Annual Results for the Year Ended 31 December 2011

Cathay International Holdings Limited

("Cathay" or the "Company")

Annual Results for the Year Ended 31 December 2011

Hong Kong, 29 March 2012 - Cathay International Holdings Ltd. (LSE: CTI.L), an investment holding company and a leading investor in the growing healthcare sector in the People's Republic of China, today announces its Annual Results for the year ended 31 December 2011.

Group

·; Revenues up by 12.0% to USD91.4 million (2010: USD81.6 million)

·; Gross profit up by 14.5% to USD46.8 million (2010: USD40.9 million)

·; Operating profit increased to USD10.2 million (2010: USD9.8 million)

·; Profit attributable to owners of the parent increased to USD1.4 million (2010: USD0.9 million)

·; Net assets per share as at 31 December 2011 were USD0.53 (2010: USD0.50)

Lansen

·; Revenues up by 27.1% to USD74.5 million (2010: USD58.6 million)

·; 28.8% growth in sales of core anti-rheumatic products (Pafulin, Tuoshu, and MMF)

·; 15.5% increase in gross profit to USD44.4 million (2010: USD38.4 million)

·; Operating profit up by 7.6% to USD13.9 million (2010: 13.0 million)

·; Increased and first full year contribution of USD1.9 million (2010: USD0.2 million) from 20% stake in Starry (iohexol X-ray contrast agent)

·; Strong growth in net profit, up by 24.6% to USD12.7 million (2010: USD10.2 million)

·; Expansion of plant extract capacity and establishment of white peony plantation base

·; New collaborative agreements with Ethypharm (anti-inflammatory) and Shanghai Jahwa (dermatology)

Haotian

·; Revenues of USD5.0 million (2010: USD14.0 million) after strategic withdrawal from non-inositol commodities other than bilberry

·; Gross margin improved from 7.9% to 15.1% after eliminating unprofitable products

·; Operating loss reduced to USD1.9 million (2010: USD2.4 million)

·; Inositol plant expansion and the fifth phytin plant completed

·; A sixth phytin plant to become operational in Q2 2012 and a seventh phytin plant in H2 2012

·; Current output of inositol and DCP sold at market prices and contract negotiations ongoing for supply of inositol and DCP

·; Inositol production at full capacity by end of 2012

·; Feed grade certificate for DCP received and food additive grade certificate for DCP expected in H2 2012

·; Curcumin, a natural food colorant identified as new product; production to start in H1 2012, re-deploying existing non-inositol facilities

·; Expanded management team to streamline production efficiency, drive business growth and enhance operation controls

·; Positioned to build market share in inositol, DCP, bilberry and curcumin in 2012

Hotel

·; Revenues grew by 31.8% to USD11.9 million (2010: USD9.0 million)

·; Occupancy rate up to 54.6% (2010: 43.8%)

·; Average room rate up to USD135 (2010: USD128)

·; Gross profit increased by 23.9% to USD1.6 million (2010: USD1.3 million)

·; Operating profit up by 20.2% to USD1.3 million (2010: 1.1 million)

·; Improved results despite growing competition at high end of Shenzhen market

·; Hotel revalued to USD129 million (2010: USD122 million)

Research and Product Development

·; Production licence for collagen as injectable cosmetic filler should be granted in H1 2012

·; Misoprostol (for inducing labor) clinical trial completed and application for production licence to be prepared

Commenting on the Annual Results, Mr. Lee Jin-Yi, CEO of Cathay International Holdings Limited, said: "2011 was a year of building momentum at Cathay. Against a backdrop of volatility in global markets and inflation in China, Cathay was able to demonstrate growth in revenue and profit. Last year Cathay expanded its facilities, notably in Lansen and Haotian, broadened its product portfolios and focused on managing its cost base and improving operational efficiencies. China, and specifically the healthcare sector, continues to demonstrate high growth and benefit to Cathay. As a result, Cathay is competitively positioned to enter 2012 on a solid footing for further growth and value creation for its shareholders."

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About Cathay

Cathay International Holdings Limited (CTI.L) is an investment holding company and a leading investor in the growing healthcare sector in the People's Republic of China ("PRC").

Taking advantage of the strong and growing domestic demand for high quality healthcare products in China, Cathay aims to identify investment opportunities with emphasis on high growth healthcare markets and build them into market sector leaders, with a clear exit strategy. Cathay has already demonstrated a strong track record of identifying high-growth potential investment opportunities in this area including: Lansen Group, China's leading specialty pharmaceutical company focused on rheumatology and Haotian Group, a company engaged in the manufacture, marketing and sale of key active ingredients for healthcare products, including dietary supplement inositol. To complement its healthcare portfolio, Cathay has a research and product development business focused on bringing new products to the growing Chinese market.

The Group employs more than 2,000 people across the PRC, including over 30 specialist corporate and business development staff based at the holding company's offices in Hong Kong and Shenzhen. Cathay also has a private equity investment arm focused on minority investment opportunities and a hotel investment. For more information please visit the Company's website: www.cathay-intl.com.hk

CHAIRMAN'S STATEMENT

A year of building momentum

During the year, the Group worked on major expansion projects at both Lansen and Haotian and broadened our product portfolios to achieve economies of scale and build momentum for future growth. The Group also focused on managing our cost base and improving operation efficiency against an inflationary environment in China. Haotian completed the expansion of its inositol and phytin facilities and restructured its non-inositol business to identify curcumin as a product for further growth. Lansen started the expansion of its herbal extracts facilities to increase the raw material supply for Pafulin and other healthcare products.

Total sales of Lansen's three core products, Pafulin, Tuoshu, and MMF, registered a 28.8% growth over a year ago. Lansen signed a collaborative agreement with Ethypharm, a European pharmaceutical company, to market and distribute their ketoprofen/omeprazole capsules in China, its first agency arrangement with a multinational company. Haotian has been selling its trial production output to target customers at market prices. Haotian is in discussions with potential customers on annual sales contracts in preparation for the nearing commercial production. Haotian would seek to establish market share through competitive cost advantages. Revenue of the Hotel increased 31.8% to approximately USD12 million. This was mainly due to an improvement in room occupancy to 54.6% and increase in average room rate to USD135. Botai expects to receive the production license for its collagen product in the first half of 2012. 

In 2011, the Group recorded revenues growth of 12.0% to USD91.4 million up from USD81.6 million last year. The Group's gross profits grew by 14.5% to USD46.8 million (2010: USD40.9 million). Profits attributable to owners of the parent increased to USD1.4 million (2010: USD0.9 million).

The global economic growth, affected by the Euro zone debt crisis, slowed down to 3.8% in 2011, compared to 5.2% a year ago. The world financial markets have become more volatile since May 2011 and risks sharply escalated, resulting in declining equity markets and widening credit spreads. The global economic uncertainty has dented demand for goods exported from China. However, the Chinese government has shifted its focus to increase the domestic consumer demand rather than building exports in its 12th Five-Year Plan (2011-2015). Unlike Europe and the US, China has had to tighten its money supply and issue a series of control measures to rein in inflation and an overheated real estate market. In 2011, the Chinese economy still registered a 9.2% growth, down from 10.4% in 2010.

Healthcare is one of the sectors in China that benefit from the 12th Five-Year Plan. The Chinese government is committed to providing affordable healthcare and aiming at achieving 20% year-on-year growth in the pharmaceutical industry. In parallel with this, the Chinese government continues to control drug prices. Pharmaceutical companies see lower profit margins and depend on volume increases to grow. China's inflation peaked at 6.5% in July 2011 and stood at 5.8% towards year end after People's Bank of China raising interest rates three times. The inflation, along with various tax hikes, caused major increases in the Group's labor and raw material costs.

Facing the strong market growth and even stronger cost pressures, the Group's strategy has been to focus on managing its cost base, improving efficiency, and cautiously investing in new facilities across all its businesses to position its businesses in a competitive way so that they can capture the right opportunities through further market penetration.

Outlook

2012 will be a year of challenges and opportunities. A prolonged Euro debt crisis would limit the world economy growth and dampen demands for our exports. However, the cool down in the Chinese economy could also reduce inflation pressure on our cost structure. Our funding costs could increase due to widened credit spread resulting from a fragile banking system. On the other hand, the weak equities markets are also likely to provide us with more investment and acquisition opportunities this year for inorganic growth. With the momentum in our businesses, we will continue to drive growth while putting emphasis on efficiency, internal control and risk management.

Lansen will further diversify its product range through in-house product development, acquisitions and collaboration with multinational companies. It will improve its cost structure through better scale and further upstream integration. 

Achieving operation efficiency and capturing market shares will be Haotian's priorities for its core products. We anticipate Haotian to make significant contributions to the Group's earnings this year when it begins to market inositol and DCP in commercial quantities, and when the restructuring of its non-inositol business shows results.

Once Botai receives its production license in the first half of 2012, it will begin sales and marketing of its collagen product towards end of 2012. 

The Hotel will focus on bringing more corporate clients, while achieving a better room rate along with the Shenzhen market.

CIC plans to widen its investment scope and explore new opportunities that will create synergies with the Group's current portfolio. Investments in both public and private companies will be considered.

On behalf of the board, I am grateful for your continued support of Cathay and would like to thank all of our employees for their contributions in a demanding year 2011.

Sum Soon Lim

Chairman

29 March 2012

FINANCIAL REVIEW

Since the beginning of 2011, the Chinese economy began to show signs of inflation. While both Lansen and the Hotel achieved strong revenue growths, their cost base, in both raw materials and labor, jumped and offset part of contributions from the additional revenues. Competition also intensified. The pharmaceutical industry went through a much more rigorous bidding process, with lower winning bids, due to the Government's medical reform program. In Shenzhen, the Hotel was affected by several new additions of international luxury hotels.

Lansen initiated a series of strategic moves to strengthen its long term competitiveness, including establishing a plantation base in Anhui, expanding its plant extract capacity, signing its first foreign drugs agency agreement, and reducing its marketing expense ratio.

The Hotel enhanced its training and upgraded two of its food and beverages outlets to counter the new entrants. The management also remodeled the dormitory and the employee cafeteria to create an attractive working environment. Through quality service and proactive marketing, the Hotel gained recognition among individual travelers.

Haotian dedicated most of its resources to the construction of the inositol project. Management completed the construction of both Gongzhuling and Dunhua plants and focused on trial production and improving operation efficiency. Haotian also reviewed its non-inositol business to identify products which it has either a manufacturing or marketing advantage for its future growth. Haotian is ready to build market shares in its four key products, inositol, DCP, bilberry and curcumin in 2012, and become a significant profit contributor to the Group going forward.

Group Results

The Group's revenue recorded a 12.0% increase to USD91,385,000 (2010: USD81,630,000). This reflected the continued growth in Lansen which, through its core products and modern Chinese medicines, increased 27.1% in revenue to USD74,475,000 (2010: USD58,607,000), and in the Hotel which revenue grew 31.8% to USD11,915,000 (2010: USD9,040,000). Haotian ceased or reduced to a limited scale manufacturing of all non-inositol products other than bilberry. As a result, its revenue dropped by 64.3% to USD4,995,000 (2010: USD13,983,000).

The Group's gross profits increased by 14.5% or USD5,915,000 to USD46,770,000 (2010: USD40,855,000). This was primarily due to the contribution from Lansen which gross profits increased by 15.5% or USD5,954,000 to USD44,387,000 (2010: USD38,433,000), although at a lower margin compared to 2011.

The Group's operating profits rose by USD407,000 to USD10,204,000 (2010: USD9,797,000). However, the combined operating profits of Lansen, Haotian and the Hotel, reached USD13,282,000, a 14.6% increase over last year's USD11,591,000, which was partially offset by an increase in corporate office expenses of USD1,160,000 (described below).

The Group's finance costs reduced by 16.9% to USD2,091,000 (2010: USD2,517,000) despite of an increase in our total borrowings. As the new borrowings were mainly for our expansion capital expenditure, part of the interest expenses were capitalised (2011: USD571,000 compared to 2010: USD325,000). The lower average borrowing costs at 2.41% (2010: 2.61%) also contributed to the reduction.

The Group's profit for the year attributable to owners of the parent recorded an increase of USD537,000 to USD1,428,000 (2010: USD891,000). The increase mainly came from the full year contribution of Starry, a 20% owned associate company that was acquired in November 2010.

Corporate office expenses

The corporate office expenses for the year were USD2,198,000 (2010: USD1,038,000) after a recognition of other income USD2,431,000 arising on maturity of loan receivables. Last year's corporate office expenses included the reversal of an expired warranty provision of £2,000,000 (or USD3,198,000) under the terms of the sale of Stonehill Industrial Park in 2003.

Excluding such one-off items, corporate office expenses for the year were USD4,629,000 (2010: USD4,236,000). The change came from an increase in salaries and amortisation of share options granted under the Company's share option plan.

Group's Net Assets and Gearing

The Group's net assets as at 31 December 2011 were USD200,177,000 (2010: USD189,400,000). Net assets per share as at 31 December 2011 were USD0.53 (2010: USD0.50).

To fund expansion, the Group increased its net bank borrowings to USD106,139,000 (2010: USD89,023,000), out of which USD10.0 million related to Lansen and USD7.1 million related to Haotian. Net gearing reached 44.4%, up from 33.5%. As of year-end 2011, short term borrowings were USD114,511,000 (2010: USD45,409,000). The management is actively discussing with banks to renew or extend existing facilities, while exploring options to secure long term funding during the next twelve to eighteen months. Banks indicated preliminary interest to extend their facilities.

OPERATION REVIEW

HEALTH CARE BUSINESSES

The Lansen Group

Lansen's revenue increased by 27.1% to USD74,475,000 (2010: USD58,607,000). Revenue from rheumatic specialty prescription western pharmaceuticals amounted to USD49.1 million (2010: USD40.6 million), an increase of 21.1% over 2010, while revenue from other pharmaceuticals amounted to USD25.3 million (2010: USD18.0 million), an increase of 40.5% over 2010.

Revenue growth in rheumatic specialty prescription western pharmaceuticals was driven by 20.4% growth in Pafulin, 32.6% in Tuoshu and 343.2% in MMF (launched in May 2010). MMF, with its highly efficient and unique immunosuppressive effect and harmlessness to liver and kidneys, is used in the treatment of systemic lupus erythematous and lupus related kidney diseases. MMF generated revenue of USD2.1 million in 2011 (2010: USD0.5 million). It is on track to become another major revenue contributor. Revenue growth in other pharmaceuticals was primarily due to a 58.0% growth in modern Chinese medicines.

Lansen's top line growth was fueled by a growing population of patients suffering from autoimmune rheumatic diseases, increasing access to healthcare insurance and greater spending power. Both rounds of drug price control measures in last year, which affected antibiotics, cardiovascular, hormonal, endocrine and nervous system drugs, did not impact Lansen's specialty drugs.

To further enhance Pafulin's market leadership, Lansen has taken a series of strategic steps. In October 2011, Pafulin was awarded a National Torch Program Certificate by The Ministry of Science and Technology of the PRC. Endorsement from this program will significantly increase brand awareness and is expected to positively impact Pafulin's market position and help drive further sales growth.

Lansen started the expansion of its plant extract capacity to meet the future demand increase in Pafulin. The new facility, to be completed by 2013, will double the current capacity of Pafulin and other herbal healthcare products, providing more cost advantages to Lansen.

Lansen has established a white peony plantation base in Bozhou, Anhui Province. By integrating upstream, Lansen wishes to get a GAP ("Good Agriculture Practices") status for Pafulin and thus ensure better product quality. Lansen also wants to create better access to suppliers and market intelligence.

Lansen's gross profit increased by 15.5% to USD44,387,000 (2010: USD38,433,000). However, its gross profit margin decreased to 59.6% in 2011 (2010: 65.6%), a drop of 6.0% in margin. The gross profit margin of Pafulin decreased from 81.4% to 77.0% while Tuoshu, the agency product maintained its gross profit margin at 78.1% (2010: 78.0%). The decrease in gross profit margin was mainly due to the surge in Chinese herbs prices including white peony (Pafulin's raw material) since 2010 and new taxes introduced in 2011 (effectively at 1.2% of revenue). Lansen managed to build up white peony inventory for 2010 and part of 2011 during the early part of the Chinese herbs price hike and sheltered part of its Pafulin gross margin. The white peony price began to soften towards end of 2011.

Lansen's operating profit increased by 7.6% to USD13,942,000 (2010: USD12,952,000). The operating profit margin was reduced to 18.7% (2010: 22.1%), a drop of 3.4% in margin which was better than the 6.0% decline in gross profit margin. The improvement was due to Lansen's effort to manage down its marketing and selling expenses to 33.3% of revenue (2010: 34.9%).

Lansen recorded an increase in profits after income tax by 24.6% to USD12,729,000 (2010: USD10,213,000), due to the contribution from Starry in which Lansen has a 20% equity interest. In 2011, Starry experienced strong growth in domestic as well as export sales. Starry's contribution to Lansen was USD1,941,000 (2010: USD221,000 post investment in Starry). Anticipating the increasing demand, Starry will double its iohexol annual capacity to 500 tonnes in the second quarter of 2012.

During the year, Lansen signed an exclusive agreement with Shanghai Ethypharm Pharmaceutical Co., Ltd and Ethypharm SA for the marketing and distribution in the PRC of the specialty analgesic and anti-inflammatory product, ketoprofen/omeprazole slow-release capsule. It was the first multinational agency arrangement for Lansen, a sign of recognition by global players. Lansen will continue to work with Ethypharm and other potential international partners on similar arrangements. In the beginning of 2012, Lansen also signed an exclusive distribution agreement with Shanghai Jahwa for the commercialisation of medical skin care products in the PRC. Such products will offer Lansen further penetration in the dermatology market.

The Haotian Group

In 2011, Haotian completed its expansion of the inositol production facilities with a designed annual capacity of 2,500 tonnes in Dunhua, Jilin Province. Haotian also completed the construction and trial production of its fifth phytin (raw material for inositol) plant in Gongzhuling, Jilin Province. The sixth phytin plant in Yushu, Jilin Province, to be operational by the second quarter of 2012, will support up to 75% of the designed inositol capacity. Haotian will build a seventh phytin plant, to be operational in the second half of 2012, and bring the inositol production to full capacity.

Haotian's management has focused on improving production efficiency to enhance cost competitiveness. Haotian's management is discussing with potential customers regarding annual supply contracts and would seek to establish its market share through competitive cost advantages. Haotian has received the feed grade certificate for DCP and has been making sales in the domestic market in China. It is expected that Haotian will receive a food additive grade certificate for DCP in the second half of 2012.

In 2011, Haotian's non-inositol business revenue dropped by 64.3% to USD4,995,000 (2010: USD13,983,000) and the gross profit decreased by 31.8% to USD756,000 (2010: USD1,109,000). Due to the fast rising raw material prices, Haotian suffered operating losses in most of its non-inositol products. After reviewing its business model, Haotian stopped or reduced to a limited production of all non-inositol products other than bilberry in the first half of 2011. By eliminating unprofitable products, the gross profit margin improved from 7.9% to 15.1% this year. Haotian's operating loss reduced to USD1,946,000 (2010: USD2,431,000), in part, due to Government grants received as investment incentives.

In the second half of 2011, Haotian identified curcumin, an active ingredient in the yellowish Indian spice turmeric, as a new product. Curcumin has beneficial health properties including antioxidant and anti-inflammatory activities. It is commonly used as a dietary supplement as well as a spice and food-coloring agent. Healthcare bodies worldwide banned artificial color in food and curcumin is one of the EU approved natural food colorants. Curcumin is also Haotian's first step in exploring the natural food colorant market, which should reach an estimated USD1.6 billion in 2015.

Haotian completed feasibility study on curcumin and the production flow design. As Haotian is able to re-deploy its existing non-inositol facilities, with only some modification to the extraction process, curcumin production should commence in the first half of 2012.

Haotian has hired several senior managers with international management and business background, including a new Deputy Chief Executive Officer, Chief Operating Officer, Director of Sales and Director of Marketing. The management team is empowered to streamline production efficiency, drive business growth and enhance operation controls.

Research and Product Development

Operating loss in the Group's research and product development division increased from USD756,000 last year to USD880,000 in 2011. The increase was mainly due to increase in labor costs.

Botai is at the final stage of applying for the production license of its collagen product. The license should be granted in the first half of 2012. Botai is currently preparing for the production and sales of collagen as injectable cosmetic filler.

Longbai completed the clinical trial of misoprostol (used for inducing labor). Longbai is preparing application for the production license, which involves modifying production facilities, producing batch samples and arranging various regulatory inspections. The licensing process could take two to three years.

Cathay International Capital ("CIC")

With the depressed equities markets and tightened credit supply, we expect more opportunities this year. CIC plans to widen its investment scope and explore opportunities that will create synergies with the Group's current portfolio.

CIC's core focus will remain within the healthcare industry, which is one of the sectors that will receive a major boost from the China's 12th Five Year Plan. CIC is also reviewing opportunities in the healthcare related agricultural processing industry and the cosmaceuticals industry that could complement Haotian and Botai.

CIC will explore green technology and recycling and environment protection industries which will also benefit from the 12th Five Year Plan.

CIC will also consider minority investments in public companies operating in the sectors described, whenever attractive opportunities arise.

Hotel operations

Revenue of the Hotel increased 31.8% to USD11,915,000 (2010: USD9,040,000). This was mainly due to an improvement in room occupancy to 54.6% (2010: 43.8%) and increase in average room rate to USD135 (2010: USD128).

In 2011, the Hotel built a higher end business client base and increased coverage over local corporate clients. The Hotel achieved a growth rate of 24.7% in room occupancy, compared to the Shenzhen industry average of 2.7%.

The Hotel's gross profits increased by 23.9% to USD1,627,000 (2010: USD1,313,000), and operating profits increased 20.2% to USD1,286,000 (2010: USD1,070,000). The gross profit margin declined to 13.7% (2010: 14.5%) and the operating profit margin declined to 10.8% (2010: 11.8%). This was mainly due to a 28.9% increase in salaries and wages and related costs under regulatory requirements.

Colliers International HK Limited, an independent firm of qualified professional valuers revalued the Hotel at USD129,000,000 (2010: USD122,000,000). The increase in revaluation was mainly due to better performance of the hotel in 2011.

The Shenzhen market has seen an increase in average room rate in 2012 as more high-end international hotels entered the market. The Hotel should also benefit from better market awareness. We expect the average room rate to improve further. Although three new hotels totaling over 900 rooms are expected to open this year, the Hotel will continue to enroll more local corporate clients and actively promote its Landmark VIP membership program to ensure a better occupancy.

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)

CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES:

1. Basis of preparation

This preliminary results statement and the consolidated financial statements of the Group have been prepared in accordance with all applicable International Financial Reporting Standards, International Accounting Standards and Interpretations (hereinafter collectively referred to as "IFRSs") issued by the International Accounting Standards Board, including all new and revised standards effective for the period commencing 1 January 2011.

The consolidated financial statements have been prepared under historical cost convention as modified by the revaluation of hotel properties and financial instruments. The consolidated financial statements are presented in United States Dollars ("USD") and all values are rounded to the nearest thousand except when otherwise indicated.

The preparation of financial statements in accordance with IFRSs requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates.

The financial statements have been prepared on a going concern basis which assumes the realisation of assets and satisfaction of liabilities in the ordinary course of business notwithstanding that the Group had net current liabilities of approximately USD23,924,000 as at 31 December 2011. Of the total bank borrowings, approximately USD114,511,000 are due for repayment within one year from 31 December 2011 (2010: USD45,409,000). The increase in short-term bank borrowings was mainly due to a reclassification of a 5 years term loan, amounted to USD46,400,000, which is due for repayment within one year. The net gearing of the Group was 44.4% (2010: 33.5%) which is considered reasonable.

The net current liabilities condition indicates the existence of uncertainty which may affect the Group's ability to continue as a going concern and hence, its ability to realise its assets and discharge its liabilities in the normal course of business. Nevertheless, the financial statements have been prepared based on the assumption that the Group can be operated as a going concern and will have sufficient working capital to finance its operation in the next twelve months from 31 December 2011.

The Group has received from the banks their preliminary interests to extend or renew the bank borrowings. As in the past, the Group will start discussions with the banks on extension or renewal of the bank borrowings a few months prior to their maturity and will receive the bank approvals before maturity. The Group does not foresee that the bank borrowings will not be renewed or extended before maturity. The Group is also exploring options to secure long term funding, including debt and/or equity, to replace part of the bank borrowings. Accordingly, the Group should be able to meet in full its financial obligations as and when they fall due for the next twelve months from 31 December 2011 without significant curtailment of operations and are satisfied that it is appropriate to prepare the financial statements on a going concern basis.

Should the Group be unable to continue in business as a going concern, adjustments would have to be made to the financial statements accordingly.

2. Segment information

Management currently identifies the Group's four products and service lines as operating segments as follows:

1) the Lansen Group segment is focused on the manufacture, marketing and sale of speciality western pharmaceuticals, modern Chinese medicine extracts and generic pharmaceuticals in the People's Republic of China (the "PRC");

2) the Haotian Group segment is involved in the manufacture, marketing and sale of key active ingredients for healthcare products. The Haotian Group is also in the process of building an inositol plant;

3) the research and product development segment is engaged in the development of pharmaceutical products; and

4) the hotel operations segment is a hotel located in the Lowu district of Shenzhen in the PRC.

These operating segments are monitored and strategic decisions are made on the basis of adjusted segment operating results. Segment information can be analysed as follows for the reporting periods under review.

The totals presented for the Group's operating segments reconcile to the entity's key financial figures as presented in its financial statements as follows:

The Group's revenue and its non-current assets (other than financial instruments) are divided into the following geographical areas:

The geographical location of customers is based on the location at which the services were provided or the goods delivered. The geographical location of the non-current assets is based on the physical location of the asset.

No single customer's revenue amounted to 10% or more of the Group's revenue for both 2011 and 2010.

3. Earnings per share attributable to owners of the parent

Basic and diluted earnings per share is based upon the profit after tax attributable to owners of the parent of USD1,428,000 (2010: USD891,000) and the following weighted average number of A Shares and Common Shares in issue during the year:

For the year ended 31 December 2011, the computation of diluted earnings per share does not assume the exercise of the Company's outstanding share options as the exercise price of those options is higher than the average market price for shares nor does it include the 1,292,353 Common Shares contingently issuable to Mr. Lee Jin-Yi, as the conditions for their issue were not met throughout the year.

4. Financial information

This preliminary results statement was approved by the Board of Directors on 28 March 2012. The above results for the year ended 31 December 2011 have been abridged from the full Group accounts for that year, which received an unqualified auditor's report and which will be delivered to the Registrar of Companies shortly.

The Annual Report and Financial Statements will be posted to shareholders as soon as practicable. Further copies will be available from the Company's registered office at Canon's Court, 22 Victoria Street, Hamilton HM12, Bermuda.

The Annual General Meeting will be held at Penha Room 2, Grand Lapa Macau, 956-1110 Avenida da Amizade, Macau SAR on 25 May 2012 at 11:30 a.m. (Macau time). In addition, a shareholder information session is to be held on 17 April 2012 at the offices of Peel Hunt LLP at Moor House, 120 London Wall, London EC2Y 5ET, United Kingdom at 11:00 a.m.