09:50     ART TEXTILE<00565> - Announcement (2)                               

    of the existing issued share capital and the enlarged issued              
    share capital, respectively, will be issued by the Company. Based         
    on the exercise in full of the conversion rights attaching to             
    the Original Tranche 1 Bonds at the Fixed Conversion Price and            
    the Tranche 1 Subscription Right, the enlarged issued share               
    capital of the Company will be 984,525,209 Shares, the                    
    shareholding of Talent Crown Investment Limited in the Company            
    will be diluted from 66.39% to approximately 59.11% and the               
    Existing Public Float will be diluted from approximately 33.61%           
    to 29.93%.                                                                
                                                                              
    According to the Subscription Agreement, apart from the Fixed             
    Conversion Price, the Original Tranche 1 Bonds can be converted           
    at the Floating Conversion Price. However, the Subscription               
    Agreement includes early redemption terms which limit the                 
    adjustments that may be made to the conversion price by                   
    specifying a minimum conversion price in circumstances including          
    where the Share price falls to a certain level and the sum of             
    Shares to be issued and allotted pursuant to the exercise of              
    the conversion right attached to the Original Tranche 1 Bonds             
    and the Tranche 1 Subscription Right exceeds the general mandate          
    granted to the Directors on 24 November 2004. If the Share price          
    is less than or equal to HK$0.4118 at any time, the Company has           
    an option to redeem any Bonds presented for conversion at their           
    principal amount at 106%. If the Share price is less than or              
    equal to HK$0.2745 for ten consecutive business days, no Bonds            
    may be converted and the Company must redeem the Bonds if the             
    holders of the Bonds require at 110% of the principal amount,             
    subject to a maximum principal amount of US$2,000,000 of Bonds            
    which may be required to be redeemed each month.                          
                                                                              
    The redemption mechanisms limit the adjustments to the minimum            
    conversion price. Theorectically, there is a possibility that             
    the Floating Conversion Price might be as low as the par value            
    of HK$0.01 per Share. For illustration purpose only, if the               
    Original Tranche 1 Bonds are converted in full at par value of            
    the Share, the maximum number of new Shares to be issued and              
    allotted will be 7,800,000,000, representing approximately                
    889.84% and approximately 89.90% of the existing issued share             
    capital and the enlarged issued share capital of the Company,             
    respectively. The Directors and the Company confirmed that they           
    will consider a redemption of the Original Tranche 1 Bonds upon           
    the occurrence of the redemption events.                                  
                                                                              
    As at the date of this announcement, the Company has no                   
    outstanding convertible securities other than the Original                
    Tranche 1 Bonds. No conversion right attached to the Original             
    Tranche 1 Bonds or the Tranche 1 Subscription Right has been              
    exercised since the Announcement.                                         
                                                                              
    Dilution effect on Shareholders                                           
                                                                              
    As the Company foresees the future dilution effect on the                 
    Shareholders in relation to the exercise of the conversion rights         
    attaching to the Original Tranche 1 Bonds and the Tranche 1               
    Subscription Right, the Company will keep the Shareholders                
    informed of the level of dilution effect and all relevant details         
    of the conversion and/or exercise of the Tranche 1 Subscription           
    Right in the following manner:                                            
                                                                              
    (a)     the Company is to make a monthly announcement on the website      
    of the Stock Exchange (the "Regular Announcement"). The Regular           
    Announcement will be made on the third business day of each               
    calendar month on the following for the last month and include            
    the following details in a table form:                                    
                                                                              
    (i)     whether there is any conversion of the Bonds. If yes,