Art Group Holdings Limited - Proxy Solicitation & Information Statement 2015

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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

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)

VERY SUBSTANTIAL DISPOSAL IN RELATION TO THE DISPOSAL OF SUBSIDIARIES

Financial adviser to the Company

==> picture [119 x 46] intentionally omitted <==

A notice convening the EGM to be held at Jade Room, 6th Floor, Marco Polo Hongkong Hotel, Harbour City, 3 Canton Road, Kowloon, Hong Kong on Tuesday, 29 December 2015 at 10:15 a.m. is set out on pages 57 to 59 of this circular. A form of proxy for use at the EGM is enclosed with this circular. Whether or not you plan to attend the EGM, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the Company’s branch share registrar, Tricor Investor Services Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding of the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

8 December 2015

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Appendix I – Financial Information of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Appendix II – Financial Information of the Disposal Group. . . . . . . . . . . . . . . . . . . .	29
Appendix III – Unaudited Pro Forma Financial Information
of the Remaining Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	36
Appendix IV – General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	48
Notice of EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	57

– i –

DEFINITIONS

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

“Art Bright”

Art Bright Holdings Limited 雅暉集團有限公司 , a company incorporated in Hong Kong with limited liability and an indirect wholly-owned subsidiary of the Company as at the date of this circular

“Art Gate”

Art Gate Limited 雅迎有限公司, a company incorporated in Hong Kong with limited liability and an indirect whollyowned subsidiary of the Company as at the date of this circular

“associates”

has the meaning ascribed to it under the Listing Rules

“Board”

board of directors of the Company

“Business Day”

“Business Day” a day (other than Saturday, Sunday or public holiday) on which commercial banks in Hong Kong open for business “BVI” the British Virgin Islands “Changdun” 鄭州昌盾資產管理有限公司 (Zhengzhou Changdun Assets Management Company Limited), a wholly foreign-owned enterprise established in the PRC on 7 July 2014 and is an indirect wholly-owned subsidiary of the Company

“Company”

Art Textile Technology International Company Limited（錦藝紡織科技國際有限公司）, a company incorporated in the Cayman Islands with limited liability whose Shares are listed on the Stock Exchange

“Completion”

the completion of the Disposal in accordance with the terms and conditions of the Sale and Purchase Agreement

“Consideration”

consideration for the Sale Share (A) and the Sale Share (B) payable by the Purchaser to the Vendor pursuant to the Sale and Purchase Agreement

– 1 –

DEFINITIONS

“Controlling Shareholders”
“Directors”
“Disposal”
“Disposal Group”
“Disposal Group Loan (A)”
“Disposal Group Loan (B)”
“EGM”
“First Acquisition”
Mr. Chen Jinyan, Mr. Chen Dong, Mr. Chen Jinqing, Ms. Lin Lin, Fully Chain Limited, Jinjie Limited and Ultimate Name Limited and their respective associates
the director(s) of the Company

the disposal of the Sale Shares by the Company in accordance with the terms and conditions of the Sale and Purchase Agreement

comprises subsidiaries of the Company, namely (1) Global Art, (2) Art Gate, (3) Fuzhou Huaguan, (4) Good Fame, (5) Art Bright and (6) Fuzhou Huasheng
the total amount of HK$302,998,000 due to Global Art, Art Gate and Fuzhou Huaguan by the Group (excluding the Disposal Group)
the total amount of HK$109,554,000 due from Good Fame, Art Bright and Fuzhou Huasheng to the Group (excluding the Disposal Group)

the extraordinary general meeting of the Company to be convened to approve, among others, the Sale and Purchase Agreement and the transactions contemplated thereunder

refers to the acquisition of an aggregate of 75% equity interests of 鄭州佳潮物業服務有限公司 (Zhengzhou Jiachao Property Services Company Limited) from 鄭州第一紡織有限公司 (Zhengzhou Diyi Textile Company Limited) and 新疆金鋒源棉花產業有限公司 (Xinjiang Jinfengyuan Cotton Industry Company Limited) by Changdun, details of which were set out in the paragraph headed “Previous acquisitions – The First Acquisition” in the letter from the Board in this circular

– 2 –

DEFINITIONS

“Fuzhou Huaguan”
“Fuzhou Huasheng”
“Global Art”
“Good Fame”
“Group”
“Hong Kong”
“Independent Third Party(ies)”
“Latest Practicable Date”
“Listing Rules”
“PRC”
福州華冠針紡織品有限公司 (Fuzhou Huaguan Knitting and Sprining Company Limited), a company incorporated in the PRC with limited liability and an indirect whollyowned subsidiary of the Company as at the date of this circular
福州華升紡織有限公司 (Fuzhou Huasheng Textile Company Limited), a company incorporated in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company as at the date of this circular
Global Art International Limited, a company incorporated in the BVI with limited liability and an indirect whollyowned subsidiary of the Company as at the date of this circular
Good Fame Group Limited 美譽集團有限公司, a company incorporated in the BVI with limited liability and an indirect wholly-owned subsidiary of the Company as at the date of this circular

the Company and its subsidiaries

the Hong Kong Special Administrative Region of the PRC

means any person(s) or company(ies) and their respective ultimate beneficial owner(s) who are third parties independent of the Company and its connected persons (as defined in the Listing Rules)
4 December 2015, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular
the Rules Governing the Listing of Securities on the Stock Exchange

the People’s Republic of China which, for the purpose of this circular, excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan

– 3 –

DEFINITIONS

“Properties” consists of two industrial compounds located on the eastern side of 201 Provincial Road, near its junction with Ronghe Line, Songxia Town, Changle City, Fuzhou Shi, Fujian Province, the PRC and located at No. 106 Zexu Avenue 368 Lane (previously known as No. 198 Fuxia Road), Cangshan Industrial Estate, Cangshan District, Fuzhou Shi, Fujian Province, the PRC “Purchaser” Li Li（李力）, an Independent Third Party “Remaining Group” the Group excluding the Disposal Group after the Completion “Sale and Purchase Agreement” the sale and purchase agreement dated 28 August 2015 and entered into between the Vendor and the Purchaser in relation to the Disposal “Sale Shares” the Sale Share (A) and the Sale Share (B)

“Sale Share (A)” as defined under the paragraph headed “Subject matter of the Disposal” of this circular “Sale Share (B)” as defined under the paragraph headed “Subject matter of the Disposal” of this circular

“Second Acquisition” refers to the acquisition of the entire equity interests in 鄭州佳聰物業服務有限公司 (Zhengzhou Jiacong Property Services Company Limited) from 鄭州暢科貿易有限公司 (Zhengzhou Changke Trading Company Limited) by Changdun, details of which were set out in the paragraph headed “Previous acquisitions – The Second Acquisition” in the letter from the Board in this circular
“SFO” Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong)
“Share(s)” ordinary share(s) of HK$0.01 each in the share capital of the Company
“Shareholder(s)” holder(s) of the Share(s)

– 4 –

DEFINITIONS

“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“subsidiary(ies)”	has the meaning ascribed to it under the Listing Rules
“Vendor”	Right Lane International Limited, a company incorporated
	in the BVI and a direct wholly-owned subsidiary of the
	Company
“HK$”	Hong Kong dollar, the lawful currency of Hong Kong
“RMB”	Renminbi, the lawful currency of the PRC
“%”	per cent

For the purpose of this circular, the conversion of RMB into HK$ is based on the approximate exchange rate of HK$1.00 to RMB0.82 for illustration purpose only.

– 5 –

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 Mr. Chen Jinqing

Independent non-executive Directors: Mr. Lin Ye Mr. Yang Zeqiang Ms. Yau Lai Ying

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, 14[th] Floor China Merchants Tower Shun Tak Centre 168-200 Connaught Road Central Hong Kong

8 December 2015

To the Shareholders

Dear Sir or Madam,

VERY SUBSTANTIAL DISPOSAL IN RELATION TO THE DISPOSAL OF SUBSIDIARIES

INTRODUCTION

Reference is made to the announcement of the Company dated 28 October 2015 in relation to the disposal of subsidiaries.

– 6 –

LETTER FROM THE BOARD

As one or more of the relevant applicable percentage ratios set forth under Rule 14.07 of the Listing Rules in respect of the Disposal are 75% or more, the Disposal constitutes a very substantial disposal for the Company and is subject to the reporting, announcement and Shareholders’ approval requirements under Chapter 14 of the Listing Rules.

The purpose of this circular is to provide the Shareholders with further details of the Sale and Purchase Agreement and the transactions contemplated therein, together with such other information as required by the Listing Rules.

SALE AND PURCHASE AGREEMENT

Date

28 August 2015 (after trading hours)

Parties

Vendor: Right Lane International Limited, a direct wholly-owned subsidiary of the Company

Purchaser: Li Li（李力）

The Purchaser, Li Li（李力）, is a citizen of the PRC and a vice general manager of a cultural industry development company in Fujian Province, the PRC. His family businesses involve in property development, supply of cement, building materials and liquefied petroleum gas, hotel accommodations and nylon technology. The Purchaser was introduced to Mr. Chen Jinyan, an executive Director, by the father of the Purchaser. The father of the Purchaser and Mr. Chen Jinyan acquainted with each other since 2012 through the introduction of their common friends.

– 7 –

LETTER FROM THE BOARD

To the best knowledge, information and belief of the Directors, and having made all reasonable enquiries, the Purchaser is a third party independent of and not connected with the Company and its connected persons (as defined in the Listing Rules) as of the date of this circular.

Subject matter of the Disposal

The Vendor will transfer to the Purchaser:

(a) one share (representing the entire issued share capital) in Global Art (“ Sale Share (A) ”); and
(b) one share (representing the entire issued share capital) in Good Fame (“ Sale Share (B) ”).

Consideration

The Consideration of the Disposal to be paid by the Purchaser to the Vendor is HK$260,788,000 which was determined after arm’s length negotiations between the Vendor and the Purchaser with reference to the unaudited net asset value of the Disposal Group as at 30 June 2015 of approximately HK$260,788,000. The Consideration is to set-off against the Disposal Group Loan (A) and Disposal Group Loan (B) with net balance of approximately HK$193,444,000 and addition of the fixed assets surplus of the Disposal Group of approximately HK$38,965,000, as well as the deductions of repair and maintenance expenditure of approximately HK$13,833,000 on the property and plant of the Disposal Group estimated by the Purchaser and the capital commitment of approximately HK$4,476,000 on the drainage system of the Disposal Group. Consequently, the Group will receive a net cash Consideration of approximately HK$88,000,000 (the “ Net Cash Received ”), which will be paid in the following manner:

(a) 30% of the Net Cash Received, being HK$26,400,000, was paid as a refundable deposit upon signing of the Sale and Purchase Agreement;
(b) 40% of the Net Cash Received, being HK$35,200,000, will be paid as a refundable deposit after the EGM; and
(c) the balance of the Net Cash Received, being HK$26,400,000, will be paid within five (5) Business Days from the completion of the Disposal.

– 8 –

LETTER FROM THE BOARD

The Directors consider that it is fair and reasonable for the Company to bear the repair and maintenance expenditure of the Disposal Group’s property and plant and the capital commitment of its drainage system. By offering favourable conditions to the Purchaser, the sale and purchase process can be speeded up to cut down the loss incurred to the Company and the Shareholders in light of no other interested purchasers.

The Directors (including the independent non-executive Directors) confirm that the Consideration is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Conditions precedent

Completion of the Disposal is conditional upon fulfillment of, among other things, the following conditions:

(a) the Shareholders approving the transactions contemplated by the Sale and Purchase Agreement in the EGM; and
(b) the obtain of all consents, authorisations, permits and approvals, including but not limited to approval from the relevant Industry and Commerce Bureau, in respect of the Sale and Purchase Agreement and the transactions contemplated under the Sale and Purchase Agreement.

If the conditions are not fulfilled or waived on or before 31 March 2016, the Sale and Purchase Agreement shall lapse and be of no further effect, and no party to the Sale and Purchase Agreement shall have any claim against or liabilities to the other parties, save in respect of any antecedent breaches.

Completion

Completion shall take place within five (5) Business Days after the conditions of the Sale and Purchase Agreement are fulfilled or waived or such other date as agreed by the parties thereto.

Completion of the sale and purchase of the Sale Share (A) and the Sale Share (B) shall take place at the same time. None of the parties to the Sale and Purchase Agreement shall be entitled to complete the sale and purchase of only the Sale Share (A) or the Sale Share (B).

Immediately after Completion, the Group will not hold any equity interest in the Disposal Group, and each member of the Disposal Group will no longer be a subsidiary of the Company.

– 9 –

LETTER FROM THE BOARD

INFORMATION ON THE PURCHASER

To the best knowledge, information and belief of the Directors, and having made all reasonable enquiries, the Purchaser is an individual whose family businesses involve in property development, supply of cement, building materials and liquefied petroleum gas, hotel accommodations and nylon technology. The Purchaser is a third party independent of and not connected with the Company and its connected persons (as defined in the Listing Rules) as of the date of this circular. The Purchaser is independent of and not connected with the relevant vendors of the First Acquisition and the Second Acquisition.

INFORMATION ON THE DISPOSAL GROUP

The Disposal Group comprises indirect wholly-owned subsidiaries of the Company, namely (1) Global Art, (2) Art Gate, (3) Fuzhou Huaguan, (4) Good Fame, (5) Art Bright and (6) Fuzhou Huasheng.

Global Art is an investment holding company which is indirectly wholly-owned by the Company. It directly owns the entire issued share capital in Art Gate, which in turn holds the entire equity interests in Fuzhou Huaguan. Art Gate is an investment holding company. Fuzhou Huaguan is principally engaged in the dyeing process of grey fabrics supplied by its customers.

Good Fame is an investment holding company which is indirectly wholly-owned by the Company. It directly owns the entire issued share capital in Art Bright, which in turn holds the entire equity interests in Fuzhou Huasheng. Art Bright is an investment holding company. Fuzhou Huasheng is principally engaged in trial weaving of grey fabrics.

The Disposal Group currently does not have any business other than the business engaged by Fuzhou Huaguan and Fuzhou Huasheng.

The Properties comprise of two individual textile compounds which have an approximate site area of 92,704 sq.m. and 3,261 sq.m.. The former was completed in stages mainly during 2001 and 2008 and consists of 5 blocks of single storey workshop building, 3 blocks of 5-storey dormitory building, 1 block of single storey workshop/godown building, 2 blocks of 3-storey office building, 1 block of 3-storey research and development building, a single storey boiler room, a single storey switch room, a single storey toilet, a partly single storey and partly 2-storey guard house, 4 blocks of single storey/2-storey sewage treatment plant office and structure, open carparking spaces, landscaping areas, paved internal vehicular roads and fencing walls. The latter was completed in 1990s and consists of 1 block of partly 3-storey and partly 5-storey workshop building, 1 block of 3-storey godown building and fencing walls.

Given that, as at 30 June 2015, the value of the Properties only amounted to 1.42% and 9.41% of the total assets of the Group and the total assets of the Disposal Group respectively, the Disposal Group is not considered to consist of solely or mainly of property and therefore, a valuation report on the Properties is not included in this circular.

– 10 –

LETTER FROM THE BOARD

INFORMATION ON THE GROUP AND THE REMAINING GROUP AND REASONS FOR THE DISPOSAL

The Company is an investment holding company. The Group is principally engaged in the dyeing process of grey fabrics and property operating.

Since 2014, the PRC’s textile enterprises faced a number of challenges, mainly, persistent decline in cotton price, rising labor costs, shrinking downstream demand, declining sales price of textile products, slow recovery of global economy and intensified competition in both domestic and overseas textile and garment markets. The PRC’s textile industry had then slowed down from high growth to medium-to-low growth. As a result, from mid-2014, the Group experienced a decrease in sales volume of garment fabrics and textile materials resulting in a decline in sales price and revenue of the Group’s garment fabrics and textile materials. However, even the Group trimmed its business strategy from manufacture/sale of garment fabrics and trading of textile materials as at 31 December 2014 to only dyeing process of grey fabrics as at 30 June 2015, the results of the textile products segment did not improve and its loss incurred in the first half year of 2015 was approximately HK$18.2 million. The financial results keep getting worse after the year ended 30 June 2015 and the results of the Disposal Group kept incurring losses and this situation is expected to continue in the future.

In view of achieving the best interests of the Company and its Shareholders as a whole, the Directors have strived to adjust business strategy and diversify the Group’s business so as to maintain the Company’s position in the declining textile market. The Group has been putting effort in diversifying its operations into different kinds of business since the year ended 30 June 2014. Therefore substantial resources have been placed into property operating aspects in order to explore future prospects and develop the relevant markets, with a view to magnify the Company’s development potential and the Shareholders’ return. The Directors had discussions from time to time for any potential opportunities to penetrate into property operating business since the year ended 30 June 2014. When the target companies of the First Acquisition and the Second Acquisition were identified and before proceeding with such acquisitions, the Directors had various rounds of discussions on the potential interests these target companies may bring to the Group. The Directors decided to conduct the First Acquisition in light of the newly developed location and the customer base of the Jiachao’s shopping mall, as well as its capital appreciation in long run. Since its operations were already drawn up and implemented for nearly two years at the time of the First Acquisition, the Jiachao’s shopping mall was an appropriate stepping stone for the Group to enter into the property market. Then the Directors believed that more suitable tenants running profitable textile business can be pinpointed as tenants of the Jiacong’s shops (as defined below) by using their own experience in the textile business, even though the Jiacong’s shops (as defined below), which form part of the giant theme shopping mall, is still not yet opened at the time of the Second Acquisition.

– 11 –

LETTER FROM THE BOARD

Completion of the First Acquisition took place on 1 April 2015. Through completion of the First Acquisition, the Group at present owns a shopping mall (the “ Jiachao’s shopping mall ”) and earns revenue from the monthly incomes of rental, management fee, operating services payable by various tenants under the respective tenancy agreements with a term ranging from 1 year to 18 years. The shopping mall had been subdivided into various units and almost all the shops in the Jiachao’s shopping mall were rented out as at 30 June 2015. As at the Latest Practicable Date, the occupancy rate of the Jiachao’s shopping mall was 100% and was rented to over 157 tenants who offer a wide range of services and goods including shopping, dining and entertainment, such as a cinema, jewellery and watches, beauty, electrical appliances, international labels for fashion, lifestyle, casual wear/sport, kid’s paradise and food and beverages outlets. The average monthly incomes derived from the Jiachao’s shopping mall based on the signed tenancy agreements in the next twelve months will be approximately HK$10.4 million, which excludes incomes based on monthly turnover of some tenants, as well as incomes from parking, advertisements and promotion.

Completion of the Second Acquisition took place on 30 October 2015. Through completion of the Second Acquisition, the Group at present owns 164 shops in a giant theme shopping mall primarily selling textile materials, accessories and products (the “ Jiacong’s shops ”). As at the Latest Practicable Date, the Company had rented out 73.2% of the Jiacong’s shops to tenants selling textile materials, accessories and products with the lease terms commencing from the beginning of 2016 for 3 years. The average monthly incomes of the Jiacong’s shops based on the signed tenancy agreements in the next twelve months will be approximately HK$0.6 million. The Directors believe with their extensive knowledge and network in the textile business, this will enable the Company to grasp decisive opportunities in the promotion of renting these shops.

On 12 August 2015, Jiachao signed a rental agreement with the real estate developer whereby Jiachao leased from the real estate developer shop units in Zone C shopping mall with a gross floor area of approximately 60,658 square metres (the “ Zone C shopping mall ”) for a term of 10.4 years from 15 August 2015. Zone C shopping mall is an individual shopping mall adjacent to the Jiachao’s shopping mall. Jiachao will promote and further rent out the Zone C shopping mall to independent tenants. Jiachao enjoys a rent-free period up to 31 December 2015. The rental expenses of the Zone C shopping mall is RMB20/sq.m/month, which will be charged starting from January 2016 of HK$1.5 million per month. While the rental income generated from Zone C shopping mall is estimated to be RMB60/sq.m/month starting from January 2016 of HK$4.4 million per month.

The Company will not become a cash company upon completion of the Disposal as it will own the Jiachao’s shopping mall and the Jiacong’s shops. As at 30 June 2015, the Remaining Group had unaudited pro forma consolidated total assets and net assets of approximately HK$3,136 million and HK$1,416 million, respectively.

– 12 –

LETTER FROM THE BOARD

The executive Directors had once considered of disposing of the Disposal Group in July 2015 but they did not determine on such disposal. However, the financial results of the Disposal Group for the year ended 30 June 2015 continued to record a severe loss and kept getting worse thereafter. The continuing deterioration in the results of the textile business catalyzed the Directors to decide to dispose of the Disposal Group after several serious and detailed discussions when the Purchaser followed up with them on a proposed acquisition of the Disposal Group. Therefore, in order to stop severe loss by the textile products segment made to the Group and the Shareholders taken as a whole and relieve the financial burden brought by the increase in losses of the textile products segment to the Company, the Directors had no other better alternative than disposing of the Disposal Group so that the loss would not lower the whole Group’s results by using the profitable segment to finance the loss segment and ultimately impair the shareholders in the long run.

The Directors confirmed that the First Acquisition, the Second Acquisition and the Disposal were contemplated and negotiated separately at different time.

The audited quarterly turnover after 1 April 2015 (date of completion of the First Acquisition) of the Remaining Group (without taking into the Jiacong’s shops) up to 30 June 2015 was HK$21.5 million, together with an increase in fair value of investment properties of HK$101.3 million based on an independent valuation as at 30 June 2015, the result of the Group’s property operating segment was HK$49.4 million.

As at the Latest Practicable Date, the Remaining Group had outstanding bank and other borrowings of approximately HK$1,281.1 million with interest rates ranged from 6.15% to 17%. The finance costs of the Remaining Group for the year ending 30 June 2016 is estimated to be approximately HK$109.6 million. Among these borrowings, the interest rates of bank borrowings of HK$794.5 million are at the base lending rate of the People’s Bank of China (“ PBC ”), subject to adjustment by PBC for each interval set by relevant bank. The interest rates of the other borrowings of approximately HK$486.6 million are from 10% to 17%, with approximately HK$303.7 million borrowings at an interest rate of 10% and approximately HK$182.9 million at an interest rate of 17%. The high interest rate of the borrowing of HK$182.9 million is because no security was pledged and the borrowing is guaranteed by an independent third party. The interest payments for these other borrowings constitute the large portion of the finance costs of the Remaining Group. The interest rate of the borrowing of approximately HK$303.7 million was originally at a rate of 17% and it was reduced to 10% after negotiation with the relevant lender.

To assist the Remaining Group in reducing the large amount of finance costs that come from its current and non-current bank and other borrowings, the following measures will be taken:

(a) to further negotiate with the relevant lender to reduce the interest rate of the borrowing of approximately HK$182.9 million to a lower interest rate. In case where the relevant lender does not agree to lower the interest rate, to repay other borrowing at a high

– 13 –

LETTER FROM THE BOARD

interest rate by a substantial shareholder’s loan at a lower interest rate. As at the Latest Practicable Date, the substantial shareholders had advanced a loan in the principal amount of RMB5.0 million to the Remaining Group. Such shareholder’s loan has been used for the partial repayment of the bank borrowings of HK$794.5 million of the Remaining Group on 16 November 2015. The shareholders’ loan is unsecured, interest-free and has no fixed term of repayment; and/or

(b) if the Disposal is completed by the end of 2015, the financial results of the Group are expected to improve as a whole and the substantial shareholders will be more willing to consider to take up the finance costs of the Remaining Group charged at interest rates higher than the base lending rate published by PBC, and such finance costs include the interest expenses for the other borrowings of approximately HK$486.6 million. The finance costs of the other borrowings taken up by the substantial shareholders for the year ending 30 June 2016 is estimated to be approximately HK$44.7 million. After taking this measure, the total finance costs incurred by the Remaining Group for the year ending 30 June 2016 is estimated to be reduced to approximately HK$64.9 million; and/or
(c) to consider other available fund raising means, such as open offer, rights issue and/ or placing, and the substantial shareholders may consider to be an underwriter or participate in the excess applications in an open offer or rights issue.

The Remaining Group will settle its bank and other borrowings by its internally generated resources, a substantial shareholder’s loan or different fund raising means or any combination of these financing methods.

For the above proposed measures, the substantial Shareholders of the Company have no current intention to change the control of the Company regardless of any financing method.

In light of the reasons above, the Directors (including the independent non-executive Directors) are of the view that the terms of the Sale and Purchase Agreement are on normal commercial terms, fair and reasonable and in the interests of the Company and its Shareholders as a whole and the Directors are of the view that the Remaining Group upon completion of the Disposal will still be able to carry out a sufficient level of operations.

The Company and its substantial Shareholders have no current intention to change the shareholding of the Company but it cannot rule out the possibility of changing the Board composition because experienced and high caliber nominees from the property operating industry may be introduced into the Board.

– 14 –

LETTER FROM THE BOARD

FINANCIAL INFORMATION AND IMPACT OF THE DISPOSAL

As at 30 June 2015, the Disposal Group had unaudited consolidated total assets and net assets of approximately HK$479,614,000 and HK$260,788,000, respectively. Selected unaudited consolidated financial information of the Disposal Group is set out below:

		Year ended 30 June
	2013	2014	2015
	HK$’000	HK$’000	HK$’000
Revenue	732,217	492,939	352,353
Net (loss)/profit before taxation	91,186	52,460	(21,748)
Net (loss)/profit after taxation	55,446	36,467	(21,987)

Based on the unaudited net asset value of the Disposal Group as at 30 June 2015, it is estimated that the Group will record a gain of approximately HK$216,725,000 from the Disposal, and the basis of calculation is as follows:

Consideration Add: fixed assets surplus Less: repair and maintenance expenditure capital commitment Gross cash received Net assets disposed of Cumulative exchange differences in respect of the net assets of the Disposal Group reclassified from equity to profit or loss on loss of control of the Disposal Group Gain on the Disposal	HK$ 260,788,000 38,965,000 (13,833,000) (4,476,000) 281,444,000 260,788,000 (196,069,000) 64,719,000 216,725,000

– 15 –

LETTER FROM THE BOARD

The financial effects to the Group upon completion of the Disposal are expected to be:

(i) a decrease in net assets of approximately HK$260,788,000;
(ii) an increase in current assets of approximately HK$86,127,000, being the cash consideration of the Disposal of approximately HK$88,000,000 less the estimated expenses of approximately HK$1,873,000 in relation to the Disposal; and
(iii) an increase in profit attributable to the equity holders of the Company of approximately HK$216,725,000.

Any actual gain or loss from the Disposal will depend on the carrying value of the net assets of the Disposal Group upon Completion.

USE OF PROCEEDS

The net proceeds from the Disposal after deducting related transaction costs and expenses are estimated to be about HK$86 million. The Group intends to apply the net proceeds from the Disposal for general working capital purpose of its property operating business.

IMPLICATIONS UNDER THE LISTING RULES

The EGM will be convened and held for the Shareholders to consider and, if thought fit, approve the Sale and Purchase Agreement and the transactions contemplated thereunder. Despite that no Controlling Shareholder has a material interest in the Disposal, in light of a good corporate governance measure and to safeguard the interests of the Company and its Shareholders as a whole, the Controlling Shareholders would defer the Disposal to the voting of the other Shareholders and all of the Controlling Shareholders and their respective associates will abstain from voting at the EGM.

– 16 –

LETTER FROM THE BOARD

PREVIOUS ACQUISITIONS

The First Acquisition

On 18 December 2014, the Group entered into a sale and purchase agreement with two vendors in relation to the acquisition of an aggregate of 75% equity interests in Zhengzhou Jiachao Property Services Company Limited (“ Jiachao ”), a limited liability company incorporated in the PRC, at total consideration of RMB591,660,000 (equivalent to approximately HK$748,937,000) which was satisfied by internal resources of the Group. The principal asset of Jiachao is a shopping mall situated in Zhengzhou Shi for rental purpose. There has been no change to the remuneration payable to and benefits receivable by the director of Jiachao subsequent to the acquisition. Financial information of Jiachao are disclosed on page 6 of the Company’s announcement dated 18 December 2014 and on pages 16 to 52 of the Company’s circular dated 30 January 2015. As at the Latest Practicable Date, Jiachao was a subsidiary of the Company by reason of the completion of the above acquisition. Quick links to the Company’s announcement dated 18 December 2014 and the Company’s circular dated 30 January 2015 published on the website of the Stock Exchange are set out below:

Announcement of the Company dated 18 December 2014:

http://www.hkexnews.hk/listedco/listconews/SEHK/2014/1219/LTN20141219137.pdf

Circular of the Company dated 30 January 2015:

http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0129/LTN20150129308.pdf

The Second Acquisition

On 26 June 2015, the Group entered into a sale and purchase agreement with a vendor in relation to the acquisition of the entire equity interests in Zhengzhou Jiacong Property Services Company Limited (“ Jiacong ”), a limited liability company incorporated in the PRC, at total consideration of RMB218,000,000 (equivalent to approximately HK$275,949,000) which was satisfied by internal resources of the Group. The principal assets of Jiacong consist of 164 shops inside a giant theme shopping mall selling textile materials, accessories and products situated in Zhengzhou Shi for rental purpose. There has been no change to the remuneration payable to and benefits receivable by the director of Jiacong subsequent to the acquisition. Financial information

– 17 –

LETTER FROM THE BOARD

of Jiacong are disclosed on page 6 of the Company’s announcement dated 26 June 2015 and on pages 13 to 42 of the Company’s circular dated 20 July 2015. As at the Latest Practicable Date, Jiacong was a wholly-owned subsidiary of the Company by reason of the completion of the above acquisition. Quick links to the Company’s announcement dated 26 June 2015 and the Company’s circular dated 20 July 2015 published on the website of the Stock Exchange are set out below:

Announcement of the Company dated 26 June 2015:

http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0626/LTN201506261160.pdf

Circular of the Company dated 20 July 2015:

http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0717/LTN20150717658.pdf

RECOMMENDATION

The Board considers that the terms of the Sale and Purchase Agreement are fair and reasonable and the entering into of the Sale and Purchase Agreement is in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors would recommend the Shareholders to vote in favour of a resolution approving the Sale and Purchase Agreement and the transactions contemplated thereunder at the EGM.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular.

By order of the Board Art Textile Technology International Company Limited Chen Jinyan

Chairman

– 18 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. FINANCIAL INFORMATION OF THE GROUP

The financial information of the Group for the years ended 30 June 2013, 2014 and 2015 are disclosed on pages 30 to 81 of the annual report of the Company for the year ended 30 June 2013, pages 31 to 85 of the annual report of the Company for the year ended 30 June 2014 and pages 32 to 93 of the annual report of the Company for the year ended 30 June 2015, respectively, all of which are published on the website of the Stock Exchange at http://www.hkexnews.hk, and the website of the Company at http://arttextile.etnet.com.hk. Quick links to the annual reports of the Company published on the website of the Stock Exchange are set out below. There was no qualified opinion issued for the audited financial information of the Group for the years ended 30 June 2013, 2014 and 2015.

Annual report of the Company for the year ended 30 June 2013:

http://www.hkexnews.hk/listedco/listconews/SEHK/2013/1023/LTN20131023255.pdf

Annual report of the Company for the year ended 30 June 2014:

http://www.hkexnews.hk/listedco/listconews/SEHK/2014/1007/LTN20141007617.pdf

Annual report of the Company for the year ended 30 June 2015:

http://www.hkexnews.hk/listedco/listconews/SEHK/2015/1030/LTN20151030352.pdf

2. INDEBTEDNESS

Bank borrowings and other borrowings

As at 31 October 2015, the Group had outstanding borrowings of approximately HK$1,322,901,000, comprising (i) secured and unguaranteed bank borrowings of approximately HK$834,146,000; (ii) unsecured and guaranteed bank borrowings of approximately HK$36,586,000; (iii) unsecured, unguaranteed and unlisted bonds at face values of HK$25,340,000; and (iv) unsecured and guaranteed borrowings from a financial institution of approximately HK$426,829,000.

As at 31 October 2015, the Group’s secured bank borrowings are wholly repayable within one to ten years and secured by certain investment properties and certain leasehold interest in land and buildings of approximately HK$1,149,131,000 and HK$839,000, respectively, as well as guarantee from two independent third parties and guarantee from a fellow subsidiary within the Group.

– 19 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Save as disclosed above and otherwise mentioned in this circular and apart from normal trade payables in the normal course of business, none of the members of the Group had, as at 31 October 2015, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, any outstanding mortgages, charges, debenture, loan capital issued and outstanding or agreed to be issued, bank loan and overdraft or other similar indebtedness, finance leases or hire purchase commitments, liabilities under acceptances or acceptance credits or any guarantee or other material contingent liabilities.

Contingent liabilities

As at 31 October 2015, the Group had no material contingent liabilities.

3. WORKING CAPITAL

Taking into account the proposed Disposal, the Group’s internal resources, the presently confirmed available banking facilities and in the absence of unforeseen circumstances, the Directors are of the opinion that, the Group has sufficient working capital for its present requirements that is for at least the next 12 months from the date of this circular.

4. MATERIAL ADVERSE CHANGE

The annual results of the Group for the year ended 30 June 2015 experienced a loss when compared with that for the year ended 30 June 2014 due to a number of adverse factors including slow recovery of the global economy, reduction of demand in both domestic and overseas textile markets, a more cautious purchasing approach adopted by downstream customers and declining sales price of textile products leading to a reduction of gross sales margin. Save as the above, as at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial position or trading prospects of the Group since 30 June 2015, the date to which the latest audited financial statements of the Company were made up.

5. CONTINGENT LIABILITIES

The Group has no other material contingent liabilities. The Group is not involved in any current material legal proceedings, nor is the Group aware of such material legal proceedings. The Group would record any loss contingencies when, based on information then available, it is probable that a loss had been incurred and the amount of the loss can be reasonably estimated. The Group confirms that there has not been any material change in the level of its contingent liabilities since 30 June 2015 up to the Latest Practicable Date.

– 20 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

For the financial year ended 30 June 2015, the Group recorded a turnover of approximately HK$373,849,000 (2014: HK$492,939,000) and incurred a loss of HK$4,654,000 (profit in 2014: HK$15,402,000). Due to a number of adverse factors including slow recovery of the global economy, reduction of demand in both domestic and overseas textile markets, a more cautious purchasing approach adopted by downstream customers and declining selling price of textile products leading to a reduction of gross sales margin, the textile products segment eventually incurred a serious loss of HK$21,775,000 for the year ended 30 June 2015 regardless of the trim of the Group’s business strategy and implementation of some cost cutting policies. Since these adverse situations are expected to be continued in future, the Board decided to dispose to the Purchaser the Disposal Group which is principally engaged in the dyeing process of grey fabrics so as to relieve its financial burden and negative impact on the Group.

The Remaining Group is principally engaged in property operating business and owns two properties, namely (i) the Jiachao’s shopping mall offering shopping, dining, entertainment and leisure services and (ii) the Jiacong’s shops in a giant theme shopping mall selling textile materials, accessories and products. Both properties are situated in Zhengzhou Shi and are acquired in 2015 for rental purpose. For the financial year ended 30 June 2015, the property operating segment recorded a profit of HK$49,375,000 as a result of the incomes from renting out of the Jiachao’s shopping mall (date of completion was 1 April 2015) and its fair value gain based on an independent valuation as at 30 June 2015. The results of the Jiacong’s shops were excluded for the financial year ended 30 June 2015 as its date of completion was on 30 October 2015.

Since the textile industry in the PRC faces significant challenges and uncertainties in the business environment, the Group’s current strategy and business plan is to put resources on the property operating segment with a view that the PRC’s economy is expected to maintain a stable growth in the next decade with its residents’ income increasing and consumer market expanding. Up to the Latest Practicable Date, the Company had no intention to acquire business/entities which carry out similar or different business as the Company.

The Group continues to implement conservative and stringent cost control policies in order to maintain sufficient working capital by imposing control over operating and capital expenditures and strengthening accounts receivable management. Moreover, the net proceeds from the Disposals will enhance the Group’s financial position to a certain extent by providing additional capital resources and improving its liquidity.

Looking forward, the Group continues to place resources to realise growth momentum from the development of property operating market and look for property projects with good economic and demographic fundamentals in order to maximise the market value of the Company and the return to its Shareholders.

– 21 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

7. MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

Set out below is the management discussion and analysis on the Remaining Group for each of the years ended 30 June 2013, 2014 and 2015 (the “ Reporting Periods ”). The financial data in respect of the Remaining Group, for the purpose of this circular, is derived from the consolidated financial statements of the Company for the Reporting Periods.

OPERATIONAL AND FINANCIAL REVIEW

For the year ended 30 June 2013, the Remaining Group is principally engaged in the manufacture and sale of cotton and yarn targeting at mid-to-high-end markets both in the PRC and overseas. The production process of the Remaining Group was only yarn spinning, of which, the yarn is used for knitting into pure cotton knit fabrics. In the end of December 2012, the Group disposed of a few subsidiaries principally engaged in the manufacture and sale of cotton and yarn due to significant amount of losses incurred by them in the past as a result of gradual fierce involvement of the PRC government in the cotton market to safeguard the interests of local cotton farmers and the stringent restriction of imported cotton quota to minimise the supply of overseas cotton with lower selling prices into the PRC at that time. As a result, the Remaining Group as a whole was affected by the broad fluctuation of cotton prices and the increase in raw material costs consequently reduced its total profits. In addition, the yarn market in the PRC remained weak and market demand decreased, which in turn significantly reduced the yarn production volumes when compared with those in the previous financial years. Furthermore, fixed production costs, such as salary and wages and depreciation costs, increased cost of production per ton and then negatively affected the gross profit margin of the Remaining Group. The Group therefore disposed of the cotton and yarn production processes in the end of December 2012 and since then, the Group did not have any other production process except the manufacture and sale of textile products that was run by the Disposal Group.

Simultaneously, for the year ended 30 June 2014, the Remaining Group did not have any other production process except the manufacture and sale of textile products that was run by the Disposal Group.

For the year ended 30 June 2015, the Group diversified its operations into different kinds of business and resources had been put into property operating aspects in order to explore future prospects and develop relevant markets. Therefore, the Group acquired 75% equity interests in a limited liability company incorporated in the PRC at a cash consideration of RMB591,660,000 (equivalent to approximately HK$748,937,000), of which, its major asset is the Jiachao’s shopping mall situated in Zhengzhou Shi in the PRC. This shopping mall offers a wide range of services including shopping, dining, entertainment and leisure with over 157 shops, such as a cinema, jewellery and watches, beauty, electrical appliances, international labels for fashion, lifestyle,

– 22 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

casual wear/sport, kid’s paradise and food and beverages outlets. For further details of this acquisition, please refer to the announcement of the Company dated 18 December 2014 and the circular of the Company dated 30 January 2015.

Turnover

For the year ended 30 June 2013, the Remaining Group recorded a turnover of approximately HK$697,808,000 from the manufacture and sale of cotton and yarn before its disposal in the end of December 2012. The Remaining Group did not record any turnover for the year ended 30 June 2014 as the Group only carried out the manufacture and sale of textile products that was run by the Disposal Group. Then the Remaining Group recorded a turnover of approximately HK$21,496,000 from the rental of the Jiachao’s shopping mall in Zhengzhou Shi for the year ended 30 June 2015 after the completion of its acquisition on 1 April 2015.

Segment results

For the year ended 30 June 2013, the Remaining Group recorded a loss for the cotton and yarn segments of approximately HK$65,174,000 in view of the vile business environment for the cotton market in the PRC at that time. The Remaining Group recorded a loss for the property operating segment of approximately HK$108,000 for the year ended 30 June 2014 as the Group commenced its business in this segment during this year. Then the Remaining Group recorded a profit for the property operating segment of approximately HK$49,375,000 from the rental of the Jiachao’s shopping mall in Zhengzhou Shi for the year ended 30 June 2015 due to the fair value gain on the investment properties.

Profit/(loss) for the year

For the year ended 30 June 2013, the Remaining Group recorded a profit of approximately HK$66,429,000 due to the gain on disposal of the cotton and yarn production processes that had incurred and accumulated significant amount of losses before its disposal in the end of December 2012. For the year ended 30 June 2014, the Remaining Group recorded a loss of approximately HK$1,065,000 arising from share-based payment transactions incurred as a consequence of the grant of 104,000,000 share options. Then the Remaining Group recorded a profit for the property operating segment of approximately HK$17,333,000 for the year ended 30 June 2015 as a consequence of the fair value gain on the investment properties.

– 23 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

PROSPECTS

The Group in the long-term plans to upgrade its tenants of the Jiachao’s shopping mall by offering tenancies to more popular brands and will continue to diversify the types of tenants to meet the needs and interests of customers from different ages and backgrounds. To achieve these aims, the Group may conduct large scale of marketing and promotion activities so that a stable and constant stream of rental income and fairly rigid cash flow can be continuously generated to the Group. Simultaneously, the Group has been continuously implementing conservative and stringent cost control policies so as to ensure sufficient working capital by imposing control over operating costs and capital expenditure and strengthening accounts receivable management. In this regard, positive results will be expected in the future.

The Jiacong’s shops are in the giant theme shopping mall selling textile materials, accessories and products with the handover time of these shops in the end of October 2015. More caliber management and skillful employees will be recruited in the future when the rental business of Jiacong proceeds. The extensive knowledge, experience and network in the textile business will enable the Group to grasp decisive opportunities in the promotion of renting these shops; hence, more suitable tenants running profitable textile business can be pinpointed as tenants of the Jiacong’s shops.

The PRC’s economy is expected to maintain a relatively stable growth in the next decade. Economic, financial and social reforms covering a wide range of areas will lead the economy and the society towards a more healthy and sustainable development. The PRC government’s focus is on targeted control measures to ensure a moderate pace of growth while continuing its economic restructuring. By leveraging on the Group’s current strategic plan and established strengths, experience and foresight, the Group continues to seize opportunities to penetrate into property operating markets, explore other new market potential and increase profit margin. Furthermore, the Group intends to manage and operate the property operating segment by the current and new caliber management and competent employees of newly acquired subsidiaries.

Looking forward, the Group continues to place additional resources to realize growth momentum from the development of property operating markets. The Jiachao’s shopping mall and the Jiacong’s shops acquired by the Group recently are situated in Zhengzhou Shi and with good economic and demographic fundamentals, which enables the Group to diversify its business operations into property operating market in depth. The business growth of the Group is expected to accelerate and accordingly, the positive outcome will be gradually reflected in the future with full recovery of the worldwide economy. By continually diversifying the Group’s business, the market value of the Company and the return to its Shareholders will be maximized in long-term, which in return for the constant trust and support bestowed to the Company by its Shareholders.

– 24 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

LIQUIDITY AND FINANCIAL RESOURCES

As at 30 June 2013, the Remaining Group had net current assets and total assets less current liabilities of approximately HK$52,148,000 and HK$52,160,000, respectively. As at 30 June 2013, the Remaining Group had cash and bank deposits of approximately HK$2,639,000. The current ratio of the Remaining Group was approximately 8,122.77%. Shareholders’ fund of the Remaining Group as at 30 June 2013 was approximately HK$52,160,000. As at 30 June 2013, there was no financial obligation incurred for the Remaining Group, therefore its gross debt gearing ratio (i.e. total borrowings/Shareholders’ fund) was nil.

As at 30 June 2014, the Remaining Group had net current assets and total assets less current liabilities of approximately HK$76,336,000 and HK$76,345,000, respectively. As at 30 June 2014, the Remaining Group had cash and bank deposits of approximately HK$7,081,000. The current ratio of the Remaining Group was approximately 9,775.03%. Shareholders’ fund of the Remaining Group as at 30 June 2014 was approximately HK$66,576,000. As at 30 June 2014, the Remaining Group had a bond measured at amortised cost of approximately HK$9,769,000, therefore its gross debt gearing ratio (i.e. total borrowings and bond/Shareholders’ fund) was approximately 14.67%.

As at 30 June 2015, the Remaining Group had net current liabilities and total assets less current liabilities of approximately HK$185,978,000 and HK$2,495,309,000, respectively. As at 30 June 2015, the Remaining Group had cash and bank deposits of approximately HK$298,348,000. The current ratio of the Remaining Group was approximately 73.97%. Shareholders’ fund of the Remaining Group as at 30 June 2015 was approximately HK$1,134,630,000. As at 30 June 2015, the total bank borrowings of the Remaining Group, repayable within 1 year to 10 years, denominated in RMB1,036,000,000, were equivalent to HK$1,311,392,000 and three bonds measured at amortised costs were HK$25,110,000. As at 30 June 2015, the gross debt gearing ratio of the Remaining Group (i.e. total borrowings and bonds/Shareholders’ fund) was approximately 117.79%.

FINANCING

As at 30 June 2013, the Remaining Group had not done any financing. For the year ended 30 June 2014, the Remaining Group arranged with an independent third party a bond, measured at amortised cost, amounted to approximately HK$9,769,000. For the year ended 30 June 2015, the total facilities from a bank and a financial institution of the Remaining Group amounted to approximately HK$1,311,392,000, of which, all was utilized. In addition, the Remaining Group arranged with three independent third parties three bonds, all measured at amortised cost, amounted to approximately HK$25,110,000.

– 25 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

TREASURY POLICY

During the Reporting Periods, the Remaining Group adopted conservative treasury policies and had tight controls over its cash management. The Remaining Group’s cash and cash equivalents were held in HK$ and RMB. The Remaining Group’s bank borrowings are denominated in RMB and have been arranged either on a fixed-rate or on a floating-rate basis. The Remaining Group’s bonds are denominated in HK$ and have been arranged on a fixed-rate basis.

CAPITAL STRUCTURE

As at 30 June 2013, 2014 and 2015, the share capital of the Company comprised ordinary shares only.

FOREIGN EXCHANGE RISK AND INTEREST RATE RISK

During the Reporting Periods, the Remaining Group was not subject to any significant exposure to foreign exchange rate risk as the majority of its transactions were denominated in RMB. Hence, no financial instrument for hedging was employed.

CHARGE ON REMAINING GROUP’S ASSETS

As at 30 June 2013 and 2014, the Remaining Group did not have any charge on its assets. As at 30 June 2015, certain investment properties of the Remaining Group with aggregate carrying value of approximately HK$1,149,131,000 was pledged to a bank to secure banking facilities granted to the Group.

CAPITAL EXPENDITURE

During the Reporting Periods, the Remaining Group did not have any capital expenditure.

As at 30 June 2013 and 2014, the Remaining Group did not have any capital commitments. As at 30 June 2015, the Remaining Group had capital commitments of approximately HK$753,000 in property, plant and equipment. The capital commitments for the year ended 30 June 2015 were funded by internally generated resources.

FUTURE PLAN FOR MATERIAL INVESTMENTS OR CAPITAL ASSETS

As at the Latest Practicable Date, the Remaining Group has no plan for material investments or capital assets.

– 26 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

MATERIAL ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES

During the Reporting Periods, the Remaining Group did not have any material acquisitions and disposals of subsidiaries except two acquisitions listed below.

On 18 December 2014, the Group entered into a sale and purchase agreement with two vendors in relation to the acquisition of an aggregate of 75% equity interests in Jiachao, a limited liability company incorporated in the PRC, at total consideration of RMB591,660,000 (equivalent to approximately HK$748,937,000) which was satisfied by internal resources of the Group. The principal asset of Jiachao is a shopping mall situated in Zhengzhou Shi for rental purpose. There has been no change to the remuneration payable to and benefits receivable by the director of Jiachao subsequent to the acquisition. Financial information of Jiachao are disclosed on page 6 of the Company’s announcement dated 18 December 2014 and on pages 16 to 52 of the Company’s circular dated 30 January 2015. As at the Latest Practicable Date, Jiachao was a subsidiary of the Company by reason of the completion of the above acquisition. Quick links to the Company’s announcement dated 18 December 2014 and the Company’s circular dated 30 January 2015 published on the website of the Stock Exchange are set out below:

Announcement of the Company dated 18 December 2014:

http://www.hkexnews.hk/listedco/listconews/SEHK/2014/1219/LTN20141219137.pdf

Circular of the Company dated 30 January 2015:

http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0129/LTN20150129308.pdf

On 26 June 2015, the Group entered into a sale and purchase agreement with a vendor in relation to the acquisition of the entire equity interests in Jiacong, a limited liability company incorporated in the PRC, at a total consideration of RMB218,000,000 (equivalent to approximately HK$275,949,000) which was satisfied by internal resources of the Group. The principal assets of Jiacong consist of 164 shops inside a giant theme shopping mall selling textile materials, accessories and products situated in Zhengzhou Shi for rental purpose. There has been no change to the remuneration payable to and benefits receivable by the director of Jiacong subsequent to the acquisition. Financial information of Jiacong are disclosed on page 6 of the Company’s announcement dated 26 June 2015 and on pages 13 to 42 of the Company’s circular dated 20 July

– 27 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

As at the Latest Practicable Date, Jiacong was a wholly-owned subsidiary of the Company by reason of the completion of the above acquisition. Quick links to the Company’s announcement dated 26 June 2015 and the Company’s circular dated 20 July 2015 published on the website of the Stock Exchange are set out below:

Announcement of the Company dated 26 June 2015:

http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0626/LTN201506261160.pdf

Circular of the Company dated 20 July 2015:

http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0717/LTN20150717658.pdf

STAFF POLICY

As at 30 June 2013, 2014 and 2015, the Remaining Group had 3 employees, 3 employees and 134 employees altogether in the PRC and/or Hong Kong, respectively. During the Reporting Periods, the Remaining Group offered a comprehensive and competitive remuneration, retirement scheme and benefit package to its employees. Discretionary bonus is offered to the Remaining Group’s staff depending on their performance. The Remaining Group is required to make contribution to a social insurance scheme in the PRC. Moreover, the Remaining Group and its employees in the PRC are required to make respective contribution to fund the endowment insurance, unemployment insurance, medical insurance, housing provident fund and employees’ compensation insurance at the rates specified in the relevant PRC laws and regulations. The Remaining Group has adopted a provident fund scheme as required under the Mandatory Provident Fund Schemes Ordinance (Cap. 485 of the Laws of Hong Kong) for its employees in Hong Kong and also a share option scheme for the purpose of providing incentives and rewards to eligible participants for their contribution to the Group and/or to enable the Group to recruit and retain high-caliber employees and attract human resources that are valuable to the Group and any entity in which the Group holds any equity interest. Moreover, the Group also provides periodic internal training to its employees.

CONTINGENT LIABILITIES

At the end of each of the Reporting Periods, the Remaining Group did not have any significant contingent liabilities.

– 28 –

APPENDIX II FINANCIAL INFORMATION OF THE DISPOSAL GROUP

Set out below are the unaudited consolidated statements of financial position of the Disposal Group as at 30 June 2013, 2014 and 2015, and the unaudited consolidated statements of profit or loss and other comprehensive income, the unaudited consolidated statements of changes in equity and the unaudited consolidated statements of cash flows of the Disposal Group for each of the years ended 30 June 2013, 2014 and 2015 and explanatory notes (the “ Financial Information ”).

The Financial Information has been prepared in accordance with paragraph 14.68(2)(a)(i) of the Listing Rules and the basis of preparation as set out in note 2 to the Financial Information and is solely for the purposes of inclusion in this circular in connection with the Disposal pursuant to the Sale and Purchase Agreement.

The reporting accountant of the Disposal Group, Dominic K.F. Chan & Co. was engaged to review the Financial Information of the Disposal Group set out on pages 29 to 35 of this circular in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” and with reference to Practice Note 750 “Review of Financial Information under the Hong Kong Listing Rules for a Very Substantial Disposal” issued by the Hong Kong Institute of Certified Public Accountants (the “ HKICPA ”). A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable the reporting accountant to obtain assurance that the reporting accountant would become aware of all significant matters that might be identified in an audit. Accordingly, the reporting accountant does not express an audit opinion.

Based on the review, nothing has come to the reporting accountant’s attention that causes them to believe that the Financial Information of the Disposal Group for the relevant years is not prepared, in all material respects, in accordance with the basis of preparation set out in note 2 to the Financial Information.

– 29 –

APPENDIX II FINANCIAL INFORMATION OF THE DISPOSAL GROUP

UNAUDITED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the years ended 30 June 2013, 2014 and 2015

Turnover Cost of sales Gross (loss)/profit Other income Loss on disposal of a subsidiary Administrative expenses Selling and distribution costs Other expenses Finance costs (Loss)/profit before tax Income tax expense (Loss)/profit for the year	Year ended 30 June 2015 2014 2013 HK$’000 HK$’000 HK$’000 352,353 492,939 732,217 (353,932) (404,154) (544,772) (1,579) 88,785 187,445 7,197 5,585 10,898 – – (49,383) (14,612) (14,910) (18,773) (8,977) (16,909) (20,603) (283) (3,229) (2,524) (3,494) (6,862) (15,874) (21,748) 52,460 91,186 (239) (15,993) (35,740) (21,987) 36,467 55,446

– 30 –

APPENDIX II FINANCIAL INFORMATION OF THE DISPOSAL GROUP

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

At 30 June 2013, 2014 and 2015

NON-CURRENT ASSETS Property, plant and equipment Prepaid lease payments CURRENT ASSETS Inventories Trade and other receivables Amount due from the Remaining Group Pledged bank deposits Bank balances and cash CURRENT LIABILITIES Trade and other payables Amount due to the Remaining Group Tax liabilities Secured bank and other borrowings NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES CAPITAL AND RESERVE Share capital Share premium and reserves NON-CURRENT LIABILITY Deferred tax liabilities	Year ended 30 June 2015 2014 2013 HK$’000 HK$’000 HK$’000 94,794 91,227 95,521 18,121 18,619 19,117 112,915 109,846 114,638 1,164 12,325 16,600 7,636 351,191 76,212 355,257 16 – – 25,316 48,087 2,642 733,578 1,088,842 366,699 1,122,426 1,229,741 8,230 81,499 156,174 161,813 69,758 49,892 – 2,880 4,876 37,975 56,962 130,696 208,018 211,099 341,638 158,681 911,327 888,103 271,596 1,021,173 1,002,741 – – – 260,788 1,010,365 993,898 260,788 1,010,365 993,898 10,808 10,808 8,843 271,596 1,021,173 1,002,741	Year ended 30 June 2015 2014 2013 HK$’000 HK$’000 HK$’000 94,794 91,227 95,521 18,121 18,619 19,117 112,915 109,846 114,638 1,164 12,325 16,600 7,636 351,191 76,212 355,257 16 – – 25,316 48,087 2,642 733,578 1,088,842 366,699 1,122,426 1,229,741 8,230 81,499 156,174 161,813 69,758 49,892 – 2,880 4,876 37,975 56,962 130,696 208,018 211,099 341,638 158,681 911,327 888,103 271,596 1,021,173 1,002,741 – – – 260,788 1,010,365 993,898 260,788 1,010,365 993,898 10,808 10,808 8,843 271,596 1,021,173 1,002,741
		114,638 16,600 76,212 – 48,087 1,088,842
		1,229,741 156,174 49,892 4,876 130,696
		341,638 888,103
		1,002,741
		– 993,898
		993,898 8,843
		1,002,741

– 31 –

APPENDIX II FINANCIAL INFORMATION OF THE DISPOSAL GROUP

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the years ended 30 June 2013, 2014 and 2015

Balance as at 1 July 2012 Profit for the year Other comprehensive income – Exchange differences arising on translation Balance as at 30 June 2013 Profit for the year Dividend declared Balance as at 30 June 2014 Loss for the year Dividend declared Balance as at 30 June 2015	Share capital HK$’000 – – – – – – – – – –	Exchange reserve HK$’000 172,173 – 23,896 196,069 – – 196,069 – – 196,069	Statutory reserve fund HK$’000 68,044 – – 68,044 – – 68,044 – – 68,044	Retained earnings HK$’000 674,339 55,446 – 729,785 36,467 (20,000) 746,252 (21,987) (727,590) (3,325)	Total HK$’000 914,556 55,446 23,896
					993,898 36,467 (20,000)
					1,010,365 (21,987) (727,590)
					260,788

– 32 –

APPENDIX II FINANCIAL INFORMATION OF THE DISPOSAL GROUP

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended 30 June 2013, 2014 and 2015

CASH FLOWS FROM OPERATING ACTIVITIES (Loss)/profit for the year Adjustments for: Income tax expenses recognised in profit and loss Depreciation of property, plant and equipment (Gain)/loss on disposal of property, plant and equipment Release of prepaid lease payments Finance costs recognised in profit or loss Interest income Loss on disposal of a subsidiary Movements in working capital Decrease in inventories Decrease/(increase) in trade and other receivables Decrease in trade and other payables (Increase)/decrease in amount due from the Remaining Group Decrease in amount due to the Remaining Group Cash (used in)/generated from operations Income tax paid NET CASH (USED IN)/GENERATED FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property, plant and equipment Placement of pledged bank deposits Withdrawal of pledged bank deposits Interest received Net cash inflow arising on disposal of a subsidiary Proceeds on disposal of property, plant and equipment	2015 HK$’000 (21,987) 239 18,168 (105) 498 3,494 (3,051) – (2,744) 11,161 343,555 (73,269) (990,776) – (712,073) (3,119) (715,192) (22,229) (38,354) 63,670 3,051 – 599	2014 HK$’000 36,467 15,993 23,201 80 498 6,862 (5,078) – 78,023 4,275 (274,979) (74,675) (150) – (267,506) (16,023) (283,529) (19,195) (53,129) 75,899 5,078 – 208	2013 HK$’000 55,446 35,740 24,922 (32) 498 15,874 (6,235) 49,383 175,596 10,805 46,803 (152,328) 51,762 (11,597) 121,041 (37,498) 83,543 (18,942) (159,706) 219,298 6,235 6,173 32

– 33 –

APPENDIX II FINANCIAL INFORMATION OF THE DISPOSAL GROUP

NET CASH GENERATED FROM INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES New bank and other borrowings raised Repayment of bank borrowings Interest paid on bank and other borrowings NET CASH USED IN FINANCING ACTIVITIES NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR, represented by bank balances and cash	6,737 63,291 (82,278) (3,494) (22,481) (730,936) – 733,578 2,642 2015 HK$’000	8,861 67,089 (140,823) (6,862) (80,596) (355,264) – 1,088,842 733,578 2014 HK$’000	53,090 134,937 (175,846) (15,874) (56,783) 79,850 20,905 988,087 1,088,842 2013 HK$’000

– 34 –

APPENDIX II FINANCIAL INFORMATION OF THE DISPOSAL GROUP

NOTES TO THE FINANCIAL INFORMATION

1. General information

On 28 August 2015, Right Lane International Limited (“ Right Lane ”) entered into the Sale and Purchase Agreement with the Purchaser and published the announcement accordingly. Global Art and Good Fame will cease to be the subsidiaries of the Company upon the Completion.

2. Basis of preparation and presentation of the Financial Information

The Financial Information of Global Art and Good Fame have been prepared in accordance with Rule 14.68(2)(a)(i) of the Listing Rules, and solely for the purpose of inclusion in this circular to be issued by the Company in connection with the Disposal. The amounts in the Financial Information for each of the years ended 30 June 2013, 2014 and 2015 have been recognised and measured in accordance with the relevant accounting policies of the Group adopted in the preparation of its consolidated financial statements, which conform to the Hong Kong Financial Reporting Standards issued by the HKICPA.

The Financial Information does not contain sufficient information to constitute a complete set of financial statements as defined in Hong Kong Accounting Standard 1 (Revised) “Presentation of Financial Statements”. The unaudited consolidated statement of profit or loss and other comprehensive income, unaudited consolidated statement of changes in equity and unaudited consolidated statement of cash flows of Global Art and Good Fame for each of the years ended 30 June 2013, 2014 and 2015 include the results, changes in equity and cash flows of Global Art and Good Fame throughout the years ended 30 June 2013, 2014 and 2015. The unaudited consolidated statement of financial position of Global Art and Good Fame as at 30 June 2013, 2014 and 2015 include assets, liabilities and equity of Global Art and Good Fame which were in existence on those dates.

Pursuant to the Sale and Purchase Agreement, Right Lane disposed of the entire equity interests in Global Art and Good Fame to the Purchaser. The Financial Information for the years ended 30 June 2013, 2014 and 2015 have been prepared on the basis as if the equity interests of Global Art and Good Fame have been disposed of as at 1 July 2012 using the principles of merger accounting.

3. Events after the reporting period

Save as disclosed elsewhere in the Financial Information, there was no significant event which happened after the end of the reporting period.

– 35 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

The following is the text of a report received from the reporting accountant, Dominic K.F. Chan & Co., for the purpose of inclusion in this circular.

==> picture [52 x 60] intentionally omitted <==

==> picture [329 x 51] intentionally omitted <==

INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION

TO THE DIRECTORS OF ART TEXTILE TECHNOLOGY INTERNATIONAL COMPANY LIMITED

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of Art Textile Technology International Company Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) by the directors of the Company (the “Directors”) for illustrative purposes only. The unaudited pro forma financial information consisted of the unaudited pro forma consolidated statement of financial position as at 30 June 2015, the unaudited pro forma consolidated statement of profit or loss and other comprehensive income for the year ended 30 June 2015, the unaudited pro forma consolidated statement of cash flows for the year ended 30 June 2015 and related notes as set out on pages 39 to 47 of this circular issued by the Company dated 8 December 2015 (the “Circular”). The applicable criteria on the basis of which the Directors have compiled the unaudited pro forma financial information are described on pages 39 to 47 of the Circular.

The unaudited pro forma financial information has been compiled by the Directors to illustrate the impact of the conditional disposal of 100% of the issued share capital of Global Art International Limited (“Global Art”) and Good Fame Group Limited (“Good Fame”) on the Group’s financial position as at 30 June 2015 and the Group’s financial performance and cash flows for the year ended 30 June 2015 as if the disposal of 100% of the issued share capital of Global Art and Good Fame had taken place at 30 June 2015 and 1 July 2014 respectively. As part of this process, information about the Group’s financial position, financial performance and cash flows has been extracted by the Directors from the Group’s consolidated financial statements for the year ended 30 June 2015, on which an audit report has been published.

– 36 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

Directors’ Responsibilities for the Unaudited Pro Forma Financial Information

The Directors are responsible for compiling the unaudited pro forma financial information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars (“AG 7”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

Reporting Accountant’s Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the unaudited pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420 “Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus” issued by the HKICPA. This standard requires that the reporting accountant comply with ethical requirements and plan and perform procedures to obtain reasonable assurance about whether the Directors have compiled the unaudited pro forma financial information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the unaudited pro forma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the unaudited pro forma financial information. The purpose of the unaudited pro forma financial information included in the Circular is solely to illustrate the impact of the disposal on unadjusted financial information of the Group as if the disposal had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the disposal at 30 June 2015 or 1 July 2014 would have been as presented.

– 37 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

A reasonable assurance engagement to report on whether the unaudited pro forma financial information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the Directors in the compilation of the unaudited pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

The related unaudited pro forma adjustments give appropriate effect to those criteria; and
The unaudited pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountant’s judgment, having regard to the reporting accountant’s understanding of the nature of the Group, the disposal in respect of which the unaudited pro forma financial information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the unaudited pro forma financial information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion:

(a) the pro forma financial information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

Dominic K.F. Chan & Co.

Certified Public Accountants (Practising)

Hong Kong, 8 December 2015

– 38 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

A. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Set out below is the summary of an illustrative and unaudited pro forma consolidated statement of financial position, unaudited pro forma consolidated statement of profit or loss and other comprehensive income and unaudited pro forma consolidated statement of cash flows (collectively the “Unaudited Pro Forma Financial Information”) of the Group as if the disposal of 100% of the issued share capital of Global Art and Good Fame (the “Disposal”) had been completed on 30 June 2015 for the unaudited pro forma consolidated statement of financial position, and on 1 July 2014 for the unaudited pro forma consolidated statement of profit or loss and other comprehensive income and unaudited pro forma consolidated statement of cash flows.

This Unaudited Pro Forma Financial Information of the Group after completion of the Disposal (the “Remaining Group”) has been prepared by the Directors in accordance with Paragraph 4.29 of the Listing Rules for illustrative purposes only, based on their judgments, estimations and assumptions, and because of its hypothetical nature, it may not give a true picture of the financial position of the Remaining Group as at 30 June 2015 or at any future date or the results and cash flows of the Remaining Group for the year ended 30 June 2015 or for any future period.

The Unaudited Pro Forma Financial Information of the Remaining Group should be read in conjunction with the audited consolidated financial statements of the Group for the year ended 30 June 2015 as disclosed in the 2015 annual report of the Company, and other financial information included elsewhere in the Circular.

The unaudited pro forma consolidated statement of financial position of the Remaining Group has been prepared based on the audited consolidated statement of financial position of the Group as at 30 June 2015, which has been extracted from the annual report of the Company for the year then ended, with the pro forma adjustments relating to the Disposal, that are factually supportable, as explained in notes below.

The unaudited pro forma consolidated statement of profit or loss and other comprehensive income and unaudited pro forma consolidated statement of cash flows of the Remaining Group have been prepared based on the audited consolidated statement of profit or loss and other comprehensive income and audited consolidated statement of cash flows of the Group for the year ended 30 June 2015, which has been extracted from the annual report of the Company for the year then ended, with the pro forma adjustments relating to the Disposal, that are factually supportable, as explained in notes below.

– 39 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

B UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE REMAINING GROUP (AS AT 30 JUNE 2015)

The Group as at 30 June 2015 Pro forma adjustments HK$’000 HK$’000 HK$’000 HK$’000 (note 1) (note 2) (note 3) (note 4) NON-CURRENT ASSETS Property, plant and equipment 95,746 (94,794) – – Prepaid lease payments 18,121 (18,121) – – Investment properties 2,645,570 – – – Goodwill 34,764 – – – 2,794,201 CURRENT ASSETS Inventories 1,164 (1,164) – – Trade and other receivables 76,036 (7,636) – – Amount due from the Remaining Group – (355,257) 355,257 – Bank balances and cash 300,990 (2,642) (193,444) 281,444 378,190 CURRENT LIABILITIES Trade and other payables 40,296 (8,230) – – Amount due to the Remaining Group – (161,813) 161,813 – Secured bank and other borrowings 365,190 (37,975) – – 405,486 NET CURRENT (LIABILITIES)/ASSETS (27,296) TOTAL ASSETS LESS CURRENT (LIABILITIES)/ASSETS 2,766,905	Unaudited pro forma of the Remaining Group HK$’000 952 – 2,645,570 34,764
	2,681,286
	– 68,400 – 386,348
	454,748
	32,066 – 327,215
	359,281
	95,467
	2,776,753

– 40 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

The Group as at 30 June 2015 Pro forma adjustments HK$’000 HK$’000 HK$’000 HK$’000 (note 1) (note 2) (note 3) (note 4) CAPITAL AND RESERVES Share capital 12,986 – – – Share premium and reserves 1,136,588 (260,788) – 281,444 Equity attributable to owners of the Company 1,149,574 Non-controlling interests 245,844 – – – Total equity 1,395,418 NON-CURRENT LIABILITIES Deferred tax liabilities 362,200 (10,808) – – Secured bank and other borrowings 984,177 – – – Bonds 25,110 – – – 1,371,487 2,766,905	Unaudited pro forma of the Remaining Group HK$’000 12,986 1,157,244
	1,170,230
	245,844
	1,416,074
	351,392 984,177 25,110
	1,360,679
	2,776,753

– 41 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME OF THE REMAINING GROUP (FOR THE YEAR ENDED 30 JUNE 2015)

Turnover Cost of sales Gross profit Other income Administrative expenses Selling and distribution costs Other expenses Fair value gain on investment properties Gain on disposal of the subsidiaries Finance costs Profit before tax Income tax expense (Loss)/profit for the year Other comprehensive income/(loss) Item that may be reclassified subsequently to profit of loss Exchange differences arising on translation Other comprehensive income/(loss) for the year (net of income tax) Total comprehensive (loss)/income for the year	The Group for the year ended 30 June 2015 Pro forma adjustments HK$’000 HK$’000 HK$’000 (note 1) (note 2) (note 4) 373,849 (352,353) – (357,855) 353,932 – 15,994 8,278 (7,197) – (57,895) 14,612 – (8,977) 8,977 – (1,135) 283 – 101,266 – – – – 216,725 (36,630) 3,494 – 20,901 (25,555) 239 – (4,654) 11 – (196,069) 11 (4,643)	Unaudited pro forma of the Remaining Group HK$’000 21,496 (3,923)
		17,573 1,081 (43,283) – (852) 101,266 216,725 (33,136)
		259,374 (25,316)
		234,058

		(196,058)
		(196,058)
		38,000

– 42 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS OF THE REMAINING GROUP (FOR THE YEAR ENDED 30 JUNE 2015)

CASH FLOWS FROM OPERATING ACTIVITIES (Loss)/profit for the year Adjustments for: Income tax expenses recognised in profit and loss Allowance for doubtful debts Fair value gain on investment properties Depreciation of property, plant and equipment Gain on the disposal of the subsidiaries (Gain)/loss on disposal of property, plant and equipment Release of prepaid lease payments Finance costs recognised in profit or loss Interest income Movements in working capital Decrease in inventories Decrease/(increase) in trade and other receivables (Decrease)/increase in trade and other payables Increase in amount due from the Remaining Group Cash generated from operations Income tax paid NET CASH GENERATED FROM OPERATING ACTIVITIES	The Group for the year ended 30 June 2015 Pro forma adjustments HK$’000 HK$’000 HK$’000 (note 1) (note 2) (note 4) (4,654) 21,987 216,725 25,555 (239) – 28 – – (101,266) – – 18,198 (18,168) – – – (216,725) (97) 105 – 498 (498) – 36,630 (3,494) – (3,170) 3,051 – (28,278) 11,345 (11,161) – 325,041 (343,555) – (44,724) 73,269 – – 990,776 – 263,384 (3,119) 3,119 – 260,265	Unaudited pro forma of the Remaining Group HK$’000 234,058 25,316 28 (101,266) 30 (216,725) 8 – 33,136 (119)
		(25,534) 184 (18,514) 28,545 990,776
		975,457 –
		975,457

– 43 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

CASH FLOWS FROM INVESTING ACTIVITIES Consideration paid for acquisition of a subsidiary Purchases of property, plant and equipment Placement of pledged bank deposits Withdrawal of pledged bank deposits Interest received Proceeds on disposal of property, plant and equipment Net proceeds from disposal of subsidiaries Net cash inflow from acquisition of a subsidiary NET CASH USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES New bank and other borrowings raised Issue of bonds Issue of shares Repayment of bank borrowings Interest paid on bank and other borrowings Interest paid on bonds NET CASH GENERATED FROM FINANCING ACTIVITIES NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS	(748,937) – – (22,631) 22,229 – (38,354) 38,354 – 63,671 (63,670) – 3,170 (3,051) – 599 (599) – – – 88,000 19,270 – – (723,212) 63,291 (63,291) – 15,340 – – 85,063 – – (103,797) 82,278 – (34,746) 3,494 – (1,884) – – 23,267 (439,680) The Group for the year ended 30 June 2015 Pro forma adjustments HK$’000 HK$’000 HK$’000 (note 1) (note 2) (note 4)	(748,937) (402) – 1 119 – 88,000 19,270 Unaudited pro forma of the Remaining Group HK$’000
		(641,949)
		– 15,340 85,063 (21,519) (31,252) (1,884)
		45,748
		379,256

– 44 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR, represented by bank balances and cash	11 – – 740,659 – – 300,990 The Group for the year ended 30 June 2015 Pro forma adjustments HK$’000 HK$’000 HK$’000 (note 1) (note 2) (note 4)	11 7,081 Unaudited pro forma of the Remaining Group HK$’000
		386,348

– 45 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

C NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION

(1) Figures are extracted from the audited consolidated financial statements of the Group as set out in the published annual report of the Company for the year ended 30 June 2015.
The unaudited pro forma financial information has been compiled by the Directors to illustrate the impact of the conditional disposal of 100% of the issued share capital of Global Art and Good Fame on the Group’s financial position as at 30 June 2015 and the Group’s financial performance and cash flows for the year ended 30 June 2015 as if the disposal of 100% of the issued share capital of Global Art and Good Fame had taken place at 30 June 2015 and 1 July 2014 respectively. As part of this process, information about the Group’s financial position, financial performance and cash flows has been extracted by the Directors from the Group’s consolidated financial statements for the year ended 30 June 2015, on which the audit report has been published.
(2) The adjustment reflects the derecognition of the entire 100% interest in Global Art and Good Fame, which have been treated as the Group’s subsidiaries and accounted for using the equity method as if the Disposal had been completed on 30 June 2015.
(3) Pursuant to the Sale and Purchase Agreement entered on 28 August 2015, the Group had agreed to dispose of the Disposal Group Loan (A) and Disposal Group Loan (B) at a consideration of approximately HK$193,444,000.
(4) The adjustment represents the net cash inflow and gain on the Disposal, assuming the Disposal had been completed on 30 June 2015. The net cash inflow arising on the Disposal of approximately HK$88,000,000 is calculated based on the agreed terms in the Sales and Purchase Agreement.

– 46 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

The pro forma gain on the Disposal is calculated as below:

Consideration Add: fixed assets surplus Less: repair and maintenance expenditure capital commitment Gross cash received Net assets disposed of Cumulative exchange differences in respect of the net assets of the Disposal Group reclassified from equity to profit or loss on loss of control of the Disposal Group Gain on the Disposal	HK$ 260,788,000 38,965,000 (13,833,000) (4,476,000) 281,444,000 260,788,000 (196,069,000) 64,719,000 216,725,000

The final gain or loss on the Disposal may be different from the amount described above and would be subject to the carrying value of the Group’s investment in Global Art and Good Fame on the date of Completion and foreign exchange rate.

– 47 –

GENERAL INFORMATION

APPENDIX IV

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. 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 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 herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

(a) Interests and short positions of Directors and chief executive in shares and debentures

As at the Latest Practicable Date, the Directors and chief executive of the Company had the following interests and short positions in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which had to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO, to be entered in the register of the Company referred to therein or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in Appendix 10 to the Listing Rules, to be notified to the Company and the Stock Exchange:

Long positions

(a) Shares

			Percentage of the
			issued share
		Number of	capital of the
Name of Director	Capacity	issued Shares held	Company
Mr. Chen Dong	Held by spouse	184,550,000	14.21%
	(Note 1)
Mr. Chen Jinyan	Held by controlled	296,740,000	22.85%
	corporation (Note 2)
Mr. Chen Jinqing	Held by controlled	83,000,000	6.39%
	corporation (Note 3)

– 48 –

GENERAL INFORMATION

APPENDIX IV

Notes:

(1) The 184,550,000 Shares are held as to 162,170,000 Shares by Jinjie Limited and 22,380,000 Shares by Ms. Lin Lin. Jinjie Limited is a company incorporated in the British Virgin Islands (the “ BVI ”), the entire issued share capital of which is beneficially owned by the spouse of Mr. Chen Dong, Ms. Lin Lin. Mr. Chen Dong is deemed to be interested in 184,550,000 Shares.
(2) The Shares are held by Fully Chain Limited (“ Fully Chain ”), a company incorporated in the BVI, the entire issued share capital of which is beneficially owned by Mr. Chen Jinyan. Mr. Chen Dong is the younger brother of Mr. Chen Jinyan.
(3) The Shares are held by Ultimate Name Limited (“ Ultimate Name ”), a company incorporated in the BVI, the entire issued share capital of which is beneficially owned by Mr. Chen Jinqing. Mr. Chen Jinqing is the youngest brother of Mr. Chen Jinyan and Mr. Chen Dong. All three of them are executive Directors.

Long positions

(b) Share options

		Number	Number of
		of share	underlying
Name of Director	Capacity	options held	shares
Mr. Chen Jinyan	Beneficial owner	1,900,000	1,900,000
Mr. Chen Jinqing	Held by spouse (Note)	2,400,000	2,400,000
Mr. Lin Ye	Beneficial owner	1,040,000	1,040,000
Mr. Yang Zeqiang	Beneficial owner	1,040,000	1,040,000
Ms. Yau Lai Ying	Beneficial owner	1,040,000	1,040,000

Note: Mr. Chen Jinqing, the youngest brother of Mr. Chen Jinyan and Mr. Chen Dong, is deemed to be interested in 2,400,000 options to subscribe for Shares, being the interest held beneficially by his spouse.

– 49 –

APPENDIX IV

GENERAL INFORMATION

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interest or short position in the Shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which had to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he was taken or deemed to have under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO, to be entered in the register of the Company referred to therein or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in Appendix 10 to the Listing Rules, to be notified to the Company and the Stock Exchange.

(b) Notifiable interests and short positions of substantial shareholders and other persons in Shares

As at the Latest Practicable Date, so far as was known to the Directors and chief executive of the Company, no substantial shareholders of the Company within the meaning of the Listing Rules and any other persons (in each case other than the Directors and chief executive of the Company) had an interest or a short position in Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

As at the Latest Practicable Date, the register of substantial shareholders maintained by the Company pursuant to section 336 of the SFO shows that the following shareholders had notified the Company of relevant interests in the issued share capital of the Company.

Long positions – Ordinary shares of HK$0.01 each of the Company

			Percentage of
			the issued share
Name of		Number of	capital of
shareholders	Capacity	shares held	the Company
Lin Lin	Beneficial owner	184,550,000	14.21%
	and interest in a
	controlled corporation
Fully Chain	Beneficial owner	296,740,000	22.85%
Ultimate Name	Beneficial owner	83,000,000	6.39%
Dresdner VPV N.V.	Investment manager	69,877,600	5.38%

– 50 –

APPENDIX IV

GENERAL INFORMATION

Save as disclosed above, as at the Latest Practicable Date, the Directors and chief executive of the Company were not aware of any substantial shareholder of the Company within the meaning of the Listing Rules or other person (in each case other than a Director or chief executive of the Company) who had, as at the Latest Practicable Date, an interest or a short position in Shares or underlying Shares which was required to be notified to the Company pursuant to Divisions 2 and 3 of Part XV of the SFO.

(c) Interests in 10% or more of shares in subsidiaries

As at the Latest Practicable Date, so far as was known to the Directors and chief executive of the Company, the following persons who (not being a member of the Group or a Director or chief executive of the Company) were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the subsidiaries of the Company or in any options in respect of such capital.

			Percentage of
Name of subsidiary	Name of shareholder	Capacity	equity interests
鄭州佳潮物業服務有限公司	鄭州第一紡織有限公司	Beneficial Owner	25%
(Zhengzhou Jiachao Property	(Zhengzhou Diyi Textile
Services Company Limited)	Company Limited)

3. DIRECTORS’ SERVICE CONTRACTS

Executive Directors

Each of the executive Directors has entered into a service contract with the Company. Particulars of these contracts are set out below:

The service contract of Mr. Chen Jinyan is for an initial term of two years commencing from 1 September 2014 and the service contracts of Mr. Chen Dong and Mr. Chen Jinqing are for an initial term of one year commencing from 1 September 2015 and 1 February 2015, respectively, unless terminated by not less than three months’ notice in writing served by either the Director or the Company. In certain other circumstances, each service contract can also be terminated by the Company, including but not limited to serious breaches of the Directors’ obligations under the service contract or serious misconduct.

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GENERAL INFORMATION

APPENDIX IV

The current basic annual salaries of the executive Directors are as follows:

Name of Director	Amount
	(HK$)
Executive Directors
Chen Jinyan	600,000
Chen Dong	1,800,000
Chen Jinqing	1,200,000

There is no discretionary bonus arrangement for any of the executive Directors.

Independent non-executive Directors

Letters of appointment have been signed by the Company with the independent nonexecutive Directors. The independent non-executive Directors have been appointed for a term of one year commencing from either 19 September or 15 October each year. Save for directors’ fees of HK$36,000 per annum for each of the two of the independent nonexecutive Directors and HK$120,000 per annum for one of the independent non-executive Directors, none of the independent non-executive Directors is expected to receive any other remuneration for holding their office as an independent non-executive Director.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors had entered into or proposed to enter into any service contract with the Remaining Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation, other than statutory compensation).

4. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors and their respective close associates (as defined in the Listing Rules) was interested in any business apart from the business of the Remaining Group, which competes or is likely to compete, either directly or indirectly, with the business of the Remaining Group.

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GENERAL INFORMATION

APPENDIX IV

5. INTERESTS OF DIRECTORS OR EXPERTS IN ASSETS/CONTRACTS AND OTHER INTERESTS

As at the Latest Practicable Date:

(a) none of the Directors was materially interested in any contract or arrangement subsisting at the date of this circular which is significant in relation to the business of the Group; and
(b) none of the Directors or experts named in the section headed “Expert and Consent” in this appendix had any direct or indirect interest in any assets which had been, since 30 June 2015 (the date to which the latest published audited accounts of the Company were made up), acquired, disposed of by, or leased to any member of the Group, or were proposed to be acquired, disposed of by, or leased to any member of the Group.

6. MATERIAL CONTRACTS

The following contracts, not being contracts in the ordinary course of business of the Group, were entered into by the Company and its subsidiaries during the period commencing two years preceding the date of this circular and are or may be material:

(i) the Sale and Purchase Agreement;
(ii) the sale and purchase agreement dated 26 June 2015 entered into between a vendor and Changdun in relation to the acquisition of the entire equity interests in a limited liability company incorporated in the PRC with 164 shops inside a giant theme shopping mall selling textile materials, accessories and products situated in Zhengzhou Shi for rental purpose as its principal asset at a total consideration was RMB218,000,000. Details of which are set out in the Company’s announcement dated 26 June 2015;
(iii) the sale and purchase agreement dated 18 December 2014 entered into between two vendors and Changdun in relation to the acquisition of an aggregate of 75% equity interests in a limited liability company incorporated in the PRC with a shopping mall situated in Zhengzhou Shi for rental purpose as its principal asset at a total consideration was RMB591,660,000. Details of which are set out in the Company’s announcement dated 18 December 2014; and

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GENERAL INFORMATION

APPENDIX IV

(iv) the placing agreement dated 12 November 2014 entered into between the Company and Ample Orient Capital Limited in relation to the placing of up to 208,000,000 Shares at a price of HK$0.335 per Share. Details of which are set out in the Company’s announcement dated 12 November 2014.

7. MATERIAL ADVERSE CHANGE

The annual results of the Group for the year ended 30 June 2015 experienced a decline when compared with the corresponding year in 2014 due to a number of adverse factors including the slow recovery of the global economy, reduction of demand in both domestic and overseas textile markets, a cautious purchasing approach adopted by downstream customers and declining sales price of textile products, which also led to the reduction of gross sales margin. Save as the above, as at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial position or trading prospects of the Group since 30 June 2015, the date to which the latest audited financial statements of the Company were made up.

8. EXPERT AND CONSENT

The following is the qualification of the expert or professional adviser who has given opinion or advice contained in this circular:

Name	Qualification
Dominic K. F. Chan & Co.	Certified Public Accountants

As at the Latest Practicable Date, Dominic K. F. Chan & Co. has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and references to its name in the form and context in which they respectively appear.

As at the Latest Practicable Date, Dominic K. F. Chan & Co. did not have any shareholding in any member of the Remaining Group or any right (whether legally enforceable or not) to subscribe for securities in any member of the Remaining Group.

As at the Latest Practicable Date, Dominic K. F. Chan & Co. was not interested, directly or indirectly, in any assets which have been or are proposed to be acquired or disposed of by or leased to any member of the Remaining Group since 30 June 2015, the date to which the latest audited financial statements of the Company were made up.

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GENERAL INFORMATION

APPENDIX IV

9. LITIGATION

As at the Latest Practicable Date, neither the Company nor any member of the Group was engaged in any litigation or arbitration or claim of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened by or against the Company or any member of the Group.

10. GENERAL

(1) The registered office of the Company is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1 – 1111, Cayman Islands.
(2) The head office and principal place of business of the Company in Hong Kong is located at Unit 1407, 14th Floor, China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central, Hong Kong.
(3) The branch share registrar and transfer office of the Company in Hong Kong is Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(4) The principal share registrar and transfer office is Royal Bank of Canada Trust Company (Cayman) Limited at 4th Floor, Royal Bank House, 24 Shedden Road, George Town, Grand Cayman KY1 – 1110, Cayman Islands.
(5) The company secretary of the Company is Ms. Yeow Mee Mooi. Ms. Yeow, aged 53, graduated from The University of Southestern Louisiana, the United States of America, with a bachelor degree in business administration. Ms. Yeow further obtained her post graduate diploma in financial management from The University of New England, Australia. Ms. Yeow is a certified practicing accountant of The Hong Kong Institute of Certified Public Accountants and a certified practicing accountant of CPA Australia. Ms. Yeow has over 24 years’ taxation auditing and commercial experience in Hong Kong. Ms. Yeow is now a director of a management consulting firm in Hong Kong.

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GENERAL INFORMATION

APPENDIX IV

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at Unit 1407, 14[th] Floor, China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central, Hong Kong up to and including the date which is 14 days from the date of this circular:

(a) the memorandum and articles of association of the Company;
(b) the Sale and Purchase Agreement;
(c) the accountants’ report on the Disposal Group, the text of which is set out in Appendix II to this circular;
(d) the accountants’ report in respect of the unaudited pro forma financial information of the Remaining Group, the text of which is set out in Appendix III to this circular;
(e) the letters of consent referred to under the paragraph headed “Expert and Consent” in this appendix;
(f) the annual reports of the Company for the years ended 30 June 2013, 30 June 2014 and 30 June 2015, respectively;
(g) the service contracts referred to in the paragraph headed “Directors’ Service Contracts” in this appendix;
(h) the material contracts referred to in the paragraph headed “Material Contracts” in this appendix; and
(i) this circular.

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NOTICE OF EGM

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 OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of Art Textile Technology International Company Limited (the “ Company ”) will be held at Jade Room, 6th Floor, Marco Polo Hongkong Hotel, Harbour City, 3 Canton Road, Kowloon, Hong Kong on Tuesday, 29 December 2015 at 10:15 a.m. for the purpose of considering and, if thought fit, passing, with or without amendments, the following resolutions as ordinary resolutions:

ORDINARY RESOLUTIONS

1. “ THAT :–

(a) The sale and purchase agreement dated 28 August 2015 (the “ Sale and Purchase Agreement ”) and entered into by Right Lane International Limited, a wholly-owned subsidiary of the Company (the “ Vendor ”) and Li Li (the “ Purchaser ”), pursuant to which the Purchaser, has conditionally agreed to acquire and the Vendor has conditionally agreed to sell (i) one share (representing the entire issued share capital) in Global Art International Limited; and (ii) one share (representing the entire issued share capital) in Good Fame Group Limited at an aggregate cash consideration of HK$260,788,000, a copy of which has been produced to this meeting marked “A” and signed by the Chairman of the meeting for the purpose of identification, and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified; and

– 57 –

NOTICE OF EGM

(b) any one or more of the directors of the Company be and is/are hereby generally and unconditionally authorized to do all such acts and things, to sign and execute all such documents for and on behalf of the Company and to take such steps as he/they may in his/their absolute discretion consider necessary, appropriate, desirable or expedient to give effect to or in connection with the Sale and Purchase Agreement and the transactions contemplated thereunder.”

Yours faithfully, For and on behalf of the Board

Art Textile Technology International Company Limited Chen Jinyan Chairman

Hong Kong, 8 December 2015

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

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NOTICE OF EGM

Notes:

Any member of the Company entitled to attend and vote at the meeting convened by the above notice shall be entitled to appoint another person (who must be an individual) as his proxy to attend and vote instead of him. A proxy need not be a member of the Company.
Where there are joint registered holders of any share, any one of such person may vote at the meeting, either personally or by proxy, in respect of such share as if he were solely entitled thereto. However, if more than one of such joint holders by present at the meeting personally or by proxy, that one of the said persons so present being the most or, as the case may be, the more senior shall alone be entitled to vote in respect of the relevant joint holding. For this purpose, seniority shall be determined by reference to the order in which the names of the joint holders stand on the register in respect of the relevant joint holding.
The instrument appointing a proxy and (if required by the Board) the power of attorney or other authority, if any, under which it is signed or a certified copy of such power or authority must be delivered at the Company’s branch share registrar and transfer office in Hong Kong, Tricor Investor Services Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong no less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.
Delivery of any instrument appointing a proxy shall not preclude a member from attending and voting in person at the meeting or poll concerned and, in such event, the instrument appointing a proxy shall be deemed to be revoked.

– 59 –

AI assistant

Art Group Holdings Limited — Proxy Solicitation & Information Statement 2015

49301_rns_2015-12-07_5e353d8f-60a9-4ff9-9be7-0f1257e11f76.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

VERY SUBSTANTIAL DISPOSAL IN RELATION TO THE DISPOSAL OF SUBSIDIARIES

Financial adviser to the Company

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

LETTER FROM THE BOARD

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

VERY SUBSTANTIAL DISPOSAL IN RELATION TO THE DISPOSAL OF SUBSIDIARIES

INTRODUCTION

LETTER FROM THE BOARD

SALE AND PURCHASE AGREEMENT

Date

Parties

LETTER FROM THE BOARD

Subject matter of the Disposal

Consideration

LETTER FROM THE BOARD

Conditions precedent

Completion

LETTER FROM THE BOARD

INFORMATION ON THE PURCHASER

INFORMATION ON THE DISPOSAL GROUP

LETTER FROM THE BOARD

INFORMATION ON THE GROUP AND THE REMAINING GROUP AND REASONS FOR THE DISPOSAL

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

FINANCIAL INFORMATION AND IMPACT OF THE DISPOSAL

LETTER FROM THE BOARD

USE OF PROCEEDS

IMPLICATIONS UNDER THE LISTING RULES

LETTER FROM THE BOARD

PREVIOUS ACQUISITIONS

The First Acquisition

The Second Acquisition

LETTER FROM THE BOARD

RECOMMENDATION

ADDITIONAL INFORMATION

FINANCIAL INFORMATION OF THE GROUP

1. FINANCIAL INFORMATION OF THE GROUP

2. INDEBTEDNESS

Bank borrowings and other borrowings

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Contingent liabilities

3. WORKING CAPITAL

4. MATERIAL ADVERSE CHANGE

5. CONTINGENT LIABILITIES

6. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

7. MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

OPERATIONAL AND FINANCIAL REVIEW

APPENDIX I

Turnover

Segment results

Profit/(loss) for the year

PROSPECTS

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

LIQUIDITY AND FINANCIAL RESOURCES

FINANCING

TREASURY POLICY

CAPITAL STRUCTURE

FOREIGN EXCHANGE RISK AND INTEREST RATE RISK

CHARGE ON REMAINING GROUP’S ASSETS

CAPITAL EXPENDITURE

FUTURE PLAN FOR MATERIAL INVESTMENTS OR CAPITAL ASSETS

MATERIAL ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

STAFF POLICY

CONTINGENT LIABILITIES

APPENDIX II FINANCIAL INFORMATION OF THE DISPOSAL GROUP

Art Group Holdings Limited Proxy Solicitation & Information Statement 2015