Tsun Yip Holdings Limited — Proxy Solicitation & Information Statement 2015

Jan 6, 2015

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 licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in CNC Holdings Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or the 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.

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CNC HOLDINGS LIMITED 中國新華電視控股有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 8356)

(1) CONNECTED TRANSACTION;

(2) PROPOSED AMENDMENTS OF THE TERMS AND CONDITIONS OF THE CONVERTIBLE BONDS; AND

(3) NOTICE OF EXTRAORDINARY GENERAL MEETING

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

A letter from the Board is set out on pages 4 to 14 of this circular and a letter from the Independent Board Committee is set out on pages 15 to 16 of this circular. A letter of advice from Nuada Limited, the independent financial adviser to the Independent Board Committee and the Independent Shareholders of the Company is set out on pages 17 to 26 of this circular.

A notice convening the EGM to be held at Rooms 2601-2605, 26/F., China Resources Building, 26 Harbour Road, Wanchai, Hong Kong on Wednesday, 21 January 2015 at 10:00 a.m. is set out on pages 33 to 35 of this circular. A form of proxy for use at the EGM is enclosed with this circular.

Whether or not you are able to attend the EGM, you are requested to complete the accompanying form of proxy, in accordance with the instructions printed thereon and deposit the same at the Hong Kong branch share registrar of the Company, Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

6 January 2015

CHARACTERISTICS OF GEM

GEM has been positioned as a market designed to accommodate companies to which a higher investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM.

– i –

CONTENTS

	Page
Characteristics of GEM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	i
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Letter from Nuada Limited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Appendix – General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	27
Notice of EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	33

– ii –

DEFINITIONS

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

• “Amendment of Interest Rate”

the proposed amendment of the interest rate of the Convertible Bonds from 5% per annum to 3% per annum pursuant to the Supplemental Deed

• “Amendment of Terms” the proposed amendment of certain terms and conditions of the Convertible Bonds pursuant to the Supplemental Deed, including the Maturity Date Extension and Amendment of Interest Rate

• “Board” the board of Directors

• “Business Day”

• any day (excluding a Saturday, a Sunday and any public holiday and any day on which a tropical cyclone warning no.8 or above or a “black” rainstorm warning signal is hoisted or remains hoisted in Hong Kong at any time between 9:00 a.m. and 12:00 noon and is not lowered or discontinued at or before 12:00 noon) on which licensed banks are generally open for business in Hong Kong throughout their normal business hours

• “CNC HK”

• China Xinhua News Network Co., Limited (中國新華新聞電 視網有限公司), a company incorporated in Hong Kong and a wholly-owned subsidiary of Xinhua News Agency (新華社 and a substantial Shareholder of the Company

• “Company”

• CNC Holdings Limited, a company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the GEM

• “connected person(s)”

• has the meaning ascribed to it under the GEM Listing Rules

• “Conversion Period”

• the period commencing from the date of the issue of the Convertible Bonds and ending upon the Extended Maturity Date

• “Conversion Price”

• the price at which each Conversion Share shall be issued upon conversion

• “Conversion Share(s)”

• new Share(s) falling to be allotted and issued upon exercise of the conversion rights attaching to the Convertible Bonds

– 1 –

DEFINITIONS

• “Convertible Bonds”

• the convertible bonds issued by the Company to CNC HK in the principal amount of HK$397,030,210 on 9 December 2011

• “Director(s)” director(s) of the Company

• “EGM” the extraordinary general meeting of the Company to be convened and held for the Independent Shareholders and/ or the Shareholders (as the case may be) to consider and, if thought fit, approve the Supplemental Deed and Amendment of Terms and transactions contemplated thereunder

• “Extended Maturity Date” the proposed extended maturity date of the Convertible Bonds, being 9 December 2017, pursuant to the Supplemental Deed

• “GEM” The Growth Enterprise Market of the Stock Exchange

• “GEM Listing Rules” The Rules Governing the Listing of Securities on GEM

• “Group” the Company and its subsidiaries

• “HK$” Hong Kong dollars, the lawful currency of Hong Kong

• “Hong Kong”

the Hong Kong Special Administrative Region of the PRC

• “Independent Board Committee”

• an independent committee of the Board comprising all the independent non-executive Directors, formed for the purpose of advising the Independent Shareholders as to the terms of the Supplemental Deed and the transactions contemplated thereunder

• “Independent Financial Adviser” or “Nuada Limited”

Nuada Limited, a corporation licensed under SFO to carry out type 6 (advising on corporation finance) regulated activities and the independent financial adviser appointed to advise the Independent Board Committee and the Independent Shareholders with regard to the Amendment of Terms

• “Independent Shareholder(s)”

the Shareholder(s) who are not interested or involved in the Supplemental Deed, the Amendment of Terms and the transactions contemplated thereunder

– 2 –

DEFINITIONS

• “Latest Practicable Date” 2 January 2015, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained in this circular

• “Maturity Date Extension” the proposed extension of the maturity date of the Convertible Bonds for 3 years to 9 December 2017 pursuant to the Supplemental Deed

• “Original Maturity Date” 9 December 2014 “PRC” The People’s Republic of China excluding Hong Kong, Macau Special Administrative Region of the PRC and Taiwan for the purpose of this circular

• “SFO” The Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) as amended or otherwise modified from time to time

• “Shares” ordinary shares of the Company

• “Shareholder(s)” holder(s) of Share(s)

• “Stock Exchange” The Stock Exchange of Hong Kong Limited

“Sale and Purchase Agreement” the sale and purchase agreement dated 6 September 2011 entered into between the Company and CNC HK and other vendors in respect of acquisition of Xinhua TV Asia-Pacific Operating Co., Limited

• “Supplemental Deed” the supplemental deed dated 9 December 2014 entered into between the Company and CNC HK in relation to the Amendment of Terms

“Takeovers Code” The Hong Kong Code on Takeovers and Mergers

“%” per cent.

– 3 –

LETTER FROM THE BOARD

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CNC HOLDINGS LIMITED 中國新華電視控股有限公司

(incorporated in the Cayman Islands with limited liability) (Stock Code: 8356)

Executive Directors: Mr. Zhang Hao Mr. Zou Chen Dong Dr. Lee Yuk Lun Mr. Kan Kwok Cheung Mr. Chia Kar Hin, Eric John

Registered office: Cricket Square Hutchins Drive PO Box 2681 Grand Cayman KY1-1111 Cayman Islands

Non-executive Director:

Dr. Li Yong Sheng

Independent non-executive Directors:

Mr. Jin Hai Tao Mr. Wong Chung Yip, Kenneth Mr. Hau Chi Kit Mr. Chu Siu Lun, Ivan

Head office and principal place of business in Hong Kong: Rooms 2601-2605 26/F., China Resources Building 26 Harbour Road Wanchai Hong Kong

6 January 2015

To the Shareholders,

Dear Sir or Madam

(1) CONNECTED TRANSACTION; AND (2) PROPOSED AMENDMENTS OF THE TERMS AND CONDITIONS OF THE CONVERTIBLE BONDS

INTRODUCTION

References are made to the announcements dated 11 October 2011, 9 December 2011 and 10 December 2014 and the circular dated 19 November 2011 of the Company in relation to, amongst other things, the issuance of the Convertible Bonds and the Supplemental Deed to which the parties agreed to amend certain terms and conditions of the Convertible Bonds.

– 4 –

LETTER FROM THE BOARD

The Company entered into the Sale and Purchase Agreement with CNC HK, pursuant to which the Company issued certain Shares and the Convertible Bonds in the principal amount of HK$397,030,210 to CNC HK as the consideration of the acquisition of its interest in Xinhua TV Asia-Pacific Operating Co., Limited. The Convertible Bonds bears interest of 5% per annum and can be convertible into Shares. All outstanding Convertible Bonds will mature on 9 December 2014 pursuant to the original terms and conditions of the Convertible Bonds.

As at the Latest Practicable Date, a portion of the Convertible Bonds in the principal amount of HK$120,000,000 was converted into 612,244,897 Shares. The Convertible Bonds in the principal amount of HK$277,030,210 is still outstanding.

The purpose of this circular is to provide you with, amongst other things, (i) further details of the Supplemental Deed and the Amendment of Terms; (ii) a letter from the Independent Board Committee to the Independent Shareholders; (iii) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Supplemental Deed and the Amendment of Terms; and (iv) a notice of the EGM to consider and if thought fit, to approve the resolution in relation to the Amendment of Terms.

THE SUPPLEMENTAL DEED

On 9 December 2014 (after trading hours), the Company entered into the Supplemental Deed with CNC HK pursuant to which the Company and CNC HK agreed to amend certain terms and conditions of the Convertible Bonds, where (i) the maturity date of the Convertible Bonds will be extended for 3 years and the Conversion Period will accordingly be extended for 3 years to 9 December 2017; and (ii) the interest rate of the Convertible Bonds will be amended from 5% per annum to 3% per annum for the extended period, being from 9 December 2014 to 9 December 2017. The Amendment of Terms is arrived at after arm’s length negotiation between the Company and CNC HK.

Pursuant to the Supplemental Deed, the Amendment of Terms is subject to the satisfaction of the following conditions:

• (a) the passing by the Independent Shareholders at the EGM of the necessary resolutions to approve the Supplemental Deed and the Amendment of Terms;

• (b) the Stock Exchange having approved the Amendment of Terms pursuant to the GEM Listing Rules and the Listing Committee granting approval for the listing of, and permission to deal in, the Conversion Shares on the Stock Exchange and the approval not having been subsequently revoked or cancelled; and

• (c) all necessary consents and approvals required to be obtained on the part of the Company and CNC HK in respect of the Amendment of Terms having been obtained.

– 5 –

LETTER FROM THE BOARD

None of the above conditions could be waived by the parties to the Supplemental Deed. The effective date of the Supplemental Deed shall be on the date when all its conditions precedents are fulfilled.

As at the Latest Practicable Date, the condition (c) above has been satisfied. Saved as disclosed, none of the above conditions have been fulfilled.

THE CONVERTIBLE BONDS

Apart from the Amendment of Terms, all other terms of the Convertible Bond will remain unchanged.

The principal terms of the Convertible Bond as amended pursuant to the Supplemental Deed are summarized as follows:

Outstanding principal HK$277,030,210 amount Maturity The Extended Maturity Date, being 9 December 2017. To the extent that the Convertible Bonds has not been previously converted, the Company shall repay the outstanding principal amount of the Convertible Bonds on the Extended Maturity Date.

• Interest rate 3% per annum

Conversion rights The Convertible Bonds are convertible at any time, and from time to time, at the option of the holder of the Convertible Bonds, subject to compliance with the Takeovers Code and the GEM Listing Rules and any other statutory and regulatory requirements.

Conversion Shares 1,413,419,439 Conversion Shares will be issued on full conversion of the Convertible Bonds based on the outstanding principal amount of approximately HK$277,030,210 and the Conversion Price of approximately HK$0.196 per Conversion Share.

The Conversion Shares represent approximately 38.27% of the existing issued share capital of the Company and approximately 27.68% of the issued share capital of the Company as enlarged by the Conversion Shares.

– 6 –

LETTER FROM THE BOARD

Conversion Price

HK$0.196 per Conversion Share, subject to adjustment.

The Conversion Price of HK$0.196 represents:

• (i) a discount of approximately 40.61% to the closing price of HK$0.33 per Share as quoted on the Stock Exchange on the date of the Supplemental Deed;

• (ii) a discount of approximately 35.31% to the average closing price of HK$0.303 per Share as quoted on the Stock Exchange for the five (5) consecutive trading days prior to the date of the Supplemental Deed; and

• (iii) a discount of approximately 41.49% to the closing price of HK$0.335 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

The Conversion Price will from time to time be adjusted upon the occurrence of subdivision or consolidation or reclassification of Shares, capitalisation issues, capital distribution (other than distribution paid out of net profits), rights issues at a price which is less than 90% of the then market price of the Shares, issue of securities with rights of conversion into or exchange for or subscription for Shares at a total effective consideration per Share less than 90% of the then market price of the Shares, and any modification of the rights of conversion or exchange or subscription attaching to the aforementioned securities resulting in reduction of the total effective consideration per Share being to less than 90% of the then market price of the Shares.

Transferability

The Convertible Bonds are transferable, provided that none of the Convertible Bonds may be transferred to any connected person of the Company.

– 7 –

LETTER FROM THE BOARD

• Limitations on conversion

• No conversion rights will be exercised by any of the holders of the Convertible Bonds if upon such conversion and immediately following the issue of the relevant Conversion Shares, (i) such holder and persons acting in concert (as defined in the Takeovers Code) with it would directly or indirectly control or be interested in an aggregate of 30% (or such other amount as may from time to time be specified in the Takeovers Code as being the level for triggering a mandatory general offer) or more of the Shares in issue, or if such holder and persons acting in concert (as defined in the Takeovers Code) with it would otherwise be obligated to make a general offer for the Shares in issue not being owned by them under Rule 26 of the Takeovers Code following such conversion; or (ii) the public float of the Shares will fall below 25% as required under the GEM Listing Rules.

Ranking

• It is expected that the Conversion Shares, when allotted and issued, will rank pari passu in all respects with all Shares in issue on the date of allotment and issue thereof.

• Voting rights

• Holders of the Convertible Bonds will not be permitted to attend or vote at meetings of the Company.

• Listing and trading

• No application will be made by the Company to the Listing Committee for the listing of the Convertible Bonds.

APPLICATION OF LISTING

No application will be made of the listing of, and permission to deal in, the Convertible Bonds on the Stock Exchange or any other stock exchange.

– 8 –

LETTER FROM THE BOARD

REASONS FOR THE AMENDMENT OF TERMS

The Amendment of Terms allows the Company to refinance the debts under the Convertible Bonds under a favourable term, i.e. reduction in interest rate, for a further 3 years. Since the Company is in a development stage, the Board is of the view that the Maturity Date Extension will enable the Company to retain its funds for potential project development and the Amendment of Interest Rate will further reduce the interest burden of the Company during the extended period. In addition, the Amendment of Terms will provide flexibility to the Group’s deployment of its financial resources to fund its operations and development as well as to plan its working capital requirements. Furthermore, although the Convertible Bonds are currently in-the-money, CNC HK cannot convert the whole amount of the remaining Convertible Bonds on or before the Original Maturity Date without triggering the mandatory offer obligation under Rule 26 of the Takeovers Code.

The Amendment of Terms was determined after arm’s length negotiations between the Company and CNC HK, after considering all the proposed amendments as a whole package, the net asset value of the Company, the general market conditions and the trading price of the Shares as at the date of Supplemental Deed.

The Board considers the Maturity Date Extension of the Convertible Bonds for a further 3 years is fair and reasonable for the reasons that: (i) the Group is in a net current liabilities position and net liabilities as at 30 September 2014 according the interim report of the Company and there may be capital requirements for the operation of the businesses of the Company in the near future. Hence, the Board expects that the Company will not have enough cash to redeem the Convertible Bonds in the next few months or within the forthcoming financial year; (ii) the Maturity Date Extension would give reasonable time for the Group to improve its business performance and financial position; and (iii) such extension with reduction of interest rate is the result of commercial negotiations between the Company and CNC HK at arm’s length basis taking into account current interest rate, best lending rate, current market cost of capital and weighted average cost of capital of the Company. Thus, the Maturity Date Extension is in the best interests of the Company and the Shareholders as a whole.

The Amendment of Terms is arrived at after arm’s length negotiation between the Company and CNC HK. The Board (excluding the independent non-executive directors who will form their views after considering the advice of the Independent Financial Adviser) considers that the terms and conditions of the Supplemental Deed are fair and reasonable, and the Amendment of Terms is in the interests of the Company and the Shareholders as a whole. The Directors are of the view that the Amendment of Terms will not pose any significant impact on the operations of the Group.

– 9 –

LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE AMENDMENT OF TERMS

Effect on liquidity

According to the Company’s interim report for the six months ended 30 September 2014, the Group had cash and cash equivalents amounted to approximately HK$44.8 million. Furthermore, the Group recorded net current liabilities of approximately HK$206.5 million and net liabilities of approximately HK$79.4 million as at 30 September 2014. The Maturity Date Extension will enable the Group to postpone a substantial cash outflow as the maturity Date of the Convertible Bonds is extended. In light of the above, the Maturity Date Extension would release the liquidity and working capital pressure of the Group.

Effect on gearing

As at 30 September 2014, the Group had a gearing ratio of approximately 84.3%, representing the Group’s total borrowing which comprised of bank borrowings, promissory note, Convertible Bonds and finance lease payables to the Group’s total assets. The management of the Company expects that there will not be any material adverse changes to the gearing of the Group as a result of the Maturity Date Extension subject to the new valuation report which to be prepared by an independent valuer. However, if the conversion rights attaching to the Convertible Bonds are exercised, the gearing position of the Group would be improved.

Effect on finance cost

The Amendment of Interest rate will reduce the burden of interest of the Company under extended Conversion Period. Assuming no conversion occurred during the extended Conversion Period, the interest payment of approximately HK$5.5 million will be saved per year under the Amendment of Terms. In addition, the imputed financial interest (finance cost) under the accounting treatment will be accounted in the statement of profit or loss subject to the new effective interest rate from a new valuation report which to be prepared by an independent valuer.

– 10 –

LETTER FROM THE BOARD

EFFECT ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

For illustration purpose only and without taking into account any other possible changes in the shareholding structure given that the Convertible Bonds have certain conversion restrictions, the shareholding structure of the Company (i) as at the Latest Practicable Date; and (ii) immediately upon full conversion of the Convertible Bonds at a conversion price of HK$0.196 is as follows:

CNC HK Shunleetat (BVI) Limited (Note a) Proud Glory Investments Limited (Note b) Chia Kar Hin, Eric John_(Note c)_ Public	As at the Latest Practicable Date Number of Shares % 1,086,580,561 29.42% 220,590,000 5.97% 140,000,000 3.79% 5,500,000 0.15% 2,240,638,570 60.67% 3,693,309,131 100.00%	Immediately upon full conversion of the Convertible Bonds (at the Conversion Price) Number of Shares % 2,500,000,000 48.95% 220,590,000 4.32% 140,000,000 2.74% 5,500,000 0.11% 2,240,638,570 43.88% 5,106,728,570 100.00%	Immediately upon full conversion of the Convertible Bonds (at the Conversion Price) Number of Shares % 2,500,000,000 48.95% 220,590,000 4.32% 140,000,000 2.74% 5,500,000 0.11% 2,240,638,570 43.88% 5,106,728,570 100.00%
			100.00%

Notes:

• (a) Mr. Kan Kwok Cheung, an executive Director, through his interest in Shunleetat (BVI) Limited, is interested in 220,590,000 Shares as at the Latest Practicable Date.

• (b) Dr. Lee Yuk Lun, an executive Director, through his interest in Proud Glory Investments Limited, is interested in 140,000,000 Shares as at the Latest Practicable Date.

• (c) Mr. Chia Kar Hin, Eric John, an executive Director, through his personal interest, is interested in 5,500,000 Shares as at the Latest Practicable Date.

– 11 –

LETTER FROM THE BOARD

FUND RAISING ACTIVITIES IN THE PRIOR 12 MONTHS PERIOD

Date of

Date of Net proceeds Intended use announcement Description (approximately) of proceeds Actual use of proceeds 17 July 2014 Placing of Shares HK$81.6 million For the Group’s Payment of registered business development, capital of a subsidiary payment of registered incorporated in the capital of a subsidiary PRC of approximately incorporated in the HK$31.6 million, PRC, repayment of repayment of unsecured unsecured and nonand non-interest interest bearing bearing advances from advances from certain certain Directors of Directors and general approximately HK$16.4 working capital of the million and general Company working capital of the Company and Group’s business development

INFORMATION ON THE GROUP AND CNC HK

The Company is an investment holding company and the Shares of which are listed on the GEM of the Stock Exchange. The Group is principally engaged in the provision of waterworks engineering services for the public sector in Hong Kong, television broadcasting business in the Asia-Pacific region (excluding the PRC) in return for advertising and related revenue and large outdoor display screen advertisement business in the PRC.

CNC HK is a company incorporated in Hong Kong and a wholly-owned subsidiary of 中 國新華新聞電視網有限公司 which is a company incorporated in the PRC and a wholly-owned subsidiary of Xinhua News Agency (新華社). Its principal business is investment holding. CNC HK is the only company which has been granted the rights to develop the television broadcasting network by the PRC government and Xinhua News Agency.

– 12 –

LETTER FROM THE BOARD

GEM LISTING RULES IMPLICATIONS

Pursuant to Rule 34.05 of the GEM Listing Rules, any alteration in the terms of convertible debt securities after issue must be approved by the Stock Exchange, except where the alteration takes effect automatically under the existing terms of such convertible debt securities. The Company has submitted the application to the Stock Exchange for its approval of the Amendment of Terms contemplated under the Supplemental Deed pursuant to Rule 34.05 of the GEM Listing Rules.

As at the Latest Practicable Date, CNC HK is interested in 1,086,580,561 Shares, representing approximately 29.42% of the issued share capital of the Company. Accordingly, CNC HK is a substantial Shareholder and a connected person of the Company under Rule 20.07(1) of the GEM Listing Rules. Accordingly, the Amendment of Terms as contemplated under the Supplemental Deed constitutes a connected transaction of the Company under the GEM Listing Rules.

As the Amendment of Terms does not fall into any exemption under Rule 20.71 of the GEM Listing Rules, the Amendment of Terms is subject to the reporting, announcement and shareholders’ approval requirements of Chapter 20 of the GEM Listing Rules. CNC HK has material interest in the Supplemental Deed, the Amendment of Terms and the transactions contemplated thereunder and will abstain from voting in the EGM for approval of the Supplemental Deed, the Amendment of Terms and the transactions contemplated thereunder. Other than CNC HK, no other Shareholder has a material interest in the Supplemental Deed and is required to abstain from voting in the EGM.

EGM AND PROXY ARRANGEMENT

The EGM will be held for the Independent Shareholders at Rooms 2601-2605, 26/F., China Resources Building, 26 Harbour Road, Wanchai, Hong Kong at 10:00 a.m. on Wednesday, 21 January 2015 for the Shareholders to consider and, if thought fit, approve the Supplemental Deed, the Amendment of Terms and the transactions contemplated thereunder. The notice of the EGM is set out on pages 33 to 35 of this circular. The voting on such resolution will be conducted by way of poll in accordance with Rule 17.47(4) of the GEM Listing Rules.

Apart from Mr. Zhang Hao, Mr. Zou Chen Dong and Dr. Li Yong Sheng, each of whom is a Director nominated by CNC HK and concurrently holds managerial position in CNC HK and/or Xinhua News Agency (新華社), none of the Directors have a material interest in the Supplemental Deed and none of them were required to abstain from voting on the Board resolutions in relation to the Supplemental Deed, the Amendment of Terms and the transactions contemplated thereunder.

To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, there is (i) no voting trust or other agreement or arrangement or understanding entered into by or binding upon any Shareholder; and (ii) no obligation or entitlement of any Shareholder as at the Latest Practicable Date, whereby its has or may have temporarily or permanently passed control over the exercise of the voting right in respect of its Shares to a third party, either generally or on a case-by-case basis.

– 13 –

LETTER FROM THE BOARD

A form of proxy for use at the EGM is enclosed with this circular. Whether or not you are able to attend the EGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and deposit the same at the Hong Kong branch share registrar of the Company, Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof (as the case may be) should you so wish.

RECOMMENDATION

Taking into account the reasons set out above, the Board (excluding all independent nonexecutive Directors, whose views are set out in the section headed “Letter from the Independent Board Committee” in this circular), consider that the Amendment of Terms is fair and reasonable and in the best interests of the Company and the Shareholders as a whole, and therefore, they recommend the Independent Shareholders to vote in favor of the proposed resolution as set out in the notice of EGM.

ADDITIONAL INFORMATION

Your attention is drawn to the (i) letter from the Independent Board Committee as set out on pages 15 to 16 of this circular which contains recommendations of the Independent Board Committee to the Independent Shareholders regarding the resolution to approve the Supplemental Deed, the Amendment of Terms and transactions contemplated thereunder; and (ii) the letter from Nuada Limited as set out on pages 17 to 26 of this circular which contains its recommendations to the Independent Board Committee and the Independent Shareholders in respect of the Supplemental Deed, the Amendment of Terms and transactions contemplated thereunder and the principal factors and reasons considered by Nuada Limited in arriving at its recommendations.

Yours faithfully

For and on behalf of the Board of

CNC Holdings Limited Li Yuet Tai Company Secretary

Hong Kong, 6 January 2015

– 14 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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CNC HOLDINGS LIMITED 中國新華電視控股有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 8356)

6 January 2015

To the Independent Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTION AND PROPOSED AMENDMENTS OF THE TERMS AND CONDITIONS OF THE CONVERTIBLE BONDS

INTRODUCTION

We refer to the circular of the Company of even date (the “ Circular ”), of which this letter forms part. Unless specified otherwise, capitalized terms used herein shall have the same meanings as those defined in the Circular.

We have been appointed by the Board to advise you on the terms of the Supplemental Deed, the Amendment of Terms and the transaction contemplated thereunder. Nuada Limited has been appointed as independent financial adviser to advise you and us in this regard. Details of their advice, together with the principal factors and reasons they have taken into consideration in giving such advice, are set out on pages 17 to 26 of the Circular. Your attention is also drawn to the letter from the Board in the Circular and the additional information set out in the appendix thereto.

RECOMMENDATION

Having considered the terms of the Supplemental Deed, the Amendment of Terms, the transactions contemplated thereunder and taking into account the independent advice of Nuada Limited and the relevant information contained in the letter from the Board, we are of the opinion that the Supplemental Deed, the Amendment of Terms and the transactions contemplated thereunder are fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

– 15 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Accordingly we recommend that you vote in favour of the ordinary resolution to be proposed at the EGM to approve the Supplemental Deed, the Amendment of Terms and the transactions contemplated thereunder.

Yours faithfully, For and on behalf of Independent Board Committee

Mr. Jin Hai Tao Mr. Wong Chung Yip, Kenneth Mr. Hau Chi Kit Mr. Chu Siu Lun, Ivan

– 16 –

LETTER FORM NUADA LIMITED

Set out below is the text of a letter received from Nuada Limited, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders regarding the Supplemental Deed and the Amendment of Terms for the purpose of inclusion in this circular.

==> picture [170 x 40] intentionally omitted <==

Unit 1805-08, 18/F OfficePlus @Sheung Wan 93-103 Wing Lok Street Sheung Wan, Hong Kong

香港上環永樂街93-103號 協成行上環中心18樓1805-08室

6 January 2015

To the Independent Board Committee and

the Independent Shareholders of CNC Holdings Limited

Dear Sirs,

CONNECTED TRANSACTION PROPOSED AMENDMENTS OF THE TERMS AND CONDITIONS OF THE CONVERTIBLE BONDS

INTRODUCTION

We refer to our engagement as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Amendment of Terms, details of which are set out in the letter from the Board (the “ Letter from the Board ”) contained in the circular of the Company to the Shareholders dated 6 January 2015 (the “ Circular ”), of which this letter forms a part. Capitalised terms used in this letter shall have the same meanings ascribed to them in the Circular unless the context otherwise requires.

On 9 December 2014, the Company entered into the Supplemental Deed with CNC HK pursuant to which the Company and CNC HK agreed to amend certain terms and conditions of the Convertible Bonds. Pursuant to the Supplemental Deed, the maturity date of the Convertible Bonds will be extended to 9 December 2017 and the annual interest rate of the Convertible Bonds will be amended to 3% per annum, subject to the conditions precedent contained in the Supplemental Deed being satisfied.

Pursuant to Rule 34.05 of the GEM Listing Rules, any alteration in the terms of convertible debt securities after issue must be approved by the Stock Exchange, except where the alteration takes effect automatically under the existing terms of such convertible debt securities. The Company has applied to the Stock Exchange for its approval of the Amendment of Terms contemplated under the Supplemental Deed pursuant to Rule 34.05 of the GEM Listing Rules.

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LETTER FORM NUADA LIMITED

As at the Latest Practicable Date, CNC HK is interested in 1,086,580,561 Shares, representing approximately 29.42% of the issued share capital of the Company. Accordingly, CNC HK is a substantial Shareholder and a connected person of the Company under Rule 20.07(1) of the GEM Listing Rules. Accordingly, the Amendment of Terms as contemplated under the Supplemental Deed constitutes a connected transaction of the Company under the GEM Listing Rules.

As the Amendment of Terms does not fall into any exemption under Rule 20.71 of the GEM Listing Rules, the Amendment of Terms is subject to the reporting, announcement and shareholders’ approval requirements of Chapter 20 of the GEM Listing Rules. CNC HK will abstain from voting in the EGM for approval of the Supplemental Deed, the Amendment of Terms and the transactions contemplated thereunder.

An Independent Board Committee (comprising all independent non-executive Directors, including Mr. Jin Hai Tao, Mr. Wong Chung Yip, Kenneth, Mr. Hau Chi Kit and Mr. Chu Siu Lun, Ivan) has been formed to advise the Independent Shareholders and we, Nuada Limited, have been appointed to advise the Independent Board Committee and the Independent Shareholders regarding the Amendment of Terms.

BASIS OF OUR OPINION

In formulating our opinion and recommendation, we have relied on the information and representations supplied, and the opinion expressed, by the Directors and management of the Company. We have assumed that such information and statements, and representations made to us or referred to in the Circular are true, accurate and complete in all material respects as of the Latest Practicable Date and continue to be so as at the date of the EGM.

We have also assumed that all statements of belief, opinion and intention made by the Company or the Directors in the Circular were reasonably made after due enquiry. We have no reason to suspect that any material facts or information have been omitted or withheld from the information contained or opinions expressed in the Circular or to doubt the truth, accuracy and completeness of the information and representations provided by the management of the Company or the Directors. The Directors collectively and individually accept full responsibility for the accuracy of the information in the Circular and confirm, having made all reasonable enquires, that to the best of their knowledge and belief, opinions expressed in the Circular have been arrived at after due and careful consideration and no other facts have been omitted that would make any statements in the Circular misleading.

We relied on the Company that it has provided us sufficient information to reach an informed view and to provide a reasonable basis for our opinions. We have not, however, carried out any independent verification of the information provided by the Company, the Directors and the management of the Company, nor have we conducted an independent investigation into the business and affairs, financial condition and future prospects of the Company. Furthermore, we have not considered the taxation implication on the Company or the Shareholders as a result of the entering into the Supplemental Deed.

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LETTER FORM NUADA LIMITED

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion regarding the Amendment of Terms, we have considered the following principal factors and reasons:

1. Background information of the Convertible Bonds

The Company entered into the Sale and Purchase Agreement with CNC HK, pursuant to which the Company issued certain Shares and the Convertible Bonds in the principal amount of HK$397,030,210 to CNC HK as the consideration of the acquisition of its interest in Xinhua TV Asia-Pacific Operating Co., Limited. The Convertible Bonds bears interest of 5% per annum and can be convertible into Shares. All outstanding Convertible Bonds shall mature on 9 December 2014 pursuant to the original terms and conditions of the Convertible Bonds.

As at the Latest Practicable Date, a portion of the Convertible Bonds in the principal amount of HK$120,000,000 was converted into 612,244,897 Shares. The Convertible Bonds in the principal amount of HK$277,030,210 is still outstanding.

2. The Supplemental Deed

On 9 December 2014 (after trading hours), the Company entered into the Supplemental Deed with CNC HK pursuant to which the Company and CNC HK agreed to amend certain terms and conditions of the Convertible Bonds, where (i) the maturity date of the Convertible Bonds will be extended for 3 years and the Conversion Period will accordingly be extended for 3 years to 9 December 2017; and (ii) the interest rate of the Convertible Bonds will be amended from 5% per annum to 3% per annum for the extended period, being from 9 December 2014 to 9 December 2017. Apart from the Amendment of Terms, all other terms of the Convertible Bonds will remain unchanged. Please refer to the section headed “The Supplemental Deed” for detailed information of the Amendment of Terms.

Pursuant to the Supplemental Deed, the Amendment of Terms is subject to the satisfaction of the following conditions:

• (a) the passing by the Independent Shareholders at the EGM of the necessary resolutions to approve the Supplemental Deed and the Amendment of Terms;

• (b) the Stock Exchange having approved the Amendment of Terms pursuant to the GEM Listing Rules and the Listing Committee granting approval for the listing of, and permission to deal in, the Conversion Shares on the Stock Exchange and the approval not having been subsequently revoked or cancelled; and

• (c) all necessary consents and approvals required to be obtained on the part of the Company and CNC HK in respect of the Amendment of Terms having been obtained.

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LETTER FORM NUADA LIMITED

None of the above conditions could be waived by the parties to the Supplemental Deed. The effective date of the Supplemental Deed shall be on the date when all its conditions precedents are fulfilled.

3. Reasons for the Amendment of Terms

(i) Maturity Date Extension

According to the Supplemental Deed, the maturity date of the Convertible Bonds will be extended for 3 years and the Conversion Period will accordingly be extended for 3 years to 9 December 2017. As disclosed in the Letter from the Board, the Company is in a development stage, the Board considers that the Maturity Date Extension will enable the Company to retain its funds for potential project development.

As stated in the Company’s annual report for the year ended 31 March 2014 (the “ Annual Report 2013/14 ”), the revenue recorded an increase of approximately 10.7% from approximately HK$293.0 million for the year ended 31 March 2013 to approximately HK$324.3 million for the year ended 31 March 2014. The net loss attributable to owners of the Company for the year ended 31 March 2014 increased by 271.2% to approximately HK$431.3 million (2013: net loss of approximately HK$116.2 million) as compared with that for the previous year. The increase in net loss was mainly resulted from the impairment loss in respect of goodwill, intangible assets and trade receivables for the year. The Group has recorded net current liabilities of approximately HK$583.1 million and net liabilities of approximately HK$407.9 million respectively as at 31 March 2014.

According to the Company’s interim report for the six months ended 30 September 2014 (the “ Interim Report 2014/15 ”), the unaudited revenue increased from approximately HK$145.5 million for the six months ended 30 September 2013 to approximately HK$156.8 million for the six months ended 30 September 2014, representing an increase of approximately 7.8%. The net loss attributable to owners of the Company decreased by approximately 27.4% to approximately HK$24.6 million for the six months ended 30 September 2014 (2013: approximately HK$33.9 million) as compared with that for the same period of the previous year. The decrease in net loss was mainly resulted from decrease in amortisation expenses for the six months ended 30 September 2014. Further, the Group recorded net current liabilities of approximately HK$206.5 million (with cash and cash equivalent of approximately HK$44.8 million) and net liabilities of approximately HK$79.4 million as at 30 September 2014.

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LETTER FORM NUADA LIMITED

Based on the Group recorded net current liabilities (with cash and cash equivalent of approximately HK$44.8 million) and net liabilities as at 30 September 2014, we consider that the Maturity Date Extension can relieve the imminent need of the Company to repay the Convertible Bonds according to the Original Maturity Date as the Company was not able to repay the outstanding principal amount of the Convertible Bonds, i.e. HK$277,030,210, on the Original Maturity Date. As such, we are of the view and concur with the view of the Board that the Maturity Extension will enable the Company to retain its funds for potential project development and it is in the interests of the Company and the Shareholders as a whole.

(ii) Amendment of Interest Rate

In accessing the fairness and reasonableness of the Amendment of Interest Rate, we have reviewed all the proposed issue of convertible bonds announced by companies listed on the Stock Exchange from 9 November 2014, being one month prior to the date of the Supplemental Deed, up to the date of the Supplemental Deed and identified 7 proposed issue of convertible bonds initially announced during the period (the “ Comparable(s) ”) for the purpose of illustrating the applicable interest rates of other convertible bonds under recent market practice. We consider that a review period of one calendar month prior and up to the date of the Supplemental Deed is appropriate to capture the recent market practice because the Comparables are considered for the purpose of taking a market general reference for the recent market practice in relation to the average interest rate of other proposed issue of convertible bonds conduct by other listed companies in the Stock Exchange under the recent market conditions and sentiments. Although the Comparables are not similar to that of the Company in term of business, size (market capitalization), shareholding spread and operation in similar geographic, as the purpose of our analysis is to illustrate the applicable interest rates of other convertible bonds issued by other listed companies in the Stock Exchange under recent market practice, instead of comparing the financial data of other listed companies in the Stock Exchange under similar business models, size, marketplace and/or operating circumstance, we consider the Comparables do serve the purpose of illustrating the recent market practice of issued convertible bonds and give general information of convertible bonds issued by other listed companies in the Stock Exchange recently. The table set out below shows details of the Comparables.

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LETTER FORM NUADA LIMITED

						Relevant
						premium/
					Relevant	discount rate
					premium/	of conversion
					discount rate	price over/to
					of conversion	the average
					price over/	closing price
					to the closing	of the relevant
					price of the	shares for
					relevant shares	the last five
					on the last	trading days
					trading day of	of the relevant
					the relevant	shares or
					shares or	the date of
					the date of	the relevant
					the relevant	agreement
			Date of		agreement (the	(the “Last
			the relevant	Connected	“Last Trading	Five Trading	Average
No.	Company	Stock code	announcement	transaction	Date”)	Date”)	interest rate
					(%)	(%)	(% per annum)
1.	Merdeka Mobile Group Limited	8163	9/12/2014	No	30.6	30.7	0
2.	Haitian Hydropower International	8261	1/12/2014	No	–19.9	–16.1	5
	Limited
3.	China Resources and	269	28/11/2014	No	11.7	9.3	9
	Transportation Group Limited
4.	Pan Asia Mining Limited	8173	23/11/2014	Yes	47.1	47.1	2
5.	Green International Holdings	2700	21/11/2014	No	–32.0	–24.4	1.33 (0% for
	Limited						first year; 2%
							in the second
							and third year)
6.	HC International, INC.	2280	20/11/2014	No	20.0	17.0	5
7.	Louis XIII Holdings Limited	577	20/11/2014	No	–23.5	–25.2	0
				Mean	4.9	5.5	3.19
				Minimum	–32	–25.2	0
				Maximum	47.1	47.1	9
	The Company				–40.6	–35.3	3

According to the above table, we noted that the range of the conversion price of the Comparables for Last Trading Date ranged from a discount of approximately 32.0% to a premium of approximately 47.1%, where the Conversion Price represents a discount of approximately 40.6% to the closing price of the Shares on the date of Supplemental Deed. Although the discount rate of Conversion Price to the closing price of Shares on the date of Supplemental Deed is out of the lower bound of that of Comparables, we are of the view that given (i) the poor financial condition of the Group with net current liabilities and net liabilities and there is insufficient fund for the Group to repay the outstanding principal amount of the Convertible Bonds upon its maturity on 9 December 2014; (ii) it is difficult for the Company to conduct other fund arising activities given the aforesaid poor financial condition of the Group (please refer to the paragraph headed “(iii) Other financing alternatives” below for detail analysis); (iii) the net liabilities per Share according to the Interim Report 2014/15; (iv) the Conversion Price represents a discount of approximately 59.6% to the closing price of HK$0.485 per Share as quoted on the Stock Exchange on the 5 September 2011, being the last trading day for the Shares before the date of the announcement dated 11 October 2011 in relation the Sale and Purchase Agreement whereas the Conversion Price represents a discount of approximately 40.6% to the closing price

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LETTER FORM NUADA LIMITED

of HK$0.33, being the last trading day before the date of the announcement dated 10 December 2014 in relation to the Supplemental Deed and Amendment of Terms; and (iv) if the Company is not able to repay the outstanding principal amount of the Convertible Bonds due on 9 December 2014, the Company would breach the relevant terms of the aforesaid convertible bonds and would be charged by the holder of the aforesaid convertible bonds, and therefore we consider that the Conversion Price is fair and reasonable.

As stated in the above table, the mean of the interest rate of the Comparables ranged from 0% per annum to 9% per annum, with mean of approximately 3.19%. The Amendment of Interest Rate of 3% per annum is slightly below the mean and within the range of the mean interest rate of the Comparables. Given the poor financial condition of the Group and the Amendment of Interest Rate is below the mean of that of the Comparables, we consider that the Amendment of Interest Rate is fair and reasonable.

According to the management of the Company, the Amendment of Terms is arrived at after arm’s length negotiation between the Company and the CNC HK. Given (i) the unfavourable financial position of the Group as stated above; (ii) the gear ratio (total debt/ total asset) of the Group as at 30 September 2014 according to the Interim Report 2014/15 is approximately 1.2, which mean the Company is under net liability; (iii) the absence of other financing alternative available to the Group as stated in the paragraph headed “(iii) Other financing alternative” below; (iv) the reduction of the interest rate of the Convertible Bonds from 5% to 3% per annum would reduce the financial burden of the Group amounted to approximately HK$5.5 million per annum (i.e. 2% times HK$277,030,210, being the outstanding principal amount of the Convertible Bonds as at the Latest Practicable Date and (v) CNC HK is interested in 1,086,580,561 Shares, representing approximately 29.42% of the issued share capital of the Company as at the Latest Practicable Date and CNC HK cannot convert the whole amount of the remaining Convertible Bonds on or before the Original Maturity Date without triggering the mandatory offer obligation under Rule 26 of the Takeovers Code which is a restriction clause of the Convertible Bonds (Please refer to the Letter from the Board for detailed information), we are of the view and concur with the view of the management of the Company that the Amendment of Terms are justifiable.

(iii) Other financing alternatives

We have enquired with the management of the Company and the management of the Company confirmed that apart from Amendment of Terms, the Group also consider alternative financing methods, such as bank borrowings, right issue and open offer, to be other possible fund raising alternatives available to the Group. However, the management of the Company are of the view that the ability of the Group to obtain bank borrowings usually depends on the Group’s financial position (where the financial position of the Group is poor as stated in the paragraph headed “(i) Maturity Date of Extension” above) and the then prevailing market condition. Furthermore, such alternative may be subject to lengthy due diligence and negotiations with banks.

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LETTER FORM NUADA LIMITED

In considering equity financing such as rights issue and open offer, the Directors consider that substantial costs in form of placing commission or underwriting commission would be incurred and such fund raising alternatives would be relatively time consuming as compared to the Amendment of Terms. Further, uncertainties in procuring favorable terms in such commercial underwriting also exist in financing through rights issue and open offer.

According to the Company’s announcements dated 3 July 2014 and 17 July 2014 respectively (the “ July Placing ”), we understand that the Company has completed a placing of new Shares with a net proceeds of approximately HK$81.6 million. However, after discussion with the management of the Company, we are of the view and concur with the view of the management of the Company that there is uncertainty in conducting equity financing successfully given (i) the July Placing is under best effort basis which mean the placing would be lapsed which is the case of the Company’s another fund raising exercise that announced in January 2014 (the placing of new Shares announced in January 2014 was lapsed due to unfavourable market condition in which it is also under best effort basis); (ii) the dollar amount of Convertible Bonds is approximately 3.4 times of the net proceeds of July Placing; (iii) the poor financial position of the Group as stated in the paragraph headed “(i) Maturity Date Extension” above and (iv) the other reasons as stated in the previous paragraph.

In addition, the management of the Company consider that as (i) the interest rate of the Convertible Bonds decreased from 5% per annum to 3% per annum; and (ii) the aforesaid interest rate is below the mean of that of the Comparables as stated in the paragraph headed “(II) Amendment of Interest Rate”, the revised interest rate, i.e. 3% per annum, of the Convertible Bonds is justifiable.

In light of the above, we are of the view and concur with the view of the Directors that the Amendment of Terms is in the interests of the Company and the Shareholders as a whole.

4. Shareholding Structure of the Company

Set out below is the shareholding structure of the Company (i) as at the Latest Practicable Date; and (ii) immediately upon the full conversion of the Convertible Bonds at a conversion price of HK$0.196.

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LETTER FORM NUADA LIMITED

			Immediately upon full conversion	Immediately upon full conversion
			of the Convertible Bonds	(at the
	As at the Latest	Practicable Date	Conversion Price)
	Number of Shares	_% _	Number of Shares	%
CNC HK	1,086,580,561	29.42%	2,500,000,000	48.95%
Shunleetat (BVI) Limited_(Note a)_	220,590,000	5.97%	220,590,000	4.32%
Proud Glory Investments Limited
(Note b)	140,000,000	3.79%	140,000,000	2.74%
Chia Kar Hin, Eric John_(Note c)_	5,500,000	0.15%	5,500,000	0.11%
Public	2,240,638,570	60.67%	2,240,638,570	43.88%
	3,693,309,131	100.00%	5,106,728,570	100.00%

Notes:

• (a) Mr. Kan Kwok Cheung, an executive Director, through his interest in Shunleetat (BVI) Limited, is interested in 220,590,000 Shares as at the Latest Practicable Date.

• (b) Dr. Lee Yuk Lun, an executive Director, through his interest in Proud Glory Investments Limited, is interested in 140,000,000 Shares as at the Latest Practicable Date.

• (c) Mr. Chia Kar Hin, Eric John, an executive Director, through his personal interest, is interested in 5,500,000 Shares as at the Latest Practicable Date.

As illustrated from the above table, the shareholding interests of the public Shareholders would be diluted from approximately 60.67% as at the Latest Practicable Date to approximately 43.88% upon the full conversion of the Convertible Bonds, which represents a dilution of approximately 27.67%.

Given (i) the poor financial condition of the Group with net current liabilities and net liabilities and there is insufficient fund for the Group to repay the outstanding principal amount of the Convertible Bonds upon its maturity on 9 December 2014; (ii) it is difficult for the Company to conduct other fund arising activities given the aforesaid poor financial condition of the Group (please refer to the paragraph headed “(iii) Other financing alternatives” above for detail analysis); (iii) the net liabilities per Share according to the Interim Report 2014/15; (iv) the Conversion Price represents a discount of approximately 59.6% to the closing price of HK$0.485 per Share as quoted on the Stock Exchange on the 5 September 2011, being the last trading day for the Shares before the date of the announcement dated 11 October 2011 in relation the Sale and Purchase Agreement whereas the Conversion Price represent a discount of approximately 40.6% to the closing price of HK$0.33, being the last trading day before the date of the announcement dated 10 December 2014 in relation to the Supplemental Deed and the Amendment of Terms; and (iv) if the Company is not able to repay the outstanding principal amount of the Convertible Bonds due on 9 December 2014, the Company would breach the relevant terms of the aforesaid convertible bonds and would be charged by the holder of the aforesaid convertible bonds, the aforesaid dilution of shareholding interests of the public Shareholders is justifiable.

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LETTER FORM NUADA LIMITED

5. Financial effect

The Amendment of Terms would bring interest expense to the Group as the Convertible Bonds incur 3% interest rate per annum (i.e. approximately HK$8.3 million per annum based on 3% times HK$277,030,210, being the principal amount of the Convertible Bonds as at the Latest Practicable Date). However, given (i) the unfavourable financial position of the Group as stated above; (ii) the gear ratio (total debt/total asset) of the Group as at 30 September 2014 according to the Interim Report 2014/15 is approximately 1.2, which mean the Group is under net liability; (iii) the absence of other financing alternative available to the Group as stated in the paragraph headed “(iii) Other financing alternative” above; (iv) the reduction of the interest rate of the Convertible Bonds from 5% to 3% per annum would reduce the financial burden of the Group amounted to approximately HK$5.5 million per annum (i.e. 2% times HK$277,030,210, being the outstanding principal amount of the Convertible Bonds as at the Latest Practicable Date and (v) CNC HK is interested in 1,086,580,561 Shares, representing approximately 29.42% of the issued share capital of the Company as at the Latest Practicable Date and CNC HK cannot convert the whole amount of the remaining Convertible Bonds on or before the Original Maturity Date without triggering the mandatory offer obligation under Rule 26 of the Takeovers Code which is a restriction of the Convertible Bonds (Please refer to the Letter from the Board for detailed information), we are of the view and concur with the view of the management of the Company that the Amendment of Terms is in the interests of the Company and the Shareholders as a whole.

RECOMMENDATION

Having taken into consideration of the above principal factors and reasons, we are of the view and concur with the view of the Boards that the Supplemental Deed, the Amendment of Terms and the transactions contemplated thereunder are fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole. Accordingly, we recommend (i) the Independent Board Committee to advise the Independent Shareholders; and (ii) the Independent Shareholders, to vote in favor of the ordinary resolution at the EGM to approve the Supplemental Deed, the Amendment of Terms and the transactions contemplated thereunder.

Yours faithfully, For and on behalf of Nuada Limited Po Chan Executive Director

Ms. Po Chan is a person licensed to carry out type 6 (advising on corporate finance) regulated activity under the SFO and is a responsible officer of Nuada Limited who has over 14 years of experience in corporate finance industry.

– 26 –

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Group. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information concerned in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

(a) Directors’ and chief executive’s interests and short positions in the securities of the Company and its associated corporations

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executive of the Company in the Shares, underlying Shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (i) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to Rule 5.46 to Rule 5.67 of the GEM Listing Rules, were as follows:

Long position in the Shares:

			Percentage
			of aggregate
			interests to
	Capacity/	Number of	total issued
Name	Nature of interest	Shares held	share capital
Dr. Lee Yuk Lun_(Note a)_	Interest in controlled	140,000,000	3.79%
	corporation
Mr. Kan Kwok Cheung	Interest in controlled	220,590,000	5.97%
(Note b)	corporation
Mr. Chia Kar Hin, Eric John	Beneficial owner	5,500,000	0.15%

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GENERAL INFORMATION

APPENDIX

Notes:

• (a) Dr. Lee Yuk Lun is the sole beneficial owner of Proud Glory Investments Limited, which was interested in 140,000,000 Shares. Under the SFO, Dr. Lee Yuk Lun is deemed to be interested in all the Shares held by Proud Glory Investments Limited.

• (b) Mr. Kan Kwok Cheung is the sole beneficial owner of Shunleetat (BVI) Limited, which was interested in 220,590,000 Shares. Under the SFO, Mr. Kan Kwok Cheung is deemed to be interested in all the Shares held by Shunleetat (BVI) Limited.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had or was deemed to have any interests or short positions in the Shares, underlying Shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (i) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to Rule 5.46 to Rule 5.67 of the GEM Listing Rules.

(b) Persons who have an interest or short position which is discloseable under Divisions 2 and 3 of Part XV of the SFO

So far as is known to the Directors and the chief executive of the Company, as at the Latest Practicable Date, the following persons (not being Directors or chief executive of the Company) had, or were deemed to have, interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO:

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GENERAL INFORMATION

APPENDIX

Long position in the Shares:

Name	Number of Shares held Beneficial owner Interest in controlled corporation Spouse interest	Number of underlying Shares under Convertible Bonds(Note a) Total interests Percentage of aggregate interests to total issued share capital Beneficial owner Interest in controlled corporation
CNC HK 1,086,580,561 (Note b) – – 1,413,419,439 (Note b) – 2,500,000,000 67.69% 中國新華新聞電視網有限公司 – 1,086,580,561 (Note b) – – 1,413,419,439 (Note b) 2,500,000,000 67.69% Ms. Lam Shun Kiu, Rosita – – 220,590,000 (Note c) – – 220,590,000 5.97% Shunleetat (BVI) Limited 220,590,000 (Note c) – – – – 220,590,000 5.97%

Notes:

• (a) Details of the Convertible Bonds were set out on pages 6 to 8 of this circular.

• (b) CNC HK is wholly and beneficially owned by 中國新華新聞電視網有限公司 Accordingly, 中國新華新聞電視網有限公司 is deemed to be interested in the 1,086,580,561 Shares and 1,413,419,439 underlying Shares held by CNC HK under the SFO.

• (c) Shunleetat (BVI) Limited is wholly and beneficially owned by Mr. Kan Kwok Cheung. Accordingly, Mr. Kan Kwok Cheung is deemed to be interested in the 220,590,000 Shares held by Shunleetat (BVI) Limited under the SFO. Ms. Lam Shun Kiu, Rosita is the spouse of Mr. Kan Kwok Cheung and is deemed to be interested in 220,590,000 Shares held by Shunleetat (BVI) Limited under the SFO.

– 29 –

GENERAL INFORMATION

APPENDIX

As at the Latest Practicable Date, the Directors and the chief executive of the Company were not aware of any other person (other than the Directors and the chief executive of the Company) who had, or was deemed to have, interests or short positions in the Shares or underlying Shares, which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group.

(c) Directorship in and employment with substantial Shareholders

Set out below are particulars of the Directors’ directorship in or employment with companies which have interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Division 2 and 3 of Part XV of the SFO:

Name of Director	Position	Name of substantial Shareholder
Zhang Hao	Director	CNC (HK)
		中國新華新聞電視網有限公司
Zou Chen Dong	Director	CNC (HK)
Lee Yuk Lun	Director	Proud Glory Investments Limited
Kan Kwok Cheung	Director	Shunleetat (BVI) Limited

3. DIRECTORS’ SERVICE CONTRACTS

Each of the executive Directors has entered into a service contract with the Company for an initial fixed term of three years subject to retirement by rotation and re-election at the annual general meeting pursuant to the articles of association of the Company. The appointment of executive Directors will continue thereafter until terminated by either party giving not less than three months’ prior written notice to the other or the payment of three month salary in lieu of notice.

The non-executive Director was appointed for a specific term of three years subject to retirement by rotation and re-election at the annual general meeting pursuant to the articles of association of the Company.

Each of the independent non-executive Directors was appointed for a specific term of three years, subject to retirement by rotation and re-election at the annual general meeting pursuant to the articles of association of the Company.

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GENERAL INFORMATION

APPENDIX

As at the Latest Practicable Date, none of the Directors has a service contract with any member of the Group which is not determinable by the relevant employer within one year without payment of compensation, other than statutory compensation.

4. DIRECTORS’ INTERESTS IN CONTRACT OR ARRANGEMENT

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement subsisting which was significant in relation to the business of the Group, nor has any Director had any direct or indirect interest in any assets which have been acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 March 2014, being the date to which the latest published audited financial statements of the Group were made up.

5. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors and their respective associates had any direct or indirect interest in a business which competes or is likely to compete with the business of the Group.

6. QUALIFICATION AND CONSENT OF EXPERT

The following is the qualification of the expert who has given opinions or advice which are contained in this circular:

Name Qualifications Nuada Limited A licensed corporation to carry out type 6 (advising on corporate finance) regulated activities pursuant to the SFO

Nuada Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and report and references to its name in the form and context in which it appears. The letter of Nuada Limited is given as of the date of the circular for incorporation herein.

As at the Latest Practicable Date, Nuada Limited does not have any shareholding in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

In addition, as at the Latest Practicable Date, Nuada Limited does not have any direct or indirect interest in any assets which had been since 31 March 2014, the date to which the latest published audited financial statements of the Group were made up, acquired or disposed of by or leased to any member of the Group.

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GENERAL INFORMATION

APPENDIX

7. MATERIAL ADVERSE CHANGE

At the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial position or trading position of the Group since 31 March 2014, being the date to which the latest published audited financial statements of the Group was made up.

8. MISCELLANEOUS

The English texts of this circular and the accompanying form of proxy shall prevail over their respective Chinese texts for the purpose of interpretation.

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be made available for inspection at the office of the Company at Rooms 2601-2605, 26/F., China Resources Building, 26 Harbour Road, Wanchai, Hong Kong, during 10:00 a.m. to 4:00 p.m. on any Business Day from the date of this circular up to and including the date of the EGM:

• (a) the memorandum and articles of association of the Company;

• (b) the annual reports of the Company for each of the two financial years ended 31 March 2013 and 31 March 2014;

• (c) Supplemental Deed;

• (d) the written consent of the expert referred to in the paragraph headed “Qualification and Consent of Expert” in this Appendix;

• (e) the letter from the Independent Board Committee, the text of which is set out on pages 15 to 16 in this circular;

• (f) the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, the text of which is set out on pages 17 to 26 in this circular;

• (g) this circular; and

• (h) Sale and Purchase Agreement.

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NOTICE OF EGM

==> picture [62 x 62] intentionally omitted <==

CNC HOLDINGS LIMITED 中國新華電視控股有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 8356)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (“ EGM ”) of CNC Holdings Limited (the “ Company ”) will be held at Rooms 2601-2605, 26/F., China Resources Building, 26 Harbour Road, Wanchai, Hong Kong on Wednesday, 21 January 2015 at 10:00 a.m., for the purpose of considering and, if though fit, passing the following resolution:

ORDINARY RESOLUTION

“ THAT :

• (a) the supplemental deed dated 9 December 2014 (“ Supplemental Deed ”) entered into between the Company and a holder of the redeemable convertible bonds issued by the Company on 9 December 2011 in an outstanding principal amount of 277,030,210 (the “ Convertible Bonds ”) (a copy of the Supplemental Deed having been produced to the EGM and marked “A” and initialled by the chairman of the EGM for the purpose of identification) in relation to the proposed amendments of certain terms and conditions of the Convertible Bonds, including the proposed extension of maturity date of the Convertible Bonds for 3 years to 9 December 2017 and the proposed amendment of interest rate from 5% per annum to 3% per annum pursuant to the Supplemental Deed and all transactions contemplated thereunder, be and are hereby approved, confirmed and ratified;

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NOTICE OF EGM

• (b) Subject to The Stock Exchange of Hong Kong Limited consenting to the alternation to the terms and conditions of the Convertible Bonds, the directors (each a “ Director ” and collectively the “ Directors ”) of the Company be and are hereby authorised to exercise all the powers of the Company and take all steps as might in their opinion be desirable, necessary or expedient to give effect to or in connection with the Supplemental Deed including without limitation to:

• (a) the execution, amendment, ratification, delivery, submission and/or implementation of any further documents or agreements in relation to the Supplemental Deed; and

• (b) the taking of all necessary actions to implement the transactions contemplated under the Supplemental Deed.”

Yours faithfully

For and on behalf of the Board of CNC Holdings Limited Li Yuet Tai Company Secretary

Hong Kong, 6 January 2015

Registered office:

Registered office: Head office and principal place of Cricket Square business in Hong Kong: Hutchins Drive Rooms 2601-2605 PO Box 2681 26/F., China Resources Building Grand Cayman 26 Harbour Road KY1-1111 Wanchai Cayman Islands Hong Kong

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NOTICE OF EGM

Notes:

• (1) A member entitled to attend and vote at the EGM is entitled to appoint one or more proxy to attend and, subject to the provisions of the articles of association of the Company, to vote on his/her/its behalf. A proxy need not be a member of the Company but must be present in person at the EGM to represent the member. If more than one proxy is so appointed, the appointment shall specify the number and class of shares in respect of which each such proxy is so appointed.

• (2) A form of proxy for use at the EGM is enclosed with the circular of the Company dated 6 January 2015. Whether or not you intend to attend the EGM in person, you are encouraged to complete and return the enclosed form of proxy in accordance with the instructions printed thereon. Completion and return of a form of proxy will not preclude a member from attending in person and voting at the EGM or any adjournment thereof, should he/she/it so wish.

• (3) In order to be valid, the form of proxy, together with a power of attorney or other authority, if any, under which it is signed, or a certified copy of such power or authority must be deposited at the Company’s Hong Kong branch share registrar, Tricor Investor Services Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the EGM or any adjournment thereof.

• (4) In the case of joint holders of shares, any one of such joint holders may vote at the EGM, either in person or by proxy, in respect of such share as if he/she/it was solely entitled thereto, but if more than one of such joint holders are present at the EGM personally or by proxy, that one of the said persons so present whose name stands first on the register of members of the Company in respect of such shares shall alone be entitled to vote in respect thereof.

• (5) Any voting at the EGM shall be taken by poll.

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