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SINO-FOREST RELEASES SUPPORTING EVIDENCE AGAINST ALLEGATIONS FROM SHORT SELLER

June 6, 2011

TORONTO, June 6, 2011 /PRNewswire/ - Sino-Forest Corporation (TSX: TRE) (“Sino-Forest” or the “Company”), a
leading commercial forest plantation operator in China, today provided
further response to allegations by short seller, Muddy Waters, LLC.

The Company believes Muddy Waters’ report to be inaccurate, spurious and
defamatory. Muddy Waters’ self-interest is transparent: to make money
from the fall in Sino-Forest’s share price on the back of a decline
that itself precipitated. Since the report’s release, the Company has
been working to address the allegations. The Company’s Board of
Directors is wholly sympathetic to stakeholders who are urging the
Company to respond forcefully and quickly. However, the Company wants
to respond definitively and it is the Board’s fiduciary duty to address
these allegations with an unrestricted thorough and independent review,
through the Independent Committee that was set up late last week. The
Independent Committee has appointed independent legal counsel,
appointing Osler, Hoskin & Harcourt LLP to support it in Canada and
both Mallesons, (a leading international law firm with offices in
Beijing, Shanghai and Hong Kong) and Jun He Law Offices a leading
Chinese law firm. The Independent Committee is also expected to
announce the appointment of an independent international accounting
firm later today.

Ownership of trees
The recent events have caused several shareholders to request clear
proof of ownership of the Company’s timber assets. The Board is anxious
to respond to this request and has commenced actions to address this,
focusing first on Yunnan Province, where the Company’s largest
hectarage of purchased plantations are held and where the short seller
focused its attacks. Nevertheless, the Company will be posting today
the following initial supporting information on the Company’s website (www.sinoforest.com):

        --  A signed copy of the master (framework) agreement (in Chinese)
            for Lincang City and surrounding areas in the Yunnan Province
            (together with a version translated to English for ease of
            reference) pursuant to which individual purchase contracts are
            then entered into;
        --  A summary schedule, as at December 31, 2010, showing
            the 186,700 hectares of purchased plantations in cities of
            Yunnan province such as Lincang, Lijiang and Pu'er;
        --  Signed copies of contracts relating to the acquisition of
            plantations in Gengma county of Lincang City and Ninglang
            county of Lijiang City, together with examples of the
            applicable plantation rights certifications or confirmations
            from the relevant government forestry bureau (as described in
            the AIF extract below). English translations will be also
            posted for ease of reference. Such contracts have been made
            available, at individual contract level with accompanying
            government confirmations, to the Company's auditors as part of
            its annual audit process for numerous years; and
        --  An extract from the Company's annual information form (AIF) for
            the year ended December 31, 2010 describing the nature of the
            Company's ownership interests in purchased plantations.

The consent from each relevant local government is necessary for the
disclosure of the individual purchase documentation. The Company has
made approximately 230 individual purchases under the six master
framework agreements it has publicly identified which have occurred in
approximately 38 cities (encompassing approximately 99 counties). The
Company is seeking the applicable consents on an expedited basis first
focusing on consents for its Yunnan purchased plantations. The
Independent Committee have advised the Board that it will ask its
independent experts to separately examine and review such individual
purchase agreements and related government documents.

Cash on hand
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 US$1.09 billion. The sources and uses of cash for
the period ending March 31, 2011 will be further detailed in our
quarterly report for the period ending March 31, 2011 expected to be
issued on June 14, 2011.

Sino-Forest has released today on its website a summary schedule of cash
and cash equivalent and short term deposits along with a detailed
listing with copies of its bank statements confirming the cash held
within the Company as at that date. The Company has conducted business
in the ordinary course since then and made ordinary course
expenditures, and its cash remains intact with the majority of it in
banks in Hong Kong.

Share buy-back
The Company has heard from many investors encouraging it to buy back
shares given the current prices. The Company has been advised by
counsel that it and its directors and officers are precluded from
purchasing stock in the current circumstances.

Legal recourse
Given the deeply damaging nature of Muddy Waters’ self-interested attack
on the Company and its shareholders, the Company is considering its
legal remedies against Muddy Waters and its principals. Further, the
Company intends to ask the securities regulators in Canada and in other
jurisdictions to investigate the trading activities conducted by Muddy
Waters.

Analyst tour
The Company will be inviting analysts to join management on a tour of
the Company’s plantations in July 2011, with details to follow. The
analysts will be invited to suggest specific locations for the tour,
and for each plantation visited, the Company will present GPS
references and the ownership documents.

Chairman of Sino-Forest, Mr. Allen Chan, commented:

“I have spent 17 years building Sino-Forest and I can promise investors
we are not guilty of the charges levied against us. The Company has
grown significantly over the past five years; a period of time in which
our financial statements have been audited by Ernst & Young a leading
international audit firm, and during which we have been thoroughly
scrutinized by several groups of major international underwriters and
their well known legal counsel both inside and outside of China in the
course of seven public and major private offerings. I stand by our
audited financial statements, including the revenue and assets shown
therein. All material related party transactions are appropriately
disclosed in our financial statements.  We do business with the parties
identified in the report at arms length. Those parties are not related
or connected to the Company or any of its management.

“I very much appreciate the understanding and support so many
shareholders have shown us in the past few days. With over a billion
dollars in cash, and a clear business strategy and plan, we will
continue to focus on executing our business strategy, while we also
deal with these allegations.

“It is important people recognize the motivations of Muddy Waters,
because it is they who deliberately muddy the waters, not us. This is a
company that has taken out a major short position in our company and
then issued a report designed to make them money by the decline of our
stock. By now they might be out of their short position and in the
money. It is the rest of us that lick our wounds, while they lick their
lips. I believe their report to be defamatory and I am confident that
the Independent Committee’s report will demonstrate that.”

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.

Foreword looking statement disclaimer

This press release contains 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


Source: newswire



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