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United Teak International

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Presentation on teak investing in Panama.

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United Teak International

  1. 1. Use your mouse to click anywhere to advance to the next discussion point or slide The following presentation includes various statistics pertaining to inflation, including selling price indices and current market values. Please be advised that past inflation and selling price trends are no guarantee of future performance. Individuals should consult their own professional advisors to determine their financial needs. No information provided or opinion expressed in this presentation constitutes an offer to buy or sell any security.
  2. 2. Use your mouse to click anywhere to advance to the next discussion point or slide The following presentation includes various statistics pertaining to inflation and selling price indices and current market values. Please be advised that past inflation and selling price trends are no guarantee of future performance. Individuals should consult their own professional advisors to determine their financial needs. No information provided or opinion expressed in this presentation constitutes an offer to buy or sell any security.
  3. 3. What you should know about Teak… Teak (also known as Tectona Grandis): <ul><ul><li>Is a deciduous hardwood tree indigenous to the dry and hilly terrains of Indonesia and Southeast Asia
  4. 4. Remains one of the most valuable of all hardwoods and is known for its beauty, strength, durability and weather-resistant qualities
  5. 5. Is the leading choice for marine and outdoor furniture applications because the extremely dense wood contains natural oils and rubber content, thereby possessing the greatest capability of any wood to withstand the effects of the harsh outdoor environment
  6. 6. Can naturally endure the effects of sun, rain and even snow without rotting, warping, cracking, shrinkage or swelling
  7. 7. Will naturally age to a beautiful silver-gray hew over the years or with a periodic application of natural teak oil will maintain its original color and richness for a lifetime.
  8. 8. Prices have increased 15% per annum between 2002 and 2007 with prices increasing by a staggering 67% in 2007 due to the supply deficit, according to the ONF (Central American National Forestry Office) </li></ul></ul>
  9. 9. What is the Project? A unique initiative designed to: <ul><ul><li>Promote responsible and sustainable reforestation in an genuine effort to preserve the threatened tropical rainforest throughout the world, one of Earth’s most precious natural habitats </li></ul></ul>… While <ul><ul><li>Providing individuals, businesses and institutions the opportunity to fortify their financial futures through responsible and sustainable investing </li></ul></ul>The United Teak Reforestation Project was established in 2008 and is managed by the United Teak Management Group (UTMG) <ul><ul><li>UTMG is a Panamanian registered privately held corporation founded on strong ethical and visionary business principles, primarily focused toward reforestation development and management of sustainable teak plantations in the Central American country of The Republic of Panama
  10. 10. UTMG has full and unencumbered authority to develop, market and manage all aspects of the United Teak Reforestation Project including the associated assets, employees, equipment, land and trees </li></ul></ul>
  11. 11. Project Overview Project objectives <ul><ul><li>Reduce deforestation of tropical rainforests by developing Teak tree plantations to fulfill growing global market demand for quality Teak wood
  12. 12. End destructive environmental impact of historical practices by: </li></ul></ul><ul><ul><ul><li>Reducing the need for harsh and destructive stripping of indigenous trees
  13. 13. Establishing sustainable Teak tree plantations on land previously “cut and slashed” for cattle grazing to restore and contribute to the lush tropical canopy
  14. 14. Reduce and progressively reverse the environmental impact of the callous destruction of tropical rainforests </li></ul></ul></ul>Project expansion achieved through sale of Teak trees <ul><ul><li>Clients purchase a certified number of quality Teak trees per 1 hectare (2.5 acre) parcel
  15. 15. UTMG prepares the land, plants, maintains and harvests Teak trees on behalf of the client
  16. 16. Client receives harvest proceeds… Project expansion achieved… All stakeholders benefit, including the precious global environment </li></ul></ul>
  17. 17. Project Methodology… Eliminate “Cut and Slash” United Teak acquires previously “Cut and Slashed” dormant fields and live-stock grazing land in ecologically sensitive areas of beautiful Panama
  18. 18. Project Methodology… Preparation and Planting Following hand clearing and cultivation of the land, high-quality Teak Seedlings are selected from certified growers and planted during the optimal rainy season
  19. 19. Project Methodology… Protection and Growth Cycle The skilled forestry team at UTMG ensures complete care and maintenance of the entire Teak plantation over the projected Twenty-year growth cycle 18 Months 48 Months
  20. 20. Project Methodology… Plantation Management UTMG manages all aspects of the Project through final harvest and ultimate sale of Client timber to selected Teak distributors, wholesalers and end-users
  21. 21. What You Are Buying? Trees guaranteed to grow… With complete life cycle management <ul><ul><li>Clients purchase and retain 1 hectare (2.5 acres) segregated “Parcels” of planted and fully managed Teak trees with a guaranteed [1] minimum yield / number of trees at final harvest
  22. 22. Typically, each parcel purchased is planted with approximately 1,100 quality Teak seedlings obtained through a recognized local Panamanian grower, although other various species of trees can be mutually agreed upon
  23. 23. UTMG provides each client with: </li></ul></ul><ul><ul><ul><li>Complete land preparation, planting, care and maintenance of Teak trees purchased throughout the entire growth cycle (Twenty-years for new seedlings)
  24. 24. Culling and preparation services (conversion to marketable timber) at final harvest
  25. 25. Sale of marketable timber in the wholesale Teak market on behalf of the client, obtaining fair and available wholesale pricing (or preparation for delivery to the client upon request) </li></ul><li>The Purchase Price is the only out of pocket cost to the client… A one-time 12% fee is deducted from all timber sale proceeds to compensate the cutting, management and selling services provided by UTMG during the contract </li></ul></ul>[1] If for any reason the client’s segregated parcel of planted Teak trees does not produce the contracted yield at final harvest, UTMG will provide the difference from a reserve of privately owned Teak trees
  26. 26. Teak Tree Parcel Pricing Current cost of one United Teak Reforestation Parcel (1,100 trees at planting with a guaranteed minimum yield of 240 Cubic Meters of commercial grade wood) is US$41,800 <ul><ul><li>Investment discounts shall be provided for each United Teak purchase contract of five parcels or greater </li></ul></ul>US$9,880 Down US$1,680 a year for 19 Years ** FOR A LIMITED TIME ONLY ** We are offering 0% interest and absolute no fee financing on the purchase of each United Teak Reforestation Parcel… No qualification or credit check required US$376,200 US$198,550 US$41,800 Purchase Price 11,000 5,500 1,100 No. of Trees US$34.20 10 Parcels US$36.10 5 Parcels US$38.00 1 Parcel Price per Tree Purchase Size 10% 5% - Discount
  27. 27. Securing Your Investment Purchases secured by “Timber Deed” Documentation Includes: <ul><ul><li>Number of trees purchased / guaranteed at final harvest </li></ul></ul><ul><ul><li>Assignment to customer of complete and unencumbered ownership of trees purchased </li></ul></ul><ul><ul><li>Location of trees (via GPS coordinates) </li></ul></ul>Back GPS Coordinates Front
  28. 28. Your Teak Parcel Valuation Calculated value of each United Teak “Parcel” <ul><li>One Parcel (1110 trees) of Teak will yield approximately 240 Cubic Meters of commercial wood within 20 years, utilizing an annualized conservative growth rate of 12 Cubic Meters per hectare
  29. 29. A conservative average teak wholesale price estimate per cubic meter (424 board feet) is US$1,060.00, or US$2.50 per board foot (see chart) </li></ul><ul><li>The estimated conservative harvest value of a United Teak tree Parcel is US$254,400 at TODAY’S wholesale prices (US$1,060 x 240 = US$254,400) </li></ul>Notes <ul><li>Source International Tropical Timber Organization ( www.itto.or.jp )
  30. 30. Price refers to plantation sawn wood, and includes small sizes </li></ul>ITTO (1) reported teak log prices as of October, 2005
  31. 31. Asset Value / Returns When you purchase one of our certified Teak “Parcels” you are actually paying only a fraction of the asset’s value at maturity, based upon current wholesale prices! <ul><ul><li>This means the value of your initial tree purchase will increase 5 times faster than the cost, simply by growing… We call this “Growth Value”
  32. 32. When historical inflation trends are added to “Growth Value” the return on your Teak purchase increases to over 900%... Or more than 9 times your total investment
  33. 33. Our conservative calculated returns do not take into account the value of you paying for your investment over 20 years… That is an additional benefit and investment security mechanism unparalleled in the reforestation investment industry </li></ul></ul>Return Example: Full Parcel of New Seedlings $254,400 Harvest value of full Parcel with 0% increase (1,100 trees) (41,800) Purchase Price (over 20 years) Growth appreciation at today’s prices - “ Growth Value ” $212,600 508% Total Return Multiple of cost 5 X’s $433,200 FUTURE harvest value of full Parcel (1,100 trees) (41,800) Purchase Price (over 20 years) Growth appreciation calculated at conservative 3% increase $391,400 936% Total Return Multiple of cost 9 X’s
  34. 34. Teak Price Trends The median wholesale price of Teak has increased an average of 5.5% per year since 1972 Chart Notes <ul><li>Source International Tropical Timber Organization ( www.itto.or.jp ), FAO ( www.fao.org ) and UTMG analysis
  35. 35. Drop in deforested Teak price is related to political situation in Myanmar and international deforestation laws
  36. 36. Plantation Teak prices steadily increased the last five years with projected long term annual growth of 5.5% to 7% </li></ul>(1) Natural Deforested Teak Plantation Teak FAO ITTO (2) (3)
  37. 37. Teak Price Future Commercial Thinning Year 7 Commercial Thinning Year 10 Commercial Thinning Year 14 Commercial Thinning Year 20 $200 / M3 $1,383 / M3 $1,557 / M3 $1,859 / M3 Notes <ul><li>A current Teak timber price of US$1,060 M3 was utilized as a starting point for growth projections
  38. 38. Average annual Teak timber price growth rate of 3% was applied to harvest years 10 through 20
  39. 39. Due to reduced size and maturity of timber harvested in year 7, a conservative fixed value of US$200 M3 was utilized </li></ul>Teak prices are predicted to continually grow mainly due to increased global demand and a decreased supply of quality timber <ul><ul><li>Increased global government restrictions placed on the cutting of natural growth forests has created a strong world demand for quality Teak timber. It is expected that the government will continue to restrict deforestation practices, eventually prohibiting all cutting of natural forests. This will surely increase the prices of plantation Teak timber
  40. 40. The expected cubic meter value at each scheduled thinning / harvest has been calculated utilizing a moderate 3.0% annual increase in already conservative Teak timber prices… The market trend since 1972 has averaged more than 5.5% </li></ul></ul>Projected Teak Price
  41. 41. Teak Investment Returns Age of Trees Trees Standing Trees Thinned Harvested Timber [M3] Commercial Value Management Fees [12%] Investment Net Value 4 1,100 433 0 $0 $0 $0 7 667 267 22.6 $5,391 $647 $4,744 10 400 132 32.5 $44,970 $5,396 $39,574 14 268 88 47.0 $73,102 $8,772 $64,330 20 180 180 166.6 $309,742 $37,169 $272,573 Totals 1,100 268.7 $433,205 $51,985 $381,220 Notes <ul><li>An average annual Teak timber price growth rate of 3% assumed, calculated utilizing the “Projected Teak Price” chart
  42. 42. The calculated 16.5% average annual compounded return does not take into account periodic harvest revenue payments </li></ul>Should historical price trends of Teak timber continue, the value of your United Teak investment is expected to greatly exceed the appreciation of conventional global investments <ul><ul><li>Applying a conservative 3.0% annual Teak timber price increase, your United Teak investment is projected to earn a 16.5% annualized compounded return… Net!! </li></ul></ul>Investment Projection
  43. 43. Comparing Teak to Conventional Investments When you compare anticipated appreciation in value to conventional investment alternatives…Teak greatly exceeds the competition United Teak 16.5% And if history repeats… Over 113 Times Purchase Price Compounded annual return – Last 32 years 11,378% 11 Times better than the US Stock Market 7.4% 8.0% 3.1% 5.0% 6.1% 8.8% Total Return % after 32 years 1,366% 454% 1,087% 915% 5,000% 7,500% 10,000% 12,500% U. S. Real Estate Gold Bullion U. S. T-Bills / Bonds Nikkei (Japan) CND. Stock Market (TSE) U.S. Stock Market (DJ) 627% 258% 2,500%
  44. 44. Primary Influence How are these returns consistently achievable? Ever-increasing demand Limited world supply Quick growing resource
  45. 45. Teak Supply Influences Teak timber supplies are influenced and limited primarily due to the following global factors: <ul><ul><li>Environmental requirements severely limit suitable growing regions: </li></ul></ul><ul><ul><ul><li>Teak trees only grow adequately within 10 - 15 degrees of the equator
  46. 46. Growing region must be at the correct elevation with distinct wet and dry seasons
  47. 47. Only equatorial regions of Central / South America and Southeast Asia / Africa possess the essential temperature, humidity and rainfall characteristics </li></ul><li>Deforestation and destructive forestry continues to occur in many areas designated as suitable growth regions: </li><ul><li>The 2001 State of the World’s Forest Report published by the United Nations stated - “ While forest area in developed countries has stabilized and is slightly increasing overall, deforestation has continued in many developing countries” </li></ul><li>Pressure from the United Nations and key governments forcing new legislation to prohibit the cutting of indigenous Teak trees
  48. 48. Good quality plantation Teak requires sufficient care and maintenance in the early years in order to produce marketable timber </li></ul></ul>
  49. 49. Teak Demand This dynamic assures ever-increasing prices for Teak wood! Plantation Teak is the investment of the future, but supply of good quality timber will be limited <ul><li>Demand for good quality Teak has never been higher due to its strength, hardness and durability
  50. 50. The high oil content of teak wood provides natural resistance to insects, fungus, fire, water and toxic acids
  51. 51. Recognized globally as a quality construction material that will endure the test of time, lasting for decades and even centuries
  52. 52. Teak is an essential construction material in ship and yacht building, joinery, flooring, decorative carving, cabinetwork, paneling, turnery, specialty fixtures, tanks and vats
  53. 53. Demand and new applications for Teak wood are ever increasing, while good quality timber is decreasing at a rapid pace </li></ul>
  54. 54. Risk Assessment With such high returns… What are the risks? <ul><li>Possible risks associated with Teak plantations: </li></ul><ul><ul><li>Agricultural
  55. 55. Physical and Environmental
  56. 56. Government Regulations
  57. 57. Plantation Management
  58. 58. Time… State of future markets
  59. 59. Impact of Inflation </li></ul></ul><ul><li>At United Teak… We have carefully structured our timber investment packages to mitigate the primary risks associated with Teak plantations and to ensure your asset is safe and secure during the 20 year life-cycle </li></ul>
  60. 60. Agricultural Risks <ul><ul><li>Insects… No indigenous harmful pests. Only exposure is to roots within first year or of planting. Problem easily avoided by proper preparation and bio-sensitive insecticides
  61. 61. Fungus / biological… No known cases in Panama of mass fungus or biological destruction. If present, fixed by implementing an effective spraying program
  62. 62. Growth… Inferior growth usually results from neglect, poor soil or unsuitable climate conditions. At United Teak we: </li></ul></ul><ul><ul><ul><li>Select farms with only grade 1 soil conditions situated in optimal growing regions
  63. 63. Our expert team of on-site foresters oversee all phases of the growth and management process including annual maintenance and fertilization </li></ul></ul></ul>High motivation for continued proper management… UTMG fees are based solely on quality of final harvest
  64. 64. Physical / Environmental Risks <ul><ul><li>Hurricane and Floods… Hurricanes are non-existent in the region. Trees / farms receive sufficient rainfall eight months of the year and excess flooding is easy managed by topography grading and properly planned irrigation
  65. 65. Fire… Forest fires highly unlikely in the tropics and the trees high oil content make them impervious to fire once they are a few years of age. Fire ditches are maintained during the dry season to reduce accidental fire risks
  66. 66. Theft… Logistically impossible as workers live onsite and work the plantation daily. UTMG staff and foresters provide regular oversight and inspection. Site is fully protected with a security fence with no hidden or concealed access points
  67. 67. Unforeseen destruction and catastrophe… None know to the region </li></ul></ul>UTMG guarantees your Teak saplings… Should any trees within the first two years of planting not perform to industry standards, they will be replaced and replanted at our cost
  68. 68. Government and Legal Risk Why is Panama ideal? <ul><ul><li>Stable government with a democratic voting system and a legal structure based on globally recognized civil law </li></ul></ul><ul><li>Radical shift in historical governmental process highly unlikely… </li></ul><ul><ul><ul><li>Widespread land ownership and voter participation in general elections
  69. 69. Viewed as one of brightest democratic success stories of the last century
  70. 70. Strategically important to the United States and regional stability… A member of the Central American Free Trade Agreement (CAFTA) with United States
  71. 71. No indigenous military… Making change by revolution unlikely
  72. 72. Progressive business environment with tax incentives, land ownership laws and rights encouraging plantation development
  73. 73. The Panama economy relies heavily on foreign investment, trade and tourism </li></ul></ul><li>Panama possess the optimum political conditions for stable investment in Teak plantations… </li></ul><ul><ul><ul><ul><li>“ Although not indigenous to Panama, this tiny country provides a uniquely perfect geographical, climatic and geomorphologic condition for the production of high quality plantation Teak, and with some of the fastest growth rates of Teak in the world being recorded in Panama .” [Teakwood Commercialization - 1998] </li></ul></ul></ul></ul>
  74. 74. Management Risk Highly skilled and professional team assembled to manage your asset’s growth <ul><ul><li>John Cornacchia… United Teak Founder, Chairman of the Board </li></ul></ul><ul><ul><ul><li>Passionate visionary with strong ethical business practices
  75. 75. Successful business owner and operations manager for over 22 years
  76. 76. Highly experienced in the dynamic global business market
  77. 77. Operating in Panama for over five years with a solid team on the ground </li></ul></ul></ul><ul><li>Strong operations team… United Teak Management Group </li></ul><ul><ul><li>Chief Executive Officer, corporate insurance expert with over 20 years of experience in operating businesses in Canada
  78. 78. Chief Operation Officer with over 16 years experience in managing agriculture projects in Panama
  79. 79. A full time forester highly educated and experienced in soil rehabilitation and Teak plantations
  80. 80. Full time plantation site manager overseeing a team of various full time and seasonal plantation employees </li></ul></ul>
  81. 81. Time… Market Risk The hardest risk to manage… Unforeseen market conditions and changes <ul><li>Certain primary factors mitigate this risk, thereby reducing the negative impact on your investment: </li></ul><ul><ul><li>Teak has always been in high demand and will remain desirable due to the unique properties and qualities it possesses
  82. 82. The quality of plantation Teak wood has greatly increased due to improved planting and maintenance practices, resulting in increased demand for the precious natural resource
  83. 83. Supply is becoming increasingly limited due to the high demand </li></ul></ul><ul><ul><ul><li>Worldwide legislative trend toward rainforest preservation and laws prohibiting the cutting of indigenous Teak trees and other tropical species
  84. 84. Recent push to establish plantations in indigenous regions of Southeast Asia and India will not enter the market for many years after plantations in Panama are ready for harvest, due to the quick growing cycles in the region </li></ul></ul></ul>The best hedge against time and market risk… Price leverage!
  85. 85. Time… Market Risk How price leverage can hedge against time and market risk: <ul><li>Your purchase price provides leverage of 5 to 1 (current harvest value vs. cost) providing outstanding risk protection
  86. 86. The chart below depicts what would happen in the unlikely event that the future value of Teak wood (relative to other goods and services) declines by 50% </li></ul>Normal inflation $254,400 Zero inflation ZERO $254,400 ($127,200) $127,200 204% 2 X’s Today’s wholesale yield value of one parcel Inflation rate (same as last 15 years) Future wholesale value Less: 50% drop in market value Harvest proceeds Total return (vs. $41,800 cost) Multiple of cost $254,400 3.0% $433,200 ($216,600) $216,600 418% 4 X’s
  87. 87. Performance Guarantees… Our Commitment to You The United Teak guarantees represent our commitment to you United Teak is built on sound and ethical business practices… We guarantee our services <ul><li>United Teak guarantees that your Teak saplings will grow to industry standards during the first two crucial growing years: </li></ul><ul><ul><li>Should any of your Teak saplings fail to grow properly within the first two years of initial planting, United Teak will purchase and replant them at our expense with no additional cost to you - Zero </li></ul><li>United Teak guarantees that you will be completely satisfied with the performance of your Teak parcel investment… So much so that we provide a five-year full money-back policy: </li><ul><li>In the unlikely event that you are not fully satisfied with your Teak parcel investment on the five year anniversary purchase date, United Teak will provide a full refund of every dollar paid under your contract, including 2.85% compounded annual interest. No questions and no cost to you - Zero </li></ul><li>United Teak guarantees that your parcel will deliver a minimum yield of 240 cubic meters of commercial grade timber during the 20 year life-cycle: </li><ul><li>Each of our Teak parcels are properly managed so that they produce 240 cubic meters of commercial grade timber during the 20 year life-cycle. Simply… We will provide any shortfall that may possibly occur from our own reserves at no additional cost to you - Zero </li></ul></ul>
  88. 88. Taking Action… United Teak has assembled a highly specialized team of experts and programs to provide a highly unique opportunity <ul><li>If your financial goals include: </li></ul><ul><ul><li>Highly lucrative, long-term investment programs
  89. 89. Mitigating risks associated with the volatile stock market
  90. 90. Diversifying your portfolio while investing globally in a renewable resource
  91. 91. The security of fully guaranteed asset ownership
  92. 92. Paying for your investment over the entire term of ownership </li></ul></ul>AND… <ul><ul><li>The opportunity to help protect the world’s precious environment </li></ul></ul><ul><li>Get involved with this exciting initiative and contact United Teak today… Or visit our website at www .unitedteak .com </li></ul>
  93. 93. Use your mouse to click anywhere to advance to the next discussion point or slide The following presentation includes various statistics pertaining to inflation and selling price indices and current market values. Please be advised that past inflation and selling price trends are no guarantee of future performance. Individuals should consult their own professional advisors to determine their financial needs. No information provided or opinion expressed in this presentation constitutes an offer to buy or sell any security.

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