Cathay Forest Products Corporation has signed an agreement for the establishment of a joint venture with Rao He Song Lin Economic Trade Company for the production, manufacture, sale and export of forestry raw timber and other products.

Cathay Forest will own 60% and Rao He 40% of the joint venture. There will be an equity injection of US$1,500,000 into the joint venture by the parties in two phases. Cathay Forest will make an investment of US$600,000 into Rao He as initial phase operations fund, and US$300,000 invested in cash and Rao He will invest US$600,000. In addition, under the terms of the joint venture, Cathay Forest will issue 300,000 common shares to Yao Song-lin, principal of Rao He, subject to regulatory approval.

The Board of the joint venture will consist of a total of 5 directors including 3 appointees of Cathay Forest. Once the joint venture has been established, Yao Song-lin will be the general manager of Rao He.

After-tax profits of the joint venture company will be used and distributed in accordance with the parties' ownership interest in the joint venture, i.e., Cathay Forest 60% and Rao He 40%.

Cathay Forest is a forest products company managing standing timber properties and developing fast-growth, high-yield poplar plantations in China.