FOCUS MEDIA HOLDING LIMITED NOTICE OF 2006 ANNUAL GENERAL MEETING OF SHAREHOLDERS TO BE HELD ON OCTOBER 20, 2006

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1 FOCUS MEDIA HOLDING LIMITED NOTICE OF 2006 ANNUAL GENERAL MEETING OF SHAREHOLDERS TO BE HELD ON OCTOBER 20, 2006 On October 20, 2006, Focus Media Holding Limited, a Cayman Islands company (the Company ), will hold its annual general meeting of shareholders at the Company s offices or the 30th Floor of the Zhao Feng World Trade Building, 369 Jiangsu Road, Shanghai, , People s Republic of China, at 10 a.m. local time for the following purposes: 1. The election of three directors to serve on the board of directors for a three year term. 2. To increase the maximum number of directors to thirteen. 3. The approval of the 2006 Employee Share Option Plan and the authorization of officers to allot, issue or deliver shares pursuant to the 2006 Employee Share Option Plan. 4. Ratification and appointment of independent auditors. 5. In addition, the meeting will transact any other business properly brought before the meeting. You can find more information about each of these items, including the nominees for directors, in the attached proxy statement. Only shareholders registered in the register of members at the close of business on August 28, 2006 can vote at this meeting or any adjournment that may take place. We cordially invite all shareholders to attend the annual general meeting in person. However, a shareholder entitled to attend and vote is entitled to appoint a proxy to attend and, on a poll, vote instead of such shareholder. A proxy need not be a shareholder of the Company. Whether or not you expect to attend the annual general meeting in person, please mark, date, sign and return the enclosed proxy card as promptly as possible in the postage-prepaid envelope provided to ensure your representation and the presence of a quorum at the annual general meeting. If you send in your proxy card and then decide to attend the annual general meeting to vote your shares in person, you may still do so. Your proxy is revocable in accordance with the procedures set forth in the proxy statement. This proxy is to be delivered to the attention of Jie Chen, Investor Relations Manager, Focus Media Holding Limited, 28-30/F, Zhao Feng World Trade Building, 369 Jiangsu Road, Shanghai , People s Republic of China, and arrive not later than 48 hours prior to the meeting. The notice of 2006 Annual General Meeting of Shareholders, the Proxy Statement and a copy of the Company s 2005 Annual Report are also available through our website at ir.focusmedia.cn. By Order of the Board of Directors, Dated: August 22, 2006 Jason Nanchung Jiang Chairman and Chief Executive Officer 1

2 FOCUS MEDIA HOLDING LIMITED PROXY STATEMENT General Our board of directors is soliciting proxies for the annual general meeting of shareholders to be held on October 20, 2006 at 10 a.m., local time, or at any adjournment or postponement thereof. The annual general meeting will be held at Company s offices or the 30th Floor of the Zhao Feng World Trade Building, 369 Jiangsu Road, Shanghai, , People s Republic of China. This proxy statement and the form of proxy are first being mailed to shareholders on or about September 8, Revocability of Proxies Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before its use by delivering a written notice of revocation or a duly executed proxy bearing a later date or, if you hold ordinary shares, by attending the meeting and voting in person. A written notice of revocation must be delivered to the attention of Focus Media, if you hold our ordinary shares, or to Citibank, N.A. if you hold American Depositary Shares, known as ADSs, representing our ordinary shares. Record Date, Share Ownership and Quorum Shareholders of record at the close of business on August 28, 2006 are entitled to vote at the annual general meeting. Our ordinary shares underlying ADSs are included for purposes of this determination. As of June 30, 2006, 529,366,773 of our ordinary shares, par value US$ per share, were issued and outstanding, of which approximately 301,496,040 were represented by ADSs. Two shareholders entitled to vote and present in person or by proxy that represent not less than one-third of our issued and outstanding voting shares will constitute a quorum for all purposes. Voting and Solicitation Each ordinary share outstanding on the record date is entitled to one vote. Voting at the annual general meeting will be by a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded (i) by the chairman of such meeting, (ii) by at least three shareholders present in person or in the case of a shareholder being a corporation by its duly authorized representative or by proxy for the time being entitled to vote at the meeting; (iii) by a shareholder or shareholders present in person or in the case of a shareholder being a corporation by its duly authorized representative or by proxy and representing not less than one-tenth of the total voting rights of all shareholders having the right to vote at the meeting, or (iv) by a shareholder or shareholders present in person or in the case of a shareholder being a corporation by its duly authorized representative or by proxy and holding our ordinary shares conferring a right to vote at the meeting being ordinary shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all ordinary shares conferring that right. 2

3 The costs of soliciting proxies will be borne by us. Proxies may be solicited by certain of our directors, officers and regular employees, without additional compensation, in person or by telephone or electronic mail. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding in their names our ordinary shares or ADSs beneficially owned by others to forward to those beneficial owners. Voting by Holders of Ordinary Shares When proxies are properly dated, executed and returned by holders of ordinary shares, the ordinary shares they represent will be voted at the annual general meeting in accordance with the instructions of the shareholder. If no specific instructions are given by such holders, the ordinary shares will be voted FOR each proposal and in the proxy holder s discretion as to other matters that may properly come before the annual general meeting. Abstentions by holders of ordinary shares are included in the determination of the number of ordinary shares present and voting but are not counted as votes for or against a proposal. Broker non-votes will not be counted towards a quorum or for any purpose in determining whether the proposal is approved. Voting by Holders of American Depositary Shares Citibank, N.A., as depositary of the ADSs, has advised us that it intends to mail to all owners of ADSs this proxy statement, the accompanying notice of annual general meeting and an ADR Voting Instruction Card. Upon the written request of an owner of record of ADSs, Citibank, N.A. will endeavor, to the extent practicable, to vote or cause to be voted the amount of ordinary shares represented by the ADSs, evidenced by American Depositary Receipts related to those ADSs, in accordance with the instructions set forth in such request. Citibank, N.A. has advised us that it will not vote or attempt to exercise the right to vote other than in accordance with those instructions. As the holder of record for all the ordinary shares represented by the ADSs, only Citibank, N.A. may vote those ordinary shares at the annual general meeting. Citibank, N.A. and its agents have advised us that they are not responsible if they fail to carry out your voting instructions or for the manner in which they carry out your voting instructions. This means that if the ordinary shares underlying your ADSs are not able to be voted at the annual general meeting, there may be nothing you can do. If (i) the enclosed ADR Voting Instruction Card is signed but is missing voting instructions, (ii) the enclosed ADR Voting Instruction Card is improperly completed or (iii) no ADR Voting Instruction Card is received by Citibank, N.A. from a holder of ADSs by October 13, 2006, Citibank, N.A. will deem such holder of ADSs to have instructed it to give a proxy to the chairman of the annual general meeting to vote in favor of each proposal recommended by our board of directors and against each proposal opposed by our board of directors. Deadline for Shareholder Proposals for 2007 Annual General Meeting We anticipate that our 2007 Annual General Meeting will be held in October Proposals which our shareholders wish to be considered for inclusion in our proxy statement and proxy card for the 2007 annual general meeting must be received by January 19, 2007 at Focus Media Holding Limited, 28-30/F, Zhao Feng World Trade Building, 369 Jiangsu Road, Shanghai , People s Republic of China, attention: Jie Chen, Investor Relations Manager and must comply with the requirements of Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the Exchange Act ). The submission of a proposal does not assure that it will be included in the proxy statement or the proxy card for the 2007 annual general meeting. 3

4 PROPOSAL 1: ELECTION OF DIRECTORS Since the previous annual general meeting of shareholders, the board of directors appointed three new directors, Mr. Charles Chao, Mr. David Feng Yu and Professor Daqing Qi. According to Article 86 of our Amendment and Restated Memorandum of Association, as these three directors were appointed by the board of directors, they can only hold office until the following annual general meeting whereupon they will need to be appointed by the members. We now hereby nominate these three directors for election at the 2006 annual general meeting. Each director to be elected will hold office for a three year term and until such director s successor is elected and is duly qualified, or until such director s earlier death, bankruptcy, insanity, resignation or removal. Ordinary shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the nominees named below. The board has no reason to believe that any of the nominees named below will be unable or unwilling to serve as a director if elected. In the event that any nominee should be unavailable for election as a result of an unexpected occurrence, such ordinary shares will be voted for the election of such substitute nominee as management may propose. The names of the nominees, their ages as of August, 2006, the principal positions currently held by them and their biography are as follows: Name Age Position David Feng Yu 44 Co-chairman of the Board of Directors and President Charles Chao (1) 40 Director Daqing Qi 43 Director (1) Independent director and a member of our audit committee, compensation committee and nomination committee. David Feng Yu has served as co-chairman of our board of directors and as our president since February 28, From 2003 until February 2006, Mr. Yu was chairman and chief executive Officer of Target Media, which we acquired in February From 2000 to 2003, Mr. Yu was chief executive offer and the sole beneficial owner of Dian Yang, whose flat panel display advertising business was transferred to Target Media in December From 1999 to 2000, Mr. Yu was the general manager of Shanghai Yuanye Info Tech Co., Ltd. In May 2005, Mr. Yu was selected by the Advertising Newspaper in China as one of the Most Influential Advertising People of the Year. In December 2004, Mr. Yu was selected by China Venture Capital Forum 2004 as one of the Top 10 Enterprisers of the Year. Mr. Yu received an Executive M.B.A. degree from China Europe International Business School in 2001 and a Master of Arts degree in philosophy from Fudan University in Charles Chao was appointed as our director in November 2005 to replace Ted Tak Dee Sun who passed away in September Mr. Chao is president and chief executive officer of SINA Corporation, an online media company listed on the Nasdaq National Market. Before he joined SINA Corporation in September 1999, Mr. Chao served as an experienced audit manager with PricewaterhouseCoopers LLP, providing auditing and business consulting services for high tech companies in Silicon Valley, California. Mr. Chao received his master of professional accounting from University of Texas at Austin. He also holds an MA degree in journalism from University of Oklahoma and a BA degree in Journalism from Fudan University in Shanghai, China. Mr. Chao is a certified public accountant and a member of the American Institute of Certified Public Accountants. 4

5 Daqing Qi was appointed as our director in February 28, 2006 upon the closing of our acquisition of Target Media. Professor Qi is professor of accounting and associate dean of the Cheong Kong Graduate School of Business, where he has taught since From 1996 until 2002, Professor Qi was an associate professor in the School of Accountancy at the Chinese University of Hong Kong. Professor Qi also has extensive experience in providing executive training and consulting services in accounting and corporate finance to government departments and private companies, including the Ministry of Information Industries of the People s Republic of China, the Shanghai Municipal Government, China Mobile, China Unicom, China Telecom, China Netcom, Nokia and Ericsson. Professor Qi also serves on the board of directors of Sohu.com, a Nasdaq-listed company that provides online services in China. Professor Qi holds a B.S. degree in biophysics and a B.A. degree in journalism from Fudan University, an MBA degree from the University of Hawaii Manoa with a concentration in accounting and finance and a Ph.D. degree in accounting from the Eli Broad Graduate School of Management of Michigan State University. The directors will be elected by an affirmative vote of the holders of a majority of the ordinary shares present in person or represented by proxy and voting at the annual general meeting. In electing directors, each shareholder may cast one vote per ordinary share owned for each director to be elected. Shareholders cannot use cumulative voting. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE NOMINEES NAMED ABOVE. 5

6 PROPOSAL 2: INCREASE THE MAXIMUM NUMBER OF DIRECTORS TO THIRTEEN (13) Our Amended and Restated Articles of Association provides that unless otherwise determined by the Company in general meeting, the number of directors of the Board shall not be less than three (3) or not more than seven (7) directors and that any change to the maximum number of directors shall be approved from time to time by the members in general meeting. Therefore, our board of directors is now recommending the members to vote in favour of increasing the maximum number of directors of the Board from seven (7) to thirteen (13). The affirmative vote of the holders of a majority of the ordinary shares present in person or represented by proxy and voting at the annual general meeting will be required to approve this proposal. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL TO INCREASE THE MAXIMUM NUMBER OF DIRECTORS TO THIRTEEN (13). MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS Our Current Board of Directors The name of our current board of directors, their ages as of August, 2006, the principal positions currently held by them and their biography are as follows: Name Age Biography Jason Nanchun Jiang 33 Chairman of the Board of Directors and Chief Executive Officer David Feng Yu (1) 44 Co-chairman of the Board of Directors and President Jimmy Wei Yu 33 Director Fumin Zhuo (2) 54 Director Neil Nanpeng Shen (2) 38 Director Charles Chao (1)(2) 40 Director Daqing Qi (1) 43 Director (1) (2) Appointed to our board of directors pursuant to Article 86(3) of our Amended and Restated Memorandum of Association. Independent director and a member of our audit committee, compensation committee and nomination committee. For biographical information on Mr. David Feng Yu, Mr. Charles Chao and Professor Daqing Qi, please see Proposal 1: Election of Directors. Jason Nanchun Jiang, our founder, has served as the chairman of our board of directors and our chief executive officer since May From 1994 to 2003, Mr. Jiang was the chief executive officer of Everease Advertising Corporation, which is one of the top 50 advertising agencies in China. Starting in 2003, Mr. Jiang was general manager of Aiqi Advertising, an advertising company founded by his immediate family members in 1997 which was renamed Focus Media Advertisement in May 2003 in connection with the establishment of our current business operations. In December 2003, Mr. Jiang was selected by China News Publisher s Media magazine as one of the Media People of the Year. In September 2003, Mr. Jiang was selected by the 6

7 Television and Newspaper Committees of the China Advertising Commission as one of its contemporary outstanding advertising media personalities. Mr. Jiang received a Bachelor of Arts degree in Chinese language and literature from Huadong Normal University in Jimmy Wei Yu has served as our director since May Mr. Yu is the chairman and chief executive officer of United Capital Investment (China) Limited, which is one of our early investors and the management company of United China Investment Limited and KTB/UCI China Ventures I Limited and United Capital Investment China Venture II Limited. Mr. Yu is also the chairman of Shanghai Multimedia Park Venture Capital, a position he has held since From 1995 to 1999, Mr. Yu served in various capacities in several telecommunications companies, including as Chief Representative of UTStarcom (Hong Kong) Ltd. He was one of the founders, a venture partner and has been the Chief Representative of Softbank China Venture Capital, which is the management company of SB China Holdings Pte. Ltd., also one of our early investors, since its incorporation in Fumin Zhuo has served as our director since December 2004 and has more than 27 years of experience in investment and corporate management. Mr. Zhuo has also served as a general partner in SIG Capital Limited since July Prior to this, Mr. Zhuo served as chairman and chief executive officer of Vertex China Investment Company (VCI), a company concentrating in investments in the Greater China region, since he joined the fund in July From 1995 to July 2002, Mr. Zhuo was chief executive officer of Shanghai Industrial Holding Ltd. and chairman of SIIC Medical Science & Technology (Group). Prior to this, starting in 1987, Mr. Zhuo served as chief assistant officer of the Shanghai Economic System Reform Committee. Mr. Zhuo has extensive experience in venture capital fund formation, mergers and acquisitions, and investment management. Mr. Zhuo graduated from Shanghai Jiaotong University s Electrical Engineering School with a degree in enterprise management and also holds a Master s degree in economics from Fudan University. Neil Nanpeng Shen has served as our director since December Mr. Shen is the founding managing partner of Sequoia Capital China, or Sequoia China, a China-focused venture capital fund which was established in August Prior to founding Sequoia China, Mr. Shen was president and chief financial officer of Ctrip.com International Limited, or Ctrip, a Nasdaq-listed on-line travel services company he co-founded and for which he continues to serve as a director. Prior to founding Ctrip, Mr. Shen worked for more than eight years in the investment banking industry in New York and Hong Kong. He was a director at Deutsche Bank Hong Kong where he worked from 1996 to Prior to 1996, he worked at Chemical Bank, Lehman Brothers and Citibank in various investment banking positions. Mr. Shen is also co-founder and co-chairman of Home Inns & Hotels Management (Hong Kong) Limited. Mr. Shen received his Master s degree from the School of Management at Yale University and his Bachelor s degree from Shanghai Jiaotong University. Meetings and Committees of the Board of Directors Following our initial public offering in July 2005, our board of directors at that time met in person or passed resolutions by unanimous written consent 6 times during the remainder of that year. Our board of directors has established an audit committee, a compensation committee and a nominations committee. Neil Nanpeng Shen, Charles Chao and Fumin Zhuo are the current members of our audit committee, our compensation committee and our nominations committee. 7

8 In 2005, our audit committee met in person or passed resolutions by unanimous written consent two (2) times. Each member of our audit committee satisfies the independence and financial literacy requirements of the Nasdaq s listing standards. Our board has also concluded that each of Neil Nanpeng Shen and Charles Chao qualify as an audit committee financial expert as established by the U.S. Securities and Exchange Commission. Our board of directors has adopted a written audit committee charter pursuant to which the audit committee is responsible for overseeing the accounting and financial reporting processes of our company, including the appointment, compensation and oversight of the work of our independent auditors, monitoring compliance with our accounting and financial policies and evaluating management s procedures and policies relative to the adequacy of our internal accounting controls. Our compensation committee held one (1) meeting in The compensation committee s functions are to review and make recommendations to our board of directors regarding our compensation policies and all forms of compensation to be provided to our executive officers and directors. Our nominations committee held one (1) meeting in Our nominations committee is responsible for, among other things, selecting and recommending the appointment of new directors to our board of directors. Copies of the charters of the audit, compensation and nominating committees are available on our website at ir.focusmedia.cn. Compensation Committee Interlocks and Insider Participation None of the members of the compensation committee is our current or former officer or employee. During 2005, none of our executive officers served as members of the board of directors or compensation committee of any entity that has one or more executive officers who served on our board or the compensation committee. As a result, there are no compensation committee interlocks and no insider participation in compensation decisions that are required to be reported under the rules and regulations of the Exchange Act. Access to Corporate Governance Policies We have adopted a Code of Business Conduct which applies to our employees, officers and non-employee directors, including our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. This code is intended to qualify as a code of ethics within the meaning of the applicable rules of the SEC. To the extent required by law, any amendments to, or waivers from, any provision of the Code of Business Conduct will be promptly disclosed to the public. Copies of the Code of Business Conduct are available on our website at ir.focusmedia.cn. 8

9 PROPOSAL 3: APPROVAL OF THE 2006 EMPLOYEE SHARE OPTION PLAN AND THE AUTHORIZATION OF OFFICERS TO ALLOT, ISSUE OR DELIVER SHARES PURSUANT TO THE 2006 EMPLOYEE SHARE OPTION PLAN In August 2006, our board of directors established the 2006 Employee Share Option Plan (the 2006 Plan ) subject to shareholder approval. The following description of the 2006 plan is a summary only and is qualified in its entirety by reference to the full text of the terms and provisions of the 2006 Plan, a copy of which, as of the date of the notification of this annual general meeting of shareholders, has been publicly filed on Form 6-K with the SEC. Purpose of the 2006 Plan The 2006 Plan is intended to attract and retain the best available personnel, to provide additional incentive to employees, directors and consultants and to promote the success of our business. Authorized shares The amount of ordinary shares of the Company, par value US$ , authorized for issuance under the 2006 Plan will be limited to 3.6% of our issued and outstanding ordinary shares on the date of the 2006 annual general meeting of shareholders plus ordinary shares reserved for issuance, but not yet issued, under the 2006 Plan Plan Administration Our compensation committee, or certain designated members of our compensation committee, will serve as the Administrator under the 2006 Plan and will be able to determine the terms and conditions of awards under the 2006 Plan, subject certain limitations set forth in the 2006 Plan. The Administrator will also be responsible for making grants in accordance with the 2006 Plan. For example, as with our 2005 Plan, the Administrator will determine who will be granted options, the type and timing of options to be granted, vesting schedules and other terms and conditions of options, including whether awards are settled in shares or cash. Eligibility and Number of Options Awarded Any of our directors, officers and employees may be granted options. In addition, at the discretion of the Administrator, individual consultants or advisors may also be granted options, subject to certain limitations. The number of options awarded to a person, if any, is based on the person s potential ability to contribute to our success, the person s position with us and other factors chosen by the Administrator. Acceleration of Vesting in Certain Circumstances Under the 2006 Plan, options generally do not vest unless the grantee remains under our employment or in service with us on the given vesting date. Thus, where the grantee s employment by or service with us has terminated, the options will terminate and become unexercisable at the discretion of the Administrator. However, in circumstances where there is a death or disability of the grantee, the vesting of options may be accelerated to permit immediate exercise of all options granted to a grantee. 9

10 Issuance and delivery of shares under the 2006 Plan Subject to shareholder approval of the 2006 Plan, our officers will be authorized on our behalf to allot, issue or deliver shares in payment of the awards granted under the 2006 Plan or upon the exercise of options granted under the 2006 Plan, subject to the terms and conditions specified in the 2006 Plan. In addition, ordinary shares delivered under the 2006 Plan may be issued or transferred in consideration of cash, rights, services, shares, other securities, property, or rights, obligations assumed or such other lawful consideration, as may be approved from time to time by our compensation committee in accordance with the terms of the 2006 Plan and applicable law. Future Modifications Our board of directors may amend, alter, suspend, or terminate the 2006 Plan at any time, provided, however, that our board of directors must first seek the approval of our shareholders and, if such amendment, alteration, suspension or termination would adversely affect the rights of a person who has been granted options under any option granted prior to that date, the approval of such person. Termination of the 2006 Plan Without further action by our board of directors, the 2006 Plan will terminate at the close of business on December 31, The affirmative vote of the holders of a majority of the ordinary shares present in person or represented by proxy and voting at the annual general meeting will be required to approve this proposal. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 2006 EMPLOYEE SHARE OPTION PLAN AND THE AUTHORIZATION OF OFFICERS TO ALLOT, ISSUE OR DELIVER SHARES PURSUANT TO THE 2006 EMPLOYEE SHARE OPTION PLAN. 10

11 PROPOSAL 4: RATIFICATION AND APPOINTMENT OF INDEPENDENT AUDITORS Our audit committee recommends, and our board of directors concurs, that Deloitte Touche Tohmatsu CPA Ltd. be appointed as our independent auditors for the year ending December 31, Deloitte Touche Tohmatsu CPA Ltd. has served as our independent auditors since In the event our shareholders fail to ratify the appointment, our audit committee will reconsider its selection. Even if the selection is ratified, our audit committee in its discretion may direct the appointment of a different independent auditing firm at any time during the year if the audit committee believes that such a change would be in the best interests of our company and shareholders. A representative of Deloitte Touche Tohmatsu CPA Ltd. is expected to be present at the annual general meeting, will have the opportunity to make a statement if he or she desires to do so, and will be available to respond to appropriate questions. The affirmative vote of the holders of a majority of the ordinary shares present in person or represented by proxy and voting at the annual general meeting will be required to approve this proposal. THE BOARD OF DIRECTORS AND THE AUDIT COMMITTEE RECOMMEND A VOTE FOR RATIFICATION OF THE APPOINTMENT OF DELOITTE TOUCHE TOHMATSU CPA LTD. AS OUR INDEPENDENT AUDITORS. 11

12 AUDIT COMMITTEE MATTERS Audit Committee Report All current members of the audit committee (the Committee ) of Focus Media Holding Limited (the Company ) are independent as defined under the applicable Nasdaq rules. The Committee operates under a written charter that has been adopted by the Company s board of directors (the Board of Directors ) and is reviewed by the Committee on an annual basis. The responsibilities of the Committee are to assist the Board of Directors in fulfilling its oversight responsibilities as they relate to the Company s accounting policies, internal controls, financial reporting practices and legal and regulatory compliance. The Committee fulfills its responsibilities through periodic meetings with the Company s independent auditors, internal auditors and management. The Committee schedules its meetings with a view to ensuring that it devotes appropriate attention to all of its tasks. Throughout the year, the Committee monitors matters related to the independence of Deloitte Touche Tohmatsu CPA Ltd., the Company s independent auditors. The Committee also discussed with management and the independent auditors the quality and adequacy of the Company s internal controls. The Committee reviewed with the independent auditors their audit plans, audit scope, and identification of audit risks. The Committee discussed and reviewed with the independent auditors all matters required by auditing standards generally accepted in the United States of America, including those described in SAS 61, Communication with Audit Committees. With and without management present, the Committee discussed and reviewed the results of the independent auditors examination of the financial statements. The Committee reviewed the audited financial statements of the Company as of and for the fiscal year ended December 31, 2005 with management and the independent auditors. Management has the responsibility for the preparation and integrity of the Company s financial statements and the independent auditors have the responsibility for the examination of those statements. Based on the above-mentioned review and discussions with management and the independent auditors, the Committee recommended to the Board of Directors that the Company s audited consolidated financial statements be included in its annual report on Form 20-F for the fiscal year ended December 31, The Committee also approved the reappointment of the independent auditors and the Board of Directors confirmed such appointment. As specified in the audit committee charter, it is not the duty of the Committee to plan or conduct audits or to determine that the Company s financial statements are complete and accurate and in accordance with accounting principles generally accepted in the United States of America. That is the responsibility of management and the Company s independent auditors. In giving its recommendation to the Board of Directors, the Committee has relied on (i) management s representation that such financial statements have been prepared with integrity and objectivity and in conformity with accounting principles generally accepted in the United States of America, and (ii) the report of the Company s independent auditors with respect to such financial statements. The Audit Committee Neil Nanpeng Shen, Chairman Fumin Zhuo Charles Chao 12

13 Principal Accountant Fees and Services The aggregate fees and expenses billed by Deloitte Touche Tohmatsu CPA Ltd. for professional services rendered for the year ended December 31, 2005 and 2004 are set forth below Audit Fees (1) $300,000 $711,000 Audit-Related Fees (2) Tax Fees (3) 14,000 46,000 All Other Fees (4) Total Fees $314,000 $757,000 (1) (2) (3) (4) Audit fees consist of fees associated with the annual audit, the reviews of our quarterly financial statements and statutory audits required internationally. They also include fees billed for those services that are normally provided by the independent accountants in connection with statutory and regulatory filings. Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements but not described in footnote (1) above. These services include consultations concerning financial accounting and reporting standards and review of capitalization of retained earnings, financial covenants in loan agreements, and our affiliates financial information. Tax fees include fees billed for professional services rendered by Deloitte Touche Tohmatsu CPA Ltd., primarily in connection with our tax compliance activities. All other fees comprise fees for all other services provided by Deloitte Touche Tohmatsu CPA Ltd., other than those services covered in footnotes (1) to (3) above. Prior to forming an audit committee, our board of directors is responsible for the oversight of our independent registered public accounting firm. The policy of our board of directors is to pre-approve all audit and non-audit services provided by Deloitte Touche Tohmatsu CPA Ltd., including audit services, audit-related services, tax services and other services, as described above. Audit Committee Pre-Approval Policies and Procedures Our audit committee must pre-approve all audit services and permissible non-audit services provided by Deloitte Touche Tohmatsu CPA Ltd. to ensure that the work does not compromise its independence in performing audit services. Our audit committee may consult with management in the decision-making process, but may not delegate this authority to management. Our audit committee may delegate its authority to pre-approve services to one or more members of the audit committee, provided that such members present any such approvals to the full audit committee at the next audit committee meeting. Our audit committee has adopted the following policies as to pre-approval: All services provided by Deloitte Touche Tohmatsu CPA Ltd. in 2005 were pre-approved by the audit committee. 13

14 Director and Executive Compensation COMPENSATION COMMITTEE MATTERS In 2005, we paid aggregate cash compensation of approximately $512,947 to our directors and executive officers as a group. In 2004 and 2005 and for the three months ended March 31, 2006, we granted to selected directors, officers and employees options to acquire an aggregate 20,643,400, 22,503,630 and 3,000,000 ordinary shares, respectively. We have no service contracts with any of our directors or executive officers that provide benefits to them upon termination. We do not pay or set aside any amounts for pension, retirement or other benefits for our officers and directors. Compensation Committee Report The compensation committee (the Committee ) of the board of directors (the Board of Directors ) reviews and make recommendations to the Board of Directors regarding the compensation policies and all forms of compensation to be provided to the executive officers and directors of Focus Media Holding Limited (the Company ). Each member of the Committee is independent as defined under the applicable Nasdaq rules. Charles Chao is the chairman of the Committee, and Neil Nanpeng Shen and Fumin Zhuo also serves on the Committee. The annual base salary for the Company s executive officers is established in line with external market practices. When reviewing base salaries, the Committee considers the following factors: competitive pay practices, the overall performance of the executive officers as a whole and the executive officers prior experience. The objective in setting base salary is generally to pay salaries at a level roughly comparable to the median for similar sized companies in this industry. The compensation of the chief executive officer of the Company is reviewed annually on the same basis as discussed above for all executive officers. In determining his base salary and housing allowance, the Committee compared the compensation of chief executive officers at other companies of similar size. The Company s chief executive officer was also established in part by evaluating the Company s ability to recruit a suitable person for this position, either on a permanent or interim basis. The Company also has employee share option scheme in place, with the intended purpose of promoting the Company s success and increase shareholder value by providing an additional means to attract, motivate, retain and reward selected directors, officers, employees and third-party consultants and advisors. The Committee administers the share option schemes and has wide discretion to award options. Subject to the provisions of the option schemes and allocation targets, the Committee determines who will be granted options, the type and timing of options to be granted, vesting schedules and other terms and conditions of options, including the exercise price. Any of the Company s employees may be granted options. The number of options awarded to a person, if any, is based on the person s potential ability to contribute to the Company s success, the person s position within the Company and other factors chosen by the Board of Directors from time to time. These share options scheme generally have a vesting period of three years. The vesting period is designed to encourage the Company s employees to work with a long-term view of the Company s welfare and to establish their long-term affiliation with the Company. It is also designed to reduce employee turnover and to retain the knowledge and skills of valued staff. For the year ended 2005, the Committee has granted the following options: In January 2005, granted options to purchase 1,200,000 of the Company s ordinary shares to some of the Company s directors with an exercise price of $0.58 per share. 14

15 In February 2005, granted options to purchase 2,000,000 and 2,100,000 of the Company s ordinary shares with an exercise price of $0.58 and $0.75, respectively, to certain of the Company s executive officers, options to purchase 720,000 of the Company s ordinary shares with an exercise price of $0.75 to certain of the Company s employees and options to purchase 1,240,000 of the Company s ordinary shares to third-party consultants and advisors with an exercise price of $0.75. In July 2005, granted options to purchase 11,683,630 of the Company s ordinary shares with an exercise price of $1.70, to certain of the Company s executive officers and employees and options to purchase 100,000 of the Company s ordinary shares to a third-party consultant with an exercise price of $1.70. In November 2005, granted options to purchase 800,000 of the Company s ordinary shares with an exercise price of $2.60, to certain of the Company s executive officers and employees and options to purchase 4,000,000 of the Company s ordinary shares with an exercise price of $2.70, to certain of the Company s executive officers and employees. In February 2006, granted options to purchase 3,000,000 of the Company s ordinary shares with an exercise price of $5.093 to certain executive officers and employees of Target Media pursuant to the Share Purchase Agreement of acquisition of Target Media in The Compensation Committee Charles Chao, Chairman Neil Nanpeng Shen Fumin Zhuo 15

16 OTHER MATTERS We know of no other matters to be submitted to the annual general meeting. If any other matters properly come before the annual general meeting, it is the intention of the persons named in the enclosed form of proxy to vote the shares they represent as the board of directors may recommend. By Order of the Board of Directors, Dated: August 22, 2006 Jason Nanchung Jiang Chairman and Chief Executive Officer 16