TOM Group Limited — Capital/Financing Update 2005

Jan 10, 2005

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in TOM Group Limited , you should at once hand this circular to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser or the transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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(Stock Code: 2383)
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DISCLOSEABLE TRANSACTION

Proposed acquisition of approximately 80.6% of the issued share capital of Indiagames Limited

• for identification purpose

10 January 2005

CONTENTS

			Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			7
A.	INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		7
B.	THE SALE AND SUBSCRIPTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		8
	1.	Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
	2.	Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
	3.	Assets to be acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
	4.	Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
	5.	Payment terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
	6.	Conditions precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
	7.	Completion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
	8.	Simplified corporate chart of Indiagames immediately
		after the Subscription Completion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
C.	THE SHAREHOLDERS AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		12
	1.	Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
	2.	Effective date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
	3.	Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
	4.	Put Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
	5.	Board of directors of Indiagames . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
	6.	Veto rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
	7.	Transfer restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
D.	INFORMATION ON INDIAGAMES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		16
E.	INFORMATION ON THE FOUNDER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		17

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CONTENTS

F.	REASONS FOR ENTERING INTO THE SALE AND SUBSCRIPTION
	AGREEMENT AND THE SHAREHOLDERS AGREEMENT . . . . . . . . . . . . . . . . . . . .	18
G.	GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
APPENDIX – GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		19

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DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions have the following meanings:

• “Acquisition”

the proposed acquisition by TOM Online Games of the Sale Shares and the Subscription Shares in accordance with the provisions of the Sale and Subscription Agreement and of the Option Shares in accordance with the provisions of the Shareholders Agreement

• “ADSs” the American depositary share(s), which are issued by Citibank N.A. and quoted on NASDAQ, each representing ownership of 80 TOM Online Shares

• “Affiliates” in relation to any person: (1) if that person is a company, any of its subsidiaries or holding companies and any subsidiary of such holding companies; or (2) if that person is an individual, any company which he directly or indirectly holds 30% or more of the issued share capital (or voting rights) thereof and any subsidiary of such company

• “associates” has the meaning ascribed to it in the Listing Rules

• “Business Day” a day (excluding Saturday) on which banks are generally open for business in India and in Hong Kong

• “Company” TOM Group Limited, a company incorporated in the Cayman Islands with limited liability, whose shares are listed on the Stock Exchange

• “Conditions” has the meaning ascribed to it in the section headed “Conditions Precedent” in this circular

• “Consideration” the Sale Consideration and the Subscription Consideration

• “Consideration Shares” has the meaning ascribed to it in the section headed “Put Options” in this circular

“Escrow Agent” the escrow agent to be jointly appointed by TOM Online Games and the Vendors for the holding of the Sale Consideration and certain documents to be delivered by the Vendors at the Sale Completion in escrow and the handing over of the same in accordance with the provisions of the Escrow Agreement

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DEFINITIONS

“Escrow Agreement” the agreement to be entered into between TOM Online Games, the Vendors, Indiagames and the Escrow Agent for the holding of the Sale Consideration and certain documents to be delivered by the Vendors at the Sale Completion in escrow by the Escrow Agent and the handing over of the same in accordance with the provisions of such agreement

• “Exercise Period” the period specified in paragraph 4.2 of the section headed “Put Options” in this circular

• “Exercise Price” the exercise price of each Put Option, being the amount calculated in the manner set out paragraph 4.1 of the section headed “Put Options” in this circular

• “Founder” Mr. Vishal GONDAL, who is the founder of Indiagames, and is a third party independent of and not connected with the Company or any of its associates and not a connected person (as defined in the Listing Rules) of the Company

• “GEM” the Growth Enterprise Market of the Stock Exchange

• “GEM Listing Rules” the Rules Governing the Listing of Securities on GEM “Group” the Company and its subsidiaries

• “HK$” Hong Kong dollars, the lawful currency of Hong Kong

• “HK GAAP” the generally accepted accounting principles in Hong Kong

• “Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China

“India” the Republic of India “Indiagames” Indiagames Limited, a company incorporated in India and, as at the date of the Sale and Subscription Agreement, is owned by the Vendors in the manner set out in the section headed “Information on Indiagames” in this circular “Indiagames Group” Indiagames and its subsidiaries (if any) “Issue Price” the issue price per Consideration Share, being the average closing price of each ADS as quoted on NASDAQ for the 30 consecutive trading days immediately preceding the date of exercise of the Put Option

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DEFINITIONS

• “Latest Practicable Date”

• “Listing Rules”

• “Lock-up Period”

• “Minority Shareholders”

• 6 January 2005, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein

the Rules Governing the Listing of Securities on the Stock Exchange

has the meaning ascribed to it in the section headed “Put Options” in this circular

1. The Founder

2. Pranath GONDAL

3. Shashi GONDAL

4. Deepak Chandappa AIL

5. Harpreet Vishal GONDAL

6. Kiran Jagannath NAYAK

7. Mahendra Vasudeo PATEL

8. Cyril FERRY

each of whom is a third party independent of and not connected with the Company or any of its associates and not a connected person (as defined in the Listing Rules) of the Company

• “NASDAQ”

• “Option Shares”

• “Pre-IPO Share Option Plan”

• “Put Option”

• “R”

• “Sale and Subscription Agreement”

the National Market of National Automated Systems Dealership and Quotation in the US

the Shares to be acquired by TOM Online Games upon the exercise of the Put Options by the Minority Shareholders, being an aggregate of 120,238 Shares (representing approximately 19.4% of the issued and paid-up capital of Indiagames (as enlarged by the issue of the Subscription Shares) as at the Subscription Completion)

• the pre-IPO share option plan adopted by the Company on 11 February 2000

the right of each Minority Shareholder to sell to TOM Online Games all (but not part) of his or her Shares at the Exercise Price during the period specified in paragraph 4.2 of the section headed “Put Options” in this circular

Rupee, the lawful currency of India

a conditional share sale and subscription agreement dated 17 December 2004 entered into between TOM Online Games, the Vendors and Indiagames

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DEFINITIONS

• “Sale Completion”

• completion of the sale and purchase of the Sale Shares in accordance with the provisions of the Sale and Subscription Agreement

• “Sale Consideration” consideration for the sale and purchase of the Sale Shares, being a sum of US$13,731,739 (equivalent to approximately HK$107,107,564)

• “Sale Shares” 386,833 Shares (representing approximately 76.29% of the existing issued and paid-up capital of Indiagames as at the Sale Completion), all of which are fully paid-up and beneficially owned by the Vendors

• “SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

• “Share(s)” equity share(s) of Rs10 each in the capital of Indiagames

• “Share Option Scheme” the share option scheme adopted by the Company on 11 February 2000 (as amended)

• “Shareholders Agreement” a conditional shareholders agreement dated 17 December 2004 entered into between TOM Online Games, the Minority Shareholders and Indiagames

• “Subscription Completion” completion of the subscription, issue and allotment of the Subscription Shares in accordance with the provisions of the Sale and Subscription Agreement

• “Subscription Consideration” consideration for the subscription of the Subscription Shares, being a sum of US$4 million (equivalent to approximately HK$31.2 million)

• “Subscription Shares”

• 112,683 Shares (which, together with the Sale Shares, represent approximately 80.6% of the issued and paid-up share capital of Indiagames (as enlarged by the issue of the Subscription Shares) as at the Subscription Completion)

• “Stock Exchange”

The Stock Exchange of Hong Kong Limited

• “TOM Online”

• TOM Online Inc., a company incorporated in the Cayman Islands with limited liability, whose shares are listed on GEM

• “TOM Online Games”

TOM Online Games Limited, a company incorporated in Mauritius, which is a non wholly-owned subsidiary of the Company

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DEFINITIONS

“TOM Online Share(s)” ordinary share(s) of HK$0.01 each in the capital of TOM Online “TOM Share(s)” ordinary share(s) of HK$0.1 each in the capital of the Company “Trading Day” a day on which the ADSs are quoted on NASDAQ “US” the United States of America

“Trading Day”

“US$”

US dollars, the lawful currency of the US

“US GAAP”

the accounting principles generally accepted in the US

“Vendors”

1. Infinity Technology Trustee Private Limited (is the second largest equity fund manager in India which is listed in the Bombay Stock Exchange managing funds of approximately US$220 million across sectors. Its investors include Indians, international highly reputable entrepreneurs)

2. IL&FS Investment Managers Limited (is a fund manager in India managing US$30 million of funds and investing in early stage technology investments in India. Its investors include Indians, international institutions and multi-lateral agencies)

3. The Founder 4. Pranath GONDAL

4. Shashi GONDAL

5. Sanjay GONDAL

6. Deepak Chandappa AIL

7. Manoj BORKAR 9. Anagha BORKAR

8. Rahul SHAH

9. Aruna SHAH

10. Dulari SHAH

11. Shahzaad DALAL

12. Pinky BHATIA

13. Rajesh BHATIA 16. Shashank Shara KHADE

14. Muneesh CHAWLA

15. Vidya N. DESHPANDE 19. Vikram GODSE

16. Harpreet Vishal GONDAL

17. Kiran Jagannath NAYAK 22. Mahendra Vasudeo PATEL

18. Cyril FERRY

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DEFINITIONS

each of whom is a third party independent of and not connected with the Company or any of its associates and not a connected person (as defined in the Listing Rules) of the Company

R1 = HK$0.1706 US$1 = HK$7.8

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LETTER FROM THE BOARD

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(Stock Code: 2383)

Directors: Frank Sixt (Chairman) Sing Wang (Chief Executive Officer) Tommei Tong Henry Cheong[#] Anna Wu[#] James Sha[#] Debbie Chang Susan Chow Edmond Ip Angelina Lee Holger Kluge Wang Lei Lei*

Registered office: P.O. Box 309 Ugland House South Church Street George Town Grand Cayman Cayman Islands British West Indies

Head office and principal place of business: 48th Floor, The Center 99 Queen’s Road Central Central Hong Kong

• Non-executive Directors

• Independent non-executive Directors

10 January 2005

To the shareholders of the Company

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION

Proposed acquisition of approximately 80.6% of the issued share capital of Indiagames Limited

A. INTRODUCTION

On 17 December 2004, the Company announced that TOM Online Games had entered into the Sale and Subscription Agreement with certain independent third parties, under which, among other things, TOM Online Games conditionally agreed to acquire (a) the Sale Shares (representing approximately

• for identification purpose

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LETTER FROM THE BOARD

76.29% of the issued and paid-up share capital of Indiagames as at the Sale Completion) at the Sale Consideration (being a sum of US$13,731,739 (equivalent to approximately HK$107,107,564)). The Sale Consideration will be paid in cash by TOM Online Games to the Vendors at the Sale Completion; and (b) the Subscription Shares (which, together with the Sale Shares, represent approximately 80.6% of the issued and paid-up share capital of Indiagames (as enlarged by the issue of the Subscription Shares) as at the Subscription Completion) at the Subscription Consideration (being a sum of US$4 million (equivalent to approximately HK$31.2 million)). The Subscription Consideration will be paid in cash by TOM Online Games to Indiagames at the Subscription Completion.

Subject to the Sale Completion and the Subscription Completion taking place, TOM Online Games will grant to each of the Minority Shareholders a Put Option on, among other things, the following terms:

• (a) if the Shares are not listed on any recognised securities exchange by the 3rd anniversary of the date of the Subscription Completion, each of the Minority Shareholders may sell to TOM Online Games all (but not part) of his or her Shares at the Exercise Price (being an aggregate sum of US$5,216,764 (equivalent to approximately HK$40,690,759)); and

• (b) at the option of TOM Online Games, the Exercise Price may be paid in cash and/or satisfied by the allotment and issue of ADSs (rounded down to the nearest whole ADS) at the Issue Price, provided that if any of the Minority Shareholders is restricted or prohibited by any applicable law, rule or regulation from holding all or any of the Consideration Shares, TOM Online Games will pay such Minority Shareholder in cash an amount equal to the number of Consideration Shares so restricted or prohibited multiplied by the Issue Price.

The Acquisition constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules.

As the Acquisition involves the possible issue and allotment of Consideration Shares by TOM Online pursuant to the exercise of the Put Options, the Acquisition constitutes a share transaction of TOM Online under Chapter 19 of the GEM Listing Rules.

The purpose of this circular is to provide the shareholders of the Company with further information relating to the Acquisition. This circular also contains information in compliance with the Listing Rules.

B. THE SALE AND SUBSCRIPTION AGREEMENT

1. Date

17 December 2004

2. Parties

Purchaser and subscriber: TOM Online Games

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LETTER FROM THE BOARD

Vendors:

1. Infinity Technology Trustee Private Limited 2. IL&FS Investment Managers Limited 3. The Founder 4. Pranath GONDAL 5. Shashi GONDAL 6. Sanjay GONDAL 7. Deepak Chandappa AIL 8. Manoj BORKAR 9. Anagha BORKAR 10. Rahul SHAH 11. Aruna SHAH 12. Dulari SHAH 13. Shahzaad DALAL 14. Pinky BHATIA 15. Rajesh BHATIA 16. Shashank Shara KHADE 17. Muneesh CHAWLA 18. Vidya N. DESHPANDE 19. Vikram GODSE 20. Harpreet Vishal GONDAL 21. Kiran Jagannath NAYAK 22. Mahendra Vasudeo PATEL 23. Cyril FERRY

Issuer:

Indiagames

3.

Assets to be acquired

• 3.1. The Sale Shares (representing approximately 76.29% of the issued and paid-up share capital of Indiagames as at the Sale Completion).

• 3.2. The Subscription Shares (which, together with the Sale Shares, represent approximately 80.6% of the issued and paid-up share capital of Indiagames (as enlarged by the issue of the Subscription Shares) as at the Subscription Completion).

4. Consideration

The Consideration (being an aggregate sum of US$17,731,739 (equivalent to approximately HK$138,307,564)) comprising:

1. the Sale Consideration (being a sum of US$13,731,739 (equivalent to approximately HK$107,107,564)); and

2. the Subscription Consideration (being a sum of US$4 million (equivalent to approximately HK$31.2 million)).

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LETTER FROM THE BOARD

The Consideration was arrived at after arm’s length negotiations between the Vendors and TOM Online Games and being a price acceptable to the Vendors and TOM Online Games with reference to the historical multiple of earnings, present and future performance and the strategic value of the Indiagames Group (as mentioned in the section headed “Reasons for entering into the Sale and Subscription Agreement and the Shareholders Agreement” below).

5. Payment terms

• 5.1. The Sale Consideration will be paid in cash by TOM Online Games to the Escrow Agent on the Sale Completion Date, which will be held in escrow by the Escrow Agent in accordance with the terms of the Escrow Agreement. The Sale Consideration will be shared by the Vendors in accordance with the proportion of their respective Shares to the Sale Shares.

• 5.2. The Subscription Consideration will be paid in cash by TOM Online Games to Indiagames at the Subscription Completion.

The Consideration will be funded by TOM Online’s internal resources.

6. Conditions precedent

The Sale Completion is conditional upon, among other things, the following conditions (“Conditions”) having been fulfilled (or waived by TOM Online Games) on or before 28 February 2005 (or such other date as the parties to the Sale and Subscription Agreement may agree):

• 6.1. there being no material adverse change in the legal, financial, taxation, business and trading positions of Indiagames and its assets or in the ability of Indiagames or any of its sharesholders to perform their respective obligations under the Sale and Subscription Agreement or the Shareholders Agreement (including, without limitation, the status and validity of, save and except Indiagames’s registration with the Software Technology Park of India, any permits, approvals, licenses or permissions required for Indiagames to effectively carry on its business);

• 6.2. a legal opinion on the due incorporation and continued existence of Indiagames, the validity of obligations on Indiagames and the Vendors (in such form and substance reasonably satisfactory to TOM Online Games) having been issued by Dua Associates, being the Indian legal counsel of Indiagames and the Vendors;

• 6.3. an employment agreement (in the form agreed by the parties to the Sale and Subscription Agreement) having been executed by Indiagames, and each of the Founder and other members of the management team of Indiagames identified by TOM Online Games;

• 6.4. the Escrow Agreement having been duly executed by TOM Online Games, the Vendors and the Escrow Agent;

• 6.5. Indiagames having passed a special resolution under Section 81(1A) of the Companies Act 1956 of India approving the issue and allotment of the Subscription Shares and a certified true copy of such resolution having been delivered or caused to be delivered to TOM Online Games;

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LETTER FROM THE BOARD

• 6.6. the Sale Shares are converted into demateralised form; and

• 6.7. all necessary third party consents for the consummation of the transactions contemplated under the Sale and Subscription Agreement (including, without limitation, any consent that is required to be obtained under any agreement to which Indiagames is a party for any change in control of Indiagames) having been obtained.

As at the Latest Practicable Date, none of the Conditions has been fulfilled.

7.

Completion

• 7.1. The Sale Completion will take place on the 3rd Business Day after the date on which the last of the Conditions is fulfilled (or waived).

• 7.2. The Subscription Completion will take place on or before 28 February 2005.

The Sale Completion and the Subscription Completion are not inter-conditional to each other.

Immediately after the Subscription Completion, Indiagames will be owned by TOM Online Games and the Minority Shareholders as follows:

	Number of Shares held (approximate	Number of Shares held (approximate
	shareholding percentage in Indiagames
	represented thereby immediately after the Sale
Name of shareholder	Completion and the Subscription Completion)
TOM Online Games	499,516	(80.6%)
The Founder	100,078	(16.15%)
Pranath GONDAL	80	(0.01%)
Shashi GONDAL	80	(0.01%)
Deepak Chandappa AIL	4,000	(0.65%)
Harpreet Vishal GONDAL	4,000	(0.65%)
Kiran Jagannath NAYAK	4,000	(0.65%)
Mahendra Vasudeo PATEL	4,000	(0.65%)
Cyril FERRY	4,000	(0.65%)
Shonila VAZIRANI and Hiranand VAZIRANI	1	(0.0002%)
Russel KINNY	1	(0.0002%)
Total:	619,756	(100%)

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LETTER FROM THE BOARD

Upon the Sale Completion and the Subscription Completion, Indiagames will become a non whollyowned subsidiary of the Company. If only the Sale Completion takes place, Indiagames will also become a non wholly-owned subsidiary of the Company.

8. Simplified corporate chart of Indiagames immediately after the Subscription Completion

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Company
71.86%
TOM Online
100%
Minority Shareholders
and three individual
TOM Online Games shareholders
80.6% 19.4%
Indiagames
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C. THE SHAREHOLDERS AGREEMENT

1. Date

17 December 2004

2. Effective date

Date of the Sale Completion

3. Parties

1. TOM Online Games

2. The Founder

3. Pranath GONDAL

4. Shashi GONDAL

5. Deepak Chandappa AIL

6. Harpreet Vishal GONDAL

7. Kiran Jagannath NAYAK

8. Mahendra Vasudeo PATEL

9. Cyril FERRY

10. Indiagames

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LETTER FROM THE BOARD

4. Put Options

• 4.1. Subject to, among other things, the relevant requirements under the Listing Rules, the GEM Listing Rules, and any applicable laws, rules and regulations, if the Shares are not listed on any recognised securities exchange by the 3rd anniversary of the Subscription Completion, each of the Minority Shareholders may sell to TOM Online Games all (but not part) of his or her Shares (“Option Shares”) at an exercise price (“Exercise Price”) equal to US$5,216,764 (equivalent to approximately HK$40,690,759) multiplied by the following fraction:

A B

where:

• A = the total number of Shares held by the relevant Minority Shareholder (who has exercised his or her Put Option) as at the date of the Subscription Completion

• B = the total number of Shares held by all of Minority Shareholder as at the date of the Subscription Completion

The Exercise Price is determined with reference to the basis of the Consideration and taking into account the expected growth of Indiagames in the next few years.

• 4.2. Each Minority Shareholder may exercise his or her Put Option only once at any time after the 3rd anniversary of the date of the Subscription Completion and before the earlier of: (i) the 5th anniversary of the date of the Subscription Completion; and (ii) the day immediately preceding the date of the initial listing of the Shares on any recognised securities exchange.

• 4.3. At the option of TOM Online Games, the Exercise Price may be paid in cash and/or satisfied by the allotment and issue of ADSs (rounded down to the nearest whole ADS) (“Consideration Shares”) at the Issue Price, provided that if any of the Minority Shareholders is restricted or prohibited by any applicable law, rule or regulation from holding all or any of the Consideration Shares, TOM Online Games shall pay such Minority Shareholder in cash an amount equal to the number of Consideration Shares so restricted or prohibited multiplied by the Issue Price.

For illustration purposes only, assuming that all of the Exercise Price will be satisfied by the allotment and issue of ADSs and based on the closing price of US$14.66 per ADS as quoted on NASDAQ on 16 December 2004, the maximum number of ADSs to be issued in satisfaction of the Exercise Price will be 355,850 (equivalent to 28,468,000 TOM Online Shares) (representing approximately 0.73% of the existing issued share capital of TOM Online as at the date of the Sale and Subscription Agreement and, assuming that no further TOM Online Shares (other than the Consideration Shares) will be issued from the date of the Sale and Subscription Agreement to the date of issue of all of the Consideration Shares, approximately 0.73% of the issued share capital of TOM Online (as enlarged by the issue of the Consideration Shares)).

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LETTER FROM THE BOARD

For illustration purposes only, assuming that all of the Exercise Price will be satisfied by the allotment and issue of ADSs and based on the closing price of US$13.391 per ADS as quoted on NASDAQ on the Latest Practicable Date, the maximum number of ADSs to be issued in satisfaction of the Exercise Price will be 389,572 (equivalent to 31,165,760 TOM Online Shares) (representing approximately 0.8% of the existing issued share capital of TOM Online as at the date of the Sale and Subscription Agreement and, assuming that no further TOM Online Shares (other than the Consideration Shares) will be issued from the date of the Sale and Subscription Agreement to the date of issue of all of the Consideration Shares, approximately 0.79% of the issued share capital of TOM Online (as enlarged by the issue of the Consideration Shares)).

• 4.4. It is a condition to completion of the sale and purchase of the Option Shares that:

• (a) each of the Minority Shareholders who has exercised his or her Put Option:

  • (i) assigns to TOM Online Games all of the rights, titles, interests and benefits in and to any outstanding loans granted to the Indiagames Group and/or security given for the benefit of the Indiagames Group by such Minority Shareholder or any of his or her Affiliates;

  • (ii) confirms in writing that he or she is not an US Person (as defined under Regulation S of the US Securities Act of 1933 (as amended)); and

  • (iii) undertakes in writing that:

    • (1) during the first 40 days after the date of issue of the Consideration Shares issued to him or her, he or she will not transfer or otherwise deal in all or any of such Consideration Shares;

    • (2) during the first 6 months after the date of issue of the Consideration Shares issued to him or her, he or she will not transfer or otherwise deal in more than 15% of such Consideration Shares;

    • (3) during a period of 12 months after the date of issue of the Consideration Shares issued to him or her (“Lock-up Period”), he or she will not transfer or otherwise deal in more than 30% of such Consideration Shares;

    • (4) on any Trading day after the end of the Lock-up Period, he or she will not transfer or otherwise deal in more than 14% of such Consideration Shares; and

• (b) such completion of the sale and purchase of the Option Shares takes place outside of the US.

• 4.5. Any Put Option that is not exercised during the Exercise Period will automatically lapse upon the expiry of the Exercise Period.

– 14 –

LETTER FROM THE BOARD

5. Board of directors of Indiagames

• 5.1. After the Sale Completion, the board of directors of Indiagames will initially comprise 5 members, of which 4 will be nominated by TOM Online Games and 1 will be nominated by the Founder, provided that he owns at least 8% of the issued and paid-up share capital of Indiagames.

• 5.2. If, at any time after the Sale Completion, Indiagames is required under applicable laws, rules or regulations to have more than 5 directors, the number of directors of Indiagames will be increased such that the total number of directors of Indiagames will be an odd number, more than half of which will be directors nominated by TOM Online Games.

6. Veto rights

After the Sale Completion and before any initial listing of the Shares on any recognised securities exchange, none of the following actions may be taken without the prior consent of the Founder, provided that the Founder owns at least 8% of the issued and paid-up share capital of Indiagames:

• 6.1. any transfer by TOM Online Games of any its equity interests in Indiagames to any third party (other than an Affiliate of TOM Online Games which is not engaged in the business of mobile gaming) or any issue of additional securities in Indiagames;

• 6.2. any decision to dissolve, liquidate or wind-up Indiagames, or dispose of, sell, license or transfer all or substantially all of the assets or the business of Indiagames;

• 6.3. save and except in the ordinary course of business of Indiagames, transfer or disposal of any material intellectual property rights owned by Indiagames;

• 6.4. amend the rights of any class of Shares;

• 6.5. amend any provision of the articles of association of Indiagames in a manner that adversely alters or changes the rights of the Shares held by the Founder or the rights of the Founder under the Shareholders Agreement;

• 6.6. increase or decrease the authorised share capital of Indiagames; or

• 6.7. any declaration of extraordinary dividends by Indiagames.

7. Transfer restrictions

• 7.1. Right of first refusal

If, at any time after the Sale Completion, any of the shareholders of Indiagames (other than TOM Online Games) wishes to sell all or any of his or her Shares, TOM Online Games has a right of first refusal to acquire such Shares on the same terms as those offered by a bona fide third party purchaser.

– 15 –

LETTER FROM THE BOARD

7.2. Drag along right

If, at any time after the Sale Completion, TOM Online Games wishes to sell all or any of its Shares, it may force all or any of the other shareholders of Indiagames to sell all or part of their/ his Shares to the same purchaser.

• 7.3. Tag-along right

If, at any time after the Sale Completion, TOM Online Games wishes to sell all or any of its Shares, the Founder may sell his Shares:

• (a) on a pro rata basis; or

• (b) if, as a result of any such proposed sale of Shares by TOM Online Games, the total number of Shares held by TOM Online Games will represent less than 51% of the issued and paid-up share capital of Indiagames, the Founder may sell all of his Shares,

on the same terms offered by the purchaser proposing to acquire all or part of TOM Online Games’s Shares.

D. INFORMATION ON INDIAGAMES

Indiagames is a company incorporated in India with limited liability. As at the date of the Sale and Subscription Agreement, Indiagames is owned as to approximately 37.12% by Infinity Technology Trustee Private Limited, approximately 26.28% by IL&FS Investment Managers Limited, approximately 29.92% by the Founder, approximately 0.02% by Pranath GONDAL, approximately 0.02% by Shashi GONDAL, approximately 0.0002% by Sanjay GONDAL, approximately 0.0002% by Shonila VAZIRANI and Hiranand VAZIRANI, approximately 1.17% by Deepak Chandappa AIL, approximately 0.0002% by Russel KINNY, approximately 0.10% by Manoj BORKAR and Anagha BORKAR, approximately 0.18% by Rahul SHAH, Aruna SHAH and Dulari SHAH, approximately 0.05% by Shahzaad DALAL, approximately 0.11% by Pinky BHATIA and Rajesh BHATIA, approximately 0.04% by Shashank Shara KHADE, approximately 0.10% by Muneesh CHAWLA, approximately 0.02% by Vidya N. DESHPANDE, approximately 0.20% by Vikram GODSE, approximately 1.17% by Harpreet Vishal GONDAL, approximately 1.17% by Kiran Jagannath NAYAK, approximately 1.17% by Mahendra Vasudeo PATEL and approximately 1.17% by Cyril FERRY.

Indiagames was founded by the Founder, the current CEO, in 1999 and has become one of the global leaders in mobile games publishing business. Indiagames has global publishing licenses for key global properties like Jurassic Park, Bruce Lee, Mask, Mummy, Mummy Returns, Scorpion King. It has distribution relationships across over 50 countries and over 100 channels including global mobile operators like Verizon, Vodafone, AT&T, Hutch, Singtel, Telefonica. In addition, Indiagames has one of the largest development team of over 150 people involved in the production of games. It works on the major global technologies like J2ME and BREW and works with both CDMA & GSM operators. With over 160 professionals based in Mumbai, Indiagames is primarily engaged in publishing and developing games across various platforms like Internet, PC, broadband, mobile phones, PDAs, handheld gaming devices

– 16 –

LETTER FROM THE BOARD

and consoles. Indiagames also has a leading edge in wireless games in various formats like Java[TM] , BREW[TM] , I-Mode[TM] , Flash Lite[TM] and Symbian[TM] . As the No.1 gaming developer and publisher in India, Indiagames controls a 60% share in India’s game-related wireless value-added services market according to the monthly game download numbers made public by Hutch and Airtel in India.

Indiagames was the first to launch mobile games in India in February 2003. It has established partnerships with all major mobile operators in India and over 100 channel partners globally. Major global distribution channels include Vodafone, O2, T-Mobile, Orange, Verizon, Sprint, Singtel, Airtel, Tata, China Mobile, Optus, Hutch, Amena, Telefonica, Wind & AT&T. Although it is based in India, 86% of its sales this year came from Europe, Asia Pacific, United States, Middle East and South Africa.

Indiagames is among the first to obtain branded licenses for mobile products with the launch of one of its best selling mobile game Spider-Man[TM] Classic in 2003. In the past 12 months Indiagames has licensed several key brands like Bruce Lee[TM] , Predator[TM] , Buffy The Vampire Slayer[TM] , The Mummy[TM] , Scorpion King[TM] , Jurassic Park[TM] 1, Jurassic Park[TM] 2, Jurassic Park[TM] 3, Garfield[TM] , The Day After Tomorrow[TM] , Spy Kids[TM] , Indian Idol, Singapore Idol, Malaysian Idol, Indonesian Idol and Phantom[TM] , to name a few.

Based on the management accounts of Indiagames prepared in accordance with US GAAP and HK GAAP, the unaudited financial information of Indiagames is set out below:

	Year	ended		Year	ended	Nine months ended
	31 December 2002			31 December 2003		30 September 2004
	Rs		HK$	Rs	HK$	Rs HK$
		equivalent			equivalent	equivalent
	(in thousand)			(in thousand)		(in thousand)
Net revenue	7,283	1,242		66,439	11,334	95,036 16,213
(Loss)/profit before taxation	(5,473)		(934)	38,851	6,628	34,158 5,827
(Loss)/profit after taxation	(3,991)		(681)	27,922	4,763	29,224 4,986
					As at 30 September 2004
						Rs HK$
						equivalent
						(in thousand)
Net assets						68,580 11,700

E. INFORMATION ON THE FOUNDER

As mentioned in the section headed “Information on Indiagames” above, the Founder founded Indiagames in December 1999. He started algorithms programming at the age of 14 and started his own company, FACT, at the age of 16. He is now head of the Mumbai Chapter of the International Game Developers Association in India and a member of The Nokia Advisory Council for Games.

– 17 –

LETTER FROM THE BOARD

F. REASONS FOR ENTERING INTO THE SALE AND SUBSCRIPTION AGREEMENT AND THE SHAREHOLDERS AGREEMENT

As mentioned in the section headed “Information on Indiagames” above, Indiagames is one of the largest mobile gaming companies in the world with global distribution to diversified geographical region including PRC, and, through the Acquisition, TOM Online intends to further strengthen its leading market position in the wireless internet sector in terms of market share, distribution channel, such as online, television, radio or print, product portfolio and national mobile telephone short text messages numbers.

The directors of TOM Online believe that the Acquisition will enable TOM Online to enlarge its market share in the wireless value added services market and increase its revenue arising from the wireless value added services segment.

The Directors consider that the Sale and Subscription Agreement and the Shareholders Agreement are entered into on normal commercial terms in the ordinary and usual course of business of the Company, and that the terms of the Sale and Subscription Agreement and the Shareholders Agreement are fair and reasonable and in the interests of the Company so far as the shareholders of the Company are concerned.

The Board does not expect the Acquisition will have any immediate material impact on either the earnings or the assets and liabilities of the Group, upon Completion.

G. GENERAL

The Acquisition constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules.

As the Acquisition involves the possible issue and allotment of Consideration Shares by TOM Online pursuant to the exercise of the Put Options, the Acquisition constitutes a share transaction of TOM Online under Chapter 19 of the GEM Listing Rules.

The Company (HKSE stock code: 2383) is listed on the Main Board of the Stock Exchange. A leading Chinese-language media group in the Greater China region, the Group has diverse business interests in five key areas: Internet (TOM Online) (Hong Kong GEM stock code: 8282, NASDAQ stock symbol: TOMO), outdoor media, publishing, sports, television and entertainment across markets in Mainland China, Taiwan and Hong Kong.

Your attention is drawn to the additional information set out in the Appendix to this circular.

Yours faithfully,

By Order of the Board TOM GROUP LIMITED Sing Wang

Chief Executive Officer and

Executive Director

– 18 –

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive of the Company in TOM Shares, underlying TOM Shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO), or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies (the “Model Code”), to be notified to the Company and the Stock Exchange, were as follows:

A. The Company

• (a) Long positions in TOM Shares

Number of TOM Shares

							Approximate
Name of		Personal	Family	Corporate	Other		percentage of
Directors	Capacity	Interests	Interests	Interests	Interests	Total	shareholding
Sing Wang	Beneficial	10,000,000	–	–	–	10,000,000	0.26%
	owner
	Interest of a	–	–	5,898,000	–	5,898,000	0.15%
	controlled			(Note 2)
	corporation
	(Note 1)
Wang Lei Lei	Beneficial	300,000	–	–	–	300,000	0.01%
	owner

Notes:

(1) By virtue of the SFO, Mr. Sing Wang is deemed to be interested in 5,898,000 TOM Shares held by Amerinvest Technology Associates I Limited, which is wholly-owned by him.

• (2) All the 5,898,000 TOM Shares have been pledged as a security against his personal loan.

– 19 –

GENERAL INFORMATION

APPENDIX

• (b) Rights to acquire TOM Shares

Pursuant to the Pre-IPO Share Option Plan and the Share Option Scheme, certain Directors were granted share options to subscribe for TOM Shares, details of which as at the Latest Practicable Date were as follows:

		Number of share
		options outstanding		Subscription
	Date	as at the Latest		price per
Name of Directors	of grant	Practicable Date	Option period	TOM Share
				HK$
Sing Wang	30/6/2000	3,000,000	30/6/2000-29/6/2010	5.27
	8/8/2000	2,138,000	8/8/2000-7/8/2010	5.30
	7/2/2002	20,000,000	7/2/2002-6/2/2012	3.76
	9/10/2003	38,000,000	9/10/2003-8/10/2013	2.505
Tommei Tong	9/10/2003	15,000,000	9/10/2003-8/10/2013	2.505
James Sha	15/11/2000	15,000,000	15/11/2000-14/11/2010	5.30
Wang Lei Lei	11/2/2000	9,080,000	11/2/2000-10/2/2010	1.78
	9/10/2003	6,850,000	9/10/2003-8/10/2013	2.505

B. Associated Corporations (within the meaning of the SFO)

• (a) Long positions in TOM Online Shares

Number of TOM Online Shares

							Approximate
Name of		Personal	Family	Corporate	Other		percentage of
Directors	Capacity	Interests	Interests	Interests	Interests	Total	shareholding
Sing Wang	Interest of a	–	–	83,142	–	83,142	0.002%
(Note)	controlled
	corporation
Wang Lei Lei	Beneficial
	owner	5,000,000	–	–	–	5,000,000	0.128%

Note: By virtue of the SFO, Mr. Sing Wang is deemed to be interested in 83,142 TOM Online Shares held by Amerinvest Technology Associates I Limited, which is wholly-owned by him.

– 20 –

GENERAL INFORMATION

APPENDIX

• (b) Right to acquire TOM Online Shares

Pursuant to the pre-IPO share option plan adopted by TOM Online, a Director was granted share options to subscribe for the TOM Online Shares, details of which as at the Latest Practicable Date were as follows:

			Number of share		Subscription
			options outstanding		price per
		Date	as at the Latest		TOM Online
Name	of Director	of grant	Practicable Date	Option period	Share
					HK$
Wang	Lei Lei	16/2/2004	165,000,000	16/2/2004-15/2/2014	1.50

• (c) Short positions in associated corporations

Mr. Wang Lei Lei has as of 12 June 2001 (as supplemented on 26 September 2003) granted an option to a subsidiary of the Company in respect of his 20% (RMB2,200,000) equity interest in Beijing Lei Ting Wan Jun Network Technology Limited (“Beijing Lei Ting”) whereby such subsidiary of the Company has the right at any time within a period of 10 years commencing from 26 September 2003 (which may be extended for another 10 years at the option of such subsidiary of the Company) to acquire all of Mr. Wang Lei Lei’s equity interest in Beijing Lei Ting at an exercise price of RMB2,200,000.

Mr. Wang Lei Lei has also as of 19 November 2003 granted an option to a subsidiary of the Company in respect of his 80% (RMB8,000,000) equity interest in Beijing Leitingwuji Network Technology Company Limited (“LTWJi”) whereby such subsidiary of the Company has the right at any time within a period of 10 years commencing from 19 November 2003 (which may be extended for another 10 years at the option of such subsidiary of the Company) to acquire all of Mr. Wang Lei Lei’s equity interest in LTWJi at an exercise price of RMB8,000,000.

Save as disclosed herein, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests or short positions in any TOM Shares, underlying TOM Shares or debentures of, the Company or any associated corporations (within the meaning of Part XV of the SFO) which would have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange.

– 21 –

GENERAL INFORMATION

APPENDIX

3. INTERESTS AND SHORT POSITIONS OF SHAREHOLDERS

So far as is known to any Director or chief executive of the Company, as at the Latest Practicable Date, the persons/companies (not being a Director or chief executive of the Company) who have interests or short positions in TOM Shares or underlying TOM Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO are as follows:

			Approximate
			percentage
Name	Capacity	No. of TOM Shares held	of shareholding
Li Ka-shing	Founder of discretionary	1,429,024,545 (L)	36.74%
	trusts & interest of	(Notes 1 & 2)
	controlled corporations
Li Ka-Shing Unity Trustee	Trustee & beneficiary	1,429,024,545 (L)	36.74%
Corporation Limited	of a trust	(Notes 1 & 2)
(as trustee of The
Li Ka-Shing Unity
Discretionary Trust)
Li Ka-Shing Unity	Trustee & beneficiary	1,429,024,545 (L)	36.74%
Trustcorp Limited	of a trust	(Notes 1 & 2)
(as trustee of another
discretionary trust)
Li Ka-Shing Unity Trustee	Trustee	1,429,024,545 (L)	36.74%
Company Limited		(Notes 1 & 2)
(as trustee of The
Li Ka-Shing Unity Trust)
Cheung Kong (Holdings)	Interest of controlled	1,429,024,545 (L)	36.74%
Limited	corporations	(Notes 1 & 2)
Cheung Kong Investment	Interest of controlled	476,341,182 (L)	12.25%
Company Limited	corporations	(Note 1)
Cheung Kong Holdings	Interest of controlled	476,341,182 (L)	12.25%
(China) Limited	corporations	(Note 1)
Sunnylink Enterprises Limited	Interest of a controlled	476,341,182 (L)	12.25%
	corporation	(Note 1)
Romefield Limited	Beneficial owner	476,341,182 (L)	12.25%
		(Note 1)

– 22 –

GENERAL INFORMATION

APPENDIX

			Approximate
			percentage
Name	Capacity	No. of TOM Shares held	of shareholding
Hutchison Whampoa Limited	Interest of a controlled	952,683,363 (L)	24.49%
	corporation	(Note 2)
Hutchison International Limited	Interest of a controlled	952,683,363 (L)	24.49%
	corporation	(Note 2)
Easterhouse Limited	Beneficial owner	952,683,363 (L)	24.49%
		(Note 2)
Chau Hoi Shuen	Interest of controlled	952,683,363 (L)	24.49%
	corporations	(Note 3)
Cranwood Company Limited	Beneficial owner &	952,683,363 (L)	24.49%
	interest of controlled	(Note 3)
	corporations
Schumann International	Beneficial owner	580,000,000 (L)	14.91%
Limited		(Note 3)
Handel International Limited	Beneficial owner	348,000,000 (L)	8.95%
		(Note 3)
Lehman Brothers Holdings Inc.	Interest of controlled	315,667,052 (L)	8.11%
	corporations	146,418,004 (S)	3.76%
		(Note 4)
Lehman Brothers U.K.	Interest of controlled	207,115,389 (L)	5.32%
Holdings (Delaware) Inc.	corporations	142,068,004 (S)	3.65%
		(Note 4)
Lehman Brothers Spain	Interest of controlled	207,115,389 (L)	5.32%
Holdings Limited	corporations	142,068,004 (S)	3.65%
		(Note 4)
Lehman Brothers Luxembourg	Interest of controlled	207,115,389 (L)	5.32%
Investments Sarl	corporations	142,068,004 (S)	3.65%
		(Note 4)
Lehman Brothers UK Holdings	Interest of controlled	207,115,389 (L)	5.32%
Limited	corporations	142,068,004 (S)	3.65%
		(Note 4)

– 23 –

GENERAL INFORMATION

APPENDIX

				Approximate
				percentage
Name		Capacity	No. of TOM Shares held	of shareholding
Lehman Brothers Holdings Plc.		Interest of controlled	207,115,389 (L)	5.32%
		corporations	142,068,004 (S)	3.65%
			(Note 4)
Lehman Brothers International		Beneficial owner	207,115,389 (L)	5.32%
(Europe)			142,068,004 (S)	3.65%
			(Note 4)
(L)	denotes a long position
(S)	denotes a short position

Notes:

• (1) Romefield Limited is a wholly-owned subsidiary of Sunnylink Enterprises Limited, which in turn is a whollyowned subsidiary of Cheung Kong Holdings (China) Limited. Cheung Kong Holdings (China) Limited is a wholly-owned subsidiary of Cheung Kong Investment Company Limited, which in turn is a wholly-owned subsidiary of Cheung Kong (Holdings) Limited.

By virtue of the SFO, Cheung Kong Investment Company Limited, Cheung Kong Holdings (China) Limited and Sunnylink Enterprises Limited are all deemed to be interested in the 476,341,182 TOM Shares held by Romefield Limited.

Li Ka-Shing Unity Holdings Limited, of which each of Mr. Li Ka-shing, Mr. Li Tzar Kuoi, Victor and Mr. Li Tzar Kai, Richard is interested in one-third of the entire issued share capital, owns the entire issued share capital of Li Ka-Shing Unity Trustee Company Limited. Li Ka-Shing Unity Trustee Company Limited as trustee of The Li KaShing Unity Trust, together with certain companies which Li Ka-Shing Unity Trustee Company Limited as trustee of The Li Ka-Shing Unity Trust is entitled to exercise or control the exercise of more than one-third of the voting power at their general meetings, hold more than one-third of the issued share capital of Cheung Kong (Holdings) Limited.

In addition, Li Ka-Shing Unity Holdings Limited also owns the entire issued share capital of Li Ka-Shing Unity Trustee Corporation Limited (“TDT1”) as trustee of The Li Ka-Shing Unity Discretionary Trust (“DT1”) and Li Ka-Shing Unity Trustcorp Limited (“TDT2”) as trustee of another discretionary trust (“DT2”). Each of TDT1 and TDT2 hold units in The Li Ka-Shing Unity Trust.

• (2) Easterhouse Limited is a wholly-owned subsidiary of Hutchison International Limited, which in turn is a whollyowned subsidiary of Hutchison Whampoa Limited. By virtue of the SFO, Hutchison Whampoa Limited and Hutchison International Limited are deemed to be interested in the 952,683,363 TOM Shares held by Easterhouse Limited.

In addition, subsidiaries of Cheung Kong (Holdings) Limited are entitled to exercise or control the exercise of more than one-third of the voting power at the general meetings of Hutchison Whampoa Limited. By virtue of the SFO, Mr. Li Ka-shing, being the settlor and may being regarded as a founder of each of DT1 and DT2 for the purpose of the SFO, Li Ka-Shing Unity Trustee Corporation Limited, Li Ka-Shing Unity Trustcorp Limited, Li Ka-Shing Unity Trustee Company Limited and Cheung Kong (Holdings) Limited are all deemed to be interested in the 476,341,182 TOM Shares and 952,683,363 TOM Shares held by Romefield Limited and Easterhouse Limited respectively.

– 24 –

GENERAL INFORMATION

APPENDIX

• (3) Schumann International Limited and Handel International Limited are companies controlled by Cranwood Company Limited and Ms. Chau Hoi Shuen is entitled to exercise more than one-third of the voting power at the general meetings of Cranwood Company Limited.

By virtue of the SFO, Cranwood Company Limited is deemed to be interested in the 580,000,000 TOM Shares and 348,000,000 TOM Shares held by Schumann International Limited and Handel International Limited respectively in addition to 24,683,363 TOM Shares held by itself.

By virtue of the SFO, Ms. Chau Hoi Shuen is deemed to be interested in 24,683,363 TOM Shares, 580,000,000 TOM Shares and 348,000,000 TOM Shares held by Cranwood Company Limited, Schumann International Limited and Handel International Limited respectively.

• (4) Lehman Brothers International (Europe) is a wholly-owned subsidiary of Lehman Brothers Holdings Plc. which in turn is a wholly-owned subsidiary of Lehman Brothers UK Holdings Limited. Lehman Brothers UK Holdings Limited is a wholly-owned subsidiary of Lehman Brothers Luxembourg Investments Sarl which in turn is a wholly-owned subsidiary of Lehman Brothers Spain Holdings Limited. Lehman Brothers Spain Holdings Limited is a wholly-owned subsidiary of Lehman Brothers U.K. Holdings (Delaware) Inc. which in turn is a whollyowned subsidiary of Lehman Brothers Holdings Inc. By virtue of the SFO, Lehman Brothers Holdings Inc., Lehman Brothers U.K. Holdings (Delaware) Inc., Lehman Brothers Spain Holdings Limited, Lehman Brothers Luxembourg Investments Sarl, Lehman Brothers UK Holdings Limited and Lehman Brothers Holdings Plc. are deemed to be interested in the 207,115,389 TOM Shares and short position in 142,068,004 TOM Shares held by Lehman Brothers International (Europe).

By virtue of the SFO, Lehman Brothers Holdings Inc. is also deemed to be interested in the 100,231,642 TOM Shares, 8,320,021 TOM Shares and short position in 4,350,000 TOM Shares held by its subsidiaries, namely, Lehman Brothers Finance S.A., Lehman Brothers Commercial Corporation Asia Limited and Lehman Brothers Inc. respectively.

So far as is known to any Director or chief executive of the Company, as at the Latest Practicable Date, the following companies/persons were interested in 10% or more of the equity interests of the subsidiaries of the Company:

		No. and class	Percentage of
Name of subsidiaries	Name of shareholders	of shares held	shareholding
Y.C. Press Advertising Limited	Yangcheng Enterprise Limited	1,200 ordinary shares	20%
YCP Advertising Limited	Yangcheng Enterprise Limited	2 ordinary shares	20%
Beijing GreaTom United	Great Wall Technology	Registered capital	10%
Technology Company	Company Ltd.	RMB2,500,000
Limited
廣東羊城報業體育	羊城晚報經濟發展總公司	Registered capital	20%
發展有限公司	(Yangcheng Evening News	RMB1,000,000
(Guangdong Yangcheng	Economic Development
Press Sports Development	Corporation)
Limited)
廣東羊城廣告有限公司	羊城晚報經濟發展總公司	Registered capital	20%
(Guangdong Yangcheng	(Yangcheng Evening News	RMB1,000,000
Advertising Company	Economic Development
Limited)	Corporation)

– 25 –

GENERAL INFORMATION

APPENDIX

		No. and class	Percentage of
Name of subsidiaries	Name of shareholders	of shares held	shareholding
Yazhou Zhoukan Holdings	Skyland International	5,000 ordinary shares	50%
Limited	Investment Limited
Cernet Information	賽爾網絡有限公司	Registered capital	49%
Technology	(Cernet Network	RMB29,400,000
Company Limited	Company Limited)
Nong Nong Magazine	Barbizon Interculture	431,000 ordinary shares	17.24%
Company Limited	Publication Company
	Limited
Panasia Publishing	Weider Publications, LLC	700,000 ordinary shares	35%
Company Limited
Panasia Publishing	Barbizon Interculture	200,000 ordinary shares	10%
Company Limited	Publication Company
	Limited
Tennis Management Limited	Spectrum International	40 ordinary shares	40%
	Holding Limited
Shandong Longjun Media	Jinan Qilu Advertising	Registered capital	40%
Company Limited	Company Limited	RMB4,400,000
Liaoning New Star	Liaoning New Star	Registered capital	40%
Guangming Media Assets	Shengshi Advertising	RMB4,000,000
Company Limited	Company Limited
Shenyang Sano Global	Wang Cheng Cheng	Registered capital	40%
Media Company Limited		RMB1,200,000
Xiamen Bomei Lianhe	Xiamen Bomei Advertising	Registered capital	40%
Advertising Company	Company Limited	RMB1,000,000
Limited
Henan New Tianming	Beijing Tianming	Registered capital	50%
Advertising & Information	International Investment	RMB3,000,000
Chuanbo Company Limited	Management Company
	Limited
Qingdao Chunyu Advertising	Qingdao Chunyu Advertising	Registered capital	30%
Chuanbo Company Limited	and Decor Construction	RMB450,000
	Company Limited

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GENERAL INFORMATION

APPENDIX

		No. and class	Percentage of
Name of subsidiaries	Name of shareholders	of shares held	shareholding
Sichuan Southwest Outdoor	Sichuan Southwest	Registered capital	30%
Media Company Limited	International Advertising	RMB900,000
	Company
Fujian Seeout Guangming	Fujian Seeout Outdoor	Registered capital	30%
Media Advertising	Advertising Company	RMB1,500,000
Company Limited	Limited
CNPIT TOM Culture	中圖信息技術有限公司	Registered capital	30%
Company Limited	(CNPIT Information	RMB1,500,000
	Technology Company
	Limited)
China Entertainment	Turner Broadcasting System	10,778 ordinary shares	35.93%
Television Broadcast	Asia Pacific, Inc.
Limited
Cite (H.K.) Publishing	Wong Shun Hing	1,000,000 ordinary shares	23.81%
Group Limited
Cite (Malaysia) SDN. BHD.	Chew Kim Ming	40,000 ordinary shares	10%
Cite (Malaysia) SDN. BHD.	Brain Network (M)	60,000 ordinary shares	15%
	SDN. BHD

Save as disclosed above, as at the Latest Practicable Date, the Directors are not aware of any other person who has an interest or short position in TOM Shares or underlying TOM Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group.

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GENERAL INFORMATION

APPENDIX

4. DIRECTORS’ INTERESTS IN COMPETING BUSINESS

Mr. Frank Sixt and Mrs. Susan Chow, the Chairman of the Company and a non-executive Director respectively, are executive directors of Hutchison Whampoa Limited (“HWL”), Cheung Kong Infrastructure Holdings Limited (“CKI”) and Hutchison Global Communications Holdings Limited (“HGCH”) and directors of certain of their respective associates (collectively referred to in this paragraph as “HWL Group”, “CKI Group” and “HGCH Group” respectively). Mr. Frank Sixt is also a non-executive director of Cheung Kong (Holdings) Limited (“CKH”) and director of certain of its associates (collectively referred to as “CKH Group”). Mr. Frank Sixt and Mrs. Susan Chow are also non-executive directors of Hutchison Telecommunications International Limited and directors of certain of its associates (collectively referred to as “HTIL Group”). Mr. Edmond Ip, a non-executive Director, is an executive director of CKH and a director of certain of its associates. HWL Group is engaged in e-commerce and general information portals, event production, broadband content, sports-related content, event management and advertising and outdoor media. Both the CKH Group and the CKI Group are engaged in information technology, e- commerce and new technology. HGCH Group is engaged in systems integration and development of software and computer network systems. HTIL Group is engaged in providing mobile and fixed-line telecommunications services, including broadband data services, multimedia services and mobile and fixed-line Internet services and Intranet services. The Directors believe that there is a risk that such businesses may compete with those of the Group.

Mr. Sing Wang, an executive Director and Chief Executive Officer of the Company, holds 4.55% of the equity interests in 北京雅寶在線拍賣有限公司 (“Yabuy Online”) whose main business consists of the operation of yabuy.com, an online auction website in the PRC. The Directors believe that there is a risk that the business of Yabuy Online may compete with those of the Group.

Ms. Tommei Tong, an executive Director and Chief Financial Officer of the Company, is a beneficial owner of less than 1% of the equity interest in Qin Jia Yuan Media Services Company Limited (“Qin Jia Yuan”) whose principal business engaged in the provision of media services in the PRC. The Directors believe that there is a risk that the business of Qin Jia Yuan may compete with those of the Group.

Save as disclosed above, none of the Directors or their respective associates have any interests in a business, which competes or may compete with the business of the Group.

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GENERAL INFORMATION

APPENDIX

5. OUTSTANDING SHARE OPTIONS

As at the Latest Practicable Date, options to subscribe for an aggregate of 198,953,000 TOM Shares granted pursuant to the Pre-IPO Share Option Plan and the Share Option Scheme were outstanding. Details of which are as follows:

(1) Pre-IPO Share Option Plan

As at the Latest Practicable Date, options to subscribe for an aggregate of 16,196,000 TOM Shares at a subscription price of HK$1.78 per TOM Share were outstanding. These options were granted to 3 persons who are employees of the Group at the date of grant. All of these options have a duration of 10 years from 11 February, 2000, but shall lapse where the grantee ceases to be employed by the Group or the HWL group of companies.

(2) Share Option Scheme

Options to subscribe for an aggregate of 182,757,000 TOM Shares (which includes the options granted to the Directors as disclosed above) were outstanding as at the Latest Practicable Date, breakdown of which are set out below:

				Option period*
				(commencing from date
	No. of	No. of	Subscription price	of grant and terminating
Date of grant	share options	employees	per TOM Share	ten years thereafter)
			HK$
23/3/2000	2,068,000	51	11.30	23/3/2000-22/3/2010
31/5/2000	2,332,000	1	4.685	31/5/2000-30/5/2010
26/6/2000	886,000	26	5.89	26/6/2000-25/6/2010
30/6/2000	3,000,000	1	5.27	30/6/2000-29/6/2010
8/8/2000	15,626,000	125	5.30	8/8/2000-7/8/2010
15/11/2000	15,000,000	1	5.30	15/11/2000-14/11/2010
7/2/2002	30,000,000	2	3.76	7/2/2002-6/2/2012
9/10/2003	103,845,000	52	2.505	9/10/2003-8/10/2013
16/2/2004	10,000,000	1	2.55	16/2/2004-15/2/2014

• Those options that have been vested may be exercised within the option period, unless they have been cancelled. Generally, the options are vested in different tranches (subject to conditions set out in the offer letters).

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GENERAL INFORMATION

APPENDIX

6. LITIGATION

As at the Latest Practicable Date, save as mentioned below, no litigation or claim of material importance is known to the Directors to be pending or threatened against any member of the Group.

Three wholly-owned subsidiaries of the Company, being (1) York Island (Guangzhou) Limited as plaintiff; (2) York Island (Chengdu) Limited as claimant; and (3) York Island (Beijing) Limited as claimant, have been involved in three separate proceedings initiated in 2003 before 廣州市中級人民法 院 (the Guangzhou Intermediary People’s Court) and 中國國際經濟貿易仲裁委員會 (China International Economic and Trade Arbitration Commission) in the PRC respectively, concerning disputes in connection with agreements entered into by the respective subsidiaries relating to the leasing, construction or delivery of (i) bus shelter with light boxes; (ii) street name light boxes; and (iii) light boxes of bicycle shelters respectively by the respective defendant or respondents. Full provisions have been made during the three months ended 31 March 2004 against the book value in the aggregate amount of approximately HK$27.8 million in respect of the three proceedings abovementioned. On 31 December 2004, 中國國際經濟貿易 仲裁委員會(China International Economic and Trade Arbitration Commission) handed down a judgment ruling that York Island (Beijing) Limited was successful in its claim. As at the Latest Practicable Date, no decision has been made for the other two proceedings.

7. SERVICE CONTRACTS

Each of Mr. Sing Wang and Ms. Tommei Tong, being all the executive Directors has entered into a continuous service contract with the Group commencing from 1 June 2000 in the case of Mr. Sing Wang and 17 March 2003 in the case of Ms. Tommei Tong. Mr. Wang Lei Lei, being a non-executive Director, has also entered into a continuous service contract with TOM Online commencing from 1 January 2004. The terms of the contracts with Mr. Sing Wang and Ms. Tommei Tong are continuous unless terminated by not less than three months’ notice in writing served by either party on the other. The term of the contract with Mr. Wang Lei Lei is fixed at three years and thereafter will be continuous unless terminated by not less than three months’ notice served by either party on the other. Each of the three Directors is entitled to the basic salary set out below (subject to review in December of each year).

In addition, Mr. Sing Wang and Ms. Tommei Tong are entitled to a bonus payable for each twelve month period at the discretion of the Board. Mr. Wang Lei Lei is also entitled to an annual bonus payable for each twelve months period completed by him commencing on 1 January of each calendar year immediately following the date he entered into his service contract. The amount of the bonus for Mr. Wang Lei Lei shall be determined at the discretion of the board of directors of TOM Online. Each of Mr. Sing Wang, Ms. Tommei Tong and Mr. Wang Lei Lei is entitled to certain allowances, medical benefits and reimbursement of all reasonable out of pocket expenses. Neither of the above Directors is entitled to vote on the relevant board resolutions relation to any bonus payable to him or her. The current basic annual salaries of the above Directors are as follows:

HK$ Sing Wang 2,768,016 Tommei Tong 1,502,040 Wang Lei Lei 1,053,919

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GENERAL INFORMATION

APPENDIX

Save as disclosed above, none of the Directors has entered into any service agreements with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation other than statutory compensation).

8. GENERAL

• (a) The registered office of the Company is at P.O. Box 309, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, British West Indies.

• (b) The head office and principal place of business of the Company is at 48th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong. The share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited at Rooms 1712-1716, 17 Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

• (c) The Qualified Accountant of the Company as required under Rule 3.24 of the Listing Rules is Ms. Tommei Tong. She holds a Bachelor of Social Sciences Degree from the University of Hong Kong in 1986. She is also a Fellow of the Association of Chartered Certified Accountants and the Hong Kong Institute of Certified Public Accountants.

• (d) The Company Secretary of the Company is Ms. Angela Mak. Ms. Mak holds a Bachelor of Commerce degree and a Bachelor of Laws degree from the University of New South Wales in Australia and has been admitted as a solicitor in New South Wales (Australia), England and Wales and Hong Kong.

• (e) The English text of this circular shall prevail over the Chinese text.

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