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Forests for Friends Ltd
Bahnhof
8750 Glarus

www.forestsforfriends.com
info@forestsforfriends.com

Risks and opportunities

Forests for Friends Ltd manages the plantations via its daughter company Forests for Friends Panama Inc. in a sustainable manner. Every business has risks and opportunities. Our business model is long term and thus many risks are to be seen in connexion with the uncertainties of the future. Some of them are listed below:

Risks
The plantations are planned over a period of twenty years. We cannot predict the development of the political situation in Panama over this time, whether the tax situation may change to our disadvantage or whether the tax exemption currently granted could be abolished.
Plantations only keep their value if they are maintained expertly until the final harvest. This is a huge investment. The Board of Directors is confident that it will be able to procure the necessary liquidity by - inter alia - convertible bonds and loans from the shareholders, sale of CO2-certificates, rising timber prices and the sale of land that is not suitable for growing teak.
Fires during the dry season are dangerous for young plantations. Preventive measures such as cutting the vegetation before and during the dry season, creating fire breaks and continuous monitoring help us reduce the risks as much as possible. When the teak trees have reached the age of five years, they are practically immune to fire. Although Panama is not usually hit by hurricanes and our plantations are on the Pacific side of the country, tropical tornadoes can blow teak trees over. The trees must be repositioned and secured with ropes within a few days to be able to continue to grow straight. We have no insurance policy, as the premium is far too high in comparison to the expected damage and the indemnification. In addition, the risk distribution is much better for a shareholding company with various plantations than in the case of individualised tree ownership.
The maintenance is paid in US dollars and the income will be mainly in this currency. Therefore, part of the available money is invested in US dollars. Shareholders in Europe do have a currency risk over the twenty years.
We publish the growth classes and projections on our website. They are cautiously calculated by BARCA and regularly updated. External developments such as natural disasters or climate change may influence them negatively.

Opportunities
Timber prices can rise and they can fall. Following the financial crisis, they have fallen, but we expect them to recover in the not too distant future. However, we can neither predict nor influence the price for plantation teak in ten to twenty years’ time. The Board of Directors, nevertheless, holds that the price for high-value teakwood is more likely to rise. In addition, the trees can be harvested one or two years later, should the timber prices be in a trough.
Panama is less influenced by the economic crisis than the USA or many countries in the EU. Nevertheless, the growth rate has slowed down. As we have quite a lot of land that is not planted or is not ideal for teak plantations, we might be able to sell it in areas that are being developed for tourists.
In our business model, the shareholders also own the land which can be commercialised after the final harvest.