TFS SANDALWOOD YIELD PROJECTION SUMMARY An independent trial conducted in 2004, supported by a 2008 trial conducted by TFS have confirmed that the projected yields published in its PDS are on target. TFS PDS The yields published in the TFS PDS are derived from the work of Mr Peter Kimber (B Sc., Forestry 1st Class Hons) whose forestry research career dates back to 1961. As Head of the Extensions Branch of the Forests Department of Western Australia Peter was instrumental in the planning and development of research planta- tions of Indian Sandalwood in the ORIA in the early 1980’s. His central involvement in the Government trials continued as Princi- pal Operations Officer of the Department of Conservation and Land Management (CALM) from 1985 to 1994. Peter brings his extensive knowledge and experience to the role of Principal Forestry Consultant to the TFS Group which he has held since 2000. 2004 INDEPENDENT TRIAL An independent trial in 2004, was conducted on a sample of 14yo trees grown on the Ord River Irrigation Area. The trees were owned by the Forest Products Commission (FPC), and the results were published in the Sandalwood Research Newsletter, March 2006. The mean heartwood content of between 29% and 34% at the two heights sampled in each tree is what is expected by TFS at the age of 14, which is one third heartwood and two thirds sapwood. In addition the mean heartwood oil yields in this trial of between 2.9%-3.4% are consistent with the TFS PDS forecast yields of 3.15%. 2008 TFS TRIAL In 2008, TFS purchased various sandalwood trees aged 14 years, from private growers in Kununurra. At the same time TFS harvested a sample of its oldest trees which were then 8 years old. The trees from the private growers were in poor condition and in fact the TFS 8yo trees were about the same size as the 14yo private trees. Data from the 14 year old trees were used to predict the heart- wood and oil yield of the TFS trees when they would be 14 yo. This projection yielded approximately 21 kg of heartwood and 0.65 kg of oil which is consistent with the TFS PDS yields. Note that these figures do not include yield from the butt and the root mass of the tree, which is expected to add 20% to the total yields. Of particular interest from this trial is the superior growth rates shown by TFS trees. Based on basal diameter measurements, the TFS trees at age 8 were about the same size as the 14yo private trees. In addition the TFS trees at 56% the age were already 75% the size of the FPC trees which were the subject of the 2004 in- dependent trial. OIL QUALITY The quality of the oil from both trials met or exceeded the ISO standard for Santalum album oil (Indian sandalwood). Based on the high quality of the Kununurra grown Indian Sandalwood oil, commercial offtake agreements have been entered into with leading global natural cosmetics house Lush Cosmetics UK, and Albert Vieille France. CHEERS – TO THE GOOD OIL “Out of over 7,000 classified fragrances since 1750, 3212 (46%) contain Sandalwood notes,” said Alexandre Choueiri, Head of Lancome UK, L’Oreal. Results are in for the distillation quality trials, and the verdict is impressive. Kununurra-grown trees ranging from 8 to 14 years were tested for oil quality at Albert Vieille’s Spanish distillation facility in April 2008. Results showed that despite the young age of the trees, the oil quality came up trumps and successfully met the international standard for Indian Sandalwood oil (ISO 3518). “This…shows that even with young trees, the oil is in the range of the usual quality of the Santalum album coming from India … The smell…here again, we are in the pattern of typical Sandalwood notes,” said Georges Ferrando, Managing Director of Albert Vieille SA. As international interest in TFS trees grow, the samples and information generated from these trials will provide an important plat- form for further research and give potential buyers a taste of what’s to come. “This is very good news, really encouraging...,” said Georges. AVG KUNUNURRA ISO 3518:2002 GROWN SANTOL ALPHA 41 – 55% 43.62 CIS BETA SANTOL 16 – 24% 18.64 TFS CORPORATION ANNOUNCES OIL SUPPLY AGREEMENT WITH LUSH COSMETICS 21 February 2008 TFS Corporation (TFS), the Western Australian-based Indian sandalwood grower, is pleased to advise that it has signed an agreement with Lush, the UK-based producer of fresh handmade cosmetics, for the supply of oil produced from TFS’s planta- tions. Since establishing in 1995, Lush Cosmetics has been driven by innovation and its ethics. Creators of pioneering beauty products such as the fizzing bath ballistic, shower jellies and butter creams and solid shampoo bars, Lush places emphasis on fresh natural ingredients like organic fruits and vegetables and operates a strict policy against animal testing. It supports Fair Trade and Com- munity Trade initiatives and leads the cosmetics industry in combating over-packaging by running public awareness campaigns and developing products that can be sold ‘naked’ to the consumer without any packaging. Lush currently has over 500 stores in 44 countries. Key aspects of the agreement include: • Five-year term, commencing with the first date of supply. • Supply to commence upon the availability of the first commercial quantities of oil from TFS’s plantations, which is anticipated to occur by FY11. • Lush to purchase a minimum of 1 tonne of oil and up to a maximum of 15% of TFS’s oil production, in each 12-month pe- riod. • Lush to create a new sandalwood-based product range using TFS’s oil, for marketing throughout their worldwide retail net- work. In addition, the TFS Board has approved the issue of one million options to Lush, exercisable at $1.80 per share at any time within three years of the first commercial oil delivery. “This is a landmark deal for TFS, which confirms the quality and appeal of our sandalwood product,” said Frank Wilson, Execu- tive Chairman. “We are particularly pleased to have concluded it with a party of such high standing as Lush, whose ethical and socially responsible standards mirror those of TFS, as reflected in our commitment to the environmentally sustainable development of our plantations.” “We are also very pleased that the price struck under the Lush agreement reflects the conditions currently prevailing on the world market,” Mr Wilson added. “Following on from the collaboration agreement struck with Albert Vieille last year, the supply agreement with Lush demonstrates that we are progressively putting in place the necessary steps to make the transition from pure plantation manager and owner, through to a vertically integrated oil producer with blue chip customers in the global fine fragrance and cosmetics industry,” said Mr Wilson.