Investors Chronicle

Coins, stamps, timber, land… Fallen out of love with equities?
Then here are some alternative investments to add some colour to your portfolio

Faith Glasgow reports…

£10,000+
TROPICAL HARDWOODS

A recent development is ethical forestry funds investing in the production of sustainably farmed teak and other hardwoods. Only 1 per cent of global teak production comes from commercial plantations; the rest comes from natural rainforests. But a growing number of countries are outlawing the import of unsustainably harvested wood. Recently, the EU has proposed a ban on illegally harvested timber imports, which account for around 20 per cent of the European total.

Such initiatives have tended to boost hardwood prices: the Costa Rican National Forestry Office reported that teak prices rose 15 per cent a year between 2002 and 2006. According to Guy Conroy, managing director of sustainable forestry company Oxigen Investments, teak returns during the past 18 years have averaged almost 10 per cent a year. “They are currently topping 16 per cent because of the strong world demand for timber,” he says.

Oxigen Investments uses investors’ money to create hardwood plantations in Sri Lanka and Costa Rica. Teak, on an 18 year harvesting cycle, is one option, but the company also produces agarwood, a high value hardwood that matures in just six years.

It’s a straightforward investment proposition, with sums of £10,000 upwards accepted. Investors lease their forestry investment plot, receiving 100 per cent of the net profit generated when the timber is harvested and sold on maturity. However, because the scheme is not UK based, the tax breaks applying to UK timber are not applicable.

Financial Times reviews Oxigen Investments

“…Oxigen Investments are taking advantage of the demand for sustainable investment opportunities. It uses investors’ money to create hardwood plantations in Costa Rica - when the wood is harvested, it reduces pressure on natural rainforests and protects thousands of acres more of previously threatened rainforest. Meanwhile, the scarcity of certified sources of hardwood drives the price up, increasing the benefit to investors.”

Nui Giai Mountain

After an early start we made our way to the foot of Nui Giai Mountain. The climb started with a gentle walk but quickly became more strenuous with parts of the two hour climb very steep. With the combination of the heat and humidity we needed to stop on several occasions to rest awhile. We passed a waterfall and a lily pond but the most breathtaking was the viewpoint from which we could see across the flood plains to Cambodia in the distance.

We made our way to an area of the plantation where the demonstration of applying the kit which forms the resin to an established aquilaria tree took place. This operation took approximately 20 minutes for two men. Firstly they drilled the holes in the tree at marked points, followed by introducing the application via tablets into the drilled holes and adding some water to activate the formula. Finally the plastic breathing tubes were inserted into the drilled holes.

We made our way to another part of the plantation to see a nine year old tree being felled. The application had been applied 18 months previously. There was a roar as the chain saw started up and we hastily moved out of the possible path of the falling tree. It crashed to the ground with the sound of the crushed undergrowth and a loud thud. Moments later cross sections of the tree were being examined for Agarwood. It was an exciting moment when we saw how much resin was in the tree and Henry Heuveling van Beek soon had some fresh Agarwood burning.

The descent was much faster than going up although great care was required to keep a safe footing. At the bottom of the mountain we enjoyed a delicious meal and hospitality of the Chief of the village and his family plus a well earned rest.

Once we were fed and watered we continued on our journey to the Village where Scented Mountain products are produced. The staff, were working hard to produce incense sticks and Agarwood chips as well as preparing the white wood for oil extraction.

When we arrived back at the hotel we were just a little bit tired!

Agarwood Conference

Dr Robert Blanchette

The conference started with a talk by Dr Robert Blanchette, (Professor dept, of Plant Pathology at University of Minnesota) who was introduced by Mguyen Thi Huynh Yen, the owner of Seven Mountains. Dr Blanchette told us about the historical and current uses of Agarwood. We heard how Agarwood has been used for meditation and prayer and about its ability to improve mental clarity. Henry Heuveling van Beek of CA companies burnt some Agarwood to enable us to make up our own minds and I for one felt a difference. The smell was extraordinary in the same way that an olive is an explosion of taste the Agarwoods smell is a complex layering of scents that has a richness beyond my previous experience.

It is easy to understand why so many Asian countries value the resin so highly and why it is gaining a following in the west. Dr Blanchette gave us information about the DNA of the various strains of Aquilaria trees and the chemical compounds. Each area where trees are grown has its own distinct smell. A bit like different wine regions have different tastes.

Mr Heuveling van Beek, Director of the Rainforest Project Foundation, then spoke to the delegates about advances in inducement technology to produce resin from the Aquilaria tree. We saw lots of photographs demonstrating the processes and afterwards had the opportunity to ask questions.

Rainforest Project Foundation

Vietnam Conference - 31st October

Oxigen is determined to stay at the forefront of technology when it comes to growing trees, particularly agarwood. The scientific breakthrough by the University of Minnesota, working in conjunction with the Rainforest Project Foundation, is described on the Trees Species page of our main website. But science never stops, and the Rainforest Project has gathered experts from all over the world in Vietnam to showcase latest developments which make plantation agarwood both viable and commercial. Oxigen Investments Managing Director Guy Conroy is attending the Project’s conference and reports from Vietnam with the very latest agarwood growth and financial results for 2008.