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, 2009.

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                   

or

o SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number: 001-33328

XINHUA SPORTS & ENTERTAINMENT LIMITED

(Exact name of Registrant as specified in its charter)

             N/A               

(Translation of Registrant’s name into English)

     Cayman Islands    

(Jurisdiction of incorporation or organization)

18/F, Tower A, Winterless Centre,
No. 1 West Da Wang Road, Chaoyang District,
Beijing, 100026, People’s Republic of China
(Address of principal executive offices)

Fredy Bush
Chief Executive Officer
18/F, Tower A, Winterless Centre,
No. 1 West Da Wang Road, Chaoyang District,
Beijing, 100026, People’s Republic of China
Tel: +86-10-8567-6000
Fax: +86-10-6448-0585
Email: info@xsel.com

(Name, Telephone, E-mail and/or Facsimile number and Address of the Company Contact Person)

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

Title of Each Class	Name of Each Exchange on Which Registered
American depositary shares, each representing two common shares, par value US$0.001 per share	The NASDAQ Stock Market LLC (The NASDAQ Global Market)

Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)

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. 176,466,050 common shares, par value US$0.001 per share as of December 31, 2009.

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o 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

U.S. GAAP þ International Financial Reporting Standards as issued by the International Accounting Standards Board o Other o

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

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

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

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

TABLE OF CONTENTS

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	27
Item 4A. Unresolved Staff Comments	61
Item 5. Operating and Financial Review and Prospects	61
Item 6. Directors, Senior Management and Employees	93
Item 7. Major Shareholders and Related Party Transactions	103
Item 8. Financial Information	109
Item 9. The Offer and Listing	111
Item 10. Additional Information	111
Item 11. Quantitative and Qualitative Disclosures About Market Risk	118
Item 12. Description of Securities Other Than Equity Securities	119
Item 13. Defaults, Dividend Arrearages and Delinquencies	120
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds	120
Item 15. Controls and Procedures	120
Item 16A. Audit Committee Financial Expert	120
Item 16B. Code of Ethics	121
Item 16C. Principal Accountant Fees and Services	121
Item 16D. Exemptions From The Listing Standards For Audit Committees	121
Item 16E. Purchases of Equity Securities By The Issuer And Affiliated Purchasers	121
Item 16F. Change In Registrant’s Certifying Accountant	122
Item 16G. Corporate Governance	122
Item 17. Financial Statements	122
Item 18. Financial Statements	122
Item 19. Exhibits	122
Exhibit 4.62
Exhibit 4.63
Exhibit 4.64
Exhibit 4.65
Exhibit 4.66
Exhibit 4.67
Exhibit 8.1
Exhibit 12.1
Exhibit 12.2
Exhibit 13.1
Exhibit 13.2
Exhibit 15.1

i

INTRODUCTION

In this annual report, except where the context otherwise requires and for purposes of this annual report only:

• “we,” “us,” “our company,” “our,” “XSEL” and “Xinhua Sports & Entertainment” refer to Xinhua Sports & Entertainment Limited, and its subsidiaries, including direct subsidiaries and affiliated entities, except where the context requires otherwise;

• “production of” or “to produce” drama series refer to “co-production with third parties who hold drama series production licenses” or “to cooperate with third parties who hold drama series production licenses to produce;”

• “shares” or “common shares” refers to our class A common shares;

• “ADSs” refers to our American depositary shares, each of which represents two common shares, and “ADRs” refers to the American depositary receipts that evidence our ADSs;

• “China” or “PRC” refers to the People’s Republic of China, excluding, for the purpose of this annual report on Form 20-F only, Taiwan, Hong Kong and Macau;

• “GAAP” refers to general accepted accounting principles in the United States;

• all references to “RMB” or “Renminbi” are to the legal currency of China, all references to “$,” “dollars,” “US$,” “USD” and “U.S. dollars” are to the legal currency of the United States and all references to “HK$” are to the legal currency of Hong Kong;

• any discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding; and

• the conversion of RMB into U.S. dollars in this annual report is based on the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. Unless otherwise noted, all translations from RMB to U.S. dollars and from U.S. dollars to RMB in this annual report were made at a rate of RMB6.8259 to $1.00, the noon buying rate in effect as of December 31, 2009.

This annual report on Form 20-F includes our audited consolidated financial statements for the years ended December 31, 2007, 2008 and 2009.

FORWARD-LOOKING INFORMATION

This annual report on Form 20-F contains statements of a forward-looking nature. You can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. You must remember that our expectations may not be correct, even though we believe that they are reasonable. These forward-looking statements include, among others:

• our goals and strategies;

• our ongoing extension into the sports and entertainment markets;

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

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

2

• our plans to expand our Internet presence, and expand into new media, such as, broadband wireless and Internet television;

• the growth or acceptance of our integrated platform;

• our plans to identify and create new advertising networks that target specific consumer demographics, which could allow us to charge a separate fee; and

• competition in the PRC media and advertising industries.

We do not guarantee that the events described in this annual report will happen as described or that they will happen at all. You should read this annual report completely and with the understanding that actual future results may be materially different from what we expect. The forward-looking statements made in this annual report relate only to events as of the date on which the statements are made. We undertake no obligation, beyond that required by law, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made, even though our situation may change in the future.

Whether actual results will conform to our expectations and predictions is subject to a number of risks and uncertainties, many of which are beyond our control, and reflect future business decisions that are subject to change. Some of the assumptions, future results and levels of performance expressed or implied in the forward-looking statements we make inevitably will not materialize, and unanticipated events may occur which will affect our results. The “Item 3.D. Key Information — Risk Factors” section of this annual report describes the principal contingencies and uncertainties to which we believe we are subject. You should not place undue reliance on the forward-looking statements.

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 statements of operations data for our company for the years ended December 31, 2007, 2008 and 2009 and the selected consolidated balance sheet data for our company as of December 31, 2008 and 2009 have been derived from our audited financial statements included elsewhere in this annual report. You should read the selected consolidated financial data in conjunction with those financial statements and the accompanying notes and “Item 5. Operating and Financial Review and Prospects.”

The following selected consolidated statements of operations data for our predecessor, EconWorld Media Limited, or EconWorld Media, for the period ended May 25, 2005 and for our company for the period from May 26, 2005, the date Xinhua Finance Limited, or XFL, acquired 60% of EconWorld Media, to December 31, 2005, and for our company for the year ended December 31, 2006 have been derived from our audited financial statements that are not included in this annual report.

3

Our consolidated financial statements are prepared and presented in accordance with U.S. GAAP. Our historical results do not necessarily indicate our results expected for any future periods.

	Period			Period
	from			from
	January 1, 2005 to			May 26,
	May 25,			2005(1) to			Year Ended			Year Ended			Year Ended			Year Ended
	2005			December 31,			December 31,			December 31,			December 31,			December 31,
	(Predecessor)			2005			2006			2007			2008			2009
	(In thousands, except for per share data)
Selected consolidated statement of operations data
Net revenues:
Advertising services	$	—		$	—		$	35,628		$	75,337		$	99,575		$	78,016
Advertising sales		—			—			—			8,141			21,912			21,215
Total net revenues		—			—			35,628			83,478			121,487			99,231
Cost of revenues:
Advertising services		—			—			23,954			54,255			71,230			61,888
Advertising sales		—			—			—			3,805			9,483			23,554
Total cost of revenues		—			—			23,954			58,060			80,713			85,442
Operating expenses:
Selling and distribution		—			—			2,355			5,662			10,683			7,708
General and administrative		—			4			10,131			17,890			45,604			27,762
Impairment charges		—			—			—			—			159,938			176,772
Loss on disposal of subsidiaries		—			—			—			—			4,721			25,640
Total operating expenses		—			4			12,486			23,552			220,946			237,882
Other operating income		—			—			—			2,262			1,251			2,065
Income (loss) from operations		—			(4	)		(812	)		4,128			(178,921	)		(222,028	)
Other income (expense), net		—			—			(167	)		5,745			(27,308	)		4,651
Equity in loss of an investment		—			—			52			—			—			—
Provision for income taxes (benefit)		—			—			(164	)		671			1,728			(4,057	)
Net income (loss) from continuing operations		—			(4	)		(867	)		9,202			(207,957	)		(213,320	)
Discontinued operations, net of taxes		(884	)		1,484			5,915			20,140			(66,274	)		(100,296	)
Net income (loss)		(884	)		1,480			5,048			29,342			(274,231	)		(313,616	)
Net income (loss) attributable to non-controlling interest		—			129			1,704			1,303			641			(2,041	)
Net income (loss) attributable to XSEL	$	(884	)	$	1,351		$	3,344		$	28,039		$	(274,872	)	$	(311,575	)
Deemed dividend on redeemable convertible preferred shares		—			—			(2,157	)		—			—			—
Dividends declared to redeemable convertible preferred shares		—			—			(5,335	)		(1,338	)		(2,000	)		(2,560	)
Net income (loss) attributable to holders of common shares		(884	)		1,351			(4,148	)		26,701			(276,872	)		(314,135	)
Net income (loss) from continuing operations per share:
Basic — Class A common share	$	—		$	—		$	(0.18	)	$	0.06		$	(1.55	)	$	(1.35	)
Basic — Class B common share	$	—		$	—		$	(0.18	)	$	0.06		$	(1.55	)	$	—
Diluted — Class A common share	$	—		$	—		$	(0.18	)	$	0.06		$	(1.55	)	$	(1.35	)
Diluted — Class B common share	$	—		$	—		$	(0.18	)	$	0.06		$	(1.55	)	$	—
Net income (loss) from discontinued operations per share:
Basic — Class A common share	$	—		$	—		$	0.10		$	0.17		$	(0.49	)	$	(0.64	)
Basic — Class B common share	$	(7.85	)	$	0.03		$	0.10		$	0.17		$	(0.49	)	$	—
Diluted — Class A common share	$	—		$	—		$	0.10		$	0.15		$	(0.49	)	$	(0.64	)
Diluted — Class B common share	$	(7.85	)	$	0.03		$	0.10		$	0.15		$	(0.49	)	$	—
Shares used in computation:
Basic — Class A common share		—			—			5,084			66,166			85,927			157,730
Basic — Class B common share		113			42,613			44,693			50,055			49,917			—
Diluted — Class A common share		—			—			5,084			86,315			85,927			157,730
Diluted — Class B common share		113			42,613			44,693			50,055			49,917			—
Dividend per redeemable convertible preferred share	$	—		$	—		$	0.34		$	0.08		$	6.67		$	7.81

(1) Date XFL acquired 60% of EconWorld Media, which equity interest was transferred to us on January 12, 2006.

4

	As of December 31,
	2008		2009
	(In thousands)
Selected consolidated balance sheet data
Cash and cash equivalents	$	54,089	$	13,230
Goodwill		46,993		7,238
Intangible assets		200,529		19,298
Total assets		508,250		242,559
Convertible loan-current		—		59,379
Total current liabilities		106,275		201,755
Convertible loan-non current		33,200		—
Net assets (liabilities)		268,791		(26,170	)
Total equity (deficiency)		238,185		(59,936	)

As of January 1, 2009, we adopted an authoritative guidance, which changed the accounting for and the reporting of minority interests, now referred to as non-controlling interests, in our consolidated financial information. Due to our corporate repositioning, certain businesses ceased operations or were sold and we have reclassified these businesses as discontinued operations in the consolidated financial information. Prior period financial information has been reclassified to conform to the current period presentation.

Exchange Rate Information

Our business is primarily conducted in China and substantially all of our revenues are denominated in RMB. However, periodic reports made to shareholders will include current period amounts translated into U.S. dollars using the then current exchange rates, for the convenience of readers. The conversion of RMB into U.S. dollars in this annual report is based on the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. Unless otherwise noted, all translations from RMB to U.S. dollars and from U.S. dollars to RMB in this annual report were made at a rate of RMB6.8259 to $1.00, the noon buying rate in effect as of December 31, 2009. We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade. On July 9, 2010, the noon buying rate was RMB6.7720 to $1.00.

5

The following table sets forth information concerning exchange rates between the RMB and the U.S. dollar for the periods indicated.

	Noon Buying Rate
Period	Period End		Average(1)		Low		High
2005		8.0702		8.1826		8.2765		8.0702
2006		7.8041		7.9579		8.0702		7.8041
2007		7.2946		7.5806		7.8127		7.2946
2008		6.8225		6.9193		7.2946		6.7800
2009		6.8259		6.8295		6.8470		6.8176
2010
January		6.8268		6.8269		6.8295		6.8258
February		6.8258		6.8285		6.8330		6.8258
March		6.8258		6.8262		6.8270		6.8254
April		6.8247		6.8256		6.8275		6.8229
May		6.8305		6.8275		6.8310		6.8245
June		6.7815		6.8184		6.8323		6.7815
July (through July 9, 2010)		6.7720		6.7762		6.7807		6.7709

(1) Annual averages are calculated from month-end rates. Monthly averages are calculated using the average of the daily rates during the relevant period.

B. Capitalization and Indebtedness

Not Applicable.

C. Reasons for the Offer and Use of Proceeds

Not Applicable.

D. Risk Factors

Risks related to our business

There is substantial doubt as to our ability to continue as a going concern, which could adversely affect our ability to meet our ongoing financing needs as well as to obtain third party financing.

As indicated in the emphasis of matter language included in the report on our financial statements issued by our auditors, Deloitte Touche Tohmatsu CPA Ltd., there is “substantial doubt” about our ability to continue as a going concern. As of December 31, 2009 our current liabilities exceeded our current assets by $50.9 million and our net shareholders’ deficit was $61.4 million. Our cash and cash equivalent as of December 31, 2009 was $13.2 million. We cannot assure you that our business will generate sufficient cash flow from operations in the future to service our debts and make necessary capital expenditures, in which case we may (i) seek additional financing, (ii) dispose of certain assets or (iii) seek to refinance some or all of our debts. We are also taking a number of other actions to address the issue, including restructuring outstanding indebtedness, disposing of non-core businesses and adopting other cost-saving strategies. We cannot assure you that any of the alternatives above can be implemented on satisfactory terms, if at all. The inclusion of the substantial doubt language in the audit report about our ability to continue as a going concern could affect our ability to obtain financing from third parties or could result in increased costs of such financing. In the event that we are unable to meet our liabilities when they are due or if our creditors take legal action against us for payment, we may have to liquidate long-term assets to repay our creditors. We may have difficulty converting our long-term assets into current assets in such a situation and may suffer losses upon the sale of our long-term assets.

6

We have sustained net losses in the past and may continue to sustain net losses in the future or may not grow as expected.

We recorded an aggregate of $267.8 million in 2009 for impairment charges relating to goodwill and intangible assets, driven mainly by (i) our repositioning in the sports and entertainment fields, (ii) the global economic downturn, (iii) the release of Rule 61 (“Rule 61”) in October 2009 by the State Administration of Radio, Film and Television, which substantially cuts the time allowed for brand advertisements in each hour of programming and the aggregate amount of time allotted for infomercials, (iv) the loss of major customers to competitors or from our Advertising Group and (v) the failure to renew an agency contract for internet property advertising. Partially because of this, we reported a net loss of $313.6 million for the year ended December 31, 2009. As of December 31, 2009, after recording these impairment charges, we had goodwill and other intangibles in an aggregate amount of $30.9 million, or approximately 12.7% of our total assets.

An asset impairment charge may result from the occurrence of unexpected adverse events that impact our estimates of expected cashflows generated from our assets. Goodwill and intangible assets with indefinite lives are required to be tested for impairment at least annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. If the estimates or related assumptions change in the future, we may be required to record additional impairment charges. Additionally, continued adverse conditions in the economy and future volatility in the stock market could continue to impact the valuation of our reporting units, which could trigger additional impairment of goodwill and intangibles in future periods and have a material adverse effect on our results of operations and the market price of our ADSs.

We may not be able to comply with the financial covenants contained in an outstanding secured convertible loan facility, which would give the lenders under such facility the right to require us to repay the outstanding balance at any time. We may not be able to make such a repayment on demand, and any acceleration of the loan would have an adverse effect on our financial condition.

In October 2008, we obtained a secured convertible loan facility from affiliates of Patriarch Partners Agency Services, LLC, or Patriarch. As of the date of this annual report, the outstanding principal amount under the secured convertible loan facility is $41.5 million. In addition, we obtained a term loan of $7.6 million from Patriarch. The credit agreement contains financial covenants relating to the business of our subsidiaries, including minimum consolidated EBITDA, interest coverage ratios, a leverage ratio and a minimum cash balance requirement. We did not meet certain of these financial covenants for the quarter ended September 30, 2009, for which we obtained a waiver. We also did not meet certain of these financial covenants for the quarters ended December 31, 2009, March 31, 2010 and June 30, 2010. We entered into an amendment and waiver to the secured convertible loan facility on July 12, 2010, which effectively waives our breach of financial covenants for the quarters ended December 31, 2009, March 31, 2010 and June 30, 2010 and up to the date of the amendment, and lowers the financial covenant requirements on a prospective basis.

Upon the occurrence of any default under the secured convertible loan facility, including our failure to comply with all financial covenants, Patriarch could elect to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be due and payable, or could require us to apply all of our available cash to repay these borrowings. If we cannot repay these amounts, Patriarch could proceed against the collateral granted to it to secure our indebtedness. We have pledged our television assets as collateral under the secured convertible loan facility. If Patriarch accelerates the repayment of borrowings, we may not have sufficient assets to repay the loans under the secured convertible loan facility and our other indebtedness, or be able to borrow sufficient funds to refinance such indebtedness. Even if we are able to obtain new financing, it may not be on commercially reasonable terms, or terms that are acceptable to us.

We cannot assure you that we will be able to comply with the covenants contained in the secured convertible loan facility in the future, and if we breach the covenants, we cannot assure you that we would be able to obtain any amendments to or waivers of the covenants contained in the secured convertible loan facility. In addition, any amendment to or waiver of the covenants may involve upfront fees, higher annual interest costs and other terms less favorable to us than those currently offered by the secured convertible loan facility. In addition, our failure to comply with the covenants under the secured convertible loan facility or an assessment that we are likely to fail to comply with such covenants could lead us to seek an amendment to or a waiver of the covenants contained in the secured convertible loan facility. 

7

Under the terms of our advertising agency agreement with Shaanxi Television Station, it held the right to terminate the agreement if we failed to make certain required payments. Shaanxi Television Station exercised this right on June 30, 2010, which could have a material and adverse impact on our business and financial conditions.

Through our subsidiary, Everfame Development Ltd., or Everfame Development, we acted as the sole advertising agent for Shaanxi Television Station, a free-to-air TV channel. Our agreement with Shaanxi Television Station provided it the right to terminate the agreement where we failed to pay the required annual license fee or make certain guarantee payments. This agreement was terminated by Shaanxi Television Station effective June 30, 2010 due to our failure to make required payments. We derived revenue of $20.8 million from this agreement for the year ended December 31, 2009, which represents 14.9% of our total revenue for that period. We may not be able to enter into a satisfactory agreement to make up for this loss of revenues, which could have a material and adverse effect on our business and financial conditions.

We have substantial indebtedness and may incur substantial additional indebtedness in the future, which could adversely affect our financial health and our ability to generate sufficient cash to satisfy our outstanding and future debt obligations.

As of December 31, 2009, we had total borrowings of $89.1 million. Our substantial indebtedness could have important consequences to you. For example, it could:

• limit our ability to satisfy our obligations under our debt;

• increase our vulnerability to adverse general economic and industry conditions;

• require us to dedicate a substantial portion of our cashflow from operations to servicing and repaying our indebtedness, thereby reducing the availability of our cashflow to fund working capital, capital expenditures and other general corporate purposes;

• limit our flexibility in planning for or reacting to changes in our businesses and the industry in which we operate;

• place us at a competitive disadvantage compared to our competitors that have less debt; and

• increase the cost of additional financing.

Our ability to generate sufficient cash to satisfy our outstanding and future debt obligations will depend upon our future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, many of which are beyond our control. We anticipate that our operating cashflow may not be sufficient to meet our anticipated operating expenses and to service our debt obligations as they become due. If we are unable to service our indebtedness, we will be forced to adopt an alternative strategy that may include actions such as reducing or delaying capital expenditures, selling assets, restructuring or refinancing our indebtedness or seeking equity capital. These strategies may not be instituted on satisfactory terms, if at all.

We are refocusing our scope of operations to include sports and entertainment media. Failure to successfully implement these new business strategies could have an adverse effect on our financial condition, results of operations and cashflow from operations.

Our content previously focused on business and financial news as well as on wealth management and affluent lifestyle programming. In late 2008 we decided to expand the scope of our business to include sports and entertainment media, in addition to our existing finance focus, to more broadly address market demand and maximize shareholder value. In connection with our re-positioning, we have made several key investments to better position ourselves for growth in the sports and entertainment markets. We have also reallocated some of our resources to these new businesses. Our re-positioning and growth of our operations have placed, and will continue to place, significant demand on our management, operational and financial resources. If we do not effectively manage our re-positioning and the growth of our operations, the quality of our services could suffer, which could negatively affect our brand and operating results. Any failure to efficiently or effectively manage this growth of our operations may limit our future growth and hamper our business strategy.

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In addition, as a result of the repositioning, we discontinued our print business and most of our broadcasting business. A number of our entities were either terminated or disposed of in 2009, which were reflected as discontinued operations in our consolidated statements of operation. In 2009, we incurred a loss from discontinued operations of $100.3 million. Our repositioning and new business strategies may result in additional discontinued operations and losses from discontinued operations, which could have an adverse effect on our financial condition and results of operations.

We may need additional capital to finance general operating costs and future acquisitions and we may not be able to obtain it.

We may require additional cash resources in order to financing general operating costs and to make acquisitions. We plan to expand through acquisitions, but have not yet identified many targets for acquisition. Often the cost of acquisitions is not known until the opportunities are analyzed, due diligence has commenced and negotiations are underway. We also may need to pay large amounts in additional earnout considerations in connection with acquisitions structured to include these types of payments. As of the date of this annual report, we may need to pay as much as $53.5 million in additional earnout considerations in connection with past acquisitions. If the cost of the acquisitions that our management deems appropriate is higher than our cash resources, we will need to seek additional cash resources, and may seek to sell additional equity or debt securities or obtain a credit facility. We also require capital to fund our ongoing general operating costs. The sale of additional equity securities could result in additional dilution to our shareholders. If we sell additional equity securities and our shareholders experience dilution, you will also experience dilution of your ADSs. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. We may not be able to obtain financing in amounts or on terms acceptable to us, if at all. As a result, our operating results and financial condition could be adversely affected.

Our successive acquisitions make evaluating our business and prospects difficult.

We were incorporated in November 2005. Since our incorporation, we have acquired various operating entities with distinct businesses. Some of the businesses we acquired have short operating histories. Our successive acquisitions make comparisons with historical data difficult. Accordingly, you should consider our future prospects in light of the risks and uncertainties experienced by early stage companies in evolving and heavily regulated industries such as the media industry in China. Some of these risks and uncertainties relate to our ability to:

• successfully integrate the recently acquired companies;

• navigate the regulatory landscape and respond to changes in the regulatory environment;

• offer new and innovative services to attract and retain an audience and readers;

• attract additional advertisers and increase advertising fees;

• increase awareness of our branded media platforms;

• respond to competitive market conditions;

• manage risks associated with intellectual property rights;

• maintain effective control of our costs and expenses;

• raise sufficient capital to sustain and expand our business; and

• attract, retain and motivate qualified personnel.

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If we are unsuccessful in addressing any of these risks and uncertainties, or any other risks listed below, our business may be materially and adversely affected.

We may not be able to achieve the benefits we expect from recent and future acquisitions, and recent and future acquisitions may have an adverse effect on our ability to manage our business.

Our recent acquisitions and any future acquisitions expose us to potential risks, including risks associated with unforeseen or hidden liabilities, the diversion of resources from our existing businesses and technologies, the change of laws and policies or their interpretations that affect the operations of the acquired businesses, the inability to generate sufficient revenue to offset the costs and expenses of acquisitions, and potential loss of, or harm to, relationships with employees, customers and business partners as a result of the integration of new businesses. As of the date of this filing, we have not encountered any of those potential risks. In addition, the revenue and cost synergies that we expect to achieve from our acquisitions may not materialize. The overhead and personnel cost of running a large organization could be significantly higher than that of a smaller organization. Any of these events could have an adverse effect on our business, financial condition, results of operations and cashflow from operations.

Strategic acquisitions are a key part of our growth strategy. Historically we have made acquisitions that were critical in providing us with product and service suites, an audience and readers, a customer base, market access and our talent pool. If we are presented with appropriate opportunities, we may acquire additional complementary companies, products or technologies. The integration of acquired companies diverts a great deal of management attention and dedicated staff efforts from other areas of our business. A successful integration process is important to realizing the benefits of an acquisition. If we encounter difficulty integrating our recent and future acquisitions, our business may be adversely affected. Certain of our acquired companies are held in the form of affiliated entities, which provides us less control than if they were direct subsidiaries, and may cause difficulty in the integration process. See “— Risks related to the regulation of our business and to our structure — 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.” The acquisitions may not result in the expected growth or development, which may have an adverse effect on our business.

We may not be successful in identifying, financing, consummating and integrating future acquisitions, which could significantly impair our growth potential. We plan to continue to make strategic acquisitions, and identifying acquisition opportunities could demand substantial management time and resources. Negotiating and financing the potential acquisitions could involve significant cost and uncertainties. If we fail to continue to execute advantageous acquisitions in the future, our overall growth strategy could be impaired, and our operating results could be adversely affected.

We rely on key contracts and business relationships, and if our current or future business partners or contracting counterparties fail to perform, or terminate, any of their contractual arrangements with us for any reason or cease operations, or should we fail to adequately identify key business relationships, our business could be disrupted, our reputation may be harmed and we may have to resort to litigation to enforce our rights, which may be time consuming and expensive.

We rely on a number of arrangements with partners and suppliers to conduct our businesses. These arrangements govern, among others, our rights to sell advertising, provide consulting and advisory services and to serve as an exclusive advertising agent. See “Item 4.B. Information on the Company — Business Overview — Arrangements with partners and suppliers.” Some of these key contracts have long terms, while others have short terms generally ranging from one year to a few years and will need renewal.

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If any of our business partners or contracting counterparties fails to perform or terminates its agreement with us for any reason (including, for example, a breach by them or the lack of proper regulatory approvals), or if our business partners or contracting counterparties with which we have short-term agreements refuse to extend or renew the agreement or enter into a similar agreement, our ability to carry on operations in that sector, and our ability to cross-sell advertising services among different platforms, may be impaired. Depending on the circumstances, the consequences could be far-reaching and extremely harmful to our reputation, existing business relationships and future growth potential. In addition, we depend on the continued operation of our long-term business partners and contracting counterparties and on maintaining good relations with them. If one of our long-term partners or counterparties is unable (including as a result of bankruptcy or a liquidation proceeding) or unwilling to continue operating in the line of business that is the subject of our contract, we may not be able to obtain similar relationships and agreements on terms acceptable to us or at all. The failure to perform or termination of any of the agreements by a partner or a counterparty, the discontinuation of operations of a partner or counterparty, the loss of good relations with a partner or counterparty or our inability to obtain similar relationships or agreements may have an adverse effect on our operating results and financial condition. If any of these business partners or contracting counterparties fails to perform its obligations, we may not be able to enforce the relevant agreements if the agreements are ruled in violation of the PRC laws, even if the agreements are otherwise legal and valid.

We will seek to enforce our rights to the maximum extent allowed by law. However, dispute resolution through litigation and arbitration in China could be time-consuming and expensive. Since the results of bringing actions in court and enforcing arbitration awards in China are not predictable, we may not prevail in court or at arbitration hearings even if we believe we should win based on the merits of the case and may not be able to collect arbitration awards even if there is no defect on the arbitration rulings.

In addition, we may need to form new strategic partnerships or joint ventures to access appropriate assets and industry know-how. Failing to identify, execute and integrate such future partnerships or joint ventures may have an adverse effect on our business, financial condition, results of operations and cashflow from operations.

We are not a party to some of the key contracts on which we rely. Instead, we have contracts with companies which in turn have these key contracts with third parties. If the third parties fail to perform or terminate any of these key contracts for any reason or cease operations, our business could be disrupted, our reputation may be harmed and we will not be able to enforce our rights in court.

Our business relies on certain key contracts to which we are not a party. Instead, we have contracts with the companies that in turn have those key contracts with third parties. The contracts we have allow us to benefit financially and strategically from our contracting counterparties’ roles in the contracts. These arrangements govern, among others, our rights to sell advertising, provide consulting and advisory services and to serve as an exclusive advertising agent. See “Item 4.B. Information on the Company — Business Overview— Arrangements with partners and suppliers.”

If our contracting counterparties do not perform or terminate their agreements with the third parties, or if the third parties do not perform or terminate their contracts with our contracting counterparties for any reason, including a breach by either party, our ability to use the media platforms, and our ability to cross-sell advertising services among different platforms may be impaired. Depending on the circumstances, the consequences of a failure to perform under the terms or the termination of a contract could be far-reaching and extremely harmful to our reputation, existing business relationships and future growth potential. We may not be able to enforce these contracts in court or at arbitration because we do not have direct contractual relationships with these entities. Our contracting counterparties may be unable or unwilling to enforce their rights under the key contracts, and if they are unwilling to do so we have no direct recourse against the third parties. In addition, we rely on the continued operation of the third parties to carry out certain parts of our operations. If any of them are unable or unwilling to continue operating in the line of business that is the subject of our contract, we do not have contractual rights to enforce against them. We may not be able to obtain access to similar platforms on terms acceptable to us or at all. A failure to perform under the terms of or the termination of any of these key contracts, the discontinuing of operations of the third parties or our inability to obtain access to similar media platforms may have an adverse effect on our financial condition, results of operations and cashflow from operations.

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Our future success depends on attracting advertisers who will advertise across our various platforms. If we fail to attract a sufficient number of advertisers, our operating results and revenues may not meet expectations.

One important strategy underlying our recent acquisitions is to create an integrated media platform on which advertisers wishing to reach an affluent audience and readers may advertise simultaneously on multiple media outlets. However, advertisers may decide that they do not need to use multiple outlets, find that our targeted demographic does not consist of their desired consumers or a critical mass of consumers, decide to use a competitor’s services or decide not to use our services for other reasons. If the advertisers decide against advertising with us, we may not realize our growth potential or meet investor expectations. Our future operating results and business prospects could be adversely affected.

We derive a substantial proportion of our revenues from advertising, and the advertising market is particularly volatile.

Our operating groups, including Broadcast and Advertising, derive the majority of their revenues from the provision of advertisements and sponsorships. Advertising spending is volatile and sensitive to changes in the economy. Our advertising customers may reduce the amount they spend on our media for a number of reasons, including:

• a downturn in economic conditions in China or around the globe;

• a decision to shift advertising expenditure to other media and platforms;

• a deterioration of the ratings of our programs;

• a change of government policy with regard to the types of programs that can be broadcast; or

• a decline in advertising spending in general.

If we are unable to continually attract advertisers to our media services, we will be unable to maintain or increase our advertising fees and sales, which could negatively affect our ability to generate revenues in the future. A decrease in demand for advertising in general, and for our advertising services in particular, could materially and adversely affect our operating results.

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

Our operating results may fluctuate as a result of a number of factors, many of which are outside of our control. Our quarterly and annual revenues and costs and expenses as a percentage of our revenues may be significantly different from historical or projected levels. Our operating results in future quarters may fall below expectations. Any of these events could cause the price of our ADSs to fall. Any of the risk factors listed in this section could cause our operating results to fluctuate from quarter to quarter.

Because of our limited operating history, our rapidly evolving business and our repositioning and other growth strategies, our historical operating results may not be useful to you, and you should not rely on our past results in predicting our future operating results. Advertising spending in China has historically been volatile, reflecting overall economic conditions as well as budgeting and buying patterns. We expect that the volatility in our business may cause our operating results to fluctuate. 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.

If we do not maintain and develop our brands and those of our strategic partners, we will not be able to attract an audience and readers to the media platforms we use.

Many of the media platforms we use attract readers, audiences and advertisers partly through brand name recognition. We believe that establishing, maintaining and enhancing our portfolio of brand names and those of our strategic partners will enhance our growth prospects. Some of our competitors have well-established brands in the media industry. The promotion of our brands and those of our strategic partners will depend largely on our success in maintaining a sizable and loyal audience and readership, providing high-quality content and organizing effective marketing programs. While many of the media platforms we utilize currently have a high level of brand recognition, we may not be able to maintain our existing brands or those of our strategic partners or develop new brands on a cost-effective basis, which may have an adverse impact on our operating results.

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In addition, Xinhua Financial Network Limited, or Xinhua Financial Network, and China Economic Information Service, entered into an agreement, pursuant to which China Economic Information Service granted Xinhua Financial Network and its affiliates the right to use the word “Xinhua” in its corporate name worldwide. Xinhua Financial Network is a subsidiary of XFL and our company is considered an affiliate of Xinhua Financial Network. We have in turn entered into an agreement with Xinhua Financial Network to use the word “Xinhua.” Our agreement with Xinhua Financial Network covers only the rights of Xinhua Financial Network and not any rights held by XFL. In addition, if we were to cease to be an affiliate of XFL, we may be unable to continue using the “Xinhua” name. If we are unable to continue using the name “Xinhua,” our branding will be affected, which may have an adverse impact on our operating results.

If we do not compete successfully against new and existing competitors, we may lose our market share, and our operating results may be adversely affected.

We compete with international and local media entities on various platforms, and with advertising service providers. The media, advertising and research sectors in China are very competitive and constantly evolving. Many of our competitors have a longer operating history, larger product and service suites, greater capital resources and broader international or local recognition. Given the recent growth in the China market, we expect international competitors to increase their focus in this region and local competitors to increase their focus in these sectors, intensifying the competition in our business areas. If we cannot successfully compete against new or existing competitors, our operating results may be adversely affected.

Our Broadcast business faces increasing competition from new technologies, such as the Internet, broadband wireless and Internet television, and new consumer products, such as portable digital audio players and personal digital video recorders. These new technologies and alternative media platforms compete with our Broadcast Group for audience and readership shares and advertising revenue, and in the case of some products, allow audience and readers to avoid traditional advertisements. China has also established a timetable to switch its radio and television broadcasting from analog to digital. We are unable to predict the effect such technologies and related services and products will have on our broadcast operations, but there exist certain risks, including, among others, that the capital expenditures necessary to adapt our services to such technologies could be substantial, and other companies employing such technologies could compete with our businesses.

Our business depends substantially on the continuing efforts of our key executives. Our business may be severely disrupted if we lose their services.

Our future success heavily depends upon the continued services of our key executives, particularly Fredy Bush, who is the Chief Executive Officer of our company. Moreover, if Fredy Bush ceases to be our Chief Executive Officer, it could be construed as a change of control event under the convertible loan facility credit agreement we entered into in October 2008 which would trigger our mandatory prepayment obligations under the credit agreement. We rely on the expertise of our key executives in business operations in the advertising and media industries and on their relationships with our shareholders, business partners and regulators. If one or more of our key executives are unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all. Therefore, our business may be severely disrupted, our financial condition and results of operations may be materially and adversely affected and we may incur additional expenses to recruit and train personnel.

In addition, if any of these key executives joins a competitor or forms a competing company, we may lose customers and business partners, and our operating results may be adversely affected. Certain of our key executive officers have entered into an employment agreement with us that contains confidentiality and non-competition provisions. If any disputes arise between our executive officers and us, these agreements may not be enforced effectively.

Our senior management and employees have worked together for a short period of time, which may make it difficult for you to evaluate their effectiveness and ability to address challenges.

Due to our limited operating history, recent acquisitions of substantial portions of our business operations and recent additions to our management team, certain of our senior management and employees have worked together at our company for only a relatively short period of time. As we acquired substantially all of our business operations recently, none of our senior management has worked with our operating groups for a substantial period of time. As a result of these circumstances, it may be difficult for you to evaluate the effectiveness of our senior management and other key employees and their ability to work with the employees of our operating groups and address future challenges to our business.

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If we are unable to attract, train and retain key individuals, highly skilled employees and important talents, our business may be adversely affected.

We expect to need to hire additional employees, including personnel to maintain and expand our graphics design, production personnel to create advertisements and produce programming, information technology and engineering personnel to maintain and expand our delivery platform, marketing personnel to sell our products and administrative staff to support our operations. Some of our operating groups, especially our Broadcast Group, also rely on the appearances of well-known personalities and talents during programming. If we are unable to identify, attract, hire, train and retain individuals in these areas or retain our existing employees due to our failure to provide them with adequate incentives or otherwise, the quality of our services may be negatively impacted, which could adversely affect our business and results of operations.

We may not be able to prevent others from using our intellectual property, which may harm our business and expose us to litigation.

We regard our content, copyrights, domain names, trade names, trademarks and similar intellectual property as critical to our success. We try to protect our intellectual property rights by relying on trademark, copyright and confidentiality laws and contracts. The copyright, trademark and confidentiality protections in China may not be as effective as in other countries, such as the United States or elsewhere.

We seek to limit the threat of content misappropriation. However, policing the unauthorized use of our services and related intellectual property is often difficult and the steps we have taken may not in every case prevent the infringement by unauthorized third parties. Developments in technology, including digital copying, file compressing and the growing penetration of high-bandwidth Internet connections increase the threat of content misappropriation by making it easier to duplicate and widely distribute misappropriated material. In addition, the risk exists that some local television stations or channels may, when airing our programs, remove the original advertisements placed by us from the programs and replace them with their own advertisements. Content misappropriation presents a threat to our revenues from services, including, but not limited to, television and media production.

There can be no assurance that our efforts to enforce our rights and protect our products, services and intellectual property will be successful in preventing content misappropriation. Any misappropriation could have a negative effect on our business and operating results. Furthermore, we may need to resort to litigation to enforce our intellectual property rights. Litigation relating to our intellectual property might result in substantial costs and diversion of resources and management attention.

In addition, the ownership of certain trademarks used by us or our strategic partners may be subject to claims by other parties and if litigation of such disputes arises, substantial costs and interruption of our business, or the business of our strategic partners, may result, which may adversely affect our business or results of operations.

Failure to achieve and maintain effective internal controls could have a material and adverse effect on the trading price of our ADSs.

We are subject to reporting obligations under the U.S. securities laws. The SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, adopted rules requiring every public company to include a management report on such company’s internal control over financial reporting in its annual report, which contains management’s assessment of the effectiveness of the company’s internal control over financial reporting. These requirements were applied to this annual report on Form 20-F for the fiscal year ended December 31, 2009.

In connection with the preparation of this annual report on Form 20-F, we carried out an evaluation of the effectiveness of our internal control over financial reporting. Based on this evaluation, our management concluded that our internal control over financial reporting is effective as of December 31, 2009. See “Item 15. Controls and Procedures.”

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However, if we fail to achieve and maintain the adequacy of our internal controls, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with the Sarbanes-Oxley Act. Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, any failure to achieve and maintain effective internal control over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could negatively impact the trading price of our ADSs.

Our strategy of expanding our television programming and new media presence may not be well received or may be more expensive than we expected.

We are expanding our television presence and are also expanding the media platforms we use to include new media, such as broadband wireless broadcasting and Internet television. However, the market for television and new media platforms is rapidly evolving and is becoming increasingly competitive. We cannot predict whether, or how fast, this market will grow. Moreover, if we fail to expand our television and new media presence or adapt to the rapid changes in the television and new media markets and technology, our business, competitiveness, or results of operations could be materially affected.

Our success with expansion into these media platforms depends on a number of factors, including:

• sufficient demand for these services from our existing and potential audience and readers, and sufficient advertising revenues from customers, to offset the substantial investment we will make in order to provide them;

• our ability to compete effectively with other providers of these services;

• our ability to adapt and develop our services in order to conform to market conditions and customer needs; and

• our ability to form, acquire or cooperate with Internet content and service providers and obtain the appropriate licenses to conduct this business.

The absence or failure of any one or more of these factors, based on our inability to predict the effect of emerging technology or competition on the viability of our broadcast operations, products or investments, may materially and adversely affect our business, results of operations, financial condition, cashflow from operations and prospects.

Risks related to the regulation of our business and to our structure

If the PRC government finds that the agreements that establish the structure for operating our China businesses do not comply with PRC governmental restrictions on foreign investment in the media and telecommunications industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.

Most of our operations are conducted through operating subsidiaries in China, and through our contractual arrangements with several of our affiliated entities and their shareholders in China. PRC regulations currently prohibit or restrict foreign ownership of media, advertising and telecommunications companies. We have entered into contractual arrangements with these affiliated entities and their shareholders, all of whom are PRC citizens, which enable us to, among other things, exercise effective control over these affiliated entities and their respective subsidiaries. We believe the business operations of our subsidiaries in China and our affiliated entities and their respective subsidiaries comply in all material respects with existing PRC laws and regulations.

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However, if we or any of our subsidiaries or affiliated entities are found to be in violation of any existing or future PRC laws or regulations (for example, if we are deemed to be holding equity interests in certain of our affiliated entities in which direct foreign ownership is prohibited), the relevant PRC regulatory authorities, including the State Administration of Radio, Film and Television, the Ministry of Culture, and the Ministry of Industry & Information Technology, which regulate the media and telecommunications industries, would have broad discretion in dealing with such violations, including:

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

• confiscating relevant income and imposing fines and other penalties;

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

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

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

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

We conduct our business through agreements with our strategic partners. Under these agreements, we provide services to our strategic partners in return for a fee from, or the exclusive rights to sell advertising for, our strategic partners. If any of these agreements is found to be in violation of any existing or future PRC laws or regulations, we would have to terminate our operation under that particular agreement or otherwise restructure our operation to bring it into compliance with the relevant laws or regulations. In addition, the relevant PRC regulatory authorities may impose further penalties. Any of these consequences could have a material and adverse effect on our operations.

In many cases, existing regulations with regard to investments from foreign investors and domestic private capital in the media industry lack detailed explanations and operational procedures, and are subject to interpretation, which may change over time. Most of these regulations have not been interpreted by the relevant authorities in circumstances similar to our corporate structure. Accordingly, we cannot be certain how the regulations will be applied to our business, either currently or in the future. Moreover, new regulations may be adopted or the interpretation of existing regulations may change, any of which could result in similar penalties, resulting 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 rely on contractual arrangements with several affiliated PRC entities and their shareholders to operate our businesses. See “Item 4.C. Information on the Company — Organizational Structure — Our corporate structure and contractual arrangements.” We believe these contractual arrangements are valid, binding and enforceable, and will not result in any violation of PRC laws or regulations currently in effect. These contractual arrangements may not be as effective in providing us with control over these entities as direct ownership. If we had direct ownership of these entities, we would be able to exercise our rights as a shareholder to effect changes in the boards of directors of these entities, which in turn could effect changes, subject to any applicable fiduciary obligations, at the management level. However, if any of these entities or any of their subsidiaries or their shareholders fails to perform its or his respective obligations under these contractual arrangements, we may not be able to enforce the relevant agreements if the agreements are ruled in violation of the PRC laws as mentioned above, even if the contracts are otherwise legal and valid. We may have to incur substantial costs and resources to enforce them, and seek legal remedies under PRC law, including specific performance or injunctive relief, and claiming damages, which may not be effective. Accordingly, it may be difficult for us to change our corporate structure or to bring claims against any of these entities if they do not perform their obligations under their contracts with us.

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.

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The shareholders of our PRC affiliated entities may breach our agreements with them or may have potential conflicts of interest with us, and we may not be able to enter further agreements to extract economic benefits from these entities, which may materially and adversely affect our business and financial condition.

The shareholders of our PRC affiliated entities may breach or cause our PRC affiliated entities and their subsidiaries to breach or refuse to renew the existing contractual arrangements that allow us to effectively control our PRC affiliated entities and their subsidiaries, and receive economic benefits from them. In addition, conflicts may arise between the dual roles of the shareholders of our PRC affiliated entities as shareholders and as our employees. We cannot assure you that when conflicts of interest arise, they will act in the best interests of our company or that conflicts of interests will be resolved in our favor. We do not have existing arrangements to address potential conflicts of interest between these individuals and our company. We have made long-term loans to these shareholders to help them fund the initial capitalization, additional capitalization or purchase of those entities. The security on the loans is limited to their pledge of the shares of those affiliates. According to the PRC Property Rights Law, effective as of October 1, 2007, and Measures for the Registration of Equity Pledge with the Administration for Industry and Commerce, effective as of October 1, 2008, however, such pledge will be effective upon registration with the relevant administration for industry and commerce. We are still in the process of applying for such registration. The refusal of the relevant administration for industry and commerce to register these pledges may allow the shareholders to dishonor their pledges to us and re-pledge the shares to another entity or person. We rely on these individuals to abide by the contract laws of China and honor their contracts with us. If we cannot resolve any conflicts of interest or disputes between us and the shareholders of our PRC affiliated entities, we would have to rely on legal proceedings, which could result in disruption of our business. There is also substantial uncertainty as to the outcome of any such legal proceedings.

Moreover, some of the subsidiaries of these entities have minority shareholders and we may not be permitted to enter into contracts to receive economic benefits from the entities because these contracts may not be on an arm’s length basis. If we are unable to enter into these contractual arrangements, we may attempt to receive dividends through the shareholders of these entities, but the minority shareholders may also be entitled to their share of dividends. Any inability to transfer economic benefits from our affiliated entities to us may have an adverse effect on our business, and on our ability to pay dividends to our shareholders, including our ADS holders.

Contractual arrangements we have entered into with our subsidiaries and affiliated entities or acquisitions of offshore entities that conduct PRC operations through affiliates in China may be subject to scrutiny by the PRC tax authorities, and we may have to pay additional taxes or be found ineligible for a tax exemption.

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 with 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. In addition, we have not paid, nor have we recorded any deferred tax liability attributable to the undistributed earnings in our affiliated entities. We believe such undistributed earnings can be distributed in a manner that would not be subject to tax and we are in the process of working with our tax consultant on a group restructuring plan to address this issue. However, a finding by the PRC tax authorities that we are ineligible for any such tax savings we may achieve, or that any of our affiliated entities are not eligible for their tax exemptions, would substantially increase our taxes owed and reduce our net income and the value of your investment. In addition, in the event that in connection with some of our acquisitions of offshore entities that conducted their PRC operations through their affiliates in China, the sellers of such entities failed to pay any taxes required under PRC law, the PRC tax authorities may require us to pay the tax, together with late-payment interest and penalties. The occurrence of any of the foregoing could have a negative impact on our financial condition, results of operations and cashflow from operations.

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Changes to the interpretation of certain PRC tax policies will cause us to incur additional tax liability, which will have an adverse effect on our financial condition.

On April 21, 2010 the State Administration of Taxation issued Circular 157 which is titled Further Clarification on Implementation of Preferential EIT Rate during Transition Periods, or Circular 157. Circular 157 seeks to provide additional guidance on the interpretation of certain preferential tax rates under the transition rules of the New EIT Law. Prior to Circular 157, we interpreted the law to mean that if an entity was in a period where it was entitled to a 50% reduction in the tax rate and was entitled to a 15% rate of tax due to its HNTE status under the New EIT Law, it was thus entitled to pay tax at a rate of 7.5%. Circular 157 indicates that such an entity is instead entitled to pay tax at either 15% or 50% of the standard PRC tax rate. The effect of Circular 157 is retrospective and would apply to 2008 and 2009. As a consequence of Circular 157, the preferential tax rate enjoyed by our subsidiary which qualified as a HNTE during its reduction period in 2008 and 2009 will be 12.5% for the relevant years rather than 7.5%, which is the rate we used prior to the issuance of Circular 157. We believe that Circular 157 is similar to a change in tax law, the cumulative effect of which should be reflected in the period of the change. As a result, we will recognize an additional tax liability in the second quarter of 2010 of approximately $0.2 million in respect of this change.

Certain of our PRC operating companies or strategic partners have previously engaged or may currently engage in activities without appropriate licenses or approvals or outside the authorized scope of their business licenses or permitted activities. This could subject those companies to fines and other penalties, which could have a material adverse effect on our business.

Some of our operating companies or strategic partners have previously engaged or may currently engage in activities without appropriate licenses or approvals or outside the authorized scope of their business licenses or permitted activities. If we or our strategic partners do not receive any necessary licenses or approvals, broaden the authorized business scope or narrow the scope of the activities as appropriate, we or the relevant strategic partner may have to cease the operations or contract our operations to third parties who hold the appropriate licenses. In addition, counterparties to contracts we make when engaging in activities that require licenses may legally default on those contracts if we or the relevant strategic partner do not possess the appropriate licenses. The occurrence of any of these events would have an adverse effect on our business, results of operations and cashflow from operations.

The authorities may refuse to grant any licenses we may seek. For companies that exceeded the scope of their business licenses or permitted activities, operated without a license or needed approval in the past but are now compliant, as well as for any companies that may currently operate without the appropriate license or approval or outside the scope of their business license or permitted activities, the relevant PRC authorities have the authority to impose fines or other penalties, sometimes as much as five to ten times the amount of the illegal revenues and may require the disgorgement of profits or revocation of the business license. Due to the inconsistent nature of regulatory enforcements in the PRC, those of our PRC operating companies and strategic partners that exceeded the scope of their business licenses or permitted activities or operated without the appropriate licenses or approvals in the past or may be doing so currently may be subject to the above fines or penalties, including the disgorgement of profits or revocation of the business license of one or more of these companies. These fines or penalties may have a material adverse effect on our business.

Any limitation on the ability of our subsidiaries and affiliated entities to make dividend or distribution payments to us could have a material adverse effect on our ability to conduct our business.

Current PRC regulations permit our subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiaries and affiliated entities in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. These reserves are not distributable as dividends. Furthermore, if our subsidiaries and affiliated entities in China incur debt on their own behalf in the future, the loan agreements governing that debt may restrict their ability to pay dividends or make other payments to us. In addition, the PRC tax authorities may require us to adjust our taxable income under the contractual arrangements we currently have in place in a manner that would materially and adversely affect our subsidiaries’ ability to pay dividends and other distributions to us. Any limitation on the ability of our subsidiaries and affiliated entities to distribute dividends or other payments to us could materially limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses, or otherwise fund and conduct our business.

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We may be treated as a resident enterprise for PRC tax purposes and our global income may be subject to PRC tax under PRC tax law, which would have a material adverse effect on our results of operations.

Under the Enterprise Income Tax Law enacted by the National People’s Congress of China and the Implementation Regulations of the Enterprise Income Tax Law, or collectively, the New EIT Law, both of which became effective on January 1, 2008, an enterprise established outside of the PRC with “de facto management bodies” within the PRC is considered a resident enterprise and is subject to the enterprise income tax at the rate of 25% on its global income. “De facto management bodies” is defined as the bodies that have material and overall management and control over the business, personnel, accounts and properties of the enterprise. If the PRC tax authorities determine that we and our subsidiaries established outside of China should be classified as resident enterprises, then our global income will be subject to the enterprise income tax at the rate of 25%, which would have a material adverse effect on our business, financial condition, results of operations and cashflow from operations. The New EIT Law further provides an exemption from enterprise income tax for dividends distributed between qualified resident enterprises, which means the investment income derived by resident enterprises from direct investment in other resident enterprises, other than investment income from circulating stocks issued publicly by resident enterprises and traded on stock exchanges where the holding period is less than 12 months. As the term “resident enterprises” has not been fully clarified by the relevant authorities, we cannot assure you that if we and our subsidiaries established outside of China were deemed to be resident enterprises, the dividends distributed by our subsidiaries incorporated in China as foreign-invested enterprises to their direct shareholders would be regarded as dividends distributed between qualified resident enterprises, and be exempt from the enterprise income tax.

In addition, even if we and our subsidiaries established outside of China are not deemed to be resident enterprises, they still may be regarded as “non-resident enterprises,” and under the New EIT Law dividends payable by a foreign-invested enterprise in China to a foreign investor that is a non-resident enterprise will be subject to a 10% withholding tax unless the foreign investor’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. The direct shareholders of our subsidiaries incorporated in China as foreign-invested enterprises are located either in the British Virgin Islands or Hong Kong. The British Virgin Islands does not have such a tax treaty with China, while according to the Mainland and Hong Kong Special Administrative Region Arrangement on Avoiding Double Taxation or Evasion of Taxation on Income agreed between China and Hong Kong in August 2006, dividends paid by a foreign-invested enterprise in China to its direct holding company in Hong Kong will be subject to withholding tax at a rate of no more than 5% (if the foreign investor owns directly at least 25% of the shares of the foreign-invested enterprise).

The imposition of withholding tax on dividends payable by our PRC subsidiaries to us, or the imposition of PRC tax on our global income as a “resident enterprise” registered outside the PRC under the New EIT law could have a material adverse effect on our financial condition, results of operations and cashflow from operations.

Foreign holders of our ADSs or common shares may be subject to PRC withholding tax on dividends payable by us and on gains realized on the sale of our ADSs or common shares if we are classified as a PRC “resident enterprise.”

Under the New EIT Law, withholding tax at a 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 interest or dividends have their sources within the PRC unless such non-resident enterprise can claim treaty protection. Similarly, any gain realized on the transfer of our ADSs or common shares by such investors is also subject to a 10% withholding tax if such gain is regarded as income derived from sources within the PRC. Since the New EIT Law is relatively new and ambiguous in certain aspects, there is uncertainty as to whether the dividends we pay with respect to our ADSs or common shares, or the gain you may realize from the transfer of our ADSs or common shares, would be treated as income derived from sources within the PRC and be subject to PRC withholding tax. If we are required under the New EIT Law to withhold PRC income tax on such dividends or your gains realized on the sales of our ADSs or common shares, your investment in our ADSs or common shares may be materially and adversely affected.

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The PRC government may prevent us or our strategic partners from producing or distributing, and we or they may be subject to liability for content that it believes is inappropriate.

The media sector in China is highly regulated and closely monitored by various government agencies, in particular the State Administration of Radio, Film and Television. China has enacted laws and regulations governing the production and distribution of news, information or other content. In the past, the PRC government has prohibited the production or distribution of information or content that it believes violates PRC law and the media entities in breach of such laws have been severely reprimanded. The State Administration of Radio, Film and Television continues to promulgate new regulations which prohibit information and content from being distributed through the media. Inappropriate content includes, among others, information that threatens the unity, sovereignty and territorial integrity of the PRC, endangers national security, incites violence and uprising, propagates obscenity or undermines public morality.

It may be difficult to determine the type of content that may result in liability. Censorship is carried out on a case-by-case basis, often without consistency between the cases and without explanation. If any of our content or the content of our strategic partners is deemed to have violated any of such content restrictions, we or they would not be able to continue to create or distribute such content and could be subject to penalties, including confiscation of income, fines, suspension of our business and revocation of licenses for operating media services, which would materially and adversely affect our business, financial condition, results of operations and cashflow from operations.

We may be subject to litigation for information provided in our media services, which may be time-consuming and costly to defend.

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.

We and our strategic partners are obligated under PRC laws and regulations to monitor the advertising content that is shown, displayed or printed on any of our or their media outlets for compliance with applicable law. In addition, for advertising content related to specific types of products and services, such as alcohol, cosmetics, pharmaceuticals and medical facilities, we and our strategic partners are required to confirm that the advertisers have obtained the requisite government approvals, including the advertisers’ operating qualifications, proof of quality inspection of the advertised products, and government pre-approval of the contents of the advertisement and filing with the local authorities. We and, to the best of our knowledge, our strategic partners, employ qualified advertising inspectors who are trained to review advertising content for compliance with relevant PRC laws and regulations, and we endeavor to comply, and encourage our strategic partners to take measures to comply, with such requirements, by methods including requesting relevant documents from the advertisers.

Our services contain information such as financial news, interviews, quotes of securities prices, analytical reports, investment recommendations and portrayals of people in our television productions. It is possible that if any information contains errors or false or misleading information, or is perceived to infringe the intellectual property rights of others, third parties could take action against us for losses incurred in connection with the use of such information. Any claims, with or without merit, could be time-consuming and costly to defend, result in litigation and divert management’s attention and resources, which could have an adverse effect on our operating results.

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 advertisements displayed on our advertising network. In addition, our reputation will be tarnished and our results of operations may be adversely affected.

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Control or significant influence by our existing shareholders may limit your ability to affect the outcome of decisions requiring the approval of shareholders.

As of December 31, 2009, XFL, Yucaipa Global Partnership Fund L.P., or Yucaipa, Patriarch Partners Media Holdings, LLC, or Patriarch Partners, and Dragon Era Group Limited beneficially own approximately 20.4%, 9.6%, 26.1% and 4.0% of the outstanding shares of our equity, respectively. Ms. Fredy Bush, our Chief Executive Officer and director, has control over Dragon Era Group Limited. Accordingly, XFL, Ms. Bush, Yucaipa and Patriarch Partners may have significant influence in determining the outcome of any corporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations, the sale of all or substantially all of our assets, the election of directors and other significant corporate actions. They will also have significant influence in preventing or causing a change in control. In addition, without their consent, we may be prevented from entering into transactions that could be beneficial to us. Their interests may differ from the interests of our other shareholders.

Risks related to doing business in China

Adverse changes in economic and political policies of the PRC government could have a material adverse effect on the overall economic growth of China, which could adversely affect our business.

We conduct substantially all of our business operations in China. As the media industry is highly sensitive to business and personal discretionary spending levels, it tends to decline during general economic downturns. Accordingly, our results of operations, financial condition and prospects are subject to a significant degree to economic, political and legal developments in China. China’s economy differs from the economies of most developed countries in many respects, including with respect to 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 in the past 20 years, growth has been uneven across different regions and among various economic sectors of China. The PRC government has implemented various measures to encourage economic development and guide the allocation of resources. While some of these measures benefit the overall PRC economy, they may also have a negative effect on us. For example, 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. As the PRC economy is increasingly intricately linked to the global economy, it is affected in various respects by downturns and recessions of major economies around the world, such as the recent financial services and economic crises of these economies. The various economic and policy measures the PRC government enacts to forestall economic downturns or shore up the PRC economy could affect our business.

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 are 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 allocating the 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 has implemented a number of measures, such as raising interest rates and bank reserve requirements to place additional limitations on the ability of commercial banks to make loans, in order to contain the growth of specific segments of China’s economy that 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.

Uncertainties with respect to the PRC legal system could adversely affect us.

We conduct our business primarily through our subsidiaries and affiliated entities in China. Our operations in China are governed by PRC laws and regulations. Our subsidiaries are generally subject to laws and regulations applicable to foreign investments in China and, in particular, laws applicable to wholly foreign-owned enterprises. The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value.

Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions and their non-binding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until some time after the violation. In addition, any litigation in China, regardless of outcome, may be protracted and result in substantial costs and diversion of resources and management attention.

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The regulations on mergers and acquisitions of PRC enterprises may delay or inhibit our ability to complete certain mergers and acquisitions and expand our business or maintain our market shares.

On August 8, 2006, six PRC regulatory agencies, namely, the Ministry of Commerce, the State Assets Supervision and Administration Commission, the State Administration for Taxation, the State Administration for Industry and Commerce, the CSRC, and the PRC State Administration of Foreign Exchange, or SAFE, jointly adopted the Regulations on 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 purports, among other things, to require offshore special purpose vehicles, formed for overseas listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals, to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange. 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 when a foreign investor acquires equity or assets of a PRC domestic enterprise. 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 our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

In addition, according to the New M&A Rule and other PRC rules regarding foreign exchange, an offshore company’s shares can be used as consideration for the acquisition of a domestic PRC company’s equity only under very limited circumstances and prior approval from the Ministry of Commerce must be obtained before such a share swap could be done. When we acquired control of certain of our PRC affiliates, we issued and promised to issue common shares to PRC citizens or to offshore entities beneficially owned by PRC citizens or entities, in exchange for each of them entering into a non-competition agreement on transferring the equity interests in the offshore companies which have the contractual arrangements with the PRC affiliates. We believe that, even though under PRC law the transaction of entering into such a non-competition agreement or transferring the equity interests in the offshore companies and the acquisition of the corresponding affiliated entity are regarded as separate transactions, the PRC governmental agencies may consider that the shares issued for a non-competition agreement or the equity transfer of an offshore company that has the contractual agreement with the PRC companies are in substance part of the consideration for the corresponding acquisition of domestic equities because we have accounted for them as if they are related transactions, and therefore may take the view that we have acquired the equity of domestic companies by using offshore shares as consideration without prior approval of the Ministry of Commerce and are therefore in violation of PRC laws. In such an event, we may face sanctions by the Ministry of Commerce, the State Administration of Foreign Exchange and the State Administration for Taxation.

We have grown our business in part by acquiring complementary businesses and we plan to do so in the future. 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 our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

Recent PRC regulations relating to offshore investment activities by PRC residents may increase our administrative burden and restrict our domestic, overseas and cross-border investment activities. 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.

Regulations were recently promulgated by the PRC National Development and Reform Commission and the PRC State Administration of Foreign Exchange that will require registrations with, and approvals from, PRC government authorities in connection with direct or indirect offshore investment activities by PRC residents, including PRC individuals and PRC corporate entities. These regulations apply to our shareholders who are PRC residents and may also apply to certain of our offshore acquisitions.

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The State Administration of Foreign Exchange regulations retroactively require registration of direct or indirect investments previously made by PRC residents in offshore companies. In the event that a PRC shareholder with a direct or indirect stake in an offshore parent company fails to make the required State Administration of Foreign Exchange registration, the PRC subsidiaries of that offshore parent company may be prohibited from making distributions of profit to the offshore parent and from paying the offshore parent proceeds from any reduction in capital, share transfer or liquidation in respect of the PRC subsidiaries. Further, failure to comply with the various State Administration of Foreign Exchange registration requirements described above could result in liability under PRC law for foreign exchange evasion.

We have notified our shareholders, and the shareholders of the offshore entities in our corporate group who are PRC residents, to urge them to make the necessary applications and filings as required under these regulations and under any implementing rules or approval practices that may be established under these regulations. However, as a result of the newness of the regulations, lack of implementing rules and uncertainty concerning the reconciliation of the new regulations with other approval requirements, it remains 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. We attempt to comply, and attempt to ensure that our shareholders who are subject to these regulations comply, with the relevant rules. However, we cannot provide any assurances that all of our shareholders who are PRC residents will comply with our request to make or obtain any applicable registration or approvals required by these regulations or other related legislation. The failure or inability of our PRC resident shareholders to receive any required approvals or make any required registrations may subject us to fines and legal sanctions, restrict our overseas or cross-border investment activities, limit our PRC subsidiaries’ ability to make distributions or pay dividends or affect our ownership structure, as a result of which our acquisition strategy and business operations and our ability to distribute profits to you could be materially and adversely affected.

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

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

Fluctuation in the value of the RMB may have a material adverse effect on your investment.

The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions and China’s foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar. Under the new policy, the RMB is permitted to fluctuate within a managed band based on market supply and demand and by reference to a basket of certain foreign currencies. This change in policy caused the Renminbi to appreciate approximately 21.2% against the U.S. dollar over the following four years. During the course of 2010 the Renminbi has continued to appreciate against the U.S. dollar.

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Our revenues and costs are mostly denominated in RMB, while a significant portion of our financial assets are denominated in U.S. dollars. We rely substantially on dividends and other fees paid to us by our subsidiaries and affiliated entities in China. Any significant appreciation of RMB against the U.S. dollar may materially and adversely affect our cashflows, revenues, earnings and financial position, and the value of, and any dividends payable on, our ADSs in U.S. dollars. For example, an appreciation of RMB against the U.S. dollar would make any new RMB denominated investments or expenditures more costly to us, to the extent that we need to convert U.S. dollars into RMB for such purposes.

We have limited insurance coverage in China.

The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited insurance products. We have determined that the risks of disruption or liability from our business, or the loss or damage to our property, including our facilities, equipment and office furniture, the cost of insuring for these risks, 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, litigation or property insurance coverage for our operations in China except for insurance on certain vehicles. Any uninsured occurrence of loss or damage to property, litigation or business disruption may result in our incurring substantial costs and the diversion of resources, which could have an adverse effect on our operating results.

Risks related to the ADSs

The market price for our ADSs may be volatile.

The market price for our ADSs is likely to be highly volatile and subject to wide fluctuations in response to factors including the following:

• announcements of technological or competitive developments;

• regulatory developments in our target markets affecting us, our customers or our competitors;

• announcements of studies and reports relating to the circulation, ratings, audience or readership size or composition, quality or effectiveness of our and our strategic partners’ products and services or those of our competitors;

• actual or anticipated fluctuations in our quarterly operating results;

• changes in financial estimates by securities research analysts;

• changes in the economic performance or market valuations of other media and advertising companies;

• addition or departure of our executive officers and key personnel;

• fluctuations in the exchange rates between the U.S. dollar and RMB;

• release or expiration of lock-up or other transfer restrictions on our outstanding ADSs; and

• sales or perceived sales of additional ADSs.

In addition, the securities markets have from time-to-time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also have a material adverse effect on the market price of our ADSs.

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Our ADSs are currently at risk for delisting from the Nasdaq Global Market. Delisting could adversely affect the liquidity of our ADSs and the market price of our ADSs could decrease, and our ability to obtain adequate financing for the continuation of our operations would be substantially impaired.

Our ADSs are currently listed on the Nasdaq Global Market. The Nasdaq Stock Market LLC, or Nasdaq, has minimum requirements that a company must meet in order to remain listed on the Nasdaq Global Market. These requirements include maintaining a minimum closing bid price of $1.00 per share, and the closing bid price of our ADSs on July 9, 2010 was $0.31 per ADS. These requirements also include maintaining a minimum market value of publicly held shares, and, as of July 9, 2010, we met this minimum requirement. Nasdaq notified us on February 4, 2010 that we have failed to meet the minimum bid price listing requirements and has given us until August 3, 2010 to comply with these requirements. Thereafter, Nasdaq may initiate the delisting process. If our ADSs are delisted, the liquidity of our ADSs would be adversely affected, the market price of our ADSs could further decrease, and our ability to obtain adequate financing for the continuation of our operations would be substantially impaired. Delisting may also cause us to default under a credit agreement we entered into in October 2008, which could have a material adverse effect on our financial condition, results of operations or cashflow from operations.

Substantial future sales or perceived sales of our ADSs in the public market could cause the price of our ADSs to decline.

Sales of our ADSs in the public market, or the perception that these sales could occur, could cause the market price of our ADSs to decline. Immediately after the completion of our initial public offering, we had 23,076,923 ADSs outstanding. All ADSs sold in the initial public offering are freely transferable without restriction or additional registration under the Securities Act of 1933, as amended, or the Securities Act. The remaining ADSs outstanding after the initial public offering are currently available for sale, subject to volume and other restrictions as applicable under Rule 144 and Rule 701 of the Securities Act.

You may not have the same voting rights as the holders of our common shares and may not receive voting materials in time to be able to exercise your right to vote.

Except as described in this filing and in the deposit agreement, holders of our ADSs will not be able to exercise voting rights attaching to the shares represented by our ADSs on an individual basis. Holders of our ADSs will appoint the depositary or its nominee to vote the shares represented by the ADSs. You may not receive voting materials in time to instruct the depositary to vote and it is possible that you, or persons who hold their ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote. Upon our written request, the depositary will mail to you a shareholder meeting notice which contains, among other things, a statement as to the manner in which your voting instructions may be given, including an express indication that such instructions may be given or deemed given to the depositary to give a discretionary proxy to a person designated by us if no instructions are received by the depositary from you on or before the response date established by the depositary. However, no voting instruction shall be deemed given and no such discretionary proxy shall be given with respect to any matter as to which we inform the depositary that (i) we do not wish such proxy given, (ii) substantial opposition exists or (iii) such matter materially and adversely affects the rights of shareholders.

Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings and you may not receive cash dividends if it is impractical to make them available to you.

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

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

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

Our 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 that from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. In addition, some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands.

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

Our memorandum and articles of association contain anti-takeover provisions that could adversely affect the rights of holders of our common shares and ADSs.

We have included certain provisions in our memorandum and articles of association that could limit the ability of others to acquire control of our company, and deprive our shareholders of the opportunity to sell their shares at a premium over the prevailing market price by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transactions.

We have included the following provisions in our articles that may have the effect of delaying or preventing a change of control of our company:

• Our board of directors has the authority to establish from time-to-time one or more series of preferred shares without action by our shareholders and to determine, with respect to any series of preferred shares: the terms and rights of that series, including the designation of the series; the number of shares of the series; the dividend rights, dividend rates, conversion rights and voting rights; and the rights and terms of redemption and liquidation preferences.

• Our board of directors may issue series of preferred shares without action by our shareholders to the extent available authorized but unissued preferred shares exist. Accordingly, the issuance of preferred shares may adversely affect the rights of the holders of the common shares. Issuance of preference shares may dilute the voting power of holders of common shares.

• Subject to applicable regulatory requirements, our board of directors may issue additional common shares without action by our shareholders to the extent available authorized but unissued shares exist.

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You may have difficulty enforcing judgments obtained against us.

We are a Cayman Islands company and most of our assets are located outside of the United States. Most 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 residents 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 U.S. courts.

We may be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. Holders of our ADSs or common shares.

Based on the market price of our ADSs, the value of our assets, and the composition of our income and assets, although not free from doubt, we do not believe that we were a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for our taxable year ended December 31, 2009. However, the application of the PFIC rules is subject to uncertainty in several respects, including how the contractual arrangements between us and our affiliated entities will be treated for purposes of the PFIC rules, and we cannot assure you that the U.S. Internal Revenue Service will not take a contrary position. A non-U.S. corporation will be a PFIC for any taxable year if either (i) at least 75% of its gross income for such year is passive income or (ii) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income. We must make a separate determination after the close of each taxable year as to whether we were a PFIC for that year. Because the value of our assets for purposes of the PFIC test will generally be determined by reference to the market price of our ADSs or common shares, fluctuations in the market price of our ADSs or common shares may cause us to become a PFIC. In addition, changes in the composition of our income or assets may cause us to become a PFIC. If we are a PFIC for any taxable year during which a U.S. Holder (as defined in “Item 10.E. Additional Information — Taxation — United States Federal Income Taxation”) holds an ADS or a common share, certain adverse U.S. federal income tax consequences could apply to such U.S. Holder. See “Item 10.E. Additional Information — Taxation — United States Federal Income Taxation — Passive foreign investment company.”

We incur increased costs as a result of being a public company.

As a public company, we incur a significantly higher level of legal, accounting and other expenses than we did as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as other rules subsequently implemented by the Securities and Exchange Commission and the Nasdaq Stock Market LLC, have required changes in corporate governance practices of public companies. These rules and regulations may increase our legal and financial compliance costs and make certain activities more time-consuming and costly. As a result of becoming a public company, we have established additional board committees and adopted and implemented additional policies regarding internal controls over financial reporting and disclosure controls and procedures. In particular, compliance with Section 404 of the Sarbanes-Oxley Act, which requires public companies to include a report of management on the effectiveness of such company’s internal control over financial reporting, has increased our costs. In addition, we incur costs associated with public company reporting requirements, such as the requirements to file filings and other event-related reports with the Securities and Exchange Commission. We also expect the rules and regulations that govern public companies to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.

Item 4. Information on the Company

A. History and Development of the Company

We were incorporated on November 7, 2005 in the Cayman Islands as an exempted company limited by shares and our affairs are governed by the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands. We have grown significantly since our inception primarily through the acquisition of assets and businesses and the development of distribution rights. For a detailed description of our acquisitions, see “Item 5.A. Operating and financial review and prospects — Operating Results — Acquisitions.”

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Our principal executive offices are located at 18/F, Tower A, Winterless Centre, Chaoyang District, Beijing 100026, People’s Republic of China. Our telephone number at this address is 86-10-8567-6000. Our registered office in the Cayman Islands is at Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman KYI-1111, Cayman Islands. Our agent for service of process in the United States is Law Debenture Corporate Services Inc., located at 400 Madison Avenue, 4th Floor, New York, New York 10017.

We file annual reports and other information with the Securities and Exchange Commission (“SEC”). These materials can be inspected and copied at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of these materials may also be obtained by mail at prescribed rates from the SEC’s Public Reference Room at the above address. Information about the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports and other information about issuers that file electronically with the SEC. The address of the SEC’s Internet website is www.sec.gov.

Our Internet website is www.xsel.com. The information contained on our website is not part of this or any other report filed with or furnished to the SEC. We make available free of charge on our website our annual reports on Form 20-F and any amendments to such reports as soon as reasonably practicable following the electronic filing of such reports with the SEC. In addition, we provide electronic or paper copies of our filings free of charge upon request.

B. Business Overview

We are a leading media group in China with a focus on sports and entertainment. Catering to a vast audience of young and upwardly mobile consumers, we believe we are well-positioned in China with our unique access. Through our key international partnerships, we are able to offer our target audience the content they demand — premium sports and quality entertainment. Through our Chinese partnerships, we are able to consult on content across a broad range of platforms, including television, Internet, mobile phones and other multimedia assets in China, subject to the approval of the relevant PRC regulatory authority.

We have developed an integrated platform of advertising resources across television, Internet, mobile phones and other media outlets. Through these outlets, we provide a total solution empowering clients at every stage of the media process linking advertisers with China’s young and upwardly mobile demographic to reach the desired audience in China.

We were incorporated on November 7, 2005 in the Cayman Islands. We have grown significantly since our inception, primarily through the acquisition of assets, businesses and the development of distribution rights.

Our business operates across two groups:

• Broadcast, which refers to the sale of advertising and the consulting on content for and the distribution of our programming through television and radio channels, as well as the new media mobile value-added services we provide to mobile phone users in China. With our business partners, we are consulting on content for four premium tier digital pay television channels to tap into the rapidly growing digital Chinese television market; and

• Advertising, which refers to our advertising agency that plans, creates and places advertising for websites, television, print media, radio, campus billboards and outdoor media, as well as online advertising sales and our below-the-line marketing services.

During 2009 we also operated a print business, which covered, among others, our exclusive right to sell advertising for and provide management and information consulting services to the newspaper the Economic Observer. We discontinued our print business in 2009 and disposed of this right in 2010.

We generate revenue principally by producing and selling advertising time and space on broadcast platforms and outdoor billboards, selling produced television programs and by providing advertising services.

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Moving forward, we have developed several initiatives to address liquidity issues and a broader cost reduction effort. These include (i) the restructuring of our secured convertible loan facility, (ii) a plan to dispose of non-core businesses, (iii) termination of our advertising agency agreement with Shaanxi Television Station and (iv) the adoption of various other cost-saving strategies. 

Sports and entertainment strategies

In February 2009, we shifted our corporate focus from finance to sports and entertainment. Positioned to offer advertisers an effective platform to reach the young, upwardly mobile and desirable demographic in China, we have been growing our media platform and business to a larger spectrum beyond financial services. We believe that sports broadcasting and entertainment offer strong growth prospects and high margins in the China market and sports and entertainment are the most logical extensions of our business model in terms of margin and sales growth.

The initiatives we implemented that created the foundation for our sports and entertainment strategies include:

Sports

• Our partner was the only media outlet to offer a nationwide, free to air, live broadcast of the National Football League (NFL) Superbowl XLII in February 2008;

• We obtained the exclusive China media rights for the UEFA Europa League (formerly the UEFA Cup) during the 2009-2012 period;

• We purchased an equity stake in the All Sports Network, “ASN,” giving us exclusive distribution rights via mobile, television, Internet and radio for ASN’s content in China. ASN’s content includes National Collegiate Athletic Association (NCAA), National Hockey League (NHL), extreme sports, motor racing and other top quality sports programming. We made a full provision for the investment in ASN in 2009;

•  We are in the process of acquiring the rights to provide consulting and advisory services for four premium PayTV channels;

• We have established a high definition digital television channel focused on showing fight programs; and

• We entered into a long-term contract with CSI Sports for Fight Sports programming giving us exclusive rights in China to their library. CSI Sports is the owner of one of the largest fight libraries in the world with a wide variety of fight programs worldwide.

Entertainment

• We founded a subsidiary, Xinhua Media Entertainment, which will structure, finance and execute co-production films deals in China in association with China Film Group and major Hollywood studios; and

• Our current film slate includes The Spy Next Door starring Jackie Chan, More Than a Game starring Lebron James and Inseparable starring two-time Academy Award Winner Kevin Spacey. The Spy Next Door was released in China in March 2010 and Inseparable is currently in post-production and will likely be released in either the fourth quarter of 2010 or the first quarter of 2011.

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Our services

Broadcast

Television

Through June 30, 2010 we held exclusive rights to sell advertising and consulting services for Shaanxi Satellite Television and rights to provide its content through our agreements with Beijing Hantang Yueyi Culture & Media Co., Ltd, or Beijing Hantang, an affiliate of Everfame Development. Shaanxi Satellite Television is the satellite channel of the Shaanxi Province, one of 35 satellite television channels in China operated by regional authorities. China also has 35 terrestrial television channels operated by China Central Television. Shaanxi Satellite Television reaches provincial capital cities and other major cities in 30 of the 34 political subdivisions of the PRC, including Beijing, Shanghai, Guangzhou, and Shenzhen. This agreement was terminated by Shaanxi Television Station effective June 30, 2010 due to our failure to make required payments.

Inner Mongolia Satellite Television is the satellite channel of the Inner Mongolia Autonomous Region, one of the 35 satellite television channels in China operated by regional authorities. China also has 15 terrestrial television channels operated by China Central Television. Through our agreement with Shanghai Camera Media Investment Co., Ltd., or Shanghai Camera, we previously distributed programming by Inner Mongolia Satellite Television to cities where it has landing rights. Inner Mongolia Satellite Television reaches provincial capital cities and other major cities in 30 of the 34 political subdivisions of the PRC, including Beijing, Shanghai and Guangzhou as well as the special administrative regions of Hong Kong and Macau. We terminated the cooperation agreement with Shanghai Camera and Inner Mongolia Satellite Television, effective as of December 2009. We estimated the operation of Inner Mongolia Satellite Television would generate significant negative cashflow in the future due to the adoption of Rule 61, which strictly controls the scope of advertising and advertising time slots allowed for television in the PRC.

Sports Programming

We have also entered into an exclusive deal with CSI Sports to acquire the rights for their library and future Fight Sports channel in China. CSI Sports is a distributor of Fight Sports programming to sports networks around the globe, and reaches over 50 channels in over 100 countries. CSI Sports has rights to high profile fight programming such as HBO’s Championship Boxing, Ultimate Fighting Championship, World Extreme Cagefighting and both BodogFIGHT and K-1, which are mixed martial arts programs. CSI Sports is the owner of the largest and most prestigious fight library with the widest variety of fight programs worldwide, including mixed martial arts, championship boxing, kickboxing, martial arts and specialty fight programs. The library includes one of the largest and most prestigious mixed martial arts series in high definition (1080i) and some of the most well known championship boxing events featuring fighters such as Mike Tyson, Lennox Lewis, Oscar De La Hoya, George Foreman and many more.

We have also acquired the exclusive Chinese language rights across all platforms for the UEFA Europa Cup (formerly the UEFA Cup) for season 2009-2010, 2010-2011 and 2011-2012. The UEFA Cup is Europe’s oldest club soccer competition with teams from across Europe and the U.K. competing for the title.

Radio

During 2009, we had a strategic partnership with China Radio International’s exclusive advertising agent, under which we have the exclusive rights to sell advertising for and the right to provide content to China Radio International’s EasyFM 91.5 of Beijing. We also had the exclusive rights to sell advertising for and the rights to provide content to several radio channels of the Guangdong People’s Radio Station, including Channel FM103.6, serving Guangzhou and the northern and eastern parts of the Guangdong Province, Channel FM90.0, serving the western part of the Guangdong Province, and Channel FM107.7, serving the entire province with a focus on the Pearl River Delta region. Through our affiliated entity, Beijing Century Media Advertising Co., Ltd., or Century Media Advertising, we also obtained the exclusive rights to sell advertising for Sports Channel FM94.0 of Shanghai, Channel FM96.6 of Wuhan and 11 other radio channels throughout Hubei province. Through our agreements with EasyFM, the Guangdong People’s Radio Station, and other radio channels throughout China, we reached an audience of 125 million people. This partnership ended in late 2009.

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Mobile interactive service

We operate our wireless mobile value-added new media service platforms nationwide through our affiliate entity Beijing Mobile Interactive Co., Ltd., or M-in. M-in’s wide range of mobile capabilities includes wireless application protocol, or WAP, short message service text messaging, or SMS, multimedia messaging service, or MMS, interactive voice response, or IVR, JAVA-based software applications including online gaming, and color ring back tone, which are supported by various major mobile telecommunication operators in China.

M-in enables us to add value to our other advertising resources by integrating mobile value-added services. For example, this integration allows mobile users to receive timely updates on their mobile phones regarding sports, entertainment and lifestyle events connected with our other media assets such as television shows and our events business. Our mobile value-added services also enable television and radio show viewers and listeners to participate in and interact with the shows through text messaging and other interactive means.

Film co–production

We became involved in structuring, financing and executing feature film production and film marketing deals in 2008 through our investment in Xinhua Media Entertainment. We have established a close partnership with China Film Group, the largest and the most influential film enterprise in China and the sole entity permitted to import foreign films into China. We work with premier Hollywood film producers on projects that have the potential to qualify as co-productions in China or films that can be licensed and marketed in China. Our current film slate includes The Spy Next Door starring Jackie Chan, More Than a Game starring Lebron James and Inseparable starring two time Academy Award winner Kevin Spacey. The Spy Next Door was released in China in March 2010 and Inseparable is currently in post-production and will likely be released in either the fourth quarter of 2010 or the first quarter of 2011.

Our close relationships with China Film Group and leading players in Hollywood as well as our resources in both industries enable us to uniquely bridge the Chinese and Hollywood film communities to create business opportunities.

Television channel packaging services

During 2009, our television channel packaging services consisted of providing brand management services for television channels. We have won several awards from Travel Satellite Television for producing the best branding and image products in categories such as bumpers, program trailers and slogans. Our television channel packaging services ceased operations in December 2009.

Pay TV

We consult on content and provide advisory services for four premium tier digital pay television channels to tap into the rapidly growing digital Chinese television market. We estimate that China has approximately 40 million digital cable subscribers, 10 million of whom subscribe to tiered pay TV services.

We currently provide consulting, advertising and advisory services to Power Sports, a fight sports channel that offers the very best in boxing, mixed martial arts and other fight sports both in live and delayed formats. We have plans to develop at least two more digital pay channels as the structure for this industry grows in China. We expect our Broadcast Group will expand to address growing demand in China for sports and entertainment media. Based upon our existing platforms and industry relationships, we believe that we are uniquely positioned to meet this demand.

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Print

Newspaper

During 2009, we had the exclusive rights to sell advertising and provide consulting services to the newspaper the Economic Observer. We sold advertising for the Economic Observer through our own sales force as well as through third-party advertising agents who then sold to advertisers. We disposed of this exclusive right in 2010.

Advertising

We plan, create and place advertising for websites, television, radio, print media, campus billboards and outdoor media. We also provide below-the-line services, which help advertisers plan, manage and execute marketing events at sporting events, shopping malls, supermarkets, campuses, hotels, exhibition centers, public squares, clubs and other entertainment outlets. We also provide advertising advisory services. Our Advertising Group creates much of the advertising it places, including planning, design and production. We expect significant co-marketing opportunities with our advertising platforms and our Broadcast Group.

Until early 2010, we were an advertising agent for leading online real estate portals in China. Our affiliated entity, Shangtuo Zhiyang International Advertising (Beijing) Co., Ltd., or Shangtuo Zhiyang, was the exclusive agent of House.china.cn, the real estate portal of China.com.cn, and was one of the only two advertising agents for Sina.com’s real estate portal. Our wholly-owned subsidiary, Beijing Jinjiu Tianyi Tianjiu Lianhe Advertising Co., Ltd., was the largest advertising agent for the Sohu.com and Focus.cn real estate portals. We transferred our equity interest in JCBN China back to its original owner in June 2010 in order to settle a dispute over earnout payments. The agency for Sina.com’s real estate portal was terminated in December 2009 and our advertising right for Sohu.com and Focus.cn were transferred to our affiliated entity, Beijing Linghang Dongli Advertising Co., Ltd., or Linghang Dongli.

In 2008, through an agreement with Youth Media Hong Kong, or YMHK, and several other parties, we obtained the right to act as an exclusive advertising agent for China’s university intranet portal. China’s university intranet fiberoptically links nearly 2,000 university campuses throughout China with a local intranet platform, and serves an addressable student market of 30 million. We made a full provision for this investment in 2009.

We provide below-the-line services to advertisers, which helps them plan, manage and execute marketing events at shopping malls, supermarkets, campuses, hotels, exhibition centers, public squares, clubs and other entertainment outlets. Below-the-line marketing events can create person-to-person marketing experiences and enhance the effectiveness of related advertising campaigns. During 2008, we organized a number of promotional events, including a series of promotional events for spirit brands in clubs and bars, a Sony and FIFA co-branded event in Shenyang, consumer products road shows in different cities of China, marketing events for the China Sharks, a leading ice hockey team in China, and an event in Beijing for Mabelline. During 2009, we organized a number of promotional events, including a series of promotional events for spirit brands in clubs and bars, a Sony and FIFA co-branded event in shopping centers in different cities of China, a product exhibition for Sony in various Chinese cities and consumer products road shows throughout China.

In addition, we serve as a non-exclusive advertising agent for other newspapers, such as Beijing Evening News and Beijing Youth Daily. Our production work for print media includes creating advertising copy, design and layout, and coordination of printing or placement on billboards.

During 2008, we conducted market research for our own use and for our international and Chinese-based customers. We also partnered with international research companies to participate in global research projects. We studied market characteristics, consumer preferences and opinions with respect to advertising and media content, and business and technology issues as needed for each project. We sold our market research business in early 2009.

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Arrangements with partners and suppliers

We rely on a number of arrangements with partners and suppliers to conduct our businesses.

Agreement regarding Shaanxi Television Station. In March 2009, through our subsidiary Beijing Han Tang Yue Yi Media Co., Ltd., we obtained the right to act as the sole advertising agent for Shaanxi Television Station, a free-to-air TV channel covering a population of approximately 600 million in China across all 35 provisional and tier-one cities. Shaanxi Television Station terminated its agreement with us on June 30, 2010.

Our affiliated entity, Linghang Dongli, entered into an advertising agent contract with Beijing Sohu New Media Information Technology Ltd., a sohu.com company. Pursuant to the contract, Linghang Dongli serves as the advertising agent for sohu.com and its affiliated websites. The contract initially covers the period from January 1, 2010 to December 31, 2010.

During 2009 we also relied on the following arrangements with partners and suppliers to conduct our business.

Agreement regarding China Youth League and associated websites. Pursuant to an agreement we entered into in 2008 with YMHK and several other parties, we obtained the right to act as an exclusive advertising agent for China’s university intranet portal. China’s university intranet fiberoptically links nearly 2,000 university campuses throughout China with a local intranet platform, and serves an addressable student market of 30 million. We have taken a full provision on this investment.

Agreements regarding Shanghai Camera. Beijing Pioneer Media Advertising Co., Ltd., or Beijing Pioneer, a subsidiary of our affiliated entity, entered into an advertising services agreement with Shanghai Camera, under which Beijing Pioneer made monthly payments to Shanghai Camera in exchange for the exclusive external advertising rights in connection with Inner Mongolia Satellite Television. This agreement was terminated at the end of 2009.

Jia Luo Business Consulting (Shanghai) Co., Ltd., or Jia Luo, our subsidiary, entered into an agreement with Shanghai Camera to provide consulting and advisory services to Shanghai Camera, in return for a service fee in 2006. This agreement was terminated at the end of 2009.

In December 2008, Jia Luo entered into a call option agreement with Shanghai Wai Gao Qiao (Group) Co., Ltd., or Wai Gao Qiao, the shareholder of Shanghai Camera, under which it has the right to purchase, directly or through its nominee, all or part of the equity interest in Shanghai Camera from Wai Gao Qiao, to the extent permissible under PRC law. The agreement terminates only when the entirety of the equity interest is transferred to Jia Luo or its nominee and has no other termination provisions.

Beijing Century Media Culture Co., Ltd., or Beijing Century Media, a subsidiary of our affiliated entity, entered into an agreement with Shanghai Camera, under which Beijing Century Media provided content to Shanghai Camera for broadcast on Inner Mongolia Satellite Television, in return for a service fee in 2006. This agreement was terminated at the end of 2009.

Jia Luo entered into a call option agreement with Shanghai Wai Gao Qiao Free Trade Zone Development Co., Ltd. in 2006, the shareholder of Shanghai Camera at that time, under which it has the right to purchase, directly or through its nominee, all or part of the equity of Shanghai Camera from Shanghai Wai Gao Qiao Free Trade Zone Development Co., Ltd., to the extent permissible under PRC law. The agreement terminates only when the entire equity interest is transferred to Jia Luo or its nominee and has no other termination provisions. The agreement was terminated in 2008 as Shanghai Wai Gao Qiao Free Trade Zone Development Co., Ltd. transferred the entirety of its equity interest in Shanghai Camera to Wai Gao Qiao.

Agreement regarding our radio broadcast business. Our affiliated entity, Century Media Advertising, entered into an agreement with Beijing Guoguang Guangrong Advertising Co., Ltd., or Guoguang Guangrong, the exclusive advertising agent for all the domestic stations of China Radio International. Under this agreement, Century Media Advertising was granted the exclusive rights to sell advertising for EasyFM 91.5 of Beijing, and the right to provide content to the stations at its own expense. We disposed of our rights under this agreement in December 2009.

Our affiliated entity, Guangzhou Singshine Communication Co., Ltd, or Singshine Communication, entered into an agreement with Guangdong People’s Radio that gives Singshine Communication the exclusive rights to sell advertising for and the rights to provide content to Channel FM107.6, which is now known as Channel FM107.7. We disposed of our rights under this agreement in December 2009.

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Singshine Communication also entered into an agreement with Guangdong People’s Radio Station that gives Singshine Communication the exclusive rights to sell advertising for and the rights to provide content to Channel FM103.6, which serves Guangzhou and the northern and eastern parts of the Guangdong Province, and Channel FM90.0, which serves the western part of the Guangdong Province. We disposed of our rights under this agreement in December 2009.

Century Media Advertising also entered into another agreement with Shanghai Media & Entertainment Group, pursuant to which Century Media Advertising obtained the exclusive rights to sell advertising for Sports Channel FM94.0 of Shanghai during 2009. The content provision by our affiliated entities for our business partners is allowed under PRC laws and regulations and the content is subject to review and approval by the radio and television stations. There is a risk that the strategic partnerships we or our affiliated entities have entered into may be deemed to have the actual effect of operating radio or television stations under relevant PRC regulations. See “Item 3.D. Key information — Risk factors — Risks related to the regulation of our business and to our structure — If the PRC government finds that the agreements that establish the structure for operating our China businesses do not comply with PRC governmental restrictions on foreign investment in the media and telecommunications industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations” and “Item 3.D. Key information — Risk factors — Risks related to our business — We rely on key contracts and business relationships, and if our current or future business partners or contracting counterparties fail to perform, or terminate, any of their contractual arrangements with us for any reason or cease operations, or should we fail to adequately identify key business relationships, our business could be disrupted, our reputation may be harmed and we may have to resort to litigation to enforce our rights, which may be time-consuming and expensive.”

Agreement regarding Money Journal. Our affiliated entity, Guangzhou Jingshi Culture Intermediary Co., Ltd., or Guangzhou Jingshi, entered into a contract with Hunan Television & Broadcast and Money Journal Press Office, which is sponsored by Hunan Radio, Movie & Television Group. Hunan Television & Broadcast is a subsidiary of Hunan Radio, Movie & Television Group. Money Journal Press Office is the legal sponsor for Money Journal. Under the contract, Guangzhou Jingshi is to provide management consulting and information provision services on distribution to Money Journal Press Office and has the exclusive right to sell advertising for Money Journal Press Office. We sold this business unit to XFL in December 2009 for cash consideration of RMB60,000 (US$9,000).

Agreement regarding Chinese Venture. Our affiliated entity, Beijing Qiannuo Advertising Co., Ltd., or Beijing Qiannuo, entered into a contract with Zhoumo Wenhui Press Office, which is the legal sponsor for Zhoumo Wenhui, or the Weekly Journal. Under the contract, Beijing Qiannuo acted as the exclusive advertising agent for the magazines or journals published by Zhoumo Wenhui Press Office, and provided information consulting and management consulting services to Zhoumo Wenhui Press Office. Zhoumo Wenhui Press Office publishes Chinese Venture under the Weekly Journal’s unified publication number. We terminated this business unit in December 2009.

Agreements by our Advertising Group securing advertising agency arrangements. Our Advertising Group has entered into various agreements granting us the advertising agency, and at times the exclusive agency, for advertising on various media platforms. Much of the revenue from this business has been derived under the following contracts:

• an advertising agent contract between Shangtuo Zhiyang, a subsidiary of our affiliated entity, Beijing Taide Advertising Co., Ltd., or Beijing Taide, and Beijing Yi Sheng Le Ju Information Service Ltd., a sina.com company. Pursuant to the contract, Shangtuo Zhiyang served as the advertising agent for sina.com with respect to the real estate advertisements in Beijing and Tianjin. The contract initially covered the period from January 1, 2008 and December 31, 2008, and it was amended and restated to cover the period from January 1, 2009 and December 31, 2009. The contract was terminated as of December 31, 2009.

• an advertising agent contract between Shangtuo Zhiyang and Beijing Sohu New Media Information Technology Ltd., a sohu.com company. Pursuant to the contract, Shangtuo Zhiyang served as the advertising agent for sohu.com and its affiliated websites. The contract initially covered the period from January 1, 2008 and December 31, 2008, and it was amended and restated to cover the period from January 1, 2009 and December 31, 2009. The contract was terminated as of December 31, 2009.

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Our customers

Our services attract a variety of international and domestic customers. The data we give for our customers below includes data from our subsidiaries for the full periods given regardless of the date we acquired them, for both continuing and discontinued operations.

Broadcast

The quality and coverage of our integrated platform have attracted a broad range of customers. For the years ended December 31, 2007, 2008 and 2009, 488, 459 and 336 customers, respectively, used the services of our Broadcast Group for advertising, sponsorship, television production, animation and channel packaging services.

Our broadcast customers include advertisers such as China Mobile, Beijing Chinanoon Advertising, China Unicom, Guangdong New Media Co. Ltd., Shandong HaiNa Culture Intermediary Co. Ltd., Chengdu Entertainment and Music Technology Co. Ltd., Chengdu TianTi Movie and Television Production Co Ltd. and Beijing Zhong Tian Yong Dao Advertising Co. Ltd.

Our top five broadcast customers accounted for 45.1%, 44.7% and 64.5% of our Broadcast Group’s revenues in 2007, 2008 and 2009, respectively. Our top ten broadcast customers accounted for 57.3%, 54.8% and 72.1% of our Broadcast Group’s revenues in 2007, 2008 and 2009, respectively. One, two and two customers accounted for more than 10% of our Broadcast Group’s revenues, in 2007, 2008 and 2009, respectively.

Advertisers purchased advertising time or sponsorship on Shaanxi Satellite Television or Inner Mongolia Television programs either directly from us or through advertising agencies that purchase these services on behalf of their domestic and international customers. In 2007, 2008 and 2009, direct sales to advertisers accounted for 43.8%, 72.0% and 49.4%, respectively, of the revenues of our Broadcast Group.

Advertising

The quality and placement access of our Advertising Group has attracted a broad range of international and domestic customers. For the years ended December 31, 2007, 2008 and 2009, approximately 1,830, 1,450 and 931 customers, respectively, used the advertising services of our Advertising Group. Our top customers include international customers such as Diageo, Sony, Allied Domecq, Pernod Ricard, Nokia, Dell and Philips. Apart from international customers, our Advertising Group also attracts a broad range of domestic customers such as Beijing Dauphin Science, Beijing Yazhong Wuxian Media Ltd., MCC Real Estate Ltd. and Beijing Ocean JiaYe Real Estate Co., Ltd.

Our top five advertising customers accounted for 16.6%, 17.9% and 27.5% of our Advertising Group’s revenues in 2007, 2008 and 2009, respectively. Our top ten advertising customers accounted for 64.8%, 86.8% and 36.3% of our Advertising Group’s revenues in 2007, 2008 and 2009, respectively. No single customer accounted for more than 10% of our Advertising Group’s revenues in 2007. One single customer accounted for more than 10% of our Advertising Group’s revenues in both 2008 and 2009.

Customers purchase advertising placements and advertising creation services either directly from us or through their advertising agents which purchase these services on behalf of their domestic and international customers. In 2007, 2008 and 2009, direct sales to advertisers accounted for 64.8%, 86.8% and 90.2%, respectively, of our Advertising Group’s revenues.

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Print

During 2009 we operated a print business, which covered, among others, our exclusive right to sell advertising for and provide management and information consulting services to the newspaper the Economic Observer. We disposed of our print business in early 2010, and our print business is now categorized as a discontinued operation for the years ended December 31, 2007, 2008 and 2009. For the years ended December 31, 2007, 2008 and 2009, approximately 350, 538 and 1,108 customers, respectively, used the services of our print business for advertising. Our print customers include international advertisers such as Mindshare Media, Optimum Media Direction and Saatchi & Saatchi and domestic advertisers such as ICBC, Guangdong Advertising Co. Ltd., China Everbright Ltd., Beijing Dentsue Media Palette Ltd. and SPD Bank. Our top five print customers accounted for 34.2%, 41.5% and 30.9% of our print business revenues in 2007, 2008 and 2009, respectively. Our top ten customers accounted for 50.8%, 53.6% and 41.5% of our print business revenues in 2007, 2008 and 2009, respectively. One single customer accounted for more than 10% of our print revenues in 2007, 2008 and 2009.

Distribution

Shaanxi Satellite Television’s programs are broadcast via satellite to cities where it has landing rights. A typical landing rights contract has a term of one year. Certain other cities in China, with which Shaanxi Satellite Television does not have landing rights, have by contract arranged to carry the station. Shaanxi Satellite Television terminated its agreement with us on June 30, 2010.

Inner Mongolia Satellite Television’s programs are broadcast via satellite to cities where they have landing rights. A typical landing rights contract has a term of one year. Some other cities where no landing rights are established by contract also carry Inner Mongolia Satellite Television. We terminated the cooperation agreement with Inner Mongolia Satellite Television, effective in December 2009.

Our sales and marketing team

Our sales and marketing team comprises 378 employees across our operational groups as of December 31, 2009. The sales and marketing team allocated to each group focuses on the specific services of that group and the needs of customers of that group, while being held together through common strategies and broader service to our company as a whole. We strengthen relationships with advertisers by cross-selling our integrated platforms to our existing advertisers, offering attractive and flexible packages to suit their needs. We promote our brand to advertisers as synonymous with the affluent demographic. We use the ratings of our programs, the circulation numbers of the magazine and newspaper and the research conducted by our Advertising Group to evidence our ability to reach this demographic effectively.

Seasonality

Our revenues may fluctuate significantly based on the seasonality of consumer spending and the corresponding advertising trends. Revenues for our business are driven largely by advertising and sponsorship across all our operating groups and media platforms, which subject us to the seasonal effects of China’s advertising industry. The advertising cycle in China typically peaks towards the end of the calendar year. Advertising spending tends to decrease during January and February due to the Chinese Lunar New Year holiday. In addition, there is a decrease in advertising during the May 1 Labor Day holiday, and the October 1 National Day holiday.

Competition

Each of our business groups is subject to significant competition, mainly from state-owned competitors. We believe we distinguish ourselves from our competitors by being the only company that can provide a full range of services including animation, broadcast design and post-production for television commercials, while having a partnership with distribution channels through various types of media outlets.

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Broadcast

We and our strategic partners face many competitors in the Chinese broadcast market. We also compete against a strong field of competitors in television and film production, including large state-owned production companies, which have been in existence for several decades.

Advertising

Our primary competition in advertising comes from the American Association of Advertising Agencies, or 4A advertising companies, which are the dominant international advertising companies. Although we have relationships with them in which they act as advertising agents, the 4A companies have much of the market share both globally and in China and are our competitors. Our competitors in the below-the-line advertising market consist of international players that have strong ties to the China market and domestic marketing agencies that render services on a local level. Our competitors in the online real estate advertising business in China are key online advertising agents, including JiaHuaHengShun, and website owners who operate advertising sales directly.

Print

During 2009 we operated our print business. The Economic Observer and the Investor Journal, both weekly newspapers, faced competition from several financial newspapers in China, including 21st Century Business Herald, First Financial Daily and China Business Journal. We disposed of the exclusive rights to sell advertising for and provide management and information consulting services to the Economic Observer in 2010.

Money Journal and Chinese Venture competed against several financial magazines, both international and domestic, such as Caijing Magazine, New Fortune, Chinese Entrepreneur, and the Chinese versions of Business Week, Fortune and Forbes. We ceased production of Funds Observer and Chinese Venture in December 2009 and sold Money Journal in December 2009.

Intellectual property

We have developed strong brand awareness for our services. We consider our trademarks, copyrights and similar intellectual property critical to our success and rely on trademark and copyright laws, as well as licensing and confidentiality agreements, to protect our intellectual property rights. The intellectual property rights, including copyrights, trademarks and Internet domains held by us and our strategic partners are described in “— Regulation — Regulations on intellectual property protection.”

Xinhua Financial Network and China Economic Information Service entered into a Content License Agreement Supplement to the Exclusive Broadcasting Agreement dated December 15, 2001, pursuant to which China Economic Information Service granted Xinhua Financial Network and its affiliates an exclusive license (worldwide excluding China) to be the only party other than China Economic Information Service to distribute its real time newsfeeds and a non-exclusive license (in China) to distribute its real time newsfeeds, as well as the right to use the word “Xinhua” in the corporate name by Xinhua Financial Network and its affiliates worldwide. The agreement is effective for 20 years from May 18, 2000 and renewable for an additional term of ten years on terms to be agreed between the parties. Xinhua Financial Network is a subsidiary of XFL and our company is considered an affiliate of Xinhua Financial Network. We have in turn entered into an agreement with Xinhua Financial Network to use the word “Xinhua.” Although XFL or Xinhua Financial Network has registered the trademark for the name “Xinhua,” it is not clear whether the registration will be accepted in the PRC or whether we, XFL or affiliates could continue to use the name “Xinhua” if the agreement were to terminate. See “Item 3.D. Key information — Risk factors — Risks related to our business.”

Regulation

The PRC government imposes extensive regulations and censorship over the media industry, including television, radio, newspapers, magazines, advertising, media content production, and telecommunications industries. This section summarizes the principal PRC regulations that are relevant to our lines of business.

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Regulatory authorities

The legal regime in China consists of the National People’s Congress, the State Council, which is the highest authority of the executive branch of the PRC central government, various ministries and agencies under the State Council’s authority and their respective authorized local branches. Our businesses in China in the media and telecommunications industries are subject to a number of existing laws, regulations, circulars, decisions, and opinions issued by various authorities, including:

• the National People’s Congress;

• the State Council;

• the National Development & Reform Commission (formerly the State Development and Planning Commission);

• the Ministry of Commerce, a combination of the former Ministry of Foreign Trade and Economic Co-operation, the State Economy and Trade Commission, and the State Development and Planning Commission;

• the State Administration for Industry and Commerce;

• the Ministry of Culture;

• the State Administration of Radio, Film & Television;

• the General Administration for Press and Publication (formerly the State Press and Publications Administration);

• the National Bureau of Statistics; and

• the Ministry of Industry & Information Technology (formerly the Ministry of Information Industry).

Regulatory framework

The PRC laws and regulations that are relevant to our business generally fall into five categories:

• laws and regulations restricting and governing investments of private capital in general and foreign capital in particular. For purposes of these restrictions under PRC laws, “foreign” investment includes investment from Hong Kong, Taiwan and Macau. As a result of these restrictions on investments of foreign and private capital, we conduct our businesses in China substantially through contractual arrangements with our affiliated PRC entities. To further comply with these restrictions, our affiliated PRC entities in our Broadcasting Group operate through contractual arrangements with our business partners, including a television station, radio stations, a newspaper press office and a magazine press office;

• industry specific laws and regulations that govern the entities and business activities within the specified industry;

• copyright and trademark protection and domain name registration regulations, which we and our affiliated entities use to protect our and their intellectual property;

• regulations on foreign currency exchange; and

• regulations on tax.

We believe the ownership structures, businesses and operations of our subsidiaries and affiliated entities in China comply in all material respects with all existing PRC laws and regulations.

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Regulations on investment of foreign and private capital in the media, advertising and telecommunications industries

Four principal regulations govern the investment of foreign and private capital in the media, advertising and telecommunications industries:

• the Foreign Investment Industrial Guidance Catalog, or the Catalog, jointly promulgated by the National Development & Reform Commission and the Ministry of Commerce on October 31, 2007 and which became effective as of December 1, 2007;

• the Several Decisions on the Entry of Private Capital into the Culture Industry, or the Decisions, issued by the State Council on April 13, 2005;

• the Several Opinions on Foreign Investment in the Culture Sector, or the Opinions, jointly issued by the State Administration of Radio, Film and Television, the Ministry of Culture, the General Administration for Press and Publication, the National Development & Reform Commission and the Ministry of Commerce on July 6, 2005; and

• the Regulations for the Administration of Foreign-Invested Telecommunications Enterprises, or the Regulations, issued by the State Council on December 11, 2001 and revised on September 10, 2008.

Under the Catalog and the Opinions, the investment of foreign capital is prohibited or restricted in companies that conduct various aspects of the television, radio, publishing and telecommunications businesses, as described below, but is permitted in the advertising business.

The Decisions affect the investment of private capital in companies that engage in the business of television, radio, publishing, advertising and media content production. Under the Decisions, investment of private capital is prohibited or restricted in many aspects of the television, radio and publishing business areas, as described below, but is allowed in other business areas such as advertising and the production of movies and drama series.

PRC laws relating to foreign investments in the media and advertising industries are relatively new compared with those in more mature markets, and the PRC government continues to promulgate and implement new laws and regulations. We believe our current ownership structure, the ownership structure of our subsidiaries, including our affiliated PRC entities, the contractual arrangements among us, our subsidiaries, including affiliated PRC entities, and their shareholders, and our business operations are in compliance with all existing PRC laws, rules and regulations in all material respects. However, there are substantial uncertainties regarding the interpretation, application and administration of current PRC laws and regulations, and the impacts of any new laws and regulations are unknown. See “Item 3.D. Key information — Risk factors — Risks related to the regulation of our business and to our structure — Certain of our PRC operating companies or strategic partners have previously engaged or may currently engage in activities without appropriate licenses or approvals or outside the authorized scope of their business licenses or permitted activities. This could subject those companies to fines and other penalties, which could have a material adverse effect on our business” and “Item 3.D. Key information — Risk factors — Risks related to the regulation of our business and to our structure — If the PRC government finds that the agreements that establish the structure for operating our China businesses do not comply with PRC governmental restrictions on foreign investment in the media and telecommunications industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.” Accordingly, if the PRC government authorities ultimately take a view contrary to our position, our business may suffer substantial interruptions and our operating results may be negatively affected.

The following discussion summarizes the relevant regulations, including the three principal ones discussed above, governing the investment of foreign and private capital in each of our lines of business.

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Regulations on television, radio and movie industry

Television and radio stations

According to the Regulations on the Administration of Radio and Television, promulgated by the State Council on August 11, 1997, Detailed Procedures for the Financing of Radio Film and Television Conglomerates, promulgated by the State Administration of Radio, Film and Television on December 20, 2001, and the Measures for the Administration of Examination and Approval of Radio Stations and Television Stations, promulgated by the State Administration of Radio, Film and Television on August 18, 2004, radio stations, television stations, radio frequencies or television channels may only be established and operated by the government. Pursuant to the Opinions and the Decisions, foreign or private capital may not be invested to establish or operate radio stations, television stations or transmission networks, broadcast radio or television programs, or operate radio frequencies or television channels for radio or television stations. Under the Opinions and the Circular on the Further Strengthening of the Supervision of Radio and Television Channels, or the Supervision Circular, promulgated by the State Administration of Radio, Film and Television on August 4, 2005, foreign investors are prohibited from operating radio frequencies or television channels by means of providing advertising, printing or distribution services.

We and our affiliated entities do not own or operate television or radio stations. Neither do we nor our affiliated entities operate television channels or radio frequencies. Through our agreements with Beijing Hantang, through June 30, 2010 we held the exclusive right to provide advertising and consulting services to Shaanxi Satellite Television, a television channel in Shaanxi province. While operating our radio business, our affiliated entities had the exclusive rights to sell advertising for and the rights to provide content to radio stations.

The content provision by our affiliated entities for our business partners is allowed under PRC laws and regulations and the content is subject to review and approval by the radio and television stations. There is a risk that the strategic partnerships we or our affiliated entities have entered into may be deemed to have the actual effect of operating radio or television stations under the Opinions or Supervision Circular. See “Item 3.D. Key information — Risk factors — Risks related to the regulation of our business and to our structure — If the PRC government finds that the agreements that establish the structure for operating our China businesses do not comply with PRC governmental restrictions on foreign investment in the media and telecommunications industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations” and “Item 3.D. Key information — Risk factors — Risks related to our business — We rely on key contracts and business relationships, and if our current or future business partners or contracting counterparties fail to perform, or terminate, any of their contractual arrangements with us for any reason or cease operations, or should we fail to adequately identify key business relationships, our business could be disrupted, our reputation may be harmed and we may have to resort to litigation to enforce our rights, which may be time-consuming and expensive.”

Radio and television program production

According to the Regulations on the Administration of Radio and Television and the Provisions on the Administration of Radio and Television Program Production promulgated by the State Administration of Radio, Film and Television on July 19, 2004, entities engaging in the production of radio and television programs, such as feature programs, general programs, drama series and animations, and the trading activities and agency services on the copyrights of such programs must first obtain preliminary approval from the State Administration of Radio, Film and Television or its provincial branches for the appropriate license. Then the entity must register with the State Administration for Industry and Commerce to obtain or update its business license.

According to the Administration of Radio and Television Program Production, wholly foreign owned enterprises, as well as Sino-foreign joint ventures, are not encouraged to produce radio and television programs or drama series. The establishment of a production company for drama series must be approved by the State Administration of Radio, Film and Television. Such company must also obtain the appropriate licenses from the provincial branches of the State Administration of Radio, Film and Television. There are two types of drama series production licenses. The first type is a general license applicable to all drama series produced by the license holder during the two-year term. The second type is a specific license applicable to the specific drama series identified on the license.

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In our media production group, a subset of our Broadcast Group, all of our affiliated PRC entities engaging in media content production have obtained the requisite business licenses and appropriate licenses for television program production or have contracted with an entity that has the required licenses. For our drama series production, our affiliated entity cooperates with third parties who to our knowledge hold drama series production licenses to produce our drama series. For details, see “— Arrangements with partners and suppliers” and “Item 4.C. Information on the Company — Organizational Structure.”

We do not directly engage in the production of radio and television programs or drama series, nor have we set up any joint ventures for that purpose. Our affiliated PRC entities engage in the production of television programs.

Movie industry

According to the Regulations on the Administration of Movies promulgated by the State Council on December 25, 2001, the PRC applies a licensing system to the production, import, export, distribution, and projection of movies and public projection of films. No entity or individual may, without permission, be engaged in the production, importation, distribution or projection of films, nor may it import, export, distribute or project a film for which the relevant license has not been obtained.

The establishment of a film production entity must be approved by the State Administration of Radio, Film & Television. After being approved, the film production entity will be issued a License for Producing Movies for movie production related activities provided by the Regulations on the Administration of Movies. The PRC also maintains a movie examination system. Films which have not been examined and adopted by the movie examination institution of the State Administration of Radio, Film & Television shall not be distributed, projected, imported or exported.

According to the Regulations on the Administration of Movies and the Provisions on the Administration of Chinese-foreign Cooperative Production of Films promulgated by the State Administration of Radio, Film & Television on July 6, 2004, only film production entities that are established with the approval of the State Administration of Radio, Film & Television and hold a License for Producing Movies can cooperate with an overseas film producer to produce films. Cooperation with an overseas film producer can be through joint production, associated production or commissioned production. Joint production refers to a cooperative agreement by which the Chinese and foreign parties jointly contribute capital (including funds, labor or in-kind contributions), produce films and share interests and risks. Associated production refers to a cooperative agreement under which the foreign party contributes capital, while the Chinese party provides assistance, such as equipment, sites and labor, and filming is done in China. Commissioned production refers to a cooperative arrangement under which the foreign party entrusts the Chinese party to produce films on its behalf. For the cooperative agreement to be valid, the film production entity must apply to the State Administration of Radio, Film & Television for approval and obtain a one-off License for Producing Films through Chinese-foreign Cooperation which will remain valid for two years. No overseas organization or individual may be independently engaged in producing films inside the territory of the PRC. We do not directly engage in movie production. We cooperate with third parties who to our knowledge hold movie production licenses to produce movies and we believe that we are in compliance with the approval requirement for our movie co-production transactions.

Import and Broadcasting of Overseas TV Programs

According to the Provisions on the Administration of Import and Broadcasting of Overseas TV Programs promulgated by the State Administration of Radio, Film and Television on September 23, 2004, the import of overseas TV programs, which include overseas films, TV plays, TV cartoons and other TV programs, such as educational, scientific and cultural TV programs to be broadcast in China shall be subject to the approval of the State Administration of Radio, Film and Television. The import process is divided into two categories, which include the import of overseas films and TV plays, and the import of other overseas TV programs through satellite transmission. For the former, if the State Administration of Radio, Film and Television approves the import, it shall issue the applicant a TV Play (TV Cartoon) Distribution License, while for the latter it shall approve the import of an overseas TV program after which the applicant shall go through the legal formalities for obtaining a License of Receiving TV Programs through Satellite Transmission.

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When a TV station broadcasts an overseas film or TV play, it shall give a clear indication of the serial number of the distribution license of the film or TV play. The time for broadcasting overseas films and TV plays per day by a television channel may not exceed 25% of its total time within the current day for broadcasting films and TV plays. The time for broadcasting other overseas TV programs per day by a television channel may not exceed 15% of the total time for broadcasting within the current day by the television channel. Without approval of the State Administration of Radio, Film and Television, no one may broadcast any overseas film or TV play during the prime time slot (7:00pm to 10:00pm).

An overseas TV program (other than a film or TV play) imported upon approval shall be re-packed and re-edited. It may not be directly broadcast as a set program at a fixed time slot. The logo of the overseas channel or picture with relevant words may not be shown in the program, nor may the program contain any advertisement publicizing the overseas media or channel and other similar content.

According to the Regulations on the Administration of Movies, the business of importing movies is to be operated by the movie import entities designated by the State Administration of Radio, Film & Television. Without being designated, no entity or individual may operate the business of importing movies. Before importing a movie, the movie import entity must submit a sample of the film to the movie examination institution for examination.

We do not possess the necessary approvals to directly engage in the production, import, export, distribution and projection of movies and public projection of films. We partner with entities that have the required license to participate in such businesses on a contractual basis. See “Item 3.D. Key information — Risk factors — Risks related to the regulation of our business and to our structure — Certain of our PRC operating companies or strategic partners have previously engaged or may currently engage in activities without appropriate licenses or approvals or outside the authorized scope of their business licenses or permitted activities. This could subject those companies to fines and other penalties, which could have a material adverse effect on our business.”

Publication of Audio-Visual Programs through the Internet

According to the Measures for the Administration of the Publication of Audio-Visual Programs through the Internet or Other Information Network promulgated by the State Administration of Radio, Movie and Television on July 6, 2004 and the Measures for the Administration of the Service of Internet Audio-Visual Programs jointly promulgated by the State Administration of Radio, Movie and Television and the Ministry of Information Industry on December 20, 2007, the state applies a licensing system to businesses which publish audio-visual programs through information networks and requires entities engaged in such a business to obtain the License for Publication of Audio-Visual Programs. No wholly foreign-owned, Sino-foreign joint venture or Sino-foreign cooperative institution may engage in the business of publishing audio-visual programs through information networks.

Audio-visual programs published to the public through information networks are highly regulated under the above two measures. News programs are limited to programs produced and broadcast by radio or television stations and approved news websites within China while movie and TV programs must first obtain the TV Play Distribution License or the Permit for Public Projection of Movies. When relaying audio-visual programs by making use of information networks, only radio and TV programs already broadcast by the radio and TV stations may be relayed. No radio or TV program illegally opened, nor any overseas radio and TV programs, may be relayed. When using information networks to link or integrate audio-visual programs, only the audio-visual programs opened by the institution that has obtained the License for Publication of Audio-Visual Programs through Information Network may be linked or integrated and no audio-visual programs from overseas internet websites may be linked or integrated.

Our affiliated entity has obtained the License for Publication of Audio-Visual Programs through Information Network.

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Regulations on the publication industry

Newspapers and magazines

Publication of newspapers or magazines. Under the Catalog and the Decisions, investment of foreign or private capital is not permitted in the establishment or operation of newspapers, publishing institutions or news agencies or in the operation of newspaper or magazine sections. However, the investment of foreign or private capital is permitted in companies engaging in the printing and wholesale or retail distribution of newspapers or magazines. Under the Opinions, foreign investors are prohibited from providing wholesale or retail distribution, printing or advertising services to the publishing institutions if the actual effect is to operate newspaper or magazine sections or to engage in the editorial work for or to publish newspapers or magazines.

The publication industry in China is governed by the Regulations on the Administration of Publication, promulgated by the State Council on December 25, 2001, and the Provisions on the Administration of the Publications Market, promulgated and amended by the General Administration for Press and Publication on June 16, 2004. These regulations govern publication activities including the publishing, printing, reproduction, importing and distribution of publications, including newspapers, magazines, books, audio and video products and electronic publications published by lawfully established press offices with the proper government approval. Such institutions may include, among others, newspaper agencies and periodical publication agencies. The establishment of a publishing institution requires approval from the General Administration for Press and Publication. The publishing institution must be sponsored by a sponsoring entity and supervised by a supervising entity, both duly authorized by the General Administration for Press and Publication on a case by case basis. The sponsoring entity and the supervising entity may be the same entity. After establishment, a newspaper or magazine press office must apply for a license for newspaper publication or a license for periodical publication and obtain a domestic unified serial number for the newspaper or the magazine. No newspaper or magazine press office may sell, lease, or transfer its own name or the domestic unified serial number, name or section of the publication, nor shall it lend, transfer, lease or sell its license(s).

A press office shall implement a system of editorial accountability to ensure that its published content complies with applicable laws. No publication shall, among other things, contain content that may violate, or may be deemed to violate the basic principles of the PRC Constitution, jeopardize state unification, harm sovereign and territorial integrity, divulge state secrets or jeopardize state security.

We and our affiliated entities do not engage in the business of publishing newspapers or magazines. We and our affiliated entities have, in the past, provided management and information consulting services to or have made contractual arrangements with various publishing institutions in relation to the Economic Observer and Investor Journal newspapers and Money Journal and Chinese Venture magazines. Our contractual arrangements pertaining to Investor Journal terminated at the end of 2008. Our contractual arrangements pertaining to Money Journal and Chinese Venture terminated at the end of 2009. For details in relation to the magazines and newspapers, see “— Arrangements with partners and suppliers” and “Item 4.C. Information on the Company — Organizational Structure.” To our best knowledge, these publishing institutions held the requisite approvals and licenses to publish newspapers or magazines during the term of our agreement. There is a risk that the strategic partnerships we or our affiliated entities have with these publishing institutions may be deemed to have the actual effect of operating newspaper or magazine sections. See “Item 3.D. Key information — Risk factors — Risks related to the regulation of our business and to our structure — If the PRC government finds that the agreements that establish the structure for operating our China businesses do not comply with PRC governmental restrictions on foreign investment in the media and telecommunications industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.”

Distribution. Under the Catalog and the Decisions, the investment of foreign capital is prohibited in companies engaging in the general distribution of newspapers or magazines. According to the Measures for the Administration of Foreign-invested Enterprises in Distribution of the Books, Newspapers and Periodicals, or the Measures, promulgated by the General Administration for Press and Publication and the Ministry of Commerce on March 17, 2003 and its supplementary provisions, investment of foreign capital is permitted in companies that engage in wholesale and retail distribution of newspapers or magazines. Wholesale distribution, for which foreign investment was permitted starting December 1, 2004, is the non-exclusive distribution of publications to other entities in the publication related businesses, such as newsstands and bookstores. Retail distribution, for which foreign investment was permitted starting on May 1, 2003, is the nonexclusive distribution of publications to readers.

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We and our affiliated entities do not currently engage in the general, wholesale or retail distribution of newspapers or magazines. Our affiliated PRC entities have, in the past, provided management and information consulting services to, or have made contractual arrangements with, the respective press offices on outsourcing the wholesale and retail distribution of Money Journal, Chinese Venture and the Economic Observer to third-party service providers and through the end of 2008 had contractual arrangements with the respective press office on the distribution of Investor Journal.

Printing of publications

According to the Regulations on the Administration of Publication, entities engaged in the business of printing publications shall first obtain approval from the provincial branch of the General Administration for Press and Publication and then register with the public security bureau and the local branch of the State Administration for Industry and Commerce. A press office shall not commission an entity that has not obtained the requisite approval to provide printing services.

According to the Provisional Regulation on Establishment of Foreign Invested Printing Enterprises promulgated by the General Administration for Press and Publication and the Ministry of Commerce on January 29, 2002, the Opinions and the Decisions, investment of foreign and private capital is permitted in the business of printing newspapers or magazines in China. Foreign investment must take the form of joint ventures in which a PRC investor must hold the controlling interest, but private investment is not subject to the same restriction.

In our print business, which ceased operations in early 2010, our affiliated entities provided management and information consulting services to a press office on the printing of Money Journal and Chinese Venture, and assisted a press office in the management of the printing of the Economic Observer, including outsourcing the printing of these publications to third-party service providers. To the best of our knowledge, these printing service providers held the requisite approvals during the term of our agreement. Our affiliated entities advised the press offices to periodically monitor these service providers to ensure that they have obtained all required approvals, although it is possible that one or more of these printing service providers may not have been in compliance with all PRC regulations at all times.

We and our affiliated entities do not print newspapers or magazines. Rather, our affiliated entities provided management and information consulting services to the publishing institutions on outsourcing the printing of Money Journal, Chinese Venture and the Economic Observer to third-party service providers, and through the end of 2008 had contractual arrangements with the publishing institution regarding printing the Investor Journal.

Distribution of publications

According to the Regulations on the Administration of Publication, entities engaging in the general distribution of newspapers or magazines must obtain approval from the General Administration for Press and Publication. Entities engaging in the wholesale distribution or retail distribution of newspapers or magazines must obtain approval from GAAP branches at the provincial and county level. The distribution of newspapers or magazines by post shall comply with the postal law.

In our print business, which ceased operations in early 2010, our affiliated entities provided management and information consulting services to the press offices for Money Journal, Chinese Venture and the Economic Observer in relation to engaging local distribution service providers to carry out the wholesale and retail distribution of the magazine or newspaper. To our knowledge, these press offices and the wholesale and retail distributors held the requisite approvals and licenses to distribute magazines or newspapers during the term of our agreement, except for Guangzhou Jingyu Culture Development Co., Ltd., a distribution service provider that is the primary general distributor engaged in the retail and wholesale distribution of Money Journal. Our affiliated entities advised the press offices to periodically monitor these wholesale and retail service providers to ensure that they have obtained all required licenses, although it is possible that one or more of these distributors may not have been in compliance with all PRC regulations at all times.

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Regulations on the advertising industry

Establishment of advertising entities

The principal regulations governing the PRC advertising industry include:

• the Advertising Law promulgated by the National People’s Congress on October 27, 1994;

• the Administration Regulations of Advertising Industry, promulgated by the State Council on October 26, 1987;

• the Implementation Rule of Advertising Industry Administration, or the Implementation Rule, promulgated by the State Administration for Industry and Commence on January 9, 1988, amended in 1998, 2000 and 2004, and effective as of January 1, 2005; and

• the Measures on Administration of Advertising Operation Licenses, promulgated by the State Administration for Industry and Commence on November 30, 2004.

Under these regulations, advertising companies may only engage in the advertising business if they have obtained from the State Administration for Industry and Commence or its local branches a business license which specifically includes operating an advertising business within its business scope. A company conducting advertising activities without such a license may be subject to penalties, including fines, confiscation of advertising income and orders to cease advertising operations. Subject to annual examination, 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. Furthermore, pursuant to the Implementation Rule, certain entities, including, but not limited to, radio and television stations and publishing institutions, must also obtain an advertising operating license from a branch of the State Administration for Industry and Commence at the county level or above before they can engage in the advertising business. These licenses will set forth the permitted advertising activities.

We conduct our advertising business in China through certain of our affiliated PRC entities. Each of them has obtained the licenses to operate an advertising business from the State Administration for Industry and Commence or its local branches as required by PRC regulations.

We and our affiliated entities work with various advertising agents in our broadcasting business. To the best of our knowledge, these advertising agents also have the requisite business licenses and advertising operating licenses, where applicable. We and our affiliated entities periodically monitor these advertising agents to ensure that they have obtained all required licenses, although it is possible that one or more of them may not be in compliance with all PRC regulations at all times. If we or our affiliated entities learn that any of them is not in compliance with applicable regulations, we or our affiliated entities will notify the entity of the need to complete any necessary steps to receive the required licenses. Under the contracts between our affiliated entities and the advertising agents, our affiliated entities have the rights to claim compensation for any direct or indirect losses caused by the non-compliance of the advertising agents. We and our affiliated entities will take steps to terminate the contract with such advertising agents if necessary.

In addition, to our best knowledge, the publishing institutions and radio stations we and our affiliated entities work with, as well as Inner Mongolia Television Station and Shaanxi Television Station, have the requisite business licenses and advertising operating licenses.

Under the Catalog and the Administrative Provision on Foreign Investment in the Advertising Industry, jointly promulgated by the State Administration for Industry and Commerce and the Ministry of Commerce on March 2, 2004 and revised on August 22, 2008, foreign investors can invest in PRC advertising companies through either wholly-owned enterprises or joint ventures with Chinese parties. Since December 10, 2005, foreign investment in PRC advertising companies has been allowed up to a 100% equity interest. However, the foreign investors are required to have at least three years of direct operations in the advertising industry as their core businesses outside of the PRC. This requirement is reduced to two years if foreign investment in the advertising company is in the form of a joint venture. Advertising enterprises with foreign capital investment can engage in advertising design, production, publishing and agency, provided that certain conditions are met and necessary approvals are obtained. Under the Decisions, private capital is allowed to conduct outdoor advertising activities and production of advertising programs.

We primarily operate our advertising businesses in Beijing, Shanghai and Shenzhen through our affiliated PRC advertising companies. For details, see “Item 4.C. Information on the Company — Organizational structure.”

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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, false or 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 radio, film, television, newspapers or magazines. 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, newspapers, magazines, 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.

Advertisers, advertising agencies, and advertising distributors are required by PRC advertising laws and regulations to ensure that the content of the advertisements they prepare or distribute is 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 complies with applicable PRC laws and regulations. Prior to distributing advertisements that 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 State Administration for Industry and Commerce or its local branches may revoke violators’ licenses or permits for advertising business operations. Furthermore, advertisers, advertising agencies 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.

As we and our affiliated entities conduct our business in the advertising industry, we each take steps to make sure that all of our and their advertisements comply with relevant laws and regulations. The advertisements placed by our Advertising Group typically are subject to the review and final approval of the partners through whom we place the advertisement. Our business partners employ qualified advertising inspectors who are trained to review advertising content for compliance with relevant laws and regulations. We do not believe that advertisements containing content subject to restriction or censorship comprise a material portion of the advertisements created or placed by our Advertising Group. In the event that some of the advertisements our advertising customers or agencies provide to us or our affiliated entities and which we or our affiliated entities include in advertising are not in compliance with relevant PRC advertising laws and regulations, or when these advertisements that we or our customers or agencies place have not received required approval from the relevant local supervisory bodies, such as the local branches of the State Administration for Industry and Commerce, or do not comply with content requirements, we will remove the advertisements or advise our business partners to remove the advertisements as soon as we notice such violations.

Operational matters of the advertising business

Under the Advertising Law, registration, review and filing systems need to be established and maintained for the operation of entities engaged in the advertising business. Advertising fees must be reasonable, and rates and fee collection methods must be filed with the PRC Commodity Price Administration and the State Administration for Industry and Commerce for their records. Under the Implementation Rule, the advertising agent fee must be 15% of the advertising cost. The advertising customer must provide relevant documents, including certificates rendered by the relevant supervisory administrations before it can broadcast or place its advertisements.

As we and our affiliated entities conduct our business in the advertising industry, we and they take steps to make sure that all of our and their operations are in compliance with relevant laws and regulations.

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Radio and television advertisements

The State Administration of Radio, Film and Television promulgated the Administrative Measures for Broadcasting Radio and Television Advertisements on September 8, 2009 to further regulate the advertisements broadcast by radio and television stations. Advertisements broadcast on radio and television stations are prohibited from containing certain content deemed to:

• be against the basic principles stipulated by the constitution;

• harm the national unity, sovereignty and territorial integrity, national security or harm national honor and interests;

• incite ethnic hatred or ethnic discrimination, be against ethnic customs and habits, undermine national unity or violate religious policy;

• disrupt the social order or undermine social stability;

• promote a cult, obscenity, gambling, violence, superstition, damage social morality or national cultural traditions;

• insult, discriminate or slander others, infringe the legal rights of others;

• induce minors to act poorly or with bad values or endanger the physical and mental health of minors;

• use absolute language to deceive and mislead the public, deliberately using the wrong spelling or tampered idioms;

• use the national flag, national emblem, national anthem, the name, image, voice, sayings, handwritings of national leaders, or the name or image of the state agencies or officers of the same effect in commercial advertising;

• promote drugs, medical devices, medical and health information advertisements promoting cure rates, efficiency, or using doctors, specialists, patients or public figures to prove a curative effect; and

• other content prohibited by laws, regulations and administrative rules.

In addition, certain advertisements are prohibited from being broadcast on radio and television station, which include:

• advertisements published in the form of a news report;

• tobacco advertisements;

• prescription drugs advertisements;

• medical advertisements for drugs, food, medical equipment used for the treatment of malignant tumors, liver disease, sexually transmitted diseases or drugs to improve sexual functions;

• voice service advertisements such as those for name or fortune analysis, affinity tests, or chat dating services;

• dairy products advertisements using the term “breast-milk substitutes;” and

• other advertisements prohibited by laws, regulations and administrative rules.

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The Administrative Measures for Broadcasting Radio and Television Advertisements also stipulates the total permitted amount and arrangements for commercial advertising. The commercial advertising broadcast each hour during each set of programs shall not exceed 12 minutes, among which, the commercial advertising broadcast between 11:00 to 13:00 on radio stations and 19:00 to 21:00 on television station shall not exceed 18 minutes. Commercial advertising may be inserted during the broadcasting of TV dramas, but shall be limited to twice an episode and each shall not be longer than one minute and 30 seconds, among which, for TV dramas broadcast during 19:00 to 21:00, commercial advertising shall only be inserted once an episode for no more than one minute.

We do not operate any radio or television broadcasting institutions. We entered into cooperation agreements with and provide advertising to radio and television stations. We estimate that our revenues and the number of advertisers placing advertisements through these mediums will decrease due to these regulations.

Outdoor advertising

Laws and regulations generally applicable to advertisements in the PRC are all applicable to outdoor advertisements. In addition, outdoor advertising is subject to regulation under the Measure for the Administration of Registration of Outdoor Advertisements, promulgated by the State Administration for Industry and Commerce on December 8, 1995, amended on December 3, 1998 and May 22, 2006, which became effective on July 1, 2006.

Under the Advertising Law, the exhibition and display of outdoor advertisements may 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 damage the urban area landscape;

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

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

Under the Measure for the Administration of Registration of Outdoor Advertisements, all outdoor advertisements must be registered with the local branch of the State Administration for Industry and Commerce above county level 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 branch of the State Administration for Industry and Commerce will issue an Outdoor Advertising Registration Certificate for the advertisement. Outdoor advertisements shall be published in accordance with the contents stipulated in the register such as venue, format, specification and time period, which cannot be altered without prior approval. The content of the outdoor advertisement must be submitted for filing with the local branch of the State Administration for Industry and Commerce.

Local governments also have regulations relating to outdoor advertising, such as the Measures for the Administration of the Installation of Outdoor Advertisements in Shanghai Municipality, promulgated on December 15, 2004 and effective as of February 1, 2005 in Shanghai, and the Measures for the Administration of the Installation of Outdoor Advertisements in Beijing Municipality, passed on June 22, 2004 and promulgated on August 5, 2004, amended on November 23, 2007, and effective as of October 1, 2004 in Beijing.

Our outdoor advertising operation is currently in Shanghai and Beijing only. We operate our campus billboard advertising business in Shanghai via our affiliated PRC entity. We have received a verbal interpretation from the relevant Shanghai authorities that our affiliated entity does not need a license for outdoor advertising as billboards on a university campus are not considered “outdoor” advertising. We and our affiliated entity take steps to make sure that all of our affiliated PRC entity’s campus billboard advertisements are in compliance with relevant laws and regulations.

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Marketing services

The laws and regulations generally applicable to the advertising industry are also applicable to the marketing services business. In our marketing services business, our affiliated PRC entity places advertising posters at various event venues. These posters are defined as “normal print advertisements” under the Print Advertisements Administrative Regulations, promulgated by the State Administration for Industry and Commerce on January 13, 2000, as amended on November 30, 2004. Under these regulations, print advertisements must not be placed in areas prohibited by laws or regulations, such as controlled areas around governmental buildings. Such print advertisement must not include non-advertisement content such as news but must contain the names and addresses of the advertiser and the advertising agents or distributors.

We and our affiliated entities take steps to make sure that all of our and their advertisements in marketing services are in compliance with relevant laws and regulations.

Regulations on the telecommunications industry

The principal regulations governing telecommunications businesses in China include:

• the Regulation on Telecommunications promulgated by the State Council on September 25, 2000;

• the Administrative Measures for Telecommunications Business Operating License promulgated by the Ministry of Industry and Information on March 1, 2009; and

• The Catalogue of Classes of Telecommunications Businesses promulgated by the Ministry of Information Industry on February 21, 2003.

Under these regulations, all telecommunications businesses in China are categorized as either infrastructure telecommunications businesses or value-added telecommunications businesses. The latter category includes SMS and other wireless value-added services. Certain services are classified as being of a value-added nature and require the commercial operator of such services to obtain an operating license, including telecommunications information services, online data processing and translation processing, call centers and Internet access.

Depending on whether the business is carried out in one province or more, one of the two different kinds of licenses are required before engaging in value-added telecommunications businesses. These include the Business License for Cross-region Value-added Telecommunications Business or the Business License for Value-added Telecommunications Business. The period of validity of the above licenses is five years. Applicants of the former license also need to have a registered capital of not less than RMB10.0 million ($1.5 million) and be approved by the MIIT, and applicants of the latter license need to have a registered capital of not less than RMB1.0 million ($147,000) and be approved by the communication administrative bureau in the relevant provinces, autonomous regions or cities under the direct control of the Central Government. A Cross-region Value-added Telecommunications Business License holder needs to register with local communication administrative bureaus before conducting its business in relevant provinces. An approved value-added telecommunications service provider must conduct its business in accordance with the specifications recorded on its Telecom Business Operating License.

Regarding the content transmitted through telecommunications service, strict censorship is required. The service provider needs to ensure that the transmitted messages will not:

• oppose the fundamental principles determined in the PRC Constitution;

• compromise state security, divulges state secrets, subvert state power or damage national unity;

• harm the dignity or interests of the state;

• incite ethnic hatred or racial discrimination or damage inter-ethnic unity;

• sabotage China’s religious policy or propagate heretical teachings or feudal superstitions;

• deliver rumors, disturb social order or disrupt social stability;

• propagate obscenity, pornography, gambling, violence, murder or fear or incite the commission of crimes;

• insult or slander a third party or infringe upon the lawful rights and interests of a third party; or

• include other content prohibited by laws or administrative regulations.

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Under the Catalogue and the Regulations, a foreign entity is prohibited from owning more than 50% of the total equity in any Chinese enterprise providing value-added telecommunications services, subject to certain geographic limitations, and the foreign investors in a foreign invested value-added telecommunications enterprise is required to be in good standing and have the relevant experience in operating a value-added telecommunications businesses.

We do not operate our wireless business directly, rather, we operate our wireless business through our Chinese affiliated entity, M-in, which holds the requisite Cross-region Value-added Telecommunications Business License to provide wireless services in China. See “Item 3.D. Key information — Risk factors — Risks related to the regulation of our business and to our structure — If the PRC government finds that the agreements that establish the structure for operating our China businesses do not comply with PRC governmental restrictions on foreign investment in the media and telecommunications industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.” We do not operate a value-added telecommunications business directly. We enter into contractual arrangements with our affiliated entity, M-in, which engages in value-added telecommunications business and has obtained an effective value-added telecommunications business operation license. For details, see “Item 4.C. Information on the Company — Organizational structure.”

Regulations on intellectual property protection

China has adopted legislation governing intellectual property rights, including copyrights, registered trademarks, exclusive rights and patent rights. China is a signatory to the main international conventions on intellectual property rights and became a member of the Agreement on Trade Related Aspects of Intellectual Property Rights upon its accession to the World Trade Organization in December 2001.

Copyright

The National People’s Congress amended the Copyright Law on October 27, 2001 to widen the scope of works and rights that are eligible for copyright protection. The amended Copyright Law extends copyright protection to Internet activities, products disseminated over the Internet and software products. In addition, there is a voluntary registration system administered by the China Copyright Protection Center.

To address the problem of copyright infringement related to content posted or transmitted over the Internet, the National Copyright Administration and the Ministry of Information Industry jointly promulgated the Administrative Measures for Copyright Protection Related to the Internet on April 30, 2005, which became effective on May 30, 2005.

We or our business partners either own copyrights to our broadcast, print and other content, or hold licenses to distribute this content on our media platforms. Our affiliated entity Beijing Century Media also shares the copyrights to certain drama series that were produced in cooperation with third parties who hold drama series production licenses. We own the copyrights of the content provided by us to Money Journal. We and our affiliated entities rely on the protection of relevant copyright laws.

Trademark

The PRC Trademark Law, adopted on August 23, 1982 and revised on October 27, 2001, protects the proprietary rights to registered trademarks. The Trademark Office under the State Administration for Industry and Commerce handles trademark registrations and grants a term of ten years to registered trademarks. Upon its expiration, a second term of ten years may be granted. Trademark license agreements must be filed with the records of the Trademark Office. In addition, if a registered trademark is recognized as a well-known trademark in a specific case, the proprietary right of the trademark holder may be extended beyond the registered sphere of services of the trademark.

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We have filed to register the name and trademark of “XSEL & Device” in the PRC. Our business partner has registered “IMTV” with the Trademark Office. Beijing Perspective Orient Movie and Television Intermediary Co., Ltd., or Beijing Perspective Orient, and Money Journal Publication Limited have registered a symbol resembling an “F” and the Chinese name for “Money Journal” with the Trademark Office, respectively. M-in has filed to register “M-in” and other trademarks in China.

Moreover, Xinhua Financial Network entered into an agreement with China Economic Information Service, under which Xinhua Financial Network and its affiliates were granted the right to use the word “Xinhua” as the first name worldwide. Either XFL or Xinhua Financial Network has also registered the name “Xinhua” in the U.S., Hong Kong, Japan and South Korea. We have in turn entered into a trademark license agreement with XFL, under which we and our subsidiaries were granted a non-exclusive worldwide license to use the trademark “Xinhua.” We rely on the trademark laws to protect our rights under the agreements to use the word.

Domain names

On November 5, 2004, the Ministry of Information Industry amended the Measures for Administration of Domain Names for the Chinese Internet, or the Domain Name Measures. The Domain Name Measures regulate the registration of domain names with the suffix “.cn.” Domain name disputes are governed by the Measures on Domain Name Dispute Resolution promulgated by the Chinese Internet Network Infrastructure Center on September 25, 2002, which was revised on March 17, 2006. Under the Measures on Domain Name Dispute Resolution, the Chinese Internet Network Infrastructure Center can authorize domain name dispute resolution institutions to decide disputes. We, our affiliated entities and strategic partners have registered many domain names. There are some domain names that one of our affiliated entities uses for which it is unclear if the registrations rest with our affiliated entity or with its management.

Some of the domain names we and our affiliated entities use have been registered by third parties, and some have not been registered.

Regulations on foreign currency exchange

Foreign currency exchange

Pursuant to the Foreign Currency Administration Rules promulgated on January 29, 1996 and amended on August 1, 2008 and various regulations issued by the State Administration of Foreign Exchange and other relevant PRC government authorities, RMB are freely convertible only to the extent of current account items, such as trade-related receipts and payments, interest and dividends. Capital account items, such as direct equity investments, loans and repatriation of investment, require the prior approval from the State Administration of Foreign Exchange or its local branch for conversion of RMB into a foreign currency, such as U.S. dollars, and remittance of the foreign currency outside the PRC. Payments for transactions that take place within the PRC must be made in RMB. Unless otherwise approved, PRC companies must repatriate foreign currency payments received from abroad. Foreign-invested enterprises may retain foreign exchange in accounts with designated foreign exchange banks subject to a cap set by the State Administration of Foreign Exchange or its local branch. Unless otherwise approved, domestic enterprises must convert all of their foreign currency receipts into RMB.

The business operations of our PRC subsidiaries and affiliated entities, which are subject to the foreign currency exchange regulations, have all been in accordance with these regulations. We will take steps to ensure that the future operations of these PRC entities are in compliance with these regulations.

Foreign exchange registration of offshore investment by PRC residents

Pursuant to the State Administration of Foreign Exchange’s Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents to Engage in Financing and Inbound Investment via Overseas Special Purpose Vehicles, or Circular No. 75, issued on October 21, 2005: (i) a PRC resident, including a PRC resident natural person or a PRC company, shall register with the local branch of the State Administration of Foreign Exchange before it establishes or controls an overseas special purpose vehicle, or SPV, for the purpose of overseas equity financing (including convertible debt financing); (ii) when a PRC resident contributes the assets of or its equity interests in a domestic enterprise into a special purpose vehicle, or engages in overseas financing after contributing assets or equity interests into a special purpose vehicle, such PRC resident shall register his or her interest in the special purpose vehicle and the change thereof with the local branch of the State Administration of Foreign Exchange; and (iii) when the special purpose vehicle undergoes a material event outside of China, such as change in share capital or merger and acquisition, the PRC resident shall, within 30 days from the occurrence of such event, register such change with the local branch of the State Administration of Foreign Exchange. PRC residents who are shareholders of special purpose vehicles established before November 1, 2005 were required to register with the local State Administration of Foreign Exchange branch before March 31, 2006.

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Under Circular No. 75, failure to comply with the registration procedures set forth above may result in penalties, including restrictions on a PRC subsidiary’s foreign exchange activities and its ability to distribute dividends to the special purpose vehicle.

On December 25, 2006, the People’s Bank of China promulgated the “Measures for the Administration of Individual Foreign Exchange,” and on January 5, 2007 the State Administration of Foreign Exchange further promulgated the implementation rules on those measures. Both became effective on February 1, 2007. According to the implementation rules, if individuals in the PRC participate in any employee stock ownership plan or stock option plan of an overseas listed company, those individuals must apply as a group through the company or a domestic agency to the State Administration of Foreign Exchange or the appropriate local branch for approval for any foreign exchange-related transactions concerning that plan.

Dividend distribution

The principal regulations governing dividend distributions by foreign owned enterprises include:

• The Wholly Foreign Owned Enterprise Law, promulgated by the National People’s Congress on April 12, 1986 and amended on October 31, 2000;

• The Wholly Foreign Owned Enterprise Law Implementing Rules, promulgated by the National People’s Congress on December 12, 1990 and amended on April 12, 2001;

• The Enterprise Income Tax Law, promulgated by the National People’s Congress on March 16, 2007; and

• The Implementation Rules on Enterprise Income Tax Law, promulgated by the State Council on December 6, 2007.

Under these regulations, wholly or partially foreign owned enterprises in the PRC may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. The distribution of dividends by a wholly foreign-owned enterprise out of China is subject to examination by banks designated by the State Administration of Foreign Exchange. In addition, based on PRC accounting standards, these wholly foreign-owned companies are required to set aside at least 10% of their after-tax profits each year, if any, to fund certain statutory reserve funds. A company is not required to set aside its profits to fund the reserve until its cumulative total reserve fund is equal to at least 50% of the company’s registered capital.

Under the new Enterprise Income Tax Law and its Implementation Rules, or the New EIT Law, dividends, interests, rent, royalties and gains on transfers of property payable by a foreign-invested enterprise in the PRC to its foreign investor who is a non-resident enterprise will be subject to a 10% withholding tax, unless such non-resident enterprise’s jurisdiction of incorporation has a tax treaty with the PRC that provides for a reduced rate of withholding tax.

Under the New EIT Law, an enterprise established outside the PRC with its “de facto management body” within the PRC is considered a resident enterprise and will be subject to the enterprise income tax at the rate of 25% on its worldwide income. A “de facto management body” is defined as an organizational body that effectively exercises overall management and control over production and business operations, personnel, finance and accounting, and properties of the enterprise. It remains unclear how the PRC tax authorities will interpret this definition. Notwithstanding the foregoing provision, the New EIT Law also provides that, if a resident enterprise directly invests in another resident enterprise, the dividends received by the investing resident enterprise from the invested enterprise are exempted from income tax, subject to certain conditions. However, it remains unclear how the PRC tax authorities will interpret the PRC tax resident treatment of an offshore company, like us, having indirect ownership interests in PRC enterprises through intermediary holding vehicles.

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Moreover, under the New EIT Law, foreign holders of ADSs or common shares may be subject to a 10% withholding tax upon dividends payable by us and gains realized on the sale or other disposition of ADSs or common shares, if such income is sourced from within the PRC and we are classified as a PRC resident enterprise.

C. Organizational Structure

Our corporate structure and contractual arrangements

We conduct a substantial portion of our operations in China through our contractual arrangements with certain of our affiliated entities and their shareholders, as well as certain of our direct subsidiaries in China. The material affiliated entities, along with their subsidiaries, on which we rely to carry out our operations in China are:

• Broadcast

• Beijing Mobile Interactive Co., Ltd, or M-in, an affiliated entity with mobile service provider licenses to operate wireless Mobile Value-Added Service (MVAS) platforms nationwide in China; and

• Beijing Hantang Yueyi Culture & Media Co., Ltd, or Beijing Hangtang, an affiliated entity that, through June 30, 2010 held the exclusive rights to sell advertising for and the right to provide content to Shaanxi Satellite Television.

• Advertising

• Shenzhen Active Trinity Advertising Co., Ltd., or Shenzhen Trinity, an affiliated entity that carries out advertising services;

• Beijing Taide Advertising Co., Ltd., or Beijing Taide, an affiliated entity whose subsidiaries include Chinese advertising agencies that also produce advertising;

• Beijing Xintai Huade Advertising Co., Ltd., or Xintai Huade, an affiliated entity that carries out advertising services;

• Shanghai Singshine Marketing Service Co., Ltd., or Shanghai Singshine Marketing, an affiliated entity that principally engages in below-the-line marketing;

• Beijing Jinjiu Tianyi Tianjiu Lianhe Advertising Co., Ltd., an affiliated entity that primarily engages in online advertising;

• Shanghai IF Advertisement Design and Production Co., Ltd., an affiliated entity that primarily engages in below-the-line marketing; and

• Shanghai Yifu Advertisement Design and Production Co., Ltd., or Shanghai Yifu, an affiliated entity that primarily engages in below-the-line advertising;

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The material subsidiaries on which we rely to carry out our operations in China are:

• Broadcast

• New China Media (Shanghai) Co., Ltd., or New China, which primarily engages in providing services to Century Media Advertising; and

• Xinhua Media Entertainment, which engages in the development, production and pre-production of film entertainment content.

• Advertising

• Active Advertising (Guangzhou) Co., Ltd., or Active Guangzhou, which primarily operates as advertising agent for PRC customers.

We conduct a portion of our operations in Hong Kong through the following entities:

• Advertising

• XSEL (Hong Kong) Limited, or Active Advertising Hong Kong, which primarily operates as an advertising agent to place advertising on media in Hong Kong; and

• JTT Advertising Limited, or JTT, which primarily engages in below-the-line marketing in Hong Kong.

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The following diagram illustrates our consolidated corporate structure and the place of incorporation for each of our continuing operations as of the date of this annual report.

(1) The remaining 25% equity interest in Xinhua Media Entertainment Limited is 17% owned by Leeding Media, LLC, a company owned by David U. Lee, and 8% owned by K-Jam Media, Inc., a company owned by Kia Jam.

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(2)	Contractual agreements consist of a secured loan agreement entered into by Wuxianshijie (Beijing) Information Technology Co. Ltd, or Wuxianshijie, and Gao Fei, the 50% shareholder of M-in, an exclusive equity purchase option agreement, an equity pledge agreement and a subrogation agreement entered into among M-In, Wuxianshijie and Gao Fei; a secured loan agreement entered into by Wuxianshijie and Xue Donghua, the 50% shareholder of M-in, an exclusive equity purchase option agreement, an equity pledge agreement and a subrogation agreement entered into among M-in, Wuxianshijie and Xue Donghua.
(3)	Contractual agreements consist of a secured loan agreement entered into among Jia Luo, Wan Jun, the 51% shareholder of Shanghai Yuan Zhi Advertising Co., Ltd., or Yuan Zhi, and Li Guang Jie, the 49% shareholder of Yuan Zhi, an exclusive equity purchase option agreement, an equity pledge agreement and a subrogation agreement entered into among Jia Luo, Yuan Zhi, Wan Jun and Li Guang Jie.
(4)	Contractual agreements consist of a secured loan agreement entered into among Nucom Media Technology (Beijing) Co., Ltd., or Nucom Media, Yang Yu-Tao, Luo Yan and Wang Hao, the three individual shareholders holding 25%, 25% and 50%, respectively, of the equity interest in Xin Chuan Online (Beijing) Information Technology Co., Ltd, or Xin Chuan Online (Beijing), an exclusive equity purchase option agreement, an equity pledge agreement and a subrogation agreement entered into among Nucom Media, Xin Chuan Online (Beijing), Yang Yu-Tao, Luo Yan and Wang Hao.
(5)	Contractual agreements consist of a secured loan agreement entered into among Nucom Media, Yang Yu-Tao and Luo Yan, the two individual shareholders each holding 50% of the equity interest in Beijing Shiji Xin Chuan Advertising Co., Ltd, or Beijing Shiji Xin Chuan Advertising, an exclusive equity purchase option agreement, an equity pledge agreement and a subrogation agreement entered into among Nucom Media, Beijing Shiji Xin Chuan Advertising, Yang Yu-Tao and Luo Yan.
(6)	Contractual agreements consist of a secured loan agreement entered into among Active Guangzhou, An Lizhang and Wang Yonghong, the two individual shareholders each holding 50% of the equity interest in Beijing Taide, an exclusive equity purchase option agreement, an equity pledge agreement and a subrogation agreement entered into among Active Guangzhou, Beijing Taide, An Lizhang and Wang Yonghong.
(7)	Contractual agreements consist of a secured loan agreement entered into by Active Guangzhou and Kuang Peiyue, the 50% shareholder of Xintai Huade, an exclusive equity purchase option agreement, an equity pledge agreement and a subrogation agreement entered into among Xintai Huade, Active Guangzhou and Kuang Peiyue, a secured loan agreement entered into by Active Guangzhou and Wang Yue, the 50% shareholder of Xintai Huade, an exclusive equity purchase option agreement, an equity pledge agreement and a subrogation agreement entered into among Xintai Huade, Active Guangzhou and Wang Yue.
(8)	Contractual agreements consist of a secured loan agreement entered into among Active Guangzhou, An Lizhang and Zhang Wenjin, the two individual shareholders each holding 50% of the equity interest in Shenzhen Trinity, an exclusive equity purchase option agreement, an equity pledge agreement and a subrogation agreement entered into among Active Guangzhou, Shenzhen Trinity, An Lizhang and Zhang Wenjin.
(9)	Contractual agreements consist of a secured loan agreement entered into by Guangzhou Excellent Consulting Service Co., Ltd, or Guangzhou Excellent, and Kuang Peiyue, the 50% shareholder of Shanghai Singshine Marketing, an exclusive equity purchase option agreement, an equity pledge agreement and a subrogation agreement entered into among Kuang Peiyue, Shanghai Singshine Marketing and Guangzhou Excellent; a secured loan agreement entered into by Guangzhou Excellent and Guo Jingjing, the 50% shareholder of Shanghai Singshine Marketing, an exclusive equity purchase option agreement, an equity pledge agreement and a subrogation agreement entered into among Guo Jingjing, Shanghai Singshine Marketing and Guangzhou Excellent.

(10)	Shanghai Singshine Marketing owns 60% of the equity interest in Shanghai Liangdian Zhongduan Zhanshi Co., Ltd., or Shanghai Liangdian, a PRC company. The remaining 40% of the equity interest in Shanghai Liangdian is owned as to 23% by Wu Xiuhui, 7% by Leng Liming, 5% by Hu Shengzhong and 5% by Yin Zijian.
(11)	The remaining 20% equity interest of Shangtuo Zhiyang is held by Wang Xiao Yu. Wang Xiao Yu is a manager of Shangtuo Zhiyang.

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PRC laws and regulations currently impose different levels of restrictions or prohibitions on investment of foreign and private capital in the media industry, including television, radio, newspapers, magazines, advertising and media content production, and the telecommunications industry. See “Item 4.B. Information on the Company — Business overview — Regulation — Regulations on investment of foreign and private capital in the media, advertising and telecommunications industries.” Our subsidiaries in China, which are considered foreign-invested entities, are limited in their abilities to engage in operations in the media, advertising and telecommunications industries. Accordingly, we operate our businesses in China primarily through our affiliated entities and their contractual arrangements with our strategic partners.

In our production and advertising businesses, our affiliated entities and their subsidiaries hold the requisite licenses and permits. In our broadcast and print businesses, our affiliated entities and their subsidiaries maintain some of the requisite licenses and permits to conduct the business, and enter into agreements with press offices, radio stations or television stations to provide them with various services and act as their advertising business party. See “Item 4.B. Information on the Company — Arrangements with partners and suppliers” for a description of those contractual relationships. See also “Item 3.D. Key information — Risk factors — Risks related to the regulation of our business and to our structure — Certain of our PRC operating companies or strategic partners have previously engaged or may currently engage in activities without appropriate licenses or approvals or outside the authorized scope of their business licenses or permitted activities. This could subject those companies to fines and other penalties, which could have a material adverse effect on our business.” We depend on these affiliated entities and their subsidiaries to operate a substantial portion of our businesses. We have entered into contractual arrangements with these affiliated entities and their shareholders, all PRC citizens, which enable us to:

• exercise effective control over these affiliated entities and their respective subsidiaries;

• receive a substantial portion of the economic benefits from the affiliated entity and its subsidiaries in consideration for the services provided us; and

• have an exclusive option to purchase all or part of the equity interests in the various affiliated entities and certain of their subsidiaries in each case when and to the extent permitted by PRC law.

We expect to continue to depend on these affiliated entities and their subsidiaries to operate a substantial portion of our businesses unless and until we are permitted under PRC laws and regulations to directly own and operate media-related businesses without constraints. Under certain agreements we have with the shareholders of these entities, we may exercise the option to acquire the affiliated entities, in part or in whole, to make them our direct subsidiaries.

Agreements that provide effective control over our affiliated entities

To obtain effective control over our affiliated entities, our subsidiaries loaned money to PRC citizens for the purpose of contributing the registered capital to or acquiring an equity interest in our affiliated entities, in each instance to become shareholders in their own names. With each contracting shareholder, our subsidiary entered into four agreements relating to each shareholder’s interest in the affiliated entity. The contracting shareholders have effective control over our affiliated entities as a result of their shareholding. Consequently, we have effective control over our affiliated entities.

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Loan agreement. Each contracting shareholder has entered into a loan agreement, as amended and restated, with our subsidiary, evidencing a zero interest loan granted to such shareholder. The contracting shareholder used the loan solely for the purpose of contributing or acquiring the registered capital of the affiliated entity. Each contracting shareholder also pledged all the equity interest in the affiliated entity as from time-to-time owned by him or her as security for the contracting shareholder’s obligations under the loan agreement. During the term or extended term of the loan, the contracting shareholder may not repay all or part of the outstanding principal without our subsidiary’s prior written consent. Our subsidiary may accelerate the loan repayment upon certain events, including if the contracting shareholder quits or is dismissed or if our subsidiary purchases the shares in accordance with the exclusive conditional equity purchase agreement.

Each loan is payable in cash or otherwise as agreed in writing by our subsidiary and as permitted under PRC laws including but not limited to, by way of transferring to our subsidiary or a designated third party all or part of the equity interest in the affiliated equity held by the contracting shareholder, at a purchase price in accordance with the exclusive conditional equity purchase option agreement between our subsidiary and the contracting shareholder described below. Set forth below is a list of all loan agreements entered into in connection with our consolidated VIEs:

• a loan agreement in the amount of RMB 100,000 ($15,000), entered into between Wan Jun, the 51 % shareholder of Yuan Zhi and Li Guang Jie, the 49% shareholder of Yuan Zhi, as borrowers, and Jia Luo, as lender;

• a loan agreement in the amount of RMB0.5 million ($73,000), entered into between Fang Quan, the 50% shareholder of Guangzhou Jingshi, as borrower, and EconWorld (Shanghai) Co., Ltd., or EconWorld Shanghai, as lender;

• a loan agreement in the amount of RMB0.5 million ($73,000), entered into between Wang Yong Hong, the 50% shareholder of Guangzhou Jingshi, as borrower, and EconWorld Shanghai as lender;

• a loan agreement in the amount of RMB0.3 million ($44,000), entered into between Zhang Wen Jin and Eric An, each a 50% shareholder of Shenzhen Trinity, as borrowers, and Active Guangzhou, as lender;

• a loan agreement in the amount of RMB10.0 million ($1.5 million), entered into between Eric An and Wang Yong Hong, each a 50% shareholder of Beijing Taide, as borrowers, and Active Guangzhou, as lender;

• a loan agreement in the amount of RMB2.5 million ($0.4 million), entered into between Kuang Peiyue, the 50% shareholder of Xintai Huade, as borrower, and Active Guangzhou, as lender;

• a loan agreement in the amount of RMB2.5 million ($0.4 million), entered into between Wang Yue, the 50% shareholder of Xintai Huade, as borrower, and Active Guangzhou, as lender;

• a loan agreement in the amount of RMB5.0 million ($0.7 million), entered into between Gao Fei, the 50% shareholder of M-in, as borrower, and Wuxianshijie, as lender;

• a loan agreement in the amount of RMB5.0 million ($0.7 million), entered into between Xue Donghua, the 50% shareholder of M-in, as borrower, and Wuxianshijie, as lender;

• a loan agreement in the amount of RMB0.5 million ($73,000), entered into between Kuang Peiyue, the 50% shareholder of Shanghai Singshine Marketing, as borrower, and Guangzhou Excellent, as lender;

• a loan agreement in the amount of RMB0.5 million ($73,000), entered into between Guo Jingjing, the 50% shareholder of Shanghai Singshine Marketing, as borrower, and Guangzhou Excellent, as lender;

• a loan agreement in the amount of RMB1.5 million ($0.2 million), entered into between Xue Donghua, the 50% shareholder of Shanghai Renhe Movie and Television Intermediary Co., Ltd., or Shanghai Renhe, as borrower, and Beijing Century Media, as lender;

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• a loan agreement in the amount of RMB1.5 million ($0.2 million), entered into between Wang Lingjun, the 50% shareholder of Shanghai Renhe, as borrower, and Beijing Century Media, as lender;

• a loan agreement in the amount of RMB0.5 million ($73,000), entered into between Wang Yue, the 100% shareholder of Shanghai Yifu, as borrower, and Shanghai IF, as lender;

• a loan agreement in the amount of RMB5.0 million ($0.7 million), entered into between Song Peng, the 50% shareholder of Beijing Hantang, as borrower, and Taihui, as lender;

• a loan agreement in the amount of RMB5.0 million ($0.7 million), entered into between Wu Chunming, the 50% shareholder of Beijing Hantang, as borrower, and Taihui, as lender;

• a loan agreement in the amount of RMB5.0 million ($0.7 million), entered into between Yang Yu-Tao, the 25% shareholder of Xin Chuan Online (Beijing), as borrower, and Nucom Media, as lender;

• a loan agreement in the amount of RMB5.0 million ($0.7 million), entered into between Luo Yan, the 20% shareholder of Beijing Shiji Xin Chuan Advertising, as borrower, and Nucom Media, as lender;

• a loan agreement in the amount of RMB10.0 million ($1.5 million), entered into between Wang Hao, the 50% shareholder of Beijing Shiji Xin Chuan Advertising, as borrower, and Nucom Media, as lender;

• a loan agreement in the amount of RMB0.1 million ($15,000), entered into between Yang Yu-Tao, the 50% shareholder of Beijing Shiji Xin Chuan Advertising, as borrower, and Nucom Media, as lender; and

• a loan agreement in the amount of RMB0.1 million ($15,000), entered into between Luo Yan, the 50% shareholder of Beijing Shiji Xin Chuan Advertising, as borrower, and Nucom Media, as lender.

Equity pledge agreement. Pursuant to the equity pledge agreements among our subsidiary, such subsidiary’s affiliated entity, and each contracting shareholder of such affiliated entity, the contracting shareholder has pledged all of his or her equity interests in the affiliated entity, to our subsidiary to secure the performance of his or her obligations under the secured loan agreement and the exclusive equity purchase option agreement described below. Our subsidiary holds a capital contribution certificate signed by the affiliated entity’s legal representative and affixed with the company seal as evidence of the pledged equity held by that shareholder. According to the PRC Property Rights Law, effective as of October 1, 2007, and Measures for the Registration of Equity Pledge with the Administration for Industry and Commerce, effective as of October 1, 2008, however, such pledge will be effective upon registration with the relevant administration for industry and commerce. We are still in the process of applying for such registration. The refusal of the relevant administration for industry and commerce to register these pledges may allow the shareholders to dishonor their pledges to us and re-pledge the shares to another entity or person. See “Item 3.D. Key information — Risk factors — Risks related to the regulation of our business and to our structure — The shareholders of our PRC affiliated entities may breach our agreements with them or may have potential conflicts of interest with us, and we may not be able to enter further agreements to extract economic benefits from these entities, which may materially and adversely affect our business and financial condition.”

Subrogation agreement. Each of our relevant subsidiaries has entered into a subrogation agreement with its respective affiliated entity and the contracting shareholders of that affiliated entity. Each contracting shareholder has agreed to unconditionally and irrevocably appoint a person as designated in writing by our subsidiary from time-to-time with his or her shareholder’s voting rights and other shareholder’s rights for representing the shareholder at the shareholders’ meeting, including the shareholder’s rights to sell or transfer the shareholder’s equity interest, change the registered capital, or merge, change the form, wind up or liquidate the entity. The contracting shareholder will provide all the necessary assistance to the appointee. Each subrogation agreement will terminate upon the repayment in full of the indebtedness incurred under the secured loan agreement.

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Agreements that provide the option to purchase the equity interest in the affiliated entity

Exclusive equity purchase option agreement. Each of our relevant subsidiaries has entered into an agreement with each contracting shareholder of such subsidiary’s affiliated entity, giving that subsidiary the right to purchase, directly or in the name of a nominee, from the respective contracting shareholder, in its sole discretion, part or all of the shareholder’s equity interests in the affiliated entity as and when permitted by PRC law. The purchase price to be paid by our subsidiary will be the same as the initial principal amount of the secured loan agreement between our subsidiary and the contracting shareholder, or any other amount as permitted by PRC law. Our subsidiary has the right to exercise the purchase right at any time by providing the shareholder with written notice 30 days in advance. The shareholder has agreed to execute with our subsidiary a binding equity transfer agreement upon the conclusion of the 30-day period or at such earlier time as agreed upon by the parties. The shareholder is required to use his or her best efforts to ensure timely finalization and government approval and registration of such equity transfer.

Agreements that transfer economic benefits to us

Service agreement. Beijing Hantang entered into a service agreement with Taihui on April 2, 2009. Under the service agreement, Taihui agreed to provide certain business advisory services to Beijing Hantang. In consideration for the services provided, Beijing Hantang will pay Taihui a service fee as the parties may agree from time-to-time. The service fee will be paid by Beijing Hantang within 14 business days after the issuance of an invoice. The agreement has an initial term of twenty years starting from April 2, 2009, and will be automatically renewed for subsequent ten-year terms. Moreover, during the term of the agreement, Taihui has the right to terminate the agreement at any time without compensation by serving a written notice to Beijing Hantang. In the event that either party materially breaches the agreement and fails to remedy such breach within 10 business days from the date it receives written notice of such breach, the other party has the right to terminate the agreement immediately by a written notice to the breaching party.

We have not yet entered into further service agreements with other affiliated entities. See “Item 3.D. Key information — Risk factors — Risks related to the regulation of our business and to our structure — The shareholders of our PRC affiliated entities may breach our agreements with them or may have potential conflicts of interest with us, and we may not be able to enter further agreements to extract economic benefits from these entities, which may materially and adversely affect our business and financial condition.”

As of the date of this annual report, we believe:

• the ownership structures of our variable interest entities, Beijing Hangtang, Jiaseng, Yuan Zhi, Beijing Taide, Shenzhen Trinity, Xintai Huade, Guangzhou Jingshi, M-in, Shanghai Singshine Marketing, Shanghai Renhe, and Shang Yifu, and our subsidiaries in China comply in all material respects with all existing PRC laws and regulations;

• the contractual arrangements among our PRC subsidiaries, affiliated entities and their shareholders governed by PRC law are valid, binding and enforceable, and will not result in any violation of PRC laws or regulations currently in effect; and

• the business operations of our subsidiaries in China and our affiliated entities and their respective subsidiaries comply in all material respects with existing PRC laws and regulations.

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, the PRC regulatory authorities may 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 media related businesses do not comply with PRC government restrictions on foreign investment in the media industry, we could be subject to severe penalties including being prohibited from continuing our operations. See “Item 3.D. Key information — Risk factors — Risks related to the regulation of our business and to our structure.”

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As of the date of this annual report, XFL, a public company incorporated in the Cayman Islands and listed on the Mothers Board of the Tokyo Stock Exchange, has approximately an 18.7% ownership interests in us. See “Item 7.B. Major shareholders and related party transactions — Related party transactions — Transactions with XFL or its subsidiaries — Loan agreements and foreign currency agreement between us and XFL or its subsidiaries.”

D. Property, Plants and Equipment

Our principal executive offices are located on premises comprising approximately 36,300 square feet in Beijing, China. We lease a total of approximately 97,600 square feet of office space, which includes approximately 75,200 square feet in Beijing, 12,900 square feet in Shanghai, 1,000 square feet in Guangzhou, 5,900 square feet in Hong Kong, 1,700 square feet in Shenzhen and 900 square feet in other cities in China.

Item 4A. Unresolved Staff Comments

Not applicable.

Item 5. Operating and Financial Review and Prospects

The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements and their related notes included in this annual report on Form 20-F. This report contains forward-looking statements. See “Forward-Looking Information.” In evaluating our business, you should carefully consider the information provided under the caption “Item 3.D. Key Information — Risk Factors” in this annual report on Form 20-F. We caution you that our businesses and financial performance are subject to substantial risks and uncertainties.

A. Operating Results

Our consolidated financial statements for the year ended December 31, 2007, which also are included in this annual report, reflect the operating results of five operating groups, namely Broadcast, Print, Advertising, Research and Production. As of the first quarter of 2008, our business groups have been integrated from five to three, with Production integrated into Broadcast and Research integrated into Advertising. In late 2009 we ceased operations of our print business and most of our advertising business. These revenues are categorized as discontinued operations for the years ended December 31, 2007, 2008 and 2009.

As we continue to evolve, we expect to face a number of challenges. In late 2009, in connection with our ongoing corporate repositioning and due to the performance of certain of our businesses, we sold or discontinued our print operations and much of our advertising business. We made this decision, in consultation with an outside financial advisor, so as to maximize operational efficiencies and better allocate our resources to focus on sports and entertainment media.

We have made acquisitions in rapid succession to build our integrated platform of services. We must integrate all these acquisitions successfully, as well as any future acquisitions. Certain of our businesses have incurred net losses in the past and we must position ourselves, through acquisitions and divestment of non-performing businesses, to be profitable in the future. In addition, we must adapt to continuing technological innovations and changes in the regulatory environment.

Acquisitions

We were established on November 7, 2005 by XFL. Our predecessor entity is EconWorld Media. We established and developed our operating groups through acquisitions and other transactions. See “Item 7.B. Major shareholders and related party transactions — Related party transactions — Transactions with XFL or its subsidiaries — Loan agreements and foreign currency agreement between us and XFL or its subsidiaries.”

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Broadcast. Our Broadcast Group was formed through the following transactions:

• Everfame. We acquired 100% of Everfame Development’s ordinary shares for cash consideration of $22.6 million on April 2, 2009. Everfame Development was incorporated under the laws of the British Virgin Islands on August 7, 2008. Everfame Development, its subsidiaries and VIEs, collectively, Everfame, are principally engaged in organizing cultural communication activities, designing and producing advertisements and acting as an advertising agent and publishing advertisements. Everfame had, through June 30, 2010 a long-term advertising agreement with Shaanxi Television Station through which Everfame held exclusive rights to provide advertising services to Shaanxi Satellite Television. The purpose of the acquisition was to expand our geographic reach and operating scope.

• M-in Group. We acquired 100% of the ordinary shares of East Alliance Limited on June 4, 2007 at an initial price of approximately $9.5 million. East Alliance Limited is an investment holding company for its wholly-owned subsidiaries and VIEs, collectively M-in Group. In addition to the initial consideration, the equity owners of M-in Group are entitled to additional consideration, 60% payable in cash and 40% in our common shares, based on a predetermined earnout formula applied to aggregate audited operating results through December 31, 2007 and 2008. M-in Group is a mobile service provider that provides mobile value added services such as wireless application protocol, or WAP, text messaging, multimedia messaging service, or MMS, and color ring back tone variously supported by major mobile telecommunication operators in China. M-in Group also has marketing and distribution channels including television, print, Internet and other media, and creates and manages a wide range of mobile and online interactive products. Based on M-in Group’s audited operating results through December 31, 2008, we recorded additional consideration totaling $7.4 million for the year ended December 31, 2009, which resulted in additional goodwill of $6.9 million. The additional consideration consisted of a cash payment of $6.2 million and consideration payable of 1.2 million as of December 31, 2009.

• Xinhua Media Entertainment. We established Xinhua Media Entertainment Limited, or Xinhua Media Entertainment, in April of 2008 and hold 75% of its equity interest. Xinhua Media Entertainment structures, finances and executes co-production film deals in China.

• Beijing Perspective. Through Beijing Century Media, an affiliated entity, we acquired 51.0% of the equity of Beijing Perspective Orient Movie and Television Intermediary Co., Ltd., or Beijing Perspective Orient, on July 28, 2006. Xinhua Financial Network financed the purchase price for this acquisition. On November 13, 2007, we acquired the remaining 49% of the equity of Beijing Perspective Orient for approximately $10.5 million, of which approximately $8.3 million was settled by the issuance of 2,043,347 of our common shares valued at $4.06 per share. Beijing Perspective Orient and its subsidiaries, collectively Beijing Perspective. Beijing Perspective engages in the production, distribution and syndication of Fortune China. Beijing Perspective ceased operations on December 31, 2009.

• Beijing Century Media. XFL, through a subsidiary, lent funds to two PRC citizens, who used the funds to buy a combined 100% equity interest in Beijing Century Media on September 9, 2005. On the same day, the subsidiary of XFL entered into a set of agreements with these two PRC citizens to give XFL effective control over Beijing Century Media. XFL transferred its control of Beijing Century Media to us through one of our affiliated entities on March 16, 2006 at a price of $11.4 million. This amount was included in our promissory notes to XFL and Xinhua Financial Network. Beijing Century Media ceased operations on December 31, 2009.

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Advertising. Our Advertising Group was formed through the following transactions:

• JCBN China. We acquired 100% of the ordinary shares of Shanghai Paxi Advertising Co., Ltd. and its subsidiaries, collectively JCBN China, on November 27, 2007 for an initial price of approximately $40.8 million. In addition, the equity owners of JCBN China are entitled to additional consideration, 60% payable in cash and 40% in our common shares based on a predetermined earnout formula applied to aggregate audited operating results through December 31, 2008 and 2009. For the year ended December 31, 2009, based on JCBN China’s audited operating results through December 31, 2008, we recorded additional consideration totaling $23.0 million, which resulted in additional goodwill of $23.0 million for the year ended December 31, 2009. The additional consideration consisted of $9.1 million paid by cash, $9.2 million settled by the issuance of 11,357,473 of our common shares and consideration payable of $4.7 million as of December 31, 2009. JCBN China is a leading advertising agency in China’s online property and imported spirits sectors. We entered into an agreement with the original selling shareholder of JCBN China in June 2010 to transfer our interest in JCBN China back to it.

• Profitown Group. We acquired 100% of the ordinary shares of Profitown Development Ltd. and its subsidiaries, collectively Profitown Group, on November 27, 2007 for an initial price of approximately $2.2 million. In addition to the initial consideration, the equity owners of Profitown Group are entitled to additional consideration, 60% payable in cash and 40% in our common shares, based on a predetermined earnout formula applied to aggregate audited operating results through December 31, 2008 and 2009. For the year ended December 31, 2009, based on Profitown Group’s audited operating results through December 31, 2008, we recorded additional consideration totaling $1.7 million, which resulted in additional goodwill of $0.3 million for the year ended December 31, 2009. The additional consideration consisted of $0.7 million settled by the issuance of 560,500 of our common shares and consideration payable of $1.0 million as of December 31, 2009. Profitown Group is principally engaged in below-the-line marketing. We entered into an agreement with the original selling shareholder of Profitown Group in June 2010 to transfer our interest in Profitown Group back to it.

• Singshine Marketing. We acquired 100% of Singshine (Holdings) Hongkong Ltd.’s ordinary shares, and its subsidiaries and VIEs, collectively Singshine Marketing, on June 11, 2007 for an initial price of approximately $6.4 million. In addition, the shareholders of Singshine Marketing are entitled to additional cash consideration based on a predetermined earnout formula applied to aggregate audited operating results through December 31, 2007, 2008 and 2009. Singshine Marketing is engaged in below-the-line marketing services. For the year ended December 31, 2009, based on Singshine Marketing’s audited operating results through December 31, 2008, we recorded additional consideration totaling $7.4 million, which resulted in additional goodwill of $7.4 million for the year ended December 31, 2009. The additional consideration consisted of a cash payment of $5.4 million and consideration payable of $2.0 million as of December 31, 2009.

General factors affecting our results of operations

We have benefited significantly from China’s overall economic and population growth. The overall economic and population growth and the increase in the gross domestic product per capita in China have led to a significant increase in spending on advertising in China. Adverse changes in the economic or political conditions in China may have a material adverse effect on the media industry in China and advertising spending, which in turn may harm our business and results of operations.

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Specific factors affecting our results of operations

While our business is affected by factors relating to the media industry in China generally, we believe that our results of operations are also affected by company-specific factors. We believe that the results of operations of our broadcast and advertising operations are affected by, among other factors, the following:

• the quality of the content and ratings of our strategic partners’ broadcast programs;

• the reach and timing of our strategic partners’ broadcasts;

• the quality of the advertising we produce for advertisers;

• the pricing of our advertising;

• the pricing and quality of our marketing services, including events organization;

• the quality of the programming we create;

• the popularity of the programs; and

• the pricing of our television programs and production services.

Results of Operations for Continuing Operations

Revenues

Net revenues from continuing operation. For the years ended December 31, 2007, 2008 and 2009, we generated total net revenues from continuing operations of $83.5 million, $121.5 million and $99.2 million, respectively. Our revenues are net of PRC business taxes, advertising rate adjustments and rebates.

We currently derive revenues from the following sources:

• advertising services, including our below-the-line services, which accounted for 90.2%, 82.0% and 78.6% of our total net revenues for the years ended December 31, 2007, 2008 and 2009, respectively; and

• advertising sales, which accounted for 9.8%, 18.0% and 21.4% of our total net revenues for the years ended December 31, 2007, 2008 and 2009, respectively.

Advertising services revenues. We generate advertising services revenues for:

• Advertising and user service fees for mobile value-added services (by the Broadcast Group). We generate revenues by providing mobile value-added services. We recognize these revenues when services are delivered to mobile users. In June 2007, we began recognizing revenues from advertising and user service fees for mobile value-added services. Our consolidated results of operations for the year ended December 31, 2007 increased as we acquired our mobile value-added services operations in June 2007.

• Marketing services (by the Advertising Group). We generate revenues primarily for online real estate, spirits and events organization. The fees we charge for marketing services vary, depending primarily on competition and our estimated costs of providing the services. We recognize these revenues when the services are provided.

• Acting as advertising agent to place advertisements on certain programs aired by various television stations, on billboards on university campuses in Shanghai and in certain print and electronic media (by the Advertising Group). We categorize our revenues for providing consulting and advisory services as advertising services revenues. We recognize these revenues when the services are provided.

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• Designing and producing television, radio, print and billboard advertisements (by the Advertising Group). We generate revenues from advertising broadcast on various television stations during certain programs. We also generate revenues from advertising on billboards placed on some university campuses in Shanghai and from advertising in certain print and electronic media. We may also provide additional services in relation to the placement and sales of advertisements, including the creation of the advertising or research services as part of our service package. We recognize these revenues when the related advertisements are aired on television, placed on the billboards or published in the print or electronic media, respectively.

Pricing for our advertising services is primarily computed on a project basis, based upon a defined set of criteria from the client. We meet with our advertising services clients to put together a concrete project plan and description, and then estimate the total number of hours required for completion. Our pricing structure is computed by multiplying a base hourly fee by the number of hours required for project completion plus a premium fee based upon the difficulty of the project. Pricing for our below-the-line services is also computed on a project basis, based upon working costs required for project completion, including third party costs, plus a commission for third party costs and a premium fee based upon project difficulty. Pricing for our mobile value-added services is computed on a product download basis, per an agreed price with the mobile service provider based upon the number of products downloaded by mobile users.

Advertising sales revenues. We generate advertising sales revenues from the following media sources:

• Shaanxi Satellite Television (by the Broadcast Group). Primarily through Everfame Development’s affiliated entity, through June 30, 2010 we held exclusive rights to sell advertising in and the right to provide content to Shaanxi Satellite Television. In April 2009, we began generating revenues from advertising sales, sponsorship and sponsored programming on Shaanxi Satellite Television. Our advertising agency agreement with Shaanxi Television Station was terminated by Shannxi Television Station on June 30, 2010 due to our failure to make required payments. As of December 31, 2009 there were approximately $68.8 million in long-term liabilities related to the agreement, which were recorded in our consolidated balance sheet. Due to the termination of this agreement, this balance was reduced by $64.2 million. As of December 31, 2009 the related intangible assets were the advertising agency agreement of $19.3 million and the television program and film rights of $4.4 million. We derived revenue of $20.8 million from this agreement for the year ended December 31, 2009, which represents 14.9% of our total revenue for that period. Everfame will be classified as a discontinued operation in the second quarter of 2010.

• Outdoor advertising (by the Advertising Group). We generate revenues from selling advertising space on traditional outdoor billboards, large-scale visual displays on architectural surfaces and inflatable billboards. We have the exclusive right to sell advertisements on these surfaces, and typically other advertising agents engage us to place such advertisements. We receive payments through these agents or, when an advertiser directly advertises with us, from the advertiser directly. We recognize these revenues when the related advertisements are displayed. Our consolidated results of operations for the year ended December 31, 2006 did not include these revenues as we acquired Xinhua Finance Media (Convey) Ltd. (formerly “Good Speed Holdings Limited”) and its subsidiaries, collectively Convey, a major outdoor advertising operator in Hong Kong and across southern China, on July 2, 2007. Our consolidated results of operations for the years ended December 31, 2007 and 2008 included these revenues from this date of the acquisition. We disposed of Convey on December 31, 2008.

We price our advertising depending upon the type of advertising we are providing and the media outlet where the advertisement is placed. Even within one outlet, prices can vary greatly. For example, television advertisement prices are highly sensitive to the time of the day an advertisement is shown. Our pricing also varies according to factors that affect the demand for advertising, such as the ratings of our strategic partners’ broadcast programs, the reach and timing of our strategic partners’ broadcast and circulation numbers, and the composition and location of the readership of our strategic partners’ publications.

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Operating costs and expenses

For our continuing operations, our operating costs and expenses consist of cost of revenues, selling and distribution expenses and general and administrative expenses. The following table sets forth the components of our operating costs and expenses, both in dollar amounts and as a percentage of total net revenues for the periods indicated, for our continuing operations.

	Year Ended December 31,
	2007				2008				2009
	$		%		$		%		$		%
	(In thousands, except percentages)
Total net revenues		83,478		100.0		121,487		100.0		99,231		100.0
Operating costs and expenses:
Cost of revenues
Advertising services		54,255		65.0		71,230		58.6		61,888		62.4
Advertising sales		3,805		4.6		9,483		7.8		23,554		23.7
Selling and distribution		5,662		6.8		10,683		8.8		7,708		7.8
General and administrative		17,890		21.4		45,604		37.5		27,762		28.0
Impairment charges		—		—		159,938		131.7		176,772		178.1
Loss on disposal of subsidiaries		—		—		4,721		3.9		25,640		25.8
Total operating costs and expenses		81,612		97.8		301,659		248.3		323,324		325.8

Cost of revenues. Our cost of revenues primarily consists of the following two components:

• Advertising services. Advertising services costs primarily consist of our direct costs to secure advertising time or space with various broadcast and print media, costs to produce advertisements, mobile value-added services costs, marketing services costs and research costs. Mobile value-added services costs represent our direct costs of providing mobile value-added services. Marketing services costs represent our direct costs of providing marketing services, including events organization.

• Advertising sales. Advertising sales costs primarily consist of (i) the fees we paid to Shaanxi Television Station and amortization of these fees, in return for advertising revenues generated from Shaanxi Satellite Television and (ii) costs to maintain and operate our outdoor advertising network.

We anticipate that our total cost of revenues will continue to increase as we continue to expand our operations. In particular, we expect our content production costs will increase as we leverage on our content production capabilities to produce content for the media platforms we use. Also, we expect the cost for acquiring media for our advertising services to increase as we expand our business in this area.

Selling and distribution expenses. Our selling and distribution expenses primarily consist of amortization of intangible assets, salaries and benefits for our sales and marketing personnel and promotional and marketing expenses. We expect that our selling and distribution expenses will increase significantly as we further expand our operations.

General and administrative expenses. Our general and administrative expenses primarily consist of compensation and benefits of administrative staff, marketing costs, fees, office rent and travel expenses. We expect that our general and administrative expenses will increase in the near term as we incur additional costs in connection with the re-positioning of our business. In addition, we incurred increased costs when we became a publicly listed company in the United States. In particular, compliance with the Sarbanes-Oxley Act, such as Section 404 thereof which requires public companies to include a report of management on the effectiveness of such company’s internal control over financial reporting, will increase our costs. We incur costs associated with public company reporting requirements, such as the requirements to file an annual report and other event-related reports with the Securities and Exchange Commission.

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Impairment charges. Our impairment charges for the year ended December 31, 2009 primarily consisted of impairment of goodwill of $71.5 million and intangible assets of $98.4 million, which was the result of the slowdown in the global economy and termination of business units resulting from our repositioning to the sports and entertainment arenas. Our impairment charges for the year ended December 31, 2008 primarily consisted of (i) impairment of goodwill of $137.3 million and intangible assets of $11.9 million, which was the result of a decrease in the fair value of the reporting unit affected by the slowdown in the global economy and our repositioning to sports and entertainment and (ii) impairment of a promissory note issued by Sino Investment Holdings Limited, or Sino Investment, with accrued interest in the aggregate of $8.5 million due to Sino Investment’s default with respect to interest payments on the promissory note.

Loss on disposal of subsidiaries. Our loss on disposal of subsidiaries for the year ended December 31, 2009 represented provision for consideration receivable of $25.6 million for disposal of our 85% equity interest in Convey driven by uncertain visibility for settlement of certain amounts receivable as determined during the fourth quarter of 2009. Our loss on disposal of subsidiaries for the year ended December 31, 2008 represented a loss on the disposal of our 85% equity interest in Convey.

Share-based compensation expenses

See “Item 6.B. Directors, senior management and employees — Compensation of Directors and Executive Officers — Share options.” Because our option plan covers all of our employees, the change in the amount of share-based compensation expenses will primarily affect our reported net income, earnings per share and our operating costs and expenses, which include general and administrative expenses.

We are required to recognize share-based compensation as compensation expense in our statement of operations based on the fair value of equity awards on the grant date, with the compensation expense recognized over the period in which the recipient is required to provide service in exchange for the award (usually the vesting period) using the graded attribution method.

We currently use the Binomial option pricing model to estimate the fair value of our share-based awards. The determination of the fair value of share-based payment awards utilizing the Binomial model is affected by our stock price and a number of assumptions, including expected volatility, risk-free interest rates, expected dividends and the trigger price multiple. The risk-free rate is based on the yield to maturity of the US Treasury Bond as of the grant date with maturity closest to the relevant award expiry date. Because we do not have sufficient history to estimate the volatility for our shares, the expected volatility was based on the historical volatilities of comparable publicly traded companies engaged in similar lines of business. The trigger price multiple represents the value of the underlying stock as a multiple of the exercise price of the option or warrant which, if achieved, results in exercise of the option or warrant. The trigger price multiple is estimated based on an empirical study on the exercise behavior of employee stock options. Employees who received our share-based awards are assumed to exhibit similar behavior. These assumptions are inherently uncertain. Changes in these assumptions could significantly affect the amount of employee share-based compensation expense we recognize in our consolidated financial statements.

Set forth below is a summary of our share-based awards granted in 2007, 2008 and 2009 and for the period through May 31, 2010:

• We granted the following restricted common shares to our Chief Executive Officer:

	Number of			Fair Value of
	Common		Share Purchase	Non-vested		Type of
Grant Date	Shares Granted		Price	Shares		Valuation
April 2, 2010		6,000,000	Par value	$	0.33	Market approach

• We granted the following restricted common shares to certain executives and employees:

	Number of			Fair Value of
	Common		Share Purchase	Restricted Class A		Type of
Grant Date	Shares Granted		Price	Common Shares		Valuation
January 23, 2008		5,536,000	Par value	$	2.24	Market approach
June 23, 2009		180,000	Par value	$	0.37	Market approach
July 11, 2009		250,000	Par value	$	0.42	Market approach
December 10, 2009		800,000	Par value	$	0.55	Market approach

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• We granted options to our employees and consultants as follows:

	Number of				Fair Value of
	Common				Underlying
	Shares		Option		Common		Fair Value of
	Underlying		Exercise		Shares at		Option at		Type of
Grant Date	Options Granted		Price		Grant Date		Grant Date		Valuation
April 25, 2007		90,000		6.50		5.20		1.85	Market Approach
September 26, 2007		120,000		4.39		4.39		1.85	Market Approach
April 1, 2008		400,000		1.325		1.62		0.97	Market Approach
April 30, 2008		60,000		1.64		2.075		1.39	Market Approach
June 13, 2008		120,000		1.265		1.265		0.77	Market Approach
January 8, 2009		1,000,000		0.305		0.325		0.18	Market Approach
December 31, 2009		160,000		0.425		0.425		0.24	Market Approach

(1) Total number of options granted in 2006 was 11,198,180, of which an aggregate of 3,072,596 options were exercised during 2007 and 2008 while 2,961,255 options lapsed during 2006, 2007, 2008 and 2009, mostly due to termination of employment.

Options representing 7,087,663 common shares were outstanding as of December 31, 2009.

Our total share-based compensation expenses accounted for $3.1 million, or 3.7% of our total net revenues, $12.5 million, or 10.3% of our total net revenues, and $2.4 million, or 2.4% of our total net revenues, for the years ended December 31, 2007, 2008 and 2009, respectively.

Results of Operations for Discontinued Operations

Revenues

Net revenues from discontinued operations. For the years ended December 31, 2007, 2008 and 2009, we generated total net revenues from discontinued operations of $51.3 million, $64.5 million and $41.4 million, respectively. Our revenues are net of PRC business taxes, advertising rate adjustments and rebates.

We derive revenues from discontinued operations from advertising services, advertising sales, content production sales and publishing services.

Advertising services revenues. We generated advertising services revenues from discontinued operations for:

• Acting as advertising agent to place advertisements on certain programs aired by Inner Mongolia Satellite Television (by our Broadcast Group). In January 2007, we began recognizing revenues from advertising, sponsorship and sponsored programming directly rather than through Shanghai Camera, and at that point began to categorize our revenues for advertising, sponsorship and sponsored programming in relation to Inner Mongolia Satellite Television as advertising sales revenues. As we terminated this business in 2009, the revenue was reclassified as discontinued operations for the years ended December 31, 2007, 2008 and 2009.

• Research services (by the Advertising Group). We generated revenues for providing research services to companies relating to market characteristics, consumer preferences and opinions with respect to advertising and media content, as well as business and technology issues. The fees we charged for research projects varied, depending on competition and our estimated costs for providing the research services. We recognized these revenues when the reported data was accepted by the customer. As we terminated this business in 2009, the revenue was reclassified as discontinued operations for the years ended December 31, 2007, 2008 and 2009.

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Pricing for our advertising services was primarily computed on a project basis, based upon a defined set of criteria from the client. We met with our advertising services clients to put together a concrete project plan and description, and then estimated the total number of hours required for completion. Our pricing structure was computed by multiplying a base hourly fee by the number of hours required for project completion plus a premium fee based upon the difficulty of the project.

Advertising sales revenues. We generated advertising sales revenues from the following media sources:

• Inner Mongolia Satellite Television (by the Broadcast Group). Primarily through Upper Step Holdings Limited, or Upper Step Holdings’ subsidiaries and affiliated entities, we had a strategic partnership with Shanghai Camera, the content and advertising provider to Inner Mongolia Satellite Television. In December 2006, we began recognizing revenues from advertising sales, sponsorship and sponsored programs directly, rather than through Shanghai Camera, as the services were performed, which revenues were categorized as advertising sales revenues. In the year ended December 31, 2008, we generated revenues from advertising sales, sponsorship and sponsored programming on Inner Mongolia Satellite Television through our strategic partnership with Shanghai Camera, which had the exclusive rights to sell advertising for Inner Mongolia Satellite Television. As we terminated this business in 2009, the revenue was reclassified as discontinued operations for the years ended December 31, 2007, 2008 and 2009.

• China Radio International’s EasyFM stations in Beijing and Shanghai (by the Broadcast Group). We generated revenues from selling advertising time slots and sponsorship on China Radio International’s EasyFM stations in Beijing and Shanghai. We recognized these revenues when the related advertisements were broadcast. As we terminated this business in 2009, the revenue was reclassified as discontinued operations for the years ended December 31, 2007, 2008 and 2009.

• Channel FM107.7, FM103.6 and FM90.0 of the Guangdong People’s Radio Station (by the Broadcast Group). We generated revenues from selling advertising time slots and sponsorships on several radio channels of the Guangdong People’s Radio Station, including FM107.7, FM103.6 and FM90.0. We recognized these revenues when the related advertisements were broadcast. As we terminated this business in 2009, the revenue was reclassified as discontinued operations for the years ended December 31, 2007, 2008 and 2009.

• Economic Observer (by our print business). We generated revenues from selling advertising space in the Economic Observer. We previously held the exclusive rights to sell advertisements for the Economic Observer, and typically other advertising agents engaged us to place advertisements on its pages. We received payments through these agents or, when an advertiser directly advertised with us, from the advertiser. We recognized these revenues when the related advertisements were published. As we discontinued the operation of Economic Observer in 2009, the revenue was reclassified as discontinued operation for the years ended December 31, 2007, 2008 and 2009.

• Money Journal and Chinese Venture (by our print business). We generated revenues from selling advertising space in the Money Journal and Chinese Venture. Most advertisements placed in these magazines result in revenues to us, except for those advertisements placed in Money Journal by Dow Jones, most of which result in revenues to Dow Jones. See “Item 4.B. Information on the Company — Business overview — Arrangements with partners and suppliers — Our Print Group’s relationship with Dow Jones.” We generated some advertising sales revenues directly from advertisers, and some through agents. We recognized these revenues when the related advertisements were published. As we terminated this business in 2009, the revenue was reclassified as discontinued operations for the years ended December 31, 2007, 2008 and 2009.

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We priced our advertising depending upon the type of advertising we provided and the media outlet where the advertisement was placed. Even within one outlet, prices can vary greatly. For example, television advertisement prices are highly sensitive to the time of the day an advertisement is shown. Our pricing also varied according to factors that affect the demand for advertising, such as the ratings of our strategic partners’ broadcast programs, the reach and timing of our strategic partners’ broadcast and the circulation numbers, and the composition and location of the readership of our strategic partners’ publications.

Content production revenues. Our content production revenues included revenues from sales of television programs, broadcast design, production of animation, visual effects for television commercials and films and post-production services. As we terminated this business in 2009, the revenue was reclassified as discontinued operations for the years ended December 31, 2007, 2008 and 2009.

We produced television programs, including drama series, and purchased the rights to distribute some drama series that were produced by other companies. We sold the rights to broadcast these programs to television stations and channels. We typically retained the distribution rights, and at the end of the contract we re-sold the broadcast rights to another buyer. We recognized revenues for television programs when the master tape of a television program became available for first airing under the terms of the relevant licensing agreement we entered into with a television station or channel. As we terminated this business in 2009, the revenue was reclassified as discontinued operations for the years ended December 31, 2007, 2008 and 2009.

We engaged in broadcast design for television channels. Broadcast design mainly includes design of television channel logos, production of trailers for advertising the television channels, and image consulting and branding for the television channels. We recognized revenues when products were delivered to and accepted by all customers or as our services were provided. As we terminated this business in 2009, the revenue was reclassified as discontinued operations for the years ended December 31, 2007, 2008 and 2009.

Our pricing for these services varied. Our average price for television programs, including drama series, varied substantially upon the quality and popularity of the programs. Our pricing for broadcast design, animation production and post-production services was usually determined through negotiations with our customers.

Publishing services revenues. Since September 20, 2006, publishing services revenues included revenues we generated in connection with our management and information consulting services relating to the subscriptions and sales of Money Journal. As we terminated this business in 2009, the revenue was reclassified as discontinued operations for the years ended December 31, 2007, 2008 and 2009.

Guangzhou Jingshi, our affiliated entity, provided management and information consulting services to the publisher of Money Journal. In return, Guangzhou Jingshi received a fee from Money Journal. As we terminated this business in 2009, the revenue was reclassified as discontinued operations for the years ended December 31, 2007, 2008 and 2009.

We also recognized publishing services revenues we generated in connection with our management and information consulting services relating to the revenues from subscriptions and sales of Chinese Venture. Our consolidated results of operations for the years ended December 31, 2007 and 2008 included these revenues as this magazine first began to generate revenues in January 2007. Although we no longer act as a book publishing agent, for the years ended December 31, 2006 and 2007, we engaged in this business and received revenues from this source. As we terminated this business in 2009, the revenue was reclassified as discontinued operations for the years ended December 31, 2007, 2008 and 2009.

We shared a portion of the revenue from subscriptions and sales of these magazines based on terms mutually agreed with the publisher. The subscription fees and the price of the magazines were determined by the publishers. As we terminated this business in 2009, the revenue was reclassified as discontinued operations for the years ended December 31, 2007, 2008 and 2009.

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Operating costs and expenses

Our operating costs and expenses from discontinued operations consist of cost of revenues, selling and distribution expenses and general and administrative expenses. The following table sets forth the components of our operating costs and expenses, both in dollar amounts and as a percentage of total net revenues for the periods indicated, in all cases for our discontinued operations.

	Year Ended December 31,
	2007				2008				2009
	$		%		$		%		$		%
	(In thousands, except percentages)
Total net revenues		51,361		100.0		64,544		100.0		41,429		100.0
Operating costs and expenses:
Cost of revenues		24,039		46.8		33,779		52.3		26,108		63.0
Selling and distribution		9,215		17.9		12,263		19.0		7,247		17.5
General and administrative		6,459		12.6		6,464		10.0		13,119		31.7
Impairment charges		—				72,660		112.6		118,044		284.9
Loss on disposal of subsidiaries		—				—				1,940		4.7
Total operating costs and expenses		39,713		77.3		125,166		193.9		166,458		401.8

Cost of revenues. Our cost of revenues for the years ended December 31, 2007, 2008 and 2009 primarily consisted of (i) our direct costs to secure advertising space with various print media and research costs for our advertising services, (ii) fees we pay to our strategic partners, and amortization of these fees, in return for advertising revenues generated from Inner Mongolia Satellite Television, China Radio International’s EasyFM station in Beijing and Shanghai, channel FM107.7, FM103.6 and FM90.0 of the Guangdong People’s Radio Station, Money Journal, Chinese Venture and the Economic Observer, (iii) direct costs we incur in producing television programs, including production overhead, development costs and pre-production costs, the cost of purchasing distribution rights for programs produced by other production companies, salaries and the purchase of software and hardware for our content production and (iv) costs incurred relating to the publication and distribution of Money Journal and certain books as part of our publishing services.

Selling and distribution expenses. Our selling and distribution expenses for the years ended December 31, 2007, 2008 and 2009 primarily consisted of salaries and benefits for our sales and marketing personnel and promotional and other marketing expenses.

General and administrative expenses. Our general and administrative expenses for the years ended December 31, 2007, 2008 and 2009 primarily consisted of compensation and benefits of administrative staff, allowance for doubtful debts and office rental payments.

Impairment charges. Our impairment charges for the year ended December 31, 2009 primarily consisted of impairment of goodwill of $11.7 million and intangible assets of $86.2 million, which was the result of (i) the release of Rule 61 in October 2009 by the State Administration of Radio, Film and Television, which substantially cuts the time allowed for brand advertisements in each hour of programming and the amount of time allotted for infomercials and (ii) the loss of major customers to competitors in our advertising business. Our impairment charges for the year ended December 31, 2008 primarily consisted of (i) impairment of goodwill of $43.5 million and intangible assets of $13.7 million which was the result of a decrease in the fair value of the reporting units affected by the slowdown in the global economy and our repositioning to sports and entertainment.

Loss on disposal of subsidiaries. Our loss on disposal of subsidiaries for the year ended December 31, 2009 represented loss on the disposal of Beijing Century Media Advertising Co., Ltd.

Taxation

We and each of our subsidiaries, including affiliated entities, file separate income tax returns.

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The Cayman Islands, the British Virgin Islands and Hong Kong

Under the current laws of the Cayman Islands and the British Virgin Islands, we and our subsidiaries incorporated in the British Virgin Islands are not subject to income or capital gains taxes. In addition, dividend payments are not subject to withholding tax in those jurisdictions. Our subsidiaries incorporated in Hong Kong have historically been subject to a profits tax rate of 17.5% on assessable profits. The Hong Kong government, in its 2008-2009 financial budget, proposed lowering the Hong Kong profits tax rate from 17.5% to 16.5%. This proposal was enacted on June 26, 2008. Payment of dividends is not subject to withholding tax in Hong Kong.

PRC

Pursuant to the PRC enterprise income tax laws, enterprise income tax is calculated based on taxable income. Under the PRC tax laws effective prior to January 1, 2008, companies established in China were generally subject to a state and local enterprise income tax, or EIT, at statutory rates of 30% and 3%, respectively. The Enterprise Income Tax Law enacted by the National People’s Congress of China, or the New EIT Law, became effective on January 1, 2008. Under the New EIT Law, foreign-invested enterprises, or FIEs, and domestic companies are subject to enterprise income tax at a uniform rate of 25%.

Under the New EIT Law, most of our subsidiaries, including affiliated entities, in China are subject to the standard enterprise income tax rate at the rate of 25%. The enterprise income tax is calculated based on taxable income under PRC GAAP. For some entities, the enterprise income tax is calculated based on the actual revenue or expense at a deemed tax rate according to the local practices of the respective local tax bureaus.

In addition, our subsidiaries and affiliated entities in China are subject to a 3.0% to 5.0% business tax on gross revenues generated from providing services. Business tax generally includes two additional fees, the city construction fee and the education fee, which are generally calculated at 7.0% and 3.0%, respectively, on business tax. Our advertising revenues are generally also subject to an additional 3.0% culture charge. However, some of our subsidiaries, including affiliated entities, in China are entitled to certain preferential income treatments described below.

The State Administration of Taxation and its delegates are authorized to grant exemptions from enterprise income tax of up to two years to newly established domestic companies that are engaged in consulting services or technology services, are in the information industry, or are cultural media enterprises. Some of our subsidiaries, including consolidated entities, are entitled to tax exemptions. Also, Shanghai Yuan Zhi Advertising Co., Ltd., an affiliated entity in our Broadcast Group, and Beijing Jingguan Xincheng Advertising Co., Ltd., a subsidiary of an affiliated entity, which was part of our print business, were granted exemptions from enterprise income tax for 2006 and 2007. Beijing Jingshi Jingguan Advertising Co., Ltd., or EWEO, a subsidiary of an affiliated entity in our print business, received an exemption from enterprise income tax for 2006 and 2007. Xintai Huade Advertising Co., Ltd., an affiliated entity in our Advertising Group, was granted an exemption from enterprise income tax for 2006 and 2007. Beijing Century Media received an exemption from enterprise income tax for 2005 and 2007. Beijing Century Workshop Communications Co., Ltd., a subsidiary of an affiliated entity in our Broadcast Group, received exemptions from enterprise income tax in 2005, 2006 and 2007. Shanghai Renhe Movie and Television Intermediary Co. Ltd. received an exemption from enterprise income tax in 2007 and 2008.

Preferential tax treatments granted to some of our consolidated entities are subject to review and may be adjusted or revoked at any time. In addition, if the government regulations or authorities were to phase out preferential tax benefits currently granted to newly established domestic companies that are engaged in consulting services, technology services or the information industry, our consolidated entities that have been entitled to such preferential tax benefits would be subject to the standard statutory tax rate, which is 25% as of January 2008.

Prior to December 31, 2008 one of our subsidiaries in China, Beijing Mobile Interactive Co., Ltd., applied for the New and High-Tech Enterprise (“HNTE”) status that would allow for a reduced 15% tax rate under China’s New EIT Law. Approval of the application was granted as of December 24, 2008. Pursuant to the New EIT Law, this subsidiary is entitled to preferential tax treatment with full tax exemption from PRC EIT for two years starting from its first profitable year of operations, followed by 50% reduction in the EIT rate for the next three years. This subsidiary was exempt from EIT for the years ended December 31, 2004, 2005 and 2006 and enjoyed a 50% reduction in the EIT rate for the years ended December 2007, 2008 and 2009, respectively, and the applicable income tax rate for 2010 is 15%. The HNTE status will expire at the end of 2010 and the subsidiary is expected to be able to retain the HNTE status for another three years during the period from 2011 to 2013. This subsidiary had no deferred tax balances as of December 31, 2009.

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On April 21, 2010 the State Administration of Taxation issued Circular 157 which is titled Further Clarification on Implementation of Preferential EIT Rate during Transition Periods, or Circular 157. Circular 157 seeks to provide additional guidance on the interpretation of certain preferential tax rates under the transition rules of the New EIT Law. Prior to Circular 157, we interpreted the law to mean that if an entity was in a period where it was entitled to a 50% reduction in the tax rate and was entitled to a 15% rate of tax due to its HNTE status under the New EIT Law, it was thus entitled to pay tax at a rate of 7.5%. Circular 157 indicates that such an entity is instead entitled to pay tax at either 15% or 50% of the standard PRC tax rate. The effect of Circular 157 is retrospective and would apply to 2008 and 2009. As a consequence of Circular 157, the preferential tax rate enjoyed by our subsidiary which qualified as a HNTE during its reduction period in 2008 and 2009 will be 12.5% for the relevant years rather than 7.5%, which is the rate we used prior to the issuance of Circular 157. We believe that Circular 157 is similar to a change in tax law, the cumulative effect of which should be reflected in the period of the change. As a result, we will recognize an additional tax liability in the second quarter of 2010 of approximately $0.2 million in respect of this change.

Furthermore, under the New EIT Law, a “resident enterprise,” which includes an enterprise established outside of China with “de facto management bodies” within China, is subject to PRC income tax on its global income. If the PRC tax authorities subsequently determine that we and our subsidiaries established outside of China should be deemed as a resident enterprise, then we and our subsidiaries established outside of China will be subject to PRC income tax at a rate of 25%. The New EIT Law provides, however, that dividends distributed between qualified resident enterprises are exempted. According to the Implementation Regulations of the Enterprise Income Tax Law, the qualified dividend and profit distribution from equity investments between resident enterprises shall refer to investment income derived by a resident enterprise from the direct investment in other resident enterprises with exception to the investment income from circulating stocks issued publicly by resident enterprises and traded on stock exchanges where the holding period is less than 12 months. As the term “resident enterprises” needs further clarification and interpretation, we cannot assure you that if we and our subsidiaries established outside of China are deemed resident enterprises, the dividends distributed by our subsidiaries incorporated in China as foreign-invested enterprises to their direct shareholders would be regarded as dividends distributed between qualified resident enterprises, and be exempted from the enterprise income tax. In addition, even if we and our subsidiaries established outside of China would not be deemed a resident enterprise, they still may be regarded as a “non-resident enterprise,” and under the new PRC enterprise income tax law and its implementation rules, dividends payable by a foreign-invested enterprise in China to its foreign investor who is a non-resident enterprise will be subject to a 10% withholding tax unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. The direct shareholders of our subsidiaries incorporated in China as foreign-invested enterprises are located either in the British Virgin Islands or Hong Kong. The British Virgin Islands does not have such a tax treaty with China while according to the Mainland and Hong Kong Special Administrative Region Arrangement on Avoiding Double Taxation or Evasion of Taxation on Income agreed between China and Hong Kong in August 2006, dividends paid by a foreign-invested enterprise in China to its direct holding company in Hong Kong will be subject to withholding tax at a rate of no more than 5% (if the foreign investor owns directly at least 25% of the shares of the foreign-invested enterprise). See “Item 3.D. Risk Factors — Risks related to the regulation of our business and to our structure — Foreign holders of our ADSs or common shares may be subject to PRC withholding tax on dividends payable by us and on gains realized on the sale of our ADSs or common shares if we are classified as a PRC ‘resident enterprise.’”

Critical Accounting Policies

Our assets and liabilities, results of operations and cash flows are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and expenses, and related disclosure of our contingent assets and liabilities. We base our estimates and judgments on historical experience, knowledge of current conditions and beliefs of what could occur in the future given the available information. We consider the following accounting policies to be both those most important to the portrayal of our financial condition and those that require the most subjective judgment. If actual results differ significantly from management’s estimates and projections, there could be a material effect on our financial statements.

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Revenue recognition

Our advertising sales revenues mainly include revenues from television advertisements and are recognized when advertisements are broadcast. Advertising sales are recorded net of provisions for estimated rate adjustments and discounts. Payments received in advance are deferred until earned and such amounts are reported as deferred revenue included in accrued expenses and other payables in the accompanying consolidated balance sheets.

Our advertising services revenues include revenues from event organization, sponsorship at events, advertising agency services, mobile value-added service and the provision of advisory and consulting services, and are generally recognized as services are provided. Revenues from event organization, such as dramas, include ticketing revenue recognized upon the delivery of tickets or admission to the events, whichever is earlier. Revenues from sponsorship at events are generally recorded over the period of the applicable agreements.

In the normal course of business, we place advertising transactions with television and radio stations for third parties. Such transactions are recorded at either a gross or net basis depending on whether we are acting as a principal or as an agent in the transaction. We are considered a principal in the majority of our arrangements, and accordingly, we record these revenues on a gross basis. Factors that support our conclusion mainly include:

• we secure the advertising media resources from television, websites and other sources, and as a result, we bear the risk of ownership and are exposed to the risk that we may not be able to sell the purchased resources;

• we are able to establish the prices charged to our customers; and

• we are obligated to pay for the purchased resources regardless of the collection from the advertising customers and as a result we bear the credit risks for the revenues generated with respect to our services.

For those transactions in which we final advertising space for advertisers and do not have substantial risks and rewards of ownership, we are considered an agent in the transaction and, accordingly, records revenue on a net basis.

Impairment of goodwill

Goodwill represents the cost of an acquired business in excess of the fair value of identifiable tangible and intangible net assets purchased. We assign all the assets and liabilities of an acquired business, including goodwill, to reporting units. The excess of the purchase price over the fair value of net assets acquired is recorded on our consolidated balance sheets as goodwill.

Goodwill is not amortized but tested for impairment annually as of December 31 and whenever events or circumstances make it more likely than not that impairment may have occurred. Goodwill impairment is tested using a two-step approach. The first step compares the fair value of a reporting unit to its carrying amount, including goodwill. If the fair value of the reporting unit is greater than its carrying amount, goodwill is not considered impaired and the second step is not required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying value of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. An impairment loss is recognized for any excess in the carrying value of goodwill over the implied fair value of goodwill. Estimating fair value is performed by utilizing various valuation techniques, with the primary technique being the discounted cash flow method.

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The following table sets forth the fair values estimated by management or carrying values of goodwill allocated to our reporting units as of December 31, 2009:

																			Upper
																			Step (2)
				Singshine			M-in			JCBN			Profitown						& Beijing
Reporting Units	XFA (1)			Marketing			Group			China			Group			Everfame			Perspective			Total
	(In thousands)
Fair value of reporting unit	$	(10,587	)	$	8,021		$	18,763		$	8,581		$	1,880		$	(39,094	)	$	(11,701	)	$	(24,137	)
Carrying value excluding goodwill (after impairment of other long-lived assets)	$	7,867		$	9,890		$	9,468		$	14,448		$	786		$	(64,455	)	$	(12,102	)	$	(34,098	)
Implied FV of goodwill	$	—		$	—		$	9,295		$	—		$	1,093		$	—		$	—			N/A
Goodwill before impairment	$	9,120		$	15,340		$	6,933		$	36,975		$	305		$	10,037		$	11,689		$	90,399
Goodwill Impairment	$	9,120		$	15,340		Nil			$	36,975		Nil			$	10,037		$	11,689		$	83,161
Goodwill After impairment	Nil			Nil			$	6,933		Nil			$	305		Nil			Nil			$	7,238
Discount rate used for impairment test		16	%		21	%		17.5	%		20	%		15	%		20	%		N/A			N/A

(1)	XSEL Advertising Limited and its wholly- and majority-owned subsidiaries and VIEs (collectively, “XFA”).
(2)	Upper Step Holdings Limited and its subsidiaries (collectively, “Upper Step”).

The reporting units that carry goodwill balances after the impairment charges in 2009 are presented in the following table:

Reporting Units	M-in Group			Profitown Group
	(In thousands)
Fair value of reporting unit	$	18,763		$	1,880
Carrying value of reporting unit (after impairment of goodwill and other long-lived assets)	$	16,401		$	1,091
Percentage by which fair value exceeds carrying value		14	%		72	%

In estimating the fair value of the reporting units, we considered the income approach to be more reliable than the market approach in determining the fair values of our reporting units. We applied the discounted cash flow, or DCF, analysis based on our projected cash flow using management’s best estimate as of December 31, 2009. The projected cash flow estimate included, among other things, an analysis of projected revenue growth, gross margins, effective tax rates, capital expenditures and working capital requirements. The income approach involves applying appropriate discount rates, based on earnings forecasts, to estimated cash flows. The key assumptions of our cash flow forecasts we used in deriving the fair values of our reporting units were consistent with the assumptions that we used in developing our business plan.

These assumptions are inherently uncertain and subjective. The discount rates reflect the risks our management perceived as being associated with achieving the forecasts and are based on the estimated cost of capital of our reporting units, which was derived by using the capital asset pricing model, after taking into account systemic risks and non-systematic risks. The capital asset pricing model is a model commonly used by market participants for determining the fair values of assets that adds an assumed risk premium rate of return to an assumed risk-free rate of return. Using this method, we determined the discount rates used for impairment tests to be appropriate for determining fair values for the reporting units and we considered the selected discount rates to properly reflect the uncertainty associated with the key assumptions of projected cash flows of our reporting units as of December 31, 2009.

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The impairment review is highly judgmental and involves the use of significant estimates and assumptions. These estimates and assumptions have a significant impact on the amount of any impairment charge recorded. Discounted cash flow methods are dependent upon assumptions of future sales trends, market conditions and cash flows of each reporting unit over several years. Actual cash flows in the future may differ significantly from those previously forecasted. Other significant assumptions include growth rates and the discount rate applicable to future cash flows.

In 2008, impairment losses on goodwill and intangible assets were driven mainly by our repositioning in the sports and entertainment fields and the global economic downturn. In 2009, the impairment losses on goodwill were mainly caused by (i) the release of Rule 61 (“Rule 61”) in October 2009 by the State Administration of Radio, Film and Television of the PRC, which substantially cuts the time allowed for brand advertisements in each hour and the amount of time allotted for infomercials, (ii) the loss of major customers to competitors in the Advertising Group and (iii) the continuing repositioning of our company in the sports and entertainment fields by divestment of certain non-core businesses including our print and content production businesses.

Driven by the above mentioned factors, and based on the impairment assessments using various assumptions, we recorded impairment losses on goodwill from continuing operations of $137.3 million and $71.5 million in 2008 and 2009, respectively, and impairment losses on goodwill from discontinued operations of $43.5 million and $11.7 million in 2008 and 2009, respectively. No impairment losses were identified in 2007.

The remaining balance of goodwill as of December 31, 2009 was $7.2 million, including goodwill of $0.3 million and $6.9 million from reporting units Profitown Group and M-in Group, respectively.

Impairment of intangible assets with definite lives

We evaluate our intangible assets with definite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When these events occur, we measure impairment by comparing the carrying amount of the assets to future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, we recognize an impairment loss as the excess of carrying amounts over fair value of the assets.

In estimating fair value of intangible assets, we typically use the income method, which starts with a forecast of all of the expected future net cash flows associated with a particular intangible asset. These cash flows are then adjusted to present value by applying an appropriate discount rate that reflects the risk factors associated with the cash flow streams.

Estimates of fair value involve a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions at a point in time. The valuations are based on information available as of the impairment review date and are based on expectations and assumptions that have been deemed reasonable by management. Any changes in key assumptions, including unanticipated events and circumstances, may affect the accuracy or validity of such estimates and could potentially result in an impairment charge.

Some of the more significant estimates and assumptions inherent in the income method or other methods include the amount and timing of projected future cash flows the discount rate selected to measure the risks inherent in the future cash flows and the assessment of the asset’s economic life cycle and the competitive trends impacting the asset, including consideration of any technical, legal, regulatory or economic barriers to entry.

Intangible assets with determinable useful lives are amortized on a straight-line basis. Determining the useful life of an intangible asset also requires judgment as different types of intangible assets will have different useful lives and certain assets may even be considered to have indefinite useful lives.

Impairment losses on intangible assets from continuing operations of $11.9 million and $98.4 million and from discontinued operations of $13.7 million and $86.2 million were identified in 2008 and 2009, respectively. No impairment losses on intangible assets were identified in 2007.

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Allowance for doubtful accounts

We regularly evaluate the collectability of our accounts receivable. We maintain allowances for doubtful accounts when we believe there is a risk to the collectability of accounts receivable. We review the aging analysis of accounts receivable and make an assessment of the collectability of specific customer accounts, including evaluating the credit worthiness and financial condition of our customers and considering our historical experience with bad debts. Actual collections of the accounts receivable could differ significantly from the original estimates. Allowance for doubtful accounts as of December 31, 2009 was $8.1 million.

Income taxes

Current income taxes are provided for in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Net operating loss carry forwards and credits are applied using 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 a portion of or all of the deferred tax assets will not be realized. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics.

The impact of an uncertain income tax position on an income tax return is recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Interest and penalties on income taxes will be classified as a component of the provisions for income taxes. We did not identify significant unrecognized tax benefits for years ended December 31, 2007, 2008 and 2009. We did not incur any interest and penalties related to potential underpaid income tax expenses and also believe that our unrecognized tax benefits did not change significantly within the 12 months ending December 31, 2009.

We consider our company to be permanently reinvested with respect to our investment in our foreign subsidiaries. Accordingly no deferred income tax liability related to our foreign subsidiaries’ unremitted earnings have been included in our provision for income taxes. Upon distribution of those earnings in the form of dividends or otherwise, we would be subject to income taxes and withholding taxes payable in various non-Cayman jurisdictions, which could potentially be offset by foreign tax credits. Determination of the amount of unrecognized deferred income tax liability is not practicable because of the complexities associated with the hypothetical calculation.

A deferred tax liability should be recorded for taxable temporary differences attributable to the excess of financial reporting amounts over tax basis amounts, including those differences attributable to a more than 50% interest in a domestic subsidiary in China. However, recognition is not required in situations where the tax law provides a means by which the reported amount of that investment can be recovered tax-free and the enterprise expects that it will ultimately use such means. We have not recorded any deferred tax liability attributable to the undistributed earnings of our financial interest in our VIE affiliates in China because we believe such excess earnings can be distributed in a manner that would not be subject to tax.

On April 21, 2010, the State Administration of Taxation issued Circular 157 titled Further Clarification on Implementation of Preferential EIT Rate during Transition Periods, or Circular 157. Circular 157 seeks to provide additional guidance on the interaction of certain preferential tax rates under the transitional rules of the New EIT Law. Prior to Circular 157, we interpreted the law to mean that if an entity was in a period where it was entitled to a 50% reduction in the tax rate and was also entitled to a 15% rate of tax due to its HNTE status under the New EIT Law, it was entitled to pay tax at the rate of 7.5%. Circular 157 appears to have the effect that such an entity is entitled to pay tax at either 15% or 50% of the standard PRC tax rate. The effect of Circular 157 is retrospective and would apply to 2008 and 2009.

As a consequence of Circular 157, the preferential tax rate enjoyed by one of our subsidiaries which qualified as a HNTE during its 50% reduction period (2008 and 2009) will be 12.5% for the relevant years rather than 7.5%, which is the rate we had used prior to the issuance of Circular 157. Because we believe that Circular 157 is similar to a change in tax law, the cumulative effect thereof should be reflected in the period of the change. As a result, we will recognize an additional tax liability in the second quarter of 2010 of approximately $0.2 million ($137,972 related to 2008 and $63,837 related to 2009) in respect of this change.

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Valuation of share-based compensation

All share-based payments, including grants of stock options, restricted stock units and non-vested shares, are required to be recognized in our financial statements based upon their respective grant date fair values. We currently use the Binomial option pricing model to estimate the fair value of our share-based awards. The determination of the fair value of share-based payment awards utilizing the Binomial model is affected by our stock price and a number of assumptions, including expected volatility, risk-free interest rates, expected dividends and the trigger price multiple.

The risk-free rate is based on the yield to maturity of the US Treasury Bond as of the grant date with maturity closest to the relevant award expiry date. Because we do not have sufficient history to estimate the volatility for our shares, the expected volatility was based on the historical volatilities of comparable publicly traded companies engaged in similar lines of business. The trigger price multiple represents the value of the underlying stock as a multiple of the exercise price of the option or warrant which, if achieved, results in exercise of the option or warrant. The trigger price multiple is estimated based on an empirical study on the exercise behavior of employee stock options. Employees who received our share-based awards are assumed to exhibit similar behavior.

Results of Operations

The following table sets forth a summary of the consolidated statements of operations of our company for the periods indicated. This information should be read together with the consolidated financial statements of our company, including the related notes, that appear elsewhere in this annual report. Our limited operating history makes it difficult to predict our future operating results. Therefore, our historical consolidated results of operations are not necessarily indicative of our results of operations you may expect for any future period.

	Year Ended December 31,
	2007		2008			2009
	(In thousands, except per share data)
Net revenues:
Advertising services	$	75,337	$	99,575		$	78,016
Advertising sales		8,141		21,912			21,215
Total net revenues		83,478		121,487			99,231
Cost of revenues:
Advertising services		54,255		71,230			61,888
Advertising sales		3,805		9,483			23,554
Total cost of revenues		58,060		80,713			85,442
Operating expenses:
Selling and distribution		5,662		10,683			7,708
General and administrative(1)		17,890		45,604			27,762
Impairment charges		—		159,938			176,772
Loss on disposal of subsidiaries		—		4,721			25,640
Total operating expenses		23,552		220,946			237,882
Other operating income		2,262		1,251			2,065
Income (loss) from operations		4,128		(178,921	)		(222,028	)
Other income (expense), net		5,745		(27,308	)		4,651
Provision for income taxes (benefit)		671		1,728			(4,057	)
Net income (loss) from continuing operation		9,202		(207,957	)		(213,320	)
Discontinued operation, net of taxes		20,140		(66,274	)		(100,296	)
Net income (loss)	$	29,342	$	(274,231	)		(313,616	)
Net income (loss) attributable to non-controlling interest		1,303		641			(2,041	)
Net income (loss) attribute to XSEL		28,039		(274,872	)		(311,575	)
Deemed dividend on redeemable convertible preferred shares		—		—			—

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	Year Ended December 31,
	2007			2008			2009
	(In thousands, except per share data)
Dividends declared to redeemable convertible preferred shares		(1,338	)		(2,000	)		(2,560	)
Net income (loss) attributable to holders of common shares	$	26,701		$	(276,872	)		(314,135	)
Net income (loss) from continuing operations per share:
Basic — class A common share	$	0.06		$	(1.55	)	$	(1.35	)
Basic — class B common share	$	0.06		$	(1.55	)	$	—
Diluted — class A common share	$	0.06		$	(1.55	)	$	(1.35	)
Diluted — class B common share	$	0.06		$	(1.55	)	$	—
Net income (loss) from discontinued operations per share:
Basic — class A common share	$	0.17		$	(0.49	)	$	(0.64	)
Basic — class B common share	$	0.17		$	(0.49	)	$	—
Diluted — class A common share	$	0.15		$	(0.49	)	$	(0.64	)
Diluted — class B common share	$	0.15		$	(0.49	)	$	—
Shares used in computation:
Basic — class A common share		66,166			85,927			157,730
Basic — class B common share		50,055			49,917			—
Diluted — class A common share		86,315			85,927			157,730
Diluted — class B common share		50,055			49,917			—

(1) Includes share-based compensation expenses of $3.1 million, $12.5 million and $2.4 million for the years ended December 31, 2007, 2008 and 2009, respectively.

Year ended December 31, 2009 Compared to Year Ended December 31, 2008

Net revenues. We generated net revenues of $121.5 million and $99.2 million for the years ended December 31, 2008 and 2009, respectively, from the following sources:

• Advertising services. Our net revenues from advertising services were $99.6 million and $78.0 million, and constituted 82.0% and 78.6% of our total net revenues, for the years ended December 31, 2008 and 2009, respectively. Our advertising services for 2008 and 2009 were derived primarily from advertising agency services for billboard and website advertising medium and mobile value-added services, and marketing services, including event organization, visual design and production. Our advertising services revenues decreased by $21.6 million between 2008 and 2009 primarily due to a decrease in below-the-line marketing services. Our advertising service revenues as a percentage of total net revenues decreased in line with the decrease in overall advertising sales.

• Advertising sales. Our net revenues from advertising sales were $21.9 million and $21.2 million, and constituted 18.0% and 21.4% of our total net revenues, for the years ended December 31, 2008 and 2009, respectively. Our advertising sales revenues for 2008 mainly represented advertising revenues generated by billboard advertising. Our advertising sales revenues for 2009 mainly represented revenue generated by sales of advertising and sponsorship on Shaanxi Satellite Television. Our advertising sales revenues decreased between 2008 and 2009 due to our disposal of Convey.

Cost of revenues. Our total cost of revenues was $80.7 million and $85.4 million, and constituted 66.4% and 86.1% of our total net revenues, for the years ended December 31, 2008 and 2009, respectively. Our total cost of revenues consisted of the following:

• Advertising services. Our advertising services costs of $71.2 million and $61.9 million accounted for 88.3% and 72.4% of our total cost of revenues for the years ended December 31, 2008 and 2009, respectively. Our advertising services costs in 2008 and 2009 were derived primarily from advertising agency services for billboard and website advertising medium and mobile value-added services, and marketing services, including event organization, visual design and production. Our advertising services costs decreased by $9.3 million between 2008 and 2009 primarily due to a decrease in below-the-line market services. Our advertising services costs as a percentage of total cost of revenues fell in line with the decrease in revenues attributable to advertising services as a percentage of total net revenues.

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• Advertising sales. Our advertising sales costs of $9.5 million and $23.6 million constituted 11.7% and 27.6% of our total cost of revenues for the years ended December 31, 2008 and 2009, respectively. Our advertising sales costs in 2008 primarily consisted of costs associated with our outdoor advertising network. Our advertising sales costs in 2009 primarily consisted of the cost of operating Shaanxi Satellite Television and amortization costs incurred in connection with obtaining the license rights for Shaanxi Satellite Television. Our advertising sales costs increased by $14.1 million between 2008 and 2009 primarily due to higher costs for operating television compared with outdoor advertising.

Operating expenses. Our total operating expenses of $220.9 million and $237.9 million constituted 181.9% and 239.7% of our total net revenues for the years ended December 31, 2008 and 2009, respectively, and consisted of the following:

• Selling and distribution expenses. Our selling and distribution expenses of $10.7 million and $7.7 million represented 4.8% and 3.2% of our total operating expenses for the years ended December 31, 2008 and 2009, respectively. Our selling and distribution expenses decreased by $3.0 million between 2008 and 2009 primarily due to a decrease in amortization expenses of $2.7 million. Our selling and distribution expenses as a percentage of our total operating expenses decreased between 2008 and 2009 primarily due to a significant increase in general and administrative expenses and impairment charges.

• General and administrative expenses. Our general and administrative expenses were $45.6 million and $27.8 million, or 20.7% and 11.7% of our total operating expenses, for the years ended December 31, 2008 and 2009, respectively. Our general and administrative expenses decreased by $17.7 million between 2008 and 2009 primarily due to a decrease in share-based compensation expenses, staff cost, auditor remuneration and a group service charge to XFL of $9.9 million, $2.0 million, $1.9 million and $1.2 million, respectively. Our general and administrative expenses as a percentage of our total operating expenses decreased in line with the decrease in general and administrative expenses.

• Impairment charges. We had impairment charges of $159.9 million and $176.8 million, or 72.4% and 74.3% of our total operating expenses, for the years ended December 31, 2008 and 2009, respectively. The impairment charges in 2008 mainly included impairment of goodwill of $137.3 million and intangible assets of $11.9 million in connection with our acquisitions of XFA, JCBN China, M-In Group and Singshine Communication. The impairment of goodwill and intangible assets was mainly due to a decrease in the fair value of the reporting units affected by the slowdown in the global economy and the repositioning of our business to sports and entertainment. The impairment charges in 2009 included impairment of goodwill of $71.5 million and intangible assets of $98.4 million in connection with our acquisitions of XFA, JCBN China, M-In Group, Singshine Communication and Everfame. The impairment of goodwill and intangible assets was the result of a decrease in the fair value of the reporting units affected by the slowdown in the global economy and termination of business units, resulting from our repositioning to the sports and entertainment fields.

• Loss on disposal of subsidiaries. We had a loss on disposal of subsidiaries of $4.7 million and $25.6 million, or 2.1% and 10.8% of our total operating expenses, for the year ended December 31, 2008 and 2009, respectively. The loss on disposal of subsidiaries in 2008 was due to loss on disposal of our 85% equity interest in Convey. On December 31, 2008 we entered into an agreement with Pariya Holdings Limited for the sale of Convey. Pursuant to the terms of the agreement, the total consideration to be paid for the asset transfer is $85.0 million and is subject to deduction of an earnout payment, which is estimated to be approximately $10.6 million. The consideration will be paid in six interest-free installment payments from the date of disposal through the end of 2012. Should the actual net income of Convey for the 2008 earnout period be lower or higher than currently estimated, there would be a corresponding impact on the loss. The range of this potential impact ranges from a reduction of the loss by approximately $11.0 million, thus becoming a gain on disposal of the subsidiary of $7.0 million, to an additional loss of approximately $29.0 million. The loss on disposal of subsidiaries in 2009 was due to provision for consideration receivable of $25.6 million for disposal of our 85% equity interest in Convey driven by the uncertain visibility for settlement of certain amounts receivable as determined during the fourth quarter of 2009.

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Other operating income. We recorded other operating income of $1.3 million and $2.1 million for the years ended December 31, 2008 and 2009, respectively. Other operating income in 2008 was primarily due to a refund of previously paid business tax of $0.9 million. Other operating income in 2009 was primarily due to a refund of previously paid business tax of $0.7 million and a return on liquidation of a subsidiary of $0.6 million.

Other income (expense), net. We had other expenses, net, of $27.3 million for the year ended December 31, 2008 and other income, net, of $4.7 million for the year ended December 31, 2009. Other expenses, net, in 2008 primarily included interest expense in connection with a bank loan and other liabilities, imputed interest on long-term obligations net of interest income of $1.1 million, an impairment charge associated with a principal protected note of $24.9 million and an impairment charge for our cost method investments of $1.3 million. The principal protected note was purchased from Lehman Brothers Holdings Inc., or Lehman Brothers, for $25.0 million. On the maturity date, the principal protected note could have been redeemed at 100% plus a variable amount based on the performance of the FTSE/Xinhua China 25 Index. Due to the bankruptcy of Lehman Brothers in September 2008, we are of the view that we cannot recover the principal protected note. Full provision of $24.9 million has been made against the value of the principal protected note. We recorded an impairment loss of $1.3 million on our cost method investment, which was the result of the cost of our investments exceeding our estimated fair value of these investments. We had other income, net, of $4.7 million for the year ended December 31, 2009, which primarily included interest expense in connection with a bank loan and other liabilities, imputed interest on long-term obligations net of interest income of $9.1 million, a non-cash fair value loss on an embedded derivative on a convertible loan of $0.3 million, a non-cash fair value loss on warrants of $2.6 million, a non-cash net gain from the settlement of a proceeding with UBS of $13.5 million and an impairment charge for our cost method investments of $1.3 million. We recorded an impairment loss of $2.0 million on our cost method investment, which was the result of the cost of our investments exceeding our estimated fair value of these investments.

Provision for income taxes (benefit). For the years ended December 31, 2008 and 2009, we recorded an income tax expense of $1.7 million and an income tax benefit of $4.1 million, respectively. In 2008, we recorded a provision of $6.4 million for income taxes offset by a $4.7 million deferred tax credit. Our effective tax rate was 0.8% for the year. In 2009, we recorded a provision of $1.4 million for income taxes offset by a $5.5 million deferred tax credit. Our effective tax rate was 1.9% for the year. The change in provision for income taxes was mainly due to the increased profitability of our subsidiaries.

Net loss from continuing operations. We had a net loss from continuing operations of $208.0 million and $213.4 million for the years ended December 31, 2008 and 2009, respectively. The net loss from continuing operations in 2008 and 2009 was mainly attributable to an impairment loss of goodwill and intangible assets of $149.2 million and $169.9 million, respectively.

Net Income (loss) from discontinued operations net of taxes. We had a net loss from discontinued operations net of taxes of $66.3 million and $100.3 million for the years ended December 31, 2008 and 2009, respectively, representing the activities of our print, television, content production and market research businesses. The net loss from discontinued operations net of taxes in 2008 and 2009 was mainly attributable to an impairment loss of goodwill and intangible assets of $57.2 million and $97.9 million, respectively.

Net income attributable to non-controlling interests. Net income attributable to non-controlling interests and net loss attributable to non-controlling interests for the years ended December 31, 2008 and 2009 were $0.6 million and $2.0 million, respectively. Non-controlling interests in 2008 represented the portions of our income due to certain minority shareholders of the subsidiaries Beijing Century Media, XSEL Advertising Limited, Singshine (Holdings) Hongkong Ltd., Beijing Jingguan Xincheng Advertising Co., Ltd. and Small World Television Limited. Non-controlling interests in 2009 represented the portions of our loss due to certain minority shareholders of the subsidiaries Beijing Century Media, XSEL Advertising Limited and Small World Television Limited, or Small World, and income to certain minority shareholders of the subsidiaries Singshine (Holdings) Hongkong Ltd. and Beijing Jingguan Xincheng Advertising Co., Ltd.

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Net loss attribute to XSEL. We had a net loss attributable to XSEL of $274.9 million and $311.6 million for the years ended December 31, 2008 and 2009, respectively. Loss of $276.9 million and $314.1 million were attributable to holders of common shares in 2008 and 2009, respectively, due to the increase in our net loss.

Year ended December 31, 2008 Compared to Year Ended December 31, 2007

Net revenues. We generated net revenues of $83.5 million and $121.5 million for the years ended December 31, 2007 and 2008, respectively, from the following sources:

• Advertising services. Our net revenues from advertising services were $75.3 million and $99.6 million, and constituted 90.2% and 82.0% of our total net revenues, for the years ended December 31, 2007 and 2008, respectively. Our advertising services for 2007 and 2008 were derived primarily from advertising agency services for billboard and website advertising medium and mobile value-added services, and marketing services, including event organization, visual design and production. Our advertising services revenue increased by $24.3 million between 2007 and 2008 primarily due to an increase in the number of mobile users in China, full year operation of our subsidiaries acquired in 2007, an increase in sales for our advertising platforms and the growth of our business generally. Our advertising service revenues as a percentage of total net revenues decreased primarily due to greater growth in other parts of our business.

• Advertising sales. Our net revenues from advertising sales were $8.1 million and $21.9 million, and constituted 9.8% and 18.0% of our total net revenues, for the years ended December 31, 2007 and 2008, respectively. Our advertising sales revenues for 2007 and 2008 included advertising revenues generated by billboard advertising. Our advertising sales revenues increased by $13.8 million between 2007 and 2008 mainly due to full year operation of Convey which we acquired in 2007.

Cost of revenues. Our total cost of revenues was $58.1 million and $80.7 million, and constituted 69.6% and 66.4% of our total net revenues, for the years ended December 31, 2007 and 2008, respectively. Our total cost of revenues consisted of the following:

• Advertising services. Our advertising services costs of $54.3 million and $71.2 million accounted for 93.4% and 88.3% of our total cost of revenues for the years ended December 31, 2007 and 2008, respectively. Our advertising services costs in 2007 and 2008 were derived primarily from advertising agency services for billboard and website advertising medium and mobile value-added services, and marketing services, including event organization, visual design and production. Our advertising services costs increased by $16.9 million between 2007 and 2008 primarily due to the growth of our business generally.

• Advertising sales. Our advertising sales costs of $3.8 million and $9.5 million constituted 6.6% and 11.7% of our total cost of revenues for the years ended December 31, 2007 and 2008, respectively. Our advertising sales costs in 2007 and 2008 primarily represented our outdoor advertising network. Our advertising sales costs increased by $5.7 million between 2007 and 2008 primarily due to full year operation of Convey which we acquired in 2007.

Operating expenses. Our total operating expenses of $23.6 million and $220.9 million constituted 28.2% and 43.3% of our total net revenues for the years ended December 31, 2007 and 2008, respectively, and consisted of the following:

• Selling and distribution expenses. Our selling and distribution expenses were $5.7 million and $10.7 million, representing 24.0% and 4.8% of our total operating expenses for the years ended December 31, 2007 and 2008, respectively. Our selling and distribution expenses increased by $5.0 million between 2007 and 2008 primarily due to the net off effect of an increase in amortization expense of $3.0 million, an increase in staff cost of $2.6 million and a decrease in marketing cost of $0.5 million. Our selling and distribution expenses as a percentage of our total operating expenses decreased between 2007 and 2008 primarily due to a significant increase in other operating expenses, such as impairment charges and loss on disposal of subsidiaries.

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• General and administrative expenses. Our general and administrative expenses were $17.9 million and $45.6 million, or 76.0% and 20.7% of our total operating expenses, for the years ended December 31, 2007 and 2008, respectively. Our general and administrative expenses increased by $27.7 million between 2007 and 2008 primarily due to an increase in staff cost of $4.7 million, an increase in share-based compensation expenses of $9.4 million, an increase in legal and professional fees of $3.0 million and an increase in rental expense of $1.1 million. Our general and administrative expenses as a percentage of our total operating expenses decreased between 2007 and 2008 primarily due to a significant increase in other operating expenses, such as impairment charges and loss on disposal of subsidiaries.

• Impairment charges. We had impairment charges of $159.9 million, or 72.4% of our total operating expenses, for the year ended December 31, 2008, primarily due to impairment of goodwill and intangible assets in connection with our acquisitions of XFA, JCBN China, M-In Group and Singshine Communication. The impairment of goodwill of $137.3 million and intangible assets of $11.9 million was a result of (i) the decrease in the fair value of the reporting units affected by the slowdown in the global economy and the repositioning of our business to sports and entertainment and (ii) impairment of a promissory note issued by Sino Investment with accrued interest in the aggregate of $8.5 million due to the Sino Investment’s default with respect to interest payments.

• Loss on disposal of subsidiaries. We had a loss on disposal of subsidiaries of $4.7 million, or 2.1% of our total operating expenses, for the year ended December 31, 2008, due to loss on disposal of our equity interest in Convey. On December 31, 2008 we entered into an agreement with Pariya Holdings Limited for the sale of Convey. Pursuant to the terms of the agreement, the total consideration to be paid for the asset transfer is $85.0 million and is subject to deduction of an earnout payment, which is estimated to be approximately $10.6 million. The consideration will be paid in six interest-free installment payments from the date of disposal through the end of 2012. Should the actual net income of Convey for the earn-out period be lower or higher than currently estimated, there would be a corresponding impact on the loss. The range of this potential impact ranges from a reduction of the loss by approximately $11.0 million, thus becoming a gain on disposal of the subsidiary of $7.0 million, to an additional loss of approximately $29.0 million.

Other operating income. We recorded other operating income of $2.3 million and $1.3 million for the years ended December 31, 2007 and 2008, respectively. Other operating income in 2007 primarily included reimbursement of initial public offering related expenses by The Bank of New York Mellon in the first quarter of 2007. The initial public offering related expenses had been recorded in the 2006 income statement as operating expenses because they were not considered to be directly related to sales of securities and instead related primarily to audit fees and fees paid to consultants during the listing period. Other operating income in 2008 was primarily due to a refund of previously paid business tax.

Other income (expense), net. We had other income, net, of $5.7 million and other expenses, net, of $27.3 million for the years ended December 31, 2007 and 2008, respectively. Other income, net, in 2007 included interest expense of a convertible loan and other liabilities net of interest income, interest income from a loan to a related party of $1.2 million and a realized gain on a currency linked note of $0.7 million. Other expenses, net, in 2008 primarily included interest expense in connection with a bank loan and other liabilities, imputed interest on long-term obligations net of interest income of $1.5 million, an impairment charge associated with a principal protected note of $24.9 million and an impairment charge for our cost method investments of $1.3 million. The principal protected note was purchased from Lehman Brothers Holdings Inc., or Lehman Brothers, for $25.0 million. On the maturity date, the principal protected note could be redeemed at 100% plus a variable amount based on the performance of the FTSE/Xinhua China 25 Index. Due to the bankruptcy of Lehman Brothers in September 2008, we are of the view that we cannot recover the principal protected note. Full provision of $24.9 million has been made against the value of the principal protected note. We recorded an impairment loss of $1.3 million on our cost method investment, which was the result of the cost of our investments exceeding our estimated fair value of these investments.

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Provision for income taxes (benefit). For the years ended December 31, 2007 and 2008, we recorded provision for income tax expense of $0.7 million and $1.7 million, respectively. In 2007, we recorded a provision of $2.3 million for income taxes offset by a $1.6 million deferred tax credit. Our effective tax rate was 8.6% for the year. In 2008, we recorded a provision of $6.4 million for income taxes offset by a $4.7 million deferred tax credit. Our effective tax rate was -0.8% for the year. The change in provision for income taxes was mainly due to the increased profitability of our subsidiaries.

Net income (loss) from continuing operations. We had net income from continuing operations of $9.2 million and a net loss from continuing operations of $208.0 million for the years ended December 31, 2007 and 2008, respectively. The net loss from continuing operations in 2008 was mainly attributable to an impairment loss of goodwill and intangible assets of $149.2 million.

Net Income (loss) from discontinued operations net of taxes. We had net income from discontinued operations net of taxes of $20.1 million and net loss from discontinued operations net of taxes of $66.3 million for the years ended December 31, 2007 and 2008, respectively, representing the activities of our print, television, content production and market research businesses. The net income from discontinued operations net of taxes in 2007 was mainly attributable to an income tax benefit of $12.9 million and income from our print business. The net loss from discontinued operations net of taxes in 2008 was mainly attributable to an impairment loss of goodwill and intangible assets of $57.2 million. Discontinued operations for this period included Upper Step, Beijing Perspective, Accord Group Investments Limited and its subsidiaries (collectively, “Accord Group”), Beijing Century Media, Economic Observer Advertising and its subsidiaries (collectively, Economic Observer Advertising”), EconWorld Media, Shanghai Hyperlink Market Research Co., Ltd., and its subsidiaries (collectively, “Hyperlink”) and our content production business Small World.

Net income attributable to non-controlling interests. Net income attributable to non-controlling interests for the years ended December 31, 2007 and 2008 was $1.3 million and $0.6 million, respectively. Non-controlling interests in 2007 represented the portions of our income due to certain minority shareholders of the subsidiaries Beijing Century Media, XSEL Advertising Limited, Singshine (Holdings) Hongkong Ltd. and Small World Television Limited and former minority shareholders of the subsidiaries of Beijing Perspective Orient Movie and Television Intermediary Co. Ltd. Net income attributable to non-controlling interests in 2008 represented the portions of our income due to certain minority shareholders of the subsidiaries Beijing Century Media, XSEL Advertising Limited, Singshine (Holdings) Hongkong Ltd., Beijing Jingguan Xincheng Advertising Co., Ltd. and Small World Television Limited.

Net income (loss) attribute to XSEL. We had net income attribute to XSEL of $28.0 million and a net loss attribute to XSEL of $274.9 million for the years ended December 31, 2007 and 2008, respectively. Income of $26.7 million and a loss of $276.9 million were attributable to holders of our common shares in 2007 and 2008, respectively, due to the increase in our net loss.

Segment Discussion for Continuing Operations

During 2009, we operated our business in two segments: Broadcast and Advertising. We also operated a print business in 2009, the operations of which were either sold or terminated at the end of 2009 and are now categorized as discontinued operations. Each of the operating groups is separately organized and provides distinct services to different customers. Each group prepares a stand-alone financial reporting package including information such as revenue, expense, and goodwill.

	Year Ended December 31,
	2007		2008		2009
	(In thousands)
Net revenues of reportable segments:
Advertising		74,141		108,326		62,103
Broadcast		9,337		13,161		37,128
Total net revenues of our company		83,478		121,487		99,231
Cost of revenues and other operating expenses excluding depreciation and amortization:
Advertising		57,154		226,072		133,554
Broadcast		6,140		25,661		115,999
XSEL Corporate		12,756		39,156		55,776
Total cost of revenues and other operating expenses excluding depreciation and amortization		76,050		290,889		305,329

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	Year Ended December 31,
	2007			2008			2009
	(In thousands)
Depreciation and amortization:
Advertising		3,684			7,643			3,383
Broadcast		1,740			2,804			13,675
XSEL Corporate		138			323			937
Total depreciation and amortization		5,562			10,770			17,995
Other operating income (loss):
Advertising		—			781			1,836
Broadcast		—			468			95
XSEL Corporate		2,262			2			134
Total other operating income	$	2,262		$	1,251		$	2,065
Operating income (loss):
Advertising		13,303			(124,608	)		(72,998	)
Broadcast		1,457			(14,836	)		(92,451	)
XSEL Corporate		(10,632	)		(39,477	)		(56,579	)
Total operating income (loss)	$	4,128		$	(178,921	)	$	(222,028	)

Year ended December 31, 2009 Compared to Year Ended December 31, 2008

Net Revenues. Our total net revenues of $121.5 million and $99.2 million for the years ended December 31, 2008 and 2009, respectively, were generated by our operating groups as follows:

• Advertising. Our net revenues from the Advertising Group were $108.3 million and $62.1 million, representing 89.2% and 62.6% of our total net revenues, for the years ended December 31, 2008 and 2009, respectively. Our net revenues from the Advertising Group in 2008 and 2009 primarily consisted of advertising sales revenues generated by billboard advertising, advertising service revenues derived from advertising agency services for print, television, billboard and website advertising medium, revenues derived from marketing services, including event organization and visual design. The decrease in our net revenues between 2008 and 2009 from the Advertising Group was primarily attributable to a decrease in revenue derived from billboards as a result of our disposal of Convey at the end of 2008 and a decrease in the revenue from below-the-line marketing services due to strong competition in that market.

• Broadcast. Our net revenues from the Broadcast Group were $13.2 million and $37.1 million, and constituted 10.8% and 37.4% of our total net revenues, for the years ended December 31, 2008 and 2009, respectively. Our net revenues from the Broadcast Group in 2009 primarily consisted of sales of mobile value-added services. Our net revenues from the Broadcast Group in 2008 primarily consisted of sales of advertising and sponsorship on Shaanxi Satellite Television and sales of mobile value-added services. Our net revenues from the Broadcast Group increased between 2008 and 2009 primarily due to an increase in the number of mobile users in China and the acquisition of Everfame Group, which through June 30, 2010 held the exclusive advertising right for Shaanxi Satellite Television.

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Cost of revenues and other expenses excluding depreciation and amortization. Our total costs of revenues and other expenses excluding depreciation and amortization of $290.9 million and $305.3 million for the years ended December 31, 2008 and 2009, respectively, consisted of the following:

• Advertising. Advertising Group costs of $226.1 million and $133.6 million, representing 77.7% and 43.7% of our total cost of revenues and other operating expenses excluding depreciation and amortization for the years ended December 31, 2008 and 2009, respectively, primarily consisted of the purchase of advertising time and space from various media outlets, event organization costs, salaries and allowances, marketing cost, sales commissions, translation costs and transportation costs. Our cost of revenues attributable to the Advertising Group fell between 2008 and 2009 primarily due to a decrease in assets impairment of $55.1 million.

• Broadcast. Broadcast Group costs of $25.7 million and $116.0 million constituted 8.8% and 38.0% of our total cost of revenues and other operating expenses excluding depreciation and amortization for the years ended December 31, 2008 and 2009, respectively. Broadcast Group costs in 2008 primarily consisted of purchases of software and hardware and costs associated with the operation of our mobile value-added services system. Broadcast Group costs in 2009 primarily consisted of salaries and allowances, the costs of purchasing distribution rights for programs, purchases of software and hardware and cost associated with operation of our mobile value-added services system. Our cost of revenues attributable to the Broadcast Group grew between 2008 and 2009 primarily due to an increase in asset impairment of $77.8 million and an increase in the cost of purchasing distribution rights for programs for Shaanxi Satellite Television, for which we held advertising rights in 2009.

• XSEL corporate. Corporate costs of $39.2 million and $55.8 million constituted 13.5% and 18.3% of our total cost of revenues and other operating expenses excluding depreciation and amortization for the years ended December 31, 2008 and 2009, respectively, and consisted primarily of staff benefits, staff salaries, auditor remuneration and legal and professional fees. Our cost of revenues attributable to XSEL corporate grew between 2008 and 2009 primarily due to an increase in impairment of assets of $32.3 million partially offset by a decrease in share-based compensation expenses of $9.9 million, a decrease in audit and related fees of $2.9 million and a decrease in group service charges to XFL of $1.2 million.

Year ended December 31, 2008 Compared to Year Ended December 31, 2007

Net Revenues. Our total net revenues of $83.5 million and $121.5 million for the years ended December 31, 2007 and 2008, respectively, were generated by our operating groups as follows:

• Advertising. Our net revenues from the Advertising Group were $74.1 million and $108.3 million, representing 88.8% and 89.2% of our total net revenues, for the years ended December 31, 2007 and 2008, respectively. Our net revenues from the Advertising Group in 2007 and 2008 primarily consisted of advertising sales revenues generated by billboard advertising, advertising service revenues derived from advertising agency services for billboard and website advertising medium, and revenues derived from marketing services, including event organization and visual design. The increase in 2008 in our net revenues from the Advertising Group was primarily attributable to the full year operation of our subsidiaries acquired in 2007, an increase in sales from our advertising platforms and the growth of our business generally.

• Broadcast. Our net revenues from the Broadcast Group were $9.3 million and $13.2 million, and constituted 11.2% and 10.8% of our total net revenues, for the years ended December 31, 2007 and 2008, respectively. Our net revenues from the Broadcast Group in 2007 and 2008 primarily consisted of sales of mobile value-added services. Our net revenues from the Broadcast Group increased between 2007 and 2008 primarily due to an increase in the number of mobile users in China.

Cost of revenues and other expenses excluding depreciation and amortization. Our total costs of revenues and other expenses excluding depreciation and amortization of $76.1 million and $290.9 million for the years ended December 31, 2007 and 2008, respectively, consisted of the following:

• Advertising. Advertising Group costs of $57.2 million and $226.1 million, representing 75.2% and 77.7% of our total cost of revenues and other operating expenses excluding depreciation and amortization for the years ended December 31, 2007 and 2008, respectively, primarily consisted of the purchase of advertising time or space from various media outlets, events organization cost, salaries and allowances, marketing cost, sales commissions, translation cost and transportation cost. Our cost of revenues attributable to the Advertising Group grew between 2007 and 2008 primarily due to the growth of our existing business, an increase in loss on our disposal of Convey of $4.7 million and an increase in assets impairment charge of $136.2 million.

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• Broadcast. Broadcast Group costs of $6.1 million and $25.7 million constituted 8.1% and 8.8% of our total cost of revenues and other operating expenses excluding depreciation and amortization for the years ended December 31, 2007 and 2008, respectively. Broadcast Group costs in 2007 and 2008 primarily consisted of salaries and allowances, purchases of software and hardware and cost associated with operation of our mobile value-added services system. Our cost of revenues attributable to the Broadcast Group grew between 2007 and 2008 primarily due to the growth of our existing business, and an increase in asset impairment charges of $15.2 million.

• XSEL corporate. Corporate costs of $12.8 million and $39.2 million constituted 16.7% and 13.5% of our total cost of revenues and other operating expenses excluding depreciation and amortization for the years ended December 31, 2007 and 2008, respectively, and consisted primarily of staff benefits, staff salaries, auditor remuneration and legal and professional fees. Our cost of revenues attributable to XSEL corporate grew between 2007 and 2008 primarily due to our increased size due to the growth of our existing business, and an impairment charge on a promissory note of $8.5 million.

B. Liquidity and Capital Resources

Our principal sources of liquidity have been cash generated from financing activities, which consist of funds raised in our initial public offering, bank borrowings, private placements of convertible preferred shares to, and borrowings from, Patriarch Partners, and a private placement of convertible preferred shares to Yucaipa. See “Item 7.B. Major shareholders and related party transactions — Related party transactions — Transactions with Patriarch Partners” and “Item 7.B. Major shareholders and related party transactions — Related party transactions — Transactions with Yucaipa.” As of December 31, 2009, we had $13.3 million in cash and $40.4 million in restricted cash. We do not have direct access to cash or future earnings of any of our PRC affiliated entities but can direct the use of their cash through agreements that provide us with effective control of these entities. See “Item 4.C. Information on the Company — Organizational structure — Agreements that provide effective control over our affiliated entities.”

On October 21, 2008, we entered into a credit agreement with Zohar CDO 2003-1, Limited and Zohar II 2005-1, Limited, as lenders, together with Patriarch, as agent for the lenders. The facility is for a term of four years and is secured by a pledge of our television assets. See “Item 7.B. Major shareholders and related party transactions — Related party transactions — Transactions with Patriarch Partners — 2008 convertible loan facility agreement among us, Zohar CDO 2003-1, Limited and Zohar II 2005-1, Limited, together with Patriarch Partners Agency Services LLC.” As of December 31, 2009, we had drawn a total of $57.8 million from the loan facility. We did not meet certain financial covenants contained in the secured convertible loan facility for the quarter ended September 30, 2009, for which we received a waiver. We also did not meet these financial covenants for the quarters ended December 31, 2009, March 31, 2010 and June 30, 2010. We entered into an amendment and waiver to the secured convertible loan facility on July 12, 2010, which effectively waives our breach of financial covenants for the quarters ended December 31, 2009, March 31, 2010 and June 30, 2010 and up to the date of the amendment, and lowers the financial covenant requirements on a prospective basis. In connection therewith, we repaid $16.3 million of the convertible loan balance of which $8.7 million was repaid from the proceeds from the sale of our printing business and the remaining $7.6 million was repaid through an additional term loan from Patriarch. In connection with the amendment to the secured convertible loan facility, we designated and issued Series C preferred shares to the lenders. While our prior breaches of these financial covenants have been waived, given our current financial circumstances we cannot be certain that we will not breach the new financial covenants. Therefore, we continue to classify the convertible loan as a current liability in our consolidated balance sheet as of December 31, 2009.

A loan from Sino Investment in the amount of $1.5 million, which we incurred in relation to our acquisition of the Accord Group, was waived in 2007. The waived amount was recorded as a shareholder’s contribution and included in paid-in capital.

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We require cash to fund our ongoing business needs, particularly future acquisitions. Since our incorporation on November 7, 2005, we have made a number of strategic acquisitions and expect to continue to acquire businesses that complement our existing operations. See “— Acquisitions.” We may not have sufficient cash to settle our payment obligations over the course of the next 12 months. We have taken a number of steps to address this issue, including engaging Houlihan Lokey to advise on the restructuring of the secured convertible loan facility and on the further repositioning of our company.

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

	Year Ended December 31,
	2007			2008			2009
	(In thousands)
Net cash provided by operating activities	$	20,293		$	14,982		$	1,975
Net cash used in investing activities		(164,922	)		(54,466	)		(29,431	)
Net cash provided by financing activities		151,259			46,521			(13,006	)
Effect of exchange rate changes		1,452			2,616			(9	)
Net increase in cash		8,082			9,653			(40,471	)
Cash and cash equivalents at beginning of period		36,354			44,436			54,089
Less: Cash and cash equivalents at end of period from discontinued operations		—			—			(388	)
Cash and cash equivalents at end of period	$	44,436		$	54,089		$	13,230

Operating activities

We have financed our operating activities primarily through cash generated from operating and financing activities. We may not have sufficient cash to settle our payment obligations over the course of the next 12 months.

Net cash provided by operating activities totaled $2.0 million for the year ended December 31, 2009 and was primarily attributable to the performance of our Broadcast and Advertising Groups and included (i) a net loss of $313.6 million, offset by the add-back of non-cash items including impairment charges of $307.8 million, depreciation and amortization of $26.9 million and imputed interest of $10.3 million, (ii) a decrease in accounts receivable of $8.0 million due to the restructuring of our business and an associated decrease in revenue and (iii) an increase in accounts payable of $4.9 million due to longer credit periods for Shaanxi Satellite Television, for which we held advertising rights in 2009, partially offset by (i) non-cash items including deferred tax income of $28.3 million and a gain on settlement of the UBS case of $13.5 million, (ii) an increase in television program and film rights due to an increase in revenues from Shaanxi Satellite Television and (iii) a decrease in accrued expenses and other payables of $7.7 million due to cessation of some non-core businesses as a result of the restructuring of our business.

Net cash provided by operating activities totaled $15.0 million for the year ended December 31, 2008 and was primarily attributable to the performance of our Broadcast and Advertising Groups, an increase in cash received from our customers as a result of an increase in revenue and included (i) a net loss of $274.2 million, offset by the add-back of non-cash items including impairment charges of $258.8 million and depreciation and amortization of $26.6 million, (ii) a decrease in prepaid advertising program space and airtime expenses of $4.7 million due to a strict cash management policy, (iii) an increase in accrued expenses and other payables of $6.9 million due to the growth of our business and increased legal and professional fees and (iv) income tax payable of $3.9 million due to increased profitability of several of our subsidiaries, including JCBN China, Hyperlink and XFA, partially offset by (i) an increase in accounts receivable of $23.6 million due to the growth of our business and an associated increase in revenue, (ii) an increase in prepaid expenses and other current assets of $4.1 million due to an increase in deposit payments for newly acquired advertising rights, such as China Youth Net, and (iii) an increase in amounts due from other parties of $2.8 million due to a related party loan and increased receipt of income on behalf of related parties.

Net cash provided by operating activities totaled $20.3 million for the year ended December 31, 2007 and was primarily attributable to the performance of our Broadcast and Advertising Groups, an increase in cash received from our customers as a result of an increase in revenue and included (i) net income of $28.6 million, offset by the add-back of non-cash items including depreciation and amortization of $20.2 million and share-based compensation of $3.1 million, (ii) an increase in accrued expenses and other payables of $8.3 million primarily due to an increase in accrued salary expense and welfare mainly attributable to the growth of our business and our acquisitions of M-In Group, Shanghai Singshine Marketing Service Co. Ltd., Convey and JCBN China and (iii) income tax payable of $2.5 million, partially offset by (i) an increase in accounts receivable of $18.2 million due to the growth of our business and the associated increase in revenue, (ii) an increase in prepaid expenses and other current assets of $6.2 million due to prepayments for the acquisition of content production and advances to employees and (iii) an increase in capitalized content production costs of $4.5 million due to disbursements made in connection with the production of TV programs as a result of the acquisition of Small World.

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Investing activities

Net cash used in investing activities totaled $29.4 million for the year ended December 31, 2009 and was primarily attributable to (i) cash paid for the acquisition of subsidiaries and investments, net of cash received of $24.7 million, (ii) cash paid for the acquisition of property, equipment and intangible assets of $5.9 million and (iii) an advance to independent third parties of $4.9 million, partially offset by net proceeds from disposal of a subsidiary, Hyperlink, of $6.1 million.

Net cash used in investing activities totaled $54.5 million for the year ended December 31, 2008 and was primarily attributable to (i) cash paid for acquisitions of subsidiaries and investments, net of cash received of $49.9 million, (ii) cash paid for acquisition of property, equipment and intangible assets of $6.9 million, (iii) investment in cost method investment of $2.0 million, which represented an investment in a stake in the All Sports Network and (iv) net cash outflow from disposal of Convey, of $2.5 million, partially offset by a decrease in restricted cash and short-term deposits of $6.8 million. The restricted cash is cash deposited in order to secure loans in RMB.

Net cash used in investing activities totaled $164.9 million for the year ended December 31, 2007 and was primarily attributable to (i) cash paid for acquisitions of subsidiaries, net of cash received of $103.2 million, (ii) investment in financial instruments of $65.0 million and (iii) an increase in restricted cash and short-term deposits of $34.7 million, partially offset by $40.7 million in proceeds from disposal of a currency-linked note. The investment in financial instruments comprised an investment in principal protection barrier notes due on January 30, 2009 and the financial instrument disposed of was a USD/RMB currency linked note.

Financing activities

Net cash used in financing activities totaled $13.0 million for the year ended December 31, 2009 and was primarily attributable to (i) net proceeds from the issuance of a convertible loan of $23.8 million, (ii) net proceeds from the issuance of common shares and warrants of $6.9 million, (iii) bank borrowings raised of $33.9 million and (iv) an advance from related parties of $12.4 million, offset by (i) repayment of bank borrowings of $25.0 million, (ii) payment of long-term payables of $26.3 million, (iii) repayment to related parties of $12.7 million and (iv) cash paid for a prior acquisition, deferred and contingent consideration of $26.3 million.

Net cash provided by financing activities totaled $46.5 million for the year ended December 31, 2008 and was attributable to (i) net proceeds from the issuance of a convertible loan of $30.7 million, (ii) net proceeds from the issuance of Series B convertible preferred shares of $29.2 million, (iii) bank borrowing raised of $40.3 million and (iv) advance from related parties of $2.1 million, partially offset by repayment of bank borrowings of $35.5 million, payment of long-term payables of $15.4 million and repurchase of common shares of $5.0 million.

Net cash provided by financing activities totaled $151.3 million for the year ended December 31, 2007 and was attributable to net proceeds from our initial public offering of $202.6 million and bank borrowing raised of $48.7 million, partially offset by (i) repayment to related parties of $48.4 million, (ii) repayment of bank borrowings of $25.8 million, (iii) payment of long-term payables of $16.5 million and (iv) repurchase of common shares of $8.6 million.

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The following table summarizes our outstanding borrowings as of December 31, 2009:

Lender	Principal	Date of Loan	Due Date	Interest Rate
Bank loan	RMB 19.0 million ($2.8 million)	May 12, 2009	May 12, 2010	4.78% per year
Bank loan	RMB 21.0 million ($3.1 million)	May 14, 2009	May 14, 2010	4.78% per year
Bank loan	RMB 9.0 million ($1.3 million)	December 21, 2009	December 21, 2010	5.31% per year
Bank loan	RMB 10.0 million ($1.5 million)	December 21, 2009	December 21, 2010	5.31% per year
Bank loan	RMB 10.0 million ($1.5 million)	December 21, 2009	December 21, 2010	5.31% per year
Bank loan	RMB 19.3 million ($2.8 million)	February 1, 2009	March 31, 2010	4.78% per year
Bank loan	RMB 18.5 million ($2.7 million)	February 1, 2009	February 1, 2010	4.78% per year
Bank loan	RMB 19.5 million ($2.8 million)	September 8, 2009	February 1, 2010	4.78% per year
Bank loan	RMB 21.5 million ($3.1 million)	September 8, 2009	September 8, 2010	4.78% per year
Bank loan	RMB 19.0 million ($2.8 million)	April 27, 2009	April 27, 2010	4.78% per year
Bank loan	RMB 18.0 million ($2.6 million)	December 10, 2009	December 10, 2010	4.78% per year
Bank loan	RMB 30.0 million ($4.4 million)	December 10, 2009	May 10, 2010	4.86% per year
Convertible loan	$33.2 million	October 21, 2008	October 21, 2012	LIBOR + 7.00% per year
Convertible loan	$24.6 million	March 10, 2009	October 21, 2012	LIBOR + 7.00% per year

We have additional amounts payable to XFL and its affiliates in the amount of $6.8 million, which mainly represents (i) a secured loan and accrued interest of $6.4 million from borrowings in 2009 and (ii) corporate overhead expenses paid by XFL and its affiliates.

Capital expenditures

Our capital expenditures were incurred primarily in connection with the purchase of property and equipment totaling $5.2 million, $6.9 million and $5.9 million during the years ended December 31, 2007, 2008 and 2009. We plan to continue to make acquisitions of businesses and assets that complement our operations when suitable opportunities arise.

Recent Accounting Pronouncements

On June 12, 2009, the FASB issued an authoritative pronouncement, which changes how a company determines whether an entity should be consolidated when such entity is insufficiently capitalized or is not controlled by the company through voting (or similar rights). The determination of whether a company is required to consolidate an entity is based on, among other things, the entity’s purpose and design and the company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. The pronouncement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2009. We do not expect the adoption of this pronouncement will have a significant effect on our consolidated financial position or results of operations.

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In October 2009, the FASB issued an authoritative pronouncement regarding the revenue arrangements with multiple deliverables. This pronouncement was issued in response to practice concerns related to accounting for revenue arrangements with multiple deliverables under the existing pronouncement. Although the new pronouncement retains the criteria from existing authoritative literature for when delivered items in a multiple-deliverable arrangement should be considered separate units of accounting, it removes the previous separation criterion that objective and reliable evidence of the fair value of any undelivered items must exist for the delivered items to be considered separate units of accounting. The new pronouncement is effective for fiscal years beginning on or after June 15, 2010. Entities can elect to apply this pronouncement (1) prospectively to new or materially modified arrangements after the pronouncement’s effective date or (2) retrospectively for all periods presented. Early application is permitted; however, if the entity elects prospective application and early adopts this pronouncement after its first interim reporting period, it must also do the following in the period of adoption: (1) retrospectively apply this pronouncement as of the beginning of that fiscal year and (2) disclose the effect of the retrospective adjustments on the prior interim periods’ revenue, income before taxes, net income, and earnings per share. We are in the process of evaluating the effect of adoption of this pronouncement.

In April 2010, the FASB issued an authoritative pronouncement regarding the milestone method of revenue recognition. The scope of this pronouncement is limited to arrangements that include milestones relating to research or development deliverables. The pronouncement specifies guidance that must be met for a vendor to recognize consideration that is contingent upon achievement of a substantive milestone in its entirety in the period in which the milestone is achieved. The guidance applies to milestones in arrangements within the scope of this pronouncement regardless of whether the arrangement is determined to have single or multiple deliverables or units of accounting. The pronouncement will be effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early application is permitted. Companies can apply this guidance prospectively to milestones achieved after adoption. However, retrospective application to all prior periods is also permitted. We do not expect the adoption of this pronouncement will have a significant effect on our consolidated financial position or results of operations.

In April 2010, FASB issued an authoritative pronouncement regarding the effect of denominating the exercise price of a share-based payment award in the currency of the market in which the underlying equity securities trades and that currency is different from (1) entity’s functional currency, (2) functional currency of the foreign operation for which the employee provides services, and (3) payroll currency of the employee. The guidance clarifies that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should be considered an equity award assuming all other criteria for equity classification are met. The pronouncement will be effective for interim and annual periods beginning on or after December 15, 2010, and will be applied prospectively. Affected entities will be required to record a cumulative catch-up adjustment for all awards outstanding as of the beginning of the annual period in which the guidance is adopted. We are in the process of evaluating the effect of the adoption of this pronouncement.

C. Research and Development

We do not make, and do not expect to make, significant expenditures on research and development activities.

D. Trend Information

Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2010 to December 31, 2010 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that caused the disclosed financial information to not be necessarily indicative of future operating results or financial conditions.

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E. Off-Balance Sheet Arrangements

We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We did not enter into any derivative contracts that are indexed to our shares and classified as owners’ and shareholders’ equity, or that are not reflected in our consolidated financial statements. Furthermore, we did 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. We did 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. Contractual Obligations and Commercial Commitments

The following table sets forth our contractual obligations as of December 31, 2009:

			Less Than						More Than
Payment Due by December 31	Total		1 Year		1-3 Years		3-5 Years		5 Years
	(In thousands)
Debt obligations(1)	$	31,976	$	31,976	$	—	$	—	$	—
Operating lease obligations		4,950		2,004		1,578		1,367		1
Purchase obligations(2)		2,443		1,580		557		204		102
Other long-term liabilities reflected on the balance sheet(3)		73,987		9,924		27,687		34,933		1,443
Capital Obligations(4)(5)		3,990		3,990		—		—		—
Convertible loan		57,800		57,800		—		—		—
Total	$	175,146	$	107,274	$	29,822	$	36,504	$	1,546

(1)	Mainly represents loans from Shenzhen Development Bank, Shanghai Pudong Development Bank and China Merchants Bank. See “Item 5.B. — Operating and Financial Review and Prospects — Liquidity and Capital Resources — Financing activities.”
(2)	Represents obligations to pay landing fees, to pay for obtaining advertising production and network services from various services providers and to pay for acquiring television dramas from various sources.
(3)	Mainly represents commitments under contracts in relation to Shaanxi Satellite Television. Shaanxi Television Station terminated its agreement with us on June 30, 2010.
(4)	Represents obligations under a purchase agreement we entered into on October 9, 2008 with Prime Day Management Limited, or Prime Day, and certain other parties to acquire a 100% equity interest in Starease Limited, which has interest in the operations of four digital pay channels in the PRC. As of December 31, 2008, we have paid $11.1 million as a deposit and made an advance of $5.3 million to Prime Day under the agreement. We also agreed to establish a joint venture with Starease Group for the operation of these four cable pay channels. In 2009, we consulted Prime Day Management regarding the establishment of a high definition digital television channel. However, pending government approval for the repositioning of these four digital pay channels and establishment of the joint venture, the acquisition has not yet been completed. The amount noted in the table above does not include the value of our common shares.
(5)	We entered into an agreement with YMHK and several other parties on December 18, 2008. Pursuant to the terms of the agreement, we agreed to provide working capital to YMHK in accordance with business plans and budgets which must be agreed to by all investors in YMHK and us. As of December 31, 2009 we had committed to pay $90,000 to YMHK based on the business plans and budgets agreed in 2009. We plan to terminate the cooperation agreement with YMHK in 2010.

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Contingent consideration payable in connection with our acquisition of Convey

In connection with our acquisition of Convey, the equity owners of Convey are entitled to additional consideration, including both cash and common shares based on a predetermined earnout formula applied to audited operating results through June 30, 2009. The maximum contingent consideration was agreed to be $40.0 million, $10.6 million of which was recorded and paid/settled in 2008 based on estimated operating results. We sold Convey back to its original equity owners on December 31, 2008. As the audited operating results of Convey through June 30, 2009 have not yet been determined, we did not record any additional contingent consideration payable in 2009. The maximum possible contingent consideration in connection with this transaction is $29.4 million.

Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management

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

Directors and Executive Officers	Age		Position
Zheng Jingsheng		62	Chairman of the Board of Directors
Fredy Bush		51	Chief Executive Officer and Director
Zhu Shan		41	Chief Operating Officer and Director
Andrew Chang		40	Chief Financial Officer
Graham Earnshaw		57	President and Director
Joseph Chan		48	Deputy Chief Operating Officer
LC Chang		53	President
Richard Young		40	Managing Director, Xinhua Sports
Aloysius T. Lawn(1)(4)		51	Independent Director
John H. Springer(1)(2)(3)		54	Independent Director
John McLean		43	General Counsel
Long Qiu Yun		47	Independent Director
Steve Richards(1)		41	Independent Director
Li Shantong		65	Independent Director
David Green(2)(4)		61	Independent Director
Harry Nam (3)(4)		45	Independent Director
Allen Hsu		57	Independent Director

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

Directors

Zheng Jingsheng has served as Chairman of the Board of Directors since July 2009. Prior to joining XSEL, Mr. Zheng, a graduate of the People’s University of China’s School of the Central Committee of the CPC, served as Vice President of the Xinhua News Agency from 1998 to 2008 and Deputy General Manager from 1995 to 1998. Mr. Zheng also previously served as Deputy General Manager at the China News Development Company (Shenzhen) of the Xinhua News Agency, as a Consulting Researcher at Development Research Center (“DRC”) of the State Council of China and as Director of Information Center for the DRC.

Fredy Bush had served as our Chief Executive Officer since our founding in November 2005 and previously served as Chairman of our Board of Directors. Her role as Chairman of the Board of Directors was succeeded by Zheng Jingsheng as of July 2009 and she continues to serve as our Chief Executive Officer. She is our founder and also a founder of XFL. Since June 2001 and January 2002, respectively, she has served as Vice Chairman and Chief Executive Officer of Xinhua Financial Network Limited, or XFN, the predecessor to XFL. From 1987 to 1999, Ms. Bush operated a consulting business in Asia where she assisted multinational companies with the identification and exploitation of business opportunities in Greater China. Of particular note was her work in advising on the creation of Taiwan’s commodity futures market. Ms. Bush serves as a director for a number of subsidiaries or affiliates of XFL. Ms. Bush also serves on the board of Bush Corporation, Monoha’a Ranch LLC, Chazara Foundation, NSAT Holdings LLC and PaperDolls LLC.

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Ms. Bush has received a number of awards, including being listed among the Wall Street Journal’s Top 50 Women to Watch in 2004 and was the recipient of the Ellis Island Medal of Honor by the National Ethnic Coalition of Organizations in 2006. In 2006, she also received CNBC’s Asia Entrepreneur of the Year Award and a Woman of Influence Award for Entrepreneur of the Year by the American Chamber of Commerce in Hong Kong.

Zhu Shan has served as our Chief Operating Officer since September 2006. Mr. Zhu has also served as our director since March 2007. From April 2002 to August 2006, Mr. Zhu was the Managing Director of FTSE Xinhua Index, a joint venture between Xinhua Financial Network and FTSE International. Prior to that, Mr. Zhu was the Vice President of China Business for Xinhua Financial Network, and has also previously served as a leading negotiator for the PRC Ministry of Defense, with 10 years of management experience. Mr. Zhu holds a Master’s degree in Public Administration from Harvard University and a Bachelor of Arts degree in British and American literature from Luoyang Foreign Studies Institute in China.

Graham Earnshaw has served as our President since September 2006 and as our director since March 2007. Mr. Earnshaw served as Editor-in-Chief of Xinhua Financial Network from January 2001 to December 2005. Mr. Earnshaw previously worked for Reuters news agency in a variety of positions including Asian Editor from 1990 to 1995. He is also a director of SinoMedia Holdings (HK) Ltd.

Aloysius T. Lawn has served as our independent director since March 2007. Since December 2006, Mr. Lawn has served clients as either a business consultant or an attorney. Until December 2006, Mr. Lawn was the Executive Vice President — General Counsel and Secretary of Talk America Holdings, Inc., an integrated communications service provider with programs designed to benefit residential and small business markets. Prior to joining Talk America Holdings, Inc. in 1996, Mr. Lawn was an attorney in private practice with extensive experience in private and public financings, mergers and acquisitions, securities regulation and corporate governance from 1985 to 1995. Mr. Lawn is a director of XFL. He has also served as a director to private and charitable organizations over the years and as a director of Stonepath Group, Inc. from February 2001 to February 2007. Mr. Lawn graduated from Yale University and Temple University School of Law.

John H. Springer has served as our independent director since March 2007. Mr. Springer joined Nike, Inc. in 2002 and currently serves as Nike Golf’s Chief Operating Officer. Mr. Springer has held both domestic U.S. and international logistics positions at IBM Corporation, Union Pacific Corporation’s third-party logistics unit, and at Dell, Inc. from 1995 to 2002. Mr. Springer has been active in the Council of Logistics Management throughout his career, including holding the position of President for the Central Texas region. Mr. Springer served on the board of directors of Stonepath Group, Inc. from May 2003 to February 2007. Mr. Springer also serves on the Board of Trustees of the Ronald McDonald House Charities of Oregon and Southwest Washington. He earned his Bachelor of Science degree at Syracuse University in Transportation & Distribution Management, and his MBA from St. Edward’s University in Austin, Texas.

Long Qiu Yun has served as our independent director since March 2007. Mr. Long served as a director of our subsidiary, Beijing Perspective Orient Movie and Television Intermediary Co., Ltd., from July 2006 until October 31, 2007. Mr. Long has served as the Board Chairman of Hunan Television & Broadcast Intermediary Co., Ltd. since December 1998, and served as General Manager from December 1998 until October 2002. Mr. Long served at the news department and the advertising department of Hunan Television Station as a journalist and as a director, respectively, from 1985 to 1994. Mr. Long holds a degree in Chinese from Heng Yang Normal University.

Steve Richards has served as our independent director since September 2007. Mr. Richards is Chief Operating Officer of Silver Pictures, a film production company founded by film producer Joel Silver and affiliated with Warner Bros., and Chief Operating Officer and Co-President of Dark Castle Entertainment, a division of Silver Pictures. Mr. Richards was formerly the Chief Financial Officer of Silver Pictures and has worked with Joel Silver and Silver Pictures since 1995. Mr. Richards also serves as a director for TreePeople, a charitable environmental organization. Mr. Richards obtained his CPA in 1992 after working for Arthur Andersen in Los Angeles with a focus on the entertainment industry. He holds an MBA from UCLA’s Anderson School of Business and a Bachelor of Arts degree from Temple University.

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Li Shantong has served as our independent director since September 2007. Ms. Li has extensive experience in funding and research. She is a senior research fellow and former Director General, Department of Development Strategy and Regional Economy at the Development Research Center (“DRC”) of the State Council, PRC, and Vice President of the Academic Committee of the China Development Research Foundation affiliated with the DRC. She was also a member of the National Committee of Chinese People’s Political Consultative Conference. Ms. Li holds Bachelor’s and Master’s Degrees in Mathematics from Peking University.

David Green has served as our independent director since March 2008. Mr. Green is the Chairman of SEPTEMBER FILMS, a leading film and television production company with offices in London and Los Angeles, which he founded in 1992. SEPTEMBER FILMS is a division of DCD Media Plc, on whose executive board Mr. Green serves as a member. Prior to founding SEPTEMBER FILMS, Mr. Green worked as an international TV producer and film director. He was educated at Bury Grammar School and Trinity College, University of Oxford, where he gained a Bachelor of Arts Honors degree and a Master’s degrees in English Language and Literature.

Harry Nam has served as our independent director since July 2009. Mr. Nam is a partner of The Yucaipa Companies, an investment firm with holdings in Europe, Asia and the Americas. He has over 15 years of executive level experience in the areas of corporate strategy, sales and marketing, finance and human resources. Most recently, he was the Director of Corporate Development for the Hysoung Corporation, a global conglomerate with revenues of over $6.1 billion in 2008. He holds an MBA from Harvard Business School and a Bachelor of Arts degree from Yale University.

Allen Hsu has served as our independent director since March 2010. Mr. Hsu is the Chairman of Pac-Link Management Corporation, a Taiwan-based venture capital firm founded in 1998, which currently manages a portfolio of $430 million with a focus on IC design, semi-conductors, telecommunications, LED and clean energy companies. In addition, Mr. Hsu serves as Deputy Managing Director of the Yulon Group, a leading Taiwanese conglomerate involved in textiles and automobile manufacturing, and is responsible for the group’s business diversification and investment. Mr. Hsu received a Bachelor’s degree in Management Science from National Chiaotung University, Taiwan and an MBA from National Chengchi University, Taiwan.

Executive officers

Andrew Chang has served as our Chief Financial Officer since May 2007. Mr. Chang joined XFL in 2003 and held senior positions with the corporate finance department until November 2006 when he transferred to our company as Managing Director of Finance. He successfully managed and completed various acquisitions, fund raisings, and other strategic financial initiatives for both XFL and us, including IPOs on the Tokyo Stock Exchange and the NASDAQ respectively. Prior to joining XFL, Mr. Chang had over 10 years of investment banking experience in the U.S., Hong Kong, China and Japan, including working at GE Capital, ABN AMRO and Nomura. Mr. Chang graduated from University of California at Berkeley.

Joseph Chan served as the President of our Advertising Group since November 2008 and was promoted to Deputy Chief Operating Officer in October 2009. Mr. Chan joined XFL in 2001 and has taken on various important roles in finance, human resources, business development and integration throughout the years until he transferred to our company in January 2008 as Managing Director of Business Development and Integration. Prior to joining XFL, Mr. Chan was a Director at the Investment Banking Division of Jardine Fleming in Hong Kong (now JP Morgan) and an auditor at PricewaterhouseCoopers. Mr. Chan also serves on the board of directors of Ming Fung Jewellery Group Limited. With an Executive MBA degree, Mr. Chan is an Associate of the Hong Kong Institute of Certified Public Accountants and a Fellow of the Association of Chartered Certified Accountants.

LC Chang has served as our President since November 2009. Mr. Chang has 27 years of experience in advertising, and traditional and new media and sports marketing. He is the founder and Chief Executive Officer of Nubb.com. Mr. Chang previously served as Vice President of sina.com, and was responsible for global operations, brand integration, marketing and online media sales. He was promoted to Chief Marketing Officer and External Vice President of Sina Corporation in 2003. Prior to joining Sina, Mr. Chang was the General Manager of Grey Advertising Taiwan from 1992 to 2000. Mr. Chang received his EMBA degree from the International Business Institute of Management College of Taiwan University and his Bachelor’s degree from Taiwan Fu Jen University.

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Richard H. Young has served as Managing Director of Sports since April 2008. He is responsible for planning, developing and overseeing all sports related initiatives of our company. Prior to joining XSEL in 2008, Mr. Young founded and managed a television consulting company which provided services in production, distribution and media rights in China for international and domestic leagues, broadcasters and commercial clients. Prior to that, Mr. Young worked with ESPN STAR Sports in Hong Kong and Singapore, a joint venture between ESPN and Star TV, where he held a number of senior positions including Vice President of Operations and Client Services and Vice President of the Event Management Group and Program Development. Mr. Young graduated cum laude with a dual-Bachelor’s degree in International Relations and East Asian Studies from Boston University and has an MBA from the University of Chicago.

John McLean has served as our General Counsel since January 1, 2010. Mr. McLean joined XFL in 2004 as General Counsel. Prior to that, Mr. McLean worked for six years in Asia with Norton Rose and four years in New York and Toronto with the Canadian law firm Stikeman Elliott. He is qualified to practice law in Hong Kong, the United Kingdom and Canada, and speaks Mandarin Chinese. Mr. McLean holds a degree in law from Queen’s University and a BA (with distinction) from University College, University of Toronto.

B. Compensation of Directors and Executive Officers

Cash compensation

For the year ended December 31, 2009, we paid aggregate cash compensation of approximately $2.1 million to our executive officers. No executive officer is entitled to any severance benefits upon termination of his or her employment with our company except for Fredy Bush, Zhu Shan, Andrew Chang, John McLean and Graham Earnshaw.

Share options

In July 2006, in order to attract and retain the best available personnel, we authorized the grant of options to purchase a maximum of 11,727,602 shares in our company. As of May 31, 2010, there were 4,874,811 common shares issuable upon the exercise of outstanding share options at a weighted average exercise price of $0.78 per share, and there were 3,780,195 common shares available for future issuance upon the exercise of future grants under individual option agreements.

Our shareholders adopted a 2007 share option plan in furtherance of the same purposes on February 7, 2007. The maximum aggregate number of shares that may be issued pursuant to all awards is equal to the lesser of (y) 19,530,205 common shares or (z) a lesser number of common shares determined by the administrator of the plan. As of May 31, 2010, there were 1,900,000 common shares issuable upon the exercise of outstanding share options at a weighted average exercise price of $1.11 per share, and there were 5,771,005 common shares available for future issuance upon the exercise of future grants under our 2007 share option plan.

The following table summarizes, as of May 31, 2010, the options granted to our directors and executive officers and other individuals as a group, without giving effect to options that were exercised or terminated.

	Common
	Shares
	Underlying		Exercise
	Granted		Price				Expiration
	Options		($/share)		Grant Date		Date
Name:
Fredy Bush		—		N/A		N/A		N/A
Zhu Shan		700,000		0.78	July 11, 2006		July 10, 2011
Graham Earnshaw		700,000		0.78	July 11, 2006		July 10, 2011
Andrew Chang		900,000		0.78	July 11, 2006		July 10, 2011
Other individuals as a group		8,168,180		0.78	July 11, 2006		July 10, 2011
Aloysius T. Lawn		30,000		6.50	April 25, 2007		April 24, 2017
		30,000		1.64	April 30, 2008		April 29, 2018
		20,000		0.425	Dec. 31, 2009		Dec. 31, 2019
John H. Springer		30,000		6.50	April 25, 2007		April 24, 2017
		30,000		1.64	April 30, 2008		April 29, 2018
		20,000		0.425	Dec. 31, 2009		Dec. 31, 2019

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	Common
	Shares
	Underlying		Exercise
	Granted		Price			Expiration
	Options		($/share)		Grant Date	Date
Long Qiu Yun		30,000		6.50	April 25, 2007	April 24, 2017
		20,000		1.265	June 13, 2008	June 12, 2018
		20,000		0.425	Dec. 31, 2009	Dec. 31, 2019
YGOF Manager, Ltd.		30,000		4.39	Sept. 26, 2007	Sept. 25, 2017
		20,000		1.265	June 13, 2008	June 12, 2018
		20,000		0.425	Dec. 31, 2009	Dec. 31, 2019
Steve Richards		30,000		4.39	Sept. 26, 2007	Sept. 25, 2017
		20,000		1.265	June 13, 2008	June 12, 2018
		20,000		0.425	Dec. 31, 2009	Dec. 31, 2019
Li Shantong		30,000		4.39	Sept. 26, 2007	Sept. 25, 2017
		20,000		1.265	June 13, 2008	June 12, 2018
		20,000		0.425	Dec. 31, 2009	Dec. 31, 2019
David Green		20,000		1.265	June 13, 2008	June 12, 2018
		20,000		0.425	Dec. 31, 2009	Dec. 31, 2019
Zheng Jingsheng		20,000		0.425	Dec. 31, 2009	Dec. 31, 2019
David U. Lee		400,000		1.325	April 1, 2008	Dec. 31, 2011
		500,000		0.305	Jan. 8, 2009	Jan. 8, 2014
Richard Young		500,000		0.305	Jan. 8, 2009	Jan. 8, 2014
John McLean		780,000		0.78	July 11, 2006	July 10, 2011
Total		13,148,180

The following paragraphs describe the principal terms of our 2007 share option plan:

Termination of options. Where the option agreement permits the exercise or purchase of the options granted for a certain period of time following the recipient’s termination of service with us, or the recipient’s disability or death, the options will terminate to the extent not exercised or purchased on the last day of the specified period or the last day of the original term of the options, whichever occurs first.

Administration. Our share option plan is administered by our board of directors or an option administrative committee designated by our board of directors constituted to comply with applicable laws. In each case, our board of directors or the committee it designates determines the provisions, terms and conditions of each option grant, including, but not limited to, the option vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment upon settlement of the award, payment contingencies and satisfaction of any performance criteria.

Vesting schedule. The vesting schedule is subject to the discretion of the option administrative committee.

Option agreement. Options granted under our share option plan are evidenced by an option agreement that contains, among other things, provisions concerning exercisability and forfeiture upon termination of employment or consulting arrangement, as determined by our board.

Option exercise. The term of options granted under our share option plan may not exceed ten years from the date of grant. The consideration to be paid for our shares upon exercise of an option or purchase of shares underlying the option will be determined by the plan administrator and may include a certified or cashier’s check or consideration received by us under a cashless exercise program implemented by us, or any combination of the foregoing methods of payment.

Third-party acquisition. If a third party acquires us through the purchase of all or substantially all of our assets, a merger or other business combination, all options or share purchase rights will become fully vested and exercisable immediately prior to such transaction.

Termination of plan. Unless terminated earlier, our share option plan will expire in 2017. Our board of directors will have the authority to amend or terminate our share option plan subject to shareholder approval to the extent necessary to comply with applicable law. However, no such action may (i) impair the rights of any optionee unless agreed by the optionee and the share option plan administrator or (ii) affect the share option plan administrator’s ability to exercise the powers granted to it under our share option plan.

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The following paragraphs describe the principal terms of the 2006 individual option agreements:

Termination of options. Where the option agreement permits the exercise or purchase of the options granted for a certain period of time following the recipient’s termination of service with us, or the recipient’s disability or death, the options will terminate to the extent not exercised or purchased on the last day of the specified period or the last day of the original term of the options, whichever occurs first.

Administration. No administration is necessary for individual option agreements, but the administrative committee and our human resources personnel may have limited roles.

Vesting schedule. In general, options granted under our individual option agreements will vest in the following manner: the first half of any option grant vested upon the date of our initial public offering and the next two quarters will vest on December 31, 2008 and 2009, respectively.

Option exercise. The term of options granted under individual option agreements may not exceed five years from the date of grant. The consideration to be paid for our shares upon exercise of an option or purchase of shares underlying the option will be determined by us and may include a certified or cashier’s check.

Third-party acquisition. If a third party acquires us through the purchase of all or substantially all of our assets, a merger or other business combination, all options or share purchase rights will become fully vested and exercisable immediately prior to such transaction.

Termination of grant. Unless terminated earlier, options granted under individual option agreements will expire in 2011.

C. Board Practices

Board of Directors

Our board of directors currently consists of 12 directors. A director is not required to hold any shares in the company by way of qualification. Provided he has properly disclosed his interest, a director may vote with respect to any contract, proposed contract or arrangement in which he is materially interested. Our board may exercise all the powers of the company to borrow money, mortgage its undertaking, property and uncalled capital, and issue debentures or other securities whenever money is borrowed or as security for any obligation of the company or of any third party. All of our directors have signed an agreement with us governing their rights and duties as directors. These agreements do not provide for benefits upon termination of directorships, except in the case of Fredy Bush. Information regarding this agreement appears below.

Committees of the Board of Directors

We have four committees under the board of directors: an audit committee, a compensation committee, a nominating and corporate governance committee and an investment committee. We adopted a charter on February 21, 2007 for our audit, compensation, and nominating and corporate governance committees, which became effective upon the closing of our initial public offering in March 2007, and adopted a charter on April 25, 2007 for our investment committee.

Audit committee

We have appointed Aloysius Lawn as chairman of our audit committee and John Springer and Steve Richards as members. Each satisfies the “independence” requirements of the Nasdaq Stock Market, Marketplace Rules and Rule 10A-3 under the Securities Exchange Act of 1934. The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company. The audit committee met 12 times in 2009 and is responsible for, among other things:

• appointing, retaining and overseeing the work of the independent auditors, including resolving disagreements between the management and the independent auditors relating to financial reporting;

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• pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors;

• reviewing annually the independence and quality control procedures of the independent auditors;

• discussing material off-balance sheet transactions, arrangements and obligations with the management and the independent auditors;

• reviewing and approving all proposed related party transactions;

• discussing the annual audited financial statements with the management;

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

• meeting separately with the independent auditors to discuss critical accounting policies, management letters, recommendations on internal controls, the auditor’s engagement letter and independence letter and other material written communications between the independent auditors and the management; and

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

Compensation committee

We have appointed John Springer as chairman of our compensation committee and David Green as a member. Each satisfies the “independence” requirements of the Nasdaq Stock Market, Marketplace Rules. The compensation committee assists the board in reviewing and approving our compensation structure, including all forms of compensation relating to our directors and executive officers. Our Chief Executive Officer may not be present at any committee meeting while her compensation is deliberated. The compensation committee met seven times in 2009 and is responsible for, among other things:

• reviewing and approving executive compensation;

• reviewing periodically and managing any long-term incentive compensation plans, share option plans, annual bonuses, employee pension and welfare benefit plans;

• determining our policy with respect to change of control or “parachute” payments; and

• managing and reviewing director and executive officer indemnification and insurance matters.

Nominating and corporate governance committee

We have appointed Harry Nam as chairman of our nominating and corporate governance committee and John Springer as a member. Each satisfies the “independence” requirements of the Nasdaq Stock Market, Marketplace Rules. The nominating and corporate governance committee assists the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board. The nominating and corporate governance committee met three times in 2009 and is responsible for, among other things:

• recommending to the board nominees for election or re-election to the board or for appointments to fill any vacancies;

• reviewing annually the performance of each incumbent director in determining whether to recommend such director for an additional term;

• overseeing the board in the board’s annual review of its own performance and the performance of the management; and

• considering, preparing and recommending to the board such policies and procedures with respect to corporate governance matters as may be required to be disclosed under the applicable laws or otherwise considered to be material.

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Investment committee

We have appointed Harry Nam as chairman of our investment committee and Aloysius Lawn and David Green as members. Each satisfies the “independence” requirements of the Nasdaq Stock Market, Marketplace Rules. The investment committee assists the board of directors in reviewing and approving merger and acquisition transactions and investment transactions proposed by management. The investment committee met three times in 2009 and is responsible for, among other things:

• reviewing acquisition strategies with management and investigating acquisition candidates on our behalf;

• recommending acquisition strategies and candidates to the board of directors;

• authorizing and approving acquisitions and investments by us valued in an amount not to exceed, for any particular acquisition or investment, $5.0 million in cash, stock or a combination thereof; and

• approving any bank loan, pledge, mortgage or charge of property and assets (whether present or future), guarantees or similar transactions entered into by our company or our subsidiaries in the ordinary course of business, provided that the total financing obligations of our company or our subsidiaries in each such transaction shall not exceed $10.0 million.

Terms of Directors and Executive Officers

In accordance with our articles of association, a director must vacate his directorship if the director resigns, becomes of unsound mind or dies, is absent from board meetings for six consecutive months without special leave from our board and the board resolves that his office be vacated, becomes bankrupt or ceases to be a director under the law or is removed by our shareholders. A director may be removed by an ordinary resolution of our shareholders. Officers of our company shall have such powers and perform such duties in the management, business and affairs of our company as maybe delegated to them by the board of directors from time-to-time. The compensation of our directors is determined by the board of directors, and divided among the directors as determined by the board. There is no maximum age at which a director must retire.

Employment Agreement with Fredy Bush

If Ms. Bush is unable to continue in employment for 180 days or upon her death, she will be entitled to one year’s current salary and bonus, plus continued participation in any share option plan we adopt. If Ms. Bush’s employment is terminated because there is a change of control of our company, if her employment is terminated by the board without cause or if we fail to pay her bonus in a timely fashion, she will be entitled to her annual salary and bonus for the remainder of the contract, including the period of extension, which could total up to ten years. In such an event, all her options become immediately vested and we or our successor must purchase all her shares at market price.

D. Employees

As of December 31, 2009, we had 817 full-time employees, including 786 located in the PRC and 31 in Hong Kong. Our employees are not covered by any collective bargaining agreement. We consider our relations with our employees to be good. A functional breakdown of our employees is set out in the following table:

Function	Headquarters		Print		Advertising		Broadcast		Total
Administration		25		6		89		10		130
Finance		26		8		44		16		94
General management		9		2		16		5		32
Information technology		6		—		9		10		25
Pre-/post-production(1)		2		—		108		48		158
Sales and marketing		5		73		258		42		378
Total		73		89		524		131		817

(1) Pre-/post-production includes our analyst, design, content production and research functions.

100

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. The total amount of contributions we made to employee benefit plans was $458,565 in 2007, $1,129,529 in 2008 and $1,124,865 in 2009. Our employees in Hong Kong are covered by the Mandatory Provident Fund Scheme. The contribution of our company for the eligible employees is based on 5% of the applicable payroll costs, and contributions are matched by the employees. We contributed $64,853 under this scheme in 2007, $97,195 in 2008 and $39,257 in 2009.

E. Share Ownership

The following table sets forth information with respect to the beneficial ownership of our shares as of May 31, 2010, by:

• each of our current directors and executive officers; and

• each person known to us to own beneficially more than 5.0% of our shares.

	Shares Beneficially
	Owned(1)(2)
	Number		%
Directors and Executive Officers:
Fredy Bush(3)		15,930,000		6.0
Zhu Shan		*		*
Andrew Chang		*		*
Graham Earnshaw		*		*
Joseph Chan		*		*
Richard Young		*		*
Aloysius T. Lawn		*		*
John McLean		*		*
Long Qiu Yun		*		*
Steve Richards		*		*
Li Shantong		*		*
David Green		*		*
Allen Hsu(4)		2,955,237		1.1
All directors and executive officers as a group(5)		19,215,387		7.2
Principal Shareholders:
Xinhua Finance Limited(6)		50,054,618		18.7
Patriarch Partners Media Holdings, LLC(7)		64,133,115		24.0
Dragon Era Group Limited(8)		8,830,000		3.3
Yucaipa Global Partnership Fund L.P.(9)		23,258,045		8.7

* Upon exercise of all options granted, would beneficially own less than 1.0% of our outstanding common shares.

101

(1)	Beneficial ownership is determined in accordance with Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, and includes voting or investment power with respect to the securities.
(2)	Percentage of beneficial ownership of each listed person is based on 198,843,675 common shares outstanding as of May 31, 2010, as well as (i) a convertible loan which may be converted into 53,993,460 common shares by Patriarch, (ii) 52,512 Series B convertible preferred shares which may be converted into 14,684,023 common shares by Yucaipa and (ii) the common shares underlying share options and warrants exercisable by such person or group within 60 days of the date of this annual report.
(3)	Includes 8,825,000 common shares owned by Dragon Era Group Limited that are restricted and held in the form of ADR evidencing 4,412,500 ADSs, and 5,000 common shares. Dragon Era Group Limited is wholly-owned by Super Tiger Limited, which in turn is wholly-owned by The Fredy Bush Trust, an irrevocable discretionary trust of which Ms. Bush is settlor. Also includes 440,000 common shares that are owned by The Fredy Bush Family Trust in the form of ADR evidencing 220,000 ADSs, and 660,000 common shares. Also includes 6,000,000 restricted shares issued to Ms. Bush in May 2010, which cannot be sold before April 2015 without the prior approval of our company. Ms. Bush disclaims beneficial ownership of all of our shares held by The Fredy Bush Family Trust. The business address of Ms. Bush is 31/F, The Center, 99 Queen’s Road, Central, Hong Kong.
(4)	Includes 1,871,650 common shares held by Pac-Link Opportunity Fund, 98,508 common shares held by Auto High Profits Limited and 985,079 common shares held by Tai Yuen Venture Capital Investment Corp. Mr. Hsu is a member of the board of directors of the three shareholders and shares the investment and voting power of such shares. Mr. Hsu disclaims beneficial ownership of all of the shares except to the extent of his pecuniary interest therein.
(5)	Includes common shares held by all of our directors and executive officers as a group and common shares issuable upon the exercise of all of the options within 60 days of the date of this annual report held by all of our directors and executive officers.
(6)	Shares are common shares. Xinhua Finance Limited is a public company listed on the Mothers Board of the Tokyo Stock Exchange. The business address of Xinhua Finance Limited is Suite 2103-4, Vicwood Plaza, 199 Des Voeux Road, Central, Hong Kong. The holdings of XFL in our shares have decreased from 100% at our founding.
(7)	Includes 10,139,655 common shares beneficially owned by Patriarch Partners Media Holdings LLC, of which 10,139,654 are restricted and held in restricted ADR form. Also include a $57.8 million convertible loan held by its affiliates that may be converted into 53,993,460 common shares at any time. The business address of Patriarch Partners is 40 Wall Street, 25th Floor, New York, NY 10005.
(8)	Includes 8,825,000 common shares that are restricted and held in the form of ADR evidencing 4,412,500 ADSs, and 5,000 common shares. Dragon Era Group Limited is wholly-owned by Super Tiger Limited, which in turn is wholly-owned by The Fredy Bush Trust, an irrevocable discretionary trust of which Fredy Bush, our chairman and chief executive officer, is settlor. The business address of Dragon Era Group Limited is 31/F, The Center, 99 Queen’s Road, Central, Hong Kong.
(9)	Includes 2,400,000 common shares that are held in the form of ADR evidencing 1,200,000 ADSs, and 6,174,022 common shares. Also includes 52,512 Series B convertible preferred shares held by Yucaipa Global Partnership Fund L.P. and its related entities, YGOF GP Ltd., Yucaipa Global Holdings G.P. and RDBI LLC that may be converted into 14,684,023 common shares at any time. See “Item 7.B. Major shareholders and related party transactions — Related Party Transactions — Transactions with Yucaipa” for additional information on our agreements with Yucaipa. Yucaipa Global Partnership Fund L.P. is controlled by Ronald W. Burkle and its business address is 9130 W. Sunset Boulevard, Los Angeles, CA 90069.

As of May 31, 2010, 198,843,675 of our common shares were issued and outstanding. Approximately 65.93% of our issued and outstanding common shares were held by record holders in the United States, including 57,119,650 ADSs held by the depositary.

Holders of common shares are entitled to one vote per share. We issued common shares represented by our ADSs in our initial public offering.

102

Our issuance of Series B convertible preferred shares to, and agreements with, Yucaipa have caused changes to the rights of our security holders. We are required to seek the approval of the holders of a majority of the outstanding Series B convertible preferred shares for certain matters, such as authorizing the issuance of any parity shares, and to require the approval of the holders of a majority of the outstanding Series B convertible preferred shares and any outstanding parity shares for certain other matters, such as entering into certain transactions with shareholders or affiliates, or materially changing the scope of our business. In addition, we entered into a shareholders agreement with Yucaipa and XFL that requires XFL to vote its shares in us and take certain other actions to ensure that an individual designated by Yucaipa will remain one of our directors so long as Yucaipa continues to hold at least 50% of the Series B convertible preferred shares originally issued under the share purchase agreement. See “Item 7.B. Major shareholders and related party transactions — Related Party Transactions — Transactions with Yucaipa” for additional information on the Series B convertible preferred shares and our agreements with Yucaipa.

Item 7. Major Shareholders and Related Party Transactions

A. Major Shareholders

Please refer to “Item 6.E. Directors, Senior Management and Employees — Share Ownership.”

B. Related Party Transactions

Contractual arrangements with our affiliated entities and their shareholders

PRC laws and regulations currently limit foreign equity ownership of companies that engage in media, advertising and market research businesses. To comply with these foreign ownership restrictions, we operate a substantial portion of our businesses in China through a series of contractual arrangements with our affiliated entities and their shareholders. For a description of these contractual arrangements, see “Item 4.C. Information on the Company — Organizational structure — Agreements that provide effective control over our affiliated entities,” “Item 4.C. Information on the Company — Organizational structure — Agreements that provide the option to purchase the equity interest in the affiliated entity” and “Item 4.C. — Organizational structure — Agreements that transfer economic benefits to us.”

Transactions with XFL or its subsidiaries

Any transactions entered into with XFL, its predecessor or its subsidiaries are treated as related party transactions, as set forth below:

Contracts between us and XFL or its subsidiaries

On September 13, 2006, we entered into a Group Services Agreement with XFL. Under this agreement, certain services shall be provided to us in exchange for a variable charge. The agreement covers a wide range of services including management, human resources, finance, legal, corporate communications, public relations, information technology and administrative services. On January 25, 2007, the Group Services Agreement was amended to provide that charges for 2006 under the agreement would not exceed $700,000 and for subsequent years would not exceed $1.0 million. On January 1, 2009, we amended and restated our agreement with XFL. Under the amended and restated agreement, XFL will provide us with only legal services and the service charge will be 50% of the actual cost incurred by XFL’s legal department. We incurred charges of $0.0 million, $0.7 and $0.3 million for 2007, 2008, and 2009, respectively, under the Group Services Agreement.

We have a verbal space arrangement with a subsidiary of XFL, pursuant to which we share costs under a lease held by the subsidiary. We paid $0.4 million, $0.3 million and $0.3 million pursuant to this agreement in 2007, 2008 and 2009, respectively.

The terms and prices of these transactions, taken as a whole, were determined on an arm’s-length basis and we believe we could have obtained comparable terms from independent third parties.

103

Loan agreements and foreign currency agreement between us and XFL or its subsidiaries

On March 31, 2006, we issued a promissory note in the amount of $38.2 million for the benefit of Xinhua Financial Network and a promissory note in the amount of $68.5 million for the benefit of XFL. Both notes were due on demand and the interest rates were not specified. We issued the promissory notes to borrow money from XFL and Xinhua Financial Network to pay for the costs related to our acquisition from XFL of equity interests XFL held before March 31, 2006 in XFA, the contractual control XFL held before March 31, 2006 in Beijing Century Media and advances from XFL and Xinhua Financial Network enabling us to acquire 19.0% equity interest in Upper Step, and Accord Group Investments Limited. During the year ended December 31, 2007, XFL paid on our behalf earnout consideration related to our acquisitions of Beijing Century Media and XFA of $7.4 million and $25.0 million, respectively, and direct costs of $0.2 million. We repaid $50.0 million in cash to XFL in 2007 and the remaining balance of $113.5 million dollars was permanently waived. For the year ended December 31, 2008, XFL and its subsidiaries paid on our behalf earnout considerations of $2.8 million, $4.5 million and $14.0 million for the acquisitions of Hyperlink, Beijing Century Media and XFA, respectively. As of December 31, 2008, the outstanding balance of $26.3 million, which included earnout consideration of $5.0 million $2.3 million, $4.6 million and $14.0 million for our acquisitions of Economic Observer Advertising, Hyperlink, Beijing Century Media and XFA, respectively, was waived by XFL in 2008. As of December 31, 2008, we owed $1.1 million to XFL and its subsidiaries, which mainly represented corporate overhead expenses paid by XFL on behalf of our company.

On March 5, 2009, we, Xinhua Sports & Entertainment (Shanghai) Limited, Xinhua Financial Network and Shanghai Huacai Investment Advisory Co. Ltd. (“Huacai”), a subsidiary of XFL, entered into an agreement, pursuant to which Huacai advanced RMB 42.8 million (approximately US$6.6 million) to Xinhua Sports & Entertainment (Shanghai) Limited, secured by our U.S. dollar deposits in the amount of $6.23 million. The agreement is to facilitate the conversion of the excess U.S. dollars we hold into RMB for working capital purpose. The terms of this agreement were determined on an arm’s-length basis. On April 7, 2009, Xinhua Sports & Entertainment (Shanghai) Limited repaid the loan and Huacai advanced another RMB42.8 million (approximately US$6.6 million) to Xinhua Sports & Entertainment (Shanghai) Limited on April 21, 2009. Interest expenses of approximately $0.2 million and interest income of approximately $0.2 million were recognized for the year ended December 31, 2009 for these loans and security deposits.

As of December 31, 2009, we owed $0.8 million to XFL and its subsidiaries, which mainly represented security loans to XFN and accrued interest of $6.4 million offset by (i) corporate overhead expenses due to XFL of $0.4 million, (ii) the loan from Huacai and accrued interest of $6.4 million and (iii) corporate overhead expenses paid by XFL on behalf of our company of $0.3 million.

Transactions involving our acquisitions

See “Item 5.A. Operating and financial review and prospects — Operating Results — Acquisitions.” The terms and pricing of each acquisition, taken as a whole, were determined on an arm’s-length basis between the sellers and the buyers and we believe the terms are comparable to terms that could have been obtained from independent third parties. However, we received assistance from XFL and Xinhua Financial Network in executing these acquisitions and in certain instances the acquisition target was initially acquired by XFL and injected to us in exchange for certain consideration. We received favorable terms from XFL and Xinhua Financial Network as we are part of the Xinhua Finance Limited group.

Transactions with David U. Lee, Leeding Media LLC, K-Jam Media Inc. and Kia Jam

In April 2008, Xinhua Media Entertainment and Leeding Media, LLC, or Leeding Media, entered into a services agreement. Pursuant to the agreement, Leeding Media agreed to furnish to Xinhua Media Entertainment the services of David U. Lee, who now serves as the Managing Director of Xinhua Media Entertainment. Mr. Lee is the sole shareholder of Leeding Media, which is a shareholder of Xinhua Media Entertainment. The agreement has an initial term of 24 months starting from April 1, 2008, and shall continue indefinitely thereafter until terminated. The agreement may be terminated by Xinhua Media Entertainment at any time for cause, by mutual consent, by six month’s written notice by either party after the expiry of the initial term, or upon certain other events. David U. Lee separately warranted to Xinhua Media Entertainment that, among other things, Xinhua Media Entertainment has the rights and remedies against Mr. Lee that it otherwise would have were Mr. Lee a direct employee.

In April 2008, Xinhua Media Entertainment, Leeding Media, David U. Lee, K-Jam Media Inc., Kia Jam and Xinhua Finance Media entered into a shareholders’ agreement pursuant to which Leeding Media agreed to introduce Xinhua Media Entertainment to business opportunities and provide the services of Mr. Lee to act as the Managing Director of Xinhua Media Entertainment. A dividend is payable to shareholders of Xinhua Media Entertainment under the agreement according to a predetermined formula. The agreement also provides for certain shareholder rights including tag-along and drag-along rights and a right of first refusal for existing shareholders to purchase additional shares in Xinhua Media Entertainment in the event of the sale of additional shares.

104

In May 2010, Xinhua Media Entertainment extended its services agreement with Leeding Media, LLC for a period of 12 months. The terms and conditions of the extension are substantially the same as the original services agreement entered into between the parties in April 2010, with the exception of one modification that specifies how the parties work together. Under the extension, for business transactions that Leeding Media submits to Xinhua Media Entertainment for consideration, if Xinhua Media Entertainment elects to not proceed with the transaction, then Leeding Media shall have right to work with third parties on terms and conditions that are substantially the same as terms and conditions originally presented to Xinhua Media Entertainment.

Transactions with Shanghai Wai Gao Qiao (Group) Co., Ltd.

Shanghai Wai Gao Qiao (Group) Co., Ltd., or Wai Gao Qiao, held 2.4% of the equity interest in us as of May 31, 2010 via its wholly-owned subsidiary, Honour Rise Services Limited. The transactions we entered into with Wai Gao Qiao and its subsidiaries, including, but not limited to, Shanghai Camera, are treated as related party transactions, as set forth below. The terms and prices of these transactions, taken as a whole, were determined on an arm’s-length basis and we believe we could have obtained comparable terms from independent third parties.

In January 2007, through an entrusted loan arrangement with the Agricultural Bank of China, our affiliated entity, Shanghai Yuan Zhi Advertising Co., Ltd., loaned $2.3 million (RMB15.5 million) to Shanghai Wai Gao Qiao Free Trade Zone Development Co., Ltd. to finance their working capital. The loan is unsecured, non-interest bearing and will mature in January 2010. The loan was fully repaid in 2008.

In December 2008, through an entrusted loan arrangement with the Agricultural Bank of China, Shanghai Yuan Zhi Advertising Co., Ltd., our affiliated entity, loaned $2.3 million (RMB15.5 million) to Wai Gao Qiao to finance its working capital. The loan is unsecured, non-interest bearing and will mature in December 2011. Wai Gao Qiao has, however, verbally agreed to repay this loan on demand.

In December 2009, we terminated the strategic cooperation relationship with Shanghai Camera and we have made full provision for the outstanding loan of $2.3 million (RMB15.5 million) for the year ended December 31, 2009.

Agreements regarding Shanghai Camera Media Investment Co., Ltd.

See “Item 4.B. Information on the Company — Business overview — Arrangements with partners and suppliers — Agreements regarding Shanghai Camera.”

We loaned $1.7 million to Shanghai Camera for working capital purposes in 2006 and an additional $0.3 million in 2008. The loan rolls over on a year-to-year basis and carries no interest. The maximum amount drawable under the loan is RMB30.0 million ($4.4 million). Shanghai Camera repaid $2.0 million in other loans to us in 2007.

In December 2009, we terminated the strategic cooperation relationship with Shanghai Camera and we have made full provision for the outstanding loan and due balance of US$5.1 million for the year ended December 31, 2009.

Transactions with Patriarch Partners

Patriarch Partners and its affiliates held 4.5% of the equity interests of XFL and 24.0% of our equity interests as of May 31, 2010. Patriarch Partners held 15,585,254 of our convertible preferred shares before our initial public offering, which automatically converted into 15,585,254 common shares upon the completion of our initial public offering. We accrued a premium over the redemption period of the preferred shares as a deemed dividend with a debit to our retained earnings of $2.2 million for the period from the date of issuance of the preferred shares to July 24, 2006. Dividends declared to redeemable convertible preferred shares were $5.3 million and $1.4 million for the years ended December 31, 2006 and 2007, respectively. No further dividends are payable on the preferred shares that were held by Patriarch Partners.

105

Under our then Memorandum and Articles of Association, Patriarch Partners, as a holder of our convertible preferred shares, was entitled to vote on an “as converted” basis together with the holders of our common shares. Moreover, subject to certain exceptions, we had to obtain prior written consent from Patriarch Partners before, among other things, incurring certain indebtedness or liens, entering into certain transactions with shareholders or affiliates, entering into certain merger agreements or issuing any common shares. As the result of its shareholding in us and XFL and the influence over us conferred by our Memorandum and Articles of Association, Patriarch Partners has significant influence over us. The transactions we entered into with Patriarch Partners are treated as related party transactions, as set forth below. The terms and prices of these transactions, taken as a whole, were determined on an arm’s-length basis, and we believe we could have obtained comparable terms from independent third parties.

Share purchase agreement between us and Patriarch Partners

Patriarch Partners entered into a share purchase agreement with us on March 16, 2006, agreeing to purchase 16,404,926 of our convertible preferred shares for $60.0 million. Patriarch Partners also agreed to purchase 5,468,309 additional convertible preferred shares for $20.0 million, but did not do so because we did not purchase additional assets for which the additional $20.0 million was to be raised. The purchase price was determined through our arm’s-length transaction with Patriarch Partners.

In connection with our issuance and sale of convertible preferred shares in March 2006, we entered into an investor rights agreement and credit agreement with Patriarch Partners.

Investor rights agreement among us, Patriarch Partners and XFL

Pursuant to an Investor Rights Agreement dated as of March 16, 2006, we have granted Patriarch Partners and certain holders of our common shares customary registration rights, including demand and piggyback registration rights and Form F-3 registration rights. A total of 15,585,254 common shares of our company are covered by registration rights, assuming all of the outstanding preferred shares are converted, there are no accrued and unpaid dividends and the conversion price is not adjusted. The number of shares covered by registration rights may increase if Patriarch Partners owns more of our shares, for instance, if it converts the loan under the credit agreement described below into common shares. In addition, the investor rights agreement grants Patriarch Partners preemptive rights with respect to any issuance of equity securities issued by us, which provision was terminated upon the completion of our initial public offering.

In the event XFL decides to transfer some of its securities in us, it must give rights of co-sale to Patriarch Partners, so that Patriarch Partners may sell securities along with XFL in the sale.

2008 convertible loan facility agreement among us, Zohar CDO 2003-1, Limited and Zohar II 2005-1, Limited, together with Patriarch Partners Agency Services LLC

On October 21, 2008, we entered into a credit agreement with Zohar CDO 2003-1, Limited and Zohar II 2005-1, Limited, as lenders, together with Patriarch Partners Agency Services, LLC, as agent for the lenders. Each of the lenders and the agent are affiliates of Patriarch Partners. The facility is for a term of four years and is secured by a pledge of our television assets. The amount outstanding under the loan facility was convertible into our common shares at an initial conversion price of $1.12 per common share for the period from October 21, 2009 to October 20, 2010. The conversion price was initially increased to $1.37 per common share for the period from October 21, 2010 to October 20, 2011 and initially to $1.62 per common share for the period after October 21, 2012. We also granted certain registration rights, pre-emptive rights and tag-along rights to the lenders. As of the date of this annual report, the outstanding principal amount under the secured convertible loan facility is $41.5 million. In addition, we obtained a term loan of $7.6 million from Patriarch. We did not meet certain financial covenants contained in the secured convertible loan facility for the quarter ended September 30, 2009, for which we received a waiver. We also did not meet these financial covenants for the quarters ended December 31, 2009, March 31, 2010 and June 30, 2010. We entered into an amendment and waiver to the secured convertible loan facility on July 12, 2010, which effectively waives our breach of financial covenants for the quarters ended December 31, 2009, March 31, 2010 and June 30, 2010 and up to the date of the amendment, and lowers the financial covenants pertaining to minimum consolidated EBITDA, minimum interest coverage ratio and maximum leverage ratio, in each case on a prospective basis.

106

In connection with the amendment to the secured convertible loan facility, (i) we designated and issued 78,295 Series C convertible preferred shares to the lenders, convertible into 25% of our fully diluted common equity, (ii) we repaid $16.3 million of the convertible loan balance of which $8.7 million was repaid from the proceeds of the sale of our printing business and the remaining $7.6 million was repaid through an additional non-convertible term-loan of $7.6 million from the lenders. The amendment, among others, required us to grant the lenders additional security in our assets as collateral, required each of our offshore subsidiaries to guarantee our obligations under the secured convertible loan facility (including the additional non-convertible term loan) and requires us to make mandatory prepayments upon the occurrence of any debt or equity offering or asset sales by us or any of our subsidiaries.

The approval of the holders of a majority of the outstanding Series C convertible preferred shares is required for certain matters, such as authorizing the issuance of any Series C parity shares, while the approval of the holders of a majority of the outstanding Series C convertible preferred shares and any outstanding Series C parity shares is required for certain other matters, such as entering into certain transactions with shareholders or affiliates, or materially changing the scope of our business. Upon any liquidation, the Series C convertible preferred shares would be entitled to a liquidation preference. The holders of the Series C convertible preferred shares have the right to require that their shares be redeemed by us upon the occurrence of certain events, such as a change of control of our company, any substantial asset sales or our receipt of any tender offer, exchange offer or repurchase offer for more than 50% of our outstanding common shares.

The Series C convertible preferred shares are a newly-created series having certain preferences, limitations and relative rights. Subject to limitations on conversion in certain circumstances, at the option of the holders, the Series C convertible preferred shares can be converted into 104,854,627 common shares at any time. The conversion rate at any time shall be determined by dividing (x) the stated value per share, which is $100.00 per Series C convertible preferred share, subject to adjustment in the event of any subdivision or combination of the outstanding convertible preferred shares by (y) the then applicable conversion price, initially equal to $0.0747 per share, but subject to adjustment. The Series C convertible preferred shares are non-voting and, with respect to distribution and any liquidation or dissolution of our company, rank junior to the Series B convertible preferred shares.

Transactions with Yucaipa

Share purchase agreement between us and Yucaipa

Yucaipa Global Partnership Fund L.P. and its affiliates, or Yucaipa, held 4.3% of our equity interests as of May 31, 2010. Yucaipa also holds 352,512 of our Series B convertible preferred shares, 300,000 of which were purchased for $30.0 million pursuant to a share purchase agreement entered into on February 18, 2008 and the remainder as in-kind dividends pursuant to the terms of the share purchase agreement. These Series B convertible preferred shares can be converted to 14,684,023 common shares at any time. The purchase price was determined through our arm’s-length transaction with Yucaipa.

The Series B convertible preferred shares have certain preferences, limitations and relative rights. The Series B convertible preferred shares are convertible into common shares at the option of holders based on a conversion formula at any time after the first anniversary of the closing of the placement on February 28, 2008, or upon the occurrence of certain other events. The conversion rate at any time shall be determined by dividing an amount equal to the sum of (x) the stated value per share, which is $100.00 per convertible preferred share subject to adjustment in the event of any subdivision or combination of the outstanding preferred shares, plus (y) the amount of any accrued dividends per share then remaining unpaid on each convertible preferred share being converted by the then applicable conversion price, initially equal to $3.00 per share, but subject to adjustment.

Yucaipa, as a holder of our Series B convertible preferred shares, is entitled to vote on an “as converted” basis together with the holders of our common shares. Moreover, the approval of the holders of a majority of the outstanding Series B convertible preferred shares is required for certain matters, such as authorizing the issuance of any parity shares, while the approval of the holders of a majority of the outstanding Series B convertible preferred shares and any outstanding parity shares is required for certain other matters, such as entering into certain transactions with shareholders or affiliates, or materially changing the scope of our business. The Series B convertible preferred shares are entitled to quarterly preferred dividends at the rate of 8.0% per annum payable in cash or, at our option subject to certain limitations, through the issuance of additional Series B convertible preferred shares. Upon any liquidation, the Series B convertible preferred shares would be entitled to a liquidation preference. The holders of the Series B convertible preferred shares have the right to require that their shares be redeemed by us upon the occurrence of certain events.

107

Shareholders agreement among us, Yucaipa and XFL

The shareholders agreement requires XFL to vote its shares in us and take certain other actions to ensure that an individual designated by Yucaipa will remain one of our directors so long as Yucaipa continues to hold at least 50% of the Series B convertible preferred shares originally issued under the share purchase agreement. The shareholders agreement also provides Yucaipa with certain tag-along rights in connection with certain sales by Xinhua Finance Limited of common shares it holds in us.

Registration rights agreement between us and Yucaipa

Pursuant to a registration rights agreement dated February 28, 2008, we have granted Yucaipa piggyback registration rights. A total of 10,000,000 common shares of our company are covered by registration rights, assuming all of the outstanding Series B convertible preferred shares are converted, there are no accrued and unpaid dividends and the conversion price is not adjusted.

Transactions with Hunan Television & Broadcast Intermediary Co., Ltd.

Long Qiu Yun has served as our independent director since March 2007 and as a director of our subsidiary, Beijing Perspective Orient, from July 2006 to October 2007. Mr. Long also has served as the Board Chairman and General Manager of Hunan Television & Broadcast Intermediary Co., Ltd., or Hunan Television, since 1995. In July 2006, we acquired 51% of the equity of Beijing Perspective Orient from Hunan Television through Beijing Century Media, an affiliated entity. Xinhua Financial Network financed the purchase price for this acquisition.

In October, 2007, we acquired, through Beijing Century Media, the remaining 49% of the equity of Beijing Perspective Orient for RMB 16.0 million ($2.3 million). In connection with the acquisition of the remaining 49% equity interest in Beijing Perspective Orient, we entered into a share subscription agreement and deed of non-competition undertaking and release with Whole Fortune Limited, or Whole Fortune, a limited liability company controlled by Hunan Television and incorporated in the British Virgin Islands. Pursuant to these agreements, we issued 2,043,347 common shares to Whole Fortune in exchange for its entering into a non-competition agreement with us. Under the non-competition agreement, Whole Fortune promised that it and its affiliates will not compete with us or our affiliates outside of China for a term of four years. The common shares we issued to Whole Fortune were valued at $4.06 per share and had an aggregate value of $8.3 million. The terms of this non-competition agreement, including the price paid by us, when taken as a whole with the acquisition of 49% of the equity interest in Beijing Perspective Orient by Beijing Century Media, were determined on an arm’s length basis, and we believe the terms are comparable to terms we could obtain from independent third parties. See “Item 5.A. Operating and financial review and prospects — Operating Results — Acquisitions.”

Share restructuring

On September 22, 2006, we issued 4,099,968 warrants and 6,478,437 common shares and XFL paid $9.1 million to Sino Investment Holdings Limited the 37.0% shareholder of our subsidiary Upper Step Holdings, and the 61.0% shareholder of Accord Group Investments Limited, another subsidiary of ours, in exchange for its shareholdings in Upper Step Holdings, and 451,107 common shares in exchange for its shareholdings in Accord Group Investments Limited. The warrants are exercisable at an initial price of $3.659 per share. In addition, Sino Investment issued a demand promissory note to us in the amount of $7.9 million as part of this transaction, which has no specified interest rate. The warrants are immediately exercisable and valid for a period of five years.

On August 7, 2007, the terms of the promissory note were amended so that the amount is repayable on or prior to November 9, 2011 and an 8.0% interest was applied to the promissory note. As of January 21, 2008, a revised repayment agreement was concluded which states that $2.5 million will be repaid on March 31, 2009, $2.5 million will be repaid on March 31, 2010, and the remaining outstanding principal amount will be repaid on March 31, 2011. The interest rate is stated at 8.0% per annum and accrued from November 10, 2006.

As of December 31, 2008, Sino Investment was in default with respect to interest payments on the promissory note. We have reserved our rights in full.

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Transaction with Fredy Bush

On March 8, 2010 we entered into a loan agreement with Fredy Bush, our Chief Executive Officer, for a bridge loan in the amount of $1.5 million. The purpose of the bridge loan is to fund our working capital needs on a short-term basis. The interest payable on the loan is 4.0% per annum. In connection therewith, we issued 6,000,000 restricted shares to Ms. Bush on May 19, 2010 which may not be sold prior to April 2, 2015 without the prior consent of our company. We repaid this loan in June 2010.

Employment agreements

See “Item 6.C. Directors, senior management and employees — Board Practices.”

Share option agreements

See “Item 6.B. Directors, senior management and employees — Compensation of Directors and Executive Officers — Share options.”

C. Interests of Experts and Counsel Not applicable.

Item 8. Financial Information

A. Consolidated Statements and Other Financial Information

We have appended consolidated financial statements filed as part of this annual report.

Legal Proceedings

In October 2007, we purchased from UBS Financial Services, Inc. a $25.0 million principal protected note issued by Lehman Brothers Holdings Inc., or Lehman Brothers, linked to the FTSE/Xinhua China 25 Index, which matured in January 2009. In July 2008, we borrowed $14.0 million from UBS AG using the principal protected note as collateral. On September 15, 2008, Lehman Brothers filed for bankruptcy, and, after we refused to post additional collateral for the loan, UBS AG filed a demand for arbitration with the American Arbitration Association against us seeking repayment of the loan on September 25, 2008. On October 28, 2008, we filed our defense to the demand as well as a cross claim against UBS Financial Services, Inc. for an amount in excess of $25.0 million. We took full provision of $24.9 million against the principal protection note as of December 31, 2008. On October 1, 2009, we settled this dispute with UBS Financial Services and UBS AG.

Dividend Policy

We have never declared or paid any dividends on our common shares, nor do we have any present plan to pay any cash dividends on our ADSs in the foreseeable future. We currently intend to retain most of our available funds and any future earnings to operate and expand our business. We have, however, paid dividends to the holder of our series A convertible preferred shares of approximately $1.3 million, $0.0 million and $0.0 million for the years ended December 31 2007, 2008 and 2009, respectively. We discontinued these dividends upon conversion of the series A convertible preferred shares. The terms of the 2008 credit agreement preclude us from paying any dividends on our common shares.

Holders of our series B convertible preferred shares are entitled to dividends at 8.0% per annum of the stated value of such series B convertible preferred shares, payable at each fiscal quarter in cash or stock at our option. We have issued an aggregate of 52,512 Series B convertible preferred shares as dividends to the holder of such shares as of the date of this annual report.

As we are a holding company, we rely on dividends paid to us by our wholly-owned subsidiaries Upper Step Holdings Limited, Accord Group Investments Limited, XFA, Profitown Group, East Alliance Limited and Small World Television, all of which are British Virgin Islands business companies, by our wholly-owned subsidiaries EconWorld Media, Singshine Marketing and Xinhua Finance Media (Hong Kong) Limited, all of which are Hong Kong companies, and by our indirect subsidiary Xinhua Media Entertainment in which we hold a 75% interest, a Cayman Islands company, for our cash requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders, service any debt we may incur and pay our operating expenses.

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In the British Virgin Islands, the payment of dividends is subject to limitations. A British Virgin Islands business company that prior to January 1, 2007 existed as an international business company is permitted to declare and pay dividends only out of surplus, meaning the excess, if any, at the time of the determination, of the total assets of the company over the sum of its total liabilities, as shown in the books of account, plus its capital. In addition, such company may not declare or pay a dividend unless the directors of the company determine that immediately after the payment of the dividend the company will be able to satisfy its liabilities as they become due in the ordinary course of its business and the realizable value of the assets of the company will not be less than the sum of its total liabilities, other than deferred taxes, as shown in the books of account, and its capital.

In Hong Kong, the payment of dividends is also subject to limitations. Dividends may only be distributed out of accumulated, realized profits less accumulated, realized losses. Accumulated, realized profits must not have been previously distributed or capitalized. Accumulated, realized losses do not include those previously written off in a reduction or reorganization of capital.

In the Cayman Islands, the payment of dividends is also subject to limitations. Dividends may only be distributed out of profits, or out of a company’s share premium account, subject to the company being able to pay its debts as they fall due in the ordinary course of business.

If we are allowed to declare and pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant. Cash dividends on our ADSs, if any, will be paid in U.S. dollars.

Agreement with JCBN

In 2007 we acquired a 100% equity interest in JCBN China, a leading advertising agent for China’s online property and imported spirits sectors, and a 100% equity interest in Profitown Group, a below-the-line marketing services provider. The acquisition agreement required us to make an earnout payment to the former owner of JCBN in the amount of approximately $2.4 million for the year ended December 31, 2008, which remains outstanding as of the date of this annual report. We have no earnout obligations for the year ended December 31, 2009. In addition, during our audit of JCBN’s financial results for the year ended December 31, 2009, we identified two transactions for which the collectability of receivables was uncertain. We accounted for these transactions using the cash basis of accounting, and accordingly recorded no significant revenue for these transactions. In connection with our ongoing corporate restructuring, and due to the performance history of JCBN, we ceased operations of the JCBN businesses in 2010.

We entered into a settlement agreement with the former owner of JCBN China and Profitown Group, collectively JCBN, in June 2010, pursuant to which we will pay the 2008 earnout amount by issuing shares in our company with an aggregate market value of approximately $2.4 million. We will issue these shares on December 28, 2010, and they will be subject to a six-month lockup period. In addition, we will transfer the entirety of our equity interest in JCBN back to the original selling shareholders. As consideration for this payment, the former owner of JCBN will agree to waive all claims against us for earnout payments.

B. Significant Changes

Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.

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Item 9. The Offer and Listing

A. Offering and Listing Details

Our ADSs, each representing one common share, have been listed on the Nasdaq since March 9, 2007.

The following table provides the high and low trading prices for our ADSs on the Nasdaq for (1) the years 2007, 2008 and 2009, (2) each of the past six quarters, and (3) each of the past six months.

	Sales Price
	High		Low
Annual High and Low
2007 (from March 9, 2007)	$	13.00	$	5.06
2008		6.28		0.31
2009		1.98		0.22
Quarterly Highs and Lows
Fourth Quarter 2008		1.59		0.31
First Quarter of 2009		0.79		0.22
Second Quarter of 2009		1.06		0.45
Third Quarter of 2009		1.98		0.79
Fourth Quarter of 2009		1.81		0.80
First Quarter of 2010		0.89		0.56
Monthly Highs and Lows
January 2010		0.89		0.60
February 2010		0.79		0.56
March 2010		0.74		0.58
April 2010		0.87		0.60
May 2010		0.68		0.34
June 2010		0.37		0.30
July 2010 (through July 9, 2010)		0.38		0.29

B. Plan of Distribution

Not applicable.

C. Markets

Our ADSs, each representing two common shares, have been listed on the Nasdaq Global Market since March 9, 2007 under the symbol “XFML.” In connection with our re-positioning, we changed our name from Xinhua Finance Media Limited to Xinhua Sports & Entertainment Limited, and changed our trading symbol to “XSEL” on March 2, 2009.

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 of association contained in our F-1 registration statement (File No. 333-140808) originally filed with the SEC on February 21, 2007, as amended. Our shareholders adopted our amended and restated memorandum and articles of association by a special resolution on February 7, 2007 and by a special resolution on January 15, 2009, further amended our amended and restated memorandum and articles of association, inter alia, to reflect the change of our name from “Xinhua Finance Media Limited” to “Xinhua Sports & Entertainment Limited.”

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C. Material Contracts

We have not entered into any material contracts other than in the ordinary course of business and other than those described in “Item 4. Information on the Company” or elsewhere in this annual report on Form 20-F.

D. Exchange Controls

See “Item 4.B. Information on the Company — Business overview — Regulation — Regulations on Foreign Currency Exchange.”

E. Taxation

The following summary of the material Cayman Islands and United States federal income tax consequences of an investment in our ADSs or common shares 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. This summary does not deal with all possible tax consequences relating to an investment in our ADSs or common shares, such as the tax consequences under state, local and other tax laws.

Cayman Islands Taxation

The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to our company levied by the Government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or brought within, the jurisdiction of the Cayman Islands. There are no exchange control regulations or currency restrictions in the Cayman Islands.

United States Federal Income Taxation

The following discussion describes the material U.S. federal income tax consequences to U.S. Holders (as defined below) under present law of an investment in the ADSs or common shares. This discussion applies only to U.S. Holders that hold the ADSs or common shares as capital assets (generally, property held for investment) and that have the U.S. dollar as their functional currency. This discussion is based on the tax laws of the United States in effect as of the date of this annual report and on U.S. Treasury regulations in effect or, in some cases, proposed as of the date of this annual report, as well as judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which change could apply retroactively and could affect the tax consequences described below.

The following discussion does not address the tax consequences to any particular investor or to persons in special tax situations such as:

• banks and other financial institutions;

• insurance companies;

• regulated investment companies;

• real estate investment trusts;

• broker-dealers;

• traders that elect to use a mark-to-market method of accounting;

• U.S. expatriates;

• tax-exempt entities;

• persons liable for alternative minimum tax;

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• persons holding an ADS or common share as part of a straddle, hedging, conversion or integrated transaction;

• persons that actually or constructively own 10% or more of the total combined voting power of all classes of our voting stock;

• persons who acquired ADSs or common shares pursuant to the exercise of any employee share option or otherwise as compensation; or

• partnerships or other pass-through entities, or persons holding ADSs or common shares through such entities.

INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE APPLICATION OF THE U.S. FEDERAL TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE, LOCAL, NON-U.S. AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ADSs OR COMMON SHARES.

The discussion below of the U.S. federal income tax consequences to “U.S. Holders” will apply to you if you are a beneficial owner of our ADSs or common shares and you are, for U.S. federal income tax purposes,

• an individual who is a citizen or resident of the United States;

• a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States, any State thereof or the District of Columbia;

• an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

• a trust that (i) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions or (ii) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

The tax treatment of a partner in a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) that holds our ADSs or common shares will depend on the status of such partner and the activities of such partnership. If you are a partner in such partnership, you should consult your tax advisors.

The discussion below assumes that the representations contained in the deposit agreement are true and that the obligations in the deposit agreement and any related agreement have been and will be complied with in accordance with their terms. If you hold ADSs, you should be treated as the holder of the underlying common shares represented by those ADSs for U.S. federal income tax purposes.

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 beneficial ownership of the underlying security (for example, pre-releasing ADSs to persons that do not have the beneficial ownership of the securities underlying the ADSs). Accordingly, the availability of the reduced tax rate for dividends received by certain non-corporate U.S. Holders, including individual U.S. Holders (as discussed below), could be affected by actions taken by intermediaries in the chain of ownership between the holders of ADSs and our company if as a result of such actions the holders of ADSs are not properly treated as beneficial owners of the underlying common shares.

Taxation of dividends and other distributions on the ADSs or common shares

Subject to the passive foreign investment company rules discussed below, the gross amount of any distributions we make to you with respect to the ADSs or common shares generally will be includible in your gross income as dividend income on the date of receipt by the depositary, in the case of ADSs, or by you, in the case of common shares, but only to the extent that the distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). The dividends will not be eligible for the dividends-received deduction allowed to corporations in respect of dividends received from other U.S. corporations. To the extent that the amount of the distribution exceeds our current and accumulated earnings and profits (as determined under U.S. federal income tax principles), such excess amount will be treated first as a tax-free return of your tax basis in your ADSs or common shares, and then, to the extent such excess amount exceeds your tax basis in your ADSs or common shares, as capital gain. We currently do not, and we do not intend to, calculate our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a distribution will generally be reported as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as a capital gain under the rules described above.

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With respect to certain non-corporate U.S. Holders, including individual U.S. Holders, for taxable years beginning before January 1, 2011, dividends may be taxed at the lower capital gains rate applicable to “qualified dividend income,” provided that (i) either (a) the ADSs or common shares, as applicable, are readily tradable on an established securities market in the United States or (b) we are eligible for the benefits of a qualifying income tax treaty with the United States that includes an exchange of information program, (ii) we are neither a passive foreign investment company nor treated as such with respect to you (as discussed below) for the taxable year in which the dividend was paid and the preceding taxable year and (iii) certain holding period requirements are met. Under U.S. Internal Revenue Service authority, ADSs or common shares will be considered for purposes of clause (i) above to be readily tradable on an established securities market in the United States if they are listed on the Nasdaq Global Market, as are our ADSs (but not our common shares). If we are treated as a “resident enterprise” for PRC tax purposes under the New EIT Law, we may be eligible for the benefits of the income tax treaty between the United States and the PRC. For more information regarding the New EIT Law, see “Item 3.D. Key Information — Risk Factors — Risks related to the regulation of our business and to our structure— We may be treated as a resident enterprise for PRC tax purposes and our global income may be subject to PRC tax under PRC tax law, which would have a material adverse effect on our results of operations.” You should consult your tax advisors regarding the availability of the lower capital gains rate applicable to qualified dividend income for dividends paid with respect to our ADSs or common shares.

Dividends will constitute foreign source income for foreign tax credit limitation purposes. If the dividends are taxed as qualified dividend income (as discussed above), the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will in general be limited to the gross amount of the dividend, multiplied by the reduced tax rate applicable to qualified dividend income and divided by the highest tax rate normally applicable to dividends. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed by us with respect to the ADSs or common shares will generally constitute “passive category income” but could, in the case of certain U.S. Holders, constitute “general category income.”

If PRC withholding taxes apply to dividends paid to you with respect to our ADSs or common shares, subject to certain conditions and limitations, such PRC withholding taxes may be treated as foreign taxes eligible for credit against your U.S. federal income tax liability. For more information regarding such PRC withholding taxes, see “Item 3.D. Key Information — Risk Factors — Risks related to the regulation of our business and to our structure — Foreign holders of our ADSs or common shares may be subject to PRC withholding tax on dividends payable by us and on gains realized on the sale of our ADSs or common shares if we are classified as a PRC ‘resident enterprise.’” The rules relating to the determination of the foreign tax credit are complex, and you should consult your tax advisors regarding the availability of a foreign tax credit in your particular circumstances.

Taxation of disposition of ADSs or common shares

Subject to the passive foreign investment company rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of an ADS or common share equal to the difference between the amount realized (in U.S. dollars) for the ADS or common share and your tax basis (in U.S. dollars) in the ADS or common share. The gain or loss generally will be a capital gain or loss. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, that has held the ADS or common share for more than one year, you may be eligible for reduced tax rates. The deductibility of capital losses is subject to limitations. Any gain or loss that you recognize on a disposition of ADSs or common shares will generally be treated as U.S. source income or loss for foreign tax credit limitation purposes. However, if we are treated as a “resident enterprise” for PRC tax purposes, we may be eligible for the benefits of the income tax treaty between the United States and the PRC. In such event, if PRC withholding taxes were to be imposed on any gain from the disposition of the ADSs or common shares, a U.S. Holder that is eligible for the benefits of the income tax treaty between the United States and the PRC may elect to treat the gain as PRC source income. For more information regarding such PRC withholding taxes, see “Item 3.D. Key Information — Risk Factors — Risks related to the regulation of our business and to our structure — Foreign holders of our ADSs or common shares may be subject to PRC withholding tax on dividends payable by us and on gains realized on the sale of our ADSs or common shares if we are classified as a PRC ‘resident enterprise.’” You should consult your tax advisors regarding the proper treatment of gain or loss in your particular circumstances.

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Passive foreign investment company

Based on the market price of our ADSs, the value of our assets, and the composition of our income and assets, although not free from doubt, we do not believe that we were a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes for our taxable year ended December 31, 2009. However, the application of the PFIC rules is subject to uncertainty in several respects, including how the contractual arrangements between us and our affiliated entities will be treated for purposes of the PFIC rules, and we cannot assure you that the U.S. Internal Revenue Service will not take a contrary position. A non-U.S. corporation will be a PFIC for U.S. federal income tax purposes for any taxable year if either:

• at least 75% of its gross income for such year is passive income; or

• at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income.

For this purpose, we will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% (by value) of the stock. In applying this rule, however, it is not clear whether the contractual arrangements between us and our affiliated entities will be treated as ownership of stock.

We must make a separate determination after the close of each taxable year as to whether we were a PFIC for that year. Because the value of our assets for purposes of the PFIC test will generally be determined by reference to the market price of our ADSs or common shares, fluctuations in the market price of the ADSs or common shares may cause us to become a PFIC. In addition, changes in the composition of our income or assets may cause us to become a PFIC.

If we are a PFIC for any taxable year during which you hold ADSs or common shares, we generally will continue to be treated as a PFIC with respect to you for all succeeding years during which you hold the ADSs or common shares, unless we cease to be a PFIC and you make a “deemed sale” election with respect to the ADSs or common shares, as applicable. If such election is made, you will be deemed to have sold the ADSs or common shares you hold at their fair market value and any gain from such deemed sale would be subject to the rules described in the following two paragraphs. After the deemed sale election, your ADSs or common shares with respect to which the deemed sale election was made will not be treated as shares in a PFIC unless we subsequently become a PFIC.

For each taxable year that we are treated as a PFIC with respect to you, you will be subject to special tax rules with respect to any “excess distribution” you receive and any gain you recognize from a sale or other disposition (including a pledge) of the ADSs or common shares, unless you make a “mark-to-market” election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the ADSs or common shares will be treated as an excess distribution. Under these special tax rules:

• the excess distribution or recognized gain will be allocated ratably over your holding period for the ADSs or common shares;

• the amount allocated to the current taxable year, and any taxable years in your holding period prior to the first taxable year in which we were a PFIC, will be treated as ordinary income; and

• the amount allocated to each other taxable year will be subject to the highest tax rate in effect for individuals or corporations, as applicable, for each such year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.

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The tax liability for amounts allocated to taxable years prior to the year of disposition or excess distribution cannot be offset by any net operating losses for such years, and gains (but not losses) from a sale or other disposition of the ADSs or common shares cannot be treated as capital, even if you hold the ADSs or common shares as capital assets.

If we are treated as a PFIC with respect to you for any taxable year, to the extent any of our subsidiaries are also PFICs or we make direct or indirect equity investments in other entities that are PFICs, you may be deemed to own shares in such lower-tier PFICs that are directly or indirectly owned by us in that proportion which the value of the ADSs or common shares you own bears to the value of all of our ADSs and common shares, and you may be subject to the rules described in the preceding two paragraphs with respect to the shares of such lower-tier PFICs that you would be deemed to own. You should consult your tax advisors regarding the application of the PFIC rules to any of our subsidiaries.

A U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election for such stock to elect out of the PFIC rules described above regarding excess distributions and recognized gains. If you make a mark-to-market election for the ADSs or common shares, you will include in income for each year that we are a PFIC an amount equal to the excess, if any, of the fair market value of the ADSs or common shares you hold as of the close of your taxable year over your adjusted basis in such ADSs or common shares. You will be allowed a deduction for the excess, if any, of the adjusted basis of the ADSs or common shares over their fair market value as of the close of the taxable year. However, deductions will be allowable only to the extent of any net mark-to-market gains on the ADSs or common shares included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as any gain from the actual sale or other disposition of the ADSs or common shares, will be treated as ordinary income. Ordinary loss treatment will apply to the deductible portion of any mark-to-market loss on the ADSs or common shares, as well as to any loss from the actual sale or other disposition of the ADSs or common shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included for such ADSs or common shares. Your basis in the ADSs or common shares will be adjusted to reflect any such income or loss amounts. The tax rules that apply to distributions by corporations which are not PFICs would apply to distributions by us, except that the lower capital gains rate applicable to qualified dividend income (discussed above under “— Taxation of dividends and other distributions on the ADSs or common shares”) would not apply.

The mark-to-market election is available only for “marketable stock,” which is stock that is regularly traded on a qualified exchange or other market, as defined in applicable U.S. Treasury regulations. Our ADSs are listed on the Nasdaq Global Market, which is a qualified exchange or other market for these purposes. Consequently, if the ADSs continue to be listed on the Nasdaq Global Market and are regularly traded, and you are a holder of ADSs, we expect that the mark-to-market election would be available to you if we were to become a PFIC. Because a mark-to-market election cannot be made for equity interests in any lower-tier PFICs that we own, a U.S. Holder may continue to be subject to the PFIC rules described above regarding excess distributions and recognized gains with respect to its indirect interest in any investments held by us that are treated as an equity interest in a PFIC for U.S. federal income tax purposes. You should consult your tax advisors as to the availability and desirability of a mark-to-market election, as well as the impact of such election on interests in any lower-tier PFICs.

Alternatively, a U.S. Holder of stock of a PFIC may make a “qualified electing fund” election with respect to such corporation to elect out of the PFIC rules described above regarding excess distributions and recognized gains. A U.S. Holder that makes a qualified electing fund election with respect to a PFIC will generally include in income for a taxable year such holder’s pro rata share of the corporation’s income for the taxable year. However, you may make a qualified electing fund election with respect to your ADSs or common shares only if we agree to furnish you annually with certain tax information, and we currently do not intend to prepare or provide such information.

Under newly enacted legislation, unless otherwise provided by the U.S. Treasury, each U.S. shareholder of a PFIC is required to file an annual report containing such information as the U.S. Treasury may require. Prior to such legislation, a U.S. shareholder of a PFIC was required to file U.S. Internal Revenue Service Form 8621 only for each taxable year in which such shareholder received distributions from the PFIC, recognized gain on a disposition of the PFIC stock, or made a “reportable election.” If we become a PFIC, you should consult your tax advisors regarding any reporting requirements that may apply to you.

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You are strongly urged to consult your tax advisor regarding the application of the PFIC rules to your investment in ADSs or common shares.

Information reporting and backup withholding

Dividend payments with respect to ADSs or common shares and proceeds from the sale, exchange or other disposition of ADSs or common shares may be subject to information reporting to the U.S. Internal Revenue Service and possible U.S. backup withholding at a current rate of 28%. Backup withholding will not apply, however, to a U.S. Holder that furnishes a correct taxpayer identification number and makes any other required certification or that is otherwise exempt from backup withholding. U.S. Holders that are required to establish their exempt status generally must provide such certification on U.S. Internal Revenue Service Form W-9. Under newly enacted legislation, for taxable years beginning after March 18, 2010, certain individuals holding the ADSs or common shares other than in an account at a financial institution may be subject to additional information reporting requirements. U.S. Holders should consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.

Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing an appropriate claim for refund with the U.S. Internal Revenue Service and furnishing any required information in a timely manner.

F. Dividends and Paying Agents

Not applicable.

G. Statement by Experts

Not applicable.

H. Documents on Display

We have filed with the SEC a registration statement on Form F-1, including relevant exhibits and securities under the Securities Act with respect to underlying common shares represented by the ADSs, sold in our initial public offering. A related registration statement on Form F-6 has been filed with the SEC to register the ADSs. You should read the registration statement and its exhibits and schedules for further information with respect to us and our ADSs.

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. All information filed with the SEC can be inspected and copied at the public reference facilities maintained by the SEC at Room 1580, 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. Additional information may also be obtained over the Internet at the SEC’s website at www.sec.gov.

I. Subsidiary Information

For a listing of our subsidiaries, see “Item 4.C. Information on the Company — Organizational structure.”

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Item 11. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and inflation.

Interest rate risk

Our exposure to interest rate risk primarily relates to the interest rates for our outstanding debt and the interest income generated by excess cash invested in liquid investments with original maturities of three months or less. As of December 31, 2009, our total bank borrowings, convertible loan and secured loan from a related party amounted to $31.3 million, $57.8 million and $6.2 million, respectively, with interest rates ranging from 4.78% to 5.31% for those borrowings with declared interest rates, 8.0% to 9.0% for the convertible loan and 4.0% to 4.77% for the secured loan from a related party. Assuming the principal amount of the outstanding bank borrowings, the convertible loan and the secured loan from a related party remain approximately the same as of December 31, 2009, a 1.0% increase in each applicable interest rate would add approximately $0.8 million to our interest expense in 2010. We have not used any derivative financial instruments to manage our interest risk exposure. Interest-earning instruments carry a degree of interest rate risk. We have not been exposed to material risks due to changes in interest rates. However, our future interest income may be higher than expected due to changes in market interest rates.

Foreign currency risk

Substantially all of our revenues and most of our expenses are denominated in RMB. Our exposure to foreign exchange risk primarily relates to cash and cash equivalents denominated in U.S. dollars as a result of our past issuances of preferred shares through a private placement and proceeds from our initial public offering. We recorded $0.1 million in foreign exchange gains for the year ended December 31, 2009, resulting predominately from our assets held in U.S. dollars, which were affected by the depreciation of the RMB. Future movements in the exchange rate of the RMB against the U.S. dollar and other foreign currencies may adversely affect our results of operations and financial condition. Assuming our U.S. dollar holdings remain approximately the same as of December 31, 2009, a 1.0% depreciation of the RMB against the U.S. dollar would cause us to record foreign exchange gains of $0.5 million for 2010. In addition, the value of your investment in our ADSs will be affected by the foreign exchange rate between U.S. dollars and the RMB because the value of our business is effectively denominated in RMB, while our ADSs are traded in U.S. dollars.

The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions. The conversion of RMB into foreign currencies, including U.S. dollars, has been based on rates set by the People’s Bank of China. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the RMB to the U.S. dollar. Under the new policy, the RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. This change in policy has resulted in an approximately 21.3% appreciation of the RMB against the U.S. dollar by December 31, 2009. There remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and more significant appreciation of the RMB against the U.S. dollar. Conversely, if we decide to convert our RMB denominated cash amounts into U.S. dollars amounts for the purpose of making payments for dividends on our common shares or ADSs or for other business purposes, appreciation of the U.S. dollar against the RMB would have a negative effect on the U.S. dollar amount available to us.

Inflation

Inflation in China has not materially impacted our results of operations in recent years. According to the National Bureau of Statistics of China, the consumer price index in China increased by 4.8% in 2007 and 5.9% in 2008, but decreased by 0.7% in 2009.

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Item 12. Description of Securities Other Than Equity Securities

A. Debt Securities

Not applicable.

B. Warrants and Rights

Not applicable.

C. Other Securities

Not applicable.

D. American Depositary Shares

According to our Deposit Agreement with our ADS depositary, The Bank of New York Mellon, the depositary collects its fees for issuance and cancellation of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions, by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.

Persons depositing or withdrawing shares must pay:	For:
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)	•    Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property; or
	•    Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
$.02 (or less) per ADS	•    Any cash distribution to you
A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs	•    Distribution of securities distributed to holders of deposited securities that are distributed by the depositary to ADS holders
$.02 (or less) per ADSs per calendar year	•    Depositary services
Registration or transfer fees	•    Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares
Expenses of the depositary	•    Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement); or
	•    Converting foreign currency to U.S. dollars
Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes	•    As necessary
Any charges incurred by the depositary or its agents for servicing the deposited securities	•    As necessary

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The fees described above may be amended from time-to-time.

The depositary has agreed to reimburse us for expenses we incur that are related to establishment and maintenance of the ADR program, including investor relations expenses and stock exchange application and listing fees. There are limits on the amount of expenses for which the depositary will reimburse us, but the amount of reimbursement available to us is not related to the amounts of fees the depositary collects from investors. In 2009, we received reimbursement relating to the ADS facility in an after-tax amount of $142,000.

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

Item 14. Material Modifications to the Rights Of Security Holders and Use of Proceeds

None.

Item 15. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, as required by Rule 13a-15(b) under the Exchange Act.

Based upon that evaluation, our management has concluded that, as of December 31, 2009, our disclosure controls and procedures were effective in ensuring that the information required to be disclosed by us in the reports that we file and furnish under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that the information required to be disclosed by us in the reports that we file or furnish under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

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 defined in Rule 13a-15(f) under the Exchange Act. Our management evaluated the effectiveness of our internal control over financial reporting, as required by Rule 13a-15(c) of the Exchange Act, based on criteria established in the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 2009.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness of our internal control over financial reporting 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 and procedures may deteriorate.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the period covered by this annual report on Form 20-F that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 16.

Item 16A. Audit Committee Financial Expert

Our board of directors has determined that Steve Richards, an independent director and member of our audit committee, is an audit committee financial expert.

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Item 16B. Code of Ethics

Our board of directors has adopted a code of ethics that applies to our directors, officers, employees and agents, including certain provisions that specifically apply to our Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Chief Technology Officer, Vice Presidents and any other persons who perform similar functions for us. We have filed our code of business conduct and ethics as an exhibit to our registration statement on Form F-1 (No. 333-140808).

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, our principal external auditors, for the periods indicated.

	2008		2009
Audit fees(1)	$	1,880,000	$	1,400,000
Audit-related fees(2)	$	788,000	$	—
Tax fees(3)	$	3,000	$	20,000

(1)	“Audit fees” means the aggregate fees billed in each of the fiscal years listed for professional services rendered by our principal auditors for the audits of our annual financial statements in 2008 and 2009 and the audit of our internal controls over financial reporting in 2008.
(2)	“Audit-related fees” means the aggregate fees billed in each of the fiscal years listed for assurance and related services by our principal auditors that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.” Services comprising the fees disclosed under the category of “Audit-Related Fees” in 2008 involve principally the interim review.
(3)	“Tax fees” means the fees billed for tax compliance services, including the preparation of tax returns and tax consultations, such as tax advice related to employee share-based compensation.

The policy of our audit committee and our board of directors is to pre-approve all audit and non-audit services provided by Deloitte Touche Tohmatsu, including audit services, audit-related services, tax services and other services as described above, other than those for de minimis services which are approved by the audit committee or our board of directors prior to the completion of the services.

Item 16D. Exemptions From The Listing Standards For Audit Committees

Not applicable.

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

The table below is a summary of the shares repurchased by us since January 1, 2008. No shares were repurchased since January 1, 2008 except during the months indicated and all shares were purchased in the open market.

					Total Number of		Approximate
					Shares		Dollar Value of
					Purchased as		Shares that May
	Total Number				Part of Publicly		yet Be
	of Shares		Average Price		Announced		Purchased
Period	Purchased		Paid per Share(1)		Plan(2)		Under the Plan(1)
June 12 — June 19, 2007		1,932,000	$	4.47		1,932,000	$	41,371,946
March 19 — March 31, 2008		2,034,236	$	1.42		2,034,236	$	38,489,716
May 14 — June 20, 2008		1,382,654	$	1.44		1,382,654	$	36,494,234
Total		5,348,890	$	2.52		5,348,890	$	36,494,234

(1)	Each of our ADSs represents two common shares.
(2)	The repurchase plan was publicly announced on May 29, 2007 and provides for the repurchase of up to $50.0 million of our common shares.

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Item 16F. Change In Registrant’s Certifying Accountant

Not applicable.

Item 16G. Corporate Governance

We are incorporated in the Cayman Islands and our corporate governance practices are governed by applicable Cayman Islands law. In addition, because our ADSs are listed on the Nasdaq Global Market, we are subject to Nasdaq corporate governance requirements. Nasdaq Marketplace Rule 4350(a)(1) permits foreign private issuers like us to follow “home country practice” with respect to certain corporate governance matters. We follow home country practice with regard to certain aspects of our corporate governance and currently do not comply with the requirements of (a) Nasdaq Listing Rule 5635(a), which requires us to obtain shareholder approval in connection with the issuance of securities for the purposes of acquiring the stock or assets of another company, (b) Nasdaq Listing Rule 5640, which governs our voting rights policy and (c) Nasdaq Listing Rule 5635(d), which requires us to obtain shareholder approval in connection with private placement issuances equal to twenty percent or more of our pre-transaction outstanding shares where the transaction price per share is less than the greater of book or market value. Neither the laws of the Cayman Islands nor our memorandum and articles of association require us to obtain shareholder approval in connection with such transactions.

We are committed to a high standard of corporate governance. As such, we endeavor to comply with most of the Nasdaq corporate governance practices and believe that we are currently in compliance with the NASDAQ corporate governance practices.

Item 17. Financial Statements

We have elected to provide financial statements pursuant to Item 18.

Item 18. Financial Statements

The consolidated financial statements of Xinhua Sports & Entertainment Limited and its subsidiaries are included at the end of this annual report.

Item 19. Exhibits

Exhibit Number		Description of Document
	1.1	Amended and Restated Memorandum and Articles of Association (incorporated by reference to Exhibit 3.2 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	2.1	Registrant’s Specimen American Depositary Receipt (incorporated by reference to Exhibit 4.1 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	2.2	Registrant’s Specimen Certificate for Common Shares (incorporated by reference to Exhibit 4.2 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	2.3	Form of Deposit Agreement among the Registrant, the depositary and holders of the American depositary receipts (incorporated by reference to Exhibit 4.3 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.1	Share Purchase Agreement, dated as of March 16, 2006, amended as of March 16, 2006, between the Registrant and Patriarch Partners Media Holdings LLC (incorporated by reference to Exhibit 4.5 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.2	Investor Rights Agreement, dated as of March 16, 2006, among the Registrant, Xinhua Finance Limited and Patriarch Partners Media Holdings LLC (incorporated by reference to Exhibit 4.6 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).

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Exhibit Number		Description of Document
	4.3	Series B Preferred Share Purchase Agreement between Yucaipa Global Partnership Fund L.P. and the Registrant, dated as of February 18, 2008 (incorporated by reference to Exhibit 4.57 from our annual report on Form 20-F (File No. 001-33328), filed with the Commission on May 19, 2008).
	4.4	Shareholders Agreement among Yucaipa Global Partnership Fund L.P., Xinhua Finance Limited and the Registrant, dated as of February 28, 2008 (incorporated by reference to Exhibit 4.58 from our annual report on Form 20-F (File No. 001-33328), filed with the Commission on May 19, 2008).
	4.5	Registration Rights Agreement between the Registrant and Yucaipa Global Partnership Fund L.P., dated as of February 28, 2008 (incorporated by reference to Exhibit 4.59 from our annual report on Form 20-F (File No. 001-33328).
	4.6	2007 Share Option Plan (incorporated by reference to Exhibit 10.1 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.7	Form of Indemnification Agreement with the Registrant’s directors (incorporated by reference to Exhibit 10.2 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.8	Form of Employment Agreement between the Registrant and a Senior Executive Officer of the Registrant (incorporated by reference to Exhibit 10.3 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.9	Trademark License Agreement, dated as of September 21, 2006, between the Registrant and Xinhua Financial Network Limited (incorporated by reference to Exhibit 10.4 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.10	English translation of Business Cooperation Agreement, amended and restated as of November 6, 2006, among Economic Observer Press Office, Guangzhou Jingshi Culture Intermediary Co., Ltd., Beijing Jingguan Xincheng Advertising Co., Ltd and Beijing Jingshi Jingguan Advertising Co., Ltd. (incorporated by reference to Exhibit 10.5 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.11	Form of Stock Option Agreements (incorporated by reference to Exhibit 10.6 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.12	Consulting Agreement, dated as of November 1, 2006, between Jia Luo Business Consulting (Shanghai) Co., Ltd. and Shanghai Camera Media Investment Co., Ltd. (incorporated by reference to Exhibit 10.12 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.13	Strategic Partnership Agreement, dated and supplemented as of June 15, 2006, among Beijing Century Media Culture Co., Ltd., Hunan Television & Broadcast Intermediary Co., Ltd., Shenzhen Ronghan Investment Co., Ltd. and Beijing Perspective Orient Movie & Television Intermediary Co., Ltd. (incorporated by reference to Exhibit 10.13 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.14	Advertising Services Agreement, dated as of December 23, 2006, between Beijing Pioneer Media Advertising Co., Ltd. and Shanghai Media Investment Co., Ltd. (incorporated by reference to Exhibit 10.15 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.15	Cooperation Agreement, dated as of November 1, 2006, between Beijing Century Media Culture Co., Ltd. and Shanghai Camera Media Investment Co., Ltd. (incorporated by reference to Exhibit 10.16 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.16	Cooperation Agreement, dated as of June 5, 2006, between the Registrant and Small World Television (incorporated by reference to Exhibit 10.17 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).

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Exhibit Number		Description of Document
	4.17	English translation of Call Option Agreement regarding Economic Observer Press Office, dated as of November 6, 2006, among Shandong Sanlian Group, Shandong Economic Observer Co., Ltd., Economic Observer Press Office and Beijing Jingguan Xincheng Advertising Co., Ltd. (incorporated by reference to Exhibit 10.19 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.18	English translation of Exclusive Advertising Agreement regarding Beijing FM91.5 and Shanghai FM87.9 of China Radio International, amended and restated as of November 28, 2006, between Beijing Guoguang Guangrong Advertising Co., Ltd. and Beijing Century Media Advertising Co., Ltd. (incorporated by reference to Exhibit 10.20 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.19	English translation of Money Journal Cooperation Agreement, amended and restated as of September 20, 2006, among Hunan Television and Broadcasting Intermediary Co., Ltd., Money Journal Press Office and Guangzhou Jingshi Culture Intermediary Co., Ltd. (incorporated by reference to Exhibit 10.21 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.20	English Translation of Cooperation Agreement, dated as of September 25, 2005, between Guangzhou Jingyu Culture Development Co., Ltd. and Beijing Qiannuo Advertising Co., Ltd. (incorporated by reference to Exhibit 10.22 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.21	Information Consulting Committee Organization Agreement, amended and restated as of November 6, 2006, among Shandong Sanlian Group, Xinhua Finance Limited, Economic Observer Press Office and Beijing Jingguan Xincheng Advertising Co., Ltd. (incorporated by reference to Exhibit 10.23 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.22	English Translation of Business Cooperation Agreement, amended and restated as of November 6, 2006, among Shandong Sanlian Group, Shandong Economic Observer Co., Ltd., Economic Observer Press Office and Beijing Jingguan Xincheng Advertising Co., Ltd. (incorporated by reference to Exhibit 10.24 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.23	Cooperation Agreement in relation to Economic Observer, dated as of April 20, 2006, among Xinhua Finance Limited, Shandong Economic Observer Co., Ltd., Shandong Sanlian Group and Beijing Jingguan Xincheng Advertising Co., Ltd. (incorporated by reference to Exhibit 10.25 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.24	Form of Equity Pledge Agreement among the affiliated entity, the shareholder of the affiliated entity and WFOE (incorporated by reference to Exhibit 10.26 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.25	Form of Exclusive Equity Purchase Option Agreement between WFOE and shareholder of affiliated entity (incorporated by reference to Exhibit 10.27 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.26	Form of Subrogation Agreement among the affiliated entity, the shareholder of the affiliated entity and the WFOE (incorporated by reference to Exhibit 10.28 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.27	Service Agreement, dated as of January 23, 2006, between New China Media Co., Ltd. and Beijing Century Media Advertising Co., Ltd. (incorporated by reference to Exhibit 10.29 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.28	Form of Deed of Non-Competition Undertaking and Release between shareholder and the Registrant (incorporated by reference to Exhibit 10.31 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.29	Form of Share Subscription Agreement dated as of September 22, 2006 (incorporated by reference to Exhibit 10.32 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).

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Exhibit Number		Description of Document
	4.30	Agreement for the Sale and Purchase of Equity Interest and Subscription in Shanghai Hyperlink Market Research Co., Ltd., dated as of June 14, 2006, among Stephen Xie Wei, Lu Qinyong, Win Jei-Ching, Yang Jing, Shi Hui, Pang Lu, Yang Weidong, Xinhua Finance Limited, Beijing Taide Advertising Co., Ltd., and Shanghai Hyperlink Market Research Co., Ltd. (incorporated by reference to Exhibit 10.34 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.31	Loan and Share Purchase Agreement in respect of shares in the capital of Upper Step Holdings Limited, dated as of February 28, 2006, among the Registrant, Sino Investment Holdings Limited and Sungolden Limited. (incorporated by reference to Exhibit 10.36 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.32	Promissory Note dated as of November 10, 2006 issued by Sino Investment Holdings Limited in favor of the Registrant (incorporated by reference to Exhibit 10.46 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.33	Share Purchase Agreement in respect of shares in the capital of EconWorld Media Limited, dated as of December 18, 2006, among the Registrant, Fan Cho Tak Alex and others (incorporated by reference to Exhibit 10.47 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.34	Form of Employment Agreement between the Registrant and a Chief Officer of the Registrant (incorporated by reference to Exhibit 10.48 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.35	English translation of Strategic Cooperation Agreement, dated as of December 18, 2003 and supplemented as of November 30, 2005, between Inner Mongolia Television Station and Shanghai Camera Media Investment Co., Ltd. (incorporated by reference to Exhibit 99.2 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.36	English translation of Zhou Mo Wen Hui Cooperation Agreement dated as of August 8, 2005, between Zhou Mo Wen Hui Press Office and Guangzhou Jingyu Culture Development Co., Ltd. (incorporated by reference to Exhibit 99.3 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.37	Content License Agreement, dated as of December 15, 2001, between China Economic Information Service of Xinhua News Agency and Xinhua Financial Network Limited (incorporated by reference to Exhibit 99.4 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	4.38	Form of loan agreement between a wholly foreign-owned entity and a shareholder of an affiliated entity (incorporated by reference to Exhibit 4.55 from our annual report on Form 20-F (File No. 001-33328), filed with the Commission on May 19, 2008).
	4.39	Waiver of loan issued by Xinhua Finance Limited to the Registrant, dated as of June 30, 2007 (incorporated by reference to Exhibit 4.56 from our annual report on Form 20-F (File No. 001-33328), filed with the Commission on May 19, 2008).
	4.40	Share subscription agreement in respect of shares in the capital of Xinhua Finance Media Limited, between Whole Fortune Limited and Xinhua Finance Media Limited, dated as of October 31, 2007 (incorporated by reference to Exhibit 4.60 from our annual report on Form 20-F (File No. 001-33328), filed with the Commission on May 19, 2008).
	4.41	Equity transfer agreement in respect of shares in Beijing Perspective Orient Movie and Intermediary Co., Ltd., between Hunan Television & Broadcast Intermediary Co., Ltd. and Beijing Century Culture Co., Ltd., dated as of October 31, 2007 (incorporated by reference to Exhibit 4.61 from our annual report on Form 20-F (File No. 001-33328), filed with the Commission on May 19, 2008).
	4.42	Purchase agreement in respect of shares in the capital of Profitown Development Limited and other assets therein, among Xinhua Finance Media Limited, Flash Star Worldwide Limited, Profitown Development Limited and Chow Chi Yan, dated as of November 26, 2007 (incorporated by reference to Exhibit 4.62 from our annual report on Form 20-F (File No. 001-33328), filed with the Commission on May 19, 2008).

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Exhibit Number		Description of Document
	4.43	Purchase agreement in respect of shares in the capital of East Alliance Limited and other assets therein, among Xinhua Finance Media Limited, East Alliance Limited and other parties set out herein, dated as of June 4, 2007 (incorporated by reference to Exhibit 4.63 from our annual report on Form 20-F (File No. 001-33328), filed with the Commission on May 19, 2008).
	4.44	Purchase agreement in respect of Convey Advertising Group, among Xinhua Finance Media Limited, Pariya Holdings Limited and Good Speed Holdings Limited, dated as of June 29, 2007 (incorporated by reference to Exhibit 4.64 from our annual report on Form 20-F (File No. 001-33328), filed with the Commission on May 19, 2008).
	4.45	Purchase agreement in respect of shares in the capital of Singshine (Holdings) Hongkong Limited and other assets set out herein, among Xinhua Finance Media Limited, Singshine (Holdings) Hongkong Limited, Zhang Jingyu, Hu Shengzhong, He Zhihao, Lu Qibo, Chen Hao and Lu Hang, dated as of June 11, 2007 (incorporated by reference to Exhibit 4.65 from our annual report on Form 20-F (File No. 001-33328), filed with the Commission on May 19, 2008).
	4.46	Cooperation agreement between Zhoumo Wen Hui Press Office and Beijing Qiannuo Advertising Co., Ltd., dated as of November 10, 2006 (incorporated by reference to Exhibit 4.66 from our annual report on Form 20-F (File No. 001-33328), filed with the Commission on May 19, 2008).
	4.47	Advertising agency agreement between Guangdong People’s Radio Station and Guangzhou Singshine Communication Co., Ltd., dated as of December 14, 2007 (incorporated by reference to Exhibit 4.67 from our annual report on Form 20-F (File No. 001-33328), filed with the Commission on May 19, 2008).
	4.48	Cooperation agreement between Guangdong People’s Radio Station and Guangzhou Singshine Communication Co., Ltd., dated as of November 1, 2006 (incorporated by reference to Exhibit 4.68 from our annual report on Form 20-F (File No. 001-33328), filed with the Commission on May 19, 2008).
	4.49	English Translation of Equity Call Option Agreement, dated as of December 10, 2008, between Shanghai Wai Gao Qiao (Group) Co., Ltd and Jia Luo Business Consulting (Shanghai) Co., Ltd.
	4.50	Agreement relating to the sale and purchase of 85% of the issued share capital of Xinhua Finance Media (Convey) Limited, dated as of December 31, 2008, between the Registrant and Pariya Holdings Limited (incorporated by reference to Exhibit 4.50 from our annual report on Form 20-F (File No. 001-33328), as amended, originally filed with the Commission on April 30, 2009).
	4.51	Escrow Agreement, dated as of December 31, 2008, among the Registrant, Pariya Holdings Limited and K&L Gates (incorporated by reference to Exhibit 4.51 from our annual report on Form 20-F (File No. 001-33328), as amended, originally filed with the Commission on April 30, 2009).
	4.52	Sale and Purchase Agreement, dated as of March 13, 2009, among the Registrant, Beijing Taide Advertising Co., Ltd., INTAGE Inc. and INTAGE Marketing Consulting (Shanghai) Co., Ltd. (incorporated by reference to Exhibit 4.52 from our annual report on Form 20-F (File No. 001-33328), as amended, originally filed with the Commission on April 30, 2009).
	4.53	Credit Agreement among the Registrant, Patriarch Partners Agency Services, LLC and the Lenders party thereto, dated as of October 21, 2008 (incorporated by reference to Exhibit 4.53 from our annual report on Form 20-F (File No. 001-33328), as amended, originally filed with the Commission on April 30, 2009).
	4.54	Investor and Registration Rights Agreement among the Registrant, Xinhua Finance Media Limited and the Investors party thereto, dated as of October 21, 2008 (incorporated by reference to Exhibit 4.54 from our annual report on Form 20-F (File No. 001-33328), as amended, originally filed with the Commission on April 30, 2009).
	4.55	Security Agreement between the Registrant and Patriarch Partners Agency Services, LLC, dated as of October 21, 2008 (incorporated by reference to Exhibit 4.55 from our annual report on Form 20-F (File No. 001-33328), as amended, originally filed with the Commission on April 30, 2009).
	4.56	Consent, Waiver and First Amendment to Credit Agreement, dated as of February 20, 2009, among the Registrant, Patriarch Partners Agency Services, LLC and the Lenders party thereto (incorporated by reference to Exhibit 4.56 from our annual report on Form 20-F (File No. 001-33328), as amended, originally filed with the Commission on April 30, 2009).
	4.57	Purchase Agreement in respect of shares in the capital of Starease Limited and other assets set out therein, dated as of October 9, 2008, among the Registrant, Prime Day Management Limited, Starease Limited and Ge Zhijun (incorporated by reference to Exhibit 4.57 from our annual report on Form 20-F (File No. 001-33328), as amended, originally filed with the Commission on April 30, 2009).

126

Exhibit Number		Description of Document
	4.58	Master Agreement in respect of Certain Advertising Business, dated as of September 30, 2008, between Registrant and Chung Cheng Co., Ltd. (incorporated by reference to Exhibit 4.58 from our annual report on Form 20-F (File No. 001-33328), as amended, originally filed with the Commission on April 30, 2009).
	4.59	Purchase Agreement, dated as of March 6, 2009, among the Registrant, Parkwood Asia Limited and Everfame Development Limited (incorporated by reference to Exhibit 4.59 from our annual report on Form 20-F (File No. 001-33328), as amended, originally filed with the Commission on April 30, 2009).
	4.60	English Translation of Cooperation Agreement, dated as of March 12, 2009, between Shaanxi TV Station and Beijing Hantang Yueyi Culture & Media Co., Ltd. (incorporated by reference to Exhibit 4.60 from our annual report on Form 20-F (File No. 001-33328), as amended, originally filed with the Commission on April 30, 2009).
	4.61	English Translation of Strategic Cooperation Agreement, dated as of March 12, 2009, among Beijing Keying & CCTV Culture Development Co., Ltd., Beijing Linghang Dongli Advertising Co., Ltd. and Beijing Science & Education Film Studio (incorporated by reference to Exhibit 4.61 from our annual report on Form 20-F (File No. 001-33328), as amended, originally filed with the Commission on April 30, 2009).
	4.62†	Form of Executive Service Agreement between the Registrant and Officers of the Registrant.
	4.63†	Bridge Loan between the Registrant and Dragon Era Group Limited, dated March 2, 2010.
	4.64†	English Translation of Purchase Agreement, dated as of May 12, 2010, among China Oceanwide Holdings Group Co., Ltd., Century Effort Limited, EO Publications Development Limited and Beijing Taide Advertising Co., Ltd.
	4.65†	Amendment No. 2 and Waiver to Credit Agreement, dated as of July 12, 2010, among the Registrant, the Guarantors, as defined therein, the financial institutions and other investors from time to time party thereto as Lenders and Patriarch Partners Agency Services, LLC as administrative agent for such Lenders.
	4.66†	Series C Convertible Preferred Shares Purchase Agreement, dated as of July 12, 2010, among the Registrant and ZOHAR CDO 2003-1, LIMITED and ZOHAR II 2005-1, LIMITED, as investors.
	4.67†	Registration Rights Agreement, dated as of July 12, 2010, among the Registrant and ZOHAR CDO 2003-1, LIMITED and ZOHAR II 2005-1, LIMITED, as investors.
	8.1†	List of subsidiaries.
	11.1	Code of Business Conduct and Ethics of the Registrant (incorporated by reference to Exhibit 99.1 from our F-1 registration statement (File No. 333-140808), as amended, initially filed with the Commission on February 21, 2007).
	12.1†	CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	12.2†	CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	13.1†	CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	13.2†	CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	15.1†	Consent of Deloitte Touche Tohmatsu.

† Filed with this Annual Report on Form 20-F

127

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing its annual report on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

XINHUA SPORTS & ENTERTAINMENT LIMITED
By:	/s/ Fredy Bush
	Name:	Fredy Bush
	Title:	Chief Executive Officer

Date: July 15, 2010

128

Xinhua Sports & Entertainment Limited
(formerly Xinhua Finance Media Limited)

Index to consolidated financial statements

	Page
Report of independent registered public accounting firm		F-2
Consolidated balance sheets as of December 31, 2008 and 2009		F-3
Consolidated statements of operations for the years ended December 31, 2007, 2008 and 2009		F-5
Consolidated statements of change in equity for the years ended December 31, 2007, 2008 and 2009		F-7
Consolidated statements of cash flows for the years ended December 31, 2007, 2008 and 2009		F-10
Notes to consolidated financial statements		F-13

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and the Shareholders of
Xinhua Sports & Entertainment Limited (formerly Xinhua Finance Media Limited):

We have audited the accompanying consolidated balance sheets of Xinhua Sports & Entertainment Limited (formerly Xinhua Finance Media Limited) and its subsidiaries and variable interest entities (the “Company”) as of December 31, 2008 and 2009 and the related consolidated statements of operations, changes in equity, and cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Company’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. The Company is not required to have, nor were we engaged to perform, an audit of the Company’s internal control over financial reporting. Our audits include consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2008 and 2009, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements for the year ended December 31, 2009 have been prepared assuming that the Company will continue as a going concern. The Company incurred a net loss of $313.6 million during the year ended December 31, 2009 and as of that date, the Company’s current liabilities exceeded its current assets by $50.9 million, its total liabilities exceeded its total assets by $26.2 million, and its net shareholders’ deficiency was $61.4 million. These factors, along with other matters as set forth in Note 2, raise substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Deloitte Touche Tohmatsu CPA Ltd.
Beijing, the People’s Republic of China
July 15, 2010

F-2

Xinhua Sports & Entertainment Limited

Consolidated balance sheets

	December 31,		December 31,
	2008		2009
	(In U.S. dollars,
	except for share data)
ASSETS
Current assets:
Cash and cash equivalents	$	54,088,842	$	13,229,958
Short term deposits		2,940,051		29,075
Restricted cash		37,510,000		40,430,000
Accounts receivable, net of allowance for doubtful debts of $9,169,667 in 2008 and $8,095,013 in 2009		44,762,902		18,319,101
Deposits for program advertising right		2,125,330		1,239,987
Prepaid expenses		3,252,022		4,828,534
Amounts due from related parties, current portion		6,547,636		6,033,114
Consideration receivable from disposal of subsidiaries		36,970,590		20,000,000
Deferred tax assets, current portion		1,042,379		—
Other current assets		4,259,056		4,018,128
Assets held for sale		—		42,737,129
Total current assets		193,498,808		150,865,026
Goodwill		46,992,724		7,238,016
Television program and film rights, net		—		4,359,421
Intangible assets, net
License agreements, net		99,148,017		19,298,292
Exclusive advertising agreement, net		74,267,216		—
Other intangible assets, net		27,113,350		—
Property and equipment, net		6,590,790		1,997,068
Cost method investment		13,508,239		11,508,239
Deposit for investment		14,174,566		16,372,089
Consideration receivable from disposal of subsidiaries		28,285,035		27,319,579
Amount due from a related party, non-current portion		1,506,137		—
Other long term assets		3,165,454		3,601,271
Total assets	$	508,250,336	$	242,559,001

See notes to consolidated financial statements

F-3

Xinhua Sports & Entertainment Limited

Consolidated balance sheets (continued)

	December 31,			December 31,
	2008			2009
	(In U.S. dollars,
	except for share data)
LIABILITIES, MEZZANINE EQUITY AND EQUITY
Current liabilities:
Accounts payable	$	5,375,281		$	16,876,116
Accrued expenses and other payables		20,405,644			18,345,214
Consideration payable		21,837,635			28,984,974
Amounts due to related parties		3,346,172			7,029,383
Long term obligation under licensing agreements, current portion		10,363,762			9,923,802
Bank borrowings, current portion		36,374,198			31,261,643
Income taxes payable		8,571,848			6,622,660
Warrants		—			1,249,000
Convertible loan		—			59,379,289
Liabilities held for sale		—			22,083,374
Total current liabilities		106,274,540			201,755,455
Deferred tax liabilities		31,679,491			—
Convertible loan		33,200,000			—
Payables for television program and film rights		—			2,910,768
Long term obligation under licensing agreements, non-current portion		68,305,496			64,062,756
Total liabilities		239,459,527			268,728,979
Commitments and contingency (Note 29)
Series B redeemable convertible preferred shares (stated value $100; 320,000 as of December 31, 2008 and 345,600 as of December 31, 2009 shares authorized; 314,000 as of December 31, 2008 and 345,600 as of December 31, 2009 shares issued and outstanding; liquidation value of $63,400,000 as of December 31, 2008 and 69,120,000 as of December 31, 2009)		30,605,591			33,765,591
Equity:
Xinhua Sports and Entertainment Limited Shareholders’ Equity
Class A common shares (par value $0.001; 343,822,874 as of December 31, 2008 and 343,822,874 as of December 31, 2009 shares authorized; 146,914,667 as of December 31, 2008 and 176,466,050 as of December 31, 2009 shares issued and outstanding)		104,302			133,854
Treasury stock (1,310,000 and 488,222 shares as of December 31, 2008 and 2009, respectively)		(1,310	)		(488	)
Additional paid-in capital		481,319,655			498,957,081
Accumulated deficit		(252,968,439	)		(567,103,780	)
Accumulated other comprehensive income		7,165,833			6,635,783
Total Xinhua Sports and Entertainment Limited shareholders’ equity (deficit)		235,620,041			(61,377,550	)
Non-controlling interests		2,565,177			1,441,981
Total equity (deficit)		238,185,218			(59,935,569	)
Total liabilities, mezzanine equity and equity	$	508,250,336		$	242,559,001

See notes to consolidated financial statements

F-4

Xinhua Sports & Entertainment Limited

Consolidated statements of operations

	Year Ended			Year Ended			Year Ended
	December 31, 2007			December 31, 2008			December 31, 2009
	(In U.S. dollars, except for share data)
Net revenues:
Advertising services	$	75,337,392		$	99,574,984		$	78,015,908
Advertising sales		8,140,718			21,911,519			21,214,830
Total net revenues		83,478,110			121,486,503			99,230,738
Cost of revenues:
Advertising services		54,255,443			71,229,714			61,887,919
Advertising sales		3,804,831			9,482,952			23,554,486
Total cost of revenues		58,060,274			80,712,666			85,442,405
Operating expenses:
Selling and distribution		5,662,277			10,683,499			7,707,793
General and administrative		17,890,193			45,604,488			27,761,489
Write-down on prepayments		—			—			1,478,264
Write-down on amounts due from related parties		—			—			410,806
Impairment loss on goodwill		—			137,343,265			71,472,061
Impairment loss on television program and film rights		—			—			14,192,291
Impairment loss on intangible assets		—			11,884,680			84,226,010
Impairment loss on promissory note		—			8,521,483			—
Impairment loss on property and equipment		—			2,188,071			468,428
Impairment loss on other non-current assets		—			—			4,524,803
Loss on disposal of Convey		—			4,720,705			25,640,000
Total operating expenses		23,552,470			220,946,191			237,881,945
Other operating income		2,261,788			1,251,405			2,065,434
Income (loss) from operations		4,127,154			(178,920,949	)		(222,028,178	)
Other income (expense):
Interest expense		(1,593,634	)		(2,528,140	)		(12,263,448	)
Interest income		5,858,372			1,463,651			3,145,175
Gain on settlement of UBS liability, net		—			—			13,516,679
Impairment loss on principal protected note		—			(24,909,929	)		—
Impairment loss on cost method investments		—			(1,333,066	)		(2,000,000	)
Other income, net		1,480,450			—			2,252,353
Income (loss) from continuing operations before provision for income taxes		9,872,342			(206,228,433	)		(217,377,419	)
Income tax provision (benefit)		670,604			1,728,361			(4,057,045	)
Net income (loss) from continuing operations		9,201,738			(207,956,794	)		(213,320,374	)
Discontinued operations:
Income (loss) from discontinued operations (including net gain on disposal of subsidiaries of $3,872,583 for 2009)		7,243,647			(65,648,657	)		(122,430,930	)
Income tax (benefit) provision		(12,896,254	)		626,080			(22,135,390	)
Income (loss) from discontinued operations, net of taxes		20,139,901			(66,274,737	)		(100,295,540	)
Net income (loss)		29,341,639			(274,231,531	)		(313,615,914	)
Less: net income (loss) attributable to non-controlling interest		1,302,634			640,468			(2,040,573	)

F-5

Xinhua Sports & Entertainment Limited

	Year Ended			Year Ended			Year Ended
	December 31, 2007			December 31, 2008			December 31, 2009
	(In U.S. dollars, except for share data)
Net income (loss) attributable to XSEL	$	28,039,005		$	(274,871,999	)	$	(311,575,341	)
Dividends declared on redeemable convertible preferred shares		(1,338,333	)		—			—
Dividends declared on series B redeemable convertible preferred shares		—			(2,000,000	)		(2,560,000	)
Net income (loss) attributable to holders of common shares	$	26,700,672		$	(276,871,999	)	$	(314,135,341	)
Earnings per share- basic and diluted
Net income (loss) from continuing operations per share:
Basic — Class A common share	$	0.06		$	(1.55	)	$	(1.35	)
Basic — Class B common share	$	0.06		$	(1.55	)	$	—
Diluted — Class A common share	$	0.06		$	(1.55	)	$	(1.35	)
Diluted — Class B common share	$	0.06		$	(1.55	)	$	—
Net income (loss) from discontinued operations per share:
Basic — Class A common share	$	0.17		$	(0.49	)	$	(0.64	)
Basic — Class B common share	$	0.17		$	(0.49	)	$	—
Diluted — Class A common share	$	0.15		$	(0.49	)	$	(0.64	)
Diluted — Class B common share	$	0.15		$	(0.49	)	$	—
Net income (loss) per share:
Basic — Class A common share	$	0.23		$	(2.04	)	$	(1.99	)
Basic — Class B common share	$	0.23		$	(2.04	)	$	—
Diluted — Class A common share	$	0.21		$	(2.04	)	$	(1.99	)
Diluted — Class B common share	$	0.21		$	(2.04	)	$	—
Weighted average number of common shares used in computation:
Basic — Class A common share		66,165,765			85,926,895			157,729,635
Basic — Class B common share		50,054,618			49,917,482			—
Diluted — Class A common share		86,314,773			85,926,895			157,729,635
Diluted — Class B common share		50,054,618			49,917,482			—

See notes to consolidated financial statements

F-6

Consolidated statements of changes in equity

(In U.S. dollars, except for share data)

	Xinhua Sports & Entertainment Limited Shareholders
	Class A						Class B										Convertible														Retained			Accumulated
	common shares						common shares				Nonvested shares						preferred shares						Additional						PRC		earnings			other		Total XSEL			Non-
	Number of						Number				Number of						Number of						paid-in			Treasury			statutory		(accumulated			comprehensive		shareholders’			controlling						Comprehensive
	shares			Amount			of shares		Amount		shares			Amount			shares			Amount			capital			stock			reserve		deficit)			income		equity (deficit)			interest			Total Equity			income
	(In U.S. dollars, except for share data)
Balance, December 31, 2006		20,961,154		$	20,961			50,054,618	$	7,442		11,050,000		$	11,050			15,585,254		$	15,585		$	103,155,391		$	—		$	1,802,084	$	(4,599,196	)	$	836,405	$	101,249,722		$	3,010,407		$	104,260,129
Issuance of common shares arising from acquisitions of subsidiaries		2,639,595			2,640			—		—		—			—			—			—			10,230,881			—			—		—			—		10,233,521			—			10,233,521
Issuance of shares for future exercises of share options		2,000,000			2,000			—		—		—			—			—			—			—			(2,000	)		—		—			—		—			—			—
Issuance of common shares for share option plan		1,587,019			1,587			—		—		—			—			—			—			2,171,088			1,200			—		—			—		2,173,875			—			2,173,875
Issuance of common shares upon initial public offering, net of issuance cost of $24,740,470		34,615,846			34,616			—		—		—			—			—			—			200,227,913			—			—		—			—		200,262,529			—			200,262,529
Conversion of preferred shares into common shares		15,585,254			15,585			—		—		—			—			(15,585,254	)		(15,585	)		—			—			—		—			—		—			—			—
Conversion of convertible loan into common shares		3,554,401			3,554			—		—		—			—			—			—			14,281,197			—			—		—			—		14,284,751			—			14,284,751
Transfer of Nonvested shares into common shares		1,500,000			1,500			—		—		(1,500,000	)		(1,500	)		—			—			—			—			—		—			—		—			—			—
Share-based compensation		—			—			—		—		—			—			—			—			3,071,573			—			—		—			—		3,071,573			—			3,071,573
Repurchase and cancellation of common shares		(1,932,000	)		(1,932	)		—		—		—			—			—			—			(8,628,054	)		—			—		—			—		(8,629,986	)		—			(8,629,986	)
Waiver of amounts due to Parent and its affiliates		—			—			—		—		—			—			—			—			115,007,785			—			—		—			—		115,007,785			—			115,007,785
Dividends declared on redeemable convertible preferred shares		—			—			—		—		—			—			—			—			—			—			—		(1,338,333	)		—		(1,338,333	)		—			(1,338,333	)
Foreign currency translation gain		—			—			—		—		—			—			—			—			—			—			—		—			2,281,126		2,281,126			82,278			2,363,404		$	2,363,404
Purchase of non-controlling interest of subsidiaries		—			—			—		—		—			—			—			—			—			—			—		—			—		—			(2,334,574	)		(2,334,574	)		—
Transfer to PRC reserve		—			—			—		—		—			—			—			—			—			—			1,608,452		(1,608,452	)		—		—			—			—			—
Net income		—			—			—		—		—			—			—			—			—			—			—		28,039,005			—		28,039,005			1,302,634			29,341,639		$	29,341,639
Balance, December 31, 2007		80,511,269		$	80,511			50,054,618	$	7,442		9,550,000		$	9,550			—		$	—		$	439,517,774		$	(800	)	$	3,410,536	$	20,493,024		$	3,117,531	$	466,635,568		$	2,060,745		$	468,696,313		$	31,705,043

F-7

Xinhua Sports & Entertainment Limited

Consolidated statements of changes in equity

(In U.S. dollars, except for share data)

	Xinhua Sports & Entertainment Limited Shareholders
	Class A						Class B												Convertible												Retained			Accumulated
	common shares						common shares						Nonvested shares						preferred shares				Additional						PRC		earnings			other		Total XSEL			Non-
	Number of						Number						Number of						Number of				paid-in			Treasury			statutory		(accumulated			comprehensive		shareholders’			controlling						Comprehensive
	shares			Amount			of shares			Amount			shares			Amount			shares		Amount		capital			stock			reserve		deficit)			income		equity (deficit)			interest			Total Equity			loss
	(In U.S. dollars, except for share data)
Balance, December 31, 2007		80,511,269		$	80,511			50,054,618		$	7,442			9,550,000		$	9,550			—	$	—	$	439,517,774		$	(800	)	$	3,410,536	$	20,493,024		$	3,117,531	$	466,635,568		$	2,060,745		$	468,696,313
Issuance of common shares arising from acquisitions of subsidiaries		3,311,670			3,312			—			—			—			—			—		—		4,933,068			—			—		—			—		4,936,380			—			4,936,380
Issuance of shares for future exercise of share options		2,000,000			2,000			—			—			—			—			—		—		—			(2,000	)		—		—			—		—			—			—
Issuance of common shares for share option plan		604,000			604			—			—			—			—			—		—		177,749			1,490			—		—			—		179,843			—			179,843
Issuance of common shares for acquiring intangible assets		4,000,000			4,000			—			—			—			—			—		—		2,656,000			—			—		—			—		2,660,000			—			2,660,000
Issuance of common shares for professional services		300,000			300			—			—			—			—			—		—		368,700			—			—		—			—		369,000			—			369,000
Transfer of Nonvested shares into common shares		9,550,000			9,550			—			—			(9,550,000	)		(9,550	)		—		—		—			—			—		—			—		—			—			—
Share-based compensation		—			—			—			—			—			—			—		—		12,323,144			—			—		—			—		12,323,144			—			12,323,144
Repurchase and cancellation of common shares		(3,416,890	)		(3,417	)		—			—			—			—			—		—		(4,959,721	)		—			—		—			—		(4,963,138	)		—			(4,963,138	)
Transfer from Class B common shares to Class A common shares		50,054,618			7,442			(50,054,618	)		(7,442	)		—			—			—		—		—			—			—		—			—		—			—			—
Waiver of amounts due to Parent and its affiliates		—			—			—			—			—			—			—		—		26,302,941			—			—		—			—		26,302,941			—			26,302,941
Dividends declared on redeemable convertible preferred shares		—			—			—			—			—			—			—		—		—			—			—		(2,000,000	)		—		(2,000,000	)		—			(2,000,000	)
Foreign currency translation gain		—			—			—			—			—			—			—		—		—			—			—		—			4,048,302		4,048,302			119,788			4,168,090		$	4,168,090
Decrease in non-controlling interest due to disposal of subsidiaries Foreign currency translation gain		—			—			—			—			—			—			—		—		—			—			—		—			—		—			(386,179	)		(386,179	)		—
Contribution from non-controlling interests		—			—			—			—			—			—			—		—		—			—			—		—			—		—			130,355			130,355			—
Net (loss) income		—			—			—			—			—			—			—		—		—			—			—		(274,871,999	)		—		(274,871,999	)		640,468			(274,231,531	)		(274,231,531	)
Balance, December 31, 2008		146,914,667		$	104,302			—		$	—			—		$	—			—	$	—	$	481,319,655		$	(1,310	)	$	3,410,536	$	(256,378,975	)	$	7,165,833		235,620,041		$	2,565,177		$	238,185,218		$	(270,063,441	)

F-8

Xinhua Sports & Entertainment Limited

Consolidated statements of changes in equity

(In U.S. dollars, except for share data)

	Xinhua Sports & Entertainment Limited Shareholders
	Class A															Accumulated
	common shares				Additional						PRC					other			Total XSEL			Non-
	Number of				paid-in			Treasury			statutory		Accumulated			comprehensive			shareholders’			controlling			Total Equity			Comprehensive
	shares		Amount		capital			stock			reserve		deficit			income			equity (deficit)			interest			(deficit)			loss
	(In U.S. dollars, except for share data)
Balance, December 31, 2008		146,914,667	$	104,302	$	481,319,655		$	(1,310	)	$	3,410,536	$	(256,378,975	)	$	7,165,833		$	235,620,041		$	2,565,177		$	238,185,218
Issuance of common shares arising from acquisitions of subsidiaries		11,917,973		11,918		9,868,082			—			—		—			—			9,880,000			—			9,880,000
Issuance of common shares to employees and directors		2,344,000		2,344		(3,166	)		822			—		—			—			—			—			—
Issuance of common shares for acquiring intangible assets		4,000,000		4,000		2,656,000			—			—		—			—			2,660,000			—			2,660,000
Issuance of common shares for professional services		260,000		260		76,240			—			—		—			—			76,500			—			76,500
Issuance of common shares upon direct offering, net of issuance cost of 1,048,583		11,029,410		11,030		2,626,387			—			—		—			—			2,637,417			—			2,637,417
Share-based compensation		—		—		2,413,883			—			—		—			—			2,413,883			—			2,413,883
Dividends declared on redeemable convertible preferred shares		—		—		—			—			—		(2,560,000	)		—			(2,560,000	)		—			(2,560,000	)
Foreign currency translation gain (loss)		—		—		—			—			—		—			(530,050	)		(530,050	)		16,667			(513,383	)	$	(513,383	)
Decrease in non-controlling interest due to disposal of subsidiaries		—		—		—			—			—		—			—			—			(3,704	)		(3,704	)
Contribution from non-controlling interests		—		—		—			—			—		—			—			—			1,425,836			1,425,836
Dividend paid to non-controlling interests		—		—		—			—			—		—			—			—			(521,422	)		(521,422	)
Provision of PRC statutory reserve		—		—		—			—			124,837		(124,837	)		—			—			—			—
Net loss		—		—		—			—			—		(311,575,341	)		—			(311,575,341	)		(2,040,573	)		(313,615,914	)	$	(313,615,914	)
Balance, December 31, 2009		176,466,050	$	133,854	$	498,957,081		$	(488	)	$	3,535,373	$	(570,639,153	)	$	6,635,783		$	(61,377,550	)	$	1,441,981		$	(59,935,569	)	$	(314,129,297	)

See notes to consolidated financial statements

F-9

Xinhua Sports & Entertainment Limited

Consolidated statements of cash flows

	Year Ended			Year Ended			Year Ended
	December 31, 2007			December 31, 2008			December 31, 2009
	(In U.S. dollars)
Cash flows from operating activities:
Net income (loss)	$	28,563,574		$	(274,231,531	)	$	(313,615,914	)
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Share-based compensation		3,071,573			12,476,894			2,413,883
Amortization of discount on convertible loan which was later converted to common shares upon IPO		267,462			—			—
Depreciation and amortization		20,185,864			26,631,650			26,914,026
Impairment loss on intangible assets		—			25,562,095			170,416,378
Impairment loss on goodwill		—			180,841,091			83,161,478
Impairment loss on capitalized content production costs		—			3,085,850			—
Impairment loss on cost method investment		—			1,333,066			2,000,000
Impairment loss on promissory note		—			8,521,483			—
Impairment loss on property and equipment		—			2,438,818			2,196,580
Impairment loss on television program and film costs		—			—			14,192,291
Impairment loss on advance to a third party		—			—			2,471,848
Impairment loss on capitalized film cost		—			—			2,052,955
Write-down on other prepayments		—			—			5,556,116
Release of lease liability upon early termination of lease agreement		—			(844,388	)		—
Write-down on amounts due from related parties		—			1,721,306			9,915,650
Allowance for doubtful debts		—			10,427,114			11,235,937
Gain on settlement of UBS case		—			—			(13,516,679	)
Impairment loss on principal protected note		90,076			24,909,929			—
Loss on disposal of subsidiaries		—			4,720,705			20,682,879
Loss due to termination of an exclusive license agreement		—			—			4,462,614
Amortized issuance cost of convertible loan		—			199,471			729,598
Imputed interest on long term obligations		4,496,020			5,045,122			9,032,773
Imputed interest on convertible loan		—			—			1,266,644
Interest income from consideration receivables		—			—			(2,063,953	)
Change in fair value of conversion feature embedded in convertible loan		—			—			312,646
Change in fair value of warrants		—			—			(2,565,000	)
Loss (gain) on disposal of property and equipment		49,410			(63,290	)		140,781
Deferred income taxes		(15,518,106	)		(4,365,037	)		(28,300,180	)
Realized gain on currency linked note		(668,280	)		—			—
Changes in operating assets and liabilities (net of effects of acquisitions and disposal):
Accounts receivable		(18,163,199	)		(23,612,506	)		7,951,218
Capitalized content production costs		(4,503,725	)		1,880,989			—
Television program and film rights		—			—			(6,036,385	)
Prepaid advertising program space and airtime		(1,962,891	)		4,746,733			(159,687	)
Prepaid expenses and other current assets		(6,167,982	)		(4,069,364	)		(2,336,531	)
Amounts due from related parties		11,616			(2,773,886	)		(2,381,019	)
Accounts payable		473,450			(1,011,631	)		4,928,030
Accrued expenses and other payables		8,266,160			7,469,106			(7,712,987	)
Interest income from promissory note receivable		(722,038	)		—			—
Income taxes payable		2,524,239			3,941,808			(1,370,724	)
Net cash provided by operating activities		20,293,223			14,981,597			1,975,266
Cash flows from investing activities:
Purchases of property and equipment		(4,504,811	)		(3,200,409	)		(1,398,264	)

F-10

Xinhua Sports & Entertainment Limited

	Year Ended			Year Ended			Year Ended
	December 31, 2007			December 31, 2008			December 31, 2009
	(In U.S. dollars)
Purchase and deposit for acquisition of intangible assets		—			(3,888,741	)		(4,519,933	)
Repayment from (Advance to) third parties		4,603,493			—			(4,935,502	)
Loans to related parties		(3,263,687	)		(192,657	)		—
Amount paid for cost method investment		—			(2,000,000	)		—
Proceeds from disposal of property and equipment		456,781			435,418			125,243
Net proceeds from disposal of subsidiaries		—			(2,483,619	)		6,109,110
(Decrease) increase in short term deposits and restricted cash		(34,672,369	)		6,802,140			(9,024	)
Cash paid for acquisition of subsidiaries, net of cash received		(103,209,310	)		(35,763,784	)		(22,528,086	)
Cash paid for deposit for investment		—			(14,174,566	)		(2,197,523	)
Other investments		—			—			(77,115	)
Investment in currency linked note		(40,000,000	)		—			—
Investment in principal protected note		(25,000,005	)		—			—
Proceeds from disposal of currency linked note		40,668,280			—			—
Net cash used in investing activities		(164,921,628	)		(54,466,218	)		(29,431,094	)
Cash flows from financing activities:
Advance and loan from related parties		9,822,237			2,068,744			12,437,737
Repayment to related parties		(58,204,939	)		—			(12,663,916	)
Proceeds from issuance of convertible loan		—			33,200,000			24,600,000
Transaction cost of issuance of convertible loan		—			(2,542,457	)		(813,695	)
Proceeds from issuance of redeemable convertible preferred shares		—			30,000,000			—
Transaction cost of issuance of redeemable convertible preferred share		—			(794,409	)		—
Contribution from non-controlling interests		—			130,355			1,425,836
Dividend paid to non-controlling interests		—			—			(463,782	)
Issuance of shares for share option plan		2,170,288			179,843			—
Repurchase of common shares		(8,629,986	)		(4,963,138	)		—
Proceeds from public offering		225,002,999			—			7,500,000
Expenses on public offering		(22,360,852	)		(116,000	)		(623,585	)
Bank borrowings and overdraft raised		48,743,861			40,333,520			33,872,761
Bank borrowings and overdraft repaid		(25,772,569	)		(35,541,106	)		(24,977,286	)
Payment of long term payables		(16,487,283	)		(15,433,903	)		(26,346,666	)
Cash paid for prior acquisition-deferred and contingent consideration		—			—			(26,297,740	)
Loss of bank balance due to settlement of UBS case		—			—			(655,673	)
Dividends paid on redeemable convertible preferred shares		(3,025,000	)		—			—
Net cash provided by financing activities		151,258,756			46,521,449			(13,006,009	)

F-11

Xinhua Sports & Entertainment Limited

	Year Ended		Year Ended		Year Ended
	December 31, 2007		December 31, 2008		December 31, 2009
	(In U.S. dollars)
Effect of exchange rate changes		1,452,189		2,615,927		(8,928	)
Net increase (decrease) in cash and cash equivalents		8,082,540		9,652,755		(40,470,765	)
Cash and cash equivalents, beginning of the year		36,353,547		44,436,087		54,088,842
Less: Cash and cash equivalents at end of period included in assets held for sale		—		—		(388,119	)
Cash and cash equivalents, end of the year	$	44,436,087	$	54,088,842	$	13,229,958
Supplemental disclosure of cash flow information:
Income taxes paid	$	768,216	$	3,708,284	$	3,574,702
Interest paid	$	1,864,203	$	2,776,738	$	7,177,502
Supplemental schedule of non-cash investing and financing activities:
Issuance of common shares for acquisitions of subsidiaries	$	10,233,521	$	4,936,380	$	9,880,000
Issuance of common shares for acquisitions of intangible assets		—		2,660,000		2,660,000
Issuance of preferred shares for settlement of dividends on redeemable convertible preferred shares		—		1,400,000		3,160,000
Consideration payable for acquisition of subsidiaries		2,607,715		21,837,635		8,984,974
Conversion of preferred shares into common shares		15,585		—		—
Conversion of convertible loan into common shares		14,284,751		—		—
Waiver of amount due to a shareholder		1,500,000		—		—
Consideration paid by Xinhua Finance Limited (“XFL”) and its affiliates on behalf of the Company and subsequently waived by XFL and its affiliates		113,507,785		26,302,941		—

F-12

Xinhua Sports & Entertainment Limited

Notes to consolidated financial statements

(In U.S. dollars)

1. Organization and principal activities

Xinhua Sports & Entertainment Limited (“XSEL”) (formerly Xinhua Finance Media Limited) was incorporated by Xinhua Finance Limited (“XFL”), a Tokyo Stock Exchange listed company, on November 7, 2005 under the laws of the Cayman Islands.

XSEL, its subsidiaries and variable interest entities (“VIEs”) included in the accompanying consolidated financial statements (collectively, the “Company”) are principally engaged in the production of television programs, the placement of advertising and advertising services in the People’s Republic of China (“PRC”) including Hong Kong. The Company’s principal geographic market is in the PRC. XSEL does not conduct any substantive operations of its own and conducts its primary business operations through its subsidiaries and VIEs in the PRC.

The contribution of the businesses by XFL to XSEL was accounted for as reorganization under common control and the related assets and liabilities are recorded on their carryover basis.

Since the Company has been growing its media capabilities beyond finance with a particular focus on sports and entertainment, on December 5, 2008, the Board of Directors made a decision to reposition the Company and change its name to XSEL. On January 15, 2009, the name change was approved by shareholders at an extraordinary general meeting, and the name change became effective following registration with the Company Registry of the Cayman Islands on February 15, 2009. The Company has also changed its trading symbol on NASDAQ from “XFML” to “XSEL” effective March 2, 2009.

The VIE arrangements

PRC regulations currently prohibit or restrict foreign ownership of media, advertising, market research and telecommunications companies. As a Cayman Islands corporation, the Company is deemed a foreign legal person under PRC laws. The Company therefore conducts substantially all of its activities through its subsidiaries and VIEs in the PRC. To provide the Company the ability to receive the majority of the expected residual returns of the VIEs and their subsidiaries, the Company entered into a series of contractual arrangements with VIEs including service agreement, loan agreement, equity pledge agreement, subrogation agreement, and exclusive equity purchase option agreement to purchase the equity interest of affiliated entity. The paid-in capital of these VIEs was funded by the Company through a loan extended to the equity shareholders.

F-13

Xinhua Sports & Entertainment Limited

As a result of these contractual arrangements, the Company is the primary beneficiary of the VIEs and the Company has consolidated the financial results of the VIEs and their subsidiaries in its consolidated financial statements since the later of the date of inception or acquisition.

The following financial statement amounts and balances of the Company’s VIEs, as of December 31, 2007, 2008 and 2009 and covering each of the three years in the period ended December 31, 2009 were included in the accompanying 2007, 2008 and 2009 consolidated financial statements:

	2007		2008			2009
Total assets	$	300,356,736	$	318,273,081		$	139,246,402
Total liabilities		153,983,859		179,924,080			179,124,554
Total net revenues — Continuing operations		65,958,072		91,753,648			96,116,978
Total operating expenses — Continuing operations		8,351,556		30,710,774			134,497,227
Net income (loss) — Continuing operations		24,102,346		(8,962,273	)		(117,430,251	)
Net income (loss) — Discontinued operations		11,595,073		(13,471,135	)		(78,195,113	)

2. Summary of principal accounting policies

(a) Basis of presentation

The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

The Company incurred a net loss of $313.6 million during the year ended December 31, 2009 and its net shareholders’ deficit was $61.4 million. The Company had cash and cash equivalents of $13.2 million as of December 31, 2009.

As of December 31, 2009, the Company did not meet certain financial covenants contained in the secured convertible loan facility (see Note 21) and this event of default meant that as of that date the secured convertible loan balance of $57.8 million was repayable upon demand by the holder. Consequently, the secured convertible loan balance which was otherwise due for repayment in 2012 was classified as a current liability.

As of December 31, 2009, the Company has amounts owed in respect of prior business acquisitions that are reflected as a current liability of $28.9 million and a contingent liability in respect of prior business acquisitions with a maximum possible amount to be paid of approximately $29.4 million which will be recorded when the contingencies are resolved.

As of December 31, 2009, the Company’s current liabilities exceeded its current assets by $50.9 million, its total liabilities exceeded its total assets by $26.2 million. The Company may not have sufficient cash to meet its payment obligations in the next 12 months.

F-14

Xinhua Sports & Entertainment Limited

The management of the Company is taking a number of actions to address this situation in order to restore the Company to a sound financial position with an appropriate business strategy going forward. These actions include:

1) The restructuring of the secured convertible loan facility:

In July 2010, the Company entered into a number of agreements with Patriarch Partners Agency Services, LLC (“Patriarch”), the convertible loan holder, which comprised of:

(a) an amendment which waives the breach of financial covenants for the quarters ended December 31, 2009 and subsequent periods up to the date of the amendment.

(b) an amendment that lowers the financial covenant requirements on a prospective basis. The previous covenants of minimum consolidated EBITDA and maximum leverage ratio for each future quarter until repayment ranged from $16.8 million to $52.1 million and 1.88 to 5.03, have been changed to $0.8 million to $3.8 million and 11.75 to 57.23, respectively. The covenant of maximum capital expenditure is added in the amendment which ranged from $0.5 million to $1.3 million for the fiscal years 2010 to 2012.

(c) the issuance of 78,295 Series C redeemable convertible preferred shares to the convertible loan holder for no additional consideration. See Note 34, Subsequent Events, for more details.

In addition, the Company has repaid $16.3 million of the convertible loan balance of which $8.7 million was repaid from the proceeds of the sale of the company’s printing business and the remaining $7.6 million was repaid though an additional term loan from Patriarch. See Note 6, Discontinued Operations, for more details.

While the prior breaches of the financial covenants have been waived, given the difficult financial circumstances of the Company, the Company cannot be certain that it will not breach the new covenants. The Company therefore continued to classify the convertible loan as a current liability.

F-15

Xinhua Sports & Entertainment Limited

2) A program of disposal of non-core businesses:

a) In June, 2010, the Company closed its disposal of the printing business for a cash consideration of $24 million (Note 6, Discontinued Operations) and used part of the proceeds to repay a portion of the convertible loan.

b) The Company now plans to dispose two non-core subsidiaries by the end of 2010. This decision was made after December 31, 2009. These two subsidiaries had net assets of $9.2 million as of December 31, 2009.

c) In June 2010, the Company reached an agreement with the original selling shareholders of a subsidiary. The outstanding consideration payable to the original selling shareholders as of December 31, 2009 was $5.7 million. According to the agreement, the Company and the original selling shareholders agreed to settle the outstanding consideration payable of approximately $2.4 million as of the date of the agreement by issuing a certain number of class A common shares of the Company. See Note 34, Subsequent Events, for more details.

3) The Company’s advertising agency agreement with Shaanxi Television Station was terminated effective June 30, 2010. As of December 31, 2009, there was approximately $68.8 million long-term liabilities related to the advertising agency agreement recorded in the consolidated balance sheet. Due to the termination, the Company’s commitment to Shaanxi Television Station was reduced by $64.2 million.

4) The Company is adopting various cost-saving strategies.

Based on the management’s plans, the consolidated financial statements have been prepared assuming the Company will continue as a going concern.

(b) Basis of consolidation

The accompanying consolidated financial statements of the Company include the accounts of XSEL, all its majority-owned subsidiaries and its VIEs. All intercompany transactions and balances have been eliminated on consolidation.

Non-controlling interests

As of January 1, 2009, the Company adopted an authoritative guidance, which changed the accounting for and the reporting of minority interest, now referred to as non-controlling interests, in the consolidated financial information. The adoption of the guidance resulted in the reclassification of amounts previously attributable to minority interest to a separate component of equity titled “Non-controlling interests” in the accompanying consolidated balance sheet. Additionally, net income (loss) attributable to non-controlling interests was shown separately from net income (loss) in the accompanying consolidated statements of operations. Prior period financial information has been reclassified to conform to the current period presentation as required by the guidance.

F-16

Xinhua Sports & Entertainment Limited

Use of estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant accounting estimates reflected in the Company’s consolidated financial statements included revenue recognition, impairment of goodwill, intangible assets and other assets, income taxes, fair value of share-based compensation, allowance for doubtful accounts.

(c) Revenue recognition

Advertising sales revenues mainly include revenue from advertisement in television and are recognized when advertisements are broadcast. The advertising sales recorded net of provisions or estimated rate adjustments and discounts. Payments received in advance are deferred until earned and such amounts are reported as deferred revenue included in accrued expenses and other payables of the accompanying consolidated balance sheets.

Advertising services revenue include revenues from event organization, sponsorship at events, advertising agency services, mobile value-added service (“MVAS”), and provision of advisory and consulting services and are generally recognized as services are provided. Revenues from event organization, such as drama, include ticketing revenue recognized upon the delivery of tickets or admission to the events, whichever is earlier. Revenues from sponsorship at events are generally recorded over the period of the applicable agreements.

The Company’s PRC subsidiaries are subject to business tax at a rate of 5% of total revenues generated from certain type of contracts. Certain contracts under specific formalities are exempted from business tax in accordance with the PRC tax laws. Business tax is reported as a deduction to revenues when incurred.

In the normal course of business, the Company places advertising transactions with television and radio stations for third parties. The Company is considered as a principal in the majority of transactions as it purchases blocks of advertising time and attempts to sell the time to advertisers, and it has substantial risks and rewards of ownership, accordingly, records revenue on a gross basis.

The Company extends credit based upon an evaluation of the customers’ financial condition and collateral is not required from such customers. Allowances for doubtful accounts are generally provided based on historical experience and credit evaluations performed on the customers.

Due to the Company’s repositioning of its focus on sports media, publishing services and content production have ceased operations since December 2009 and related revenues have been classified as discontinued operations for all periods presented. Publishing services revenues included management and information consulting fees relating to magazine subscriptions and sale of magazines, such as, Money Journal and Chinese Venture. Content production revenues included revenues from producing television programs, animations, visual effects and post-production for television commercials and broadcast design.

F-17

Xinhua Sports & Entertainment Limited

(d) Restricted cash

Restricted cash are cash balances pledged for the use of banking facilities granted by banks.

(e) Deposits for program advertising right

Deposit for program advertising right mainly represents deposits paid to certain websites to secure advertising rights, is refundable after the contract term expires.

(f) Other current assets

Other current assets include advance to third parties, employees, rental deposits, and interest income receivables.

(g) Cost method investment

Investments in equity securities of privately held companies where the Company’s level of ownership is such that it cannot exercise significant influence over the investee are stated at cost, adjusted for declines in fair value that are considered other than temporary. Fair value of the investments is estimated based on income approach or other valuation techniques. In determining whether impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence that would be considered in this assessment includes, but is not limited to, the reasons for the impairment, the severity and duration of the impairment, and forecasted recovery. Any impairment is charged to earnings and a new cost basis for the investment is established.

(h) Property and equipment, net

Property and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization are provided on a straight-line basis over the following estimated useful lives:

Leasehold improvements	Lesser of 5 years or lease term
Furniture, fixtures and equipment	4-5 years
Motor vehicles	5 years

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Xinhua Sports & Entertainment Limited

(i) Television program and film right, net

Television program and film rights are certain rights to completed television program and films acquired and are stated at cost less accumulated amortization and any impairment losses. Amortizations are provided on a straight-line basis over their estimated useful lives.

(j) License agreements

The advertising and broadcasting license agreements are accounted for as a purchase of right or group of rights. The assets and liabilities for license agreements are initially recorded at fair value which is the present value of the future required payments. The differences between the gross and net liability are then recorded as interest under the effective interest method and the assets are amortized over the life of the agreement.

(k) Fair value of financial instruments

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

Fair value hierarchy

Authoritative literature provides a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The level in the hierarchy within which the fair value measurement in its entirety falls is based upon the lowest level of input that is significant to the fair value measurement as follows:

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

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Xinhua Sports & Entertainment Limited

(l) Long-lived assets with definite lives

The Company evaluates its long-lived assets (including license agreements and other intangible assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When these events occur, the Company measures impairment by comparing the carrying amount of the assets to future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flow is less than the carrying amount of the assets, the Company would recognize an impairment loss as the excess of carrying amounts over fair value of the assets.

In estimating fair value of long-lived assets, the Company typically uses the income method, which starts with a forecast of all of the expected future net cash flows associated with a particular asset. These cash flows are then adjusted to present value by applying an appropriate discount rate that reflects the risk factors associated with the cash flow streams.

Estimates of fair value involve a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions at a point in time. The valuations are based on information available as of the impairment review date and are based on expectations and assumptions that have been deemed reasonable by management. Any changes in key assumptions, including unanticipated events and circumstances, may affect the accuracy or validity of such estimates and could potentially result in an impairment charge. Some of the more significant estimates and assumptions inherent in the income method or other methods include the amount and timing of projected future cash flows the discount rate selected to measure the risks inherent in the future cash flows and the assessment of the asset’s economic life cycle and the competitive trends impacting the asset, including consideration of any technical, legal, regulatory or economic barriers to entry.

No impairment loss on long-lived assets was identified in 2007. Impairment loss on long-lived assets from continuing operations of $14,072,751 and $103,411,532 and from discontinued operations of $17,014,012 and $87,918,520 was recorded in 2008 and 2009, respectively. For discussions on impairments of long-lived assets with definite lives, refer to Note 5, Impairments.

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Xinhua Sports & Entertainment Limited

(m) Goodwill and intangible assets with indefinite lives

The excess of the purchase price over the fair value of net assets acquired is recorded on the consolidated balance sheets as goodwill.

Goodwill (and intangible assets with indefinite lives) is not amortized but tested for impairment annually as of December 31 and whenever events or circumstances make it more likely than not that impairment may have occurred. Goodwill impairment is tested using a two-step approach. The first step compares the fair value of a reporting unit to its carrying amount, including goodwill. If the fair value of the reporting unit is greater than its carrying amount, goodwill is not considered impaired and the second step is not required. If the fair value of the reporting unit is less than its carrying amount, the second step of the impairment test measures the amount of the impairment loss, if any, by comparing the implied fair value of goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, an impairment loss is recognized equal to that excess. The implied fair value of goodwill is calculated in the same manner that goodwill is calculated in a business combination, whereby the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit, with the excess purchase price over the amounts assigned to assets and liabilities. Estimating fair value is performed by utilizing various valuation techniques, with the primary technique being a discounted cash flow.

The impairment review is highly judgmental and involves the use of significant estimates and assumptions. These estimates and assumptions have a significant impact on the amount of any impairment charge recorded. Discounted cash flow methods are dependent upon assumptions of future sales trends, market conditions and cash flows of each reporting unit over several years. Actual cash flows in the future may differ significantly from those previously forecasted. Other significant assumptions include growth rates and the discount rate applicable to future cash flows.

No impairment loss on goodwill was identified in 2007. Impairment losses on goodwill from continuing operations of $137,343,265 and $71,472,061 were recorded in 2008 and 2009, respectively and impairment losses on goodwill from discontinued operations of $43,497,826 and $11,689,417 were recorded in 2008 and 2009, respectively. For discussions on goodwill impairments, refer to Note 5, Impairments.

The impairment test for intangible assets not subject to amortization consists of a comparison of the fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. In 2009, the trademarks of $1,584,000, which were the Company’s only intangible assets with indefinite life, were fully impaired.

(n) Other income

Other income (expenses) in 2009 represents change in fair value of warrants and conversion option of convertible debt. Other income in 2007 mainly represented gain on held-to-maturity investment, which was due on October 26, 2007.

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Xinhua Sports & Entertainment Limited

(o) Income taxes

Current income taxes are provided for in accordance with the laws of the relevant tax authorities. Deferred income taxes are recognized when temporary differences exist between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Net operating loss carry forwards and credits are applied using 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 a portion of or all of the deferred tax assets will not be realized. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics.

The impact of an uncertain income tax position on the income tax return is recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Interest and penalties on income taxes will be classified as a component of the provisions for income taxes. The Company did not identify significant unrecognized tax benefits for years ended December 31, 2007, 2008 and 2009. The Company did not incur any interest and penalties related to potential underpaid income tax expenses and also believed that the Company’s unrecognized tax benefits did not change significantly within 12 months from December 31, 2009.

(p) Foreign currency translation

The functional and reporting currency of the Company and the Company’s subsidiaries located outside the PRC and Hong Kong is the United States dollar (“U.S. dollar”). The financial records of the Company’s subsidiary, its VIEs and its VIEs’ subsidiaries located in the PRC or Hong Kong are maintained in its local currency, the Renminbi (“RMB”) or Hong Kong dollar, respectively, which are the functional currencies of these entities.

Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at the rates of exchange ruling at the balance sheet date. Transactions in currencies other than the functional currency during the year are converted into functional currency at the applicable rates of exchange prevailing when the transactions occurred. Transaction gains and losses are recognized in the statements of operations.

The Company’s entities with functional currency of RMB translate their operating results and financial position into the U.S. dollar, the Company’s reporting currency. Assets and liabilities are translated using the exchange rates in effect on the balance sheet date. Revenues, expenses, gains and losses are translated using the average rate for the year. Translation adjustments are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive income.

F-22

Xinhua Sports & Entertainment Limited

(q) Net income (loss) per share

The Company had two classes (Class A and Class B) of common shares which participate in undistributed earnings before December 31, 2008. Accordingly, the Company had used the two-class method of computing income per share. Diluted income per share is computed using the more dilutive of (a) the two-class method or (b) the if-converted method. As of December 31, 2008, all Class B common shares were converted to Class A common shares using a conversion ratio of one to one.

(r) Share-based compensation

Share-based payment transactions with employees and directors, such as share options and nonvested shares, are measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period using the graded attribution method. Forfeiture rate is estimated based on historical staff turnover rate.

The grant-date fair value of employee share options and similar instruments are estimated using option-pricing models. If the award is modified after the grant date, incremental compensation cost is recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification.

Share awards issued to consultants are measured and recognized at fair value at the date the service is completed.

(s) Business combinations

On January 1, 2009, the Company adopted a new accounting guidance with prospective application which made certain changes to the previous authoritative literature on business combinations. From January 1, 2009, the assets acquired, the liabilities assumed, and any noncontrolling interest of the acquiree at the acquisition date, if any, are measured at their fair values as of that date. Goodwill is recognized and measured as the excess of the total consideration transferred plus the fair value of any noncontrolling interest of the acquiree, if any, at the acquisition date over the fair values of the identifiable net assets acquired. Previously, any non-controlling interest was reflected at historical cost. Common forms of the consideration made in acquisitions include cash and common equity instruments. Consideration transferred in a business acquisition is measured at the fair value as at the date of acquisition. For shares issued in a business combination, the Company has estimated the fair value as of the date of acquisition.

F-23

Xinhua Sports & Entertainment Limited

Where the consideration in an acquisition includes contingent consideration the payment of which depends on the achievement of certain specified conditions post-acquisition, from January 1, 2009 the contingent consideration is recognized and measured at its fair value at the acquisition date and if recorded as a liability it is subsequently carried at fair value with changes in fair value reflected in earnings. For periods prior to January 1, 2009 contingent consideration was not recorded until the contingency was resolved.

(t) Recent accounting pronouncements

On June 12, 2009, the Financial Accounting Standards Broad (“FASB”) issued an authoritative pronouncement, which changes how a company determines whether an entity should be consolidated when such entity is insufficiently capitalized or is not controlled by the company through voting (or similar rights). The determination of whether a company is required to consolidate an entity is based on, among other things, the entity’s purpose and design and the company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. The pronouncement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2009. The Company does not expect the adoption of this pronouncement will have a significant effect on its consolidated financial position or results of operations.

F-24

Xinhua Sports & Entertainment Limited

In October 2009, the FASB issued an authoritative pronouncement regarding the revenue arrangements with multiple deliverables. This pronouncement was issued in response to practice concerns related to accounting for revenue arrangements with multiple deliverables under the existing pronouncement. Although the new pronouncement retains the criteria from existing authoritative literature for when delivered items in a multiple-deliverable arrangement should be considered separate units of accounting, it removes the previous separation criterion that objective and reliable evidence of the fair value of any undelivered items must exist for the delivered items to be considered separate units of accounting. The new pronouncement is effective for fiscal years beginning on or after June 15, 2010. Entities can elect to apply this pronouncement (1) prospectively to new or materially modified arrangements after the pronouncement’s effective date or (2) retrospectively for all periods presented. Early application is permitted; however, if the entity elects prospective application and early adopts this pronouncement after its first interim reporting period, it must also do the following in the period of adoption: (1) retrospectively apply this pronouncement as of the beginning of that fiscal year and (2) disclose the effect of the retrospective adjustments on the prior interim periods’ revenue, income before taxes, net income, and earnings per share. The Company is in the process of evaluating the effect of adoption of this pronouncement.

In April 2010, the FASB issued an authoritative pronouncement regarding milestone method of revenue recognition. The scope of this pronouncement is limited to arrangements that include milestones relating to research or development deliverables. The pronouncement specifies guidance that must be met for a vendor to recognize consideration that is contingent upon achievement of a substantive milestone in its entirety in the period in which the milestone is achieved. The guidance applies to milestones in arrangements within the scope of this pronouncement regardless of whether the arrangement is determined to have single or multiple deliverables or units of accounting. The pronouncement will be effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early application is permitted. Companies can apply this guidance prospectively to milestones achieved after adoption. However, retrospective application to all prior periods is also permitted. The Company does not expect the adoption of this pronouncement will have a significant effect on its consolidated financial position or results of operations.

In April 2010, FASB issued an authoritative pronouncement regarding the effect of denominating the exercise price of a share-based payment award in the currency of the market in which the underlying equity securities trades and that currency is different from (1) entity’s functional currency, (2) functional currency of the foreign operation for which the employee provides services, and (3) payroll currency of the employee. The guidance clarifies that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should be considered an equity award assuming all other criteria for equity classification are met. The pronouncement will be effective for interim and annual periods beginning on or after December 15, 2010, and will be applied prospectively. Affected entities will be required to record a cumulative catch-up adjustment for all awards outstanding as of the beginning of the annual period in which the guidance is adopted. The Company is in the process of evaluating the effect of the adoption of this pronouncement.

F-25

Xinhua Sports & Entertainment Limited

3. Concentration of risk

Concentration of credit risk

Financial instruments that potentially expose the Company to concentration of credit risk consists primarily of cash and cash equivalents, accounts receivable, consideration receivable from disposal of subsidiaries, and amounts due from related parties.

No single group or customer contributed more than 10% of the Company’s revenue for the years ended December 31, 2007 and 2008. Two customers contributed approximately $12,335,000, or 12.4% and $15,122,000 or 15.2%, of the company’s revenues during the year ended December 31, 2009.

No single group or customer contributed more than 10% of the Company’s accounts receivable balance as of December 31, 2007 and 2008. One customer accounted for 25.5% of the Company’s account receivable balance at December 31, 2009.

Accounts receivable are typically unsecured and are derived from revenue earned from customers in China. The Company maintains an allowance for doubtful debts and such losses have been within management’s expectation.

Concentration of location

Substantially all of the Company’s revenues for the years ended December 31, 2007, 2008 and 2009 were generated from the PRC including Hong Kong. In addition, a substantial portion of the identifiable assets of the Company are located in the PRC.

4. Acquisitions

I. 2009 acquisition

Everfame Development Limited was incorporated in the British Virgin Islands (“BVI”) under the laws of the BVI on August 7, 2008. Everfame Development Limited, its subsidiaries and its VIE (collectively, “Everfame”) are principally engaged in organization of culture communication activities, design and production of advertisement and acting as an agent and publishing advertisement. Everfame has a long term advertising agreement with Shaanxi Television Station through which Everfame has exclusive rights to provide advertising service up to 15 years in Shaanxi Satellite Television.

F-26

Xinhua Sports & Entertainment Limited

On April 2, 2009, XSEL acquired 100% Everfame ordinary shares with cash consideration of $22,589,642. The purpose of the acquisition was to expand the Company’s geographic reach and operating scope.

The accompanying consolidated financial statements include the assets and liabilities of Everfame as of December 31, 2009 and the operating results for the period from April 2, 2009 (date of acquisition) to December 31, 2009.

The following table summarizes the fair values of the assets acquired and liabilities assumed by XSEL on the acquisition date of Everfame.

Assets acquired:
Cash	$	61,556
Prepaid expenses and other current assets		265,883
Deposits		1,453,398
Television program and film rights		13,838,579
License agreement		77,111,642
Property and equipment		1,664
Total		92,732,722
Liabilities assumed:
Accounts payable		6,306,460
Accrued expenses and other payables		13,642,949
Lease liabilities		74,144,168
Deferred tax liability		4,056,955
Total		98,150,532
Intangible assets		16,227,819
Net assets acquired		10,810,009
Cash consideration	$	22,589,642
Goodwill	$	11,779,633

			Amortization
			Period
			(Years)
Intangible assets comprised of:
Exclusive advertising agreement	$	77,111,642		5.75
Exclusive advertising agreement resulting from acquisition		16,227,819		9.75

F-27

Xinhua Sports & Entertainment Limited

The following unaudited pro forma information summarizes the effect of the acquisition, as if the acquisition of Everfame had occurred as of January 1, 2008 and January 1, 2009. This pro forma information is presented for information purposes only. It is based on historical information and does not purport to represent the actual results that may have occurred had the Company consummated the acquisition on January 1, 2008 or January 1, 2009, nor is it necessarily indicative of future results of operations of the consolidated enterprises:

	2008			2009
	(Unaudited)			(Unaudited)
Pro forma net revenues	$	186,030,952		$	140,659,771
Pro forma (loss) income from operations		(239,295,147	)		(339,461,802	)
Pro forma net loss		(274,231,531	)		(313,662,124	)
Pro forma net loss per share
Basic and diluted from continuing operations — Class A Common share	$	(1.55	)	$	(1.36	)
Basic and diluted from continuing operations — Class B Common share		(1.55	)		N/A
Basic and diluted from discontinued operations — Class A Common share		(0.49	)		(0.64	)
Basic and diluted from discontinued operations — Class B Common share		(0.49	)		N/A

Intangible assets of $62,826,470 and television program and film rights of $14,192,291 were impaired in 2009 and goodwill was fully impaired as of December 31, 2009. Refer to Note 5, Impairments, for more details.

Refer to Note 34 for subsequent events.

II. Prior year acquisitions

(a) East Alliance Limited

East Alliance Limited was incorporated in the BVI under the laws of the BVI on June 2, 2006 and is an investment holding company for its wholly-owned subsidiaries and VIEs (collectively, “M-in Group”). M-in Group is a mobile service provider (“SP”) in China with SP licenses nationwide operating on wireless MVAS platforms.

On June 4, 2007, XSEL acquired 100% of East Alliance Limited’s ordinary shares at an initial cash consideration of $9,502,341, net of direct cost of 651,932. $452,265 of contingent consideration, which represents the lesser of the maximum amount of contingent consideration and the amount of negative goodwill, was recognized as of the date of acquisition.

F-28

Xinhua Sports & Entertainment Limited

The following table summarizes the fair values of the assets acquired and liabilities assumed on the date of acquisition of M-in Group by XSEL.

Assets acquired:
Cash	$	1,087,862
Accounts receivable		2,318,995
Prepaid expenses and other current assets		321,849
Property and equipment		234,966
Total		3,963,672
Liabilities assumed:
Accounts payable		600,932
Accrued expenses and other payables		344,036
Amounts due to related parties		789,876
Contingent consideration payable		452,265
Deferred tax liability		1,148,951
Income taxes payable		65,339
Total		3,401,399
Intangible assets		9,592,000
Net assets acquired		10,154,273
Cash consideration in 2007	$	10,154,273

			Amortization
			Period
			(Years)
Intangible assets comprised of:
License rights	$	9,372,000		3.5
Noncompete agreement		220,000		1

In addition to the initial consideration, the equity owners of M-in Group are entitled to subsequent consideration, including cash and XSEL’s Class A common shares, based on a predetermined earn-out formula applied to audited operating results through December 31, 2007 and 2008. In 2008, the Company recorded additional consideration totaling $11,853,452, of which $7,112,072 was paid in cash and $4,741,380 was settled by the issuance of 3,261,670 Class A common shares in April 2008. In 2009, the Company recorded additional consideration and goodwill of $6,933,094. Consideration of $6,153,302 was paid in cash during 2009 and $1,225,946 was recorded as consideration payable in current liabilities as of December 31, 2009.

The accompanying consolidated financial statements include the assets and liabilities of M-in Group as of December 31, 2008 and 2009 and the operating results for the period from June 4, 2007 (date of acquisition by XSEL) to December 31, 2007 and for the years ended December 31, 2008 and 2009.

All intangible assets of M-in Group have been impaired as of December 31, 2009. Refer to Note 5, Impairments, for more details.

(b) Singshine (Holdings) Hongkong Ltd.

Singshine (Holdings) Hongkong Ltd. was established on September 10, 2003 in Hong Kong. Singshine (Holdings) Hongkong Ltd., its subsidiaries and VIEs (collectively, “SSMS”) are principally engaged in providing the marketing and promoting activities in restaurants, clubs and public areas (commonly referred to as “Below-The-Line marketing”).

On June 11, 2007, XSEL acquired 100% of SSMS’s ordinary shares at an initial cash consideration of $6,440,757. Direct costs of $196,568 were incurred.

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Xinhua Sports & Entertainment Limited

The following table summarizes the fair values of the assets acquired and liabilities assumed by XSEL on the date of the acquisition of SSMS.

Assets acquired:
Cash	$	1,140,230
Accounts receivable		1,567,372
Prepaid expenses and other current assets		306,557
Property and equipment		364,782
Other long term assets		131,456
Total		3,510,397
Liabilities assumed:
Accounts payable		97,905
Accrued expenses and other payables		589,048
Amounts due to related parties		424,197
Income taxes payable		94,941
Amounts due to former shareholders		125,722
Deferred tax liabilities		567,827
Total		1,899,640
Intangible assets		3,767,000
Net assets acquired		5,377,757
Initial cash consideration		6,637,325
Goodwill	$	1,259,568

			Amortization
			Period
			(Years)
Intangible assets comprised of:
Indefinite life trademark	$	1,584,000	Indefinite
Customer base		1,588,000		4.5
Noncompete agreement		595,000		3.8

In addition to the initial cash consideration, the selling shareholders of SSMS were entitled to additional cash consideration based on a predetermined earn-out formula applied to audited operating results through December 31, 2007, 2008 and 2009. In 2008, the Company recorded additional goodwill of $6,654,508 upon the earn-out payment and the finalization of the purchase price allocation on the assets acquired and liabilities assumed. In 2009, the Company recorded additional consideration and goodwill of $7,425,913. The additional consideration of $5,382,972 was paid in cash and $2,062,068 was recorded as consideration payable in current liabilities as of December 31, 2009.

The accompanying consolidated financial statements include the assets and liabilities of SSMS as of December 31, 2008 and 2009 and the operating results for the period from June 11, 2007 (date of acquisition by XSEL) to December 31, 2007 and for the years ended December 31, 2008 and 2009.

SSMS’s intangible assets and goodwill were fully impaired as of December 31, 2009. Refer to Note 5, Impairments, for more details.

F-30

Xinhua Sports & Entertainment Limited

(c) Shanghai Paxi Advertising Co., Ltd.

Shanghai Paxi Advertising Co., Ltd. was established on August 17, 2006 in the PRC. Shanghai Paxi Advertising Co., Ltd. and its subsidiaries (collectively, “JCBN China”) are principally engaged in Below-The-Line marketing and online advertising.

On November 27, 2007, XSEL acquired 100% of JCBN China’s ordinary shares at an initial consideration of $40,825,770. Direct costs of $801,892 were incurred.

The following table summarizes the fair values of the assets acquired and liabilities assumed by XSEL on the date of the acquisition of JCBN China.

Assets acquired:
Cash	$	947,777
Accounts receivable		4,609,190
Prepaid expenses and other current assets		784,533
Amounts due from related parties		133,141
Property and equipment		143,616
Total		6,618,257
Liabilities assumed:
Accounts payable		2,279,020
Accrued expenses and other payables		534,984
Amounts due to related parties		91,821
Income taxes payable		1,038,571
Deferred tax liabilities		2,761,298
Total		6,705,694
Intangible assets		10,951,764
Net assets acquired		10,864,327
Initial purchase consideration		41,627,662
Goodwill	$	30,763,335

			Amortization
			Period
			(Years)
Intangible assets comprised of:
Customer base	$	8,824,516		5
Exclusive advertising agreement		75,350		1
Noncompete agreement		1,655,221		5
Backlog order		35,940		1
Distribution network		360,737		5

In addition to the initial consideration, the selling shareholders of JCBN China are entitled to additional consideration, including both cash and XSEL Class A common shares based on a predetermined earn-out formula applied to audited operating results through December 31, 2008 and 2009. In 2009, the Company recorded additional consideration and goodwill of $23,009,708, of which $9,121,467 was paid in cash, $9,203,884 of which was settled by the issuance of 11,357,473 Class A common shares in September 2009. The remaining balance of $4,682,784 was recorded as consideration payable in current liabilities as of December 31, 2009.

F-31

Xinhua Sports & Entertainment Limited

The accompanying consolidated financial statements include the assets and liabilities of JCBN China as of December 31, 2008 and 2009 and the operating results for the period from November 27, 2007 (date of acquisition) to December 31, 2007 and for the years ended December 31, 2008 and 2009.

Goodwill and intangible assets of JCBN China were fully impaired as of December 31, 2009. Refer to Note 5, Impairments, for more details.

Refer to Note 34 for subsequent settlement.

(d) Profitown Development Limited

Profitown Development Ltd. (“Profitown”) was established on May 10, 2007 in the BVI. Profitown and its subsidiaries (collectively, “Profitown Group”) are principally engaged in Below-The-Line marketing.

On November 27, 2007, XSEL acquired 100% Profitown’s ordinary shares at an initial consideration of $2,241,230. Direct costs of $77,959 were incurred.

The following table summarizes the fair values of the assets acquired and liabilities assumed by XSEL on the date of the acquisition of Profitown Group.

Assets acquired:
Cash	$	66,689
Accounts receivable		48,143
Prepaid expenses and other current assets		9,873
Amounts due from related parties		217,115
Property and equipment		24,064
Total		365,884
Liabilities assumed:
Accounts payable		33,519
Accrued expenses and other payables		12,690
Income tax payables		48,114
Bank overdraft		22,768
Capital lease obligations		13,034
Deferred tax liabilities		271,650
Total		401,775
Intangible assets		1,552,285
Net assets acquired		1,516,394
Initial purchase consideration		2,319,189
Goodwill	$	802,795

F-32

Xinhua Sports & Entertainment Limited

			Amortization
			Period
			(Years)
Intangible assets comprised of:
Customer base	$	1,339,657		5
Noncompete agreement		191,319		5
Backlog order		21,309		1

In addition to the initial consideration, the equity owners of Profitown Group are entitled to additional consideration, including both cash and XSEL Class A common shares based on a predetermined earn-out formula applied to audited operating results through December 31, 2008 and 2009. In 2008, the Company recorded additional consideration and goodwill of $1,385,370. In 2009 the Company recorded additional consideration and goodwill of $304,922. The consideration of $676,116 was settled by the issuance of 560,500 Class A common shares and $1,014,176 was recorded as consideration payable in current liabilities as of December 31, 2009.

The accompanying consolidated financial statements include the assets and liabilities of Profitown Group as of December 31, 2008 and 2009 and for the period from November 27, 2007 (date of acquisition by XSEL) to December 31, 2007 and for the years ended December 31, 2008 and 2009.

Refer to Note 34 for subsequent settlement.

III. The prior years’ acquisitions subsequently discontinued or disposed

(a) Guangzhou Singshine Communication Co., Ltd.

Guangzhou Singshine Communication Co., Ltd., (“Singshine Communication”) was established on July 4, 1997 in the PRC. Singshine Communication place advertisements, provide advertising services to customers in the PRC and have the exclusive rights to sell advertising for and the rights to provide content to the Channel FM107.6 of the Guangdong People’s Radio Station. Singshine Communication also provides design and production services to its customers.

In 2007, as a result of a series of contractual arrangements with nominee shareholders of Singshine Communication, XSEL became the primary beneficiary of 100% interest in Singshine Communication.

On November 27, 2009, Singshine Communication was sold back to the original selling shareholders of Singshine Communication. The accompanying consolidated financial statements include the assets and liabilities of Singshine Communication as of December 31, 2007 and 2008 and the operating results for the period from June 11, 2007 (effective date of the equity pledge and subordinate agreements) to December 31, 2007 and for the years ended December 31, 2008 and 2009 were reclassified to income (loss) from discontinued operations. Refer to Note 6, Discontinued Operations, for more details.

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Xinhua Sports & Entertainment Limited

(b) Small World Television Ltd.

Small World Television Ltd. was established in Hong Kong on August 25, 2004. Small World Television and its subsidiary (collectively “Small World”) are principally engaged in the production of television programs. Small World also offers broadcast design services.

On August 22, 2007, XSEL acquired 70% equity interest of Small World with a consideration of $6,742,531 (net of transaction costs of $81,162), of which $1,742,531 was settled by the issuance of 546,248 Class A common shares of XSEL. On September 30, 2008, XSEL acquired the remaining 30% equity interest of Small World at nil consideration.

Small World ceased operation in December of 2009. The accompanying consolidated financial statements included the assets and liabilities of Small World as of December 31, 2008 and 2009 and the operating results for the period from August 22, 2007 (date of acquisition by XSEL) through December 31, 2007 and for the years ended December 31, 2008 and 2009 were reclassified to income from discontinued operations, respectively. Refer to Note 6, Discontinued Operations, for more details.

(c) Xinhua Finance Media (Convey) Limited

Xinhua Finance Media (Convey) Ltd. (formerly “Good Speed Holdings Limited”), was incorporated in the BVI under the laws of the BVI on June 6, 2007. Xinhua Finance Media (Convey) Ltd., and its subsidiaries (collectively, “Convey”) are principally engaged in outdoor advertising. On October 8, 2007, Good Speed Holdings Limited changed its name to Xinhua Finance Media (Convey) Ltd.

On July 2, 2007, XSEL acquired 100% Convey’s ordinary shares at an initial cash consideration of $33,000,000, net of direct costs of $257,411.

The following table summarizes the fair values of the assets acquired and liabilities assumed by XSEL on the acquisition date of Convey.

Assets acquired:
Accounts receivable	$	1,536,045
Prepaid expenses and other current assets		771,307
Property and equipment		495,722
Other assets		64,263
Total		2,867,337
Liabilities assumed:
Accounts payable		527,558
Accrued expenses and other payables		1,237,539
Bank overdraft		319,050
Bank loans		125,580
Capital lease obligations		496,494
Amounts due to related parties		79,073
Income taxes payable		17,263
Deferred tax liabilities		3,130,977
Total		5,933,534
Intangible assets		17,415,579
Net assets acquired		14,349,382
Cash consideration		33,257,411
Goodwill	$	18,908,029

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Xinhua Sports & Entertainment Limited

			Amortization
			Period
			(Years)
Intangible assets comprised of:
Indefinite life trademark	$	8,059,482	Indefinite
Distribution network		5,402,375		9
Customer base		3,702,354		15
Backlog order		251,368		1

In addition to the initial consideration, the shareholders of Convey are entitled to additional consideration, including both cash and XSEL’s Class A common shares based on a predetermined earn-out formula applied to the aggregate audited operating results through June 30, 2008 and 2009.

In 2008, the Company recorded additional consideration and goodwill of $39,810,073. The additional consideration of $19,810,073 was paid by cash and $20,000,000 will be payable in Class A common shares.

On December 31, 2008, 85% of equity interest of Convey was sold back to the original owner. Refer to Note 7, Disposal of Convey, for details. The accompanying consolidated financial statements only included the operating results for the period from July 2, 2007 (date of acquisition) to December 31, 2007 and for the year ended December 31, 2008.

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Xinhua Sports & Entertainment Limited

5. Impairments

Impairment losses recorded for assets from continuing and discontinued operations as a result of repositioning and change of business environment for the years ended December 31, 2007, 2008 and 2009 are summarized in the table below:

	Year Ended		Year Ended		Year Ended
	December 31, 2007		December 31, 2008		December 31, 2009
	(In U.S. dollars)
Continuing operations
Impairment loss on goodwill (a)		—		137,343,265		71,472,061
Impairment loss on intangible assets (a)		—		11,884,680		84,226,010
Impairment loss of television program and film rights (a)		—		—		14,192,291
Impairment loss on other non-current assets (b)		—		—		4,524,803
Impairment loss on property and equipment (a)		—		2,188,071		468,428
Impairment loss on promissory note (c)		—		8,521,483		—
Discontinued operations
Impairment loss on goodwill (a)		—		43,497,826		11,689,417
Impairment loss on intangible assets (a)		—		13,677,415		86,190,368
Impairment loss on other non-current assets (b)		—		3,085,850		—
Impairment loss on property and equipment (a)		—		250,747		1,728,152

(a)	In 2008, impairment losses on goodwill, intangible assets and property and equipment were driven mainly by the Company’s repositioning in the sports and entertainment fields and the global economic downturn in 2008. In 2009, the impairment losses on goodwill, intangible assets, television program and film costs and property and equipment were mainly due to (1) the release of Rule 61 (“Rule 61”) in October 2009 by the State Administration of Radio, Film and Television, which substantially cuts the time allowed for brand advertisements in each hour and the amount of time allotted for infomercials and (2) the loss of major customers to competitors in the Advertising Group. For details of goodwill and intangible assets, please refer to Note 14, License agreements, Exclusive Advertising Agreement and Other Intangible Assets, and Note 15, Goodwill.
(b)	The impairments on non-current assets mainly consist of impairment of capitalized content production cost, capitalized film cost, and advance to third parties due to the same reason as stated above for 2009 goodwill impairment.
(c)	This represented impairment on promissory note issued to a related party, 50% of which was owned by the Company’s former senior management officer. Impacted by challenging economic conditions, the related party was unable to repay the principal and accrued interest. Therefore, the Company recorded a provision of $8,521,483 for the remaining amount of the note and accrued interest as of December 31, 2008.

The impairments of goodwill and long-lived assets were determined based on the fair values of reporting units or assets, which were developed using models with significant unobservable inputs (level 3), including but not limited to the amount and timing of projected future cash flows, the discount rate selected to measure the risks inherent in the future cash flows and the assessment of the asset’s economic life cycle and the competitive trends impacting the asset, including consideration of any technical, legal, regulatory or economic barriers to entry.

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Xinhua Sports & Entertainment Limited

6. Discontinued operations

Subsidiary to be sold

In the fourth quarter of 2009, as a result of the repositioning of the Company, the Company determined to seek buyers of Beijing Jingguan Xincheng Advertising Co., Ltd. and its subsidiary (collectively “Economic Observer Advertising”) and Beijing Jingshi Jingguan Advertising Co., Ltd. (“EWEO”), the Company’s printing business. Accordingly, the assets and liabilities of Economic Observer Advertising and EWEO are separately reported as “assets and liabilities held for sale” as of December 31, 2009. The results of operations of Economic Observer Advertising and EWEO, including revenue, for all periods, are separately reported as part of “discontinued operations”.

After impairment charges, the carrying amounts of the major classes of assets and liabilities of Economic Observer Advertising and EWEO as of December 31, 2009 were as follows:

Cash		388,119
Other current assets		4,253,942
Non-current assets		38,095,068
Total assets held for sale	$	42,737,129
Current liability	$	10,633,290
Other current liabilities		11,450,084
Total liabilities held for sale	$	22,083,374
Net assets held for sale	$	20,653,755

Economic Observer Advertising and EWEO were subsequently sold to an independent, non-affiliated purchaser at cash consideration of US$24,000,000. Refer to Note 34, Subsequent events, for more details.

Subsidiaries disposed

In addition, Shanghai Hyperlink Market Research Co., Ltd. and its subsidiaries (collectively, “Hyperlink”), Beijing Century Media Advertising Co., Ltd. (“Century Media Advertising”) and Singshine Communication were sold in 2009. Their historical operating results were reported as part of “discontinued operations” for all periods presented in the accompanying consolidated statement of operations. The net gain on disposal of subsidiaries was $3,872,583, which was reported as part of “discontinued operations” for the year ended December 31, 2009. Refer to below for more details.

Loss on disposal of Century Media Advertising		(1,939,757	)
Gain on disposal of Singshine Communication		4,746,971
Gain on disposal of Hyperlink		1,065,369
Net gain on disposals	$	3,872,583

(a) Century Media Advertising and Singshine Communication

On November 26, 2009, Century Media Advertising was sold back to the original selling shareholders with cash consideration of RMB 1. The disposition was completed on November 27, 2009 and a loss on such disposition of $1,939,757 (including loss on waiver of receivable from Singshine Communication) was recognized by the Company for the year ended December 31, 2009.

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Xinhua Sports & Entertainment Limited

The carrying amounts of the major classes of assets and liabilities of Century Media Advertising at November 27, 2009 were as follows:

Total assets	$	2,595,018
Total liabilities	$	1,038,391
Net assets disposed	$	1,556,627

Revenue and net income of Century Media Advertising, before intercompany eliminations, for the year ended 31 December, 2009 are as follows:

Net revenue	$	5,128,878
Net income	$	1,184,704

Singshine Communication is wholly owned by Century Media Advertising, and was also disposed on November 27, 2009 with a cash consideration of RMB 1. A gain of $4,746,971 related to the disposal of Singshine Communications was recognized by the Company for the year ended December 31, 2009.

The carrying amounts of the major classes of assets and liabilities of Singshine Communication at November 27, 2009 were as follows:

Total assets	$	475,768
Total liabilities	$	5,242,057
Net liabilities disposed	$	4,766,289

Revenue and net income of Singshine Communication, before intercompany eliminations, for the year ended 31 December, 2009 is as follows:

Net revenue	$	3,907,330
Net loss	$	295,969

(b) Hyperlink

On March 13, 2009, the Company entered into an agreement with INTAGE Inc. and INTAGE Marketing Consulting (Shanghai) Co., Ltd., for the sale of its entire investment in Hyperlink, which was 100% equity interest. Under the agreement, the total consideration for the assets transferred was US$10,713,292 (Yen 1,050,000,000).

The disposition was completed on October 21, 2009 and a gain on such disposition of $1,065,369 (net of transaction cost of $638,811 and bonus payment to the executives of Hyperlink pursuant to employment agreements of $2,200,000) was recognized by the Company for the year ended December 31, 2009.

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Xinhua Sports & Entertainment Limited

The carrying amounts of the major classes of assets and liabilities of Hyperlink at October 21, 2009 were as follows:

Total assets	$	8,057,955
Total liabilities	$	1,127,136
Net assets disposed	$	6,930,819

Revenue and net income of Hyperlink, before intercompany eliminations, for the year ended 31 December, 2009 are as follows:

Net revenue	$	4,514,411
Net income	$	256,483

Subsidiaries terminated

In the fourth quarter of 2009, due to the cessation of print business, content production business and strategic partnership with Shanghai Camera Media Investment Co., Ltd., the historical operating results of EconWorld Media Limited and its subsidiaries (collectively “EconWorld Media”), Beijing Century Media Culture Co., Ltd. and its subsidiaries (collectively, “Beijing Century Media”), Upper Step Holdings Limited and its subsidiaries (collectively, “Upper Step”), Beijing Perspective Orient Movie and Television Intermediary Co., Ltd. and its subsidiaries (collectively, “Beijing Perspective”) and Small World are reported as part of “discontinued operations” for all periods presented in the accompanying condensed consolidated statement of operations.

Selected operating results for the discontinued business are presented in the following table:

	Year Ended			Year Ended			Year Ended
	December 31, 2007			December 31, 2008			December 31, 2009
	(In U.S. dollars, except for share data)
Net revenues		51,360,580			64,544,449			41,429,034
Income (loss) from discontinued operations before current income tax expense (1)		7,243,647			(65,648,657	)		(122,430,930	)
(Benefit) provision for income tax		(12,896,254	)		626,080			(22,135,390	)
Income (loss) from discontinued operations, net of taxes		20,139,901			(66,274,737	)		(100,295,540	)

(1) Included in 2009 loss from discontinued operations was a net gain on disposal of subsidiaries of $3,872,583.

7. Loss on disposal of Convey

On December 31, 2008, the Company entered into an agreement with Pariya Holdings Limited (“Pariya”), the original selling shareholders of Convey where the Company purchased Convey in 2007, for the sales of 85% of its 100% equity investment in Convey. Under the agreement, the total consideration for the assets transferred was $85,000,000. The disposition was completed on December 31, 2008 and a loss of $4,720,705 on such disposition was recognized by the Company for the year ended December 31, 2008.

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Xinhua Sports & Entertainment Limited

The carrying amounts of the major classes of assets and liabilities of Convey at December 31, 2008 were as follows:

Total assets	$	91,147,876
Total liabilities	$	(8,872,513	)
Net assets	$	82,275,363
Other investment (15% interests retained)		(12,341,305	)
Net assets disposed (85% equity interest)	$	69,934,058

Revenue and net income of Convey, before intercompany eliminations, for the year ended 31 December, 2008 is as follows:

Net revenue	$	21,598,870
Net income	$	6,462,136

The disposition of Convey was completed on December 31, 2008, and did not meet the definition of discontinued operations since the Company still has the line of business Convey was in and the Company had continuing involvement in Convey.

In connection with the 2007 Convey purchase agreement, as of December 31, 2008, there was consideration payable balance of $20,000,000, which remained outstanding as of December 31, 2009. In addition, in 2008, the Company incurred additional earn-out consideration payable to Pariya of $10,640,000, $5,640,000 of which was paid in January 2009, and the remaining $5 million was recorded as a reduction to consideration receivables in relation to the sales agreement with Pariya (see below discussion).

According to the sales agreement with Pariya, the consideration receivables by the Company are in seven installments in which the first six installments, $45,640,000, were scheduled to be settled in 2009 and the last installment, $34,360,000, will be settled in 2012. The non-current portion of consideration receivable was discounted to its present value of approximately $27.3 million as of December 31, 2009.

As of December 31, 2009, the current portion of consideration receivable of $45,640,000 was overdue. Due to the uncertain in collectability, provision of $25,640,000 was made to reduce the current consideration receivable to the amount equal to the consideration payable of $20 million.

As of December 31, 2009, the total consideration receivables (current and non-current) from Pariya were $47.3 million and the consideration payable to Pariya remained $20.0 million.

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Xinhua Sports & Entertainment Limited

8. Accounts receivable, net of allowance for doubtful debts

	At December 31, 2008			At December 31, 2009
Accounts receivable	$	53,932,569		$	26,414,114
Less: Allowance for doubtful debts		(9,169,667	)		(8,095,013	)
Total	$	44,762,902		$	18,319,101

	2007		2008			2009
Movements in allowance for doubtful debts
Balance at the beginning of the year	$	—	$	301,217		$	9,169,667
Add: Amount charged to expenses		301,217		10,427,114			11,235,937
Exchange rate difference		—		97,244			(12,484	)
Less: Write-off of allowance for doubtful debts		—		(601,054	)		(8,974,631	)
Recovery of the provision		—		—			(3,282,163	)
Reclassified to assets held for sale		—		—			(41,313	)
Disposal of subsidiaries		—		(1,054,854	)		—
Balance at the end of the year	$	301,217	$	9,169,667		$	8,095,013

9. Cost method investment

The Company uses the cost method of accounting to record its investment since the Company does not have the ability to exercise significant influence over the operating and financial policies. The Company periodically reviews the investment of other-than-temporary impairment. The Company measures its cost method investment at fair value when they are deemed to be other-than-temporarily impaired. The fair values of the Company’s investments are determined based on valuation techniques using the best information available. An impairment charge is recorded when the cost of the investment exceeds its fair value and this condition is determined to be other than temporary.

The cost method investment as of December 31, 2008 and 2009 consisted of the following:

	At December 31, 2008		At December 31, 2009
Investment in Convey	$	11,508,239	$	11,508,239
Investment in ASN		2,000,000		—
Total	$	13,508,239	$	11,508,239

As of December 31, 2008, the Company’s investment represented 15.5% equity interest in ASN Holdings Limited (“ASN”) of $2,000,000 and 15% equity interest in Convey of $11,508,239. As of December 31, 2009, the Company’s investment represented 15% equity interest in Convey of $11,508,239.

ASN is a company incorporated in the BVI and is intended to be engaged in investment holding and distribution of sports program. The investment of ASN was accounted for as a cost method investment.

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Xinhua Sports & Entertainment Limited

Convey was incorporated in the BVI under the laws of the BVI on June 6, 2007 and it is principally engaged in outdoor advertising. The Company acquired 100% equity interest of Convey on July 2, 2007 and disposed of 85% of its equity on December 31, 2008. The remaining 15% equity interest of Convey was then accounted for as a cost method investment.

The fair values of the equity interest of the cost method investments were developed through the application of the income approach technique known as the discounted cash flow method. Under this method, value depends on the present worth of future economic benefits to be derived from the projected net income and is developed by discounting projected future net cash flows available to its present worth. The fair value was determined using models with significant unobservable inputs (level 3), including but not limited to financial forecast, projection in capital expenditure, terminal value, discount rate and required return on equity capital. Impairment loss is recorded when the decline of its fair value measured on a nonrecurring basis below its carrying amount determined to be other than temporary, which involves judgment as to the severity and duration of the decline below fair value.

For the year ended December 31, 2008, the Company recognized an impairment loss of $833,066 based on estimation of future cash flows of Convey and a full impairment $500,000 for 19% equity interest in Hyperlink E-data International Limited, which was intended to be engaged in market research online business.

For the year ended December 31, 2009, based on the estimated fair value of the equity interest in ASN, full impairment charge of $2,000,000 was recognized for the investment in ASN.

The investment in Convey as of December 31, 2009, measured at fair value on a nonrecurring basis, was not impaired since the estimated fair value was more than its carrying amount.

10. Television program and film right, net

Television program and film right, net consisted of the following:

	At December 31, 2008		At December 31, 2009
Television program and film right		—	$	19,874,965
Less: Accumulated amortization		—		1,323,253
Less: Impairment loss		—		14,192,291
Television program and film right, net		—	$	4,359,421

Television program and film rights are amortized on a straight-line basis over their estimated useful lives. Amortization expenses were 1,322,981 for the year ended December 31, 2009. Television program and film right of $14,192,291 were impaired in 2009 due to the estimated decreasing future cash flow from advertisements. Refer to Note 5, Impairments, for more details.

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Xinhua Sports & Entertainment Limited

11. Other current assets

Other current assets consisted of the following:

	At December 31, 2008		At December 31, 2009
Advances to employees	$	1,225,066	$	347,826
Rent deposits		471,978		542,561
Interest income receivable		245,784		183,677
Advance to third party		—		1,900,000
Others		2,316,228		1,044,064
Total	$	4,259,056	$	4,018,128

Advances to employees are non-interest bearing and are due on the Company’s demand. Advance to third party represented amount to a third party which is non-interest bearing and is due on the Company’s demand.

12. Deposit for investment

On October 9, 2008, the Company entered into a purchase agreement with Prime Day Management Limited, (“Prime Day”), and certain other parties to acquire a 100% equity interest in Starease Limited, a company incorporated under the laws of BVI (which, together with its subsidiaries and associated company, Starease Group) at consideration of $15,000,000 in cash and 2,000,000 in XSEL Class A common shares. Starease Group has interest in operating four digital pay channels in the PRC. As of December 31, 2008, the Company has paid a deposit of $10,000,000 and advance of $4,174,566 to Prime Day and Starease Group, respectively, pursuant to the purchase agreement. As of December 31, 2009, the Company has paid a deposit of $11,100,000 and advance of $5,272,089 to Prime Day and Starease Group, respectively, pursuant to the purchase agreement. The Company also agreed to establish a joint venture with Starease Group for the operation of these four cable pay channels. In 2009, the Company and Prime Day Management established a high definition digital television channel. However, the government approval for repositioning of those four digital pay channels and establishment of the joint venture has not been obtained and the acquisition has not yet been completed. As of December 31, 2009, if or when the acquisition is completed, the Company has a commitment to pay $3,900,000 and issue 2,000,000 XSEL’s common shares under this purchase agreement.

13. Property and equipment, net

Property and equipment, net consisted of the following:

	At December 31, 2008		At December 31, 2009
Leasehold improvements	$	2,003,777	$	1,538,264
Billboards and lampposts		2,749,421		3,133,391
Furniture, fixtures and equipment		7,925,794		6,581,671
Motor vehicles		696,387		465,754
Total		13,375,379		11,719,080
Less: Impairment loss		2,438,818		4,635,398
Accumulated depreciation and amortization		4,499,074		5,195,798
Total		6,437,487		1,887,884
Construction in progress		153,303		109,184
Property and equipment, net	$	6,590,790	$	1,997,068

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Xinhua Sports & Entertainment Limited

Depreciation and amortization expense was $1,772,825 (including $730,492 from continued operation and $1,042,333 from discontinued operation), $2,813,730 (including $1,430,533 from continued operation and $1,383,197 from discontinued operation) and $2,209,439 (including $968,938 from continued operation and $1,240,501 from discontinued operation) for the years ended December 31, 2007, 2008 and 2009, respectively. For impairment on property and equipment, refer to Note 5, Impairments, for more details.

14. License Agreements, Exclusive Advertising Agreement, and Other Intangible Assets

(a) License agreement in Upper Step

	At December 31, 2008		At December 31, 2009
— License agreement	$	38,834,305	$	38,834,305
— Television advertising services contract		71,926,980		71,915,965
		110,761,285		110,750,270
Less: Accumulated amortization
License agreements in Upper Step
— License agreement		2,970,461		4,359,541
— Television advertising services contract		8,642,807		13,017,075
		11,613,268		17,376,616
Less: Impairment loss
License agreements in Upper Step
— License agreement		—		34,474,764
— Television advertising services contract		—		12,461,652
		—		46,936,416
Less: license rights under Television advertising service contract due to early termination of contract (1)		—		46,437,238
License agreements in Upper Step, net	$	99,148,017	$	—

(1) As of December 31, 2009, due to the impact of the release of Rule61 in October 2009 by the State Administration of Radio, Film and Television, which substantially cuts the time allowed for brand advertisements in each hour and the amount of time allotted for infomercials, Upper step terminated its advertising services contract with Inner Mongolia Television Station. Both the license rights under the Television advertising services contracts and associated liabilities were reduced, which resulted in a loss of $4.5 million due to the termination of the license contract. The loss was recorded as part of the net gain (loss) on disposal of subsidiaries in discontinued operations.

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Xinhua Sports & Entertainment Limited

(b) License agreement in Everfame

License agreement in Everfame	$	—	$	93,444,842
Less: Accumulated amortization		—		11,320,080
Less: Impairment loss		—		62,826,470
License agreement in Everfame, net	$	—	$	19,298,292

This license agreement represents exclusive licensing and advertising rights in association with acquisition of Everfame in 2009. Refer to Note 4, Acquisitions, for more details.

(c) Exclusive advertising agreement in Economic observer advertising

Exclusive advertising agreement in Economic Observer Advertising	$	77,922,407	$	77,967,856
Less: Accumulated amortization		3,655,191		5,202,247
Less: Impairment loss		—		35,369,044
Less: Relass to assets held for sale(2)		—		37,396,565
	$	74,267,216	$	—

(2) As of December 31, 2009, as a result of the planned sale of Economic Observer Advertising, the exclusive advertising agreement of Economic Observer was reclassified as part of assets held for sale.

(d) Other intangible assets

Other intangible assets, net consisted of the following:

Advertising agency right	$	8,590,721	$	4,333,110
Backlog order		340,089		340,089
Customer base		16,663,921		10,577,092
Distribution network		203,769		196,069
Exclusive advertising agreement		11,845,287		10,420,260
License rights (3)		9,373,959		5,985,456
Noncompete agreements		5,619,660		4,171,154
Publishing title		189,354		80,270
Radio advertising agency rights		11,920,134		—
Research customer relationship		405,548		—
Trademark		4,220,142		3,761,732
Others (4)		4,907,042		7,066,731
Total cost of other intangible assets		74,279,626		46,931,963
Less: Accumulated amortization
Advertising agency right	$	2,366,251	$	2,337,920
Backlog order		340,089		340,089
Customer base		6,367,502		7,433,138
Distribution network		45,311		83,802
Exclusive advertising agreement		641,394		966,434
License rights		4,240,604		5,150,962
Noncompete agreements		2,709,330		2,895,032
Publishing title		80,270		80,270
Radio advertising agency rights		3,171,750		—
Research customer relationship		241,673		—
Trademark		528,154		840,231
Others		871,853		1,519,637
Total accumulated amortization		21,604,181		21,647,515
Less: Impairment loss		25,562,095		25,284,448
Other intangible assets, net	$	27,113,350	$	—

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Xinhua Sports & Entertainment Limited

(3)	Included in the license rights were 4,000,000 common shares issued in 2009 in relation to the acquisition of China Youth Net license rights.
(4)	Included in the balance of other intangible assets as of December 31, 2008 and 2009 are trademarks of $1,584,000 and $0, respectively, with indefinite life and not subject to amortization. Impairment loss of $457,000 and $1,584,000 is recognized for these intangible assets for the year ended December 31, 2008 and 2009, respectively. Refer to Note 5, Impairments, for more details.

Amortization expense of intangible assets was $14,622,199 (including $4,831,997 from continued operation and $9,790,202 from discontinued operation), $19,762,310 (including $9,339,513 from continued operation and $10,422,797 from discontinued operation) and $23,381,606 (including $15,703,173 from continued operation and $7,678,433 from discontinued operation and) for the years ended December 31, 2007, 2008 and 2009, respectively.

For impairments on the license agreement, exclusive advertising agreements, and other intangible assets, refer to Note 5, Impairments, for more details.

15. Goodwill

The changes in the carrying amount of goodwill in each of the segments are as follows:

2009	Print			Advertising			Broadcasting			Total
Gross amount
Beginning balance	$	6,566,376		$	163,416,551		$	57,850,888		$	227,833,815
Finalization of earnout consideration (1)		—			30,740,543			6,933,094			37,673,637
Goodwill acquired during acquisition		—			—			11,779,633			11,779,633
Modification due to finalization of purchase price allocation		—			—			(1,742,676	)		(1,742,676	)
Write-off related to disposal of subsidiaries		—			(4,303,824	)		—			(4,303,824	)
Ending balance		6,566,376			189,853,270			74,820,939			271,240,585
Accumulated impairment loss (2):
Beginning balance		(6,566,376	)		(128,113,244	)		(46,161,471	)		(180,841,091	)
Charge for the year		—			(61,435,104	)		(21,726,374	)		(83,161,478	)
Ending balance		(6,566,376	)		(189,548,348	)		(67,887,845	)		(264,002,569	)
Goodwill, net	$	—		$	304,922		$	6,933,094		$	7,238,016

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Xinhua Sports & Entertainment Limited

2008	Print			Advertising			Broadcasting			Total
Gross amount
Beginning balance	$	6,566,376		$	135,531,566		$	38,027,546		$	180,125,488
Finalization of earnout consideration (1)		—			86,751,419			20,562,708			107,314,127
Modification due to finalization of purchase price allocation		—			(148,332	)		(739,366	)		(887,698	)
Write-off related to disposal of subsidiaries		—			(58,718,102	)		—			(58,718,102	)
Ending balance		6,566,376			163,416,551			57,850,888			227,833,815
Accumulated impairment loss (2):
Beginning balance		—			—			—			—
Charge for the year		(6,566,376	)		(128,113,244	)		(46,161,471	)		(180,841,091	)
Ending balance		(6,566,376	)		(128,113,244	)		(46,161,471	)		(180,841,091	)
Goodwill, net	$	—		$	35,303,307		$	11,689,417		$	46,992,724

(1)	The amount represents the contingent consideration (earn-out) recognized during the year when the contingency was resolved. For details of contingent consideration finalized during 2008 and 2009, please refer to Note 18, Consideration payable.
(2)	Refer to Note 5, Impairments, for more details.

16. Principal protected note

In October 2007, the Company acquired a $25.0 million unsecured principal protected note (the “Principal Protected Note”) issued by Lehman Brothers Holdings Inc., (“Lehman Brothers”) from UBS Financial Service, Inc. and matured on January 30, 2009 (the “Maturity Date”). On the Maturity Date, the Principal Protected Note will be redeemed at 100% plus a variable amount based on the performance of the FTSE/Xinhua China 25 Index. The unrealized loss of $90,076 was charged to other expenses in the consolidated statement of operations during the year ended December 31, 2007. In July 2008, the Company borrowed $14.0 million from UBS AG using the Principal Protected Note as collateral. In September 2008, Lehman Brother filed for bankruptcy, and after the Company refused to post additional collateral for the loan, USB AG filed a demand for arbitration with American Arbitration Association against the Company seeking repayment of the loan on September 25, 2008. On October 28, 2008, the Company filed its defense to the demand as well as a cross claim against UBS Financial Services, Inc, for an amount excess of $25.0 million. Due to the bankruptcy of Lehman Brothers, the Company was of the view that the Principal Protected Note cannot be recovered and was considered other than temporarily impaired, and full provision of $24,909,929 has been taken against the carrying value of the Principal Protected Note as of December 31, 2008. On October 1, 2009, the Company settled this dispute with UBS Financial Services and UBS AG. All claims have been discharged. The Company recorded for the year ended December 31, 2009 a net gain of $13.5 million in relation to the settlement.

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Xinhua Sports & Entertainment Limited

On January 1, 2009 the Company adopted an authoritative pronouncement which requires that an entity separates the amount of the other than temporary impairment into the amount that is credit related (credit loss component) and the amount due to all other factors. The credit loss component is recognized in earnings, which represents the difference between a security’s amortized cost basis and the discounted present value of expected future cash flows. The amount due to other factors is recognized in other comprehensive income if the entity neither intends to sell and will not more likely than not be required to sell the security before recovery. The difference between the amortized cost basis and the cash flows expected to be collected is accreted as interest income. Because the other than temporary impairment recognized in 2008 of $24,909,929 was all attributable to credit loss, the adoption of the new guidance did not result in a cumulative-effect adjustment as of January 1, 2009.

17. Accrued expenses and other payables

Accrued expenses and other payables consisted of the following:

	At December 31, 2008		At December 31, 2009
Accrued salary and welfare	$	2,771,726	$	2,944,700
Other taxes payable		4,397,486		2,874,997
Payables for television program and film right		—		2,910,768
Receipt in advance		3,357,461		714,956
Deferred revenue		595,871		148,361
Audit and audit related fees		1,789,117		1,404,149
Short term loan payables		—		1,887,684
Other		7,493,983		5,459,599
Total	$	20,405,644	$	18,345,214

18. Consideration payable

							JCBN			Profitown
(U.S. dollars in millions)	SSMS			XFA(1)			China			Group			Convey			M-in Group			Others(2)			Total
Balance as at January 1, 2008		—			—			0.9			—			—			0.5			1.2			2.6
Contingent consideration recognized for the year		5.4			35.4			0.1			1.4			40.0			11.8			11.5			105.6
Finalization of purchase price allocation		1.3			—			—			—			—			—			—			1.3
Cash payment for the year		(6.7	)		—			(1.0	)		—			(20.0	)		(7.1	)		(0.9	)		(35.7	)
Share issuance for the year		—			—			—			—			—			(4.7	)		(0.2	)		(4.9	)
Cash payment by XFL		—			(17.7	)		—			—			—			—			(6.1	)		(23.8	)
Share issuance by XFL		—			(17.7	)		—			—			—			—			(5.5	)		(23.2	)
Balance as at January 1, 2009		—			—			—			1.4			20.0			0.5			—			21.9
Contingent consideration recognized for the year		7.4			—			23.0			0.3			5.6			6.9			—			43.2
Payment for the year		(5.4	)		—			(9.1	)		—			(5.6	)		(6.2	)		—			(26.3	)
Share issuance for the year		—			—			(9.2	)		(0.7	)		—			—			—			(9.9	)
Balance as at December 31, 2009		2.0			—			4.7			1.0			20.0			1.2			—			28.9

(1) XSEL Advertising Ltd, its subsidiaries and VIEs are collectively referred to as XFA.

(2) Others include Hyperlink, Singshine Communication, Century Media Advertising and Beijing Perspective. Hyperlink, Singshine Communication and Century Media Advertising were disposed in 2009 and Beijing Perspective was reclassified to discontinued operation as of December 31, 2009. Refer to Note 6, Discontinued operations, for more details.

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Xinhua Sports & Entertainment Limited

19. Long term obligations under licensing agreements

	At December 31, 2008		At December 31, 2009
Long term obligations, current portion	$	10,363,762	$	9,923,802
Long term obligations, non-current portion		68,305,496		64,062,756
Total	$	78,669,258	$	73,986,558

The long term obligations as of December 31, 2009 represent the outstanding consideration for the acquisition of exclusive operating right in Everfame and exclusive advertising agreement in XFA and XSEL which are non-interest bearing and have repayment terms ranging from 2 to 20 years with fixed monthly or annual payments. The long term obligations as of December 31, 2008 represented the outstanding consideration for the acquisition of license agreement and exclusive advertising agreements in Economic Observer Advertising, advertising services agreement in Upper Step and exclusive advertising agreement in Singshine Communication and XFA which were non-interest bearing and have repayment terms ranging from 5 to 50 years with fixed monthly or annual payments.

The obligation was accordingly discounted at an effective interest rate of 8% per annum. Such imputed interest included in the consolidated statement of operations for the years ended December 31, 2007, 2008 and 2009 amounted to $4,496,020, $5,045,122 and $9,032,773, respectively.

The schedule of principal payments of long term obligations as of December 31, 2009 was as follows:

2010	$	9,923,802
2011		12,506,892
2012		15,180,369
2013		17,527,385
2014		17,405,131
After 2014		1,442,979
Total	$	73,986,558
Less: current portion		9,923,802
Non-current portion	$	64,062,756

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Xinhua Sports & Entertainment Limited

20. Bank borrowings

The bank borrowings as of December 31, 2008 and 2009 were secured by bank deposits of approximately $37.5 million and $35.9 million, respectively.

The bank borrowings as of December 31, 2009 carried interest ranging from 4.78% to 5.31% per annum and had repayment terms ranging from 6 months to 1 year. The bank borrowings as of December 31, 2008 carried interest ranging from 3.61% to 6.72% per annum and had repayment terms ranging from 6 months to 1 year.

21. Convertible securities

(a) Redeemable convertible preferred shares

(i) On March 16, 2006, XSEL entered into an agreement with one of XFL’s shareholders and sold 16,404,926 of XSEL’s redeemable convertible preferred shares (“Preferred Share(s)”) for $60,000,000. The cash proceeds were used primarily to acquire the equity interest of certain subsidiaries and affiliates. Upon completion of the initial public offering of the Company in March 2007, each Preferred Share was automatically converted into one Class A common share. The number of Class A common shares that have been issued upon conversion of all Preferred Shares was 15,585,254. Accordingly, no Preferred Shares were outstanding as of December 31, 2007.

(ii) On February 18, 2008, the Company entered into an agreement with a shareholder, Yucaipa Global Partnership Fund L.P., and sold 300,000 redeemable convertible preferred shares (“Series B Preferred Shares” or “the Shares”) recorded in mezzanine equity of each at a stated value (the “Stated Value”) of $100 per share for $30,000,000 with transaction cost of approximately $794,000. The cash proceeds were used primarily to finance the business growth and expansion in China.

The key terms of the Convertible Redeemable Preferred Shares are as follows:

Dividends. The holders of Series B Preferred Shares are entitled to receive quarterly cumulative dividends at a rate equal to the higher of (i) 8% per annum and (ii) the aggregate amount of dividends declared during the applicable fiscal quarter on the number of Class A common shares into which Series B Preferred Shares were convertible when such dividends were declared. The dividends are payable in cash or stock at XSEL’s option. Dividends of $2,000,000 and $2,560,000 were declared for the Series B Preferred Shares in 2008 and 2009, respectively.

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Xinhua Sports & Entertainment Limited

Conversion. Series B Preferred Shares are convertible into Conversion Shares, defined as any Class A common shares issued upon conversion of any of the Shares or Series B Preferred Shares issued as payment-in-kind dividends pursuant to the authorizing resolution, at any time and from time to time after the earlier of either (i) one year after the Closing Date, defined as the date on which the issuance, purchase and sale of the Shares, or (ii) the occurrence of any of realization events as defined in the share subscription agreement, without the payment of additional consideration, any Series B Preferred Shares holder shall have the right, at its option, to convert, all or any portion of Series B Preferred Shares held by it into Conversion Shares at the then applicable conversion rate (the “Conversion Rate”). The Conversion Rate at any time shall be determined by dividing an amount equal to the sum of (x) the Stated Value per share plus (y) the amount of any accrued preferred dividends per share then remaining unpaid on each Series B Preferred Share being converted by the then applicable Conversion Price per share. The “Conversion Price” shall initially be equal to the US$3.00 per share, but shall be subject to adjustment from time to time based on certain anti-dilution adjustment.

Realization events. Realization event shall mean any of (a) any change in control of the Company which will occur (i) if any person or group, other than XFL and its affiliates, shall acquire, take control of (whether by merger, consolidation, sale or otherwise, in one transaction or in a related series of transactions) or otherwise beneficially own voting securities of the Company (or any successor entity in a merger or consolidation involving the Company) representing more than 35% of the total voting power of all outstanding voting shares of the Company unless XFL and its affiliates then beneficially own voting shares of the Company representing a higher percentage of the voting power of all such outstanding voting shares of the Company (or such successor entity) or (ii) any person or group, other than XFL and its affiliates, shall obtain the ability to control the Company, (b) any substantial asset sale, (c) any consolidation or merger (other than a reincorporation transaction) or acquisition or sale of voting shares of the Company resulting in the holders of the issued and outstanding voting shares of the Company immediately prior to such transaction beneficially owning or controlling less than a majority of the voting shares of the continuing or surviving entity immediately following such transaction or (d) any tender offer, exchange offer or repurchase offer for more than fifty percent (50%) of the outstanding common shares.

Redemption. Upon the occurrence of any of realization events as defined in the share subscription agreement, without the payment of additional consideration thereof, the holder of Series B Preferred Shares shall have the right to redeem Series B Preferred Shares at a redemption price equal to the greater of (x) the sum of (i) the Stated Value of such shares plus (ii) any accrued but unpaid dividends on such shares and (y) the fair market value of each redeemable shares as of the redemption date.

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Xinhua Sports & Entertainment Limited

Voting rights. Each Series B Preferred Share shall entitle the holder to such number of votes equal to the number of common shares into which such Series B Preferred Shares are then convertible.

Liquidation preference. In the event of any liquidation, dissolution or winding up of the Company, of any distribution of assets to its shareholders, either voluntary or involuntary, each Series B Preferred Share holder shall be entitled to receive for each of its Series B Preferred Share, out of any lawfully available assets of the Company, in preference to the holders of common shares and any other preferred shares, an amount equal to the greater of (x) the sum of (i) two times the Stated Value plus (ii) any accrued but unpaid dividends and (y) the liquidation value attributable to the Conversion Shares into which such Series B Preferred Shares are then convertible.

There were 314,000 and 345,600 Series B Preferred Shares outstanding as of December 31, 2008 and 2009, respectively. Of which 14,000 and 31,600 Series B Preferred Shares were issued during the year ended December 31, 2008 and 2009, respectively, as dividends in kind.

(b) Convertible loan

On October 21, 2008 (the “Convertible Loan Closing Date”), XSEL has entered into a secured convertible loan facility for up to $80 million with affiliates (collectively, the “Investors”) of Patriarch, a global investment firm based in New York and currently a shareholder of XSEL. The funds were used to finance its expansion in its broadcast business, with a focus on sports. The facility is for a term of four years, and is secured by certain television assets of the Company with carrying value as of December 31, 2008 and 2009 approximately $7,956,000 and $0, respectively. As of December 31, 2008 and 2009, the Company has drawn $33.2 million and $57.8 million through this loan facility (the “Convertible Loan”). The capitalized transaction cost was $1,929,216 and $943,578 for the year ended December 31, 2008 and 2009, respectively. Amortization expenses on capitalized transaction cost, commitment fee and interest expenses, including imputed interest expenses, were $708,362 and $6,492,454 for the year ended December 31, 2008 and 2009, respectively.

The key terms of the Convertible Loan are as follows:

Maturity date. The maturity date is the earlier of (i) October 21, 2012 and (ii) the date that the loan shall become due and payable in full hereunder, whether by acceleration or otherwise.

Interest. Interest is payable monthly at LIBOR plus 6%. Due to violation of financial covenant in the third quarter of 2009, the interest rate has been increased to LIBOR plus 7% since November 9, 2009 according to second amendment to credit agreement.

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Xinhua Sports & Entertainment Limited

Conversion. The sum of the outstanding principal amount plus all accrued and unpaid interest shall convert into Class A common shares at the Conversion Price (as defined below) at any time after the first anniversary of the Convertible Loan Closing Date. The Convertible Loan is convertible into Class A common share after one year at a conversion price of $1.12 per share. The conversion price will be increased to $1.37 per share after the second year and to $1.62 per share after the third year that the facility is outstanding. The conversion price is subject to adjustment upon certain events such as stock issuances below conversion price or market price, dividend or split, combinations, distributions of capital stock, indebtedness or other non-cash assets, distributions of cash, purchases of common shares by tender offer.

Optional prepayment. The Company may voluntarily prepay the Convertible Loan at any time except (i) at any time during the first year following the Closing Date or (ii) after the first year following the Closing Date, if the current market price of the Class A common share is less than 110% of the then applicable Conversion Price.

Mandatory prepayment. The Company is required to prepay the Convertible Loan upon the occurrence of any of (i) Debt or Equity offering and (ii) Change of control.

Financial covenant. The Company shall not permit (i) Consolidated EBITDA or the Interest Coverage Ratio for any of the latest thirteen four-week periods ending on the end of the fiscal quarters set forth below to be less than the amount or ratio set forth opposite such period, and (ii) the Leverage Ratio for any of the latest thirteen four-week periods ending on the end of the fiscal quarters set forth below to be more than the ratio set forth opposite such period.

	Minimum
	Consolidated
	EBITDA				Maximum
	(Dollars in		Minimum Interest		Leverage
Fiscal quarter ending	millions)		Coverage Ratio		Ratio
4th Fiscal Quarter ending in Fiscal Year 2008	$	25.5		3.23		5.03
1st Fiscal Quarter ending in Fiscal Year 2009	$	20.4		3.19		4.79
2nd Fiscal Quarter ending in Fiscal Year 2009	$	20.4		2.48		4.81
3rd Fiscal Quarter ending in Fiscal Year 2009	$	20.5		2.24		4.76
4th Fiscal Quarter ending in Fiscal Year 2009	$	21.1		2.09		4.64
1st Fiscal Quarter ending in Fiscal Year 2010	$	16.8		1.66		5.82
2nd Fiscal Quarter ending in Fiscal Year 2010	$	21.9		2.17		4.46
3rd Fiscal Quarter ending in Fiscal Year 2010	$	27.7		2.74		3.53
4th Fiscal Quarter ending in Fiscal Year 2010	$	34.3		3.40		2.85
1st Fiscal Quarter ending in Fiscal Year 2011	$	22.6		2.24		4.33
2nd Fiscal Quarter ending in Fiscal Year 2011	$	32.0		3.16		3.06
3rd Fiscal Quarter ending in Fiscal Year 2011	$	42.3		4.19		2.31
4th Fiscal Quarter ending in Fiscal Year 2011	$	52.1		5.16		1.88
1st Fiscal Quarter ending in Fiscal Year 2012	$	52.1		5.16		1.88
2nd Fiscal Quarter ending in Fiscal Year 2012	$	52.1		5.16		1.88
3rd Fiscal Quarter ending in Fiscal Year 2012	$	52.1		5.16		1.88

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Xinhua Sports & Entertainment Limited

As of December 31, 2009, the Company did not meet the financial covenants of consolidated EBITDA, Interest Coverage ratio and leverage ratio for the latest thirteen four-week periods ended December 31, 2009, contained in the secured convertible loan facility from Patriarch.

After the adoption of an authoritative guidance with respect to the determination whether an instrument is indexed to an Entity’s own stock, as of January 1, 2009, the conversion option embedded in Convertible Loan was accounted for separately at fair value and changes in fair value are reflected in net income. This authoritative guidance requires accumulated fair value adjustment upon adoption, which was insignificant. The fair value change of the conversion option was recorded in other income in the consolidated statements of operations. Interest expenses of $5,673,717, including imputed interest expense of $1,266,644, was recorded for the year ended December 31, 2009.

The conversion option in convertible loan is classified within Level 2 of the fair value hierarchy as there is model-derived valuation in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. The conversion option is recorded in the liabilities as part of the carrying value of convertible loan. Refer to Note 28, Fair value measurement, for more details.

22. Warrants

In association with the Company’s direct offering in October 2009, the Company granted investors two series of warrants (“Series A Warrants” and “Series B Warrants”) to purchase up to an aggregate of 14,889,703 class A common shares of the Company.

The key terms of Series A Warrants are as follows:

Number of warrants: Series A Warrants to purchase up to 3,860,293 Class A common shares

Initial exercise price: The initial exercise price per Common Share shall be $0.975 and is subject to adjustments for dividend payment, stock split, subsequent equity sales, pro rata distributions and fundamental transaction.

Initial exercise date: At any time on or after April 29, 2010

Termination date: On or prior to the close of business on the five year anniversary of the Initial exercise date

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Xinhua Sports & Entertainment Limited

Cashless exercise: If at the time of exercise there is no effective registration statement registering, the issuance of the common shares to the holder of warrants and there is no effective registration statement covering the resale of the common shares by the holder of warrants, then this warrant may also be exercised, in whole or in part, at such time by cashless exercise.

Exercise limitations: The holder of warrants shall not have the right to exercise any portion of this warrant to the extent that after giving effect to such issuance after exercise, the holder of the warrants (together with the holder’s affiliates, and any other persons acting as a group together with the holder or any of the holder’s Affiliates), would beneficially own in excess of the beneficial ownership limitation (“Series A Warrants Beneficial Ownership Limitation”) which shall be 4.9% of the number of shares of the Common Shares outstanding immediately after giving effect to the issuance of Common Shares issuable upon exercise of this warrant. The holder of the warrant, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Series A Warrants Beneficial Ownership Limitation provisions, provided that the Series A Warrants Beneficial Ownership Limitation in no event exceeds 9.99% of the number of Common Shares outstanding immediately after giving effect to the issuance of Common Shares upon exercise of this Warrant held by the holder.

The key terms of Series B Warrants are as follows:

Number of warrants: Series B warrants to purchase up to 11,029,410 Class A common shares

Initial exercise price: The initial exercise price per Common Share shall be $0.68 and is subject to adjustments for dividend payment, stock split, pro rata distributions, subsequent equity sales, and fundamental transaction.

Initial exercise date: At any time on or after October 29, 2009

Termination date: On or prior to the close of business on the six month from the Initial exercise date

Cashless exercise: If at the time of exercise there is no effective registration statement registering, the issuance of the common shares to the holder of warrants and there is no effective registration statement covering the resale of the common shares by the holder of warrants, then this warrant may also be exercised, in whole or in part, at such time by cashless exercise.

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Xinhua Sports & Entertainment Limited

Exercise limitations: The holder of warrants shall not have the right to exercise any portion of this warrant to the extent that after giving effect to such issuance after exercise, the holder of the warrants (together with the holder’s affiliates, and any other persons acting as a group together with the holder or any of the holder’s Affiliates), would beneficially own in excess of the beneficial ownership limitation (“Series B Warrants Beneficial Ownership Limitation”) which shall be 4.9% of the number of shares of the Common Shares outstanding immediately after giving effect to the issuance of Common Shares issuable upon exercise of this warrant. The holder of the warrant, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Series B Warrants Beneficial Ownership Limitation provisions, provided that the Series B Warrants Beneficial Ownership Limitation in no event exceeds 9.99% of the number of Common Shares outstanding immediately after giving effect to the issuance of Common Shares upon exercise of this Warrant held by the holder.

The warrants represent the Company’s obligations to issue a variable number of the XSEL common A shares. The warrants were not considered indexed to the company’s stock, and were recorded as liabilities at fair value as of the issuance date and subsequently marked to market. The change in fair value of $2,565,000 was recorded in other income in the consolidated statements of operations for the year ended December 31, 2009. The warrants are classified within Level 2 of the fair value hierarchy as there is model-derived valuation in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Refer to Note 28, fair value measurement.

The fair value of the Series A Warrants and Series B Warrants were $0.92 per warrant and $0.37 per warrant, respectively, as at issuance date. The fair value of the Series A Warrants and Series B Warrants were $0.55 per warrant and $0.03 per warrant, respectively, as of December 31, 2009. The fair value was calculated using the Binomial option pricing model. The assumptions used in determining the fair value were as follows:

	As of October 26, 2009						As of December 31, 2009
	Series A Warrant			Series B Warrant			Series A Warrant			Series B Warrant
Expected price volatility		104.54	%		122.10	%		102.25	%		77.57	%
Risk-free interest rate		2.62	%		0.18	%		2.76	%		0.06	%
Contractual life of the warrant	5.51 years			0.51 years			5.33 years			0.33 years
Expected dividends		0	%		0	%		0	%		0	%
Trigger price multiple	2 times			2 times			2 times			2 times

The expected price volatility of the underlying common shares during the life of the warrants was estimated based on the historical stock price volatility of XSEL over a period comparable to the contractual life of the options. The risk free interest rate is based on the yield to maturity of the US Treasury Bond as of the grant date with maturity closest to the warrants’ expiry date.

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Xinhua Sports & Entertainment Limited

Series B warrants to purchase up to 11,029,410 Class A common shares subsequently expired on April 29, 2010.

23. Share based compensation

Share options

Pursuant to a resolution of the directors of XSEL on July 11, 2006, XSEL granted options to employees of the Company for the purchase of 11,727,602 shares in XSEL, subject to vesting requirements. The options entitled the option holders to acquire common shares of XSEL at an exercise price of $0.78 each and vested in the following manner: the first half of options granted vested upon the earlier of the date of the initial public offering and December 31, 2007; the next two quarters vested on December 31, 2008 and December 31, 2009, respectively. The fair value of the share option at grant date was $0.14 for each option. The exercisable period of the option granted to employees on July 11, 2006 is 5 years up to 2011. Pursuant to a resolution passed on December 17, 2008, 400,000 options held by two senior executives became early vested on December 17, 2008, resulting in no incremental compensation cost. The related unrecognized compensation cost of $56,524 was recognized in 2008.

On February 7, 2007, the shareholders of the Company adopted a 2007 share option plan, under which the Company may grant its directors, consultants and employees various types of awards including options to purchase common shares of XSEL, nonvested shares or restricted share units. The maximum aggregate number of shares that may be issued pursuant to all awards is equal to the lesser of (i) 19,530,205 Class A common shares, or (ii) a lesser number of common shares determined by the administrator of the plan. The term of each award under the 2007 share option plan will be specified in the award agreement, but the life of any award may not exceed ten years from the date of grant.

F-57

Xinhua Sports & Entertainment Limited

Pursuant to resolutions of the directors meetings or compensation committee meetings of the Company on April 25, 2007, September 26, 2007, March 7, 2008, April 25, 2008, June 13, 2008, January 8, 2009 and September 23, 2009, the Company granted options to directors and executives of the Company with key terms as follows:

Date of grant

April 25, 2007

September 26, 2007

April 1, 2008

April 30, 2008

June 13, 2008

January 8, 2009

December 31, 2009

Number of options granted

90,000

120,000

400,000

60,000

120,000

1,000,000

160,000

Grantees

3 independent directors

4 independent directors

An executive

2 independent directors

6 independent directors

2 executives

8 independent directors

Weighted average fair value of the options at date of grant

$

1.85

$

1.85

$

0.97

$

1.39

$

0.77

$

0.18

$

0.24

Exercise price

$

6.5

$

4.39

$

1.325

$

1.64

$

1.265

$

0.305

$

0.425

Term of options

May not exceed 10 years from the date of grant

May not exceed 10 years from the date of grant

May not exceed 3.75 years from the date of grant

May not exceed 10 years from the date of grant

May not exceed 10 years from the date of grant

May not exceed 5 years from the date of grant

May not exceed 10 years from the date of grant

Vesting period — one third of total number of options will vest upon each of:

March 8, 2008

September 26, 2008

December 31, 2008

April 30, 2009

June 13, 2008

December 31, 2009

December 31, 2009

March 8, 2009

September 26, 2009

December 31, 2009

April 30, 2010

June 13, 2009

December 31, 2010

December 31, 2010

March 8, 2010

September 26, 2010

December 31, 2010

April 30, 2011

June 13, 2010

December 31, 2011

December 31, 2011

Expiration date of options

April 24, 2017

September 25, 2017

December 31, 2011

April 29, 2018

June 12, 2018

January 7, 2014

December 30, 2019

The above share options expire upon the earlier of (1) immediately upon termination of service with XSEL, (2) 3 months after termination of service with XSEL as a result of voluntary termination, or (3) expiration date of the options. The options can be exercised anytime after the vest date and before expiry.

The fair values were calculated using the Binomial option pricing model. The assumptions used in determining the fair value at the respective date of grants were as follows:

	April 25,			September 26,			April 1,			April 30,			June 13,			January 8,			December 31,
Date of Grant	2007			2007			2008			2008			2008			2009			2009
Exercise price	$	6.5		$	4.39		$	1.325		$	1.64		$	1.265		$	0.305		$	0.425
Expected price volatility		44	%		44	%		89	%		88	%		93	%		74	%		74	%
Contractual life	10 years			10 years			3.75 years			10 years			10 years			5 years			10 years
Risk-free interest rate		4.66	%		4.63	%		2.295	%		3.770	%		4.270	%		1.57	%		3.84	%
Expected dividends		0	%		0	%		0	%		0	%		0	%		0	%		0	%
Trigger price multiple	1.5 times			1.5 times			2 times			2 times			2 times			2 times			2 times

Expected price volatility is derived by referring to the statistical analysis of the weekly share prices of comparable listed companies 3 years prior to the date of granting the option. The risk free interest rate is based on the yield to maturity of the US Treasury Bond as of the grant date with maturity closest to the relevant option expiry date. The trigger price multiple for the exercise of option is assumed to be 1.5 to 2.0 times of exercise price.

F-58

Xinhua Sports & Entertainment Limited

A summary of options under the plan as of December 31, 2007, 2008 and 2009, and changes in the years are presented below:

						Weighted Average
	Number of Share			Weighted-Average		Grant-Date Fair
	Option			Exercise Price		Value
Outstanding as of January 1, 2007		10,698,141		$	0.78	$	0.14
Granted during year 2007		210,000		$	5.29	$	1.85
Forfeited during the year 2007		(351,480	)	$	0.78	$	0.14
Exercised during the year 2007		(2,877,934	)	$	0.78	$	0.14
Outstanding as of December 31, 2007		7,678,727		$	0.90	$	0.19
Exercisable as of December 31, 2007		2,467,556		$	0.78	$	0.14
Outstanding as of January 1, 2008		7,678,727		$	0.90	$	0.19
Granted during year 2008		580,000		$	1.35	$	0.97
Forfeited during the year 2008		(774,402	)	$	0.78	$	0.14
Exercised during the year		(194,662	)	$	0.78	$	0.14
Outstanding as of December 31, 2008		7,289,663		$	0.96	$	0.26
Exercisable as of December 31, 2008		5,986,160		$	0.85	$	0.18
Outstanding as of January 1, 2009		7,289,663		$	0.96	$	0.26
Granted during year 2009		1,160,000		$	0.32	$	0.19
Cancelled during year 2009		(1,362,000	)	$	0.84	$	0.16
Exercised during year 2009		—		$	—	$	—
Outstanding as of December 31, 2009		7,087,663		$	0.87	$	0.26
Vested and expected to be vested as of December 31, 2009		7,086,736		$	0.87	$	0.26
Exercisable as of December 31, 2009		6,057,659		$	0.89	$	0.23

The following table summarizes information with respect to shares options outstanding as of December 31, 2009:

	Options Outstanding								Options Exercisable
					Weighted-								Weighted-
			Weighted-		Average		Weighted-				Weighted-		Average		Weighted-
			Average		Remaining		Average				Average		Remaining		Average
	Number of		Exercise		Contractual		Intrinsic		Number of		Exercise		Contractual		Intrinsic
	Outstanding		Price		Life		Value		Exercisable		Price		Life		Value
Date of grant:
July 11, 2006		5,164,329	$	0.78		1.5	$	—		5,164,329	$	0.78		1.5	$	—
April 25, 2007		90,000	$	6.50		7.3	$	—		60,000	$	6.50		7.3	$	—
September 26, 2007		100,000	$	4.39		7.7	$	—		80,000	$	4.39		7.7	$	—
April 1, 2008		400,000	$	1.33		2.0	$	—		266,666	$	1.33		2.0	$	—
April 30, 2008		60,000	$	1.64		8.3	$	—		20,000	$	1.64		8.3	$	—
June 13, 2008		113,334	$	1.27		8.5	$	—		80,004	$	1.27		8.5	$	—
January 8, 2009		1,000,000	$	0.31		4.0	$	—		333,332	$	0.31		4.0	$	—
December 31, 2009		160,000	$	0.43		10.0	$	—		53,328	$	0.43		10.0	$	—
		7,087,663	$	0.87		2.4	$	—		6,057,659	$	0.89		2.0	$	—

During the years ended December 31, 2007, 2008 and 2009, compensation expenses of $609,868, $670,590 and $302,611 were recognized and included in administrative expenses from continuing operations, respectively. There was no stock-based compensation expense recorded for discontinued operations. The total amount of cash received from exercise of share option was $151,836 and $0 for the years ended December 31, 2008 and 2009, respectively. The total intrinsic value of shares exercised during the years ended December 31, 2007 and 2008 was $9,002,000 and $171,993 respectively. There were no options exercised during 2009. As of December 31, 2009, the Company’s unrecognized share-based compensation costs related to share options totaled $192,801which is expected to be recognized over a weighted-average vesting period of 1.3 years.

F-59

Xinhua Sports & Entertainment Limited

Restricted share units

Pursuant to a resolution of the directors of XSEL on January 23, 2008, XSEL granted restricted share units to certain directors and employees of the Company for 5,536,000 shares in XSEL, subject to vesting requirements. The restricted share units will expire immediately upon termination of service with XSEL. The shares vested over three year period from March 31, 2008 to March 31, 2010.

The fair value of restricted share units was determined as $2.24 per share, based on the closing market price of the Company at the grant date, together with the adjustment on the marketability discount. Marketability discount was deducted from the downside risk arising from the holders’ inability to sell the restricted share units in the public market. The compensation expense was calculated based on the fair value on the date of grant.

Pursuant to a resolution of Compensation Committee of the Board of Directors passed on December 17, 2008, 1,084,000 restricted share units held by three directors became early vested on December 17, 2008, resulting in no incremental compensation expense and the related unrecognized compensation expense of $767,141 was recognized in 2008.

In addition, pursuant to resolutions of the compensation committee meeting of the Company on June 23, 2009, July 11, 2009 and December 7, 2009, the Company granted 180,000 shares, 250,000 shares and 800,000 shares in XSEL to some directors of the Company, not subject to vesting requirements.

A summary of restricted share units as of December 31, 2008 and 2009 and changes in the period is presented below:

				Weighted-Average
				Grant-Date
	Number of Shares			Fair Value
Outstanding as of January 1, 2008		—			—
Granted during year 2008		5,536,000			2.24
Vested during year 2008		(2,946,400	)		2.24
Forfeited during year 2008		(578,800	)		2.24
Outstanding as of December 31, 2008		2,010,800			2.24
Granted during year 2009		1,230,000			0.49
Vested during year 2009		(2,207,800	)		1.27
Cancelled during year 2009		(247,200	)		2.24
Outstanding as of December 31, 2009		785,800			2.24

These restricted share units are subject to transfer restrictions and do not have any voting rights, entitlement of dividends, rights to the surplus assets of the Company in the event of a winding-up or reorganization of the Company and generally all of the rights attached to common shares until they are vested.

F-60

Xinhua Sports & Entertainment Limited

The Company recorded compensation expense of $8,690,792 and $2,111,272 in administrative expenses from continuing operations for the year ended December 31, 2008 and 2009, respectively. There were no stock-based compensation expenses recorded for discontinued operations. The intrinsic value of shares vested for the year ended December 31, 2008 and 2009 are $3,262,372 and $860,578, respectively. As of December 31, 2009, unrecognized share-based compensation related to restricted share units totaled $264,126 which is expected to be recognized over the remaining vesting period of 3 months.

Nonvested shares

In June 2006, XSEL granted 11,050,000 Class A common shares of $0.001 each (“Nonvested Shares”) to a director, Ms. Fredy Bush as fully paid shares at par and the fair value of Nonvested Shares is $0.6 which was determined based on a valuation made by an independent appraiser. The nonvested Shares were subject to a 5-year vesting period and one-fifth of the total Non-vested Shares granted become vested on each of the annual anniversary dates after the date of grant.

Pursuant to the board resolutions passed on March 7, 2007, January 22, 2008, and December 17, 2008, 1,500,000, 725,000, 2,170,000, and the remaining 6,655,000 nonvested shares were early vested on March 9, 2007, January 22, 2008, June 13, 2008, and December 17, 2008, respectively. These modifications resulted in no incremental compensation cost.

A summary of nonvested shares as of December 31, 2007, 2008 and 2009 and changes in the corresponding periods are presented below:

	Number of Nonvested
	Shares
Outstanding as of January 1, 2007		11,050,000
Vested during year 2007		(1,500,000	)
Outstanding as of December 31, 2007		9,550,000
Vested during year 2008		(9,550,000	)
Outstanding as of December 31, 2008		—
Vested during year 2009		—
Outstanding as of December 31, 2009		—

Accordingly, the Company recorded compensation expense of $2,001,856, $2,961,762 and $0 in administrative expenses from continuing operations for the years ended December 31, 2007, 2008 and 2009, respectively. The intrinsic value of shares vested for the year ended December 31, 2007 and 2008 are $8,512,500 and $6,464,775, respectively.

Warrants

Pursuant to a resolution of the directors of XSEL on January 15, 2007, XSEL granted warrants to an employee of the Company for the purchases of 221,280 Class A common shares in XSEL. The warrants entitle the warrant holder to acquire common A shares of XSEL at an exercise price of $5.00 each. The related compensation expenses of $459,849, which was determined based on the fair value of the warrants on the grant date, was fully recognized in administrative expenses for the year ended December 31, 2007. The warrants expired on January 15, 2008 without being exercised.

F-61

Xinhua Sports & Entertainment Limited

The fair value of the warrants was $2.08 per warrant. The fair value was calculated using the Binomial option pricing model. The assumptions used in determining the fair value were as follows:

Exercise price	$	5.00
Expected price volatility		44	%
Risk-free interest rate		5.06	%
Contractual life of the warrant	1 year
Expected dividends		0	%

24. Capital Structure

On January 12, 2006, in connection with the acquisition of 60% interest in EconWorld Media, XSEL issued 1,000 shares (adjusted for the effect of share subdivision on March 16, 2006) with par value of $0.001 for a total consideration of $4,553,599, which represented XFL’s investment in EconWorld Media.

On March 16, 2006, XSEL issued 42,612,289 shares at par value of $0.001 per share to XFL, which has been accounted for as a stock split. The share proceeds of $42,612 remained outstanding and subscription receivable of $42,612 was recorded.

Pursuant to a special resolution passed on March 16, 2006, every issued and unissued share of $1.0 each in the capital of XSEL is subdivided into 1,000 share of $0.001 each. Accordingly, immediately after the subdivision, XSEL has an authorized share capital of $50,000 divided into 50,000,000 shares of $0.001 each and issued share capital of $2 divided into 2,000 shares of $0.001 each. All share and per share amounts were retroactively adjusted to reflect this share subdivision.

In addition, on March 16, 2006, the authorized share capital of XSEL was increased to $1,000,000 and thereafter, be redesignated and reclassified into (a) 22,000,000 Preferred Shares of $0.001 each and (b) 978,000,000 common shares of $0.001 each. Accordingly the amended authorized share capital is $1,000,000 divided into 978,000,000 common shares of a nominal or par value of $0.001 each and 22,000,000 preferred shares of a nominal or par value of $0.001 each.

On July 24, 2006, XSEL redesignated its 42,614,289 common shares held by XFL as Class B common shares and 11,050,000 Nonvested Shares held by a director, Fredy Bush, as Class A common shares.

F-62

Xinhua Sports & Entertainment Limited

The Class A common shares shall entitle the holder to one vote per share; entitle the holder to such dividends as the Board may from time to time declare; in the event of a winding-up or dissolution of the Company, whether voluntary or involuntary or for the purpose of a reorganization or otherwise or for the purpose of a reorganization or otherwise or upon any distribution of capital, entitle to the surplus assets of the Company; and generally entitle the holder to enjoy all of the rights attaching to Class A common shares.

The Class B common shares shall entitle the holder to ten votes per share; entitle the holder to convert such shares into Class A common shares on a one to one basis at any time upon delivery of written notice to the Board of Directors; upon any sale, pledge, transfer, assignment or disposition of Class B common shares by a holder thereof to any person or entity which is not at any time a wholly-owned and wholly-controlled subsidiary of XFL, automatically convert into Class A common shares and, for the avoidance of doubt, at any time such subsequent holder ceases to be a wholly-owned and wholly-controlled subsidiary of XFL, the Class B common shares held by such holder shall automatically convert into Class A common shares; and otherwise rank pari passu with the Class A common shares.

On September 20, 2006, 6,400,000 authorized and unissued Preferred Shares were cancelled and the authorized number was reduced to 15,600,000 Preferred Shares.

On September 21, 2006, 5,761,317 and 1,679,012 Class B common shares were issued to XFL for the acquisition of 50% equity interests of Economic Observer Advertising and 51% equity interest of Hyperlink, respectively.

On September 22, 2006, pursuant to a number of share subscription agreements, XSEL issued 125,053 and 1,613,169 and 5,761,317 Class A common shares to three individuals in exchange for their entering into Deeds of Non-Competition Undertaking and Release with XSEL and Beijing Century Media,Hyperlink, and Economic Observer Advertising respectively, for a term of four years as part of the acquisition of Century Media Advertising, Hyperlink and Economic Observer Advertising.

On September 22, 2006, 6,929,544 Class A common shares were issued to Sino Investment for XSEL’s investments in Upper Step and Accord Group Investments Limited and its subsidiaries (collectively, “Accord Group”).

On November 1, 2006, pursuant to a share subscription agreement, XSEL issued 6,532,071 and 6,532,071 Class A common shares to an individual in exchange for his entering into a Deed of Non-Competition Undertaking and Release with XSEL and Beijing Century Advertising for a term of four years as part of the acquisition of Accord Group and Upper Step.

F-63

Xinhua Sports & Entertainment Limited

On March 9, 2007, 1,500,000 Nonvested Shares were transferred into 1,500,000 Class A common shares upon vesting.

On March 14, 2007, the Company issued 34,615,846 Class A common shares by an initial public offering. The gross proceeds received were $225,002,999 and the transaction costs were $24,740,470.

In addition, on March 14, 2007, the convertible loan and Preferred Shares were converted into 3,554,401 and 15,585,254 Class A common shares respectively.

On June 21, 2007, 16,668 Class A common shares were issued to a share option holder upon exercise of share option with proceeds of $13,001.

On June 25, 2007, 50,000 Class A common shares amounting to $195,000 were issued for the acquisition of 100% equity interest of Singshine Communication.

On July 18, 2007, 2,000,000 Class A common shares were issued for the Company’s share option plan of which 1,290,915 share options were exercised by the share option holders. The proceeds received were $936,000.

On July 30, 2007, the Company repurchased and cancelled 1,932,000 Class A common shares amounting to $8,629,986.

On August 23, 2007, 546,248 Class A common shares amounting to $1,742,531 were issued for the acquisition of 70% equity interest of Small World.

On September 28, 2007, 1,570,351 Class A common shares were issued upon exercise of the Company’s share options with proceeds of $1,224,874.

On November 13, 2007, 2,043,347 Class A common shares amounting to $8,295,990 were issued for the acquisition of 49% equity interest of Beijing Perspective.

On January 22, 2008, 725,000 Nonvested Shares were transferred into 725,000 Class A common shares upon vesting.

In March and April 2008, 2,000,000 Class A common shares were issued for future exercise of share options and 604,000 Class A common shares were issued upon the exercise of share options by employees.

On April 1, 2008, 3,261,670 Class A common shares amounting to $4,741,380 were issued for the earnout consideration determined in 2008 in relation to the acquisition of 100% equity interest of M-in Group in 2007.

On April 8, 2008, the Company repurchased and cancelled 3,416,890 Class A common shares amounting to $4,963,138.

F-64

Xinhua Sports & Entertainment Limited

On April 25, 2008, 50,000 Class A common shares amounting to $195,000 were issued for settling the remaining consideration for the acquisition of 100% equity interest of Singshine Communication.

On June 13, 2008, 2,170,000 Nonvested Shares were transferred into 2,170,000 Class A common shares upon vesting.

On August 15, 2008, 300,000 Class A common shares amounting to $369,000 were issued as consideration for a one-year consultancy service.

On October 16, 2008, 4,000,000 Class A common shares amounting to $2,660,000 were issued for acquisition of license agreement.

On December 17, 2008, 6,655,000 Nonvested Shares were transferred into 6,655,000 Class A common shares upon vesting.

On December 31, 2008, 50,054,618 Class B common shares were transferred to 50,054,618 Class A common shares upon conversion of XFL’s ownership interest in the Company, thus relinquishing XFL’s super voting rights in the Company.

On January 5, 2009, 4,000,000 Class A common shares amounting to $2,660,000 were issued for acquisition of license agreement.

On August 12, 2009, 260,000 Class A common shares amounting to $76,500 were issued as consideration for consultancy service.

On September 10, 2009, 11,917,973 Class A common shares amounting to $9,880,000 were issued for the earnout consideration determined in 2009 in relation to the acquisition of 100% equity interest of JCBN China and Profitown Group in 2007.

In February, March, April 2009, 660,000, 426,000 and 28,000 Class A common shares were issued to employees upon vesting of the restricted share units.

In July, August and December 2009, 180,000, 250,000 and 800,000 Class A common shares were issued to employees pursuant to resolutions of the compensation committee meeting of the Company on June 23, 2009, July 11, 2009 and December 7, 2009.

On October 26, 2009, XSEL entered into agreements to sell 11,029,410 Class A common shares at a price per common share of $0.68 in a registered direct offering to several select institutional investors. The gross proceeds received were $7,500,000 and the transaction costs were $1,048,583. The cash proceeds were used for working capital purposes. Investors will also receive two series of warrants (“Series A Warrants” and “Series B Warrants”) to purchase up to an aggregate of 14,889,703 class A common shares of the Company (equivalent to approximately 7,444,851 ADS).

F-65

Xinhua Sports & Entertainment Limited

25. Provision for income taxes

XSEL is a tax exempted company incorporated in the Cayman Islands. The Company’s subsidiaries incorporated in Hong Kong and PRC are subject to Hong Kong Profits Tax and Foreign Enterprise Income Tax in the PRC.

On March 16, 2007, the National People’s Congress adopted the Enterprise Income Tax Law (the “New Income Tax Law”), effective on January 1, 2008, replaced the separate income tax laws for domestic enterprises and foreign-invested enterprises, which are PRC subsidiaries of the Company, by adopting unified income tax rate of 25% for most enterprises. In accordance with the implementation rules of the New Income Tax Law, the preferential tax treatments granted to various of the Company’s PRC entities did not continue and they are subject to the statutory 25% tax rate and therefore the Company used such rate in the calculation of the Company’s deferred tax balances, except for certain entities that the transition rules would allow certain of PRC entities to continue to enjoy the tax rate that is lower than 25%.

Due to the changes in the new tax law in March 2007, the Company’s deferred tax balances were calculated based on the newly enacted tax rate effective on January 1, 2008. The impact on the deferred taxes resulting from the rate change as of January 1, 2008 was an adjustment to the net deferred tax liabilities of $12,277,520, representing a decrease in deferred tax liabilities and a decrease in deferred tax expense. The Company also recorded lower deferred tax assets for certain of its PRC subsidiaries at the 25% rate but because of full valuation allowance on most of these PRC subsidiaries, the change in statutory tax rate in this regard has resulted in no significant effect to current year’s income tax provision for these entities in 2007.

Prior to December 31, 2008, one of the subsidiaries applied for the New and High-Tech Enterprise (“HNTE”) status that would allow for a reduced 15% tax rate under China’s Enterprise Income Tax Law (“EIT Law”) and approval of such application has been granted prior to December 31, 2008. Pursuant to the PRC tax laws, this subsidiary was entitled to preferential tax treatment with full tax exemption from PRC corporate income tax (“CIT”) for three years from 2004 to 2006, followed by 50% reduction in CIT rate for the next three years from 2007 to 2009. This subsidiary enjoyed the tax rate of 7.5% for 2007, 2008 and 2009 and is subject to 15% for 2010. Refer to Note 34, Subsequent Events, for more details on the Circular 157 issued by the State Administration of Taxation.

There are undistributed deficits of the Company’s PRC subsidiaries at December 31, 2009 and accordingly no provision for PRC dividends withholding tax has been provided thereon.

F-66

Xinhua Sports & Entertainment Limited

The Company’s subsidiaries incorporated in Hong Kong are taxed at 17.5% up to December 31, 2007 and at 16.5% beginning from January 1, 2008, on the assessable profits arising in or derived from Hong Kong. In the 2008-09 Financial Budget delivered on February 27, 2008, the Financial Secretary of the Government of the Hong Kong Special Administrative Region proposed to lower the Hong Kong Profits Tax rate from 17.5% to 16.5%. The proposal was formally enacted on June 26, 2008.

For those Hong Kong subsidiaries which generate PRC sourced income, PRC income tax should still be payable on the assessable profits at 33% up to December 31, 2007 and at 25% beginning from January 1, 2008.

Under US GAAP, a deferred tax liability should be recorded for taxable temporary differences attributable to the excess of financial reporting amounts over tax base amounts, including those differences attributable to a more than 50% interest in a domestic subsidiary. However, recognition is not required in situations where the tax law provides a means by which the reported amount of that investment can be recovered tax-free and the enterprise expects that it will ultimately use that means. The Company has not recorded any such deferred tax liability attributable to the undistributed earnings of its financial interest in VIE affiliate because it believes such excess earnings can be distributed in manner that would not be subject to tax.

Uncertainties exist with respect to how the PRC’s current income tax law applies to the Company’s overall operations, and more specifically, with regard to tax residency status. The New Income tax Law includes a provision specifying that legal entities organized outside of the PRC will be considered residents for PRC income tax purposes if their place of effective management or control is within PRC. The Implementation Rules to the New Law provide that non-resident legal entities will be considered PRC residents if substantial and overall management and control over the manufacturing and business operations, personnel, accounting, properties, etc. occurs within the PRC. Additional guidance is expected to be released by the PRC government in the near future that may clarify how to apply this standard to taxpayers. Despite the present uncertainties resulting from the limited PRC tax guidance on the issue, the Company does not believe that its legal entities organized outside of the PRC should be treated as residents for the New Income tax Law’s purposes. If one or more of the Company’s legal entities organized outside of the PRC were characterized as PRC tax residents, the impact would adversely affect the Company’s results of operation.

The Company did not identify significant unrecognized tax benefits for years ended December 31, 2007, 2008 and 2009. The Company did not incur any interest and penalties related to potential underpaid income tax expenses and also believed that the adoption of pronouncement issued by FASB regarding accounting for uncertainty in income taxes did not have a significant impact on the unrecognized tax benefits within 12 months from December 31, 2009. For PRC, tax years 1999 through 2009 still remain subject to examination by the PRC tax authorities. For Hong Kong, tax years 2004 through 2009 still remain subject to examination by the Hong Kong tax authorities.

F-67

Xinhua Sports & Entertainment Limited

Provision for income taxes from continuing operation comprises of the following:

	For the Year Ended			For the Year Ended			For the Year Ended
	December 31, 2007			December 31, 2008			December 31, 2009
Current tax	$	2,247,566		$	6,431,464		$	1,422,977
Deferred tax		(1,576,962	)		(4,703,103	)		(5,480,022	)
Total	$	670,604		$	1,728,361		$	(4,057,045	)

Reconciliation between the provision for income taxes computed by applying the PRC enterprise income rate of 25% (2007: 33%) to income (loss) before provision for income taxes and the actual provision for income taxes is as follows:

	For the Year Ended			For the Year Ended			For the Year Ended
	December 31, 2007			December 31, 2008			December 31, 2009
Net income (loss) before provision for income taxes	$	9,872,342		$	(206,228,433	)	$	(217,377,419	)
PRC statutory tax rate		33	%		25	%		25	%
Income tax at statutory tax rate		3,257,873			(51,557,108	)		(54,344,355	)
Expenses not deductible for tax purposes:
Entertainment		43,893			56,263			93,128
Accrued salaries and employees’ benefits		380,664			3,119,224			—
Impairment loss on goodwill		—			34,335,817			17,868,015
Impairment loss on Principle Protected Note		—			6,227,482			—
Impairment loss on promissory note receivable and accrued interest income		—			2,130,371			—
Loss on disposal of subsidiaries		—			1,180,176			—
Impairment loss on intangible and other assets		48,720			127,344			16,971,393
Non-taxable income		(345,134	)		(61,146	)		(3,731,543	)
Effect of income tax rate differences in other jurisdictions		(152,575	)		2,744,553			362,327
Changes in valuation allowances		1,006,146			3,352,633			5,851,317
Effect of tax exemptions		(3,407,436	)		(571,421	)		12,674,369
Effect of change in tax rate		(133,181	)		(184,975	)		(273,119	)
Inter-companies transaction with discontinued overprovision in prior years operations		83,738			474,417			(85,428	)
Others		(112,104	)		354,731			556,851
Provision for income taxes	$	670,604		$	1,728,361		$	(4,057,045	)

Without the tax exemptions PRC income taxes for continuing operations would have been increased by approximately $3,407,000, $571,000 and $434,000 for the years ended December 31, 2007, 2008 and 2009, respectively. The basic and diluted net income from continuing operations per share would have been decreased to $0.03 and $0.02, respectively, for the year ended December 31, 2007. The basic and diluted net loss from continuing operations per share would have been increased to $1.55 for the year ended December 31, 2008. The basic and diluted net loss from continuing operations per share would have been increased to $1.44, for the year ended December 31, 2009.

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Xinhua Sports & Entertainment Limited

The principal components of the deferred income tax assets and liabilities are as follows:

	At December 31,			At December 31,
	2008			2009
Deferred tax assets:
Capitalized content production cost	$	—		$	—
Property and equipment		547,018			661,921
Accrued payroll and benefit		—			355,295
Provision for amount due from a related party		430,327			43,662
Allowance for doubtful debts		1,761,113			2,388,059
Net operating losses		11,636,501			9,854,861
Other intangible assets		50,299			1,232,780
Total		14,425,258			14,536,578
Less: Valuation allowance, current portion		(769,033	)		(2,874,932	)
Valuation allowance, non-current portion		(12,613,846	)		(11,661,646	)
Deferred tax assets, net		1,042,379			—
Deferred tax liability:
Intangible assets	$	31,679,491		$	—
Total	$	(30,637,112	)	$	—
Reported as:
Deferred tax assets, current portion	$	1,042,379		$	—
Deferred tax assets, non-current portion	$	—		$	—
Deferred tax liabilities, non-current portion	$	(31,679,491	)	$	—
Total	$	(30,637,112	)	$	—

Due to the uncertainty of the level of PRC statutory income and the Company’s lack of operating history, management does not believe certain subsidiaries will generate taxable PRC statutory income in the near future and it is more likely than not that not all of the deferred tax assets will be realized, and valuation allowance has been established for certain amount of deferred tax assets at December 31, 2008 and full valuation allowance has been established deferred tax assets as of December 31, 2009.

The Company has tax loss carry forwards from continued operation of $4, 562,895, $13,796,544 and $26,782,315 for the years ended December 31, 2007, 2008 and 2009, respectively. The net tax loss carry forwards for the PRC subsidiaries expire on various dates through 2014 and there is nil net tax loss carries forwards for the Hong Kong subsidiaries.

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Xinhua Sports & Entertainment Limited

26. Related party transactions

Other than those disclosed elsewhere in the financial statements, the Company has entered into the following transactions with related parties.

Amounts due from (to) related parties were as follows:

	At December 31,		At December 31,
	2008		2009
Due from related parties:
Due from affiliates(b)	$	1,048,108	$	—
Due from directors		119,092		—
Due from minority shareholders of subsidiaries		55,646		—
Due from XFL and its affiliates(a)		—		6,033,114
Due from related companies(c)		5,324,790		—
Total	$	6,547,636	$	6,033,114
Due to related parties:
Due to affiliates(d)		1,583,229		239,111
Due to XFL and its affiliates(a)		1,131,050		6,790,272
Due to related companies		24,615		—
Due to directors		7,278		—
Due to a shareholder(e)		600,000		—
Total	$	3,346,172	$	7,029,383

(a)	On March 5, 2009, Xinhua Sports & Entertainment (Shanghai) Co., Ltd. (“XSEL SH”), a subsidiary of the Company, Xinhua Financial Network Limited (“XFN”), a subsidiary of XFL, and Shanghai Huacai Investment Advisory Co., Ltd. (“Huacai”), a subsidiary of XFL, entered into an agreement. Pursuant to this agreement, Huacai advanced RMB 42,780,000 (around $6.6 million) to XSEL SH which was secured by U.S. dollar deposits of $6.23 million lent by XSEL to XFN. 4% interest per annum was charged on the loan and deposit, respectively. The agreement was to facilitate the conversion of U.S. dollars into RMB for working capital purpose. On April 7, 2009, XSEL SH repaid the loan and Huacai advanced another RMB42,780,000 (around US$6.6 million) to XSEL SH on April 21, 2009 which was secured by U.S. dollar deposits of $6.23 million lent by XSEL to XFN and the interest rate on the loan and deposit increase to 4.77% per annum. Interest expense of approximately $208,000 was recognized for the year ended December 31, 2009.
	The amounts due to XFL and its affiliates as of December 31, 2009 principally represented loan due to Huacai. The amounts from XFL and its affiliates as of December 31, 2009 principally represented $6.23 million lent to XFN as security deposits for the loan from Huacai.
	The Company shared costs for premises under a lease held by a subsidiary of the Parent. The amount paid or payable by the Company for 2008 and 2009 were approximately $340,000 and $310,000, respectively.
(b)	Amounts due from affiliates as of December 31, 2008 principally represented advance to former shareholders of subsidiaries. The amounts are non-interest bearing and repayable on demand. As of December 31, 2009, full provision was recognized for the amount advanced to this former shareholder.
(c)	The balance as of December 31, 2008 included an entrusted loan of $2,256,344 and advances to a related party. The entrusted loan is unsecured, non-interest bearing and repayable on demand. As of December 31, 2009, full provision was recognized for the amount due from this related party.

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Xinhua Sports & Entertainment Limited

(d)	The amounts as of December 31, 2008 and 2009 principally represented advance from former shareholders of subsidiaries and are non-interest bearing and repayable on demand.
(e)	Amount due to a shareholder represented accrued dividends on Series B Preferred Shares issued in February 2008. In 2009, the Company has issued 6,000 Series B Preferred Share to settle this accrued dividend.

27. Financial instruments

The carrying amounts of cash, short term deposits, restricted cash, accounts receivable, other current assets, accounts payable, other payables and amounts due from (to) related parties approximate to their fair values due to the short term nature of these instruments.

The carrying amounts of bank overdraft and bank borrowings approximate their fair values as the bank borrowings bear variable interest rates which approximate the market interest rate.

The carrying amount of the long term consideration receivable from the disposal of Convey approximates its fair value. This receivable is recorded at its discounted values using a fixed interest rate that approximates to the market rate.

28. Fair value measurement

The financial assets and liabilities of the Company measured at fair value on a recurring basis as of December 31, 2009 are the conversion option of convertible loan, Series A Warrants and Series B Warrants.

The following section describes the valuation methodologies the Company uses to measure financial assets and liabilities at fair value.

The conversion option on convertible loan, Series A Warrants and Series B Warrants are classified within Level 2 of the fair value hierarchy as there is model-derived valuation in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. The conversion option is recorded in the liabilities as part of the carrying value of convertible loan. Series A Warrants and Series B Warrants Are recorded as current liabilities in the balance sheet.

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Xinhua Sports & Entertainment Limited

Assets and liabilities measured at fair value on a recurring basis

The following table presents the assets and liabilities at December 31, 2009, which are measured at fair value on a recurring basis:

	Level 1		Level 2		Level 3		Total
Liabilities
Derivative component of convertible loan	$	—	$	4,851,928	$	—	$	4,851,928
Series A Warrants		—		1,066,000		—		1,066,000
Series B Warrants		—		183,000		—		183,000
	$	—	$	6,100,928	$	—	$	6,100,928

Assets and liabilities measured at fair value on a nonrecurring basis

The Company measures the cost method investments (ASN and Convey) at fair value on a nonrecurring basis. These assets are recognized at fair value when they are deemed to be other-than-temporarily impaired. The determination of fair value of the investment involves judgment as to the severity and duration of the decline below fair value. The fair value of the equity interest in ASN and Convey is developed through the application of the income approach technique known as the discounted cash flow method. Under this method, value depends on the present worth of future economic benefits to be derived from the projected net income and is developed by discounting projected future net cash flows available to its present worth. The fair value was determined using models with significant unobservable inputs (Level 3 inputs), including but not limited to financial forecast, projection in capital expenditure, terminal value of ASN and Convey, discount rate and required return on equity capital. During the year ended December 31, 2009, impairment charges of $2 million were recognized for investment in Convey as the decline in their respective fair values below their cost was determined to be other than temporary.

For impairments of goodwill and long-lived assets, refer to Note 5, Impairments.

29. Commitments and contingency

(a) Operating leases

The Company has operating lease agreements principally for its office spaces in the PRC and Hong Kong. These leases expire through April 2018 and are renewable upon negotiation. Rent expenses were $3,376,179 and $4,884,655 and $4,095,108 for the years ended December 31, 2007, 2008 and 2009, respectively.

Future minimum lease payments under non-cancelable operating lease agreements at December 31, 2009 are as follows:

2010	$	2,003,713
2011		894,482
2012		683,656
2013		683,656
2014		683,656
After 2014		965
Total	$	4,950,128

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Xinhua Sports & Entertainment Limited

(b) Other commitment

The Company entered into a number of agreements to obtain advertising production and network services from various services providers. As of December 31, 2009, future minimum services fee commitments under the agreements totaled approximately $605,000 and approximately $99,000 of which will be paid in each of 2010 and 2011 and approximately $102,000 will be paid in each of 2012 through 2015.

The Company also entered into a number of agreements for the purchases of television program and film rights. As of December 31, 2009, future minimum payment commitments under the agreements totaled approximately $297,000 which will be paid in 2010.

The Company also entered into a number of agreements for the landing fee associated with satellite television operation. As of December 31, 2009, future minimum service fee commitments under the agreements totaled approximately $1,541,000, of which approximately $1,184,000 will be paid in 2010 and the remaining will be paid in 2011.

The Company’s advertising agency agreement with Shaanxi Television Station was terminated by Shaanxi Television Station effective June 30, 2010 because the Company did not make certain required payments to Shannxi Television Station according to the advertising agency agreement. See Note 34, Subsequent Events, for more details.

For the acquisition of Starease Group as discussed in Note 12, Deposit for investment, as of December 31, 2008, the Company has paid a deposit of $11,100,000 and an advance of $5,272,089 to Prime Day and Starease Group, respectively. The Company also agreed to establish a joint venture with Starease Group for the operation of four digital pay channels. As of December 31, 2009, the Company has a commitment to pay $3,900,000 and 2,000,000 XSEL’s common shares upon the completion of this purchase agreement.

(c) Contingency

The Company was subject to a class action complaint for violations of US federal securities laws, Plaintiffs in the class action assert claims under the US Securities Act of 1993, as amended (“US Securities Act”), against the Company, Chief Executive Officer Fredy Bush and former Chief Financial Officer Shelly Singhal as well as underwriters of the Company’s initial public offering for failing to disclose in initial public offering registration statement required under the US Securities Act certain background information concerning Shelly Singhal. The background information comprised a list of lawsuits and proceedings that were brought against other entities with which Shelly Singhal was associated and that were completely unrelated to the Company. The Company’s motion to dismiss, which the Company filed along with the other defendants, was granted on February 25, 2009, and the case was dismissed.

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Xinhua Sports & Entertainment Limited

Regarding the acquisition of JCBN China, the equity owners of JCBN China are entitled to additional consideration, including both cash and XSEL Class A common shares based on a predetermined earn-out formula applied to audited operating results through December 31, 2009 and subsequent accounts receivable settlements. Therefore, the amount of the additional consideration has not been determined. However, the maximum exposure to the Company is approximately $10 million. Refer to Note 34 for subsequent settlement.

In addition, according to the 2007 acquisition agreement to purchase Convey, the selling shareholders of Convey was entitled to additional consideration, including both cash and XSEL Class A common shares based on a predetermined earn-out formula applied to operating results through June 30, 2009. The maximum consideration was set to be $40 million, $10.6 million of which was paid by the Company in 2008. Convey was sold back to the original selling shareholders on December 31, 2008. The additional contingent consideration has not been determined and the maximum exposure to the Company is $29.4 million.

30. Segment information

During 2007, the Company operated in five reportable segments that include media production, print, advertising, broadcasting and research. In 2008, the business segments was integrated from five (Advertising, Broadcast, Print, Production, and Research) to three, with Production integrated into Broadcast and Research integrated into Advertising. With the change of composition of reportable segments in 2008, the 2007 comparative numbers were reclassified accordingly to conform to 2008 composition of its reportable segments. The change in composition of reportable segments did not have any impact on either the financial results or financial position of the Company in 2007.

Each reportable segment is separately organized and provides distinct products and services to different customer groups. Each reportable segment prepares a stand-alone set of financial reporting package including information such as revenue, expenses, and goodwill, and the package is regularly reviewed by the chief operating decision maker. During the years ended December 31, 2007, 2008 and 2009, the Company’s chief operating decision maker was the Chief Executive Officer.

Due to the cessation of print segment in 2009, the operating results of the print segment were reclassified as discontinued operation for all periods presented. There were two operating segments, advertising and broadcasting, as of December 31, 2009. The summary of segment information presented below includes print segment for presentation purpose only.

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Xinhua Sports & Entertainment Limited

Discontinued operation

As discussed in Note 6, Discontinued operations, due to the pending sale of Economic Observer Advertising and EWEO, the Company’s print business, in 2009, its results of operations, including revenue, were separately reported as part of “discontinued operations” and its assets and liabilities were separately reported as “assets and liabilities held for sale”.

In addition, due to the sale of Hyperlink, Century Media Advertising and Singshine Communication in 2009, their historical operating results were reported as part of “discontinued operations” for all periods presented in the accompanying condensed consolidated statement of operations.

As a result of the cessation of print business, content production business and strategic partnership with Shanghai Camera Media Investment Co., Ltd. in 2009, the historical operating results of EconWorld Media, Beijing Century Media, Upper Step, Beijing Perspective, and Small World were reported as “discontinued operations” for all periods presented in the accompanying condensed consolidated statement of operations.

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Xinhua Sports & Entertainment Limited

The following is a summary of relevant information relating to each segment reconciled to amounts on the accompanying consolidated financial statements for the year ended December 31, 2007:

							XSEL
	Print		Advertising		Broadcasting		Corporate			Total
Net revenues:
Content production	$	—	$	—	$	—	$	—		$	—
Advertising sales		—		8,140,718		—		—			8,140,718
Advertising services		—		66,000,705		9,336,687		—			75,337,392
Publishing services		—		—		—		—			—
Total net revenues	$	—	$	74,141,423	$	9,336,687	$	—		$	83,478,110
Depreciation and amortization		—		3,683,868		1,740,436		138,186			5,562,490
Cost of revenues and operating expenses excluding depreciation and amortization		—		57,154,102		6,139,583		12,756,569			76,050,254
Other operating income		—		—		—		2,261,788			2,261,788
Operating income (loss)		—		13,303,453		1,456,668		(10,632,967	)		4,127,154
Other incomes, net											5,745,188
Income from continuing operations before provision for income taxes											9,872,342
Tax expenses											670,604
Net income from continuing operations											9,201,738
Income from discontinued operations, net of taxes											20,139,901
Net income											29,341,639
Net income attributable to non-controlling interests		—		919,957		382,677		—			1,302,634
Net income attributable to XSEL										$	28,039,005
Total assets, excluding goodwill	$	87,188,203	$	116,976,266	$	171,427,721	$	95,084,535		$	470,676,725
Goodwill	$	6,566,376	$	135,531,566	$	38,027,546	$	—		$	180,125,488
Capital expenditure	$	391,137	$	2,474,168	$	1,505,332	$	839,075		$	5,209,712

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Xinhua Sports & Entertainment Limited

The following is a summary of relevant information relating to each segment reconciled to amounts on the accompanying consolidated financial statements for the year ended December 31, 2008:

										XSEL
	Print			Advertising			Broadcasting			Corporate			Total
Net revenues:
Content production	$	—		$	—		$	—		$	—		$	—
Advertising sales		—			21,911,519			—			—			21,911,519
Advertising services		—			86,413,787			13,161,197			—			99,574,984
Publishing services		—			—			—			—			—
Total net revenues	$	—		$	108,325,306		$	13,161,197		$	—		$	121,486,503
Depreciation and amortization		—			7,642,294			2,804,520			323,232			10,770,046
Cost of revenues and operating expenses excluding depreciation and amortization		—			226,071,843			25,660,516			39,156,452			290,888,811
Other operating income		—			781,264			467,966			2,175			1,251,405
Operating income (loss) from operations		—			(124,607,567	)		(14,835,873	)		(39,477,509	)		(178,920,949	)
Other expenses, net														(27,307,484	)
Income from continuing operations before provision for income taxes and minority interest														(206,228,433	)
Provision for income taxes														1,728,361
Net loss from continuing operation														(207,956,794	)
Loss from discontinued operations, net of taxes														(66,274,737	)
Net loss														(274,231,531	)
Net (loss) income attributable to non-controlling interests		(131,089	)		582,057			189,500			—			640,468
Net loss attributable to XSEL													$	(274,871,999	)
Total assets, excluding goodwill	$	83,200,125		$	129,209,336		$	175,175,442		$	73,672,709		$	461,257,612
Goodwill	$	—		$	35,303,307		$	11,689,417		$	—		$	46,992,724
Capital expenditure	$	665,751		$	4,911,259		$	989,726		$	369,111		$	6,935,847

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Xinhua Sports & Entertainment Limited

The following is a summary of relevant information relating to each segment reconciled to amounts on the accompanying consolidated financial statements for the year ended December 31, 2009:

									XSEL
	Print		Advertising			Broadcasting			Corporate			Total
Net revenues:
Content production	$	—	$	—		$	—		$	—		$	—
Advertising sales		—		404,462			20,810,368			—			21,214,830
Advertising services		—		61,698,283			16,317,625			—			78,015,908
Publishing services		—		—			—			—			—
Total net revenues	$	—	$	62,102,745		$	37,127,993		$	—		$	99,230,738
Depreciation and amortization		—		3,382,526			13,674,790			937,776			17,995,092
Cost of revenues and operating expenses excluding depreciation and amortization		—		133,554,092			115,999,502			55,775,664			305,329,258
Other operating income		—		1,835,701			95,376			134,357			2,065,434
Operating income (loss) from operations		—		(72,998,172	)		(92,450,923	)		(56,579,083	)		(222,028,178	)
Other incomes, net													4,650,759
Income from continuing operations before provision for income taxes and minority interest													(217,377,419	)
Provision for income tax benefits													4,057,045
Net loss from continuing operation													(213,320,374	)
Loss from discontinued operations, net of taxes													(100,295,540	)
Net loss													(313,615,914	)
Net (loss) income attributable to non-controlling interests		3,805		(1,509,653	)		(534,725	)		—			(2,040,573	)
Net loss attributable to XSEL												$	(311,575,341	)
Total assets, excluding goodwill	$	53,594,254	$	93,634,021		$	63,833,236		$	24,259,474		$	235,320,985
Goodwill	$	—	$	304,922		$	6,933,094		$	—		$	7,238,016
Capital expenditure	$	103,817	$	2,160,804		$	3,404,254		$	210,591		$	5,879,466

Substantially all of the Company’s revenue for the years ended December 31, 2007, 2008 and 2009 was generated from the PRC including Hong Kong.

At December 31, 2009, apart from the cash and bank balances of $4,129,000 located in Hong Kong, substantial portion of the identifiable assets of the Company are located in the PRC. Accordingly, no geographical segments are presented.

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Xinhua Sports & Entertainment Limited

31. Net income (loss) per share

The following table sets forth the computation of basic and diluted net income (loss) per common shares.

	For the Year			For the Year			For the Year
	Ended			Ended			Ended
	December 31,			December 31,			December 31,
	2007			2008			2009
Numerator for continuing operations used for net income (loss) and diluted net income (loss) per Class A and Class B common shares::
Net income (loss) from continuing operations	$	9,201,738		$	(207,956,794	)	$	(213,320,374	)
Less: net income attributable to non-controlling interest		(1,273,174	)		(582,057	)		2,015,262
Less: dividends declared on redeemable convertible preferred shares		(1,338,333	)		—			—
Less: dividends declared on series B redeemable convertible preferred shares		—			(2,000,000	)		(2,560,000	)
Net income (loss) from continuing operations attributable to holders of common shares-basic	$	6,590,231		$	(210,538,851	)	$	(213,865,112	)
Add: dividends declared on redeemable convertible preferred shares		1,338,333			—			—
Add: interest expense for convertible loan		267,464			—			—
Net income (loss) from continuing operations attributable to holders of common shares-diluted	$	8,196,028		$	(210,538,851	)	$	(213,865,112	)
Numerator for discontinued operations used for net income (loss) and diluted net income (loss) per Class A and Class B common shares:
Net (loss) income from discontinued operations	$	20,139,901		$	(66,274,737	)	$	(100,295,540	)
Less: net income from discontinued operations attributable to non-controlling interest		(29,460	)		(58,411	)		25,311
Net income (loss) from discontinued operations attributable to holders of common shares-basic and diluted	$	20,110,441		$	(66,333,148	)	$	(100,270,229	)
Denominator:
Weighted average of issued shares outstanding		116,220,383			135,844,377			157,729,635
Effect of dilutive securities:
Employee share options		7,290,608			—			—
Nonvested Shares		8,748,080			—			—
Warrants		282,390			—			—
Convertible loan		710,880			—			—
Redeemable convertible preferred shares		3,117,051			—			—
Total effect of dilutive securities		20,149,009			—			—
Denominator used for diluted net (loss) income per Class A and Class B common shares		136,369,392			135,844,377			157,729,635
Net income (loss) from continuing operations per share:
Basic net income (loss) per Class A common shares	$	0.06		$	(1.55	)	$	(1.35	)
Basic net income (loss) per Class B common shares	$	0.06		$	(1.55	)	$	—
Diluted net income (loss) per Class A common share	$	0.06		$	(1.55	)	$	(1.35	)
Diluted net income (loss) per Class B common share	$	0.06		$	(1.55	)	$	—
Net income (loss) from discontinued operations per share:
Basic net income (loss) per Class A common shares	$	0.17		$	(0.49	)	$	(0.64	)
Basic net income (loss) per Class B common shares	$	0.17		$	(0.49	)	$	—
Diluted net income (loss) per Class A common share	$	0.15		$	(0.49	)	$	(0.64	)
Diluted net income (loss) per Class B common share	$	0.15		$	(0.49	)	$	—
Net income (loss) per share:
Basic net income (loss) per Class A common shares	$	0.23		$	(2.04	)	$	(1.99	)
Basic net income (loss) per Class B common shares	$	0.23		$	(2.04	)	$	—
Diluted net income (loss) per Class A common share	$	0.21		$	(2.04	)	$	(1.99	)
Diluted net income (loss) per Class B common share	$	0.21		$	(2.04	)	$	—

F-79

Xinhua Sports & Entertainment Limited

As of December 31, 2008, the Company had 314,000 redeemable convertible preferred shares, convertible loan of $33,200,000, 7,289,663 options, 4,729,968 warrants and 2,010,800 restricted share units outstanding which could potentially dilute basic earnings per share in the future, but were excluded from the computation of diluted net loss per share for the year ended December 31, 2008, as their effects would have been antidilutive.

As of December 31, 2009, the Company had 345,600 redeemable convertible preferred shares, convertible loan of $57,800,000, 7,087,663 options, 19,619,671 warrants and 785,800 restricted share units outstanding which could potentially dilute basic earnings per share in the future, but were excluded from the computation of diluted net loss per share for the year ended December 31, 2009, as their effects would have been antidilutive.

32. Employee benefit plans

Employees of the Company and its subsidiaries located in Hong Kong are covered by the Mandatory Provident Fund Scheme (“MPF Scheme”) established on December 1, 2000 under the Mandatory Provident Fund Scheme Ordinance of Hong Kong. The calculation of contributions for these eligible employees is based on 5% of the applicable payroll costs, and contributions are matched by the employees. The amounts paid by the Company to the MPF Scheme were $64,853, $97,195 and $39,257 for the years ended December 31, 2007, 2008 and 2009, respectively.

Employees of the Company and its subsidiaries located in the PRC are covered by the retirement schemes defined by local practice and regulations, which are essentially defined contribution schemes. The contributed amounts are determined based on 20% of the applicable payroll costs. The amounts paid by the Company to these defined contribution schemes were $458,565, $1,129,529 and $1,124,865 for years ended December 31, 2007, 2008 and 2009, respectively.

In addition, the Company is required by law to contribute medical insurance benefits, housing funds, unemployment, and other statutory benefits ranging from 1% to 10% of applicable salaries. The PRC government is directly responsible for the payment of the benefits to these employees. The amounts contributed for medical insurance benefits were $259,481, $746,588 and $736,148 for the years ended December 31, 2007, 2008 and 2009, respectively. The amounts contributed for housing funds was $218,540, $513,586 and $557,475 for the years ended December 31, 2007, 2008 and 2009, respectively. The amounts contributed for other benefits were $494,908 and $716,451 and $551,089 for the years ended December 31, 2007, 2008 and 2009, respectively.

F-80

Xinhua Sports & Entertainment Limited

33. Statutory reserves

As stipulated by the relevant laws and regulations in the PRC, the Company is required to maintain non-distributable reserves which include a statutory surplus reserve and a statutory welfare reserve. Appropriations to the statutory surplus reserve are required to be made at not less than 10% of profit after taxes as reported in the Company’s PRC statutory financial statements. The statutory welfare reserve allocations are determined annually at the discretion of the Company’s Board of Directors. Once appropriated, these amounts are not available for future distribution to owners or shareholders. The statutory surplus reserve may be applied against prior year losses, if any, and may be applied to the purchase of capital assets upon the Board of Directors’ approval. As of December 31, 2008 and 2009, the balance of the statutory surplus reserve and the statutory welfare reserve were $3,410,536 and $3,535,373, respectively. Amounts contributed to the statutory surplus reserve and the statutory welfare reserve were $1,608,452, nil and $124,837 for the years ended December 31, 2007, 2008 and 2009, respectively.

34. Subsequent events

On March 11, 2010, XSEL completed the acquisition of NuCom Online Corporation (“NuCom”) at an initial share consideration of 17,074,704 XSEL common A shares and contingent share consideration of 13,134,384 XSEL common A shares if Nucom Corp’s revenue meet certain amount for the year ended December 31, 2010 and 2011, respectively. NuCom is a leading sports media company which owns China’s largest sports portal, NuBB (www.nubb.com).

On April 21, 2010, the State Administration of Taxation issued Circular 157 Further Clarification on Implementation of Preferential EIT Rate during Transition Periods (“Circular 157”). Circular 157 seeks to provide additional guidance on the interaction of certain preferential tax rates under the transitional rules of the New EIT Law. Prior to Circular 157, the Company interpreted the law to mean that if an entity was in a period where it was entitled to a 50% reduction in the tax rate and was also entitled to a 15% rate of tax due to HNTE status under the New EIT Law then it was entitled to pay tax at the rate of 7.5%. Circular 157 appears to have the effect that such an entity is entitled to pay tax at either 15% or 50% of the standard PRC tax rate. The effect of Circular 157 is retrospective and would apply to 2008 and 2009. As a consequence of Circular 157, the preferential tax rate enjoyed by the subsidiary which qualified as a HNTE during its 50% reduction period (2008 and 2009) will be 12.5% for the relevant years rather than 7.5% which is the rate the Company had used prior to the issuance of Circular 157. Because the Company believes that Circular 157 is similar to a change in tax law, the cumulative effect of which should be reflected in the period of the change. As a result, the Company will recognize an additional tax liability in the second quarter of 2010 of approximately $201,809 ($137,972 related to 2008 and $63,837 related to 2009) in respect of this change.

F-81

Xinhua Sports & Entertainment Limited

On December 4, 2009, XSEL entered into a purchase agreement to acquire China Sports Media (“CSM”), China’s leading sports media rights distributor, at an initial cash consideration of $5,000,000 and share consideration of 8,044,810 XSEL common A shares and contingent share consideration of 3,447,776 XSEL common A shares if CSM’s net income growth meet certain criteria for the year ended December 31, 2010 and 2011, respectively. CSM has popular domestic, Asia, and other contents, and has significant majority of the Chinese sports television rights and distribution market, and is the long term partner of the All-China Sports Federation for its television rights business.

As stated in Note 6, in June 2010, the Company closed its disposal of Economic Observer Advertising and EWEO, which comprised its printing business, for a cash consideration of $24,000,000 and used part of the proceeds to repay a portion of the convertible loan.

Power Sports, China’s first ever nationwide high definition cable sports channel, was launched in May, 2010 by Starease Group. The acquisition of Starease Group is subject to certain closing conditions and is expected to be completed in the last half of 2010.

In July 2010, the Company entered into a number of agreements with Patriarch, the convertible loan holder, which comprised of: (1) an amendment which waives the breach of financial covenants for the quarters ended December 31, 2009 and subsequent periods up to the date of the amendment, (2) an amendment that lowers the financial covenant requirements on a prospective basis. The previous covenants of minimum consolidated EBITDA and maximum leverage ratio for each future quarter until repayment ranged from $16.8 million to $52.1 million and 1.88 to 5.03 have been changed to $0.8 million to $3.8 million and 11.75 to 57.23, respectively. The covenant of maximum capital expenditure is added in the amendment which ranged from $0.5 million to $1.3 million for the fiscal years 2010 to 2012. (3) the issuance of 78,295 Series C redeemable convertible preferred shares to the convertible loan holder for no additional consideration. In addition, the Company has repaid $16.3 million of the convertible loan balance of which $8.7 million was repaid from the proceeds of the sale of the company’s printing business and the remaining $7.6 million was repaid through an additional term loan from Patriarch.

The Series C redeemable convertible preferred shares are redeemable upon certain events which include (“Realization Events”):

(a)	Any Change of Control of the Company;
(b)	Any Substantial Asset Sale;

F-82

Xinhua Sports & Entertainment Limited

(c)	Any consolidation or merger or acquisition or sale of voting securities of the Company resulting in the holders of the issued and outstanding voting securities of the Company immediately prior to such transaction less than a majority of the voting securities of the continuing or surviving entity immediately following such transaction; or
(d)	Any tender offer, exchange offer or repurchase offer for more than 50% of the outstanding Common Shares.

The redemption price to be paid by the Company for each redeemable share shall be equal to the greater of the stated value of $100 and common equivalent value of each redeemable share as of the redemption date.

Series C redeemable convertible preferred shares can be converted into 104,854,627 common shares at any time. The conversion rate at any time shall be determined by dividing (x) the stated value of $100 per share, which is subject to adjustment in the event of any subdivision or combination of the outstanding preferred shares by (y) the then applicable conversion price, initially equal to $0.0747 per share, but subject to adjustment.

In June 2010, the Company reached an agreement with the original selling shareholders of JCBN China and Profitown Group, subsidiaries of the Company. The outstanding consideration payable to the original selling shareholders as of December 31, 2009 was $5.7 million. According to the agreement, the Company and the original selling shareholders agreed to settle the remaining outstanding consideration payable of approximately $2.4 million as of the date of the agreement by issuing class A common shares of the Company with an aggregate market value equal to that outstanding amount at the share issuance date. In addition, the Company will transfer all of its equity interests in JCBN China and Profitown Group to the original selling shareholders. As a consideration for the arrangement, the original selling shareholders of JCBN China and Profitown Group agree to waive all claims against the Company for any earn-out payments.

The Company’s advertising agency agreement with Shaanxi Television Station was terminated effective June 30, 2010. As of December 31, 2009, there was approximately $68.8 million long-term liabilities recorded in the consolidated balance sheet related to the advertising agency agreement. Due to the termination, the Company’s commitment to Shaanxi Television Station was reduced by $64.2 million. As of December 31, 2009, the related intangibles assets were the advertising agency agreement of $19.3 million, and television program and film rights of $4.4 million. The subsidiary that executed the advertising agency agreement with Shaanxi Television Station, Everfame, will be classified as discontinued operations in the second quarter of 2010.

F-83

EX-4.62

Exhibit 4.62

Dated

XINHUA SPORTS & ENTERTAINMENT LIMITED

and

EXECUTIVE SERVICE AGREEMENT

DATE:

PARTIES:

(1) XINHUA SPORTS & ENTERTAINMENT LIMITED a company registered in the Cayman Islands whose office is at 21/F On Hong Commercial Bldg, 145 Hennessy Road, Wanchai, Hong Kong (the “Company”);

and

(2) an individual (the “Executive”).

RECITALS:

The Company has agreed to employ the Executive and the Executive has agreed to serve the Company as                      on the following terms and conditions.

TERMS AGREED:

1. Definitions and Interpretation

1.1 In this Agreement where the context so admits the following words and expressions shall have the following meanings:

“Associated Company”	means in relation to the Company, any subsidiary or holding company of the Company, any subsidiary of such holding company, and any company in which the Company or any such holding company holds or controls directly or indirectly not less than 20% of the issued share capital;
“CEO”	means the CEO of directors of the Company from time to time;
“HK$”	means Hong Kong dollars;
“Hong Kong”	means the Hong Kong Special Administrative Region of the People’s Republic of China.

1.2 Terms defined in Section 2 of the Companies Ordinance shall in this Agreement have the meanings ascribed to them in that section.

1.3 All references in this Agreement and the Schedule attached hereto to the Company or any Associated Companies shall include their successors in title or assigns.

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1.4 References herein to Clauses and the Schedules are references to the clauses and the schedules of this Agreement which shall be deemed to form part of this Agreement. The headings in this Agreement are inserted for convenience of reference only and do not affect the interpretation hereof.

2.	Employment
	The Company shall employ the Executive and the Executive shall serve the Company as [                    ] on and subject to the terms and conditions specified herein.

3. Commencement

3.1 The Executive agrees that he will remain in the employ of the Company or an Associated Company for the period commencing the date of this Agreement and ending on the date that is three years after the date of this Agreement, with a three year renewal at the option of the Executive. The renewal will be at identical terms as this contract; PROVIDED, HOWEVER, that nothing in this Clause 3 shall affect the termination provisions pursuant to clause 12.

4. Duties

4.1 Subject to Clause 6.1 below, the Executive shall be employed in the position of                                          in which capacity he shall devote such time, attention and skill as is necessary in order to fulfill his duties hereunder, and shall at all times during such employment act in the interests of the Company and its Associated Companies, and shall faithfully and diligently perform such duties and exercise such powers consistent therewith as may from time to time be assigned to or vested in him by the CEO or the Company.

4.2 The Executive shall fulfill the reasonable and lawful orders of the CEO, given by or with the authority of the CEO provided such orders comply with recognizable pertinent ethical standards in effect at such time, and shall comply with all the Company’s rules, regulations, policies and procedures from time to time in force.

4.3 The Executive may be required in pursuance of his duties hereunder to perform services not only for the Company but also for any Associated Company and, without further remuneration (except as otherwise agreed), to accept any such office or position in any Associated Company which is consistent with his position with the Company, as the CEO or the Company may from time to time reasonably require, provided that such office and/or position does not inhibit the Executive from performing his duties hereunder or entail services which are well beyond his duties hereunder (in which event the parties shall mutually agree to acceptable additional remuneration in connection with such position and/or office).

4.4 The Executive will keep the CEO promptly and fully informed (in writing if so requested) of his conduct of the business or affairs of the Company and any Associated Company and provide such explanations as the CEO may require in connection therewith.

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5. Place of Work

The Executive’s place of work shall be                                         , or any location outside                                          as the Company and the Executive shall mutually agree. In the performance of his duties hereunder, the Executive may be required to travel both throughout and outside Asia.

6. Exclusivity of Service/Conflicts

6.1 During the period of the Executive’s employment hereunder the Executive shall devote such of his time and attention to his duties hereunder as is required to fulfill those duties and he shall not (without the prior written consent of the CEO) directly or indirectly either on his own account or on behalf of any other person, company, business entity or other organisation:

6.1.1 (i) engage in, or (ii) be concerned with, or (iii) provide services to, (whether as an employee, officer, director, agent, partner, consultant or otherwise) any other business in direct competition with the Company or any Associated Company; or

6.1.2 accept any public office;

PROVIDED THAT the Executive may not hold shares in a private company which is in direct competition with the Company; and

FURTHER PROVIDED THAT the Executive is entitled to devote his time and attention to other business interests provided that such interests do not conflict or interfere with the duties of the Executive as set out in this Agreement.

7. Remuneration

The remuneration of the Executive shall be:

(a) a monthly salary of US$                     payable in arrears such salary to include any sum receivable as other remuneration from any Associated Company, except as set forth herein.

(b) a discretionary bonus in cash or shares in such amounts (if any), at such times and subject to such conditions as the Compensation Committee of the Company may in its absolute discretion decide;

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8. Other Benefits

8.1 In addition to the foregoing remuneration and benefits, the Executive shall also be entitled to the following:

(a) the provision of medical, dental, travel and optical insurance under such insurance scheme as the CEO may decide from time to time at the expense of the Company for the benefit of the Executive, his spouse and dependent children under the age of 21;

(b) participation in any share option scheme which may be adopted by the Company, subject to the terms and conditions of such scheme from time to time in place; and

8.2 Details of the scheme(s) referred to in Clauses 8.1(a), (b) and (c) above can be obtained from the HR Department. The Company reserves the right to substitute other scheme(s) for such scheme(s) or amend the scale of benefits of such scheme(s) provided the level of benefits to the Executive is not diminished.

8.3 The Company represents that it has taken all corporate action necessary in order to enter into this Agreement and comply with the terms contained herein, including the payment of bonus and issuance of shares in accordance with terms of this Agreement and the Compensation Share Agreement.

8.4 The Company agrees that it shall obtain Officers and Directors liability insurance covering the Executive from a reputable internationally recognized insurance carrier, at such levels as is customary in the business conducted by the Company.

9. Expenses

The Company shall reimburse the Executive (against receipts or other satisfactory evidence) for all reasonable expenses properly incurred in the course of his employment hereunder or in promoting or otherwise in connection with the business of the Company and as set forth in this Agreement.

10. Deductions

The Company shall, to the extent permitted by s.32 of the Employment Ordinance of the Laws of Hong Kong, be entitled to deduct from the Executive’s remuneration hereunder any monies due from his to the Company or any Associated Company including, but not limited to, any outstanding loans, advances, the cost of repairing any damage to or loss of the Company’s property caused by his (and of recovering the same, only as adjudged by a court of competent jurisdiction) and any other monies owed by his to the Company or any Associated Company.

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11. Leave

11.1 The Executive shall be entitled to _____ working days’ per calendar year leave (in addition to public holidays) with full pay, which leave shall be taken at such time or times which do not interfere with the Executive carrying out his duties hereunder.

11.2 Unused annual leave may not be carried forward without the approval of CEO. Failure to take holiday entitlement in the appropriate holiday year will lead to forfeiture of any accrued holiday not taken without any right to payment in lieu thereof.

12. Termination

12.1 Notwithstanding the provisions of Sections 2 and 3, the Executive’s employment with the Company may be earlier terminated as follows:

12.1.1 By action taken by the CEO or the Board, the Executive may be discharged for cause (as hereinafter defined), effective as of such time as the CEO or the Board shall determine. Upon discharge of the Executive pursuant to this Section 12.1.1, the Company shall have no further obligation or duties to the Executive, except for payment of salary, issuance of all Shares earned, benefits, expenses and any earned but unpaid bonus, through the effective date of termination, and the Executive shall have no further obligations or duties to the Company. “Cause” means (i) the Executive’s indictment or conviction of a felony or crime involving moral turpitude or the Executive’s intentional commission of any other act or omission involving dishonesty, fraud or malfeasance; (ii) the Executive’s gross failure to perform duties of the office held by the Executive as reasonably directed by the CEO or Board of Directors, if such failure is not cured within ninety (90) days after the Executive receives written notice thereof; (iii) gross negligence or willful misconduct in the performance of the Executive’s duties which materially injures the Company or its reputation; or (iv) the Executive’s willful breach of any of the covenants of this Agreement.

12.1.2 In the event of (i) the death of the Executive or (ii) by action of the CEO or the Board and the inability of the Executive, by reason of physical or mental disability, to continue substantially to perform his duties hereunder for a period of 180 consecutive days, during which 180 day period salary and any other benefits hereunder shall not be suspended or diminished. Upon any termination of the Executive’s employment under this Section 12.1.2, the Company be responsible for paying to the Executive (or the Executive’s estate if applicable) a lump sum equal to the annual salary of the Executive in effect at the time of termination plus shares or bonus as provided in Section 7 above, plus the benefits in Section 8.1(a) for a period of one year following such termination. Provided that by way of example, if either of the aforementioned events occur, the Executive shall be entitled to such bonus enumerated in Clause 7 if at the end of such calendar year the Executive has achieved the predetermined milestones for which a bonus is to be paid.

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12.1.3 In the event (i) that Executive’s employment with the Company is terminated by action taken by the CEO or the Board of Directors without cause or (ii) there is a Change in Control (as hereinafter defined), or (iii) the Company fails to pay such bonus due to Executive in accordance with Section 7 in a timely fashion (in such event the Executive shall have the right to terminate this Agreement upon written notice to the Company, in which case the Company shall be responsible for the payments set forth below), then the Company shall be responsible for payment to the Executive of the salary amounts and such earned but unpaid bonus as provided in Section 7 above plus expenses incurred by the Executive as per Section 9 above and the benefits in Section 8.1(a) all of which shall be for a period through the life of this contract plus option extension following such termination, and Executive shall have no further obligations or duties to the Company . In the event such aforementioned termination and/or event occurs, the Company shall pay to the Executive within five business days after such termination/event a lump sum due the Executive whether due to Executive in cash or shares per section 7 above. Additionally, all options or other types of shares granted but not vested shall become immediately vested. Additionally, the Company or it successors shall be required at the Executive’s option to purchase all of the Executives shares at $2.24 USD per share or market price whichever is higher.

All amounts payable to the Executive pursuant to this Section 12.1.3 shall be paid to the Executive in one lump-sum payment within five business days after such termination. Provided that by way of example, if either of the aforementioned events occur, the Executive shall be entitled to such compensation enumerated in Clause 7 if at the end of such calendar year the Executive has achieved the predetermined milestones.

12.2 For purposes of this Agreement a “Change in Control” shall be deemed to occur, unless previously consented to in writing by the Executive, in case the Company shall, consolidate or merge with or into another corporation (whether or not the Company is the surviving corporation or where there is a change in or distribution with respect to the stock of the Company), or sell, transfer or otherwise dispose of a substantial portion, all or substantially all of its shares, property, assets or business to another corporation or investor and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Agreement to be performed and observed by the Company and all the obligations hereunder.

12.3 Forthwith upon the termination of the employment of the Executive hereunder, provided the parties are not involved in a dispute over such materials, if the Company shall so request, the Executive shall deliver to the Company all documents (including correspondence, lists of customers, notes, memoranda, plans, drawings and other documents of whatsoever nature), models or samples made or compiled by or delivered to the Executive during his employment hereunder, in connection with his duties hereunder, and concerning the business, finances or affairs of the Company or any Associated Company. For the avoidance of doubt it is hereby declared that the property in all such documents as aforesaid shall at tall times be vested in the relevant Associated Company.

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12.4 The Executive acknowledges that the Company may, during all or any part of any period of notice whether given by the Company or the Executive to terminate the Executive’s employment under this Agreement, require the Executive not to attend work and/or not to undertake all or any of his duties and/or exclude his from any premises of the Company, provided that for the avoidance of doubt during such period the Executive shall continue to receive salary and other contractual benefits provided by this Agreement.

12.5 The Executive agrees that he will not at any time after the termination of the Employment represent himself as still having any connection with the Company or any Associated Company, save as a former employee for the purpose of communicating with prospective employers or complying with any applicable statutory requirements.

13. [Intentionally Omitted]

14. Reasonableness of Restrictions

The Executive recognises that, whilst performing his duties for the Company, he will have access to and come into contact with trade secrets and confidential information belonging to the Company or to Associated Companies and will obtain personal knowledge of and influence over its or their customers and/or employees. The Executive therefore agrees that the restrictions contained or referred to in Clauses 15 and 16 and Schedule 1 are reasonable and necessary to protect the legitimate business interests of the Company and the Associated Companies both during and after the termination of his employment.

15. Confidentiality

15.1 The Executive shall neither during the Employment (except in the proper performance of his duties) nor one year after the termination thereof by the Company for cause (as defined above) or termination by the Executive, directly or indirectly

15.1.1 use for his own purposes or those of any other person, company, business entity or other organisation whatsoever; or

15.1.2

disclose to any person, company, business entity or other organisation whatsoever.

any trade secrets or confidential information belonging to the Company or any Associated Company including but not limited to any such information relating to customers, customer lists or requirements, price lists or pricing structures, sales and marketing information, business plans or dealings, employees or officers, source codes and computer systems, software, financial information and plans, designs, formulae, prototypes, product lines, services, research activities, which are expressly proprietary to the Company or any Associated Company and not in the knowledge of the Executive prior to the date of this Agreement, any document marked ‘Confidential’ (or with a similar expression), or any information which the Executive has been told is confidential or which he might reasonably expect the Company would regard as confidential, or any information which has been given to the Company or any Associated Company in confidence by customers, suppliers or other persons.

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15.2 The obligations contained in Clause 15.1 shall cease to apply to any information or knowledge which may subsequently come into the public domain other than by way of unauthorised disclosure, or any such information which is the subject of a lawful court order then in effect.

16. Copyright, Inventions and Patents

16.1 The Executive will promptly disclose to the Company and to no one else all copyright works or designs originated, conceived, written or made by him alone or with others in the course of his employment (except only those works originated, conceived, written or made by him wholly outside his normal working hours and which are wholly unconnected with his employment).

16.2 All records, documents, papers (including copies and summaries thereof) and other copyright protected works made or acquired by him in the course of his employment shall, together with all the worldwide copyright and design rights in all such works, be and at all times remain the absolute property of the Company.

16.3 The Executive hereby irrevocably and unconditionally waives in favour of the Company all rights granted by the Copyright Ordinance 1997 in connection with his authorship of any copyright works in the course of his employment with the Company, including without limitation any moral rights and any right to claim an additional payment with respect to use or exploitation of those works.

16.4 The Executives agree that his compensation in this Agreement are full compensation for his services and all present and future uses of copyright works made by him in the course of his employment.

16.5 If, at any time during the Executive’s employment under this Agreement, he (whether alone or with any other person or persons) shall make any invention which relates directly to the business of the Company or any Associated Company or was made or acquired in course of his employment, he will promptly disclose to the Company and no-one else full details, including drawings and models, of such invention.

16.6 If the Executive makes any inventions that do not belong to the Company under the Patents Ordinance 1997, he agrees that he will forthwith agree that the Company shall have the first right to exclusively license such inventions. The Company will pay to the Executive such compensation for the license as the Executive and the Company agree, with such compensation being in lines with the standard in such industry. If the parties do not agree then the Executive shall be entitled to license such invention to other parties.

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16.7 The Executive will, at the request and expense of the Company both during and after the termination of his employment under this Agreement, do all things necessary or desirable to perfect the rights of the Company under this Clause 16, provided no bona fide dispute exists.

17. Post-Termination Obligations

17.1 The Executive agrees that he will observe the post-termination obligations set out in Schedule 1 for a period of one year.

18. [Intentionally Omitted]

19. Warranty

The Executive represents and warrants that he is not prevented by any agreement, arrangement, contract, understanding, court order or otherwise, which in any way directly or indirectly restricts or prohibits him from fully performing the duties of his employment hereunder, or any of them, in accordance with the terms and conditions of this Agreement.

20. Indemnification

The Company shall indemnify and hold harmless the Executive against any and all expenses reasonably incurred by him in connection with or arising out of (a) the defense of any action, suit or proceeding in which he is a party, or (b) any claim asserted or threatened against him, in either case by reason of or relating to his being or having been an employee, officer or director of the Company, provided the Executive has acted in the best interests of the Company and has not acted in bad faith, whether or not he continues to be such an employee, officer or director at the time of incurring such expenses, except insofar as such indemnification is prohibited by law. Such expenses shall include, without limitation, the fees and disbursements of attorneys, amounts of judgments and amounts of any settlements. Such amounts do not need to be agreed to in advance by the Company. The foregoing indemnification obligation is independent of any similar obligation provided in the Company’s organization documents or Articles of Association, and to matters attributable to his employment hereunder, without regard to when asserted. No indemnification shall be available to the Executive in the event of actions by Executive which are in violation of this Agreement, however, in the event of actions by Executives which are in violation of this Agreement, however, in the event of the Company terminates the Executives, the Company shall pay for Executive’s legal representation in any settlement discussions. Additionally, in the event of any disputes, the Company shall pay all costs of Executives separate counsel, whether or not the Company deems those expenses reasonable.

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21. Notices

21.1 Each notice, demand or other communication given or made under this Agreement shall be in writing and delivered or sent to the relevant party at its address or fax number set out below (or such other address or fax number as the addressee has by five business days’ prior written notice specified to the other party):

To the Company:	Xinhua Sports & Entertainment Limited
	Fax number:	(86-10) 8567 6074
	Attention:	CEO
To the Executive:

21.2 Any notice, demand or other communication so addressed to the relevant party shall be deemed to have been delivered (a) if given or made by letter, when actually delivered to the relevant address; and (b) if given or made by fax, when dispatched subject to receipt of machine-printed confirmation of error-free dispatch.

21.3 Any notice to be given hereunder may be delivered (a) in the case of the Company by first class post addressed to its Registered Office or via facsimile, and (b) in the case of the Executive, either to him personally or by first class postage to his last known address.

22. Miscellaneous

22.1 The various provisions and sub-provisions of this Agreement and the Schedules are severable and if any provision or sub-provision is held to be unenforceable by any court of competent jurisdiction then such unenforceability shall not affect the enforceability of the remaining provisions or sub-provisions in this Agreement or the Schedules.

22.2 The benefit of each agreement and obligation of the Executive under Clause 15 and Schedule 1 may be assigned to and enforced by all successors and assigns for the time being of the Company and each Associated Company and such agreements and obligations shall operate and remain binding notwithstanding the termination of this Agreement.

22.3 This Agreement cancels and is in substitution for all previous letters of engagement, agreements and arrangements (whether oral or in writing) relating to the subject-matter hereof between the Company and the Executive all of which shall be deemed to have been terminated by mutual consent. This Agreement constitutes the entire terms and conditions of the Executive’s employment and no waiver or modification thereof shall be valid unless in writing, signed by the parties and only to the extent therein set forth.

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22.4 No failure or delay by the Company in exercising any right, power or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of the same preclude any further exercise thereof or the exercise of any other right, power or remedy. Without limiting the foregoing, no waiver by the Company of any breach by the Executive of any provision in this Agreement shall be deemed to be a waiver of any subsequent breach of that or any other provision in this Agreement.

22.5 This Agreement shall be governed by and construed in accordance with the laws of Hong Kong and the parties hereby irrevocably submit to the non-exclusive jurisdiction of the Hong Kong courts.

SIGNED by the parties on the date first above written.

                                                                                                                        
For and on behalf of

XINHUA SPORTS & ENTERTAINMENT LIMITED

in the presence of:

SIGNED SEALED AND DELIVERED
AS A DEED by

in the presence of:

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Schedule 1

Post-Termination Restrictions

1. Non-Competition

The Executive hereby agrees that he shall not (without the written consent of the CEO) for the Relevant Period within the Prohibited Area and whether on his own behalf or in conjunction with or on behalf of any other person, firm, company or other organisation, (and whether as an employee, director, principal, agent, consultant or in any other capacity whatsoever,) in competition with the Company directly or indirectly (i) be employed or engaged in, or (ii) perform services in respect of, or (iii) be otherwise concerned with:

1.1 the research into, development, manufacture, supply or marketing of any product which is of the same or similar type to any product researched, or developed, or manufactured, or supplied, or marketed by the Company during the 12 months immediately preceding the Termination Date;

1.2 the development or provision of any services (including but not limited to technical and product support, or consultancy or customer services) which are of the same or similar type to any services provided by, or known by the Executive to be in development by, the Company during the 12 months immediately preceding the Termination Date;

2. Non-Solicitation of Customers

The Executive hereby agrees that he shall not for the Relevant Period whether on his own behalf or in conjunction with or on behalf of any person, company, business entity or other organisation (and whether as an employee, director, principal, agent, consultant or in any other capacity whatsoever), directly or indirectly (i) solicit or, (ii) assist in soliciting, or (iii) accept, or (iv) facilitate the acceptance of, or (v) deal with, in competition with the Company, the custom or business of any Customer or Prospective Customer.

3. Non-Solicitation of Employees

The Executive hereby agrees that he will not for the Relevant Period either on his own behalf or in conjunction with or on behalf of any other person, company, business entity, or other organization (and whether as an employee, principal, agent, consultant or in any other capacity whatsoever), directly or indirectly:-

3.1 (i) induce, or (ii) solicit, or (iii) entice or (iv) procure, any person who is a Company Employee to leave the Company’s or any Associated Company’s employment (as applicable) where that person is a Company Employee on the Termination Date or during the Relevant Period;

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3.2 be personally involved to a material extent in (i) accepting into employment or (ii) otherwise engaging or using the services of, any person who is a Company Employee on the Termination Date.

4. Interference with Suppliers/Joint Venture Partners/Company Employees

The Executive hereby agrees that he shall not (i) for the Relevant Period, and (ii) in relation to any contract or arrangement which the Company has with any joint venture partner, Company Employee, or Supplier for the exclusive supply of goods or services to the Company and/or to its Associated Companies, for the duration of such contract or arrangement, whether on his own behalf or in conjunction with or on behalf of any person, company, business entity or other organization, (and whether as an employee, director, agent, principal, consultant or in any other capacity whatsoever), directly or indirectly:

4.1 interfere with the supply of goods or services to the Company from any Supplier, Company Employee, or joint venture partner;

4.2 induce any Company Employee, joint venture partner, or Supplier of goods or services to the Company to cease or decline to supply such goods or services in the future.

5. Associated Companies

5.1 Paragraphs 1, 2, 3, 4, and 6 in this Schedule 1 shall apply as though references to the “Associated Company” were substituted for references to the “Company”. The obligations undertaken by the Executive pursuant to this Schedule shall, with respect to each Associated Company, constitute a separate and distinct covenant and the invalidity or unenforceability of any such covenant shall not affect the validity or enforceability of the covenants in favour of the Company or any other Associated Company.

5.2 In relation to each Associated Company referred to in paragraphs 5.1 above, the Company contracts as trustee and agent for the benefit of each such Associated Company. The Executive agrees that, if required to do so by the Company, he will enter into covenants in the same terms as those set out in paragraphs 1, 2, 3, 4, and 6 hereof directly with all or any of such Associated Companies, mutatis mutandis. If the Executive fails, within seven business days of receiving such a request from the Company, to sign the necessary documents to give effect to the foregoing, the Company shall be entitled, and is hereby irrevocably and unconditionally authorised by the Executive, to execute all such documents as are required to give effect to the foregoing, on his behalf.

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6. Definitions

For the purposes of this Schedule, the following words and expressions shall have the meanings set out below:

6.1 “Associated Company”, “CEO”, and “Company” shall have the meanings set out in the Agreement attached hereto, and shall include their successors in title and assigns (as applicable).

6.2 “Company Employee” means any person who was employed by (i) the Company or (ii) any Associated Company, for at least one month during Executive’s employment with the Company or during the Relevant Period.

6.3	“Customer” shall mean any person, firm, company or other organisation whatsoever to whom the Company has supplied goods or services.
6.4	“Prohibited Area” means:

6.4.1

Hong Kong;

6.4.2

any other country in the world where, on the Termination Date, the Company develops, sells, supplies, manufactures or researches its products or services or where the Company is intending within 3 months following the Termination Date to develop, sell, supply or manufacture its products or services and in respect of which the Executive has been responsible (whether alone or jointly with others), concerned or active on behalf of the Company during any part of the 12 months immediately preceding the Termination Date.

6.5 “Prospective Customer” shall mean any person, firm, company or other organisation with whom the Company has had any material negotiations or material discussions regarding the possible supply of goods or services by the Company.

6.6 The “Relevant Period” shall mean, solely in the event of termination by the Company of the Executive with cause (as defined in the Agreement) the 12 months immediately following the Termination Date. PROVIDED that the Relevant Period shall be the Termination Date in the event of termination of the Executive Services Agreement for any other reason whatsoever.

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6.7 “Supplier” means any person, company, business entity or other organisation whatsoever who:

6.7.1 has supplied goods or services to the Company during any part of the 12 months immediately preceding the Termination Date; or

6.7.2	has agreed prior to the Termination Date to supply goods or services to the Company to commence at any time in the 12 months following the Termination Date; or
6.7.3	as at the Termination Date, supplies goods or services to the Company under a contract or arrangement between that Supplier and the Company.

6.8 “Termination Date” shall mean the date upon which the Executive’s employment with the Company terminates.

SIGNED by the parties on the date first above written.

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EX-4.63

Exhibit 4.63

8 March 2010

XINHUA SPORTS & ENTERTAINMENT LIMITED
c/o Suite 2103-4 Vicwood Plaza
199 Des Voeux Road Central
Hong Kong

Attention: Board of Directors

Dear Sirs:

          Re: Bridge Loan in the Amount of $1.5 million USD.

The undersigned (the “Lender”) is pleased to make a loan available to Xinhua Sports & Entertainment Limited (the “Borrower”) for in accordance with the terms and conditions as set forth below.

Purpose of Bridge Loan

The loan (the “Bridge Loan") will be applied by the Borrower for working capital purposes and will be repaid as provided in this letter agreement.

Availability and Repayment

The principal amount of the Bridge Loan shall be advanced in its entirety on March 2, 2010 or such other date as may be mutually agreed by the Lender and the Borrower. The Borrower shall repay the principal amount of the Bridge Loan upon the earlier of i) the closing of the sale of its equity interest in Beijing Jinguan Xincheng Advertising; and ii) the consummation of a capital raising exercise by the Borrower for net proceeds at least equal to the principal amount of the Bridge Loan plus any accrued and unpaid interest.

The Borrower may prepay the amount outstanding under the Bridge Loan in whole or in part at any time.

Interest

The principal amount of the Bridge Loan outstanding from time to time shall bear interest, both before and after maturity, default and judgment, at four (4%) per cent per annum.

Interest on amounts outstanding under the Bridge Loan shall accrue daily on the basis of actual number of days elapsed in the year of 365 days (or 366 days in a leap-year) and shall, subject to the requirement to repay accrued but unpaid interest at the time of repayment or prepayment of principal, be payable in arrears on final maturity, to the Lender at the location specified above, with interest on overdue interest, as well after as before default, maturity and judgment as hereinafter provided.

Any payment of principal or interest which becomes due under the Bridge Loan on a day which is not a day on which banks are open for business in Hong Kong (a “Business Day”) shall be paid on the next following Business Day, and such extension shall be taken into account for the calculation of interest and overdue interest.

All calculations of interest shall be made by the Lender, and such calculations shall, in the absence of manifest mathematical error, be final, conclusive and binding on the Borrower. The indebtedness of the Borrower in respect of the advance made by the Lender to the Borrower and interest payable hereunder shall, absent manifest mathematical error, be conclusively evidenced by the books and records of the Lender.

Events of Default

Upon the happening of any of the following events (each an “Event of Default"), the Lender may, by notice in writing, accelerate the maturity of the Bridge Loan and require immediate payment of all amounts due:

1. If the Borrower fails to pay to the Lender any amount of principal or interest for a period of seven days after such principal or interest is due.

2. If an order is made or an effective resolution is passed for the winding-up, liquidation, reorganization or dissolution of the Borrower (except for the purposes of a bona fide corporate reorganization previously approved in writing by the Lender), or if the Borrower makes a general assignment for the benefit of creditors in any other jurisdiction, or is declared bankrupt, or if a custodian or a sequestrator or a receiver or a receiver and manager or any other officer with similar powers is appointed for the Borrower or its property or any portion of such property which is, in the Lender’s opinion, substantial.

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3. If any material part of any property of the Borrower is taken by any governmental authority by the exercise of any power of expropriation or otherwise.

4. If the Borrower fails to pay any indebtedness, or any interest or premium, on indebtedness when due (whether at stated maturity or by required prepayment, acceleration, demand or otherwise) and such failure continues after the applicable grace period, if any, specified in the agreement or instrument relating to such indebtedness; or any other default under any agreement or instrument relating to such indebtedness, or any other event, shall occur and shall continue after the applicable grace period if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate, or to permit the acceleration of, the maturity of such indebtedness; or any such indebtedness is declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment) prior to its stated maturity.

Miscellaneous

This letter agreement and the parties respective obligations hereunder shall be subject to the requirement of the Borrower to obtain the prior approval of the Audit Committee of its Board of Directors.

The advance of the Bridge Loan and accrued interest shall be repaid or paid in United States dollars. All dollar amounts referred to in this letter agreement shall be deemed to refer to United States dollars.

The Lender may assign all or otherwise transfer all or any part of, or may grant participation in all or any part of, its interests in the Bridge Loan to any other party, and such other party shall then become vested with all the rights granted to the Lender in this letter agreement or otherwise. This letter agreement may not be assigned by the Borrower without the prior written consent of the Lender.

This letter agreement and shall be governed by and interpreted and enforced in accordance with the laws of Hong Kong.

Any notice, direction or other communication required or permitted to be given under this letter agreement shall be in writing and given by delivering it or sending it by facsimile or other similar form of recorded communication addressed:

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(a)	if to the Borrower, to it at: Suite 2103 Vicwood Plaza 199 Des Voeux Road Central, Hong Kong Attention: Board of Directors Facsimile: 852 2541 8266
(b)	if to the Lender, to it at: Unit PH3, Block 3, Park Avenue No 6 Chao Yang Gong Yuan Nan Lu Chao Yang District, Beijing 100026, China Attention: Chloe Meng Telephone: 86 135 8185 6130 Facsimile: 8610 8587 4166

Any communication shall be deemed to have been validly and effectively given (i) if personally delivered, on the date of such delivery if such date is a Business Day and such delivery was made prior to 4:00 p.m. (Beijing time), (ii) if transmitted by facsimile or similar means of recorded communication on the Business Day following the date of transmission. Any party may change its address for service from time to time by notice given in accordance with the foregoing and any subsequent notice shall be sent to the party at its changed address.

As the context requires, words importing the singular number shall include the plural and vice versa, and words importing gender including the masculine, feminine and neuter genders.

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Please evidence your approval and acceptance of this letter agreement by signing and returning the enclosed copy on or before March 2, 2010.

Yours truly,
CHLOE MENG
By:	/s/ Chloe Meng
	On behalf of Dragon Arena

The undersigned agree to and accept this letter agreement on and subject to its terms and conditions.

XINHUA SPORTS & ENTERTAINMENT LIMITED
By:	/s/ Aloysius T. Lawn, IV

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EX-4.64

Exhibit 4.64
English Translation

China Oceanwide Holdings Group Co., Ltd.

and

Century Effort Limited

and

EO Publications Development Limited

and

Beijing Taide Advertising Co., Ltd.

PURCHASE AGREEMENT
IN RESPECT OF
SHARES IN THE CAPITAL OF
EO PUBLICATIONS DEVELOPMENT LIMITED AND
OTHER EQUITY INTERESTS SET OUT HEREIN

May 12, 2010

THIS PURCHASE AGREEMENT (this “Agreement”) is made and entered into by and among the following parties on 12 May, 2010 in Beijing, PRC:

BETWEEN

1. China Oceanwide Holdings Group Co., Ltd., a company incorporated under the laws of the PRC with registration number 100000000007739 and its registered address located at 20F, Tower A, Minsheng Financial Center, No. 28 Jianguomennei Avenue, Dongcheng District, Beijing, as Purchaser (“Purchaser”);

2. EO Publications Development Limited, a company incorporated under the laws of the British Virgin Islands, with registration number 1573253 and its registered address located at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands (the “Company”);

3. Century Effort Limited, a company incorporated under the laws of the British Virgin Islands with registration number 1524622 and its registered address located at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands, as Vendor (“Vendor”);

4. Beijing Taide Advertising Co., Ltd., a company incorporated under the laws of the People’s Republic of China with registration number 1101081806271, as Covenantor (“Covenantor”).

WHEREAS

A. The Vendor holds the legal and beneficial interest in the Company Share (representing all of the total issued share capital for the Company).

B. The Purchaser desires to purchase and the Vendor wish to sell to the Purchaser all of the Company Shares it owns and sells and procure the sale of some other equity interests as stipulated in this Agreement subject to the terms and conditions set out in this Agreement.

C. The Covenantor holds 100% equity interests of Jingguanxincheng and 50% equity interests of Jingshijingguan, Jingguanxincheng holds the remaining 50% equity interests in Jingshijingguan, and the Company is the defacto controller of Jingguanxincheng and Jingshijingguan.

NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth herein, the sufficiency, adequacy and receipt of which are hereby acknowledged, the Purchaser, the Company, the Vendor and the Covenantor do hereby agree as follows:

1. DEFINITIONS

1.1 Definitions. The following terms, as used herein, have the following meanings:

“PRC “ means the People’s Republic of China;

“Jingguanxincheng” means Beijing Jingguanxincheng Advertising Co., Ltd, a company incorporated under the laws of PRC with registration number 1101111930073 and registered address located at No. 18-C66 Jianshe Road, Kaixuan Avenue, Fangshan District, Beijing, PRC, the particulars of which are set out in Appendix B;

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“Jingshijingguan” means Beijing Jingshijingguan Advertising Co., Ltd, a company incorporated under the laws of PRC with registration number 1101111970696 and registered address located at No. 18-C68 Jianshe Road, Kaixuan Avenue, Fangshan District, Beijing, PRC, the particulars of which are set out in Appendix B;

“PRC Companies” means, collectively, Jingguanxincheng and Jingshijingguan;

“Siwei Media” means, Beijing Siwei Media Advertising Co., Ltd.

“Affiliates” of a specified Person means 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 or, in the case of a natural Person, such Person’s spouse, parents and descendants (whether by blood or adoption and including stepchildren);

“Business Day” means any Monday, Tuesday, Wednesday, Thursday and Friday on which banks in Hong Kong or the PRC are required or permitted by laws to be open;

“Foreign Closing” has the meaning ascribed to it in Clause 2.2;

“PRC Closing” has the meaning ascribed to it in Clause 3.1;

“Alteration Registration Date of Domestic Equity Interests” has the meaning ascribed to it in Clause 3.1 (f);

“Closing Date” means the latter of the Alteration Registration Date of Domestic Equity Interests of Jingguanxincheng and Jingshijingguan;

“Alteration Registration Date of Foreign Equity Interests” means the date for registration of the ownership of the equity interests in the Company in the name of the Purchaser;

“Closing Payment” has the meaning ascribed to it in Clause 4;

“Financial Statements”, means, to Jingguanxincheng and Jingshijingguan respectively, the financial statements of Jingguanxincheng and Jingshijingguan as of March 31, 2010 as set out in Appendix F and Appendix G.

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“Accounting Date” means, to Jingguanxincheng and Jingshijingguan respectively, the cutoff date of the financial statements of Jingguanxincheng and Jingshijingguan as set out in Appendix F and Appendix G.

“Company Shares” means all of the share capital of the Company being ordinary shares each with a par value of US$1.00 in the capital of the Company;

“Governmental Department” means any court, regulatory body, administrative agency or commission or other governmental body, whether domestic or overseas;

“Person” or “Persons” means any natural person, corporation, company, association, partnership, organization, business, firm, joint venture, trust, unincorporated organization or any other entity or organization including any Governmental Department;

“Approval” means any consent, approval, permit, license, order, or authorization of or registration, declaration, or filing with or exemption by or from a Governmental Department;

“Control”, “Controls”, “Controlled” (or any correlative term) means the possession, directly or indirectly, of the power to direct or cause the direction of the management of a Person, whether through the ownership of voting securities, by contract, credit arrangement or proxy, as trustee, executor, agent or otherwise. For the purpose of this definition, a Person shall be deemed to Control another Person if such first Person, directly or indirectly, owns or holds more than 50% of the voting equity interests in such other Person;

“Domestic Equity Interests” means all the equity interests of Jingguanxincheng and Jingshijingguan on the execution date of this Agreement (for Jingshijingguan, including 50% shares held by Jingguanxincheng and 50% shares held by Covenantor), particulars of which are set in Appendix B, as well as relevant assets interests contemplated in this Agreement.

“Designee” means China Oceanwide International Holdings Co., Ltd. (an offshore company, with its English name of China Oceanwide International Holdings Co., Ltd.), designated by the Purchaser, to pay Foreign Closing Payment to the Vendor and being transferred the Company Shares;

“Disclosing Party” has the meaning ascribed to it in Clause 9.4;

“PRC Closing Payment” means the payment of Domestic Equity Interests, which shall be determined in accordance with Clause 4.2;

“Foreign Closing Payment” means the payment of all the Company Shares, which shall be determined in accordance with Clause 4.1;

“Encumbrance” means and includes any interest or equity of any person (including, without prejudice to the generality of the foregoing, any right to acquire, option or right of first refusal) or any mortgage, charge, pledge, lien or assignment or any other encumbrance, priority or security interest or arrangement of whatsoever nature over or in the relevant property;

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“Group” means, collectively, the Company and the PRC Company;

“Share Arrangements and Business Operation Agreements” means contracts, agreements and documents set out in Appendix A;

“Hong Kong” means the Hong Kong Special Administrative Region of the PRC;

“Indemnified Party” has the meaning ascribed to it in Clause 7.4;

“Indemnifying Party” has the meaning ascribed to it in Clause 7.4;

“Losses” has the meaning ascribed to it in Clause 7;

“Non-Disclosing Parties” has the meaning ascribed to it in Clause 9.4;

“RMB” or “Renminbi” means the lawful currency of the PRC;

“US$” and “US Dollars” means the lawful currency of the United States of America;

“XSEL” refers to Xinhua Sports & Entertainment Limited, a Cayman Island incorporated company.

1.2 Interpretation. In this Agreement:

(a) the headings are inserted for convenience only and shall not affect the construction of this Agreement;

(b) references to statutory provisions shall be construed as references to those provisions as of the date of this Agreement, as amended or re-enacted or as their application is modified by other statutory provisions (whether before or after the date hereof) from time to time and shall include any provisions of which they are re-enactments (whether with or without modification);

(c) all time and dates in this Agreement shall be PRC time and dates except where otherwise stated;

(d) references herein to clauses, recitals and appendices are to clauses, recitals of and apendixes to this Agreement.

1.3 Recitals and Appendix. All recitals and appendices form part of this Agreement and shall have the same force and effect as if expressly set out in the body of this Agreement and any reference to this Agreement shall include the recitals and appendices.

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2. SALE AND PURCHASE OF COMPANY SHARES

2.1 Sale and Purchase of Company Shares. Subject to the terms and conditions set out in this Agreement, the Purchaser or the Designee agrees with the Vendor to purchase for the Foreign Closing Payment all of the Company Shares, and the Vendor and Covenantor agree to procure to sell or cause to be sold to the Purchaser or Designee for PRC Closing Payment, all of the Domestic Equity Interests. All parties hereby confirm that, the Vendor and the Covenantor will abandon the undistributed profit of the PRC Company ever since 2006, and at the premise that the Foreign Closing and PRC Closing has completed in accordance with this Agreement, and the Purchaser and Designee have paid the Vendor and Covenantor or any their designee the payments as stipulated in this Agreement (or any other related agreements):

(a) Beginning from the Alteration Registration Date of Foreign Equity Interests, the Purchaser or the Designee shall own all of the Company Shares, as well as the dividends (which includes any kinds of dividends) starting from April 1, 2010. In addition, the Vendor covenants that the Company Shares are free from all options, liens, charges, pledges, claims, agreements, Encumbrances, equities and other third party rights of any nature whatsoever before and at Alteration Registration Date of Foreign Equity Interests. With respect to the Company Shares, the Vendor and the Covenantor shall unconditionally afford all the liabilities generated in case there is any options, liens, charges, pledges, claims, agreements, Encumbrances, equities and other third party rights of any nature whatsoever before or on the Alteration Registration Date of Foreign Equity Interests which cause the Purchaser being alleged the recourse by any third parity, or any of the Company, the PRC Company or the Purchaser to afford any liabilities.

(b) Beginning from the respective Alteration Registration Date of Domestic Equity Interests in respect of Jingguanxincheng and Jingshijingguan, the Purchaser or the Designee shall own relevant Domestic Equity Interests. In addition, the Vendor and the Covenantor covenant that the Domestic Equity Interests are free from all options, liens, charges, pledges, claims, agreements, Encumbrances, equities and other third party rights of any nature whatsoever on the Alteration Registration Date of Domestic Equity Interests. With respect to the Domestic Equity Interests, the Vendor and the Covenantor shall unconditionally afford all the liabilities generated in case there is any options, liens, charges, pledges, claims, agreements, Encumbrances, equities and other third party rights of any nature whatsoever before or on the Alteration Registration Date of Domestic Equity Interests which cause the Purchaser being alleged the recourse by any third party, or any of the Company, the PRC Company or the Purchaser to afford any liabilities.

2.2 Foreign Closing. The sale and purchase of Company Shares (“Foreign Closing”) shall take place at a place agreed by the parties. The occurance of the Alteration Registration Date of Foreign Equity Interests shall be deemed as the completion of the Foreign Closing.

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2.3 The Vendors’ Closing Obligations. Within 7 Business Days of the execution of the Agreement, the Vendor and the Covenantor shall deliver or procure to be delivered to the Purchaser or the Designee the following documents:

(a) duly completed and signed instrument of transfers of the Company Shares hold by the registered shareholders thereof in favour of the Purchaser or any entity as it may designate together with the share certificates representing the applicable Company Shares;

(b) duly completed and signed letters of resignation from existing directors and company secretary (where applicable) of the Company;

(c)	completion of the resignation of the existing directors and company secretary (where applicable), the appointment of the persons nominated by the Vendor or Designee to be new directors and company secretary, execution of shareholders’ and directors’ resolution approving the transfer of the Company Shares;
(d)	any books and records of the Company (if any);
(e)	any seal , specimen signature and credit voucher of the Company (if any);

(f) written notice issued to the BVI agent of the Company notifying them of the change in authorised contact person;

(g) relevant documents submitted to registration authority in order to register the transfer of Company Shares and cause the Purchaser or the Designee to be duly registered as shareholder of the Company.

3. SALE AND PURCHASE OF DOMESTIC ENQUITY INTERESTS

3.1 Domestic Equity Interests. At the same time the execution of this Agreement, the Vendor and the Covenantor shall, as soon as practicable, procure and ensure the transfer of all the Domestic Equity Interests to the Purchaser or Designee(“PRC Closing”), the occurrence of the latter of the Alteration Registration Date of the Domestic Equity Interests in respect of Jingguanxincheng and Jingshijingguan shall be deemed as the completion of the PRC Closing and the Vendor and the Covenantor shall guarantee to fulfil the following procedures:

(a) Provision of a statement by the Covenantor at the execution date of this Agreement, listing all the cash income and expenses of Jingguanxincheng and Jingshijingguan from the Accounting Date till the execution date of this Agreement (as stated in Appendix H), and all the documents binding upon Jingguanxincheng and Jingshijingguan executed during the same period (as stated in Appendix E);

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(b) On the date this Agreement is executed or the following date, the Covenantor to execute with the Purchaser or Designee the Share Transfer Agreement with respect to the Domestic Equity Interests of Jingguanxincheng and Jingshijingguan, to sell and transfer all of the Domestic Equity Interests;

(c) The resignation of the present directors and legal representative of Jingguanxincheng and Jingshijingguan;

(d) Amending the articles of association of Jingguanxincheng and Jingshijingguan;

(e) Completely settling the current account (as disclosed in Appendix I) generated between Jingguanxincheng or Jingshijingguan as one party and XSEL or any of its Affiliates as the other before the Closing Date; and

(f) the registration of the ownership of the Domestic Equity Interests in the name of the Purchaser or Designee (the “Alteration Registration Date of Domestic Equity Interests”,for Jingguanxincheng, the registration of 100% equity interests of Jingguanxincheng held by Covenantor in the name of the Purchaser or Designee; for Jingshijingguan, the registration of 50% of Jingshijingguan held by Covenantor in the name of the Purchaser or Designee).

3.2 Frozen Period. The Vendor and the Covenantor warrant and represent to the Purchaser that, unless the consent of the Purchaser is obtained, the Company , Jingguanxincheng and Jingshijingguan shall not sign any contract, agreement and memorandum or other documents binding on Company, Jingguanxincheng or Jingshijingguan during the period from the execution date of this Agreement to the relevant Alteration Registration Date of Domestic Equity Interests (the “Frozen Period of Company”). Furthermore, the Covenantor warrant and represent, unless the consent of the Purchaser is obtained, Covenantor shall not sign any documents in relation to the Company, Jingguanxincheng or Jingshijingguan (except for the documents for the equity transfer stated herein) during the Frozen Period of Company. The documents executed by the Company, Jingguanxincheng or Jingshijingguan pursuant to the requirements by the Governmental Department (e.g. relevant documents filed with the relevant Governmental Department to pay the taxes) shall not apply, however, the Purchaser shall be informed .

3.3 Transfer Procedures. The Vendor and the Covenantor undertake to the Purchaser that as soon as practicable after the execution and delivery of this Agreement and within seven (7) Business Days from the payment by the Purchaser and the Designee set out in Clause 4.1(b) and Clause 4.2(c), they shall assist the Purchaser, the Designee, Jingguanxincheng and Jingshi Jingguan to file and submit all documents required for the equity transfer of the Domestic Equity Interests to relevant Governmental Department.

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3.4 Governance Documents of PRC Company. At the Alteration Registration Date of Domestic Equity Interests in respect of Jingguanxincheng and Jingshijingguan, the Vendor and the Covenantor shall deliver all of the record books, records, filings, documents, certificates, company chops and financial chops of Jingguanxincheng and Jingshijingguan to the Purchaser and Designee.

3.5 The Purchaser’s Further Assurance. The Purchaser guarantees to procure the Purchaser or Designee to transfer, after the completion of the PRC Closing, 20% of the equity interests in Jingguanxincheng to the management of Jingguanxincheng as set out in Appendix D in consideration of RMB 1.

3.6 Cash of RMB 9,000,000. The Vendor shall guarantee at the Closing Date, the cash registered in the company account of Jingguanxincheng and Jingshijingguan shall not be less than RMB 9,000,000.

4. CLOSING PAYMENT

The Purchaser, the Vendor and the Covenantor jointly agree that the transfer of Company Shares and the transfer of Domestic Equity Interests under this Agreement shall be seemed as mutual premises and indivisible. The total consideration of the above transaction shall be US$ 24,000,000 or Renminbi of equivalent amount (the “Closing Payment”) (the exchange rate of US$ and RMB under or relating to this Agreement shall be 1: 6.827).

The Purchaser or the Designee will purchase the Company Shares and pay US dollars to Vendor (“Foreign Closing Payment”). The Purchaser or the Designee and the Vendor shall jointly procure the transfer of Domestic Equity Interests, for which the Purchaser or its Designee shall pay Renminbi to the Vendor or its affiliates (“PRC Closing Payment”).

Notwithstanding how the specific number of Foreign Closing Payment and PRC Closing Payment is determined, the sums of Foreign Closing Payment and PRC Closing Payment shall be equal to the Closing Payment.

4.1 Foreign Closing Payment.

(a) The Purchaser, the Vendor and the Covenantor jointly agree that the payment of Company Shares transferred from the Vendor to the Purchaser or Designee under this Agreement shall be US$ 15,943,753.00;

(b) The Purchaser or Designee shall pay 30% of the Foreign Closing Payment to XSEL, the designee of the Vendor by cash remittance after the execution of this Agreement, in accordance with the payment instruction specifying the company name, account, payment time issued to the Purchaser from the Vendor;

(c) The Purchaser or Designee shall pay 60% of the Foreign Closing Payment to XSEL, the designee of the Vendor in cash dollars within three (3) Business Days after the Alteration Registration Date of Domestic Equity Interests in respect of Jingguanxincheng.

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(d) 10% of the Foreign Closing Payment shall be the security deposit of the Vendor and the Covenantor, which will be paid by the Purchaser or Designee to XSEL, the designee of the Vendor, within the first working week in 2011, provided, by 12 PM December 31, 2010, there are not any breach by the Vendor and the Covenantor of any representation and warranty, and none of the Company, the PRC Company or any equity interests being transferred being alleged any recourse or any other rights by any third parties due to the reason happened before the alteration registration of the relevant equity interests; otherwise, the Purchaser shall deduct the relevant Losses from the 10% of the Foreign Closing Payment and pay the remaining (if any) to XSEL, the designee of the Vendor during the aforesaid time limit.

4.2 PRC Closing Payment.

(a) The Purchaser, the Vendor and the Covenantor jointly agree that the consideration of Domestic Equity Interests transferred from the Covenantor to the Purchaser or Designee under this Agreement shall be PRC Closing Payment;

(b) PRC Closing Payment shall be RMB 55,000,000, of which RMB 41,000,000, and RMB 14,000,000 shall be respectively the consideration of the equity interests of Jingguanxincheng and Jingshijingguan;

(c) The Purchaser or Designee shall pay 30% of the PRC Closing Payment in respect of Jingguanxincheng (which is RMB 12,300,000) to the Covenantor or its designated party after the execution of equity transfer agreement in respect of Jingguanxincheng, in accordance with the payment instruction specifying the company name, account, payment time issued to the Purchaser from the Vendor; the Purchaser or Designee shall procure the Designee to pay 30% of the PRC Closing Payment in respect of Jingshijingguan (which is RMB 4,200,000) to the Covenantor or its designated party in cash after the execution of equity transfer agreement in respect of Jingshijingguan, in accordance with the payment instruction specifying the company name, account, payment time issued to the Purchaser from the Vendor.

(d) The Purchaser or the Designee shall pay 60% of the PRC Closing Payment in respect of Jingguanxincheng (which is RMB 24,600,000) to the Covenantor or its designated party in cash with three (3) business days after the Alteration Registration Date of the Domestic Equity Interests in respect of Jingguanxincheng; the Purchaser or the Designee shall pay 60% of the PRC Closing Payment in respect of Jingshijingguan (which is RMB 8,400,000) to the Covenantor or its designated party in cash with three (3) business days after the Alteration Registration Date of the Domestic Equity Interests in respect of Jingshijingguan.

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(e) 10% of the PRC Closing Payment shall be the security deposit of the Vendor and the Covenantor, which will be paid by the Purchaser or Designee within the first working week in 2011, provided, by 12 PM December 31, 2010, there is no breach by the Vendor and the Covenantor of any representation and warranty, and none of the Company, the PRC Company or any equity interests being transferred being alleged any recourse or any other rights by any third parties due to the reason happened before the alteration registration of the relevant equity interests; otherwise, the Purchaser shall deduct the relevant losses from the 10% of the PRC Closing Payment and pay the remaining (if any) to the Vendor during the aforesaid time limit.

4.3 Delays in Payment.

If the Purchaser or the Designee defaults in the payment of any of the Closing Payment, the Purchaser or the Designee shall pay to the Vendor or the Covenantor on such overdue amounts thereafter until payment in full at the rate of 12% per annum, provided that such remedies contained in this Clause 4.3, which shall be without prejudice to any other rights and remedies available to the Vendor and the Covenantor.

5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE VENDOR AND THE COVENANTOR

Subject to those disclosed in written in this Agreement or the Appendices, the Vendor and the Covenantor hereby represent and warrant to the Purchaser that the following statements are true, correct and complete as of the date hereof:

5.1 In Respect of the Company and Each PRC Company:

(a) Organization, Standing and Power. It is a company duly organized, validly existing, and in good standing under the laws of jurisdiction of incorporation, has all requisite corporate power and authority to carry on its businesses, and is duly qualified and in good standing in each jurisdiction where it conducts business;

(b) Corporate Records. It has provided the Purchaser all the minute books and corporate records, complete and correct copies of which in respect of all the Company and PRC Company, true, correct and complete in all material respects;

(c) Contingent Rights and Obligations. There exists no litigation to which the Company and each PRC Company is involved, nor the possibility of claiming rights against the Company and each PRC Company to which third party is entitled or probably entitled.

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(d) Capital Structure.

(i) The capital structure of the PRC Companies immediately prior to and following the Alteration Registration Date of Domestic Equity Interests and the capital structure immediately prior to and following the Alteration Registration Date of Foreign Equity Interests will be set out in Appendix B and Appendix C, respectively.

(ii) No equity interests is subject to any Encumbrance or any third party rights (except for the Share Arrangements and Business Operation Agreements listed in Appendix A).

(e) Branches. It does not presently own or control, directly or indirectly, any interest in any other corporation, association, or other business entity, and is not a participant in any joint venture, partnership, or similar arrangement, except as set out in Appendix B and Siwei Media.

(f) Tax. The Company and each of the PRC Company have paid the tax payable before the execution date of this Agreement in accordance with the laws and regulations.

5.2 Material Contracts of PRC Company.

(a) The Intra-group Arrangements

(i) The Vendor, the Covenantor, Jingguanxincheng and Jingshijingguan have already executed the Share Arrangements and Business Operation Agreements as listed in Appendix A, in accordance to which, the Company is the defacto controller of all the equity interests in Jingguanxincheng and Jingshijingguan, and the Company may request the Covenantor to transfer all of the equity interests in Jingguanxincheng and Jingshijingguan at any time to anyone designated by the Company in consideration of PRC Closing Payment.

(ii) It is agreed by the parties that the Share Arrangements and Business Operation Agreements shall become ineffective upon the date of the execution of this Agreement, in order that the Designee designated by the Purchaser can acquire all the equity interests of Jingguanxincheng and Jingshijingguan.

(b) Business Contracts

With respect to the business agreements or contracts of the Company, Jingguanxincheng or Jingshijingguan, (i) Jingguanxincheng and Jingshijingguan have already signed a series of material business contracts, which are listed in Appendix A, according to which Jingguanxincheng has the right to act as the sole advertising agency for The Economic Observer and other related rights; (ii) except for (i) or otherwise stated in the Appendices of this Agreement, Jingguanxincheng and Jingshijingguan do not have any other material agreements or arrangements which have caused or will cause Jingguanxincheng or Jingshijingguan to afford any obligations as of the date hereof; and (iii) the Vendor and the Covenantor further covenant and guarantee, as of the date hereof, except as disclosed in this Agreement or the Appendices, there is no other items need to be disclosed and none of the Company or the PRC Company exist any potential liability, and the Vendor and the Covenantor shall afford unconditionally all the Losses or compensation liability caused by any items not disclosed.

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5.3 The Vendor and the Covenantor

(a) Organisation and Qualification. It is a legal entity duly organised and validly existing under the laws of its jurisdiction of incorporation;

(b) Power and Authority. It has completed all corporate or other action required to authorise, and has duly authorised, the execution, delivery and performance of this Agreement and upon due execution and delivery the same will constitute its legal, valid and binding obligations enforceable in accordance with its terms;

(c) Compliance with Laws and Other Instruments. It holds, and at all times has held all licenses, permits, and authorizations from all Governmental Department necessary for the lawful conduct of its business pursuant to all applicable statutes, laws, ordinances, rules, and regulations of all such authorities having jurisdiction over it or any part of its operations. There are no violations or claimed violations of any such license, permit, or authorization, or any such statute, law, ordinance, rule or regulation; and

(d) Corporate Governance. Neither the execution and delivery of this Agreement nor the performance by it of its obligations under this Agreement will (i) conflict with or result in any breach of its charter documents; (ii) require any Approvals by Governmental Department, (iii) conflict with, result in a breach or default of, or give rise to any right of termination, cancellation or acceleration or result in the creation of any lien, charge, Encumbrance, or restriction upon any of the properties or assets of it or its shares.

6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER

The Purchaser hereby represents, warrants and covenants to the Vendor and the Covenantor that each of the following statements is true and correct:

6.1 Organization and Qualification. It is a legal entity duly organised and validly existing under the laws of its jurisdiction of incorporation.

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6.2 Authorization. It has taken all corporate or other action required to authorise, and has duly authorised, the execution, delivery and performance of this Agreement and upon due execution and delivery the same will constitute its legal, valid and binding obligations enforceable in accordance with its terms.

6.3 Power and Authority. It has full power and authority to make the covenants and representations referred to herein and to purchase the Company Shares and to execute, deliver and perform this Agreement. It has the capacity to pay the Closing Payment and other payment as provided in this Agreement to the Vendor.

6.4 Compliance with Laws and Other Instruments. It holds, and at all times has held all licenses, permits, and authorizations from all Governmental Department necessary for the lawful conduct of its business pursuant to all applicable statutes, laws, ordinances, rules, and regulations of all such authorities having jurisdiction over it or any part of its operations. There are no violations or claimed violations of any such license, permit, or authorization, or any such statute, law, ordinance, rule or regulation.

6.5 Corporate Governance. Neither the execution and delivery of this Agreement nor the performance by it of its obligations under this Agreement will (i) conflict with or result in any breach of its charter documents; (ii) require any Approvals by Governmental Department, (iii) conflict with, result in a breach or default of, or give rise to any right of termination, cancellation or acceleration or result in the creation of any Encumbrance upon any of the properties or assets of it or its shares.

7. INDEMNITY

7.1 Indemnity of the Non-breaching Party. The party who breaches this Agreement shall indemnify and will keep indemnified and save harmless the non-breaching party from and against any out-of-pocket losses (collectively, the “Losses”), provided expect to the extent any such Losses are not caused by the wilful misconduct and/or gross fault negligence of the breaching party. For the purpose of this Agreement, Losses do not include any consequential losses or any anticipation interests.

It is agreed by parties that any breach of any representation, warranty or covenant made in this Agreement shall be deemed as a breach of this Agreement.

7.2 Costs. For the purposes of this Clause 7, “Losses” includes reasonable lawyers’ and accountants’ fees and expenses, court costs and all other out-of-pocket expenses.

7.3 After the execution of the PRC equity transfer agreement and foreign equity transfer agreement, if the Vendor defaults in any of the said agreements, the Purchaser shall have the right to terminate all the said agreements. The Vendor shall refund all the equity transfer payments of within three (3) days after termination, and pay interest at an annual rate of 12% to the Purchaser,.

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After the execution of the PRC equity transfer agreement and foreign equity transfer agreement, in the event that any party cannot duly perform its obligations under any of the agreements as a result of Force Majeure, the Purchaser hall have the right to terminate all the said agreements. The Vendor shall refund all the equity transfer payments to the Purchaser within three (3) days after the termination.

7.4 Third Party Claims. A party entitled to indemnification hereunder (an “Indemnified Party”) shall notify promptly the indemnifying party (the “Indemnifying Party”) in writing of the commencement of any action or proceeding with respect to which a claim for indemnification may be made pursuant to this Agreement. The Indemnifying Party shall take reasonable steps necessary to protect the Indemnified Party from being liable to any indemnity, and Indemnified Party shall proceed with relating legal procedures in active cooperation with Indemnifying Party.

7.5 Settlement of Claims.

No Indemnifying Party shall, without the written consent of the Indemnified Party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification may be sought hereunder (whether or not the Indemnified Party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the Indemnified Party from all liability arising out of such action or claim, (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any Indemnified Party and (iii) does not include any injunctive or other non-monetary relief.

8. TERMINATION

8.1 Termination. This Agreement may be terminated at any time prior to the latter of the Alteration Registration Date of Domestic Equity Interests of Jingguanxincheng or Jingshijingguan:

(a) by the Purchaser if, between the date hereof and the latter of the Alteration Registration Date of Domestic Equity Interests of Jingguanxincheng or Jingshijingguan: (i) the Vendor shall not have complied in all material respects with the covenants or agreements contained in this Agreement to be complied with by it or (ii) the Vendor, the Covenantor or the PRC Company makes a general assignment for the benefit of creditors, or any proceeding is instituted by or against the Vendor, the Covenantor, the PRC Company seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up or reorganization, arrangement, adjustment, protection, relief or composition of its debts under any law related to bankruptcy, insolvency or reorganization;

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(b) by the Vendor if, between the date hereof and the latter of the Alteration Registration Date of Domestic Equity Interests of Jingguanxincheng or Jingshijingguan: (i) the Purchaser shall not have complied in all material respects with the covenants or agreements contained in this Agreement to be complied with by it or (ii) the Purchaser makes a general assignment for the benefit of creditors, or any proceeding shall be instituted by or against the Purchaser seeking to adjudicate the Purchaser in question bankrupt or insolvent, or seeking liquidation, winding up or reorganization, arrangement, adjustment, protection, relief or composition of its debts under any law related to bankruptcy, insolvency or reorganization;

(c) by the Purchaser or the Vendor in the event that any PRC Governmental Agencies shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement; or

(d) by the written consent of the Purchaser and the Vendor.

8.2 Where the Alteration Registration Date of Domestic Equity Interests fails to occur as of August 31, 2010, either party shall be entitled to terminate this Agreement unilaterally in advance provided that he or she is not in breach of this Agreement and the nonoccurrence of such date is not caused by any reason attributable to such party.

If this Agreement is terminated for any reason, all parties shall assist each other in order to unwind the transactions so as to restore to the status of the other parties to the former state before the execution of this Agreement.

9. CONFIDENTIALITY AND NON-DISCLOSURE

9.1 Non-Disclosure of Terms. The terms and conditions of this Agreement and the Ancillary Agreements, including their existence, shall be considered confidential information and shall not be disclosed by any party hereto to any third party except in accordance with the provisions set forth below; provided that such confidential information shall not include any information that is in the public domain other than by the breach of the confidentiality obligations hereunder.

9.2 Press Releases, Etc. Any press release issued by any party hereto or any member of the Group in relation to this Agreement shall be approved in advance in writing by the each Party to this Agreement, whose consent shall not be unreasonably withheld. No other announcement regarding any of the terms set out in this Agreement in a press release, conference, advertisement, announcement, professional or trade publication, mass marketing materials or otherwise to the general public may be made without the prior written consent of each Party to this Agreement, whose consent shall not be unreasonably withheld.

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9.3 Permitted Disclosures. Notwithstanding the foregoing, any party may disclose any of the terms set out in this Agreement to its current or bona fide, employees, bankers, lenders, partners, accountants and attorneys and other professional advisers, in each case only where such persons or entities are under appropriate non-disclosure obligations.

9.4 Legally Compelled Disclosure. In the event that any party is requested or becomes legally compelled (including without limitation, pursuant to securities laws and regulations) to disclose the existence or terms of this Agreement or the Ancillary Agreements in contravention of the provisions of this Clause, such party (the “Disclosing Party”) shall provide the other parties (the “Non-Disclosing Parties”) with prompt written notice of that fact and use all reasonable efforts to seek (with the cooperation and reasonable efforts of the other parties) a protective order, confidential treatment or other appropriate remedy. In such event, the Disclosing Party shall furnish only that portion of the information which is legally required and shall exercise reasonable efforts to keep confidential such information to the extent reasonably requested by any Non-Disclosing Party. In the event that disclosure of relevant agreements is sufficient to meet the disclosure requirement, the Disclosing Party shall keep confidential this Agreement.

9.5 Other Information. The provisions of this Clause shall be in addition to, and not in substitution for, the provisions of any separate nondisclosure agreement executed by any of the parties hereto with respect to the transactions contemplated hereby.

10. MISCELLANEOUS

10.1 Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties.

10.2 Governing Law and Jurisdiction. Offshore matters in this Agreement shall be governed by and construed in accordance with the laws of Hong Kong; while domestic matters in this Agreement shall be governed by and construed in accordance with the laws of PRC.

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10.3 Arbitration. Any dispute, controversy or claim out of or relating to this Agreement, or the breach, termination or invalidity of this Agreement and its Appendices, shall be settled by binding arbitration by China International Economic & Trade Arbitration Commission (“CIETAC”) in accordance with its arbitration rules as present in force in Beijing in the manner set forth in this Clause 10.3:

(a)

The procedures of this Clause 10.3(b) may be initiated by a written notice (a “Dispute Notice”) given by one party (a “Claimant”) to the other, but not before thirty (30) days have passed during which the parties have been unable to reach a resolution. The Dispute Notice shall be accompanied by (i) a statement of the Claimant describing the dispute in reasonable detail and (ii) documentation, if any, supporting the Claimant’s position on the dispute. Within twenty (20) days after the other party’s (the “Respondent”) receipt of the Dispute Notice and accompanying materials, the dispute shall be resolved by binding arbitration in Beijing under the CIETAC arbitration rules. All arbitration procedures pursuant to this paragraph (a) shall be confidential and treated as compromise and settlement negotiations and shall not be admissible in any arbitration or other proceeding;

(b)

The parties shall agree on a single arbitrator to resolve the dispute. If the parties fail to agree on the designation of an arbitrator within a twenty (20)-day period the CIETAC shall be requested to designate the single arbitrator. If the arbitrator becomes disabled, resigns or is otherwise unable to discharge the arbitrator’s duties, the arbitrator’s successor shall be appointed in the same manner as the arbitrator was appointed;

(c) Any award arising out of arbitration (i) shall be binding and conclusive upon the parties; (ii) shall be limited to a holding for or against a party, and affording such monetary remedy as is deemed equitable, just and within the scope of this Agreement; (iii) may not include special, indirect, incidental, consequential, special, punitive or exemplary damages or diminution in value; (iv) may in appropriate circumstances include injunctive relief; and (v) may be entered in a court .

(d) Arbitration shall not be deemed a waiver of any right of termination under this Agreement, and the arbitrator is not empowered to act or make any award other than based solely on the rights and obligations of the parties prior to termination in accordance with this Agreement;

(e) The arbitrator may not limit, expand or otherwise modify the terms of this Agreement;

(f) Each party shall bear its own expenses incurred in any arbitration or litigation, but any expenses related to the compensation and the costs of the arbitrator shall be borne equally by the parties to the dispute;

(g) If any action or proceeding is commenced to construe or enforce this Agreement or the rights and duties of the parties hereunder, then the party prevailing in that action, and any appeal thereof, shall be entitled to recover its attorney’s fees and costs in that action or proceeding, as well as all costs and fees of any appeal or action to enforce any judgment entered in connection therewith.

10.4 Counterparts. This Agreement shall be entered into in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

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10.5 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

10.6 Notices. Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified or upon postal service delivery, by registered or certified mail, postage prepaid and addressed to the party to be notified at the address indicated for such party on the signature page hereof or by facsimile at the facsimile number set out on the signature page hereof, or at such other address or facsimile number as such party may designate by two (2) days’ advance written notice to the other parties.

To the Purchaser

Business Address: 20F Sci-tech Tower, No. 22 Jianguomenwai Avenue, Chaoyang District, Beijing
Tel: 010 65123322
Fax: 01065123551
Attention: Liu Jianping

To the Vendor

Business Address: 18F, Tower A, Winnerless Center, No. 1 Xidawang Road, Chaoyang District, Beijing
E-mail: amanda.gong@xsel.com
Fax: 010 85676074
Attention: Gong Huina

To the Company

Business Address: 18F, Tower A, Winnerless Center, No. 1 Xidawang Road, Chaoyang District, Beijing
E-mail: amanda.gong@xsel.com
Fax: 010 85676074
Attention: Gong Huina

To the Covenantor

Business Address: 18F, Tower A, Winnerless Center, No. 1 Xidawang Road, Chaoyang District, Beijing
E-mail: amanda.gong@xsel.com
Fax: 010 85676074
Attention: Gong Huina

10.7 Expenses. Each of the parties hereto shall be responsible for its own costs and expenses incurred in the preparation, negotiation and execution of this Agreement.

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10.8	Severability. If any provision of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision was so excluded and shall be enforceable in accordance with its terms.
10.9	Language. This Agreement shall be executed in Chinese.

— EXECUTION PAGE FOLLOWS —

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

The Purchaser

For and on behalf of China Oceanwide Holdings Group Co., Ltd.

By:	/s/ Yu Zheng
	Name:	Yu Zheng
	Title:	Vice President

Address of the Purchaser:

20F, Tower A, Minsheng Financial Center, No. 28 Jianguomennei Avenue, Dongcheng District, Beijing
Telephone: 010 65123322
Facsimile: 010 65123551

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The Company

For and on behalf of EO Publications Development Limited

By:	/s/ Chen Wenqiao
	Name:	Chen Wenqiao
	Title:	Director

Address of the Company:

18F, Tower A, Winterless Center, No. 1 Xidawang Road
Telephone: 010-85676026
Facsimile: 010 85676074

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The Vendor

For and on behalf of Century Effort Limited

By:	/s/ Chen Wenqiao
	Name:	Chen Wenqiao
	Title:	Director

Address of the Vendor:

18F, Tower A, Winterless Center, No. 1 Xidawang Road
Telephone: 010-85676026
Facsimile: 010 85676074

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The Covenantor

For and on behalf of Beijing Taide Advertising Co., Ltd.

By:	/s/ Wang Yonghong
	Name:	Wang Yonghong
	Title:	Legal Representative

Address of the Company:

18F, Tower A, Winterless Center, No. 1 Xidawang Road
Telephone: 010-85676026
Facsimile: 010 85676074

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Appendix A

Material Contracts

1. Share Arrangements and Business Operation Agreements

(a)	The Share Arrangements and Business Operation Agreements entered into by and among EO Publications Development Limited, Beijing Taide Advertising Co., Ltd., and Beijing Jingguanxincheng Advertising Co., Ltd..
(b)	The Share Arrangements and Business Operation Agreements entered into by and among EO Publications Development Limited, Beijing Taide Advertising Co., Ltd., and Beijing Jingshijingguan Advertising Co., Ltd..

2. Material Business Contracts

(a)	The Amended and Restated Business Cooperation Agreement dated as of November 6, 2006 entered into by and among the Economic Observer, Guangzhou Jingshi Culture Communication Co., Ltd., Beijing Jingguanxincheng Advertising Co., Ltd. and Beijing Jingshijingguan Advertising Co., Ltd.
(b)	The Amended and Restated Business Cooperation Contract dated as of November 6, 2006 entered into by and among Shandong Sanlian Group Co., Ltd., Shandong Economic Observer Newspaper Co., Ltd., the Economic Observer and Beijing Jingguanxincheng Advertising Co., Ltd.
(c)	The Economic Observer Transfer Agreement dated as of November 6, 2006 entered into by and among Shandong Sanlian Group Co., Ltd., Shandong Economic Observer Newspaper Co., Ltd., the Economic Observer and Beijing Jingguanxincheng Advertising Co., Ltd.

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Appendix B

Corporate Details of the Group as at the date of this Agreement

1. The Company

Name	EO Publications Development Limited
Date and Place of Incorporation	March 2, 2010 / British Virgin Islands
Incorporation Number	1573253
Registered Address	P.O. Box 957, Offshore Incorporations Centre,
	Road Town, Tortola, British Virgin Islands
Registered Capital	USD 50,000
Authorized Capital Issued Capital	USD 1
		Number of Ordinary
Shareholder	Name	Shares
	Century Effort Limited	1
	Total:	1
Director(s)	Chen Wenqiao
Company Secretary	Offshore Incorporations Limited

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2. PRC Company

a. Jingguanxincheng

Name	Beijing Jingguanxincheng Co., Ltd.
Date and Place of Incorporation	February 25, 2006, PRC
Registration number	1101111930073
Registered Address	No. 18-C66 Jianshe Road, Kaixuan Avenue, Fangshan District, Beijing
Registered Capital	RMB5,000,000
Shareholder	Name	Shareholding
	Beijing Taide Advertising Co., Ltd.	RMB5,000,000 (100%)
	Total:	RMB5,000,000 (100%)
Legal Representative	Chen Liyi
Director & Management	Chen Liyi, Chen Hui, Wang Yongjing, Zhu Shan, Chen Wenqiao, Fredy Bush and Graham Earnshaw
Business Scope	Act as an advertising agency and release advertisement
Business term	January 25, 2006 — January 24, 2056

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b. Jingshijingguan

Name	Beijing Jingshijingguan Advertising Co., Ltd.
Date and Place of Incorporation	PRC
Registration number	1101111970696
Registered Address	No. 18-C68 Jianshe Road, Kaixuan Avenue, Fangshan District, Beijing
Registered Capital	RMB6,000,000
Shareholder	Name	Shareholding
	Beijing Taide Advertising Co., Ltd.	RMB3,000,000 (50%)
	Beijing Jingguanxincheng Co., Ltd.	RMB3,000,000 (50%)
	Total:	RMB6,000,000 (100%)
Legal Representative	Chen Hui
Director & Management	Chen Hui, Lai Juntao, Chen Wenqiao
Business Scope	Act as an advertising agency and release advertisement; Undertake exhibitions; Organize cultural and art exchange activities (except performance); Information Consultation (except agency services); Technology development, technical services and technical training.
Business term	June 9, 2006 — June 9, 2056

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Appendix C

Corporate Details of the Group immediately following Closing Date

A. The Company

Name	EO Publications Development Limited
Date and Place of Incorporation	March 2, 2010 / British Virgin Islands
Incorporation Number	1573253
Registered Address	P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands
Registered Capital	USD 50,000
Authorized Capital Issued Capital	USD 1
		Number of Ordinary
Shareholder	Name	Shares
	o	1
	Total:	1
Director(s)	o
Company Secretary	o

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B. Jingguanxincheng

Name	Beijing Jingguanxincheng Co., Ltd.
Date and Place of Incorporation	February 25, 2006, PRC
Registration number	1101111930073
Registered Address	No. 18-C66 Jianshe Road, Kaixuan Avenue, Fangshan District, Beijing
Registered Capital	RMB5,000,000
Shareholder	Name	Shareholding
	Total:
Legal Respresentative Director & Management
Business Scope	Act as an advertising agency and release advertisement
Business term	January 25, 2006 — January 24, 2056

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C.	The Subsidiaries
1.	Beijing Jingshijingguan Advertising Co., Ltd.

Name	Beijing Jingshijingguan Advertising Co., Ltd.
Date and Place of Incorporation	PRC
Registration number	1101111970696
Registered Address	No. 18-C68 Jianshe Road, Kaixuan Avenue, Fangshan District, Beijing
Registered Capital	RMB6,000,000
Shareholder	Name	Shareholding
	Total:
Legal Representative Director & Management
Business Scope	Act as an advertising agency and release advertisement; Undertake exhibitions; Organize cultural and art exchange activities (except performance); Information Consultation (except agency services); Technology development, technical services and technical training.
Business term	June 9, 2006 — June 9, 2056

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Appendix D

The Management

Liu Jian (ID number: 110105196609047758); Wang Yongjing (ID number: 372424197207286529); Piao Chunhua (ID number: 370602197312183426); Wang Shengzhong (ID number: 110108196812260078) etc.

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Appendix E

Disclosure Schedule

I. Staff List of Jingguanxincheng

		Starting Time and Ending
Name	Salary Composition	Time of Labor Contract

II. Staff List of Jingshijingguan

		Starting Time and Ending
Name	Salary Composition	Time of Labor Contract

III.	List of agreements of Jingguanxincheng which are effective as of the date of this Agreement.
IV.	List of agreements of Jingshijingguan which are effective as of the date of this Agreement.
V.	The Agreement dated December 18, 2007 in respect of the newspaper of the Investors (formelly named People Focus Weekly) as well as the lawyer’s letter issued by Hunan Qiyuan Law Firm dated February 4, 2009 and April 8, 2010.
VI.	Financial information of Jingguanxincheng as of the date of this Agreement.
VII.	Financial information of Jingshijingguan as of the date of this Agreement.

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Appendix F

Financial Statements of Jingguanxincheng as of March 31, 2010

- 33 -

Appendix G

Financial Statements of Jingshijingguan as of March 31, 2010

- 34 -

Appendix H

List of all Cash Income and Expenses in respect of Jingguanxincheng and
Jingshijingguan from Accounting Date and the Date of this Agreement

- 35 -

Appendix I
Current Account in respect of Jingguanxincheng and Jingshijingguan Needed To
Be Settled

- 36 -

EX-4.65

Exhibit 4.65

EXECUTION COPY

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

Amendment No. 2 and Waiver (this “Amendment”), dated as of July 12, 2010, to the Credit Agreement, dated as of October 21, 2008 (as modified to the date hereof, the “Credit Agreement”), among XINHUA SPORTS & ENTERTAINMENT LIMITED (formerly known as XINHUA FINANCE MEDIA LIMITED), a Cayman Islands limited company (the “Borrower”), the Subsidiaries of the Borrower signatory thereto (collectively, the “Guarantors”), the financial institutions and other investors from time to time party thereto as Lenders and PATRIARCH PARTNERS AGENCY SERVICES, LLC, a Delaware limited liability company, as administrative agent for such Lenders (in such capacity, the “Administrative Agent”). Capitalized terms used herein but not defined herein are used as defined in the Credit Agreement.

W i t n e s s e t h:

WHEREAS, the Borrower, the Guarantors, the Lenders and the Administrative Agent are party to the Credit Agreement;

WHEREAS, the Lenders party to this Amendment, the Borrower, the Guarantors and the Administrative Agent have agreed, subject to certain limitations and conditions set forth below, to make certain amendments to the Credit Agreement, as more specifically set forth below;

WHEREAS, the Borrower has notified the Administrative Agent that the Events of Default specified on Schedule A (Events of Default) hereto have occurred and are continuing (such Events of Default, together with any Event of Default that may exist by reason of any failure to deliver notice thereof pursuant to the Credit Agreement and by past misrepresentations under the Credit Agreement that no Default or Events of Default existed and were continuing, each a “Specified Event of Default” and, collectively, the “Specified Events of Default”);

WHEREAS, the Borrower and the Guarantors have requested that the Administrative Agent and the Required Lenders (a) waive the Specified Events of Default and (b) further amend the Credit Agreement as set forth herein; and

WHEREAS, the Lenders party hereto (constituting the Required Lenders) and the Administrative Agent agree, subject to the limitations and conditions set forth herein, to (a) waive the Specified Events of Default and (b) further amend the Credit Agreement as set forth herein;

NOW, THEREFORE, the parties hereto agree as follows:

Section 1. Waiver

(a) Effective as of the date first written above and subject to the satisfaction (or due waiver) of the conditions set forth in Section 3 (Conditions Precedent to the Effectiveness of this Amendment) hereof, the Lenders party to this Amendment, constituting the Required Lenders, and the Administrative Agent waive the following:

(i) the Specified Events of Default; provided, however, that, (A) in respect of Specified Events of Default relating to representations and warranties, such Specified Events of Default shall be waived only to the extent they relate to representations and warranties made prior to the

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

date hereof and (B) the Specified Event of Default described in Item 2 of Schedule A (Events of Default) shall be waived only to the extent that the Borrower shall file the Shelf Registration Statement with the SEC as soon as practicable after the date hereof but in any event within 45 days after the date hereof and shall use its reasonable best efforts to cause such Shelf Registration Statement to be declared effective within 120 days after the date hereof; and provided, further, that the waiver set forth in this clause (i) shall not excuse any failure to comply after the earlier of the date hereof and the Amendment Effective Date with the Credit Agreement as amended hereby; and

(ii) compliance with Section 2.12(a) with respect to the issuance by the Borrower of the Series C Preferred Shares to the Lenders.

Section 2. Amendments to the Credit Agreement. The Credit Agreement is, effective as of the date first written above and subject to the satisfaction (or due waiver) of the conditions set forth in Section 3 (Conditions Precedent to the Effectiveness of this Amendment) hereof, hereby amended as follows (with bold, underline, indenting and other formatting modified to conform to the formatting of the Credit Agreement):

(a) Amendments to Article I (Defined Terms)

(i) The following definitions are hereby inserted in Section 1.1 (Defined Terms) of the Credit Agreement in the appropriate place to preserve the alphabetical order of the definitions in such section (and, if applicable, the following definitions shall replace in their entirety existing definitions for the corresponding terms in such section):

“Additional Term Loan Commitment” means, (i) with respect to each Lender that is a lender on the Second Amendment Date, the amount set forth opposite such Lender’s name on Schedule I as such Lender’s “Additional Term Loan Commitment” and (ii) in the case of any lender that becomes a Lender after the Second Amendment Date, the amount specified as such Lender’s “Additional Term Loan Commitment” in the Assignment and Acceptance pursuant to which such Lender assumed such Additional Term Loan Commitment, in each case as the same may be reduced or increased from time to time pursuant to the terms hereof.

“Additional Term Loan Funding Date” means June 17, 2010.

“Additional Term Loans” means the Term Loans deemed made by a Lender to the Borrower pursuant to Section 2.1(d).

“Convertible Term Loans” means the Term Loans made during the Commitment Period.

“EO Sale” has the meaning set forth in the Consent to Credit Agreement dated as of May 12, 2010, by and among the Borrowers, the Guarantors, the Lenders and the Agent.

“Extraordinary Receipts” means, with respect to any person, (a) any cash received by, paid to or for the account of such Person not in the ordinary course of business, including tax refunds, pension plan reversions, proceeds of insurance (including any key man life insurance but excluding proceeds of key man life insurance to the extent such proceeds constitute compensation from lost earnings), (b) indemnity payments received by such Person and (c) any working capital, earnings, balance sheet, other purchase price or similar adjustment under any acquisition agreement received by such Person.

2

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

“Second Amendment Date” means July 12, 2010.

“Series C Preferred Shares” means the Series C Convertible Preferred Shares of the Borrower, each with a par value of $0.001 per share and a stated value of $100.00 per share.

(ii) Each of the following definitions in Section 1.1 (Defined Terms) of the Credit Agreement are hereby amended and restated in their entirety to read as follows:

“Applicable Margin” means 6% for Convertible Term Loans and 8% for Additional Term Loans.

“Commitments” means the Term Loan Commitments and the Additional Term Loan Commitments.

“Default Rate” means LIBOR plus 8.0% per annum for Convertible Term Loans and LIBOR plus 10% per annum for Additional Term Loans.

“Loans” means the Term Loans, including the Additional Term Loans and the Convertible Term Loans.

“Net Cash Proceeds” means with respect to (A) the issuance or incurrence of any Indebtedness by any Person or any of its Subsidiaries, (B) the sale or issuance by any Person or any of its Subsidiaries of any shares of its Capital Stock, (C) any Asset Sale, (D) any casualty insurance policy in respect of a covered loss thereunder or (E) the taking of any assets of any Person or any of its Subsidiaries by any other Person pursuant to the power of eminent domain, condemnation, or otherwise or pursuant to a sale of any such assets to a purchaser with such power under threat of such taking, the aggregate amount of cash received (directly or indirectly) from time to time (whether as initial consideration or through the payment or disposition of deferred consideration) by or on behalf of such Person or such Subsidiary in connection therewith, net of underwriting discounts and after deducting therefrom only (i) reasonable expenses related thereto incurred by such Person or such Subsidiary in connection therewith, and (ii) transfer taxes paid by such Person or such Subsidiary in connection therewith; in each case of clauses (i) and (ii) to the extent, but only to the extent, that the amounts so deducted are (x) actually paid to a Person that, except in the case of reasonable out-of-pocket expenses, is not an Affiliate of such Person or any of its Subsidiaries and (y) properly attributable to such transaction or to the asset that is the subject thereof.

(iii) The definition of “Affiliate” contained in Section 1.1 (Defined Terms) of the Credit Agreement is hereby amended by deleting the clause “the Agent, any Lender or any Affiliate of any Lender” from the last sentence thereof and replacing it with “the Agent, any Lender or any Related Fund or Affiliate of the Agent or any Lender”.

(iv) The definition of “Internal Control Agreement” contained in Section 1.1 (Defined Terms) of the Credit Agreement is hereby amended by (A) deleting the clause “with respect to any Media Asset” from clause (i) thereof, and (B) deleting the term “Media Asset” from clause (ii) thereof and replacing it with “asset”.

(v) The definition of “Restricted Junior Payment” in Section 1.1 (Defined Terms) of the Credit Agreement is hereby amended by deleting the two proviso clauses at the end thereof and replacing them with the following language:

3

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

; provided, however, Restricted Junior Payments shall not include any payments made to the Agent, any Lender or any Affiliate or Related Fund of the Agent or any Lender under the Series C Preferred Shares and shall not include any cash payment in lieu of any shares of any class of Capital Stock of the Borrower payable in respect of Earn-Out Consideration; provided, further, with respect to subclauses (i), (ii) and (iii) above, Restricted Junior Payments shall not include any dividends or other distributions by a Subsidiary which are made pro rata to all of its shareholders or members.

(vi) The definition of “Significant Person” in Section 1.1 (Defined Terms) of the Credit Agreement is hereby amended by deleting the last sentence thereof and replacing it with the following:

Notwithstanding the foregoing, “Significant Person” does not include the Parent, the Agent, any Lender or any Affiliate or Related Fund of the Agent or any Lender.

(b) Amendments to Article II (Loans)

(i) Clause (b) of Section 2.1 (Term Loans) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

(b) Any amount borrowed under this Section 2.1 and subsequently repaid or prepaid may not be reborrowed. Subject to Sections 2.11 and 2.12, (i) all amounts owed under this Section 2.1 with respect to Convertible Term Loans shall be paid in full or a Conversion Notice shall have been delivered pursuant to Article X no later than the Maturity Date, and (ii) all amounts owed under this Section 2.1 with respect to Additional Term Loans shall be paid in full no later than the Maturity Date.

(ii) Section 2.1 (Term Loans) of the Credit Agreement is hereby amended by inserting a new clause (d) at the end thereof to read in its entirety as follows:

(d) On the Second Amendment Date, subject to the terms and conditions hereof and relying on the representations and warranties herein set forth, subject to Section 2.4, each Lender shall make, severally, and not jointly, an Additional Term Loan to the Borrower in one or more advances in an amount up to but not exceeding such Lender’s Additional Term Loan Commitment. Such Additional Term Loans shall be deemed to have been made on the Additional Term Loan Funding Date for all purposes, including, without limitation, the calculation of interest under Section 2.7.

(iii) Section 2.3 (Borrowing Mechanics) of the Credit Agreement is hereby amended by inserting a new clause (d) at the end thereof to read in its entirety as follows:

(d) The provisions of this Section 2.3 shall not apply to Additional Term Loans.

(iv) Section 2.5 (Use of Proceeds) of the Credit Agreement is hereby amended by deleting clause (ii) thereof in its entirety and replacing it with the following new clause (ii) to read in its entirety as follows:

(ii) for general corporate purposes

4

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

(v) Clause (b) of Section 2.7 (Interest on Loans) is hereby amended by inserting the text “(it being understood that the Additional Term Loan Funding Date is the date of the making of an Additional Term Loan)” immediately after the text “the making of such Loan” in the second sentence thereof.

(vi)  Section 2.10 (Repayment) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

Section 2.10 Repayment. On the Maturity Date, (a) all Obligations other than the Convertible Term Loans shall become due and payable and (b) the Borrower shall pay to each Lender an amount in cash equal to the Loan Payment Amount (determined as of the Maturity Date) for such Lender with respect to the Convertible Term Loans; provided, that such Lender may reject any such payment of the Loan Payment Amount with respect to Convertible Term Loans only and instead elect to convert such Convertible Term Loans into Borrower Common Shares pursuant to Article X hereof. The Borrower shall provide five (5) Business Days prior written notice (or such lesser time as may be agreed by the Agent) to the Agent of its intent to pay such Loan Payment Amount on the Maturity Date, and with respect to the Convertible Term Loans only, the Agent shall have three (3) Business Days from the date it receives such notice from the Borrower to elect to convert such Loan Payment Amount into Borrower Common Shares pursuant to Article X hereof. For purposes of clarification, if any Lender elects to convert the Loan Payment Amount with respect to Convertible Term Loans to Borrower Common Shares pursuant to Article X hereof, the Borrower shall not have the option of paying the Loan Payment Amount with respect to Convertible Term Loans in cash to such Lender. If the Borrower fails to pay such Loan Payment Amount in cash and/or deliver the Borrower Common Shares, as the case may be, to each Lender on the Maturity Date, an Event of Default shall occur. In addition to all other remedies, at the option of the Agent, interest shall accrue on the Loan Payment Amount and the Loans, respectively, at the Default Rate from and after the date any Event of Default shall occur, and all amounts due shall thereafter be payable on demand.

(vii) Section 2.11 (Optional Repayment) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

Section 2.11 Optional Prepayments. The Borrower is not permitted to voluntarily prepay the Loans (i) at any time during the first year following the Closing Date or (ii) after the first year following the Closing Date, if the Current Market Price, determined six (6) days in advance of the proposed prepayment, of the Borrower Common Shares is less than 110% of the then applicable Conversion Price. Subject to the foregoing sentence, the Borrower may voluntarily prepay the Loans, in whole but not in part, at any time, with five (5) Business Days advance written notice (or such lesser time as may be agreed by the Agent) of the date of prepayment (the “Optional Prepayment Date”) being provided to the Agent, by paying to each Lender an amount in cash equal to the Loan Payment Amount (determined as of the Optional Prepayment Date) for such Lender; provided, that such Lender may reject any such payment of the Loan Payment Amount with respect to its Convertible Term Loans and instead elect to convert such Convertible Term Loans into Borrower Common Shares pursuant to Article X hereof at the then applicable Conversion Price. Borrower shall provide five (5) Business Days prior written notice to the Agent of its intent pursuant to this Section 2.11 to pay the Loan Payment Amount and with respect to the prepayment of Convertible Term Loans only, the Agent shall have three (3) Business Days from and after the date it receives such notice from the Borrower to elect to convert the Loan Payment Amount with respect to Convertible Term Loans into Borrower Common Shares pursuant to Article X hereof. For purposes of clarification, if any Lender elects to convert the Loan Payment Amount with respect to its Convertible Term Loans to

5

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

Borrower Common Shares pursuant to Article X hereof, the Borrower shall not have the option of paying the Loan Payment Amount for such Convertible Term Loans in cash to such Lender. If the Borrower fails to pay the Loan Payment Amount and/or deliver the Borrower Common Shares, as the case may be, to each Lender on the Optional Prepayment Date, then (in addition to all other remedies), at the option of the Agent, interest shall accrue on the Loan Payment Amount and the Loans, respectively, at the Default Rate from the Optional Prepayment Date, and all amounts due shall thereafter be payable on demand. Any prepayments of Additional Term Loans pursuant to this Section 2.11 shall only be made in cash.

(viii) Section 2.12 (Mandatory Prepayments) of the Credit Agreement is hereby amended and restated in its entire to read as follows:

Section 2.12 Mandatory Prepayments.

(a) Debt or Equity Offerings. No later than the first Business Day following the issuance or incurrence by the Borrower or any of its Subsidiaries of any Indebtedness (other than Permitted Indebtedness), or the sale or issuance by the Borrower or any of its Subsidiaries of any shares of its Capital Stock, the Borrower shall make an offer to prepay the outstanding principal amount of the Loans in an amount in cash equal to 100% of the Net Cash Proceeds received by such Person in connection therewith. Each Lender has the option to (i) accept such prepayment of its Convertible Term Loans in cash, (ii) reject such prepayment of its Convertible Term Loans or (iii) elect to convert its Convertible Term Loans into Borrower Common Shares pursuant to Article X hereof. The Borrower shall provide five (5) Business Days prior written notice (or such lesser time as may be agreed by the Agent) to the Agent of its offer to make a prepayment pursuant to this Section 2.12(a), and with respect to the prepayment of its Convertible Term Loans only, the Agent shall have three (3) Business Days from and after the date it receives such notice from the Borrower to accept such prepayment, reject such prepayment or elect to convert into Borrower Common Shares pursuant to Article X hereof. For purposes of clarification, if any Lender elects to reject the prepayment of its Convertible Term Loans or convert its Convertible Term Loans to Borrower Common Shares pursuant to Article X hereof, the Borrower shall not make the prepayment in cash required hereunder for the Convertible Term Loans to such Lender. If the Borrower fails to make the required prepayment in cash and/or deliver the Borrower Common Shares, as the case may be, to any Lender when due, an Event of Default shall occur. In addition to all other remedies, at the option of the Agent, interest shall accrue on the prepayment amount for such Lender and the Loans for such Lender, respectively, at the Default Rate from the date any Event of Default shall occur, and all amounts due shall thereafter be payable on demand. If any Lender rejects the prepayment of its Convertible Term Loans and/or does not elect to convert its Convertible Term Loans into Borrower Common Shares, then the Borrower shall use such proceeds only for investment in Media Assets. Notwithstanding anything to the contrary set forth in this Section 2.12, during the first year following the Closing Date, no Lender will have the option to elect to convert its Convertible Term Loans into Borrower Common Shares pursuant to Article X hereof upon the foregoing described prepayment events. The provisions of this Section 2.12(a) shall not be deemed to be implied consent to any such issuance, incurrence or sale otherwise prohibited by the terms and conditions of this Agreement. Any prepayment of Additional Term Loans made pursuant to this Section 2.12(a) shall only be made in cash.

(b) Change of Control. No later than the first Business Day following a Change of Control, the Borrower shall make an offer to prepay in full the outstanding principal amount of the Loans, together with interest thereon or all other amounts owing hereunder. Each Lender has the option to (i) accept such prepayment of its Convertible Term Loans in cash,

6

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

(ii) reject such prepayment of its Convertible Term Loans or (iii) elect to convert its Convertible Term Loans into Borrower Common Shares pursuant to Article X hereof. The Borrower shall provide five (5) Business Days prior written notice to the Agent (or such lesser time as may be agreed by the Agent) of its offer to make a prepayment pursuant to this Section 2.12, and with respect to Convertible Term Loans, the Agent shall have three (3) Business Days from and after the date it receives such notice from the Borrower to accept such prepayment, reject such prepayment or elect to convert into Borrower Common Shares pursuant to Article X hereof. For purposes of clarification, if any Lender elects to reject the prepayment of its Convertible Term Loans or convert its Convertible Term Loans to Borrower Common Shares pursuant to Article X hereof, the Borrower shall not make the prepayment in cash required hereunder with respect to such Convertible Term Loans to such Lender. If the Borrower fails to make the required prepayment in cash or deliver the Borrower Common Shares, as the case may be, to any Lender when due, an Event of Default shall occur. In addition to all other remedies, interest shall accrue on the prepayment amount for such Lender and the Loans for such Lender, respectively, at the Default Rate from the date any Event of Default shall occur, and all amounts due shall thereafter be payable on demand. Notwithstanding anything to the contrary set forth in this Section 2.12, during the first year following the Closing Date, no Lender will have the option to elect to convert its Convertible Term Loans into Borrower Common Shares pursuant to Article X hereof upon a Change of Control. Any prepayment of Additional Term Loans pursuant to this Section 2.12(b) shall only be made in cash.

(c) Asset Sales; Insurance/Condemnation; Extraordinary Receipts. No later than the first Business Day following any Asset Sale by the Borrower or any of its Subsidiaries any covered loss under any casualty insurance policy held by the Borrower or any of its Subsidiaries, the taking of any assets of the Borrower or any of its Subsidiaries pursuant to the power of eminent domain, condemnation or otherwise, the sale of any assets of the Borrower or any of its Subsidiaries under the threat of such taking or the receipt by the Borrower or any of its Subsidiaries of any Extraordinary Receipts, the Borrower shall make an offer to prepay the outstanding principal amount of the Loans in an amount in cash equal to 100% of the Net Cash Proceeds or the Extraordinary Receipts, as applicable, received by such Person in connection therewith. Each Lender has the option to (i) accept such prepayment of its Convertible Term Loans in cash, (ii) reject such prepayment of its Convertible Term Loans or (iii) elect to convert its Convertible Term Loans into Borrower Common Shares pursuant to Article X hereof. The Borrower shall provide five (5) Business Days prior written notice to the Agent (or such lesser time as may be agreed by the Agent) of its offer to make a prepayment pursuant to this Section 2.12, and with respect to Convertible Term Loans, the Agent shall have three (3) Business Days from the date it receives such notice from the Borrower to accept such prepayment, reject such prepayment or elect to convert into Borrower Common Shares pursuant to Article X hereof. For purposes of clarification, if any Lender elects to reject the prepayment of its Convertible Term Loans or convert its Convertible Term Loans to Borrower Common Shares pursuant to Article X hereof, the Borrower shall not make the prepayment in cash required hereunder for such Convertible Term Loans to such Lender. If the Borrower fails to make the required prepayment in cash and/or deliver the Borrower Common Shares, as the case may be, to any Lender when due, an Event of Default shall occur. In addition to all other remedies, at the option of the Agent, interest shall accrue on the prepayment amount for such Lender and the Loans for such Lender, respectively, at the Default Rate from the date any Event of Default shall occur, and all amounts due shall thereafter be payable on demand. If any Lender rejects the prepayment of its Convertible Term Loans and/or does not elect to convert its Convertible Term Loans into Borrower Common Shares, then the Borrower shall use such proceeds only for investment in Media Assets. Notwithstanding anything to the contrary set forth in this Section 2.12, during the

7

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

first year following the Closing Date, no Lender will have the option to elect to convert its Convertible Term Loans into Borrower Common Shares pursuant to Article X hereof upon the foregoing described prepayment events. The provisions of this Section 2.12(c) shall not be deemed to be implied consent to any such issuance, incurrence or sale otherwise prohibited by the terms and conditions of this Agreement. Any prepayment of Additional Term Loans made pursuant to this Section 2.12(c) shall only be made in cash.

(d) Payment Certificate. Concurrently with any payment or prepayment of the Loans pursuant to Sections 2.10, 2.11, 2.12 or 8.2(a), the Borrower shall deliver to the Agent a certificate of an Authorized Officer certifying whether the Loans being prepaid are Convertible Term Loans or Additional Term Loans and demonstrating the calculation, with respect to each Lender, of the Loan Payment Amount, the amount of the applicable net proceeds, or the number of Borrower Common Shares to be delivered, as the case may be. In the event that the Borrower shall subsequently determine that the actual amount received exceeded the amount set forth in such certificate, the Borrower shall promptly make an additional prepayment of the Loans (with the corresponding right of the Lenders to elect to convert its Convertible Term Loans into Borrower Common Shares) in accordance with Section 2.12 and in an amount equal to such excess, and the Borrower shall concurrently therewith deliver to the Agent a certificate of an Authorized Officer demonstrating the derivation of such excess.

(ix) Section 2.16 (Termination of Commitments) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

Section 2.16 Termination of Commitments. The Term Loan Commitment with respect to Convertible Term Loans only terminated on March 31, 2009. Upon the making of any Term Loan, each Lender’s Commitment shall be permanently reduced by an amount equal to the principal amount of such Term Loan.

(c) Amendments to Article III (Conditions Precedent; Conditions Subsequent)

(i) Section 3.2 (Conditions to Each Borrowing) of the Credit Agreement is hereby amended by inserting the text “Convertible Term” immediately prior to the text “Loan” in the second line thereof.

(d) Amendments to Article IV (Representations and Warranties).

(i) Section 4.1 (Representations and Warranties of the Credit Parties) of the Credit Agreement is hereby amended by inserting the text “, on the Second Amendment Date” immediately after the text “Closing Date” in the fourth line thereof.

(ii) Each of Sections 4.1(l), (m), (x) and (mm) of the Credit Agreement is hereby amended by deleting the text “each Media Company”, “the Media Companies”, “any Media Company”, “the other Media Companies” and “other Media Company”, as applicable, each time such text appears therein and replacing it with “the Borrower and each of its Subsidiaries”, “the Borrower and its Subsidiaries”, “the Borrower or any of its Subsidiaries”, “its Subsidiaries”, and “Subsidiary”, respectively.

(iii) Each of Sections 4.1(l), (m)(i) and (iii), (p)(ii), (w), (x), (aa), (dd), (hh), (ii), and (mm) of the Credit Agreement is hereby amended by deleting the text “the Closing Date” and “the date hereof”, as applicable, each time such text appears therein and replacing it with “the Second Amendment Date”.

8

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

(iv) Clause (ii) of Section 4.1(l) (Subsidiaries) of the Credit Agreement is hereby further amended by deleting the text “Section 4.1(m) of the Disclosure Schedule” therefrom and replacing it with “Section 4.1(l) of the Disclosure Schedule”.

(v) Section 4.1(hh) (Financial Projections) of the Credit Agreement is hereby further amended by (A) deleting the text “Section 4.1(m) of the Disclosure Schedule” therefrom and replacing it with “Section 4.1(l) of the Disclosure Schedule” and (B) deleting the text “Media Assets” in clause (ii) thereof and replacing it with “assets”.

(vi) Section 4.1(kk) (Media Assets) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

(kk) Assets. With respect to the assets acquired on or prior to the Second Amendment Date, the Borrower, or a wholly owned direct or indirect Foreign Subsidiary of the Borrower, either (i) has good and marketable title to such assets or (ii) owns all outstanding shares of Capital Stock of the WFOE which is party to an Internal Control Agreement with respect to such assets. With respect to assets acquired after the date hereof, as of the date of acquisition, the Borrower, or a wholly owned direct or indirect Foreign Subsidiary of the Borrower, either (i) will have good and marketable title to such assets or (ii) will own all outstanding shares of Capital Stock of the WFOE which is a party to an Internal Control Agreement with respect to such assets.

(e) Amendment to Article V (Affirmative Covenants)

(i) Section 5.1(a) (Basic Reporting Requirements) of the Credit Agreement is hereby amended by deleting the text “upon, but only upon, the request of a Lender or the Agent” from the second line thereof and replacing it with “unless the Agent notifies the Borrower otherwise”.

(ii) Section 5.1(m) (Guarantors) of the Credit Agreement is hereby amended by (A) deleting the text “which directly or indirectly holds any Media Assets or any outstanding shares of Capital Stock of a WFOE which is a party to an Internal Control Agreement with respect to such Media Assets” therefrom, (B) deleting the text “Foreign Subsidiary” each time it appears therein and replacing it with “Subsidiary”, and by inserting the text “and pledge all of its property and assets in favor of the Agent for the benefit of the Agent and the Lenders” immediately after the text “Guarantor hereunder”.

(iii) Section 5.1(o) (Additional Media Assets) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

(o) Additional Assets. Other than purchases of inventory in the ordinary course of business, no assets or property shall be acquired after the date hereof without the prior written consent of the Lenders.

(iv) Section 5.1 (Affirmative Covenants) of the Credit Agreement is hereby amended by inserting new clause (t) immediately after clause (s) thereof to read in its entirety as follows:

(t) Asset, Financing or Equity Proposal. Promptly upon the Borrower or any of its Subsidiaries becoming aware of any proposal, negotiation or bid for any asset transfer, equity or debt issuance or other financing involving the Borrower or any of its Subsidiaries, the Borrower shall notify the Agent and the Lenders in writing thereof and deliver to the Agent and the Lenders copies of all statements, reports, correspondence, notices and other information relating thereto unless the Agent notifies the Borrower otherwise.

9

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

(v) Each of Sections 5.1(b), (c), (d), (g), (h), (i), (j), (k) and (l) of the Credit Agreement is hereby amended by deleting the text “the other Credit Parties” and “other Credit Party”, as applicable therefrom and replacing it with “its Subsidiaries” and “of its Subsidiaries”, respectively.

(vi) Article V (Affirmative Covenants) to the Credit Agreement is hereby amended by inserting new Section 5.2 (Board Observer and Access) immediately after new clause (t) of Section 5.1 to read in its entirety as follows:

5.2 Board Observer and Access.

(a) So long as any Obligation shall remain outstanding, the Agent shall have the right to have one representative (who need not be the same individual from meeting to meeting) (a “Non-Voting Observer”) observe in full each meeting of the Board and each of the committees thereof (a “Meeting”), whether in person or, at the option of the Non-Voting Observer, via telephone attendance; provided that the Non-Voting Observer may not attend (i) any Meeting of the Audit Committee or Compensation Committee where such committee has determined in good faith and after consultation with legal counsel that the subject matter of such Meeting is such that it is required or advisable that only independent directors attend and non-independent directors not attend, (ii) any Meeting or portion thereof where such attendance by the Non-Voting Observer could, in the opinion of legal counsel, compromise Borrower’s attorney-client privilege under applicable law or (iii) any Meeting or portion thereof where a similarly situated director of the Borrower should, in the opinion of legal counsel, recuse himself from attendance of such Meeting or portion thereof under applicable law, regulation or the rules of any stock exchange or inter-dealer quotation system because such attendance would present a material conflict of interest; provided, however, that any such exclusion of the Non-Voting Observer pursuant to clause (ii) or (iii) shall extend only with respect to the subject matter and portion of any such Meeting relating to such privilege or conflict.

(b) So long as any Obligation shall remain outstanding, the Borrower shall give the Agent written notice of each Meeting, including the Meeting’s time and place, in the same manner as the directors of the Board, and (subject to the exceptions in clause (i) and (ii) of Section 5.2(a)) shall provide the Agent with any document, correspondence or other information provided to any member of the Board individually or to the Board collectively, whether provided by the Borrower or a third party, including, without limitation, agenda and minutes of the Meetings, in each case, no later than it gives such notice and provides such document, correspondence or other information to such member or the Board, as the case may be.

(c) The Borrower shall reimburse the Non-Voting Observer for its reasonable out-of-pocket expenses incurred in connection with attendance at each Meeting, including but not limited to food, lodging and transportation.

(d) The Non-Voting Observer shall be entitled to participate in discussions and consult with, and make proposals and furnish advice to, the Board or committee without voting. The Non-Voting Observer shall have a duty of confidentiality to the Borrower comparable to the duty of confidentiality of a director of the Board.

(e) The Borrower shall use commercially reasonable efforts to obtain within 30 days of the Second Amendment Date and (if so obtained) shall thereafter maintain directors’ and officers’ liability insurance covering the Non-Voting Observer in an amount of at least $10,000,000.

10

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

(f) The Borrower shall indemnify and hold harmless, to the fullest extent permitted under applicable law, the Non-Voting Observer to the same extent as members of the Board and on terms no less favorable than under the Borrower’s by-laws or other governing document as in effect on the date hereof.

(g) So long as any Obligation shall remain outstanding, upon reasonable notice and upon reasonable request by any of the Lenders or the Agent, each of the Borrower and the Guarantors shall (i) give such Lender or Agent and their authorized representatives reasonable access during normal business hours to their accountants, and, to the extent available to the Borrower or the Guarantors after the Borrower or the Guarantors use reasonable efforts to obtain them, the accountants’ work papers, (ii) permit each of the Lenders or the Agent to make such copies and inspections thereof as any such Person may reasonably request and discuss the affairs, finances and accounts with the managers, executives and officers thereof.

(f) Amendments to Article VI (Negative Covenants and Financial Covenants)

(i) Clause (vi) of Section 6.1(b) of the Credit Agreement is hereby amended by deleting the language “Section 6.1(a)(vii)” therefrom and replacing it with “Section 6.1(a)(v).

(ii) Section 6.1(g) (Mergers; Asset Sales) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

(g) Mergers; Asset Sales. Neither the Borrower nor any of its Subsidiaries shall (i) become a party to a merger or consolidation, (ii) sell, lease or otherwise dispose of assets, other than (A) sales of inventory in the ordinary course of business and (B) disposals of obsolete, worn-out or surplus property, (iii) make any changes in the corporate structure or identity of the Borrower or any of its Subsidiaries or (iv) enter into any agreement to do any of the foregoing; provided, that, any Credit Party (other than the Borrower) may merge with and into the Borrower or any Credit Party upon not less than twenty (20) days’ prior written notice to the Agent of such merger. For the avoidance of doubt, sales and other dispositions of assets which either are not prohibited by this Section 6.1(g) or are expressly consented to by the Agent shall be deemed permitted sales of assets for all purposes of this Agreement, including, without limitation, Section 11.1(e).

(iii) Section 6.1(k) (Subsidiaries) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

(k) Subsidiaries. From and after the Second Amendment Date, neither the Borrower nor any of its Subsidiaries shall form, cause or permit to be formed or cause or permit to exist, any other Subsidiary, without the prior written consent of the Lenders.

(iv) Section 6.1(p) (Restrictions on Subsidiary Distributions) of the Credit Agreement is hereby amended by deleting the text “the Media Companies”, “any Media Company”, “Media Company’s” and “Media Company” therefrom and replacing it with “its Subsidiaries”, “any of its Subsidiaries”, “Subsidiary’s” and “Subsidiary”, respectively.

(g) Amendments to Section 6.2 (Financial Covenants)

(i) Clause (a) of Section 6.2 (Financial Covenants) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

11

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

(a) Minimum Consolidated EBITDA, Maximum Leverage Ratio and Maximum Capital Expenditures. The Borrower shall not permit (A) Consolidated EBITDA of the Borrower and its Subsidiaries for any of the latest thirteen four-week periods ending on the end of the Fiscal Quarters set forth below to be less than the amount or ratio set forth opposite such period, and (B) the Leverage Ratio for any of the latest thirteen four-week periods ending on the end of the Fiscal Quarters set forth below to be more than the ratio set forth opposite such period, in each case for clauses (A) and (B) above, evidence of which shall be delivered to the Agent with the applicable Financials and certifications required under Section 5.1(a):

	Minimum
	Consolidated		Maximum
Fiscal Quarter Ending	EBITDA		Leverage Ratio
4th Fiscal Quarter ending in Fiscal Year 2010	$	789,302		57.23:1
1st Fiscal Quarter ending in Fiscal Year 2011	$	2,316,403		19.50:1
2nd Fiscal Quarter ending in Fiscal Year 2011	$	2,825,436		15.99:1
3rd Fiscal Quarter ending in Fiscal Year 2011	$	3,079,953		14.67:1
4th Fiscal Quarter ending in Fiscal Year 2011	$	3,843,503		11.75:1
1st Fiscal Quarter ending in Fiscal Year 2012	$	3,669,732		12.31:1
2nd Fiscal Quarter ending in Fiscal Year 2012	$	3,495,961		12.92:1
3rd Fiscal Quarter ending in Fiscal Year 2012	$	3,322,190		13.60:1

For purposes of calculating the financial covenants set forth above for the fourth fiscal quarter ending in 2010 and for each of the first two fiscal quarters ending in 2011, Consolidated EBITDA shall be calculated by calculating Consolidated EBITDA for the period from the first day of the fourth fiscal quarter ending in 2010 through the end of the period of determination and dividing it by the number of fiscal quarters in such period of determination on and after the first day of the fourth fiscal quarter ending in 2010 and multiplying the result by 4.

(ii) The Borrower and its Subsidiaries will not make or become legally obligated to make any Capital Expenditures during any Fiscal Year exceeding, in the aggregate for the Borrower and its Subsidiaries, the amount set forth below opposite such Fiscal Year:

	Maximum Capital
Fiscal Year	Expenditures
2010	$	1,275,000
2011	$	515,000
2012	$	615,000

(iii) Clause (b) of Section 6.2 (Financial Covenants) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

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AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

(b) No Payments. No Payments. None of the Borrower or any of its Subsidiaries shall make any payment or series of related payments outside the ordinary course of business without the prior written consent of the Agent, provided that in any event any payment or series of related payments by the Borrower or any Subsidiary in excess of $500,000 in any Fiscal Year shall be considered outside the ordinary course of business unless (1) such payment or series of related payments is made pursuant to a legal and valid agreement entered into in the ordinary course of business and binding on the Borrower or such Subsidiary and, to the knowledge of the Borrower or such Subsidiary, on the recipient of such payment and (x) such agreement is not with an Affiliate or Significant Person of the Borrower or any of its Subsidiaries, (y) such agreement is in existence and legal, valid and binding as of the Second Amendment Date (or is an extension, renewal or modification thereof on substantially the same terms) and (z) there exists no breach, default or event of default, or other right to terminate thereunder on the part of the Borrower or such Subsidiary, or, to the knowledge of the Borrower or such Subsidiary, the recipient of such payment, both as of the Second Amendment Date and as of the date of such payment and both before and after giving effect to such payment, or (2) such payment or series of related payments is made pursuant to a legal and valid agreement entered into in the ordinary course of business and binding on the Borrower or such Subsidiary and, to the knowledge of the Borrower or such Subsidiary, on the recipient of such payment and (x) such agreement is not in existence as of the Second Amendment Date, (y) the counterparty to such agreement is not an Affiliate or Significant Person of the Borrower or any of its Subsidiaries, and (z) a copy of such agreement and all ancillary documents have been provided to the Agent not less than five (5) Business Days prior to the execution thereof by the Borrower or such Subsidiary and the Agent has determined in its sole discretion that such agreement (1) was made in good faith, in the ordinary course of business and to further the business purpose of the Borrower and its Subsidiaries and (2) was not entered into for the purpose of, and does not have the effect of, making preferential payments to other creditors of the Borrower and its Subsidiaries; provided, that, if the Agent fails to notify the Borrower or such Subsidiary of its determination on or prior to the expiration of such five (5) Business Day period, the Agent shall be deemed to have consented to the execution thereof by the Borrower or such Subsidiary.

(iv) The amendments in this clause (g) are intended to cure any Default or Event of Default that may have occurred prior to the date hereof for failure to comply with Section 6.2 (Financial Covenants) of the Credit Agreement as in effect prior to this Amendment unless the Credit Parties would also have failed to comply with such Section 6.2 after giving effect to this Amendment.

(h) Amendment to Article VIII (Events of Default)

(i) Section 8.1(n) (Internal Control Agreements) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

(n) Internal Control Agreements. At any time after the execution and delivery thereof any Internal Control Agreement ceases to be in full force and effect (other than by its terms) or shall be declared null and void or any breach or default shall occur thereunder or under any commitment letter, power of attorney, document or agreement delivered to the Agent in connection therewith;

(ii) Section 8.2(a) (Certain Remedies) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

(a) Certain Remedies. In the case of (i) any Event of Default specified in any Section other than Section 8.1(f) or 8.1(g), the Agent may, and at the request of the Required

13

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

Lenders shall, by notice to the Borrower declare the unpaid principal amount of the Loans and interest accrued thereon and all other Obligations to be immediately due and payable, which upon delivery of such notice shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower, and (ii) any of the Events of Default specified in either Section 8.1(f) or 8.1(g), automatically, without any notice to the Borrower or any other act by the Agent or any Lender, the Commitments shall thereupon terminate, and the unpaid principal amount of the Loans and interest accrued thereon and all other Obligations shall immediately become due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower, provided, that, with respect to the Convertible Term Loans only, such Lender may, regardless of any such amounts becoming due, elect at any time after acceleration to convert such Convertible Term Loans into Borrower Common Shares pursuant to Article X hereof. For purposes of clarification, if any Lender elects to convert its Convertible Term Loans to Borrower Common Shares pursuant to Article X hereof, the Borrower shall not have to pay the Loan Payment Amount for Convertible Term Loans if such Borrower Common Shares are delivered to such Lender in accordance with Article X hereof.

(iii) Clause (ii) of Section 8.2(b) (Remedies in All Events of Default) of the Credit Agreement is hereby amended by adding the text “or any of its Subsidiaries” immediately after the text “Borrower”.

(i) Amendments to Article X (Conversion)

(i) Section 10.1 (Conversion Privilege) of the Credit Agreement is hereby amended by inserting a new clause (f) at the end thereof to read in its entirety as follows:

(f) Additional Term Loans. Notwithstanding anything contained herein to the contrary, this Article X shall not apply to Additional Term Loans.

(j) Amendments to Schedules to the Credit Agreement

(i) The contents of Schedule I (Commitments) to the Credit Agreement are hereby replaced in their entirety with the contents of Schedule I (Commitments) hereto.

Section 3. Conditions Precedent to the Effectiveness of this Amendment. This Amendment shall become effective as of the date first written above when, and only when, each of the following conditions precedent shall have been satisfied or duly waived by the Administrative Agent (the date each such conditions precedent is satisfied or duly waived, the “Amendment Effective Date”):

(a) Certain Documents. The Administrative Agent shall have received each of the following, each, other than this Amendment, dated the Amendment Effective Date (unless otherwise agreed by the Administrative Agent) and each in form and substance satisfactory to it:

(i) this Amendment, duly executed by the Borrower, each Guarantor, the Administrative Agent and the Lenders;

(ii) favorable opinions of New York, British Virgin Islands, Cayman Islands and Hong Kong counsel to the Credit Parties, addressed to the Administrative Agent and the Lenders as to the enforceability of this Amendment and the enforceability of the Credit Documents after giving effect to this Amendment, and addressing such other matters as the Administrative Agent may reasonably request;

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AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

(iii) all of the documents, instruments and agreements requested by it to grant to the Agent, to the extent permitted by applicable law, a first-priority security interest in all of the capital stock of each Subsidiary of the Borrower, whether a Foreign Subsidiary or a Domestic Subsidiary, and all assets of the Borrower and all of its Subsidiaries, whether organized under the laws of the PRC or offshore, including interests in Internal Control Agreements, and in joint ventures of the Borrower or any of its Subsidiaries;

(iv) to the extent permitted by applicable law and requested by the Agent, Guaranties, duly executed by each Subsidiary of the Borrower, both Foreign Subsidiaries and Domestic Subsidiaries;

(v) The preferred stock, together all documents, instruments, consents and agreements requested by it and in form and substance satisfactory to it, to evidence such preferred stock and its issuance, as described in the Proposal Letter dated July 1, 2010 between the Agent and the Borrower;

(vi) Original copies of all Internal Control Agreements of the Borrower and its Subsidiaries and any other Material Contracts requested by it;

(vii) an updated Disclosure Schedule to reflect the Credit Agreement, as amended hereby; and

(viii) such additional documentation as the Administrative Agent may reasonably require;

(b) Representations and Warranties. Each of the representations and warranties contained in this Amendment were true when made;

(c) No Default or Event of Default. After giving effect to this Amendment, no Default or Event of Default shall have occurred and be continuing, either on the date hereof or on the Amendment Effective Date;

(d) Corporate and Other Proceedings. All corporate and other proceedings, and all documents, instruments, consents and other legal matters ancillary to the transactions contemplated by this Amendment shall be completed in a form and manner satisfactory in all respects to the Administrative Agent;

(e) Fees and Expenses Paid. The Borrower shall have paid all Obligations due, after giving effect to this Amendment, on or before the later of the date hereof and the Amendment Effective Date, including, without limitation, all fees set forth in Section 6 (Fees and Expenses) hereof, all other costs, expenses and fees due under any Credit Document and invoiced prior to the Amendment Effective Date and all costs, expenses and fees due in connection with the issuance of the Series C Preferred Shares;

(f) Operation of Business. The Credit Parties shall continue to operate their business in the ordinary course without any extraordinary payments and there shall not have occurred any material adverse change since June 1, 2010 in the business, assets, properties, liabilities (actual or contingent), operations, condition (financial or otherwise) or prospects of (a) the Borrower and (b) the Borrower, the Guarantors and their respective Subsidiaries taken as a whole or in the facts and information regarding such entities as represented to date;

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AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

(g) Repayment of Convertible Term Loans with Proceeds of EO Sale. The Borrower shall have repaid the Convertible Term Loans with the proceeds received by it from the EO Sale in an amount equal to $7,600,000.

(h) No Laws. No law or regulation shall be applicable in the judgment of the Administrative Agent that restrains, prevents or imposes materially adverse conditions upon the transactions contemplated hereby.

Section 4. Further Agreements. Unless otherwise agreed by the Administrative Agent, the Borrower and each of its Subsidiaries shall perform all duties and obligations specified on Schedule C attached hereto within the time limitations stated thereon, time being strictly of the essence. The failure of the Borrower or any of its Subsidiaries to fully perform on a timely basis all of the duties and obligations specified on Schedule C attached hereto shall constitute an Event of Default under the Credit Agreement.

Section 5. Representations and Warranties. On and as of the date hereof and as of the Amendment Effective Date, after giving effect to this Amendment, each Credit Party hereby represents and warrants to the Administrative Agent and each Lender as follows:

(a) Binding Obligation. This Amendment has been duly authorized, executed and delivered by such Credit Party and constitutes a legal, valid and binding obligation of such Credit Party, enforceable against such Credit Party in accordance with its terms and the Credit Agreement as modified by this Amendment, except as enforceability thereof may be limited by applicable bankruptcy or other debtor relief laws and by general principles of equity (regardless of whether enforcement is sought in proceeding in equity or at law);

(b) Subsidiaries and Affiliates. (i) If such Credit Party is the Borrower, the corporate chart attached hereto as Schedule C and the representations and warranties set forth Section 4.1(l) (Subsidiaries) of the Credit Agreement are true as of the date hereof (replacing “Closing Date” therein with the date of this Amendment and taking into account any updated information delivered by the Borrowers to the Administrative Agent on or prior to the date hereof), all Subsidiaries of the Borrower existing on the Amendment Effective Date have executed a Guaranty and the Credit Documents required to be executed with respect to such Subsidiaries pursuant to the Credit Agreement, including, without limitation, Section 5.1(m) (Guarantors) thereof and (ii) in any case, all certificates, statements, updated schedules, collateral and other updates and other documents required to be delivered by such Credit Party to the Administrative Agent or any Lender pursuant to any Credit Document as modified hereby have been delivered thereunder and all filings required to be made by or on behalf of such Credit Party pursuant to any such Credit Document have been made;

(c) Representations and Warranties in Credit Documents. Each of the representations and warranties of such Credit Party contained in any Credit Document (as modified hereby) or in any certificate, document or financial or other written statement furnished at any time under or in connection therewith is true in all material respects on and as of the date hereof and the Amendment Effective Date, in each case as if made on and as of such date and except to the extent that such representations and warranties expressly relate to a specific date, in which case such representations and warranties shall be true in all material respects as of such specific date; provided, however, that, as used therein, (i) “Credit Agreement” shall refer to the Credit Agreement as amended hereby and after giving effect to the waivers set forth herein and (ii) “Credit Documents” shall include this Amendment;

(d) No Litigation or Defense. No litigation has been commenced or threatened against such Credit Party or any of its Subsidiaries seeking to restrain or enjoin (whether temporarily,

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AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

preliminarily or permanently) the performance of any action by any Credit Party or any Subsidiary of any Credit Party required or contemplated by the terms of this Amendment or any other Credit Document as modified hereby, and there exists no cause of action, offset, claim, counterclaim or defense, whether or not asserted, against the Administrative Agent or any Lender or any of their Related Parties (as defined below) with respect to the Obligations under any Credit Document; and

(e) Outstanding Principal Amount. Schedule B hereto correctly lists the aggregate principal amount of all Loans outstanding on the date hereof (prior to giving effect to this Amendment), each of which is owed by the Borrower.

Section 6. Fees and Expenses.

(a) On the date hereof, the Borrower shall pay to the Agent a one-time non-refundable amendment fee (the “Amendment Fee”) equal to (i) the sum of all Additional Term Loan Commitments as of the Second Amendment Date, times (ii) a rate equal to 2.0%. The Amendment Fee shall be deemed fully earned and due and payable in immediately available Dollars on the date hereof, and shall be in addition to any other fee from time to time payable under the Credit Documents.

(b) Each Credit Party agrees to pay on demand (i) in accordance with the terms of Section 11.3 (Expenses) of the Credit Agreement all costs and expenses of the Administrative Agent in connection with the preparation, reproduction, execution, delivery and enforcement of this Amendment and all other Credit Documents entered into in connection herewith (including, without limitation, the fees and expenses of attorneys, advisors and other professionals hired by the Administrative Agent with respect to the Credit Parties or the Credit Documents) and (ii) all fees, costs and expenses due in connection with the issuance of the Series C Preferred Shares (including without limitation, the fees and expenses of attorneys, advisors and other professionals with respect thereto).

Section 7. Release. In further consideration for the execution by the Administrative Agent and the Lenders party hereto of this Amendment and without limiting any rights or remedies the Administrative Agent or any Lender may have, each Credit Party hereby releases each of the Administrative Agent, each Lender and each of their Related Parties (each a “Releasee” and, collectively, the “Releasees”) from any and all Claims that any Credit Party has or may have against any Releasee, whether or not relating to any Credit Document, Obligation, Collateral, or legal relationship that exists or may exist between any Releasee and any Credit Party. As used in this Section 7, (i) “Claims” means all liabilities, rights, demands, covenants, duties, obligations (including, without limitation, indebtedness, receivables and other contractual obligations), claims, actions and causes of actions, suits, disputes, judgments, damages, losses, debts, responsibilities, fines, penalties, sanctions, commissions and interest, disbursements, taxes, charges, costs, fees and expenses (including, without limitation, fees, charges and disbursements of financial, legal and other advisors, consultants and professionals and, if applicable, any value-added and other taxes and charges thereon), in each case of any kind or nature, whether joint or several, whether now existing or hereafter arising and however acquired and whether or not known, asserted, direct, contingent, liquidated, due, consequential, actual, punitive or treble, (ii) “Related Party” shall mean, with respect to any Person, any Affiliate of such Person or of another Related Party of such Person (excluding, in each case, the Credit Parties and their Controlled Affiliates) and such Person’s and such Affiliate’s predecessors, successors, assigns, managers, members, partners, directors, officers, employees (regardless of whether seconded to a third party and including, without limitation, individuals with independent contractor or similar status), individual stockholders, agents, attorneys-in-fact, trustees, fiduciaries, representatives and advisors, (iii) “Affiliated Investor” means any Person that is a collateralized debt obligation, collateralized loan obligation or any other investment pooling vehicle or other entity that (A) is created primarily to invest in equity or debt securities, loans and other investments, (B) does not operate any trade or business and (C) is administered, advised or managed by, or directly or

17

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

indirectly under common administration, advice or management with, the Administrative Agent or any Lender or any Affiliate of any Lender or the Administrative Agent and (iv) “Controlled Affiliate” means, with respect to any entity, any Person directly or indirectly “controlled” (as defined in the definition of “Affiliate” set forth in the Credit Agreement on the date hereof) by one or more of such entity and its other Controlled Affiliates.

Section 8. Consent of Guarantors and Reaffirmation of Obligations. Each Guarantor hereby consents to this Amendment and agrees that it continues to guaranty, pursuant to the Credit Documents, as primary obligor and not as surety, the full and punctual payment when due of the Obligations as modified hereby and that the terms hereof shall not affect in any way its obligations and liabilities, as expressly modified hereby, under the Credit Documents. Each Credit Party hereby reaffirms (a) all such obligations and liabilities, and agrees that such obligations and liabilities shall remain in full force and effect, (b) the Liens granted under the Credit Documents, and agrees that such Liens shall continue to secure the Obligations as expressly modified hereby, and (c) the validity and enforceability of the Credit Documents.

Section 9. Effect on the Credit Documents. This Amendment is a Credit Document and is limited as written and failure to comply with any of the agreements set forth herein shall be an immediate Event of Default. As of the date each modification set forth herein shall become effective, each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” “herein,” or words of like import, and each reference in the other Credit Documents to the Credit Agreement (including, without limitation, by means of words like “thereunder”, “thereof” and words of like import), shall refer to the Credit Agreement as modified thereby, and this Amendment and the Credit Agreement shall be read together and construed as a single agreement. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, (a) waive or modify any right, power or remedy under, or any other provision of, any Credit Document or (b) commit or otherwise obligate the Administrative Agent or any Lender to enter into or consider entering into any other waiver or modification of any Credit Document.

Section 10. Reservation of Rights. No failure on the part of any Lender or the Administrative Agent to exercise, and no delay in exercising, any right under the Credit Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. Nothing herein, or in the course of dealing or in the discussions between any Credit Party and any of the Administrative Agent, the Lenders and their related parties, shall waive any Default or Events of Default or waive or modify any other provision of any Credit Document.

Section 11. Waiver of Jury Trial; Miscellaneous. Headings are for convenience only and do not form part of this Amendment, except when used to reference an article or section, in which case such title reference shall govern absent manifest error in case of conflict. All communications and notices hereunder shall be given as provided in the Credit Documents. This Amendment (a) shall be governed by and construed in accordance with the law of the State of New York, (b) is for the exclusive benefit of the parties hereto and, together with the other Credit Documents, constitutes the entire agreement of such parties, superseding all prior agreements among them, with respect to the subject matter hereof, (c) may be modified, waived or assigned only in writing and only to the extent such modification, waiver or assignment would be permitted under the Credit Documents (and any attempt to assign this Amendment without such writing shall be null and void), (d) may be executed in counterparts, which may be effectively transmitted by fax or e-mail (in each case return receipt requested and obtained) and which, together, shall constitute one and the same instrument, (e) is a negotiated document, entered into freely among the parties upon advice of their own counsel, and it should not be construed against any of its drafters and (f) shall survive the satisfaction or discharge of the Obligations. The fact that any term or

18

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

provision of this Amendment is held invalid, illegal or unenforceable as to any person in any situation in any jurisdiction shall not affect the validity, enforceability or legality of the remaining terms or provisions hereof or the validity, enforceability or legality of such offending term or provision in any other situation or jurisdiction or as applied to any person. Each party hereto hereby irrevocably and unconditionally waives any right to trial by jury with respect to this Amendment.

[SIGNATURE PAGES FOLLOW]

19

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers and general partners thereunto duly authorized, as of the date first written above.

BORROWER:

Executed as a Deed by	)
XINHUA SPORTS &	)
ENTERTAINMENT LIMITED (formerly	) /s/ Graham Anton Earnshaw
known as Xinhua Finance Media Limited)	)
in the presence of and SIGNED by:	)

GRANTORS:

Executed as a Deed by	)
UPPER STEP HOLDINGS LIMITED	)
in the presence of and SIGNED by:	) /s/ Graham Anton Earnshaw
	)
	)
Executed as a Deed by	)
CHINA LEAD PROFITS LIMITED	)
in the presence of and SIGNED by:	) /s/ Graham Anton Earnshaw
	)
	)
Executed as a Deed by	)
EVERFAME DEVELOPMENT	)
LIMITED	)
in the presence of and SIGNED by:	) /s/ Graham Anton Earnshaw
	)

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

Executed as a Deed by	)
STAREASE LIMITED	)
in the presence of and SIGNED by:	) /s/ Graham Anton Earnshaw
	)
	)
Executed as a Deed by	)
ACCORD GROUP INVESTMENTS	)
LIMITED	)
in the presence of and SIGNED by:	) /s/ Graham Anton Earnshaw
	)
Executed as a Deed by	)
GREAT TRIUMPH INVESTMENTS	)
LIMITED	)
in the presence of and SIGNED by:	) /s/ Graham Anton Earnshaw
	)
Executed as a Deed by	)
EAST ALLIANCE LIMITED	)
in the presence of and SIGNED by:	) /s/ Graham Anton Earnshaw
	)
	)
Executed as a Deed by	)
CENTURY EFFORT LIMITED	)
in the presence of and SIGNED by:	) /s/ Graham Anton Earnshaw
	)
	)

2

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

Executed as a Deed by	)
SMALL WORLD HOLDING	)
COMPANY LIMITED	)
in the presence of and SIGNED by:	) /s/ Graham Anton Earnshaw
	)
Executed as a Deed by	)
NUCOM ONLINE CORPORATION	)
in the presence of and SIGNED by:	) /s/ Graham Anton Earnshaw
	)
	)
Executed as a Deed by	)
XSEL ADVERTISING LIMITED	)
in the presence of and SIGNED by:	) /s/ Graham Anton Earnshaw
	)
	)
Executed as a Deed by	)
UPPER WILL ENTERPRISES	)
LIMITED	)
in the presence of and SIGNED by:	) /s/ Graham Anton Earnshaw
	)
Executed as a Deed by	)
XINHUA SPORTS VENTURES	)
LIMITED	)
in the presence of and SIGNED by:	) /s/ Graham Anton Earnshaw
	)

3

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

The Common Seal of	)
CHINA MEDIA NETWORK LIMITED	) /s/ Graham Anton Earnshaw
was affixed in the presence of:	)
	)
	)
The Common Seal of	)
XINHUA SPORTS &	)
ENTERTAINMENT (HK) LIMITED	)
was affixed in the presence of:	) /s/ Graham Anton Earnshaw
	)
The Common Seal of	)
ADVANCE MIND HOLDINGS	)
LIMITED	)
was affixed in the presence of:	) /s/ Graham Anton Earnshaw
	)
The Common Seal of	)
XSEL (HONG KONG) LIMITED	)
was affixed in the presence of:	) /s/ Graham Anton Earnshaw
	)
	)
The Common Seal of	)
HONG KONG STOCK EXPRESS	)
PUBLICATION LIMITED	)
was affixed in the presence of:	) /s/ Graham Anton Earnshaw
	)

4

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

The Common Seal of	)
SINGSHINE (HOLDINGS)	)
HONGKONG LIMITED	)
was affixed in the presence of:	) /s/ Graham Anton Earnshaw
	)

5

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

AGENT:	PATRIARCH PARTNERS AGENCY SERVICES, LLC, as Agent
	By:	/s/ Lynn Tilton
		Name:	Lynn Tilton
		Title:	Manager

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

LENDERS:	ZOHAR CDO 2003-1, LIMITED
	By:	Patriarch Partners VIII, LLC,
		its Collateral Manager
		By:	/s/ Lynn Tilton
			Name:	Lynn Tilton
			Title:	Manager
	ZOHAR II 2005-1, LIMITED
	By:	Patriarch Partners XVI, LLC,
		its Collateral Manager
		By:	/s/ Lynn Tilton
			Name:	Lynn Tilton
			Title:	Manager

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

SCHEDULE A

EVENTS OF DEFAULT

1. The Borrower is not in compliance with Section 6.2(a) of the Credit Agreement for the fourth Fiscal Quarter ending in 2009 and the First and Second Fiscal Quarters in 2010.

2. The Borrower is not in compliance with Section 4.01 of the Investor and Registration Rights Agreement, which required the Borrower to (a) file with the SEC within 180 days prior to the Effectiveness Deadline the Shelf Registration Statement and (b) cause the Shelf Registration Statement to be declared effective by the Effectiveness Deadline.

SCHEDULE A

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

SCHEDULE B

EXISTING LOANS

Lender	Outstanding Principal Amount of all Loans
ZOHAR CDO 2003-1, LIMITED	$	26,310,332.87
ZOHAR II 2005-1, LIMITED	$	22,745,707.13
Total	$	49,056,040.00

SCHEDULE B

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

SCHEDULE C

CORPORATE CHART

SCHEDULE C

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

SCHEDULE D

FURTHER AGREEMENTS

1. Not later than 5 p.m. (Hong Kong time) on Wednesday, July 14, 2010 (or such longer period as the Agent may agree), the Borrower shall deliver to the Agent evidence of the appointment of CT Corporation as agent for service of process on behalf of the Credit Parties and the Subordination Creditors listed on the signature pages of the Intercompany Subordination Agreement in connection with such agreement.

2. For each Credit Party organized under the laws of the British Virgin Islands, the Borrower shall deliver to the Agent, not later than 5 p.m. (New York City time) on (a) Tuesday, July 13, 2010 (or such longer period as the Agent may agree), a copy of the share register for such Credit Party evidencing the notation of the lien of the Agent against such Credit Party’s shares, certified by the British Virgin Islands registered agent of such Credit Party and (b) Monday, July 19, 2010 (or such longer period as the Agent may agree), (i) a copy of the share register for such Credit Party evidencing the notation of the lien of the Agent against such Credit Party’s shares, certified by the Registrar of Corporate Affairs for the British Virgin Islands and (ii) Certificates of Registration of Charge from the Registrar of Corporate Affairs for the British Virgin Islands, certifying that all charges against the assets of such Credit Party have been registered in the Register of Registered Charges.

3. Not later than 5 p.m. (New York City time) on Tuesday, July 13, 2010 (or such longer period as the Agent may agree), for each Credit Party organized under the laws of the Cayman Islands, (a) a copy of the Register of Mortgages and Charges for such Credit Party evidencing the notation of the lien of the Agent, and (b) with respect to each of NuCom Online Corporation and Xinhua Sports Ventures Limited, a copy of the Register of Members of such Credit Party evidencing the notation of the lien of the Agent against such Credit Party’s shares, each certified by the Cayman Islands registered agent of such Credit Party.

4. Not later than 5 p.m. (New York City time) on Wednesday, July 14, 2010 (or such longer period as the Agent may agree), the Borrower shall deliver to the Agent copies of fully executed share transfer documents transferring all of the shares of equity in (a) Zhongxi Taihe Culture Consultation (Shanghai) Co., Ltd.; (b) Xinhua Sports & Entertainment (Shanghai) Co., Ltd.; and (c) Xinhua Sports & Entertainment (Beijing) Co., Ltd. from the Borrower to Upper Step Holdings Limited, an entity incorporated in the British Virgin Islands.

5. To the extent not delivered on or before the Amendment Effective Date, the Borrower shall deliver to the Agent as promptly as practicable after the Amendment Effective Date, but not later than 5 p.m. (New York City time) on Wednesday, July 14, 2010 (or such longer period as the Agent may agree), original copies of all of the Internal Control Agreements for the Borrower’s Domestic Subsidiaries, including without limitation, all of the following documents related thereto: (a) authorisation letters; (b) equity transfer agreements; (c) resignation letters; (d) director appointment letters; and (e) legal representative appointment letters.

6. No later than three (3) Business Days (or such longer period as the Agent may agree) after the Agent shall have provided to the Borrower the name of the individual designated by the Agent and if required by such bank, the appearance in person by such individual at such bank, the Borrower shall have added such individual as a required signatory to its banks accounts located in the PRC, provided that such designated individual shall furnish to the applicable bank all information required by such bank for such designated individual to become a required signatory to such bank accounts.

SCHEDULE D

7. The Borrower shall deliver to the Agent as promptly as practicable after the Amendment Effective Date, but not later than 5 p.m. (New York City time) on Monday, July 19, 2010 (or such longer period as the Agent may agree), (a) an originally and fully executed copy of the Intercompany Subordination Agreement, in the form approved by the Agent, by the Subordination Creditors listed on the signature pages thereof, with the official chop affixed thereto, (b) a copy of the business license for each Subordinated Creditor, or other documentation reasonably acceptable to the Agent, evidencing the authority of the individual executing the Intercompany Subordination Agreement to sign as the legal representative or the authorized signatory of such Subordinated Creditor, (c)(i) an originally and fully executed copy of a Commitment Letter from each WFOE and each of its variable interest entities, including without limitation those majority held entities organized in the PRC shown on the Corporate Chart of the Borrower attached hereto as Exhibit C (individually an “Operating Company” and collectively the “Operating Companies”) and each WFOE not subject to Internal Control Agreements, (ii) a Power of Attorney from each WFOE and (iii) signed undated letters of resignation from each chairman, director, supervisor and legal representative of each WFOE, each Operating Company and each of the subsidiaries of each Operating Company, all in forms approved by the Agent, and (d) an opinion of Latham & Watkins, special United States counsel to the Borrowers, in form and substance satisfactory to the Agent, regarding enforceability and no conflicts with respect to the Intercompany Subordination Agreement.

8. The Borrower shall deliver to the Agent as promptly as practicable after the Amendment Effective Date, but not later than 5 p.m. (New York City time) on Monday, July 19, 2010 (or such longer period as the Agent may agree) (a) originally and fully executed copies of the Letters of Resignation and Written Resolutions required in connection with the Share Charges executed by NuCom Online Corporation; (b) the original share certificate of NuCom Online Corporation, a Cayman Islands entity (“NuCom”), evidencing the 100% equity interest in NuCom held by the Borrower, together with an originally executed blank transfer power with respect thereto; (c) the original share certificate of NuCom Online Hongkong Limited, a Hong Kong entity (“NuCom Hongkong”), evidencing the 100% equity interest in NuCom Hongkong held by NuCom Online Corporation, together with an originally executed blank transfer power with respect thereto; (d) duly adopted written resolutions or the minutes of a meeting of the directors of NuCom Hongkong relating to the authorization, execution, delivery and performance of the Credit Documents to be executed by NuCom Hongkong and the consummation of the transactions contemplated thereby, certified by a Director of NuCom Hongkong, as being true, correct, complete and in full force and effect; (e) originally executed copies of all of the documents, instruments and agreements requested by the Agent to grant to the Agent, to the extent permitted by applicable law, a first-priority security interest in all of the capital stock of NuCom Hongkong and all assets of NuCom Hongkong, including without limitation, a Debenture, Security Assignment Over Bank Accounts, Notice of Assignment of Bank Account, Joinder to Credit Agreement, Intercompany Subordination Agreement, Joinder to Security Agreement, Commitment Letter and related documents; (f) a Joinder to Guaranty, duly executed by NuCom Hongkong; (g) favorable opinions of New York and Hong Kong counsel to NuCom Hongkong, addressed to the Administrative Agent and the Lenders as to the enforceability of the Credit Documents to be executed by NuCom Hongkong, and addressing such other matters as the Administrative Agent may reasonably request; and (h) a certificate of a director of NuCom Hongkong, substantially in the form of Exhibit E to the Credit Agreement, with respect to the certificate of formation, articles of association, the resolutions referred to in clause (d) above, and the incumbency of the authorized signatory of NuCom Hongkong.

9. As soon as practicable after the Amendment Effective Date, but in any event not later than 5 p.m. (New York City time) on Monday, July 26, 2010 (or such longer period as the Agent may agree), the original share certificate of Xinhua Finance Media (Convey) Limited, a British Virgin Islands entity (“Xinhua Finance Media (Convoy)”), evidencing the 15% equity interest in Xinhua Finance Media (Convey) held by the Borrower.

10. As soon as practicable after the Amendment Effective Date, but in any event no later than 60 days after the date hereof (or such longer period as the Agent may agree), the transfer of all of the shares of equity in (a) Zhongxi Taihe Culture Consultation (Shanghai) Co., Ltd.; (b) Xinhua Sports & Entertainment (Shanghai) Co., Ltd.; and (c) Xinhua Sports & Entertainment (Beijing) Co., Ltd. from the Borrower to Upper Step Holdings Limited, an entity incorporated in the British Virgin Islands, shall be effective for all purposes, and all consents, including those of any Governmental Body in the PRC, the British Virgin Islands, and the Cayman Islands, shall have been obtained and all necessary filings shall have been made in respect thereof.

AMENDMENT NO. 2 AND WAIVER
TO CREDIT AGREEMENT OF
XINHUA SPORTS & ENTERTAINMENT LIMITED

SCHEDULE I

COMMITMENTS

Lender	Convertible Term Loan Commitments
ZOHAR CDO 2003-1, LIMITED	$	22,234,208.30
ZOHAR II 2005-1, LIMITED	$	19,221,831.70
Total Convertible Term Loan Commitments	$	41,456,040.00

Lender	Additional Term Loan Commitments
ZOHAR CDO 2003-1, LIMITED	$	4,076,124.57
ZOHAR II 2005-1, LIMITED	$	3,523,875.43
Total Additional Term Loan Commitments	$	7,600,000.00
TOTAL COMMITMENTS	$	49,056,040.00

SCHEDULE I

EX-4.66

Exhibit 4.66

EXECUTION COPY

SERIES C CONVERTIBLE PREFERRED SHARES

PURCHASE AGREEMENT

Dated as of July 12, 2010

between

THE INVESTORS LISTED ON SCHEDULE 1

and

XINHUA SPORTS & ENTERTAINMENT LIMITED

TABLE OF CONTENTS

ARTICLE I DEFINITIONS AND INTERPRETATION	1
Section 1.1 Definitions	1
Section 1.2 Interpretation	1
ARTICLE II PURCHASE AND SALE OF SHARES	2
Section 2.1 Purchase and Sale of Shares	2
Section 2.2 The Closing	2
Section 2.3 Investors’ Deliveries at the Closing	2
Section 2.4 Company Deliveries at the Closing	2
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY	3
Section 3.1 Organization	3
Section 3.2 Capitalization	3
Section 3.3 Authorization; Execution and Enforceability	4
Section 3.4 Subsidiaries and Joint Ventures	5
Section 3.5 No Conflicts; Consents and Approvals	5
Section 3.6 SEC Reports; Financial Statements	6
Section 3.7 Absence of Certain Changes	6
Section 3.8 No Undisclosed Liabilities	7
Section 3.9 Litigation	7
Section 3.10 Licenses	7
Section 3.11 Intellectual Property Rights	8
Section 3.12 Exchange Listing	8
Section 3.13 Tax Matters	8
Section 3.14 Tangible Assets	8
Section 3.15 Leases and Contracts	9
Section 3.16 Employees	9
Section 3.17 Compliance with Law	9
Section 3.18 Related Party Transactions	9
Section 3.19 Investment Company	9
Section 3.20 Corrupt Practices; USA Patriot Act, OFAC	10
Section 3.21 Validity of the Shares	10
Section 3.22 Registration, Information and Special Voting Rights	10
Section 3.23 Securities Law Compliance	10
Section 3.24 Brokers	11
Section 3.25 Tag-Along Rights	11
Section 3.26 Change of Control	11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE INVESTORS	11
Section 4.1 Organization, Standing and Power	11
Section 4.2 Authorization; Execution and Investors	11
Section 4.3 No Conflict; Consents and Approvals	11

i

Section 4.4 Purchase Entirely for Own Account	12
Section 4.5 Investment Experience	12
Section 4.6 Restricted Securities	12
Section 4.7 Legends	12
Section 4.8 Accredited Investor	13
Section 4.9 No General Solicitation	13
Section 4.10 Brokers	13
ARTICLE V COVENANTS	13
Section 5.1 Access to Information	13
Section 5.2 Pre-Closing Actions Affecting the Common Shares	14
Section 5.3 Listing	14
Section 5.4 Preservation of Accuracy of Representations and Warranties; Fulfillment of Conditions; Notification of Certain Pre-Closing Matters; Cooperation	15
Section 5.5 Contractual Consents and Governmental Approvals	15
Section 5.6 Issuance of ADS Shares	16
Section 5.7 Investors’ Pre-Emptive Rights	16
Section 5.8 Shelf Registration Statement	18
Section 5.9 Board Observer	25
Section 5.10 Negotiation of Proper Initial Conversion Price	26
ARTICLE VI CONDITIONS	27
Section 6.1 Conditions to the Company’s Obligations	27
Section 6.2 Conditions to the Investors’ Obligations	28
ARTICLE VII INDEMNIFICATION	29
Section 7.1 Survival	29
Section 7.2 Indemnification	29
Section 7.3 [Intentionally Omitted]	30
Section 7.4 Indemnification Procedures	30
Section 7.5 Third-Party Claims	30
Section 7.6 Tax Treatment of Indemnity Payments	30
Section 7.7 Exclusivity	31
Section 7.8 Certain Damages	31
ARTICLE VIII FURTHER AGREEMENTS; TRANSFER RESTRICTIONS	31
Section 8.1 Public Announcements	31
Section 8.2 Fees and Expenses	31
Section 8.3 Restrictions on Transfers of Series C Preferred Shares	31
Section 8.4 Limitation on Short Sales	32

ii

ARTICLE IX GENERAL	32
Section 9.1 Termination	32
Section 9.2 Notices	33
Section 9.3 Complete Agreement; No Third-Party Beneficiaries	34
Section 9.4 GOVERNING LAW	35
Section 9.5 No Assignment	35
Section 9.6 Counterparts	35
Section 9.7 Remedies; Waiver	35
Section 9.8 Severability	35
Section 9.9 Amendment; Waiver	36
Section 9.10 WAIVER OF JURY TRIAL	36
Exhibit A Definitions
Exhibit B Form of Series C Authorizing Resolution
Exhibit C-1 Form of Legal Opinion of Conyers Dill & Pearman
Exhibit C-2 Form of Legal Opinion of Latham & Watkins
Exhibit D Form of Registration Rights Agreement
Schedule 1 List of Investors

iii

SERIES C CONVERTIBLE PREFERRED SHARES
PURCHASE AGREEMENT

THIS SERIES C CONVERTIBLE PREFERRED SHARES PURCHASE AGREEMENT, dated as of July 12, 2010, is by and between the Investors listed on Schedule 1 hereto (the “Investors”), and XINHUA SPORTS & ENTERTAINMENT LIMITED (formerly known as Xinhua Finance Media Limited), a company organized under the laws of the Cayman Islands (the “Company” and together with the Investors, the “Parties”) (this “Agreement”).

W I T N E S S E T H:

WHEREAS, the Parties are entering into that certain Amendment No. 2 and Waiver to the Patriarch Credit Agreement (as defined in Exhibit A hereto), dated as of the date hereof, by and among the Parties and the other parties thereto (the “Amendment”);

WHEREAS, the Company has created a new class of convertible preferred shares designated as Series C Convertible Preferred Shares (the “Series C Preferred Shares”) through the adoption by the Board of an authorizing resolution in the form attached as Exhibit B hereto (the “Authorizing Resolution”); and

WHEREAS, in connection with the Amendment, the Company wishes to issue and sell to the Investors, and the Investors wish to purchase from the Company, 78,295 Series C Preferred Shares (the “Shares”) upon the terms and subject to the conditions set forth herein and in the Transaction Documents;

NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE I

DEFINITIONS AND INTERPRETATION

Section 1.1 Definitions. The capitalized terms that are defined in Exhibit A are used herein with the meanings set forth therein.

Section 1.2 Interpretation.

(a) Headings. The headings to the Articles, Sections and Subsections of this Agreement or any Exhibit to this Agreement are inserted for convenience of reference only and shall not affect the meaning or interpretation of this Agreement.

(b) Usage. In this Agreement, unless the context requires otherwise: (i) the singular number includes the plural number and vice versa; (ii) reference to any gender includes each other gender; (iii) Exhibit A to this Agreement is hereby incorporated into, and shall be deemed to be a part of, this Agreement; (iv) the terms “hereunder”, “hereof”, “hereto” and words of similar import shall be deemed references to this Agreement as a whole and not to any

particular section or other provision hereof; (v) the words “include”, “includes” and “including” shall be deemed to be followed by the words “without limitation”; and (vi) a reference to any Article, Section, Subsection or Exhibit shall be deemed to refer to the corresponding Article, Section, Subsection, or Exhibit of this Agreement.

ARTICLE II

PURCHASE AND SALE OF SHARES

Section 2.1 Purchase and Sale of Shares. At the Closing, the Company shall issue and sell to the each Investor, and each Investor shall purchase from the Company, the number of Shares set forth opposite the name of such Investor on Schedule 1, on the terms and subject to the conditions set forth herein, free and clear of any Liens. The Shares shall be issued upon payment to the Company by the Investors of the Purchase Consideration.

Section 2.2 The Closing. Subject to the fulfillment of the conditions set forth in Article VI, the issuance, purchase and sale of the Shares and the consummation of the other Transactions (the “Closing”) shall take place in the offices of Latham & Watkins, 41st Floor, One Exchange Square, 8 Connaught Place, Central, Hong Kong on July 12, 2010, or at such other time and place as the Company and the Investors may agree (the date on which the Closing actually takes place being sometimes referred to herein as the “Closing Date”). At the Closing, the Investors and the Company shall make certain deliveries, as specified in Sections 2.3 and 2.4, respectively, and all such deliveries, regardless of chronological sequence, shall be deemed to occur contemporaneously and simultaneously on the occurrence of the last delivery and none of such deliveries shall be effective until the last of the same has occurred.

Section 2.3 Investors’ Deliveries at the Closing. At the Closing, the Investors shall deliver to the Company:

(a) the Purchase Consideration, of which amount the aggregate par value of the Shares shall be set off against amounts owed by the Company to the Investors under Section 8.2;

(b) a counterpart of the Registration Rights Agreement, duly executed by the Investors; and

(c) each of the certificates and documents required to be delivered by the Investors at the Closing pursuant to Section 6.1.

Section 2.4 Company Deliveries at the Closing. At the Closing, the Company shall deliver to the Investors:

(a) certificates representing the Shares registered in the names of the Investors;

(b) a counterpart of the Registration Rights Agreement, duly executed by the Company; and

2

(c) each of the opinions, certificates and documents required to be delivered by the Company at the Closing pursuant to Section 6.2.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to the Investors as of the date of this Agreement and as of the Closing Date, as follows:

Section 3.1 Organization. The Company: (a) is an exempted company limited by shares duly organized, validly existing and in good standing under the laws of the Cayman Islands; (b) has all requisite corporate power and authority to carry on its business as now conducted; (c) is duly qualified, licensed and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except where the failure to do so would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; and (d) has the corporate power and authority to execute, deliver and perform its obligations under each of the Transaction Documents to which it is a party. The Company is not in default under or in violation of any provision of its Memorandum of Association or Articles of Association, and no such defaults or violations have occurred in the past which would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

Section 3.2 Capitalization.

(a) As of the date hereof (and without giving any effect to the Transactions), the authorized capital of the Company consists of 343,822,874 Class A Common Shares, 50,054,619 Class B Common Shares, 373,248 Series B Preferred Shares, 0 Series C Preferred Shares and 605,749,259 shares not yet designated as to class or series (the “Undesignated Shares”). Of the Class B Common Shares, none are currently outstanding and the remainder are unissued and not reserved for issuance for any purpose. Of the Series B Preferred Shares 359,424 shares are currently outstanding. None of the Series C Preferred Shares have been issued or have been reserved for any purpose other than for issuance pursuant to this Agreement. The issued and outstanding capital of the Company on a fully diluted basis immediately prior to and immediately following the Closing is as set forth on Section 3.2(a) of the Disclosure Schedule, as it may be amended pursuant to Section 5.10 of this Agreement and Section 4.4(h) and/or Section 4.4(i) of the Authorizing Resolution.

(b) Section 3.2(b) of the Disclosure Schedule sets forth a list of all Employee Share Options currently outstanding as of the date hereof. Except for such Employee Share Options or as otherwise set forth in Section 3.2(b) of the Disclosure Schedule: (i) there are no outstanding Convertible Securities, other than the Patriarch Loans and the Series B Preferred Shares, or Share Purchase Rights or any share appreciation rights, performance share awards or other employee incentive awards the value of which is determined by reference to the value of the Class A Common Shares, Class B Common Shares, Series B Preferred Shares or ADS Shares, (ii) the Company is not a party to any other agreements or commitments obligating the Company to issue, sell, repurchase, redeem or otherwise acquire any Capital Shares, Convertible

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Securities, other than pursuant to the Series B Authorizing Resolution, this Agreement and the Patriarch Credit Agreement, or Share Purchase Rights; and (iii) to the knowledge of the Company, no other Person is a party to or otherwise bound by any agreements, trusts, proxies, instruments or other commitments relating to the voting, purchase, sale or other disposition of any Capital Shares, Convertible Securities or Share Purchase Rights held by such Person. Except as disclosed in Section 3.2(b) of the Disclosure Schedule, neither the issuance of the Shares as contemplated herein nor the issuance of any Conversion Shares will cause the number of Common Shares issuable pursuant to the Employee Share Options or any other outstanding Convertible Securities or Share Purchase Rights to increase as a result of any antidilution provisions relating thereto.

(c) There are no authorized or outstanding bonds, debentures, notes or other obligations of the Company, the holders of which have the right to vote with the holders of Common Shares on any matter.

(d) Except as disclosed in the SEC Reports or Section 3.2(d) of the Disclosure Schedule, the Company does not have in effect any dividend reinvestment plans or employee share purchase plans.

(e) All outstanding Capital Shares have been duly authorized and validly issued and are fully-paid and nonassessable and have been issued without violation of any preemptive rights of any Person. All outstanding Employee Share Options have been issued without violation of any preemptive rights of any Person, and all Class A Common Shares issued upon exercise thereof will have been, upon such issuance, duly authorized and validly issued without violation of any preemptive rights of any Person and will be fully-paid and nonassessable.

(f) Upon the due issuance by the Depositary to the Investors of ADRs evidencing the ADS Shares against the deposit of Class A Common Shares in accordance with the provisions of the Deposit Agreement, such ADRs will be duly and validly issued under the Deposit Agreement and the Investors will be entitled to the rights of a registered holder of ADRs evidencing the ADS Shares specified therein and in the Deposit Agreement. The Deposit Agreement is in full force and effect, has been duly authorized, executed and delivered by the Company and, to the knowledge of the Company, the Depositary, and constitutes a valid and legally binding obligation of the Company and, to the knowledge of the Company, the Depositary, enforceable against the Company and (to the knowledge of the Company) the Depositary in accordance with its terms. The Company has not breached any of its material obligations under the Deposit Agreement, and, to the knowledge of the Company, the Depositary has not breached any of its material obligations under the Deposit Agreement. The Company has not received any notice of resignation or termination from the Depositary.

Section 3.3 Authorization; Execution and Enforceability.

(a) The Company has all requisite corporate power and authority to execute, deliver and perform each Transaction Document to which it is a party and to consummate each of the Transactions. The execution, delivery and performance of each Transaction Document to which the Company is a party and the consummation of each of the Transactions has been duly

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authorized by the Board and by its Audit Committee and no further corporate action on the part of the Company (including any action by the shareholders of the Company) is required in connection therewith.

(b) This Agreement has been duly executed and delivered by the Company and constitutes, and, upon execution and delivery thereof as contemplated herein, each other Transaction Document to which the Company is a party will have been duly executed and delivered by the Company and will constitute, a legal, valid and binding obligation of the Company enforceable against it in accordance with its terms, subject to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium, restructuring or similar laws affecting creditors’ rights and remedies generally and general equitable principles (regardless of whether enforceability is considered a proceeding in equity or at law) (“Enforceability Exceptions”).

Section 3.4 Subsidiaries and Joint Ventures.

(a) All material Subsidiaries of the Company are described in the SEC Reports or in Section 3.4(a) of the Disclosure Schedule. Except as disclosed in the SEC Reports or in Section 3.4(a) of the Disclosure Schedule: (i) all of the outstanding shares or registered capital or other equity capital in each of such Subsidiaries are duly authorized, validly issued, fully paid and nonassessable; (ii) all of the outstanding shares or registered capital of, or other ownership interest in each of such Subsidiaries are owned by the Company or a wholly-owned Subsidiary of the Company, free and clear of any Liens; and (iii) there are no outstanding subscriptions, rights, convertible securities or other agreements or commitments obligating the Company or any such Subsidiary to issue, transfer or sell any securities of any such Subsidiary.

(b) Except as described in the SEC Reports or in Section 3.4(b) of the Disclosure Schedule, neither the Company nor any of its Subsidiaries owns, of record or beneficially, any material direct or indirect equity or other interest in any other Entity.

Section 3.5 No Conflicts; Consents and Approvals.

(a) The execution, delivery or performance by the Company of the Transaction Documents to which it is a party and the consummation of the Transactions will not (a) conflict with or violate any provision of the Memorandum of Association or Articles of Association of the Company or any Organizational Document of any of its Subsidiaries; (b) result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of, create in any Person any right to accelerate, terminate, modify or cancel, or require any notice, consent or waiver under, any Contractual Obligation or any Law applicable to the Company or any of its Subsidiaries or any of their respective properties and assets; (c) result in the imposition of any Lien upon any properties or assets of the Company or any of its Subsidiaries, (d) result in the Company being required to redeem, repurchase or otherwise acquire any outstanding equity or debt interests, securities or obligations of the Company or any of its Subsidiaries or any options or other rights exercisable for any of same or (e) cause the accelerated vesting of any Employee Share Options or other employee benefits or result in any obligations on the part of the Company or any of its Subsidiaries to pay any additional severance benefits upon the termination of the employment of any employee

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thereof, except in the case of (b) or (c), to the extent it does not or would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(b) Except as set forth in Section 3.5(b) of the Disclosure Schedule, the Company is not required to obtain any consent, authorization or approval of, or make any filing, notification or registration with, any Governmental Authority or any self regulatory organization in order for the Company to execute, deliver and perform any Transaction Document to which it is a party or to consummate any of the Transactions (“Company Approvals”).

(c) Except as set forth in Section 3.5(c) of the Disclosure Schedule, no Contractual Consents are required to be obtained under any Contractual Obligation applicable to the Company or any of its Subsidiaries in connection with the execution, delivery or performance by the Company of any Transaction Document to which it is a party or the consummation of any of the Transactions (“Company Contractual Consents”).

Section 3.6 SEC Reports; Financial Statements.

(a) Except as set forth on Schedule 3.6(a) of the Disclosure Schedule, from January 1, 2009, the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Exchange Act (all the foregoing filed prior to the date hereof and all exhibits included or incorporated by reference therein and financial statements and schedules thereto and documents included or incorporated by reference therein being sometimes hereinafter collectively referred to as the “SEC Reports”). As of their respective filing dates, the SEC Reports complied in all material respects with the requirements of the Exchange Act applicable to the SEC Reports (as amended or supplemented), and none of the SEC Reports, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

(b) As of their respective dates, except as set forth therein or in the notes thereto, the financial statements contained in the SEC Reports and the related notes (the “Financial Statements”) complied as to form in all material respects with all applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. The Financial Statements: (i) were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), consistently applied during the periods involved (except (x) as may be otherwise indicated in the notes thereto or (y) in the case of unaudited interim statements, to the extent that they may not include footnotes or may be condensed or summary statements), (ii) fairly present in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments) and (iii) are in all material respects in accordance with the books of account and records of the Company and its consolidated subsidiaries (except as may be otherwise noted therein).

Section 3.7 Absence of Certain Changes. Except as disclosed in the SEC Reports or in Section 3.7 of the Disclosure Schedule, since December 31, 2009, (a) there has not

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been any Material Adverse Effect or any changes, events or developments that would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, and (b) the Company and its Subsidiaries, taken as a whole, have conducted their respective businesses only in the ordinary course and in conformity with past practice.

Section 3.8 No Undisclosed Liabilities. Except as disclosed in the SEC Reports or in Section 3.8 of the Disclosure Schedule, neither the Company nor any of its Subsidiaries has any material liability (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated, whether due or to become due), except for the following: (a) liabilities reflected in or reserved for in the Recent Balance Sheet, (b) liabilities that have arisen since the date of the Recent Balance Sheet in the ordinary course of the businesses of the Company and its Subsidiaries consistent with past practice that would have been required under GAAP to be reflected in the Recent Balance Sheet had such liabilities existed as of the date of the Recent Balance Sheet, (c) liabilities that would not be required under GAAP to be reflected in an audited consolidated balance sheet of the Company and its consolidated subsidiaries and that are not in the aggregate material and (d) liabilities incurred in connection with the Transactions.

Section 3.9 Litigation. Except as disclosed in the SEC Reports or in Section 3.9 of the Disclosure Schedule, there is no Action or Proceeding to which the Company or any of its Subsidiaries or any of their respective officers, directors or employees is a party (either as a plaintiff or defendant) pending or, to the knowledge of the Company, threatened before any Governmental Authority (i) that challenges the validity or propriety of any of the Transactions or (ii) if determined adversely to the Company or any of its Subsidiaries or any such officer, director or employee would reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. Except as disclosed in the SEC Reports or as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, there has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by any Governmental Authority involving the Company or any of its Subsidiaries or any officer, director, employee thereof. Except as disclosed in the SEC Reports, no order, judgment or decree of any Governmental Authority has been issued in any Action or Proceeding to which the Company or any of its Subsidiaries is or was a party or, to the knowledge of the Company, in any other Action or Proceeding except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

Section 3.10 Licenses. Except as disclosed in the SEC Reports or in Section 3.10 of the Disclosure Schedule and except as would not be reasonably expected to have a Material Adverse Effect, all material Licenses required to be obtained by the Company or any of its Subsidiaries in all relevant jurisdictions in order to own their respective assets and to operate their respective businesses have been duly obtained in accordance with all applicable Laws. None of such Licenses has been terminated and, in respect of any such Licenses that is subject to renewal, the Company has not received any notice that such renewal will not be timely granted by the relevant Government Authorities. The Company and each of its Subsidiaries are in compliance with the terms of such Licenses, except where the failure to so comply does not or would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Neither the execution, delivery or performance by the Company of any Transaction Document to which it is a party nor the consummation of any of the Transactions will result in a

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breach of, or constitute a default under, any such License. Except as disclosed in Section 3.10 of the Disclosure Schedule, neither the Company nor any of its Subsidiaries is, or has received any notice that it is, or has at any time been, in default (or with the giving of notice or lapse of time or both, would be in default) under any such License.

Section 3.11 Intellectual Property Rights. Except as would not reasonably be expected to have a Material Adverse Effect, the Company and the Subsidiaries own or possess, or will be able to obtain on reasonable terms, licenses or sufficient rights to use all patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names and copyrights necessary to enable them to conduct their businesses as currently conducted (“Intellectual Property”). Neither the Company nor any of the Subsidiaries has infringed the intellectual property rights of third parties, and no third party, to the knowledge of the Company, is infringing the Intellectual Property of the Company, in each case, where such infringement would reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. There is no material claim or proceeding pending or, to the knowledge of the Company, threatened that challenges the right of the Company or any of the Subsidiaries with respect to any of the Intellectual Property.

Section 3.12 Exchange Listing. Except as set forth in Section 3.12 of the Disclosure Schedule, (i) the ADS Shares are listed on the NASDAQ Global Market and, to the knowledge of the Company, there are no proceedings to revoke or suspend such listing; (ii) the Company is in compliance with the requirements of the NASDAQ Global Market for continued listing of the ADS Shares thereon and any other applicable NASDAQ Global Market listing and maintenance requirements; and (iii) trading in the ADS Shares has not been suspended by the SEC or the NASDAQ Global Market.

Section 3.13 Tax Matters. Except as disclosed in the SEC Reports or in Section 3.13 of the Disclosure Schedule or except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect: (i) the Company and each of its Subsidiaries have filed all material Tax Returns required to be filed by them; (ii) all such material Tax Returns are true, correct and complete in all material respects; (iii) all material Taxes due and owed by the Company and its Subsidiaries (whether or not shown on any Tax Return) have been paid; (iv) neither the Company nor any of its Subsidiaries currently is the beneficiary of any extension of time within which to file any material Tax Return; (v) no claim has ever been made by a Governmental Authority in a jurisdiction where the Company or any of its Subsidiaries does not file Tax Returns that the Company or any such Subsidiary is or may be subject to taxation by that jurisdiction; (vi) there are no Liens on any of the assets or properties of the Company or any of its Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Tax; and (vii) neither the Company nor any of its Subsidiaries has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

Section 3.14 Tangible Assets. Except as disclosed in the SEC Reports or in Section 3.14 of the Disclosure Schedule or except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, the Company and each of its Subsidiaries have good and marketable title to, or have valid rights to lease or otherwise use, all items of real and tangible personal property that are material to their respective businesses, free

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and clear of all Liens other than Liens (i) that do not materially interfere with the use of such property or (ii) would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

Section 3.15 Leases and Contracts. (a) Except as disclosed in the SEC Reports or in Section 3.15(a) of the Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party to or bound by any material Company Contract. (b) Except as disclosed in the SEC Reports or in such Section 3.15(b) or except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect: (i) each Company Contract is in full force and effect; (ii) the Company and its Subsidiaries have satisfied in full or provided for all of their liabilities and obligations under each such Company Contract requiring performance prior to the date hereof in all material respects, and are not in default under any of them, nor, to the knowledge of the Company, does any condition exist that with notice or lapse of time or both would constitute such a default; (iii) to the knowledge of the Company, no other party to any such Company Contract is in default thereunder, nor does any condition exist that with notice or lapse of time or both would constitute such a default; and (iv) no approval or consent of any Person is needed for each such Company Contract to continue to be in full force and effect following the consummation of the Transactions.

Section 3.16 Employees. Except as disclosed in the SEC Reports or in Section 3.16 of the Disclosure Schedule or except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, to the knowledge of the Company, no officer or key employee of the Company or any of its Subsidiaries, or any group of employees whose continued employment is material to the operations of the Company or any of its Subsidiaries, intends to terminate their employment with the Company and there are no material controversies between the Company and any of its officers or key employees.

Section 3.17 Compliance with Law. Except as disclosed in the SEC Reports or in Section 3.17 of the Disclosure Schedule or except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, the Company and each of its Subsidiaries and the conduct and operation of their respective businesses are and have been, since January 1, 2007, in material compliance with (a) each Law that affects or relates to this Agreement or the Transaction Documents or any of the Transactions or (b) each Law that is applicable to the Company or its Subsidiaries or their respective businesses, including any environmental and securities Laws and Laws relating to employment practices.

Section 3.18 Related Party Transactions. Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, all Company Contracts, and any other material relationships, between the Company or any Subsidiary (each, a “Company Party”), on the one hand, and any Related Person of a Company Party, on the other hand, and all obligations owed by a Company Party to any Related Person of the Company Party (other than obligations owed by one Company Party to another), are disclosed in the SEC Reports or in Section 3.18 of the Disclosure Schedule.

Section 3.19 Investment Company. The Company is not, and after giving effect to the Transactions will not be, an “investment company” as such term is defined in the Investment Company Act of 1940, as amended.

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Section 3.20 Corrupt Practices; USA Patriot Act, OFAC. Neither the Company nor any Subsidiary, nor to the knowledge of the Company any director, officer, employee, agent or other Person acting on behalf of the Company or any Subsidiary has, in the course of his or its actions for, or on behalf of the Company or any of its Subsidiaries (i) used any corporate funds for any unlawful contribution gift, entertainment or other unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employees from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee. The Company and each of its Subsidiaries is in compliance in all material respects with the USA Patriot Act (Title III of Pub.L. 107-56 (signed into law October 26, 2001)). None of the Company or its Subsidiaries (i) is a Sanctioned Person, (ii) has more than 10% of its assets in Sanctioned Entities, or (iii) derives more than 10% of its operating income from investments in, or transactions with Sanctioned Persons or Sanctioned Entities. The proceeds hereunder will not be used and have not been used to fund any operations in, finance any investments or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity.

Section 3.21 Validity of the Shares.

(a) Upon the issuance to the Investors in accordance with the Transaction Documents, the Shares will have been duly authorized and validly issued without violation of the preemptive rights of any Person and will be fully-paid and nonassessable, free and clear of any Liens.

(b) Any Conversion Shares issued upon conversion of any of the Shares, upon the issuance thereof, will have been duly authorized and validly issued without violation of the preemptive rights of any Person and will be fully-paid and nonassessable, free and clear of any Liens.

Section 3.22 Registration, Information and Special Voting Rights. Except as disclosed in the SEC Reports or in Section 3.22 of the Disclosure Schedule and except as provided in the Series B Purchase Agreement, the Series B Registration Rights Agreement and the Patriarch Investor Rights Agreements, the Company has not granted or agreed to grant any registration rights, information rights or special voting rights to any Person.

Section 3.23 Securities Law Compliance. Assuming the accuracy of the Investors’ representations and warranties contained in Article IV, the offer, sale and issuance of the Shares hereunder and the issuance of any Conversion Shares upon the conversion thereof is and will be in compliance with Section 4(2) of the Securities Act and is exempt from the registration and prospectus delivery requirements of the Securities Act and all applicable state and foreign securities laws. Neither the Company nor any agent of the Company has offered the Shares by any form of general solicitation or general advertising, including any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.

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Section 3.24 Brokers. No broker, investment banker or other Person is entitled to any broker’s, finder’s or other similar fee or commission in connection with the execution and delivery of this Agreement or any of the other Transaction Documents or the consummation of any of the Transactions based upon arrangements made by or on behalf of the Company.

Section 3.25 Tag-Along Rights. The Class A Common Shares to be held by any Investor as a result of the conversion of the Shares pursuant to the Authorizing Resolution shall constitute “Common Shares” (as such term is defined in the 2008 IRRA) owned by such Investor for purposes of Section 3.02(b) of the 2008 IRRA.

Section 3.26 Change of Control. The Transactions will not constitute a “Change of Control” (as such term is defined in the Series B Authorizing Resolution) for purposes of the Series B Authorizing Resolution.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE INVESTORS

Each Investor hereby represents and warrants to the Company as of the date of this Agreement and as of the Closing Date as follows:

Section 4.1 Organization, Standing and Power. The Investor is an exempted company duly organized, validly existing and in good standing under the laws of the Cayman Islands. The Investor has the necessary power and authority to execute, deliver and perform each Transaction Document to which it is a party.

Section 4.2 Authorization; Execution and Investors. The execution, delivery and performance by the Investor of each Transaction Document to which it is a party have been duly and validly authorized by all necessary corporate action on the part of the Investor and do not require any further authorization or consent of the shareholders of the Investor. This Agreement has been duly executed and delivered by the Investor, and each other Transaction Document to which the Investor is a party, when executed and delivered as contemplated herein, will have been duly executed and delivered by the Investor, and this Agreement constitutes, and each of such other Transaction Documents upon execution and delivery thereof by the Investor will constitute, the legal, valid and binding obligations of the Investor, enforceable against the Investor in accordance with their respective terms, subject to the Enforceability Exceptions.

Section 4.3 No Conflict; Consents and Approvals.

(a) Neither the execution, delivery or performance by the Investor of any Transaction Document to which it is a party, nor the consummation by the Investor of any of the Transactions will (i) conflict with or violate any provision of any Organizational Document of the Investor or (ii) result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of, create in any Person any right to accelerate, terminate, modify or cancel, or require any notice, consent or waiver under, any Contractual Obligation or any Law applicable to the Investor or any of its properties or assets other than a breach, default, acceleration, right, notice, consent or waiver that is not material.

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(b) The Investor is not required to obtain any consent, authorization or approval of, or make any filing or registration with, any Governmental Authority in order for the Investor to execute, deliver and perform each Transaction Document to which it is a party and to consummate the Transactions.

Section 4.4 Purchase Entirely for Own Account. The Shares and Conversion Shares to be acquired by the Investor hereunder will be acquired for investment for the Investor’s own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the Securities Act, and the Investor has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of the Securities Act. The Investor does not have any agreement or understanding, whether or not legally binding, direct or indirect, with any other Person to sell or otherwise distribute the Shares.

Section 4.5 Investment Experience. The Investor acknowledges that it can bear the economic risk and complete loss of its investment in the Shares and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment contemplated hereby. The Investor understands that the purchase of the Shares involves substantial risk.

Section 4.6 Restricted Securities. The Investor understands that the Shares and any Conversion Shares issued to the Investor will be characterized as “restricted securities” under the United States federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in certain limited circumstances. The Investor understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Shares or the fairness or suitability of the investment in the Shares.

Section 4.7 Legends. The Investor understands that, except as provided below and until such time as the resale thereof has been registered under the Securities Act, certificates evidencing the Shares and Conversion Shares issued to the Investor shall bear the following legends:

(a) “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OFFERED FOR SALE, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR IF REQUIRED BY THE COMPANY AN OPINION FROM COUNSEL IN A FORM ACCEPTABLE TO THE COMPANY AND ITS LEGAL COUNSEL STATING THAT SUCH REGISTRATION IS NOT REQUIRED.”

(b) If required under the securities laws of any U.S. state or foreign country in connection with the issuance or sale of the Shares and Conversion Shares issued to the Investor, any legends required in order to comply with such laws.

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Section 4.8 Accredited Investor. The Investor is an “accredited Investor” as defined in Rule 501(a) of Regulation D, as amended, under the Securities Act. The Investor’s principal place of business is in the Cayman Islands.

Section 4.9 No General Solicitation. The Investor did not learn of the opportunity to purchase the Shares by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature, including (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media, or broadcast over television or radio, or (ii) any seminar or meeting to which the Investor was invited by any of the foregoing means of communications.

Section 4.10 Brokers. Except as heretofore been disclosed to the Company by the Investor, no broker, investment banker or other Person is entitled to any broker’s, finder’s or other similar fee or commission in connection with the execution an delivery of this Agreement or the Registration Rights Agreement or the consummation of any of the Transactions based upon arrangements made by or on behalf of the Investor, and the Investor shall indemnify and hold the Company harmless against any claim for any such fee or commission based on any such arrangements.

ARTICLE V

COVENANTS

Section 5.1 Access to Information.

(a) In General. The Company shall at all times afford the officers, employees and authorized representatives of the Investors (including independent public accountants and attorneys) reasonable access during normal business hours to the offices, properties, employees and business and financial records (including computer files, retrieval programs and similar documentation) of the Company and its Subsidiaries, all to the extent reasonably requested by the Investors. The Investors agree that any such investigation shall be conducted in such a manner as not to interfere unreasonably with the operations of the Company and its Subsidiaries.

(b) Financial and Other Information. If the Company at any time ceases to timely file periodic reports pursuant to Section 13 of the Exchange Act, the Company shall deliver to the Investors each of the following:

(i) As soon as available, and in any event within sixty (60) days after the end of each of the first three quarters of each fiscal year, unaudited interim consolidated balance sheets of the Company and its Subsidiaries as at the end of such quarter and the related consolidated statements of income, cash flow, shareholders equity and changes in financial position of the Company and its Subsidiaries as at the end of and for such quarter, setting forth in each case in comparative form the corresponding figures for and as at the end of the corresponding quarter of the preceding fiscal year, all in reasonable detail and prepared in accordance with GAAP consistently applied (subject to year end adjustments and the absence of footnotes);

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(ii) Within one hundred and twenty (120) days after the end of each fiscal year of the Company, consolidated balance sheets of the Company and its Subsidiaries as at the end of such year and the related consolidated statements of income, shareholders’ equity and changes in financial position of the Company and its Subsidiaries for such fiscal year, setting forth in each case in comparative form the consolidated figures for the previous fiscal year, all in reasonable detail and accompanied by a report thereon of independent public accountants of recognized national standing selected by the Company; and

(iii) Promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available by the Company to the holders of any class of its securities generally or by any Subsidiary of the Company to the holders of any class of its securities generally.

(c) Other Information Upon Request. The Company shall furnish to the Investors with reasonable promptness such other information relating to the Company and its Subsidiaries as the Investors may from time to time reasonably request; provided that the Company shall not be obligated to furnish any information which (i) the Board believes could compromise any attorney-client privilege or (ii) may cause the Company to breach a confidentiality obligation by which it is bound.

Section 5.2 Pre-Closing Actions Affecting the Common Shares. Between the date of this Agreement and the Closing Date, the Company shall not: (i) pay any dividends or make any distributions on its Common Shares other than (A) regular cash dividends or distributions paid out of retained earnings and (B) distributions permitted pursuant to clause (v) or below, (ii) subdivide or reclassify its outstanding Common Shares into a greater number of shares, (iii) consolidate or reclassify its outstanding Common Shares into a smaller number of shares; (iv) other than in an “Exempt Issuance”, issue any “New Securities” for a consideration per share less than the initial “Conversion Price” (with the terms in quotations having the meanings specified in the Authorizing Resolution), (v) other than in such an “Exempt Issuance”, distribute to all holders of its Common Shares any share capital of the Company or evidences of Indebtedness or rights, options or warrants to subscribe for or purchase any of its securities or (vi) effect any transaction referred to in Section 4.8 of the Authorizing Resolution.

Section 5.3 Listing. Neither the Company nor any of its Subsidiaries shall take any action which would be reasonably expected to result in the delisting or suspension of the ADS Shares on the NASDAQ Global Market and shall use commercially reasonable efforts to maintain the listing of the ADS Shares on the NASDAQ Global Market, including without limitation, (a) exhausting all available remedies, appeal reviews and other similar mechanisms and procedures provided for under the rules and regulations of the NASDAQ Global Market to permit such continued listing of the ADS Shares and (b) (i) delivering to The Nasdaq Stock Market, Inc. promptly after Closing Date of a notice and opinion of Cayman Islands counsel to the Company that the Company has elected to follow corporate governance practices in the Cayman Islands allowing issuance of the Shares without receipt of shareholder approval

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otherwise required pursuant to Rule 5635(d) of the Nasdaq Listing Rules and (ii) disclosing such election in the Company’s next filed annual report on Form 20-F.

Section 5.4 Preservation of Accuracy of Representations and Warranties; Fulfillment of Conditions; Notification of Certain Pre-Closing Matters; Cooperation.

(a) The Company and the Investors shall each refrain from taking any action which would render any representation or warranty contained in Article III or IV inaccurate in any material respect as of the Closing Date. Each Party shall promptly notify the other of (i) any event or matter that would reasonably be expected to cause any of its representations or warranties to be untrue in any material respect or (ii) any Action or Proceeding that shall be instituted or threatened against such Party to restrain, prohibit or otherwise challenge the legality of any of the Transactions.

(b) The Company and the Investors shall each use their respective reasonable best efforts to cause each of the conditions precedent set forth in Article VI to be satisfied as soon as practicable after the date hereof. Without limiting the generality of the foregoing, the Company shall cause the Authorizing Resolution to be duly adopted by the Board prior to the Upset Date.

(c) Between the date hereof and the Closing Date, the Company shall notify the Investors of (i) the occurrence of any Material Adverse Effect, (ii) any Action or Proceeding that is threatened, brought, asserted or commenced against the Company or any of its Subsidiaries or any of their respective officers, directors or employees which would have been required to be disclosed in the Disclosure Schedule with respect to the representations and warranties of the Company set forth in Section 3.9 if such Action or Proceeding had arisen prior to the date hereof, (iii) any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with the Transactions, (iv) any material default of which the Company becomes aware under any material Company Contract or any event which, with notice or lapse of time or both, would become such a default on or prior to the Closing Date; and (v) any notice from any Governmental Authority in connection with or relating to any of the Transactions.

(d) The Company and the Investors shall cooperate fully with each other and assist each other in defending any Action or Proceeding brought against either Party challenging this Agreement or any of the other Transaction Documents or the consummation of any of the Transactions, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Authority vacated or reversed.

Section 5.5 Contractual Consents and Governmental Approvals.

(a) The Company will use commercially reasonable efforts to obtain before the Closing Date, and the Investors shall reasonably cooperate with the Company in such efforts, the Company Contractual Consents set forth in Section 3.5(c) of the Disclosure Schedule, provided that neither the Company nor the Investors shall have any obligation to offer or pay any consideration in order to obtain any such Company Contractual Consent.

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(b) Between the date hereof and the Closing Date, the Company and the Investors shall use commercially reasonable efforts, and shall cooperate with each other, in making any required filing, registration or notification with, and in attempting to obtain the Company Approvals set forth in Section 3.5(b) of the Disclosure Schedule in connection with the Transactions and to otherwise satisfy the conditions set forth in Article VI.

Section 5.6 Issuance of ADS Shares. Upon the request of an Investor at any time, and subject to applicable securities Laws and the provisions of the Deposit Agreement, the Company shall arrange for any Conversion Shares issued or issuable to the Investors to be deposited with the Depositary and for corresponding ADRs to be issued in the name of the Investor, and the Company shall pay any fees or expense reimbursements required to be paid to the Depositary in connection therewith.

Section 5.7 Investors’ Pre-Emptive Rights.

(a) If at any time the Company wishes to issue any Common Shares, other Capital Shares, Convertible Securities or Share Purchase Rights (collectively, “New Securities”) to any Person or Persons, each Investor shall have a preemptive right to purchase its Pro Rata Share (as defined below), of any such New Securities. “Pro Rata Share” for purposes of this preemptive right means that number of the New Securities equal to the product of (i) a fraction, the numerator of which is the Investor’s aggregate ownership of Common Shares (calculated on an as converted and fully-diluted basis) and the denominator of which is the number of the Company’s total issued and outstanding Common Shares (calculated on an as converted and fully-diluted basis), multiplied by (ii) the number of New Securities to be issued. The Company will not issue any New Securities without first offering each Investor its preemptive right described in this Section 5.7.

(b) In the event that the Company proposes to issue New Securities, it may give each Investor a written notice of its intention to issue New Securities (the “Issuance Notice”), describing the approximate number and type of New Securities, the terms of such New Securities, the estimated pricing date, the estimated price range (as may be modified in accordance with the provisions hereof, the “Estimated Price Range”) and the other terms upon which the Company proposes to issue and sell such New Securities. Any such Issuance Notice shall be delivered to each Investor not less than ten (10) Business Days prior to the pricing (the “Pricing”) of such New Securities. If the estimated pricing date or the Estimated Price Range shall change, the Company shall promptly notify the Investors prior to the Pricing, provided that in the event of any change in the Estimated Price Range, each Investor shall be entitled to revoke any agreement to purchase that it may have delivered as set forth in the following sentence. Following receipt of an Issuance Notice as set forth in the first two sentences of this paragraph, each Investor shall have the right, by giving written notice to the Company at least three (3) days prior to the Pricing, to either (x) agree to purchase up to its Pro Rata Share of such New Securities within the Estimated Price Range and upon the general terms specified in the Issuance Notice (which shall not exceed the Investor’s Pro Rata Share) or (y) waive its right to so purchase up to its Pro Rata Share of such New Securities. If, following receipt of an Issuance Notice as set forth in the first two sentences of this paragraph, an Investor fails to agree in writing at least three days prior to the Pricing to purchase the Investor’s full Pro Rata Share of such offering of New Securities, then (A) except as set forth in Section 5.7(c), the Investor shall

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forfeit the right hereunder to purchase that part of its Pro Rata Share of such New Securities that it did not so agree to purchase, and (B) the Company shall have sixty (60) calendar days thereafter to sell the New Securities with respect to which the Investor’s preemptive right hereunder was not exercised, at a price within or above the Estimated Price Range and upon general terms no more favorable to the purchasers thereof than specified in the Company’s Issuance Notice to the Investors. In the event that the Company has not issued and sold the New Securities within such sixty (60) calendar day period, then the Company shall not thereafter issue or sell any New Securities without again first offering such New Securities to the Investors pursuant to this Section 5.7.

(c) In the event that the Company proposes to issue New Securities in a transaction in which (i) it does not provide the Investors with the Issuance Notice and an opportunity for the Investors to elect to purchase up to their Pro Rata Share of such New Securities during the period described above, or (ii) it shall have notified (or been required to notify) the Investors, less than five days prior to the Pricing, of any acceleration in the estimated pricing date, or a delay in the estimated pricing date of more than ten (10) days, or a reduction of more than 10% in the Estimated Price Range (and the Investors shall not have purchased New Securities in connection with such transaction), then no later than five (5) days after the issuance of such New Securities, the Company shall provide the Investors with a written notice of the issuance of such New Securities, setting forth the price and other terms on which such New Securities were sold, and the Investors shall have thirty (30) days from the date such notice is effective hereof based upon the manner or method of notice, to deliver to the Company a written notice indicating its agreement to purchase up to its Pro Rata Share of such New Securities at the same price and on the same terms and conditions under which such New Securities were sold in such transaction, by giving written notice to the Company and stating therein the quantity of New Securities to be purchased (not to exceed the Investors’ Pro Rata Share), and upon receipt of such written notice from the Investors, the Company shall be required to sell such quantity of the New Securities to the Investors.

(d) If the Investors gives the Company notice pursuant to Section 5.7(b) or Section 5.7(c) that the Investors desires to purchase all or any of the New Securities it is entitled to purchase (the “Elected New Securities”), payment therefor shall be made by wire transfer, against issuance of such New Securities at the executive offices of the Company, on the date such securities are issued to the Investors. In the event that the Issuance Notice specifies that consideration other than cash is to be paid in connection with any issuance of New Securities, in lieu of such other consideration, the Investors will be entitled to pay the cash equivalent of such other consideration, as determined by an independent third-party appraiser jointly appointed by the Company and the Investors.

(e) The preemptive rights contained in this Section 5.7 shall not apply to the issuance of any of the following: (i) any PIK Dividend Shares (as defined in the Series B Purchase Agreement), (ii) any Permitted Parity Preferred Shares with regard to which the Investors have not exercised such preemptive rights or (iii) any New Securities issued (A) as a share dividend to holders of Common Shares, Series B Preferred Shares, Series C Preferred Shares or Permitted Parity Preferred Shares or upon any subdivision or combination of such Common Shares, Series B Preferred Shares, Series C Preferred Shares or Permitted Parity Preferred Shares, (B) upon the conversion of any Series B Preferred Shares, Series C Preferred

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Shares or Permitted Parity Preferred Shares or upon the conversion or exchange of any other Convertible Securities of the Company duly issued on or prior to the date hereof that are convertible into or exchangeable for Common Shares (including any “Loan Shares”, as defined in the Patriarch Credit Agreement), (C) upon the exercise of any Share Purchase Rights issued prior to the date hereof (D) to employees, officers or directors of the Company or any Subsidiary pursuant to incentive agreements, share purchase or share option plans, share bonuses or awards, or employment or advisory related warrants, contracts or other arrangements approved by the Board prior to or following the date hereof or (E) in connection with any direct or indirect acquisition by the Company of, or a merger with and into the Company of, another Person or business approved by the Board prior to or following the date hereof.

Section 5.8 Shelf Registration Statement.

(a) Filing. The Company shall file with the SEC, within 45 days after the Closing Date, a Shelf Registration Statement covering the resale from time to time of Registrable Securities by Registrable Securities Holders (such Shelf Registration Statement may also from time to time cover the resale of any Parity Registrable Securities held by any holders of Parity Registrable Securities) in accordance with the methods or distribution selected by such holders and shall use its reasonable best efforts to cause such Shelf Registration Statement to be declared effective under the Securities Act as soon as practicable after such filing.

(b) Continued Effectiveness. Subject to Section 5.8(c), the Company shall use its reasonable best efforts to have the Shelf Registration Statement declared effective within 120 days after the Closing Date. The Company shall thereafter use its reasonable best efforts to prepare and file with the SEC such amendments and supplements to the Shelf Registration Statement and the Prospectus as may be necessary to keep the Shelf Registration Statement current and continuously effective in order to permit the Prospectus forming a part thereof to be usable by the Registrable Securities Holders for the offer and sale of Registrable Securities until the earlier of (x) the fifth anniversary of the date hereof and (y) the date as of which such Registrable Securities Holders no longer hold any Registrable Securities.

(c) Suspension of Use of Shelf Registration Statement. The Company may suspend the use of the Shelf Registration Statement by the Registrable Securities Holders (and any holders of Parity Registrable Securities) if the Company furnishes to such holders a certificate signed by the Chief Executive Officer, Chief Financial Officer or General Counsel of the Company (x) stating that a Potential Material Event exists (and enclosing a copy of the written determination of the Board referred to in the definition of Potential Material Event) or (y) stating that a Company-initiated registration statement for an underwritten offering of Equity Securities has become effective, in which event the Company shall have the right to suspend such use for a period of not more than 90 calendar days after the date of such certificate (a “Shelf Suspension”), provided that the Company shall not exercise a Shelf Suspension more than twice in any 12-month period with at least a 60 calendar day interval between each Shelf Suspension. In the event of any Shelf Suspension, no Registrable Securities Holder (or Parity Registrable Securities Holder) may offer or sell any Registrable Securities (or Parity Registrable Securities) pursuant to the Shelf Registration Statement during the period of the applicable Shelf Suspension.

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(d) Expenses of Registration. All Registration Expenses incurred in connection with any registration, filing, qualification or compliance pursuant to this Section 5.8 shall be borne by the Company. Unless otherwise stated, all Selling Expenses relating to any Registrable Securities and/or Parity Registrable Securities offered pursuant to the Shelf Registration Statement filed pursuant to this Section 5.8 shall be borne by the applicable Selling Holders pro rata based on the respective numbers of Registrable Securities and/or Parity Registrable Securities registered by them.

(e) Further Obligations of the Company. Whenever the Company effects the registration of any Registrable Securities pursuant to this Section 5.8, the Company shall:

(i) Registration of ADS. If the Selling Holders propose to sell Registrable Securities and/or Parity Registrable Securities in the form of ADS Shares, the Company shall, if and to the extent necessary, register additional ADS Shares on Form F-6, to permit the sale of such Registrable Securities and/or Parity Registrable Securities as ADS Shares.

(ii) Copies of Documents. Furnish to each Selling Holder, without charge, such number of conformed copies of the Shelf Registration Statement and of any amendments and supplements thereto (in each case including all exhibits), such number of copies of the Prospectus included in such Shelf Registration Statement (including each preliminary prospectus and any summary prospectus), in conformity with the requirements of the Securities Act, such documents incorporated by reference in such Shelf Registration Statement or Prospectus, and such other documents, as such Selling Holders may reasonably request.

(iii) Opinion and Comfort Letter. Furnish to such Selling Holders (i) an opinion of the counsel representing the Company for purposes of such registration, dated the effective date of such Shelf Registration Statement (or, in the case of any underwritten public offering pursuant to the Shelf Registration Statement, dated the date of the closing under the underwriting agreement with respect to both the effective date of the Shelf Registration Statement and the date of the closing under the underwriting agreement), in form and substance as is customarily given by counsel for the issuer to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to such Selling Holders, and (ii) a “cold comfort” letter, dated the effective date of the Shelf Registration Statement (and, in the case of any underwritten public offering pursuant to the Shelf Registration Statement, dated the date of the closing under the underwriting agreement) signed by the independent certified public accountants who have certified the Company’s financial statements included in such Shelf Registration Statement, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to such Selling Holders.

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(iv) “Blue Sky” Qualification. Register or qualify all Registrable Securities and Parity Registrable Securities to be offered under such Shelf Registration Statement under the securities or blue sky laws of such jurisdictions as the applicable Selling Holders (or in an underwritten offering, the managing underwriter) shall reasonably request, and do any and all other acts and things which may be necessary or advisable to enable such Selling Holders to consummate the disposition in such jurisdictions of the Registrable Securities and/or Parity Registrable Securities offered pursuant to such Shelf Registration Statement, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it is not so qualified, or to subject itself to taxation in any such jurisdiction, or to consent to general service of process in any such jurisdiction.

(v) Notification of Certain Events. As promptly as practicable after becoming aware thereof, notify the applicable Selling Holders of the happening of any event of which the Company has knowledge, as a result of which the prospectus included in the Shelf 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, in light of the circumstances under which they were made, not misleading, and promptly prepare and file with the SEC a supplement or amendment to the Shelf Registration Statement or other appropriate filing with the SEC to correct such untrue statement or omission, and deliver a number of copies of such supplement or amendment to such Selling Holders as such Selling Holders may reasonably request.

(vi) SEC Stop Orders. As promptly as practicable after becoming aware thereof, notify the applicable Selling Holders (and, in the event of an underwritten offering, the managing underwriters) of the issuance by the SEC of any notice of effectiveness or any stop order or other suspension of the effectiveness of the Shelf Registration Statement at the earliest possible time.

(vii) Listing Requirements. Use its reasonable best efforts to list such Registrable Securities and/or Parity Registrable Securities on each securities exchange on which the Equity Securities of the Company (including the ADS Shares) are then listed. If the Selling Holders propose to sell Registrable Securities and/or Parity Registrable Securities in the form of ADS Shares, the Company shall (subject to the Deposit Agreement) procure delivery of ADS Shares listed on such securities exchange to the Selling Holders and, to the extent additional ADS Shares are required to be registered on Form F-6 in order to carry out such delivery, register such additional ADS Shares.

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(viii) Certificate Preparation. Cooperate with the applicable Selling Holders to facilitate the timely preparation and delivery of certificates for the Registrable Securities and/or Parity Registrable Securities to be offered pursuant to the Shelf Registration Statement and enable such certificates for the Registrable Securities and/or Parity Registrable Securities to be in such denominations or amounts as the case may be, as such Selling Holders may reasonably request, and deliver, or shall cause legal counsel selected by the Company to deliver, to the transfer agent for the Registrable Securities (with copies to such Selling Holders) an appropriate instruction and opinion of such counsel. If the Selling Holders propose to sell Registrable Securities and/or Parity Registrable Securities in the form of ADS Shares, the Company shall cooperate with such Selling Holders to facilitate the timely delivery of the certificates referred to above to the Depositary and shall (subject to the Deposit Agreement) cause the Depositary to cooperate with such Selling Holders to facilitate the timely preparation and delivery of the depositary receipts evidencing such ADS Shares in such denominations or amounts as the case may be, as such Selling Holders may reasonably request.

(ix) Underwriting Agreement. In the event of any underwritten public offering pursuant to the Shelf Registration Statement, enter into and perform its obligations under an underwriting agreement, in usual and customary form and complying with the provisions of Section 5.8(h), with the managing underwriter of such offering.

(x) Other Actions. Take all other reasonable actions necessary to expedite and facilitate disposition by the applicable Selling Holders of the Registrable Securities and/or Parity Registrable Securities pursuant to the Shelf Registration Statement.

(f) Information from Holders. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 5.8 with respect to the Registrable Securities or Parity Registrable Securities of any Selling Holder that such Selling Holder shall furnish to the Company such information regarding itself, the Registrable Securities or Parity Selling Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such securities.

(g) Preparation; Reasonable Investigation; Review by Counsel. In connection with any offering of Registrable Securities under the Shelf Registration Statement, each Registrable Securities Holder, its underwriters, if any, and counsel for such Registrable Securities Holder shall:

(i) be permitted to review such Shelf Registration Statement, each prospectus included therein or filed with the SEC, and each amendment thereof or supplement thereto a reasonable period of time (but not less than 3 Business Days) prior to their filing with the SEC; and

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(ii) be given reasonable access to the Company’s books and records and such opportunities to discuss the business of the Company with its officers, counsel and the independent public accountants who have certified its financial statements as shall be necessary, in the reasonable opinion of such Registrable Securities Holders, such underwriters, if any, or their respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act.

(h) Indemnification. In the event any Registrable Securities and/or Parity Registrable Securities are included in the Shelf Registration Statement filed pursuant to this Section 5.8, the following indemnification provisions shall apply.

(i) Indemnification by the Company.

(1) Indemnification. To the extent permitted by law, the Company shall indemnify and hold harmless each Selling Holder, each of the employees, officers, directors, partners, members, managers, legal counsel and agents of such Selling Holders, any underwriter (as defined in the Securities Act) for such Selling Holders and each Person, if any, who controls any of such Selling Holders or underwriter within the meaning of the Securities Act or Exchange Act (collectively, the “Holder Indemnified Persons”) against and hold each Holder Indemnified Person harmless from any and all liabilities, obligations, losses, damages, (excluding consequential, special, indirect or punitive damages), lawsuits, investigations, arbitrations, actions, judgments, costs, expenses or claims, including, without limitation, reasonable attorneys’ fees and expenses incurred in investigation or defending any of the foregoing (collectively, “Losses”), that the Holder Indemnified Persons may suffer or sustain arising out of or due to any of the following (any of the following being a “Violation”):

(a) any untrue statement or alleged untrue statement of a material fact contained in such Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto;

(b) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or

(c) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities

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law, or any applicable securities laws or Laws of a jurisdiction outside the United States.

(2) Limitations on Indemnification. Notwithstanding the foregoing, the Company shall not be liable for:

(a) any amounts paid in settlement of any such Losses if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld or delayed); or

(b) any Losses to the extent that such Losses arise out of or are based upon a Violation which occurs in reliance upon and in strict conformity with written information furnished by such Selling Holders expressly for use in connection with such registration.

(ii) Indemnification by the Registrable Securities Holders.

Indemnification. To the extent permitted by law, each Selling Holder participating in any registration pursuant to this Agreement shall indemnify and hold harmless the Company, each of the Company’s employees, officers, directors, legal counsel and other agents, any underwriter (as defined in the Securities Act) for the Company and each Person, if any, who controls the Company or underwriter within the meaning of the Securities Act or Exchange Act (collectively, the “Company Indemnified Persons”), against and hold each Company Indemnified Person harmless from any and all Losses that the Company Indemnified Persons may suffer or sustain arising out of or due to any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in strict conformity with written information furnished by such Selling Holder expressly for use in connection with such registration.

(2) Limitations on Indemnification. Notwithstanding the foregoing, no Selling Holder shall not be liable for:

(a) indemnification pursuant to this Agreement in excess of the aggregate net cash proceeds received by such Selling Holder from the offering of Registrable Securities in such registration;

(b) any amounts paid in settlement of any such Losses if such settlement is effected without the consent of such Selling Holder; (which consent shall not be unreasonably withheld or delayed); or

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(c) any Losses to the extent that such Losses do not arise out of or are not based upon a Violation which occurs in reliance upon and in strict conformity with written information furnished by such Selling Holder expressly for use in connection with such registration.

(iii) Indemnification Mechanics. If there occurs an event which a Company Indemnified Person or a Holder Indemnified Person (any such Person being the “Indemnitee”) hereto asserts is an indemnifiable event pursuant to this Section, the Indemnitee shall promptly notify the party obligated to provide indemnification hereunder (the “Indemnitor”) in writing of such event. Delay or failure to so notify the Indemnitor shall only relieve the Indemnitor of its obligations to the extent, if at all, that it is actually prejudiced by reason of such delay or failure. The Indemnitor shall have a period of 20 calendar days in which to respond thereto. If the Indemnitor so elects, within such 20 day period, it shall be entitled to assume the defense of such claim (such election to be without prejudice to the right of the Indemnitor to dispute whether such claim constitutes Losses under this Section 5.8(i)). If the Indemnitor fails to assume the defense of such matter within such 20 calendar day period or does not respond within such 20 calendar day period, the Indemnitee against which such matter has been asserted shall (upon delivering notice to such effect to the Indemnitor) have the right to undertake, at the Indemnitor’s cost and expense, the defense, compromise or settlement of such matter on behalf of the Indemnitee, provided that the Indemnitee shall not settle such claim without the consent of the Indemnitor (which consent shall not be unreasonably withheld) and provided further that the Indemnitor shall have the right to participate (but not control) at its own expense in the defense of such asserted claim. In any event, the Indemnitee shall have the right to participate (but not control) at its own expense in the defense of such asserted liability; provided, however, that the Indemnitor shall pay the expenses of such defense if the Indemnitee is advised by counsel in writing that there are one or more legal defenses available to the Indemnitee that are different from or additional to those available to the Indemnitor (in which case, if the Indemnitee notifies the Indemnitor in writing, the Indemnitor shall not have the right to assume the defense of such asserted liability on behalf of the Indemnitee).

(iv) Contribution. If the indemnification provided for in this Section 5.8(h) is held by a court of competent jurisdiction to be unavailable to an Indemnitee with respect to any Losses, then the Indemnitor, in lieu of indemnifying such Indemnitee hereunder, shall contribute to the amount paid or payable by such Indemnitee as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the Indemnitor on the one hand and of the Indemnitee on the other in connection with the Violation that resulted in such Losses, as well as any other relevant equitable considerations; provided, however, that in no event shall any

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contribution under this Section 5.8(h)(iv) from any Selling Holder, together with the amount of any indemnification payments made by such Selling Holder pursuant to Section 5.8(h)(ii) above, exceed the net proceeds from the offering received by such Selling Holder. The relative fault of the Indemnitor and of the Indemnitee shall be determined by reference to, among other things, whether the Violation relates to information supplied by the Indemnitor or the Indemnitee and the parties relative intent, knowledge, access to information, and opportunity to correct or prevent such Violation.

(v) No Inconsistent Underwriting Agreements. Notwithstanding any provision of this Agreement to the contrary, the Selling Holders shall not be required to enter into an underwriting agreement that contains indemnification and contribution provisions which, in the sole discretion of such Selling Holders, materially differ from those contained in this Section 5.8(h).

(vi) Registration in Non-U.S. Jurisdictions. In the event that the ADS Shares cease to be listed on the NASDAQ Global Market and have not been listed on another nationally recognized securities exchange in the United States, but the Company has listed its Common Shares (or related depositary shares) on any Designated Offshore Securities Market or other internationally recognized securities exchange, then the Company shall use its reasonable best efforts, to the extent permitted by applicable law, to provide the Registrable Securities Holders with substantially the same rights and benefits in such jurisdiction as are provided for in this Section 5.8, and to take such steps, if any, consistent with customary market practice at the time so that the Registrable Securities are freely transferable in such listed market without transfer restrictions imposed by the securities or similar laws of such jurisdiction.

Section 5.9 Board Observer.

(a) The Investors shall have the right to have one representative (who need not be the same individual from meeting to meeting) (a “Non-Voting Observer”) observe in full each meeting of the Board and each of the committees thereof (a “Meeting”), whether in person or, at the option of the Non-Voting Observer, via telephone attendance; provided that the Non-Voting Observer may not attend (i) any Meeting of the Audit Committee or Compensation Committee where such committee has determined in good faith and after consultation with legal counsel that the subject matter of such Meeting is such that it is required or advisable that only independent directors attend and non-independent directors not attend, (ii) any Meeting or portion thereof where such attendance by the Non-Voting Observer could, in the opinion of legal counsel, compromise the Company’s attorney-client privilege under applicable law or (iii) any Meeting or portion thereof where a similarly situated director of the Company should, in the opinion of legal counsel, recuse himself from attendance of such Meeting or portion thereof under applicable law, regulation or the rules of any stock exchange or interdealer quotation system because such attendance would present a material conflict of interest; provided, however,

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that any such exclusion of the Non-Voting Observer pursuant to clause (ii) or (iii) shall extend only with respect to the subject matter and portion of any such Meeting relating to such privilege or conflict. Zohar CDO 2003-1, Limited, Zohar II 2005-1, Limited, their Affiliates and their Affiliated Funds shall not exercise their rights under this Section 5.9 and Section 5.2 of the Patriarch Credit Agreement with respect to the same Meeting.

(b) The Company shall give the Investors written notice of each Meeting, including the Meeting’s time and place, in the same manner as the directors of the Board, and (subject to the exceptions in clause (i) and (ii) of Section 5.9(a)) shall provide the Investors with any document, correspondence or other information provided to any member of the Board individually or to the Board collectively, whether provided by the Company or a third party, including, without limitation, agenda and minutes of the Meetings, in each case, no later than it gives such notice and provides such document, correspondence or other information to such member or the Board, as the case may be.

(c) The Company shall reimburse the Non-Voting Observer for its reasonable out-of-pocket expenses incurred in connection with attendance at each Meeting, including but not limited to food, lodging and transportation.

(d) The Non-Voting Observer shall be entitled to participate in discussions and consult with, and make proposals and furnish advice to, the Board or committee without voting. The Non-Voting Observer shall have a duty of confidentiality to the Company comparable to the duty of confidentiality of a director of the Board.

(e) The Company shall use commercially reasonable efforts to obtain within 30 days of the Second Amendment Date (as such term is defined in the Patriarch Credit Agreement) and (if so obtained) shall thereafter maintain directors’ and officers’ liability insurance covering the Non-Voting Observer in an amount of at least $10,000,000.

(f) The Company shall indemnify and hold harmless, to the fullest extent permitted under applicable law, the Non-Voting Observer to the same extent as members of the Board and on terms no less favorable than under the Company’s by-laws or other governing document as in effect on the date hereof.

Section 5.10 Negotiation of Proper Initial Conversion Price. Each of the Company and the Investors shall negotiate in good faith to mutually agree on the proper initial Conversion Price pursuant to Section 4.4(h) of the Authorizing Resolution. If the initial Conversion Price is adjusted pursuant to such section, then the Company will deliver to the Investors, together with the officer’s certificate required by and no later than the end of the 15-day period set forth in such section, an updated Disclosure Schedule Section 3.2(a) setting forth the adjusted issued and outstanding capital of the Company on a fully diluted basis immediately prior to and immediately following the Closing.

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ARTICLE VI

CONDITIONS

Section 6.1 Conditions to the Company’s Obligations. The obligation of the Company to sell and issue the Shares and to consummate the other Transactions on the Closing Date shall be subject to the fulfillment (or waiver by the Company) at or prior to the Closing of each of the following conditions:

(a) No Order. No court or other Governmental Authority having jurisdiction over the Company or any of its Subsidiaries or the Investors shall have instituted, enacted, issued, promulgated, enforced or entered any Law (whether temporary, preliminary or permanent) that is then in effect and that (i) has the effect of making illegal or otherwise prohibiting or invalidating consummation of any of the Transactions or any provision of any Transaction Document or (ii) seeks to restrain, prohibit or invalidate the consummation of the Transactions or to invalidate any provision of any Transaction Document.

(b) Company Approvals. Each Company Approval shall have been obtained or made and shall be in full force and effect to the extent that the failure to obtain or make such Company Approval (i) has the effect of making illegal or otherwise prohibiting or invalidating consummation of any of the Transactions or any provision of this Agreement or the other Transaction Documents or (ii) would reasonably be expected, individually or together with other Company Approvals that have not been obtained or made, to have a Material Adverse Effect.

(c) Performance of Obligations. Each of the Investors shall have performed in all material respects each of its respective covenants and agreements contained in this Agreement or the other Transaction Documents and required to be performed at or prior to the Closing.

(d) Representations and Warranties. Each of the representations and warranties of the Investors contained in this Agreement that is qualified as to materiality shall be true and correct on and as of the Closing Date as if made on and as of such date (other than representations and warranties which address matters only as of a certain date, which shall be true and correct as of such certain date) and each of the representations and warranties of the Investors that is not so qualified shall be true and correct in all material respects on and as of the Closing Date as if made on and as of such date (other than representations and warranties which address matters only as of a certain date, which shall be true and correct in all material respects as of such certain date).

(e) Officer’s Certificate. A certificate executed on behalf of each of the Investors by a senior executive of such Investor, to the effect that the conditions set forth in paragraphs (c) and (d) above have been satisfied, shall have been delivered to the Company.

(f) Amendment. The Amendment shall have been executed and delivered by the parties thereto (other than the Company) and become effective.

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Section 6.2 Conditions to the Investors’ Obligations. The obligation of the Investors to purchase the Shares and to consummate the other Transactions on the Closing Date shall be subject to the fulfillment (or waiver by the Investors) at or prior to the Closing of each of the following conditions:

(a) Effectiveness of Authorizing Resolution. The Authorizing Resolution shall be in full force and effect.

(b) No Order. No court or other Governmental Authority having jurisdiction over the Company or any of its Subsidiaries or the Investors shall have instituted, enacted, issued, promulgated, enforced or entered any Law (whether temporary, preliminary or permanent) that is then in effect and that (i) has the effect of making illegal or otherwise prohibiting or invalidating consummation of any of the Transactions or any provision of any Transaction Document or results or would result in a Material Adverse Effect or (ii) seeks to restrain, prohibit or invalidate the consummation of any of the Transactions or to invalidate any provision of any Transaction Document.

(c) Company Approvals. Each Company Approval shall have been obtained or made and shall be in full force and effect to the extent that the failure to obtain or make such Company Approval (i) has the effect of making illegal or otherwise prohibiting or invalidating consummation of any of the Transactions or any provision of any Transaction Document or (ii) would reasonably be expected, individually or together with other Company Approvals that have not been obtained or made, to have a Material Adverse Effect.

(d) Contractual Consents. Each Company Contractual Consent shall have been obtained and shall be in full force and effect to the extent that the failure to obtain such Company Contractual Consent would reasonably be expected, individually or together with other Company Contractual Consents that have not been obtained, to have a Material Adverse Effect.

(e) Performance of Obligations. The Company shall have performed in all material respects each of its respective covenants and agreements contained in this Agreement and each other Transaction Document and required to be performed at or prior to the Closing.

(f) Representations and Warranties. Each of the representations and warranties of the Company contained in this Agreement that is qualified as to materiality shall be true and correct on and as of the Closing Date as if made on and as of such date (other than representations and warranties which address matters only as of a certain date, which shall be true and correct as of such certain date) and each of the representations and warranties of the Company that is not so qualified shall be true and correct in all material respects on and as of the Closing Date as if made on and as of such date (other than representations and warranties which address matters only as of a certain date, which shall be true and correct in all material respects as of such certain date).

(g) No Other Material Adverse Effect. Since the date of this Agreement, there shall not have occurred any changes, events or developments that have had, or would reasonably be expected, individually or in the aggregate, to have, a Material Adverse Effect.

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(h) Officer’s Certificate. A certificate executed on behalf of the Company by a senior executive officer of the Company to the effect that the conditions set forth in paragraphs (c), (d), (e) and (f) above have been satisfied, shall have been delivered to the Investors.

(i) Opinions of Company Counsel. The Investors shall have received an opinion from (i) Conyers, Dill & Pearman, special Cayman Islands counsel to the Company, dated as of the Closing Date, substantially in the form attached as Exhibit C-1 and (ii) Latham & Watkins, special New York counsel to the Company, dated as of the Closing Date, substantially in the form attached as Exhibit C-2 hereto.

(j) Good Standing Certificates. The Investors shall have received a Certificate of Good Standing for the Company dated not more than five (5) Business Days prior to the Closing Date issued by the Registrar of Companies of the Cayman Islands.

(k) Company Secretary’s Certificate. The Investors shall have received a certificate in a form reasonably satisfactory to the Investors from the Company Secretary or another officer (if there is no person serving as Company Secretary) of the Company attaching and certifying: (i) true and correct copies of the Memorandum and Articles of Association of the Company; (ii) a true and correct copy of the Authorizing Resolution as duly adopted by the Board and as in full force and effect, (iii) true and correct copies of the resolutions adopted by the Board authorizing the execution and delivery of this Agreement and each of the other Transaction Documents to which the Company is a party, as in full force and effect, and (iv) as to the incumbency of any officers of the Company executing any Transaction Document.

(l) Amendment. The Amendment shall have been executed and delivered by the parties thereto (other than the Investors and the Administrative Agent (as defined in the Amendment)) and become effective.

ARTICLE VII

INDEMNIFICATION

Section 7.1 Survival. The respective representations, warranties, covenants and agreements of the Company and the Investors set forth in this Agreement (except covenants and agreements which are expressly required to be performed and are performed in full on or prior to the Closing Date) shall survive the Closing Date and the consummation of the Transactions indefinitely. Notwithstanding the foregoing, the covenants set forth in Sections 5.1, 5.3, 5.4(d), 5.6, 5.7, and 5.9 shall survive the Closing Date so long as the Investors and their Affiliates and Affiliated Funds continue to hold at least 5% of the Common Shares (calculated on an as converted and fully-diluted basis).

Section 7.2 Indemnification. Subject to the limitations set forth in this Article VII, the Company shall indemnify, defend and hold harmless each of the Investors, its members, managers, officers, employees and Affiliates (collectively, the “Investor Indemnified Parties”) from and against any and all losses, costs, damages, liabilities, obligations, impositions, inspections, assessments, fines, deficiencies and expenses (collectively, “Damages”) resulting from, in connection with or arising out of (i) any inaccuracy in any representation or warranty of

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the Company contained in this Agreement or in the certificate delivered pursuant to Section 6.2(h) or (ii) any breach of or default under any of the covenants or agreements given or made by the Company in this Agreement; provided, however, that any claim by any Investor Indemnified Party under clause (i) above shall be made prior to the date on which the applicable representation and warranty expires pursuant to Section 7.1 and that any claim by any Investor Indemnified Party under clause (ii) above shall be made within twelve (12) months of the time performance of such covenant or agreement is contemplated.

Section 7.3 [Intentionally Omitted.]

Section 7.4 Indemnification Procedures. In the event an Investor Indemnified Party has a claim against the Company under this Article VII, such Investor Indemnified Party shall deliver notice of such claim (which claim shall be described with reasonable specificity in such notice) with reasonable promptness to the Company. The failure by such Investor Indemnified Party to so notify the Company shall not relieve the Company from any liability which it may have to such Investor Indemnified Party under this Article VII, except to the extent that the Company demonstrates that it has been actually prejudiced by such failure. If the Company disputes its liability with respect to such claim, such Investor Indemnified Party and the Company shall proceed in good faith to negotiate a resolution of such dispute and, if not resolved through negotiations, such dispute shall be resolved by arbitration pursuant to Section 9.10.

Section 7.5 Third-Party Claims. In the event that an Investor Indemnified Party becomes aware of a third-party claim which such Investor Indemnified Party believes may result in a demand for indemnification pursuant to this Article VII, such Investor Indemnified Party shall promptly notify the Company of such claim, and the Company shall be entitled to assume the defense of such claim (such election to be without prejudice to the right of the Company to dispute whether such claim constitutes indemnifiable Damages under this Article VII); provided, however, that such Investor Indemnified Party shall be entitled to participate, at the Investor Indemnified Party’s sole expense, in (but not control) such defense and (ii) the Company shall not settle such claim without the consent of such Indemnified Party (which consent shall not be unreasonably withheld) unless such settlement entails no payment of any kind by such Investor Indemnified Party and provides for the complete release from all liabilities and claims of any kind of such Investor Indemnified Party from such claim and the circumstances giving rise to such claim; provided, further, however, that if the Company does not elect to assume the defense of such claim pursuant to this sentence, then the Company may participate in (but not control), at the Company’s sole expense, such defense. The failure by such Investor Indemnified Party to so notify the Company shall not relieve the Company from any liability which it may have to such Investor Indemnified Party under this Article VII, except to the extent that the Company demonstrates that it has been actually prejudiced by such failure.

Section 7.6 Tax Treatment of Indemnity Payments. Any indemnity payments made hereunder by the Company to an Investor Indemnified Party, shall be treated by the parties for all federal, state and local income tax purposes as an adjustment to the consideration paid by the Investor for the Shares, and not as a dividend or other form of income payment from the Company to the Investor.

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Section 7.7 Exclusivity. Except in the case of fraud, the indemnification provisions of this Article VII shall be the Investors’ sole and exclusive monetary remedy with respect to any and all claims relating to the subject matter of this Agreement and the Investors shall not pursue or seek any other monetary remedy.

Section 7.8 Certain Damages. In no event shall the indemnification obligations under this Agreement or the term “Damages” cover or include consequential, incidental, special, indirect or punitive damages or lost profits suffered by an Investor Indemnified Party, whether based on statute, contract, tort or otherwise.

ARTICLE VIII

FURTHER AGREEMENTS; TRANSFER RESTRICTIONS

Section 8.1 Public Announcements. The Investors and the Company shall consult with each other before issuing any press release or otherwise making any public statements with respect to the execution and delivery of this Agreement or the other Transaction Documents or any of the Transactions, and shall not issue any such press release or make any such public statement prior to reaching mutual agreement on the language of such press release or such public statement, except as may otherwise be required by applicable Law or stock exchange rule.

Section 8.2 Fees and Expenses.

(a) Except as otherwise specified in this Section 8.2 or agreed in writing by the parties, all costs and expenses incurred in connection with this Agreement, the other Transaction Documents and the Transactions shall be paid by the party incurring such cost or expense.

(b) The Company shall pay to the Investors documented legal and other expenses incurred by the Investors in connection with the Transactions, with (a) an amount equal to the aggregate par value of the Shares paid on the Closing Date by set off against amounts owed by the Investors to the Company under Section 2.3(a); and (b) the remainder of such expenses paid on the first Hong Kong business day following the Closing Date by wire-transfer of same day funds to Citibank, Los Angeles, ABA #: 322271724, Swift Code: CITIUS33, Account Name: Jones Day Operating Account, Account #: 203196878, REF: 223194-615023 (or such other account or accounts as the Investors shall notify the Company in writing).

(c) The Company shall pay or promptly reimburse the Investors for any transfer taxes, document Taxes, stamp duty or other similar Taxes imposed in connection with the issuance of the Shares or Conversion Shares to the Investors.

Section 8.3 Restrictions on Transfers of Series C Preferred Shares.

(a) Certain Transfers Prohibited. In no event shall the Investors Transfer any Series C Preferred Shares to a Competitor at any time. For the avoidance of doubt, the foregoing restrictions shall not apply to any Transfers of Common Shares held by the Investors.

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(b) Transferees to be Bound by Certain Restrictions. It shall be a condition to any Transfer of Series C Preferred Shares by the Investors that the transferee (other than a transferee purchasing shares in a public offering or through a brokerage transaction) agree in writing to be bound by (i) the limitation on short sales set forth in Section 8.4 below (which shall apply so long as such transferee shall continue to hold any Series C Preferred Shares) and (ii) the restriction on Transfers of Series C Preferred Shares to Competitors set forth in Section 8.3(a) above.

(c) Non-Complying Transfers Null and Void. Any purported Transfer of Series C Preferred Shares in violation of this Section 8.3 shall be null and void and the Company will not register such purported Transfer.

Section 8.4 Limitation on Short Sales. So long as an Investor holds any Series C Preferred Shares, the Investor shall not engage in any short sales of Common Shares or ADS Shares. For the avoidance of doubt, the foregoing restriction shall cease to apply once the Investor no longer holds Series C Preferred Shares, even if the Investor thereafter continues to hold Common Shares.

ARTICLE IX

GENERAL

Section 9.1 Termination. This Agreement may be terminated at any time prior to the Closing:

(a) by mutual written consent of the Investors and the Company;

(b) by the Investors if there has been (i) a material breach of any of the representations or warranties of the Company set forth in this Agreement that would give rise to the failure of the condition set forth in Section 6.2(f) or (ii) a material breach of any of the covenants or agreements of the Company set forth in this Agreement, which breach has not been cured within ten (10) Business Days following receipt by the Company of notice of such breach from the Investors; provided that neither of the Investors is then in material breach of any representation or warranty or material breach of any covenant or agreement made by it in this Agreement.

(c) by the Company if there has been (i) a material breach of any of the representations or warranties of either of the Investors set forth in this Agreement that would give rise to the failure of the condition set forth in Section 6.1(d) or (ii) a material breach of any of the covenants or agreements of either of the Investors set forth in this Agreement, which breach has not been cured within ten (10) Business Days following receipt by the Investors of notice of such breach from the Company; provided that the Company is not then in material breach of any representation or warranty or material breach of any covenant or agreement made by it in this Agreement.

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(d) by either the Investors or the Company if any permanent order, decree, ruling or other action of a court or other competent authority restraining, enjoining or otherwise preventing the consummation of any of the Transactions shall have become final and non-appealable;

(e) by either the Investors or the Company if the Closing shall not have occurred on or before July 12, 2010 (the “Upset Date”, as such date may be hereafter extended by agreement of the parties), unless the failure for the Closing to occur is the result of a material breach of this Agreement by the Party seeking to terminate this Agreement;

In the event of termination of this Agreement by either the Investors or the Company, as provided in this Section 9.1, this Agreement shall forthwith become void and there shall be no liability hereunder on the part of the Investors or the Company, or their respective officers, directors, managers, members or shareholders, except for Sections 8.2 and 9.1 and except that no such termination shall relieve any Party of liability for any breach of any other provision of this Agreement occurring prior to such termination.

Section 9.2 Notices. Whenever any notice is required to be given hereunder, such notice shall be deemed given only when such notice is in writing and is delivered by messenger or courier or, if sent by fax, when received. All notices, requests and other communications hereunder shall be delivered by courier or messenger or shall be sent by facsimile to the following addresses:

(i) If to the Investors, at the following address:

Zohar CDO 2003-1, Limited

c/o Patriarch Partners, LLC
32 Avenue of the Americas, 17^th Floor
New York, NY 10013
Attn: Senior Credit Associate
Facsimile: 212-825-2038

with a copy to

c/o Patriarch Partners, LLC
32 Avenue of the Americas, 13^th Floor
New York, NY 10013
Attn: Senior Director Legal
Facsimile: 212-483-0709

Zohar II 2005-1, Limited

c/o Patriarch Partners, LLC
32 Avenue of the Americas, 17^th Floor
New York, NY 10013
Attn: Senior Credit Associate
Facsimile: 212-825-2038

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with a copy to

c/o Patriarch Partners, LLC
32 Avenue of the Americas, 13^th Floor
New York, NY 10013
Attn: Senior Director Legal
Facsimile: 212-483-0709

with a copy by fax or messenger or courier to:

Jones Day
North Harwood Street
Dallas, Texas 75201
Facsimile: (214) 969-5100
Attention: Michael O. Weisberg, Esq.

(ii) If to the Company, at the following address:

Xinhua Sports & Entertainment Limited
Suite 2103-4
Vicwood Plaza
199 Des Voeux Road
Central, Hong Kong
Facsimile: +852.2541.8266
Attention: John McLean

with a copy by fax or messenger or courier to:

Latham & Watkins
41^st Floor, One Exchange Square
8 Connaught Place, Central
Hong King
Fax: +852.2522.7006
Attn: David T. Zhang

or to such other respective addresses as may be designated by notice given in accordance with this Section 9.2. If, subsequent to the date hereof, an Investor assigns any of its pre-emptive rights under Section 5.7 to an Affiliate or an Affiliated Fund in accordance with this Agreement, any notice to the Investor pursuant to this Section 9.2 shall be deemed to also have been duly delivered to such Affiliate or Affiliated Fund.

Section 9.3 Complete Agreement; No Third-Party Beneficiaries. This Agreement, the Disclosure Schedule and the other Transaction Documents constitute the entire agreement among the parties pertaining to the subject matter hereof and supersede all prior agreements and understandings of the parties in connection therewith. This Agreement, other than Article VII, is not intended to confer upon any person other than the Company and the Investors any rights or remedies hereunder.

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Section 9.4 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SUBJECT TO SECTION 9.10, THE INVESTORS AND THE COMPANY HEREBY CONSENT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE FEDERAL COURTS LOCATED IN THE BOROUGH OF MANHATTAN WITH RESPECT TO ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE ANY PROVISION OF THIS AGREEMENT OR TO DETERMINE THE RIGHTS OF ANY PARTY HERETO.

Section 9.5 No Assignment. Neither this Agreement nor any rights or obligations of the Company under it are transferable or assignable by the Company without the written consent of the Investors. After the Closing, this Agreement and the rights and obligations of an Investor under it are assignable by such Investor to a Person that is not a Competitor; provided that, in addition to the foregoing limitation (a) such Investor shall furnish the Company written notice of the name and address of such transferee or assignee, (b) such transferee or assignee shall have agreed in writing to be bound by the transfer restrictions and other applicable provisions of this Agreement, (c) the rights of the Investors set forth in Section 5.1(b) or (c) may only be transferred or assigned to a transferee or assignee that has entered into a confidentiality undertaking reasonably satisfactory to the Company with respect thereto, (d) the Investors may only transfer or assign the rights and obligations under Section 5.9 to a single transferee, and (e) the Investors may only assign rights to register Registrable Securities under Section 5.8 in connection with a Transfer to a transferee of Registrable Securities representing at least 1% of the number of Common Shares outstanding at the time of such Transfer, provided the Company is furnished with a written notice of the name and address of such transferee or assignee and the Registrable Securities with respect to which such registration rights are being assigned.

Section 9.6 Counterparts. This Agreement may be executed in one or more counterparts and by different parties in separate counterparts. All such counterparts shall constitute one and the same agreement and shall become effective when one or more counterparts have been signed by each Party and delivered to the other Party.

Section 9.7 Remedies; Waiver. Subject to Section 7.7, all rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available. No failure on the part of any Party to exercise or delay in exercising any right hereunder shall be deemed a waiver thereof, nor shall any single or partial exercise preclude any further or other exercise of such or any other right. Notwithstanding any other provision of this Agreement, it is understood and agreed that remedies at law would be inadequate in the case of any breach of the covenants contained in this Agreement. The Company and the Investors shall be entitled to equitable relief, including the remedy of specific performance, with respect to any breach or attempted breach of such covenants by the other Party.

Section 9.8 Severability. Any invalidity, illegality or unenforceability of any provision of this Agreement in any jurisdiction shall not invalidate or render illegal or unenforceable the remaining provisions hereof in such jurisdiction and shall not invalidate or render illegal or unenforceable such provisions in any other jurisdiction. The Company and the Investors shall endeavor in good faith negotiations to replace any invalid, illegal or

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unenforceable provision with a valid, legal and enforceable provision, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provision.

Section 9.9 Amendment; Waiver. This Agreement may be amended only by agreement in writing of both parties. No waiver of any provision nor consent to any exception to the terms of this Agreement shall be effective unless in writing and signed by the Party to be bound and then only to the specific purpose, extent and instance so provided.

Section 9.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

[the next page is the signature page]

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IN WITNESS WHEREOF, the Company and the Investors have caused this Agreement to be executed by their respective officers thereunto duly authorized all as of the date first written above.

XINHUA SPORTS & ENTERTAINMENT LIMITED
By:	/s/ Graham Anton Earnshaw
	Name:	Graham Anton Earnshaw
	Title:	Director

Signature Page to Series C Convertible Preferred Shares Purchase Agreement

INVESTORS:	ZOHAR CDO 2003-1, LIMITED
	By:	Patriarch Partners VIII, LLC,
		its Collateral Manager
		By:	/s/ Lynn Tilton
			Name:	Lynn Tilton
			Title:	Manager
	ZOHAR II 2005-1, LIMITED
	By:	Patriarch Partners XVI, LLC,
		its Collateral Manager
		By:	/s/ Lynn Tilton
			Name:	Lynn Tilton
			Title:	Manager

Signature Page to Series C Convertible Preferred Shares Purchase Agreement

Exhibit A
to
Series C Convertible Preferred Shares
Purchase Agreement

Defined Terms

“AAA” has the meaning set forth in Section 9.10(b).

“Action or Proceeding” means any suit, action, proceeding (including any compliance, enforcement or disciplinary proceeding), arbitration, formal or informal inquiry, inspection, investigation or formal order of investigation of complaint.

“ADRs” means the American Depositary Receipts evidencing the ADS Shares.

“ADS Shares” means the American depository shares issued by the Depositary pursuant to the Deposit Agreement each of which shares represents two Class A Common Shares.

“Affiliate” means with respect to any Person, any other Person that directly or indirectly, though one or more intermediaries, controls, is controlled by, or under common control with, the first mentioned Person. For purposes of this definition, “control” (including with correlative meanings, the terms “controlling”, “controlled by” and under “common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“Affiliated Fund” means any investment fund sponsored or managed by an Investor or an Affiliate.

“Amendment” has the meaning set forth in the Recitals.

“Articles of Association” means the Amended and Restated Articles of Association of the Company as currently in effect.

“Authorizing Resolution” has the meaning set forth in the Recitals.

“Board” means the Board of Directors of the Company.

“Business Day” means any day other than a Saturday, Sunday or a day on which banking institutions in the State of New York or Hong Kong are authorized by law or executive order to close.

“Capital Shares” means any shares in the capital of the Company.

“Class A Common Shares” means the A Common Shares in the Company with a nominal value of $0.001 per share.

A-1

“Class B Common Shares” means the B Common Shares in the Company with a nominal value of $0.001 per share.

“Closing” has the meaning set forth in Section 2.2.

“Closing Date” has the meaning set forth in Section 2.2.

“Code” means the U.S. Internal Revenue Code of 1986, as amended.

“Common Shares” means, collectively, the Class A Common Shares and the Class B Common Shares.

“Company” has the meaning set forth in the Preamble.

“Company Approvals” has the meaning set forth in Section 3.5(b).

“Company Contract” means any indenture, mortgage, deed of trust, lease, contract, agreement, instrument or other undertaking or legally binding arrangement (whether written or oral) to which the Company or any Subsidiary is a party or by the Company or any Subsidiary or any of their respective properties or assets is bound.

“Company Contractual Consents” has the meaning set forth in Section 3.5(c).

“Company Indemnified Persons” has the meaning set forth in Section 5.8(h)(ii)(1).

“Company Party” has the meaning set forth in Section 3.18.

“Competitor” means (i) any Person that is engaged in any business or organization in any jurisdiction in which the Company or any of its Subsidiaries sells products or provides services which, directly or indirectly, Competes (as hereinafter defined) with the Company or any of its Subsidiaries; and (ii) any Affiliates of a Person described in clause (i). A business or organization shall be deemed to “Compete” with the Company or a Subsidiary of the Company if such business or organization competes in a significant manner with the business of the Company or any of its Subsidiaries as such business is conducted as of the date hereof or at any time while this Agreement is in effect.

“Contingent Obligation” shall mean as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument or arrangement (whether in writing or otherwise) to which such Person is a party or by which it or any of such Person’s property is bound.

“Contractual Consent” applicable to a specified Person in respect of a specified matter means any consent required to be obtained by such Person from any other Person party to any Contractual Obligation to which such first Person is a party or by which it is bound in order for such matter to occur or exist without resulting in the occurrence of a default or event of default or termination, the creation of any lien, the triggering of any decrease in the rights of

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such first Person, any increase in the obligations of such first Person or any other consequence adverse to the interests of such first Person, under any provision of such Contractual Obligation.

“Contractual Obligation” means, as to any Person, any obligation arising out of any indenture, mortgage, deed of trust, contract, agreement, insurance policy, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound (including, without limitation, any debt security issued by such Person).

“Conversion Shares” means any Class A Common Shares issued upon conversion of any of the Shares pursuant to Article 4 of the Authorizing Resolution.

“Convertible Securities” means any securities or obligations that are convertible into or exchangeable for Capital Shares.

“Damages” has the meaning set forth in Section 7.2.

“Deposit Agreement” means the Deposit Agreement among the Company, the Depositary and the holders from time to time of the ADRs.

“Depositary” means The Bank of New York, as the depositary under the Deposit Agreement.

“Designated Offshore Securities Market” means a Designated Offshore Securities Market as defined in Rule 902(b) of Regulation S of the Securities Act.

“Disclosure Schedule” means the schedule dated the date hereof delivered by the Company to the Investors, which schedule relates to this Agreement and is designated therein as the Disclosure Schedule of the Company for the purposes hereof.

“Disputant” has the meaning set forth in Section 9.10(a).

“Dispute” has the meaning set forth in Section 9.10(a).

“Elected New Securities” has the meaning set forth in Section 5.7(d).

“Employee Share Options” means any share options granted pursuant to the Share Option and Share Grant Plan.

“Enforceability Exceptions” has the meaning set forth in Section 3.3(b).

“Entity” means any corporation, partnership, limited liability company, joint venture, association, partnership, business trust or other entity.

“Equity Securities” means the Class A Common Shares, and any other Capital Shares (including the Series B Preferred Shares, the Series C Preferred Shares and the Class B Common Shares), equity interest or other ownership interest or profit participation or similar right with respect to the Company, including, without limitation, limited liability company membership interests, partnership interests, voting trust certificates, certificates of interest or

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participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as “securities” or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing.

“Estimated Price Range” has the meaning set forth in Section 5.7(b).

“Exchange Act” means the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder.

“Financial Statements” has the meaning set forth in Section 3.6(b).

“GAAP” has the meaning set forth in Section 3.6(b)

“Governmental Authority” means any government or political subdivision or department thereof, any governmental or regulatory body, commission, board, bureau, agency or instrumentality, or any court or arbitrator or alternative dispute resolution body, in each case whether federal, state, local, foreign or supranational, as well as any applicable self regulatory body.

“Holder Indemnified Persons” has the meaning set forth in Section 5.8(h)(i)(1).

“Hong Kong” means the Special Administrative Region of Hong Kong.

“Indebtedness” shall mean as to any Person (a) all obligations of such Person for borrowed money (including without limitation, reimbursement and all other obligations with respect to surety bonds, unfunded credit commitments, letters of credit and bankers’ acceptances, whether or not matured), (b) all indebtedness, obligations or liability of such Person (whether or not evidenced by notes, bonds, debentures or similar instruments) whether matured or unmatured, liquidated or unliquidated, direct or indirect, absolute or contingent, or joint or several, that should be classified as liabilities in accordance with GAAP, including without limitation, any items so classified on a balance sheet and any reimbursement obligations in respect of letters of credit or obligations in respect of bankers acceptances, (c) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable and accrued commercial or trade liabilities arising in the ordinary course of business, (d) all interest rate and currency swaps, caps, collars and similar agreements or hedging devices under which payments are obligated to be made by such Person, whether periodically or upon the happening of a contingency, (e) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (whether or not the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (f) all obligations of such Person under leases which have been or should be, in accordance with GAAP, recorded as capital leases, (g) all indebtedness secured by any Lien (other than Liens in favor of lessors under leases) on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is non-recourse to the credit of that Person,

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and (h) any Contingent Obligation of such Person incurred in respect of any Indebtedness referred to in (a) to (g) above.

“Indemnitee” has the meaning set forth in Section 5.8(h)(iii).

“Indemnitor” has the meaning set forth in Section 5.8(h)(iii).

“Intellectual Property” has the meaning set forth in Section 3.11.

“Investors” has the meaning set forth in the Preamble (and/or their permitted transferees and assignees as the context may require).

“Investor Common Shares” means (a) any A Common Shares issued or issuable upon conversion of any Series C Preferred Shares purchased by the Investors pursuant to this Agreement and (b) any A Common Shares of the Company which the Investors (or any permitted transferee hereunder) shall be entitled to receive, or shall have received, in connection with any share splits, share dividends or similar events with respect to the Company’s A Common Shares.

“Investor Indemnified Party” has the meaning set forth in Section 7.2.

“Issuance Notice” has the meaning set forth in Section 5.7(b).

“Law” means any judgment, order (whether temporary, preliminary or permanent), writ, injunction, decree, statute, rule, regulation, notice, law or ordinance and shall also include any regulations of any applicable self regulatory organizations.

“License” means any license, franchise, permit, privilege, immunity, approval or other authorization required to be obtained under any applicable Law from any applicable Governmental Authority.

“Liens” means security interests, liens, claims, pledges, mortgages, options, rights of first refusal, agreements, limitations on voting rights, charges, easements, servitudes, encumbrances and other restrictions of any nature whatsoever.

“Losses” has the meaning set forth in Section 5.8(h)(i)(1).

“Material Adverse Effect” means a material adverse effect on (i) the ability of the Company to consummate any of the Transactions or to perform any of its obligations under any of the Transaction Documents or (ii) the businesses, assets (including licenses, franchises and other intangible assets), liabilities, financial condition or operating income of the Company 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 the Company and its Subsidiaries and generally affect the industry in which the Company and its Subsidiaries operate; (b) effects or changes relating to loss of employees, suppliers, vendors, agents, customers or other business partners resulting primarily from the announcement or pendency of the transactions contemplated by this Agreement;

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(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 by the Company at the request of the Investors or as required by the terms of this Agreement or the other Transaction Documents.

“Meeting” shall have the meaning set forth in Section 5.9.

“Memorandum of Association” means the Amended and Restated Memorandum of Association of the Company as currently in effect.

“New Securities” has the meaning set forth in Section 5.7(a).

“Non-Voting Observer” shall have the meaning set forth in Section 5.9.

“NuCom Registration Rights Agreement” means the Registration Rights Agreement dated as of March 11, 2009 between the Company and the investors listed therein.

“OFAC” means the Office of Foreign Assets Control of the US Department of the Treasury.

“Organizational Document” means, with respect to any Entity. any certificate or articles of incorporation, memorandum or articles of association, by-laws, partnership agreement, limited liability agreement, operating agreement, trust agreement or other agreement, instrument or document governing the affairs of such Entity.

“Parity Registrable Securities” means (a) any “Registrable Securities” as defined in the Patriarch Investor Rights Agreements, (b) any “Registrable Securities” as defined in the Series B Registration Rights Agreement, (c) any “Registrable Securities” as defined in the NuCom Registration Rights Agreement, and (d) any A Common Shares into which any Permitted Parity Preferred Shares are convertible, to the extent that registration rights are granted to the holders of such shares in connection with the issuance of such Permitted Parity Preferred Shares.

“Patriarch” means Patriarch Partners Media Holdings, LLC.

“Patriarch Credit Agreement” means the Credit Agreement dated as of October 21, 2008 among the Company, certain subsidiaries of the Company, Patriarch Partners Agency Services, LLC, Zohar CDO 2003-1, Limited and Zohar II 2005-1, Limited, as amended, modified or supplemented from time to time.

“Patriarch Loans” means the Loans outstanding under the Patriarch Credit Agreement.

“Patriarch Investor Rights Agreements” means (i) the Investor Rights Agreement dated as of March 16, 2006 among the Company, Xinhua Finance Limited and Patriarch and (ii) the Investor and Registration Rights Agreement dated as of October 21, 2008 (the “2008 IRRA”)

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among the Company, the investors listed therein and Patriarch, in each case, as amended, modified or supplemented from time to time.

“Permitted Parity Preferred Shares” means any preferred shares of the Company that constitute “Parity Shares” issued in compliance with Section 5.2(c) of the Authorizing Resolution.

“Person” means any individual, Entity, unincorporated association or Governmental Authority.

“Potential Material Event” means either (a) the possession by the Company of material information not ripe for disclosure in a Registration Statement, or (b) any material engagement or activity by the Company which would be adversely affected by disclosure in a Registration Statement at such time, in each case, which shall be evidenced by a written good faith determination by the Board of Directors that both disclosure of such information, engagement or activity in a Registration Statement would be detrimental to the business and affairs of the Company, and a Registration Statement would be materially misleading absent the inclusion of such information, engagement or activity.

“Purchase Consideration” means the payment of the aggregate par value of the Shares and the execution and delivery of the Amendment by the agent and lender parties thereto.

“PRC” means the People’s Republic of China, but for purpose of this Agreement, does not include Taiwan and the Special Administrative Regions of Hong Kong and Macau.

“Pricing” has the meaning set forth in Section 5.7(b).

“Prospectus” means the prospectus included in any Registration Statement, all amendments and supplements to such prospectus and all material incorporated by reference in such prospectus.

“Pro Rata Share” has the meaning set forth in Section 5.7.

“Recent Balance Sheet” means the consolidated balance sheet of the Company and its consolidated subsidiaries as of December 31, 2009 included in the Financial Statements.

“Registrable Securities” means any Investor Common Shares; provided, however, that Registrable Securities shall cease to be Registrable Securities upon the earlier of (i) when the Registrable Securities have been transferred pursuant to Rule 144, (ii) when, with respect to any Registrable Securities Holder, in the reasonable opinion of counsel to the Company, all Registrable Securities proposed to be sold by such Registrable Securities Holder may then be sold pursuant to Rule 144 without any volume limitations, which counsel shall be reasonably satisfactory to such Registrable Securities Holder and (iii) the date as of which all of the Registrable Securities have been sold pursuant to a Registration Statement, provided further, that “Registrable Securities” shall exclude in all cases any Registrable Securities Transferred by a Registrable Securities Holder or any other Person other than an assignment pursuant to Section 9.5.

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“Registrable Securities Holder” means any Person who holds Registrable Securities who (i) is an Investor or (ii) is a Person to whom registration rights under Section 5.8 have been assigned pursuant to Section 9.5. For the purposes of this Agreement, any holder of Series C Preferred Shares shall be deemed to be the holder of any Registrable Securities issuable upon conversion of such Series C Preferred Shares.

“Registration Expenses” means all expenses incurred by the Company in connection with the Shelf Registration Statement filed pursuant to Section 5.8, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, blue sky fees and expenses, the expense of any special audits incident to or required by any such registration and the reasonable fees and disbursements of a single special legal counsel to represent the Selling Holders in connection with any offering thereunder. Registration Expenses do not include compensation of regular employees of the Company which shall be paid in any event by the Company, underwriting discounts and commissions and share transfer taxes.

“Registration Statement” means any registration statement of the Company filed with, or to be filed with, the SEC under the rules and regulations promulgated under the Securities Act, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, and all exhibits and all material incorporated by reference in such registration statement.

“Registration Rights Agreement” means the Registration Rights Agreement to be dated as of the Closing Date between the Company and the Investors substantially in the form attached hereto as Exhibit D hereto.

“Related Person” means, with respect to any Person, (a) any holder or beneficial owner (directly or indirectly) of equity securities, or rights to acquire equity securities, representing 5% or more of the voting equity securities of such Person (a “5% Shareholder”); (b) any Affiliate of such specified Person or of any such 5% Shareholder thereof; (c) any Person that serves as a director, officer, partner, employee, executor or trustee (or in similar capacity) of such Person or of any 5% Shareholder thereof, or any of their respective Affiliates; (d) any Person with respect to which such specified Person serves as a general partner, managing member, manager or trustee (or in a similar capacity); and (e) any relative or spouse (or relative of such spouse) who resides with, or is a dependent of, any Related Person described in clauses (a), (b), (c) or (d) of this definition.

“Rule 144” means Rule 144 promulgated under the Securities Act, as such rule shall be in effect from time to time.

“Rules of Arbitration” has the meaning set forth in Section 9.10(b).

“Sanctioned Entity” shall mean (i) the government of or an agency of the government of, (ii) an organization directly or indirectly controlled by, or (iii) a person resident in a country that is subject to a sanctions program identified on the list maintained by OFAC and available at http://www.ustreas.gov/offices/enforcement/ofac/programs/, or as otherwise

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published from time to time as such program may be applicable to such agency, organization or person.

“Sanctioned Person” shall mean a person named on the list of Specially Designated Nationals or Blocked Persons maintained by OFAC available at http://www.treas.gov/offices/enforcement/ofac/sdn/index.shtml, or as otherwise published from time to time.

“SEC” means the United States Securities and Exchange Commission and includes any Governmental Authority succeeding to the functions thereof.

“SEC Reports” has the meaning set forth in Section 3.6(a)

“Securities Act” means the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder.

“Selling Expenses” means, in respect of an offering pursuant to the Shelf Registration Statement filed pursuant to Section 5.8, all underwriting discounts, selling commissions and share transfer taxes applicable to the Registrable Securities and/or Parity Registrable Securities registered by the applicable Selling Holders.

“Selling Holders” means, in respect of an offering pursuant to the Shelf Registration Statement filed pursuant to Section 5.8, Registrable Securities Holders and/or holders of Parity Registrable Securities selling Registrable Securities and/or Parity Registrable Securities pursuant to such Shelf Registration Statement.

“Series B Authorizing Resolution” means the authorizing resolution adopted on February 28, 2008 creating the Series B Preferred Shares.

“Series B Preferred Shares” means the Series B Convertible Preferred Shares of the Company.

“Series B Purchase Agreement” means the Series B Convertible Preferred Shares Purchase Agreement dated as of February 18, 2008 between the Company and Yucaipa, as amended, modified or supplemented from time to time.

“Series B Registration Rights Agreement” means the Registration Rights Agreement dated as of February 28, 2008 between the Company and Yucaipa.

“Series C Preferred Shares” has the meaning set forth in the Recitals.

“Share Option and Share Grant Plan” means the Company’s Share Option and Share Grant Plan.

“Share Purchase Rights” means any options, warrants, awards or other rights exercisable for the purchase or acquisition of Capital Shares or Convertible Securities.

“Shares” has the meaning set forth in the Recitals.

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“Shelf Registration Statement” means a Registration Statement of the Company filed with the SEC on Form F-3 (or any successor form or other appropriate form under the Securities Act, including Form F-1) for an offering to be made on a continuous or delayed basis pursuant to Rule 415 under the Securities Act (or any similar rule that may be adopted by the SEC).

“Shelf Suspension” has the meaning set forth in Section 5.8(c).

“Subsidiary” means any Entity of which the Company (either alone or through or together with one or more other Subsidiaries) (x) owns, directly or indirectly, more than 50% of the shares or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such Entity, (y) is a general partner, managing member, trustee or other Person performing similar functions or (z) has control (as defined in Rule 405 under the Securities Act).

“Tax Return” means any return, report or similar statement (including the attached schedules) required to be filed with respect to any Tax, including, without limitation, any information return, claim for refund, amended return or declaration of estimated Tax.

“Tax” means any tax, governmental fee or other like assessment or charge of any kind whatsoever (including any tax imposed under Subtitle A of the Code and any net income, alternative or add-on minimum tax, gross income, gross receipts, sale, bulk sales, use, real property, personal property, ad valorem, value added, transfer, franchise, profits, license, withholding tax on amounts paid, withholding, payroll, employment, excise severance, stamp, capital shares, occupation, property, environmental or windfall profits tax, premium, custom, duty or other tax or assessment), together with any interest, penalty, addition to tax or additional amount thereto, imposed by any Governmental Authority.

“Taxing Authority” means any Governmental Authority (domestic or foreign) responsible for the imposition of any Tax.

“Transaction Documents” means this Agreement, the Authorizing Resolution, the Registration Rights Agreement and the Amendment.

“Transfer” of a security means any sale, assignment, transfer, exchange, pledge, grant of security interest in, hypothecation, encumbrance or other disposition or conveyance of any interest in such security.

“Transactions” means the purchase and sale of the Shares, the entry into the Amendment and the other transactions contemplated by the Transaction Documents.

“Undesignated Shares” has the meaning set forth in Section 3.2.

“Upset Date” has the meaning set forth in Section 9.1(e).

“USD”, “Dollars” or “US$” means the lawful currency of the United States of America.

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“Violation” has the meaning set forth in Section 5.8(h)(i)(1).

“Yucaipa” means Yucaipa Global Partnership Fund L.P., an exempted limited partnership organized under the laws of the Cayman Islands.

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SCHEDULE 1

Name of Investors	Number of Shares to be purchased
ZOHAR CDO 2003-1, LIMITED		41,992
ZOHAR II 2005-1, LIMITED		36,303

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EX-4.67

Exhibit 4.67

EXECUTION COPY

REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT (the “Agreement”), dated as of July 12, 2010, by and between XINHUA SPORTS & ENTERTAINMENT LIMITED, a Cayman Islands limited company (the “Company”), and the Investors listed in Schedule 1 hereof (each, an “Investor” and collectively the Investors, and, together with the Company, the “Parties”).

W I T N E S S E T H:

WHEREAS, the Company and the Investors have entered into that certain Series C Convertible Preferred Shares Purchase Agreement dated as of the date hereof (the “Preferred Shares Purchase Agreement”), pursuant to which the Investors are acquiring certain Preferred Shares (as defined below) of the Company, and the Company agreed to provide certain registration rights to the Investors;

WHEREAS, the Company sponsors a depository facility under which certain American Depository Shares (“ADS”) have been (and in the future may be) issued, with each ADS representing two A Common Shares of the Company;

WHEREAS, the Company maintains a listing for the ADS on the Nasdaq Global Market; and

WHEREAS, the Parties desire to set forth the Investors’ rights and the Company’s obligations in relation to the Registrable Securities (as defined below).

NOW, THEREFORE, in consideration of the premises and the mutual covenants and the agreements herein set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

ARTICLE I
DEFINITIONS AND INTERPRETATION

Section 1.01. Definitions. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined).

“A Common Shares” means the Class A Common Shares of the Company, par value US$0.001 per share.

“Action” against a Person means an action, suit, litigation, arbitration, investigation, complaint, contest, hearing, inquiry, inquest, audit, examination or other proceeding threatened or pending against or affecting the Person or its property, whether civil,

criminal, administrative, investigative or appellate, in law or equity before any arbitrator or Governmental Authority.

“ADS” has the meaning set forth in the recitals set forth above.

“B Common Shares” means the Class B Common Shares of the Company, par value US$0.001 per share.

“Board of Directors” means the board of directors of the Company as constituted from time to time.

“Business Day” means any day other than a Saturday, Sunday or a day on which banking institutions in the State of New York or Hong Kong are required or authorized by law or executive order to close.

“Company” has the meaning set forth in the preamble hereof.

“Company Indemnified Persons” has the meaning set forth in Section 2.06(b).

“Deposit Agreement” means the Deposit Agreement among the Company, the Depositary and the holders from time to time of the depositary receipts evidencing ADS.

“Depositary” means The Bank of New York, as the depositary under the Deposit Agreement.

“Designated Offshore Securities Market” means a Designated Offshore Securities Market as defined in Rule 902(b) of Regulation S of the Securities Act.

“Equity Securities” means the A Common Shares, and any other capital shares (including the Series C Preferred Shares, the Series B Preferred Shares and the Company’s B Common Shares, par value US$.001 per share), equity interest or other ownership interest or profit participation or similar right with respect to the Company, including, without limitation, limited liability company membership interests, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as “securities” or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing.

“Exchange Act” means the United States Securities Exchange Act of 1934, as amended from time to time, and any successor statute.

“Governmental Authority” means any government or political subdivision or department thereof, any governmental or regulatory body, commission, board, bureau, agency or instrumentality, or any court or arbitrator or alternative dispute resolution body, in each case whether federal, state, local, foreign or supranational, as well as any applicable self regulatory body.

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“Holder Indemnified Persons” has the meaning set forth in Section 2.06(a)(i).

“Hong Kong” means the Special Administrative Region of Hong Kong.

“Indemnitee” has the meaning set forth in Section 2.06(c).

“Indemnitor” has the meaning set forth in Section 2.06(c).

“Investors” has the meaning set forth in the preamble hereof.

“Investor Common Shares” means (a) any A Common Shares issued or issuable upon conversion of any Series C Preferred Shares purchased by an Investor pursuant to the Preferred Shares Purchase Agreement and (b) any A Common Shares of the Company which an Investor (or any permitted transferee hereunder) shall be entitled to receive, or shall have received, in connection with any share splits, share dividends or similar events with respect to the Company’s A Common Shares.

“Losses” has the meaning set forth in Section 2.06(a)(i).

“NuCom Registration Rights Agreement” means the Registration Rights Agreement dated as of March 11, 2009 between the Company and the investors listed therein.

“Parity Registrable Securities” means (a) any “Registrable Securities” as defined in the Patriarch Investor Rights Agreement, (b) any “Registrable Securities” as defined in the Patriarch Investor and Registration Rights Agreement, (c) any “Registrable Securities” as defined in the Yucaipa Registration Rights Agreement, (d) any “Registrable Securities” as defined in the NuCom Registration Rights Agreement, and (e) any A Common Shares into which any Permitted Parity Preferred Shares are convertible, to the extent that registration rights are granted to the holders of such shares in connection with the issuance of such Permitted Parity Preferred Shares.

“Parity Registrable Securities Holder” means any holder of Parity Registrable Securities.

“Parties” has the meaning set forth in the preamble hereof.

“Patriarch Investor and Registration Rights Agreement” means the Investor and Registration Rights Agreement dated as of October 21, 2008 among the Company, the investors listed therein and XFL.

“Patriarch Investor Rights Agreement” means the Investor Rights Agreement dated as of March 16, 2006 among the Company, Xinhua Finance Limited and Patriarch Partners Media Holdings, LLC.

“Permitted Parity Preferred Shares” means any preferred shares of the Company that constitute “Parity Shares” issued in compliance with Section 5.2(c) of the Series B Authorizing Resolution.

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“Person” shall mean any individual, Governmental Authority, firm, corporation, limited liability company, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity.

“Potential Material Event” means either (a) the possession by the Company of material information not ripe for disclosure in a registration statement, or (b) any material engagement or activity by the Company which would be adversely affected by disclosure in a registration statement at such time, in each case, which shall be evidenced by a written good faith determination by the Board of Directors that both disclosure of such information, engagement or activity in a registration statement would be detrimental to the business and affairs of the Company, and (y) a registration statement would be materially misleading absent the inclusion of such information, engagement or activity.

“Preferred Shares Purchase Agreement” has the meaning set forth in the recitals set forth above.

“Prior Agreements” means (a) the Patriarch Investor Rights Agreement, (b) the Patriarch Investor and Registration Rights Agreement, (c) the Yucaipa Registration Rights Agreement, and (d) the NuCom Registration Rights Agreement.

“Register”, “registered” and “registration” means a registration effected through the preparation and filing of a registration statement or similar document in compliance with the Securities Act and the declaration or ordering of effectiveness of such registration statement or document.

“Registrable Securities” means any Investor Common Shares; provided, however, that Registrable Securities shall cease to be Registrable Securities upon the earlier of (i) when the Registrable Securities have been transferred pursuant to Rule 144, (ii) when, with respect to any Registrable Securities Holder, in the reasonable opinion of counsel to the Company, all Registrable Securities proposed to be sold by such Registrable Securities Holder may then be sold pursuant to Rule 144 without any volume limitations, which counsel shall be reasonably satisfactory to such Registrable Securities Holder and (iii) the date as of which all of the Registrable Securities have been sold pursuant to a Registration Statement, provided, further, that “Registrable Securities” shall exclude in all cases any Registrable Securities Transferred by a Registrable Securities Holder or any other Person in a transaction other than an assignment pursuant to Section 2.07.

“Registrable Securities Holder” means any Person who holds Registrable Securities who (i) is an Investor or (ii) is a Person to whom rights under this Agreement have been assigned pursuant to Section 2.07. For the purposes of this Agreement, any holder of Series C Preferred Shares shall be deemed to be the holder of any Registrable Securities issuable upon conversion of such Series C Preferred Shares.

“Registration Expenses” means all expenses incurred by the Company in effecting any registration under this Agreement, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the

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Company, blue sky fees and expenses, the expense of any special audits incident to or required by any such registration and the reasonable fees and disbursements of a single special legal counsel to represent the Selling Holders, as the case may be. Registration Expenses do not include compensation of regular employees of the Company which shall be paid in any event by the Company, underwriting discounts and commissions and share transfer taxes.

“Registration Statement” means a registration statement on Form F-1 or S-1, Form F-3 or S-3 or Form SB-2 (or such similar or successor forms as may be appropriate) prepared and filed with the SEC by the Company pursuant to Article II of this Agreement.

“Regulation” means each applicable law, rule, regulation, order, guidance or recommendation (or any change in its interpretation or administration) by any Governmental Authority, central bank or comparable agency and any request or directive (whether or not having the force of law) of any of those Persons and each judgment, injunction, order, writ, decree or award of any Governmental Authority, arbitrator or other Person.

“Rule 144” means Rule 144 promulgated under the Securities Act, as such rule shall be in effect from time to time.

“SEC” means the United States Securities and Exchange Commission and includes any Governmental Authority succeeding to the functions thereof.

“Securities” means any shares, limited liability company membership interests, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as “securities” or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing.

“Securities Act” means the United States Securities Act of 1933, as amended from time to time, and any successor statute.

“Selling Expenses” means, in respect of a Registration Statement, all underwriting discounts, selling commissions and share transfer taxes applicable to the Registrable Securities registered by the applicable Selling Holders.

“Selling Holders” means, in respect of a Registration Statement, Registrable Securities Holders and/or Parity Registrable Securities Holders selling Registrable Securities and/or Parity Registrable Securities pursuant to such Registration Statement.

“Series B Authorizing Resolution” means the authorizing resolution adopted on or prior to the date hereof creating the Series B Preferred Shares.

“Series B Preferred Shares” means the Series B Convertible Preferred Shares of the Company, each with a par value US$0.001 per share and a Stated Value of US$100.00 per share.

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“Series C Preferred Shares” means the Series C Convertible Preferred Shares of the Company, each with a par value US$0.001 per share and a Stated Value of US$100.00 per share.

“Transfer” means any sale, assignment, transfer, exchange, pledge, grant of security interest in, hypothecation, encumbrance or other disposition or conveyance of any interest in.

“USD”, “Dollars” or “US$” means the lawful currency of the United States of America.

“Violation” has the meaning set forth in Section 2.06(a)(i).

“XFL” means Xinhua Finance Limited, a company organized under the laws of the Cayman Islands.

“Yucaipa Registration Rights Agreement” means the Registration Rights Agreement dated as of February 28, 2008 by and between the Company and Yucaipa Global Partnership Fund, L.P., an exempted limited partnership organized under the laws of the Cayman Islands.

Section 1.02. Interpretation.

(a) Headings. The headings to the Articles, Sections and Subsections of this Agreement are inserted for convenience of reference only and shall not affect the meaning or interpretation of this Agreement.

(b) Usage. In this Agreement, unless the context requires otherwise: (i) the singular number includes the plural number and vice versa; (ii) reference to any gender includes each other gender; (iii) the Exhibits to this Agreement are hereby incorporated into, and shall be deemed to be a part of, this Agreement; (iv) the terms “hereunder”, “hereof”, “hereto” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular section or other provision hereof; (v) the words “include”, “includes” and “including” shall be deemed to be followed by the words “without limitation”; and (vi) a reference to any Article, Section or Subsection shall be deemed to refer to the corresponding Article, Section, or Subsection of this Agreement.

ARTICLE II
REGISTRATION RIGHTS

Section 2.01. Piggyback Registration.

(a) Company Registration. If the Company proposes to register (including for this purpose a registration effected by the Company for shareholders other than the Registrable Securities Holders) any of its Equity Securities under the Securities Act in connection with the public offering of such securities, the Company shall promptly give all Registrable Securities Holders written notice of such registration at least 30 calendar days prior to the filing of such Registration Statement with the SEC. Such Registrable Securities Holders shall have a period of

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20 calendar days after receiving such written notice from the Company in which to elect to include some or all of such Registrable Securities Holders’ Registrable Securities in such Registration Statement. Such Registrable Securities Holders shall exercise their right to include Registrable Securities in such Registration Statement by delivering a written notice to the Company within such 20 calendar day period specifying the number of Registrable Securities such Registrable Securities Holders wishes to include in such Registration Statement. Subject to the provisions of Section 2.01(b) hereof, the Company shall use its reasonable best efforts to include the Registrable Securities requested to be included by such Registrable Securities Holders in the Registration Statement.

(b) Underwritten Offerings.

(i) If the registration for which the Company gives notice to the Registrable Securities Holders under Section 2.01(a) is an underwritten offering, the Company shall not be required under this Section 2.01 to include any of such Registrable Securities Holders’ Registrable Securities in such underwriting unless such Registrable Securities Holders accept the terms of the underwriting as agreed upon between the Company and the underwriters. In connection with such an underwritten offering, the Company (or other Persons who may be entitled to select the underwriters) shall have the right to select the managing underwriter or underwriters. If such Registrable Securities Holders wish to distribute their Registrable Securities through such underwriting, such Registrable Securities Holders shall enter into an underwriting agreement in customary form with the underwriter or underwriters, subject to the limitations set forth in Section 2.06 hereof. If such Registrable Securities Holders do not approve of the terms of such underwriting, such Registrable Securities Holders may elect to withdraw from such offering by providing written notice to the Company and the underwriter.

(ii) Notwithstanding any other provision of this Section 2.01, if the underwriter advises the Company that in the opinion of such underwriter, the distribution of all of the Registrable Securities requested to be registered would materially and adversely affect the distribution of all of the securities to be underwritten, then (x) the Company shall deliver to the Registrable Securities Holders who requested inclusion of Registrable Securities held by them in the offering a copy of such underwriter’s opinion, which opinion shall be in writing and shall state the reasons for such opinion and (y) the number of Equity Securities (including the Registrable Securities) that may be included in such registration shall be allocated in the order listed below (provided that in the case of any Registration Statement to which the provisions of any of the Prior Agreements are applicable, the following priorities shall apply only to the extent not inconsistent with such provisions):

(A) first, to the Company;

(B) second, to such Registrable Securities Holders and any Parity Registrable Securities Holders proposing to register securities in such registration (pro rata based on the respective numbers of Registrable Securities or Parity Registrable Securities held by them); and

(C) third, to the other Persons proposing to register securities in such registration, if any.

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If so determined by the underwriter, all Registrable Securities may be excluded from such registration and underwritten offering so long as all Parity Registrable Securities are similarly excluded. Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from the registration.

(iii) The Company shall have no obligation to register any Registrable Securities under this Section 2.01 in connection with a registration by the Company (i) relating solely to the sale of securities to participants in a Company equity incentive plan, or (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) a registration on Form S-8 or any successor form to such form.

Section 2.02. Expenses of Registration. All Registration Expenses incurred in connection with any registration, filing, qualification or compliance pursuant to Section 2.01, shall be borne by the Company. Unless otherwise stated, all Selling Expenses relating to any Registrable Securities and/or Parity Registrable Securities shall be borne by the applicable Selling Holders pro rata based on the respective numbers of Registrable Securities and/or Parity Registrable Securities registered by them.

Section 2.03. Further Obligations of the Company. Whenever the Company effects the registration of any Registrable Securities pursuant to this Article II, the Company shall:

(a) Registration of ADS. If the Selling Holders propose to sell Registrable Securities and/or Parity Registrable Securities pursuant to any Registration Statement referred to herein in the form of ADS, register additional ADS on Form F-6 if and to the extent necessary to permit the sale of such Registrable Securities and/or Parity Registrable Securities as ADS.

(b) Filing of Amendments and Supplements. Prepare and file with the SEC such amendments (including post-effective amendments) and supplements to the Registration Statement and the prospectus used in connection with the Registration Statement as may be necessary to keep the Registration Statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities and other securities of the Company covered by the Registration Statement at all times during the period for which the Company is required to maintain the effectiveness of such Registration Statement pursuant to the terms of this Agreement.

(c) Copies of Documents. Furnish to each Selling Holder, without charge, such number of conformed copies of the Registration Statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus included in such Registration Statement (including each preliminary prospectus and any summary prospectus), in conformity with the requirements of the Securities Act, such documents incorporated by reference in such Registration Statement or prospectus, and such other documents, as such Selling Holders may reasonably request.

(d) Opinion and Comfort Letter. Furnish to such Selling Holders (i) an opinion of the counsel representing the Company for purposes of such registration, dated the

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effective date of such Registration Statement (or, if such registration includes an underwritten public offering, dated the date of the closing under the underwriting agreement with respect to both the effective date of the Registration Statement and the date of the closing under the underwriting agreement), in form and substance as is customarily given by counsel for the issuer to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to such Selling Holders, and (ii) a “cold comfort” letter, dated the effective date of such Registration Statement (and, if such Registration Statement includes an underwritten public offering, dated the date of the closing under the underwriting agreement) signed by the independent certified public accountants who have certified the Company’s financial statements included in such Registration Statement, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to such Selling Holders.

(e) “Blue Sky” Qualification. Register or qualify all Registrable Securities and other securities covered by such Registration Statement under the securities or blue sky laws of such jurisdictions as the applicable Selling Holders (or in an underwritten offering, the managing underwriter) shall reasonably request, and do any and all other acts and things which may be necessary or advisable to enable such Selling Holders to consummate the disposition in such jurisdictions of the Registrable Securities and/or Parity Registrable Securities covered by such Registration Statement, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it is not so qualified, or to subject itself to taxation in any such jurisdiction, or to consent to general service of process in any such jurisdiction.

(f) Notification of Certain Events. As promptly as practicable after becoming aware thereof, notify the applicable Selling Holders of the happening of any event of which the Company has knowledge, as a result of which the prospectus included in the 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, in light of the circumstances under which they were made, not misleading, and promptly prepare and file with the SEC a supplement or amendment to the Registration Statement or other appropriate filing with the SEC to correct such untrue statement or omission, and deliver a number of copies of such supplement or amendment to such Selling Holders as such Selling Holders may reasonably request.

(g) SEC Stop Orders. As promptly as practicable after becoming aware thereof, notify the applicable Selling Holders (and, in the event of an underwritten offering, the managing underwriters) of the issuance by the SEC of any notice of effectiveness or any stop order or other suspension of the effectiveness of the Registration Statement at the earliest possible time.

(h) Potential Material Event. As promptly as practicable after becoming aware thereof, notify the applicable Selling Holders (and, in the event of an underwritten offering, the managing underwriters) of the existence of a Potential Material Event, in which case, such Selling Holders shall not offer or sell any Registrable Securities or Parity Registrable Securities, or engage in any other transaction involving or relating to such Registrable Securities or Parity Registrable Securities, from the time of the giving of notice with respect to a Potential

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Material Event until such Selling Holders receive written notice from the Company that such Potential Material Event either has been disclosed to the public or no longer constitutes a Potential Material Event; provided, however, that such Selling Holders may only be required to cease offering and selling Registrable Securities and/or Parity Registrable Securities pursuant to this clause (h) for a period of not more than 90 calendar days after receiving notice from the Company that a Potential Material Event exists; provided, further, however, that the Company may only exercise its rights under this clause (h) twice in any 12-month period with at least a 60 calendar day interval between such “black-out” periods.

(i) Listing Requirements. Use its reasonable best efforts to list such Registrable Securities and/or Parity Registrable Securities on each securities exchange on which the Equity Securities of the Company (including the ADS) are then listed. If the Selling Holders propose to sell Registrable Securities and/or Parity Registrable Securities in the form of ADS, the Company shall (subject to the Deposit Agreement) procure delivery of ADS listed on such securities exchange to the Selling Holders and, to the extent additional ADS are required to be registered on Form F-6 in order to carry out such delivery, register such additional ADS.

(j) Certificate Preparation. Cooperate with the applicable Selling Holders to facilitate the timely preparation and delivery of certificates for the Registrable Securities and/or Parity Registrable Securities to be offered pursuant to the Registration Statement and enable such certificates for the Registrable Securities and/or Registrable Securities to be in such denominations or amounts as the case may be, as such Selling Holders may reasonably request, and, within 2 Business Days after a Registration Statement which includes Registrable Securities and/or Parity Registrable Securities is ordered effective by the SEC, the Company shall deliver, or shall cause legal counsel selected by the Company to deliver, to the transfer agent for the Registrable Securities (with copies to such Selling Holders) an appropriate instruction and opinion of such counsel. If the Selling Holders propose to sell Registrable Securities and/or Parity Registrable Securities in the form of ADS, the Company shall cooperate with such Selling Holders to facilitate the timely delivery of the certificates referred to above to the Depositary and shall (subject to the Deposit Agreement) cause the Depositary to cooperate with such Selling Holders to facilitate the timely preparation and delivery of the depositary receipts evidencing such ADS in such denominations or amounts as the case may be, as such Selling Holders may reasonably request.

(k) Underwriting Agreement. In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form and complying with the provisions of Section 2.06, with the managing underwriter of such offering.

(l) Section 11 Information. Make available to the applicable Selling Holders, as soon as reasonably practicable, an earnings statement covering the period of at least 12 months, but not more than 18 months, beginning with the first month of the first fiscal quarter after the effective date of such Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act, including, without limitation, Rule 158 promulgated thereunder.

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(m) Other Actions. Take all other reasonable actions necessary to expedite and facilitate disposition by the applicable Selling Holders of the Registrable Securities and/or Parity Registrable Securities pursuant to the Registration Statement.

Section 2.04. Information from Holder. It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 2.01 with respect to the Registrable Securities or Parity Registrable Securities of any Selling Holder that such Selling Holder shall furnish to the Company such information regarding itself, the Registrable Securities or Parity Selling Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such securities.

Section 2.05. Preparation; Reasonable Investigation; Review by Counsel. In connection with the preparation and filing of each Registration Statement registering Registrable Securities and/or Parity Registrable Securities under the Securities Act, each Selling Holder, its underwriters, if any, and counsel for such Selling Holder shall:

(a) be permitted to review such Registration Statement, each prospectus included therein or filed with the SEC, and each amendment thereof or supplement thereto a reasonable period of time (but not less than 3 Business Days) prior to their filing with the SEC; and

(b) be given reasonable access to the Company’s books and records and such opportunities to discuss the business of the Company with its officers, counsel and the independent public accountants who have certified its financial statements as shall be necessary, in the reasonable opinion of such Selling Holders, such underwriters, if any, or their respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act.

Section 2.06. Indemnification. In the event any Registrable Securities and/or Parity Registrable Securities are included in a Registration Statement under this Article II, the following indemnification provisions shall apply.

(a) Indemnification by the Company.

(i) Indemnification. To the extent permitted by law, the Company shall indemnify and hold harmless the Selling Holders, each of the employees, officers, directors, partners, members, managers, legal counsel and agents of such Selling Holders, any underwriter (as defined in the Securities Act) for such Selling Holders and each Person, if any, who controls any of such Selling Holders or underwriter within the meaning of the Securities Act or Exchange Act (collectively, the “Holder Indemnified Persons”) against and hold each Holder Indemnified Person harmless from any and all liabilities, obligations, losses, damages, (excluding consequential, special, indirect or punitive damages), lawsuits, investigations, arbitrations, actions, judgments, costs, expenses or claims, including, without limitation, reasonable attorneys’ fees and expenses incurred in investigation or defending any of the foregoing (collectively, “Losses”), that the Holder Indemnified Persons may suffer or sustain arising out of or due to any of the following (any of the following being a “Violation”):

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(A) any untrue statement or alleged untrue statement of a material fact contained in such Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto;

(B) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or

(C) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law, or any applicable securities laws or Regulations of a jurisdiction outside the United States.

(ii) Limitations on Indemnification. Notwithstanding the foregoing, the Company shall not be liable for:

(A) any amounts paid in settlement of any such Losses if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld or delayed); or

(B) any Losses to the extent that such Losses arise out of or are based upon a Violation which occurs in reliance upon and in strict conformity with written information furnished by such Selling Holders expressly for use in connection with such registration.

(b) Indemnification by the Registrable Securities Holders.

(i) Indemnification. To the extent permitted by law, each Selling Holder participating in any registration pursuant to this Agreement shall indemnify and hold harmless the Company, each of the Company’s employees, officers, directors, legal counsel and other agents, any underwriter (as defined in the Securities Act) for the Company and each Person, if any, who controls the Company or underwriter within the meaning of the Securities Act or Exchange Act (collectively, the “Company Indemnified Persons”), against and hold each Company Indemnified Person harmless from any and all Losses that the Company Indemnified Persons may suffer or sustain arising out of or due to any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in strict conformity with written information furnished by such Selling Holder expressly for use in connection with such registration.

(ii) Limitations on Indemnification. Notwithstanding the foregoing, no Selling Holder shall be liable for:

(A) indemnification pursuant to this Agreement in excess of the aggregate net cash proceeds received by such Selling Holder from the offering of Registrable Securities in such registration;

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(B) any amounts paid in settlement of any such Losses if such settlement is effected without the consent of such Selling Holder; (which consent shall not be unreasonably withheld or delayed); or

(C) any Losses to the extent that such Losses do not arise out of or are not based upon a Violation which occurs in reliance upon and in strict conformity with written information furnished by such Selling Holder expressly for use in connection with such registration.

(c) Indemnification Mechanics. If there occurs an event which a Company Indemnified Person or a Holder Indemnified Person (any such Person being the “Indemnitee”) hereto asserts is an indemnifiable event pursuant to this Section, the Indemnitee shall promptly notify the party obligated to provide indemnification hereunder (the “Indemnitor”) in writing of such event. Delay or failure to so notify the Indemnitor shall only relieve the Indemnitor of its obligations to the extent, if at all, that it is actually prejudiced by reason of such delay or failure. The Indemnitor shall have a period of 20 calendar days in which to respond thereto. If the Indemnitor so elects, within such 20 day period, it shall be entitled to assume the defense of such claim (such election to be without prejudice to the right of the Indemnitor to dispute whether such claim constitutes Losses under this Section 2.06). If the Indemnitor fails to assume the defense of such matter within such 20 calendar day period or does not respond within such 20 calendar day period, the Indemnitee against which such matter has been asserted shall (upon delivering notice to such effect to the Indemnitor) have the right to undertake, at the Indemnitor’s cost and expense, the defense, compromise or settlement of such matter on behalf of the Indemnitee, provided that the Indemnitee shall not settle such claim without the consent of the Indemnitor (which consent shall not be unreasonably withheld) and provided further that the Indemnitor shall have the right to participate (but not control) at its own expense in the defense of such asserted claim. In any event, the Indemnitee shall have the right to participate (but not control) at its own expense in the defense of such asserted liability; provided, however, that the Indemnitor shall pay the expenses of such defense if the Indemnitee is advised by counsel in writing that there are one or more legal defenses available to the Indemnitee that are different from or additional to those available to the Indemnitor (in which case, if the Indemnitee notifies the Indemnitor in writing, the Indemnitor shall not have the right to assume the defense of such asserted liability on behalf of the Indemnitee).

(d) Contribution. If the indemnification provided for in this Section is held by a court of competent jurisdiction to be unavailable to an Indemnitee with respect to any Losses, then the Indemnitor, in lieu of indemnifying such Indemnitee hereunder, shall contribute to the amount paid or payable by such Indemnitee as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the Indemnitor on the one hand and of the Indemnitee on the other in connection with the Violation that resulted in such Losses, as well as any other relevant equitable considerations; provided, however, that in no event shall any contribution under this Section 2.06(d) from any Selling Holder, together with the amount of any indemnification payments made by such Selling Holder pursuant to Section 2.06(b) above, exceed the net proceeds from the offering received by such Selling Holder. The relative fault of the Indemnitor and of the Indemnitee shall be determined by reference to, among other things, whether the Violation relates to information supplied by the Indemnitor or the Indemnitee and

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the parties relative intent, knowledge, access to information, and opportunity to correct or prevent such Violation.

(e) No Inconsistent Underwriting Agreements. Notwithstanding any provision of this Agreement to the contrary, the Selling Holders shall not be required to enter into an underwriting agreement that contains indemnification and contribution provisions which, in the sole discretion of such Selling Holders, materially differ from those contained in this Section 2.06.

Section 2.07. Transfer of Registration Rights. The Investors’ rights under this Article II may be assigned by the Investors (or any assignee permitted hereunder) to a transferee or assignee of any of the Registrable Securities held by the Investors (or such assignee), provided that (x) the Company is furnished a written notice of the name and address of such transferee or assignee and the Registrable Securities with respect to which such registration rights are being assigned and (y) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement and (z) such assignee acquires Registrable Securities representing at least 1% (calculated on an as converted basis) of the Common Shares (calculated on an as converted and fully-diluted basis).

Section 2.08. Registration in Non-U.S. Jurisdictions. In the event that the ADS cease to be listed on the Nasdaq Global Market and have not been listed on another nationally recognized securities exchange in the United States, but the Company has listed A Common Shares (or related depositary shares) on any Designated Offshore Securities Market or other internationally recognized securities exchange, then the Company shall use its reasonable best efforts, to the extent permitted by applicable law, to provide the Registrable Securities Holders with substantially the same rights and benefits in such jurisdiction as are provided for in this Agreement, and to take such steps, if any, consistent with customary market practice at the time so that the Registrable Securities are freely transferable in such listed market without transfer restrictions imposed by the securities or similar laws of such jurisdiction.

ARTICLE III
MISCELLANEOUS

Section 3.01. Notices. All notices, requests, demands and other communications to any Party or given under this Agreement shall be in writing and delivered personally, by overnight delivery or courier, by registered mail or by telecopier (with confirmation received) to the Parties at the address or telecopy number specified for such Parties below (or at such other address or telecopy number as may be specified by a Party in writing given at least five business days prior thereto). All notices, requests, demands and other communications shall be deemed delivered when actually received:

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(a) If to the Company, at:

Xinhua Sports & Entertainment Limited
Suite 2103-4
Vicwood Plaza
199 Des Voeux Road
Central, Hong Kong
Facsimile: +852.2541.8266
Attention: John McLean

With a copy to:

Latham & Watkins
41^St Floor, One Exchange Square
8 Connaught Place, Central
Hong Kong
Fax: +852.2522.7006
Attn: David T. Zhang

(b) If to the Investors, at:

Zohar CDO 2003-1, Limited

c/o Patriarch Partners, LLC
32 Avenue of the Americas, 17^th Floor
New York, NY 10013
Attn: Senior Credit Associate
Facsimile: 212-825-2038

with a copy to

c/o Patriarch Partners, LLC
32 Avenue of the Americas, 13^th Floor
New York, NY 10013
Attn: Senior Director Legal
Facsimile: 212-483-0709

Zohar II 2005-1, Limited

c/o Patriarch Partners, LLC
32 Avenue of the Americas, 17^th Floor
New York, NY 10013
Attn: Senior Credit Associate
Facsimile: 212-825-2038

with a copy to

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c/o Patriarch Partners, LLC
32 Avenue of the Americas, 13^th Floor
New York, NY 10013
Attn: Senior Director Legal
Facsimile: 212-483-0709

With copy to:

Jones Day
2727 North Harwood Street
Dallas, Texas 75201
Facsimile: (214) 969-5100
Attention: Michael O. Weisberg, Esq.

Section 3.02. Counterparts. This Agreement may be executed simultaneously in one or more counterparts, and by different Parties in separate counterparts, each of which when executed shall be deemed an original, but all of which taken together shall constitute one and the same instrument.

Section 3.03. Modification or Amendment of Agreement. This Agreement may not be modified or amended except by an instrument in writing signed by all of the Parties.

Section 3.04. Successors and Assigns. This Agreement shall be binding upon and inures to the benefit of and is enforceable by the respective successors and permitted assigns of the Parties hereto.

Section 3.05. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the state of New York.

Section 3.06. Waiver of Jury. THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT THAT THEY MAY HAVE TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION, OR IN ANY LEGAL PROCEEDING, DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT (WHETHER BASED ON CONTRACT, TORT, OR ANY OTHER THEORY). EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT, OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTIES WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

Section 3.07. Integration. This Agreement and the Preferred Shares Purchase Agreement contain and constitute the entire agreement of the Parties with respect to the subject

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matter hereof and supersede all prior negotiations, agreements and understandings, whether written or oral, of the Parties.

Section 3.08. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

Section 3.09. Ambiguities. This Agreement was negotiated between legal counsel for the Parties and any ambiguity in this Agreement shall not be construed against the Party who drafted this Agreement.

Section 3.10. Further Assurances. In order to (a) carry out more effectively the purposes of this Agreement, (b) enable the Parties to exercise and enforce their rights and remedies hereunder, promptly upon the reasonable request by any Party, the Company and the Investors shall (with the expenses paid by the Party responsible as provided in this Agreement) shall (i) correct any defect or error that may be discovered in this Agreement or in the execution, delivery, acknowledgment or recordation of this Agreement and (ii) execute, acknowledge, deliver, record, file and register, any and all such further acts, conveyances, assignments, notices of assignment, transfers, certificates, assurances and other instruments, in each case, as such requesting Party may require from time to time.

Section 3.11. No Third-Party Rights. This Agreement is not intended, and shall not be construed, to create any rights in any Person other than the Parties and any Parity Registrable Securities Holder and their respective successors and permitted assigns, and no Person may assert any rights as third-party beneficiary hereunder, except as provided in Section 2.06.

Section 3.12. No Waiver; Remedies. No failure or delay by any Party in exercising any right, power or privilege under this Agreement shall operate as a waiver of the right, power or privilege. A single or partial exercise of any right, power or privilege shall not preclude any other or further exercise of the right, power or privilege or the exercise of any other right, power or privilege.

Section 3.13. Submission to Jurisdiction. Each Party hereby consents to the non-exclusive jurisdiction of the courts of the State of New York and the federal courts located in the borough of Manhattan with respect to any Action brought to enforce any provision of this Agreement or to determine the rights of any Party hereto.

[SIGNATURE PAGE FOLLOWS]

17

IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the date first written above.

COMPANY:	XINHUA SPORTS & ENTERTAINMENT LIMITED
	By:	/s/ Graham Anton Earnshaw
		Name:	Graham Anton Earnshaw
		Title:	Director

Signature Page to Registration Rights Agreement

INVESTORS:	ZOHAR CDO 2003-1, LIMITED
	By:	Patriarch Partners VIII, LLC,
		its Collateral Manager
		By:	/s/ Lynn Tilton
			Name:	Lynn Tilton
			Title:	Manager
	ZOHAR II 2005-1, LIMITED
	By:	Patriarch Partners XVI, LLC,
		its Collateral Manager
		By:	/s/ Lynn Tilton
			Name:	Lynn Tilton
			Title:	Manager

Signature Page to Registration Rights Agreement

SCHEDULE 1
LIST OF INVESTORS

Name of Investors	Number of Shares to be purchased
ZOHAR CDO 2003-1, LIMITED		41,992
ZOHAR II 2005-1, LIMITED		36,303

EX-8.1

EXHIBIT 8.1

List of Subsidiaries and VIEs

Accord Group Investments Ltd.	BVI
Active Advertising (Guangzhou) Co., Ltd.	People’s Republic of China
Advance Mind Holdings Limited	Hong Kong
Beijing ChuanHui HuaRen Consulting Co., Ltd.	People’s Republic of China
Beijing Hantang Yueyi Culture & Media Co., Ltd.	People’s Republic of China
Beijing Linghang Dongli Advertising Co., Ltd.	People’s Republic of China
Beijing Mingyi Yongkang Advertising Co., Ltd.	People’s Republic of China
Beijing Mobile Interactive Co., Ltd.	People’s Republic of China
Beijing Shi Ji Xin Chuan Advertising Co., Ltd.	People’s Republic of China
Beijing Singshine Advertising Co., Ltd.	People’s Republic of China
Beijing Taide Advertising Co., Ltd.	People’s Republic of China
Beijing Xinhua Yinghua Film & TV Planning Co.,Ltd.	People’s Republic of China
Beijing Xintai Huade Advertising Co., Ltd.	People’s Republic of China
Beijing Yuedong Chuangshi Culture and Intermediary Co., Ltd.	People’s Republic of China
Century Effort Limited	BVI
China Lead Profits Limited	BVI
China Media Network Limited	Hong Kong
East Alliance Limited	BVI
Everfame Development Ltd.	BVI
Great Triumph Investments Ltd.	BVI
Guangzhou Excellent Consulting Service Co., Ltd.	People’s Republic of China
Guangzhou Liangdian Zhongduan Zhanshi Co., Ltd.	People’s Republic of China
Guangzhou Singshine Advertising Co., Ltd.	People’s Republic of China
Guoxin Hongdi Network Information & Technology (Beijing) Co., Ltd.	People’s Republic of China
Hong Kong Stock Express Publication Ltd.	Hong Kong
Jia Luo Business Consulting (Shanghai) Co., Ltd.	People’s Republic of China
New China Media Co., Ltd.	People’s Republic of China
NuCom Online Corporation	Cayman Islands
NuCom Online Hong Kong Limited	Hong Kong
Nucom Media Technology (Beijing) Co., Ltd.	People’s Republic of China
Shanghai Fenghuo Marketing Consulting Co., Ltd.	People’s Republic of China
Shanghai Heju Marketing Consulting Co., Ltd.	People’s Republic of China
Shanghai Jiaseng Advertising Co., Ltd.	People’s Republic of China
Shanghai Liangdian Zhongduan Zhanshi Co., Ltd.	People’s Republic of China
Shanghai Singshine Marketing Service Co., Ltd.	People’s Republic of China
Shanghai Yuan Zhi Advertising Co., Ltd.	People’s Republic of China
Shanghai Yuanxin Advertising Media Co., Ltd.	People’s Republic of China
Shangtuo Zhiyang International Advertising (Beijing) Co., Ltd.	People’s Republic of China
Shenzhen Active Trinity Advertising Co., Ltd.	People’s Republic of China
Shenzhen Haibei Leidi Business Consultancy Co.,Ltd.	People’s Republic of China
Singshine (Holdings) Hongkong Limited	Hong Kong
Small World Holding Co. Ltd.	BVI
Starease Limited	BVI
Taihui Business Consulting (Shanghai) Co.,Ltd.	People’s Republic of China
TianJin Jinli Culture Media Limited	People’s Republic of China
TianJin Shidai Ruipu Culture Media Limited	People’s Republic of China
TianJin Shidai Tianchuang Media Development Co., Ltd.	People’s Republic of China
Upper Step Holdings Limited	BVI
Upper Will Enterprises Limited	BVI
Wuxianshijie (Beijing) Information Technology Co., Ltd.	People’s Republic of China
Xin Chuan Online (Beijing) Information Technologies Co., Ltd.	People’s Republic of China
Xinhua Media Entertainment Limited	Cayman Islands
Xinhua Sports & Entertainment (Beijing) Co., Ltd.	People’s Republic of China
Xinhua Sports & Entertainment (HK) Limited	Hong Kong
Xinhua Sports & Entertainment (Shanghai) Co., Ltd.	People’s Republic of China
Xinhua Sports Ventures Limited	Cayman Islands
XSEL (Hong Kong) Limited	Hong Kong
XSEL Advertising Ltd.	BVI
Zhongxi Taihe Culture Consultation (Shanghai) Co., Ltd.	People’s Republic of China

EX-12.1

EXHIBIT 12.1

Certification by the Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Fredy Bush, certify that:

1. I have reviewed this annual report on Form 20-F of Xinhua Sports & Entertainment Limited (the “Company”);

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officer(s) 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15 (f) and 15d-15(f)) for the Company 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 Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’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 Company’s internal control over financial reporting.

Date: July 15, 2010

By:	/s/ Fredy Bush
	Name:	Fredy Bush
	Title:	Chief Executive Officer

EX-12.2

EXHIBIT 12.2

Certification by the Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Andrew Chang, certify that:

1. I have reviewed this annual report on Form 20-F of Xinhua Sports & Entertainment Limited (the “Company”);

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officer(s) 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15 (f) and 15d-15(f)) for the Company 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 Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’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 Company’s internal control over financial reporting.

Date: July 15, 2010

By:	/s/ Andrew Chang
	Name:	Andrew Chang
	Title:	Chief Financial Officer

EX-13.1

EXHIBIT 13.1

Certification by the Chief Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Xinhua Sports & Entertainment Limited (the “Company”) on Form 20-F for the year ended December 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Fredy Bush, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

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: July 15, 2010

By:	/s/ Fredy Bush
	Name:	Fredy Bush
	Title:	Chief Executive Officer

EX-13.2

EXHIBIT 13.2

Certification by the Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Xinhua Sports & Entertainment Limited (the “Company”) on Form 20-F for the year ended December 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Andrew Chang, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(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: July 15, 2010

By:	/s/ Andrew Chang
	Name:	Andrew Chang
	Title:	Chief Financial Officer

EX-15.1

Exhibit 15.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-142838 on Form S-8 and Registration Statement Nos. 333-161724 and 333-159058 on Forms F-3 of our report dated July 15, 2010 relating to the consolidated financial statements of Xinhua Sports & Entertainment Limited, its subsidiaries and its variable interest entities (collectively, the “Company”) (which report includes an emphasis of matter paragraph regarding the Company’s ability to continue as a going concern), appearing in the annual report on Form 20-F of the Company for the year ended December 31, 2009.

/s/ Deloitte Touche Tohmatsu CPA Ltd.

Beijing, the People’s Republic of China
July 15, 2010