang Health Care’s total installed base consists of over 10,000 LDC screens placed in hospitals, drug store chains and other healthcare locations in 36 cities in China. We believe that by increasingly offering new advertising channels on our out-of-home television networks, we will be able to offer advertisers more targeted and effective audience reach, thereby enabling us to increase our advertising rates.

     Expanding our network through regional distributors enables us to provide our advertisers with broader nationwide coverage and to test, develop and evaluate these regional advertising markets without our having to incur start-up and ongoing expenses at the early stages of their development. We also seek to acquire our regional distributors when we believe it is more likely for us to benefit economically from the full integration of their operations into our network. We do not have the contractual right to purchase our regional distributors, and any such acquisition must be negotiated with each regional distributor separately.

     Each of our regional distributors operates independently from us and is responsible for independently complying with all relevant PRC laws and regulations including those related to advertising. We periodically monitor our regional distributors to ensure they have obtained all required licenses and are complying with regulations relating to advertising content. See “Item 3D Risk Factors — Risks Relating to Our Business and Industry — One or more of our regional distributors could engage in activities that are harmful to our reputation in the industry and to our business”.

     Outdoor LED billboard network. In April 2006, we commenced operations of an outdoor LED billboard network consisting of 5’ x 5’ LED digital billboards that are installed on the street-sides in major shopping districts and other locations with high pedestrian traffic in Shanghai. Full-color audiovisual commercials are displayed on the digital billboards in a repeating six-minute cycle. The commercials displayed on the LED billboards are highly visible even during bright daylight. As of December 31, 2007, the number of the LED billboards in our street-side outdoor LED billboard network in prime commercial and shopping areas reached approximately 200 our street-side outdoor network also consists of one 1,500 square foot digital LED billboard placed on a boat navigating roundtrips along the Bund area of Shanghai.. We market this part of our network under the name “iStreet Network”.

     Movie theater advertising network. We operate our movie theater advertising network by leasing screen time from movie theaters in cities in China. We then sell this leased screen time as time slots to advertisers. We have the right to three minutes of screen time prior to the screening of each movie shown in the theater.

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In-store Network

     As part of our growth strategy, we commenced operations of our in-store network in April 2005. As of December 31, 2007, we had placed 49,452 flat-panel displays in 1,398 hypermarkets, 638 supermarkets and 2,027 convenience stores throughout China. We believe the rapid expansion of hypermarkets and other chain retail stores in China provides opportunities and incentives for advertisers to take advantage of in-store television advertising networks such as our in-store network. Our in-store network primarily attracts advertisers of food and beverage products, household, kitchen and bathroom products, and household appliances. In January 2008, we completed the acquisition of CGEN, significantly expanding our in-store network.

Poster Frame Network

     We own and operate a network of traditional and digital advertising poster frames deployed primarily in the elevators and public areas of residential complexes under the brand name “Framedia”. We place two or three advertising frames in each elevator in which we lease space and sell frame space to advertising clients on a per frame basis for periods of two weeks or longer. As of December 31, 2007, we had installed 190,468 poster frames including 10,819 digital poster frames in cities throughout China. Our digital frames use high-resolution LCD displays with integrated sound, all-angle viewing and remote control technologies. We believe the new media format provides a more effective advertising media to our advertising customers.

Mobile Handset Advertising Network

     Through Focus Media Wireless, we operate an advertising delivery platform on the mobile telecommunications networks of China Mobile and China Unicom. Focus Media Wireless delivers SMS-, MMS- and WAP-based advertisements to mobile handset users accessed through service providers in China. Focus Media Wireless receives a fee from advertisers for delivering advertisements and pays mobile service providers a fee for accessing their networks. It also sells advertising to other mobile handset service providers and to traditional advertisers. In March 2008, we announced changes our mobile advertising business model and no longer send messages on a “push” basis. Now, advertising customers purchase advetising space on WAP-based content or services that are accessed by mobile phone users who view the advertising as banner-style advertisements on the content and services they access. We send advertising messages to mobile users only after receiving their consent. We provide a toll-free telephone number to enable mobile users to report “spam” and unauthorized messages to us directly.

Internet Advertising Services Network

     In March 2007, we completed the acquisition of 100% of the equity interests in Allyes. Allyes is a leading Internet advertising agency and provider of Internet advertising technology in China. Its proprietary software application suite, ‘AdForward’, which covers all aspects of online ad publishing, creative production, tracking, targeting, and performance analysis, is used by independent commercial websites and ad agencies in China. Based on the significant number of Internet advertising campaigns it has executed since its inception in 2000, its widely-used Internet application software and its unique tracking technology, Allyes has accumulated a large database of Internet viewers, segmented based on individual behavior. Allyes initiated the performance-based online advertising model in China. Its advertising network, ‘SmartTrade’, allows advertisers to pay by CPA (cost-per-action), and directly links advertising cost with performance. SmartTrade has integrated advertising resources from over 5,000 popular websites, making it one of the largest performance-based online advertising networks in China.

Advertising Clients, Sales and Marketing

     Our Advertising Clients. The quality and coverage of our network has attracted a broad base of international and domestic advertising clients. Our advertising clients include leading international and domestic brand name advertisers such as China Mobile, Dong Feng Auto (including joint venture brands with Toyota and Peugeot), Mazda, Meng Niu Diary and Toyata, which together accounted for approximately 9.4% of our revenue in 2007.

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     No single advertising client accounted for more than 3% of our revenues in 2007. We believe the appeal and effectiveness of our advertising network is largely evidenced by the number of advertising clients who place multiple advertising campaigns on our network, which is reflected in the percentage increase of advertising fees we receive from clients over time.

     Sales. We employ an experienced advertising sales force in each city in which we operate. We provide in-house education and training to our sales force to ensure they provide our current and prospective clients with comprehensive information about our services, the advantages of using our advertising networks as marketing channels, and relevant information regarding the advertising industry. Our sales team is organized by city, industry and client accounts. We also market our advertising services from time to time by placing advertisements on third-party media, including primarily magazines and Internet websites. We maintain separate sales teams for our poster frame network, our mobile handset advertising network and our Internet advertising services network. We have begun engaging in limited cross-selling initiatives to enable existing and potential advertising clients to take advantage of our multi-platform advertising network.

     Advertising Contracts. We offer advertisers five-, fifteen- or thirty-second time slots on our out-of-home television advertising networks, including our commercial location, in-store, outdoor LED and movie theater advertising networks. For our commercial location network, our standard advertising package includes a time slot on our entire network or a particular channel in each city in which the advertiser wishes to display the advertisement. For our movie theater advertising network, time slots are sold on a regional or entire network basis. Our sales are made pursuant to written contracts with commitments ranging from one week to several months. Our advertising rates vary by city and by the number of cities in which the advertisement is placed, as well as by the length of the time slot purchased and the duration of the advertising campaign. We generally require our clients to submit advertising content at least seven days prior to the campaign start date. We also reserve the right to refuse to disseminate advertisements that are not in compliance with content requirements under PRC laws and regulations.

     Advertising contracts for our in-store network, outdoor LED network and movie theater advertising network are substantially similar to those used for our commercial location network. Advertising clients generally purchase time slots on our in-store network on a chain-by-chain basis, while time slots on the outdoor LED network cover the entire network and contracts on our movie theater advertising network are done on regional or entire network basis.

     For our poster frame network, advertising clients purchase frame space on a per-frame basis for terms of one week or more. For our mobile handset advertising network, our contracts agree to deliver advertising messages to mobile devices based on specific selection criteria set by the advertisers. For our Internet advertising services, we provide Internet advertising solutions for advertisers tailored to their needs.

     Network Monitoring and Media Measurement. We provide a number of services in connection with each client’s advertising campaign following the sales process. Our network operations team monitors the displays in our network on a daily basis. They are also responsible for compiling reports that are supplied under some of our agreements to clients as evidence of the broadcast of their advertisements on our network. The report generally includes a list of buildings where our client’s advertisements were broadcast as well as photographs of representative television displays showing their advertisements being displayed. The advertising campaign reports are provided to our clients for information purposes and do not constitute a customer acceptance provision. The reports we provide to our clients may also contain portions prepared by independent third-party research companies that verify the proper functioning of our flat-panel displays and the proper dissemination of the advertisement, by conducting on-site evaluations and polls to analyze the effectiveness of and public reaction to the advertisement.

     Aside from third-party verification services, we and our regional distributors conduct substantially all client services using our own employees or the employees of the relevant regional distributor. In Beijing and Guangzhou, we contract some of these services to third-party agents. These agents provide us with network development, installation, maintenance, monitoring and reporting services.

     We believe our advertising clients derive substantial value from our ability to provide advertising services targeted at specific segments of consumer markets. Market research is an important part of evaluating the effectiveness and value of our business to advertisers. We conduct market research, consumer surveys, demographic analysis and other advertising industry research for internal use to evaluate new and existing advertising channels. We

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also purchase or commission studies containing relevant market study data from reputable third-party market research firms, such as Nielsen Media Research, CTR Market Research and Sinomonitor. Our acquisition of iResearch Consulting Co., Ltd. in September 2007 has also provided us with enhanced in-house market research capabilities. iResearch is a market research company focusing on the Internet and new media industries in urban areas of China. We typically consult such studies to assist us in evaluating the effectiveness of our network to our advertisers. A number of these studies contain research on the numbers and socio-economic and demographic profiles of the people who visit the locations of our network.

Programming

     Substantially all of the content on our out-of-home television advertising networks consists of audiovisual television advertising provided to us by our advertising clients. We also provide a limited amount of time for landlords and property managers to display location-specific information, building announcements and related promotional material on our network. We do not produce or create any of the advertising content shown on our network, except our own marketing content. All of the advertising content displayed on the portion of the network we operate directly is reviewed by qualified members of our staff to ensure compliance with PRC laws and regulations, while our agreements with our regional distributors require each of them to review the contents shown on the portion of the network they operate for compliance with PRC laws and regulations. See “Item 4.B Information on the Company—Business Overview—Regulatory Matters — Regulation of Advertising Services — Advertising Content”.

     Advertisements on our poster frame network consist of full-color glossy advertising posters designed and provided by our advertising clients.

Pricing

     For information regarding factors affecting our pricing, refer to “Factors that Affect Our Advertising Service Revenue” in Item 5 — Operating and Financial Review and Prospects.

Relationships with Location Providers

     We install our flat-panel displays in selected spaces we lease in office buildings and other commercial locations, hypermarkets, supermarkets and convenience stores. We install our advertising poster frames in elevators and other public areas in residential complexes. Establishing and maintaining long-term relationships with landlords and property managers is a critical aspect of our business. We employ a team of location relationship personnel in each city in which we operate directly who are responsible for identifying desirable locations, negotiating display and frame placement agreements and engaging in ongoing site placement relations.

     In addition to helping us expand our network, our location relationship personnel ensure that the needs and concerns of landlords and property managers are being met and addressed effectively and on a timely basis. These concerns generally include ensuring that the flat-panel displays are properly installed and are in proper working condition. We undertake to landlords and property managers in our network to maintain the proper operation of our flat-panel displays. We generally rely on our own employees to install, maintain, monitor and repair our flat-panel displays and advertising poster frames. Each of our flat-panel displays is inspected at least once daily.

     We enter into display placement agreements with individual landlords, property managers, hotels, shopping malls and chain store companies under which we generally pay a fixed annual rent in exchange for the right to display advertising and commercial media in lobby and elevator areas in the case of our commercial location network and in specific product areas in the major aisles and near check-out counters in hypermarkets, supermarkets and convenience stores in the case of our in-store network. In Beijing and Guangzhou, we contract a portion of the location development, monitoring and maintenance work to local agents. We attempt to maintain terms favorable to our network operations in our display placement agreements, such as long-term leases and exclusivity provisions. We are not reliant on any one landlord or property manager for a material portion of our network coverage. As hypermarkets, supermarkets and convenience stores have control over multiple locations, a smaller number of display placement agreements and contractual arrangements account for a larger percentage of our in-store network coverage.

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     We believe that landlords and property managers generally do not view us as a major source of revenue and are instead primarily attracted to our flat-panel displays as an innovative and visually pleasing medium that complements their public areas and that provides an engaging means of conveying building-related information to their tenants. In connection with certain of our display placement agreements, we agree to provide concessions and services, such as displaying building-related notifications, publicity and other information provided by the landlord or property manager or granting time slots to the landlord or property manager for their own promotional purposes.

     Our display placement agreements have initial terms ranging anywhere from one to ten years. As of December 31, 2007, we had the right under the majority of our display placement agreements to renew the display placement agreements provided that the terms offered by us are no less favorable than those offered by competing bidders. The rental terms and fees under our display placement agreements vary considerably depending on the city, location of the building, size of the building and number of flat-panel displays that may be installed. Under our display placement agreements, we retain ownership of the flat-panel displays.

     We enter into similar frame placement agreements for the deployment of our advertising poster frames in elevators and public areas of residential complexes and commercial buildings. The majority of our frame placement agreements have terms of two to three years, and contain exclusivity and best offer renewal rights.

Technology and Suppliers

     Out-of-home television advertising is a relatively new advertising medium that owes its development in large part to the emergence of new technologies, such as low-cost, light-weight, flat-panel television displays and compact storage technology. The primary hardware required for the operation of our business consists of components that comprise the flat-panel displays we use in our advertising network. We also develop and install software in our flat-panel displays to assist us with the configuration, editing and operation of our advertising content cycles. Maintaining a steady supply of our proprietary flat-panel displays is important to our operations and the growth of our advertising network.

     We design the distinctive shape of our flat-panel displays, identify suppliers of component parts used in our displays and contract the assembly of our flat-panel displays to third-party contract assemblers. Our contract assemblers are responsible for purchasing the component parts from suppliers we identify each month and assembling the flat-panel displays according to our specifications using components purchased in off-the-shelf form from wholesale distributors. We select component suppliers based on price and quality. As there are many qualified alternative suppliers for our equipment, our obligation to our current contract assemblers is not exclusive. We have never experienced any material delay or interruption in the supply of our flat-panel displays.

     Our services provided through Allyes use proprietary ad serving solutions that assist advertisers, advertising agencies and web publishers in creating and delivering Internet ads, monitoring and analyzing website traffic, tracking the performance of advertising campaigns and implementing direct marketing. Most of the Allyes software applications, from Internet marketing technologies to the applications that operate our servers, are proprietary and were developed in-house by Allyes’ research and development team.

Competition

     We compete with other advertising companies in China including companies that operate out-of-home or telecommunications-based advertising media networks, such as JCDecaux and ClearMedia. We compete for advertising clients primarily on the basis of network size and coverage, location, price, the range of services that we offer and our brand name. We also compete for overall advertising spending with other alternative advertising media companies, such as Internet, wireless telecommunications, street furniture, billboard, frame and public transport advertising companies, and with traditional advertising media, such as newspapers, television, magazines and radio.

Facilities

     We currently maintain our headquarters at 28-30/F, Zhao Feng World Trade Building, 369 Jiangsu Road, Shanghai 200050, People’s Republic of China.We also have offices in more than 50 other cities in China.

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Regulatory Matters

     We operate our business in China under a legal regime consisting of the State Council, which is the highest authority of the executive branch of the PRC central government, and several ministries and agencies under its authority including the State Administration for Industry and Commerce, or SAIC.

     China’s Advertising Law was promulgated in 1994. In addition, the State Council, SAIC and other ministries and agencies have issued regulations that regulate our business, which are discussed below.

Limitations on Foreign Ownership in the Advertising Industry

     The principal regulations governing foreign ownership in the advertising industry in China include:

• The Catalogue for Guiding Foreign Investment in Industry (2004); and

• The Administrative Regulations on Foreign-invested Advertising Enterprises (2004).

     These regulations require foreign entities that directly invest in the advertising industry to have at least two years of direct operations in the advertising industry outside of China. Since December 10, 2005, foreign investors have been permitted to own directly a 100% interest in advertising companies in China, but such foreign investors are also required to have at least three years of direct operations in the advertising industry outside of China. PRC laws and regulations do not permit the transfer of any approvals, licenses or permits, including business licenses containing a scope of business that permits engaging in the advertising business. In the event we are able to qualify to acquire the equity interest of Focus Media Advertisement under the rules allowing complete foreign ownership, Focus Media Advertisement would continue to exist as the holder of the required advertising license consistent with current regulatory requirements.

     Since we have not been involved in advertising outside of China for the required number of years, our domestic PRC operating subsidiaries, which are considered foreign invested, are currently ineligible to apply for the required advertising services licenses in China. Our advertising business is currently mainly provided through our contractual arrangements with our consolidated affiliated entities in China, including Focus Media Advertisement and its subsidiaries, New Focus Media Advertisement, New Focus Media Agency, Focus Media Defeng Advertisement Framedia Advertisement, Guangdong Framedia, New Structure Advertisement, Focus Media Wireless and the Allyes operating affiliates. Each of our PRC operating affiliates is currently owned or controlled either (i) by two PRC citizens designated by us or (ii) by two PRC entities owned by our subsidiaries or by our designated appointees. Our PRC operating affiliates and certain of their respective subsidiaries hold the requisite licenses to provide advertising services in China. We, Focus Media Technology, Focus Media Digital, New Focus Media Advertisement, New Focus Media Agency, Focus Media Defeng Advertisement, Framedia Investment, Dotad Technology and New Allyes Technology have entered into a series of contractual arrangements with our PRC operating affiliates and their respective subsidiaries and shareholders under which:

• we are able to exert effective control over our PRC operating affiliates and their respective subsidiaries;

• a substantial portion of the economic benefits of our PRC operating affiliates and their respective subsidiaries will be transferred to us; and

• we have an exclusive option to purchase all or part of the equity interests in our PRC operating affiliates and all or part of the equity interests in Focus Media Advertisement’s subsidiaries that are owned by Focus Media Advertisement or its nominee holders, as well as all or a part of the assets of our PRC operating affiliates, in each case when and to the extent permitted by PRC law.

     See “Item 4.C Information on the Company—Organizational Structure” and “Item 7.B Major Shareholders and Related Party Transactions—Related Party Transactions”.

     In the opinion of Global Law Office, our PRC legal counsel,

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• the respective ownership structures of Focus Media, Framedia, Focus Media Wireless, Allyes and their respective PRC affiliates and subsidiaries are in compliance with existing PRC laws and regulations;

• the contractual arrangements (i) among Focus Media, Framedia, Focus Media Wireless, Allyes and their respective PRC affiliates, subsidiaries and PRC shareholders, in each case governed by PRC law are valid, binding and enforceable, and will not result in any violation of PRC laws or regulations currently in effect; and

• the PRC business operations of Focus Media, Framedia, Focus Media Wireless, Allyes and their respective affiliates and subsidiaries as described in this annual report, are in compliance with existing PRC laws and regulations in all material respects.

     We have been advised by our PRC legal counsel, however, that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, there can be no assurance that the PRC regulatory authorities, in particular the SAIC which regulates advertising companies, will not in the future take a view that is contrary to the opinion of our PRC legal counsel. We have been further advised by our PRC counsel that if the PRC government determines that the agreements establishing the structure for operating our PRC advertising business do not comply with PRC government restrictions on foreign investment in the advertising industry, we could be subject to severe penalties. See “Item 3.D Key Information—Risk Factors — Risks Relating to Regulation of Our Business and to Our Structure — If the PRC government finds that the agreements that establish the structure for operating our China business do not comply with PRC governmental restrictions on foreign investment in the advertising industry, we could be subject to severe penalties”.

Regulation of Advertising Services

Business License for Advertising Companies

     The principal regulations governing advertising businesses in China include:

• The Advertising Law (1994);

• The Advertising Administrative Regulations (1987); and

• The Implementing Rules for the Advertising Administrative Regulations (2004).

     These regulations stipulate that companies that engage in advertising activities must obtain from the SAIC or its local branches a business license which specifically includes operating an advertising business within its business scope. Companies conducting advertising activities without such a license may be subject to penalties, including fines, confiscation of advertising income and orders to cease advertising operations. The business license of an advertising company is valid for the duration of its existence, unless the license is suspended or revoked due to a violation of any relevant law or regulation. We do not expect to encounter any difficulties in maintaining our business licenses. Each of Focus Media Advertisement, its subsidiaries and New Focus Media Advertisement has obtained, or in the case of some of our new directly-operated cities, are in the process of obtaining such a business license from the local branches of the SAIC as required by the existing PRC regulations. Some of our regional distributors may not possess all the licenses required to operate an advertising business, or may fail to maintain the licenses they currently hold. We periodically monitor our regional distributors to ensure they have obtained all required licenses and are complying with regulations relating to advertising content, although it is possible that one or more of our regional distributors may not be in compliance with all PRC regulations at all times. To our knowledge, all of our regional distributors have received, or are in the process of obtaining, the licenses required to operate an advertising business. If we learn that any of our regional distributors are not in compliance with applicable terms and regulations we notify such regional distributors of the need to complete any necessary procedures and to report any developments to us. If a regional distributor fails to complete the steps necessary to receive the required licenses, we will take steps to terminate the contract with such regional distributor. See “Item 3.D Key Information—Risk Factors — Risks Relating to Our Business and Industry — One or more of our regional distributors could engage in activities that are harmful to our reputation in the industry and to our business”.

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Advertising Content

     PRC advertising laws and regulations set forth certain content requirements for advertisements in China, which include prohibitions on, among other things, misleading content, superlative wording, socially destabilizing content or content involving obscenities, superstition, violence, discrimination or infringement of the public interest. Advertisements for anesthetic, psychotropic, toxic or radioactive drugs are prohibited. It is prohibited to disseminate tobacco advertisements via broadcast or print media. It is also prohibited to display tobacco advertisements in any waiting lounge, theater, cinema, conference hall, stadium or other public area. There are also specific restrictions and requirements regarding advertisements that relate to matters such as patented products or processes, pharmaceuticals, medical instruments, agrochemicals, foodstuff, alcohol and cosmetics. In addition, all advertisements relating to pharmaceuticals, medical instruments, agrochemicals and veterinary pharmaceuticals advertised through radio, film, television, newspaper, magazine, out-of-home and other forms of media, together with any other advertisements which are subject to censorship by administrative authorities according to relevant laws and administrative regulations, must be submitted to the relevant administrative authorities for content approval prior to dissemination. We do not believe that advertisements containing content subject to restriction or censorship comprise a material portion of the advertisements shown on our network.

     Advertisers, advertising operators and advertising distributors are required by PRC advertising laws and regulations to ensure that the content of the advertisements they prepare or distribute are true and in full compliance with applicable law. In providing advertising services, advertising operators and advertising distributors must review the prescribed supporting documents provided by advertisers for advertisements and verify that the content of the advertisements comply with applicable PRC laws and regulations. In addition, prior to distributing advertisements for certain commodities which are subject to government censorship and approval, advertising distributors are obligated to ensure that such censorship has been performed and approval has been obtained. Violation of these regulations may result in penalties, including fines, confiscation of advertising income, orders to cease dissemination of the advertisements and orders to publish an advertisement correcting the misleading information. In circumstances involving serious violations, the SAIC or its local branches may revoke violators’ licenses or permits for advertising business operations. Furthermore, advertisers, advertising operators or advertising distributors may be subject to civil liability if they infringe on the legal rights and interests of third parties in the course of their advertising business.

     We employ qualified advertising inspectors who are trained to review advertising content for compliance with relevant laws and regulations.

Outdoor Advertising

     The Advertising Law stipulates that the exhibition and display of outdoor advertisements must not:

• utilize traffic safety facilities and traffic signs;

• impede the use of public facilities, traffic safety facilities and traffic signs;

• obstruct commercial and public activities or create an eyesore in urban areas;

• be placed in restrictive areas near government offices, cultural landmarks or historical or scenic sites; and

• be placed in areas prohibited by the local governments from having outdoor advertisements.

     In additional to the Advertising Law, the SAIC promulgated the Outdoor Advertising Registration Administrative Regulations on December 8, 1995, as amended on December 3, 1998, which governs the outdoor advertising industry in China.

     Outdoor advertisements in China must be registered with the local SAIC before dissemination. The advertising distributors are required to submit a registration application form and other supporting documents for registration. After review and examination, if an application complies with the requirements, the local SAIC will issue

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an Outdoor Advertising Registration Certificate for such advertisement. The content of the outdoor advertisement must be submitted for filing with the local SAIC.

     The placement and installation of LED billboards are subject to municipal zoning requirements and governmental approvals, including application for an outdoor advertising registration certificate for each LED billboard subject to a term of use of no more than six years for each LED billboard. If the existing LED billboards placed by our LED location provider or us are required to be removed, the attractiveness of this portion of our advertising network will be diminished. Moreover, failure by an owner of LED billboards to maintain outdoor advertising registration certificates would result in the inability to lease or market such space for the placement of advertisements.

Print Advertising

     Following our acquisition of Framedia on January 1, 2006, we also operate a network of advertising poster frames placed primarily in the elevators and public areas of residential complexes. The advertisements shown on our poster frame network are defined as “normal print advertisements” under the Print Advertisements Administrative Regulations promulgated by the SAIC on January 13, 2000, as amended on November 30, 2004, or the Print Advertisements Regulations. Under these regulations, print advertisements must not be placed in areas prohibited by laws or regulations from posting print advertisements.

Regulation of Telecommunications Value-added Service Providers

     The Telecommunications Regulations (2000), or the Telecom Regulations, and the Administrative Measures for Telecommunications Business Operating License (2002), or the Telecom License Measures, contain provisions governing providers of telecommunications services, including value-added service providers. The Telecom Regulations categorize all telecommunication services businesses in China as either infrastructure telecommunication services businesses or value-added telecommunication services businesses. The latter category includes WAP services. Under the Telecom Regulations, certain services are classified as being of a value-added nature and require the commercial mobile operator of such services to obtain an operating license, including online data processing and transaction processing, call centers and Internet access. The Telecom Regulations also set forth extensive guidelines with respect to different aspects of telecommunications operations in China. Under the Telecom License Measures, an approved value-added telecommunication services provider must conduct its business in accordance with the specifications recorded on its value-added telecommunication services operating license. Under PRC law, it is unclear whether the services offered by Focus Media Wireless should be deemed value-added telecommunication services, which requires an operation permit which has a valid period of five years. Focus Media Wireless has been granted an operation permit for its wireless advertising operations. If Focus Media Wireless is deemed by the PRC regulatory authorities to be providing value-added telecommunication services but the operation permit is revoked or if we are unable to renew its operation permit upon its expiration, we will be required to suspend our services relating to our mobile handset advertising network, and our advertising service revenue derived from this portion of our network would be adversely affected. See “Item 3.D Key Information—Risk Factors — Our recent entry into mobile handset advertising through our acquisition of Focus Media Wireless may expose us to risks associated with operating in the telecommunications industry in China which could materially affect our financial condition or results of operation”. In addition, Since March 2008, the Ministry of Information Industry, or MII, the national regulatory authority of the telecom industry has ordered all local telecom regulators and telecom operators at all levels to tighten up regulation of short messaging services, in particular so-called “spam”, or unsolicited, advertisements and messages. It has been reported that several local telecom regulators and operators adopted policies restricting short message advertising activities by limiting the number of such advertisements or disallowing companies from engaging in unsolicited short messaging advertising activities. It has also been reported that the MII, together with other national authorities, is drafting new regulations governing the short messaging business, and that the new regulations are expected to impose strict technical requirements and standards requiring short message advertisements to be sent following the consent of the relevant mobile phone user.

Regulation of Foreign Exchange in Certain Onshore and Offshore Transactions

     In January and April 2005, the PRC State Administration of Foreign Exchange, or SAFE, issued two rules that require PRC residents to register with and receive approvals from SAFE in connection with their offshore

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investment activities. SAFE has announced that the purpose of these regulations is to achieve the proper balance of foreign exchange and the standardization of the cross-border flow of funds.

     On October 21, 2005, SAFE issued the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-raising and Reverse Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies, or Notice 75, which became effective as of November 1, 2005. Notice 75 replaced the two rules issued by SAFE in January and April 2005 mentioned above.

     According to Notice 75:

• prior to establishing or assuming control of an offshore company for the purpose of financing that offshore company with assets or equity interests in an onshore enterprise in the PRC, each PRC resident, whether a natural or legal person, must complete the overseas investment foreign exchange registration procedures with the relevant local SAFE branch;

• an amendment to the registration with the local SAFE branch is required to be filed by any PRC resident that directly or indirectly holds interests in that offshore company upon either (1) the injection of equity interests or assets of an onshore enterprise to the offshore company, or (2) the completion of any overseas fund raising by such offshore company; and

• an amendment to the registration with the local SAFE branch is also required to be filed by such PRC resident when there is any material change involving a change in the capital of the offshore company, such as (1) an increase or decrease in its capital, (2) a transfer or swap of shares, (3) a merger or division, (4) a long term equity or debt investment, or (5) the creation of any security interests over the relevant assets located in China.

     Moreover, Notice 75 applies retroactively. As a result, PRC residents who have established or acquired control of offshore companies that have made onshore investments in the PRC in the past are required to complete the relevant overseas investment foreign exchange registration procedures by March 31, 2006. Under the relevant rules, failure to comply with the registration procedures set forth in Notice 75 may result in restrictions being imposed on the foreign exchange activities of the relevant onshore company, including the payment of dividends and other distributions to its offshore parent or affiliate and the capital inflow from the offshore entity, and may also subject relevant PRC residents to penalties under PRC foreign exchange administration regulations.

     As a Cayman Islands company, and therefore a foreign entity, if Focus Media Holding purchases the assets or equity interest of a PRC company owned by PRC residents in exchange for our equity interests, such PRC residents will be subject to the registration procedures described in Notice 75. Moreover, PRC residents who are beneficial holders of our shares are required to register with SAFE in connection with their investment in us.

     As a result of the lack of implementing rules and other uncertainties relating to the interpretation and implementation of Notice 75, we cannot predict how these regulations will affect our business operations or strategies. For example, our present or future PRC subsidiaries’ ability to conduct foreign exchange activities, such as remittance of dividends and foreign-currency- denominated borrowings, may be subject to compliance with such SAFE registration requirements by relevant PRC residents, over whom we have no control. In addition, we cannot assure you that any such PRC residents will be able to complete the necessary approval and registration procedures required by the SAFE regulations. We require all the shareholders in Focus Media Holding who are PRC residents to comply with any SAFE registration requirements, but we have no control over either our shareholders or the outcome of such registration procedures. Such uncertainties may restrict our ability to implement our acquisition strategy and adversely affect our business and prospects.

C. Organizational Structure

     Our predecessor company, Shanghai Aiqi Advertisement Co., Ltd., or Aiqi Advertisement, was established by immediate family members of Jason Nanchun Jiang in September 1997 and operated as an advertising agency. In

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May 2003, Aiqi Advertisement discontinued its advertising agency business, was renamed Shanghai Focus Media Advertisement Co., Ltd., commenced operation of our out-of-home television advertising network in China and reorganized its shareholdings. At the same time, we entered into arrangements with Focus Media Advertisement that resulted in the consolidation of Focus Media Advertisement. Following this reorganization Jason Nanchun Jiang continued to hold a controlling interest in Focus Media Advertisement.

     In conjunction with the change in our business model in May 2003 and to facilitate foreign investment in our company, we established our offshore holding company, Focus Media Holding Limited as a company registered in the British Virgin Islands in April 2003. In April 2005, we completed the process of changing Focus Media Holding Limited’s corporate domicile to the Cayman Islands and we are now a Cayman Islands company. On July 13, 2005, our ADSs were listed for quotation on the Nasdaq National Market.

     In January 2006, we acquired Framedia and E-Times, which operate networks of advertising poster frames placed primarily in elevators and public areas of residential complexes in China. In February 2006, we acquired Target Media. Target Media operated an out-of-home advertising network using flat-panel displays placed in elevator lobbies and other public areas in commercial buildings, hospitals, hotels, banks, residential buildings, convenience stores and other locations in cities in China. Following the acquisition of Target Media, we combined Target Media’s network into our existing commercial location and in-store networks. Other than holding their existing contracts, the former Target Media entities no longer conduct any operations, and the combined network is operated through our existing corporate entities. In March 2006, we acquired Focus Media Wireless, which operates a WAP-based advertising delivery platform on the mobile telecommunications networks of China Mobile and China Unicom. In March 2007, we acquired Allyes, which operates an Internet advertising marketing services and technology business. In January 2008, we acquired CGEN, which operates digital advertising displays in large chain stores in China.

Our Corporate Structure and Contractual Arrangements

     Substantially all of our operations are conducted in China as follows:

• with regard to the operation of our digital out-of-home advertising network, through Focus Media Technology, our indirect wholly-owned subsidiaries in China, Focus Media Digital, a 90%-owned subsidiary of Focus Media Technology, and New Focus Media Advertisement, New Focus Media Agency, Focus Media Defeng Advertisement, all of which are 90%-owned subsidiaries of Focus Media Digital, and through our contractual arrangements with several of our consolidated affiliated entities in China, including Focus Media Advertisement, and its subsidiaries. Focus Media Advertisement owns the remaining 10% equity interest in Focus Media Digital and New Focus Media Advertisement, New Focus Media Agency, Focus Media Defeng Advertisement and Shanghai CGEN Digital Media Network Co., Ltd.; and through Framedia Advertisement, Guangdong Framedia and New Structure Advertisement, each of which is 90% owned by Focus Media Advertisement and 10% owned by Focus Media Advertising Agency, respectively;

• with regard to the operation of our mobile handset advertising network, through Focus Media Wireless, which is 90% owned by Focus Media Advertisement and 10% owned by Focus Media Advertising Agency, respectively; and

• with regard to the operation of our the Internet advertising marketing agency business of Allyes, through seven PRC operating companies, which we refer to as the Allyes operating affiliates, each of which is owned by PRC citizens.

     Each of our PRC operating subsidiaries and their respective affiliated entities and shareholders, have entered into contractual arrangements substantially similar to those control agreements entered into among Focus Media Technology, Focus Media Digital, New Focus Media Advertisement, New Focus Media Agency, Focus Media Defeng Advertisement, Focus Media Advertisement and its shareholders and subsidiaries. See “Item 7.B Major Shareholders and Related Party Transactions—Related Party Transactions — Agreements Among Our Wholly Foreign-Owned Enterprises, PRC Operating Affiliates and Their Respective Shareholders”.

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     The following diagram of our current corporate structure includes our primary businesses and the primary entities involved in the operation of those businesses, and excludes dormant entities and entities, which aside from holding existing contracts, no longer conduct any operations:

(1)	Loans used to capitalize our PRC operating companies and to facilitate our control over them.
(2)	Agreements that give us effective control over our PRC operating affiliates and their respective subsidiaries, as described in “Item 7.B Major Shareholders and Related Party Transactions—Related Party Transactions”.
(3)	Agreements that transfer a substantial portion of the economic benefits of our PRC operating affiliates and their respective subsidiaries to us, as described in “Related Party Transactions”.
(4)	Each of our PRC operating affiliates is owned by two or more PRC shareholders, which are in each case either (i) PRC citizens designated by us or our subsidiaries or (ii) PRC entities owned by our subsidiaries or by our designated appointees.
(5)	The wholly-owned entities relating to our out-of-home television network operations include New Focus Media Technology, Focus Media Technology, Focus Media Digital and New Focus Media Digital. These consist of subsidiaries of Focus Media Advertisement, which holds between 60% and 99% of the subsidiaries, with the remaining minority interest held by Jimmy Wei Yu, Focus Media Advertising Agency or unrelated third parties.
(6)	The PRC operating affiliates engaged in the operating of our poster frame network include: New Structure Advertisement, Framedia Advertisement and Guangzhou Framedia.
(7)	The Allyes operating affiliates engaged in the operation of our online advertising agency business consist of seven different companies under our control.
(8)	Our out-of-home television network operations comprise our commercial location, in-store, outdoor LED and movie theater networks.

     In connection with its entry into the World Trade Organization, China is required to relax restrictions on foreign investment in the advertising, telecommunications and Internet industries in China. Accordingly, PRC regulations stipulate that starting from December 10, 2005, foreign investors are allowed to directly own 100% of PRC companies operating an advertising business if the foreign entity has at least three years of direct operations in the advertising business outside of China or to directly own less than 100% if the foreign entity has at least two years of direct operations in the advertising business outside of China. We do not currently directly operate an advertising business outside of China and cannot qualify for direct ownership of a PRC advertising company under PRC regulations any earlier than two or three years, respectively, after we commence any such operations or until we acquire a company which has directly operated an advertising business for the required period of time. We do not currently know how or when we will be able to qualify under these regulations. Even if we do qualify in the future, it may be burdensome or not cost effective for us to meet the required criteria for direct ownership. If and when we qualify for direct ownership, we intend to explore the commercial feasibility of changing our current structure, including possibly direct ownership of our PRC operating affiliates and their respective subsidiaries, taking into consideration relevant cost, market, competitive and other factors. In the event we take such steps, we cannot assure you that we will be able to identify or acquire a qualified foreign company for a possible future restructuring or that any restructuring we may undertake to facilitate direct ownership will be successful.

     Accordingly, since we have not been involved in the direct operation of an advertising business outside of China, our domestic PRC subsidiaries, Focus Media Technology, Framedia Investment, Focus Media Digital and New Allyes Technology, which are considered foreign-invested, are currently ineligible to apply for the required advertising services licenses in China. Our advertising business is currently mainly provided through contractual arrangements with our consolidated affiliated entities in China, including (i) Focus Media Advertisement and its subsidiaries with regard to our commercial location, in-store and outdoor LED networks, (ii) Framedia Advertisement, Guangdong Framedia and New Structure Advertisement with regard to our poster frame network, (iii) Focus Media Wireless with regard to our mobile handset advertising network, and (iv) each of seven Allyes operating affiliates, and each of their respective shareholders. Focus Media Advertisement is owned by two PRC citizens, Jason Nanchun

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Jiang, our chairman, and Jimmy Wei Yu, one of our directors. Each of Framedia Advertisement, Guangdong Framedia, New Structure Advertisement, Focus Media Wireless and Shanghai CGEN Digital Media Network Co., Ltd., or CGEN Digital Media, is owned by Focus Media Advertisement and Focus Media Advertising Agency. Each of the Allyes operating affiliates is owned by two PRC citizens. Each of Focus Media Advertisement, several of its subsidiaries, New Focus Media Advertisement, New Focus Media Agency, Focus Media Defeng Advertisement, Framedia Advertisement, Guangdong Framedia, New Structure Advertisement, Focus Media Wireless, the Allyes operating affiliates and CGEN Digital Media, which we refer to collectively as our PRC operating affiliates, holds the requisite licenses to provide advertising, telecommunications or Internet services in China, as applicable. In 2006, we began operating a portion of our advertising business through our 90%-owned indirect subsidiary Focus Media Advertisement after which time we will no longer entirely rely on contractual arrangements with our PRC operating affiliates and their respective subsidiaries and shareholders for the operation of our advertising business.

     We have been and are expected to continue to be dependent on our PRC operating affiliates to operate our advertising business until we acquire them as our wholly-owned subsidiaries. We and Focus Media Technology, Focus Media Digital, New Focus Media Advertisement, New Focus Media Agency, Focus Media Defeng Advertisement, Framedia Investment, Dotad Technology, New Allyes Information Technology (Shanghai) Co., Ltd., New Allyes Technology and CGEN Digital, which we refer to as our wholly-foreign owned entities, have entered into contractual arrangements with their respective PRC operating affiliates and shareholders, pursuant to which:

• we are able to exert effective control over our PRC operating affiliates;

• a substantial portion of the economic benefits of our PRC operating affiliates will be transferred to us; and

• each of our wholly-foreign owned entities or their respective designees has an exclusive option to purchase all or part of the equity interests in our PRC affiliated entities or their respective nominee holders, or, in some cases, all or part of the assets of our PRC affiliated entities, in each case when and to the extent permitted by PRC law.

     Each of our contractual arrangements with our PRC affiliated entities and their respective shareholders and subsidiaries can only be amended with the approval of our audit committee or another independent body of our board of directors. See “Item 7.B Major Shareholders and Related Party Transactions—Related Party Transactions” for further information on our contractual arrangements with these parties.

     In the opinion of Global Law Office, our PRC legal counsel:

• the respective ownership structures of Focus Media, Framedia, Focus Media Wireless, Allyes, CGEN, their respective PRC operating affiliates and subsidiaries are in compliance with existing PRC laws and regulations;

• the contractual arrangements among Focus Media, Framedia, Focus Media Wireless, Allyes, CGEN, their respective PRC operating affiliates, subsidiaries and shareholders, in each case governed by PRC law are valid, binding and enforceable, and will not result in any violation of PRC laws or regulations currently in effect; and

• the PRC business operations of Focus Media, Framedia, Focus Media Wireless, Allyes, CGEN and their respective PRC operating affiliates and subsidiaries as described in this annual report, are in compliance with existing PRC laws and regulations in all material respects.

     We have been advised by our PRC legal counsel, however, that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations. Accordingly, there can be no assurance that the PRC regulatory authorities, in particular the SAIC which regulates advertising companies, will not in the future take a view that is contrary to the above opinion of our PRC legal counsel. We have been further advised by our PRC counsel that if the PRC government finds that the agreements that establish the structure for operating our PRC advertising business do not comply with PRC government restrictions on foreign investment in advertising

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businesses, we could be subject to severe penalties. See “Item 7.B Major Shareholders and Related Party Transactions—Risk Factors — If the PRC government finds that the agreements that establish the structure for operating our China business do not comply with PRC governmental restrictions on foreign investment in the advertising industry, we could be subject to severe penalties”, “— Our business operations may be affected by legislative or regulatory changes” and “— The PRC legal system embodies uncertainties which could limit the legal protections available to you and us”.

Subsidiaries of Focus Media Holding Limited

     An exhibit containing a list of our direct subsidiaries has been filed with this annual report.

     As described in the corporate structure section above, in addition to our direct and indirect subsidiaries, we also operate our businesses through affiliated operating entities that we control through contractual relationships. Our primary PRC operating affiliates include:

• with respect to our digital out-of-home advertising networks, Focus Media Advertisement and its subsidiaries, New Structure Advertisement, Framedia Advertisement and Guangdong Framedia;

• with respect to our wireless advertising services, Focus Media Wireless; and

• with respect to our online advertising agency business, Shanghai MSN Advertising Co., Ltd., Shanghai Huxin Advertising Co., Ltd., Shanghai Quanshi Advertising Co., Ltd., Shanghai Kuantong Advertising Co., Ltd., Beijing Quanshi Advertising Co., Ltd., Shanghai Allyes Advertising Co., Ltd., and Shenzhen Baifen Creative Advertising Co., Ltd., and their respective subsidiaries, which seven companies and additional subsidiaries we collectively refer to as the Allyes operating affiliates.

D. Property, Plants and Equipment

     Please refer to “—B. Business Overview—Facilities” for a discussion of our property, plants and equipment.

ITEM 4A. UNRESOLVED STAFF COMMENTS

     Not applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

     You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report. Our consolidated financial statements have been prepared in accordance with U.S. GAAP. In addition, our consolidated financial statements and the financial data included in this annual report reflect our reorganization and have been prepared as if our current corporate structure had been in place throughout the relevant periods. The following discussion and analysis contain forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. For additional information regarding these risks and uncertainties, see “Item 3.D Key Information — Risk Factors”.

Overview

     Our out-of-home advertising network consists of (i) our commercial location netowrk (including our outdoor LED, movie theater networks), in-store network, and our poster frame network, which we collectively refer to as our digital out-of-home television networks, (ii) our mobile handset advertising network and (iii) our Internet advertising agency business. We have experienced significant revenue and earnings growth, and the size of our network has grown significantly, since the commercial launch of our advertising network in May 2003.

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     The significant increase in our operating results since we commenced our current business operations is attributable to a number of factors, including the substantial expansion of our flat-panel display network, the launch and ongoing expansion of our in-store network, the commencement of operations of our poster frame network, the successful execution of strategic acquisitions, such as our acquisition of Framedia, Target Media, Focus Media Wireless, Allyes and CGEN, and the growing acceptance of our multi-platform network as an appealing advertising medium by our clients.

     We expect our future growth to be driven by a number of factors and trends including:

• Overall economic growth in China, which we expect to contribute to an increase in advertising spending in major urban areas in China where consumer spending is concentrated;

• Our ability to increase sales of advertising time slots and extend the duration of our advertising cycle on our commercial location and in-store networks;

• Our ability to expand our client base through promotion of our services and cross-selling;

• Our ability to identify and create new advertising channels by establishing separate advertising networks that enable advertisers to target a diverse range of consumer groups with specific demographic profiles;

• Our ability to successfully enter into the mobile handset network advertising business, in part through our acquisition of Focus Media Wireless;

• Our ability to successfully operate and market our new outdoor LED network;

• Our ability to successfully operate and market our new Internet advertising marketing and technology agency; and

• Our ability to acquire companies that operate advertising businesses complementary to our existing operations.

     Because our primary source of revenue is our advertising service revenue, we focus on factors that directly affect our advertising service revenue such as the number of advertising time slots that we have available for sale and the price we charge for our advertising time slots after taking into account any discounts.

     As we continue to expand our network, we expect to face a number of challenges. We have expanded our network rapidly, and we, as well as our competitors, have occupied many of the most desirable locations in China’s major cities. In order to continue expanding our network in a manner that is attractive to potential advertising clients, we may continue to enter into new advertising media platforms and to establish additional stand-alone networks that provide effective channels for advertisers. In addition, we must react to continuing technological innovations, such as the potential uses of wireless and broadband technology in our network, and changes in the regulatory environment.

     Our financial results for 2006 also include those of Framedia that we acquired on January 1, 2006, of Target Media that we acquired on February 28, 2006 and, starting in the second quarter of 2006, those of Focus Media Wireless that we acquired in March 2006. Starting in the second quarter of 2007, our financial results include those of Allyes, the acquisition of which we completed in March 2007. Our financial results for 2008 will include those of CGEN, which we acquired in January 2008.

Revenues

     In 2005, 2006 and 2007, we had total revenues of $68.2 million, $211.9 million and $506.6 million, respectively. We generate revenues primarily from the sale of advertising time slots on our out-of-home television advertising networks and, beginning in 2006, from the sale of frame space on our poster frame network. Our advertising service revenue includes the sale of advertising time slots on our network, as well as a small amount of revenue attributable to other advertising related services we provide to our advertising clients. We also derive

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revenues from the sale of our flat-panel displays to regional distributors, which we refer to as our advertising equipment revenue. In 2005, 2006 and 2007, our advertising service revenue accounted for 98.0%, 99.1% and 99.8% of our total revenues, respectively. The following table sets forth a breakdown of our total revenues for the periods indicated:

	For the year ended December 31,
	2005					2006					2007
			% of					% of					% of
			total					total					total
	$		revenues			$		revenues			$		revenues
	(in thousands of U.S. dollars, except percentages)
Net revenues:
Commercial location network(1)	$	61,435		90.0	%	$	132,601		62.3	%	$	220,683		43.5	%
In-store network:(1)		5,469		8.0	%		26,907		12.7	%		27,444		5.4	%
Poster frame network(1)		—		—			40,904		19.3	%		85,472		16.9	%
Mobile Handset Advertising Network		—		—			10,101		4.8	%		46,909		9.3	%
Internet Advertising Network		—		—			—		—			124,938		24.7	%
Advertising service revenue		66,904		98.0	%		209,973		99.1	%		505,446		99.8	%
Other revenue		1,325		2.0	%		1,932		0.9	%		1,114		0.2	%
Total revenues	$	68,229		100.0	%	$	211,905		100.0	%	$	506,560		100.0	%
Net revenues:

(1) Advertising service revenue is presented net of business tax. Business tax on advertising service revenue from our commercial location network amounted to $6.0 million, $13.6 million and $19.9 million in 2005, 2006 and 2007, respectively. Business tax on advertising service revenue for our in-store network amounted to $2.8 million and $2.8 million in 2006 and 2007, respectively. Business tax on advertising service revenue for our poster frame network amounted to $4.0 million and $7.9 million for 2006 and 2007, respectively. Business tax on advertising service revenue for our mobile handset advertising network amounted to $0.8 million and $1.6 million in 2006 and 2007, respectively. Business tax for our Internet advertisings service revenue amounted to $5.0 million in 2007. Business tax includes business tax ranging from 3% to 5.55% and cultural industries tax of ranging from 0% to 4.0% of our gross advertising service revenue.

     We also break down our total revenues into related-party and unrelated-party sources. The following table presents a more detailed breakdown of our gross revenues and its component parts:

	For the year ended December 31,
	2005				2006				2007
	(in thousands of U.S. dollars, except percentages)
Gross Revenue:
Commercial Locations
— Unrelated parties	$	59,435	87.1	%	$	130,474	61.6	%	$	238,119	47.0	%
— Related parties		7,991	11.7	%		15,228	7.2	%		2,468	0.5	%
Total Commercial Locations		67,426	98.8	%		145,702	68.8	%		240,587	47.5	%
In-store Network
— Unrelated parties		5,475	8.0	%		25,330	12.0	%		28,986	5.7	%
— Related parties		518	0.8	%		4,380	2.0	%		1,301	0.3	%
Total in-store network		5,993	8.8	%		29,710	14.0	%		30,287	6.0	%
Poster Frame Network
— Unrelated parties		—	—			44,893	21.2	%		93,157	18.4	%
— Related parties		—	—			—	—			244	0.0	%
Total Poster Frame Network		—	—			44,893	21.2	%		93,401	18.4	%
Mobile Handset Advertising Network
— Unrelated parties		—	—			10,880	5.1	%		48,407	9.6	%
— Related parties		—	—			—	—			114	0.0	%
Total Mobile Handset Advertising network		—	—			10,880	5.1	%		48,521	9.6	%
Internet Advertising Network
— Unrelated parties		—	—			—	—			128,830	25.4	%
— Related parties		—	—			—	—			1,140	0.2	%
Total Internet Advertising network		—	—			—	—			129,970	25.7	%
Gross Advertising Services Revenue:		73,419	107.6	%		231,185	109.1	%		542,766	107.4	%
Less: Sales taxes:
Commercial Locations		5,991	8.8	%		13,641	6.4	%		19,904	3.9	%
In-store Network		524	0.8	%		2,803	1.3	%		2,843	0.6	%
Poster Frame Network		—	—			3,989	1.9	%		7,929	1.6	%

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	For the year ended December 31,
	2005				2006				2007
	(in thousands of U.S. dollars, except percentages)
Mobile Handset Advertising Network.		—	—			779	0.4	%		1,612	0.3	%
Internet Advertising Network		—	—			—	—			5,032	1.0	%
Total sales taxes		6,515	9.6	%		21,212	10.0	%		37,320	7.4	%
Net Advertising Service Revenue		66,904	98.0	%		209,973	99.1	%		505,446	99.8	%
Add:
Other revenue:		1,325	2.0	%		1,932	0.9	%		1,114	0.2	%
Net revenues:	$	68,229	100.0	%	$	211,905	100.0	%	$	506,560	100.0	%

Advertising Service Revenue

     Sources of Revenues. We derive most of our total revenues from the sale of time slots on our commercial location network and our in-store network to unrelated third parties and to some of our related parties. We report our advertising revenue between related and unrelated parties because historically more than 10% of our advertising service revenues came from clients related to some of our directors. Our advertising services to related parties were provided in the ordinary course of business on the same terms as those provided to our unrelated advertising clients on an arm’s-length basis.

     Our advertising service revenue is recorded net of any sales discounts and agency commissions from our standard advertising rate cards that we may provide to our advertising clients. These discounts include volume discounts and other customary incentives offered to our advertising clients, including additional broadcast time for their advertisements if we have unused time slots available in a particular city’s advertising cycle, and represent the difference between our standard rate card and the amount we charge our advertising clients. Our advertising clients include advertisers that directly engage in advertisement placements with us and advertising agencies retained by some advertisers to place advertisements on the advertiser’s behalf. We expect that our advertising service revenue will continue to be the primary source, and constitute the substantial majority of, our revenues for the foreseeable future.

     Our advertising service revenue reflects a deduction for business taxes and related surcharges incurred in connection with the operations of Focus Media Advertisement and its subsidiaries. Their revenues are subject to a sales tax consisting of approximately ranging from 3% to 5.55% business tax plus a cultural industries tax ranging from 0% to 4.0% on revenues earned from their advertising services provided in China. We deduct these amounts from our advertising service revenues to arrive at our total revenues attributable to advertising services.

Factors that Affect Our Advertising Service Revenue.

Digital Out-of-home Advertising Service Revenues

     Prices for advertising services on our digital out-of-home advertising networks also vary significantly from city to city as income levels, standards of living and general economic conditions vary significantly from region to region in China, which in turn affect the advertising rates we are able to charge for time slots and frame space.

Commercial Location Network

     Our advertising service revenue derived from our commercial location network is directly affected by the average price we charge for the advertising package provided to our customers, after taking into account any discount offered, as well as by the following factors:

• LCD display network. The number of flat-panel displays in our network and the desirability, quality and pedestrian traffic of the locations where we are able to lease space to install our flat-panel displays;

• Outdoor LED billboard network. The number of publicly placed LED billboards in our network and the desirability, quality and pedestrian traffic of the locations of the LED billboards we own or lease from third-parties; and

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• Movie theater advertising network. The number of movie theaters in which we have leased screen time, our expansion into additional theaters, and the length of the leased screen time, which is currently three minutes per screening per theater prior to movie screenings at movie theaters.

In-store Network

     Our advertising service revenue derived from our in-store network is directly affected by the number of flat-panel displays in our network, the number of hypermarkets, supermarkets and convenience stores in the network, and the average price we charge for the advertising package provided to our customers, after taking into account any discount offered.

Poster Frame Network

     Our advertising service revenue derived from our poster frame network is directly affected by:

• the number of frames in our poster frame network. We sell frame space on our poster frame network on a per frame basis. Increasing the number of residential and other locations on our poster frame network allows us to increase the number of frames on our network, thereby increases the available frame space for sale to advertisers As we upgrade the network to incorporate more digital poster frames, we will also increase the available space as multiple advertisements can be placed on a digital frame on time-shared basis; and

• the average price we charge for frame space on a per frame basis, after taking into account any discount offered.

Mobile Handset Advertising Service Revenues

     Prior to April 1, 2008, our advertising service revenue derived from our mobile handset advertising network was directly affected by:

• the number of messages we deliver to mobile phone users. We charge advertisers fees based on the number of successfully delivered messages; and

• the average price we charge per message.

     Subsequent to April 1, 2008, our advertising service revenue derived from our mobile handset advertising network is directly affected by:

• the number of times mobile phone users access WAP-based content that contains our advertising content. We charge advertisers fees based on the number of user accesses; and

• the average price we charge per access.

Internet Advertising Service Revenues

     As of March 2007, we derive revenue from our Internet advertising business operated by Allyes. Our advertising service revenue derived from our Internet advertising services is directly affected by:

• the number of customers who purchase agency services from us. We agree to provide advertising agency services and technology, and we charge fees based on the size and duration of the advertising campaign and the number of daily impressions or “hits” on the Internet advertisement; and

• our ability to identify relevant Internet user traffic and deliver effective advertisements for our advertising clients

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     Network Expansion. Many of the most desirable locations for our digital out-of-home advertising network have been occupied, either by our network as a result of our expansion or by our competitors. As a result, we will need to rely on means other than the rapid increase in the number of locations, flat-panel displays, LED billboards and advertising poster frames in order to continue growing our revenues. We have focused, and expect to continue to focus, on developing new channels in our out-of-home television advertising networks and entering into new types of advertising media operations to continue to grow our revenues and to address these potential capacity constraints on our existing network. These steps have included: (1) expanding our digital out-of-home advertising network through increasing the size and scope of our existing commercial location, in-store and poster frame networks, and adding new media such as LED billboards and movie theater screens to our out-of-home television networks, (2) establishing discrete stand-alone channels on our commercial location network, such as our premier A and B office building, travel, fashion, elite and healthcare channels and (3) expanding our media platform into new areas such as mobile handset advertising services and Internet advertising services and software packages. We expect to continue to explore opportunities to open up additional channels on our existing network and to enter into new advertising media platforms in China. We intend to continue expanding our out-of-home advertising network both through increasing the number of locations, displays and advertising poster frames on our commercial location, in-store and poster frame networks and through strategic acquisition of competitors and businesses that complement our existing out-of-home advertising network. In addition, we entered into new advertising platforms through Focus Media Wireless’ mobile handset advertising network and our outdoor LED billboard network, and into Internet advertising services through our recent acquisition of Allyes. We believe these measures will enable us to continue the future growth of our business.

     Seasonality. Our advertising service revenue is subject to key factors that affect the level of advertising spending in China generally. In addition to fluctuations in advertising spending relating to general economic and market conditions, advertising spending is also subject to fluctuations based on the seasonality of consumer spending. In general, a disproportionately larger amount of advertising spending is concentrated on product launches and promotional campaigns prior to the holiday season in December. In addition, advertising spending generally tends to decrease in China during January and February each year due to the Chinese Lunar New Year holiday as office buildings and other commercial venues in China tend to be closed during the holiday. We believe this effect will be less pronounced with regard to advertising spending on our in-store network, as we believe commercial activity in hypermarkets and supermarkets is stable or even enhanced during the period of Chinese Lunar New Year. We also experience a slight decrease in revenues during the hot summer months of July and August each year, when there is a relative slowdown in overall commercial activity in urban areas in China. Our past experience, although limited, indicates that our revenues would tend to be lower in the first quarter and higher in the fourth quarter of each year, assuming other factors were to remain constant, such as our advertising rates and the number of available time slots on our network.

     Revenue Recognition. We typically sign standard advertising contracts with our advertising clients, which require us to run the advertiser’s advertisements on our network in specified cities for a specified period, typically from four to twelve weeks. We recognize advertising service revenue ratably over the performance period of the advertising contract, so long as collection of our fee remains probable. We do not bill our advertising clients under these contracts until we perform the advertising service by broadcasting the advertisement on our network. Revenue collected from our poster frame network is recognized in substantially the same manner as revenues collected under the advertising contracts used for our commercial location and in-store networks.

     Revenues primary consist of revenues from advertising and advertising-related services and revenues from sales of Adforward software.

     Advertising revenues, net of agency rebates are recognized ratably over the period in which the advertisement is displayed. Advertising revenues are recognized in accordance with Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition in Financial Statements” (“SAB 104”). In accordance with SAB 104, revenues are recognized when all four of the following criteria are met: (i) persuasive evidence of agreement exists; (ii) delivery of service has occurred; (iii) the price is both fixed and determinable; and (iv) collection of the resulting receivable is reasonably assured. The Company sells Adforward subscriptions and perpetual licenses. Revenues are recognized for subscription arrangements ratably over the subscription period for those with fixed fees and as earned (based on actual usage) under our variable fee arrangements. Under perpetual license agreements, revenue recognition is generally commenced when delivery has occurred, software has been installed and training has been

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provided as the Company does not currently have vendor-specific objective evidence of fair value, or VSOE, for either installation or training services.

     Revenue primarily consists of service revenue for delivering advertisement and other messages to the targeted mobile phone devices through channels provided by telecommunication vendors. Revenues from such services, net of agency rebates, are recognized when these messages are delivered to the vendor’s channels. Accordingly, revenue is recognized when all four of the following criteria are met: (i) pervasive evidence that an arrangement exists; (ii) delivery of the services has occurred; (iii) the selling price is both fixed and determinable; and (iv) collection of the resulting receivable is reasonably assured. Prepayments for the advertising services are deferred and recognized as revenue when the advertising services are rendered.

     We generally collect our advertising service fees by billing our advertising clients within 60 to 90 days after completion of the advertising contract and book these unbilled or unpaid amounts as accounts receivable until we receive payment or determine the account receivable to be uncollectible.

     Our accounts receivable are general unsecured obligations of our advertising clients and we do not receive interest on unpaid amounts. We make specific reserves for accounts that we consider to be uncollectible. We also provide a general reserve for uncollectible accounts that we reassess on an annual basis. In 2005, 2006 and 2007, we made provision of $235,604, $1,844,605 and $3,655,448, respectively, for accounts receivable that were outstanding for longer than six months. The average number of days outstanding of our accounts receivable, including from related parties, was 71, 71 and 92, respectively, as of December 31, 2005, 2006 and 2007.

Other Revenue

     We also derive a portion of our total revenues from the sale of flat-panel displays to our regional distributors on a cost-plus basis, which we record as advertising equipment revenue. Our advertising equipment revenue represented 2.0%, 0.9% and 0.2% of our total revenues in 2005, 2006 and 2007, respectively. Our advertising equipment revenue is recorded net of the 17% value added tax to which equipment sales in China are subject. We expect that advertising equipment sales as a percentage of our total revenues will continue to be low.

Cost of Revenues

     Our cost of revenues consists of costs directly related to the offering of our advertising services and costs related to our sales of advertising equipment.

     The following table sets forth our cost of revenues, divided into its major components, by amount and percentage of our total revenues for the periods indicated:

	For the year ended December 31,
	2005					2006					2007
			% of					% of					% of
			total					total					total
	$		revenues			$		revenues			$		revenues
	(in thousands of U.S. dollars, except percentages)
Total revenues	$	68,229		100.0	%	$	211,905		100	%	$	506,560		100	%
Cost of revenues:
Net advertising service cost:
Commercial location network		18,611		27.3	%		42,836		20.2	%		79,625		15.7	%
In-store network		7,137		10.5	%		18,106		8.5	%		23,502		4.6	%
Poster frame network		—		—			13,621		6.4	%		28,086		5.5	%
Mobile Handset network		—		—			6,052		2.9	%		23,193		4.6	%
Internet Advertising		—		—			—		—			93,238		18.4	%
Advertising service cost		25,748		37.8	%		80,615		38.0	%		247,644		48.8	%
Other cost		976		1.4	%		765		0.4	%		798		0.2	%
Total cost of revenues		26,724		39.2	%		81,380		38.4	%	$	248,442		49.0	%
Gross profit	$	41,505		60.8	%	$	130,525	$	61.6	%	$	258,118		51.0	%

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Advertising Service Costs

     Our cost of revenues related to the offering of our advertising services on our advertising network consists of location costs, flat-panel display depreciation costs and other cost items, including salaries for and travel expenses incurred by our network maintenance staff and costs for materials.

     Our location costs for our out-of-home television networks consist of:

• rental fees and one-time signing payments we pay to landlords, property managers and stores pursuant to the display placement agreements we enter into with them;

• commissions and public relations expenses we incur in connection with developing and maintaining relationships with landlords and property managers; and

• maintenance fees for keeping our displays in proper operating condition.

     Generally, we capitalize the cost of our media displays and recognize depreciation costs on a straight-line basis over the term of their useful lives, which we estimate to be five years. The primary factors affecting our depreciation costs are the number of flat-panel displays in our network and the unit cost for those displays, as well as the remaining useful life of the displays. We expect our results of operations for a period of at least seven years beginning in 2006 to be negatively affected by the amortization of intangible assets in relation to, among other things, material contracts and customer lists as a result of several acquisitions, particularly Framedia and Target Media.

     Our other cost of revenues consists of salary for and travel expenses incurred by our network maintenance staff and costs for materials and maintenance in connection with the upkeep of our advertising network. The primary factor affecting our other costs of revenues is the size of our network maintenance staff. As the size of our network increases, we expect our network maintenance staff, and associated costs, to increase in absolute terms, but to decrease as a percentage of total revenues.

     Commercial Location Network. Location costs are the largest component of our cost of revenues for our commercial location network. The primary factors affecting the amount of our location costs include the number of display placement agreements we enter into and the rental fees we pay under those agreements. We expect these costs to decrease as a percentage of our advertising service revenue for our commercial location network in the future, as our advertising service revenue for our commercial location network is expected to increase faster than the additional cost we incur from entering into new display placement agreements and any increases we may experience in renewing existing display placement agreements. However, when our display placement agreements expire, we may be unable to renew these agreements on favorable terms and the rental fee portion of our location costs attributable to these existing locations could increase. As we continue to increase the size of our network and as we update and replace our existing displays with new technology, our depreciation costs in connection with our commercial location network are expected to increase.

     In-store Network. The primary costs of revenues connected with our in-store network are location costs resulting from rental and maintenance fees and depreciation costs for our displays. We expect these costs to continue to increase in 2006 as we expand our in-store network and to decrease as a percentage of advertising service revenue for our in-store network.

     Poster Frame Network. The primary costs of revenues connected with our poster frame network are location costs resulting from rental fees. Depreciation costs for our frames and other costs for salary and maintenance fees also account for a significant portion of cost of revenues for our poster frame network. We expect these costs to increase in 2006 as we expand our poster frame network but to decrease as a percentage of advertising service revenue for our poster frame network.

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     Wireless handset advertising network. Prior to April 1, 2008, the primary costs of revenues connected with our wireless handset advertising network are message costs charged by mobile advertisers. Since April 1, 2008 when we began focusing on advertising “pull” campaigns, and no longer send advertising messages to consumers without their consent, our primary costs relate to fees we pay to content providers in order to act as their agent for the mobile phone-accessed content they provide.

     Internet advertising services network. The primary costs of revenues connected with our Internet advertising services network are advertising space leasing costs charged by gateway websites and research and development costs in connection with the development of Internet advertising software packages. We expect these costs to increase as we continue to expand this part of our business as Internet use continues to grow in China.

Other Cost

     Our net advertising equipment cost consists of the amounts we pay to the contract assembler who purchases the components and assembles them into the flat-panel displays we sell to our regional distributors. Our net advertising equipment cost accounted for 1.4%, 0.4% and 0.2% of our total revenues in 2005, 2006 and 2007, respectively. The primary factors affecting our net advertising equipment cost are the number of flat-panel displays we sell and the unit cost we pay to our contract assembler for each such flat-panel display.

Operating Expenses and Net Income

     Our operating expenses consist of general and administrative, selling and marketing expenses and amortization of acquired intangible assets. In 2004, our operating expenses also included a goodwill impairment loss. The following table sets forth our operating expenses, divided into their major categories by amount and as a percentage of our total revenues for the periods indicated.

	For the year ended December 31,
	2005					2006						2007
			% of						% of						% of
			total						total						total
	$		revenues			$			revenues			$			revenues
	(in thousands of U.S. dollars, except percentages)
Gross profit	$	41,505		60.8	%	$	130,525			61.6	%	$	258,118			51.0	%
Operating expenses:
General and administrative		9,120		13.4	%		25,723			12.1	%		49,456			9.8	%
Selling and marketing		9,599		14.0	%		25,762			12.2	%		69,932			13.8	%
Other operating income		—		—			(1,338	)		(0.6	%)		(5,125	)		(1.0	%)
Total		18,719		27.4	%		50,147			23.7	%		114,263			22.6	%
Income from operations		22,786		33.4	%		80,378			37.9	%		143,855			28.4	%

     General and Administrative. General and administrative expenses primarily consist of salary and benefits for management and finance and administrative staff personnel, business tax mainly relating to license fees paid by our affiliated PRC companies to Focus Media Advertisement and to Focus Media Digital, office rental, maintenance and utilities expenses, depreciation of office equipment, other office expenses and professional services fees. General and administrative expenses accounted for 13.4%, 12.1% and 9.8% of our total revenues in 2005, 2006 and 2007, respectively. Salaries and benefits accounted for 26.9%, 23.3% and 22.2% of our general and administrative expenses in 2005, 2006 and 2007, respectively. We expect that our general and administrative expenses will be relatively stable as a percentage of total revenues in the near term but to increase in absolute terms as we hire additional personnel and incur additional costs in connection with the expansion of our business and with being a publicly traded company, including costs of enhancing our internal controls.

     Selling and Marketing. Our selling and marketing expenses primarily consist of salaries and benefits, including share-based compensation expense for our sales staff, marketing and promotional expenses, and other costs related to supporting our sales force. Selling and marketing expenses accounted for 14.0%,12.2% and 13.8% of our total revenues in 2005, 2006 and 2007, respectively. As we acquired more of our regional distributors, continue to expand our client base and have commenced operation of new advertising platforms, we increased our sales force,

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which resulted in an increase in salary expenses. We expect selling and marketing expenses to remain relatively stable as a percentage of total revenues.

     Share-based Compensation. Prior to 2006, our share-based compensation expense relating to general and administrative and selling and marketing primarily consists of the amortized portion of deferred share-based compensation recognized by us. We issued options representing 10.87% of our issued share capital under our 2003 Employee Share Option Scheme, or the 2003 Option Plan. In addition, we have issued options representing 3.95% of our issued share capital under our 2005 Share Option Plan, or the 2005 Option Plan. In addition, we have issued options representing 3.6% of our issued share capital under our 2006 Share Option Plan, or the 2006 Option Plan. Our share-based compensation relating to general and administrative accounted for 7.5%, 23.8% and 22.1% of our general and administrative expenses in 2005, 2006 and 2007, respectively. Share-based compensation relating to selling and marketing accounted for 0.5%, 8.1% and 13.6% of our selling and marketing expenses in 2005, 2006 and 2007, respectively. Share-based compensation increased following the effectiveness, as of January 2006, of Statement of Financial Accounting Standards No. 123(R) relating to share-based compensation. As a result, we recorded share-based compensation expense of $21.5million for 2007.

     Amortization of Acquired Intangibles. Our amortization of acquired intangibles consists of the amortized portion of intangible assets we acquired through our acquisition of other companies, businesses and assets. Amortization of acquired intangibles accounted for 0.6%, 2.7% and 4.9% of our total revenues in 2005, 2006 and 2007, respectively.

Critical Accounting Policies

     We prepare our financial statements in conformity with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities on the date of the financial statements and the reported amounts of revenues and expenses during the financial reporting period. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We consider the policies discussed below to be critical to an understanding of our financial statements as their application places the most significant demands on our management’s judgment.

Share-based Compensation

     Through 2005, we accounted for our share option plan using the intrinsic value method under Accounting Principles Board, or APB, No. 25. Effective the beginning of 2006, we adopted Statement of Financial Accounting Standards, or SFAS, No. 123-R, “Share-Based Payment”, and elected to adopt the modified prospective application method. SFAS No. 123-R requires us to use a fair-value based method to account for share-based compensation. Accordingly, share-based expense is measured at the grant date, based on the fair value of the award, and is recognized as expense over the employees’ requisite service period. Our share option plans are described in Note 12 to our consolidated financial statements..

     We estimated the fair value of share options granted using the Black-Scholes-Merton option pricing model, which requires the input of highly subjective assumptions, including the estimated expected life of the share options, estimated forfeitures and the price volatility of the underlying shares. The assumptions used in calculating the fair value of share options represent management’s best estimates, but these estimates involve inherent uncertainies and the applicable of management judgement. As a result, if factors change and we use different assumptions, our share-based compensation expense could be materially different in the future. In addition, we estimate our expected forfeiture rate and recognize the expense only for those shares expected to vest. These estimates are based on past employee retention rates and our expectations of future retention rates. We will prospectively revise our estimated forfeiture rates based on actual history. Our compensation expense may change based on changes to our actual forfeitures of these share options.

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Income Taxes

     We account for income taxes under the provisions of SFAS No. 109, “Accounting for Income Taxes” and effective from January 1, 2007, the Group adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”), with the required disclosures as described in Note 13 to our consolidated financial statements., we record a valuation allowance to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized. In the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of their recorded amount, an adjustment to our deferred tax assets would increase our income in the period such determination was made. Likewise, if we determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to our deferred tax assets would be charged to our income in the period such determination is made. We record income tax expense on our taxable income using the balance sheet liability method at the effective rate applicable to each of our affiliated entities in China in our consolidated statements of operations and comprehensive income.

Goodwill and Long-lived Assets Impairment

We test goodwill for possible impairment on an annual basis as of December 31 of each year and at any other time if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Circumstances that could trigger an impairment test between annual tests include, but are not limited to:

• a significant adverse change in the business climate or legal factors;

• an adverse action or assessment by a regulator;

• unanticipated competition;

• loss of key personnel;

• the likelihood that a reporting unit or a significant portion of a reporting unit will be sold or disposed of;

• a change in reportable segments; and/or

• results of testing for recoverability of a significant asset group within a reporting unit.

As of December 31, 2005, 2006 and 2007, we had a goodwill balance of $13.3 million, $739.7 million and $943.4 million, respectively, which is not deductible for tax purposes. We incurred a goodwill impairment loss of $58,397 in 2004 in connection with our acquisition of Perfect Media which is part of the commercial location reporting segment. In conducting our annual impairment test, we undertook a valuation of Perfect Media using the expected present value of cash flow and the income approach valuation methods, which resulted in a goodwill impairment loss of $58,397 in 2004, indicating that the value of Perfect Media was less than what we paid at the time we acquired it.

The fair value of each reporting unit is determined by allocating our total fair value among our reporting units using a combination of income approach and market approach.

We may incur additional goodwill impairment charges in the future although we cannot predict whether this will occur when we perform our goodwill impairment test each year.

We test long-lived assets for possible impairment if an event occurs or circumstances change that would more likely than not reduce the fair value of an asset group below its carrying amount. Asset recoverability is an area involving management judgement, requiring assessment in two steps as to whether the carrying value of assets can be supported by the undiscounted future cash flows and the net present value of future cash flows derived from such assets using cash flow projections which have been discounted at an appropriate rate. In calculating the net present value of the future cash flows, certain assumptions are required to be made in respect of highly uncertain matters such as revenue growth rates, gross margin percentages and terminal growth rates.

     In March 2008, as a result of uncertainty in the mobile handset advertising industry in PRC, there was a triggering event which required the Group to reevaluate the carrying value of the goodwill and assets of the mobile handset advertising segment. The Group undertook a business restructuring in April 2008 to amend their strategic business plans and is working on the calculations for impairments and the costs related to exit activities.

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Taxation

Cayman Islands, the British Virgin Islands and Hong Kong.

     Under the current laws of the Cayman Islands and the British Virgin Islands, none of Focus Media Holding Limited, and its subsidiaries incorporated in Cayman Islands or the British Virgin Islands, is subject to tax on its income or capital gains. Focus Media Hong Kong, Allyes (China) Holding Company Limited and Hua Kuang Advertising Company Limited, our wholly owned subsidiaries incorporated in Hong Kong, is subject to profits tax rate of 17.5% on its assessable profits, yet interest derived from deposits placed in Hong Kong with authorized institutions is exempted from the Hong Kong profits tax. In addition, payment of dividends by either company is not subject to withholding tax in those jurisdictions.

Taxable Presence Exposure in the PRC

     The newly enacted Enterprise Income Tax Law and its implementation regulations, as discussed below, provides that enterprises established under the laws of foreign countries or regions whose “de facto management bodies” are located within the PRC are considered PRC resident enterprises and will be subject to the PRC Enterprise Income Tax at the rate of 25% on their worldwide income. Under the Implementation Rules of the PRC Enterprise Income Tax Law, as discussed below, a “de facto management body” is defined as a body that has material and overall management and control over manufacturing and business operations, personnel and human resources, finances and treasury, and acquisition and disposition of properties and other assets of an enterprise. Due to the fact that substantially all of our operational management is currently based in the PRC, our Cayman Islands company and BVI company may be deemed as resident enterprises in the PRC. If we are treated as resident enterprises for PRC tax purposes, we will be subject to PRC tax on our worldwide income at the 25% tax rate, which would have an impact on our effective tax rate. Additionally, under such circumstances, dividends distributed from our PRC subsidiaries to our BVI company and ultimately to our Cayman Islands company, could be exempt from Chinese dividend withholding tax, and dividends from our Cayman Islands company to ultimate shareholders would be subject to Chinese withholding tax at 10% or a lower treaty rate.

PRC

     Our PRC entities are subject to PRC business tax. We primarily pay 5% business tax on revenues generated from our commercial location, in-store network, poster frame network and internet advertising business, net any deductible advertising cost for business tax purpose. Revenues generated from our mobile handset advertising business generally pays a 3% business tax on the gross revenues. In addition, in 2005 Focus Media Digital pay a 5% business tax on the gross revenues derived from their contractual arrangements with Focus Media Advertisement and its subsidiaries and these taxes are primarily recorded in operating expenses.

     In addition to business tax and the 4% cultural industries tax imposed on our advertising business and VAT imposed on our sales of advertising equipment, all of our PRC entities are subject to PRC enterprise income tax on their taxable income, except to the extent some of them enjoy temporary tax exempt status as described in further detail below.

     Pursuant to PRC law, prior to January 1, 2008, enterprise income tax is generally assessed at the rate of 33% of taxable income. Most of our PRC entities are currently subject to this 33% enterprise income tax. State Administration of Taxation and its delegates of the PRC are authorized to grant an exemption from enterprise income tax of up to two years to qualifying newly established domestic companies that have no direct foreign ownership and that are financially independent and engaged in consulting services, technology services or the information industry, which includes advertising services. Focus Media Digital and Focus Media Advertising Agency were established in October 2004 and both were granted exemptions from enterprise income tax in 2004 and 2005. In 2006 and 2007, we continued our tax exempt status through New Focus Media Advertisement, New Focus Media Agency, Focus Media Defeng Advertisement, New Structure Advertisement and Focus Media Wireless, which were established during the period from October 2005 to June 2006 and have obtained tax-exempt approval for 2006 and 2007.

     In 2005, Focus Media Advertising Agency has generated revenue by selling time slots on our advertising network and pays a dissemination fee to Focus Media Advertisement and its certain subsidiaries, which places

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advertisements for Focus Media Advertising Agency’s clients on our network. Finally, Focus Media Agency also license technology used in our business operations from Focus Media Digital in exchange for license fees paid to Focus Media Digital. As a result of Focus Media Agency’s amortization of the license fee paid to Focus Media Digital, it incurred a charge to earnings of approximately $23 million in 2005. See “Related Party Transactions” for further information on these transactions and contractual agreements. Although these transactions were eliminated upon consolidation as transactions among members of our consolidated companies for financial accounting purposes, they did have the affect of reducing our total income tax expense and increasing our after tax net income in 2005. As a result of these transactions, our effective tax rates were 2.8% in 2005.

     In December 2005, we established New Focus Media Advertisement which has received tax-exempt approval for 2006 and 2007. We further incorporated New Focus Media Agency and Focus Media Defeng Advertisement in 2006 which also received tax-exempt approval for 2006 and 2007. Besides, New Structure Advertisement, which incorporated in October 2005, also received its tax-exempt approval for 2006 and 2007. Focus Media Wireless, as a high-tech company incorporated in Zhonguancun District, Beijing, China, is exempted from income tax from 2006 to 2008, plus a 50% reduction holiday from 2009 to 2011.

     In December 2005, Focus Media Digital sold all of its flat-panel display equipment to New Focus Media Advertisement at fair market value and Focus Media Digital sold all of its technology to New Focus Media Advertisement in January 2006 at a fixed fee. As of January 2006, New Focus Media Advertisement generates revenue by selling time slots on our advertising network and pays a dissemination fee to Focus Media Advertisement and its certain subsidiaries, which places advertisements for New Focus Media Advertisement’s clients on our network. Both New Focus Media Agency and Focus Media Defeng Advertisement act as advertising agencies for New Focus Media Advertisement and receives agency fees and retains a reasonable profit generated from their various operating activities. The reasonable profit is determined according to function and risk analysis for each of our major subsidiaries and VIEs and the comparable market profit rates we obtained from time to time. While these transactions are eliminated upon consolidation as transactions among members of our consolidated companies for financial accounting purposes, they did have the affect of reducing our total income tax expenses and increasing our after tax net income. As a result, our effective tax rate was 1.3% and 7.0% for 2006 and 2007, respectively. See “Related Party Transactions” for further information on these transactions and contractual agreements. In addition, upon expiration of these tax exemptions, we will consider available options, in accordance with applicable law, that would enable us to qualify for further tax exemptions, if any, to the extent they are then available to us.

     Under PRC law, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. If any of the transactions described above are found not to be on an arm’s-length basis, or to result in an unreasonable reduction in tax under PRC law, the PRC tax authorities have the authority to disallow our tax savings, adjust the profits and losses of our respective PRC entities and assess late-payment interest and penalties. A finding by the PRC tax authorities that we are ineligible for the tax savings we achieved in 2005, 2006 and 2007, or that Focus Media Digital, Focus Media Advertising Agency, New Focus Media Advertisement, New Structure Advertisement, or Framedia Advertisement are ineligible for their tax exemptions, would substantially increase our taxes owed and reduce our net income and the value of your investment. As a result of this risk, you should evaluate our results of operations and financial condition without regard to these tax savings. See “Risk Factors — Risks Relating to Regulation of Our Business and to Our Structure — Contractual arrangements we have entered into among our subsidiaries and affiliated entities may be subject to scrutiny by the PRC tax authorities and a finding that we owe additional taxes or are ineligible for our tax exemption, or both, could substantially increase our taxes owed, and reduce our net income and the value of your investment.”

     On March 16, 2007, the National People’s Congress of China enacted a new Enterprise Income Tax Law, which took effect beginning January 1, 2008. On December 6, 2007, the State Council approved and promulgated the Implementation Rules of the PRC Enterprise Income Tax Law, which took effect simultaneously with the new tax law. Under the new tax law, domestically-owned enterprises and foreign-invested enterprises are subject to a uniform tax rate of 25%. The new tax law provides a five-year transition period starting from its effective date for certain qualifying enterprises which were established before the promulgation date of the new tax law and which were entitled to a preferential tax rate under the then effective tax laws or regulations. In accordance with the Notice of the State Council Concerning Implementation of Transitional Rules for Enterprise Income Tax Incentives, tax rate of such qualifying enterprises will gradually transition to the uniform tax rate within such transition period. Most of our PRC subsidiaries or VIEs’ tax holiday will expire after 2007.

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While the new tax law equalizes the tax rates for FIEs and domestically-owned enterprises, preferential tax treatment would continue to be given to companies in certain encouraged sectors and to those classified as high technology companies enjoying special support from the state. Following the implementation of the new tax law, our effective tax rate may increase, unless we are otherwise eligible for preferential treatment and obtain approvals on preferential treatment from tax bureaus. Under the enterprise income tax law prior to January 1, 2008, to qualify as a “new and high technology enterprise” for PRC enterprise income tax purposes, a business entity generally must meet certain financial and non-financial criteria, including, but not limited to:

• the technology researched and developed by the company falling into the high technology category promulgated by PRC government;

• a minimum level of revenue generated from high technology related sales or services as a percentage of total revenue;

• a minimum number of employees engaged in research and development;

• a minimum requirement for the education degree of employees; and

• a minimum level of research and development expenses as a percentage of total revenue

     If any of our PRC entities ceases to qualify for their current preferential enterprise income tax rates, we will consider options that may be available at the time that would enable the entities to qualify for other preferential tax treatment. To the extent we are unable to offset the expiration or the inability to obtain preferential tax treatment with new tax exemptions, tax incentives or other tax benefits, our effective tax rate will increase. The amount of income tax payable by our PRC subsidiaries in the future will depend on various factors, including, among other things, the results of operations and taxable income of, and the statutory tax rate applicable to our PRC entities.

     The PRC central or provincial government could eliminate or reduce the preferential tax treatment in the future, which, as a result, would lead to an increase in our effective tax rate. Upon the eventual lapse of the preferential enterprise income tax rates of these subsidiaries, our effective tax rate will increase in the future.

     Most of the Company’s subsidiaries and VIEs are expected to transition from 33% to 25% starting from January 1, 2008. Those that currently enjoy a lower tax rate of 15% as a high and new technology company will transition to the uniform tax rate of 25% from 2008 unless the company obtains the “new and high technology enterprise” status under the new tax law.

Recently Issued Accounting Standards

     In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurement” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value and expands disclosures about assets and liabilities measured at fair value. The Company will be required to adopt SFAS 157 for fiscal year beginning January 1, 2008. The Company is currently evaluating the impact, if any, of SFAS 157 on its financial position, results of operations and cash flows.

     In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact, if any, of SFAS 159 on its financial position, results of operations and cash flows.

     In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”), which replaces SFAS No. 141, “Business Combination.” The statement retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. SFAS 141R is effective for fiscal years and interim periods within those fiscal years beginning on or after December 15, 2008 and will apply prospectively to business combinations completed on or after that date.

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The Company is currently evaluating the impact, if any, of SFAS 141R on its financial position, results of operations and cash flows.

     In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51” (“SFAS 160”), which changes the accounting and reporting for minority interests. Minority interests will be recharacterized as noncontrolling interests and will be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement and, upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. SFAS 160 is effective for fiscal years and interim periods within those fiscal years beginning on or after December 15, 2008 and will apply prospectively, except for the presentation and disclosure requirements, which will apply retrospectively. The Company is currently evaluating the impact, if any, of SFAS 160 on its financial positions, results of operations and cash flows.

Acquisitions

     Since we commenced our current business operations in May 2003, we have acquired numerous companies to expand the coverage of our network in China and to acquire businesses that are complementary to our operations. See “Item 10.C Additional Information — Material Contracts”.

     Some of the businesses we acquired had entities located both in and outside of China. The consideration we paid for these businesses was made in two parts, one part for the entity located in China, and the other part for the entity located outside of China. For consideration paid to acquire entities located in China, we withheld on behalf of sellers who are natural persons 20% of the amount by which the acquisition price exceeded the registered capital of such PRC entity as required under the PRC Individual Income Tax Law and related implementation rules. We were not required to and did not withhold any tax in connection with payments made to acquire the entities located outside of China. See “Item 3.D Key Information — Risk Factors — Risks Relating to the People’s Republic of China — The PRC tax authorities may require us to pay additional taxes in connection with our acquisitions of offshore entities that conducted their PRC operations through their affiliates in China”.

     The financial statements of:

• Allyes Information Technology Company Limited, for the year ended, and as of, December 31, 2006;

• Target Media Holdings, for the periods ended, and as of, December 31, 2004 and 2005; and

• Infoachieve Limited, for the periods ended, and as of, December 31, 2003, 2004 and 2005

     are available in our registration statement on Form F-1 (File No. 333-146913) and the financial statements of:

• Perfect Media Holding Ltd. for the periods ended, and as of, December 31, 2003 and September 30, 2004;

• Focus Media Changsha Holding Ltd., Focus Media Qingdao Holding Ltd. and Focus Media Dalian Holding Ltd. for the period ended, and as of, October 31, 2004; and

• Capital Beyond Limited for the periods ended, and as of, December 31, 2004 and March 31, 2005, respectively,

     are available in our registration statement on Form F-1 (File No. 333-134714).

     In 2007, we also made a number of smaller acquisitions, which, due to the smaller size, does not necessitate our providing their financial statements on a stand alone basis. Among these smaller acquisitions, we acquired eight

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regional distributors in our digital out-of-home netword, five local poster frame companies, ten companies in the mobile advertising sector and six Internet advertising companies (excluding Allyes). No one of these acquisitions was material to our business.

Quarterly Results of Operation

     The following table presents unaudited consolidated quarterly financial data by amount for each of the eight quarters in the period from March 31, 2006 to December 31, 2007. You should read the following table in conjunction with our audited consolidated financial statements and related notes included elsewhere in this Form 20-F. We have prepared the unaudited consolidated quarterly financial information on substantially the same basis as our audited consolidated financial statements and using information derived from our unaudited consolidated financial statements which are not included in this Form 20-F. The following information contains normal recurring adjustments which are, in the opinion of our management, necessary for a fair presentation of the results for such unaudited period. Our operating results for any quarter are not necessarily indicative of results that may be expected for any future period.

	For the three months ended
Consolidated Statement of	March 31,			June 30,			September 30,			December 31,			March 31,			June 30,			September 30,			December 31,
Operations Data	2006			2006			2006			2006			2007			2007			2007			2007
	(in thousands of U.S. dollars)
Net revenues:
Digital out-of-home
Commercial location(1)	$	21,380		$	30,438		$	38,519		$	41,724		$	31,644		$	51,060		$	64,589		$	73,390
In-store network(1)		5,294			6,538			7,239			7,836			6,638			7,244			7,087			6,475
Poster frame network(1)		6,067			9,778			11,284			13,775			12,669			18,548			23,063			31,192
Mobile handset advertising (1)		—			3,076			3,516			3,509			6,008			10,882			14,025			15,994
Internet advertising services (1)		—			—			—			—			—			25,236			42,511			57,191
Total advertising service revenue		32,741			49,830			60,558			66,844			56,959			112,970			151,275			184,242
Other revenue		457			233			90			1,152			381			305			117			310
Total revenues		33,198			50,063			60,648			67,996			57,340			113,275			151,392			184,552
Cost of revenues:
Digital out-of-home
Commercial location network		8,226			11,487			11,404			11,719			12,898			17,868			22,825			26,034
In-store network		3,973			4,394			4,616			5,123			5,027			5,187			5,832			7,456
Poster frame network		2,792			3,222			3,756			3,851			4,746			5,265			6,656			11,419
Mobile handset advertising network		—			2,405			2,219			1,428			2,754			4,569			6,145			9,725
Internet advertising services network		—			—			—			—			—			18,405			32,718			42,115
Advertising service cost:		14,991			21,508			21,995			22,121			25,425			51,294			74,176			96,749
Other cost		232			80			80			373			165			138			121			373
Total cost of revenues		15,223			21,588			22,075			22,494			25,590			51,432			74,297			97,122
Gross profit		17,975			28,475			38,573			45,502			31,750			61,843			77,095			87,430
Operating expenses:
General and administrative		4,395			6,298			5,956			9,074			8,683			11,646			12,095			17,032
Selling and marketing		4,407			5,376			6,784			9,195			9,886			13,154			19,081			27,810
Other operating income		(20	)		(137	)		(5	)		(1,176	)		(1,263	)		(1,121	)		(1,203	)		(1,537	)
Total operating expenses		8,782			11,537			12,735			17,093			17,306			23,679			29,973			43,305
Income from operations		9,193			16,938			25,838			28,409			14,444			38,164			47,122			44,125
Interest income (expenses), net		888			605			1,070			1,692			2,693			1,934			1,595			3,530
Other income (expenses), net		(71	)		(408	)		(175	)		367			92			(52	)		5			2,523
Income before income taxes and minority interest		10,010			17,135			26,733			30,468			17,229			40,046			48,722			50,178
Total income taxes		(617	)		(373	)		317			(371	)		(968	)		(2,318	)		(2,109	)		(5,649	)
Minority interests		40			(91	)		(45	)		(9	)		31			(13	)		—			(713	)
Net income attributed to shareholders	$	9,433		$	16,671		$	27,005		$	30,088		$	16,292		$	37,715		$	46,613		$	43,816

(1) Advertising service revenue is presented net of sales taxes. The following tables presents the unaudited quarterly sales taxes information:

	For the three months ended
	March 31,		June 30,		September 30,		December 31,		March 31,		June 30,		September 30,		December 31,
	2006		2006		2006		2006		2007		2007		2007		2007
	(in thousands of U.S. dollars)
Sales taxes:
Commercial location network	$	2,082	$	2,968	$	4,062	$	4,529	$	3,274	$	4,308	$	5,584	$	6,738
In-store network		524		697		763		819		688		754		726		675
Poster frame network		591		958		1,102		1,338		1,185		1,799		2,058		2,887
Mobile handset advertising network		—		289		285		205		12		386		602		612
Internet advertising services network		—		—		—		—		—		1,182		1,723		2,127
Total	$	3,197	$	4,912	$	6,212	$	6,891	$	5,159	$	8,429	$	10,693	$	13,039

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The following table presents our unaudited consolidated quarterly financial data as a percentage of our total revenues for the periods indicated.

	For the three months ended
Consolidated Statement of	March 31,			June 30,			September 30,			December 31,			March 31,			June 30,			September 30,			December 31,
Operations Data	2006			2006			2006			2006			2007			2007			2007			2007
	(in thousands of U.S. dollars)
Digital out-of-home
Commercial location network		64.4	%		60.8	%		63.6	%		61.4	%		55.2	%		45.1	%		42.7	%		39.8	%
In-store network		15.9	%		13.1	%		11.9	%		11.5	%		11.6	%		6.4	%		4.7	%		3.5	%
Poster frame network		18.3	%		19.5	%		18.6	%		20.2	%		22.1	%		16.4	%		15.2	%		16.8	%
Mobile handset advertising network		—			6.1	%		5.8	%		5.2	%		10.5	%		9.6	%		9.3	%		8.7	%
Internet advertising services network		—			—			—			—			—			22.3	%		28.0	%		31.0	%
Other revenues		1.4	%		0.5	%		0.1	%		1.7	%		0.6	%		0.2	%		0.1	%		0.2	%
Total revenues		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenues:
Digital out-of-home
Commercial location network		24.8	%		22.9	%		18.8	%		17.2	%		22.5	%		15.8	%		15.1	%		14.1	%
In-store network		12.0	%		8.8	%		7.6	%		7.5	%		8.8	%		4.6	%		3.9	%		4.0	%
Poster frame network		8.4	%		6.4	%		6.2	%		5.7	%		8.3	%		4.6	%		4.4	%		6.2	%
Mobile Handset Advertising Network		—			4.8	%		3.7	%		2.1	%		4.8	%		4.1	%		4.1	%		5.3	%
Internet advertising services network		—			—			—			—			—			16.2	%		21.5	%		22.8	%
Other costs		0.7	%		0.2	%		0.1	%		0.5	%		0.3	%		0.1	%		0.1	%		0.2	%
Total cost of revenues		45.9	%		43.1	%		36.4	%		33.0	%		44.7	%		45.4	%		49.1	%		52.6	%
Gross profit		54.1	%		56.9	%		63.6	%		67.0	%		55.3	%		54.6	%		50.9	%		47.4	%
Operating expenses:
General and administrative		13.2	%		12.6	%		9.8	%		13.3	%		15.1	%		10.3	%		8.0	%		9.2	%
Selling and marketing		13.3	%		10.7	%		11.2	%		13.5	%		17.2	%		11.6	%		12.6	%		15.1	%
Other operating income		(0.1	)%		(0.3	)%		(0.0	)%		(1.7	)%		(2.2	)%		(1.0	)%		(0.8	)%		(0.8	)%
Total operating expenses		26.4	%		23.0	%		21.0	%		25.1	%		30.1	%		20.9	%		19.8	%		23.5	%
Income from operations		27.7	%		33.9	%		42.6	%		41.9	%		25.2	%		33.7	%		31.1	%		23.9	%
Interest income (expenses), net		2.7	%		1.2	%		1.8	%		2.5	%		4.7	%		1.7	%		1.1	%		1.9	%
Other income (expenses), net		(0.2	)%		(0.8	)%		(0.3	)%		0.5	%		0.2	%		0.0	%		0.0	%		1.4	%
Income before income taxes and
minority interest		30.2	%		34.3	%		44.1	%		44.9	%		30.1	%		35.4	%		32.2	%		27.2	%
Total income taxes		(1.9	)%		(0.7	)%		0.5	%		(0.5	)%		(1.7	)%		(2.0	)%		(1.4	)%		(3.1	)%
Minority interest		0.1	%		(0.2	)%		(0.1	)%		0.0	%		0.1	%		0.0	%		—			(0.4	)%
Net income attributable to shareholders		28.4	%		33.4	%		44.5	%		44.4	%		28.5	%		33.4	%		30.8	%		23.7	%

(1) Advertising service revenue is presented net of sales taxes. The following table presents the unaudited quarterly percentage of sales taxes against gross revenues:

	For the three months ended
	March 31,			June 30,			September 30,			December 31,			March 31,			June 30,			September 30,			December 31,
	2006			2006			2006			2006			2007			2007			2007			2007
	(in thousands of U.S. dollars)
Sales taxes:
Commercial location network		8.9	%		8.9	%		9.5	%		9.8	%		9.4	%		7.8	%		8.0	%		8.4	%
In-store network		9.0	%		9.6	%		9.5	%		9.5	%		9.4	%		9.4	%		9.3	%		9.4	%
Poster frame network		8.9	%		8.9	%		8.9	%		8.9	%		8.6	%		8.8	%		8.2	%		8.5	%
Mobile handset advertising network		—			8.6	%		7.5	%		5.5	%		0.2	%		3.4	%		4.1	%		3.7	%
Internet advertising services network		—			—			—			—			—			4.5	%		3.9	%		3.6	%
Total		8.9	%		9.0	%		9.3	%		9.3	%		8.3	%		6.9	%		6.6	%		6.6	%

     Certain quarterly financial information related to each fiscal quarters of the fiscal year ended December 31, 2006 have been restated and differ from previously announced information in the Forms 6-K furnished to the SEC on May 26, 2006, August 21, 2006, November 20, 2006 and February 26, 2007 as a result of the following:

     Advertising agency rebates for each fiscal quarter of the fiscal year ended December 31, 2006. We classified $88,537, $624,365, $425,807 and $257,205 advertising agency rebates, respectively, as selling expenses rather than as a reduction of revenues in the quarter ended March 31, June 30, September 30 and December 31, 2007, respectively. This adjustment resulted in an increase in the originally reported gross margin and a decrease to reported selling expenses from our filings on Form 6-K dated May 26, 2006, August 21, 2006, November 20, 2006 and February 26, 2007, respectively. The foregoing restated amounts did not affect net income or earnings per share.

A. Operating Results

Results of Operations

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

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     Total Revenues. Our total revenues increased substantially from $211.9 million in 2006 to $506.6 million in 2007 due primarily to an increase in our advertising service revenue.

Digital Out-of-home Advertising Network. Advertising service revenue from our digital out-of-home advertising network, which includes our commercial location, in-store and poster frame networks, increased 66.9% from $199.9 million in 2006 to $333.6 million in 2007, primarily due to a 67.1% increase in revenues from our commercial location network and an approximately two-fold increase in revenues from our poster frame network.

• Commercial location network. Advertising service revenue from our commercial location network increased 67.1% from $132.1 million in 2006 to $220.7 million in 2007. The increase in advertising service revenue is attributable to: (i) continued acceptance of our media by an increasing number of advertising clients; (ii) the steady expansion of our media network, including the number of LCD displays and LED billboards on our network; and (iii) the sale of tailored advertising packages including through the seven specialized channels on our commercial location network and by targeting advertising campaigns on specific lists of buildings requested by advertising clients.

• In-store network. Advertising service revenue from our in-store network, increased 2.0% to $27.4 million in 2007 from $26.9 million in 2006. This increase was attributable to steady sales of advertising services on the network as it continued to increase in size. Specifically, the number of displays installed in the in-store network amounted to 49,452 as of December 31, 2007, up from 38,742 as of December 31, 2006, offset in part by relatively strong competition in this area, mainly from CGEN Digital Media Company Limited, which we subsequently acquired in January 2008. The number of hypermarkets in our networks, from which we derive most of our in-store network revenue, increased from 1,100 as of December 31, 2006 to 1,398 as of December 31, 2007.

• Poster frame network. Advertising service revenue from our poster frame network more than doubled to $85.5 million in 2007 compared to $40.9 million in 2006. This increase in revenue is primarily attributable to robust sales as the total number of frames installed more than doubled from 95,878 as of December 31, 2006 to 190,468 as of December 31, 2007, including 10,819 digital frames which we introduced in 2007.

     Mobile Handset Advertising Network. Advertising service revenue from our mobile handset advertising network increased significantly from $10.1 million in 2006 to $46.9 million in 2007 due to the increasing acceptance by advertisers of mobile handset advertising as telecommunications services and mobile handset ownership continues to grow in China. Starting in April 1, 2008, we expect our revenues from our mobile handset advertising business to decrease as we no longer engage in “push” campaigns that involve sending messages to cuonsumers without their consent. We now engage only in “pull” advertising campaigns, or sending messages to consumers after receiving their explicit consent.

     Internet Advertising Services Network. We commenced providing Internet advertising services and software solutions in March 2007 upon our acquisition of Allyes. Advertising service revenue from our Internet advertising services network totaled $124.9 million in 2007 attributable primarily to sales of our digital marketing services, sales of our performance-based advertising service ‘SmartTrade’ and sales of our Internet advertising software package ‘AdForward’.

     Cost of Revenues. Our cost of revenues increased significantly from $81.4 million in 2006 to $248.4 million in 2007 due to increases in costs of expanding and maintaining our digital out-of-home advertising networks and mobile handset advertising network as well as from costs related to our Internet advertising services network, which we began to incur in April 2007 upon the acquisition of Allyes.

     Digital out-of-home advertising costs. Cost of revenues associated with our digital out-of-home advertising networks increased 75.9% from $74.6 million in 2006 to $131.2 million in 2007. This increase is primarily attributable to increased costs associated with the expansion of our commercial location network and an increase in the number of LED billboards.

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• Net advertising service cost — commercial location network. Our net advertising service cost for our commercial location network increased 85.9% from $42.8 million in 2006 to $79.6 million in 2007. This increase was due to (i) the substantial increase in our advertising service business on our commercial location network between these two periods including substantial increases in our location costs due to a substantial increase in the number of commercial locations where we entered into display placement agreements, including those we operate in our ourdoor billboard business; (ii) an increase in flat-panel display depreciation costs as a result of an increase in the number of flat-panel displays we own and operate directly from 80,623 as of December 31, 2006 to 107,533 as of December 31, 2007; (iii) our acquisition of 8 regional distributors during this period, (iv) an increase in other direct costs associated with maintaining the network and (v) payments associated with our lease of curbside LED billboards and screen time at movie theaters.

• Net advertising service cost — in-store network. We incurred $23.5 million in net advertising service cost for our in-store network in 2007 compared to $18.1 million in 2006, consisting of location costs and depreciation costs relating to the installation and maintenance of our in-store network.

• Net advertising service cost — poster frame network. Our net advertising service cost for our poster frame network increased significantly to $28.1 million in 2007 compared to $13.6 million in 2006, attributable to location costs and depreciation costs relating to the installation and maintenance of poster frames on our network as we significantly increased the number of traditional poster frames on our network and, in June 2007, began to incur location costs associated with our digital poster frames.

• Net advertising service cost — mobile handset advertising network. Net advertising service cost associated with our mobile handset advertising network increased significantly from $6.1 million in 2006 to $23.2 million in 2007. These costs consist primarily of message costs charged by mobile operators.

• Net advertising service cost — Internet advertising service network. We incurred net advertising service costs of $93.2 million in 2007. These costs consist primarily of advertising space leasing costs charged by gateway websites.

     Gross Profit. As a result of the foregoing, our gross profit increased by 97.8% from $130.5 million in 2006 to $258.1 million in 2007. Our overall gross margin decreased during the same period from 61.6% to 51.0% primarily due to the addition of our Internet advertising services network in the first half of 2007, which has lower margins and higher intangible amortization expenses resulting from acquisitions in our poster frame, mobile and Internet advertising businesses. Our gross margins for each of our businesses during these periods are presented in the following table:

	Year ended December 31,
	2006			2007
	US$’000			US$’000
Gross profit
Commercial location network	$	89,225		$	141,058
In-store network		8,801			3,942
Poster frame network		27,283			57,386
Digital out-of-home		125,309			202,386
Mobile Handset Advertising Network		4,049			23,716
Internet Advertising		—			31,700
Others		1,167			316
Total	$	130,525		$	258,118
Gross margin
Commercial location network		67.6	%		63.9	%
In-store network		32.7	%		14.4	%
Poster frame network		66.7	%		67.1	%

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	Year ended December 31,
	2006			2007
	US$’000			US$’000
Digital out-of-home		62.7	%		60.7	%
Mobile Handset Advertising Network		40.1	%		50.6	%
Internet Advertising		—			25.4	%
Others		60.4	%		28.4	%
Total		61.6	%		51.0	%

     In the future, our gross margin may fluctuate depending on the respective financial performance and stage of development of each of our networks as well as the relative contribution to our revenues and costs of each network.

     Operating Expenses. Our operating expenses increased significantly from $50.1 million in 2006 to $114.3 million in 2007. Operating expenses remained relatively consistent as a percentage of revenues, 23.7% in 2006 compared to 22.6% in 2007. The increase in operating expenses was primarily due to increases in our selling and marketing expenses and in our general and administrative expenses associated with the growth of our business, and in share-based compensation expenses under SFAS 123-R, as well as the amortization of acquisition related intangible assets.

• General and Administrative. General and administrative expenses increased substantially from $25.7 million in 2006 to $49.5 million in 2007 mainly due to an increase in the size of our administrative staff and corresponding increases in expenses for salary and benefits as our operations have grown, increases in share-based compensation expense and increases in costs associated with being a publicly listed company.

• Selling and Marketing. Selling and marketing expenses increased substantially from $25.8 million in 2006 to $69.9 million in 2007 due to increases in marketing and promotional expenses by our sales force, and in salary and benefits associated with the expansion of our sales force as well as share-based compensation expenses and amortization of acquisition related intangible assets.

Other operating income. Other operating income represented the government subsidy received.

     Income from Operations. As a result of the foregoing, we had income from operations of $143.9 million in 2007 compared to $80.4 million in 2006.

     Income Before Income Taxes and Minority Interest. Income before income taxes and minority interest was $84.3 million in 2006 compared to $156.2 million in 2007, which included interest income and other income (expenses).

• Interest Income. Interest income increased from $4.5 million in 2006 to $9.8 million in 2007. This interest income was the result of a significant increase in our cash and cash equivalents balances resulting from our follow-on public offerings.

• Income Taxes. Our income taxes were $1.0 million in 2006 with an effective tax rate of 1.2% compared to $11.0 million in 2007 with an effective tax rate of 7.1%.

     Net Income. As a result of the foregoing, our net income increased 73.6% from $83.2 million in 2006 to $144.4 million in 2007.

Year Ended December 31, 2006 Compared to Year Ended December 31, 2005

     Total Revenues. Our total revenues increased substantially from $68.2 million in 2005 to $211.9 million in 2006 due to an increase in our advertising service revenue.

     Our total advertising service revenue increased significantly from $66.9 million in 2005 to $210.0 million in 2006, including the advertising service revenues derived from our poster frame network amounting to $40.9 million and $10.1 million from mobile handset advertising network primarily as a result of our acquisitions in 2006.

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     Digital Out-of-home Advertising Network. Advertising service revenue from our digital out-of-home advertising network increased significantly from $66.9 million in 2005 to $199.9 million in 2006, primarily due to rapid growth in revenues from our commercial location network as well as from the addition of revenues from our poster frame network.

• Commercial location network. Advertising service revenue from our commercial location network increased significantly from $61.4 million in 2005 to $132.1 million, including $15.4 million to related parties in 2006. The increase in advertising service revenue for our commercial location network is attributable to:

• An increase in the number of flat-panel displays on our network from 48,226 as of December 31, 2005 to 85,460 as of December 31, 2006 including our regional distributors;

• Our network reach increased from 58 cities as of December 31, 2005, including 26 cities directly operated by our company and 32 cities operated by our regional distributors, to 91 cities as of December 31, 2006, including 51 cities directly operated by our company and 40 cities operated by our regional distributors;

• We gained an additional seven minutes of advertising cycle time from each of the regional distributors we acquired between January 1, 2006 and December 31, 2006; and

• The increase in the average selling price was largely due to increased demand in our Tier II cities, while the average selling price of our advertising services in our Tier I cities increased between these two periods.

• In-store network . Advertising service revenue from our in-store network, which commenced operations in April 2005, totaled $26.9 million in 2006. We expect the contribution to our total revenues from our in-store network to increase in the near future.

• Poster frame network. We generated $40.9 million in net revenues from our poster frame network in 2006. We commenced operation of our poster frame network in 2006 following our acquisition of Framedia.

     Mobile handset advertising network. We generated $10.1 million in net revenues from our mobile handset advertising network in 2006. We commenced operations of this network in May 2006.

     Other revenues increased from $1.3 million in 2005 to $1.9 million in 2006, primarily from license fees that we received from our overseas franchise companies. By the end of 2006, we granted licenses to approximately 10 overseas franchise companies using the Focus Media brand in operating local LCD advertising networks in India, Malaysia, Indonesia, the Philippines, the Gulf Cooperation Council region (including Saudi Arabia), Hong Kong, Taiwan and Singapore.

     Cost of Revenues. Our cost of revenues increased significantly from $26.7 million in 2005 to $81.4 million in 2006 due to increases in our net advertising service cost for our commercial location network, our in-store network and two new business lines: our poster frame network and mobile handset advertising network.

     Net Advertising Service Cost — Digital Out-of-home Advertising Network. Our net advertising service cost for our digital out-of-home advertising network increased significantly from $25.7 million in 2005 to $74.6 million in 2006, primarily as a result of substantial growth in the size of our commercial location network and in-store network as well as costs associated with our poster frame network following our acquisition of Framedia.

• Net advertising service cost — commercial location network. Our net advertising service cost for our commercial location network increased substantially from $18.6 million in 2005 to $42.8 million in 2006. This increase was due to the substantial increase in our advertising service business on our commercial location network between these two periods. Our location costs increased substantially from $11.3 million in

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	2005 to $25.8 million in 2006 due to a substantial increase in the number of commercial locations where we entered into display placement agreements. Our rental fees increased as a percentage of total revenues between these two periods as a result of (1) a significant increase in the number of locations in our commercial location network, including those previously operated by Target Media; and (2) average increased rental payments for the renewal of display placement agreements in the more desirable locations on our commercial location network. Flat-panel display depreciation costs increased from $3.4 million in 2005 to $9.2 million in 2006, as a result of an increase in the number of flat-panel displays we own and operate directly from 45,049 as of December 31, 2005 to 80,623 as of December 31, 2006 and to our acquisition of Target Media and 3 regional distributors during this period. Other cost of revenues related to net advertising service cost increased from $3.2 million in 2005 to $6.1 million in 2006 as a result of (1) an increase in number of personnel responsible for monitoring the network following the acquisition of Target Media; (2) an increase in the volume of CF cards we purchased even as the per-unit cost of CF cards decreased and (3) an increase in salary and benefit expenses for personnel responsible for location relations and display placement agreements with landlords and property managers and for maintaining and monitoring our network.
•	Net advertising service cost — in-store network. We began incurring net advertising service cost relating to our in-store network in April 2005 when we launched our in-store network. We incurred $18.1 million in net advertising service cost for our in-store network in 2006, consisting of location costs of $12.7 million and depreciation costs relating to the installation and maintenance of our in-store network amounting to $3.5 million.
•	Net advertising service cost — poster frame network. We began incurring net advertising service cost relating to our poster frame network in 2006 following our acquisition of Framedia. We incurred $13.6 million in net advertising service cost for our poster frame network in 2006, consisting primarily of frame costs and depreciation costs relating to the installation and maintenance of the poster frames.
•	Net advertising service cost — mobile handset advertising network. We began incurring net advertising service cost relating to our mobile handset advertising network in 2006 following our acquisition of Dotad, now known as Focus Media Wireless. We incurred $6.1 million in net advertising service cost for our mobile handset advertising network in 2006, primarily consisting of message costs charged by mobile network providers
•	Other cost. We incurred net advertising equipment costs of $975,747 in 2005 compared to $764,959 in 2006, which decrease reflects the fact that we have acquired many of our fastest-growing regional distributors. We expect net advertising equipment costs to continue to decrease.

     Gross Profit. As a result of the foregoing, our gross profit increased from $41.5 million in 2005 to $130.5 million in 2006 and our overall gross margin increased during the same period from 60.8% to 61.6%. The increase in our gross margin was due to a combination of the continuous increase in the sell-out rate and cost optimization.

     Operating Expenses. Our operating expenses increased significantly from $18.7 million in 2005 to $50.1 million in 2006. This increase was primarily due to increases in our selling and marketing expenses and in our general and administrative expenses associated with the growth of our business.

• General and Administrative. General and administrative expenses increased substantially from $9.1 million in 2005 to $25.7 million in 2006 mainly due to an increase in the size of our administrative staff and corresponding increases in expenses for salary and benefits as well as accounting and administrative costs related to being a public company. In addition, in connection with the options granted to our directors, employees and consultants since July 2004, we recorded stock-based compensation of $6.1 million in 2006 following the adoption of SFAS No. 123 (revised 2005), “Share-Based Payment".

• Selling and Marketing. Selling and marketing expenses increased substantially from $9.6 million in 2005 to $25.8 million in 2006 due to increases in marketing and promotional expenses by our sales force and in salary

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and benefits associated with the expansion of our sales force.

     Income from Operations. As a result of the foregoing, we had income from operations of $22.8 million in 2005 compared to $80.4 million in 2006.

     Income Before Income Taxes and Minority Interest. Income before income taxes and minority interest was $24.4 million in 2005 compared to $84.3 million in 2006.

• Interest Income, net. Interest income, net of interest expenses increased from 1.8 million in 2005 to $4.3 million in 2006. This interest income was the result of a significant increase in our cash and cash equivalents balances resulting from cash payments collected from our advertising operations and proceeds from our follow-on offerings.

• Other Expense, net. We recorded net other expense of $161,148 in 2005 compared to other income of $287,539, in 2006.

• Income Taxes. Our income taxes were $694,453 in 2005 compared to $1,043,538 in 2006.

• Minority Interests. We had minority interests expense of $144,433 and $104,773 in 2005 and 2006, respectively, in connection with the pro rata income attributable to minority shareholders of our subsidiaries.

     Net Income. As a result of the foregoing, we recorded net income of $83.2 million in 2006 compared to net income of $23.5 million in 2005.

B. Liquidity and Capital Resources

Liquidity and Capital Resources

Cash Flows and Working Capital

     To date, we have financed our operations primarily through cash generated from operating activities and sales of equity in private and public transactions. As of December 31, 2007, we had approximately $450.4 million in cash and cash equivalents, of which we paid $168.4 million to the former shareholder of CGEN on January 1, 2008 in connection with our acquisition of CGEN. As we have expanded our network, entered into a large number of display placement agreements, increased our acquisition of regional distributors and related businesses, and made strategic acquisitions, our cash needs for such acquisitions, the purchase of flat-panel displays, payment of our location and maintenance costs and employee costs increased significantly and accounted for the net cash used in investing activities. Our cash and cash equivalents primarily consist of cash on hand, liquid investments with original maturities of three months or less that are deposited with banks and other financial institutions. We generally deposit our excess cash in interest bearing bank accounts. Although we consolidate the results of Focus Media Advertisement and its subsidiaries in our consolidated financial statements and we can utilize their cash and cash equivalents in our operations through Focus Media Advertisement and its subsidiaries, we do not have direct access to the cash and cash equivalents or future earnings of Focus Media Advertisement. However, these cash balances can be utilized by us for our normal operations pursuant to our agreements with Focus Media Advertisement and its subsidiaries that provide us with effective control over Focus Media Advertisement and its subsidiaries. In addition, we have access to the cash flows of Focus Media Advertisement and its subsidiaries through contractual arrangements with our subsidiaries Focus Media Technology and Focus Media Digital, which provide technical and other services in exchange for fees. See “Item 7.B Major Shareholders and Related Party Transactions — Related Party Transactions — Agreements Among Us, Focus Media Technology, Focus Media Digital, New Focus Media Advertisement, Focus Media Advertisement and Its Subsidiaries”.

     We expect to require cash in order to fund our ongoing business needs, particularly the location costs connected with the placement of our television displays, to fund the ongoing expansion of our network and for payments in connection with our acquisitions. Other possible cash needs may include the upgrading of technology on

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our network as well as any payment of claims that could be made against us. We have not encountered any difficulties in meeting our current cash needs.

     The following table shows our cash flows with respect to operating activities, investing activities and financing activities in 2005, 2006 and 2007:

	For the year ended December 31,
	2005			2006			2007
	(in thousands of U.S. dollars)
Net cash provided by operating activities	$	11,269		$	93,355		$	166,960
Net cash (used) in investing activities		(117,667	)		(121,994	)		(342,881	)
Net cash provided by financing activities		119,168			153,521			442,976
Effect of exchange rate changes		1,214			3,076			18,750
Net increase in cash and cash equivalent		13,984			127,958			285,805

     We had cash provided by operating activities of $167.0 million in 2007, a 75.5% increase compared to $95.1 million in 2006. This is in line with the 73.6% increase in our net income compared to 2006. For detail reconciliation from our net income to net cash provided by operating activities, please refer to consolidated cashflow statements contained in ITEM 18.

     We had net cash used in investing activities of $342.9 million in 2007, primarily consists the followings: (1) investment in available-for-sale equity securities of $88.2 million; (2) purchase consideration paid and deposits paid to acquire subsidiaries aggregating $165.1 million, primarily including Allyes, CGEN; (3) capital expenditure of $55.8 million; and (4) loan issued to CGEN of $30 million. We had net cash used in investing activities of $123.8 million in 2006, primarily in connection with the acquisition of companies, including Target Media and Focus Media Wireless, subsidiaries and regional distributors, purchase of equipment used to expand our networks, and rental deposits paid for locations on our out-of-home television, poster frame and outdoor LED networks. Our acquisition of Framedia involved our payment of $39.6 million in cash and issuance of $55.4 million of our ordinary shares to the seller parties at a fixed value of $2.456 per ordinary share. Pursuant to the share purchase agreement we entered into with E-Times and Skyvantage, we paid the seller parties $5.0 million. We also paid $70 million in cash and issued 77 million ordinary shares to the shareholders of Target Media. See “Item 10.C Additional Information — Material Contracts — Framedia” and “— Target Media”. We had net cash used in investing activities of $117.8 million for in 2005, primarily in connection with the acquisition of companies, subsidiaries and regional distributors, purchase of equipment used to expand our commercial location and in-store networks, and rental deposits paid for locations on both our commercial location and in-store networks.

     $443.0 million net cash was provided by financing activities in 2007, primarily from the proceeds of $312.5 million, net of issuance costs, from our follow-on offering in November 2007 and the proceeds of $115.0 million, net of issuance costs, from our follow-on offering in January 2007. $153.5 million net cash was provided by financing activities in 2006, primarily from the proceeds of $142.8 million, net of issuance costs, from our follow-on offerings. $119.2 million net cash was provided by financing activities in 2005, primarily from the proceeds of our initial public offering in July 2005.

     We believe that our current cash and cash equivalents, cash flow from operations and the proceeds from our most recent public offering will be sufficient to meet our anticipated cash needs, including for working capital and capital expenditures, for the foreseeable future. These additional cash needs may include costs associated with the expansion of our network, such as the purchase of flat-panel displays and LED digital billboards and increased location cost, including in connection with our acquisition of Framedia, Target Media, E-Times, Focus Media Wireless and CGEN, as well as possible acquisitions of our regional distributors. We are also required under PRC law to set aside 10% of our after-tax profits into a general reserve fund. We expect that revenues from operation of our advertising network and the proceeds from this offering will be sufficient to cover any such obligations and costs. We may, however, require additional cash resources due to changed business conditions or other future developments. If these sources are insufficient to satisfy our cash requirements, we may seek to sell debt securities or additional equity securities or obtain a credit facility. The sale of convertible debt securities or additional equity securities could result in additional dilution to our shareholders. The incurrence of indebtedness would result in debt service obligations and could result in operating and financial covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.

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     From time to time, we evaluate possible investments, acquisitions or divestments and may, if a suitable opportunity arises, make an investment or acquisition or conduct a divestment.

Transactions with Related Parties

     Our transactions with related parties have been conducted on arm’s length terms. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions” and Note 17 to our audited consolidated financial statements included in this annual report.

Capital Expenditures

     The following table sets forth our historical capital expenditures for the periods indicated. Actual future capital expenditures may differ from the amounts indicated below.

	For the year ended December 31,
	2005		2006		2007
	(in thousands of U.S. dollars)
Total capital expenditure	$	36,765	$	22,878	$	55,776

     Our capital expenditures were made primarily to acquire flat-panel displays and digital frames for our advertising network. Our capital expenditures are primarily funded by net cash provided from operating activities. We expect our capital expenditures in 2008, in an amount of approximately $50 million, to primarily consist of purchases of components for our flat-panel displays and new poster frames as we continue to expand our commercial location network, in-store network and poster frame network. We also intend to upgrade our financial, accounting systems and internal control systems. As opportunities arise, we may make additional acquisitions of regional distributors and other businesses that complement our operations. We believe that we will be able to fund these upgrades and equipment purchases through the revenues we generate, and do not anticipate that these obligations will have a material impact on our liquidity needs.

Restricted Net Assets

     Relevant PRC laws and regulations permit payments of dividends by our PRC subsidiaries only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. In addition, PRC laws and regulations require that annual appropriations of 10% of after-tax income for our general reserve fund should be set aside prior to payment of dividends. As a result of these PRC laws and regulations, our PRC subsidiaries and our affiliated PRC entities are restricted in their ability to transfer a portion of their net assets to us whether in the form of dividends, loans or advances. As of December 31, 2006 and 2007, the amount of our restricted net assets was approximately $223.4 million and $447.6 million, respectively.

C. Research, Development, Patents and Licenses, etc.

Research and Development

     We intend to continue to develop a more advanced model of flat-panel display that uses mobile communications and wireless technology to receive, store, configure and play back advertising content. Whether or not we deploy this newer technology will depend upon cost and network security. We are also developing related software systems that will enable us to configure and run the content on our advertising network in conjunction with mobile communications systems. We also continue to develop proprietary software and systems in connection with the operation of and provision of services through our online advertising services business through Allyes.

Patents and Trademarks

     We believe that the value of our advertising network derives from its effectiveness in reaching a large number of consumers with higher-than-average disposable incomes in urban areas. To a great extent, our business model does not rely on advanced or sophisticated technology or on proprietary trade secrets because our flat-panel displays are assembled with components purchased in off-the-shelf form from wholesale distributors. We endeavor to protect

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certain of the designs and operating software we use in each generation of our flat-panel displays. We currently hold design patents for our new model of flat-panel display and our software. We have the right to use several trademarks relating to the “Focus Media” brand name in China and in Singapore. We also have the right to use several trademarks relating to the “Framedia” brand name in China. Following our acquisition of Allyes, we also acquired all of its intellectual property including that held by its subsidiaries and affiliates.

     We do not know if our trademark applications will lead to registered trademarks with the scope of the goods and services we seek, if at all, or whether any trademark we have registered or may receive registration in the future will be challenged or invalidated. See Item 3.D Risk Factor — Risks Relating to Our Business and Industry — Unauthorized use of our intellectual property by third parties, and the expenses incurred in protecting our intellectual property rights, may adversely affect our business. We have also obtained copyright registration for a number of our software. We will continue to assess appropriate occasions for seeking trademark, copyright and other intellectual property protections for those aspects of our business that we believe provide significant competitive advantages.

     The technology developed by Allyes enables us to collect and use data derived from user activity on the Internet. Although we believe that we have the right to use this information and to compile it in our databases, we cannot assure you that any trade secret, copyright or other protection will be available for this information. In addition, our clients and other parties may claim rights to this information.

D. Trend Information

     Please refer to “—Overview” for a discussion of the most significant recent trends in our production, sales, costs and selling prices. In addition, please refer to discussions included in this Item for a discussion of known trends, uncertainties, demands, commitments or events that we believe are reasonably likely to have a material effect on our net operating revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.

E. Off-balance Sheet Arrangements

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

F. Tabular Disclosure of Contractual Obligations

     The following table sets forth our contractual obligations and commitments with definitive payment terms on a consolidated basis which will require significant cash outlays in the future as of December 31, 2007.

	Payments due December 31
	TOTAL		2008		2009		2010		2011		Thereafter
Display and poster frame placement agreement obligations	$	194,068	$	96,042	$	54,958	$	23,786	$	10,278	$	9,004
Office premise lease obligations		13,283		6,014		4,068		1,711		1,282		208
Total contractual obligations	$	207,351	$	102,056	$	59,026	$	25,497	$	11,560	$	9,212

     Other than certain leasing arrangements relating to the placement of our flat-panel and office premises, as of December 31, 2007, we did not have any long-term debt obligations, operating lease obligations or purchase obligations.

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     As of December 31, 2007, we had no other indebtedness, material contingent liabilities, or material mortgages or liens. We intend to meet our future funding needs primarily through net cash provided from operating activities and the proceeds of this offering. Our objective is to maintain the safety and liquidity of our cash. Therefore we intend to keep our cash and cash equivalents in short-term bank deposits and short-term bonds.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management

     The following table sets forth certain information relating to our directors and executive officers. The business address of each of our directors and executive officers is 28-30/F, Zhao Feng World Trade Building, 369 Jiangsu Road, Shanghai 200050, People’s Republic of China.

Name	Age		Position
Jason Nanchun Jiang		35	Executive Chairman of the Board of Directors
Zhi Tan		53	Chief Executive Officer and Director
David Feng Yu(1)		46	Co-chairman of the Board of Directors
Jimmy Wei Yu		35	Director
Fumin Zhuo(2)		56	Director
Neil Nanpeng Shen(2)		40	Director
Charles Chao(2)(3)		42	Director
Daqing Qi(4)		45	Director
David Ying Zhang(5)		34	Director
Daniel Mingdong Wu		41	Chief Financial Officer
David Hailong Zhu		40	Senior Vice President — Internet Advertising
Maodong Xu		40	Senior Vice President — Mobile Handset Advertising

(1)	Mr. Yu was appointed as co-chairman of the board of directors of Focus Media on February 28, 2006 pursuant to the terms of the share purchase agreement between us and Target Media in connection with our acquisition of Target Media.
(2)	Independent director and a member of our audit committee, compensation committee and nomination committee.
(3)	In the year ended December 31, 2007, SINA Corporation and Focus Media were involved in transactions exceeding 5% of SINA’s revenues, and accordingly, under Nasdaq rules, Mr. Chao has lost his status as an independent director. We intend to replace Mr. Chao with another independent director at our next annual shareholders meeting, as is consistent with Nasdaq requirements, as well as to appoint additional directors at that time. We intend for Mr. Chao to remain on at that time as an executive (non-independent) director.
(4)	Mr. Qi was appointed as an independent director on February 28, 2006 by the seller parties of Target Media pursuant to the terms of the share purchase agreement between us and Target Media in connection with our acquisition of Target Media.
(5)	David Ying Zhang was appointed as an independent director on September 28, 2007 by our nominations committee and board of directors in order to restore a majority of independent directors to our board.

     Jason Nanchun Jiang, our founder, has served as the chairman of our board of directors since May 2003 and our chief executive officer from May 2003 to March 2008. From 1994 to 2003, Mr. Jiang was the chief executive officer of Everease Advertising Corporation, which is one of the top 50 advertising agencies in China. Starting in 2003, Mr. Jiang was general manager of Aiqi Advertising, an advertising company founded by his immediate family members in 1997 which was renamed Focus Media Advertisement in May 2003 in connection with the establishment of our current business operations. In December 2003, Mr. Jiang was selected by China News Publisher’s Media magazine as one of the “Media People of the Year”. In September 2003, Mr. Jiang was selected by the Television and Newspaper Committees of the China Advertising Commission as one of its “contemporary outstanding advertising media personalities”. Mr. Jiang received a Bachelor of Arts degree in Chinese language and literature from Huadong Normal University in 1995.

     Zhi Tan was appointed as our chief executive officer in March 2008 and has been a director since January 2007. Prior to his appointment, Dr. Tan has served as both president of the company and senior vice president in charge of the operations of our poster frame network. Dr. Tan was previously the chairman and chief executive officer

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of Framedia. Dr. Tan has extensive management and operational experience. He served as senior advisor at Tom.com of Hong Kong prior to join Framedia. From 1999 to 2002, he was the chief executive officer of 8848.net Corporation, which was one of the largest online e-commerce organizations in China. Before joining 8848.net, Dr. Tan was deputy general manager for Microsoft China in 1999. Prior to Microsoft, Dr. Tan was senior vice-president for UTStarcom China from 1995 to 1998. He was directly responsible for all aspects of operations for both Microsoft China and UTStarcom China. Dr. Tan received his PhD in Computer Science from Worcester Polytechnic Institute of Massachusetts in 1987 and a B.S. in Computer Engineering from Jilin Industrial University in China in 1980.

     David Feng Yu resigned from his position as president since January 2007 and retains his position as co-chairman of the Board. He has served as co-chairman of our board of directors and as our president since February 28, 2006. From 2003 until February 2006, Mr. Yu was chairman and chief executive Officer of Target Media, which we acquired in February 2006. From 2000 to 2003, Mr. Yu was chief executive offer and the sole beneficial owner of Dian Yang, whose flat panel display advertising business was transferred to Target Media in December 2003. From 1999 to 2000, Mr. Yu was the general manager of Shanghai Yuanye Info Tech Co., Ltd. In May 2005, Mr. Yu was selected by the Advertising Newspaper in China as one of the “Most Influential Advertising People of the Year.” In December 2004, Mr. Yu was selected by China Venture Capital Forum 2004 as one of the “Top 10 Enterprisers of the Year.” Mr. Yu received an Executive M.B.A. degree from China Europe International Business School in 2001 and a Master of Arts degree in philosophy from Fudan University in 1991.

     Jimmy Wei Yu has served as our director since May 2003. Mr. Yu is the chairman and chief executive officer of United Capital Investment (China) limited, which is one of our principal shareholders and the management company of United China Investment Limited and KTB/UCI China Ventures I Limited and UCI China Venture II Limited. Mr. Yu is also the chairman of Shanghai Multimedia Park Venture Capital, a position he has held since 2003. From 1995 to 1999, Mr. Yu served in various capacities in several telecommunications companies, including as Chief Representative of UTStarcom (Hong Kong) Ltd. He also has been the Chief Representative of Softbank China Venture Capital since its incorporation in 1999.

     Fumin Zhuo has served as our director since December 2004 and has more than 27 years of experience in investment and corporate management. Mr. Zhuo has also served as a general partner in SIG Capital Limited since July 2005. Prior to this, Mr. Zhuo served as chairman and chief executive officer of Vertex China Investment Company (VCI), a company concentrating in investments in the Greater China region, since he joined the fund in July 2002. From 1995 to July 2002, Mr. Zhuo was chief executive officer of Shanghai Industrial Holding Ltd. and chairman of SIIC Medical Science & Technology (Group). Prior to this, starting in 1987, Mr. Zhuo served as chief assistant officer of the Shanghai Economic System Reform Committee. Mr. Zhuo has extensive experience in venture capital fund formation, mergers and acquisitions, and investment management. Mr. Zhuo graduated from Shanghai Jiaotong University’s Electrical Engineering School with a degree in enterprise management and also holds a Master’s degree in economics from Fudan University.

     Neil Nanpeng Shen has served as our director since December 2004. Mr. Shen is the founding managing partner of Sequoia Capital China, or Sequoia China, a China-focused venture capital fund which was established in August 2005. Prior to founding Sequoia China, Mr. Shen was president and chief financial officer of Ctrip.com International Limited, or Ctrip, a Nasdaq-listed on-line travel services company he co-founded and for which he continues to serve as a director. Prior to founding Ctrip, Mr. Shen worked for more than eight years in the investment banking industry in New York and Hong Kong. He was a director at Deutsche Bank Hong Kong where he worked from 1996 to 1999. Prior to 1996, he worked at Chemical Bank, Lehman Brothers and Citibank in various investment banking positions. Mr. Shen is also co-founder and co-chairman of Home Inns & Hotels Management (Hong Kong) Limited. Mr. Shen received his Master’s degree from the School of Management at Yale University and his Bachelor’s degree from Shanghai Jiaotong University.

     Charles Chao was appointed as our director in November 2005 to replace Ted Tak Dee Sun who passed away in September 2005. Mr. Chao is president and chief executive officer of SINA Corporation, an online media company listed on the Nasdaq National Market. Before he joined SINA Corporation in September 1999, Mr. Chao served as an experienced audit manager with PricewaterhouseCoopers LLP, providing auditing and business consulting services for high tech companies in Silicon Valley, California. Mr. Chao received his master of professional accounting from University of Texas at Austin. He also holds an MA degree in journalism from

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University of Oklahoma and a BA degree in Journalism from Fudan University in Shanghai, China. Mr. Chao is a certified public accountant and a member of the American Institute of Certified Public Accountants.

     Daqing Qi was appointed as our director on February 28, 2006 upon the closing of our acquisition of Target Media. Professor Qi is professor of accounting and associate dean of the Cheong Kong Graduate School of Business, where he has taught since 2002. From 1996 until 2002, Professor Qi was an associate professor in the School of Accountancy at the Chinese University of Hong Kong. Professor Qi also has extensive experience in providing executive training and consulting services in accounting and corporate finance to government departments and private companies, including the Ministry of Information Industries of the People’s Republic of China, the Shanghai Municipal Government, China Mobile, China Unicom, China Telecom, China Netcom, Nokia and Ericsson. Professor Qi also serves on the board of directors of Sohu.com, a Nasdaq-listed company that provides online services in China. Professor Qi holds a B.S. degree in biophysics and a B.A. degree in journalism from Fudan University, an MBA degree from the University of Hawaii Manoa with a concentration in accounting and finance and a Ph.D. degree in accounting from the Eli Broad Graduate School of Management of Michigan State University.

     David Ying Zhang was appointed as our director on September 28, 2007. Mr. Zhang is the managing director and head of the Beijing office of WI Harper, a private equity investment fund. Mr. Zhang joined WI Harper in late 2001 in the San Francisco office and moved back to China in early 2003. Prior to joining WI Harper, Mr. Zhang was a senior venture associate with ABN AMRO Capital focusing on the life sciences, information technology, and Internet sectors. Before joining ABN AMRO Capital, Mr. Zhang worked at Salomon Smith Barney. At WI Harper, Mr. Zhang has been responsible for investments in a number of companies including Pollex, Cardiva, Celestry Designs, Focus Media and iKang Healthcare. Mr. Zhang was born in Shanghai, grew up in the United States and holds a M.S. degree in biotechnology and business from Northwestern University and a B.S. in biology and chemistry from California State University, San Francisco.

     Daniel Mingdong Wu has served as our chief financial officer since February 2005. Mr. Wu was chief financial officer and a director of Harbour Networks Ltd. from January 2004 until January 2005. Prior to that, Mr. Wu was a partner of Bridgecross Ltd. from 2001 until 2003 and acting chief financial officer of Wi-Comm United Communications Inc. from May 2003 until January 2004. From 2000 until 2001, Mr. Wu was a vice president for technology investment banking at Merrill Lynch (Asia Pacific) Ltd. From 1996 to 2000, Mr. Wu worked in the global communications group of Lehman Brothers Inc. Mr. Wu holds a B.A. degree from the State University of New York at Buffalo and an MBA degree from Columbia Business School.

     David Hailong Zhu has been our Senior Vice President — Internet Advertising. Mr. Zhu since March 2008. From 2001 until 2006, Mr. Zhu was a director and chief executive officer of Allyes, where he was vice president from 2000 until 2001. Prior to joining Allyes, Mr. Zhu worked at FCB Worldwide from 1999 to 2000 as account director. From 1995 to 1997, Mr. Zhu served as account manager at McCann-Erickson. Mr. Zhu worked at DMB&B as accounting executive from 1994 to 1995. Mr. Zhu obtained a bachelor’s degree in English Literature from the University of International Relations in Beijing and an EMBA from the China Europe International Business School.

     Maodong Xu has been our Senior Vice President — Mobile Handset Advertising since March 2008. From December 2005 until March 2008, Mr. Xu was a senor vice president at Focus Media Wireless (formerly Dotad). From 1998 until 2005, Mr. Xu was the general manager of Digital Galvez Technology Ltd. Prior to that appointment, Mr. Xu had worked at Qilu Company as general manager and at the Rizhao Port Authority in Shandong as a manager. Mr. Xu has been honored as an “Outstanding Private Entrepreneur of Shandong Province” among other honors. Mr. Xu holds a B.S. degree from Wuhan University of Water Transportation Engineering.

     We increased our board of directors from five to seven members when we completed our acquisition of Target Media, and further to nine members in 2007.

Duties of Directors

     Under Cayman Islands law, our directors have a duty of loyalty to act honestly in good faith with a view to our best interests. Our directors also have a duty to exercise the care, diligence and skills that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure

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compliance with our amended and restated memorandum and articles of association. A company has the right to seek damages if a duty owed by our directors is breached.

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

• convening shareholders’ meetings and reporting its work to shareholders at such meetings;

• implementing shareholders’ resolutions;

• determining our business plans and investment proposals;

• formulating our profit distribution plans and loss recovery plans;

• determining our debt and finance policies and proposals for the increase or decrease in our registered capital and the issuance of debentures;

• formulating our major acquisition and disposition plans, and plans for merger, division or dissolution;

• proposing amendments to our amended and restated memorandum and articles of association; and

• exercising any other powers conferred by the shareholders’ meetings or under our amended and restated memorandum and articles of association.

B. Compensation

     In 2007, we paid aggregate cash compensation of approximately $734,000 to our directors and executive officers as a group. In 2005, 2006 and 2007, we granted to selected directors, officers and employees options to acquire an aggregate 22,503,630, 14,800,000, and 10,892,685 ordinary shares, respectively. We have no service contracts with any of our directors or executive officers that provide benefits to them upon termination. We do not pay or set aside any amounts for pension, retirement or other benefits for our officers and directors.

Share Option Plans

     Our 2003 Employee Share Option Scheme, or our 2003 Option Plan, was adopted by our board of directors at a meeting on June 1, 2003. Our members and board of directors adopted our 2005 Share Option Plan, or our 2005 Option Plan, in May 2005. Our members and board of directors adopted our 2006 Employee Share Option Plan, or our 2006 Option Plan, in October 2006. Our members and board of directors adopted our 2007 Employee Share Option Plan, or our 2007 Option Plan, in December 2007. Our option plans are intended to promote our success and to increase shareholder value by providing an additional means to attract, motivate, retain and reward selected directors, officers, employees and third-party consultants and advisors.

     Originally, under our 2003 Option Plan, not more than 30% of our share capital was reserved for grants of options. Prior to the adoption of our 2005 Option Plan, we issued options equivalent to 10.87% of our issued share capital under our 2003 Option Plan. Under our 2005 Option Plan, the amount of options we may issue has been reduced to an aggregate of 20% of our share capital, including the 10.87% already granted under our 2003 Option Plan. Under our 2006 Share Option Plan, we were authorized to issue up to 3.6% of our share capital outstanding from time to time. In addition, during the three years from the adoption of our 2007 Option Plan, we may issue no more than 5% of our share capital for grants of options.

     Under our 2003 Option Plan:

• In July and August 2004, we granted:

• options to purchase 12,181,600 shares, representing 3.7% of our pre-offering diluted share capital, to certain members of our board of directors and our management group. Each of these options has

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	an exercise price of $0.24 per share. 8,460,800 of these options vest over three years while the remaining 3,720,800 options vest over one year.
•	options to purchase 8,461,800 shares, representing 2.5% of our pre-offering diluted share capital, to members of our staff. Each of these options has an exercise price of $0.24 per share. 2,159,800 of these options vest over three years while the remaining 6,302,000 options vest over one year.
•	options to purchase 4,564,800 shares, representing 1.4% of our pre-offering diluted share capital, to third-party consultants and advisors. Each of these options have an exercise price of $0.24 per share. 1,310,400 of these options vest over three years while the remaining 3,254,400 options vest over one year.

     Under our 2005 Option Plan:

• In January 2005, we granted additional options to purchase 1,200,000 of our ordinary shares to some of our directors with an exercise price of $0.58 per share. All of these options vest over three years.

• In February 2005, we granted:

• options to purchase 2,000,000 and 2,100,000 of our ordinary shares with an exercise price of $0.58 and $0.75, respectively, to certain of our executive officers and options to purchase 720,000 of our ordinary shares with an exercise price of $0.75 to certain of our employees. All of these options vest over three years.

• options to purchase 1,240,000 of our ordinary shares to third-party consultants and advisors with an exercise price of $0.75. All of these options vest over three years.

• In July 2005, we granted:

• options to purchase 11,683,630 of our ordinary shares with an exercise price of $1.70, to certain of our executive officers and employees. All of these options vest over three years.

• options to purchase 100,000 of our ordinary shares to a third-party consultant with an exercise price of $1.70. All of these options vest over three years.

• In November 2005, we granted:

• options to purchase 800,000 of our ordinary shares with an exercise price of $2.60, to certain of our executive officers and employees. All of these options vest over three years.

• options to purchase 4,000,000 of our ordinary shares with an exercise price of $2.70, to certain of our executive officers and employees. All of these options vest over three years.

• In March 2006, we granted options to purchase 3,000,000 of our ordinary shares with an exercise price of $5.09, to certain of our executive officers, employees and directors. All of these options vest over three years.

     Under our 2006 Option Plan:

• In November 2006, we granted options to purchase 11,800,000 of our ordinary shares to certain of our employees, executive officers and directors. Of these options, 10,300,000 were issued to non-management employees and 1,500,000 were issued to our directors and officers. The issuance to our officers and directors included a grant to Jason Nanchun Jiang of options to purchase 500,000 of our ordinary shares. No other director or officer, upon exercise of all options granted, would beneficially

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	own more than 1% of our outstanding ordinary shares. All of the options granted vest over a three year period, beginning one year from the date of issuance. The exercise price of the options is $5.724 per share which was based on the market price of our ADSs at the time the options were granted. The options expire on November 14, 2016.
•	In March 2007 and May 2007, we granted options to purchase 1,200,000 and 100,000 of our ordinary shares to certain of our employees. The exercise price of the options is $7.20 and $7.394 per share which was based on the market price of our ADSs at the time the options were granted. The options expire on March 18, 2017 and May 8, 2017, respectively.
•	In October 2007, we granted options to purchase 9,592,685 of our ordinary shares to certain of our employees, executive officers and directors. Of these options, 6,982,500 were issued to non-management employees and 2,610,185 were issued to our directors and officers. The issuance to our officers and directors included grants to Jason Nanchun Jiang and Zhi Tan of options to purchase 210,185 and 250,000 of our ordinary shares, respectively. No other director or officer, upon exercise of all options granted, would beneficially own more than 1% of our outstanding ordinary shares. All of the options granted vest over a four year period, beginning one year from the date of issuance. The exercise price of the options is $11.422 per share which was based on the market price of our ADSs at the time the options were granted. The options expire on October 3, 2017.

     Under our 2007 Option Plan:

• In January 2008, we granted options to purchase 4,500,000 of our ordinary shares to certain of our non-management employees. All of the options granted vest over a four year period, beginning one year from the date of issuance. The exercise price of the options is $9.10 per share which was based on the market price of our ADSs at the time the options were granted. The options expire on January 29, 2018.

• In March 2008, we granted options to purchase 2,750,000 of our ordinary shares to certain of our executive officers. Of these options, 2,500,000 were issued to Zhi Tan. All of the options granted vest over a four year period, beginning one year from the date of issuance. The exercise price of the options is $8.262 per share which was based on the market price of our ADSs at the time the options were granted. The options expire on March 9, 2018.

     Options generally do not vest unless the grantee remains under our employment or in service with us on the given vesting date. However, in circumstances where there is a death or disability of the grantee, or, for certain option holders, a change in the control of our company, the vesting of options will be accelerated to permit immediate exercise of all options granted to a grantee.

     Our compensation committee, which administers our option plans, has wide discretion to award options. Subject to the provisions of our option plans and the above allocation targets, our committee that administers our option plans determines who will be granted options, the type and timing of options to be granted, vesting schedules and other terms and conditions of options, including the exercise price. Any of our employees may be granted options. The number of options awarded to a person, if any, is based on the person’s potential ability to contribute to our success, the person’s position with us and other factors chosen by our board of directors.

     Generally, to the extent an outstanding option granted under our option plans has not become vested on the date the grantee’s employment by or service with us terminates, the option will terminate and become unexercisable.

     Our board of directors may amend, alter, suspend, or terminate each of our option plan at any time, provided, however, that in order to increase the limit of 20% of our share capital that may be granted as options, our board of directors must first seek the approval of our shareholders and, if such amendment, alteration, suspension or termination would adversely affect the rights of an optionee under any option granted prior to that date, the approval of such optionee. Without further action by our board of directors, our 2007 Option Plan will terminate in December 2017.

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     The table below sets forth the option grants made to our directors and executive officers pursuant to our option plans as of March 31, 2008.

	Number of ordinary
	shares to be issued
	upon exercise of		Exercise per
	options		ordinary share		Date of grant	Date of expiration
	(in U.S. dollars)
Jason Nanchun Jiang		5,882,000	$	0.24	August 25, 2004	August 24, 2014
“		3,080,000	$	2.60	November 2, 2005	November 1, 2015
“		1,051,100	$	2.70	November 16, 2005	November 15, 2015
“		210,185	$	11.42	October 3, 2007	October 2, 2017
David Feng Yu		*	$	5.09	March 10, 2006	March 9, 2016
Jimmy Wei Yu		*	$	0.24	July 5, 2004	July 4, 2014
“		*	$	0.24	August 25, 2004	August 24, 2014
“		*	$	1.70	July 13, 2005	July 13, 2015
“		*	$	11.42	October 3, 2007	October 2, 2017
Fuming Zhuo		*	$	0.24	August 10, 2004	August 9, 2014
“		*	$	11.42	October 3, 2007	October 2, 2017
Neil Nanpeng Shen		*	$	0.58	January 1, 2005	December 31, 2014
“		*	$	11.42	October 3, 2007	October 2, 2017
Charles Chao		*	$	2.60	November 2, 2005	November 1, 2015
“		*	$	11.42	October 3, 2007	October 2, 2017
Daqing Qi		*	$	5.09	March 10, 2006	March 9, 2016
“		*	$	11.42	October 3, 2007	October 2, 2017
Zhi Tan		*	$	5.72	November 16, 2006	November 15, 2015
“		*	$	11.42	October 3, 2007	October 2, 2017
“		*	$	8.262	March 10, 2008	March 9, 2018
Daniel Mingdong Wu		*	$	0.58	February 2, 2005	February 1, 2015
“		*	$	0.75	February 2, 2005	February 1, 2015
“		*	$	1.70	July 13, 2005	July 13, 2015
“		*	$	11.42	October 3, 2007	October 2, 2017
“		*	$	8.262	March 10, 2008	March 9, 2018

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

C. Board Practices

     Each of our directors holds office until a successor has been duly elected and qualified unless the director was appointed by our board of directors, in which case such director holds office until the next following annual meeting of shareholders at which time such director is eligible for reelection. All of our executive officers are appointed by and serve at the discretion of our board of directors. Neither we nor any of our subsidiaries has entered into a contract with any of our directors by which our directors are expected to receive benefits upon termination of their employment.

Board Committees

     Our board of directors has established an audit committee, a compensation committee and a nominations committee.

     Audit Committee. Our audit committee currently consists of Neil Nanpeng Shen, Charles Chao and Fumin Zhuo. Mr. Shen is the chairman of our audit committee. Our board of directors has determined that all of our audit committee members are “independent directors” within the meaning of Nasdaq Marketplace Rule 4200(a)(15) and meet the criteria for independence set forth in Section 10A(m)(3) of the U.S. Securities Exchange Act of 1934, or the Exchange Act, other than Charles Chao who will be replaced as an independent director at our next annual shareholders meeting in accordnace with Nasdaq requirements but who will remain on as a non-independent director.

     Our audit committee is responsible for, among other things:

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• recommending to our shareholders, if appropriate, the annual re-appointment of our independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors;

• annually reviewing an independent auditors’ report describing the auditing firm’s internal quality-control procedures, any material issues raised by the most recent internal quality control review, or peer review, of the independent auditors and all relationships between the independent auditors and our company;

• setting clear hiring policies for employees or former employees of the independent auditors;

• reviewing with the independent auditors any audit problems or difficulties and management’s response;

• reviewing and approving all proposed related-party transactions, as defined in Item 404 of Regulation S-K under the U.S. securities laws;

• discussing the annual audited financial statements with management and the independent auditors;

• discussing with management and the independent auditors major issues regarding accounting principles and financial statement presentations;

• reviewing reports prepared by management or the independent auditors relating to significant financial reporting issues and judgments;

• reviewing with management and the independent auditors the effect of regulatory and accounting initiatives, as well as off-balance sheet structures on our financial statements;

• discussing policies with respect to risk assessment and risk management;

• reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies;

• timely reviewing reports from the independent auditors regarding all critical accounting policies and practices to be used by our company, all alternative treatments of financial information within U.S. GAAP that have been discussed with management and all other material written communications between the independent auditors and management;

• establishing procedures for the receipt, retention and treatment of complaints received from our employees regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters;

• annually reviewing and reassessing the adequacy of our audit committee charter;

• such other matters that are specifically delegated to our audit committee by our board of directors from time to time;

• meeting separately, periodically, with management, the internal auditors and the independent auditors; and

• reporting regularly to the full board of directors.

     Compensation Committee. Our current compensation committee consists of Neil Nanpeng Shen, Charles Chao and Fumin Zhuo. Mr. Chao is the chairman of our compensation committee. Our board of directors has

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determined that all of our compensation committee members are “independent directors” within the meaning of Nasdaq Marketplace Rule 4200(a)(15), other than Charles Chao who will be replaced as an independent director at our next annual shareholders meeting in accordnace with Nasdaq requirements but who will remain on as a non-independent director.

     Our compensation committee is responsible for:

• determining and recommending the compensation of our chief executive officer;

• reviewing and making recommendations to our board of directors regarding our compensation policies and forms of compensation provided to our directors and officers;

• reviewing and determining bonuses for our officers;

• reviewing and determining share-based compensation for our directors and officers;

• administering our equity incentive plans in accordance with the terms thereof; and

• such other matters that are specifically delegated to the compensation committee by our board of directors from time to time.

     Nominations Committee. Our current nominations committee consists of Neil Nanpeng Shen, Charles Chao and Fumin Zhuo. Mr. Zhuo is the chairman of our nominations committee. Our board of directors has determined that all of our nominations committee members are “independent directors” within the meaning of Nasdaq Marketplace Rule 4200(a)(15), other than Charles Chao who will be replaced as an independent director at our next annual shareholders meeting in accordnace with Nasdaq requirements but who will remain on as a non-independent director.

     Our nominations committee is responsible for, among other things, selecting and recommending the appointment of new directors to our board of directors.

D. Employees

     As of December 31, 2007, we had a total of 5,175 full-time employees and no part-time employees. The following table sets out the number of staff by business area as of December 31, 2007:

	Number of
	employees(1)		Percentage
Sales and marketing		1,429		28	%
Operations		2,665		51	%
Management and administration		1,081		21	%
Total number of employees		5,175		100	%

(1) This excludes employees our regional distributors and agents who are not directly under our employ.

     As required by PRC regulations, we participate in various employee benefit plans that are organized by municipal and provincial governments, including pension, work-related injury benefits, maternity insurance, medical and unemployment benefit plans. We are required under PRC law to make contributions to the employee benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time to time. Members of the retirement plan are entitled to a pension equal to a fixed proportion of the salary prevailing at the member’s retirement date.

     Generally we enter into a three-year standard employment contract with our officers and managers and a one-year standard employment contract with other employees. According to these contracts, all of our employees are prohibited from engaging in any activities that compete with our business during the period of their employment with

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us. Furthermore, the employment contracts with officers or managers include a covenant that prohibits officers or managers from engaging in any activities that compete with our business for two years after the period of their employment with us.

E. Share Ownership

     Please see Item 6.B. and Item 7.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

     The following table sets forth information with respect to the beneficial ownership, within the meaning of Rule 13d-3 under the Exchange Act, of our ordinary shares, as of March 31, 2008:

• each person known to us to own beneficially more than 5% of our ordinary shares and

• each of our directors and executive officers who beneficially own our ordinary shares.

     Beneficial ownership includes voting or investment power with respect to the securities. Except as indicated below, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all ordinary shares shown as beneficially owned by them. The number of our ordinary shares outstanding used in calculating the percentage for each listed person includes our ordinary shares underlying options held by such person that are exercisable within 60 days of March 31, 2008, but excludes ordinary shares underlying options held by any other person. Percentage of beneficial ownership is based on 647,503,412 ordinary shares outstanding as of the date of this annual report.

	Shares beneficially owned
	Number		Percent
Principal Shareholders
JJ Media Investment Holding Ltd./ Jason Nanchun Jiang (1)		69,104,595		10.55	%
Pequot Capital Management, Inc.(2)		48,869,600		7.55	%
FMR LLC(2)		45,502,190		7.03	%
Directors and Executive Officers (3)
JJ Media Investment Holding Ltd./ Jason Nanchun Jiang (4)		68,604,595		10.55	%
David Feng Yu		*		*
Jimmy Wei Yu		*		*
Neil Nanpeng Shen		—		*
Charles Chao		—		*
Fumin Zhuo		—		*
Daqing Qi		—		*
Zhi Tan		*		*
Daniel Mingdong Wu		—		*
David Hailong Zhu		—		*
Maodong Xu		—		*

*	Upon exercise of all options currently exercisable or vesting within 60 days of the date of this annual report, would beneficially own less than 1% of our ordinary shares.
(1)	Includes 53,975,959 ordinary shares beneficially owned by JJ Media Investment Holding Ltd., 500,000 ordinary shares beneficially owned by JJ Media Investment Holding Ltd. in the form of ADSs through Citi (Nominees) Limited, and 5,041,600 and 2,476,650 options to purchase our ordinary shares owned by Target Sales International Limited and Target

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	Management Group Limited. JJ Media Investment Holding Ltd., Target Sales International Limited and Target Management Group Limited are 100% owned by Jason Nanchun Jiang, our founder and executive chairman.
(2)	Information based on the most recent Form 13G filed by these entities.
(3)	The address of our current directors and executive officers is c/o 28F, Zhao Feng World Trade Building, 369 Jiangsu Road, Shanghai 200050, China.
(4)	See note 1.

     None of our major shareholders have different voting rights from those of our other shareholders. To the best of our knowledge, we are not directly or indirectly controlled by another corporation, by any foreign government or by any other natural or legal person severally or jointly.

     We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.

     For information regarding our shares held or beneficially owned by persons in the United States, see “Item 9. The Offer and Listing—Market Price Information for Our American Depositary Shares” in this annual report.

B. Related Party Transactions

     Details of gross advertising service revenue from related parties for the years ended December 31, 2005, 2006 and 2007 are as follows:

		Year ended December 31,
Name of related parties	Director interested	2005		2006		2007
Shanghai Everease Advertising & Communication Ltd. (“Everease”)	Jason Nanchun Jiang	$	1,552,039	$	7,764,977	$	3,132,954
Multimedia Park Venture Capital	Jimmy Wei Yu		2,330,945		3,885,546		104
Shanghai Jobwell Business Consulting Co., Ltd.	Jimmy Wei Yu		1,050,258		1,382,695		—
Shanghai Wealove Wedding Service Co., Ltd.	Jimmy Wei Yu		757,850		1,122,945		—
Shanghai Wealove Business Consulting Co., Ltd.	Jimmy Wei Yu		—		671,488		—
Shanghai Hetong Network Technology Co., Ltd.	Jimmy Wei Yu		908,100		982,527		—
Shanghai Shengchu Advertising Agency Co., Ltd.	Jimmy Wei Yu		1,646,120		3,230,040		44,542
Beijing Sina Internet Information Services Co., Ltd.	Charles Cao		—		190,563		1,095,814
Beijing Sohu New-age Information Technology Co., Ltd.	Daqing Qi		—		119,768		608,150
Home-Inn Hotel Management (Beijing) Co., Ltd	Neil Nanpeng Shen		—		78,742		82,356
Ctrip Travel Information Technology (Shanghai) Co., Ltd.	Neil Nanpeng Shen		264,120		178,933		—
51.com	Neil Nanpeng Shen		—		—		19,611
Qihoo.com	Neil Nanpeng Shen		—		—		12,151
UUSEE	Neil Nanpeng Shen		—		—		27,789
Yadu Huang Ke Technology Co., Ltd.	Fuming Zhuo		—		—		243,628
Total		$	8,509,432	$	19,608,224	$	5,267,099

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     Details of advertising space leasing costs charged, net of agency rebates received or will be received from gateway websites, of those whom are the related parties, for the years ended December 31, 2005, 2006 and 2007 are as follows:

		Year ended December 31,
Name of related parties	Director interested	2005		2006		2007
Beijing Sina Internet Information Services Co., Ltd.	Charles Cao	$	—	$	—	$	24,755,004
Beijing Sohu New-age Information Technology Co., Ltd.	Daqing Qi		—		—		14,596,893
Ctrip Travel Information Technology (Shanghai) Co., Ltd.	Neil Nanpeng Shen		—		—		130,230
51.com	Neil Nanpeng Shen		—		—		204,612
Qihoo.com	Neil Nanpeng Shen		—		—		305,413
UUSEE	Neil Nanpeng Shen		—		—		15,929
E-House (China) Holdings Limited	Neil Nanpeng Shen						2,008
Total		$	—	$	—	$	40,010,089

Details of amounts due from related parties as of December 31, 2005, 2006 and 2007 are as follows:

			December 31,
Name of related parties	Note	Director interested	2005		2006		2007
Shanghai Everease Advertising & Communication Ltd. (“Everease”)	(a)	Jason Nanchun Jiang	$	572,525	$	6,331,549	$	133,543
Multimedia Park Venture Capital	(a)	Jimmy Wei Yu		330,700		12,705		—
Shanghai Jobwell Business Consulting Co., Ltd.	(a)	Jimmy Wei Yu		546,207		—		—
Shanghai Wealove Wedding Service Co., Ltd.	(a)	Jimmy Wei Yu		662,954		—		—
Shanghai Hetong Network Technology Co., Ltd.	(a)	Jimmy Wei Yu		533,469		—		—
Shanghai Shengchu Advertising Agency Co., Ltd.	(a)	Jimmy Wei Yu		474,351		403,889		—
Beijing Sina Internet Information Services Co., Ltd.	(a)	Charles Cao		—		—		3,385,671
Beijing Sohu New-age Information Technology Co., Ltd.	(a)	Daqing Qi		—		—		1,198,429
Ctrip Travel Information Technology (Shanghai) Co., Ltd.	(a)	Neil Nanpeng Shen		—		—		89,946
51.com	(a)	Neil Nanpeng Shen		—		—		105,147
UUSEE	(a)	Neil Nanpeng Shen		—		—		10,952
Home-Inn Hotel Management (Beijing) Co., Ltd	(d)	Neil Nanpeng Shen		—		39,699
Yadu Huang Ke Technology Co., Ltd.	(a)	Fuming Zhuo		—		—		150,158
Qihoo.com	(a)	Neil Nanpeng Shen		—		—		17,683
David Yu	(b)	David Yu		—		1,064,947		—
Total			$	3,120,206	$	7,852,789	$	5,091,529

Details of amounts due to related parties as of December 31, 2005, 2006 and 2007 are as follows:

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			December 31,
Name of related parties	Note	Director interested	2005		2006		2007
Beijing Sina Internet Information Services Co., Ltd.	(d)	Charles Cao	$	—	$	—	$	12,491,999
Beijing Sohu New-age Information Technology Co., Ltd.	(d)	Daqing Qi		—		—		301,520
51.com	(d)	Neil Nanpeng Shen		—		—		179,750
UUSEE	(d)	Neil Nanpeng Shen		—		—		3,696
Home-Inn Hotel Management (Beijing) Co., Ltd	(d)	Neil Nanpeng Shen		—				171
Tan Zhi	(c)	Tan Zhi		—		345,768		—
Total			$	—	$	345,768	$	12,977,136

     The following is a summary of the material provisions of these agreements. For more complete information you should read these agreements in their entirety. Directions on how to obtain copies of these agreements are provided in this annual report under “Item 10.H Additional Information — Documents on Display” and “Item 19. Exhibits”.

Agreements among Us, Our Wholly Foreign-Owned Subsidiaries, Our PRC Operating Affiliates and Their Shareholders and Subsidiaries

     We have entered into a series of contractual arrangements with our PRC operating affiliates and their respective shareholders and subsidiaries, including contracts relating to the provision of services and certain shareholder rights and corporate governance matters. Each of our contractual arrangements with our PRC operating affiliates and their respective shareholders and subsidiaries may only be amended with the approval of our audit committee or another independent body of our board of directors. In connection with our acquisition of Framedia, we entered into a series of contractual arrangements with Focus Media Advertisement’s subsidiaries relating to our poster frame network, Framedia Advertisement, New Structure Advertisement, and Guangdong Framedia, each of which is a subsidiary of Focus Media Advertisement, including contracts relating to the provision of services and certain shareholder rights and corporate governance matters. Each of our contractual arrangements with Framedia Advertisement, Guangdong Framedia, New Structure Advertisement and their shareholders may only be amended in writing by all of its parties unless the provisions being amended only involve certain parties’ interests in which case the amendment shall be made in writing by such parties. Each of Framedia Advertisement, Guangdong Framedia and New Structure Advertisement is 90%-owned by Focus Media Advertisement and 10%-owned by Focus Media Advertising Agency, respectively. In addition, with regard to Allyes, which we acquired in March 207, New Allyes Information has entered into a series of contractual arrangements with the Allyes operating affiliates and their shareholders, including contracts relating to the provision of services and certain shareholder rights and corporate governance matters. Each of the contractual arrangements with the Allyes operating affiliates and their shareholders may only be amended with the approval of our audit committee or another independent body of our board of directors.

Transfer of Ownership When Permitted By Law

     Pursuant to call option agreements, including in certain cases subsequent participation letters by new subsidiaries of our PRC operating affiliates, by and among our wholly foreign-owned subsidiaries, our PRC operating affiliates, and their respective shareholders and its subsidiaries, the two shareholders of each of our PRC operating affiliates, which shareholders are either (i) two PRC citizens designated by us or (ii) two PRC entities owned by our subsidiaries or by our designated appointees, has granted the relevant wholly foreign-owned subsidiary or its designee an exclusive option to purchase all or part of their equity interests in the relevant PRC operating affiliate, and its subsidiaries, or all or part of the assets of the relevant PRC operating affiliate, in each case, at any time determined by the relevant wholly foreign-owned subsidiary and to the extent permitted by PRC law. In some cases, pursuant to separate letters of undertaking each such shareholder agrees to pay to the relevant wholly foreign-owned subsidiary or us any excess of the purchase price paid for the equity interests in, or assets of, the relevant PRC operating affiliate or

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its subsidiaries over the respective registered capital of such affiliate or its subsidiaries in the event that the wholly-foreign owned subsidiary or its designee exercises such option.

Voting Arrangements

     Pursuant to voting rights proxy agreements and in certain cases subsequent participation letters by new subsidiaries of the PRC operating affiliates, by and among the wholly foreign-owned subsidiaries, the PRC operating affiliates and their subsidiaries, each of the respective shareholders of the PRC operating affiliates has granted a PRC individual designated by the wholly foreign-owned subsidiaries the right to appoint all of the directors and senior management of the PRC operating affiliates and those subsidiaries and all of their other voting rights as shareholders of the PRC operating affiliates and their subsidiaries, as the case may be, as provided under the articles of association of each such entity. Under the voting rights proxy agreement, there are no restrictions on the number, to the extent allowed under the respective articles of association of the PRC operating affiliates and their respective subsidiaries, or identity of those persons we can appoint as directors and officers.

Equity Pledge Agreements

     Pursuant to equity pledge agreements and, in certain instances, subsequent participation letters by new subsidiaries of the PRC operating affiliates, by and among the relevant wholly foreign-owned subsidiaries, the relevant PRC operating affiliates and their respective subsidiaries, each shareholder of the relevant PRC operating affiliates has pledged his or its equity interest in the relevant PRC operating affiliates and their subsidiaries, as the case may be, to certain of the wholly foreign-owned subsidiaries to secure their obligations under the relevant contractual control agreements to which each is a party, including but not limited to, the obligations of the relevant PRC operating affiliates and their respective subsidiaries under certain technical services agreements, trademark licence agreements and exclusive services agreements, as the case may be, and the obligation of each shareholder of the PRC operating affiliates under the respective loan agreements between the relevant shareholder and wholly foreign-owned subsidiary, for the sole purpose of increasing the registered capital of the PRC operating affiliates, as the case may be and acquiring certain of our regional distributors, respectively. See “— Loans to the Shareholders of the PRC Operating Affiliates”. Under these equity pledge agreements, each shareholder has agreed not to transfer, assign, pledge or otherwise dispose of their interest in the relevant PRC operating affiliate or its subsidiaries, as the case may be, without the prior written consent of the relevant wholly foreign-owned subsidiary.

Equity Trust Agreements

     Pursuant to the equity trust agreement by and among Focus Media Advertisement and Focus Media Technology dated as of March 28, 2005, Focus Media Advertisement holds a 9% equity interest in Focus Media Digital in trust for the benefit of Focus Media Technology. Under the equity trust agreement, Focus Media Technology provides trust funds to Focus Media Advertisement to be used for the purchase of a 9% equity interest in Focus Media Digital and Focus Media Technology agrees to be the beneficiary of any profits or other benefit generated that is attributable to the management, use or disposal of the trust funds. Through these arrangements, we have enabled our indirect subsidiary, Focus Media Technology, to beneficially hold an additional 9% of the interest in Focus Media Digital in addition to the 90% equity interest it holds in its own name.

Trademark License Agreement

     Pursuant to the trademark license agreement by and among Focus Media Technology, Focus Media Advertisement and its subsidiaries dated as of March 28, 2005, Focus Media Technology has agreed to license the use of its trademarks to be registered in China to Focus Media Advertisement and its subsidiaries in exchange for a monthly licensing fee of RMB10,000 ($1,247) for each affiliated company using such trademarks.

Cooperation Agreements

     Pursuant to the cooperation agreements by and among New Focus Media Advertisement, Focus Media Advertisement and its subsidiaries, dated as of May 22, 2006, New Focus Media Advertisement entrusted Focus Media Advertisement and its subsidiaries to disseminate advertisements as required by New Focus Media

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Advertisement in all locations rented by Focus Media Advertisement and its subsidiaries, and to sell advertising time slots for those locations, and each of Focus Media Advertisement and its subsidiaries ensures the allocation of advertising time slots on its respective portion of the advertising network adequate for the dissemination of advertising content as agreed upon between New Focus Media Advertisement and its advertising clients. New Focus Media Advertisement pays a dissemination fee to Focus Media Advertisement and its relevant subsidiaries for dissemination services on a cost-plus basis.

Asset Transfer Agreement

     Pursuant to the asset transfer agreement entered into by and between Focus Media Digital and New Focus Media Advertisement, dated as of December 31, 2005, Focus Media Digital transferred to New Focus Media Advertisement all of its assets relating to its out-of-home LCD television advertising business at fair market value.

Technology Transfer Agreement

     Pursuant to the technology and assets transfer agreement by and between Focus Media Digital and New Focus Media Advertisement, dated as of May 22, 2006, Focus Media Digital transferred to New Focus Media Advertisement all of its technology at a fixed fee.

Advertisement Dissemination Agreement

     Pursuant to the advertisement dissemination agreement by and between New Focus Media Advertisement and Focus Media Advertising Agency, dated as of May 22, 2006, New Focus Media Advertisement agrees to disseminate advertisements for Focus Media Advertising Agency pursuant to the agreements by and among Focus Media Advertising Agency and its clients, and Focus Media Advertising Agency agrees to pay a dissemination fee to New Focus Media Advertisement for the dissemination services.

Exclusive Services Agreement

     Pursuant to the exclusive services agreements by and among New Allyes Information, and certain of its PRC operating affiliates, New Allyes Information has agreed to provide exclusive services in respect of the business operations of Shanghai the relevant PRC operating affiliates and those operating affiliates have agreed to pay a service fee totaling equal to 100% of their tax excluded annual revenues to New Allyes Information.

Other Related Party Transactions

Shareholders Agreement

     See Item 14.A—Material Modifications to the Rights of Security Holders and Use of Proceeds” for a description of our amended shareholders’ agreement.

Loans to Shareholders of Our PRC Operating Affiliates

     Pursuant to loan agreements entered into by the relevant wholly foreign-owned subsidiaries and the shareholders of each of our PRC operating affiliates, respectively, the shareholders obtained a loan of the registered capital of the relevant PRC operating affiliate from the relevant wholly foreign-owned for the sole purpose of establishing or increasing, as the case may be, the registered capital of each such PRC operating affiliate. As of December 31, 2007, the full amounts of the loans to these shareholders remained outstanding. The relevant wholly foreign-owned subsidiary granted these loans without interest.

Loan from Relative of Jason Nanchun Jiang

     In March 2006, Weiqiang Jiang, the father of Jason Nanchun Jiang, provided a short-term loan to us of RMB 20.0 million ($2.5 million) to relieve a temporary shortage of Renminbi we were experiencing at that time. The loan is

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unsecured and was provided to us at no interest. As of December 31, 2006, we paid $2.5 million to Everease and they remitted this fund to Weiqiang Jiang on our behalf to repay the loan outstanding.

Transactions with Everease

     Prior to establishing our business, Jason Nanchun Jiang, our founder, chairman and chief executive officer, served as the legal representative and general manager of Everease from 2000 to 2004. From 2004 to March 2005, Ms. Shen Yacheng, the mother of Jason Jiang, served as legal representative of Everease. Everease and our company were considered to be under common control through March 2005 and all transactions we entered into with Everease were treated as related party transactions. Subsequent to Shen Yacheng’s resignation in March 2005, Jason’s father continued to serve as finance manager of Everease (effective from 1994) as a result of which he is able to exert a certain degree of influence over Everease. Therefore, Everease continues to be deemed a related party of Focus Media. In connection with the audit of our financial statements as of and for the period ended December 31, 2006, our auditors noted that, with regard to determination of related party status, we lack a process for timely review of changes in relationships with companies that were excluded from related party status in prior years. The auditors identified this as a significant deficiency under standards established by the PCAOB in our internal accounting controls. See “Risk Factors—There have been historical deficiencies with our internal controls and there remain areas of our internal and disclosure controls that require improvement, and we are exposed to potential risks from legislation requiring companies to evaluate controls under Section 404 of the Sarbanes-Oxley Act of 2002.”

Everease Non-Competition Agreement

     Pursuant to the Everease Non-competition Agreement between Everease and us, dated as of November 2004, Everease, its affiliates, or its directors, officers or employees have agreed not to disclose any confidential information regarding Focus Media to any third-party without our written consent. In addition, for so long as Jason Nanchun Jiang continues to hold any equity interest in our company and for two years thereafter, none of Everease, its affiliates, or its directors, officers or employees may (i) engage in, or lend its name to, any business that competes with our business, (ii) deal in a competitive manner with any of our customers, (iii) solicit any of our directors, officers, employees or agents to become directors, officers, employees or agents of others entities, or (iv) engage in any business conducted under a name that is the same as, or similar to, ours or any trade name used by us where the use of such name is reasonably likely be confused for our name. Everease entered into the non-competition agreement in consideration of its business relationship with us at the time, which relationship was subsequently terminated, and received no cash or other monetary compensation.

Advertising Services Provided to Everease

     We have provided our advertising services to Everease in the aggregate amounts of $1.6 million, $7.7 million and $3.1 million in 2005, 2006 and 2007, respectively. These advertising services were provided in the ordinary course of business on terms substantially similar to those provided to our unrelated advertising clients on an arm’s-length basis.

Transactions with Entities Affiliated with Jimmy Wei Yu

     We have provided our advertising services to certain companies for which Jimmy Wei Yu, one of our directors, also serves as a director. The advertising service revenue for these services totalled in the aggregate $5.0 million, $11.3 million and $nil in 2005, 2006 and 2007, respectively. As of December 31, 2007, $nil remained outstanding.

     For each of the years ended December 31, 2005, 2006 and 2007, office rentals were paid to Multimedia Park Venture Capital approximately amounting to $395,083, $476,902 and $690,018 respectively.

     These advertising services were provided in the ordinary course of business on terms substantially similar to those provided to our unrelated advertising clients on an arm’s-length basis.

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C. Interests of Experts and Counsel

     Not applicable.

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements and Other Financial Information

     Please refer to Item 18 for a list of our annual consolidated financial statements filed as part of this annual report.

Legal Proceedings

     On or about November 27, 2007, Eastriver Partners, Inc. filed a purported class action lawsuit in the United States District Court for the Southern District of New York against us and the underwriters of our follow-on offering of November 2007. On or about December 21, 2007, Scott Bauer filed a purported class action lawsuit in the United States District Court for the Southern District of New York against us, certain of our officers and directors, and the underwriters of our follow-on offering of November 2007. Both complaints allege that our registration statement on Form F-1 on November 1, 2007, as amended, and the related prospectus contained inaccurate statements of material fact. Specifically, the complaints allege that we failed to disclose reduced gross margins in our Internet advertising business division due to acquisitions we made. The complaint filed by Scott Bauer also alleges that we issued a press release concerning our second quarter 2007 financial results that contained inaccurate statements of material fact. We believe we have meritorious defenses to the claims alleged and intend to defend against these lawsuits vigorously. However, there can be no assurance that we will prevail in any such litigation and any adverse outcome of these cases could have a material adverse effect on our business or results of operations.

     Except as disclosed above, we are not currently a party to any material legal proceeding. From time to time, we may be subject to various claims and legal actions arising in the ordinary course of business.

Dividend Policy

     We have not previously declared any dividends. In 2004, we recorded deemed dividends of $8.3 million, $2.2 million and $13.4 million in connection with our Series A, Series B and Series C-1 and Series C-2 convertible redeemable preference shares, of which $4.9 million of the deemed dividend related to the difference between the fair value at that time of the Series C-1 convertible redeemable preference shares and ordinary shares in connection with a sale of 9,729,600 ordinary shares by Jason Nanchun Jiang, our chairman, to a third-party investor, which shares were redesignated as Series C-1 convertible redeemable preference shares. These deemed dividends were not cash dividends and upon conversion of our Series A, Series B and Series C-1 and Series C-2 convertible redeemable preference shares into ordinary shares, we are no longer required to record deemed dividends prospectively. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends on our ordinary shares, or indirectly on our ADSs, for the foreseeable future.

     Future cash dividends, if any, will be at the discretion of our board of directors and will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, shareholders’ interests, contractual restrictions and other factors as our board of directors may deem relevant. In addition, we can pay dividends only out of our profits or other distributable reserves. Any dividend we declare will be paid to the holders of ADSs, subject to the terms of the deposit agreement, to the same extent as holders of our ordinary shares, less the fees and expenses payable under the deposit agreement. Other distributions, if any, will be paid by the depositary to holders of our ADSs in any means it deems legal, fair and practical. Any dividend will be distributed by the depositary, in the form of cash or additional ADSs, to the holders of our ADSs. Cash dividends on our ADSs, if any, will be paid in U.S. dollars.

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B. Significant Changes

     Since the date of the audited financial statements included as a part of this annual report, the following significant changes have occurred:

• On January 2, 2008, we completed the acquisition of CGEN Digital Media Company Limited, or CGEN. In accordance with the share purchase agreement entered into on December 10, 2007, we made a cash payment of US$168.4 million to the former CGEN shareholders and the former CGEN shareholders delivered 100% of the equity interest in CGEN to us.

• On March 5, 2008, we appointed Dr. Zhi Tan, formerly president of Focus Media, as our chief executive officer. Our previous chief executive officer, Jason Nanchun Jiang remained on as executive chairman. On the same date, we also appointed David Hailong Zhu, former chief executive officer of Allyes, as our executive vice president — Internet advertising and Maodong Xu, formerly chief executive officer of Focus Media Wireless, as executive vice president — mobile handset advertising.

• In March 2008, we announced the existence of our internal policy strictly prohibiting the sending of SMS or MMS messages without the explicit consent of the receiving mobile user. We also provide a toll-free telephone number to enable mobile users to report “spam” and unauthorized messages to us directly.

• On March 20, 2008, our executive chairman Jason Jiang purchased 100,000 Focus Media ADSs at an average price of USD 34.19 per ADS in the open market.

• On April 10, 2008, due to recent uncertainties in the mobile handset advertising business in China, we significantly lowered the guidance for our revenue from our mobile handset advertising business for 2008 from the previously announced range of between $54.0 million and $55.8 million to between $14.0 million to $15.8 million, or $40 million less than the previously announced range. We also announced a revised range for full year 2008 revenue guidance to a range of from $860 million to $890 million from previously announced $900 million to $930 million, and full year 2008 net income excluding share-based compensation expenses and amortization of intangible assets resulting from acquisitions (non-GAAP) to be between US$260 million and US$280 million, as compared to the original guidance of between US$280 million and US$300 million. We also expect the resulting non-cash impairment charge of goodwill and acquired intangible assets of mobile advertising business to range from $75 million to $95 million in the first quarter of 2008 due to a restructuring of our mobile handset advertising business and termination of earn-outs based acquisition agreements with certain mobile handset advertising subsidiaries. We also announced that going forward, our mobile handset advertising business will focus on building a pull-based advertising model for our mobile business and will only send advertising information to consumers in China based on their explicit consent.

     Please see the section titled “Material Contracts” of Item 10.C. “Additional information”.

ITEM 9. THE OFFER AND LISTING

A. Offer and Listing Details

Market Price Information for Our American Depositary Shares

     Our ADSs have been listed on the Nasdaq Global Market since July 13, 2005. Our ADSs trade under the symbol “FMCN”. On December 24, 2007, we were added to the Nasdaq — 100 Index. From July 13, 2005 until April 10, 2007, each of our ADSs represented ten of our ordinary shares. Starting April 11, 2007, we reduced this ratio to five-to-one. All ADS trading prices on the Nasdaq Global Market set forth in this annual report, including historical trading and closing prices, have been adjusted to reflect the new ADS-to-share ratio of five-to-one. For the period from July 1, 2007 to May 1, 2008 the trading price of our ADSs on the Nasdaq Global Market has ranged from a low of

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US$9.50 to a high of US$65.88 per ADS. The following table provides the high and low trading prices for our ADSs on the Nasdaq Global Market for each month since July 2007.

	SALE PRICE
	HIGH		LOW
	US$		US$
MONTHLY HIGHS AND LOWS
2007 (from July 1)
July		53.29		39.25
August		43.00		34.57
September		60.07		40.56
October		62.00		55.00
November		65.88		50.35
December		58.96		52.46
2008
January		58.98		45.05
February		53.50		44.92
March		51.82		29.25
April		42.01		30.00

     As of March 31, 2008, a total of 129,500,682 ADSs were outstanding. As of March 31, 2008, 647,503,412 shares were registered in the name of a nominee of Citibank, N.A., the depositary under the deposit agreement. We have no further information as to shares held, or beneficially owned, by U.S. persons.

B. Plan of Distribution

     Not applicable.

C. Markets

     Our ADSs, each representing five of our ordinary shares, have been trading on the Nasdaq National Market since July 13, 2005 under the symbol “FMCN.”

D. Selling Shareholders

     Not applicable.

E. Dilution

     Not applicable.

F. Expenses of the Issue

     Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

     Not applicable.

B. Memorandum and Articles of Association

     We incorporate by reference into this annual report the description of our amended and restated memorandum and articles of association contained in our F-1 registration statement (File No. 333-134714), as amended, first filed with the Commission on June 2, 2006.

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C. Material Contracts

     We have not entered into any material contracts other than in the ordinary course of business or other than those described below and elsewhere in this annual report.

Framedia

     On January 1, 2006, we completed the acquisition of Infoachieve Limited, and its affiliate Framedia Advertisement by purchasing 100% of the shares of Infoachieve from Total Team, through which the former shareholders held their respective interests in Infoachieve. Framedia installs and deploys poster frames mainly inside elevators and throughout the public areas of residential complexes in major cities in China and sells frame space to advertising clients.

     The following is a brief summary of material provisions of the share purchase agreement. This summary is qualified in its entirety by reference to the share purchase agreement.

     Structure. We acquired 100% of the shares of Infoachieve, which controls its affiliates Framedia Advertisement, New Structure Advertisement and Guangdong Framedia through contractual relationships with Framedia Advertisement, New Structure Advertisement and Guangdong Framedia and their shareholders. Under the share purchase agreement, we gain control of Framedia Advertisement, New Structure Advertisement and Guangdong Framedia by gaining the right (i) to appoint their equity holders and (ii) to take over the contractual arrangements among Infoachieve, Framedia Advertisement, New Structure Advertisement and Guangdong Framedia and their equity holders.

     Purchase Price. On December 15, 2005, we paid the shareholders of Infoachieve $39.6 million in cash. At the closing on January 1, 2006, we also issued to the former shareholders of Infoachieve 19,306,840 of our ordinary shares. We also issued 2,850,163 of our ordinary shares to Total Team in consideration for their cancellation of the share option plan of Infoachieve prior to our acquisition of it. In March 2007, we issued an additional 35,830,619 of our ordinary shares, to Total Team as part of the purchase consideration. All shares issued to Total Team in connection with our acquisition of Framedia were valued at a fixed price of $2.456 per share and locked up for a specified period of time.

     Representations and Warranties. In the share purchase agreement, the seller parties made customary representations and warranties to us, which representations and warranties survive for a period of two years following the closing date, and we made customary representations and warranties to the seller parties, which representations and warranties survive for a period of six months following the closing date.

     Covenants. The share purchase agreement also includes customary covenants relating to, among other things, notification of certain matters, access to information, public announcements, non-competition of certain persons, treatment of related party accounts, agreement to pay back or cancel all outstanding loans of Framedia, and preparation of financial accounts.

     Voting Rights. Under the terms of the share purchase agreement, after we issue shares to Total Team on behalf of the seller parties, each of the shareholders of Total Team is required to exercise their voting rights in Focus Media’s shares independently of each other and Total Team’s authorized representative is required to solicit a proxy statement from each shareholder indicating how the votes to which each shareholder is entitled should be voted. In the event a shareholder does not provide a proxy from a shareholder, the shareholder will be deemed to have abstained and Total Team will not be entitled to cast such votes.

     Indemnification. The seller parties have agreed to indemnify us for damages resulting from inaccuracies of their representations and warranties or failure to perform their obligations under the share purchase agreement. The seller parties’ indemnification obligation is limited to the total consideration we are to pay to them. If the seller parties indemnify us using our common shares, the value of such shares shall be the value of the shares when any indemnified losses become payable. If the seller parties’ lock-up agreements are still in effect at such time, they may dispose of only those shares that cover the amount of the indemnified losses.

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     We have agreed to indemnify the seller parties for damages resulting from inaccuracies of our representations and warranties or failure to perform our obligations under the share purchase agreement. Our indemnification obligation is limited to the total consideration (excluding any earnout payment) to be paid to the seller parties.

Target Media

     On February 28, 2006, we acquired Target Media Holdings, its affiliated PRC entity Shanghai Target Media and its subsidiary Target Multi-Media, by purchasing 100% of the shares of Target Media Holdings from its shareholders. Target Media and several of its principal shareholders, including David Feng Yu, its chairman of the board of directors and SII International Holding Limited, are referred to as the seller parties. Collectively, Target Media’s shareholders, including The Carlyle Group, are referred to as the Target Media selling shareholders.

     The following is a brief summary of material provisions of the share purchase agreement. This summary is qualified in its entirety by reference to the share purchase agreement filed as an exhibit to our registration statement.

     Purchase Price. We have agreed to pay the shareholders of Target Media US$94 million in cash, subject to a working capital adjustment, and 77 million of our ordinary shares. The cash portion of the purchase price will be paid in three installments. The first installment of $45 million was paid at closing on February 28, 2006. The second installment of $25 million was paid on April 28, 2006. The final installment of $24 million was paid on July 31, 2006.

     Focus Media Options. We also granted options to purchase up to 3,000,000 of our ordinary shares to an agreed upon list of employees of Target Media who entered into new employment agreements with Focus Media.

     Representations and Warranties. In the share purchase agreement, the seller parties made customary representations and warranties to us, which generally survive for a period of six months following the closing date. However, a number of specified representations and warranties survive for longer periods or indefinitely. In the definitive share purchase agreement, the Target Media selling shareholders also made customary representations and warranties to us, which generally survive for a period of six months following the closing date. However, a number of specified representations and warranties survive for longer periods or indefinitely. In the definitive share purchase agreement, we made customary representations and warranties to the Target Media selling shareholders, which generally survive for a period of six months following the closing date. However, a number of specified representations and warranties survive for longer periods or indefinitely.

     Covenants. The definitive share purchase agreement includes customary covenants relating to, among other things, notification of certain matters, public announcements, non-competition of certain persons, treatment of related party accounts and preparation of financial accounts. The share purchase agreement also contains covenants requiring us to enter into employment agreements with key employees of Target Media.

     We agreed under the definitive share purchase agreement and the employment agreement with Mr. David Feng Yu to appoint him as co-chairman of the board of directors and president of Focus Media upon the completion of the acquisition. We also agreed to increase our board of directors from five to seven members at closing, and to assist in the nomination and appointment of David Feng Yu, the founder, chairman and chief executive officer of Target Media, and a nominee of David Feng Yu to fill the additional seats at the first annual meeting of our shareholders following the closing. The director nominated by David Feng Yu will qualify as an independent director for the purpose of complying with NASDAQ listing standards and Sarbanes-Oxley Act requirements so that a majority of our board of directors continues to be independent. See “Item 6.A Directors, Senior Management and Employees—Directors and Senior Management”. We have also agreed to permit The Carlyle Group to appoint an observer to our board of directors for a limited period of time.

     Indemnification. The seller parties have agreed to indemnify us for damages resulting from inaccuracies of their representations and warranties or failure to perform their obligations under the share purchase agreement; losses arising out of indebtedness of Target Media not reflected in its financial statements; losses arising out of or pursuant to terms of the contracts of Target Media that were not disclosed to us prior to the closing date due to their commercially sensitive nature and those terms are not in the ordinary course of business of Target Media; and certain tax liabilities.

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     Two Target Media selling shareholders that hold an approximately 49.7% equity interest in Target Media, or collectively, the Controlling Target Media Selling Shareholders, have agreed to indemnify us for damages resulting from inaccuracies of representations and warranties in relation to Target Media and the Controlling Target Media Selling Shareholders, respectively, or failure of Target Media or the Controlling Target Media Selling Shareholders to perform their respective obligations under the share purchase agreement. The Target Media selling shareholders other than the Controlling Target Media Selling Shareholders and The Carlyle Group, or collectively, the Non-Controlling Target Media Selling Shareholders, have agreed to indemnify us for damages resulting from inaccuracies of representations and warranties in relation to Target Media and the Non-Controlling Target Media Selling Shareholders, respectively, or failure of the Non-Controlling Target Media Selling Shareholders to perform their obligations under the share purchase agreement. The Carlyle Group has agreed to indemnify us for damages resulting from inaccuracies of representations and warranties in relation to The Carlyle Group, or failure of The Carlyle Group to perform its obligations under the share purchase agreement.

     The indemnification obligations of all Target Media selling shareholders (excluding The Carlyle Group) are limited to US$80 million, provided that the Controlling Target Media Selling Shareholders shall be responsible for indemnifying us up to $325 million for additional losses arising out of several specified claims, including such contracts not disclosed to us prior to the closing of the acquisition, which contracts contain clauses that are out of ordinary course of Target Media’s business. The indemnification obligation of The Carlyle Group is limited to $16.3 million, except for a breach with respect to their ownership of the shares they are selling to us.

     For so long as the shares received by Target Media selling shareholders in this acquisition are restricted from sales in the open market by either the lock-up, or securities laws, the Target Media selling shareholders have the right to settle any indemnification obligation by paying us in kind with our ordinary shares, valued at one-tenth of the closing price of our ADSs (each of which represents ten of our ordinary shares) on the business day prior to the payment of such shares.

     We have agreed to indemnify the seller shareholders for damages resulting from inaccuracies of our representations and warranties or failure to perform our obligations under the share purchase agreement. Certain of our indemnification obligations are capped at $39 million, while several specified indemnification obligations of our company are capped at the total consideration to be paid to the selling shareholders.

Focus Media Wireless

     In March 2006, Focus Media acquired Dotad Media Holdings Limited, or Dotad Holdings, and its wholly-owned PRC subsidiary Dotad Technology and their affiliated PRC operating company, now called Beijing Focus Media Wireless Co., Ltd., or Focus Media Wireless, which operate a WAP-based advertisement delivery platform in China through China Mobile and China Unicom’s mobile networks. Following our acquisition of Dotad Holdings, we rebranded the company under the brand name Focus Media Wireless

     The following is a brief summary of material provisions of the share purchase agreement. This summary is qualified in its entirety by reference to the actual Dotad Media Share Purchase Agreement.

     Purchase Price. We agreed to pay the shareholder of Focus Media Wireless’s $15 million in cash and an amount up to $15 million in Focus Media ordinary shares, depending on Focus Media Wireless’s 2006 and 2007 audited annual net income. The cash portion of the purchase price was paid in two instalments. The first instalment of $3 million was paid on March 7, 2006. The second instalment of $12 million was paid on the closing date. In addition under the terms of the agreement, if Focus Media Wireless attains net income of at least $5 million and $8 million during the twelve month periods ended March 31, 2007 and March 31, 2008, respectively, for each of these two net earnings attainments, we will issue 1,500,000 of our ordinary shares to the seller parties. If the income in 2006 does not meet the minimum level set by the agreement, then no shares will be paid and a calculation will be made for a return of some of the cash consideration already paid by us. If the income in 2007 does not meet the minimum level set by the agreement, no shares will be paid.

     Representations and Warranties. In the share purchase agreement, the seller and the seller’s shareholder made customary representations and warranties to us, which survive for a period of two years following the closing

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date. In the share purchase agreement, we made customary representations and warranties to the seller, which survive for a period of six months following the closing date.

     Covenants. The share purchase agreement includes customary covenants relating to, among other things, conducting of the business in the ordinary course prior to the closing date, establishment by the seller of a wholly-foreign owned enterprise in Beijing, notification of certain matters, confidentiality, public announcement, non-competition of certain persons and entities, treatment of management accounts and tax matters. The share purchase agreement also contains covenants requiring us to enter into employment agreements with Mr. Xu Maodong, the selling shareholder, and other key management personnel, to allow them to continue to run the group affiliate companies of Focus Media Wireless as an independent business unit of our company.

     Indemnification. The seller has agreed to indemnify us for any and all losses. The seller’s liability for such losses shall not exceed $1 million, unless the losses were a result of gross negligence or wilful misconduct, in which case the damages shall not exceed the aggregate consideration of the share purchase agreement. The seller’s shareholder also has agreed to indemnify us for any and all losses arising out of a breach of any representation or warranty. The seller’s shareholder shall in no event be liable in an amount greater than $1 million. We have agreed to indemnify the seller shareholders for any and all losses. The amount that the seller may obtain from losses shall not exceed $1 million.

Focus Media Movie Theater Advertising network

     In September 2006, we completed the acquisition of 70% of the equity interest in ACL, a British Virgin Islands company. ACL, through its affiliated PRC entity, leases screen time from movie theaters in cities in China, which it then sells as screen time slots to advertisers. Under its contracts with movie theaters, ACL has the right to three minutes of screen time prior to the screening of each movie shown in the theater. Under the terms of the share purchase agreement, we made an initial deposit payment of $2.8 million to the shareholders of ACL upon signing of the share purchase agreement in July 2006. We will pay the shareholders of ACL additional earn-out payments calculated according to their attainment of certain earnings targets in respect of each of the years ending August 31, 2006, 2007 and 2008 and subject to the attainment of certain gross margin targets.

Allyes

     In March 2007, we completed the acquisition of Allyes Information Technology Company Limited, and its wholly-owned PRC subsidiaries New Allyes Information Technology (Shanghai) Co., Ltd. and Allyes Information Technology (Shanghai) Co., Ltd. and their affiliated PRC operating companies. David Zhu, the founder, former chairman and chief executive officer of Allyes, signed an employment agreement with Focus Media and remains as the chief executive officer of Allyes.

     The following is a brief summary of material provisions of the share purchase agreement. This summary is qualified in its entirety by reference to the actual Allyes Share Purchase Agreement.

     Purchase Price. We agreed to pay the selling shareholders of Allyes $70 million in cash and 19,969,080 Focus Media ordinary shares. In addition, if Allyes’s audited annual net income for the twelve month period to end March 31, 2008 is greater than $9 million, we will issue our ordinary shares to the Allyes selling shareholders equal in value to 25 times the amount by which Allyes’s 2007 audited annual net income exceeds $9 million, up to a maximum amount not to exceed $75 million in our ordinary shares, based upon a fixed price per ordinary share of $7.762. Fifty percent of the ordinary shares received by the Allyes selling shareholders at the first closing are locked up for 180 days from March 28, 2007, with the remaining ordinary shares locked up until 365 days from March 28, 2007. The ordinary shares to be received in connection with the earn out, if any, will not be subject to any lock-up

     Representations and Warranties. In the share purchase agreement, the Allyes selling shareholders made customary representations and warranties to us, which generally survive for a period of fifteen months following the closing date. However, a number of specified representations and warranties survive for longer periods. We made customary representations and warranties to the Allyes selling shareholders, which survive for a period of one year following the closing date.

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     Covenants. The definitive share purchase agreement includes customary covenants relating to, among other things, the conducting of the business in the ordinary course prior to closing, notification of certain matters, confidentiality, non-compete agreements for key employees, treatment of related party accounts and preparation of financial statements.

     Indemnification. The management shareholders have agreed to indemnify us for damages resulting from any breach of any representation or warranty, covenant or other agreement made by the management shareholders in the share purchase agreement, including but not limited to losses arising out of materially inaccurate disclosures made in Allyes’s financial statements; losses arising out of failure to report any material changes in Allyes or its affiliates; losses arising out of failure to adequately disclose terms of any material contracts of Allyes or its affiliates; and losses arising out of any tax or legal liabilities.

     The non-management shareholders have also agreed to indemnify us for damages resulting from any breach of any representation or warranty, covenant or other agreement made by the non-management shareholders in the share purchase agreement.

     The Allyes selling shareholders collectively shall not be liable to indemnify losses greater than the aggregate consideration of the share purchase agreement, and each selling shareholder is only liable up to the product of (x) the amount of his percentage equity interest in the company prior to the closing multiplied by (y) the aggregate consideration of the share purchase agreement. The Allyes selling shareholders are not obligated to indemnify our losses until and unless such losses exceed $1 million. If our losses exceed $1 million, the selling shareholders are liable for all amounts including the first $1 million. Management shareholders will be jointly and severally liable. Non-management shareholders will be severally but not jointly liable.

     We have agreed to indemnify the selling shareholders for damages resulting from any breach of any representation or warranty, covenant or other agreement of ours in the share purchase agreement. Our indemnification obligations are capped at the aggregate consideration of the share purchase agreement.

     Amounts of losses are subject to insurance recoveries and other mitigating circumstances. Indemnification payments may be made in-kind with Focus Media ordinary shares received under the share purchase agreement.

     Under the terms of the transaction, we also granted certain registration rights to the former shareholders of Allyes. See “Item 14.A—Material Modifications to the Rights of Security Holders and Use of Proceeds” elsewhere in this annual report.

CGEN

     In January 2008, we completed the acquisition of CGEN Digital Media Company Limited., or CGEN Holdings, and its wholly-owned PRC subsidiary CGEN Digital Technology (Shanghai) Co., Ltd., or CGEN Digital, and their affiliated PRC operating company, Shanghai CGEN Digital Media Network Co., Ltd., or CGEN Network, which operates an in-store advertising network in China. Until the completion of the earn-out payments described below, we will continue to operate CGEN under its own brand and through these existing corporate entities.

     The following is a brief summary of material provisions of the share purchase agreement. This summary is qualified in its entirety by reference to the actual CGEN Share Purchase Agreement.

     Purchase Price. We paid the shareholders of CGEN Holdings $168.4 million in cash, and will make two additional payments of up to US$90.8 million each, partly in cash and partly in Focus Media ordinary shares (valued at US$53.42 per ADS, each of which represents five Focus Media ordinary shares), contingent upon CGEN meeting certain earnings targets during each of the two twelve month periods starting from the closing of the transaction.

     Representations and Warranties. In the share purchase agreement, the seller parties and the selling shareholders made customary representations and warranties to us, which survive for a period of one year following the closing date with certain representations surviving for a period of 18 months or, for tax matters, for 90 days following any applicable statute of limitations. In the share purchase agreement, we made customary representations

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and warranties to the seller, which survive for a period of one year following the closing date with certain representations surviving for a period of 18 months.

     Covenants. The share purchase agreement includes customary covenants relating to, among other things, conducting of the business in the ordinary course prior to the closing date, notification of certain matters, confidentiality, public announcement, non-competition of certain persons and entities, treatment of management accounts and tax matters. The share purchase agreement also contains covenants requiring us to enter into employment agreements with key management personnel of CGEN, to allow them to continue to run the group affiliate companies of CGEN as an independent business unit of our company.

     Indemnification. The seller parties have agreed to indemnify us for any and all losses arising out of a breach of a representation or warranty or a covenant. The seller parties’ indemnification obligation is limited to the total consideration we are to pay to them. The seller’s shareholder also has agreed to indemnify us for any and all losses arising out of a breach of any representation or warranty. The seller’s shareholder indemnification obligation is limited to the total consideration we are to pay to them. The seller parties and selling shareholders have the right to settle any indemnification obligation by paying us in kind with our ordinary shares, valued at one-fifth of the closing price of our ADSs (each of which represents five of our ordinary shares) on the business day prior to the payment of such shares. We have agreed to indemnify the seller shareholders for the breach of any representation, warranty or covenant we made. The amount that the seller may obtain from losses for the failure of a representation or warranty by us to be true and correct shall not exceed the amount of the aggregate consideration paid under the share purchase agreement.

Control Over Acquired Entities

     We have entered into a series of agreements with the subsidiaries, affiliated entities and nominee shareholders of such affiliated entities of each of Target Media, Framedia, Focus Media Wireless, Allyes and CGEN that provide us with effective control over each of their respective affiliated entities while enabling the their businesses to be consolidated with the respective Cayman holding company of each such business and with us. See “Item 4.C Information on Our Company—Organization Structure— Our Corporate Structure and Contractual Arrangements” and “ Item 7.B Major Shareholders and Related Party Transactions—Related Party Transactions — Agreements Among Us, Our Wholly Foreign-Owned Subsidiaries, Our PRC Operating Affiliates and Their Shareholders”.

D. Exchange Controls

     Our operating businesses are currently conducted in China and substantially all of our revenues and expenses are denominated in Renminbi. The People’s Bank of China, or PBOC, sets and publishes daily a base exchange rate with reference primarily to the supply and demand of Renminbi against a basket of currencies in the market during the prior day. The PBOC also takes into account other factors, such as the general conditions existing in the international foreign exchange markets. Since 1994, the conversion of Renminbi into foreign currencies, including Hong Kong dollars and U.S. dollars, has been based on rates set by the PBOC, which are set daily based on the previous day’s inter-bank foreign exchange market rates and current exchange rates in the world financial markets. From 1994 to July 20, 2005, the official exchange rate for the conversion of Renminbi to U.S. dollars was generally stable. Although PRC governmental policies were introduced in 1996 to reduce restrictions on the convertibility of Renminbi into foreign currency for current account items, conversion of Renminbi into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of the State Administration for Foreign Exchange and other relevant authorities. On July 21, 2005, the PRC government introduced a managed floating exchange rate system to allow the value of the Renminbi to fluctuate within a regulated band based on market supply and demand and by reference to a basket of currencies. On the same day, the value of the Renminbi appreciated by 2.0% against the U.S. dollar. Since then, the PRC government has made, and may in the future make, further adjustments to the exchange rate system. The PBOC announces the closing price of a foreign currency traded against the Renminbi in the inter-bank foreign exchange market after the closing of the market on each working day, and makes it the central parity for the trading against the Renminbi on the following working day.

     In January and April 2005, the PRC State Administration of Foreign Exchange, or SAFE, issued two rules that require PRC residents to register with and receive approvals from SAFE in connection with their offshore investment activities. SAFE has announced that the purpose of these regulations is to achieve the proper balance of foreign exchange and the standardization of the cross-border flow of funds.

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     On October 21, 2005, SAFE issued the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-raising and Reverse Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies, or Notice 75, which became effective as of November 1, 2005. Notice 75 replaced the two rules issued by SAFE in January and April 2005 mentioned above.

     According to Notice 75:

• prior to establishing or assuming control of an offshore company for the purpose of financing that offshore company with assets or equity interests in an onshore enterprise in the PRC, each PRC resident, whether a natural or legal person, must complete the overseas investment foreign exchange registration procedures with the relevant local SAFE branch;

• an amendment to the registration with the local SAFE branch is required to be filed by any PRC resident that directly or indirectly holds interests in that offshore company upon either (1) the injection of equity interests or assets of an onshore enterprise to the offshore company, or (2) the completion of any overseas fund raising by such offshore company; and

• an amendment to the registration with the local SAFE branch is also required to be filed by such PRC resident when there is any material change involving a change in the capital of the offshore company, such as (1) an increase or decrease in its capital, (2) a transfer or swap of shares, (3) a merger or division, (4) a long term equity or debt investment, or (5) the creation of any security interests over the relevant assets located in China.

     Moreover, Notice 75 applies retroactively. As a result, PRC residents who have established or acquired control of offshore companies that have made onshore investments in the PRC in the past are required to complete the relevant overseas investment foreign exchange registration procedures by March 31, 2006. Under the relevant rules, failure to comply with the registration procedures set forth in Notice 75 may result in restrictions being imposed on the foreign exchange activities of the relevant onshore company, including the payment of dividends and other distributions to its offshore parent or affiliate and the capital inflow from the offshore entity, and may also subject relevant PRC residents to penalties under PRC foreign exchange administration regulations.

     As a Cayman Islands company, and therefore a foreign entity, if Focus Media Holding purchases the assets or equity interest of a PRC company owned by PRC residents in exchange for our equity interests, such PRC residents will be subject to the registration procedures described in Notice 75. Moreover, PRC residents who are beneficial holders of our shares are required to register with SAFE in connection with their investment in us.

     As a result of the lack of implementing rules and other uncertainties relating to the interpretation and implementation of Notice 75, we cannot predict how these regulations will affect our business operations or strategies. For example, our present or future PRC subsidiaries’ ability to conduct foreign exchange activities, such as remittance of dividends and foreign-currency- denominated borrowings, may be subject to compliance with such SAFE registration requirements by relevant PRC residents, over whom we have no control. In addition, we cannot assure you that any such PRC residents will be able to complete the necessary approval and registration procedures required by the SAFE regulations. We require all the shareholders in Focus Media Holding who are PRC residents to comply with any SAFE registration requirements, but we have no control over either our shareholders or the outcome of such registration procedures. Such uncertainties may restrict our ability to implement our acquisition strategy and adversely affect our business and prospects.

E. Taxation

Cayman Islands Taxation

     The following discussion of the material Cayman Islands federal income tax consequences of an investment in our ADSs is based upon laws and relevant interpretations thereof in effect as of the date of this annual report, all of which are subject to change, possibly with retroactive effect. This discussion does not deal with all possible tax

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consequences relating to an investment in our ADSs, such as the tax consequences under state, local and other tax laws. To the extent that the discussion relates to matters of Cayman Islands tax law, it represents the opinion of Conyers, Dill & Pearman, our special Cayman Islands counsel.

     The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty or withholding tax applicable to us or to any holder of ADS, or ordinary shares. There are no other taxes likely to be material to us levied by the Government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or after execution brought within the jurisdiction of the Cayman Islands. No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands companies except those which hold interests in land in the Cayman Islands. The Cayman Islands is not party to any double taxation treaties. There are no exchange control regulations or currency restrictions in the Cayman Islands.

     Pursuant to Section 6 of the Tax Concessions Law (1999 Revision) of the Cayman Islands, we have obtained an undertaking from the Governor-in-Council:

     (1) that no law which is enacted in the Cayman Islands imposing any tax to be levied on profits or income or gains or appreciation shall apply to us or our operations; and

     (2) that the aforesaid tax or any tax in the nature of estate duty or inheritance tax shall not be payable on the shares, debentures or other obligations of the Company.

     The undertaking for us is for a period of twenty years from May 3, 2005.

People’s Republic of China Taxation

     The newly enacted PRC Enterprise Income Tax Law, or the EIT Law, and the implementation regulations for the EIT Law issued by the PRC State Council, became effective as of January 1, 2008. The EIT Law provides that enterprises established outside of China whose “de facto management bodies” are located in China are considered “resident enterprises” and are generally subject to the uniform 25% enterprise income tax rate as to their worldwide income. Under the implementation regulations for the EIT Law issued by the PRC State Council, “de facto management body” is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and treasury, and acquisition and disposition of properties and other assets of an enterprise. Although substantially all of our operational management is currently based in the PRC, it is unclear whether PRC tax authorities would require (or permit) us to be treated as a PRC resident enterprise.

     Under the EIT Law and implementation regulations issued by the State Council, PRC income tax at the rate of 10% is applicable to dividends payable to investors that are “non-resident enterprises,” which do not have an establishment or place of business in the PRC, or which have such establishment or place of business but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends have their sources within the PRC. Similarly, any gain realized on the transfer of ADSs or shares by such investors is also subject to 10% PRC income tax if such gain is regarded as income derived from sources within the PRC. If we are considered a PRC “resident enterprise,” it is unclear whether dividends we pay with respect to our ordinary shares or ADSs, or the gain you may realize from the transfer of our ordinary shares or ADSs, would be treated as income derived from sources within the PRC and be subject to PRC tax. It is also unclear whether, if we are considered a PRC “resident enterprise,” holders of our ordinary shares or ADSs might be able to claim the benefit of income tax treaties entered into between China and other countries.

United States Federal Income Taxation

     The following discussion describes certain United States federal income tax consequences of the ownership of our ordinary shares and ADSs as of the date hereof. Except where noted, it deals only with ordinary shares and ADSs held as capital assets. This discussion does not represent a detailed description of the United States federal income tax consequences applicable to you if you are subject to special treatment under the United States federal income tax laws, including if you are:

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• a bank;

• a dealer in securities or currencies;

• a financial institution;

• a regulated investment company;

• a real estate investment trust;

• an insurance company;

• a tax-exempt organization;

• a person holding our ordinary shares or ADSs as part of a hedging, integrated or conversion transaction, a constructive sale or a straddle;

• a trader in securities that has elected the mark-to-market method of accounting for your securities;

• a person liable for alternative minimum tax;

• a person who owns or is deemed to own 10% or more of our voting stock;

• a partnership or other pass through entity for United States federal income tax purposes; or

• a person whose “functional currency” is not the United States dollar.

     Furthermore, the discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and regulations, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked or modified so as to result in United States federal income tax consequences different from those discussed below. In addition, this summary is based, in part, upon representations made by the depositary to us and assumes that the deposit agreement, and all other related agreements, will be performed in accordance with their terms. IF YOU ARE CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF OUR ORDINARY SHARES OR ADSS, YOU SHOULD CONSULT YOUR OWN TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO YOU IN LIGHT OF YOUR PARTICULAR SITUATION AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.

     As used herein, the term “United States Holder” means a beneficial holder of an ordinary share or ADS that is for United States federal income tax purposes:

• an individual citizen or resident of the United States;

• a corporation (or other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

• an estate the income of which is subject to United States federal income taxation regardless of its source; or

• a trust which either (1) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person.

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     If a partnership holds our ordinary shares or ADSs, the tax treatment of a partner will depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our ordinary shares or ADSs, you should consult your tax advisors.

ADSs

     If you hold ADSs, for United States federal income tax purposes, you generally will be treated as the owner of the underlying ordinary shares that are represented by such ADSs. Accordingly, deposits or withdrawals of ordinary shares for ADSs will not be subject to United States federal income tax.

     The U.S. Treasury has expressed concerns that intermediaries in the chain of ownership between the holder of an ADS and the issuer of the security underlying the ADS may be taking actions that are inconsistent with the claiming of foreign tax credits for United States Holders of ADSs. Such actions would also be inconsistent with the claiming of the reduced rate of tax, described below, applicable to dividends received by certain non-corporate holders. Accordingly, the creditabilities of PRC taxes, if any, and the availability of the reduced tax rate for dividends received by certain non-corporate holders, each described below, could be affected by actions taken by intermediaries in the chain of ownership between the holder of an ADS and our company.

Taxation of Dividends

     Subject to the discussion below under “Passive Foreign Investment Companies”, the gross amount of distributions on our ordinary shares or ADSs will be taxable as dividends, to the extent paid out of our current or accumulated earnings and profits, as determined under United States federal income tax principles. Such income will be includable in your gross income as ordinary income on the day actually or constructively received by the depositary. Such dividends will not be eligible for the dividends received deduction allowed to corporations under the Code. With respect to non-corporate United States investors, certain dividends received in taxable years beginning before January 1, 2011 from a qualified foreign corporation may be subject to reduced rates of taxation. A foreign corporation is treated as a qualified foreign corporation with respect to dividends paid by that corporation on shares (or ADSs backed by such shares) that are readily tradable on an established securities market in the United States. United States Treasury Department guidance indicates that our ADSs, which are listed on the Nasdaq National Market, but not our ordinary shares, are readily tradable on an established securities market in the United States. Thus, we believe that dividends we pay on our ordinary shares that are represented by ADSs, but not our ordinary shares that are not so represented, currently meet such conditions required for the reduced tax rates. There can be no assurance that our ADSs will be considered readily tradable on an established securities market in later years. A qualified foreign corporation also includes a foreign corporation that is eligible for the benefits of certain income tax treaties with the Unites States. In the event that we are deemed to be a PRC “resident enterprise” under PRC tax law (see discussion under “Taxation—People’s Republic of China Taxation”), we may be eligible for the benefits of the income tax treaty between the Unites States and the PRC, and if we are eligible for such benefits, dividends we pay on our ordinary shares, regardless of whether such shares are represented by ADSs, would be subject to the reduced rates of taxation. Non-corporate holders that do not meet a minimum holding period requirement during which they are not protected from the risk of loss or that elect to treat the dividend income as “investment income” pursuant to section 163(d)(4) of the Code will not be eligible for the reduced rates of taxation regardless of our status as a qualified foreign corporation. In addition, the rate reduction will not apply to dividends if the recipient of a dividend is obligated to make related payments with respect to positions in substantially similar or related property. This disallowance applies even if the minimum holding period has been met. You should consult your own tax advisors regarding the application of this legislation to your particular circumstances.

     In the event that we are deemed to be a PRC “resident enterprise” under PRC tax law (see discussion under “Taxation—“People’s Republic of China Taxation”, you may be subject to PRC withholding taxes on dividends paid to you with respect to our ordinary shares or ADSs. In that case, however, you may be able to obtain a reduced rate of PRC withholding taxes under the treaty between the United States and the PRC if certain requirements are met. In addition, subject to certain conditions and limitations, PRC withholding taxes on dividends, if any, may be treated as foreign taxes eligible for credit against your United States federal income tax liability. For purposes of calculating the foreign tax credit, dividends paid to you with respect to our ordinary shares or ADSs will be treated as income form sources outside the United States and will generally constitute passive category income. The rules governing the

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foreign tax credit are complex. You are urged to consult your tax advisors regarding the availability of the foreign tax credit under your particular circumstances.

     To the extent that the amount of any distribution exceeds our current and accumulated earnings and profits for a taxable year, as determined under United States federal income tax principles, the distribution will first be treated as a tax-free return of capital, causing a reduction in the adjusted basis of our ordinary shares or ADSs (thereby increasing the amount of gain, or decreasing the amount of loss, to be recognized by you on a subsequent disposition of our ordinary shares or ADSs), and the balance in excess of adjusted basis will be taxed as capital gain recognized on a sale or exchange. However, we do not expect to keep earnings and profits in accordance with United States federal income tax principles. Therefore, you should expect that a distribution will generally be treated as a dividend (as discussed above).

Passive Foreign Investment Companies

     We operate an active advertising business in China and based on the past and projected composition of our income and valuation of our assets, including goodwill, we believe we were not a passive foreign investment company for 2007, we do not expect to be a passive foreign investment company (“PFIC”), for 2008, and we do not expect to become one in the future, although there can be no assurance in this regard. Because PFIC status is a factual determination, our United States counsel expresses no opinion with respect to our PFIC status and also expresses no opinion with respect to our expectations contained in this paragraph.

     We will be a PFIC for any taxable year in which:

• at least 75% of our gross income is passive income, or

• at least 50% of the value (determined on a quarterly basis) of our assets is attributable to assets that produce or are held for the production of passive income.

     For this purpose, passive income includes dividends, interest, royalties and rents (other than royalties and rents derived in the active conduct of a trade or business and not derived from a related person). If we own at least 25% (by value) of the stock of another corporation, we will be treated, for purposes of the PFIC tests, as owning our proportionate share of the other corporation’s assets and receiving our proportionate share of the other corporation’s income.

     The determination of whether we are a PFIC is made annually for each taxable year of our company. Accordingly, it is possible that we may become a PFIC in the current or any future taxable year due to changes in our asset or income composition. We could become a PFIC, for example though a decrease in the price of our ADSs (resulting in a decrease in the value of our goodwill, an active asset). If we are a PFIC for any taxable year during which you hold our ordinary shares or ADSs, you will be subject to special tax rules discussed below.

     If we are a PFIC for any taxable year during which you hold our ordinary shares or ADSs, you will be subject to special tax rules with respect to any “excess distribution” received and any gain realized from a sale or other disposition, including a pledge, of ordinary shares or ADSs. Distributions received in a taxable year that are greater than 125% of the average annual distributions received during the shorter of the three preceding taxable years or your holding period for the ordinary shares or ADSs will be treated as excess distributions. Under these special tax rules:

• the excess distribution or gain will be allocated ratably over your holding period for the ordinary shares or ADSs,

• the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and

• the amount allocated to each other year will be subject to tax at the highest tax rate in effect for that year and the interest charge applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.

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     In addition, non-corporate United States Holders will not be eligible for reduced rates of taxation on any dividends received from us in taxable years beginning before January 1, 2011, if we are a PFIC in the taxable year in which such dividends are paid or in the preceding taxable year. You will be required to file Internal Revenue Service Form 8621 if you hold our ordinary shares or ADSs in any year in which we are classified as a PFIC.

     If we are a PFIC for any taxable year during which you hold our ordinary shares or ADSs and any of our non-United States subsidiaries is also a PFIC, a United States Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these rules. You are urged to consult your tax advisors about the application of the PFIC rules to any of our subsidiaries.

     In certain circumstances, in lieu of being subject to the excess distribution rules discussed above, you may make an election to include gain on the stock of a PFIC as ordinary income under a mark-to-market method provided that such stock is regularly traded on a qualified exchange. Under current law, the mark-to-market election may be available to holders of ADSs because the ADSs are listed on the Nasdaq Global Market, which constitutes a qualified exchange as designated in the Internal Revenue Code, although there can be no assurance that the ADSs will be “regularly traded” for purposes of the mark-to-market election.

     If you make an effective mark-to-market election, you will include in each year as ordinary income the excess of the fair market value of your ADSs at the end of the year over your adjusted tax basis in the ADSs. You will be entitled to deduct as an ordinary loss each year the excess of your adjusted tax basis in the ADSs over their fair market value at the end of the year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. If you make an effective mark-to-market election, any gain you recognize upon the sale or other disposition of your ADSs, will be treated as ordinary income and any loss will be treated as ordinary loss, but only to the extent of the net amount previously included in income as a result of the mark-to-market election.

     Your adjusted tax basis in the ADSs will be increased by the amount of any income inclusion and decreased by the amount of any deductions under the mark-to-market rules. If you make a mark-to-market election it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the ADSs are no longer regularly traded on a qualified exchange or the Internal Revenue Service consents to the revocation of the election. You are urged to consult your tax advisor about the availability of the mark-to-market election, and whether making the election would be advisable in your particular circumstances.

     Alternatively, you can sometimes avoid the rules described above by electing to treat us as a “qualified electing fund” under section 1295 of the Code. This option is not available to you because we do not intend to comply with the requirements necessary to permit you to make this election.

     You are urged to consult your tax advisors concerning the United States federal income tax consequences of holding our ordinary shares or ADSs if we are considered a PFIC in any taxable year.

Taxation of Capital Gains

     Subject to the discussion above under “Passive Foreign Investment Companies”, for United States federal income tax purposes, you will recognize taxable gain or loss on any sale or exchange of our ordinary shares or ADSs in an amount equal to the difference between the amount realized for the ordinary shares or ADSs and your tax basis in the ordinary shares or ADSs. Such gain or loss will generally be capital gain or loss. Capital gains of individuals derived with respect to capital assets held for more than one year are eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. Any gain or loss recognized by you will generally be treated as United States source gain or loss. However, in the event that we are deemed to be a PRC “resident enterprise” under PRC tax law (see discussion under “Taxation—“People’s Republic of China Taxation”), we may be eligible for the benefits of the income tax treaty between the United States and the PRC. Under that treaty, if any PRC tax were to be imposed on any gain from the disposition of our ordinary shares or ADSs, the gain may be treated as PRC-source income. You are urged to consult your tax advisors regarding the tax consequences if a foreign withholding tax is imposed on a disposition of ordinary shares or ADSs, including the availability of the foreign tax credit under your particular circumstances.

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Information Reporting and Backup Withholding

     Information reporting will apply to dividends in respect of our ordinary shares or ADSs and the proceeds from the sale, exchange or redemption of our ordinary shares or ADSs that are paid to you within the United States (and in certain cases, outside the United States), unless you are an exempt recipient such as a corporation. A backup withholding tax may apply to such payments if you fail to provide a taxpayer identification number or certification of other exempt status or fail to report in full dividend and interest income.

     Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your United States federal income tax liability provided the required information is furnished to the Internal Revenue Service.

     PROSPECTIVE PURCHASERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY ADDITIONAL TAX CONSEQUENCES RESULTING FROM PURCHASING, HOLDING OR DISPOSING OF ADSS, INCLUDING THE APPLICABILITY AND EFFECT OF THE TAX LAWS OF ANY STATE, LOCAL OR FOREIGN JURISDICTION, INCLUDING ESTATE, GIFT, AND INHERITANCE LAWS.

F. Dividends and Paying Agents

     Not applicable.

G. Statement by Experts

     Not applicable.

H. Documents on Display

     We have filed this annual report on Form 20-F, including exhibits, with the SEC. As allowed by the SEC, in Item 19 of this annual report, we incorporate by reference certain information we filed with the SEC. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this annual report.

     We have previously filed with the Commission our registration statements on Form F-1 and F-3ASR and prospectuses and prospectus supplements under the Securities Act of 1933, as amended, with respect to our ADSs.

     The SEC also maintains a website that contains reports, proxy statements and other information about issuers, such as us, who file electronically with the SEC. The address of that website is http://www.sec.gov . The information on that website is not a part of this annual report.

     We will furnish to Citibank, N.A., as depositary of our ADSs, our annual reports. When the depositary receives these reports, it will upon our request promptly provide them to all holders of record of ADSs. We will also furnish the depositary with all notices of shareholders’ meetings and other reports and communications in English that we make available to our shareholders. The depositary will make these notices, reports and communications available to holders of ADSs and will upon our request mail to all holders of record of ADSs the information contained in any notice of a shareholders’ meeting it receives.

     We are subject to periodic reporting and other informational requirements of the Exchange Act, as applicable to foreign private issuers. Accordingly, we are required to file reports, including annual reports on Form 20-F, and other information with the SEC. As a foreign private issuer, we are exempt from the rules of the Exchange Act prescribing the furnishing and content of proxy statements to shareholders under the federal proxy rules contained in Sections 14(a), (b) and (c) of the Exchange Act, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. The registration statements, reports and other information so filed can be inspected and copied at the public reference

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facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You can request copies of these documents upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms.

I. Subsidiary Information

     Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

     Our exposure to interest rate risk primarily relates to the interest income generated by excess cash, which is mostly held in interest-bearing bank deposits. We have not used derivative financial instruments in our investment portfolio. Interest earning instruments carry a degree of interest rate risk. We have not been exposed nor do we anticipate being exposed to material risks due to changes in market interests rates. However, our future interest income may fall short of expectations due to changes in market interest rates.

Foreign Currency Risk

     Substantially all our revenues and expenses are denominated in Renminbi. We have not had any material foreign exchange gains or losses. Although in general, our exposure to foreign exchange risks should be limited, the value of your investment in our ADSs will be affected by the foreign exchange rate between U.S. dollars relative to the Renminbi because the value of our business is effectively denominated in Renminbi, while the ADSs will be traded in U.S. dollars. Furthermore, a decline in the value of the Renminbi could reduce the U.S. dollar equivalent of the value of the earnings from, and our investments in, our subsidiaries and PRC-incorporated affiliates in China. In addition, appreciation or depreciation in the value of the Renminbi relative to the U.S. dollar would affect our reported financial results in U.S. dollar terms. See “Item 3.B. — Risk Factors — Risks Relating to the People’s Republic of China — Fluctuations in exchange rates could result in foreign currency exchange losses”.

Inflation

     In recent years, China has not experienced significant inflation, and thus inflation has not had a significant effect on our business historically. According to the National Bureau of Statistics of China, the change in the Consumer Price Index in China was 1.8%, 1.5% and 4.8% in 2005, 2006 and 2007, respectively.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

     Not applicable.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

     None of these events occurred in any of fiscal 2005, 2006 and 2007.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

A. Modifications of Rights

     Upon the closing of our acquisition of Target Media, we amended our shareholder’s agreement to grant the former shareholders of Target Media registration rights with regard to the Focus Media ordinary shares we issued to such former Target Media shareholders. Such shareholders are now entitled to demand registration rights and

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piggyback registration rights under our amended and restated shareholders agreement. At any time after six months following the closing of our initial public offering,

• any of our shareholders representing a majority of the ordinary shares converted from the Series A convertible redeemable preference shares;

• any of our shareholders representing a majority of the ordinary shares converted from the Series B convertible redeemable preference shares;

• any of our shareholders representing 20% of the ordinary shares converted from the Series C convertible redeemable preference shares; and

• since the closing of our acquisition of Target Media, any of the former Target Media shareholders representing 25% of the ordinary shares issued to them as a group as consideration in connection with our acquisition of Target Media;

may require us to effect the registration, on a form other than Form F-3, of at least 25% of the registrable securities then outstanding. We are not obligated to take any action to effect any such registration on more than two occasions each on behalf of each group of shareholders described above or more than once in any six month period or within six months of any other public offering we conduct in which they had the opportunity to participate without the exclusion of any shares eligible for registration under the shareholders agreement.

     In addition, holders of any of our registrable securities may require us to effect a registration statement on Form F-3 (or any successor form or any comparable form for a registration in a jurisdiction other than the United States) for a public offering of registrable securities so long as the reasonably anticipated aggregate price to the public (net of selling expenses) would be at least $1,000,000 and we are entitled to use Form F-3 (or a comparable form) for such offering. Holders of registrable securities may demand a registration on Form F-3 on unlimited occasions, although we are not obligated to effect more than once in any six month period if within six months of any other public offering we conduct in which they had the opportunity to participate without the exclusion of any shares eligible for registration under the shareholders agreement.

     Upon the closing of our acquisition of Allyes, we granted the former shareholders of Allyes registration rights with regard to the Focus Media ordinary shares we issued to them. Under the terms of our agreement with the former Allyes shareholder:

• prior to September 18, 2009 or prior to the time when the shares proposed to be sold by the former Allyes shareholders may be sold in a 90-day period under Rule 144, any former Allyes shareholders holding 3 million of our ordinary shares may request that we effect the registration of the ordinary shares held by them using our existing registration statement on Form F-3ASR, provided that if the offering is part of an underwritten offering, the expected proceeds from such an offering would not be less than US$40 million; we are obligated to effect up to three such registrations; and

• certain of the former Allyes shareholders, on a date at least 150 days and no more than 330 days following March 28, 2007, may request that we effect the registration of the ordinary shares held by them using our existing registration statement on Form F-3ASR; we are obligated to effect only one such registration.

     We are not obligated to take any action to effect any such registration more than once in any six month period or within six months of any other public offering we conduct in which they had the opportunity to participate without the exclusion of any shares eligible for registration under the shareholders agreement.

     On April 11, 2007, we effected a change of the ratio of our ADSs to ordinary shares from one (1) ADS representing ten (1) ordinary shares to one (1) ADS representing five (5) ordinary shares.

112

     Upon the closing of our acquisition of CGEN, we granted the former shareholders (including optionholders) of CGEN registration rights with regard to the Focus Media ordinary shares we issued to them. Under the terms of our agreement with the former CGEN shareholders, any former CGEN shareholders holding 3 million of our ordinary shares may request that we effect the registration of the ordinary shares held by them using our existing registration statement on Form F-3ASR or other effective registration statement, provided that if the offering is part of an underwritten offering, the expected proceeds from such an offering would not be less than US$40 million; we are obligated to effect up to three such registrations.

     We are not obligated to take any action to effect any such registration more than once in any six month period or within six months of any other public offering we conduct in which they had the opportunity to participate without the exclusion of any shares eligible for registration under the shareholders agreement.

B. Use of Proceeds

     Not applicable.

ITEM 15. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

     Under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934, as amended. Based on that evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report.

Management’s Annual Report on Internal Control Over Financial Reporting.

     Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended, for our company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with generally accepted accounting principles and includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of a company’s assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that a company’s receipts and expenditures are being made only in accordance with authorizations of a company’s management and directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of a company’s assets that could have a material effect on the consolidated financial statements.

     Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance with respect to consolidated financial statement preparation and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

     As required by Section 404 of the Sarbanes-Oxley Act of 2002 and related rules as promulgated by the Securities and Exchange Commission, management assessed the effectiveness of the internal control over financial reporting as of December 31, 2007 using criteria established in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission.

     Based on this assessment, management concluded that the our internal control over financial reporting was effective as of December 31, 2007 based on the criteria established in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission.

     Our management has excluded from our assessment for internal control over financial reporting at Allyes Information Technology Company Limited, Angeli Education Development Limited, Advantage Way Limited, Century Bonus Limited & Smart Cheer Limited, Evercom Pacific Limited, Brightchina Enterprise Limited, Spacenet International Limited, Multibillion International Limited, Homesky Investment Limited, Hua Kuang Advertising Company Limited (HK), Pear Commercial INC, Crownsky Limited, Quanzhou New Continental Culture and Communication Company Limited, Vast Well Development Limited, Active Max Limited, Guiyang TianMing Advertising Company Limited, One Capital Investment Limited, First Star Investment Limited, Xin Jin Hong Limited, Suzhou Focus Media Comany Limited, Richcrest Pacific Limited, Sky Max Global Limited, Fully Ascend Limited, Summitworld Limited, Surgezhenghe Holding Limited, Profitbest Worldwide Limited, Speedaccess Limited, Peakbright Group Limited, Wiseglobe Investments Limited, Newking Investment Limited, E-Rainbow Mobile Information Company Limited, Cmsc Holdings Limited and Directvantage Limited, which were acquired on March 28, April 16, May 1, September 15, July 16, September 1, August 15, November 26, March 1, May 15, January 15, March 1, March 30, June 1, June 15, August 1, August 8, September 15, November 1, November 8, February 1, September 1, October 1, March 1, March 1, April 1, March 1, March 1, March 1, April 1, July 2, October 1 and October 1 of 2007, respectively, and whose aggregated financial statements constitute 4.2 percent and 7.8 percent of net and total assets, respectively, 37.0 percent of revenues, and 29.3 percent of net income of the consolidated financial statement amounts as of and for the year ended December 31, 2007.

     The effectiveness of internal control over financial reporting as of December 31, 2007 has been audited by Deloitte Touche Tohmatsu CPA Ltd., an independent registered public accounting firm, who has also audited our consolidated financial statements for the year ended December 31, 2007.

ATTESTATION REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF FOCUS MEDIA HOLDING LIMITED

     We have audited the internal control over financial reporting of Focus Media Holding Limited and subsidiaries (the “Group”) as of December 31, 2007, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in the Report by Management on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Allyes Information Technology Company Limited, Angeli Education Development Limited, Advantage Way Limited, Century Bonus Limited & Smart Cheer Limited, Evercom Pacific Limited, Brightchina Enterprise Limited, Spacenet International Limited, Multibillion International Limited, Homesky Investment Limited, Hua Kuang Advertising Company Limited (HK), Pear Commercial INC, Crownsky Limited, Quanzhou New Continental Culture and Communication Company Limited, Vast Well Development Limited, Active Max Limited, Guiyang TianMing Advertising Company Limited, One Capital Investment Limited, First Star Investment Limited, Xin Jin Hong Limited, Suzhou Focus Media Comany Limited, Richcrest Pacific Limited, Sky Max Global Limited, Fully Ascend Limited, Summitworld Limited, Surgezhenghe Holding Limited, Profitbest Worldwide Limited, Speedaccess Limited, Peakbright Group Limited, Wiseglobe Investments Limited, Newking Investment Limited, E-Rainbow Mobile Information Company Limited, Cmsc Holdings Limited, and Directvantage Limited, which were acquired on March 28, April 16, May 1, September 15, July 16, September 1, August 15, November 26, March 1, May 15, January 15, March 1, March 30, June 1, June 15, August 1, August 8, September 15, November 1, November 8, February 1, September 1, October 1, March 1, March 1, April 1, March 1, March 1, March 1, April 1, July 2, October 1 and October 1 of 2007, respectively, and whose aggregated financial statements constitute 4.2 percent and 7.8 percent of net and total assets, respectively, 37.0 percent of revenues, and 29.3 percent of net income of the consolidated financial statement amounts as of and for the year ended December 31, 2007. Accordingly, our audit did not include the internal control over financial reporting at Allyes Information Technology Company Limited, Angeli Education Development Limited, Advantage Way Limited, Century Bonus Limited & Smart Cheer Limited, Evercom Pacific Limited, Brightchina Enterprise Limited, Spacenet International Limited, Multibillion International Limited, Homesky Investment Limited, Hua Kuang Advertising Company Limited (HK), Pear Commercial INC, Crownsky Limited, Quanzhou New Continental Culture and Communication Company Limited, Vast Well Development Limited, Active Max Limited, Guiyang TianMing Advertising Company Limited, One Capital Investment Limited, First Star Investment Limited, Xin Jin Hong Limited, Suzhou Focus Media Comany Limited, Richcrest Pacific Limited, Sky Max Global Limited, Fully Ascend Limited, Summitworld Limited, Surgezhenghe Holding Limited, Profitbest Worldwide Limited, Speedaccess Limited, Peakbright Group Limited, Wiseglobe Investments Limited, Newking Investment Limited, E-Rainbow Mobile Information Company Limited, Cmsc Holdings Limited, and Directvantage Limited. The Group’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report by Management on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Group’s internal control over financial reporting based on our audit.

     We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

     A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

     Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

     In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

     We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2007 of the Group and our report dated May 6, 2008 expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Group’s adoption of FASB Interpretation No. 48, ¡°Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109”, effective January 1, 2007 and Statement of Financial Accounting Standards No. 123R “Share-based Payment”, effective January 1, 2006.

/s/ DELOITTE TOUCHE TOHMATSU CPA LTD.

Shanghai, China
May 6, 2008

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

     Our Board of Directors has determined that Neil Nanpeng Shen, who is an independent directors, and Charles Chao, who is now a non-independent director, each qualify as audit committee financial experts as defined in Item 16A of the instruction to Form 20-F.

ITEM 16B. CODE OF ETHICS

     Our board of directors adopted a code of business conduct and ethics on April 16, 2005, which is applicable to our directors, officers and employees. Our code of business conduct and ethics is publicly available on our website at: http://nocache.corporate-ir.net/media_files/irol/19/190067/corp_gov/Conduct_and_Ethics.pdf.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by Deloitte Touche Tohmatsu CPA Ltd., our independent registered public accounting firm, for the years indicated.

113

	For the year ended December 31,
	2006		2007
	(in thousands, US dollar)
Audit Fees (1)	$	1,184	$	1,960
Audit-related Fees (2)		—		—
Tax Fees (3)		83		394
All Other Fees (4)		—		—
Total	$	1,267	$	2,354

(1)	Audit fees consist of fees associated with the annual audit, the reviews of our quarterly financial statements and statutory audits required internationally. They also include fees billed for those services that are normally provided by the independent accountants in connection with statutory and regulatory filings.
(2)	Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements but not described in footnote (1) above. These services include consultations concerning financial accounting and reporting standards and review of capitalization of retained earnings, financial covenants in loan agreements, and our affiliates’ financial information.
(3)	Tax fees include fees billed for professional services rendered by Deloitte Touche Tohmatsu CPA Ltd., primarily in connection with our transfer study activities.
(4)	All other fees comprise fees for all other services provided by Deloitte Touche Tohmatsu CPA Ltd., other than those services covered in footnotes (1) to (3) above.

     Prior to forming an audit committee, our board of directors is responsible for the oversight of our independent registered public accounting firm. The policy of our board of directors is to pre-approve all audit and non-audit services provided by Deloitte Touche Tohmatsu CPA Ltd., including audit services, audit-related services, tax services and other services, as described above.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

     None.

ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

     None.

PART III

ITEM 17. FINANCIAL STATEMENTS

     The Registrant has elected to provide the financial statements and related information specified in Item 18.

ITEM 18. FINANCIAL STATEMENTS

     The following is a list of the audited financial statements and report of independent registered public accounting firm included in this annual report beginning on page F-1.

	Page
Report of Independent Registered Public Accounting	F-2
Consolidated Balance Sheets as of December 31, 2005 and 2006	F-3
Consolidated Statements of Operations for each of the years ended December 31, 2005, 2006 and 2007	F-4
Consolidated Statements of Changes in Shareholders’ Equity (Deficiency) and Comprehensive Income (Loss) for the years ended December 31, 2005, 2006 and 2007	F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2006 and 2007	F-6
Notes to the Consolidated Financial Statements	F-7

114

ITEM 19. EXHIBITS

Exhibit
Number	Description of Exhibits
3.1*	Amended and Restated Memorandum and Articles of Association of Focus Media Holding Limited.
4.1*	Specimen Ordinary Share Certificate.
4.2*	Amended and Restated Shareholders Agreement of Focus Media Holding Limited, dated December 2, 2004, among Focus Media Holding Limited, its subsidiaries, its ordinary shareholders, its preferred shareholders and the investors named therein.
4.3*	Deposit Agreement dated July 18, 2005 among the Registrant, Citibank, N.A. and holders of the American Depositary Receipts (incorporated by reference to the registration statement on Form F-6 (File No. 333-126011) filed with the Securities and Exchange Commission with respect to American Depositary Shares representing ordinary shares).
5.1*	Form of opinion of Conyers, Dill & Pearman, Cayman Islands special counsel to the registrant, regarding the validity of the ordinary shares being registered.
5.2*	Form of opinion of Global Law Office, counsel as to PRC law to the registrant, regarding the validity of (i) the corporate structure of Focus Media Technology (Shanghai) Co., Ltd. and Shanghai Focus Media Advertisement Co., Ltd. and contractual arrangements among Focus Media Technology (Shanghai) Co., Ltd., Shanghai Focus Media Advertisement Co., Ltd. and its subsidiaries, Jason Nanchun Jiang and Jimmy Wei Yu, (ii) the corporate structure of Framedia Investment and Shanghai Framedia Advertisement Development Co., Ltd. and contractual arrangements among Framedia Investment and Shanghai Framedia Advertisement Development Co., Ltd. and its subsidiaries, Jason Nanchun Jiang and Jimmy Wei Yu and (iii) the corporate structure of Shanghai Focus Media Advertisement Co., Ltd., Shanghai Focus Media Advertising Agency Co., Ltd., Beijing Dotad Technology Co., Ltd., Beijing Focus Media Wireless Technology Co., Ltd., Jason Nanchun Jiang and Jimmy Wei Yu.
8.1*	Form of opinion of Conyers, Dill & Pearman, special Cayman Islands tax counsel to the registrant, regarding tax matters.
10.1*	Rules of the 2003 Employee Share Option Scheme and form of grant letter.
10.2*	Technology License and Service Agreement, dated March 28, 2005, by and among Focus Media Digital Information Technology (Shanghai) Co., Ltd., Shanghai Focus Media Advertisements Co., Ltd. and the subsidiaries of Shanghai Focus Media Advertisement Co., Ltd.
10.3*	Business Cooperation Agreement, dated March 28, 2005, by and among Shanghai Focus Media Advertisement Co., Ltd., Shanghai Focus Media Advertising Agency Co., Ltd. and the subsidiaries of Shanghai Focus Media Advertisement Co., Ltd.
10.4*	Equity Pledge Agreement, dated March 28, 2005, by and among Jason Nanchun Jiang, Jimmy Wei Yu, Shanghai Focus Media Advertisement Co., Ltd., Focus Media Technology (Shanghai) Co., Ltd., Focus Media Digital Information Technology (Shanghai) Co., Ltd. and the subsidiaries of Shanghai Focus Media Advertisement Co., Ltd.
10.5*	Call Option Agreement, dated March 28, 2005, among Jason Nanchun Jiang, Jimmy Wei Yu, Shanghai Focus Media Advertisement Co., Ltd. and Focus Media Technology (Shanghai) Co., Ltd.
10.6*	Shareholders’ Voting Rights Proxy Agreement, dated March 28, 2005, among Jason Nanchun Jiang,

115

Exhibit
Number	Description of Exhibits
	Jimmy Wei Yu, Shanghai Focus Media Advertisement Co., Ltd., Focus Media Technology (Shanghai) Co., Ltd. and the subsidiaries of Shanghai Focus Media Advertisement Co., Ltd.
10.7*	Trust Agreement, dated March 28, 2005, by and between Shanghai Focus Media Advertisement Co., Ltd. and Focus Media Technology (Shanghai) Co., Ltd.
10.8*	Trademark License Agreement, dated March 28, 2005, by and among Focus Media Technology (Shanghai) Co., Ltd., Shanghai Focus Media Advertisement Co., Ltd. and its subsidiaries.
10.9*	Loan Agreement, dated June 10, 2003, among Focus Media Holding Limited, Jason Nanchun Jiang, Jimmy Wei Yu, Yuanzhe Fu, Yibing Zhou and Yiqing Hou.
10.10*	Loan Agreement, dated March 28, 2005, by and between Jason Nanchun Jiang and Focus Media Technology (Shanghai) Co., Ltd.
10.11*	Loan Agreement, dated March 28, 2005, by and among Jimmy Wei Yu, Focus Media Technology (Shanghai) Co., Ltd. and Shanghai Focus Media Advertisement Co., Ltd.
10.12*	Form of Employment Agreement of Focus Media Technology (Shanghai) Co., Ltd.
10.13*	Manager Non-Competition Agreement entered into by Focus Media Holding Limited and Jason Nanchun Jiang on November 29, 2004.
10.14*	Technology Transfer Agreement entered into by Jimmy Wei Yu and Focus Media Digital Information (Shanghai) Co., Ltd., dated November 1, 2004.
10.15*	Asset and Business Acquisition Agreement between Shanghai Everease Communication Company and Shanghai Focus Media Advertisement Co., Ltd. dated July 1, 2003.
10.16*	Everease Non-competition Agreement between Focus Media Holding Limited and Shanghai Everease Communication Company, dated as of November 2004.
10.17*	Sales Contract between Shanghai Everease Communication Company and Shanghai Focus Media Advertisement Co., Ltd., dated May 2003.
10.18*	Project Cooperation Framework Agreement between Shanghai Everease Communication Company and Beijing Suodi Advertising Co., Ltd., dated February, April and June 2003.
10.19*	Transfer Agreement on Project Cooperation Framework Agreement between Shanghai Focus Media Advertisement Co., Ltd. and Beijing Suodi Advertising Co., Ltd., dated August 28, 2003.
10.20*	Business Agency Agreement between Shanghai On-Target Advertising Co., Ltd. and Shanghai Focus Media Advertisement Co., Ltd.
10.21*	Agreement between Shanghai On-Target Advertising Co., Ltd., Jimmy Wei Yu, Shanghai Focus Media Advertisement Co., Ltd., Union Enterprise Holding Co., Ltd. and Shenlong Lin, dated October 15, 2003.
10.22*	Acknowledgement Letter entered into as of March 28, 2005 by and among Shanghai Focus Media Advertisement Co., Ltd., Focus Media Technology (Shanghai) Co., Ltd., Focus Media Digital Information Technology (Shanghai) Co., Ltd. and subsidiaries of Shanghai Focus Media Advertisement Co., Ltd.
10.23*	Share Option Plan 2005.

116

Exhibit
Number	Description of Exhibits
10.24*	Acknowledgement Letter for Participation of Equity Pledge Agreement, dated January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and Fuzhou Fukesi Advertisement Co., Ltd.
10.25*	Acknowledgement Letter for Participation of Equity Pledge Agreement, dated January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and Hefei Fukesi Advertisement Co., Ltd.
10.26*	Acknowledgement Letter for Participation of Equity Pledge Agreement, dated January 13, 2006, of Shanghai Focus Media Co., Ltd. and Hefei Fukesi Advertisement Co., Ltd.
10.27*	Acknowledgement Letter for Participation of Equity Pledge Agreement, dated January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and Shenyang Focus Media Advertisement Co., Ltd.
10.28*	Acknowledgement Letter for Participation of Equity Pledge Agreement, dated January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and Shenzhen Bianjie Building Advertisement Co., Ltd.
10.29*	Acknowledgement Letter for Participation of Equity Pledge Agreement, dated January 13, 2006, of Shanghai Focus Media Co., Ltd. and Shenzhen Bianjie Building Advertisement Co., Ltd.
10.30*	Acknowledgement Letter for Participation of Call Option Agreement, dated January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and Fuzhou Fukesi Advertisement Co., Ltd.
10.31*	Acknowledgement Letter for Participation of Call Option Agreement, dated January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and Hefei Fukesi Advertisement Co., Ltd.
10.32*	Acknowledgement Letter for Participation of Call Option Agreement, dated January 13, 2006, of Shanghai Focus Media Co., Ltd. and Hefei Fukesi Advertisement Co., Ltd.
10.33*	Acknowledgement Letter for Participation of Call Option Agreement, dated January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and Shenyang Focus Media Advertisement Co., Ltd.
10.34*	Acknowledgement Letter for Participation of Call Option Agreement, dated January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and Shenzhen Bianjie Building Advertisement Co., Ltd.
10.35*	Acknowledgement Letter for Participation of Call Option Agreement, dated January 13, 2006, of Shanghai Focus Media Co., Ltd. and Shenzhen Bianjie Building Advertisement Co., Ltd.
10.36*	Acknowledgement Letter for Participation of Shareholders’ Voting Rights Proxy Agreement, dated January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and Fuzhou Fukesi Advertisement Co., Ltd.
10.37*	Acknowledgement Letter for Participation of Shareholders’ Voting Rights Proxy Agreement, dated January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and Hefei Fukesi Advertisement Co., Ltd.
10.38*	Acknowledgement Letter for Participation of Shareholders’ Voting Rights Proxy Agreement, dated January 13, 2006, of Shanghai Focus Media Co., Ltd. and Hefei Fukesi Advertisement Co., Ltd.
10.39*	Acknowledgement Letter for Participation of Shareholders’ Voting Rights Proxy Agreement, dated January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and Shenyang Focus Media Advertisement Co., Ltd.

117

Exhibit
Number	Description of Exhibits
10.40*	Acknowledgement Letter for Participation of Shareholders’ Voting Rights Proxy Agreement, dated January 13, 2006, of Shanghai Focus Media Advertisement Co., Ltd. and Shenzhen Bianjie Building Advertisement Co., Ltd.
10.41*	Acknowledgement Letter for Participation of Shareholders’ Voting Rights Proxy Agreement, dated January 13, 2006, of Shanghai Focus Media Co., Ltd. and Shenzhen Bianjie Building Advertisement Co., Ltd.
10.42*	Equity Pledge Agreement, dated January 13, 2006, by and among Shanghai Focus Media Advertisement Co., Ltd., Shanghai Focus Media Co., Ltd., Shanghai Framedia Investment Consultancy Co., Ltd. and the Local Advertisement Companies named therein.
10.43*	Call Option Agreement, dated January 13, 2006, by and among Shanghai Focus Media Advertisement Co., Ltd., Shanghai Focus Media Co., Ltd., Shanghai Framedia Investment Consultancy Co., Ltd. and the Local Advertisement Companies named therein.
10.44*	Shareholders’ Voting Rights Proxy Agreement, dated January 13, 2006, by and among Shanghai Focus Media Advertisement Co., Ltd., Shanghai Focus Media Co., Ltd., Shanghai Framedia Investment Consultancy Co., Ltd. and the Local Advertisement Companies named therein.
10.45*	Equity Pledge Agreement, dated January 13, 2006, by and among Lei Liu, Yong Shi, Shanghai Framedia Investment Consultancy Co., Ltd. and Guangdong Century Shenghuo Advertisement Co., Ltd.
10.46*	Call Option Agreement, dated January 13, 2006, by and among Lei Liu, Yong Shi, Shanghai Framedia Investment Consultancy Co., Ltd. and Guangdong Century Shenghuo Advertisement Co., Ltd.
10.47*	Shareholders’ Voting Rights Proxy Agreement, dated January 13, 2006, by and among Lei Liu, Yong Shi, Shanghai Framedia Investment Consultancy Co., Ltd. and Guangdong Century Shenghuo Advertisement Co., Ltd.
10.48*	Share Purchase Agreement, dated October 15, 2005, as amended and supplemented, among Focus Media Holding Limited, Infoachieve Limited, Total Team Investments Limited and the other Infoachieve parties named therein.
10.49*	Share Purchase Agreement, dated as of January 7, 2006, among Focus Media Holding Limited, Target Media Holdings Limited and Its Shareholders.
10.50*	Asset Transfer Agreement, dated December 31, 2005, by and between Focus Media Digital Information Technology (Shanghai) Co., Ltd. and Shanghai New Focus Media Advertisement Co., Ltd.
10.51*	Share Purchase Agreement, dated March 7, 2006, by and among Focus Media Holding Limited and Dotad Wireless Holdings Co., Ltd.
10.52*	Equity Pledge Agreement, dated May 22, 2006, by and among Shanghai Focus Media Advertisement Co., Ltd., Shanghai Focus Media Advertising Agency Co., Ltd., Beijing Dotad Technology Co., Ltd and Beijing Focus Media Wireless Co., Ltd.
10.53*	Call Option Agreement, dated May 22, 2006, by and among Shanghai Focus Media Advertisement Co., Ltd., Shanghai Focus Media Advertising Agency Co., Ltd., Beijing Dotad Technology Co., Ltd and Beijing Focus Media Wireless Co., Ltd.
10.54*	Shareholders’ Voting Rights Proxy Agreement, dated May 22, 2006, by and among Shanghai Focus

118

Exhibit
Number	Description of Exhibits
	Media Advertisement Co., Ltd., Shanghai Focus Media Advertising Agency Co., Ltd., Beijing Dotad Technology Co., Ltd and Beijing Focus Media Wireless Co., Ltd.
10.55*	Equity Pledge Agreement, dated May 22, 2006, by and among Shanghai Focus Media Advertisement Co., Ltd., Shanghai Focus Media Advertising Agency Co., Ltd., Shanghai Framedia Investment Consulting Co., Ltd. and Guandong Shiji Shenghuo Advertisement Co., Ltd.
10.56*	Call Option Agreement, dated May 22, 2006, by and among Shanghai Focus Media Advertisement Co., Ltd., Shanghai Focus Media Advertising Agency Co., Ltd., Shanghai Framedia Investment Consulting Co., Ltd. and Guandong Shiji Shenghuo Advertisement Co., Ltd.
10.57*	Shareholders’ Voting Rights Proxy Agreement, dated May 22, 2006, by and among Shanghai Focus Media Advertisement Co., Ltd., Shanghai Focus Media Advertising Agency Co., Ltd., Shanghai Framedia Investment Consulting Co., Ltd. and Guandong Shiji Shenghuo Advertisement Co., Ltd.
10.58*	Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of Shanghai New Focus Media Advertisement Co., Ltd.
10.59*	Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of Shanghai New Focus Media Advertisement Co., Ltd.
10.60*	Acknowledgement Letter of Participation of Shareholders’ Voting Rights Proxy Agreement, dated May 22, 2006, of Shanghai New Focus Media Advertisement Co., Ltd.
10.61*	Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of Shanghai New Focus Media Advertising Agency Co., Ltd.
10.62*	Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of Shanghai New Focus Media Advertising Agency Co., Ltd.
10.63*	Acknowledgement Letter of Participation of Shareholders’ Voting Rights Proxy Agreement, dated May 22, 2006, of Shanghai New Focus Media Advertising Agency Co., Ltd.
10.64*	Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of Shanghai Target Media Co., Ltd.
10.65*	Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of Shanghai Target Media Co., Ltd.
10.66*	Acknowledgement Letter of Participation of Shareholders’ Voting Rights Proxy Agreement, dated May 22, 2006, of Shanghai Target Media Co., Ltd.
10.67*	Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of Dongguan Focus Media Advertisement Co., Ltd.
10.68*	Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of Dongguan Focus Media Advertisement Co., Ltd.
10.69*	Acknowledgement Letter of Participation of Shareholders’ Voting Rights Proxy Agreement, dated May 22, 2006, of Dongguan Focus Media Advertisement Co., Ltd.
10.70*	Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of Fuzhou Fukesi Advertising Co., Ltd.

119

Exhibit
Number	Description of Exhibits
10.71*	Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of Fuzhou Fukesi Advertising Co., Ltd.
10.72*	Acknowledgement Letter of Participation of Shareholders’ Voting Rights Proxy Agreement, dated May 22, 2006, of Fuzhou Fukesi Advertising Co., Ltd.
10.73*	Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of Hefei Fukesi Advertising Co., Ltd.
10.74*	Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of Hefei Fukesi Advertising Co., Ltd.
10.75*	Acknowledgement Letter of Participation of Shareholders’ Voting Rights Proxy Agreement, dated May 22, 2006, of Hefei Fukesi Advertising Co., Ltd.
10.76*	Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of Shanghai On-Target Advertisement Co., Ltd.
10.77*	Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of Shanghai On-Target Advertisement Co., Ltd.
10.78*	Acknowledgement Letter of Participation of Shareholders’ Voting Rights Proxy Agreement, dated May 22, 2006, of Shanghai On-Target Advertisement Co., Ltd.
10.79*	Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of Shanghai Jiefang Focus Media Advertisement Co., Ltd.
10.80*	Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of Shanghai Jiefang Focus Media Advertisement Co., Ltd.
10.81*	Acknowledgement Letter of Participation of Shareholders’ Voting Rights Proxy Agreement, dated May 22, 2006, of Shanghai Jiefang Focus Media Advertisement Co., Ltd.
10.82*	Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of Shanghai Perfect Media Advertising Agency Co., Ltd.
10.83*	Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of Shanghai Perfect Media Advertising Agency Co., Ltd.
10.84*	Acknowledgement Letter of Participation of Shareholders’ Voting Rights Proxy Agreement, dated May 22, 2006, of Shanghai Perfect Media Advertising Agency Co., Ltd.
10.85*	Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of Shenzhen E-Time Commercial Consulting Co., Ltd.
10.86*	Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of Shenzhen E-Time Commercial Consulting Co., Ltd.
10.87*	Acknowledgement Letter of Participation of Shareholders’ Voting Rights Proxy Agreement, dated May 22, 2006, of Shenzhen E-Time Commercial Consulting Co., Ltd.
10.88*	Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of Shenzhen Bianjie Building Advertisement Co., Ltd.

120

Exhibit
Number	Description of Exhibits
10.89*	Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of Shenzhen Bianjie Building Advertisement Co., Ltd.
10.90*	Acknowledgement Letter of Participation of Shareholders’ Voting Rights Proxy Agreement, dated May 22, 2006, of Shenzhen Bianjie Building Advertisement Co., Ltd.
10.91*	Acknowledgement Letter of Participation of Equity Pledge Agreement, dated May 22, 2006, of Shenyang Focus Media Advertising Co., Ltd.
10.92*	Acknowledgement Letter of Participation of Call Option Agreement, dated May 22, 2006, of Shenyang Focus Media Advertising Co., Ltd.
10.93*	Acknowledgement Letter of Participation of Shareholders’ Voting Rights Proxy Agreement, dated May 22, 2006, of Shenyang Focus Media Advertising Co., Ltd.
10.94*	Cooperation Agreement, dated May 22, 2006, by and among Shanghai Focus Media Advertisement Co. Ltd. and its local advertising subsidiaries named therein and Shanghai New Focus Media Advertisement Co. Ltd.
10.95*	Technology Transfer Agreement, dated as of May 22, 2006, by and between Focus Media Digital Information Technology (Shanghai) Co., Ltd. and Shanghai New Focus Media Advertisement Co., Ltd.
10.96*	Advertisement Dissemination Agreement, dated May 22, 2006, by and between Shanghai Focus Media Advertising Agency Co., Ltd. and Shanghai New Focus Media Advertisement Co., Ltd.
10.97*	2006 Share Option Plan.
10.98*	Share Purchase Agreement, dated as of February 28, 2007, among Allyes Information Technology Company Limited, the selling shareholders named therein and Focus Media Holding Limited.
10.99*	Asset Transfer Agreement, dated as of January 30, 2003, among Shanghai Allyes Advertisement Co., Ltd., New Allyes Information Technology (Shanghai) Co., Ltd., Xiangdong Xiong and Jiangang Wang.
10.100*	Call Option Agreement, dated as of January 30, 2003, among Jiangang Wang, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Allyes Advertisement Co., Ltd.
10.101*	Call Option Agreement, dated as of January 30, 2003, among Xiangdong Xiong, new Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Allyes Advertisement Co., Ltd.
10.102*	Equity Interests Pledge Agreement, dated as of January 30, 2003, between New Allyes Information Technology (Shanghai) Co., Ltd. and Jianggang Wang.
10.103*	Equity Interests Pledge Agreement, dated as of January 30, 2003, between New Allyes Information Technology (Shanghai) Co., Ltd. and Xiangdong Xiong.
10.104*	Exclusive Service Agreement, dated as of January 20, 2003, by and among Shanghai Allyes Advertisement Co., Ltd. and New Allyes Information Technology (Shanghai) Co., Ltd.
10.105*	Loan Agreement, dated as of January 10, 2003, by and among New Allyes Information Technology (Shanghai) Co., Ltd. and Jiangang Wang.
10.106*	Loan Agreement, dated as of January 10, 2003, by and among New Allyes Information Technology

121

Exhibit
Number	Description of Exhibits
	(Shanghai) Co., Ltd. and Xiangdong Xiong.
10.107*	Shareholders’ Voting Rights Proxy Agreement, dated as of January 30, 2003, among Xiangdong Xiong, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Allyes Advertisement Co., Ltd.
10.108*	Call Option Agreement, dated November 1, 2004, among Jiangang Wang, New Allyes Information Technology (Shanghai) Co., Ltd. and Shenzhen Baifen Creation Advertisement Co., Ltd.
10.109*	Call Option Agreement, dated November 1, 2004, among Xiangdong Xiong, New Allyes Information Technology (Shanghai) Co., Ltd. and Shenzhen Baifen Creation Advertisement Co., Ltd.
10.110*	Equity Interests Pledge Agreement, dated November 1, 2004, by and between New Allyes Information Technology (Shanghai) Co., Ltd. and Jiangang Wang.
10.111*	Equity Interests Pledge Agreement, dated November 1, 2004, by and between New Allyes Information Technology (Shanghai) Co., Ltd. and Xiangdong Xiong.
10.112*	Exclusive Service Agreement, dated as of November 1, 2004, by and among Shenzhen Baifen Creation Advertisemnet Co., Ltd. and New Allyes Information Technology (Shanghai) Co., Ltd.
10.113*	Loan Agreement, dated as of November 1, 2004, by and among New Allyes Information Technology (Shanghai) Co., Ltd. and Jiangang Wang.
10.114*	Loan Agreement, dated as of November 1, 2004, by and among New Allyes Information Technology (Shanghai) Co., Ltd. and Xiangdong Xiong.
10.115*	Shareholders’ Voting Rights Proxy Agreement, dated as of November 1, 2004, among Jiangang Wang, New Allyes Information Technology (Shanghai) Co., Ltd. and Shenzhen Baifen Creation Advertisement Co., Ltd.
10.116*	Shareholders’ Voting Rights Proxy Agreement, dated as of November 1, 2004, among Xiangdong Xiong, New Allyes Information Technology (Shanghai) Co., Ltd. and Shenzhen Baifen Creation Advertisement Co., Ltd.
10.117*	Asset Transfer Agreement, dated November 30, 2004, among Shanghai Huxin Advertisement Co., Ltd., New Allyes Information Technology (Shanghai) Co., Ltd., Suyang Zhang and Hailong Zhu.
10.118*	Call Option Agreement, dated November 30, 2004, among Suyang Zhang, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Huxin Advertisement Co., Ltd.
10.119*	Call Option Agreement, dated November 30, 2004, among Hailong Zhu, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Huxin Advertisement Co., Ltd.
10.120*	Equity Interests Pledge Agreement, dated November 30, 2004, by and between New Allyes Information Technology (Shanghai) Co., Ltd. and Suyang Zhang.
10.121*	Equity Interests Pledge Agreement, dated November 30, 2004, by and between New Allyes Information Technology (Shanghai) Co., Ltd. and Hailong Zhu.
10.122*	Exclusive Service Agreement, dated as of November 11, 2004, by and among Shanghai Huxin Advertisement Co., Ltd. and New Allyes Information Technology (Shanghai) Co., Ltd.
10.123*	Loan Agreement, dated as of November 1, 2004, by and among New Allyes Information Technology

122

Exhibit
Number	Description of Exhibits
	(Shanghai) Co., Ltd. and Suyang Zhang.
10.124*	Loan Agreement, dated as of November 1, 2004, by and among New Allyes Information Technology (Shanghai) Co., Ltd. and Hailong Zhu.
10.125*	Shareholders’ Voting Rights Proxy Agreement, dated as of November 30, 2004, among Suyang Zhang, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Huxin Advertisement Co., Ltd.
10.126*	Shareholders’ Voting Rights Proxy Agreement, dated as of November 30, 2004, among Hailong Zhu, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Huxin Advertisement Co., Ltd.
10.127*	Asset Transfer Agreement, dated as of November 30, 2004, among Shanghai MSN Advertisement Co., Ltd., New Allyes Information Technology (Shanghai) Co., Ltd., Suyang Zhang and Hailong Zhu.
10.128*	Call Option Agreement, dated November 30, 2004, among Suyang Zhang, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai MSN Advertisement Co., Ltd.
10.129*	Call Option Agreement, dated November 30, 2004, among Hailong Zhu, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai MSN Advertisement Co., Ltd.
10.130*	Equity Interests Pledge Agreement, dated November 30, 2004, by and between New Allyes Information Technology (Shanghai) Co., Ltd. and Suyang Zhang.
10.131*	Equity Interests Pledge Agreement, dated November 30, 2004, by and between New Allyes Information Technology (Shanghai) Co., Ltd. and Hailong Zhu.
10.132*	Exclusive Service Agreement, dated as of November 3, 2004, by and among Shanghai MSN Advertisement Co., Ltd. and New Allyes Information Technology (Shanghai) Co., Ltd.
10.133*	Loan Agreement, dated as of November 1, 2004, by and among New Allyes Information Technology (Shanghai) Co., Ltd. and Hailong Zhu.
10.134*	Loan Agreement, dated as of November 1, 2004, by and among New Allyes Information Technology (Shanghai) Co., Ltd. and Suyang Zhang.
10.135*	Shareholders’ Voting Rights Proxy Agreement, dated as of November 30, 2004, among Suyang Zhang, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai MSN Advertisement Co., Ltd.
10.136*	Shareholders’ Voting Rights Proxy Agreement, dated as of November 30, 2004, among Hailong Zhu, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai MSN Advertisement Co., Ltd.
10.137*	Asset Transfer Agreement, dated as of May 17, 2005, among Shanghai Quanshi Advertisement Co., Ltd., New Allyes Information Technology (Shanghai) Co., Ltd., Suyang Zhang and Hailong Zhu.
10.138*	Call Option Agreement, dated May 17, 2005, among Hailong Zhu, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Quanshi Advertisement Co., Ltd.
10.139*	Call Option Agreement, dated May 17, 2005, among Hailong Zhu, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Quanshi Advertisement Co., Ltd.

123

Exhibit
Number	Description of Exhibits
10.140*	Equity Interests Pledge Agreement, dated May 17, 2005, by and between New Allyes Information Technology (Shanghai) Co., Ltd. and Suyang Zhang.
10.141*	Equity Interests Pledge Agreement, dated May 17, 2005, by and between New Allyes Information Technology (Shanghai) Co., Ltd. and Hailong Zhu.
10.142*	Exclusive Service Agreement, dated as of April 20, 2005, by and among Shanghai Quanshi Advertisement Co., Ltd. and New Allyes Information Technology (Shanghai) Co., Ltd.
10.143*	Loan Agreement, dated as of April 20, 2005, by and among New Allyes Information Technology (Shanghai) Co., Ltd. and Suyang Zhang.
10.144*	Loan Agreement, dated as of April 20, 2005, by and among New Allyes Information Technology (Shanghai) Co., Ltd. and Hailong Zhu.
10.145*	Shareholders’ Voting Rights Proxy Agreement, dated as of May 17, 2005, among Suyang Zhang, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Quanshi Advertisement Co., Ltd.
10.146*	Shareholders’ Voting Rights Proxy Agreement, dated as of May 17, 2005, among Hailong Zhu, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Quanshi Advertisement Co., Ltd.
10.147*	Supplemental Agreement for Loan Agreement, dated as of March 20, 2006, by and among New Allyes Information Technology (Shanghai) Co., Ltd. and Suyang Zhang.
10.148*	Supplemental Agreement for Loan Agreement, dated as of March 20, 2006, by and among New Allyes Information Technology (Shanghai) Co., Ltd. and Hailong Zhu.
10.149*	Call Option Agreement, dated July 1, 2006, among Hailong Zhu, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Kuantong Advertisement Co., Ltd.
10.150*	Call Option Agreement, dated July 1, 2006, among Hailong Zhu, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Kuantong Advertisement Co., Ltd.
10.151*	Equity Interests Pledge Agreement, dated July 1, 2006, by and between New Allyes Information Technology (Shanghai) Co., Ltd. and Jiangang Wang.
10.152*	Equity Interests Pledge Agreement, dated July 1, 2006, by and between New Allyes Information Technology (Shanghai) Co., Ltd. and Suyang Zhang.
10.153*	Exclusive Service Agreement, dated as of July 1, 2006, by and among Shanghai Kuantong Advertisement Co., Ltd. and New Allyes Information Technology (Shanghai) Co., Ltd.
10.154*	Loan Agreement, dated as of June 20, 2006, by and among New Allyes Information Technology (Shanghai) Co., Ltd. and Jiangang Wang.
10.155*	Loan Agreement, dated as of June 20, 2006, by and among New Allyes Information Technology (Shanghai) Co., Ltd. and Suyang Zhang.
10.156*	Shareholders’ Voting Rights Proxy Agreement, dated as of July 1, 2006, among Jiangang Wang, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Kuantong Advertisement Co., Ltd.
10.157*	Shareholders’ Voting Rights Proxy Agreement, dated as of July 1, 2006, among Suyang Zhang, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Kuantong Advertisement Co., Ltd.

124

Exhibit
Number	Description of Exhibits
10.158*	Share Purchase Agreement, dated as of July 21, 2006, among EFT Partners Limited, Focus Media Holdings Limited, Appreciate Capital Ltd., Zhang Qingyong and Wang Yongmei.
10.159*	Registration Rights Agreement, dated as of March 28, 2007, by and among Focus Media Holding Limited and Persons who represent certain former shareholders, warrant holders and options holders of Allyes Information Technology Compnay Limited.
10.160*	Shareholders’ Voting Rights Proxy Agreement, dated as of January 30, 2003, among Jiangang Wang, New Allyes Information Technology (Shanghai) Co., Ltd. and Shanghai Allyes Advertisement Co., Ltd.
10.161	2007 Share Option Plan
10.162	Share Purchase Agreement, dated as of December 8, 2007, among Focus Media Holding Limited, CGEN Digital Media Company Limited and the selling shareholders and other parties named therein.
10.163	Registration Rights Agreement, dated as of January 2, 2008, among Focus Media Holding Limited and the former shareholders of CGEN Digital Media Company Limited named therein.
10.164	Equity Pledge Agreement, dated as of January 5, 2008, among Shanghai Focus Media Advertisement Co., Ltd, Shanghai Focus Media Advertising Agency Co., Ltd., CGEN Digital Technology (Shanghai) Company Ltd. And Shanghai CGEN Culture Communication Company Ltd.
10.165	Call Option Agreement, dated as of January 5, 2008, among Shanghai Focus Media Advertisement Co., Ltd, Shanghai Focus Media Advertising Agency Co., Ltd., CGEN Digital Technology (Shanghai) Company Ltd. And Shanghai CGEN Culture Communication Company Ltd
10.166	Shareholders’ Voting Rights Proxy Agreement, dated as of January 5, 2008, among Shanghai Focus Media Advertisement Co., Ltd, Shanghai Focus Media Advertising Agency Co., Ltd., CGEN Digital Technology (Shanghai) Company Ltd. And Shanghai CGEN Culture Communication Company Ltd
10.167	Exclusive Technology and Consulting Agreement, dated as of January 16, 2006, among CGEN Digital Technology (Shanghai) Company Ltd. And Shanghai CGEN Culture Communication Company Ltd
12.1	Certificate of Chief Executive Officer.
12.2	Certificate of Chief Financial Officer.
13.1	Certification of Periodic Financial Report.
13.2	Certification of Periodic Financial Report.
15.1	Consent of Conyers, Dill & Pearman.
15.2	Consent of Global Law Office.
21.1	List of Subsidiaries.

* Previously filed.

125

SIGNATURES

     The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

Focus Media Holding Limited
By:	/s/ Jason Nanchun Jiang
	Name:	Jason Nanchun Jiang
	Title:	Executive Chairman

Date: May 6, 2008

By:	/s/ Zhi Tan
	Name:	Zhi Tan
	Title:	Chief Executive Officer

Date: May 6, 2008

126

FOCUS MEDIA HOLDING LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS

	Pages
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets as of December 31, 2005, 2006 and 2007		F-3
Consolidated Statements of Operations for the Years Ended December 31, 2005, 2006 and 2007		F-4
Consolidated Statements of Shareholders’ Equity and Comprehensive Income for the Years Ended December 31,2005, 2006 and 2007		F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2006 and 2007		F-6
Notes to the Consolidated Financial Statements		F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF FOCUS MEDIA HOLDING LIMITED

We have audited the accompanying consolidated balance sheets of Focus Media Holding Limited and subsidiaries (the “Group”) as of December 31, 2005, 2006, and 2007, and the related consolidated statements of operations, shareholders’ equity (deficiency) and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2007. These financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Focus Media Holding Limited and subsidiaries as of December 31, 2005, 2006, and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 11 to the consolidated financial statements, effective January 1, 2007, the Group adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109”. Also, as discussed in Note 2(s) to the consolidated financial statements, effective January 1, 2006, the Group changed its method of accounting for share-based payments to conform to Statement of Financial Accounting Standards No. 123R “Share-based Payment”.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2007, based on the criteria established in “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated May 6, 2008 expressed an unqualified opinion on the Group’s internal control over financial reporting.

/s/ DELOITTE TOUCHE TOHMATSU CPA LTD.

Shanghai, China

May 6, 2008

F-2

FOCUS MEDIA HOLDING LIMITED

CONSOLIDATED BALANCE SHEETS

	December 31,
	2005			2006		2007
	(In U.S. Dollars, except share data)
Assets
Current assets:
Cash and cash equivalents	$	36,653,180		$	164,610,942	$	450,416,381
Investment in debt and equity securities		34,835,850			—		90,145,360
Accounts receivable, net of allowance for doubtful accounts of $396,657, $1,308,554 and $5,310,835 in 2005, 2006 and 2007, respectively		21,188,531			61,614,343		206,102,130
Inventories		479,529			519,095		1,654,451
Prepaid expenses and other current assets		4,444,303			5,199,355		58,884,992
Deposits paid for acquisition of subsidiaries		40,919,530			3,526,370		40,401,852
Amounts due from related parties		3,120,206			7,852,789		5,091,529
Rental deposits		—			—		28,762,699
Total current assets		141,641,129			243,322,894		881,459,394
Rental deposits		11,819,095			11,833,290		5,301,990
Equipment, net		43,694,888			70,249,324		95,478,326
Acquired intangible assets, net		1,157,920			34,717,019		155,717,055
Goodwill		13,298,072			739,743,871		943,398,282
Other long-term assets		742,914			6,375,682		58,182,855
Total assets	$	212,354,018		$	1,106,242,080	$	2,139,537,902
Liabilities and shareholders’ equity
Current liabilities:
Short-term loans	$	991,301		$	2,769,459	$	—
Accounts payable		5,847,530			5,987,593		50,378,576
Accrued expenses and other current liabilities		11,746,902			38,674,175		190,312,946
Income taxes payable		2,108,071			4,060,170		21,391,295
Amount due to related parties		—			345,768		12,977,136
Deferred tax liabilities		—			—		1,226,999
Total current liabilities		20,693,804			51,837,165		276,286,952
Deferred tax liabilities		—			3,303,110		6,393,505
Total liabilities	$	20,693,804		$	55,140,275	$	282,680,457
Commitments and contingencies (Note 17)
Minority interest		245,563			357,814		1,913,248
Shareholders’ equity
Ordinary shares ($0.00005 par value; 19,800,000, 19,800,000,000 and 19,800,000,000 shares authorized in 2005, 2006 and 2007; 378,306,000, 534,896,873 and 640,230,852 shares issued and outstanding in 2005, 2006 and 2007, respectively)		18,916			26,745		32,020
Additional paid-in capital		177,419,761			709,196,246		1,581,579,792
Acquisition consideration to be issued		—			237,879,480		—
Deferred share-based compensation		(246,569	)		—		—
Retained earnings		12,997,237			96,194,969		236,718,179
Accumulated other comprehensive income		1,225,306			7,446,551		36,614,206
Total shareholders’ equity	$	191,414,651		$	1,050,743,991	$	1,854,944,197
Total liabilities and shareholders’ equity	$	212,354,018		$	1,106,242,080	$	2,139,537,902

The accompanying notes are an integral part of these consolidated financial statements.

F-3

FOCUS MEDIA HOLDING LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the years ended December 31,
	2005			2006			2007
	(In U.S. Dollars, except share data)
Net revenues:
Advertising Service Revenue	$	66,903,679		$	209,973,935		$	505,445,386
Other Revenue		1,325,234			1,931,530			1,114,384
Total net revenues		68,228,913			211,905,465			506,559,770
Cost of revenues:
Advertising Service Cost		25,748,318			80,615,408			247,644,672
Other Cost		975,747			764,959			797,717
Total cost of revenues		26,724,065			81,380,367			248,442,389
Gross profit		41,504,848			130,525,098			258,117,381
Operating expenses:
General and administrative		9,119,846			25,723,413			49,455,529
Selling and marketing		9,599,226			25,761,948			69,932,201
Other operating income		—			(1,338,334	)		(5,125,052	)
Total operating expenses		18,719,072			50,147,027			114,262,678
Income from operations		22,785,776			80,378,071			143,854,703
Interest income		1,811,782			4,560,798			9,777,655
Interest expense		(49,873	)		(305,287	)		(25,269	)
Other income		70,471			271,451			3,948,028
Other expense		(231,619	)		(558,990	)		(1,379,633	)
Income before income taxes and minority interest		24,386,537			84,346,043			156,175,484
Income taxes:		694,453			1,043,538			11,045,565
Net income after income taxes before minority interest		23,692,084			83,302,505			145,129,919
Minority interest		(144,433	)		(104,773	)		(694,370	)
Net income attributable to holders of ordinary shares	$	23,547,651		$	83,197,732		$	144,435,549
Income per share — basic	$	0.09		$	0.16		$	0.24
Income per share — diluted	$	0.06		$	0.16		$	0.24
Shares used in calculating basic income per share		252,128,545			505,411,079			590,387,396
Shares used in calculating diluted income per share		365,938,094			521,536,381			608,326,450

The accompanying notes are an integral part of these consolidated financial statements.

F-4

FOCUS MEDIA HOLDING LIMITED

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIENCY) AND COMPREHENSIVE INCOME

								Deferred			Retained			Accumulated			Total
					Additional			share			earnings			other			shareholders’
	Ordinary				paid-in			based			(accumulated			comprehensive			equity			Comprehensive
	Shares		Amount		capital			compensation			deficit)			income (loss)			(deficiency)			income
	(In U.S. dollars, except share data)
Balance at January 1, 2005		142,464,600	$	7,124	$	5,981,154			(969,959	)	$	(10,550,414	)	$	(41,106	)	$	(5,573,201	)	$	373,401
Series A convertible redeemable preference shares converted into ordinary shares upon initial public offering		41,967,400		2,098		6,293,012			—			—			—			6,295,110			—
Series B convertible redeemable preference shares converted into ordinary shares upon initial public offering		48,191,600		2,409		12,060,287			—			—			—			12,062,696			—
Series C-1 convertible redeemable preference shares converted into ordinary shares upon initial public offering		34,054,000		1,703		17,498,647			—			—			—			17,500,350			—
Series C-2 convertible redeemable preference shares converted into ordinary shares upon initial public offering		34,053,400		1,703		17,413,297			—			—			—			17,415,000			—
Issuance of ordinary shares upon initial public offering, net of issuance cost of $13,703,370		77,575,000		3,879		118,170,251			—			—			—			118,174,130			—
Deferred share-based compensation		—		—		(264,751	)		264,751			—			—			—			—
Share-based compensation expense		—		—		267,864			458,639			—			—			726,503			—
Unrealized loss on debt securities		—		—		—			—			—			(164,150	)		(164,150	)	$	(164,150	)
Cumulative translation adjustments		—		—		—			—			—			1,430,562			1,430,562			1,430,562
Net income		—		—		—			—			23,547,651			—			23,547,651			23,547,651
Balance at December 31, 2005		378,306,000	$	18,916	$	177,419,761			(246,569	)	$	12,997,237		$	1,225,306		$	191,414,651		$	24,814,063
Issuance of ordinary shares upon follow-on offering on January 27, 2006, net of issuance cost of $3,466,700		15,000,000		750		61,782,550			—			—			—			61,783,300			—
Issuance of ordinary shares upon follow-on offering on June 16, 2006, net of issuance cost of $2,740,407		16,000,000		800		80,966,793			—			—			—			80,967,593			—
Issuance of ordinary shares in connection with acquisitions		99,254,193		4,962		365,660,061			—			—			—			365,665,023			—
Issuance of ordinary shares pursuant to share option plans		26,336,680		1,317		15,246,244			—			—			—			15,247,561			—
Ordinary shares to be issued in connection with acquisitions		—		—		237,879,480			—			—			—			237,879,480			—
Adjustment for the adoption of SFAS 123R		—		—		(246,569	)		246,569			—			—			—			—
Share-based compensation expense		—		—		8,367,406			—			—			—			8,367,406			—
Realized gain on debt securities		—		—		—			—			—			164,150			164,150			164,150
Cumulative translation adjustments		—		—		—			—			—			6,057,095			6,057,095			6,057,095
Net income		—		—		—			—			83,197,732			—			83,197,732			83,197,732
Balance at December 31, 2006		534,896,873	$	26,745	$	947,075,726		$	—		$	96,194,969		$	7,446,551		$	1,050,743,991		$	89,418,977
Issuance of ordinary shares upon follow-on offering on January 25, 2007, net of issuance cost of $672,289		15,000,000		750		114,869,653			—			—			—			114,870,403			—
Issuance of ordinary shares upon follow-on offering on November 7, 2007, net of issuance cost of $1,463,191		25,000,000		1,250		312,573,058			—			—			—			312,574,308			—
Issuance of ordinary shares in connection with acquisitions		57,299,699		2,865		166,047,247			—			—			—			166,050,112			—
Issuance of ordinary shares in connection with share option plans		8,034,280		410		19,559,810			—			—			—			19,560,220			—
Adjustment upon adoption of FIN 48		—		—		—			—			(3,912,339	)		—			(3,912,339	)		—
Share-based compensation expense		—		—		21,454,298			—			—			—			21,454,298			—
Unrealized gain on equity securities		—		—		—			—			—			1,967,393			1,967,393			1,967,393
Cumulative translation adjustments		—		—		—			—			—			27,200,262			27,200,262			27,200,262
Net income		—		—		—			—			144,435,549			—			144,435,549			144,435,549
Balance at December 31, 2007		640,230,852	$	32,020	$	1,581,579,792		$	—		$	236,718,179		$	36,614,206		$	1,854,944,197		$	173,603,204

The accompanying notes are an integral part of these consolidated financial statements.

F-5

FOCUS MEDIA HOLDING LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the year ended December 31,
	2005			2006			2007
	(In U.S. dollars)
Operating activities:
Net income attributable to holders of ordinary shares		23,547,651			83,197,732			144,435,549
Adjustments to reconcile net income to net cash provided by operating activities:
Minority interest		144,433			104,773			694,370
Bad debt provision		235,604			1,844,605			3,655,448
Share-based compensation		726,503			8,367,406			21,454,298
Loss on disposal of equipment		—			—			3,674,886
Depreciation and amortization		4,927,016			19,511,552			44,197,504
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable, net		(14,710,176	)		(22,289,344	)		(92,171,199	)
Inventories		(408,223	)		23,334			(1,113,692	)
Prepaid expenses and other current assets		(2,347,426	)		7,857,172			(904,345	)
Amounts due from related parties		(380,174	)		(4,732,583	)		(5,762,593	)
Rental deposits		(10,076,230	)		3,104,667			(22,231,398	)
Accounts payable		5,007,564			(3,174,405	)		11,670,114
Accrued expenses and other current liabilities		3,950,903			(1,673,496	)		37,678,359
Amounts due to related parties		—			—			12,631,368
Income tax payable		672,585			1,276,252			10,033,244
Deferred taxes		(20,664	)		(63,383	)		(982,272	)
Net cash provided by operating activities	$	11,269,366		$	93,354,282		$	166,959,641
Investing activities:
Purchase of equipment and other long-term assets	$	(36,765,294	)	$	(22,878,254	)	$	(59,450,942	)
Acquisition of intangible assets		—			(6,403,114	)		(105,049	)
Purchase of subsidiaries, net of cash acquired		(4,982,523	)		(124,062,515	)		(81,779,531	)
Deposit paid to acquire subsidiaries		(40,919,530	)		(3,710,369	)		(83,367,278	)
Disposal of an equity investment		—			60,005			—
Cash paid for purchases of debt and equity securities		(35,000,000	)		—			(88,177,967	)
Cash received from sale of debt and equity securities		—			35,000,000			—
Issuance of loan receivables		—			—			(30,000,000	)
Net cash used in investing activities	$	(117,667,347	)	$	(121,994,247	)	$	(342,880,767	)
Financing activities:
Proceeds from issuance of ordinary shares, net of issuance costs of $13,703,370, $6,207,107 and $2,135,480 in 2005, 2006 and 2007, respectively	$	118,174,130		$	142,750,893		$	427,444,711
Proceeds from issuance of ordinary shares pursuant to share option plans		—			15,247,561			19,560,220
Proceeds from short-term loans		991,301			24,598,037			—
Repayment of short-term loans		—			(29,402,066	)		(4,165,716	)
Capital injection from minority shareholders		3,089			326,307			136,914
Net cash provided by financing activities	$	119,168,520		$	153,520,732		$	442,976,129
Effect of exchange rate changes		1,213,535			3,076,995			18,750,436
Net increase in cash and cash equivalents	$	13,984,074		$	127,957,762		$	285,805,439
Cash and cash equivalents, beginning of year		22,669,106			36,653,180			164,610,942
Cash and cash equivalents, end of year	$	36,653,180		$	164,610,942		$	450,416,381
Supplemental disclosure of cash flow information
Income taxes paid	$	94,391		$	153,526		$	1,247,277
Interest paid	$	11,581		$	244,702		$	13,897
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Non-cash investing activities:
Acquisition of subsidiaries:
Value of ordinary shares issued	$	—		$	365,665,023		$	166,047,247
Ordinary share consideration to be issued	$	—		$	237,879,480		$	—
Accounts payable	$	99,130		$	4,530,745		$	17,873,584
Liabilities recorded as a result of contingent consideration	$	—		$	379,436		$	72,902,515

The accompanying notes are an integral part of these consolidated financial statements.

F-6

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

1. Organization and Principal Activities

     Focus Media Holding Limited and all of its subsidiaries (collectively referred to as the “Group”) are mainly engaged in selling out-of home television advertising time slots on its network of flat-panel television advertising displays located in high traffic areas such as commercial locations and in-store network. The Group is also engaged in providing advertising services on in-elevator poster frames, mobile handsets and the internet.

     PRC regulations currently limit foreign ownership of companies that provide advertising services, including out-of -home television advertising services. To comply with these regulations, the Group conducts substantially all of its activities through Focus Media Advertisement Co., Ltd. (“Focus Media Advertisement”), a variable interest entity and its subsidiaries. On April 11, 2004, the majority shareholder of Focus Media Advertisement, Jason Nanchun Jiang, incorporated Focus Media Holding Limited (“Focus Media Holding” or the “Company”) with the same shareholders of Focus Media Advertisement. Focus Media Advertisement entered into various agreements with 100% owned subsidiaries of Focus Media Holding, i.e. Focus Media Technology (Shanghai) Co., Ltd. (“Focus Media Technology”) and Focus Media Digital Information Technology (Shanghai) Co., Ltd. (“Focus Media Digital”), including a transfer of trademarks and exclusive services agreement. Under these agreements, Focus Media Advertisement has the right to use the trade name of Focus Media Technology and Focus Media Digital, provides technical and consulting services to Focus Media Advertisement and its subsidiaries. In return, Focus Media Advertisement and its subsidiaries are required to pay Focus Media Technology service fees for the use of trade name and Focus Media Digital for the technical and consulting services it receives. The technical and consulting service fees are adjusted at Focus Media Digital’s sole discretion. Focus Media Digital is entitled to receive service fees in an amount up to all of the net income of Focus Media Advertising.

     In addition, Focus Media Holding, through Focus Media Technology, has been assigned all voting rights by the direct and indirect owners of Focus Media Advertisement through an agreement valid indefinitely that cannot be amended or terminated except by written consent of all parties. Finally, Focus Media Holding, through Focus Media Technology has the option to acquire the equity interests of Focus Media Advertisement and its subsidiaries for a purchase price equal to the respective registered capital of Focus Media Advertisement and its subsidiaries or a proportionate amount thereof, or such higher price as required under PRC laws at the time of such purchase. Each of the shareholders of Focus Media Advertisement has agreed to pay Focus Media Holding any excess of the purchase price paid for such equity interests in, or assets of, Focus Media Advertisement or its subsidiaries over the registered capital of Focus Media Advertisement or its subsidiaries in the event that such option is exercised.

     Through the contractual arrangements described above, Focus Media Holding is deemed the primary beneficiary of Focus Media Advertisement resulting in Focus Media Advertisement being deemed a subsidiary of Focus Media Holding under the requirements of FIN 46 (Revised), “Consolidation of Variable Interest Entities” (“FIN 46(R)”). In substance, an existing company, Focus Media Advertisement, has been reorganized as a subsidiary of the new company Focus Media Holding. Focus Media Holding has the same controlling shareholder and the same non-controlling shareholders. Accordingly, the Group’s financial statements reflect the consolidated financial statements of Focus Media Holding and its subsidiaries, which include Focus Media Advertisement and its subsidiaries for all periods presented.

     As of December 31, 2007, the major subsidiaries of Focus Media Holding and Focus Media Advertisement’s subsidiaries include the Appendix 1 attached.

F-7

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

2. Summary of Significant Accounting Policies

(a) Basis of Presentation

     The consolidated financial statements of the Group have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

(b) Basis of Consolidation

     The consolidated financial statements include the financial statements of Focus Media Holding, its majority-owned subsidiaries, its variable interest entity and its majority-owned subsidiaries. All inter-company transactions and balances have been eliminated upon consolidation.

(c) Cash and Cash Equivalents

     Cash and cash equivalents consist of cash on hand and highly liquid investments which are unrestricted as to withdrawal or use, and which have original maturities of three months or less when purchased.

(d) Use of Estimates

     The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenue and expenses in the financial statements and accompanying notes. Significant accounting estimates reflected in the Group’s financial statements include allowance for doubtful accounts, useful lives and impairment for long-lived assets and goodwill, the recognition and measurement of current and deferred income tax assets, and the valuation and recognition of share-based compensation. The actual results experienced by the Company may differ from management’s estimates.

(e) Investment in Available-for-sale Debt and Equity Securities

     The Group classifies all of its short-term investments as available-for-sale securities. Such short-term investments consist primarily of debt and equity instruments which are stated at fair market value, with unrealized gains and losses recorded as accumulated other comprehensive income.

(f) Inventory

     Inventory is comprised of media display equipments and compact flash cards, which are held for sale. Inventory is stated at the lower of cost or market value. Adjustments are recorded to write down the cost of obsolete and excess inventory to the estimated market value based on historical and forecast demand.

(g) Equipment, Net

     Equipment, net is carried at cost less accumulated depreciation and amortization. Depreciation and amortization is calculated on a straight-line basis over the following estimated useful lives:

Media display equipment	5 years
Computers and office equipment	5 years
Vehicles	5 years
Leasehold improvements	lesser of the term of the lease or the estimated useful lives of the assets

     The Group assembles certain of the media display equipment. In addition to costs under assembly contracts, external costs directly related to the assembly of such equipment, including duty and tariff, equipment installation and shipping costs, are capitalized.

F-8

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

(h) Acquired Intangible Assets, net

     Acquired intangible assets, which consist of operation and broadcasting rights, lease agreements, customer bases, customer backlogs, trademarks, non-compete agreements, and acquired technology are valued at cost less accumulated amortization. Amortization is calculated using the straight-line method over their expected useful lives of 1 to 10 years.

(i) Impairment of Long-Lived Assets

     The Group evaluates its long-lived assets and intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. When these events occur, the Group measures impairment by comparing the carrying amount of the assets to the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the future undiscounted cash flow is less than the carrying amount of the assets, the Group would recognize an impairment loss equal to the excess of the carrying amount over the fair value of the assets.

(j) Goodwill

     SFAS No. 142 “Goodwill and Other Intangible Assets” requires the Group to complete a two-step goodwill impairment test. The first step compares the fair value of each reporting unit to its carrying amount, including goodwill. If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only performed for purposes of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or liabilities. An impairment loss is recognized for any excess in the carrying value of goodwill over the implied fair value of goodwill. Management performed an annual goodwill impairment test for each of its reporting units as of December 31, 2005, 2006, and 2007, and no impairment loss was required.

     The changes in the carrying amount of goodwill by segment for the year ended December 31, 2005, 2006 and 2007 are as follows:

	Out-of-Home			In -elevator			Mobile
	Television			Poster-frame			Handset		Internet
	Advertising			Advertising			Advertising		Advertising
	Services			Services			Services		Services		Total
Balance as of January 1, 2005	$	9,058,086		$	—		$	—	$	—	$	9,058,086
Goodwill acquired during the year		4,043,747			—			—		—		4,043,747
Tax benefits arising from acquired subsidiaries		(244,236	)		—			—		—		(244,236	)
Modification of preliminary purchase price allocation		64,477			—			—		—		64,477
Translation adjustments		375,998			—			—		—		375,998
Balance as of December 31, 2005	$	13,298,072		$	—		$	—	$	—	$	13,298,072
Goodwill acquired during the year		380,109,233			99,683,161			8,444,464		—		488,236,858
Goodwill recorded as a result of contingent consideration resolved		—			237,879,480			—		—		237,879,480
Translation adjustments		329,461			—			—		—		329,461
Balance as of December 31, 2006	$	393,736,766		$	337,562,641		$	8,444,464	$	—	$	739,743,871
Goodwill acquired during the year		144,189			129,395			22,745,267		166,646,082		189,664,933
Modification of preliminary purchase price allocation		1,067,825			(371,912	)		44,835		—		740,748
Goodwill recorded as a result of contingent consideration resolved		783,653			—			11,769,000		—		12,552,653
Translation adjustments		696,077			—			—		—		696,077
Balance as of December 31, 2007	$	396,428,510		$	337,320,124		$	43,003,566	$	166,646,082	$	943,398,282

F-9

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

(k) Revenue Recognition

     The Group’s revenues are primarily derived from advertising services and to a lesser extent, sales from advertising equipment and sales from Internet subscriptions and perpetual licenses to its Adforward software.

     Revenues from advertising services and advertising equipment are recognized when (i) persuasive evidence of an arrangement exists; (ii) delivery of the products and/or services has occurred and risks and rewards of ownership have passed to the customer; (iii) the selling price is both fixed and determinable; and (iv) collection of the resulting receivable is reasonably assured.

     The Group generates advertising service revenues from the sale of advertising time slots in the out-of-home television advertising networks, the sales of frame space on the poster frame network, and the sales of advertising service through the mobile handset advertising and internet network. In the majority of advertising arrangements, the Group acts as a principal in the transaction and records advertising revenues on a gross basis. The associated expenses are recorded as cost of revenues. In some instances the Group is considered an agent and recognizes revenue on a net basis. Revenues from advertising services are recognized, net of agency rebates, ratably over the period in which the advertisement is displayed, assuming all other revenue recognition criteria have been met.

     Revenues from the sale of advertising equipment are recognized upon delivery, assuming all other revenue recognition criteria have been met.

     Adforward software sales typically include multiple elements, including sale of software licenses and services. Service includes installation, training and post contract customer support (“PCS”), which consists of when-and-if available software license updates and technical support. The Group recognizes revenues based on the provisions of the American Institute of Certified Public Accountants Statement of Position (“SOP”) No. 97-2, “Software Revenue Recognition”, as amended by SOP No. 98-9, “Modification of SOP No. 97-2, Software Revenue Recognition, With Respect to Certain Transactions.” Revenues under multiple-element arrangements are allocated to each element in the arrangement primarily using the residual method based upon the fair value of the undelivered elements, which is specific to the Group (vendor-specific objective evidence of fair value or VSOE). This means that the Group defers revenue from the arrangement fee equivalent to the fair value of the undelivered elements. Discounts, if any, are applied to the delivered elements, usually software licenses, under the residual method. VSOE for PCS is determined based on either the renewal rate specified in each contract or the price charged when each element is sold separately. If the Group does not have VSOE for the undelivered elements, revenue recognition is deferred until VSOE for such elements are obtained or until all elements have been delivered.

     The Group sells Adforward subscriptions and perpetual licenses. Revenues are recognized for subscription arrangements ratably over the subscription period for those with fixed fees and as earned (based on actual usage) under our variable fee arrangements. Under perpetual license agreements, revenue recognition generally commences when delivery has occurred, software has been installed and training has been provided as the Group does not currently have VSOE for either installation or training services.

     The Group entered into franchise arrangements with a number of third party franchisors. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 45 “Accounting For Franchise Fee Revenue”, revenue from initial franchise fees was recognized when the franchise sale transaction was completed, that is, when all material services or conditions relating to the sale had been substantially performed or satisfied by the franchisor.

     Prepayments for advertising services are deferred and recognized as revenue when the advertising services are rendered.

F-10

     The Group presents advertising service revenue, net of sales taxes incurred, as follows:

	For the years ended December 31,
	2005		2006		2007
	(In U.S. dollars, except per share data)
Advertising Service Revenue, Net of Agency rebates
Commercial Locations
— Unrelated parties	$	59,434,823	$	130,474,324	$	238,117,687
— Related parties		7,991,434		15,227,937		2,468,526
Total Commercial Locations		67,426,257		145,702,261		240,586,213
In-store Network
— Unrelated parties		5,475,192		25,330,654		28,986,724
— Related parties		517,998		4,380,287		1,300,982
Total in-store network		5,993,190		29,710,941		30,287,706
In-elevator poster frame
— Unrelated parties		—		44,893,004		93,157,536
— Related parties		—		—		243,628
Total In-elevator poster frame		—		44,893,004		93,401,164
Mobile handset advertising
— Unrelated parties		—		10,880,075		48,407,413
— Related parties		—		—		114,427
Total mobile handset advertising		—		10,880,075		48,521,840
Internet advertising
— Unrelated parties		—		—		128,831,164
— Related parties		—		—		1,139,536
Total internet advertising		—		—		129,970,700
Advertising Services Revenue:	$	73,419,447	$	231,186,281	$	542,767,623
Less: Sales taxes:
Commercial Locations	$	5,991,497	$	13,641,118	$	19,905,100
In-store Network		524,271		2,803,349		2,843,367
In-elevator poster frame		—		3,988,769		7,929,207
Mobile handset advertising		—		779,110		1,612,832
Internet advertising		—		—		5,031,731
Total sales taxes	$	6,515,768	$	21,212,346	$	37,322,237
Net Advertising Service Revenue		66,903,679		209,973,935		505,445,386
Add: Other Revenue:		1,325,234		1,931,530		1,114,384
Net revenues:	$	68,228,913	$	211,905,465	$	506,559,770

F-11

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

(l) Operating Leases

     Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company are accounted for as operating leases. Payments made under operating leases are charged to the consolidated statements of operations on a straight-line basis over the lease periods.

(m) Advertising Costs

     The Group expenses advertising costs as incurred. Total advertising expenses were $45,712, $1,157,672 and $1,086,739 for the years ended December 31, 2005, 2006, and 2007, respectively and have been included as part of selling and marketing expenses.

(n) Foreign Currency Translation

     The functional and reporting currency of Focus Media Holding is the United States dollar (“US dollar”). Monetary assets and liabilities denominated in currencies other than the US dollar are translated into the US dollar at the rates of exchange ruling at the balance sheet date.

     Transactions in currencies other than the US dollar during the year are converted into US dollar at the applicable rates of exchange prevailing at the first day of the month transactions occurred. Transaction gains and losses are recognized in other income or other expenses.

     The financial records of the Group’s subsidiaries and its variable interest entity are maintained in its local currency, the Renminbi (“RMB”), which is the functional currency. Assets and liabilities are translated at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange rates and revenues, expenses, gains and losses are translated using the average rate for the year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive income in the statement of shareholders’ equity (deficiency) and comprehensive income.

(o) Income Taxes

     Deferred income taxes are recognized for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, net operating loss carry forwards and credits by applying enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on the characteristics of the underlying assets and liabilities.

     Effective January 1, 2007, the Group adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”), which clarifies the accounting and disclosure for uncertainty in tax positions, as defined in that statement. See Note 13 for additional information including the impact of adopting FIN 48 on the Group’s consolidated financial statements.

(p) Comprehensive Income

     Comprehensive income includes foreign currency translation adjustments and unrealized gains (losses) on marketable securities classified as available-for-sale debt and equity securities. Comprehensive income is reported in the consolidated statements of shareholders’ equity.

(q) Fair Value of Financial Instruments

     Financial instruments include cash and cash equivalents, investments in debt and equity securities and short-term borrowings. The carrying values of cash and cash equivalents, investments in debt and equity securities and short-term borrowings approximate their fair values due to their short-term maturities.

F-12

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

(r) Share-based Compensation

     Effective January 1, 2006 the Group adopted SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123-R”), using the modified prospective application transition method, which establishes accounting for share-based awards exchanged for employee services. Accordingly, share-based compensation cost is measured at grant date, based on the fair value of the award, and recognized in expense over the requisite service period. The Group previously applied Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), and related Interpretations and provided the pro forma disclosures required by SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). APB 25 required the Group to record a compensation charge for the excess of the market value of the share at the grant date or any other measurement date over the amount an employee must pay to acquire the share. The compensation expense is recognized over the requisite service period which is the vesting period.

Periods prior to the adoption of SFAS 123-R

     Prior to the adoption of SFAS 123-R, the Group provided the disclosures required under SFAS 123, as amended by SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosures”.

     The following table illustrates the effect on net income and income per share as if the Group had applied the fair value recognition provisions of SFAS 123 to options granted under the Group’s share-based compensation plans prior to the adoption. For purposes of this pro forma disclosure the value of the options was estimated using the Black-Scholes option-pricing model and amortized using an accelerated method over the respective vesting periods of the awards.

	Year ended
	December 31, 2005
Net income, as reported	$	23,547,651
Add: Share-based compensation as reported		726,503
Less: Share-based compensation determined using the fair value method		(3,225,668	)
Pro forma net income attributable to holders of ordinary shareholders	$	21,048,486
Basic income per share:
As reported	$	0.09
Pro forma	$	0.08
Diluted income per share:
As reported	$	0.06
Pro forma	$	0.06

     As required by SFAS 123-R, management has made an estimate of expected forfeitures and is recognizing compensation costs only for those equity awards expected to vest. The cumulative effect of initially adopting SFAS 123-R was not significant. The Group’s total share-based compensation expense for the year ended December 31, 2006 and 2007 was $8,367,406 and $21,454,298, respectively. As a result of adopting SFAS 123-R, income before income tax and net income were both lower by $8,119,732 and $20,864,335 than if the Group had continued to account for share-based compensation under APB 25 for the year ended December 31, 2006 and 2007, respectively. The impact on basic and diluted earnings per share in 2007 was a decrease of $0.04 and $0.04 per share respectively.

     The following table summarizes the share-based compensation recognized in the consolidated statements of operations:

	2005		2006		2007
Cost of sales	$	—	$	146,942	$	980,488
General and administrative		683,186		6,130,076		11,307,664
Selling and marketing		43,317		2,090,388		9,166,146

(s) Income per Share

     Basic income per share is computed by dividing income attributable to holders of ordinary shares by the weighted average number of ordinary shares outstanding during the year. Diluted income per ordinary share reflects the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised or converted into ordinary shares. Ordinary share equivalents are excluded from the computation in loss years as their effects would be anti-dilutive.

F-13

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

(t) Recently Issued Accounting Standards

     In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurement” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value and expands disclosures about assets and liabilities measured at fair value. The Company will be required to adopt SFAS 157 for fiscal year beginning January 1, 2008. The Group is currently evaluating the impact, if any, of SFAS 157 on its financial position, results of operations and cash flows.

     In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Group is currently evaluating the impact, if any, of SFAS 159 on its financial position, results of operations and cash flows.

     In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”), which replaces SFAS No. 141, “Business Combination.” The statement retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. SFAS 141R is effective for fiscal years and interim periods within those fiscal years beginning on or after December 15, 2008 and will apply prospectively to business combinations completed on or after that date. The Group is currently evaluating the impact, if any, of SFAS 141R on its financial position, results of operations and cash flows.

     In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51” (“SFAS 160”), which changes the accounting and reporting for minority interests. Minority interests will be recharacterized as noncontrolling interests and will be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement and, upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. SFAS 160 is effective for fiscal years and interim periods within those fiscal years beginning on or after December 15, 2008 and will apply prospectively, except for the presentation and disclosure requirements, which will apply retrospectively. The Group is currently evaluating the impact, if any, of SFAS 160 on its financial positions, results of operations and cash flows.

F-14

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

3. Acquisitions

2005 Acquisitions:

     In 2005, the Group acquired nine entities in order to further expand its out-of-home television advertising network for total consideration of $3,083,244, which was paid primarily in cash. As a result of these acquisitions, the Group recorded goodwill and intangible assets of $2,809,442 and $382,400, respectively. All of the goodwill was assigned to the out-of-home television advertising services segment.

     In addition, on March 21, 2005, the Group acquired Capital Beyond Limited, including its then variable interest entity Guangdong Framedia, an advertising services provider, in exchange for cash consideration of $2,054,008, all of which was paid as of December 31, 2005. The acquisition was recorded using the purchase method of accounting and, accordingly, the acquired assets and liabilities were recorded at their fair market value at the date of acquisition. The purchase price was allocated as follows:

			Amortization
			period
Net tangible assets acquired	$	337,252
Intangible assets:
Lease agreements		471,818	2.3 years
Customer base		10,633	7 years
Goodwill		1,234,305		N/A
Total	$	2,054,008

2006 Acquisitions:

     On January 1, 2006, the Group acquired Infoachieve Limited (“Infoachieve”), which included its then variable interest entity Shanghai Framedia Advertising Development Ltd. (“Framedia”), the largest in-elevator poster frame advertising network operator in China. The purchase price included cash of $39,600,000, all of which was paid as of December 31, 2005, and 22,157,003 ordinary shares having a fair value of $54,690,130, or approximately $2.47 per ordinary share. The fair value of the ordinary shares was based on the average market price of Focus Media Holding’s ordinary shares over a reasonable period before and after the date that the terms of the acquisition were agreed to and announced. Framedia achieved certain earnings targets for the year ended December 31, 2006 and, as a result, on June 15, 2007 the Group issued 35,830,619 ordinary shares as additional purchase consideration. As the contingency was resolved as of December 31, 2006, the Group recorded $237,879,480 in consideration payable as a component of shareholders’ equity, which represents the fair value of the 35,830,619 shares as of December 31, 2006.

     The aggregate purchase price is comprised of the following:

Cash consideration	$	39,600,000
Other acquisition costs		311,110
Value of the ordinary shares issued		54,690,130
Value of the ordinary shares issued as a result of contingent consideration resolved		237,879,480
Total consideration	$	332,480,720

     The acquisition was recorded using the purchase method of accounting and, accordingly, the acquired assets and liabilities were recorded at their fair market value at the date of acquisition as follows:

				Amortization
				period
Net tangible liabilities assumed	$	(8,443,960	)
Intangible assets:
Lease agreements		8,281,999		6 years
Customer base		2,664,685		7 years
Non-compete agreement		463,558		3 years
Trademark		939,377		1 year
Contract backlog		70,120		1 year
Goodwill		328,504,941			N/A
Total	$	332,480,720

     The goodwill was assigned to the in-elevator poster frame advertising services segment

F-15

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

     On February 28, 2006, the Group acquired Target Media Holdings Limited (“Target Media”), which used to be the Group’s biggest competitor in out-of-home television advertising services, and its wholly-owned subsidiary, Target Media Multi-Media technology (Shanghai) Co., Ltd. (“TMM”), and a consolidated variable interest entity, Shanghai Target Media Co., Ltd. (“STM”), one of the largest out-of-home advertising network operators in China. The purchase price included cash of $94,000,000, all of which was paid in 2006, and 77,000,000 ordinary shares having a fair value of $310,464,000, or $4.032 per ordinary share. The fair value of the ordinary shares was based on average market price of Focus Media Holding’s ordinary shares over a reasonable period before and after the date that the terms of the acquisition were agreed to and announced.

     The aggregate purchase price of $407,321,524 consisted of the following:

Cash consideration	$	94,000,000
Other acquisition costs		2,857,524
Value of the ordinary shares issued		310,464,000
Total consideration	$	407,321,524

     The acquisition was recorded using the purchase method of accounting and, accordingly, the acquired assets and liabilities were recorded at their fair market value at the date of acquisition as follows:

			Amortization
			period
Net tangible assets acquired	$	19,629,853
Intangible assets:
Lease agreements		4,510,494	10 years
Customer base		449,631	7 years
Trademark		5,721,874	10 years
Contract backlog		148,550	1 year
Goodwill		376,861,122		N/A
Total	$	407,321,524

     The goodwill was assigned to the out-of-home television advertising services segment.

     The purchase price allocation and intangible asset valuations for each of the two acquisitions described above were determined by management based on a number of factors including a valuation report provided by a third party valuation firm. The valuation report utilized and considered generally accepted valuation methodologies such as the income, market, cost and actual transaction of Group shares approach. The Group has incorporated certain assumptions which include projected cash flows and replacement costs.

     In the valuation of lease agreements, customer base and contract backlog, an indication of value was developed through the application of a form of income approach, known as excess earnings method. The first step to apply the excess earning method was to estimate the future debt-free net income attributable to the intangible asset. The resulting debt-free net income was then reduced by an estimated fair rate of return on contributory assets necessary to realize the projected earnings attributable to the intangible assets. These assets include fixed assets, working capital and other intangible assets.

     The valuation of the trademark was based on the relief from royalty method whereby an asset is valued based upon the after-tax cash flow savings accruing to the owner by virtue of the fact that the owner does not have to pay a “fair royalty” to a third party for the use of that asset. Accordingly, a portion of the owner’s earnings, equal to the after-tax royalty that would have been paid for use of the asset can be attributed to that asset. The value of the asset depends on the present worth of future after-tax royalties attributable to the asset to their present worth at market-derived rates of return appropriate for the risks of that particular asset.

     Also in 2006, the Group completed a number of individually insignificant acquisitions which are described below:

     On March 21, 2006, the Group acquired Dotad Media Holdings Limited (“Dotad’”) in exchange for cash consideration of $15,000,000, all of which was paid as of December 31, 2007. On June 15, 2007, additional 1,500,000 ordinary shares were issued as Dotad has met its earning targets in the first year it was acquired. An additional 1,500,000 ordinary shares is issuable contingent upon Dotad’s meeting certain earning targets in 2007. The Group acquired intangible assets of $6,587,095 and recognized goodwill of $8,444,464. The goodwill was assigned to the mobile handset advertising services segment.

     The Group acquired three entities in the poster-frame advertising business for cash consideration of $10,670,222. The Group recognized acquired intangible assets of $1,682,771 and recognized goodwill of $9,057,700, which was assigned to the in-elevator poster frame advertising services segment.

F-16

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

     The Group acquired three entities which provide out-of-home television advertising services and the remaining minority interest in six subsidiaries, for cash consideration of $5,314,923 and 97,190 ordinary shares. Certain of these acquisitions have contingent consideration based on future earnings targets. The Group recognized acquired intangible assets of $12,507 and recognized goodwill of $3,248,111 which was assigned to the out-of-home television advertising services segment.

     The Group acquired 70% of the outstanding ordinary shares of Appreciated Capital Ltd. and its then variable interest entity Beijing YangShiSanWei Advertisement Co., Ltd. (collectively, “ACL”). ACL sells advertising in movie theatres to its customers. The purchase consideration is fully contingent and is based on the cumulative earnings targets for the three year periods from September 1, 2006 to August 31, 2009 subject further to the attainment of certain operational targets. The Group advanced $2.8 million to ACL. The purchase price allocation can not be completed until the contingent consideration is resolved. As such, the Group has recorded a liability of $358,574, which is equal to the excess of the fair value of the assets acquired over cost on the date of acquisition.

2007 Acquisitions:

     On March 28, 2007, the Group acquired Allyes Information Technology Company Limited (“Allyes”), the leading internet advertising company in China. The purchase price included cash of $70,000,000 and 19,969,080 ordinary shares having a fair value of $154,281,112, or approximately $7.726 per ordinary share. The fair value of the ordinary shares was based on the average market price of Focus Media Holding’s ordinary shares over a reasonable period before and after the date that the terms of the acquisition were agreed to and announced. Additional consideration up to 9,662,458 ordinary shares is issuable, contingent upon Allyes meeting certain earnings targets during the twelve month period from April 1, 2007 to March 31, 2008.

     The aggregate purchase price excluding contingent consideration is comprised of the following:

Cash consideration	$	70,000,000
Other acquisition costs		417,362
Value of the ordinary shares issued		154,281,112
Total consideration	$	224,698,474

     The acquisition was recorded using the purchase method of accounting and, accordingly, the acquired assets and liabilities were recorded at their fair market value at the date of acquisition as follows:

			Amortization
			period
Net tangible liabilities assumed	$	21,912,649
Intangible assets
Customer base		10,261,307	7 years
Trademark		8,147,061		N/A
Non-compete agreement		1,665,072	4 years
Completed technologies		11,847,121	6 years
Smart-trade platform		3,721,393	7 years
Contract backlog		497,789	1 year
Goodwill		166,646,082		N/A
Total	$	224,698,474

     The goodwill was assigned to the internet advertising services segment.

     Also in 2007, the Group completed a number of individually insignificant acquisitions which are described below:

     The Group acquired ten entities which provide out-of-home television advertising services for cash consideration of $6,362,389 as of December 31, 2007. The Group recognized acquired intangible assets of $8,047,983 and recognized goodwill of $144,189, which was assigned to the out-of-home television advertising services segment. Part of the purchase consideration is contingent and is based on earnings targets for two to three years subsequent to the acquisition, subject further to the attainment of certain operational targets. The purchase price allocation can not be completed until the contingent consideration is resolved. As such, the Group has recorded a liability of $2,326,468, which is equal to the excess of the fair value of the assets acquired over cost on the date of acquisition.

F-17

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

     The Group acquired seven entities in the poster-frame advertising business for cash consideration of $3,290,730 as of December 31, 2007. The Group recognized acquired intangible assets of $23,143,001 and recognized goodwill of $129,395, which was assigned to the in-elevator poster frame advertising services segment. Part of the purchase consideration is contingent and is based on earnings targets for two to three years subsequent to the acquisition, subject further to the attainment of certain operational targets. The purchase price allocation can not be completed until the contingent consideration is resolved. As such, the Group has recorded a liability of $10,266,510, which is equal to the excess of the fair value of the assets acquired over cost on the date of acquisition.

     The Group acquired two entities which provide outdoor billboard advertising services, for nil cash consideration as of December 31, 2007. The Group recognized acquired intangible assets of $25,857,405. The purchase consideration is contingent and is based on earnings targets for two to three years subsequent to the acquisition, subject further to the attainment of certain operational targets. The purchase price allocation can not be completed until the contingent consideration is resolved. As such, the Group has recorded a liability of $25,995,465, which is equal to the excess of the fair value of the assets acquired over cost on the date of acquisition.

     The Group acquired ten entities which provide wireless advertising service, for cash consideration of $31,063,795 and 1,500,000 ordinary shares as of December 31, 2007. The Group recognized acquired intangible assets of $11,825,398 and recognized goodwill of $34,514,267, which was assigned to the wireless advertising services segment. Part of the purchase consideration is contingent and is based on earnings targets for the three years subsequent to the acquisition, subject further to the attainment of certain operational targets. The purchase price allocation can not be completed until the contingent consideration is resolved. As such, the Group has recorded a liability of $2,653,357, which is equal to the excess of the fair value of the assets acquired over cost on the date of acquisition.

     In addition to Allyes, the Group also acquired eight entities which provide internet advertising service, for cash consideration of $6,940,832 as of December 31, 2007. The Group recognized acquired intangible assets of $35,918,189, which was assigned to the internet advertising services segment. Part of the purchase consideration is contingent and is based on earnings targets for three years subsequent to the acquisition, subject further to the attainment of certain operational targets. The purchase price allocation can not be completed until the contingent consideration is resolved. As such, the Group has recorded a liability of $30,896,895, which is equal to the excess of the fair value of the assets acquired over cost on the date of acquisition.

Pro forma (unaudited)

     The following summarized unaudited pro forma results of operations for the years ended December 31, 2005, 2006 and 2007, have been prepared assuming that the individually material acquisitions, being Capital Beyond Limited , Infoachieve Limited, Target Media Holdings Limited and Allyes Information Technology Company Limited, occurred as of January 1, 2005, 2006 and 2007. These pro forma results have been prepared for comparative purposes only based on management’s best estimate and do not purport to be indicative of the results of operations which actually would have resulted had the acquisitions occurred as of January 1, 2005, 2006 and 2007.

	Pro forma
	Year ended December 31,
	2005		2006		2007
	(unaudited)		(unaudited)		(unaudited)
Revenues	$	113,750,432	$	264,014,401	$	517,148,361
Net income (loss) attributable to holders of ordinary shares		3,127,583		69,471,318		140,098,285
Income (loss) per share — basic	$	0.01	$	0.13	$	0.24
Income (loss) per share — diluted	$	0.01	$	0.13	$	0.23

4. Investment in Debt and Equity Securities

     The following is a summary of short-term available-for-sale debt and equity securities:

	December 31,
	2005			2006		2007
Debt and Equity Securities	$	35,000,000		$	—	$	88,177,967
Gross unrealized gain (loss)		(164,150	)		—		1,967,393
Fair Value	$	34,835,850		$	—	$	90,145,360

F-18

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

5. Accounts Receivable, Net

     Accounts receivable, net consists of the following:

	December 31,
	2005		2006		2007
Billed receivables	$	13,684,419	$	37,922,093	$	167,443,428
Unbilled receivables		7,504,112		23,692,250		38,658,702
Total	$	21,188,531	$	61,614,343	$	206,102,130

     Unbilled receivables represent amounts earned under advertising contracts in progress but not billable at the respective balance sheet dates. These amounts become billable according to the contract term. The Group anticipates that substantially all of such unbilled amounts will be billed and collected within twelve months of balance sheet dates.

6. Acquired Intangible Assets, Net

     As of December 31, 2005, 2006 and 2007, the Group has the following amounts related to intangible assets:

	December 31,
	2005		2006		2007
Cost:
Operation and broadcasting rights	$	—	$	6,403,114	$	9,251,020
Lease agreements		1,249,843		16,336,586		69,366,199
Customer bases		430,879		7,827,587		52,943,013
Trademark		—		6,861,065		18,555,020
Acquired technology		—		2,546,519		21,229,362
Others		—		1,177,276		16,701,599
Total	$	1,680,722	$	41,152,147	$	188,046,213
Accumulated amortization:
Operation and broadcasting rights	$	—	$	80,039	$	850,263
Lease agreements		447,578		3,015,639		12,866,124
Customer bases		75,224		1,051,403		8,280,127
Trademark		—		1,462,163		2,192,685
Acquired technology		—		381,978		3,710,502
Others		—		443,906		4,429,457
Total	$	522,802	$	6,435,128	$	32,329,158
Intangible assets, net:	$	1,157,920	$	34,717,019	$	155,717,055

     The Group recorded amortization expense as follows:

	December 31,
	2005		2006		2007
Cost of revenues	$	382,359	$	3,207,079	$	16,113,970
Selling and marketing		55,478		2,567,002		8,639,094
Total	$	437,837	$	5,774,081	$	24,753,064

     The Group will record amortization expense of $33,652,914, $32,149,023, $28,747,413, $21,187,998 and $14,504,364 for the years ending December 31, 2008, 2009, 2010, 2011 and 2012, respectively.

F-19

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

7. Equipment, Net

     Equipment, net consists of the following:

	December 31,
	2005			2006			2007
Media display equipment	$	40,191,968		$	77,088,464		$	103,036,365
Computers and office equipment		1,267,696			3,360,590			8,674,466
Leasehold improvements		537,130			713,524			948,828
Vehicles		349,575			658,825			1,259,605
Total	$	42,346,369		$	81,821,403		$	113,919,264
Less: accumulated depreciation and amortization		(5,975,119	)		(22,767,910	)		(43,339,838	)
Net book value		36,371,250			59,053,493			70,579,426
Assembly in progress		7,323,638			11,195,831			24,898,900
Total	$	43,694,888		$	70,249,324		$	95,478,326

     Depreciation expense for 2005, 2006 and 2007 was $4,489,179, $13,737,441 and $19,444,440 respectively.

     Assembly in process relates to the assembly of flat-panel television screens. No provision for depreciation is made on assembly in process until such time as the relevant assets are completed and put into use.

8. Short-term Loans

	December 31,
	2005		2006		2007
Short-term bank loan (a)	$	991,301	$	—	$	—
Other loan due to ex-shareholders of Framedia (b)		—		2,769,459		—
Total	$	991,301	$	2,769,459	$	—

(a)

The Group had $991,301, $nil and $nil outstanding under line of credit arrangement as of December 31, 2005, 2006 and 2007, respectively. The amount available for additional borrowings under this line of credit at December 31, 2005, 2006 and 2007 was $nil, $2,106,516 and $nil, respectively. The line of credit was subject to an interest rate of 10%, discounted by an amount equal to the six month loan interest rate of The People’s Bank of China. As of December 31, 2005, the line of credit bore interest at 4.698% per annum. The Group recorded interest expense under the line of credit in 2005, 2006 and 2007 of $49,873, $305,287 and $25,269 respectively.

(b)

At December 31, 2006, the short-term loans from ex-shareholders of Framedia are non-interest bearing, all of which are repayable within one year.

9. Accrued Expenses and Other Current Liabilities

     Accrued expenses and other current liabilities consist of the following:

	December 31,
	2005		2006		2007
Accrued sales commissions	$	2,583,270	$	5,813,761	$	15,631,196
Other accrued expenses		577,863		1,844,781		4,859,205
Other taxes payables		3,037,443		7,451,787		15,870,893
Advance from customers		3,387,224		6,381,032		31,049,894
Accrued employee payroll and welfare		1,059,717		1,465,142		6,145,823
Payables and other liabilities related to acquisitions		99,130		4,530,745		90,214,133
Amount due to ex- shareholders of subsidiary		200,848		—		4,207,387
Withholding individual PRC income tax		—		9,046,576		15,092,588
Others		801,407		2,140,351		7,241,827
Total	$	11,746,902	$	38,674,175	$	190,312,946

F-20

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

10. Share-based Compensation

     In June 2003, the Group adopted the 2003 Employee Share Option Scheme (“2003 Plan”) under which not more than 30% of issued share capital was reserved for grants of options. In May 2005, the Group adopted the 2005 Share Option Plan (“2005 Plan”), under which the amount of options that may issue has been reduced to an aggregate of 20% of issued share capital, including the 10.87% already granted under the 2003 Plan. In addition, during the three years after the adoption of our 2005 Plan, the Group may issue no more than 5% of issued share capital for grants of options. In October 2006, the Group further adopted the 2006 Employee Share Option Plan (“2006 Plan”), under which the Group may issue no more than 3.6% of issued ordinary shares for grant of options. In November 2007, the Group’s 2007 Employee Share Option Scheme (“2007 Plan”) was authorized, under which the Group is authorized to grant option to purchase up to 5% of the Group’s issued and outstanding ordinary shares from time to time in the three years following the date of enactment of 2007 Plan. The option plans are intended to promote the success and to increase shareholder value by providing an additional means to attract, motivate, retain and reward selected directors, officers, employees and third-party consultants and advisors.

     In 2005, 2006 and 2007, options to purchase 23,843,630, 14,800,000 and 10,892,685 ordinary shares were authorized and granted under the option plans, respectively. Under the terms of each option plan, options are generally granted at prices equal to the fair market value as determined by the Board of Directors, expire 10 years from the date of grant and generally vest over three years while certain options granted vest over one year. Subsequent to the initial public offering, options were generally granted at the fair market value of the ordinary shares at the date of grant. As of December 31, 2005, 2006 and 2007, options to purchase 49,051,830, 37,515,150 and 39,890,055 ordinary shares were granted to employees and non-employees and remained outstanding. Share options granted to external consultants and advisors in exchange for services were expensed based on the estimated fair value utilizing the Black-Scholes option pricing model.

     The fair value of options granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

	2005			2006			2007
Option granted to employees:
Average risk-free rate of return		3.10 — 4.43	%		4.74% — 4.80	%		4.02% — 4.68	%
Weighted average expected option life	2-3 years			2 years			2 years
Volatility rate		30.49% — 36.2	%		40.0 — 53.7	%		50.61% — 53.05	%
Dividend yield		0	%		0	%		0	%

     Prior to the initial public offering in July 2005, the derived fair value of the ordinary shares underlying the options was determined by management by factoring into their consideration a retrospective valuation conducted by a third party valuation firm using a generally accepted valuation methodology, the guideline companies approach, which incorporates certain assumptions including the market performance of comparable listed companies as well as the financial results and growth trends of the Group, to derive the total equity value of the Group. The valuation model allocated the equity value between the ordinary shares and the preference shares and determined the fair value of ordinary shares based on two assumptions: where conversion into ordinary shares would result in a higher economic value, preference shares were treated as if they had converted into ordinary shares; and preference shares that have a value higher than their conversion price were assigned a value that took into consideration their liquidation preference.

     The ordinary shares were assigned a value equal to their pro rata share of the residual amount, if any, that remained after consideration of the liquidation preference of preferred shares with a value below their conversion price. Also prior to July 2005, the expected volatilities are estimated based on the average volatility of comparable companies with the time period commensurate with the expected time period. Following the initial public offering, the expected volatilities were estimated based on the historical volatility. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free interest rate assumption is determined using the Federal Reserve nominal rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award.

     The weighted average fair value of options granted for the years ended December 31, 2005, 2006 and 2007 was $0.39, $1.77 and $3.56 respectively. A summary of the share option activities are as follows:

	Weighted			Weighted		remaining	Aggregate
	Number			average		contract term	intrinsic
	of shares			exercise price		(in years)	value
Options outstanding at January 1, 2007		37,515,150		$	2.97
Granted		10,892,685		$	10.92
Forfeited		(483,500	)	$	5.72
Exercised		(8,034,280	)	$	2.46
Options outstanding at December 31, 2007		39,890,055		$	5.21	8.35 years	$	245,913,534
Options vested or expected to vest at December 31, 2007		37,857,177		$	5.03	8.30 years	$	240,274,250
Options exercisable at December 31, 2007		16,261,178		$	1.94	7.40 years	$	153,291,942

F-21

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

     The total intrinsic value of options exercised during the years ended December 31, 2005, 2006 and 2007, was $nil, $146,119,111 and $34,693,538 respectively.

     As of December 31, 2007, there was $36,784,619 in total unrecognized compensation expense related to unvested share-based compensation arrangements, which is expected to be recognized over a weighted-average period of 1.36 years.

11. Income Taxes

Cayman Islands

     Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. In addition, upon payments of dividends by the Company to its shareholders, no Cayman Islands withholding tax will be imposed.

British Virgin Islands

     The Group’s subsidiaries incorporated in the BVI are not subject to taxation.

Hong Kong

     Focus Media (China) Holding Ltd. is subject to Hong Kong profit tax at a rate of 17.5% on its assessable profit. No Hong Kong profit tax has been provided as the Group does not have assessable profit that is earned in or derived from Hong Kong during the years presented.

PRC

     Pursuant to the PRC Income Tax Laws, the Company’s subsidiaries and VIEs are generally subject to Enterprise Income Taxes (“EIT”) at a statutory rate of 33%, which comprises 30% national income tax and 3% local income tax. Some of the Company’s subsidiaries and VIEs are newly incorporated enterprises engaged in the advertising industry which are entitled to a two-year tax exemption holiday, commencing from the first operating year. Some of the subsidiaries of the Company, e.g. Beijing Focus Media Wireless Co., Ltd., and Beijing Shi Ji Zhong Kai Technology Co., Ltd are qualified new technology enterprises. Under PRC Income Tax Laws they are subject to a preferential tax rate of 15%, plus a three-year tax exemption followed by three years with a 50% reduction in the tax rate, starting from the first operating year.

     On March 16, 2007, the PRC National People’s Congress passed the China Corporate Income Tax Law (“the New Law”), which became effective January 1, 2008 and applies a uniform income tax rate for both foreign invested enterprises and domestic enterprise. The New Law provides a five-year transition period from its effective date for those enterprises which were established before the promulgation date of the new tax law and which were entitled to a preferential tax treatment such as a reduced tax rate or a tax holiday. On December 26, 2007, the State Council issued the Notice of the State Council Concerning Implementation of Transitional Rules for Enterprise Income Tax Incentives (“Circular 39”). Based on Circular 39, certain specifically listed categories of enterprises which enjoyed a preferential tax rate of 15% are eligible for a graduated rate increase to 25% over the 5-year period beginning from January 1, 2008. Specifically, the applicable rates under such an arrangement for such enterprises would be 18%, 20%, 22%, 24% and 25% for 2008, 2009, 2010, 2011, 2012 and thereafter, respectively. Preferential tax treatments will continue to be granted to industries and projects that are strongly supported and encouraged by the state, and enterprises that qualify as “new and high technology enterprises strongly supported by the state” under the new law will be entitled to a 15% preferential enterprise income tax rate.

     Most of the Company’s subsidiaries and VIEs are expected to transition from 33% to 25% starting from January 1, 2008. Those that currently enjoy a lower tax rate of 15% as a high-tech company under the old law will transition to the uniform tax rate of 25% from 2008 unless the company obtains the “new and high technology enterprise” status under the new tax law. The Group has thus applied the 25% rate in calculating its deferred tax balances.

     In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (“FIN 48”), which clarifies the accounting and disclosure for uncertainty in tax positions, as defined in that statement. FIN 48 prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures.

     The Group adopted the provisions of FIN 48 effective January 1, 2007 and estimated the cumulative effect on adoption of FIN48 to be a reduction of consolidated retained earning as of January 1, 2007 of approximately $3.9 million, including interest and penalty, with a corresponding increase in the liability for uncertain tax positions. The Group has elected to classify interest and/or penalties relating to income tax matters within income tax expenses. The amount of penalties and interest as of December 31, 2007 is immaterial. The Group further provided an additional FIN48 reserve of approximately $4.2 million in connection with tax uncertainties during the year ended December 31, 2007. The Group does not anticipate any significant increases or decreases to its liability for unrecognized tax benefits within the next 12 months.

Balance at January 1, 2007	3,912,340
Additions based on tax position related to the current year	4,234,066
Translation adjustment	86,307
Balance at December 31, 2007	8,232,713

     According to the PRC Tax Administration and Collection Law, the statute of limitations is generally three years if the underpayment of taxes is due to computational errors made by the taxpayer. The statute of limitations will be extended to five years under special circumstances, which are not clearly defined, but an underpayment of tax liability exceeding RMB100,000 (approx. $14,000 under the current exchange rate) is specifically listed as a special circumstance. In the case of a transfer pricing related adjustment, the statute of limitations is 10 years. There is no statute of limitations in the case of tax evasion. The status of limitations in Hongkong is 6 years.

Composition of income tax expense

     The current and deferred portion of income tax expense (benefit) included in the consolidated statements of operations for the years ended December 31 is as follows:

	2005			2006			2007
Current income tax expense	$	715,117		$	1,106,921		$	11,764,813
Deferred income tax expense (benefit)		(20,664	)		(63,383	)		(719,248	)
Income tax expense	$	694,453		$	1,043,538		$	11,045,565

F-22

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

Reconciliation of the differences between statutory tax rate and the effective tax rate

     Reconciliation between total income tax expense and that amount computed by applying the PRC statutory income tax rate of 33% to income before taxes is as follows:

	Years ended December 31,
	2005			2006			2007
Statutory rate		33.0	%		33.0	%		33.0	%
Effect of different tax rate of group entities operating in other jurisdiction		0.0	%		2.4	%		5.2	%
Effect of different tax rates applicable to the subsidiaries and VIEs		0.1	%		3.5	%		-0.7	%
Effect of FIN48 unrecognized tax benefits		0.0	%		0.0	%		2.6	%
Effect of tax holiday		-31.6	%		-39.1	%		-37.4	%
Effect of non-deductible expenses		1.1	%		2.2	%		2.9	%
Change in valuation allowance		0.2	%		-0.7	%		1.4	%
Effective tax rate		2.8	%		1.3	%		7.0	%

     The following table sets forth the effects of the tax holidays granted to the entities of the Group for the periods presented:

	Years ended December 31,
	2005		2006		2007
Tax holiday effect	$	23,212,976	$	99,641,998	$	178,521,625
Net income per share effect — basic	$	0.09	$	0.20	$	0.30
Net income per share effect — diluted	$	0.06	$	0.19	$	0.29

The principal components of the Group’s deferred income tax assets/liabilities are as follows:

	December 31,
	2005			2006			2007
Deferred tax assets:
Net operating loss carry forwards	$	545,208		$	2,317,316		$	5,076,326
Accrued expenses temporarily non-deductible		46,695			242,106			206,670
Pre-operating expenses		80,102			—			—
Bad debt provision		130,897			704,429			1,472,981
Total deferred tax assets	$	802,902		$	3,263,851		$	6,755,977
Valuation allowance on deferred tax assets		(59,988	)		(2,438,008	)		(5,615,737	)
Net deferred tax assets	$	742,914		$	825,843		$	1,140,240
Deferred tax liabilities:
Intangible asset basis difference	$	—		$	3,303,110		$	7,620,504
Total deferred tax liabilities	$	—		$	3,303,110		$	7,620,504

     A significant portion of the deferred tax assets recognized relate to net operating loss carry forwards. As of December 31, 2007, the Group had tax losses of $20,236,946 as of December 31, 2007 to be carried forward against future taxable income, which will expire if unused in the years ending December 31, 2009 through 2012. The Group operates through multiple subsidiaries and the valuation allowance is considered on each individual subsidiary basis. Where a valuation allowance was not recorded, the Group believes that there was sufficient positive evidence to support its conclusion not to record a valuation allowance as it expects to generate sufficient taxable income in the future.

     The valuation allowance in 2006 and 2007 has been increased in connection with an increase in net operating losses for which the Group believes it cannot generate future taxable income sufficient to recognize the income tax benefit.

     Undistributed earnings of the Group’s PRC subsidiaries of approximately $348 million at December 31, 2007 are considered to be indefinitely reinvested and, accordingly, no provision for PRC dividend withholding tax has been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise in the future, the Group would be subject to the then applicable PRC tax laws and regulations.

F-23

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

     12. Net income per Share

     The following table sets forth the computation of basic and diluted income per share for the years indicated:

	Years ended December 31,
	2005		2006		2007
Income attributable to holders of ordinary shares (numerator):	$	23,547,651	$	83,197,732	$	144,435,549
Shares (denominator):
Weighted average ordinary shares outstanding used in computing basic income per share		252,128,545		505,411,079		590,387,396
Plus weighted average preference shares outstanding		84,119,675		—		—
Plus incremental weighted average ordinary shares from assumed conversions of stock option using treasury stock method		29,689,874		16,125,302		17,939,054
Weighted average ordinary shares outstanding used in computing diluted income per share		365,938,094		521,536,381		608,326,450
Net income per share — basic	$	0.09	$	0.16	$	0.24
Net income per share — diluted	$	0.06	$	0.16	$	0.24

     For the above mentioned years, the Group had securities outstanding which could potentially dilute basic earnings per share in the future, but which were excluded from the computation of diluted net income per share in the years presented, as their effects would have been anti-dilutive. Such outstanding securities consist of the following:

	Years ended December 31,
	2005		2006		2007
Outstanding options to purchase ordinary shares		49,051,830		37,515,150		39,890,055

13. Ordinary Shares

     (1) On May 31, 2005, shareholders of the Group approved a 200-for-1 split of the Company’s shares, with immediate effect. The 200-for-l share split of the Company’s shares has been retroactively applied to all periods presented.

     (2) Upon initial public offering on July 13, 2005, the Group issued 77,575,000 ordinary shares, for US$1.7 per ordinary share, for total proceeds of US$118,174,130, net of offering expenses.

     (3) On January 1, 2006, the Group issued 22,157,003 ordinary shares as partial consideration of the acquisition of Infoachieve (Note 3).

     (4) On January 27, 2006, the Group issued 15,000,000 ordinary shares, for US$4.35 per ordinary share, for total proceeds of US$61,783,300, net of offering expenses.

     (5) On February 28, 2006, the Group issued 77,000,000 ordinary shares as partial consideration of the acquisition of all the outstanding ordinary shares of Target Media (Note 3).

     (6) On March 1, 2006, the Group issued 74,720 ordinary shares related to an acquisition (Note 3).

     (7) On May 30, 2006, the Group issued 22,470 ordinary shares related to an acquisition (Note 3).

     (8) On June 16, 2006, the Group issued 16,000,000 ordinary shares, for US$5.4 per ordinary share, for total proceeds of US$80,967,593, net of offering expenses.

     (9) During the year ended December 31, 2006, the Group issued 26,336,680 ordinary shares pursuant to share-based compensation plans upon exercise of options.

     (10) On January 25, 2007, the Group issued 15,000,000 ordinary shares, for US$7.711 per ordinary share, for total proceeds of US$114,870,403, net of offering expenses.

     (11) On March 28, 2007, the Group issued 19,969,080 ordinary shares as partial consideration of the acquisition of Allyes Information Technology Company Limited (Note 3).

F-24

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

     (12) In June 2007, the Group issued 37,330,619 ordinary shares as earn-out consideration for the acquisitions of Framedia and Dotad (Note 3).

     (13) On November 7, 2007, the Group issued 25,000,000 ordinary shares, for US$12.56 per ordinary share, for total proceeds of $312,574,308, net of offering expenses.

     (14) During the year ended December 31, 2007, the Group issued 8,034,280 ordinary shares pursuant to share-based compensation plans upon exercise of options.

14. Mainland China Contribution Plan and Profit Appropriation

     Full time employees of the Group in the PRC participate in a government-mandated multiemployer defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. PRC labor regulations require the Group to accrue for these benefits based on certain percentages of the employees’ salaries. The total contribution for such employee benefits were $619,831, $2,326,895 and $4,354,955 for the years ended December 31, 2005, 2006 and 2007, respectively.

     Pursuant to laws applicable to entities incorporated in the PRC, the Group subsidiaries in the PRC must make appropriations from after-tax profit to non-distributable reserve funds. These reserve funds include one or more of the following: (i) a general reserve, (ii) an enterprise expansion fund and (iii) a staff bonus and welfare fund. Subject to certain cumulative limits, the general reserve fund requires annual appropriations of 10% of after tax profit (as determined under accounting principles generally accepted in the PRC at each year-end) until such cumulative appropriation reaches 50% of the registered capital; the other fund appropriations are at the Group’s discretion. These reserve funds can only be used for specific purposes of enterprise expansion and staff bonus and welfare and are not distributable as cash dividends. For the years ended December 31, 2005, 2006 and 2007, the Group made total appropriations of $98,729, $650,851 and $141,121 respectively.

15. Commitments and Contingencies

{a}Leases commitments

     The Group has entered into certain leasing arrangements relating to the placement of the flat-panel television screens in various locations where the Group operates the networks and in connection with the lease of the Group’s office premises. Rental expense under operating leases for 2005, 2006 and 2007 were $15,481,200, $50,106,121 and $85,733,483 respectively.

     Future minimum lease payments under non-cancelable operating lease agreements were as follows:

	For the year ended
	December 31,
2008	$	102,055,984
2009		59,026,176
2010		25,497,410
2011		11,560,511
2012 and thereafter		9,212,178
Total	$	207,352,259

{b} Legal proceedings

     The Group is a defendant in ongoing lawsuits as described below:

• On November 27, 2007, Eastriver Partners, Inc. filed a purported class action lawsuit in the United States District Court for the Southern District of New York against the Group and the underwriters of the Group’s offering filed in November 2007.

• On December 21, 2007, Scott Bauer filed a purported class action lawsuit in the United States District Court for the Southern District of New York against the Group, certain of the Group’s officers and directors, and the underwriters of the Group’s offering filed in November 2007.

Both complaints allege that the Group’s registration statement on Form F-1 on November 1, 2007, as amended, and the related prospectus contained inaccurate statements of material fact. The Group has meritorious defenses to the claims alleged and intend to defend against these lawuits vigorously. The Group is unable to estimate the possible loss or possible range of loss, if any, associated with the resolution of these lawsuits. An unfavorable outcome from these lawsuits could have a material adverse effect on our consolidated financial position, results of operations, or cash flows in the future.

16. Segment Information

     The Group is mainly engaged in operating an out-of-home advertising network in the PRC using flat-panel television advertising displays located in high traffic commercial locations and in-store areas. The Group also provides in-elevator poster frame advertising services, mobile handset advertising services and internet advertising services.

     The Group’s chief operating decision maker has been identified as the Chief Executive Officer (“CEO”), who reviews consolidated results when making decisions about allocating resources and assessing performance of the Group. The Group uses the management approach to determine the operating segments. The management approach considers the internal organization and reporting used by the Group’s chief operating decision maker for making decisions, allocating resources and assessing the performance. The Group has four operating segments and determined that it has four reporting segments, which are out-of-home television advertising services (consists of commercial location advertising network and in-store advertising network), in-elevator poster frames, mobile handset advertising and internet advertising. These segments all derive their revenues from the sale of advertising services.

F-25

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

     The Group’s chief operating decision maker does not assign assets to these segments. Consequently, it is not practical to show assets by reportable segments. Prior to 2006, the Group only had a single operating segment, out-of-home television advertising services. The in-elevator poster frame advertising services and mobile handset advertising services were the result of acquisitions made in 2006. The internet advertising services segment was the result of the acquisitions made in 2007. The following table presents selected financial information relating to the Group’s segments:

     2007:

			In-elevator		Mobile
	Out-of-home		poster frame		handset		Internet
	advertising		advertising		advertising		advertising
	services		services		services		services		Eliminations			Total
Net revenue — external	$	249,239,836	$	85,471,957	$	46,909,008	$	124,938,969		—		$	506,559,770
Net revenue — intersegment		741,764		770,168		—		—		(1,511,932	)		—
Total net revenues		249,981,600		86,242,125		46,909,008		124,938,969		(1,511,932	)		506,559,770
Cost of revenue — external		103,925,053		28,086,215		23,193,873		93,237,248		—			248,442,389
Cost of revenue — intersegment		770,168		—		—		741,764		(1,511,932	)		—
Total cost of revenues		104,695,221		28,086,215		23,193,873		93,979,012		(1,511,932	)		248,442,389
Gross profit		145,286,379		58,155,910		23,715,135		30,959,957		—			258,117,381
Interest income		9,095,303		125,421		134,309		422,622		—			9,777,655
Interest expense		16,024		921		—		8,324		—			25,269
Depreciation and amortization		24,170,981		8,880,046		4,212,953		6,933,524		—			44,197,504
Income tax expense		5,551,130		1,088,231		1,938,393		2,467,811		—			11,045,565
Net income	$	83,792,458	$	34,105,815	$	14,148,625	$	12,388,651		—		$	144,435,549

     2006:

			In-elevator		Mobile
	Out-of-home		poster frame		handset
	advertising		advertising		advertising
	services		services		services			Eliminations			Total
Net revenue — external	$	160,900,265	$	40,904,235	$	10,100,965		$	—		$	211,905,465
Net revenue — intersegment		—		245,274		—			(245,274	)		—
Total net revenues		160,900,265		41,149,509		10,100,965			(245,274	)		211,905,465
Cost of revenue — external		61,706,462		13,622,059		6,051,846			—			81,380,367
Cost of revenue — intersegment		245,274		—		—			(245,274	)		—
Total cost of revenues		61,951,736		13,622,059		6,051,846			(245,274	)		81,380,367
Gross profit		98,948,529		27,527,450		4,049,119			—			130,525,098
Interest income		4,419,864		123,740		17,194			—			4,560,798
Interest expense		304,294		52		941			—			305,287
Depreciation and amortization		15,067,829		3,599,827		843,896			—			19,511,552
Income tax expense		1,060,314		103,434		(120,210	)		—			1,043,538
Net income	$	60,968,695	$	20,006,067	$	2,222,970		$	—		$	83,197,732

Geographic Information

     The Group operates in the PRC and all of the Group’s long lived assets are located in the PRC.

Major Customers

     As of December 31, 2005, 2006 and 2007, there were no customers who accounted for 10% or more of the Group’s net revenues or accounts receivables.

Major Service lines

     The Group derives revenues from the following major service lines:

	For the year ended December 31,
	2005					2006					2007
			% of					% of					% of
			total revenues					total revenues					total revenues
Net revenues
Commercial location network	$	61,434,760		90.0	%	$	132,061,143		62.3	%	$	220,681,113		43.6	%
In-store network		5,468,919		8.0	%		26,907,592		12.7	%		27,444,339		5.4	%
Poster frame network		—		—			40,904,235		19.3	%		85,471,957		16.9	%
Mobile handset network		—		—			10,100,965		4.7	%		46,909,008		9.3	%
Internet advertising		—		—			—		—			124,938,969		24.7	%
Advertising service revenue		66,903,679		98.0	%		209,973,935		99.0	%		505,445,386		99.9	%
Equipment revenue		1,325,234		2.0	%		945,606		0.5	%		774,404		0.1	%
Franchise revenue		—		—			985,924		0.5	%		339,980		0.0	%
Total revenues	$	68,228,913		100.0	%	$	211,905,465		100.0	%	$	506,559,770		100.0	%

F-26

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

17. Related Party Transactions

     Details of advertising service revenue from related parties for the years ended December 31, 2005, 2006 and 2007 are as follows:

		Year ended December 31,
Name of related parties	Director interested	2005		2006		2007
Shanghai Everease Advertising & Communication Ltd. (“Everease”)	Jason Nanchun Jiang	$	1,552,039	$	7,764,977	$	3,132,954
Multimedia Park Venture Capital	Jimmy Wei Yu		2,330,945		3,885,546		104
Shanghai Jobwell Business Consulting Co., Ltd.	Jimmy Wei Yu		1,050,258		1,382,695		—
Shanghai Wealove Wedding Service Co., Ltd.	Jimmy Wei Yu		757,850		1,122,945		—
Shanghai Wealove Business Consulting Co., Ltd.	Jimmy Wei Yu		—		671,488		—
Shanghai Hetong Network Technology Co., Ltd.	Jimmy Wei Yu		908,100		982,527		—
Shanghai Shengchu Advertising Agency Co., Ltd.	Jimmy Wei Yu		1,646,120		3,230,040		44,542
Beijing Sina Internet Information Services Co., Ltd.	Charles Cao		—		190,563		1,095,814
Beijing Sohu New-age Information Technology Co., Ltd.	Daqing Qi		—		119,768		608,150
Home-Inn Hotel Management (Beijing) Co., Ltd	Neil Nanpeng Shen		—		78,742		82,356
Ctrip Travel Information Technology (Shanghai) Co., Ltd.	Neil Nanpeng Shen		264,120		178,933		—
51.com	Neil Nanpeng Shen		—		—		19,611
Qihoo.com	Neil Nanpeng Shen		—		—		12,151
UUSEE	Neil Nanpeng Shen		—		—		27,789
Yadu Huang Ke Technology Co., Ltd.	Fuming Zhuo		—		—		243,628
Total		$	8,509,432	$	19,608,224	$	5,267,099

     Details of advertising space leasing costs charged, net of agency rebates received or receivables from gateway websites, of those whom are the related parties, for the years ended December 31, 2005, 2006 and 2007 are as follows:

		Year ended December 31,
Name of related parties	Director interested	2005		2006		2007
Beijing Sina Internet Information Services Co., Ltd.	Charles Cao	$	—	$	—	$	24,755,004
Beijing Sohu New-age Information Technology Co., Ltd.	Daqing Qi		—		—		14,596,893
Ctrip Travel Information Technology (Shanghai) Co., Ltd.	Neil Nanpeng Shen		—		—		130,230
51.com	Neil Nanpeng Shen		—		—		204,612
Qihoo.com	Neil Nanpeng Shen		—		—		305,413
UUSEE	Neil Nanpeng Shen		—		—		15,929
E-House (China) Holdings Limited	Neil Nanpeng Shen						2,008
Total		$	—	$	—	$	40,010,089

F-27

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

     Details of amounts due from related parties as of December 31, 2005, 2006 and 2007 are as follows:

			December 31,
Name of related parties	Note	Director interested	2005		2006		2007
Shanghai Everease Advertising & Communication Ltd. (“Everease”)	(a)	Jason Nanchun Jiang	$	572,525	$	6,331,549	$	133,543
Multimedia Park Venture Capital	(a)	Jimmy Wei Yu		330,700		12,705		—
Shanghai Jobwell Business Consulting Co., Ltd.	(a)	Jimmy Wei Yu		546,207		—		—
Shanghai Wealove Wedding Service Co., Ltd.	(a)	Jimmy Wei Yu		662,954		—		—
Shanghai Hetong Network Technology Co., Ltd.	(a)	Jimmy Wei Yu		533,469		—		—
Shanghai Shengchu Advertising Agency Co., Ltd.	(a)	Jimmy Wei Yu		474,351		403,889		—
Beijing Sina Internet Information Services Co., Ltd.	(a)	Charles Cao		—		—		3,385,671
Beijing Sohu New-age Information Technology Co., Ltd.	(a)	Daqing Qi		—		—		1,198,429
Ctrip Travel Information Technology (Shanghai) Co., Ltd.	(a)	Neil Nanpeng Shen		—		—		89,946
51.com	(a)	Neil Nanpeng Shen		—		—		105,147
UUSEE	(a)	Neil Nanpeng Shen		—		—		10,952
Home-Inn Hotel Management (Beijing) Co., Ltd.	(a)	Neil Nanpeng Shen		—		39,699		—
Yadu Huang Ke Technology Co., Ltd.	(a)	Fuming Zhuo		—		—		150,158
Qihoo.com	(a)	Neil Nanpeng Shen		—		—		17,683
David Yu	(b)	David Yu		—		1,064,947		—
Total			$	3,120,206	$	7,852,789	$	5,091,529

Note (a) —	These amounts represent trade receivables for advertising services provided.
Note (b) —	The amount represents a payment due from the ex-shareholder of Target Media for an indemnification of a contingent liability which arose after the acquisition. This amount was paid out in cash in 2007.

     Details of amounts due to related parties as of December 31, 2005, 2006 and 2007 are as follows:

			December 31,
Name of related parties	Note	Director interested	2005		2006		2007
Beijing Sina Internet Information Services Co., Ltd.	(d)	Charles Cao	$	—	$	—	$	12,491,999
Beijing Sohu New-age Information Technology Co., Ltd.	(d)	Daqing Qi		—		—		301,520
51.com	(d)	Neil Nanpeng Shen		—		—		179,750
UUSEE	(d)	Neil Nanpeng Shen		—		—		3,696
Home-Inn Hotel Management (Beijing) Co., Ltd	(d)	Neil Nanpeng Shen		—		—		171
Tan Zhi	(c)	Tan Zhi		—		345,768		—
Total			$	—	$	345,768	$	12,977,136

Note (c) —	The amount represents the amount due to the president of Focus Media for operating funds of Framedia. The loan was non-interest bearing and was fully repaid in 2007.
Note (d) —	the amounts represent trade payables for advertising services purchased.

F-28

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

Other related party transactions

     For each of the years ended December 31, 2005, 2006 and 2007, office rentals were paid to Multimedia Park Venture Capital approximately amounting to $395,083, $476,902 and $690,018 respectively.

     In 2006, Everease charged the Group $47,804 for providing administration services.

     In March 2006, Weiqiang Jiang, father of Jason Nanchun Jiang, provided a short-term loan to the Group of approximately $2.5 million to relieve a temporary shortage of Renminbi the Group experienced at that time. The loan was unsecured and non-interesting bearing. At the end of June 2006, the Group paid $2.5 million to Everease and they remitted this fund to Weiqiang Jiang on our behalf to repay the loan outstanding.

18. Restricted Net Assets

     Relevant PRC statutory laws and regulations permit payments of dividends by the Group’s PRC subsidiaries only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. In addition, PRC laws and regulations require that annual appropriations of 10% of after-tax income should be set aside prior to payment of dividends as a general reserve fund. As a result of these PRC laws and regulations, the Group’s PRC subsidiaries and PRC affiliates are restricted in their ability to transfer a portion of their net assets to Focus Media Holding in the form of dividends, loans or advances, which restricted portion amounted to approximately $447,557,373 as of December 31, 2007.

19. Subsequent Event

     In January 2008, the Group completed the acquisition of CGEN Digital Media Company Limited, or CGEN, a Cayman Islands company, which operates hyper-market advertising marketing agency services through its PRC VIEs. CGEN is the largest hyper-market advertising agency in China. The purchase price consideration was $168,437,500 in cash. Additional consideration, contains both of cash and ordinary shares is issuable, contingent upon CGEN meeting certain earnings targets during the two year period from February 1, 2008 to January 31, 2010.

     In the first quarter of 2008, the Group completed acquisitions of six companies that primarily provide in-elevator poster frame advertising and internet advertising services, for which consideration is contingent upon the achievement of certain earnings targets over the next one to three fiscal years. The Group also made an advance payment of $11million, which will be deducted from the contingent purchase price consideration.

     In January, 2008, the Group entered into a share purchase agreement to acquire 20% equity interests in Yanhuang Health Media Limited, a leading LCD advertising operator targeting hospitals and healthcare locations in China, for cash consideration of $5 million and the lease agreements and LCD display equipment that the Group has operated in hospitals and healthcare locations.

     In March 2008, as a result of uncertainty in the mobile handset advertising industry in the PRC, there was a triggering event which required the Group to reevaluate the carrying value of the goodwill and assets of the mobile handset advertising segment. The Group undertook a business restructuring in April 2008 to amend their strategic business plans and is working on the calculations for impairments and the costs related to exit activities.

F-29

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

Appendix 1

Subsidiaries of Focus Media Holding Limited

The following table sets forth information concerning our direct subsidiaries:

	Place of	Percentage
Subsidiary	Incorporation	of ownership
Focus Media (China) Holding Ltd.	Hong Kong		100	%
Focus Media Technology (Shanghai) Co., Ltd.	PRC		100	%
British Virgin Islands
Perfect Media Holding Ltd.	(“BVI”)		100	%
Focus Media Qingdao Holding Ltd.	BVI		100	%
Focus Media Dalian Holding Ltd.	BVI		100	%
Focus Media Changsha Holding Ltd.	BVI		100	%
Focus Media Digital Information Technology (Shanghai) Co., Ltd.	PRC		100	%
New Focus Media Technology (Shanghai) Co., Ltd.	PRC		100	%
Sorfari Holdings Limited	BVI		100	%
Focus Media Tianjin Limited	BVI		80	%
Capital Beyond Limited	BVI		100	%
Shanghai New Focus Media Advertisement Co., Ltd.	PRC		90	%
Shanghai New Focus Media Agency Co., Ltd.	PRC		90	%
Shanghai Focus Media Defeng Advertisement Co., Ltd.	PRC		90	%
Shanghai Focus Media Baiwang Advertising Co., Ltd.	PRC		70	%
Shanghai Focus Media Xiangkun Advertising Co., Ltd.	PRC		70	%
Infoachieve Limited	BVI		100	%
Shanghai Framedia Investment Consultation Co., Ltd.	PRC		100	%
Target Media Holdings Limited	Cayman Islands		100	%
Target Media Multi-Media Technology (Shanghai) Co., Ltd.	PRC		100	%
Dotad Holdings Limited	BVI		100	%
ProfitBest Worldwide Limited	BVI		100	%
Wiseglobal Investments Limited	BVI		100	%
Summitworld Limited	BVI		100	%
Newking Investment Limited	BVI		100	%
Surge Zhenghe Holding Limited	BVI		100	%
Speedaccess Limited	BVI		100	%
Peakbright Group Limited	BVI		100	%
Homesky Investment Limited	BVI		100	%
Bestwin Partners Limited	BVI		100	%
Glomedia Holdings Limited	BVI		100	%
Appreciate Capital Ltd.	BVI		70	%
Richcrest Pacific Limited	BVI		100	%
Wealthstar Holdings Limited	BVI		100	%
Highmark Asia Limited	BVI		100	%
Plentiworth Investment Limited	BVI		100	%
Directwealth Holdings Limited	BVI		100	%
Better off Investments Limited	BVI		100	%
Topstart Holdings Limited	BVI		100	%
Vast Well Development Limited	BVI		100	%
Crownsky Limited	BVI		100	%
E-Rainbow Mobile Information Co., Limited	BVI		100	%
Directvantage Limited	BVI		100	%
Cmsc Holdings Limited	BVI		100	%
Active Max Limited	BVI		100	%
Sky Max Global Limited	BVI		100	%
Fully Ascend Limited	BVI		100	%
Luck Trillion Limited	BVI		100	%
Angli Education Development Limited	BVI		100	%
Angli Education Investment Limited	BVI		100	%
Evercom Pacific Limited	BVI		70	%
Century Bonus Limited	BVI		70	%
Smart Cheer Limited	BVI		70	%

F-30

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

Appendix 1

Subsidiaries of Focus Media Holding Limited (continued)

The following table sets forth information concerning our direct subsidiaries:

	Place of	Percentage
Subsidiary	Incorporation	of ownership
Brightchina Enterprises Limited	BVI		70	%
Spacenet International Limited	BVI		80	%
Multibillion International Limited	BVI		100	%
Pear Commercial Inc.	BVI		100	%
One Capital Investment Limited	BVI		100	%
First Star Investment Limited	BVI		100	%
Xin Jin Hong Limited	Macau		100	%
Advantage Way Limited	BVI		100	%
Hua Kuang Advertising Company Limited	HK		100	%
Allyes Information Technology Co., Ltd	Cayman Island		100	%

F-31

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

Appendix 1

Subsidiaries of Focus Media Advertisement

The following table sets forth information concerning Focus Media Advertisement’s subsidiaries each of which is incorporated in China:

	Focus Media
	Advertisement’s			Region of
Subsidiaries	Ownership Percentage			Operations	Primary Business
Shanghai Focus Media Advertising Co., Ltd.		90.0%	(1)	PRC	Advertising agency
Shanghai Perfect Media Advertising Agency Co., Ltd.		90.0%	(1)	PRC	Advertising company that operates advertising services network on shoe-shining machines
Qingdao Fukesi Advertisement Co., Ltd.		90.0%	(1)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Changsha Focus Media Shiji Advertisement Co., Ltd.		90.0%	(1)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Dalian Focus Media Advertising Co., Ltd.		90.0%	(1)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Shanghai Qianjian Advertising Co., Ltd.		90.0%	(1)	PRC	Operation and maintenance of out-of-home television advertising network in banking locations
Guangzhou Framedia Advertising Company Ltd.		90.0%	(1)	PRC	Operation and maintenance of out-of-home television advertising network
Zhuhai Focus Media Culture and Communication Company Ltd.		90.0%	(1)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Shanghai Focus Media Digital Information Technology Co., Ltd.		10%	(2)	PRC	Technical and business consultancy
Shenzhen Bianjie Building Advertisement Co., Ltd.		90.0%	(2)	PRC	Operation and maintenance of frame advertising network
Hebei Tianma Weiye Advertising Company Ltd.		90.0%	(2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Xiamen Focus Media Advertising Company Ltd.		90.0%	(2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Sichuan Focus Media Advertising Communications Co., Ltd.		90.0%	(3)	PRC	Operation and maintenance of out-of-home television advertising network

F-32

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

Appendix 1

Subsidiaries of Focus Media Advertisement (continued)

	Focus Media
	Advertisement’s	Region of
Subsidiaries	Ownership Percentage	Operations	Primary Business
Shanghai New Structure Advertisement Co., Ltd.	90.0% (2)	PRC	Technical and business consultancy for poster frame network
Shanghai Framedia Advertising Development Co., Ltd.	90.0% (2)	PRC	Operation and maintenance of advertising poster frame network
Guangzhou Shiji Shenghuo Advertisement Co., Ltd.	90.0% (2)	PRC	Operation and maintenance of advertising poster frame network
Hefei Fukesi Advertising Co. Ltd.	90.0% (2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Jinan Focus Media Advertising Co., Ltd.	90.0% (2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Shenzhen E-Times Consulting Co., Ltd.	90.0% (2)	PRC	Operation and maintenance of advertising poster frame network
Shanghai Target Media Co., Ltd.	90.0% (2)	PRC	Dormant (Former operation and maintenance of Target Media’s out-of-home television advertising network)
Shenyang Target Media Ltd.	90.0% (2)	PRC	Dormant (Former operation and maintenance of Target Media’s out-of-home television advertising network)
Fuzhou Hengding United Media Ltd.	90.0% (2)	PRC	Dormant (Former operation and maintenance of Target Media’s out-of-home television advertising network)
Beijing Focus Media Wireless Co., Ltd.	90.0% (2)	PRC	Operation of mobile handset advertising service network
Guangzhou Feisha Advertisement Co., Ltd.	90.0% (2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
DongGuan Focus Media Advertisement & Communications Co., Ltd.	90.0% (2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Shanghai FengJing Advertisement & Communications Co., Ltd.	95.0% (2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)

F-33

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

Appendix 1

Subsidiaries of Focus Media Advertisement (continued)

	Focus Media
	Advertisement’s			Region of
Subsidiaries	Ownership Percentage			Operations	Primary Business
ZhengZhou Focus Media Advertisement & Communications Co., Ltd.		85.0%	(2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
ShiJiaZhuang Focus Media HuiHuang Business Advertisement Co., Ltd.		90.0%	(2)	PRC	Operation and maintenance of advertising poster frame network
Nanjing Focus Media Advertising Co., Ltd.		90.0%	(3)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Yunnan Focus Media Co., Ltd.		89.5%	(2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Tianjin Focus Tongsheng Advertising Company Ltd.		80.0%	(2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Zhejiang Ruihong Focus Media Advertising Communications Co., Ltd.		80.0%	(2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Wuhan Geshi Focus Media Advertising Co., Ltd.		75.0%	(2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Xian Focus Media Advertising & Information Company Ltd.		70.0%	(3)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Shenyang Focus Media Advertising Co., Ltd.		70.0%	(3)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Fuzhou Focus Media Advertising Co., Ltd.		70.0%	(3)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Chongqing Geyang Focus Media Culture & Broadcasting Co., Ltd.		60.0%	(2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Shanghai On-Target Advertisement Co., Ltd.		60.0%	(3)	PRC	Advertising agency
Shanghai Jiefang Focus Media Advertisement & Communications Co., Ltd.		70.0%	(3)	PRC	Operation and maintenance of direct mailing advertising business
City Billboard (BeiJing) Advertisement Co., Ltd.		75.0%	(3)	PRC	Operation and maintenance of outdoor LED billboards advertising network
BeiJing YangShiSanWei Advertisement Co., Ltd.		70.0%	(3)	PRC	Operation and maintenance of movie theatre advertising network

F-34

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

Appendix 1

Subsidiaries of Focus Media Advertisement (continued):

	Focus Media
	Advertisement’s			Region of
Subsidiaries	Ownership Percentage			Operations	Primary Business
Beijing Tuojiachengyuan Advertisement Co., Ltd.		90	%(2)	PRC	Operation and maintenance of outdoor billboards advertising network
Shanghai Zonghengpinyu Advertisement Co., Ltd.		90	%(2)	PRC	Operation and maintenance of outdoor LED billboards advertising network
Quanzhou Xindalu Culture Communication Co., Ltd.		100	%	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Guizhou Focus Media Advertisement Co., Ltd.		100	%	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Lanzhou Focus Media Advertisement Co., Ltd.		100	%	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Haerbin Focus Media Advertisement Co., Ltd.		100	%	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Jilin Focus Media Advertisement Co., Ltd.		90	%(2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Hefei Tiandi Advertisement Co., Ltd.		90	%(2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Suzhou Focus Media Communication and Advertisement Co., Ltd.		90	%(2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Shanghai Shenghuotongdao Advertisement Co., Ltd.		90	%(2)	PRC	Operation and maintenance of direct mailing advertising business
Zhengzhou Focus Media Frame Advertisement Co., Ltd.		100	%	PRC	Operation and maintenance of advertising poster frame network
Shanghai Yuanchi Advertisement Co., Ltd.		90	%(2)	PRC	Operation and maintenance of advertising poster frame network
Tianjin Saige Advertisement Planning Co., Ltd.		90	%(2)	PRC	Operation and maintenance of advertising poster frame network
Shijiazhuang Framedia Zhonglian Advertisement Co., Ltd.		90	%(2)	PRC	Operation and maintenance of advertising poster frame network
Taiyuan Framedia Juzhong Advertisement Co., Ltd.		90	%(2)	PRC	Operation and maintenance of advertising poster frame network
Jinan Framedia Advertisement Co., Ltd.		90	%(2)	PRC	Operation and maintenance of advertising poster frame network

F-35

FOCUS MEDIA HOLDING LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
(In U.S. dollars except share data and unless otherwise stated)

Appendix 1

Subsidiaries of Focus Media Advertisement (continued):

	Focus Media
	Advertisement’s			Region of
Subsidiaries	Ownership Percentage			Operations	Primary Business
Guangzhou Hengxun Advertisement Co., Ltd.		63	%(5)	PRC	Internet advertising agency
Beijing Chuangshiqiji Advertisement Co., Ltd		70	%(3)	PRC	Internet advertising agency
Beijing Kudong Media Advertisement Co., Ltd.		70	%(3)	PRC	Internet advertising agency
Shanghai Yuewei Computer Information Technology Co., Ltd.		70	%(3)	PRC	Internet advertising agency
Shanghai Jiangpan Advertisement Co., Ltd.		70	%(3)	PRC	Internet advertising agency
Shanghai Wangmai Advertisement Co., Ltd.		70	%(3)	PRC	Internet advertising agency
Beijing Jiahuahengshun Advertisement Co., Ltd.		80	%(3)	PRC	Internet advertising agency
Beijing Jiahuahengshun Media Advertisement Co., Ltd.		80	%(3)	PRC	Internet advertising agency
Beijing Jiahuazhongwang Advertisement Co., Ltd.		80	%(3)	PRC	Internet advertising agency
Kesishitong Advertisement (Beijing) Co., Ltd		90	%(2)	PRC	Internet advertising agency
Beijing Yibolande Advertisement Co., Ltd.		90	%(2)	PRC	Internet advertising agency
Beijing Yitong Wireless Information Technology Co., Ltd.		90	%(2)	PRC	Operation of mobile handset advertising service network

(1)	The remaining equity interest is held by Jimmy Wei Yu as our nominee holder.
(2)	The remaining equity interest is held by Focus Media Advertising Agency.
(2)	The remaining equity interest is held by Focus Media Technology.
(3)	The remaining equity interest in this entity is owned by unrelated third parties.
(4)	The remaining equity interest in this entity is owned by Focus Media Digital.
(5)	Focus Media Advertising Agency holding 7%, the remaining equity interests held by unrelated third parties.

F-36

EX-10.161

Exhibit 10.161

FOCUS MEDIA HOLDING LIMITED

2007 EMPLOYEE SHARE OPTION PLAN

     1. Purposes of the Plan.

          The purposes of this Employee Share Option Plan are to attract and retain the best available personnel, to provide additional incentive to Employees, Directors and Consultants and to promote the success of the Company’s business.

     2. Definitions.

          As used herein, the following definitions shall apply:

          2.1 “Administrator” means the Board or any of the Committees appointed to administer the Plan.

          2.2 “Applicable Laws” means the legal requirements relating to the administration of share incentive plans, if any, under applicable provisions of the U.S. federal securities laws, the U.S. state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system, and the laws and rules of any jurisdiction outside the U.S. applicable to Options, SARs or Restricted Shares granted to residents therein.

          2.3 “Board” means the Board of Directors of the Company.

          2.4 “Code” means the U.S. Internal Revenue Code of 1986, as amended.

          2.5 “Committee” means any committee appointed by the Board to administer the Plan, and initially the Compensation Committee of the Company, provided that the Committee shall consist of not fewer than two (2) members of the Board, and shall, following the Registration Date and, solely to the extent required to comply with Applicable Laws, be composed of “non-employee” directors within the meaning of Rule 16b-3 as promulgated under the Exchange Act and “outside directors” within the meaning of the Code. To the extent the Plan is administered by the Board, the term “Committee” shall refer to the Board.

          2.6 “Company” means Focus Media Holding Limited, a company incorporated under the laws of the Cayman Islands.

          2.7 “Consultant” means any person (other than an Employee or a Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity or any other selective persons the Administrator determines provides, directly or indirectly, bona fide value to the Company or any Related Entity. The term “Consultant” shall include any company, trust, special purpose vehicle or other legal entity owned by such person.

2

          2.8 “Continuous Service” means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director or Consultant, is not interrupted or terminated. Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in the Option Agreement). An approved leave of absence shall include sick leave, maternity leave, or any other authorized personal leave. For purposes of Incentive Share Options, no such leave may exceed ninety (90) days, unless re-employment upon expiration of such leave is guaranteed by statute or contract.

          2.9 “Corporate Transaction” means any of the following transactions to which the Company is a party:

               (i) a merger or consolidation or reorganization in which the Company is not the surviving entity; or

               (ii) the sale, transfer or other disposition of all or substantially all of the assets of the Company (including the share capital of the Company’s Subsidiaries).

          2.10 “Director” means a member of the Board or the board of directors of any Related Entity.

          2.11 “Disability” means that an Optionee is permanently unable to carry out the responsibilities and functions of the position held by the Optionee by reason of any medically determinable physical or mental impairment as determined by the Administrator. An Optionee will not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion.

          2.12 “Effective Date” means the date on which a Grant of Options and/or SARs and/or Restricted Shares shall take effect in accordance with the Option Agreement.

          2.13 “Employee” means any person, including an Officer or Director, who is an employee of the Company or any Related Entity. The term “Employee” shall include any company, trust, special purpose vehicle or other legal entity owned by such employee. The payment of an independent director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment” of such person by the Company.

          2.14 “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.

          2.15 “Fair Market Value” means, as of any date, the value of Ordinary Shares as follows:

               (a) Where there exists a public market for the Ordinary Shares, the Fair Market Value shall be (i) the closing price for a Share for the last market trading day prior to the time of the determination (or, if no closing price was reported on that date, on the last trading date on which a closing price was reported) on the stock exchange determined by the

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Administrator to be the primary market for the Ordinary Shares or the Nasdaq National Market, whichever is applicable, or (ii) if the Ordinary Shares are not traded on any such exchange or national market system, the average of the closing bid and asked prices of a Share on the Nasdaq Small Cap Market for the day prior to the time of the determination (or, if no such prices were reported on that date, on the last date on which such prices were reported), in each case, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

               (b) In the absence of an established market for the Ordinary Shares of the type described in (a), above, the Fair Market Value thereof shall be determined by the Administrator in good faith by reference to (i) the valuation price made by an independent appraiser appointed by the Administrator; (ii) the placing price of the latest private placement of the Shares and (iii) the development of the Company’s business operations since such latest private placement.

          2.16 “Grant” means the number of Options and/or SARs and/or Restricted Shares and/or Restricted Share Units granted to an Optionee at any time in accordance with Section 6 hereof.

          2.17 “Immediate Family” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the Optionee’s household (other than a tenant or employee), a trust in which these persons (or the Optionee) have more than fifty percent (50%) of the beneficial interest, a foundation in which these persons (or the Optionee) control the management of assets, and any other entity in which these persons (or the Optionee) own more than fifty percent (50%) of the voting interests.

          2.18 “Incentive Share Option” means an Option intended to qualify as an incentive share option within the meaning of Section 422 of the Code.

          2.19 “Liquidation Event” means a complete dissolution or liquidation of the Company.

          2.20 “Non-Statutory Share Option” means an Option not intended to qualify as an Incentive Share Option within the meaning of Section 422 of the Code.

          2.21 “Officer” means a person who is an officer of the Company or a Related Entity within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder or, to the extent applicable, other Applicable Laws.

          2.22 “Old Plans” means the Employee Share Option Schemes of the Company adopted in 2003, 2005 and 2006.

          2.23 “Option” means an option to purchase Shares pursuant to an Option Agreement granted under the Plan, as amended.

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          2.24 “Optionee” means an Employee, Director or Consultant (including any company, trust, special purpose vehicle or other legal entity owned by such Employee, Director or Consultant) who receives a Grant under the Plan.

          2.25 “Option Agreement” means the written agreement evidencing the grant of an option and/or SARs and/or Restricted Shares executed by the Company and the Optionee, including any amendments thereto.

          2.26 “Option Period” means the period commencing on the Effective Date of a Grant and ending no later than on the day prior to the tenth anniversary of such Effective Date.

          2.27 “Ordinary Share” means a share of US$0.00005 nominal or par value, of the Company, or, if applicable, the number or fraction of American Depositary Receipt representing an Ordinary Share.

          2.28 “Parent” means a “parent corporation”, whether now or hereafter existing, as defined in Section 424(e) of the Code or, to the extent applicable, other Applicable Laws.

          2.29 “Plan” means this 2007 Employee Share Option Plan of Focus Media Holding Limited, as Amended and Restated as set forth herein and as may be amended from time to time.

          2.30 “Registration Date” means the first to occur of (a) the closing of the first sale to the general public of (i) the Ordinary Shares or (ii) the same class of securities of a successor corporation (or its Parent) issued pursuant to a Corporate Transaction in exchange for or in substitution of the Ordinary Shares, pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act or an equivalent thereof in a jurisdiction outside the U.S.; and (b) in the event of a Corporate Transaction, the date of the consummation of the Corporate Transaction if the same class of securities of the successor corporation (or its Parent) issuable in such Corporate Transaction shall have been sold to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act or an equivalent thereof in a jurisdiction outside the U.S., on or prior to the date of consummation of such Corporate Transaction.

          2.31 “Related Entity” means any Parent, Subsidiary and any other corporation, partnership, limited liability company or other business entity in which the Company, its Parent or a Subsidiary holds a substantial ownership interest, directly or indirectly.

          2.32 “Securities Act” means the U.S. Securities Act of 1933, as amended.

          2.33 “SAR” means a stock appreciation right entitling the Grantee to Shares or cash compensation, as established by the Administrator, measured by appreciation in the value of Ordinary Shares.

          2.34 “Shares” mean Ordinary Shares of the Company.

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          2.35 “Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code or, to the extent applicable, other Applicable Laws.

     3. Shares Subject to the Plan.

          3.1 Subject to the provisions of Section 10.1 and any amendment of this Plan by the Board or the Committee pursuant to Section 12 below, in the three years following the date of enactment of this Plan, Grants of Options (including Incentive Stock Options) issued under this Plan shall not exceed in the aggregate five percent (5%) of the issued share capital of the Company, outstanding from time to time. In addition, the maximum aggregate number of Shares which may be issued pursuant to all Grants (including Incentive Stock Options) shall be increased by any Shares that are represented by awards under the Company’s Old Plans that are forfeited, expire or are cancelled without delivery of the Shares or which result in forfeiture of the Shares back to the Company on or after the adoption of this Plan. The Shares to be issued pursuant to Grants must be authorized, but unissued.

          3.2 Any Shares covered by a Grant (or portion of a Grant) which is forfeited or cancelled, expires or is settled in cash or otherwise, shall be deemed not to have been issued for purposes of determining the maximum aggregate number of Shares which may be issued under the Plan. If any unissued Shares are retained by the Company upon exercise of a Grant in order to satisfy the exercise price for such Grant or any withholding taxes due with respect to such Grant, such retained Shares subject to such Grant shall become available for future issuance under the Plan (unless the Plan has terminated). Shares that actually have been issued under the Plan pursuant to a Grant shall not be returned to the Plan and shall not become available for future issuance under the Plan.

     4. Administration of the Plan.

          4.1 Plan Administrator. The Committee shall administer the Plan in accordance with its terms.

          4.2 Powers of the Administrator. Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Administrator hereunder), and except as otherwise provided by the Board, the Administrator shall have the authority, in its discretion:

               (a) to determine the eligibility of Grants, the classes of bands and the range of number of Shares covered in each Band, to authorize and determine the number of shares of each Grant;

               (b) to approve forms of Option Agreements for use under the Plan;

               (c) to determine to grant Options with or without SARs;

               (d) to determine that the Options granted shall be either Incentive Share Options or Non-Statutory Share Options or a combination thereof;

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               (e) to determine the exercise price applicable to the Share covered by each Option;

               (f) to determine the Option Period applicable thereto;

               (g) to establish additional terms, conditions, rules or procedures to accommodate the rules or laws of applicable foreign jurisdictions and to afford Optionees favourable treatment under such rules or laws; provided, however, that no Grant shall be granted under any such additional terms, conditions, rules or procedures with terms or conditions which are inconsistent with the provisions of the Plan;

               (h) to amend the terms of any outstanding Grant granted under the Plan;

               (i) to construe and interpret the terms of the Plan and Grants, including without limitation, any notice of Grant or Option Agreement, granted pursuant to the Plan; and

               (j) to take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate.

     5. Eligibility.

          Incentive Share Options may be granted only to Employees of the Company, a Parent or a Subsidiary. Grants other than Incentive Share Options may be granted to Employees, Directors and Consultants. An Employee, Director or Consultant who has been granted a Grant may, if otherwise eligible, be granted additional Grants. Grants may be granted to such Employees, Directors or Consultants who are residing in foreign jurisdictions as the Administrator may determine from time to time.

     6. Type of Grants; Terms and Conditions of Grants.

          Grants under the Plan may consist of one or more of the following: Options, SARs, or Restricted Shares (which may be granted as Restricted Share units). Awards of Restricted Shares may provide the Optionee with dividends or dividend equivalents and voting rights prior to vesting. Each Grant shall be designated in the Option Agreement.

          6.1 Options.

               (a) Option Designation. In the case of an Option, the Option shall be designated as either an Incentive Share Option or a Non-Statutory Share Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of Shares subject to Options designated as Incentive Share Options which become exercisable for the first time by an Optionee during any calendar year (under all plans of the Company or any of its Parent or Subsidiary) exceeds US$100,000, such excess Options, to the extent of the Shares covered thereby in excess of the foregoing limitation, shall be treated as Non-Statutory Share Options. For this purpose, Incentive Share Options shall be taken into account in the order in

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which they were granted, and the Fair Market Value of the Shares shall be determined as of the grant date of the relevant Option.

               (b) Option Exercise Price. The exercise price of an Option shall be the Fair Market Value per Share on the date of grant.

               (c) Consideration. In addition to any other types of consideration the Administrator may determine, the Administrator is authorized to accept as consideration for Shares issued under the Plan the following: (i) cash or check in U.S. dollars (in connection therewith the Administrator may require the Optionee to provide evidence that the funds were taken out of any relevant non-U.S. jurisdiction in accordance with applicable foreign exchange control laws and regulations); (ii) cancellation of indebtedness owed by the Company to the Optionee; (iii) promissory note; (iv) Shares previously acquired by the Optionee valued at the Fair Market Value at the time of the exercise; (v) withholding from delivery to the Optionee that number of whole Shares having a Fair Market Value at the time of the exercise equal to the exercise price payable to the Company upon exercise of the Option; or (vi) any combination of the foregoing methods of payment.

               (d) Easy-Sale Exercise.

               (i) Exercise/Sale. An Option Agreement may, but need not, provide that, if Shares are publicly traded, all or part of the exercise price of an Option and any withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver all or part of the sales proceeds to the Company.

               (ii) Exercise/Pledge. An Option Agreement may, but need not, provide that, if Shares are publicly traded, all or part of the exercise price of an Option and any withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an irrevocable direction to pledge Shares to a securities broker or lender approved by the Company, as security for a loan, and to deliver all or part of the loan proceeds to the Company.

          6.2 SARs.

               (a) Grant. SARs may be granted in tandem with an Option, in addition to an Option, or may be freestanding and unrelated to an Option. SARs granted in tandem or in addition to an Option may be granted either at the same time as the Option or at a later time. SARs shall vest and become exercisable at a rate determined by the Administrator, and shall remain exercisable for such period as specified by the Administrator. A SAR shall entitle the Optionee to receive from the Company an amount equal to the excess of the Fair Market Value of a Share on the exercise of the SAR over the Fair Market Value of a Share on the date of grant or, in the case of an SAR granted in tandem with an Option, the per Share exercise price applicable to such Option.

               (b) Settlement. The Administrator shall determine in its sole discretion whether the SAR shall be settled in cash, Shares or a combination of cash and Shares. In no event may any Optionee receive grants of SARs with respect to more than five percent (5%) of the issued share capital of the Company in any calendar year.

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          6.3 Restricted Shares.

               (a) Grant. Restricted Shares may be granted in the form of Shares or share units having a value equal to an identical number of Shares. The employment conditions and the length of the period for vesting of Restricted Shares shall be established by the Administrator at the time of grant. In the event that a share certificate is issued in respect of Restricted Shares, such certificate shall be registered in the name of the Optionee but shall be held by the Company until the end of the restricted period. During the restricted period, Restricted Shares may not be sold, assigned, transferred or otherwise disposed of, or pledged or hypothecated as collateral for a loan or as security for the performance of any obligation or for any other purpose as the Administrator shall determine.

               (b) Settlement. The Administrator shall determine in its sole discretion whether Restricted Shares granted in the form of share units shall be paid in cash, Shares, or a combination of cash and Shares.

          6.4 Conditions of Grant; Vesting and Repurchase Right. Subject to the terms of the Plan, the Administrator shall determine the provisions, terms, and conditions of each Grant including, but not limited to, the Grant vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares, or other consideration) upon settlement of the Grant, payment contingencies, and satisfaction of any performance criteria, provided, however, unless specifically provided otherwise in the relevant Option Agreement, a total of one-forth (1/4^th) of the Grant shall vest at the 1^st anniversary following the issuance of such Grant and, subsequently, a total of one-fourth (1/4^th) of the Grant shall vest at the end of anniversary of the 2^nd, 3^rd and 4^th years for so long as the Optionee provides Continuous Service to the Company, such that the entire Grant shall be fully vested four (4) years from the date of the Grant.

          6.5 Acquisitions and Other Transactions. The Administrator may issue Grants under the Plan in settlement, assumption or substitution for, outstanding Grants or obligations to grant future Grants in connection with the Company or a Related Entity acquiring another entity, an interest in another entity or an additional interest in a Related Entity whether by merger, share purchase, asset purchase or other form of transaction.

          6.6 Deferral of Grant Payment. The Administrator may establish one or more programs under the Plan to permit selected Optionees the opportunity to elect to defer receipt of consideration upon exercise of a Grant, satisfaction of performance criteria, or other event that absent the election would entitle the Optionee to payment or receipt of Shares or other consideration under a Grant. The Administrator may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, Shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Administrator deems advisable for the administration of any such deferral program.

          6.7 Award Exchange Programs. The Administrator may establish one or more programs under the Plan to permit selected Optionees to exchange a Grant under the Plan

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for one or more other types of Grants under the Plan on such terms and conditions as determined by the Administrator from time to time.

          6.8 Separate Programs. The Administrator may establish one or more separate programs under the Plan for the purpose of issuing particular forms of Grants to one or more classes of Optionees on such terms and conditions as determined by the Administrator from time to time.

          6.9 Early Exercise. The Option Agreement may, but need not, include a provision whereby the Optionee may elect, at any time while being an Employee, Director or Consultant, to exercise any part or all of the Grant prior to full vesting of the Grant. Any unvested Shares received pursuant to such exercise may be subject to a repurchase right in favor of the Company or a Related Entity or to any other restriction the Administrator determines to be appropriate.

          6.10 Option Period. The Option Period shall be the term stated in the Option Agreement up to ten (10) years from the Effective Date of Grant thereof or such shorter term as may be provided in the Option Agreement.

          6.11 Transferability of Grants. No Grant may be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee; provided, however, during the lifetime of the Optionee, SARs may be transferred by gift to members of the Optionee’s Immediate Family to the extent and manner determined by the Administrator.

          6.12 Time of Grants. The date of grant of a Grant shall for all purposes be the date on which the Administrator makes the determination to grant such Grant, or such other date as is determined by the Administrator. Notice of the grant determination shall be given to each Employee, Director or Consultant to whom a Grant is so granted within a reasonable time after the date of such grant. Unless otherwise determined by the Administrator, Grants will be made twice a year.

          6.13 Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares or other consideration, any Grant previously granted based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time such offer is made.

     7. Withholding.

          The Company shall have the right to deduct from any payment to be made pursuant to the Plan the amount of any taxes required by law to be withheld therefrom, or to require an Optionee to pay to the Company such amount required to be withheld prior to the issuance or delivery of any Shares or the payment of cash under the Plan. The Administrator may, in its discretion, permit an Optionee to elect to satisfy such withholding obligation by having the Company retain the number of Shares whose Fair Market Value equals the amount required to be withheld. Any fraction of a Share required to satisfy such obligation shall be disregarded and the amount due shall instead be paid in cash by the Optionee.

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     8. Exercise of Grant.

          8.1 Procedure for Exercise; Rights as a Shareholder.

               (a) Any Grant granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator under the terms of the Plan and specified in the Option Agreement provided always that any calculation of any period for vesting as aforesaid shall (i) be suspended during any period beginning when the Optionee ceases Continuous Service until such Optionee resumes Continuous Service, (ii) be suspended during the period of suspension referred to in Section 8.2 below, and (iii) cease upon death of the Optionee and upon the lapse of the Option for whatsoever reason and in such event of such cessation any vesting which has not taken place shall automatically cease and lapse, and provided further that the Company shall not be liable in any way nor shall the Optionee at any time have any rights (whatsoever) against the Company in relation to such suspension, cessation of and/or lapse of vesting as aforesaid.

               (b) A Grant shall be deemed to be exercised when written notice of such exercise has been given to the Company, as in a form required under the applicable Option Agreement, in accordance with the terms of the Grant by the person entitled to exercise the Grant and full payment for the Shares is made with respect to which the Grant is exercised. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the share certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to Shares subject to a Grant, notwithstanding the exercise of an Option or other Grant. The Company shall issue (or cause to be issued) such share certificate as soon as practicable following the exercise of the Grant. No adjustment will be made for a dividend or other right for which the record date is prior to the date the share certificate is issued, except as provided in the Option Agreement or Section 10, below.

          8.2 Misconduct. If an Optionee is found guilty of serious misconduct or has been convicted of any criminal offence involving his integrity or honesty, any Option of his then subsisting shall automatically lapse and become of no further effect on the date such verdict is given by the relevant court of law, body or authority, and if any investigation is being carried out on the Optionee in respect of any of the matters referred to above or if his office or duties as an Employee or Consultant is/are suspended in connection therewith, then his right to exercise the Option shall automatically be suspended for such period as the Board may in its discretion determine.

          8.3 Death or Disability of Optionee.

               (a) If an Optionee’s Continuous Service is terminated due to death or Disability more than three (3) months after such Optionee commenced service for the Company, the portion of the Grant that would have vested at the 1^st anniversary of such Optionee’s Continuous Service shall automatically vest and be exercisable in accordance with and subject to paragraph (c) below.

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               (b) If an Optionee’s Continuous Service is terminated due to death or Disability any time following any anniversary of such Optionee’s Continous Service, the portion of the Grant that would have vested between such anniversary and the subsequent anniversary (and which have not already vested) of such Optionee’s Continuous Service shall automatically vest and be exercisable in accordance with and subject to paragraph (c) below.

               (c) If an Optionee’s Continuous Service is terminated due to death or Disability, the Option or SAR may be exercised at any time within twelve (12) months following the date of death or termination of employment due to Disability, in the case of death, by the Optionee’s estate or by a person who acquired the right to exercise the Option or SAR by bequest or inheritance, or, in the case of Disability, by the Optionee, but in any case (i) only to the extent the Optionee was entitled to exercise the Option or SAR at the date of his or her termination of Continuous Service by death or Disability or (ii) to such further extent as set forth in paragraphs (a) and (b) above; provided, however, that no Option or SAR shall be exercisable after the expiration of the term set forth in the Option Agreement. To the extent that such Optionee was not entitled to exercise such Option or SAR at the date of his or her termination of employment by death or Disability as augmented by the provisions of paragraphs (a) and (b) above or if such Option or SAR is not exercised (to the extent it could be exercised) within the time specified herein, the Option or SAR shall terminate.

          8.4 Extension of Time to Exercise. Notwithstanding anything to the contrary in this Section 8, the Administrator may at any time and from time to time prior to the termination of a Non-Statutory Share Option, with the consent of the Optionee, extend the period of time during which the Optionee may exercise his or her Non-Statutory Share Option following the date the Optionee’s ceases Continuous Services; provided, however, that (a) the maximum period of time during which a Non-Statutory Share Option shall be exercisable following such termination date shall not exceed an aggregate of six (6) months, (b) the Non-Statutory Share Option shall not become exercisable after the expiration of the term of such Option as set forth in the Option Agreement as a result of such extension, and (c) notwithstanding any extension of time during which the Non-Statutory Share Option may be exercised, such Option, unless otherwise amended by the Administrator, shall only be exercisable to the extent to which the Optionee was entitled to exercise it on the date the Optionee ceased Continuous Services. To the extent that such Optionee was not entitled to exercise the Option at the date of such termination, or if such Optionee does not exercise an Option which the Optionee was entitled to exercise within the time specified herein, the Option shall terminate.

          8.5 No compensation. Upon the lapse of an Option for whatsoever reason, under no circumstances whatsoever shall an Optionee or any person whomsoever be entitled to any compensation for or in respect of any consequential diminution or extinction of any rights or benefits (actual or prospective) under and/or in relation to such Option subsisting prior to such lapse or otherwise in anyway in connection with the Plan or such Option, including without limitation, where such lapse is by reason of termination of the Optionee’s office or employment by the Company or any Subsidiary which is a breach of the contract of employment or otherwise, and/or whether the Optionee has any rights against the Company or any Subsidiary for and/or in relation to such termination.

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     9. Conditions Upon Issuance of Shares.

          9.1 No Violation of Law. Shares shall not be issued pursuant to a Grant or the exercise of a Grant unless the exercise of such Grant and the issuance and delivery of such Shares pursuant thereto shall comply with all Applicable Laws, and the Administrator may further subject any issuance of Shares to the approval of counsel for the Company with respect to such compliance.

          9.2 Execution of Documents. As a condition to the exercise of a Grant, the Administrator may require the person exercising such Grant to execute an investment representation statement acceptable to the Company or a share purchase agreement acceptable to the Company, each in forms approved by the Administrator from time to time, in addition to any other instrument the Administrator deems necessary or advisable.

     10. Adjustments Upon Changes in Capitalization or Corporate Transaction.

          10.1 Adjustments upon Changes in Capitalization. Subject to any required action by the shareholders of the Company, the number of Shares covered by each outstanding Grant, and the number of Shares which have been authorized for issuance under the Plan but as to which no Grants have yet been granted or which have been returned to the Plan, the exercise or purchase price of each such outstanding Grant, as well as any other terms that the Administrator determines require adjustment shall be proportionately adjusted for (a) any increase or decrease in the number of issued Shares resulting from a share split, reverse share split, share dividend, combination or reclassification of the Shares, or similar transaction affecting the Shares, (b) any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, or (c) as the Administrator may determine in its discretion, any other transaction with respect to Shares to which Section 424(a) of the Code applies or a similar transaction; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Administrator and its determination shall be final, binding and conclusive. Except as the Administrator determines, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to a Grant.

          10.2 Corporate Transaction. In the event of a proposed Corporate Transaction, subject to the actual consummation of the proposed transaction, each outstanding Grant shall automatically become fully vested and exercisable, unless the Grant is assumed or substituted with an equivalent option or right by the successor corporation or the Parent or Subsidiary thereof. If the successor corporation refuses to assume or substitute for the Grant, the Administrator shall notify the Optionee that the Grant shall be fully vested and exercisable with respect to all of the Shares underlying the Grant (including Shares as to which it would not otherwise be vested or exercisable) for a period of fifteen (15) days from the date of such notice. If the Grant thus becomes fully vested and exercisable but is not exercised during this fifteen (15) day period, it shall terminate immediately prior to the effective time of such Corporate Transaction. For the purposes of this Section 10.2, the Grant shall be considered assumed or substituted with an equivalent option or right if, in connection with the Corporate Transaction, the Grant is replaced with a comparable option or right with respect to shares of the successor

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corporation or Parent or Subsidiary thereof or is replaced with a cash incentive program of the successor corporation or Parent or Subsidiary thereof which preserves the compensation element of such Grant existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to such Grant. The determination of Grant comparability above shall be made by the Administrator and its determination shall be final, binding and conclusive.

          10.3 Liquidation Event. In the event of a proposed Liquidation Event, the Administrator shall notify each Optionee of the proposed event at least twenty (20) days prior to the proposed effective date of the Liquidation Event. The Administrator in its discretion may provide for an Optionee to have the right to exercise his or her Grant until ten (10) days prior to the proposed effective date for the Liquidation Event with respect to all Shares underlying the Grant (including Shares as to which it would not otherwise be vested or exercisable), subject to the actual completion of the Liquidation Event at the time and in the manner contemplated. In addition, the Administrator may provide that any Company repurchase option applicable to any Shares issued upon grant or an exercise of a Grant shall lapse as to all Shares, subject to the actual completion of the Liquidation Event at the time and in the manner contemplated. Any unexercised Grant shall terminate immediately prior to effective time of the Liquidation Event.

     11. Effective Date and Term of Plan.

          The Plan, and any amendments to the Plan, shall become effective upon its adoption by the Board. It shall continue in effect until the end of 2010 unless sooner terminated. Subject to Applicable Laws, Grants may be granted under the Plan upon its becoming effective.

          Upon the effectiveness of this Plan, no additional grants of Options shall be made under the Old Plans. Options previously issued and outstanding pursuant to the Old Plans shall continue to be governed under the rules of the Old Plans.

     12. Amendment, Suspension or Termination of the Plan.

          The Board may at any time amend, suspend or terminate the Plan. No Grant may be granted during any suspension of the Plan or after termination of the Plan. Any amendment, suspension or termination of the Plan (including termination of the Plan pursuant to this Section 12) shall not affect Grants already granted, and such Grants shall remain in full force and effect as if the Plan had not been amended, suspended or terminated, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company.

     13. Availability of Shares; No Issuance in Violation of Law.

          13.1 Availability of Shares. The Company, during the term of the Plan, will at all times keep available such number of unissued Shares as shall be sufficient to satisfy the requirements of the Plan.

          13.2 No Issuance in Violation of Law. The inability of the Company to obtain authority from any regulatory body having jurisdiction under Applicable Law, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares

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hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

     14. No Effect on Terms of Employment/Consulting Relationship.

          The Plan shall not confer upon any Optionee any right with respect to the Optionee’s Continuous Service, nor shall it interfere in any way with his or her right or the Company’s or a Related Entity’s right to terminate the Optionee’s Continuous Service at any time, with or without cause.

     15. No Effect on Retirement and Other Benefit Plans.

          Except as specifically required by law or provided in a retirement or other benefit plan of the Company or a Related Entity, Grants shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation. The Plan is not a “Retirement Plan” or “Welfare Plan” under the U.S. Employee Retirement Income Security Act of 1974, as amended.

     16. Liability of the Company; Consents.

          16.1 Qualification as Incentive Share Option. Neither the Company nor any Related Entity shall be liable to any Optionee or to any other person if it is determined that an Option intended to be an Incentive Share Option granted hereunder does not qualify as incentive share options within the meaning of Section 422 or the Code.

          16.2 Consents. Optionee shall be responsible for obtaining any governmental or other official consent that may be required by any country or jurisdiction in order to permit the grant or exercise of any Grant. Neither the Company nor any Related Entity shall be responsible for any failure by an Optionee to obtain such consent or for any tax or other liability to which an Optionee may become subject to as a result of his or her participation in the Plan.

EX-10.162

Exhibit 10.162

EXECUTION COPY

SHARE PURCHASE AGREEMENT

AMONG

FOCUS MEDIA HOLDING LIMITED,

CGEN DIGITAL MEDIA COMPANY LIMITED

THE SELLING SHAREHOLDERS

AND

THE OTHER PARTIES LISTED HEREIN

DATED AS OF

December 8, 2007

Table of Contents

		Page
ARTICLE I. DEFINITIONS			1
Section 1.1	Certain Defined Terms		1
Section 1.2	Other Defined Terms		10
Section 1.3	Other Interpretive Provisions		11
ARTICLE II. PURCHASE AND SALE OF OFFERED SHARES; CANCELLATION OF OPTIONS			12
Section 2.1	Purchase and Sale		12
Section 2.2	Consideration		12
Section 2.3	First Closing		16
Section 2.4	Second Closing		17
Section 2.5	Third Closing		17
Section 2.6	Rounding		18
Section 2.7	Share Splits and Other Similar Events		18
Section 2.8	2008 and 2009 Audited Financial Statements; Disputes		19
Section 2.9	Sellers’ Representative		20
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES			20
Section 3.1	Due Organization, Good Standing and Power		20
Section 3.2	Capitalization; Valid Issuance		21
Section 3.3	Group Companies		21
Section 3.4	Corporate Records		22
Section 3.5	Financial Statements		22
Section 3.6	Authorization, Enforceability, No Approvals or Conflicts		23
Section 3.7	Compliance with Law; Governmental Authorizations		24
Section 3.8	Licenses		24
Section 3.9	Litigation		24
Section 3.10	Absence of Certain Changes		24
Section 3.11	Tax Matters		26
Section 3.12	Dividends and Distributions		26
Section 3.13	Officers, Employees and Labor		27
Section 3.14	Loans		28
Section 3.15	Share Option and Other Plans		28
Section 3.16	Intellectual Property		29
Section 3.17	Contracts		29
Section 3.18	Certain Transactions		30
Section 3.19	Structure Agreements		31
Section 3.20	Compliance with Laws		31
Section 3.21	Environmental Matters		32
Section 3.22	Insurance		32
Section 3.23	Personal Property Assets		33
Section 3.24	Real Property		33
Section 3.25	No State Assets		33

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		Page
Section 3.26	Brokers	33
Section 3.27	No Other Representations and Warranties	33
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS		34
Section 4.1	Authorization, Enforceability	34
Section 4.2	Ownership and Transfer of Offered Shares	34
Section 4.3	No Approvals or Conflicts	34
Section 4.4	No Competition	35
Section 4.5	Brokerage	35
Section 4.6	Investment	35
Section 4.7	Accredited Investor; Foreign Investor	35
Section 4.8	No Other Representations and Warranties	35
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER		36
Section 5.1	Organization	36
Section 5.2	Authorization, Enforceability	36
Section 5.3	No Approvals or Conflicts	36
Section 5.4	Litigation	37
Section 5.5	Outstanding Share Capital	37
Section 5.6	Validity of Share Consideration	37
Section 5.7	SEC Filings	37
Section 5.8	Absence of Certain Changes	38
Section 5.9	No Consent for Creation of Registration Rights	38
Section 5.10	No Other Representations or Warranties	38
ARTICLE VI. COVENANTS AND AGREEMENTS		38
Section 6.1	Conduct of Business Prior to the First Closing	38
Section 6.2	Filings and Consents	40
Section 6.3	Third Party Consents	40
Section 6.4	Tax Matters; Cooperation; Preparation of Returns; Tax Elections	40
Section 6.5	Employees; Benefit Plans	41
Section 6.6	Related Party Accounts	41
Section 6.7	Non-Violation	41
Section 6.8	Confidentiality	42
Section 6.9	Buyer's Board of Directors	42
Section 6.10	Buyer's Deposit; Bank Guarantee Letter	42
Section 6.11	No Transfer by Selling Shareholders	43
Section 6.12	Change of Owners; CGEN Network Transfer	43
Section 6.13	Key Management Independence	43
Section 6.14	Non-competition	44
Section 6.15	Further Actions	44
Section 6.16	Delivery of Allocation Schedule	45
Section 6.17	Grant of Buyer Options	45
Section 6.18	Delivery of Audited September 30, 2007 Financial
	Statements; 2007 Audited Financial Statements, Closing
	Net Current Assets	45

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		Page
Section 6.19	Payment of Permitted Dividends; Other Distributions	45
Section 6.20	Cancellation of Company Stock Options	46
Section 6.21	Medley Repayment	46
Section 6.22	Use of CGEN’s Media-1 Software	46
ARTICLE VII. CONDITIONS TO THE OBLIGATIONS OF THE SELLER PARTIES and THE OTHER SELLING SHAREHOLDERS		46
Section 7.1	Representations and Warranties	46
Section 7.2	Performance	46
Section 7.3	Qualifications	46
Section 7.4	No Material Adverse Change	47
Section 7.5	Registration Rights Agreement	47
Section 7.6	Officer's Certificate	47
Section 7.7	Injunctions	47
Section 7.8	Adverse Market Change	47
Section 7.9	Opinion of Counsel	47
Section 7.10	Employment Agreements	47
ARTICLE VIII. CONDITIONS TO BUYER’S OBLIGATIONS		47
Section 8.1	Representations and Warranties	47
Section 8.2	Closing Net Current Assets	48
Section 8.3	Performance	48
Section 8.4	No Indebtedness	48
Section 8.5	Officer's Certificate	48
Section 8.6	Outstanding Obligations	48
Section 8.7	Employment Agreements	49
Section 8.8	Corporate Matters	49
Section 8.9	Opinions of Counsel	49
Section 8.10	CGEN Network Transfer	49
Section 8.11	Injunctions	49
Section 8.12	Financial Statements	49
Section 8.13	Medley Payoff Statement	49
ARTICLE IX. TERMINATION		49
Section 9.1	Termination	49
Section 9.2	Procedure and Effect of Termination	50
ARTICLE X. INDEMNIFICATION		51
Section 10.1	Indemnification by the Management Parties	51
Section 10.2	Indemnification by the Selling Shareholders	52
Section 10.3	Indemnification by Buyer	52
Section 10.4	Indemnification as Exclusive Remedy; Mitigation	53
Section 10.5	Limitation on Indemnification	53
Section 10.6	Indemnification Calculations	53
Section 10.7	Notice and Opportunity to Defend	53
Section 10.8	Payment in Kind	54

iii

		Page
ARTICLE XI. MISCELLANEOUS		54
Section 11.1	Fees and Expenses; Liquidated Damages	54
Section 11.2	Governing Law	55
Section 11.3	Amendment	55
Section 11.4	No Assignment	55
Section 11.5	Waiver	56
Section 11.6	Notices	56
Section 11.7	Complete Agreement	57
Section 11.8	Counterparts	57
Section 11.9	Publicity	57
Section 11.10	Headings	57
Section 11.11	Severability	58
Section 11.12	Third Parties	58
Section 11.13	Dispute Resolution	58
Section 11.14	Obligations of Selling Shareholders	58

SCHEDULES

1.1A	Ancillary Documents
1.1B	Knowledge of Buyer
1.1C	Knowledge of Seller Parties
6.13(e)	Accounting Policies
7.3	Qualifications of Buyer
8.3(c)	Qualifications of Seller Parties Disclosure Schedule

EXHIBITS

A	Unaudited Financial Statements
B	Form of Registration Rights Agreement
C	Form of Legal Opinion of Cayman Islands Counsel to Buyer
D	Form of Key Company Employee Employment Agreement
E	Form of Legal Opinion of Cayman Islands Counsel to Group Companies and Selling Shareholders
F	Form of Legal Opinion of PRC Counsel to Group Companies and Selling Shareholders
G	Form of Medley Payoff Statement
H	Form of Notice to Option Holders Re: Cancellation of Company Stock Options
I	Form of Loan Repayment Loan Agreement

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SHARE PURCHASE AGREEMENT

     This SHARE PURCHASE AGREEMENT (this “Agreement”), dated as of December 8, 2007, among CGEN DIGITAL MEDIA COMPANY LIMITED, a company with limited liability organized under the laws of the Cayman Islands (“CGEN” or the “Company”), the Other Management Parties (as defined below), the Management Shareholder (as defined below, and together with the Other Management Parties and the Company, the “Seller Parties”), the other selling shareholders of the Company set forth on the signature pages hereto and Medley Opportunity Fund Ltd. (the “Other Selling Shareholders”, and together with the Management Shareholder, the “Selling Shareholders”) and FOCUS MEDIA HOLDING LIMITED, a company with limited liability organized under the laws of the Cayman Islands (“Focus Media” or “Buyer”).

     WHEREAS, the Selling Shareholders collectively own all of the outstanding Shares (as defined below), including shares issuable upon conversion of Company Preferred Shares and upon exercise of warrants, but excluding shares issuable under stock options of the Company issued to its employees pursuant to the Option Plans (as defined below) (the “Offered Shares”);

     WHEREAS, the Selling Shareholders have duly approved the sale of the Offered Shares to Buyer;

     WHEREAS, the Selling Shareholders desire to sell to Buyer, and Buyer desires to purchase from the Selling Shareholders, the Offered Shares, on a fully converted and diluted basis, upon the terms and subject to the conditions set forth in this Agreement;

     WHEREAS, at least 15 days prior to the First Closing Date the Company intends to send each Option Holder (as defined herein) written notice advising such Option Holder that, contemporaneously with the effectiveness of the First Closing (i) each in-the-money stock option held by such Option Holder will be cancelled in exchange for the consideration provided by Buyer (on behalf of the Company) as set forth in Article II of this Agreement and (ii) each out-of-the-money stock option held by such Option Holder will be cancelled;

     NOW, THEREFORE, in consideration of the premises and the mutual promises herein made and the representations, warranties, covenants and agreements contained herein and intending to be legally bound hereby, the parties hereto hereby agree as follows:

ARTICLE I.
DEFINITIONS

     Section 1.1 Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings:

     “2007 Audited Financial Statements” means the audited financial statements of the Company and its consolidated entities for the twelve-month period starting from January 1, 2007 and ending December 31, 2007, prepared by Ernst & Young or another Big Four Accounting Firm, in accordance with U.S. GAAP.

     “2008 Audited Annual Net Income” means the Company’s audited consolidated net income after tax as defined under U.S. GAAP for the twelve-month period starting from the

first day of the first full month immediately following the First Closing Date and ending twelve months thereafter as set forth in the 2008 Audited Financial Statements, plus the sum of any amount of actual accounting benefit which is accepted by the Buyer (such acceptance not to be unreasonably withheld) and equal to 50% of the aggregate rent reductions enjoyed by Buyer during such period from retailers for its own in-store television network (excluding the Company’s network) arising out of or resulting from rent reductions that the Company achieves for Buyer’s network following the date of this Agreement.

     “2008 Audited Financial Statements” means the audited financial statements of the Company and its consolidated entities for the twelve-month period starting from the first day of the first full month immediately following the First Closing Date and ending twelve months thereafter, prepared by the Auditors in accordance with U.S. GAAP.

     “2009 Audited Annual Net Income” means the Company’s audited consolidated net income after tax as defined under U.S. GAAP for the twelve-month period starting from the first day immediately following the end of the period for which the 2008 Audited Financial Statements are prepared and ending twelve months thereafter as set forth in the 2009 Audited Financial Statements, plus the sum of any amount of actual accounting benefit which is accepted by the Buyer (such acceptance not to be unreasonably withheld) and equal to 50% of the aggregate rent reductions enjoyed by Buyer during such period from retailers for its own in-store television network (excluding the Company’s network) arising out of or resulting from rent reductions that the Company achieves for Buyer’s network following the date of this Agreement.

     “2009 Audited Financial Statements” means the audited financial statements of the Company and its consolidated entities for the twelve-month period starting from the first day immediately following the end of the period for which the 2008 Audited Financial Statements are prepared, prepared by the Auditors in accordance with U.S. GAAP.

     “Adjusted Purchase Price” means, if the 2008 Audited Annual Net Income is equal to or greater than US$17,500,000, US$350,000,000.

     “ADSs” means the American depositary shares of Buyer, each representing five (5) FM Ordinary Shares, quoted for trading on the Nasdaq Global Market.

     “Affiliate” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.

     “Aggregate Consideration” means, to the extent applicable, the Initial Cash Consideration, the Second Installment Consideration, the Third Installment Consideration and the Base Catchup Amount or the Adjusted Catchup Amount, as applicable.

     “Agreement” means this Share Purchase Agreement among the parties hereto, as amended, modified or supplemented from time to time.

     “Ancillary Documents” means those agreements, documents and instruments as set forth in Schedule 1.1A.

     “Audited September 30, 2007 Financial Statements” means the audited financial statements of the Company and its consolidated entities for the nine-month period ending

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September 30, 2007, prepared by Ernst & Young or another Big Four Accounting Firm in accordance with U.S. GAAP.

     “Auditors” means Deloitte Touche Tohmatsu, the independent auditors to Buyer, or another Big Four Accounting Firm.

     “Average FM Share Price” means, with respect to the Second Installment Share Consideration, the Third Installment Share Consideration, the Base Catchup Amount and the Adjusted Catchup Amount, as the case may be, one-fifth of the average closing price for ADSs for the 14 trading days preceding the date of execution of this Agreement, as adjusted for any stock split, stock consolidation or like event.

     “Bank Guarantee Letter” means that certain bank guarantee letter from Morgan Stanley, Hong Kong to Buyer, dated as of the date hereof, stipulating that Buyer maintains an investment account with Morgan Stanley, Hong Kong and providing the value of such account as of the date hereof. The parties agree that at least US$148,437,500 of such value shall be maintained in such account and shall be used solely in connection with the payment of the Initial Cash Consideration at the First Closing or for any other payment due from Buyer pursuant to this Agreement, and for no other purpose without the prior written consent of the Company and the Sellers’ Representative, until the earlier of (i) the First Closing (and the parties agree and understand that the funds may be used to pay the Initial Cash Consideration), (ii) the termination of the Agreement and (iii) January 31, 2008.

     “Base Purchase Price” means US$306,250,000.

     “Big Four Accounting Firm” means Ernst & Young, KPMG, Pricewaterhouse Coopers or Deloitte Touche Tohmatsu.

     “Business” means (i) providing advertising on digital flat-panel displays networked through broad-band technology in hypermarkets, home improvement stores and other retail venues, (ii) providing promotional services for retailers and advertisers, and (iii) any other business as currently conducted by the Group Companies.

     “Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in Shanghai, PRC; Hong Kong Special Administrative Region; or The City of New York.

     “Cause” means:

(i)	a Key Company Employee’s willful misconduct in the performance of his or her material duties to the Group Companies;
(ii)	a Key Company Employee’s misappropriation of material assets of, or embezzlement from, the Group Companies;
(iii)	willful breach by a Key Company Employee of such employee’s material obligations under the relevant Key Company Employee Employment Agreement;
(iv)	a material breach by a Key Company Employee of the terms and conditions of such employee’s Key Company Employee Employment Agreement which

3

	breach is not cured within a reasonable period following delivery of written notice thereof to such employee, which written notice specifically identifies the manner in which such Key Company Employee is in breach of the terms and conditions of such Key Company Employee Employment Agreement; and
(v)	fraud, material malfeasance or willful violation of provisions of Buyer’s code of ethics relating to fraud or the integrity of the Key Company Employee.

     No act or failure to act on the part of a Key Company Employee shall be considered “willful” unless it is done, or omitted to be done, by the Key Company Employee in bad faith or without reasonable belief that the Key Company Employee’s act or omission was in the best interests of the Company. Any act, or failure to act, based upon express authority given pursuant to a resolution duly adopted by the board of directors of the Company or Buyer with respect to such act or omission or based upon the advice of counsel for the Company or Buyer shall be presumed to be done, or omitted to be done, by a Key Company Employee in good faith and in the best interests of the Company.

     “CGEN Network” means Shanghai CGEN Digital Media Network Co., Ltd., a company organized and existing under the laws of the PRC.

     “CGEN Network Transfer” means the transfer by the shareholders of CGEN Network of all of the equity interest in CGEN Network to Buyer or a Person or Persons designated by Buyer, subject to Section 6.12.

     “Change in Control” means (w) an event where all or substantially all of the assets of Buyer are sold, (x) a merger, consolidation, amalgamation, share exchange or similar business combination involving Buyer (A) pursuant to which the outstanding FM Ordinary Shares would be converted into cash or securities of another Person or (B) which would result in a third party or Group beneficially owning, directly or indirectly, 100% of the total voting power of all FM Ordinary Shares then outstanding and normally entitled to vote in the election of directors without regard to the occurrence of any contingency, (y) any other acquisition (including by way of merger, consolidation, share exchange, trade sale or otherwise) by any Person or Group of beneficial ownership, directly or indirectly, of 100% of the total voting power of all FM Ordinary Shares then outstanding and normally entitled to vote in the election of directors without regard to the occurrence of any contingency or (z) an event where any Person or Persons other than Buyer or its Affiliates is or becomes the beneficial owner, directly or indirectly, of more than 50% of the total voting power of all FM Ordinary Shares then outstanding and normally entitled to vote in the election of directors without regard to the occurrence of any contingency and (A) the Chief Executive Officer and the Chief Financial Officer of Buyer immediately prior to such event are not retained as the Chief Executive Officer and the Chief Financial Officer of Buyer, for a term ending on or after the Third Closing Date, immediately following such event. For the purposes of this definition, a Person shall be deemed to beneficially own any voting securities of an entity held by any other entity (the “Parent Entity”), if such Person is the beneficial owner, directly or indirectly, of more than 50% of the voting power of the voting securities of the Parent Entity.

     “Closing Net Current Assets” means the Company’s Net Current Assets as of the First Closing Date, which shall include any dividends declared by the Company on or prior to the First Closing Date but not paid on or prior to such date.

4

     “Code” means the Internal Revenue Code of 1986, as amended.

     “Company Options” means options to purchase Company Ordinary Shares granted under an Option Plan.

     “Company Ordinary Shares” means the ordinary shares, US$0.000001 par value per share, of the Company.

     “Company Preferred Shares” means the Series A, Series B and Series C redeemable convertible preferred shares, each with a par value of US$0.000001 per share, of the Company.

     “Competing Business” means any business providing in-store advertising through the use of flat-panel displays in hypermarkets, supermarkets, home improvement stores and other retail or entertainment venues.

     “Confidentiality Agreement” means the Non-disclosure Agreement entered into by each of the Company and Buyer in favor of the other party, dated October 26, 2007.

     “Contract” means any contract, agreement, arrangement or understanding, whether written or oral, including without limitation, the Structure Agreements.

     “Control” (including the terms “controlled by” and “under common control with”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, by Contract or otherwise, including the ownership, directly or indirectly, of securities having the power to elect a majority of the board of directors or similar body governing the affairs of such Person.

     “Deposit” means US$20,000,000 in immediately available funds deposited by Buyer, on the date of the execution of this Agreement, or if such date is not a Business Day, on the first Business Day following the date of the execution of this Agreement, in an account specified by the Company. For the avoidance of doubt, any references to current assets of the Company in this Agreement and the Ancillary Documents shall exclude the amount of the Deposit.

     “Disclosure Schedule” means the Disclosure Schedule attached hereto, dated as of the date hereof, delivered by the Company to Buyer in connection with this Agreement. Notwithstanding anything to the contrary contained in the Disclosure Schedule or in this Agreement, the information and disclosures contained in any section of the Disclosure Schedule shall be deemed to be disclosed and incorporated by reference in any other section of the Disclosure Schedule as though fully set forth in such other section for which the applicability of such information and disclosure is reasonably apparent on the face of such information or disclosure.

     “Encumbrance” means any security interest, pledge, mortgage, lien, charge, limitation, condition, equitable interest, option, easement, encroachment, right of first refusal, or similar adverse claim or restriction, including any restriction on transfer or other assignment, as security or otherwise, of or relating to use, quiet enjoyment, voting, receipt of income or exercise of any other attribute of ownership.

5

     “Environmental Claim” means any written notice, claim or demand or any action, suit, complaint, or proceeding by any person alleging liability or potential liability (including liability or potential liability for investigatory costs, cleanup costs, governmental response costs, natural resource damages, fines or penalties) under any Environmental Laws.

     “Environmental Laws” means all Laws in effect in the PRC at the date of this Agreement relating to protection of the environment.

     “Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

     “Financing Lease” means (i) any lease of property, real or personal, the obligations under which are capitalized on the balance sheet of the Company and (ii) any other such lease to the extent that the then present value of the minimum rental commitment thereunder should, in accordance with U.S. GAAP, be capitalized on a balance sheet of the Company.

     “First Closing Allocation Schedule” means a schedule setting forth the allocation of the Initial Cash Consideration to be signed and delivered by the Sellers’ Representative (on behalf of the Option Holders) and all of the Selling Shareholders no later than five Business Days prior to the First Closing Date.

     “FM Ordinary Shares” means the ordinary shares, US$0.00005 par value per share, of Buyer.

     “Government Official” means any official, director, politician, employee or other similar Persons with a position at a Governmental Authority.

     “Governmental Authority” means any government or governmental or regulatory body thereof, or political subdivision thereof, whether federal, state, municipal, local or foreign, or any agency, instrumentality or authority thereof, or any court or arbitrator (public or private).

     “Governmental Authorization” means any consent or approval of or from any United States of America, PRC or Cayman Islands Governmental Authority.

     “Governmental Order” means any order, writ, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

     “Group” has the meaning set forth in the Exchange Act.

     “Group Companies” means the Company, the Subsidiaries, any variable interest entity controlled by and consolidated with the Company and any Person that is not a natural person and that is controlled by a Group Company, a list of which companies is set forth in Section 3.3 of the Disclosure Schedule.

     “Hazardous Materials” means all materials defined as “hazardous substances” or “hazardous wastes,” toxic, pollutant, contaminant or words of similar meaning or effect, or any other term of similar import under any Environmental Law.

     “Indebtedness” of a Person, at a particular date, means the sum (without duplication) at such date of (i) indebtedness for borrowed money or for the deferred purchase price of property or services in respect of which such Person is liable as obligor, (ii) indebtedness

6

secured by any lien on any property or asset owned or held by such Person regardless of whether the indebtedness secured thereby shall have been assumed by or is a primary liability of such Person, (iii) obligations of such Person under Financing Leases, (iv) the face amount of all letters of credit issued for the account of such person and, without duplication, the unreimbursed amount of all drafts drawn thereunder and (v) obligations (in the nature of principal or interest) of such Person in respect of acceptances or similar obligations issued or created for the account of such Person. For the avoidance of doubt, obligations of a Group Company pursuant to a Contract entered into between such Group Company and a customer in the ordinary course of business shall not constitute Indebtedness.

     “Intellectual Property” means all rights under patent, copyright, trademark or trade secret Law or any other statutory provision or common law doctrine, including design rights.

     “Key Company Employees” means Mr. Yising Chan, Mr. Guanyong Tian and Mr. Mei Lijun.

     “Key Management Dismissal Event” means the dismissal of any of the Key Company Employees by Buyer, directly or indirectly, without Cause, other than pursuant to Section 2.2(b)(ii).

     “Key Company Employee Employment Agreement” means an employment agreement substantially in the form attached hereto as Exhibit D.

     “Knowledge of Buyer” means the actual knowledge after due inquiry of the individuals set forth on Schedule 1.1B hereto.

     “Knowledge of Seller Parties” means the actual knowledge after due inquiry of the individuals set forth on Schedule 1.1C hereto.

     “Law” means any statute, code, law, ordinance, regulation or rule or other legally binding requirement of any Governmental Authority.

     “Management Parties” means the Management Shareholder and the Other Management Parties.

     “Management Shareholder” means Mr. Yising Chan.

     “Material Adverse Effect” or “Material Adverse Change” means any effect or change that would be or would reasonably be expected to be materially adverse (i) to the business, assets, condition (financial or otherwise), operating results or operations of such entity and its subsidiaries, taken as a whole, except: (a) effects or changes (including general economic and political conditions) that do not have a materially disproportionate effect (relative to other industry participants) on such entity and generally affect the industry in which such entity operates; (b) effects or changes relating to loss of employees, suppliers, vendors, agents, customers or other business partners (including web sites and portals) resulting primarily from the announcement or pendency of the transactions contemplated by this Agreement; (c) effects or changes to the extent attributable to changes in PRC Law after the date of this Agreement and (d) any change or effect that results from any action taken at the request of Buyer or as required by the terms of this Agreement or the Ancillary Documents by the Company or the Selling Shareholders (including, without limitation, any change after the date hereof in the Company’s accounting methods with respect to doubtful

7

accounts, to the extent such change is made in order to treat such accounts in a manner consistent with treatment by Buyer) or (ii) to the ability of Buyer or the Selling Shareholders, as applicable, to perform its or their obligations hereunder. Notwithstanding the foregoing, termination by the Company or amendment by the Company in a manner adverse and material to the Company or termination by the Carrefour Commercial Companies (provided that such termination is a result of material breach by the Company of the terms of the Carrefour Contract) of the Carrefour Contract shall constitute a Material Adverse Effect on the Company.

     “Medley” means Medley Opportunity Fund Ltd. (Cayman).

     “Medley Credit Agreement” means the credit agreement dated as of September 7, 2007 among Medley, the Company and CGEN Media Technology Company Limited (Hong Kong) (as amended).

     “Medley Warrants” means the warrants to purchase Company Ordinary Shares in an amount equal to 3% of the outstanding Company Ordinary Shares on a fully-diluted and as converted basis (excluding the Company Ordinary Shares for which such warrants are exercisable) pursuant to the warrant purchase agreement dated as of September 11, 2007 between the Company and Medley.

     “MOFCOM” means the Ministry of Commerce or, with respect to any matter to be submitted for examination and approval by the Ministry of Commerce, any government entity which is similarly competent to examine and approve such matter under the laws of the PRC.

     “Net Current Assets” means consolidated current assets minus consolidated current liabilities (in the case of the Company, current liabilities shall be reduced by the amount of any incremental provisioning for doubtful accounts which may arise between the date hereof and the First Closing Date as a result of a change in the Company’s accounting methods with respect thereto, if such change is made to treat such accounts in a manner consistent with treatment by Buyer). For the avoidance of doubt current assets of the Company shall include any amounts received by the Company in connection with the exercise of the Medley Warrants or the exercise or conversion of any other securities of the Company.

     “Option Holder” means a holder as of the First Closing Date of Company Options pursuant to an Option Plan.

     “Option Holders’ Representative” means Sellers’ Representative who shall receive all payments and distributions paid by Buyer (on behalf of the Company) with respect to Company Options and shall distribute such amounts to the Option Holders.

     “Option Plans” means the employee stock option plans and other equity incentive plans maintained by the Company as of the date hereof.

     “Other Management Parties” means Mr. Guanyong Tian and Mr. Mei Lijun.

     “Permitted Dividends” means dividends declared prior to the First Closing Date, the amount of which shall be based on Company management’s best estimate of the amount by which the Company’s Net Current Assets, as reflected on the 2007 Audited Financial Statements shall be greater than zero. Permitted Dividends shall be paid, in accordance with

8

applicable law, prior to the First Closing Date, provided, that to the extent the Company’s Net Current Assets (as reflected on the 2007 Audited Financial Statements) minus any Permitted Dividends paid prior to the First Closing Date, is greater than zero, such excess amount may be paid, in accordance with applicable law, in the form of additional Permitted Dividends prior to June 30, 2008.

     “Permitted Encumbrances” means (i) Encumbrances for Taxes not yet due and payable or being contested in good faith, (ii) Encumbrances in respect of property or assets imposed by Law that were incurred in the ordinary course of business, such as carriers’, warehousemen’s, materialmen’s and mechanics’ liens and other similar liens, (iii) pledges or deposits made in the ordinary course of business to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations, (iv) survey exceptions, reciprocal easement agreements and other customary encumbrances on title to real property, (v) Encumbrances specified in Section 1.1 to the Disclosure Schedule and (vi) such other encumbrances as would not, individually or in the aggregate, materially and adversely affect the value of or the use of the encumbered property for its current and anticipated purposes.

     “Person” means any individual, partnership, firm, company, corporation, association, trust, unincorporated organization, joint venture or other entity.

     “PRC” means the People’s Republic of China, but solely for the purposes of this Agreement excluding the Hong Kong Special Administrative Region, Macau Special Administrative Region and the island of Taiwan.

     “Prospective Event of Change in Control” means any potential event, including any transaction of which Buyer is aware, which is reasonably likely to result in a Change in Control in thirty (30) days or less.

     “Related Party” means, in respect of any Person, any other Person specified in Item 7.B of Form 20-F under the Securities Act.

     “RMB” means Renminbi, the legal currency of the PRC.

     “Second Installment Allocation Schedule” means a schedule setting forth the allocation of the Second Installment Share Consideration to be signed and delivered by the Sellers’ Representative (on behalf of the Option Holders) and all of the Selling Shareholders no later than five (5) Business Days prior to the Second Closing Date.

     “Securities Act” means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

     “Shares” means all of the equity interests of the Company, including Company Ordinary Shares, Company Preferred Shares, options, warrants and other equity interests.

     “Structure Agreements” means, collectively, the Contracts and instruments, a list of which is attached hereto as Section 3.19 of the Disclosure Schedule, which were entered into to enable the Company to effectively control and consolidate the financial results of CGEN Network (and its subsidiaries) with its financial statements.

     “Subsidiaries” means any and all corporations, partnerships, companies and other entities with respect to which the Company, directly or indirectly, owns more than 50% of the

9

securities having the power to elect members of the board of directors or similar body governing the affairs of such entity.

     “subsidiaries” means, with respect to any Person, any other Person with respect to which the first Person, directly or indirectly, owns 50% or more of the securities of the second Person having the power to elect members of the board of directors or similar body governing the affairs of such entity.

     “Tax” or “Taxes” means any taxes of any kind, including but not limited to those on or measured by or referred to as income, gross receipts, capital, sales, use, ad valorem, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, value-added, property or windfall profits taxes, customs, duties or similar fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any Governmental Authority.

     “Tax Return” means any return, estimate, report or statement required to be filed with any Governmental Authority with respect to Taxes, including any schedule or attachment thereto, amendment thereof, claim for refund or declaration of estimated Tax.

     “Taxing Authority” means, with respect to any Tax, the government entity or political subdivision thereof that imposes such Tax and the agency (if any) charged with the collection of such Tax for such entity or subdivision.

     “Third Installment Allocation Schedule” means a schedule setting forth the allocation of the Third Installment Consideration and the Base Catchup Amount or the Adjusted Catchup Amount, as applicable, to be signed and delivered by the Sellers’ Representative (on behalf of the Option Holders) and all of the Selling Shareholders no later than five (5) Business Days prior to the Third Closing Date.

     “Unearned Second Installment Consideration” means US$90,781,250 minus the Second Installment Consideration.

     “U.S. GAAP” means United States generally accepted accounting principles and practices as in effect from time to time.

     Section 1.2 Other Defined Terms. The following terms shall have the meanings defined for such terms in the Sections set forth below:

Term	Section
Additional Share Consideration	Section 2.2(c)(i)
Adjusted Catchup Amount	Section 2.2(c)(i)
Agreement	Preamble
Audited Financial Statements	Section 3.5(a)
Balance Sheet	Section 3.5(a)
Balance Sheet Date	Section 3.5(a)
Base Catchup Amount	Section 2.2(c)(i)
Buyer	Preamble
Buyer Indemnified Persons	Section 10.1(a)
Buyer’s Liquidated Damages	Section 11.1(d)
Buyer Options	Section 6.17
Buyer SEC Documents	Section 5.7(a)

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Term	Section
Carrefour Contract	Section 2.2(b)(ii)
CGEN	Preamble
Company	Preamble
Confidential Information	Section 6.8
Deposit Account	Section 6.10
Financial Statements	Section 3.5(a)
First Closing	Section 2.3(a)
First Closing Date	Section 2.3(a)
Focus Media	Preamble
HKIAC	Section 11.13(b)
Indemnifying Management Party	Section 10.1(a)
Indemnifying Selling Shareholder	Section 10.2(a)
Indemnifying Party	Section 10.7
Independent Accounting Firm	Section 2.8(a)
Initial Cash Consideration	Section 2.2(a)
IP Licenses	Section 3.16(c)
Key Company Employee Employment Agreements	Section 7.10
Loan Repayment Loan	Section 6.21
Long-Stop Date	Section 9.1(e)
Losses	Section 10.1(a)
Material Contract	Section 3.17(a)
Medley Payoff Statement	Section 6.21
Offered Shares	Preamble
Other Selling Shareholders	Preamble
Registration Rights Agreement	Section 7.5
Related Party Accounts	Section 6.6
Reviewed Financial Statements	Section 3.5(a)
SEC	Section 5.7(a)
Second Closing	Section 2.4(a)
Second Closing Date	Section 2.4(a)
Second Installment Cash Consideration	Section 2.2(b)(iii)
Second Installment Consideration	Section 2.2(b)
Second Installment Share Consideration	Section 2.2(b)(iii)
Seller Indemnified Persons	Section 10.3(a)
Seller Parties	Preamble
Sellers’ Liquidated Damages	Section 11.1(c)
Sellers’ Representative	Section 2.9
Selling Shareholders	Preamble
Third Closing	Section 2.5(a)
Third Closing Date	Section 2.5(a)
Third Installment Cash Consideration	Section 2.2(c)(iii)
Third Installment Consideration	Section 2.2(c)
Third Installment Share Consideration	Section 2.2(c)(iii)
Unaudited Financial Statements	Section 3.5(a)

     Section 1.3 Other Interpretive Provisions The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. The words

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“include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

ARTICLE II.
PURCHASE AND SALE OF OFFERED SHARES; CANCELLATION OF OPTIONS

     Section 2.1 Purchase and Sale.

          (a) Subject to the terms and conditions set forth in this Agreement, (x) each Selling Shareholder shall sell to Buyer all of such Selling Shareholder’s right, title and interest in the Offered Shares owned by it, free and clear of all Encumbrances at the First Closing Date, and Buyer shall purchase the Offered Shares at the First Closing Date, on a fully converted and diluted basis and (y) the Company shall cause all of the outstanding Company Options of the Option Holders pursuant to the Option Plans to be cancelled at the First Closing Date, for total consideration consisting of the Initial Cash Consideration, the Second Installment Consideration, the Third Installment Consideration and the Base Catchup Amount or the Adjusted Catchup Amount, as and if applicable, as set forth below:

          (i) On the First Closing Date (as defined below) and subject to the terms and conditions set forth in this Agreement, Buyer shall pay the Initial Cash Consideration (minus the Deposit) to the Selling Shareholders and (on behalf of the Company) to the Option Holders’ Representative, as set forth opposite their names in the First Closing Allocation Schedule to be delivered by the Sellers’ Representative to Buyer;

          (ii) On the Second Closing Date (as defined below) and subject to the terms and conditions set forth in this Agreement, Buyer shall issue and transfer to the Selling Shareholders and (on behalf of the Company) to the Option Holders’ Representative the Second Installment Cash Consideration (if any) and all of Buyer’s right, title and interest in and to the Second Installment Share Consideration (if any), free and clear of all Encumbrances, as set forth opposite their respective names in the Second Installment Allocation Schedule to be delivered by the Sellers’ Representative to Buyer; and

          (iii) On the Third Closing Date (as defined below) and subject to the terms and conditions set forth in this Agreement, Buyer shall issue and transfer to the Selling Shareholders and (on behalf of the Company) to the Option Holders’ Representative the Third Installment Cash Consideration (if any) and all of Buyer’s right, title and interest in and to the Third Installment Share Consideration (if any) and the Additional Share Consideration (if any), free and clear of all Encumbrances, as set forth opposite their respective names in the Third Installment Allocation Schedule to be delivered by the Sellers’ Representative to Buyer.

     Section 2.2 Consideration. The Aggregate Consideration shall be paid as follows:

          (a) Subject to the terms and conditions set forth in this Agreement, in reliance on the representations, warranties, covenants and agreements of the parties contained herein and in the Ancillary Documents and in consideration of the sale, assignment and transfer of the Offered Shares and the cancellation of all of the Company Options of the Option Holders under the Option Plans and the exercise or cancellation of all outstanding

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warrants, including without limitation the Medley Warrants, Buyer shall on the First Closing Date pay to the Selling Shareholders and (on behalf of the Company) to the Option Holders’ Representative as set forth opposite their respective names in the First Closing Allocation Schedule a total amount equal to US$168,437,500 in cash (such amount, the “Initial Cash Consideration”), minus the Deposit. The Sellers’ Representative shall deliver the First Closing Allocation Schedule to Buyer no later than five Business Days prior to the First Closing Date.

          (b) Buyer shall pay the Selling Shareholders and (on behalf of the Company) the Option Holders’ Representative additional consideration within five (5) Business Days following the date on which the 2008 Audited Financial Statements are delivered to Buyer (and in any event no later than May 15, 2009, unless the delivery of the 2008 Audited Financial Statements has been delayed due to a failure on the part of Key Management to timely furnish the Auditors with the management accounts required for the preparation thereof, in which case such payment shall be made within five (5) Business Days of delivery of the 2008 Audited Financial Statements), and such additional aggregate consideration (the “Second Installment Consideration”) shall be calculated in the following manner:

          (i) if the 2008 Audited Annual Net Income is equal to or greater than US$9,625,000,

The Second
Installment
Consideration = ( 17.5 X 2008 Audited Annual
Net Income — Initial Cash
Consideration ) X 50 %

          If the 2008 Audited Annual Net Income is equal to or greater than US$20,000,000, the figure of $20,000,000 shall be used for the 2008 Audited Annual Net Income in the above formula. The Second Installment Consideration shall in no event be less than zero nor greater than US$90,781,250.

          (ii) If the 2008 Audited Annual Net Income is less than US$9,625,000, Buyer shall have the right to terminate the Key Company Employees and terminate this Agreement immediately with no further responsibility for any payment with respect to the Second Installment Consideration, the Third Installment Consideration, the Base Catchup Amount or the Adjusted Catchup Amount. If, following the First Closing Date and prior to December 31, 2008, the Amended and Restated Video Information System Cooperation Contract between Carrefour Commercial Companies and Shanghai CGEN Digital Media Network Company Limited (the “Carrefour Contract”) is terminated by CGEN or amended by CGEN in a manner adverse and material to the Company or is terminated by the Carrefour Commercial Companies as a result of material breach by the Company of the terms of the Carrefour Contract), Buyer shall have no obligation to make any additional unmade payments on or in respect of the Second Installment Consideration, the Third Installment Consideration, the Base Catchup Amount or the Adjusted Catchup Amount, regardless of whether any such amounts would otherwise be payable.

          (iii) If the 2008 Audited Annual Net Income is equal to or greater than US$17,500,000, 55% of the amount by which the Second Installment Consideration exceeds US$68,906,250 shall be payable in cash (the “Second

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Installment Cash Consideration”) and the balance shall be paid by delivery of a number of FM Ordinary Shares equal to the balance of the Second Installment Consideration divided by the Average FM Share Price (such aggregate number of FM Ordinary Shares issued, the “Second Installment Share Consideration”). The Second Installment Cash Consideration (if any) and the Second Installment Share Consideration (if any) shall be issued to the Selling Shareholders and the Option Holders’ Representative as set forth opposite their respective names in the Second Installment Allocation Schedule to be delivered by the Sellers’ Representative to Buyer five (5) Business Days before the Second Closing Date.

          (c) Buyer shall pay the Selling Shareholders and (on behalf of the Company) the Option Holders’ Representative additional consideration within five (5) Business Days following the date on which the 2009 Audited Financial Statements are delivered to Buyer (and in any event no later than May 15, 2010, unless the delivery of the 2009 Audited Financial Statements has been delayed due to a failure on the part of Key Management to timely furnish the Auditors with the management accounts required for the preparation thereof, in which case such payment shall be made within five (5) Business Days of delivery of the 2009 Audited Financial Statements), and such additional consideration (the “Third Installment Consideration”) shall be calculated in the following manner:

          (i) if the 2008 Audited Annual Net Income is equal to or greater than US$9,625,000 and the 2009 Audited Annual Net Income is equal to or greater than US$12,250,000,

The Third Installment Consideration	=	(	2009 Audited Annual Net Income		– 1	)	X	The Second Installment Consideration
			2008 Audited Annual Net Income
				0.4

          The Third Installment Consideration shall in no event be less than zero nor greater than The Second Installment Consideration.

          In addition, (A) if 2008 Audited Annual Net Income is equal to or greater than US$9,625,000 and less than US$17,500,000 and 2009 Audited Annual Net Income is greater than US$24,500,000, Buyer shall pay the Selling Shareholders and (on behalf of the Company) the Option Holders’ Representative additional consideration within five (5) Business Days following the date on which the 2009 Audited Financial Statements are delivered to Buyer (and in any event no later than May 15, 2010, unless the delivery of the 2009 Audited Financial Statements has been delayed due to a failure on the part of Key Management to timely furnish the Auditors with the management accounts required for the preparation thereof, in which case such payment shall be made within five (5) Business Days of delivery of the 2009 Audited Financial Statements) (such additional consideration the “Base Catchup Amount”). The Base Catchup Amount shall be equal to the Base Purchase Price (US$306,250,000) minus the Initial Cash Consideration, the Second Installment Consideration and the Third Installment Consideration. The sum of the Initial Cash Consideration, the Second Installment Consideration, the Third Installment Consideration and the Base Catchup Amount shall in no event greater than US$306,250,000; or (B) if the 2008 Audited Annual Net Income is equal to or greater than US$17,500,000 and the 2009 Audited Annual Net Income is equal to or greater

14

US$28,000,000, Buyer shall pay the Selling Shareholders and (on behalf of the Company) the Option Holders’ Representative additional consideration within five (5) Business Days following the date on which the 2009 Audited Financial Statements are delivered to Buyer (such additional consideration, the “Adjusted Catchup Amount”). The Adjusted Catchup Amount shall be equal to The Adjusted Purchase Price (US$350,000,000) minus the Initial Cash Consideration, the Second Installment Consideration and the Third Installment Consideration. The sum of the Initial Cash Consideration, the Second Installment Consideration, the Third Installment Consideration and the Adjusted Catchup Amount shall in no event be greater than US$350,000,000.

          The Third Installment Consideration shall be paid by delivery of a number of FM Ordinary Shares equal to the Third Installment Consideration divided by the Average FM Share Price (such number of FM Ordinary Shares issued, the “Third Installment Share Consideration”). The Third Installment Share Consideration (if any) shall be issued to the Selling Shareholders and the Option Holders as set forth opposite their respective names in the Third Installment Allocation Schedule.

          The Base Catchup Amount or the Adjusted Catchup Amount shall be paid by delivery of a number of FM Ordinary Shares equal to the Base Catchup Amount or the Adjusted Catchup Amount divided by the Average FM Share Price (such aggregate number of FM Ordinary Shares issued, the “Additional Share Consideration”). The Additional Share Consideration (if any) shall be issued to the Selling Shareholders and (on behalf of the Company) the Option Holders’ Representative as set forth opposite their respective names in the Third Installment Allocation Schedule.

               (ii) if the 2009 Audited Annual Net Income is less than US$12,250,000, the Buyer will have no further responsibility for any payment with respect to the Third Installment Consideration.

               (iii) If, at the Third Closing, the sum of the Initial Cash Consideration and the Second Installment Cash Consideration is less than 55% of the Aggregate Consideration, part of the Third Installment Consideration shall be paid in cash (the “Third Installment Cash Consideration”) so that the sum of the Initial Cash Consideration, the Second Installment Cash Consideration, the Third Installment Cash Consideration is equal to 55% of the Aggregate Consideration (including the Adjusted Catchup Amount, if any and as applicable). The balance of the Third Installment Consideration and the Adjusted Catchup Amount, as and if applicable, shall be by delivery of FM Ordinary Shares as provided herein. The balance of the Third Installment Consideration and the Adjusted Catchup Amount, as and if applicable, shall be paid by delivery of a number of FM Ordinary Shares equal to such balance divided by the Average FM Share Price (such aggregate number of FM Ordinary Shares issued, the “Third Installment Share Consideration”). The Third Installment Cash Consideration (if any) and the Third Installment Share Consideration (if any) shall be issued to the Selling Shareholders and (on behalf of the Company) the Option Holders’ Representative as set forth opposite their respective names in the Third Installment Allocation Schedule to be delivered by the Sellers’ Representative to the Buyer five (5) Business Days before the Third Closing Date.

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     Section 2.3 First Closing.

          (a) Subject to the terms and conditions set forth in this Agreement, the closing of the transactions contemplated by Section 2.2(a) of this Agreement (the “First Closing”) shall take place on January 2, 2008 or if such day is not a Business Day, the next Business Day, at the offices of Wilson Sonsini Goodrich & Rosati, Jin Mao Tower, 38F, Unit 01-04, 88 Century Boulevard, Pudong, Shanghai 200121, People’s Republic of China (or at such other place and on such other day and effective date as mutually agreed to by the parties hereto, the “First Closing Date”) as specified by Buyer in a notice to the Selling Shareholders duly signed and delivered by Buyer as promptly as practicable but in any event within five (5) Business Days following the date of the satisfaction or waiver of all of the conditions set forth in Articles VII and VIII hereof (other than those that are only capable of being satisfied on or as of the First Closing Date).

          (b) The Sellers’ Representative shall deliver the First Closing Allocation Schedule to Buyer no later than five Business Days prior to the First Closing Date.

          (c) At or prior to the First Closing, each of the Selling Shareholders or the Company, as applicable, shall deliver to Buyer the following:

          (i) share certificates evidencing the Offered Shares to be sold by such Selling Shareholder accompanied by a duly executed instrument of transfer;

          (ii) Audited September 30, 2007 Financial Statements;

          (iii) all other previously undelivered documents required by this Agreement and the Ancillary Documents to be delivered by such Selling Shareholder to Buyer at or prior to the First Closing Date in connection with the transactions contemplated hereby and thereby; and

          (iv) in respect of each Group Company, the certificates of incorporation, common seal (if it exists), share register and share certificate book (with any unissued share certificates) and all minute books and other statutory books or such equivalent items in the relevant jurisdiction as are kept by the relevant Group Company or are required by the Law of the jurisdiction where such Group Company is incorporated to be kept by such Group Company.

          (d) At the First Closing, Buyer shall deliver to the Selling Shareholders and (on behalf of the Company) to the Option Holders the Initial Cash Consideration (minus the Deposit), as set forth opposite their names in the First Closing Allocation Schedule in accordance with the wire transfer instructions set forth in the First Closing Allocation Schedule. Buyer shall not be obligated to deliver a Selling Shareholder’s portion of the Initial Cash Consideration (minus the deposit) until such Selling Shareholder has complied with Section 2.3(c).

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     Section 2.4 Second Closing.

          (a) Subject to the terms and conditions set forth in this Agreement, the closing of the transactions contemplated by Section 2.2(b) of this Agreement (the “Second Closing”) shall take place at the place and on the date (the “Second Closing Date”) as specified by Buyer in a notice to the Selling Shareholders duly signed and delivered by Buyer as promptly as practicable following the delivery of the 2008 Audited Financial Statements to Buyer (such Second Closing to take place within five (5) Business Days following such delivery and in any event no later than May 15, 2009, unless the delivery of the 2008 Audited Financial Statements has been delayed due to a failure on the part of Key Management to timely furnish the Auditors with the management accounts required for the preparation thereof, in which case such payment shall be made within five (5) Business Days of delivery of the 2008 Audited Financial Statements).

          (b) Upon the occurrence of a Prospective Event of Change in Control after the First Closing Date and before the Second Closing Date, Buyer shall notify the Sellers’ Representative within three (3) Business Days of the occurrence of such Prospective Event of Change in Control, and the Second Closing and the Third Closing may take place on an accelerated basis. Notwithstanding any other provision of this Agreement to the contrary in the event of a Prospective Event of Change in Control, (i) the Second Closing and the Third Closing shall take place immediately prior to the closing of such Prospective Event of Change in Control, (ii) the Second Installment Consideration shall be equal to US$68,906,250, payable in cash and (iii) the Third Installment Consideration shall be equal to US$68,906,250, payable in cash.

          (c) Upon the occurrence of a Key Management Dismissal Event after the First Closing Date and before the Second Closing Date, the Second Closing and the Third Closing shall take place on an accelerated basis. Notwithstanding any other provision of this Agreement to the contrary, (i) the Second Closing and the Third Closing shall take place within seven (7) Business Days of the occurrence of the Key Management Dismissal Event, (ii) the Second Installment Share Consideration shall be equal to US$90,781,250 divided by the Average FM Share Price, (iii) the Third Installment Share Consideration shall be equal to US$68,906,250 divided by the Average FM Share Price and (iv) the Additional Share Consideration shall be equal to US$21,875,000 divided by the Average FM Share Price.

          (d) The Sellers’ Representative shall deliver the Second Installment Allocation Schedule to Buyer no later than five (5) Business Days prior to the Second Closing Date.

          (e) At or prior to the Second Closing, Buyer shall deliver to the Sellers’ Representative for the benefit of the Selling Shareholders and the Option Holders true copies of the register of members of Buyer indicating the transfer to the Selling Shareholders and the Option Holders and registration in the name of the Selling Shareholders and the Option Holders in respect of the Second Installment Share Consideration, if any, as set forth opposite their respective names in the Second Installment Allocation Schedule.

     Section 2.5 Third Closing.

          (a) Subject to the terms and conditions set forth in this Agreement, the closing of the transactions contemplated by Section 2.2(c) of this Agreement (the “Third Closing”) shall take place at the place and on the date (the “Third Closing Date”) as

17

specified by Buyer in a notice to the Selling Shareholders duly signed and delivered by Buyer as promptly as practicable following the delivery of the 2009 Audited Financial Statements to Buyer (such Third Closing to take place within five (5) Business Days following such delivery and in any event no later than May 15, 2010, unless the delivery of the 2009 Audited Financial Statements has been delayed due to a failure on the part of Key Management to timely furnish the Auditors with the management accounts required for the preparation thereof, in which case such payment shall be made within five (5) Business Days of delivery of the 2009 Audited Financial Statements).

          (b) Upon the occurrence of a Prospective Event of Change in Control after the Second Closing Date and before the Third Closing Date, Buyer shall notify the Sellers’ Representative within three (3) Business Days of the occurrence of such Prospective Event of Change in Control, and the Third Closing shall take place on an accelerated basis. Notwithstanding any other provision of this Agreement to the contrary, (i) the Third Closing shall take place immediately prior to the closing of such Prospective Event of Change in Control and (ii) the Third Installment Consideration shall be equal to the Base Purchase Price minus the Second Installment Consideration and the Initial Cash Consideration, and payable in cash.

          (c) Upon the occurrence of a Key Management Dismissal Event after the Second Closing Date and before the Third Closing Date, the Third Closing shall take place on an accelerated basis. Notwithstanding any other provision of this Agreement to the contrary, (i) the Third Closing shall take place within seven (7) Business Days of the occurrence of the Key Management Dismissal Event, (ii) the Third Installment Share Consideration shall be equal to US$68,906,250 divided by the Average FM Share Price and (iii) the Additional Share Consideration shall be equal to US$350,000,000 minus the Initial Cash Consideration, the Second Installment Consideration and US$68,906,250, divided by the Average FM Share Price.

          (d) The Sellers’ Representative shall deliver the Third Installment Allocation Schedule to Buyer no later than five (5) Business Days prior to the Third Closing Date.

          (e) At or prior to the Third Closing, Buyer shall deliver to the Sellers’ Representative for the benefit of the Selling Shareholders and the Option Holders true copies of the register of members of Buyer indicating the transfer to the Selling Shareholders and the Option Holders and registration in the name of the Selling Shareholders and the Option Holders in respect of the Third Installment Share Consideration, if any, and the Additional Share Consideration, if any, as set forth opposite their respective names in the Third Installment Allocation Schedule.

     Section 2.6 Rounding. If the result of any calculation of the number of FM Ordinary Shares to be delivered to the Selling Shareholders and the Option Holders pursuant to any provision of this Article II is a number that is not a whole number, such number shall be rounded up to the next succeeding whole number.

     Section 2.7 Share Splits and Other Similar Events. Any number of shares to be delivered pursuant to, or price per share referenced in, this Article II shall be equitably adjusted in the event of any stock split, stock dividend, recapitalization or reorganization after the date hereof (for the avoidance of doubt no adjustment shall be made to account for

18

additional issuances of shares by Buyer in connection with any capital raising transaction or acquisitions by Buyer).

     Section 2.8 2008 and 2009 Audited Financial Statements; Disputes.

          (a) The Sellers’ Representative may dispute the amount of 2008 Audited Annual Net Income or 2009 Audited Annual Net Income in the 2008 Audited Financial Statements or the 2009 Audited Financial Statements, as the case may be; provided, however, that the Sellers’ Representative shall have notified Buyer in writing of such dispute setting forth, in reasonable detail, the basis for such dispute, within fifteen (15) Business Days of Buyer’s delivery of the 2008 Audited Financial Statements or the 2009 Audited Financial Statements, as the case may be, to the Sellers’ Representative. The Sellers’ Representative and Buyer shall attempt to reconcile their differences, and any resolution by them as to any disputed amounts shall be final, binding and conclusive on the parties hereto. If the Sellers’ Representative and Buyer are unable to reach a resolution with such effect within fifteen (15) Business Days after the receipt by Buyer of the Sellers’ Representative’s written notice of dispute, Buyer and the Sellers’ Representative shall submit the items remaining in dispute for resolution to one of Ernst & Young, KPMG or PricewaterhouseCoopers, as mutually acceptable to the Sellers’ Representative and Buyer (an “Independent Accounting Firm”), which shall, within fifteen (15) Business Days after such submission, determine and report in writing to the Sellers’ Representative and Buyer upon such remaining disputed items and the amount of 2008 Audited Annual Net Income or 2009 Audited Annual Net Income, as the case may be, and such written report shall be final, binding and conclusive on the Seller Parties and Buyer. The fees and disbursements of the Independent Accounting Firm acting under this Section 2.8 shall be borne by the Company.

          (b) The 2008 Audited Financial Statements and the 2009 Audited Financial Statements shall be deemed final for the purposes of this Section 2.8 upon the earliest of (i) the failure of the Sellers’ Representative to notify Buyer of a dispute within fifteen (15) Business Days of Buyer’s delivery of the 2008 Audited Financial Statements or the 2009 Audited Financial Statements (as applicable) to the Seller’s Representative, (ii) the resolution of all disputes, pursuant to Section 2.8(a), by the Sellers’ Representative and Buyer and (iii) the resolution of all disputes, pursuant to Section 2.8(a), by the Independent Accounting Firm.

          (c) (i) Buyer agrees that, notwithstanding any dispute with respect to 2008 Audited Annual Net Income, Buyer shall pay the Second Installment Consideration in accordance with the time frame set forth in Section 2.4(a). If Buyer pays the Second Installment Consideration pursuant to Section 2.4(a) prior to the resolution of any such dispute in accordance with Section 2.8(b) and the result of the resolution of such dispute is that Buyer has overpaid with respect to the Second Installment Consideration, Buyer may reduce the amount payable by Buyer as Third Installment Consideration by the amount of such overpayment. If the result of the resolution of such dispute is that Buyer has overpaid with respect to the Second Installment Consideration and the Third Installment Consideration is not enough to offset such overpayment, such amount may be recovered (to the extent paid) through the indemnification provided in Section 10.2. If the result of the resolution of such dispute is that Buyer has underpaid with respect to the Second Installment Consideration, the amount payable by Buyer as Third Installment Consideration shall be increased by the amount of such underpayment.

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          (ii) Notwithstanding Section 2.5(a), Buyer shall not be obligated to make any payment with respect to the Third Installment Consideration, the Catchup Amount or the Adjusted Catchup Amount, until any dispute with respect to the 2009 Audited Annual Net Income has been resolved in accordance with Section 2.8(b).

     Section 2.9 Sellers’ Representative. Each Selling Shareholder hereby appoints Mr. Yising Chan (the “Sellers’ Representative”) as such Selling Shareholder’s attorney-in-fact and representative, (i) to do any and all things and to execute any and all documents or other papers, in each such Selling Shareholder’s name, place and stead, in any way in which each such Selling Shareholder could do if personally present, in connection with this Agreement and the applicable Ancillary Documents and the transactions contemplated hereby and thereby, (ii) to amend, cancel or extend, or waive the terms of, this Agreement and any of the Ancillary Documents in a manner that would not disproportionately affect such Selling Shareholder as compared to the other Selling Shareholders, (iii) to act on behalf of such Selling Shareholder with respect to any claims (including the settlement thereof) made by Buyer or such Selling Shareholder for indemnification pursuant to Article X or any dispute arising under Section 2.8 in a manner that would not disproportionately affect such Selling Shareholder as compared to the other Selling Shareholders or which does not relate to a breach by such Selling Shareholder specifically, of its representations, warranties or obligations in connection with this Agreement and the applicable Ancillary Documents. The power of attorney granted hereby is coupled with an interest. In the event that the Sellers’ Representative becomes unable or unwilling to continue in his or her capacity as the Sellers’ Representative under this Agreement, the Selling Shareholders shall promptly appoint a successor Sellers’ Representative by written notice to Buyer, and the appointment of such successor Sellers’ Representative shall become effective only upon Buyer’s receipt of such written notice. Each Selling Shareholder hereby agrees that any successor Sellers’ Representative so selected by such Selling Shareholder shall be entitled to act as such under this Agreement on behalf of such Selling Shareholder. All references herein to the Sellers’ Representative shall include any such successor Sellers’ Representative. Except as otherwise expressly set forth herein, the Selling Shareholders hereby consent to the taking by the Sellers’ Representative of any and all actions and the making of any decisions required or permitted to be taken by such Selling Shareholders under this Agreement. The Selling Shareholders shall be bound by all actions taken by the Sellers’ Representative in his or her capacity as the Sellers’ Representative.

ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES

The Seller Parties, severally and not jointly, represent and warrant to Buyer as of the date hereof and as of the First Closing Date (except as otherwise provided) as though made as of the First Closing Date as follows:

     Section 3.1 Due Organization, Good Standing and Power.

          (a) The Company is a company duly organized, validly existing and in good standing under the laws of the Cayman Islands. The Company has the requisite power and authority to own, lease and operate its assets and to conduct the business now being conducted by it and, if applicable, is duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification except where the failure to be so qualified or in good standing would not reasonably be

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expected, individually or in the aggregate, to have a Material Adverse Effect on the Company. The Company has all requisite power and authority to enter into this Agreement and the Ancillary Documents to which it is a party and to perform its obligations hereunder and thereunder.

          (b) The Company is a holding company. Except as set forth in Section 3.1(b) to the Disclosure Schedule, the Company has no liabilities or obligations and is not a party to any Contract, other than (i) this Agreement, the Ancillary Documents to which it is a party and such other Contracts as are described in Section 3.1(b) of the Disclosure Schedule, and (ii) any liabilities or obligations relating solely to the transactions contemplated by this Agreement, the Ancillary Documents to which the Company is a party or the Contracts described in Section 3.1(b) of the Disclosure Schedule.

     Section 3.2 Capitalization; Valid Issuance. The Shares set forth in Section 3.2 of the Disclosure Schedule constitute the only issued and outstanding equity capital of the Company including without limitation, any options and warrants and convertible bonds convertible into or exercisable or exchangeable for Company Ordinary Shares, which represents 100% of the Company’s equity capital. All of the Shares were duly authorized for issuance without violation of any preemptive or similar rights and are validly issued and, except for the Company Ordinary Shares issuable upon exercise of the stock options, fully paid and nonassessable. As of the First Closing, the Selling Shareholders shall own 100% of such Shares (excluding the Company Options to be cancelled in accordance with the provisions of this Agreement).

     Section 3.3 Group Companies.

          (a) Section 3.3 of the Disclosure Schedule sets forth for each of the Group Companies (i) its jurisdiction of incorporation, formation or organization, as applicable, and (ii) the number of authorized, issued and outstanding shares of each class of its capital stock or other authorized, issued and outstanding equity interests, as applicable, the names of the holders thereof, and the number of shares or percentage interests, as applicable, held by each such holder. Each of the Group Companies is duly incorporated or formed, as applicable, validly existing and, in good standing under the Laws of its jurisdiction of incorporation or formation, as applicable, has the requisite corporate or other applicable organizational power and authority to own, lease and operate its assets and to carry on its business now being conducted by it, except for such failure to have such power or authority or to be so qualified or licensed or in good standing, as the case may be, as would not, individually or in the aggregate, (i) adversely affect the ability of such Group Company to conduct the Business or (ii) otherwise be reasonably expected to have a Material Adverse Effect on the Group Companies. All the issued and outstanding shares of capital stock or other equity interests of the Group Companies indicated as being owned by the Company in Section 3.3 of the Disclosure Schedule are owned of record, free and clear of any Encumbrances, except Permitted Encumbrances. All of such issued and outstanding shares or other equity interests of the Group Companies have been validly issued, are fully paid and, if applicable, nonassessable and have not been issued in violation of any preemptive or similar rights, if any. Except as disclosed in Section 3.3 of the Disclosure Schedule, there is no existing option, warrant, call, right, commitment or other agreement of any character to which any Seller Party or Group Company is a party requiring, and there are no securities of any Group Company outstanding which upon conversion or exchange would require, the issuance, sale or transfer or repurchase or redemption or otherwise acquisition of any additional shares of capital stock, issued or unissued, or other equity securities of any Group Company or other

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securities convertible into, exchangeable for or evidencing the right to subscribe for or purchase shares of capital stock or other equity securities of such Group Company or relating to dividends or voting rights. Except as contemplated by the Structure Agreements and as disclosed in Section 3.3(a) to the Disclosure Schedule, none of the Group Companies is a party to any voting trust, other voting agreement or Contract with respect to any of the Shares or to any agreement relating to the issuance, sale, redemption, transfer or other disposition of the capital stock of any Group Company.

          (b) No shares of capital stock or other equity or ownership interests of any Group Company have been issued in violation of any rights, agreements, arrangements or commitments under any provision of applicable Law, the certificate of incorporation or bylaws or comparable organizational documents of any Group Company or any Contract to which any Group Company is a party or by which such Group Company is bound.

     Section 3.4 Corporate Records. The certificates of incorporation, memorandum and articles of association, by-laws or comparable organizational documents and business licenses of each Group Company are in full force and effect. None of the Group Companies is in violation of any of the provisions of its certificate of incorporation, memorandum and articles of association, bylaws or comparable organizational documents. The transfer books and minute books of each Group Company are true and complete in all material respects and record all the matters required to be recorded therein.

     Section 3.5 Financial Statements.

          (a) The Company has delivered to Buyer (i) complete copies of the Company’s audited consolidated balance sheets as of December 31, 2005 and 2006, and the related statements of operations, shareholders’ equity and cash flows for the years ended December 31, 2005 and 2006, together with the notes to such financial statements (the “Audited Financial Statements”), (ii) complete copies of the Company’s reviewed consolidated balance sheet as of June 30, 2007, the related statement of operations for the six months ended June 30, 2007 and the related statement of shareholders’ equity and cash flows for the six months ended June 30, 2007, together with the notes to such financial statements (the “Reviewed Financial Statements”) and (iii) complete copies of the Company’s consolidated balance sheet as of September 30, 2007, the related statement of operations for the nine months ended September 30, 2007 and the related statements of shareholders equity and cash flows for the nine months ended September 30, 2007, together with the notes to such financial statements which are attached hereto as Exhibit A (the “Unaudited Financial Statements”). The Audited Financial Statements, the Reviewed Financial Statements and the Unaudited Financial Statements are collectively referred to herein as the “Financial Statements”. The Financial Statements (i) are true, correct and complete in all material respects and have been prepared in accordance with the books and records of the Company and its Subsidiaries, (ii) have been prepared in accordance with U.S. GAAP applied on a consistent basis throughout the periods indicated therein, and (iii) fairly present, in all material respects, the financial condition and results of operations and cash flows of the business of the Company and its Subsidiaries, as of and for the periods to which they relate, subject, in the case of the Reviewed Financial Statements and the Unaudited Financial Statements, to normal year-end audit adjustments (which are not, in the aggregate, material to the Group Companies, taken as a whole). For the purposes hereof, the consolidated balance sheet of the Company and its Subsidiaries as of September 30, 2007 is referred to as the “Balance Sheet” and September 30, 2007 is referred to as the “Balance Sheet Date”. None of the Group Companies has made any changes in its accounting methods or principles since

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the Balance Sheet Date (other than with respect to provisioning for doubtful accounts and such changes as required by Law or U.S. GAAP). The books of account and financial records of the Group Companies have been prepared and are maintained in accordance with sound accounting practice.

          (b) Since the Balance Sheet Date, none of the Group Companies has sustained any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree; and, since the Balance Sheet Date, there has not been any material change in the share capital, short-term debt or long-term debt of any of the Group Companies or any Material Adverse Change.

          (c) Except as set forth in Section 3.5(c) of the Disclosure Schedule, the Company maintains a system of internal accounting controls that provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded in reasonable detail, accurately and fairly reflect in all material respects the transactions and dispositions of assets of such entity as necessary to permit preparation of financial statements in conformity U.S. GAAP, (iii) access to material assets is permitted only in accordance with management’s general or specific authorization, (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate actions are taken with respect to any differences and (v) each of the Group Companies has made and kept books, records and accounts which, in reasonable detail, accurately and fairly reflect in all material respects the transactions and dispositions of assets of such entity and provide a sufficient basis for the preparation of financial statements in accordance with U.S. GAAP.

          (d) There are no liabilities of any kind whatsoever (whether absolute, accrued, contingent or otherwise and whether due or to become due) of the Group Companies that would be required to be reflected in, or disclosed in the notes to, financial statements prepared in accordance with U.S. GAAP other than liabilities and obligations (i) reflected or reserved against on the Balance Sheet or disclosed in the notes thereto, (ii) arising in the ordinary course of the business of the Group Companies since the Balance Sheet Date or (iii) that would not, individually or in the aggregate, reasonably be expected to be material to the Group Companies, taken as a whole.

     Section 3.6 Authorization, Enforceability, No Approvals or Conflicts.

          (a) The execution and delivery by the Company of this Agreement and the Ancillary Documents to which it is a party and the performance by the Company of its obligations hereunder and thereunder have been duly authorized by all necessary corporate or other applicable organizational action of the Company. Each of this Agreement and the Ancillary Documents to which it is a party has been duly executed and delivered by the Company and, assuming due authorization, execution and delivery by the other party/parties thereto, constitutes a valid and binding agreement of the Company, enforceable against it in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at Law).

          (b) Except as set forth in Section 3.6(b) to the Disclosure Schedule, the execution, delivery and performance by the Company of this Agreement and the Ancillary

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Documents to which it is a party, and the consummation by the Company of the transactions contemplated hereby and thereby do not and will not (i) violate, conflict with or result in a breach of the organizational documents of any of the Group Companies, (ii) violate, conflict with or result in a breach of, or constitute a default by any of the Group Companies (or create an event which, with notice or lapse of time or both, would constitute a default) or give rise to any right of termination, cancellation or acceleration under, or result in the creation of any Encumbrance upon any of the properties of any of the Group Companies or on the Shares under, any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, lease, contract, agreement or other instrument to which any of the Group Companies or any of their respective properties is bound or (iii) violate or result in a breach of any Governmental Order or Law applicable to any of the Group Companies or any of their respective properties, except, with respect to the foregoing clauses (ii) and (iii) above, as would not reasonably be expected to have a Material Adverse Effect on the Group Companies, or as would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Company to consummate the transactions contemplated by this Agreement or the Ancillary Documents to which it is a party. Except as set forth on Section 3.6(b) to the Disclosure Schedule, no Governmental Authorizations are required for the execution, delivery and performance by the Group Companies of this Agreement and the consummation of the transaction by the Seller Parties.

     Section 3.7 Compliance with Law; Governmental Authorizations. Except as would not reasonably be expected to have a Material Adverse Effect on the Group Companies and none of the Group Companies is in violation of any Governmental Order or Law applicable to them or any of their respective properties.

     Section 3.8 Licenses. Each of the Group Companies has obtained all licenses, franchises, concessions, consents, authorizations, approvals, orders, certificates and permits of and from, and has made all declarations and filings with, all Governmental Authorities necessary to own, lease, license and use its properties and assets and conduct its business in the manner currently conducted and such licenses, consents, authorizations, approvals, orders, certificates or permits contain no materially burdensome restrictions or conditions for the conduct of the Business as currently conducted. To the Knowledge of Seller Parties, no regulatory body is considering modifying, suspending or revoking any such licenses, consents, authorizations, approvals, orders, certificates or permits and each of the Group Companies is in material compliance with the provisions of all such licenses, consents, authorizations, approvals, orders, certificates or permits.

     Section 3.9 Litigation. There are no suits, actions, arbitrations, proceedings or investigations pending or, to the Knowledge of Seller Parties, threatened against any of the Company and the Group Companies.

     Section 3.10 Absence of Certain Changes. Since the Balance Sheet Date and through the date of this Agreement, the Business has been conducted in all material respects only in the ordinary course consistent with past practice. Without limiting the generality of the foregoing and since the Balance Sheet Date and through the date of this Agreement, there has not been:

          (a) any damage, destruction or loss (whether or not covered by insurance) materially affecting the business or assets of the Group Companies;

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          (b) any sale, purchase, option, subscription, warrant, call, commitment or agreement of any character granted or made by any of the Group Companies in respect of its capital stock or other equity interests, other than the granting of Company Options in the ordinary course of business;

          (c) any declaration, setting aside or payment of any dividend or other distribution in respect of any shares of capital stock of any Group Company or any repurchase, redemption or other acquisition by any Group Company of any outstanding shares of capital stock or other securities of, or other ownership interest in, any Group Company;

          (d) any material loans, advances or capital contributions to, or investments in, any Person or payment of any fees or expenses to any Seller Party or any Affiliate of any Seller Party other than salaries and normal business expenses paid to employees in the ordinary course of business;

          (e) any acquisition of assets or disposition of assets by any of the Group Companies, excluding (i) any single acquisition or disposition of assets, which does not exceed RMB2,000,000 and (ii) one or more related acquisitions or dispositions of assets, the aggregate value of which does not exceed RMB10,000,000;

          (f) any merger or consolidation by any of the Group Companies with any Person;

          (g) other than in the ordinary course of business, capital expenditures by any of the Group Companies, which in the aggregate exceed RMB1,000,000;

          (h) any incurrence, assumption or guarantee of any Indebtedness for borrowed money by any of the Group Companies, which in aggregate exceeds RMB1,000,000;

          (i) any Encumbrance of material assets of any of the Group Companies, other than Permitted Encumbrances;

          (j) other than in the ordinary course of business, any increase in the compensation of employees of any of the Group Companies;

          (k) any loan made by any of the Group Companies to any director, officer or other member of senior management of any of the Group Companies other than reasonable travel and business expense advances incurred in the ordinary course of business;

          (l) any material change in the accounting methods or practices followed by any of the Group Companies (other than such changes that have been required by Law or U.S. GAAP); or

          (m) any agreement or commitment by any of the Group Companies to do any of the foregoing.

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     Section 3.11 Tax Matters. Except as set forth in Section 3.11 to the Disclosure Schedule

          (a) All Tax Returns required to be filed pursuant to applicable Law by or on behalf of any Group Company have been filed in a timely manner (within any applicable extension periods) and are true, correct and complete in all material respects, (ii) all Taxes of the Group Companies have been timely paid in full or will be timely paid in full by the due date thereof if due prior to the First Closing Date, except for those contested in good faith, and the Group Companies have adequately provided for all Taxes in the Financial Statements for which they are required to provide, (iii) none of the Group Companies has liability for Taxes in excess of the accruals for Taxes reflected on the Financial Statements to the extent such Taxes are required to be accrued under U.S. GAAP and (iv) no unresolved claims have been asserted in writing by a Taxing Authority with respect to any Taxes of any of the Group Companies;

          (b) Each of the Group Companies is and has been in compliance with all applicable Laws relating to the payment, withholding and exemptions of Taxes and has duly and timely withheld from employee salaries, wages and other compensation and has paid over to the appropriate Taxing Authorities all amounts required to be so withheld and paid over for all periods prior to and including the First Closing Date under all applicable Laws;

          (c) No submissions made to any Taxing Authority in connection with obtaining Tax exemptions, Tax holidays or reduced Tax rates contained any material misstatement or omission that would have affected the granting of such Tax exemptions, Tax holidays or reduced Tax rates;

          (d) No written claim has been made by any Taxing Authority in any jurisdiction where a Group Company does not file Tax Returns that it is or may be subject to Tax by that jurisdiction. No extensions or waivers of statutes of limitations with respect to any Tax Returns have been given by or requested from any Group Company. There are no audits or investigations by any Taxing Authority of any of the Group Companies in progress nor, to the Knowledge of Seller Parties, does any Group Company have actual knowledge of any pending or threatened audit or investigation by any Taxing Authority;

          (e) All deficiencies asserted or assessments made against any Group Company as a result of any examinations by any Taxing Authority have been fully paid in accordance with their stipulated due date;

          (f) No Group Company is a party to any tax indemnity, tax allocation or tax sharing or similar agreement or arrangement (whether or not written) pursuant to which it could have any obligation to make any payments after the First Closing; and

          (g) Other than in respect of Taxes not yet due and payable, there are no Encumbrances for Taxes upon the assets of any Group Company.

     Section 3.12 Dividends and Distributions.

          (a) Retained earnings of CGEN Network, for purposes of declaring and paying dividends, were computed in accordance with PRC GAAP and all dividends paid were declared and paid according to the laws and regulations of the PRC as then in effect. No such dividends or other distribution were subject to withholding or other tax under the

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laws and regulations of the PRC that were not paid or withheld and were otherwise free and clear of any other tax, withholding or regulations in the PRC that were not otherwise paid, withheld or complied with (as the case may be). CGEN Network has received the necessary governmental approvals, certificates, permits and other similar permission to pay such dividends as it has as of the date of this Agreement.

          (b) All contractual and other payments made by the Group Companies (other than CGEN Network) to CGEN Network have been made according to the terms and conditions of the Structure Agreements and no such payments have been subject to withholding taxes under the laws and regulations of the PRC that have not been withheld and have been otherwise free and clear of any withholding tax in the PRC that were not otherwise withheld.

     Section 3.13 Officers, Employees and Labor.

          (a) Each of the Group Companies has complied in all material respects with all applicable Laws relating to the employment of labor, including provisions thereof relating to wages, hours, social welfare, equal opportunity and collective bargaining. There is no organized labor dispute or claim pending, or to the Knowledge of the Seller Parties, threatened, against or affecting any of the Group Companies. There is no organized labor strike or slowdown pending, or to the Knowledge of the Seller Parties, threatened, against or affecting any of the Group Companies. None of the Group Companies has any Contract with any labor union.

          (b) Section 3.13(b)of the Disclosure Schedule sets forth a list of all officers of the Group Companies and all other employees and consultants whose current annual salary or rate of compensation (including bonuses and commissions) is in excess of RMB1,000,000 (or equivalent in a different currency), together with their current job titles or relationship to the Group Companies. The Company does not have any employees in the Cayman Islands.

          (c) To the Knowledge of the Seller Parties, none of the employees of the Group Companies is obligated under any Contract, or subject to any Governmental Order that would prevent such employees from assigning to a Group Company inventions conceived or reduced to practice or copyrights for materials developed in connection with services rendered to the Group Company. The following do not or will not, as the case may be, conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any Contract between any Group Company and such employee: (i) the execution, delivery and performance of any of this Agreement and the Ancillary Documents to which any of the Seller Parties is a party and (ii) the conduct of the Business of any Group Company as currently conducted.

          (d) Other than the acceleration of the Company’s stock options as disclosed to Buyer, none of the execution, delivery and performance of any of this Agreement and the Ancillary Documents to which any of the Seller Parties is a party will constitute an event under any benefit plan or individual agreement that will or may result in any payment (whether of severance pay or otherwise), acceleration, vesting or increase in material benefits with respect to any employee, former employee, consultant, agent or director of the Group Companies.

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          (e) Except as set forth in Section 3.13(e) to the Disclosure Schedule and except as required by applicable Laws, none of the Group Companies has any obligation or liability to provide retirement, death, disability or other welfare benefits to any of the present or past employees of the Group Companies, or to any other person.

          (f) (i) There is no unfair labor practice complaint pending or, to the Knowledge of the Seller Parties, threatened against any of the Group Companies before any competent Governmental Authority; and (ii) except as would not reasonably be expected to have a Material Adverse Effect on the Group Companies, there has been no violation of any laws, regulations, rules, orders, decrees, guidelines, judicial interpretations, notices or other legislation of the Cayman Islands, the PRC, the United States or any other jurisdiction applicable to any of the Group Companies relating to discrimination in the hiring of employees, social welfare benefits, equal opportunity, collective bargaining, promotion or pay of employees, applicable wage or hour laws, the payment or withholding of payroll or similar taxes for employees, or any other applicable law or regulation concerning the employees of the Group Companies.

     Section 3.14 Loans. Except as described in the Structure Agreements, none of the Group Companies has, directly or indirectly (A) extended credit, arranged to extend credit, or renewed any extension of credit, in the form of a personal loan, to or for any director or executive officer of the Seller Parties and the Group Companies, or to or for any family member or Affiliate of any director or executive officer of the Seller Parties and the Group Companies or (B) made any material modification, including any renewal thereof, to any term of any personal loan to any director or executive officer of the Seller Parties or the Group Companies, or any family member or Affiliate of any such director executive officer, which loan was outstanding as of the date hereof.

     Section 3.15 Share Option and Other Plans. (a) Except as set forth in Section 3.15 of the Disclosure Schedule, none of the Group Companies has any pension, profit sharing, stock option, employee stock purchase, severance or other plan, program, policy, practice or Contract providing for incentives or other compensation which has been maintained, contributed to, or required to be contributed to by any Group Company for the benefit of any current or former employees, directors or consultants (aside from any salary or commission payable in the ordinary course), or any other employee benefit plan with respect to which any Group Company has or may have any liability or obligation. Except for required contributions or benefit accruals for the current plan year, no material liability has been or is expected to be incurred by any of the Group Companies under or pursuant to any applicable Law relating to benefit plans and, to the Knowledge of Seller Parties, no event, transaction or condition has occurred or exists that is reasonably likely to result in any such material liability to any of the Group Companies. Except as set forth in Section 3.15 to the Disclosure Schedule, the Company and the Group Companies have performed in all material respects all obligations required to be performed by them under, are not in default or violation of, and to the Knowledge of Seller Parties there is not any default or violation by any other party to each plan, program, policy, practice or Contract set forth in Section 3.17 of the Disclosure Schedule, and each has been established and maintained in all material respects in accordance with its terms and in compliance with applicable Laws.

          (b) At the First Closing, all unexercised Company Options shall be cancelled.

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     Section 3.16 Intellectual Property.

          (a) The Group Companies own or have the rights to use all Intellectual Property material to the Business.

          (b) To the Knowledge of Seller Parties, none of the Group Companies has taken any action or failed to take any action that could reasonably be expected to result in the abandonment, cancellation, forfeiture, relinquishment, invalidation or unenforceability of any of the registered Intellectual Property material to the Business (including the failure to pay any filing, examination, issuance, post-registration and maintenance fees, annuities and the like).

          (c) Each contract or license pursuant to which (i) any third Person has granted to any Group Company a license or rights to any material Intellectual Property or (ii) any Group Company has granted to a third Person any license or rights to any material Intellectual Property owned by any Group Company, is in full force and effect, and none of the Group Companies is in material default under any of such licenses and, to the Knowledge of Seller Parties, no other Person who is a party to any of such licenses is in material default thereunder or has exercised any termination rights with respect thereto (such contracts and licenses the “IP Licenses”).

          (d) None of the operations, conduct or products of any Group Company infringes upon or is in violation of any Intellectual Property of any Person.

          (e) No Group Company is a party to any pending legal proceedings which involve a claim of infringement, unauthorized use, or violation of any intellectual property right by any Person against such Group Company or challenging the ownership, use, validity or enforceability of, any material Intellectual Property owned by or exclusively licensed to such Group Company, and (ii) no Group Company has received any notice or claim challenging a Group Company ownership of any of the Intellectual Property owned (in whole or in part). No Intellectual Property owned by or licensed to the Group Companies is subject to any outstanding order, judgment or decree restricting the use or licensing thereof by the Group Companies.

          (f) To the Knowledge of Seller Parties, no Person is infringing, violating, misusing or misappropriating any Intellectual Property owned by any Group Company, except for such infringement, violation, misuse or misappropriation as would not reasonably be expected to have a Material Adverse Effect on the Group Companies, and no written claims to such effect have been made against any Person by any Group Company.

          (g) To the Knowledge of Seller Parties, the consummation of the transactions contemplated hereby and by the Ancillary Documents to which any Seller Party is a party will not result in the loss or impairment of any Group Company’s right to own or use any of the material Intellectual Property owned by any Group Company.

     Section 3.17 Contracts.

          (a) Except as set forth in Section 3.17 of the Disclosure Schedule, none of the Group Companies is bound by (i) any Contract which contains restrictions with respect to payment of dividends or any other distribution in respect of its capital stock, partnership interests or membership interests; (ii) any Contract requiring the applicable Group Company

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to make future capital contributions to any entity; (iii) any Contract relating to Indebtedness of the applicable Group Company in excess of RMB2,000,000; (iv) any loan or advance by a Group Company to, or investment by a Group Company in, any Related Party; (v) any loan or advance in an amount in excess of RMB500,000 (either individually or in the aggregate) to, or investment by a Group Company in, any Person other than a Related Party; (vi) any management, service, consulting or any other similar type of Contract requiring payment of fees in excess of RMB500,000 per annum; (vii) any material warranty, guaranty or similar undertaking with respect to contractual performance extended by any Group Company other than in the ordinary course of business; (viii) any IP License that is material to the business of any Group Company; (ix) any Contract involving payment in excess of RMB2,000,000 per annum that cannot be terminated by a Group Company that is a party to such Contract without material liability upon less than ninety (90) days’ notice; (x) any Contract that governs any joint venture, partnership or other cooperative arrangement or any other relationship involving a sharing of profits; (xi) any Contract that would result in the merger with or into or consolidation into another Person; (xii) any Contract for the sale of any of the assets of any Group Company with a sale price in excess of RMB250,000; (xiii) any material Contract that requires a consent to or otherwise contains a provision relating to a “change in control”, or any Contract that would prohibit or delay the consummation of the transactions contemplated by this Agreement or the Ancillary Documents to which the Company is a Party or that would trigger, give rise to, accelerate or augment any liabilities or terminate or modify any rights of any Group Company as a result of the consummation of the transactions contemplated hereby and thereby; (xiv) any Contract that restricts the Group Companies from engaging in any line of business in any geographic area or competing with any Person that materially impairs the operation of the Group Companies, individually or taken as whole; (xv) any Contract with Carrefour Commercial Companies or Wal-Mart (China) Investment Company, Ltd or any of their respective Subsidiaries or Affiliates; or (xvi) any material amendment, modification or supplement in respect of any of the foregoing made other than in the ordinary course of business consistent with past practice (each of (i) to (xvi) above, a “Material Contract”).

          (b) Other than Material Contracts which have terminated or expired in accordance with their terms, each Material Contract is a valid and binding agreement of the relevant Group Company and, to the Knowledge of the Seller Parties, each of the other parties thereto, enforceable against the Group Company in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally, and general equitable principles (whether considered in a proceeding in equity or at Law). Except as set forth in Section 3.17 of the Disclosure Schedule, neither the Company nor any Subsidiary is in breach of, or default under, any Material Contract to which it is a party, except for such breaches or defaults that would not have a Material Adverse Effect on the Group Companies.

     Section 3.18 Certain Transactions. (i) None of the Group Companies is indebted, either directly or indirectly, to any Related Party in an aggregate amount in excess of RMB100,000 other than for payment of salary for services rendered and reasonable expenses, (ii) no Related Party is indebted to any of the Group Companies or has any direct or indirect ownership interest (other than as a result of any ownership interest held in the Company) in any of the Group Companies, (iii) to the Knowledge of Seller Parties, no Related Party has any direct or indirect ownership interest (other than an equity interest of 5% or less in a publicly traded company), or contractual relationship, with any Person with which any of the Group Companies has a material business relationship or any Person which, directly or

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indirectly, competes with any of the Group Companies, and (iv) no Related Party is, directly or indirectly, a party to any material Contract with any Group Company.

     Section 3.19 Structure Agreements. Section 3.19 of the Disclosure Schedule sets forth all of the Structure Agreements, which constitute all of the agreements, contracts and instruments enabling the Company to effect control over and consolidate with its financial statements each Group Company. Each of the Group Companies which is a party to the Structure Agreements has full power, authority and legal right to execute, deliver and perform their respective obligations under each of the Structure Agreements to which it is a party, and has authorized, executed and delivered each of the Structure Agreements to which it is a party, and such obligations constitute valid, legal and binding obligations enforceable against it in accordance with the terms of each of the Structure Agreements, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally, and general equitable principles (whether considered in a proceeding in equity or at Law). The execution, delivery and performance of each Structure Agreement by the parties thereto did not and is not reasonably expected to (i) result in any violation of the business license, articles of association, other constitutional documents (if any) or permits of the Group Companies; (ii) result in any violation of or penalty under any laws, regulations, rules, orders, decrees, guidelines, judicial interpretations, notices or other legislation of the PRC as in effect as of the date hereof; or (iii) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any other Contract, license, indenture, mortgage, deed of trust, loan agreement, note, lease or other agreement or instrument in effect as of the date hereof to which any of them is a party or by which any of them is bound or to which any of their property or assets is subject; except, in the case of clause (ii) and (iii), as would not reasonably be expected to have a Material Adverse Effect on the Group Companies. Each Structure Agreement is in full force and effect and none of the Group Companies which is a party to any Structure Agreement is in breach or default in the performance or observance of any of the terms or provisions thereof. To the Knowledge of the Seller Parties, none of the parties to any Structure Agreement has sent or received any written communication regarding termination of, or intention not to renew, any of the Structure Agreements, and no such termination or non-renewal has been threatened by any of the parties thereto. No breach or default under any of the Structure Agreements by any Group Company will occur as a result of the execution, delivery and performance of this Agreement or any Ancillary Document to which the Company is a party. Except as set forth in Section 3.19 of the Disclosure Schedule consummation of the transactions contemplated by this Agreement and the Ancillary Documents to which the Company is a party will not (and will not give any Person a right to) terminate or modify any rights of, or accelerate or augment any obligation of, any Group Company under any Structure Agreement.

     Section 3.20 Compliance with Laws.

          (a) None of the Group Companies has received any written notice or other communication from any Governmental Authority since the Balance Sheet Date regarding (A) any actual, alleged, or potential violation of, or failure to comply with, any applicable Law, or (B) any actual, alleged, or potential obligation on the part of any Group Company to undertake, or to bear all or any portion of the cost of, any remedial action of any nature.

          (b) None of the Group Companies or any director, officer, agent, employee, or any other Person associated with or acting for or on behalf of the foregoing, has offered, paid, promised to pay, or authorized the payment of any money or corporate fraud, or

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offered, given a promise to give, or authorized the giving of anything of value, to any Government Official, to any political party or official thereof or to any candidate for political office (or to any Person where such Group Company, director, officer, agent, employee or other Person knew that all or a portion of such money or thing of value would be offered, given or promised, directly or indirectly, to any Government Official, political party, party official, or candidate for political office) for any unlawful contribution, gift, entertainment or other unlawful expenses relating to a political activity, or for the purpose of:

     (i) (x) influencing any act or decision of such Government Official, political party, party official, or candidate in his or its official capacity, (y) inducing such Government Official, political party, party official or candidate to do or omit to do any act in violation of the lawful duty of such Government Official, political party, party official or candidate, or (z) securing any improper advantage, or (ii) inducing such Government Official, political party, party official, or candidate to use his or its influence with any Governmental Authority to affect or influence any act or decision of such Governmental Authority, in order to assist such Group Company in obtaining or retaining business for or with, or directing business to any Group Company.

          (c) To the Knowledge of Seller Parties, none of the beneficial owners of any interest in any Group Company is controlled by a Governmental Authority.

     Section 3.21 Environmental Matters.

     Except as would not reasonably be expected to have a Material Adverse Effect on the Group Companies:

          (a) Each of the Group Companies is in compliance with all applicable Environmental Laws.

          (b) None of the Group Companies has received any Environmental Claim or notice of any threatened Environmental Claim.

          (c) None of the Group Companies has entered into, has agreed to, or is subject to, any decree or order or other similar requirement of any Governmental Authority under any Environmental Laws.

          (d) None of the Group Companies has released Hazardous Materials into the environment in violation of Environmental Laws or in a manner that would reasonably be expected to result in material liability under Environmental Laws, and to the Knowledge of Seller Parties, no other Person has released Hazardous Materials into the environment at any property currently owned or operated by any of the Group Companies in violation of Environmental Laws or in a manner that would reasonably be expected to result in material liability to any of the Group Companies under Environmental Laws.

     Section 3.22 Insurance. Set forth in Section 3.22 of the Disclosure Schedule is a list of the insurance policies of each of the Group Companies as of the date hereof. All such insurance policies are in full force and effect. There are no material claims by the Group Companies under any such insurance policy as to which any insurance policy is denying liability or defending under a reservation of rights clause.

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     Section 3.23 Personal Property Assets.

          (a) Each of the Group Companies has good title to, or holds by valid and existing lease or license, all the material tangible personal property assets reflected as assets of the Group Companies on or assets acquired after the Balance Sheet Date, free and clear of all Encumbrances except for Permitted Encumbrances.

          (b) The Group Companies own, or have valid leasehold interests in, all material tangible personal property assets necessary for the conduct of the Business as currently conducted and all such assets are in reasonably good maintenance, operating condition and repair, normal wear and tear excepted, other than machinery and equipment under repair or out of service in the ordinary course of business.

     Section 3.24 Real Property.

          (a) Leased Properties. Section 3.24(a) of the Disclosure Schedule lists all real property leased or subleased by any of the Group Companies as office space. With respect to each such lease and sublease:

          (i) such lease or sublease is in full force and effect, in all material respects, assuming the respective lessor holds valid title certificate to such properties; and

          (ii) (A) No Group Company is, and to the Knowledge of Seller Parties, no other party to the lease or sublease is, in material default beyond any applicable notice, grace or cure period and (B) none of the Group Companies has received a written notice of default with respect to such lease or sublease.

          (b) Land Use Rights. None of the Group Companies owns or has legal or equitable title in any real property.

     Section 3.25 No State Assets. None of the assets of the Group Companies constitute state-owned assets and, accordingly, are not required to undergo any form of valuation under applicable Law in the PRC governing the transfer of state-owned assets prior to the consummation of the transactions contemplated herein or in any of the Ancillary Documents to which the Company is a party.

     Section 3.26 Brokers. Except as set forth in Section 3.26 of the Disclosure Schedule, no finder, broker, agent, financial advisor or other intermediary has acted on behalf of the Seller Parties, the Group Companies or any of their respective Affiliates in connection with the negotiation or consummation of this Agreement or the Ancillary Documents to which the Company is a party, or any of the transactions contemplated hereby or thereby.

     Section 3.27 No Other Representations and Warranties.

          (a) Except for the representations and warranties contained in this Article III, the Company makes no other express or implied representation or warranty to Buyer.

          (b) Except for the representations and warranties contained in this Article III and (with respect to the Management Shareholder) in Article IV, the Management Parties make no other express or implied representation or warranty to Buyer.

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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS

     Each of the Selling Shareholders, severally and not jointly, represents and warrants to Buyer as of the date hereof and as of the First Closing Date (except as otherwise provided) as though made as of the First Closing Date as follows:

     Section 4.1 Authorization, Enforceability. Such Selling Shareholder that is not an individual has been duly organized, is validly existing, and is in good standing in its jurisdiction of organization, has the corporate power and authority to execute and deliver this Agreement and the Ancillary Documents to which it is a party and perform its obligations hereunder and thereunder. The execution and delivery of this Agreement and the Ancillary Documents to which it is a party by such Selling Shareholder and the performance by such Selling Shareholder of its respective obligations hereunder and thereunder have been duly authorized by all necessary corporate or other applicable organizational action on the part of each such party. Each of this Agreement and the Ancillary Documents to which it is a party has been duly executed and delivered by such Selling Shareholder and, assuming due authorization, execution and delivery by the other party/parties thereto, constitutes a valid and binding agreement of such Selling Shareholder, enforceable against it in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at Law).

     Section 4.2 Ownership and Transfer of Offered Shares. Such Selling Shareholder is the only record and beneficial owner of the Offered Shares held by such Selling Shareholder and has valid title to such Offered Shares, free and clear of any and all Encumbrances other than restrictions set forth in the Company’s Shareholders Agreement dated December 7, 2006 (to the extent such Selling Shareholder is a party thereto, or otherwise bound thereby), which restrictions will terminate as of the First Closing. Such Selling Shareholder has the corporate or other applicable organizational power and authority to sell, transfer, assign and deliver such Offered Shares as provided in this Agreement, and such delivery will convey to Buyer valid title to such Offered Shares, free and clear of any and all Encumbrances.

     Section 4.3 No Approvals or Conflicts. The execution, delivery and performance by such Selling Shareholder of this Agreement and the Ancillary Documents to which it is a party, and the consummation by such Selling Shareholder of the transactions contemplated hereby and thereby do not and will not (i) violate, conflict with or result in a breach by such Selling Shareholder of the organizational documents of such Selling Shareholder, (ii) violate, conflict with or result in a breach of, or constitute a default by such Selling Shareholder (or create an event which, with notice or lapse of time or both, would constitute a default) or give rise to any right of termination, cancellation or acceleration under, or result in the creation of any Encumbrance upon such properties of such Selling Shareholder or on the Shares held by such Selling Shareholder under any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, lease, Contract, agreement or other instrument to which such Selling Shareholder or any of its respective properties is bound, (iii) violate or result in a breach of any Governmental Order or Law applicable to such Selling Shareholder or any of its properties or (iv) except as set forth in Section 4.3 of the Disclosure Schedule, require any order, consent, approval or authorization of, or notice to, or declaration, filing, application, qualification or registration by such Selling Shareholder with, any Governmental Authority, except, with respect to the foregoing clauses (ii), (iii) and (iv) above, as would not,

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individually or in the aggregate, reasonably be likely to have a material adverse effect on the ability of such Selling Shareholder to consummate the transactions contemplated by this Agreement or the Ancillary Documents to which it is a party.

     Section 4.4 No Competition. If such Selling Shareholder is a Management Shareholder, (i) such Selling Shareholder does not, nor does any Related Party of such Selling Shareholder, have any direct or indirect ownership interest (other than an equity interest of 5% or less in a publicly traded company), or contractual relationship, with any Person which, directly or indirectly, competes with any of the Group Companies, and (ii) neither such Selling Shareholder nor any of its Related Parties is, directly or indirectly, a party to any Contract (or, to the Knowledge of any Seller Party, any oral material Contract) with any Group Company.

     Section 4.5 Brokerage. Other than as disclosed in Section 3.26 of the Disclosure Schedule, there are no contracts, agreements or understandings between such Selling Shareholder and any person that would give rise to a valid claim against such Selling Shareholder or Buyer for a brokerage commission, finder’s fee or other like payment in connection with the offer and sale of the Offered Shares.

     Section 4.6 Investment. Such Selling Shareholder confirms that any FM Ordinary Shares to be received by such Selling Shareholder will be acquired for investment for the account of such Selling Shareholder, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and that such Selling Shareholder has no present intention of selling, granting any participation in, or otherwise distributing any of the FM Ordinary Shares, except in a manner consistent with the Registration Rights Agreement (defined in Section 7.5). By executing this Agreement, such Selling Shareholder further represents that it has no contract, undertaking, agreement, or arrangement with any person to sell, transfer, or warrant participation to that person or to any third person, with respect to any of the FM Ordinary Shares.

     Section 4.7 Accredited Investor; Foreign Investor. Such Selling Shareholder represents that such Selling Shareholder is not involved in a plan or scheme designed to evade the registration provisions of the Securities Act and either (a) presently qualifies, and will as of the First Closing Date, qualify, as an “accredited investor” within the meaning of Regulation D of the rules and regulations promulgated under the Securities Act or (b) is not presently, and will not be as of the First Closing Date, a “U.S. person” within the meaning of Regulation S of the rules and regulations promulgated under the Securities Act.

     Section 4.8 No Other Representations and Warranties.

          (a) Except for the representations and warranties contained in this Article IV, the Selling Shareholders (other than the Management Shareholder) make no other express or implied representation or warranty to Buyer.

          (b) Except for the representations and warranties contained in this Article IV and in Article III, the Management Shareholder makes no other express or implied representation or warranty to Buyer.

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ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BUYER

     Buyer hereby represents and warrants to the Seller Parties and the Other Selling Shareholders as of the date hereof and as of the First Closing Date (except as otherwise provided) as though made as of the First Closing Date as follows:

     Section 5.1 Organization. Buyer is a corporation duly incorporated, validly existing and in good standing under the Laws of the Cayman Islands. Buyer has all requisite corporate power and authority to own its assets and to carry on its business as now being conducted by it and is duly qualified or licensed to do business and is in good standing in the jurisdictions in which the ownership of its property or the conduct of its business requires such qualification or license, except where the failure to be so qualified or licensed would not reasonably be expected, individually or in the aggregate, to have a material adverse effect on the ability of Buyer to consummate the transactions contemplated by this Agreement and by the Ancillary Documents to which it is a party, and would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on Buyer.

     Section 5.2 Authorization, Enforceability. Buyer has the corporate power and authority to execute and deliver this Agreement and the Ancillary Documents to which it is a party and perform its obligations hereunder and thereunder. The execution and delivery of this Agreement and the Ancillary Documents to which it is a party by Buyer and the performance by it of its obligations hereunder and thereunder have been duly authorized by all necessary corporate action on the part of Buyer and no other corporate or stockholder proceedings or actions are required to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by Buyer and, assuming due authorization, execution and delivery by the other parties thereto, constitutes a valid and binding agreement of Buyer, enforceable against it in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at Law) and subject to the effect of public policy on the enforceability of the indemnification provisions in connection with registration rights provided to Selling Shareholders.

     Section 5.3 No Approvals or Conflicts. The execution, delivery and performance by Buyer of this Agreement and the Ancillary Documents to which it is a party and the consummation by Buyer of the transactions contemplated hereby and thereby do not and will not (i) violate, conflict with or result in a breach by Buyer of the certificate of incorporation or memorandum and articles of association of Buyer, (ii) violate, conflict with or result in a breach of, or constitute a default by Buyer (or create an event which, with notice or lapse of time or both, would constitute a default) or give rise to any right of termination, cancellation or acceleration under, or result in the creation of any Encumbrance upon any of the properties of Buyer under, any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, lease, contract, agreement or other instrument to which Buyer or any of its properties may be bound, (iii) violate or result in a breach of any Governmental Order or Law applicable to Buyer or any of its properties or (iv) require any order, consent, approval or authorization of, or notice to, or declaration, filing, application, qualification or registration with, any Governmental Authority, except, with respect to the foregoing clauses (ii), (iii) and (iv) above, as would not reasonably be expected to have a Material Adverse Effect on Buyer, or as would not, individually or in the aggregate, reasonably be expected to have a material adverse effect

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on the ability of Buyer to consummate the transactions contemplated by this Agreement or the Ancillary Documents to which it is a party.

     Section 5.4 Litigation. There are no suits, actions, arbitrations, proceedings or investigations pending or, to the Knowledge of Buyer, threatened against Buyer.

     Section 5.5 Outstanding Share Capital. As of the date hereof, Buyer has 655,000,000 FM Ordinary Shares issued and outstanding. As of the First Closing Date, immediately prior to the payment of the Initial Cash Consideration, Buyer shall have no more than 680,000,000 FM Ordinary Shares issued and outstanding on a fully diluted and converted basis, excluding (i) any issuance of stock options pursuant to the employee stock option plans disclosed in the Buyer SEC Documents and (ii) any FM Ordinary Shares to be issued upon the vesting of any options issued by Buyer.

     Section 5.6 Validity of Share Consideration. The FM Ordinary Shares issuable as the Second Installment Share Consideration, the Third Installment Share Consideration and the Additional Share Consideration will be duly authorized for issuance prior to the First Closing and, when issued and delivered in accordance with the provisions of this Agreement, will be validly issued and fully paid and nonassessable and free from any Encumbrance; and the issuance of such FM Ordinary Shares will not be subject to preemptive or other similar rights and such delivery will convey to the Selling Shareholders and the Option Holders good and valid title to such FM Ordinary Shares, free and clear of any and all Encumbrances (other than in connection with applicable securities laws).

     Section 5.7 SEC Filings.

          (a) Other than its 2006 annual report on Form 20-F, Buyer has timely filed or furnished all documents required to be filed or furnished by it with the U.S. Securities and Exchange Commission (the “SEC”) since January 1, 2005 (the “Buyer SEC Documents”). As of their respective dates, the Buyer SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations thereunder, and none of the Buyer SEC Documents contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The consolidated financial statements of Buyer included in the Buyer SEC Documents (a) have been prepared from the books and records of Buyer and its subsidiaries, (b) complied as to form in all material respects with the applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been, and will be, prepared in accordance with U.S. GAAP consistently applied throughout the periods involved (except as may be indicated therein or in the notes thereto) and (c) present fairly in all material respects the consolidated financial position, results of operations and cash flows of Buyer and its consolidated subsidiaries as of the dates or for the periods indicated therein, subject, in the case of the unaudited financial statements, to normal year-end audit adjustments (which are not, in the aggregate, material to Buyer) and the absence of footnote disclosure.

          (b) Except as and to the extent set forth on Buyer’s consolidated balance sheet as of December 31, 2006, including the notes thereto, and as disclosed in the Buyer SEC Documents, none of Buyer or any of its consolidated subsidiaries has any liabilities or obligations that are required to be disclosed pursuant to U.S. GAAP, except for liabilities or

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obligations incurred since December 31, 2006 that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Buyer.

     Section 5.8 Absence of Certain Changes. Since September 30, 2007, there has not been any stock split or similar change to the capital structure of Buyer or any declaration, setting aside or payment of any dividend or other distribution in respect of any shares of capital stock of Buyer (other than the grant of stock options to directors and employees pursuant to employee benefit plans disclosed in the Buyer SEC Documents), any material amendment to any organizational document of Buyer or any agreement or commitment by Buyer to do any of the foregoing.

     Section 5.9 No Consent for Creation of Registration Rights. The execution, delivery and performance by the Buyer of the Registration Rights Agreement (defined in Section 7.5) does not and will not violate, conflict with or result in a breach of, any contract or other agreement to which the Buyer is bound. No consent by any party is required for the execution, delivery and performance by the Buyer of the Registration Rights Agreement.

     Section 5.10 No Other Representations or Warranties. Except for the representations and warranties contained in this Article V, Buyer makes no other express or implied representation or warranty to the Seller Parties and the Other Selling Shareholders.

ARTICLE VI.
COVENANTS AND AGREEMENTS

     Section 6.1 Conduct of Business Prior to the First Closing.

          (a) Without the consent of Buyer, from and after the date of this Agreement and until the First Closing Date, the Company shall, and shall cause the Group Companies to (i) conduct the Business in the ordinary course of business consistent with commercially reasonable practice, (ii) not enter into a new line of business and (iii) use their commercially reasonable efforts to maintain their current relationships with suppliers, customers and others having material business relationships with them. Except as contemplated by this Agreement, the Company shall not, and shall cause the Group Companies to not do any of the following from and after the date of this Agreement and until the First Closing Date without the prior written consent of Buyer:

          (i) except for purchases and sales by a Group Company to or from another Group Company, purchase, sell or issue (other than the issuance of capital stock upon the exercise of options outstanding as of the date of this Agreement pursuant to the Option Plans or pursuant to the Medley Warrants) any of their capital stock or other equity interests or grant or make any option, subscription, warrant, call, commitment or agreement of any character in respect of their capital stock or other equity interests;

          (ii) issue or pay any dividends other than to any of the Group Companies, except for Permitted Dividends;

          (iii) conduct any split, recombination or reclassification or issuance of capital stock;

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          (iv) take any steps in furtherance of an initial public offering of the Company’s equity securities on any securities exchange;

          (v) other than in the ordinary course of business consistent with past practice, sell or otherwise dispose of assets with value in the aggregate in excess of RMB500,000;

          (vi) acquire assets having an aggregate value exceeding RMB2,000,000, excluding (A) capital expenditures permitted by clause (viii) below, (B) acquisitions in the ordinary course of business and (C) the Company’s planned fit-out of its offices with new fixtures, fittings and IT equipment;

          (vii) merge or consolidate with any Person;

          (viii) and other than in the ordinary course of business, make capital expenditures in excess of RMB2,000,000 in aggregate;

          (ix) incur, assume or guarantee any indebtedness for borrowed money in excess of RMB1,000,000, other than in each case in the ordinary course of business and other than in connection with the payment of fees and expenses of financial advisors, legal advisors, accountants and other service providers incurred in connection with the Company’s proposed initial public offering, other financing activities or acquisitions (which amounts shall be paid prior to the First Closing Date), other than as a result of holding the Deposit on behalf of the Selling Shareholders and the Option Holders and other than in connection with any Permitted Dividends;

          (x) incur any Encumbrance of material assets, other than Permitted Encumbrances;

          (xi) increase the compensation of employees of the Group Companies other than (A) in the ordinary course of business of (B) as required by any agreement in effect as of the date hereof or as required by Law;

          (xii) make any material change in the accounting methods or practices followed by any of the Group Companies (other than with respect to provisioning for doubtful accounts and such changes as are required by Law or U.S. GAAP);

          (xiii) other than as required pursuant to PRC Law or as suggested by the Company’s auditors, change any method of Tax accounting, make or change any Tax election, file any amended Tax Return, settle or compromise any material Tax liability, agree to an extension or waiver of the statute of limitations with respect to the assessment or determination of Taxes, enter into any closing agreement with respect to any Tax or surrender any right to claim a Tax refund;

          (xiv) other than in the ordinary course of business, enter into any contract that would be a Material Contract;

          (xv) enter into any partnership, limited liability company or joint venture agreement other than in the ordinary course of business;

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          (xvi) other than in the ordinary course of business, terminate or make any material amendment to a Material Contract, except a Material Contract entered into with Medley;

          (xvii) grant any waiver or release under any confidentiality or similar agreement;

          (xviii) other than (A) in the ordinary course of business, (B) as required by any agreement in effect as of the date hereof, (C) as required by Law enter into, adopt or amend any employment agreement or employee benefit plan with or for the benefit of any of its employees;

          (xix) purchase, cancel or terminate any insurance policy naming any of the Group Companies as a beneficiary or a loss payee other than in the ordinary course of business;

          (xx) amend any of its organizational documents; or

          (xxi) agree or commit to do any of the foregoing.

     Section 6.2 Filings and Consents. Each of the Seller Parties and the Group Companies, on the one hand, and Buyer, on the other hand, shall use all reasonable best efforts to do all things necessary, proper and desirable to obtain and to cooperate in obtaining any consent, approval, authorization or order of, and in making any registration or filing with, any Governmental Authority or other Person required in connection with the execution, delivery or performance of this Agreement, including any applicable filings pursuant to (i) any antitrust regulation, (ii) the Securities Act and Exchange Act, and (iii) any other applicable filings or consents. The Seller Parties and Buyer shall pay all filing fees required to be paid in connection with their respective filings to be made under each such foreign law or regulation.

     Section 6.3 Third Party Consents. Except as set forth on Section 6.3 to the Disclosure Schedule, the Company shall use commercially reasonable best efforts to obtain all consents of any parties to any Material Contract as are required thereunder in connection with the transactions contemplated by this Agreement and the Ancillary Documents or for any such Material Contracts to remain in full force and effect immediately following the First Closing, all of which are set forth on Schedule 6.3. In the event that the other parties to any such Material Contract conditions its grant of a consent, waiver or approval (including by threatening to exercise a “recapture” or other termination right) upon the payment of a consent fee, “profit sharing” payment or other consideration, including increased rent payments or other payments under the Material Contract, the Company shall be responsible for making all payments required to obtain such consent, waiver or approval.

     Section 6.4 Tax Matters; Cooperation; Preparation of Returns; Tax Elections.

          (a) Buyer agrees to (i) consult with the Seller Parties as is reasonably necessary for the filing of all Tax Returns and the making of any election related to Taxes for the periods prior to the First Closing and (ii) furnish or cause to be furnished to the Seller Parties, upon request, as promptly as practicable, such information and assistance relating to any of the Group Companies (including access to books and records, employees, contractors and representatives) as is reasonably necessary for the periods prior to the First Closing for

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the preparation for any audit by any Taxing Authority, and the prosecution or defense of any claim, suit or proceeding relating to any Tax Return for the periods prior to the First Closing. The Company shall retain all books and records with respect to Taxes pertaining to the Group Companies until the expiration of all relevant statutes of limitations (and, to the extent notified by Buyer, any extensions thereof). At the end of such period, Buyer shall provide the Seller Parties with at least sixty (60) days prior written notice before destroying any such books and records, during which period the party receiving such notice can elect to take possession, at its own expense, of such books and records.

          (b) The Company shall prepare, or cause to be prepared, all Tax Returns in respect of any of the Group Companies for any taxable year ending on or before the First Closing Date. The Company shall, or shall cause the Group Companies to, timely pay to the relevant Taxing Authority all Taxes due in connection with any such Tax Returns.

          (c) The Seller Parties, shall, or shall cause relevant equity holders of the Group Companies to, pay all transfer, documentary, sales, use, registration and other such Taxes (including all applicable real estate transfer Taxes, but excluding any Taxes based on or attributable to income or gains) and related fees (including any penalties, interest and additions to Tax) incurred in connection with the transfer of the Offered Shares by the Selling Shareholders to Buyer and the transfer of all equity interests in the Group Companies held by their equity holders to Buyer (or Persons designated by Buyer) pursuant to the terms of this Agreement and the Ancillary Documents and the transactions contemplated hereby and thereby.

     Section 6.5 Employees; Benefit Plans. Nothing herein expressed or implied shall confer upon any of the employees of the Seller Parties, Buyer, the Group Companies, or any of their Affiliates, any additional rights or remedies, including any additional right to employment, or continued employment for any specified period, of any nature or kind whatsoever under or by reason of this Agreement and the Ancillary Documents.

     Section 6.6 Related Party Accounts. Prior to the First Closing Date, the Company and the Seller Parties shall use reasonable efforts to cash settle or extinguish all Related Party Accounts, so that there will be no Related Party Accounts outstanding upon the First Closing. The Company and the Seller Parties shall provide to Buyer, at least 5 days prior to the First Closing Date, a schedule listing all remaining Related Party Accounts As used herein, “Related Party Accounts” means with respect to each Group Company (i) all related party receivables due to such Group Company from the Seller Parties and their Affiliates (other than the Group Companies), other than receivables for goods and services incurred in the ordinary course of business less (ii) all related party payables of such Group Company to the Seller Parties and their Affiliates (other than the Group Companies), other than payables for goods and services incurred in the ordinary course of business.

     Section 6.7 Non-Violation.

          (a) Prior to the First Closing Date, the Seller Parties shall not, and shall cause any Group Company not to, without the prior written consent of Buyer, knowingly take any action which would result in any of the representations, warranties or covenants contained in this Agreement and in the Ancillary Documents becoming untrue or incapable of performance, as applicable. The Seller Parties shall promptly advise Buyer of any action or event of which the Seller Parties become aware which has the effect of rendering any such covenants incapable of performance.

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          (b) Prior to the First Closing Date, Buyer shall not, without the prior written consent of the Company, knowingly take any action which would result in any of the representations, warranties or covenants contained in this Agreement and in the Ancillary Documents becoming untrue or incapable of performance, as applicable. Buyer shall promptly advise the Sellers’ Representative of any action or event of which Buyer becomes aware which has the effect of rendering any such representations and warranties untrue or any such covenants incapable of performance.

     Section 6.8 Confidentiality. Each party hereto shall keep confidential, and shall cause its officers, directors, employees, counsel, investment bankers, consultants and other representatives to keep confidential, the terms and conditions of this Agreement and of any Ancillary Document (collectively, the “Confidential Information”), and shall use, and shall cause its officers, directors, employees, counsel, investment bankers, consultants and other representatives to use, the Confidential Information, except as the parties hereto mutually agree in writing otherwise, only in connection with the evaluation of the transactions contemplated by this Agreement and the Ancillary Documents provided that any party may disclose Confidential Information (i) to its officers, directors, employees, counsel, investment bankers, consultants and other representatives who need to know such information for the purpose of the performance of its obligations in connection herewith and with the Ancillary Documents (it being understood that such party will cause each Person to whom it has disclosed such Confidential Information to treat such information in a confidential manner), (ii) in the event that such party or its officers, directors, employees, counsel, investment bankers, consultants and other representatives or affiliates are required to disclose such information in connection with any judicial or administrative proceeding subject to such party provide each other party hereto in advance of such disclosure notice of such requirements, (iii) to the extent advised by competent legal advisors that such disclosure is required by applicable Law and so long as, where such disclosure is to a Governmental Authority, such party shall use all reasonable efforts to obtain confidential treatment of the Confidential Information so disclosed, (iv) to the extent required by the rules of the SEC and any stock exchange and (v) to permit disclosure to its respective fund investors of the amount of proceeds it receives hereunder (including the number of FM Ordinary Shares).

     Section 6.9 Buyer’s Board of Directors. As of the First Closing Date Mr. Yising Chan shall have the right to appoint one observer (which may be himself) to Buyer’s board of directors, provided that such appointee shall have no voting rights with respect to matters subject to board approval, and provided further that such observer appointed by Mr. Yising Chan may be removed as an observer upon the Third Closing.

     Section 6.10 Buyer’s Deposit; Bank Guarantee Letter. Buyer shall pay the Deposit by wire transfer to an account specified by the Company (the “Deposit Account”), on the date of the execution of this Agreement, or if such date is not a Business Day, on the first Business Day following the date of the execution of this Agreement. Simultaneously with the First Closing (and following the satisfaction or waiver of the conditions set forth in Article VII and Article VIII), the Company shall transfer the Deposit to the Selling Shareholders and the Option Holders Representative in accordance with the First Closing Allocation Schedule. The Company agrees that the Deposit shall remain in the Deposit Account and shall not otherwise be used or withdrawn from such account except as provided in Section 11.1. Buyer shall deliver the Bank Guarantee Letter to the Company on the date of the execution of this Agreement.

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     Section 6.11 No Transfer by Selling Shareholders. From the date of this Agreement through the First Closing Date, no Selling Shareholder shall transfer or grant or permit or allow the creation of and Encumbrance, directly or indirectly, any interest in the Company or the entity through which it holds its interest in the Company without the prior written approval of Buyer; provided that (i) any Selling Shareholder who is a natural person may transfer to his or her guardian, conservator, executor, administrator, spouse, children, grandchildren or parents, or to a trust of which the beneficiaries of the corpus and the income shall by such a person upon such Selling Shareholder’s death or permanent incapacity, (ii) any Selling Shareholder that is not a natural person may transfer to its limited partners, its Affiliates (including any person to whom such Affiliate would be allowed to transfer such Affiliate’s shares pursuant to this Section 6.11), or to any successor to such Selling Shareholder as the result of any merger, consolidation or other reorganization; provided further that any transferee in relation to any transfer pursuant to any of the foregoing exceptions shall enter into an agreement or instrument prior to the transfer thereof and prior to the First Closing Date pursuant to which such transferee shall agree to be bound by the terms and conditions of this Agreement and the Ancillary Documents to which the transferor is a party.

     Section 6.12 Change of Owners; CGEN Network Transfer. The Company shall use reasonable best efforts to cause all holders of outstanding equity interests in CGEN Network to transfer at the First Closing, or as soon as possible thereafter, their respective equity interests in such entity to Buyer or a Person or Persons designated by Buyer, provided that any such transfer shall not affect CGEN Network’s status as a “variable interest entity” of the Company pursuant to U.S. GAAP.

     Section 6.13 Key Management Independence.

          (a) Buyer agrees that it shall, during the period commencing from the First Closing Date and ending on the date of payment of the Third Installment Consideration and the Additional Share Consideration, take all actions necessary and appropriate to enable the Key Management (meaning Mr. Yising Chan, Mr. Guanyong Tian and Mr. Mei Lijun) to continue to run the Group Companies as an independent business unit of Buyer, provided that the Key Management’s ability to operate the Group Companies as an independent business unit shall be subject to (i) compliance with Buyer’s code of ethics and (ii) any relevant requirements of the Sarbanes-Oxley Act and other U.S. securities laws and regulations.

          (b) Subject to Section 2.2(b)(ii), Buyer agrees that it shall not, prior to the Third Closing Date, dismiss any member of the Key Management without Cause and that any such dismissal without Cause will accelerate the Second Closing and/or the Third Closing as set forth in Article II.

          (c) Buyer agrees that it shall, until the Third Closing Date, provide reasonable capital support within thirty (30) days after a written request (which request shall identify in reasonable detail the proposed use of the funds) by the Company (during the period beginning January 1, 2008 and ending December 31, 2009, the outstanding principal amount of such capital support shall not at any time exceed US$20,000,000, excluding any amounts due pursuant to the Loan Repayment Loan), and other support to the Group Companies. Any capital support pursuant to this Section 6.13(c) may, at the option of Buyer, be in the form of borrowings and the interest rate with respect thereto shall be on an arm’s length basis. Buyer shall consider in good faith any reasonable request from the Company for capital support in excess of such US$20,000,000.

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          (d) Without limiting the foregoing, Buyer agrees that it shall not, prior to the Third Closing Date, allocate unreasonable overhead expenses to any of the Group Companies.

          (e) Subject to Section 2.2(b)(ii), Buyer agrees that Key Management will have sole and full authority with respect to all aspects of the Company’s operations prior to the Third Closing Date, including the appointment and dismissal of all other Company personnel; provided, however, the Company agrees Buyer shall be entitled to appoint a financial controller for the Company on or following the First Closing Date and Company and Buyer agree that following the First Closing Date the Company shall adopt and implement the accounting policies set forth in Schedule 6.13(e).

     Section 6.14 Non-competition.

          (a) Each member of Key Management agrees that he shall not, from the First Closing Date until the date that is two (2) years after the date on which such member of Key Management ceases to be employed by or otherwise be a service provider to the Company, Buyer or their respective Affiliates, engage in a Competing Business, directly or indirectly, in the PRC or directly or indirectly enter into a Contract or be an employee, consultant, director, advisor, investor or otherwise be affiliated with any company or entity directly or indirectly entering into any Contract with the Carrefour Commercial Companies or any Affiliates thereof for the provision of goods and services similar to those provided in the Amended and Restated Video Information System Cooperation Contract between Carrefour Commercial Companies and Shanghai CGEN Digital Media Network Company Limited (it being understood that the foregoing restriction shall not be applicable if such member of Key Management is terminated without Cause or upon the occurrence of a Prospective Event of Change in Control).

          (b) Buyer and the Company each agree that during the period from the First Closing until the Third Closing Date they shall not, and shall cause their subsidiaries not to, knowingly compete indirectly or directly for any retailers known by such party to be under contract with the other party. Buyer and the Company further agree, that in the event the Carrefour Contract is terminated, Buyer shall have the unrestricted right to compete for any new contract with the Carrefour Commercial Companies to provide similar services as provided in the Carrefour Contract and, if it is awarded such contract, shall use reasonable efforts to transfer such contract to the Company, provided that such transfer is approved by the Carrefour Commercial Companies.

          (c) Without limiting clause (b) of this Section 6.14, Buyer and the Company further agree that, during the period from the First Closing Date until the Third Closing Date, to the extent they are competing with one another, they shall do so in good faith.

     Section 6.15 Further Actions. Each of the parties hereto shall use commercially reasonable efforts to take, or cause to be taken, all appropriate action, do or cause to be done all things necessary under applicable Law, and execute and deliver such documents and other papers, as may be required to consummate the transactions contemplated by this Agreement and by the Ancillary Documents.

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     Section 6.16 Delivery of Allocation Schedule. The Seller Parties shall cause the First Closing Allocation Schedule to be delivered to Buyer no later than five (5) Business Days prior to the First Closing Date.

     Section 6.17 Grant of Buyer Options. Buyer agrees to grant a specified number of options to purchase FM Ordinary Shares (the “Buyer Options”) subject to applicable law, no later than 18 months following the First Closing Date to (i) the employees of the Company who have entered into the Key Company Employee Employment Agreements (defined in Section 7.10) on or prior to the First Closing Date and (ii) to such other employees of the Company as shall be mutually agreed between Buyer and the Company. The Company may determine, in its sole discretion, to allocate the number of the Buyer Options among the employees described in clauses (i) and (ii) above. Buyer shall grant additional Buyer Options to such parties in the event the 2009 Audited Annual Net Income is equal to or greater than US$28,000,000.

     Section  6.18 Delivery of Audited September 30, 2007 Financial Statements; 2007 Audited Financial Statements, Closing Net Current Assets.

          (a) The Company shall deliver to Buyer the Unaudited Financial Statements on or prior to the date of this Agreement, (b) the Company shall deliver to Buyer the Audited September 30, 2007 Financial Statements no later than two (2) business days prior to the First Closing Date, which financial statements the Company does not reasonably expect to be materially different in substance from the Unaudited Financial Statements, and (c) the Company shall deliver the 2007 Audited Financial Statements to Buyer as soon as practicable after December 31, 2007, and in no event later than April 30, 2008. To the extent that Closing Net Current Assets as reflected on the 2007 Audited Financial Statements, minus the amount of any Permitted Dividends paid prior to June 30, 2008, is less than zero, Buyer shall be entitled to reduce the Second Installment Consideration on a dollar-for-dollar basis by the amount of such deficit, plus interest on such amount from the First Closing Date through the date of payment of the Second Installment Consideration (based on the average three-month Hong Kong Interbank Offered Rate quoted by the Hong Kong and Shanghai Banking Corporation during such period).

     Section 6.19 Payment of Permitted Dividends; Other Distributions. The parties agree and acknowledge that, notwithstanding anything to the contrary in this Agreement, the Company may, subject to applicable law, at any time prior to the First Closing Date declare one or more Permitted Dividends payable to shareholders of record as of a date prior to the First Closing Date which shall be payable by the Company at any time prior to the First Closing Date (or, to the extent applicable, June 30, 2008). In addition, to the extent any provisions, reserves or other allowances made by the Company during the 2007 fiscal year are subsequently reversed and added back to net income during the 2008 or the 2009 fiscal year, the Company and Buyer agree that such amounts shall be distributed to the Selling Shareholders and the Option Holders as additional cash consideration (x) in accordance with the Second Installment Allocation Schedule and concurrently with the due date for payment of the Second Installment Consideration (if any), with respect to any such provisions, reserves or allowances that are reversed during the 2008 fiscal year and (y) in accordance with the Third Installment Allocation Schedule and concurrently with the due date for payment of the Third Installment Consideration (if any), with respect to any such provisions, reserves or allowances that are reversed during the 2009 fiscal year.

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     Section 6.20 Cancellation of Company Stock Options. At least 15 days prior to the First Closing Date, the Company shall send to each Option Holder written notice advising such Option Holder that, subject to, and contemporaneously with the effectiveness of, the First Closing (i) each in-the-money stock option held by such Option Holder shall be cancelled in exchange for the consideration provided for in Article II of this Agreement, and (ii) each out-of-the-money stock option held by such Option Holder shall be cancelled.

     Section 6.21 Medley Repayment. The parties agree that, no later than seven (7) days after the date of this Agreement, the Buyer shall provide a no-interest loan of US$30,000,000, pursuant to an agreement substantially in the form attached hereto as Exhibit I (the “Loan Repayment Loan”) to the Company for the sole purpose of repaying, prior to the First Closing, any and all amounts owing pursuant to the Medley Credit Agreement; it being understood and agreed that the full amount of the Loan Repayment Loan shall be repaid to Buyer no later than the earlier of (i) thirty (30) days after the First Closing and (ii) January 30, 2008. In connection with the repayment to Medley, (i) the Company shall obtain a payoff statement from Medley, substantially in the form attached hereto as Exhibit G (the “Medley Payoff Statement”) and (ii) Medley shall have exercised or cancelled the Medley Warrants.

     Section 6.22 Use of CGEN’s Media-1 Software. The parties agree that if the Company provides its “Media-1” software, together with any related technical services, to Buyer and its Affiliates following the First Closing, the Company shall be able to charge a reasonable fee with respect to the provision of such software and services, at rates to be mutually agreed between Buyer and the Company.

ARTICLE VII.
CONDITIONS TO THE OBLIGATIONS OF THE SELLER PARTIES AND THE
OTHER SELLING SHAREHOLDERS

     The obligation of the Seller Parties and the Other Selling Shareholders to effect the First Closing under this Agreement as specified below is subject to the satisfaction, at or prior to the First Closing Date, of each of the following conditions, unless validly waived in writing by the Company and the Sellers’ Representative.

     Section 7.1 Representations and Warranties. The representations and warranties made by Buyer in this Agreement, disregarding all qualifications and exceptions as to materiality and Material Adverse Effect on Buyer, shall be true and correct as of the First Closing Date as though such representations and warranties were made at such date (except that any representations and warranties that are made as of a specified date shall be true and correct as of such specified date), with only such exceptions as would not in the aggregate reasonably be expected to have a Material Adverse Effect on Buyer.

     Section 7.2 Performance. Buyer shall have performed and complied in all material respects with all agreements and obligations required by this Agreement and the Ancillary Documents to be so performed or complied with by it prior to the First Closing Date.

     Section 7.3 Qualifications. The consents, waivers, approvals or other authorizations listed on Schedule 7.3 shall have been obtained or otherwise satisfied and shall continue to be in effect.

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     Section 7.4 No Material Adverse Change. Since June 30, 2007 there shall not have been any Material Adverse Change in respect of Buyer that is continuing as of the Closing Date.

     Section 7.5 Registration Rights Agreement. As of the First Closing, Buyer shall have entered into a registration rights agreement with the Selling Shareholders and the Option Holders, substantially in the form attached hereto as Exhibit B (the “Registration Rights Agreement”) and such Registration Rights Agreement shall be in full force and effect.

     Section 7.6 Officer’s Certificate. Buyer shall have delivered to the Selling Shareholders a certificate, dated as of the First Closing Date and executed by an executive officer of Buyer, certifying to the fulfillment of the conditions specified in Section 7.1, Section 7.2, Section 7.3 and Section 7.4 hereof.

     Section 7.7 Injunctions. At the First Closing Date, there shall not be in effect any Law or Governmental Order directing that the transactions provided for herein and in the Ancillary Documents not be consummated as provided herein or which has the effect of rendering it impossible to consummate such transactions.

     Section 7.8 Adverse Market Change. After the date hereof and prior to the First Closing Date, there shall not have occurred a suspension or material limitation in trading in Buyer’s securities on NASDAQ which occurrence is still outstanding as of the First Closing Date, if the effect of any such event in the reasonable judgment of the Company makes it impracticable or inadvisable to proceed with the transactions contemplated in this Agreement and the Ancillary Documents.

     Section 7.9 Opinion of Counsel. As of the First Closing Date, the Seller Parties, the Option Holders and the Other Selling Shareholders shall have received from Cayman Islands counsel to Buyer a written opinion dated and delivered as of the First Closing Date substantially in the form attached hereto as Exhibit C.

     Section 7.10 Employment Agreements. As of the First Closing Date, each Key Company Employee shall have entered into a Key Company Employee Employment Agreement, substantially in the form attached hereto as Exhibit D (each a “Key Company Employee Employment Agreement”), and each such agreement shall be in full force and effect.

ARTICLE VIII.
CONDITIONS TO BUYER’S OBLIGATIONS

     The obligation of Buyer to effect the First Closing under this Agreement as specified below is subject to the satisfaction, at or prior to the First Closing Date, as applicable, of each of the following conditions, unless waived in writing by Buyer.

     Section 8.1 Representations and Warranties. The representations and warranties made by the Seller Parties and the Other Selling Shareholders in this Agreement, disregarding all qualifications and exceptions as to materiality and Material Adverse Effect, shall be true and correct as of the First Closing Date as though such representations and warranties were made at such date (except that any representations and warranties that are made as of a specified date shall be true and correct as of such specified date), with only such exceptions

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as would not in the aggregate reasonably be expected to have a Material Adverse Effect on the Company or the Selling Shareholders.

     Section 8.2 Closing Net Current Assets. Closing Net Current Assets minus the aggregate principal amount of the loan outstanding under the Medley Credit Agreement as of the First Closing Date shall be greater than zero.

     Section 8.3 Performance.

          (a) Performance. The Company and the Selling Shareholders shall have performed and complied in all material respects with all agreements and obligations required by this Agreement and the Ancillary Documents to be performed or complied with by them prior to the First Closing Date.

          (b) Proceedings and Documents. All corporate and other proceedings that are required to be performed in connection with the transactions contemplated by this Agreement and the Ancillary Documents at the First Closing shall have been performed. Buyer shall have received a copy of (i) the Company’s board resolutions approving the transactions contemplated hereunder, (ii) the board resolutions of CGEN Media Technology Company Limited (Hong Kong) approving the transactions contemplated hereunder (insofar as such transactions pertain to CGEN Media Technology Company Limited (Hong Kong)) and (iii) the waiver by the holders of the Company Preferred Shares of their rights pursuant to the Company’s Shareholders Agreement dated December 7, 2006 in connection with the transactions contemplated hereunder

          (c) Qualifications. The consents, waivers, approvals or other authorizations listed on Schedule 8.3(c) shall have been obtained or otherwise satisfied and shall continue to be in effect.

          (d) No Material Adverse Change. Since the Balance Sheet Date there shall not have been any Material Adverse Change in respect of the Group Companies that is continuing as of the Closing Date.

     Section 8.4 No Indebtedness. The Seller Parties will have taken such action, or have caused the Group Companies to have taken such action, such that none of the Group Companies has any outstanding indebtedness for borrowed money, other than in connection with the Loan Repayment Loan and any liabilities incurred in the ordinary course of business of the Group Companies consistent with past practice.

     Section 8.5 Officer’s Certificate. The Company shall have delivered to Buyer a certificate, dated as of the First Closing Date and executed by the Chief Executive Officer or the Chief Financial Officer, certifying to the fulfillment of the conditions specified in Section 8.1, Section 8.3(a), Section 8.3(c), Section 8.3(d) and Section 8.4 hereof to the extent such conditions relate to the Company.

     Section 8.6 Outstanding Obligations. As of the First Closing Date, the Company shall have provided to Buyer an updated schedule of Outstanding Obligations setting forth the Company’s operating lease obligations as of December 31, 2007.

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     Section 8.7 Employment Agreements. As of the First Closing Date, each Key Company Employee shall have entered into a Key Company Employee Employment Agreement and each such agreement shall be in full force and effect.

     Section 8.8 Corporate Matters. On or prior to the First Closing Date, the Company shall have provided to Buyer copies of (i) the notices delivered to the Option Holders as required in Section 6.20 (which notices shall be substantially in the form attached hereto as Exhibit H), and (ii) the acceptance, by each Option Holder that agrees to the cancellation of his or her Company Options pursuant to the terms of this Agreement, of the cancellation of such Option Holder’s Company Options, contemporaneously with the First Closing, in exchange for the consideration set forth in Article II.

     Section 8.9 Opinions of Counsel. Buyer shall have received from Cayman Islands counsel and PRC counsel to the Company, the Group Companies and the Selling Shareholders, as the case may be, written opinions dated and delivered as of the First Closing Date, substantially in the forms attached hereto as Exhibits E and F, respectively.

     Section 8.10 CGEN Network Transfer. The Seller Parties shall have submitted an application to the appropriate PRC Government Authorities with respect to the CGEN Network Transfer on or prior to the First Closing Date and provided a copy of such application to Buyer.

     Section 8.11 Injunctions. At the First Closing Date, there shall not be in effect any Law or Governmental Order directing that the transactions provided for herein not be consummated as provided herein or which has the effect of rendering it impossible to consummate such transactions.

     Section 8.12 Financial Statements. The Seller Parties or the Company shall have delivered the Audited September 30, 2007 Financial Statements to Buyer on or prior to the First Closing Date, and the audit opinion for such Audited September 30, 2007 Financial Statements shall be based on representations from existing Company management, including the Management Parties, consistent with past practice.

     Section 8.13 Medley Payoff Statement. In connection with the Loan Repayment Loan, the Company shall have obtained the Medley Payoff Statement.

ARTICLE IX.
TERMINATION

     Section 9.1 Termination. This Agreement may be terminated at any time prior to the First Closing Date:

          (a) by the mutual written consent of the Company and the Sellers’ Representative on the one hand and Buyer, on the other;

          (b) by either the Company and the Sellers’ Representative, on the one hand or Buyer, on the other, if any Governmental Authority of competent jurisdiction shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated hereby and such order, decree or ruling or other action shall have become final and nonappealable;

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          (c) by Buyer, if any Seller Party breaches or fails to perform in any respect any of its representations, warranties or covenants contained in this Agreement or any Ancillary Document and such breach or failure to perform (A) would give rise to the failure of a condition set forth in Section 8.1 or Section 8.3 of Article VIII, (B) cannot be or has not been cured within 30 days following written notice of such breach or failure to perform and (C) has not been waived by Buyer;

          (d) by the Company and the Sellers’ Representative, if Buyer breaches or fails to perform in any respect any of its representations, warranties or covenants contained in this Agreement or any Ancillary Document and such breach or failure to perform (A) would give rise to the failure of a condition set forth in Section 7.1, Section 7.2, Section 7.3 or Section 7.4 of Article VII, (B) cannot be or has not been cured within 30 days following written notice of such breach or failure to perform and (C) has not been waived by the Company and the Sellers’ Representative; or

          (e) by either the Company and the Sellers’ Representative, on the one hand or Buyer, on the other, if the First Closing Date shall not have occurred (other than through the failure of any party seeking to terminate this Agreement to comply fully with its obligations under this Agreement) on or before March 31, 2008 (the “Long-Stop Date”), provided that Buyer may not terminate this Agreement pursuant to this Section 9.1(e) if it has willfully and intentionally taken action to cause any of the conditions set forth in Article VIII to not be satisfied as of the Long-Stop Date;

          (f) by Buyer, upon the Selling Shareholders’ failure to effect the purchase and sale as provided herein; provided that each of the conditions set forth in Article VII have been satisfied or waived by the Company and the Sellers’ Representative (other than those that are only capable of being satisfied on or as of the First Closing Date); or

          (g) by the Company and the Sellers’ Representative, upon Buyer’s failure to effect the purchase and sale as provided herein; provided that each of the conditions set forth in Article VIII have been satisfied by the Company and Seller Parties, as applicable or waived by Buyer (other than those that are only capable of being satisfied on or as of the First Closing Date), except for any such condition where Buyer has willfully and intentionally taken action to cause such condition to not be satisfied; provided that Buyer shall not be obligated to waive any condition set forth in Article VIII.

     Section 9.2 Procedure and Effect of Termination. In the event of the termination of this Agreement and the abandonment of the transactions contemplated hereby pursuant to Section 9.1 hereof, written notice thereof shall forthwith be given to all other parties. If this Agreement is terminated and the transactions contemplated by this Agreement are abandoned as provided herein:

          (a) Buyer will redeliver or at its option destroy (and deliver a certificate from Buyer’s General Counsel to such effect) to the Company all documents, work papers and other material of any of the Seller Parties relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof (provided that the General Counsel of the Buyer may keep a copy of all such materials for evidentiary purposes only);

          (b) The provisions of the Confidentiality Agreement shall continue in full force and effect; and

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          (c) Subject to Section 11.1, no party to this Agreement will have any liability under this Agreement to any other except (i) that nothing herein shall relieve any party from any liability for any willful breach of any of the representations, warranties, covenants and agreements set forth in this Agreement, and (ii) as contemplated by paragraph (b) above.

ARTICLE X.
INDEMNIFICATION

     Section 10.1 Indemnification by the Management Parties.

          (a) Subject to the limits set forth in this Article X, from and after the First Closing Date, to the extent permitted by law, the Management Shareholder, jointly and severally, and the Other Management Parties, severally and not jointly with each other and the Management Shareholder (each an “Indemnifying Management Party”), agree to indemnify, defend and hold Buyer, its Affiliates (including the Company and its Affiliates) and their respective officers, directors, stockholders, employees, agents and representatives (the “Buyer Indemnified Persons”) harmless from and in respect of any and all losses, damages, costs, penalties, assessments, fines and expenses (including reasonable fees and expenses of counsel and other professional advisers) (collectively, “Losses”), that they actually incur arising out of or due to (i) any breach of any representation or warranty by the Seller Parties contained in Article III of this Agreement or (ii) any breach of any covenant by the Seller Parties contained in this Agreement.

          (b) The representations and warranties contained in Article III of this Agreement shall survive the First Closing for a period of one (1) year after the First Closing Date; provided that (i) the representations and warranties set forth in Section 3.1(a), Section 3.2 and Section 3.6(a) shall survive for a period of eighteen months after the First Closing Date and (ii) the representations and warranties set forth in Section 3.11 (Tax Matters) shall survive the First Closing until ninety (90) days after the expiration of the applicable statute of limitations; provided, further, that any claim made with reasonable specificity by the party seeking to be indemnified shall survive until such time as such claim is finally and fully resolved so long as such claim is brought prior to the expiration of the applicable survival period set forth in this Section 10.1(b). Each covenant or agreement of the Seller Parties in this Agreement shall survive the First Closing until six months from the time performance of such covenant or agreement is contemplated; provided that any claim made with reasonable specificity by the party seeking to be indemnified shall survive until such time as such claim is finally and fully resolved so long as such claim is brought prior to the expiration of the applicable survival period set forth in this Section 10.1(b).

          (c) Notwithstanding anything to the contrary contained in this Agreement: (i) with respect to the provisions of Section 10.1(a)(i), an Indemnifying Management Party shall not be liable for any claim for indemnification pursuant thereto, unless and until the aggregate amount of indemnifiable Losses which may be recovered from the Indemnifying Management Parties as a group equals or exceeds US$1,000,000, after which the Indemnifying Management Party shall be liable only for those Losses in excess of US$1,000,000, and (ii) the maximum amount of indemnifiable Losses which may be recovered from any Indemnifying Management Party shall be an amount equal to 100% of the Aggregate Consideration actually received by such Indemnifying Management Party.

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     Section 10.2 Indemnification by the Selling Shareholders.

          (a) Subject to the limits set forth in this Article X, from and after the First Closing Date, to the extent permitted by law, each Selling Shareholder (an “Indemnifying Selling Shareholder”) agrees, severally and not jointly, to indemnify, defend and hold the Buyer Indemnified Persons harmless from and in respect of any and all Losses that they actually incur arising out of or due to (i) any breach of any representation or warranty of such Indemnifying Selling Shareholder contained in Article IV of this Agreement, and (ii) any breach of any covenant by such Indemnifying Selling Shareholder contained in this Agreement.

          (b) The representations and warranties contained in Article IV of this Agreement shall survive the First Closing for a period of one (1) year after the First Closing Date; provided that the representations and warranties set forth in Section 4.2 shall survive for a period of eighteen months following the First Closing Date; provided, further, that any claim made with reasonable specificity by the party seeking to be indemnified shall survive until such time as such claim is finally and fully resolved so long as such claim is brought prior to the expiration of the applicable survival period set forth in this Section 10.2(b). Each agreement of the Indemnifying Selling Shareholders in this Agreement shall survive the First Closing until one (1) year from the time performance of such agreement is contemplated; provided that any claim made with reasonable specificity by the party seeking to be indemnified shall survive until such time as such claim is finally and fully resolved so long as such claim is brought prior to the expiration of the applicable survival period set forth in this Section 10.2(b).

          (c) Notwithstanding anything to the contrary contained in this Agreement: (i) an Indemnifying Selling Shareholder shall not be liable for any claim for indemnification pursuant to Section 10.2(a)(i), unless and until the aggregate amount of indemnifiable Losses which may be recovered from the Indemnifying Selling Shareholders equals or exceeds US$1,000,000, after which the Indemnifying Selling Shareholders shall be liable only for those Losses in excess of US$1,000,000, and (ii) the maximum amount of indemnifiable Losses which may be recovered from any Indemnifying Selling Shareholder shall be an amount equal to 100% of the Aggregate Consideration actually received by such Indemnifying Selling Shareholder.

     Section 10.3 Indemnification by Buyer.

          (a) Subject to the limits set forth in this Article X, from and after the First Closing Date, to the extent permitted by law, Buyer agrees to indemnify, defend and hold the Selling Shareholders and the Other Management Parties, their Affiliates and their respective officers, directors, stockholders, employees, agents and representatives (the “Seller Indemnified Persons”) harmless from and in respect of any and all Losses that they may incur arising out of or due to any breach of any representation, warranty, covenant or other agreement of Buyer contained in this Agreement provided that, with respect to all Losses indemnifiable pursuant to this paragraph (a) arising from the failure of a representation or warranty herein by Buyer to be true and correct, the Seller Indemnified Persons shall not be entitled to recover more than the amount of the Aggregate Consideration.

          (b) The representations and warranties of Buyer contained in this Agreement shall survive the First Closing for a period of one (1) year after the First Closing; provided that the representations and warranties set forth in Section 5.1 and Section 5.2 shall

52

survive for a period of eighteen months following the First Closing Date and the representations and warranties set forth in Section 5.6 shall survive until the Third Closing Date; provided, further, that any claim made with reasonable specificity by the party seeking to be indemnified shall survive until such time as such claim is finally and fully resolved so long as such claim is brought prior to the expiration of the applicable survival period set forth in this Section 10.3(b). Each covenant or agreement of Buyer in this Agreement shall survive the First Closing until one (1) year from the time performance of such covenant or agreement is contemplated; provided that any claim made with reasonable specificity by the party seeking to be indemnified shall survive until such time as such claim is finally and fully resolved so long as such claim is brought prior to the expiration of the applicable survival period set forth in this Section 10.3(b).

     Section 10.4 Indemnification as Exclusive Remedy; Mitigation. Except with respect to willful misrepresentation or fraud claims, the indemnification provided in this Article X, subject to the limitations set forth herein, shall be the exclusive, post-Closing remedy available to any party in connection with any and all Losses arising out of or resulting from this Agreement, the transactions contemplated hereby, any property owned, based or subleased by any of the Group Companies or otherwise regarding any of the Group Companies. Each party hereto shall take all reasonable steps to mitigate its Losses after becoming aware of any event which could reasonably be expected to give rise to any Losses. None of the parties hereto shall be liable under any provision of this Agreement or any Ancillary Document for any consequential or punitive damages (other than consequential or punitive damages payable to a third party).

     Section 10.5 Limitation on Indemnification. No claim may be asserted against either party for breach of any representation, warranty, covenant or agreement contained herein, unless written notice of such claim or action is received by such party describing in reasonable detail the facts and circumstances with respect to the subject matter of such claim on or prior to the date on which the representation, warranty, covenant or agreement on which such claim is based ceases to survive as set forth in Section 10.1, Section 10.2 and Section 10.3 irrespective of whether the subject matter of such claim shall have occurred before or after such date.

     Section 10.6 Indemnification Calculations. The amount of any and all Losses for which indemnification is provided under this Article X shall be computed net of any insurance proceeds received by the indemnified party in connection with such Losses. If an indemnified party receives insurance proceeds in connection with Losses for which it has received indemnification, such party shall refund to the indemnifying party the amount of such insurance proceeds when received, up to the amount of indemnification received. An indemnified party shall use its commercially reasonable efforts to pursue insurance claims with respect to any Losses. The parties agree that any indemnification payments made pursuant to this Agreement shall be treated for tax purposes as an adjustment to the Purchase Price, unless otherwise required by applicable Law.

     Section 10.7 Notice and Opportunity to Defend. If there occurs an event which a party asserts is an indemnifiable event pursuant to Section 10.1, Section 10.2 and Section 10.3, the party or parties seeking indemnification shall notify the other party or parties obligated to provide indemnification (the “Indemnifying Party”) promptly. If such event involves any claim or the commencement of any action or proceeding by a third person, the party seeking indemnification will give such Indemnifying Party prompt written notice of such claim or the commencement of such action or proceeding; provided that the failure to

53

provide prompt notice as provided herein will relieve the Indemnifying Party of its obligations hereunder only to the extent that such failure prejudices the Indemnifying Party hereunder. In case any such action shall be brought against any party seeking indemnification and it shall notify the Indemnifying Party of the commencement thereof, the Indemnifying Party shall be entitled to assume the defense thereof, with counsel selected by the Indemnifying Party and, after notice from the Indemnifying Party to such party or parties seeking indemnification of such election so to assume the defense thereof, the Indemnifying Party shall not be liable to the party or parties seeking indemnification hereunder for any legal expenses of other counsel or any other expenses subsequently incurred by such party or parties in connection with the defense thereof. The Indemnifying Party and the party seeking indemnification agree to cooperate fully with each other and their respective counsel in connection with the defense, negotiation or settlement of any such action or asserted liability. The party or parties seeking indemnification shall have the right to participate at its or their own expense in the defense of such action or asserted liability. If the Indemnifying Party assumes the defense of an action no settlement or compromise thereof may be effected (i) by the Indemnifying Party without the written consent of the indemnified party (which consent shall not be unreasonably withheld or delayed) or (ii) by the indemnified party without the consent of the Indemnifying Party (which consent shall not be unreasonably withheld or delayed). In no event shall an Indemnifying Party be liable for any settlement effected without its written consent (which consent shall not be unreasonably withheld or delayed).

     Section 10.8 Payment in Kind. Any indemnity payable by a Selling Shareholder or an Other Management Party may, at the option of such Selling Shareholder or such Other Management Party, be paid with FM Ordinary Shares. For the purposes of calculating the number of FM Ordinary Shares to be paid to satisfy any such indemnity, each FM Ordinary Share shall be valued at an amount equal to one-fifth of the closing price per ADS on the date one (1) Business Day prior to the payment of any such indemnity or, if payment of such indemnity in FM Ordinary Shares would be allowed pursuant to this Section 10.8, in FM Ordinary Shares.

ARTICLE XI.
MISCELLANEOUS

     Section 11.1 Fees and Expenses; Liquidated Damages.

          (a) Except as otherwise provided in this Agreement, each of Buyer, the Company and the Selling Shareholders shall pay all of its respective out-of-pocket fees and expenses in connection with the preparation and negotiation of this Agreement and the Ancillary Documents and the consummation of the transactions contemplated hereby and thereby.

          (b) The total amount of the Deposit shall be (i) returned by the Company to Buyer within two (2) Business Days following the date of the termination of this Agreement pursuant to Section 9.1(a), Section 9.1(b), Section 9.1(c), Section 9.1(e) or Section 9.1(f), (ii) deducted from the Initial Cash Consideration payable by Buyer on the First Closing Date as set forth in Section 2.2(a) and paid to the Selling Shareholders and the Option Holders in the same manner as the Initial Cash Consideration or (iii) deducted from any amount payable by Buyer pursuant to Section 11.1(c).

          (c) The parties agree that the Company’s planned initial public offering constitutes an option with significant economic value. The parties further agree that the fair

54

and reasonable value of this option is equal to US$80,000,000, which amount is the estimated net proceeds from the Company’s planned initial public offering. Accordingly, if this Agreement is terminated by the Sellers’ Representative and the Company pursuant to Section 9.1(g), Buyer shall pay to the Sellers’ Representative, on behalf of the Seller Parties (for distribution to the Selling Shareholders and Option Holders who elect to have their Company Options cancelled in exchange for the consideration set forth in Article II, based on the methodology set forth in Section 2.2(a)) an amount in cash equal to US$80,000,000 as liquidated damages and not as a penalty (the “Sellers’ Liquidated Damages”). The Sellers’ Liquidated Damages shall be paid within five Business Days of receipt of written notice from the Sellers’ Representative and the Company. The Deposit and the funds represented by the Bank Guarantee Letter shall be applied towards Buyer’s payment obligation with respect to the Sellers’ Liquidated Damages. The Parties agree that the provisions of this Section 11.1(c) are reasonable and necessary for the protection of the Selling Shareholders and the Option Holders, and further agree that the said provisions are not excessive or unduly onerous upon Buyer. However, it is hereby agreed and declared that if any of such provisions shall be adjudged to be void as going beyond what is reasonable in all the circumstances for the protection of the Selling Shareholders and the Option Holders, but would be valid if part of the wording thereof were deleted or the amount of Sellers’ Liquidated Damages reduced or the scope of the provisions reduced, the said provisions shall apply with such modification or modifications as may be necessary to make them valid and effective.

          (d) If this Agreement is terminated by Buyer pursuant to Section 9.1(f), the Company shall pay to Buyer an amount in cash equal to US$80,000,000 in the form of liquidated damages and not as a penalty (the “Buyer’s Liquidated Damages”). Such amount shall be paid by the Company within five Business Days of receipt of written notice from Buyer. The Parties agree that the provisions of this Section 11.1(d) are reasonable and necessary for the protection of Buyer, and further agree that the said provisions are not excessive or unduly onerous upon Seller Parties or the Company. However, it is hereby agreed and declared that if any of such provisions shall be adjudged to be void as going beyond what is reasonable in all the circumstances for the protection of Buyer, but would be valid if part of the wording thereof were deleted or the amount of Buyer’s Liquidated Damages reduced or the scope of the provisions reduced, the said provisions shall apply with such modification or modifications as may be necessary to make them valid and effective.

     Section 11.2 Governing Law. This Agreement shall be construed under and governed by the Laws of the State of New York.

     Section 11.3 Amendment. This Agreement may not be amended, modified or supplemented except upon the execution and delivery of a written agreement executed by the parties hereto and except for the joinder of any additional Selling Shareholders between the date hereof and the First Closing Date (which additional Selling Shareholders shall be deemed to make the representations and warranties set forth in Article IV as of the date of their joinder).

     Section 11.4 No Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto without the prior written consent of Buyer, in the case of assignment by any of the Seller Parties, and the Seller Parties, in the case of any assignment by Buyer, provided that Buyer may assign its rights to acquire and hold the Offered Shares acquired hereunder to an Affiliate but Buyer shall remain liable in all other respects for the performance of its payment and all other obligations hereunder.

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     Section 11.5 Waiver. Any of the terms or conditions of this Agreement which may be lawfully waived may be waived in writing at any time by each party which is entitled to the benefits thereof. Any waiver of any of the provisions of this Agreement by any party hereto shall be binding only if set forth in an instrument in writing signed on behalf of such party. No failure to enforce any provision of this Agreement shall be deemed to or shall constitute a waiver of such provision and no waiver of any of the provisions of this Agreement shall be deemed to or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

     Section 11.6 Notices.

          (a) Any notice, demand, or communication required or permitted to be given by any provision of this Agreement shall be deemed to have been sufficiently given or served for all purposes if (i) personally delivered, (ii) sent by a nationally recognized overnight courier service to the recipient at the address below indicated or (iii) delivered by facsimile which is confirmed in writing by sending a copy of such facsimile to the recipient thereof pursuant to clause (i) or (ii) above:

          If to Buyer:

Focus Media Holding Limited
28-30/F, Zhao Feng World Trade Building
369 Jiangsu Road
Shanghai 200050 PRC
Attn: Daniel Wu, Chief Financial Officer
+86 21 3212 4661 ex. 6339 (tel)
+86 21 5240 0228 (fax)

Wilson Sonsini Goodrich & Rosati
Jin Mao Tower
38F, Unit 01-04
88 Century Boulevard
Pudong, Shanghai 200121
People’s Republic of China
Attn: Carmen Chang
Don S. Williams
+86 21 6165 1700 (tel)
+86 21 6165 1799 (fax)

          If to any of the Selling Shareholders, to the Sellers’ Representative:

Mr. Yising Chan
c/o CGEN Digital Media Company Limited
Suite 3213-14, Tower B, City Center of Shanghai
No. 100 Zunyi Road, Shanghai 200051,
China
+86 21 6237 2250 (tel)
+86 21 6237 1918 (fax)
ys.chan@cgenmedia.cn (email)

          and

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Latham & Watkins LLP
41/F, One Exchange Square
8 Connaught Place
Central, Hong Kong
Attn: David Zhang, Esq.
+852 2522 7886 (tel)
+852 2522 7006 (fax)

or to such other address as any party hereto may, from time to time, designate in a written notice given in like manner.

          (b) Except as otherwise provided herein, any notice under this Agreement will be deemed to have been given (x) on the date such notice is personally delivered or delivered by facsimile or (y) the next succeeding Business Day after the date such notice is delivered to the overnight courier service if sent by overnight courier; provided that in each case notices received after 4:00 p.m. (local time of the recipient) shall be deemed to have been duly given on the next Business Day.

          (c) For convenience only, the parties agree that all notices, consents, directions or other actions that may be given or taken hereunder by the Seller Parties may be given by the Sellers’ Representative on behalf of the Seller Parties pursuant to a written instruction or document duly executed by the Seller’s Representative and that Buyer shall treat any such instrument or document as the action of the Seller Parties hereunder.

     Section 11.7 Complete Agreement. This Agreement, the Confidentiality Agreement, the Ancillary Documents and the other documents and writings referred to herein or delivered pursuant hereto contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and thereof. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

     Section 11.8 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and each of which shall be deemed an original.

     Section 11.9 Publicity. The Seller Parties and Buyer will consult with each other and will mutually agree upon any publication or press release of any nature with respect to this Agreement or the transactions contemplated hereby and shall not issue any such publication or press release prior to such consultation and agreement except as may be required by applicable Law or by obligations pursuant to any listing agreement with any securities exchange or any securities exchange regulation, in which case the party proposing to issue such publication or press release shall make all reasonable efforts to consult in good faith with the other party or parties before issuing any such publication or press release and shall provide a copy thereof to the other party or parties prior to such issuance.

     Section 11.10 Headings. The headings contained in this Agreement are for reference only and shall not affect in any way the meaning or interpretation of this Agreement.

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     Section 11.11 Severability. Any provision of this Agreement which is invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions hereof in such jurisdiction or rendering that or any other provision of this Agreement invalid, illegal or unenforceable in any other jurisdiction.

     Section 11.12 Third Parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any Person or corporation, other than the parties hereto and their permitted successors or assigns, any rights or remedies under or by reason of this Agreement.

     Section 11.13 Dispute Resolution.

          (a) Any dispute, controversy or claim arising out of or relating to this Agreement, or the interpretation, breach, termination or validity hereof, shall be resolved through consultation. Such consultation shall begin immediately after one party hereto has delivered to any other party hereto a written request for such consultation. If within thirty (30) days following the date on which such notice is given the dispute cannot be resolved, the dispute shall be submitted to arbitration upon the request of any party to such dispute with notice to the others.

          (b) The arbitration shall be conducted in Hong Kong under the auspices of the Hong Kong International Arbitration Centre (the “HKIAC”). There shall be three (3) arbitrators. Each opposing party to a dispute shall be entitled to appoint one arbitrator, and the third arbitrator shall be jointly appointed by the disputing parties or, failing such agreement by thirty (30) days after the appointment by each party of its arbitrator, the HKIAC shall appoint the third arbitrator.

          (c) The arbitration proceedings shall be conducted in English. The arbitration tribunal shall apply the UNCITRAL Arbitration Rules as administered by the HKIAC at the time of the arbitration.

          (d) The arbitrators shall decide any dispute submitted by the parties to the arbitration strictly in accordance with the substantive laws of New York and shall not apply any other substantive law.

          (e) Each party hereto shall cooperate with the other in making full disclosure of and providing complete access to all information and documents requested by the others in connection with such arbitration proceedings, subject only to any confidentiality obligations binding on such party.

          (f) The award of the arbitration tribunal shall be final and binding upon the disputing parties, and the prevailing party or parties may apply to a court of competent jurisdiction for enforcement of such award.

          (g) Any party shall be entitled to seek preliminary injunctive relief from any court of competent jurisdiction pending the constitution of the arbitral tribunal.

     Section 11.14 Obligations of Selling Shareholders. The parties acknowledge and agree that the rights and obligations of the Selling Shareholders hereunder are several and not joint or joint and several.

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[remainder of page intentionally left blank]

59

     IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by its duly authorized officer, in each case as of the date first above written.

FOCUS MEDIA HOLDING LIMITED
By:	/s/ Jiang Nanchun
	Name:	Jiang Nanchun
	Title:	Chief Executive Officer & Chairman
WITNESSED BY:
/s/ Alex Yang
Name: Alex Yang
Title: General Counsel
CGEN DIGITAL MEDIA COMPANY LIMITED
By:	/s/ Mei Lijun
	Name:	Mei Lijun
	Title:	Director
WITNESSED BY:
/s/ Cao Xiao Feng
Name: Cao Xiao Feng
Title: Company Secretary

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CHAN YI SING (in his capacity as Selling Shareholder, Sellers’ Representative and Option Holders’ Representative)
/s/ Chan Yi Sing
GUANYONG TIAN
/s/ Guanyong Tian
MEI LIJUN
/s/ Mei Lijun
TDF CAPITAL CHINA II, LP
By:	/s/ Goh Yin Long
	Name:	Goh Yin Long
	Title:	Investment Director
TDF CAPITAL ADVISORS, LP
By:	/s/ Goh Yin Long
	Name:	Goh Yin Long
	Title:	Investment Director
REDPOINT VENTURES II, L.P., by its General Partner Redpoint Ventures II, LLC
By:	/s/ John L. Walecka
	Name:	John L. Walecka
	Title:	Managing Director

61

REDPOINT ASSOCIATES II, LLC, as nominee
By:	/s/ John L. Walecka
	Name:	John L. Walecka
	Title:	Managing Director
JAFCO ASIA TECHNOLOGY FUND III
By:	/s/ Hiroshi Yamada
	Name:	Hiroshi Yamada
	Title:	Attorney
S.I. TECHNOLOGY VENTURE CAPITAL LIMITED
By:	/s/ Zhou Jie
	Name:	Zhou Jie
	Title:	Director
SUMITOMO CORPORATION EQUITY ASIA LIMITED
By:	/s/ Tsuyoshi Konda
	Name:	Tsuyoshi Konda
	Title:	Managing Director
INVESTLINK CONSULTING (CHINA) LIMITED
By:	/s/ Nina Yeung
	Name:	Nina Yeung
	Title:	Director

62

HUITUNG INVESTMENTS (BVI) LIMITED
By:	/s/ Tsui-Hui Huang
	Name:	Tsui-Hui Huang
	Title:	President
CPI BALLPARK INVESTMENTS LTD
By:	/s/ David Noh
	Name:	David Noh
	Title:	Managing Director
TOTNES INTERNATIONAL LIMITED
By:	/s/ Steve Chu
	Name:	Steve Chu
	Title:	Director
MEDLEY OPPORTUNITY FUND LTD.
By:
	Name:
	Title:

63

Schedule 1.1A

COMPLETE LIST OF ANCILLARY DOCUMENTS

Key Company Employee Employment Agreements

Loan Repayment Loan Agreement

Registration Rights Agreement

Schedule 1.1B

RELEVANT PERSONS FOR PURPOSES OF KNOWLEDGE OF BUYER

Jason Jiang

Daniel Mingdong Wu

Schedule 1.1C

RELEVANT PERSONS FOR KNOWLEDGE OF SELLER PARTIES

Yising Chan

Lijun Mei

Schedule 6.13(e)

ACCOUNTING POLICIES

Schedule 7.3

NONE

Schedule 8.3(c)

NONE

Disclosure Schedule

Exhibit A

Unaudited Financial Statements

Exhibit B

Form of Registration Rights Agreement

Exhibit C

Form of Legal Opinion of Cayman Islands Counsel to Buyer

Exhibit D

Form of Key Company Employee Employment Agreement

Exhibit E

Form of Legal Opinion of Cayman Islands Counsel
to Group Companies and Selling Shareholders

Exhibit F

Form of Legal Opinion of PRC Counsel to
Group Companies and Selling Shareholders

Exhibit G

Medley Payoff Statement

Exhibit H

Form of Notice to Option Holders
Re: Cancellation of Company Stock Options

Exhibit I

Form of Loan Repayment Loan Agreement

EX-10.163

Exhibit 10.163

REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of January 2, 2008, by and among Focus Media Holding Limited, a company with limited liability organized under the laws of the Cayman Islands (the “Company”), each of the Persons listed on Schedule A hereto (the “CGEN Holders” and, individually, a “CGEN Holder”), who represent all the shareholders and option holders of CGEN Digital Media Company Limited, a company with limited liability organized under the laws of the Cayman Islands (“CGEN”).

RECITALS

     A. Each of the CGEN Holders, who collectively own 100% of the outstanding shares of CGEN on a fully-diluted basis, has agreed to sell all the shares held by it to the Company or to the cancellation of all of the options held by it, as the case may be, and as part of the consideration therefor, the Company has agreed to issue to each such CGEN Holder, or its representative, certain Ordinary Shares (as defined below) of the Company on the terms and conditions set forth in that certain Share Purchase Agreement dated as of December 8, 2007 (the “CGEN Purchase Agreement”), by and among the Company, CGEN and the CGEN Holders who are a party thereto.

     B. In connection with the consummation of the transactions contemplated by the CGEN Purchase Agreement, the parties hereto desire to enter into this Agreement to enable the CGEN Holders from time to time to register the Ordinary Shares that they may receive pursuant to the CGEN Purchase Agreement under the Securities Act (as defined below).

     D. The CGEN Purchase Agreement provides that the execution and delivery of this Agreement by the parties hereto shall be a condition precedent to the consummation of the transactions contemplated thereunder.

     E. The Company seeks to induce the CGEN Holders to consummate the transactions contemplated in the CGEN Purchase Agreement, and to such end, seeks to satisfy the conditions precedent to such transactions by entering into this Agreement.

AGREEMENT

     NOW, THEREFORE, in consideration of the foregoing recitals, the mutual promises hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto further agree as follows:

SECTION 1 INTERPRETATION

     1.1 Definitions. Unless otherwise defined in this Agreement, capitalized terms used in this Agreement shall have the following meanings:

     “Accounting Principles” means generally accepted accounting principles as applied in the United States of America.

     “Additional Share Consideration” has the meaning ascribed to it in the CGEN Purchase Agreement.

     “ADSs” means American Depositary Shares, with each ADS as of the date of this Agreement representing five (5) Ordinary Shares.

     “Affiliate” means, with respect to any given Person, a Person that Controls, is Controlled by, or is under common Control with the given Person.

     “Agreement” has the meaning ascribed thereto in the preamble hereto.

     “Applicable Securities Law” means (i) with respect to any offering of securities in the United States of America, or any other act or omission within that jurisdiction, the securities law of the United States, including the Exchange Act and the Securities Act, and any applicable law of any State of the United States, and (ii) with respect to any offering of securities in any jurisdiction other than the United States of America, or any related act or omission in that jurisdiction, the applicable laws of that jurisdiction.

     “Business Day” means any weekday that the banks in the PRC, Hong Kong and the City of New York are generally open for business.

     “Centre” has the meaning ascribed thereto in Section 3.3(c).

     “CGEN Holders” has the meaning ascribed thereto in the preamble hereof.

     “CGEN Purchase Agreement” has the meaning ascribed thereto in the recitals hereof.

     “CGEN Registrable Securities” means (i) the Ordinary Shares received or to be received by the CGEN Holders pursuant to the CGEN Purchase Agreement, including, without limitation, any Ordinary Shares issued as part of the Second Installment Share Consideration, the Third Installment Share Consideration or the Additional Share Consideration, and (ii) any Equity Securities of the Company issued as a dividend or other distribution with respect to, or in exchange for, or in replacement of, the shares referenced in clause (i).

     “Commission” means (i) with respect to any offering of securities in the United States of America, the Securities and Exchange Commission of the United States or any other federal agency at the time administering the Securities Act, and (ii) with respect to any offering of securities in a jurisdiction other than the United States of America, the regulatory body of the jurisdiction with authority to supervise and regulate the sale of securities in that jurisdiction.

     “Company” has the meaning ascribed thereto in the preamble hereto.

     “Control” means, when used with respect to any Person, the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “Controlling” and “Controlled” have meanings correlative to the foregoing.

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     “Depositary” means the depositary in respect of the Company’s ADSs, currently Citibank, N.A.

     “Dispute” has the meaning ascribed thereto in Section 3.3(a).

     “Equity Securities” means any Ordinary Shares, Ordinary Share Equivalents or other voting securities of the Company.

     “Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

     “First Closing Date” has the meaning ascribed in the CGEN Purchase Agreement.

     “Form F-1” means Registration Statement on Form F-1 promulgated by the Commission under the Securities Act or any substantially similar form then in effect.

     “Form F-3” means Registration Statement on Form F-3 promulgated by the Commission under the Securities Act or any substantially similar form then in effect.

     “Form F-3ASR” means the Company’s F-3 automatic shelf registration statement filed with the Commission.

     “Form S-1” means Registration Statement on Form S-1 promulgated by the Commission under the Securities Act or any substantially similar form then in effect.

     “Form S-3” means Registration Statement on Form S-3 promulgated by the Commission under the Securities Act or any substantially similar form then in effect.

     “Holders” means the CGEN Holders together with the permitted transferees and assigns of any Holder.

     “Hong Kong” means the Hong Kong Special Administrative Region.

     “Initiating Holders” means, with respect to a request duly made to Register any Registrable Securities under Section 2.1(a), the Holders initiating such request.

     “Ordinary Shares” means the ordinary shares, par value US$0.00005 per share, of the Company.

     “Ordinary Share Equivalents” means warrants, options and rights exercisable for Ordinary Shares and instruments convertible or exchangeable for Ordinary Shares.

     “Parties” has the meaning ascribed thereto in Section 3.3(a).

     “Person” means any natural person, corporation limited liability company, joint stock company, joint venture, partnership, enterprise, trust, unincorporated organization or any other entity or organization.

     “Registration” means a registration effected by preparing and filing a Registration Statement and the declaration or ordering of the effectiveness of that

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Registration Statement, and the terms “Register” and “Registered” have meanings correlative with the foregoing.

     “Registrable Securities” means the CGEN Registrable Securities, excluding in all cases, however, any Equity Securities sold by a Person in a transaction other than an assignment pursuant to Section 3.1.

     “Registration Statement” means a registration statement prepared on Forms S-3, F-3, S-1 or F-1 under the Securities Act, or on any comparable form in connection with registration in a jurisdiction other than the United States.

     “Second Installment Share Consideration” has the meaning ascribed to it in the CGEN Purchase Agreement.

     “Securities Act” means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

     “Third Installment Share Consideration” has the meaning ascribed to it in the CGEN Purchase Agreement.

     “Underwritten Offering” has the meaning ascribed in Section 2.1(a)(1).

     “Violation” has the meaning ascribed thereto in Section 2.6(a).

     1.2 Interpretation. For all purposes of this Agreement, except as otherwise expressly herein provided, (i) the terms defined in Section 1 shall have the meanings assigned to them in Section 1 and shall include the plural as well as the singular, (ii) all references in this Agreement to designated “Sections” and other subdivisions are to the designated Sections and other subdivisions of the body of this Agreement, (iii) pronouns of either gender or neuter shall include, as appropriate, the other pronoun forms, (iv) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Section or other subdivision, and (v) all references in this Agreement to designated Schedules are to the Schedules attached to this Agreement.

SECTION 2 REGISTRATION RIGHTS.

     2.1 Demand Registration Rights.

          (a) Registration.

          (1) Subject to the terms of this Agreement, from time to time and at any time, Holders holding at least 3,000,000 Registrable Securities (as adjusted for any stock splits, stock dividends, recapitalizations, reorganizations or similar events) may request the Company in writing to register all or part of the Registrable Securities (a “Registration”); provided however, that if a request for Registration is for an underwritten public offering (an “Underwritten Offering”), such request shall be for at least 3,000,000 Registrable Securities and be subject to the requirement that the reasonably anticipated aggregate price to the public be not less than US$40,000,000. Upon receipt of such a request, the Company shall (i) promptly, and in any event within ten (10) Business Days after receipt of such written request, give written notice of the proposed Registration to all other Holders, and (ii) use best

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efforts to cause, as soon as practicable, the Registrable Securities specified in the request, together with any Registrable Securities of any Holder who requests in writing to join such Registration within twenty (20) Business Days after the Company’s delivery of written notice, to be Registered and/or qualified for sale and distribution to the public in such jurisdictions as the Initiating Holders may reasonably request. Notwithstanding anything contrary contained herein, the Company shall be not obligated to effect more than three (3) Registrations pursuant to this Section 2.1(a)(1).

          (2) Any Registration made pursuant to this Section 2.1 shall be made: (i) if available, on the Company’s then existing and effective Registration Statement on Form F-3ASR; or (ii) in each case subject to the terms of this Section 2.1(a)(3) below, (x) if such F-3ASR is not available, on another Registration Statement on Form F-3 (or any successor to Form F-3 or Form S-3) if such form is available for use by the Company, or (y) otherwise on Form F-1 or Form S-1 (or any successor to Form F-1 or S-1) if such form is available for use by the Company. In the event that the Company becomes ineligible to use its then existing and effective Registration Statement on Form F-3ASR for the reasons set forth in Schedule 2.1(a)(2) hereto, the Company shall not be obligated to effect a Registration until it regains eligibility to use Form F-3ASR.

          (3) Any Registration of Registrable Securities shall count as one (1) demand Registration, pursuant to this Section 2.1(a), irrespective of whether such Registrable Securities are distributed by the Holder thereof.

          (b) Right of Deferral. Notwithstanding anything to the contrary in this Section 2.1:

          (1) The Company shall not be obligated to Register or qualify Registrable Securities for an Underwritten Offering pursuant to any of the provisions of Section 2.1(a) if: (i) within the six (6) month period preceding the date of such request, the Company has either (x) already effected a Registration for an Underwritten Offering under any of the provisions of Section 2.1(a), or (y) already effected a Registration (other than a registration of securities in a transaction under Rule 145 of the Securities Act or with respect to an employee benefit plan) in which the Holders had an opportunity to participate pursuant to the provisions of Section 2.2 and no Registrable Securities of the Holders were excluded from such Registration pursuant to the provisions of Section 2.2(c) or (ii) within the three (3) month period preceding the date of such request, the Company has already effected a Registration other than an Underwritten Offering under any of the provisions of Section 2.1(a).

          (2) The Company shall not be obligated to Register or qualify Registrable Securities pursuant to Section 2.1(a) if the Company shall furnish to the Holders a certificate signed by the Chief Executive Officer of the Company stating that, in the good faith judgment of the Board of Directors of the Company, any registration of Registrable Securities should not be made because it would be materially detrimental to the Company and its shareholders for a Registration Statement to be filed in the near future. Following delivery of such certificate, the Company shall have the right to defer such filing for a period not to exceed ninety (90) days from the receipt of any request duly submitted by Holders under Section 2.1(a) or to Register Registrable Securities; provided, however, that the Company shall not utilize this right more than once in any twelve (12) month period.

          (c) Underwritten Offerings. If, in connection with a request to Register Registrable Securities under the provisions of Section 2.1(a), the Initiating Holders seek to

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distribute such Registrable Securities through an Underwritten Offering, they shall so advise the Company as a part of the request, and the Company shall include such information in the written notice to the other Holders described in Section 2.1(a). In such event, the right of any Holder to include its Registrable Securities in such Registration shall be conditioned upon such Holder’s participation in such Underwritten Offering and the inclusion of such Holder’s Registrable Securities in the Underwritten Offering (unless otherwise mutually agreed by Initiating Holders representing a majority in voting power of the Registrable Securities held by the Initiating Holders) to the extent provided herein. All Holders proposing to distribute their securities through such Underwritten Offering shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such Underwritten Offering by the Company (which underwriter or underwriters shall be reasonably acceptable to Initiating Holders representing a majority in voting power of the Registrable Securities held by the Initiating Holders). Notwithstanding any other provision of this Agreement, if the managing underwriter advises the Company that marketing factors (including the aggregate number of securities requested to be Registered, the general condition of the market, and the status of the Persons proposing to sell securities pursuant to the Registration) require a limitation of the number of Equity Securities to be underwritten, the underwriters may exclude such number of Registrable Securities from the Underwritten Offering as required (1) after excluding any other Equity Securities from the Underwritten Offering (including, without limitation, any Equity Securities which the Company may seek to include in the Underwritten Offering for its own account and all Equity Securities which are not Registrable Securities and are held by Persons other than the Holders), and (2) so long as at least thirty percent (30%) in voting power of any Registrable Securities requested by the Holders to be included in such Underwritten Offering and Registration shall be included. If a limitation of the number of Registrable Securities is required pursuant to this Section 2.1(c), the number of Registrable Securities that may be included in the Underwritten Offering by selling Holders shall be allocated among such Holders, in proportion, as nearly as practicable, to the respective amounts of Registrable Securities which the Holders would otherwise be entitled to include in the Registration. If any Holder disapproves of the terms of any Underwritten Offering, the Holder may elect to withdraw therefrom by written notice to the Company and the underwriters delivered at least ten (10) Business Days prior to the effective date of the Registration Statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from the Registration.

     2.2 Piggyback Registrations.

          (a) Registration of the Company’s Securities. Subject to Section 2.2(c), if the Company proposes to Register for its own account or for the account of any Person that is not a Holder (unless such Person is contractually entitled to exclude participation by the Holders in its Registration, and subject to any rights to partially exclude participation by the Holder in its Registration) any of its Equity Securities in connection with the public offering of such securities, the Company shall promptly give each Holder written notice of such Registration and, upon the written request of any Holder given within twenty (20) days after delivery of such notice, the Company shall use its best efforts to include in such Registration any Registrable Securities thereby requested by such Holder. If a Holder decides not to include all or any of its Registrable Securities in such Registration by the Company, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent Registration Statement or Registration Statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein.

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          (b) Right to Terminate Registration. The Company shall have the right to terminate or withdraw any Registration initiated by it under Section 2.2(a) prior to the effectiveness of such Registration, whether or not any Holder has elected to participate therein. The expenses of such withdrawn Registration shall be borne by the Company in accordance with Section 2.3.

          (c) Underwriting Requirements.

          (1) In connection with any offering involving an underwriting of the Company’s Equity Securities initiated by the Company, the Company shall not be required to Register the Registrable Securities of a Holder under this Section 2.2 unless such Holder shall include such Registrable Securities in the underwriting and such Holder enters into an underwriting agreement in customary form with the underwriters selected by the Company and setting forth such terms for the underwriting as have been agreed upon between the Company and the underwriters. Subject to Section 2.2(c)(2), in the event the underwriters advise Holders seeking Registration of Registrable Securities pursuant to this Section 2.2 in writing that market factors (including the aggregate number of Registrable Securities requested to be Registered, the general condition of the market, and the status of the Persons proposing to sell securities pursuant to the Registration) require a limitation of the number of Equity Securities to be underwritten, the underwriters may exclude some or all Registrable Securities from the Registration and underwriting after excluding any other Equity Securities from the underwriting (other than any Equity Securities which the Company may seek to include in the underwriting for its own account), and the number of Equity Securities and Registrable Securities that may be included in the Registration and the underwriting shall be allocated (i) first, to the Company, and (ii) thereafter, among the Holders requesting inclusion of their Registrable Securities in such Registration Statement in proportion, as nearly as practicable, to the respective amounts of Registrable Securities which the Holders would otherwise be entitled to include in the Registration.

          (2) Notwithstanding anything to the contrary in this Section 2.2(c), in connection with any offering involving an underwriting of the Company’s Equity Securities, in no event shall the underwriters exclude any Registrable Securities which Holders may seek to include in such Registration and underwriting under this Section 2.2 unless at least thirty percent (30%) in voting power of any Registrable Securities requested by the Holders to be included in such underwriting and Registration shall be included.

          (3) If any Holder disapproves of the terms of any underwriting, the Holder may elect to withdraw therefrom by written notice to the Company and the underwriters delivered at least seven (7) days prior to the effective date of the Registration Statement. Any Registrable Securities excluded or withdrawn from the underwriting shall be withdrawn from the Registration.

          (d) Exempt Transactions. The Company shall have no obligation to Register any Registrable Securities under this Section 2.2 in connection with a Registration by the Company (i) relating solely to the sale of securities to participants in a Company share plan, (ii) relating to a corporate reorganization or other transaction under Rule 145 of the Securities Act (or comparable provision under the laws of another jurisdiction, as applicable), or (iii) on any form that does not include substantially the same information as would be required to be included in a Registration Statement covering the sale of the Registrable securities.

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     2.3 Expenses. All expenses incurred in connection with Registrations, filings or qualifications pursuant to this Agreement, including, without limitation, (a) any underwriting, brokerage or similar commissions, compensation, discounts or concessions paid or allowed by the Company that are incurred or to be incurred by the Selling Shareholders in connection with such issue or sale; (b) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with this Agreement (excluding expenses or costs in respect of Company employees in connection therewith), (c) all fees and expenses incurred in connection with the listing, if any, of any of the Registrable Securities on any securities exchange or exchanges, (d) all fees and expenses of the Depositary relating to the deposit of the Registrable Securities into the deposit facility and issuance by the Depositary of shares or receipts representing such Registrable Securities, (e) the reasonable fees and disbursements of counsel for the Company and of the independent public accountants of the Company specifically related to such Registration, including the expenses of any special audits or “comfort” letters required by or incident to such performance and compliance, (f) the fees and expenses of share registry or custodian, (g) the reasonable fees and disbursements of counsel representing the Holders of Registrable Securities, and (h) all U.S. federal, “blue sky” and all foreign registration, filing and qualification fees, accounting fees, and fees and disbursements of counsel for the Company (but excluding underwriters’ discounts and commissions relating to shares sold by the Holders), shall be borne by the Holders (allocated pro rata based on the Registratable Securities included in such Registration); provided, however, that (1) where an offering of securities includes a primary offering by the Company or a secondary offering of securities by other shareholders of the Company other than the Holders, the Holders shall be bear the pro rata portion of expenses attributable to them based on the number of Registrable Securities included in such Registration (for the avoidance of doubt, any such fees or expenses that are incurred entirely as a result of sales by selling shareholders shall be borne on a pro rata basis with regard only to the Registrable Securities offered by the Selling Shareholders in the aggregate and not by the Company), and (2) the Company shall use commercially reasonable efforts to minimize the amount of such expenses and, in connection with any Underwritten Offering, use commercially reasonable efforts to cause the related underwriters to pay such expenses to the extent possible (other than any related brokerage or selling commission or discount); provided further, that the failure or unwillingness of the related underwriters to agree to pay such expenses in whole or in part shall not affect the selling shareholders’ obligations to pay any expenses pursuant to this Section 2.3.

     2.4 Obligations of the Company. Subject to the provisions of Section 2.3 hereof, whenever required to effect the Registration of any Registrable Securities under this Agreement the Company, shall as expeditiously as reasonably possible:

          (a) Use its reasonable best efforts to ensure that its then existing Registration Statement is Effective; provided, that the Company shall not be required to keep any such Registration Statement effective for more than (i) one (1) year in the case of a Registration Statement on Form S-3, F-3, F-3ASR, or (ii) ninety (90) days in the case of a Registration Statement on Form S-1 or F-1.

          (b) Prepare and file with the Commission such amendments and supplements to such Registration Statement and the prospectus used in connection with such Registration Statement as may be necessary to comply with the provisions of Applicable

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Securities Law with respect to the disposition of all securities covered by such Registration Statement.

          (c) Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus and any supplement thereto, in conformity with the requirements of Applicable Securities Law, and such other documents as such Holders may reasonably request in order to facilitate the disposition of the Registrable Securities owned by them that are included in such Registration.

          (d) Use its best efforts to register and qualify the securities covered by such Registration Statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.

          (e) In the event of any Underwritten Offering, enter into and perform its obligations under an underwriting agreement in usual and customary form (including usual and customary provisions with respect to indemnification), with the managing underwriter(s) of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement.

          (f) Notify each Holder of Registrable Securities covered by the Registration Statement: (i) of the issuance of any stop order by the SEC in respect of such registration statement, (ii) of the receipt by the Company of any notification of the suspension of the qualification of the Registered Securities for offering or sale in any jurisdiction, (iii) of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, or (iv) if for any other reason it shall be necessary to amend or supplement such registration statement or prospectus in order to comply with the Securities Act; and, in each case of (i) and (ii), make reasonable efforts to prevent or obtain at the earliest possible moment the withdrawal of any stop order with respect to the applicable Registration Statement or other order suspending the use of any preliminary or final prospectus, and in each case of (iii) and (iv) as promptly as reasonably practicable thereafter, prepare and file with the SEC an amendment or supplement to such registration statement or prospectus which will correct such statement or omission or effect such compliance.

          (g) Upon the occurrence of any event described in Section 2.4(f) above, prepare a supplement or post-effective amendment to the applicable registration statement or related prospectus or any document incorporated therein by reference, or file any other required document so that, as thereafter delivered to the Holders of the securities being sold thereunder, such prospectus will not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading.

          (h) In the event of an Underwritten Offering, furnish, at the request of any Holder requesting Registration of Registrable Securities, on the date that such Registrable Securities are delivered to the underwriter(s) for sale, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the Registration Statement with respect to such securities becomes effective, (1) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such

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registration, in form and substance as is customarily given to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Holders requesting Registration, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities, and (2) a “comfort” letter dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Holders requesting registration, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities.

          (i) Provide a transfer agent and registrar for all Registrable Securities Registered pursuant to the Registration Statement and, where applicable, a CUSIP number for all those Registrable Securities, in each case not later than the effective date of the Registration.

          (j) Take all reasonable action necessary to: (1) cause the Depositary to accept the deposit of the Registrable Securities into the deposit facility to issue ADSs (or receipts) representing such Registrable Securities and to issue the related American Depositary Receipts; (2) cause the Depositary to register with the SEC (to the extent necessary) such ADSs; and (3) list the Registrable Securities on the primary exchange upon which the Company’s securities are traded.

     2.5 Obligations of Holders. It shall be a condition precedent to the obligations of the Company to Register the Registrable Securities of any Holder pursuant to this Section 2 that the selling Holder shall furnish to the Company such information regarding itself, the Registrable Securities held thereby and the intended method of disposition of such securities as shall be required to timely effect the Registration of such Holder’s Registrable Securities.

     2.6 Indemnification. In the event any Registrable Securities are included in a registration statement under this Section 2:

          (a) Company Indemnity. To the extent permitted by law, the Company will indemnify and hold harmless each Holder, its partners, officers, directors, shareholders, legal counsel, accountants, any underwriter (as defined in the Securities Act) for such Holder and each Person, if any, who controls (as defined in the Securities Act) such Holder or underwriter against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under laws which are applicable in connection with any Registration, qualification, or compliance, of the Company’s securities insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”):

          (1) any untrue statement or alleged untrue statement of a material fact contained in such Registration Statement, including any preliminary prospectus or final prospectus or any “free writing prospectus” (as defined in Rule 405 under the Securities Act) used in connection with the sale of any Registrable Securities contained therein or any amendments or supplements thereto;

          (2) the omission or alleged omission to state in the Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, a material fact required to be stated therein, or necessary to make the statements therein not misleading; or

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          (3) any violation or alleged violation by the Company of Applicable Securities Law, or any rule or regulation promulgated under Applicable Securities Law,

and the Company will reimburse each such Holder, its partners, officers, directors, legal counsel, accountants, underwriter or controlling Person for any legal or other expenses reasonably incurred by them, as incurred, in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 2.6(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld or delayed), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such Registration by such Holder, underwriter or controlling Person of such Holder.

          (b) Notice. Promptly after receipt by an indemnified party under this Section 2.6 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.6, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential conflict of interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of liability to the indemnified party under this Section 2.6 to the extent the indemnifying party is prejudiced as a result thereof, but the omission to so deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.6.

          (c) Contribution. If any indemnification provided for in this Section 2.6 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the one hand, and of the indemnified party, on the other, in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.

          (d) Survival. The obligations of the Company and Holders under this Section 2.6 shall survive the completion of any offering of Registrable Securities in a

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Registration Statement, regardless of the expiration of any statutes of limitation or extensions of such statutes.

     2.7 Termination of the Company’s Obligations. The registration rights set forth in Section 2.1 of this Agreement shall terminate upon the earlier of (i) when with respect to any Holder, in the reasonable opinion of counsel to the Company, all Registrable Securities proposed to be sold by such Holder may then be sold without registration in any ninety (90) day period pursuant to Rule 144 under the Securities Act, which counsel shall be reasonably satisfactory to such Holder (it being understood that the Company’s regular outside legal counsel shall be deemed satisfactory) (ii) the date as of which all of the Registrable Securities have been sold pursuant to a Registration Statement or (iii) twenty-four months following the Third Closing Date (as such term is defined in the CGEN Purchase Agreement).

     2.8 Rule 144 Reporting. With a view to making available the benefits of Rule 144 promulgated under the Securities Act and any comparable provision of Applicable Securities Law which may at any time permit the sale of the Registrable Securities to the public without registration or pursuant to a registration on Form S-1, F-1, S-3 or F-3, the Company agrees to:

          (a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act (or comparable provision under Applicable Securities Law in any jurisdiction where the Company’s securities are listed), at all times;

          (b) use reasonable, diligent efforts to file with the Commission in a timely manner all reports and other documents required of the Company under Applicable Securities Law; and

          (c) so long as a Holder owns any Registrable Securities, to furnish to such Holder forthwith upon request (1) a written statement by the Company as to its compliance with the reporting requirements of all Applicable Securities Law, or whether it qualifies as a registrant whose securities may be resold pursuant to Form S-3 or F-3 (or any form comparable thereto under Applicable Securities Law of any jurisdiction where the Company’s securities are listed), (2) a copy of the most recent annual of the Company and such other reports and documents as may be filed by the Company with the Commission, and (3) such other reports, documents or information of the Company, as a Holder may reasonably request in availing itself of any rule or regulation of the Commission that permits the selling of any such securities without registration or pursuant to Form S-3 or F-3 (or any form comparable thereto under Applicable Securities Law of any jurisdiction where the Company’s securities are listed).

SECTION 3 MISCELLANEOUS

     3.1 Binding Effect; Assignment.

          (a) Notwithstanding anything herein to the contrary, the rights of any CGEN Holders under this Agreement may be assigned or transferred by those CGEN Holders (i) to their respective partners, general partners, limited partners or other entities contractually or legally entitled to distributions from such a Holder, or (ii) to an Affiliate provided in each

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case that (1) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such rights are being assigned, and (2) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Section 3 and the terms and conditions of each Section of this Agreement with respect to which any rights are being assigned thereto under this clause. From the time of such transfer or assignment, for all purposes of each Section of this agreement with respect to which rights are assigned thereto under this clause, such transferee or assignee shall be treated as a “CGEN Holder”, as the case may be.

          (b) This Agreement shall be binding upon and shall be enforceable by each party, its successors and permitted assigns. Except as provided in Section 3.1(a) and Section 3.1(b), no party may assign any of its rights or obligations hereunder without the prior written approval of the other parties.

     3.2 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

     3.3 Dispute Resolution.

          (a) Any dispute, controversy or claim (each, a “Dispute”) arising out of or relating to this Agreement, or the interpretation, breach, termination or validity hereof, shall be resolved at the first instance through consultation between the representatives appointed by the highest ranking corporate officer of the Company and a representative selected by a majority of the Registrable Securities outstanding at the time of such dispute (provided any dispute as to any particular Registration Statement shall be resolved by a representative selected by the Holders representing a majority of the Registrable Securities included in such Registration Statement) (each a “Party”). Such consultation shall begin immediately after either Party has delivered to the other Party a written notice for such consultation.

          (b) If the Dispute is not resolved within sixty (60) days following the date on which such notice is given, the Dispute shall be submitted to arbitration upon the request of either Party with notice to the other Party (the “Arbitration Notice”).

          (c) The arbitration shall be conducted in Hong Kong under the auspices of the Hong Kong International Arbitration Centre (the “Centre”). There shall be three (3) arbitrators. The claimants in the Dispute shall collectively choose one arbitrator, and the respondents shall collectively choose one arbitrator. The Secretary General of the Centre shall select the third arbitrator, who shall be qualified to practice law in the State of New York. If any of the members of the arbitral tribunal have not been appointed within thirty (30) days after the Arbitration Notice is given, the relevant appointment shall be made by the Secretary General of the Centre.

          (d) The arbitration proceedings shall be conducted in English. The arbitration tribunal shall apply the Arbitration Rules of the United Nations Commission on International Trade Law, as in effect at the time of the arbitration. However, if such rules are in conflict with the provisions of this Section 3.3, including the provisions concerning the appointment of arbitrator, the provisions of this Section 3.3 shall prevail.

          (e) Each Party shall cooperate with the other in making full disclosure of and providing complete access to all information and documents requested by the other in

13

connection with such arbitration proceedings, subject only to any confidentiality obligations binding on such Party.

          (f) The arbitrator shall decide any dispute submitted by the parties to the arbitration strictly in accordance with the substantive law of the State of New York and shall not apply any other substantive law.

          (g) The award of the arbitration tribunal shall be final and binding upon the Parties, and the prevailing Party may apply to a court of competent jurisdiction for enforcement of such award.

          (h) Either Party shall be entitled to seek preliminary injunctive relief, if possible, from any court of competent jurisdiction pending the constitution of the arbitral tribunal.

          (i) During the course of the arbitration tribunal’s adjudication of the dispute, this Agreement shall continue to be performed except with respect to the part in dispute and under adjudication.

          (j) The cost of arbitration (including legal, accounting and other professional fees and expenses reasonably incurred, by any prevailing party with respect to the investigation, collection, prosecution and/or defense of any claim in the Dispute) shall be borne pro rata by each losing party.

     3.4 Amendments; Termination. Except for the joinder of any additional CGEN Holders, this Agreement and its provisions may be amended, changed, waived, discharged or terminated only by a writing signed by each of (a) the Company, and (b) the CGEN Holders representing a majority in voting power of the CGEN Registrable Securities. Any amendment, change, waiver, discharge or termination effected in accordance with the preceding sentence shall be binding upon each of the parties hereto and their successors and permitted assigns. Without limiting the foregoing, any party hereto may in writing waive any right that it individually holds hereunder without seeking the prior consent of any other party hereto. This Agreement shall automatically terminate when all Holders cease to hold any CGEN Registrable Securities.

     3.5 Notices. All notices, claims, certificates, requests, demands and other communications under this Agreement shall be made in writing and shall be delivered to any party hereto by hand or sent by facsimile, or sent, postage prepaid, by reputable overnight courier services at the address given for such party on the signature pages hereof (or at such other address for such party as shall be specified by like notice), and shall be deemed given when so delivered by hand, or if sent by facsimile, upon receipt of a confirmed transmittal receipt, or if sent by overnight courier, five (5) calendar days after delivery to or pickup by the overnight courier service.

     3.6 Further Assurances. Each Party shall do and perform, or cause to be done and performed, all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments and documents as the other Party may reasonably request to give effect to the terms and intent of this Agreement.

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     3.7 Entire Agreement. This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior written or oral understandings or agreements.

     3.8 Severability. If any provision of this Agreement shall be held invalid or unenforceable to any extent, the remainder of this Agreement shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

     3.9 Remedies Cumulative. The rights and remedies available under this Agreement or otherwise available shall be cumulative of all other rights and remedies and may be exercised successively.

     3.10 Counterpart Execution. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

     3.11 No Third Party Beneficiary. Except as contemplated in Section 2.6, nothing in this Agreement is intended to confer upon any Person other than the Parties hereto and their respective successors and permitted assigns any rights, benefits, or obligations hereunder.

[Signature pages follow.]

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     IN WITNESS WHEREOF the Parties hereto have caused their duly authorized representatives to execute this Agreement as of the first date written above.

FOCUS MEDIA HOLDING LIMITED
By:	/s/ Daniel Mingdong Wu
	Name:	Daniel Mingdong Wu
	Capacity: Chief Financial Officer

Address for notice:
28-30/F, Zhao Feng World Trade Building
369 Jiangsu Road
Shanghai 200050 PRC
Attn: Daniel Wu, Chief Financial Officer
Tel: +86 21 3212 4661 ex. 6339
Fax: +86 21 5240 0228

[Signature Page to Registration Rights Agreement]

     IN WITNESS WHEREOF the Parties hereto have caused their duly authorized representatives to execute this Agreement as of the first date written above.

CGEN HOLDERS
By:	/s/ Chan Yi Sing
	Name:	Chan Yi Sing
	Capacity:

Address for notice:
Suite 3203-4, Tower B,
City Center of Shanghai,
No.100 Zunyi Road
Shanghai 200051
Attn:                                                             
Tel: +86 21 6237 2250
Fax: +86 21 6237 1918

[Signature Page to Registration Rights Agreement]

TOTNES INTERNATIONAL LIMITED
By:	/s/ Steve Chu
	Name:	Steve Chu
	Capacity: Director

Address for notice:
Jin Lin Tiandi
139 Danshui Lu
Unit 2- 1901
Shanghai 200020
China
Attn: Steve Chu
Tel: +86 13918191183
Fax:

[Signature Page to Registration Rights Agreement]

S.I. TECHNOLOGY VENTURE CAPITAL LIMITED
By:	/s/ Zhou Jie
	Name:	Zhou Jie
	Capacity:	Director
Address for notice: 26/F, Harcourt House, 39 Gloucester Road, Hong Kong
Attn:	Mr. Roger L.C. Leung/Ms. Rebecca Ng
Tel:	(852) 2821 3909
Fax:	(852) 2866 3330

[Signature Page to Registration Rights Agreement]

SUMITOMO CORPORATION EQUITY ASIA LIMITED
By:	/s/ Tsuyoshi Konda
	Name:	Tsuyoshi Konda
	Capacity:	Managing Director
Address for notice: Suite 602, One International Finance Centre No.1 Harbour View Street Central Hong Kong
Attn:	Tsuyoshi Konda
Tel:	852- 2295- 0300
Fax:	852- 2295- 0600

[Signature Page to Registration Rights Agreement]

JAFCO ASIA TECHNOLOGY FUND III
By:	/s/ Hiroshi Yamada
	Name:	Hiroshi Yamada
	Capacity:	Attorney
Address for notice: c/o JAFCO Investment (Asia Pacific) Ltd. 6 Battery Road #42-01 Singapore 049909
Attn:	The President
Tel:	(65) 6224 6383
Fax:	(65) 6221 3690

[Signature Page to Registration Rights Agreement]

TDF CAPITAL CHINA II, LP
By:	/s/ Goh Yin Long
	Name:	Goh Yin Long
	Capacity:	Investment Director
Address for notice: Unit 2505, K. Wah Centre 1010 Huaihai Zhong Road Shanghai 200031, PRC
Attn:	Mr. Goh Yin Long
Tel:	+8621 5467 0500
Fax:	+8621 5404 7557

[Signature Page to Registration Rights Agreement]

TDF CAPITAL ADVISORS, LP
By:	/s/ Goh Yin Long
	Name:	Goh Yin Long
	Capacity:	Investment Director
Address for notice: Unit 2505, K. Wah Centre 1010 Huaihai Zhong Road Shanghai 200031, PRC
Attn:	Mr. Goh Yin Long
Tel:	+8621 5467 0500
Fax:	+8621 5404 7557

[Signature Page to Registration Rights Agreement]

HUITUNG INVESTMENTS (BVI) LIMITED
By:	/s/ Tsui-Hui Huang
	Name:	Tsui-Hui Huang
	Capacity:	President
Address for notice: Room 2211, Shui On Plaza 333 Huai Hai Zhong Road Shanghai, China Zip Code: 200021
Attn:	David Tso
Tel:	86-21-6385-3266
Fax:	86-21-6385-2199

[Signature Page to Registration Rights Agreement]

REDPOINT VENTURES II, L.P. by its General Partner Redpoint Ventures II, LLC
By:	/s/ R. Thomas Dyal
	Name:	R. Thomas Dyal
	Capacity:	Managing Director
Address for notice: Redpoint Ventures 3000 Sand Hill Road Building 2 Suite 290 Menlo Park, CA 94025
Attn:	Lars Pedersen
Tel:	650-926-5600
Fax:	650-854-5762

[Signature Page to Registration Rights Agreement]

REDPOINT ASSOCIATES II, LLC, as nominee
By:	/s/ R. Thomas Dyal
	Name:	R. Thomas Dyal
	Capacity:	Managing Director
Address for notice: Redpoint Ventures 3000 Sand Hill Road Building 2 Suite 290 Menlo Park, CA 94025
Attn:	Lars Pedersen
Tel:	650-926-5600
Fax:	650-854-5762

[Signature Page to Registration Rights Agreement]

INVESTLINK CONSULTING (CHINA) LIMITED
By:	/s/ Peter Yeung
	Name:	Peter Yeung
	Capacity:	Director
Address for notice: 38/F Tower 2, Plaza 66 1366 Nan Jing Road West Shanghai 200040 China
Attn:	Steven Xiang
Tel:	8621 3217 9511
Fax:	8621 6288 3866

[Signature Page to Registration Rights Agreement]

CPI BALLPARK INVESTMENTS LTD
By:	/s/ Ian Johnson
	Name:	Ian Johnson
	Capacity:	Director
Address for notice: Merrill Lynch Asia Pacific 15th Floor, Citibank Tower 3 Garden Road Central, Hong Kong
Attn:	Sampson Lew
Tel:	+852 2161 7650
Fax:	+852 2161 7148

[Signature Page to Registration Rights Agreement]

Schedule A — CGEN Holders

Shareholders

Chan Yi Sing
Totnes International Limited
S.I. Technology Venture Capital Limited
Sumitomo Corporation Equity Asia Limited
JAFCO Asia Technology Fund III
TDF Capital China II, LP
TDF Capital Advisors, LP
Huitung Investments (BVI) Limited
Redpoint Ventures II, L.P.
Redpoint Associates II, LLC
Investlink Consulting (China) Limited
CPI Ballpark Investments Ltd.

Option Holders

(Chinese Characters) (Tian Guanyong)
(Chinese Characters) (Cao Xiaofeng)
(Chinese Characters) (Zhu Haiguang)
(Chinese Characters) (Yao Fang)
(Chinese Characters) (Mei Lijun)
(Chinese Characters) (Cao Zhigao)
(Chinese Characters) (Hu Yufei)
JJZ Investment Ltd.
(Chinese Characters) (Zhu Wei)
(Chinese Characters) (Fang Sheng)
(Chinese Characters) (Hu Xiaotu)
(Chinese Characters) (Yuan Gang)
(Chinese Characters) (Feng Enxu)
(Chinese Characters) (Ma Yiheng)
(Chinese Characters) (Li Ji)
(Chinese Characters) (Chi Guliang)
(Chinese Characters) (Gu Qing)
(Chinese Characters) (Cao Jiong)
(Chinese Characters) (Chen Yafeng)
(Chinese Characters) (Jiang Haili)
(Chinese Characters) (Qian Feng)
(Chinese Characters) (Cheng Fangmin)
(Chinese Characters) (Jia Jidong)
(Chinese Characters) (Chen Budong)
(Chinese Characters) (Yang Bin)
(Chinese Characters) (Wang Bin)
(Chinese Characters) (Wang Yan)

(Chinese Characters) (Zhou Jun)
(Chinese Characters) (Liu Xuanyun)
(Chinese Characters) (Geng Xiaoxuan)
(Chinese Characters) (Zhan Lei)
(Chinese Characters) (Xia Ying)
(Chinese Characters) (Weng Da)
(Chinese Characters) (Xu Xiao)
(Chinese Characters) (Zhang Nan)
(Chinese Characters) (Meng Bing)
(Chinese Characters) (Fang Yanrong)
(Chinese Characters) (Yan Jianwen)
(Chinese Characters) (Cai Yan)
(Chinese Characters) (Xue Baogen)
(Chinese Characters) (Dong Yi)
(Chinese Characters) (Wang Xiaoying)
(Chinese Characters) (Zhou Rongbao)
(Chinese Characters) (Chen Mingliang)
(Chinese Characters) (Cai Chunming)
(Chinese Characters) (Gao Zhiwei)
(Chinese Characters) (Wang Zheng)
(Chinese Characters) (Yue Lei)
(Chinese Characters) (Lai Yunna)
(Chinese Characters) (Huang Shen)
(Chinese Characters) (Guan Yudong)
(Chinese Characters) (Shan Renli)
(Chinese Characters) (Wu Xin)
(Chinese Characters) (Tu Jie)
(Chinese Characters) (Zhang Lianwei)
(Chinese Characters) (Xing Rui)
(Chinese Characters) (Geng Haibin)
(Chinese Characters) Zhang Zhengxian)
(Chinese Characters) (Zhu Feng)
(Chinese Characters) (He Shijiong)
(Chinese Characters) (Pan Jianhua)
(Chinese Characters) (Zhang Ye)
(Chinese Characters) (Sun Fang)
(Chinese Characters) (Zhou Zheng)
(Chinese Characters) (Jiang Pengtao)

Schedule 2.1(a)(2)

1. Ernst & Young Hua Ming’s inability or unwillingness to provide an unqualified audit report in respect of CGEN Digital Media Company Limited for fiscal year 2007.

2. Any issue or problem relating to SEC Rule 3-05 of Regulation S-X that arises primarily as a result of Focus Media Holding Limited’s acquisition of CGEN Digital Media Company Limited.

3. Any other issue or problem that renders Focus Media Holding Limited ineligible to use Form F-3ASR; provided that Focus Media Holding Limited demonstrates to the reasonable satisfaction of the Seller’s Representative that such issue or problem was primarily a result of the acquisition of CGEN Digital Media Company Limited.

EX-10.164

Exhibit 10.164

Confidential

EQUITY PLEDGE AGREEMENT

AMONG

SHANGHAI FOCUS MEDIA ADVERTISEMENT CO., LTD

SHANGHAI FOCUS MEDIA ADVERTISING AGENCY CO., LTD

CGEN DIGITAL TECHNOLOGY (SHANGHAI) COMPANY LTD

AND

SHANGHAI CGEN CULTURE COMMUNICATION COMPANY LTD

DATED AS OF

January 5 2008

EQUITY PLEDGE AGREEMENT

This Equity Pledge Agreement (hereinafter, this “Agreement”) is entered into in Shanghai of the People’s Republic of China (hereinafter “PRC”) as of January 5 2008 by and among the following Parties:

(1)	Shanghai Focus Media Advertisement Co., Ltd. (hereinafter “Focus Media Advertisement”) Registered Address: Unit F Room 1003, No.1027, Changning Road, Changning District, Shanghai
(2)	Shanghai Focus Media Advertising Agency Co., Ltd. (hereinafter “Focus Media Advertising Agency”) Registerd Address: Room A65, 28th Floor, No. 369, Changning Road, Changning District, Shanghai
(3)	CGEN Digital Technology (Shanghai) Company Ltd. (hereinafter “Pledgee”) Registered Address: Room 2207, Building 2, 200 Zhangheng Road, Zhangjiang High Technology Park, Shanghai
(4)	Shanghai CGEN Culture Communications Company Ltd (hereinafter “CGEN Culture”) Registered Address: Unit A, F4, North Tower, 1016 Dingxi Road, Changning District, Shanghai

(The above parties hereinafter shall be individually referred to as a “Party” and collectively referred to as the “Parties”, of which Focus Media Advertisement and Focus Media Advertising Agency shall be individually referred to as a “Pledgor” and collectively referred to as the “Pledgors” .)

WHEREAS:

(1) Shareholders are the enrolled shareholders of CGEN Culture, legally holding all the equity of the company as of the execution date of this Agreement, of which Focus Media Advertisement holds 90% interest and Focus Media Advertising Agency holds 10%.

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(2)	Pursuant to the Call Option Agreement dated as of January 5 2008 among the Pledgee, the Pledgors and CGEN Culture (hereinafter, the “Call Option Agreement”), the Plegors shall transfer part or all of the equity interest of CGEN Culture they hold to Pledgee and/or any other entity or individual designated by Pledgee at the request of Pledgee.
(3)	Pursuant to the Shareholders’ Voting Right Proxy Agreement dated as of January 5 2008 among the Pledgee, the Pledgors and CGEN Culture (hereinafter, the “Proxy Agreement”), Pledgors have already entrusted the person designated by the Pledgees with full power to exercise on their behalves all of their shareholders’ voting rights in CGEN Culture.
(4)	As security for performance by the Pledgors of the Contract Obligations (as defined below) and repayment of the Guaranteed Liabilities (as defined below), the Pledgors agree to pledge all of their CGEN Culture Equity to the Pledgee and grant the Pledgee the right to request for repayment on first priority and CGEN Culture agrees such equity pledge arrangement.

Therefore, the Parties hereby have reached the following agreement upon mutual consultations:

Article 1 Definition

1.1 Except as otherwise construed in the context, the following terms in this Agreement shall be interpreted to have the following meanings:

“Contract Obligations” shall mean all contractual obligations of a Pledgor under the Call Option Agreement and Proxy Agreement; all contractual obligations of CGEN Culture under the Call Option Agreement and Proxy Agreement; and all contractual obligations of a Pledgor under this Agreement.

“Guaranteed Liabilities” shall mean all direct, indirect and consequential losses and losses of foreseeable profits suffered by Pledgee due to any Breaching Event (as defined below) by a Pledgor and/or CGEN Culture, and all fees incurred by Pledgee for the enforcement of the Contractual Obligations of a Pledgor and/or CGEN Culture.

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“Transaction Agreements” shall mean the Call Option Agreement and the Proxy Agreement.

“Breaching Event” shall mean any breach by either Pledgor of its Contract Obligations under the Proxy Agreement, Call Option Agreement and/or this Agreement; any breach by a CGEN Culture of its Contract Obligations under the Call Option Agreement, Proxy Agreement and/or this Agreement.

“Pledged Property” shall mean the equity interest in CGEN Culture which is legally owned by the Pledgor as of the effective date hereof and is to be pledges by the Pledgor to the Pledgee according to provisions hereof as the security for the performance by the Pledgor and CGEN Culture of their Contractual Obligations (in respect of Focus Media Advertisement, means the 90% equity interest it holds in CGEN Culture, and in respect of Focus Media Advertising Agency, means the 10% equity interest it holds in CGEN Culture), and the increased capital contribution and equity interest described in Articles 2.6 and 2.7 hereof.

“PRC Law” shall mean the then valid laws, administrative regulations, administrative rules, local regulations, judicial interpretations and other binding regulatory documents of the People’s Republic of China.

1.2 The references to any PRC Law herein shall be deemed:

(1)	to include any references to the amendments, changes, supplements and reenactments of such law, irrespective of whether they take effect before or after the formation of this Agreement; and
(2)	to include any references to other decisions, notices or regulations enacted in accordance therewith or effective as a result thereof.

1.3 Except as otherwise stated in the context herein, all references to an Article, clause, item or paragraph shall refer to the relevant part of this Agreement.

Article 2 Equity Pledge

2.1 Each Pledgor hereby agrees to pledge the Pledged Property, which it legally

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owns and has the right to dispose of, to Pledgee according to the provisions hereof as the security for the performance of the Contract Obligations and the repayment of the Guaranteed Liabilities. CGEN Culture hereby agrees that the Pledgors who legally hold equity interest in it to pledge the Pledged Property to the Pledgee according to the provisions hereof.

2.2	Each Pledgor hereby undertakes that it will be responsible for, recording the arrangement of the equity pledge hereunder (hereinafter, the “Equity Pledge”) on the shareholder register of CGEN Culture on the date hereof, and will do its best endeavor to make registration with registration authorities of industry and commerce where CGEN Culture registers. CGEN Culture undertakes that it will do its best to cooperate with the Pledgors to complete the registration with authorities of industry and commerce under this Article.
2.3	During the valid term of this Agreement, except for the willful misconduct or gross negligence of Pledgee which has direct cause and effect relationship with the reduction in value of the Pledged Property, Pledgee shall not be liable in any way to, nor shall Pledgors have any right to claim in any way or propose any demands on Pledgee, in respect of the said reduction in value of the Pledged Property.
2.4	To the extent not violating provision of Article 2.3 above, in case of any possibility of obvious reduction in value of the Pledged Property which is sufficient to jeopardize Pledgee’s rights, Pledgee may at any time auction or sell off the Pledged Property on behalf of Pledgors, and discuss with Pledgors to use the proceeds from such auction or sale-off as pre-repayment of the Guaranteed Liabilities, or may submit such proceeds to the local notary institution to keep where Pledgee are domiciled (any fees incurred in relation thereto shall be borne by Pledgors).
2.5	The Plegee as Plegee shall be deemed to have created the encumbrance of first order in priority on the Pledged Property, and in case of any Breaching Event, such Pledgee shall have the right to dispose of the Pledged Property in the way set out in Article 4 hereof.
2.6	Only upon prior consent by Pledgee, Pledgors may increase their capital

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contribution to CGEN Culture. Further capital contribution made by Pledgor (s) in CGEN Culture shall also be part of the Pledged Property.

2.7 Only upon prior consent by Pledgee, Pledgors may be able to receive dividends or share profits from the Pledged Property. The dividends or the profits received by Pledgors from the Pledged Property shall be deposited into Pledgee’s bank account designated by Pledgee respectively, to be under the supervision of Pledgee and used as the Pledged Property to repay in priority the Guaranteed Liabilities.

Article 3 Release of Pledge

In respect of equity interest of CGEN Culture, upon full and complete performance by relevant Pledgors of all of their Contract Obligations and upon the full repayment by relevant Pledgors of all the Guaranteed Liabilities(if any), the Pledgee shall, at the request of relevant Pledgors, release the pledge created on CGEN Culture under this Agreement, and shall cooperate with Pledgors to go through the formalities to cancel the record of the Equity Pledge in the shareholder register of CGEN Culture; in case of the Equity Pledge having been recorded at the registration department of Administration of Industry and Commerce where CGEN Culture registers, the relevant Parties shall cooperate with each other to go through the formalities to cancel such record of the Equity Pledge. The reasonable fees incurred in connection with such release to be borne by Pledgee.

Article 4 Disposal of the Pledged Property

4.1 Pledgors, CGEN Culture and Pledgee hereby agree that, in case of any Breaching Event, the Pledgee shall have the right to exercise, upon giving written notice to Pledgors, all of the remedial rights and powers enjoyable by it under PRC Law, Transaction Agreements and the terms hereof, including but not limited to being repaid in priority with proceeds from auctions or sale-offs of the Pledged Property. Pledgee shall not be liable for any loss as the result of their reasonable exercise of such rights and powers.

4.2 Pledgee shall have the right to designate in writing its legal counsel or other agents to exercise on their respective behalf any and all rights and powers set out above, and neither Pledgors nor CGEN Culture shall not oppose thereto.

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4.3 The reasonable costs incurred by Pledgee in connection with their exercise of any and all rights and powers set out above shall be borne by Pledgors, and Pledgee shall have the right to deduct the costs actually incurred from the proceeds acquired from the exercise of the rights and powers.

4.4 The proceeds that Pledgee acquires from the exercise of their respective rights and powers shall be used in the priority order as follows:

Firstly, to pay any cost incurred in connection with the disposal of the Pledged Property and the exercise by Pledgee of their respective rights and powers (including remuneration paid to their respective legal counsels and agents);

Secondly, to pay any taxes and levies payable for the disposal of the Pledged Property; and

Thirdly, to repay Pledgee for the Guaranteed Liabilities.

In case of any balance after payment of the above amounts, Pledgee shall return it to Pledgors or other persons entitled thereto according to the relevant laws and rules or submit it to the local notary institution for keeping where Pledgee is domiciled (any fees incurred in relation thereto shall be borne by Pledgors).

4.5 Pledgee shall have the option to exercise, simultaneously or in certain sequence, any of the remedies at breaching that it is entitled to in respect of the equity interest of CGEN Culture held by any Pledgor. Pledgee shall not be obliged to exercise any other remedies at breaching before their exercise of the right to the auctions or sale-offs of the Pledged Property hereunder. Pledgors or CGEN Culture shall not oppose to whether Pledgee exercises any part of the right to the pledge or the sequence of exercising the pledge interest.

Article 5 Fees and Costs

All costs actually incurred in connection with the establishment of the Equity Pledge hereunder, including but not limited to stamp duties, any other taxes, all legal fees, etc shall be borne by the Pledgee.

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Article 6 Continuity and No Waive

The Equity Pledge hereunder is a continuous guarantee, with its validity to continue until the full performance of the Contract Obligations or the full repayment of the Guaranteed Liabilities. Neither exemption or grace period granted by Pledgee to Pledgors in respect of their breach, nor delay by Pledgee in exercising any of their rights under the Transaction Agreements and this Agreement shall affect the rights of Pledgee under this Agreement, relevant PRC Law and the Transaction Agreements, the rights of Pledgee to demand at any time thereafter the strict performance of the Transaction Agreements and this Agreement by Pledgors or the rights Pledgee may be entitled to due to subsequent breach by Pledgors of the obligations under the Transaction Agreements and/or this Agreement.

Article 7 Representations and Warranties by Pledgors

Each of Pledgors hereby, in respect of itself and CGEN Culture in which it holds equity interest, represents and warrants to Pledgee as follows:

7.1 Each Individual Pledgor is a limited liability corporation duly registered and validly existing under PRC Law with complete and independent status as a legal person; Each of Shareholders has full and independent legal status and legal capacity to execute, deliver and perform this Agreement, and is capable to act independently as a subject of legal actions.

7.2 CGEN Culture in which the Pledgors hold equity interest is a limited liability corporation duly incorporated and validly existing under PRC Law, it has independent status as a legal person. It has full and independent legal status and capacity to execute, deliver and perform this Agreement and can independently be a subject of actions. It has full right and authorization to execute and deliver this Agreement and other documents relating to the transaction as stipulated in this Agreement and to be executed by them. It also has full right and authorization to complete the transaction stipulated in this Agreement.

7.3 All reports, documents and information concerning Pledgors and all matters as required by this Agreement which are provided by Pledgors to Pledgee before this Agreement comes into effect are true, correct and effective in all material

7

	aspects as of the effectiveness hereof.
7.5	At the time of the effectiveness of this Agreement, Pledgors are the sole legal owners of the Pledged Property, with no existing dispute whatsoever concerning the ownership of the Pledged Property. Pledgors have the right to dispose of the Pledged Property or any part thereof.

7.6 Except for the encumbrance set on the Pledged Property hereunder and the rights set under the Transaction Agreements, there is no other encumbrance or third party interest set on the Pledged Property.

7.7 The Pledged Property is capable of being pledged or transferred according to the laws, and Pledgors have the full right and power to pledge the Pledged Property to Pledgee according to this Agreement.

7.8 This Agreement constitutes the legal, valid and binding obligations on Pledgors when it is duly executed by Pledgors.

7.9 Any consent, permission, waive or authorization by any third person, or any approval, permission or exemption by any government authority, or any registration or filing formalities (if required by laws) with any government authority to be handled or obtained in respect of the execution and performance hereof and the Equity Pledge hereunder have already been handled or obtained, and will be fully effective during the valid term of this Agreement.

7.10 The execution and performance by Pledgors of this Agreement are not in violation of or conflict with any laws applicable to them, or any agreement to which they are a party or which has binding effect on their assets, any court judgment, any arbitration award, or any administration authority decision.

7.11 The pledge hereunder constitutes the encumbrance of first order in priority on the Pledged Property.

7.12 All taxes and fees payable in connection with acquisition of the Pledged Property have already been paid in full amount by Pledgors.

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7.13 There is no pending or, to the knowledge of Pledgors, threatened litigation, legal process or demand by any court or any arbitral tribunal against Pledgors, or their property, or the Pledged Property, nor is there any pending or, to the knowledge of Pledgors, threatened litigation, legal process or demand by any government authority or any administration authority against Pledgors, or their property, or the Pledged Property, which is of material or detrimental effect on the economic status of Pledgors or their capability to perform the obligations hereunder and the Guaranteed Liabilities.

7.14 Pledgors hereby warrant to Pledgee that the above representations and warranties will remain true, correct and effective at any time and under any circumstance before the Contractual Obligations are fully performed or the Guaranteed Liabilities are fully repaid, and will be fully complied with.

Article 8 — Representations and Warranties by CGEN Culture

CGEN Culture hereby represents and warrants to Pledgee as follows:

8.1 CGEN Culture is a limited liability corporation duly incorporated and validly existing under PRC Law, with full capacity of disposition and has obtained due authorization to execute, deliver and perform this Agreement and can independently be a subject of actions.

8.2 All reports, documents and information concerning Pledged Property and all matters as required by this Agreement which are provided by CGEN Culture to Pledgee before this Agreement comes into effect are true, correct and effective in all material aspects as of the execution hereof.

8.3 All reports, documents and information concerning Pledged Property and all matters as required by this Agreement which are provided by CGEN Culture to Pledgee after this Agreement comes into effect are true, correct and effective in all material aspects upon provision.

8.4 This Agreement constitutes the legal, valid and binding obligations on CGEN Culture when it is duly executed by CGEN Culture.

8.5 It has full right and authorization to execute and deliver this Agreement and

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other documents relating to the transaction as stipulated in this Agreement and to be executed by them. It also has full right and authorization to complete the transaction stipulated in this Agreement.

8.6

There is no pending or, to the knowledge of CGEN Culture, threatened litigation, legal process or demand by any court or any arbitral tribunal against CGEN Culture, or their property (including but are not limited to the Pledged Property), nor is there any pending or, to the knowledge of CGEN Culture, threatened litigation, legal process or demand by any government authority or any administration authority against CGEN Culture, or their property (including but are not limited to the Pledged Property), which is of material or detrimental effect on the economic status of CGEN Culture or their capability to perform the obligations hereunder and the Guaranteed Liabilities.

8.7 CGEN Culture hereby agree to bear joint responsibilities to Pledgee in respect of the representations and Warranties made by its relevant Plegor according to Article 7.5, Article 7.6, Article 7.7, Article 7.9 and Article 7.11 hereof.

8.8 CGEN Culture hereby warrant to Pledgee that the above representations and warranties will remain true, correct and effective at any time and under any circumstance before the Contractual Obligations are fully performed or the Guaranteed Liabilities are fully repaid, and will be fully complied with.

Article 9 — Undertakings by Pledgors

Each of Pledgors hereby individually undertakes to Pledgee in respect of itself and CGEN Culture of which it holds equity as follows:

9.1 Without prior written consent by Pledgee, Pledgors shall not establish or permit to establish any new pledge or any other encumbrance on the Pledged Property.

9.2 Without first giving written notice to Pledgee and having Pledgee’s prior written consent, Pledgors shall not transfer the Pledged Property, and any attempt by Pledgors to transfer the Pledged Property shall be null and void. The proceeds from transfer of the Pledged Property by Pledgors shall be used to repay to Pledgee in advance the Guaranteed Liabilities or submit the same to the third party agreed with Pledgee.

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9.3	In case of any litigation, arbitration or other demand which may affect detrimentally the interest of Pledgors or Pledgee under the Transaction Agreements and hereunder or the Pledged Property, Pledgors undertake to notify Pledgee thereof in writing as soon as possible and promptly and shall take, at the reasonable request of Pledgee, all necessary measures to ensure the pledge interest of Pledgee in the Pledged Property.
9.4	Pledgors shall not carry on or permit any act or action which may affect detrimentally the interest of Pledgee under the Transaction Agreements and hereunder or the Pledged Property.
9.5	Pledgors guarantee that they shall, at the reasonable request of Pledgee, take all necessary measures and execute all necessary documents (including but not limited to supplementary agreement hereof) in respect of ensuring the pledge interest of Pledgee in the Pledged Property and the exercise and realization of the rights thereof.
9.6	In case of assignment of any Pledged Property as the result of the exercise of the right to the pledge hereunder, Pledgors guarantee that they will take all necessary measures to realize such assignment.
9.7	Without the prior written consent by the Pledgee, if the business term of CGEN Culture expires during the term of this Agreement, each Pledgor shall then take all necessary measures to extend such business term to ensure the business term of CGEN Culture not be expired during the term of this Agreement.

Article 10 — Undertakings by CGEN Culture

10.1 Any consent, permission, waive or authorization by any third person, or any approval, permission or exemption by any government authority, or any registration or filing formalities (if required by laws) with any government authority to be handled or obtained in respect of the execution and performance hereof and the Equity Pledge hereunder will be cooperated to handle or obtain by CGEN Culture to their best and will be ensured to remain full effective during the valid term of this Agreement.

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10.2 Without the prior written consent by Pledgee, CGEN Culture shall not cooperate to establish or permit to establish any new pledge or any other encumbrance on the Pledged Property.

10.3 Without having Pledgee’s prior written consent, CGEN Culture shall not cooperate to transfer or permit to transfer the Pledged Property.

10.4 In case of any litigation, arbitration or other demand which may affect detrimentally the interest of CGEN Culture or Pledgee under the Transaction Agreements and hereunder or the equity of CGEN Culture as the Pledged Property, CGEN Culture undertake to notify Pledgee thereof in writing as soon as possible and promptly and shall take, at the reasonable request of Pledgee, all necessary measures to ensure the pledge interest of Pledgee in the Pledged Property.

10.5 CGEN Culture shall not carry on or permit any act or action which may affect detrimentally the interest of Pledgee under the Transaction Agreements and hereunder or the Pledged Property.

10.6 CGEN Culture shall provide Pledgee with the financial statement of the last calendar season within the first month of each calendar season, including but are not limited to the balance sheet, the income statement and the statement of cash flow.

10.7 CGEN Culture guarantee that they shall, at the reasonable request of Pledgee, take all necessary measures and execute all necessary documents (including but not limited to supplementary agreement hereof) in respect of ensuring the pledge interest of Pledgee in the Pledged Property and the exercise and realization of the rights thereof.

10.8 In case of assignment of any Pledged Property as the result of the exercise of the right to the pledge hereunder, CGEN Culture guarantee that they will take all necessary measures to realize such assignment.

Article 11 — Change of Circumstances

As supplement and subject to compliance with other terms of the Transaction

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Agreements and this Agreement, in case that at any time the promulgation or change of any PRC Law, regulations or rules, or change in interpretation or application of such laws, regulations and rules, or the change of the relevant registration procedures enables Pledgee to believe that it will be illegal or in conflict with such laws, regulations or rules to further maintain the effectiveness of this Agreement and/or dispose of the Pledged Property in the way provided herein, Pledgors and CGEN Culture shall, at the written direction of Pledgee and in accordance with the reasonable request of Pledgee, promptly take actions and/or execute any agreement or other document, in order to:

(1)	keep this Agreement remain in effect;
(2)	facilitate the disposal of the Pledged Property in the way provided herein; and/or
(3)	maintain or realize the intention or the guarantee established hereunder.

Article 12 — Effectiveness and Term of This Agreement

12.1 This Agreement shall become effective when this Agreement is duly executed by Pledgee, CGEN Culture and the Pledgors who hold the equity interest in CGEN Culture.

12.2	The Pledgors who hold the equity interest in CGEN Culture and CGEN Culture shall legally record the Equity Pledge in the shareholders’ registry of CGEN Culture.
	Pledgors shall provide the registration certification of the Equity Pledge being recorded in the shareholders’ registry as mentioned above to Pledgee in a way satisfactory to Pledgee.

12.3 This Agreement shall have its valid term until the full performance of the Contract Obligations or the full repayment of the Guaranteed Liabilities.

Article 13 — Notice

13.1 Any notice, request, demand and other correspondences made as required by or in accordance with this Agreement shall be made in writing and delivered to the relevant Party.

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13.2 The abovementioned notice or other correspondences shall be deemed to have been delivered when it is transmitted if transmitted by facsimile; it shall be deemed to have been delivered when it is delivered if received in person; it shall be deemed to have been delivered five (5) days after posting the same if posted by mail.

Article 14 — Miscellaneous

14.1 Pledgee may, upon notice to Pledgors and CGEN Culture but not necessarily with Pledgors and CGEN Culture’s consent, assign Pledgee’s rights and/or obligations hereunder to any third party; provided that Pledgors can not, without Pledgee’s prior written consent, assign Pledgors’ rights, obligations and/or liabilities hereunder to any third party. Successors or permitted assignees (if any) of Pledgors shall continue to perform the obligations of Pledgors under this Agreement.

14.2 This Agreement shall be prepared in the Chinese language in four (4) original copies, with each involved Party holding one (1) copy hereof.

14.3 The formation, validity, execution, amendment, interpretation and termination of this Agreement shall be governed by PRC Law.

14.4 Any disputes arising hereunder and in connection herewith shall be settled through consultations among the Parties, and if the Parties cannot reach an agreement regarding such disputes within thirty (30) days of their occurrence, such disputes shall be submitted to China International Economic and Trade Arbitration Commission for arbitration in Shanghai in accordance with the arbitration rules of such Commission, and the arbitration award shall be final and binding on all disputing Parties.

14.5 Any rights, powers and remedies empowered to any Party by any provisions herein shall not preclude any other rights, powers and remedies enjoyed by such Party in accordance with laws and other provisions under this Agreement, and the exercise of its rights, powers and remedies by a Party shall not preclude its exercise of its other rights, powers and remedies by such Party.

14.6 Any failure or delay by a Party in exercising any of its rights, powers and

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	remedies hereunder or in accordance with laws (hereinafter, the “Party’s Rights”) shall not lead to a waiver of such rights, and the waiver of any single or partial exercise of the Party’s Rights shall not preclude such Party from exercising such rights in any other way and exercising the remaining part of the Party’s Rights.
14.7	The titles of the Articles contained herein shall be for reference only, and in no circumstances shall such titles be used in or affect the interpretation of the provisions hereof.

14.8 Each provision contained herein shall be severable and independent from each of other provisions, and if at any time any one or more articles herein become invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions herein shall not be affected as a result thereof.

14.9 This Agreement shall substitute any other documents on the same subject executed by relevant Parties hereof once duly executed.

14.10 Any amendments or supplements to this Agreement shall be made in writing. Except for assignment by Pledgee of its rights hereunder according to Article 14.1 of this Agreement, the amendments or supplements to this Agreement shall take effect only when properly signed by the Parties to this Agreement.

14.11 This Agreement shall be binding on the legal successors of the Parties.

14.12 At the time of execution hereof, each of Pledgors shall sign respectively a Power of Attorney (as set out in Appendix I hereto, hereinafter, the “Power of Attorney”) to authorize any person designated by the Pledgee to sign on the Pledgee’s behalf according to this Agreement any and all legal documents necessary for the exercise of Pledgee’s rights hereunder. Such Power of Attorney shall be delivered to the Pledgee to keep in custody and, when necessary, the Pledgee may at any time submit the Power of Attorney to the relevant government authority.

[The remainder of this page is left blank]

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IN WITNESS HEREOF, the following Parties have caused this Equity Pledge Agreement to be executed as of the date and in the place first here above mentioned.

Shanghai Focus Media Advertisement Co., Ltd.
(chop)
Signature by Authorized Representative:                                         
Name: Jiang Nanchun
Position: Legal Representative

Shanghai Focus Media Advertising Agency Co., Ltd
(chop)
Signature by Authorized Representative:                                         
Name: Jiang Nanchun
Position: Legal Representative

CGEN Digital Technology (Shanghai) Co., Ltd.
(chop)
Signature by Authorized Representative:                                         
Name:
Position:

Shanghai CGEN Culture Communication Co., Ltd
(chop)
Signature by Authorized Representative:                                         
Name: Yang Deyi
Position: Legal Representative

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Appendix I:

Form of Power of Attorney

The company hereby irrevocably entrust [                              ] [Identity Card number:                                         ], as the authorized representative of the company, to sign all the necessary or useful legal documents for the exercise of the rights by CGEN Digital Technology (Shanghai) Company Ltd under the Equity Pledge Agreement among CGEN Digital Technology (Shanghai) Company Ltd, the company, Shanghai CGEN Culture Communication Co., Ltd and other relevant party dated                     , 2008.

Shanghai Focus Media Advertisement Co., Ltd.
(Chop)
 

Signature: 

Date:  

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Form of Power of Attorney

The company hereby irrevocably entrust [                              ] [Identity Card number:                                         ], as the authorized representative of the company, to sign all the necessary or useful legal documents for the exercise of the rights by CGEN Digital Technology (Shanghai) Company Ltd under the Equity Pledge Agreement among CGEN Digital Technology (Shanghai) Company, the company, Shanghai CGEN Culture Communication Co., Ltd and other relevant party dated                     , 2008.

Shanghai Focus Media Advertising Agency Co., Ltd.
(Chop)
 

Signature: 

Date: 

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EX-10.165

Exhibit 10.165

Confidential

CALL OPTION AGREEMENT

AMONG

SHANGHAI FOCUS MEDIA ADVERTISEMENT CO., LTD

SHANGHAI FOCUS MEDIA ADVERTISING AGENCY CO., LTD

CGEN DIGITAL TECHNOLOGY (SHANGHAI) COMPANY LTD

AND

SHANGHAI CGEN CULTURE COMMUNICATION COMPANY LTD

DATED AS OF

January 5 2008

CALL OPTION AGREEMENT

This Call Option Agreement (this “Agreement”) is entered into in Shanghai of the People’s Republic of China (the “PRC”) as of January 5 2008 by and among the following Parties:

(1)	Shanghai Focus Media Advertisement Co., Ltd. (hereinafter “Focus Media Advertisement”)
	Registered Address: Unit F Room 1003, No.1027, Changning Road, Changning District, Shanghai
(2)	Shanghai Focus Media Advertising Agency Co., Ltd. (hereinafter “Focus Media Advertising Agency”)
	Registered Address: Room A65, 28th Floor, No. 369, Changning Road, Changning District, Shanghai
(3)	CGEN Digital Technology (Shanghai) Company Ltd. (hereinafter “CGEN Digital”)
	Registered Address: Room 2207, Building 2, 200 Zhangheng Road, Zhangjiang High Technology Park, Shanghai
(4)	Shanghai CGEN Culture Communications Company Ltd (hereinafter “CGEN Culture”)
	Registered Address: Unit A, F4, North Tower, 1016 Dingxi Road, Changning District, Shanghai

(Focus Media Advrtisement and Focus Media Adverting Agency hereinafter shall be individually referred to as a “Shareholder” and collectively, “Shareholders”. Shareholders, CGEN Digital and CGEN Culture hereinafter shall be individually referred to as a “Party” and collectively referred to as “Parties”.)

WHEREAS:

(1)	Shareholders are enrolled shareholders of CGEN Culture, legally holding all the equity of the company as of the execution date of this Agreement, of which Focus Media Advertisement holds 90% interest and Focus Media Advertising Agency holds 10%.
(2)	Subject to non-violation of PRC Law, the Shareholders intend to transfer to CGEN Digital, and CGEN Digital is willing to accept, all their respective equity interest in CGEN Culture.

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(3) In order to realise the above equity transfer transaction, the Shareholders agree to jointly grant CGEN Digital an irrevocable call option for equity transfer (hereinafter the “Call Option”), under which and to the extent permitted by PRC Law, the Shareholders shall on request of CGEN Digital transfer the Option Equity (as defined below) to CGEN Digital and/or any other entity or individual designated by it in accordance with the provisions contained herein.

Therefore, the Parties hereby have reached the following agreement upon mutual consultations.

Article 1 — Definitions

1.1 Except as otherwise construed in the context, the following terms in this Agreement shall be interpreted to have the following meanings:

“PRC Law” shall mean the then valid laws, administrative regulations, administrative rules, local regulations, judicial interpretations and other binding regulatory documents of the People’s Republic of China.

“Option Equity” shall mean, in respect of each of the Shareholders, all of the equity interest held thereby in CGEN Culture Registered Capital (as defined below); (in respect of Focus Media Advertisement, means the 90% equity it holds in CGEN Culture and in respect of Focus Media Advertising Agency, means the 10% equity it holds in CGEN Culture.).

“CGEN Culture Registered Capital” shall mean the registered capital of CGEN Culture as of the date of this Agreement, which shall include any increased registered capital as the result of any capital increase taking place within the term of this Agreement.

“Transferred Equity” shall mean the equity of CGEN Culture which CGEN Digital has the right to request the Shareholders to transfer to it or its designated entity or individual when CGEN Digital exercises its Call Option (hereinafter the “Exercise of Option”) in accordance with Article 3.2 herein, the amount of which may be all or part of the Option Equity and the details of which shall be determined by CGEN Digital at its sole discretion in accordance with the then valid PRC Law and its commercial consideration.

“Transfer Price” shall mean all the consideration that CGEN Digital or its designated entity or individual is required to pay to the Shareholders in order to obtain the Transferred Equity upon each Exercise of Option. Upon each Exercise of Option of CGEN Culture by CGEN Digital, all the Transfer Price that CGEN Digital or its designated entity or individual shall pay to the Shareholders shall be calculated by multiplying the ratio of such Option Equity to the registered capital of CGEN Culture

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with the total amount of the registered capital of CGEN Culture. If any regulatory provision restricts Transfer Price under then PRC Law, CGEN Digital or its designated entity or individual shall be entitled to pay the lowest price permitted by PRC Law as the Transfer Price.

“Business Permits” shall mean any approvals, permits, filings, registrations etc. which CGEN Culture is required to have for legally and validly operating its advertisement designing, producing, agency, publishing and any other businesses, including but not limited to Business License of the Corporate Legal Person, Tax Registration Certificate and any other relevant licenses and permits as required by then PRC Law.

“CGEN Culture Assets” shall mean all the tangible and intangible assets which CGEN Culture owns or has the right to use during the term of this Agreement, including but not limited to any real estate and moveable assets, intellectual property rights as trademarks, copyrights, patents, proprietary know-how, domain names and software use rights, and other documents, files and material such as client information and database.

“Material Agreement” shall mean an agreement to which CGEN Culture is a party and which has a material impact on the businesses or assets of CGEN Culture,

1.2	The references to any PRC Law herein shall be deemed (1) to include any references to the amendments, changes, supplements and reenactments of such law, irrespective of whether they take effect before or after the formation of this Agreement; and (2) to include any references to other decisions, notices or regulations enacted in accordance therewith or effective as a result thereof.
1.3	Except as otherwise stated in the context herein, all references to an Article, clause, item or paragraph shall refer to the relevant part of this Agreement.

Article 2 — Grant of Call Option

The Parties hereby agree to irrevocably and with no additional condition grant CGEN Digital an exclusive Call Option, under which CGEN Digital have the right to request the Shareholders to transfer the Option Equity to CGEN Digital or its designated entity or individual in the method set out herein and as permitted by PRC Law. CGEN Digital also agrees to accept such Call Option.

Article 3 — Method of Exercise of Option

3.1 Subject to permission by PRC Law, CGEN Digital shall have the absolute sole

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	discretion to determine the specific time, method and times of its Exercise of Option.
3.2	If the then PRC Law permits CGEN Digital and/or other entity or individual designated by it to hold all the equity interest of CGEN Culture, then CGEN Digital shall have the right to elect to exercise all of its Call Option at once, where CGEN Digital and/or other entity or individual designated by it shall accept all the Option Equity from the Shareholders at once; if then PRC Law permits CGEN Digital and/or other entity or individual designated by it to hold only part of the equity in CGEN Culture, CGEN Digital shall have the right to determine the amount of the Transferred Equity within the extent not exceeding the upper limit of shareholding ratio set out by then PRC Law (hereinafter the “Shareholding Threshold”), where CGEN Digital and/or other entity or individual designated by it shall accept such amount of Transferred Equity from the Shareholders. In the latter case, CGEN Digital shall have the right to exercise its Call Option at multiple times in line with the gradual deregulation of PRC Law on the permitted Shareholding Threshold, with a view to ultimately acquiring all the Option Equity.
3.3	At each Exercise of Option by CGEN Digital, each of the Shareholders shall transfer their respective equity in CGEN Culture to CGEN Digital and/or other entity or individual designated by it respectively in accordance with the amount required in the Exercise Notice stipulated in Article 3.5. CGEN Digital and other entity or individual designated by it shall pay the Transfer Price to each of the Shareholders who has transferred the Transferred Equity accepted in each Exercise of Option. If permitted by PRC Law, CGEN Digital shall have the right to set-off the Transfer Price with its/its affiliates’ credit rights (if any) against the Shareholders.
3.4	In each Exercise of Option, CGEN Digital may accept the Transferred Equity by itself or designate any third party to accept all or part of the Transferred Equity.
3.5	On deciding each Exercise of Option, CGEN Digital shall issue a notice for exercising the Call Option to the Shareholders (hereinafter the “Exercise Notice”, the form of which is set out as Appendix I hereto). The Shareholders shall, upon receipt of the Exercise Notice, forthwith transfer all the Transferred Equity in accordance with the Exercise Notice to CGEN Digital and/or other entity or individual designated by CGEN Digital in the method as described in Article 3.3 herein.
3.6	The Shareholders hereby severally undertake and guarantee that once CGEN Digital issues the Exercise Notice in respect to the specific Transferred Equity in CGEN Culture held by it:

3.6.1 it shall immediately hold or request to hold a shareholders’ meeting of

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CGEN Culture, adopt a resolution through the shareholders’ meeting, and take all other necessary actions to agree to the transfer of all the Call Option to CGEN Digital and/or other entity or individual designated by it at the Transfer Price and waive the possible preemption rights;

3.6.2

it shall immediately enter into an equity transfer agreement with CGEN Digital and/or other entity or individual designated by it for transfer of all the Transferred Equity to CGEN Digital and/or other entity or individual designated by it at the Transfer Price; and

3.6.3

it shall provide CGEN Digital with necessary support (including providing and executing all the relevant legal documents, processing all the procedures for government approvals and registrations and bearing all the relevant obligations) in accordance with the requirements of CGEN Digital and of the laws and regulations, in order that CGEN Digital and/or other entity or individual designated by it takes all the Transferred Equity free from any legal defect.

3.7 At the meantime of this Agreement, the Shareholders shall respectively enter into a power of attorney (hereinafter the “Power of Attorney”, the form of which is set out as Appendix II hereto), authorizing in writing any person designated by CGEN Digital to, on behalf of such Shareholder, to enter into any and all of the legal documents in accordance with this Agreement so as to ensure that CGEN Digital and/or other entity or individual designated by it take all the Transferred Equity free from any legal defect. Such Power of Attorney shall be delivered to remain custody of CGEN Digital and CGEN Digital may, at any time if necessary, require the Shareholders to execute multiple copies of the Power of Attorney respectively and deliver the copy of Power of Attorney to the relevant government department.

Article 4 — Representations and Warranties

4.1 Each of the Shareholders hereby severally represents and warrants in respect to itself and CGEN Culture as follows:

4.1.1	Each of Shareholders is a limited liability corporation duly registered and validly existing under PRC Law with complete and independent status as a legal person and has appropriate authorisation to execute, deliver and perform this Agreement, and is capable of acting independently as a subject of legal actions.
4.1.2	This Agreement is executed and delivered by Shareholders legally and appropriately. This Agreement constitutes legal and binding obligations on Shareholders and is enforceable against in accordance with its terms

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and conditions.

4.1.3

The Shareholders are the enrolled legal owner of the Option Equity as of the effective date of this Agreement, and except the encumbrances created by this Agreement, the Shareholders’ Voting Rights Proxy Agreement entered into by Shareholders, CGEN Digital and CGEN Culture dated January 5 2008 (the “Proxy Agreement”), the Equity Pledge Agreement entered into by Shareholders, CGEN Digital and CGEN Culture dated January 5 2008 (the “Equity Pledge Agreement”), there is no lien, pledge, claim, other encumbrances and third party rights on the Option Equity. In accordance with this Agreement, CGEN Digital and/or other entity or individual designated by it is able to , after the Exercise of Option, obtain the proper title to the Transferred Equity free from any lien, pledge, claim, other encumbrances and third party rights.

4.1.4

CGEN Culture shall obtain complete Business Permits as necessary for its operations upon this Agreement taking effect, and CGEN Culture shall have sufficient rights and qualifications to operate within PRC the businesses of advertising service and other business relating to its current business structure. CGEN Culture has conducted its business legally since its establishment and has not incurred any cases which violate or may violate the regulations and requirements set forth by the departments of commerce and industry, tax, culture, news, quality technology supervision, labor and social security and other governmental departments or any disputes in respect of breach of contract.

Article 5 — Undertakings by the Shareholders

5.1

The Shareholders hereby severally undertake that, within the term of this Agreement, it must take all necessary measures to ensure that CGEN Culture is able to obtain all Business Permits necessary for its business in a timely manner and all Business Permits remain in effect at any time. Without prior written consent by CGEN Digital, if the business term of CGEN Culture is to expire during the term of this Agreement, Shareholders shall take all necessary measures to extend the business term to ensure it expires at the end of the term of this Agreement.

5.2

Unless otherwise stipulated by applicable PRC Law, during the term of the Agreement, the Shareholders hereby severally undertake within the term of this Agreement that without prior written consent by CGEN Digital,

5.2.1 no Shareholders shall transfer or otherwise dispose of any Option Equity or create any encumbrance or other third party rights on any Option

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Equity;

5.2.2	it shall not increase or decrease CGEN Culture Registered Capital or cast affirmative vote regarding the aforesaid increase or decrease in registered capital;
5.2.3	it shall not dispose of or cause the management of CGEN Culture to dispose of any of the CGEN Culture Assets (except as occurs during the arm’s length operations);
5.2.4	it shall not terminate or cause the management of CGEN Culture to terminate any Material Agreements entered into by CGEN Culture, or enter into any other Material Agreements in conflict with the existing Material Agreements;
5.2.5	it shall not individually or collectively cause CGEN Culture to conduct any transactions that may substantively affect the assets, liability, business operation, equity structure, equity of a third party and other legal rights (except those occurring during the arm’s length operations or daily operation, or having been disclosed to and approved by CGEN Digital in writing);
5.2.6	it shall not appoint or replace any executive director or members of board of directors (if any), supervisors or any other management personnel of CGEN Culture who is required to appoint or dismiss by the Shareholders;
5.2.7	it shall not announce the distribution of or in practice release any distributable profit, dividend or share profit or cast affirmative votes regarding the aforesaid distribution or release;
5.2.8	it shall ensure that CGEN Culture validly exist and prevent it from being terminated, liquidated or dissolved;
5.2.9	it shall not amend the Articles of Association of CGEN Culture or cast affirmative votes regarding such amendment;
5.2.10	it shall ensure that CGEN Culture shall not lend or borrow any loan, or provide guarantee or engage in security activities in any other forms, or bear any substantial obligations other than on the arm’s length basis.

5.3 The Shareholders hereby severally undertake that, during the term of this Agreement, to develop the business of CGEN Culture at its best affect, and ensure that the operations of CGEN Culture are legitimate and in compliance with the regulations and that it shall not engage in any actions or omissions which

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might harm CGEN Culture Assets or its credit standing or affect the validity of Business Permits of CGEN Culture.

5.4 CGEN Culture undertakes that, before CGEN Digital exercises the Option and acquire all equity of CGEN Culture, CGEN Culture shall not do the following:

5.4.1	Sell, transfer, mortgage or dispose by other way any assets, business, revenue or other legal rights of its own, or permit creating any encumbrance or other third party’s interest on such assets, business, revenue or other legal rights (except for as occurs during the arm’s length operations or daily operation, or as is disclosed to CGEN Digital and approved by CGEN Digital in writing);
5.4.2	conduct any transactions that may materially affect the asset, liability, business operation, equity structure, equity of a third party and other legal rights (except for those occurring during the arm’s length operations or daily operation, or having been disclosed to CGEN Digital and approved by CGEN Digital in writing);
5.4.3	release any dividend or share profit to Shareholders in any form.

Article 6 — Confidentiality

6.1 Notwithstanding the termination of this Agreement, the Shareholders shall be obligated to keep in confidence the following information (hereinafter collectively the “Confidential Information”):

(i)	information on the execution, performance and the contents of this Agreement;
(ii)	the commercial secret, proprietary information and customer information in relation to CGEN Digital known to or received by it as the result of execution and performance of this Agreement; and
(iii)	the commercial secrets, proprietary information and customer information in relation to CGEN Culture known to or received by it as the shareholder of CGEN Culture.

The Shareholders may use such Confidential Information only for the purpose of performing its obligations under this Agreement. No Shareholders shall disclose the above Confidential Information to any third parties without written consent from CGEN Digital, or they shall bear the default liability and indemnify losses caused.

6.2 Upon termination of this Agreement, both Shareholders shall, upon request of CGEN Digital, return, destroy or otherwise dispose of all the documents,

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materials or software containing the Confidential Information and cease using such Confidential Information.

6.3 Notwithstanding any other provisions herein, the validity of this Article shall not be affected by the suspension or termination of this Agreement.

Article 7 — Term of Agreement

7.1 Subject to Article 7.2 and 7.3 herein, this Agreement shall take effect from the date of formal execution by the Parties with the term of ten (10) years, unless the Parties terminate the Agreement with written agreement in advance, or the Parties terminate the Agreement in accordance with Article 9.1 of this Agreement. Upon the expiration of this Agreement, the Agreement will be automatically renewed for one (1) year, unless CGEN Digital gives the other Parties written notice of its intention not renew at least thirty (30) days prior to expiration.

7.2 In respect of the Shareholder, when it transfers all of its Option Equity for all the equity interest they held in CGEN Culture to CGEN Digital and/or other entity or individual designated by it in accordance with this Agreement, the Agreement for such shareholder in its capacity as the shareholder of CGEN Culture is terminated. After termination of this Agreement in respect to such Shareholder according to this Article, this Agreement continues to be fully valid in respect to the other Shareholders.

7.3 During the term of this Agreement, should the business term of CGEN Culture terminate by any reason; this Agreement to CGEN Culture and Shareholders (to the extent that it acts as the shareholder of CGEN Culture) is terminated.

Article 8 — Notice

8.1 Any notice, request, demand and other correspondences made as required by or in accordance with this Agreement shall be made in writing and delivered to the relevant Party.

8.2 The abovementioned notice or other correspondences shall be deemed to have been delivered when it is transmitted if transmitted by facsimile; it shall be deemed to have been delivered when it is delivered if received in person; it shall be deemed to have been delivered five (5) days after posting if posted by mail.

Article 9 — Liability for Breach of Contract

9.1 The Parties agree and confirm that, if any party (hereinafter the “Defaulting Party”) materially breaches any of the provisions herein or materially omits to perform any of the obligations hereunder, such a breach or omission shall

9

constitute a default under this Agreement (hereinafter a “Default”). The non-defaulting Party shall have the right to require the Defaulting Party to rectify such Default or take remedial measures within a reasonable period. If the Defaulting Party fails to rectify such Default or take remedial measures within such reasonable period or within ten (10) days of non-defaulting Party’s notifying the Defaulting Party in writing and requiring it to rectify the Default, then non-defaulting Party shall have the right at its own discretion to select any of the following remedial measures: (1) to terminate this Agreement and require the Defaulting Party to indemnify it for all the damage; or (2) specific performance of the obligations of the Defaulting Party hereunder and require the Defaulting Party to indemnify it for all the damage.

9.2 The Parties agree and confirm that in no circumstances shall the Shareholders request the termination of this Agreement for any reason, except otherwise stipulated by law or this Agreement.

9.3 Notwithstanding any other provisions herein, the validity of this Article shall stand disregarding the suspension or termination of this Agreement.

Article 10 — Miscellaneous

10.1 This Agreement shall be produced in the Chinese language in four (4) original copies, with each Party holding one (1) copy hereof.

10.2 The formation, validity, execution, amendment, interpretation and termination of this Agreement shall be governed by PRC Law.

10.3 Any disputes arising hereunder and in connection herewith shall be settled through consultations among the Parties to the dispute, and if the Parties to the dispute cannot reach an agreement regarding such disputes within thirty (30) days of their occurrence, such disputes shall be submitted to China International Economic and Trade Arbitration Commission for arbitration in Shanghai in accordance with the arbitration rules of such Commission, and the arbitration award shall be final and binding on all Parties to the dispute.

10.4 Any rights, powers and remedies empowered to any Party by any provisions herein shall not preclude any other rights, powers and remedies enjoyed by such Party in accordance with laws and other provisions under this Agreement, and the exercise of its rights, powers and remedies by a Party shall not preclude its exercise of its other rights, powers and remedies by such Party.

10.5 Any failure or delay by a Party in exercising any of its rights, powers and remedies hereunder or in accordance with laws (hereinafter the “Party’s Rights”) shall not lead to a waiver of such rights, and the waiver of any single

10

or partial exercise of the Party’s Rights shall not preclude such Party from exercising such rights in any other way and exercising the remaining part of the Party’s Rights.

10.6 The titles of the Articles contained herein shall be for reference only, and in no circumstances shall be used or affect the interpretation of the provisions hereof.

10.7 Each provision contained herein shall be severable and independent to each of other provisions, and if at any time any one or more articles herein become invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions herein shall not be affected as a result thereof.

10.8 Upon execution, this Agreement shall substitute any other legal documents previously executed by the Parties on the same subject.

10.9 Any amendments or supplements to this Agreement shall be made in writing and shall take effect only when properly executed by the Parties to this Agreement.

10.10 Without prior written consent by CGEN Digital, the Shareholders shall not assign it rights and/or obligation under this Agreement to any third party. CGEN Digital shall have the right to assign to any third party designated by it any of its right and/or obligation under this Agreement after giving notice to the Shareholders.

10.11 This Agreement shall be binding on legal successors of the Parties.

[ The remainder of this page is left blank.]

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IN WITNESS HEREOF, the following Parties have caused this Call Option Agreement to be executed as of the date and in the place first here above mentioned.

Shanghai Focus Media Advertisement Co., Ltd.
(chop)
Signature by Authorized Representative:                                         
Name: Jiang Nanchun
Position: Legal Representative

Shanghai Focus Media Advertising Agency Co., Ltd
(chop)
Signature by Authorized Representative:                                         
Name: Jiang Nanchun
Position: Legal Representative

CGEN Digital Technology (Shanghai) Co., Ltd.
(chop)
Signature by Authorized Representative:                                         
Name:
Position:

Shanghai CGEN Culture Communication Co., Ltd
(chop)
Signature by Authorized Representative:                                         
Name: Yang Deyi
Position: Legal Representative

12

Appendix I:

Format of the Option Exercise Notice

To: [Name of the Shareholder(s)]

As per the Call Option Agreement as of [               ], 2008 executed among your company and other relevant parties (hereinafter the “Option Agreement”), it has been agreed that, subject to permission of PRC Laws and regulations, your company shall transfer the equity your company hold in Shanghai CGEN Culture Communication Co., Ltd (hereinafter the “CGEN Culture”) to our company or any third party or parties designated by our company on request of our company,

Therefore, our company hereby gives this Notice to you as follows:

Our company hereby requests to exercise the Call Option under the Option Agreement and [our company]/[name of company/individual] designated by our company shall accept the equity your company hold accounting for           % of CGEN Culture Registered Capital (hereinafter the “Proposed Accepted Equity”). Your company is required to forthwith transfer all the Proposed Accepted Equity to [our company]/[name of designated company/individual] upon receipt of this Notice in accordance with the agreed terms in the Option Agreement.

Best regards,

CGEN Digital Technology (Shanghai) Co., Ltd.
  (Chop)
  Authorized Representative: _______________
  Date: __________________  

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Appendix II:

Form of the Power of Attorney

Our company hereby irrevocably entrusts [               ] [Identity Card number:                          ] , as the authorized representative of our company, to sign the Equity Transfer Agreement between our company and CGEN Digital Technology (Shanghai) Co., Ltd. regarding the Equity Transfer of Shanghai CGEN Culture Communication Co., Ltd. and other relevant legal documents.

Our company hereby confirms that once the Equity Transfer Agreement between our company and CGEN Digital Technology (Shanghai) Co., Ltd. regarding the Equity Transfer of Shanghai CGEN Culture Communication Co., Ltd. and other relevant legal documents are signed by the entrusted representative for and on behalf of our company, such agreement and other relevant legal documents constitute legal and binding obligations on our company.

Shanghai Focus Media Advertisement Co., Ltd.
  (Chop)
  Signature: _______________
  Date: ___________________
 

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Form of the Power of Attorney

Our company hereby irrevocably entrusts [               ] [Identity Card number:                          ] , as the authorized representative of our company, to sign the Equity Transfer Agreement between our company and CGEN Digital Technology (Shanghai) Co., Ltd. regarding the Equity Transfer of Shanghai CGEN Culture Communication Co., Ltd. and other relevant legal documents.

Our company hereby confirms that once the Equity Transfer Agreement between our company and CGEN Digital Technology (Shanghai) Co., Ltd. regarding the Equity Transfer of Shanghai CGEN Culture Communication Co., Ltd. and other relevant legal documents are signed by the entrusted representative for and on behalf of our company, such agreement and other relevant legal documents constitute legal and binding obligations on our company.

Shanghai Focus Media Advertising Agency Co., Ltd.
  (Chop)
  Signature: _______________
  Date: ___________________
 

15

EX-10.166

Exhibit 10.166

Confidential

SHAREHOLDERS’ VOTING RIGHTS
PROXY AGREEMENT

AMONG

SHANGHAI FOCUS MEDIA ADVERTISEMENT CO., LTD

SHANGHAI FOCUS MEDIA ADVERTISING AGENCY CO., LTD

CGEN DIGITAL TECHNOLOGY (SHANGHAI) COMPANY LTD

AND

SHANGHAI CGEN CULTURE COMMUNICATION COMPANY LTD

DATED AS OF

January 5 2008

SHAREHOLDERS’ VOTING RIGHTS PROXY AGREEMENT

This Shareholders’ Voting Rights Proxy Agreement (this “Agreement”) is entered into in Shanghai of the People’s Republic of China (hereinafter “PRC”) as of January 5 2008 by and among the following Parties:

(1)	Shanghai Focus Media Advertisement Co., Ltd. (hereinafter “Focus Media Advertisement”)
	Registered Address: Unit F Room 1003, No.1027, Changning Road, Changning District, Shanghai
(2)	Shanghai Focus Media Advertising Agency Co., Ltd. (hereinafter “Focus Media Advertising Agency”)
	Registered Address: Room A65, 28th Floor, No. 369, Changning Road, Changning District, Shanghai
(3)	CGEN Digital Technology (Shanghai) Company Ltd. (hereinafter “CGEN Digital”)
	Registered Address: Room 2207, Building 2, 200 Zhangheng Road, Zhangjiang High Technology Park, Shanghai
(4)	Shanghai CGEN Culture Communication Company Ltd (hereinafter “CGEN Culture”)
	Registered Address: Unit A, F4, North Tower, 1016 Dingxi Road, Changning District, Shanghai

(The above parties hereinafter shall be individually referred to as a “Party” and collectively referred to as the “Parties”, of which Focus Media Advertisement and Focus Media Advertising Agency shall be individually referred to as a “Shareholder” and collectively referred to as the “Shareholders”.)

WHEREAS:

1. As of the date of the Agreement, Shareholders are the enrolled shareholders of CGEN Culture, legally holding all the equity of the company as of the execution date of this Agreement, of which Focus Media Advertisement holds 90% interest and Focus Media Advertising Agency holds 10%.

2. The Shareholders intend to severally entrust the individual designated by CGEN Digital with the exercises of their voting rights in CGEN Culture and CGEN

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Digital is willing to designate such an individual to accept the entrustment.

The Parties hereby have reached the following agreement upon friendly consultations:

Article 1 Voting Rights Entrustment

1.1 The Shareholders hereby irrevocably undertake to respectively sign an Entrustment Letter after execution of the Agreement to respectively entrust the individual designated by CGEN Digital (hereinafter, the “Trustees”) to exercise the following rights respectively enjoyed by them as shareholders of CGEN Culture in accordance with then effective articles of association of CGEN Culture (collectively, the “Entrusted Rights”):

(1)	Proposing to convene and attending shareholders’ meetings of CGEN Culture as proxy of the Shareholders according to the articles of association of CGEN Culture;
(2)	Exercising voting rights as proxy of the Shareholders on matters discussed and resolved by the shareholders’ meeting of CGEN Culture, including but not limited to the appointment and election of senior management personnel of CGEN Culture such as directors, supervisors, general manager, deputy general manager, financial officer.

The above authorization and entrustment is granted subject to the status of Trustees to be PRC citizens and the approval by CGEN Digital. Upon and only upon written notice of dismissing and replacing Trustee(s) given by CGEN Digital to the Shareholders, the Shareholders shall promptly entrust another PRC citizen then designated by CGEN Digital to exercise the above Entrusted Rights, and once new entrustment is made, the original entrustment shall be replaced with immediate effect; the Shareholders shall not withdraw the authorization and entrustment of the Trustee(s) otherwise.

1.2 The Trustees shall perform the entrusted obligation within the scope of entrustment in due care and prudence and in compliance with laws; the Shareholders acknowledge and assume relevant liabilities for any legal consequences of the Trustees’ exercise of the foregoing Entrusted Rights.

1.3 The Shareholders hereby acknowledge that the Trustees are not required to seek advice from the Shareholders prior to their respective exercise of the foregoing Entrusted Rights. However, the Trustees shall inform the Shareholders in a timely manner of any resolution or proposal on convening interim shareholders’ meeting after such resolution or proposal is made.

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Article 2 Right to Information

For the purpose of exercising the Entrusted Rights under this Agreement, the Trustees are entitled to know the information with regard to CGEN Culture’s operation, business, clients, finance, staff, etc., and shall have access to relevant materials of CGEN Culture. CGEN Culture shall adequately cooperate with the Trustees in this regard.

Article 3 Exercise of Entrusted Rights

3.1 The Shareholders will provide adequate assistance to the exercise of the Entrusted Rights by the Trustees, including execution of resolutions of the shareholders’ meeting of CGEN Culture or other pertinent legal documents made by the Trustees when necessary (e.g., to satisfy governmental requirements in case of examination and approval of or registration or filing ).

3.2 If at any time during the term of this Agreement, the entrustment or exercise of the Entrusted Rights under this Agreement is unenforceable for any reason except for default of any Shareholder or CGEN Culture, the Parties shall immediately seek a most similar substitute for the unenforceable provision and, if necessary, enter into supplementary agreement to amend or adjust the provisions herein, in order to ensure the realization of the purpose of this Agreement.

Article 4 Exemption and Compensation

4.1 The Parties acknowledge that CGEN Digital shall not be requested to be liable for or compensate (monetary or otherwise) other Parties or any third party due to exercise of Entrusted Rights by the Trustees designated by CGEN Digital under this Agreement.

4.2 CGEN Culture and the Shareholders agree to indemnify CGEN Digital and hold it harmless against all of its losses incurred or likely to incur due to exercise of the Entrusted Rights by the Trustees designated by CGEN Digital, including without limitation any loss resulting from any litigation, demand, arbitration or claim initiated or raised by any third party against it or from administrative investigation or penalty of governmental authorities. However, the Shareholders and CGEN Culture will not compensate for losses incurred due to wilful misconduct or gross negligence of CGEN Digital.

Article 5 Representations and Warranties

5.1 Each of the Shareholders hereby respectively represents and warrants that:

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5.1.1	Each of Shareholders is a limited liability corporation duly registered and validly existing under PRC Law with complete and independent status as a legal person and appropriate authorisation to execute, deliver and perform this Agreement, and is capable of acting independently as a subject of legal actions..
5.1.2	The Shareholders have full internal corporate right and authorization to execute and deliver this Agreement and other documents relating to the transaction as contemplated in this Agreement. It also has full right and authorization to complete the transaction stipulated in this Agreement.
5.1.3	The Shareholders are enrolled and legal shareholders of CGEN Culture as of the effective date of this Agreement, and except the rights created by this Agreement, the Call Option Agreement (the “Call Option Agreement”) as well as the Equity Pledge Agreement (the “Equity Pledge Agreement”) entered into by CGEN Digital, CGEN Culture and them on January 5 2008, there exists no third party right on the Entrusted Rights. Pursuant to this Agreement, the Trustees is capable to fully and sufficiently exercise the Entrusted Rights in accordance with then effective articles of association of CGEN Culture.

5.2 CGEN Culture hereby represents and warrants that:

5.2.1	It is a company with limited liability duly registered and legally existing under PRC laws with complete and independent status as a legal person and has apporpriate authorisation to execute, deliver and perform this Agreement and is capable of acting independently as a subject of legal actions.
5.2.2	It has the full corporate power and authority to execute and deliver this Agreement and all the other documents to be entered into by it in relation to the transaction contemplated hereunder, and has the full power and authority to consummate such transaction.
5.2.3	The Shareholders are enrolled shareholders as of the effective date of this Agreement, of which Focus Media Advertisement holds 90% interest while Focus Media Advertising Agency holds 10%. Except rights created by this Agreement, the Equity Pledge Agreement and the Call Option Agreement, there exists no third party right on the Entrusted Rights. Pursuant to this Agreement, the Trustees may fully and sufficiently exercise the Entrusted Rights in accordance with then effective articles of association of CGEN Culture.

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5.2.4 Considering the fact that the Shareholders of CGEN Culture will set aside all the equity interest held thereby in CGEN Culture as security to secure the performance of the contractual obligations by CGEN Culture under the Call Option Agreement, CGEN Culture undertakes to, during the valid term of this Agreement, make full and due performance of any and all obligations under Call Option Agreement, and warrant that no adverse impact on the exercise of the Entrusted Rights hereunder by the Trustees will be incurred due to the breach of the Call Option Agreement by CGEN Culture.

Article 6 Term of Agreement

6.1 Subject to Article 6.2 and 6.3 herein, this Agreement shall take effect as of the date of formal execution by the Parties with the term of ten (10) years, unless the Parties terminate the Agreement with written agreement in advance, or the Parties terminate the Agreement in accordance with Article 8.1 of this Agreement. Upon the expiration of this Agreement, the Agreement will be automatically renewed for one (1) year, unless CGEN Digital gives the other Parties written notice of its intention of not renew at least thirty (30) days prior to expiration.

6.2 In case that a Shareholder transfers all of the equity interest held by it in CGEN Culture with prior consent of CGEN Digital, such Shareholder shall no longer be a Party to this Agreement whilst the obligations and commitments of the other Parties under this Agreement shall not be adversely affected thereby.

6.3 During the term of this Agreement, should the business term of CGEN Culture terminate by any reason; this Agreement to CGEN Culture and Shareholders is terminated.

Article 7 Notice

7.1 Any notice, request, demand and other correspondences made as required by or in accordance with this Agreement shall be made in writing and delivered to the relevant Party.

7.2 The abovementioned notice or other correspondences shall be deemed to have been delivered when it is transmitted if transmitted by facsimile, or when it is delivered if received in person, or when five (5) days have elapsed after posting if posted by mail.

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Article 8 Default Liability

8.1 The Parties agree and confirm that, if any of the Parties (the “Defaulting Party”) breaches substantially any of the provisions herein or fails substantially to perform any of the obligations hereunder, such a breach or failure shall constitute a default under this Agreement (a “Default”). In such event any of the other Parties without default (a “Non-defaulting Party”) who incurs losses arising from such a Default shall have the right to require the Defaulting Party to rectify such Default or take remedial measures within a reasonable period. If the Defaulting Party fails to rectify such Default or take remedial measures within such reasonable period or within ten (10) days of a Non-defaulting Party’s notifying the Defaulting Party in writing and requiring it to rectify the Default, then the relevant Non-defaulting Party shall be entitled to choose at its discretion to (1) terminate this Agreement and require the Defaulting Party to indemnify all damages, or (2) require specific performance by the Defaulting Party of this Agreement and indemnifation against all damages.

8.2 The Parties agree and confirm, the Shareholders or CGEN Culture shall not request the termination of this Agreement for whatsoever reason and under whatsoever circumstance, except otherwise stipulated by laws or this Agreement.

8.3 Notwithstanding any other provisions herein, the validity of this Article shall not be affected by the suspension or termination of this Agreement.

Article 9 Miscellaneous

9.1 This Agreement shall be prepared in Chinese language in four (4) original copies, with each Party holding one (1) copy hereof.

9.2 The conclusion, validity, execution, amendment, interpretation and termination of this Agreement shall be governed by laws of the PRC.

9.3 Any disputes arising from and in connection with this Agreement shall be settled through consultations among the Parties involved, and if the Partiesinvolved fail to reach an agreement regarding such a dispute within thirty (30) days of its occurrence, such dispute shall be submitted to China International Economic and Trade Arbitration Commission for arbitration in Shanghai in accordance with the arbitration rules of such commission, and the arbitration award shall be final and binding on all the Parties involved.

9.4 Any rights, powers and remedies empowered to any Party by any provisions herein shall not preclude any other rights, powers and remedies enjoyed by such Party in accordance with laws and other provisions under this Agreement, and a

6

	Party’s exercise of any of its rights, powers and remedies shall not preclude its exercise of other rights, powers and remedies of it.
9.5	Any failure or delay by a Party in exercising any of its rights, powers and remedies hereunder or in accordance with laws (the “Party’s Rights”) shall not lead to a waiver of such rights, and the waiver of any single or partial exercise of the Party’s Rights shall not preclude such Party from exercising such rights in any other way or exercising the remaining part of the Party’s Rights.
9.6	The titles of the Articles contained herein are for reference only, and in no circumstances shall such titles be used for or affect the interpretation of the provisions hereof.
9.7	Each provision contained herein shall be severable and independent from each of other provisions. If at any time any one or more articles herein become invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions herein shall not be affected thereby.
9.8	Upon execution, this Agreement shall replace any other previous legal documents entered into by relevant Parties on the same subject matter.
9.9	Any amendments or supplements to this Agreement shall be made in writing and shall take effect only when properly signed by the Parties to this Agreement.
9.10	In respect of the Shareholder and CGEN Culture, they shall not assign any of their rights and/or transfer any of their obligations hereunder to any third parties without prior written consent from CGEN Digital; CGEN Digital shall have the right to assign any of its rights and/or transfer any of its obligations hereunder to any third parties designated by it after giving notice to the Shareholders.
9.11	This Agreement shall be binding on its legal successors of the Parties.

[The remiander of this page is left blank]

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IN WITNESS HEREOF, the following Parties have caused this Shareholders’ Voting Rights Proxy Agreement to be executed as of the date and in the place first here above mentioned.

Shanghai Focus Media Advertisement Co., Ltd.
(chop)
Signature by Authorized Representative:                                         
Name: Jiang Nanchun
Position: Legal Representative

Shanghai Focus Media Advertising Agency Co., Ltd
(chop)
Signature by Authorized Representative:                                         
Name: Jiang Nanchun
Position: Legal Representative

CGEN Digital Technology (Shanghai) Co., Ltd.
(chop)
Signature by Authorized Representative:                                         
Name:
Position:

Shanghai CGEN Culture Communication Co., Ltd
(chop)
Signature by Authorized Representative:                                         
Name: Yang Deyi
Position: Legal Representative

8

EX-10.167

Exhibit 10.167

EXCLUSIVE TECHNOLOGY CONSULTING

AND SERVICE AGREEMENT

BETWEEN

CGEN DIGITAL TECHNOLOGY (SHANGHAI) COMPANY LTD

AND

SHANGHAI CGEN CULTURE COMMUNICATION COMPANY LTD

This Exclusive Technology and Service Agreement (this “Agreement”) is entered into between the following Parties:

CGEN Digital Technology (Shanghai) Company Ltd (hereinafter “Party A”), a wholly foreign owned limited liability company established and validly existing under the law of People’s Republic of China (PRC); and

Shanghai CGEN Culture Communications Company Ltd (hereinafter “Party B”), a company with limited liability established and validly existing under the law of PRC.

WHEREAS

(1)	Party A is a company which is engaged in the business of digital communication application technology, development and sales of computer hardware and software and relevant commercial, technique and customer service with good experiences, specialty and resources in marketing, customer support and technology consulting of such business.
(2)	Party B is a company which is engaged in the business of culture communications and advertisement service and desires to further develop its business from time to time within its business scope (hereinafter “Party B Business”) via co-operation with Party A.

NOW, THEREFORE, after friendly consultations between both Parties on the principle of mutual benefit, based on the premise of above and mutual undertakings, the Parties hereby agree as follows:

Article 1 — Technology Consulting and Service

1.1	Both parties hereby agree that Party B shall, under the terms of the Agreement, appoint Party A to provide exclusive service set forth in Schedule I.
1.2	Party B shall actively co-operate with Party A to complete the foregoing task, including but not limited to furnishing relevant data, technique requirements and explanations.
1.3	The term of the Agreement is five (5) years. Both parties shall agree to an extension upon request of Party A before the expiration of the Agreement and execute a separate exclusive technology consulting and service agreement.
1.4	Party A is the exclusive provider of the technology consulting service to Party B under the Agreement. Unless agreed in writing by Party A in advance, Party B shall not accept all or any part of technology consulting and service under the Agreement by any third party.

1

Article 2 —Service Fees

2.1 Both parties agree, for the consideration to the technology consulting and technique service provided by Party A to Party B under Article 1.1 hereof, Party B shall pay the service fee reasonably determined by board of directors of Party A from time to time in a timely manner. The amount of the service fee shall be determined upon the following factors:

(a)	technique difficulties and complexity of the service;
(b)	time spent by Party A’s staff for the consultation and service;
(c)	commercial value and details of the service; and
(d)	market price of similar service.

2.2 The foregoing service fee shall be paid quarterly. Party B shall pay service fee of previous quarter to the bank account designated by Party A in accordance with invoice received within fifteen (15) working days after the commerce of any quarter.

2.3 In case when Party A deems the mechanism of determining price of service fee becomes unpractical for a reason and adjustments shall be made, Party B shall discuss with Party A in an active and sincere manner within seven (7) working days after receiving written request of adjusting service fee to determine a new fee schedule or mechanism.

Article 3 —Confidentiality

3.1 Party A shall enjoy exclusive and sole ownership of any rights and ownerships, interests and all intellectual property rights, including but not limited to software copyrights, patents, technique secrets and business secrets that are created during the performance of the Agreement.

3.2 Party B shall made reasonable effort to ensure confidential of all or part of the information of Party A that are marked CONFIDENTIAL or is known to Party B to be confidential (Confidential Information). Unless agreed by Party A in writing, Party B shall not reveal, inform or transfer such Confidential Information to any third party. Upon termination of the Agreement, Party B shall return or destroy all documents, material or software that contain Confidential Information in accordance with Party A’s request and delete any Confidential Information from its memory device and prohibit any continuous use of such Confidential Information. Party B shall make its employees , agents or professional consultants to comply with this article.

3.3 Both parties agree that, regardless any amendment, suspension or termination of the Agreement, the confidentiality clause shall remain valid unless terminated by both party in writing.

3.4 Party B undertakes to indemnify Party A’s loss resulting from violation of this clause by Party B.

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Article 4 — Default Liability

4.1 In the case when Party B fails to pay Party A service fees in time under the terms of the Agreement, it shall pay penalty for the delay. When such delay is over ten (10) working days, Party A is entitled to execute its rights under the Equity Pledge Agreement between both Parties within scope allowed by relevant laws.

4.2 Party A hereby indemnifies Party B against loss that results from breach of the Agreement of Party A.

Article 5 — Force Majeure

5.1 Force Majeure under the Agreement are natural catastrophes such as war, fire, earthquake and flood as well as any events that are unforeseeable at the time of execution of the Agreement with inevitable occurrence.

5.2 Party hereto shall be exempted to its default liability when it is unable to perform its all or any part of obligations under the Agreement or fail to perform such in time due to effect of Force Majeure event but shall resume its performance when such effect disappears. When the effect is such so as to make the performance of the Agreement becomes impossible, both parties shall terminate the Agreement and seek discussion to other solution.

Article 6 — Amendment, Cancellation and Termination of the Agreement

6.1 Any valid amendment regarding the Agreement shall be executed in writing by both parties.

6.2 Either party hereto fails to perform within the agreed term under the Agreement, and still fail to perform within the grace period of thirty (30) days, commencing on the expiry date of the agreed performance period under the Agreement, the other party shall be entitled to notice the defaulting party to terminate the Agreement. The termination will take effect from the day of receipt of the notice.

6.3 During the term of the Agreement, in case of either party hereto applies for bankruptcy in any form, is applied against by any third party, enters into liquidation proceedings, is banned by the government to operate business, or loses its capacity as a legal person or other legal entity competence, the other party is entitled to terminate the Agreement. The termination will take effect from the day of receipt of the notice.

6.4 The amendment and termination shall not affect the rights of the party hereto to demand compensation. Loss suffered by one party due to amendment or termination of the Agreement shall be indemnified by the defaulting party unless excused by applicable laws.

Article 7 — Applicable Law and Dispute Resolution

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7.1 The formation, validation, interpretation, performance, amendment, termination of the Agreement and dispute resolution shall be governed by PRC law.

7.2 All disputes rising from the performance of the Agreement or in connection with the Agreement shall be resolved by friendly consultation between both parties. In case where consultation fails, the dispute then shall be submitted to China International Economic and Trade Arbitration Commission Shanghai Branch for arbitration in accordance with then valid arbitration rules of such Commission. The arbitration language shall be Chinese and the arbitration award shall be final and binding on both parties to the dispute. The losing party shall be liable for the arbitration fee.

Article 8 —Miscellaneous

8.1 The Agreement shall be effective on and from the date of execution and seal of both parties.

8.2 Both party may agree and enter into supplementary agreement after effectiveness and performance of the Agreement for undue matters hereof or newly-emerged circumstances during performance. The supplementary agreement is deemed as an integrated part of the Agreement.

8.3 The Agreement is produced in two (2) original copies with each party hold one copy. Each copy carries same effect.

8.4 All notices for performing rights or obligations hereof shall be in writing. A notice shall be deemed to have been delivered when it is actually arrived if delivered in person. It shall be deemed to have been delivered when it is transmitted if transmitted by facsimile or telex. When the day when a delivery takes place fells on a non-business day or after business hour of a business day, the next consecutive business day shall be deemed as the deliver day. The deliver place shall be the addresses of the parties hereinabove mentioned or other addresses that will be notified by parties from time to time in writing. In writing includes facsimile and telex.

8.5 The Agreement is binding to both parties (including their successors and authorized assignees). Unless agreed by the other party in writing in advance, either party shall not assign any of rights or obligations it may have under the Agreement.

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IN WITNESS HEREOF, the Parties have caused this Agreement to be executed in Shanghai as of the date below.

CGEN Digital Technology (Shanghai) Company Ltd
(Corporate Seal)

Authorized Representative:
(Signature)

Shanghai CGEN Culture Communications Company Ltd
(Corporate Seal)

Authorized Representative
(Signature)

Date: 16^th Jan, 2006

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Schedule I

Technology Consulting and Service Content

Within the scope that is permitted by relevant laws, the exclusive technology consulting and service that Party A shall provide Party B shall include:

1.	to answer Party B’s technique questions related to Party B’s Business from time to time and provide technology consulting opinion in a timely manner;
2.	to be responsible for the daily maintenance, supervision, setting and clearing of failure of equipments of Party B’s business projects and computer internet;
3.	per Party B’s request from time to time, to research and collect related data and material for specific technique problems and requirements that are emerged during the operation of Party B’s business; to issue research reports and result within Party B requested timeline and provide Party B with, including but not limited to, statement, reports, materials and data of technique related designs, proposals, drawings, data, indicators, standards, software, programs, data base and similar technology research;
4.	to provide Party B with other relevant technique support, training, consulting and service under the term of the Agreement;
5.	to provide Party B with technique license that is required for Party A to furnish during the business operation of Party B;
6.	per the requirement and need of marketing of Party B, to provide relevant marketing, industry, clients and technology information to Party B;
7.	to provide filing, analysis and processing service of the information mentioned in article 6 to Party B;
8.	to provide Party B with feasibility report, submit pre-research report and marketing consulting service;
9.	to support and service Party B’s marketing strategy and proposals making.

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EX-12.1

Exhibit 12.1

CERTIFICATION OF OUR CHIEF EXECUTIVE OFFICER

I, Zhi Tan, certify that:

1.	I have reviewed this annual report on Form 20-F of Focus Media Holding Limited;
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
(b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and
(c)	Disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: May 6, 2008

By:	/s/ Zhi Tan
	Name:	Zhi Tan
	Title:	Chief Executive Officer

EX-12.2

Exhibit 12.2

CERTIFICATION OF OUR CHIEF FINANCIAL OFFICER

I, Daniel Mingdong Wu, certify that:

1.	I have reviewed this annual report on Form 20-F of Focus Media Holding Limited;
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
(b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and
(c)	Disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: May 6, 2008

By:	/s/ Daniel Mingdong Wu
	Name:	Daniel Mingdong Wu
	Title:	Chief Financial Officer

EX-13.1

Exhibit 13.1

CERTIFICATION OF PERIODIC FINANCIAL REPORT

Pursuant to 18 U.S.C. Section 1350

     In connection with the Annual Report of Focus Media Holding Limited (the “Company”) on Form 20-F for the fiscal year ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Zhi Tan, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C.§ 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 6, 2008

By:	/s/ Zhi Tan
	Name:	Zhi Tan
	Title:	Chief Executive Officer

* A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-13.2

Exhibit 13.2

CERTIFICATION OF PERIODIC FINANCIAL REPORT
Pursuant to 18 U.S.C. Section 1350

          In connection with the Annual Report of Focus Media Holding Limited (the “Company”) on Form 20-F for the fiscal year ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel Mingdong Wu, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C.§ 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 6, 2008

By:	/s/ Daniel Mingdong Wu
	Name:	Daniel Mingdong Wu
	Title:	Chief Financial Officer

* A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-15.1

Exhibit 15.1

[Conyers Dill & Pearman Letterhead]

5 May 2008

Focus Media Holding Limited	DIRECT LINE: 2842 9556
28-30/F Zhao Feng World Trade Building	E-MAIL: christopher.bickley@conyersdillandpearman.com
369 Jiangsu Road	OUR REF: RH/M#670853/D#214021(HK)
Shanghai 100032	YOUR REF:
China

Attention: Mr. Alex Yang

Dear Sirs:

We hereby consent to the reference to our firm under the heading “Taxation — Cayman Islands” in the annual report on Form 20-F for the fiscal year ended December 31, 2007 of Focus Media Holding Limited to be filed with the Securities and Exchange Commission on or about May 5, 2008.

Yours faithfully,
 

/s/ Conyers Dill & Pearman  

Conyers Dill & Pearman 

EX-15.2

Exhibit 15.2

[Letterhead of Global Law Office]

[Chinese Characters]
33/F, Shanghai Square
No. 138 Middle Huai Hua Road
Shanghai 200021, China
Tel: ++86 21 6375 6722 Fax: ++86 21 6375 6723
www.globallawoffice.com.cn

May 5^th, 2008

Focus Media Holding Limited
28-30/F, Zhao Feng World Trade Building
369 Jiangsu Road
Shanghai 200050
PRC

Dear Sirs,

Re: The Annual Report on Form 20-F for the Fiscal Year ended December 31, 2007 of Focus Media Holding Limited (“Annual Report”)

We hereby consent to the reference to our firm under the headings “Information on the Company — Business Overview — Regulatory Matters” and “—Organization Structure” in the annual report on Form 20-F for the fiscal year ended December 31, 2007 of Focus Media Holding Limited to be filed with the Securities and Exchange Commission on or about May 5, 2008.

Yours faithfully,
 

/s/ Global Law Office  

Global Law Office 

EX-21.1

Exhibit 21.1

Subsidiaries of Focus Media Holding Limited

The following table sets forth information concerning our direct subsidiaries:

	Place of	Percentage
Subsidiary	Incorporation	of ownership
Focus Media (China) Holding Ltd.	Hong Kong	100%
Focus Media Technology (Shanghai) Co., Ltd.	PRC	100%
British Virgin Islands
Perfect Media Holding Ltd.	(“BVI”)	100%
Focus Media Qingdao Holding Ltd.	BVI	100%
Focus Media Dalian Holding Ltd.	BVI	100%
Focus Media Changsha Holding Ltd.	BVI	100%
Focus Media Digital Information Technology (Shanghai) Co., Ltd.	PRC	100%
New Focus Media Technology (Shanghai) Co., Ltd.	PRC	100%
Sorfari Holdings Limited	BVI	100%
Focus Media Tianjin Limited	BVI	80%
Capital Beyond Limited	BVI	100%
Shanghai New Focus Media Advertisement Co., Ltd.	PRC	90%
Shanghai New Focus Media Agency Co., Ltd.	PRC	90%
Shanghai Focus Media Defeng Advertisement Co., Ltd.	PRC	90%
Shanghai Focus Media Baiwang Advertising Co., Ltd.	PRC	70%
Shanghai Focus Media Xiangkun Advertising Co., Ltd.	PRC	70%
Infoachieve Limited	BVI	100%
Shanghai Framedia Investment Consultation Co., Ltd.	PRC	100%
Target Media Holdings Limited	Cayman Islands	100%
Target Media Multi-Media Technology (Shanghai) Co., Ltd.	PRC	100%
Dotad Holdings Limited	BVI	100%
ProfitBest Worldwide Limited	BVI	100%
Wiseglobal Investments Limited	BVI	100%
Summitworld Limited	BVI	100%
Newking Investment Limited	BVI	100%
Surge Zhenghe Holding Limited	BVI	100%
Speedaccess Limited	BVI	100%
Peakbright Group Limited	BVI	100%
Homesky Investment Limited	BVI	100%
Bestwin Partners Limited	BVI	100%
Glomedia Holdings Limited	BVI	100%
Appreciate Capital Ltd.	BVI	70%
Richcrest Pacific Limited	BVI	100%
Wealthstar Holdings Limited	BVI	100%
Highmark Asia Limited	BVI	100%
Plentiworth Investment Limited	BVI	100%
Directwealth Holdings Limited	BVI	100%
Better off Investments Limited	BVI	100%
Topstart Holdings Limited	BVI	100%
Vast Well Development Limited	BVI	100%
Crownsky Limited	BVI	100%
E-Rainbow Mobile Information Co., Limited	BVI	100%
Directvantage Limited	BVI	100%
Cmsc Holdings Limited	BVI	100%
Active Max Limited	BVI	100%
Sky Max Global Limited	BVI	100%
Fully Ascend Limited	BVI	100%
Luck Trillion Limited	BVI	100%
Angli Education Development Limited	BVI	100%
Angli Education Investment Limited	BVI	100%
Evercom Pacific Limited	BVI	70%
Century Bonus Limited	BVI	70%
Smart Cheer Limited	BVI	70%

Appendix 1

Subsidiaries of Focus Media Holding Limited (continued)

The following table sets forth information concerning our direct subsidiaries:

	Place of	Percentage
Subsidiary	Incorporation	of ownership
Brightchina Enterprises Limited	BVI	70%
Spacenet International Limited	BVI	80%
Multibillion International Limited	BVI	100%
Pear Commercial Inc.	BVI	100%
One Capital Investment Limited	BVI	100%
First Star Investment Limited	BVI	100%
Xin Jin Hong Limited	Macau	100%
Advantage Way Limited	BVI	100%
Hua Kuang Advertising Company Limited	HK	100%
Allyes Information Technology Co., Ltd	Cayman Island	100%

Subsidiaries of Focus Media Advertisement

The following table sets forth information concerning Focus Media Advertisement’s subsidiaries each of which is incorporated in China:

	Focus Media
	Advertisement’s			Region of
Subsidiaries	Ownership Percentage			Operations	Primary Business
Shanghai Focus Media Advertising Co., Ltd.		90.0%	(1)	PRC	Advertising agency
Shanghai Perfect Media Advertising Agency Co., Ltd.		90.0%	(1)	PRC	Advertising company that operates advertising services network on shoe-shining machines
Qingdao Fukesi Advertisement Co., Ltd.		90.0%	(1)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Changsha Focus Media Shiji Advertisement Co., Ltd.		90.0%	(1)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Dalian Focus Media Advertising Co., Ltd.		90.0%	(1)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Shanghai Qianjian Advertising Co., Ltd.		90.0%	(1)	PRC	Operation and maintenance of out-of-home television advertising network in banking locations
Guangzhou Framedia Advertising Company Ltd.		90.0%	(1)	PRC	Operation and maintenance of out-of-home television advertising network
Zhuhai Focus Media Culture and Communication Company Ltd.		90.0%	(1)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Shanghai Focus Media Digital Information Technology Co., Ltd.		10%	(3)	PRC	Technical and business consultancy
Shenzhen Bianjie Building Advertisement Co., Ltd.		90.0%	(2)	PRC	Operation and maintenance of frame advertising network
Hebei Tianma Weiye Advertising Company Ltd.		90.0%	(2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Xiamen Focus Media Advertising Company Ltd.		90.0%	(2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Sichuan Focus Media Advertising Communications Co., Ltd.		90.0%	(3)	PRC	Operation and maintenance of out-of-home television advertising network

Subsidiaries of Focus Media Advertisement (continued)

	Focus Media
	Advertisement’s	Region of
Subsidiaries	Ownership Percentage	Operations	Primary Business
Shanghai New Structure Advertisement Co., Ltd.	90.0% (2)	PRC	Technical and business consultancy for poster frame network
Shanghai Framedia Advertising Development Co., Ltd.	90.0% (2)	PRC	Operation and maintenance of advertising poster frame network
Guangzhou Shiji Shenghuo Advertisement Co., Ltd.	90.0% (2)	PRC	Operation and maintenance of advertising poster frame network
Hefei Fukesi Advertising Co. Ltd.	90.0% (2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Jinan Focus Media Advertising Co., Ltd.	90.0% (2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Shenzhen E-Times Consulting Co., Ltd.	90.0% (2)	PRC	Operation and maintenance of advertising poster frame network
Shanghai Target Media Co., Ltd.	90.0% (2)	PRC	Dormant (Former operation and maintenance of Target Media’s out-of-home television advertising network)
Shenyang Target Media Ltd.	90.0% (2)	PRC	Dormant (Former operation and maintenance of Target Media’s out-of-home television advertising network)
Fuzhou Hengding United Media Ltd.	90.0% (2)	PRC	Dormant (Former operation and maintenance of Target Media’s out-of-home television advertising network)
Beijing Focus Media Wireless Co., Ltd.	90.0% (2)	PRC	Operation of mobile handset advertising service network
Guangzhou Feisha Advertisement Co., Ltd.	90.0% (2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
DongGuan Focus Media Advertisement & Communications Co., Ltd.	90.0% (2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Shanghai FengJing Advertisement & Communications Co., Ltd.	95.0% (2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)

Subsidiaries of Focus Media Advertisement (continued)

	Focus Media
	Advertisement’s			Region of
Subsidiaries	Ownership Percentage			Operations	Primary Business
ZhengZhou Focus Media Advertisement & Communications Co., Ltd.		85.0%	(2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
ShiJiaZhuang Focus Media HuiHuang Business Advertisement Co., Ltd.		90.0%	(2)	PRC	Operation and maintenance of advertising poster frame network
Nanjing Focus Media Advertising Co., Ltd.		90.0%	(3)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Yunnan Focus Media Co., Ltd.		89.5%	(2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Tianjin Focus Tongsheng Advertising Company Ltd.		80.0%	(2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Zhejiang Ruihong Focus Media Advertising Communications Co., Ltd.		80.0%	(2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Wuhan Geshi Focus Media Advertising Co., Ltd.		75.0%	(2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Xian Focus Media Advertising & Information Company Ltd.		70.0%	(3)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Shenyang Focus Media Advertising Co., Ltd.		70.0%	(3)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Fuzhou Focus Media Advertising Co., Ltd.		70.0%	(3)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Chongqing Geyang Focus Media Culture & Broadcasting Co., Ltd.		60.0%	(2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Shanghai On-Target Advertisement Co., Ltd.		60.0%	(3)	PRC	Advertising agency
Shanghai Jiefang Focus Media Advertisement & Communications Co., Ltd.		70.0%	(3)	PRC	Operation and maintenance of direct mailing advertising business
City Billboard (BeiJing) Advertisement Co., Ltd.		75.0%	(3)	PRC	Operation and maintenance of outdoor LED billboards advertising network
BeiJing YangShiSanWei Advertisement Co., Ltd.		70.0	%(3)	PRC	Operation and maintenance of movie theatre advertising network

Subsidiaries of Focus Media Advertisement (continued):

	Focus Media
	Advertisement’s			Region of
Subsidiaries	Ownership Percentage			Operations	Primary Business
Beijing Tuojiachengyuan Advertisement Co., Ltd.		90	%(2)	PRC	Operation and maintenance of outdoor billboards advertising network
Shanghai Zonghengpinyu Advertisement Co., Ltd.		90	%(2)	PRC	Operation and maintenance of outdoor LED billboards advertising network
Quanzhou Xindalu Culture Communication Co., Ltd.		100	%	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Guizhou Focus Media Advertisement Co., Ltd.		100	%	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Lanzhou Focus Media Advertisement Co., Ltd.		100	%	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Haerbin Focus Media Advertisement Co., Ltd.		100	%	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Jilin Focus Media Advertisement Co., Ltd.		90	%(2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Hefei Tiandi Advertisement Co., Ltd.		90	%(2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Suzhou Focus Media Communication and Advertisement Co., Ltd.		90	%(2)	PRC	Operation and maintenance of out-of-home television advertising network (former regional distributor)
Shanghai Shenghuotongdao Advertisement Co., Ltd.		90	%(2)	PRC	Operation and maintenance of direct mailing advertising business
Zhengzhou Focus Media Frame Advertisement Co., Ltd.		100	%	PRC	Operation and maintenance of advertising poster frame network
Shanghai Yuanchi Advertisement Co., Ltd.		90	%(2)	PRC	Operation and maintenance of advertising poster frame network
Tianjin Saige Advertisement Planning Co., Ltd.		90	%(2)	PRC	Operation and maintenance of advertising poster frame network
Shijiazhuang Framedia Zhonglian Advertisement Co., Ltd.		90	%(2)	PRC	Operation and maintenance of advertising poster frame network
Taiyuan Framedia Juzhong Advertisement Co., Ltd.		90	%(2)	PRC	Operation and maintenance of advertising poster frame network
Jinan Framedia Advertisement Co., Ltd		90	%(2)	PRC	Operation and maintenance of advertising poster frame network

Subsidiaries of Focus Media Advertisement (continued):

	Focus Media
	Advertisement’s			Region of
Subsidiaries	Ownership Percentage			Operations	Primary Business
Guangzhou Hengxun Advertisement Co., Ltd.		63%	(5)	PRC	Internet advertising agency
Beijing Chuangshiqiji Advertisement Co., Ltd.		70	%(3)	PRC	Internet advertising agency
Beijing Kudong Media Advertisement Co., Ltd.		70	%(3)	PRC	Internet advertising agency
Shanghai Yuewei Computer Information Technology Co., Ltd.		70	%(3)	PRC	Internet advertising agency
Shanghai Jiangpan Advertisement Co., Ltd.		70	%(3)	PRC	Internet advertising agency
Shanghai Wangmai Advertisement Co., Ltd.		70	%(3)	PRC	Internet advertising agency
Beijing Jiahuahengshun Advertisement Co., Ltd.		80	%(3)	PRC	Internet advertising agency
Beijing Jiahuahengshun Media Advertisement Co., Ltd.		80	%(3)	PRC	Internet advertising agency
Beijing Jiahuazhongwang Advertisement Co., Ltd.		80	%(3)	PRC	Internet advertising agency
Kesishitong Advertisement (Beijing) Co., Ltd.		90	%(2)	PRC	Internet advertising agency
Beijing Yibolande Advertisement Co., Ltd.		90	%(2)	PRC	Internet advertising agency
Beijing Yitong Wireless Information Technology Co., Ltd.		90	%(2)	PRC	Operation of mobile handset advertising service network

(1)	The remaining equity interest is held by Jimmy Wei Yu as our nominee holder.
(2)	The remaining equity interest is held by Focus Media Advertising Agency.
(2)	The remaining equity interest is held by Focus Media Technology.
(3)	The remaining equity interest in this entity is owned by unrelated third parties.
(4)	The remaining equity interest in this entity is owned by Focus Media Digital.
(5)	Focus Media Advertising Agency holding 7%, the remaining equity interests held by unrelated third parties.