TORONTO, June 3, 2011 /CNW/ - Sino-Forest Corporation (TSX: TRE)
("Sino-Forest" or the "Company"), a leading commercial forest
plantation operator in China, today commented on the share price
decline on June 2, 2011 as a result of the allegations made in a
'report' issued on a website by a short seller operating under the name
Muddy Waters, LLC. The Company was not contacted by Muddy Waters for
comment ahead of publication of its report.
The Board of Directors and management of Sino-Forest wish to state
clearly that there is no material change in its business or inaccuracy
contained in its corporate reports and filings that needs to be brought
to the attention of the market. Further we recommend shareholders take
extreme caution in responding to the Muddy Waters report.
As indicated in the report, Muddy Waters has a short position in the
Company's shares and therefore stands to realize significant gains from
a share price decline that it precipitated. Muddy Waters expressly
admits that it makes no representation as to the accuracy, timeliness,
or completeness of any information contained in its report. Further,
its website discloses no address or ownership information, nor the
credentials of any of the authors of the 'report'. Neither the Ontario
Securities Commission nor the Securities Exchange Commission website
lists Muddy Waters or its author as being registered as an advisor.
Nevertheless, due to the substantial impact that the report has had on
the prices of the Company's securities and the reputation of the
Company, the Board has appointed an independent committee consisting of
three of the Company's independent directors, William Ardell (Chair),
James Bowland and James Hyde. All three of these directors are
financially qualified professionals and two of the three are recent
appointees to the Board. The independent committee's mandate is to
thoroughly examine and review the allegations contained in Muddy
Waters' report, and report back to the Board. The independent committee
has appointed Osler Hoskin & Harcourt LLP as independent legal counsel
and will retain the services of an independent accounting firm and such
other independent advisors as it deems necessary to assist with its
examination. During the course of the independent committee's
examination, the Company will provide any updates as appropriate.
Following conclusion of the report, the key findings of the independent
committee will be released to shareholders.
Allen Chan, Chairman and CEO of Sino-Forest commented: "We are committed
to a high level of corporate governance and stand by the integrity of
our company, our 16-year operational track record and our financial
statements. Our company has continuously retained the services of
internationally recognized law firms, auditors and expert consultants
from Canada, the US, Hong Kong and mainland China."
"It is important that our independent committee thoroughly address Muddy
Waters' allegations, and they will have my full support and those of
the management team in doing so. However, let me say clearly that the
allegations contained in this report are inaccurate and unfounded.
Muddy Waters' shock-jock approach is transparently self-interested and
we look forward to providing our investors and other stakeholders with
additional information to rebut these allegations."
David Horsley, Senior Vice President and CFO of Sino-Forest commented:
"I am confident that the independent committee's examination will find
these allegations to be demonstrably wrong, as for example:
(a) Muddy Waters fundamentally misunderstands and misrepresents the
most basic items in our published Management's Discussion & Analysis
with respect to revenue generated from Yunnan Province, which we report
as being approximately 45.5% of the Company's standing timber revenue
of approximately US$508 million. Muddy Waters alleges that it is
impossible that such revenue existed because achieving such levels
would greatly exceed allowable cutting quotas and it would be
impossible to truck close to that volume in the period. However, that
revenue was very clearly disclosed in our MD&A filed for Q1 and Q2 of
2010 as revenue resulting from the sale of the standing timber - there
is no cutting or transport involved, as the trees were sold but not
harvested and therefore are not considered part of the quota for the
region until the harvesting is conducted by the buyers.
(b) Muddy Waters alleges that the Company overstated the assets in
Yunnan Province, based on its erroneous and narrow assumption that our
only purchases in Yunnan Province consisted of purchases of 20,574 ha
of plantations in Gengma county in Yunnan. However, this allegation
ignores the fact that in addition to the purchased plantations in
Gengma county, (as disclosed in our 2010 annual MD&A of a total of
approximately 193,000 ha purchased in Yunnan Province) we have
purchased approximately 173,000 ha of plantations in approximately 25
other counties in Yunnan Province as of December 31, 2010."
As at December 31, 2010, the Company had approximately US$1.26 billion
in cash, cash equivalents and short term deposits as reported in the
audited consolidated balance sheet. As at March 31, 2011, the
comparable amount was approximately US$1.09 billion. The Company
continues to hold such cash, with the majority of it in banks in Hong
Kong and offshore.
As previously announced, the Company intends to file its Q1 2011 results
on June 14, 2011.
About Sino-Forest Corporation
Sino-Forest Corporation is a leading commercial forest plantation
operator in China. Its principal businesses include the ownership and
management of tree plantations, the sale of standing timber and wood
logs, and the complementary manufacturing of downstream engineered-wood
products. Sino-Forest also holds a majority interest in Greenheart
Group Limited, a Hong Kong-listed investment holding company (HKSE:
00094) with operations based in Suriname, South America and New
Zealand, which is involved in responsible and sustainable log
harvesting, lumber processing and sales and marketing of logs and
lumber products to China and other countries around the world.
Sino-Forest's common shares have been listed on the Toronto Stock
Exchange under the symbol TRE since 1995. Learn more at www.sinoforest.com.
Please note: This press release contains projections and forward-looking
statements regarding future events. Such forward-looking statements are
not guarantees of future performance of the Company and are subject to
risks and uncertainties that could cause actual results and company
plans and objectives to differ materially from those expressed in the
forward-looking statements. Such risks and uncertainties include, but
are not limited to: changes in China's and international economies and
in currency exchange rates; changes in market supply and demand for the
Company's products, including global production capacity and wood
product imports into China; changes in China's political and forestry
policies; changes in climatic conditions affecting the growth of the
Company's trees; competitive pricing pressures for the Company's
products; and changes in wood acquisition and operating costs.
SOURCE Sino-Forest Corporation
For further information:
| SINO-FOREST CORPORATION || |
| Dave Horsley |
- Senior Vice President & Chief Financial Officer
Tel: +905 281 8889