INVESTMENT FORESTRY - Continued

Historical Note Since 1946 UK governments of all political persuasions have supported forestry in an attempt to increase home production and reduce dependence on imports by a combination of grant aid and tax relief. More recently the emphasis has shifted to a mixture of commercial, recreational and environmental priorities with grant aid being available for the development of both forestry and non-forestry activities.

Future market for timber The UK timber market is cyclical, performing as a lagging indicator of general economic activity (GDP). Up until 1995 timber prices tended to follow the consumer price index, giving forestry its reputation as a hedge against inflation. Over the 6 years to 2001 prices fell in real terms, held steady for three years and from 2004 began to show signs of recovery. It seems likely that they will gain further and that the upward trend in line with inflation will be resumed.Investment characteristics

MINIMUM INVESTMENT - is around £40,000. Most investments are in the range £100,000 to £500,000 and upwards.

INVESTMENT PERFORMANCE - can be by growth in capital value or by income from timber sales but usually by a combination of both. Commercial conifer plantations are generally bought on an forecast real yield of 6% to 7%.