Forestry 2014 - page 19

19
Criteria Investment A Score Risk Comments
Ownership/Structure UCIS 5 M FCA authorised operator
Tree Species Ash 7 H Native slow growing hardwood
Tree Growth stage 20 year old standing wood 5 M Well established plantation which could be harvested soon
Country UK 1 L Developed land ownership laws and investor protections
Location Hampshire 2 L Establised forestry location
Forestry Management
Company
Establised, long track record 3 L
Well establised company with a large amount of land under
management
Certification FSC Certified Forestry 2 L Certified plantation
Exit At discretion of management company 5 M Investors have no control over exit
Yield
10% average predicted return per
year
5 M Sensible yield based upon justified tree growth
Purchase Price At present market value 5 M Verified by independent third party
Ongoing Costs High but clearly stated 4 M Costs associated with management and land ownership
Currency Risk Sterling 0 L No currency risk to UK based sterling investors
Total 44/120 M Well managed fund but liquidity and slow tree growth increases risk
Criteria Investment B Score Risk Comments
Ownership/Structure Tree Ownership Agreement 8 H Ownership is unclear
Tree Species Acacia 8 H Slow growing hardwood, not native to Brazil
Tree Growth stage Sapling 10 H First returns not due for at least 10 years
Country Brazil 5 M Developed land ownership and open to foreign investment
Location Amazonas 5 M Establised forestry location
Forestry Management
Company
Establised, long track record 3 L
Well establised company with a large amount of land under
management
Certification Adheres to the Brazil Forest Code 5 M General forestry code for Brazil
Exit Predicted exit many years in future 9 H Exit is unclear and predicted to be after 25 years
Yield
Predicted 50% average return per
year
10 H Returns are speculative and not supported by evidence
Purchase Price Hard to value 9 H No comparisons or verification of land price
Ongoing Costs Unknown 9 H Costs are not stated in product literature
Currency Risk Brazilian Real 7 H Land valued and returns paid in local currency
Total 87/120 H High risk with speculative returns and unclear ownership
Criteria Investment C Score Risk Comments
Ownership/Structure Freehold Title 5 M Directly held physical ownership
Tree Species Bamboo 5 M Fast growing tree species
Tree Growth stage Sapling 7 H First yields predicted after 2 years
Country Sri Lanka 7 H Weak foreign land ownership laws
Location Hamillewa 6 M Established and native forestry area
Forestry Management
Company
New company, no solid experience
or track record
8 H Lack necessary skills and experience
Certification No certification 8 H Forestry plantation not certified
Yield
10% average predicted return per
year
5 M Investors have no control over exit
Exit Defined exit 2 L Timber purchase agreements in place and verified
Purchase Price Hard to value 9 H Land values unclear and not verified
Ongoing Costs No costs to the investor 0 L Investor is not liable for any costs
Currency Risk USD 5 M Investment and returns all in USD
Total 66/120 M Lack of management experience and location increase risk to the investor
WORKED EXAMPLE
SAMPLE RISK
WEIGHTING: M 40 - 91
L 0 - 39 H 92 - 130