Panama Teak Information Memo Brochure

Information MemorandumPanama Teak Investments PlcPromoter: Green Belt Limitedthrough a solid, eco-friendly investment in teak plantations in PanamaCreating Wealth Naturally...???????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????Table Of Contents?????????????????????????????1AfforestationThe planting of trees for commercial purposes, in this case, teak (Tectona grandis).B Ordinary ShareA B Ordinary Share of €1, the Capital of the Company.Clearfell (clearcut)A forest management method that involves the complete felling and removal of a crop of trees.CompanyPanama Teak Investments Plc, an unlisted public company registered in Ireland. It has a wholly owned Panamanian subsidiary called Irish Teak Investments SA.DocumentThis Information Memorandum.Loan NoteThe non-interest bearing, non-transferable Loan Note to be issued by Panama Teak Investments Plc to each investor, to be constituted by a trust deed, (the “Loan Note Agreement”)Management FeeThe annual fees payable by Panama Teak Investments Plc, through its subsidiary, to Green Belt (Panama) Ltd. for supervising all aspects of plantation management. Investor or PlaceeInvestor or Company to whom this Information Memorandum is made available and who opts to invest in the Company.ITTOInternational Tropical Timber Organisation. An intergovernmental organisation promoting the conservation and sustainable management, use and trade of tropical forest resources. Web address www.itto.or.jpPlacing AgentSolas Financial.Placing CommissionPlacing fee charged by Placing Agent.Placing ProceedsFunds raised by the Placing Agent for the purposes of this investment.PlantationA crop of trees that has been grown through direct seeding or by planting seedlings.PromoterGreen Belt Limited.Risk FactorsThose risk factors set out on in this document to which the attention of the Investors is speci?cally drawn prior to investing in the Company. See Page 19.ShareholderThe holders of Ordinary Shares from time to time.ThinningA partial cutting or respacing operation made in an immature forest stand to accelerate the growth of the remaining trees.Net Asset ValueNet asset value of the Company, veri?ed by an international accountancy practice.IncentiveAn incentive which will be payable to the Promoter at the end of the investment term. This incentive is only payable on investment returns in excess of 8% compounded growth per annum to Investors (pre-tax, after all costs). The management incentive is 33% of the investment growth over the initial 8% compounded return per annum. The target return of €400,000 per €50,000 invested is net of any such incentive.De?nitions“An investment in forestry is seen as a solid long term investment, that can have positive effects on the environment, if professionally managed to sustainable forest management principles.”2The following describes an opportunity to invest into Teak forestry plantations located in Panama. The investment is targeting compounded returns of 12.25% per annum, with a €50,000 investment targeting a return of €400,000 (pre tax, net of all fees) at the end of the investment term. The investment term is expected to be between 18 and 20 years which is the time it takes to grow a teak crop to its ?nancial maturity. The Company plans to raise up to €10,000,000 in this placing. Investors will subscribe for B Ordinary Shares and Loan Notes issued by Panama Teak Investment Plc, (the “Company”), an Irish registered unlisted public company. The Company wholly owns a subsidiary in Panama called “Irish Teak Investments SA.”The proceeds of the B Ordinary Shares and the Loan Notes will be invested by Panama Teak Investments Plc into Irish Teak Investments SA. The Company believes that Irish Teak Investments SA based on current legislation should qualify for tax exempt status as a registered forestry operator in Panama. At the end of the investment period, Irish Teak Investments SA will return all pro?ts to the Company by way of a dividend payout. The Company will then be liquidated and the Loan Note repaid to Investors and the pro?ts from the investment distributed to the holders of the B Ordinary Shares (less the incentive). The pro?ts will be subject to capital gains tax which is currently 20% in Ireland (based on current tax law in Ireland). The investment structure is open to private investment, small self administered pension schemes (SSAPs) and non standard PRSA accounts.Teak is one of the world’s most sought after hardwoods, which historically has exhibited steady price appreciation and stable demand. The investment location, Panama, is a stable, US dollar economy where teak plantations have already been established by the Promoter and other international investor groups. The hot and periodically moist, tropical climate and deep fertile soils provide optimal growth conditions for teak, allowing a crop of mature teak to be produced in c.18 years. The Promoter and investment manager is Green Belt Limited based in Virginia, Co. Cavan. The Green Belt Limited is Ireland’s largest private forestry company and provides forestry management services on over 175,000 acres (c.€500,000,000 in asset value) of forestry for private and institutional investors. The company has been active in Panama over the last 3 years and is now managing approximately 680 acres of teak plantations in the country.The minimum investment is €50,000 plus the Placing commission of 3%.SummaryReasons to invest in this Product:• High Target Returns: The target return is 12.25% compounded per annum with a €50,000 investment targeting €400,000 (pre-tax, net of all fees) at the end the investment term.• Low volatility: The investment has low levels of internal gearing which should result in a lower risk pro?le.• Asset Backed: The investment proceeds will be used to purchase land in Panama and grow teak crops.• Stable Demand:Teak has historically exhibited stable demand and price growth.• Turnkey Investment: The investment is turnkey with no management required by Investors.• Private Pensions: The investment is open to Self Administered Pensions Schemes and non standard PRSA accounts.• Strong Management Team: Green Belt Limited is a very experienced forestry management company with a highly experienced team and a proven track record in Ireland and in Panama.• Ethically and Environmentally Sound: The plantations will be managed in line with sustainable forest management (SFM) principles and independent veri?cation will be sought from the Forest Stewardship Council (FSC). 4Investment Rationale“We continually strive to produce quality timber that yields strong pro?ts for our investors, in an ecologically and socially sustainable manner.”- John O’Reilly, CEO, Green Belt Ltd.The Promoter was founded in 1982 by Tim O’Brien (deceased) and Maurice (Mossie) Ryan and is now Ireland’s leading private forestry company and the national market leader in the area of new forest establishment. The Promoter currently provides forestry management services to over 175,000 acres (c.€500,000,000 in asset value) and plants an average of 10,000 acres of new forests in Ireland each year. Its management portfolio now includes plantations owned by thousands of Irish farmers, private and institutional investors. The Promoter has an annual turnover of €11 million and has recently formed a number of other companies within the group including:• Green Belt Panama Limited:Provides management services to existing and planned forestry plantations in Panama.• Imperative Energy Limited:Involved in delivering ef?cient, economical heating solutions from renewable resources.• Green Belt Carbon Balance Ltd:Veri?es and trades carbon credits from forestry and renewable energy projects..The company’s business encompasses all aspects of forestry management including:• Sourcing, acquisition and development of land, for private and corporate investors. • Provision of forestry development and afforestation services to farmers, private and corporate investors.• Provision of forestry management and maintenance services• Management services at all stages of forest maturity for woodland owners, including valuation and marketing.• Complete forestry technical advice service.• Harvesting of forests at maturity.Green Belt Limited operates through a network of 20 professionally quali?ed foresters, strategically based throughout Ireland, covering all geographical areas. Green Belt Limited employs a further ten ?nance and administration staff at its headquarters in Virginia, Co Cavan. At times of peak activity during the season, it employs over 200 contract staff.The Promoter has been active in Panama over the last 3 years and is now managing approximately 680 acres of teak plantations in the country. 2007 will be the Promoter’s third planting season in Panama. The ?rst crop of c.175 acres was planted in 2005, is now over 5 metres in height and growing in line with the Promoter’s forecasted yield model. The second crop of c.500 acres which was planted from May to September 2006 has shown survival rates and early growth rates well in line with projections.“With over 25 years forest management experience and with over 175,000 acres under active management, Green Belt Ltd. is Ireland’s largest private forest management company” 5About the Promoter6Maurice Ryan, Managing DirectorMaurice (Mossie) Ryan, a native of Tipperary, quali?ed in Forestry in 1963. Mr. Ryan started his career with the Forest Service, working in forest management, spending three years in research & inventory, and working throughout Ireland in various aspects of forestry, from forest nurseries to sawmilling. Mr. Ryan along with Mr. O’Brien (deceased) formed Green Belt Limited in 1982. Green Belt Limited under the directorship of Mossie, Tim and a team of experienced executives has become the leading private forestry management company in Ireland. The company has a consistent annual planting programme of c. 10,000 acres and provides management services to over 175,000 acres (c.€500,000,000 in asset value) of forestry. Among Green Belt Limited’s clients are a number of large ?nancial institutions and pension funds, for whom Green Belt Limited has purchased land and provided turnkey forest establishment and management services.John O’Reilly, CEOJohn O’Reilly graduated from UCD in 1989 with an honours degree in Agricultural Science having specialised in forestry. Since graduation, John has worked in the private sector and joined Green Belt Limited in 1991, becoming regional manager (Leinster) in 1997 and CEO in 2001.Mr. O’Reilly is actively involved in managing Green Belt Limited’s core business of afforestation and timberland management. Since taking over as CEO he has overseen the diversi?cation of the company with the establishment of Imperative Energy Limited, a renewable energy company; Green Belt Carbon Balance Limited, a carbon assessment and trading company; and Green Belt (Panama) Ltd.Joe O’Carroll, Strategic Business Development ManagerJoe O’Carroll has a ?rst class honours degree from UCD (B.Agr.Sc.) and an MBA (honours) from UCC. He has completed executive training with the IMI, the Institute of Transport and Logistics and the Kennedy School at Harvard University. After graduation Joe worked with the Department of Agriculture in Northern Ireland before joining Willamette Europe Ltd. (now Weyerhaeuser). From 2000 he spent 5 years as Operations Manager of COFORD, the National Council for Forest Research & Development, where he oversaw the implementation and execution of a national programme for forest industry development. He was instrumental in delivering the 2003 Bacon report on the Forest Industry. In 2003 he completed an internship with the Division of Energy Resources (Commonwealth of Massachusetts).Prior to joining Green Belt Limited, he was Managing Consultant of OC Consulting, which specialises in business development guidance for companies in the natural resources, renewable energy and pharmaceutical sectors. He is also managing director of the renewable energy company, Imperative Energy Ltd. (www.imperativeenergy.ie) and Green Belt Carbon Balance Ltd. (www.carbon-balance.com).6Management Team7• The minimum amount required for the investment to proceed is €2,000,000. Investor funds are invested by way of B Ordinary Shares and Loan Note in the ratio of ¤49 in nominal amount of Loan Notes for every B Ordinary Share issued in Panama Teak Investment Plc which is an Irish registered public company governed by the laws of Ireland. No dividend will be paid to any shareholder during the investment period and the Loan Note issued to investors will rank senior to shares in the Company.• Panama Teak Investment Plc wholly owns a subsidiary in Panama called “Irish Teak Investments SA.” The Shares and Loan Note proceeds will be invested by Panama Teak Investments Plc into Irish Teak Investments SA which is a private limited company governed by the laws of Panama. Surplus funds not required at the early stage of the investment will be deposited in an interest bearing deposit account with an international bank until they are required for ongoing management and maintenance of the crop.• Irish Teak Investments SA will acquire land in Panama. These lands will be planted and developed under a management agreement by Green Belt (Panama) Ltd. • Irish Teak Investments SA will apply to be registered in Panama as a forestry operator and will bene?t from Panamanian tax exemptions from forestry projects. The process of registration as a forestry operator is straight forward and is done once suitable land is identi?ed. Once the company is registered as a forestry operator it will notify the Panama Revenue to secure its tax exemption. • Green Belt (Panama) Ltd. will provide ongoing management services and manage the teak plantations through their full rotation. Green Belt will operate locally through its Panamanian subsidiary Green Belt (Panama) SA, which will contract local staff and companies to undertake the physical management of the plantations.• The initial capital investment funds the land acquisition and the ongoing maintenance and management of the crop to approximately year six of the investment. On or about year six non recourse working capital loans will be obtained by Irish Teak Investments SA to fund the ongoing management and maintenance of the crop. These working capital loans will be secured against the land and the teak crop on a non recourse basis to investors. The working capital loans will not exceed 30% of net asset value at any time.7Investment Structure and Exit MechanismPanama Teak Investment PlcInvestorsIrish Teak Investments SALand and PlantationsGreen Belt (Panama) LtdCash InvestmentManagement AgreementPlantation ManagementTimber Marketing and SalesWholly Owned SubsidiaryPurchase and Management of Plantation SitesLoan Note & B Ordinary Shares• Irish Teak Investments SA will earn revenue from “Thinning” during the investment term. The proceeds of this revenue will be used to help fund the ongoing management and maintenance of the plantations.• At the end of the investment period when “Clearfell” occurs the timber and the land on which the teak crop was grown will be sold and pro?ts earned by Irish Teak Investments SA.• On foot of the tax exemption, no corporation tax in Panama will be paid on the pro?ts arising from the sale of the timber, pro?ts arising from the sale of the land will be taxable as a capital gain (currently at a rate of 30%).• Once the timber and land has been sold, Irish Teak Investments SA will become Irish tax resident by moving its centre of management and control to Ireland. It will then declare and pay a dividend to Panama Teak Investment Plc. • Once the dividend has been received by Panama Teak Investment Plc the company will be liquidated, the Loan Note redeemed and the net pro?ts distributed to the Shareholders in agreed proportions.• The Target return is 12.25% compounded per annum, with a €50,000 investment targeting €400,000 (pre-tax, net of all fees) at the end of the investment period. GovernanceAll strategic decisions will be taken by the board of directors of Panama Teak Investments Plc. The board of directors will include two executives, initially Mr. Maurice (Mossie) Ryan and Mr. John O’Reilly, and at least two non-executive directors. The chairman will be one of the non-executive directors. The investors will have the right to nominate a non executive director.The Memorandum & Articles of Association of the Company do not allow a dividend to be paid to any shareholder in Panama Teak Investment Plc.• The Promoter will only receive a share of pro?t after Investors have been repaid their initial investment and the compounded rate of return on the investment exceeds 8% per annum.• The Promoter will send the Investors an audited set of accounts (prepared by an internationally recognised accountancy ?rm) for Panama Teak Investment Plc and an operational update on the investment each year. Pension InvestorsThe Promoter believes this investment is suitable as a private self administered pension investment. In the event of death or early retirement, investors or an investor’s estate will be given the choice of remaining in the investment until wind up or be allowed to redeem their investment. This encashment could be effected by a number of means including a re?nancing of the assets held by Irish Teak Investment SA at that time or from internal cash reserves. 8The investment strategy of Panama Teak Investment Plc will be a similar model to that which has been used by the Promoter since 1982. This model includes, a selective land acquisition process to purchase only land which the Promoter feels will be very suitable for growing a quality teak crop, active management of the forests when planted and the identi?cation of the optimum sales strategy for the crop at Clearfell. This land is expected to be primarily located southeast of Panama City adjacent to the Pan-American Highway, giving it excellent access to domestic and export markets. The following describes the investment process and strategy. 9Investment Process Site Identification and AcquisitionOnly acquire sites with significant potential – working through a local network to source optimum sitesPlantation Establishment and MaintenanceProven management capabilitiesValue adding through pruning and thinningValue MaximisationHarvest at optimal timeDevelop local processing capacityThe Land Acquisition ProcessAssessing a land area for its suitability for growing teak involves a number of steps. Prior to purchasing a parcel of land it is screened on two separate occasions.The ?rst screening is based on experience and local knowledge. This assessment is carried out by the Promoter and its local representatives. The local team has many years experience in establishing and managing teak plantations throughout Central and South America. This initial assessment involves verifying the total area, quantifying the productive area and determining the quality and productivity class of the site. If the productivity class is acceptable the lands are then put forward to the second screening process which involves an Environmental Impact Assessment (EIA). This is a more detailed assessment which determines the nutrient status of the soil and its pH. It also involves assessing the overall environmental impact of establishing a teak plantation at this location.This EIA must receive the full approval of the Autoridad Nacional del Ambiente (ANAM) which is Panama’s equivalent of Ireland’s Department of the Environment. ANAM has responsibility for forest policy and practice.This authority acts independently and its approval of a site for the establishment of teak ensures that the site is of suitable quality and that the development of the site will not have a detrimental effect on the local environment.Having received a positive result from ANAM based on the EIA, the lands are then purchased by Irish Teak Investments SA, subject to satisfactory price negotiations.All parcels of land that are considered for purchase are surveyed using a Geographical Information System (GIS). This mapping system ?rstly con?rms the total area for sale. Furthermore, the site location is recorded using a Global Positioning System (GPS). Some of the land purchased must be left unplanted to act as a conservation area in compliance with the EIA. Therefore, the GIS is used to map the utilisable area of each land parcel. Plantation Establishment ProcessFollowing the purchase of suitable land, each site is cleaned to facilitate planting. Cleaning takes place through the slashing of scrub and removal of vegetation. The site is then left in a condition that facilitates accurate and complete planting.The lands are made stock proof (to protect against cattle trespass) where necessary and then planted. The planting season usually runs from early May to late October. The planting programme expects that c.710 trees per hectare will be planted at c.3.75m x 3.75m square spacing. During the crop rotation, a number of thinning operations will be undertaken. Thinning is a silvicultural process which involves removing smaller trees. The objective of the thinning process is to increase the growing space available to the remaining trees so as to enable greater diameter growth. Ingrowth (see below) drives value creation in the plantation. The trees removed during the Thinnings carried out in year 8 and year 13 generate revenue that will be used to ?nance the management and maintenance of the crop through to Clearfell. A Thinning in year 5 is a non-commercial thinning (i.e. no merchantable timber is produced).Drivers of Capital Timber ValuesThere are three principal drivers of capital timber value:1. Biological growth:The seasonal growth increments (natural growth) add greater timber inventories each year and are obviously unaffected by external economic factors. Biological growth will account for a signi?cant amount of value adding, if an appropriate land acquisition discipline and forestry management regime is followed. 2. Ingrowth:As trees grow, they increase in girth and height. As the crop matures, it produces larger logs. These logs are more valuable not only because of their greater volume, but also because larger logs can yield higher value end products. This progression from one product class to a higher value product class is called ingrowth. The product class hierarchy is: pulpwood, boxwood (or palletwood), sawlog and veneer grade. 3. Price growth:• Professional Management and Marketing:Professional forest management can increase the value added potential of Biological Growth and Ingrowth. Initial site selection, species/provinence/seed selection, selection of silvicultural regime, thinning intensity and timing, genetic enhancement, fertilisation, timing of clearfell and certi?cation under Forest Stewardship Council procedures are all part of a comprehensive forest management package that is essential to maximise returns. These procedures are all part of the integrated management programme provided by the Promoter.• Historical Precedent:Hardwood lumber prices have consistently exceeded in?ation for a prolonged period of time.• Shifting Global Markets:Due to dwindling tropical supplies, plantation hardwoods are gaining prominence worldwide, and prices have been rising as referenced in the Markets for Teak section of this document. 10The following table illustrates a model of estimated costs and yields. The ?gures provided are based on assumptions made by the Promoter from its analysis of the current and historical prices, projected trends and current yields and interest rates. No assurance can be given that these assumptions will not change or that the actual return will be as indicated. 11Illustrative Financial Model Model Overview (sample €50,000 investment)€Contributed Capital 51,500Less: placing, marketing &administration fee @ 3%1,500Net equity investment 50,000Net proceeds from investment 400,000Compound annual rate of return 12.26%Deposit interest rate 4.50%Loan interest rate 6.00%Panamanian cost in?ation1 2.00%Irish cost in?ation 3.00%Teak Price In?ation (real terms) 2.00%Panamanian Land Value In?ation 3.00%Year 8 thinning (cubic metres per hectare) 22.34Year 13 thinning (cubic metres per hectare) 40.89Year 18 clearfell (cubic metres per hectare) 166.51Current price 8 year old Teak (1st thinning) $80.00Current price 13 year old Teak(2nd thinning)$135.00Current price 18 year old Teak (clearfell) $290.00Area (hectares) to be purchased/planted foreach €50,000 invested6.5Average purchase price of land per hectare $2,200Establishment costs per hectare2 $1,690Teak Price In?ation: Sensitivity AnalysisBased on a sample €50,000 investment (net of placing, marketing & administration fees).Teak Price In?ation(real) %InvestorReturn € CompoundAnnual Rate of Return (net of all fees) %-2 216,320 8.480 293,950 10.342 401,000 12.264 547,910 14.236 748,500 16.221 [Estimate based on IMF prediction for 2006 of 1.8%]2 [Estimate supplied by ANAM]Key AssumptionsThe following section describes some of the reasons why teak was chosen as the investment crop. This section also gives some insight into the developments in teak production world wide and historical price information on teak prices. • Teak is the world’s most sought after tropical hardwood. For many years it has been the benchmark timber in terms of quality, strength, durability and versatility. Teak is indigenous to Burma, Thailand and other areas of Southeast Asia.• Changes in Regulations: The original, natural teak forests have been depleted due to unregulated harvesting. Much of the remaining natural teak forest is now protected by the relevant Governments. This restriction has not diminished demand but has started to restrict supply and will continue to do so as more countries protect natural forests. Indonesia for instance has outlawed all natural forest harvesting from 2013. Other countries are likely to follow this example. • The current global restrictions include: • Thailand introduced a ban on the felling of natural forests in 1989.• China has a ban on harvesting natural tropical forests in its southern provinces (Hainan and Yunnan).• Indonesia has a ban on export of logs from natural forests. Indonesia signed agreements in 2003-2004 to stem illegal log ?ows with some major trading partners such as China, Japan and the UK. Malaysia introduced legislation banning the import of logs and squared timber from Indonesia.• The Ivory Coast has introduced new procedures for the logging of community teak. Such felling is now subject to speci?c approval by the Ministry of Water and Forests.• The Philippines have an export ban on logs coming from natural forests and lumber processed out of these logs.• In Panama itself, Decree No. 57 came into force on 6 June 2002. It imposes a total ban on the export of logs, blocks, sawnwood or rough-planed timber from natural forests. This means that all exports of these products should be from plantation timber.• Despite dif?culties, there has been signi?cant progress towards sustainable forest management (SFM) in the tropics since an initial survey by ITTO in 1988. Countries have established and are starting to implement new forest policies that contain the basic elements of SFM. More forests have been given some security by commitment as permanent forest estate (PFE) for production or protection, and more are actually being sustainably managed. Moreover, some of the PFE is also certi?ed – a new development since 1988. However, the proportion of natural production forest under SFM is still low, and SFM is distributed unevenly across the tropics and within countries. The Promoter believes therefore that the global demand for teak can only be sustainably satis?ed from well managed plantations of teak adhering to SFM practices.• Despite the progress made since 1988, signi?cant areas of tropical forest are still lost every year, and unsustainable (and often illegal) extraction of tropical forest resources remains widespread. However, most countries are now attempting widespread implementation of SFM which will lead to a greater level of restrictions (or total banning) on logging natural tropical forests. This will further stem the supply of natural forest teak and push the market towards the greater reliance on plantation teak.12Markets for Teak Remarkably, the price for teak logs was unaffected by the Asian ?nancial crisis in 1998 when the prices for most other tropical hardwoods collapsed. In the assumptions of this investment the projected real growth in the value of teak logs is 2% for the annualised return of 12.25%.Historical Prices of TeakThe Market Information Service of the intergovernmental organisation ITTO began recording price data for teak logs in 1997. Since then, higher grades of teak logs have experienced an average price growth of over 5% per annum (in real terms, adjusted for IMF’s Consumer Price Index for industrial countries) as illustrated in the graph below. 13“The spike in log prices in 2002 was due to the uncertainty surrounding a proposed US trade embargo on Myanmar (major exporter of teak at the time).”BELIZEMEXICOGUATEMALACOSTA RICAHONDURASNICARAGUAPANAMASOUTH AMERICAAbout PanamaPanama is a well-located, politically stable and well-educated country. The economy in Panama is focused on banking, mining, commerce and tourism, with the canal and the shipping business playing an important role. The Government has introduced many investment incentives such as a favourable tax regime on income derived from forestry operations. Copper mining began to have signi?cance only quite recently, but Panama is now emerging as one of the world’s major producers, with gold mining also making a contribution.The unit of currency used in Panama is the Balboa (PAB), which is pegged at parity to the dollar. There is no Panamanian paper currency and the US dollar is the de facto of?cial currency for all but minor transactions. In?ation in Panama is low, estimated at 1.8% in 2006.GeographyThe Republic of Panama lies in Central America between the Caribbean Sea and the North Paci?c Ocean. There are land borders of 225 km with Colombia (on the west) and 330 km with Costa Rica (on the east). The land area totals 75,990 sq km. The capital is Panama City. The Panama Canal links the North Atlantic Ocean via the Caribbean Sea with the North Paci?c Ocean. The climate is tropical with prolonged rainy periods between May and January. There is a brief dry season between January and May. Panama’s international airport is connected by many international carriers to most world centres. There are two sea ports, Balboa and Cristobal (at either end of the canal). The time zone is 5 hours behind GMT.Panama Business EnvironmentIn terms of business and communications infrastructure, the long-term US in?uence on Panama has been very bene?cial, with Panama City in particular having the highest international standards. The well-established banking sector is well regarded internationally and operated to high standards.Why Teak Plantations in Panama?Panama is an attractive country in which to establish teak plantations for a number of reasons:• Politically stable economy.• Attractive land prices.• Tropical climate, deep soils and heavy seasonal rainfall provide the optimal growth conditions for teak.• Highly developed transport infrastructure to export markets.• The Panamanian government currently has strong tax incentives in place to encourage foreign investment in forestry projects (Law 24 of 1992, Law 6 of 2005 and presidential decree no 143 of 2005 set out the tax incentives exempting registered forestry operators from paying tax on income derived from forestry operations that will apply to all plantations established before 2017). • US dollar-based economy. • Current low in?ation.• No exchange controls (i.e. no government restrictions on moving money into, or out of, Panama).As well as Green Belt, teak plantations have already been established in Panama by investor groups from Japan, USA and Switzerland.Panama - Key DataPopulation: 3.0 million (rising at 1.9% p.a. estimate for 2006)Size: 78,000 sq. km. (10% larger than Ireland)Government: Constitutional democracyGDP: US$22.6 billion (estimate 2005)Growth: 4.9% p.a. (estimate 2005)In?ation: 1.8% (2006 projection by IMF; currently one of the lowest among all countries in North, Central and South America)14Panama as an Investment Location “Panama is an important economic, political and geographical turntable between East and West, North and South.”The following is a general summary of the Irish tax implications of an investment in Panama Teak Investments Plc. by Investors who are resident, ordinarily resident and domiciled in Ireland for tax purposes. It is recommended that Investors take taxation advice which is speci?c to their facts and circumstances before making any investment. This general summary is for guidance only and is based on an interpretation of tax law and practice in Ireland, which may change over time.The Investors will subscribe for B Ordinary Shares and Loan Notes in Panama Teak Investments Plc. The target term of the investment is 18 to 20 years. Panama Teak Investments Plc will own a wholly owned Panamanian subsidiary, Irish Teak Investments, SA. Irish Teak Investments, SA will be resident in Panama for tax purposes. Irish Teak Investments, SA will acquire land in Panama and will earn revenue from thinning the forest during the term of the investment. The bulk of its pro?ts will be earned at Clearfell. Provided Irish Teak Investments, SA will be registered in Panama as a forestry operator under current legislation, it will not be liable to corporate tax in Panama on income derived from its forestry operations. Any pro?ts arising on the sale of the land used for forestry operations will be subject to tax in Panama (currently at a rate of 30%). No interest or dividends will be paid to the Investors over the term of the investment. The Panamanian tax authorities also impose a retained earnings tax at a rate of 4% on the retained earnings of a Panamanian company which are not distributed to shareholders. Under current legislation any retained earnings tax suffered is creditable against the 10% withholding tax on dividend payments.It has been assumed that Panama Teak Investments Plc will not be regarded as a close company for Irish tax purposes.Capital Gains Tax (currently at a rate of 20%) will apply to the gain in Panama Teak Investments Plc by Investors who are resident or ordinarily reside in Ireland for tax purposes. In calculating the capital gain on exit, it will be necessary to convert both investor input (B Ordinary Shares and Loan Note subscription value) and investor return from dollars to euro based on the Central Bank exchange rate on both transaction dates. For a detailed description of the tax structure please refer to the Appendix.15Taxation SummaryThe following fees and charges will apply to this investment.• Entry Fee. A placing commission of 3% of the amount invested into the structure will apply. Total amount payable is €51,500, per €50,000 invested.• Management Fee. Green Belt (Panama) Ltd. will be paid an annual management fee in return for providing all of the management services to the investment. This will include supervision and management of land acquisition, planting of the teak crop, the ongoing management of the plantations, through to the sale of the mature teak crop and the land at the end of the investment term. The annual asset management fee averages 0.4% of the gross asset value under management. The management fee is based on actual plantation management costs and will be higher in years of increased plantation management activity. This annual fee will not exceed 3% (index linked) of the total proceeds of this placing. During the land acquisition process a property acquisition fee of 2% of the purchase price will apply. • Incentive. A management/promoter incentive will be payable at the end of the investment term. This incentive will only be payable on investment returns in excess of 8% compounded growth per annum (pre-tax) after all costs to investors. The incentive is 33% of the investment growth over the initial 8% compounded return per annum. The target return of €400,000 per €50,000 invested is net of any such incentive.• Operating Expenses. Costs will include professional fees and expenses involved in establishing the corporate and investment structure and in the management of the investment through its term. These will include legal and taxation services, company secretarial fees, external directors fees, asset valuation fees, audit, liquidation fees and all operational expenses incurred in the running of the company and its subsidiary’s business.16Fees and Charges17Frequently Asked QuestionsWhat is the ?re risk and what level of insurance is available or being sought by the promoter? Normal forestry practice in Panama is to insure plantations for the ?rst 5 years only. After year 5, the bark of teak trees becomes ?re resistant meaning that the trees cannot be destroyed by ?re. In the event that ?re occurs the leaves will be burned off and some growth increment will be lost. However, the ?re should not be detrimental. Through active forest management the risks of ?res occurring can be greatly reduced – forest ?res need lots of dry ground vegetation and dead standing trees to get established, active management removes such material minimising the ‘fuel’ available for ?res.Fires in hardwood plantations are much more rare than in coniferous plantations and they are also less damaging. This is because the needles of conifers contain high combustible resins - leaves of hardwoods such as teak do not. Conifers have a high proportion of non-stem biomass (basically lots of small branches and retained, dead needles from previous years) which acts as a fuel source to intensify forest ?res (particularly ?res in the canopy of the trees). Are there any plans to purchase land in multiple parts of Panama to avoid any exposure to natural disaster?Yes, it is envisaged that a number of different properties will be acquired and owned by Irish Teak Investments SA. The properties will be located in the same region of Panama (east of Panama City - best soil and growing conditions) but will be suf?ciently dispersed to minimise the likelihood of certain injurious risk factors affecting more than one plantation.How long has Green Belt Limited been active in Panama?Green Belt Ltd. has been active in Panama for over 3 years; this will be its third planting season. It currently manages c.680 acres in the country.What is the period of the Investment?The investment period is expected to be between 18 and 20 years, which is the time it takes to grow a teak crop to its ?nancial maturity. The exact duration will depend on prevailing market conditions at year 18. Is the Investment de?ned as transferable for regulatory purposes?No, the investment will not be transferable or tradable.How will I know the investment is performing?You will receive an annual investment update including audited accounts during the investment term.Is my investment capital guaranteed?No. While the land being purchased will have extensive due diligence carried out on it and great care will be taken with the planting and the management of the plantations, all property and forestry transactions have an element of risk. Is the return capped in any way?No, the return is not capped. The structure is designed to include pro?t sharing incentives with the management and the promoter to enhance the value of your investment. Why have you not factored the revenue from Carbon Credits in the return on investment analysis?There are a number of potential markets for carbon credits from forestry projects in Panama. It is the opinion of the Promoters that the most lucrative will be the so-called traded sector in the EU. This is the sector created by the EU’s Emissions Trading Scheme. This cap and trade scheme obligates polluting industrial and commercial entities to reduce their greenhouse gas emissions. Failure to do so will require that entity to purchase carbon credits from approved projects. To access this market, the teak plantations in Panama will have to be approved by the Clean Development Mechanism (CDM) Executive Board. The process of bringing a project to the CDM Executive Board is very detailed and requires the gathering of baseline data and host country approval. Panama (the host country) has approved in principle the sale of carbon credits to international markets. This is a very signi?cant ?rst step, but a lot of administration must be completed before the credits can be established, veri?ed and traded. So, while thePromoters plan to fully exploit the carbon credit potential on behalf ofInvestors, it would be premature to include these returns in theinvestment analysis.What is the potential value of the Carbon Credits? As outlined above this is dif?cult to determine at this stage, and will be determined by the market into which they are traded. The medium-term predicted price for carbon credits ranges from €5 to €20/tCO2. Teak plantations sequester c.15.4tCO2 per hectare per annum.How long has the Promoter been in the forestry business?Green Belt Limited was founded in 1982 by Mossie Ryan and Tim O’Brien.18Investors should carefully consider the risks and uncertainties involved in investing by way of B Ordinary Shares and Loan Note in Panama Teak Investments Plc, which will invest in forestry projects in Panama. Investment in forestry projects is speculative and involves a degree of ?nancial, commercial and other risks. The future value of the investment and the potential return on your investment is dependent, inter alia, on the effective management of the plantation, prevailing prices of teak and the quality of the teak at Clearfell.If you are in any doubt about the contents of this Information Memorandum you should consult an independent professional adviser authorised or exempted under the Investment Intermediaries Act 1995 or the Stock Exchange Act 1995 who specialises in advising on the acquisition of shares, commodities and other securities. This Information Memorandum assumes that all investors are Irish resident and domiciled for tax purposes. Current legislation and tax rates could change, with a consequent impact on Investors’ investments. Prospective investors are advised to consult their own tax advisers before participating in this investment.While the risk factors listed below do not purport to be a complete explanation of all the risks involved in the investment, the Promoter and the directors of Panama Teak Investments Plc consider that, as of the date of this Information Memorandum, the principal areas of risk for investors include the following:Timber Market RiskInvestors contemplating an investment in Shares and Loan Notes in Panama Teak Investments Plc should recognise that their investment will be subject to general and speci?c risks connected with timberland investment. Markets for certain timber products can experience short-term price volatility. However, such volatility is less pronounced in high quality tropical hardwoods. Any dramatic economic downturn in global economic performance could affect the demand for teak and have an adverse impact on the value of land in Panama.Injurious FactorsForest plantations are generally susceptible to a range of injurious factors such as ?re and wind in the ?rst four years of growing. Teak trees then become resistant to ?re as the bark (which is ?re resistant) is thick enough to protect the tree against high temperatures experienced during forest ?re. Teak plantations are traditionally not prone to wind damage. The threat of wind damage is further avoided through the selection of appropriate sites. In addition, Panama is not within the normal pathway of tropical storms. As a result of the factors outlined above, it is proposed to insure the plantations against ?re and wind damage for the ?rst ?ve years only, in keeping with normal practice in Panama. Investment RiskThe value of any investment made into Panama Teak Investments Plc can go down as well as up and the amount investors receive back from the investment may be less than the amount they originally invest. Property and forestry related assets can be dif?cult to value and as a result valuations can be subject to some uncertainty.Key Personnel and Winding DownThe success of the investment will depend to a large extent on the abilities and continued participation of certain key employees of the Promoter. A loss of these key employees could have a material adverse effect on the investment.LegislationGovernmental authorities at all levels are actively involved in the promulgation and enforcement of regulation relating to taxation, land use and zoning and planning restrictions, environmental protection and health and safety in the industry and the economy in general. The introduction of new laws and regulation (or changes in their interpretation) and their enforcement could have the effect of increasing the costs and lowering the income or rate of return from, as well as adversely affect the value of the Company’s assets.Tax RisksThe information contained in this Information Memorandum is based on the Promoters understanding of current tax legislation and practice in Ireland and Panama. Tax legislation and its interpretation and practice are subject to change during the investment period, possibly without notice. Such changes may have an adverse effect upon the investment returns and/or result in taxation issues for investors.19Risk Factors20Interest Rates and Gearing RiskThe Company will maintain a cash reserve to cover annual operating costs up to around year 6 of the investment. On a needs basis, working capital loans will be required to supplement cash ?ows from thinning sales revenue. Due to the long period of time remaining before the working capital loans are required, these working capital loans have not yet been formally agreed, so there is a risk that they may not be available. The initial cash reserve on deposit and subsequent short term working capital loans generate a certain degree of interest rate risk. The working capital loans will be secured against the value to the land and teak crop. There is a potential risk in the event of a fall in land valuations. Liquidity RiskThis is a long term investment and the B Ordinary Shares and Loan Notes to be issued to Investors will not be transferable or tradable. Investors should not consider this investment unless they are prepared to wait until the end of the projected investment period for their initial capital to be returned as it will not be possible to encash, realise or transfer the investment prior to its maturity (other than on death or in the case of early retirement).Foreign Exchange RiskThe investment in Panama will be in US dollars, the currency of international trade. All operational costs and revenues in Panama will be in US Dollars. At the end of the investment term a currency risk exists when the dollars are converted into euro.Valuation RiskForestry related assets are inherently dif?cult to value due to the lack of uniformity of product. As a result,valuations are subject to uncertainty. There is no assurance that the estimates resulting from the valuationprocess will re?ect the actual sales price even where such sales occur shortly after the valuation date. However, as a commodity, there are comparable prices that can be used to determine reasonably accurate valuations.This Information Memorandum does not and is not intended to constitute investment advice. All projections, forecasts and estimates in this Information Memorandum are prepared on the basis of current information, legislation and tax practice in Ireland and Panama. This Information Memorandum is a preliminary Information Memorandum and is subject to material updating, revision and amendment. In particular, this Information Memorandum refers to certain events as having occurred which have not yet occurred but are expected to occur prior to the ?nalisation of this Investment Memorandum.Recipients of this Information Memorandum should not treat the contents of this Information Memorandum as a recommendation or advice relating to the legal, taxation or investment matters contained in this Information Memorandum and are advised to consult their own professional advisers concerning the investing in the Panama Teak Investments Plc. Any projections, estimates or opinions in this Information Memorandum involve signi?cant elements of subjective judgment.This Information Memorandum is for the con?dential use of only those persons to whom it is addressed and is not to be reproduced for any other purpose or distributed to or used by any other person. No person has been authorised to give any information or to make any representations other than those contained in this Information Memorandum and, if given or made, such information or representation must not be relied upon as having been authorised.This Information Memorandum, has not been prepared in accordance with Directive 2003/71/EC on Prospectuses where any measures under that Directive or the laws of Ireland or of any EU Member State or EEA Treaty Adherence State that implement that Directive or those measures.This Information Memorandum has not been reviewed, prior to its being issued, by any regulatory authority in Ireland or in any other EU Member State or EEA Treaty Adherence State, and therefore may not contain all the information required where a document is prepared pursuant to that Directive or those laws.• Past performance may not be a reliable guide to future performance.• Simulated performance may not be a reliable guide to future performance.• Investments may fall as well as rise in value.• Income may ?uctuate in accordance with market conditions and taxation arrangements.• Changes in exchange rate may have an adverse effect on the value, price or income of the investment.No representation or warranty, express or implied, is given by Panama Teak Investments Plc or its directors, Green Belt Limited or Solas Financial as to the accuracy of the information or opinions contained in this Information Memorandum and no liability is accepted for any such information or opinions.Please refer to the section titled “Risk Factors” which highlights some of the risks associated with an investment of this nature. While all reasonable care has been taken in the preparation of this investor brie?ng note, any charts, projections, forecasts or estimates referred to in this Information Memorandum are prepared on the basis of current information, legislation, market and tax practice and subject to the risk notices highlighted above.This Information Memorandum may not be distributed in United States of America or in any country outside of the Republic of Ireland where such distribution may lead to a breach of any law or regulatory requirement.21Important NoticeA.? ??????????????????????????????????????????????????????????????B.? ??????????????????????????????????????€???????????????????????????????????????????????????????????????????????????????C.? ????????????????????? ? ??? ???????????????????????????? ? ??? ?????????????????????????????????????? ? ??? ???????????????????????????????????????????????? ? ??? ??????????????????????????????????????????????????????????????????????????????????????????????T: 353 21 4875300E: info@solas?nancial.com22Investment StepsInvestment Application formNameAddressEmailHome Phone NumberMobile NumberPPS NumberPassport NumberI wish to apply to make an investment in Panama Teak Investments Plc in the amount set out above and I hereby undertake and agree to make the investment upon the terms of the Information Memorandum dated May 2007 and this application form duly completed by me and subject to the Memorandum and Articles of Association of Panama Teak Investments Plc and the Loan Note instrument (a copy is available on request).I enclose a cheque/banker’s draft made payable to Panama Teak Investments Plc for the above-mentioned sum (including Placing Commission of 3%), being the amount payable in full on application.I acknowledge that my cheque/banker’s draft will be presented for payment on receipt. [I further acknowledge that if I accompany my application form with a cheque or banker’s draft denominated in an amount other than Euro, that these funds will be converted to Euro on presentation at the exchange rate as quoted by Allied Irish Bank Plc prevailing at the close of business on that day. I acknowledge that the conversion into Euro will be rounded up to the nearest €100 and such equivalent number of units of Shares and Loan Notes having equivalent value will be issued to me provided always that the amount of my investment following conversion into Euro equals or exceeds ¤50,000.] Any amounts due to the Company as a result of this rounding-up will be deducted from the Placing Commission payable by me, thus proportionately reducing the amount of the Placing Commission payable.I acknowledge that all terms and expressions in the Information Memorandum dated May 2007 shall have the same meaning in this application form unless the context otherwise requires.In consideration of the Company agreeing to consider my application upon the terms and subject to the conditions of the Information Memorandum, I agree that this application shall be irrevocable and, if accepted by the Company, shall constitute a contract between the Company and me. I agree that in respect of the units of Shares and Loan Notes for which my application is accepted in accordance with the terms of the Information Memorandum, noti?cation to me in writing to the address set out above of the basis of allocation shall constitute a full acceptance of my application on such basis.I hereby authorise you to forward to me con?rmation of my investment and/or cheque for any refund monies to me by post at my risk to the address shown above.• I acknowledge that I have taken independent advice in relation to the suitability of this investment to me and the risks associated with it;• I am not relying on any warranties, representations or undertakings, nor on any taxation advice from the Promoter or any of their employees or advisers or any other person in connection with my investment;• I have read and understood the section of the Information Memorandum headed “Important Notice” and Risk Factors and I have received such advice and information as I consider reasonably necessary in connection with my investment;• I have read the Information Memorandum and this application form in their entirety.I attach a cheque/banker’s draft payable to Panama Teak Investments Plc in the amount of €________________ (including Placing Commission due of 3% amounting to €_______) and hereby apply so that for each €50 invested, I will receive 1 B Ordinary Share of €1 and €49 in nominal amount of loan notes.Signed In the presence ofWitness nameWitness addressWitness occupationWitness signaturePlease make cheques payable to Panama Teak Investments PlcApplications, signed and crossed cheque with a copy of passport or driver’s license and a recent utility bill should be sent to: Solas Financial, Great Island Enterprise Park, Ballincollig, Co. CorkIrelandDateInvestment Application Form252526262728AdvisorsPromoter and Investment Manager:Green Belt LimitedTax: Deloitte, Dublin, IrelandAdvisor and Distributor: Solas Financial For further information please contact Solas Financial at the address below:Solas FinancialGreat Island Enterprise ParkBallincolligCo. CorkIrelandtel: +353 (0) 21 487 5300fax: +353 (0) 21 487 5254 web: www.solasfinancial.com/teakemail: info@solasfinancial.comGreen Belt LimitedMain StreetVirginiaCo. Cavantel: +353 (0)49 854 8000fax: +353 (0)49 854 7509 email: info@greenbelt.ie