09:18     LEADERSHIP PGL<08010>-Announcement&Resumption of Trading(2)         

    As at the date of this announcement, the Subscriber is                    
    beneficially interested in an aggregate of 261,473,945 Shares,            
    representing approximately 26.36% of the existing issued share            
    capital of the Company. Assuming that the Convertible Note is             
    fully converted into the Convertible Shares, the Subscriber               
    will be beneficially interested in 1,261,473,945 Shares,                  
    representing approximately 63.34% of the issued share capital             
    of the Company as enlarged by the issue and allotment of the              
    Convertible Shares. The Subscriber will comply with the Hong              
    Kong Code on Takeovers and Mergers in the event that an                   
    obligation for a mandatory general offer arises.                          
                                                                              
    The terms and conditions of the Subscription Agreement have               
    been negotiated between the Company and the Subscriber on an              
    arm's length basis and are on commercial terms. The Directors             
    consider that the terms of the Subscription Agreement are fair            
    and reasonable and the issue of the Convertible Note is in the            
    interest of the Company and its Shareholders as a whole.                  
                                                                              
    The gross proceeds from the issue of the Convertible Note will            
    be HK$50 million. The estimated expenses of the issue of the              
    Convertible Note are approximately HK$0.45 million, which will            
    be borne by the Company. The estimated net proceeds from the              
    issue of the Convertible Note will be approximately HK$49.55              
    million and will be used (i) to repay the Shareholder's Loan              
    (as at the date of this announcement, the Company has drawn               
    down HK$10.2 million from the Facility. Hence, the amount of              
    the Shareholder's Loan as at the date of this announcement is             
    HK$34.7 million); (ii) to settle the Claimed Amount of                    
    HK$2,305,098; and (iii) the remaining as general working                  
    capital of the Group.                                                     
                                                                              
    The Share price as quoted on the Stock Exchange as at the                 
    Latest Trading Date was HK$0.03 per Share. As the Share price             
    is now approaching extremity of HK$0.01, the Company will take            
    appropriate step(s) after Completion, such as to effect a                 
    share consolidation, to comply with the requirements of Rule              
    17.76 of the GEM Listing Rules.                                           
                                                                              
    As the Subscriber is a substantial Shareholder, the Subscriber            
    is a connected person of the Company as defined under Rule                
    20.11 of the GEM Listing Rules. As such, the entering into of             
    the Subscription Agreement by the Subscriber constitutes a                
    connected transaction for the Company for the purpose of                  
    Chapter 20 of the GEM Listing Rules. Accordingly, the entering            
    into of the Subscription Agreement and the issue of the                   
    Convertible Note are subject to the approval of the                       
    Independent Shareholders by way of a poll at the EGM pursuant             
    to Rule 20.52 of the GEM Listing Rules. As the Subscriber is              
    beneficially interested in approximately 48.79% of the issued             
    share capital of SMI, by virtue of the SFO, the Subscriber is             
    deemed to be interested in all the Shares in which SMI is                 
    interested. Accordingly, the Subscriber, SMI and both of their            
    associates are required to abstain from voting at the EGM.                
                                                                              
    An independent board committee will be formed to advise the               
    Independent Shareholders in relation to the fairness and                  
    reasonableness of the terms of the Subscription Agreement. An             
    independent financial adviser will be appointed to advise the             
    independent board committee of the Company and the Independent            
    Shareholders in this regard. Kingston Corporate Finance                   
    Limited has been appointed as the financial adviser to the                
    Company.                                                                  
                                                                              
    A circular containing, inter alia, details of the Subscription,           
    the recommendation from the independent board committee of the            
    Company to the Independent Shareholders, advice from the                  
    independent financial adviser to the independent board                    
    committee of the Company and the Independent Shareholders, as             
    required under the GEM Listing Rules, together with a notice              
    to convene the EGM, will be despatched to the Shareholders as             
    soon as practicable but in any case within 21 days after the              
    date of this announcement.                                                
                                                                              
    RESUMPTION OF TRADING                                                     
    At the request of the Company, trading in the Shares on the               
    Stock Exchange has been suspended with effect from 9:30 a.m.              
    on 22 December 2004 pending the release of this announcement.             
    Application has been made by the Company to the Stock Exchange            
    for resumption of trading in the Shares on the Stock Exchange             
    with effect from 9:30 a.m. on 4 February 2005.                            
                                                                              
    By the Order of the Board                                                 
    SMI Publishing Group Limited                                              
    XING Jing                                                                 
    Chairman and Executive Director