Emperor Capital Group Ltd. — M&A Activity 2006

Nov 13, 2006

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

AGREEMENT FOR PROPOSED ESTABLISHMENT OF A JOINT VENTURE COMPANY IN VIETNAM

10 November 2006

CONTENTS

		Pages
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1-2
**LETTER FROM **	THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3-7
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		8-11

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DEFINITIONS

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

• “Agreement” the agreement which has been entered into between Luks Land Investments and Thanh Phat on 19th October 2006 for the proposed establishment of a JVC for the Project in Vietnam

• “associate” has the meaning ascribed to it under the Listing Rules

• “Board” the board of Directors

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

• “Connected person(s)” the meaning ascribed to it under the Listing Rules

• “Contribution” US$14 million (approximately HK$109,200,000), the amount to be contributed by Luks Land Investments for the establishment of the JVC for the development of the Project, the said sum represents 70% of the share capital of the proposed JVC

• “Director(s)” the director(s) of the Company

• “Group” the Company and its subsidiaries

• “HKSAR”

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

• “JVC”

• the joint venture company to be formed by Luks Land Investments and Thanh Phat in Vietnam for the purpose of the Project subject to the approvals from relevant authorities in Vietnam having been obtained

• “Land Area”

• a land area of approximately 22,000 square metres located at An Lac Ward, Binh Chanh District, Ho Chi Minh City, Vietnam which is legally and beneficially owned by Thanh Phat

• “Latest Practicable Date” 10 November, 2006 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

• “Luks Land Investments” Luks Land Investments 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. 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands

• “Project” the development of the Land Area into a residential and commercial area for sale and leasing upon the approvals for the change of use in respect of the Land Area having been obtained from the relevant authorities in Vietnam

• “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 “Thanh Phat” CONG TY NHUA NONG SAN THANH PHAT (TNHH), a company incorporated in Vietnam with its registered office at 394, Ho Ngoc Lam, Quarter 3, An Lac Ward, Binh Chanh District, Ho Chi Minh City, Vietnam

• “HK$” Hong Kong dollars, the lawful currency of Hong Kong “US$” 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

10 November 2006

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION AGREEMENT FOR PROPOSED ESTABLISHMENT OF A JOINT VENTURE COMPANY IN VIETNAM

INTRODUCTION

On 20 October 2006, the Company announced that Luks Land Investments, a wholly-owned subsidiary of the Company had entered into a conditional agreement with Thanh Phat on 19 October 2006 in connection with a proposal to establish a JVC in Vietnam for the Project with a proposed total share capital of US$20 million (approximately HK$156,000,000), Thanh Phat, the owner of the Land Area shall contribute the land use right of the Land Area valued at US$ 6 million (approximately HK$46,800,000) representing 30% of the share capital of the proposed JVC. Luks Land Investments shall contribute payment of US$14 million (approximately HK$109,200,000) representing 70% of the share capital of the proposed JVC subject to the terms and conditions set out in the Agreement. Apart from the share capital contribution of US$14 million, it is estimated that there will be no extra costs for the Company in the Project.

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LETTER FROM THE BOARD

Pursuant to the Agreement, Luks Land Investments shall be required to lend a loan of US$500,000 (approximately HK$3,900,000) to Thanh Phat when Thanh Phat shall hand over the Land Area to the management of the JVC. The principal business of the JVC after its establishment is for the development of the Project for sale and leasing and the JVC will become a 70% indirectly owned subsidiary of the Company after the JVC having been set up.

The Agreement constitutes 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 Agreement.

THE AGREEMENT DATED 19 OCTOBER 2006

1. Parties

• (A) Luks Land Investments, a wholly-owned subsidiary of the Company; and

• (B) Thanh Phat

To the best knowledge information and belief of the Directors having made all reasonable enquiries, Thanh Phat 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 Subject Matter

The proposed establishment of a JVC in Vietnam for the Project

3. Total share capital and Contribution

The proposed total share capital for the proposed JVC is US$20 million (approximately HK$156,000,000), in which Luks Land Investments shall contribute US$14 million (approximately HK$109,200,000) of cash which will be paid according to the progress of the Project and initial payment shall be satisfied in the proposed time schedule as follows:

1. within 14 days upon signing of the Agreement, Luks Land Investments shall advance US$100,000 to US$200,000 (approximately HK$780,000 to HK$1,560,000) to the JVC;

2. Upon obtaining of written approvals for setting up of the JVC from the relevant authorities in Vietnam, Luks Land Investments shall contribute share capital (estimated to be about US$500,000 to US$1,000,000 (approximately HK$3,900,000 to HK$7,800,000) to the JVC;

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LETTER FROM THE BOARD

1. Upon obtaining written approval for the designs and drawings and licence for all relevant construction works for the Project, Luks Land Investments shall contribute share capital (estimated to be about US$500,000 to US$1,000,000 (approximately HK$3,900,000 to HK$7,800,000) to the JVC;

2. Upon the completion of all the procedures and written approvals for the Project having been obtained, Luks Land Investments agrees to lend an unsecured and interest free loan of US$500,000 (approximately HK$3,900,000) to Thanh Phat. Thanh Phat will apply the loan proceed to relocate the existing factories and machineries of Thanh Phat which are now on the Land Area to other place. Based on commercial negotiation, the loan was agreed to be interest free and will be repayable by Thanh Phat upon the first distribution of dividends from the JVC. Considering the terms of the transaction as a whole, the Directors (including the independent non-executive Directors) consider the loan to be fair and reasonable and in the interests of the Company and the Shareholders.

The Contribution will be paid 50% by cash from the Company’s internal resources and 50% by banks’ borrowing. The Directors believe that the Group is capable to obtain the required banks’ borrowing for its contribution.

The proposed Contribution was arrived after arm’s length negotiation between the Company and Thanh Phat. The Directors (including the independent non-executive Directors) consider that the Contribution made by the Company for the proposed JVC and the terms and conditions of the Agreement are fair and reasonable and are 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.

4. Conditions precedent to the Agreement

The Agreement is conditional, inter alia, upon:

• (i) Thanh Phat having obtained written approval for the change of use of the Land Area into residential use and commercial use and for the Project by the local government authorities (including but not limited to Ho Chi Minh People’s Committee and other relevant authorities) in Vietnam and written evidence for the payment of the premium and expenses relating to the Land Area;

• (ii) Formal documents issued by relevant government authorities in Vietnam for approving the establishment of the JVC having been obtained; and

• (iii) the transfer of the land use right of the Land Area to the JVC upon the licence for the formation of the JVC having been granted by the relevant authorities of Vietnam.

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LETTER FROM THE BOARD

The Land Area is currently used as factories by Thanh Phat. The government has rezoned the Land Area into residential and commercial development. Upon signing of the Agreement, Thanh Phat will apply to the government for developing of the Land Area into residential and commercial development. Pursuant to the Agreement, Thanh Phat has guaranteed the floor areas of the development will not be less than 115,000 square metres (excluding basement), which shall include 17,250 square metres of commercial areas, 74,750 square metres of residential areas and 23,000 square metres of public and ancillary facilities.

The Company has been discussing with various land owners and property developers for opportunities in property development in Vietnam. The management decided to enter into Agreement with Thanh Phat after having taken into consideration of the following favourable conditions to the Company, (i) no initial fund is required for the land cost; (ii) the land cost for commercial and residential saleable area on average, is only approximately US$65 per square metre (or HK$47 per square foot) (i.e. US$6,000,000 divided by 92,000 square metres saleable areas, which is guaranteed by Thanh Phat per the Agreement), and the land cost is similar to other land cost in the same district; and (iii) except for the initial payments of US$1,600,000 to US$2,700,000 (approximately HK$12,480,000 to HK$21,060,000), the capital injection of the Company into the JVC is according to the construction progress which can be more flexible adjusting to the market condition and the Company’s cashflow.

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

5. Information on Thanh Phat

Thanh Phat is a limited company duly constituted in 1992 and validity existing under the laws of Vietnam and is principally engaged in investments of land and manufacturing business in Vietnam. Thanh Phat is owned by two Vietnamese, namely, Trinh Cuong who holds 93.71% shareholding and Ha Hon holds 6.29% shareholding.

6. Information on Luks Land Investments

Luks Land Investments is a limited company incorporated in the British Virgin Islands and principally engaged in the investments business.

7. Information on the Land Area and the Project

Thanh Phat is the legal and beneficial owner of a land area of approximately 22,000 square metres located at An Lac Ward, Binh Chanh District, Ho Chi Minh City, Vietnam.

Upon signing of the Agreement, Thanh Phat will apply to the Vietnamese government to develop the Land Area into a residential and commercial property for the Project. After getting the approval of the Project from the government, Thanh Phat will apply to the government to set up a JVC with 70% and 30% shareholding for Luks Land Investments and Thanh Phat respectively, to develop the Project.

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LETTER FROM THE BOARD

The preliminary plan of the Project consists of 6 to 8 blocks of buildings, each with 16 floors. The total construction areas are 115,000 square metres, for which saleable area for commercial, residential and public facilities are 17,250 square metres, 74,750 square metres and 23,000 square metres respectively. However, the detailed plan will be drafted only after the Agreement having been signed and is subject to the government approval.

8. Reasons for Entering into the Agreement

The Group is principally engaged in the (i) manufacture and sale of cement products; (ii) property investment; and (iii) manufacture and sale of holistic healthcare products.

In line with the growth pace of the Vietnamese economy and the Group’s strategy in investing in property and infrastructure related business in Vietnam, the Directors believe that it is a suitable timing to increase its investment in residential and commercial property development for sale or leasing purpose in Ho Chi Minh City, Vietnam. The management has studied the residential market, including the selling price of apartments around the region of the Land Area and the cost of constructions and based on those researches and has projected that the Project shall be able to generate good return to the Group.

There will be no effects on the Group’s overall positions on earnings, assets and liabilities until the JVC is formally established. Before the setting up of the JVC, the Group will only be required to lend US$100,000 to US$200,000 to Thanh Phat. The lending will be financed by internal resources and thus the effect will be that cash of the Group will decrease by about US$100,000 to US$200,000 whereas other receivable will increase for the same amount. After the setting up of the JVC, the Group’s overall positions on earnings, assets and liabilities will be increased. The Board considers that the transaction is on normal commercial terms and the terms and conditions of the Agreement to be fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

9. Implication under the Listing Rules

The Agreement constitutes a discloseable transaction of the Company pursuant to Chapter 14 of the Listing Rules.

10. 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 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 190,479,286 – 57,226,071 18,012,800 – 36,912,027 3,370,800 174,000 – 6,529,600 – – 1,500,000 – – 219,892,486 174,000 94,138,098	Total 247,705,357 54,924,827 3,544,800 6,529,600 1,500,000 314,204,584	Percentage of the Company’s issued share capital 49.55% 10.99% 0.71% 1.31% 0.30%
			62.86%

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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”)
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Notes:

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

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

• (c) In addition to the above personal interest, Mr. Luk Yan had a family interest, which held 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 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	11.45
	owned
CC (Holdings) Limited	Directly beneficially	36,912,027	7.39
	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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