Sandalwood PROJECT 2001 - Ferrier Hodgson · Sandalwood Project 2001 ARSN 096 165 874 ... Sandalwood Farming Makes Sense 6 ... when the Communist Government banned imports.

ACN 089 582 427

ARSN 096 165 874

Sandalwood

PROJECT 2001

FOREST REWARDS LTD

P R O S P E C T U S

1.

This prospectus was lodged with the Australian Securitiesand Investments Commission (ASIC) on 26 March 2001.That date of lodgement is the date of this prospectus.

No interests will be issued on the basis of this prospectuslater than 13 months after the date of issue of thisprospectus. Neither the ASIC, nor any of its officers, takesany responsibility for the contents of this prospectus.Forest Rewards Ltd (“Responsible Entity”) is the issuer ofthis prospectus and, except for the preparation of thoseparts of the prospectus in which its professional adviserswere also involved, is wholly responsible for its content.

This prospectus relates to the Forest RewardsSandalwood Project 2001 ARSN 096 165 874(“Project”).

Neither the Responsible Entity nor its related companiesguarantee the success of the Project or the repayment ofcapital or income return or make any representation withrespect to income or taxation consequences of anyinvestment in the Project which is made under thisprospectus.

Participation in the Project is considered to bespeculative. Before deciding to subscribe for woodlots,prospective Growers should read the entire prospectusand seek professional advice that an investment of thistype is appropriate for their particular circumstances.

Responsible EntityForest Rewards LtdACN 089 582 427Level 2, Scott House46-50 Kings Park RoadWest Perth WA 6005Tel 08 9324 1155Fax 08 9324 2171Email [email protected]

Directors ofResponsible EntityDr Andrew RadomiljacMr Craig BurtonMr Mark Blanchard

ManagerForest RewardsManagement Pty LtdACN 089 940 376Level 2, Scott House46-50 Kings Park RoadWest Perth WA 6005

Independent ForesterAssociate ProfessorNicholas MalajczukBSc (For) PhDTreetec Consulting Pty Ltd

Taxation AdvisersKPMG152 St George’s TerracePerth WA 6000

SolicitorsGarton Smith & Barrett13 Nairn StreetFremantle WA 6160

CCoorrppoorraattee

DDiirreeccttoorryy

Forest Rewards Ltd

2.

Corporate Directory 1

Investment Highlights 4

Sandalwood Farming Makes Sense 6

An Important Part of Western Australia’s History 12

Project Summary 16

What are we offering? 16

How much will it cost? 16

Taxation benefits 16

What are the estimated returns? 16

How will the Plantation be established? 17

How will the Plantation be maintained? 17

When is the Plantation harvested? 17

How will the trees be harvested? 17

How will the trees be sold? 17

Insurance 18

How do I subscribe? 18

What information will I receive? 18

Financial Forecasts 19

Returns per Woodlot 19

Cashflow Model 20

Sensitivity Analysis 20

Taxation 21

Environmental Considerations 22

Research on Sandalwood 24

Forest Rewards The Group 25

Management Team 27

Corporate Structure 30

Further Details of the Project 32

Independent Forester’s Report 35

WA Sandalwood Market Report 38

Sandalwood Market Report (International) 43

Project Risks and Safeguards 47

Summary of Material Agreements 49

Additional Information 55

Directors’ Consents 56

Application Directions 57

Application Form 58

Glossary of Terms 62

CCoonntteennttss

Forest Rewards Ltd

FOREST R E W A R D S

Forest Rewards Ltd

“Sandalwood is the most valuable

tree in the world. As with gold,

platinum and diamonds, it owes its

value to demand based on ritual,

fashion and scarcity. It is the stuff

of mystery and intrigue, and

fortunes can still be made from it.”

Professor John E. D. Fox

3.

SandalwooD

Forest Rewards Ltd

Become a Sandalwood FarmerInvestors become farmers of sandalwood in Western Australiaby subscribing for woodlots through this prospectus. You willbe able to identify your woodlots and visit them. They willbe established and managed on your behalf by the ForestRewards group.

A Tax Effective InvestmentThe initial investment and the first year fees are 100% taxdeductible in the financial year they are incurred. This isconfirmed by Product Ruling PR 2001/17 issued by theAustralian Taxation Office.

Excellent Projected ReturnsInvesting in sandalwood trees is projected to provide anexcellent return on your money. Increasing Asian anddomestic demand for sandalwood, together with limitedsupply from natural stands worldwide, creates a favourablemarket outlook.

A Well Established IndustrySandalwood has been exported from Western Australia toAsian markets for over 150 years. It is an aromatic woodhighly prized in Asia for its use in joss sticks (incense) and asa source of essential oil. Sandalwood oil is also used as abase in many French perfumes.

The Most Valuable Timber in AustraliaThe market value of sandalwood is much greater than anyother native timber grown in Australia.

Sandalwood is in Short SupplyAlthough sandalwood grows in some Asian countries, mostof those countries utilise all their production domestically.Other Asian countries, such as Taiwan, have no nativesupplies and are dependent on supplies from WesternAustralia. The depletion of native resources of sandalwood inWestern Australia has led to government controls, includingstrict quotas.

Environmental BenefitsThe project will ease pressure on native sandalwood suppliesin Australia and the Tropics, help reduce salinity caused byrising groundwater, and create a sink for greenhouse gases.

Strong Management TeamThe project will be run by a skilled management team. Theplantation will be professionally managed using best industrypractice under a detailed management plan.

A Revitalised Timber IndustryThe Federal Government has published a vision statement -2020 Vision - confirming its commitment to expanding andsupporting the Australian timber industry. Not only willforestry projects provide jobs, they will increase Australia'sexports and reduce our need for imported timber products.

Investment Highlights

4.

A tax deductible outlay of $7,800 generates an estimated return of $43,800

Forest Rewards Ltd

SandalwooD

5.

The many uses of sandalwood and

its religious significance to vast

populations, on one hand, and

the relative scarcity of the wood, on

the other, have combined to make

it an extremely valuable commodity.

Forest Rewards Ltd 6.

The OpportunityA unique opportunity exists toestablish a boutique tree crop industrybased on Australia's most valuablenative tree Santalum spicatum,commonly known as WesternAustralian sandalwood. With increaseddemand for sandalwood in Asia,Government incentives for forestryprojects, and substantial environmentalbenefits, the development ofsandalwood tree crops on farmland inWestern Australia makes perfect sense.

The MarketsSandalwood has been highly prizedand intimately linked to Asian culturesfor thousands of years. Sandalwood isused in a variety of ways:

The wood is powdered for themanufacture of joss sticks, which areburned as incense during Hindu andBuddhist religious ceremonies.

Sandalwood oil extracted from thewood and root is used for highquality perfumes, soaps and creamsbecause of its unique fragrance andfixative properties.

The extremely dense and close-grained fibre of the wood providesgreat appeal for the creation ofintricate woodcarvings and furniture.

Sandalwood farming

makes sense

The most significant use of sandalwood is for the production of joss sticks(incense) which are burned during Hindu and Buddhist religious ceremonies.

A few Asian countries have their own native supplies of sandalwood. Thesesupplies are generally used domestically and are not traded internationally. In fact, India and Indonesia, which were traditionally major suppliers to theinternational sandalwood market, now have strict government controls oversandalwood harvesting and export. The controls are aimed at preventingoverexploitation and to ensure domestic demand is met.

The many Asian countries without native stands of sandalwood are whollydependent on international supply. Taiwan is most notable and is the largestimporter of sandalwood from Western Australia.

Another significant market for sandalwood is China. China was the largestimporter of sandalwood from Western Australia until the Cultural Revolution in1966, when the Communist Government banned imports. In 1999, Chinaannounced it would re-open its domestic market to agricultural and forestryproducts to promote free trade. Shipments of Western Australian sandalwood to China have already commenced. The potential size of the Chinese market issubstantial.

7.

The Asian Market

Forest Rewards Ltd

Forest Rewards Ltd

Markets for sandalwood aredeveloping within Australia and inother Western countries. Sandalwoodoil has long been used as a base formany French perfumes. It is also indemand in the Western world for usein aromatherapy and fragrant bodycare products.

In 1997 Mt Romance Australia Ltdopened a state of the art essential oilsfactory near Albany, Western Australia.The factory has developed world classtechnology and aims to process up to1000 tonnes a year of sandalwood. Ashowroom has also been opened inMelbourne. After 2 years of researchand development, Mt Romancereleased a range of sandalwood oilbased body care and therapeuticproducts under the "Santalia" label.

A 10 year contract with CALM (therelevant Western Australian State body)for up to 1000 tonnes of sandalwood ayear guarantees Mt Romance ongoingsupply. If Mt Romance were to utiliseits full CALM quota the nativesandalwood available for export wouldbe halved.

The

Western

Market

Sandalwood conjures up many

images. For some, it excites

memories of Asian holidays,

exotic fragrances and

carvings.

8.

Forest Rewards Ltd

The Demand OutlookThe outlook for demand forsandalwood appears to be very strong:

The use of sandalwood in joss sticks isintimately tied to Asian cultures and hasbeen for centuries. It is a strong, stablemarket.

The major Asian suppliers, India andIndonesia, have restricted sandalwoodlog exports because of dwindling stocks.

China recently changed its policyenabling recommencement ofimportation of sandalwood.

The use of sandalwood oil in Westerncountries is likely to grow.

The Supply OutlookWestern Australia has now become themain source of internationally tradedsandalwood. Production from theremaining native stands in WesternAustralia is subject to a strictgovernment quota of 2000 tonnes per year.

Until recently the bulk of the State'ssandalwood exports were sold toTaiwan. In the mid 1990's CALMappointed a private produce marketinggroup to market the State'ssandalwood. As a result, sales to Chinaand India have now commenced andother international markets are beingpursued.

These new markets together with theMt Romance quota are squeezing thesupply of sandalwood to Taiwan. Withfurther growth expected in the newmarkets, the limited native sandalwoodresource needs to be supplemented byplantation grown sandalwood. Notsurprisingly, the State government isnow actively encouraging sandalwoodplanting.

Growers of sandalwood will have aunique opportunity to capitalise on aglobal market for sandalwood in whichalternative sources of supply are verylimited.

9.

Increasing Demand

Over a period of 60

years from 1870 to

1930, when supply

constraints were

not as severe, exports

of sandalwood from

Western Australia

averaged more

than 6000 tonnes

per annum.


Why haven't

Sandalwood

plantations

been grown

before?

Although there are many small scaleplantings of sandalwood by Wheatbeltfarmers, Forest Rewards undertook thefirst commercial scale plantation lastyear. There are a number of reasons forthe lack of past development:

In the 1920's, sandalwood exports wereso lucrative that over-harvesting led toconcerns about the sustainability of theindustry. To protect this valuable resourcethe Western Australian governmentintroduced legislation that imposed theneed for a licence on anyone who wishedto pull sandalwood, effectively vestingsandalwood in the State no matterwhere grown. It was only in 1996 thatthis legislation was amended to exemptsandalwood grown on privateplantations from these requirements.

The past few years have witnessed adramatic increase in the level of forestryinvestment and plantation development,in particular for bluegum plantations.This has generated considerableawareness of the benefits of sound andwell managed plantation projects.

Over the last decade a greater emphasishas been placed on sandalwoodresearch. This research has assisted inunderstanding the silviculturalrequirements for sandalwood. Inparticular, research conducted by theWestern Australian Department ofConservation and Land Management,Curtin University, Murdoch Universityand the University of Western Australiahas been of great value.

Sandalwood farming makes

commercial and environmental

sense so it is surprising that

sandalwood plantations have

not been established in the past.

Forest Rewards Ltd11.

Sandalwood has played a vital role

in Western Australia’s history since

it was first exported in 1845.

Sandalwoodtrade route

trade route


There are 16 species of sandalwood, ofwhich four are native to WesternAustralia. Of these four, the one withthe greatest commercial significance isSantalum spicatum, Western Australiansandalwood. The fragrant wood ofthis tree is the most valuable of alltimbers in Australia.

Sale of Western Australian sandalwoodwas one of the State’s first and mostimportant export industries.

In 1843 a report reached the youngWA colony of the high prices beingobtained for sandalwood in Singapore.Up until that time the settlers, beingignorant of its value, had been usingsandalwood for firewood and fencingmaterial, or else simply burning itwhen clearing their land. This wasoccurring at a time when the colonywas desperate for an increase inexports to help balance its tradedeficit.

Sandalwood was tested by an expert inEngland who pronounced it equal tothe East Indian sandalwood andsettlers were advised that it should bepossible to sell large quantities of it at“enormous prices”.

The struggling colony hastened toinitiate the export of sandalwood tothe Far East. Settlers were instructednot to burn or use sandalwood for anyother purpose, but when clearing tostack it aside and have it available forexport when required.

Within a few years, sandalwood hadbecome the colony’s primary exportindustry. All those who were able todo so became involved in sandalwoodgathering. In 1848 sandalwood earned40 percent of the colony’s totalexports. An export tax on sandalwoodprovided the colony with funds forpublic works, helping to open up roadsand other transport routes.

There was a boom period forsandalwood from the 1860’s to the1920’s. By 1920, 330,000 tonnes ofsandalwood worth over 3 millionpounds had been exported (worthover $2 billion at today’s prices). In1924, exports peaked at 14,000tonnes.

By the turn of the century it becameclear that the level of harvesting wasunsustainable. The first seriousattempt to control the industry wasintroduced in 1923 by way ofregulations imposing quotas, increasedroyalties, and export licences.

An Important Part of

Western Australia’s History

Courtesy Battye Library 10009P

Forest Rewards Ltd

Sandalwood Industry TodayGovernment regulation of nativesources of sandalwood continues todaythrough CALM. CALM harvests, carts,processes and exports sandalwoodunder contracts awarded by tender. Italso controls the amount andminimum size of sandalwood trees thatcan be removed from natural stands.There is a strict quota on how muchsandalwood can be harvested eachyear. That quota is about 2,000tonnes.

Private plantations are not subject tothese controls. The amendedSandalwood Act 1929 exemptssandalwood growing on privateplantations from governmentregulation.

At present all sandalwood exportscome from natural stands withinWestern Australia and the industry isworth about $14 million a year inexports. The state government isactively encouraging privateplantations to ease pressure on nativeresources and assist in combatingerosion and salinity problems in theWheatbelt.

Natural distribution ofSantalum spicatumSandalwood naturally occurs over alarge area of Western Australia. Itsoriginal distribution was from thewestern edge of the Wheatbelt intothe vast Western Australian deserts. Inthe high rainfall zone of the Wheatbelt(400 mm or more per year)sandalwood was a forest tree, growingwith native acacia and eucalypt trees.It has virtually disappeared from theWheatbelt due to over cutting andland clearing. Sandalwood is nowmostly confined to pastoral lease landwhere annual rainfall is less than 250mm per year.

13.




LEGEND

Original occurrence

Present occurrence

Sandalwood is now mostly found inthe pastoral zone of WA. It hasvirtually disappeared from theWheatbelt.

Distribution of

Sandalwood

Carnarvon

barri

eraldton

AN OCEAN

SOUTHERN OCEAN

Northampton

Morawa

MeekatharaWiluna

Warburton

Leonora

Kalgoorlie

Norseman

Esperance

Albany

Perth

Southern CrossToodyay

Northam

Narrogin

Busselton

23.15. Forest Rewards Ltd

Forest Rewards Ltd

What are we offering?We are offering you the opportunity toparticipate in the Forest RewardsSandalwood Project 2001. As a Groweryou will establish and maintain yourown stand of sandalwood by:

leasing identifiable allotments of land ofone hectare each (woodlots);

engaging us to establish and manage asandalwood plantation on yourwoodlots; and

engaging us to arrange harvest and thensale of your wood for the best price wecan obtain.

The terms of these arrangements arecontained in the Constitution,Management Agreement and Leasesummarised in the Summary ofMaterial Agreements section of thisprospectus.

How much will it cost?An establishment fee of $7,200 ispayable on application. This covers thecost of establishing the host trees,purchasing the planting stock, andadministration.

A fee of $600 is payable to cover thecosts incurred in the first financial yearfollowing the initial investment. Thisfee is payable on 1 September of thenext financial year.

An amount equal to 12% of your shareof the net sale proceeds of eachharvest is payable to cover rent andongoing plantation maintenance,management and administration.

10% GST is payable by you on each ofthe above fees.

Taxation benefitsGrowers can obtain immediatetaxation benefits. Under currentAustralian taxation laws, all the fees are100% tax deductible in the financialyear they are incurred. This isconfirmed by a Product Ruling PR 2001/17 issued by the AustralianTaxation Office.

What are the estimatedreturns?For a tax deductible outlay of $7,800the project generates estimated netsales proceeds of $43,800 perwoodlot. The after tax internal rate ofreturn is 11.34%. Full details of theestimated returns and underlyingassumptions are set out in the FinancialForecasts section of this prospectus.

16.

Project Summary

Forest Rewards Ltd

How will the Plantation beestablished?Sandalwood requires a host tree tohelp it grow. The woodlots areestablished by planting Acacia hosttrees as seedlings in rows. This speciesis native to the plantation area,nitrogen-fixing, hardy, and relativelyeasy to grow. It is the ideal hostspecies.

The following year sandalwood seedswill be direct sown into the groundnear the host trees. The next year asurvival count will be conducted andany necessary resowing will beundertaken. The overall number ofsurviving sandalwood seedlings will bethinned to about 550 seedlingsper hectare.

How will the Plantation bemaintained?The plantation will be monitored andmaintained by the Manager. Thisincludes weed and pest control,nutrient analysis, fertilising, fire control,and annual reporting. The ResponsibleEntity will retain $1000 per woodlotout of the Managers funds to secureperformance of these maintenanceobligations.

When is the Plantationharvested?The sandalwood trees will beprogressively harvested between ages10 and 20. The precise timing, numberof trees per harvest, and number ofharvests will be determined by theManager at the relevant time with theaim of achieving the best overall resultfor Growers. An indicative harvestschedule is set out in the FinancialForecasts section of this prospectus.

How will the trees beharvested?The whole of the sandalwood tree,including roots, branches and butt, arevaluable. The trees will be harvested bypulling them from the ground usingexcavation equipment. The trees willthen be cut into smaller sections,debarked and transported to Perth for sale.

How will the trees be sold?Following each harvest, the Managerwill sell the timber for the bestachievable price. The Manager willdetermine the best method of sale atthe relevant time, the most likely beingsale by private tender to the (mostly)Asian buyers. The proceeds of sale ofeach woodlot will be pooled and youwill receive your proportionate shareafter deducting the applicableexpenses.

17.


InsuranceAt your request we will arrangeinsurance for your woodlots. The firstyear's insurance is included in the firstyear fee. Thereafter, the cost ofinsurance will be at your expense andis tax deductible.

How do I subscribe?To become a sandalwood Grower, youshould complete and deliver to theCustodian the attached Applicationform and a cheque for the subscriptionmonies.

You can elect to apply for year 2001woodlots or year 2002 woodlots. Theyear 2001 woodlots will be establishedby 30 June 2001 and the year 2002woodlots by 30 June 2002.

Applications for the year 2001woodlots must be received on orbefore 31 May 2001. We reserve theright to accept late applications butonly if we can schedule completion ofthe host tree establishment work by 30June 2001.

We reserve the right to accept or rejectapplications in whole or in part at ourdiscretion.

What information will Ireceive?You will receive:

A document confirming acceptance ofyour application.

A site plan to enable you to identify yourwoodlot(s).

An annual report from the Manager.

A forester's report every 3 yearsdescribing the progress of the project.

The right to visit your woodlot(s) and theproject plantation.

All information relating to the project youreasonably request at any time.

In 1948 four tons of

sandalwood was used

on Mahatma Ghandi’s

funeral pyre.

Forest Rewards Ltd

Specific Notes (1) At sandalwood age 10, 250 trees are pulled yielding

71/2 kg of saleable wood per tree, fetching a net priceof $4.00 per kg indexed.

(2) At sandalwood age 14, 100 trees are pulled yielding13 kg of saleable wood per tree, fetching a net priceof $5.00 per kg indexed.

(3) At sandalwood age 18, 150 trees are pulled yielding20 kg of saleable wood per tree, fetching a net priceof $6.00 per kg indexed.

(4) The harvest costs (including transport and storage) are$3.00 per tree indexed.

(5) The Manager's maintenance fee is 8% of the net salesproceeds of each harvest.

(6) Rent is 4% of the net sales proceeds of each harvest.

(7) The establishment fee is $7,200 per woodlot.

(8) The management fee in the first year is $600 perwoodlot.

(9) Tax is calculated at the rate of 48.5%.

(10) This is the internal rate of return of the estimated aftertax cash flows of the project i.e. allowing for taxdeductions on outflows and the tax paid on income(assuming a tax rate of 48.5%).

General Notes(11) Assumes 550 sandalwood trees are established on

average per woodlot. All early mortality is replaced.Other mortality is 50 trees, leaving 500 commercialtrees per woodlot on average.

(12) Indexation (inflation) is assumed to be 3% per annum.

(13) No allowance is made for insurance costs or GST(which are payable by the Grower).

(14) For simplicity, tax payments/refunds are assumed tobe paid/received in the same year as incurred.

(15) The sandalwood trees will be harvested on aprogressive (thinning) basis between ages 10 and 20.The precise timing, number of trees per harvest, andnumber of harvests will be determined by theManager at the relevant time with the aim ofachieving the best overall result for Growers. Theharvest schedule used in the forecasts is indicativeonly.

(16) The price currently being obtained by the State fornative sandalwood is in the range of $6 to $10 per kgdepending on the size and quality of the wood. Theplantation wood produced by this project will beyounger than the native wood harvested by the Stateand accordingly a price discount is applied.

(17) See the Project Risks and Safeguards section of thisprospectus.

The establishment fee of $7,200 and the first year fee of$600 are both 100% tax deductible in the financial year inwhich they are paid.

Financial Forecasts

19.

Sandal-woodAge

101418

TreesHarvested

250100150

Yieldkg perTree

71/2

1320

Total Yield

kg

1,8751,3003,000

Price$kg

4.005.006.00

Notes

(1)(2)(3)

ProceedsAge 10

$

10,382

ProceedsAge 14

$

10,127

ProceedsAge 18

$

31,563

TotalProceeds

10,382

1,038747374

8,223

10,127

468773386

8,500

31,563

7892,4621,231

27,081

52,072

2,2953,9821,991

43,804

Gross Sales ProceedsLess:Harvest costs (4)Maintenance Fee (8%) (5)Rent (4%) (6)

Net Sales ProceedsLess:Establishment Fee (7)First Year Fee (8)Net Profit before tax

Less Tax (9)Net profit after tax

Rates of Return (10)Annual compound return (IRR) after tax

7,200600

36,004

17,46218,542

11.34%

Returns per Woodlot

20.

Cashflow Model

Sensitivity Analysis

Year ending 30th June 2001 2002 2012 2016 2020 TOTAL

Sandalwood Age 10 years 14 years 18 years

Net Sales Proceeds 8,223 8,500 27,081 43,804

Establishment fee (7,200) 7,200

First Year fee (600) 600

Cashflow Before Tax (7,200) (600) 8,223 8,500 27,081 36,004

Tax (payable) refund 3,492 291 (3,988) (4,122) (13,134) (17,462)

Cashflow After Tax (3,708) (309) 4,235 4,378 13,947 18,542

Cumulative Cashflow (3,708) (4,017) 218 4,595 18,542

After Tax

Change in variable IRR Net SalesProceeds

Sandalwood price or yield 40% increase 13.94% $62,13320% increase 12.74% $52,968Projected 11.34% $43,80420% decrease 9.65% $34,63940% decrease 7.51% $25,475

Harvest costs50% increase 11.13% $42,794Projected 11.34% $43,80450% decrease 11.55% $44,813

An indication of how changes in sandalwood yield,prices and harvest costs will affect returns to Growersis set out on the left. This sensitivity analysis showsthat due to the high value of the wood relative to theharvest costs the returns are robust, even withsubstantial changes in price or yield. The sensitivityanalysis is calculated with no borrowings.

Forest Rewards Ltd

Forest Rewards Ltd

The Australian Taxation Office has issued Product Ruling PR 2001/17. This Ruling confirms the deductibility of theestablishment and first year fees. To view the Product Rulinggo to the Australian Taxation Office website at"law.ato.gov.au" and enter"PR 2001/17" in the search box.

The Product Ruling is binding provided the project is carriedout in accordance with details provided to the AustralianTaxation Office by Forest Rewards Ltd and described in theRuling.

Goods and Services TaxThe Federal Government has introduced a GST which appliesto the supply of goods and services (unless otherwiseexempt). The establishment fee, first year fee, rent,maintenance fee and performance fee for all woodlots willattract GST.

If you are registered for GST purposes then any GST paid inrelation to the fees you pay will represent a GST input taxcredit. If you are not registered for GST purposes any GSTpaid in relation to the fees you pay will be a cost and will bedeductible.

Unless otherwise stated, dollar amounts referred tothroughout this Prospectus do not include GST and theinternal rate of return calculations are calculated before theimpact of the GST.

Independent Taxation AdviceIntending investors should seek advice from theirprofessional tax advisers to confirm their own position inrespect of taxation in general and the impact of GST.

21.

Taxation


The Plantation will have substantialenvironmental benefits

Reduction of pressure on native standsBefore the commencement of sandalwood harvesting inWestern Australia, sandalwood trees were naturally abundantthroughout the Wheatbelt. Today, this tree has virtuallydisappeared from the Wheatbelt due to clearing foragriculture and past over-harvesting.

Sandalwood now mainly occurs in the arid interior. Thesestands are subject to low growth rates due to low rainfalland poor regeneration due to grazing by domestic and feralanimals.

The development of a plantation resource in the Wheatbeltwill have the potential to reduce the pressure on nativestands and re-establish sandalwood in its natural habitat. Itwill also help address the overwhelming pressures onsandalwood resources elsewhere in the world where somesandalwood species have been harvested to the edge ofextinction.

Rectification of land degradationLarge amounts of salt are stored in the groundwater and soilbeneath farmland in the Wheatbelt of Western Australia. Thesalt originated from the ocean and was carried in rainfallover millions of years. Before large scale clearing foragriculture this large store of salt was kept more or less inbalance by the consumption of water by native vegetation.

When the land was cleared and replaced with shallow rootedannual pastures and crops, which have a much lower waterdemand, the groundwater rose and mobilised the salts. Inmany areas the groundwater has risen to a point where itnow intersects the surface resulting in salinisation of soil andsurface water. Research has shown that this process can bestopped, and over time reversed, by tree planting.

Greenhouse gases and carbon creditsTree crops contribute to the absorption of carbon dioxide inthe atmosphere. As a result, they help reduce the netemission of greenhouse gases. Australia, along with otherindustrialised nations, has pledged to reduce greenhouse gasemissions under the Kyoto Protocol to the United NationsFramework Convention on Climate Change held in late 1997.

It was agreed at this conference that countries with highcarbon emissions could "balance their books" by takingcarbon out of the atmosphere via large-scale tree planting. Asystem is being developed so that when countries burn fossilfuel they can offset this incursion with a "carbon credit" byplanting trees. Carbon polluters would pay tree planters toaccommodate their carbon emission problems via trees thathave the capacity to store carbon.

A number of broking houses have stated a desire to establishtrading in carbon credits which would make it possible torealise the benefit of accruing carbon credits. Given the earlystage of the Kyoto initiatives, carbon credits are not factoredinto the financial model for this project. Any carbon creditswill accrue to the benefit of the Grower (80%) and theManager (20%). The Manager will consult Growersregarding opportunities to take advantage of carbon creditsas and when such opportunities arise.

Environmental

Considerations

23. Forest Rewards Ltd


A valuable body of research onsandalwood has been developed inWestern Australia in recent years,contributing greatly to knowledge onestablishment and management ofsandalwood trees. The research comesfrom government and universitysources, including the following.

In the late 1980's, CALM established asandalwood trial planting nearNorthampton to investigate thegermination and establishment of eightdifferent provenances of sandalwood.

In 1991, CALM established a 2 hectaresandalwood planting near Kwobrup. Thisinvestigated the effect of different hostspecies on sandalwood establishment.

Curtin University has conductedextensive research on sandalwood. In1993 Curtin University published a studyon the germination rates of sandalwoodseed collected from eight provenances.Curtin continues significant research onsandalwood plantation establishment.Recent research has focused on the effectof sowing depth on the establishment ofsandalwood.

Murdoch University and the University ofWestern Australia have conductedvaluable research on the parasitic natureof sandalwood and the influence ofdifferent host species on sandalwoodgrowth.

A number of post-graduate degrees onsandalwood have been obtained from allthree universities. Forest Rewards'director Dr Andrew Radomiljac completed a doctoral thesis on Indiansandalwood.

Findings from sandalwood researchshow that acacia trees are the besthost trees for sandalwood. Researchhas also found that direct sowingsandalwood seeds near establishedacacia trees is an effective method ofestablishing sandalwood in plantationson farmland.

Forest Rewards has conducted its ownresearch on direct sowing sandalwoodseed. Seed was collected from 10different provenances in WesternAustralia and direct sown beneathacacia hosts, near New Norcia. Thisresearch found an average sandalwoodgermination and survival rate of about80%.

Forest Rewards has structured thisproject on the basis of both thepublished research and its in-houseresearch and specialist sandalwoodknowledge.

Research

on Sandalwood

Forest Rewards Ltd

Forest Rewards

The Group

25.

The Forest Rewards Group was founded with the vision ofdeveloping new, niche forestry projects using first classtechnical expertise. There is a need for new investmentalternatives in the plantation forestry industry, particularlywith the possibility of over-investment occuring in leadingproducts.

With the advent of ATO product rulings, the tax effectiveindustry is here to stay and represents a legitimate andappropriate vehicle to generate much needed investment incommercial scale forestry and agricultural projects inAustralia. Forest Rewards aims to meet the need within thisindustry for investment alternatives backed by qualitymanagement.

Forest Rewards established the first commercial scaleplantation of Santalum spicatum last year with itsSandalwood Project 2000, which closed fully subscribed.This year we will be offering the Sandalwood Project 2001and two other forestry projects that have been underresearch and development for almost two years.

Although pioneering new projects inevitably involvesadditional risks, we seek to minimise the risks by use of bestexpertise and practice, combined with a flexible andprogressive approach. The potential financial rewards inselect niche projects are substantially higher than intraditional projects where first choice land is no longeravailable and over-production may well be occurring.

The Forest Rewards Group holds and retains important core values:

• First class forestry expertise and management practices,which will not be compromised

• Ongoing research and development of quality,alternative forestry and agricultural products

• Reasonably priced tax effective investment products, i.e.a fair deal between management and growers

• A dynamic and innovative approach to all aspects ofits business

• Awareness of project risks and processes to minimisesuch risks

This section contains extracts of the Group’s auditedaccounts in respect of the period to 30 June 2000. A full setof the Group’s financial statements including notes to theaccounts is available on request.

Forest Rewards Corporation Ltd Audited ConsolidatedBalance Sheet as at 30 June 2000

$

Current assetsCash 2,951,932Receivables 8,771Other 33,731

Total current assets 2,994,434

Non current assetsProperty, plant and equipment 28,420Other 25,979

Total non current assets 54,399

Total assets 3,048,833

Current LiabilitiesAccounts payable 713,925Borrowings 196,999Provisions 746,946

Total current liabilities 1,657,870Forest Rewards Ltd 26.


Directors

The directors of Forest Rewards Ltd(and each other company in the ForestRewards group) as at the date of thisprospectus are:

Dr Andrew RadomiljacExecutive Director - ForestryDr Radomiljac is a professionallyqualified forester with a degree inforestry from Australian NationalUniversity and a doctorate inplantation sandalwood from MurdochUniversity.

From 1992 to 1999 he worked for theWestern Australian Department ofConservation and Land Management,primarily as a research scientist andproject leader based in Kununurraworking on CALM's plantation forestryproject. More recently, Dr Radomiljacwas based in Perth heading a part ofCALM's maritime pine share farmingproject.

He has published 22 internationaljournal articles, conference papers,books and popular articles onplantation development andsandalwood farm forestry.

Mr Craig Burton Executive Director -CorporateMr Burton has a law degree and is aFellow of the Australian Institute ofCompany Directors. He is a formerChairman of a listed forestry group.

Mr Burton has extensive experience inpublic company administration and inproject development, financing andstructuring. He co-founded VeronaCapital, a venture capital business thatprovides finance and corporateassistance for start up businesses andventures seeking a public listing.

Mr Mark Blanchard Non-Executive DirectorMr Blanchard has degrees incommerce and economics and is anAssociate of the Securities Institute ofAustralia. He has worked in merchantand corporate banking in Australia,and in London for the UK's largestcredit insurer. From 1993 to 1997 heassisted in the establishment of ahighly successful funds management group. He is a co-founder and principalof Verona Capital.

Field Manager

The directors of Forest Rewards Ltd aresupported by Mr Peter Grime.

Mr Grime was appointed ForestRewards’ Field Manager in May 2000,having formerly worked for CALM. Heis responsible for conducting andsupervising all plantation planting,maintenance, and site selectionactivities.

Over a period of 24 years with CALM,Mr Grime's experience includes fieldmanager on the maritime pineplanting project in the Wheatbelt,coordinator of the Peel/Harvey Estuarytree planting project, area coordinatorof the first commercial bluegumplantations for CALM Estate, andmanager of CALM's nursery operationsat Hamel.

Management Team


Compliance Committee

Forest Rewards Ltd has established aCompliance Committee as required bythe Corporations Law. The Committeeconsists of two independent membersand one representative of ForestRewards Ltd. The members are:

Mr Craig ReadheadExternal MemberMr Readhead is a barrister and solicitorwith extensive experience in corporateand resources law.

Ms Anne Thoume External MemberMs Thoume is a business consultantwith a strong background in fundsmanagement. She has experience as amember of a number of compliancecommittees.

Mr Mark BlanchardMr Blanchard is the representative ofForest Rewards Ltd.

The Compliance Committee willmonitor Forest Rewards Ltd'scompliance with the Compliance Planand report any compliance failures.


100% owned 100% owned 100% owned

Constitution Lease Management Agreement

Grower

Forest Rewards Ltd(Responsible Entity)

Forest Lands Pty Ltd(Land Owner)

Forest RewardsManagement Pty Ltd

(Manager)

Forest Rewards Corporation Ltd(Parent Company)

SandalwooD


Corporate Structure

Forest Rewards CorporationLimited - Parent Company Forest Rewards Corporation Limited isthe ultimate holding company of thethree companies involved in theProject.

Forest Rewards Ltd - TheResponsible EntityUnder the Corporations Law, theproject requires a "responsible entity"to protect the interests of the Growers.Forest Rewards Ltd is the responsibleentity and has obtained a dealerslicence to operate the project.

The rights and responsibilities of ForestRewards Ltd are set out in theConstitution (see the Summary ofMaterial Agreements section of thisprospectus). Amongst other things, itmust receive and disburse money onbehalf of the Growers (through theCustodian) and hold the project assetson behalf of the Growers.

To ensure efficient and timelymanagement and compliance with itsstatutory duties, Forest Rewards Ltdhas formulated a Compliance Plan tobe overseen by a separate ComplianceCommittee. Details of this Committeeand Plan are set out below.

Forest RewardsManagement Pty Ltd - The Manager Growers will contract Forest RewardsManagement Pty Ltd to establish,maintain and manage the plantation,and arrange harvest and then sale ofthe timber. Forest RewardsManagement Pty Ltd will use the

services of a skilled management teamand will undertake its duties inaccordance with the Management Planfor the project and the Code ofPractice for timber plantations inWestern Australia.

Forest Lands Pty Ltd - The LessorForest Lands Pty Ltd has entered intoan agreement to purchase the land onwhich the plantation will beestablished. It will lease woodlots toGrowers under the terms of the Lease.

Compliance PlanForest Rewards Ltd has prepared aCompliance Plan to ensure that itmeets its obligations as a ResponsibleEntity and that the rights of Growersare protected. The plan identifies thevarious obligations under theCorporations Law, the Constitution,the Lease and the ManagementAgreement that affect the ResponsibleEntity, identifies the risks of non-compliance and establishes measuresdesigned to address these risks.In particular, the Compliance Plan:

includes measures to ensure theResponsible Entity and its officers andemployees comply with their respectiveobligations under the Corporations Law;

appoints the Compliance Officer,establishes the Compliance Committee,and regulates the Committee's dutiesand functions, its members and itsmeetings and activities;

ensures the Responsible Entity keepsadequate records and complies with thefinancial reporting requirements of theCorporations Law, and appoints theauditors of the Project;

addresses related party issues and setsout the Complaints Handling Procedures;

identifies the Project property, ensures itis held separately from the property ofthe Responsible Entity and any otherscheme and appoints the Custodian; and

establishes procedures in relation to thisProspectus, moneys received under theConstitution, the conduct of businessissues, external service providers, theappointment of agents to marketwoodlots, insurance and the relationshipbetween the Manager and the Lessor.

Management PlanThe project will be conducted inaccordance with a detailedManagement Plan. The ManagementPlan outlines the procedures to befollowed to ensure that the project iscarried out in accordance with theWestern Australian Code of Practice forTimber Plantations and in a mannerdesigned to both mitigate the projectrisks and maximise the growth andyield of the plantation. It deals withthe following aspects:

Design of PlantationLand PreparationWeed ControlPlantingFertilisingPest ControlFire ControlPruningMonitoringReporting


SandalwooD

Forest Rewards Ltd

The Plantation Site

The plantation site or sites will becarefully chosen to meet the followingcriteria:

RainfallSandalwood grows in areas thatreceive between 200 to 600millimetres annual rainfall. The rainfallat the plantation site will average morethan 400 millimetres a year.

SoilThe suitability of the site will bedetermined by evaluation of soil depth,fertility and moisture retentioncharacteristics. It will be in an area inwhich sandalwood naturally occurs.

InfrastructureThe sites will be within 200km of theprocessing centres in Perth and theport of Fremantle.

Farmland The plantation sites will be establishedon previously cleared and pasturedfarmland in the Wheatbelt whichensures high fertility and minimises thedevelopment of competing woodyweeds.

Independent ReviewEach selected site will be inspected bythe Independent Forester and mustmeet his approval.

Planting and SeedingSandalwood trees require a host treeto survive and grow. The sandalwoodtree's roots penetrate the roots of thehost to draw water and nutrients.Wattles (Acacia) are considered thebest hosts due to their nitrogen fixingabilities. This species is native to theplantation area, hardy, and relativelyeasy to grow.

These host trees will be planted on thesite in June of the financial year theinvestment is made. In the followingyear, sandalwood seeds will be directsown into the ground near theestablished host trees. The seeds forplanting have been selected from treesgrowing in remnant natural stands inthe Wheatbelt or adjacent pastoralareas.

In the year following seed sowing, asurvival count will be conducted andany necessary resowing will be done.The overall number of surviving

sandalwood seedlings will be thinnedto about 550 seedlings per woodlot.

Maintenance

The plantation will be maintained inaccordance with the Management Planto ensure it performs to its potential.Maintenance will include weed andpest control, pruning, culling, nutrientanalysis, fertilising, fire control,inventory measurement and annualreporting.

The Responsible Entity will retain$1000 per woodlot of theestablishment fee to secureperformance of the Manager's ongoingmaintenance obligations. This will bereleased in annual instalments over 11years provided the IndependentForester is satisfied that the Manager isperforming its maintenanceobligations. If for any reasonmaintenance is not undertaken the Responsible Entity may use theretained monies to pay anothercontractor to undertake the work.

32.

Further Details of

the Project


Harvest and Sale

HarvestingThe sandalwood trees will be harvestedon a progressive (thinning) basisbetween ages 10 and 20. The precisetiming, number of trees per harvest,and number of harvests will bedetermined by the Manager at therelevant time with the aim of achievingthe best overall result for Growers. Thelogs, roots and butts of the treecontain saleable wood and are easilyharvested by pulling the whole treefrom the ground.

MarketingThe wood from the harvests will bedifferentiated depending on qualityand size and sold for the highestpossible price. Presently, sandalwoodprocessed prior to export is sold asuncleaned logs, cleaned logs, buttsand roots, dead wood pieces, chips (2 grades), powder and shavings.

At the time of sale, the Manager willdetermine the most profitable andappropriate markets for the productand whether to contract any valueadding prior to sale. The proceeds ofeach woodlot will be pooled and Growers will be paid theirproportionate share of proceeds from the relevant plantation after deductionof applicable costs.

Harvest and Sale CostsEach Grower is responsible for theirshare of harvest, transport, storage,processing (if any) and sale costs.These costs will be deducted from thesale proceeds. A maintenance fee of8% of net harvest proceeds and rent of4% of net harvest proceeds will also bededucted from the sale proceeds.

Performance IncentiveAs a performance incentive, theManager is entitled to 15% of theamount by which the net salesproceeds of the harvests exceed theforecasts in this prospectus.

Election to Harvest and Market A Grower may notify the Manager by30 June 2003 that the Grower wishesto make his or her own arrangementsfor harvesting and marketing. Where aGrower makes this election the Manager will mark out the Grower'swoodlots and advise the Grower when the trees may be harvested. TheGrower will remain liable to pay themaintenance fees and the rent.

Reports to and visits

by Growers

The Manager will prepare and deliverto Growers, by mail or email, annualreports comprising a summary ofprogress, growth and other mattersspecific to the plantation.

Prior to each harvest the Manager willsend to each Grower a report detailingthe proposed timing for harvest andexpected yield. Growers will beentitled to visit and view theirwoodlots and the plantation at anytime, subject to giving the Managerreasonable notice.

Insurance

At a Grower's request, Forest RewardsLtd will use best endeavours to arrangeinsurance against destruction ordamage to the Grower's tree crop. Thecost of the insurance will be borne bythe Grower, other than insurance forthe first year which is covered by thefirst year fee. The cost of insurance andthe terms of the cover available will bedetermined by the state of theinsurance market at the time the coveris sought.

Forest Rewards Ltd

Land

The Manager is in the process ofidentifying land suitable for this projectthat meets the selection criteriadescribed in this prospectus and theapproval of the Independent Forester.In the event that the number ofapplicants who subscribe to this offerexceeds the maximum number thatcan be accommodated on the initialplantation site, and the Manager hassecured further land, the ResponsibleEntity may accept oversubscriptions tothe extent of the further land available.No additional allotments will be madeuntil the acquisition or lease of theadditional land is secured.

Applications and

Allotments

All Applications are sent to theCustodian.

Forest Rewards Ltd has the discretionas to whether to accept or rejectApplications under this prospectus inwhole or in part. When Forest RewardsLtd accepts an Application and allotsone or more woodlots, the Growerautomatically becomes bound to theConstitution and Rules. TheResponsible Entity has entered intoStanding Offers with the Manager andthe Lessor so that upon the allotment,the person who is allotted woodlotsalso automatically becomes a party tothe Lease and ManagementAgreement as a Grower in respect ofthe specific woodlots allotted.

As agent for the Bare Trustee, theCustodian holds the subscriptionmoney for woodlots on trust pendingthe allotment of woodlots. After theallotment of woodlots, the subscriptionmoney may be released in payment ofproject fees in accordance with theLease, Management Agreement andConstitution. Forest Rewards Ltd also has the power to direct theCustodian to invest the subscriptionmoney in any authorised investment.

34.


This report has been prepared forinclusion in a second prospectus to beissued by Forest Rewards Limitedwhich offers investors the opportunityto subscribe to the Forest RewardsSandalwood Project 2001 to establishanother plantation of sandalwood(Santalum spicatum) in the WesternAustralian Wheatbelt.

Treetec Consulting Pty Ltd has beencommissioned by Forest Rewards Ltdto provide an independent technicalassessment of the Project and ForestRewards' methodology concerning siteselection, establishment, management,and anticipated returns to the investor.

The Director of Treetec, Dr. NicholasMalajczuk is forestry educated and hasover 25 years research experience as ascientist with CSIRO, Division ofForestry. Dr. Malajczuk's professionalexpertise includes Australian andinternational research on plantationestablishment and nutrition in bothtemperate and tropical/sub-tropicalenvironments. He has worked withmajor forestry companies in Australiaincluding Bunnings Treefarms, APPMand ANM on the inoculation ofeucalypts with mycorrhizal fungi and nutrient application to maximise treegrowth.

Dr Malajczuk also has extensiveforestry experience in China, thePhilippines and Japan. More recentlyhe has been a consultant to forestryprojects in the agricultural areas ofWestern Australia. In 1994 he wasappointed an Adjunct AssociateProfessor at Murdoch University inWestern Australia and supervisesHonours and PhD students in variousaspects of forestry. He has publishedover 140 research papers ininternational journals and books.

Dr Malajczuk has inspected the areasto be planted with sandalwood andknown past trial plantings ofsandalwood within the Wheatbelt.Forest Rewards technical staff werepresent to discuss aspects of thetechnical operations.

The ProposalInvestors are invited to enter into aLease and Management Agreement forWoodlots of Western Australiansandalwood. Woodlots are to be onehectare in size within a proposedplantation estate of 1100 hectares. TheProject proposes to grow sandalwoodtrees on a 18 year rotation forproduction of export qualitysandalwood.

The SpeciesThe species to be grown for thisproject is to be Santalum spicatum. Thisspecies is currently commerciallyharvested from native stands located inWestern Australia's arid interior andapproximately 2,000 tonnes areexported each year. S. spicatum is anobligate root semi-parasite requiring ahost plant such as acacia trees, tosurvive and grow. Nutrients and waterare obtained from these host plantroot systems so that it is essential thatthese trees be nurtured with thesandalwood during life of the project.

The species grows mainly on loamy,acidic soils where rainfall is 200-500mm a year. It can withstandtemperatures in excess of 40°C whenestablished and prefers well-drainedsoils for subsequent growth anddevelopment. The higher rainfall areasof the Wheatbelt have been known toproduce the largest trees ofsandalwood.

Since the early 1980's, CALM andCurtin University have carried outextensive research and field trials onthe propagation and establishment ofsandalwood on farmland. Morerecently, Forest Rewards haveundertaken the establishment of

Independent Forester’s Report

Treetec Consulting Pty Ltd

21 November 2000

The DirectorsForest Rewards LtdLevel 2, Scott House46-50 Kings Park RoadWest Perth 6005Western Australia


sandalwood at a property near NewNorcia using the current best practicesfor growing sandalwood.

Location of Plantation andsite conditionsThe property is located nearGoomalling on the western edge ofthe Western Australian Wheatbelt,about 130 km east north east of Perth.It is gently undulating and over 90%of the property has been cleared. It hasbeen regularly cropped to wheat,canola and legumes and grazed bysheep. The property receivesapproximately 450mm rainfall perannum during the winter period. Thesoil is a sandy loam overlaying clay atdepth >1-2 metres. The residualfertiliser is relatively high inphosphorus and nitrogen and willensure good growth of the host plantand sandalwood. The property hasseveral large sandalwood trees growingon it within the remaining nativevegetation suggesting to Treetec thatthis property should meet the yieldestimates outlined in the prospectus.

Selection of plantingmaterialsForest Rewards has entered into asupply contract with a reputablenursery for the supply of Acaciaacuminata host seedlings. The samenursery supplied high quality acaciaseedlings to Forest Rewards last year.The selected host plants have beensourced from provenances in theWheatbelt and will perform well at theproperty.

Forest Rewards has also entered into acontract for the supply of high qualitysandalwood seed. Seed has beensourced from provenances in remnantstands of Wheatbelt sandalwood andin neighbouring pastoral land areas.

Plantation ConfigurationThe host seedlings will be planted inJune 2001 following site preparation.Sandalwood seeds will be planted inautumn 2002. This delayedsandalwood seeding will ensure thatthe hosts are well established by thetime of sandalwood germination androot establishment.

Row width will vary slightly ondifferent sites, but will usually be 4metres apart and host seedling spacingalong the row will vary between 2.5 to3 metres apart giving an approximatestocking of about 960 hosts perhectare. Host plants will be planted by

hand after delivery of the seedlingsfrom the nursery.

Following host seedling establishment,sandalwood seeds will be direct sownnear the Acacia host trees at a densityof at least 1200 seeds per hectare thefollowing year. Eventually the totalnumber of sandalwood seedlings willbe reduced to about 550 per hectare.This thinning will be based on severalcriteria including proximity to hosts,creating uniform sandalwood density,and removal of less vigorous seedlings.The overall host to sandalwood ratiowill be about 1.75 hosts to 1sandalwood tree.

Checks of the plantation survival willbe undertaken in the autumn followingplanting. If necessary, bothsandalwood seeds and host seedlingswill be infilled during the followingwinter.

Establishment andManagementThe plantations will require extensiveweed control, consisting ofbroadspraying, mounding and postplanting weed control.

Fertiliser requirements of sandalwoodare not well known however foliaranalysis does provide a guide to wholetree requirements if measurements aretaken seasonally. Based on this analysis,fertiliser will need to be applied ifelement levels are lower thanpublished figures for slow growingtrees. Fertilizer can readily be appliedas hard compound fertilizer near thetrees soon after sandalwood seedlingsbecome established or during thegrowing season throughout therotation.

Firebreaks will need to be ploughed,graded or broad sprayed prior tosummer. Access until harvesting will beby firebreaks. Roads will need to beformed as required to enableharvesting equipment access at thetime of harvesting.

Treetec has reviewed Forest Rewards'methodologies for plantationestablishment and maintenance andconcludes that the silvicultural systemused to establish sandalwood in thisProject is appropriate for theachievement of high establishmentand sandalwood growth rates.

MonitoringThe Project provides for regularinspections by an expert forester whoreports to the Manager. Inspections

will occur in the first 13 months, andthereafter at least tri-annually . Theseinspections will focus on survival, fire protection, weed control, growth rates,and plantation health.

Management ExpertiseForest Rewards executives areprofessionally qualified and experts intheir field. The Project brings togethera mix of long time experience inproject management and plantationestablishment and maintenance.

Forest Rewards has also acquired theservices of experienced consultants toprovide advice on sandalwoodprovenance selection, host speciessuitability, sandalwood plantingdensity, sandalwood growth rates andharvesting techniques.

Growth and YieldsThe valuable component of thesandalwood tree is its oil-bearingwood, which is mostly the heartwoodbut can include some sapwood andtransition sections. Heartwoodformation commences around age five.Yields quoted in this report refer tosaleable wood only and not to thetotal weight of the tree. At age 10years the sandalwood trees areestimated to produce 7.5 kg ofsaleable wood per tree. At age 14years the forecast is 13 kg per tree andat age 18 years 20 kg per tree. Theoverall mean annual increment (MAI)of the plantation will be about 340 kgper hectare per year.

Based on published research by theDepartment of Conservation and LandManagement, yields reported in thisreport are achievable from sandalwoodplantations, provided that siteselection, establishment techniquesand subsequent management meetthe specifications summarised above.Actual yields from individual Woodlotswill vary above and below the averagefigure, depending on micro-sitefactors.

Financial AnalysisTreetec has assessed the assumptionsstipulated by Forest Rewards to modelthe net Project return and return to theinvestor. Treetec have independentlychecked and confirmed the cash flowmodel for the Project. The projections on returns are basedon assumptions for plantation yield,rotation length, price of sandalwood,costs for establishment andmaintenance, transport andprocessing. These assumptions are


consistent with current industrypractices and are consideredreasonable. Treetec's assessment ofForest Rewards methodology for siteselection, plantation establishment andmaintenance and managementindicate that the Project will beeconomically viable and potential risksto returns will be minimised, althoughreturns are sensitive to price, yield andtaxation treatment.

PricesSandalwood prices have remainedstable for the past few years. Despitethe strong outlook for sandalwoodprices, prices are determined by theinternational market and are thereforevolatile. The forecast value forsandalwood timber from each Woodlotis based on the well known andpublished export prices forsandalwood. Sandalwood pricescurrently range from about $A6 to$A10 per kilogram depending on thespecific sizes of logs and heartwoodquality.

FeesIn my opinion the fees payable toForest Rewards are a sufficient andcommercially realistic amount toensure that the importantestablishment and maintenance phasesare properly performed. The fees are inaccordance with reasonable standardindustry costs and practices, andcomparable to other crop ventures.

RisksThe principal risks to sandalwoodplantations in the Wheatbelt are fire,wind, insect attack, drought, salinityand nutritional deficiencies.

Treetec has assessed the risk factorsassociated with the Project and issatisfied that all risks can be managedto minimise their influence on theProject's performance. Treetec haveindependently checked Forest Rewards'risk management strategy and canverify that appropriate measures areavailable to manage the risks.

Provided that the plantations areestablished on favourable areas on theproperty the risk of drought andsalinity can be greatly minimised.Correct initial establishment techniquesprovide the best risk managementstrategy for plantations from weedcompetition and insect and verminattack.

Wildfire is a risk within the Wheatbelt.However, a combination of vehiclemovement bans imposed by Shiresduring summer, well maintainedinternal and external firebreaks, andintegration with fire fightingauthorities will greatly minimise therisk of wildfires. Losses from fire, hailand windstorms can be covered byinsurance. I advise Growers to considerinsuring against damage or loss causedby bushfires and windstorms, and todiscuss this with Forest Rewards.Seedling deaths of host plants mayoccur in the first year after outplanting.Therefore infills or replants will becarried out as part of the normalestablishment regime.

Forest Rewards has conductedgermination studies on thesandalwood seed collected by the seedsuppliers. Of the provenances testedhigh rates of germination andestablishment were recorded, with anaverage germination and survival rate

of about 80%. It is important thatForest Rewards continues to monitorand test the germination rates of thesandalwood seed prior to seeding toensure that the number of seedlingsestablished match what is indicated inthe prospectus.

SummaryThe silvicultural procedures adopted byForest Rewards for establishing thesandalwood plantation have been wellthought out, are based on soundresearch and observations of their pastplantings and experience, and arecapable of producing the yieldspredicted.

The price estimates used to forecastreturns are reasonable and well-basedthough investors should be aware ofthe unpredictable nature of priceswhich are dependant on aninternational market.

Treetec consents to being named asthe expert Forester in the Prospectusfor Forest Rewards Ltd and to theinclusion of the Foresters Report in theform in which it is submitted. Treetechas acted as the independent Foresterand in no other capacity. Treetec takesno responsibility for any other matterin the Prospectus.

Dr Nicholas MalajczukDirector Treetec Consulting Pty Ltd


This Report was prepared by ProfessorJohn E.D. Fox, for inclusion in ForestRewards Sandalwood 2001 Projectprospectus. Professor Fox has 40 yearsprofessional experience in forestresearch, including 13 years of tropicalrain forest research and 25 yearsinvestigating tree regeneration in thearid zone of Western Australia. He isDirector-at-Large of the InternationalSociety of Tropical Foresters. His main

areas of expertise are in silviculture andforest ecology. He has researchedsandalwood growth since 1980.During 1987-1994 he conducted a co-operative research project on Indiansandalwood for the Australian Centrefor International Agricultural Researchwith the Forest Research Institute ofNTT, Kupang, Indonesia. He hassupervised many projects dealing withsandalwood research, prepared some

30 reports and some 35 journal articlesor conference papers on sandalwood.He was a trustee of the SandalwoodResearch Institute from its inception in1980 until its demise in 1994. Inaddition to West Timor, he has alsovisited Sandalwood areas in Java, Bali,Karnataka (India), New Caledonia and Fiji.

WA Sandalwood Market Report

FIGURE 1. Annual harvests (tonnes) of dead, green and total sandalwood, taken from crown landin Western Australia 1993-2000.

1992 1994 1996 1998 2000

2000

1500

1000

500

0

Total

YEARS

PRO

DU

CTI

ON

(to

nn

es)

Greenwood

Deadwood

3 December 2000



IntroductionSandalwood is a valuable commodity,traded for centuries and well known inworld markets. Many sandalwoodproducts and derivatives of the oil aresold to the world's luxury markets.Wood is used for carvings, and wooddust is used in joss sticks at shrines andtemples. Wood is burnt on funeralpyres by Hindus in India and also burntby devotees of Buddhism in SE Asiaand by Muslims in the middle-east.Sandalwood oil is a high price rawmaterial for the perfume industry. It isused in a range of medicinalpreparations and for toiletry items(soap, face cream, powders andcosmetics).

Current and HistoricallyTraded SandalwoodVolumesThe wood of native WA sandalwood(Santalum spicatum) has been tradedfrom Fremantle (WA) for 150 years. Itis of lower oil content than Indiansandalwood (Santalum album) but theoils are similar and are readilysubstituted.

Production of wood for export fromWA began after an initial trial shipmentin 1844. Quantities exported rose from370 tonnes in 1847 to 1,335 tonnes in1848. Once the market wasestablished, harvesting sandalwoodprovided a good source of income to

early settlers of the developingwheatbelt and pastoral industries(1844-1880) and during the main timeof gold prospecting activity (1880-1918). The quantity exported wasdetermined more by supply thandemand. The supply depended onlabour and availability of the wood.Good quantities were taken frommuch of the area eventually cleared foragriculture. From 1859-1867, exportswere 1,200-3,000 tonnes per annum,rising to 3,000-7,000 tonnes between1868 and 1880. More than 9,000tonnes was exported in 1882 andagain in 1907-1908. The maximumrecorded annual export (> 14,000tonnes) was reached in 1920 and1924. Production declined to between1,000-3,000 tonnes from 1930 untilWorld War II. Thereafter, it did notexceed 1,000 tonnes per annum until1973. From 1980 to the present, some1,500-1,900 tonnes have beenexported each year. Processing ofsandalwood for oil in Western Australiawas a feature of the trade between1913 and 1971, but export of woodwas the main activity.

In most countries, natural grown (oldgrowth) sandalwood is not managedunder a system of sustained yield.Sandalwood is very valuable vis-a-vislabour prices in India and Indonesia.Consequently, theft and smugglingtake place. Both countries use localmaterial for a range of products butalso export processed sandalwood oil.

Governments have instituted bans onwood export from time to time assupplies have diminished in recentyears. Governments are attempting toencourage land holders to cultivatesandalwood with little success.

Certain conventions govern theregulation of harvest of naturallyoccurring populations, such as treesand forests. Naturally renewablesupplies can last indefinitely, as long asharvests do not exceed the growthrate, and providing the resource baseis not destroyed. This is known assustained yield.

The natural sandalwood resource inWA is believed currently capable ofsustaining annual yields of 1,980tonnes. This harvest level is used tocontrol WA production. Currentsupplies from government controlledland in Western Australia (Figure 1),come from some 190,000 ha of thearid zone, mainly pastoral stations orun-allocated land, to the North andEast of Kalgoorlie.

Influence of Decline ofGlobal Supply onConsumption and Price The supply of sandalwood has declinedhistorically. Stands closest to portswere exploited and used up first. Formaterial further inland, transport andother costs were greater. Contracts forsandalwood collection would only

TABLE 1. Sandalwood production, exports and sales 1992-1993. (+ Private land production not available, this isincluded for 1992-1997, at ~ 210 tonne per annum)

Year Production (tonne) Exports Sales

Crown Land Private Land Total (tonne) (A$m)

1992-93 1,823 217 2,040 1,899 6.24

1993-94 1,786 207 1,996 2,032 7.16

1994-95 1,895 198 2,093 1,568 na

1995-96 1,900 217 2,117 1,827 13.20

1996-97 1,771 208 1,979 1,073 7.53

1997-98 1,653 + 1,653 1,334 8.35

1998-99 1,730 + 1,730 1,166 6.63

1999-00 1,390 + 1,390 1,814 11.64


have been met when prices available weresufficient to induce sandalwood harvesters tobe involved.

Sandalwood has been, weight for weight, themost valuable wood resource in WesternAustralia. In 1845 the initial export price was£10 per ton (1 ton = 1.016 tonne). Relativeprice stability ensued until 1918, with theexport price fluctuating between £7-10 ton.In 1918 the price reached £12 ton. Pricesincreased steadily thereafter, to average £30per ton in 1926; from 1948-1965 prices werebetween £176-305 per ton.

A period of relative inactivity, through theWWII period and after, was followed by oneof steadily increasing prices from 1968 todate. This coincided with higher costs totransport material over greater distances.Average prices exceeded A$700 per tonne in1968; A$1500 in 1983; and A$5,000 in 1988.

It is widely considered that prices rose inresponse to the world supply weakness. Bythe 1990's, the sandalwood export marketfrom Western Australia had becomeremarkably stable in relation to supply (Table1). This constant, regulated, supply has beenaccompanied by increasing sales values.

Sales revenue combined with export weight isa crude measure of price. The available grossreported values are illustrated (Figure 2) todemonstrate that the price trend for WesternAustralian sandalwood remains on an upwardtendency. Whereas the WA supply is fixed,other sources are not always available to theworld market.

FIGURE 2. Notional dollar values per tonne with trend line shown.

10000

8000

6000

4000

2000

0

NAT

ION

AL

$ p

er t

onn

e

1985 1990 1995 2000YEARS

TABLE 2. Sandalwood product prices relative to cleaned logs(1990 FOB Fremantle).

Category Price (A$ t-1) Index

Cleaned logs 9363 100

Butts 7573 81

Pieces (dead) 6926 74

Uncleaned logs 5318 57

Powder 5000 53

Chips 4788 51

Shavings 2952 32

No.2 chips 2500 27

Significance of Emerging Markets and Reopening of Old Sandalwood Markets on Consumption and Price. There is no shortage of markets for Western Australian sandalwood. Allparts of the heartwood component can be traded (Table 2).


The pattern of product share for WAwood exports in 1992-93 (of 1900tonnes), was as follows: Logs 40%(uncleaned 36%, quality logs 4%);other wood 12% (butts 8%; pieces4%); chips 38.3%; powder 8.9%.Market destinations in 1992-93 were:Taiwan 57%; Hong Kong 21%;Singapore 10%; Malaysia 10%; andThailand 2%.

All markets will take produce fromdifferent sources. For example, Fijiexported a total of 1,115 tonnes from1984-1993 to Taiwan, Singapore,Japan, Korea and Saudi Arabia. Oilfactories in India and Indonesia maysource Australian plantation woodfrom time to time.

All purchasers of raw materials willplace a premium on a dependablesupply and consistent quality. It maybe especially prudent in plantationestablishment to plant blocks byprovenance so that marketing caninclude a premium for material ofsimilar characteristics.

The Australian Sandalwood Companyhad a monopoly on export ofsandalwood, until the last change instate government. This monopoly wasabolished and a new company,Wescorp Sandalwood won a fixed-termcontract to export the sandalwoodquota derived from natural supplies,mainly in the Goldfields region. Clearlysome time, effort and trust must beput into nurturing and maintainingmarkets, but without a readilyavailable, existing and marketablesupply of additional product, openingnew markets is likely to beunsuccessful.

Taiwan dominates demand for woodand is the most important market.Undoubtedly some of the Taiwanpurchases find their way to other endmarkets. However, it must beremembered that the broader entity ofChina was the major market in theearly trade and considerable quantitieswere exported from Fremantle toSingapore and Shanghai for China.Recent political developments suggestthat a vast new market will open inChina in the near future as the peopleare increasingly able to worshiptraditional deities. The same argumentapplies to N. and S. Korea. The present proposal to grow

sandalwood additional to thatcurrently harvested from the wild willfind that ready markets exist for thiscommodity as soon as the supply isavailable.

Emergence of New EndUses- Pharmaceutical andMedicinal Uses It must be said that there are manyblue sky possibilities for sandalwoodproducts. In the class of 'minor forestproducts' such 'value-added' items areunlikely to be marketed successfullyfrom a state with a low populationbase. It as more likely that theimporting countries will developproducts based on mass markets forhighly altered raw materials.

Sandalwood oil has a traditional role asan antiseptic. It has medicinal uses. Inthe Pacific Island cultures, each grouphas particular medicinal folkloreassociated with the local sandalwoodspecies. Sandalwood oil from Santalumspicatum was first traded from WAdirectly into world markets in 1913.The oil was found to have an unusualpositive refraction. The British armyused the oil as a treatment for venerealdisease. Little has been heard of this inrecent years.

Perfumery is well known as the highestvalue end-use for sandalwood oil. Oilhas antiseptic properties and is alsoused in soaps, toiletries (skin creams)and a wide range of consumerproducts. Small bottles of oil areavailable in producer countries andthese invariably represent the highestvalue unit sales, but take little of thegross product. Both powder and oil arealso used in traditional ceremonies forcultural purposes in most countrieswhere the various species occurnaturally.

As more people in China, India andIndonesia become relatively affluent,demand for incense usage will increaseinexorably. Use of sandalwood oil (andderivatives) is already comparativelyhigh in India and Indonesia. Shouldextensive, successful, plantations beestablished in Western Australia then S.spicatum wood could be exported fordistillation at Kupang in West Timor, orDili in East Timor, as well as Indiawhere the majority of distillation plantsare located.

Global Supply of NaturallyOccurring Sandalwood

Western Australian sandalwooddominates the international trade inwood. The WA state governmentregulates the world supply of wood atthe determined quantity of no morethan 2,000 tonnes per year. The totalworld supply of natural sandalwoodencompasses limited and sporadicallyavailable quantities of material sourcedfrom some 16 species of sandalwood(genus Santalum). Apart from WesternAustralia, these occur in India,Indonesia, Queensland, Fiji, Vanuatu,Hawaii and other Pacific Islandterritories. None provide regularlyavailable supplies. In 1998, an estimateof current world supply was ~ 5,100tonnes.

These supplies are brought forwardirregularly, on an opportunistic basis.Wood production from West Timor isreported to have averaged 550 tonnesfrom 1970 to 1990. This material hasbeen wholly used for internal oilmanufacture. Oil manufacturers inIndia require at least 2,000 tonnes perannum for efficient operation. SomeIndian wood has been exported toJapan and other countries in recentyears. Export prices have beenreported up to about US$18,000. Thisreflects a considerable premium abovethe Indian domestic market price and awillingness by the authorities to tradein wood when export opportunitiesarise.

Santalum album is accepted as beingthe most valuable sandalwood species.It has the highest oil content in itsheartwood. It grows relatively fast to atree of up to 20 m in height. It isnative to India and Indonesia.Governments attempt to strictlycontrol production of wood. Currentplans to grow this with irrigation in thetropical north-west of Western Australiamay create a new and valuable supply.

Inadequate supplies of availablematerial form the major limitation tothe world market in wood. Policies inoil-producing countries (India andIndonesia) favour oil production at theexpense of wood export. Log exporthas been banned, mainly to directsupply to domestic oil production. Oilfactories have been unable to operate


at capacity due to the shortage ofwood. Any new oil refining enterprisesare likely to be obliged to pay currentworld market prices for governmentsupplies of wood. Such activities musteither develop lucrative new marketsor operate very efficiently, in order tojustify the high cost of wood purchase.A new enterprise, Mt Romance,operating at Albany, WA, has openedto produce oil. The state governmenthas guaranteed a supply of up to1,000 tonnes of WA sandalwood perannum over 10 years to support thisventure. It is understood this Companywill pay current world price (exportvalue) for this wood. This quantity issaid to be part of the currentlyavailable yield of ~ 2,000 tonnes peryear. Should the Mt Romance venturebe successful, then the supply of WAsandalwood to the export market willbe halved.

Pacific Island countries have limited(and probably declining) areas ofproduction and irregularly bring stocksto the market. East Timor has anunknown quantity of material availablethat could be brought to market atany time. This could cause sometemporary disruption to prices.However reliable reports of the statusof sandalwood in that territory are notavailable. No country or state (exceptWestern Australia), currently has alarge quantity of material potentiallyavailable, although inventories haveperiodically resulted in severalcountries putting wood supplies intothe world market. The supply of stockto Indian distilleries has been disruptedin recent years as the authorities haverealised that the resource has beenover-cut.

Importance of PlantationSandalwood to SupplementSupply From Natural StandsIn order for plantation sandalwood tobe acceptable emphasis must beplaced on quality and consistency.Large amounts of material of relativelyuniform characteristics should alwayscommand higher market values thanmixed, variable, natural materials. Apremium is generally available forestablished producers who canmaintain a constant quality. Newventures offer the prospects ofattention to quality and consistencyfrom the start-up phase, as eachprocedure is checked in turn againsteffect on growth.

Naturally occurring sandalwood isinevitably declining in WesternAustralia. This is due to continuing lossof habitat and destruction of seedlingregeneration through selective grazing.There is an almost total lack ofseedlings or young plants in naturalstands. Most state governmentholdings are being increasinglydevoted to conservation reserves.These reserves, mainly in the arid zone,are unlikely to be opened forharvesting. In addition, currentgovernment policy does not ensureregeneration of sandalwood. Of thepresent residual distribution, not allcan be considered as economicallyavailable for harvesting due to lowtonnages and remoteness.

Until recently, both Australian andIndonesian (Timor) sandalwood hadbeen considered the property of theCrown. This notion mitigated againstprivate cultivation and ownership. Inthe past few years the legal status haschanged in both countries, but little inthe way of plantation development hasoccurred in Timor. However, thetechniques are proven and as soon asentrepreneurial management can bebrought to bear, plantationdevelopment is possible.

New Caledonia has adopted a policy ofencouraging local value-adding andmay not again produce log materialfor the export market, as it had,irregularly, in the past. The onlypotential competitors with WesternAustralia in the world market for woodand unprocessed material are thePacific Island nations. None of thesecurrently have either sufficient stock orplantation programs to allow anythingother than an irregular log exportindustry.

It is possible for the WA government toincrease the native harvest yield above2,000 tonnes per year. However, asharvesting moves into ever moreremote areas, the costs of productionrise and labour involved facesincreasing disincentives to work theproduct. Social benefits and alternativeemployment options may terminatethe trade sooner than a loss of supply.Increased environmental awarenesscould rapidly erode the currentindustry, based as it is on a non-sustainable, wasting asset taken fromfragile and sensitive lands.

A significant increase in supply ofplantation wood of consistent quantityand quality is likely to be readilyabsorbed by a market that is starved ofreliable sources of supply. Under allscenarios, privately produced materialin plantations would be moreattractive to buyers in the worldmarket for wood.

Signed

John E D FoxProfessor of Vegetation ScienceDirector, Mulga Research Centre


This sandalwood market report hasbeen prepared by Mr. H.S. AnanthaPadmanabha for the inclusion in aprospectus to be issued by ForestRewards Ltd. This prospectus offersinvestors the opportunity to subscribeto the Forest Rewards SandalwoodProject 2001 (Project). The Project isoffering an opportunity to share in thedevelopment of approximately 1000hectares near Toodyay in the Shire ofGoomalling as a commercialsandalwood plantation.

Mr. H.S. Anantha Padmanabha hasover 35 years of research experience assenior scientist at Institute of WoodScience and Technology (IndianCouncil of Forestry & Education,Government of India). He hasresearched various aspects ofsandalwood for over three decades,with particular emphasis on improvingtechniques of growing sandalwood. Hewas designated as chief TechnicalAdvisor for a World Bank sandalwoodproject in India. He was also aconsultant to plantation companiesgrowing Teak and Acacia plantations inIndia.

Mr. H.S. Anantha Padmanabha hasforestry experience in the UnitedStates, Australia, Nepal and UK. Atpresent he is a Director of theKarnataka Research Foundation for

Advance Science Technology Transfers(FAST). He has co-authored books onsandalwood and has published over125 research papers in internationaljournals. In 1992 he received the RonCockcraft award for IRG (Sweden).

IntroductionSandalwood and its fragrant oil areone of the most valuable perfumerymaterials in the world. Its utilisationdates back to the early civilisation.Sandalwood is a moderately heavytimber, which seasons slowly and isstrongly scented. It is yellow or brownin appearance and even textured. Thewood is used within the premiumAsian carving market. Oil extractedfrom sandalwood is highly prized as akey ingredient in the cosmetics andperfumes. Sandalwood oil hasimportant fixative properties, which iscritical in the blending process forperfume manufacture. These fixativeproperties are due to the chemicalcomposition of two key compounds,alpha and beta santalol.

This report provides an independentevaluation of the Indian andinternational markets for sandalwoodand its oil.

International SandalwoodMarkets

OilThe predominant markets for Indiansandalwood oil are France, the USA,the UK and the Middle East. It isestimated that 30,000 kg of oil isexported to the US, Europe, USA, Asiaand Middle East each year. Bothdomestic and international demand isincreasing, especially in new markets,such as in aromatherapy,pharmaceutical applications andcosmetics.

Sandalwood Market

Report (International)

UK

USA

France

Tiawan

Hong Kong

Japan

Malaysia

Singapore

Dubai

South Africa

37%

37%

3%

5%

3%

3%

3%3%

3% 3%

25 November 2000


Export markets for Indiansandalwood oil


Currently, India is the largest exporterof sandalwood oil, supplying around75% of the world demand. The onlyother notable exporter of sandalwoodoil is Indonesia. Oil from Indonesiandistilleries is less sought after byperfume manufacturers compared tothat of Indian oil due to theinconsistent supply. The main reasonfor the inconsistent supply of oil fromIndonesia is largely due to the declinein sandalwood production from naturalforests. It is believed that there may beonly limited oil production in Indonesiain forthcoming years because of amoratorium imposed on harvestingsandalwood. The flow on effect of thismoratorium is that sandalwoodindustries in Indonesia will have limitedaccess to sandalwood and as a resultthese industries may need to importsandalwood from Australia or India toprevent their collapse.

A significant influence on theinternational demand for sandalwoodoil is the increasing trend for naturalflavours and fragrances. Healthregulations, in particular in the EU, arebecoming more stringent on the use ofsynthetics in fragrances and flavoursand as a result there is greaterimportance placed on the use ofnatural products. Consumers have alsobecome more discerning, demandingmore intensive flavours and fragrances.

Domestic SandalwoodMarkets

Sandalwood Incense sticksIn India a major consumer ofsandalwood is the incense (joss stick)industry. Burning incense is animportant cultural and religiouspastime in India and large quantities ofsandalwood incense sticks areconsumed each year. The process ofmaking incense sticks consists ofgrinding sandalwood to a powder andcoating the powder onto thin pieces ofwood, usually bamboo. Using puresandalwood powder is prohibitivelyexpensive for the Indian incenseindustry and as a result sandalwoodpowder is almost solely derived fromsandalwood oil distilleries, which is inthe form of spent sandalwood.

Low quality incense sticks are nowbeing manufactured from substitutesas a result of the supply shortage ofsandalwood.

Carvings and furnitureSandalwood is also one of the finestwoods for carving as it has a uniform,straight close wood grain. It is almost

completely free from knots and iseasily worked. Sandalwood is used tomake cabinets panels, jewel cases,walking sticks, picture frames, fans,table lamps, and carvings.

Sandalwood carving has importantcultural significance in India, which hasbeen practiced for centuries. Thetraditional community of professionalsandalwood carvers are called"gudigars" The craftsmanship is passedon from generation to generationwithin the community.

The carving industry is prominent inthe Indian states of Karnataka, TamilNadu, Rajas than, Kerala, AndhraPradesh, Gujarat and Utter Pradesh.The styles in carving vary significantlyfrom state to state.

To promote the sandalwood carvingindustry in Karnataka and Tamil Nadugovernment supplies sandalwood at asubsidised rate as the unpredictableand erratic supply of sandalwood hascompelled the sandalwood carvers tosource alternate raw material.

The demand for the handicraftmaterial is increasing both in India aswell as in the international market, butthe cost of sandalwood carvings isextremely expensive.

OilIt is estimated that domestic industriesin India consume about 30,000 kg ofsandalwood oil each year. Maindomestic industry consumers ofsandalwood oil include the perfumeindustry, attar products, soaps anddetergents, incense sticks,pharmaceutical applications and themanufacture of scented tobacco.

About 70% of the total consumptionof sandalwood in India is in the attarindustry. The production of attar hasoccurred in India for centuries. Attar isa blend of sandalwood oil and floweroil, such as rose petal oil. Thepreparation of attar involves distillingthe oil from flowers and blending thiswith sandalwood oil. The quality ofattar depends on the concentration offlower oil within the sandalwood oil.Numerous types of attar products aremade in India, which consist ofdifferent types of flowers and theproportions of flower oil andsandalwood oil within the attar. Attarforms the principal constituent for themanufacture of incense sticks andscented tobacco.

As the attar industry consumes largequantities of sandalwood oil, and dueto the supply shortages and highsandalwood oil prices, the industry isvery keen to explore the possibility ofusing Western Australian sandalwoodoil in different attar formulations.

The manufacture of scented tobacco(zarada) also consumes large quantitiesof sandalwood oil. Up to 20% of thepopulation in Southern Asia and theMiddle East chew scented tobacco.The popularity of chewing tobacco israpidly growing and has placedsignificant demand pressures on oildistilleries for sandalwood oil.

Chewing tobacco manufactured usingsandalwood oil is an expensive habit.As sandalwood oil is a natural productit is widely considered as a safeingredient for chewing tobacco.

The price of Indian sandalwood oil isabout A$500 / kg. The price forinternationally traded sandalwood oil ismore expensive than that tradeddomestically, with price ranges ofA$580 to A$625 / kg.

Present StatusNatural sandalwood forests in Indiahave declined dramatically over thepast few decades due to unsustainableharvesting. Similarly, the production ofsandalwood has declined over the pastseveral years as a result of thedepletion of these natural forests. As aresult of the short and inconsistentsupply, the prices for oil and the woodfluctuate in the international market.

It is difficult to estimate the remainingsandalwood resource in native forests.However, it is widely accepted that theresource is declining rapidly and thecultivation of plantations undertakenby both the government and the

Attar

Perfume

Soap & Detergents

Incense

Pharmaceutical

Other

70%

10%

8%

1% 6%5%

Domestic use ofsandalwood oil in India


private sectors in India are notadequate to meet future demand.

Current supply trendThe Indian sandalwood industry hasthree distinct markets: (i) sandalwoodand sandalwood powder, for productssuch as incense manufacture, (ii)sandalwood oil for cosmetics andfragrance manufacture and (iii)sandalwood solid wood for finefurniture and carving manufacture.

To supply the diverse range ofdomestic and international sandalwoodmarkets a minimum of 1500 tonnes ofIndian sandalwood is requiredannually. About 60 tonnes ofsandalwood oil (the equivalent to 1300tonnes of sandalwood) is requiredannually to supply the global cosmeticand aromatherapy industries. Inaddition, the Indian carving industryconsumes about 200 tonnes ofsandalwood annually.

The official government annualproduction of sandalwood in India isless than 1000 tonnes, predominatelyfrom the states of Karnataka and TamilNadu. The official volume clearly does

not reconcile with the quantitiesconsumed. Consequently, the supplyshortfall is met by illegally harvestedand smuggled sandalwood fromnatural forests. The combined officialand unofficial harvest volume in Indiais estimated to be about 3000 tonnesper annum.

The declining natural sandalwoodforests together with the effects ofillegal harvesting have created achronic sandalwood supply shortage inIndia. This is further exacerbated bythe lack of regrowth in the naturalforests.

Price TrendThe price of sandalwood has beenincreasing on the international marketover recent years. At present, thegovernment auction price forsandalwood is about A$28,600/ tonne.

Sandalwood is harvested andtransported to State Forest Departmentdepots. Sandalwood is sorted andclassified into six classes, depending onthe size and soundness of billets(sandalwood logs). These are classifiedin Table 1.

Billets with knots, cracks & small Sandalwood is publicly auctioned twicea year in Tamil Nadu. Bidders need toregister with the State ForestDepartment and they also need topossess a permit to store and on sellsandalwood.

As expected prices fluctuate withquality and the expectation of futuresupply. High quality sandalwood, formarkets such as carving and finefurniture is becoming increasinglydifficult to source.

Price structure of WesternAustralian sandalwoodAt present Western Australiansandalwood oil is distilled in smallquantities in Australia. Discussionswithin the Indian sandalwood industrysuggest that the price of WesternAustralian sandalwood should be set atabout one-third the price of Indiansandalwood. Indian sandalwood oilcontains about 90-93% of santalol,whereas Western Australiansandalwood oil contains about 30%santalol. Therefore, using this model,the price of Western Australiansandalwood in India may range

0

500

1000

1500

2000

2500

3000

1987-88

1988-89

1989-90

1990-91

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-2000

TON

NES

Annual Government sandalwood harvest in India

YEAR


between US$3500 to $4000 / tonne [or A$6363 to $7272 /tonne (US$ = A$0.55)].

ConclusionThere is an obvious need for plantation grown sandalwoodto enter the market. In India and elsewhere, the naturalforests alone will not be able to meet the current and futuredemand for sandalwood. Sandalwood grown in plantationsin Australia and elsewhere will generate a consistent supplyof sandalwood to market, therefore reducing the widefluctuations in supply and help to stabilise price.

Signed

Mr H. S. Anantha Padmanabha

Class Category Description Auction price Auction priceon April 2000 on Sept 2000(A$ / tonne) (A$ / tonne)

1 First class Completely sound billets, weighingnot less than 9kgs and not exceeding This class is not sold at auction112 pieces to the tonne.

2 Second class Slightly inferior billets, weighing notless than 4.5kg and not exceeding This class is not sold at auction224 pieces to the tonne.

3 Third class Billets having knots, cracks and hollows weighing not less than 448 This class is not sold at auctionpieces to the tonne.

4 Ghat badla Billets with knots, cracks and smallholes at either end weighing not less This class is not sold at auctionthan 4.5kgs and not exceeding 240pieces to the tonne.

5 Roots Root material A$28,000 A$32,6086 Jagpokal Hollow pieces weighing not less than A$27,478 A$30,434

1.3kgs.7 Ain chilta Solid, cracked and hollow pieces A$26,522 A$30,000

weighing not less than 0.45kg.8 Ain billets Chips and small pieces of heartwood. A$21,739

TABLE 1. Categories and price of sandalwood at government auctions in Tamil Nadu, India.

0

5000

10000

15000

20000

25000

30000

35000

91 92 93 94 95 96 97 98 99 2000

$A/T

ON

NES

Auction price for sandalwood in India

YEAR


As with any investment in forestry, there are inherent risks.Some of these risks can be mitigated by the use ofsafeguards and appropriate systems and actions, but manyare outside the control of the Manager. There are a numberof risk factors which investors should consider before theymake a decision to apply for woodlots. The principal factorsinclude, but are not limited to, the following.

Primary Production RisksLimited History of Santalum spicatumPlantationsThere is a limited history of plantation grown Santalumspicatum. The first large scale commercial plantation wasundertaken by the Manager last financial year and it is still inearly stages of development. The project must be consideredin light of the risks and difficulties frequently encountered bypioneering projects. Although the project is based onpublished research following trial plantings, some aspects ofthe project may not have been exposed to all variables inthe environment.

Establishment risksThe plantation will be established by direct sowingsandalwood seed near the base of established host trees. Toachieve the projected sandalwood stocking rate, a seedgermination and survival rate of at least 35% is required.Additionally, a reasonable host tree survival rate is necessaryto support the sandalwood. Research shows that sandalwoodgermination and survival rates should be significantly higherthan 35%.

To mitigate establishment risks, the Manager will infill plantany areas necessary to achieve the desired stocking rate ofsandalwood and host trees. Establishment risks also apply tosuch infill planting.

FireThere is a fire risk in the Wheatbelt over the warmer months.Wildfire frequency is moderate and fire protection is animportant element of plantation management. The Managerwill adopt a fire management plan for the plantation,including well maintained firebreaks. The Managerrecommends that Growers insure their woodlots against fire.

Physical risksThere are inherent physical agricultural risks such as drought,frost, hail, windstorms and other acts of God, disease,insects, grazing animals, and other pests that can affect theplantation. Santalum spicatum and acacia are hardy, nativespecies that grow naturally in the Wheatbelt and more aridsurrounding regions. The Manager will monitor theplantation and where possible take remedial action tominimise these risks.

GeneralGood forestry management practices are necessary to ensurethat weed control, land preparation, seedlings, seeds,planting technique, fertiliser application, pest control, firecontrol and general management are of a high standard.

The aim of the Management Plan is to achieve highstandards and outcomes in this respect.

Financial RisksThe financial success of the project depends primarily on thegrowth rate of the sandalwood trees and the sale price ofsandalwood timber at the time of the harvests. Ultimateoutcomes are dependent upon future silvicultural andmarket factors that cannot be accurately predicted.Accordingly outcomes may vary substantially from theforecasts contained in this prospectus. Included in thefinancial analysis is a sensitivity table that shows anticipatedeffects of movements in key variables such as sandalwoodprice, sandalwood yield and harvest costs.

Market riskThere may be changes in supply or demand for sandalwoodduring the term of the project that affect the prices paid forSantalum spicatum. Demand can be affected by many factorsincluding Asian economic conditions, availability ofsubstitutes, China's import policy, and the success of MtRomance. Some of the factors that affect supply includeCALM's native harvest quota policy, competitive plantationprojects, private plantings, and developments in the supplyof other sandalwood species. There is no guaranteedminimum price received for sandalwood.

Plantation sandalwood price discountGenerally speaking, sandalwood quality improves with ageas the heartwood content increases. To allow for this,forecast prices for the plantation sandalwood to beproduced by this project incorporate a discount to thecurrent market prices being paid for native sandalwood. Asthere are no current commercial scale sales of plantationgrown Santalum spicatum, the size of this discount is anestimate.

Yield estimatesThe sandalwood yields in the financial forecasts are estimateshaving regard to published research on trial plantings andthe site selection criteria. These trial plantings are located invarious parts of the Wheatbelt and are still at early stages ofdevelopment. There are no substantial plantations or trialplantings of Santalum spicatum more than 10 years of agefrom which yield data can be drawn. The yield estimates aretherefore based on limited data.

Harvest schedule changesThe financial forecasts are based upon an indicative harvestschedule. The final harvest schedule as determined by theManager will affect the timing, yield, and sale priceultimately achieved.

No buy back rightGrowers have no right to require Forest Rewards to purchasetheir interest and there is no secondary market in thewoodlots.

Project Risks and Safeguards


TaxationThe Australian Taxation Office has issued a Product Ruling inrelation to this project.

The Product Ruling is a ruling on the application of taxationlaw only and is in no way expressly or impliedly a guaranteeor endorsement of the commercial viability of the Project,the soundness of the Project as an investment, or thereasonableness or commerciality of any of the fees charged.

The Ruling is only binding if the project is carried out inaccordance with details provided to the Australian TaxationOffice by Forest Rewards Ltd and described in the Ruling.

Before deciding whether to participate, you should obtainyour own independent financial advice on the taxationimplications of participating in the project.

GeneralThe value of the project can be affected by various generalfinancial factors such as economic conditions, inflation,exchange rates, regulatory changes, and taxation changes.

Force MajeureThe Manager can be excused from performing itsobligations if it is prevented from doing so due tocircumstances beyond its reasonable control (other thanfinancial circumstances or circumstances arising from abreach of its obligations). The Manager must try to remedyand avoid any such circumstances.


The following are summaries of the principal terms ofmaterial agreements which relate to the Forest RewardsSandalwood Project 2001. The project has been registeredby the Australian Securities and Investments Commission asa managed investment scheme.

The material agreements are the:

1. Lease2. Management Agreement 3. Constitution4. Rules5. Standing Offers

Copies of these agreements are available for inspection atthe registered office of Forest Rewards Ltd during normalbusiness hours. This Prospectus does not set out all of theprovisions of these documents. Any intending applicant whowishes to gain a full knowledge of the contents of anyagreement should inspect the documents. Prospectiveapplicants should seek independent professional advice onthese agreements if necessary.

1. LEASEPartiesForest Lands Pty Ltd (the Lessor), Forest Rewards Ltd (theResponsible Entity), and each Grower.

Grant of LeaseThe Lessor leases to the Grower the woodlots allotted underthe prospectus commencing on the date of such allotmentuntil completion of the final harvest.

The Grower is entitled to the sandalwood trees and the hosttrees planted on the woodlots and all timber therefrom (butnot seed and propagation material).

The Lessor has or will contract to buy freehold land for theplantation. If the Lessor does not own the land the Leaseconstitutes a sublease (with the consent of the registeredproprietor of the land) from the date of commencementuntil the date the Lessor settles acquisition of the land.

RentThe Grower shall pay rent of an amount equal to 4% of theGrower's share of the net sales proceeds of each harvest,plus GST, payable out of such net sales proceeds.

Grower CovenantsThe Grower shall:a) plant on each woodlot host trees and sandalwood trees;b) tend to the trees according to good forestry principles;c) prevent or combat land degradation in relation to

woodlots;d) comply with the Bush Fires Act 1954;e) not render any applicable insurance policy void or

voidable;f) comply with all laws, regulations and other legal

obligations in respect of the use of woodlots;g) permit the Lessor to enter the woodlots as necessary;

h) give such access to occupiers of adjoining woodlots as is necessary;

i) take all reasonable steps to avoid interfering with theoperations of any owner or occupier of neighbouringland.

Lessor's CovenantsThe Lessor will give the Grower quiet possession of thewoodlots and pay all rates, taxes and other charges inrespect of the land.

InterestAny overdue monies shall bear interest at the NationalAustralia Bank Limited Base Rate plus 3%.

DefaultThe Lessor may terminate the Lease if the Grower is declaredbankrupt, goes into liquidation, a receiver is appointed tothe undertaking of the Grower, or the Grower fails toperform its obligations under the Management Agreementor the Constitution or the Lease and such default continuesfor a period of 21 days after receipt by the Grower of writtennotice. Upon such termination the sandalwood trees andhost trees shall vest in the Lessor with no compensation forthe monies contributed by the Grower. The Lessor retainsthe right to sue the Grower for payment of any outstandingmonies.

Prohibited ActivitiesThe Grower shall not:a) use the woodlots for anything other than cultivating

sandalwood trees;b) permit any nuisance or disturbance upon the woodlots;c) erect any buildings, structures or dwellings on the

woodlots;d) use the woodlots for any illegal purpose;e) store or use any inflammable, chemical, noxious or

dangerous substances on the woodlots in a mannerlikely to cause damage;

f) light any fires in the woodlots except in accordance with the Bush Fires Act 1954;

g) lodge any absolute caveat against the land.

The Grower appoints the Lessor and its officers as itsattorney to execute and register a withdrawal of anyabsolute caveat and at any time beyond two weeks afterexpiry of the Lease a withdrawal of any subject to claimcaveat.

Upon terminationUpon termination the Grower must remove any plant,equipment, debris or rubbish and deliver up the woodlots ingood repair, order and condition.

2. MANAGEMENT AGREEMENTPartiesForest Rewards Management Pty Ltd (Manager), ForestRewards Ltd (as Responsible Entity and Bare Trustee) andeach Grower.

Summary of Material

Agreements


Appointment of ManagerThe Grower engages the Manager as an independentcontractor to carry out the Initial Services and the Ongoing Services in accordance with sound forestry and environmental practices.

Initial ServicesThe Manager's Initial Services comprise:a) Supply sufficient host tree seedlings to the specifications

recommended in the management plan.b) Supply sufficient sandalwood seed to the specifications

recommended in the management plan.c) Ensure all necessary approvals for the establishment of

the plantation are obtained.d) Ensure that the woodlots are ready for planting in

accordance with the management plan.e) Ensure that all roads, tracks and firebreaks in and about

the plantation are in good repair.f) Controlling rabbits, pest and other vermin.g) Plant the host trees.h) Use an experienced and competent forestry

management team to perform the Manager's services.i) Supervise and secure management of all works on

the plantation.j) Administration.

The Initial Services shall be completed by 30 June2001 (in the case of year 2001 woodlots) or 30 June2002 (in the case of year 2002 woodlots).

Ongoing ServicesThe Manager's Ongoing Services comprise:(a) Combat land degradation in relation to the woodlots.(b) Tend to the sandalwood trees and host trees according

to the principles of good forestry, including suchnutrient analysis, pruning, fertilising and fumigating, asthe Manager deems appropriate to promote tree growthand yields.

(c) Maintain and repair roads and fences on the land andkeep the woodlots in good and substantial repair andcondition;

(d) Control disease, rodents, vermin, noxious weeds, rabbits,insect pests and all other pests of any kind.

(e) Comply with the provisions of the Bush Fires Act, 1954.(f) Attend such local government meetings as are

considered necessary.(g) Secure entryways to the land against trespass as

considered necessary.(h) Keep a public risk insurance policy in respect of the

plantation for not less than $5,000,000.(i) Sow sandalwood seeds within 12 months of planting of

the host trees.(j) Within 12 months of the planting of the host trees and

the sowing of the sandalwood seeds respectively,conduct a survival count and replant or resow (as thecase may be) as necessary.

(k) Carry out any other obligation imposed on the Growerunder the provisions of clause 4.1 of the Lease subject tothe other provisions thereof.

(l) Manage the tree crop in accordance with themanagement plan.

(m) Undertake periodic site inspections.(n) Determine the harvest schedule and manage each

harvest.(o) Manage the sale of harvested timber.(p) Provide periodic reports to the Grower.

Fees and CostsThe following management fees are payable:a) $6,500 per woodlot plus GST for the Initial Services and

the supply of the planting material. An additional $700plus GST is payable to the Responsible Entity under theConstitution for administration;

b) $600 per woodlot plus GST payable on or before 1September of the following financial year for theOngoing Services provided in that financial year;

c) thereafter, for the Ongoing Services, an amount equal to8% of the Grower's share of the sale proceeds of eachharvest after deducting harvest costs, plus GST, payableout of such proceeds; and

d) as a performance fee, 15% of the amount by which theGrower's share of the net proceeds of all harvestsexceeds the forecast as set out in this prospectus, plusGST, payable out of the final harvest receipts.

Crop InsuranceThe Manager shall use best endeavours to arrangeappropriate crop insurance at the Grower's election and cost.

Tree FarmingThe Manager shall:a) be allowed full access to the woodlots to carry out its

duties;b) not erect any structures on the woodlots;c) not use the woodlots for any illegal purpose or create a

nuisance;d) not use or store any inflammable, chemical, noxious or

dangerous substances in a manner likely to causedamage;

e) have the right to erect a sign on the plantation;f) comply with all applicable laws, regulations and notices;g) take all reasonable steps to avoid interfering with the

operations of any owner or occupier of neighbouringland.

If the Manager sells any carbon credits in connection withthe trees the proceeds will belong 80% to the Grower and20% to the Manager. All seed and other propagationmaterial from the sandalwood and host trees will be theproperty of the Manager.

HarvestHarvest shall take place as and when deemed appropriate bythe Manager the aim being to produce the best overallresult for Growers. The timing of harvest may be altered bythe Manager as against the indicative harvest schedule inthis prospectus.

Prior to each harvest, the Manager will provide to theGrower a harvest plan setting out expected harvest dates, anestimate of expected costs, the proposed method of sale ofthe timber, and the estimated number of trees to beharvested.

Subject to the Grower's right to elect to harvest itself, theGrower irrevocably appoints the Manager to arrange theharvest and engage contractors to undertake the harvest.The Manager will use best endeavours to ensure the work isundertaken in a competent manner and for a competitiveprice. The Grower is liable to pay the Grower's share of allcosts of and incidental to harvest. If practicable, these costsshall be paid out of the proceeds of the relevant harvest.


SaleSubject to the Grower's right to elect to sell the timber itself,the Grower irrevocably appoints the Manager to negotiatethe sale of the harvested timber. The Manager will use bestendeavours to negotiate the highest price practicable.

The project is split between year 2001 woodlots (plantedprior to 30 June 2001) and year 2002 woodlots (planted inthe financial year to 30 June 2002). The timber from eachharvest of each of these plantations is pooled and theGrower takes its share according to the proportion ofwoodlots held by the Grower in the relevant plantation. Theproceeds of sale will be paid directly to the Bare Trustee anddealt with in accordance with the Constitution.

Harvest and Sale by GrowerThe Grower may elect on or before 30 June 2003 to harvestand sell the timber itself. In this case the Manager will markout the Grower's woodlots and advise the Grower of whenthe trees can be harvested. The Grower must pay alloutstanding project fees and estimated fees payable within 6months (including the maintenance fee and theperformance fee as estimated by the Responsible Entity)prior to commencing harvest.

Other RightsGrowers may inspect documents and other informationrelevant to the Manager's activities subject to appropriateconfidentiality undertakings.

Manager's ReportsThe Manager shall provide to Growers:

• an annual report detailing actual operations performed,health and vigour of the trees, and details of anyoutcomes likely to affect performance or viability of thetrees;

• a report prior to any harvest setting out details of theharvest; and

• a report within 30 days of sale of timber setting outdetails of the sale.

Interest on overdue moniesThe Grower must pay the Manager interest on any overduemonies at the rate being 3% per annum above the NationalAustralia Bank Limited Base Rate.

TerminationThe Manager may terminate the Management Agreement ifthe Grower is declared bankrupt, goes into liquidation, areceiver is appointed to the undertaking of the Grower, orthe Grower fails to perform its obligations under theManagement Agreement or the Constitution or the Leaseand such default continues for a period of 21 days afterreceipt of written notice. The Manager retains the right tosue the Grower for payment of any outstanding monies.

The Grower may terminate the Management Agreement ifthe Manager fails to perform its obligations under theManagement Agreement and such default continues for aperiod of 21 days after receipt of written notice.

Force MajeureEither party shall be excused from the performance of itsobligations to the extent such performance is prevented bycircumstances beyond the reasonable control of that party,other than financial circumstances.

3. CONSTITUTIONPartiesForest Rewards Ltd (the Responsible Entity) and ForestRewards Ltd (the Bare Trustee) and each several Grower.

AppointmentsThe Responsible Entity acts as agent for the Grower and asbare trustee of the subscription money and project property.

A Custodian may be appointed to act as trustee of the Fundsset up under the Constitution, in accordance with therequirements of the Corporations Law.

Acceptance of ApplicationsUpon any application under this Prospectus being acceptedby the Responsible Entity, the applicant is deemed to havecontemporaneously become a party to the Constitution, theManagement Agreement and the Lease (the Agreements).To the extent the application is accepted, the subscriptionmonies will be applied towards the fees payable by theGrower under the Agreements.

Release of Subscription MoneyAll subscription money must be placed in an account calledthe Subscription Fund in the name of the Custodian.The money in the Subscription Fund may only be releasedwhen:a) the minimum subscription is reached; andb) the Responsible Entity has notified the Custodian that it

is satisfied that:i) the areas of land to be leased to the Applicants are not

subject to any encumbrances or restrictions whichdetrimentally affect the interests of the Growers andwhich are not disclosed in the Prospectus;

ii) the relevant Lease and Management Agreement are inthe proper form and have been entered into by all theparties;

iii) any other matters necessary for the creation of the Leaseand the effective vesting in the Grower of the Lease andManagement Agreement have been attended to; and

iv) there are no outstanding material breaches of theConstitution which are detrimental to the interests of theApplicants.

If the subscription money paid by an Applicant is notreleased within the financial year in which the application isaccepted, the Responsible Entity will refund that subscriptionmoney to the Applicant.

Trust AccountsThe Bare Trustee will create the following separate funds (inthe name of the Custodian where required by theCorporations Law):a) the Subscription Fund for the purpose of depositing

subscription money;b) the Project Fund for the purpose of depositing project

fees; andc) one or more Proceeds Funds for the purpose of

depositing receipts including the proceeds of sale of thetimber. Separate Proceeds Funds must be established inrelation to separate plantations.

These funds will be pooled in a trust bank accountestablished by the Custodian and held by the Custodian asagent for the Bare Trustee.


The Subscription Fund will be deemed to have become theProject Fund upon woodlots being allotted to the Grower, tothe extent that the moneys of the Applicant are appliedthereto.

The Responsible Entity or the Manager shall be entitled toany interest earned on subscription money, retention money,project fees or receipts.

Maintenance FundThe Manager is to pay an amount of $1,000 per woodlotinto a separate account in the name of the ResponsibleEntity to secure performance by the Manager of theOngoing Services.

Provided the Independent Forester is satisfied the Manager isperforming the Ongoing Services, these funds will bereleased to the Manager. The Manager is entitled to anyincome on the funds.

If the Manager fails to perform any Ongoing Services theResponsible Entity may use these funds to pay anothercontractor to do the work.

Consideration Payable by GrowerEach Grower pays the following consideration for acquiringan interest in the project (the project fees):a) the subscription money;b) all expenses, fees, interest, taxes or monies payable

under the Management Agreement;c) all rent or other expenses or monies payable under the

Lease; andd) all fees, expenses or monies payable under the

Constitution.

Appointment of Responsible Entity as AgentEach Grower irrevocably appoints the Responsible Entity as asole and exclusive agent for the Grower in relation to theproject. The Responsible Entity shall have irrevocable poweras agent and attorney of the Grower:(a) [Subscription Fund] to direct the Bare Trustee to

receive and hold subscription money from the Growerin the Subscription Fund;

(b) to direct the Bare Trustee to invest those moneys inany Authorised Investment pooled with AuthorisedInvestments made on behalf of other Growers;

(c) to discharge the Grower's obligations pursuant to theAgreements and this Constitution;

(d) [Project Fees] to direct the Bare Trustee to receive andhold the project fees in the Project Fund;

(e) to direct the Bare Trustee to invest the project fees ofthe Grower in any Authorised Investment pooled withAuthorised Investments made on behalf of otherGrowers;

(f) to direct the Bare Trustee to use the project fees of theGrower in discharging the Grower's obligationspursuant to the Agreements and this Constitution;

(g) [Lease] to confirm the Grower as a party to the Lease;(h) to monitor the performance of the Lessor's obligations

in accordance with the Lease;(i) to exercise all rights and powers of the Grower and/or

to direct the Bare Trustee to exercise any right orpower under the Lease;

(j) to buy, sell or otherwise deal in any sequestrationrights, carbon credits or other environmental creditsarising from, or in connection with the woodlots orthe trees and to which the Grower is entitled;

(k) [Management Agreement] to confirm the Grower as aparty to the Management Agreement;

(l) to monitor the performance of the Manager'sobligations in accordance with the ManagementAgreement;

(m) to appoint the Auditors or other auditors to auditand/or monitor the accounting records and otherrecords of the Manager;

(n) to exercise all rights and powers of the Grower and/orto direct the Bare trustee to exercise any right orpower under the Management Agreement;

(o) [harvest agreement] to enter into any harvestagreement on behalf of the Grower;

(p) to enter into any contracts with any person whichhave the effect of varying or replacing the harvestagreement in order to better achieve the purposes ofthe project;

(q) to monitor the performance of the obligations of theparty commissioned to harvest the trees in accordancewith the harvest agreement;

(r) to exercise all rights and powers of the Grower and orto direct the Bare Trustee to exercise any right orpower under any harvest agreement;

(s) [sale agreement] to enter into any sale agreement onbehalf of the Grower;

(t) to appoint the Manager to negotiate the sale of thetimber from the Grower's woodlots;

(u) to enter into any contracts with any person whichhave the effect of varying or replacing the saleagreement in order to better achieve the purposes ofthe project;

(v) to exercise all rights and powers of the Grower and orto direct the Bare Trustee to exercise any right orpower under any sale agreement;

(w) [sale on termination] upon the termination of theproject, or earlier after the passing of a resolution at ameeting of Growers in terms which support theproposed sale or assignment, to direct the BareTrustee to sell or assign all right, title and interest ofthe Grower in relation to the project, whether formoney, shares or some other consideration;

(x) to direct the Bare Trustee to pay for the costs andexpenses of any such sale;

(y) to direct the Bare Trustee to receive sale proceeds;(z) [Receipts] to receive or direct the Bare Trustee to

receive the sales proceeds;(aa) to direct the Bare Trustee to hold the receipts in the

Proceeds Fund;(bb) to direct the Bare trustee to invest the receipts and

interest on the receipts and other accretions in anyAuthorised Investment and to pool any AuthorisedInvestment;

(cc) to direct the Bare Trustee to deal with the receipts andother money in any Proceeds Fund as provided in theConstitution;

(dd) [audit] to direct the Bare Trustee to pay for the costsand expenses of any audit from money in the TrustAccounts, each Grower to pay the Grower's sharethereof;

(ee) [indemnities] to indemnify the Responsible Entity andthe Bare Trustee as provided in the Constitution;

(ff) [legal and arbitration proceedings] to commence legalor arbitration proceedings as authorised in theConstitution;

(gg) [settle and compromise] to receive, collect, pay, settleand compromise any payments, debts, obligations,judgments or settlements in relation to the projectand/or to direct the Bare Trustee to do the same;

(hh) [caveat] to lodge and withdraw a subject to claimcaveat against the certificate of title to the land thesubject of the woodlots;


(ii) [other] to execute the Compliance Plan, any deed,agreement, certificate or other document and to do allother things necessary or desirable in furtherance ofthe powers granted to the Responsible Entity and/orto direct the Bare Trustee to do the same; and

(jj) [borrow] to borrow or raise money for the purposes of the project.

Payment of Project FeesThe Responsible Entity shall arrange dispatch to Growers aninvoice requesting payment from the Grower of project feesat least one month prior to the date for payment. TheGrower will pay interest at the Base Rate of NationalAustralia Bank Limited plus 3% per annum on any latepayments of monies.

The Grower agrees to pay to the Responsible Entity as partof the establishment fee referred to in the ManagementAgreement a fee of $700 (plus GST) per woodlot, payableon application.

Dealing with ReceiptsThe Bare Trustee shall deal with the Grower's share ofreceipts of the project and any other money in the ProceedsFund of the Grower in the following manner and priority:(a) pay the Grower's share of the costs of the harvest and

sale as advised by the Manager (unless the Grower hasmade an election to sell their timber under theManagement Agreement); and then

(b) pay to the Responsible Entity any outstanding projectfees or other fees, costs, interest or taxes owing by theGrower to the Responsible Entity under thisConstitution; and then

(c) pay as directed by the Responsible Entity the reasonableestimate of what may be required within the following12 months to pay any project fees payable by theGrower; and then

(d) to pay to the Manager any outstanding fees, costs,interest or taxes owing by the Grower to the Managerunder the Management Agreement; and then

(e) to pay to the Lessor any outstanding Rent or other fees,costs, interest, expenses or taxes owing by the Growerto the Lessor under the Lease; and then

(f) distribute the balance to the Grower (provided theentire balance distributed to Growers is greater than$1000).

Complaints Handling MethodsThe Responsible Entity will deal with all complaintsaccording to the following methods, the details of which areset out in the Compliance Plan:a) all complaints are to be acknowledged promptly;b) complaints that do not require investigation are to be

resolved immediately or expeditiously;c) otherwise, within 21 days of the complaint being made,

the complaint is to be investigated, the complainant isto be given an opportunity to provide information, thecomplaint is to be properly considered, and a report isto be prepared;

d) a decision is to be made and the decisioncommunicated to the complainant with the reasons forthe decision within 28 days of the complaint beingmade;

e) if the complainant remains unsatisfied, the complainantis to be provided with information as to appropriateavenues by which the complainant can pursue thecomplaint including having the complaint resolved byan industry complaints tribunal; and

f) the complaints handling procedures are summarisedseparately in the Compliance Plan, and a copy of themwill be made available on request by any Grower free ofcharge.

Other Obligations of the Responsible EntityThe Responsible Entity is also required to comply withobligations imposed by the Corporations Law. These includethe duty to keep accounts and have those accounts audited,procedure for meetings of Growers, the keeping of theregister of Growers, provisions regarding thetransfer/assignment of woodlots, provisions relating torelated party transactions, and the statutory duties of theResponsible Entity.

Except as set out below, the Growers do not have the rightto withdraw from, or realise the assets of, the project. TheGrower does not have the right to require payment to it ofany money in a trust account other than as provided for inthe Constitution.

Term of ProjectThe project shall commence upon the date upon whichwoodlots are first allotted in relation to the project and,subject to the terms of the Constitution, shall terminateupon the later of the termination of the Lease or the finaldistribution of receipts to the Grower.

Termination of ProjectAt any time, a meeting of Growers may by special resolutionresolve to terminate the project. However, the project maybe continued if it appears to the Responsible Entity to be inthe interests of the Growers for it to do so for such period asis determined by the Responsible Entity.

Upon the termination, the Responsible Entity shallimmediately sell, call in, convert and realise all timber andproject property after paying all proper costs and fees oftermination.

Grower's RelationshipsThe Grower does not have any relationship or contract withany other Growers in the project and all Growers areindependent.

IndemnitiesThe Bare Trustee may indemnify the Responsible Entity fromand against any expense or liability incurred by theResponsible Entity or the Bare Trustee in legal proceedingsrelating to the project, except to the extent that the expenseor liability is attributable to a breach of the duties underSection 601FC or elsewhere in the Corporations Law. If theproject or trust account is taxed under the Tax Act, theResponsible Entity and Bare Trustee may be indemnified outof receipts.

The Responsible Entity shall not be liable for anything doneor suffered as a result of it acting in good faith in relianceupon the opinion or advice of an expert. The ResponsibleEntity is entitled to be indemnified from the receipts to theextent that any such liability is incurred except to the extentattributable to the Responsible Entity's own neglect ordefault.

The Responsible Entity shall not be under any liability onaccount of anything done or suffered by other parties,except to the extent that any loss is attributable to theResponsible Entity's own act, neglect or default.


Provided the Responsible Entity has not breached its dutiesunder Section 601FC or elsewhere in the Corporations Law,it shall not in any way be responsible for any loss, costs,damages or inconvenience resulting from the exercise ornon-exercise of the powers, authorities and discretions underthe Constitution or reliance on documents reasonablybelieved to be genuine. The Responsible Entity may delegateany of its functions under the Constitution and the BareTrustee may delegate any of its powers to the Custodian.

The Responsible Entity and the Bare Trustee will remainresponsible for any such delegates' acts and omissions whichconstitute a breach of duty.The Responsible Entity will not be liable for any failure of aGrower to obtain a tax deduction in respect of the project.

4. RULESAcceptance of ApplicationsWithin 2 months after the acceptance of an Applicationunder any prospectus, and when next accounting to aGrower after any change in the holding of the Grower in theregister, the Responsible Entity will issue to the Grower awoodlot statement.

Assignment or Transmission of WoodlotsNo assignment or transmission of any woodlots may beregistered unless an instrument of transmission or a deed ofassignment in the form set out in the Rules, duly stamped,has been delivered to the Responsible Entity.

QuorumNo business shall be transacted at any meeting unless aquorum is present at all times during the meeting. Thequorum necessary for a meeting at which a resolution only isto be proposed shall be two Growers and for a meeting atwhich a special resolution is to be proposed shall be personsholding or representing by proxy more than 50% of thenumber of woodlots issued to the Growers for whom themeeting has been called.

5. STANDING OFFERSA Standing Offer by the Manager and the Responsible Entityto enter into the Management Agreement with every personwho becomes a Grower under this Prospectus.

A Standing Offer by the Lessor and the Responsible Entity toenter into the Lease with every person who becomes aGrower under this prospectus.


RegistersWe will maintain the principal registers of Growers at ourregistered office at Level 2, Scott House, 46-50 Kings ParkRoad, West Perth, Western Australia. The registers may beinspected by any member of the public between the hoursof 9.00am and 5.00pm on Monday to Friday inclusive,excluding public holidays.

Our allocation policyUnless we agree otherwise with any particular Growers orfinancial intermediary, we will allocate woodlots in order ofreceipt of completed applications.

Minimum subscriptionThe minimum subscription level is 150 woodlots by 31 May2001. If this is not met, or we are unable to accept anapplication for any reason, we will immediately refund theapplication monies received.

Subscriptions and OversubscriptionsThe offer is for up to 1,000 woodlots to raise $7,200,000(plus GST). The Manager reserves the right to acceptoversubscriptions.

CommissionsWe may pay commissions or brokerage in relation towoodlots for which you apply to those persons authorisedby the Corporations Law to receive such commissions orbrokerage. In addition, we may reimburse persons formarketing and other administrative costs incurred in relationto woodlots sold.

DisclosureExcept as stated under the heading “Interests and Fees”below, no persons required to make disclosure underSections 711(2), 711(3) and 711(4) of the Corporations Lawhold (or held at any time during the last 2 years) any interestin the Project or in the formation or promotion of the Projector in any property acquired or proposed to be acquired inconnection with the formation or promotion of the Projectand no amount has been paid or agreed to be paid to thosepersons or benefit given or agreed to be given:(a) to the Responsible Entity, to procure acquisition of

interests in the Project or for services provided under theConstitution; or

(b) for services rendered by the person in connection withformation or promotion of the Project; or

(c) in the case of directors to induce them to become orqualify them as directors.

Interests & FeesThe Manager will receive the fees set out in the summary ofthe Management Agreement.The Lessor will receive the Rent as set out in the summary ofthe Lease.The Responsible Entity will receive the fee set out in thesummary of the Constitution.The directors are entitled to be paid a directors fee whichwill not exceed $40,000 per annum per director, or suchsum as the members may at general meeting from time totime determine.

Mr Mark Blanchard has been paid directors’ fees totalling$12,500 in the last two years.

The directors hold the following interests in Forest RewardsCorporation Ltd:

• Mr Craig Burton has a relevant interest in 9,020,000shares and 2 million options exercisable at 50 cents eachon or before 30 June 2005.

• Dr Andrew Radomiljac has a relevant interest in6,020,000 shares.

• Mr Mark Blanchard has a relevant interest in 3 millionshares.

The directors reserve the right to participate as Growers onthe terms set out in this prospectus.

Mangium Consulting Pty Ltd has received or is entitled toreceive $80,000 per annum for providing forestry services. Dr. Radomiljac is a director of Mangium Consulting Pty Ltd.

Verona Capital Pty Ltd has received or is entitled to receive$220,000 for providing office, secretarial, bookkeeping andadministrative services. Mr Burton and Mr Blanchard aredirectors of Verona Capital Pty Ltd.

Sampala Investments Pty Ltd has received or is entitled toreceive $120,000 per annum for the provision of corporateconsultancy services and Brindabella Holdings Pty Ltd hasreceived $20,000 for the provision of corporate services. MrBurton is a director of Sampala Investments Pty Ltd and isassociated with Brindabella Holdings Pty Ltd.

Treetec Consulting Pty Ltd has received or is entitled toreceive fees of $15,000 (plus GST) for the preparation of theIndependent Forester's Report.

Curtin Consultancy Services Pty Ltd has received or isentitled to receive fees of $6,950 for the preparation of theWA Sandalwood Market Report.

Mr H. S. Anantha Padmanabha has received or is entitled toreceive fees of $2,300 for the preparation of the SandalwoodReport (International).

Garton Smith & Barrett have received or are entitled toreceive fees of $13,750 (plus disbursements) for legalservices and further amounts for any future services inaccordance with their usual time-based charges.

KPMG has been paid a fee of $15,000 (plus disbursements)for the audit of Forest Rewards' financial statements for theyear ended 30 June 2000. KPMG has also assisted ForestRewards Ltd to apply for the Product Ruling and, in respectof this work, Forest Rewards Ltd estimates it will payapproximately $3,960 to KPMG.

ConsentsThe following have each given (and have not prior tolodgement of this Prospectus with ASIC withdrawn) theirwritten consent to the inclusion of the reports, sections,express and implied references and statements detailedbelow in the prospectus in the form and context in whicheach is included, and for the purpose of Sections 716(2) and729 of the Corporations Law were each involved only in the

Additional Information


preparation of those reports, sections, express and impliedreferences and statements:

Treetec Consulting Pty Ltd, Curtin Consultancy Services PtyLtd, Mr H.S. Anantha Padmanabha for inclusion in thisprospectus of their respective reports.

Dr Nicholas Malajczuk of Treetec Consulting Pty Ltd asIndependent Forester in the Corporate Directory and FurtherDetails of the Project sections.

Garton Smith & Barrett for the Additional Information(except the details of interests and fees).

KPMG for the inclusion in this prospectus of extracts of theaudited financial statements of the Forest Rewards Group forthe period ending 30 June 2000 and to being referred to inthe Corporate Directory and Additional Information sections.

DisclaimersTreetec Consulting Pty Ltd, Curtin Consultancy Services PtyLtd and Mr H. S. Anantha Padmanabha have acted asindependent experts and have authorised the issue only oftheir respective reports. They expressly disclaim and take noresponsibility for any other part of this prospectus.

Garton Smith & Barrett have assisted in preparing theConstitution, the Agreements and the Compliance Plan inrelation to this prospectus. They have reviewed thisprospectus to ensure that its contents are consistent with theConstitution and the Agreements. Garton Smith & Barrettexpressly disclaim and take no responsibility for any othermatter referred to in this prospectus.

KPMG have not been involved in any aspect of thisprospectus apart from the financial statements on page 26.They expressly disclaim and take no responsibility for anyother part of this prospectus.

No GuaranteeForest Rewards Ltd does not guarantee the amount ortiming of any tax deduction or item.

Inspection of documentsCopies of the Lease, Management Agreement, Constitution,Rules and Standing Orders may be inspected or obtained,free of charge, during normal business hours at ourregistered office Level 2, Scott House, 46-50 Kings ParkRoad, West Perth, Western Australia.

LitigationThere is no litigation of a material nature pending orthreatened which may significantly affect the Forest Rewardsgroup or the project.

Compliance Committee MembersThe external members of the Compliance Committee, CraigReadhead and Anne Thoume, were not involved in thepreparation of any part of the Prospectus and have notauthorised or caused the issue of the Prospectus. MrReadhead and Ms Thoume consent only to being named asthe external members of the Compliance Committee.

Enhanced Dislocure SecuritiesThe Woodlots may be enhanced disclosure securities withinSection 111AD of the Corporations Law if there are morethan 100 Growers, and if so, the Responsible Entity will besubject to regular reporting and disclosure obligations. Inthat event, documents lodged pursuant to theserequirements may be obtained from, or inspected at, anyoffice of ASIC. Further, in that event, the Responsible Entitywill provide a copy of the most recent financial statement ofthe Responsible Entity and any other document required tobe lodged under Section 1001B of the Corporations Law freeof charge to any person who asks for it during the currencyof the Prospectus.

Application of this ProspectusThis Prospectus has been prepared to comply with thesecurities laws of Australia. The offer of Woodlots containedin this Prospectus is available to persons receiving thisProspectus within Australia.

Directors' ConsentsAs required by law, each of the directors of Forest Rewards Ltd has given his written consent to the issue of this prospectus.Further, this prospectus has been signed by each of those directors or his agent authorised in writing.

Craig Burton Andrew Radomiljac Mark Blanchardby his agent authorised in writing


How to apply• Before signing the Application, you should read the whole of this Prospectus.• The Application must be signed and dated by individuals in the presence of an adult who must sign as witness. Company

applicants may sign under seal, although a seal is not required.• Lodge your completed Form together with your cheque made payable to "CFM - Sandalwood Project 2001" and crossed

"Not Negotiable" by delivery to: Custodian and Funds Management Services, Locked Bag 7, Osborne Park, WA 6916.

Your Woodlots and payment details• You may apply for any number of Woodlots. Forest Rewards Ltd reserves the right to accept or reject applications in

whole or in part at its discretion.• Complete the payment details on the Form. • The amount payable per woodlot is $7,200 plus GST. A further $600 plus GST is payable on 1 September of the next

financial year.

Signature and declarations• Applicants must be one or more individuals or a company.• Each Form must be signed personally by an applicant who is an individual. • Joint applicants must each sign the Application. • Joint applicants will be deemed to hold their woodlots as tenants in common unless requested to the contrary.• An Application by a company may be under seal. • All communications from us will be sent to the address shown on the Form. For joint applicants, only one

address is required.• Please provide your full telephone, fax and mobile phone details in case we need to contact you urgently.• Please date the Application.

Application Directions

Application FormPlease read the Terms and Conditions forming part of this Form before signing it.

Your DetailsFull Name (individual or co.) Mr/Mrs/Miss/Ms

Joint Applicant (if applicable)

ACN (if Company) Contact Name:

Address:

Post Code:

Telephone: Mobile:

Fax: Email:

Your Woodlots

Number of Woodlots applied for

• Year 2001 woodlots at $7,920 per woodlot inclusive of GST


Amount payable $

Please make cheque payable to "CFM - Sandalwood Project 2001”

Terms and ConditionsThe Applicant agrees to be bound by the Constitution as a Grower. The Applicant also offers to enter into the Lease andthe Management Agreement as a Grower and acknowledges that upon this Application being accepted in whole or part, the Applicant will be bound to the Lease and to the Management Agreement as a Grower.

Date of Signing: / /

If Applicant is a Person: If Applicant is a Company:

Signed THE COMMON SEAL of the company Applicant is affixed in accordance withits constitution in the presence of:

Signed Director(if joint applicant)

Witness Director/Secretary

POST TO CUSTODIAN AND FUNDS MANAGEMENT SERVICES, LOCKED BAG 7, OSBORNE PARK, WA 6916BY 31 MAY 2001 (for Year 2001 Woodlots)


Forest Rewards Ltd






financial year.



59.



Please read the Terms and Conditions forming part of this Form before signing it.

Your DetailsFull Name (individual or co.) Mr/Mrs/Miss/Ms

Joint Applicant (if applicable)

ACN (if Company) Contact Name:

Address:

Post Code:

Telephone: Mobile:

Fax: Email:

Your Woodlots

Number of Woodlots applied for



Amount payable $

Please make cheque payable to "CFM - Sandalwood Project 2001”

Terms and ConditionsThe Applicant agrees to be bound by the Constitution as a Grower. The Applicant also offers to enter into the Lease andthe Management Agreement as a Grower and acknowledges that upon this Application being accepted in whole or part, the Applicant will be bound to the Lease and to the Management Agreement as a Grower.

Date of Signing: / /

If Applicant is a Person: If Applicant is a Company:

Signed THE COMMON SEAL of the company Applicant is affixed in accordance withits constitution in the presence of:

Signed Director(if joint applicant)

Witness Director/Secretary

POST TO CUSTODIAN AND FUNDS MANAGEMENT SERVICES, LOCKED BAG 7, OSBORNE PARK, WA 6916BY 31 MAY 2001 (for Year 2001 Woodlots)

Application Form







financial year.





ASICMeans the Australian Securities andInvestments Commission.

CALMMeans the Department ofConservation and Land Managementof Western Australia.

Corporations LawMeans the Corporations Law ofWestern Australia.

CPIMeans the Consumer Price Index (AllGroups) for All Cities published fromtime to time by the Australian Bureauof Statistics.

ConstitutionMeans the Constitution summarised inthe Summary of Material Agreementssection of this prospectus.

CustodianCustodian and Funds Management Pty Ltd, a division of Hayes KnightGTO Pty Ltd.

Financial YearMeans financial year ending on 30June of the relevant year.

GrowerMeans a person (or in the case of jointapplicants, those persons) whobecomes a Grower as a result of eitherthe allotment of woodlots under thisprospectus or a transmission, transfer,mortgage, assignment or otherdisposal of woodlots under theprovisions of the Lease and theManagement Agreement and whoremains the registered holder for thetime being of any relevant woodlots.

GSTMeans the goods and services taxintroduced by the Commonwealthgovernment.

IndexedMeans adjusted by CPI incrementsusing the March 2001 quarter as thebase.

Lessor Means Forest Lands Pty Ltd ACN 089 949 824.

Management PlanMeans the management plan for theproject (as amended or updated fromtime to time).

ManagerMeans Forest Rewards ManagementPty Ltd ACN 089 940 376.

Project or projectMeans the Forest Rewards SandalwoodProject 2001 outlined in thisProspectus.

Responsible Entity Means Forest Rewards Ltd ACN 089 582 427.

Sandalwood or sandalwoodMeans Santalum spicatum, commonlyknown as Western Australiansandalwood.

Woodlot or woodlotMeans an area of approximately onehectare offered to be subleased to aGrower under the Lease.

year 2001 woodlotMeans a woodlot in the project forwhich the Initial Services arecompleted by 30 June 2001.

year 2002 woodlotMeans a woodlot in the project forwhich the Initial Services arecompleted in the financial year to 30June 2002.

Glossary Of Terms


Level 2, Scott House 46-50 Kings Park Road West Perth WA 6005

Tel 08 9324 1155 Fax 08 9324 2171Email [email protected]

FOREST REWARDS LTD

Sandalwood PROJECT 2001 - Ferrier Hodgson · Sandalwood Project 2001 ARSN 096 165 874 ... Sandalwood Farming Makes Sense 6 ... when the Communist Government banned imports.

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