TORONTO, April 30, 2012 /PRNewswire/ - Sino-Forest Corporation ("Sino-Forest") announced today that it has filed the attached Change of Auditor Notice on Sedar in accordance with National Instrument 51-102 together with a letter from its former auditor, Ernst & Young LLP, confirming that it is in agreement with the statements contained in the notice that relate to Ernst & Young LLP.
Sino-Forest 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 (HKSE:00094), a Hong-Kong listed investment holding company with assets in Suriname (South America) and New Zealand and involved in sustainable harvesting, processing and sales of its logs and lumber to China and other markets around the world. Learn more at www.sinoforest.com.
All inquiries regarding the Companies' Creditors Arrangement Act (the "CCAA") proceedings should be directed to the Monitor, FTI Consulting Canada Inc., via email at: [email protected], or telephone: (416) 649-8094. Information about the CCAA proceedings, including copies of all court orders and the Monitor's reports, are available at the Monitor's website http://cfcanada.fticonsulting.com/sfc.
CHANGE OF AUDITOR NOTICE
April 13, 2012
|TO:||Ontario Securities Commission|
|| British Columbia Securities Commission
Alberta Securities Commission
Saskatchewan Financial Services Commission, Securities Division
The Manitoba Securities Commission
Autorité des marchés financiers
New Brunswick Securities Commission
Nova Scotia Securities Commission
Superintendent of Securities, Prince Edward Island
Superintendent of Securities, Newfoundland and Labrador
Re: Sino-Forest Corporation — Resignation of Auditor
This letter constitutes notice, pursuant to Section 4.11 of National Instrument 51-102 of the Canadian Securities Administrators ("NI 51-102"), that Ernst & Young LLP ("E&Y") has resigned as the auditor of Sino-Forest Corporation ("Sino-Forest" or the "Company").
The Company advises as follows.
- E&Y resigned as auditor of Sino-Forest on April 4, 2012, on its own initiative.
- The possible resignation of E&Y was considered jointly by the Audit Committee and Special Restructuring Committee of the Board of Directors at a meeting on April 2, 2012. The resignation of E&Y was considered by the Board of Directors at a meeting on April 8, 2012. A successor auditor has not been appointed.
- No audit report has been issued for the Company's most recently completed fiscal year ended December 31, 2011.
- E&Y's audit reports for the Company's fiscal years ended December 31, 2010 and December 31, 2009 were unqualified when issued but, as set forth below, by press release dated January 10, 2012, Sino-Forest cautioned that the Company's historic financial statements and related audit reports should not be relied upon.
- On June 2, 2011, in response to a report issued by Muddy Waters, LLC (the "MW Report"), the Board of Directors appointed a committee of independent directors (the "IC") to examine the allegations in the MW Report, and report back to the Board of Directors.
- On August 11, 2011, the IC delivered its First Interim Report to the Board of Directors. On November 14, 2011, the IC delivered its Second Interim Report to the Board.
- The primary findings of the IC, as set out in the two reports, were summarized in a press release issued by the Company and dated November 15, 2011. The press release indicated that with delivery of its Second Interim Report to the Board, the IC believed its work was substantially complete, but indicated there remained certain further steps it intended to take as follows: (i) review the information and analysis which it had recently received from Management relating to certain relationship issues; (ii) engage an independent valuator to conduct a valuation process with a scope and parameters acceptable to the IC; (iii) take such other steps as the IC, in its judgment, deemed advisable in the discharge of its mandate; and (iv) submit its final report and recommendations to the Board.
- In the November 15, 2011 press release, the Company also announced that it was deferring the release of the Company's third quarter financial results until certain issues could be resolved to the satisfaction of the Board of Directors. The issues included (a) determining the nature and scope of the relationships between Sino-Forest and certain of its authorized intermediaries and suppliers and among certain authorized intermediaries and suppliers, as discussed in the Second Interim Report of the IC, and (b) the satisfactory explanation and resolution of issues raised by certain documents identified by the advisors to the IC, by counsel to the Company, by E&Y and by staff of the Ontario Securities Commission. The press release stated that the Company would make efforts to release the third quarter results within 30 days.
- In a press release dated December 12, 2011, the Company announced that the Board of Directors had concluded that the Company would not be able to release the third quarter results within the 30-day period originally indicated. The press release went on to say that (i) there was no assurance that the Company would be able to release the third quarter results or, if able, as to when such release would occur and (ii) the circumstances that could cause the Company to be unable to release the third quarter results also could impact the Company's historic financial statements.
- On January 10, 2012, the Company issued a press release repeating the statement in its December 12, 2011 press release that there was no assurance that the Company would be able to release the third quarter results or, if able, as to when such release would occur.
- The January 10, 2012 press release also referred to the Company's earlier statement that the circumstances that could cause the Company to be unable to release the third quarter results could impact the Company's historic financial statements. For this reason, the Company cautioned in the January 10, 2012 press release that the Company's historic financial statements and related audit reports should not be relied upon.
- On January 31, 2012, the IC delivered its Final Report to the Board of Directors. Although there remained outstanding issues that had not been fully answered, the IC ceased its investigative, review and oversight activities. Issues that remained outstanding, as identified in the Final Report or earlier reports of the IC, have been referred to the Audit Committee or Special Restructuring Committee whose work is ongoing.
- On March 30, 2012, the Company filed for and was granted protection from its creditors under the Companies' Creditors Arrangement Act. As a result of that filing, it was unlikely that the Company would continue to devote significant resources to the release of the Company's third quarter results or to obtaining an audit for the Company's 2011 fiscal year.
- As of April 4, 2012, the date of E&Y's resignation, the Company remained of the view that the Company's historic financial statements and related audit reports should not be relied upon. The Audit Committee has discussed these matters with E&Y, which are understood to be "unresolved issues" which constitute "reportable events" under NI 51-102, with E&Y.
- The Company has authorized E&Y to respond fully to inquiries by any successor auditor concerning the "unresolved issues" which constitute "reportable events" under NI 51-102.
SOURCE Sino-Forest Corporation