Art Group Holdings Limited — Proxy Solicitation & Information Statement 2012

Oct 9, 2012

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(s) or the transferee(s) or to the bank, licensed dealer, or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or the transferee(s).

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.

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 RE-ELECTION OF RETIRING DIRECTORS PROPOSED AMENDMENTS TO THE ARTICLES AND

NOTICE OF ANNUAL GENERAL MEETING

A letter from the Board is set out on pages 3 to 8 of this circular.

A notice dated 10 October 2012 convening the annual general meeting of the Company to be held at Fung Shui Room II, 6th Floor, Marco Polo Hongkong Hotel, Harbour City, 3 Canton Road, Kowloon, Hong Kong on Thursday, 22 November 2012 at 3:30 p.m. is set out on pages 18 to 21 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) to the office of the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited at 26th Floor, 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 annual general meeting or any adjourned meeting if you so wish and in such event, the instrument appointing a proxy shall be deemed to be revoked.

10 October 2012

RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained 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 contained herein or this circular misleading.

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CONTENTS

	Pages
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Appendix I – Explanatory Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Appendix II – Details of the proposed amendments to the Articles. . . . . . . . . . . . . . . .	13
Notice of Annual General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18

– 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 Thursday, 22 November 2012 at 3:30 p.m. at Fung Shui
	Room II, 6th Floor, Marco Polo Hongkong Hotel, Harbour
	City, 3 Canton Road, Kowloon, Hong Kong;
“Articles”	the articles of association adopted by the Company,
	and as amended from time to time by resolution of the
	Shareholders;
“associate”	has the meaning ascribed to it 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 Main Board of 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 PRC;
“Issue Mandate”	a general mandate to be granted to the Directors at the
	AGM to allot, issue and otherwise deal with Shares not
	exceeding 20% of the issued share capital of the Company
	as at the date of the passing of such resolution plus the
	amount representing the aggregate nominal amount of the
	share capital of the Company repurchased by the Company
	under the Repurchase Mandate;

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	DEFINITIONS
“Latest Practicable Date”	4 October 2012, 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;
“PRC”	the People’s Republic of China;
“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 as at the date of passing of
	such resolution;
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong);
“Shares”	the ordinary share(s) of HK$0.01 each in the capital of the
	Company;
“Shareholders”	the shareholders of the Company from time to time;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“Takeovers Code”	the Hong Kong Code on Takeovers and Mergers; and
“%”	per cent.

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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) Mr. Chen Jinqing

Independent non-executive directors: Mr. Lo Kin Chung Mr. Yu Zhongming Mr. Yang Zeqiang

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

Head office and principal place of business: Unit 1407, 14th Floor, China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central, Hong Kong 10 October 2012

To the Shareholders Dear Sir or Madam,

PROPOSALS FOR GENERAL MANDATES FOR THE ISSUE OF SHARES AND

THE REPURCHASE OF SHARES RE-ELECTION OF RETIRING DIRECTORS PROPOSED AMENDMENTS TO THE ARTICLES 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 grant of a general mandate to the Directors to allot, issue and deal with Shares not exceeding 20% of the issued share capital of the Company as at the date of resolution; (ii) the grant of a general mandate to the Directors to repurchase Shares not exceeding 10% of the issued share capital of the Company as at the date of resolution; (iii) the re-election of retiring Directors; and (iv) the proposed amendments to the Articles. This circular contains the explanatory statement in compliance with the Listing Rules and gives all the information reasonably necessary to enable the Shareholders to make an informed decision on whether to vote for or against the resolutions.

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LETTER FROM THE BOARD

A notice convening the AGM is set out on pages 18 to 21 of this circular.

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 passing of the resolution; and (iii) to extend the general mandate granted to the Directors to allot, issue and deal with additional Shares as mentioned in (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 Issue Mandate and the Repurchase Mandate shall continue in force 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 Issue Mandate and the existing Repurchase Mandate granted to the Company at the annual general meeting of the Company on 21 November 2011 will expire at the AGM. As at the Latest Practicable Date, the issued share capital of the Company comprised 1,040,602,583 Shares. Assuming there is no change in the issued share capital of the Company between the period from the Latest Practicable Date to the date of AGM and subject to the passing of the ordinary resolutions approving the Issue Mandate and the Repurchase Mandate, exercise in full of the Repurchase Mandate will result in up to 104,060,258 Shares being purchased by the Company, and the Directors will be authorised to allot and issue under the Issue Mandate up to 208,120,516 Shares, and to the extent the Repurchase Mandate is exercised, plus the amount of Shares representing the aggregate nominal amount of the share capital of the Company repurchased by the Company under the Repurchase Mandate.

EXPLANATORY STATEMENT

An explanatory statement containing all relevant information relating to the proposed Repurchase Mandate is set out in Appendix I 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 the Repurchase Mandate to the Directors.

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LETTER FROM THE BOARD

RE-ELECTION OF DIRECTORS

As at the Latest Practicable Date, the executive Directors were Mr. Chen Jinyan, Mr. Chen Dong and Mr. Chen Jinqing; and the independent non-executive Directors were Mr. Lo Kin Chung, Mr. Yu Zhongming and Mr. Yang Zeqiang.

Pursuant to Article 86(3) of the Articles, any Director appointed by the Board shall hold office only until the next following general meeting of the Company and shall then be eligible for re-election. Accordingly, Mr. Yang Zeqiang, who was appointed by the Board as independent nonexecutive Director with effect from 19 September 2012, will retire from office and offer himself for re-election at the AGM.

Pursuant to Article 87 of the Articles, at each annual general meeting of the Company, onethird 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 reelection. 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. Chen Jinyan and Mr. Yu Zhongming, who being eligible, have offered themselves for re-election at the AGM.

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

Mr. Chen Jinyan（陳錦艷） , aged 43, has been an executive Director since August 2003. He is also the Chairman of the Company and is responsible for the Group’s operation and product development. Mr. Chen has over 21 years of experience in the textile industry. Mr. Chen obtained a diploma in the design of textile products from the textile engineering faculty of Jiangxi Textile Industry Academy（江西紡織工業學院）. He is the elder brother of Mr. Chen Dong and Mr. Chen Jinqing. Mr. Chen has been the vice president and authorised representative of Textile Engineering Society of Fujian Province（福建省紡織工程學會）since 2006.

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LETTER FROM THE BOARD

Mr. Chen has entered into a service agreement with the Company for a fixed term of two years from 1 September 2012 to 31 August 2014 (both days inclusive) and is subject to termination by either party by giving not less than three months’ written notice. He is also subject to retirement by rotation and re-election at annual general meeting of the Company pursuant to the Articles. Mr. Chen is entitled to a director’s emolument of HK$120,000 per month, which is determined with reference to the emoluments paid by comparable companies, time commitment and responsibilities of Mr. Chen and the Company’s performance.

As at the Latest Practicable Date, Mr. Chen was interested in 251,640,000 Shares, representing approximately 24.18% of the total issued share capital of the Company.

Mr. Yu Zhongming（俞忠明） , aged 77, 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 49 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 entered into an appointment letter with the Company for a fixed term of one year from 1 September 2012 to 31 August 2013 (both days inclusive) and is subject to termination by either party by giving not less than two months’ written notice. He is also subject to retirement by rotation and re-election at annual general meeting of the Company pursuant to the Articles. Mr. Yu is entitled to a director’s fee of HK$36,000 per annum, which is determined with reference to the fees paid by comparable companies, time commitment and responsibilities of Mr. Yu and the Company’s performance.

Mr. Yang Zeqiang（楊澤強） , aged 42, has been the financial controller of Zhengzhou Han Yuan Zhi Ye Company Limited（鄭州翰園置業有限公司）since 2008, responsible for overseeing the financial operations of the company. Prior to joining Zhengzhou Han Yuan Zhi Ye Company Limited, Mr. Yang worked at Zhengzhou Yi Mian Textile Company Limited（鄭州一棉 有限責任公司）as accounting supervisor from 1992 to 1996 and subsequently as head of finance department from 1996 to 2008. Mr. Yang obtained a diploma in accounting and a bachelor’s degree in accounting from Zhongyuan University of Technology（中原工學院）(formerly known as Zhengzhou Textile Institute（鄭州紡織工學院）) in 1992 and 2005, respectively.

Mr. Yang has entered into an appointment letter with the Company for a term of one year commencing from 19 September 2012 to 18 September 2013 (both days inclusive) and is subject to termination by either party by giving not less than two months’ written notice. He is also subject to retirement by rotation and re-election at the annual general meeting of the Company pursuant to the Articles. Mr. Yang is entitled to a director’s fee of HK$36,000 per annum which is determined with reference to the fees paid by comparable companies, time commitment and responsibilities of Mr. Yang and the Company’s performance.

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LETTER FROM THE BOARD

Save as disclosed hereof, as at the Latest Practicable Date, and to the best knowledge and belief of the Board, the Directors confirmed that:

• (a) each of Mr. Chen Jinyan, Mr. Yu Zhongming and Mr. Yang Zeqiang is not connected with any Director, senior management, substantial Shareholder or controlling Shareholder of the Company;

• (b) each of Mr. Chen Jinyan, Mr. Yu Zhongming and Mr. Yang Zeqiang has no other interests in the Shares which are required to be disclosed under Part XV of the SFO;

• (c) each of Mr. Chen Jinyan, Mr. Yu Zhongming and Mr. Yang Zeqiang did not hold any other directorships in listed public companies in the last three years;

• (d) there is no information that needs to be disclosed pursuant to any of the requirements as set out in Rule 13.51(2)(h) to (v) of the Listing Rules; and

• (e) the Company is not aware of any other matter that needs to be brought to the attention of the Shareholders and the Stock Exchange in relation to the re-election of Directors.

AMENDMENTS TO THE ARTICLES

For the purpose of conforming with the latest amendments to the Listing Rules which became effective on 1 January 2012 and 1 April 2012, respectively, a special resolution will be proposed to the Shareholders to approve the proposed amendments to the Articles at the AGM. The major amendments to the Articles are as follows:

• (a) all resolutions at general meetings of the Company shall be decided by poll other than resolution which relates purely to a procedural or administrative matter as may be permitted under the Listing Rules to be voted by a show of hands;

• (b) no longer permitting a Director to disregard 5% interests when considering whether the Director has a material interest which would prevent him from forming part of the quorum or voting at board meetings;

• (c) requiring physical board meetings in lieu of written resolutions where a substantial shareholder or a Director has a conflict of interest in a matter to be considered by the Board which the Board has determined to be material; and

• (d) requiring Shareholders’ approval at a general meeting for any proposal to appoint or remove an auditor before the term of his office.

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LETTER FROM THE BOARD

Details of the proposed amendments to the Articles are set out in Appendix II to this circular. A special resolution will be proposed at the AGM for approving these amendments to the Articles by way of adopting a new set of amended and restated articles of association which consolidates all the proposed amendments to the Articles.

THE AGM, PROXY ARRANGEMENT AND DEMAND FOR POLL

A notice convening the AGM to be held at Fung Shui Room II, 6th Floor, Marco Polo Hongkong Hotel, Harbour City, 3 Canton Road, Kowloon, Hong Kong, on Thursday, 22 November 2012 at 3:30 p.m. is set out on pages 18 to 21 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 practicable and in any event not less than 48 hours before the time fixed for holding the AGM (or any adjournment thereof) to the office of the Company’s branch share registrar in Hong Kong, Tricor Investor Services Limited at 26th Floor, 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 and in such event, the instrument appointing a proxy shall be deemed to be revoked.

Pursuant to Rule 13.39(4) of the Listing Rules, any vote of Shareholders at a general meeting must be taken by poll. At the AGM, the chairman of the AGM will exercise his power under the Articles to demand a poll for every resolution put to vote at the AGM.

RECOMMENDATION

The Directors consider that all the proposed resolutions at 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

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EXPLANATORY STATEMENT

APPENDIX I

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 Shares 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.

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EXPLANATORY STATEMENT

APPENDIX I

(d) Fund of repurchase

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

The Company is empowered by its memorandum and Articles to repurchase its Shares. The Cayman Islands law provides that the amount of capital repaid in connection with a share repurchase may only be paid out of either the capital paid up on the relevant shares, or the profit that would otherwise be available for distribution by way of dividend or the proceeds of a new issue of shares made for such purpose. The amount of premium payable on redemption may only be paid out of either the profits that would otherwise be available for distribution by way of dividend or out of the share premium of the Company. Under the Cayman Islands laws, the repurchased Shares will remain part of the authorised but unissued share capital.

As compared with the financial position of the Company as at 30 June 2012 (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. 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).

(e) Connected parties

None of the Directors nor, to the best of the knowledge of the Directors 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) of the Company has notified the Company that he/she has a present intention to sell Shares to the Company, nor has he/she undertaken not to do so, if the Repurchase Mandate is approved by the Shareholders.

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EXPLANATORY STATEMENT

APPENDIX I

(f) Undertaking by the 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 repurchase of Shares, a Shareholder’s proportionate interest in the voting rights of the Company increases, such increase will be treated as an acquisition of voting rights for the purpose of the Takeovers Code.

As at the Latest Practicable Date, the substantial Shareholders (as defined in the Listing Rules), together with their parties acting in concert (within the meaning of the Takeovers Code) and their respective associates, were beneficially interested in 583,810,000 Shares representing approximately 56.10% of the issued shares. In the event that the Directors exercise the Repurchase Mandate in full in accordance with the terms of the ordinary resolution to be proposed at the AGM, the interests of the substantial Shareholders, together with their respective associates, in the Company would be increased to approximately 62.34% of the issued shares, which will not give rise to an obligation to make a mandatory offer under Rules 26 and 32 of the Takeovers Code.

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 to below 25%.

2. SHARE PURCHASE MADE BY THE COMPANY

During the six months immediately preceding the Latest Practicable Date, no Shares have been repurchased by the Company.

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EXPLANATORY STATEMENT

APPENDIX I

3. SHARE PRICES

During each of the previous 12 months immediately preceding the Latest Practicable Date, the highest and lowest share prices at which Shares traded on the Stock Exchange were as follows:

	Per Share
Month	Highest	Lowest
	(HK$)	(HK$)
2011
September	0.200	0.150
October	0.183	0.137
November	0.167	0.116
December	0.152	0.136
2012
January	0.168	0.136
February	0.195	0.138
March	0.280	0.183
April	0.260	0.230
May	0.260	0.222
June	0.255	0.247
July	0.300	0.235
August	0.290	0.250
September	0.375	0.285
October (up to the Latest Practicable Date)	0.330	0.275

Note: The information on the share price is extracted from the official website of the Stock Exchange.

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APPENDIX II DETAILS OF THE PROPOSED AMENDMENTS TO THE ARTICLES

Details of the proposed amendments to the Articles are as follows:

1.	Article no. 2.(1)	Article no. 2.(1)	Action:Addition
	Existing article	–
	Amended and restated article	“substantial shareholder” shall have the same meaning ascribed to it under the rules of the Designated Stock Exchange.
2.	Article no. 44		Action:Amendment
	Existing article	The Register and branch register of Members, as the case may be, shall be open to inspection for at least two (2) hours on every business day by Members without charge or by any other person, upon a maximum payment of $2.50 or such lesser sum specified by the Board, at the Office or such other place at which the Register is kept in accordance with the Law or, if appropriate, upon a maximum payment of $1.00 or such lesser sum specified by the Board at the Registration Office. The Register including any overseas or local or other branch register of Members may, after notice has been given by advertisement in an appointed newspaper or any other newspapers in accordance with the requirements of any Designated Stock Exchange or by any electronic means in such manner as may be accepted by the Designated Stock Exchange to that effect, be closed at such times or for such periods not exceeding in the whole thirty (30) days in each year as the Board may determine and either generally or in respect of any class of shares.
	Amended and restated article	The Register and branch register of Members, as the case may be, shall be open to inspection for at least two (2) hours during business hours by Members without charge or by any other person, upon a maximum payment of $2.50 or such lesser sum specified by the Board, at the Office or such other place at which the Register is kept in accordance with the Law or, if appropriate, upon a maximum payment of $1.00 or such lesser sum specified by the Board at the Registration Office. The Register including any overseas or local or other branch register of Members may, after notice has been given by advertisement in an appointed newspaper or any other newspapers in accordance with the requirements of any Designated Stock Exchange or by any electronic means in such manner as may be accepted by the Designated Stock Exchange to that effect, be closed at such times or for such periods not exceeding in the whole thirty (30) days in each year as the Board may determine and either generally or in respect of any class of shares.
3.	Article no. 66		Action:Amendment
	Existing article	Subject to any special rights or restrictions as to voting for the time being attached to any shares by or in accordance with these Articles, at any general meeting on a poll every Member present in person or by proxy or, in the case of a Member being a corporation, by its duly authorised representative shall have one vote for every fully paid share of which he is the holder but so that no amount paid up or credited as paid up on a share in advance of calls or instalments is treated for the foregoing purposes as paid up on the share. A resolution put to the vote of a meeting shall be decided by way of a poll.
	Amended and restated article	(1) Subject to any special rights or restrictions as to voting for the time being attached to any shares by or in accordance with these Articles, at any general meeting on a poll every Member present in person or by proxy or, in the case of a Member being a corporation, by its duly authorised representative shall have one vote for every fully paid share of which he is the holder but so that no amount paid up or credited as paid up on a share in advance of calls or instalments is treated for the foregoing purposes as paid up on the share. A resolution put to the vote of a meeting shall be decided by way of a poll save that the chairman of the meeting may in good faith, allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands in which case every Member present in person (or being a corporation, is present by a duly authorised representative), or by proxy(ies) shall have one vote provided that

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APPENDIX II DETAILS OF THE PROPOSED AMENDMENTS TO THE ARTICLES

		where more than one proxy is appointed by a Member which is a clearing house (or its nominee(s)), each such proxy shall have one vote on a show of hands. For purposes of this Article, procedural and administrative matters are those that (i) are not on the agenda of the general meeting or in any supplementary circular that may be issued by the Company to its Members; and (ii) relate to the chairman’s duties to maintain the orderly conduct of the meeting and/or allow the business of the meeting to be properly and effectively dealt with, whilst allowing all Members a reasonable opportunity to express their views. (2) Where a show of hands is allowed, before or on the declaration of the result of the show of hands, a poll may be demanded: (a) by at least three Members present in person or in the case of a Member being a corporation by its duly authorised representative or by proxy for the time being entitled to vote at the meeting; or (b) by a Member or Members present in person or in the case of a Member 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 Members having the right to vote at the meeting; or (c) by a Member or Members present in person or in the case of a Member being a corporation by its duly authorised representative or by proxy and holding shares in the Company 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. A demand by a person as proxy for a Member or in the case of a Member being a corporation by its duly authorised representative shall be deemed to be the same as a demand by the Member.	where more than one proxy is appointed by a Member which is a clearing house (or its nominee(s)), each such proxy shall have one vote on a show of hands. For purposes of this Article, procedural and administrative matters are those that (i) are not on the agenda of the general meeting or in any supplementary circular that may be issued by the Company to its Members; and (ii) relate to the chairman’s duties to maintain the orderly conduct of the meeting and/or allow the business of the meeting to be properly and effectively dealt with, whilst allowing all Members a reasonable opportunity to express their views. (2) Where a show of hands is allowed, before or on the declaration of the result of the show of hands, a poll may be demanded: (a) by at least three Members present in person or in the case of a Member being a corporation by its duly authorised representative or by proxy for the time being entitled to vote at the meeting; or (b) by a Member or Members present in person or in the case of a Member 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 Members having the right to vote at the meeting; or (c) by a Member or Members present in person or in the case of a Member being a corporation by its duly authorised representative or by proxy and holding shares in the Company 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. A demand by a person as proxy for a Member or in the case of a Member being a corporation by its duly authorised representative shall be deemed to be the same as a demand by the Member.
4.	Article no. 67		Action:Addition
	Existing article	Intentionally deleted.
	Amended and restated article	Where a resolution is voted on by a show of hands, a declaration by the chairman that a resolution has been carried, or carried unanimously, or by a particular majority, or not carried by a particular majority, or lost, and an entry to that effect made in the minute book of the Company, shall be conclusive evidence of the facts without proof of the number or proportion of the votes recorded for or against the resolution.
5.	Article no. 75.(1)		Action:Amendment
	Existing article	A Member who is a patient for any purpose relating to mental health or in respect of whom an order has been made by any court having jurisdiction for the protection or management of the affairs of persons incapable of managing their own affairs may vote by his receiver, committee, curator bonis or other person in the nature of a receiver, committee or curator bonis appointed by such court, and such receiver, committee, curator bonis or other person may vote by proxy, and may otherwise act and be treated as if he were the registered holder of such shares for the purposes of general meetings, provided that such evidence as the Board may require of the authority of the person claiming to vote shall have been deposited at the Office, head office or Registration Office, as appropriate, not less than forty-eight (48) hours before the time appointed for holding the meeting, or adjourned meeting, as the case may be.
	Amended and restated article	A Member who is a patient for any purpose relating to mental health or in respect of whom an order has been made by any court having jurisdiction for the protection or management of the affairs of persons incapable of managing their own affairs may vote, whether on a show of hands or on a poll, by his receiver, committee, curator bonis or other person in the nature of a receiver, committee or curator bonis appointed by such court, and such receiver, committee, curator bonis or other person may vote by proxy, and may otherwise act and be treated as if he were the registered holder of such shares for the purposes of general meetings, provided that such evidence as the Board may require of the authority of the person claiming to vote shall have been deposited at the Office, head office or Registration Office, as appropriate, not less than forty-eight (48) hours before the time appointed for holding the meeting, or adjourned meeting, as the case may be.

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APPENDIX II DETAILS OF THE PROPOSED AMENDMENTS TO THE ARTICLES

6.	Article no. 81	Article no. 81	Action:Amendment
	Existing article	Instruments of proxy shall be in any common form or in such other form as the Board may approve (provided that this shall not preclude the use of the two-way form) and the Board may, if it thinks fit, send out with the notice of any meeting forms of instrument of proxy for use at the meeting. The instrument of proxy shall be deemed to confer authority to vote on any amendment of a resolution put to the meeting for which it is given as the proxy thinks fit. The instrument of proxy shall, unless the contrary is stated therein, be valid as well for any adjournment of the meeting as for the meeting to which it relates.
	Amended and restated article	Instruments of proxy shall be in any common form or in such other form as the Board may approve (provided that this shall not preclude the use of the two-way form) and the Board may, if it thinks fit, send out with the notice of any meeting forms of instrument of proxy for use at the meeting. The instrument of proxy shall be deemed to confer authority to demand or join in demanding a poll and to vote on any amendment of a resolution put to the meeting for which it is given as the proxy thinks fit. The instrument of proxy shall, unless the contrary is stated therein, be valid as well for any adjournment of the meeting as for the meeting to which it relates.
7.	Article no. 84.(2)		Action:Amendment
	Existing article	If a clearing house (or its nominee(s)), being a corporation, is a Member, it may authorise such persons as it thinks fit to act as its representatives at any meeting of the Company or at any meeting of any class of Members provided that, if more than one person is so authorised, the authorisation shall specify the number and class of shares in respect of which each such representative is so authorised. Each person so authorised under the provisions of this Article shall be deemed to have been duly authorised without further evidence of the facts and be entitled to exercise the same rights and powers on behalf of the clearing house (or its nominee(s)) as if such person was the registered holder of the shares of the Company held by the clearing house (or its nominee(s)).
	Amended and restated article	If a clearing house (or its nominee(s)), being a corporation, is a Member, it may authorise such persons as it thinks fit to act as its representatives at any meeting of the Company or at any meeting of any class of Members provided that, if more than one person is so authorised, the authorisation shall specify the number and class of shares in respect of which each such representative is so authorised. Each person so authorised under the provisions of this Article shall be deemed to have been duly authorised without further evidence of the facts and be entitled to exercise the same rights and powers on behalf of the clearing house (or its nominee(s)) as if such person was the registered holder of the shares of the Company held by the clearing house (or its nominee(s)) including, where a show of hands is allowed, the right to vote individually on a show of hands.
8.	Article no. 103.(1)(iv)		Action:Amendment
	Existing article	any contract or arrangement in which the Director or his associate(s) is/are interested in the same manner as other holders of shares or debentures or other securities of the Company or any of its subsidiaries by virtue only of his/their interest in shares or debentures or other securities of the Company;
	Amended and restated article	any contract or arrangement in which the Director or his associate(s) is/are interested in the same manner as other holders of shares or debentures or other securities of the Company or any of its subsidiaries by virtue only of his/their interest in shares or debentures or other securities of the Company; or

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APPENDIX II DETAILS OF THE PROPOSED AMENDMENTS TO THE ARTICLES

9.	Article no. 103.(1)(v)	Article no. 103.(1)(v)	Action:Delete in its entirety
	Existing article	any contract or arrangement concerning any other company in which the Director or his associate(s) is/are interested only, whether directly or indirectly, as an officer or executive or a shareholder other than a company in which the Director and/or his associates is/are beneficially interested in five (5) per cent or more of the issued shares or of the voting rights of any class of shares of such company (or any third company through which his interest or that of any of his associate is derived); or
	Amended and restated article	Intentionally deleted.
10.	Article no. 103.(2)		Action:Delete in its entirety
	Existing article	A company shall be deemed to be a company in which a Director and/or his associate(s) own(s) five (5) per cent. or more if and so long as (but only if and so long as) he and/or his associates, (either directly or indirectly) are the holders of or beneficially interested in five (5) per cent. or more of any class of the equity share capital of such company or of the voting rights available to members of such company (or of any third company through which his/ their interest or that of any of his associates is derived). For the purpose of this paragraph there shall be disregarded any shares held by a Director or his associate(s) as bare or custodian trustee and in which he or any of them has no beneficial interest, any shares comprised in a trust in which the interest of the Director or his associate(s) is/are in reversion or remainder if and so long as some other person is entitled to receive the income thereof, and any shares comprised in a trust in which the Director or his associate(s) is/are in revision or remainder if and so long as some other person is entitled to receive the income thereof, and any shares comprised in an authorized unit trust scheme in which the Director or his associate(s) is/are interested only as a unit holder and any shares which carry no voting right at general meetings and very restrictive dividend and return of capital right.
	Amended and restated article	Intentionally deleted.
11.	Article no. 103.(3)		Action: Delete in its entirety
	Existing article	Where a company in which a Director and/or his associate(s) own(s) five (5) per cent. or more (within the meaning of Article 103(2)) is materially interested in a transaction, then that Director and/or his associate(s) shall also be deemed materially interested in such transaction.
	Amended and restated article	Intentionally deleted.
12.	Article no. 104.(4)(iii)		Action:Amendment
	Existing article	if any one or more of the Directors hold (jointly or severally or indirectly or indirectly) a controlling interest in another company, make a loan to that other company or enter into any guarantee or provide any security in connection with a loan made by any person to that other company.
	Amended and restated article	if any one or more of the Directors hold (jointly or severally or directly or indirectly) a controlling interest in another company, make a loan to that other company or enter into any guarantee or provide any security in connection with a loan made by any person to that other company.

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APPENDIX II DETAILS OF THE PROPOSED AMENDMENTS TO THE ARTICLES

13.	Article no. 122.	Article no. 122.	Action:Amendment
	Existing article	A resolution in writing signed by all the Directors except such as are temporarily unable to act through ill-health or disability, and all the alternate Directors, if appropriate, whose appointors are temporarily unable to act as aforesaid shall (provided that such number is sufficient to constitute a quorum and further provided that a copy of such resolution has been given or the contents thereof communicated to all the Directors for the time being entitled to receive notices of Board meetings in the same manner as notices of meetings are required to be given by these Articles) be as valid and effectual as if a resolution had been passed at a meeting of the Board duly convened and held. Such resolution may be contained in one document or in several documents in like form each signed by one or more of the Directors or alternate Directors and for this purpose a facsimile signature of a Director or an alternate Director shall be treated as valid.
	Amended and restated article	A resolution in writing signed by all the Directors except such as are temporarily unable to act through ill-health or disability, and all the alternate Directors, if appropriate, whose appointors are temporarily unable to act as aforesaid shall (provided that such number is sufficient to constitute a quorum and further provided that a copy of such resolution has been given or the contents thereof communicated to all the Directors for the time being entitled to receive notices of Board meetings in the same manner as notices of meetings are required to be given by these Articles) be as valid and effectual as if a resolution had been passed at a meeting of the Board duly convened and held. Such resolution may be contained in one document or in several documents in like form each signed by one or more of the Directors or alternate Directors and for this purpose a facsimile signature of a Director or an alternate Director shall be treated as valid. Notwithstanding the foregoing, a resolution in writing shall not be passed in lieu of a meeting of the Board for the purposes of considering any matter or business in which a substantial shareholder of the Company or a Director has a conflict of interest which the Board has determined to be material.
14.	Article no. 155.(1)		Action:Amendment
	Existing article	The Board shall appoint an auditor to audit the accounts of the Company and such auditor shall hold office until the Board appoints another auditor. Such auditor may be a Member but no Director or officer or employee of the Company shall, during his continuance in office, be eligible to act as an auditor of the Company.
	Amended and restated article	At the annual general meeting or at a subsequent extraordinary general meeting in each year, the Members shall appoint an auditor to audit the accounts of the Company and such auditor shall hold office until the next annual general meeting. Such auditor may be a Member but no Director or officer or employee of the Company shall, during his continuance in office, be eligible to act as an auditor of the Company.
15.	Article no. 155.(2)		Action:Amendment
	Existing article	The Board may remove the Auditor at any time before the expiration of his term of office and shall by resolution at the same meeting or at a separate meeting appoint another Auditor in his stead for the remainder of his term.
	Amended and restated article	The Members may, at any general meeting convened and held in accordance with these Articles, by special resolution remove the Auditor at any time before the expiration of his term of office and shall by ordinary resolution at that meeting appoint another Auditor in his stead for the remainder of his term.
16.	Article no. 157		Action:Amendment
	Existing article	The remuneration of the Auditor shall be fixed by the Board or in such manner as the Board may determine.
	Amended and restated article	The remuneration of the Auditor shall be fixed by the Company in general meeting or in such manner as the Members may determine.

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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 Fung Shui Room II, 6th Floor, Marco Polo Hongkong Hotel, Harbour City, 3 Canton Road, Kowloon, Hong Kong on Thursday, 22 November 2012 at 3:30 p.m. for the following purposes:

ORDINARY BUSINESS

1. To receive and consider the audited consolidated financial statements of the Company and its subsidiaries for the year ended 30 June 2012 and the report of the Directors and independent auditor’s report for the year ended 30 June 2012.

2. (A) To re-elect Mr. Chen Jinyan as a director of the Company (the “ Director ”).

3. (B) To re-elect Mr. Yu Zhongming as the Director.

4. (C) To re-elect Mr. Yang Zeqiang as the Director.

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

6. To re-appoint auditor and to authorise the board of Directors to fix the remuneration of the auditor.

SPECIAL BUSINESS

1. To consider and, if thought fit, pass with or without modifications, the following resolution as an ordinary resolution of the Company:

ORDINARY RESOLUTIONS

• (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 issue, allot and deal with additional shares in the share 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 earliest 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 on 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 restrictions or obligations under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any territory outside the Hong Kong Special Administrative Region of the People’s Republic of China).”

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NOTICE OF ANNUAL GENERAL MEETING

• (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 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, 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 in issue 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 earliest 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 on 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. To consider as special business, if thought fit, pass the following resolution as special resolution:

SPECIAL RESOLUTION

“ THAT the amended and restated articles of association of the Company (the “ Amended and Restated Articles of Association ”), a full copy of which together with a summary of all the proposed amendments (as set out in Appendix II to the circular to the shareholders of the Company dated 10 October 2012) have been produced to this meeting marked “A” and signed by the chairman of this meeting for the purpose of identification, be and are hereby approved and adopted as the new articles of association of the Company in substitution for and to the exclusion of the existing articles of association of the Company with effect from the close of this meeting, and the board of directors of the Company be and is hereby authorised to do all such acts and to enter into all such transactions and arrangements as may be necessary or expedient in order to give effect to the Amended and Restated Articles of Association.”

By Order of the Board

Art Textile Technology International Company Limited Chen Jinyan Chairman

Hong Kong, 10 October 2012

As at the date of this notice, the executive directors of the Company are Mr. Chen Jinyan, Mr. Chen Dong and Mr. Chen Jinqing; and the independent non-executive directors of the Company are Mr. Lo Kin Chung, Mr. Yu Zhongming and Mr. Yang Zeqiang.

Notes:

1. Any shareholder entitled to attend and vote at the meeting is entitled to appoint one or, if he is holder of more than one share, 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 26th Floor, 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.

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