TOM Group Limited — Interim / Quarterly Report 2007

Sep 5, 2007

==> picture [1210 x 861] intentionally omitted <==

----- Start of picture text -----

Stock Code:2383
----- End of picture text -----

Interim Report 2007

01

CONTENTS

• 2 Definitions

• 3 Chairman’s Statement

• 8 Management’s Discussion and Analysis

• 10 Independent Review Report

• 11 Interim Financial Statements

• 15 Notes to the Condensed Consolidated Interim Financial Statements

• 35 Disclosure of Interests

• 45 Corporate Governance

• 46 Other Information

TOM GROUP LIMITED

02

DEFINITIONS

“Associates” has the meaning ascribed under the Listing Rules “Beijing Lei Ting” means Beijing Lei Ting Wan Jun Network Technology Limited “CKH” means Cheung Kong (Holdings) Limited “Company” means TOM Group Limited “Director(s)” means the director(s) of the Company “Greater China” means Mainland China, Hong Kong, Macau and Taiwan “Group” means the Company and its subsidiaries “HWL” means Hutchison Whampoa Limited “Listing Rules” means the Rules Governing the Listing of Securities on the Stock Exchange “Main Board” means the main board of the Stock Exchange “New Option Scheme” means the share option scheme adopted by the Company on 23 July 2004 “Old Option Scheme” means the share option scheme adopted by the Company on 11 February 2000 (as amended) and terminated with effect from 4 August 2004 “Pre-IPO Share Option Plan” means the Pre-IPO Share Option Plan adopted by the Company on 11 February 2000 “SFO” means the Securities and Futures Ordinance, Chapter 571 of the laws of Hong Kong “Stock Exchange” means The Stock Exchange of Hong Kong Limited “TOM Online” means TOM Online Inc.

Interim Report 2007

03

CHAIRMAN’S STATEMENT

I am pleased to announce the results of TOM Group Limited (“TOM” or the “Company”) and its subsidiaries (collectively referred to as the “TOM Group” or the “Group”) for the six months ended 30 June 2007.

The first half of 2007 was challenging for TOM Group but the performance of various business groups were encouraging. While the overall performance of the Group was impacted by the online business; all the offline business groups showed improvements in both revenues and segment profit.

Financial Highlights

	For the six months ended	For the six months ended
	30 June 2007	30 June 2006*
	HK$’000	HK$’000
Revenues
Offline business	782,151	691,259
Online business	564,859	781,881
	1,347,010	1,473,140
Segment profit
Offline business	72,416	52,803
Online business	56,500	207,602
	128,916	260,405
(Loss)/profit attributable to shareholders	(72,346)**	91,262***
Basic (Loss)/earnings per share (HK cents)	(1.81)**	2.69***

• Restated to reflect the discontinued operations of the Sports Group

• ** Included TOM Online’s goodwill impairment of HK$53 million and share of TOM Eachnet’s loss of HK$54 million *** Included a deemed disposal net gain of HK$25 million

For the six months ended 30 June 2007:

• Group Revenues were HK$1,347 million

• Segment profit was HK$129 million

• EBITDA was HK$97 million

• Loss attributable to shareholders was HK$72 million

• Loss per share from continuing operations was HK1.81 cents

TOM GROUP LIMITED

04

Financial Performance

For the six months ended 30 June 2007, the TOM Group reported revenues of HK$1,347 million, a drop of 8.6% compared to the same period last year’s HK$1,473 million. Segment profit was HK$129 million versus last year’s HK$260 million. Segment profit margin was 9.6% compared to last year’s 17.7%. Loss attributable to shareholders was HK$72 million (included TOM Online’s goodwill impairment of HK$53 million and share of TOM Eachnet’s loss of HK$54 million) versus profit attributable to shareholders of HK$91 million reported in the same period last year (included a deemed disposal net gain of HK$25 million). Loss per share from continuing operations for the six months was HK1.81 cents.

The Internet Group reported revenues of HK$565 million, a drop of 27.8% compared to last year’s HK$782 million. Segment profit for the period dropped by 72.8% to HK$57 million. Revenues of the Publishing Group increased by 3.4% to HK$482 million for the six months, compared to last year’s HK$466 million; segment profit grew by 9.6% to HK$72 million, versus last year’s HK$66 million. Revenues of the Outdoor Media Group grew by 15.3% to HK$213 million, compared to last year’s HK$185 million; segment profit was HK$14 million versus last year’s HK$12 million. The Television and Entertainment Group reported revenues of HK$87 million for the period, which included HK$41 million of revenues generated by Yangcheng (“YC”). Excluding the revenues of YC, the Television and Entertainment Group posted a growth of 14.1% to HK$46 million in revenues compared to last year’s HK$40 million. Segment loss for the Television and Entertainment group was HK$14 million; excluding YC’s segment profit of HK$1.2 million, segment loss of the Television and Entertainment Group reduced by 39.3% to HK$15 million, versus last year’s HK$25 million.

Business Review

Internet Group

Revenues of the Internet Group for the period were HK$565 million, a drop of 27.8% versus last year’s HK$782 million. Operations of TOM Online made up about 97.9% of Internet Group’s total revenues. Segment profit dropped by 72.8% to HK$57 million compared to last year’s HK$208 million. Segment profit margin for the period was 10.0% versus last year’s 26.6%.

For the first six months of 2007, total wireless Internet revenues dropped by 31.9% to HK$484 million versus last year’s HK$711 million and accounted for 89.3% of TOM Online’s total revenues. Online advertising revenues dropped by 8.3% to HK$47 million compared to last year’s HK$51 million, and made up about 8.7% of TOM Online’s total revenues.

In May 2007, China Mobile introduced a new practice of sending fee reminders to its WAP service users when they request downloads of WAP pages onto their mobile handsets and seeking their confirmation before such download requests are processed. Furthermore, in the past, China Mobile entered into its own strategic alliances with selected mobile phone producers pursuant to which it embedded menus in their handsets for all the best-selling products on China Mobile’s Monternet wireless portal, including certain of our products. However, beginning in May 2007, China Mobile has started to promote only its own wireless value-added service products in such menus and does not include ours or those of any other third-party value-added service providers. These policies had a significant adverse impact on TOMO’s wireless Internet business in 2Q07. A goodwill impairment of approximately HK$53 million on the Wireless Internet business was made for the six months.

Interim Report 2007

05

Although these new measures adversely impacted TOM Online in the period and the last half of 2006 in the short run, we believe that in the longer term there remains good opportunities for the continued development of our wireless Internet businesses. Throughout this difficult period, TOM Online has maintained a healthy working relationship with China Mobile. In addition, certain products, such as SMS (“Short Messaging Service”) and CRBT (“Color Ring Back Tone”) continued to post growth (14% and 3% respectively in the second quarter of 2007 compared with the first quarter of the year). For the first six months of 2007, revenues CRBT grew 19% over last year.

Online advertising reported revenues of HK$47 million, representing a drop of 8.3% compared to last year’s HK$51 million.

Beginning on 1 February 2007, TOMO recognized its share of losses from the TOM Eachnet JV based on the equity method of accounting. For the six months ended 30 June 2007, its 51% share of losses from the TOM Eachnet JV was approximately HK$54 million and has been included in share of loss on equity investment in a joint venture in the unaudited consolidated profit and loss account.

Before its share of start-up losses of TOM Eachnet JV and the goodwill impairment, TOM Online achieved positive cashflow from operations of HK$55 million for the first half of the year.

The new platform of TOM Eachnet was formally launched on 12 July 2007 with a more simplified and user-friendly interface for Chinese users. The independent platform in China is much more responsive to users’ requests and functionality updates. Daily page views reached 17 million in early August. The TOM Eachnet platform is now a standalone platform. More new functions will be launched and marketing efforts which has been put on hold during the development of the new platform will be stepped up in the coming months to enhance traffic and transaction volume of the website.

At the end of July 2007, TOM-Skype registered users were 51.0 million, up from over 35.5 million at the end of March 2007. Value added services will be launched in the near future to leverage on the user base.

Publishing Group

The Publishing Group reported revenues of HK$482 million for the first six months of 2007, a moderate growth of 3.4% over last year’s HK$466 million. Segment profit of the group grew by 9.6% to HK$72 million, compared to last year’s HK$66 million. Segment profit margin for the six months improved from last year’s 14.1% to 14.9%. Excluding the disposal gain of HK$14 million from the disposal of Yazhou Zhoukan in the first half of 2006, segment profit increased by 41.2% and segment profit margin improved from last year’s 10.9% to 14.9% for the six months.

In the first half of 2007, advertising revenues made up 31% of the group’s total, magazine sales made up 24%, while book sales accounted for 41%. Revenue from Taiwan accounted for 98% of the total revenues, with the rest generated from Mainland China and Hong Kong.

The performance of Taiwan Publishing in the first half was encouraging given the competitive operating environment in which it operates. The Taiwan magazine business continued to perform well in the first half of the year. Advertising revenues of the Taiwan magazines maintained steady growth in the first half of the year. Magazine circulation volume increased about 20% over the same period last year. Mom Baby , a magazine published by Nong Nong , received an award as the most popular magazine for female in the age group of 25 to 34 from AC Nielsen, while Citta Bella became one of the top two fashion magazines in Taiwan. Two news stories reported by Business Weekly received the SCOOP Award and Excellence in Reporting Breaking News award from The Society of Publishers in Asia.

TOM GROUP LIMITED

06

With the emphasis on profitability, the number of new book titles published by the Taiwan operations reduced by 13.4% for the first six months of the year as planned, and the total number of new books printed reduced by similar percentage compared to last year. Revenues of Cite, grew by 14.3% to HK$119.7 million, gross profit grew by 37.4% to HK$50 million and gross profit margin improved from last year’s 35.0% to 42.1%.

Performance of the five magazines developed and launched in Mainland China by Taiwan operations were encouraging albeit they were still in investment stage. The number of subscribers increased more than 4 fold versus the same period last year; circulation revenues increased by 45.2% to HK$1.5 million. Advertising revenues increased 24.4% over the same period last year, total number of pages for advertisement increased 46.2% over the past year. The February 2007 issue of “DG Best” awarded as one of the top 10 popular magazines in a survey conducted by ZCOM, a leading Internet magazine distributors in Mainland China.

Pixnet, (www.pixnet.net) a leading social networking website in Taiwan, acquired in February 2007, has been performing well. During the past six months since its acquisition, Pixnet’s ranking in terms of traffic in Taiwan went up from 59th to 24th according to Alexa, an information company. In addition to increasing traffic, Pixnet has begun to generate advertising revenue. Pixnet acts as pre-marketing and pre-research platform for new books launched by the group and also produces online social networking channels for magazines within the group.

Outdoor Media Group

Revenues of the Outdoor Media Group (“OMG”) were HK$213 million for the first six months of 2007, a growth of 15.3% compared to the same period last year’s HK$185 million. Segment profit of the group grew by 19.1% to HK$14 million versus last year’s HK$12 million. Segment profit margin was 6.7% compared to last year’s 6.5%.

In the first six months of 2007, revenues from self-owned/leased media made up 61% of the total, media buying made up 27%, with the remainder generated from professional services. Average selling price of self-built/leased assets for the period increased 24.7% over the same period last year. Average selling price of billboard and unipole increased 38.4% versus last year.

Total media asset space of OMG maintained at about 340,000 square meters; self-owned/leased assets made up about 87% of total assets, and the remainder was media buying. Billboard and unipole made up 77% of the total media assets, street furniture and transportation advertisings made up 22% and remaining 1% were other media. Occupancy rate of self-owned/leased assets were about 71% compared to 73% at the end of 2006.

OMG has been stepping up its development in the first tier cities including Beijing, Shanghai, Guangzhou and Shenzhen in the first six months of the year; apart from the development of digital light boxes in Puxi of Shanghai and various projects in negotiations in Shanghai, it has just secured several spectacular billboards located in a prime location of Beijing city in July 2007. OMG believes that the newly secured billboards will enable the group to capture good business opportunities resulting from the 2008 Beijing Olympics.

In the first half of the year, OMG continued to expand its media assets portfolio in different higher margin categories in the first tier cities as well as leading second tier cities, though the focus of the group remains on billboard and unipole. Initiatives were also undertaken to strengthen the group’s network sales by enhanced integration within subsidiaries. As at 30 June 2007, OMG operated 16 subsidiaries with advertising presence in over 60 cities throughout Mainland China.

Interim Report 2007

07

Television and Entertainment Group

Revenues of the Television and Entertainment Group grew by 116.1% to HK$87 million, compared to last year’s HK$40 million. Starting from the fiscal year of 2007, results of YC, previously a sports marketing company, are grouped under the Television and Entertainment Group. In the first half of the year, YC reported revenues of HK$41 million which were mainly advertising revenues. Excluding the revenues of YC, the Television and Entertainment Group posted a growth of 14.1% to HK$46 million in revenues compared to last year’s HK$40 million. Segment loss for the Television and Entertainment group was HK$14 million; excluding YC’s segment profit of HK$1.2 million, segment loss of the Television and Entertainment Group reduced by 39.3% to HK$15 million versus last year’s HK$25 million.

Advertising revenues made up 80% of the total revenues of CETV for the six months ended 2007, compared to last year’s 86%; with the rest contributed by new media, events and program syndication. Revenues from event management of CETV increased substantially at over 50% versus last year; contracts secured and to be recognized in the second half of the year amounted to over HK$17 million. Leveraging on its broadcasting platform, CETV organized events for certain large local clients such as Shenzhen Telecom as well as various international brands. Program syndication of CETV maintained a moderate growth in the first half of 2007 and it is expected that with more in-house productions in pipeline, revenues from program syndication will continue to grow.

A new company was set up under the Television and Entertainment Group to further pursue new media initiatives. The new TV Interactive company will work closely with TOMO and CETV in producing interactive programs leveraging the multi-media platform of TOM Group. The new company will also work with other wireless services providers and television networks.

The restructuring of YC held in the first half of 2006 has successfully repositioned the Company as an integrated marketing communication expert. In the first half of the year, revenues of YC were mainly generated from event, PR promotion production services and media buying business. YC has organized events for various international brands, including a countrywide campaign for Nokia covering 42 cities throughout Mainland China. The Company has also played a significant role in cross-selling relevant products from all of TOM Group’s business groups, especially OMG and CETV.

Business Outlook

The privatization of TOM Online was approved by a majority of votes by shareholders in the Court meeting and EGM held on 10 August 2007 respectively. This will result in an estimated annual operating saving of HK$40 million, TOM Online’s joint ventures with Skype and Ebay will diversify and broaden the revenues streams of the Group’s online businesses. The TV Interactive company will expand both the content production and distribution capabilities of the Group. These initiatives, together with continued focus on operating and financial disciplines in the Publishing, Outdoor Media and Television and Entertainment Groups should lay the foundation for improved performance going forward.

I would like to take this opportunity to thank the management and staff for their continuing hard work and dedication.

Frank Sixt Chairman

Hong Kong, 21 August 2007

TOM GROUP LIMITED

08

MANAGEMENT’S DISCUSSION AND ANALYSIS

Liquidity and Financial Resources

As at 30 June 2007, TOM Group had bank and cash balance, including pledged deposits, of approximately HK$1,686 million and listed debt securities of approximately HK$1,692 million, of which bank balance and listed debt securities of approximately HK$36 million and HK$1,614 million, respectively were pledged to secure bank loan facilities of the Group. A total of HK$4,740 million financing facilities from banks were available, of which HK$2,485 million had been drawn down to finance the Group’s acquisitions, capital expenditures and for working capital purposes as at 30 June 2007. This total available financing facilities included a total of US$230 million (approximately HK$1,794 million) which was secured by the Group for the purpose of financing the privatization of TOM Online as disclosed in the scheme document dated 30 April 2007 jointly issued by TOM Online and the Group.

Total borrowings of TOM Group amounted to approximately HK$2,681 million as at 30 June 2007. This included liability portion of convertible bonds of approximately HK$196 million, long-term bank and other loans of approximately HK$2,133 million and short-term bank and other loans of approximately HK$352 million. The gearing ratio of TOM Group was 38.1% as at 30 June 2007, as compared to 40.3% as at 31 December 2006.

As at 30 June 2007, the Group had net current assets of approximately HK$990 million, as compared with HK$864 million as at 31 December 2006.

As at 30 June 2007, the current ratio of TOM Group was 1.47 compared to 1.43 as at 31 December 2006.

For the six months of 2007, the Group generated net cash of HK$9 million from its operating activities, as compared to net cash inflow of approximately HK$274 million in the same period of 2006.

Charges on Group Assets

As at 30 June 2007, the Group had listed debt securities with a market value of approximately HK$1,614 million pledged to banks for securing bank loans and the amount drawn down by the Group was HK$1,489 million. In addition, bank deposits, cash and other assets at total net book value of approximately HK$42 million were pledged to banks for securing banking and other facilities granted to certain subsidiaries and an associate company of the Group.

Interim Report 2007

09

Foreign Exchange Exposure

In general, it is the Group’s policy for each operating entity to borrow in local currencies, where necessary, to minimize currency risk.

Contingent Liabilities

As at 30 June 2007, TOM Group had no material contingent liabilities.

Employee Information

As at 30 June 2007, TOM Group had 3,991 full-time employees. During the first six months of the year, employee and stock option costs, including Directors’ emoluments, totaled at HK$300 million. The Group’s employment and remuneration policies remained the same as detailed in the Annual Report for the year ended 31 December 2006.

TOM GROUP LIMITED

10

INDEPENDENT REVIEW REPORT

==> picture [86 x 50] intentionally omitted <==

REPORT ON REVIEW OF INTERIM FINANCIAL REPORT TO THE BOARD OF DIRECTORS OF TOM GROUP LIMITED

(Incorporated in the Cayman Islands with limited liability)

Introduction

We have reviewed the interim financial report set out on pages 11 to 34, which comprises the condensed consolidated balance sheet of TOM Group Limited (the “Company”) and its subsidiaries (together, the “Group”) as at 30 June 2007, and the condensed consolidated profit and loss account, the condensed consolidated statement of recognised income and expense and the condensed consolidated cash flow statement for the six-month period then ended, and a summary of significant accounting policies and other explanatory notes. The Rules Governing the Listing of Securities on the Main Board of The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial report to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants. The directors of the Company are responsible for the preparation and presentation of this interim financial report in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting”. Our responsibility is to express a conclusion on this interim financial report based on our review and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Scope of Review

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Hong Kong Institute of Certified Public Accountants. A review of interim financial report consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim financial report is not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting”.

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong, 21 August 2007

Interim Report 2007

11

INTERIM FINANCIAL STATEMENTS

Condensed Consolidated Profit And Loss Account

For the six months ended 30 June 2007

Note

Unaudited Six months ended 30 June 2007 2006 HK$’000 HK$’000 (As restated) 1,347,010 1,473,140 (877,495) (876,220) 50,204 49,544 (160,728) (151,610) (118,177) (128,534) (135,062) (132,262) (53,283) – (54,030) (327) 8,435 5,014 6,874 238,745 – 24,601 6,874 263,346 (68,792) (66,818) (61,918) 196,528 (24,412) (20,542) (86,330) 175,986 (1,780) (13,938) (88,110) 162,048 (15,764) 70,786 (72,346) 91,262 HK(1.81) cents HK2.69 cents N/A N/A HK(0.05) cents HK(0.34) cents N/A N/A

Continuing operations Turnover 3 Cost of sales Interest income Selling and marketing expenses Administrative expenses Other operating expenses Provision for goodwill impairment 4 Share of losses of jointly controlled entities Share of profits of associated companies Operating profit before net gain on deemed disposals of interests in subsidiaries Net gain on deemed disposals of interests in subsidiaries 5 Operating profit 6 Finance costs 7 (Loss)/profit before taxation Taxation 8 (Loss)/profit for the period from continuing operations Discontinued operations Loss for the period from discontinued operations 9 (Loss)/profit for the period Attributable to: Minority interests Equity holders of the Company (Loss)/earnings per share for (loss)/profit attributable to the equity holders of the Company during the period 11 From continuing operations Basic Diluted From discontinued operations Basic Diluted

1,347,010 (877,495) 50,204 (160,728) (118,177) (135,062) (53,283) (54,030) 8,435 6,874 – 6,874 (68,792) (61,918) (24,412) (86,330) (1,780) (88,110) (15,764) (72,346) HK(1.81) cents N/A HK(0.05) cents N/A

TOM GROUP LIMITED

12

Condensed Consolidated Balance Sheet

As at 30 June 2007

Note	30 June 2007 Unaudited HK$’000	31 December 2006 Audited HK$’000 302,314 2,719,455 104,316 14,171 231,093 1,986,388 2,091 42,896 19,501 5,422,225 ------------------- 93,973 130,068 988,133 37,546 1,618,778 2,868,498 ------------------- 7,920 129,220 816,689 56,858 265,786 727,569 2,004,042 ------------------- 864,456 ------------------- 6,286,681 ------------------- 11,617 1,953,286 1,964,903 ------------------- 4,321,778 389,328 2,544,673 (6,244) 2,927,757 1,394,021 4,321,778
ASSETS AND LIABILITIES Non-current assets Fixed assets 12 Goodwill 13 Other intangible assets 14 Interests in jointly controlled entities Interests in associated companies Available-for-sale financial assets Loans and receivables Deferred tax assets Other non-current assets Current assets Assets classified as held for sale 15 Inventories Trade and other receivables 16 Restricted cash 17 Bank balances and cash Current liabilities Liabilities classified as held for sale 15 Consideration payables Trade and other payables 18 Taxation payable Long-term bank loans – current portion Short-term bank and other loans Net current assets Total assets less current liabilities Non-current liabilities Deferred tax liabilities Other non-current liabilities 19 Net assets EQUITY Capital and reserves attributable to equity holders of the Company Share capital 21 Reserves 23 Own shares held Shareholders’ funds Minority interests 24 Total equity	275,119 2,637,585 70,843 (36,454) 231,146 1,745,743 2,112 45,521 21,823 4,993,438 ------------------- 210,384 128,145 1,056,579 35,575 1,650,696 3,081,379 ------------------- 11,011 134,330 803,983 45,165 745,060 351,810 2,091,359 ------------------- 990,020 ------------------- 5,983,458 ------------------- 14,650 1,612,467 1,627,117 ------------------- 4,356,341 389,328 2,547,430 (6,244) 2,930,514 1,425,827 4,356,341

Interim Report 2007

13

Condensed Consolidated Statement of Recognised Income and Expense

For the six months ended 30 June 2007

	Unaudited Six months ended 30 June 2007 2006 HK$’000 HK$’000 9,844 (19,552) 99,657 61,725 109,501 42,173 (88,110) 162,048 21,391 204,221 23,087 86,785 (1,696) 117,436
Revaluation surplus/(deficit) on available-for-sale financial assets Exchange translation differences Net income recognised directly in equity (Loss)/profit for the period Total recognised income and expense for the period Attributable to: Minority interests Equity holders of the Company	9,844 99,657 109,501 (88,110) 21,391 23,087 (1,696)

TOM GROUP LIMITED

14

Condensed Consolidated Cash Flow Statement

For the six months ended 30 June 2007

	Unaudited Six months ended 30 June 2007 2006 HK$’000 HK$’000 8,697 273,977 266,780 (221,663) (243,559) 557,315 31,918 609,629 1,618,778 1,081,506 1,650,696 1,691,135
Net cash from operating activities Net cash from/(used in) investing activities Net cash (used in)/from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period	8,697 266,780 (243,559) 31,918 1,618,778 1,650,696

Interim Report 2007

15

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1 Basis of preparation and accounting policies

These unaudited condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants and applicable disclosure requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

These condensed consolidated financial statements should be read in conjunction with the 2006 annual financial statements of the Group.

The accounting policies and methods of computation used in preparation of these condensed consolidated financial statements are consistent with those used in the annual financial statements for the year ended 31 December 2006.

The following new standards, amendments to standards and interpretations are mandatory for financial year ending 31 December 2007:

Amendment to HKAS 1	“Presentation of Financial Statements: Capital Disclosures”
HKFRS 7	“Financial Instruments: Disclosures”
HK(IFRIC)-Int 7	“Applying the Restatement Approach under HKAS 29, Financial Reporting in
	Hyperinflationary Economies”
HK(IFRIC)-Int 8	“Scope of HKFRS 2”
HK(IFRIC)-Int 9	“Reassessment of Embedded Derivatives”
HK(IFRIC)-Int 10	“Interim Financial Reporting and Impairment”

All the new standards, amendments to standards and interpretations above are either not relevant or do not have material impacts to the Group.

2 New standards not yet effective

The Group has not early adopted the following new standards or interpretations that have been issued but are not yet effective for 2007:

HKAS 23 (Revised)	“Borrowing Costs”
HKFRS 8	“Operating Segments”
HK(IFRIC)-Int 11	“HKFRS 2 – Group and Treasury Share Transactions”
HK(IFRIC)-Int 12	“Service Concession Arrangements”

The Group has commenced an assessment of the impacts of these new standards or interpretations and they are not expected to have a significant impact on the Group’s results and financial position.

• 3 Segment reporting

Primary reporting format – business segments

The Group is organised into the following business segments:

Continuing operations

• Internet Group – provision of wireless internet services, online advertising, commercial enterprise solutions, and internet access.

• Publishing Group – magazine and book circulation, sales of publication advertising and other related products.

• Outdoor Media Group – advertising sales of outdoor media assets and provision of outdoor media services.

• Television and Entertainment Group – advertising sales, provision of broadcasting post production services, event organisation and sponsorship sales.

Discontinued operations

• Sports Group – event organisation, advertising and sponsorship sales in relation to sports events and programmes.

Since 1 January 2007, Sports Group has ceased to participate in or organise any sports events. Further details of the discontinuation of the Sports Group segment are set out in note 9 to the condensed consolidated interim financial statements.

TOM GROUP LIMITED

16

Unaudited

Six months ended 30 June 2007

			Continuing Operations Television Outdoor and Publishing Media Entertainment Group Group Group HK$’000 HK$’000 HK$’000	Continuing Operations Television Outdoor and Publishing Media Entertainment Group Group Group HK$’000 HK$’000 HK$’000	Continuing Operations Television Outdoor and Publishing Media Entertainment Group Group Group HK$’000 HK$’000 HK$’000	Sub-total HK$’000	Discontinued Operations Sports Group HK$’000	Total HK$’000
		Internet Group HK$’000	Publishing Group HK$’000
Total gross segment turnover Inter-segment turnover Turnover Segment profit/(loss) before amortisation and depreciation Amortisation and depreciation Segment profit/(loss) Provision for goodwill impairment Share of losses of jointly controlled entities Share of profits of associated companies Unallocated (costs)/ income Operating profit/(loss) Finance costs Loss before taxation Taxation Loss for the period Attributable to: Minority interests Equity holders of the Company Segment capital expenditure Unallocated capital expenditure Total capital expenditure		564,859 – 564,859 98,593 (42,093) 56,500 (53,283) (54,030) 229 10,978	482,298 (116) 482,182 80,857 (8,854) 72,003 – – 8,206 3,878	212,987 – 212,987 31,463 (17,162) 14,301 – – – 12,292	87,942 (960) 86,982 1,090 (14,978) (13,888) – – – 18,693	1,348,086 (1,076) 1,347,010 212,003 (83,087) 128,916 (53,283) (54,030) 8,435 (23,164) 6,874 (68,792) (61,918) (24,412) (86,330) (15,764) (70,566) 45,841	– – – (1,808) (48) (1,856) – – – 76 (1,780) – (1,780) – (1,780) – (1,780) –	1,348,086 (1,076) 1,347,010 210,195 (83,135) 127,060 (53,283) (54,030) 8,435 (23,088) 5,094 (68,792) (63,698) (24,412) (88,110) (15,764) (72,346) 45,841 467 46,308

Interim Report 2007

17

Unaudited As at 30 June 2007 Television Outdoor and Internet Publishing Media Entertainment Sports Group Group Group Group Group HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Total HK$’000

Segment assets 4,067,142 1,269,259 1,010,310 289,185 26,428 Assets classified as held for sale 97,967 – – – 112,417 Interests in jointly controlled entities (36,454) – – – – Interests in associated companies 1,973 229,173 – – – Unallocated assets Total assets Segment liabilities 309,675 335,019 138,684 66,594 5,150 Liabilities classified as held for sale 11,011 – – – – Unallocated liabilities Total liabilities

6,662,324 210,384 (36,454) 231,146 1,007,417 8,074,817 855,122 11,011 2,852,343 3,718,476

TOM GROUP LIMITED

18

Unaudited

Six months ended 30 June 2006

			Continuing Operations Television Outdoor and Publishing Media Entertainment Group Group Group HK$’000 HK$’000 HK$’000	Continuing Operations Television Outdoor and Publishing Media Entertainment Group Group Group HK$’000 HK$’000 HK$’000	Continuing Operations Television Outdoor and Publishing Media Entertainment Group Group Group HK$’000 HK$’000 HK$’000	Sub-total HK$’000	Discontinued Operations Sports Group HK$’000	Total HK$’000
		Internet Group HK$’000	Publishing Group HK$’000
Total gross segment turnover Inter-segment turnover Turnover Segment profit/(loss) before amortisation and depreciation Amortisation and depreciation Segment profit/(loss) Share of losses of jointly controlled entities Share of (losses)/profits of associated companies Unallocated (costs)/ income Operating profit/(loss) before net gain on deemed disposals Net gain on deemed disposals of interests in subsidiaries Operating profit/(loss) Finance costs Profit/(loss) before taxation Taxation Profit/(loss) for the period Profit/(loss) attributable to Minority interests Profit/(loss) attributable to Equity holders of the Company Segment capital expenditure Unallocated capital expenditure Total capital expenditure		781,881 – 781,881 244,581 (36,979) 207,602 (327) (108) – 34,917	467,739 (1,452) 466,287 75,511 (9,823) 65,688 – 5,122 – 7,745	184,728 – 184,728 27,583 (15,575) 12,008 – – 24,601 11,921	44,198 (3,954) 40,244 (3,950) (20,943) (24,893) – – – 18,923	1,478,546 (5,406) 1,473,140 343,725 (83,320) 260,405 (327) 5,014 (26,347) 238,745 24,601 263,346 (66,818) 196,528 (20,542) 175,986 71,331 104,655 73,506	49,482 (625) 48,857 (14,012) (291) (14,303) – – 233 (14,070) – (14,070) – (14,070) 132 (13,938) (545) (13,393) 64	1,528,028 (6,031)
								1,521,997
								329,713 (83,611)
								246,102 (327) 5,014 (26,114)
								224,675 24,601
								249,276 (66,818)
								182,458 (20,410)
								162,048
								70,786
								91,262
								73,570 777
								74,347

Interim Report 2007

19

Audited As at 31 December 2006 Television Outdoor and Internet Publishing Media Entertainment Sports Group Group Group Group Group HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	Total HK$’000
Segment assets 3,974,986 1,261,094 1,024,608 217,596 221,646 Assets classified as held for sale 93,973 – – – – Interests in jointly controlled entities 14,171 – – – – Interests in associated companies 1,246 229,847 – – – Unallocated assets Total assets Segment liabilities 287,538 358,022 155,795 38,182 45,650 Liabilities classified as held for sale 7,920 – – – – Unallocated liabilities Total liabilities	6,699,930 93,973 14,171 231,093 1,251,556
	8,290,723
	885,187 7,920 3,075,838
	3,968,945

Secondary reporting format – geographical segments

The Group’s business segments are operated in three main geographical areas:

Hong Kong – Internet Group, Publishing Group and Television and Entertainment Group

Mainland China – Internet Group, Publishing Group, Outdoor Media Group, Sports Group (discontinued operations) and Television and Entertainment Group

Taiwan and other Asian countries – Internet Group and Publishing Group

There are no significant sales between the geographical segments.

TOM GROUP LIMITED

20

	Unaudited Turnover Six months ended 30 June 2007 Six months ended 30 June 2006 Continuing Discontinued Consolidated Continuing Discontinued Consolidated Operations Operations Total Operations Operations Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	Unaudited Turnover Six months ended 30 June 2007 Six months ended 30 June 2006 Continuing Discontinued Consolidated Continuing Discontinued Consolidated Operations Operations Total Operations Operations Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	Unaudited Turnover Six months ended 30 June 2007 Six months ended 30 June 2006 Continuing Discontinued Consolidated Continuing Discontinued Consolidated Operations Operations Total Operations Operations Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	Unaudited Turnover Six months ended 30 June 2007 Six months ended 30 June 2006 Continuing Discontinued Consolidated Continuing Discontinued Consolidated Operations Operations Total Operations Operations Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	Unaudited Turnover Six months ended 30 June 2007 Six months ended 30 June 2006 Continuing Discontinued Consolidated Continuing Discontinued Consolidated Operations Operations Total Operations Operations Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	Unaudited Turnover Six months ended 30 June 2007 Six months ended 30 June 2006 Continuing Discontinued Consolidated Continuing Discontinued Consolidated Operations Operations Total Operations Operations Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Hong Kong Mainland China Taiwan and other Asian countries	7,704 866,819 472,487 1,347,010	– – – –				8,152 1,043,636 470,209
						1,521,997
Hong Kong Mainland China Taiwan and other Asian countries Amortisation and depreciation Provision for goodwill impairment Share of losses of jointly controlled entities Share of profits of associated companies Net gain on deemed disposals of interests in subsidiaries Unallocated (costs)/ income Operating profit/(loss)	(5,547) 130,349 87,201 212,003 (83,087) (53,283) (54,030) 8,435 – (23,164) 6,874	– (1,808) – (1,808) (48) – – – – 76 (1,780)	(5,547) 128,541 87,201 210,195 (83,135) (53,283) (54,030) 8,435 – (23,088) 5,094	(399) 269,814 74,310 343,725 (83,320) – (327) 5,014 24,601 (26,347) 263,346	– (14,012) – (14,012) (291) – – – – 233 (14,070)	(399) 255,802 74,310
						329,713 (83,611) – (327) 5,014 24,601 (26,114)
						249,276

Interim Report 2007

21

4 Provision for goodwill impairment

In May 2007, China Mobile Communications Corporation (“China Mobile”) began the operational practice of displaying a service fee reminder to Wireless Application Protocol (WAP) service users when they requested for the download of a WAP page onto their mobile handsets and seeking their confirmation before processing the download request. In addition, China Mobile started to place links to only its own Wireless Value-added Services (WVAS) offerings on the embedded menus of mobile handsets with customized software for China Mobile users. In the past, such embedded menus on handsets featured links to all popular products on China Mobile’s networks, including the products of the Group. The Group believes the above changes by China Mobile could have an adverse impact on the Group’s WVAS business, in particular the WAP business.

In view of the adverse impact and the uncertainties in future operating environment, the Group tested the carrying value of goodwill in relation to the wireless internet business for impairment as at 30 June 2007 and recorded an impairment charge of HK$53,283,000 for the six-month period ended 30 June 2007. The valuation was arrived at after using a combination of a market value approach (with comparisons to selected publicly traded companies operating in the same industry) and an income approach (discounted cash flows). Any continued adverse changes in mobile operators’ policies or in the competitive environment could lead to additional impairment charges and the Group is continually monitoring such changes to assess their impact on the Group.

5 Net gain on deemed disposals of interests in subsidiaries

On 28 March 2006, TOM Outdoor Media Group Limited (“TOM OMG”), a then wholly-owned subsidiary of the Company, issued a total of 35 new shares to an independent third party at a total consideration of US$26 million (approximately HK$202.8 million). As a result of this share issuance, the Group’s shareholding in TOM OMG has been diluted to 65%, and resulted in a gain on deemed disposal of HK$24,601,000.

6 Operating profit

Operating profit is stated after charging / crediting the following:

	Unaudited Six months ended 30 June 2007 2006 HK$’000 HK$’000	Unaudited Six months ended 30 June 2007 2006 HK$’000 HK$’000
Charging: Continuing operations Depreciation of fixed assets Amortisation of other non-current assets Amortisation of other non-current assets included in interests in associated companies Discontinued operations Depreciation of fixed assets Crediting: Continuing operations Gain on disposal of a subsidiary_(Note) Gain on disposal of available-for-sale financial assets(Note)_ Dividend income from available-for-sale financial assets Discontinued operations Dividend income from available-for-sale financial assets	60,012 24,317 2,448 48 – 5,193 – –	57,818 27,729 2,449
		291
		14,698 – 543
		377

Note: On 20 March 2006, the Group disposed of its 50% equity interests in Yazhou Zhoukan Holdings Limited, a then subsidiary of the Company, to Ming Pao Enterprise Corporation Limited (“Ming Pao”), a listed company on the Main Board of The Stock Exchange of Hong Kong Limited, for a consideration of 12,000,000 ordinary shares of Ming Pao (“Ming Pao Shares”) which was valued at a total of approximately HK$16 million. A gain on this disposal of HK$14,698,000 was recorded by the Group. During the period ended June 2007, all Ming Pao Shares were sold which resulted in a profit of approximately HK$5,193,000.

TOM GROUP LIMITED

22

7 Finance costs

All finance costs were incurred in continuing operations and are shown as follows:–

	Unaudited Six months ended 30 June 2007 2006 HK$’000 HK$’000	Unaudited Six months ended 30 June 2007 2006 HK$’000 HK$’000
Interest and borrowing costs on bank loans Interest and borrowing costs on convertible bonds Interest on other loans, wholly repayable within five years	63,489 5,001 302 68,792	39,368 27,041 409
		66,818

8 Taxation

Hong Kong profits tax has been provided at the rate of 17.5% (2006: 17.5%) on the estimated assessable profits for the period. Taxation outside Hong Kong has been provided for at the applicable rates on the estimated assessable profits less available tax losses.

The amount of taxation charged in the consolidated profit and loss account represents:

	Unaudited Six months ended 30 June 2007 2006 HK$’000 HK$’000	Unaudited Six months ended 30 June 2007 2006 HK$’000 HK$’000
Continuing operations
Overseas taxation Over-provision in prior years Deferred taxation Discontinued operations Over-provision in prior years	25,660 (2,139) 891 24,412 –	20,816 – (274
		20,542
		(132

For the periods ended 30 June 2007 and 2006, no taxation has been included in the consolidated profit and loss account as share of profits of associated companies.

9

Discontinued operations

Since 1 January 2007, the Group has ceased to participate in any sports related events and is in the process of selling the core assets in relation to the China Open tennis tournament event in Beijing (“China Open”). On 18 March 2007, pursuant to a series of agreements with an independent third party, the Group agreed to dispose of its 49% equity interest in the Beijing China Open Promotion Company Limited (“COL”), and 100% equity interests in Champion Will International Limited (“Champion Will”) and Swidon Enterprises Limited (“Swidon”) for a total consideration of US$15.5 million (approximately HK$121 million). COL is mainly engaged in the organisation of the China Open, while Champion Will and Swidon are the holders of the ATP and WTA licences, respectively. The completion of the disposal is subject to, among others, the approval of the relevant authorities.

In addition, 廣東羊城廣告有限公司 and 廣東羊城報業體育發展有限公司 (collectively “Yangcheng”) which were mainly involved in sports events organisation in prior years, also commenced to focus their operations in non sports-related activities since 1 January 2007. As a result, the results and assets and liabilities of Yangcheng have been included in the Television and Entertainment Group in the current period.

Interim Report 2007

23

(i) Loss for the period from discontinued operations is analysed as follows:

10

	Unaudited Six months ended 30 June 2007 2006 HK$’000 HK$’000	Unaudited Six months ended 30 June 2007 2006 HK$’000 HK$’000
Turnover Interest income Operating expenses Operating loss Taxation Loss for the period Attributable to: Minority interest Equity holders of the Company Net cash flows of discontinued operations are summarised as below:	– 48,857 76 233 (1,856) (63,160) (1,780) (14,070) – 132 (1,780) (13,938) – (545) (1,780) (13,393) Unaudited Six months ended 30 June 2007 2006 HK$’000 HK$’000	48,857 233 (63,160)
		(14,070) 132
		(13,938)
		(545)
		(13,393)
Net cash inflows from operating activities Net cash inflow from investing activities Net increase in bank balances and cash Bank balances and cash at the beginning of the period Bank balances and cash at the end of the period	6,451 54 6,505 5,460 11,965	2,264 313
		2,577 30,210
		32,787

(ii) Net cash flows of discontinued operations are summarised as below:

Dividend

No dividend has been paid or declared by the Company for the periods ended 30 June 2007 and 2006.

11 (Loss)/Earnings per share

Basic

Basic (loss)/earnings per share is calculated by dividing the (loss)/profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the period, excluding own shares held.

	Unaudited Six months ended 30 June 2007 2006	Unaudited Six months ended 30 June 2007 2006
(Loss)/Earnings from continuing operations (Loss)/profit attributable to equity holders of the Company_(HK$’000) Weighted average number of ordinary shares in issue Loss from discontinued operations Net loss attributable to equity holders of the Company(HK$’000) Continuing operations Basic (loss)/earnings per share(HK cents per share) Discontinued operations Basic loss per share(HK cents per share)_	(70,566) 3,893,270,558 (1,780) (1.81) (0.05)	104,655
		3,893,270,558
		(13,393)
		2.69
		(0.34)

TOM GROUP LIMITED

24

Diluted

No diluted (loss)/earnings per share is presented for the six months ended 30 June 2007 and 2006 as the exercise prices of the outstanding share options granted by the Company were higher than the average market price of the shares of the Company during the respective periods, and the conversion of the convertible bonds would have an anti-dilutive effect during these periods.

• 12

Fixed assets

12	Fixed assets
13		HK$’000
	At 1 January 2006 Additions Acquisition of subsidiaries Disposals Depreciation charge Exchange adjustment At 30 June 2006 Additions Acquisition of subsidiaries Transfer to other intangible assets Reclassification to assets held for sale Disposals Depreciation charge Exchange adjustment At 31 December 2006 Additions Acquisition of a subsidiary_(note 27(a))_ Disposals Depreciation charge Exchange adjustment At 30 June 2007 Goodwill	315,592 48,578 1,083 (4,579) (58,109) 3,673
		306,238 49,969 4,451 (2,721) (1,082) (1,206) (57,786) 4,451
		302,314 28,091 395 (2,763) (60,060) 7,142
		275,119
		HK$’000
	At 1 January 2006 Additions Consideration adjustments for acquisition of subsidiaries Disposal of a subsidiary Exchange adjustments At 30 June 2006 Additions Consideration adjustments for acquisition of subsidiaries Transferred to assets held for sale_(note 15(a)) Provision for impairment Exchange adjustments At 31 December 2006 Additions(note 27(a)) Consideration adjustments for acquisition of subsidiaries Provision for goodwill impairment Transferred to assets held for sale(note 15(b))_ Exchange adjustments At 30 June 2007	2,514,896 129,952 665 (27,493) 45,351
		2,663,371 113,011 (8,465) (72,997) (11,000) 35,535
		2,719,455 7,026 (3,961) (53,283) (85,117) 53,465
		2,637,585

Interim Report 2007

25

14 Other intangible assets

Other intangible assets
Concession rights HK$’000	Licence rights and royalties HK$’000	Publishing rights HK$’000	Purchased programme and film rights HK$’000	Software HK$’000	Customer base and technical know-how HK$’000	Total HK$’000
At 1 January 2006 36,115 Additions 3,716 Acquisition of subsidiaries – Amortisation charge (4,697) Exchange adjustment 1,498 At 30 June 2006 36,632 Additions 2,797 Acquisition of subsidiaries 5,941 Transfer from construction in progress 2,721 Amortisation charge (5,195) Reclassification to assets held for sale – Exchange adjustment (148) At 31 December 2006 42,748 Additions 364 Amortisation charge (5,284) Disposal (657) Reclassification to assets held for sale_(note 15(b))_ – Exchange adjustment (19) At 30 June 2007 37,152	29,882 – 890 (816) 101 30,057 – – – (902) – 46 29,201 – (928) – (27,300) 47 1,020	9,180 3,926 – (2,334) 183 10,955 489 – – (3,614) – (2) 7,828 281 (1,822) – – (29) 6,258	8,243 18,127 – (17,469) – 8,901 4,896 – – (10,275) – – 3,522 17,572 (11,498) – – – 9,596	6,725 – 85 (1,085) 100 5,825 – – – (1,014) – 111 4,922 – (1,042) – – 138 4,018	1,728 – 20,036 (1,328) 87 20,523 – – – (3,860) (951) 383 16,095 – (3,743) – – 447 12,799	91,873 25,769 21,011 (27,729) 1,969
						112,893 8,182 5,941 2,721 (24,860) (951) 390
						104,316 18,217 (24,317) (657) (27,300) 584
						70,843

15 Assets and Liabilities Held for Sale

Assets and Liabilities Held for Sale
	Unaudited 30 June 2007 HK$’000	Audited 31 December 2006 HK$’000
Assets held for sale Indiagames Limited_(note a) COL(note b) Liabilities held for sale Indiagames Limited(note a)_	97,967 112,417 210,384 11,011	93,973 –
		93,973
		7,920

TOM GROUP LIMITED

26

(a) Indiagames Limited (“Indiagames”)

In December 2006, TOM Online Inc. (“TOMO”), a non wholly-owned subsidiary of the Company, committed to a plan which was approved by the TOMO’s Board of Directors on 29 December 2006 to sell its entire equity interests in Indiagames in order to focus on the China market and initiated actions to locate a buyer. As a result, the assets and liabilities of Indiagames were classified as held for sale and presented separately as current assets and liabilities on the consolidated balance sheet as at 31 December 2006 and 30 June 2007.

On 5 March 2007, the Group signed a binding term sheet with a potential buyer for the disposal of Indiagames and the definitive agreement was still under finalisation as at 30 June 2007. The Group expects the disposal will be completed in the second half of 2007.

The major classes of assets and liabilities classified as held for sale were as follows:

	Unaudited 30 June 2007 HK$’000	Audited 31 December 2006 HK$’000
Cash and cash equivalents Trade and other receivables Goodwill_(note 13) Other non-current assets Less: Provision for impairment(note (i))_ Exchange adjustment Assets held for sale Trade and other payables Liabilities held for sale	14,863 31,257 72,997 8,904 128,021 (36,044) 5,990 97,967 11,011 11,011	23,049 30,382 72,997 3,517
		129,945 (36,044) 72
		93,973
		7,920
		7,920

(i) A provision for impairment of assets held for sale of HK$36,044,000 with reference to the expected disposal value of the assets less costs to sell.

(b)

COL

The assets and liabilities in relation to the disposal of the Group’s interest in COL, Champion Will and Swidon as disclosed in note 9 were classified as held for sale and presented separately as current assets on the consolidated balance sheet as at 30 June 2007.

	HK$’000
Goodwill_(note 13) License right(note 14)_ Assets held for sale	85,117 27,300
	112,417

Interim Report 2007

27

16 Trade and other receivables

Trade and other receivables
	Unaudited 30 June 2007 HK$’000	Audited 31 December 2006 HK$’000
Trade receivables, net of provision Prepayments, deposits and other receivables The ageing analysis of the Group’s trade receivables is as follows:	567,480 489,099 1,056,579 Unaudited 30 June 2007 HK$’000	555,227 432,906
		988,133
		Audited 31 December 2006 HK$’000
1-30 days 31-60 days 61-90 days Over 90 days Less: Provision for impairment Represented by: Receivables from an associated company Receivables from related companies Receivables from third parties	206,643 133,916 86,037 220,264 646,860 (79,380) 567,480 – 261 567,219 567,480	204,232 133,722 74,707 222,204
		634,865 (79,638
		555,227
		9,360 598 545,269
		555,227

(a) The carrying values of trade and other receivables approximate their fair values.

(b) Majority of the Group’s turnover is on open account terms and in accordance with terms specified in the contracts governing the relevant transactions.

17 Restricted Cash

As at 30 June 2007, bank deposits and cash of the Group totalling of US$2,344,000 (approximately HK$18,280,000) (31 December 2006: US$2,344,000 or approximately HK$18,280,000), NT9,200,000 (approximately HK$2,194,000) (31 December 2006: NT9,515,000 or approximately HK$2,273,000) and RMB618,000 (approximately HK$637,000) (31 December 2006: RMB618,000 or approximately HK$618,000) were pledged to banks for securing banking facilities granted to certain subsidiaries of the Company and RMB14,043,000 (approximately HK$14,464,000) (31 December 2006: RMB14,043,000 or approximately HK$14,043,000) were pledged to banks for securing banking facilities granted to an associated company respectively.

In addition, included in the restricted cash of the Group as at year ended 31 December 2006 was an amount of US$300,000 (approximately HK$2,332,000), representing money held in escrow pursuant to tax warrants provided by the founder of Indiagames.

TOM GROUP LIMITED

28

18 Trade and other payables

Trade and other payables
	Unaudited 30 June 2007 HK$’000	Audited 31 December 2006 HK$’000
Trade payables 222,662 Other payables and accruals 581,321 803,983 The ageing analysis of the Group’s trade payables at end of the period is as follows:		271,402 545,287
		816,689

	Unaudited 30 June 2007 HK$’000	Audited 31 December 2006 HK$’000
1-30 days 31-60 days 61-90 days Over 90 days Represented by: Payable to an associated company Payable to related companies Payable to third parties	85,831 38,042 20,461 78,328 222,662 – 1,174 221,488 222,662	123,629 47,324 27,737 72,712
		271,402
		3,116 286 268,000
		271,402

The carrying values of trade and other payables approximate their fair values.

19	Other non-current liabilities	Unaudited 30 June 2007 HK$’000	Audited 31 December 2006 HK$’000
	Non-current portion of long-term bank loans Convertible bonds Pension obligations	1,388,310 195,522 28,635 1,612,467	1,733,436 191,023 28,827
			1,953,286

Interim Report 2007

29

20 Movements in borrowings

20	Movements in borrowings
21		Short-term bank and other loans HK$’000	Loans from Long-term minority bank loans shareholders HK$’000 HK$’000			Convertible bonds- liability portion HK$’000		Total HK$’000
	As at 1 January 2006 Borrowings Repayments Convertible bonds interests, net of payments of coupon interests Exchange adjustments As at 30 June 2006 (unaudited) As at 1 January 2007 Borrowings Repayments Reclassification upon loan extension Convertible bonds interests, net of payments of coupon interests Exchange adjustments As at 30 June 2007 (unaudited) Share capital	75,213 294,317 (74,241) – 27 295,316 727,569 33,659 (135,115) (274,662) – 359 351,810	1,577,415 73,842 (37,236) – 5,185 1,619,206 1,999,222 – (142,990) 274,662 – 2,476 2,133,370	9,946 1,032,803 6,021 – – – – 24,194 – – 15,967 1,056,997 – 191,023 – – – – – – – 4,499 – – – 195,522 No. of ordinary shares of HK$0.1 each				2,695,377 374,180 (111,477) 24,194 5,212
								2,987,486
								2,917,814 33,659 (278,105) – 4,499 2,835
								2,680,702
								HK$’000
	Authorised: As at 1 January and 30 June 2006, and 1 January and 30 June 2007 Issued and fully paid: As at 1 January and 30 June 2006, and 1 January and 30 June 2007				5,000,000,000 3,893,270,558			500,000
								389,328

TOM GROUP LIMITED

30

22 Share option schemes

(a) Details of share options granted by the Company

	20 Pre-IPO Share Option Plan	Six months ended 30 June 07 200 Old Pre-IPO Option Share Scheme Option Plan	Six months ended 30 June 07 200 Old Pre-IPO Option Share Scheme Option Plan	6 Old Option Scheme
Number of share options: At the beginning of the period Lapsed during the period Cancelled during the period At the end of the period (unaudited)	16,196,000 – – 16,196,000	150,648,000 (5,000,000) (77,546,000) 68,102,000	16,196,000 – – 16,196,000	164,682,000 (10,096,000 (1,450,000 153,136,000

Terms of the share options outstanding as at 30 June 2007 are:

Expiry date Subscriptionpriceper share	Unaudited No. of share options 30 June 30 June 2007 2006	Unaudited No. of share options 30 June 30 June 2007 2006
10 February – 14 November 2010 HK$1.78 – HK$11.30 6 February 2012 HK$3.76 8 October 2013 HK$2.505 15 February 2014 HK$2.55	39,656,000 – 39,642,000 5,000,000 84,298,000	48,402,000 20,000,000 90,930,000 10,000,000
		169,332,000

For detailed information of the Pre-IPO Share Option Plan and Old Option Scheme of the Company, please refer to the 2006 annual report of the Company.

(b) Details of the share options granted by TOMO

	20 Pre-IPO Share Option Plan	Six months ended 30 June 07 200 Share Pre-IPO Option Share Scheme Option Plan	Six months ended 30 June 07 200 Share Pre-IPO Option Share Scheme Option Plan	6 Share Option Scheme
Number of share options: At the beginning of the period Exercised during the period Lapsed during the period At the end of the period (unaudited)	181,247,231 – (385,921) 180,861,310	18,000,000 – – 18,000,000	220,457,181 (35,034,719) (616,685) 184,805,777	18,000,000 – – 18,000,000

Terms of the share options outstanding as at 30 June 2007 are:

Expiry date Subscriptionpriceper share	Unaudited No. of share options 30 June 30 June 2007 2006	Unaudited No. of share options 30 June 30 June 2007 2006
15 February 2014 HK$1.50 10 May 2015 HK$1.204	180,861,310 18,000,000 198,861,310	184,805,777 18,000,000
		202,805,777

For detailed information of the Pre-IPO Share Option Plan and Share Option Scheme of TOM Online, please refer to the 2006 annual report of the Company.

Interim Report 2007

31

23 Reserves

Share premium account HK$’000	Capital reserve HK$’000	Capital redemption reserve HK$’000	General reserve HK$’000	Available- for-sale financial assets reserve HK$’000	Exchange Convertible difference bonds reserve HK$’000 HK$’000	Exchange Convertible difference bonds reserve HK$’000 HK$’000	Accumulated losses HK$’000	Total HK$’000
At 1 January 2006 3,625,981 Investment revaluation deficit – Exchange difference – Profit for the period – Employee share option schemes – value of employee services – At 30 June 2006 3,625,981 At 1 January 2007 3,625,981 Investment revaluation surplus – Reserve realised upon disposal – Exchange difference – Loss for the period – Employee share option schemes – value of employee services – At 30 June 2007 3,625,981	96,567 – – – 8,972 105,539 114,508 – – – – 5,209 119,717	776 – – – – 776 776 – – – – – 776	99,839 – 182 – – 100,021 111,285 – – (32) – – 111,253	(50,195) (16,097) (16) – – (66,308) (43,823) 8,485 (756) – – – (36,094)	4,462 – 42,105 – – 46,567 84,077 – – 62,197 – – 146,274	174,327 – – – – 174,327 30,879 – – – – – 30,879	(1,445,055) – – 91,262 – (1,353,793) (1,379,010) – – – (72,346) – (1,451,356)	2,506,702 (16,097) 42,271 91,262 8,972
								2,633,110
								2,544,673 8,485 (756) 62,165 (72,346) 5,209
								2,547,430

24 Minority interests

Minority interests
	Unaudited 30 June 2007 HK$’000	Audited 31 December 2006 HK$’000
At 1 January (Loss)/profit for the period/year attributable to minority interests Exchange difference Revaluation surplus on available-for-sale financial assets Actuarial loss on defined benefit plan Recognised income and expense attributable to minority interests Acquisition of interests in subsidiaries Dividend paid by subsidiaries to minority interests Exercise of share options of a subsidiary granted to employees Reclassified from loans from a minority shareholder Deemed disposal of interests in subsidiaries Contribution from minority shareholders Disposal of a subsidiary/interests in subsidiaries Employee share option scheme – value of employee services attributable to minority interests Other reserves shared by minority interests At 30 June/31 December	1,394,021 ------------------ (15,764) 37,492 1,359 – 23,087 ------------------ 2,771 (3,737) – – – 7,185 – 2,500 – 1,425,827	1,017,497 ------------------ 87,654 45,082 1,264 (1,125)
		132,875 ------------------
		10,560 (31,425) 32,990 15,967 177,198 – 31,188 7,717 (546)
		1,394,021

TOM GROUP LIMITED

32

25 Pledge of assets

Save as disclosed in note 17, the Group has the following pledge of assets:

• (a) At as 30 June 2007, available-for-sale financial assets with a total market value of approximately HK$1,614,065,000 (31 December 2006: HK$1,758,646,000) were pledged to banks for securing bank loans totaling HK$1,488,909,000 (31 December 2006: HK$1,628,071,000).

• (b) As at 30 June 2007, concession rights and properties with net book values of approximately HK$5,173,000 (31 December 2006: HK$7,588,000) and HK$835,000 (31 December 2006: HK$11,003,000), respectively, were pledged to banks for securing banking facilities granted to certain subsidiaries of the Company.

26 Contingent liabilities

As at 30 June 2007 and 31 December 2006, the Group had no significant contingent liabilities.

27 Business combinations

• (a) Acquisition of Pixnet Digital Media Corporation (“Pixnet”)

On 14 February 2007, the Group, through a 82.5% owned subsidiary, Cite Publishing Limited, entered into a Sale and Purchase Agreement with the shareholders of Pixnet for the acquisition of 90% equity interests in Pixnet at a total consideration of NT$135 million (approximately HK$31,968,000), of which NT$35 million (approximately HK$8,288,000) is for the acquisition of existing shares of Pixnet from the existing shareholders, and NT$100 million (approximately HK$23,680,000) is to be injected into Pixnet for subscription of new Pixnet shares. Pixnet is principally engaged in the operation of popular online community and social networking websites in Taiwan.

The allocation of the consideration is as follows:

	HK$’000
Fixed assets_(note 12) Trade and other receivables Bank balances and cash Trade and other payables Minority Interests(note 24) Cost of acquisition Purchase consideration Goodwill(note 13)_	395 38 27,321 (41) (2,771)
	24,942 31,968
	7,026

The acquiree’s book values of net assets at the date of acquisition approximate their fair values as disclosed above.

The goodwill is attributable to the significant synergies with existing publishing business in Taiwan expected to arise after the Group’s acquisition.

The Group’s share of Pixnet’s net assets as at 30 June 2007, post acquisition turnover and loss for the period ended 30 June 2007 amounted to approximately HK$19,131,000, HK$227,000 and HK$1,599,000 respectively.

The unaudited proforma financial information in relation to the acquisition of Pixnet is not presented as the management considered it is not material to the Group.

Interim Report 2007

33

(b) TOM Eachnet

Pursuant to a joint venture deed signed between TOMO and eBay International AG (“eBay”) on 20 December 2006, a joint venture, TOM Eachnet, has been formed on 1 February 2007 to carry on the business of owning and operating a mobile and Internet-based marketplace in China. TOM Eachnet is jointly controlled and owned by TOMO and eBay as to 51% and 49% respectively.

eBay provided an initial funding of US$40,000,000 (equivalent to approximately HK$312,000,000) cash to TOM Eachnet and TOMO will provide a shareholder’s loan in the amount of US$20,000,000 (equivalent to approximately HK$156,000,000), bearing interest at 1.3% over London Inter-Bank Offered Rate (“LIBOR”), to TOM Eachnet when the remaining cash balance of TOM Eachnet is only enough to finance no more than six months of its operation. If the funding from eBay and the shareholder’s loan from TOMO have been fully utilised, additional funding in the form of shareholders’ loans of not exceeding US$10,000,000 (equivalent to approximately HK$78,000,000) will be provided by TOMO and eBay in equal proportions if additional funding is required by TOM Eachnet and as mutually agreed by eBay and TOMO. In addition, eBay injected its subsidiary engaging in the business of operating an online auction and marketplace site in China to TOM Eachnet while TOMO contributes its expertise in the Internet and mobile industries in China and its leadership and management services to TOM Eachnet.

The Group accounts for this joint venture using the equity method of accounting since 1 February 2007. As at 30 June 2007, the Group had a negative investment in TOM Eachnet of US$6,426,000 (equivalent to approximately HK$50,224,000), representing its investment cost of US$527,000 (equivalent to approximately HK$4,114,000), being contribution of services to TOM Eachnet by the Group, less the Group’s share of TOM Eachnet’s losses for the five months ended 30 June 2007 of US$6,877,000 (equivalent to approximately HK$53,733,000) and currency translation adjustment of US$76,000 (equivalent to approximately HK$605,000).

28 Commitments

• (a) Capital commitments

	Unaudited 30 June 2007 HK$’000	Audited 31 December 2006 HK$’000
Acquisition of new investments – Contracted but not provided for_(Note)_ Acquisition of fixed assets and other intangible assets – Contracted but not provided for – Authorised but not contracted for	156,000 – 252,906 408,906	176,814 1,196 295,892
		473,902

Note: Included in the balance as at 30 June 2007 and 31 December 2006 was the commitment of US$20,000,000 (approximately HK$156,000,000) for financing the joint venture, TOM Eachnet. For details, please refer to note 27(b).

• (b) As at 30 June 2007, the Group had no commitment in respect of contributions of registered capital of investments in Mainland China (31 December 2006: HK$10,583,000).

• (c) Except for the Group’s commitments to pay 2007 earn-out consideration of an unknown amount in relation to the Group’s acquisition of Gainfirst Asia Limited (For details, please refer to Note 41(b) and 45(c) of the Company’s 2006 annual report), the Group did not have any material contingent liabilities as at 30 June 2007.

TOM GROUP LIMITED

34

29 Related party transactions

A summary of significant related party transactions, in addition to those disclosed in notes 16 and 18 to the interim financial statements, is set out below:

(a) Sales of goods and services

	Unaudited	Unaudited
	For the six months ended
		30 June
	2007	2006
	HK$’000	HK$’000
Sales to
– Hutchison Whampoa Limited (“HWL”) and its subsidiaries	6,215	4,149
– minority shareholders of subsidiaries and their subsidiaries	993	–

• (b) Purchase of goods and services

	Unaudited	Unaudited
	For the six months ended
		30 June
	2007	2006
	HK$’000	HK$’000
Cost of sales payable to
– minority shareholders of subsidiaries and their subsidiaries	6,442	7,554
Office and warehouse rental and service fees payable to
– an associated company of CKH	4,263	4,859
– a subsidiary of CKH	3,165	2,070
– minority shareholders of subsidiaries and their subsidiaries	240	903
Services fees payable to
– HWL and its subsidiaries	4,376	5,461
– minority shareholders of subsidiaries and their subsidiaries	216	243
Interest expenses payable to
– minority shareholders of subsidiaries and their subsidiaries	302	409

(c) Key management compensation

During the periods ended June 2006 and 2007, no transactions have been entered with the directors of the Company (being the key management personnel) other than the emoluments paid to them (being key management personnel compensation).

30 Subsequent event

On 9 March 2007, the Company and TOMO made a joint announcement regarding a proposed conditional privatisation of TOMO by the Company by way of scheme of arrangement (the “Proposed Privatisation Plan”). Pursuant to the Proposed Privatisation Plan, the Company intended to propose that the issued shares of TOMO held by parties other than Cranwood Company Limited, Handel International Limited, Schumann International Limited and Devine Gem Management Limited are to be cancelled in exchange for HK$1.52 per share in cash payable by the Company. Upon the completion of the cancellation, TOMO will apply for the withdrawal of the listing of its shares.

On 10 August 2007, the Proposed Privatisation Plan was duly approved at a court meeting and an extra-ordinary general meeting by the shareholders of TOMO. Subject to the fulfillment or waiver of certain other conditions, the Proposed Privatisation Plan is expected to be become effective on 31 August 2007. In this respect, the Company is estimated to pay a total of HK$1,577 million for 1,033,766,075 shares of TOMO to be cancelled. The Company is in the process of assessing the detail concrete financial impacts of the Proposed Privatisation Plan to the Group’s financial statements.

31

Approval of interim financial statements

The condensed consolidated interim financial statements have been approved by the Board of Directors on 21 August 2007.

Interim Report 2007

35

DISCLOSURE OF INTERESTS

Directors’ interests and Short Positions in Shares, Underlying Shares and Debentures

As at 30 June 2007, the interests or short positions of the Directors in the shares, underlying 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 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 for Securities Transactions by Directors of Listed Issuers (“Model Code”), to be notified to the Company and the Stock Exchange, were as follows:

A. The Company

(a) Long positions in the shares of the Company

Name of Directors Capacity	Number of shares of the Company Approximate Personal Family Corporate Other percentage of Interests Interests Interests Interests Total shareholding
Angela Mak Beneficial Owner Wang Lei Lei Beneficial owner	44,000 – – – 44,000 Below 0.01% 300,000 – – – 300,000 0.01%

TOM GROUP LIMITED

36

(b) Rights to acquire shares of the Company

Pursuant to the Pre-IPO Share Option Plan and/or the Old Share Option Scheme, certain Directors were granted share options to subscribe for the shares of the Company, details of which as at 30 June 2007 were as follows:

		Number of		Subscription
		share options		price per
		outstanding as at		share of the
Name of Directors	Date of grant	30 June 2007	Option period	Company
				HK$
Tommei Tong	9/10/2003	15,000,000	9/10/2003-8/10/2013	2.505
		(Note 1)
Angela Mak	11/2/2000	3,026,000	11/2/2000-10/2/2010	1.78
		(Note 2)
	9/10/2003	6,000,000	9/10/2003-8/10/2013	2.505
		(Note 3)
James Sha	15/11/2000	15,000,000	15/11/2000-14/11/2010	5.30
		(Note 4)
Wang Lei Lei	11/2/2000	9,080,000	11/2/2000-10/2/2010	1.78
		(Note 2)
	9/10/2003	6,850,000	9/10/2003-8/10/2013	2.505
		(Note 5)

Notes:

1. The options have vested in three tranches in the proportion of 1/3:1/3:1/3 on 17 March 2004, 17 March 2005 and 17 March 2006 respectively.

2. The options have vested in three tranches in the proportion of 20%:30%:50% on 11 February 2001, 11 February 2002 and 11 February 2003 respectively.

3. The options have vested in four tranches. The first tranche of 2,700,000 options and the second, third and fourth tranches of 1,100,000 options each have vested on 10 October 2003, 1 January 2004, 1 January 2005 and 1 January 2006 respectively.

4. The options have vested in three tranches in the proportion of 20%:30%:50% on 15 November 2001, 15 November 2002 and 15 November 2003 respectively.

5. The options have vested in four tranches. The first tranche of 850,000 options, the second, third and fourth tranches of 2,000,000 options each have vested on 10 October 2003, 1 February 2004, 1 February 2005 and 1 February 2006 respectively.

Save as disclosed above, during the six months ended 30 June 2007, none of the Directors or their Associates was granted options to subscribe for shares of the Company, nor had exercised such rights. No option granted to the above Directors was lapsed or cancelled during the six months ended 30 June 2007.

Interim Report 2007

37

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

• (a) Rights to acquire shares of TOM Online

Pursuant to the pre-IPO share option plan adopted by TOM Online, a Director was granted share options to subscribe for the shares of TOM Online, details of which as at 30 June 2007 were as follows:

Name of Date of Director grant	Number of share options Subscription Outstanding Outstanding price as at Granted Exercised Lapsed Cancelled as at per share 1 January during the during the during the during the 30 June Option of TOM 2007 period period period period 2007 period Online HK$
Wang Lei Lei 16/2/2004	139,264,000 – – – – 139,264,000 16/2/2004– 1.50 (Note) 15/2/2014

Note: The options will vest in five tranches in the proportion of 10%:15%:20%:25%:30%. The first, second, third and fourth tranches of the options have vested on 12 April 2004, 16 February 2005, 16 February 2006 and 16 February 2007 respectively. The fifth tranche of the options will vest on 16 February 2008.

• (b) 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% (RMB20,000,000) equity interest in 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 RMB20,000,000.

Save as disclosed above, as at 30 June 2007, none of the Directors or their Associates had any interests or short positions in any shares, underlying shares or debentures of, the Company or any of its 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.

TOM GROUP LIMITED

38

Share Option Schemes

A. The Company

As at 30 June 2007, options to subscribe for an aggregate of 84,298,000 shares of the Company granted pursuant to the Pre-IPO Share Option Plan and the Old Option Scheme were outstanding. Details of which were as follows:

(a) Pre-IPO Share Option Plan

As at 30 June 2007, options to subscribe for an aggregate of 16,196,000 shares of the Company were outstanding and these options relate to the options granted to 3 persons who were employees of the Group at the date of grant. Details of which were as follows:

			Number of share	Number of share	options
		Outstanding				Outstanding		Subscription
		as at	Exercised	Lapsed	Cancelled	as at		price per
	Date of	1 January	during the	during the	during the	30 June	Option	share of the
	grant	2007	period	period	period	2007	period	Company
								HK$
Directors	11/2/2000	12,106,000	–	–	–	12,106,000	11/2/2000 –	1.78
						(Note)	10/2/2010
Employee	11/2/2000	4,090,000				4,090,000	11/2/2000 –	1.78
(including						(Note)	10/2/2010
ex-employee)
	Total:	16,196,000	–	–	–	16,196,000

Note: The options have vested in three tranches in the proportion of 20%:30%:50% on 11 February 2001, 11 February 2002 and 11 February 2003, respectively.

Interim Report 2007

39

(b) Old Option Scheme

As at 30 June 2007, options to subscribe for an aggregate of 68,102,000 shares of the Company which were granted to certain Directors, continuous contract employees and ex-employees of the Group were outstanding. Details of which were as follows:

Number of share options

Date of grant	Outstanding as at 1 January 2007	Granted during the period	Exercised during the period	Lapsed during the period	Cancelled during the period	Subscription Outstanding price per as at share of 30 June Option the 2007 period Company HK$
		– – – – – – – – – –	– – – – – – – – – –	– – – – – 146,000 – 82,000 – 3,000,000 – 3,996,000 – 20,000,000 – 50,322,000 5,000,000 – 5,000,000 77,546,000

Notes:

1. Details of the options granted to the Directors are set out in the section headed “Directors’ Interest and Short Positions in Shares, Underlying Shares and Debentures” above.

2. The options have vested in two tranches in the proportion of 50%:50% on 23 March 2005 and 23 March 2006 respectively.

3. The options have vested in two tranches in the proportion of 50%:50% on 26 June 2005 and 26 June 2006 respectively.

4. The options have vested on (i) 8 August 2001 or (ii) 8 August 2001 and 8 August 2002.

5. (i) For certain grantees, all the options have vested on 10 October 2003.

6. (ii) For certain grantees, the options have vested in two tranches. The first tranche of the options has vested on 10 October 2003 and the second tranche of the options has vested on the anniversary of their respective joining dates with the Group in 2004.

7. (iii) For certain grantees, the options have vested in three to four tranches. The first tranche of the options has vested on 10 October 2003 and the remaining tranches of the options will vest on the anniversaries of their respective joining dates with the Group in 2004 and 2005 or 2004, 2005 and 2006 (as the case may be).

TOM GROUP LIMITED

40

• (iv) For certain grantees, the options have vested in three tranches in the proportion of 1/3:1/3:1/3. The first tranche of the options has vested on the anniversaries of their respective joining dates with the Group in 2004, the second and third tranches of the options will vest on the anniversaries of their respective joining dates with the Group in 2005 and 2006.

• The options have vested on 16 February 2005 and 16 February 2006.

(c) New Option Scheme

No option has been granted pursuant to the New Option Scheme since its adoption.

B. TOM Online

As at 30 June 2007, options to subscribe for an aggregate of 198,861,310 shares of TOM Online pursuant to the pre-IPO share option plan and the share option scheme of TOM Online were outstanding. Details of which were as follows:

(a) Pre-IPO share option plan of TOM Online

As at 30 June 2007, options to subscribe for an aggregate of 180,861,310 shares of TOM Online which were granted to a Director, continuous contract employees and ex-employees of the Group were outstanding. Details of which were as follows:

				Number of share options	Number of share options
									Subscription
		Outstanding					Outstanding		price per
		as at	Granted	Exercised	Lapsed	Cancelled	as at		share of
	Date of	1 January	during the	during the	during the	during the	30 June	Option	TOM
	grant	2007	period	period	period	period	2007	period	Online
									HK$
Director	16/2/2004	139,264,000	–	–	–	–	139,264,000	16/2/2004 –	1.50
							(Note 1)	15/2/2014
Employees	16/2/2004	41,983,231	–	–	385,921	–	41,597,310	16/2/2004 –	1.50
(including							(Note 2)	15/2/2014
ex-employees)
	Total:	181,247,231	–	–	385,921	–	180,861,310

Notes:

1. Details of the options granted to the Director are set out in the section headed “Directors’ Interests and Short Positions in Shares, Underlying Shares and Debentures” above.

2. For certain grantees, the options have vested in 4 tranches in the proportion of 10%:30%:30%:30% on 12 April 2004, 16 February 2005, 16 February 2006 and 16 February 2007 respectively.

For certain grantees, the options have vested on (i) 12 April 2004 or (ii) 12 April 2004 and 16 February 2005.

Interim Report 2007

41

(b) Share option scheme of TOM Online

As at 30 June 2007, options to subscribe for 18,000,000 shares of TOM Online which were granted to a continuous contract employee of the Group were outstanding. Details of which were as follows:

Date of grant	Number of share options Subscription Outstanding Outstanding price per as at Granted Exercised Lapsed Cancelled as at share of 1 January during the during the during the during the 30 June Option TOM 2007 period period period period 2007 period Online HK$
Employee 11/5/2005	18,000,000 – – – – 18,000,000 11/5/2005 – 1.204 (Note) 10/5/2015

Note: The options will vest in 4 tranches in proportion of 15%:25%:30%:30%. The first and second tranches of the options have vested on 11 May 2006 and 11 May 2007 respectively. The third and fourth tranches of the options will vest on 11 May 2008 and 11 May 2009 respectively.

Valuation of Share Options

The Group accounts for share-based employee compensation arrangement in accordance with provisions of Hong Kong Financial Reporting Standards (“HKFRS”) 2 “Share-based Payments” issued by the Hong Kong Institute of Certified Public Accountants. Pursuant to the provisions in the HKFRS2, the fair value of the employee services received in exchange for the grant after 7 November 2002 and not yet vested on 1 January 2005 (the “Relevant Share Options”) is recognised as expenses. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted at the grant date. The following weighted average assumptions were included in the estimated grant date fair value calculations for the Relevant Share Options, calculated using the Black-Scholes model. Key assumptions are:

Risk free interest rate (%)	2.07 – 4.22
Expected life (years)	1 – 7.01
Expected dividend	0
Volatility (%)	46 – 64
Weighted average estimated grant date fair value (HK$)	0.55 – 1.16

Share-based compensation cost, calculated by applying the above model and assumptions, charged to the condensed consolidated interim financial statement of the Company for the six months ended 30 June 2007, net of minority interests, was HK$3,369,000.

TOM GROUP LIMITED

42

Interests and Short Positions of Shareholders

As at 30 June 2007, the persons or corporations (not being a Director or chief executive of the Company) who have interests or short positions in the shares and underlying shares of the Company as recorded in the register required to be kept under Section 336 of the SFO or have otherwise notified to the Company were as follows:

			Approximate
		No. of shares	percentage of
Name	Capacity	of the Company held	shareholding
Li Ka-shing	Founder of	1,429,024,545 (L)	36.71%
	discretionary	(Notes 1 & 2)
	trusts &
	interest of
	controlled
	corporations
Li Ka-Shing Unity Trustee	Trustee &	1,429,024,545 (L)	36.71%
Corporation Limited	beneficiary	(Notes 1 & 2)
(as trustee of The Li Ka-Shing	of a trust
Unity Discretionary Trust)
Li Ka-Shing Unity Trustcorp Limited	Trustee &	1,429,024,545 (L)	36.71%
(as trustee of another	beneficiary	(Notes 1 & 2)
discretionary trust)	of a trust
Li Ka-Shing Unity Trustee	Trustee	1,429,024,545 (L)	36.71%
Company Limited		(Notes 1 & 2)
(as trustee of The Li Ka-Shing
Unity Trust)
Cheung Kong (Holdings) Limited	Interest of	1,429,024,545 (L)	36.71%
	controlled	(Notes 1 & 2)
	corporations
Cheung Kong Investment	Interest of	476,341,182 (L)	12.24%
Company Limited	controlled	(Note 1)
	corporations

Interim Report 2007

43

			Approximate
		No. of shares	percentage of
Name	Capacity	of the Company held	shareholding
Cheung Kong Holdings (China)	Interest of	476,341,182 (L)	12.24%
Limited	controlled	(Note 1)
	corporations
Sunnylink Enterprises Limited	Interest of a	476,341,182 (L)	12.24%
	controlled	(Note 1)
	corporation
Romefield Limited	Beneficial	476,341,182 (L)	12.24%
	owner	(Note 1)
Hutchison Whampoa Limited	Interest of a	952,683,363 (L)	24.47%
	controlled	(Note 2)
	corporation
Hutchison International Limited	Interest of a	952,683,363 (L)	24.47%
	controlled	(Note 2)
	corporation
Easterhouse Limited	Beneficial	952,683,363 (L)	24.47%
	owner	(Note 2)
Chau Hoi Shuen	Interest of	928,006,363 (L)	23.84%
	controlled	(Note 3)
	corporations
Cranwood Company Limited	Beneficial	928,006,363 (L)	23.84%
	owner &	(Note 3)
	interest of
	controlled
	corporations
Schumann International Limited	Beneficial	580,000,000 (L)	14.90%
	owner	(Note 3)
Handel International Limited	Beneficial	348,000,000 (L)	8.94%
	owner	(Note 3)

(L) denotes a long position

TOM GROUP LIMITED

44

Notes:

• (1) Romefield Limited is a wholly-owned subsidiary of Sunnylink Enterprises Limited, which in turn is a wholly-owned 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 shares of the Company 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 KaShing Unity Trustee Company Limited. Li Ka-Shing Unity Trustee Company Limited as trustee of The Li Ka-Shing 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 KaShing 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 shares of the Company 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 shares of the Company and 952,683,363 shares of the Company held by Romefield Limited and Easterhouse Limited respectively.

• (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 shares of the Company and 348,000,000 shares of the Company held by Schumann International Limited and Handel International Limited respectively in addition to 6,363 shares of the Company held by itself.

By virtue of the SFO, Ms. Chau Hoi Shuen is deemed to be interested in 6,363 shares of the Company, 580,000,000 shares of the Company and 348,000,000 shares of the Company held by Cranwood Company Limited, Schumann International Limited and Handel International Limited respectively.

Save as disclosed above, as at 30 June 2007, the Directors are not aware of any other person or corporation having an interest or short position in the shares and underlying shares of the Company representing 5% or more of the issued share capital of the Company.

Interim Report 2007

45

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 HWL, Cheung Kong Infrastructure Holdings Limited (“CKI”) and directors of certain of their respective Associates (collectively referred to as “HWL Group” and “CKI Group” respectively). In addition, Mr. Frank Sixt is also a non-executive director of CKH and Hutchison Telecommunications International Limited (“HTIL”) and director of certain of their Associates (collectively referred to as “CKH Group” and “HTIL Group” respectively). Mrs. Susan Chow is an alternate director of HTIL and director of certain of its Associates. Mr. Edmond Ip, a non-executive Director, is the deputy managing director of CKH, the senior vice president and chief investment officer of CK Life Sciences Int’l., (Holdings) Inc. (“CK Life”), the deputy chairman of CKI and a non-executive director of Excel Technology International Holdings Limited (“Excel Technology”). HWL Group is engaged in e-commerce and general information portals and broadband content. CKH Group, CKI Group, CK Life and Excel Technology are engaged in information technology, e-commerce or new technology where applicable. 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.

Ms. Tommei Tong, an executive Director and Chief Executive 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, during the six months ended 30 June 2007, 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.

CORPORATE GOVERNANCE

Audit Committee

The Company has established an audit committee (“Audit Committee”) in January 2000. Written terms of reference in compliance with the Listing Rules has been adopted for the Audit Committee.

The primary duties of the Audit Committee are to review and supervise the financial reporting process and internal control procedures of the Group. The Audit Committee comprises three independent non-executive Directors, namely, Mr. Henry Cheong, Ms. Anna Wu and Mr. James Sha and a non-executive Director, namely, Mrs. Angelina Lee. Mr. Henry Cheong is the chairman of the Audit Committee.

The unaudited consolidated results of the Group for the six months ended 30 June 2007 have been reviewed by the Audit Committee.

TOM GROUP LIMITED

46

Code on Corporate Governance Practices

The Company has complied with the code provisions set out in the Code on Corporate Governance Practices contained in Appendix 14 to the Listing Rules during the six months ended 30 June 2007.

Model Code for Securities Transactions by Directors

The Company has adopted the Model Code contained in Appendix 10 to the Listing Rules. Having made specific enquiry of the Directors, all the Directors confirmed that they have complied with the required standard as set out in the Model Code during the six months ended 30 June 2007.

OTHER INFORMATION

Purchase, Sale or Redemption of Securities

During the six months ended 30 June 2007, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed shares.

As at the date hereof, the directors of the Company are:

Executive Directors: Non-executive Directors: Ms. Tommei Tong Mr. Frank Sixt (Chairman) Ms. Angela Mak Ms. Debbie Chang Mrs. Susan Chow Mr. Edmond Ip Mrs. Angelina Lee Mr. Wang Lei Lei

Independent non-executive Directors: Mr. Henry Cheong Ms. Anna Wu Mr. James Sha