Dear Shareholders,

On behalf of China Grand Forestry Green Resources Group Limited (the “Company”), I would like to express our heartfelt gratitude for your support and confidence in the Company. I hereby report to our shareholders the audited consolidated results of the Company and its subsidiaries (collectively, the “Group”) for the year ended 31 March 2011 together with comparative figures for the year ended 31 March 2010.

For the year, the Group recorded a loss attributable to shareholders of HK$1,204 million, representing a loss of HK13.07 cents per share. During the year, there was no substantial acquisition or disposal transaction made, the Group had entered into a memorandum of understanding in relation to an acquisition of coking coal mine business but due to the Group and the potential seller cannot enter into final agreement within the agreed period, the proposed transaction has not been completed. During the year, the Group temporarily closed two biological assets projects, namely paper mulberry trees and liquorices to minimize the business risk. The Group would actively seek new investment opportunities which will improve the Group’s performance and increase shareholders’ value. The cash and bank balance as at year end date was HK$581 million which can support the Group to seek new business opportunities.

STATUS OF INDUSTRY DEVELOPMENT AND MARKET REVIEW
In the year, the business environment of the ecological business in China was adversely affected by various factors such as environmental issues and government policies. The turnover of the Group decreased continuously due to decrease in wood flow and this trend is expected to continue in the coming years. Ecological business is labour intensive and it requires a long investment period to generate return.

TEMPORARY CLOSURE OF TWO BIOLOGICAL ASSETS
In previous years, the Group planted Paper Mulberry Tree in various provinces in China and Liquorices in Inner Mongolia. Unfortunately, there were consecutive climate disasters (such as drought, heavy snow rain, and heavy rain etc.) that caused a serious blow to the paper mulberry trees and a terribly low survival rate to the planted paper mulberry trees. The survival rate of young Liquorices was also terribly low caused by extreme cold and drought climate in Inner Mongolia. The Group made a large loss in previous years. These plantation estates need to be replanted again but plantation is labour intensive. Obviously, labour cost is much higher than previous years which make the plantation expenditures and maintenance cost much higher than previous years. In addition, the Group did not have any downstream production plants, the Group has been seeking appropriate business partner since year 2007 but has not be successful. The Group also considered that the increasingly unpredictable weather situation increase the business risk significantly. Therefore, due to commercial consideration to balance the investment expenditure, the business risk and return, the Group temporarily closed Paper Mulberry Trees and Liquorices projects and relevant provision or write-off was made during the year. The Group may restart these two biological assets projects when there is/are appropriate business partner(s) and the yield of plantation can be increased.

BUSINESS DEVELOPMENT STRATEGIES AND PROSPECTS
The Group had restructured its management team in September 2009. Since then the new management has the view that focus on a few biological assets projects are beneficial to the Group so that the Group can concentrate the resources to develop business and reduce the business risks. Thus, the Group temporarily closed two biological assets projects during the year, namely paper mulberry tree and liquorices projects. In addition, the Group is seeking appropriate local business partners to develop together the remaining biological assets to enhance the management efficiency and broaden the sales channel. The Group may also restructure existing forestry portfolio and may dispose non-core forest estate to improve the management efficiency.

The Group is continuously looking for new investment opportunities to broaden the revenue sources. During the year, the Group had entered a memorandum of understanding in relation to acquisition of coking coal mine business in Mongolia but due to the Group and the potential seller cannot enter final agreement within the agreed period, the proposed transaction has not been completed.

The Group will continue working on broadening  revenue source in order to increase the shareholders’ return, the Group would consider any appropriate business opportunities which can generate appropriate cash inflow with appropriate business risk.

APPRECIATION
On behalf of the board, I would like to express our gratitude to the shareholders, customers, suppliers and professional advisors for their support over the past year, and to sincerely thank our management and staff for their dedication and diligence.

Chairman

Hong Kong, 30 June 2011