TOM Group Limited — Interim / Quarterly Report 2011

Aug 18, 2011

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Contents
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2	Definitions
3	Chairman’s Statement
4	Management’s Discussion and Analysis
8	Independent Review Report
9	Interim Financial Information
16	Notes to the Condensed Consolidated Interim Financial Information
29	Disclosure of Interests
35	Corporate Governance
36	Other Information

1

TOM GROUP LIMITED

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Definitions
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“Associates” has the meaning ascribed under the Listing Rules “CETV” means China Entertainment Television Broadcast Limited “CKH” means Cheung Kong (Holdings) Limited “Company” or “TOM” means TOM Group Limited “Director(s)” means the director(s) of the Company “Group” or “TOM 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 “Mainland” means The People’s Republic of China, excluding Hong Kong, Macau and Taiwan “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 “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.

2

INTERIM REPORT 2011

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Chairman’s Statement
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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 2011.

For the reporting period, the Group posted revenue of HK$1,122 million. Operating loss was HK$100 million whereas loss attributable to shareholders was HK$129 million and loss per share was 3.3 HK cents. During the period, regulatory and mobile operator policies in the Mainland continued to pose challenges to the Group’s mobile value-added service businesses. To meet these challenges, the Group is building cloudbased cross-device and operator-agnostic open platforms, focusing on user-centric products and services.

During the period, the Internet Group posted revenue of HK$389 million. Segment loss amounted to HK$28 million.

The e-Commerce Group continued to build encouraging growth momentum. The Ule joint-venture sold over RMB170 million of prepaid cards while conversion rate of cards sold to customer purchases averaged over 30%. The Ule joint-venture is well positioned competitively in the e-commerce market in the Mainland and management expects this business will become one of the Group’s key revenue drivers in future years.

The Publishing Group posted satisfactory results again for the period. Segment revenue and profit grew by 14% and 9% respectively as compared to the previous year. The Group remains a market leader in the digital and printed publishing in the Chinese-language. It has launched over 120 applications on various e-reading devices, while printed publications saw 13% growth in sales during the period.

The operating environment remained challenging for CETV. The Television & Entertainment Group reported loss of HK$43 million in the period. To increase the distribution of its content, CETV has developed iPhone, iPad and Android applications, which to date have been downloaded 90,000 times in the aggregate. CETV also produces interactive entertainment content that is delivered over other online platforms. Management expects these applications and online offerings to provide a new distribution channel and additional monetisation opportunities for CETV’s content.

The Outdoor Media Group posted a 7% increase in revenue while occupancy rate of the media assets stood at about 70%.

I would like to take this opportunity to render my appreciation to all the Group’s management and staff for their continuing hard work and dedication.

Frank Sixt

Chairman

Hong Kong, 1 August 2011

3

TOM GROUP LIMITED

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Management’s Discussion and Analysis
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Financial Highlights

	For the six months ended	For the six months ended
	30 June 2011	30 June 2010
	HK$’000	HK$’000
Revenue	1,122,139	1,243,826
Operating loss#	(99,811)	(11,931)
Loss attributable to equity holders of the Company	(128,516)	(66,106)
Loss per share (HK cents)	(3.30)	(1.70)

Including share of results of associated companies and jointly controlled entities

Business Review

E-Commerce – KPI performances indicate encouraging growth momentum

Ule (www.ule.com.cn), a unique open platform and joint-venture between TOM and China Post, rolled out an upgrade version of its virtual distribution centre (VDC) in June. This one-stop logistics and warehousing system is tailored to enhance offline merchants’ efficiency in order handling, and to offer merchants an affordable entrance to establish their e-commerce channels by offering them the capability for store-front fulfillment in the absence of warehousing. Currently, more than half of the Ule merchants have been using the VDC.

As Ule commenced operation in 2010, it reported encouraging results in various key performance indicators (KPIs), revealing positive growth momentum. Ule was named one of the top 10 portals in the Mainland offering the best investment value. As at end of June, Ule reported gross merchandise value (GMV) over RMB60 million. Revenue grew rapidly with double digit growth per month. The average value per transaction stood at RMB270. On the other hand, offline over-the-counter sales services have been extended to nationwide. Among the various sales channels, group buying services contributed around 20% of GMV.

Moving forward, Ule is becoming a cloud-based open platform for domestic and international business partners, with or without e-commerce experience and capabilities, to tap the Mainland e-commerce market. Furthermore, Ule will grow its user base and sales platform by extending services to online, offline and mobile channels.

4

INTERIM REPORT 2011

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Management’s Discussion and Analysis
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Mobile Internet – cloud platform serving as landing runway for international and domestic partners’ technology and applications

In response to the evolvement in the 2.5G eco system and the arrival of 3G mobile Internet and smartphones, the Internet Group proactively reallocated its financial and human resources from content-based value-added and portal services, which were increasingly pressurised by high costs and thin margin, to the fast-growing mobile Internet business. In the second half of the year, the Internet Group will focus on the launch of mobile Internet products and services on the readily-built cloud-based cross-device mobile Internet platform, in order to materialise the strategic landing platform for local and overseas novelty technology and applications.

In the first six months of the year, e-reading platform Huanjianshumeng (hjsm.tom.com) extended its devicebased platform and saw growth in the number of registered users by 9 folds, reaching 3.6 million. Also, the Group recently announced a strategic partnership with Glu Mobile Inc., a global social mobile game publisher, to develop a smartphone store-front community for the Mainland market. Also to be launched in the fourth quarter in conjunction with an UK partner is “Crunch Time”, an application that combines game entertainment and e-commerce. On the music front, the Internet Group has developed a streaming music social networking services application, which will be pre-embedded in Samsung tablet computers and smartphones to be rolled out by late third quarter the earliest. In June, the Internet Group joined the leading local operator 3HK and ESD Life to launch a self-developed cross-device application “Favspot” in Hong Kong, which recorded over 15,000 downloads shortly since launch and ranked among the top 10 in iTunes Appstore under the Lifestyle category. Moving forward, Favspot will join a major partner to roll out the service in the Mainland.

Publishing – over 120 applications and 700,000 downloads reveal fast development of digital publishing

Both traditional and digital publishing businesses under the Publishing Group reported satisfactory performance. Sales of books and magazines were up by 13% year on year, whereas the digital publishing business captured opportunities in online reading, e-reading applications and hardware devices. Besides e-reading application “e Reading Now” which provides over 650 books, the Publishing Group has launched over 120 reading applications over iPhone, iPad and Android platforms, recording over 700,000 downloads in the aggregate. These included searcher application on iPad “Make You Smart”, paid iPad applications launched by Business Weekly Media Group and Nong Nong’s “Bella” etc. On the other hand, POPO (www. popo.tw) also saw continuous growth in the aggregate number of authors and titles by 31% and 18% year on year, reaching 4,200 and 4,700 respectively. The Gurubear storybook houses network has extended to 13 outlets.

In August, Cité moved further into the international arena by collaborating with the global leading media group British Broadcasting Corporation (BBC) in the launch of Lonely Planet Chinese edition, while iPad and Android versions were also made available. The Chinese edition of BBC Knowledge , a magazine popular amongst the Western markets, will be rolled out in September. Cité and BBC will further collaborate to produce Simplified Chinese editions of these magazines to tap the Mainland market.

CETV under the Television & Entertainment Group outreached to tap overseas advertising clients, and continued to expand its audience base with the launch of device-based applications on iPhone and Android etc. On the other hand, the Outdoor Media Group continued in optimising and upgrading its media assets portfolio. It posted a 7% growth in revenue in the first half of the year.

5

TOM GROUP LIMITED

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Management’s Discussion and Analysis
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Liquidity and Financial Resources

As at 30 June 2011, TOM Group had bank and cash balances, including pledged deposits, of approximately HK$1,065 million. A total of HK$2,689 million financing facilities were available, of which HK$2,034 million had been utilised as at 30 June 2011, to finance the Group’s capital expenditures and for working capital purposes.

Total borrowings of TOM Group amounted to approximately HK$2,034 million as at 30 June 2011. This included long-term bank loans of approximately HK$1,906 million and short-term bank loans of approximately HK$128 million. The gearing ratio (Debts/(Debts + Equity)) of TOM Group was 53% as at 30 June 2011, as compared to 51% as at 31 December 2010.

As at 30 June 2011, the Group had net current assets of approximately HK$501 million, as compared to approximately HK$565 million as at 31 December 2010.

As at 30 June 2011, the current ratio (Current assets/Current liabilities) of TOM Group was 1.34, as compared to 1.39 as at 31 December 2010.

For the first six months of 2011, the Group generated net cash from its operating activities before interest and taxation of HK$23 million, as compared to HK$66 million in the same period of 2010.

Charges on Group Assets

As at 30 June 2011, the Group had restricted cash amounting to approximately HK$3 million, being bank deposits mainly pledged in favour of certain publishing distributors as retainer fee for potential sales return.

Foreign Exchange Exposure

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

Contingent Liabilities

From 2008 to June 2011, a subsidiary of the Group in Taiwan received revised income tax assessments for the years ended 31 December 2004 to 2008 from the local tax authority, disallowing the deduction of amortisation of intangible assets amounting to approximately NT$663 million (approximately HK$179 million) in total in deriving the assessable profits of the subsidiary. This gave rise to a potential additional income tax liability to the Group of approximately NT$166 million (approximately HK$45 million). The subsidiary duly filed the petitions/appeals to the tax authority and requested for re-examination on the deductibility of the amortisation charge. In 2010, the appeals for 2004 and 2005 revised tax assessments were turned down by the tax authority and the subsidiary escalated the appeals to the Court in Taiwan. In December 2010, the subsidiary won the administrative proceedings for the 2004 tax appeal and in January 2011, the tax authority filed a final appeal to the Court for the 2004 revised tax assessment. In June 2011, the subsidiary won the administrative proceedings for the 2005 tax appeal and the tax authority has not yet filed an appeal to the Court at the date of this financial information. Up to the date of this financial information, the final appeal for 2004 and petitions for 2006, 2007 and 2008 are still outstanding and no results have been finalised.

6

INTERIM REPORT 2011

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Management’s Discussion and Analysis
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Management has discussed the cases with its external tax representative. Based on the consultation, management considers that the amortisation of intangible assets should be tax deductible under the tax rules in Taiwan, and in view of the positive outcome of the 2004 and 2005 administrative proceedings, management is confident of a favourable outcome of the tax appeals/petitions and considers no provision is necessary at this stage.

Should the tax appeals and petitions by the subsidiary be turned down finally, the subsidiary’s income tax assessments for each of the years from 2009 to 2011 would likely be revised on a similar basis. The total incremental tax liability from year 2004 to 30 June 2011 to the Group thereon is approximately NT$245 million (approximately HK$66 million).

Employee Information

As at 30 June 2011, TOM Group had over 3,000 full-time employees. During the first six months of the year, employee costs, including Directors’ emoluments, totalled at HK$305 million. The Group’s employment and remuneration policies remained the same as detailed in the Annual Report for the year ended 31 December 2010.

Disclaimer:

Non-GAAP measures

Certain non-GAAP (generally accepted accounting principles) measures, such as operating profit/(loss) including share of results of associated companies and jointly controlled entities and segment profit/(loss) excluding provision for impairment charges, are used for assessing the Group’s performance. These non-GAAP measures are not expressly permitted measures under GAAP in Hong Kong and may not be comparable to similarly titled measures for other companies. Accordingly, such non-GAAP measures should not be considered as an alternative to operating income as an indicator of the operating performance of the Group or as an alternative to cash flows from operating activities as a measure of liquidity. The use of non-GAAP measures is provided solely to enhance the overall understanding of the Group’s current financial performance. Additionally because the Group has historically reported certain non-GAAP results to investors, the Group considers the inclusion of non-GAAP measures provides consistency in the financial reporting.

7

TOM GROUP LIMITED

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Independent Review Report
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REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION TO THE BOARD OF DIRECTORS OF TOM GROUP LIMITED

(incorporated in the Cayman Islands with limited liability)

Introduction

We have reviewed the interim financial information set out on pages 9 to 28, which comprises the condensed consolidated interim statement of financial position of TOM Group Limited (the “Company”) and its subsidiaries (together, the “Group”) as at 30 June 2011 and the related condensed consolidated interim income statement, interim statement of comprehensive income, interim statement of changes in equity and interim statement of cash flows 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 Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information 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 information in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting”. Our responsibility is to express a conclusion on this interim financial information 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 information 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 information is not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34 “Interim Financial Reporting”.

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong, 1 August 2011

8

INTERIM REPORT 2011

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Interim Financial Information
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Condensed Consolidated Interim Income Statement

For the six months ended 30 June 2011

Note	Unaudited Six months ended 30 June 2011 2010 HK$’000 HK$’000	Unaudited Six months ended 30 June 2011 2010 HK$’000 HK$’000
Revenue 4 Cost of sales 6 Selling and marketing expenses 6 Administrative expenses 6 Other operating expenses 6 Other gains, net 6 Provision for impairment of goodwill and other assets 5 Share of profits less losses of jointly controlled entities Share of profits less losses of associated companies Finance income 7 Finance costs 7 Finance costs, net 7 Loss before taxation Taxation 8 Loss for the period Attributable to: – Non-controlling interests – Equity holders of the Company Loss per share for loss attributable to the equity holders of the Company Basic and diluted 10	1,122,139 (846,711) (132,681) (83,870) (159,120) 6,989 – (6,571) 14 (99,811) 8,437 (29,294) (20,857) (120,668) (17,332) (138,000) (9,484) (128,516) HK(3.30)cents	1,243,826
		(926,773) (121,274) (84,427) (127,567) 20,312 (4,800) (12,965) 1,737
		(11,931) 7,866 (29,911)
		(22,045)
		(33,976) (25,570)
		(59,546)
		6,560
		(66,106)
		HK(1.70)cents

9

TOM GROUP LIMITED

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Interim Financial Information
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Condensed Consolidated Interim Statement of Comprehensive Income

For the six months ended 30 June 2011	Unaudited Six months ended 30 June 2011 2010 HK$’000 HK$’000	Unaudited Six months ended 30 June 2011 2010 HK$’000 HK$’000
Loss for the period Other comprehensive income/(expenses) Exchange translation differences Employee share option schemes – Value of employee services Revaluation surplus/(deficit) on available-for-sale financial assets, net of tax Other comprehensive income/(expenses) for the period, net of tax Total comprehensive expenses for the period Total comprehensive income/(expenses) for the period attributable to: – Non-controlling interests – Equity holders of the Company	(138,000) 54,721 – 443 55,164 (82,836) 1,447 (84,283)	(59,546) (4,614) 120 (1,462)
		(5,956)
		(65,502)
		8,469
		(73,971)

10 INTERIM REPORT 2011

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Interim Financial Information
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Condensed Consolidated Interim Statement of Financial Position

As at 30 June 2011 Note	Unaudited 30 June 2011 HK$’000	Audited 31 December 2010 HK$’000
ASSETS AND LIABILITIES Non-current assets Fixed assets 11 Goodwill 12 Other intangible assets 13 Interests in jointly controlled entities Interests in associated companies Available-for-sale financial assets Advance to an investee company Deferred tax assets Other non-current assets Current assets Inventories Trade and other receivables 14 Restricted cash 15 Cash and cash equivalents Current liabilities Trade and other payables 16 Taxation payable Long-term bank loans – current portion 17 Short-term bank loans 17 Net current assets Total assets less current liabilities	145,350 2,730,203 122,531 (128,645) 223,032 14,943 2,172 36,431 19,545 3,165,562 106,097 821,334 3,210 1,062,269 1,992,910 1,240,340 47,401 75,853 128,108 1,491,702 501,208 3,666,770	143,769 2,682,513 112,207 (132,651) 230,736 28,780 2,172 31,235 23,609
		3,122,370
		98,354 836,240 3,958 1,079,340
		2,017,892
		1,226,149 45,937 72,039 109,032
		1,453,157
		564,735
		3,687,105

11

TOM GROUP LIMITED

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Interim Financial Information
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Condensed Consolidated Interim Statement of Financial Position

As at 30 June 2011 Note	Unaudited 30 June 2011 HK$’000	Audited 31 December 2010 HK$’000
Non-current liabilities Deferred tax liabilities Non-current portion of long-term bank loans 17 Pension obligations Net assets EQUITY Equity attributable to the Company’s equity holders Share capital 18 Reserves Own shares held Non-controlling interests Total equity	13,925 1,830,276 33,981 1,878,182 1,788,588 389,328 1,045,394 (6,244) 1,428,478 360,110 1,788,588	12,449 1,770,361 32,384
		1,815,194
		1,871,911
		389,328 1,130,525 (6,244)
		1,513,609 358,302
		1,871,911

12 INTERIM REPORT 2011

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Interim Financial Information
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Condensed Consolidated Interim Statement of Changes in Equity

For the six months ended 30 June 2011

				Unaudited Attributable to equity holders of the Company	Unaudited Attributable to equity holders of the Company	Unaudited Attributable to equity holders of the Company	Unaudited Attributable to equity holders of the Company			Total HK$’000	Non- controlling interests HK$’000	Total equity HK$’000
	Share capital HK$’000	Own shares held HK$’000	Share premium HK$’000	Capital reserve HK$’000	Capital redemption reserve HK$’000	General reserve HK$’000	Available- for-sale financial assets reserve HK$’000	Exchange Accumulated reserve losses HK$’000 HK$’000
Balance at 1 January 2011 Comprehensive income: Loss for the period Other comprehensive income: Revaluation surplus on available- for-sale financial assets, net of tax Exchange translation differences Total comprehensive income for the period ended 30 June 2011 Transactions with equity holders: Dividend paid to non-controlling interests Acquisition of additional interests in a subsidiary Contribution from non-controlling interests Transactions with equity holders Balance at 30 June 2011	389,328 – – – – – – – – 389,328	(6,244) – – – – – – – – (6,244)	3,625,981 – – – – – – – – 3,625,981	27,162 – – – – – (848) – (848) 26,314	776 – – – – – – – – 776	137,346 – – – – – – – – 137,346	3,001 – 443 – 443 – – – – 3,444	605,993 – – 43,790 43,790 – – – – 649,783	(3,269,734) (128,516) – – (128,516) – – – – (3,398,250)	1,513,609 (128,516) 443 43,790 (84,283) – (848) – (848) 1,428,478	358,302 (9,484) – 10,931 1,447 (1,428) 848 941 361 360,110	1,871,911
												(138,000) 443 54,721
												(82,836)
												(1,428) – 941
												(487)
												1,788,588

13

TOM GROUP LIMITED

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Interim Financial Information
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Condensed Consolidated Interim Statement of Changes in Equity

For the six months ended 30 June 2011

					Unaudited Attributable to equity holders of the Company	Unaudited Attributable to equity holders of the Company	Unaudited Attributable to equity holders of the Company	Unaudited Attributable to equity holders of the Company			Total HK$’000	Non- controlling interests HK$’000	Total equity HK$’000
		Share capital HK$’000	Own shares held HK$’000	Share premium HK$’000	Capital reserve HK$’000	Capital redemption reserve HK$’000	General reserve HK$’000	Available- for-sale financial assets reserve HK$’000	Exchange Accumulated reserve losses HK$’000 HK$’000
Balance at 1 January 2010 Comprehensive income: Loss for the period Other comprehensive income: Employee share option schemes – Value of employee services Revaluation deficit on available-for- sale financial assets, net of tax Exchange translation differences Total comprehensive income for the period ended 30 June 2010 Transactions with equity holders: Dividend paid to non-controlling interests Deconsolidation of a subsidiary Contribution from non-controlling interests Transactions with equity holders Balance at 30 June 2010		389,328 – – – – – – – – – 389,328	(6,244) – – – – – – – – – (6,244)	3,625,981 – – – – – – – – – 3,625,981	38,437 – 133 – – 133 – – – – 38,570	776 – – – – – – – – – 776	133,760 – – – – – – – – – 133,760	2,332 – – (1,462) – (1,462) – – – – 870	569,729 – – – (6,536) (6,536) – – – – 563,193	(3,095,946) (66,106) – – – (66,106) – – – – (3,162,052)	1,658,153 (66,106) 133 (1,462) (6,536) (73,971) – – – – 1,584,182	377,723 6,560 (13) – 1,922 8,469 (1,368) (7,359) 468 (8,259) 377,933	2,035,876
													(59,546) 120 (1,462) (4,614)
													(65,502)
													(1,368) (7,359) 468
													(8,259)
													1,962,115

14 INTERIM REPORT 2011

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Interim Financial Information
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Condensed Consolidated Interim Statement of Cash Flows

For the six months ended 30 June 2011

For the six months ended 30 June 2011
	Unaudited Six months ended 30 June 2011 2010 HK$’000 HK$’000
Net cash inflow from operations Interest paid Overseas taxation paid Net cash (used in)/from operating activities Net cash used in investing activities Net cash from/(used in) financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the period Exchange adjustment Cash and cash equivalents at the end of the period	22,518 (14,591) (20,159) (12,232) (93,122) 59,460 (45,894) 1,079,340 28,823 1,062,269	65,752 (10,328) (13,315)
		42,109 (118,058) (30,671)
		(106,620) 1,186,178 3,271
		1,082,829

15

TOM GROUP LIMITED

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Notes to the Condensed Consolidated
Interim Financial Information
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1 Basis of preparation and accounting policies

This unaudited condensed consolidated interim financial information for the six months ended 30 June 2011 has been prepared in accordance with Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and applicable disclosure requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2010, which have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”).

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2010, as described in those annual financial statements.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

The following amendments to standards are relevant and mandatory to the Group for the financial year beginning 1 January 2011:

HKFRSs (Amendments)	Improvements to HKFRSs 2010
HKAS 34 (Amendment)	Interim Financial Reporting

The effect of the adoption of the above amendments to standards beginning 1 January 2011 is not material to the Group’s results of operations or financial position and only results in additional disclosures.

At the date of authorisation of this condensed consolidated interim financial information, the following standards and amendments to standards were in issue but not yet effective and have not been early adopted by the Group:

HKAS 1 (Amendment)	Presentation of Financial Statements
HKAS 12 (Amendment)	Deferred Tax – Recovery of Underlying Assets
HKAS 19 (Amendment)	Employee Benefits
HKFRS 1 (Amendment)	Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters
HKFRS 7 (Amendment)	Disclosures – Transfers of Financial Assets
HKFRS 9	Financial Instruments
HKFRS 10	Consolidated Financial Statements
HKFRS 11	Joint Arrangements
HKFRS 12	Disclosures of Interests in Other Entities
HKFRS 13	Fair Value Measurements

The Group has already commenced an assessment of the impact of these new standards and amendments to standards, but is not in a position to state whether these new standards and amendments to standards would have a significant impact to its results of operations or financial position.

16 INTERIM REPORT 2011

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Notes to the Condensed Consolidated
Interim Financial Information
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2 Critical accounting estimates and judgements

The preparation of this condensed consolidated interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial information, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2010, with the exception of changes in estimates that are required in determining the provision for income taxes.

3 Financial risk management

The Group’s activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including cash flow interest rate risk, fair value interest rate risk, price risk and currency risk).

This condensed consolidated interim financial information do not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual financial statements as at 31 December 2010.

There have been no changes in the risk management policies since year ended 31 December 2010.

4 Segment information

The Group has five reportable segments:

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

• E-Commerce Group – merchandise sales through internet-based marketplace.

• 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 in relation to satellite television channel operations, provision of broadcasting post production and event production and marketing services.

Sales between segments are carried out at arm’s length.

17

TOM GROUP LIMITED

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Notes to the Condensed Consolidated
Interim Financial Information
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4 Segment information (Continued)

The segment results for the six months ended 30 June 2011 are as follows:

	Unaudited Six months ended 30June 2011	Unaudited Six months ended 30June 2011	Unaudited Six months ended 30June 2011	Unaudited Six months ended 30June 2011	Unaudited Six months ended 30June 2011	Total HK$’000
	Internet E-Commerce Group Group HK$’000 HK$’000		Publishing Group HK$’000	Television Outdoor and Media Entertainment Group Group HK$’000 HK$’000
Total gross segment revenue Inter-segment revenue Net revenue from external customers Segment profit/(loss) before amortisation and depreciation Amortisation and depreciation Segment profit/(loss) Other material non-cash items: Share of profits less losses of jointly controlled entities Share of profits less losses of associated companies Finance costs: Finance income_(note a) Finance expenses(note a)_ Segment profit/(loss) before taxation Unallocated corporate expenses Loss before taxation Expenditure for operating segment non-current assets Unallocated expenditure for non-current assets Total expenditure for non-current assets	388,942 – 388,942 (21,888) (6,254) (28,142) – 164 164 7,082 – 7,082 (20,896) 3,727	– – – (25,709) (1,598) (27,307) (6,571) – (6,571) 7 – 7 (33,871) 512	500,991 – 500,991 106,352 (50,333) 56,019 – (150) (150) 10,969 (7,706) 3,263 59,132 52,946	149,944 – 149,944 1,749 (20,447) (18,698) – – – 1,022 – 1,022 (17,676) 22,566	82,727 (465) 82,262 (21,711) (21,240) (42,951) – – – 36 (9,415) (9,379) (52,330) 26,112	1,122,604 (465) 1,122,139 38,793 (99,872) (61,079) (6,571) 14 (6,557) 19,116 (17,121) 1,995 (65,641) (55,027) (120,668) 105,863 62 105,925

The Group has reorganised the business segments such that merchandise sales generated through internet-based marketplace and the related costs have been reported in the E-Commerce Group from the year ended 31 December 2010 onwards.

Note (a) : Inter-segment interest income and inter-segment interest expenses amounted to HK$10,759,000 and HK$9,781,000 were included in the finance income and finance expenses respectively.

18 INTERIM REPORT 2011

4 Segment information (Continued)

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The segment results for the six months ended 30 June 2010 are as follows:

	Unaudited Six months ended 30June 2010	Unaudited Six months ended 30June 2010	Unaudited Six months ended 30June 2010	Unaudited Six months ended 30June 2010	Unaudited Six months ended 30June 2010
	Internet E-Commerce Group Group HK$’000 HK$’000		Publishing Group HK$’000	Television Outdoor and Media Entertainment Group Group HK$’000 HK$’000		Total HK$’000
Total gross segment revenue Inter-segment revenue Net revenue from external customers Segment profit/(loss) before amortisation and depreciation Amortisation and depreciation Segment profit/(loss) Other material non-cash items: Provision for impairment of goodwill and other assets Share of losses of jointly controlled entities Share of profits less losses of associated companies Finance costs: Finance income_(note a) Finance expenses(note a)_ Segment profit/(loss) before taxation Unallocated corporate expenses Loss before taxation Expenditure for operating segment non-current assets Unallocated expenditure for non-current assets Total expenditure for non-current assets	562,864 – 562,864 37,955 (7,823) 30,132 – – 311 311 6,403 – 6,403 36,846 4,899	264 – 264 (10,158) (939) (11,097) – (12,965) – (12,965) 1 – 1 (24,061) 7,787	439,371 – 439,371 85,265 (33,635) 51,630 – – 1,426 1,426 12,618 (9,286) 3,332 56,388 42,955	139,846 – 139,846 11,352 (21,522) (10,170) (4,800) – – (4,800) 1,545 (279) 1,266 (13,704) 20,141	102,027 (546) 101,481 (5,502) (17,248) (22,750) – – – – 28 (8,780) (8,752) (31,502) 18,381	1,244,372 (546)
						1,243,826
						118,912 (81,167)
						37,745
						(4,800) (12,965) 1,737
						(16,028)
						20,595 (18,345)
						2,250
						23,967 (57,943)
						(33,976)
						94,163 25
						94,188

For the six months ended 30 June 2010, the Group reported merchandise sales generated through internet-based marketplace and the related costs in the Internet Group. The comparative figures have been reclassified to conform with the current period’s presentation.

Note (a) : Inter-segment interest income and inter-segment interest expenses amounted to HK$12,845,000 and HK$9,478,000 were included in the finance income and finance expenses respectively.

19

TOM GROUP LIMITED

4 Segment information (Continued)

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The segment assets and liabilities at 30 June 2011 are as follows:

	Unaudited As at 30June 2011	Total HK$’000
	Television Outdoor and Internet E-Commerce Publishing Media Entertainment Group Group Group Group Group HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Segment assets Interests in jointly controlled entities Interests in associated companies Unallocated assets Total assets Segment liabilities Unallocated liabilities: Corporate liabilities Current taxation Deferred taxation Borrowings Total liabilities	2,902,559 18,079 1,259,880 652,544 180,522 – (128,645) – – – 3,937 – 219,095 – – 543,584 6,531 370,408 160,418 81,694	5,013,584 (128,645) 223,032 50,501 5,158,472 1,162,635 111,686 47,401 13,925 2,034,237 3,369,884

The segment assets and liabilities at 31 December 2010 are as follows:

	Audited As at 31 December 2010	Total HK$’000 4,995,742 (132,651) 230,736 46,435 5,140,262 1,153,019 105,514 45,937 12,449 1,951,432 3,268,351
	Television Outdoor and Internet E-Commerce Publishing Media Entertainment Group Group Group Group Group HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Segment assets Interests in jointly controlled entities Interests in associated companies Unallocated assets Total assets Segment liabilities Unallocated liabilities: Corporate liabilities Current taxation Deferred taxation Borrowings Total liabilities	2,830,779 25,874 1,243,478 726,167 169,444 – (132,651) – – – 3,722 – 227,014 – – 517,567 11,739 401,565 158,023 64,125

The unallocated assets represent the corporate assets. The unallocated liabilities represent the corporate liabilities in addition to operating segment taxation payable, deferred tax liabilities and borrowings which are managed on a central basis.

20 INTERIM REPORT 2011

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5 Provision for impairment of goodwill and other assets

The amount in 2010 represented the provision for impairment of goodwill of HK$2,614,000 and an availablefor-sale financial asset of HK$2,186,000 relating to the Outdoor Media Group. These provisions were made with reference to the reduced estimated values of certain operations and assets held by the Outdoor Media Group.

6 Operating loss

Operating loss is stated after charging/crediting the following:

	Unaudited Six months ended 30 June 2011 2010 HK$’000 HK$’000	Unaudited Six months ended 30 June 2011 2010 HK$’000 HK$’000
Charging: Depreciation of fixed assets_(Note 11) Amortisation of other intangible assets(Note 13)_ Amortisation of other intangible assets included in interests in associated companies Loss on disposal of fixed assets Crediting: Exchange gains, net Dividend income from available-for-sale financial assets/ an available-for-sale financial asset Gain on disposal of fixed assets	28,496 71,892 1,356 – 653 6,153 183	29,475 52,003 1,356 320
		20,329 303 –

7 Finance costs, net

Finance costs, net
	Unaudited Six months ended 30 June 2011 2010 HK$’000 HK$’000
Interest and borrowing costs on bank loans Interest on other loans Less: Interest income	28,370 924 29,294 (8,437) 20,857	28,977 934
		29,911 (7,866)
		22,045

21

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8 Taxation

Hong Kong profits tax has been provided at the rate of 16.5% (2010: 16.5%) on the estimated assessable profits for the period. Taxation on overseas profits has been calculated on the estimated assessable profits for the period at the rates of taxation prevailing in the countries in which the Group operates.

The amount of taxation charged to the condensed consolidated interim income statement represents:

	Unaudited Six months ended 30 June 2011 2010 HK$’000 HK$’000	Unaudited Six months ended 30 June 2011 2010 HK$’000 HK$’000
Overseas taxation Under-provision in prior years Deferred taxation Taxation charge	19,679 540 (2,887) 17,332	17,585 – 7,985
		25,570

Income tax expense is recognised based on management’s estimate of the weighted average annual income tax rate expected for the full financial year.

9 Dividends

No dividends had been paid or declared by the Company for the six months ended 30 June 2011 (2010: Nil).

10 Loss per share

(a) Basic

The calculation of the basic loss per share is based on consolidated loss attributable to the equity holders of the Company of HK$128,516,000 (2010: HK$66,106,000) and the weighted average of 3,893,270,558 (2010: 3,893,270,558) ordinary shares in issue during the period.

(b) Diluted

Diluted loss per share is equal to the basic loss per share for the period ended 30 June 2011 as the exercise price of the outstanding share options granted by the Company were higher than the average market price of the share of the Company (2010: Same).

22 INTERIM REPORT 2011

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11 Fixed assets

During the period, major fixed assets acquired by the Group was computer equipment amounting to HK$10,705,000 (31 December 2010: HK$30,461,000).

12

	HK$’000
At 1 January 2010 Additions Disposals Deconsolidation of a subsidiary Depreciation charge Exchange adjustments At 30 June 2010 (unaudited) At 1 January 2011 Additions Disposals Depreciation charge Exchange adjustments At 30 June 2011 (unaudited) Goodwill	152,961 22,399 (1,402) (1,888) (29,475) 503
	143,098
	143,769 26,875 (589) (28,496) 3,791
	145,350
	HK$’000
At 1 January 2010 Provision for impairment of goodwill Exchange adjustments At 30 June 2010 (unaudited) At 1 January 2011 Exchange adjustments At 30 June 2011 (unaudited)	2,643,106 (2,614) 153
	2,640,645
	2,682,513 47,690
	2,730,203

23

TOM GROUP LIMITED

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13 Other intangible assets

14		Concession rights HK$’000	Publishing rights HK$’000	Purchased programme and film rights HK$’000	Purchased programme and film rights HK$’000	Customer base and technical know-how HK$’000	Customer base and technical know-how HK$’000	Total HK$’000
	At 1 January 2010 Additions Amortisation charge Deconsolidation of a subsidiary Exchange adjustments At 30 June 2010 (unaudited) At 1 January 2011 Additions Amortisation charge Exchange adjustments At 30 June 2011 (unaudited) Trade and other receivables	37,341 13,680 (7,627) (400) – 42,994 31,504 7,859 (7,477) 767 32,653	33,727 34,112 (27,442) – 616 41,013 60,251 44,796 (42,109) 1,926 64,864	6,424 4,876 16,289 7,708 (16,517) (417) – – – – 6,196 12,167 7,371 13,081 26,068 327 (20,878) (1,428) 150 323 12,711 12,303 Unaudited 30 June 2011 HK$’000				82,368 71,789 (52,003) (400) 616
								102,370
								112,207 79,050 (71,892) 3,166
								122,531
								Audited 31 December 2010 HK$’000
	Trade receivables Prepayments, deposits and other receivables				526,210 295,124 821,334			538,364 297,876
								836,240

The Group has established credit policies for customers in each of its businesses. The average credit period granted for trade receivables ranges from 30 days to 90 days. The Group’s turnover is determined in accordance with terms specified in the contracts governing the relevant transactions. The carrying values of trade and other receivables approximate their fair values.

24 INTERIM REPORT 2011

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14 Trade and other receivables (Continued)

The ageing analyses of the Group’s trade receivables were as follows:

	Unaudited 30 June 2011 HK$’000	Audited 31 December 2010 HK$’000
Current 31-60 days 61-90 days Over 90 days Less: Provision for impairment Represented by: Receivables from related companies Receivables from third parties	152,131 112,762 90,327 269,009 624,229 (98,019) 526,210 5,256 520,954 526,210	168,424 132,085 89,129 244,635
		634,273 (95,909)
		538,364
		4,231 534,133
		538,364

15 Restricted Cash

As at 30 June 2011, NT$11,900,000 (approximately HK$3,210,000) (31 December 2010: NT$15,246,000 or approximately HK$3,958,000) were mainly pledged to certain publishing distributors in Taiwan as retainer fee for potential sales return.

16 Trade and other payables

Trade and other payables
	Unaudited 30 June 2011 HK$’000	Audited 31 December 2010 HK$’000
Trade payables Other payables and accruals	320,377 919,963 1,240,340	319,787 906,362
		1,226,149

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

The ageing analyses of the Group’s trade payables were as follows:

	Unaudited 30 June 2011 HK$’000	Audited 31 December 2010 HK$’000
Current 31-60 days 61-90 days Over 90 days Represented by: Payable to related companies Payable to third parties	81,973 42,878 24,961 170,565 320,377 1,315 319,062 320,377	101,460 47,170 27,951 143,206
		319,787
		1,513 318,274
		319,787

25

TOM GROUP LIMITED

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17 Movements in borrowings

18		Short-term bank loans HK$’000	Long-term bank loans HK$’000	Total HK$’000
	As at 1 January 2010 Borrowings Repayments Exchange adjustments As at 30 June 2010 (unaudited) As at 1 January 2011 Borrowings Repayments Exchange adjustments As at 30 June 2011 (unaudited) Share capital	119,800 36,630 (36,630) 2,400 122,200 109,032 74,168 (59,334) 4,242 128,108	1,841,090 36,660 (61,039) 8,036 1,824,747 1,842,400 86,000 (37,421) 15,150 1,906,129 No. of ordinary shares of HK$0.1 each	1,960,890 73,290 (97,669) 10,436
				1,946,947
				1,951,432 160,168 (96,755) 19,392
				2,034,237
				HK$’000
	Authorised: As at 1 January and 30 June 2010 and 1 January and 30 Issued and fully paid: As at 1 January and 30 June 2010 and 1 January and 30	June 2011 June 2011	5,000,000,000 3,893,270,558	500,000
				389,328

19 Pledge of assets

Save as disclosed in Note 15, the Group has no pledge of assets as at 30 June 2011 (31 December 2010: Nil).

20 Contingent liabilities

From 2008 to June 2011, a subsidiary of the Group in Taiwan received revised income tax assessments for the years ended 31 December 2004 to 2008 from the local tax authority, disallowing the deduction of amortisation of intangible assets amounting to approximately NT$663 million (approximately HK$179 million) in total in deriving the assessable profits of the subsidiary. This gave rise to a potential additional income tax liability to the Group of approximately NT$166 million (approximately HK$45 million). The subsidiary duly filed the petitions/appeals to the tax authority and requested for re-examination on the deductibility of the amortisation charge. In 2010, the appeals for 2004 and 2005 revised tax assessments were turned down by the tax authority and the subsidiary escalated the appeals to the Court in Taiwan. In December 2010, the subsidiary won the administrative proceedings for the 2004 tax appeal and in January 2011, the tax authority filed a final appeal to the Court for the 2004 revised tax assessment. In June 2011, the subsidiary won the administrative proceedings for the 2005 tax appeal and the tax authority has not yet filed an appeal to the Court at the date of this financial information. Up to the date of this financial information, the final appeal for 2004 and petitions for 2006, 2007 and 2008 are still outstanding and no results have been finalised.

Management has discussed the cases with its external tax representative. Based on the consultation, management considers that the amortisation of intangible assets should be tax deductible under the tax rules in Taiwan, and in view of the positive outcome of the 2004 and 2005 administrative proceedings, management is confident of a favourable outcome of the tax appeals/petitions and considers no provision is necessary at this stage.

Should the tax appeals and petitions by the subsidiary be turned down finally, the subsidiary’s income tax assessments for each of the years from 2009 to 2011 would likely be revised on a similar basis. The total incremental tax liability from year 2004 to 30 June 2011 to the Group thereon is approximately NT$245 million (approximately HK$66 million).

26 INTERIM REPORT 2011

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21 Commitments

(a) Capital commitments

Save as disclosed in note (b) below, the Group’s maximum capital commitments as at 30 June 2011 are as follows:

	Unaudited 30 June 2011 HK$’000	Audited 31 December 2010 HK$’000
Acquisition of/loans to new investments – Contracted but not provided for Acquisition of fixed assets and other intangible assets – Authorised but not contracted for	226,637 85,793 312,430	220,971 147,165
		368,136

• (b) Joint venture (“Joint Venture”) with Ebay International AG (“eBay”)

During the period ended 30 June 2011, additional shareholder’s loan of US$1,247,000 (approximately HK$9,724,000) from TOM Online has been advanced to the Joint Venture. Therefore, the outstanding commitment of the Group in respect of the Joint Venture totalled US$9,192,000 (approximately HK$71,700,000) as at 30 June 2011 (31 December 2010: US$10,439,000 or approximately HK$81,424,000). For details, please refer to the Group’s 2010 annual report.

22 Related party transactions

A summary of significant related party transactions, in addition to those disclosed in notes 14 and 16 to the condensed consolidated interim financial information, is set out below:

(a) Sales of goods and services

Sales of goods and services
	Unaudited
	For the six months ended	30 June
	2011	2010
	HK$’000	HK$’000
Sales to
– Hutchison Whampoa Limited (“HWL”) and
its subsidiaries	15,317	21,939
– non-controlling interests of subsidiaries and
their subsidiaries	10,268	5,889

TOM GROUP LIMITED 27

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22 Related party transactions (Continued)

• (b) Purchase of goods and services

party transactions (Continued) Purchase of goods and services
	Unaudited
	For the six months ended	30 June
	2011	2010
	HK$’000	HK$’000
Purchase of services payable to
– non-controlling interests of subsidiaries and
their subsidiaries	6,722	10,653
Rental payable to
– an associated company of Cheung Kong (Holdings)
Limited (“CKH”)	4,605	4,420
– a subsidiary of CKH	4,295	4,295
– non-controlling interests of subsidiaries and
their subsidiaries	799	564
Service fees payable to
– HWL and its subsidiaries	1,982	2,282
Interest expenses payable to
– non-controlling interests of subsidiaries and
their subsidiaries	941	941

In July 2009, three substantial shareholders of the Company granted guarantees to the Company for loan facilities amounting to HK$1,900 million and guarantee fees were charged by these substantial shareholders. During the period, HK$3,759,000 was paid by the Company (2010: HK$3,600,000).

(c) Key management compensation

During the period ended 30 June 2011, no transactions have been entered into with the directors of the Company (being the key management personnel) other than the emoluments paid to them (being key management personnel compensation) (2010: Nil).

23 Comparative figures

Certain comparative figures have been reclassified to conform to the current period’s presentation. These reclassifications have no impact on the Group’s total equity as at both 30 June 2011 and 31 December 2010, or on the Group’s loss for the periods ended 30 June 2011 and 2010.

24 Approval of interim financial information

The condensed consolidated interim financial information was approved by the Board of Directors on 1 August 2011.

28 INTERIM REPORT 2011

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Disclosure of Interests
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Directors’ Interests and Short Positions in Shares, Underlying Shares and Debentures

As at 30 June 2011, the interests or short positions of the Directors and chief executive of the Company 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) 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
Yeung Kwok Mung Interest of spouse Angela Mak Beneficial owner	– 30,000 – – 30,000 Below 0.01% 44,000 – – – 44,000 Below 0.01%

(b) Rights to acquire shares of the Company

Pursuant to the Old Option Scheme, a Director was granted share options to subscribe for the shares of the Company, details of which as at 30 June 2011 were as follows:

Date of Name of Director grant		Number of share	Number of share	options	Subscription Outstanding price per as at Option share of the 30 June 2011 period Company HK$
	Outstanding as at 1 January 2011	Exercised during the period	Lapsed during the period	Cancelled during the period
Angela Mak 9/10/2003 Total:	6,000,000 6,000,000	– –	– –	– –	6,000,000 9/10/2003 – 2.505 (Note) 8/10/2013 6,000,000

29

TOM GROUP LIMITED

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Note:

The options have vested in four tranches. The first tranche of 2,700,000 options, 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.

Save as disclosed above, during the six months ended 30 June 2011, none of the Directors or chief executive of the Company was granted options to subscribe for shares of the Company, nor had exercised such rights.

Save as disclosed above, as at 30 June 2011, none of the Directors or chief executive of the Company 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.

Outstanding Share Options

(a) Old Option Scheme

As at 30 June 2011, options to subscribe for an aggregate of 6,556,000 shares of the Company which were granted to certain Directors, continuous contract employees and ex-employees of the Group were outstanding. Details of the share option movement during the six months ended 30 June 2011 were as follows:

Date of grant				Number of share options	Number of share options	Subscription Cancelled Outstanding price per during the as at Option share of the period 30 June 2011 period Company HK$	Subscription Cancelled Outstanding price per during the as at Option share of the period 30 June 2011 period Company HK$
		Outstanding as at 1 January 2011	Granted during the period	Exercised during the period	Lapsed during the period
Director 9/10/2003 (Note 1) Employees (including 9/10/2003 ex-employees) Total:		6,000,000 976,000 6,976,000	– – –	– – –	– – –	– (420,000) (420,000)	6,000,000 9/10/2003 – 2.505 8/10/2013 556,000 9/10/2003 – 2.505 (Note 2) 8/10/2013 6,556,000

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

3. (ii) For certain grantees, the options have vested in three tranches. 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 have vested on the anniversaries of their respective joining dates with the Group in 2005 and 2006.

4. (iii) 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 have vested on the anniversaries of their respective joining dates with the Group in 2005 and 2006.

30 INTERIM REPORT 2011

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(b) New Option Scheme

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

Interests and Short Positions of Shareholders

As at 30 June 2011, 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 of	percentage of
Name	Capacity	the Company held	shareholding
Li Ka-shing	Founder of discretionary	1,429,024,545 (L)	36.70%
	trusts & interest of	(Notes 1 & 2)
	controlled corporations
Li Ka-Shing Unity Trustee	Trustee & beneficiary	1,429,024,545 (L)	36.70%
Corporation Limited	of a trust	(Notes 1 & 2)
(as trustee of The Li Ka-Shing
Unity Discretionary Trust)
Li Ka-Shing Unity Trustcorp Limited	Trustee & beneficiary	1,429,024,545 (L)	36.70%
(as trustee of another	of a trust	(Notes 1 & 2)
discretionary trust)
Li Ka-Shing Unity Trustee	Trustee	1,429,024,545 (L)	36.70%
Company Limited		(Notes 1 & 2)
(as trustee of The Li Ka-Shing
Unity Trust)

31

TOM GROUP LIMITED

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			Approximate
		No. of shares of	percentage of
Name	Capacity	the Company held	shareholding
CKH	Interest of controlled	1,429,024,545 (L)	36.70%
	corporations	(Notes 1 & 2)
Cheung Kong Investment	Interest of controlled	476,341,182 (L)	12.23%
Company Limited	corporations	(Note 1)
Cheung Kong Holdings (China)	Interest of controlled	476,341,182 (L)	12.23%
Limited	corporations	(Note 1)
Sunnylink Enterprises Limited	Interest of a controlled	476,341,182 (L)	12.23%
	corporation	(Note 1)
Romefield Limited	Beneficial owner	476,341,182 (L)	12.23%
		(Note 1)
HWL	Interest of controlled	952,683,363 (L)	24.47%
	corporations	(Note 2)
Hutchison International Limited	Interest of a controlled	952,683,363 (L)	24.47%
	corporation	(Note 2)
Easterhouse Limited	Beneficial owner	952,683,363 (L)	24.47%
		(Note 2)
Chau Hoi Shuen	Interest of controlled	993,498,363 (L)	25.51%
	corporations	(Notes 3 & 4)
Cranwood Company Limited	Beneficial owner &	993,498,363 (L)	25.51%
	interest of controlled	(Notes 3 & 4)
	corporations
Schumann International Limited	Beneficial owner	580,000,000 (L)	14.90%
		(Notes 3 & 4)
Handel International Limited	Beneficial owner	348,000,000 (L)	8.94%
		(Notes 3 & 4)

(L) denotes a long position

32 INTERIM REPORT 2011

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Disclosure of Interests
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Notes:

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

• 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 Ka-Shing Unity Trustee Company Limited. Li Ka-Shing Unity Trustee Company Limited as trustee of The Li KaShing Unity Trust, together with certain companies which Li Ka-Shing Unity Trustee Company Limited as trustee of The Li Ka-Shing Unity Trust is entitled to exercise or control the exercise of more than one-third of the voting power at their general meetings, hold more than one-third of the issued share capital of CKH.

	In addition, Li Ka-Shing Unity Holdings Limited also owns the entire issued share capital of Li Ka-Shing Unity
	Trustee Corporation Limited (“TDT1”) as trustee of The Li Ka-Shing Unity Discretionary Trust (“DT1”) and Li Ka-
	Shing Unity Trustcorp Limited (“TDT2”) as trustee of another discretionary trust (“DT2”). Each of TDT1 and TDT2
	hold units in The Li Ka-Shing Unity Trust.
(2)	Easterhouse Limited is a wholly-owned subsidiary of Hutchison International Limited, which in turn is a wholly-
	owned subsidiary of HWL. By virtue of the SFO, HWL 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 CKH are entitled to exercise or control the exercise of more than one-third of the voting
	power at the general meetings of HWL. 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 CKH 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 65,498,363 shares of the Company held by itself.

• By virtue of the SFO, Ms. Chau Hoi Shuen is deemed to be interested in 65,498,363 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.

• (4) Cranwood Company Limited, Schumann International Limited and Handel International Limited have charged 63,004,363 shares of the Company, 580,000,000 shares of the Company and 348,000,000 shares of the Company respectively in favour of HWL on 20 July 2009.

Save as disclosed above, as at 30 June 2011, 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.

33

TOM GROUP LIMITED

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Disclosure of Interests
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Directors’ Interests in Competing Business

Mr. Frank Sixt and Mrs. Susan Chow, the non-executive 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 Hong Kong Holdings Limited (“HTHKH”) and director of certain of their Associates (collectively referred to as “CKH Group” and “HTHKH Group” respectively). Mrs. Susan Chow is a nonexecutive director of HTHKH and director of certain of their 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 telecommunications, e-commerce, Internet and information technology services. CKH Group, CKI Group, CK Life and Excel Technology are engaged in information technology, e-commerce or new technology where applicable. HTHKH Group operates GSM dual-band and 3G mobile telecommunications services in Hong Kong and Macau and provides fixed-line telecommunications services in Hong Kong. The Directors believe that there is a risk that such businesses may compete with those of the Group.

Save as disclosed above, none of the Directors or their respective Associates have any interests in a business which competes or may compete with the business of the Group during the six months ended 30 June 2011.

34 INTERIM REPORT 2011

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Corporate Governance
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Audit Committee

The Company has established an audit committee (“Audit Committee”) in January 2000. Written terms of reference in compliance with the Listing Rules have 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 condensed consolidated interim financial information of the Group for the six months ended 30 June 2011 has been reviewed by the Audit Committee.

Code on Corporate Governance Practices

The Company has complied with all the code provisions of the Code on Corporate Governance Practices contained in Appendix 14 to the Listing Rules for the six months ended 30 June 2011.

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 2011.

35

TOM GROUP LIMITED

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Other Information
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Purchase, Sale or Redemption of Securities

During the six months ended 30 June 2011, 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 are:

Executive Directors: Mr. Yeung Kwok Mung Ms. Angela Mak

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

Non-executive Directors: Independent non-executive Directors: Mr. Frank Sixt (Chairman) Mr. Henry Cheong Ms. Debbie Chang Ms. Anna Wu Mrs. Susan Chow Mr. James Sha Mr. Edmond Ip Mrs. Angelina Lee Alternate Director: Mr. Francis Meehan (Alternate to each of Mr. Frank Sixt, Ms. Debbie Chang, Mrs. Susan Chow and Mr. Edmond Ip)

36

INTERIM REPORT 2011