Investing in Forestry in Paraguay

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Venezuela

Ecuador

Bolivia

Colombia

Chile

Argentina

Brasil

Peru

Uruguay

Paraguay

2011 2010

Paraguay was the Economy with 2nd largest growth rate in the world

Source: IMF

The Country

Cattle breeding

Swamps

Cattle breeding & Dairy Farming

Combined Transition Area

Modern Agriculture & Forestry

Asuncion (Capital)

Navigable Waterways

Deforestation Process

Location

Forestry in Paraguay – Main Features

• Favorable Climatic Conditions – 23 º C (mean temperature) – 1,500 mm/year (mean precipitation)

• Low costs and high availability of human resources – 60% of workforce with less than 30 years of age – 38% of the population in rural areas – US$ 300 minimum wage – 16% of wage social security

• Excellent Land Conditions to attain high yields – More than 50% of the land is agriculturable/forestable

(FAOSTAT)

• Mean Annual Growth of Forests 26-28 m3 • Final Estimated Value of Reforestation US$ 35 /m3 • Estimated Time until Felling 13 years • Unmet demand

Products of the Timber industry

MORE VALUE ADDED

Forestry Sector

Biomass

Logs

Carbon

Sawn Wood

Chips / Cellulose

Construction

FURNITURE SECTOR

OTHER INPUTS

TIMBER SECTOR

The Company

•Ganadera Vista Alegre (VASA) is an established cattle

farming and forestry company operating in Paraguay and

Argentina since 1940. Shares are owned by brothers Federico

and Margarita Robinson, Federico being the manager of the

whole operation. Federico is very experienced in the cattle

breeding and forestry sectors and is managing the company

since 1985. They received 44,000 hectares as inheritance and

he managed to bring the company to its current level of

assets.

•The company holds 95,000 hectares of agricultural cattle

farming and forestry fields with about 20,000 hectares of which

have potential for reforestation, and more than 3.500 hectares

are already reforested. VASA´s assets are valued at US$ 140

million and liabilities at around US$ 2.5 million. Profits average around US$ 3 million per year.

Potential Risks and Mitigating Actions

• Hail: can affect only in the first 6 months.

• Pests: To date there is no knowledge of pests that affect Eucalyptus Grandis.

• Fire: most important factor to take care and prevent during the whole cycle.

• Social Environment

– VASA has hired well-known NGO “Fundación Moisés Bertoni” to involve the surrounding population.

– The project is providing jobs for surrounding population.

CURRENT INVESTMENT OPTIONS Vista Alegre Trust Fund

Project 1 • Objective: Raise up to US$ 7 million.

• Description of the Project: VASA holds 1,700 hectares of Eucalyptus Grandis clones planted with an average age of 36 months in the San Pedro area of the Oriental Region of Paraguay. At the current price of US$ 35 per m3 and growth rate of 26 m3 per year, the estimated value of the forest at felling is US$ 20.111.000. With an annual price increase of 3%, this expected value jumps to over US$ 27 million.

• The Operation: VASA is transferring the whole 1,700 has (land and forest) to a trust fund that under Paraguayan law must be managed by a banking institution supervised by the Central Bank. The trust fund will issue 10 year maturity zero coupon bonds for a value not superior to 75% of the estimated felling value of the forest that will be sold at a discount using an interest rate to be agreed upon.

• Collateral: Both land and forest act as collateral for the whole operation, the bank being responsible for executing the trust fund contract. Current land value is estimated at US$ 3,000 per ha, and current forest value at US$ 2,730 per ha. Thus, current value of the collateral is estimated at US$ 9,741,000.

DATA FOR PROJECT 1

Expected Investment Up to US$ 7,000,000

Horizon 10 years

Return Rate To be agreed upon

Paper Issued Zero coupon bond sold at discount

Debtor Trust fund. Settlor: Ganadera Vista Alegre S.A.

Collateral

Land and Forest (1,700 has)

US$ 9,741,000 at present

US$ 20,111,000 at felling

Project 2

• Objective: Raise up to US$ 8 million. • Description of the Project: VASA is interested in extending its forest

plantation to 1,000 ha. of its own land and buying a new property of 1,500 ha. (estimated price of US$ 3,000 per ha.) to develop new forests in the same region where the company is established.

• The money raised will be distributed as follows: – Planting and Maintenance Costs US$ 2,440,000 – Land Buying (1,500 hectares) US$ 4,500,000 – TOTAL US$ 6,950,000

• The Operation: All the land will be incorporated into a trust fund that will issue both fix and variable rate securities. – Zero coupon bonds will be issued with a face value equal to 600 ha at felling valued at

today´s timber price and expected to attain US$ 8.505 million in 13 years. These bonds will be sold at a discount value using an interest rate to be agreed upon.

– The trust fund will issue variable rate shares, over the expected value at felling of 750 ha. of newly planted forest, with a maturity of 13 years. Expected internal annual return rate for these shares vary between 11 and 13.7%, depending on the price of timber at felling.

• Collateral: The remaining forest and the land will act as collateral for the whole operation. At felling, the trust fund is dissolved; the investor collects its money and VASA retains the value of the remaining forest and land.

DATA FOR PROJECT 2

Expected Investment Up to US$ 8,000,000

Horizon 13 years

Return Rate Fix Rate: To be agreed upon Variable Rate: Between 11 and 13.7%

Paper Issued Zero coupon bond sold at discount.

Debtor Trust fund. Settlor: Ganadera Vista Alegre S.A.

Collateral

Land and Forest (About 2,500 ha.)

US$ 4,500,000 at present

US$ 28,202,500 at felling

Thank You Very Much!