Skyworth Group Limited — Capital/Financing Update 2021

Aug 23, 2021

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This announcement appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities in Hong Kong, the PRC or elsewhere.

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SKYWORTH GROUP LIMITED 創 維 集 團 有 限 公 司

(Incorporated in Bermuda with limited liability) (Stock Code: 00751)

VOLUNTARY ANNOUNCEMENT UPDATE ON THE PROGRESS OF THE PROPOSED SPIN-OFF AND SEPARATE LISTING OF SKYWORTH ELECTRIC CO., LTD.

Reference is made to the announcement of Skyworth Group Limited (the “ Company ”, together with its subsidiaries, the “ Group ”) dated 16 July 2021 (the “ Announcement ”) in relation to the proposed spin-off and listing of the business of Skyworth Electric Co., Ltd. (創維電器股份有限公司), an indirect non-wholly owned subsidiary of the Company (“ Skyworth Electric ”) on the ChiNext Board of the People’s Republic of China Shenzhen Stock Exchange (“ SZSE* ”). Unless otherwise defined, capitalised terms used in this announcement shall have the same meanings as used in the Announcement.

PROPOSED SPIN-OFF

The board (the “ Board ”) of directors (the “ Directors ”) of the Company is pleased to announce that Skyworth Electric has made a submission to the Jiangsu Regulatory Bureau of the China Securities Regulatory Commission (the “ CSRC ”) for the pre-listing tutoring in accordance with the laws of the People’s Republic of China (“ PRC ”) and based on information published at the website of CSRC for Jiangsu on 23 August 2021, the application has been accepted by the Jiangsu Regulatory Bureau of the CSRC on 26 July 2021.

The Company further announces that, for the three years ended 31 December 2020, Skyworth Electric and its subsidiaries (collectively, the “ Spin-off Group ”) received (a) government grants in the total amount of approximately RMB8 million, RMB10 million and RMB40 million, respectively; and (b) value-added tax and other tax refunds in the total amount of approximately RMB27 million, RMB26 million and RMB33 million, respectively. The Company confirms that such government grants and value-added tax and other tax refunds were received by the Spin-off Group directly. The auditor of the Spin-off Group, BDO China SHU LUN PAN Certified Public Accountants LLP has reviewed the aforementioned financial information and the methodology of recognition.

The Proposed Spin-off, if materialised, may constitute a notifiable transaction of the Company under Chapter 14 of the Listing Rules. The Company will make further announcement on the Proposed Spin-off in due course in accordance with the relevant requirements of the Listing Rules.

*For identification purpose only

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WAIVER FROM STRICT COMPLIANCE WITH PARAGRAPH 3(F) OF PRACTICE NOTE 15 OF THE LISTING RULES

Practice Note 15 of the Listing Rules requires the Company to have due regard to the interests of its existing shareholders by providing them with an assured entitlement to the shares of Skyworth Electric when contemplating the Proposed Spin-off.

As advised by the PRC legal counsel of the Company, under the relevant securities laws and other relevant regulations and rules of the PRC currently in force, other than (a) residents of Hong Kong and Macao Special Administrative Region and Taiwan working and living in the Mainland China; (b) foreigners working in the Mainland China and whose home country’s securities regulatory authorities have established regulatory cooperation mechanisms with China Securities Regulatory Commission; (c) foreigners who have obtained permanent residency in China; (d) eligible foreign investors who have made strategic investments in listed companies in the PRC; (e) qualified foreign institutional investors under《合格境外機構投資者境內證券投資管理辦法》(QFII); (f) RMB qualified foreign institutional investors under《人民幣合格境外機構投資者境內證券投資 試點辦法》(RQFII); (g) foreign natural investors who meet the requirements relevant to the incentive criteria under the《上市公司股權激勵管理辦法》(Administrative Measures for the Incentive Measures of Listed Companies) (only applicable to listed companies to implement the equity incentive for foreign natural employees); and (h) foreign investors holding shares of the company to be listed before the initial public offering, ((a) to (h) are collectively referred to as the “ Qualified Foreign Investors ”), non-PRC investors such as natural persons of Hong Kong and Macao Special Administrative region and Taiwan, foreign institutions and the institutions founded in Hong Kong and Macao Special Administrative Region and Taiwan are not allowed to open A shares securities accounts and hence they are not allowed to participate in offline distribution or online subscription of new shares in Skyworth Electronic in the PRC.

Based on the register of members maintained by the branch share registrar of the Company in Hong Kong, most of the registered shareholders of the Company are individuals with addresses in Hong Kong, and on that basis, the Board believes that most of these shareholders are not Qualified Foreign Investors. The Board considers it impracticable and unduly burdensome to provide its shareholders with assured entitlement under the Proposed Spin-off in light of the legal restrictions for foreign investors to subscribe for or participate in the offering of A shares.

Given the above PRC legal impediments, it is not feasible for the Company to comply with Paragraph 3(f) of Practice Note 15 of the Listing Rules in connection with the Proposed Spin-off. Accordingly, the Company has applied for, and the Stock Exchange has granted, a waiver from strict compliance with the requirement of Paragraph 3(f) of Practice Note 15 of the Listing Rules. After taking the above reasons into account, the Board is of the view that the Proposed Spin-off and the non-provision of an assured entitlement in relation to the Proposed Spin-off are fair and reasonable, and in the interest of the Company and its shareholders as a whole.

Skyworth Electronic will remain as a subsidiary of the Company after the Proposed Spin-off. The Board views that the Proposed Spin-off is expected to create greater value for the Company and its shareholders as a whole and Skyworth Electronic for the following reasons:

• (a) the Directors believe that the Proposed Listing will unlock value for shareholders of the Company and better identify and establish the fair value of the Skyworth Electric’s principal businesses, including research and development, manufacturing and sales of refrigerated and cold storage products and washing equipment for personal care products, currently including refrigerators, freezers, washing machines, and clothes dryers (the “ Spin-off Business ”). Separate listing of the Spin-off Group on ChiNext Market of the SZSE will better reflect the

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value of the Spin-off Business, rather than containing it within the Company’s listing. The Directors anticipate that the premium obtained from the separate listing of the Spin-off Group will represent a substantial enhancement to the Spin-off Business’ existing value, increase its visibility and further crystallise the value of its higher growth business by aligning it with the appropriate type of investors, which will in turn benefit the Company as the controlling shareholder and enhance the overall market value of the Company;

• (b) the separate listing of the Spin-off Group will allow investors to separately value the remaining businesses of Group and the Spin-off Group based on their distinct investment identities as well as the respective operational performance and financial results on a standalone basis. This is expected to unlock the intrinsic value of the Spin-off Group and possibly improve its valuation which may allow it to achieve a fuller valuation potential as a whole;

• (c) the Company and Skyworth Electronic, operating in different business segments and producing different products, are believed to have different growth paths and different business strategies. By delineating clearly between the remaining business of the Group and the Spin-off Group business, the Proposed Spin-off allows the Spin-off Business to create a more defined business focus and efficient resource allocation. The Proposed Spin-off will also allow separate fund raising platforms for Skyworth Electronic and the Company to fund the growth and expansion of the Spin-off Business and the remaining business of the Group;

• (d) the separate listing of the Spin-off Business will provide investors, the market generally and the rating agencies with greater clarity regarding the business and financial status of the Spin-off Business. The Spin-off Business is expected to undergo relatively rapid business expansion and rapid growth, the Proposed Spin-off is expected to attract an investor base that favours high growth opportunities and focus investment opportunities in Spin-off Business, which is different from the relatively more diverse business model of the Group’s remaining business operation that includes multimedia business, smart systems technology business, other smart appliances business and other modern services. Thus, the Proposed Spin-off will potentially provide greater debt capacity due to greater clarity for credit profiling of the Company and Skyworth Electronic respectively by financial institutions that wish to extend credit or financing to the Company or Skyworth Electronic;

• (e) the Proposed Spin-off will enable the management of the Company and Skyworth Electronic to dedicate their time on building the remaining core businesses of the Group and the Spinoff Group, respectively, to adopt different business strategies in order to better suit their respective businesses, thereby simplifying the decision-making process and increasing their responsiveness to market changes and opportunities specific to the business of the relevant group;

• (f) the Proposed Spin-off will provide a mechanism to attract and motivate the management of Skyworth Electronic to be directly in charge of its operating and financial performance on a standalone basis; and

• (g) the Company will continue to be the beneficial owner of a majority of shares in Skyworth Electronic after the Proposed Spin-off and to benefit from any enhanced value of Skyworth Electronic through the Proposed Spin-off. Shareholders of the Company will continue to enjoy the benefits from the future development and growth of the Spin-off Business.

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Shareholders and potential investors of the Company should be aware that the Proposed Spin-off is subject to, among other things, the prevailing market conditions and the approval from relevant authorities (including the Shenzhen Stock Exchange). As such, there is no assurance that the Proposed Spin-off and separate listing of Skyworth Electric will take place and the time for completion. Shareholders and potential investors of the Company should exercise caution when dealing in the securities of the Company.

By order of the Board Skyworth Group Limited Lai Weide Chairman of the Board

Hong Kong, 23 August 2021

As at the date of this notice, the Board comprises Mr. Lai Weide as the Chairman of the Board, Mr. Liu Tangzhi as executive Director and the chief executive officer, Ms. Lin Wei Ping, Mr. Shi Chi, Mr. Lin Jin and Mr. Lam Shing Choi, Eric as executive Directors; and Mr. Li Weibin, Mr. Cheong Ying Chew, Henry and Mr. Hung Ka Hai, Clement as independent non-executive Directors.

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