Guangzhao Industrial Forest Biotechnology Group Ltd Annual Report 2008

8/14/2019 Guangzhao Industrial Forest Biotechnology Group Ltd Annual Report 2008

1/104

Guangzhao Industrial Forest Biotechology Group Limited

Annual Report 2008

nurturing the seeds of opportunities


2/104

CONTENTS

Corporate Prole

01

Chairmans Statement

02

Board o Directors

06

Financial Highlights

09

Corporate Inormation

10

Corporate Directory

11

Corporate Governance

12

Statistics o Shareholdings

21

Statistics o Warrant holdings

23Notice o Annual General Meeting

24

Proxy orm

27

Report o the Directors And Financial Statements

29

2

Gagza Iial F Biclgy G LimiAnnual Report 2008


3/104

CORPORATE PROFILE

Based in Shanghai, China, Guangzhao Industrial Forest Biotechnology Group Limited (Guangzhao

or the Group) is engaged in the tissue culture and propagation o plantlets and saplings, o which

its main product is the Guangzhao Fast-Growing Poplar. This unique poplar is able to grow at twice

the normal rate and can also thrive in conditions where the soil is arid or saline. Currently, its tissue-

cultured poplar is planted in over 18,600 hectares spread across eight provinces in China or eventual

harvest and sale to the pulp or timber industries.

Building upon its successul commercialisation o tissue culture or poplar trees, the Group has

in recent years begun supplying plantlets and saplings o other plant species both within China

and Southeast Asia. These includeJatropha curcas, orchids, tropical ruit such as banana and non-

poplar trees such as the Oriental Fir. Established in 1999, Guangzhao was listed on the Singapore

Exchange in July 2004. The Groups ounders believe that tissue culture o plants will not only yield

commercial rewards or its shareholders and other stakeholders, but will also contribute positively to

environmental preservation.


1



4/104

CHAIRMANS STATEMENT

da alOn behal o the Board o Directors (the Board)o Guangzhao, I am pleased to present you ourannual report or the nancial year ended 31December 2008 (FY2008).

Ya i rcFY2008 was a year o many challenges andachievements or Guangzhao as we continued tostreamline our core operating processes and coststructure. While we continueto make headway with theharvesting o our proprietaryast-growing poplar inFY2007, the unexpectedsnowstorm in January 2008coupled with the impact o therecent global nancial crisis onwood-related product pricesin the second hal o FY2008hampered our harvestingeorts.

Despite the obstacles thatinterrupted the harvestingo our standing timber, the Groups revenue grew90.1% to RMB21.5 million in FY2008 rom RMB11.3million in FY2007, mainly driven by the harvestingand sale o our biological assets in Anhui andHubei provinces during ourth quarter o FY2008.Proceeds rom the sale o timber contributedRMB20.7 million while the sales o tissue-culturedbanana plantlets, orchids and ornamental plantsrom our nurseries made up the remaining RMB0.8million.

Outside the PRC, although the strong undamentalso our operations in Malaysia and Cambodia remainlargely intact, the global uncertainty and creditcrunch have become a hindrance to our eorts topursue new opportunities in these countries. Torefect the new challenges that we are currentlyacing, we have established an allowance orimpairment on investment in FY2008.

While damage to the plantations due to theunprecedented winter storm was limited, we havemade impairment charges o RMB18.9 million tothe air value o our biological assets ollowing a

detailed damage assessment. Owing to the dualimpact o the January snowstorm and the declinein wood-related product prices, we restated the

carrying value o our biological assets to RMB547.8million as at 31 December 2008 rom RMB695.8million as at 31 December 2007 to better present aair-value assessment o our biological assets.

In view o the changes in air value, the Grouprecognised a RMB223.2 million loss attributableto shareholders or FY2008 compared to a proto RMB65.8 million in FY2007. Net asset value pershare was 70.0 RMB cents as at 31 December 2008compared to 108.2 RMB cents a year ago while

the Groups net cash andbank balances was RMB8.8million, including RMB7.8million pledged to nancialinstitutions.

Nevertheless, we continueto strive or the beneto our shareholders and Iam pleased to report thatsubsequent to the endo the nancial year, wehave started to harvest ourorestry assets in Shandong

Province in February 2009. We expect the revenuegenerated rom the sales o these harvested treesto supplement our existing business activitiesand contribute positively to the Groups nancialperormance in FY2009.

pc a F plaGuangzhao has consistently leveraged on itstechnical competencies and proprietary patents todevelop market-leading, ast-growing renewableorestry and agricultural resources.

Jatropha CurcasTestament to the success o our intensive research,we have successully cultivated a strain o high-yield, ast-growing dwared Jatropha that can beused as a key eedstock or the global biodieselindustry. Possessing higher oil content per seed anda bioengineered height restriction that will helpreduce harvesting costs, the dwared Jatropha plantwill help alleviate pressures on the global biodieselindustry. In recent years the biouel industry hasdrawn the ire o environmentalists and nationalgovernments or their excessive usage o corn

a key ood supply resulting in rising prices andshortages o the commodity.

FY2008 was a yearo many challengesand achievements

or Guangzhao as wecontinued to streamline

our core operatingprocesses and cost

structure.

2


2



5/104

3


In May 2008, we initiated large-scale cultivationo approximately 120,000 Jatropha seedlings at a42-hectare plot in Cambodia. I am pleased to reportthat progress on this widely supported test-plot ison-track and we will seek additional collaborativeopportunities to maximise the potential o ourdwared Jatropha plant. We are currently applyingor a total o six research patents based on ndingsrom this Jatropha project.

Tropical Fruit Plantlets

In addition to our breakthrough achievement inJatropha research, our tropical ruit joint-venturein Malaysia, Jalur Lipur Sdn. Bhd. (Jalur), hasalso delivered commendable results. By adaptingGuangzhaos tissue-culture technology to bananatrees, Jalur produced and sold one million ast-growing higher-yielding banana plantlets toMalaysias Department o Agriculture in FY2008.We have also promulgated various key initiatives toincrease the capacity o our Malaysian operationsin the subsequent periods to capitalise on theoverwhelming demand.

Beyond the lucrative sale o banana plantlets, Jaluris currently researching other tropical ruits such aspapaya and mangosteen at its 4,000-square-metregreenhouse in Selangor state, Malaysia.

Fast-Growing Poplar

The cultivation and harvesting o our ast-growingpoplars remains the stalwart o the Groupsoperation. While harvesting o our poplars washalted prematurely due to the January snowstormand the strategic decision to retain our orestryassets in anticipation o higher uture prices, the

Group remains condent o the long-term prospectso the orestry industry in the PRC.

pcIn view o the global nancial crisis and theprospects o slower economic growth in the PRC,the central government promulgated a broadarray o economic stimulus plans such as the scalinjection o over RMB4.0 trillion and the easing orules and regulations governing home ownershipto spur domestic consumption.

With the projected increase in construction and

housing projects, demand and consequently theprices or wood-related products have witnesseda gradual recovery. Following the revival o priceso wood and wood-related products, we initiatednew harvesting work at Shandong Province on

25 February 2009, and will continue logging untilendApril 2009. The Group also plans to harvest40,258 mu (2,684 hectares) o our orest landsrom October 2009.

La dvlmOn 12 September 2008, Guangzhao voluntarilysuspended the trading o its shares ollowing thedrastic drop in its share price due to rumours oaccounting irregularities and cash fow problems.

The suspension, which exceeded 14 consecutivebusiness days, constituted an event o deault underthe terms o the convertible notes that Guangzhaoissued to Liberty Harbour LLC (Liberty Harbour)and thus allowing Liberty Harbour to redeem theconvertible notes. The Group is actively negotiatingwith Liberty Harbour and will make promptannouncement ater both parties concluded thenegotiation.

AciaiIn October 2008, Mr Ong Han Sim relinquished hisrole as an Executive Director o the Group to pursuehis personal interests. He is replaced by Mdm SunShu Shen who was also appointed as Deputy ChieExecutive Ocer in December 2008.

Subsequent to the end o the year, Mr Lew Syn Pau,Mr Ong Kian Min and Dr Yong Wan Hong Jean haverespectively relinquished their appointments asindependent directors within the Group. We wouldlike to take this opportunity to thank all outgoingdirectors or their past contributions and wish themevery success in their uture endeavours. We wouldalso like to extend a warm welcome to Mdm Sun

and look orward to her valued contribution.

FY2008 has been a challenging year or the Group.I would like to take this opportunity to extend myappreciation to our valued shareholders, customers,business associates and sta or their continuedsupport and contributions during this period. Aswe enter yet another year ahead, I look orwardto your continued support and the greater heightsthat we will scale together.

Yours sincerely,

s MiExecutive Chairman

3



6/104

4


:

2008

20082008

2007

20081

2008

2008

2007113090.1%

20082150

207080

2008

20081

1890

200812312007123169580

54780

20076580200822320

70.02007108.2

880

780

20092

2009

,

2008542

12

Jalur Lipur

2008

100

4



7/104

5


Jalur Lipur

4,000

20081

4

2009225

4200910

40,2582,684

2008912

14

Liberty Harbour

Liberty

Harbour

200810

12

2009

2008

5



8/104

6


BOARD OF DIRECTORS

M s Mi, exciv Caima

Appointed on 1 July 2003, Su Min is one o the

ounders o our Group. She is responsible or charting

the strategic direction o our Group. Su Min was

instrumental in leading the Groups technological

development in the biotechnology industry. Since

the establishment o Shanghai Guangzhao in

April 1999, she has been its Executive Chairman

and Chie Technology Ocer and, together with

Song Xuemeng, was instrumental in developing

the commercial production o our GuangzhaoFast Growing Poplar. Prior to 1999, together with

Song Xuemeng, she co-ounded Shanghai Shihua

Technology Investment Co., Ltd. (

), an investment management company

that also provides investment advisory services and

was its Chairman rom 1996 to 2001. From 1998 to

2001, Su Min was also the Chairman o Shanghai

Shihua Plant Gene Engineering Co., Ltd (

), a company involved

in the development and provision o plant gene

engineering technology. Between 1994 to 1996,

Su Min was the Deputy General Manager o the

Shanghai branch o Heilongjiang Land Resource

Development Co. (

) where she served as deputy general

manager involved in business development.

Ms Su graduated rom Zhongshan University (

) in 1982 with a Bachelor o Arts degree

in Literature (). In 1992, Su Min

obtained a doctorate in Oriental Medicine rom

the International Martial Arts Medical University,

Caliornia through parttime studies rom 1990

to 1992. In July 2003, Su Min completed a post-

graduate program in Ethics (Orientation oEconomic Ethics and Strategic Decision-making) at

Fudan University ().

M sg Xmg, Ci exciv oc

Appointed on 1 July 2003, and together with

Su Min, is one o the ounders o the Group. He

oversees the operations, nance and business

development o the Group. Song Xuemeng has

more than ten years o experience in business

management and nance as a result o his

experience gained rom the management o

several companies. Since the establishment o

Shanghai Guangzhao in April 1999, he has been its

Chie Executive Ocer and, together with Su Min,

was instrumental in developing the commercial

production o our Guangzhao Fast Growing

Poplar. Prior to 1999, Song Xuemeng co-ounded

Shanghai Shihua Technology Investment Co., Ltd.

(), and was its Chie

Executive Ocer and Chie Financial Ocer rom

1996 to 2001. From 1998 to 2001, he was alsothe Chie Financial Ocer o Shanghai Shihua Plant

Gene Engineering Co., Ltd (

). Between 1994 to 1996, Song Xuemeng

was the General Manager o the Shanghai branch

o Heilongjiang Land Resource Development Co. (

) where he

was responsible or the management o various

business projects o the company in Shanghai. Mr

Song graduated rom Beijing University ()

in 1988 with a Bachelor o Arts degree.

Mm s s s, dy Ci exciv

oc & exciv dic

Mdm Sun Shu Shen was appointed as Executive

Director and Deputy Chie Executive or the Group

on 29 December 2008. She oversees the Groups

China operations and is in charge o assisting

the Group to obtain government unding and

subsidies.

Mdm Sun joined the Group as the Chie Executive

Ocer o our subsidiary, Shanghai Guangzhao

Plant Fast Growing Technology Co., Ltd., in June

2008. Prior to 2008, she was the Mayor Assistant o

Taian City, Shandong Province, and was in chargeo the operations o the citys regulatory bodies or

Finance, Security and Capital Markets. Concurrently,

Mdm Sun was also appointed as Director o Taian

Citys Department o Planning and Development.

In addition to her in-depth understanding o the

PRC regulatory policies, Mdm Sun also has vast

commercial experience. During her tenure with

the Taian City government, she was appointed as

Deputy Chairman o City Commercial Bank, Vice

Chairman o Pacic Securities Company as well

6



9/104

7


as Party Committee Secretary o Taian Lurun Co.,

Ltd. and Sinopec Shandong Taishan Petroleum

Co.,Ltd. Between 1990 and 1996, Mdm Sun was

the District Party Committee Secretary o Taishan

District, Taian City. From 1974 to 1990, Mdm Sun

served as Party Committee Secretary o Taian Citys

Bureau o Textile Industry and Taian Woolen textile

Factory.

Mdm Sun holds a bachelor degree rom the Party

School o the Central Committee o the CommunistParty o China.

M Lw sy pa, I dic

(Stepped down on 6 March 2009)

Appointed on 29 March 2004. Mr Lew is presently

the Chairman o Stanbridge International Pte

Ltd, an international executive search rm. He

was President o the Singapore Manuacturers

Federation rom 2002 to 2006. In addition, he

holds directorships in several other public listed

and private companies in Singapore. Between

1988 to 2001, he served as a Member o the

Singapore Parliament and chaired the Government

Parliamentary Committees or Education, Finance,

Trade and Industry and National Development.

Between 1994 and 1997, Mr Lew was General

Manager and Senior Country Ocer o Banque

Indosuez (now known as Credit Agricole Indosuez).

Prior to that, he was the Assistant Secretary-General

o NTUC rom 1990 to 1994, and the Managing

Director o General Automotive Services Pte Ltd

rom 1990 to 1993. Between 1987 to 1993, he was

the General Manager and subsequently Managing

Director o NTUC Comort. During this period, he

was concurrently the General Manager o NTUCPasir Ris Resort rom 1989 to 1991.

Mr Lew is a Colombo Plan scholar and holds a

Masters o Engineering rom Cambridge University,

UK and a Masters o Business Administration rom

Stanord University, USA.

M og ha sim, Fiac dic

(Stepped down on 1 October 2008)

Mr Ong Han Sim was appointed as Finance

Director on 15 May 2006 and has been our Chie

Financial Ocer rom September 2005. Overseeing

the Groups overall nancial management and

corporate planning, Mr Ong brings with him a

wealth o experience in nancial management and

risk control. Having held key positions in numerous

multi-national companies, Mr Ong was the Group

Financial Controller or SESDAQ listed MayranInternational Ltd rom 2002 and the General

Manager o Jeje Corporatama Pte Ltd rom 1997.

He was also the Finance Director o DIT Singapore

Pte Ltd rom 1991. Mr Ong graduated rom

Nanyang University, Singapore with Honours in

Accountancy and has a Post Graduate Diploma in

Business and Administration rom Brunel University,

UK. He is a Fellow o the Member o Institute o

Certied Public Accountants o Singapore.

d Ja Yg Wa hg, I dic


A plant biochemist and eco-physiologist by

training, Dr. Jean Yong received his B.Sc. (Hons)

and M.Sc. degrees rom the National University

o Singapore. His Ph.D. was awarded by the

Research School o Biological Sciences, Australian

National University. Currently, he is an Assistant

Proessor at National Institute o Education,

Nanyang Technological University (NTU). Among

his accolades o achievements, he has published

his research in a number o scientic journals and

also contributed to several books. Between 2003

and 2004, Dr. Jean Yong was the US Fulbright

Scholar with Brown University, USA where hehad the opportunity to be immersed in his other

research interest o climate change science and

policy issues. On his return to Singapore, Dr.

Jean Yong continued to contribute his technical

and scientic expertise to various governmental

agencies and commercial rms in addition to

his regular research on the biochemistry and

physiology o plant growth regulators (especially

or cytokinins). Pragmatic and yet learned in his

7



10/104

8


BOARD OF DIRECTORS

approach towards problem solving, he provides

eective solutions and academically, inspires

many students under his charge, to ollow in

his ootsteps, a passion in pursuing sustainable

development, biodiversity conservation, plant

industry and climate change science. He has

also, recently won the 2006 Nanyang Award or

Teaching Excellence, and the ROAR (Research

Outcome Award & Recognition) Award at NTU.

Within the local context, he rmly believes in the

restoration o native mangroves in Singapore toyield a natural protection against coastal erosion,

to provide a means o remediation against

pollutants and the other chemical contaminants

while conerring a natural solution to sequester

CO2 using the ubiquitous seawater via mangrove

plant photosynthesis. Regionally, he is evaluating

various ecologically-riendlier bio-uel plant

species or wide-scale industrial implementation

in order to support the emerging bio-diesel

industry throughout Asia, while at the same time

ensuring the continual preservation o the tropical

rain orests and the adjacent arable lands.

M og Kia Mi, I dic


Mr Ong was last re-elected as an Independent

Director in the Annual General Meeting held on

26th day o April 2008. He was a member o the

Audit Committee, Remuneration Committee and

Nominating Committee. Mr Ong was called to

the Bar o England and Wales in 1988 and to

the Singapore Bar the ollowing year. In addition

to practising as a consultant with Drew & Napier

LLC, a leading Singapore law rm, he is a senior

adviser o Alpha Advisory Pte. Ltd. (a nancialand corporate advisory rm) and an executive

director o Katana Asset Management Pte. Ltd.

In his 19 years o legal practice, he ocused on

corporate and commercial law such as mergers

and acquisitions, joint ventures, restructuring

and corporate nance. Mr Ong also serves as

an independent director and chairs most o the

audit committees o several other SGX-ST listed

companies. Mr Ong was awarded the Presidents

Scholarship and Police Force Scholarship in

1979. He holds a Bachelor o Laws (Honours)

external degree rom the University o Londonand a Bachelor o Science (Honours) Degree rom

the Imperial College o Science and Technology

in England. Mr Ong has been a Member o

Parliament o Singapore since January 1997, and

serves as Deputy Chairman o the Government

Parliamentary Committee (GPC) or Transport.

8



11/104

FINANCIAL HIGHLIGHTS

G

FY2008 FY2007

rMB000 rMB000

rv

Sales o agricultural products 21,489 11,304

Gains arising rom changes in air value

less estimated point-o-sales costs (138,135) 157,963

pabiliyOperating prot (230,743) 89,919

Prot beore income tax (243,870) 82,905

Prot ater income tax (223,202) 65,873

Return on assets (%) n.M.1 7.60%

Return on equity (%) n.M.1 10.38%

Earnings per ordinary share (RMB cents) - basic (37.97 ) 11.91

Earnings per ordinary share (RMB cents) - diluted (37.97 ) 8.77

Fiacial pii

Total assets 669,534 866,662

Total debts 258,059 232,297

Shareholders equity 411,475 634,365Debt to equity ratio (times) 0.63 0.37

Net tangible assets per share (RMB cents) 70.0 108.22

Cafw

Net cash used in operating activities (48,723) (68,094)

Net cash used in investing activities (3,203) (2,492)

Net cash rom nancing activities 22,814 95,200

1 Explanatory Notes

N.M. - Not Meaningul

9


9



12/104

CORPORATE INFORMATION

AudIt CoMMIttee

LEW SYN PAU (Chairman)


DR JEAN YONG WAN HONG


ONG KIAN MIN


reGIstered oFFICe

6, Temasek Boulevard #23-06

Suntec Tower Four

Singapore 038986

AudItors

Moore Stephens LLP10 Anson Road #29-15

International Plaza

Singapore 079903

Partner-in-charge: Ng Chiou Gee Willy

Date o appointment: Since nancial year

ended 31 December 2008

BAnKers

DBS Bank Ltd

United Overseas Bank Ltd

shAre And WArrAnt reGIstrAr

Boardroom Corporate &Advisory Services Pte Ltd

3 Church Street #08-01

Samsung Hub

Singapore 049483

Tel: 6536 5355

Fax: 6536 1360

shAnGhAI, p.r. ChInA oFFICe

138, Yulu Road, Malu Town

Jiading District

Shanghai 201801 P.R. China

Tel: 86-21-6915 6062

Fax: 86-21-6915 6076

138

: 201801

: 86-21-6915 6062

: 86-21-6915 6076

noMInAtInG CoMMIttee

LEW SYN PAU (Chairman)


DR JEAN YONG WAN HONG


ONG KIAN MIN


BoArd oF dIreCtors

SU MIN Executive Chairman

SONG XUEMENG Chie Executive Ocer

SUN SHU SHEN Deputy Chie Executive Ocer & Executive Director

reMunerAtIon CoMMIttee

DR JEAN YONG WAN HONG (Chairman)


LEW SYN PAU


ONG KIAN MIN


CoMpAnY seCretArIes

ONG WEI JIN (LLB - Hons)

GOH WEI LIN (LLB - Hons)

10


10



13/104

CORPORATE DIRECTORY

sInGApore

Gagza IialF BiclgyG Limi

6, Temasek Boulevard #23-06Suntec Tower FourSingapore 038986

Tel: 65-62350255Fax: 65-62350705

Mr Song XuemengCEO

ChInA

sagai Gagza plaFa-Gwig tclgyC., L.

sagai GagzaFy dvlmC., L.

sagai siza taigC., L.

138, Yulu Road, Malu Town

Jiading DistrictShanghai 201801 P.R. China

Tel: 86-21-6915 6062Fax: 86-21-6915 6076

Mr Song XuemengCEO

MALAYsIA

Jal Li s. B.

82-A, Lorong 5/2,Oakland Commercial Square70200, Seremban,

Negeri Sembilan, Malaysia

Tel: 60-6-6012979Fax: 60-6-6012977

Mr Lai Sead PingDirector

CAMBodIA

Gagza Bil p. L.

138, Norodom Boulevard,Sangkat Tonle Bassac,Khan Chamkarmon,

Phnom Penh, Cambodia

Tel: 855-23-228866Fax: 855-23-227766

Mr Song XuemengCEO

11


11



14/104

12

Guangzhao Industrial Forest Biotechology Group LimitedAnnual Report 2008

CORPORATE GOVERNANCEReport or the period 1 January 2008 to 31 December 2008

The Board o Directors (the Board) o Guangzhao Industrial Forest Biotechnology Group Limited is committed to maintaining a highstandard o corporate governance within the Company and its subsidiaries (the Group) based on which its operations, businesses and

strategies are directed and controlled. Good corporate governance establishes and maintains an ethical environment in the Group, whichstrives to enhance the interests o the shareholders o the Company (the Shareholders). This report describes the Companys corporate

governance processes and activities in FY2008 with specic reerence to the Code o Corporate Governance 2005 (the Code).

Board Matters

Principle 1: The Boards Conduct o Aairs

At 31 December 2008, the Board comprises six directors, three o whom are executive directors and three o whom are independent

directors. To maintain eective supervision and accountability at each o the Board and management levels, the positions o Chairman andChie Executive Ocer (CEO) are held by two persons.

The Boards primary role is to protect Shareholders interests and enhance long-term Shareholders value. To ull this role, the Board is

responsible or setting strategic direction o the Group, establishing goals or management and monitoring the achievement o these goals.

Apart rom its statutory responsibilities, the principal unctions o the Board are:

(a) approving the Groups key business strategies and nancial objectives;

(b) reviewing and approving corporate policies and strategies;

(c) reviewing and approving annual budgets, major unding proposals, investment and divestment proposals;

(d) monitoring managements perormance;

(e) reviewing the adequacy and integrity o the Groups internal controls, risk management systems and nancial reporting systems;

() ensuring the Groups compliance to laws, regulations, policies, directives, guidelines and internal code o conduct;

(g) ensuring accurate, adequate and timely reporting to, and communication with shareholders; and

(h) assuming the responsibility or the satisactory ullment o social responsibilities o the Group.

Matters which are specically reserved to the ull Board or approval are those involving corporate plans and budgets, material acquisitions

and disposals o assets, corporate or nancial restructuring, share issuances, dividends and other returns to shareholders, and mattersinvolving interested person transactions and major undertakings outside the ordinary course o business.

The composition o the Board has a strong independent element, which enables the Board to exercise objective judgment in corporate aairsindependently and, in particular, exercise judgment independent o the executive management. The Board is also o an appropriate size. Thedirectors who comprise the Board possess, collectively, core competencies in nance, management, industry, strategic planning and customer

management. These actors amount to a Board that is able to eectively lead and control the Company.

Certain unctions have been delegated to various Board committees, namely, the Audit Committee, the Nominating Committee and the

Remuneration Committee.

The Board has conducted regular scheduled meetings to approve the Groups nancial results announcement and ad-hoc meetings are alsoarranged whenever the need arises. The Company's Articles o Association allow meetings to be conducted both physically and by way o

telephone conerencing or by means o similar communication equipment whereby all persons participating in the meeting are able to heareach other, provided that the requisite quorum is present.


15/104

13



In the year under review, the number o Board meetings and Board committee meetings held and attendance o the directors at meetings,as well as the requency o such meetings, are as ollows:-

Board Audit Remuneration Nominating CommitteeCommittee Committee

Directors No. o No. o No. o No. o No. o No. o No. o No. omeetings meetings meetings meetings meetings meetings meetings meetings

held attended held attended held attended held attended

Su Min 4 1 4 0* 1 0* 1 0*Song Xuemeng 4 4 4 3* 1 1* 1 1*

Lew Syn Pau 4 4 4 4 1 1 1 1Dr Jean Yong Wan Hong 4 2 4 2 1 0 1 0

Ong Kian Min 4 4 4 4 1 1 1 1Sun Shu Shen1 N/A N/A N/A N/A N/A N/A N/A N/A

Ong Han Sim2 4 3 4 3* 1 1* 1 1*

Notes:* By invitation

1. Sun Shu Shen was appointed on 29 December 2008

2. Ong Han Sim resigned on 1 October 2008

All Directors are provided with regular updates on changes in the relevant laws and regulations to enable them to make well-inormeddecisions and to ensure that the directors are competent in carrying out their expected role and responsibilities. Where possible and when

an opportunity arises, the Directors will be invited to locations within the Groups operations to enable them to obtain a better perspectiveo the business and enhance their understanding o the Groups operations.

On directors training, the Group has instituted an orientation programme to amilarise new directors with the Groups core business and

governance practice. The programmes are brieed by the Chie Executive Ocer on the Groups history, business operations, policies,strategic plans and objectives. Directors and senior executives are encouraged to undergo relevant training to enhance their skills and

knowledge, particularly on new laws and regulations aecting the Groups operations.

Principle 2: Board Composition and Guidance

The Board comprised three Executive Directors and three Independent Directors in 2008. Key inormation regarding the directors can be ound

under the Board o Directors" section on pages 6, 7 and 8 o this annual report. The Nominating Committee reviews the independence oeach Independent Director annually and adopts the Codes denition o what constitutes an Independent Director in its review.

The Nominating Committee is o the view that the current Board, with independent directors making up at least one-third o the Board,

has an independent element that suciently enables the Board to exercise objective judgment on corporate aairs independently rom the

management. The Nominating Committee is also o the view that no individual or small groups o individuals dominate the Boards decision-making processes.

The Board is o the view that the size o the current board, is appropriate with reerence to the scope and extent o the Groups operations.

The Board will constantly examine its size with a view to determine its impact upon its eectiveness. The Board also considers that itscomposition o non-executive and independent directors provide an eective Board with a combination o core competencies o knowledge,

business contacts and extensive business and commercial experience. This balance is vital in ensuring that the strategies proposed by theexecutive management are ully discussed and examined, taking into account the long term interests o the Group.

Principle 3: Chairman and Chie Executive Ofcer

The roles and responsibilities between the Chairman and the CEO are held by separate individuals. The Chairman, Ms Su Min, and the CEO,Mr Song Xuemeng, are both Executive Directors o the Group. The Board believes that notwithstanding that the Chairman and the CEO are

both part o the executive management team, the current composition o the Board is able to make objective and prudent judgment on the

Groups corporate aairs.

The Board is o the view that there are sucient saeguards and checks to ensure that the process o decision making by the Board is

independent and based on collective decisions without any individual exercising any considerable concentration o power or infuence.Further, the Audit Committee, Remuneration Committee and Nominating Committee are chaired by Independent Directors.


16/104

14



Ms Su Min, our Executive Chairman o the Board has several years o experience in agriculture-related biotechnology business. Mr SongXuemeng, our CEO is responsible or day-to-day overall management o our Group. There is a clear separation o their roles and responsibilities.

The Chairman leads the Board and is responsible or its workings and proceedings, while the CEO is responsible or implementing the Groupsstrategies and policies and the conduct o its business.

Board Committees

Nominating Committee

Principle 4: Board Membership

The Nominating Committee (NC) comprises the ollowing Directors, the majority o whom, including the Chairman o the NC, areindependent rom the management. In addition, the Chairman o the NC is not, or not directly associated with, the substantial shareholder

o the Company.

Lew Syn Pau (Chairman)Dr Jean Yong Wan Hong (Member)

Ong Kian Min (Member)

The NC has adopted specic written terms o reerence and is scheduled to meet at least once a year. Its role is to establish a ormal and

transparent process or:

(a) reviewing and making recommendations to the Board on all candidates nominated or appointment to the Board;

(b) to decide whether a Director is able to carry out his/her duties adequately especially when he/she has multiple board representations.

(c) reviewing and recommending to the Board on an annual basis, the Board structure, size and composition, taking into account the

balance between Executive and Non-Executive, Independent and Non-Independent Directors and having regard at all times to theprinciples o corporate governance and the Code;

(d) procuring that at least one-third o the Board shall comprise Independent Directors;

(e) making recommendations to the Board on the continuation o the services o any Director who has reached the age o 70;

() identiying and making recommendations to the Board as to which directors are to retire by rotation and to be put orward or re-

election at each Annual General Meeting (AGM) o the Company, having regard to the Directors contribution and perormance,including Independent Directors;

(g) determining whether a Director is independent (taking into account the circumstances set out in the Code and other salient actors); and

(h) proposing a set o objective perormance criteria to the Board or approval and implementation, to evaluate the eectiveness o theBoard as a whole and the contribution o each Director to the eectiveness o the Board.

We believe that Board renewal must be an on-going process, to ensure good corporate governance and to maintain relevance to the business

as well as the changing needs o the Company. Our Articles o Association require at least one-third o our Directors (excluding the ExecutiveChairman) to retire by rotation and subject themselves to re-election by Shareholders at every AGM such that no director stays in oce or

more than three years without being re-elected by Shareholders.

The NC had recommended to the Board that Mdm Sun Shu Shen be nominated or re-appointment at the orthcoming AGM. Mdm Sun

Shu Shen, whom has been appointed as an Executive Director on 29 December 2008, will be retired in accordance to Article 117 o theCompanys Article o Association.

Although the Non-Executive Directors hold directorships in other companies which are not in the Group, the Board is o the view that such

multiple board representations do not hinder them rom carrying out their duties as directors. These Directors would widen the experienceo the Board and give it a broader perspective.


17/104


18/104


19/104

17


The number o top executives alling within the various remuneration bands are as set out below:-

Remuneration bands FY2008 FY2007

S$500,000 and above 0 0

S$250,000 to below S$500,000 0 0Below S$250,000 5 5

Total 5 5

The Company does not have any employees who are immediate amily members o a director, Executive Chairman or the CEO.

The Group has also entered into various letters o employment with all o the executive ocers. Their compensation consists o salary, bonus,

perormance awards that are dependent on the perormance o the Group.

The Company does not have any employee share option schemes.

Audit Committee

Principle 10: Accountability

Principle 11: Audit Committee

The Board is mindul that it is accountable to the Shareholders and strives to ensure that ull material inormation is timely disclosed to

Shareholders in compliance with the statutory requirements and SGX-ST Listing Manual. Price sensitive inormation is rst publicly released,either beore the Company meets with any group o investors or analysts or simultaneously with such meetings. Financial results and annual

reports will be announced or issued within legally prescribed periods.

The Board provides the Shareholders with a detailed and balanced explanation and analysis o the Groups perormance position and

prospects on a quarterly basis. The management provides the Board with appropriately detailed management accounts o the Groupsperormance, position and prospects on a quarterly basis.

In preparing the nancial statements, the directors have:

(a) selected suitable accounting policies and applied them consistently;

(b) made judgments and estimates that are reasonable and prudent;

(c) ensured that all applicable accounting standards have been ollowed; and

(d) prepared nancial statements on a going concern basis as the directors have a reasonable expectation, having made enquiries, that the

Group and Company have adequate resources to continue in operational existence or the oreseeable uture.

The Audit Committee (AC) comprises the ollowing non-executive directors, all o whom including the Chairman, are independent and

majority o whom possess the appropriate accounting experience and/or related nancial management expertise:

Lew Syn Pau (Chairman)

Dr Jean Yong Wan Hong (Member)Ong Kian Min (Member)

The AC meets periodically to perorm the ollowing unctions:

(a) review with the external auditors the audit plan, their evaluation o the system o internal accounting controls, their letter to management

and the managements response;

(b) review the quarterly and annual nancial statements and balance sheet and prot and loss accounts beore submission to our Board or

approval, ocusing in particular on changes in accounting policies and practices, major risk areas, signicant adjustments resulting romthe audit, compliance with accounting standards and compliance with the SGX-ST Listing Manual and any other relevant statutory or

regulatory requirements;



20/104

18



(c) review the internal control procedures and ensure co-ordination between the external auditors and our management, and review theassistance given by our management to the auditors, and discuss problems and concerns, i any, arising rom the interim and nal

audits, and any matters which the auditors may wish to discuss (in the absence o the management, where necessary);

(d) review and discuss with the external auditors any suspected raud or irregularity, or suspected inringement o any relevant laws, rules orregulations, which has or is likely to have a material impact on our Groups operating results or nancial position, and our managements

response;

(e) consider the appointment or re-appointment o the external auditors and matters relating to the resignation or dismissal o the

auditors;

() review interested person transactions (i any) alling within the scope o Chapter 9 o the SGX-ST Listing Manual;

(g) review potential conficts o interest, i any;

(h) undertake such other reviews and projects as may be requested by the Board and will report to the Board its ndings rom time to timeon matters arising and requiring the attention o our AC; and

(i) generally undertake such other unctions and duties as may be required by the legislation, regulations or the SGX-ST Listing Manual, orby such amendments as may be made thereto rom time to time.

The Board considers that the members o the AC are appropriately qualied to discharge their responsibilities.

The AC has ull access to and ull co-operation o the management and external auditors. It also has the discretion to invite any director and

executive director to attend its meetings. The AC also has the power to conduct or authorise investigations into any matters within its termso reerence.

The AC has reviewed the external auditors non-audit services and is satised that the nature and extent o such services has not prejudicedthe independence and objectivity o the external auditors. The AC recognizes the need to maintain a balance between the independence

and objectivity o the external auditors and the work carried out by the external auditors based on value or money consideration.

The AC has recommended to the Board the re-appointment o Moore Stephens LLP as the Companys external auditors at the orthcoming AGM.

Principle 12: Internal Controls

The Board is responsible or the overall internal control ramework and is ully aware o the need to put in place a system o internal controls

within the Group to saeguard Shareholders interests and the Groups assets, and to manage risks. The Board also acknowledges that nocost eective internal control system will preclude all errors and irregularities. A system is designed to manage rather than eliminate the risk

o ailure to achieve business objectives, and can provide only reasonable and not absolute assurance against material misstatement or loss.The Board is satised that currently there are adequate internal controls in the Company. The Board regularly reviews the eectiveness o all

internal controls, including operational controls.

Principle 13: Internal Audit

The Board recognises and is responsible or maintaining a system o internal control processes to saeguard Shareholders investments andthe Groups business and assets. The Internal Audit Department is independent o the activities it audits. It reports to the AC unctionally and

to the management administratively. The Internal Audit Manager manages the internal audit unctions and coordinates with the external

accounting rm that perorm specic audit assignments as directed by AC. She oversees and carries out the unctions o internal audits,including the running o a stable and timely process o identiying and evaluating business risks, controls over cash fows and preparing

timely reports and communications to the various committees, such as audit matters to the AC and administrative and operational mattersto the Board.

As part o the procedures to ensure adequacy o the internal audit unctions, the AC reviews the internal audits activities and processes on

a regular basis.


21/104

19


Communication With Shareholders

Principle 14: Communication with Shareholders

Principle 15: Greater Shareholder Participation

We believe in regular and timely communication with Shareholders as part o our organisation's development to build systems and procedures

that will enable us to compete internationally. The Company places great emphasis on investor relations and strives to maintain a high

standard o transparency and to promote better investor communications. It aims to provide investors with clear, balanced and useulinormation, on a timely basis, about the Groups perormance, nancial position and prospects.

The Company does not practise selective disclosure. In line with continuous obligations o the Company pursuant to the SGX-ST Listing

Manual and the Companies Act, Cap. 50 o Singapore, the Boards policy is that all Shareholders should be equally and timely inormed oall major developments that will impact the Company or the Group. Inormation is communicated to Shareholders on a timely basis through

the SGXNET and the press.

We support the Codes principle to encourage shareholder participation. Shareholders are encouraged to attend the AGM to ensure a highlevel o accountability and to stay inormed o the Companys strategy and goals. Notice o the AGM is despatched to Shareholders, together

with explanatory notes or a circular on items o special business (i necessary), at least 14 clear days beore the meeting. The Board welcomesquestions rom Shareholders who have an opportunity to raise issues either inormally or ormally beore or at the AGM.

Dealings In Securities

In line with chapter 12, rule 1207(18) o the listing manual, the Company has in place a policy on dealings in securities. The Directors andemployees are prohibited rom securities dealings whilst they are in possession o price - sensitive inormation. The Company issues regular

circulars to its Directors, principal ocers and relevant ocers who have access to unpublished material price - sensitive inormation toremind them o the prohibition and the requirement to report their dealing in shares o the Company.

The Directors and employees are also prohibited rom dealing in the securities o the Company during the period commencing two weeks

prior to the announcement o the Companys nancial statements or each o the rst three quarters o its nancial year and one monthbeore the announcement o the Companys nancial statements or the ull nancial year, and ending on the date o the announcement o

the relevant results.

Directors and executives are also expected to observe insider-trading laws at all times even when dealing with securities within the permitted

trading period.

Material Contracts

Save or the interested person transactions and the service agreement between the executive Chairman and CEO and the Company, therewere no material contracts o the Company or its subsidiary involving the interests o any director or controlling shareholder subsisted at the

end o the nancial year or have been entered into since the end o the previous nancial year.

Risk Management

The Company does not have a Risk Management Committee. However, the Management regularly reviews the Companys business and

operational activities to identiy areas o signicant business risks as well as appropriate measures to control and mitigate these risks. TheManagement reviews all signicant control policies and procedures and highlights all signicant matters to the directors and AC.



22/104

20



Interested Person Transactions

The Company has established procedures to ensure that all transactions with interested persons are reported in a timely manner to the AC

and that the transactions are on an arms length basis.

The aggregate value o the interested person transactions entered during the nancial year under review is as ollows:

Name o Interested Person Aggregate value o all interested Aggregate value o all interestedperson transactions during the person transactions conductedfnancial year under review under shareholders mandate(excluding transactions less than pursuant to Rule 920 (excluding$100,000 and transactions transactions less than $100,000)conducted under shareholdersmandate pursuant to Rule 920)

RMB RMB

Suzhou Shihua Tianlibao Bioertilizer Co. Ltd 6,276,125 0Sanan Shihua Bio-ertilizer Co. Ltd 1,449,000 0

Su Min and Song Xue Meng 8,325,105 0

The above transactions to Suzhou Shihua Tianlibao Bioertilizer Co. Ltd and Sanan Shihua Bio-ertilizer Co. Ltd. were incurred or the

purchase o ertilizer at arms length.

The above transactions to Su Min and Song Xue Meng were payments made on behal o directors. There were a series o payments madeon behal o them which had generally been settled within a month. As at 31 December 08, there were no outstanding amounts. For these

payments made on behal, interest at 3.5% pa were charged and or FY2008, the interest amounted to about RMB 7,000.


23/104

21


STATISTICS OF SHAREHOLDINGSAs At 19 March 2009

Issued and ully paid-up capital : S$60,019,061Number o shares issued : 588,082,360

Class o shares : Ordinary sharesVoting rights : One vote per share

Distribution O Shareholdings

No. o No. oSize o shareholdings shareholders % shares %

1 - 999 126 4.16 5,134 0.00

1,000 - 10,000 737 24.33 5,248,480 0.8910,001 - 1,000,000 2,121 70.02 181,725,040 30.90

1,000,001 and above 45 1.49 401,103,706 68.21

Total 3,029 100.00 588,082,360 100.00

Twenty Largest Holders O Shares

No. Name No. o shares %

1 See Hoy Chan Investment Limited 96,500,000 16.41

2 DBS Nominees Pte Ltd 35,345,000 6.013 United Overseas Bank Nominees Pte Ltd 26,685,000 4.54

4 CIMB-GK Securities Pte. Ltd. 24,007,033 4.085 Rafes Nominees Pte Ltd 17,048,000 2.90

6 Hong Leong Finance Nominees Pte Ltd 16,550,000 2.817 DMG & Partners Securities Pte Ltd 15,810,000 2.69

8 Phillip Securities Pte Ltd 14,877,233 2.539 SBS Nominees Pte Ltd 14,850,000 2.53

10 UOB Kay Hian Pte Ltd 13,809,730 2.3511 Kim Eng Securities Pte. Ltd. 12,644,045 2.15

12 OCBC Securities Private Ltd 10,258,705 1.7413 Oversea-Chinese Bank Nominees Pte Ltd 10,000,000 1.70

14 RHB Bank Nominees Pte Ltd 10,000,000 1.70

15 HL Bank Nominees (S) Pte Ltd 8,122,540 1.3816 Perennial Advisory Pte Ltd 7,993,000 1.36

17 Mayban Nominees (S) Pte Ltd 5,825,010 0.9918 DBS Vickers Securities (S) Pte Ltd 4,973,000 0.85

19 Citibank Consumer Nominees Pte Ltd 4,265,005 0.7320 Tan Boon Liat 4,000,000 0.68

Total 353,563,301 60.13


24/104

22


STATISTICS OF SHAREHOLDINGSAs At 19 March 2009

Substantial Shareholders

Substantial Shareholders o the Company (as recorded in the Register o Substantial Shareholders) as at 19 March 2009.

No. o Ordinary sharesName Direct Interest % Indirect Interest %

Su Min (1) 66,496,000 11.31% 20,000,000 3.40%Song Xuemeng (1) 100,523,460 17.09% 20,000,000 3.40%

See Hoy Chan Investment Limited 96,500,000 16.41%

See Hoy Chan Equities Pte Ltd (2) 96,500,000 16.41%

Notes:

(1) Su Min and Song Xuemeng are deemed to be interested in the 20,000,000 shares held by Hireach Assets Limited.

(2) See Hoy Chan Equities Pte Ltd is deemed to be interested in the 96,500,000 shares held by See Hoy Chan Investment Limited.

Free Float

As at 19 March 2009, approximately 51.79% o the Issued ordinary shares o the Company was held in the hands o the public (on the basiso inormation available to the Company).

Accordingly, the Company has complied with Rule 723 o the Listing Manual o the Singapore Exchange Securities Trading Limited.


25/104

23


STATISTICS OF WARRANT HOLDINGSAs at 19 March 2009

Distribution O Warrant Holdings

No. o No. oSize o warrant holdings warrant holders % warrants %

1 - 999 6 1.59 2,016 0.001,000 - 10,000 140 37.14 684,544 0.37

10,001 - 1,000,000 218 57.82 23,196,600 12.401,000,001 and above 13 3.45 163,214,784 87.23

Total 377 100.00 187,097,944 100.00

Twenty Largest Warrant Holders

No. oNo. Name warrants %

1 Hireach Assets Limited 89,195,784 47.67

2 See Hoy Chan Investment Limited 35,400,000 18.923 ASIACAP Management Pte Ltd 7,460,000 3.99

4 Er Sock Lang 4,945,000 2.64

5 Leow Kwee Siew 4,173,000 2.236 Oversea-Chinese Bank Nominees Pte Ltd 4,000,000 2.14

7 Perennial Advisory Pte Ltd 3,941,000 2.118 OCBC Securities Private Ltd 3,682,000 1.97

9 Lim & Tan Securities Pte Ltd 3,454,000 1.8510 Teo Ah Tiak 1,886,000 1.01

11 Sun Wei 1,875,000 1.0012 Lim Ngern Khee 1,604,000 0.86

13 DBS Vickers Securities (S) Pte Ltd 1,599,000 0.8514 Chew Kheng Siang 1,000,000 0.53

15 CIMB-GK Securities Pte. Ltd. 868,000 0.4616 Chua Keng Loy 840,000 0.45

17 Tan Jit Seng 834,000 0.4518 Low Cheng Lum 800,000 0.43

19 Goh Tze Min 710,000 0.3820 Lim Kok Siong 656,000 0.35

Total 168,922,784 90.29


26/104

24


NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT the Annual General Meeting o Guangzhao Industrial Forest Biotechnology Group Limited will be heldat Grand Park City Hall, 10 Coleman Street, Singapore 179809 (Canning Room, Level 2) on Friday, 24 April 2009 at 9.30 a.m. or theollowing purposes:-

As Ordinary Business

1. To receive and, i approved, to adopt the Audited Financial Statements or the nancial year ended 31 December 2008 together with

the Directors Report and Auditors Report thereon. Resolution 1

2. To approve Directors' ees o S$150,000 or the nancial year ended 31 December 2008. Resolution 2

3. To re-elect Mdm Sun Shu Shen who is retiring pursuant to Article 117 o the Articles o Association. Resolution 34. To re-appoint Messrs Moore Stephens LLP, Certied Public Accountants, as the Companys Auditors and to authorise the Directors to x

their remuneration. Resolution 4

5. To transact any other ordinary business which may be properly transacted at an annual general meeting.

Share Issue Mandate

6. THAT pursuant to Section 161 o the Companies Act, Cap. 50 (the Act) and the listing rules o the Singapore Exchange Securities

Trading Limited (SGX-ST), authority be and is hereby given to the Directors to:

(i) issue shares in the capital o the Company whether by way o bonus issue, rights issue or otherwise; and/or

(ii) make or grant oers, agreements or options (collectively Instruments) that might or would require shares to be issued, includingbut not limited to the creation and issue o (as well as adjustments to) warrants, debentures or other instruments convertible into

shares; and/or

(iii) issue additional Instruments convertible into shares arising rom adjustments made to the number o Instruments

at any time and upon such terms and conditions and or such purposes and to such persons as the Directors may, in their absolute

discretion, deem t; and (notwithstanding the authority conerred by this Resolution may have ceased to be in orce) issue sharesin pursuance o any Instrument made or granted by the Directors while this Resolution was in orce,

provided that:

(1) the aggregate number o shares to be issued pursuant to this Resolution (including shares to be issued in pursuance o anyInstruments made or granted pursuant to this Resolution):

(A) by way o renounceable rights issues on a pro rata basis to shareholders o the Company ("Renounceable Rights

Issues") shall not exceed 100 percent o the total number o issued shares in the capital o the Company excludingtreasury shares (as calculated in paragraph (3) below); and

(B) otherwise than by way o Renounceable Rights Issues ("Other Shares Issues") shall not exceed 50 percent o the

total number o issued shares in the capital o the Company excluding treasury shares (as calculated in accordancewith paragraph (3) below), o which the aggregate number o shares to be issued other than on a pro rata basis to

shareholders o the Company shall not exceed 20 percent, o the total number o issued shares in the capital o the

Company excluding treasury shares (as calculated in accordance with paragraph (3) below);

(2) the Renounceable Rights Issues and Other Shares Issues shall not, in aggregate, exceed 100 percent o the total number oissued shares in the capital o the Company excluding treasury shares (as calculated in paragraph (3) below);


27/104

25



As Ordinary Business (Contd)

Share Issue Mandate (Contd)

(3) (subject to such manner o calculation as may be prescribed by the SGX-ST) or the purpose o determining the aggregatenumber o shares that may be issued under paragraphs (1)(A) and (1)(B) above, the percentage o issued shares shall

be based on the total number o issued shares in the capital o the Company excluding treasury shares at the time thisResolution is passed, ater adjusting or:

(i) new shares arising rom the conversion or exercise o any convertible securities or shares options or vesting o share

awards which are outstanding or subsisting at the time this Resolution is passed; and

(ii) any subsequent bonus issue or consolidation or subdivision o shares;

(4) in exercising the authority conerred by this Resolution, the Company shall comply with the provisions o the Listing Manual

o the SGX-ST or the time being in orce (unless such compliance has been waived by the SGX-ST) and the Articles oAssociation or the time being o the Company; and

(5) (unless revoked or varied by the Company in General Meeting) the authority conerred by this Resolution shall continue

in orce until the conclusion o the next Annual General Meeting o the Company or the date by which the next AnnualGeneral Meeting o the Company is required by law to be held, whichever is the earlier. Resolution 5

Placement o Shares under the Share Issue Mandate at not more than 20% Discount

7. THAT notwithstanding Rule 811 o the Listing Manual, the Directors o the Company be and are hereby authorised to issue shares and/

or Instruments other than on a pro rata basis pursuant to the aoresaid general mandate at a discount not exceeding twenty percent(20%) to the weighted average price or trades done on the SGX-ST or the ull market day on which the placement or subscriptionagreement in relation to such shares and/or Instruments is executed, provided that:-

(a) in exercising the authority conerred by this Resolution, the Company shall comply with the provisions o the Listing Manual o the

SGX-ST or the time being in orce (unless such compliance has been waived by the SGX-ST) and the Articles o Association orthe time being o the Company; and

(b) (unless revoked or varied by the Company in General Meeting) the authority conerred by this Resolution shall continue in orce

until the conclusion o the next Annual General Meeting o the Company or the date by which the next Annual General Meeting

o the Company is required by law to be held, whichever is the earlier. Resolution 6

By order o the board

ONG WEI JINCompany Secretary

9 April 2009

Singapore


28/104

26


Explanatory Notes

1. A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote in his stead. A member o the Company, which is a

corporation, is entitled to appoint its authorised representative or proxy to vote on its behal.

A proxy need not be a member o the Company.

The instrument appointing a proxy must be deposited at the Companys registered oce at 6 Temasek Boulevard, #23-06 Suntec Tower Four, Singapore 038986 at

least 48 hours beore the time o the Meeting.

2. I re-elected under Resolution No. 3, Mdm Sun Shu Shen will remain as Deputy Chie Executive Ocer and Executive Director o the Company.

3. Resolution No. 5 is to empower the Directors to issue shares in the capital o the Company and to make or grant instruments (such as warrants or debentures)

convertible into shares, and to issue shares in pursuance o such instruments; up to a number not exceeding (i) 100% or Renounceable Rights Issues and (ii) 50%

or Other Shares Issues, o which up to 20% may be issued other than on a pro rata basis to shareholders, provided that the total number o shares which may be

issued pursuant to (i) and (ii) shall not exceed 100% o the issued shares (excluding treasury shares) in the capital o the Company. For the purpose o determining

the aggregate number o shares that may be issued, the percentage o issued shares shall be based on the total number o issued shares (excluding treasury shares)

in the capital o the Company at the time that Resolution No. 5 is passed, ater adjusting or (a) new shares arising rom the conversion or exercise o any convertible

securities or share option or vesting o share awards which are outstanding or subsisting at the time that Resolution No. 5 is passed, and (b) any subsequent bonus

issue or consolidation or subdivision o shares.

The authority or undertaking 100% Renounceable Rights Issues is proposed pursuant to the SGX-STs news release o 19 February 2009 which introduced urther

measures to accelerate and acilitate the und raising eorts o listed issuers.

4. Resolution No. 6 is to authorise the Directors to issue new shares to subscribers or placees at a discount o not more than 20% to the weighted average price or

trades done on the SGX-ST or the ull market day on which the placement or subscription agreement is signed.

The maximum pricing discount o 20% is proposed pursuant to the SGX-STs news release o 19 February 2009 which introduced urther measures to accelerate

and acilitate the und raising eorts o listed issuers.



29/104

27


I/We (Name) NRIC/Passport No.

o (Address)

being a member/members o the above-mentioned Company, hereby appoint:-

Name NRIC/Passport No. Proportion o Shareholdings

No. o Shares %

Address

and/or (delete as appropriate)

Name NRIC/Passport No. Proportion o Shareholdings

No. o Shares %

Address

or ailing him/her/them, the Chairman o the Meeting as my/our proxy/proxies to attend and to vote or me/us on my/our behal at theAnnual General Meeting (the Meeting) o the Company to be held at Grand Park City Hall, 10 Coleman Street, Singapore 179809

(Canning Room, Level 2) on Friday, 24th day o April 2009 at 9.30 a.m. and at any adjournment thereo. I/We direct my/our proxy/proxiesto vote or or against the Resolutions to be proposed at the Meeting as indicated hereunder. I no specic direction as to voting is given or

in the event o any other matter arising at the Meeting and at any adjournment thereo, the proxy/proxies will vote or abstain rom votingat his/her discretion. The authority herein includes the right to demand or to join in demanding a poll and to vote on a poll.

(Please indicate your vote For or Against with a tick [ X ] within the box provided)

No. Resolutions relating to: For Against

Ordinary Business

1. To receive and adopt the Audited Financial Statements, Directors Report and Auditors Report or thenancial year ended 31 December 2008

2. To approve Directors Fees or the nancial year ended 31 December 2008.3. To re-elect Mdm Sun Shu Shen who is retiring under Article 117 o the Articles o Association o the Company.

4. To re-appoint Messrs Moore Stephens LLP as Auditors o the Company and to authorise the Directors to xtheir remuneration.

Special Business

5. To approve Share Issue Mandate

6. To approve placement o shares under the Share Issue Mandate at not more than 20% discount

Dated this day o 2009.

Signature(s) o Shareholder(s)

or, Common Seal o Corporate Shareholder

Guangzhao Industrial Forest Biotechnology Group Limited

PROXY FORM(Please see notes overlea beore completing this Form)

Important:

1. For investors who have used their CPF monies to buy Guangzhao Industrial Forest

Biotechnology Group Limiteds shares, this Annual Report is orwarded to them at the

request o the CPF Approved Nominees and is sent solely FOR INFORMATION ONLY.

2. This Proxy Form is not valid or use by CPF Investors and shall be ineective or all

intents and purposes i used or purported to be used by them.

3. CPF investors who wish to attend the Meeting as an observer must submit their

requests through their CPF Approved Nominees within the time rame specied. Ithey also wish to vote, they must submit their voting instructions to the CPF Approved

Nominees within the time rame specied to enable them to vote on their behal.

GUANGZHAO INDUSTRIAL FORESTBIOTECHNOLOGY GROUP LIMITED(Incorporated in the Republic o Singapore)

Total number o Shares in: No. o Shares

(a) CDP Register

(b) Register o Members


30/104

28


Notes:

1. Please insert the total number o shares held by you. I you have shares entered against your name in the Depository Register (as dened in Section 130A o the

Companies Act, Chapter 50), you should insert that number o shares. I you have shares registered in your name in the Register o Members, you should insert

that number o shares. I you have shares entered against your name in the Depository Register and shares registered in your name in the Register o Members, you

should insert the aggregate number o shares entered against your name in the Depository Register and registered in your name in the Register o Members. I no

number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the shares held by you.

2. A member o the Company entitled to attend and vote at the Meeting o the Company is entitled to appoint not more than two proxies to attend and vote in his/

her stead.

3. Where a member appoints two proxies, he/she shall speciy the percentage o his shares to be represented by each proxy and i no percentage is specied, the rst

named proxy shall be deemed to represent 100 per cent o his shareholding and the second named proxy shall be deemed to be an alternate to the rst named.

4. A proxy need not be a member o the Company.

5. The instrument appointing a proxy or proxies together with the letter o power o attorney, i any, under which it is signed or a duly certied copy thereo, must be

deposited at the registered oce o the Company at 6 Temasek Boulevard, #23-06 Suntec Tower Four, Singapore 038986, not less than 48 hours beore the time

appointed or the Meeting.

6. A corporation which is a member may authorise by resolution o its directors or other governing body such a person as it thinks t to act as its representative at the

Meeting, in accordance with Section 179 o the Companies Act, Chapter 50.

7. Please indicate with an X in the spaces provided whether you wish your vote(s) to be or or against the Resolutions as set out in the Notice o Annual General

Meeting. In the absence o specic directions, the proxy/proxies will vote or abstain as he/she/they may think t, as he/she/they will on any other matter arising at

the Meeting.

8. The Company shall be entitled to reject the instrument appointing a proxy or proxies i it is incomplete, improperly completed or illegible or where the true intentions

o the appointor are not ascertainable rom the instructions o the appointor specied in the instrument appointing a proxy or proxies.

9. In the case o a member whose shares are entered against his name in the Depository Register, the Company may reject any instrument appointing a proxy or proxieslodged i the member, being the appointor, is not shown to have shares entered against his name in the Depository Register as at 48 hours beore the time appointed

or holding the Meeting, as certied by The Central Depository (Pte) Limited to the Company.


31/104

29


REPORT OF THE DIRECTORS AND FINANCIAL STATEMENTSCONTENTS

Report o the Directors

1

Statement by Directors

4

Independent Auditors Report

5

Consolidated Income Statement

9

Balance Sheets

10

Consolidated Statements o Changes in Equity

11

Consolidated Cash Flow Statement

12

Notes to the Financial Statements

13


32/104

GUANGZHAO INDUSTRIAL FOREST BIOTECHNOLOGY GROUP LIMITED

(Incorporated in Singapore)

AND ITS SUBSIDIARIES

REPORT OF THE DIRECTORS - 31 DECEMBER 2008

1

The directors are pleased to present their report to the members together with the consolidated financialstatements of Guangzhao Industrial Forest Biotechnology Limited (the Company) and its subsidiaries (theGroup) for the financial year ended 31 December 2008 and the balance sheet of the Company as at31 December 2008.

1 DirectorsThe directors of the Company in office at the date of this report are as follows:

Su MinSong XuemengSun Shu Shen (Appointed on 29 December 2008)

2 Arrangements to Enable Directors to Acquire Shares and DebenturesExcept as disclosed in Note 3 of this report, neither at the end of nor at any time during the financialyear was the Company a party to any arrangement whose object is to enable the directors of theCompany to acquire benefits by means of the acquisition of shares in or debentures of the Company orany other body corporate.

3 Directors Interests in Shares and DebenturesThe directors of the Company who held office at the end of the financial year had no interests in theshares, warrants and debentures of the Company and related corporations as recorded in the registerof directors shareholdings kept by the Company under Section 164 of the Singapore Companies Act,Cap. 50 except as follows:

Direct interest Deemed interest

Name of director

At thebeginning offinancial year

At theend of

financial year

At21 January

2009

At thebeginning offinancial year

At theend of

financial year

At21 January

2009

The Company

Ordinary shares

Su Min 68,750,000 66,496,000 66,496,000 40,000,000 20,000,000 20,000,000

Song Xuemeng 119,739,460 100,523,460 100,523,460 40,000,000 20,000,000 20,000,000


33/104





2

3 Directors Interests in Shares and Debentures (contd)

Rights issue of warrants to subscribe for ordinary shares in the Company:

Name of directorExercise price Exercise period

Holdings at thebeginning offinancial year

Holdings atthe end of

financial year

At21January

2009

Deemed interestSu Min S$0.07 29 June 2007 - 28 June 2011 89,195,784 89,195,784 89,195,784

Song Xuemeng S$0.07 29 June 2007 - 28 June 2011 89,195,784 89,195,784 89,195,784

4 Directors Contractual BenefitsSince the end of the previous financial year, no director has received or become entitled to receive a

benefit by reason of a contract made by the Company or a related corporation with the director orwith a firm of which he is a member, or with a company in which he has a substantial financialinterest, except as disclosed in the financial statements. Certain directors also received remunerationfrom related corporations in their capacity as directors and/or executives of those relatedcorporations.

5 Options GrantedDuring the financial year, no options to take up unissued shares of the Company or any corporations inthe Group were granted, except as disclosed in Note 8 of this report.

6 Options ExercisedDuring the financial year, there were no shares of the Company or any corporations in the Groupissued by virtue of the exercise of an option to take up unissued shares.

7 Options OutstandingAt the end of the financial year, there were no unissued shares of the Company or any corporations inthe Group under option, except as disclosed in Note 8 of this report.

8 Rights Issue of WarrantsDuring the financial year ended 31 December 2006, the Company issued 199,400,944 warrants onthe basis of two warrants for every five existing ordinary shares in the capital of the Company, at an

issue price of S$0.03 each to the shareholders of the Company to subscribe for new ordinary sharesin the capital of the Company. The warrants may be exercised at any time from the date of issue ofthe warrants up to the fifth anniversary on the date of the warrants. Each warrant carries the right tosubscribe for one new ordinary share at an exercise price of S$0.07 each.


34/104





3

8 Rights Issue of Warrants (contd)

During the financial year, the Company issued 1,925,000 (2007: 10,378,000) ordinary shares pursuant

to the exercise of 1,925,000 (2007: 10,378,000) warrants. At the end of the financial year, the number

of outstanding warrants was 187,097,944 (2007: 189,022,944).

9 Audit CommitteeThe Audit Committee carried out its functions in accordance with Section 201B(5) of the SingaporeCompanies Act, the Singapore Exchange Securities Trading Limited (SGX-ST) Listing Manual

and the Code of Corporate Governance.

The composition of the Audit Committee and those functions performed by the Audit Committee

during the financial year are disclosed in the Corporate Governance Report.

Subsequent to the financial year end, all the members of the Audit Committee have resigned as

Independent Directors of the Company with effect from 6 March 2009, the reasons for which are

disclosed in the Companys announcement on the Singapore Exchange Ltd on the same day.

10 Independent AuditorsMoore Stephens was converted to Moore Stephens LLP, a limited liability partnership with effect

from 1 July 2008. Accordingly, Moore Stephens LLP, Certified Public Accountants, have expressed

their willingness to accept re-appointment.

On behalf of the Board of Directors,

Su Min

Executive Chairman

Song Xuemeng

Chief Executive Officer

Singapore31 March 2009


35/104




4

STATEMENT BY DIRECTORS

31 DECEMBER 2008

(a) The directors are of the opinion that the consolidated financial statements of the Group and thebalance sheet of the Company set out on pages 9 to 68 are drawn up so as to give a true and fair

view of the state of affairs of the Group and the Company as at 31 December 2008 and of the results,

changes in equity and cash flows of the Group for the year then ended; and

(b) As mentioned and more fully described in Note 2 to the financial statements, the ability of theCompany and the Group to continue as going concerns is dependent upon:

- the Convertible Noteholder not demanding immediate redemption of the Companys convertiblenote and the successful outcome of the ongoing negotiations with the Convertible Noteholder on

the waiver and revised terms and conditions of the Convertible Note;

- the success of various strategies that management is presently evaluating to improve theoperating performance, financial position and cash flow of the Company and the Group. These

strategies include, inter alia, obtaining alternative sources of finance; and

- the generation of significant positive cash flows from the harvesting of the Groups biologicalassets in 2009 which is stated in the Groups balance sheet at RMB103,354,000.

Based on the above factors, at the date of this statement, the directors are of the opinion that there arereasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

On behalf of the Board of Directors,

Su MinExecutive Chairman

Song Xuemeng

Chief Executive Officer

Singapore

31 March 2009


36/104


37/104


38/104


39/104


40/104




The accompanying notes form an integral part of the financial statements

9

CONSOLIDATED INCOME STATEMENT

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2008

Group

Note 2008 2007RMB000 RMB000

Sales of agricultural products 5 21,489 11,304

(Loss)/Gain arising from changes in fair value

less estimated point-of-sale costs 6 (138,135) 157,963Interest and other income 7 943 2,469Expenses

Harvesting costs (15,236) (3,215)Staff costs 8 (12,075) (10,265)Depreciation and amortisation expense 9 (4,690) (4,301)Allowance for impairment loss 10 (4,945) (3)Research and development costs (3,342) (3,199)Rental expenses 34 (32,453) (31,283)Other operating expenses (20,312) (17,823)

Finance costs 11 (13,127) (7,014)Total expenses (106,180) (77,103)Share of loss of jointly controlled entity 16 (498) (424)

(Loss)/Profit before income tax 12 (243,870) 82,905Income tax 13 20,668 (17,032)

(Loss)/Profit for the year (223,202) 65,873

(Loss)/Earnings per share (RMB cents) 14Basic (37.97) 11.91

Diluted (37.97) 8.77


41/104





10

BALANCE SHEETS

AS AT 31 DECEMBER 2008

Group Company

Note 2008 2007 2008 2007RMB000 RMB000 RMB000 RMB000

ASSETS

Non-current AssetsInvestment in subsidiaries 15 - - 188,196 194,158Due from subsidiaries 15 - - 151,352 121,589Investment in a jointly controlled entity 16 - 1,124 - 1,548Property, plant and equipment 17 18,766 19,004 597 1,301Land use rights 18 11,667 12,037 - -

Prepaid lease payments 19 14,460 14,668 - -Land development costs 20 35,901 36,761 - -Biological assets 21 444,408 534,145 - -

525,202 617,739 340,145 318,596

Current AssetsCash and cash equivalents 22 8,848 67,835 8,298 45,233Financial assets, at fair valuethrough profit or loss 23 88 1,117 88 1,117

Trade receivables 24 20,516 6,066 - -Other receivables 25 10,003 10,901 507 1,500Prepaid lease payments 19 1,395 1,333 - -Biological assets 21 103,354 161,638 - -

Inventories 26 128 33 - -144,332 248,923 8,893 47,850

Total Assets 669,534 866,662 349,038 366,446

EQUITY AND LIABILITIESShare Capital and ReservesShare capital 27 288,985 288,007 288,985 288,007Reserves 28 122,490 346,358 3,594 26,719

411,475 634,365 292,579 314,726

Non-current Liabilities

Other payables 29 - 32,441 - -

Finance lease liabilities 30 - 290 - 290Borrowings 31 - 50,037 - 48,037Deferred income tax liabilities 32 65,054 85,822 1,096 1,485

65,054 168,590 1,096 49,812

Current LiabilitiesTrade and other payables 29 117,978 34,167 7,569 1,728Staff incentive and welfare fund 33 5,220 5,297 - -Finance lease liabilities 30 - 80 - 80Borrowings 31 59,694 14,150 47,594 -Income tax payable 10,113 10,013 200 100

193,005 63,707 55,363 1,908

Total liabilities 258,059 232,297 56,459 51,720

Total Equity and Liabilities 669,534 866,662 349,038 366,446


42/104





11

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


CurrencyShare Capital General Other translation Accumulatedcapital reserve reserve reserve reserve profits/(losses) Total

RMB000 RMB000 RMB000 RMB000 RMB000 RMB000 RMB000

Group

Balance at 1 January 2008 288,007 27,731 9,927 6,697 (44) 302,047 634,365

Loss recognised directlyin equity - currency translation

difference - - - - (373) - (373)

Loss for the year - - - - - (223,202) (223,202)

Total recognised (loss) - - - - (373) (223,202) (223,575)

Issue of shares- Exercise of rights issue

of warrants 978 (293) - - - - 685

Balance at 31 December 2008 288,985 27,438 9,927 6,697 (417) 78,845 411,475

Balance at 1 January 2007 218,835 29,292 9,927 - - 236,174 494,228

Loss recognised directlyin equity - currency translationdifference - - - - (44) - (44)

Profit for the year - - - - - 65,873 65,873

Total recognised (loss)/gain - - - - (44) 65,873 65,829

Issue of shares- Convertible note exercised 30,385 - - - - - 30,385- Placement exercise 35,052 - - - - - 35,052- Exercise of rights issue

of warrants 5,204 (1,561) - - - - 3,643

Share issue expenses (1,469) - - - - - (1,469)

Equity portion ofconvertible note - - - 6,697 - - 6,697

Balance at 31 December 2007 288,007 27,731 9,927 6,697 (44) 302,047 634,365


43/104





12

CONSOLIDATED CASH FLOW STATEMENT


Group

2008 2007RMB000 RMB000

Cash Flows from Operating Activities(Loss)/Profit before incom

Documents

Guangzhao Industrial Forest Biotechnology Group Ltd Annual Report 2008