Art Group Holdings Limited — Proxy Solicitation & Information Statement 2015

Jul 17, 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)

MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF THE ENTIRE EQUITY INTERESTS IN ZHENGZHOU JIACONG PROPERTY SERVICES COMPANY LIMITED

Financial adviser to the Company

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

A notice convening the EGM to be convened at Fung Shui Room, 6th Floor, Marco Polo Hongkong Hotel, Harbour City, 3 Canton Road, Kowloon, Hong Kong on Thursday, 20 August 2015 at 10:30 a.m. is set out on pages 74 to 76 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.

20 July 2015

CONTENTS

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Appendix I – Financial Information of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Appendix II – Financial Information of the Target Company. . . . . . . . . . . . . . . . . . .	17
Appendix III – Unaudited Pro Forma Financial Information
of the Enlarged Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	43
Appendix IV – Valuation Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	51
Appendix V – General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	65
Notice of Extraordinary General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	74

– i –

DEFINITIONS

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

“Acquisition”

the acquisition of the entire equity interests in the Target Company from the Vendor by the Purchaser pursuant to the Sale and Purchase Agreement

“Board”

board of directors of the Company

“Business Day”

“Company”

a day (other than Saturday, Sunday or public holiday) on which commercial banks in Hong Kong open for business 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

“Consideration”

consideration for the Acquisition

“Directors”

the director(s) of the Company

“Enlarged Group”

the Group upon the Acquisition

“EGM”

“Group”

the extraordinary general meeting of the Company to be convened to approve, among others, the Acquisition the Company and its subsidiaries

“Hong Kong” “Jiachao”

the Hong Kong Special Administrative Region of the PRC

鄭州佳潮物業服務有限公司 (Zhengzhou Jiachao Property Services Company Limited)

“Latest Practicable Date” 15 July 2015, being the latest practicable date prior to the printing of this circular for ascertaining certain information in this circular

– 1 –

DEFINITIONS

“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

• “PRC” 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

• “Property” the property located at No. 1 Zheng Shang (Middle Section) Road, Zhongyuan District, Zhengzhou Shi, Henan Province, the PRC, consisting of 164 shops with a gross floor area of approximately 6,928 square metres

• “Purchaser” 鄭州昌盾資產管理有限公司 (Zhengzhou Changdun Asset 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

• “Sale and Purchase Agreement” the sale and purchase agreement dated 26 June 2015 and entered into between the Vendor and the Purchaser in relation to the Acquisition

• “SFO” Securities and Futures Ordinance (Cap. 571 of 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)

• “Shareholders’ Loan”

• the loan of RMB97,706,000 (equivalent to approximately HK$123,678,000 and subject to adjustment described in the paragraph headed “Consideration” in this circular) due from the Target Company to the Vendor as at the date of the Sale and Purchase Agreement

“Stock Exchange”

The Stock Exchange of Hong Kong Limited

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DEFINITIONS

“Target Company”	鄭州佳聰物業服務有限公司(Zhengzhou Jiacong Property
	Services Company Limited)
“Vendor”	鄭州暢科貿易有限公司(Zhengzhou Changke Trading
	Company Limited)
“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 RMB0.79 for illustration purpose only.

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LETTER FROM THE BOARD

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

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 565)

Executive directors: Mr. Chen Jinyan (Chairman) Mr. Chen Dong 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

20 July 2015

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF THE ENTIRE EQUITY INTERESTS IN ZHENGZHOU JIACONG PROPERTY SERVICES COMPANY LIMITED

INTRODUCTION

Reference is made to the announcement of the Company dated 26 June 2015 in relation to the acquisition of the entire equity interests in Zhengzhou Jiacong Property Services Company Limited.

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LETTER FROM THE BOARD

As one or more of the applicable percentage ratios in respect of the Acquisition exceed 25% but are less than 100%, the Acquisition contemplated under the Sale and Purchase Agreement constitutes a major transaction for the Company under Chapter 14 of the Listing Rules. Therefore, the Acquisition is subject to reporting, announcement and Shareholders’ approval requirements under Chapter 14 of the Listing Rules.

The EGM will be convened for the purpose of considering, and if thought fit, approving the Acquisition. To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, no Shareholder has a material interest in the Acquisition and therefore, no Shareholder is required to abstain from voting for the resolution to approve the Acquisition at the EGM.

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

26 June 2015 (after trading hours)

Parties

Purchaser: 鄭州昌盾資產管理有限公司 (Zhengzhou Changdun Asset Management Company Limited), an indirect wholly-owned subsidiary of the Company Vendor: 鄭州暢科貿易有限公司 (Zhengzhou Changke Trading Company Limited)

Target Company: 鄭州佳聰物業服務有限公司 (Zhengzhou Jiacong Property Services Company Limited)

The Vendor is a limited company incorporated under the laws of the PRC and principally engaged in the sale and purchase of textile products and textile raw materials. The Vendor was a supplier of the Group supplying raw materials including cotton. The Group has established business relationship with the Vendor for more than two years. To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, the Vendor and its ultimate beneficial owner(s) is/are third party(ies) independent of the Company and its connected persons (as defined in Chapter 14A of the Listing Rules). Moreover, the Vendor has no relationship with the vendors of the Company’s previous major acquisition in relation to the acquisition of an aggregate

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LETTER FROM THE BOARD

of 75% equity interests in Jiachao, a limited liability company incorporated in the PRC, with a shopping mall situated in Zhengzhou Shi for rental purpose as its principal asset. Details of such previous acquisition are set out in the Company’s announcement dated 18 December 2014. The Target Company has no relationship with Jiachao as well.

Subject matter of the Acquisition

Pursuant to the Sale and Purchase Agreement, the Vendor has conditionally agreed to sell and the Purchaser has conditionally agreed to purchase the entire equity interests in the Target Company at a consideration of RMB218,000,000 (equivalent to approximately HK$275,949,000) and the Shareholders’ Loan.

Consideration

The total Consideration of RMB218,000,000 (equivalent to approximately HK$275,949,000) was arrived at after arm’s length negotiation among the parties to the Sale and Purchase Agreement with reference to the opinion of value of the Property of RMB218,000,000 (equivalent to approximately HK$275,949,000) as advised by an independent professional valuer. The Consideration comprises (1) RMB120,294,000 (equivalent to approximately HK$152,271,000 and subject to adjustment described below) for the entire equity interests in the Target Company; and (2) RMB97,706,000 (equivalent to approximately HK$123,678,000 and subject to adjustment described below) for repayment of the Shareholders’ Loan.

All of the Consideration will be settled in cash upon completion by internal resources of the Group and loans from independent banks/financial institutions. The Directors consider that the Group will have sufficient fund to complete the Acquisition.

The Consideration will be satisfied in the following manner:

• (a) 20% of the Consideration, being RMB43,600,000 (equivalent to approximately HK$55,190,000) and comprises (i) RMB19,174,000 (equivalent to approximately HK$24,271,000) for the entire equity interests in the Target Company and (ii) RMB24,426,000 (equivalent to approximately HK$30,919,000) for repayment of the Shareholders’ Loan, has been paid as refundable deposit upon signing of the Sale and Purchase Agreement;

• (b) a further refundable deposit of 30% of the Consideration, being RMB65,400,000 (equivalent to approximately HK$82,785,000) and comprises (i) RMB40,974,000 (equivalent to approximately HK$51,866,000) for the entire equity interests in the Target Company and (ii) RMB24,426,000 (equivalent to approximately

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LETTER FROM THE BOARD

HK$30,919,000) for repayment of the Shareholders’ Loan, has been paid upon the appointment of the legal representative and the director nominated by the Purchaser to the Target Company;

• (c) a further refundable deposit of 30% of the Consideration, being RMB65,400,000 (equivalent to approximately HK$82,785,000) and comprises (i) RMB40,973,000 (equivalent to approximately HK$51,865,000) for the entire equity interests in the Target Company and (ii) RMB24,427,000 (equivalent to approximately HK$30,920,000) for repayment of the Shareholders’ Loan, will be payable upon completion of the due diligence exercise of the Target Company by the Purchaser; and

• (d) the balance of the Consideration, being RMB43,600,000 (equivalent to approximately HK$55,189,000) and comprises (i) RMB19,173,000 (equivalent to approximately HK$24,269,000) for the entire equity interests in the Target Company and (ii) RMB24,427,000 (equivalent to approximately HK$30,920,000) for repayment of the Shareholders’ Loan, will be paid within five (5) Business Days from the completion of the Acquisition.

If the Shareholders’ Loan at the date of completion of the Acquisition exceeds RMB97,706,000 (equivalent to approximately HK$123,678,000 and being the amount of Shareholders’ Loan as at the date of the Sale and Purchase Agreement), the following adjustments to balance of the Consideration referred to in paragraph (d) above will be made:

• (a) the consideration of RMB19,173,000 (equivalent to approximately HK$24,269,000) for the entire equity interests in the Target Company will be adjusted to an amount equal to RMB43,600,000 (equivalent to approximately HK$55,189,000) minus RMB24,427,000 (equivalent to approximately HK$30,920,000) and further minus the difference between the amount of the Shareholders’ Loan as at the date of completion of the Acquisition and the date of Sale and Purchase Agreement; and

• (b) the sum of RMB24,427,000 (equivalent to approximately HK$30,920,000) for repayment of the Shareholders’ Loan will be adjusted to an amount equal to RMB24,427,000 (equivalent to approximately HK$30,920,000) plus the difference between the amount of the Shareholders’ Loan as at the date of completion of the Acquisition and the date of Sale and Purchase Agreement.

Notwithstanding anything in the Sales and Purchase Agreement, the Vendor and the Purchaser have agreed that if the Target Company has not obtained all the Building Ownership Certificates for the Property by 1 March 2016, the Vendor will immediately return in cash to the Purchaser all the Consideration paid together with interest accrued at a rate of 4% per annum.

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LETTER FROM THE BOARD

Conditions precedent

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

• (a) the Shareholders have approved the transactions contemplated by the Sale and Purchase Agreement in the EGM;

• (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, the transfers of equity interests in the Target Company and the transactions contemplated under the Sale and Purchase Agreement;

• (c) sale and purchase agreements of the Property having been entered into between the Target Company, as the purchaser, and a real estate developer, who is an independent third party, as the vendor; and

• (d) completion of the due diligence exercise on the Target Company by the Purchaser with a result satisfactory to the Purchaser.

If the conditions are not fulfilled or waived on or before the expiry of 180 days from the date of the Sale and Purchase Agreement (or other later date as agreed to by the parties thereto), 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.

Upon completion of the Acquisition, the Company will be indirectly interested in the entire equity interests in the Target Company, and the Target Company will become an indirect whollyowned subsidiary of the Company. The results of the Target Company will be consolidated with the accounts of the Group.

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LETTER FROM THE BOARD

INFORMATION ON THE TARGET COMPANY

The Target Company is a limited liability company incorporated in the PRC on 20 April 2015. The principal business of the Target Company is intended to hold the Property for rental purpose and agency. Upon completion of the sale and purchase agreements of the Property between the Target Company and a real estate developer, the principal asset of the Target Company will be the Property, which had a cost (excluding all transaction cost and taxation) of approximately RMB117,186,000 (equivalent to approximately HK$148,337,000) as at 24 June 2015.

The Target Company entered into the sale and purchase agreements with a real estate developer at the end of May 2015 to purchase the Property inside a giant theme shopping mall selling textile materials, accessories and products. This shopping mall was still under construction as at the Latest Practicable Date. The expected construction costs, such as costs of water and electricity pipelines, pathways and interior and exterior renovation, to be incurred to complete the construction of the Property is RMB5,000,000 (equivalent to approximately HK$6,329,000). The construction costs will be borne by the real estate developer. The Group has no capital commitments regarding the Property. The Property is targeted for handover by the end of October 2015. This shopping mall is located at No. 1 Zheng Shang (Middle Section) Road, Zhongyuan District, Zhengzhou Shi, Henan Province, the PRC and forms part of a big scale mixed residential, commercial, office and hotel development project. Its location is a newly developing area on the western part of Zhengzhou Shi and takes less than an hour driving distance to two railway stations and an airport. The shopping mall has comprehensive auxiliary facilities, such as large signboards, thousands of parking spaces, nearly hundreds of escalators and customer or freight elevators and wide passages for ease of logistics. The Property consists of a total of 164 ground floor shop units with a total gross floor area of approximately 6,928 square meters. The floor area and height of these shop units are ranged from 22 square meters to 54 square meters and from 5 meters to 6 meters, respectively, which enables ample rooms for tenants to display their goods. The Target Company intends to rent out the Property at fixed market rate to tenants selling textile materials, accessories and products starting from the beginning of 2016.

For less than one month ended 30 April 2015 since its incorporation, the unaudited net loss before and after tax of the Target Company amounted to approximately RMB5,000 (equivalent to approximately HK$6,000) and RMB5,000 (equivalent to approximately HK$6,000), respectively.

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LETTER FROM THE BOARD

POSSIBLE FINANCIAL EFFECTS OF THE ACQUISITION

Upon the completion of the Acquisition, the Target Company will become a wholly-owned subsidiary of the Group and its financial statements will be consolidated to those of the Group.

As set out in Appendix III to this circular, assuming the Acquisition has been completed on 31 December 2014, the consolidated total assets of the Group would be increased from approximately RMB1,011,363,000 (equivalent to approximately HK$1,280,206,000) to RMB1,034,150,000 (equivalent to approximately HK$1,309,050,000). The consolidated total liabilities of the Group would be increased from approximately RMB111,805,000 (equivalent to approximately HK$141,525,000) to approximately RMB136,347,000 (equivalent to approximately HK$172,591,000). The increase of the consolidated total liabilities is primarily due to the consolidation of the liability of the Target Company with that of the Group and the accrual for the consideration of RMB218,000,000 (equivalent to approximately HK$275,949,000) payable to the Vendor. As a result, the consolidated net assets of the Group would decrease from approximately RMB899,558,000 (equivalent to approximately HK$1,138,681,000) to RMB897,803,000 (equivalent to approximately HK$1,136,459,000).

Taking into account the synergy potential of the Acquisition, the Acquisition is expected to further broaden the revenue and earning base of the Group in future.

REASONS FOR AND THE BENEFITS OF THE ACQUISITION

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

The Group tried to diversify its operations into different kinds of business since the year ended 30 June 2014. Therefore 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 consider that the Acquisition signifies the second property operating project the Group invested in and the sustainable development of the Group to diversify its business into the property operating business. The Property will be held by the Group as investment property which will generate a stable and constant stream of rental income to the Group, which ultimately will benefit the Company and its Shareholders as a whole. The Directors also expect that there will be appreciation of property value in long term. Moreover, the Directors have further explored the possible diversification of the Group’s business to the property operating segment because of the increasing population and consuming power of the PRC and a strong market potential is foreseeable.

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LETTER FROM THE BOARD

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.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios in respect of the Acquisition exceed 25% but are less than 100%, the Acquisition contemplated under the Sale and Purchase Agreement constitutes a major transaction for the Company under Chapter 14 of the Listing Rules. Therefore, the Acquisition is subject to reporting, announcement and Shareholders’ approval requirements under Chapter 14 of the Listing Rules.

The EGM will be convened for the purpose of considering, and if thought fit, approving the Acquisition. The Acquisition will result in a broaden diversification of the Group’s business to enlarge the territory of the property operating business in addition to its existing business of the dyeing process of grey fabrics and property operating of a shopping mall for rental purpose. To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, no Shareholder has a material interest in the Acquisition and therefore, no Shareholder is required to abstain from voting for the resolution to approve the Acquisition at the EGM.

PREVIOUS 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 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

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LETTER FROM THE BOARD

Circular of the Company dated 30 January 2015:

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

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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 2012, 2013, 2014 are disclosed on pages 26 to 73 of the annual report of the Company for the year ended 30 June 2012, pages 30 to 81 of the annual report of the Company for the year ended 30 June 2013 and pages 31 to 85 of the annual report of the Company for the year ended 30 June 2014, respectively. The financial information of the Group for the period ended 31 December 2014 is disclosed on pages 3 to 18 of the interim report of the Company for the period ended 31 December 2014. 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 and the interim report 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 2012, 2013 and 2014.

Annual report of the Company for the year ended 30 June 2012:

http://www.hkexnews.hk/listedco/listconews/SEHK/2012/1009/LTN20121009285.pdf

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

Interim report of the Company for the period ended 31 December 2014:

http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0306/LTN20150306130.pdf

2. INDEBTEDNESS

Bank borrowings and other borrowings

As at 30 June 2015, the Enlarged Group had outstanding borrowings of approximately HK$1,374,707,000, comprising (i) secured and unguaranteed bank borrowings of approximately HK$868,354,000; (ii) unsecured and guaranteed bank borrowings of approximately HK$37,975,000; (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$443,038,000.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

As at 30 June 2015, the Enlarged Group’s secured bank borrowings are wholly repayable within one to ten years and secured by certain buildings, certain leasehold interest in land, guarantee from two independent third parties and guarantee from a fellow subsidiary within the Group approximately HK$735,534,000, HK$3,657,000 and HK$518,987,000, respectively.

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 Enlarged Group had, as at 30 June 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 30 June 2015, the Enlarged Group had no material contingent liabilities.

3. WORKING CAPITAL

Taking into account the proposed Acquisition, the Enlarged 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 Enlarged 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 interim results of the Group for the period ended 31 December 2014 experienced a decline when compared with the corresponding period in year 2013 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 and a cautious purchasing approach adopted by downstream customers, 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 2014, the date to which the latest audited financial statements of the Company were made up.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

5. CONTINGENT LIABILITIES

The Enlarged Group has no other material contingent liabilities. The Enlarged Group is not involved in any current material legal proceedings, nor is the Enlarged 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 31 December 2014 up to the Latest Practicable Date.

6. OUTLOOK AND PROSPECTS

In accordance with 中原經濟區規劃 (Zhongyuan Economic Zone Plan) (the “Plan”) proposed by Henan Provincial Government, textile industry is the traditional pillar industry to the core city of Henan Province, Zhengzhou. As the Plan was included in 全國主體功能區規劃 (National Main Body Functional Zone Plan) as national development strategy, future prospects of textile industry in Zhengzhou is therefore expected to be optimistic and have more opportunities to further develop. There has been a long history of textile industry in Zhengzhou, therefore large amount of experienced and skillful workforce can be found here. Zhengzhou is the centre of the PRC, highways and railways thread Zhengzhou together to all directions of the PRC which is convenient for manpower movement and goods delivery. The giant theme shopping mall is created as the central pivot of selling textile materials, accessories and products in the middle part of the PRC. Based on the advantages obtained in development strategy, textile markets, human resources, location and communications, a great number of investment promotions can be attracted to Zhengzhou from the eastern coastal regions.

The PRC’s economy is expected to maintain a rapid yet 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. With financial reforms in the banking system, capital markets and public finance such as liberalisation of interest rates and better access to housing finance, a healthy property market will be developed. With improvements done by the PRC government in household registration system, property rights and land title registration system, the interests of the owners of the properties will also be safeguarded. Furthermore, urbanisation has been another focus for the PRC government in setting economic policy and objectives over the past few decades. A comprehensive policy framework for urbanisation would narrow rural-urban inequalities and reduce wealth disparities. Since the PRC has transformed into a consumption-driven society as a result of the increase in residents’ incomes, the living standard and consuming power in the PRC, in particular for the urban Chinese population, have kept increasing over the past two decades, especially on the luxurious consumer goods. Recently, easing of one-child policy will also increase demand for consumer

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

products, education and housing. The above reforms and improvements are all important to establish a more sustainable consumption-led economy in the PRC. By leveraging on the Enlarged Group’s current strategic plan and established strengths, experience and foresight, the Enlarged Group continues to seize opportunities to penetrate into property operating markets, explore new market potentials and increase profit margin.

The Company intends to appoint one of the executive directors, Mr. Chen Jinqing, as the general manager of the Target Company to manage the rental business with three current staff of the Target Company in view of its simple rental business and accounting processes. More caliber management and skillful employees will be recruited in future if the rental business becomes more extensive.

Looking forward, the Group continues to place additional resources to realise growth momentum from the development of property operating markets. The Property and a shopping mall for rental purpose acquired by the Group recently are situated in Zhengzhou Shi and with good economic and demographic fundamentals, which enables the Enlarged Group to diversify its business operations into property operating market in depth. The business growth of the Enlarged 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 Enlarged 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.

– 16 –

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

A. ACCOUNTANTS’ REPORT OF THE TARGET COMPANY

The following is the text of a report on the Target Company for the period from 20 April 2015 to 30 April 2015, prepared for the sole purpose of inclusion in this circular, received from Dominic K.F. Chan & Co., Certified Public Accountants (Practising), Hong Kong.

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The Board of Directors

Art Textile Technology International Company Limited Unit 1407, 14th Floor,

China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central, Hong Kong

Dear Sirs,

We set out below our report on the financial information regarding Zhengzhou Jiacong Property Services Company Limited (the “Target Company”) for the period from 20 April 2015 (date of incorporation) to 30 April 2015 (the “Relevant Period”), for inclusion in the shareholders’ circular of Art Textile Technology International Company Limited (the “Company”) dated 20 July 2015 (the “Circular”) in connection with the Company’s proposed acquisition (the “Acquisition”) of the 100% equity interests in the Target Company, pursuant to the Sale and Purchase Agreement dated 26 June 2015 entered into among Zhengzhou Changdun Asset Management Company Limited, an indirect wholly-owned subsidiary of the Company, Zhengzhou Changke Trading Company Limited and the Target Company. The financial information of the Target Company set out in Appendix II of the Circular comprises the statement of financial position as at 30 April 2015, and the statement of profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash flows for the period from 20 April 2015 (date of incorporation) to 30 April 2015, and a summary of significant accounting policies and other explanatory information.

The Target Company was incorporated in the People’s Republic of China (the “PRC”) with limited liability on 20 April 2015, with paid-in capital of RMB20,000,000. As at the date of this report, the Target Company is principally engaged in holding the Property for rental purpose and agency.

– 17 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

No statutory financial statements are prepared by the Target Company since the date of incorporation as there is no statutory requirement to do so.

For the purpose of this report, the director of the Target Company has prepared the financial statements in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) with no adjustments considered necessary to comply with HKFRSs.

DIRECTOR’S RESPONSIBILITY

The director of the Target Company is responsible for the preparation of the financial information in order to give a true and fair view. In preparing the financial information that gives a true and fair view, it is fundamental that appropriate accounting policies are selected and applied consistently, and that judgements and estimates made are prudent and reasonable.

REPORTING ACCOUNTANTS’ RESPONSIBILITY

For the purpose of this report, we have carried out independent audit procedures on the financial information in accordance with Hong Kong Standards on Auditing issued by the HKICPA, and such additional procedures as we considered necessary in accordance with Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA. It is our responsibility to form an independent opinion, based on our procedures, on the financial information and to report our opinion thereon.

OPINION

In our opinion, the financial information gives, for the purpose of this report, a true and fair view of the results and cash flows of the Target Company for the Relevant Period and of the state of affairs of the Target Company as at 30 April 2015.

Yours faithfully,

Dominic K.F. Chan & Co.

Certified Public Accountants (Practising) Hong Kong, 20 July 2015

– 18 –

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

STATEMENT OF PROFIT OR LOSS AND OTHER	COMPREHENSIVE INCOME	COMPREHENSIVE INCOME
		From
		20 April 2015
		(date of
		incorporation)
		to 30 April 2015
	Notes	RMB
Turnover	5	–
Administrative expenses		(4,560)
Loss before tax		(4,560)
Income tax expense	6	–
Loss and total comprehensive loss for the period		(4,560)

– 19 –

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

STATEMENT OF FINANCIAL POSITION

Notes CURRENT ASSETS Other receivable 11 Cash and bank balances 12 CURRENT LIABILITY Other payable 13 NET CURRENT ASSETS CAPITAL AND RESERVE Paid-in capital 14 Accumulated loss TOTAL EQUITY	At 30 April 2015 RMB 500,000 20,005,440 20,505,440 510,000 19,995,440 20,000,000 (4,560) 19,995,440

– 20 –

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

STATEMENT OF CHANGES IN EQUITY

Note Capital injection 14 Loss for the period Balance as at 30 April 2015	Paid-in capital RMB 20,000,000 – 20,000,000	Accumulated loss RMB – (4,560) (4,560)	Total RMB 20,000,000 (4,560) 19,995,440

– 21 –

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

STATEMENT OF CASH FLOWS

Note CASH FLOW FROM OPERATING ACTIVITIES Loss before tax Operating cash flows before working capital changes Working capital changes:– Increase in other receivable Increase in other payable NET CASH GENERATED FROM OPERATING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Issuance of registered capital NET CASH GENERATED FROM FINANCING ACTIVITIES NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 12

Period from 20 April 2015 (date of incorporation) to 30 April 2015 RMB (4,560) (4,560) (500,000) 510,000 5,440 20,000,000 20,000,000 20,005,440 – 20,005,440

– 22 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

NOTES TO THE FINANCIAL INFORMATION

1. General

The Target Company was incorporated in the People’s Republic of China (the “PRC”) with limited liability on 20 April 2014. As at the date of this report, the registered office of the Target Company is located at 鄭州市中原區桐柏路178號4號樓1105, 1106室 (Rooms 1105 and 1106, No. 4 Building, Tong Bai Road, Zhong Yuan Area, Zhengzhou Shi). Its shareholder is Zhengzhou Changke Trading Company Limited（鄭州暢科貿易有限公司） which was incorporated in the PRC.

The financial information are presented in Renminbi (“RMB”), which is also the functional currency of the Target Company, except when otherwise indicated.

The Target Company is principally engaged in holding the Property for rental purpose and agency. During the Relevant Period, there was no operation carried out.

2. Application of new and revised Hong Kong Financial Reporting Standards (“HKFRSs”)

For the purpose of preparing and presentation of the financial information for the Relevant Period, the Target Company has applied Hong Kong Accounting Standards (“HKASs”), HKFRSs and Interpretation (“HK(IFRC) – Int”) issued by the HKICPA which are effective for the financial period beginning on 1 January 2015 and consistently applied throughout the Relevant Period.

At the date of this report, the Target Company has not early applied the following new and revised HKFRSs that have been issued but are not yet effective:

HKAS 1 (Amendments)	Disclosure Initiative1
HKAS 16 and HKAS 38	Clarification of Acceptable Methods of Depreciation
(Amendments)	and Amortisation1
HKAS 16 and HKAS 41	Agriculture: Bearer Plants1
(Amendments)
HKAS 27 (Amendments)	Equity Method in Separate Financial Statements1
HKFRSs (Amendments)	Annual Improvements to HKFRSs 2012-2014 Cycle1

– 23 –

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

HKFRS 9 Financial Instruments[3] HKFRS 10 and HKAS 28 Sale or Contribution of Assets between an Investor (Amendments) and its Associate or Joint Venture[1] HKFRS 10, HKFRS 12 and Investment Entities: Applying the Consolidation HKAS 28 (Amendments) Exception[1] HKFRS 11 (Amendments) Accounting for Acquisitions of Interests in Joint Operations[1] HKFRS 14 Regulatory Deferral Accounts[1] HKFRS 15 Revenue from Contracts with Customers[2]

1 Effective for annual periods beginning on or after 1 January 2016

2 Effective for annual periods beginning on or after 1 January 2017

3 Effective for annual periods beginning on or after 1 January 2018

The director of the Target Company anticipates that the application of new and revised HKFRSs will not have material impact on the results and the financial position of the Target Company.

3. Significant accounting policies

The financial information has been prepared on the historical cost basis, and in accordance with accounting policies set out below which are in conformity with HKFRSs issued by the HKICPA. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Target Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in the financial information is determined on such a basis, except for share-based payment transactions that are within the scope of HKFRS 2, leasing transactions that are within the scope of HKAS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in HKAS 2 or value in use in HKAS 36.

– 24 –

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

The principal accounting policies are set out below.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments that are readily convertible into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, and form an integral part of the Target Company’s cash management.

Provisions

Provisions are recognised when the Target Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Target Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the relevant period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material). When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

– 25 –

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

Impairment losses

At the end of the relevant period, the Target Company reviews the carrying amounts of its assets with finite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the period. Taxable profit differs from “profit before tax” as reported in the statement of profit or loss and other comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Target Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the relevant period.

– 26 –

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial information and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Target Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.

– 27 –

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

Related parties

• (a) A person, or a close member of that person’s family, is related to the Target Company if that person:

• (i) has control or joint control over the Target Company;

• (ii) has significant influence over the Target Company; or

• (iii) is a member of the key management personnel of the Target Company or of a parent of the Target Company;

• (b) An entity is related to the Target Company if any of the following conditions applies:

• (i) the entity and the Target Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others);

• (ii) one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member);

• (iii) both entities are joint ventures of the same third party;

• (iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;

• (v) the entity is a post-employment benefit plan for the benefit of employees of either the Target Company or an entity related to the Target Company;

• (vi) the entity is controlled or jointly controlled by a person identified in (a); and

• (vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

– 28 –

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

Financial instruments

Financial assets and financial liabilities are recognised in the statement of financial position when an entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

The Target Company’s financial assets are classified as loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. The accounting policies adopted in respect of loans and receivables are set out below.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Interest income is recognised on an effective interest basis for debt instruments.

– 29 –

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including other receivable and cash and bank balances) are carried at amortised cost using the effective interest method, less any identified impairment losses.

Interest income is recognised by applying the effective interest rate, except for short-term receivables where the recognition of interest would be immaterial.

Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of the relevant period. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected.

For loans and receivables, objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

• breach of contract, such as default or delinquency in interest and principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or

• the disappearance of an active market for that financial asset because of financial difficulties.

For certain categories of financial assets, such as other receivable, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Target Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.

– 30 –

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of the estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade and other receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When trade and other receivables are considered uncollectible, they are written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the financial asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Financial liabilities and equity instruments

Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Target Company after deducting all of its liabilities. Equity instruments issued by the Target Company are recognised at the proceeds received, net of direct issue costs.

– 31 –

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

Financial liabilities (including other payable) are subsequently measured at amortised cost using the effective interest method.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Interest expense is recognised on an effective interest basis.

Derecognition

The Target Company derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Target Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Target Company continues to recognise the asset to the extent of its continuing involvement and recognises an associated liability. If the Target Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Target Company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

– 32 –

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

On derecognition of a financial asset other than in its entirety, the Target Company allocates the previous carrying amount of the financial asset between the part it continues to recognise, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in profit or loss. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.

The Target Company derecognises financial liabilities when, and only when, the Target Company’s obligations are discharged, cancelled or expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

4. Critical accounting judgment and key sources of estimation uncertainty

In the application of the Target Company’s accounting policies, which are described in note 3, the management are required to make judgment, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

5. Turnover

The Target Company did not generate any turnover during the Relevant Period.

– 33 –

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

6. Income tax expense

Under the Law of the PRC on Enterprise Income Tax (“EIT”) (“EIT Law”) and Implementation Regulation of the EIT Law, the statutory EIT rate of the Target Company is 25% with effective or at lower preferential rates applicable in the respective jurisdictions.

No provision for PRC EIT has been made as the Target Company had no assessable profits arising in the PRC during the Relevant Period.

The income tax expense for the Relevant Period can be reconciled to the loss before tax per the statement of profit or loss and other comprehensive income as follows:

Loss before tax Tax at the domestic income tax rate of 25% Tax effect of expenses not deductible for tax purpose	Period from 20 April 2015 (date of incorporation) to 30 April 2015 RMB (4,560) (1,140) 1,140 –

7. Director’s emoluments

No emoluments were paid or payable to the director of the Target Company during the Relevant Period.

8. Segment information

The Target Company is principally engaged in holding the Property for rental purpose and agency in the PRC. No revenue generated due to no operation carried out during the Relevant Period; therefore, no operating segment has been formed.

– 34 –

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

9. Earnings per share

No earnings per share information is presented as its inclusion, for the purpose of this report is not considered meaningful.

10. Dividend

No dividend was paid or proposed for the period ended 30 April 2015 nor has any dividend been proposed since the end of the Relevant Period.

11. Other receivable

On 29 April 2015, the Target Company signed a preliminary sale and purchase agreement with a real estate developer for an intention to acquire a total of 164 shops which are under development as at the date of this report, at a consideration of RMB117,186,469. Those shops are located in Zhengzhou Shi, Henan Province of the PRC. The amount was paid to the real estate developer as a deposit for acquiring the shops. The deposit will be refunded once the whole consideration is settled.

12. Cash and bank balances

Cash and bank balances comprise cash held by the Target Company and bank balances that carry interest rates at 0.35% per annum and have original maturity of three months or less.

13. Other payable

Other payable represented an amount due to a holding company which had arranged business operation cash flow to the Target Company during the Relevant Period.

The amount due to a holding company is unsecured, non-interest bearing and repayable on demand.

– 35 –

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

14. Paid-in capital

	As at
	30 April 2015
	RMB
Paid-in capital:
At 30 April 2015	20,000,000

The Target Company was established with registered capital of RMB60,010,000. As at the date of this report, RMB20,000,000 has been injected as paid-in capital of the Target Company.

15. Capital risk management

The Target Company’s objective when managing capital is to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholder.

The capital structure of the Target Company consists of cash and bank balances and paid-in capital.

The management of the Target Company reviews the capital structure on a regular basis. As part of this review, the management of the Target Company considers the cost of capital and the risks associated with each class of capital, and takes appropriate actions to balance its overall capital structure.

– 36 –

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

16. Financial instruments

(a) Categories of financial instruments

The carrying amounts of each category of financial instruments at the end of the Relevant Period are as follows:–

Financial assets Loans and receivables: Other receivable Cash and bank balances Financial liability Financial liability at amortised cost: Other payable	As at 30 April 2015 RMB 500,000 20,005,440
	20,505,440
	As at 30 April 2015 RMB 510,000

(b) Financial risk management objectives and policies

The Target Company’s major financial instruments include other receivable, cash and bank balances and other payable. Details of these financial instruments are disclosed in respective notes.

The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management of the Target Company manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

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FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

Market risk

Interest rate risk

The Target Company’s cash flow interest rate risk is mainly concentrated on the fluctuation of the rate determined by the People’s Bank of China arising from the Target Company’s RMB in relation to bank balances.

The Target Company currently does not have an interest rate hedging policy. However, management monitors interest rate change exposure and will consider hedging significant interest rate change exposure should the need arise.

Sensitivity analysis

No sensitivity analysis has been presented as the director considers that the impact to profit or loss for the Relevant Period is insignificant, taking into account that the fluctuation in interest rates on bank balances is minimal. Accordingly, no sensitivity analysis is presented.

Credit risk

At the end of each reporting period, the Target Company’s maximum exposure to credit risk which will cause a financial loss to the Target Company due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the statement of financial position.

In order to minimise the credit risk, the management of the Target Company has policies in place to recover overdue debts. In addition, the management of the Target Company reviews the recoverable amount of each receivable at the end of each reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the management of the Target Company considers that the credit risk is significantly reduced.

The credit risk of these liquid funds is limited because the counterparty is bank located in the PRC with high credit rating.

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FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

Liquidity risk

In the management of the liquidity risk, the Target Company monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Target Company’s operations and mitigate the effects of fluctuations in cash flows.

The following table details the Target Company’s remaining contractual maturity for its non-derivative financial liability. The table has been drawn up based on the undiscounted cash flows of financial liability based on the earliest date on which the Target Company can be required to pay. The table includes both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the end of each reporting period.

		Total
	On demand or	undiscounted	As at
	within 1 year	cash flow	30 April 2015
	RMB	RMB	RMB
Non-derivative
financial liability
Other payable	510,000	510,000	510,000

Fair value measurements of financial instruments

The fair values of financial assets and financial liability are determined in accordance with generally accepted pricing models based on a discounted cash flow analysis using prices or rates from observable current market transactions as input.

The management of the Target Company considers that the carrying amounts of financial assets and financial liability recognised in the financial information approximate their fair values.

17. Subsequent events

On 6 May 2015, the Target Company paid RMB20,000,000 to the real estate developer as part of the consideration as stated in the preliminary sale and purchase agreement. Up to 25 May 2015, the Target Company entered into 164 sets formal sale and purchase agreements with the developer for acquiring 164 shops. The remaining balance of the consideration had been fully settled on 24 June 2015.

– 39 –

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

18. Related party transaction

Save as disclosed elsewhere in the financial information, which in the opinion of the director of the Target Company, there was no other material related party transaction during the Relevant Period.

Detail of the balance with a related party at the end of the Relevant Period is set out in note 13 to the financial information.

19. Subsequent financial information

No audited financial statements have been prepared by the Target Company in respect of any period subsequent to 30 April 2015.

B. MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANY

Set out below is the management discussion and analysis of the Target Company for the Relevant Period, which is based on the financial information of the Target Company as set out in part A of Appendix II to this Circular.

OPERATIONAL AND FINANCIAL REVIEW

The Target Company had entered into 164 sets of sale and purchase agreements with a real estate developer at the end of May 2015 to purchase the Property inside a giant theme shopping mall selling textile materials, accessories and products. This shopping mall is still under construction as at the Latest Practicable Date but targeted for handover by the end of October 2015. This shopping mall is located at No. 1 Zheng Shang (Middle Section) Road, Zhongyuan District, Zhengzhou Shi, Henan Province, the PRC and forms part of a big scale mixed residential, commercial, office and hotel development project. Its location is a newly developing area on the western part of Zhengzhou Shi and takes less than an hour driving distance to two railway stations and an airport. The shopping mall has comprehensive auxiliary facilities, such as large signboards, thousands of parking spaces, nearly hundreds of escalators and customer or freight elevators and wide passages for ease of logistics. The Property consists of a total of 164 ground floor shop units with a total gross floor area of approximately 6,928 square meters. The floor area and height of these shop units are ranged from 22 square meters to 54 square meters and from 5 meters to 6 meters, respectively, which enables ample rooms for tenants to display their goods. The Target Company intends to rent out the Property at fixed market rate to tenants selling textile materials, accessories and products starting from the beginning of 2016.

– 40 –

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

Turnover and Gross Profit

As the Target Company was only incorporated on 20 April 2015 and entered into a preliminary sale and purchase agreement with a real estate developer before the end of the Relevant Period to purchase 164 shop units which are still under construction before the end of the Relevant Period, therefore, no turnover and gross profit was then generated.

Loss and Total Comprehensive Loss for the Relevant Period

The Target Company’s loss and total comprehensive loss of RMB4,560 (equivalent to approximately HK$5,772) was incurred during the Relevant Period which is further described below.

Administrative Expenses

The Target Company incurred administrative expenses of RMB4,560 (equivalent to approximately HK$5,772) during the Relevant Period which included travelling expenses and some incorporation fees.

CAPITAL STRUCTURE, LIQUIDITY AND FINANCIAL RESOURCES

During the Relevant Period, the Target Company funded its incorporation wholly by the proceeds from issuance of registered capital of RMB20,000,000 (equivalent to approximately HK$25,316,456). As at 30 April 2015, the assets of the Target Company comprised of cash and bank balances of RMB20,005,440 (equivalent to approximately HK$25,323,342) and other receivables of RMB500,000 (equivalent to approximately HK$632,911). As at 30 April 2015, the Target Company had no borrowings. Its liability was only an amount due to a holding company of RMB510,000 (equivalent to approximately HK$645,570). Therefore, the Target Company recorded net current assets of RMB19,995,440 (equivalent to approximately HK$25,310,684) as at 30 April 2015.

During the Relevant Period, the Target Company did not have any formal hedging policies and no financial instrument was used for hedging purpose.

As at 30 April 2015, the Target Company’s current ratio (“Current Ratio”, represented by current assets as a percentage of current liabilities) and gearing ratio (“Gearing Ratio”, represented by total liabilities as a percentage of total assets) were approximately 4,020.7% and approximately 2.5% respectively.

– 41 –

FINANCIAL INFORMATION OF THE TARGET COMPANY

APPENDIX II

FOREIGN EXCHANGE RISK AND INTEREST RATE RISK

During the Relevant Period, the Target Company was not exposed to any material foreign currency risk as all of its business transactions, assets and liability were denominated in RMB.

CHARGE ON ASSETS

As at 30 April 2015, the Target Company did not have any charges on assets.

SIGNIFICANT INVESTMENT HELD

As at 30 April 2015, the Target Company did not hold any significant investment.

ACQUISITION OR DISPOSAL OF SUBSIDIARY OR ASSOCIATED COMPANY

During the Relevant Period, the Target Company did not have any significant acquisition or disposal of any subsidiary or associated company.

CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES

As at 30 April 2015, the Target Company had no significant capital commitments for the Acquisition and contingent liabilities.

STAFF POLICY

The Target Company had 3 employees in the PRC as at 30 April 2015. The Target Company offers a comprehensive and competitive remuneration, retirement scheme and benefit package to its employees. Discretionary bonus is offered to the Target Company’s staff depending on their performance. There is no share option scheme offered by the Target Company to its staff. The Target Company is required to make specified contributions to a state-managed retirement benefit scheme in the PRC. The Target Company also provides periodic internal training to its employees. During the Relevant Period, the Target Company did not incur any staff’s salaries and other benefits, staff’s retirement benefit scheme contributions and director’s remuneration as the Target Company was just incorporated on 20 April 2015.

– 42 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

A. Introduction

The unaudited pro forma statement of assets and liabilities of the Enlarged Group (the“Statement”) set out in Appendix III below has been prepared by the Directors, for illustrative purposes only, to provide information about how the proposed Acquisition might have affected the financial position of the Group as if the Acquisition had been completed on 31 December 2014.

Pursuant to the Sale and Purchase Agreement dated 26 June 2015, Zhengzhou Changdun Asset Management Company Limited, an indirect wholly-owned subsidiary of the Company, agreed to acquire 100% equity interests in Zhengzhou Jiacong Property Services Company Limited which at an aggregate cash consideration of RMB218,000,000 (equivalent to approximately HK$275,949,000). The consideration will be financed by internal resources of the Group and loans from independent banks/financial institution.

The Statement has been prepared based on the unaudited condensed consolidated statement of financial position of the Group as at 31 December 2014, which has been extracted from the published interim report of the Company for the six months ended 31 December 2014 after making certain pro forma adjustments that are (i) directly attributable to the Acquisition and (ii) factually supportable, as further described in the accompanying notes.

The Statement is prepared based on a number of assumptions, estimates, uncertainties and currently available information, and is provided for illustrative purposes only. Accordingly, as a result of the nature of the Statement, it may not give a true picture of the actual financial position of the Enlarged Group that would have been attained had the Acquisition been completed on 31 December 2014. Furthermore, the Statement does not purport to predict the Enlarged Group’s future financial position.

The Statement should be read in conjunction with the financial information of the Group and the Target Company as set out in Appendix II of this Circular, the Company’s announcement dated 26 June 2015 and other financial information included elsewhere in this Circular.

– 43 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

B. Unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group

NON-CURRENT ASSETS Property, plant and equipment Property under development Prepaid lease payments Goodwill CURRENT ASSETS Inventories Trade and other receivables Pledged bank deposits Bank balances and cash CURRENT LIABILITIES Trade and other payables Tax liabilities Secured bank borrowings NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Deferred tax liabilities Bonds NET ASSETS	The Group as at 31 December 2014 (Unaudited) HK$’000 (Note 1) 99,503 – 18,370 – 117,873 548 476,781 25,316 659,688 1,162,333 58,568 2,356 44,304 105,228 1,057,105 1,174,978 10,808 25,489 36,297 1,138,681	The Target Company as at 30 April 2015 Pro forma adjustment Pro forma adjustment Pro forma adjustment (Unaudited) (Unaudited) (Unaudited) (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 (Note 2) (Note 3) (Note 4) (Note 5) – – 154,270 121,679 – – 159,380 – – 633 – 25,323 (154,270) (275,949) (2,222) 25,956 646 – – 646 25,310 25,310 – 30,420 – – 25,310	As at 31 December 2014 HK$’000
			99,503 275,949 18,370 159,380
			553,202
			548 477,414 25,316 252,570
			755,848
			59,214 2,356 44,304
			105,874
			649,974
			1,203,176
			41,228 25,489
			66,717
			1,136,459

– 44 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Notes:

1. The figures were extracted from the unaudited condensed consolidated statement of financial position of the Group as at 31 December 2014 as set out in the Company’s published interim report for the six months ended 31 December 2014.

2. The figures were extracted from accountants’ report of the Target Company in Appendix II of this Circular, after foreign exchange translation at the exchange rate of HK$1 to RMB0.79 to conform the presentation format of the Group, which is the prevailing exchange rate on 30 April 2015.

3. Being the adjustment to acquire a total of 164 shops which are under development as at the date of this report at a consideration of RMB117,186,000 (equivalent to HK$148,337,000) upon the completion. The tax expense of RMB4,687,000 (equivalent to HK$5,933,000) is capitalised to property under development in relation to deed tax, which is 4% of RMB117,186,000, is also taken into account.

4. The pro forma adjustment reflects the allocation of the cost of the Acquisition to the identifiable assets and liability of the Target Company. The Acquisition is accounted for using acquisition method of accounting in accordance with Hong Kong Financial Reporting Standard 3 (Revised) “Business Combinations”. For the purpose of preparing the unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group, the pro forma fair values of the identifiable assets and liability (other than goodwill) of the Target Company as at 30 April 2015 are assumed to be the same as their carrying amounts as at 30 April 2015.

Cash consideration of approximately HK$275,949,000 is to be paid by the Group for the Acquisition of 100% equity interests in the Target Company, assuming the Acquisition was taken place on 31 December 2014.

• (a) Fair value adjustment of the identifiable assets and liabilities of the Target Company

The fair value of 164 shops based on director’s estimation with reference to Valuation Report in Appendix IV of this Circular is approximately RMB218,000,000 (equivalent to HK$275,949,000) as at 30 April 2015. An amount of approximately HK$121,679,000, being the difference between the fair value of 164 shops and its cost of approximately HK$154,270,000 is adjusted as an increase in fair value. The corresponding deferred tax liability of approximately HK$30,420,000 is recognized based on the People’s Republic of China Enterprise Income Tax rate of 25% for the increase in fair value.

The fair values of the identifiable assets and liability of the Target Company and the amount of goodwill are subject to change upon the finalisation of the valuation on the completion date, which may be substantially different from their estimated amounts used in the preparation of this unaudited pro forma financial information.

– 45 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(b) Recognition of goodwill in relation to the Acquisition

Goodwill of the Enlarged Group represents the excess of the cost of the Acquisition over the estimated fair value of the identifiable net assets of the Target Company. The calculation is as follows:

Consideration of the Acquisition Less: identifiable net assets acquired Goodwill arising from the Acquisition	HKD’000 275,949 (116,569)
	159,380

For the purpose of the preparation of the unaudited pro forma financial information, the directors of the Company have assessed whether the goodwill may be impaired as at 31 December 2014 on a pro forma basis in accordance with Hong Kong Accounting Standard 36 “Impairment of Assets” and concluded that there is no impairment on the goodwill arising from the Acquisition as at 31 December 2014 based on the management’s assessment on the business plan to be executed and the recoverable amount of the cash generating unit comprising the goodwill with reference to Valuation Report in Appendix IV of this Circular. The actual amount of impairment of goodwill arising from the Acquisition at the date of completion may be different from that presented above and the difference may be significant.

The Directors confirm that the basis used in the preparation of the unaudited pro forma financial information of the Enlarged Group is consistent with the accounting policies of the Company, and the accounting policies and the principal assumptions will be consistently adopted in the first set of the financial statements of the Company after the completion of the Acquisition.

1. The pro forma adjustment represents the acquisition-related costs incurred by the Group and the total transaction costs, including legal, accounting and other professional parties are approximately HK$2,222,000.

2. No other adjustments have been made to reflect any trading results or other transactions of the Group entered into subsequent to 31 December 2014 and of the Target Company entered into subsequent to 30 April 2015.

– 46 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is the text of a report from the reporting accountants, Dominic K. F. Chan & Co., Certified Public Accountants (Practising), on the unaudited pro forma financial information of the Enlarged Group, for inclusion in this circular.

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

The Board of Directors

Art Textile Technology International Company Limited Unit 1407, 14th Floor, China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central,

Hong Kong

Dear Sirs,

We have completed our assurance engagement to report on the compilation of pro forma financial information of Art Textile Technology International Company Limited (the “Company”) and its subsidiaries (collectively the “Group”) by the directors of the Company (the “Directors”) for illustrative purposes only. The pro forma financial information consists of the pro forma consolidated statement of assets and liabilities of the Enlarged Group as at 31 December 2014 and related notes as set out in section headed “Unaudited Pro Forma Financial Information of the Enlarged Group” in Appendix III of the circular issued by the Company dated 20 July 2015 (the “Circular”). The applicable criteria on the basis of which the Directors have compiled the pro forma financial information are also described in the section headed “Unaudited Pro Forma Financial Information of the Enlarged Group” in Appendix III of the Circular.

– 47 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The pro forma financial information has been compiled by the Directors to illustrate the impact of the proposed acquisition (the “Acquisition”) of 100% equity interests in Zhengzhou Jiacong Property Services Company Limited (the “Target Company”) on the Group’s assets and liabilities as at 31 December 2014 as if the transaction was completed on 31 December 2014. As part of this process, information about the Group’s financial position has been extracted by the Directors from the Group’s interim report for the six months ended 31 December 2014, on which the interim report has been published.

Directors’ Responsibility for the Pro Forma Financial Information

The Directors are responsible for compiling the 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 (“HKICPA”).

Reporting Accountants’ Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the 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 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 accountants comply with ethical requirements and plans and perform procedures to obtain reasonable assurance about whether the Directors have compiled the 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 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 pro forma financial information.

– 48 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The purpose of pro forma financial information included in this Circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the Group as if the event had occurred or the transaction 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 Acquisition at 31 December 2014 would have been as presented.

A reasonable assurance engagement to report on whether the 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 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 pro forma adjustments give appropriate effect to those criteria; and

• The pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

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

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

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

– 49 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

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 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, 20 July 2015

– 50 –

VALUATION REPORT

APPENDIX IV

The following is the text of a letter and valuation certificate received from International Valuation Limited, an independent valuer, in connection with its valuation as at 30 April 2015 of the Property.

Room 1203A Kai Tak Commercial Building 317-319 Des Voeux Road Central Hong Kong

Date: 20 July 2015

The Board of Directors

Art Textile Technology International Company Limited

Unit 1407, 14/F China Merchants Tower Shun Tak Centre 168-200 Connaught Road Central Hong Kong

Dear Sirs,

Re: A total of 164 shops on Level 1 of Phase 2 of a theme shopping mall located at No. 1 Zheng Shang (Middle Section) Road, Zhongyuan District, Zhengzhou Shi, Henan Province, The People’s Republic of China (Land Lot No. ZY13-1-183)

INSTRUCTIONS

In accordance with the instructions to us to value the captioned property which is proposed to be acquired by Art Textile Technology International Company Limited or its subsidiaries (hereinafter together referred to as the “Group”) in the People’s Republic of China (the “PRC”), we confirm that we have carried out inspections, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value of the property interests as at 30 April 2015 (the “valuation date”).

This letter which forms parts of our valuation report explains the basis and methodology of valuation and clarifies our assumptions made, titleship of property and the limiting conditions.

– 51 –

VALUATION REPORT

APPENDIX IV

PREMISES OF VALUE

The valuation is our opinion of market value which is defined by the International Valuation Standards of the International Valuation Standards Council and followed by the Hong Kong Institute of Surveyors as “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing where the parties had each acted knowledgeably, prudently and without compulsion”.

BASIS OF VALUATION

In valuing the property interests, we have complied with all the requirements contained in Chapter 5 and Practice Note 12 to the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited, the HKIS Valuation Standards (2012 Edition) published by the Hong Kong Institute of Surveyors and the International Valuation Standards published from time to time by the International Valuation Standards Council.

Our valuation excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangement, special considerations or concessions granted by anyone associated with the sale, or any element of special value or costs of sale and purchase or offset for any associated taxes.

Our valuation also excludes potential tax liability which might arise if the assets were to be sold at the valuation date, including but not limited to profit tax, business tax, land appreciation tax, capital gain tax and any other relevant taxes prevailing at the valuation date.

CATEGORISATION OF PROPERTY INTERESTS

In the course of our valuation, the appraised property interests have been categorised according firstly to type of interests and then country where it is located, which in turn being classified into the below group:

– Property interests to be acquired by the Group for investment in the PRC

VALUATION METHODOLOGY

In the course of our valuation, unless otherwise stated, we have valued the property in its designated uses with the understanding that the property will be used as such (hereafter referred to as “continued uses”).

– 52 –

APPENDIX IV

VALUATION REPORT

The property had been subdivided into various small units and all of them were vacant with internal decoration in progress as at the valuation date. We have valued the property interests in its existing state and with the benefit of vacant possession. In the course of our valuation, we have valued the property by market approach and using comparison method with reference to comparable sales evidence, especially those within the subject development and asking price as available in the relevant market subject to suitable adjustments between the property and the comparable properties.

TITLE INVESTIGATION

We have been provided by the Group with copy of extract of the title documents and development consents/permits relating to the property interests. Where possible, we have examined the original documents to verify the existing title to the property interests in the PRC and any material encumbrances that might be attached to the property interests or any amendments which may not appear on the copies handed to us.

However, we have not searched the original documents to verify ownership or to ascertain any amendment. Due to the current registration system of the PRC under which the registration information is not accessible to the public, no investigation has been made for the title of the property interests in the PRC and the material encumbrances that might be attached. In the course of our valuation, we have relied considerably on the legal opinion given by the Company’s PRC legal adviser – 福建創元律師事務所 (Trend Associates), concerning the validity of property title and material encumbrances of the property in the PRC.

SITE INVESTIGATION

We have inspected the exterior and, where possible, the accessible portions of the interior of the property being appraised. However, we have not been commissioned to carry out structural survey nor to arrange for an inspection of the services. We are, therefore, not able to report whether the property is free of rot, infestation or any other structural defects. We formulate our view as to the overall conditions of the property taking into account the general appearance, the apparent standard and age of fixtures and fittings and the existence of utility services. Hence it must be stressed that we have had regard to you with a view as to whether the subject buildings are free from defects or as to the possibility of latent defects which might affect our valuation. In the course of our inspection, we did not note any serious defects. No tests were carried out on any of the services. We have assumed that utility services, such as electricity, telephone, water, etc., shall be available and free from defect. Moreover, we have assumed that there was not any alteration and addition works being carried out within the property, as at the valuation date.

– 53 –

APPENDIX IV

VALUATION REPORT

We have not arranged for any investigation to be carried out to determine whether or not high alumina cement concrete or calcium chloride additive or pulverized fly ash, or any other deleterious material has been used in the construction of the property. We are therefore unable to report that the property is free from risk in this respect. For the purpose of this valuation, we have assumed that deleterious material has not been used in the construction of the property.

We have not carried out any site investigation to determine the suitability of the ground conditions or the services for any property development erected or to be erected thereon. Nor did we undertake archaeological, ecological or environmental surveys for the property interests. Our valuation is prepared on the assumption that these aspects are satisfactory and that no extraordinary expenses or delays will be incurred during the construction period. Should it be discovered that contamination, subsidence or other latent defects exists in the property or on adjoining or neighbouring land or that the property had been or are being put to contaminated use, we reserve right to revise our opinion of value.

Moreover, we have not been commissioned to carry out detailed site measurements to verify the correctness of the land or building areas in respect of the property but have assumed that the areas provided to us are correct. Based on our experience of valuation of similar properties, we consider the assumptions so made to be reasonable. We have also assumed that there was not any material change of the property in between date of our inspection and the valuation date.

SOURCE OF INFORMATION

Unless otherwise stated, we shall rely to a considerable extent on the information provided to us by you or your legal or other professional advisers, in particular, but not limited to, statutory notices, planning approvals, zoning, easements, tenure, completion date of building, development schemes, identification of property, particulars of occupation, site areas, floor areas (including the gross floor area, planned gross floor area and surveyed gross floor area), matters relating to tenure, tenancies and all other relevant matters. Dimensions, measurements and areas included in the valuation certificate are based on information contained in the documents provided to us and are therefore approximations and for reference only. We have not searched original plans, developer brochures and the like to verify them.

We have taken every reasonable care to examine the information provided to us and also to make relevant enquiries. We have had no reason to doubt the truth and accuracy of the information provided to us by you, which is material to the valuation. We have also sought confirmation from you that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to reach an informed view and we have no reason to suspect that any material information has been withheld.

– 54 –

VALUATION REPORT

APPENDIX IV

VALUATION ASSUMPTIONS

For the properties which are held under long term land use rights, we have assumed that transferable land use rights in respect of the property interests at nominal land use fees has been granted and that any premium payable has already been fully settled. Unless stated as otherwise, we have assumed that the title owner of the property has an enforceable title of the property interests and have free and uninterrupted rights to occupy, use, sell, lease, charge, mortgage or otherwise dispose of the property without the need of seeking further approval from and paying additional premium to the Government for the unexpired land use term as granted. Unless otherwise stated in the report, vacant possession is assumed for the property concerned.

Moreover, we have assumed that the design and construction of the property is/will be in compliance with the local planning regulations and requirements and had been/would have been duly examined and approved by the relevant authorities.

Continued uses assumes the property will be used for the purposes for which the property is designed and built, or to which it is currently adapted. The valuation on the property in continued uses does not represent the amount that might be realised from piecemeal disposition of the property in the open market.

Unless otherwise stated in the report, no environmental impact study has been ordered or made. Full compliance with applicable national, provincial and local environmental regulations and laws is assumed. Moreover, it is assumed that all required licences, consents or other legislative or administrative authority from any local, provincial or national government or private entity or organisation either have been or can be obtained or renewed for any use which the report covers.

It is also assumed that all applicable zoning and use regulations and restrictions have been complied with unless nonconformity has been stated, defined and considered in the valuation report. In addition, it is assumed that the utilisation of the land and improvements are within the boundaries of the property described and that no encroachment or trespass exists, unless noted in the report.

– 55 –

VALUATION REPORT

APPENDIX IV

We have assumed that the respective surveyed gross floor areas provided to us will be consistent with the registered gross floor areas to be shown on the respective title documents. Moreover, it is also assumed there shall be no legal impediment for any prospective purchaser of the property to obtain legal building title documents.

We have not undertaken a survey to determine whether the mechanical and electrical systems within the property (or the building(s) or development(s) in which they are located) will be adversely affected on or after the year 2000 and as such have assumed that the property and those systems were or will be unaffected.

No allowance has been made in our report for any charges, mortgages or amounts owing on any of the property interests valued nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property is free from alterations, additions, illegal structures, encumbrances, restrictions and outgoings of an onerous nature, which could affect its value.

We have further assumed that the property was not transferred or involved in any contentious or non-contentious dispute as at valuation date. The property can be sold freely to both local and overseas purchasers.

LIMITING CONDITIONS

Where the property is located in a relatively under-developed market, such as the PRC, those assumptions are often based on imperfect market evidence. A range of values may be attributable to the property depending upon the assumptions made. While the valuer has exercised his professional judgement in arriving at the value, investors/report readers are urged to consider carefully the nature of such assumptions that are disclosed in the valuation report and should exercise caution in interpreting the valuation report.

Wherever the content of this report is extracted and translated from the relevant documents supplied in Chinese context and there are discrepancies in wordings, those parts of the original documents will take prevalent.

– 56 –

VALUATION REPORT

APPENDIX IV

CURRENCY

Unless otherwise stated, all amounts are denominated in Renminbi (RMB). Our valuation certificate is attached herewith.

Yours faithfully, For and on behalf of International Valuation Limited Sr K L Yuen MRICS MHKIS Registered Professional Surveyor (General Practice) General Manager – Real Estate

Note: Mr. K L Yuen is a Chartered Valuation Surveyor and a Registered Professional Surveyor (General Practice), who has more than 15 years’ experience in the valuation of properties in the PRC, Hong Kong, New York and the South East Asia. Mr. K L Yuen is also a valuer on the List of Property Valuers for Undertaking Valuations for Incorporation or Reference in Listing Particulars and Circulars and Valuations in Connection with Takeovers and Mergers published by the HKIS and RICS Hong Kong.

– 57 –

VALUATION REPORT

APPENDIX IV

VALUATION CERTIFICATE

Description and tenure

Property

1. A total of 164 shops The property comprises a total of 164 on Level 1 of Phase 2 small ground floor shops located on of a theme shopping the northwest portion of a giant theme mall located at shopping mall. The shopping mall No. 1 Zheng Shang comprises 3 phases. Main construction (Middle Section) works of Phases 1 & 2 have been Road, Zhongyuan completed and they are targeted for District, Zhengzhou handover by the end of June and Shi, Henan Province, October 2015 respectively. The People’s Republic of China The shopping mall forms part of a big scale mixed residential, commercial,

(Land Lot No. ZY13office and hotel development which 1-183) is mainly erected on a piece of land having a site area of approximately 143,724.72 sq.m..

Market value in existing state as at Particular of occupancy 30 April 2015 RMB We have been informed 218,000,000 that as at the valuation date, the property had been topped off and internal decoration was in progress. The property was vacant and handover date had been targeted by the end of October 2015.

The shopping mall is a theme shopping complex selling textile materials and products, which at the moment primarily consists of 32 blocks of 3-storey commercial building, 2 blocks of 4-storey commercial building and 1 block of 20-storey office tower built over a level of basement carpark/ warehouse and a level of basement carpark.

The shopping mall is located on the fringe of West 4th Ring of Zhengzhou Shi and enjoys good accessibility with less traffic jam. It is situated about 20 minutes’ driving distance west of Zhengzhou Railway Station, 50 minutes’ driving distance west of Zhengzhou East Railway Station and 45 minutes’ driving distance northwest of Zhengzhou Xinzheng International Airport.

– 58 –

APPENDIX IV

VALUATION REPORT

Property

Description and tenure

Particular of occupancy

Market value in existing state as at 30 April 2015 RMB

The subject locality is a newly developing area on the western part of Zhengzhou Shi and undergoing piecemeal redevelopment. Developments in the vicinity comprise mainly residential buildings and hotels such as By The Riverside, Chao Yang Estate, Zheng Nei Estate, Zhongzhou International Hotel and Jin Du Hotel interspersed with a few commercial and some industrial facilities. The property is located on the western side of West 4th Ring, at its junction with Jian She West Road. It is a convenient location which is served by various public transportation, such as, MRT Line 1 and public bus route Nos. 11, 34, 44, 99, 100, 322 & Y819. It is also situated close to the G3001 Zhengzhou Ring Expressway which links up with S1 Airport Expressway.

In accordance with the subject building floor area surveying reports provided by the Group, the property extends to a total surveyed gross floor area of approximately 6,928.24 sq.m. (74,575.58 sq.ft.). Details of which are listed in Note 1 below.

The size of subject shops is ranging from 21.56 sq.m. to 53.89 sq.m..

Pursuant to the subject land use rights certificate dated 16 November 2012, the term of land use rights of the property is for a term till 11 November 2052. Permitted user of the land is mixed residential, commercial and service.

– 59 –

VALUATION REPORT

APPENDIX IV

Notes:

The property

1. The property consists of a total of 164 ground floor shop units which are detailed as below:–

Zone Level Unit Nos. Type of Property 4A 1 101 to 126 Commercial 4B 1 101 to 113 and 115 to 128 Commercial 4C 1 101, 102 and 104 to 127 Commercial 4D 1 107 to 112 Commercial 5A 1 101 to 113 and 115 to 129 Commercial 5B 1 101 to 117 and 119 to 131 Commercial 5C 1 106 to 125 and 128 Commercial Total:	No. of Unit Approximate Surveyed Gross Floor Area (sq.m.) 26 1,097.97 27 1,122.98 26 1,113.79 6 273.42 28 1,222.13 30 1,197.82 21 900.13 164 6,928.24	No. of Unit Approximate Surveyed Gross Floor Area (sq.m.) 26 1,097.97 27 1,122.98 26 1,113.79 6 273.42 28 1,222.13 30 1,197.82 21 900.13 164 6,928.24
		6,928.24

Title of the property

1. In accordance with 合同編號: 410100-CR-2012-0160-1740號 (Land Use Rights Grant Contract No.: 410100CR-2012-0160-1740) signed between 河南省鄭州市國土資源局 (Henan Province Zhengzhou Shi Stateowned Land Resources Bureau) and developer of the subject mixed residential, commercial, office and hotel development (hereinafter referred to as the “Developer”) on 15 August 2012, the land use rights of the property had been granted to the Developer and was subject to, inter-alia, the following terms and conditions:–

Land Area : 143,724.72 sq.m. (portion) User : Mixed residential, commercial and service Term : 40 years (for commercial and service uses) 70 years (for residential use) Land Grant Premium : RMB375,740,000 (portion) Plot Ratio : Less than 3.28 Site Coverage : Less than 60% Height Restriction : Lower than 100 metres Landscaped Coverage : Greater than 10% Commencement of works : No later than 15 August 2013 Completion of works : No later than 15 February 2016

– 60 –

VALUATION REPORT

APPENDIX IV

1. The land use rights of the property is held under a state-owned land use rights certificate issued by 鄭州市人民 政府 (Zhengzhou Municipal Government) to the Developer.

According to 鄭國用(2012)第0370號 (State-owned Land Use Rights Certificate No. 0370 of 2012) dated 16 November 2012, land use rights of the property is held by the Developer via assignment grant and subject to, inter alia, the following terms and conditions:–

• (a) User of the Land : Mixed residential, commercial and service (b) Land Area : 143,724.72 sq.m. (portion) (c) Term : till 11 November 2052 (for commercial and service uses) till 11 November 2082 (for residential use)

• Pursuant to 鄭規地字第410100201219176號 (Construction Land Use Planning Permit No. 410100201219176) dated 5 November 2012 issued by 鄭州市城鄉規劃局 (Zhengzhou Shi Urban and Rural Planning Bureau), the construction site with a total area of approximately 143,724.747 sq.m. is in compliance with the requirements of urban planning. The Developer can develop the land in question.

• Pursuant to 鄭規建（建築）字第410100201309081號 (Construction Works Planning Permit No. 410100201309081) dated 5 July 2013 issued by 鄭州市城鄉規劃局 (Zhengzhou Shi Urban and Rural Planning Bureau), the Developer is permitted to develop Phase 2 of the subject shopping mall with a total planned gross floor area of approximately 114,295.81 sq.m..

• Pursuant to 鄭重開字(2014)第01號 (Construction Works Commencement Permit No. 01 of 2014) dated 6 January 2014 issued by 鄭州市重點項目建設辦公室 (Zhengzhou Shi Key Projects Construction Office), the Developer is permitted to commence the construction works for business office A, basement and Phase 2 of the subject shopping mall.

• Pursuant to 2 Pre-sale Permits all dated 17 October 2014 issued by 鄭州市住房保障和房地產管理局 (Zhengzhou Shi Housing Security and Real Estate Management Bureau), the Developer is allowed to pre-sale a total of 760 non-domestic units (including the property) of Zones 4A to 4G and 5A to 5D of Phase 2 of the subject shopping mall with a total planned gross floor area of approximately 33,295.04 sq.m. with details as below:–

		Planned Gross
Zone	Pre-sale Permit No.	Floor Area	Date
		(sq.m.)
4A to 4G	3411 of 2014	20,395.52	17 October 2014
5A to 5D	3412 of 2014	12,899.52	17 October 2014

1. 鄭州佳聰物業服務有限公司 (Zhengzhou Jiacong Property Services Company Limited) had acquired the property from the Developer pursuant to a purchase intent agreement dated 29 April 2015 and 164 commodity house sale & purchase agreements dated in between 21 May 2015 and 25 May 2015.

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VALUATION REPORT

APPENDIX IV

1. The land use rights and development rights of the property are held by the Developer but subject to the signed purchase intent agreement and 164 commodity house sale & purchase agreements as mentioned in Note 8 above.

Material encumbrances

1. We have been advised by the Company’s PRC legal adviser that the property (together with the portion of land where it is erected thereon) was not subject to any material encumbrances as at the valuation date, save and except the signed purchase intent agreement and 164 commodity house sale & purchase agreements as mentioned in Note 8 above.

PRC legal opinion

1. We have been provided with a legal opinion regarding the legality of title of the property issued by the Company’s PRC legal adviser, which contains, inter alia, the followings:–

2. (i) The Developer had fully settled land premium, associated taxes and expenses for the land of the property.

3. (ii) The Developer has obtained all the necessary legal consents and permits and is entitled to pre-sale the property.

4. (iii) The 164 commodity house sale & purchase agreements signed between the Developer and 鄭州佳聰物業服 務有限公司 (Zhengzhou Jiacong Property Services Company Limited) are legal, valid and binding on the contracted parties.

5. (iv) The 164 commodity house sale & purchase agreements had been filed with 鄭州市房屋交易和登記中心 (Zhengzhou Shi Building Transaction and Registration Centre). 鄭州佳聰物業服務有限公司 (Zhengzhou Jiacong Property Services Company Limited) had fully settled the purchase price and been registered as the beneficial owner of the property.

6. (v) 鄭州佳聰物業服務有限公司 (Zhengzhou Jiacong Property Services Company Limited) had not yet obtained a good title to the property. It can legally occupy, use, benefit or treated in any other ways in accordance with the relevant PRC laws after the name of title owner of subject building ownership certificates have been changed in favour of 鄭州佳聰物業服務有限公司 (Zhengzhou Jiacong Property Services Company Limited). There is no legal impediment for such changes.

Land use zoning of the property

1. In accordance with the subject state-owned land use rights certificate dated 16 November 2012, permitted user of the land where the property has been erected thereon is mixed residential, commercial & service.

Construction costs of the property

1. In accordance with the information provided by the Group, the total expended construction costs of the property, as at the valuation date, was approximately RMB68,000,000 whereas the total estimated construction costs was approximately RMB73,000,000.

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VALUATION REPORT

APPENDIX IV

Gross development value of the property

1. The market value of the property assuming that it was completed as at the valuation date, was approximately RMB229,000,000.

Status of major document relating to legality of tile owner and the property

1. The status of the title and grant of major approvals in accordance with the information provided by the Group are as follows:–

Documents relating to title company’s legality:	Obtained
Business Licence	Yes
Documents relating to property title:
State-owned Land Use Rights Grant Contract	Yes
State-owned Land Use Rights Certificate	Yes
Red-line drawing	Yes
Building Ownership Certificate	N/A
Documents relating to planning and construction:
Construction Land Use Planning Permit	Yes
Environmental Impact Assessment Approval	Yes
Construction Works Planning Permit	Yes
Construction Works Commencement Permit	Yes
Pre-sale Permit	Yes
Building Floor Area Surveying Report	Yes
Construction Works Completion Examination Record Table	No

Inspection of the property

1. The property was last inspected by Sr K L Yuen, MRICS MHKIS RPS(GP) on 21 April 2015.

2. We have inspected the exterior and, where possible, the accessible portions of the interior of the property. However, we have not been commissioned to carry out structural survey nor to arrange for an inspection of the services, but in the course of our inspection, we did not note any serious defects. We are, therefore, not able to report whether the property is free of rot, infestation or any other structural defects. We formulate our view as to the overall conditions of the property taking into account the general appearance, the apparent standard and age of fixtures and fittings. In the course of our valuation, we have assumed that the property is structural sound, free from defects or as to the possibility of latent defects. No tests were carried out on any of the services. We have assumed that utility services, such as electricity, telephone, water, etc., are also free from defect.

– 63 –

VALUATION REPORT

APPENDIX IV

Major assumptions of valuation

1. Our key assumptions of the valuation are:–

Market Value Discount Rate (RMB/sq.m.(g)) (per annum) 31,000 – 32,100 5.5%

In the course of our valuation, we have made reference to sales transaction and asking prices of ground floor shop of the subject development as well as similar properties within the same district. The major unit prices range from RMB27,000 per sq.m.(g) to RMB43,000 per sq.m.(g).

In the course of our valuation for the property when completed, we have made use of a discount rate of 5.5% per annum to reflect the difference in handover date. Discount rate has been made reference to the loan prime rate adopted by Bank of China as at the valuation date, i.e. 5.3%.

The above market value assumed by us are consistent with the relevant market comparables after due adjustments. The discount rate adopted is considered to be reasonable with regard to the loan prime rate of Bank of China in the PRC at the relevant date, after due adjustments.

Potential tax liability for the proposed acquisition of the property

1. We have been advised and confirmed by the Group that there will be potential tax liability of stamp duty (calculated at 4% of the purchase price) charged to the Group as a result of the acquisition of the property. However, in accordance with our established practice, we have neither verified nor taken into account of any tax liability, in the course of our valuation.

– 64 –

GENERAL INFORMATION

APPENDIX V

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)

– 65 –

GENERAL INFORMATION

APPENDIX V

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.

– 66 –

APPENDIX V

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%

– 67 –

GENERAL INFORMATION

APPENDIX V

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 2013 and the service contracts of Mr. Chen Dong and Mr. Chen Jinqing are for an initial term of one year commencing from 1 September 2014 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.

– 68 –

GENERAL INFORMATION

APPENDIX V

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 Enlarged 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 Enlarged Group, which competes or is likely to compete, either directly or indirectly, with the business of the Enlarged Group.

– 69 –

GENERAL INFORMATION

APPENDIX V

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 Enlarged Group; and

• (b) none of the Directors or experts named in the section headed “Experts and Consents” in this appendix had any direct or indirect interest in any assets which had been, since 30 June 2014 (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 Enlarged Group, or were proposed to be acquired, disposed of by, or leased to any member of the Enlarged Group.

6. MATERIAL CONTRACTS

The following contracts, not being contracts in the ordinary course of business of the Enlarged 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 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; and

• (iii) the sale and purchase agreement dated 18 December 2014 entered into between two vendors and the Purchaser 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.

– 70 –

GENERAL INFORMATION

APPENDIX V

7. MATERIAL ADVERSE CHANGE

The interim results of the Group for the period ended 31 December 2014 experienced a decline when compared with the corresponding period in year 2013 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 and a cautious purchasing approach adopted by downstream customers, 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 2014, the date to which the latest audited financial statements of the Company were made up.

8. EXPERTS AND CONSENTS

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
International Valuation Limited	Independent Professional Valuers
福建創元律師事務所(Trend Associates)	PRC Legal Advisers

As at the Latest Practicable Date, each of Dominic K. F. Chan & Co., International Valuation Limited and 福建創元律師事務所 (Trend Associates) 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., International Valuation Limited and 福建創元律師事務所 (Trend Associates) did not have any shareholding in any member of the Enlarged Group or any right (whether legally enforceable or not) to subscribe for securities in any member of the Enlarged Group.

As at the Latest Practicable Date, each of Dominic K. F. Chan & Co., International Valuation Limited and 福建創元律師事務所 (Trend Associates) 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 Enlarged Group since 30 June 2014, the date to which the latest audited financial statements of the Company were made up.

– 71 –

GENERAL INFORMATION

APPENDIX V

9. LITIGATION

As at the Latest Practicable Date, neither the Company nor any member of the Enlarged 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 Enlarged 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 52, 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 23 years’ taxation auditing and commercial experience in Hong Kong. Ms. Yeow is now a director of a management consulting firm in Hong Kong.

– 72 –

GENERAL INFORMATION

APPENDIX V

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 PRC legal opinion issued by 福建創元律師事務所(Trend Associates) dated 20 July 2015;

• (d) the accountants’ report on the Target Company, the text of which is set out in Appendix II to this circular;

• (e) the accountants’ report in respect of the unaudited pro forma financial information of the Enlarged Group, the text of which is set out in Appendix III to this circular;

• (f) the Valuation Report prepared by International Valuation Limited in respect of the Property, the text of which are set out in Appendix IV to this circular;

• (g) the letters of consent referred to under the paragraph headed “Experts and Consents” in this appendix;

• (h) the annual reports of the Company for the years ended 30 June 2013 and 30 June 2014, respectively, and the interim report for the period ended 31 December 2014;

• (i) the service contracts referred to in the paragraph headed “Directors’ Service Contracts” in this appendix;

• (j) the material contracts referred to in the paragraph headed “Material Contracts” in this appendix; and

• (k) this circular.

– 73 –

NOTICE OF EXTRAORDINARY GENERAL MEETING

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

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 565)

NOTICE 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 Fung Shui Room, 6th Floor, Marco Polo Hongkong Hotel, Harbour City, 3 Canton Road, Kowloon, Hong Kong on Thursday, 20 August 2015 at 10:30 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 26 June 2015 (the “Sale and Purchase Agreement”) entered into between 鄭州昌盾資產管理有限公司 (Zhengzhou Changdun Asset Management Company Limited) (the “Purchaser”), an indirect wholly-owned subsidiary of the Company, and 鄭州暢科貿易有 限公司 (Zhengzhou Changke Trading Company Limited) (the “Vendor”) in connection with 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) (the “Target Company”) at a cash consideration of RMB218,000,000 (equivalent to approximately HK$275,949,000), 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

– 74 –

NOTICE OF EXTRAORDINARY GENERAL MEETING

(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, 20 July 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

– 75 –

NOTICE OF EXTRAORDINARY GENERAL MEETING

Notes:

1. 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.

2. 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.

3. 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.

4. 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.

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