FAQ

What is teak used for? Which final product is obtained from this resource?

Teak wood is highly appreciated and requested all over the world for the construction of decks, decoration and detailed works on boats, select quality furniture -mostly for outside use-, floors, cabinetmaking, carvings and lathe products.

Which advantages has Teak over other kinds of wood?

Teak wood is rich in natural oils, which make it very durable. It resists humidity and the processes of extraction when exposed to the inclemency of the weather. It is extremely resistant to attacks of fungus and termites, since its oils act as a natural repellent for insects. In addition, it has a great resistance to fire and decomposition.

Which is the position of teak on the wood market?

The physical features of teak have given it its reputation of Premium Wood on world levels. Its current production equals approximately three million cubic meters per year, which is a humble position in terms of world wood production. Nevertheless, teak is known as a high-value wood on the international markets.

Which are the main teak importing countries?

India, China, Canada and the United States of America.

How many trees are sown per hectare?

There are several sowing modalities in terms of density, depending of the nature of the lot, the management costs and certain assumptions handled by those who develop teak plantations. In our case, we consider that sowing 833 trees per hectare is the optimum density, under the 4x3-modality.

In case of fire on the plantation, what happens to the shareholders’ investment?

Teak is immune to fire after its fourth year and very resistant until that moment. In the event of a fire after the fourth year, teak would not be affected. Should a fire take place before that moment, the most probable thing to do would be performing reanimation works to the plantation, in other words, the wood would be cut until a height of fifteen cm from the soil and the subsequent amount of water would be applied. Since the roots of the plant are under the ground, they probably would not be affected and in the next winter, the parts of the plant that have been affected by the fire should simply revive.

In the improbable event of a fire destroying the plantations, the insurance claim would be filed before the insurance company, and after the respective payment, we will sow again in the next winter season.

It is worth pointing out that since the beginning of SIEMBRA, we have never had to turn to the insurance company to file any claims for such incidents.

What about hurricane risks or other ecological events?

Ecuador is not subject to hurricanes. The country is located in a zone that may be affected by the El Niño phenomenon: there may be strong and extended rainfall. Nevertheless, due to the topography of the lots where the plantations are located, there is no flooding risk either. The lots are provided with very good natural drainage.

And plagues?

Teak is very resistant to plagues, and in Ecuador, there is no record of plagues that have affected teak plantations. Thanks to the mechanical structure of the teak wood, it is highly resistant to insects.

Based, on which hypotheses is the investment´s yield calculated?

The fundamental hypotheses are related to the volume of wood production, which is estimated at two hundred cubic meters per hectare, and to the estimation of a 5% annual growth of the wood price, which is far below the average of the last 40 years. The other assumptions are based on cost projection, an issue we have abundant information about, and all of which quite conservative.

When do I start receiving profit from the investment?

You see profit from the moment you purchase the shares. It is important to distinguish the components of profitability: on one hand, profitability is comprised by the variation in price of a share over time, and on the other hand, by the receipt of dividends. Practically speaking, the material dividends are seen upon the harvest of the plantation in the twentieth year after sowing. Nevertheless, given the fact that the plantation continues developing over time until its harvest, and that the price of the wood increases, the shares also gains value, which allows you to see an increase in the value of your investment. The fundamental hypotheses are related to the volume of wood production, which is estimated at two hundred cubic meters per hectare, and to the estimation of a 5% annual growth of the wood price, which is far below the average of the last 40 years. The other assumptions are based on cost projection, an issue we have abundant information about, and all of which quite conservative.
Which resources maintain the plantations until its first harvest?

Upon the presentation of the public bid for the shares, the Promoters have already contributed the required resources for the appropriate maintenance of the plantations.

Which other assets do the companies have?

The only assets foreseen in each of the companies correspond to the plantation and the investments (the liquid assets mentioned before). There will also be a small investment, corresponding to a 1% share in a sawmill, since all forest companies we promote and operate have a share in that sawmill, which corresponds to a process of long-term integration, in benefit of the shareholders of the wood companies.

Which liabilities may the companies have?

The companies do not foresee any kind of liability.

At the end of the Teak growth circle, who will exploit the wood?

The company itself shall carry out the exploitation, and therefore, the yield shall correspond to the company shareholders as such. We focus on a vertical integration process forward (adding value), in other words, we procure processing wood from its natural state; nevertheless, profitability of 15% of the IRR is calculated without considering that scenario. We are sure that the vertical integration scheme will add a higher profitability for the shareholders.

Once the Teak has been exploited, what happens to the purchased land?

The lot is and will be the company’s full property, and therefore, it belongs to the shareholders in proportion to their share. It is worth taking into account that, since the land is the company’s full property, the successive harvests of the plantation are also property of the company and therefore, of its shareholders.

What do I own and until when?

The investor is owner of the company in proportion to the amount of shares he purchases, and the company is the owner of the plantation and the resources that are necessary for its maintenance. Consequently, the investor (shareholder) is the proportional owner of the plantation (land and trees), as well as of the company’s resources. The investor remains the permanent owner, without time limit, as long as he maintains his shares.

Who appoints the administrators?

In a democratic way, the shareholders appoint the administrators in a Shareholders’ Meeting held for that purpose.

Is there a minimum or maximum investment amount?

There is no minimum investment, but we consider a minimum amount of two hundred shares a recommendable base, in other words, US$2,400 for local investors and 500 shares which means $6,000 for foreign investors, in both cases the values refer to those of the public offering. Nevertheless, the minimum amount of investment is technically US$12, which is the value of one share.

The maximum amount of investment recommended by the Promoters equals 10% of the company. Even though the company is quoted on the Stock Exchange, we cannot prevent a purchase of a higher amount. Nevertheless, the promoters own approximately 25% of the share capital, protecting the company from hostile participation at the detriment of small investors. The shares circulate freely on the market.

Which are the requirements to invest?

The overall requirement for any investor in Ecuador is having an Identity document (identity Card for Ecuadorians and passport for foreigners). In addition, it is the responsibility of the receiver of the investment, either Bank or Stock brokerage, to establish and take responsibility for the fact that the funds come from legal sources. The SIEMBRA Group is particularly concerned about the concept “know your investor” and applies processes to prevent money laundering.
Being physically present in Ecuador is not necessary in order to perform an investment; it is sufficient to fill out a form to open an account and grant a power at a Stock Brokerage (we recommend Albion Casa de Valores) and to give instructions for the purchase of the securities you chose, so the operation can take place.
Undoubtedly, the Broker will ask for a wire transfer and will operate once the funds are at its disposal. For your safety, you can consult the Guayaquil Stock Exchange on the issue of the brokerage Albion Casa de Valores. Your investment account can be opened with a minimum amount of US$2,400. It is worth taking into account that Ecuador applies regulations for the prevention of money laundering, and therefore, the information requested by the Brokerage shall be essential if you want to invest. That only protects your and the other shareholders´ investment.

 
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