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China Cablecom Holdings, Ltd. – ‘20-F’ for 12/31/09

On:  Thursday, 7/1/10, at 4:26pm ET   ·   For:  12/31/09   ·   Accession #:  1144204-10-36139   ·   File #:  1-34136

Previous ‘20-F’:  ‘20-F’ on 7/15/09 for 12/31/08   ·   Next:  ‘20-F’ on 7/28/11 for 12/31/10   ·   Latest:  ‘20-F/A’ on 12/18/13 for 12/31/11   ·   Referenced via Accession #:  By:  SEC – ‘UPLOAD’ on 8/4/11

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 7/01/10  China Cablecom Holdings, Ltd.     20-F       12/31/09   22:46M                                    Vintage/FA

Annual Report of a Foreign Private Issuer   —   Form 20-F
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 20-F        Annual Report of a Foreign Private Issuer           HTML   1.40M 
 2: EX-1.1      Underwriting Agreement                              HTML      9K 
 3: EX-1.2      Underwriting Agreement                              HTML     11K 
 4: EX-4.54     Instrument Defining the Rights of Security Holders  HTML     12K 
 5: EX-4.55     Instrument Defining the Rights of Security Holders  HTML     11K 
 6: EX-4.56     Instrument Defining the Rights of Security Holders  HTML     13K 
 7: EX-4.57     Instrument Defining the Rights of Security Holders  HTML      9K 
 8: EX-4.58     Instrument Defining the Rights of Security Holders  HTML     13K 
 9: EX-4.59     Instrument Defining the Rights of Security Holders  HTML     11K 
10: EX-4.60     Instrument Defining the Rights of Security Holders  HTML     10K 
11: EX-4.61     Instrument Defining the Rights of Security Holders  HTML     12K 
12: EX-4.62     Instrument Defining the Rights of Security Holders  HTML     10K 
13: EX-4.63     Instrument Defining the Rights of Security Holders  HTML     13K 
14: EX-4.64     Instrument Defining the Rights of Security Holders  HTML      9K 
15: EX-4.65     Instrument Defining the Rights of Security Holders  HTML     11K 
16: EX-4.66     Instrument Defining the Rights of Security Holders  HTML      9K 
17: EX-4.67     Instrument Defining the Rights of Security Holders  HTML     13K 
18: EX-4.68     Instrument Defining the Rights of Security Holders  HTML      9K 
19: EX-4.69     Instrument Defining the Rights of Security Holders  HTML      9K 
20: EX-12.1     Statement re: Computation of Ratios                 HTML     20K 
21: EX-12.2     Statement re: Computation of Ratios                 HTML     20K 
22: EX-13.1     Annual or Quarterly Report to Security Holders      HTML     15K 


20-F   —   Annual Report of a Foreign Private Issuer


This is an HTML Document rendered as filed.  [ Alternative Formats ]



  Unassociated Document  

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 20-F

o
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (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

OR

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

for the transition period from __________ to ___________

Commission file number  001-34136

China Cablecom Holdings, Ltd.
 

(Exact name of the Registrant as specified in its charter)

British Virgin Islands
 

 (Jurisdiction of incorporation or organization)

Suite 4612, Tower 1
Plaza 66
No.1266 Nanjing West Road
Shanghai, 200040
People’s Republic of China
(86) 21 6113-8281
 

 (Address of principal executive offices)

Debra Chen, debra@chinacablecom.net, 27 Union Square West, Suite 501-502, New York, NY 10003

(Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
 
Title of Each Class
 
ORDINARY SHARES, $.0015 PAR VALUE
 
Name of each exchange on which registered 
 
The NASDAQ Capital Market LLC
 
Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

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

On December 31, 2009, the registrant had 4,688,151 ordinary shares outstanding.
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 
o Yes                x No
 
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.
 
o Yes                x No 

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.
 
x Yes                o No 

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  x

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.
 
o  Large Accelerated filer
o  Accelerated filer
x  Non-accelerated filer

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

 
o  International Financial Reporting
 
x  US GAAP
Standards as issued by the International
o  Other
 
Accounting Standards Board
 
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.
 
o Item 17     o Item 18
 
 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).
o Yes                x No 
 
(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 the securities under a plan confirmed by a court.
 
o Yes                o No

 
 

 

TABLE OF CONTENTS
 
     
Page
   
PART I
   
Item 1.
 
Identity of Directors, Senior Management and Advisers
 
         
Item 2.
 
Offer Statistics and Expected Timetable
 
5
         
Item 3.
 
Key Information
 
5
A.
 
Selected financial data
 
5
B.
 
Capitalization and indebtedness
 
9
C.
 
Reasons for the offer and use of proceeds
 
9
D.
 
Risk factors
 
9
         
Item 4.
 
Information on the Company
 
19
A.
 
History and Development of the Company
 
19
B.
 
Business overview
 
23
C.
 
Organizational structure
 
31
D.
 
Property, plants and equipment
 
34
         
Item 4A.
 
Unresolved Staff Comments
 
34
         
Item 5.
 
Operating and Financial Review and Prospects
 
34
         
Item 6.
 
Directors, Senior Management and Employees
 
41
A.
 
Directors and senior management
 
41
B.
 
Compensation
 
44
C.
 
Board practices
 
46
D.
 
Employees
 
49
E.
 
Share ownership
 
49
         
Item 7.
 
Major Shareholders and Related Party Transactions
 
50
A.
 
Major shareholders
 
50
B.
 
Related party transactions
 
52
C.
 
Interests of experts and counsel
 
53
         
Item 8.
 
Financial Information
 
53
A.
 
Consolidated Statements and Other Financial Information
 
53
B.
 
Significant Changes
 
53
         
Item 9.
 
The Offer and Listing
 
53
A.
 
Offer and listing details
 
53
B.
 
Plan of distribution
 
56
C.
 
Markets
 
56
D.
 
Selling shareholders
 
57
E.
 
Dilution
 
57
F.
 
Expenses of the issue
 
57

 
2

 
 
Item 10.
 
Additional Information
 
57
A.
 
Share capital
 
57
B.
   
57
C.
 
Material contracts
 
57
D.
 
Exchange controls
 
58
E.
 
Taxation
 
58
F.
 
Dividends and paying agents
 
65
G.
 
Statement by experts
 
65
H.
 
Documents on display
 
66
I.
 
Subsidiary Information
 
66
         
Item 11.
 
Quantitative and Qualitative Disclosure About Market Risk
 
66
         
Item 12.
 
Description of Securities Other Than Equity Securities
 
66
         
   
PART II
   
         
Item 13.
 
Defaults, Dividend Arrearages and Delinquencies
 
67
         
Item 14.
 
Material Modifications to the Rights of Security Holders and Use of Proceeds
 
67
         
Item 15.
 
Controls and Procedures
 
67
         
Item 16
 
[Reserved]
 
68
         
Item 16A
 
— Audit Committee Financial Expert
 
68
         
Item 16B
 
— Code of Ethics
 
68
         
Item 16C
 
— Principal Accountant Fees and Services
 
68
         
Item 16D
 
— Exemption from the Listing Standards for Audit Committees
 
68
         
Item 16E
 
— Purchases of Equity Securities by the Issuer and Affiliated Purchasers
 
68
         
Item 16F
 
— Change in Registrant’s Certifying Accountant
 
68
         
Item 16G
 
— Corporate Governance
 
68
         
   
PART III
   
         
Item 17
 
Financial Statements
 
69
         
Item 18.
 
Financial Statements
 
69
         
Item 19
 
Exhibits
 
69
         
Signatures
     
73

 
3

 

CERTAIN INFORMATION

As used in this Annual Report on Form 20-F (the “Annual Report”), unless otherwise indicated, “we,” “us,” “our,” the “Company,” the “Corporation,” and “China Cablecom Holdings” refers to China Cablecom Holdings, Ltd., a company formed in the British Virgin Islands and its subsidiaries.  All references to “China Cablecom,” and “China Cablecom Ltd.” refer to China Cablecom Ltd., a wholly owned subsidiary of China Cablecom Holdings, and the entity through which our operating businesses are held. All references to “China” or the “PRC” refer to the People’s Republic of China.

See Item 3: “Key Information” for historical information regarding the average rate between buying and selling as published by the people’s Bank of China with respect to Chinese Renminbi. You should not construe these translations as representations that the Chinese Renminbi amounts actually represent such US dollar amounts or could have been or could be converted into US dollars at the rates indicated or at any other rates. Such rates are the number Chinese Renminbi per one United States dollar quoted by the People’s Bank of China.
 
FORWARD-LOOKING STATEMENTS

This Annual Report contains ‘‘forward-looking statements’’ that represent our beliefs, projections and predictions about future events. All statements other than statements of historical fact are ‘‘forward-looking statements,’’ including any projections of earnings, revenue or other financial items, any statements of the plans, strategies and objectives of management for future operations, any statements concerning proposed new projects or other developments, any statements regarding future economic conditions or performance, any statements of management’s beliefs, goals, strategies, intentions and objectives, and any statements of assumptions underlying any of the foregoing. Words such as ‘‘may’’, ‘‘will’’, ‘‘should’’, ‘‘could’’, ‘‘would’’, ‘‘predicts’’, ‘‘potential’’, ‘‘continue’’, ‘‘expects’’, ‘‘anticipates’’, ‘‘future’’, ‘‘intends’’, ‘‘plans’’, ‘‘believes’’, ‘‘estimates’’ and similar expressions, as well as statements in the future tense, identify forward-looking statements.
 
These statements are necessarily subjective and involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any future results, performance or achievements described in or implied by such statements. Actual results may differ materially from expected results described in our forward-looking statements, including with respect to correct measurement and identification of factors affecting our business or the extent of their likely impact, the accuracy and completeness of the publicly available information with respect to the factors upon which our business strategy is based or the success of our business.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of whether, or the times by which, our performance or results may be achieved. Forward-looking statements are based on information available at the time those statements are made and management’s belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to, those factors discussed under the headings ‘‘Risk Factors’’, ‘‘Operating and Financial Review and Prospects,’’ ‘‘Information on Our Company” and elsewhere in this Annual Report.

 
4

 

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
 
A.      Directors and Senior Management
 
Not required.
 
B.      Advisers
 
Not required.
 
C.      Auditors
 
Not required.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not required.
  
ITEM 3. KEY INFORMATION

A.  Selected financial data
 
The following summary consolidated financial data for the years ended December 31, 2008 and 2009 have been derived from the Company’s audited consolidated financial statements included in this Annual Report beginning on page F-1. The following selected historical statement of income data for the period from October 1, 2007 to December 31, 2007 and the selected historical balance sheet data as of December 31, 2007 have been derived from the audited financial of the Company not included in this annual report.
 
The following selected historical statements of income data for the years ended December 31, 2005 and 2006 and for the period from January 1, 2007 to September 30, 2007 and the selected historical balance sheet data as of December 31, 2005 and 2006 and September 30, 2007 have been derived from the audited financial statements of Binzhou Guangdian Network Co., Ltd. (the “Predecessor Company”) not included in this annual report. This information is only a summary and should be read together with the consolidated financial statements, the related notes and other financial information included in this Annual Report.
 
Certain factors that affect the comparability of the information set forth in the following table are described in the “Operating and Financial Review and Prospects,” and the Financial Statements and related notes thereto included elsewhere in this Annual Report.

 
5

 

 
   
Predecessor Company
       
   
Year
Ended
December
31,2005
   
Year
Ended
December
31,2006
   
January 1
through
   
October 1
through
   
Year Ended
   
Year Ended
 
(in US$ thousands, except for share data)
                                   
                                     
Statement of Income Data:
                                   
                                     
Revenues, net
    7,804       8,288       5,020       1,995       23,439       45,563  
                                                 
Gross profit
    5,066       5,485       2,340       978       10,002       15,696  
                                                 
Operating income (loss)
    3,628       3,774       532       (684 )     (5,123 )     (6,957 )
                                                 
Interest expenses
    (703 )     (721 )     (743 )     (1,474 )     (8,742 )     (9,982 )
                                                 
Income (loss) before income tax and non-controlling interest
    2,984       3,154       222       (2,095 )     (12,844 )     (55,604 )
                                                 
Net profit (loss) attributable to China Cablecom Holdings, Ltd.
    2,861       2,925       24       (2,155 )     (14,173 )     (56,569 )
                                                 
Loss per share
                                               
                                                 
Basic
                            (2.61 )     (5.73 )     (16.68 )
                                                 
Diluted
                            (2.61 )     (5.73 )     (16.68 )
                                                 
Weighted average number ordinary shares, Basic and diluted
                                               
                                                 
Basic
                            688,893       2,472,504       3,391,924  
                                                 
Diluted
                            688,893       2,472,504       3,391,924  


Weighted ordinary share numbers have been restated to reflect the Company’s March 2, 2010 1-for-3 Reverse Split.

 
6

 
 
   
Predecessor Company
                   
   
As of
   
As of
   
As of
   
As of
   
As of
   
As of
 
(in US$ thousands)
                                   
                                     
Balance Sheet Data:
                                   
                                     
Cash and cash equivalents
    355       303       867       12,639       29,182       23,938  
                                                 
Prepaid expenses and advances
    1,791       1,165       667       669       9,236       9,223  
                                                 
Total current assets
    3,150       2,649       2,830       16,194       43,792       41,168  
                                                 
Property, plant & equipment, net
    20,197       20,946       21,324       20,722       79,877       89,330  
                                                 
Intangible assets, net
    -       -       -       18,363       37,850       35,042  
                                                 
Goodwill
    -       -       -       -       19,276       19,276  
                                                 
Total assets
    23,998       23,840       24,812       69,496       183,076       190,771  
                                                 
Current portion of long term debt, net of discount
    1,859       1,921       1,998       9,618       9,482       -  
                                                 
Accounts payable
    12,129       9,624       8,736       2,461       8,872       17,504  
                                                 
Note payable – non-controlling interest
    -       -       -       17,218       55,420       27,627  
                                                 
Liabilities to be settled by minority interest
    -       -       -       12,461       -       -  
                                                 
Total current liabilities
    14,943       12,543       13,895       43,247       83,067       57,575  
                                                 
Convertible notes, net of discounts
    -       -       -       -       16,684       -  
                                                 
Senior secured notes, net of discounts
    -       -       -       -       -       7,973  
                                                 
Junior secured notes, net of discounts
    -       -       -       -       -       17,063  
                                                 
Unsecured notes, net of discounts
    -       -       -       -       -       5,135  
                                                 
Notes payable – non-controlling interest, net of current portion
    -       -       -       17,047       51,778       64,348  
                                                 
Notes payable, net of discount and current portion
    -       -       -       7,478       -       -  
                                                 
Total liabilities
    14,943       12,543       13,895       67,772       151,528       152,094  
                                                 
Total shareholders equity
    9,055       11,297       10,917       1,724       31,547       38,677  
 
7


Exchange Rate Information

Our business is currently conducted in and from China in Renminbi. In this annual report, all references to “Renminbi” and “RMB” are to the legal currency of China and all references to U.S. dollars, dollars, $ and US$ are to the legal currency of the United States. The conversion of Renminbi into U.S. dollars in this annual report is based on the middle rate between buying and selling as published by the People’s Bank of China of the PRC. For reader convenience, this annual report contains translations of some Renminbi or U.S. dollar amounts for 2009 at US$1.00: RMB6.8282, which was the middle rate on December 31, 2009. The published middle rate on June 29, 2010 was US$1.00: RMB 6.7901. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated below, or at all. The Chinese government imposes control over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign currency and through restrictions on foreign trade.

The following table sets forth the average middle rates for Renminbi expressed as per one U.S. dollar for the years 2005, 2006, 2007, 2008 and 2009:

Year
 
Renminbi Average(1)
 
2005
    8.1826  
2006
    7.9579  
2007
    7.6040  
2008
    6.9451  
2009
    6.8314  

 
(1)
Determined by averaging the middle rate between buying and selling rates on the last business day of each month during the relevant period.

The following table sets forth the high and low middle rates for Renminbi expressed as per one U.S. dollar during the past six months.

Month Ended
 
High
   
Low
 
    6.8299       6.8260  
    6.8258       6.8295  
    6.8330       6.8258  
    6.8270       6.8254  
    6.8275       6.8229  
    6.8310       6.8245  
June 30, 2010  (through June 29)
    6.8284       6.7890  

 
8

 

B.  Capitalization and Indebtedness
 
Not required.

C .   Reasons for the Offer and Use of Proceeds

Not required.
 
D.  Risk factors
 
Risks Relating to Our Business
 
We have a very limited operating history, which may make it difficult for you to evaluate our business and prospects.
 
We acquired Binzhou Broadcasting and Television Information Network Co., Ltd. (“Binzhou Broadcasting”) in September 2007 and Hubei Chutian Video Communication Network Co., Ltd. (“Hubei Chutian”) in June 2008. As a result, our operating history is very limited and, accordingly, the revenue and income potential of our business and markets are unproven. Binzhou Broadcasting’s and Hubei Chutian’s historical operating results may not provide a meaningful basis for evaluating our business, financial performance and prospects, particularly in view of the fact that the networks comprising the operations of Binzhou Broadcasting and Hubei Chutian have historically been operated independently.
 
We also face numerous risks, uncertainties, expenses and difficulties frequently encountered by companies at an early stage of development. Some of these risks and uncertainties relate to our ability to:
 
 
·
develop new customers or new business from existing customers;
 
 
·
expand the technical sophistication of the products we offer;
 
 
·
respond effectively to competitive pressures;
 
 
·
attract and retain qualified management and employees; and
 
 
·
adverse effect on our business caused by the global financial crisis.
 
We may not meet internal or external expectations regarding our future performance. If we are not successful in addressing these risks and uncertainties, our business, operating results and financial condition may be materially adversely affected.

 
9

 
 
We must make significant intercompany loans to Binzhou Broadcasting to preserve our consolidation of the operating results of Binzhou Broadcasting for financial reporting purposes.
 
Although we are currently entitled to consolidate the financial position and operating results of Binzhou Broadcasting in our financial statements under US GAAP, this is the result of the ratio of risk and rewards borne by us regarding the operations of Binzhou Broadcasting, which in turn is dependent on the significant level of intercompany debt we have extended to Binzhou Broadcasting. Pursuant to the terms of the Asset Transfer Agreement with the local state-owned enterprise, Binzhou Guangdian Network Co., Ltd. (“Binzhou SOE”), Binzhou Broadcasting must complete the payment for all assets to be transferred not later than August 2008, which was later extended to December 31, 2008, further extended to January 31, 2009, further extended to December 31, 2009 and further extended to June 30, 2010.To the extent the financing for such payment is not in the form of an intercompany loan from us, our ability to preserve the accounting treatment of Binzhou Broadcasting will be jeopardized. Based on a recent government decree in an initiative of “forming one consolidated broadcasting network within one province”, the Shandong party committee and government have recently announced plans on the development and reform of provincial Radio and TV broadcasting network, in such that, the municipal, county (county level city or district) Radio and TV broadcasting network shall freeze headcounts and assets and maintain the current organization to suspend any pending financing activities. As a result, our Binzhou JV has temporarily suspended any current obligations until further notification from the government, delaying and extending our payment obligations to June 30, 2010.We are required to seek additional financing and to amend or modify the terms of our existing debts to meet these obligations. There can be no assurance that any such additional financing will be available on acceptable terms or at all or that such lenders will be willing to amend or modify the terms of the outstanding notes. Any such failure to secure additional financing by us will create a default under the terms of the joint venture agreement between Jinan Youxiantong Network Technology Co., Ltd. (“JYNT”) and Binzhou SOE and likely result in us no longer being entitled to consolidate the financial position and results of operations of Binzhou Broadcasting.
 
The PRC television broadcasting industry may not digitalize as quickly as we expect, as a result of which our revenues would be materially adversely affected.
 
Our future success depends upon the pace at which PRC television network operators switch from analog to digital transmission. Various factors may cause PRC television network operators to convert from analog to digital transmission at a slow pace. The PRC government, which has strongly encouraged television network operators to digitalize their networks and has set a target of 2015 for all, except for up to six, analog channels to be switched off, may relax or cancel the 2015 target. Also, PRC television viewers may fail to subscribe to digital television services in sufficient numbers to support wide-scale digitalization.
 
Existing and emerging alternative platforms for delivering television programs, including terrestrial networks, Internet protocol television and satellite broadcasting networks present a significant competitive risk to our business.
 
We compete with traditional terrestrial television networks for the same pool of viewers. As technologies develop, other means of delivering information and entertainment to television viewers are evolving. For example, some telecommunications companies in the PRC are seeking to compete with terrestrial broadcasters and cable television network operators by offering Internet protocol television, or IPTV, which allows telecommunications companies to stream television programs through telephone lines. While the PRC Ministry of Information Industry, or the MII, so far has issued only five IPTV licenses, it may issue significantly more licenses in the future. In addition, the State Administration of Radio, Film and Television (“SARFT”) issued a broadcast license last year to the PRC’s first direct satellite broadcast company, which is expected to begin commercial operation this year. To the extent that the terrestrial television networks, telecommunications companies and direct satellite television network operators compete successfully with us for viewers, our ability to attract and retain subscribers may be adversely affected.
 
Changes in the regulatory environment of, and government policies towards, the PRC television network industry could materially adversely affect our revenues.
 
Strong PRC government support has been a significant driver of the PRC television broadcasting industry’s transition from analog to digital transmission. Although the PRC government has set a target of 2015 for all television networks to switch to digital transmissions, terminating all analog transmissions except for up to six channels that will continue in service for the benefit of those unable to afford digital television, there is no assurance that the government will not change or adjust its digitalization policies at any time, including canceling or relaxing the target date for digitalization. If the digitalization process in the PRC were to be slowed down or otherwise adversely affected by any government action or inaction, we may not be able to develop new customers or attract new business from existing customers, and our revenues would be materially adversely affected.

 
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Furthermore, the television broadcasting industry in the PRC is a highly regulated industry. Government regulations with respect to television broadcasting content, the amount and content of advertising, the pricing of pay-television subscriptions, the role of private-sector investment and the role of foreign investment significantly influence the business strategies and operating results of our customers. Among other things, the SARFT must approve the creation of new premium content channels and has the power to order television network operators to stop airing programs or advertising that it considers illegal or inappropriate. Any of such adverse government actions against television network operators could in turn cause us to lose existing or potential subscribers.
 
In China, the basic subscription fee for cable television is regulated, municipal cable television operators have to apply for approval at the local Price Bureau, which will then arrange public hearings to approve any subscription price changes. Although Binzhou Broadcasting and Hubei Chutian have applied for and have acquired approval for a subscription fee raise from the Price Bureau in year 2009 and 2005, respectively, there is no guarantee that any future partnership networks will succeed in getting approval for subscription fee raises for digital television services.
 
Our officers and directors may allocate their time to other businesses, and may be affiliated with entities that may cause conflicts of interest. In particular, our principal shareholder and Executive Chairman is subject to potentially conflicting duties to another company he established to pursue business opportunities in the PRC.
 
Messrs. Ng and Pu and certain of our other officers and directors have the ability to allocate their time to other businesses and activities, thereby causing possible conflicts of interest in their determination as to how much time to devote to our affairs.
 
These individuals are engaged in several other business endeavors and are not obligated to devote any specific number of hours to our affairs. If other business affairs require them to devote more substantial amounts of time to such affairs, it could limit their ability to devote time to our affairs and could have a negative impact on our ongoing business. Certain of our officers and directors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to be conducted by us or otherwise, and accordingly, may have conflicts of interest in allocating their time and determining to which entity a particular investment or business opportunity should be presented. Moreover, in light of our officers’ and directors’ existing affiliations with other entities, they may have fiduciary obligations to present potential investment and business opportunities to those entities in addition to presenting them to us, which could cause additional conflicts of interest. While we do not believe that any of our officers or directors has a conflict of interest in terms of presenting to entities other than our investment and business opportunities that may be suitable for us, conflicts of interest may arise in the future in determining to which entity a particular business opportunity should be presented. We cannot assure you that any conflicts will be resolved in our favor. These possible conflicts may inhibit the activities of such officers and directors in seeking acquisition candidates to expand our geographic reach or broaden our service offerings. For a complete description of our management’s other affiliations, see “Directors and Management.” In any event, it cannot be predicted with any degree of certainty as to whether or not Mr. Ng, Mr. Pu or our other officers or directors will have a conflict of interest with respect to a particular transaction as such determination would be dependent upon the specific facts and circumstances surrounding such transaction at the time.
 
Mr. Ng, our Executive Chairman, entered into a settlement agreement with China Broadband, Inc., another company he organized to pursue broadband cable opportunities in the PRC, and certain of its shareholders and consultants, relating to possible claims that China Broadband and such shareholders and consultants suggested might be brought by China Broadband against Mr. Ng for his activities in forming China Cablecom. If the parties to the settlement agreement fail to observe the terms of the agreement, China Cablecom Holdings may be involved in burdensome and time-consuming litigation in order to establish clear entitlement to the Binzhou Broadcasting operations.

 
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In particular, notwithstanding the terms of the settlement and the amendment to Mr. Ng’s employment agreement with China Broadband, Ltd., Mr. Ng’s continuing relationship with China Broadband could lead to future claims of violation of his duties to China Broadband in the event future acquisitions in the PRC are offered to us rather than China Broadband, notwithstanding the express terms of the revised employment agreement and provisions of the settlement agreement. Mr. Ng’s revised employment agreement with China Broadband contains an express provision permitting Mr. Ng to resign from China Broadband in the event an acquisition arises that involves the business of China Cablecom, which is how Mr. Ng currently intends to handle opportunities in the future that could create a situation similar to that which led to the settlement agreement.
 
The settlement agreement contains a provision recognizing that the provision of integrated cable television services in the People’s Republic of China and related activities is our business and the provision of stand-alone independent broadband services is the business of China Broadband. However, notwithstanding the terms of the settlement agreement and the amendment to Mr. Ng’s employment agreement with China Broadband, Mr. Ng’s continuing relationship with China Broadband could lead to future claims of violation of his duties to China Broadband in the event future acquisitions in the PRC are offered to China Cablecom Holdings rather than China Broadband, notwithstanding his current intention to resign in such circumstances.
 
If shareholders sought to sue our officers or directors, it may be difficult to obtain jurisdiction over the parties and access to the assets located in the PRC.
 
Because most of our officers and directors reside outside of the U.S., it may be difficult, if not impossible, to acquire jurisdiction over these persons in the event a lawsuit is initiated against such officers and directors by shareholders in the U.S. It also is unclear if extradition treaties now in effect between the U.S. and the PRC would permit effective enforcement of criminal penalties of the federal securities laws. Furthermore, because substantially all of our assets are located in the PRC, it would also be extremely difficult to access those assets to satisfy an award entered against us in U.S. court. Moreover, we have been advised that the PRC does not have treaties with the U.S. providing for the reciprocal recognition and enforcement of judgments of courts. As a result, it may not be possible for investors in the U.S. to enforce their legal rights, to effect service of process upon our directors or officers or to enforce judgments of U.S. courts predicated upon civil liabilities and criminal penalties of our directors and officers under federal securities laws.
 
The Chinese government could change its policies toward, or even nationalize, private enterprise, which could reduce or eliminate our interests.
 
Over the past several years, the Chinese government has pursued economic reform policies, including the encouragement of private economic activities and decentralization of economic regulation. The Chinese government may not continue to pursue these policies or may significantly alter them to our detriment from time to time without notice. Changes in policies by the Chinese government that result in a change of laws, regulations, their interpretation, or the imposition of high levels of taxation, restrictions on currency conversion or imports and sources of supply could materially and adversely affect our business and operating results. The nationalization or other expropriation of private enterprises by the Chinese government could result in the total loss of our investment in China.
 
Foreign exchange regulations in the PRC may affect our ability to pay dividends in foreign currency or conduct other foreign exchange business.
 
Renminbi, or RMB, is not presently a freely convertible currency, and the restrictions on currency exchanges may limit our ability to use revenues generated in RMB or to make dividends or other payments in U.S. dollars. The PRC government, through the State Administration for Foreign Exchange (“SAFE”), regulates conversion of RMB into foreign currencies. Currently, Foreign Invested Enterprises (such as China Cablecom) are required to apply for “Foreign Exchange Registration Certificates” and to renew those certificates annually. However, even with that certification, conversion of currency in the “capital account” (e.g. for capital items such as direct investments or loans) still requires the approval of SAFE. There is no assurance that SAFE approval will be obtained, and if it is not, it could impede our business activities.

 
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The Onshore and Offshore Loan Agreements may be scrutinized by the SAFE

In June and July of 2008, China Cablecom entered into 2 loan agreements, whereby, China Cablecom extended 2 loans in U.S. dollars to Rich Dynamic Limited, a Hong Kong company, (“RDL”), which amount in aggregate, to U.S. dollars 38,000,000. These loans were utilized as payment to a shareholder (“Shareholder”) of Chengdu Chuanghong Jinsha Real Estate Co., Ltd. (“Chengdu Chuanghong”), for the purpose of acquiring 60% of the equity interest in this company.  After payment was made to the Shareholder, 2 RMB loans were extended by the Shareholder to JYNT, pursuant to the loan agreements entered into between the Shareholder and JYNT, which amount in aggregate to RMB 244,000,000.

Although neither of the loan transactions contravenes PRC Law, we cannot ensure that the SAFE will not regard the transactional arrangement (taken as a whole) as an attempt to circumvent the SAFE’s scrutiny over foreign exchange. If the SAFE deems the transactional arrangement to be illegal, it may levy fines and restrict our ability to transfer funds to our PRC subsidiaries. As a result, the development of our business may be adversely affected.  
 
We may have difficulty establishing adequate management, legal and financial controls in the PRC, which could result in misconduct and difficulty in complying with applicable laws and requirements.
 
As a quasi-governmental business in the PRC, our networks have not historically focused on establishing Western-style management and financial reporting concepts and practices, as well as modern banking, computer and other internal control systems. We may have difficulty in hiring and retaining a sufficient number of qualified internal control employees to work in the PRC. As a result of these factors, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet Western standards, especially on the operation level of our joint ventures with municipal cable TV network operators.
 
Being a foreign private issuer exempts us from certain Securities and Exchange Commission requirements that provide shareholders the protection of information that must be made available to shareholders of United States public companies.
 
As a foreign private issuer. we are exempt from certain provisions applicable to United States public companies including:
 
 
·
The rules requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K;
 
 
·
The sections of the Securities Exchange Act regulating the solicitation of proxies, consents or authorizations with respect to a security registered under the Securities Exchange Act;
 
 
·
Provisions of Regulation FD aimed at preventing issuers from making selective disclosures of material information; and
 
 
·
The sections of the Securities Exchange Act requiring insiders to file public reports of their share ownership and trading activities and establishing insider liability for profits realized from any “short swing” trading transactions (i.e., a purchase and sale, or a sale and purchase, of the issuer’s equity securities within less than six months).
 
Because of these exemptions, our shareholders may not be afforded the same protections or information generally available to investors holding shares in public companies organized in the United States.

 
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Risks Relating to our Corporate Structure
 
We exercise voting and economic control over Jinan Youxiantong Network Technology Co., Ltd. (“JYNT”) pursuant to contractual agreements with the shareholders of JYNT that may not be as effective as direct ownership.
 
As a result of the contractual agreements entered into between our indirect subsidiary Heze Cablecom Network Technology Co., Ltd., a PRC company (“HZNT”), and the shareholders of JYNT, we control and are considered the primary beneficiary of JYNT, and are entitled to consolidate the financial results of JYNT, which includes JYNT’s 60% economic interest in the financial results of Binzhou Broadcasting and JYNT’s 55% economic interest in the financial results of Hubei Chutian. While the terms of these contractual agreements are designed to minimize the operational impact of governmental regulation of the media, cultural and telecommunications industries in the PRC, and provide us with voting control and the economic interests associated with the shareholders’ equity interest in JYNT, they are not accorded the same status at law as direct ownership of JYNT and may not be as effective in providing and maintaining control over JYNT as direct ownership. For example, we may not be able to take control of JYNT upon the occurrence of certain events, such as the imposition of statutory liens, judgments, court orders, death or capacity. If the PRC government proposes new laws or amends current laws that are detrimental to the contractual agreements with JYNT, such changes may effectively eliminate our control over the JYNT and our ability to consolidate the financial results of Binzhou Broadcasing and Hubei Chutian, JYNT’s sole operational assets. In addition, if the shareholders of JYNT fail to perform as required under those contractual agreements, we will have to rely on the PRC legal system to enforce those agreements, and there is no guarantee that we will be successful in an enforcement action.
 
Furthermore, if we, or HZNT, were found to be in violation of any existing PRC laws or regulations, the relevant regulatory authorities would have broad discretion to deal with such violation, including, but not limited to the following:
 
 
·
levying fines;
 
 
·
confiscating income; and/or
 
 
·
requiring a restructure of ownership or operations.
 
JYNT has a 49% equity interest in each of Binzhou Broadcasting and Hubei Chutian and the failure by the Binzhou SOE or the Hubei SOE to perform its obligations under the respective  joint venture agreements and services agreements may negatively impact our ability to consolidate the financial operations of Binzhou Broadcasting and Hubei Chutian.
 
JYNT has entered into a joint venture agreement and a series of services agreements that, pursuant to applicable accounting principles, entitles JYNT to consolidate 60% of the operating results of Binzhou Broadcasting, although JYNT only has a 49% equity interest and the Binzhou SOE has retained control of the joint venture.  JYNT has also entered into a joint venture agreement and a series of services agreements that, pursuant to applicable accounting principles, entitles JYNT to consolidate 55% of the operating results of Hubei Chutian, although JYNT only has a 49% equity interest and the local state-owned enterprise, Hubei Chutian Radio and Television Information Network Co., Ltd. (“Hubei SOE”) has retained control of the joint venture.  Because JYNT lacks actual control over Binzhou Broadcasting and Hubei Chutian, JYNT, and us through our contractual arrangements with the shareholders of JYNT, are protected in our dealings with the Binzhou SOE and the Hubei SOE only to the extent provided for in the joint venture agreement and the services agreements. If either the Binzhou SOE or the Hubei SOE fails to observe the requirements of its respective joint venture agreement and other services agreements with JYNT, we may have to incur substantial costs and resources to enforce such arrangement, and rely on legal remedies under PRC law, including seeking specific performance or injunctive relief, and claiming damages, which may not be effective. If the shareholders of JYNT and us are unable to compel the Binzhou SOE or Hubei SOE to observe the requirements of its respective joint venture agreement and the services agreements, we may be forced to account for the financial results and position of Binzhou Broadcasting and Hubei Chutian pursuant to different accounting principles, effectively eliminating our sole operational assets.

 
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The agreements that establish the structure for operating our business may result in the relevant PRC government regulators revoking or refusing to renew Binzhou Broadcasting’s or Hubei Chutian’s operating permit.
 
Each of Binzhou Broadcasting and Hubei Chutian obtains exclusive operating rights by entering into exclusive service agreements with Binzhou SOEs and Hubei SOEs, respectively, who are 100% owned by different levels of branches of SARFT in Binzhou Municipality and Hubei Municipality, respectively. Binzhou SOEs and Hubei SOEs enjoy the right to provide cable access services in their respective territories. Any foreign-invested enterprise incorporated in the PRC, such as our subsidiary, HZNT, is prohibited from conducting a business involving the transmission of broadcast television or the provision of cable access services. Our contractual arrangements with JYNT and its shareholders provide us with the economic benefits of Binzhou Broadcasting and Hubei Chutian. If SARFT determines that our control over JYNT, or our relationship with Binzhou Broadcasting or Hubei Chutian through those contractual arrangements, is contrary to their generally restrictive approach towards foreign participation in the PRC cable television industry, there can be no assurance that SARFT will not reconsider Binzhou Broadcasting’s or Hubei Chutian’s eligibility to hold exclusive rights to provide operating services or cable access services to Binzhou SOEs or Hubei SOEs. If that were to happen, we might have to discontinue all or a substantial portion of our business pending the approval of exclusive service and operating rights on the required operating permits held by Binzhou SOEs and Hubei SOEs. In addition, if we are found to be in violation of any existing or futures PRC laws or regulations, the relevant regulatory authorities, including the SARFT, would have broad discretion in dealing with such violation, including levying fines, confiscating our income, revoking the business licenses or operating licenses of our PRC affiliates and Binzhou SOE and Hubei SOE, requiring us to restructure the relevant ownership structure or operations, and requiring us to discontinue all or any portion of our operations. Any of these actions could cause significant disruption to our business operations and may materially and adversely affect our business, financial condition and results of operations.
 
Risks Relating to the People’s Republic of China
 
Adverse changes in economic policies of the PRC government could have a material adverse effect on the overall economic growth of the PRC, which could reduce the demand for our services and materially adversely affect our business.
 
All of our assets are located in and all of our revenue is sourced from the PRC. Accordingly, our business, financial condition, results of operations and prospects will be influenced to a significant degree by political, economic and social conditions in the PRC generally and by continued economic growth in the PRC as a whole.
 
The PRC economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. 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 the PRC is still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over the PRC’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.

 
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While the PRC economy has experienced significant growth over the past decade, growth has been uneven, both geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall PRC economy, but may also have a negative effect on us. For example, our operating results and financial condition may be adversely affected by government control over capital investments or changes in tax regulations that are applicable to us.
 
Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.
 
The PRC legal system is a civil law system based on written statutes. Unlike common law systems, it is a system in which legal decisions have limited value as precedents. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past three decades has significantly increased the protections afforded to various forms of foreign or private-sector investment in the PRC. These laws and regulations change frequently, and their interpretation and enforcement involve uncertainties. For example, we may have to resort to administrative and court proceedings to enforce the legal protections that we enjoy either by law or contract. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. These uncertainties may also impede our ability to enforce the contracts we have entered into. As a result, these uncertainties could materially adversely affect our business and operations.

Under the EIT Law, we and China Cablecom Company Limited (“HKZ") may be classified as a “resident enterprise” of the PRC. Such classification could result in unfavorable tax consequences to us and HKZ and our non-PRC shareholders.

On March 16, 2007, the Fifth Session of the Tenth National People’s Congress passed the Enterprise Income Tax Law of the People’s Republic of China (the “EIT Law”), which became effective on January 1, 2008. Under the EIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes, although the dividends paid to one resident enterprise from another may qualify as “tax-exempt income.” The implementing rules of the EIT Law define de facto management as “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise.

On April 22, 2009, the State Administration of Taxation issued the Notice on the Issues Regarding Recognition of Overseas Incorporated Domestically Controlled Enterprises as PRC Resident Enterprises Based on the De Facto Management Body Criteria, which was retroactively effective as of January 1, 2008. Under this notice, an overseas incorporated domestically controlled enterprise will be recognized as a PRC resident enterprise if it satisfies all of the following conditions: (i) the senior management responsible for daily production/business operations is primarily located in the PRC, and the location(s) where such senior management execute their responsibilities are primarily in the PRC; (ii) strategic financial and personnel decisions are made or approved by organizations or personnel located in the PRC; (iii) major properties, accounting ledgers, company seals and minutes of board meetings and shareholder meetings, etc., are maintained in the PRC; and (iv) 50% or more of the board members with voting rights or senior management habitually reside in the PRC. However, it is still unclear whether PRC tax authorities would require us and/or China Cablecom to be treated as a PRC resident enterprise.

If the PRC tax authorities determine that we and HKZ are a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we and HKZ may be subject to enterprise income tax at a rate of 25% on our worldwide taxable income, as the case may be, as well as PRC enterprise income tax reporting obligations. Second, although under the EIT Law and its implementing rules, dividends paid to us from our PRC subsidiaries through HKZ, our Hong Kong sub-holding company, assuming we and HKZ are each treated as a “resident enterprise” under the EIT Law, may qualify as “tax-exempt income,” we cannot guarantee that such dividends will not be subject to withholding tax generally at a rate of 10% (or, if the Double Tax Avoidance Agreement between Hong Kong and Mainland China is applicable, 5%). Finally, the new “resident enterprise” classification could result in a situation in which a 10% PRC tax is imposed on dividends we pay to our non-PRC security holders and gains derived by our non-PRC security holders from transferring our securities, if such income is considered PRC-sourced income by the relevant PRC tax authorities.

 
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If any such PRC tax applies to a non-PRC security holder, such security holder may be entitled to a reduced rate of PRC taxes under an applicable income tax treaty and/or a dedution for such PRC tax against such security holder's domestic taxable income or a foreign tax credit in respect of such PRC tax against such security holder’s domestic income tax liability (subject to applicable conditions and limitations). You should consult with your own tax advisors regarding the applicability of any such taxes, the effects of any applicable income tax treaties, and any available deductions or foreign tax credits.
 
Risks Relating to Being Incorporated in the British Virgin Islands
 
We are a British Virgin Islands company and, because the rights of shareholders under British Virgin Islands law differ from those under U.S. law, you may have fewer protections as a shareholder.
 
Our corporate affairs are governed by our Amended and Restated Memorandum and Articles of Association, the BVI Business Companies Act, 2004 (as amended) of the British Virgin Islands (the “Act”) and the common law of the British Virgin Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibility of the directors under British Virgin Islands law are governed by the Act and the common law of the British Virgin Islands. The common law of the British Virgin Islands is derived in part from comparatively limited judicial precedent in the British Virgin Islands as well as from English common law, which has persuasive, but not binding, authority on a court in the British Virgin Islands. The rights of shareholders and the fiduciary responsibilities of directors under British Virgin 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 British Virgin Islands has a less developed body of securities laws as compared to the United States, and some states (such as Delaware) have more fully developed and judicially interpreted bodies of corporate law.
 
British Virgin Islands companies may not be able to initiate shareholder derivative actions, thereby depriving shareholders of the ability to protect their interests.
 
British Virgin Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States. The circumstances in which any such action may be brought, and the procedures and defenses that may be available in respect to any such action, may result in the rights of shareholders of a British Virgin Islands company being more limited than those of shareholders of a company organized in the United States. Accordingly, shareholders may have fewer alternatives available to them if they believe that corporate wrongdoing has occurred. The British Virgin Islands courts are also unlikely to recognize or enforce against us judgments of courts in the United States based on certain liability provisions of U.S. securities law, and to impose liabilities against us, in original actions brought in the British Virgin Islands, based on certain liability provisions of U.S. securities laws that are penal in nature.
 
The laws of the British Virgin Islands provide statutory protection for minority shareholders.
 
Under the laws of the British Virgin Islands, there is some statutory law for the protection of minority shareholders under the Act. The principal protection under statutory law is that shareholders may bring an action to enforce our Amended and Restated Memorandum and Articles of Association. The Act sets forth the procedure to bring such a claim. Shareholders are entitled to have the affairs of the company conducted in accordance with the general law and the Amended and Restated Memorandum and Amended and Restated Articles of Association.  Companies are not obligated to appoint an independent auditor and shareholders are not entitled to receive the audited financial statements of the company.

 
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There are common law rights for the protection of shareholders that may be invoked (such rights have also now been given statutory footing under the Act), largely dependent on English company law, since the common law of the British Virgin Islands for business companies is limited. Under the general rule pursuant to English company law known as the rule in Foss v. Harbottle, a court will generally refuse to interfere with the management of a company at the insistence of a minority of its shareholders who express dissatisfaction with the conduct of the company’s affairs by the majority or the board of directors. However, every shareholder is entitled to have the affairs of the company conducted properly according to law and the constituent documents of the corporation. As such, if those who control the company have persistently disregarded the requirements of company law or the provisions of the company’s memorandum or articles of association, then the courts will grant relief. Generally, the areas in which the courts will intervene are the following: (i) an act complained of which is outside the scope of the authorized business or is illegal or not capable of ratification by the majority, (ii) acts that constitute fraud on the minority where the wrongdoers control the company, (iii) acts that infringe on the personal rights of the shareholders, such as the right to vote, and (iv) where the company has not complied with provisions requiring approval of a special or extraordinary majority of shareholders, which are more limited than the rights afforded minority shareholders under the laws of many states in the U.S.
 
The Act has introduced a series of remedies available to members. Where a company incorporated under the Act conducts some activity which breaches the Act or the company's memorandum and articles of association, the court can issue a restraining or compliance order. Members can now also bring derivative, personal and representative actions under certain circumstances. The traditional English basis for members' remedies have also been incorporated into the Act – where a member of a company considers that the affairs of the company have been, are being or are likely to be conducted in a manner likely to be oppressive, unfairly discriminating or unfairly prejudicial to him, he may now apply to the BVI court for an order on such conduct.
 
Any member of a company may apply to the BVI court for the appointment of a liquidator for the company and the court may appoint a liquidator for the company if it is of the opinion that it is just and equitable to do so.
 
The Act provides that any member of a company is entitled to payment of the fair value of his shares upon dissenting from any of the following: (a) a merger; (b) a consolidation; (c) any sale, transfer, lease, exchange or other disposition of more than 50 per cent in value of the assets or business of the company if not made in the usual or regular course of the business carried on by the company but not including (i) a disposition pursuant to an order of the court having jurisdiction in the matter, (ii) a disposition for money on terms requiring all or substantially all net proceeds to be distributed to the members in accordance with their respective interest within one year after the date of disposition, or (iii) a transfer pursuant to the power of the directors to transfer assets for the protection thereof; (d) a redemption of 10 percent, or fewer of the issued shares of the company required by the holders of 90 percent, or more of the shares of the company pursuant to the terms of the Act; and (e) an arrangement, if permitted by the court.
 
Generally any other claims against a company by its shareholders must be based on the general laws of contract or tort applicable in the British Virgin Islands or their individual rights as shareholders as established by the company's memorandum and articles of association.
 
Because we do not intend to pay dividends shareholders will benefit from an investment in our ordinary shares only if they appreciate in value.
 
We have never declared or paid any cash dividends on our ordinary shares. We currently intend to retain all future earnings, if any, for use in the operations and expansion of the business. As a result, we do not anticipate paying cash dividends in the foreseeable future. Any future determination as to the declaration and payment of cash dividends will be at the discretion of our Board of Directors and will depend on factors our Board of Directors deems relevant, including among others, our results of operations, financial condition and cash requirements, business prospects, and the terms of China Cablecom Holdings’ credit facilities, if any, and any other financing arrangements. Accordingly, realization of a gain on shareholders’ investments will depend on the appreciation of the price of the ordinary shares. There is no guarantee that our ordinary shares will appreciate in value.

 
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There is a risk that we could be treated as a U.S. domestic corporation for U.S. federal income tax purposes, which could result in significantly greater U.S. federal income tax liability to us.
 
Section 7874(b) of the Internal Revenue Code of 1986, as amended (the “Code”) generally provides that a corporation organized outside the United States which acquires, directly or indirectly, pursuant to a plan or series of related transactions substantially all of the assets of a corporation organized in the United States will be treated as a domestic corporation for U.S. federal income tax purposes if shareholders of the acquired corporation, by reason of owning shares of the acquired corporation, own at least 80% (of either the voting power or the value) of the stock of the acquiring corporation after the acquisition. If Section 7874(b) were to apply to the Redomestication Merger and Business Combination (as each such term is defined in the section of this Annual Report entitled “Information on the Company), then, among other things, we would be subject to U.S. federal income tax on our worldwide taxable income following the Redomestication Merger and Business Combination as if we were a domestic corporation. Although it is not expected that Section 7874(b) will apply to treat us as a domestic corporation for U.S. federal income tax purposes, this result is not entirely free from doubt. As a result, shareholders and warrant holders are urged to consult their tax advisors on this issue. The balance of this discussion (including the discussion in the section of this Annual Report entitled “Taxation—United States Federal Income Taxation”) assumes that we will be treated as a foreign corporation for U.S. federal income tax purposes.

We may qualify as a passive foreign investment company, or “PFIC,” which could result in adverse U.S. federal income tax consequences to U.S. investors.

In general, we will be classified as a PFIC for any taxable year in which either (1) at least 75% of our gross income (looking through certain corporate subsidiaries) is passive income or (2) at least 50% of the average value of our assets (looking through certain corporate subsidiaries) is attributable to assets that produce, or are held for the production of, passive income. Passive income generally includes, without limitation, dividends, interest, rents, royalties, and gains from the disposition of passive assets. If we are determined to be a PFIC for any taxable year during which a U.S. Holder (as defined in the section of this Annual Report captioned ‘‘Taxation – United States Federal Income Taxation – General’’) held our ordinary shares or warrants, the U.S. Holder may be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements. Based on the composition (and estimated values) of the assets and the nature of the income of us and our subsidiaries in 2009, we do not anticipate that we will be treated as a PFIC in 2009. Notwithstanding the foregoing, our view that we will not be treated as a PFIC in 2009 is not free from doubt because of, among other things, the significant cash position and uncertainties relating to the actual values of the other assets of us and our subsidiaries in 2009. Our actual PFIC status for any subsequent taxable year will not be determinable until after the end of such taxable year. Accordingly, there can be no assurance with respect to our status as a PFIC for 2009 or any subsequent taxable year. We urge U.S. Holders to consult their own tax advisors regarding the possible application of the PFIC rules. For a more detailed explanation of the tax consequences of PFIC classification to U.S. Holders, see the section of this Annual Report captioned ‘‘Taxation—United States Federal Income Taxation—Tax Consequences to U.S. Holders of Our Ordinary Shares and Warrants—Passive Foreign Investment Company Rules.’’

ITEM 4. INFORMATION ON THE COMPANY

A.  History and Development of the Company.
 
China Cablecom Holdings was formed on October 25, 2007, in the British Virgin Islands, and operates through a wholly-owned subsidiary China Cablecom Ltd., a British Virgin Islands company, which (through subsidiaries) is a joint-venture provider of cable television services in the PRC, operating in partnership with a local state-owned enterprise (“SOE”) authorized by the PRC government to control the distribution of cable TV services. China Cablecom acquired the network it currently operates in Binzhou, Shandong Province in September 2007 and in Hubei Province in June 2008 by entering into a series of asset purchase and services agreements with a company organized by SOEs owned directly or indirectly by local branches of SARFT in five different municipalities to serve as a holding company of the relevant businesses.

 
19

 
 
China Cablecom Ltd.’s operating activity from October 6, 2006 (inception date) to September 30, 2007, was limited and related to its formation, and professional fees and expenses associated with its acquisition activities.
 
On September 20, 2007, China Cablecom Ltd. entered into a Purchase Agreement with several accredited investors (the “Purchase Agreement”), and consummated the private placement of 20,000,000 units, each unit consisting of (i) a promissory note in the face amount of $499,808, bearing interest at the rate of 10% per annum (the “Note”), and (ii) 19,167 detachable shares of China Cablecom Ltd.’s Class A Preferred Stock (the “Units”). As security for the Notes, Mr. Clive Ng pledged and granted to the investors, on a pro rata basis, a first priority lien on 50.1% of the ordinary shares of China Cablecom Ltd. owned by him. The proceeds of the sale and issuance of the Units were used in the following manner: (i) $12.0 million was used to finance the acquisition through contractual arrangements of Binzhou Broadcasting and (ii) $8 million was used for working capital, including payment of certain administrative, legal, investment banking and accounting fees, repayment of loans in the aggregate amount of $720,000 owed to Mr. Ng and a $475,000 loan made to Jaguar Acquisition Corporation (“Jaguar”). Jaguar used the proceeds of this loan for working capital expenses associated with completing its acquisition of China Cablecom Ltd. After its merger with and into China Cablecom Holdings, Jaguar ceased to exist and the loan was assumed by China Cablecom Holdings and continues to be in effect an intercompany obligation.
 
On April 9, 2008, pursuant to the terms of an Agreement and Plan of Merger, dated October 30, 2007 (“Merger Agreement”), Jaguar merged with and into (the “Redomestication Merger”) China Cablecom Holdings, its wholly-owned British Virgin Islands subsidiary, for the purpose of redomesticating Jaguar to the British Virgin Islands as part of the acquisition of China Cablecom Ltd., and China Cable Merger Co., Ltd., a wholly-owned British Virgin Islands subsidiary of China Cablecom Holdings (“China Cable Merger Co.”), merged with and into China Cablecom Ltd., resulting in China Cablecom Ltd. becoming a wholly-owned subsidiary of China Cablecom Holdings (the “Business Combination”).
 
At the closing of the Business Combination, China Cablecom Holdings issued to China Cablecom’s shareholders aggregate merger consideration of 2,066,680 of ordinary shares and China Cablecom Holdings assumed approximately $20 million in outstanding debt of China Cablecom.
 
In connection with the approval of the merger at the April 9, 2008 Special Meeting of Stockholders of Jaguar, the stockholders of Jaguar also approved (i) the adoption of China Cablecom Holdings’ 2007 Omnibus Securities and Incentive Plan, which provides for the grant of up to 10,000,000 ordinary shares of China Cablecom Holdings or cash equivalents to directors, officers, employees and/or consultants of China Cablecom Holdings and its subsidiaries; (ii) the grant of up to 8,120,000 ordinary shares (‘‘Performance Shares’’), pursuant to consulting and other arrangements to certain of Jaguar’s and China Cablecom’s insiders in connection with the Business Combination upon the achievement of certain financial goals of China Cablecom Holdings following the Business Combination; and (iii) the payment of cash bonuses of up to $5,000,000 to certain officers and directors of Jaguar and China Cablecom following the exercise of existing warrants after the Business Combination.
 
As a result of the Redomestication Merger and Business Combination, China Cablecom Holdings succeeded to the registration of Jaguar’s common stock under Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
 
The Company consummated a convertible debt financing in May 2008 with current and new investors involving the issuance of an aggregate of $43.175 million principal amount at maturity of secured convertible notes and approximately 1.525 million ordinary shares to assist in securing its acquisition of Hubei Broadcasting. Interest was prepaid at closing, resulting in net proceeds (excluding existing investors who reinvested principal and interest repayments in the new issuance) to the Company of approximately $19 million. Chardan Capital Markets, LLC, Lazard Frères & Co. LLC and Roth Capital Partners , LLC acted as co-placement agents.

 
20

 
 
The 3-year senior secured convertible notes bear an interest rate of 9.99% per annum and are secured by a pledge of the stock of the Company’s wholly-owned subsidiary, China Cablecom Ltd., and all other assets owned by the Company outside of the People’s Republic of China. The notes are convertible into shares of the Company’s ordinary shares at a conversion price of $9.50 per share and are guaranteed by China Cablecom Ltd. as to the principal, interest and all other amounts due thereunder. In addition, the Company issued approximately 1.525 million ordinary shares to the investors and is obligated to issue an additional approximate 125,000 shares if the notes are not repaid upon the first anniversary of the closing and an additional approximate 300,000 shares if the notes are not repaid upon the second anniversary of the closing. Additionally, the Company has the ability to prepay the notes for a total of $34 million upon the first anniversary of their issuance and any time thereafter at prepayment amounts equal to such amount plus additional amounts equal to approximately 10 5/8% of the principal amount of maturity per annum of such notes, based on the number of days from such first anniversary to such date of pre payment. To the extent that the Company calls its outstanding warrants and such warrants are exercised, it is required to repay the notes with the net proceeds from such warrant exercise.

Debt Restructure and Private Financings, October 2009

Debt Restructure

Due to a default in repayment of principal and interest on certain of its outstanding promissory notes in April 2009, the Company negotiated a comprehensive restructuring of its outstanding capital markets debt obligations which closed in October 2009.

Pursuant to the Restructuring, the Company entered into a waiver agreement and consent with all note holders pusuant to which the note holders agreed to exchange approximately $47 million in aggregate principal amount of current debt obligations for an aggregate of $5.5 million in unsecured notes, $18 million in secured notes and 65,799,286 newly issued shares of Series A Convertible Preferred Shares, each share convertible into one ordinary share and representing in aggregate approximately 66.2% of the Company's ordinary shares outstanding after the closing of the Restructuring and the private financing referred to below.

Until fourteen months after the issue date, principal on the new notes is subject to cancellation in the event that (i) the Company's ordinary shares close at a daily volume weighted average price greater than $0.85 for 30 consecutive days with daily dollar volume of 500,000 or more and all of the conversion shares issuable upon conversion of the Series A Preferred Shares could have been sold by the noteholder during such 30 day period; or (ii) noteholders convert the Series A Convertible Preferred Shares into ordinary shares within 14 months after the issue date, such cancellation in proportion to the amount converted.  Since the Restructuring, an aggregate of $1,840,965 in principal amount of the secured notes and $365,205 in principal amount of the unsecured notes has been cancelled as a result of such conversions.

The unsecured and secured notes are due April 2016 and bear non-cash interest at 5% per annum payable semi-annually in the form of the Company’s Common Stock valued at 95% of the volume-weighted average price for the 10 trading days prior to the required payment date.  Amortizing principal repayments with respect to both the unsecured and secured notes commence in 2012.

Private Financing

In October 2009, the Company also completed a private placement of $33 million in aggregate principal amount of 12% Senior Secured Notes (the “New Notes”) due October 2015. The holders of New Notes have been issued 23,158,080 Series B Convertible Preferred Shares, representing approximately 23.3% of the Company's total outstanding ordinary shares after the Restructuring and issuance of the New Notes. Immediately following the issuance, the Company redeemed approximately $13.9 million of the New Notes, resulting in approximately $19.1 million of New Notes remaining outstanding.

 
21

 

The New Notes are due October 2015 and bear cash interest at 12% per annum payable semi-annually commencing October 2012.  Amortizing principal repayments with respect to the New Notes were commence in 2014 as a result of the redemption described above.

The net proceeds from the private financing were used to satisfy the Company's remaining obligations to the Hubei SOE under its supplementary framework agreement.
 
Joint Venture with Binzhou Guangdian Network Co., Ltd. and China Cablecom.
 
In September 2007, China Cablecom entered into a Framework Agreement through its affiliated company, JYNT, to purchase a 49% equity interest and 60% economic benefit in a newly created joint venture, Binzhou Broadcasting and Television Information Network Co., Ltd. (“Binzhou Broadcasting”). The local state-owned enterprise, Binzhou Guangdian Network Co., Ltd. (“Binzhou SOE”), agreed to contribute certain assets and businesses for a 51% equity interest in Binzhou Broadcasting. Binzhou SOE was organized in 2006 to aggregate various local state-owned cable assets and businesses within the city of Binzhou, China. Prior to the formation of Binzhou Broadcasting, Binzhou SOE consolidated the following five cable operating companies and networks:
 
 
·
Binzhou Guang Shi Network Co., Ltd.;
 
 
·
Huiming Cable Network Co., Ltd.;
 
 
·
Boxing Dian Guang Media Co., Ltd.;
 
 
·
Zouping Cable Network Center; and
 
 
·
Binzhou Guang Dian Cable Network Center.
 
In order to comply with current PRC laws limiting foreign ownership in the cable industry, Binzhou Broadcasting operates in a joint venture and China Cablecom manages its interest in the joint venture through direct ownership of wholly foreign owned entities and affiliated companies wholly owned by PRC citizens. China Cablecom entered into contractual arrangements, through its affiliated PRC company, JYNT, to provide marketing, strategic consulting and technical support and services to Binzhou Broadcasting for a fee of 11% of the net profits of the joint venture. In addition, in the Framework Agreement between JYNT and the Binzhou SOE, JYNT has the ability to control certain aspects of the financing and management of Binzhou Broadcasting arising from a veto right it holds regarding the appointment of the general manager of Binzhou Broadcasting, the right to appoint the chief financial officer of Binzhou Broadcasting and an obligation to provide continued financial resources for investment and capital expenditure for the future expansion of the joint venture’s operations. As a result, China Cablecom has the ability to substantially influence the joint venture’s daily operations and financial affairs, appoint their senior executives and approve all matters requiring shareholder vote. In addition, China Cablecom enjoys 60% of the economic benefits of the joint venture through its 11% fee of net profit combined with its 49% ownership interest. The other provisions of the Framework Agreement (including an appraisal of the assets of Binzhou Broadcasting, the initial capitalization of Binzhou Broadcasting and a prohibition on the Binzhou SOE establishing a competing network in the cooperation area) have either been performed in full or are contained in the formal agreement entered into subsequent thereto.
 
Joint Venture with Hubei Chutian Radio and Television Information Network Co., Ltd. and China Cablecom.

 
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In June 2008, China Cablecom entered into a Framework Agreement through its affiliated company, JYNT, to purchase a 49% equity interest and 60% economic benefit in a newly created joint venture, Hubei Chutian Video Communication Network Co., Ltd. (“Hubei Chutian”). In September 2009, the Framework Agreement was revised by Supplement Agreement II. China Cablecom reduced it’s economic interest to 55% in Hubei Chutian. The local state-owned enterprise, Hubei Chutian Radio and Television Information Network Co., Ltd. (“Hubei SOE”), agreed to contribute certain assets and businesses for a 51% equity interest in Hubei Chutian. Hubei SOE was organized under the laws of the PRC to aggregate various local state-owned cable assets and businesses within the Province of Hubei, China.
 
In order to comply with current PRC laws limiting foreign ownership in the cable industry, Hubei Chutian operates in a joint venture and China Cablecom manages its interest in the joint venture through direct ownership of wholly foreign owned entities and affiliated companies wholly owned by PRC citizens. China Cablecom entered into contractual arrangements, through its affiliated PRC company, JYNT, to provide marketing, strategic consulting and technical support and services to Hubei Chutian for a fee of 6% of the net profits of the joint venture. In addition, in the Framework Agreement between JYNT and the Hubei SOE, JYNT has the ability to control certain aspects of the financing and management of Hubei Chutian arising from a veto right it holds regarding the appointment of the general manager of Hubei Chutian, the right to appoint the chief financial officer of Hubei Chutian and an obligation to provide continued financial resources for investment and capital expenditure for the future expansion of the joint venture’s operations. As a result, China Cablecom has the ability to substantially influence the joint venture’s daily operations and financial affairs, appoint their senior executives and approve all matters requiring shareholder vote. In addition, China Cablecom enjoys 55% of the economic benefits of the joint venture through its 6% fee of net profit combined with its 49% ownership interest.
 
Our registered office is located at Kingston Chambers, P. O. Box 173, Road Town, Tortola, British Virgin Islands.  Our principal executive office is located at Suite 4612, Tower 1, Plaza 66, No1266, Nanjing West Road, Shanghai, 200040, People’s Republic of China.  The telephone number of our principal executive office is (86) 21 6113-8281.

B.  Business Overview
 
Overview
 
We are a joint-venture provider of cable television services in the PRC, operating in partnership with a local state-owned enterprise authorized by the PRC government to control the distribution of cable TV services (“SOE”). We acquired the networks we currently operate in Binzhou, Shandong Province in September 2007 and in Hubei Province in June 2008 by entering into a series of asset purchase and services agreements with companies organized by SOEs owned directly or indirectly by local branches of SARFT to serve as holding companies of the relevant businesses. Due to restrictions on foreign ownership of PRC media and broadcasting entities, our 49% joint venture interest is held through a series of contractual arrangements intended to result in the risks and benefits of Binzhou Broadcasting’s and Hubei Chutian’s operations being primarily borne by us, rather than through a direct ownership of equity securities. In addition to seeking to avoid a violation of PRC law, these arrangements provide, under relevant principles of US GAAP, for the consolidation of 60% and 55% of the results of operations, financial position and cash flows of Binzhou Broadcasting and Hubei Chutian respectively by us. These contractual arrangements with Binzhou SOE have an initial term of 20 years. The parties may mutually seek to extend these agreements upon the expiry of the current term. The contractual agreements with Hubei SOE have a fixed term of 30 years and China Cablecom agreed to transfer the remaining economic interest in the Joint Venture to Hubei SOE after the 30 years period for free.
 
We are not aware of any legal impediments that may affect the renewal of the agreements with Binzhou SOE and to sign the new agreements with Hubei Chutian after the 30 years periodunder current PRC laws. In order for us to continue to derive the economic benefits from the operation of Binzhou Broadcasting and Hubei Chutian, it must renew these agreements with Binzhou SOE and sign new agreements with Hubei SOE after the first 30 year co-operation period. Binzhou Broadcasting operates a cable network with 482,016 paying subscribers as of December 31, 2009 and Hubei Chutian operates a cable network with approximately 1,190,000 paying subscribers as of December 31, 2009 . China Cablecom’s strategy is to replicate the acquisition by operating partnership model in other municipalities in the PRC and then introduce operating efficiencies and increase service offerings in the networks it has acquired.

 
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The PRC Cable Industry
 
China is the world’s largest cable television market in subscriber volume. As of December 31, 2009, China had 174 million cable subscribers, or 41% of cable television-viewing subscribers, , including 65 million digital TV subscribers. Howeverdigital cable penetration rates are reported to be very low compared to all television-viewing households. We expect to benefit from the following additional trends affecting the PRC and the Chinese cable TV industry:
 
 
·
Rising household incomes in the PRC.  According to a report by the McKinsey Global Institute, over the next 20 years more people will migrate to China’s cities for higher-paying jobs. These working consumers will create a new and significant middle class. McKinsey also notes that the trend in China is toward a younger middle class.
 
 
·
Government mandates ensure proliferation of digital cable. According to the provisions of SARFT, China will carry out digital broadcast and television roundly in 2010, and will halt analog TV programs in 2015. With the approaching deadline, the pace of conversion to DTV speeds up in China.
 
 
·
New and dynamic product offerings.  The transition to digital cable benefits cable operators by expanding their market for premium product and service offerings to their customers. Examples that are more fully describe below, include broadband Internet access; premium content subscription; electronic programming guide, or EPG; video on-demand, VOD; personal video recorder, or PVR; and others.
 
 
·
Higher ARPU.  Digital cable offers cable network operators an opportunity to create new revenue streams. In addition, SARFT has authorized cable operators to apply for rate increases to cover the costs associated with digitalization. Recently, the government approved rate increase in excess of 70%. On average, subscribers in the PRC pay $1.50 per month for basic cable service compared to digital cable which averages $3.50 per month.
 
The following chart summarizes two recent studies on the impact of selected cable operators throughout the PRC and the impact on ARPU after the digitalization conversion. The average increase in ARPU for these 15 locations was 72%.

 
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Monthly subscription fee before
and after digitalization (USD)
       
                   
City/Location
 
Analog
   
Digital
   
% Increase
 
                   
Chongqing
    1.57       2.88       83 %
                         
Dalian
    1.57       3.14       100 %
                         
Foshan
    1.83       2.22       21 %
                         
Fuzhou
    1.83       3.40       86 %
                         
Guangxi Province
    1.70       3.40       100 %
                         
Guangzhou
    2.22       3.46       56 %
                         
Hainan Province
    2.09       3.40       63 %
                         
Hangzhou
    1.83       1.83       0 %
                         
Hunan Province
    2.16       3.27       52 %
                         
Jinan
    1.70       3.66       115 %
                         
Qingdao
    1.57       2.88       83 %
                         
Shaanxi Province
    1.83       3.14       71 %
                         
Shenzhen
    2.09       3.66       75 %
                         
Taiyuan
    1.57       3.01       92 %
                         
Zibo
    1.70       3.66       115 %
                         
Average
    1.83       3.14       72 %
 
Source: SYWG Consulting and Research, 2007; Skillnet MI, 2007

 
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Products and Service Offerings
 
Currently, we operate two cable networks, Binzhou Broadcasting and Hubei Chutian, and offer the following products and services to our customers: (i) basic analog and digital cable subscription services (including installation), referred to as video subscription services, (ii) landing service for satellite TV broadcasters, (iii) network leasing, (iv) broadband Internet, and (v) other services, including premium content and interactive.
 
Video subscription services.  The majority of the revenues are currently generated from video subscription services and related installation fees. As of December 31, 2009, the two networks we operate served 1,673,695 paying subscribers. Subscribers typically pay Binzhou Broadcasting and Hubei Chutian on an annual basis and generally may discontinue services at any time. Monthly subscription rates were ranging from RMB12 to RMB15 for analog service and Rmb 24 to Rmb 28 for digital service.
 
Landing service for satellite TV broadcasters.  Satellite broadcasters in China have no network and must pay a ‘‘landing fee’’ to local cable operators. The landing fee for satellite TV to reach one household is approximately $0.04 per channel per year.
 
Network leasing.  Local enterprises in the PRC, such as hospitals, schools, financial institutions and telecommunications companies, do not have complete coverage within the region for their own local network. Accordingly, they rent network bandwidth from local cable companies to operate their internal communication networks among their subsidiaries and branches.
 
Broadband Internet.  Binzhou Broadcasting and Hubei Chutian offer to residential, commercial and government broadband internet services. Key customers for cable internet access include new buildings and the government. As of December 31, 2009, the two networks we operate had 21,939 broadband households, representing 1% of service penetration.

 
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We operate cable network systems through Binzhou Broadcasting and Hubei Chutian as summarized in the table below:

   
Binzhou Broadcasting
 
Hubei Chutian
         
Location
 
Shandong province, China
 
Hubei province, China
         
Number of networks
 
5
 
23
         
Subscribers (2009/2008)
 
482,016 / 477,910
 
1,191,679/ 1,031,212
         
Revenues (2009/2008)
 
$10.5 million / $ 9.1 million
 
$35.0 million / $ 27.5 million
 
Most of our revenues are from subscription fees and one time installation charges.
 
Competition and Threats of Substitution
 
Cable operators in the PRC are local monopolies, similar to the U.S. in the past where only one cable network operated in one municipal city or one county. China Cablecom believes it is possible that current cable network operators may ultimately lose their single monopoly status. Additionally, there are other private sector investors seeking to explore the cable industry in the Shandong and Hubei provinces, including CITIC Group, a publicly traded company listed in Hong Kong.
 
There are, however, emerging threats to traditional cable, such as Internet Protocol TV, or IPTV, and Direct Broadcast Satellite, or DBS. Since media and media content are strongly controlled by the PRC government, new entrants to the market will face significant hurdles that are heavily government policy oriented and not market-oriented. Foreign IPTV models cannot be copied in the PRC due to the strict control by the government for censorship purposes. As a consequence, cable operators will continue to be the dominant market force for the foreseeable future. For example, industry experts forecast that in five years cable network operators will still maintain 70% market share in the financially lucrative pay TV content distribution market.
 
IPTV rollout in the PRC has also been hampered by high service fees, which are $8.00 per month, as well as conflict of interest issues between local SARFT and local telecommunications operators, which has slowed the licensing process for IPTV operators. China Cablecom believes that these new entrants will not pose significant threats of substitution to cable network operators in the foreseeable future.
 
Similar to the U.S., DBS poses even less of a threat to cable operators than IPTV. There are very few DBS households in the PRC. Due to PRC policies, DBS typically cannot be directly received into households, requiring retransmission through terrestrial or cable networks. The transition to digital cable greatly diminishes the competitive threat to cable from DBS.
 
Other threats of substitution, such as mobile TV, are in the early stages of development and customer acceptance of this technology is unknown. We believe mobile TV does not represent a competitive threat.
 
Currently, there are several large cable operators in the PRC. The cable market is highly fragmented and the large operators are geographically centered. For example, Beijing GeHau, a cable operator with 3.8 million households, focuses its efforts in Beijing. Hangzhou Wasu, a cable operator with 1.0 million households, focuses its efforts in Hangzhou. The largest consolidator in the PRC is CITIC Guoan, or CITIC, with 8.8 million households. CITIC is a publicly listed company on the Shenzhen stock exchange and is diversified across several industries, including cable TV, real estate, energy and others. CITIC has focused its efforts in the Hunan and Jiangxi provinces; however, they do operate one local cable network, Weihai, in Shandong and Wuhan, the capital city of Hubei Province.

 
27

 
 
China Cablecom believes that there are many attractive acquisition targets in PRC and the presence of other cable operators in the PRC does not pose a competitive threat, especially in the territories that we have already covered, given the inherent monopolistic nature of the cable business in the PRC.
 
On January 13, 2010 the State Council of People’s Republic of China announced a decision to accelerate the convergence of three networks: telecom, broadcasting and internet.  As a result, cable operators will face competition from the PRC telecom companies for broadcasting revenue, although the Company management believes this also provides opportunities for cable operates to tap the broadband access and VoIP markets. China Cablecom believes the 3-Net convergence plan will not have immediate impact on its business since the plan sets a 3-year trial run in limited sites for convergence service to firm up relevant regulatory policies and framework. Given the fact that content is still under the control of SARFT, management believes telecom operators are unlikely to attract a lot of IPTV subscribers with the same content now provided by cable operators.
 
Marketing and Sales
 
Our sales and marketing strategy depends heavily on the monopolistic situation of cable in the PRC. We do not intend to spend significant dollar amounts on marketing and sales efforts other than for converting the analog signal to a digital signal. The cost of marketing programs associated with premium content service offerings will be mostly borne by the content providers and integrators.
 
Governmental Regulation
 
The media, cultural and telecommunications industries in China are highly regulated by the PRC government, even though the past several years have seen liberalization in this regard. Many foreign and domestic industry participants operate by means of establishing flexible corporate and commercial relationships that allow them to avoid regulatory restrictions while at the same time achieving their business goals. As a result, in order to comply with current PRC laws limiting foreign ownership in the cable industry, Binzhou Broadcasting and Hubei Chutian operate in a joint venture and we manage our interest in the joint venture through direct ownership of wholly foreign owned entities and affiliated companies wholly owned by PRC citizens. This organization structure is designed to minimize the operational impact of governmental regulation in the PRC, although the contractual arrangements required in this regard are not accorded the same status at law as direct ownership, which may affect our ability to secure future financing and pursue its strategic growth plans. The effectiveness of the current contractual arrangement is more dependent on there being no change (or at least no substantial change) in the current PRC regulations, rather than direct ownership. There is the possibility that the relevant PRC authorities could, at any time, decide that this contractual arrangement violates existing or future PRC laws, regulations or policies.
 
Cable TV
 
Overall responsibility for the administration of the cable TV sector is divided between the Chinese Communist Party (“CCP”) and the central government. The CCP Central Committee is responsible for censorship; the State Council, in co-operation with the National People’s Congress (“NPC”), is the government body responsible for promulgating new laws and regulations for the cable TV industry. Responsibility for enforcing policies and laws set out by the CCP and State Council at the local level lies with the relevant department of the State Administration of Radio, Film and Television (“SARFT”).

 
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Investments in cable TV companies are subject to the supervision of the SARFT and other relevant government agencies. The primary restrictions in this regard are as follows:
 
 
·
Transmission Network
 
 
·
Foreign Investment – Prohibited – Foreign investors are prohibited from investing in all levels of radio and TV transmission networks.
 
 
·
Domestic Private Investment – Limited Access – Private investors may invest in the construction and operation of cable TV transmission networks and participate in the reconstruction of digitalization of the receiving terminals of cable TV, subject to a 49% shareholding ceiling. However, private investors are allowed to hold majority shares in companies which only operate the community access portion (terminal connection) of the cable TV transmission networks.
 
 
·
TV Stations and Channels
 
 
·
Foreign Investment/Domestic Private Investment – Prohibited – Foreign and domestic private investors are prohibited from investing in radio stations and TV stations and channels.
 
Notwithstanding the recent attempts at liberalization, the cable TV industry is still primarily State owned. At the central government level, the SARFT is responsible for approving the establishment of cable, radio and TV stations, the nationwide administration of cable, radio and TV services, and developing and promulgating policies, standards and regulations. At the local level, the radio and TV administrative departments and bureau of provinces, municipalities and counties are in charge of the administration of radio and TV services and of implementing policies, standards and regulations within their jurisdiction. In accordance with the Interim Measures on Administration of Fees for Basic Receipt and Maintenance of Cable TV (jointly promulgated by the SARFT and the National Development and Reform Commission on December 2, 2004 and effective as of January 1, 2005), the standards governing the fees for basic receipt and maintenance of cable TV shall be set by the authorities in charge of pricing. A prior hearing is required before the authorities set or adjust the fees. Any changes to the fee standards must comply with the principles of equality, fairness, transparency, and efficiency. In addition, the service costs incurred by providers, as well as the feasibility of the consumer market are considered in making any changes.
 
As a result of the above restrictions on foreign investment, we rely on the contractual arrangements with these affiliated PRC companies to hold and maintain the licenses necessary to operate our cable TV business in China.
 
The chart below reflects the division of authority.

 
29

 
 
Assets of different SARFT
   
Central SARFT
 
Province SARFT
(e.g. Shandong)
 
City SARFT (e.g.
Binzhou, Jining)
 
District & county
SARFT (e.g.
Boxing/Binzhou)
                 
Character
 
No direct access to households but strong power due to central authorities
 
No direct access to households
 
Direct access to households in its network
 
Direct access to households in its network
                 
Networks
 
Backbone connected with province backbone
 
Backbone in the province, from city to city
 
Backbone in the city
 
Small networks
                 
Channels – Broadcasters
 
CCTV
 
Province channels, satellite channels
 
 
Local channels, network center
 
 
Local channels, network center
 
As a result of the control arrangements established by us through affiliated PRC companies wholly owned by PRC citizens, we believe that we are in compliance with the above prohibitions. As set forth in the chart above, however, there are different authorities within the PRC that could seek to regulate the operations of Binzhou Broadcasting, and the fact that one such authority does not impose restrictions on Binzhou Broadcasting’s operations does not mean that any other authority is foreclosed from doing so.
 
The Measures for the Administration of Radio and Television Program Transmission Services (promulgated on July 6, 2004 by the SARFT as Decree No. 33 and effective as of August 10, 2004), require entities that wish to provide TV program transmission and cable access services to obtain an operating permit for Radio and Television Program Transmission Services.
 
Only the following entities may apply for an Operating Permit: (i) radio and television broadcasting entities which have been established with the permission of the SARFT; (ii) radio, film and television groups and their affiliates which have been established with the permission of the SARFT; and (iii) state-owned entities that have the right to operate radio and television cable networks.
 
The Operating Permit contains information about the transmission content, transmission range, transmission technology and transmission methods. The entity holding the Operating Permit must operate in accordance with the details set forth on the permit.
 
Legal Proceedings
 
We are not a party to any material legal proceedings nor are we aware of any circumstance that may reasonably lead a third party to initiate legal proceedings against us.
 
30

 
C.  Organizational Structure
 
PRC Corporate Structure
 
China Cablecom conducts substantially all of its business in the PRC through Heze Cablecom Network Technology Co., Ltd. (“HZNT”), and Jinan Youxiantong Network Technology Co., Ltd. (“JYNT”), a PRC company and a domestic variable interest entity (“VIE”). JYNT is controlled by the Company through contractual arrangements. China Cablecom also owns 100% of the equity interest of Hong Kong Zhongyouxiantong Co., Ltd. (“HKZ”), a Hong Kong holding company that, in turn, directly owns 100% of the equity interest of HZNT.
 
In order to comply with the PRC’s regulations on private investment in the cable industry, China Cablecom operates its cable business in a joint venture with a local state-owned enterprise. China Cablecom’s operations are conducted through direct ownership of HKZ and HZNT and contractual arrangements with JYNT. China Cablecom does not have an equity interest in JYNT, but instead enjoys the economic benefits derived from JYNT through a series of contractual arrangements. JYNT is owned 95% by Pu Yue , China Cablecom’s Chief Executive Officer and 5% by Liang Yuejing, his spouse.
 
China Cablecom operates its cable business in two joint ventures: Binzhou Broadcasting, which is 49% owned by JYNT and 51% by Binzhou SOE, a PRC state-owned enterprise and Hubei Chutian, which is 49% owned by JYNT and 51% by Hubei SOE, a PRC state-owned enterprise.
 
 
We do not directly or indirectly have an equity interest in JYNT, but HZNT and HKZ, our wholly owned subsidiaries, have entered into a series of contractual arrangements with JYNT and its shareholders. As a result of the following contractual arrangements, we control and are considered the primary beneficiary of JYNT and, accordingly, we consolidate JYNT’s results of operations in our financial statements.
 
 
·
the shareholders of JYNT have jointly granted HZNT an exclusive and irrevocable option to purchase all or part of their equity interests in JYNT at any time; this option may only be terminated by mutual consent or at the direction of HZNT;
 
 
·
without HKZ’s consent, the shareholders of JYNT may not (i) transfer or pledge their equity interests in JYNT, (ii) receive any dividends, loan interest or other benefits from JYNT, or (iv) make any material adjustment or change to JYNT’s business or operations;
 
31

 
 
·
the shareholders of JYNT agreed to (i) accept the policies and guidelines furnished by HKZ with respect to the hiring and dismissal of employees, the operational management and the financial system of JYNT, and (ii) appoint the candidates recommended by HKZ as directors of JYNT;
 
 
·
each shareholder of JYNT has appointed HKZ’s designee as their attorneys-in-fact to exercise all its voting rights as shareholders of JYNT. This power of attorney is effective until 2027; and
 
 
·
each shareholder of JYNT has pledged all of its respective equity interests in JYNT to HZNT to secure the payment obligations of JYNT under certain contractual arrangements between JYNT and HKZ, and HZNT and JYNT. This pledge is effective until the later of (1) the date on which the last surviving of the Service Agreements, the Loan Agreement and the Equity Option Agreement terminates; and (2) the date on which all outstanding Secured Obligations are paid in full or otherwise satisfied.
 
JYNT, Binzhou Broadcasting and Binzhou SOE have entered into the following contractual arrangements that provide JYNT with the ability to control and consolidate the results of operations of Binzhou Broadcasting. Also, as a result of these agreements, Binzhou Broadcasting controls and consolidates Binzhou SOE in its financial statements.
 
 
·
a technical services agreement, pursuant to which JYNT exclusively performs the following for Binzhou Broadcasting: (i) management, operation and maintenance of relevant networks and equipment; (ii) consulting services for operation, business development, sales and planning, market research, data collection and analysis; (iii) training for management personnel; (iv) international developments and advanced technology regarding the cable business; (v) provide developed systems and financial support software; and (vi) provide other technology troubleshooting plans, related software and technical services. JYNT is paid a fee of 11% of the net profits of Binzhou Broadcasting, which brings its effective economic interest in Binzhou Broadcasting to 60%. The term of this technical services agreement is 20 years. JYNT and Binzhou Broadcast may mutually seek to extend this agreement upon the expiry of the current term, and we are not aware of any legal impediments that may affect the renewal of this agreement under current PRC laws. This agreement further provides that any non-breaching party may early terminate this agreement in the event that a breaching party has not made rectification 30 days after receipt of the breaching notice from the non-breaching party.
 
 
·
an exclusive services agreement, pursuant to which Binzhou Broadcasting exclusively performs marketing, strategic consulting and technical support and services for Binzhou SOE.
 
 
·
under PRC law, Binzhou SOE must maintain ownership of the broadcasting licenses related to the assets that were contributed to Binzhou Broadcasting for a 51% equity interest. As a result and pursuant to an exclusive services agreement, Binzhou Broadcasting will provide the following services in operating the Binzhou SOE contributed assets: (i) collecting all cash related to revenues generated including subscription fees, installation fees, and channel landing fees; (ii) the marketing, promotion and sales of digital TV set-top boxes; (iii) the building and maintenance of the cable TV network; (iv) the marketing, promotion and sales of businesses in relation to broadcast and television network broadband access; (v) the operation of businesses in relation to wireless network transmission and cable TV; (vi) various troubleshooting, software support and other technology services; (vii) developments, updates and upgrades in relation to the provider application software and user application software; (viii) training services for technology staff and technology consulting services in relation to the business; and (ix) other applicable technology services. As the license holder, Binzhou SOE will collect all revenues from customers and, in turn, remit the cash flows, net of business taxes, to Binzhou Broadcasting. Binzhou Broadcasting will provide the necessary resources including employees and other costs necessary to operate the cable business. The term of the agreement is 20 years with an option to extend for another 10 years. Binzhou SOE and Binzhou Broadcasting may mutually seek to extend this agreement upon the expiry of the current term, and we are not aware of any legal impediments that may affect the renewal of this agreement under current PRC laws. This agreement further provides that Binzhou SOE and Binzhou Broadcasting may early terminate this agreement with the mutual written consent of the parties.
 
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In addition, JYNT, Hubei Chutian and Hubei SOE have entered into the following contractual arrangements that provide JYNT with the ability to control and consolidate the results of operations of Hubei Chutian.
 
 
·
a technical services agreement, pursuant to which JYNT exclusively performs the following for Hubei Chutian: (i) management, operation and maintenance of relevant networks and equipment; (ii) consulting services for operation, business development, sales and planning, market research, data collection and analysis; (iii) training for management personnel; (iv) international developments and advanced technology regarding the cable business; (v) provide developed systems and financial support software; and (vi) provide other technology troubleshooting plans, related software and technical services. JYNT is paid a fee of 6% of the net profits of Hubei Chutian, which brings its effective economic interest in Hubei Chutian to 55%. The term of this technical services agreement is 30 years. JYNT and Hubei Chutian may mutually seek to extend this agreement upon the expiry of the current term, and we are not aware of any legal impediments that may affect the renewal of this agreement under current PRC laws. This agreement further provides that any non-breaching party may early terminate this agreement in the event that a breaching party has not made rectification 30 days after receipt of the breaching notice from the non-breaching party.
 
 
·
an exclusive services agreement, pursuant to which Hubei Chutian exclusively performs marketing, strategic consulting and technical support and services for Hubei SOE.
 
 
·
under PRC law, Hubei SOE must maintain ownership of the broadcasting licenses related to the assets that were contributed to Hubei Chutian for a 51% equity interest. As a result and pursuant to an exclusive services agreement, Hubei Chutian will provide the following services in operating the Hubei SOE contributed assets: (i) collecting all cash related to revenues generated including subscription fees, installation fees, and channel landing fees; (ii) the marketing, promotion and sales of digital TV set-top boxes; (iii) the building and maintenance of the cable TV network; (iv) the marketing, promotion and sales of businesses in relation to broadcast and television network broadband access; (v) the operation of businesses in relation to wireless network transmission and cable TV; (vi) various troubleshooting, software support and other technology services; (vii) developments, updates and upgrades in relation to the provider application software and user application software; (viii) training services for technology staff and technology consulting services in relation to the business; and (ix) other applicable technology services. As the license holder, Hubei SOE will collect all revenues from customers and, in turn, remit the cash flows, net of business taxes, to Hubei Chutian. Hubei Chutian will provide the necessary resources including employees and other costs necessary to operate the cable business. The term of the agreement is 30 years. Hubei SOE and Hubei Chutian may mutually seek to extend this agreement upon the expiry of the current term, and we are not aware of any legal impediments that may affect the renewal of this agreement under current PRC laws. This agreement further provides that Hubei SOE and Hubei Chutian may early terminate this agreement with the mutual written consent of the parties.
 
33

 
D.  Property, plant and equipment
 
Binzhou Broadcasting has 310 employees working in one headquarter facility and 5 operating subsidiary facilities located in Boxin, Huiming and Zoupin counties and in Binzhou city. Hubei Chutian has 3,248 employees working in one headquarter facility located in Wuhan city and 23 subsidiary facilities in Hubei Province. Our property, plant and equipment mainly include the following:
 
 
·
Fiber infrastructures: fiber cable laid underground or laid through poles across urban and suburban areas;
 
 
·
Electronic equipment: distribution amplifier, decoders, mixers and fiber substations, etc., which changes the fiber signal to electric signals that can be distributed to householders’ TV sets; and
 
 
·
Headend facilities: distributes Cable TV signals.
 
We plan to invest $30 million, through vendor financing and operating cash flows, in 2010 on upgrading the networks and on digital TV set-up-boxes (“STB”) and related electronic equipment to convert 300,000 existing subscribers to digital subscribers.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.
 
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Overview
 
China Cablecom Ltd., a British Virgin Islands company, was incorporated on October 6, 2006. On April 9, 2008, China Cablecom Ltd. and Jaguar Acquisition Corporation ("Jaguar"), a special purpose acquisition company, completed both the previously announced redomestication merger of Jaguar in the British Virgin Islands as China Cablecom Holdings and the concurrent business combination merger with China Cablecom Ltd.
 
In accordance with the merger agreement, the following occurred with respect to the outstanding Class A Preference shares and common shares of China Cablecom Ltd. and the common shares and warrants of Jaguar:

i)
all of the Class A preference shares and common shares of China Cablecom Ltd. were cancelled and each registered owner of outstanding preference shares and common shares of China Cablecom Ltd. automatically become the registered owner of one and 0.6842 shares of our ordinary shares, respectively.
ii)
all of the common shares of Jaguar were cancelled and each registered owner of outstanding common shares of Jaguar automatically become the registered owner of one share of our ordinary shares.
iii)
all the outstanding warrants were assumed by the Company and became exercisable for our ordinary shares at the original exercise price, US$ 5.00.
 
China Cablecom Ltd. is the 100% shareholder of Hong Kong Zhongyouxiantong Co., Ltd. (“HKZ”), incorporated in Hong Kong on May 22, 2007. HKZ owns 100% of Heze Cablecom Network Technology Co., Ltd ("HZNT") incorporated under the laws of the PRC on October 9, 2007. We are also the primary beneficiary of the following Variable Interest Entities (“VIE”) as defined under FASB ASC 810-10:

l
Jinan Youxiantong Network Technology Co., Ltd. ("JYNT") incorporated under the laws of the PRC on July 16, 2007.
 
34

 
l
Binzhou Broadcasting and Television Information Network Co., Ltd. (“Binzhou Broadcasting”) incorporated under the laws of the PRC on September 10, 2007.
 
l
Hubei Chutian Video Communication Network Co., Ltd. (“Hubei Chutian”) incorporated under the laws of the PRC on May 15, 2008.
 
On October 1, 2007, JYNT entered into an operating partnership through a joint venture with its partner Binzhou SOE, called Binzhou Broadcasting.  Binzhou SOE agreed to contribute all of the inventory and property, plant and equipment of Binzhou PRC along with all of their cable business operations in the PRC in exchange for a 51% equity interest in Binzhou Broadcasting. JYNT agreed to acquire the remaining 49% equity interest in Binzhou Broadcasting, as well as receive 60% of the economic benefits in Binzhou Broadcasting, through an exclusive 11% service agreement, for total consideration of approximately $26.5 million. This exclusive service agreement provides marketing, strategic consulting and technical support and services for 11% of the net profits of Binzhou Broadcasting. Binzhou SOE receives 40% of the economic benefits or net profits of Binzhou Broadcasting for its interest in the joint venture.
 
In addition, in accordance with the operating partnership and other agreements (“Framework Agreement”) between JYNT and Binzhou SOE, JYNT was given the ability to control certain aspects of the financing and management of Binzhou Broadcasting. JYNT has a veto right regarding the appointment of the general manager of Binzhou Broadcasting, the right to appoint the chief financial officer of Binzhou Broadcasting and an obligation to provide continued financial resources for investment and capital expenditures for the future expansion of the Binzhou Broadcasting’s operations. The result of these rights and obligations given to JYNT is that China Cablecom and JYNT have the ability to substantially influence the joint venture’s daily operations and financial affairs, appoint their senior executives and approve all matters requiring shareholder vote.
 
The contractual arrangements between JYNT and Binzhou Broadcasting have an initial term of 20 years. The parties may mutually seek to extend these agreements upon the expiry of the current term. China Cablecom is not aware of any legal impediments that may affect the renewal of these agreements under current PRC laws. In order for China Cablecom to continue to derive the economic benefits from its joint venture interest in the operation of Binzhou Broadcasting, it must renew these contractual agreements.
 
On June 16, 2008, we announced the phase one acquisition of Hubei Chutian network through a contractual and joint venture agreement similar to that used in the acquisition of Bingzhou network.
 
We, through JYNT, acquired a 49% equity interest in Hubei Chutian, a joint-venture company, operating with its partner in the joint venture, Hubei Chutian Radio and Television Information Network Co., Ltd. (‘‘Hubei SOE’’).
 
In accordance with the operating partnership and other agreements (“Framework Agreement”) between JYNT and Hubei SOE, JYNT was given the ability to control certain aspects of the financing and management of Hubei Chutian. JYNT has a veto right regarding the appointment of the general manager of Hubei Chutian, the right to appoint the chief financial officer of Hubei Chutian and an obligation to provide continued financial resources for investment and capital expenditures for the future expansion of the Hubei Chutian’s operations. The result of these rights and obligations given to JYNT is that China Cablecom and JYNT have the ability to substantially influence the joint venture’s daily operations and financial affairs, appoint their senior executives and approve all matters requiring shareholder vote.
 
JYNT also enter into a technical service agreement with Hubei Chutian, JYNT provides marketing, strategic consulting and technical support and services for 11% of the net profits. Together with its 49% equity interest, JYNT effectively received 60% of economic benefits of Hubei Chutian.

On September 30, 2009 JYNT and Hubei SOE signed a supplement to the Framework which reduces the service fee from 11% to 6% of the net profits and the effective economic benefit received by JYNT to 55%.
 
35

 
A.
Results of operation
 
The following discussion of our results of operations is based upon our audited consolidated financial statements beginning on Page F-1 on this Annual Report.

Fiscal year ended 2009 compared to fiscal year ended 2008

Revenue
 
During the fiscal year ended  December 31, 2009, our revenue were $45.6 million, which is an increase of $22.2 million, or 95%, compare to the same period of 2008. The increase was largely attributable to a full year of consolidation of Hubei Chutian for 2009; the organic growth of paying subscribers and the increase of average ARPU resulted from the fast digitalization . As of December 31, 2009, the Company had more than 1.6 million paying subscribers, who pay on average $1.50 to $2.20 per month.

Cost of revenue
 
Cost of revenue for the year ended December 31, 2009 were $29.9 million, an increase of $16.5 million or 123%, from $13.4 million for the year ended December 31, 2008. The increase was also attributable to the full year consolidation of Hubei Chutian for 2009.
 
Cost of revenue includes maintenance costs; depreciation expense related to network property, plant and equipment; and costs associated with maintenance and construction projects including replacing cable TV boxes at subscriber’s homes, troubleshooting cable TV problems, and occasionally digging up cable lines to determine network problems. Also included in cost of revenues are salaries and related employee costs for the maintenance employees, including temporary staff.

Gross Profit
 
As a percentage of net sales, the gross margin was 34% for the year ended December 31, 2009 compared to 43% for the year ended December 31, 2008.

 
The decrease in gross profit percentage is primarily due to the higher cost of revenue of Hubei Chutian which operates a cable network which covers larger rural areas than Binzhou Broadcasting.

Selling expenses.
 
Selling and marketing expenses are not significant because of the nature of cable TV in the PRC.

General and administrative expenses
 
General and administrative expenses for the year ended December 31, 2009 were $22.6 million, an increase of $7.5 million from $15.1 million for the year ended December 31, 2008. General and administrative expenses consist primarily of amortization of intangible assets and deferred offering costs, and salary and welfare expenses in administrative functions such as human resources, finance and senior management. The increase was mainly due to increased general administration expenses of $6 million associated with full year of operations for Hubei Chutian.
 
Amortization expenses for the year ended December 31, 2009 were $3.4 million, including amortization of intangible assets of $2.8 million and amortization of deferred offering costs of $0.6 million. Intangible assets with a definite useful life are amortized using the straight line method over the estimated economic life of the intangible assets. For the subscriber base, the useful life is 10 years while the cable operating license is 20 years. Amortization of deferred offering costs for the year ended December 31, 2009 was approximately $0.6 million. The deferred offering costs are the costs directly attributed to the Company’s financing of anticipated business acquisition activities. Deferred offering costs related to the Company’s Bridge Financing and Convertible Notes has been fully amortized as a result of the Restructuring.
 
36

 
Interest income
 
Interest income for the year ended December 31, 2009 was $152,000, a decrease of $188,000 from $340,000 for the year ended December 31, 2008. The decrease in interest income is attributable to lower average cash balances and lower interest rate on savings.

Interest expenses
 
Interest expense for the year ended December 31, 2009 was $10 million, an increase of $1.3 million from $8.7 million for the year ended December 31, 2008.
 
The $10 million interest expense primarily comprised (1) interest and amortization of deferred financing costs on the promissory notes issued in connection with the bridge financing in the amount of $1.6 million; (2) interest and amortization of deferred financing costs on the convertible notes issued in May 2008 in the amount of $7.3 million; (3) interest on the secured notes and unsecured notes issued in October 2009 in the amount of $0.3 million; (4) interest and amortization of deferred financing costs on the New Notes issued in October 2009 in the amount of $0.5 million; and (5) $0.3 million interest on short-term borrowings incurred at Hubei Chutian.

Income tax expense
 
Income tax expense for the year ended December 31, 2009 was $572,000, an increase of $230,000, from $342,000 for the year ended December 31, 2008. The increase in income tax expense is primarily attributable to the first full year operation of Hubei Chutian.

Loss from operations before non-controlling interest
 
Loss from operations before non-controlling interest for the year ended December 31, 2009 was $56.2 million, an increase of $43 million, from $13.2 million for the year ended December 31, 2008.  China Cablecom suffered an one time loss on the debt extinguishment of $39.7M on the debt restructure completed in October 2009.

Noncontrolling (‘‘minority’’) interest in income
 
Noncontrolling (minority) interest in income for the year ended December 31, 2009 was $392,856, representing the 40% noncontrolling (minority) interest on Binzhou SOE’s share of the net income of Binzhou Broadcasting of $ 356,687 and the 45% noncontrolling (minority) interest on Hubei SOE’s share of the net income of Hubei Chutian of $36,169.

Liquidity and Capital Resources
 
As of December 31, 2009, the Company had cash and cash equivalents in the amount of $23.9 million, of which $21.2 million were Binzhou Broadcasting and Hubei Chutian’s working capital, which are sufficient for their operation.
 
As of December 31, 2009, the Company had cash and cash equivalents approximately $2.7 million available for investment and corporate overhead. As we discussed under the risk factor - We must make significant intercompany loans to Binzhou Broadcasting to preserve our consolidation of the operating results of Binzhou Broadcasting for financial reporting purposes, We are required to seek additional financing and to amend or modify the terms of our existing debts to meet the obligations of providing loan financial to Binzhou Broadcasting. The amount of the required financing is approximately $16 million.
 
37

 
As of December 31, 2009, we had following obligations:

l
$5.1 million unsecured notes with 5% annual interest rate. The repayment was scheduled in 8 installments  to be paid every 6 months starting from October 15, 2012
l
$17 million  secured notes with 5% annual interest rate. The repayment was scheduled in 7 installments to be paid every 6 months starting from October 15, 2012.
l
$19.1 million ($8.0M after discount) Senior Secured Notes with 12% annual interest rate. The repayment was scheduled in 6 installments to be paid every 6 months starting from April 15, 2013.
l
$25.3 million due to Binzhou SOE of which $6.6 million is repayable on demand and $18.7 million is to be paid over a 20-year period.
l
$66.6 million due to Hubei SOE of which $21 million is repayable on demand and $45.6 million does not have a fixed repayment date. 

Capital expenditures
 
Capital expenditures, excluding the assets acquired under the assets transfer agreements with Binzhou SOE and Hubei SOE, for 2009 and 2008 were approximately $25 million and $10 million. The vast majority of these expenditures related to digital set-up boxes, underground fiber cable and related distribution equipment necessary to decode and send electric signals to household TV sets.

Trend information
 
Other than as disclosed elsewhere in this Annual Report, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net sales, profitability, liquidity or capital resources, or that caused the disclosed financial information to not necessarily be indicative of future operating results or financial conditions.

Off-balance sheet arrangements
 
We do not have any off-balance sheet arrangements, any outstanding derivative financial instruments, interest rate swap transactions or foreign currency forward contracts.
 
38

 
Tabular disclosure of contractual obligations

The following table summarizes our contractual commitments as of December 31, 2009 and the effect those commitments are expected to have on our liquidity and cash flow in future periods:

               
Payments due by period
 
US$ Million
 
Total
   
Less than one
year
   
1-3 years
   
3-5 years
   
More than 5
years
 
                                         
Long-term Debt Obligations
    30.0       -       -       26.4       3.6  
                                         
Capital (Finance) Lease Obligations
    -       -       -       -       -  
                                         
Operating Lease Obligations
    -       -       -       -       -  
                                         
Purchase Obligations
    -       -       -       -       -  
                                         
Other Long-Term Liabilities Reflected on the Company's Balance Sheet under the GAAP of the primary financial statements
    91.9       27.6       -       -       64.3  
                                         
Total
    121.9       27.6       -       26.4       67.9  

Recent Accounting Pronouncements

ASC 105.  In June 2009, the Financial Accounting Standards Board (“FASB”) issued FASB Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, (“SFAS No. 168”) “— a replacement of FASB Statement No. 162.  SFAS No. 168 is the new source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. This statement was incorporated into ASC 105, Generally Accepted Accounting Principles under the new FASB codification which became effective on July 1, 2009. The new Codification supersedes all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. The Company has included the references to the Codification, as appropriate, in these consolidated financial statements. Adoption of this statement did not have an impact on the Company’s consolidated results of operations, cash flows or financial condition.
 
ASC 805.  FASB Statement No. 141(R) Business Combinations was issued in December 2007. This statement was incorporated into ASC 805, Business Combinations, under the new FASB codification. ASC 805 requires that upon initially obtaining control, an acquirer should recognize 100% of the fair values of acquired assets, including goodwill and assumed liabilities, with only limited exceptions, even if the acquirer has not acquired 100% of its target. Additionally, contingent consideration arrangements will be fair valued at the acquisition date and included on that basis in the purchase price consideration and transaction costs will be expensed as incurred. This statement also modifies the recognition for pre-acquisition contingencies, such as environmental or legal issues, restructuring plans and acquired research and development value in purchase accounting. This statement amends ASC 740-10, Income Taxes (“ASC 740”) to require the acquirer to recognize changes in the amount of its deferred tax benefits that are recognizable because of a business combination either in income from continuing operations in the period of the combination or directly in contributed capital, depending on the circumstances. ASC 805 is effective for fiscal years beginning after December 15, 2008. The adoption of these provisions did not have an effect on the Company’s financial reporting.
 
39

 
ASC 805 Update.  In February 2009, the FASB issued SFAS No. 141R-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies, which allows an exception to the recognition and fair value measurement principles of ASC 805. This exception requires that acquired contingencies be recognized at fair value on the acquisition date if fair value can be reasonably estimated during the allocation period. This statement update was effective for the Company as of January 1, 2009 for all business combinations that close on or after January 1, 2009 and it did not have an impact on the Company’s consolidated results of operations, cash flows or financial condition.

ASC 810.  In December 2007, the FASB issued FASB Statement No. 160, Non-controlling Interests in Consolidated Financial Statements — an amendment of ARB No. 51, which is effective for fiscal years beginning after December 15, 2008. Early adoption is prohibited. SFAS No. 160 was incorporated into ASC 810, Consolidation (“ASC 810”) and requires companies to present minority interest separately within the equity section of the balance sheet. The Company adopted this statement as of January 1, 2009 and it did not have an impact on the Company’s consolidated results of operations, cash flows or financial condition.
 
ASC 810.  In June 2009, the FASB issued FASB Statement No. 167, Amendments to FASB Interpretation No. 46 (R) (“SFAS No. 167”), which amended the consolidation guidance for variable-interest entities. The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. This Statement is effective for financial statements issued for fiscal years periods beginning after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. The Company will adopt these provisions on January 1, 2010 and the adoption will not have an impact on the Company’s financial statements.
 
ASC 275 and ASC 350.  In April 2008, the FASB issued FASB Staff Position (“FSP”) No. 142-3, Determination of the Useful Lives of Intangible Assets, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of an intangible asset. Under the new codification this FSP was incorporated into two different ASC’s, ASC 275, Risks and Uncertainties (“ACS 275”) and ASC 350, Intangibles — Goodwill and Other (“ASC 350”). This interpretation was effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those years. The Company adopted this FSP on January 1, 2009, and it did not have a material impact on the Company’s consolidated results of operations, cash flows or financial condition, and did not require additional disclosures related to existing intangible assets.
  
ASC 820.  On February 12, 2008, the FASB issued FSP FAS 157-2, Effective Date of FASB Statement No. 157 (“FSP 157-2”), which delayed the effective date of SFAS No. 157 Fair Value Measurements, for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008. Under the new codification the FSP was incorporated into ASC 820, Fair Value Measurements and Disclosures (“ASC 820”). The Company adopted this ASC update on January 1, 2009 and it did not have a material impact on the Company’s consolidated results of operations, cash flows or financial condition, and did not require additional disclosures.

ASC 260.  In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF 03-6-1”).  Under the new FASB codification this FSP was incorporated into ASC 260, Earnings Per Share (“ASC 260”). ASC 260 clarifies that unvested share-based payment awards that entitle holders to receive non-forfeitable dividends or dividend equivalents (whether paid or unpaid) are considered participating securities and should be included in the computation of earnings per share (“EPS”) pursuant to the two-class method. The Company does not currently have any share-based awards that would qualify as participating securities. Therefore, application of this FSP will not have an effect on the Company's financial reporting.
 
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ASU 2009-05.  The FASB issued Accounting Standards Update (“ASU”) No. 2009-05 which provides additional guidance on how companies should measure liabilities at fair value and confirmed practices that have evolved when measuring fair value such as the use of quoted prices for a liability when traded as an asset. While reaffirming the existing definition of fair value, the ASU reintroduces the concept of entry value into the determination of fair value. Entry value is the amount an entity would receive to enter into an identical liability. Under the new guidance, the fair value of a liability is not adjusted to reflect the impact of contractual restrictions that prevent its transfer. The effective date of this ASU is the first reporting period (including interim periods) after August 26, 2009. Early application is permitted for financial statements for earlier periods that have not yet been issued. The adoption of these provisions did not have an effect on the Company’s financial reporting.

ASU 2010-06.  The FASB issued ASU No. 2010-06 which provides improvements to disclosure requirements related to fair value measurements. New disclosures are required for significant transfers in and out of Level 1 and Level 2 fair value measurements, disaggregation regarding classes of assets and liabilities, valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements for Level 2 or Level 3. These disclosures are effective for the interim and annual reporting periods beginning after December 15, 2009. Additional new disclosures regarding the purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements are effective for fiscal years beginning after December 15, 2010 beginning with the first interim period. The adoption of these provisions did not have an effect on the Company’s financial reporting.

ASU 2010-09.  The FASB issued ASU No. 2010-09 which provides amendments to certain recognition and disclosure requirements. Previous guidance required that an entity that is an SEC filer be required to disclose the date through which subsequent events have been evaluated. This update amends the requirement of the date disclosure to alleviate potential conflicts between ASC 855-10 and the SEC’s requirements. The adoption of these provisions did not have an effect on the Company’s financial reporting.
 
In May 2008, the FASB issued ASC 470-20, Debt with Conversion and Other Options (ASC 470-20).  ASC 470-20 will be effective for financial statements issued for fiscal years beginning after December 15, 2008. The FSP includes guidance that convertible debt instruments that may be settled in cash upon conversion should be separated between the liability and equity components, with each component being accounted for in a manner that will reflect the entity's nonconvertible debt borrowing rate when interest costs are recognized in subsequent periods.. Adoption of this statement did not have an impact on the Company’s consolidated results of operations, cash flows or financial condition.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.  Directors and senior management
 
Our board of directors and executive officers are as follows:
 
Name
 
Age
 
Position
         
Clive Ng
 
47
 
Executive Chairman
         
Pu Yue
 
37
 
Chief Executive Officer
         
Sikan Tong
 
37
 
Chief Financial Officer
         
Kerry Propper
 
34
 
Director
         
Su-Mei Thompson (1)
 
44
 
Director
         
Pierre Suhandinata (2)
 
41
 
Independent Director
         
Richard Eu
 
62
 
Independent Director
         
Shan Li
 
46
 
Independent Director
         
Emmanuel J. Olympitis
 
61
 
Independent Director
 
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(1)           Ms. Thompson resigned from her position as a director of the Company on July 4, 2009.
 
(2)           Mr. Suhandinata resigned from his position as an independent director of Company on  September 22, 2009.
 
Clive Ng has served as Executive Chairman of the board of China Cablecom since its inception on October 6, 2006 and as a director and Executive Chairman of China Cablecom Holdings since October 2007. From 2000 to 2003, he was the Chief Executive Officer of Pacific Media PMC, a home shopping company, Mr. Ng co-founded TVB Superchannel Europe in 1992, which has grown to become Europe’s leading Chinese language broadcaster. He also owned a 50% stake in HongKong SuperNet, the first Hong Kong based ISP which was then sold to Pacific Internet (NASDAQ:PCNTF). He was Chairman and founder of Asia content (NASDAQ:IASIA), one of the first Asian internet companies to list in the United States, that has been a joint venture partner with NBCi, MTVi, C-NET, CBS Sportsline and DoubleClick in Asia. Mr. Ng was also one of the initial investors and founder of E*TRADE Asia, a partnership with E*TRADE Financial Corp (NYSE: ET). He is also a founding shareholder of MTV Japan, with H&Q Asia Pacific and MTV Networks (a division of Viacom Inc). Currently he serves as a Senior Advisor to Warner Music Group Inc. (NYSE: WMG) and as Chairman and a director of China Broadband, Inc., a company that operates a broadband cable internet company based in the city of Jinan in the Shandong region of China pursuant to contractual arrangements similar to those between JZNT and China Cablecom.
 
Pu Yue has served as general manager and Chief Executive Officer of China Cablecom since its inception in 2006 and Chief Executive Officer of China Cablecom Holdings since October 2007. Mr. Pu also serves as Chief Executive Officer and a director of China Broadband, Inc., a company that operates a broadband cable internet company based in the city of Jinan in the Shandong region of China pursuant to contractual arrangements similar to those between JZNT and China Cablecom. Mr. Pu was an intelligence officer with China’s National Security Service from 1993 to 1995. He then worked as a logistics specialist with the joint venture between Crown Cork & Seal and John Swire & Sons in Beijing. In 1997, he joined Economic Daily, where he spent a two-year journalism career with China Entrepreneur Magazine. From 1999 to 2000, he oversaw the inception of Macau 5-Star Satellite TV, a mainland China satellite TV channel venture in which his family took significant investment. From 2004 to 2006, Mr. Pu was in charge of business development for a TV advertising consolidation venture under HC International. Mr. Pu holds MBA from Jesse H. Jones Graduate School of Management of Rice University, and Bachelor of Law from University of International Relations in Beijing, China.
 
Sikan Tong has served as Chief Financial Officer of China Cablecom since March 31, 2009.  From March 2008 to February 2009, Mr. Tong was the Senior Vice President of the Company where he was responsible for the Company’s internal control over financial reporting. From September 2006 to February 2008, Mr. Tong was the Chief Financial Officer of Merrylin International Holding, which manages Merrylin restaurants and Motel 168 hotel chains in China, where he spearheaded Merrylin’s IPO and closely managed fundraising activities through private placements. Mr. Tong served as Head of Accountancy Training at The Financial Training Company, a leading provider of professional qualifications and business training in the United Kingdom and Asia, which later became part of Kaplan Inc. from November 2005 to August 2006. From May 2003 to October 2005, Mr. Tong served as the learning and education manager of the Shanghai office of PriceWaterhouseCoopers where he began his career in the audit practice and was responsible for lecturing and organization of the training courses. Mr. Tong received his Bachelor degree from Shanghai University in 1995 in Mechanic and Robotic.
 
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Kerry Propper has been a director of China Cablecom Holdings since October 2007 and the chief financial officer, secretary and a member of the board of directors of Chardan North China Acquisition Corporation and has been the chief executive officer, secretary and a member of the board of directors of Chardan South China Acquisition Corp. since their inception in March 2005. Chardan North China Acquisition Corp. and Chardan South China Acquisition Corp. are blank check companies seeking to acquire an operating business north and south, respectively, of the Yangtze River in the People’s Republic of China. Mr. Propper has been the owner and chief executive officer of Chardan Capital Markets LLC, a New York based broker/dealer, since July 2003. He has also been a managing director of SUJG, Inc., an investment company, since April 2005. From its inception in December 2003 until November 2005, Mr. Propper served as the executive vice president and a member of the board of directors of Chardan China Acquisition Corp., an OTC Bulletin Board listed blank check company that was seeking to acquire an operating business in the People’s Republic of China. In November 2005, Chardan China Acquisition Corp. completed its business combination with State Harvest Holdings Ltd. and changed its name to Origin Agritech Ltd. Mr. Propper has continued to serve as a member of the board of directors of Origin Agritech since its merger. Mr. Propper also sits on the board of directors of Source Atlantic Inc., a health care consulting company based in Massachusetts. Mr. Propper was a founder, and from February 1999 to July 2003 owner and managing director of Windsor Capital Advisors, a full service brokerage firm also based in New York. Mr. Propper also founder The Private Capital Group LLC, a small private investment firm specializing in hard money loans and convertible preferred debt and equity offerings for small companies, in May 2000 and was affiliated with it until December 2003. From July 1997 until February 1999, Mr. Propper worked at Aegis Capital Corp., a broker dealer and member firm of NASD. Mr. Propper received his B.A. (with honors) in Economics and International Studies from Colby College and studied at the London School of Economics.
 
Su-Mei Thompon was a director of China Cablecom Holdings from December 2008 until July 2009. Ms. Thompson was a Senior Vice President of Strategic Business Development for Asia at Christie's Asia, Art and Auction Business from April 2007 to July 2008. From April 2003 to April 2007, Ms. Thompson served as the Managing Director of the Financial Times, Asia Pacific during which she oversaw the launch of the Financial Times Asian edition, and the Financial Times luxury title "How To Spend It" in Asia, and its Chinese language website, FTChinese.com. She was a member of the board of directors of the Financial Times Global Management and on the board of directors of Business Standard in India. Previously, she served as General Counsel and Senior Vice-President for Business Development and Corporate Development at Asiacontent.com, a NASDAQ-listed Asia joint venture partner for leading websites such as CNET.com and MTVi.com. She also served as Regional Director, Business and Legal Affairs, at Walt Disney Television Asia-Pacific from 1996 to 2000 where she was involved in negotiating and concluding joint venture and licensing arrangements for Disney TV in China and across the region. Prior to joining Disney, Ms. Thompson was a senior associate in corporate finance at Linklaters and served in the firm's London, Paris and Hong Kong offices. Ms. Thompson earned her undergraduate degree in law at Trinity College, Cambridge in 1987 and her Masters degree in law (BCL) at Christchurch College, Oxford in 1989. She also received her MBA from IMD, Switzerland in 2001.
 
Pierre Suhandinata was an Independent Director of the Company from May 2008 until September 2009. He currently serves as Chairman and Chief Executive Officer and Co-founder of ACCESS China Inc., a global provider of mobile content delivery and access technologies for information appliances. He has more than 15 years of successful investment and management experience in multinational companies across several countries. Prior to ACCESS, he worked several years as an engineer in Japan, and as a Management Consultant with The Boston Consulting Group in South-East Asia
 
Richard Eu has been our Independent Director since May 2008, Ltd. He is Group CEO of Eu Yang Sang International Ltd, an investment holding company that engages in the manufacture, distribution, and sale of Chinese herbs, Chinese proprietary medicines, and health foods. He Serves on the boards of the Hong Kong Singapore Business Association, Broadway Industrial Group Limited, Harry’s Holdings Ltd and Governing Council for the Singapore Institute of Management. He has Leadership and management expertise through his appointments at Haw Par Brothers International Ltd, Dataprep Group, Metro Holdings Ltd and Intervest Capital Management Pte Ltd, among many other companies.
 
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Shan Li has been served as our independent director since October 2007. Mr. Li is a founding principal of San Shan Capital Partners, a Hong Kong-based private equity firm focusing on asset-based alternative investments in the Greater China region where he has been employed since November 2005. From April 2001 until October 2005, Dr. Li was the Chief Executive Officer of Bank of China International Holdings (“BOCI”). Prior to joining BOCI and from 1999, Dr. Li was the managing director and head of China investment banking at Lehman Brothers, from April 1998 to September 1999 he was the Deputy Head of the Investment Bank Preparation Committee at the China Development Bank. From November 1993 to April 1998, Dr. Li was the Executive Director of Investment Banking and Economic Research at Goldman Sachs and from April 1993 until October 1993, he was an Associate of Global Foreign exchange trading at Credit Suisse First Boston. Dr. Li is Vice Chairman of China Overseas-Educated Scholars Development Foundation and a regular commentator and author of various influential local and international mass media and publications on areas concerning China’s economic development policy. He is deputy head of the National Center of Economic Research and a member of the board of alumni at Tsinghua University in Beijing. Mr. Li holds a B.E. in management information systems from Tsinghua University, an M.A. in economics from University of California at Davis and a Ph.D. in economics from Massachusetts Institute of Technology.
 
Emmanuel J. Olympitis has been served as our independent director since October 2009.  Mr. Olympitis currently serves as Executive Chairman of Petrocapital Resources Plc., a UK-listed company with investments in the oil sector. He is also a non-executive Director of Canoel International Energy Ltd., a Toronto-listed exploration oil and gas company. From 1999 to 2004, Mr. Olympitis was formerly Executive Chairman of Pacific Media Plc., a London Stock Exchange listed retail, media, and e-commerce company focused on Asia. Previously, he held numerous executive positions including Group Chief Executive of Aitken Hume International Plc., a London Stock Exchange listed banking, insurance and fund management group. Subsequently, Mr. Olympitis was Executive Chairman and Managing Director of Johnson & Higgins Ltd., during which time the company won the Queens Award for Exports in 1994. Mr. Olympitis' background includes investment banking where he was appointed head of all Eurodollar syndicated loan activities for Bankers Trust International Limited in London. There he served as Executive Director where he managed international initiatives of several billion dollars into South America, Greece and Eastern Europe.More recently, he has held positions as a non-executive Director and member of Audit Committees on several UK-listed companies including Matica Plc., Secure Fortress Plc., Bulgarian Land Development Plc., Norman 95 Plc., and served as Chairman for Bella Media Plc.
 
There is no family relationship between any of our executive officers or directors.
 
B.  Compensation

Compensation of Directors and Executive Officers
 
In 2009, we granted stock options to purchase an aggregate of 160,000 ordinary shares to our non-executive directors under the 2007 Omnibus Securities and Incentive Plan.
 
All directors receive reimbursements from us for expenses which are necessary and reasonably incurred by them for providing services to us or in the performance of their duties.
 
Our directors who are also our employees receive compensation in the form of salaries, housing allowances, other allowances and benefits in kind in their capacity as our employees. Our directors do not receive any compensation in their capacity as directors in addition to their salaries and other remunerations as members of our management team. We pay their expenses related to attending board meetings and participating in board functions.
 
The aggregate cash compensation and benefits that we paid to our directors and executive officers, a group of eight persons for the year ended December 31, 2009 was approximately RMB5,000,000. No executive officer is entitled to any severance benefits upon termination of his or her employment with our company.
 
In addition, we granted options to purchase an aggregate of 2,516,666 ordinary shares in 2009 under the 2007 Omnibus Securities and Incentive Plan to our Executive Chairman, our Executive Director, and our Chief Executive Officer and our Chief Financial Officer, as set forth below:
 
44

 
   
Individual Grants
 
 
Name
 
Ordinary
Shares
Underlying
Options
Granted
   
% of
Options
Granted to
Employees
in Fiscal
Year (1)
   
Exercise
Price (2)
 
Date of
Grant
 
Date of
Expiration
                               
Clive Ng
    833,334       29.7 %   $ 2.34    
                               
Clive Ng
    733,333       26.1 %   $ 1.83    
                               
Kerry Propper
    33,333       1.2 %   $ 2.34    
                               
Kerry Propper
    33,333       1.2 %   $ 1.83    
                               
Pu Yue
    333,333       11.9 %   $ 2.34    
                               
Pu Yue
    333,333       11.9 %   $ 1.83    
                               
Sikan Tong
    50,000       1.8 %   $ 2.34    
                               
Sikan Tong
    166,667       5.9 %   $ 1.83    
(1)
Based on a total of 2,810,000 options granted to our employees in 2009, including options granted to the executive officers.
(2)
The exercise price per share of options granted represented the fair market value of the underlying ordinary shares on the date the options were granted.
 
Employment Agreements
 
The following discussion summarizes the material terms of current employment agreements between us and our executive officers:
 
We have entered into an agreement with Clive Ng on the following terms:
 
 
·
Annual Salary – $500,000; minimum bonus of $250,000.
 
 
·
Principal Benefits will include Health Insurance, Life Insurance, Company Car, Tax Advisory Services, Annual Leave of Four Weeks and Stock Option Employment Commencement Package with vesting over ten (10) years.
 
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·
Benefits Upon Termination For Cause or Resignation For Other Than Good Reason will include Earned Compensation, Earned Benefits, Vested Stock Options.
 
 
·
Severance Pay – The greater of six (6) times monthly compensation or twelve (12) months base salary less any compensation paid to the employee during the period between change of control and termination.
 
We have entered into an agreement with Pu Yue on the following terms:
 
 
·
Annual Salary – RMB 900,000.
 
 
·
Principal Benefits will include Health Insurance, Life Insurance, Annual Leave of Four Weeks.
 
 
·
Benefits Upon Termination For Cause or Resignation For Other Than Good Reason will include Earned Compensation, Earned Benefits.
 
 
·
Severance Pay – The greater of six (6) times monthly compensation or twelve (12) months base salary less any compensation paid to the employee during the period between change of control and termination.
 
Other than as described above for Mr. Ng and Mr. Pu, there have been no employment agreements negotiated or drafted between us and our executive officers of although it is anticipated that such agreements may be put in place with our executive offices.

C.  Board Practices 
 
All of our directors serve for an indefinite term until their respective successor takes office or until his or her earlier death, resignation or removal by the members at a meeting called for the purpose of removing the directors or for purposes including the removal of a director; or by a resolution passed by the majority of the remaining directors. The following table sets forth the number of years our current directors and executive officers have held their positions and the expiration of their current term.
 
Name
 
Appointed on
     
Clive Ng
 
October 2006
     
Kerry Propper
 
October 2007
     
Shan Li
 
October 2007
     
Pierre Suhandinata (1)
 
May 2008
     
Richard Eu
 
May 2008
     
Su-Mei Thompson (2)
 
December 2008
     
Emmanuel J. Olympitis
  
October 2009
 
(1) Mr. Suhandinata resigned from his position as an independent director of the Company on September 22, 2009.
 
 (2) Ms. Thompson resigned from her position as a director of the Company on July 4, 2009.

 
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Director Independence
 
The Board of Directors has determined that Emmanuel J. Olympitis, Richard Eu and Shan Li are independent under the Nasdaq Marketplace Rules, because they do not currently own a significant percentage of our ordinary shares, are not currently employed by us, have not been actively involved in the management of China Cablecom and do not fall into any of the enumerated categories of people who cannot be considered independent under the Nasdaq Marketplace Rules. We have an Audit Committee, Nominating and Corporate Governance Committee and Compensation Committee. We have appointed independent directors to each of our committees.
 
Compensation Committee Interlocks and Insider Participation
 
During the last fiscal year, no officer and employee of China Cablecom Holdings, and no former officer of China Cablecom Holdings, during the last completed fiscal year, participated in deliberations of the Board of Directors concerning executive officer compensation.
 
Meetings and Committees of the Board of Directors
 
To date, the Board has only taken formal action solely by unanimous consent. Although we do not have any formal policy regarding director attendance at annual shareholder meetings, in the future we will attempt to schedule our annual meetings so that its directors can attend. In addition, we expects our directors to attend all Board and committee meetings and to spend the time needed and meet as frequently as necessary to properly discharge their responsibilities.
 
Audit Committee
 
The Audit Committee was established on June 2, 2008. Our Audit Committee currently consists of Emmanuel J. Olympitis, Richard Eu and Shan Li, who are independent directors and are also “financially literate.” The Nasdaq rule defines “financially literate” as being able to read and understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement. On September 22, 2009, Mr. Pierre Suhandinata resigned from his position as a member of the board of directors and as a result ceased to serve as a member of the Audit Committee. On October 2009, Mr. Emmanuel J. Olympitis was appointed  as a member of the board of directors and Audit Committee..
 
Audit Committee Financial Expert.  Emmanuel J. Olympitis has been qualified by the board as an “audit committee financial expert” within the meaning of all applicable rules. The Audit Committee is responsible for, among other things:
 
 
·
reviewing and approving all transactions with affiliates, related parties, directors and executive officers;
 
 
·
reviewing the procedures for the receipt and retention of, and the response to, complaints received regarding accounting, internal control or auditing matters; and
 
 
·
reviewing with management and the independent auditors, at least once annually.
 
Nominating Committee and Corporate Governance Committee
 
The Nominating and Corporate Governance Committee was established on June 2, 2008. Our Nominating and Corporate Governance Committee currently consists of Emmanuel J. Olympitis, Richard Eu and Shan Li. On September 22, 2009, Mr. Pierre Suhandinata resigned from his position as a member of the board of directors and as a result ceased to serve as a member of the Nominating and Corporate Governance Committee. On October 2009, Mr. Emmanuel J. Olympitis was appointed  as a member of the board of directors and Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee is responsible for, among other things:

 
47

 
 
 
·
reviewing with the board from time to time the appropriate skills and characteristics required of board members;
 
 
·
establishing and administering a periodic assessment procedure relating to the performance of the board as a whole and its individual members; and
 
 
·
making recommendations to the board regarding corporate governance matters and practices, including formulating and periodically reviewing corporate governance guidelines to be adopted by the board.
 
Compensation Committee
 
The Compensation Committee was established on June 2, 2008. Our Compensation Committee currently consists of Emmanuel J. Olympitis, Richard Eu and Shan Li. On September 22, 2009, Mr. Pierre Suhandinata resigned from his position as a member of the board of directors and as a result ceased to serve as a member of the Compensation Committee. On October 2009, Mr. Emmanuel J. Olympitis was appointed  as a member of the board of directors and Compensation Committee. The Committee is responsible for, among other things:
 
 
·
assisting the board in determining the compensation of the Chief Executive Officer, Chief Financial Officer and other officers of the Company;
 
 
·
reviewing and making recommendations to the board with respect to non-CEO and non-CFO compensation; and
 
 
·
making recommendations to the board regarding approval, disapproval, modification, or termination of existing or proposed employee benefit plans.
 
Settlement with China Broadband
 
Following Jaguar’s original filing, on October 31, 2007, of its prospectus/proxy statement on Form S-4 with the Securities and Exchange Commission relating to the Redomestication Merger and Business Combination, investors in China Broadband informed Mr. Ng that they viewed our activities as violative of Mr. Ng’s employment agreement with China Broadband. China Broadband is another company organized by Mr. Ng to pursue broadband cable opportunities in the PRC. Currently, it operates a broadband cable internet company that is pursuing opportunities in stand-alone, independent broadband services, including electronic program/television program-type publications, and is based in the city of Jinan in the Shandong province of the PRC.
 
Although Mr. Ng disagreed that our activities violated his employment agreement with China Broadband, in order to avoid the possibility of time consuming and costly litigation, Mr. Ng, Mr. Pu, China Broadband, Jaguar, us and certain of China Broadband’s shareholders and consultants entered into a settlement agreement dated as of January 11, 2008, pursuant to which the potential claims were resolved. As a result of this settlement, the parties agreed, among other things, as follows:

 
48

 
 
 
·
Each of Mr. Ng and Mr. Pu agreed with a subsidiary of China Broadband to modifications to his employment agreement to reflect the original intent of the parties, and allow them to continue as executives and directors of China Cablecom Holdings. In addition, the amendment to Mr. Ng’s employment agreement provides that (i) until such time as China Broadband hires a new Chief Executive Officer, Mr. Ng would remain an executive of China Broadband and take commercially reasonable efforts to assure that his activities with us would not materially interfere with his obligations to China Broadband and (ii) when China Broadband hires a new Chief Executive Officer, Mr. Ng’s work requirements for China Broadband would be appropriately reduced and he would no longer be an executive of China Broadband, although he will remain the non-executive Chairman and a member of the board of directors of China Broadband until the expiration of the employment agreement in July 2009, and (iii) requiring that he assist the Chief Executive Officer, the Board and management of China Broadband in identifying, negotiating with and entering into agreements with potential acquisition candidates that are in the stand-alone, independent broadband business in the People’s Republic of China. A new Chief Executive Officer was appointed by China Broadband. The amendment to Mr. Pu’s employment agreement provides that when China Broadband hires a new Chief Financial Officer and Principal Financial Officer, Mr. Pu’s work requirements for China Broadband shall be appropriately reduced although he will remain Vice Chairman and a member of the board of directors of China Broadband. The settlement agreement contains a provision recognizing that the provision of integrated cable television services in the People’s Republic of China and related activities is our business and the provision of stand-alone independent broadband services is the business of China Broadband. Mr. Ng’s revised employment agreement contains an express provision permitting Mr. Ng to resign from China Broadband in the event an acquisition arises that involves our business, which is how Mr. Ng currently intends to handle opportunities in the future that could create a situation similar to that which led to the settlement agreement. (Mr. Pu’s revised employment agreement does not include a similar provision). The resignation of Mr. Ng under his revised employment agreement with China Broadband should not result in a violation of such agreement for actions occurring prior to his resignation provided he complies with the terms of such agreement. However, notwithstanding the terms of the settlement agreement and the amendment to Mr. Ng’s employment agreement with China Broadband, Mr. Ng’s continuing relationship with China Broadband could lead to future claims of violation of his duties to China Broadband in the event future acquisitions in the PRC are offered to us rather than China Broadband, notwithstanding his current intention to resign in such circumstances.
 
 
·
The revised China Broadband employment agreements with Messrs. Ng and Pu expressly allow for them to engage in certain “permitted activities”, including serving as an officer, director and/or board committee member or being a securityholder of us pursuant to an employment agreement or otherwise and all activities undertaken in connection with the business of acting as a joint venture provider of integrated cable television services in the PRC and related activities (not including the provision of stand-alone broadband services).
 
 
·
Mr. Ng agreed, subject to the terms of the settlement agreement, to transfer 130,000 of our ordinary shares and make certain transfers of shares of China Broadband to or for the benefit of certain securityholders of China Broadband.
 
 
·
China Broadband, for itself and on behalf of any person or entity claiming by or through China Broadband, together with the securityholders and consultants who are parties to the settlement agreement, Mr. Ng, Mr. Pu, Jaguar and us all agreed to mutual releases of claims against each other (except that no release was provided by Jaguar or us to Mr. Ng or Mr. Pu and that certain investors have been asked to provide releases subsequent to the settlement agreement having been entered into).
 
D.  Employees
 
We had 3,566 and 3,568 employees as of December 31, 2008 and 2009, respectively. As of December 31, 2009, we had 3,568 employees, including 2,182 in customer service, 403 in maintenance and engineering and 983 in administration. None of our employees are represented under collective bargaining agreements. We consider our relations with our employees to be good.

E.  Share Ownership 
 
See Item 7.A below.

 
49

 
 
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.  Major shareholders
 
The following table sets forth information with respect to the beneficial ownership of the ordinary shares as of June 25, 2010 by each person who beneficially owns more than 5% of ordinary shares and each officer, each director and all officers and directors as a group.
 
Ordinary shares which an individual or group has a right to acquire within 60 days pursuant to the exercise or conversion of options, warrants or other similar convertible or derivative securities are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table.
Name and Address of Beneficial Owner(1)
 
Amount and
Nature of
Beneficial
Ownership
   
Approximate
Percentage of
Outstanding
Ordinary
Shares
 
Clive Ng(2)
    370,000 (3)     5.5 %
Pu Yue(4)
          - %
Sikan Tong
          - %
Kerry Propper(5)
    83,888 6)     1.2 %
Pierr Suhandinata
          - %
Shan Li(7)
          - %
Richard Eu
          - %
Emmanuel J. Olympitis
          - %
Craig Samuels(8)
    1,147,271       2.2 %
JLF Offshore Fund, Ltd(9)
          - %
JLF Partners I, L.P.(9)
          - %
Globis Capital Partners, L.P.(10)
    26,892       0.4 %
Globis Capital Advisors., L.L.C.(10)
    26,892       0.4 %
Globis Overseas Fund, Ltd.(10)
    22,937       0.3 %
Globis Capital Management, L.P.(10)
    49,829       0.7 %
Globis Capital, L.L.C.(10)
    49,829       0.7 %
Paul Packer(10)
    49,829       0.7 %
Jack Silver(11)
    208,793       3.1 %
Sherleigh Associates Inc. Profit Sharing Plan(11)
          - %
Spinner Global Technology Fund, Ltd.(12)
    140,991       2.1 %
Spinner Asset Management, LLC(12)
    140,991       2.1 %
Arthur C. Spinner(12)
    140,991       2.1 %
China Broadband, Inc. (13)
    17,151       0.2 %
Jeffrey Keswin(14)
    46,301       0.7 %
Lyrical Corp. I, LLC(14)
    46,301       0.7 %
Lyrical Partners, L.P.(14)
    46,301       0.7 %
All directors and executive officers as a group (eight individuals)
          - %
Jayhawk Private Equity Fund, L.P. .(15)
    259,824       3.8 %
Jayhawk Private Equity Co-Invest Fund, L.P. .(15)
    16,363       0.2 %
Jayhawk Private Equity GP, L.P. .(15)
    276,188       4.1 %
Jayhawk Capital Management.(15)
    276,188       4.1 %
Jayhawk Private Equity Fund II, L.P. .(15)
    279,150       4.1 %
Jayhawk Private Equity GP II, L.P. .(15)
    279,150       4.1 %
Jayhawk Private Equity, LLC.(15)
    279,150       4.1 %
Kent C. McCarthy.(15)
    555,338       8.3 %
Platinum Partners Value Arbitrage Fund L.P. (16)
    335,981       5.0 %

 
50

 


(1)
Unless otherwise indicated, the business address of each of the individuals is Suite 4612, Tower 1, Plaza 66, No.1266 Nanjing West Road, 200040, People’s Republic of China.

(2)
The business address for Mr. Ng is 27 Union Square West, Suite 501-502, New York, NY 10003.
 
(3)
After giving effect to delivery of 130,000 ordinary shares by the shareholder pursuant to the terms of a settlement agreement. See “Settlement Agreement with China Broadband”. Excludes 378,889 ordinary shares which are subject to voting agreements China Cablecom Holdings and Mr. Ng entered into with certain shareholders who were issued shares of China Cablecom Holdings in connection with the Business Combination. Pursuant to the voting agreements, such shareholders agreed, for a period of three years following the Business Combination, to vote their shares in favor of the Board nominees presented at a meeting of stockholders. Mr. Ng. disclaims beneficial ownership of the shares held by such shareholders. Not include up to 2,506,667 shares that can be earned in connection with the grant of the Performance Shares.
 
(4)
The business address for Mr. Pu is Suite 4612, Tower 1, Plaza 66, No.1266 Nanjing West Road, 200040, People’s Republic of China.
 
(5)
The business address of Mr. Propper is Chardan Capital Markets, LLC, 17 State Street, Suite 2575, New York, New York 10004.
 
(6)
Includes 15,833 shares issuable upon exercise of warrants. Not include 66,667 shares that can be earned in connection with the grant of the Performance Shares.
 
(7)
The business address of Mr. Li is Two IFC, 8 Finance Street, Central, Hong Kong.
 
(8)
The business address of Mr. Samuels is 13990 Rancho Dorado Bend, San Diego, CA 92130. Include 300,000 shares issuable upon exercise of warrants. The information was derived from a Schedule 13D filed with the SEC on February 13, 2009.
 
(9)
The business address of JLF Partners I, L.P. is 2775 Via de la Valle, Suite 204, Del Mar, CA 92014. The business address of JLF Offshore Fund, Ltd. is c/o Goldman Sachs (Cayman) Trust Limited, PO Box 896, Harbour Centre, 2nd Floor, North Church Street, Grand Cayman KY1-1103, Cayman Islands.  The information was derived from a Schedule 13G/A filed with the SEC on July 24, 2008.
 
(10)
The principal office and business address is 60 Broad Street, 38th floor, New York, NY 10004. The Schedule 13G, as amended, on March 13, 2009, was jointly filed by each of the following persons pursuant to Rule 13d-1 promulgated by the Securities and Exchange Commission pursuant to Section 13 of the Securities Exchange Act of 1934, as amended: (i) Globis Capital Partners, L.P., a Delaware limited partnership (“Globis Partners”), with respect to shares of Common Stock directly held by it; (ii) Globis Capital Advisors, L.L.C., a Delaware limited liability company (“Globis Advisors”), serves as the general partner of Globis Partners, with respect to shares of Common Stock directly held by Globis Partners; (iii) Globis Overseas Fund, Ltd., a Cayman Islands exempted company (“Globis Overseas”), with respect to shares of Common Stock directly held by it; (iv) Globis Capital Management, L.P., a Delaware limited partnership (the “Investment Manager”), which serves as investment manager to, and has investment discretion over the securities held by, Globis Partners and Globis Overseas, with respect to shares of Common Stock directly held by Globis Partners and Globis Overseas; (v) Globis Capital, L.L.C., a Delaware limited liability company (“GC”), which serves as the general partner of the Investment Manager, with respect to shares of Common Stock directly held by Globis Partners and Globis Overseas; and (vi) Mr. Paul Packer (“Mr. Packer”), who is the Managing Member of Globis Advisors, and GC, with respect to shares of Common Stock directly held by Globis Partners and Globis Overseas. The information was derived from a Schedule 13G/A filed on March 13, 2009.

 
51

 
 
(11)
The principal office and business address is c/o SIAR Capital LLC, 660 Madison Avenue, New York, NY 10021. Represents 422,186 shares issuable upon the exercise of outstanding warrants held by Sherleigh Associates Inc. Profit Sharing Plan, a trust of which Mr. Silver is the trustee. This information was derived from a Schedule 13G filed on February 17, 2009.
 
(12)
The principal office and business address of Spinner Asset Management, LLC and Arthur C. Spinner is 730 Fifth Avenue, Suite 1601, New York, NY 10019. The principal office and business address of Spinner Global Technology Fund, Ltd. is c/o ATC Fund Services (Curacao) N.V., Bon Bini Business Center Units 2B2K/2B2L, Schottegatweg Oost 10, Willemstad, Curacao. The Schedule 13G was jointly filed by each of the following persons pursuant to Rule 13d-1 promulgated by the Securities and Exchange Commission pursuant to Section 13 of the Securities Exchange Act of 1934, as amended: (i) Spinner Global Technology Fund, Ltd. (the “Fund”), Spinner Asset Management, LLC (the “Manager”) and Arthur C. Spinner.  The Manager is the investment manager of the Fund and Mr. Spinner is the managing member of the Manager.  Each of the Fund and the Manager has the shared power to vote and to dispose of the shares reported above and Mr. Spinner, by virtue of his position as the managing member of the Member, has shared authority to vote and to dispose of such shares. The information was derived from a Schedule 13G filed with the SEC on January 22, 2009.
 
(13)
The principal office and business address is 1900 Ninth Street, 3rd Floor Boulder, Colorado 80302. Marc Urbach, President, or such other person as designated by the board of directors of China Broadband, Inc. has dispositive and voting power over the shares.
 
(14)
The principal office and business address of Jeffrey Keswin, Lyrical Corp. I, LLC (“Lyrical Corp.”) and Lyrical Partners, L.P. (“Lyrical”) is 405 Park Avenue, 6th Floor, New York, NY 10022. Lyrical serves as principal investment manager to a number of investment funds with respect to which it has voting and dispositive authority over the shares.  Lyrical Corp. serves as the general partner of Lyrical.  As such, Lyrical Corp. may be deemed to control Lyrical and therefore may be deemed to be the beneficial owner of the shares.  Mr. Jeffrey Keswin is the Managing Partner of Lyrical Corp. and may be deemed to control Lyrical Corp. and be the beneficial owner of the shares. The information was derived from a Schedule 13G filed with the SEC on February 11, 2009.(15)The principal business address of Mr. McCarthy, JCM, JPEGP, JPEF, JPECF, JPE, JPEGPII, and JPEFII is 930 Tahoe Blvd., 802-281, Incline Village, NV, 89451.
 
(16)
The principal business address of Platinum Partners Value Arbitrage Fund L.P., is 152 West 57th Street, 4th floor, New York, NY 10019.
 
B.  Related Party Transactions
 
We have not, during the three most recently completed financial years and the subsequent period up to the date of this Annual Report, entered into transactions or loans with any (a) enterprises that are directly or indirectly controlled by or under common control with us; (b) our associates; (c) individuals directly or indirectly owning voting right which give them significant influence over us or close members of their respective families, (d) our directors, senior management or close members of their respective families or (e) enterprises in which a substantial interest in the voting power is held or significantly influenced by any of the foregoing individuals, except as indicated below.

On June 26, 2008, we issued 106,666 shares of our ordinary shares to ClearMedia Limited, a company owned by our executive Chairman, Clive Ng, as finder’s fee in connection with the acquisition of Hubei Chutian.
 
We consummated a convertible debt financing in May 2008 with current and new investors involving the issuance of an aggregate of $43.175 million principal amount at maturity of secured convertible notes and approximately 1.525 million ordinary shares to assist in securing our acquisition of Hubei Broadcasting. Chardan Capital Markets, LLC, acted as lead placement agent in the convertible debt financing and was paid a broker fee of $1,400,000. Kerry Propper, a member of our board of directors, is the chief executive officer of Chardan Capital Markets, LLC.
 
In October 2009, we consummated a senior secured debt financing involving the issuance of an aggregate of $33 million secured notes and approximately 23 million preferred series B shares. Chardan Capital Markets, LLC, acted as lead placement agent in the convertible debt financing and was paid a broker fee of $1,494,000 along with 250,000 ordinary shares of the Company. Kerry Propper, a member of our board of directors, is the chief executive officer of Chardan Capital Markets, LLC.

 
52

 

C.
Interests of Experts and Counsel

Not Applicable.
 
ITEM 8. FINANCIAL INFORMATION

A.  Consolidated Statements and Other Financial Information

The Company’s consolidated financial statements are stated in U.S dollars and are prepared in accordance with US GAAP.
 
Audited Financial Statements
 
Our consolidated financial statements for the years ended December 31, 2009 and 2008 as required under Item 17 are included immediately following the text of this Annual Report. The audit reports of the Company are included herein immediately preceding the financial statements.

Legal/Arbitration Proceedings
 
The Directors and the management of the Company do not know of any material, active or pending, legal proceedings against them; nor is the Company involved as a plaintiff in any material proceeding or pending litigation.
 
Policy on Dividend Distributions

The Company has not paid any dividends on its outstanding common shares since its incorporation and does not anticipate that it will do so in the foreseeable future. The payment of dividends in the future, if any, is within the discretion of the Board of Directors of Dynasty and will depend upon our earnings, our capital requirements and financial condition and other relevant factors. We do not anticipate declaring or paying any dividends in the foreseeable future.
 
B.
Significant Changes
 
None.

ITEM 9. THE OFFER AND LISTING

A.  Offer and Listing Details 
 
Our ordinary shares, are quoted on the Nasdaq Capital Market under the symbol CABL.  The closing price for the securities on June 29, 2010, the most recent trading day practicable before the date of this Annual Report, was  $0.79.
 
Prior to the Business Combination, Jaguar’s units commenced public trading on April 6, 2006, and common stock and warrants commenced public trading on June 26, 2006. The Business Combination occurred on April 9, 2008 and we began trading as China Cablecom Holdings, Ltd. on the OTC Bulletin Board on April 10, 2008. Our ordinary shares, warrants and units commenced trading on the Nasdaq Capital Market on July 30, 2008.

 
53

 
 
The table below sets forth, for the calendar quarters indicated, the high and low bid prices for the securities as reported on the OTC Bulletin Board and Nasdaq Capital Market in U.S. dollars. These quotations reflect inter-dealer prices, without markup, markdown or commissions, and may not represent actual transactions.
 
On February 19, 2010, we announced that our Board of Directors authorized a one-for-three reverse share split of our ordinary shares effective March 2, 2010, at the open of trading.
 
On March 1, 2010, we announced that effective April 4, 2010, our units will be separated into its component securities, consisting of one share of common stock and two warrants. As a result, beginning April 4, 2010, the Units and Warrants ceased trading. The warrants expired on April 4, 2010 and the reverse stock split was applied to each ordinary share resulting from the expired unit.
 
54

 
   
Common
Stock/Ordinary
Shares
 
   
High
   
Low
 
   
(US$)
   
(US$)
 
                 
2007
    22.20       16.05  
                 
First Quarter
    16.71       16.05  
                 
Second Quarter
    17.70       16.59  
                 
Third Quarter
    18.00       16.89  
                 
Fourth Quarter
    22.32       18.00  
                 
2008
               
                 
First Quarter
    22.35       19.29  
                 
Second Quarter
    19.05       17.70  
                 
Third Quarter
    21.00       6.51  
                 
Fourth Quarter
    7.65       1.77  
               
 
2009
               
                 
First Quarter
    2.61       0.45  
                 
Second Quarter
    5.82       0.78  
                 
Third Quarter
    4.14       1.14  
                 
Fourth Quarter
    3.30       1.41  
                 
2010
               
                 
First Quarter
    2.37       1.40  
                 
Second Quarter (through June 23)
    1.68       0.77  

 
55

 
 
*The share prices from the Second Quarter of 2006 begin on the dates which our securities first commenced trading.
 
Holders of ordinary shares should obtain current market quotations for their securities. There can be no assurance that a trading market will develop for these securities.
 
Status of Outstanding Ordinary Shares.  As of June 25, 2010, we had a total of 6,688,919 ordinary shares issued and outstanding.
 
Holders.  As of June 25, 2010 there were, of record, 34 holders of ordinary shares. We believe the number of beneficial holders of each of these securities is significantly greater than the number of record holders.

B.  Plan of Distribution

Not Applicable.

C.  Markets

Our ordinary shares, are quoted on the Nasdaq Capital Market under the symbols CABL.
 
On March 1, 2010, we announced that effective April 4, 2010, our units (CABLU) will be separated into its component securities, consisting of one share of common stock (CABL) and two warrants. As a result, beginning April 4, 2010, the Units  (CABLU) and Warrants (CABLW) ceased trading. The warrants expired on April 4, 2010 and the reverse stock split was applied to each ordinary share resulting from the expired unit.

 
56

 

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

The description of certain terms and provisions of our Amended and Restated Memorandum and Articles of Association is incorporated by reference to our Registration Statement filed on Form S-4 filed with the SEC on March 21, 2008.

C.  Material Contracts

During the fiscal years ended December 31, 2009 and 2008, the Company has not entered into any material agreements which are not described elsewhere in this Annual Report except that:

In June and July of 2008, China Cablecom and JYNT entered into a set of loan agreements which are detailed below.

Offshore Loan Agreements.  China Cablecom and Rich Dynamic Limited, a Hong Kong company (“RDL”), entered into two loan agreements respectively on June 10, 2008 and July 29, 2008 (“Offshore Loan Agreements”), whereby China Cablecom agreed to extend loans to RDL.  RDL’s loan repayment obligations under the Offshore Loan Agreements were secured under share pledge agreements, in which RDL agreed to pledge its equity interest in Chengdu Chuanghong to China Cablecom as security for RDL’s performance of its loans repayment obligations under the Offshore Loan Agreements.

Onshore Loan Agreements.  Dong Wanling and JYNT entered into two loan agreements respectively on June 10, 2008 and July 29, 2008 (“Onshore Loan Agreements“), whereby Dong Wanling agreed to extend two loans to JYNT which amount in aggregate to RMB 254,600,000. To date, we have received a payment of RMB244,000,000 in aggregate for both the Onshore Loan Agreement and the Offshore Loan Agreement. We will settle the Onshore Loan Agreement and the Offshore Loan Agreement once the payment under the Onshore Loan Agreement has been made in full.

 
57

 

D.  Exchange controls
 
China’s government imposes control over the convertibility of RMB into foreign currencies. Under the current unified floating exchange rate system, the People’s Bank of China publishes a daily exchange rate for RMB, or the PBOC Exchange Rate, based on the previous day’s dealings in the inter-bank foreign exchange market. Financial institutions authorized to deal in foreign currency may enter into foreign exchange transactions at exchange rates within an authorized range above or below the PBOC Exchange Rate according to market conditions.
 
Pursuant to the Foreign Exchange Control Regulations issued by the State Council on January 29, 1996 and effective as of April 1, 1996 (and amended on January 14, 1997) and the Administration of Settlement, Sale and Payment of Foreign Exchange Regulations which came into effect on July 1, 1996 regarding foreign exchange control, or the Regulations, conversion of Renminbi into foreign exchange by foreign investment enterprises for current account items, including the distribution of dividends and profits to foreign investors of joint ventures, is permissible upon the proper production of qualified commercial vouchers or legal documents as required by the Regulations. Foreign investment enterprises are permitted to remit foreign exchange from their foreign exchange bank account in China upon the proper production of, inter alia, the board resolutions declaring the distribution of the dividend and payment of profits. Conversion of RMB into foreign currencies and remittance of foreign currencies for capital account items, including direct investment, loans, security investment, is still subject to the approval of the State Administration of Foreign Exchange, or SAFE, in each such transaction. On January 14, 1997, the State Council amended the Foreign Exchange Control Regulations and added, among other things, an important provision, as Article 5 provides that the State shall not impose restrictions on recurring international payments and transfers.
 
Under the Regulations, foreign investment enterprises are required to open and maintain separate foreign exchange accounts for capital account items (but not for other items). In addition, foreign investment enterprises may only buy, sell and/or remit foreign currencies at those banks authorized to conduct foreign exchange business upon the production of valid commercial documents and, in the case of capital account item transactions, document approval from SAFE.
 
Currently, foreign investment enterprises are required to apply to SAFE for “foreign exchange registration certificates for foreign investment enterprises.” With such foreign exchange registration certificates (which are granted to foreign investment enterprises, upon fulfilling specified conditions and which are subject to review and renewal by SAFE on an annual basis) or with the foreign exchange sales notices from the SAFE (which are obtained on a transaction-by-transaction basis), foreign-invested enterprises may enter into foreign exchange transactions at banks authorized to conduct foreign exchange business to obtain foreign exchange for their needs.

E. Taxation

BVI Tax Considerations
 
The Government of the British Virgin Islands, will not, under existing legislation, impose any income, corporate or capital gains tax, estate duty, inheritance tax, gift tax or withholding tax upon the Company or its shareholders or warrant holders.  The British Virgin Islands are not party to any double taxation treaties.

The Company and all distributions, interest and other amounts paid by the Company to persons who are not persons resident in the British Virgin Islands are exempt from the provisions of the Income Tax Act in the British Virgin Islands and any capital gains realized with respect to any shares, debt obligations or other securities of the Company by persons who are not resident in the British Virgin Islands are exempt from all forms of taxation in the British Virgin Islands.  As of January 1, 2007, the Payroll Taxes Act, 2004 came into force. It will not apply to the Company except to the extent the Company has employees (and deemed employees) rendering services to the Company wholly or mainly in the British Virgin Islands.  The Company at present has no employees in the British Virgin Islands and has no intention of having any employees in the British Virgin Islands.

 
58

 

No estate, inheritance, succession or gift tax, rate, duty, levy or other charge is payable by persons who are not persons resident in the British Virgin Islands with respect to any shares, debt obligations or other securities of the Company.

All instruments relating to transactions in respect of the shares, debt obligations or other securities of the Company and all instruments relating to other transactions relating to the business of the Company are exempt from the payment of stamp duty in the British Virgin Islands.

There are currently no withholding taxes or exchange control regulations in the British Virgin Islands applicable to the Company or its shareholders or warrant holders.

United States Federal Income Taxation
 
General
 
The following is a summary of the material U.S. federal income tax consequences of owning and disposing of our units, ordinary shares and warrants, sometimes referred to as our securities, to holders of our securities. As used in this discussion, references to "we", "us" and "our" refer to China Cablecom Holdings, Ltd. Because the components of a unit are separable at the option of the holder, the holder of a unit should be treated, for U.S. federal income tax purposes, as the owner of the underlying ordinary share and warrant components of the unit, as the case may be. As a result, the discussion below of the U.S. federal income tax consequences with respect to actual holders of ordinary shares and warrants should also apply to the holder of a unit (as the deemed owner of the underlying ordinary share and warrant components of the unit). The discussion below of the U.S. federal income tax consequences to “U.S. Holders” will apply to a beneficial owner of our securities that is for U.S. federal income tax purposes:
 
 
·
an individual citizen or resident of the United States;

 
·
a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) that is created or organized (or treated as created or organized) in or under the laws of the United States, any state thereof or the District of Columbia;

 
·
an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or

 
·
a trust if (i) a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons are authorized to control all substantial decisions of the trust, or (ii) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
 
If a beneficial owner of our ordinary shares and warrants is not described as a U.S. Holder and is not an entity treated as a partnership or other pass-through entity for U.S. federal income tax purposes, such owner will be considered a “Non-U.S. Holder.” The U.S. federal income tax consequences applicable specifically to Non-U.S. Holders is described below under the heading “Non-U.S. Holders.”

This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), its legislative history, Treasury regulations promulgated thereunder, published rulings and court decisions, all as currently in effect. These authorities are subject to change or differing interpretations, possibly on a retroactive basis.
 
This discussion does not address all aspects of U.S. federal income taxation that may be relevant to us or to any particular holder based on such holder’s individual circumstances. In particular, this discussion considers only holders that own our ordinary shares and warrants as capital assets within the meaning of Section 1221 of the Code, and does not address the potential application of the Medicare contribution tax on certain unearned income or the alternative minimum tax. In addition, this discussion does not address or the U.S. federal income tax consequences to holders that are subject to special rules, including:

 
·
financial institutions or financial services entities;

 
59

 

 
·
broker-dealers;

 
·
taxpayers subject to the mark-to-market accounting rules under Section 475 of the Code;

 
·
tax-exempt entities;

 
·
governments or agencies or instrumentalities thereof;

 
·
insurance companies;

 
·
regulated investment companies;

 
·
real estate investment trusts;

 
·
certain expatriates or former long-term residents of the United States;

 
·
persons that actually or constructively own 5% or more of our voting shares;

 
·
persons that acquired our ordinary shares or warrants pursuant to an exercise of employee share options, in connection with employee share incentive plans or otherwise as compensation;

 
·
persons that hold our ordinary shares or warrants as part of a straddle, constructive sale, hedging, conversion or other integrated transaction; or

 
·
persons whose functional currency is not the U.S. dollar.

This discussion does not address any aspect of U.S. federal non-income tax laws, such as gift or estate tax laws, state, local or non-U.S. tax laws, or except as discussed herein, any tax reporting obligations of a holder of our securities. Additionally, the discussion does not consider the tax treatment of partnerships or other pass-through entities or persons who hold our ordinary shares or warrants through such entities. If a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of our ordinary shares or warrants, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership.
 
We have not sought, and will not seek, a ruling from the Internal Revenue Service (“IRS”) or an opinion of counsel as to any U.S. federal income tax consequence described herein. The IRS may disagree with the description herein, and its determination may be upheld by a court. Moreover, there can be no assurance that future legislation, regulations, administrative rulings or court decisions will not adversely affect the accuracy of the statements in this discussion.

BECAUSE OF THE COMPLEXITY OF THE TAX LAWS AND BECAUSE THE TAX CONSEQUENCES TO US OR TO ANY PARTICULAR HOLDER OF OUR SECURITIES MAY BE AFFECTED BY MATTERS NOT DISCUSSED HEREIN, EACH HOLDER OF OUR SECURITIES IS URGED TO CONSULT WITH ITS TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE ACQUISITION AND THE OWNERSHIP AND DISPOSITION OF OUR SECURITIES, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND NON-U.S. TAX LAWS, AS WELL AS U.S. FEDERAL TAX LAWS AND ANY APPLICABLE TAX TREATIES.

 
60

 

Tax Consequences to U.S. Holders of Our Ordinary Shares and Warrants
 
Taxation of Distributions Paid on Ordinary Shares
 
Subject to the passive foreign investment company, or “PFIC”, rules discussed below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any cash dividend paid on our ordinary shares. A cash distribution on our ordinary shares will be treated as a dividend for U.S. federal income tax purposes to the extent the distribution is paid out of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes). Such dividend will not be eligible for the dividends-received deduction generally allowed to U.S. corporations in respect of dividends received from other U.S. corporations. Such distributions in excess of such earnings and profits will be applied against and reduce the U.S. Holder’s basis in its ordinary shares and, to the extent in excess of such basis, will be treated as gain from the sale or exchange of such ordinary shares.
 
With respect to non-corporate U.S. Holders for taxable years beginning before January 1, 2011, dividends may be taxed at the lower applicable regular long term capital gains rate (see “— Taxation on the Disposition of Ordinary Shares and Warrants” below) provided that (1) our ordinary shares are readily tradable on an established securities market in the United States or in the event we are treated as a PRC resident enterprise under the EIT law, we are eligible for benefits of the income tax treaty between the United States and the PRC, (2) we are not a PFIC, as discussed below, for either the taxable year in which the dividend was paid or the preceding taxable year, and (3) certain holding period requirements are met. Under recently published IRS authority, shares are considered for purposes of clause (1) above to be readily tradable on an established securities market in the United States only if they are listed on certain exchanges, which presently include the Nasdaq Capital Market.  While our ordinary shares are currently listed and traded on the Nasdaq Capital Market, U.S. Holders nevertheless should consult their own tax advisors regarding the availability of the lower rate for any dividends paid with respect to our ordinary shares.
 
If PRC taxes apply to dividends paid to a U.S. Holder on our ordinary shares, such taxes may be treated as foreign taxes eligible for a deduction from such holder's U.S. federal taxable income or a foreign tax credit against such holder’s U.S. federal income tax liability (subject to applicable conditions and limitations), and a U.S. Holder may be entitled to certain benefits under the income tax treaty between the United States and the PRC. U.S. Holders should consult their own tax advisors regarding the deduction or credit for any such PRC tax and their eligibility for the benefits of the income tax treaty between the United States and the PRC.
 
Taxation on the Disposition of Ordinary Shares and Warrants
 
Upon a sale or other taxable disposition of our ordinary shares or warrants, and subject to the PFIC rules discussed below, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized and the U.S. Holder’s adjusted tax basis in the ordinary shares or warrants. See “— Exercise or Lapse of a Warrant” below for a discussion regarding a U.S. Holder’s basis in the ordinary shares acquired pursuant to the exercise of a warrant.
 
The regular U.S. federal income tax rate on capital gains recognized by U.S. Holders generally is the same as the regular U.S. federal income tax rate on ordinary income, except that long-term capital gains recognized by non-corporate U.S. Holders are generally subject to U.S. federal income tax at a maximum regular rate of 15% for taxable years beginning before January 1, 2011 (and 20% thereafter). Capital gain or loss will constitute long-term capital gain or loss if the U.S. Holder’s holding period for the ordinary shares exceeds one year. The deductibility of capital losses is subject to various limitations.
 
If PRC taxes apply to any gain from the disposition of our ordinary shares or warrants by a U.S. Holder, such taxes may be treated as foreign taxes eligible for a deduction from such holder's U.S. federal taxable income or a foreign tax credit against such holder’s U.S. federal income tax liability (subject to applicable deductions and limitations), and a U.S. Holder may be entitled to certain benefits under the income tax treaty between the United States and the PRC. U.S. Holders should consult their own tax advisors regarding the deduction or credit for any such PRC tax and their eligibility for the benefits of the income tax treaty between the United States and the PRC.

 
61

 
 
Exercise or Lapse of a Warrant
 
Subject to the discussion of the PFIC rules below, a U.S. Holder generally will not recognize gain or loss upon the acquisition of ordinary shares on the exercise of a warrant for cash. Ordinary shares acquired pursuant to the exercise of a warrant for cash generally will have a tax basis equal to the U.S. Holder’s tax basis in the warrant, increased by the amount paid to exercise the warrant. The holding period of such ordinary shares generally would begin on the day after the date of exercise of the warrant. The terms of a warrant provide for an adjustment to the number of ordinary shares for which the warrant may be exercised or to the exercise price of the warrant, in certain events. Such adjustment may, under certain circumstances, result in constructive distributions that could be taxable to the U.S. Holder of the warrants. Conversely, the absence of an appropriate adjustment similarly may result in a constructive distribution that could be taxable to the U.S. Holders of the ordinary shares. See “—Taxation of Distributions Paid on Ordinary Shares,” above. If a warrant is allowed to lapse unexercised, a U.S. Holder generally will recognize a capital loss equal to such holder’s tax basis in the warrant. If a warrant is exercised other than by the payment of the exercise price in cash, the tax treatment of such an exercise may vary from that described above. U.S. Holders should consult their own tax advisors regarding the tax treatment of such an exercise.
 
Passive Foreign Investment Company Rules
 
A foreign corporation will be a passive foreign investment company, or PFIC, if at least 75% of its gross income in a taxable year, including its pro rata share of the gross income of any company in which it is considered to own at least 25% of the shares by value, is passive income. Alternatively, a foreign corporation will be a PFIC if at least 50% of its assets in a taxable year, ordinarily determined based on fair market value and averaged quarterly over the year, including its pro rata share of the assets of any company in which it is considered to own at least 25% of the shares by value, are held for the production of, or produce, passive income. Passive income generally includes dividends, interest, rents and royalties (other than certain rents or royalties derived from the active conduct of a trade or business), and gains from the disposition of passive assets.
 
Based on the composition (and estimated values) of the assets and the nature of the income of us and our subsidiaries in 2009, we do not anticipate that we will be treated as a PFIC in 2009. Notwithstanding the foregoing, our view that we will not be treated as a PFIC in 2009 is not free from doubt because of, among other things, the significant cash position and uncertainties relating to the actual values of the other assets of us and our subsidiaries in 2009. Our actual PFIC status for any subsequent taxable year will not be determinable until after the end of such taxable year. Accordingly, there can be no assurance with respect to our status as a PFIC for 2009 or any subsequent taxable year.
 
If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder of our ordinary shares or warrants and, in the case of our ordinary shares, the U.S. Holder did not make either a timely qualified electing fund (“QEF”) election for the first taxable year of its holding period for our ordinary shares or a mark-to-market election, as described below, such holder will be subject to special rules with respect to:
 
 
·
any gain recognized by the U.S. Holder on the sale or other disposition of its ordinary shares or warrants; and

 
·
any “excess distribution” made to the U.S. Holder (generally, any distributions to such U.S. Holder during a taxable year of the U.S. Holder that are greater than 125% of the average annual distributions received by such U.S. Holder in respect of the ordinary shares during the three preceding taxable years or, if shorter, such U.S. Holder’s holding period for the ordinary shares).
 
Under these rules,
 
 
·
the U.S. Holder’s gain or excess distribution will be allocated ratably over the U.S. Holder’s holding period for the ordinary shares or warrants;

 
·
the amount allocated to the taxable year in which the U.S. Holder recognized the gain or received the excess distribution, or to the period in the U.S. Holder's holding period before the first day of our first taxable year in which we qualified as a PFIC, will be taxed as ordinary income;

 
·
the amount allocated to other taxable years (or portions thereof) will be taxed at the highest tax rate in effect for that year and applicable to the U.S. Holder; and

 
62

 

 
·
the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such other taxable year of the U.S. Holder.
 
In general, a U.S. Holder may avoid the PFIC tax consequences described above in respect to our ordinary shares by making a timely QEF election to include in income its pro rata share of our net capital gains (as long-term capital gain) and other earnings and profits (as ordinary income), on a current basis, in each case whether or not distributed. A U.S. Holder may make a separate election to defer the payment of taxes on undistributed income inclusions under the QEF rules, but if deferred, any such taxes will be subject to an interest charge.
 
A U.S. Holder may not make a QEF election with respect to its warrants. As a result, if a U.S. Holder sells or otherwise disposes of a warrant (other than upon exercise of a warrant), any gain recognized generally will be subject to the special tax and interest charge rules treating the gain as an excess distribution, as described above, if we were a PFIC at any time during the period the U.S. Holder held the warrants. If a U.S. Holder that exercises such warrants properly makes a QEF election with respect to the newly acquired ordinary shares (or has previously made a QEF election with respect to our ordinary shares), the QEF election will apply to the newly acquired ordinary shares, but the adverse tax consequences relating to PFIC shares will continue to apply with respect to such ordinary shares (which generally will be deemed to have a holding period for the purposes of the PFIC rules that includes the period the U.S. Holder held the warrants), unless the U.S. Holder makes a purging election. The purging election creates a deemed sale of such shares at their fair market value. The gain recognized by the purging election will be subject to the special tax and interest charge rules treating the gain as an excess distribution, as described above. As a result of the purging election, the U.S. Holder will have a new basis and holding period in the ordinary shares acquired upon the exercise of the warrants for purposes of the PFIC rules.
 
The QEF election is made on a shareholder-by-shareholder basis and, once made, can be revoked only with the consent of the IRS. A U.S. Holder generally makes a QEF election by attaching a completed IRS Form 8621 (Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund), including the information provided in a PFIC annual information statement, to a timely filed U.S. federal income tax return for the tax year to which the election relates. Retroactive QEF elections generally may be made only by filing a protective statement with such return and if certain other conditions are met or with the consent of the IRS.
 
In order to comply with the requirements of a QEF election, a U.S. Holder must receive certain information from us. Upon request from a U.S. Holder, we will endeavor to provide to the U.S. Holder no later than 90 days after the request such information as the IRS may require, including a PFIC annual information statement, in order to enable the U.S. Holder to make and maintain a QEF election. However, there is no assurance that we will have timely knowledge of our status as a PFIC in the future or of the required information to be provided.
 
If a U.S. Holder has elected the application of the QEF rules to our ordinary shares, and the special tax and interest charge rules do not apply to such shares (because of a timely QEF election for our first tax year as a PFIC in which the U.S. Holder holds (or is deemed to hold) such shares or a purge of the PFIC taint pursuant to a purging election, as described above), any gain recognized on the sale of our ordinary shares generally will be taxable as capital gain and no interest charge will be imposed. As discussed above, U.S. Holders of a QEF are currently taxed on their pro rata shares of its earnings and profits, whether or not distributed. In such case, a subsequent distribution of such earnings and profits that were previously included in income generally will not be taxable as a dividend to such U.S. Holders. The tax basis of a U.S. Holder’s shares in a QEF will be increased by amounts that are included in income, and decreased by amounts distributed but not taxed as dividends, under the above rules. Similar basis adjustments apply to property if by reason of holding such property the U.S. Holder is treated under the applicable attribution rules as owning shares in a QEF.

 
63

 
 
Although a determination as to our PFIC status will be made annually, an initial determination that our company is a PFIC will generally apply for subsequent years to a U.S. Holder who held ordinary shares or warrants while we were a PFIC, whether or not we meet the test for PFIC status in those years. A U.S. Holder who makes the QEF election discussed above for our first tax year in which the U.S. Holder holds (or is deemed to hold) our ordinary shares as a PFIC, however, will not be subject to the PFIC tax and interest charge rules discussed above in respect to such shares. In addition, such U.S. Holder will not be subject to the QEF inclusion regime with respect to such shares for any taxable year of us that ends within or with a taxable year of the U.S. Holder and in which we are not a PFIC. On the other hand, if the QEF election is not effective for each of our tax years in which we are a PFIC and the U.S. Holder holds (or is deemed to hold) our ordinary shares, the PFIC rules discussed above will continue to apply to such shares unless the holder makes a purging election, as described above, and pays the tax and interest charge with respect to the gain inherent in such shares attributable to the pre-QEF election period.

Alternatively, if a U.S. Holder, at the close of its taxable year, owns shares in a PFIC that is treated as marketable stock, the U.S. Holder may make a mark-to-market election with respect to such shares for such taxable year. If the U.S. Holder makes a valid mark-to-market election for the first tax year of the U.S. Holder in which the U.S. Holder holds (or is deemed to hold) ordinary shares in us and for which we are determined to be a PFIC, such holder generally will not be subject to the PFIC rules described above in respect to its ordinary shares. Instead, in general, the U.S. Holder will include as ordinary income each year the excess, if any, of the fair market value of its ordinary shares at the end of its taxable year over the adjusted basis in its ordinary shares. The U.S. Holder also will be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted basis of its ordinary shares over the fair market value of its ordinary shares at the end of its taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). The U.S. Holder’s basis in its ordinary shares will be adjusted to reflect any such income or loss amounts, and any further gain recognized on a sale or other taxable disposition of the ordinary shares will be treated as ordinary income. Currently, a mark-to-market election may not be made with respect to warrants.
 
The mark-to-market election is available only for stock that is regularly traded on a national securities exchange that is registered with the Securities and Exchange Commission (including the Nasdaq Capital Market), or on a foreign exchange or market that the IRS determines has rules sufficient to ensure that the market price represents a legitimate and sound fair market value. While our ordinary shares are currently listed and traded on the Nasdaq Capital Market, U.S. Holders nevertheless should consult their own tax advisors regarding the availability and tax consequences of a mark-to-market election in respect to our ordinary shares under their particular circumstances.
 
If we are a PFIC and, at any time, have a non-U.S. subsidiary that is classified as a PFIC, U.S. Holders generally would be deemed to own a portion of the shares of such lower-tier PFIC, and generally could incur liability for the deferred tax and interest charge described above if we receive a distribution from, or dispose of all or part of our interest in, the lower-tier PFIC. Upon request, we will endeavor to cause any lower-tier PFIC to provide to a U.S. Holder no later than 90 days after the request the information that may be required to make or maintain a QEF election with respect to the lower-tier PFIC. However, there is no assurance that we will have timely knowledge of the status of such lower-tier PFIC or will be able to cause the lower-tier  PFIC to provide the required information. U.S. Holders are urged to consult their own tax advisors regarding the tax issues raised by lower-tier PFICs.
 
If a U.S. Holder owns (or is deemed to own) shares during any year in a PFIC, such holder may have to file an IRS Form 8621 (whether or not a QEF election or mark-to-market election is made).
 
The rules dealing with PFICs and with the QEF and mark-to-market elections are very complex and are affected by various factors in addition to those described above. Accordingly, U.S. Holders of our ordinary shares should consult their own tax advisors concerning the application of the PFIC rules to our ordinary shares and warrants under their particular circumstances.

 
64

 
 
Tax Consequences to Non-U.S. Holders of Our Ordinary Shares and Warrants
 
Dividends paid (or deemed paid) to a Non-U.S. Holder in respect to its ordinary shares generally will not be subject to U.S. federal income tax, unless the dividends are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base that such holder maintains in the United States).
 
In addition, a Non-U.S. Holder generally will not be subject to U.S. federal income tax on any gain attributable to a sale or other disposition of our ordinary shares or warrants unless such gain is effectively connected with its conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base that such holder maintains in the United States) or the Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of sale or other disposition and certain other conditions are met (in which case, such gain from United States sources generally is subject to tax at a 30% rate or a lower applicable tax treaty rate).
 
Dividends and gains that are effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base in the United States) generally will be subject to tax at the same regular U.S. federal income tax  rates applicable to a comparable U.S. Holder and, in the case of a Non-U.S. Holder that is a corporation for U.S. federal income tax purposes, may also be subject to an additional branch profits tax at a 30% rate or a lower applicable tax treaty rate.
 
Backup Withholding and Information Reporting
 
In general, information reporting for U.S. federal income tax purposes will apply to distributions made on our ordinary shares within the United States to a non-corporate U.S. Holder and to the proceeds from sales and other dispositions of our ordinary shares or warrants by a non-corporate U.S. Holder to or through a U.S. office of a broker. Payments made (and sales and other dispositions effected at an office) outside the United States will be subject to information reporting in limited circumstances.
 
In addition, backup withholding of United States federal income tax, currently at a rate of 28%, generally will apply to dividends paid on our ordinary shares to a non-corporate U.S. Holder and the proceeds from sales and other dispositions of shares or warrants by a non-corporate U.S. Holder, in each case who:
 
 
·
fails to provide an accurate taxpayer identification number;

 
·
is notified by the IRS that backup withholding is required; or

 
·
in certain circumstances, fails to comply with applicable certification requirements.
 
A Non-U.S. Holder generally may eliminate the requirement for information reporting and backup withholding by providing certification of its foreign status, under penalties of perjury, on a duly executed applicable IRS Form W-8 or by otherwise establishing an exemption.
 
Backup withholding is not an additional tax. Rather, the amount of any backup withholding will be allowed as a credit against a U.S. Holder’s or a Non-U.S. Holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that certain required information is timely furnished to the IRS. Holders are urged to consult their own tax advisors regarding the application of backup withholding and the availability of and procedure for obtaining an exemption from backup withholding in their particular circumstances.
 
F. Dividends and paying agents
 
Not applicable.
 
G. Statement by experts
 
Not applicable.

 
65

 
 
H.  Documents on display
 
Documents concerning us that are referred to in this document may be inspected at our principal executive offices at Suite 4612, Tower 1 Plaza 66, 1 Nanjing West Road, Shanghai, 200040, People’s Republic of China.

In addition, we will file annual reports and other information with the Securities and Exchange Commission. We will file annual reports on Form 20-F and submit other information under cover of Form 6-K. As a foreign private issuer, we are exempt from the proxy requirements of Section 14 of the Exchange Act and our officers, directors and principal shareholders are exempt from the insider short-swing disclosure and profit recovery rules of Section 16 of the Exchange Act. Annual reports and other information we file with the Commission may be inspected at the public reference facilities maintained by the Commission at Room 1024, 100 F. Street, N.E., Washington, D.C. 20549, and at its regional offices located at 233 Broadway, New York, New York 10279 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and copies of all or any part thereof may be obtained from such offices upon payment of the prescribed fees. You may call the Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms and you can request copies of the documents upon payment of a duplicating fee, by writing to the Commission. In addition, the Commission maintains a web site that contains reports and other information regarding registrants (including us) that file electronically with the Commission which can be assessed at http://www.sec.gov.

I.  Subsidiary Information
 
Not required.
 
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
   
The Company anticipates its primary market risk, if any, will be related to fluctuations in exchange rates.  Exchange rate risk may arise if the Company is required to use different currencies for various aspects of its operations.  Although the principal currency of our primary revenue source will be the Chinese RMB, the corporate expenses of the Company (e.g., rent, telephone, payroll, professional fees etc.) are likely to be paid in US Dollars. The Company intends to monitor its exchange rate risk and take necessary actions to reduce its exposure, though the Company is not currently exploring hedging opportunities.

We do not use derivative financial instruments.  
 
ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

 
66

 

PART II
 
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable
 
ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not applicable
 
ITEM 15.     CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures
 
An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the December 31, 2009. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, have concluded that our disclosure controls and procedures as of December 31, 2009 were effective and that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.
 
(b) Management’s annual report on internal control over financial reporting
 
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
 
 Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Given the size of our Company in terms of capital and personnel, the controls generally involve direct observations by the CFO and CEO, and the review of all financial reporting documents by the CFO. Management has concluded that our internal controls over financial reporting are effective.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can only provide reasonable assurances with respect to financial statement preparation and presentation. In addition, any evaluation of effectiveness for future periods is subject to the risk that controls may become inadequate because of changes in conditions in the future.

(c) Attestation report of the register public accounting firms
 
Not applicable.
 
(d) Changes in Internal Controls over Financial Reporting
 
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the year ended December 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. It should be noted that while our management believes that our disclosure controls and procedures provide a reasonable level of assurance; our management does not expect that our disclosure controls and procedures or internal financial controls will prevent all errors or fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

 
67

 

ITEM 16.     [RESERVED]

ITEM 16A.  AUDIT COMMITTEE FINANCIAL EXPERT.

Our Board of Directors has determined that Emmanuel J. Olympitis, is an independent financial expert serving on our audit committee.
 
ITEM 16B.  CODE OF ETHICS.

The Company has adopted a Code of Conduct that applies to its Chief Executive Officer and all of its directors, officers and employees, or persons performing similar functions. A copy of our Code of Conduct is available at its corporate office in the PRC. Any future changes to the Code of Conduct will be posted on the Company’s website or filed as an exhibit to a report filed with the SEC within five business days of the change being effective.
 
ITEM 16C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The following table represents aggregate fees billed to the Company for fiscal years ended December 31, 2009 and 2008 by UHY Vocation HK CPA Limited, the Company’s principal accounting firm.

Accountant Fees and Services
 
2009
   
2008
 
Audit Fees
  $ 324,300     $ 259,800  
Audit Related Fees
    20,000       348,200  
    $ 344,300     $ 608,000  

Audit Fees

The audit fees for the years ended December 31, 2009 and 2008, respectively, were paid for professional services rendered for the audits of our consolidated financial statements, quarterly reviews, consents, and assistance with review of documents filed with the SEC.

ITEM 16D.  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.

Not applicable.
 
ITEM 16E.  PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.

Not applicable. 

ITEM 16F.  CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT.

Not applicable.

ITEM 16G.  CORPORATE GOVERNANCE.

Not applicable.

 
68

 

PART III

ITEM 17. FINANCIAL STATEMENTS

Our audited Financial Statements are included as the “F” pages attached to this report.

All financial statements in this Annual Report, unless otherwise stated, are presented in accordance with US GAAP.
 
ITEM 18. FINANCIAL STATEMENTS

The Company has elected to provide financial statements pursuant to ITEM 17.
 
ITEM 19. EXHIBITS
 
Exhibit
Number
 
Description of Exhibit
     
1.1
 
China Cablecom Holdings Amended and Restated Memorandum of Association
     
1.2
 
China Cablecom Holdings Amended and Restated Articles of Association
     
2.1 (1)
 
Specimen Unit Certificate
     
2.2 (1)
 
Specimen Ordinary Share Certificate
     
2.3 (1)
 
Form of Unit Purchase Option
     
2.4 (1)
 
Form of Warrant
     
2.5 (2)
 
Form of Warrant Agreement
     
4.1 (1)
 
The China Cablecom Holdings 2007 Omnibus Securities and Incentive Plan
     
4.2 (1)
 
Warrants Exercise Proceeds Award Agreement between China Cablecom Holdings and James S. Cassano
     
4.3 (1)
 
Warrants Exercise Proceeds Award Agreement between China Cablecom Holdings and Kerry Proper
     
4.4 (1)
 
Warrants Exercise Proceeds Award Agreement between China Cablecom Holdings and Jonathan Kalman
     
4.5 (1)
 
Warrants Exercise Proceeds Award Agreement between China Cablecom Holdings and Clive Ng
     
4.6 (1)
 
Incentive Share Agreement between China Cablecom Holdings and James S. Cassano
     
4.7 (1)
 
Incentive Share Agreement between China Cablecom Holdings and Kerry Proper
     
4.8 (1)
 
Incentive Share Agreement between China Cablecom Holdings and Jonathan Kalman
     
4.9 (1)
 
Form of Consulting Agreement between China Cablecom Holdings and China Cablecom Holdings Limited, a Cayman Islands limited company
     
4.10 (1)
 
Form of Employment Agreement between China Cablecom Holdings and Clive Ng
     
4.11 (1)
 
Promissory Note from China Cablecom to Jaguar in the initial principal amount of $475,000
     
4.12 (1)
 
Purchase Agreement, dated as of September 19, 2007, by and among China Cablecom Ltd. and the entities listed on the Schedule of Investors attached thereto as Schedule I

 
69

 

4.13 (1)
 
Form of First Closing Promissory Note
     
4.14 (1)
 
Registration Rights Agreement, dated September 19, 2007, by and among China Cablecom Ltd. and the entities listed on the Schedule A attached thereto
     
4.15 (1)
 
Share Pledge Agreement, dated as of September 19, 2007, by Clive Ng in favor of the persons and entities listed on the Schedule of Investors attached thereto as Schedule III
     
4.16 (2)
 
Form of Registration Rights Agreement among the Registrant and the Initial Stockholders
     
4.17( 2)
 
Form of Stock Escrow Agreement between the Registrant, Continental Stock Transfer & Trust Company and the Initial Stockholders
     
4.18 (2)
 
Letter Agreement among the Registrant, Early Bird Capital, Inc. and Jonathan Kalman
     
4.19 (2)
 
Letter Agreement among the Registrant, Early Bird Capital, Inc. and C. Richard Corl
     
4.20 (2)
 
Letter Agreement among the Registrant, Early Bird Capital, Inc. and James S. Cassano
     
4.21 (2)
 
Letter Agreement among the Registrant, Early Bird Capital, Inc. and John J. Hoey
     
4.22 (2)
 
Letter Agreement among the Registrant, Early Bird Capital, Inc. and William J. Westervelt, Jr.
     
4.23 (2)
 
Letter Agreement among the Registrant, Early Bird Capital, Inc. and David W. Tralka
     
4.24 (2)
 
Letter Agreement among the Registrant, Early Bird Capital, Inc. and Robert Moreyra
     
4.25 (2)
 
Letter Agreement among the Registrant, Early Bird Capital, Inc. and Peter Collins
     
4.26 (2)
 
Letter Agreement among the Registrant, Early Bird Capital, Inc. and Sapphire Canyon Investments LLC
     
4.27 (2)
 
Letter Agreement among the Registrant, Early Bird Capital, Inc. and Corl LLC
     
4.28 (2)
 
Letter Agreement among the Registrant, Early Bird Capital, Inc. and JSC Group Holdings LLC
     
4.29 (2)
 
Letter Agreement among the Registrant, Early Bird Capital, Inc. and PA Holdings, LLC
     
4.30 (1)
 
Framework Agreement by and between Binzhou Broadcasting and Television Network Co., Ltd. and Jinan Youxiantong Network Technology Co., Ltd., August 2007
     
4.31 (1)
 
Asset Transfer Agreement by and between Binzhou Broadcasting and Television Network Co., Ltd. and Binzhou Broadcast and Television Information Network Co., Ltd., September 2007
     
4.32 (1)
 
Exclusive Service Agreement between Binzhou Broadcasting and Television Network Co., Ltd. and Binzhou Broadcast and Television Information Network Co., Ltd., September 2007
     
4.33 (1)
 
Technical Services Agreement between Binzhou Broadcast and Television Information and Network Co., Ltd. and Jinan Youxiantong Network Technology Co., Ltd., September 2007
     
4.34 (1)
 
Equity Option Agreement by and between Heze Cablecom Network Technology Co., Ltd. and Liang Yue Jing, July 2007
     
4.35 (1)
 
Equity Option Agreement by and between Heze Cablecom Network Technology Co., Ltd. and Pu Yue, July 2007
     
4.36 (1)
 
Equity Pledge Agreement by and between Heze Cablecom Network Technology Co., Ltd. and Lian Yue Jing, July 2007
     
4.37 (1)
 
Equity Pledge Agreement by and between Heze Cablecom Network Technology Co., Ltd. and Pu Yue, July 2007

 
70

 

4.38 (1)
 
Loan Agreement by and between China Cablecom Co. Ltd. (Hong Kong) and Liang Yue-Jing, June 2007
     
4.39 (1)
 
Loan Agreement by and between China Cablecom Co. Ltd. (Hong Kong) and Pu Yue, June 2007
     
4.40 (1)
 
Power of Attorney granted by Lian Yue Jing, July 16, 2007
     
4.41 (1)
 
Power of Attorney granted by Pue Yue, July 16, 2007
     
4.42 (1)
 
Trustee Arrangement Letter, by and between China Cablecom Co., Ltd. (Hong Kong) and Lian Yue Jing, June 30, 2007
     
4.43 (1)
 
Trustee Arrangement Letter, by and between China Cablecom Co., Ltd. (Hong Kong) and Pu Yue, June 30, 2007
     
4.44 (1)
 
Supplementary Agreement to the Framework Agreement, by and between Binzhou Broadcasting and Television Network, Co., Ltd. and Jinan Youxiantong Network Technology Co. Ltd., dated August 6, 2007
     
4.45 (3)
 
Settlement Agreement by and between China Broadband, Inc., China Broadband, Ltd., China Broadband, Inc., Stephen P. Cherner, Maxim Financial Corporation, Mark L. Baum, BCGU, LLC, Mark I. Lev, Wellfleet Partners, Inc., Pu Yue, Clive Ng, Chardan Capital Markets, LLC, Jaguar Acquisition Corporation and China Cablecom Holdings, Ltd. dated January 9, 2008
     
4.46 (1)
 
Form of Voting Agreement by and between Jaguar Acquisition Corporation, China Cablecom Holdings, Ltd., Certain Shareholders of Jaguar Acquisition Corporation and Clive Ng.
     
4.47 (1)
 
Form of Employment Agreement by and between China Cablecom Holdings, Ltd. and Pu Yue.
     
4.48 (4)
 
Unit Purchase Option Clarification Agreement dated as of January 30, 2008 by Jaguar Acquisition Corporation.
     
4.49 (4)
 
Warrant Clarification Agreement dated January 30, 2008 by and between Jaguar Acquisition Corporation and Continental Stock Transfer & Trust Company.
     
4.50 (5)
 
Offshore Loan Agreement between China Cablecom and Rich Dynamic Limited, dated June 10, 2008.
     
4.51 (6)
 
Offshore Loan Agreement between China Cablecom and Rich Dynamic Limited, dated July 29, 2008.
     
4.52 (7)
 
Onshore Loan Agreement between Dong Wanling and JYNT, dated June 10, 2008.
     
4.53 (8)
 
Onshore Loan Agreement between Dong Wanling and JYNT, dated June 10, 2008.
     
4.54
 
Supplement to Framework Agreement dated September 29, 2009
     
4.55
 
Form of Hubei Chutian Loan Agreement dated September 29, 2009
     
4.56
 
Subscription Agreement dated October 9, 2009
     
4.57
 
Form of New Note
     
4.58
 
New Notes Security Agreement
     
4.59
 
Senior Secured Subsidiary Guaranty

 
71

 

4.60
 
Collateral Agent Agreement
     
4.61
 
Intercreditor Agreement dated October 9, 2009
     
4.62
 
Warrant for Chardan Capital Markets LLC
     
4.63
 
Secured Notes Exchange and Waiver Agreement dated October 9, 2009
     
4.64
 
Form of New Junior Secured Notes
     
4.65
 
Junior Secured Security Agreement dated October 9, 2009
     
4.66
 
Junior Secured Subsidiary Guaranty dated October 9, 2009
     
4.67
 
Unsecured Notes Exchange and Waiver Agreement dated October 9, 2009
     
4.68
 
Form of New Unsecured Notes
     
4.69
 
Unsecured Notes Subsidiary Guaranty dated October 9, 2009
     
8.1 (9)
 
List of subsidiaries
     
11.1 (10)
 
China Cablecom Holdings Ltd. Code of Business Conduct and Ethics
     
12.1
 
Certification of Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
     
12.2
 
Certification of Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002.
     
13.1
 
Certification of Chief Executive Officer and Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002.
 
(1)
Incorporated by reference to the Company’s Registration Statement on Form S-4 (Registration No. 333-147038).

(2)
Incorporated by reference to Jaguar Acquisition Corp. Registration Statement on Form S-1 (Registration No. 333-127135).

(3)
Incorporated by reference to Exhibit No. 10.1 to the Current Report on Form 8-K filed with the SEC by China Broadband, Inc. on January 17, 2008.

(4)
Incorporated by reference to the Quarterly Report on Form 10-QSB filed with the SEC by Jaguar Acquisition Corp. on February 14, 2008.
 
(5)
Incorporated by reference to Exhibit No. 4.50 to the Annual Report on Form 20-F filed on July 15, 2009.
 
(6)
Incorporated by reference to Exhibit No. 4.51 to the Annual Report on Form 20-F filed on July 15, 2009.
 
(7)
Incorporated by reference to Exhibit No. 4.52 to the Annual Report on Form 20-F filed on July 15, 2009.
 
(8)
Incorporated by reference to Exhibit No. 4.53 to the Annual Report on Form 20-F filed on July 15, 2009.
 
(9)
Incorporated by reference to Exhibit No. 8.1 of the Annual Report on Form 20-F filed on July 15, 2009.
 
(10)
Incorporated by reference to Exhibit No. 11.1 of the Annual Report on Form 20-F filed on July 15, 2009.
 
 
72

 

SIGNATURES
 
The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
 
CHINA CABLECOM HOLDINGS, LTD.
 
           
By:
/s/ Pu Yue  
By:
/s/ Sikan Tong  
           
Name: Pu Yue
 
Name: Sikan Tong
 
Title: Chief Executive Officer
 
Title: Chief Financial Officer
 
   

 
73

 

CHINA CABLECOM HOLDINGS, LTD.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

   
Page
 
       
Report of Independent Registered Public Accounting Firm
  F-1  
Consolidated Balance Sheets
 
F-2
 
Consolidated Statements of Operations
 
F-3
 
Consolidated Statements of Comprehensive Loss
 
F-4
 
Consolidated Statements of Changes in Stockholders’ Equity (Deficiency)
 
F-5
 
Consolidated Statements of Cash Flows
 
F-6
 
Notes to Consolidated Financial Statements
 
F-8
 
 
 
74

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders
China Cablecom Holdings, Ltd.

We have audited the accompanying consolidated balance sheets of China Cablecom Holdings, Ltd. (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity (deficiency) and cash flows for the years then ended.  The Company’s management is responsible for these financial statements.  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 are we engaged to perform, an audit of its internal control over financial reporting. Our audits included 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2009 and 2008, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has incurred significant losses during 2009 and 2008, has a working capital deficit at December 31, 2009 and has relied on debt and equity financings to fund their operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ UHY Vocation HK CPA Limited
UHY Vocation HK CPA Limited
Certified Public Accountants

Hong Kong, June 30, 2010
(THE PEOPLE'S REPUBLIC OF CHINA)

 
F-1

 

CHINA CABLECOM HOLDINGS, LTD.
CONSOLIDATED BALANCE SHEETS

         
         
(restated)
 
ASSETS
           
Current Assets:
           
Cash and cash equivalents
  $ 23,938,460     $ 29,182,251  
Accounts receivable
    1,973,333       1,628,710  
Prepaid expenses and advances
    9,222,547       9,236,025  
Inventories
    6,033,914       3,744,745  
Total Current Assets
    41,168,254       43,791,731  
                 
Property, Plant & Equipment, net
    89,329,880       79,877,186  
Construction In Progress
    3,967,552       1,036,667  
Intangible assets, net
    35,042,708       37,850,441  
Goodwill
    19,275,561       19,275,561  
Other Assets:
               
Deferred financing costs, net
    1,987,215       1,243,923  
Total Assets
  $ 190,771,170     $ 183,075,509  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Current Liabilities:
               
Promissory note – net of discount
  $ -     $ 9,481,940  
Accounts payable
    17,504,073       8,872,144  
Service performance obligation – deferred revenue
    3,069,899       1,661,311  
Other current liabilities
    9,374,749       7,630,924  
Note payable – noncontrolling interest
    27,626,772       55,420,250  
Total Current Liabilities
    57,575,493       83,066,569  
Long Term Liabilities:
               
Senior secured notes, net of discount
    7,973,096       -  
Secured notes, net of discount
    17,062,563       -  
Unsecured notes, net of discount
    5,134,795       -  
Convertible notes, net of discount
    -       16,684,044  
Note payable – noncontrolling interest, net of current portion
    64,347,852       51,777,719  
Total Liabilities
    152,093,799       151,528,332  
                 
EQUITY
               
Series A convertible preferred shares, $.0005 par value; 70,000,000 authorized shares, 62,161,965 shares issued and outstanding (December 31, 2008 none issued)
    31,081       -  
Series B convertible preferred shares, $.0005 par value; 25,000,000 authorized shares, 23,158,080 shares issued and outstanding (December 31, 2008 none issued)
    11,579       -  
Ordinary shares, $.0015 par value; 51,666,667 authorized shares, 4,688,151 shares issued and outstanding (December 31, 2008 3,225,711shares issued)
    7,033       4,839  
Additional paid-in capital
    109,452,870       45,526,562  
Statutory reserves
    141,582       131,501  
Accumulated deficit
    (73,111,896 )     (16,532,864 )
Accumulated other comprehensive income
    595,396       613,064  
Shareholders’ equity
    37,127,645       29,743,102  
Non-controlling interest
    1,549,726       1,804,075  
                 
Total equity
    38,677,371       31,547,177  
Total liabilities and shareholders’ equity
  $ 190,771,170     $ 183,075,509  
 
 
F-2

 

CHINA CABLECOM HOLDINGS, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS

   
For the year ended
   
For the year ended
 
         
             
Revenue
  $ 45,563,281     $ 23,439,217  
Cost of revenue
    (29,867,222 )     (13,436,959 )
Gross profit
    15,696,059       10,002,258  
Operating expenses
               
General and administrative expenses
    (22,652,668 )     (15,125,517 )
Total operating expenses
    (22,652,668 )     (15,125,517 )
Loss from operations
    (6,956,609 )     (5,123,259 )
                 
Other income / (expenses)
               
Interest income
    151,993       340,102  
Interest expense
    (9,982,012 )     (8,741,899 )
Loss on debt extinguishment
    (39,663,466 )     -  
Other income
    845,980       680,574  
Total other expenses
    (48,647,506 )     (7,721,223 )
Loss before income taxes and non-controlling interest
    (55,604,114 )     (12,844,482 )
                 
Income taxes
    (571,981 )     (341,748 )
                 
Net loss, net of tax
    (56,176,095 )     (13,186,230 )
                 
Less:  Net profit attributable to non-controlling interest
    392,856       986,619  
Net loss attributable to China Cablecom Holdings, Ltd.
  $ (56,568,951 )   $ (14,172,849 )
                 
Loss per ordinary share:
               
- Basic and fully diluted
  $ (16.68 )   $ (5.73 )
Weighted average number of shares
               
- Basic and fully diluted
    3,391,924       2,472,504  
 
 
F-3

 

CHINA CABLECOM HOLDINGS, LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

   
For the year ended
   
For the year ended
 
         
             
Net loss
  $ (55,176,095 )   $ (13,186,230 )
Other comprehensive (loss) / income, net of tax:
               
Foreign currency translation adjustment
    (29,791 )     295,477  
Total other comprehensive (loss) / income, net of tax
    (29,791 )     295,477  
                 
Comprehensive loss
    (55,205,886 )     (12,890,753 )
Less:  Comprehensive income attributable to the non-controlling interests
    380,733       943,450  
Comprehensive loss attributable to China Cablecom Holdings, Ltd.
  $ (55,586,619 )   $ (13,834,203 )
 
 
F-4

 

CHINA CABLECOM HOLDINGS, LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
For the years ended December 31, 2009 and 2008
   
Preferred Shares
   
Series A Preferred Shares
   
Series B Preferred
Shares
   
Ordinary shares
   
Additional
Paid-in
         
Accumulated
   
Accumulated
Other
Comprehensive
   
Shareholders
   
Non-
controlling
   
Total
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
   
Capital
   
Reserves
   
Deficit
   
Income
   
Equity
   
Interest
   
Equity
 
                                                                                           
    766,680     $ 383       -     $ -       -     $ -       633,334     $ 950     $ 3,575,737     $ 46,269     $ (2,274,783 )   $ 274,418     $ 1,622,974     $ 101,123     $ 1,724,097  
                                                                                                                         
Recapitalization – reverse merger
    (766,680 )     (383 )     -       -       -       -       1,961,012       2,941       22,131,052       -       -       -       22,133,610       -       22,133,610  
                                                                                                                         
Minority Share of Capital
    -       -       -       -       -       -       -       -       -       -       -       -       -       744,871       744,871  
                                                                                                                         
Share of Minority Interest – Loan Elimination
    -       -       -       -       -       -       -       -       -       -       -       -       -       14,631       14,631  
                                                                                                                         
Allocation of proceeds from issuance of convertible notes – incentive shares
    -       -       -       -       -       -       508,331       763       9,079,667       -       -       -       9,080,430       -       9,080,430  
                                                                                                                         
Warrants exercised
    -       -       -       -       -       -       16,367       25       245,475       -       -       -       245,500       -       245,500  
                                                                                                                         
Issuance of ordinary shares as finder’s fee
    -       -       -       -       -       -       106,667       160       1,951,840       -       -       -       1,952,000       -       1,952,000  
                                                                                                                         
Allocation of proceeds from issuance of  convertible notes – beneficial conversion feature
      -         -         -         -         -         -         -         -         8,542,791         -         -         -         8,542,791         -         8,542,791  
                                                                                                                         
Cumulative translation adjustment
    -       -       -       -       -       -       -       -       -       -       -       338,646       338,646       (43,169 )     295,477  
                                                                                                                         
Transfer from retained earnings to statutory reserve
    -       -       -       -       -       -       -       -       -       85,232       (85,232 )     -       -       -       -  
                                                                                                                         
Net loss for 2008
    -       -       -       -       -       -       -       -       -       -       (14,172,849 )     -       (14,172,849 )     986,619       (13,186,230 )
                                                                                                                         
    -     $ -       -     $ -       -     $ -       3,225,711     $ 4,839     $ 45,526,562     $ 131,501     $ (16,532,864 )   $ 613,064     $ 29,743,102     $ 1,804,075     $ 31,547,177  
                                                                                                                         
Issuance of Preferred Shares related to debt restructure
    -       -       65,799,285       32,900       -       -       -       -       51,290,543       -       -       -       51,323,443       -       51,323,443  
                                                                                                                         
Issuance of Preferred Shares related to issue of Senior Secured notes, net of issuance costs
    -       -       -       -       23,158,080       11,579       -       -       10,530,960       -       -       -       10,542,539       -       10,542,539