Art Group Holdings Limited — Capital/Financing Update 2021

Nov 5, 2021

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ART GROUP HOLDINGS LIMITED 錦藝集團控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 565)

SUPPLEMENTAL ANNOUNCEMENT DISCLOSEABLE TRANSACTION RELATING TO PROVISION OF LOAN AND ADVANCE TO AN ENTITY

Reference is made to the announcement of Art Group Holdings Limited dated 27 October 2021 (the “ Announcement ”) in relation to the discloseable transaction and advance to an entity relating to the entering into of the Loan Agreement. Unless the context requires otherwise, capitalised terms used herein shall have the same meanings as defined in the Announcement.

The Company would like to provide the following supplemental information in respect of the Announcement.

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FURTHER BACKGROUND INFORMATION AND REASONS OF THE LOAN

To the knowledge of the Directors and after making due and careful inquiry with the Borrower, the Borrower was in negotiation for a project. At the final stage of negotiation, with short notice, as a condition to get the project, the counterparty requested the Borrower to produce financial proof of a minimum certain amount as at a specific date. Since the Borrower did not have sufficient cash flow in its bank account at the relevant time and it approached the Company for the Loan. The Loan was made for this transitional period and therefore of a short term. The Loan is primarily used to support the Borrower’s financial proof for the project and will not be utilized by the Borrower during the Loan period. The Borrower will repay the Loan after it produced the relevant financial proof for the project. The Directors therefore are of the view that the risk of the Borrower’s default in repaying the Loan is minimal, and taking into the benefit of the Loan to the Company and its Shareholders as a whole, the Loan Agreement was entered into.

As part of the assessment, the Directors have also viewed the counterparty’s financial proof request to the Borrower.

FURTHER BASIS OF THE INTEREST RATE

Due to administration works and internal approval procedures, it is unlikely that the Borrower can obtain the Loan from banks and other financial institutions promptly. Given the term of the Loan is very short and there is no direct comparable interest rate in the market, the parties agreed to use the interest rate of 4.35% per annum offered by commercial banks for loans with a term less than one year as the starting point in the negotiation of the interest rate for the Loan. On this basis and having considered factors such as interest income amount, default risk of the Loan, term of the Loan, use of the Loan and background of the Borrower, the Lender, after arm’s length negotiation with the Borrower, agreed at an interest rate of 6% per annum for the Loan.

FUNDING OF THE LOAN

The Loan was financed by internal resources of the Group comprising the un-utilised proceeds received from the disposal of a Company’s subsidiary as set out in the Company’s announcement dated 26 April 2021 and cash generated from the Group’s operating activities.

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FURTHER REASONS TO ENTER INTO THE LOAN AGREEMENT

Before the Loan Agreement, the Loan was then placed as deposits in banks with interest rate at 0.30% per annum. The Loan is for a very short term and will generate higher interest income for the Group, and given the Loan was not to be utilised by the Group for the time being but was deposited in banks, the background of the Borrower and the reasons for the Loan, the Directors are of the view that the entering into the Loan Agreement is fair and reasonable, on normal commercial terms, and in the interest of the Company and its Shareholders as a whole.

CURRENT STATUS OF THE LOAN

As at the date of the announcement, the Loan was fully repaid.

By order of the Board ART GROUP HOLDINGS LIMITED Chen Jinyan Chairman

Hong Kong, 5 November 2021

As at the date of this announcement, the executive directors of the Company are Mr. Chen Jinyan and Mr. Chen Jindong; and the independent non-executive directors of the Company are Mr. Kwan Chi Fai, Mr. Lin Ye, Ms. Chong Sze Pui Joanne and Ms. Wang Yuqin.

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