Emperor Capital Group Ltd. — Capital/Financing Update 2007

Feb 28, 2007

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 stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold all your shares in LUKS INDUSTRIAL (GROUP) LIMITED, you should at once hand this circular to the purchaser or transferee or to the bank, a stockbroker or other registered dealer in securities or other agent through whom the sale was effected for transmission to the purchaser or transferee.

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

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LUKS INDUSTRIAL (GROUP) LIMITED

(incorporated in Bermuda with limited liability) (Stock Code: 366)

DISCLOSEABLE TRANSACTION

PURCHASE OF CEMENT PRODUCTION EQUIPMENT

26 February 2007

CONTENTS

		Pages
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1-3
**LETTER FROM **	THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4-8
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		9-12

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DEFINITIONS

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

• “Agreement A”

• the agreement entered into between Best Deluxe Assets and China National Aero-Technology on 5th February 2007 for the purchase of the Facilities of a 3,000TPD (tonnes per day) clinkers’ production line to be installed in Vietnam

• “Agreement B” the agreement entered into between Best Deluxe Assets and China National Aero-Technology on 5th February 2007 for the purchase of the Facilities of a 1.5million TPY (tonnes per year) cement grinding mill to be installed in Vietnam

• “Agreements” Agreement A and Agreement B

• “associate”

• has the meaning ascribed to it under the Listing Rules

• “Best Deluxe Assets”

• Best Deluxe Assets Limited, a limited company incorporated in the British Virgin Islands and a wholly owned subsidiary of the Company, with its registered office at Offshore Incorporations Limited, P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands

• “Board” the board of Directors

• “Cement Production Equipment”

• the Facilities of a 3,000TPD (tonnes per day) clinkers’ production line more particularly set out in Agreement A and a 1.5 million TPY (tonnes per year) cement grinding mill more particularly set out in Agreement B both to be installed in Vietnam

• “Company”

• Luks Industrial (Group) Limited, a company incorporated in Bermuda with limited liability, the shares of which are listed on the Stock Exchange

• “China National Aero-Technology”

• China National Aero-Technology Import & Export Corporation Beijing Company ( ), a company incorporated in PRC with

• its registered office at 8/F., CATIC PLAZA, 18 Beichen Dong Street, Chaoyang District, Beijing, 100101 China

• “Connected person(s)”

• the meaning ascribed to it under the Listing Rules

• “Director(s)”

• the director(s) of the Company

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DEFINITIONS

• “Facilities”

the equipments, machineries and parts in connection with a 3,000 TPD (tonnes per day) clinkers’ production line and a 1.5 million TPY (tonnes per year) cement grinding mill with details as set out in the Agreements

“First Letter of Credit” the unconditional and irrevocable Letter of Credit which Best Deluxe Assets will arrange for the opening in favour of China National Aero-Technology with validity period of 12 months from the date of issue for the respective sum of US$6,866,400 (approximately HK$53,557,920) representing 40% of the total consideration under Agreement A and US$3,356,000 (approximately HK$26,176,800) representing 40% of the total consideration under Agreement B

• “Group” the Company and its subsidiaries

• “HKSAR”

• the Hong Kong Special Administrative Region of the People’s Republic of China

• “HK$”

Hong Kong dollars, the lawful currency of Hong Kong

• “Letters of Credit”

• the First Letter of Credit and the Second Letter of Credit

• “Letters of Undertaking”

the respective letter of undertaking issued by China National Aero-Technology’s bank for guaranteeing the refund to Best Deluxe Assets for the respective sums of US$5,149,800 (approximately HK$40,168,440) representing 30% of the total consideration under Agreement A and US$2,517,000 (approximately HK$19,632,600) representing 30% of the total consideration under Agreement B received by China National Aero-Technology if it fails to make delivery to Best Deluxe Assets of the first batch of the Facilities within 6 months from the conditions precedent having been fully complied with pursuant to the terms of the Agreements

• “Latest Practicable Date”

16th February 2007 being the latest practicable date prior to the printing of this circular for the purpose of ascertaining and collation of relevant information contained in this circular

• “Listing Rules”

the Rules Governing the Listing of Securities on the Stock Exchange

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DEFINITIONS

• “Model Code” Model Code for Securities Transactions by Directors of Listed Issuers

• “PRC” the People’s Republic of China, and for the purposes of this circular, excluding Hong Kong, the Macau Special Administrative Region and Taiwan

• “Purchase” the supply of Facilities and installation of a 3,000 TPD (tonnes per day) clinkers’ production line and a 1.5 million TPY (tonnes per year) cement grinding mill both to be installed in Vietnam subject to the terms and conditions of the Agreements as set out therein

• “Second Letter of Credit” the unconditional and irrevocable Letter of Credit which Best Deluxe Assets will arrange for the opening in favour of China National Aero-Technology and which will be valid from the date of issue to 31st December 2008 for the sum of US$5,149,800 (approximately HK$40,168,440) under Agreement A and US$2,517,000 (approximately HK$19,632,600) under Agreement B respectively

• “SFO” The Securities and Futures Ordinance (Chapter 571 of the laws of HKSAR)

• “Shares” the ordinary share(s) of HK$0.01 each in the issued share capital of the Company

• “Shareholder(s)” holder(s) of the Shares of the Company “Stock Exchange” The Stock Exchange of Hong Kong Limited

• “US$” United States dollars, the lawful currency of the United States

• “Vietnam” the Socialist Republic of Vietnam “%” per cent

In this circular, except as otherwise indicated, US$ has been translated into HK$ at the rate of US$1.00=HK$7.8 for reference purpose.

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LETTER FROM THE BOARD

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LUKS INDUSTRIAL (GROUP) LIMITED

(incorporated in Bermuda with limited liability)

(Stock Code: 366)

Executive Directors: Mr. Luk King Tin (Chairman) Ms. Cheng Cheung Mr. Luk Yan Mr. Fan Chiu Tat, Martin Mr. Luk Fung

Independent non-executive Directors:

Mr. Liang Fang Mr. Liu Li Yuan Mr. Tam Kan Wing

Registered Office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Principal place of business in Hong Kong: 5th Floor Cheong Wah Factory Building 39-41 Sheung Heung Road Tokwawan, Kowloon Hong Kong 26 February 2007

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION PURCHASE OF CEMENT PRODUCTION EQUIPMENT

INTRODUCTION

On 8th February 2007, the Company announced that Best Deluxe Assets, a wholly-owned subsidiary of the Company entered into two conditional agreements with China National Aero-Technology on 5th February 2007 in connection with the Purchase of Cement Production Equipment namely, (a) the Facilities of a 3,000 TPD clinkers’ production line and (b) the Facilities of a 1.5 million TPY cement grinding mill respectively both to be installed in Vietnam at an aggregate consideration of US$25,556,000 (approximately HK$199,336,800) which covers the installation charges for the Facilities, subject to the terms and conditions set out in Agreement A and Agreement B respectively. 3,000 TPD clinkers’ production line is for the production of semi-finished cement whereas 1.5 million TPY cement grinding mill is for grinding of cement. China National Aero-Technology will assemble and install the equipments, machineries and parts in connection with the Cement

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LETTER FROM THE BOARD

Production Equipment at the site in Vietnam. It is expected that China National Aero-Technology will complete the installation of the Facilities of the Cement Production Equipment by the second quarter of 2008.

The Agreements constitute a discloseable transaction of the Company pursuant to Chapter 14 of the Listing Rules.

The main purpose of this circular is to provide you with details of the Agreements.

1. The Purchase

On 5th February 2007, Best Deluxe Assets, a wholly-owned subsidiary of the Company, entered into the two respective conditional agreements with China National Aero-Technology for the Purchase of Cement Production Equipment subject to the terms and conditions set out in Agreement A and Agreement B respectively.

3,000 TPD clinkers’ production line is for the production of semi-finished cement whereas 1.5 million TPY cement grinding mill is for grinding of cement. China National Aero-Technology will assemble and install the equipments, machineries and parts in connection with the Cement Production Equipment at the site in Vietnam. It is expected that China National Aero-Technology will complete the installation of the Facilities of the Cement Production Equipment by the second quarter of 2008.

To the best knowledge of the Directors having made all reasonable enquiries, China National Aero-Technology and its ultimate beneficial owner are third parties independent of the Company and its subsidiaries and Connected persons of the Company and its subsidiaries.

2. The Consideration

The respective consideration is US$17,166,000 (approximately HK$133,894,800) under Agreement A and US$8,390,000 (approximately HK$65,442,000) under Agreement B which will be satisfied by payments in cash and Letters of Credit respectively as follows:

• (1) a cash deposit for the respective sum of US$5,149,800 (approximately HK$40,168,440) representing 30% of the total consideration under Agreement A and US$2,517,000 (approximately HK$19,632,600) representing 30% of the total consideration under Agreement B respectively, both will be payable within 20 days from the date of signing Agreement A and B and upon the receipt of respective Letters of Undertaking by Best Deluxe Assets;

• (2) Best Deluxe Assets will deliver to China National Aero-Technology two respective First Letter of Credit for the respective sum of US$6,866,400 (approximately HK$53,557,920) representing 40% of the total consideration under Agreement A and US$3,356,000 (approximately HK$26,176,800) representing 40% of the total consideration under Agreement B within 60 days from the date of the signing of Agreement A and B respectively; and

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LETTER FROM THE BOARD

• (3) Best Deluxe Assets will deliver to China National Aero-Technology two respective Second Letter of Credit for the respective sum of US$5,149,800 (approximately HK$40,168,440) representing the balance of the total consideration under Agreement A and US$2,517,000 (approximately HK$ 19,632,600) representing the balance of the total consideration under Agreement B immediately before the delivery of the first batch of the Facilities by China National Aero-Technology under Agreement A and Agreement B respectively.

The payments under the respective First Letter of Credit and Second Letter of Credit will only be negotiated subject to the progress of the delivery and installation of the Facilities more particularly set out in the Agreements.

The Company will withhold further payment if China National Aero-Technology is in default after the cash deposits has been paid as prepayment under the Agreements.

The aggregate consideration of US$25,556,000 (approximately HK$199,336,800) which covers the installation charges for the Facilities, will be paid partially from a bank’s borrowing which amount will be US$12,778,000 (approximately HK$99,668,400) and partially from the Company’s internal resources.

The aggregate consideration was arrived after arm’s length negotiation between the Company and China National Aero-Technology. The management has conducted due diligence on the consideration by making reference to the market price of similar equipment in PRC and comparing quotations from different suppliers.

The Directors consider that the aggregate consideration payable for the Purchase and the terms and conditions of the Agreements are fair and reasonable and is in the interests of the Shareholders and the Company as a whole.

As at the Latest Practicable Date, the Company has not made any of the above payments.

3. Conditions precedent to the Agreements

Both Agreements are conditional, inter alias, upon:

• (i) the receipt by Best Deluxe Assets of the respective Letters of Undertaking; and

• (ii) the receipt by China National Aero-Technology of respective sum of US$5,149,800 (approximately HK$40,168,440 representing 30% of the total consideration being prepayment under Agreement A and US$2,517,000 (approximately HK$19,632,600) representing 30% of the total consideration being prepayment under Agreement B.

The respective Letters of Undertaking referred to in (i) above were issued by China National Aero-Technology’s bank for guaranteeing the refund to Best Deluxe Assets of the cash deposit for the respective sum of US$5,149,800 (approximately HK$40,168,440) representing 30% of the total consideration under Agreement A and US$2,517,000

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LETTER FROM THE BOARD

(approximately HK$19,632,600) representing 30% of the total consideration under Agreement B received by China National Aero-Technology if it fails to make delivery to Best Deluxe Assets of the Facilities within 6 months from the conditions precedent having been fully complied with pursuant to the terms of the Agreements.

As at the Latest Practicable Date, none of the aforesaid conditions have been fulfilled

yet.

4. Information on China National Aero-Technology

China National Aero-Technology is a company duly constituted and validity existing under the laws of PRC and is principally engaged in machineries and equipments import and export business.

5. Information on Best Deluxe Assets

Best Deluxe Assets is a limited company incorporated in the British Virgin Islands and principally engaged in trading business.

6. Reasons for Entering into the Agreements

The Group is principally engaged in (i) manufacture and sale of cement products; (ii) manufacture and sale of holistic healthcare products; (iii) sale of electronic products and plywood products; (iv) property investment; and (v) investment holding.

Along with the growth of the local economy, the demand of cement has been growing in a faster pace in Vietnam. As reported in the 2006’s Interim Report of the Company, the Group had submitted an application to the Vietnamese Central Government to invest in an additional new cement production line. In December 2006, the Vietnamese Central Government granted the approval to the Group to invest a new cement production line of an annual capacity of 1.3 million tonnes. Therefore, the Group entered into the transactions herein for the purchase of the Cement Production Equipment in accordance with its expansion plan of the cement production capacity in Vietnam. The new cement production line is scheduled to commence operation in the second quarter of 2008. It is anticipated that after the completion of the installation of the Facilities, the production output of cement will be increased to 2.8 million tonnes from the existing capacity of 1.5 million tonnes per annum, representing an increase of approximately 85%. The Directors believe that the business of cement will maintain its growing pace in a foreseeable future and the Purchase will enable the Company to increase the capacity of the production of clinkers and cement and thus enhance the Group’s earning base.

After the Purchase and upon payment of the aggregate consideration for the total sum of US$25,556,000 (approximately HK$199,336,800) to China National Aero-Technology, the Group’s overall positions on the assets of the Group will increase whereas the liabilities are expected to increase by US$12,778,000 (approximately HK$99,668,400) on completion of payment since 50% of the aggregate consideration would come from borrowings.

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LETTER FROM THE BOARD

It is forecasted that the Group’s overall positions on income and earnings will increase by the second quarter of 2008 after the completion of the installation of the Facilities and commencement of operation.

The Board considers that the transactions are on normal commercial terms and the terms and conditions of the Agreements to be fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

7. Implication under the Listing Rules

The Agreements constitute a discloseable transaction of the Company pursuant to Chapter 14 of the Listing Rules.

8. Additional Information

Your attention is also drawn to the general information set out in this circular.

By order of the Board LUKS INDUSTRIAL (GROUP) LIMITED Luk King Tin Chairman

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GENERAL INFORMATION

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 there are no other facts not contained in this circular, the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS BY THE DIRECTORS AND CHIEF EXECUTIVE OF THE COMPANY

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive of the Company and their respective associates have the following interests and short positions in the Shares, debentures or underlying Shares of the Company or its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept under section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short position in which he was taken or deemed to have under such provisions of the SFO) and the Model Code.

(i) Long positions in the Shares:

Name of Director Notes Luk King Tin (a) Cheng Cheung (b) Luk Yan (c) Luk Fung Fan Chiu Tat, Martin	Number of shares held, capacity and nature of interest Directly beneficially owned Through spouse or minor children Through controlled corporation 193,979,286 – 57,226,071 18,012,800 – 36,912,027 6,370,800 174,000 – 8,529,600 – – 3,500,000 – – 230,392,486 174,000 94,138,098	Total 251,205,357 54,924,827 6,544,800 8,529,600 3,500,000 324,704,584	Percentage of the Company’s issued share capital 49.03% 10.72% 1.28% 1.66% 0.68%
			63.37%

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GENERAL INFORMATION

(ii) Interests in shares of an associated corporation

Long positions in shares of an associated corporation:

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----- Start of picture text -----

Percentage
of the
associated
Name of Relationship Capacity corporation’s
associated with the Number of and nature issued share
Name of Director Note corporation Company shares held of interest capital
Luk King Tin and (d) Vigconic Company’s 2,299,908 Through 25%
Luk Fung International subsidiary controlled
(Holdings) corporation
Limited
(“Vigconic”)
----- End of picture text -----

Notes:

• (a) Mr. Luk King Tin had a beneficial interest in KT (Holdings) Limited, which held 57,226,071 Shares at the Latest Practicable Date.

• (b) Madam Cheng Cheung had a beneficial interest in CC (Holdings) Limited, which held 36,912,027 Shares at the Latest Practicable Date.

• (c) Mr. Luk Yan had a family interest in 174,000 Shares at the Latest Practicable Date.

• (d) Mr. Luk King Tin and Mr. Luk Fung had a beneficial interest in Vigconic Biotechnology Company Limited, which held 2,299,908 shares of US$1 each of Vigconic at the Latest Practicable Date.

In addition to the above, certain Directors have non-beneficial personal equity interests in certain subsidiaries held for the benefit of the Company solely for the purpose of complying with the minimum company membership requirements.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors, chief executive nor their respective associates had any interests or short positions in the Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of part XV of the SFO) as recorded in the register kept by the Company under section 352 of the SFO, or as otherwise 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 in which he was taken or deemed to have under such provisions of the SFO) and the Model Code.

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GENERAL INFORMATION

3. SUBSTANTIAL SHAREHOLDERS

Substantial Shareholders’ and other persons’ interests and short positions in Shares and underlying Shares

As at the Latest Practicable Date, in accordance with the register of substantial shareholders kept by the Company under Section 336 of the SFO, or to be disclosed under the provisions of Divisions 2 and 3 of Part XV of the SFO and the Listing Rules, the following persons were interested (including short positions) in the shares or underlying shares of the Company:

Long positions:

			Percentage of
	Capacity and	Number of	issued share
Name	nature of interest	Shares held	capital
KT (Holdings) Limited	Directly beneficially	57,226,071	11.17
	owned
CC (Holdings) Limited	Directly beneficially	36,912,027	7.20
	owned

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company knew of any person (not being a Director or chief executive of the Company) who had an interest or short position in the 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, or who was, 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 any other member of the Group or held any option in respect of such capital.

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with any member of the Group which would not expire or would not be determinable by the Group within one year without payment of compensation (other than statutory compensation).

5. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors or their respective associates has any interests in any company or business which compete or may compete with the businesses of the Group.

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GENERAL INFORMATION

6. LITIGATION

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

7. GENERAL

• (a) The company secretary and the qualified accountant of the Company is Mr. Fan Chiu Tat, Martin, B.Soc.Sc., FCCA, CPA.

• (b) The registered office of the Company is located at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.

• (c) The registrar and transfer office of the Company are Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.

• (d) The principal place of business of the Company is located at 5th Floor, Cheong Wah Factory Building, 39-41 Sheung Heung Road, Tokwawan, Kowloon, Hong Kong.

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