Art Group Holdings Limited — Proxy Solicitation & Information Statement 2016

Oct 31, 2016

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 or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional advisers.

If you have sold or transferred all your shares in Art Group Holdings Limited (the “ Company ”), you should at once hand this circular with the enclosed form of proxy to the purchaser or transferee or to the bank, licensed securities dealer, registered institution in securities 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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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)

PROPOSED BONUS ISSUE OF SHARES PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL AND NOTICE OF EXTRAORDINARY GENERAL MEETING

A notice convening an extraordinary general meeting of Art Group Holdings Limited to be held at Lotus Room, 6th Floor, Marco Polo Hongkong Hotel, Harbour City, 3 Canton Road, Kowloon, Hong Kong on Wednesday, 16 November 2016 at 9:30 a.m. or immediately after the conclusion of the AGM is set out on pages 16 to 19 of this circular. A form of proxy for use at the extraordinary general meeting is enclosed. Such form of proxy is also published on the website of The Stock Exchange of Hong Kong Limited (www.hkexnews.hk). Whether or not you are able to attend the extraordinary general meeting, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for holding the extraordinary general meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the extraordinary general meeting, or any adjournment thereof, should you so wish, and in such event, the instrument appointing the proxy shall be deemed to be revoked.

1 November 2016

CONTENTS

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
EXPECTED TIMETABLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
NOTICE OF EXTRAORDINARY GENERAL MEETING. . . . . . . . . . . . . . . . . . . . . . . .	16

– i –

DEFINITIONS

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

“AGM”

the annual general meeting of the Company to be convened and held at Lotus Room, 6th Floor, Marco Polo Hongkong Hotel, Harbour City, 3 Canton Road, Kowloon, Hong Kong on Wednesday, 16 November 2016 at 9:15 a.m. or any adjournment thereof, the notice of which is set out in the circular of the Company dated 17 October 2016

“Board”

the board of Directors

“Bonus Issue”

the proposed allotment and issue of Bonus Shares on the basis of 10 Bonus Shares for every 10 existing Shares held by the Qualifying Shareholders

“Bonus Shares”

the new Shares to be issued under the Bonus Issue

“CCASS”

The Central Clearing and Settlement System established and operated by HKSCC

“Company”

Art Group Holdings Limited, a company incorporated in the Cayman Islands with limited liability, the Shares of which are listed on the Main Board of the Stock Exchange

“Directors”

the director(s) of the Company

“EGM”

the extraordinary general meeting of the Company to be convened and held on Wednesday, 16 November 2016 at 9:30 a.m. or immediately after the conclusion of the AGM to approve, among other things, the Bonus Issue and the proposed increase in authorised share capital of the Company

“Excluded Shareholders”

Overseas Shareholders who are excluded from the Bonus Issue and as defined and more particularly described in the section headed “Overseas Shareholders” in this circular

“Group”

the Company and its subsidiaries

– 1 –

DEFINITIONS

• “HK$”

Hong Kong dollar(s), the lawful currency of Hong Kong

• “HKSCC”

Hong Kong Securities Clearing Company Limited

• “Hong Kong”

the Hong Kong Special Administrative Region of the PRC

• “Latest Practicable Date” 28 October 2016, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular

• “Listing Committee” the listing sub-committee of the board of directors of the Stock Exchange

“Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

• “Overseas Shareholders” holders of Shares whose addresses as shown on the register of members on the Record Date are outside Hong Kong

“PRC” the People’s Republic of China and, except where the context requires and only for the purpose of this circular, references in this circular to the PRC do not include Taiwan, Hong Kong or the Macau Special Administrative Region of the PRC

“Qualifying Shareholders” holder of Shares whose names are shown on the register of members of the Company on the Record Date, not being Excluded Shareholders, who are entitled to the Bonus Issue

• “Record Date”

Thursday, 24 November 2016, being the record date for determination of entitlements to the Bonus Issue

• “Share(s)”

ordinary share(s) of par value HK$0.01 each in the share capital of the Company

• “Share Option Scheme”

the share option scheme adopted by the Company on 22 November 2013

– 2 –

DEFINITIONS

“Share Registrar” the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong “Shareholder(s)” holder(s) of the Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited “%” per cent

– 3 –

EXPECTED TIMETABLE

Set out below is the expected timetable of the Bonus Issue:

Date (2016)

Despatch of circular and notice of the EGM . . . . . . . . . . . . . . . . on or before Tuesday, 1 November

Latest time for lodging transfer of Shares for registration in order to be entitled to attend EGM . . . . . . . . . . . . . . . . . . 4:30 p.m. on Friday, 11 November Closure of register of members for attending and voting at the EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 14 November to Wednesday, 16 November (both days inclusive) Latest time to return form of proxy for the EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Monday, 14 November Record date for attending and voting at the EGM . . . . . . . . . . . . . . . . . . . Wednesday, 16 November Date and time of EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. or immediately after the conclusion of the AGM on Wednesday, 16 November Publication of poll results announcement of EGM . . . . . . . . . . . . . . . . . . Wednesday, 16 November Register of members re-opens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 17 November

The following events are conditional on the increase in authorised share capital and the Bonus Issue being approved at the EGM

Last day of dealings in Shares cum-entitlements to the Bonus Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 17 November First day of dealings in Shares ex-entitlements to the Bonus Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 18 November Latest time for lodging transfers of Shares for registration in order to qualify for the Bonus Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:30 p.m. on Monday, 21 November

– 4 –

EXPECTED TIMETABLE

Date (2016)

Closure of register of members for determination of

entitlement to the Bonus Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 22 November to

Thursday, 24 November (both days inclusive)

Record date for determination of entitlement

to the Bonus Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 24 November

Register of members re-opens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 25 November

Certificates of the Bonus Shares to be dispatched . . . . . . . . . . . . . . . . . . . . . . . . . . . . . on or before

Monday, 28 November Tuesday, 29 November

Dealings in Bonus Shares commence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:00 a.m. on

Note: All times refer to Hong Kong local time in this circular.

Dates or deadlines specified in this circular are indicative only and may be varied by the Company. Any consequential changes to the expected timetable will be published or notified to the Shareholders as and when appropriate.

– 5 –

LETTER FROM THE BOARD

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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)

Executive Directors: Mr. Chen Jinyan (Chairman) Mr. Chen Dong Mr. Chen Jinqing

Independent Non-executive Directors: Mr. Kwan Chi Fai Mr. Lin Ye Mr. Yang Zeqiang

Registered office: Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Place of business in Hong Kong Unit 1407, 14th Floor China Merchants Tower Shun Tak Centre 168-200 Connaught Road Central Hong Kong

1 November 2016

To the Shareholders and the holders of the share options (for information only) Dear Sir or Madam

PROPOSED BONUS ISSUE OF SHARES PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL AND NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTIONS

Reference is made to the announcements of the Company dated 3 October 2016 (the “ Announcement ”), in which the Company announced that the Board has proposed a Bonus Issue to be made on the basis of 10 Bonus Shares for every 10 existing Shares held by the Qualifying Shareholders whose name appear on the register of members of the Company on the Record Date. In order to allow the Bonus Issue and any possible further issue of Shares, the Board has also proposed to increase the authorised share capital of the Company to HK$50,000,000 divided into 5,000,000,000 Shares by the creation of an additional 3,000,000,000 Shares.

– 6 –

LETTER FROM THE BOARD

The purpose of this circular is to: (i) provide you with further details in respect of the Bonus Issue and the proposed increase in authorised share capital of the Company; and (ii) give you notice of the EGM to consider and, if thought fit, approve the increase in authorised share capital of the Company and the Bonus Issue.

PROPOSED BONUS ISSUE OF 10 BONUS SHARES FOR EVERY 10 EXISTING SHARES

The Board has proposed a Bonus Issue to be made on the basis of 10 Bonus Shares for every 10 existing Shares held by the Qualifying Shareholders whose names appear on the register of members of the Company on the Record Date. The Bonus Shares will be issued and credited as fully paid by way of capitalisation of an amount equal to the total par value of the Bonus Shares standing to the credit of the share premium account of the Company. The terms of the Bonus Issue are set out below.

Basis of Bonus Issue

Subject to the conditions as set out under the heading “Conditions of the Bonus Issue” below, the Bonus Shares will be issued and credited as fully paid at par on the basis of 10 Bonus Shares for every 10 existing Shares held on the Record Date by the Qualifying Shareholders.

The Bonus Shares will be issued and credited as fully paid at par by way of capitalisation of an amount standing to the credit of the share premium account of the Company that is equivalent to the total par value of the Bonus Shares to be issued by the Company. On the basis of 1,339,702,583 existing Shares in issue as at the Latest Practicable Date, assuming no further Shares will be issued or repurchased on or before the Record Date, it is anticipated that 1,339,702,580 Bonus Shares will be issued under the Bonus Issue, and HK$13,397,025.80 standing to the credit of the share premium account of the Company will be capitalised for paying up in full at par of the 1,339,702,580 Bonus Shares. After the completion of the Bonus Issue, it is expected that there will be a total of 2,679,405,163 Shares in issue as enlarged by the Bonus Issue. Upon issuance, the Bonus Shares will rank pari passu with the then existing Shares in all respects.

Record Date and closure of register of members

The Bonus Shares will be issued to the Qualifying Shareholders. Arrangement for the Excluded Shareholders are further elaborated below under the heading “Overseas Shareholders” of this circular.

– 7 –

LETTER FROM THE BOARD

The register of members of the Company will be closed from Monday, 14 November 2016 to Wednesday, 16 November 2016 (both days inclusive), during which no transfer of Shares will be registered, for the purpose of determining the Shareholders who are entitled to attend and vote at the EGM. In order to qualify for attendance of and voting at the EGM, all completed transfer forms accompanied by the relevant share certificates must be lodged with the Share Registrar for registration not later than 4:30 p.m. on Friday, 11 November 2016.

The register of members of the Company will also be closed from Tuesday, 22 November 2016 to Thursday, 24 November 2016 (both days inclusive), during which no transfer of Shares will be registered, in order to determine the entitlement of the Shareholders under the Bonus Issue.

Shareholders are reminded that in order to qualify for the Bonus Issue, they must ensure that all transfers accompanied by the relevant share certificates are lodged with the Share Registrar for registration not later than 4:30 p.m. on Monday, 21 November 2016.

The exact total number of Bonus Shares to be issued under the Bonus Issue will not be capable of determination until after the Record Date.

Reasons for the proposed Bonus Issue

The Board believes that the Bonus Issue will, on the one hand, enable the Group to maintain its cash position for future development, and on the other hand, allow the Shareholders to enjoy a pro-rata increase in the number of Shares held by them in the Company without incurring any significant costs to them.

The Board also believes that even if the price per Share on an ex-entitlement (or a post Bonus Issue) basis is expected to reduce proportionately, the Bonus Issue will not change any right or the proportionate equity interest of the Shareholders in the Company. By way of illustration only, based on the closing price of HK$1.15 per Share as at the Latest Practicable Date, the theoretical price per Share is expected to decrease to HK$0.575 after the Bonus Issue has taken place, and the trading price per board lot of 5,000 Shares is expected to decrease from HK$1.15 as at the Latest Practicable Date to HK$0.575 after the Bonus Issue has taken place.

Nevertheless, the Bonus Issue will increase the number of Shares to be held by the Shareholders and will capitalise part of the share premium account. Whilst it is arguable that the Bonus Issue may reduce the value of each Shareholder’s holding in the Company due to the transaction costs involved in the Bonus Issue, it is expected that the transaction costs are to be minimal. With such additional number of Shares in issue as a result of the Bonus Issue, the trading volume and the liquidity of the Shares on the market are expected to be improved.

– 8 –

LETTER FROM THE BOARD

The Board has also considered alternative methods such as a sub-division of Shares to achieve the above purposes. However, sub-division of shares involves more complicated administrative procedures than a bonus issue of shares, which includes replacing all the existing share certificates with new share certificates, arranging for exchange of all share certificates and applying for parallel trading, and as such the Company may have to incur more administration costs in a sub-division of shares than a bonus issue of shares. As advised by the Share Registrar, apart from the professional fees, if the Company chose for a sub-division of shares, the costs to be incurred are expected to be at least 102% more than the costs to be incurred in the Bonus Issue. For reference only, apart from the professional fees, the estimated costs of a sub-division of shares are approximately HK$98,000 whereas the costs of the Bonus Issue are expected to be approximately HK$48,500.

Having considered the simple administrative procedures to be involved and comparatively low expenses to be incurred for the Bonus Issue, and to preserve cash for the Group’s future development, the Directors consider that the Bonus Issue is a more appropriate and cost-effective way of achieving the abovementioned purposes taking into account the interests of the Company and the Shareholders as a whole.

In addition, the Bonus Issue will almost double the number of Shares to be held by the Shareholders, which will afford them with more flexibility in managing their own investment portfolios such as giving them more convenience in disposing of a portion of their Shares and realising a cash return to meet the individual Shareholders’ financial needs under good market conditions. As such, the Board considers the Bonus Issue could potentially improve the trading liquidity of the Shares which will be beneficial to the Company and the Shareholders as a whole.

Shareholders are advised to:

• (i) take note that the information mentioned in the above paragraphs is considered as forward looking and is based on management’s assumptions, current beliefs and estimates that are subject to risks, uncertainties and other factors in the market and under no circumstances shall it be considered as a guarantee for future performance and therefore actual results may differ materially from those presented in this circular;

• (ii) take note of the potential positive and negative impact on the liquidity and the trading volume of the Shares; and

• (iii) consult their professional advisers if they are in doubt about the advantages and disadvantages of the Bonus Issue.

– 9 –

LETTER FROM THE BOARD

Overseas Shareholders

As at the Latest Practicable Date, the Company has five Overseas Shareholders whose addresses as recorded in the register of members of the Company are in the PRC, representing approximately 12% of the total Shares in issue. In compliance with Rule 13.36(2)(a) of the Listing Rules, the Directors have made enquiries with the legal adviser as to the laws of the PRC regarding the legal restrictions in the PRC applicable to extending the Bonus Issue to the Overseas Shareholders in the PRC. Based on the results of such enquiries, there is no legal restriction or requirement of any regulatory body or stock exchange in the PRC that prevents the issuance of the Bonus Shares to such Overseas Shareholders in the PRC. The Company will therefore extend the Bonus Issue to such Overseas Shareholders in the PRC.

The Company will continue to ascertain whether there are any other Overseas Shareholders on the Record Date. The Board will make enquiry pursuant to Rule 13.36(2)(a) of the Listing Rules and, if necessary, seek legal advice from overseas counsel(s) on the applicable procedural requirements for extending the Bonus Issue to the Overseas Shareholders. Upon such enquiry, if the Board is of the view that there is no legal restriction(s) under the laws of the relevant place or any requirement of a regulatory body or stock exchange in that place, such Overseas Shareholders will be permitted to participate in the Bonus Issue. If, however, after making such enquiry the exclusion of the Overseas Shareholders is necessary or expedient on account either of the legal restrictions under the laws of the relevant place or the requirement of a regulatory body or stock exchange in that place, the Bonus Shares will not be granted to the Excluded Shareholders.

In circumstances where any Overseas Shareholders are not permitted to participate in the Bonus Issue, arrangements will be made for the Bonus Shares which would otherwise have been issued to the Excluded Shareholders, if any, to be sold in the market as soon as practicable after dealing in the Bonus Shares commences. Any net proceeds of sale, after deduction of expenses, will be distributed in Hong Kong dollars to the Excluded Shareholders, if any, pro rata to their respective shareholdings and remittances therefor will be posted to them, at their own risk, unless the amount falling to be distributed to any such persons is less than HK$100.00, in which case it will be retained for the benefit of the Company.

All Overseas Shareholders are highly recommended to consult their bankers or other professional advisers as to whether any governmental or other consents are required or other formalities need to be observed to enable them to receive the Bonus Shares.

– 10 –

LETTER FROM THE BOARD

Status of Bonus Shares

The Bonus Shares, upon issued, will rank pari passu with the Shares then existing in all respects, including the entitlement to dividends and other distributions the record date for which is on or after the date of allotment and issue of the Bonus Shares.

The Bonus Issue is non-renounceable.

Fraction of Bonus Shares

The total number of Bonus Shares to be issued to any Shareholders will be rounded down to a whole number, if there are any fractional entitlements of the Bonus Shares. Such fractional entitlements arising from the Bonus Issue (if any) will not be issued to the Shareholders, but will be disregarded by the Company.

The Bonus Issue is not expected to result in any odd lots for Shareholders who hold Shares in whole board lot size.

Conditions of the Bonus Issue

The completion of Bonus Issue is conditional upon:

• (i) the approval of the proposed increase in the authorised share capital of the Company by the Shareholders at the EGM;

• (ii) the approval of the Bonus Issue by the Shareholders at the EGM;

• (iii) the Listing Committee granting the approval for the listing of, and permission to deal in, the Bonus Shares; and

• (iv) compliance with the relevant legal procedures and requirements (if any) under the applicable laws of the Cayman Islands and the articles of association of the Company to effect the Bonus Issue.

– 11 –

LETTER FROM THE BOARD

Application for Listing

Application will be made to the Listing Committee in respect of such approval for the listings of, and permission to deal in, the Bonus Shares. Apart from making listing application to the Listing Committee, the Board does not propose to make application to any other stock exchanges for the listing of, and permission to deal in, the Bonus Shares. No securities of the Company is listed or dealt in on any other stock exchange. No new class of securities is to be listed pursuant to the Bonus Issue and that all necessary arrangements will be made by the Company to enable the Bonus Shares to be admitted into the Central Clearing and Settlement System established and operated by Hong Kong Securities Clearing Company Limited.

Subject to the fulfillment of the conditions as set out in the paragraph headed “Conditions of the Bonus Issue” above, which include the granting of listing of and permission to deal in, the Bonus Shares on the Stock Exchange, the Bonus Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the commencement date of dealings in the Bonus Shares on the Stock Exchange or such other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second settlement day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

– 12 –

LETTER FROM THE BOARD

Adjustments to outstanding share options

As at the Latest Practicable Date, there were 6,780,000 share options granted by the Company pursuant to its share option schemes entitling the holders thereof to subscribe for the Shares remain outstanding. The Bonus Issue may lead to adjustments to the exercise prices of the outstanding share options and the number of Shares which may fall to be issued upon exercise of the outstanding share options.

By way of illustration only, with reference to the provisions of the Share Option Scheme, Rule 17.03(13) of the Listing Rules and supplementary guidance issued by the Stock Exchange on 5 September 2005 regarding the interpretation of Rule 17.03(13) of the Listing Rules, the exercise prices of the outstanding share options and the number of Shares that can be subscribed for upon the exercise of the outstanding share options are expected to be adjusted upon the issuance of Bonus Shares in the following manner, assuming no outstanding share options will be exercised between the Latest Practicable Date and immediately before the issuance of Bonus Shares:

		Immediately before	Immediately before	Immediately after	Immediately after
		issuance of Bonus Shares		issuance of	Bonus Shares
					Adjusted
			Number of		number of
			Shares that		Shares that
			can be		can be
			subscribed		subscribed
			for upon		for upon
			exercise of the	Adjusted	exercise of the
		Exercise price	outstanding	exercise price	outstanding
Grant date	Exercise period	per Share	share options	per Share	share options
		HK$		HK$
10 July 2008	From 1 August 2008	0.358	1,900,000	0.179	3,800,000
	to 31 July 2018
22 May 2014	From 22 May 2014	0.331	1,040,000	0.166	2,080,000
	to 21 May 2024
22 May 2014	From 22 May 2014	0.331	1,040,000	0.166	2,080,000
	to 21 May 2024
22 May 2014	From 22 May 2014	0.331	2,800,000	0.166	5,600,000
	to 21 May 2024
			6,780,000		13,560,000

– 13 –

LETTER FROM THE BOARD

Dominic K.F. Chan & Co., the auditor of the Company has certified in writing that the arithmetic accuracy of the calculation of the adjustments to the exercise prices of the outstanding share options and the number of Shares that can be subscribed for upon the exercise of the outstanding share option is in accordance with Hong Kong Standard on Related Services 4400 “Engagements to Perform Agreed-Upon Procedures Regarding Financial Information” issued by Hong Kong Institute of Certified Public Accountants, and reported their factual findings, if any, to the Directors.

Other than the outstanding share options, the Company did not have any warrants, options, or other securities exchangeable or convertible into Shares as at the Latest Practicable Date. The Company will make further announcement upon the aforesaid adjustments to the share options as and when appropriate.

Certificates for Bonus Shares

It is expected that share certificates for the Bonus Shares will be posted by ordinary post on or before Monday, 28 November 2016 upon fulfillment of all the conditions of the Bonus Issue at the risk of the Qualifying Shareholders to their respective addresses shown on the register of members of the Company on the Record Date. In the case of a joint holding, the share certificates for the Bonus Shares will be posted to the address of the person whose name stands first on the register of members of the Company on the Record Date.

Subject to the fulfilment of the conditions of the Bonus Issue, dealings in the Bonus Shares are expected to commence on Tuesday, 29 November 2016.

Future fundraising activities

As at the Latest Practicable Date, the Company did not have an immediate plan to conduct any fund raising activities involving the issuance of equity securities in the next 12 months. Notwithstanding the above, the Company may consider conducting fund raising activities such as right issues or placing for funding appropriate new business opportunities should they arise, depending on the commercial environment and financial needs of the Company.

PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL OF THE COMPANY

The existing authorised share capital of the Company is HK$20,000,000 divided into 2,000,000,000 Shares, whereas 1,339,702,583 Shares have been issued as at the Latest Practicable Date. Under the Bonus Issue, the Company will issue 1,339,702,580 Bonus Shares on the assumption that there will be no change in the number of the issued Shares up to (and including) the Record Date. In order to allow the Bonus Issue and any possible further issues of Shares, the Board proposed to increase the authorised share capital of the Company to HK$50,000,000 divided into 5,000,000,000 Shares, by the creation of an additional 3,000,000,000 Shares. The additional Shares shall rank pari passu in all respects with the existing Shares. The increase in the authorised share capital of the Company is conditional upon the approval of the Shareholders of the Company by way of an ordinary resolution at the EGM.

– 14 –

LETTER FROM THE BOARD

EXTRAORDINARY GENERAL MEETING

Resolutions will be proposed at the EGM for the Shareholders to consider and, if thought fit, approve, among other things, the proposed increase in the authorised share capital of the Company and the Bonus Issue.

The notice convening the EGM has been set out on pages 16 to 19 of 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 instruction printed thereon and return it to the Share Registrar as soon as possible but 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 meeting or any adjourned meeting should you wish, and in such event, the instrument appointing the proxy shall be deemed to be revoked.

No Shareholder is required to abstain from voting on the ordinary resolutions to approve the proposed increase in the authorised share capital of the Company and the Bonus Issue at the EGM.

Pursuant to Rule 13.39(4) of the Listing Rules, any vote of shareholders at a general meeting must be taken by poll except where the chairman, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands. Therefore, all the resolutions put to the vote at the EGM will be taken by way of poll and the Company will announce the results of the poll in the manner prescribed under Rule 13.39(5) of the Listing Rules.

RECOMMENDATION

The Directors consider that the Bonus Issue and the increase in authorised share capital of the Company are in the interests of the Company and the Shareholders. Accordingly, the Directors recommend that the Shareholders vote in favour of all resolutions as set out in the EGM Notice.

MISCELLANEOUS

The English text of this circular shall prevail over the Chinese text for the purpose of interpretation.

Yours faithfully,

By the order of the Board

Art Group Holdings Limited Chen Jinyan

Chairman

– 15 –

NOTICE OF EXTRAORDINARY GENERAL MEETING

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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)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT the extraordinary general meeting of Art Group Holdings Limited (the “ Company ”) will be held at Lotus Room, 6th Floor, Marco Polo Hongkong Hotel, Harbour City, 3 Canton Road, Kowloon, Hong Kong at 9:30 a.m. or immediately after the conclusion of the annual general meeting of the Company on Wednesday, 16 November 2016.

To consider and, if thought fit, pass with or without modification, the following resolutions which will be proposed, as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

1. “ THAT

2. (a) the authorised share capital of the Company be and is hereby increased from HK$20,000,000 divided into 2,000,000,000 shares to HK$50,000,000 divided into 5,000,000,000 shares by creation of an addition 3,000,000,000 shares of HK$0.01 par value each in the capital of the Company (the “ Increase in Authorised Share Capital ”);

3. (b) the Directors be and are hereby authorised for and on behalf of the Company to execute all such documents, instruments and agreements and to do all such acts or things deemed by them to be incidental to, ancillary to or in connection with the matters contemplated in and for completion of the Increase in Authorised Share Capital.”

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NOTICE OF EXTRAORDINARY GENERAL MEETING

1. “ THAT subject to and conditional upon (i) the passing of the first resolution set out above; (ii) The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) granting the listing of, and permission to deal in, the Bonus Shares (as defined below); and (iii) compliance with the relevant legal procedures and requirements under the applicable laws of the Cayman Islands and the articles of association of the Company to effect the Bonus Issue (as defined below):

2. (a) an amount standing to the credit of the share premium account of the Company which is equivalent to the aggregate nominal amount of the Bonus Shares (as defined below) to be issued by the Company be capitalised and the Directors be and are hereby authorised to apply such amount in paying up in full at par such number of new shares of HK$0.01 each in the capital of the Company (the “ Bonus Shares ”) on the basis of 10 Bonus Shares for every 10 existing shares in issue on Thursday, 24 November 2016 (the “ Record Date ”), and the Directors be authorised to allot, issue and distribute the Bonus Shares, which are credited as fully paid, to the Qualifying Shareholders (as defined in the circular of the Company dated 1 November 2016) (the “ Bonus Issue ”);

3. (b) in case where the address of any holder of shares as shown on the register of members of the Company on the Record Date is outside Hong Kong (the “ Overseas Shareholders ”) and upon making relevant enquiries, the Directors consider the exclusion of such Overseas Shareholders in necessary or expedient, the Bonus Shares shall not be issued to such Overseas Shareholders (the “ Excluded Shareholders ”) but shall be aggregated and sold in the market as soon as practicable after dealings in the Bonus Shares commence. Any net proceeds of sale, after deduction of the related expenses, of HK$100.00 or more, will be distributed in Hong Kong dollars to the relevant Excluded Shareholders, if any, pro-rata to their respective shareholdings and remittances therefor will be posted to them, at their own risk, unless the amount falling to be distributed to any such persons is less than HK$100.00, in which case the Directors be and are hereby authorised to retain such amount for the benefit of the Company;

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NOTICE OF EXTRAORDINARY GENERAL MEETING

• (c) the Bonus Shares to be issued, allotted and distributed in the manner referred to in this resolution shall be subject to the memorandum and articles of association of the Company and shall rank pari passu in all respects with the existing issued and unissued shares on the Record Date, except that they will not be entitled for the issue of Bonus Shares mentioned in this resolution; and

• (d) the Directors be and are hereby authorised, at their absolute discretion, to do all acts and things as may be necessary and expedient in connection with the allotment and issue of the Bonus Shares, including, but not limited to, determining the amount to be capitalised out of the share premium account of the Company and the number of Bonus Shares to be issued, allotted and distributed in the manner referred to in this resolution.”

By the order of the Board Art Group Holdings Limited Chen Jinyan Chairman

Hong Kong, 1 November 2016

Registered office: Principal place of business in Cricket Square Hong Kong: Hutchins Drive Unit 1407, 14th Floor P.O. Box 2681 China Merchants Tower Grand Cayman KY1-1111 Shun Tak Centre Cayman Islands 168-200 Connaught Road Central Hong Kong

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NOTICE OF EXTRAORDINARY GENERAL MEETING

Notes:

1. A member entitled to attend and vote at the extraordinary general meeting convened by the above notice is entitled to appoint another person as his proxy to attend and vote in his stead. A proxy need not be a member of the Company.

2. Where there are joint registered holders of any shares, any one of such persons may vote at the above meeting or at any adjournment thereof, either personally or by proxy, in respect of such shares as if he were solely entitled thereto; but if more than one of such joint holders be present at the above meeting 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 share shall alone be entitled to vote in respect thereof.

3. To be valid, a form of proxy and the power of attorney or other authority, if any, under which it is signed, or a certified copy of such power or authority, must be lodged with the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 48 hours before the time for holding the meeting or any adjournment thereof.

4. The completion and return of the form of proxy shall not preclude shareholders of the Company from attending and voting in person at the above meeting or any adjournment thereof if they so wish, and in such event, the instrument appointing the proxy shall be deemed to be revoked.

5. The translation into Chinese language of this notice is for reference only. In case of any inconsistency, the English version shall prevail.

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