Central Development Holdings Limited — Annual Report 2011

Jun 28, 2011

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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CHINA TIMBER RESOURCES GROUP LIMITED （中國木業資源集團有限公司[*] ）

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 269)

ANNOUNCEMENT OF FINAL RESULTS FOR THE YEAR ENDED 31 MARCH 2011

The board (the “Board”) of directors (the “Directors”) of China Timber Resources Group Limited (the “Company”) announces the annual consolidated results of the Company and its subsidiaries (the “Group”) for the year ended 31 March 2011 together with comparative figures for the last year as follows:

CONSOLIDATED INCOME STATEMENT

For the year ended 31 March 2011

Notes Turnover 5 Cost of sales Gross (loss)/profit Gain on change in fair value of investment property (Loss)/gain on change in fair value less costs to sell of biological assets Change in fair value of derivative financial instrument Other income and other gains or losses 6 Realised gain on financial assets at fair value through profit or loss Selling and administrative expenses Finance costs 7 Loss before income tax expense 8 Income tax expense 9 Loss for the year Loss attributable to: Owners of the Company Non-controlling interests Loss per share attributable to owners of the Company 11 — Basic — Diluted	2011 HK$’000 13,332 (16,485) (3,153) 1,157 (22,458) (67,726) 6,054 — (71,208) (184) (157,518) (12) (157,530) (153,670) (3,860) (157,530) HK cents (1.026) (1.026)	2010 HK$’000 (Restated) 21,171 (19,528) 1,643 148 4,869 29,820 6,983 729 (71,478) (9,633) (36,919) 248 (36,671) (33,119) (3,552) (36,671) HK cents (0.31) (0.49)

* for identification only

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 March 2011

Loss for the year Other comprehensive income: Exchange differences on translation of financial statements of foreign operations Other comprehensive income for the year, net of tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR Total comprehensive income attributable to Owners of the Company Non-controlling interests	2011 HK$’000 (157,530) 49,245 49,245 (108,285) (103,599) (4,686) (108,285)	2010 HK$’000 (Restated) (36,671) 3,164 3,164 (33,507) (30,645) (2,862) (33,507)

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 March 2011

Notes Non-current assets Investment property Property, plant and equipment Other properties under development Prepaid lease payments Biological assets Forest concession rights Long term prepayments Derivative financial instrument Total non-current assets Current assets Properties under development for sale Inventories Trade and other receivables 12 Prepaid lease payments Cash and cash equivalents Total current assets Total assets Current liabilities Trade and other payables 13 Promissory note Deferred government grant Amount due to a joint venture partner Amount due to a director Borrowings Total current liabilities Net current assets Total assets less current liabilities		2011 HK$’000		2010 HK$’000 (Restated)
		49,800 134,260 194,341 32,977 95,781 521,643 9,004 213,094		44,900 131,492 170,680 32,211 94,014 528,545 35,261 411,498
		1,250,900		1,448,601
		1,077,653 135,232 51,908 657 591,575		911,560 128,646 29,078 704 19,759
		1,857,025 3,107,925		1,089,747 2,538,348
		92,722 284,797 9,277 59,270 12,446 6,164 464,676		50,778 59,930 8,915 — 2,000 5,696 127,319
		1,392,349 2,643,249		962,428 2,411,029

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Non-current liabilities Deferred tax liabilities Deferred government grant Convertible bond Promissory note Acreage fees payable Total non-current liabilities Total liabilities Net assets Capital and reserves attributable to owners of the Company Share capital Reserves Equity attributable to owners of the Company Non-controlling interests Total equity		2011 HK$’000 1,574 116,407 263,112 — 11,020 392,113 856,789 2,251,136 198,429 2,037,509 2,235,938 15,198 2,251,136		2010 HK$’000 (Restated)
		1,574 116,407 263,112 — 11,020		1,574 111,871 361,205 177,332 11,083
				663,065 790,384 1,747,964 144,129 1,583,951 1,728,080 19,884 1,747,964

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NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 2011

1. CORPORATE INFORMATION

The Company is an exempted Company incorporated in the Cayman Islands with limited liability and its shares are listed on The Stock Exchange of Hong Kong Limited (the “SEHK”). The address of the registered office is the office of Caledonian Bank & Trust Limited, Caledonian House, George Town, Grand Cayman, Cayman Islands. Its principle place of business is located at Room 1801-07, China Resources Building, 26 Harbour Road, Wanchai, Hong Kong.

The principal activities of the Group are forest operation and management, timber logging and trading, timber processing, sale of timber products, plantation and trading of seedlings, cold storage warehouse rental, property development and asset management.

2. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”)

(a) Adoption of new/revised HKFRSs — effective 1 April 2010

HKFRSs (Amendments)	Improvements to HKFRSs
Amendments to HKAS 32	Classification of Rights Issues
Amendments to HKAS 39	Eligible Hedged Items
Amendments to HKFRS 2	Share-based Payment — Group Cash-settled Share-based
	Payment Transactions
HKAS 27 (Revised)	Consolidated and Separate Financial Statements
HKFRS 3 (Revised)	Business Combinations
HK(IFRIC) — Interpretation 17	Distributions of Non-cash Assets to Owners
HK Interpretation 5	Presentation of Financial Statements — Classification by the
	Borrower of a Term Loan that Contains a Repayment on
	Demand Clause

Except as explained below, the adoption of these new/revised standards and interpretations has no significant impact on the Group’s financial statements.

HKFRS 3 (Revised) — Business Combinations and HKAS 27 (Revised) — Consolidated and Separate Financial Statements

The revised accounting policies are effective prospectively for business combinations effected in financial periods beginning on or after 1 July 2009. Changes in HKFRS 3 include the valuation of non-controlling interest, the accounting for transaction costs, the initial recognition and subsequent measurement of a contingent consideration and business combinations achieved in stages. These changes impact the amount of goodwill and the results in the period that an acquisition occurs and future results. The adoption of revised HKFRS 3 has had no impact to the financial statements as there has been no business combination transaction during the year.

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The revised HKAS 27 requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as a transaction with owners in their capacity as owners, accordingly, such transactions are recognised within equity. When control is lost and any remaining interest in the entity is re-measured to fair value, a gain or loss is recognised in profit or loss. The adoption of revised HKAS 27 has had no impact on the current year.

HKAS 17 (Amendments) — Leases

HKAS 17 (amendment), ‘Leases’, deletes specific guidance regarding classification of leases of land, so as to eliminate inconsistency with the general guidance on lease classification. As a result, leases of land should be classified as either finance or operating lease using the general principles of HKAS 17, i.e. whether the lease transfers substantially all the risks and rewards incidental to ownership of an asset to the lessee. Prior to the amendment, land interest which title is not expected to pass to the Group by the end of the lease term was classified as operating lease under “prepaid lease payments”, and amortised over the lease term.

HKAS 17 (amendment) has been applied retrospectively for annual periods beginning 1 January 2010 in accordance with the effective date and transitional provisions of the amendment. The Group has reassessed the classification of unexpired land use rights as at 1 April 2010 on the basis of information existing at the inception of those leases, and considered the leasehold land in the People’s Republic of China (the “PRC”) remained as operating lease. As a result of the reassessment, the Group has not reclassified any leasehold land from operating lease to finance lease.

HK Interpretation 5 — Presentation of Financial Statements — Classification by the Borrower of a Term Loan that Contains a Repayment on Demand Clause

The Interpretation is a clarification of an existing standard, HKAS 1 — Presentation of Financial Statements. It sets out the conclusion reached by the HKICPA that a term loan which contains a clause which gives the lender the unconditional right to demand repayment at any time shall be classified as a current liability in accordance with paragraph 69(d) of HKAS 1 irrespective of the probability that the lender will invoke the clause without cause.

The adoption of the requirements of HK Interpretation 5 has no impact to the financial statements.

(b) New/revised HKFRSs that have been issued but are not yet effective

The following new/revised HKFRSs, potentially relevant to the Group’s financial statements, have been issued, but are not yet effective and have not been early adopted by the Group.

HKFRSs (Amendments)	Improvements to HKFRSs 2010 1&2
HK(IFRIC) — Interpretation 19	Extinguishing Financial Liabilities with Equity Instruments			1
HKAS 24 (Revised)	Related Party Disclosures 2
Amendments to HKFRS 7	Disclosures — Transfers of Financial Assets	3
Amendments to HKAS 12	Deferred Tax — Recovery of Underlying Assets		4
HKFRS 9	Financial Instruments 5

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• 1 Effective for annual periods beginning on or after 1 July 2010

• 2 Effective for annual periods beginning on or after 1 January 2011 3 Effective for annual periods beginning on or after 1 July 2011 4 Effective for annual periods beginning on or after 1 January 2012 5 Effective for annual periods beginning on or after 1 January 2013

HKAS 24 (Revised) clarifies and simplifies the definition of related parties. It also provides for a partial exemption of related party disclosure to government-related entities for transactions with the same government or entities that are controlled, jointly controlled or significantly influenced by the same government.

The amendments to HKFRS 7 improve the derecognition disclosure requirements for transfer transactions of financial assets and allow users of financial statements to better understand the possible effects of any risks that may remain with the entity on transferred assets. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period.

Under HKFRS 9, financial assets are classified into financial assets measured at fair value or at amortised cost depending on the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. Fair value gains or losses will be recognised in profit or loss except for those non-trade equity investments, which the entity will have a choice to recognise the gains and losses in other comprehensive income. HKFRS 9 carries forward the recognition and measurement requirements for financial liabilities from HKAS 39, except for financial liabilities that are designated at fair value through profit or loss, where the amount of change in fair value attributable to change in credit risk of that liability is recognised in other comprehensive income unless that would create or enlarge an accounting mismatch. In addition, HKFRS 9 retains the requirements in HKAS 39 for derecognition of financial assets and financial liabilities.

The amendments to HKAS 12 introduce a rebuttable presumption that an investment property is recovered entirely through sales. This presumption is rebutted if the investment property is depreciable and is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale. The amendments will be applied retrospectively.

The Group is in the process of making an assessment of the potential impact of these new/revised HKFRSs and the directors so far concluded that the application of these new/revised HKFRSs will have no material impact on the Group’s financial statements.

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3. PRINCIPAL ACCOUNTING POLICIES

(a) Statement of compliance

The financial statements have been prepared in accordance with all applicable HKFRSs, Hong Kong Accounting Standards (“HKASs”) and Interpretations (hereinafter collectively referred to as the “HKFRSs”) and the disclosure requirements of Hong Kong Companies Ordinance. In addition, the financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

(b) Basis of measurement

The financial statements have been prepared under historical cost basis except for investment property, buildings included in property, plant and equipment, derivative financial instruments, and biological assets, which are measured at revalued amounts, fair values or fair value less costs to sell.

(c) Changes in accounting policies

During the year, the Group changed its accounting policy for land use rights which is held for development and subsequent sale or use in production of goods or services or for administrative purposes.

Land use rights which are held for development and subsequent sale meet the definition of both inventories under HKAS 2 “Inventories” and leasehold land under HKAS 17 “Leases”. Previously, land use rights held for development and subsequent sale were classified as prepaid leases payments and were amortised on a straight line basis over the period of the lease in accordance with HKAS 17. Amortisation of leasehold land during the development phase was capitalised as part of the construction costs of the property. Amortisation charges incurred prior to development and following completion of the property were recognised in profit or loss. Subsequent to the change in accounting policy, land use rights which is held for development and subsequent sale are classified as inventories and included in “properties under development for sale” in accordance with HKAS 2 and measured at the lower of cost and net realisable value.

Also, the directors considered that payments for land use rights constitute an element of costs for self-constructed or jointly-constructed property, plant and equipment. Subsequent to the change in accounting policy, land use rights held for development and subsequent use in production of goods or services or administrative purposes are included in “other properties under development” in accordance with HKAS 16 and measured at cost less any accumulated impairment losses, if any. No provision for amortisation is made on other properties under development until such time as the relevant assets are completed and are available for intended use.

Management believes that the new classification of land use rights results in a more relevant presentation of the financial position of the Group, and of its performance for the year. The revised treatment reflects management’s intention regarding the use of the land use rights and results in a presentation consistent with the industry practices.

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The change in accounting policy has been accounted for retrospectively in accordance with HKAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” and the consolidated financial statements have been restated by reversing the amortisation charged in prior years. The effect on the consolidated financial statements is as follows:

		As at 31 March	As at 31 March	As at 31 March
		2011		2010
		HK$’000		HK$’000
Increase in other properties under development — non-current		194,341		170,680
Increase in properties under development for sale — current		—		911,560
Decrease in prepaid lease payment — non-current		174,665		1,050,077
Increase in retained profits		19,188		32,104
Increase in translation reserve		488		59
	For the year ended 31 March
		2011		2010
		HK$’000		HK$’000
Decrease in selling and administrative expenses		19,188		32,104
Decrease in loss attributable to owners of the Company		19,188		32,104
Decrease in loss per share (basic and diluted)		0.13 cents		0.3 cents

The 2010 comparatives have been restated in these financial statements to effect the above adjustments. Under HKAS 1 “Presentation of Financial Statements”, this restatement would ordinarily require the presentation of a consolidated statement of financial position as at 1 April 2009. However, as the restatement would have no effect on the previously published consolidated statement of financial position as at that date, the directors do not consider that this would provide any additional information and, in consequence, have not presented it in these financial statements.

4. SEGMENT INFORMATION

The Group has four reportable segments. The segments are managed separately as each business offers different products and requires different business strategies. The following summary describes the operations in each of the Group’s reportable segments:

• Timber logging and trading — sales of timber logs from forest concession, tree plantation area and outside suppliers, and sales of seedlings

• Other timber operation — the manufacture and sale of furniture and handicrafts and sales of refined tea oil

• Property development and asset management

• Cold storage warehouse leasing

Segment assets exclude derivative financial instrument and cash and cash equivalents and other unallocated head office and corporate assets as these assets are managed on a group basis.

Segment liabilities exclude deferred tax liabilities, promissory note and convertible bond and other unallocated head office and corporate liabilities as these liabilities are managed on a group basis.

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(a) Reportable Segment

There was no inter-segment sale or transfer during the year (2010: HK$ Nil). Central revenue and expenses are not allocated to the operating segments as they are not included in the measure of the segments’ loss that is used by the chief operating decision makers for assessment of segment performance.

For the year ended 31 March 2011

REVENUE Revenue from external customers Inter-segment revenue Reportable segment revenue Reportable segment (loss)/profit Reportable segment assets Reportable segment liabilities Other segment information Additions of property, plant and equipment Unallocated additions of property, plant and equipment Total additions of property, plant and equipment Additions of other properties under development Additions of biological assets Depreciation and impairment loss of property, plant and equipment Unallocated depreciation and impairment loss of property, plant and equipment Total depreciation and impairment loss of property, plant and equipment Amortisation of prepaid lease payments Unallocated amortisation of prepaid lease payments Total amortisation of prepaid lease payments	Timber logging and trading HK$’000 3,224 — 3,224 (15,506) 582,035 (12,042) — — 21,269 2,532 —	Other timber operation Property development and asset management HK$’000 HK$’000 9,349 — — — 9,349 — (26,221) (1,911) 307,811 1,259,518 (61,726) (211,091) 5,620 365 — 16,739 1,757 — 3,817 54 577 —	Cold storage warehouse leasing HK$’000 759 — 759 15 68,734 (230) — — — — —	Total HK$’000 13,332 — 13,332 (43,623) 2,218,098 (285,089) 5,985 6,774 12,759 16,739 23,026 6,403 4,866 11,269 577 80 657

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Timber logging and trading Other timber operation Property development and asset management Cold storage warehouse leasing HK$’000 HK$’000 HK$’000 HK$’000 Amortisation of forest concession rights 6,896 — — — Gain on change in fair value of investment property — — — 1,157 Loss on change in fair value less costs to sell of biological assets (20,338) (2,120) — — Write down of inventories, net — (5,293) — — Interest income 1 34 123 — Unallocated interest income Total interest income Interest on short term borrowing 184 — — — Income tax expense — 12 — —

Total HK$’000 6,896 1,157 (22,458) (5,293) 158 3 161 184 12

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For the year ended 31 March 2010

REVENUE Revenue from external customers Inter-segment revenue Reportable segment revenue Reportable segment loss Reportable segment assets Reportable segment liabilities Other segment information Additions of property, plant and Equipment Unallocated additions of property, plant and equipment Total additions of property, plant and equipment Additions to other properties under development Additions of biological assets Depreciation and impairment loss of property, plant and equipment Unallocated depreciation and impairment loss of property, plant and equipment Total depreciation and impairment loss of property, plant and equipment Amortisation of prepaid lease payments Unallocated amortisation of prepaid lease payments Total amortisation of prepaid lease payments	Timber logging and trading HK$’000 14,383 — 14,383 (17,370) 817,218 (41,514) 1,005 — 6,724 3,869 623	Other timber operation Property development and asset management HK$’000 HK$’000 (Restated) 6,106 — — — 6,106 — (18,859) — 80,971 1,084,392 (15,555) (113,907) 29,132 — — 170,785 11,923 — 2,263 1 — —	Cold storage warehouse leasing HK$’000 682 — 682 (59) 44,900 (198) — — — 1 —	Total HK$’000 (Restated) 21,171 — 21,171 (36,288) 2,027,481 (171,174) 30,137 14,275 44,412 170,785 18,647 6,134 4,277 10,411 623 81 704

— 12 —

Timber logging and trading Other timber operation Property development and asset management Cold storage warehouse leasing HK$’000 HK$’000 HK$’000 HK$’000 Amortisation of forest concession rights 2,214 — — — Gain on change in fair value of investment property — — — 148 Gain on change in fair value less costs to sell of biological assets 4,869 — — — Write down of inventories, net — (1,059) — — Interest income 59 85 — — Unallocated interest income Total interest income Over provision of income tax expense (248) — — —

Total HK$’000 2,214 148 4,869 (1,059) 144 19 163 (248)

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(b) Reconciliation of reportable segment loss, assets and liabilities

Reportable segment loss before income tax expense Gain on change in fair value of investment property (Loss)/gain on change in fair value less costs to sell of biological assets Change in fair value of derivative financial instrument Other income and other gains or losses Realised gain on financial assets at fair value through profit or loss Unallocated corporate expenses Finance costs Consolidated loss before income tax expense Assets: Reportable segment assets Derivative financial instrument Cash and cash equivalents Unallocated corporate assets Consolidated total assets Liabilities: Reportable segment liabilities Deferred tax liabilities Promissory note Convertible bond Unallocated corporate liabilities Consolidated total liabilities	2011 HK$’000 (43,623) 1,157 (22,458) (67,726) 5,511 — (30,195) (184) (157,518) 2011 HK$’000 2,218,098 213,094 591,575 85,158 3,107,925 285,089 1,574 284,797 263,112 22,217 856,789	2010 HK$’000 (Restated) (36,288) 148 4,869 29,820 6,592 729 (33,156) (9,633) (36,919) 2010 HK$’000 (Restated) 2,027,481 411,498 19,759 79,610 2,538,348 171,174 1,574 237,262 361,205 19,169 790,384

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(c) Geographical information

The Group operates in four principal geographical areas — the People’s Republic of China (excluding Hong Kong) (the “PRC”), Hong Kong, Australia and Guyana.

The following table provides an analysis of the Group’s revenue from external customers and noncurrent assets other than financial instruments (“Specified non-current assets”).

PRC Hong Kong Australia Guyana	Revenue from external customers 2011 2010 HK$’000 HK$’000 11,966 8,355 — 3,191 759 682 607 8,943 13,332 21,171	Specified non-current assets 2011 2010 HK$’000 HK$’000 (Restated) 435,510 430,136 13,369 14,016 49,800 44,900 539,127 548,051 1,037,806 1,037,103	Specified non-current assets 2011 2010 HK$’000 HK$’000 (Restated) 435,510 430,136 13,369 14,016 49,800 44,900 539,127 548,051 1,037,806 1,037,103
			1,037,103

(d) Information about major customers

The Group’s customer base is not diversified and there were four (2010: two) customers with whom transactions have exceeded 10% of the Group’s revenues. Revenues from one (2010: one) customer in the timber logging and trading segment was approximately HK$1,702,000 (2010: HK$5,536,000) and revenues from three (2010: one) customers from other timber operation segment was approximately HK$6,193,000 (2010: HK$4,134,000).

5. TURNOVER

Turnover, which is also the revenue, represents the net invoiced value of goods sold and rental income earned by the Group. The amounts of each significant category of revenue recognised during the year are as follows:

Income from timber logging and trading Sales of seedlings Sales of furniture and handicrafts Sales of tea oil Gross rental income from cold storage warehouse (before direct outgoings of HK$98,000 (2010: HK$49,000))	2011 HK$’000 607 2,617 7,552 1,797 759 13,332	2010 HK$’000 11,855 2,528 5,125 981 682
		21,171

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6. OTHER INCOME AND OTHER GAINS OR LOSSES

Other income and other gains or losses comprises:

Interest income Exchange gain, net (Loss)/gain on deregistration of a subsidiary Gain on disposal of property, plant and equipment Others FINANCE COSTS Interest on short term borrowings wholly repayable within five years Interest expenses on convertible bond maturing within five years Interest expenses on promissory note maturing within five years_(note i) Total borrowing cost _Less:_Amount capitalised(note ii)_	2011 HK$’000 161 5,041 (27) 163 716 6,054 2011 HK$’000 184 47,839 47,535 95,558 (95,374) 184	2010 HK$’000 163 6,453 225 — 142
		6,983
		2010 HK$’000 — 5,853 3,780
		9,633 —
		9,633

7. FINANCE COSTS

Notes:

• i. During the year, the Group defaulted on payment of the principal and interest of the promissory note. Interest expense for the current year comprised of imputed interest up to the date of default, coupon interest thereafter and early recognition of remaining imputed interest to maturity date resulting from default of payment.

• ii. Borrowing costs capitalised during the year arose on specific borrowings to expenditure on qualifying assets.

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8. LOSS BEFORE INCOME TAX EXPENSE

Loss before income tax expense is stated after charging:

	2011	2010
	HK$’000	HK$’000
		(Restated)
Auditor’s remuneration	1,230	1,200
Depreciation of property, plant and equipment_(Note i)_	11,269	10,411
Amortisation of forest concession rights included in selling and
administrative expenses	6,896	2,214
Amortisation of prepaid lease payments_(Note ii)_	657	704
Cost of inventories and timber harvested:
— Upon sales	11,192	18,469
— Write down of inventories	5,293	1,059
Staff cost (excluding director’s remuneration):
— Salaries and allowances_(Note iii)_	15,648	25,437
— Defined contribution pension cost	286	357

Note (i): An analysis of the Group’s depreciation of property, plant and equipment is as follows:

Amounts included in biological assets Amounts included in cost of sales Amounts included in selling and administrative expenses	2011 HK$’000 180 506 10,583 11,269	2010 HK$’000 157 291 9,963
		10,411

Note (ii): An analysis of the Group’s amortisation of prepaid lease payments is as follows:

Amounts included in biological assets Amounts included in selling and administrative expenses	2011 HK$’000 536 121 657	2010 HK$’000 (Restated) 582 122
		704

Note (iii): Salaries and allowances of HK$1,032,000 (2010: HK$2,025,000) has been included in the cost of sales on the face of the consolidated income statement.

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9. INCOME TAX EXPENSE

The income tax expense comprises:

PRC enterprise income tax — current year — over provision, in respect of prior years Income tax expense	2011 HK$’000 12 — 12	2010 HK$’000 — (248) (248)

The income tax expense for the year can be reconciled to the loss per the consolidated income statement as follows:

Loss before income tax expense Tax calculated at 16.5% Over provision in prior years Net effect of non-taxable/deductible items Net effect of tax losses and temporary differences not recognised Tax effect on tax exemption granted by PRC tax authority Effect of different tax rates of subsidiaries operating in other jurisdictions Income tax expense	2011 HK$’000 (157,518) (25,990) — 21,085 8,165 (260) (2,988) 12	2010 HK$’000 (Restated) (36,919) (6,092) (248) (4,510) 14,086 (369) (3,115) (248)

The statutory tax rate for Hong Kong profits tax is 16.5% (2010: 16.5%) on the estimated assessable profits arising in Hong Kong during the year. No provision for Hong Kong profits tax has been made as the Group did not earn any income subject to Hong Kong profits tax during the years ended 31 March 2011 and 2010.

The subsidiaries in Guyana are liable to Guyana income tax at a rate of 45% (2010: 45%). No provision for Guyana income tax has been made as the subsidiaries in Guyana sustained losses for taxation purposes for the years ended 31 March 2011 and 2010.

The subsidiaries in Australia are liable to Australian income tax at a rate of 30% (2010: 30%). No provision for Australian income tax has been made as the subsidiaries in Australian sustained losses for taxation purposes for the years ended 31 March 2011 and 2010.

The State Council released the Implementation Rules to the Corporate Income Tax Law on 6 December 2007 (the “Implementation Rules”). According to the Implementation Rules, an entity engaged in forestry business is entitled to full exemption from PRC enterprise income tax commencing from 1 January 2008. Two subsidiaries of the Group, namely 樹人木業（大埔）有限公司 and 樹人苗木組培（大埔）有限公司 are qualified as forestry operation enterprise by the local tax authorities and so they are fully exempted from PRC enterprise income tax.

— 18 —

For the year ended 31 March 2011, the statutory corporate income tax rates applicable to the subsidiaries established and operating in the PRC is 25% (2010: 25%).

10. DIVIDEND

The Directors do not recommend the payment of a dividend for the year ended 31 March 2011 (2010: HK$Nil).

11. LOSS PER SHARE

The calculation of the basic and diluted loss per share attributable to owners of the Company is based on the following data:

Loss attributable to owners of the Company

Loss for the purposes of basic loss per share Interest on convertible bond Fair value loss/(gain) on the derivative financial instrument Loss for the purposes of diluted loss per share Number of shares Weighted average number of ordinary shares for the purposes of basic loss per share Adjustment for convertible bond Weighted average number of ordinary shares for the purposes of diluted loss per share Loss per share attributable to owners of the Company — Basic — Diluted (exclude anti-dilutive)	2011 HK$’000 (153,670) — 67,726 (85,944) ’000 14,971,055 8,281,781 23,252,836 HK cents (1.026) (1.026)	2010 HK$’000 (Restated) (33,119) 5,853 (29,820) (57,086) ’000 10,734,514 839,285 11,573,799 HK cents (Restated) (0.31) (0.49)

For the year ended 31 March 2011 and 2010, the computation of diluted loss per share does not assume the exercise of the Company’s outstanding warrants as the exercise price of those warrants is higher than the average market price for shares for 2011 and 2010.

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12. TRADE AND OTHER RECEIVABLES

Trade receivables Other receivables Deposits paid Prepayments	Group 2011 2010 HK$’000 HK$’000 2,796 2,903 18,378 5,566 6,568 2,285 24,166 18,324 51,908 29,078	Group 2011 2010 HK$’000 HK$’000 2,796 2,903 18,378 5,566 6,568 2,285 24,166 18,324 51,908 29,078
		29,078

The Group’s trading terms with its customers are mainly on credit, except for new customers, where payment in advance is normally required. The credit period is generally two months, extending up to over three months or more for major customers. Each customer has a maximum credit limit. The Group seeks to maintain strict control over its outstanding receivables and has a credit control department to minimise credit risk. Overdue balances are reviewed regularly by senior management.

Details of the ageing analysis of trade receivables of the Group are as follows:

Outstanding balances aged: 0 to 30 days 31 to 60 days 61 to 180 days Over 180 days	Group 2011 2010 HK$’000 HK$’000 794 2,015 14 451 659 52 1,329 385 2,796 2,903	Group 2011 2010 HK$’000 HK$’000 794 2,015 14 451 659 52 1,329 385 2,796 2,903
		2,903

At 31 March 2011 and 2010, all of the Group’s trade receivables were neither past due nor impaired which related to customers for whom there was no recent history of default. Consequently, no allowance for doubtful debts was recognised at the end of reporting period.

Included in trade receivables are the following amounts denominated in a currency other than the functional currency of the entity to which they relate:

Renminbi (“RMB”) United States Dollars (“USD”)	Group 2011 2010 HK$’000 HK$’000 1,550 85 1,246 2,818 2,796 2,903	Group 2011 2010 HK$’000 HK$’000 1,550 85 1,246 2,818 2,796 2,903
		2,903

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13. TRADE AND OTHER PAYABLES

	Group	Group
	2011	2010
	HK$’000	HK$’000
Trade payables	3,402	2,256
Other payables and accruals	75,505	39,872
Deposit received from customers	8,707	3,542
Purchase consideration payable	5,108	5,108
	92,722	50,778
Details of the ageing analysis of trade payables of the Group are as follows:
	Group
	2011	2010
	HK$’000	HK$’000
Outstanding balances aged:
0 to 30 days	302	1,543
31 to 60 days	450	—
61 to 180 days	507	698
Over 180 days	2,143	15
	3,402	2,256
Trade and other payables were denominated in the following currencies:

HKD RMB USD Australian Dollars	Group 2011 2010 HK$’000 HK$’000 23,411 30,283 67,003 18,345 2,079 1,946 229 204 92,722 50,778	Group 2011 2010 HK$’000 HK$’000 23,411 30,283 67,003 18,345 2,079 1,946 229 204 92,722 50,778
		50,778

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MANAGEMENT DISCUSSION AND ANALYSIS FOR THE YEAR ENDED 31 MARCH 2011

BUSINESS REVIEw

For the year ended 31 March 2011, the Group has started to gradually shift its focus to transportation and expressway operation from forest operation and management, timber logging and trading, timber processing, sale of timber products, plantation and trading of seedlings, property development and asset management.

The financial year ended 31 March 2011 was a turning point for the Group as it has witnessed our expedition into a new frontier of transportation and expressway operation. Despite a continual challenging market environment, the Group persistently looking for investment opportunities to build up the breadth and depth of our operation which the Group foresees will bear fruits in the near future.

Further, the Group’s property development operation in Yichang city of Hubei Province was in steady progress. On 16 August 2010, the Group’s property development arm Yichang Xinshougang Property Development Company Limited（宜昌新首鋼房地產開發有限公司）(“Yichang Xinshougang”) entered into a joint development agreement with an independent third party Dafang Properties Development Co. Ltd. (“Dafang Properties”) for the development of several complex commercial and residential properties, including Yichang Three Gorges International Convention Centre, the Three Gorges State Guest House and the Three Gorges State Guest Garden Commercial Property (collectively the “Yichang Project”). Yichang Xinshougang has contributed a parcel of land while Dafang Properties has provided funding for all necessary development and construction costs for the Yichang Project. Pre-sale of residential properties commenced in mid-June 2011 and distributable profit from sales is to be shared by the Group and Dafang Properties on a 60: 40 basis.

FINANCIAL REVIEw

For the year ended 31 March 2011, turnover of the Group recorded a substantial decrease of 37% to approximately HK$13.33 million (2010: HK$21.17 million) which is mainly attributable to a significant decrease of income generated from timber logging and trading (including sales of seedlings) which was HK$3.22 million (2010: HK$14.38 million) resulting from a significant cut down in timber logging, an adjustment made due to market uncertainty. The turnover comprised four business segments, namely income from timber logging and trading, other timber operation, property development and asset management, and cold storage warehouse leasing which respectively contributed approximately HK$3.22 million, HK$9.35 million, HK$0 million, and HK$0.76 million (2010: HK$14.38 million, HK$6.11 million, HK$0 million and HK$0.68 million) to the Group’s consolidated income.

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Detailed segment turnover and contribution to loss before income tax expense of the Group are shown in note 4 of the Notes to the Financial Statements herein. Cost of sales for the year was approximately HK$16.49 million (2010: HK$19.53 million). As a result, the Group recorded a gross loss of approximately HK$3.15 million which was contrary to a gross profit of approximately HK$1.64 million in last financial year.

Net loss for the year was approximately HK$157.53 million (2010 (Restated): HK$36.67 million) and loss per share attributable to shareholders of the Company (“Shareholders”) was HK1.026 cents per basic share (2010 (Restated): HK0.31 cents) and HK1.026 cents per diluted share (2010 (Restated): HK0.49 cents).

The loss was mainly attributable to the losses recorded on a change in fair value less costs to sell of biological assets in China which was approximately HK$22.46 million (2010: gain of HK$4.87 million) and a change in fair value of the derivative financial instrument which was approximately HK$67.73 million (2010: gain of HK$29.82 million) i.e. a total of approximately HK$90.19 million loss in book value. The selling and administrative expenses was HK$71.21 million, slightly decreased from that of previous year (2010 (Restated): HK$71.48 million).

The Board considers that the changes in fair value of the derivative financial instrument and the biological assets in China are non-cash items which do not have any impact on the operating cash flows of the Group.

Further, the Group’s cash and cash equivalents stood at approximately HK$591.58 million as at 31 March 2011 (2010: HK$19.76 million). The increase in cash and cash equivalents was due to the completion of placing of 1,800,000,000 new shares of the Company at a placing price of HK$0.30 per ordinary share, raising approximately HK$534 million net proceeds in January 2011.

As at 31 March 2011, gearing ratio of the Group was 27.6% (2010 (Restated): 31.3%).

The Board did not recommend any final dividend for the year ended 31 March 2011 (2010: NIL).

LIqUIDITY REVIEw

As at 31 March 2011, the Group’s total assets less current liabilities amounted to approximately HK$2,643 million compared to approximately HK$2,411 million (Restated) as at 31 March 2010, representing an increase of about 9.6%. Total assets were approximately HK$3,107 million (2010 (Restated): HK$2,538 million) which comprised total non-current assets of approximately HK$1,250 million (2010 (Restated): HK$1,448 million) and total current assets of approximately HK$1,857 million (2010 (Restated): HK$1,089 million). The current assets of the Company include properties under development for sale which were valued at approximately HK$1,077 million (2010 (Restated): HK$912 million).

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The Group’s current liabilities increased from HK$127.32 million in 2010 to HK$464.68 million in 2011, mainly attributable by a promissory note of approximately HK$284.80 million, trade and other payables of approximately HK$92.72 million, amount due to a joint venture partner of approximately HK$59.27 million and an amount due to a director of approximately HK$12.45 million. The said director’s loan is unsecured, interest free and repayable on demand.

The said promissory note with a principal amount of HK$280 million was issued to China Alliance International Holding Group Limited, a substantial shareholder of the Company, in connection with the acquisition of Yichang Xinshougang, details of which was disclosed in an announcement dated 21 May 2009 by the Company. As per the default clause of the promissory note, if the Group failed to repay as per repayment schedule, the note holder is entitled to demand immediate payment of principal and accrued interest. No payment for principal and accrued interest was made by the Group since 8 May 2010, the first repayment date. As a result, a total of approximately HK$284.80 million was recorded under current liabilities as at 31 March 2011 (2010: HK$59.93 million). Details of the information can be found in note 30 of the Notes to the Financial Statements of the Company’s annual report for the year ended 31 March 2011 (“the 2011 Annual Report”) to be despatched in due course.

The Group’s capital commitments outstanding as at 31 March 2011 was approximately HK$188.80 million, of which HK$184.72 million, representing almost 98%, was for development of the Yichang Project.

As at 31 March 2011, the Group had an outstanding borrowing of HK$6.16 million (2010: HK$5.70 million).

The Group’s business operations, assets and liabilities are denominated mainly in Hong Kong dollars, Renminbi and US dollars except its cold storage warehouse in Australia, thus appreciation in Australian dollars has resulted in a net exchange gain. Save as aforesaid, the Board considered foreign exchange risk is minimal. The management will review from time to time the potential foreign exchange exposure and will take appropriate actions to minimise any potential foreign exchange exposure risk to be arisen in the future.

The Group did not use any financial instruments for hedging purposes and did not have foreign currency net investments being hedged by foreign currency borrowings and other hedging instruments.

Details of the Group’s financial risk management are set out in note 45 of the Notes to the Financial Statements of the 2011 Annual Report.

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MATERIAL EVENTS AND PROSPECT

Joint development of Yichang Project

On 16 August 2010, Yichang Xinshougang entered into a joint development agreement with Dafang Properties in respect of the Yichang Project. Pursuant to the agreement, Dafang Properties shall provide Yichang Xinshougang the funds to meet all necessary development and construction costs of the Yichang Project (estimated ranging from RMB800 million to RMB1,000 million (approximately HK$916 million to HK$1,145 million)) in exchange for an entitlement to share 35-40% of the economic benefit of the Yichang Project.

The development of the Yichang Project is capital intensive. The Directors considered that joint development with Dafang Properties allowed the Group to minimise its risk in securing sufficient financing at commercially viable and favourable terms while still holding the majority economic benefit from the Yichang Project.

The Yichang Project is in steady progress and pre-sale of residential properties has been started in mid-June 2011 and thus will contribute to the turnover of the Group in the coming financial year.

Transforming into transportation and expressway operation

Commencing in January 2011, the Group embarked on a new business in toll road and expressway operation in Inner Mongolia by investing into Inner Mongolia Zhunxing Heavy Haul Expressway Company Limited (“ 內蒙古准興重載高速公路有限責任公司 ”) (“Zhunxing”) which has an exclusive right to build and operate the first heavy-duty toll expressway designed for coal transportation in the Inner Mongolia Autonomous Region for 30 years (excluding the construction period). The toll road will run from the Jungar Banner which is a major coal production area located south of Hohhot in the Ordos, toward the north east for 265 km to Xinghe County which is a major logistic hub for coal distribution in northern China.

The expressway, currently under construction and expected to open for traffic in January 2013, is designed to sustain 100-ton trucks whereas most other expressways in China can only allow 50-ton trucks.

In a nutshell, on 21 April 2011, the Company, through its subsidiary, entered into the first capital injection agreement with Zhunxing for the acquisition of its 11% equity interest at the consideration of RMB500 million (approximately HK$602 million) (the “First Capital Injection Agreement”). The said acquisition was completed on 9 May 2011 and Zhunxing has been transformed into a Sinoforeign joint venture. On 26 May 2011, the Company, through its subsidiary, further entered into a second capital injection agreement with Zhunxing for the acquisition of its 40% equity interest at the consideration of RMB1,818 million (approximately HK$2,190 million). Upon completion of the second capital injection agreement, the Group will be in control of 51% equity interest in Zhunxing and Zhunxing will become a subsidiary of the Company. Details of the transaction are disclosed in the announcement of the Company dated 26 May 2011.

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In addition, the Group has been granted an option but not obliged to acquire a total of 66% equity interest in Zhunxing under the First Capital Injection Agreement. In order to capture the economic benefits of the expressway operation, the Group may further invest in Zhunxing in the future and will keep the Shareholders informed of the progress.

EMPLOYEES AND RETIREMENT BENEFIT SCHEME

The Group had approximately 235 employees in Hong Kong, the PRC, Australia and Guyana as at 31 March 2011. The Group implements remuneration policy, bonus and share options schemes to ensure that pay scales of its employees are rewarded on performance-related basis within the general framework of the Group’s remuneration strategy.

The emoluments payable to the Directors are determined based on the scope of work, level of involvement, experience and seniority.

CAPITAL RAISING AND EXPENDITURE

On 21 January 2011, the Company allotted and issued 1,800,000,000 new shares to not less than six placees who are third parties independent from the Company through placing agent Guotai Junan Securities (Hong Kong) Limited at a placing price of HK$0.30 per ordinary share, raising approximately HK$534 million net proceeds, of which approximately HK$450 million was injected into Zhunxing as registered capital. The placing shares were allotted and issued pursuant to the general mandate granted to the Directors by a resolution of the Shareholders passed at the annual general meeting held on 30 August 2010.

For the year ended 31 March 2011, the Company issued 287,141,477 new shares at HK$0.23 per share due to exercise of warrants issued by the Company on 8 February 2010 and 3,342,857,141 new shares upon conversion of convertible bonds issued by the Company on 9 February 2010 at the conversion price of HK$0.056 per share.

CONTINGENT LIABILITIES

The Group’s operations are regulated by various laws and regulations in Guyana. Guyana laws and regulations for the protection of the environment and wild life have generally become more stringent in recent years. Some of these laws and regulations could impose significant costs, expenses, penalties and liabilities on the Group. The Directors are not aware of any environmental liabilities as at the end of the reporting period and up to the date of this Announcement. The Directors are also not aware of any violation to existing conditions attached to the Group’s timber concession rights, or subject to any significant costs, expenses, penalties and liabilities.

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DIVIDENDS

The Directors do not recommend the payment of any dividend for the year ended 31 March 2011 (2010: Nil).

PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES

There was no purchase, sale or redemption of listed securities of the Company by the Company or any of its subsidiaries during the year.

THE MODEL CODE

The Company has adopted a code of conduct regarding directors’ securities transactions on terms no less than the required standard set out in the Model Code in Appendix 10 of the Rules Governing the Listing of Securities (“Listing Rules”) on The Stock Exchange of Hong Kong Limited (“Stock Exchange”) and the Directors have confirmed that they have complied with the required standard set out in the Model Code and the Company’s code of conduct regarding Directors’ securities transactions.

AUDIT COMMITTEE

The Company has established the Audit Committee in accordance with the requirements of the Listing Rules. The Audit Committee, comprising all independent non-executive Directors, namely Mr. Yip Tak On, Mr. Jing Baoli and Mr. Bao Liang Ming, is responsible for reviewing the Group’s accounting practice and policies, the external audit, internal control and risk evaluation.

The Group’s annual results for the year ended 31 March 2011 have been reviewed by the Audit Committee.

REMUNERATION COMMITTEE

To comply with the Code on Corporate Governance Practices, a remuneration committee was established with specific written terms of reference which deal clearly with its authority and duties. The remuneration committee comprises all independent non-executive Directors, Mr. Yip Tak On, Mr. Jing Baoli and Mr. Bao Liang Ming and an executive Director, Mr. Tsang Kam Ching, David.

COMPLIANCE wITH THE CODE ON CORPORATE GOVERNANCE PRACTICES

During the financial period under review, the Company has complied with all those code provisions set out in the Code on Corporate Governance Practices contained in Appendix 14 of the Listing Rules, except that the Board held only two regular board meetings instead of at least 4 for the financial year. Further details of the Company’s corporate governance practices will be set out in the Corporate Governance Report to be contained in the 2011 Annual Report.

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PUBLICATION OF RESULTS ON THE STOCK EXCHANGE’S wEBSITE

All the information required by paragraph 46 of Appendix 16 of the Listing Rules will be published on the website of the Stock Exchange in due course and at the website of the Company at http:// www.ctrg.com.hk. Our 2011 Annual Report containing all the information required by the Listing Rules will be despatched to the Shareholders and available on the above websites in due course.

By Order of the Board China Timber Resources Group Limited Cao Zhong Chairman

Hong Kong, 28 June 2011

As at the date of this announcement, the Board comprises three executive Directors, namely Mr. Cao Zhong, Mr. Fung Tsun Pong and Mr. Tsang Kam Ching, David; a non-executive Director, namely Mr. Neil Bush and three independent non-executive Directors, namely Mr. Yip Tak On, Mr. Jing Baoli and Mr. Bao Liang Ming.

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