Art Group Holdings Limited — Proxy Solicitation & Information Statement 2007

Oct 11, 2007

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in doubt as to any aspect of this circular, you should consult a licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Art Textile Technology International Company Limited (the “Company”), you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, licensed dealer, or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

ART TEXTILE TECHNOLOGY INTERNATIONAL COMPANY LIMITED 錦藝紡織科技國際有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 565)

PROPOSALS FOR GENERAL MANDATES FOR THE ISSUE OF SHARES AND THE REPURCHASE OF SHARES, REFRESHMENT OF THE SHARE OPTION SCHEME LIMIT, RE-ELECTION OF RETIRING DIRECTORS AND NOTICE OF ANNUAL GENERAL MEETING

A letter from the Board is set out on page 3 to 9 of this circular.

A notice dated 12 October 2007 convening the annual general meeting of the Company to be held at The Silk Room, 3rd Floor, Gateway, 13 Canton Road, Harbour City, Tsim Sha Tsui, Kowloon, Hong Kong on 29 November 2007 at 2:30 p.m., is set out on page 14 to 18 of this circular. Whether or not you are able to attend the meeting, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as practicable and in any event not less than 48 hours before the time fixed for holding the annual 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 annual general meeting or any adjourned meeting if you so wish.

12 October 2007

RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement contained herein misleading.

– i –

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Appendix – Explanatory Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Notice of Annual General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14

– ii –

DEFINITIONS

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

“AGM”	the annual general meeting of the Company to be
	convened on 29 November 2007 at 2:30 p.m. at The
	Silk Room, 3rd Floor, Gateway, 13 Canton Road,
	Harbour City, Tsim Sha Tsui, Kowloon, Hong Kong;
“Articles”	the articles of association adopted by the Company,
	and as amended from time to time by resolution of
	the Shareholders of the Company;
“Associate”	has the meaning ascribed to this term under the Listing
	Rules;
“Board”	the board of Directors;
“Chairman”	chairman of the Board;
“Companies Ordinance”	the Companies Ordinance, Chapter 32 of the laws of
	Hong Kong;
“Company”	Art Textile Technology International Company Limited,
	a company incorporated in the Cayman Islands with
	limited liability with its securities listed on the Stock
	Exchange;
“Directors”	directors of the Company;
“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
	People’s Republic of China;
“Latest Practicable Date”	9 October 2007, being the latest practicable date prior
	to the printing of this circular for ascertaining certain
	information referred to in this circular;
“Listing Rules”	the Rules Governing the Listing of Securities on the
	Stock Exchange;
“Repurchase Mandate”	the repurchase mandate proposed to be granted to the
	Directors at the AGM to repurchase up to 10% of the
	issued share capital of the Company;

– 1 –

DEFINITIONS

“Shares”	the ordinary share(s) of HK$0.01 each in the capital of
	the Company;
“Share Option Scheme”	the share option scheme adopted by the Company on
	16 August 2003;
“Shareholders”	the shareholders of the Company from time to time;
“SFO”	the Securities and Futures Ordinance (Chapter 571 of
	the Laws of Hong Kong); and
“Stock Exchange”	The Stock Exchange of Hong Kong Limited.

– 2 –

LETTER FROM THE BOARD

ART TEXTILE TECHNOLOGY INTERNATIONAL COMPANY LIMITED 錦藝紡織科技國際有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 565)

Executive directors: Mr. Chen Jinyan (Chairman) Mr. Chen Dong (Chief Executive Officer) Ms. Kong Ping

Independent non-executive directors: Mr. Lo Kin Chung Mr. Huang Yongfeng Mr. Yu Zhong Ming

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

Head office and principal place of business: Room 2402, 24/F. Wing On Centre 111 Connaught Road Central Hong Kong

12 October 2007

To shareholders

Dear Sir or Madam,

PROPOSALS FOR GENERAL MANDATES FOR THE ISSUE OF SHARES AND THE REPURCHASE OF SHARES, REFRESHMENT OF THE SHARE OPTION SCHEME LIMIT, RE-ELECTION OF RETIRING DIRECTORS AND NOTICE OF ANNUAL GENERAL MEETING

INTRODUCTION

The purpose of this circular is to provide you with information in respect of the resolutions to be proposed at the AGM relating to (i) the granting to the Directors a general mandate to allot, issue and deal with Shares not exceeding 20% of the Shares in the issued share capital of the Company as at the date of resolution, (ii) the granting to the Directors a general mandate to repurchase the Shares not exceeding 10% of the Shares in the issued share capital of the Company as at the date of resolution, (iii) the refreshment of the Share Option Scheme; and (iv) the re-election of retiring Directors.

A notice convening the AGM is set out on page 14 to page 18 to this circular.

– 3 –

LETTER FROM THE BOARD

GENERAL MANDATES TO ISSUE AND REPURCHASE SHARES

At the AGM, separate ordinary resolutions will be proposed to renew the general mandates given to the Directors (i) to allot, issue and otherwise deal with Shares not exceeding 20% of the aggregate nominal amount of the issued share capital of the Company at the date of passing of the resolution; (ii) to exercise all powers of the Company to repurchase issued and fully paid Shares on the Stock Exchange up to a maximum of 10% of the aggregate nominal amount of the issued share capital of the Company at the date of the passing of the resolution; (iii) to extend the general mandate granted to the Directors to allot, issue and deal with additional Shares as mentioned in paragraph (i) above by the amount representing the aggregate nominal amount of the share capital of the Company repurchased by the Company under the Repurchase Mandate.

The Repurchase Mandate allows the Company to make or agree to make repurchases only during the period ending on the earliest of (a) the date of the next annual general meeting; (b) the date by which the next annual general meeting of the Company is required to be held by law or by its Articles; or (c) the date upon which such authority is revoked or varied by an ordinary resolution of the Shareholders in a general meeting of the Company.

The existing Repurchase Mandate granted to the Company at the annual general meeting of the Company on 30 November 2006 will expire at the AGM. An explanatory statement containing all relevant information relating to the proposed Repurchase Mandate is set out in the Appendix to this circular. The information in the explanatory statement is provided to you with information reasonably necessary to enable you to make an informed decision on whether to vote for or against the resolution to grant to the Directors the Repurchase Mandate.

PROPOSED REFRESHMENT OF THE GENERAL SCHEME LIMIT UNDER THE SHARE OPTION SCHEME

Under the rules of the Share Option Scheme:

• (a) the maximum number of Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and any other share option schemes of the Company must not exceed 30 per cent. of the Shares in issue from time to time;

• (b) the total number of the Shares which may be issued upon exercise of all options to be granted under the Share Option Scheme and any other share option schemes of the Company (the “ General Scheme Limit ”) must not be in aggregate exceed 10 per cent. of the Shares in issue as at the date of adoption of the Share Option Scheme. Options which have lapsed in accordance with the terms of the Share Option Scheme or any other share option schemes of the Company are not counted for the purpose of calculating such scheme limit;

– 4 –

LETTER FROM THE BOARD

• (c) subject to (a) and (b) above, the Company may seek approval of the Shareholders in general meeting to “refresh” the General Scheme Limit, provided that a circular containing the information required by the Listing Rules has been issued to the Shareholders for that purpose, and further provided that the total number of Shares which may be issued upon exercise of all options to be granted under the Share Option Scheme and any other share option schemes of the Company must not exceed the General Scheme Limit as at the date of the approval of the “refreshed” limit. For the purpose of calculating the “refreshed” scheme limit, options (including those outstanding, cancelled, lapsed or exercised in accordance with the Share Option Scheme and any other share option scheme) previously granted under the Share Option Scheme and other share option schemes of the Company will not be counted.

The refreshment of the General Scheme Limit is conditional upon:

• (a) the passing by the Shareholders of an ordinary resolution to approve the refreshment of the General Scheme Limit at the AGM; and

• (b) the Listing Committee of the Stock Exchange granting the listing of, and the permission to deal in any Shares, representing 10 per cent. of the Shares in issue as at the date of the AGM, to be issued upon the exercise of the options granted under the “refreshed” General Scheme Limit.

The initial General Scheme Limit was 87,500,000 Shares on the date of adoption of the Share Option Scheme (i.e. 16 August 2003), representing 10% of the aggregate nominal amount of the share capital of the Company in issue as at 16 August 2003. By an ordinary resolution passed by the Shareholders at the annual general meeting of the Company held on 24 November 2004, the General Scheme Limit was refreshed to 87,650,000 Shares, representing 10% of the aggregate nominal amount of the share capital of the Company in issue as at 24 November 2004.

As at the Latest Practicable Date, there were 97,150,000 options granted under the Share Option Scheme and any other share option scheme(s) of the Company, among which 2,700,000 options were exercised, 7,000,000 options lapsed, no option was cancelled and 87,450,000 options were outstanding. The total number of Shares issued and to be issued upon exercise of all outstanding options granted under the Share Option Scheme and any other scheme(s) of the Company was 87,450,000 Shares, representing 8.40% of the issued share capital of the Company as at the Latest Practicable Date.

Of the outstanding options granted pursuant to the Share Option Scheme, options to subscribe for a total of 8,500,000 Shares were granted to connected persons (as defined in the Listing Rules), as to 4,000,000 Shares to Mr. Chen Jinyan, the chairman of the Company and an executive Director, with a subscription price of HK$0.612 per Share and an option period from 23 December 2003 to 22 December 2013 and a further 4,500,000 Shares to Mr. Chen Jinyan, with a subscription price of HK$0.450 per Share and an option period from 2 January 2007 to 1 January 2012.

– 5 –

LETTER FROM THE BOARD

The Directors believe that unless the General Scheme Limit is “refreshed”, their ability to grant to other eligible participants who contribute to the Group would be restricted.

If the General Scheme Limit is “refreshed”, on the basis of 1,040,602,583 Shares in issue as at the Latest Practicable Date and assuming that no Shares are issued or repurchased by the Company prior to the AGM, the General Scheme Limit will re-set to 104,060,258 Shares, being 10% of the Shares in issue as at the AGM, and the Directors will be allowed to grant further options under the Share Option Scheme and other share option schemes carrying the rights to subscribe for a maximum of 104,060,258 Shares. As at the Latest Practicable Date, the Company had not adopted any share option scheme other than the Share Option Scheme.

The Directors expect that the grant of options in full under the refreshed General Scheme Limit will not cause the Shares to be issued upon the full exercise of the outstanding options granted and available to be granted under the Share Option Scheme or any other share option scheme(s) of the Company to be in excess of 30% of the Shares in issue from time to time.

Apart from the number of Shares which may be issued under the refreshed General Scheme Limit, the Directors confirmed that there has been no change to the terms of the Share Option Scheme.

Application will be made to the Stock Exchange for the approval for the listing of and permission to deal in any Shares, representing 10 per cent. of the Shares in issue as at the date of the AGM, to be issued upon the exercise of the options granted under the “refreshed” General Scheme Limit.

RE-ELECTION OF DIRECTORS

As at the date of this circular, the executive Directors are Mr. Chen Jinyan, Mr. Chen Dong and Ms. Kong Ping; and the independent non-executive Directors are Mr. Lo Kin Chung, Mr. Huang Yongfeng and Mr. Yu Zhong Ming.

Pursuant to Article 87 of the Articles, at each annual general meeting of the Company, one-third of the Directors for the time being (or, if their number is not a multiple of three (3), the number nearest to but not less than one-third) shall retire from office by rotation provided that every Director shall be subject to retirement by rotation at least once every three years. The Directors to retire by rotation shall include any Director who wishes to retire and not to offer himself for re-election. Any further Directors so to retire shall be those of the other Directors subject to retirement by rotation who have been longest in office since their last re-election or appointment and so that as between persons who became or were last re-elected Directors on the same day those to retire shall (unless they otherwise agree among themselves) be determined by lot.

Accordingly, the Directors retiring by rotation at the AGM are Mr. Huang Yongfeng and Mr. Yu Zhong Ming, who being eligible, offer themselves for re-election at the forthcoming AGM.

– 6 –

LETTER FROM THE BOARD

The biographical details of all the retiring Directors are as follows:

Mr. Huang Yongfeng (黃勇峰), aged 37, has been an independent non-executive Director since June 2003. Mr. Huang was educated at the Power Engineering Department of Dalian University of Technology (大連理工大學 ) and obtained a bachelor degree in Internal Combustion Engineering. He has also obtained a Master degree in Business Administration from the National University of Singapore. He is currently the General Manager of Chongqing Mondy Human Resource Consulting Co., Ltd (重慶蒙迪人才諮詢有限公司 ).

Mr. Huang has been appointed by the Company to act as an independent non-executive Director for an initial term of one year commencing from June 2003, which was renewed to expire on 31 August 2008. Pursuant to the terms of appointment, Mr. Huang is entitled to receive emoluments of HK$36,000 per annum. His emoluments are determined by reference to salaries paid by comparable companies, time commitment, his duties and responsibilities at the Company, the Company’s performance and its remuneration policy. Mr. Huang did not hold any directorship in other listed company in the last three years. As at the Latest Practicable Date, Mr. Huang had no interest in the Shares pursuant to Part XV of the SFO. Mr. Huang does not have any relationship with any Directors, senior management, substantial or controlling shareholders of the Company. Apart from being an independent non-executive Director, Mr. Huang does not hold any position in other members of the Group.

Mr. Yu Zhong Ming (俞忠明 ), aged 72, has been an independent non-executive Director since September 2004. Mr. Yu was educated at the Shanghai Hua Dong Textile College (上海華東紡織工學院 ) and obtained a diploma from the Textile Engineering Faculty. Mr. Yu has over 44 years of experience in the textile industry. He has been the vice president of Textile Engineering Society of Fujian Province (福 建省紡織工程學會 ) since 1996.

Mr. Yu has been appointed by the Company to act as an independent nonexecutive Director for an initial term of one year commencing from September 2004, which was renewed to expire on 31 August 2008. Pursuant to the terms of appointment, Mr. Yu is entitled to receive emoluments of HK$36,000 per annum. His emoluments are determined by reference to salaries paid by comparable companies, time commitment, his duties and responsibilities at the Company, the Company’s performance and its remuneration policy. Mr. Yu did not hold any directorship in other listed company in the last three years. As at the Latest Practicable Date, Mr. Yu had no interest in the Shares pursuant to Part XV of the SFO. Mr. Yu does not have any relationship with any Directors, senior management, substantial or controlling shareholders of the Company. Apart from being an independent non-executive Director, Mr. Yu does not hold any position in other members of the Group.

– 7 –

LETTER FROM THE BOARD

Save as disclosed herein, the Board is not aware of any matters which are required to be disclosed pursuant to paragraphs (h) to (v) of Rules 13.51(2) of the Listing Rules, or any other matters that need to be brought to the attention of the Shareholders in relation to the aforesaid retiring Directors.

THE AGM, PROXY ARRANGEMENT AND DEMAND BY POLL

A notice convening the AGM to be held at The Silk Room, 3rd Floor, Gateway, 13 Canton Road, Harbour City, Tsim Sha Tsui, Kowloon, Hong Kong, on 29 November 2007 at 2:30 p.m. is set out on page 14 to 18 of this circular.

A form of proxy for use at the AGM is enclosed with this circular. Whether or not you are able to attend the AGM, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the AGM (or any adjournment thereof) to the office of the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited at 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong. Completion and return of the form of proxy will not preclude you from attending and voting in person at the AGM or any adjournment thereof should you so wish.

Pursuant to Article 66 of the Articles, every resolution submitted to a general meeting shall be determined on a show of hands in the first instance by the Shareholders present unless (before or upon the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded by:

• (a) the chairman of the meeting; or

• (b) at least 3 Shareholders present in person or in the case a Shareholder being a corporation by its duly authorised representative or by proxy for the time being entitled to vote at the meeting; or

• (c) a Shareholder or Shareholders present in person or in the case a Shareholder being a corporation by its duly authorised representative or by proxy and representing not less than one-tenth of the total voting rights of all the Shareholders having the right to vote at the meeting; or

• (d) a Shareholder or Shareholders present in person or in the case a Shareholder being a corporation by its duly authorised representative or by proxy and holding Shares conferring a right to vote at the meeting being Shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all Shares conferring that right.

– 8 –

LETTER FROM THE BOARD

Unless a poll is duly demanded in accordance with the foregoing provisions, a declaration of the chairman of the meeting that a resolution has been carried or lost or has or has not been carried by any particular majority, and an entry to that effect in the minutes of the proceedings of the Company, shall be conclusive evidence of the fact without proof of the number, proportion or validity of the votes recorded in favour of or against such resolution.

RECOMMENDATION

The Directors consider that all the proposed resolutions in the AGM are in the interests of the Company and the Shareholders as a whole and, accordingly, the Directors recommend all Shareholders to vote in favour of all the resolutions to be proposed at the AGM in respect thereof.

Yours faithfully For and on behalf of the Board

Art Textile Technology International Company Limited Chen Jinyan Chairman

– 9 –

APPENDIX

EXPLANATORY STATEMENT

This Appendix serves as an explanatory statement, as required by the Listing Rules, to provide all the information in relation to the Repurchase Mandate for your consideration.

1. LISTING RULES RELATING TO THE REPURCHASES OF SECURITIES

The Listing Rules permit companies whose primary listing is on the Stock Exchange to repurchase their fully-paid shares on the Stock Exchange subject to certain restrictions, the more important of which are summarised below:

(a) Shareholders’ approval

All proposed purchase of securities on the Stock Exchange by a company with its primary listing on the Stock Exchange must be approved in advance by the shareholders by an ordinary resolution, either by way of a general mandate or by a specific approval in relation to a specific transaction.

(b) Share capital

Under the Repurchase Mandate, the number of Shares that the Company may repurchase shall not exceed 10% of the aggregate nominal amount of its issued share capital at the date of the passing of the proposed resolution granting the Repurchase Mandate.

As at the Latest Practicable Date, the Company had 1,040,602,583 Shares in issue. Subject to the passing of the proposed resolution for the grant of the Repurchase Mandate and on the basis that no Shares are issued or repurchased by the Company prior to the AGM, the exercise of the Repurchase Mandate in full would result in up to 104,060,258 Shares being repurchased by the Company during the period prior to the next annual general meeting of the Company following the passing of the resolution referred to herein or the date upon which the Repurchase Mandate is revoked or varied by an ordinary resolution of the Shareholders in a general meeting of the Company, whichever occurs first.

(c) Reason for repurchase

The Directors believe that it is in the interests of the Company and the Shareholders to have a general authority from the Shareholders to enable the Directors to repurchase securities of the Company on the market. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net value of the Company and its assets and/or its earnings per Share and will only be made when the Directors believe that such repurchases will benefit the Company and the Shareholders.

– 10 –

APPENDIX

EXPLANATORY STATEMENT

(d) Fund of repurchase

In repurchasing securities, a company may only apply funds legally available for such purpose in accordance with its constitute documents and the laws of the jurisdiction in which the Company was incorporated.

As compared with the financial position of the Company as at 30 June 2007 (being date of its latest audited accounts), the Directors consider that there would not be a material adverse impact on the working capital or gearing position of the Company if the Repurchase Mandate was to be exercised in full during the proposed repurchase period. However, the Directors do not propose to exercise the Repurchase Mandate to such extent as would, in the circumstances, have a material adverse effect on the working capital or the gearing level (as compared with the position disclosed in its most recent published audited accounts) which in the opinion of the Directors are from time to time appropriate for the Company.

(e) Connected parties

None of the Directors nor, to the best knowledge having made all reasonable enquiries, any of their Associates has any present intention to sell Shares to the Company if the Repurchase Mandate is approved by the Shareholders.

As at the Latest Practicable Date, no connected person (as defined in the Listing Rules) had notified the Company that he has a present intention to sell Shares to the Company, or has undertaken not to do so, if the Repurchase Mandate is approved by the Shareholders.

(f) Undertaking by Directors

The Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the Repurchase Mandate in accordance with the Listing Rules and the applicable laws of the Cayman Islands.

(g) Takeovers Code

If as a result of a securities repurchase a Shareholder’s proportionate interest in the voting rights of the repurchasing company increases, such increase will be treated as an acquisition of voting rights for the purpose of the Hong Kong Code on Takeovers and Mergers (the “Takeovers Code”).

– 11 –

APPENDIX

EXPLANATORY STATEMENT

As at the Latest Practicable Date, the register of the Shareholders maintained by the Company pursuant to Section 336 under Part XV of the SFO showed that the Company has been notified of the following interests, being 5% or more of the Company’s issued share capital:

			Approximate
		Approximate	percentage of
		percentage of	shareholding
		the shareholding	if the Repurchase
	Number of	as at the Latest	Mandate is
Name	Shares held	Practicable Date	exercised in full
Talent Crown Investment
Limited_(Note 1)_	581,910,000	55.92%	62.13%
Concordia Advisors
(Bermuda) Limited_(Note 2)_	179,355,000	17.24%	19.15%
Veer Palthe Voute NV_(Note 3)_	76,055,000	7.31%	8.12%

Notes:

1. Talent Crown Investment Limited is a company incorporated in the British Virgin Islands, the entire issued share capital of which is beneficially owned by Mr. Chen Dong, the chief executive officer of the Company. Mr. Chen Dong is the younger brother of Mr. Chen Jinyan, the Chairman of the Company.

2. These Shares were beneficially held by Concordia Advisors (Bermuda) Limited.

3. These Shares were beneficially held by Veer Palthe Voute NV, whose ultimate holding company, Allianz Aktiengesellschaft, indirectly holds 81.1% interest in Veer Palthe Voute NV.

In the event that the Directors shall exercise in full the Repurchase Mandate, the total interests of the above Shareholders would be increased to approximately the percentages shown in the last column above and such increase will not give rise to an obligation to make a mandatory offer under Rule 26 of the Takeovers Code and will reduce the amount of Shares held by the public to be below 25%.

The Directors confirm that the Repurchase Mandate will not be exercised to an extent where the amount of Shares held by the public will be reduced below 25%.

– 12 –

APPENDIX

EXPLANATORY STATEMENT

2. SHARE PURCHASE MADE BY THE COMPANY

During each of the six months preceding the date of this circular, no Shares have been repurchased by the Company.

3. SHARE PRICES

During each of the previous 12 months, the highest and lowest traded prices for Shares on the Stock Exchange were as follows:

		Per Share
Month	Highest		Lowest
	(HK$)		(HK$)
2006
October	0.49		0.43
November	0.47		0.44
December	0.47		0.44
2007
January	0.50		0.44
February	0.59		0.46
March	0.57		0.47
April	0.55		0.48
May	0.59		0.52
June	0.85		0.58
July	0.74		0.59
August	0.69		0.51
September	0.67		0.58
October (to the Latest Practicable Date)	0.68		0.61

– 13 –

NOTICE OF ANNUAL GENERAL MEETING

ART TEXTILE TECHNOLOGY INTERNATIONAL COMPANY LIMITED 錦藝紡織科技國際有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 565)

NOTICE IS HEREBY GIVEN THAT the annual general meeting of ART TEXTILE TECHNOLOGY INTERNATIONAL COMPANY LIMITED (the “ Company ”) will be held at The Silk Room, 3rd Floor, Gateway, 13 Canton Road, Harbour City, Tsim Sha Tsui, Kowloon, Hong Kong on 29 November 2007 at 2:30 p.m. for the following purposes:

1. To receive and consider the report of the directors of the Company (the “ Directors ”), audited consolidated financial statements and independent auditor’s report for the year ended 30 June 2007.

2. To declare a final dividend for the year ended 30 June 2007.

3. To re-elect retiring Directors.

4. To authorise the board to fix the remuneration of the Directors.

5. To re-appoint auditors and to authorise the Directors to fix the remuneration of the auditors.

6. As special business, to consider and, if thought fit, pass with or without modifications, the following resolution as an ordinary resolution of the Company:

7. (A) “ THAT

   • (a) subject to paragraph (c) of this Resolution, the exercise by the Directors during the Relevant Period (as defined below) of all the powers of the Company to allot, issue and deal with additional shares in the capital of the Company and to make or grant offers, agreements and options which might require the exercise of such powers be and is hereby generally and unconditionally approved;

   • (b) the approval in paragraph (a) of this Resolution shall authorise the Directors during the Relevant Period to make or grant offers, agreements and options which might require the exercise of such powers after the end of the Relevant Period;

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NOTICE OF ANNUAL GENERAL MEETING

• (c) the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) by the Directors pursuant to the approval in paragraph (a) of this Resolution, otherwise than pursuant to (i) a Rights Issue (as defined below); (ii) the exercise of rights of subscription or conversion under the terms of any warrants issued by the Company or any securities which are convertible into shares of the Company; (iii) the exercise of any option under any share option scheme or similar arrangement for the time being adopted for the grant or issue to officers, employees of the Company and/or any of its subsidiaries or other eligible participants of shares or rights to acquire shares in the Company; or (iv) any scrip dividend or similar arrangement providing for the allotment of shares in lieu of the whole or part of the cash payment for a dividend on shares of the Company in accordance with the articles of association of the Company, shall not exceed 20% of the aggregate nominal amount of the share capital of the Company in issue at the date of this Resolution and the said approval shall be limited accordingly; and

• (d) for the purposes of this Resolution:

“ Relevant Period ” means the period from the passing of this Resolution until whichever is the earlier of:

• (i) the conclusion of the next annual general meeting of the Company;

• (ii) the expiration of the period within which the next annual general meeting of the Company is required by the articles of association of the Company or any applicable law to be held; and

• (iii) the date of which the authority set out in this Resolution is revoked or varied by an ordinary resolution of the shareholders of the Company in general meeting.

“ Rights Issue ” means an offer of shares or other securities of the Company open for a period fixed by the Directors to holders of shares of the Company or any class thereof on the register on a fixed record date in proportion to their then holdings of such shares or class thereof (subject to such exclusion or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or having regard to any

– 15 –

NOTICE OF ANNUAL GENERAL MEETING

restrictions or obligations under the laws of, or the requirements of any recognized regulatory body or any stock exchange in, any territory outside the Hong Kong Special Administrative Region of the People’s Republic of China).”

• (B) “ THAT

• (a) subject to paragraph (b) of this Resolution, the exercise by the Directors during the Relevant Period (as defined below) of all powers of the Company to repurchase shares of the Company, subject to and in accordance with all applicable laws and requirements, be and is hereby generally and unconditionally approved;

• (b) the aggregate nominal amount of the shares of the Company which may be purchased pursuant to the approval in paragraph (a) of this Resolution shall not exceed 10% of the aggregate nominal amount of the share capital of the Company as at the date of passing of this Resolution and the said approval shall be limited accordingly; and

• (c) for the purposes of this resolution:

“ Relevant Period ” means the period from the passing of this Resolution until whichever is the earlier of:

• (i) the conclusion of the next annual general meeting of the Company;

• (ii) the expiration of the period within which the next annual general meeting of the Company is required by the articles of association of the Company or any applicable law to be held; and

• (iii) the date which the authority set out in this Resolution is revoked or varied by an ordinary resolution of the shareholders of the Company in general meeting.”

• (C) “ THAT conditional upon Resolutions A and B set out above being passed, the aggregate nominal amount of the shares of the Company which are repurchased by the Company under the authority granted to the Directors as mentioned in Resolution B above shall be added to the aggregate nominal amount of the share capital of the Company that may be allotted or agreed conditionally or unconditionally to be allotted by the Directors pursuant to the Resolution A above.”

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NOTICE OF ANNUAL GENERAL MEETING

1. As special business, to consider and, if thought fit, pass the following resolution as an ordinary resolution of the Company:

“ THAT

• (a) conditionally upon paragraph (c) of this Resolution below, pursuant to the terms of the share option scheme (the “ Share Option Scheme ”) of the Company adopted pursuant to resolutions in writing of all shareholders of the Company passed on 16 August 2003, the maximum limit (the “ General Scheme Limit ”) in respect of the granting of share options under the Share Option Scheme be refreshed provided that (i) the total number of shares of HK$0.01 each in the Company which may be issued upon the exercise of all options to be granted under the Share Option Scheme and other share option schemes of the Company under the limit as “refreshed” hereby shall not exceed 10 per cent. of the aggregate nominal amount of the share capital of the Company in issue on the date of the passing of this resolution and (ii) options previously granted under the Share Option Scheme and other share option schemes of the Company (including options outstanding, cancelled, lapsed or exercised in accordance with the terms of the Share Option Scheme or any other share option schemes of the Company) shall not be counted for the purpose of calculating the General Scheme Limit as “refreshed” hereby;

• (b) any director of the Company be and is hereby authorised to take any step as he/she consider necessary, desirable or expedient in connection with the refreshment of the General Scheme Limit; and

• (c) paragraph (a) of this Resolution is conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited granting the listing of and permission to deal in the shares of the Company to be issued upon exercise of any options granted under the refreshed General Scheme Limit.”

By Order of the Board

Art Textile Technology International Company Limited Chen Jinyan Chairman

Hong Kong, 12 October 2007

As at the date of this notice, the executive directors of the Company are Mr. Chen Jinyan, Mr. Chen Dong and Ms. Kong Ping; and the independent non-executive directors of the Company are Mr. Lo Kin Chung, Mr. Huang Yongfeng and Mr. Yu Zhong Ming.

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NOTICE OF ANNUAL GENERAL MEETING

Notes:

1. Any shareholder entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and vote instead of him. A proxy need not be a shareholder of the Company.

2. In order to be valid, a form of proxy in the prescribed form together with the power of attorney or other authority (if any) under which it is signed must be deposited at the branch share registrar of the Company, Tricor Investor Services Limited at 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the meeting (or any adjournment thereof).

3. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under its common seal or under the hand of an officer or attorney or other person duly authorised.

4. Delivery of the form of proxy will not preclude a member from attending and voting in person at the meeting convened and in such event, the form of proxy shall be deemed to be revoked.

5. The register of members of the Company will be closed from 26 November 2007 to 29 November 2007, both days inclusive, during which period no transfer of shares will be effected. In order to qualify for the final dividend to be approved at the annual general meeting, all transfers accompanied by the relevant share certificates must be lodged with the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited, 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not later than 4:30 p.m. on 23 November 2007.

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