Skyworth Group Limited - Proxy Solicitation & Information Statement 2013

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your securities in Skyworth Digital Holdings Limited (the ‘‘Company’’), you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, 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 circular.

SKYWORTH DIGITAL HOLDINGS LIMITED (創維數碼控股有限公司[*] ) (Incorporated in Bermuda with limited liability) (Stock Code: 00751)

WAIVER OF ASSURED ENTITLEMENT UNDER A PROPOSED SPIN-OFF OF THE DIGITAL SET-TOP BOX BUSINESS OF THE GROUP AND NOTICE OF SPECIAL GENERAL MEETING

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

Optima Capital Limited

A notice convening the special general meeting of the Company to be held at Regus Business Centre, 35/F Central Plaza, 18 Harbour Road, Wanchai, Hong Kong on 25 June 2013 at 10:00 a.m. or any adjournments of the meeting, at which the proposed resolution as stated in the aforesaid notice will be considered, is set out on pages 31 to 32 of this circular.

If you do not intend to attend the meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar in Hong Kong, Hong Kong Registrars Limited, 17M Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as practicable and in any event not later than forty-eight (48) hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting at the meeting or any adjourned meeting should you so desire.

For identification purposes only

5 June 2013

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . . . . .	23
LETTER FROM OPTIMA CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
NOTICE OF SPECIAL GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	31

– i –

DEFINITIONS

In this circular, the following expressions shall have the following meanings unless the context otherwise requires:

‘‘A Shares’’
A shares of RMB1.00 each in the share capital of China Resources Jinhua which are listed on the Shenzhen Stock Exchange
‘‘Asset Restructuring’’
the asset restructuring of China Resources Jinhua which involves the Yantai Disposal, the SSDT Disposal, the Suining Acquisition and the Jinhua Acquisition
‘‘associate(s)’’ has the meaning ascribed to it under the Listing Rules
‘‘Board’’ the board of Directors
‘‘Bye-laws’’
the bye-laws of the Company (as amended from time to time)
‘‘China Resources Jinhua’’
華潤錦華股份有限公司 (China Resources Jinhua Co., Ltd.*), a joint stock limited company established under the laws of the PRC whose A shares are listed on the Shenzhen Stock Exchange and is owned as to approximately 50.99% by China Resources Textiles as at the Latest Practicable Date
‘‘China Resources Textiles’’
華潤紡織(集團)有限公司 (China Resources Textiles Holdings Limited*), a company incorporated in Hong Kong with limited liability and the controlling shareholder of China Resources Jinhua as at the Latest Practicable Date
‘‘Company’’
Skyworth Digital Holdings Limited, a company incorporated in Bermuda with limited liability and whose shares are listed on the Stock Exchange with stock code 751
‘‘Compensation Period’’
a period of three financial years commencing from the financial year during which (a) the transactions contemplated under the Framework Agreement have been approved by the CSRC and the shareholders of China Resources Jinhua at a general meeting and (b) the A Shares issued to RGB and SSDT Minority Shareholders have been duly registered by the Shenzhen Stock Exchange and the securities depository and clearing corporation, and ending on the third financial year immediately thereafter
‘‘Completion’’
completion of the Yantai Disposal, the SSDT Disposal, the Suining Acquisition and the Jinhua Acquisition in accordance with the terms of the Framework Agreement
‘‘connected person’’

has the meaning ascribed to it under the Listing Rules

– 1 –

DEFINITIONS

‘‘Consideration Shares’’
initially a total of 368,300,544 new A Shares to be issued by China Resources Jinhua to RGB and SSDT Minority Shareholders in settlement of the balance of the consideration for the SSDT Disposal pursuant to the terms of the Framework Agreement
‘‘CSRC’’

the China Securities Regulatory Commission

‘‘Director(s)’’

the director(s) of the Company

‘‘Framework Agreement’’
the framework agreement dated 19 April 2013 entered into between RGB, China Resources Jinhua, SSDT Minority Shareholders and China Resources Textiles in relation to the Yantai Disposal, the SSDT Disposal, the Suining Acquisition and the Jinhua Acquisition
‘‘Group’’ the Company and its subsidiaries
‘‘Hong Kong’’
the Hong Kong Special Administrative Region of the PRC
‘‘HK$’’
Hong Kong dollar(s), the lawful currency of Hong Kong
‘‘Independent Board Committee’’
the independent committee of the Board comprising Mr. So Hon Cheung, Stephen, Mr. Li Weibin and Ms. Chan Wai Kay, Katherine, all being the independent non-executive Directors, formed to advise the Independent Shareholders in relation to the waiver of the assured entitlement under the Proposed Spinoff
‘‘Independent Shareholders’’ Shareholder(s) other than Mr. Wong Wang Sang, Stephen and his associates
‘‘Jinhua Acquisition’’
the acquisition of initially 47,984,194 Settlement Shares in China Resources Jinhua by RGB pursuant to the terms of the Framework Agreement
‘‘Latest Practicable Date’’
31 May 2013, being the latest practicable date for ascertaining certain information for inclusion in this circular
‘‘LCD Module Group’’
Skyworth Display Technology Holdings Limited and its subsidiaries which engage in the business of the research and development, manufacturing, assembling and sale of LCD modules (including television modules and mobile modules) and other related products and which has submitted a listing application for the listing of its shares on the Main Board of the Stock Exchange on 11 March 2013, details of which are set out in the Company’s announcement dated 11 March 2013

– 2 –

DEFINITIONS

‘‘Listing Rules’’
the Rules Governing the Listing of Securities on the Stock Exchange
‘‘Optima Capital’’
Optima Capital Limited, a corporation licensed to carry on Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) regulated activities as defined under the SFO, and the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the waiver of the assured entitlement under the Proposed Spin-off
‘‘Placing’’
the proposed placing of new A Shares by China Resources Jinhua for subscription by not more than 10 investors at an issue price to be determined which may take place after Completion as disclosed in the Company’s announcement dated 22 April 2013
‘‘PN 15’’ Practice Note 15 of the Listing Rules
‘‘PRC’’
the People’s Republic of China, for the purpose of this circular, excludes Hong Kong, Macau Special Administrative Region and Taiwan
‘‘Price Determination Date’’
22 April 2013, being the date on which the issue price of the Consideration Shares was initially determined and the day on which China Resources Jinhua made an announcement disclosing that its board of directors have resolved to approve the proposals in respect of the Asset Restructuring
‘‘Profit Forecast Compensation Agreement’’
a profit forecast compensation agreement to be entered into between RGB, SSDT Minority Shareholders and China Resources Jinhua in relation to the profit guarantee of SSDT
‘‘Proposed Retained Business’’
the business of design, manufacturing and sale of consumer electronic products (including televisions) and property holding
‘‘Proposed Spin-off’’
the proposed disposal of the Set-top Box Business by way of the SSDT Disposal to China Resources Jinhua pursuant to the terms of the Framework Agreement
‘‘Qualifying Shareholders’’
Shareholder(s) whose name(s) appear(s) on the register of members of the Company at the close of business on the Record Date
‘‘Record Date’’
the record date for ascertaining entitlements to the Special Dividend which will be determined and announced by the Company

– 3 –

DEFINITIONS

‘‘Remaining Group’’ the Group, excluding the SSDT Group and LCD Module Group

‘‘RGB’’ Shenzhen Chuangwei-RGB Electronics Co., Ltd. (深圳創維RGB電子有限公司), a sino-foreign equity joint venture registered in the PRC and an indirect wholly-owned subsidiary of the Company

‘‘RMB’’ Renminbi, the lawful currency of PRC
‘‘SASAC’’
State-owned Assets Supervision and Administration Commission of the State Council

‘‘Set-top Box Business’’ the business of the manufacture and sales of set-top boxes or TV boxes for connection of broadcasting signals and providing value added services to the system integrators owned and operated by SSDT

‘‘Settlement Shares’’ initially 47,984,194 A Shares to be transferred from China Resources Textiles to RGB at the transfer price of RMB8.06 per A Share in settlement of the Yantai Receivables (subject to finalisation and (if any) adjustment) pursuant to the terms of the Framework Agreement
‘‘SFO’’ the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) as amended, supplemented or otherwise modified from time to time
‘‘SGM’’ the special general meeting of the Company to be held at Regus Business Centre, 35/F Central Plaza, 18 Harbour Road, Wanchai, Hong Kong on 25 June 2013 at 10:00 a.m. (or any adjournment thereof) to approve the waiver of the assured entitlement under the Proposed Spin-off
‘‘SGM Notice’’ the notice convening the SGM, which is set out on pages 31 to 32 of this circular
‘‘Share(s)’’ ordinary share(s) of HK$0.10 each in the issued share capital of the Company
‘‘Shareholder(s)’’ holder(s) of the Share(s)
‘‘Shenzhen Lingyou’’ 深圳市領優投資有限公司 (Shenzhen Lingyou Investment Co., Ltd.*), a company established under the laws of the PRC with limited liability

– 4 –

DEFINITIONS

‘‘Shenzhen Mingdian’’
深圳銘店壹佰網絡科技有限公司 (Shenzhen Mingdian Yibai Network Technology Co., Ltd.*), a limited liability company established under the laws of the PRC and a wholly-owned subsidiary of SSDT
‘‘Shenzhen Stock Exchange’’
The Shenzhen Stock Exchange
‘‘Shenzhen Weipute’’
深圳微普特信息技術有限公司 ( S h e n z h e n W e i p u t e Information Technology Co., Ltd.*), a limited liability company established under the laws of the PRC and a nonwholly owned subsidiary of SSDT
‘‘Skyworth Haitong’’ 北京創維海通數字技術有限公司 (Beijing Skyworth Haitong Digital Technology Co., Ltd.*), a limited liability company established under the laws of the PRC and a non-wholly owned subsidiary of SSDT
‘‘Skyworth Software’’
深圳市創維軟件有限公司 (Shenzhen Skyworth Software Co., Ltd.*), a limited liability company established under the laws of the PRC and a wholly-owned subsidiary of SSDT
‘‘Skyworth Wireless’’
深圳創維無線技術有限公司 (Shenzhen Skyworth Wireless Technology Co., Ltd.*), a limited liability company established under the laws of the PRC and a wholly-owned subsidiary of SSDT as at 31 December 2012
‘‘Smart Choice Store’’
Smart Choice Store Company Limited 才智商店有限公司, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of SSDT
‘‘Special Dividend’’
the conditional interim dividend of HK4 cents per Share declared by the Board on 10 May 2013 to be paid in cash
‘‘SSDT’’ 深圳創維數字技術股份有限公司 (Shenzhen Skyworth Digital Technology Co., Ltd.*), a joint stock limited company incorporated in the PRC which is owned as to 70% by RGB and as to 30% by the SSDT Minority Shareholders as at the Latest Practicable Date
‘‘SSDT Disposal’’
the disposal of a total of 100% equity interests in SSDT from RGB and SSDT Minority Shareholders to China Resources Jinhua pursuant to the terms of the Framework Agreement
‘‘SSDT Group’’
SSDT and its subsidiaries

– 5 –

DEFINITIONS

‘‘SSDT Minority Shareholders’’
Shenzhen Lingyou and 183 individuals who are present employees of SSDT Group including Mr. Shi Chi, an executive Director and a director of SSDT, and Mr. Zhang Zhi, a director of SSDT, who together hold a total of 30% equity interests in SSDT as at the Latest Practicable Date
‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited
‘‘Suining Acquisition’’ the acquisition of the Suining Assets by RGB and SSDT Minority Shareholders pursuant to the terms of the Framework Agreement
‘‘Suining Assets’’ the assets and liabilities of Suining Branch
‘‘Suining Branch’’ 華潤錦華股份有限公司遂寧分公司 (China Resources Jinhua Co., Ltd. Suining Branch*), a branch company of China Resources Jinhua
‘‘Tripartite Agreement’’
the tripartite agreement dated 19 April 2013 entered into between RGB, China Resources Jinhua and China Resources Textiles in relation to the arrangement of employees of China Resources Jinhua affected by the Asset Restructuring
‘‘Valuation Date’’
31 December 2012, being the date on which the values of SSDT, the Yantai Receivables, China Resources Jinhua, Skyworth Software, Shenzhen Weipute, Skyworth Haitong, Smart Choice Store, Shenzhen Mingdian and Skyworth Wireless were determined
‘‘Yantai Disposal’’
the transfer of 72% equity interests in Yantai Jinlun from China Resources Jinhua to China Resources Textiles pursuant to the terms of the Framework Agreement
‘‘Yantai Jinlun’’
煙台華潤錦綸有限公司 (Yantai China Resources Jinlun Co., Ltd.), a sino-foreign joint venture established under the laws of the PRC with limited liability and is owned as to 72% by China Resources Jinhua and as to 28% by 華潤紡織投資發展有限公司 (China Resources Textiles Investment Development Co., Ltd.) as at the Latest Practicable Date
‘‘Yantai Receivables’’
approximately RMB387 million receivables owed by China Resources Textiles to China Resources Jinhua immediately upon completion of the Yantai Disposal pursuant to the terms of the Framework Agreement

– 6 –

DEFINITIONS

‘‘Zhong He’’ Zhong He Appraisal Co., Ltd., an independent firm of valuer qualified in the PRC ‘‘%’’%’’’’ per cent.

‘‘%’’%’’’’

English names of entities are translated for identification purpose only

For the purpose of this circular, amounts denominated in RMB have been translated into HK$ at an exchange rate of RMB1:HK$1.2564. No representation is made that any amounts in RMB and HK$ can be or could have been converted at the relevant dates at the above rates or at any other rates at all.

– 7 –

LETTER FROM THE BOARD

SKYWORTH DIGITAL HOLDINGS LIMITED (創維數碼控股有限公司[*] )

(Incorporated in Bermuda with limited liability)

(Stock Code: 00751)

Executive Directors: Lin Wei Ping (Executive Chairman) Yang Dongwen (Chief Executive Officer) Leung Chi Ching, Frederick Lu Rongchang Shi Chi

Independent non-executive Directors: So Hon Cheung, Stephen Li Weibin Chan Wai Kay, Katherine

Registered office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Principal place of business: Rooms 1601–04 Westlands Centre 20 Westlands Road Quarry Bay Hong Kong

5 June 2013

To the Shareholders

Dear Sir or Madam,

WAIVER OF ASSURED ENTITLEMENT UNDER A PROPOSED SPIN-OFF OF THE DIGITAL SET-TOP BOX BUSINESS OF THE GROUP AND

NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

We refer to the Company’s (a) announcement dated 22 April 2013 in relation to the conditional Framework Agreement entered into between RGB, an indirect wholly-owned subsidiary of the Company, China Resources Jinhua, SSDT Minority Shareholders and China Resources Textiles in respect of the Asset Restructuring of China Resources Jinhua which involves, inter alia, the Yantai Disposal, the SSDT Disposal, the Suining Acquisition and the Jinhua Acquisition, (b) announcement dated 10 May 2013 in relation to the declaration of conditional Special Dividend, formation of Independent Board Committee and appointment of independent financial adviser, (c) announcement dated 14 May 2013 in relation to the delay in publication of further announcement in respect of the profit forecasts, and (d) announcement dated 27 May 2013 in relation to the profit forecasts of each of SSDT, Skyworth Software, Shenzhen Weipute, Skyworth Haitong and Skyworth Wireless.

For identification purposes only

– 8 –

LETTER FROM THE BOARD

The transactions contemplated under the Framework Agreement are effectively an asset swap exercise between RGB and China Resources Jinhua, an injection of the Set-top Box Business by RGB into China Resources Jinhua and an acquisition of an equity interest in China Resources Jinhua by RGB. As the injection of the Set-top Box Business by RGB into China Resources Jinhua is in effect a separate listing of the Set-top Box Business on the Shenzhen Stock Exchange through China Resources Jinhua, it is a spin-off for the purposes of PN 15 and therefore subject to its requirements.

In accordance with the requirements of PN 15 of the Listing Rules, the Board is required to give due regard to the interests of the existing Shareholders by providing the Shareholders with an assured entitlement to the A Shares of China Resources Jinhua, being the immediate shareholder holding 100% equity interests in SSDT immediately upon completion of the Asset Restructuring and the Proposed Spin-off. However, in view of the legal restrictions on foreign investors to subscribe for and holding A Shares of China Resources Jinhua, the Board will propose a resolution for approval by the Independent Shareholders at the SGM to waive the assured entitlement under the Proposed Spin-off.

The purpose of this circular is to (a) provide you with details of the Framework Agreement and the Proposed Spin-off, (b) set out the advice of Optima Capital to the Independent Board Committee and the Independent Shareholders relating to the waiver of the assured entitlement under the Proposed Spin-off, (c) set out the recommendation of the Independent Board Committee to the Independent Shareholders relating to the waiver of the assured entitlement under the Proposed Spin-off and (d) give you notice of the SGM.

A summary of the principal terms of the Framework Agreement is set out below.

FRAMEWORK AGREEMENT

Date: 19 April 2013 Parties: (1) China Resources Jinhua (2) RGB (3) SSDT Minority Shareholders (4) China Resources Textiles

Save for Mr. Shi Chi who is an executive Director and a director of SSDT and Mr. Zhang Zhi who is a director of SSDT, being two of the SSDT Minority Shareholders, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, China Resources Jinhua, the SSDT Minority Shareholders (excluding Mr. Shi Chi and Mr. Zhang Zhi), China Resources Textiles and their respective ultimate beneficial owners are third parties independent of the Company and connected persons of the Company.

– 9 –

LETTER FROM THE BOARD

Subject matter:

Pursuant to the Framework Agreement:

(a) Yantai Disposal — China Resources Jinhua has conditionally agreed to sell its entire 72% equity interests in Yantai Jinlun to China Resources Textiles;
(b) SSDT Disposal and Suining Acquisition — RGB and SSDT Minority Shareholders have conditionally agreed to transfer 70% and 30% equity interests in SSDT respectively to China Resources Jinhua in consideration of which:
(i) China Resources Jinhua will assign the Yantai Receivables owed by China Resources Textiles to RGB; and
(ii) China Resources Jinhua will transfer the Suining Assets to RGB or an entity designated by RGB, which will hold the respective interests of RGB and SSDT Minority Shareholders in the Suining Assets; and
(c) Jinhua Acquisition — China Resources Textiles has conditionally agreed to transfer the Settlement Shares to RGB in settlement of the Yintai Receivables.

The Yantai Disposal, the SSDT Disposal, the Suining Acquisition and the Jinhua Acquisition are inter-conditional upon one another. If one of them does not proceed to completion, the others will not proceed to completion.

Immediately after Completion, (a) SSDT will continue to be an indirect non-wholly owned subsidiary of the Company through its shareholding in China Resources Jinhua which will acquire 100% equity interests in SSDT owning all SSDT’s operating assets and intangible assets including trademarks and patents required for the operation of Set-top Box Business; (b) RGB, China Resources Textiles, SSDT Minority Shareholders and the public will hold approximately 58.52%, 3.64%, 25.08% and 12.76% equity interest in China Resources Jinhua as enlarged by the issue of the Consideration Shares respectively, the actual figures of which may be subject to changes to be proposed by the PRC authorities during their approval process on the value of Yantai Receivables, the value of Suining Assets and the number of the Consideration Shares to be issued and assuming that there is no change in the number of issued shares of China Resources Jinhua from the Latest Practicable Date to the date of Completion. China Resources Jinhua will therefore become a nonwholly owned subsidiary of the Company through RGB.

– 10 –

LETTER FROM THE BOARD

Consideration for the The consideration for the SSDT Disposal is RMB3.50047 billion SSDT Disposal: (equivalent to approximately HK$4.3980 billion) which was determined after arm’s length negotiations between the parties with reference to the final valuations on SSDT, the five subsidiaries of SSDT, namely, Skyworth Software, Shenzhen Weipute, Skyworth Haitong, Smart Choice Store and Shenzhen Mingdian, and Skyworth Wireless which is a former subsidiary of SSDT as at 31 December 2012 based on the final valuation reports on SSDT, such five subsidiaries of SSDT and Skyworth Wireless prepared by Zhong He.

The consideration for the SSDT Disposal will be payable by China Resources Jinhua to RGB and SSDT Minority Shareholders on Completion in the following manner:

(a) as to approximately RMB387 million (equivalent to approximately HK$486 million) by the assignment of the Yantai Receivables owed by China Resources Textiles from China Resources Jinhua to RGB;
(b) as to approximately RMB145 million (equivalent to approximately HK$182 million) by the transfer of the Suining Assets from China Resources Jinhua to RGB or an entity designated by RGB, which will hold the respective interests of RGB and SSDT Minority Shareholders in the Suining Assets; and
(c) as to the balance of approximately RMB2.9685 billion (equivalent to approximately HK$3.7296 billion) by way of issue and allotment of 66.1% and 33.9% of the Consideration Shares by China Resources Jinhua to RGB and SSDT Minority Shareholders respectively.

The estimated value of the Yantai Receivables as at 31 December 2012 is determined with reference to 72% equity interests of Yantai Jinlun based on the preliminary valuation report on the asset value of Yantai Jinlun as at 31 December 2012, which was estimated to be RMB387 million, prepared by an independent firm of qualified valuer in the PRC.

The estimated value of the Suining Assets as at 31 December 2012 was RMB145 million and is determined by deducting 72% of the asset value of Yantai Jinlun as at 31 December 2012, which was estimated to be RMB387 million, from the asset value of China Resources Jinhua as at 31 December 2012, which was estimated to be RMB532 million, as preliminarily appraised by an independent firm of qualified valuer in the PRC.

– 11 –

LETTER FROM THE BOARD

Consideration Shares: It is proposed that initially 243,415,123 Consideration Shares and 124,885,421 Consideration Shares will be issued by China Resources Jinhua to RGB and SSDT Minority Shareholders respectively as part of the consideration of the SSDT Disposal at an issue price of RMB8.06 per A Share, taking into account the average trading price of A Shares on the Shenzhen Stock Exchange in the last 20 trading days immediately preceding the Price Determination Date and the payment by China Resources Jinhua of a cash dividend of RMB0.30 (tax inclusive) for every 10 A Shares held pursuant to the resolutions passed by the shareholders of China Resources Jinhua on 19 April 2013.

The number of the Consideration Shares will be adjusted correspondingly in case of, inter alia, distribution of dividends, issue of new A Shares, ex-dividend or ex-entitlement during the period between the date of the Framework Agreement and the issue date of the Consideration Shares.

Subject to the approval of the CSRC, the final number of the Consideration Shares to be issued by China Resources Jinhua pursuant to the Framework Agreement will be determined with reference to the balance of the consideration for the SSDT Disposal, rounded down to the nearest whole A Share. Cash will be paid by China Resources Jinhua for fractional A Shares which RGB and SSDT Minority Shareholders would otherwise be entitled to.

Suining Acquisition: As part of the consideration for the SSDT Disposal, China Resources Jinhua will transfer the Suining Assets to RGB or an entity designated by RGB, which will hold the respective interests of RGB and SSDT Minority Shareholders in the Suining Assets.

Yantai Receivables: As part of the consideration for the SSDT Disposal, China Resources Jinhua will assign the Yantai Receivables owed by China Resources Textiles to RGB. Under the Framework Agreement, the Yantai Receivables are proposed to be settled by China Resources Textiles by way of transfer of initially 47,984,194 Settlement Shares to RGB at the transfer price of RMB8.06 per A Share. The final number of Settlement Shares subject to transfer will be determined in the definitive transaction agreement to be entered into by the parties in due course.

If during the period between the date of the Framework Agreement and the date of completion of the Asset Restructuring there occurs any bonus issue of the A Shares or transfer of capital surplus into share capital by China Resources Jinhua, the number of the Settlement Shares to be transferred to RGB will be adjusted correspondingly.

– 12 –

LETTER FROM THE BOARD

Sharing of gain and loss during the period between the Valuation Date and the date of Completion:
Pursuant to the Framework Agreement, during the period between the Valuation Date and the date of Completion:
(a) any gain and loss arising from the operations of China Resources Jinhua will belong to or be borne by China Resources Textiles; and
(b) any gain arising from the operations of SSDT will belong to China Resources Jinhua and any loss arising from the operations of SSDT will be borne by shareholders of SSDT.

Pursuant to the Framework Agreement and the Tripartite Agreement, the employment relationship and social insurance of the existing employees of China Resources Jinhua will be transferred to the new owner of the relevant assets after the date of Completion. The economic compensation of all the employees of the Suining Branch up to the date of Completion will be borne by China Resources Textiles. China Resources Textiles has also undertaken to properly resolve issues relating to elderly insurance, medical insurance and housing provident fund of the employees of the Suining Branch. China Resources Textiles will be responsible for and will settle the employee settlement expenses of China Resources Jinhua arising from the Asset Restructuring and other expenses which should be borne by China Resources Jinhua in connection with the execution, performance and termination of employment contracts between China Resources Jinua and its employees before the date of Completion within the prescribed time periods. In the event that China Resources Textiles fails to settle such expenses within the prescribed time periods and if such failure causes any loss to China Resources Jinhua, RGB will pay for such expenses and loss suffered by China Resources Jinhua for China Resources Textiles which will reimburse RGB for the expenses and loss paid.

Conditions precedent The Framework Agreement will become effective upon satisfaction of to the Framework following conditions: Agreement:
(a) the Framework Agreement having been duly executed by the parties thereto;
(b) the Asset Restructuring having been approved by the respective authoritative institutions of the parties thereto;
(c) the Company having complied with all requirements of the Listing Rules in the event that the transactions contemplated under the Framework Agreement constitutes a major transaction under the Listing Rules;

– 13 –

LETTER FROM THE BOARD

(d) the Company having complied with all requirements of the Listing Rules including, if required, the obtaining of approval from independent Shareholders in respect of the Proposed Spinoff;
(e) the directors and shareholders of SSDT having approved the transactions contemplated under the Framework Agreement;
(f) the passing of the requisite resolution at the general meeting by shareholders of China Resources Jinhua to approve the waiver of the general offer obligations on the part of RGB to acquire the remaining A Shares of China Resources Jinhua;
(g) the obtaining of foreign investment approval in respect of the Asset Restructuring from the relevant PRC regulatory authorities;
(h) the obtaining of approval from and/or the filing with the SASAC in respect of the Asset Restructuring and related matters;
(i) the obtaining of approval from the CSRC in respect of the Asset Restructuring; and
(j) the obtaining of waiver from the CSRC in respect of the general offer obligations on the part of RGB as a result of the Asset Restructuring.

As at the Latest Practicable Date, condition (a) has been fulfilled.

None of the above conditions can be waived and there is no long stop date for the Framework Agreement until all of the above conditions are fulfilled.

Lock-up Period

The initial 243,415,123 Consideration Shares and 124,885,421 Consideration Shares to be issued by China Resources Jinhua to RGB and SSDT Minority Shareholders respectively as part of the consideration for the SSDT Disposal are subject to a lock-up period of 36 months and 12 months respectively commencing from the date of listing of such Consideration Shares. RGB and SSDT Minority Shareholders may dispose of their respective Consideration Shares in accordance with the relevant requirements of CSRC and the Shenzhen Stock Exchange after the expiration of the relevant lock-up period.

Placing

According to China Resources Jinhua, it is re-assessing its funding need and therefore the Placing may not proceed.

– 14 –

LETTER FROM THE BOARD

Net profit attributable to the assets

Set out below are the audited net profit (before taxation and extraordinary items, and after taxation and extraordinary items) attributable to 100% of the equity interests of Yantai Jinlun and 100% of the equity interests of SSDT respectively for each of the two immediate preceding financial years ended 31 December 2012:

Yantai Jinlun

	For the year ended
	31 December
	2012 2011
	(RMB million)
Net profit before taxation and extraordinary items	57.68 76.10
Net profit after taxation and extraordinary items	51.47 69.18
SSDT
	For the year ended
	31 December
	2012 2011
	(RMB million)
Net profit before taxation and extraordinary items	312.95 305.30
Net profit after taxation and extraordinary items	288.19 269.42

Profit guarantee

Pursuant to the Provisions on Issues Concerning the Regulating of the Material Asset Reorganisations of Listed Companies (上市公司重大資產重組管理辦法) formulated by the CSRC, as the valuation of SSDT was based on the income approach, China Resources Jinhua is required to submit to the CSRC a profit forecast report in respect of SSDT and the parties to the Framework Agreement are required to enter into a compensation agreement which sets out the compensation mechanism in the event that the actual profit of SSDT falls short of its forecasted profit. In this regard, RGB, SSDT Minority Shareholders and China Resources Jinhua propose to enter into the Profit Forecast Compensation Agreement pursuant to which RGB and SSDT Minority Shareholders will agree to guarantee in favour of China Resources Jinhua that the actual net profit of SSDT after deduction of non-recurrent profit and loss for the year ending 31 December 2013, 2014 and 2015 will not be less than the guaranteed net profit of SSDT for the respective period to be set out in the Profit Forecast Compensation Agreement (‘‘Guaranteed Net Profit’’). If the actual net profit of SSDT is less than the Guaranteed Net Profit of SSDT for the relevant year, each of RGB and SSDT Minority Shareholders will be

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LETTER FROM THE BOARD

required to transfer to China Resources Jinhua at the total transfer price of RMB1.00 such number of A Shares to be determined according to the following formula as compensation (‘‘Compensation Shares’’):

(Accumulated Guaranteed Net Profit of SSDT as at the end of the relevant year – Accumulated actual net profit of SSDT as at the end of the relevant year) x Number of A Shares issued to RGB and SSDT Minority Shareholders divided by Total Guaranteed Net Profit of SSDT during the Compensation Period – Number of Compensation Shares already transferred from RGB and SSDT Minority Shareholders

If upon the expiry of the Compensation Period any reduction in value in SSDT (which is the difference between the then valuation amount of SSDT and consideration of SSDT) divided by the consideration for SSDT is greater than the total number of Compensation Shares already transferred by RGB and SSDT Minority Shareholders during the Compensation Period divided by the total number of A Shares issued to RGB and SSDT Minority Shareholders, then RGB and SSDT Minority Shareholders will be required to transfer such additional number of Compensation Shares to China Resources Jinhua in accordance with the following formula:

Reduction in value in SSDT as at the end of the Compensation Period/Issue price per A Share – Total number of Compensation Shares already transferred by RGB and SSDT Minority Shareholders during the Compensation Period

Based on the Directors’ calculation, the maximum number of Compensation Shares which may be subject to transfer pursuant to the Profit Guarantee Compensation Agreement will not exceed the number of A Shares issued to RGB and SSDT Minority Shareholders pursuant to the Framework Agreement. Subject to approval by the board of directors and the shareholders of China Resources Jinhua, the Compensation Shares shall be cancelled by China Resources Jinhua upon the expiry of the Compensation Period and the relevant lock-up period in respect of the A Shares.

FINANCIAL EFFECT OF THE SSDT DISPOSAL AND THE PROPOSED SPIN-OFF

Immediately after Completion, the Company’s equity interests in SSDT will reduce from 70% to not less than 51% and SSDT will continue to be an indirect non-wholly owned subsidiary of the Company through its shareholding in China Resources Jinhua. As a result, SSDT will continue to be consolidated into the consolidated financial statements of the Remaining Group. Shareholders should however note that the actual gain or loss from the SSDT Disposal to be recorded by the Group will depend on the actual asset values of SSDT, the Yantai Receivables, the Suining Assets and China Resources Jinhua on the date of Completion. As the transactions contemplated under the Framework Agreement are effectively an asset swap exercise between RGB and China Resources Jinhua, no sale proceeds will be received by RGB in respect of the SSDT Disposal.

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LETTER FROM THE BOARD

INFORMATION ON THE COMPANY, THE REMAINING GROUP, CHINA RESOURCES JINHUA, RGB, SHENZHEN LINYOU, CHINA RESOURCES TEXTILES AND SSDT

The Company is an investment holding company. The principal activities of the Company’s principal subsidiaries and jointly controlled entities are the manufacture and sale of consumer electronic products and upstream accessories, and property holding.

After completion of the Proposed Spin-off, the Remaining Group will continue to engage in the Proposed Retained Business.

China Resources Jinhua is a joint stock limited company whose A shares are listed on the Shenzhen Stock Exchange. Prior to the Asset Restructuring, it is principally engaged in spinning, weaving, manufacture and sales of textiles.

RGB is an indirect wholly-owned subsidiary of the Company. It is principally engaged in the research and development, manufacture and sales of televisions.

Shenzhen Lingyou is a limited liability company established under the laws of the PRC. It is principally engaged in investment management and investment consultation.

China Resources Textiles is a limited liability company incorporated in Hong Kong and the controlling shareholder of China Resources Jinhua as at the Latest Practicable Date. It is principally engaged in the manufacture, processing and distribution of textiles and clothes.

SSDT is a non-wholly owned subsidiary of the Company. It is principally engaged in the Set-top Box Business.

REASONS FOR AND BENEFITS OF THE TRANSACTIONS AND THE PROPOSED SPIN-OFF

SSDT is incorporated under the laws of the PRC as a PRC joint stock limited company. Its operations, assets, and principal business of research and development, manufacture and sale of digital set-top boxes are based, managed and conducted in the PRC. If it were to be listed on a stock exchange outside of the PRC, it will likely need to undergo a restructuring involving changing its enterprise status. Such change may not be beneficial to its existing business operations which are now conducted under its current business licence. The listing of SSDT’s shares on the “A” share market will also increase the profile and reputation of SSDT in the domestic market and enhance its ability to capture the potential market growth.

In 2007 and 2008, the Board took steps to implement a plan to spin off the Set-top Box Business by way of a separate listing of SSDT’s shares on the ‘‘A’’ share market of the Shenzhen Stock Exchange. However, as disclosed in the Company’s announcement dated 30 September 2008, the implementation of such plan was delayed given the adverse situation in world-wide securities markets at that time. With the increase in popularity and coverage of digital broadcasting in the PRC and product diversification of SSDT, the turnover from sales of digital set-top boxes has grown more than four-fold since 2008. The turnover from sales of digital set-top boxes increased from approximately HK$733 million for the year ended 31

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LETTER FROM THE BOARD

March 2007 to approximately HK$3,365 million for the year ended 31 March 2012. The total segmental results of the Group for the year ended 31 March 2012 was HK$2,023 million, of which the SSDT Group accounted for approximately HK$347 million. As set out in the annual report of the Company for the year ended 31 March 2012, the sales amount of digital set-top boxes in Asia recorded a growth of 6.8 percentage points from 9.2% of the total turnover for the year ended 31 March 2011 to 16.0% for the year ended 31 March 2012. The sales amount of digital set-top boxes in Europe recorded a growth of 46.2% for the year ended 31 March 2012.

The Board considers that the Set-top Business has grown to a sufficient size to warrant a separate listing. While a separate listing of the SSDT’s shares can be achieved by making a listing application to the Shenzhen Stock Exchange, this process is time consuming as much time and costs would be required to prepare and file the counselling materials for listing with the CSRC. In addition, the Company understands that as the CSRC has yet to resume granting approval for public offering and listing on the domestic exchanges, there is a long list of applicants applying for listing in the PRC. The Board considers that the injection of the Set-top Business into China Resources Jinhua pursuant to the Framework Agreement, which requires relatively shorter time for approval from the relevant regulatory authorities, would achieve a similar purpose, i.e. to obtain a listing status. Therefore, the Board considers that it is fair and reasonable to list the Set-top Box Business on the ‘‘A’’ share market by injecting such business into China Resources Jinhua.

The Board considers that the Proposed Spin-off is in the interests of the Group and the Shareholders taken as a whole based on the following reasons:

(a) the Proposed Spin-off essentially separates the Set-top Box Business from the Proposed Retained Business. Such segregation enables investors and the market with greater clarity on the business and financial status of the Set-top Box Business;
(b) the Proposed Spin-off will allow the management team of the SSDT Group to focus on opportunities which are specific to the business of the SSDT Group and to enjoy greater flexibility to grow its business;
(c) SSDT will have an opportunity to have direct access to the domestic capital market after the Proposed Spin-off for its business expansion, thus widening the financing channels available and increasing the financing ability of SSDT; and
(d) the Company intends to maintain not less than 51% equity interests in SSDT. Accordingly, the Company will continue to benefit from any potential upside in the Set-top Box Business through consolidation of financial results generated by the SSDT Group.

Immediately after the Proposed Spin-off, the Set-top Box Business will be held by China Resources Jinhua whose A Shares are listed on the Shenzhen Stock Exchange and RGB, being the controlling shareholder of China Resources Jinhua holding approximately 58.52% equity interests in China Resources Jinhua as enlarged by the issue of the Consideration Shares, the actual figures of which may be subject to changes to be proposed by the PRC authorities during their approval process on the value of Yantai Receivables, the value of Suining Assets

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LETTER FROM THE BOARD

and the number of the Consideration Shares to be issued and assuming that there is no change in the number of issued shares of China Resources Jinhua from the Latest Practicable Date to the date of Completion, will maintain a controlling attributable equity interests in the Set-top Box Business through China Resources Jinhua. Immediately after the Proposed Spin-off, RGB will still retain a controlling stake in the Set-top Box Business through its holding of not less than 51% equity interests in China Resources Jinhua as enlarged by the issue of the Consideration Shares, the actual figures of which may be subject to changes to be proposed by the PRC authorities during their approval process on the value of Yantai Receivables, the value of Suining Assets and the number of the Consideration Shares to be issued and assuming that there is no change in the number of issued shares of China Resources Jinhua from the Latest Practicable Date to the date of completion of the Asset Restructuring.

The consideration for the Yantai Disposal, the SSDT Disposal, the Suining Acquisition and the Jinhua Acquisition under the Framework Agreement has been determined after arm’s length negotiations with reference to the final valuation report on the fair value of SSDT. Although the Suining Branch was loss-making in the financial year ended 31 December 2012 recording a net loss of RMB30.69 million and the losses of Suining Branch for the four months ended 30 April 2013 was RMB1.24 million, it is stipulated in the Framework Agreement that any loss arising from the operations of China Resources Jinhua, including the Suining Branch, between the Valuation Date and the date of Completion will be borne by China Resources Textiles. The Directors therefore consider that the benefits of the SSDT Disposal and the Proposed Spin-off outweigh the possible negative impact that may be brought by the acquisition of the Suining Assets which constitute part of the consideration for the SSDT Disposal and the Directors (including the independent non-executive Directors) are of the view that the terms of the Framework Agreement are fair and reasonable and are on normal commercial terms and the transactions contemplated under the Framework Agreement are in the interests of the Company and the Shareholders as a whole.

ASSURED ENTITLEMENT

As the injection of the Set-top Box Business by RGB into China Resources Jinhua by way of the SSDT Disposal pursuant to the Framework Agreement is in effect a separate listing of the Set-top Box Business on the Shenzhen Stock Exchange through China Resources Jinhua, it is a spin-off for the purposes of PN 15 and therefore subject to its requirements. The Company will submit a spin-off proposal to the Stock Exchange pursuant to PN 15 in relation to the Proposed Spin-off in due course.

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LETTER FROM THE BOARD

Spin-off and having taken into account the advice of the Company’s PRC legal counsel, the Board has resolved not to provide assured entitlement to the Shareholders under the Proposed Spin-off for the following reasons:

(a) if the Proposed Spin-off proceeds, the A Shares of China Resources Jinhua will only be listed and traded on the Shenzhen Stock Exchange only and no other stock exchange for the time being; and
(b) under the current PRC laws and regulations, foreign investors (other than qualified foreign institutional investors and some other exceptions including citizens of Hong Kong, Macau Special Administrative Region and Taiwan working and residing in the PRC) including Shareholders holding the Shares of the Company are restricted from subscribing for or trading in A shares listed on any of the PRC domestic stock exchanges.

In view of the legal restrictions on foreign investors to subscribe for and holding A Shares of China Resources Jinhua, the Board will propose a resolution for approval by the Independent Shareholders at the SGM to waive the assured entitlement under the Proposed Spin-off.

CONDITIONAL SPECIAL DIVIDEND

The Directors have resolved at the Board meeting held on 10 May 2013 to declare a conditional Special Dividend of HK4 cents per Share and, subject to the Independent Shareholders’ approval at the SGM regarding a waiver of the assured entitlement under the Proposed Spin-off and Completion taking place, the Special Dividend will be paid to the Qualifying Shareholder(s) on the Record Date which date will be determined and announced by the Company.

If the resolution in respect of the waiver is not passed and/or if the Completion does not take place, no special dividend will be paid.

Given the waiver sought from Shareholders in respect of assured entitlement to the A Shares of China Resources Jinhua, the Board considers that a ‘‘sweetener’’ by way of a Special Dividend would be appropriate in the circumstances. Having considered the historical dividend payment and current financial position of the Company, the Board considers that it is fair and reasonable to declare a conditional Special Dividend of HK4 cents per Share to the Shareholders as ‘‘sweetener’’ for the waiver of the assured entitlement under the Proposed Spin-off.

Based on 2,803,735,469 Shares in issue as at the Latest Practicable Date and the Special Dividend of HK4 cents per Share, the total amount of the Special Dividend will be approximately HK$112.1 million. Based on 2,873,596,969 Shares as enlarged by the full exercise of share options exercisable into a total of 69,861,500 Shares which remain outstanding as at the Latest Practicable Date and were granted by the Company to eligible participants conferring them the rights to subscribe for new Shares pursuant to the 2008 Share Option Scheme of the Company, the total amount of Special Dividend will be approximately HK$114.9 million. Upon review of the financial position of the Company, the Board has

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LETTER FROM THE BOARD

decided to pay the Special Dividend to the Qualifying Shareholders in cash out of the Company’s reserves, instead of its contributed surplus as referred to in the Company’s announcement dated 10 May 2013.

Further announcement(s) in relation to the expected timetable of the Special Dividend will be made by the Company as and when appropriate.

The Special Dividend will be paid subject to (i) the Independent Shareholders’ approval at the SGM regarding a waiver of the assured entitlement under the Proposed Spin-off and (ii) Completion taking place. Shareholders and potential investors should exercise caution when dealing in or investing in the securities of the Company.

Mr. Wong Wang Sang, Stephen, being the controlling Shareholder holding 968,061,099 Shares which represent approximately 34.53% of the existing issued Shares as at the Latest Practicable Date, will abstain from voting on the resolution in respect of waiver of the assured entitlement under the Proposed Spin-off at the SGM in accordance with the requirement under PN 15. Mr. Shi Chi and Mr. Zhang Zhi, by virtue of their interests in the Proposed Spin-off as SSDT Minority Shareholders, have also agreed to voluntarily abstain from voting on the resolution in respect of waiver of the assured entitlement under the Proposed Spin-off at the SGM.

The transactions contemplated under the Framework Agreement and the Proposed Spin-off are subject to, among other things, approvals by the relevant PRC government authorities including the CSRC and SASAC. Accordingly, Shareholders and potential investors should be aware that there is no assurance that the transactions contemplated under the Framework Agreement and the Proposed Spin-off will proceed. Shareholders and potential investors should therefore exercise caution when dealing in or investing in the securities of the Company.

SGM

The SGM Notice is set out on pages 31 to 32 of this circular. Ordinary resolution in respect of the waiver of the assured entitlement under the Proposed Spin-off will be proposed at the SGM.

A form of proxy for use at the SGM is enclosed with this circular. If you do not intend to attend, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the Company’s branch share registrar in Hong Kong, Hong Kong Registrars Limited, 17M Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as practicable and in any event not later than forty-eight (48) hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting at the SGM or any adjourned meeting should you so desire.

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LETTER FROM THE BOARD

VOTING BY POLL

Pursuant to Rule 13.39(4) of the Listing Rules, any vote of Shareholders at a general meeting must be taken by poll. The Chairman of the SGM will therefore demand voting on the resolution set out in the SGM Notice be taken by way of poll pursuant to bye-law 66 of the Bye-laws.

On a poll, every Shareholder present in person (or, in the case of a Shareholder being a corporation, by its duly authorised representative) or by proxy shall have one vote for each Share registered in his name in the register. A Shareholder entitled to more than one vote on a poll need not cast all his votes in the same way.

INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

An Independent Board Committee comprising all of the Company’s independent nonexecutive Directors, namely Mr. So Hon Cheung, Stephen, Mr. Li Weibin and Ms. Chan Wai Kay, Katherine, has been formed to advise the Independent Shareholders as to whether the waiver of the assured entitlement under the Proposed Spin-off is in the interests of the Company and the Shareholders as a whole and to advise the Independent Shareholders on how to vote in relation to the ordinary resolution to be proposed to approve the waiver of the assured entitlement under the Proposed Spin-off, taking into account the advice of Optima Capital.

Optima Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders as to whether the waiver of the assured entitlement under the Proposed Spin-off is in the interests of the Company and the Shareholders as a whole and to advise the Independent Shareholders on how to vote in respect of the waiver of the assured entitlement under the Proposed Spin-off at the SGM.

RECOMMENDATIONS

Your attention is drawn to (a) the letter from the Independent Board Committee set out on page 23 of this circular; and (b) the letter from Optima Capital to the Independent Board Committee and the Independent Shareholders set out on pages 24 to 30 of this circular.

The Independent Board Committee, having taken into account the advice of Optima Capital, considers that the waiver of the assured entitlement under the Proposed Spin-off is fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to waive the assured entitlement under the Proposed Spin-off.

Yours faithfully, For and on behalf of the Board Skyworth Digital Holdings Limited Lin Wei Ping Executive Chairman

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

SKYWORTH DIGITAL HOLDINGS LIMITED (創維數碼控股有限公司[*] )

(Incorporated in Bermuda with limited liability)

(Stock Code: 00751)

5 June 2013

To the Independent Shareholders

Dear Sir or Madam,

WAIVER OF ASSURED ENTITLEMENT

We refer to the circular of Skyworth Digital Holdings Limited (the ‘‘Company’’) dated 5 June 2013 (the ‘‘Circular’’) of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

We have been authorized by the Board to form the Independent Board Committee to advise the Independent Shareholders on whether the waiver of the assured entitlement under the Proposed Spin-off is in the interests of the Company and the Shareholders as a whole.

Optima Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard. We wish to draw your attention to the letter from Optima Capital as set out on pages 24 to 30 of the Circular and the letter from the Board as set out on pages 8 to 22 of the Circular.

Having considered, among others, the factors and reasons considered by, and the advice of Optima Capital as set out in its letter of advice, we consider that the waiver of the assured entitlement under the Proposed Spin-off is fair and reasonable and in the interests of the Company and the Shareholders as a whole. We therefore recommend the Independent Shareholders to vote in favour of the ordinary resolution to approve the waiver of the assured entitlement under the Proposed Spin-off at the SGM.

Yours faithfully

For and on behalf of the Independent Board Committee of

Skyworth Digital Holdings Limited

So Hon Cheung, Stephen Li Weibin Chan Wai Kay, Katherine

Independent Non-executive Directors

For identification purposes only

– 23 –

LETTER FROM OPTIMA CAPITAL

The following is the text of a letter of advice from Optima Capital, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the waiver of the assured entitlement under the Proposed Spin-off for the purpose of incorporation in this circular.

OPTIMA CAPITAL LIMITED Suite 1501, 15th Floor Jardine House 1 Connaught Place Central Hong Kong

5 June 2013

To: the Independent Board Committee and the Independent Shareholders of Skyworth Digital Holdings Limited

Dear Sirs/Madam,

PROPOSED SPIN-OFF OF SHENZHEN SKYWORTH DIGITAL TECHNOLOGY CO., LTD.

INTRODUCTION

We refer to our appointment to advise the Independent Board Committee and the Independent Shareholders on whether the wavier (the ‘‘Waiver’’) being sought by the Company from the strict compliance with paragraph 3(f) of PN 15 is fair and reasonable and in the interests of the Company and the Shareholders as a whole. Details of the Waiver are set out in the letter from the Board contained in the circular of the Company dated 5 June 2013 (the ‘‘Circular’’), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless otherwise specified.

The Company announced on 22 April 2013 that the conditional Framework Agreement in relation to the Asset Restructuring (involving the proposed injection of the Set-top Box Business into China Resources Jinhua) was entered into among RGB, China Resources Jinhua, China Resources Textiles and the SSDT Minority Shareholders. RGB is an indirect whollyowned subsidiary of the Company while SSDT is currently a 70%-owned subsidiary of RGB. China Resources Jinhua is a company incorporated in the PRC with its A Shares listed on the Shenzhen Stock Exchange. The proposed injection of the Set-top Box Business into China Resources Jinhua by way of the SSDT Disposal pursuant to the Framework Agreement is considered as a spin-off under the Listing Rules. Pursuant to paragraph 3(f) of PN 15, where there is a proposal to effect a separate listing of assets or businesses wholly or partially within the Group, the Company is expected to have due regard to the interests of the Shareholders by providing them with an assured entitlement to the A Shares, either by way of a distribution in specie of A Shares or by way of preferred application in an offer of the A Shares. In this regard, the Company will make an application to the Stock Exchange for the Waiver from the

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LETTER FROM OPTIMA CAPITAL

strict compliance with the requirement under paragraph 3(f) of PN 15 to provide an assured entitlement of A Shares to the Shareholders. The Waiver is subject to the approval of the Independent Shareholders at the SGM.

The Company also announced on 10 May 2013, among other things, the declaration of the Special Dividend of HK$0.04 per Share to the Shareholders which is subject to the approval of the Independent Shareholders at the SGM regarding the Waiver and Completion taking place.

The Independent Board Committee, comprising all the independent non-executive Directors, namely Mr. So Hon Cheung, Stephen, Mr. Li Weibin and Ms. Chan Wai Kay, Katherine, has been established to make recommendation to the Independent Shareholders as to whether the Waiver is fair and reasonable and in the interests of the Company and the Shareholders as a whole. Optima Capital has been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

In formulating our opinion, we have relied on the information and facts supplied, and the opinions expressed, by the executive Directors and management of the Company and have assumed that the information and facts provided and opinions expressed to us are true, accurate and complete in all material respects at the time they were made and up to the date of this letter. We have also sought and received confirmation from the executive Directors that no material facts have been omitted from the information supplied and opinions expressed to us. We have relied on such information and consider that the information we have received is sufficient for us to reach an informed view and have no reason to believe that any material information has been withheld, nor doubt the truth or accuracy of the information provided. We have not, however, conducted any independent investigation into the business and affairs of the Group, nor have we carried out any independent verification of the information supplied.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In considering whether the Waiver is fair and reasonable and in the interests of the Company and the Shareholders as a whole, we have taken into account the principal factors and reasons set out below:

1. Background

The Group is principally engaged in (i) the manufacturing and sale of consumer electronic products and upstream accessories which consist mainly of TV products, digital set-top boxes and LCD modules; and (ii) property holding.

SSDT is a company incorporated in the PRC on 11 April 2001 and is currently owned as to approximately 70% by RGB which is an indirect wholly-owned subsidiary of the Company. The remaining equity interest in SSDT is held as to 11% by Shenzhen Lingyou and as to the remaining 19% by certain individuals (collectively, the SSDT Minority Shareholders). Save for Mr. Shi Chi (who is an executive Director and a director of SSDT) and Mr. Zhang Zhi (who is a director of SSDT), the SSDT Minority Shareholders are otherwise third parties independent of the Company and its connected persons. The SSDT Group is principally engaged in the business of manufacturing and sale of digital set-top boxes (i.e. the Set-top Box Business).

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LETTER FROM OPTIMA CAPITAL

2. The Proposed Spin-off

The Company proposes to inject the Set-top Box Business into China Resources Jinhua, a company with its A Shares listed on the Shenzhen Stock Exchange, by way of the SSDT Disposal. Pursuant to the Framework Agreement, RGB and the SSDT Minority Shareholders will respectively transfer 70% and 30% of the equity interest in SSDT to China Resources Jinhua at an aggregate consideration of approximately RMB3,500 million (equivalent to approximately HK$4,398 million) which was determined after arm’s length negotiations among the parties to the Framework Agreement and based on the final appraised value of the SSDT Group. The consideration of the SSDT Disposal will be settled (i) as to approximately RMB387 million (equivalent to approximately HK$486 million) by the assignment of the Yantai Receivables from China Resources Jinhua to RGB; (ii) as to approximately RMB145 million (equivalent to approximately HK$182 million) by the transfer of the assets and liabilities of the Suining Branch (i.e. the Suining Assets) to RGB or an entity designated by RGB, which will hold the respective interests of RGB and the SSDT Minority Shareholders in the Suining Assets; and (iii) as to the remaining balance of approximately RMB2,968 million (equivalent to approximately HK$3,730 million) by way of the issue and allotment of 66.1% and 33.9% of the Consideration Shares to RGB and the SSDT Minority Shareholders respectively.

The Yantai Receivables of RMB387 million will be settled by the transfer of 47,984,194 A Shares (i.e. the Settlement Shares) to RGB by China Resources Textiles at the transfer price of RMB8.06 per Settlement Share.

The issue price of RMB8.06 per Consideration Share was determined taking into account the average trading price of the A Shares in the last 20 trading days immediately preceding the Price Determination Date and the payment by China Resources Jinhua of a cash dividend of RMB0.30 (tax inclusive) for every 10 A Shares held pursuant to the resolutions passed by the shareholders of China Resources Jinhua on 19 April 2013. Based on the aforesaid proposed initial issue price, 243,415,123 Consideration Shares and 124,885,421 Consideration Shares will be issued by China Resources Jinhua to RGB and the SSDT Minority Shareholders respectively.

Based on the current shareholding structure of China Resources Jinhua and assuming that there is no change in the number of issued shares of China Resources Jinhua from the Latest Practicable Date to the date of Completion, it is expected that the Company will through RGB indirectly hold approximately 58.52% equity interest in China Resources Jinhua as enlarged by the issue of the Consideration Shares immediately upon completion of the Proposed Spin-Off. The final figures may subject to changes to be proposed by the PRC authorities during their approval process on the value of Yantai Receivables, the value of Suining Assets and the number of the Consideration Shares to be issued. As China Resources Jinhua will hold 100% equity interests in SSDT and the Company intends to maintain not less than 51% equity interests in China Resources Jinhua through RGB immediately after Completion, SSDT will continue to be an indirect non whollyowned subsidiary of the Company.

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LETTER FROM OPTIMA CAPITAL

3. Reasons for the Proposed Spin-off

The Board has considered spinning off the Set-top Box Business by way of a separate listing of SSDT’s shares on the ‘‘A’’ share market of the Shenzhen Stock Exchange since 2007 but such plan was delayed given the adverse situation in the worldwide securities markets in 2008.

The revenue from sales of set-top boxes of SSDT recorded significant increase in recent years which was in line with the increase in popularity and coverage of digital broadcasting in the PRC and benefited from product diversification of SSDT. The revenue and segment results of the Set-top Box Business reached HK$3,365 million and HK$347 million respectively for the year ended 31 March 2012. The Board is of the view that the Set-top Box Business has grown to a sufficient size to warrant a separate listing and considered the Proposed Spin-off would enable the Set-top Box Business to obtain a listing status on the ‘‘A’’ share market of the Shenzhen Stock Exchange.

As the PRC domestic market is the major market of the Set-top Box Business, the Proposed Spin-off, which allows listing of the Set-top Box Business on the Shenzhen Stock Exchange, is believed to further increase the profile and reputation of SSDT, enhance the brand image of SSDT in the domestic market and enhance its ability and chances to capture potential market growth. As SSDT is incorporated under the laws of the PRC as a PRC joint stock limited company, it would require to undergo a restructuring involving changing its enterprise status if it were to seek a listing of its shares on a stock exchange outside of the PRC. Such restructuring may not be beneficial to its existing business operations which are now conducted under its current business licence. In light of these, we concur with the Director’s view that the ‘‘A’’ share market in the PRC is an appropriate venue for the listing of SSDT.

The Directors are also of the view that the Proposed Spin-off will be beneficial to both the Company and the SSDT Group for the following reasons:

(i) the Proposed Spin-off essentially separates the Set-top Box Business from the Proposed Retained Business and provides investors and the market with greater clarity on the business and financial status of the Set-top Box Business;
(ii) the Proposed Spin-off will allow the management team of the SSDT Group to focus on opportunities which are specific to the business of the SSDT Group and to enjoy greater flexibility to grow its business;
(iii) SSDT will have an opportunity to have direct access to the domestic capital market after the Proposed Spin-off for its business expansion, thus widening the financing channels available and increasing the financing ability of SSDT; and
(iv) the Company intends to maintain not less than 51% equity interests in SSDT and will continue to benefit from any potential upside in the Set-top Box Business through consolidation of financial results generated by the SSDT Group.

We concur with the Directors’ view above that the Proposed Spin-off is in the interests of the Company and the Shareholders as a whole.

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LETTER FROM OPTIMA CAPITAL

4. Effects of the Proposed Spin-off on the Group

Dilution of interest in the SSDT Group

Based on the terms of the Framework Agreement, immediately upon completion of the Proposed Spin-off, it is expected that the attributable interest held by the Company in SSDT will be reduced from the current level of 70% to approximately 58.52%.

Earnings

According to the audited consolidated financial statements of the Group for the year ended 31 March 2012, the Group recorded audited turnover and total segmental results of approximately HK$28,137 million and HK$2,023 million respectively, of which the SSDT Group accounted for approximately HK$3,365 million and HK$347 million respectively. As the transactions contemplated under the Framework Agreement will be regarded as equity transactions, no gain or loss is expected to arise immediately upon completion of the Proposed Spin-off.

After completion of the Proposed Spin-off, SSDT will remain a subsidiary of the Company and its results will continue to be consolidated into the financial statements of the Group, although the percentage of non-controlling interests will increase. Nevertheless, the Company is expected to enjoy the benefits that may be brought about by the Proposed Spin-off to SSDT as it continues to be the controlling shareholder of SSDT through China Resources Jinhua.

Net asset value

Based on the unaudited consolidated financial statements of the Group for the six months ended 30 September 2012, the total equity attributable to equity holders of the Company was approximately HK$8,792 million as at 30 September 2012, representing approximately HK$3.25 per Share based on 2,705,303,523 Shares in issue as at that date. Based on the terms of the Framework Agreement and the financial information of the SSDT Group as at 30 September 2012 and assuming completion of the Proposed Spin-off, the Company expects that the total equity attributable to equity holders of the Company will increase to approximately HK$9,239 million (equivalent to approximately HK$3.42 per Share), representing an improvement of approximately 5.1%.

Shareholders should however note that the above financial effects are estimated based on the appraised values of the SSDT Group, the Yantai Receivables and the Suining Assets as at 31 December 2012 and are for illustration only. The exact financial effects will depend on the final terms of the Proposed Spin-off (including the final issue price of the Consideration Shares) and the financial position of the SSDT Group as at the date of Completion which may be different from those as set out above.

– 28 –

LETTER FROM OPTIMA CAPITAL

5. The Waiver

Pursuant to paragraph 3(f) of PN 15, where there is a proposal to effect a separate listing of assets or businesses wholly or partially within the Group, the Company is expected to have due regard to the interests of its existing Shareholders by providing them with an assured entitlement, either by way of a distribution in specie of the existing A Shares or by way of preferred application in an offer of the A Shares. However, having taken into account the requirements of the PRC and the advice from the Company’s legal counsel as to PRC laws, the Directors consider that the provision of assured entitlement under either a distribution or a preferred application in an offer of the A Shares shall not be feasible, for the reason that according to the existing laws and regulations of the PRC, no foreign investors are allowed to subscribe for A shares in the PRC unless they are specifically qualified as (i) qualified foreign institutional investors; (ii) RMB qualified foreign institutional investors; (iii) Hong Kong, Macau and Taiwan residents who work and reside in the PRC; or (iv) foreign individuals who are eligible for permanent residence in the PRC. Given that a substantial number of Shareholders will be considered as foreign investors for the purpose of subscription for online and offline A shares in the PRC, it would not be feasible for the Company to provide the assured entitlement to such Shareholders.

In light of the above, the Company proposes that no assured entitlement to A Shares will be offered to the Shareholders. In the circumstances, the Company will apply for the Waiver from the strict compliance with the requirements of paragraph 3(f) of PN 15, which is subject to the approval of the Independent Shareholders at the SGM.

In view of the legal requirements in the PRC and the fact that the A Shares will only be listed and traded on the Shenzhen Stock Exchange and no other stock exchange for the time being, we consider the Waiver to be fair and reasonable.

6. Special Dividend

Having considered the historical dividend payment and the current cash position of the Group, the Company proposed the Special Dividend of HK$0.04 per Share to the Shareholders, which is subject to the approval of the Waiver by the Independent Shareholders at the SGM and Completion taking place. The Special Dividend will be paid to the Shareholder(s) whose name(s) appear on the register of members of the Company at the close of business on the Record Date which will be determined and announced by the Company.

If the resolution in respect of the Waiver is not passed and/or if Completion does not take place, no Special Dividend will be paid.

Based on 2,803,735,469 Shares in issue as at the Latest Practicable Date and the Special Dividend of HK$0.04 per Share, the total amount of the Special Dividend will be approximately HK$112.1 million. Based on 2,873,596,969 Shares as enlarged by the full exercise of outstanding share options of the Company which are exercisable into a total of 69,861,500 Shares as at the Latest Practicable Date, the maximum amount of Special Dividend will be approximately HK$114.9 million. Such total amount of Special Dividend

– 29 –

LETTER FROM OPTIMA CAPITAL

is in excess of the potential dilution in profit contribution by the SSDT Group to the Group as a result of the Proposed Spin-off, which is estimated to amount of approximately HK$39.8 million based on the segment results of the SSDT Group of HK$347 million for the year ended 31 March 2012. The Special Dividend will be paid in cash out of the Company’s reserves, instead of its contributed surplus as referred to in the Company’s announcement dated 10 May 2013.

As the entire amount of the consideration of the SSDT Disposal will be settled by assignment of the Yantai Receivables (which will then be settled by transfer of the Settlement Shares to RGB), the issue of Consideration Shares and the transfer of the Suining Assets, no cashflow will be generated from the Proposed Spin-off to the Company. The Special Dividend, which will be paid out of the current cash position of the Group, serves as a “sweetener” for the Waiver. In light of the abovementioned legal requirements in the PRC, we consider the Waiver to be fair and reasonable, and the Special Dividend provides additional rewards to the Shareholders.

OPINION

In view of the legal requirements in the PRC and having taken into account (i) the benefits that the Proposed Spin-off may bring to the Group; (ii) the positive financial effects of the Proposed Spin-off to the Group; and (iii) the Special Dividend as discussed above, we are of the view that the Waiver is fair and reasonable and in the interests of the Company and the Shareholders as a whole. We therefore advise the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Waiver.

Yours faithfully, for and on behalf of OPTIMA CAPITAL LIMITED Beatrice Lung Managing Director

– 30 –

NOTICE OF SPECIAL GENERAL MEETING

SKYWORTH DIGITAL HOLDINGS LIMITED

(創維數碼控股有限公司[*] )

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

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting of Skyworth Digital Holdings Limited (the ‘‘Company’’) will be held at Regus Business Centre, 35/F Central Plaza, 18 Harbour Road, Wanchai, Hong Kong on 25 June 2013 at 10 a.m. for the purpose of considering and, if thought fit, passing, with or without amendments, the following resolution as ordinary resolution:

ORDINARY RESOLUTION

‘‘THAT the assured entitlement requirement in respect of the A shares of 華潤錦華股份有限公司 (China Resources Jinhua Co., Ltd.) (‘‘China Resources Jinhua’’) in accordance with Practice Note 15 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited if the proposed disposal of 100% equity interests in 深圳創維數字技術股份有限公司 (Shenzhen Skyworth Digital Technology Co., Ltd.) to China Resources Jinhua as more particularly described in the circular of the Company dated 5 June 2013, of which this notice forms part, proceeds, be and is hereby waived.’’

For and on behalf of the Board Skyworth Digital Holdings Limited Leung Chi Ching, Frederick Executive Director, Chief Financial Officer & Company Secretary

Hong Kong, 5 June 2013

English names of entities are translated for identification purpose only

As at the date hereof, the Board of the Company comprised of Ms. Lin Wei Ping as executive Chairman of the Board, Mr. Yang Dongwen as executive Director and the chief executive officer, Mr. Lu Rongchang, Mr. Leung Chi Ching, Frederick and Mr. Shi Chi as executive Directors, and Mr. So Hon Cheung, Stephen, Mr. Li Weibin, and Ms. Chan Wai Kay, Katherine as independent non-executive Directors.

For identification purposes only

– 31 –

NOTICE OF SPECIAL GENERAL MEETING

Registered office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Principal place of business: Rooms 1601–04 Westlands Centre 20 Westlands Road Quarry Bay Hong Kong

Notes:

(1) A member entitled to attend and vote at a meeting of the Company is entitled to appoint another person as his proxy to attend and, subject to the provisions of the bye-laws of the Company, vote on his behalf. A member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf. A proxy need not be a member of the Company.
(2) In order to be valid, the form of proxy must be deposited together with a power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of that power or authority, at the office of the Company’s branch share registrar in Hong Kong, Hong Kong Registrars Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time fixed for holding the meeting or adjourned meeting thereof. Completion and return of the form of proxy will not preclude any member from attending and voting in person should he so desire.
(3) The register of members of the Company will be closed from 21 June 2013 to 25 June 2013 (both days inclusive), during which period no transfer of shares in the Company will be effected. In order to qualify for attending the special general meeting, all transfers, accompanied by the relevant share certificates, have to be lodged with the Company’s branch share registrar and transfer office in Hong Kong, Hong Kong Registrars Limited, at Rooms 1712–1716, 17/F., Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not later than 4:30 p.m. on 20 June 2013.

– 32 –

AI assistant

Skyworth Group Limited — Proxy Solicitation & Information Statement 2013

49442_rns_2013-06-04_23edb97b-f1a4-45a6-abf3-2e14f7a307ee.pdf

WAIVER OF ASSURED ENTITLEMENT UNDER A PROPOSED SPIN-OFF OF THE DIGITAL SET-TOP BOX BUSINESS OF THE GROUP AND NOTICE OF SPECIAL GENERAL MEETING

Optima Capital Limited

DEFINITIONS

DEFINITIONS

DEFINITIONS

SKYWORTH DIGITAL HOLDINGS LIMITED (創 維 數 碼 控 股 有 限 公 司[*] )

(Stock Code: 00751)

WAIVER OF ASSURED ENTITLEMENT UNDER A PROPOSED SPIN-OFF OF THE DIGITAL SET-TOP BOX BUSINESS OF THE GROUP AND

NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

LETTER FROM THE BOARD

FRAMEWORK AGREEMENT

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Lock-up Period

Placing

LETTER FROM THE BOARD

Net profit attributable to the assets

Yantai Jinlun

Profit guarantee

FINANCIAL EFFECT OF THE SSDT DISPOSAL AND THE PROPOSED SPIN-OFF

INFORMATION ON THE COMPANY, THE REMAINING GROUP, CHINA RESOURCES JINHUA, RGB, SHENZHEN LINYOU, CHINA RESOURCES TEXTILES AND SSDT

REASONS FOR AND BENEFITS OF THE TRANSACTIONS AND THE PROPOSED SPIN-OFF

LETTER FROM THE BOARD

ASSURED ENTITLEMENT

CONDITIONAL SPECIAL DIVIDEND

SGM

VOTING BY POLL

INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

RECOMMENDATIONS

SKYWORTH DIGITAL HOLDINGS LIMITED (創 維 數 碼 控 股 有 限 公 司[*] )

WAIVER OF ASSURED ENTITLEMENT

Yours faithfully

Skyworth Digital Holdings Limited

So Hon Cheung, Stephen Li Weibin Chan Wai Kay, Katherine

LETTER FROM OPTIMA CAPITAL

PROPOSED SPIN-OFF OF SHENZHEN SKYWORTH DIGITAL TECHNOLOGY CO., LTD.

INTRODUCTION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background

2. The Proposed Spin-off

3. Reasons for the Proposed Spin-off

4. Effects of the Proposed Spin-off on the Group

Dilution of interest in the SSDT Group

Earnings

Net asset value

5. The Waiver

6. Special Dividend

OPINION

SKYWORTH DIGITAL HOLDINGS LIMITED

(創 維 數 碼 控 股 有 限 公 司[*] )

NOTICE OF SPECIAL GENERAL MEETING

ORDINARY RESOLUTION

Notes:

More from Skyworth Group Limited

Skyworth Group Limited Proxy Solicitation & Information Statement 2013

SKYWORTH DIGITAL HOLDINGS LIMITED (創維數碼控股有限公司[*] )

SKYWORTH DIGITAL HOLDINGS LIMITED (創維數碼控股有限公司[*] )

(創維數碼控股有限公司[*] )