2,173 55,000acres currently new trees plantedprotected in our per week duringForestry Easement peak season

Trust

Ethical Timestm

Summer newsletter 2013

this issue...Harvesting anddevelopment

After another successful harvest,we share our plans for the future

Plantation updateRobert Brown reports on the progressof our Chimurria plantation

Pallet productionWhy Ethical Forestry is such animportant part of the fruitexport chain

Growing together

2013 Harvests completedAs another successful harvesting season ends, ourreturns were once again inline with our projections

As our Workers’ Co-operative gainsmomentum, we share our goalsand ethos behind the project

Market reportWhy is the ONF’s timber marketreport so important?

Investor’s storyInvestor, Simon Gibbons, shareshis thoughts and experienceof investing with us

We are pleased to report that our 2013 harvests werecompleted on time and our payouts are once againinline with our projections. Investors who had theirtrees harvested during this period are now receivingtheir returns.

2013 has been an exceptionally busy year both in theUK and Costa Rica. As the demand for our productscontinues to grow, so have our facilities. We haveexpanded our workforce, purchased 14 new plantationsand are increasing our San Carlos nursery’s output from25,000 new trees per week to 55,000.

Inside this edition you can read more about our expansionplans as well as the recent harvesting of Formaleta, Teak,Melina, Acacia and other mixed species.

Due to popular demand, we are continuing our Chimurriaplantation update seen in the previous two newsletters.This section chronicles the impressive growth of 325,000+Melina trees over an 11-month period, photographedfrom the same position.

Step into virtually any supermarket in the UK and you willfind crates of pineapples and bananas from Costa Rica.As a respected supplier of pallets and wood to CostaRica’s food packaging industry, we share some interestingstatistics about the industry and why, as suppliers ofwood, Ethical Forestry are an important part of the fruitexport chain.

You can also read about our Workers’ Co-operative,developed to provide our growing workforce with themeans to create a sustainable food source.

On the back page you will find our popular ‘Investor’sstory’, where Simon Gibbons shares his and his family’sexperience of Ethical Forestry.

We hope you enjoy this newsletter and, as always, wewelcome any comments.

The Ethical Forestry team

Ethical Forestry Ltd, 80 Holdenhurst Road, Bournemouth, Dorset, BH8 8AQ telephone 0800 075 30 10 email enquiries@ethicalforestry.com

Operations update2013 expansion planspush ahead of targetAs ever, all our departments in both the UK and Costa Rica are busy with

operations. But it’s our harvesting, plantation acquisition, land preparationand nursery teams that are particularly active.

To cope with the rise in demand for our investments, our land acquisition team,

headed by Professor Ignacio Rodríguez Varela, recently surveyed numerous potential

sites and purchased 14 new plots. Covering 3,429 acres, they allow us to plant over

one million new trees for our investors. We own all of the sites unencumbered, which

are registered with the Costa Rican Land Registry.

Careful consideration was given to the new sites and from detailed analysis we knowthey have the right topography and soil for strong and healthy plantations.

To provide trees for these new plantations, our nursery team is increasing theSan Carlos nursery’s output capacity from 25,000 new trees per week to 55,000.

Like all our new sites, they are undergoing rapid changes such as land preparation,the creation of new houses for our resident caretakers and their families as well asthe development of road infrastructure and access.

Preserving the natural forests adjacent to our plantations is an important part of ouroperations, so we have assigned approximately 35% of this new land to our ForestryEasement Trust, bringing the trust’s protected land to over 2,100 acres.

The safeguarding of the rare and endangered tree species within these newlyprotected zones lies with our expert Dendrologist, Ariel Rodriguez Guitierrez. With an

incredible passion for his work, Ariel will support us in our conservation efforts across

our 14 new sites by collecting the rare and endangered trees’ seeds and strategically

planting their saplings. This process is integral to our operations and guiding

principles, and one we know Ariel is committed to.

25,000 new trees per week to 55,000Top two: As part of our field study research, our Forestry Engineers gather

growth data from mature trees

Middle: Forestry Engineers harvesting

Below: Logs harvested from 4-year-old Melina trees arrive at our timber mBottom: A panoramic shot of harvested Acacia at our timber mill

To cope with the high demand for our investments, our expansionplans have seen the acquisition of 14 new plots

during the first half of 2013Meanwhile, the growth-harvest cycle continues for our investors

While our 14 new plots are developed and our nursery’s capacity increased,our harvesting team, which includes our Forestry Engineers, GPS specialistsand extraction teams, have successfully completed the 2013 harvest onbehalf of our investors.

As always, it has been a methodical process. Before harvesting began, our

investors were sent a harvesters’ report outlining the proposed course of

action and recommending which trees should be harvested and which

should be left to continue growing. Once our investors approved their

reports, our Forestry Engineers surveyed their trees and checked the GPS

points against our tree management database. They then harvested theselected trees, producing our investors’ returns. This process will be repeatedthroughout the term of their investments until the final harvest, when alltheir remaining trees are harvested.

During all this activity, our protected zones have been alive with CostaRica’s fascinating wildlife. Our timber mill Plant Manager, Loyal Clarke,

recently came across a curious sloth that had wandered out of the abuttingprotected zone and into our timber mill. With a keen interest in animals andtheir protection, Loyal aided it back into the safety of the forest.

With our successful land acquisition, development of our nursery and the

harvesting of our investors’ trees, it’s a busy time for everyone. We will keep

you updated on the progress of our 14 new plantations as well as the other

new plots that are currently being reviewed.

Top: Our nursery will soon be producing 55,000 new trees per weekduring peak season

Middle: Loyal carries an inquisitive sloth from our timber mill back into the protected

Right: An exotic hawkmoth larvae that mimics a snake to deter predators

Right bottom: Fer-de-lance and coral snakes photographed on our plantations

Below centre: Stack of sold Teak and Acacia awaiting shipment at our timber mill

Growing to planAs our Chimurria plantation reaches its first birthday,we share its impressive growth rates

Our Chimurria plantation is a typical example of the many sites withinour portfolio. Since the purchase and development of the land, whichwe first reported on in our autumn 2012 newsletter, it has grown

healthy and strong.

The main image below shows the rolling fields of the plantation’s Melina trees

11 months after planting. To show the plantation’s development, their growthcan be compared to the images in our two previous newsletters (available todownload at www.ethicalforestry.com).

The series of photographs on the opposite page show the growth of thisMelina plantation photographed from the same position over an 11-monthperiod. Starting with the planting of Melina saplings in August 2012, theirprogress is tracked to June 2013. During this time the average height of thetrees has increased from 1.5 feet to over 17.5 feet.

Our resident photographer, Norbert, says: “Photographing the plantations to tryand encapsulate the size of the trees and the area covered is a real challenge.It’s only when you step into the plantations do you get a sense of scale, wherefield after field seems to roll on forever.”

Over the coming months, our team of Forestry Engineers will tend the325,000+ Melina trees on this plantation individually. Undertaking careful

pruning to ensure the trees continue to grow tall and straight, they will also be‘sealed & healed’ to protect them and keep them healthy.

As previously reported, 132.57 hectares (327.58 acres) of this plantation hasbeen placed within our Forestry Easement Trust to protect the land and theecosystems within it. While the commercial trees are being tended to, ourDendrologist, Ariel Rodriguez, will document and safeguard the rare andendangered species both in and outside the protected areas.

After just 11 months, the average height of theseMelina trees has grown from 1.5 feet to over 17.5 feet

The remarkable growthof our Melina

August 2012Young Melina saplings are planted andGPS coordinates allocated to each one

November 2012Directors Robert Brown, Stephen Greenawayand Matthew Pickard stand amongst the sameMelina trees 4 months after planting

September 2012Just one month after planting, the Melinasaplings are already thriving

January 2013UK Business Development Manager,Jerry Thomas, stands under the canopy of thesame Melina trees 5 months after planting

October 2012Director, Robert Brown, stands next to the sameMelina trees 3 months after planting

June 2013Every tree we plant has unique GPS coordinatesregistered on our tree management database

June 2013Robert Brown stands amongst Melina treesplanted 11 months previously

Fruit export is big businessGo into virtually any supermarket in Europe orAmerica and you will find crates of pineapplesand bananas exported from Costa Rica

Since Christopher Columbus first encountered the pineapple in 1493,the humble, spiky fruit has arguably travelled just as far, if not further.It’s now a regular feature in most supermarkets and convenience storesaround the world.

Costa Rica is currently the third largest producer of pineapples in the world,producing around 1,870,000 kilo tonnes per annum mainly for export to Europe,the USA and Canada. The main producer is the Philippines (2,198), the secondbeing Thailand (1,894).

To export these vast quantities, Costa Rica now produces over 5.5 million palletsper annum. Producing this amount of pallets every year requires a reliable,steady supply of logs to keep the chain operating.

In the 2012 ‘Wood in Costa Rica’ report by the ONF (The Costa Rican NationalForestry Office), they state the following statistics:

‘In 2011, 919,014 cubic metres of roundwood (log) were consumed, 73.7% ofwhich came from sustainable plantations, 23.4% from agricultural land and 2.9%from the forests. 50% of this wood was used for pallet production, 28.5% forconstruction, 16.8% for furniture and 2.2% for other uses.’

Geri Brown, Director and Head of Sales for Ethical Forestry Costa Rica, says:

“By working closely with fruit exporters who recognise our reliable supply chain

and uncompromising attitude towards sustainability and quality, we supply a

steady stream of pallets and pallet kits for their thriving agricultural operations

within the region.”

Approximately 5.5 millionpallets are used for the

exportation of fruitproducts from

Costa Ricaevery year

She goes on to add: “In 2001 Costa Rica exported 322,000 tonnes of pineapples.It now exports in excess of 1.8 million along with 2.3 million pallets carryingbananas. With the export trend rising and the wood supply chain from naturalforests reducing, the need for sustainable plantations such as ours is becomingincreasingly necessary to ensure this major contribution to the country’seconomy continues.”

A typical pineapple plantation

Our guarantee: every pallet we produce bares our seal of sustainability and quality

A popular supermarket commodity: pineapples from Costa Rica

Working togetherSelf-sufficiency

through ourWorkers’ Co-operative

As part of our sustainability programme, we’ve launched our Workers’Co-operative. Designed to create and maintain a healthy, self-sufficient andsustainable food source for our workers, we aim to significantly improvequality of life by providing them with the facilities and means to thrive.

Supplying the co-operative with land, seeds, facilities, livestock and materials,the initiative is supported by Ethical Forestry but run by our employees. Workersplant, manage and tend the land, crops and animals, giving them a reliable,

Olivier Gutierez Malespin, who manages theco-operative, tends to the aubergines

Corn grown and tended by Olivier

Green chillies - a common ingredient in CostaRican cuisine

Olivier harvests radishes - just one of themany foods grown by the co-operative

high-quality food source that is local to them.

The funds generated from the sale of the goods are then reinvested into furtherfacilities, reinforcing the initiative’s inherent sustainability.

The Workers’ Co-operative includes:• A continual reinvestment programme ensuring infrastructure growth

• Adding nursery loop tunnels to continue growing crops throughoutthe rainy season

• The development of a free range chicken enclosure housing approx.250 chickens producing approx. 225 eggs per day and 500 cubic metres

of droppings per annum to be used for compost production

• The growing of vegetables such as corn, cassava, plantain, tomatoes,peppers and green beans, as well as fruit such as passion fruit and papaya

The Workers’ Co-operative, coupled with our ethos of offering the best workingconditions, good wages and staff education is testament to our belief that wecannot have a healthy and growing business unless our community of workersis receiving the best support we can give them.

ONF - Timber market reportOfficial facts and figures produce positive reports

As the leading provider of sustainable timber investments, it’s vital we getthe trends and statistics surrounding our industry from a dependable andreliable source. Costa Rica’s National Forestry Office (ONF) is just that.

Equivalent to the UK’s Forestry Commission, the ONF is Costa Rica’s leadingauthority on its woodland.

Their primary task is to provide forestry statistics to MINAET (the Costa RicanMinistry of Environment, Energy and Telecommunications).

To do this, the organisation collects data from hundreds of sources within thecountry, enabling them to compile a reliable report on the country’s performance.

With an emphasis on protecting, expanding and promoting the sustainablemanagement of Costa Rica’s woodlands, the ONF also works to increase thecountry’s market value, ensuring profitability is at its best.

The ONF distributes national and international information about timbermarkets, costs, prices, trends, buyers and more. Which is why as growers of manyof the country’s most popular timber species, we make sure we’re always up tospeed with their latest reports.

An investor’s story Written by Sarah andSimon Gibbons

If you would like to appear inAn investor’s story, please contact

peter.bowdler@ethicalforesty.com

Finding the right investmentfor their family’s needs

“ After my wife Sarah and I gave careful consideration to our pension fund in whichwe were achieving between 3% and 8% returns but averaging around 4%, andwith inflation running at around 2.5% on our savings, we decided to investigatethe alternative investment market, which led us to Ethical Forestry.

At first we thought the figures were perhaps too good to be true, but with manynews reports on the global timber supply chain reducing and demand for timberproducts rising year-on-year, we contacted them and arranged to visit theiroffices in Bournemouth.

What struck us most about the company was the professionalism, both intheir attitude and work environment. Specialising in just one area, theirlevel of expertise was clear from the outset.

After going through the figures in detail, from Melina growth rates to its currentmarket value, we quickly warmed to the prospect of investing.

Our next hurdle was the concern for the security of our investment. This wasquickly overcome by having the comfort of a tree replacement guarantee forthe first three years, rights to the land on which our trees would be planted

throughout the term and individual GPS points for every tree. The environmentalbenefits were also an important consideration for us; we want to leave the worlda better place for our son, Cameron. Cameron liked the investment too so as a

Print and protect

family we invested, both for our pension and a sum from Cameron’ssavings that will generate income for his university fees or home deposit. ”

How we reduce the environmentalimpact of our printed marketing materials

You’ll notice that we feature the World Land Trust’s logo on our brochuresand leaflets. This is because we endeavour to reduce our carbon footprintby using Carbon Balanced Paper where possible.

Considered the most sustainable method of producing and distributing paper, itis carbon balanced, or offset, by the international conservation charity, the WorldLand Trust.

By using Carbon Balanced Paper we’re able to support this extremely worthwhilecharity in protecting threatened habitats and their biodiversity. The World LandTrust has already saved 40,770 tonnes of CO2, protecting 1,677 acres of threatenedforest and natural habitat, so it’s clearly an incredibly effective initiative and onewe’re committed to.

Additionally, we always encourage people to download material from ourwebsite in PDF format rather than print it off, and only send out brochures andleaflets when necessary.

To learn more about the great work the World Land Trust does, visit their websitewww.worldlandtrust.org

100% recycled paper Ethical Forestry is committed to the successful future of our planet. This newsletter is printed on recycled paper producedusing 100% recycled waste at a mill that has been awarded the ISO140001 certificate for environmental management. The pulp used in thisproduct is bleached using a totally chlorine free (TCF) process. We only used 100% vegetable inks in the printing of this brochure.

251kgs of CO2 has been balanced in the production of this newsletter, preserving 21.08 m2 of ecologically important standing forest underimminent threat of clearance. This newsletter is designed and published with respect for the environment, please recycle if no longer required.

For more information on our ethical investments or to speak with an advisor, please call us free on 0800 075 30 10 or visit www.ethicalforestry.com