Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

SIM TECHNOLOGY GROUP LIMITED 晨訊科技集團有限公司 *

(Incorporated in Bermuda with limited liability)

(Stock code: 2000)

MAJOR TRANSACTION

Financial Adviser to the Company

THE SALE AND PURCHASE AGREEMENT

On 21 December 2017 (after trading hours), the Company, Simcom International, Shenzhen Sunsea and the Target Companies entered into the Sale and Purchase Agreement under which Simcom International has conditionally agreed to sell, and Shenzhen Sunsea has conditionally agreed to purchase, 100% of the equity interest of Simcom Wireless for RMB518 million (equivalent to approximately HK$611.2 million).

Under the Sale and Purchase Agreement, the Company has conditionally agreed to procure that the IP Assets (being certain patents owned by Shanghai Simcom and Shanghai Sunrise and three trademarks owned by Shanghai Simcom) shall be transferred to Simcom Wireless before Completion for RMB90 million (equivalent to approximately HK$106.2 million).

THE SUPPLY CONTRACT

Under the Supply Contract, Simcom Electronic and Shenzhen Sunsea are to appoint Shenyang SIM to procure parts and materials for the manufacture of wireless communication modules, and Shenyang SIM (or other members of the Group) to manufacture wireless communication modules for, and sell them to, Simcom Electronic for a term of three years from the effective date of the Supply Contract.

THE TENANCY AGREEMENT

Under the Tenancy Agreement, Shanghai SIM Technology (as landlord) and Simcom Electronic (as tenant) agree to the leasing of the properties comprising 6/F and a portion of 7/F, Building B, SIM Technology Building, No. 633 Jinzhong Road, Changning District, Shanghai, the PRC ( 中國上海市長寧區金鐘路633 號B 樓第六層整層及第七層部分 ) for office use for a term from 1 January 2018 to 31 December 2020.

LISTING RULE IMPLICATIONS

The Sale and Purchase Agreement

As certain percentage ratio(s) under the Listing Rules in respect of the transactions contemplated under the Sale and Purchase Agreement (including the IP Transfer) exceed 25% but are less than 75%, the entering into of the Sale and Purchase Agreement constitutes a major transaction for the Company under the Listing Rules. Therefore, the Sale and Purchase Agreement and the transactions contemplated under it (including the IP Transfer) are subject to the reporting, announcement and Shareholders’ approval requirements under Chapter 14 of the Listing Rules.

The Supply Contract and the Tenancy Agreement

The Supply Contract is of a revenue nature in the ordinary and usual course of business of the Group, and does not constitute a notifiable transaction under Chapter 14 of the Listing Rules.

The applicable percentage ratio(s) under the Listing Rules in respect of the Tenancy Agreement are less than 5% and the entering into of the Tenancy Agreement does not constitute a notifiable transaction under Chapter 14 of the Listing Rules. The Company discloses the Supply Contract and the Tenancy Agreement on a voluntary basis to enable the Shareholders to have a full picture on the transactions with Simcom Electronic after the disposal of Simcom Electronic by the Company.

SGM AND CIRCULAR

A circular containing, among other things, (1) details of the Sale and Purchase Agreement; (2) details of the Transaction; and (3) the notice of SGM, is expected to be despatched to the Shareholders in accordance with requirements under the Listing Rules. As the Company expects that it will require more time to collect and collate the information to be included in the circular, it is currently expected that the circular will be despatched to the Shareholders on or before 25 January 2018.

The Directors shall seek the approval of the Shareholders on the Sale and Purchase Agreement and the transactions contemplated under it (including the IP Transfer) at the SGM.

Shareholders and potential investors should note that the Completion is subject to the satisfaction of the conditions precedent set out in the Sale and Purchase Agreement. Therefore, the Completion may or may not proceed. Shareholders and potential investors are advised to exercise caution when dealing in the securities of the Company, and are recommended to consult their professional advisers if they are in any doubt about their position and as to actions that they should take.

1 THE SALE AND PURCHASE AGREEMENT

1.1 Principal terms of the Sale and Purchase Agreement

The principal terms of the Sale and Purchase Agreement are set out below:

Date:

21 December 2017

Parties:

(1) the Company
(2) Simcom International (as seller)
(3) Shenzhen Sunsea (as buyer)
(4) the Target Companies

Assets to be disposed of and consideration:

Simcom International has conditionally agreed to sell, and Shenzhen Sunsea has conditionally agreed to purchase, 100% of the equity interest of Simcom Wireless. Shenzhen Sunsea may designate its wholly-owned entity/entities as agreed by the Company and Simcom International in writing to be the ultimate buyer of the Target Companies. Before Completion, all the equity interest in Simcom Electronic will be transferred by Simcom International to Simcom Wireless so that Shenzhen Sunsea can acquire the Target Companies through the acquisition and holding of the direct interest in a single entity, being Simcom Wireless.

The total Consideration is RMB608 million (equivalent to approximately HK$717.4 million) which comprises (1) the Share Consideration; and (2) the Intellectual Property Consideration. The Intellectual Property Consideration has already been paid in November 2017 to Shanghai Simcom and Shanghai Sunrise by Simcom Wireless.

The Share Consideration is RMB518 million (equivalent to approximately HK$611.2 million) which was determined after an arm’s length negotiation with reference to, among other things, (1) the net asset value of the Target Companies as at 30 June 2017; (2) the purchase price of the Wireless Communication Modules Business to be disposed of under the technology assignment contract and the asset purchase agreement as referred to in the Company’s circular dated 28 February 2017; and (3) the current operations and business prospects of the Wireless Communication Modules Business.

The parties agree that (1) the Deposit shall be payable within ten days after the signing date of the Sale and Purchase Agreement to a bank account designated by Simcom International, which will be transferred to a bank account held by Shenzhen Sunsea and under the joint control of Simcom International, the Company and Shenzhen Sunsea before the payment of the second instalment in (2) below is made; (2) 80% of the Share Consideration (which includes the Deposit) shall be payable within 10 days after the Completion Date from the bank account held by Shenzhen Sunsea and under the joint control of Simcom International, the Company and Shenzhen Sunsea; and (3) 20% of the Share Consideration shall be payable within 270 days after the Completion Date.

The Intellectual Property Consideration is RMB90 million (equivalent to approximately HK$106.2 million) which was determined after an arm’s length negotiation with reference to the valuation of the IP Assets prepared by the Company’s valuer as at 30 November 2017.

Effective date and conditions:

The effectiveness of the Sale and Purchase Agreement is subject to the satisfaction of the following conditions:

(1) the obtaining of all the internal approvals of the Transaction by Shenzhen Sunsea (including approvals by its board of directors and shareholders);
(2) the obtaining of all the internal approvals of the Transaction by Simcom International (including approvals by its board of directors and shareholders);
(3) the obtaining of all the internal approvals of the Transaction by the Company (including approvals by its board of directors and shareholders);
(4) the obtaining of the approvals of the Transaction by the shareholders of the Target Companies;
(5) the obtaining of the approvals of the Transaction by, or the making of the necessary filings with, the relevant PRC authorities; and
(6) the obtaining of the approval of the Transaction by the Stock Exchange.

If any of the conditions precedent to the effectiveness of the Sale and Purchase Agreement on the part of the Company and Simcom International are not satisfied within 90 days from the signing date of the Sale and Purchase Agreement, Shenzhen Sunsea has the right to terminate the Sale and Purchase Agreement and the Deposit shall be refunded to Shenzhen Sunsea without interest. If any of the conditions precedent to the effectiveness of the Sale and Purchase Agreement on the part of Shenzhen Sunsea are not satisfied within 90 days from the signing date of the Sale and Purchase Agreement, the Company and Simcom International have the right to either (a) require Shenzhen Sunsea to remedy and fulfil the relevant condition(s) precedent or (b) terminate the Sale and Purchase Agreement and the Deposit shall be forfeited.

Completion:

Completion shall take place on a day to be agreed by the parties which is within 30 days after the provision of sufficient information by Shenzhen Sunsea and the satisfaction of the following conditions:

(1) the satisfaction of the conditions for the Sale and Purchase Agreement becoming effective as mentioned above;
(2) the Sale and Purchase Agreement not having been terminated under its terms;
(3) Simcom Electronic having been transferred to Simcom Wireless and the registration of the transfer with the relevant PRC Administration for Industry and Commerce having been completed;
(4) the execution of the agreement for the transfer of the IP Assets and the completion of the transfer or, if the transfer has yet to be completed, the acknowledgement of the acceptance of the transfer applications by the relevant PRC governmental authorities and, under such circumstances, a licence shall be granted to the Target Companies for use of such patents pending completion of the transfer, and the Intellectual Property Consideration has been paid by Simcom Wireless;
(5) the execution of the Supply Contract and the Supply Contract becoming effective; and
(6) the acquisition of the assets and assumption of liabilities of the Target Companies (excluding the assets and liabilities relating to the Wireless Communication Modules Business) by the Company or its designated third party at their book value as at 30 June 2017 which have been confirmed by the Company, Simcom International and Shenzhen Sunsea in writing.

Non-competition:

Each of the Company and Simcom International undertakes that, for a period of five years after the Completion Date, except being appointed by the Target Companies, it shall not, and shall procure that its affiliates shall not, engage in any form and manner in the sale business of the 2G, 3G, 4G wireless communication modules and GNSS modules, nor invest directly or indirectly in any entity which engages in the sale business of such modules, nor solicit the employment of the key employees of the Target Companies.

Other terms:

Under the Sale and Purchase Agreement, the Group is responsible for the loss (if any) of the parts and materials relating to wireless communication modules held by the Group (including the Target Companies) on or before the date of the Sale and Purchase Agreement and those parts and materials ordered on or before the date of the Sale and Purchase Agreement but yet to be delivered on the date of the Sale and Purchase Agreement. This means that the Group is responsible for any parts and materials and backlog (if they have not been used or sold or they become obsolete inventories) on or before the date of the Sale and Purchase Agreement.

In addition, under the Sale and Purchase Agreement, if the parts and materials relating to wireless communication modules, and the related semi-finished products have not been used or sold on the Completion Date, the Group (or its designated third parties) shall purchase from Simcom Electronic such unutilised parts and materials, and semi-finished products at their book value. The aggregate amount for the purchase of such unutilised parts and materials, and semifinished products is expected to be not more than RMB40 million (equivalent to approximately HK$47.2 million).

The amount of the cap of RMB40 million was determined by reference to the inventories level and the amount of the parts and materials yet to be delivered as at the end of November 2017 and the estimated consumption level from December 2017 to January 2018 if the Completion is to take place by the end of February 2018. The estimated consumption level was determined based on the consumption level from October to November 2017. Having considered the above basis, the Directors are of the view that the actual amount of the unutilised parts and materials, and semi-finished products is expected to be less than the cap of RMB40 million.

1.2 Effect of the Transaction

After Completion, the Target Companies will cease to be subsidiaries of the Company, and their financial results, assets and liabilities will no longer be included in the consolidated financial statements of the Group.

It is estimated that the Group will record an unaudited net gain before taxation of approximately RMB418.2 million (equivalent to approximately HK$493.5 million) from the transactions contemplated under the Sale and Purchase Agreement (including the IP Transfer), which is calculated with reference to the gross proceeds from the Consideration to be payable to the Group less the unaudited net asset value of the Target Companies as at 30 June 2017 together with the costs related to the transactions contemplated under the Sale and Purchase Agreement (including the IP Transfer). However, the Group may incur other costs in connection with the transactions contemplated under the Sale and Purchase Agreement (including the IP Transfer) which have not been included in the calculation of the unaudited net gain before taxation, including but not limited to loss from unused parts and materials, and semi-finished products as a result of the Transaction, staff related cost and net profit of the Target Companies after 30 June 2017 to Completion Date which belongs to Shenzhen Sunsea. The actual gain or loss as a result of the transactions contemplated under the Sale and Purchase Agreement (including the IP Transfer) to be recorded by the Group is subject to the final audit to be performed by its auditors.

The table below shows the effect of the Transaction and the IP Transfer on the earnings and assets and liabilities of the Group which was determined based on the audited financial statements of the Group for the year ended 31 December 2016 and the unaudited financial statements of the Group as at 30 June 2017, respectively, and prepared in accordance with International Financial Reporting Standards (without taking into account the estimated net gain before taxation from the transactions contemplated under the Sale and Purchase Agreement as disclosed above):

	For the year	ended 31 December 2016	ended 31 December 2016
	Before the	After the	Increases/
	Completion	Completion	(Decreases)
	HK$’000	HK$’000	HK$’000
	(Audited)	(Unaudited)	(Unaudited)
Profit before taxation	96,500	44,551	(51,949)
	As	at 30 June 2017
	Before the	After the	Increases/
	Completion	Completion	(Decreases)
	HK$’000	HK$’000	HK$’000
	(Unaudited)	(Unaudited)	(Unaudited)
Net asset value	2,154,638	2,683,505	528,867

1.3 Use of proceeds

Based on the total Consideration, the Company intends to apply the net proceeds of approximately RMB551.9 million (equivalent to approximately HK$651.2 million) for the following purposes:

(1) approximately 30.94% of the net proceeds (approximately HK$201.5 million) for the purchase of the land for the Group’s operations centre in Dongguan, the PRC and the construction of the operations centre, which is expected to (a) house the research and development team, production facilities, logistics facilities, warehouses and sales force of the Group, and (b) enable the Group to excel its growth by utilizing the strengths of lower costs and locations of supplies chains in Dongguan, the PRC;
(2) approximately 17.68% of the net proceeds (approximately HK$115.1 million) for (a) upgrading the production facilities of the Group in Shanghai and the above operations centre and development of an automated intelligent 3D-warehouse; (b) further implementation of the digitization, networking and intelligent processes by Industry 4.0; and (c) enhancing the competiveness of the high-end handsets ODM (original design manufacturing) and EMS (electronic manufacturing services) businesses; and
(3) approximately 51.38% of the net proceeds (approximately HK$334.6 million) for the payment of a special interim dividend (subject to Completion) and for general working capital. It is expected that approximately 35% of the actual net gain from the transactions contemplated under the Sale and Purchase Agreement will be used for the payment of a special interim dividend and the balance will be used for general working capital. Further details of the amount of the special interim dividend and the record date of the entitlements will be announced by the Company after Completion.

2 INFORMATION ON THE PARTIES

2.1 The Group

The Group is principally engaged in the PRC in (1) the ODM (original design manufacturer) of handsets and intelligent terminals; (2) the design and development, manufacturing and sale of the Group’s SIMCom-branded wireless communication modules; (3) intelligent manufacturing business; (4) internet of things business; and (5) property development in a small scale.

2.2 Shenzhen Sunsea

Shenzhen Sunsea is a company incorporated in the PRC whose shares are listed on the Shenzhen Stock Exchange. It is a national high-tech enterprise specialized in information and communications technology (ICT) and a leading domestic service provider on internet of things (IoT) terminals, Cloud Platform and multi-industry solutions. It provides IoT end-to-end products and operational support service. It is also a leading domestic communication network access provider and communication engineering service provider.

To the best knowledge, information and belief of the Directors, and having made all reasonable enquiries, Shenzhen Sunsea and its ultimate beneficial owners are Independent Third Parties and are not connected persons of the Company.

3 INFORMATION ON THE TARGET COMPANIES

Set out below is the unaudited financial statements of Simcom Wireless prepared in accordance with International Financial Reporting Standards for each of the two financial years ended 31 December 2015 and 2016:

	For the year ended	For the year ended
	31 December
	2016	2015
	*(HK$’000)*	(HK$’000)
	(Unaudited)	(Unaudited)
Net profit before tax	23,036	36,123
Net profit after tax	23,036	36,123
	As at 31 December
	2016	2015
	*(HK$’000)*	(HK$’000)
	(Unaudited)	(Unaudited)
Net asset value	146,698	130,726
Set out below is the unaudited financial statements of Simcom Electronic prepared		in accordance
with International Financial Reporting Standards for each of the two financial years ended 31
December 2015 and 2016:
	For the year ended
	31 December
	2016	2015
	*(HK$’000)*	(HK$’000)
	(Unaudited)	(Unaudited)
Net loss before tax	1,019	2,565
Net loss after tax	1,019	2,565
	For at 31 December
	2016	2015
	*(HK$’000)*	(HK$’000)
	(Unaudited)	(Unaudited)
Net asset value	1,357	2,461

As at 30 June 2017, the aggregate unaudited net asset value of the Target Companies amounted to approximately HK$154.6 million.

The segmental results of the Wireless Communication Modules Business for the two years ended 31 December 2016 as extracted from the annual report of the Group for the year ended 31 December 2016 are as follows:

	For the	For the
	year ended	year ended
	31 December	31 December
	2016	2015
	HK$’000	HK$’000
Segment revenue	815,016	638,847
Segment profit	63,974	58,567

As at 30 June 2017, although the aggregate unaudited net book value of the IP Assets amounted to nil, the expenses incurred in connection with the research and development of the IP Assets of approximately RMB21.5 million (equivalent to approximately HK$25.4 million) have been capitalised on the financial statements of the Group.

The value of the IP Assets as assessed by the valuer appointed by the Company as at 30 November 2017 was approximately RMB88.7 million (equivalent to approximately HK$104.7 million).

Simcom Wireless is an indirect wholly-owned subsidiary of the Company and its principal business is the design and research and development of wireless communication modules.

Simcom Electronic is an indirect wholly-owned subsidiary of the Company and its principal business is the procurement, warehousing, logistics and sale of wireless communication modules and related parts.

4 REASONS FOR AND BENEFITS OF THE TRANSACTIONS

The current business segments of the Group include (i) sale of handsets, solutions and intelligent terminals; (ii) sale of Wireless Communication Modules; (iii) IoT (internet of things) business; (iv) intelligent manufacturing business; and (v) property development. The Transaction relates to the business segment of sale of Wireless Communication Modules. In the past five years, following the change in trends, the Group has been committed to shift from the manufacturing industry to the information technology services industry and transform itself from a product-oriented manufacturer to a service-oriented service provider. The Directors are of the view that the Transaction will accelerate the change of the Group from an OBM to an EMS provider with regard to standalone wireless communication modules enabling the Group to continue to utilize its existing production capacity and to avoid its production capacity from being idled, and that the IoT (internet of things) business of the Group is unaffected by the Transaction. The Supply Contract will bring revenue and profit to the Group. The provision of EMS under the Supply Contract provides an additional stream

of income to the Group, which is beneficial to the Shareholders. Through the provision of EMS, the Group will be able to maintain purchase volume with its suppliers under a number of purchase contracts with suppliers for parts and materials of wireless communication modules and, therefore, strengthen its bargaining power when the Group negotiates purchase of parts and materials for the Group’s other business.

Since the Wireless Communication Modules Business involves research and development, procurement, production, and sales and marketing of the Group’s own-branded products and related parts and materials, the Group intends to continue to focus on its strengths in research and development, procurement and production. As an OBM with regard to standalone wireless communication modules, the Group has to keep inventories for parts and materials according to sales forecast. The Group is, therefore, exposed to significant inventories risks. The Directors consider that it is beneficial to the Shareholders to reduce the inventories risks. The Group’s focus on the further research and development on its embedded wireless communication modules and industrial terminals applications will enable the Group to achieve its goal to provide services which will offer a higher profit margin. The Directors consider that it is not necessary to develop the Group’s standalone wireless communication modules in order to enable standalone wireless communication modules to be tapped into the IoT and industrial terminal market as well.

Having considered the reasons for and benefits of the Transaction as mentioned above, the Board is of the view that the terms of the Sale and Purchase Agreement (including the Consideration and the Amount for the Loss of the Goods) and the transactions contemplated under it (including the IP Transfer) are on normal commercial terms and are fair and reasonable and in the interests of the Company and its Shareholders as a whole.

5 THE SUPPLY CONTRACT AND THE TENANCY AGREEMENT

On 21 December 2017 (after trading hours), Shenyang SIM entered into the Supply Contract with Simcon Electronic and Shenzhen Sunsea, and Shanghai SIM Technology entered into the Tenancy Agreement with Simcom Electronic.

5.1 Supply Contract

5.1.1 Principal terms

The principal terms of the Supply Contract are set out below:

Parties : Shenyang SIM (as supplier) Simcom Electronic (as customer) Shenzhen Sunsea
Subject matter : Simcom Electronic and Shenzhen Sunsea are to appoint Shenyang SIM to procure parts and materials for the manufacture of wireless communication modules, and Shenyang SIM (or other members of the Group) to manufacture wireless communication modules for, and sell them to, Simcom Electronic at the selling prices.
Term : three years from the effective date of the Supply Contract
Price : The selling prices (DAP delivery at place) of wireless communication modules are based on the following formula:

Selling prices = ((costs of parts and materials x 1.003) + production costs) x 1.05 + royalty

Where:

(1) Costs of parts and materials are based on the market prices using openBoM (a bill of materials (BoM) setting out the models of all the parts and materials required and their prices);
(2) 1.003 represents that parts and materials during the manufacturing process are damaged at the rate of 0.3%;
(3) Production costs include the depreciation of machines, equipment and manufacturing facilities, labour costs, utilities costs, and auxiliary material costs but exclude molds, clamps, non-standard instruments and equipment, packaging costs, transportation fees, after-sale service costs, and custom taxes;

(4) 1.05 represents electronic manufacturing services (EMS) at the gross profit margin of 5% which includes net profit from EMS, operation management costs, domestic warehouse and logistics costs, costs of capital, and after-sale service costs but excludes custom inspection and taxes and overseas transportation and insurance premium;
(5) Royalty: the fee is to be paid by Simcom Electronic to Shenyang SIM (or other member of the Group) first which will then pay to the owner(s) of the royalty or Simcom Electronic is to pay such fee directly to the owner(s) of the royalty.

Placing ordering : Not less than 45 days Minimum amount per : 5,000 units or not less than RMB0.5 million order or per type of product Payment term : Delivery upon payment or subject to the terms of the relevant order

5.1.2 Parts and materials under the Supply Contract

Under the Supply Contract, where Shenzhen Sunsea has confirmed the procurement plan, if the parts and materials relating to wireless communication modules ordered by the Group (other than the Target Companies) during the period between the day after the date of the Sale and Purchase Agreement and Completion Date (inclusive of the Completion Date) remain unconsumed within 12 months after the date of the Supply Contract, Simcom Electronic and Shenzhen Sunsea shall be responsible for the loss of such unutilised parts and materials which is determined by reference to the original costs.

In addition, under the Supply Contract, Simcom Electronic and Shenzhen Sunsea shall be responsible for the loss (if any) of any parts and materials relating to wireless communication modules of the Group which are ordered for Simcom Electronic after Completion and remain unutilized, and shall settle the loss within six months which is determined by reference to the original costs.

5.1.3 Reasons for the Supply Contract

The Board considers that (a) the Supply Contract will enable the Group to continue to utilize its existing production capacity and avoid its production capacity from being idled; (b) the provision of EMS (electronic manufacturing services) will bring revenue and profit to the Group; (c) through the provision of EMS, the Group will be able to maintain purchase volume with its suppliers under a number of purchase contracts with suppliers for parts and materials of wireless communication modules and, therefore, strengthen its bargaining power when the Group negotiates purchases of parts and materials for the Group’s other businesses.

5.2 Tenancy Agreement

5.2.1 Principal terms

The principal terms of the Tenancy Agreement are set out below:

Parties	:	Shanghai SIM Technology (as landlord)
		Simcom Electronic (as tenant)
Properties being leased	:	6/F and a portion of 7/F, Building B, SIM Technology
		Building, No. 633 Jinzhong Road, Changning District,
		Shanghai, the PRC (中國上海市長寧區金鐘路633號B樓
		第六層整層及第七層部分)
Area and use	:	2,770.65 sq.m. in total for office use
Tenancy term	:	Effective from 1 January 2018 to 31 December 2020
Rental	:	RMB4.3 per sq.m. per day and the annual rental is
		calculated based on 365 days a year
		Annual rental (exclusive of management fee and other
		utilities charges) is about RMB4,348,535.18 (equivalent
		to approximately HK$5,131,271.5)
Rental deposit	:	RMB1,087,133.79, being three months’ rental
Management fee deposit	:	RMB207,798.75, being three months’ management
		fee which is calculated based on RMB25 per sq.m. per
		month

Termination : If the tenant is to early terminate the Tenancy Agreement, it has to pay a sum representing three times the amount of the monthly rental. If the landlord is to early terminate the Tenancy Agreement, it has to pay a sum representing the rental deposit. Rent free period : Nil Other terms : Not more than 33 car park units will be available to the employees of the Target Companies. The monthly rental per car park unit is RMB400 which is the same as the amount of rental of car park units for other users in the same building.

5.2.2 Reasons for the Tenancy Agreement

The Board considers that the leasing of the Properties under the Tenancy Agreement will provide rental income which is comparable to rental income receivable had the Properties be leased to other third parties and that the Group has to find a replacement tenant if the Group does not continue to lease the Properties to Simcom Electronic.

6 IMPLICATIONS UNDER THE LISTING RULES

The Supply Contract is of a revenue nature in the ordinary and usual course of business of the Company, and does not constitute a notifiable transaction under Chapter 14 of the Listing Rules.

The Board considers that the terms of the Supply Contract are on normal commercial terms and are fair and reasonable, and in the interests of the Company and its Shareholders as a whole.

The Directors consider that the terms of the Tenancy Agreement are on normal commercial terms and are fair and reasonable, and in the interest of the Company and its Shareholders as a whole.

7 THE SGM AND DESPATCH OF THE CIRCULAR

The Directors shall seek the approval of the Shareholders on the Sale and Purchase Agreement and the transactions contemplated under it (including the IP Transfer) at the SGM.

8 PREVIOUS PROPOSED DISPOSALS OF THE TARGET COMPANIES

Apart from the Consideration and the payment schedule, the present proposed transactions are substantially on similar terms with the respective previous potential buyers, namely, (i) u-blox AG and (ii) Queclink Wireless and Richjoy. The present proposed transactions are not related to any of u-blox AG, Queclink Wireless and Richjoy. To the best knowledge of the Directors, Queclink Wireless, Richjoy and Shenzhen Sunsea do not have any business relationship with each other.

9 DEFINITIONS

In this announcement, unless the context otherwise requires, the following terms shall have the following meanings:

“Amount for the Loss of the estimated maximum amount for the loss of the parts and the Goods” materials relating to wireless communication modules, and the related semi-finished products which have not been used or sold before Completion as referred to in paragraph headed “Other terms” in paragraph 1.1 of this announcement

“associate(s)” has the meaning ascribed to it under the Listing Rules
“Board” the board of Directors

“BVI”	the British Virgin Islands
“Company”	SIM Technology Group Limited (晨訊科技集團有限公司*), a
	company incorporated in Bermuda with limited liability, the Shares
	of which are listed on the Main Board of the Stock Exchange
“Completion”	completion of the sale and purchase of the Target Companies under
	the Sale and Purchase Agreement
“Completion Date”	the date of approval and registration of the transfer of the Target
	Companies as contemplated under the Sale and Purchase Agreement
	by the PRC Administration for Industry and Commerce
“connected persons”	has the meaning ascribed to it under the Listing Rules
“Consideration”	the Share Consideration and the Intellectual Property Consideration
“Deposit”	the deposit of 10% of the Share Consideration
“Directors”	the directors of the Company
“EMS”	electronic manufacturing services
“Financial Adviser”	CIMB Securities Limited, a corporation licensed to conduct type
	1 (dealing in securities), type 4 (advising on securities), and type
	6 (advising on corporate finance) regulated activities under the
	Securities and Futures Ordinance (Chapter 571 of the Laws of Hong
	Kong)
“Group”	the Company and its subsidiaries from time to time
“HK$”	Hong Kong dollar(s), the lawful currency of Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Independent Third Party/	a person or persons who is or are independent of, and not connected
Parties”	with, any directors, chief executive or substantial shareholders
	(within the meaning under the Listing Rules) of the Company or any
	of its subsidiaries or any of their respective associate(s) (within the
	meaning under the Listing Rules)
“Intellectual Property	the consideration for the transfer of the patents and three trademarks
Consideration”	under the Sale and Purchase Agreement

“IP Assets”	the patents and three trademarks to be transferred under the Sale and
	Purchase Agreement
“IP Transfer”	the transfer of the IP Assets as contemplated under the Sale and
	Purchase Agreement
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock Exchange
“OBM”	original brand manufacturers
“percentage ratio”	has the meaning ascribed to it under the Listing Rules
“PRC”	the People’s Republic of China
“Properties”	6/F and a portion of 7/F, Building B, SIM Technology Building, No.
	633 Jinzhong Road, Changning District, Shanghai, the PRC (中國上
	海市長寧區金鐘路633 號B 樓第六層整層及第七層部分)
“Queclink Wireless”	上海移為通信技術股份有限公司(Queclink Wireless Solutions Co.,
	Ltd.*), a company incorporated in the PRC with limited liability, the
	shares of which are listed on the Shenzhen Stock Exchange (stock
	code: 300590.SZ)
“Richjoy”	Richjoy Talent Limited (日領有限公司), a company incorporated in
	the Hong Kong and is wholly-owned by Mr Wong Hei, Simon, one
	of the sons of Mr Wong Cho Tung, an executive Director, and Ms
	Yeung Man Ying, an executive Director
“RMB”	Renminbi, the lawful currency of the PRC
“Sale and Purchase	the sale and purchase agreement dated 21 December 2017 entered
Agreement”	into between the Company, Simcom International, Shenzhen Sunsea
	and the Target Companies in respect of the Transaction and the IP
	Transfer
“SGM”	the special general meeting of the Company to be convened and
	held to consider, and, if thought fit, approve, the Sale and Purchase
	Agreement and the transactions contemplated under it (including the
	IP Transfer)
“Shanghai Simcom”	Shanghai Simcom Limited (希姆通信息技術（上海）有限公司),
	a company incorporated in the PRC and an indirect wholly-owned
	subsidiary of the Company

“Shanghai SIM	Shanghai SIM Technology Limited (晨訊科技（上海）有限公司),
Technology”	a company incorporated in the PRC and an indirect wholly-owned
	subsidiary of the Company
“Shanghai Sunrise”	Shanghai Sunrise Simcom Limited (上海晨興希姆通電子科技有限
	公司), a company incorporated in the PRC and an indirect wholly-
	owned subsidiary of the Company
“Share Consideration”	the consideration for the sale and purchase of the Target Companies
	under the Sale and Purchase Agreement
“Share(s)”	ordinary share(s) of HK$0.10 each in the share capital of the
	Company
“Shareholder(s)”	the holder(s) of the Share(s)
“Shenyang SIM”	Shenyang SIM Simcom Technology Limited (瀋陽晨訊希姆通科
	技有限公司), a company incorporated in the PRC and an indirect
	wholly-owned subsidiary of the Company
“Shenzhen Sunsea”	深圳日海通訊技術股份有限公司(Shenzhen Sunsea Communication
	Technology Co., Ltd.*), a company incorporated in the PRC with
	limited liability, the shares of which are listed on the Shenzhen
	Stock Exchange (stock code: 002313.SZ)
“Simcom Electronic”	Shanghai Simcom Electronic Limited (上海芯通電子有限公司),
	a company incorporated in the PRC and an indirect wholly-owned
	subsidiary of the Company
“Simcom International”	Simcom International Holdings Limited, a company incorporated in
	the BVI and an indirect wholly-owned subsidiary of the Company
“Simcom Wireless”	Shanghai Simcom Wireless Solutions Limited (芯訊通無線科技（上
	海）有限公司), a company incorporated in the PRC and an indirect
	wholly-owned subsidiary of the Company
“sq.m.”	square metres
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“subsidiary” or	has the meaning ascribed to in under the Listing Rules
“subsidiaries”

“Supply Contract” the supply contract dated 21 December 2017 entered into between Shenyang SIM, Simcom Electronic and Shenzhen Sunsea in respect of the procurement of parts and materials and the production of wireless communication modules
“Target Companies” Simcom Electronic and Simcom Wireless
“Tenancy Agreement” the tenancy agreement dated 21 December 2017 entered into between Shanghai SIM Technology and Simcom Electronic in respect of the leasing of the Properties
“Transaction” the sale and purchase of the Target Companies under the Sale and Purchase Agreement
“u-blox AG” u-blox AG, a company incorporated and existing in Switzerland, an Independent Third Party
“Wireless Communication the wireless communication modules business operated by the Modules Business” Group, comprising the 2G, 3G, 4G wireless communication modules and GNSS module business
“%” per cent

For the purpose of this announcement, the exchange rate of RMB1.00 to HK$1.18 has been used, where applicable, for illustrative purposes only and does not constitute a representation that any amount has been, could have been or may be exchanged at such rate or any other rate or at all on the date or dates in question or any other date.

By Order of the Board SIM Technology Group Limited Wong Cho Tung Director

21 December 2017

As of the date of this announcement, the executive Directors are Ms Yeung Man Ying, Mr Wong Cho Tung, Ms Tang Rongrong, Mr Chan Tat Wing, Richard, Mr Liu Hong and Mr Liu Jun, and the independent non-executive Directors of the Company are Mr Liu Hing Hung, Mr Wang Tianmiao and Mr Wu Zhe.

For identification purposes only

AI assistant

SIM Technology Group Limited M&A Activity 2017

50331_rns_2017-12-21_0499d342-357d-4c9d-b2e6-650cf2b3c44e.pdf

SIM TECHNOLOGY GROUP LIMITED 晨訊科技集團有限公司 *

MAJOR TRANSACTION

Financial Adviser to the Company

THE SALE AND PURCHASE AGREEMENT

THE SUPPLY CONTRACT

THE TENANCY AGREEMENT

LISTING RULE IMPLICATIONS

The Sale and Purchase Agreement

The Supply Contract and the Tenancy Agreement

SGM AND CIRCULAR

1.1 Principal terms of the Sale and Purchase Agreement

Date:

Parties:

Assets to be disposed of and consideration:

Effective date and conditions:

Completion:

Non-competition:

Other terms:

1.2 Effect of the Transaction

1.3 Use of proceeds

2 INFORMATION ON THE PARTIES

2.1 The Group

2.2 Shenzhen Sunsea

3 INFORMATION ON THE TARGET COMPANIES

4 REASONS FOR AND BENEFITS OF THE TRANSACTIONS

5 THE SUPPLY CONTRACT AND THE TENANCY AGREEMENT

5.1.1 Principal terms

Where:

5.1.2 Parts and materials under the Supply Contract

5.2 Tenancy Agreement

5.2.1 Principal terms

5.2.2 Reasons for the Tenancy Agreement

6 IMPLICATIONS UNDER THE LISTING RULES

7 THE SGM AND DESPATCH OF THE CIRCULAR

8 PREVIOUS PROPOSED DISPOSALS OF THE TARGET COMPANIES

9 DEFINITIONS

21 December 2017

AI assistant

SIM Technology Group Limited — M&A Activity 2017

50331_rns_2017-12-21_0499d342-357d-4c9d-b2e6-650cf2b3c44e.pdf

SIM TECHNOLOGY GROUP LIMITED 晨訊科技集團有限公司 *

MAJOR TRANSACTION

Financial Adviser to the Company

THE SALE AND PURCHASE AGREEMENT

THE SUPPLY CONTRACT

THE TENANCY AGREEMENT

LISTING RULE IMPLICATIONS

The Sale and Purchase Agreement

The Supply Contract and the Tenancy Agreement

SGM AND CIRCULAR

1.1 Principal terms of the Sale and Purchase Agreement

Date:

Parties:

Assets to be disposed of and consideration:

Effective date and conditions:

Completion:

Non-competition:

Other terms:

1.2 Effect of the Transaction

1.3 Use of proceeds

2 INFORMATION ON THE PARTIES

2.1 The Group

2.2 Shenzhen Sunsea

3 INFORMATION ON THE TARGET COMPANIES

4 REASONS FOR AND BENEFITS OF THE TRANSACTIONS

5 THE SUPPLY CONTRACT AND THE TENANCY AGREEMENT

5.1.1 Principal terms

Where:

5.1.2 Parts and materials under the Supply Contract

5.2 Tenancy Agreement

5.2.1 Principal terms

5.2.2 Reasons for the Tenancy Agreement

6 IMPLICATIONS UNDER THE LISTING RULES

7 THE SGM AND DESPATCH OF THE CIRCULAR

8 PREVIOUS PROPOSED DISPOSALS OF THE TARGET COMPANIES

9 DEFINITIONS

21 December 2017

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SIM Technology Group Limited M&A Activity 2017