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General questions
Q1. How do investors find public
disclosure documents such as
Prospectuses, Annual Information Forms,
Management Information/Proxy Circulars
and reports on timber assets by
independent forestry experts?
Q2. What is Sino-Forest’s strategy for
profitable growth?
Q3. How will Sino-Forest create value
for shareholders?
Q4. Why is TRE trading at a relatively
low price multiple, while the
corporation is reporting relatively good
financial results?
Q5. Will Sino-Forest have sufficient
cash to fund its planned capital
expenditures?
Q6. Does Sino-Forest pay dividends to
shareholders? If not, when will it?
Q7. What is Sino-Forest’s strategy
regarding focusing on plantations versus
expanding its downstream product
manufacturing?
Q8. What impacts will continuing
revaluation of China’s currency have on
Sino-Forest’s financial results?
Q9. Does Sino-Forest provide earnings
guidance, and/or analyst reports?
Q10. When and where is the next annual
meeting?
Q11. Who is Sino-Forest’s independent
public accountant?
Regarding Sino-Forest’s publicly traded
securities
Q12. Who can one contact regarding
registry or transfer of Sino-Forest
shares, or regarding a change of
address, or if share certificates have
been lost or misplaced?
Q13. How many common shares of
Sino-Forest are outstanding?
Q14. On what stock exchanges is
Sino-Forest listed? What is its stock
symbol? And how can one get a history of
its stock price for specific dates?
Q15. Who are the largest owners of
Sino-Forest shares?
Q16. What is Sino-Forest CUSIP number?
Q17. What are the corporate and credit
bond ratings of Sino-Forest’s bonds?
Q18. When and what was the amount raised
at Sino-Forest’s last equity offering,
and what was the use of proceeds?
Q19. Why is Sino-Forest, with its
operations in China and executive head
office in Hong Kong, listed on the
Toronto Stock Exchange?
Q20. Sino-Forest was created as a result
of the amalgamation of Mt. Kearsage
Minerals Inc., and a numbered Company in
1994. What is the share exchange ratio?
Q21. Does Sino-Forest have a Direct
Stock Purchase Plan?
Regarding operations
Q22. What are Sino-Forest’s unique
strengths that give it a competitive
edge and represent barriers to entry to
its industry?
Q23. Does Sino-Forest own the land at
its plantations?
Q24. Will Sino-Forest have a sufficient
inventory of mature trees to harvest in
the next several years to sustain
earnings per share and cash flow?
Q25. How and when will Sino-Forest turn
around income losses related to wood
panel manufacturing?
Q26. How many employees does Sino-Forest
have?
General questions
A1.
These documents are posted on
Sino-Forest’s website (under Investor
Relations, Reports) or on www.SEDAR.com.
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A2.
Leveraging its many competitive
advantages, Sino-Forest is executing the
following strategies in order to broaden
its market penetration, deliver results
consistently, and increase shareholder
value in the long term:
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A3.
Sino-Forest is creating value in the
short term by rapidly augmenting its
supply of wood fibre available for
harvesting, which increases net income
and cash flow per share. In the
medium-to-long term, the corporation has
set a goal of selling 30 million m3
of fibre annually by the end of 2013
from its plantations operation. We will
re-plant harvested areas leased on a
long-term basis, with scientifically
advanced seedlings, thereby
significantly increasing the yield of
eucalyptus standing timber. We are also
increasing public disclosure and analyst
coverage of Sino-Forest in an effort to
increase the price multiple that capital
markets apply to its projected earnings
per share.
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A4.
Investors and analysts have cited many
reasons for this illogical situation,
including global capital market,
economic and political conditions and
perceptions, but Sino-Forest generally
does not speculate which factors may be
affecting its share price in the short
term. Instead, we focus on executing our
strategic plan for growing sustainable
earnings and value per share over the
long term.
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A5.
In 2010, Sino-Forest generated operating
cash flow of $840 million, and by year
end had cash & equivalents of $1.2
billion. The corporation’s capital
expenditure plan for 2011, previously
announced with our 2010 annual results
was to spend approximately US$1.3
billion on sustainable tree acquisition,
cultivation and planting and $30 million
on manufacturing operations. We have
adequate cash reserves, combined with
cash flow from operations in 2011, for
funding our CAPEX program.
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A6.
Sino-Forest does not pay a dividend, and
does not plan to pay one in the medium
term in order to maintain sufficient
cash reserves to continue rapidly
growing its wood fibre inventory to meet
strong market demand, and expanding its
plantation portfolio geographically.
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A7.
Sino-Forest is mainly focusing its
resources on growing its wood fibre
operations because they are the
company’s core business and generate
higher margins. We are carefully and
gradually expanding our manufacturing
facilities to the extent that they
maximise the use and value of our wood
fibre, and enhance local employment,
which complements government policy.
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A8.
Sino-Forest derives most of its
revenues in Chinese Renminbi and reports
in US dollars. If China’s currency
increases in value relative to the US
dollar (i.e. it takes fewer Renminbi to
buy a US dollar), then the corporation’s
revenues, earnings and asset value will
appreciate, and the cost of servicing
our outstanding US debt declines.
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A9.
Focused on profitable growth in the long
term, Sino-Forest’s policy is to not
provide earnings guidance. And following
generally accepted disclosure practices,
we do not disseminate investment analyst
reports about Sino-Forest.
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A10.
Sino-Forest’s Annual General Meeting
usually takes place at the end of May in
Toronto, Canada, where its corporate
head office, several Directors and
executives and many investors are
located. More specific details about the
approaching event are posted on the
corporation’s website at
www.sinoforest.com, under Investor
Relations.
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A11.
Sino-Forest’s auditor is Ernst & Young
LLP, which is registered with the
Canadian Public Accountability Board.
The corporation adopted International
Financial Reporting Standards (IFRS) in
January 2011.
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Regarding Sino-Forest’s publicly traded
securities
A12. Call
Sino-Forest’s Registrar and Transfer
Agent – Valiant Trust Company in
Toronto, at 416-360-8122 or toll-free
North America 1-888-707-7710.
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A13.
As at June 30, 2011, there were 246.1
million shares outstanding.
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A14.
Sino-Forest’s common shares trade on the
Toronto Stock Exchange under the symbol
TRE, and a history of their price is
available at www.tsx.com.
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A15.
Large mutual funds, other institutional
investors and Sino-Forest executives are
among Sino-Forest’s largest
shareholders. For details, please refer
to the corporation’s management
information circular filed on
www.SEDAR.com.
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A16.
Sino-Forest’s CUSIP number is 82934H.
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A17.
The current corporate and
credit bond ratings of Sino-Forest’s
bonds are as follows:
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There is
no corporate and credit bond ratings
for Sino-Forest’s bonds. Fitch
Ratings, Standard & Poor's Ratings
Services and Moody’s Investors
Service withdrew its ratings on the
Company on July 14, 2011, August 29,
2011 and December 14, 2011
respectively. The corporate ratings
on the Company’s notes were affected
after a report issued by Muddy
Waters, LLC on June 2, 2011 which
contained various allegations
regarding the Company. As a result,
the Company has set up an
Independent Committee to investigate
the unfounded allegations. |
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A18.
Sino-Forest has not issued equity since
2009. Net proceeds from equity and debt
offerings are typically used for
acquisition and planting of trees and
for general corporate purposes,.
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A19.
Back in 1994 when Sino-Forest’s founders
sought financing through reverse
takeover to create a corporation that
would acquire and cultivate plantation
trees, they found the Canadian
investment community to be very
knowledgeable of the forest product
industry and financially supportive of
Sino-Forest’s business model and
strategy.
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A20.
Every 10 shares of Mt. Kearsarge were
exchanged for one Class A
Subordinate-Voting Share of Sino-Forest.
To convert Mt. Kearsage shares to
Sino-Forest shares, call Sino-Forest’s
Registrar and Transfer Agent, Valiant
Trust Company in Toronto at 416-360-8122
or toll-free North America
1-888-707-7710.
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A21.
Sino-Forest does not have a Direct Stock
Purchase Plan at this time.
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Regarding operations
A22. Our
competitive advantages as a leading,
foreign-owned, commercial plantation
operator in the PRC include:
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access to strategically located
plantations, in favourable climates
for fast-growing trees, near
transportation arteries connected to
China’s largest manufacturing hubs
and consumer markets;
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extensive forestry and management
expertise; e.g. the Gaoyao
plantation in Guangdong Province
received China’s first Forest
Stewardship Council Certification
(FSC) for a commercial plantation;
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strong research and development
expertise, and systematic
application of silviculture
techniques to maximize annual yield
at plantations; and |
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strong brand, reputation and
established relationships with local
forestry bureaus and local
communities in the PRC. |
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A23.
Sino-Forest typically owns the trees,
but not the land at its plantations as
the majority of plantation land in China
is owned by the State or farmer
collectives. In order to plant and
cultivate its trees, we typically secure
long-term land use rights registered
with local forestry bureaus and/or lease
land for terms of 30 to 50 years.
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A24.
The corporation is focusing its efforts
and investments on acquiring as many
mature and young trees as possible in
order to harvest in a sustainable manner
a volume of wood each year that will
generate consistent and growing EPS and
cash flow. Sino-Forest’s year-end
plantation area under management has
grown 189% from 177,000 hectares in 2000
to 788,700 hectares in 2010. In any
given year, the number of trees that is
harvested typically does not exceed the
number of the trees that come to
maturity. And Sino-Forest is in the
process of acquiring substantially more
trees in the years to come.
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A25.
After selling some unprofitable
manufacturing assets, Sino-Forest has
significantly reduced losses from its
Manufacturing & Other Operations
business segment. Some of our
manufacturing mills include state-of-the
art recomposed wood technology, and many
of them produce value-added wood
products from small-diameter plantation
logs, rather than larger diameter
natural forest. The objectives of
operating these complementary
manufacturing facilities are to maximize
the usage and value of wood fibre, and
to enhance local employment, which
aligns with government policies.
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A26. The
corporation had over 3,900 employees on
payroll as of March 31, 2011, and
engages over 20,000 seasonal workers by
third party service providers.
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Glossary
CJV (Cooperative Joint Venture):
a Sino-foreign enterprise with limited
liability, whereby local forestry
bureaus provide the land and Sino-Forest
invests in research & development,
plantation development and provides
silviculture expertise. Upon maturing of
standing timber, the local forestry
bureaus obtain 30% of the fibre.
Hectare: a metric unit
measurement of land surface area equal
to 10,000 square meters or 2.471 acres
MAI (Mean Annual Increment): the average
volume of standing timber produced per
year for a forest of known age, in cubic
meters per hectare divided by the age of
the stand.
MU: Imperial Chinese measurement
for agricultural land; 1 hectare equals
15 MU, 10,000 square metres, 2.471 acres
Planted plantation business model:
Sino-Forest has the rights to the trees
and use the land under long-term leases.
Our goal is to transform China’s
low-yield forests to fast-growing,
high-yielding plantations at designated
plantation areas.
Purchased plantation business model:
Sino-Forest purchased pre-mature trees
and has the rights to sell them and to
lease the land for replanting (including
the transfer of plantation land use
rights) for periods of 30 to 50 years.
The trees are purchased from authorized
agents of the original owners of trees,
which can be either collectively-owned
or privately-owned tree plantations, and
Sino-Forest manages the growing process
of these trees with minimal capital
expenditure. After the trees reach
maturity, the Corporation either
harvests or sells the trees as standing
timber whereby the trees are expected to
be harvested by the purchasers.
Sino-Forest returns the land to the
local forestry bureaus after harvesting,
unless it exercises an option for the
transfer of the plantation land use
rights through long-term leases of up to
50 years, subject to negotiation of
lease rate and other conditions.
PRC: People’s Republic of China
WFOE (Wholly Foreign Owned
Enterprise): an enterprise
established in China with capital
provided solely by foreign investors,
whereby Sino-Forest leases plantation
land from local forestry bureaus or
collective owners. Sino-Forest has 100%
operating and management rights to the
planted area and owns 100% of fibre.
Yield: amount of wood harvested,
depending on the type of tree, measured
in cubic metres of fibre volume per
hectare. |
