CTI.L Regulatory News (CTI)

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DEFINED TERMS USED BUT NOT DEFINED IN THIS ANNOUNCEMENT HAVE THE MEANINGS SET OUT IN THE PROPSECTUS

Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR).

Cathay International Holdings Limited

("Cathay" or the "Company" or the "Group")

Proposed Open Offer of 6,487,178,943 New Common Shares (16.7456 New Common Shares for every

Existing Share) and Subscription of 540,598,984 New Common Shares, both at 1.5p each,

Reduction of the par value of Common Shares and A Shares

Amendments to the Bye-Laws

Disposal of shares in Zhejiang Starry Pharmaceutical Co. Ltd.

and

Transfer of listing category on the Official List from premium to standard

Hong Kong, 24 April 2020 - Cathay International Holdings Limited (LSE: CTI.L), an operator and investor in the healthcare sector in the People's Republic of China, today announces proposals for a major equity financing to enable Cathay to invest in its businesses and reduce its borrowings, a further disposal of Starry Shares and for the transfer of the listing category of the Common Shares on the Official List from Premium Listing to Standard Listing (together, the "Proposals").

1. Introduction

Cathay is proposing to raise gross proceeds of up to GBP 105.4 million (USD 130 million) (approximately GBP 103.7 million (USD 128 million) after the deduction of estimated fees and expenses), comprising an Open Offer of up to 6,487,178,943 New Common Shares to existing Shareholders raising up to GBP 97.3 million (USD 120 million) and a Subscription by selected new and existing institutional and high net worth investors of up to a further 540,598,984 New Common Shares raising up to a further GBP 8.1 million (USD 10 million). The Subscription may be increased to the extent that New Common Shares are not taken up in the Open Offer.

Both the Open Offer and the Subscription will be at an Issue Price of 1.5p per share. The New Common Shares will be issued/credited as fully paid and will rank pari passu in all respects with the Existing Common Shares.

In addition to the Fundraising, the Company proposes a reduction of the par value of the Common Shares and a number of amendments to the Bye-Laws of the Company in order to facilitate the Fundraising, and the transfer of the Common Shares out of the category of the Premium Listing and into the category of the Standard Listing.

Finally, the Company is seeking authority for a further 12 months for further disposals of Starry Shares. The Further Starry Share Disposals constitute a Class 1 transaction under the Listing Rules and are subject to shareholder approval.

A Prospectus will be issued today providing details of the Fundraising, the proposed reduction of the par value of the Common Shares, the amendments to the Bye-Laws, the Further Starry Share Disposals and the Proposed Transfer, to explain why the Board considers these proposals to be in the best interests of Cathay and Shareholders as a whole, and to recommend that Shareholders vote in favour of the Resolutions to be proposed at the Special General Meeting to be held at 9.30 am on 15 May 2020. Notice of the Special General Meeting will be set out at the end of the Prospectus.

The Fundraising is intended to provide the Group with a stronger capital base that the Board believes is necessary to enable the Group to implement an investment programme and to reduce the Group's level of indebtedness, both of which the Board considers fundamental to the future success of the Group.

The Fundraising is conditional upon a minimum take up of New Common Shares by existing Shareholders raising GBP 8.1 million (USD 10 million). The Fundraising is also conditional upon the passing of the Fundraising Resolutions at the forthcoming Special General Meeting and Admission having become effective by no later than 8.00 a.m. on 18 May 2020 or such later time and/or date as the Company may decide (but, in any event, not later than 8.00 a.m. on 1 June 2020).

The Resolutions must be passed by Shareholders at the SGM in order for all of the proposals to proceed.

Your attention is drawn to paragraph 11 (Background to the Proposed Transfer) below which explains why the Company is seeking to transfer the listing of the Common Shares out of the category of the Premium Listing and into the category of the Standard Listing, following discussions with the FCA, and to paragraph 19 (Importance of your Vote) below which explains that in the event that Resolution 1, the Transfer Resolution, is not approved by Shareholders, the Company will issue a further circular to Shareholders for a further special general meeting at which Shareholders would be asked for a second time to approve a resolution for a transfer of listing category, failing which the FCA may use its powers to cancel the admission of the Common Shares to listing. Failure to approve the Transfer Resolution would present a serious risk that trading in the Common Shares would be cancelled in which circumstances shareholders would no longer be able to trade in the Common Shares on the London Stock Exchange which would severely limit liquidity.

Your attention is also drawn to paragraph 18 (Working Capital) below which explains that the Company does not have sufficient working capital for its present requirements and how it intends to address a working capital shortfall, and to paragraph 19 (Importance of Vote) below which explains that if Shareholders do not vote in favour of Resolutions 2, 4, 5 and 7, none of the proceeds of the Fundraising or the Further Starry Share Disposals will be received and the Group will not be able to invest in its subsidiaries or reduce borrowings, and that the Group will face a significantly increased risk to the Group's financial position and ability to repay existing borrowings as they mature.

The Shareholder vote is important and failure to pass the Resolutions will materially and adversely affect the Group's business, results of operations, financial condition and prospects.

A summary of the principal conditions of the Open Offer and Subscription is set out in paragraphs 4, 5 and 6 below and in detail in the Prospectus.

2. Background Overview, Strategy of the Group and Reasons for the Fundraising

2.1 Background Overview

Cathay was incorporated on 18 January 2001 with a strategy to identify investment opportunities within the healthcare sector in China. The Group's present operations are in pharmaceuticals, healthcare, cosmeceuticals and hospitality.

The Group's strategy has been to take advantage of growing domestic demand for high quality healthcare products in China, to identify investment opportunities with an emphasis on high growth healthcare markets and to build them into market sector leaders. The Company has demonstrated a track record of identifying investment opportunities in this area. The key investments have been in Lansen, a specialty pharmaceutical company focused on rheumatology; Haizi, a manufacturer of inositol, which is used as nutritional supplement; Natural Dailyhealth, a manufacturer of plant extracts used as key active ingredients in healthcare products; and Botai, a manufacturer of collagen based cosmeceuticals.

In addition, the Company owns a 312 room hotel in Shenzhen, China, which operates under the Crowne Plaza brand operated by IHG.

Lansen

Lansen accounts for the majority of the Group's revenues. Cathay invested in Lansen in 2005 and successfully listed Lansen on the main board of the Hong Kong Stock Exchange in 2010. Lansen's headquarters are located in Ningbo, China. Lansen is engaged in the development, production and sale of specialty prescription drugs and generic drugs. The primary therapeutic focus is the treatment of autoimmune disorders in rheumatology and dermatology. The sales and distribution network covers more than 1,500 hospitals in 22 provinces in China. Pafulin, Lansen's core product, is a prescription drug used for alleviating rheumatoid arthritis. Pafulin is also used for applications in dermatology. Lansen also operates in the field of dermatology with a steroid cream called Sicorten Plus. In addition, Lansen has a number of generic products including licorice compound oral solution, Bazhen granules, Qixuekang oral drink and Yahao boron-based toothpaste.

In 2010, Lansen and a wholly owned subsidiary of Cathay (which was acquired by Lansen in November 2012) invested in Starry, which subsequently listed on the Shanghai Stock Exchange. In March 2019, Cathay issued a circular setting out proposals to dispose of the Starry Shares, as the Directors no longer believed the Group had a strategic reason to retain an interest, which were approved by Shareholders on 12 April 2019. The approval granted by Shareholders expires on 19 April 2020. As at the date of the Prospectus, 16,304,028 Starry Shares have been sold for gross sale proceeds of RMB 545 million (USD 79.1 million) and Lansen holds a further 6,715,972 Starry Shares with an aggregate market value of RMB 488.3 million (USD 68.9 million) based on the Starry share price as at the Latest Practicable Date, which it intends to continue to sell subject to the approval already granted and to market conditions.

Natural Dailyhealth

Natural Dailyhealth is based in Yangling and Ningbo, and manufactures plant extracts which are used as key active ingredients in health products, such as bilberry extract, believed to treat eye conditions such as disorders of the retina; ginkgo biloba which is believed to improve memory and sharpen thinking; and alpha glyceryl phosphoryl choline extract which is believed to improve memory.

Haizi

Haizi, based in Changchun, Jilin Province, manufactures inositol and plant-derived DCP. Inositol is a vitamin-like substance that is found in many plants and animals and is used as a nutritional supplement in healthcare products. Haizi produces DCP as a co-product to inositol, which is mainly used as an additive in the animal feed market in China.

Botai

Botai, based in Changchun, Jilin Province, is engaged in the research and development, and manufacture, of collagen injectable fillers and collagen related products. Botai received the first ever domestic production licence for collagen-based dermal fillers by the CFDA in 2012 and remains the only holder of such a licence.

Hotel

The Hotel is a 5-star business hotel with 312 superior suites located in the Luohu district of Shenzhen in China. As at the Latest Practicable Date, it is ranked among the top 10 business hotels in Shenzhen by Tripadvisor. The Hotel was transformed into an all-suite hotel with 312 superior suites in 2006.

The Group as a whole employs approximately 1,461 people across China, including over 20 specialist corporate and business development staff based at the Group's offices in Hong Kong and Shenzhen.

2.2 Strategy and reasons for the Fundraising

The Group has been operating in a challenging environment with significant regulatory and market reforms in the last few years in China affecting its pharmaceutical business, adverse market conditions affecting its inositol business and slow economic growth and the continuing trade war between China and the US adversely impacting the Hotel.

Lansen and the Hotel, which together account for over 84 per cent. of Group revenues have been profitable, but the Group's other businesses have been and continue to be loss making. As a result, as at 31 March 2020 (being the latest date available), the Group had borrowings (comprising bank borrowing and shareholder loans) of USD 176.8 million (31 December 2019: USD 191.9 million and 31 December 2018: USD 201.9 million), the majority of which were due for repayment within 12 months, and net gearing had increased to 154.3 per cent. as at 29 February 2020 (31 December 2019: 151.2 per cent. and 31 December 2018: 138.0 per cent).

The Group's borrowings as at 31 March 2020 may be analysed as follows:

Note 1. As at 31 March 2020, the Group's borrowings (other than those relating to Lansen which are discussed below) comprise bank borrowings of USD 88 million and shareholder loans of USD 46 million in aggregate from the Controlling Shareholder (being CIEW43, the company through which Mr Wu, Non-Executive Chairman, and his family hold their interests in the Company).

The bank borrowings include five facilities of USD 62.0 million, in aggregate, secured on the value of the Hotel and related real estate, which expires between June 2021 and July 2022. These facilities include a facility USD 45.0 million from United Overseas Bank Limited which expires in June 2021.

The Group's bank borrowings also include 12 revolving credit and overdraft facilities of USD 32.7 million, in aggregate, of which USD 25.7 million was utilised and of which USD 23.6 million were due for repayment within 12 months. Of these facilities, USD 18.6 million were secured against bills payable/cash balances.

The shareholder loans represent drawn facilities provided by CIEW43. Between November 2019 and January 2020, CIEW43 provided a facility of USD 34 million, which has been used to repay bank borrowings of approximately USD 23 million and a shareholder loan (from the former CEO) of approximately USD 3 million, and which is due for repayment in November 2020 (or earlier in the event of an equity fundraising such as the Open Offer). The remainder of the shareholder loan, USD 12 million, is due for repayment in June 2020 (or earlier in the event of an equity fundraising such as the Open Offer). The shareholder loans are unsecured and bear interest at 3.5 per cent. over LIBOR. CIWE43 has provided a conditional waiver to the Company of the repayment rights in its loans to the Company on the basis that, if the Fundraising proceeds, it will not make any demand for repayment before 30 June 2021, save where the Fundraising is successful in raising more than the Minimum Proceeds (and in such circumstances CIEW43 reserves its rights to demand repayment for an amount up to the amount by which the proceeds of the Fundraising exceeds GBP8.1 million (USD10 million). If the Company raises funds from a further equity issue or if the Company enters into any formal insolvency or liquidation process, the waiver would not apply and CIEW43 reserves its full right to repayment or to participate as an unsecured creditor as part of such process as applicable.

Note 2. As at 31 March 2020, Lansen is managed independently and its banking arrangements and working capital requirements are independent of those of the rest of the Group (other than a cross guarantee of up to USD 18.6 million). Lansen currently has available 14 banking facilities, primarily revolving credit facilities, of USD 177.4 million, in aggregate, of which USD 42.7 million was utilised as at 31 March 2020. As at 31 March 2020, these facilities included a facility of USD 17.5 million from SPDB which expires in June 2020 and of which USD 2.9 million is utilised, a facility of USD 40.0 million from Fubon which expires in June 2020 which is not currently utilised and a facility of USD 55.3 million from ABC which expires in September 2021 and of which USD 25.8 million was utilised.

Note 3. The effective interest rate in aggregate for all of the Group's facilities for the year ended 31 December 2019 was 5.8 per cent. (2018: 5.3 per cent.)

As can be seen in the analysis above, the Group relies on short term financing. The Group has used this approach in the past and has a track record of repaying, renewing and refinancing such facilities, and the current financial position is in line with that strategy. However, with the ongoing losses at some of the Group's businesses and the relatively high level of gearing across the Group as a whole, there is a significant risk that future borrowing will be more difficult and more expensive. If the Group was unable to repay, renew or refinance existing borrowings or extend borrowings if required, and the major shareholder was not willing to extend further credit, the Group's business, results of operations, financial condition and prospects would be materially and adversely affected.

The Board believes that the Group is over-leveraged and the current capital position is unsustainable. As the prevailing trading environment is expected to continue to be difficult, the Group considers it practical to mitigate against the risks associated with any failure to successfully renew or re-finance the Group's existing banking facilities. Accordingly, the Board has determined that an equity fundraising is a necessary step to allow the Group to reduce gearing, to invest in the Group's businesses in order to increase revenues and generate profits, to improve the Group's working capital position and to provide funds for future investment opportunities.

The Fundraising, if successful, will raise a minimum of GBP 8.1 million (USD 10 million) and a maximum of GBP 105.4 million (USD 130 million) (before deduction of estimated fees and expenses). Mr Wu Zhen Tao, Non-Executive Chairman, on behalf of the CIEW43, the Controlling Shareholder, has committed to apply for at least GBP8.1 million (USD10 million) in the Open Offer and intends to apply for up to his full entitlement subject to the level of take up by other shareholders in the Open Offer and by new investors in the Subscription. The Minimum Proceeds would provide working capital for the Group's Corporate Office, including the costs of publishing the Prospectus and the Fundraising. If the Fundraising is successful in raising more than the Minimum Proceeds, priority will be given to reducing borrowings, before allocating funds for investment in Haizi, Botai, the Hotel and additional working capital and future investment opportunities (discussed in more detail below).

The Directors believe that the Fundraising will be beneficial to the Group by enabling it to reduce borrowings, thereby reducing financial risk and borrowing costs, and by providing a stronger capital base to facilitate capital investment in the short and medium term. A stronger capital structure will, the Directors believe, provide the Group with the financial flexibility to build on the recent operational restructuring and integration, and to exploit investment opportunities.

In addition, the Fundraising would materially increase the number of Common Shares in issue by a factor of almost 17 times the current number in issue. The Directors hope that, with the investment strategy described in the Prospectus and the reduction in borrowings, the expansion of the issued share capital would also encourage trading in the shares which will improve liquidity and the share price.

3. Use of Proceeds

Summary

The Minimum Proceeds of the Fundraising are GBP8.1 million (USD10 million). The Maximum Proceeds of the Fundraising are GBP105.4 million (USD130 million).

The Company may in the future receive dividends from Lansen as a result of the proposed Further Starry Share Disposals (or otherwise from Lansen's profits). There is no minimum or maximum proceeds from the Further Starry Share Disposals.

The Minimum Proceeds will be used for Corporate Office working capital, including the expenses of GBP1.6 million (USD 2 million) relating to the Fundraising.

In the event that more than the Minimum Proceeds are received or dividends are received from Lansen, further investment will be prioritised in the following order:

· up to approximately GBP37.3million (USD 46 million) for the repayment of the shareholder loans;

· up to approximately GBP17 million (USD 21 million) for the repayment of part of bank borrowings;

· up to approximately GBP11.4 million (USD 14 million) to upgrade the production facilities in Haizi and its phytin plants, and working capital;

· up to approximately GBP7.3 million (USD 9 million) in respect of the expansion of the collagen production facilities in Botai, and working capital; and

· up to approximately GBP24.3 million (USD 30 million) for investment and working capital reserves, and to reconfigure the Hotel.

Further details on the use of proceeds

Corporate office - working capital

The Minimum Proceeds of USD 10.0 million will be used by the Corporate Office, which operates as a cost centre responsible for Group strategy, corporate governance and finance function, to meet its future working capital needs and the costs of the Fundraising.

Reduce gearing

In the event that more than the Minimum Proceeds are received or dividends are received from Lansen, the Group intends to prioritise the reduction of gearing.

At 31 December 2019 the Group had bank borrowings of USD 160 million and shareholder loans of USD 32 million. Since 31 December 2019, the Group has repaid bank loans of USD 30 million and a shareholder loan of USD 3 million (from the Company's former CEO). At 31 March 2020, the Group owed bank borrowings of USD 131 million and shareholder loans of USD 46 million.

The Group intends to repay borrowings in the following order:

· the shareholder loans from CIEW43 totalling USD 46 million, including the USD 34 million received between November 2019 and January 2020, which would generate interest savings of an estimated USD 2.3 million per annum (if repaid in full).

· The CIEW43 loan bears interest at 3.5 per cent. over LIBOR per annum. The interest on the loan from CIEW43 has not been paid since January 2019 and has been added to the balance. In connection with the March 2019 Circular, CIEW43 undertook not to call the loan (which then had a balance of USD 12 million) before 30 June 2020. However, the loan is repayable if the Company undertakes an equity fundraising. The additional facility of USD 34 million provided in November and December 2019 is on the same terms. Accordingly, both loans are repayable from the proceeds of the Fundraising; and

· bank borrowings of up to USD 21 million, which would generate further interest savings of up to an estimated USD 1.0 million per annum. The bank loans comprise USD 2 million from United Overseas Bank, USD 7 million from China Merchants Bank and USD 12 million from Industrial Bank.

Haizi - upgrading production

Haizi currently produces inositol and feed grade DCP. Whilst Haizi has made efforts to reduce its cost of production, the market price for inositol is below the cost of production at present (and has been since 2015) owing to over-supply in the market and aggressive pricing. However, the global inositol market is expected to grow at 6.4 per cent. per annum for the next two to five years, which the Directors believe will allow both prices and volumes at Haizi to increase.

DCP is a co-product of inositol production, which sells for approximately RMB 1.7 (USD 0.24) per kilogram. Haizi has been working on the development of better quality and higher value-added co-products such as food grade DCP, which sells at a significantly higher price (currently approximately RMB 7.0 (USD1.0) per kilogram) and offers the opportunity to improve margins.

The Group plans to invest up to USD 14.0 million in Haizi. USD 7.0 million would be used to reduce trade and other payables. USD 3.3 million would be invested to upgrade the phytin production plants in order that they can lower production cost and produce the higher quality of phytin feedstock necessary to produce higher quality co-products. A further USD 3.7 million will be invested to upgrade the production facility for co-products, including the upgrading of resin columns.

Haizi currently produces approximately 5.5 kilograms of DCP for each kilogram of inositol produced. With the anticipated higher margin generated from higher value-added co-products available to partly offset the production cost of inositol, the Directors believe that the investment should help Haizi become more cost competitive as a whole.

The upgrades to production would be completed in phases. The first phase, expected to take around 6- 9 months to complete, would be the upgrading of Haizi and of the phytin plants in Gongzhuling and Yushu in order to reduce production costs of phytin, inositol and co-products. This first phase should reduce phytin production costs, but would not be sufficient to make Haizi profitable based on current costs and selling prices. In the second phase, expected to require a further 6-9 months, the production facilities for co- products in Haizi will be upgraded, together with further upgrading of the phytin plants to produce higher grade phytin. It is anticipated that only at this stage, would Haizi begin to see the full benefits of the investment and be capable of producing higher quality and higher value-added co-products. The first sales of co-products would be expected 12-18 months following commencement of the first phase.

The Directors believe the investment in Haizi has the potential to generate sales of a higher value added product at a better margin and improve the cost competitiveness of Haizi as a whole.

Botai - increasing production capacity

Botai currently produces injectable collagen (Fillderm). Lansen was appointed as the agent of Botai's Fillderm and had planned to establish a network of clinics selling its products.

Lansen and Botai are developing the sales and marketing strategy for Fillderm and, to date, Botai has only been able to sell small volumes of its products in the initial network developing phase. Once a network of clinics has been established, the growing market for collagen products in China should offer an opportunity to produce and sell a substantially higher volume. Current production capacity is 40,000 ml per annum of Fillderm. The Directors believe that demand is growing and that there is potential to sell more than the current production capacity. Lansen hired a senior business executive in 2019, with more than 10 years of experience in the medical cosmetic field, to build up a professional team to sell Fillderm and Lansen's other products. It is anticipated that the team will establish a network of clinics through which Fillderm and other products can be sold more widely.

The Group intends to invest up to USD 9.0 million in Botai, comprising USD 6.0 million to reduce trade and other payables and USD 3.0 million to upgrade and increase production from 40,000 ml to 80,000 ml of injectable collagen per annum. The capital investment would consist of the construction of a new plant and warehouse and the purchase of equipment, expected to take approximately one year to complete. The increase in capacity would be expected approximately 12 months following the commencement of construction.

Hotel investment, working capital and future investment opportunities

If more than USD 100 million is received in the Fundraising, the Group will allocate up to a further USD 30 million for investment in the Hotel (up to USD 19 million) and/or general working capital purposes and future investment reserves (up to USD 11 million).

The Hotel comprises 312 suites, 3 restaurants and bars, a fitness and wellbeing centre including an indoor pool and a business centre. The Hotel operates under the Crowne Plaza brand under an agreement with IHG. The agreement was renewed for a further 10 years in 2017. The Directors believe, based on discussions with IHG and local market rates, that the Hotel could increase its room revenue and food and beverage revenues by reconfiguring some of the suites into smaller rooms.

The Hotel will be renovated in phases, with 179 of the existing suites each being split into two smaller rooms. It is expected that the total number of rooms will increase from 312 to 491. The total investment is expected to be approximately USD 19 million, which comprises of the demolition and removal work, re- configuration of rooms, re-construction of curtain walls, modification of entrance areas, public areas and conference facilities, design and other professional fees. The development would be carried out over approximately 18 months.

Whilst GBP15.4 million (USD 19 million) of the proceeds in excess of USD 100 million are reserved for the renovation of the Hotel, spending would be spread over a number phases (each floor of the Hotel can be taken as a separate project if necessary), and in practice it may be possible to raise bank borrowings for a material part of this cost. Therefore, even if the Fundraising does not exceed USD 100 million, this project may proceed in any event.

If the proceeds exceed USD 100 million, the Group intends to reserve some or all of these proceeds (up to USD 11 million, depending on how and when the investment in the Hotel is made) for general working capital purposes and to take advantage of future investment opportunities which may arise, either in the existing businesses or new ventures in the pharmaceutical, healthcare or related sectors.

4. Terms of the Open Offer

Cathay is proposing to raise gross proceeds of up to GBP 97.3 million (USD 120 million) (approximately GBP 95.7 million (USD 118 million) after deduction of estimated fees and expenses) by way of an Open Offer of

16.7456 New Common Shares at an Issue Price of 1.5p for every Existing Share.

The New Common Shares will be issued/credited as fully paid and will rank pari passu in all respects with the Existing Common Shares.

Qualifying Shareholders and Qualifying DI Holders may apply for any whole number of New Common Shares. Fractions of New Common Shares (or Convertible Instruments) will not be allotted and each Open Offer Entitlement will be rounded down to the nearest whole number. The fractions once rounded down will be aggregated under the Excess Application Facility. Excess applications will be satisfied only to the extent that other Qualifying Shareholders or Qualifying DI Holders do not apply for their Open Offer Entitlements under the Open Offer in full or in respect of the aggregated fractional entitlements to New Common Shares. Applications under the Excess Application Facility shall be allocated in such manner as the Directors may determine, in their absolute discretion, and no assurance can be given that the applications by Qualifying Shareholders and Qualifying DI Holders will be met in full or in part or at all. The Directors will use their discretion to allocate New Common Shares and Convertible Instruments to Qualifying Shareholders and Qualifying DI Holders as a result of applications under both Open Offer Entitlements and Excess Application Facility which would otherwise lead to a shareholding of 5 per cent. or more, in order to ensure that the number of shares in public hands is at least 25 per cent. at Admission. Therefore, Qualifying Shareholders and Qualifying DI Holders should be aware that they may receive a mix of New Common Shares and Convertible Instruments. Qualifying Shareholders and Qualifying DI Holders may elect to receive a refund if they do not wish to receive Convertible Instruments.

The Fundraising is conditional upon a minimum take up in the Open Offer of the New Common Shares by existing Shareholders raising GBP 8.1 million (USD10 million).

The Board has considered the best way to structure the proposed equity capital raising in light of the Group's current financial position. The Board believes that the Open Offer will provide all Shareholders with the opportunity to invest to maintain or increase their proportionate shareholdings in Cathay, whilst the Subscription will provide an opportunity to satisfy demand from potential new investors. The Board is seeking the approval of the Shareholders, by way of the passing of the Fundraising Resolutions at the Special General Meeting, to the proposed Fundraising.

Mr Wu, on behalf of the Controlling Shareholder, has expressed his enthusiasm over the plans for investment described in the Prospectus, and has confirmed that the Controlling Shareholder would like to subscribe for its full entitlement, GBP 58.6 million (USD72.3 million), under the Open Offer, subject to the level of take up by other Shareholders in the Open Offer and by new investors in the Subscription. However, the Controlling Shareholder has committed to apply for a minimum of GBP8.1 million (USD10 million) in the Open Offer, which would be sufficient to meet the Minimum Proceeds.

Further details of the terms and conditions of the Open Offer, including the procedure for acceptance and payment and the procedure in respect of Open Offer Entitlements and Excess Application Facility not taken up, are set out in the Prospectus and, where relevant, the Application Form.

NOTE: Under the terms of the Open Offer, Shareholders who submit an Application Form will irrevocably agree to vote in favour of the Transfer Resolution, and, in the event that the Transfer Resolution is not approved at the SGM, to vote in favour of a future resolution on the proposed transfer of listing category at a second special general meeting if called by the Company.

Shares in public hands

Under the Listing Rules, Cathay is required to maintain at least 25 per cent. of its issued share capital in public hands. Shares in public hands exclude shares held by Directors (and the directors of subsidiaries) and other Shareholders with interests of 5 per cent. or more of the Common Shares. At the date of the Prospectus, 21.49 per cent. of the issued share capital is in public hands and the Company needs to take action to either issue new shares to investors would count toward public hands (such as the Fundraising) or to encourage existing shareholders who do not count towards public hands to reduce their shareholdings below 5 per cent. The Directors intend that the Open Offer and Subscription will ensure that sufficient new Common Shares are acquired by investors who count towards public hands to ensure that the percentage is at least 25 per cent. at Admission.

The allocation of shares in the Open Offer to Shareholders who do not count towards public hands could further reduce the percentage of shares in public hands, subject to the level of take up by other Shareholders (see below under Dilution, for an analysis of the potential dilution for existing Shareholders).

In order to ensure that at least 25 per cent. of the Enlarged Share Capital at Admission is held in public hands as required by the Listing Rules, the Company may, at its sole discretion, allocate Convertible Instruments in place of the New Common Shares. This means that certain Qualifying Shareholders and Subscribers may receive Convertible Instruments or a combination of the New Common Shares and Convertible Instruments. A Convertible Instrument will have a par value equal to the Issue Price, be convertible into one New Common Share, not redeemable and carry a variable coupon equal to any dividend paid or declared in respect of the Common Shares. Please refer to paragraph 6 below for further details of the terms of the Convertible Instruments.

The Directors will use their discretion to allocate New Common Shares and Convertible Instruments to Qualifying Shareholders and Qualifying DI Holders as a result of applications under both Open Offer Entitlements and Excess Application Facility which would otherwise lead to a shareholding of 5 per cent. or more, in order to ensure that the number of shares in public hands is at least 25 per cent. at Admission. Therefore, Qualifying Shareholders and Qualifying DI Holders should be aware that they may receive a mix of New Common Shares and Convertible Instruments. Qualifying Shareholders and Qualifying DI Holders may elect to receive a refund if they do not wish to receive Convertible Instruments.

The Company intends to allocate sufficient Convertible Instruments to ensure that the number of shares in public hands is at least 25 per cent. of the Enlarged Share Capital as required by the Listing Rules.

The following analysis demonstrates the effect of the issue of the Convertible Instruments and the conversion of A Shares on the number of shares in public hands, assuming full take up under the Open Offer and the Fundraising:

Note 1: There are 8,952,881 A Shares in issue, of which 446,530 A Shares would on conversion count towards the number of shares in public hands. The A Shares convert to Common Shares either at the request of the holder or automatically on a sale or transfer.

Note 2: The analysis assumes that all of the A Shares convert. However, Mr Wu has confirmed, on behalf of the Controlling Shareholder, that it would not convert its 8,249,276 A Shares if doing so would reduce the number of shares in public to less than 25 per cent. On this basis, the percentage of shares in public hands, assuming all of the A Shares (other than those held by the Controlling Shareholder) convert, would be 67.79 per cent.

Issue Price

The Open Offer will be made at an Issue Price of 1.5p per New Common Share. The Issue Price is equal to the Closing Price of 1.5p on the Latest Practicable Date. The Issue Price has been set by the Directors following their assessment of the prevailing market conditions and anticipated demand for the New Common Shares. The Board, having taken appropriate advice from its advisers, believes that the Issue Price is appropriate in the circumstances.

Open Offer

Under the Open Offer, Qualifying Shareholders and Qualifying DI Holders are being given the opportunity to subscribe for New Common Shares (or if required to comply with the Listing Rules, Convertible Instruments) pro rata to their Existing Shares on the basis of:

16.7456 New Common Shares (or Convertible Instruments) for every Existing Share

held by them and registered in their name at the Record Date (and so in proportion to any other number of Existing Shares then held) on the terms and subject to the conditions set out in the Prospectus.

Qualifying Shareholders and Qualifying DI Holders may apply for any whole number of New Common Shares up to their Open Offer Entitlement. Fractions of New Common Shares (or Convertible Instruments) will not be allotted and each Open Offer Entitlement will be rounded down to the nearest whole number. The fractions of New Common Shares once rounded down will be aggregated under the Excess Application Facility.

Qualifying Shareholders and Qualifying DI Holders are also being given the opportunity to apply for Excess New Common Shares (or if required to comply with the Listing Rules, Convertible Instruments) at the Issue Price through the Excess Application Facility.

Applications by Qualifying Shareholders and Qualifying DI Holders will be satisfied in full up to their Open Offer Entitlements. In addition and subject to availability, the Excess Application Facility will enable Qualifying Shareholders and Qualifying DI Holders who have taken up their Open Offer Entitlements in full to apply for any whole number of Excess New Common Shares (or if required to comply with the Listing Rules, Convertible Instruments) in excess of their Open Offer Entitlements up to a maximum number of Excess New Common Shares not exceeding 6,487,178,943 and will not be increased in response to any applications under the Excess Application Facility. Such applications will therefore only be satisfied to the extent that other Qualifying Shareholders or Qualifying DI Holders do not apply for their Open Offer Entitlements under the Open Offer in full. Applications under the Excess Application Facility shall be allocated in such manner as the Directors may determine, in their absolute discretion, and no assurance can be given that the applications by Qualifying Shareholders and Qualifying DI Holders will be met in full or in part or at all. The Directors will use their discretion to allocate New Common Shares and Convertible Instruments to Qualifying Shareholders and Qualifying DI Holders as a result of applications under both Open Offer Entitlements and Excess Application Facility which would otherwise lead to a shareholding of 5 per cent. or more, in order to ensure that the number of shares in public hands is at least 25 per cent. at Admission. Therefore, Qualifying Shareholders and Qualifying DI Holders should be aware that they may receive a mix of New Common Shares and Convertible Instruments. Qualifying Shareholders and Qualifying DI Holders may elect to receive a refund if they do not wish to receive Convertible Instruments.

Qualifying Shareholders should complete the relevant sections of the Application Form. You should write the number of Open Offer Shares that you wish to take up in Box 2. You should then write the number of Open Offer Shares you wish to apply for under the Excess Application Facility in Box 3 and then complete Box 4 by adding together the numbers you have entered in Boxes 2 and 3. For example, if you are entitled to take up 50 shares under your Open Offer Entitlement and you wish to take up a further 25 shares under the Excess Application Facility, then you should write '50' in Box 2, '25' in Box 3 and '75' (being the total of Box 2 and Box 3) in Box 4. Qualifying DI Holders will have Excess Open Offer Entitlements credited to their stock account in CREST and should refer to the Prospectus on how to apply for the Excess New Common Shares (or if required to comply with the Listing Rules, Convertible Instruments) pursuant to the Excess Application Facility.

Shareholders should be aware that the Open Offer is not a rights issue. As such, Shareholders should note that their Application Forms are not negotiable documents and cannot be traded. Qualifying DI Holders should note that, although the Open Offer Entitlements and Excess Open Offer Entitlements will be admitted to CREST, and be enabled for settlement, the entitlements will not be tradeable or listed, and applications in respect of the Open Offer may only be made by the Qualifying DI Holders originally entitled or by a person entitled by virtue of a bona fide market claim by Euroclear's Claims Processing Unit. New Common Shares for which application has not been made under the Open Offer will not be sold in the market for the benefit of those who do not apply under the Open Offer and Qualifying Shareholders and Qualifying DI Holders who do not apply to take up their entitlements will have no rights, and will not receive any benefit, under the Open Offer.

Conditionality

The Open Offer is conditional, inter alia, upon:

(i) receipt of valid subscriptions of at least GBP 8.1 million (USD 10 million) in the Open Offer;

(ii) the Fundraising Resolutions having been passed by Shareholders at the Special General Meeting;

(iii) Admission occurring on or prior to 8:00 a.m. on 18 May 2020 (or such later time as the Company may determine, not being later than 1 June 2020); and

(iv) the Sponsor Agreement becoming unconditional in all respects and not having terminated in accordance with its terms prior to Admission.

If any of the conditions are not satisfied or, if applicable, waived, then the Fundraising will not proceed, any Open Offer Entitlements and Excess Open Offer Entitlements admitted to CREST will thereafter be disabled and application monies under the Open Offer will be refunded to the applicants, by cheque (at the applicant's risk) in the case of Qualifying Shareholders and by way of a CREST payment in the case of Qualifying DI Holders, without interest, as soon as practicable thereafter.

Applications will be made to the FCA and to the London Stock Exchange for the New Common Shares to be admitted to the Official List and to trading on the Main Market, respectively. It is expected that Admission will become effective and that dealings in the New Common Shares will commence at 8.00 a.m. on 18 May 2020. The New Common Shares will initially be admitted to the premium segment of the Official List. Subject to the passing of the Transfer Resolution, all of the Common Shares will transfer to the standard segment of the Official List as soon as possible following the SGM, but no earlier than 20 business days following the SGM. The Common Shares will continue to trade on the London Stock Exchange's Main Market.

The New Common Shares may be held in certificated or uncertificated form.

5. Subscription

In addition to the Open Offer, the Company proposes a Subscription by selected new and existing institutional and high net worth investors of up to 540,598,984 New Common Shares raising up to a further GBP 8.1 million (USD10 million) at the Issue Price of 1.5 each. The Subscription may be increased to the extent that New Common Shares are not taken up by existing Shareholders in the Open Offer.

6. Convertible Instruments

As noted above, in order to comply with the Listing Rules requirement that at least 25 per cent. of a company's listed shares must be held in public hands the Company may, in its absolute discretion, issue Convertible Instruments as an alternative to New Common Shares under the terms of the Fundraising. The Directors will use their discretion to allocate New Common Shares and Convertible Instruments to Qualifying Shareholders and Qualifying DI Holders as a result of applications under both Open Offer Entitlements and Excess Application Facility which would otherwise lead to a shareholding of 5 per cent. or more, in order to ensure that the number of shares in public hands is at least 25 per cent. at Admission. Therefore, Qualifying Shareholders and Qualifying DI Holders should be aware that they may receive a mix of New Common Shares and Convertible Instruments. Qualifying Shareholders and Qualifying DI Holders may elect to receive a refund if they do not wish to receive Convertible Instruments.

The Convertible Instruments will be issued on the basis of one Convertible Instrument for every one New Common Share (subject to adjustment for share capital reorganisations including bonus issues, subdivision, consolidation or merger) which would otherwise have been issued under the Fundraising. The Convertible Instruments will have a par value equal to the Issue Price. The Convertible Instruments are not redeemable and will each carry a coupon right equal to the amount of any dividend paid per Common Share.

The Convertible Instruments shall be converted on sale or transfer, or at the request of the holder in such manner as the Company, in its absolute discretion, considers to be necessary or desirable to comply with the shares in public hands requirement of the Listing Rules referred to above.

If more than one transferee of such Convertible Instruments is eligible for conversion of their Convertible Instruments into New Common Shares, such Convertible Instruments shall be converted on a pro rata basis, in priority to any holders of the Convertible Instruments who may otherwise be eligible at the same time for conversion of their Convertible Instruments in accordance with the paragraph immediately below.

In the event of a request for conversion from one holder and in any event at least once every six months, the Company will review the number of Common Shares held in public hands and will convert such number of Convertible Instruments into New Common Shares as the Company determines, in its absolute discretion, on a pro rata basis, subject to maintaining the appropriate number of shares in public hands pursuant to the Listing Rules.

Application will be made for any New Common Shares to be admitted to trading as soon as possible following a conversion.

The maximum number of Convertible Instruments that may be issued under the Open Offer and Subscription is 7,027,777,927 (assuming that none of investors participating in the Fundraising would count towards the number of shares in public hands pursuant to the Listing Rules).

7. Financial Effects of the Fundraising

Had the Fundraising taken place at the beginning of the financial period ended 31 December 2019 and the Minimum Proceeds were raised, the effect would have been an increase in cash and cash equivalents of GBP 8.1 million (USD 10 million (USD 8 million after deduction of estimated fees and expenses)) as at 31 December 2019.

Your attention is also drawn to the Prospectus, which contains unaudited pro forma financial information of the Group comprising the following:

l the unaudited pro forma statement of net assets of the Group as at 31 December 2019, which has been prepared to illustrate the effect on the consolidated net assets of the Group as if the Further Starry Share Disposals and the proposed Fundraising had taken place on 31 December 2019; and

l the unaudited pro forma statement of profit or loss of the Group for the year ended 31 December 2019, which has been prepared to illustrate the effect on the consolidated statement of profit or loss of the Group as if the all of the disposals of Starry Shares during the year ended 31 December 2019 and Further Starry Shares and the proposed Fundraising had all taken place on 1 January 2019.

8. Dilutive Effects of the Fundraising

If the Fundraising proceeds, existing Shareholders' voting rights and economic rights will be diluted. If Shareholders other than CIEW43 (the Controlling Shareholder, who has committed to applying for a minimum of GBP 8.1 million (USD10 million) in the Open Offer) do not take up their entitlements under the Open Offer (i.e. GBP 8.1 million (USD10 million) is raised in the Open Offer and GBP 8.1 million (USD 10 million) is raised in the Subscription), Shareholders will experience dilution in their voting rights of 74.07 per cent. and dilution in their economic rights of 73.62 per cent. If Shareholders including CIEW43 do take up their entitlements under the Open Offer (i.e. only GBP 8.1 million (USD 10 million) is raised in the Subscription), Shareholders will experience dilution in their voting rights of 58.82 per cent. and dilution in their economic rights of 58.25 per cent.

The table below illustrates the issued share capital and Convertible Instruments at Admission and the dilutive effect on existing Shareholders of the Fundraising if a Shareholder or DI Holder does not acquire any New Common Shares in the Fundraising (i.e. the effect on a Shareholder who does not participate if both the Open Offer and Fundraising are taken up in full).

The table assumes that the Open Offer and the Subscription is taken up in full and that the maximum of 7,027,777,927 New Common Shares and/or Convertible Instruments are issued. If all of applications are made by parties who count towards the number of shares in public hands, no Convertible Instruments will be issued (Illustration (i) in the table below). However, if all of the applications (other than the Fundraising) are made by parties who would not count towards the number of shares in public hands, the maximum number of Convertible Instruments will be issued (Illustration (ii) in the table below).

Notes:

1. Each Common Shares carries one vote per share.

2. Each A Share carries the same economic rights as one Common Share and 20 votes per share.

3. Under the Listing Rules, voting on matters relevant to a premium listing is restricted to the holders of the Common Shares, being the only class of shares admitted to premium listing. These matters include certain resolutions relating to cancellation of listing, transfer between listing categories, discounted options, pricing of open offers, class 1 transactions, related party transactions and purchase of own securities. The A Shares are entitled to vote on all other matters.

4. The Common Shares and the A Shares carry the same economic rights. The Convertible Instruments have the same effective economic rights as the Common Shares and the A Shares.

The net asset value (excluding the non-controlling interest) per Existing Shares as of the date of the latest balance sheet before the Open Offer and Subscription is 9.1p. The Issue Price per new Common Share is 1.5p in both the Open Offer and the Subscription.

9. Background to and reasons for the reduction of the par value of Common Shares and A Shares and amendments to the Bye-Laws

Reduction of Common Share par value

Pursuant to the laws of Bermuda and the Bye-Laws, the Company is not permitted to issue new shares at a price below the par value. The par value of the Common Shares is USD 0.05 and, as at the Latest Practicable Date, the market price of the Existing Common Shares is 1.5p (USD 0.0185). Accordingly, a reduction in the par value of the Common Shares is necessary before the New Common Shares under the terms of the Open Offer and Subscription can be issued.

Resolution 2, to be proposed at the SGM as a special resolution, stipulates that the par value is reduced from USD 0.05 to USD 0.01 per Common Share and from USD 0.05 to USD 0.01 per A Share.

Amendments to the Bye-Laws

The Company proposes to amend Bye-Law 8 to facilitate the Fundraising by bringing it in line with the Listing Rule 9.3.12 and allow the Company flexibility to deal with fractional entitlements and Overseas Shareholders in the context of a dis-application of pre-emption rights. As is customary under open offers and as specifically permitted under the Listing Rules, the proposed amendment will allow the Company to exclude certain Overseas Shareholders from participating in the Open Offer which would otherwise result in the Company being obliged to comply with costly and time-consuming registration requirements imposed by local regulatory laws. Accordingly, the Open Offer is not being made to shareholders located in an Excluded Territory. Similarly, it is customary under open offers and specifically permitted under the Listing Rules in order to allow for flexibility in dealing with and allocating any fractional entitlements arising under the Open Offer.

The Company proposes to amend Bye-Law 102 to provide greater flexibility in allowing the Company to carry out fundraisings. As currently drafted Bye-Law 102 restricts the Company and/or any of its subsidiaries from borrowing an amount which would exceed an amount equal to two and a half times the adjusted share capital and consolidated reserves of the Company. The effect of the proposed amendment is to clarify that borrowings excludes non-redeemable financial instruments of the Company, such as the Convertible Instruments and borrowings by Lansen, and that adjusted share capital includes non-redeemable financial instruments of the Company, such as the Convertible Instruments, for the purposes of the calculation of borrowing limits under Bye-Law 102.

Resolution 3, to be proposed at the SGM as a special resolution, proposes these changes to Bye-Laws 8 and 102.

10. Further Starry Share Disposals

The Company proposes to approve of the planned disposal by Lansen of its remaining 6,715,972 shares in Starry, which have an aggregate market value of RMB 488.3 million (USD 68.9 million) as at the Latest Practicable Date, and any subsequent bonus issue entitlement.

The Further Starry Share Disposals constitute a Class 1 transaction under the Listing Rules and are subject to shareholder approval. The Company previously obtained shareholder approval at a general meeting held on 12 April 2019 and as that approval expires on 11 April 2020 the Company is seeking approval in respect of a further 12 month period from the date of the SGM.

Information regarding these proposals is provided in the Prospectus.

11. Background to the Proposed Transfer

The Proposed Transfer is a result of discussions with the FCA in relation to the appropriate categorisation of the Company under the Listing Rules with respect to technical considerations related to, inter alia, the Group's structure which may be considered to be incompatible with the Premium Listing. The discussions with the FCA arose from the Enforcement Case and the Starry Share Disposal in June 2018.

In May 2019, Cathay announced the outcome of an investigation by the FCA which had commenced in 2016 (the "Enforcement Case"). The FCA had issued a Decision Notice to Cathay for breaches of the Listing Principles and DTRs, as a result of which Cathay received a fine of GBP411,000. The FCA found, inter alia, that Cathay breached Listing Principle 1 by failing to take reasonable steps to establish and maintain adequate procedures, systems and controls to enable it to comply with its obligations as a listed company and breached DTR 2.2.1R and Premium Listing Principle 6 by failing to disclose to the market as soon as possible inside information relating to its expected financial performance for the year ended 31 December 2015. In addition, in August 2018, the FCA wrote to the Company to raise a concern that Cathay may not be able to demonstrate that it continues to carry on an independent business and that it continues to exercise operational control over its business.

The concern stems from the Group's structure relating to its ownership of Lansen, a 52.83 per cent. owned subsidiary which was listed on the Hong Kong Stock Exchange in 2010. Although Lansen is Cathay's subsidiary, it has operated and been managed independently since its listing in 2010, as required by the Hong Kong Listing Rules. Cathay has board representation and a high degree of influence, and there is very significant integration of policies and procedures between Cathay and Lansen for the management of operations and strategy, finance functions and corporate governance functions. As listed entities, Cathay and Lansen seek to cooperate to ensure that the requirements of the UK and Hong Kong Listing Rules are met.

In June 2018, Cathay announced that Lansen had disposed of 2,400,000 Starry Shares for gross proceeds of USD 10.2 million, of which USD 2.8 million was recognised as a net gain by Cathay. This disposal constituted a Class 1 disposal for Cathay under the Listing Rules and Cathay should have sent an explanatory circular to shareholders and obtained their prior approval in a general meeting. As such, this disposal represented a breach by Cathay of its obligations under the Listing Rules.

Cathay had sought prior approval of such Starry Share Disposal and had submitted a number of drafts of a circular to the FCA. Cathay's sponsor in connection with that circular resigned before the circular could be published and during the Enforcement Case. During Cathay's circular vetting process, Lansen had sought board approval of further disposal of Starry Shares. Although Cathay's representatives on the board of Lansen had voted against the disposal as Cathay had not yet obtained shareholder approval, the other directors of Lansen had been of the view that the disposal would be in the interests of Lansen and its shareholders, and Lansen's board resolution was passed by a majority of votes. Unfortunately, the Starry Share Disposal in June 2018 occurred before Cathay obtained its shareholders approval.

Since 2018, Cathay has put in place policies and procedures to address the issues identified during the course of the Enforcement Case. Furthermore, the Company believes that the circumstances leading to the breach relating to the Starry Shares Disposal in June 2018 was an unusual isolated incident. However, Cathay cannot overcome the requirement that Lansen is managed independently and there remains a risk that Lansen could make decisions in the future which would cause breaches of the Listing Rules by the Company, as a result of which the Company's shareholders would not benefit from the protections afforded to shareholders of companies with Premium Listing. In such circumstances, the Listing Rules require that a listed company considers applying for a transfer of its listing category or seeking a cancellation of listing. Having discussed with the FCA and with its advisers, the Board has concluded that it should seek a transfer of listing category from premium to standard. A Standard Listing category would remove many obligations relating to transactions by premium listed companies (such as the Starry Shares Disposal in June 2018), but would retain the disclosure requirements which apply to all listing categories.

A summary of the key differences between the Standard Listing and Premium Listing is set out in the Prospectus.

Under the Listing Rules, the Proposed Transfer requires the Company to obtain the prior approval of a resolution for such transfer from:

i. a majority of not less than 75 per cent. of the votes attaching to the Common Shares voted on the resolution; and

ii. a simple majority of the votes attaching to the Common Shares of independent shareholders (being all Shareholders holding Common Shares other than the Controlling Shareholder) voted on the resolution.

Mr Wu, on behalf of the Controlling Shareholder, has indicated its intention to vote in favour of all of the Resolutions on which he is entitled to vote, including the Transfer Resolution in respect of his interests, which represent 59.50 per cent. of the votes to be cast in (i) above.

Pursuant to the Listing Rules, the date of transfer of listing category must not be less than 20 Business Days after the passing of the relevant resolution. The Board proposes to apply as soon as possible for the transfer to be effected and so, subject to the passing of the Transfer Resolution and the FCA confirming that the Company meets the eligibility requirements for such a listing, it is anticipated that the date of transfer will be 16 June 2020. The Common Shares will, on completion of the transfer, continue to be traded on the Main Market, but under the designation "Listed: Standard".

The Board is firmly of the belief that the Proposed Transfer is in the best interests of both the Company and its Shareholders, and recommends Shareholders to vote in favour of the Transfer Resolution.

In the event that the Transfer Resolution is not approved by Shareholders, the Company will issue a further circular to Shareholders for a further special general meeting at which Shareholders would be asked for a second time to approve a resolution for a transfer of listing category. Under the terms of the Sponsor Agreement, the Sponsor may terminate the Open Offer and the Subscription in certain circumstances, which would include the failure to pass the Transfer Resolution or the possibility that it could not be passed at a further special general meeting, at any time prior to Admission, in which circumstances the Fundraising would not proceed.

If the Company did not pursue the Proposed Transfer and the shares were to remain in the Premium Listing category, there is a risk that the Company could not meet its continuing obligations under the Listing Rules, as described above, leading to the FCA using its powers to cancel the admission of the Company's shares to the Official List. If the FCA were to cancel admission, the Common Shares would no longer trade on the London Stock Exchange and Shareholders ability to buy and sell the Common Shares would be severely impaired.

12. Trading Update and Outlook

Due to the outbreak of coronavirus, the Chinese government limited travel within China and extended the Chinese New Year holiday period in an attempt to control spread of the infection. The Group coordinated and acted swiftly with multiple authorities, and deployed prevention and control measures in a timely manner.

The Group stopped production during the extended Chinese New Year holiday period until late February when the Group gradually resumed business and production. At present, our pharmaceutical, healthcare and cosmetic businesses and production at all of our plants has been resumed, and the Group is able to continue to implement the current strategy for the pharmaceutical, healthcare and cosmetic businesses.

The disruption caused by the coronavirus to the businesses did not have a significant adverse impact on our pharmaceutical, healthcare and cosmetic performance in the first quarter of 2020, but the current financial year is expected to be challenging.

However, the Hotel showed a marked reduction in occupancy and bookings which resulted from the travel restrictions within China, and this will have a material adverse impact on the Hotel's performance for this year.

There remains very considerable uncertainty over the potential consequences of the outbreak in China and around the world, which may cause further reductions in global demand for goods (including those produced by Cathay), disrupted supply chains or restricted movement and business activities. In China, the coronavirus has not been completely eradicated and a second wave of infection is a possibility. The Group's business outlook could be gravely affected by such developments. Cathay will closely monitor the performance of its businesses and will adapt its strategy to cope with changing circumstances.

The Company anticipates that these trading conditions and trends will continue in 2020. The majority of the anticipated benefits of the proposed investments outlined in the Prospectus will impact results from the second half of 2021 onwards, other than the interest savings, depending on the level of take up under the Fundraising.

13. Special General Meeting

You will find set out at the end of the Prospectus a notice convening a Special General Meeting to be held at 9.30 am on 15 May 2020 at Suites 1203-4, 12/F, Li Po Chun Chambers 189 Des Voeux Road Central Hong Kon at which the Resolutions will be proposed for the Proposed Transfer, to permit the implementation of the Fundraising, to amend the Bye-Laws and to approve the Further Starry Share Disposals.

Resolution 1 is proposed as a special resolution to approve the transfer of listing category on the Official List from premium to standard.

Resolution 2 is proposed as a special resolution to reduce the par value of each share comprising the Company's issued and authorised share capital from USD 0.05 to USD 0.01. This reduction in the par value of the Common Shares will be effected by cancelling the paid-up capital of the Company to the extent of USD 0.04 on each of the Existing Shares and crediting the same to a contributed surplus share account of the Company. The par value of the authorised but unissued share capital of the Company will also be reduced from USD 0.05 to USD 0.01 such that any new shares in the share capital of the Company will be issued with a par value of USD 0.01.

Resolution 3 is proposed as a special resolution to amend the Bye-Laws is in respect of existing Bye-Law 8 and existing Bye-Law 102.

Resolutions 4, which is conditional on the passing of Resolution 2, is proposed as ordinary resolution to increase the Company's authorised share capital in order to allow the implementation of the Fundraising.

Resolution 5, which is conditional on the passing of Resolution 4, is proposed as an ordinary resolution in order to create authorised but unissued share capital sufficient to implement the Fundraising and a further one third of the issued share capital, assuming the Fundraising is fully subscribed. The Directors have no present intention of issuing any part of the unissued authorised share capital, other than in connection with the Fundraising.

Resolution 6, which is conditional on the passing of Resolutions 4 and 5, is proposed as a special resolution and seeks authority for the Directors to allot and issue (i) shares under the Open Offer as if Bye-Law 8 did not apply to the allotment provided that the power is limited to a maximum nominal amount not exceeding USD 70,277,779.27 (representing 7,027,777,927 New Common Shares equating to 1,857 per cent. of the issued share capital of the Company as at the Latest Practicable Date) and (ii) other shares and equity securities for cash as if Bye- Law 8 did not apply to the allotment, provided that the power is limited to a maximum nominal amount not exceeding 7,415,173.96 (representing 741,517,396 new Common Shares equating to 10 per cent. of the issued share capital of the Company as enlarged by the Fundraising).

Resolution 7 is proposed as an ordinary resolution to approve the Further Starry Share Disposals.

Voting

The holders of all of the Common Shares and all of the A Shares may vote on all Resolutions, save as:

Resolution 1

Under the Listing Rules, the Proposed Transfer requires the Company to obtain the prior approval of a resolution for such transfer from:

· a majority of not less than 75 per cent. of the votes attaching to the Common Shares voted on the resolution; and

· a simple majority of the votes attaching to the Common Shares of independent shareholders (being all Common Shareholders other than the Controlling Shareholder) voted on the resolution.

· The votes attaching to the A Shares will not be counted on Resolution 1; and

Resolution 7

Under the Listing Rules, approval of a Class 1 transaction such as the Further Starry Share Disposals requires a majority of the votes attaching to the Common Shares voted on the resolution.

The votes attaching to the A Shares will not be counted on Resolution 7.

Under the terms of the Open Offer, Shareholders who submit an Application Form will irrevocably agree to vote in favour of the Transfer Resolution and, in the event that the Transfer Resolution is not approved at the SGM, to vote in favour of a future resolution on the proposed transfer of listing category at a second special general meeting of the Company if called by the Company.

14. Action to be taken

Special General Meeting

A Form of Proxy for use by Shareholders or a Form of Direction for use by DI Holders, as applicable, in connection with the Special General Meeting will be issued with the Prospectus. If you are a Shareholder or DI Holder, you are requested to complete, sign and return the Form of Proxy or Form of Direction, whether or not you intend to be present at the meeting, and return it to Link Asset Services, PXS 1, 34 Beckenham Road, Beckenham, Kent, BR3 4ZF as soon as possible and in any event so as to arrive not later than 9.30 a.m. on 13 May 2020 for Forms of Proxy and not later than 9.30 a.m. on 12 May 2020 for Forms of Direction. If you are a holder of Shares (but not Depository Interests), the completion and return of a Form of Proxy will not prevent you from attending the Special General Meeting and voting in person should you subsequently wish to do so. If you are a Qualifying DI Holder, completion of the Form of Direction will not preclude you from attending the Special General Meeting, should you wish. If you hold your shares via the Depository Interest arrangement and would like to attend the Special General Meeting, please contact the Depository, Link Asset Services.

CREST members who wish to appoint one or more proxies through the CREST system may do so by using the procedures described in "the CREST voting service" section of the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed one or more voting service providers, should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.

Open Offer

Qualifying Shareholders who wish to apply for New Common Shares should complete the Application Form accompanying the Prospectus in accordance with the instructions set out in the Prospectus and the Application Form. To be valid, duly completed Application Forms must be returned, with the appropriate remittance, with respect to payments in Sterling, to Link Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU as soon as possible and in any event so as to be received by no later than 11.00 a.m. on 13 May 2020 and, with respect to payments in USD (provided that the application is in excess of GBP100,000), to the Company's Secretary at the Head Office address set out in the Prospectus as soon as possible and in any event so as to be received by no later than 9.00 a.m. on 13 May 2020.

Qualifying DI Holders will receive a credit to their appropriate CREST stock account in respect of their Open Offer Entitlements representing their maximum entitlement under the Open Offer and a credit in respect of the Excess Open Offer Entitlement for use in connection with the Excess Application Facility.

They should refer to the procedures for application in the Prospectus and should refer to their CREST sponsors regarding the action to be taken in connection with the Prospectus and the Open Offer.

If you do not wish to apply for any of the New Common Shares you should not complete or return an Application Form or, in the case of Qualifying DI Holders, take any action with regard to your CREST stock account. Shareholders and DI Holders are nevertheless requested to complete and return the Form of Proxy or Form of Direction, as appropriate.

15. Intentions regarding the Open Offer and the SGM

Mr Wu Zhen Tao is interested in 225,156,434 Common Shares and 8,249,276 A Shares representing 60.25 per cent. of the Existing Shares by number, 59.50 per cent. of the votes attaching to the Common Shares (only the votes attaching to the Common Shares will be counted for Resolutions 1 and 7) and 69.98 per cent. of the votes attaching to the Common Shares and A Shares in aggregate (the votes attaching to both the Common Shares and the A Shares will be counted for Resolutions 2, 3, 4, 5 and 6).

Mr Wu, on behalf of CIEW43 (the Controlling Shareholder through which he and his family hold their interests in the Company), has expressed his enthusiasm over the plans for investment described in the Prospectus, and has confirmed that the direct shareholder entities, Circle Finance and Mega Worldwide, which are ultimately owned by CIEW43 intend to vote in favour of all of the Resolutions and would like to subscribe for their full entitlement, GBP58.6 million (USD72.3 million), under the Open Offer, subject to the level of take up by other Shareholders in the Open Offer and by new investors in the Subscription. However, the Controlling Shareholder has committed to apply for a minimum of GBP8.1 million (USD10 million) in the Open Offer, which would be sufficient to meet the Minimum Proceeds.

16. Dividend Policy

The New Common Shares will rank pari passu in all respects with the Existing Common Shares including the right to receive all dividends and other distributions (if any) declared, pared or made by the Company.

The Company has adopted a dividend policy, pursuant to which the Company gives priority to distributing dividends in cash to share profit with the Shareholders. The dividend payout ratio shall be determined or recommended, as appropriate, by the Board at its absolute discretion after taking into account the following:

· the provisions of the Bye-Laws;

· the applicable restrictions and requirements under the laws of Bermuda;

· the Company's results of operations, financial condition and cash flows;

· operating expenditure, capital expenditure and the investment requirements of the Company; and

· any other factors that the Board may consider relevant.

No dividends have been paid in or declared in respect of the three years ended 31 December 2017, 2018 and 2019.

17. Risk Factors

Your attention is also drawn to the risk factors included in the Prospectus. These factors could have an adverse impact on the Group's results of operations, financial condition and prospects.

18. Working Capital

The following working capital statement is set out in the Prospectus:

"The Company is of the opinion that the Group does not have sufficient working capital for its present requirements, that is, for at least the next 12 months following the date of this Prospectus.

For the purposes of making this working capital statement the Company has prepared and analysed a downside working capital forecast for the Group to illustrate the effects of a reasonable worst case scenario, which assumes, inter alia, that no proceeds are received from the Fundraising, no Further Starry Share Disposals take place and current borrowings are not renewed or refinanced before their maturity dates. In relation to the impact of the Covid-19 pandemic, it is assumed that this principally impacts on the hotel business in 2020 and has a less significant adverse impact on the performance of the Group's pharmaceutical, healthcare and cosmetic businesses. As a result, the downside working capital forecast assumes, inter alia, that, in the working capital period, revenue from the hotel business is 80 per cent. lower than in 2019 until 2021 when it is 30 per cent. lower than in 2019, revenue from Lansen is 3 per cent. lower than in 2019, and revenue from Natural Dailyhealth is 9 per cent. lower than in 2019. Therefore, trading is assumed to continue to generate an operating loss. However, there remains uncertainty as to how the Covid-19 pandemic will develop in China and worldwide and the severity of the impact on the economy and the Group's businesses and hence whether its impact could be more significant than reflected in the downside working capital forecast.

Under the downside working capital forecast, the Group will incur a net cash outflow from operating and investing activities, in addition to the repayment of borrowings, resulting in a working capital shortfall for the Group of USD 3.6 million arising in May 2020 increasing to USD 91.5 million by April 2021. The downside working capital forecast has been prepared on the assumptions set out in the paragraph above and is subject to the uncertainty as to how the Covid-19 pandemic will develop in China and worldwide and the severity of the impact on the economy and the Group's businesses, which could cause a greater shortfall than that currently forecast in the Company's downside working capital forecast.

The Group's major subsidiary, Lansen, manages its working capital independently within the Lansen Group. Throughout the period covered by the working capital statement, Lansen is forecast to operate within its existing borrowing facilities. Therefore, the shortfall identified above reflects the downside forecast for the Group, excluding Lansen, assuming that no dividend is received from Lansen.

The downside working capital forecast also shows an ongoing working capital shortfall beyond the next 12 months, primarily due to expiry of existing borrowing facilities and repayment of existing borrowings, and on the assumption of continuing operating losses.

Therefore, the Group anticipates that it will need to raise up to USD 91.5 million in order to maintain sufficient working capital for the period of 12 months from the date of this Prospectus, based on the Company's assumptions used to prepare the downside working capital forecast and subject to the uncertainty as to how the Covid-19 pandemic will develop in China and worldwide and the severity of the impact on the economy and the Group's businesses, which could cause a greater shortfall than that currently forecast in the Company's downside working capital forecast. Thereafter, the Group will need to raise sufficient funds to cover ongoing operating losses and to repay or refinance borrowings.

The principal sources of finance to address the working capital shortfall are expected to come from the Fundraising, dividend income from Lansen, new borrowings (or through negotiating extended terms and renewals of existing borrowings) and achieving revenue growth which returns the Group to profitability.

The Fundraising, if it proceeds, would raise a minimum of GBP 8.1 million (USD 10 million) and a maximum of up to GBP 105.4 million (USD 130 million). If the Minimum Proceeds were received, there would be GBP 6.5 million (USD 8 million after expenses) available for working capital purposes which would reduce the working capital shortfall, increasing to up to GBP 103.8 million (USD 128 million) if more than the Minimum Proceeds is received. On the basis that Mr Wu, on behalf of the Controlling Shareholder, has committed to take up at least GBP8.1 million (USD10 million) in the Open Offer, the Directors are confident that at least USD 10 million will be raised in the Open Offer. The extent to which funds are raised in excess of this amount will depend on whether the remaining Shareholders take up their entitlements and/or whether new investors participate in the Subscription and, unless the Fundraising raises substantially more than the Minimum Proceeds, the Group will continue to have a shortfall and will need to rely on other means to meet its ongoing requirements.

The Further Starry Share Disposals, if they proceed, would generate cash within Lansen of up to (USD 69 million) at current market prices. The proceeds of the Further Starry Share Disposals are primarily intended to be used by Lansen for its working capital purposes, rather than the wider Group, and would not therefore impact the working capital shortfall identified above. However, if Lansen decides to pay a dividend using its retained profits and/or the proceeds of the Further Starry Share Disposals (the Company received a special dividend of USD 4.0 million in 2017 following the first disposal of Starry Shares), this would reduce the working capital shortfall. The Group has successfully sold 9,729,028 Starry Shares over the past 11 months for gross proceeds of USD 42.9 million. Subject to market conditions, the Directors are confident that the remaining 6,715,972 Starry Shares can be disposed of within the 12 months following the SGM.

The Company has managed its finances with a reliance on relatively short term bank borrowings for several years. In the three years ended 31 December 2017, 2018 and 2019, Cathay (excluding Lansen) has raised USD69.2 million, USD28.4 million and USD45.3 million, respectively, in new bank borrowings. The Directors expect that that Cathay (excluding Lansen) will continue to be able to refinance or renegotiate bank borrowings, but are cognisant that there are increasing risks that banks may be less willing to lend or will only do so on more onerous terms, given the ongoing losses, existing borrowings and challenging market conditions in light of the impact of the ongoing coronavirus outbreak and trade war between China and the US.

The Directors are confident of returning the Group to growth over the medium term and that doing so could generate additional cash; however, the Company has no expectation that improving trading performance will materially reduce the Group's working capital shortfall in the next 12 months.

Accordingly, the Directors expect that the Group will primarily raise the working capital that it needs for the foreseeable future from the proceeds of the Fundraising, Further Starry Share Disposals and new borrowings (or through negotiating extended terms and renewals of existing borrowings), subject to the uncertainty as to how the Covid-19 pandemic will develop in China and worldwide and the severity of the impact on the economy and the Group's businesses.

To the extent that the Group cannot address its shortfall in full through these measures, the Group may also consider raising funds through a further equity issue and/or through assets sales, such as the hotel and/or its associated staff accommodation block and/or part or all of the Group's shareholding in Lansen (whose shares are listed on the Hong Kong Stock Exchange). In the current challenging market conditions, the Directors believe such alternative measures would be difficult to achieve or may not be achievable at valuations which reflect the current price of the shares or most recent asset valuations, and it is not possible to say whether these measures alone would sufficient to address the shortfall in its entirety.

If all of the above actions were unsuccessful, it is likely that the Company would not be able to continue as a going concern. If the Company is not able to continue as a going concern, it would enter an insolvency process and, whilst the Group has net assets (based on the last published balance sheet), there would be no certainty of the value that may remain for Shareholders, if any, once all liabilities had been settled, and the shares would cease trading on the London Stock Exchange."

19. Importance of your Vote

The Resolutions must be passed by Shareholders at the SGM in order for the Fundraising, reduction of Common Share par value, amendments to the Bye-Laws, Proposed Transfer and the Further Starry Share Disposals to proceed.

In the event that Resolution 1 is not approved by Shareholders, the Company will issue a further circular to Shareholders for a further special general meeting at which Shareholders would be asked for a second time to approve the resolution for a transfer of listing category. Under the terms of the Sponsor Agreement, the Sponsor may terminate the Open Offer and the Subscription in certain circumstances, which would include the failure to pass the Transfer Resolution or the possibility that it could not be passed at a further special general meeting, at any time prior to Admission, in which circumstances the Fundraising would not proceed. Failure to approve the Transfer Resolution would also present a serious risk that the FCA may use its powers to cancel the admission of the Common Shares to listing in which circumstances the Common Shares would no longer trade on the London Stock Exchange and shareholders ability to buy and sell the Common Shares would be severely impaired.

Resolutions 2, 4, 5 and 6 (the Fundraising Resolutions), must all be approved for the Fundraising to proceed. As described in paragraph 21 above regarding working capital, the Company is of the opinion that the Group does not have sufficient working capital for its present requirements, i.e., for at least the next 12 months following the date of the Prospectus. Accordingly, if Shareholders do not approve all of the Fundraising Resolutions:

· none of the proceeds of the Fundraising will be received;

· the investments Haizi, Botai and the Hotel will not proceed; and

· the Group will not be able to repay bank borrowings or the shareholder loans, or to reduce trade and other payables balances.

Shareholders are asked to vote in favour of the Fundraising Resolutions at the SGM in order for the Fundraising to proceed. The Directors believe that the successful completion of the Fundraising will, subject to the amount raised, significantly strengthen the Group's balance sheet and provide it with the capacity to continue to invest in support of its strategic objectives for the benefit of Shareholders.

Shareholders are also asked to vote in favour of Resolution 7 to permit the Further Starry Share Disposals to proceed.

If the Fundraising Resolutions and the Further Starry Share Disposals are not approved, the Fundraising and the Further Starry Share Disposals will not proceed and the Group will not receive any proceeds of the Fundraising and Lansen will not receive any proceeds of the Further Starry Share Disposals (and will therefore be less likely to pay a material dividend). Under such circumstances the Group (excluding Lansen) will have a working capital shortfall in the very short term of USD 3.6 million by May 2020 which is expected to continue to rise to USD 91.5 million (under a reasonable worst case scenario) by April 2021 and to continue to rise thereafter.

Lansen, the Group's major subsidiary, manages its working capital independently from the rest of the Group. Throughout the period covered by the working capital statement, Lansen is forecast to operate within its existing borrowing facilities. Therefore, the shortfall identified above reflects the downside forecast for the Group, excluding Lansen, assuming that no dividend is received from Lansen. The proceeds of the Further Starry Share Disposals are primarily intended to be used by Lansen for its working capital purposes, rather than the wider Group, and would not therefore impact the working capital shortfall identified above. However, if Lansen decides to pay a dividend using its retained profits and/or the proceeds of the Further Starry Share Disposals (the Company received a special dividend of USD 4.0 million in 2017 following the first disposal of Starry Shares), this would reduce the working capital shortfall. It is therefore important that Shareholders vote to approve the Further Starry Share Disposal.

The Directors believe that the funding shortfall and negative sentiment in the event that the Fundraising and the Further Starry Share Disposals did not proceed would make raising new debt finance considerably more difficult. The Directors expect that in such circumstances they would need to consider selling assets, including the Group's interests in Lansen (which have a current market valuation of USD 18 million) and the Hotel (which was valued at USD 135.2 million as at 31 December 2019 by Colliers International (Hong Kong) Ltd., albeit on the assumption that the proposed reconfiguration is completed). There is no guarantee that buyers would be found, or on what timescale they could be found, or that the actual prices achieved would be sufficient to meet the Group's debts.

The Directors believe there would be a significant risk that the Group would not have the funds available to repay amounts when required. If it is unable to do so, absent further action, the Group could become insolvent and may be required to cease trading, and Shareholders could lose all or part of the value of their investment in the Company.

If the Fundraising Resolutions are approved and the New Common Shares are issued, the Directors expect that sufficient New Common Shares will be issued to increase the percentage of shares in public hands to at least 25 per cent. If the Fundraising does not proceed, no New Common Shares will be issued and the percentage of shares in public hands will likely remain below 25 per cent. The Company would need to discuss and agree a plan of action with the FCA, which would include a possible alternative issue new shares to investors who would count toward public hands or to encourage existing shareholders who do not count towards public hands to reduce their shareholdings below 5 per cent. The Company may apply to the FCA for, and the FCA may agree to, a modification of Listing Rule 9.2.15R to allow a percentage of shares in public hands of less than 25 per cent. on a temporary basis if the Company was able to demonstrate to the FCA that the market for the shares will operate properly with a lower percentage. There can be no guarantee that an application to the FCA will be granted and if a modification is not granted or the Company is not successful in taking action to increase the percentage of shares in public hands to at least 25 per cent., the FCA may use its enforcement powers to suspend or cancel the admission of the Company's shares to the official list. In addition, if the Fundraising does not proceed but the transfer to the standard list is approved by Shareholders, the percentage of shares in public hands would likely remain below 25 per cent. and the Company would, in order to meet the eligibility requirements for admission to the standard list, need to make an application to the FCA for a modification of Listing Rule 14.2.2R to allow a percentage of shares in public hands of less than 25 per cent. on a temporary basis if the Company was able to demonstrate to the FCA that the market for the shares would operate properly with a lower percentage. If the FCA did not grant the modification of Listing Rule 14.2.2R, the transfer could not proceed, the Company would continue to be in breach of Listing Rule 9.2.15R and, if no alternative plan of action could be agreed with the FCA, the FCA may use its enforcement powers to suspend of cancel the admission of the Company's shares to the official list. If the FCA were to suspend or cancel admission, the Common Shares would no longer trade on the London Stock Exchange and shareholders ability to buy and sell the Common Shares would be severely impaired.

As such, it is very important that Shareholders vote in favour of each of the Resolutions at the SGM so that, assuming that the other conditions are satisfied, all of the proposals set out in the Prospectus can proceed.

Under the terms of the Open Offer, Shareholders who submit an Application Form will irrevocably agree to vote in favour of the Transfer Resolution, and, in the event that the Transfer Resolution is not approved at the SGM, to vote in favour of a future resolution on the proposed transfer of listing category at a second special general meeting of the Company if called by the Company."

20. Recommendation

The Board considers the Proposed Transfer, the Fundraising, reduction of Common Share par value, amendments to the Bye-Laws and Further Starry Share Disposals to be in the best interests of the Company and Shareholders as a whole. Accordingly, the Board recommends Shareholders to vote in favour of the Resolutions.

The Directors, who in aggregate hold 229,156,434 Existing Common Shares and 8,249,276 Existing A Shares representing approximately 60.55 per cent. of the votes entitled to vote on Resolution 1 (the Transfer Resolution) and Resolution 7 (the resolution relating to the Further Starry Share Disposals) and 70.70 per cent. of the votes entitled to vote on Resolutions 2, 3, 4, 5 and 6, intend to vote in favour of the Resolutions.

19. Indicative Timetable

Unless specifically set out above, all references to time in this announcement relate to London time.

20. Prospectus

The Prospectus containing full details of the Proposals is expected to be made available on the Company's website www.cathay-intl.com.hk later today.

The Prospectus will be submitted to the National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism following publication.

This announcement should be read in conjunction with the full text of the Prospectus. Capitalised terms used in this announcement shall have the meanings set out below.

For further enquiries, please contact:

IMPORTANT NOTICE:

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation ("MAR") EU no.596/2014. Upon the publication of this announcement via Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

This announcement has been issued by and is the sole responsibility of the Company. This announcement is not a prospectus but an advertisement and investors should not acquire any New Common Shares referred to in this announcement except on the basis of the information contained in the Prospectus to be published by the Company in connection with the Prosposals. The information contained in this announcement is for background purposes only and does not purport to be full or complete. No reliance may or should be placed by any person for any purpose whatsoever on the information contained in this announcement or on its accuracy or completeness. The information in this announcement is subject to change.

Copies of the Prospectus when published will be available from the head office of the Company and on the Company's website at ww.cathay-intl.com.hk provided that the Prospectus is not, subject to certain exceptions, available (through the website or otherwise) to Shareholders in the United States of America or any other Excluded Territory. Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this announcement. The Prospectus provides further details of the New Common Shares being offered pursuant to the Fundraising.

This announcement is for information purposes only and is not intended to and does not constitute or form part of any offer or invitation to purchase or subscribe for, or any solicitation to purchase or subscribe for New Common Shares in any jurisdiction. No offer or invitation to purchase or subscribe for, or any solicitation to purchase or subscribe for New Common Shares will be made in any jurisdiction in which such an offer or solicitation is unlawful. The information contained in this announcement is not for release, publication or distribution to persons in the United States or any other Excluded Territory, and should not be distributed, forwarded to or transmitted in or into any jurisdiction, where to do so might constitute a violation of local securities laws or regulations.

This announcement is not an offer of securities for sale in the United States. The New Common Shares and the Application Forms have not been and will not be registered under the Securities Act or under any securities laws of any state or other jurisdiction of the United States and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within the United States except pursuant to an applicable exemption from or in a transaction not subject to the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. There will be no public offer of the New Common Shares in the United States.

The distribution of this announcement into jurisdictions other than the United Kingdom may be restricted by law, and, therefore, persons into whose possession this announcement comes should inform themselves about and observe any such restrictions. Any failure to comply with any such restrictions may constitute a violation of the securities laws of such jurisdiction. In particular, subject to certain exceptions, this announcement, the Prospectus (once published) and the Application Forms (once printed) should not be distributed, forwarded to or transmitted in or into the United States or any other Excluded Territory.

This announcement does not constitute a recommendation concerning any investor's options with respect to the Proposals. The price and value of securities can go down as well as up. Past performance is not a guide to future performance. The contents of this announcement are not to be construed as legal, business, financial or tax advice. Each Shareholder or prospective investor should consult his, her or its own legal adviser, business adviser, financial adviser or tax adviser for legal, financial, business or tax advice.

This announcement contains forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "will", "may", "should", "would", "could", "is confident", or other words of similar meaning. Undue reliance should not be placed on any such statements because they speak only as at the date of this announcement and, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and Low & Bonar's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements.

There are a number of factors which could cause actual results to differ materially from those expressed or implied in forward-looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are: increased competition, the loss of or damage to one or more key relationships, changes to customer ordering patterns, price level changes, the failure of one or more key suppliers, the outcome of business or industry restructuring, the outcome of any litigation, changes in economic conditions, currency fluctuations, changes in interest and tax rates, changes in raw material or energy market prices, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, technological developments, the failure to retain key management, or the key timing and success of future acquisition opportunities or major investment and research and development projects.

Neither the Company nor SPARK are under any obligation to update or revise publicly any forward-looking statement contained within this announcement, whether as a result of new information, future events or otherwise, other than in accordance with their legal or regulatory obligations (including under the Listing Rules, the Disclosure Guidance and Transparency Rules and the Prospectus Rules).

Notice to all investors

Spark Advisory Partners Limited, which is authorised and regulated in the United Kingdom by the FCA, is acting solely for the Company as sponsor and for no one else in relation to the Fundraising, the content of this announcement, the Prospectus and other matters described in the Prospectus, and will not be responsible to anyone other than the Company for providing the protections afforded to the clients of Spark or for providing advice to any other person in relation to the Fundraising, the content of this announcement, the Prospectus or any other matters described in the Prospectus.

Apart from the responsibilities and liabilities, if any, which may be imposed upon Spark by FSMA or the regulatory regime established thereunder, Spark does not accept any responsibility whatsoever or make any representation or warranty, express or implied, concerning the contents of this announcement or the Prospectus, including its accuracy, completeness or verification, or concerning any other statement made or purported to be made by it, or on its behalf, in connection with the Company or the Fundraising, and nothing in this announcement or the Prospectus is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or future. Spark accordingly disclaims, to the fullest extent permitted by law, all and any responsibility and liability whether arising in tort, contract or otherwise (save as referred to herein) which it might otherwise have in respect of this announcement or the Prospectus or any such statement.

Definitions

The following definitions apply throughout the Prospectus unless the context otherwise requires:

References to page numbers, paragraphs and Parts are references to such page numbers, paragraphs and Parts of the Prospectus, unless the context requires or indicates otherwise.