– Nominal value
– Tax value
– Market value

The value of a share is basically determined by the market. No active market has established itself forl the registered  shares of Forests for Friends Ltd.
Our share is a typical long-term investment. It not listed on a stock exchange, but it can be traded. To establish a price level, it makes sense to calculate an indicatory value. Following aspects can be considered:

• The majority of Forests for Friends Panama’s plantations that continue to be intensively maintained were planted in 2004 and 2005 with some small areas already planted in 2003. The 2002 plantations (Torio and Zapotal) are not being maintained area-wide.
• Teak plantations are capital intensive. Maintenance costs peak in the first years and then reduce continually.
• The world-wide trading of CO2-certificates has not yet been established. The income is not yet calculable.
• The thinnings in year 4 do not produce any revenues and in year 7 and 10 none of any importance. Year 14 will generate considerable income.
• The final harvest of the trees is planned in 20 years. 85 % of the revenues can be expected with the final harvest and the sales of the land.

Consequence: Forests for Friends Ltd will generate no income from its daughter company in Panama until 2014 and only modest income until 2018. We do not expect to be able to pay any kind of dividends generated from our core business, i.e. the sale of timber, to shareholders before 2019.
The long-term yield depends mainly on the development of the price for plantation teak, the rate of inflation, the US-dollar fluctuation, and the increase in the value of the land. Forecasts over 10 or 20 years are not serious. Periodical re-evaluations and thus fluctuations are necessary and are carried out regularly.
Tree plantations retain and increase their value only if they are regularly maintained and cultivated. The company must guarantee the financial resources for the entire period. Two models of payment by the investors are possible: the periodic payment of the maintenance costs or the prepayment for the entire period. Forests for Friends' model is that of pre-payment.

New investors must pay for the remaining maintenance costs up until the final harvest along with the pure share value so as not to dilute the value of the shares.

Nominal value

...is a formal part of the share. It is 100 Swiss Francs. It is the value of the share without the surcharge (agio) at the time it is bought and this is the value registered in the commercial register. It has nothing to do with the market value of the share. The nominal value becomes interesting, when capital is paid back to the shareholders. In many countries, the payback of the nominal value is not regarded as income and is thus tax exempt.

Tax value

Unfortunately, the answer to the question about the tax value of our share is neither easy nor clear-cut. In Switzerland, the situation is as follows:

The tax value on 31st December is usually the same as the closing stock price of the last trading day of December (source: Telekurs Financial). If there is no such price available, the last available price is taken (Art. 66, Abs. 1 StHG).
Non-listed security, i.e. not traded on a stock exchange, must be declared at the fair market value (tax value) at 31st December. If this value is not known at the time of handing in the tax declaration, the last-known tax value can be declared (tax value at 31st December of the previous year), subject to adjustment by the tax authorities.
Source: SR 642.14: Federal law of 14.12.1990 on the harmonisation of the direct taxes of the cantons and communities (StHG)

Our share was issued in 2006 and is not listed. The tax office of the Canton of Glarus determined a valuation on 29^th January 2010, defining a net tax value of CHF 98.00 for 2008. For 2009 we have not yet received an official value. Further information will follow, as soon as it is available.

Market value

The market value of our share can be approached by various methods:

Method 1: Deduction from the business figures

Based on the financial statements, budget and evaluation, the value of our share is composed of three parts:

• The inner value of a share follows from the consolidated assets of the company divided by the number of paid-up shares. These assets are mainly composed of the value of the growing trees (estimated annually), the book value of the land, the market appreciation of the land and the liquid assets. The inner value increases year by year.
• The remaining maintenance costs up until the final harvest are composed of the costs for maintenance and management. These costs decrease annually.
• The surcharge for future development can only be influenced by the company by good performance and trustworthy behaviour. This value must therefore be defined by the market and the individual investor, respectively. In general, it can vary between -10 % and +40 %. Following factors may influence your evaluation: on the positive side: an experienced maintenance enterprise, a broad shareholder basis, transparent information; on the negative side: we are not listed on a stock exchange, the investment is long-term.

Method 2: Previous expenses

Until now, the following expenses have occurred:

• Purchase costs for the land (including the unplanted land) and the takeover and organizational costs of the Company
• Development of the infrastructure, preparation of the land, preparation / purchase and planting of seedlings
• Costs for maintenance and care up until today
• Management costs

As a rescue company, we did not receive all the files and are therefore unable to calculate all these costs exactly.
Regarding the investment value, serious competitors and experts agree that a purchase price of more than US$ 30,000 (including maintenance costs until the final harvest) per freshly planted hectare of teak precludes an above-average revenue. This price excludes the land value. Our plantations have an average age of 5 years.

Method 3: The expected profit

This method only takes the discounted value of the expected income from the harvest minus the harvesting expenses plus the net income from the land into account. We have discounted the total value at an interest rate of 5% per annum.
The most important factor to calculate the expected profit is the timber price in 10 to 20 years, which is obviously not known today.  In the case of projections we take realistic figures at the lower end of the gamut.

Method 4: Comparison with the competition

It is difficult to compare the various products in the teak market. Some offers include land possession or offer discounts on the purchase price; the duration of the rotations vary; the number of trees per hectare, the number of trees taken out, growth projections, estimated revenues and the accounting of management and harvesting expenses vary and are not always transparent.