SIM Technology Group Limited

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( Incorporated in Bermuda with limited liability )

( Stock Code : 2000 )

Interim Report 2011

Group Financial Highlights

		Unaudited consolidated	Unaudited consolidated
		For the	six months ended
			30 June
		2011	2010
•	Revenue (HK$ million)	1,265	2,015
•	Gross prof t (HK$ million)	123	243
•	Gross prof t margin	9.74%	12.07%
•	Net (loss) prof t attributable to owners
	of the Company (HK$ million)	(19)	108
•	Basic (loss) earnings per share (HK cents)	(1.2)	7.0
•	Interim dividendper share(HK cents)	1.0	2.5

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Chairman’s Statement

Market and business review

It is with deep regret that we report the fi rst unprofi table fi nancial result for SIM Technology Group Limited (the “Company”) together with its subsidiaries (the “Group”). Despite a healthy fi rst quarter, business slowed down signifi cantly in the last few months resulting in missing of sales target and lower gross profi t margin. The Group encountered two unfavourable events during our “High Value Added” ODM transition in the fi rst half of 2011. First, our traditional open market handset business shrank due to the signifi cant reduction in customer demand. Not only do our open market customers face slower market demand, some were caught up in intellectual property dispute with other parties. The result was a sudden and drastic drop in sales order. Compounding with competitors’ panic selling, the open market handset segment was unprofi table for the Group. The open market segment sales in the recent months reduced about 50% from previously. Second, our anticipated high end ODM business in the fi rst half did not materialize. Part of it was due to the change in TD-SCMDA tender. Part of it was due to the challenges we have to overcome internally during the transition. We are continuing the learning journey to revamp our organization structure, business process, performance review, and incentive program to adapt to the new engagement rules with our Tier One customers. And equally important is the effort it took to change the thousand’s of employees’ mind set turned out to be quite hard. Therefore, the transition proved to be more diffi cult and more time consuming than we expected. Many of the high end ODM projects are anticipated to begin shipment in the second half of 2011. As a result, the high end ODM projects were not able to offset the drop in the open market segment performance in the fi rst half of 2011.

For wireless modules segment, shipment volume of 2.5G modules increased as compared to the fi rst half of 2010. However, shipment of TD-SCDMA modules dropped signifi cantly due to demand reduction and fi erce price competition. In addition, the volume gain in 2.5G modules was not able to offset the price delta due to the higher average selling price of TD-SCDMA modules. Compounding with the fact that some of the module growth was coming from low cost regions like PRC where average sales prices are on the low side, the gross profi t margin were fl at. As a result, the fi rst half wireless module segment reports a small drop of 6% in volume and a drop of 25% in revenue versus same period in 2010.

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Chairman’s Statement

Our Group is fi rmly committed to the strategy of transitioning to become “High Value Added” ODM. The market has shown us that only a differentiable business model can sustain long term profi table growth. Our ability to meet our Tier One ODM customers’ uncompromising demand in excellence service and quality set us apart from our competitors. We gained a signifi cant head start by beginning the transition earlier than others. Therefore, we are optimistic that the unprofi table result is short-lived.

Interim dividend

The board of directors (the “Board”) of the Company has resolved to declare an interim dividend for the six months ended 30 June 2011 HK1.0 cent per share (2010: HK2.5 cents per share) to shareholders of the Company whose names appear on the register of members of the Company on 23 September 2011. The interim dividend will be paid on or about 7 October 2011.

Closure of register of members

The Company’s register of members will be closed from 21 September 2011 to 23 September 2011, both days inclusive, during such period no transfer of shares will be registered. In order to qualify for the interim dividend, all transfer forms accompanied by the relevant share certifi cates must be lodged with the Company’s Registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, Shops 1712-16, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong by 4:30 p.m. on 20 September 2011.

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Chairman’s Statement

Prospect

The management is confi dent about the second half result, particularly in the fourth quarter. The Group is making steady progress towards the transition. We have already passed through the audit by the Japanese operator in anticipation to the fi rst model launched in the Japanese market. The two Japanese and two domestic ODM customers’ upcoming demand alone can support our Group’s second half handset business target. We do not anticipate the open market segment to grow. The Group is making the right tradeoff to move away from an unprofi table and nondifferentiable business. Just a couple years ago, it is unthinkable that our quality would satisfy the Japanese domestic market, our customer base would consist of the world’s most demanding branded handset suppliers, and our products would address the top one-third segment of the handset market. Now, we are investing in the most advance technology including 4G and developing high end 3G smart phones and tablets. The Group targeted that the shipment and sales for 3G smart phones in 2H-2011 will exceed any of our previously reported results, representing about 80% of 3G handset sales. Our dedication, determination, and plenty of hard work turn our dream into reality. The management is confi dent that our successful execution will lead the Group to another phase of fast profi table growth.

Appreciation

The Board would like to thank our shareholders, customers, suppliers, bankers and professional advisers for their support of the Group and to extend our appreciation to all our staff for their dedication and contribution throughout the reporting period.

Yeung Man Ying

Chairman

Hong Kong, 19 August 2011

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Management Discussion and Analysis

FINANCIAL REVIEW

Financial results

For the six months ended 30 June 2011, the Group’s revenue decreased by 37.21% to HK$1,265.4 million (2010: HK$2,015.1 million) as compared with that of the fi rst half of 2010 (“1H-2010”). The sales decrease was attributable to the reduction in demand of mid to low end solutions in the open market segment. The feature phone projects launched last year by both Japan and Korea customers have ended earlier than expected while the new smart phone projects by the same customers are targeted to ship in 2H-2011. As a result, the sales of handsets and solutions during this transition period decreased as compared with those in 1H-2010. Wireless communication modules also decreased as compared to the same period last year mainly due to the weak demand of the TDSCDMA modules.

The gross profi t of the Group decreased dramatically by 49.34% to HK$123.2 million (2010: HK$243.2 million) for 1H-2011 as compared to 1H-2010 while the gross profi t margin decreased to 9.74% (2010: 12.07%). The Group incurred a loss for the reporting period of HK$18.7 million (2010: profi t of HK$108.2 million). The basic loss per share was HK1.2 cents (2010: earnings per share HK7 cents).

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Management Discussion and Analysis

Segment results

	Six months ended 30 June (unaudited) 2011 2010 Gross Gross prof t/ Gross Unit prof t/ (loss) Unit Gross prof t Revenue shipped (loss) margin Revenue shipped prof t margin HK$’M ’000 HK$’M % HK$’M ’000 HK$’M %
Handsets and solutions Display modules Wireless communication modules Total	934 5,406 76 8.16% 1,583 8,031 169 10.73% 58 1,047 (4) (6.25%) 67 1,761 6 8.83% 273 2,968 51 18.59% 365 3,145 68 18.48%
	1,265 9,421 123 9.74% 2,015 12,937 243 12.07%

Handsets and solutions

For 1H-2011, the revenue of 3G/3.5G handset solutions increased by 74% due to increase sales of WCDMA solutions for the China Unicom network and CDMA solutions for the China Telecom network. Whereas the revenue of 2G/2.5G handset solutions dropped by 53% as compared to those of 1H-2010. The sale of handsets and solutions decreased by 41% due to the sudden and drastic drop in demand from open market customers as compared to that of 1H-2010. The gross profi t margin decreased to 8.16% (2010: 10.73%). The revenue of handsets and solutions was about 27% and 47% (2010: 43% and 35%) respectively of the total revenue of the Group. The Group has launched 118 handset models and 41 handset platforms during the reporting period (2010: 100 handset models, 46 handset platforms).

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Management Discussion and Analysis

Display modules

The revenue for display modules decreased by 11.53% as compared to that in 1H-2010 and sustained a loss during the reporting period. The Group was exiting the low end display market segment and upgrading the factory equipment to produce high end LCD modules to support our ODM handsets. In addition, the Group increased investment in R&D and manufacturing capability for capacity touch panel (CTP) in 1H-2011. As a result, there was a loss incurred in the sale of display modules in 1H-2011.

Wireless communication modules

The revenue of wireless communication modules decreased substantially by 25.39% because of the decrease in the sale of TD-SCDMA modules. The decrease was partially offset by the increase in 2.5G modules. However, since the TD-SCDMA modules had higher average selling price than our 2.5G modules, the resulting revenue decreased for the overall segment. The gross margin stayed fl at at 18.59% (2010: 18.48%) in 1H-2011 due to the improved gross margin in SIM900 family offset by the decrease in gross margin for low cost module in some of the emerging markets.

LIQUIDITY, FIANCIAL RESOURCES AND CAPITAL STRUCTURE

The fi nancial position of the Group remains strong and healthy. As at 30 June 2011, the Group had bank balances (including pledged bank deposits) of HK$863.7 million (31 December 2010: HK$1,151.4 million), of which 90.92% was held in Renminbi, 9.07% was held in United States (“US”) dollars and the remaining balance was held in Hong Kong dollars. The bank balances are expected to fi nance the Group’s working capital and capital expenditure plans in developing new technologies for handsets and solutions.

The Company listed 137,500,000 units of Taiwan depository receipts (“TDR”), each unit of TDR represents two shares of the Company, on the Taiwan Stock Exchange Corporation on 25 April 2011. The 137,500,000 units of TDR represent 275,000,000 shares of the Company, of which the Company issued 137,500,000 new shares at approximately HK$1.60 per share and Info Dynasty Group Limited, a substantial shareholder of the Company transferred 137,500,000 shares as underlying securities of the TDR. The Company raised net proceeds after deducting the relevant expenses of approximately HK$214 million. During 1H-2011, the Group utilised the said proceeds of HK$79 million for the construction of Shenyang factory and purchase of machinery equipment.

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Management Discussion and Analysis

As at 30 June 2011, the Group had total bank borrowings amounting to HK$356 million (31 December 2010: HK$640.3 million) comprising invoice fi nancing bank loans and denominated in US dollars, were matured within one year. The annual interest rate on the above bank borrowings was ranging from 1.3% to 3.3%.

For the period under review, the Group’s turnover period for inventory, trade receivables together with notes and bills receivable, and trade payables were increased to 74 days, 35 days and 70 days respectively (31 December 2010: 44 days, 20 days and 52 days respectively). The turnover periods are consistent with the respective policies of the Group on credit terms granted to customers and credit terms obtained from suppliers.

As at 30 June 2011, the current ratio, calculated as current assets over current liabilities, was 2 times (31 December 2010: 1.7 times).

After reviewing the current fi nancial position based on the Group’s fi nance policy, the management of the Group considered that it was not necessary to use any fi nancial instrument for hedging purpose nor adopt any particular hedging policy.

As at 30 June 2011, the Company had an issued capital comprising 1,727,541,000 ordinary shares of HK$0.10 each. During the period under review, the Company has repurchased an aggregate of 16,590,000 shares, all of which had not been cancelled as at 30 June 2011.

GEARING RATIO

As at 30 June 2011, the total assets value of the Group was HK$3,057.8 million (31 December 2010: HK$3,151.3 million) and the bank borrowings was HK$356 million (31 December 2010: HK$640.3 million). The gearing ratio of the Group, calculated as total bank borrowings over total assets, was 11.64% (31 December 2010: 20.32%).

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Management Discussion and Analysis

EMPLOYEES

As at 30 June 2011, the Group had 3,489 (31 December 2010: 3,455) employees. The Group operates a mandatory provident fund retirement benefi ts scheme for all its employees in Hong Kong, and provides its PRC employees with welfare schemes as required by the applicable laws and regulations of the PRC. The Group also offers discretionary bonuses to its employees by reference to individual performance and the performance of the Group.

EMOLUMENT POLICY

The emolument policy of the employees of the Group is set up by the human resources department and seeks to provide remuneration packages on the basis of their merit, qualifi cations and competence of the employees.

The emoluments of the directors (“Directors”) and senior management of the Company will be reviewed by the remuneration committee of the Company, having regard to factors including the Group’s operating results, responsibilities of the Directors and senior management and comparable market statistics.

The Company has adopted a pre-listing share option scheme to recognise and reward the contribution of certain Directors and employees of the Group to the growth and development of the Group. The Group has also adopted another share option scheme, the primary purpose of which is to motivate the eligible persons referred to in the scheme, which includes employees of the Group, to optimise their future contributions to the Group and to reward them for their efforts.

CHARGES ON GROUP ASSETS

As at 30 June 2011, there were no charges on the Group’s assets.

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Management Discussion and Analysis

FOREIGN EXCHANGE EXPOSURE

Most of the sales of the Group are denominated in Renminbi and most of the purchases of inventories are denominated in US dollars. With the introduction of a more elastic exchange rate regime for Renminbi, the Renminbi exchange rate movements might become more volatile, creating an uncertainty effect on the Group’s business. Furthermore, certain trade receivables, trade payables and bank balances are denominated in US dollars, therefore exposing the Group to US dollars currency risk. The Group does not have a foreign currency hedging policy but will continue to monitor any further changes in Renminbi’s exchange rate and would proactively take measures to minimise any adverse impact that fl uctuations of exchange rates might have on the Group.

FUTURE PLANS FOR MATERIAL INVESTMENT

As at 30 June 2011, the Group did not have any other material investment plans.

MATERIAL ACQUISITION AND DISPOSAL OF SUBSIDIARIES

During 1H-2011, the Group did not have any material acquisition or disposal of subsidiaries or associated companies.

CONTINGENT LIABILITIES

As at 30 June 2011, the Group did not have any material contingent liabilities.

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

CONDENSED CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2011

NOTES	Six months ended 30 June 2011 2010 HK$’000 HK$’000 (unaudited) (unaudited)
Revenue 3 Cost of sales Gross prof t Other income 5 Other gains and losses 7 Research and development expenses Selling and distribution costs Administrative expenses Finance costs (Loss) Prof t before taxation Tax charge 6 (Loss) Prof t for the period 7 (Loss) Prof t for the period attributable to: Owners of the Company Non-controlling interests (Loss) Earnings per share (HK cents) 9 Basic Diluted	1,265,378 2,015,109 (1,142,168) (1,771,903)
	123,210 243,206 24,571 53,075 25,905 3,975 (76,326) (52,087) (47,821) (54,104) (64,038) (58,676) (3,497) (5,487)
	(17,996) 129,902 (2,810) (23,099)
	(20,806) 106,803
	(18,748) 108,216 (2,058) (1,413)
	(20,806) 106,803
	(1.2) 7.0
	(1.2) 6.7

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2011

	Six months ended 30 June 2011 2010 HK$’000 HK$’000 (unaudited) (unaudited)
(Loss) Prof t for the period Other comprehensive income for the period: Exchange difference arising on translation to presentation currency Total comprehensive income for the period Total comprehensive income attributable to: Owners of the Company Non-controlling interest	(20,806) 106,803 35,571 26
	14,765 106,829
	16,251 108,242 (1,486) (1,413)
	14,765 106,829

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 JUNE 2011

NOTES	30 June 31 December 2011 2010 HK$’000 HK$’000 (unaudited) (audited)
Non-current assets Investment properties 10 Property, plant and equipment 10 Land use rights Goodwill Intangible assets 10 Deferred tax assets 11 Available-for-sale investment Deposits paid for property, plant and equipment Current assets Inventories Properties under development for sales Trade receivables 12 Notes and bills receivables 12 Other receivables, deposits and prepayments Pledged bank deposits Bank balances and cash Current liabilities Trade and notes payables 13 Other payables, deposits received and accruals 13 Bank borrowings 14 Tax payable Net current assets Total assets less current liabilities	257,076 243,832 423,485 343,389 96,655 96,108 28,321 28,321 189,076 177,453 9,620 9,592 16,200 15,876 12,793 20,226
	1,033,226 934,797
	488,256 440,013 135,731 110,441 121,616 110,420 126,199 124,304 289,043 279,997 319,719 616,828 543,966 534,522
	2,024,530 2,216,525
	402,763 420,357 232,756 198,904 355,981 640,335 15,579 29,488
	1,007,079 1,289,084
	1,017,451 927,441
	2,050,677 1,862,238

SIM TECHNOLOGY GROUP LIMITED

INTERIM REPORT 2011

Interim Financial Statements

NOTES	30 June 31 December 2011 2010 HK$’000 HK$’000 (unaudited) (audited)
Capital and reserves Share capital 15 Reserves Equity attributable to owners of the Company Non-controlling interests Total equity Non-current liability Deferred tax liabilities 11	171,095 156,962 1,805,113 1,634,103
	1,976,208 1,791,065 26,539 28,025
	2,002,747 1,819,090
	47,930 43,148
	2,050,677 1,862,238

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2011

	Attributable to owners of the Company Statutory Share Properties Capital Non- Share Share surplus Other option revaluation redemption Translation Accumulated controlling capital premium reserve reserve reserve reserve reserve reserve prof ts Total interests Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note a) (Note b)
At 1 January 2010 (audited) Prof t for the period Other comprehensive income for the period Total comprehensive income (expense) for the period Issue of new shares upon exercise of share options Transfer upon exercise of share options Recognition of equity settled share based payments Dividends recognised as distribution At 30 June 2010 (unaudited)	152,871 493,843 27,599 97,091 25,399 73,739 – 118,504 537,940 1,526,986 17,483 1,544,469
	– – – – – – – – 108,216 108,216 (1,413) 106,803 – – – – – – – 26 – 26 – 26
	– – – – – – – 26 108,216 108,242 (1,413) 106,829
	3,709 30,402 – – – – – – – 34,111 – 34,111 – 15,399 – – (15,399) – – – – – – – – – – – 7,633 – – – – 7,633 – 7,633 – – – – – – – – (34,415) (34,415) – (34,415)
	156,580 539,644 27,599 97,091 17,633 73,739 – 118,530 611,741 1,642,557 16,070 1,658,627

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

	Attributable to owners of the Company Statutory Share Properties Capital Non- Share Share surplus Other option revaluation redemption Translation Accumulated controlling capital premium reserve reserve reserve reserve reserve reserve prof ts Total interests Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note a) (Note b)
At 1 January 2011 (audited) Loss for the period Other comprehensive income for the period Total comprehensive income (expense) for the period Issue of new shares upon exercise of share options Issue of shares upon listing of Taiwan Depositary Receipts on the Taiwan Stock Exchange Corporation Transaction costs attributable to issue of new shares Repurchase of shares Transfer upon exercise of share options Recognition of equity settled share based payments Dividends recognised as distribution At 30 June 2011 (unaudited)	156,962 543,914 27,599 97,091 25,144 73,739 – 168,937 697,679 1,791,065 28,025 1,819,090
	– – – – – – – – (18,748) (18,748) (2,058) (20,806) – – – – – – – 34,999 – 34,999 572 35,571
	– – – – – – – 34,999 (18,748) 16,251 (1,486) 14,765
	2,042 14,553 – – – – – – – 16,595 – 16,595 13,750 207,132 – – – – – – – 220,882 – 220,882 – (7,708) – – – – – – – (7,708) – (7,708) (1,659) (11,536) – – – – 1,659 – (1,659) (13,195) – (13,195) – 7,683 – – (7,683) – – – – – – – – – – – 4,051 – – – – 4,051 – 4,051 – – – – – – – – (51,733) (51,733) – (51,733)
	171,095 754,038 27,599 97,091 21,512 73,739 1,659 203,936 625,539 1,976,208 26,539 2,002,747

Notes:

(a) As stipulated by the relevant People’s Republic of China (“PRC”) laws and regulations, before distribution of the net profi t each year, the subsidiaries established in the PRC shall set aside 10% of their net profi t after taxation to the statutory surplus reserve. The reserve fund can only be used, upon approval by the board of directors of the relevant subsidiaries and by the relevant authority, to offset accumulated losses or increase capital.
(b) Other reserve is arisen from a reorganisation to rationalise the structure of the Group in preparation for listing of the Company’s shares on the Main Board of The Stock Exchange of Hong Kong Limited.

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE 2011

	Six months ended 30 June 2011 2010 HK$’000 HK$’000 (unaudited) (unaudited)
NET CASH FROM OPERATING ACTIVITIES INVESTING ACTIVITIES Purchase of property, plant and equipment Proceeds on disposal of property, plant and equipment Development costs paid Deposits paid for purchase of land use rights Decrease (increase) in pledged bank deposits NET CASH FROM (USED IN) INVESTING ACTIVITIES FINANCING ACTIVITIES Issue of shares Transaction costs attributable to issue of new shares New bank borrowings raised Repayments of bank borrowings Dividends paid Interest paid Repurchase of shares NET CASH (USED IN) FROM FINANCING ACTIVITIES NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD EFFECT OF FOREIGN EXCHANGE RATE CHANGES CASH AND CASH EQUIVALENTS AT END OF THE PERIOD, REPRESENTED BY BANK BALANCES AND CASH	628 19,511
	(92,605) (73,456) 93 – (83,742) (84,248) – (5,035) 304,452 (162,545)
	128,198 (325,284)
	237,477 34,111 (7,708) – 127,175 327,957 (417,203) (78,000) (51,733) (34,415) (3,497) (5,487) (13,195) –
	(128,684) 244,166
	142 (61,607) 534,522 532,276 9,302 26
	543,966 470,695

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2011

1. GENERAL INFORMATION AND BASIS OF PREPARATION

The Company was incorporated in Bermuda as an exempted company under the Companies Act 1981 of Bermuda (as amended) with limited liability.

The Company is an investment holding company. The principal activities of its subsidiaries are manufacturing, design and development and sales of display modules, handsets (full handsets for ODM customers) and solutions (SKD/CKD and royalties), and wireless communication modules.

The functional currency of the Company is Renminbi. The condensed consolidated fi nancial statements are presented in Hong Kong dollar, as the directors of the Company (“Directors”) consider that such presentation is more appropriate for a company listed in Hong Kong and for the convenience of the shareholders of the Company.

The condensed consolidated fi nancial statements of the Group have been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and with International Accounting Standard (“IAS”) 34 “Interim Financial Reporting”.

2. PRINCIPAL ACCOUNTING POLICIES

The condensed fi nancial statements have been prepared on the historical cost basis except for certain properties, which are measured at fair values.

The accounting policies and methods of computation used in the condensed consolidated fi nancial statements are consistent with those followed in the preparation of the Group’s annual fi nancial statements for the year ended 31 December 2010, except as described below.

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

In the current period, the Group has applied, for the fi rst time, the following new and revised standards, amendments or interpretations, (“new and revised IFRSs”) issued by International Accounting Standards Board (“IASB”) and the International Financial Reporting Interpretations Committee (“IFRIC”) of the IASB that are effective for the Group’s fi nancial year beginning on 1 January 2011.

IFRSs (Amendments)	Improvements to IFRSs 2010
IAS 24 (Revised)	Related party disclosures
IAS 32 (Amendment)	Classif cation of rights issues
IFRIC 14 (Amendment)	Prepayments of a minimum funding requirement
IFRIC 19	Extinguishing f nancial liabilities with equity instruments

The application of the new and revised IFRSs had no effect on the condensed consolidated fi nancial statement of the Group for the current or prior accounting periods.

The Group has not early applied the following new or revised standards and amendments that have been issued but are not yet effective.

IFRS 7	Disclosures - Transfers of f nancial assets1
IFRS 9	Financial instruments2
IFRS 10	Consolidated f nancial statements2
IFRS 11	Joint arrangements2
IFRS 12	Disclosures of interests in other entities2
IFRS 13	Fair value measurement2
IAS 1 (Amendments)	Presentation of items of other comprehensive income4
IAS 12 (Amendments)	Deferred tax: Recovery of underlying assets3
IAS 19 (Revised)	Employee benef ts2
IAS 27 (Revised)	Separate f nancial statements2
IAS 28 (Revised)	Investments in associates and joint ventures2

1 Effective for annual periods beginning on or after 1 July 2011. 2 Effective for annual periods beginning on or after 1 January 2013. 3 Effective for annual periods beginning on or after 1 January 2012.
4 Effective for annual periods beginning on or after 1 July 2012.

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

IFRS 9 “Financial instruments” (as issued in November 2009) introduces new requirements for the classifi cation and measurement of fi nancial assets. IFRS 9 “Financial instruments” (as revised in October 2010) adds requirements for fi nancial liabilities and for derecognition.

Under IFRS 9, all recognised fi nancial assets that are within the scope of IAS 39 “Financial instruments: Recognition and measurement” are subsequently measured at either amortised cost or fair value. Specifi cally, debt investments that are held within a business model whose objective is to collect the contractual cash fl ows, and that have contractual cash fl ows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods.

IFRS 9 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted.

The directors anticipate that IFRS 9 that will be adopted in the Group’s consolidated fi nancial statements for fi nancial year ending 31 December 2013 and that the application of IFRS 9 will mainly affect the classifi cation and measurement of the Group’s available-for-sale investments.

The amendments to IAS 12 titled “Deferred tax: Recovery of underlying assets” mainly deal with the measurement of deferred tax for investment properties that are measured using the fair value model in accordance with IAS 40 “Investment property”. Based on the amendments, for the purposes of measuring deferred tax liabilities and deferred tax assets for investment properties measured using the fair value model, the carrying amounts of the investment properties are presumed to be recovered through sale, unless the presumption is rebutted in certain circumstances.

In the opinion of the Directors, it is not practicable to provide reasonable estimate of the effect of application of IFRS 9 and IAS 12 as stated above until detailed review has been completed.

The Directors anticipate that the application of other new and revised standards and amendments will have no material impact on the results and the fi nancial position of the Group.

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

3. REVENUE

Revenue represents the amounts received and receivable for goods sold net of discounts and sales related taxes.

4. SEGMENT INFORMATION

Segment information is presented based on internal reports about components of the Group that are regularly reviewed by the chief operating decision maker, represented by the Board of Directors, for the purpose of allocate resources to segments and assessing their performance.

The Group currently organised into three revenue streams - sale of handsets and solutions, sale of display modules and sale of wireless communication modules.

Segment information about these businesses is presented below:

Six months ended 30 June 2011 (Unaudited)

Six months ended (Unaudited)	30 June 2011
	Sale of Sale of handsets Sale of wireless and dispaly communication Segment solutions modules modules total Elimination HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	Consolidated HK$’000
Revenue External sales 934,024 58,715 272,639 1,265,378 – Inter-segment sales – 17,643 – 17,643 (17,643) Total 934,024 76,358 272,639 1,283,021 (17,643) Segment (loss) prof ts (18,836) (15,002) 7,299 (26,539) – Other income Corporate expenses Gain from changes in fair value of investment properties Finance costs Loss before taxation	934,024 58,715 272,639 1,265,378 – – 17,643 – 17,643 (17,643)	1,265,378 –
	934,024 76,358 272,639 1,283,021 (17,643)	1,265,378
	(18,836) (15,002) 7,299 (26,539) –	(26,539) 15,560 (11,719) 8,199 (3,497)
		(17,996)

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

Six months ended 30 June 2010 (Unaudited)

	Sale of Sale of handsets Sale of wireless and display communication Segment solutions modules modules total Elimination HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	Consolidated HK$’000
Revenue External sales Inter-segment sales Total Segment prof t (loss) Other income Corporate expenses Finance costs Prof t before taxation	1,583,337 66,366 365,406 2,015,109 – – 24,012 – 24,012 (24,012)	2,015,109 –
	1,583,337 90,378 365,406 2,039,121 (24,012)	2,015,109
	112,698 (9,084) 48,360 151,974 –	151,974 8,312 (24,897) (5,487)

		129,902

Inter-segment sales are charged at mutually agreed terms.

Segment result represents the fi nancial result by each segment without allocation of rental income, interest income, other income, corporate expenses, gain from changes in fair value of investment properties and fi nance costs. This is the measure reported to the Group’s management for the purposed of resource allocation and assessment of segment performance.

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

The following is an analysis of the Group’s assets by operating segments:

	30 June 31 December 2011 2010 HK$’000 HK$’000 (unaudited) (audited)
	989,169 1,068,903 309,463 254,929 353,998 161,450
	1,652,630 1,485,282

For the purposes of monitoring segment performances and allocating resources between segments, all assets are allocated to operating segments other than investment properties, certain property, plant and equipment, pledged bank deposits, bank balances and cash, deposits paid for property, plant and equipment, available-for-sale investments, deferred tax assets, properties under development for sales and certain other receivables, deposits and prepayment. Assets used jointly by operating segments are allocated on the basis of the revenues earned by individual operating segments.

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

5. OTHER INCOME

	Six months ended 30 June 2011 2010 HK$’000 HK$’000 (unaudited) (unaudited)
Refund of VAT (Note 1) Government grants (Note 2) Interest income earned on bank balances Rental income (Less: outgoings of HK$331,000 (2010: HK$201,000)) Others	5,728 6,552 3,283 38,211 7,610 3,257 7,848 4,332 102 723
	24,571 53,075

Notes:

(1) Shanghai Simcom Limited, Shanghai Speedcomm Technology Limited and Shanghai Simcom Wireless Solutions Limited, wholly-owned subsidiaries of the Company, are engaged in the business of distribution of self-developed and produced software. Under the current PRC tax regulation, it is entitled to a refund of Value Added Tax (“VAT”) paid for sales of self-developed software in the PRC.
(2) Government grants for the current period of HK$3,283,000 represented unconditional government grants received to encourage for the Group’s research and developments activities in the PRC. During the six months period ended 30 June 2010, HK$5,391,000 of such government grant has been received and recognised by the Group.

During the period ended 30 June 2010, the Group received government grants of HK$18,673,000 towards the cost of development on wireless communication modules and mobile handset modules in Shenyang. The amounts are transferred to other income to match actual expenditure used in research and development activities and HK$32,820,000 was recognised in the profi t or loss during the period.

During the period ended 30 June 2011, the Group received government grants of HK$12,095,000 and a total amount of HK$39,501,000 (31 December 2010: HK$27,349,000) remains to be unamortised and included in other payables.

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

6. TAX CHARGE

	Six months ended 30 June 2011 2010 HK$’000 HK$’000 (unaudited) (unaudited)
Tax charge comprises: PRC Enterprise Income Tax – current period – overprovision in prior periods Deferred tax charge (credit) (note 11)	2,687 24,486 (3,570) – 3,693 (1,387)
	2,810 23,099

No provision for Hong Kong Profi ts Tax has been made for both periods as the Company and its subsidiaries have no assessable profi ts arising in Hong Kong.

PRC Enterprise Income Tax is calculated at the rates prevailing in the relevant districts of the PRC taking relevant tax incentives into account. The estimated average annual tax rate used for PRC Enterprise Income Tax is 15% for six months ended 30 June 2011 (1 January 2010 to 30 June 2010: 18%).

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

7. (LOSS) PROFIT FOR THE PERIOD

Six months ended 30 June 2011 2010 HK$’000 HK$’000 (unaudited) (unaudited)	Six months ended 30 June 2011 2010 HK$’000 HK$’000 (unaudited) (unaudited)
(Loss) Prof t for the Period is arrived at after charging (crediting): Amortisation of intangible assets (included in cost of sales) 75,677 Amortisation of land use rights 1,073 Depreciation of property, plant and equipment 28,765 Less: Amount capitalised in development costs classif ed as intangible assets (1,470) 27,295 Staff costs including directors’ emoluments 169,071 Share-based payments 4,051 Less: Amount capitalised in development costs classif ed as intangible assets (67,799) 105,323 Write-down of inventories (included in cost of sales) 3,511 Allowance for bad and doubtful debts – Loss on disposal of property, plant and equipment 24 Net foreign exchange gain (included in other gains and losses) (8,023) Gain from changes in fair value of investment properties (included in other gains and losses) (8,199) Reversal of allowance for bad and doubtful debts (included in other gains and losses) (9,683)	77,423 850 21,958 (1,566)
	20,392 155,024 7,633 (63,417)
	99,240 3,029 4,533 27 (3,975) – –

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

8. DIVIDENDS

	Six months	ended 30 June
	2011	2010
	HK$’000	HK$’000
	(unaudited)	(unaudited)
Dividends recognised as distribution - f nal dividend
for year 2010 of HK3.0 cents (HK2.2 cents
for year 2009) per share	51,733	34,415

Subsequent to the reporting period date, the Directors determined that an interim dividend of HK1.0 cent (1 January 2010 to 30 June 2010: HK2.5 cents) per share would be paid to the owners of the Company whose names appear on the Register of Members on 23 September 2011.

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

9. (LOSS) EARNINGS PER SHARE

The calculation of the basic and diluted (loss) earnings per share attributable to the owners of the Company is based on the following data:

	Six months ended 30 June 2011 2010 HK$’000 HK$’000 (unaudited) (unaudited)
(Loss) Earnings (Loss) Earnings for the purposes of basic and diluted (loss) earnings per share for the period attributable to the owners of the Company	(18,748) 108,216
	’000 ’000
Number of shares Weighted average number of ordinary shares for the purpose of basic (loss) earnings per share Effect of dilutive potential ordinary shares - share options Weighted average number of ordinary shares for the purpose of diluted (loss) earnings per share	1,577,784 1,544,102 – 68,066
	1,577,784 1,612,168

The computation of diluted loss per share for the period ended 30 June 2011 does not assume the exercise of the Company’s share options as it would reduced loss per share.

For the period ended 30 June 2010, weighted average number of ordinary shares for the purpose of the computation of diluted earnings per share has accounted for the effect of the share options with dilutive effect.

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

10. MOVEMENTS IN INVESTMENT PROPERTIES, PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS

The Group’s investment properties were fair valued by the Directors. The valuation was arrived at by reference to the discount cash fl ow projections based on estimates of future cash fl ows, supported by the terms of existing lease and reasonable and supportable assumptions that represent what knowledgeable willing parties would assume about rental income for future leases in the light of current conditions, using discount rates that refl ect current market assessments of the uncertainty in the amount and timing of cash fl ows.

Based on the assessment by the Directors, the fair value of investment properties as at 30 June 2011 is HK$257,076,000 (31 December 2010: HK$243,832,000) and fair value changes of HK$8,199,000 have been recognised directly in profi t or loss for the six months ended 30 June 2011 (1 January 2010 to 30 June 2010: nil).

During the period, additions to the Group’s property, plant and equipment amounted to HK$102,195,000 (1 January 2010 to 30 June 2010: HK$73,456,000).

During the period, additions to the Group’s intangible assets amounted to HK$85,212,000 (1 January 2010 to 30 June 2010: HK$84,248,000).

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

11. DEFERRED TAXATION

The followings are the major deferred tax (liabilities) assets recognised by the Group and the movement thereon during the current period and prior year:

	Write-down Development of inventories Revaluation of cost and trade investment Intangible capitalised receivables properties assets Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
	(8,235) 3,438 (25,610) (3,268) (33,675) 1,387 – – – 1,387
	(6,848) 3,438 (25,610) (3,268) (32,288) (282) 394 (887) – (775) (2,425) 5,760 (3,828) – (493)
	(9,555) 9,592 (30,325) (3,268) (33,556) (453) 28 (636) – (1,061) (1,643) – (2,050) – (3,693)
	(11,651) 9,620 (33,011) (3,268) (38,310)

The following is the analysis of the deferred tax balances for fi nancial reporting purposes:

	30 June 31 December 2011 2010 HK$’000 HK$’000 (unaudited) (audited)
Deferred tax assets Deferred tax liabilities	9,620 9,592 (47,930) (43,148)
	(38,310) (33,556)

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

12. TRADE RECEIVABLES AND NOTES AND BILLS RECEIVABLES

The normal credit period taken on sales of goods is 0 to 90 days. The following is an aged analysis of trade receivables, notes and bills receivables presented based on the invoice date at the end of the reporting period:

	30 June 31 December 2011 2010 HK$’000 HK$’000 (unaudited) (audited)
0 - 30 days 31 - 60 days 61 - 90 days 91 - 180 days Over 180 days Less: Accumulated allowances Trade receivables 0 - 30 days 31 - 60 days Notes and bills receivables (Note)	92,281 103,747 23,986 1,689 1,944 655 3,305 2,126 12,457 23,882
	133,973 132,099 (12,357) (21,679)
	121,616 110,420
	122,828 124,304 3,371 –
	126,199 124,304

Note: Notes and bills receivables represent the promissory notes issued by banks received from the customers.

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

13. OTHER CURRENT FINANCIAL LIABILITIES

The normal credit period taken for trade purchases is 30 to 60 days. The following is an aged analysis of trade and notes payables presented based on the respective invoice date at the end of the reporting period:

	30 June 31 December 2011 2010 HK$’000 HK$’000 (unaudited) (audited)
0 - 30 days 31 - 60 days 61 - 90 days Over 90 days	345,807 357,207 33,051 42,571 12,706 4,556 11,199 16,023
	402,763 420,357

On 4 November 2010, the Group entered into a sale and purchase agreement with a related company, which was benefi cially owned by Mr Wong Sun, who is a son of Ms Yeung Man Ying (an executive Director) and Mr Wong Cho Tung (an executive Director), on disposing of 40% equity interest in Shenyang SIM Real Estate Limited which was a whollyowned subsidiary of the Company for a consideration of US$8 million (approximately HK$62,030,000). During the period ended 30 June 2011, the Group received a refundable deposits of HK$30,000,000 from the related company for this transaction. On 13 July 2011, a supplemental agreement was entered into between the Group and such related Company. This transaction is not yet completed as at the date of this report.

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

14. BANK BORROWINGS

During the period, the Group repaid short-term bank borrowings of HK$417,203,000 (1 January 2010 to 30 June 2010: HK$78,000,000) and obtained new short-term bank borrowings with total amount of HK$127,175,000 (1 January 2010 to 30 June 2010: HK$327,957,000). The borrowings bear interest at fi xed rates ranging from 1.3% to 3.3% per annum (31 December 2010: 1.24% to 2.3% per annum) and are repayable within one year. The proceeds were used to meet short-term expenditure needs.

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

15. SHARE CAPITAL

	Number Share of shares capital ’000 HK$’000
Ordinary shares of HK$0.1 each Authorised: At 1 January 2011 and 30 June 2011 Issued: At 1 January 2011 (audited) Exercise of share options Issue of shares upon listing of Taiwan Depositary Receipts on the Taiwan Stock Exchange Corporation (note 1) Repurchase of shares (note 2) At 30 June 2011 (unaudited)	3,000,000 300,000
	1,569,625 156,962 20,416 2,042 137,500 13,750 (16,590) (1,659)
	1,710,951 171,095

Notes:

(1) On 18 April 2011, the Company issued 137,500,000 new shares through Taiwan Depositary Receipts on the Taiwan Stock Exchange Corporation at a price of HK$1.60 per share.

(2) During the period ended 30 June 2011, the Company repurchased 16,590,000 of its own shares through the Main Board of The Stock Exchange of Hong Kong Limited.

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

16. OPERATING LEASE ARRANGEMENT

The Group as lessee

At the end of the reporting period, the Group had commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows:

	30 June 31 December 2011 2010 HK$’000 HK$’000 (unaudited) (audited)
Within one year In the second to f fth year inclusive	4,274 2,636 4,826 2,338
	9,100 4,974

The Group as lessor

At the end of the reporting period, the Group had contracted with tenants for the following future minimum lease payments:

	30 June 31 December 2011 2010 HK$’000 HK$’000 (unaudited) (audited)
Within one year In the second to f fth year inclusive After f ve years	17,777 14,890 50,914 52,566 8,087 10,118
	76,778 77,574

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Interim Financial Statements

17. COMMITMENTS

	30 June 31 December 2011 2010 HK$’000 HK$’000 (unaudited) (audited)
Capital commitment Expenditure contracted for but not provided in the condensed consolidated f nancial statements in respect of: – building construction for production plant of the Group – properties under development for sales	85,014 18,934 140,471 –
	225,485 18,934

18. RELATED PARTY TRANSACTIONS

The remuneration of key management during the period was as follows:

	Six months	ended 30 June
	2011	2010
	HK$’000	HK$’000
	(unaudited)	(unaudited)
Short term benef ts	1,991	3,620
Post-employment benef ts	70	65
Share based payments	1,094	1,026
	3,155	4,711

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Other Information

DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS AND SHORT POSITION IN SHARES

At 30 June 2011, the interests and short positions of the Directors and chief executives of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporation (within the meaning of Part XV of the Securities and Future Ordinance (CAP 571, Laws of Hong Kong) (“SFO”)), as recorded in the register maintained by the Company pursuant to Section 352 of the SFO, or as otherwise notifi ed to the Company and The Stock Exchange of Hong Kong Limited (“Stock Exchange”) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (“Model Code”) as set out in Appendix 10 to the Rules Governing the Listing of Securities on the Stock Exchange (the “Listing Rules”), were as follows:

(a) Interests in the shares of the Company and the shares of associated corporations of the Company

Approximate percentage of Name Nature of Total number interest in Name of director of corporation interest of ordinary shares the corporation (note 3)	Approximate percentage of Name Nature of Total number interest in Name of director of corporation interest of ordinary shares the corporation (note 3)
Mr Wong Cho Tung Company Interest of controlled corporation (note 1) Info Dynasty Group Benef cial owner Limited (“Info Dynasty”) Ms Yeung Man Ying Company Interest of controlled corporation (note 2) Company Benef cial owner Subtotal Info Dynasty Benef cial owner Mr Wong Hei, Simon Info Dynasty Benef cial owner Mr Zhang Jianping Company Benef cial owner Ms Tang Rongrong Company Benef cial owner	772,500,000 44.72% 1,000 49.95% 703,675,000 40.73% 320,000 0.02%
	703,995,000 40.75%
	1,000 49.95% 1 0.05% 4,864,000 0.28% 186,000 0.01%

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Other Information

Notes:

Mr Wong Cho Tung (“Mr Wong”) controls more than one-third of the voting power of Info Dynasty. Mr Wong is therefore deemed to be interested in all the 703,675,000 shares held by Info Dynasty in the Company by virtue of Part XV of the SFO. Both Intellipower Investments Limited (“Intellipower”) and Simcom Limited (“Simcom (BVI)”) are wholly-owned by Mr Wong and he is therefore deemed to be interested in all the 48,825,000 shares and 20,000,000 shares held by Intellipower and Simcom (BVI) respectively in the Company by virtue of Part XV of the SFO.
Ms Yeung Man Ying (“Mrs Wong”), the spouse of Mr Wong, controls more than one-third of the voting power of Info Dynasty. Mrs Wong is therefore deemed to be interested in all the 703,675,000 shares held by Info Dynasty by virtue of Part XV of the SFO.
Calculation of percentage of interest in the Company is based on the issued share capital of 1,727,541,000 shares of the Company as at 30 June 2011.

(b) Interests in the underlying shares of the Company

Please see the section headed “Share Options” on page 39 to 40 of this report for information of the interests of the Directors and chief executive of the Company in the underlying shares of the Company as at 30 June 2011.

Save as disclosed above, as at 30 June 2011, none of the Directors or chief executive of the Company had any interest or short position in the shares, underlying shares and debentures of the Company or any of its associated corporations that was required to be recorded pursuant to Section 352 of the SFO, or as otherwise notifi ed to the Company and the Stock Exchange pursuant to the Model Code.

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Other Information

SUBSTANTIAL SHAREHOLDERS

At 30 June 2011, the interests of other persons (other than a Director or chief executive of the Company) in the shares and underlying shares of the Company as recorded in the register maintained by the Company pursuant to section 336 of the SFO were as follows:

			Approximate
			percentage of
		Number of shares	interest in
Name of shareholder	Nature of interest	in the Company	the Company
			(note 1)
Info Dynasty (Note 2)	Benef cial owner	703,675,000	40.73%

Notes:

Calculation of percentage of interest in the Company is based on the issued share capital of 1,727,541,000 shares of the Company as at 30 June 2011.
The relationship between Info Dynasty and Mr Wong and the relationship between Info Dynasty and Mrs Wong is disclosed under the paragraph headed “Directors’ and Chief Executives’ Interests and Short Position in Shares” above.

Save as disclosed above, as at 30 June 2011, there is no other person (other than a Director or chief executive of the Company) had interests or short positions in the shares and underlying shares of the Company which are required to be recorded in the register required to be kept by the Company under section 336 of the SFO.

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Other Information

SHARE OPTIONS

The Company granted share options under the pre-listing share option scheme adopted by the Company on 30 May 2005 (“Pre-IPO Options”) and under a share option scheme (“Post-IPO Options”) adopted on 30 May 2005.

The details of the options under Pre-IPO Options and Post-IPO Options granted to certain Directors and employees of the Group and movements in such holdings were illustrated below:

			Outstanding	Granted	Exercised	Lapsed	Outstanding
Category of	Name of	Date of	at	during	during	during	at
participants	scheme	grant	1 January 2011	theperiod	theperiod	theperiod	30 June 2011
Directors
Mr Zhang Jianping	Pre-IPO	30.5.2005	1,500,000	–	–	–	1,500,000
	Post-IPO	28.3.2008	800,000	–	–	–	800,000
	Post-IPO	3.9.2009	7,500,000	–	(300,000)	–	7,200,000
Ms Tang Rongrong	Pre-IPO	30.5.2005	–	–	–	–	–
	Post-IPO	28.3.2008	800,000	–	–	–	800,000
	Post-IPO	3.9.2009	3,000,000	–	–	–	3,000,000
Mr Chan Tat Wing Richard	Pre-IPO	30.5.2005	500,000	–	–	–	500,000
	Post-IPO	28.3.2008	1,600,000	–	–	–	1,600,000
	Post-IPO	3.9.2009	3,000,000	–	–	–	3,000,000
			18,700,000	–	(300,000)	–	18,400,000
Employees of the Group	Pre-IPO	30.5.2005	2,972,500	–	(951,000)	(298,500)	1,723,000
	Post-IPO	12.5.2006	5,967,500	–	–	(1,075,000)	4,892,500
	Post-IPO	13.11.2007	7,238,000	–	(94,000)	(1,733,500)	5,410,500
	Post-IPO	28.3.2008	30,716,000	–	(8,344,000)	(936,000)	21,436,000
	Post-IPO	3.9.2009	72,331,500	–	(10,727,500)	(3,373,500)	58,230,500
			137,925,500	–	(20,416,500)	(7,416,500)	110,092,500

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Other Information

Notes:

In relation to each grantee of the options granted under the Pre-IPO Options, 25% of the options will vest during the period from 1 April 2006 to 31 December 2006 and in each of the three calendar years from 1 January 2007 to 31 December 2009. The exercise price per share is HK$1.02 and the exercise period is 1 April 2006 to 29 May 2015.
In relation to each grantee of the options granted on 12 May 2006 under Post-IPO Options, 25% of the options will vest in each of the four calendar years from 1 January 2007. The exercise price per share is HK$3.675 and the exercise period is 1 January 2007 to 11 May 2016.
In relation to each grantee of the options granted on 13 November 2007 under Post-IPO Options, 25% of the options will vest in each of the four calendar years from 1 April 2008. The exercise price per share is HK$1.64 and the exercise period is 1 April 2008 to 12 November 2017.
In relation to each grantee of the options granted on 28 March 2008 under Post-IPO Options, 25% of the options will vest in each of the four calendar years from 15 April 2009. The exercise price per share is HK$0.81 and the exercise period is 15 April 2009 to 27 March 2018.
In relation to each grantee of the options granted on 3 September 2009 under Post-IPO Options, 25% of the options will vest in each of the four calendar years from 15 April 2010. The exercise price per share is HK$0.79 and the exercise period is 15 April 2010 to 2 September 2019.
In respect of share options exercised during the period, the weighted average closing share price before the exercise dates was HK$1.57.

Other than as disclosed above, at no time during the period was the Company or any of its subsidiaries a party to any arrangements that enable the Directors or the chief executive of the Company to acquire benefi ts by means of acquisition of shares in, or debt securities (including debentures) of, the Company or any other body corporate and save as disclosed in this report, none of the Directors, the chief executive, their spouses or children under the age of 18, had any right to subscribe for securities of the Company, or had exercise any such right during the period.

PURCHASE, SALE OR REDEMPTION OF SHARES

During the reporting period, the Company has purchased an aggregate of 16,590,000 shares on the Stock Exchange for an aggregate consideration of HK$13,126,000. Save as aforesaid, neither the Company nor any of its subsidiaries has purchased, redeemed or sold any of the Company’s listed securities during the reporting period.

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Other Information

CHANGES OF DIRECTORS’ INFORMATION UNDER RULE 13.51B(1) OF THE LISTING RULES

Below are the changes of directors’ information required to be disclosed pursuant to Rule 13.51B(1) of the Listing Rules since the date of the 2010 Annual Report:

Mr Xie Linzhen, an independent non-executive director of the Company, is an independent director of Funtalk China Holdings Limited, which was previously a listed company on NASDAQ of the United States of America and went privatization in August 2011.

Save for the information disclosed above, there is no other information required to be disclosed pursuant to Rule 13.51B(1) of the Listing Rules

CODE ON CORPORATE GOVERNANCE PRACTICES

Save as mentioned below, the Company has complied with the code provisions laid down in the Code on Corporate Governance Practices as set out in Appendix 14 to the Listing Rules (“Corporate Governance Code“) during the reporting period.

According to the code provision E.1.2 of the Corporate Governance Code, the chairman of the Board shall attend the annual general meeting of the Company and arrange for the chairmen of the audit, remuneration and nomination committees (as appropriate) or in the absence of the chairman of such committees, another member of the committee or failing this his duly appointed delegate, to be available to answer questions at the annual general meeting.

At the annual general meeting of the Company held on 13 May 2011 (“2011 AGM”), Ms Yeung Man Ying, the chairman of the Board, was unable to attend due to unexpected business engagement. Mr Chan Tat Wing, Richard, an executive Director and the chief fi nance offi cer of the Group, chaired the 2011 AGM on behalf of the chairman of the Board pursuant to the Bye-laws and was available to answer questions. Mr Wong Cho Tung, an executive Director and a member of the Remuneration Committee together with Mr Liu Hing Hung, an independent non-executive Director and the chairman of the Audit Committee, were also available at the 2011 AGM to answer questions from shareholders of the Company.

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Other Information

COMPLIANCE WITH THE MODEL CODE

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 to the Listing Rules as its own code for securities transactions. All directors of the Company have confi rmed, following specifi c enquiry by the Company with all the directors, that they have fully complied with the required standard as set out in the Model Code for the reporting period.

AUDIT COMMITTEE

The audit committee of the Company (“Audit Committee”) has reviewed with management the accounting principles and practice adopted by the Group and reviewed the unaudited condensed consolidated fi nancial statements of the Group for the six months ended 30 June 2011. In addition, the condensed consolidated fi nancial statements of the Group for the six months ended 30 June 2011 have been reviewed by our auditor, Messrs. Deloitte Touche Tohmatsu, and an unqualifi ed review report was issued. The Audit Committee comprises the three independent non-executive directors of the Company.

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

Corporate Information

BOARD OF DIRECTORS

Executive Directors Ms YEUNG Man Ying (Chairman) Mr WONG Cho Tung Mr ZHANG Jianping Mr WONG Hei, Simon Ms TANG Rongrong Mr CHAN Tat Wing, Richard

Independent non-executive Directors Mr LIU Hing Hung Mr XIE Linzhen Mr DONG Yunting (Appointed on 1 June 2011) Mr Zhuang Xingfang (Resigned on 1 June 2011)

AUDIT COMMITTEE

Mr LIU Hing Hung (Chairman) Mr XIE Linzhen Mr DONG Yunting (Appointed on 1 June 2011) Mr Zhuang Xingfang (Resigned on 1 June 2011)

REMUNERATION COMMITTEE

Mr DONG Yunting (Chairman) (Appointed on 1 June 2011) Mr XIE Linzhen Mr WONG Cho Tung Mr Zhuang Xingfang (Resigned on 1 June 2011)

COMPANY SECRETARY

Ms WONG Tik

AUDITORS

Deloitte Touche Tohmatsu

LEGAL ADVISER AS TO HONG KONG LAW

REGISTERED OFFICE

Clarendon House 2 Church Street Hamilton HM11 Bermuda

HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS IN HONG KONG

Unit 2908, 29th Floor 248 Queen’s Road East Wanchai Hong Kong

PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE

Butterfi eld Fund Services (Bermuda) Limited Rosebank Centre 11 Bermudiana Road Pembroke Bermuda

HONG KONG BRANCH SHARE REGISTRAR AND TRANSFER OFFICE

Computershare Hong Kong Investor Services Limited Shops 1712-16, 17th Floor Hopewell Centre 183 Queen’s Road East, Wanchai Hong Kong

WEBSITE ADDRESS

http://www.sim.com

STOCK CODE

2000

LEUNG & LAU, Solicitors

PRINCIPAL BANKERS

Hang Seng Bank Limited Bank of Communications Shanghai Pudong Development Bank

INTERIM REPORT 2011

SIM TECHNOLOGY GROUP LIMITED

AI assistant

SIM Technology Group Limited — Interim / Quarterly Report 2011

50331_rns_2011-09-08_8409743a-c4dc-4a38-9642-482252fce32c.pdf