Scully Royalty Ltd. — Director's Dealing 2006

Feb 3, 2006

SEC Form 4 — Statement of Changes in Beneficial Ownership

Issuer: CATHAY MERCHANT GROUP, INC. (CMQ)
CIK: 0000352281
Period of Report: 2005-01-31

Reporting Person: KHD HUMBOLDT WEDAG INTERNATIONAL LTD. (10% Owner)

Non-Derivative Transactions

Date	Security	Code	Shares	Price	A/D	Holdings After	Ownership
2006-01-31	common stock	J	806100	—	Disposed	0	Indirect
2006-01-31	common stock	J	3738044	—	Disposed	0	Indirect
2006-01-31	common stock	J	680000	—	Disposed	0	Direct

Holdings (Derivative)

Security	Exercise Price	Expiration	Underlying	Shares	Ownership
Convertible debt	$0	2009-03-31	common stock (0)	0	Direct

Footnotes

F1: On January 31, 2006, the Reporting Person completed a reorganization and spin-off of its wholly-owned subsidiary, Mass
Financial Corp. As part of the reorganization, the Reporting Person transferred its interests in the Issuer to Mass
Financial Corp.

F2: Pursuant to a credit facility agreement (the "Credit Facility Agreement") dated for reference April 1, 2004 between MFC
Merchant Bank and the Issuer, MFC Merchant Bank will make available to the Issuer, subject to the terms and conditions of
the Credit Facility Agreement, until March 31, 2009, a revolving credit facility (the "Credit Facility") in the principal
amount of up to $20,000,000 (the "Commitment"). As part of MFC Merchant Bank's compensation for the services to be performed
by it under the Credit Facility Agreement, MFC Merchant Bank may at any time and from time to time during the term of the
Agreement convert the Commitment or any portion of the Credit Facility to shares of common stock of the Issuer. MFC Merchant
Bank is not entitled to exercise rights that will cause it to own or control greater than 19.99% of the voting control of
the Issuer until such time as the Issuer has received shareholder approval to do so.

F3: On August 24, 2004, upon MFC Merchant Bank exercising its conversion rights under the Credit Facility Agreement and converted
$1,575,000 of the Commitment at a rate of exchange of $0.50 per share, the Issuer issued to MFC Merchant Bank 3,150,000
shares in the common stock, representing approximately 18.4% of the Issuer's common stock. On September 16, 2004 shareholder
approval was received so that MFC Merchant Bank has the right to convert all of the remaining $18,425,000 of the Credit
Facility into shares of the Issuer.

F4: The rate of exchange for purposes of calculating the number of shares in the common stock of the Issuer to be exchanged for
the Commitment or a portion should be as follows: (amount of Commitment to be converted) divided by (the ten day average of
the closing price of the stock of the Issuer).