The mystery of Oud « LES MYSTERES DU BOIS DE OUD »

Andrew G. STEEL Director

ASIA FORESTRY MANAGEMENT LTD

Asia Forestry Management

Founded in 2006 Formed for the purpose of investing in and implementing environmentally sound forestry development projects sustaining and strengthening an ecological balance within its operational areas. Our vision is to reduce the pressure on the world's natural forests enabling investments into forestry that will create sustainable plantations over the long term Aim was to be a forestry management company allows the general public to diversify their portfolio and invest in:

- Themselves- The community- The environment

1. Asia Forestry Management

The Asia Forestry Group is engaged in forestry management in Thailand. The group is focusing on Aquilaria plantations and distillation divided into 2 key business units,

Asia Forestry Management Co., Ltd. and Asia Forestry Distillery Co., Ltd.,

Company Name Operation Registered Year

1. Asia Forestry Management Co,. Ltd. (“AFM”)

• Investing in Aquilaria trees plantations (Agarwood trees)

• Offering investment units in Agarwood trees to investors

September 2006

2. Asia Forestry Distillery Co,. Ltd. (“AFD”)

• Producing and selling premium grade oud oil

October 2008

2. Group Business Overview

Summary of Group OperationsI. Plantation: AFM

Initial plantation: AFM invests in both corporate owned plantations and farmer contracts.

Inoculation - the trees, >5 years old, will be inoculated with a particular technique.

Resin development: After 1-2 years of the inoculation process, the dark resin is developed.

I. Distillation: AFD

Harvesting: the wood is cut and transported to the factory.

Wood chip preparation: the log is chopped and grinded, then fermented

Distillation: distill the prepared mix raw material for 10 days to extract Oudh oil.

Oil grading & Stocking: After Inspection oil is classified into quality grades, the bottled oil is stored in secured rooms in safe due to its high value.

Planting/Buying

Harvest & Cutting

Inoculation

Send to AFD

Resin Development

DistillationD

istillery P

rocess

Plan

tation

P

rocess

AFM

AFD

Stocking

3. Summary of Group Operations

Summary of Group Operations

Planting/Buying

Harvest & Cutting

Inoculation

Send to AFD

Resin Development

DistillationD

istillery P

rocess

Plan

tation

P

rocess

AFM

AFD

Stocking

3a. Summary of Group Operations

• Agarwood is a precious resinous wood forming in Aquilaria trees, native to the Southeast Asia region. The dark resin is formed as an antibody for healing after injury or fungus infection. The agarwood is widely used in perfume and cosmetic industry, and religious activities.

• Agarwood trees are registered as an endangered species by CITES due to its precious value, causing illegal wood smuggling.

• Thailand has been recognized worldwide as a source of premium quality agarwood; however, most of agarwood supply is derived from wild cutting or illegal logging.

• In respect of tree conservation, the concept of

Aquilaria plantations was initially developed in Thailand, with inoculation techniques, capable to provide premium quality agarwood comparable to the wild source.

4. What is Aquilaria?

All AFM plantations are located in Trat province, next to the Cambodian border providing perfect growing conditions of agarwood inoculation.

35 plantations currently able to supply more than 40,000 trees and the inoculated trees account for 40% of total trees.

Trat is also known as the ‘Fruit capital’ of the world. The 380 kilometer stretched forest grounds, the very fertile soil and the rainy climate make Trat the most perfect place for our plantations. The best Agar oil from Thailand comes from this region. Trat is situated near the Cambodian border.

Asia Forestry Plantations5. Asia Forestry Plantations

CITES (the Convention on International Trade in Endangered Species of Wild Fauna and Flora)

CITES is an international convention aiming at preserving the wild specimens, both

animals and plants. Aquilaria is considered as endangered species and the trade of such trees is strictly

governed by CITES. The wild agarwood trading has been prohibited since 2004. Appendix II includes species not necessarily threatened with extinction, but in which

trade must be controlled in order to avoid utilization incompatible with their survival.

Around 200 tree species are included in the three CITES Appendices About 85 species

are included in Appendix II Agarwood originating from managed plantations is required to register with CITES

to ensure its origin, and CITES permit is a prerequisite for the export of agar products.

CITES Appendix II: Agarwood - Endangered species

6. CITES

CITES Reporting 7. CITES Reporting - Thailand

8. History of Oud

•There are 5 separate places in the bible where aloeswood is mentioned. In older oral traditions, aloeswood is sometimes referred to simply as aloes (not to be confused with aloe vera).

Aloeswood and the Bible

•“Like valleys that stretch out, Like gardens beside the river, Like aloes planted by the LORD, Like cedars beside the waters.

Numbers 24:6

•Nicodemus, who had first come to Him by night, also came, bringing a mixture of myrrh and aloes, about a hundred pounds weight

John 19:39

•“I have sprinkled my bed With myrrh, aloes and cinnamon.”

Proverbs 7:17

•All thy garments smell of myrrh, and aloes, and cassia, out of the ivory palaces, whereby they have made thee glad

Psalms 45:8

•Spikenard and saffron; calamus and cinnamon, with all trees of frankincense; myrrh and aloes, with all the chief spices.

Solomon 4:14

History of Oud oil9. History of Oud

Book 27 of Sahih Muslim, #5601

• Nafi’ reported that when Ibn Umar wanted fumigation he got it from aloeswood without mixing anything with it, or he put camphor along with aloeswood and then said: This is how Allah’s Messenger (may peace be upon him) fumigated.

Book 55 of Sahih Bukhari, #544

• Narrated Abu Huraira: Allah’s Apostle said, “The first group of people who will enter Paradise, will be glittering like the full moon and those who will follow them, will glitter like the most brilliant star in the sky. They will not urinate, relieve nature, spit, or have any nasal secretions. Their combs will be of gold, and their sweat will smell like musk. The aloes-wood will be used in their centers. All of them will look alike and will resemble their father Adam (in statute), sixty cubits tall.”

Book 26 of Sahih Muslim, #5487

• Umm Qais, daughter of Mihsan, the sister of ‘Ukasha b. Mihsan said: I visited Allah’s Messenger (may peace be upon him) along with my son who had not, by that time, been weaned and he pissed over his (clothes). He ordered water to be brought and sprinkled (it) over them. She (further) said: I visited him (Allah’s Apostle) along with my son and I had squeezed the swelling in the uvula, whereupon he said: Why do you afflict your children by compressing like this? Use this Indian aloeswood, for it contains seven types of remedies, one among them being a remedy for pleurisy. It is applied through the nose for a swelling of the uvula and poured into the side of the mouth for pleurisy.

• Agarwood has a very long history of use as a medicine, incense and as an aromatic oil.

• Agarwood and its essential oil have long been associated with various religions and cultures. While it finds a mention in ancient scriptures of Japanese and Chinese dynasties it also finds mention in the Bible where it is known as aloes or aloeswood.

• It is considered an aid for meditation in spiritual circles.

History of Oud oil

Agar Wood Agar Oil Aloe Oil Oud(h) Oil Gaharu Jinko Aloeswood

11. History of Oud

Product Characteristics:

The resinous wood from the particular trees provide a very pleasant odour highly sought after throughout the world. As a result, the premium-grade Agarwood is extremely precious, being considered as the most expensive product originated from plant.

Agarwood price is subject to quality, purity, and origin of the wood. The premium quality wood price is high as thirty thousand US dollars per kilogram.

Incense for religious purposes Perfume and perfume component Spa & Aromatherapy Traditional medicinal

Value: Agarwood - the most expensive plant product by weight

Usage: Various usage for both pleasure and religious activities

12. Product Characteristics

Plantation Operations

Nursery Stage Site Preparation 2 year old 6 Years Old

Individual ID Infected Wood Inoculation

13. Plantation Operations

AFD Current Target Expansion Future

No. of Distillation Stills 59 141 200

Avg. Distillation Capacity (Kgs./month) 5.4-12 13-28 18-50

AFD Factory is located close to the raw material supply via AFM plantations, to minimize logistic cost.

AFD currently operates 59 stills which is capable to produce Oudh oil of approximately 4,500 - 5,000 tolas/year or 54 -60 kgs./year.

In the near future, AFD plans to expand its capacity to 200 stills, almost 4 times greater than its current capacity, already obtaining the approval from Ministry of Industry.

14. Distillation Process

Distillation Operations

15. Distillation Operations

Factory Storage Preparation

From the tree to the pot – Preparation – PHASE I

Distillation Operations

16. Distillation Operations

Mash Distillation Room Filling 10 days Oil

Extracting the oil from the tree

Fermentation – Phase II

Distillation – Phase III

QA – Phase IV

Testing – Phase V

Traditional Distilling Process17. Traditional Distilling Process

Wood Fired 10 days 32ml per

still

Modern Distillation18. Modern Distillation

•Electrically Heated process•Distillation time - 3Days •Production 50 Kg per month

Advantages:

• Consistency of Quality & Quantity • Economies of scale - lower price

MAIN FACTORS

LocationOdour Buyers Market

IMPROVEMENTS DNA testing International standard

19. Grading Of Oil

Agar Wood and its oil is not always of the same value. The value depends on a set of factors related to the size, resin content, fragrance and color / purity. Also the country where the Agar Wood comes from is an important aspect for its value.

How do the grades differ?

• Oudh oil can be practically classified into 4 grades, i.e. grade A, B, C and D. The grade-A is currently the main product of AFD which is priced approximately $21,000 to $35,000 per litre.

• The retail price of AAA vintage oud, strictly preserved under perfect conditions, is extremely expensive, over $1000 per tora, or $83,000/Litre.

AFD Oudh Oil Recommended Retail Price Wholesale Price

Grade A USD35,000/Litre USD16 - 22,000/Litre

• Asia Forestry Group offers high grade agar products - 100% PURE OIL

20. Premium products

OUD - Liquid Gold

The value of Agar Oil compared with the value of gold:

Today’s gold price is US $ 1,350 per ounce. 1 kilogram equal 35.27 ounces. Gold per kilogram US $ 47,600Grade A – Agar Oil (retail) is US $ 80,000+

1 tola $1000-200084 Tola Per Kg

21. Liquid Gold

The most expensive essential oil in the world!

The Middle East market is the main market for Oudh Oil, mainly the Muslim community, as this is the world’s most popular region for using oudh.

The needs of the target group can be divided into different parts:• Religious: The needs of the Muslim community are related to religious

aspects. They highly cherish the oudh and use it for ceremony purposes.

• Cultural: oudh oil is often used as special gifts and as a welcomingfragrance in their houses.

• Esthetical reasons: Oudh oil is has a very strong and distinct smell and is hardly used anywhere outside the Arabian Peninsula. This distinct smell is adored by both men and women and stands for wealth.

The Middle East market uses Oudh oil for the following end products: Perfumes Incense Medicines

The Middle East Market22. The Middle East Market

23. World Muslim Population

Oud Wholesale market 24. Wholesale Market

Shooting export volume : Surging exports over 102.7% per year to support the global growing demand from Y2005 to Y2009.

Premium grade oil : Thai oud oil, mostly from Aquilaria Crassna, is highly appreciated by the Middle East customers from Saudi Arabia, Bahrain and U.A.E, covering almost 100% of the export volume from Thailand.

• World export increased by 87.7% from Y2005 to Y2007.

• Thailand is the worlds top exporter enjoying the highest market share of 51.1% in Y2006 and 49.3%in Y2007.

World import surged by 92.5% from Y2005 to Y2007.

Most of Oudh importers are located in Middle East region, namely Saudi Arabia, U.A.E and Bahrain, covering more than 90% of world import volume.

Source : www.cites.org

World export : Growing demand in Oud oil

World import : Middle East - the major oudh oil consumers

97

435

754

11

114

371

145

189

253

182

91

134

434

851

1,529

-

500

1,000

1,500

2,000 United Arab Emirates

Singapore

Malaysia

Thailand

Total

Kilograms

405 4286951

287

536

11

112

244

7

53

96

424

880

1,571

-

500

1,000

1,500

2,000 Others

Bahrain

United Arab Emirates

Saudi Arabia

Total

Kilograms

25. Global Imports v Export

• Aquilaria Crassna provides the highest quality resin among all Aquilaria families. This sub species is found natively in Southeast Asia region, especially in Thailand and Cambodia.

• The oudh oil from Aquilaria Crassna is the most sought after with rapid increase in trading volume, according to CITES, growing by 106% during 2005 to 2007.

So

urce

: ww

w.cite

s.org

Global Crassna oil demand : Impressive Growth

322 445624102

435

947

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800 Crassna

Others

Kilograms

Growing 106%/year

26. Global Crassna oil Demand

Shooting export volume : Surging exports over 102.7% per year to support the global growing demand from Y2005 to Y2009.

Premium grade oil : Thai oud oil, mostly from Aquilaria Crassna, is highly appreciated by the Middle East customers from Saudi Arabia, Bahrain and U.A.E, covering almost 100% of the export volume from Thailand.

Thailand: 1st world exporter - both quality & volume

So

urc

e :

ww

w.c

ites.

org

83

284 369604 608

10

112183

244419

1

36

184

118

548

2

2

18

6

51

96

434

754

972

1,627

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800Others

U.A.E

Bahrain

Saudi Arabia

Total

Kilograms

Growing 103%/year

27. Thailand Exports

28. Supply Route to Europe

We Supply all of the relevant paperwork (CITES, Export, GC Analysis)

Bangkok

29. Sustainability

2009 winner of the United Nations SEED Award for

Entrepreneurship in Sustainable Environmental and Social Development

The FSC is a body which pertains only to timber products. The production from our plantations is based on the sale of essential oil, which is a Non-Forestry Timber Product (NFTP) and are not eligible for the FSC certification.

Strategy

30. Strategy

Management Team

1 •Expand operations across SE Asia•Become preferred supplier to the perfume industry

2 •Extend the Value Chain•Direct supply to buyers

3 •Consistent Quality & Quantity•Secure long term supply contracts

ASIA FORESTRY MANAGEMENT

SOCIÉTÉ FRANCAISE DES PARFUMEURS36 rue du Parc de Clagny - 77000 Versailles - Tél : 01 39 55 84 34 - www.parfumeur-createur.com

Asia Forestry Management Co., Ltd. 54 BB Building, # 3705, Sukhumvit 21 Road (Asoke),Kwaeng Klongtoey-Nua, Bangkok 10110 Thailand+66 (0) 2 259 6255| andy@asiaforestry.biz | www.asiaforestry.biz | skype| andrew.g.steel | BB PIN 220512B2

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