Duglen International

Touchwood FAQ

Q1 : Who is Touchwood?
The Touchwood Group is a multi-national managed forestry company with registered headquarters in Hong Kong and operational headquarters in Bangkok, Thailand. Originally incorporated in Sri Lanka, Touchwood now has offices in Australia, Hong Kong, Japan, Korea, Malaysia, South Africa, Thailand, United Arab Emirates and the United Kingdom.

Touchwood owns and manages 28 plantations across Australia, Sri Lanka and Thailand and is adding to this number every year. Touchwood Group serves more than 15,000 clients and employs over 600 people. The Company has rapidly expanded in recent years and this is set to continue into the future, Moreover, our strong growth also demonstrates that we are in the forefront of managed forestry.

Touchwood have five distinct areas of operation:

- Research and development of rare and endangered species of trees;
- Growing plantation hardwoods on a commercial basis
- Sales of individual pre-planted forest plots
- Provision of plantation-maintenance services; and
- Provision of tree-harvesting services

Q2 : How do I invest with Touchwood?
Duglen International

Contact Duglen Internaional:
Kannai Keihin Building 1001,
Ougi-cho 2-4-2, Naka-ku
Yokohama 231-0027, Japan
Tel: 81-(0)45-222-4711
Fax: 81-(0)45-222-4712
First of all a client needs to decide what type of tree they wish to invest in and how long they are planning to invest for. For example a client may wish to buy some trees when a baby is born in order to provide a lump sum when they are 18 years old; in which case Mahogany or Sandalwood trees would be the obvious choice; However, another client may decide that they want their return over a shorter period, in which case Agarwood would be more suitable as it can be harvested in a shorter period.

The client then needs to decide how much they want to invest. We have packages starting from approx. US$8,000 and if clients choose to use our maintenance service (plantation management) they can opt to pay this upfront or annually.

When the client makes an order (tree sale order) it is sent to the Touchwood Group who will confirm the plot allocation and issue the client with a "Touchwood Forestry Agreement" detailing the client's ownership of the trees in addition to other important information including land details, plantation management and harvest management.

All of Touchwood’s clients are kept updated as to the progress of their trees. Touchwood issues a full audit of all of its plantations once per year. Any client can have an independent audit of their own plot at any time (at additional cost). Moreover, Touchwood also encourages its clients to view its work and as such it offers clients organized trips to visit their tree plots. These client visits are a particularly popular aspect of the Touchwood product as they provide clients with the opportunity to inspect their trees, meet fellow investors and find out more about the people and culture in the local area.

When the trees are nearing maturity clients are advised accordingly. Following the harvest being conducted, each client has a number of options ranging from having the Company sell their harvested logs on their behalf through to having the harvested trees available for them to take delivery of at the plantation site. Whatever the client’s decision they will receive the full value of their harvest less any pre-agreed harvesting, sale or processing fee(s).

Q3 : Why is managed forestry a desirable asset class?
Managed forestry is becoming a popular and desirable asset class for several reasons.

Firstly, managed forestry has historically generated excellent returns.

Secondly, forestry historically has a low correlation with other major asset classes, thereby, providing portfolio diversification.

Thirdly, managed forestry returns have been positively correlated to the rate of inflation, which creates a hedge for the portfolio.

Q4 : Why is forestry well - suited for institutional investors?
Managed forestry is well suited to institutional investors for a number of reasons. Primarily, institutional investors are capable of funding larger transactions and are typically longer-term investors. These attributes uniquely suit managed forestry ownership. Also, institutional investors are more flexible with harvest levels based on log prices.

Q5 : What risks are involved in forestry investing?
The risks associated with forestry investments can be classified into two major categories:

- Physical risks which include natural disasters, pest infestation, disease, animal damage, and theft; and
- Economic risks which include price fluctuations, supply risk, adverse regulatory changes, risk of reduced demand, and liquidity risks.
With the use of small decentralized plantations and growing only high commercial value species, most of these risk factors are significantly minimized

Q6 : How does an investor best diversify their investment portfolio by adding managed forestry?
The addition of forestry, by itself (even in a single investment), provides positive diversification benefits to an investor's portfolio. As an investor builds their forestry portfolio (utilizing an opportunistic approach), over time, a diverse portfolio of forestry of varying age classes, species, locations, regions, and country locations can be achieved.

Managed forestry is generally a niche investment and therefore investors should focus on the region that offers the most favorable value and opportunity rather than simply focusing on diversification of the forestry portfolio simply to "diversify".

Q7 : What are the environmental benefits of investing in plantation forestry?
Plantation forestry can provide a number of environmental benefits, including reducing the pressure on native forests, helping to reduce salinity and soil erosion, improving water quality, providing a potential source of renewable bio-energy and creating sinks for greenhouse gases.

Q8 : When is the best time to invest in managed forestry?
Based on the Touchwood Group's opportunistic approach to investing, it is always the right time to invest in managed forestry. The critical factor is to invest in the right location with the right tree species at the right price. Furthermore, changes in the forestry market environment will provide investors with better buying opportunities regionally at certain points in time.

Q9 : What are the estimated returns?
This is a "Retail Investment" and as such our clients are not buying into a fund or any other form of collective investment scheme and are not promised any specific return.

However, since they own their trees the return is based on the full value of those trees at maturity. Touchwood constantly monitors the wholesale prices of timber they grow and based on these values and their projected movement our clients can expect to receive back up to three times their investment for Agarwood and up to 10 times their investment for Bamboo, Mahogany, Sandalwood and White Gum. Our projections and how we calculate these are available on our website.

Q10 : Can I sell my trees before the due harvest date?
Our clients own their specific trees and a lease on the plot they are growing on. So, whilst we maintain the way to realise the best return is to keep the asset until the due harvest date, they can, of course, sell or transfer that asset at anytime to whoever they wish.

Touchwood makes this easy to do as the client’s Forestry Agreement contains a section which entitles the client to transfer their Forestry Agreement to a new client. Moreover, client’s should be aware that Touchwood has a lively secondary market as it regularly offers client's packages for sale to other clients; indeed Touchwood has never failed to re-sell a client’s package often at a considerable profit.

Q11 : Is my investment safe?
As well as growing trees for our clients, we also grow forestry for our own commercial production and own very large assets that are increasing in value year on year. We are in business for the long term and have a business model that is sustainable. Two major factors set us apart from other similar companies:

Touchwood is one of the largest companies of its kind operating in Asia. The company has an impressive track record, operates to Global Reporting Initiative standards and is ISO 9001 & 14000 accredited. We are approved by the Board of Investments in both Sri Lanka and Thailand and also approved by the Thai Royal Forestry Department.

Whilst we hold the freehold interest in all our plantations, our clients own the leases and trees and so remain in control of the actual assets at all times.

However, we appreciate that our clients deserve to be reassured on this issue and we encourage every client to check our credentials and take independent advice before making their investment.