Cochabamba Loan Stock Offer Issue 2

The Cochabamba Project Limited industrial and provident society

Offer for Unsecured Loan Stock Issue date: February 2012

The Cochabamba Project Ltd. is an industrial and provident society that was formed to enable socially minded investors to invest in the reforestation of one of the world’s most valuable and bio-diverse habitats - the Bolivian Amazon Rainforest - whilst also providing poor communities with genuine sustainable alternatives to farming that would otherwise lead to further deforestation and loss of biodiversity.

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Important Notice

The Cochabamba Project is an Industrial and Provident Society (IPS) engaged in the business of commercial forestry and the trading of carbon credits in order to fund its commercial forestry activities as part of the ArBolivia project in Bolivia. The information provided is important and requires your detailed attention. You should read the rest of this notice before proceeding further. If you require advice you should consult a bank manager, solicitor, accountant, stock broker or independent financial adviser authorised under the Financial Services and Markets Act 2000 (FSMA 2000).

The Cochabamba Project is an Industrial and Provident Society, registered on 9th March 2009 with number 30642R with the Financial Services Authority.

Its registered office is: 52a High Street Sheffield, S20 2ED Its Rules and its latest annual accounts are available online (www.cochabamba.coop).

This communication is not intended to be distributed or passed on directly or indirectly to any other person. It is supplied to you at your request and for your information only.

The Cochabamba Project’s website and any communication issued by The Cochabamba Project are intended for the personal use of UK residents only. It may be used by them only in relation to their activities within the UK. The Cochabamba Project is not an authorised body under FSMA 2000. The Cochabamba Project does not accept deposits. There is no deposit protection scheme for unsecured loan stockholders.

Unsecured loan stock is not covered by the Financial Services Compensation Scheme. The Cochabamba Project is not a member of an Investor Protection Scheme.

Unsecured loan stockholders are not and are not deemed to be members of The Cochabamba Project.

Unsecured loan stockholders are not entitled to receive notice of or to attend and vote at any meeting of the members of The Cochabamba Project. However, loan stockholders who have paid in full for the minimum subscription (£3,000) will be awarded 1 ordinary share with a nominal value of £1.00.

Industrial and Provident Societies are exempt from the FSMA 2000 financial promotion restriction in respect of unsecured loan stock. Pursuant to Article 35 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (Order) the financial promotion restriction does not apply to loan stock The documents that are available for your inspection are as follows: • The Rules of The Cochabamba Project Ltd • The contracts relating to investments in the ArBolivia project • The latest financial accounts and 5 year financial projections You may inspect these, during normal business hours at the registered office with prior arrangement Registered office: 52a High Street, Beighton, Sheffield, S20 1ED Contact Address: 100 Whirlowdale Road, Sheffield, S7 2 NJ Advisers and Bankers Solicitors: Coffin Mew LLP, Kings Park House, 22 Kings Park Road, Hampshire, SO15 2UF Bankers: The Co-operative Bank, PO Box 250 Skelmersdale, WN8 6WT Contact: David Vincent (Company Secretary), 100 Whirlowdale Road, Sheffield, S7 2NJ. Tel: 0114 2368 168 Email: david.vincent@cochabamba.coop

Contents

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Letter from the founder...................................................................

4

Executive Summary........................................................................

5

About The Society…………………………………………………….

6

The Loan Stock Offer—Interest Rate & Term………………………

7

Arbolivia..........................................................................................

8

Distinguishing Features of the Forestry Parcels…………………...

9

The Social and Environmental Returns……………………………..

10

Employment Of Funds…………………………………………..…….

11

Information for the Issuance of Loan stock………………………….

13

Terms and Conditions…………………………………………………

14

Risk Factors.................................................................................... .

17

FURTHER READING: Background to the Arbolivia Project …………………………………

19

Carbon Credits and Environmental Services………………………..

20

Risks ..............................................................................................

21

The Society’s Directors & Advisory Committee …………………….

23

Interests and Partnerships..............................................................

24

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Letter From The Society’s Founder

Dear Investor After more than two decades in financial services, and fourteen years advising on ethical investment, the collapse of the stock market in 2008 finally persuaded me that there has to be a better way for ordinary people to put capital to work in order to tackle the major social and environmental issues of our time.

Since the Society itself was established in 2009 we have all witnessed the alarming fragility and volatility of financial markets, along with growing social unrest and increasing evidence of the devastating consequences of unbridled consumerism, the loss of our natural habitat and climate change.

Yet over the same period, the society has channelled over £2m to support over 1000 families from disadvantaged communities across the Bolivian tropics in a spirit of international co-operation, as an example of how enterprise can be conducted for the wider benefit of society rather than a select few.

The Year 2012 has been designated United Nations’ “International Year of the Co-Operative and it also marks the first decade since the start of the FAO-funded pilot project in the Cochabamba Tropics, which resulted in the establishment of the ArBolivia project itself in 2007. Our society, The Cochabamba Project Ltd will itself be 3 years old in March and this will be the last year before we can start to enjoy the fruits of our investment, with a modest amount of revenue anticipated from the first commercial thinning of 6 year old trees planted in 2007. This will rise quickly to over £1m in the 2015/16 season.

The ArBolivia project in which the Society invests, covers so much more than commercial forestry. It is a whole new model of co-operative enterprise, land management and conservation that combats poverty, empowers communities and tackles the root cause of deforestation, which is a major cause of climate change at both a local and global level. This model can serve as a template for international co-operation and for land management projects throughout the Amazon region and the wider developing world.

As the founder of The Cochabamba Project Ltd I believe that the Industrial and Provident Society model provides the most appropriate structure available for socially minded investors in the UK to achieve their social and environmental objectives whilst maintaining the prospect of a reasonable financial return. This is because the social objectives of the society are the reason for its existence and are enshrined in its rules. It is a democratic and transparent institution in which both its members and its officers are duty bound to make the society’s social objectives their priority.

We invite you to join with us, to help us through the final period towards our break-even point, when we can repay those who had the courage and commitment to support us at the start of our journey.

Your participation will help us to maintain the forestry parcels that have been planted to date and will encourage further investment from other private investors, thereby enabling the project to expand further in the future. I hope you are able to support our efforts and look forward to welcoming you as a partner.

Yours faithfully

David Vincent

Executive Summary

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This document details and contains an invitation to subscribe for shares in The Cochabamba Project Ltd. The Cochabamba Project Ltd (Society) was established in March 2009 as an Industrial and Provident Society for the Benefit of the Community. Your money will fund a public-spirited “not-for-profit organisation which was formed for the specific purpose of supporting a reforestation project which commenced operations in 2007 and is known as ArBolivia This venture is a true partnership with Bolivian farmers, as net revenues from the timber are shared equally between the society and the farmers, with the former providing investment capital and the latter providing land and labour. Arbolivia has been acknowledged for its role not only in mitigating the impact of climate change but also in providing quantifiable positive benefits both for the communities in which it operates and for biodiversity in the region.

The society anticipates that it has sufficient reserves and contracted income to meet its contractual obligations for the current financial year (ending 31/10/2012) We are therefore now seeking to raise additional finance for the financial year 2012/13, which will also be the final accounting year before timber revenues begin in earnest.

The Society will use new shareholder funds to pay the on-going project costs associated with growing trees until they are ready to be harvested for timber. In return for our payments to the project, we are entitled to a 50% share in the future net revenues generated from timber sales and by discounting the future value of timber revenues, the society expects to be able to offer every member a fair return on their investment whenever they eventually choose to withdraw their holding. Whilst substantial revenues are predicted to be received in the 2015/16 season, the society is also mindful that it has obligations to existing holders of both shares and loan stock. For this reason the directors do not currently intend to approve any withdrawals for new shareholders in the first five years of investment. Any surplus after paying interest to members will be used by the society to benefit the local communities in Bolivia. This may include for example the provision of micro-finance facilities, the establishment of further conservation areas, provision of additional facilities such as efficient cook-stoves or solar power units. It may also include further investment into the expansion of the project.

The Amazon Rainforest is unquestionably one of the most valuable and important single habitats on our planet making a vital contribution in maintaining the balance of oxygen in our atmosphere and providing unrivalled biodiversity1. Over the last few decades, however, the western fringes of the Amazon have been the scene of some of the most aggressive deforestation in the world2. Driven by desperation, migrants have moved down from the Andes and have now been granted official title to land within the perimeter of the rainforest, enabling them to exploit the valuable timber and establish smallholdings to eke out a living from the land3. After decades of adopting poor agricultural practices and without the capital to invest in a viable alternative, smallholders are still forced to continue their “slash and burn� methods in order to maintain their meagre existence. Without an economically viable alternative, these problems will persist.

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About the Society

The Society is investing in just such an alternative – the ArBolivia Project. This has been established to tackle the multiple problems of poor land management, deforestation and poverty, and is the culmination of many years of consultation between local co-operatives, regional and international development agencies and ecological consultants. The Society’s investment not only makes a clearly quantifiable contribution to combating climate change through the sequestration of carbon, but it is also contributing to the protection, repair and enhancement of biodiversity in the region. Most importantly, however, it is providing substantial and sustainable economic benefits to individual families and local communities in Bolivia.

If we reach our current funding target, your investment will help us reach the critical break even point. This in turn will establish the ArBolivia project as a model of community-based land management, which might then be replicated elsewhere and make a demonstrable impact in countering loss of biodiversity, preventing climate change and reducing global poverty.

Investing in The Cochabamba Project Ltd should be seen primarily as a social rather than a financial investment.

The society may only pay a low rate of interest on loan stock And we have set this at 5%. We intend to repay holders of loan stock on 31 October 2019 when major timber revenues should accrue that will be more than enough to repay all loan stock holders. However, there is no guarantee that the society will be able to pay interest or to repay any or all of the capital owing.

This document is important and requires your detailed attention. If you require advice you should consult an Independent Financial Adviser.

The Cochabamba Project Ltd is an Industrial and Provident Society for the Benefit of the Community and operates on a ‘one member one vote’ principle, irrespective of the size of a member’s shareholding. The society is governed by its rules which are available on the society’s website at www.cochabamba.coop. The purpose of the society is to benefit the communities of the departments of Cochabamba, Santa Cruz, Beni and La Paz in Bolivia. The directors intend to achieve this by investing the society’s funds for the foreseeable future in the ArBolivia project.

Membership of the society is afforded to holders of ordinary shares. These shares can be withdrawn in accordance with the society’s rules but cannot be sold or transferred and there is no prospect of them ever being worth more than their nominal value).

The society was formed on 9th March 2009 and as at 31st January 2012 the society had issued share capital of £1,606,703 and had 316 members, including Rathbones Investment Management and Ethical Investments Ltd, who act as nominees on behalf of a number of private clients. The society also had loans and loan stock amounting to £422,895 at that time. The society owns the rights to a 50% share in the revenues from 1,119 hectares, which are expected to commence in 2013/4.In addition it was also granted the rights to 311,256 tonnes carbon credits relating to approximately 85% of the hectares planted to date and which are being sold to reduce the amount of investment capital required. Investors who do not wish to benefit from carbon credit subsidies may elect to waive their interest.

The current directors of the society are David Vincent, John Fleetwood and Daniel Brewer, who between them, have considerable experience and expertise in advising on sustainable forestry and other investments with a high social impact. The society has also appointed an advisory committee to provide guidance to the directors on different aspects of the project. We are currently fortunate to have two of the leading experts in their fields on our advisory committee – former head of the Financial Services Authority, David Jackman and leading environmental academic, Mike Berners-Lee. One of the unique characteristics of forestry is the length of time between the initial capital investment and the receipt of eventual revenues, resulting in the need to carry forward substantial losses until they are overtaken by subsequent revenues. This loan stock issue will help to fund the project’s running costs until these revenues are received.

The Loan Stock Offer—Interest Rate and Term

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In determining the level of interest, the directors primarily take into account the society’s intention to contribute financially to the community, with the expectation of a social dividend, rather than any personal financial reward. However, the directors are also mindful of the need to pay an interest rate sufficient to attract and retain capital, especially given the relatively high level of risk associated with the project.

Due to the nature of our forestry assets it will be a few years before we have sufficient revenue of our own to pay back all our investors in full. It is also only fair not only that we pay back our earliest investors first but also that the rate of interest reflects to some degree the actual risks to which successive investors are exposed.

For this reason, although we anticipate significant revenues from 2015 onwards, these must first be used to reduce our existing debts and provide for anticipated redemption requests from our earliest shareholders and loan stockholders. With this in mind we have set a maturity date of 31st October 2019, which will allow us to defer repayments to a time when we comfortably have sufficient revenues with which to repay the capital and any outstanding interest.

We have also set an interest rate of 5%, which is lower than the rate we hope to maintain for ordinary shareholders. This is because our existing shareholders have borne the significant risks of helping us reach the current stage and it is effectively their capital which is paying the interest to new bond holders.

Attention should be given to the financial risks outlined. Investors should be aware that they are responsible for declaring interest payments through their Self Assessment return and may be liable to tax on their interest when it is actually received.

Further details of the anticipated management costs and timber revenues for each year until 2046 are available on request.

Arbolivia

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The Society’s funds are used to support the Arbolivia Project, which is pioneering a new model of community based land management including cash crops, conservation and also an element of commercial forestry, which is intended to act as a catalyst for investment, as distinct from reliance on aid.

The net proceeds of the commercial forestry operations are to be shared equally between the investor (i.e. the society) and farmer. This package of practical and financial support gives farmers sufficient economic incentive to reforest part of their land and also removes their need to continue the regular clearance of more prime tropical rainforest. Technical assistance is provided to the farmers so that they can derive a better income from their land as a whole and can also manage it in a more ecologically sustainable manner.

Intercropping is encouraged so that farmers can cultivate both food crops and timber on the same plot of land, whilst predominantly native species of trees are used in a patchwork of different tree types. Instead of planting one non-indigenous tree type in a concentrated area, 19 different species have been planted on widely dispersed small plots of land. The resulting biodiversity gains together with the focus on putting farmers’ interests at the heart of the project, make Arbolivia a very special forestry project that stands out from other ‘sustainable’ forestry schemes.

The net proceeds of the commercial forestry operations will be shared equally between the investor (i.e. the society) and farmer. This package of practical and financial support gives farmers sufficient economic incentive to reforest part of their land and also removes their need to continue the regular clearance of more prime tropical rainforest. Technical assistance is provided to the farmers so that they can derive a better income from their land as a whole and can also manage it in a more ecologically sustainable manner. Intercropping is encouraged so that farmers can cultivate both food crops and timber on the same plot of land, whilst predominantly native tree species are used in a patchwork of different tree types.

Instead of planting one non-indigenous tree type in a concentrated area, 19 different species have been planted on widely dispersed small plots of land. The resulting biodiversity gains together with the focus on putting farmers’ interests at the heart of the project, make this a very special forestry project that stands out from other ‘sustainable’ forestry schemes.

ArBolivia is managed on the ground by the Sicirec Bolivia, a company limited by guarantee established in Bolivia by – but independent from - Sicirec Group BV, a firm of Dutch forestry professionals with considerable experience of assessing and managing tropical forestry projects around the world. However, the project is also notable for its partnerships between NGOs, international governments, peasant farmers, forestry experts, investors and academics (see Interests and Partnerships page 23 for further details).

Managing almost 1000 widely dispersed farmers (as at 31/01/2012) in what can be quite a difficult environment with poor communications, poses something of a challenge and requires a sizeable team of technicians and managers to ensure that quality standards are met. It is also important to maintain good relations with farmers, many of whom have little or no education. This requires much higher costs than would normally be associated with a project of this size. However the resulting social and environmental benefits also mean that it is able to compensate for these additional costs by attracting funding from the sale of carbon credits and environmental services (see page 20), without which the project would not have been possible.

Distinguishing features of the Forestry Plantations

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The commercial forestry enterprise undertaken by the ArBolivia project is very different from more conventional forestry plantations, even those that are termed ‘sustainable’: 

The forested land is not owned by the project manager. Each forestry parcel is owned by an individual smallholder.



As at 31st January 2012 the forested areas consist of 2789 separate “sectores” (an area defined by a specific species and planting date) spread across 4 separate “departmentos” (federal states). This geographic distribution and isolation of individual parcels means that any incidence of fire, disease or insect attack is confined and will have little or no impact on other forestry parcels, providing highly effective natural, risk management.

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Farmers can choose from 18 native tree specie dues. (At the start teak was also made available due to the lack of high quality native seed.) Having a range of indigenous tree species on widely dispersed plots contrasts starkly with the norm of monoculture plantations where “identikit” trees stretch monotonously in to the horizon.

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This diversity is not only good for the environment but it means that smallholders are able to select species to match the exact conditions of their land, ensuring that survival rates and yields are optimised.

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The high levels of technical expertise and management demanded by this model serve to reduce significantly the risk of disease or poor growth. The cost of this additional skilled manpower is compensated by carbon credit payments, which are only awarded if the project is able to show “additionality” the provision of social benefits ( i.e. additional local employment) and environmental benefits (improved soils and biodiversity) that a purely commercial project would not consider.

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Some of the species are faster growing but the most valuable timber is from trees which may take 35 – 40 years to mature. This is much longer than most commercial forestry enterprises will entertain so the ability to generate carbon credits and revenues from other environmental services whilst the trees are growing is extremely valuable.

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Smallholders receive 50% of the net timber revenues from the trees they plant and maintains as well as receiving regular payments and technical support in managing the whole of their land. By aggregating and co-ordinating supplies for the larger timber merchants ArBolivia believes it is able to secure much higher prices than individual smallholders are able achieve by themselves. Current estimates indicate a premium of at least 300% and as much as 800% for more mature timber sold for export over that sold domestically. Smallholders therefore have a huge incentive to look after their forestry parcels. There are also a range of additional safeguards to ensure that smallholders fulfil their contractual obligations

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Social & Environmental Benefits

The Arbolivia Project is remarkable for its high social and environmental impacts, many of which have been independently verified under the Plan Vivo certification process.

These include the following: 

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   

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   

Carbon capture - The project has previously been accredited as a “Clean Development Mechanism” under the terms of the Kyoto protocol. This means that the carbon absorption of the project has been independently verified to a very high order. At full scale the verified amount of carbon captured over a 21 year period is estimated at 1,257,499 tonnes.

Avoided deforestation – the project addresses the root causes of deforestation by providing a real economic alternative to further deforestation and by improving agricultural practices.

Enhanced biodiversity – ArBolivia uses 18 indigenous species of trees, intercropping and working with over 2,000 farmers on widely distributed plots, as well as creating wildlife corridors and planting new wild reserves.

Increased incomes for poor farmers - Profits are shared between local farmers and investors. The average current annual earnings of participating smallholders are only around $2,300 and the livelihood of local farmers is central to the vision and operation of the project. By participating in the project smallholders can expect to treble their earnings on their forested land over the 40 year project term. Smallholders are also benefitting from both financial and practical assistance to increase efficiency and the yields on their remaining land through agro-forestry (e.g. cocoa and citrus fruits) and through collective bargaining and fair trade accreditation Conservation - The Society’s trees not only absorb carbon, but the tree growing programme includes valuable conservation work to combat erosion and improve biodiversity.

Improved Agricultural Management – Arbolivia works with smallholders to improve agricultural management practices, thereby reducing deforestation and improving smallholder incomes.

Employment in nurseries - A number of new nurseries have been established which are privately owned by local families and employ hundreds of people at the height of the season.

Education and Capacity Building - Many additional social benefits are provided though a programme of education and capacity building, which makes use of existing social structures such as community committees, farmers co-operatives and other NGOs working in the area. For example, training on fire risks and control is an important additional weapon against “slash and burn” farming methods.

Nature conservation - A conservation project has been initiated to plant 400,000 trees in designated conservation areas. The objective is to counter the loss of biodiversity by repairing dedicated areas and corridors in order to provide a network of secure habitats and thoroughfares. Much of the conservation work is focussed on controlling erosion from increased local flooding during the wet season (which is itself a direct consequence of deforestation).

Support of local communities - In the longer term, the directors believe that significant surpluses of revenue may accrue over and above the amounts needed to retain capital for investors. Any such surplus profits after the payment of reasonable interest to members will be used by The Cochabamba Project Ltd to benefit the local communities in the areas in which the project operates.

Technical & Marketing Support - Farmers receive one-to-one practical advice and support on all aspects of management, including land use, crop and stock selection as well as marketing support.

Intercropping - Many of the trees are inter-planted with other crops to improve fertility, reduce labour, provide structural support, competition for growth and increased yields per hectare.

Locally sourced seed - The project only buys locally sourced seed. ArBolivia certifies the best seed trees, which provide a source of income for owners and an incentive to preserve trees for the future.

NGO Alliances - ArBolivia has also fostered relations with other NGOs and development projects, including, for example, a fair-trade organic cocoa project based at ArBolivia’s office in Chapare.

Employment of Funds

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Commercial planting for The Cochabamba Project started in 2007 and the society has acted as the principle financier of the operations on the ground since 2009. Costs have mainly been related to the team of 30 technicians and advisers who travel around the project areas giving technical advice and assistance to the farmers. These costs have increased mainly due to new labour regulations and the impact of inflation in Bolivia which has risen to around 10% over the past year. Despite this, the project has been financed for over 5 years now and we are less than three years off receiving the first significant timber revenues. As the chart below shows, these revenues will exceed £1 million in 2015 alone, with much more thereafter. October 2014 is our turning point when we are due to receive our first significant timber revenues. After that the project should move firmly into profitability. Assuming that everything goes to plan, over the period from 2015 to 2020, we will be able to repay our debts, pay interest on shares and meet requests for the redemption of shares.

Financing the project to 2014 is therefore our key goal. Assuming that we achieve Carbon Fix accreditation before July, the contracted income from the sale of carbon credits together with our current reserves should be sufficient to meet our anticipated costs for the rest of the financial year to 31st October. The Society is focusing on raising additional share capital to finance the project through to 2014, and in particular the calendar year 2013. At the same time we are seeking to sell the carbon credits which we have available, which could easily realise in excess of $1 million.

The Society is contracted to pay $50,000 per month to the project until June 2012, after which the payments fall to $42,000 for the next 12 months, $36,000 per month for 2013/14 and $31,000 per month thereafter. We also pay roughly double the amount in the month of December to cover regular costs which occur on an annual basis (the exact formula is available on request). This means that the Society’s obligations until the first major timber revenues are received are as follows: 1st Feb 2012 to 31st Oct 2012 – £280,000 1st Nov 2012 to 31st Oct 2013 - £350,000 1st Nov 2013 to 31st Oct 2014 - £300,000 The total therefore amounts to around £930,000. However, we have already raised £250,000 and have contracted income of around £100,000 from the sale of carbon to Forest Finance as well as £18,000 from thinnings in 2013, meaning that we have to raise an additional £562,000 This works out at £187,000 a year from the sale of carbon credits or investment, not accounting for the running costs of the society, marketing and servicing our existing debts for which we require around £60,000 a year. The total is therefore approximately £250,000 a year for the next three years.

This is significantly less than we have managed to attract over the past three years, despite an adverse climate for capital raising in general. The key issues for us are that we sell the carbon credits at a reasonable price and continue to attract sufficient share capital to fund the project.

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However, the project budget is actually more than we are contracted to pay to the project, with additional costs of about $160,000 a year. This is because ArBolivia is engaged in other activities which do not relate to the maintenance of the Society’s timber and it has agreed to seek finance for these non-commercial activities through its own endeavours. To this end, Sicirec Bolivia has attracted grant finance and has also provided forestry services to private landowners. ArBolivia is also applying for further major grants which will help farmers grow more crops, whilst also sharing some of the cost of retaining technicians to visit the farmers.

In summary, we are still in the cash hungry phase of the project, but the end is now clearly in sight. Whilst we are financed for the current financial year, both the Society and Sicirec Bolivia wish to use this period to raise additional funds to meet the project’s running costs to take us as close to breakeven as we can.

At the date of issue the society was still waiting for its accounts for the period to 31st October 2011. Investors who have registered for a prospectus on the Society’s website will receive a copy of the accounts as soon as they are published. The accounts will also be available to download. The society will also revise its 5 year projections on the basis of these finalised accounts and will make these projections available on its website as soon as they are completed. Hard copy of these documents will also be available on request.

Information For The Issuance Of Loan Stock

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Please read this section carefully – it sets out the details of becoming a member and investor in The Cochabamba Project Ltd. All applications are subject to the terms set out in the Rules of The Cochabamba Project Ltd, which are available on request.

The Society is offering up to £350,000 of unsecured, transferable loan stock for purchase to fund the maintenance of trees growing in the existing 1,400 planted hectares for the period 1st November 2012 to 31st October 2013. The society needs to raise approximately £350,000 from all sources so no specific minimum threshold in respect of the loan stock issue required to proceed.

If there is sufficient surplus to fund the foreseeable management costs until break even we will consider allocating funds to the planting of new hectares. The closing date for the current offer is 31st October 2012.

The offer is open to:  Individuals over the age of 16  Trusts, including a bare trust arrangement for children  Self Invested Personal Pension Plans  Nominee Services  Corporate entities, groups and associations Legal Information This document is issued by The Cochabamba Project Ltd, registered number 30642R, an Industrial and Provident Society incorporated in England and Wales on the 9th March 2009 under the Industrial and Provident Societies Act 1965. The Cochabamba Project Ltd is a Society for the benefit of the community.

Units Each unit of loan stock has a nominal value of £1.00. The minimum investment for an individual is £3,000, which can be paid by way of a regular standing order, with a minimum payment of £50 per month or £1,000 per annum.

Once payment for the minimum investment has been received in full the holder will also receive one ordinary share, in order to confer equal voting rights with the society’s ordinary share holders Units are transferable although there is no prospect of them being listed on any stock market so the society cannot offer any guarantee that a suitable purchaser can be found. However by allowing shares to be transferred the society wishes to facilitate investment by parents or grandparents who may wish to invest on behalf of children and for them to retain the option to transfer their holding to the child on reaching a particular age.

In addition the society will endeavour to facilitate the sale of loan stock on behalf of investors prior to the maturity date, as long as this does not conflict with its need to raise additional capital. Loan stock may in the future be advertised for resale on the society’s website and via its newsletter to members and supporters. However the Society cannot guarantee that its efforts will prove successful.

Interest Interest is payable at a rate of 5% per annum. Interest on lump sum investments can be either rolled up or paid out. Interest for investors opting to pay by regular instalments must be rolled up but can be paid out once regular payments cease and the minimum investment level (£3,000) has been reached.

Where interest is rolled up then it will be converted to additional units each year on 1st November.

After the closing date on 31st October interest will accrue on the number of units held on that date and on 31st October each year thereafter.

If interest is paid out annually it will be paid on 1st November in arrears.

If interest is paid out quarterly it will be at the rate of 1.25% of the number of units held at the end of each preceding quarter. Payment dates are 1st November, 1st February, 1st May, 1st August or the first normal working day thereafter. Interest may also be waived.

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Terms & Conditions

Early Bird Bonus In order to encourage early investment, investors will receive 0.5 additional units for each £100 invested at the end of each full month prior to the closing date.

For example an investor paying £100 a month on 20th May, will receive a total of 7.5 additional units on 1st November.

Nominee Option In the event of the death of a shareholder, the repaid value of the shares will normally be added to the estate for probate purposes. For investments up to £5,000 you may elect to nominate a recipient for the value of the shares and thus (under current legislation) remove the value of the shares (up to £5,000) from your estate for probate (but not tax) purposes.

Voting Each member has one vote regardless of the size and value of their shareholding. Investor members will be kept informed of the activities of the Cochabamba Project Ltd through an occasional newsletter, a website, the annual reports and the Annual General Meeting.

Charges & Running Costs There are no charges made on your investment but the considerable costs of attracting capital and the costs of running the Society will be paid for by the Society and these have been taken into account in setting the interest rate for the current loan stock offer. Accounts for the financial year 31/10/2009 to 31/10/2010 are available at www.cochabamba.coop or on request. Accounts for the financial year 31/10/2010 to 31/10/2011 will also be made available as soon as they are finalised. In particular you should note the following costs, which still apply:  The Directors are currently paid £475 per month each plus expenses.  Mr Vincent acts as company secretary for which he is paid £2,000 pa.  Ethical Investments receives a payment of 8% of any sums raised for the Society.  Ethical Investments may, out of its own 8% marketing fee, pay financial advisers and other introducers an introducer’s fee of up to 3%  Advertising and direct promotional costs are anticipated to be in the region of £10,000 for the current share issue.

TERMS AND CONDITIONS 1 Applicants must be at least 16 years of age. Units may be transferred to children on their 16th birthday or at any time thereafter. Applications on behalf of children may also be made under the terms of a bare trust, which will enable units to be transferred on reaching age 18. In the case of joint applications, all applicants must sign.

2 The unsecured loan stock shall be repaid in full at the end of term.

3 Interest is payable on unsecured loan stock and in accordance with the Rules of the Society.

4 Applications to the Society for unsecured loan stock may be refused by the Board of the Society without giving any reason therefore in which case your cheque will be returned to you through the post at your risk.

A contract will not exist between us until we have issued your unsecured loan stock certificate.

5 Applications for unsecured loan stock may only be made by post.

6 Successful applicants will receive an unsecured loan stock certificate by email or by post, if requested.

7 Under extraordinary circumstances the Society may, at its discretion, accept applications for early repayment of Loan Stock subject to the following conditions: (a) A written notice stating the amount requested to be repaid should be sent to the Society together with the paper Loan Stock Certificate if issued. (b) The society will endeavour to repay you within the following periods of time after proper notice has been received: Up to £20,000 within 30 days and amounts over £20,000 within 90 days.

8 Interest is payable after deduction of tax at the basic rate from time to time. If exempt from tax send R85 with this form.

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9 Unsecured loan stockholders shall cease to be entitled to amounts due in respect of interest which remain unclaimed for a period of 6 years and to amounts due in respect of principal which remain unclaimed for a period of 10 years, in each case from the date on which the relevant payment first became due.

10 Unsecured loan stock is transferable although no ready market currently exists. Ho 11 No application has been made to any Stock Exchange for the unsecured loan stock to be listed or dealt in. The most likely use of such a facility is therefore between generations of the same family.

12 Unsecured loan stock, as and when issued, shall rank pari passu equally and rateably without discrimination or preference as an unsecured debt obligation of the Society for the punctual payment of the principal and interest in respect of it and for the performance of all the obligations of the Society with respect to it.

13 Unsecured loan stock certificates are normally digitally signed and sent by email. You may request a signed paper certificate to be posted at your own risk to your address given in the application form.

14 Unsecured loan stock will be repaid automatically on maturity together with any accrued interest. You do not have to send in a repayment notice or letter.

15 Any notice required to be given to the Society under the Terms and Conditions of the unsecured loan stock shall be in writing (which includes email) and may be given either personally, by email, or by sending it by post in a prepaid envelope addressed to the Society at its registered office or to such other address as the Society may from time to time notify to the unsecured loan stockholders for the purpose.

16 A notice given or sent by an unsecured loan stockholder to the Society shall not be effective unless and until received by the Society's Secretary. Any other notice given or document sent by post within the United Kingdom shall be deemed to be served or received at the expiry of 48 hours (or when sent by second class mail 72 hours) after the time it is posted and in proving service or receipt it shall be sufficient to prove that the envelope containing the notice or documents was properly addressed, stamped and posted. In case of email the notice shall be deemed to be served on the day of transmission if sent before 4.00pm and if sent after 4.00pm shall be deemed to be served on the next following working day.

17 Extract from the Rules Rule 33.1 of the Society states that it may: 33.1.13 take mortgages, charges, liens and other security to secure obligations of others to the society; 33.1.14 borrow money and accept credit and grant mortgages, charges, liens and other security to secure the society’s obligations but 33.1.14.1 the society may not carry on a deposit taking business (within the meaning of the Banking Act 1987; and 33.1.14.2 where: 33.1.14.2.1 the loan is unsecured, and 33.1.14.2.2 the lender is not itself authorised under the Banking Act 1987, 33.1.14.3 the society will not pay a rate of interest that is higher than the society needs to fund its activities; in setting the rate, the directors will take particular account of the society’s intention to provide an opportu nity for other public-spirited people and organisations to contribute financially to the community with the expectation of a social dividend, rather than personal financial reward

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18 Data Protection By completing this unsecured loan stock form application you consent to the Society holding personal data about you in accordance with the Data Protection Act 1998 (as amended). The Society does not sell or exchange mailing lists. In signing the application form you (each of you if more than one is applying) confirm you understand that the personal information that you have given on the application form and give during the period of your holding unsecured loan stock will be retained by the Society on computer and other records. You also understand that your personal information and unsecured loan stock details may be; ..used to process your application; provide the services you request; deal with enquiries you make or authorise to be made and contact you regarding your unsecured loan stock; ..used for market research purposes, developing products and services, statistical business analysis, and creating and maintaining a customer profile; ..disclosed to appropriate regulatory authorities (including regulators of voluntary codes of practice), auditors, any other body having legal right to the information or anyone you appoint to administer or operate your holding of unsecured loan stock; ..used to investigate complaints, and disclosed for auditing purposes; ..used to check your identity to ensure The Cochabamba Project meets money laundering regulations; ..used to identify and tell you (by telephone, post or other electronic media) about any products and services that might be beneficial to you.

The Society will not share any information about you and your unsecured loan stock outside the Society for marketing purposes. You have the right to receive a copy of the information we hold about you if you apply to us in writing. A fee of £10 will be payable.

19 Your Payment The directors will acknowledge receipt of your cheque and application (where possible by email). They may cash your cheque as soon as it is received. The Cochabamba Project Ltd will hold your money on trust for you in a separate account until the directors consider your application. The directors will return your money to you (within twenty eight days of the Board of Directors meeting at which we consider your application) if they decide not to issue shares to you. If they decide to issue fewer shares to you than you applied for, they will return the balance to you (within twenty eight days of that Board of Directors meeting). The money will belong to The Cochabamba Project Ltd (and the directors will no longer hold it on trust for you) as soon as the directors issue shares to you (to the extent that they take it as payment for shares). The company will not pay you interest on any money it returns to you.

20 Money Laundering The Society complies with the Money Laundering Regulations 2003, the Proceeds of Crime Act 2002 and other rules and regulations relating to money laundering. Accordingly the Society is required to verify the identity of any applicant. You may be asked to provide further details about yourself. If satisfactory evidence of identity is not provided this may result in delays to processing your application and may even result in it being rejected. Any monies then returned to you will be without interest. A cheque from your personal bank account must accompany the application form. Cheques are sent by post at your risk to the address given above.

21 Complaints If you have a complaint, write to or telephone the Company Secretary on 0114 2368 168 22 The laws of England apply to this application. The courts of England and Wales have exclusive jurisdiction. English language is the definitive language. You will be bound by the rules of The Cochabamba Project Ltd (as may be amended from time to time) if the directors issue units and/or shares to you.

23 YOU SHOULD KEEP A PAPER COPY OF YOUR APPLICATION FOR YOUR RECORDS 24 Your promises to us You promise that: • Your cheque will be honoured on presentation.

• You, as an individual, are at least 16 years of age.

• You have authority to sign the application form. If you are signing it for another person, you will provide the directors with evidence of your authority to sign if they ask to see it.

• You will supply us with proof of your identity and address, if we ask for it. We may need to do this to comply with the Money Laundering Regulations 2003. We may have to hold back your shares until we see this.

Risk Factors

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Investment in the society should be regarded as long term in nature and involving a substantial degree of risk. Accordingly, investors should consider carefully all the information set out in this prospectus and the risks attaching to their investment in the Society including, in particular, the risks described on page 20. As a result of these risks you may lose the value of your units and any interest accrued.

The directors consider that the following are the most important risks to the project.  The project may not be able to secure sufficient funding to meet ongoing running costs and as a result, may place the project in financial jeopardy  The project depends in part on revenues from the sale of carbon credits or environmental services to help fund the maintenance of the trees and farmer payments for the first 5 - 8 years of growth prior to first commercial thinnings. Should the market for these credits and services deteriorate or disappear it would at best take longer than predicted to pay back investors and at worst the project may become unviable.

However, the directors will seek to protect against such risks through the following:  Maintaining a balance of funding and revenue sources including equity investment, debt instruments, sales of carbon credits, payments for environmental services and timber revenues. The level of annual funding required over the next three years is significantly lower than the amounts achieved each year to date. The amount could be reduced still further if additional potential funding streams materialise.  Working (together with Sicirec Investment Management BV and a number of other partners) to secure long-term funding  Adopting conservative estimates of future timber prices based solely on local market prices and low annual increases. In addition the society is able, after consultation with the forestry manager, to time the harvesting of trees to benefit from the most favourable market conditions  Close cooperation with the local population, non-governmental organisations and the Bolivian Government  Careful site selection, matching of species and soil types and use of natural flood-resistant tree species  Legal contracts with farmers and collective organisations of farmers, including permanent land use restrictions and long term financial incentives  Forestry committees consisting of representatives from the participating farmers have been established as part of the risk management strategy. An Arbitration Board is made up of 2 members of Sicirec Bolivia and 2 members from the participating farmers. This board has binding powers to settle disputes between farmers and the project.  Fair trade principles: Due to the scale of the project access to markets by Sicirec Bolivia will be much better than for individual farmers. In addition operational costs can be shared, resulting in prices, which might be 3 to 8 times higher than those achievable by one smallholder acting alone. It should be clear that even though they will only receive 50% of the higher price, there is a very clear financial incentive for smallholder to meet their contractual obligations, thereby reducing the risk of “back door” sales.

Please note: As an industrial and provident society, The Cochabamba Project Ltd does not need to be authorised by the Financial Services Authority to take deposits by issuing unsecured Loan Stock..

Directors’ declaration.

The Directors whose names are set out above accept responsibility for the information contained in the Offer Document. To the best of the knowledge of the Directors, who have taken all reasonable care to ensure that this is the case, the information contained in this document is in accordance with the facts and does not omit anything likely to affect its import.

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FURTHER READING

Background To The Project

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Since 1995, the Food and Agriculture Organisation of the United Nations (FAO), the European Union and the Belgian government together with the regional government in Bolivia have funded the reforestation of 2000 hectares as part of the regional sustainable development programme. The aim of this program was to promote and implement economically viable and labour-intensive land-use and forest resource management practices in the Cochabamba Tropics region of Bolivia, in the form of plantation forestry, agroforestry, silvipastoral systems and sustainable management of residual primary forests. The program served as a pilot for the ArBolivia project and generated knowledge on how trees can fit into an integrated farming system as part of plantation forestry, agroforestry and silvipastoral systems.

In 2002 the Centro Tecnico Forestal (Cetefor), a Bolivian foundation set up to attract international investment into sustainable forestry and farming development, signed an agreement with Sicirec, an experienced firm of consultants specialising in sustainable tropical forestry from the Netherlands. Sicirec’s brief was to create a comprehensive programme, which would qualify as a Clean Development Mechanism activity. In order to deliver the project on the ground Sicirec Group established a separate, independent company, Sicirec Bolivia Limitida, which is registered in Bolivia. (Sicirec Group does not own shares in Sicirec Bolivia but is represented on its board of directors. This ensures that, in the event of the demise of Sicirec Group, no charge would be levied against the assets of Sicirec Bolivia.) The formal name of this joint venture vehicle is the “Asociación Accidental Cetefor Sicirec”. In practice Cetefor has suffered like many NGOs from lack of funding and this partnership is to all intents and purposes redundant with Sicirec Bolivia having a majority on the board of the AACS and complete control of the project and its finances.

A joint venture organisation, Asociacion Accidental Cetefor – Sicirec, was established in order to execute contracts with individual smallholders, apply for accreditation as a Clean Development Mechanism and receive funding from the sale of the resultant carbon credits , known as Certified Emissions Reductions. After 6 years of monitoring and research relating to a the whole portfolio of activities ArBolivia received a positive validation report from the Designated Operational Entity (DOE) in 2007 which resulted in the registration of the first official CDM-AR Small Scale Activity (registration number 2510) in 2009. An Emissions Reduction Purchase Agreement was signed by the Flemish government for the forward purchase of credits for the years 2008—2012, with a further option to purchase credits for the years 2013 – 17. The full validation report can be found on the UNFCCC website at: http://cdm.unfccc.int/UserManagement/FileStorage/H56C84P7GYEWT9U3XDNB1ZVFSORLQA A total of 8 separate Project Design Documents covering a total surface of 6000 hectares were to be submitted for registration under UNFCCC regulations. A further 1,200 hectares were also to be dedicated to conservation activities outside the remit of CDM activity.

However at the end of 2009 only the first of these PDDs had received a letter of approval from the Bolivian government. Following the failure of talks at the Copenhagen summit in November 2009 the Bolivian government withdrew its support for the Clean Development Mechanism, which meant that ArBolivia could no longer count on further Letters of Approval and would therefore no longer be able to deliver the certification required by the Flemish government under the ERPA. This has meant that ArBolivia has had to seek alternative certification in order to sell its credits in the voluntary market, where the approval of the host country is not required. A new submission for current and projected activities was subsequently made under the Plan Vivo standard and certification was finally granted on 31st May 2011.

In consideration of its funding commitment to the ArBolivia project the rights to the bulk of these credits have now been transferred to the society. The society has already signed a new ERPA with the German company, Forest Finance GmbH and has received an initial payment for delivery of the first 10,000 tonnes.

In addition, Forest Finance is assisting with a further submission for certification under the Carbon Fix Standard which is more widely known in Germany. It has further agreed to purchase and pay for a minimum of 25,000 tonnes of Carbon Fix credits by 30th June 2012. The society has also signed an agreement with the Swedish company Zero Mission for the sale of a minimum of 5,000 credits by 31/12/2012, which over 3,000 had already been sold as at 31/01/2012.

The availability of marketable carbon credits means that the society is able to generate cash revenues earlier than originally anticipated. However the recent market for credits has fallen substantially and the directors would prefer not to rely on carbon credit sales for its immediate funding requirements.

At full scale the project will comprise approximately 5,000 hectares of commercial timber within small, isolated parcels owned by roughly 2000 smallholders who belong to co operatives within the departments of Cochabamba, Santa Cruz, Beni and La Paz. A further 1,000 hectares will be planted for agro-forestry (cocoa and citrus fruits) and a further 1,200 hectares of planting will be devoted purely for conservation.

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Carbon Credits & Environmental Services

Whilst both the society and its partners in Bolivia recognise the criticisms levelled against what is loosely termed the “carbon market” it remains a fact that the many social and environmental impacts, which ArBolivia delivers, are in every sense “additional” to profit centred investment. The society is happy to pursue all means of generating the additional financial subsidies needed but will continue to market its carbon credits in order to secure the future of the ArBolivia project and optimise the non-commercial impacts it brings about.

There are two distinct markets for carbon credits – the compulsory market and the voluntary market: The compulsory market includes buyers from the 39 developed countries, who signed up to the Kyoto protocol. The most common type of compliance credit is a CER (Certified Emission Reduction unit) which originates from projects in developing counties. Certification and overall approval of these abatement projects and their credits is known as the Clean Development Mechanism (CDM).

In order to gain accreditation CDM projects must demonstrate:  The amount of carbon they lock up for the long term after taking account of all “leakage” (caused, for example by relocating the damaging activities elsewhere)  A positive effect on biodiversity  A positive and sustainable effect on local communities, based on full consultation and agreement  “Additionality” – i.e. that the project would not have gone ahead without accreditation and the subsequent benefitsfrom carbon credits.

It is extremely difficult for forestry projects both to fulfil the conditions for CDM status and also to be able to evaluate whether these conditions have been met. For these reasons only a handful of reforestation projectsin the whole world have so far been accredited – and ArBolivia was one of them. However, following the Copenhagen summit in 2009 Bolivian government withdrew support for the CDM system and as a result ArBolivia lost any prospect of being able to sell certified credits under CDM. It has nevertheless been independently audited and has been shown to have met all the exacting quality standards required to do so.

ArBolivia has since achieved alternative verification for its credits to enable them to be sold to individuals and organisations in the voluntary market as Voluntary Emissions Reductions (VERs). Certification under the Plan Vivo standard was achieved on 31st May 2011. Plan Vivo is UK based foundation which provides accreditation for carbon credits from forestry projects with additional social and environmental credentials In consideration of its funding commitment to the project the majority of the rights to carbon credits have been transferred to the society, which is now an authorised reseller with Plan Vivo, Markit and a number of other organisations.

CarbonFix CarbonFix is a leading climate forest standard, which aims to increase the amount of sustainably managed forests and decrease global CO2 levels. CarbonFix is a non-profit organisation registered under German law, whose statutory purpose is to foster climate forestation projects. Forest Finance has recently submittted an application on behalf of ArBolivia for certification of separate credits under the CarbonFix Standard and will seek to sell CarbonFix credits in Germany.

Forest Finance GmbH The ForestFinance Group is based in Germany and has been developing ecologically sound tropical forestry and agroforestry projects since the 90s. Through its consultancy arm CO2OL it markets carbon credits predominantly to German companies for events.

The Climate Action Plan In the light of on-going criticism of the existing carbon trading market and the failure of the international community to agree alternative mechanisms for reducing carbon emissions (and deforestation in particular), a growing number of organisations are committing to sponsoring tree planting schemes, without linking their investment to levels of carbon sequestration. The society is now also offering such as scheme, which it calls the “Climate Action Plan”.

It has recently delivered its first order for over 1,200 trees. As part of the plan, the VERs relating to the certified trees will be retired from the carbon credit register in order to avoid accusations of “double counting”. For further details visit www.climateactionplan.co.uk

Risks

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THE FOLLOWING RISK FACTORS DO NOT PURPORT TO BE A COMPLETE EXPLANATION OF ALL OF THE RISKS INVOLVED. POTENTIAL INVESTORS SHOULD READ THIS OFFERING DOCUMENT IN ITS ENTIRETY BEFORE DETERMINING WHETHER TO SUBSCRIBE FOR SHARES. Liquidity The liquidity of investments held by the Society cannot be guaranteed and, in certain circumstances, any illiquidity may prevent the redemption of investments. The directors have the right to refuse redemption requests, so unlike a commercial fund it is not possible for a run of redemptions from the society’s own members to trigger a forced sale of assets. The Society’s liquidity depends on the flow of revenues from carbon credits, environmental services and timber sales. In the event that the Society wishes to realise its investment prior to the forestry assets reaching full maturity (and therefore the highest value), ArBolivia may only be able to meet such requests by selling forestry assets before maturity, thereby achieving a significantly lower value than would have been achieved at full maturity. This may result in delays in redeeming members’ shares or significant reduction in the value of the redemption proceeds, which the directors may not consider to be acceptable for the majority of members.

Valuation Risk In calculating the Net Asset Value and the Net Asset Value per Share, the value of the Society’s rights to timber revenues and carbon assets are calculated in accordance with policies set out in this prospectus.

There can be no guarantee that any such investments will ultimately be realised at any such valuation. The society’s valuation model creates an intrinsic value based on cash flow forecasts many years into the future. This may not be representative of the market value of these assets, particularly where assets have to be sold quickly as an emergency measure. In the event that there is a forced sale of forestry or carbon assets prior to anticipated maturity, the assumptions made in the valuation model will not all continue to apply and the Net Asset Value of the Society and any redemptions proceeds will be affected accordingly. In addition, the unquoted nature of the Society’s investments may mean that they may be difficult to realise in a timely manner or at all. Valuations of the Society’s assets are made on valuation information provided by ArBolivia and other third parties. The directors endeavour to evaluate all such information or data but are generally not in a position to confirm the completeness, genuineness or accuracy of such information.

Country Risk The Society invests in the rights to forestry assets located in Bolivia. Investments in developing markets such as Bolivia may, among other things, carry the risks of less publicly available information, more volatile markets, a greater likelihood of severe inflation, corruption, unstable currency, inadequate investor protection, contradictory legislation, rudimentary, unpredictable, incomplete, unclear and changing laws, lack of established or effective avenues for legal redress, lack of standard financial or commercial practices, disclosure and confidentiality customs characteristic of developed markets, and lack of enforcement of existing laws and regulations. Investing in Bolivia also creates greater exposure to economic structures that are generally less diverse and mature. It may also be difficult to obtain and enforce a judgment. There is also the possibility of expropriation or confiscatory taxation, imposition of withholding or other taxes on dividends, interest, capital gains or other income, limitations on the removal of funds or other assets, political changes, government regulation, social instability or diplomatic developments (including war), all of which could affect adversely the country’s economy or the value of the society’s investments in Bolivia.

Physical risks associated with timber Natural causes such as fire, insect infestation, extreme weather, disease and other causes beyond the control of the Society may have an impact on the timing of harvests, or reduce the volume and value of timber harvested from the Society’s parcels. This in turn may adversely affect the Society’s operations and financial condition. For example, infestation by certain insects could necessitate the early harvesting of affected trees. Extreme drought conditions could reduce the survival rate of trees planted within a year of the drought conditions. Hail and tropical storms could necessitate the early or unplanned harvesting of affected trees. Prolonged periods of adverse weather could negatively affect the quality of the timber produced or negatively affecting the value of the harvest. The Society will not maintain insurance for any loss to its timber from natural disasters or other similar causes, which is consistent with normal industry practices.

Physical Risks associated with carbon Loss of timber stocks also directly affect the levels of carbon stored and thus the validity of some of the credits owned. Plan Vivo insists on ArBolivia withholding a buffer of available credits to act as an insurance against any such failures. This buffer is set at 30% of the total credits available for sale. This means that should the trees which produce specific credits fail, they can be replaced by trees from other locations in order to preserve the validity of the credits in question. In line with industry practice the Society does not therefore maintain insurance for any loss to its credits from natural disasters or other similar causes.

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All forestry parcels are formally registered on the official land use register and they must therefore be used only for the registered purpose, i.e. forestry. This means that leakage cannot occur as it would involve a change of land use within the smallholding, which would be ruled out under the terms of the contract with the project. The most likely cause of a failure through lack of management control is a lack of funding. However even then it is unlikely that the landowners would cut down their trees before the end of the qualifying period. This is because they would still have a legal obligation to continue growing trees on the land and it would be a criminal offence to clear fell trees in order to put the land to alternative use.

Economic risks associated with timber The Society’s operating revenues are dependent on prevailing market prices for wood products, which can fluctuate over time and are affected by changes in supply and demand, especially within a particular geographic area. Decreases in demand, increases in supply, or both, may reduce timber prices, which in turn may reduce the Society’s revenues and affect its ability to fund redemption requests and pay interest. The industries that use these various wood products drive the demand for them. Each market prices the product in a manner that is largely independent from the other markets. It is possible that all markets could deteriorate simultaneously, and negatively affect the ability of the Society to fund redemption requests and interest payments. The number of timber sellers and the volume of timber available for sale determine the supply of timber. Historically, increases in timber prices have caused forest owners to increase their timber cutting.

An increase in supply may partly offset price increases. Changes in government regulations and restrictions could adversely affect operating results and timber prices. Certain government agencies have the ability to affect the market for timber due to their forestry holdings. Any substantial increase in sales of timber from government lands could reduce timber prices. Alternatively, government imposed conservation and environmental restrictions, whether federal, state, or local, could result in a reduced ability to harvest from timberlands. Future and existing environmental laws and regulations could adversely affect the Society’s revenues. The supply of timber available for harvest may also be affected by, among other things, environmental and other legal restrictions on harvesting. Regulations could also diminish the residual value of the assets of the Society. The Society’s operations may also be subject to laws and regulations specifically governing forestry operations and health and safety. These laws could impose significant costs, penalties and liabilities on ArBolivia for violations, whether or not ArBolivia caused or knew about them, which could adversely affect the society’s own operating results. Future regulations may cause the Society to alter certain aspects of its investment strategy and may adversely affect the Society’s operating results and financial condition. Environmental laws and regulations may become more restrictive in the future.

Economic risks associated with carbon credits The carbon credit market is still relatively young and is vulnerable to high levels of volatility. This may be due to changes in national and international regulation and agreements or public and corporate reaction to developing awareness of the market. There is also a risk that the project’s chosen standard may be superceded by more popular or more readily marketable standards.

Personnel Risks The ability of the Society to achieve its investment objective is significantly dependent upon the expertise of the current directors of both the society and its partner organisations. The Society is also reliant upon the skills of its other non-executive Directors and the loss of any of these persons could reduce the Society’s ability to achieve its planned investment objectives if no suitable replacement is identified and appointed in a timely manner.

Currency Risk The Society will primarily invest in rights to a share in timber revenues which are denominated in US dollars and, thus the equivalent sterling value of these assets will fluctuate in line with exchange rates.

Title Risk Whilst the individual parcels of land upon which the forestry assets are planted are owned by a large number of individual smallholders and it is part of the independent certification process to verify title to the land upon which the forestry assets are planted, there may be an adverse impact on the value of the forestry assets in the event of any dispute arising out of such joint ownership or leasehold possession.

Legal, regulatory and tax risks Legal and regulatory changes, particularly those concerning taxation, could occur that may adversely affect the Society. Changes in the regulation of industrial and provident societies may adversely affect the value of the Society’s timber rights Laws governing transactions and contractual relationships are or may be new and largely untested in Bolivia. There can be no assurance that this difficulty in protecting and enforcing rights will not have a material adverse effect on the Society’s investments.

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Interests & Partnerships

The following organisations are associated with the ArBolivia Project and/or the society: Sicirec Group: The Sicirec Group is based in The Netherlands, where interest and expertise in tropical forestry and agriculture is highly developed, with some forestry investment schemes dating back to the 1980s. Sicirec SA was originally established in 1991 in Costa Rica by Popko P. van der Molen and has been one of the leading environmental consultancies in its field for almost 20 years with experience of designing and managing successful commercial projects in developing countries in Latin America, South America and Africa. Sicirec Investment Management BV is one of only a handful of companies in the Netherlands authorised to manage and promote forestry funds. These funds are only available to suitably qualified investors in the UK with a minimum investment level of 50,500 Euros. Sicirec Investment Management BV is responsible for finding the finance necessary for the further expansion of the ArBolivia project. Sicirec Forestry Consulting BV provides consultancy services in project design, investment structures and carbon credit accreditation. Ecosafe Trust BV holds forestry assets in custody on behalf of investors in the Netherlands. Mr van der Molen, a biologist and forest ecologist, established Sicirec SA in 1991 in Costa Rica with the remit of providing services for investors in tropical forestry (primarily teak). In 1997 he became vice president of a failing plantation teak forestry company, Bosque Puerto Carrillo (BPC) and led a successful effort to rescue the business. In 1998 he set up NIBO (Nederlandse Internationale Bosbouw-Onderneming), which acquired a controlling stake in BPC. A new company, Pan American Woods (PAW), was subsequently created, which is still trading successfully. He left PAW in 2001 to concentrate on developing new projects and in particular the FAO pilot project which became ArBolivia. Further information is available on the group’s website at www.sicirec.org Sicirec Bolivia Limitida / Sicirec Bolivia SA: Sicirec Bolivia Limitida is the independent company established under Bolivian law by the directors of Sicirec Group. Sicirec Bolivia’s board of directors are Popko van der Molen (also CEO of Sicirec Group), Anko Stilma, managing director, Rodrigo Méndez, a Bolivian lawyer, and David Vincent, who represents the interests of the society and other UK investors. Sicirec Bolivia Limitida does not have any shareholders and as such its assets are fully protected in the event of the demise of Sicirec Group. However, should institutional investment be forthcoming, it is highly likely that the company will be restructured as a “Sociedad Anonima”.

The society would continue to be represented as a shareholder in the new company.

Sicirec Mixfund This is the forestry investment fund managed by Sicirec Investment Management and authorised in the Netherlands. It has an interest in 130 hectares of the 1400. Under a recent agreement the society has now acquired the carbon credits relating to these hectares in exchange for a commitment to pay the Mixfund’s share of the maintenance costs. Further information about the Mixfund can be found at www.sicirec.org Arbolivia: Arbolivia is the name of the project in Bolivia, in which the society invests. A special purpose vehicle has been established under Bolivian law between Sicirec Bolivia S A and Cetefor Carbono Limitida, the trading arm of a local NGO, Fundación Cetefor in order to conduct the day to day field management and monitoring of the project.

Ethical Investments Ltd: Sheffield based Ethical Investments, undertakes to promote the share offer and to provide administrative services to the Society (www.ethicalinvestments.co.uk). Ethical Investments Ltd also provides specialist services to facilitate and support socially responsible investment projects in the UK and abroad, having advised on tropical forestry investment since 2003.

Food and Agriculture Organisation of the UN The FAO leads international efforts to defeat hunger by helping developing countries and countries in transition modernize and improve agriculture, forestry and fisheries practices and ensure good nutrition for all.

FAO provided the finance and technical expertise for a pilot project, which formed the basis of the ArBolivia project. The FAO’s project leader, Anko Stilma has since become the project leader for Arboliva and has recruited a number of key staff from that time.

References 1. http://assets.panda.org/downloads/facts___figures.pdf 2. http://rainforests.mongabay.com/deforestation/2000/Bolivia.htm 3. http://www.boliviainfoforum.org.uk/inside-page.asp?page=43 &section=2

The Cochabamba Project Limited industrial and provident society

The Cochabamba Project Contact: David Vincent Address: 100 Whirlowdale Road Sheffield Phone: 555-555-5555 S7555-555-5555 2NJ Fax:

E-mail: someone@example.com

Tel: 0114 2368 168 Email: david.vincent@cochabamba.coop

APPLICATION FOR UNSECURED LOAN STOCK (Issue 2 February 2012) This Application is made by the undersigned on the terms below and subject to the Rules of the Society.

Please complete in black ink and return by post to the Society (see footer).

First Applicant

Second / Joint Applicant

Address

Address

Tel:

Tel:

Email

Email

Amount to be invested as a lump sum (minimum £3,000) Amount to be paid in instalments (minimum £50 pm /£600 pa) Interest Payments to be (circle as appropriate)

Monthly /Annually Reinvested / paid annually / paid quarterly / waived

Bank Account Number ( for repayment of interest ) Bank Sort Code



□ □

I/we hereby make an application to the Society for unsecured loan stock in the above sum and attach a cheque drawn on my/our personal account payable to “The Cochabamba Project Limited”. have set up a standing order to pay regular installments of £………………………… starting on (date)………………………………. and finishing on (date)…………………………. to the Society’s bank account number 65348590, sort code 08-92-99.

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have made a BACs payment to the society’s bank account number 65348590, sort code 08-92-99.

Delete as necessary  I/we have read, accept and understand the Terms and Conditions set out in this document and am/are aware of the risks involved in applying for unsecured loan stock to the Society. I/we consent to you holding and processing personal data in accordance with Data Protection Law and your privacy policy.  I/we are exempt from tax (if exempt from tax please send a completed R85 with this form).  I/we can confirm that I have read all Notices in this document.

In the case of joint applications ALL MUST SIGN. In the case of corporations this form must be executed under its common seal or signed on its behalf by a duly authorised officer or agent, whose capacity must be stated.

Applications from unincorporated bodies must be signed by two persons who must state their capacity.

Name __________________________________Capacity (if relevant) _________________________ Signed _________________________________ Dated _______________________________20 Name __________________________________ Capacity (if relevant) ________________________ Signed _________________________________ Dated _______________________________20 Please return your application to: The Cochabamba Project Limited, 100 Whirlowdale Road, Sheffield, S7 2NJ If you need assistance please call David Vincent on 0114 2368 168 or email david.vincent@cochabamba.coop