Thank you for requesting this Product Disclosure Statement from Funds
Focus.
Fee Reduction
As highlighted within our offers page, whilst most agribusiness schemes typically
pay an entry fee of up to 8%. Applications lodged through Wealth Focus will
receive a rebate of up to 8% in the form of a cheque once your application has
been processed.
How to Apply
Please have a read through the PDS and if you would like to invest the
application pages can generally be found towards the back of the document.
You will only need to send the application section back with a cheque payable
direct to the investment company (not ourselves). You should take note of any
minimum investment amounts that may apply.
Then mail the completed application directly to us.
We will then check to ensure your form is completed correctly before
forwarding your document on to the investment provider on your behalf.
Wealth Focus Pty Ltd
Reply Paid 760
Manly
NSW 1655
Please note that we are unable to track applications mailed directly to the
product provider and therefore cannot guarantee that your discounts have
been applied in these instances.
Should you wish to take advantage of our free annual valuation and tax report
for all your investments you should complete our broker nomination form for
The Wealth Focus Investment Service.
Regards
Sulieman Ravell
Managing Director
Wealth Focus Pty Ltd
ABN 87 123 556 730
56 The Corso, Manly, NSW 2095
Postal Address: Reply Paid 760, Manly, NSW 1655
Requirements for verifying your identity under the new Anti Money Laundering
(AML)/Counter Terrorism Financing (CTF) Act
The new AML/CTF Act cameinto effect on the 12th December 2007. All financial
planning and fund management companies are now required to collect, verify and
store specific customer information before arranging certain services such as managed
investments for a client. It is designed to prevent, detect and protect Australian
business from money laundering and the financing of terrorist activities.
We are currently in a transition phase and as such whilst most companies will not
accept any new business without a person identity being verified, there are a number
that still do not. To avoid confusion, we request that all new applications are sent with
‘certified documentation’.
We’ve found that the easiest way to provide the required documentation is to
have a copy of your driving licence or passport certified by Australia Post or a
Justice of the Peace (please see following page for a full list of individuals that
can certify documentation).
Once this has been completed, under the current requirements we will not
require you to send identification again.
What you need to do
You will need to enclose a certified piece of photographic evidence or one piece of
primary non-photographic evidence and one piece of secondary evidence (please refer
to the Identification Form for document requirements), with your application form
and post to us at the following address
Wealth Focus Pty Ltd
Reply Paid 760
Manly
NSW 1655
Please do not send us original driving licences or passports as these can very easily
get lost in the post. Copies of documents can be certified by an authorised individual,
they will need to sight and verify that the copy is a ‘certified true copy’, sign, date,
print their name and list their qualification.
ANTI-MONEY LAUNDERING REQUIREMENT FOR NEW APPLICATIONS
IDENTIFICATION FORM
INDIVIDUALS & SOLE TRADERS
GUIDE TO COMPLETING THIS FORM (MUST BE INCLUDED WITH ALL NEW APPLICQATIONS)
o Complete one form for each applicant. Complete all applicable sections of this form in BLOCK LETTERS.
o Please contact us on 1300 55 98 69 if you have any queries.
o If you wish to apply in the name of a super fund, trust or company, please contact us for an alternative identification
form.
SECTION 1A: PERSONAL DETAILS
Date of Birth dd/mm/yyyy
Surname
Full Given Name(s)
Residential Address (PO Box is NOT acceptable)
Street
Suburb
State
Postcode
Country
COMPLETE THIS PART IF INDIVIDUAL IS A SOLE TRADER
Full Business Name (if any)
ABN (if any)
Principal Place of Business (if any) (PO Box is NOT acceptable)
Street
Suburb
State
Postcode
Country
Who can verify customer identity documents?
Please find below a list of all the Approved Individuals that can certify documents:
•
A Justice of the Peace
•
An agent of the Australian Postal Corporation who is in charge of an office supplying postal services to the public, or a
permanent employee with more than two years continuous service (who is employed in an office supplying postal services to
the public)
•
A notary public (for the purposes of the Statutory Declaration Regulations 1993)
•
A person who is enrolled on the roll of the Supreme Court of a State or Territory, or the High Court of Australia, as a legal
practitioner (however described)
•
A judge, magistrate, registrar or deputy registrar of a court
•
A chief executive officer of a Commonwealth Court
•
A police officer
•
An Australian consular or diplomatic officer (within the meaning of the Consular Fees Act 1955)
•
An officer or finance company officer with two or more continuous years of service with one or more financial institutions (for
the purposes of the Statutory Declaration Regulations 1993)
•
An officer with, or authorised representative of, a holder of an Australian Financial Services Licence, having two or more
continuous years of service with one or more licensees, and
•
A member of the Institute of Chartered Accountants in Australia, CPA Australia or the National Institute of Accountants with
more than two years continuous membership.
1/2
V 200712.04
IDENTIFICATION FORM
INDIVIDUALS & SOLE TRADERS
VERIFICATION PROCEDURE
Attach a certified copy of the ID documentation used as proof of identity. ID enclosed should verify the applicant’s full
name; and EITHER their date of birth or residential address.
o Complete Part I (or if the individual does not own a document from Part I, then complete either Part II or III.)
o Contact your licensee if the individual is unable to provide the required documents.
PART I – ACCEPTABLE PRIMARY ID DOCUMENTS
Tick
3
Select ONE valid option from this section only
Australian State / Territory driver’s licence containing a photograph of the person
Australian passport (a passport that has expired within the preceding 2 years is acceptable)
Card issued under a State or Territory for the purpose of proving a person’s age containing a photograph of the person
Foreign passport or similar travel document containing a photograph and the signature of the person*
PART II – ACCEPTABLE SECONDARY ID DOCUMENTS – should only be completed if the individual does not own a document from Part I
Tick
3
Tick
3
Select ONE valid option from this section
Australian birth certificate
Australian citizenship certificate
Pension card issued by Centrelink
Health card issued by Centrelink
AND ONE valid option from this section
A document issued by the Commonwealth or a State or Territory within the preceding 12 months that records the provision of
financial benefits to the individual and which contains the individual’s name and residential address
A document issued by the Australian Taxation Office within the preceding 12 months that records a debt payable by the
individual to the Commonwealth (or by the Commonwealth to the individual), which contains the individual’s name and
residential address. Block out the TFN before scanning, copying or storing this document.
A document issued by a local government body or utilities provider within the preceding 3 months which records the provision
of services to that address or to that person (the document must contain the individual’s name and residential address)
If under the age of 18, a notice that: was issued to the individual by a school principal within the preceding 3 months; and
contains the name and residential address; and records the period of time that the individual attended that school
PART III – ACCEPTABLE FOREIGN ID DOCUMENTS – should only be completed if the individual does not own a document from Part I
Tick
3
BOTH documents from this section must be presented
Foreign driver's licence that contains a photograph of the person in whose name it issued and the individual’s date of birth*
National ID card issued by a foreign government containing a photograph and a signature of the person in whose name the
card was issued*
*Documents that are written in a language that is not English must be accompanied by an English translation prepared by an accredited translator.
2/2
PROJECT 2008
ARSN: 129 750 296
FEA PLANTATIONS LIMITED ABN: 44 055 969 429 AFSL NO: 243 515
Supplementary Product Disclosure Statement
This supplementary product disclosure statement (Supplementary PDS) is dated 30 September 2008 and is supplementary to the product
disclosure statement dated 19 March 2008 (PDS), issued by FEA Plantations Ltd ABN 44 055 969 429 (AFS licence 243515) (FEA Plantations) in
relation to the FEA Plantations Project 2008 ARSN 129 750 296 (Project). This Supplementary PDS must be read together with the PDS.
DEFINITIONS
Terms defined in the PDS have the same meaning when used in this Supplementary PDS.
THE PURPOSE OF THIS SUPPLEMENTARY PDS
FEA Plantations is issuing this Supplementary PDS to update prospective Growers on the changes to the treatment of an investment in the Project by the ATO.
CHANGED TAX ENVIRONMENT
The changes to the tax landscape for forestry managed investment schemes are set out on pages 42 and 43 of the PDS. The transitional period for
forestry managed investment schemes expired on 30 June 2008.
This means that, for Growers who enter the Project from 1 July 2008, tax deductions will only be available for Grower’s expenditure if it can be
demonstrated to the ATO that at least 70 percent of the Grower’s expenditure (in present value terms) will constitute ‘direct forestry expenditure’.
The ATO’s current interpretation of the taxation laws is set out in TR 2007/8 which provides that investors are not carrying on a business when investing
in an agribusiness managed investment scheme. This interpretation is the subject of a test case which is currently before the Courts. The outcome of this
test case will determine whether or not Growers who invest in the Project (or similar schemes) are “in the business” of establishing a forestry plantation.
Growers should be aware that the deductibility of their investment does not depend on the outcome of the test case. However, the outcome of the test
case (that is, the determination as to whether you are ‘in the business’ of establishing a commercial forestry plantation) may have an impact on whether
GST is payable in relation to your investment in the Project.
PRODUCT RULING
As disclosed in the PDS, FEA Plantations obtained product rulings which covered Growers who entered into the Project on or before 30 June 2008.
FEA Plantations has applied for a Product Ruling under the new ‘direct forestry expenditure’ rules. When issued, this Product Ruling will apply to
Growers who enter into the Project after the date the Product Ruling is issued and before 30 June 2009 and will confirm those Growers are entitled to
tax deductions for their investment. In accordance with the disclosure on page 3 of the PDS (in paragraph 4 of Dealing with Applications), prospective
Growers who apply for Woodlots before the new Product Ruling is issued will not be issued Woodlots until after the Product Ruling is issued.
If a Product Ruling is not issued within the following time frames, then FEA Plantations will reject the application and refund any Application Money received:
1. Within one month of receipt of Application Money from a prospective Grower.
2. If a prospective Grower applies for an interest in the Project using one of the loan options from FEA, then within three months of receipt of the
application. In this regard, it is important to note that FEA will not process the loan application until a Product Ruling is issued. Therefore, FEA
Plantations will not receive any Application Money from the prospective Grower until after the Product Ruling is issued.
Prospective Growers should be aware there is a risk the ATO will not issue a Product Ruling under the ‘direct forestry expenditure’ rules. If the ATO
refuses to issue a Product Ruling under the ‘direct forestry expenditure’ rules, then FEA Plantations will reject applications received from prospective
Growers and will refund all Application Money received.
Continued over...
PROJECT 2008
ARSN: 129 750 296
FEA PLANTATIONS LIMITED ABN: 44 055 969 429 AFSL NO: 243 515
Supplementary Product Disclosure Statement (continued)
GOODS AND SERVICES TAX
The costs associated with the Project, as outlined in the PDS, are GST-inclusive amounts (except where otherwise indicated). The PDS contains
disclosure about the GST consequences after 1 July 2008 on pages 44 and 87 of the PDS. This disclosure indicates that the GST consequences for
Growers entering into the Project after 1 July 2008 should be the same as the GST consequences for Growers who entered the Project on or before
30 June 2008.
While the ATO has not yet finalised GSTR 2008/D1, the ATO has now indicated that, adopting the ATO’s current view that Growers in the Project are no
longer ‘in the business’ of growing plantation timber, GST may not be required to be remitted to the ATO (and Growers who are registered for GST will
not be able to claim input tax credits). However, the position in this regard remains uncertain while the test case is before the Courts.
If, at the time payments are made by Growers, FEA Plantations determines (in consultation with the ATO), that no GST needs to be remitted to the ATO
in relation to payments made by Growers, then FEA Plantations will refund any GST amounts to Growers.
If it is later determined by the Court that Growers are ‘in the business’ of plantation forestry, then GST may be payable at that time and FEA Plantations
would have the right to recover this amount from Growers.
Further, we anticipate that any Product Ruling issued in relation to the ‘direct forestry expenditure’ rules, will not indicate that tax deductions will be
available for any GST amounts paid by Growers. This is because Growers are not regarded as “carrying on the business” of growing plantation timber
but that it is the scheme that is carrying on that business and the Growers’ interest in the scheme is a financial product not subject to GST.
This means that any Product Ruling issued by the ATO after 1 July 2008 is likely to provide that only the following amounts will be tax deductible:
1. Woodlot Option 1 — $3,150.
2. Woodlot Option 2 — $3,150.
3. Woodlot Option 3 — $3,150.
4. Woodlot Option 4 — $21,000.
Therefore, an investment will only be 100 percent tax deductible (as provided on page 10 of the PDS), if it is not necessary for FEA Plantations to remit
GST to the ATO and the GST amounts are refunded to investors. At the date of issue of this Supplementary PDS, FEA Plantations anticipates any GST
amounts received from Growers will be refunded to those Growers.
CONSENTS
The directors of FEA Plantations have consented to this issue of this Supplementary PDS.
UPDATED INFORMATION
As noted in the PDS, information contained in the PDS may change from time to time. If the change will be materially adverse to the offer, then
FEA Plantations will issue a supplementary PDS. However, if the change is not materially adverse, then no supplementary PDS will be issued.
Updated information will be available at www.fealtd.com and upon request, FEA Plantations will provide you with a paper copy of any updated
information.
PROJECT 2008
ARSN: 129 750 296
FEA PLANTATIONS LIMITED ABN: 44 055 969 429 AFSL NO: 243 515
IMPORTANT NOTICE
FOR INVESTORS IN FEA PLANTATIONS PROJECT 2008
For an application for FEA Plantations Project 2008 to be accepted after 30 July 2008, the following
acknowledgement must be signed and returned to our office along with the original application for woodlots.
This acknowledgement must be signed by the same parties who signed the Application Form in the PDS.
Acknowledgement — FEA Plantations Project 2008
To: FEA Plantations Ltd
I,
, hereby acknowledge I have received a copy of the following documents:
1. The original product disclosure statement for the FEA Plantations Project 2008 dated 19 March 2008.
2. The supplementary product disclosure statement for the FEA Plantations Project 2008 dated 30 September 2008
I confirm I have read both of these documents prior to signing the attached application form.
Individual Applicant/s
Company Applicants
Applicant 1
Director
Signature
Signature
Name (please print)
Name (please print)
Applicant 2
Director/Secretary
Signature
Signature
Name (please print)
Name (please print)
Date
Date
P R O D U C T DIS C LO SU R E STATE M E N T
FEA
PLANTATIONS
PROJECT 2008
Setting the standard in managed forestry investments
FEA Plantations Ltd
ABN: 44 055 969 429
AFSL No: 243 515
ABN: 44 055 969 429 – AFSL No: 243 515 – ARSN: 129 750 296
Registered OFFICE
• AU S
T
R
N
•
PR
OD
UCT RULIN
anagemen
t
al M
nt
14001
Freecall: 1800 600 009
Web: www.fealtd.com
TAXATIO
FICE
Facsimile: (03) 6331 5047
Email: marketing@fealtd.com
IA N
OF
Telephone: (03) 6334 7811
AL
. ISO
PO Box 733, Launceston, Tasmania 7250
Environ
me
233B Charles Street, Launceston, Tasmania 7250
G
trust-mark.com®
AFS/01-21-09
AFS/01-21-09
PEFC/21-23-09
PEFC/21-23-09
035
SETTING THE
STANDARD IN
FEA has evolved into one of Australia’s leading fully integrated forestry
and forest products companies and anticipates opportunities in the forest
products sector for those who are prepared to learn, specialise and innovate.
MANAGED
FORESTRY
INVESTMENTS
18. CORPORATE DIRECTORY
Responsible Entity
Directors
Taxation Advisers
FEA Plantations Ltd
ABN 44 055 969 429
Anthony Maxwell Cannon (Chairman)
Gavin Wilson Wright
Michael John Williams
Kerry Christopher Harvey Duncan
KPMG, Chartered Accountants
ABN: 20 238 520 534
Australian Financial Services
Licence Number: 243515
Head Office
Compliance Committee
233b Charles Street,
Launceston, Tasmania 7250
Ross Frederick James Waining
Nigel Scott Dawkins
Kerry Christopher Harvey Duncan
Postal Address
PO Box 773
Launceston, Tasmania 7250
Phone: (03) 6334 7811
Fax: (03) 6331 5047
Freecall 1800 600 009
Email: marketing@fealtd.com
Web: www.fealtd.com
Parent Company,
Manager and Financier
Forest Enterprises Australia Ltd
ABN 47 009 553 548
233b Charles Street
Launceston, Tasmania 7250
Custodian
Tasmanian Perpetual Trustees Ltd
ABN 97 009 475 629
23 Paterson Street
Launceston, Tasmania 7250
Australian Financial Services
Licence Number: 234630
Solicitors
McMahon Clarke Legal
ABN 29 832 978 575
62 Charlotte Street
Brisbane, Queensland 4000
Level 8, 45 Murray Street
Hobart, Tasmania 7000
Independent Forestry
Consultant
Van Diemen Forestry Consultants Pty Ltd
ACN 009 577 842
212 Union Road
Surrey Hills, Victoria 3127
Auditors of the Scheme
and the Responsible Entity
Pitcher Partners
Level 19, 15 William Street
Melbourne, Victoria 3000
Auditor of the
Compliance Plan
Peter Anthony Jose
C/- Pitcher Partners
Level 19, 15 William Street
Melbourne, Victoria 3000
113
Contents
Section PAGE
Important Information 2
Key Details of The Offer 3
1
Key Features of the Project 5
2
Why Invest in Forestry? 9
3Australian Forest Industry Overview 13
4FEA’s Strategy 19
5The Offer 25
6How The Project Works 29
7Project Fees 37
8Taxation 41
9Project Returns AND Risks 45
10Responsible Entity and Compliance Committee 53
11The FEA Group 57
12Additional Information 63
13
67
Independent Reports 14Glossary of Terms 88
15Frequently Asked Questions 90
16Project Agreements 92
17How to Apply 103
18Corporate Directory 113
1
Important Information
Parent Company
Forest Enterprises Australia Ltd ABN 47 009 553 548 is the parent
company of FEA Plantations.
The Offer
This PDS is dated 19 March 2008 and contains an offer to
apply for interests in the FEA Plantations Project 2008 –
ARSN 129 750 296 (Project).
The offer contained in this PDS is only made to persons resident
in Australia. This PDS will be available on FEA Plantations’ website
at www.fealtd.com. Any person accessing the electronic version
of this PDS for the purpose of participating in the Project must be
an Australian resident and must only access the information from
within Australia.
During the offer period, any person may obtain a hard copy of this
PDS by contacting FEA Plantations. Interests will only be issued
under this PDS on receipt of the ‘Application Form & Power of
Attorney’ issued together with the PDS.
This PDS was prepared on the basis of information available to
FEA Plantations on the issue date.
AFG operates a voluntary, independent, thirdparty product certification program to give
investors confidence that offer documents for
forestry investment schemes operating within
the Corporations Act are in accordance with the
defined standards of the Disclosure Code for
035
Afforestation Managed Investment Schemes. This
program is accredited through JAS-ANZ, which is also responsible
for accrediting the certification bodies.
The tick on the front cover of this PDS means the Project has been
independently assessed as being in accordance with the defined
standards of the code. The code, which is voluntary, requires companies
offering managed timber investments to ensure the information they
provide in a PDS is always clear, concise and of a high quality.
AFG have prepared and issued an ‘Investors’ Short Guide
to Afforestation Investment’. This guide provides investors
with details of the disclosure code and sets out why investors
should seek out a Project bearing the AFG ‘tick’. Please contact
our office if you would like a free copy of this guide or go to
www.afg.asn.au.
FEA Plantations obtained certification on 26 March 2008 –
compliance number 035.
AFG Pruned Stand Certification Scheme
This scheme provides certification that tree
Pruning has been completed to acceptable
PRUNED
STAND
standards. It provides confirmation to future
CERTIFICATION
buyers of the timber that the logs will contain
LI
AN
GR
F O R E ST
Clearwood of a known standard based on the
implementation of an appropriate Pruning
regime. All pruned stands in Woodlot Option 2 and Woodlot
Option 4 will be audited under the scheme.
Additional Information
FEA Plantations has appointed Tasmanian Perpetual Trustees Ltd
as the Custodian to hold the relevant property in the name of
the Responsible Entity. The Custodian is not the issuer of the
interests in the Project and only has the obligations under the
Custodian agreement, a summary of which is set out in section
16 of this PDS.
Any reference to legislative material contained in the PDS should
not be considered to be an official or authorised version. None of
the photographs in this PDS are of assets or property owned by
FEA Plantations or the Project.
ASIC has not approved or endorsed the offer and takes no
responsibility for the contents of this PDS.
2
RA
Information contained in this PDS may change from time to
time. If the change will be materially adverse to the offer,
then in accordance with the Corporations Act we will issue a
supplementary PDS. However, if the change is not materially
adverse, then we will not issue a supplementary PDS. Updated
information will be available at www.fealtd.com and upon
request we will provide you with a paper copy of any updated
information.
A U ST
Changes
INISTERED B
DM
Y
A
All fees and charges quoted in this PDS are inclusive of GST, unless
otherwise stated.
AFG Disclosure Code for Afforestation
Managed Investment Schemes
ERS
The PDS is issued by FEA Plantations Ltd, who has been issued
with an Australian Financial Services Licence (AFSL), number
243515.
Australian Forest Growers (AFG)
Quality Assurance Schemes
OW
Responsible Entity
Disclaimers
The information given in this PDS is of a general nature and has been
prepared without taking account of Growers individual investment
objectives, financial situation or particular investment needs.
Before making an investment decision on the basis of this PDS, you
should read the entire PDS and consider the appropriateness of the
information, having regard to your objectives, financial situation and
needs before proceeding to invest. Your financial or professional
advisers can help you determine how best to achieve your financial
goals and whether investing in the Project is appropriate for you.
Investment in the Project is to be considered speculative. It should
be understood that a venture in tree farming is a long-term
investment. If your application is accepted, you will be a Grower
engaged in the business of tree farming as part of the Project.
Growers are not excluded from liability to other parties and risks
commonly associated with commercial plantation forestry.
None of FEA Plantations, its parent FEA, or any related companies
within the FEA Group or their respective officers, employees and
agents, guarantees or underwrites the performance of the Project,
the return of capital or any particular rate of return.
Key Details of the Offer
The Offer
The FEA Plantations Project 2008 provides Growers with the opportunity to invest in a business growing either
eucalypt Hardwood or radiata pine Softwood trees on ½ hectare Woodlots located on plantations in Tasmania,
northern New South Wales or south-east Queensland.
There are four investment options offered through the Project and Applicants may choose to apply for Woodlots
in either or all options. The intended use, period to harvest and ongoing costs vary depending on the investment
option selected. The options are as follows:
Woodlot Option 1 – Eucalyptus Hardwood grown for sale as unpruned Sawlog and Pulpwood.
Woodlot Option 2 – Eucalyptus Hardwood grown for sale as pruned and unpruned Sawlog, Veneer and Pulpwood.
Woodlot Option 3 – Radiata pine Softwood grown for sale as unpruned Sawlog and Pulpwood.
Woodlot Option 4 – Diversified forestry offer, being a combination of Woodlot Options 1, 2 and 3 in a fixed ratio
of four, one and two Woodlots respectively.
Key Dates
Offer Opens
26 March 2008.
Offer Closes
30 June 2008, in respect of Growers investing on or before 30 June 2008.
30 June 2009, in respect of Growers investing on or after 1 July 2008.
Please note that the Responsible Entity, in its absolute discretion, may determine to close either or both offers
earlier than expected if demand exceeds the available Woodlots on offer.
Dealing with
Applications
Woodlots are allotted on a first-come, first-served basis, in the order of lodgement with FEA Plantations of
completed applications and receipt of the matching application monies. An application subject to finance approval
is regarded as an incomplete application until such time as finance is approved.
As Responsible Entity, FEA Plantations reserves the right to refuse any investment application in whole or in part,
some applications but not others, or all applications without giving reasons. Upon refusal, application monies will
be refunded to the Applicant within 30 days.
Growers and their financial adviser will be notified in writing within 30 days of receipt when their application is
accepted or otherwise.
The ATO has issued Product Ruling No.’s PR 2008/31, PR 2008/32, PR 2008/33 & PR 2008/34 corresponding to
Woodlot Options 1, 2, 3 & 4 respectively. The Product Rulings confirm tax deductibility for the initial Establishment
Fee and other costs which may be incurred by Growers as referred to in the Product Rulings. The Product Rulings
apply to Growers accepted into the Project on or before 30 June 2008. At the date of this PDS, FEA Plantations
anticipates the issue of Product Rulings confirming identical tax treatment for post 30 June 2008 Growers. We will
not accept any applications from such investors until a Product Ruling on the anticipated terms is issued.
3
4
1. Key
features of
the project
The Project has been established to provide Growers the opportunity
to participate in a business of growing either eucalypt Hardwood or radiata
pine Softwood trees on ½ hectare Woodlots located on plantations
in Tasmania, northern New South Wales or south-east Queensland.
5
1.
Key features of the project
This section contains only a summary of the Project. Before deciding whether to participate in the Project, Growers should read
the entire PDS.
More
Information
Feature
Summary
Overview
The Project has been established to provide Growers the opportunity to participate in a business
of growing either eucalypt Hardwood or radiata pine Softwood trees on ½ hectare Woodlots
located on plantations in Tasmania, northern New South Wales or south-east Queensland.
Section 5
Why Invest
in Forestry?
World demand for plantation timbers is growing each year. It is anticipated that demand for
timber products will increasingly be satisfied from plantations as environmental pressure
slows traditional harvesting of native forests.
Section 2
The
Responsible
Entity
and FEA
The Responsible Entity for the Project is FEA Plantations, a wholly owned subsidiary of FEA.
FEA Plantations manages 15 existing plantation projects dating back to 1993, with around
$280M in investments under management.
Section 10
Section 6
Section 11
FEA was established in 1985 and is currently the manager of over 50,000 hectares of
plantations located in Tasmania, New South Wales and Queensland.
FEA is a public company that is listed on the Australian Securities Exchange. As at 30 June
2007, FEA had net tangible assets of approximately $288M and achieved a profit of $21.5M
after tax for the full financial year.
Choice of
Woodlot
Options
Growers are offered the flexibility of four investment options, with the intended use, period to
harvest and ongoing costs varying, depending on the investment option selected.
Section 5
Term of
Project
The approximate term for each Woodlot investment option is expected to be as follows:
Section 5
Woodlot Option 1 – 14 years.
Woodlot Option 2 – 17 years.
Woodlot Option 3 – 26 years.
Woodlot Option 4 – 26 years.
Structure of
the Project
By signing the ‘Application Form & Power of Attorney’, each Grower will sign a management
agreement and Forestry Right lease deed under which they contract with FEA Plantations to
establish their plantation and carry on the future management, maintenance and harvesting of
their Woodlots. Upon accepting each Grower into the Project, FEA Plantations will execute the
management agreement on its own behalf in respect of the Woodlots allocated to the Grower.
Section 6
Fees
Woodlot Options 1, 2 & 3 – Each Grower must pay a total up front Establishment Fee of $3,465
per ½ hectare Woodlot (incl $315 GST) in respect of plantation establishment. The minimum
investment is one Woodlot.
Section 7
Woodlot Option 4 – Each Grower must pay a total up front Establishment Fee of $23,100 (incl
$2,100 GST) in respect of plantation establishment. To invest in Woodlot Option 4, investors
must apply for at least seven Woodlots.
There are no ongoing rent or maintenance fees payable by Growers during the term of
the Project. These fees will be deducted via a percentage deduction from the Harvest
Proceeds, according to the fees charged on the individual investment options.
Growers in Woodlot Option 2 and Woodlot Option 4 will be required to pay Pruning fees in
approximately years two, four and six.
How to
Apply
All applications must be made by completing the ‘Application Form & Power of Attorney’ on
pages 107 - 109 of this PDS.
Section 17
Payment
Options
Applicants can either pay the full Establishment Fee by way of cheque or credit card payment,
or apply to fund the investment via a range of competitive finance options.
Section 5
Insurance
Growers have the option to insure their Woodlots against loss from fire and other usual risks
if they wish to do so. Alternatively, Growers may ask FEA Plantations to seek suitable cover
at the Grower’s cost.
Section 6
Additional insurance cover for the full value of the investment may also be available to enable
Growers to insure their interests for the original amount invested. This level of insurance is
compulsory if obtaining finance for a term longer than one year.
6
Feature
Summary
Taxation
Features
The ATO has issued Product Ruling No.’s PR 2008/31, PR 2008/32, PR 2008/33 & PR 2008/34
corresponding to Woodlot Options 1, 2, 3 & 4 respectively. The Product Rulings are applicable
for Growers who enter into the Project on or before 30 June 2008.
More
Information
Section 8
Section 13
We anticipate that a Product Ruling will be issued in due course which will confirm
that the tax treatment for post 30 June 2008 investors is identical to that of pre 1 July
2008 investors.
Land
Selection
Selected regions of Tasmania, northern New South Wales and south-east Queensland are
considered by FEA Plantations to be ideally situated for the establishment of eucalypts, and
Tasmania predominantly for the growing of Softwood (Pinus radiata).
Section 4
Plantation
Management
On behalf of the Grower, FEA Plantations has engaged FEA to perform the management
services under the management agreement. The Woodlots will be managed by a team of
experienced professional forestry managers that operate in accordance with strict health,
safety and environmental procedures. FEA has developed highly professional regimes for site
selection, tree establishment and maintenance.
Section 6
Stocking
Guarantee
The Responsible Entity provides each Grower with a Stocking Guarantee for a period of two
years from the date the Grower is registered as the holder of the Woodlots. The guarantee
provides that if the survival of seedlings is less than 90% of the original plantings, it will
reinstate the Woodlots with replacement seedlings up to the above mentioned 90%. There
is no additional cost to the Grower for replacement of seedlings under this guarantee.
Section 6
Project
Returns
Growers should receive payments for timber sold following Thinnings, which are expected
to occur at different stages depending on the Woodlot option selected. Growers should also
receive payments following the final harvest.
Section 9
Section 6
FEA has entered into a Wood Purchase Agreement relating to the purchasing of Growers’
timber at harvest and paying the greater of either the prevailing market price at the time of
harvest, or for Woodlot Options 1 & 2, a Floor Price linked to the price FEA receives for the
final product.
All proceeds of timber sales for each Woodlot option will be pooled and Growers will share in
any proceeds of sale for each pool based on the number of Woodlots owned as a percentage
of the total number of Woodlots in the relevant option, less their share of the management
and Forestry Right lease fees.
Risks and
Safeguards
Participation in this Project is a medium to long-term venture in commercial forestry. There are a
variety of risks that are peculiar to an investment such as this and the Project should be considered
speculative. The known likely risks and relevant safeguards are disclosed in this PDS.
Section 9
Secondary
Market
Growers are free to assign their interests in the Project, subject to the conditions set out
in the Constitution. However, there is currently no active secondary market for interests in
the Project.
Section 8
Section 12
In May 2007 as part of the Federal Budget, it was announced that the government would
allow investors in forestry managed investment schemes to trade their interests once they
have been held by the initial investor for a period of at least four years. Any Grower wishing to
sell their interest in the Project should seek appropriate professional advice because a transfer
could have income tax and other implications.
Independent
Experts
We have obtained the following expert reports to provide information about this investment
and its key variables:
Section 13
Independent Forester’s Report.
Independent Market Report.
Independent Taxation Opinion.
7
8
2. WHY
INVEST IN
FORESTRY?
Enhancing Your Investment Portfolio
Market Opportunities
Environmental Benefits
Government Policy & Australia’s Plantations
The existence of a diversified range of potential end-markets
for Growers’ trees, including both large global and high value
niche markets means potentially lower market risk for Growers.
9
2.
WHY INVEST IN FOREST RY?
This Project should be viewed as a long-term investment. Due
to the length of the Project’s investment term, it is possible that
market demand for Growers’ timber at the time of harvest will be
different from that currently anticipated. The market information
included in this section should be read in conjunction with the
market risks disclosed in Section 9.
Growing World Demand
Well managed agribusiness ventures are specialist business
investments outside of the traditional asset classes. Accordingly, they
may be suitable for investors who want to diversify their portfolio.
World consumption of timber is growing in correlation with
rising population levels and standards of living. There is a high
correlation between a country’s income per capita and its use of
wood and paper. Increasingly, improved standards of living will
mean that new urban dwellers demand more wood products,
including paper and paper products. These market forces are
expected to drive future growth in world demand for both
Hardwoods and Softwoods over the life of the Project and beyond
as the consumption of forest products such as paper, paperboard
and sawn timber continues to grow. See Section 3, ‘Australian
Forest Industry Overview’ and Section 13, ‘Independent Market
Report’ for further information.
Tax Effective
Declining Access to Native Forests
Australia’s current income tax laws allow for the costs of establishing
plantations, and consequently, investor’s Project costs to be 100%
tax deductible in the financial year in which they are incurred
dependent upon individual circumstances. The ATO through the
issue of Product Ruling No.’s PR 2008/31, PR 2008/32, PR 2008/33
& PR 2008/34 has confirmed this tax deductibility for investors
who are accepted into the Project on or before 30 June 2008.
The world’s native forest area is declining and environmental
constraints are impacting on existing production forests.
Traditionally, Australia’s building products and the majority of
Woodchips exported from Australia and used in the production of
paper have been sourced from native forests.
ENHANCING YOUR
INVESTMENT PORTFOLIO
Diversification
The Product Rulings guarantee such deductions as long as the
Project is carried out in accordance with the details provided
to the ATO and described in the ruling. Proceeds received
by investors from harvesting trees towards the end of the
investment term are fully assessable for income tax purposes.
Further details regarding the taxation aspects of the Project
can be found in the ‘Taxation’ section on page 41, and in the
‘Independent Taxation Opinion’ on page 86.
Flexible Timing of Harvest
The nature of managed agribusiness investments is that returns are
generally a function of yields and market prices for the produce at
the time of harvest. Most farming enterprises have little flexibility
as to when to harvest and sell their produce. A key advantage
of forestry projects such as those offered by FEA Plantations is
that the timing schedule for harvesting can be flexible. If market
conditions are not ideal, the harvest (whether Thinning or final
harvest) can simply be postponed until they improve. Meanwhile
the plantation will continue to grow in volume and value and can
be reassessed at another time.
FEA places great emphasis on assessing the volume, Growth Rate
and quality of each of its plantations. It uses a structured sampling
program plus industry specific modelling software to generate a
range of product and volume scenarios from assumed harvesting
at different ages for different markets.
This data is combined with other key factors such as the distances
to the nearest suitable processing plants. This harvest modelling
gives FEA the ability to plan and control log supply to customers,
which is an important factor in achieving potentially better prices
for Growers. Such planning will also tend to produce returns over
several years rather than a single year return at both Thinning and
final harvesting.
10
MARKET OPPORTUNITIES
Plantation forests, both Hardwood and Softwood will need to
play a greater role in supplying the growing world demand for
industrial wood. As a consequence, an excellent opportunity
exists for plantation grown Hardwood and Softwood to provide
an alternative to replace the declining native forest supply.
Diversified Forest Product End-Markets
High Value Versatile Species
For centuries, forests have globally produced a spectrum
of wood products with uses in paper production, cardboard
packaging, housing and commercial building construction,
furniture manufacture, landscaping and fencing, to name a few.
The existence of a diversified range of potential end-markets for
Growers’ trees, including both large global and high value niche
markets means potentially lower market risk for Growers.
The Hardwood and Softwood species chosen by FEA Plantations,
together with the Silviculture regimes adopted, will be capable
of conversion into a wide range of timber products. Hardwood
eucalypt species used by FEA Plantations are chosen because
of their potential high end-product market value, both as
wood fibre in the manufacture of paper products and sawn
timber for construction and decorative furnishing uses. These
plantation grown species are preferred over native Hardwood
fibre by Japanese pulp and paper manufacturers for fine quality
paper manufacture.
Forest products fall generally under three headings:
Sawn timber is used for many purposes in building, joinery,
furniture making, etc. Included in this category are logs used
for poles in landscaping and agricultural uses.
Wood based panels includes Medium Density Fibreboard
(MDF), oriented strand board, particle boards and Veneers,
which are thin sheets, peeled or sliced from the log and then
either glued in layers to make plywood or used as a surfacing
on other types of panel.
Paper & Paperboard in the form of Woodchips, is used
to make pulp for paper manufacture, or to make panels.
Plantation Hardwood fibre fetches a higher price for
making paper than older native forest wood because of its
uniformity, its brightness and the fact that it yields more
pulp in kraft pulping.
Since 1970 , there has been global growth in demand for all three
forest product categories with growth expected to continue for
the decade to come. See Section 3, ‘Australian Forest Industry
Overview’ and Section 13, ‘Independent Market Report’ for
further information.
Plantation Hardwood chips have traditionally commanded a
premium price over mixed eucalypt native Woodchips in export
Asian markets. Sawlogs have historically attracted higher mill
door prices than pulp logs and are expected to do so in the
future. Softwood sawn timber is the staple product used in the
house framing market and is used virtually in all building and
furniture applications.
Australia’s Competitive Position
Asian countries are currently the most active world export
markets for plantation timber products. Japan is currently the
world’s largest importer of Woodchips and China, Indonesia and
India are currently experiencing market growth.
Australia’s proximity and shorter shipping times to Japan and
other key Asian markets (relative to other major suppliers such
as Chile and South Africa) is a significant factor in providing costcompetitiveness. These markets are subject to volatility due to
variations in exchange rates between competitive supply zones.
11
2.
WHY INVEST IN FOREST RY?
ENVIRONMENTAL BENEFITS
Wood is a renewable resource, grown by natural processes
involving water and sunlight. It can be processed into finished
products with less energy and risk of pollution than alternatives
such as metals, concrete and plastics.
Plantations can provide a number of environmental benefits:
They reduce the reliance on harvesting native forests, which in
some parts of the world is not done sustainably.
They can help to repair major land degradation such as salinity
and erosion, which may have resulted from over-clearing
native vegetation and consequent higher water tables.
They can help maintain and improve water quality.
The young wood from plantations needs less bleaching than
wood from mature native forests. This means pulp plants
can operate more efficiently to produce fine writing and
copying papers.
Plantation forests have the capacity to remove and store
carbon dioxide through the process of sequestration, thereby
reducing the levels of carbon dioxide (the major greenhouse
gas) from accumulating in the atmosphere.
12
GOVERNMENT POLICY &
AUSTRALIA’S PLANTATIONS
In recognition of the emerging opportunities for renewable
timber production, the policy statement ‘Plantations for Australia:
The 2020 Vision’ was released in 1997 and relaunched in 2002 as
a combined strategy of federal and state governments, and the
commercial plantation growing and timber processing industries.
This government policy and strategy confirms the establishing
of plantations as the preferred option to ensure future domestic
timber supplies. The ‘2020 Vision’ seeks a trebling of the nation’s
1997 resource base from 1 million to 3 million hectares by the
year 2020. The ‘2020 Vision’ has enjoyed support at all levels of
government and in the investment community since its release.
The target will only be achieved through substantial private
investment. Australia’s total plantation area reached 1.82 million
hectares in 2006. That area includes over 800,000 hectares
(44%) of Hardwood species and over 1,000,000 hectares (56%)
of Softwood species. Investors who have purchased Woodlots
in managed investment schemes, including those managed
by FEA Plantations, own over 470,000 hectares (26%) of
Australia’s plantations (2006).
3. AUSTRALIAN
FOREST INDUSTRY
OVERVIEW
Global Timber Supply Gap
Global Paper Consumption Trend
The Asia-Pacific Market
Japanese Woodchip Market
China
Australia’s Cost Competitiveness
Sawn Timber Markets
Veneer & Select Grade Sawn Timber
Australia’s Economy & its Forest Products Sector
Australia’s Forest Resource Production & Consumption
Australia’s Plantation Estate
Reducing Access to Australia’s Native Forests
Emerging Alternative Forest Product Markets
Carbon Credit Trading
Australia produces a wide range of quality timber products and is also
expected to continue as one of the major exporters of Woodchips.
The turnover of Australia’s forestry and forest products sector is approximately
$19 billion or 5.3% of manufacturing sales and service income, and is a major
regional employer with around 7% of Australia’s total manufacturing employment.
13
3. AUST RALIAN FOREST INDUST RY OVERVIEW
It is intended the trees grown will potentially produce Sawlogs,
Veneer logs, as well as logs for Pulpwood. The ultimate endmarkets for these products are likely to include sawn timber
markets and paper markets, both domestic and export.
GLOBAL TIMBER SUPPLY GAP
There is an increasing gap between world demand and supply
of timber. Globally, the annual deficit in sawn Softwood timber
is predicted to be 55 million tonnes by 2010. The gap in sawn
Hardwood timber is predicted to be 10 million tonnes by 2010.
In the Asia-Pacific region, the rapid depletion of forest cover
coupled with increased environmental awareness has turned the
wood products trade balance in many countries from a surplus to
a deficit. For example, it has been estimated that the volume of
industrial wood harvested in Indonesia and Malaysia more than
halved between 1990 and 2005.
GLOBAL PAPER
CONSUMPTION TREND
World production of paper and paperboard has increased from 283
million metric tonnes (Mt) to 354 Mt over the last decade (1995
- 2005). This is an average annual increase of 2.3%. Additionally,
the consumption of paper and paperboard in Asia has increased
by 4.1% over the same period. This increased demand trend
is driven by growth in population, literacy levels and average
personal income.
The link between increasing affluence and rising consumption of
paper and paperboard is illustrated below. In particular, China’s
apparent consumption per capita rose at an average annual rate
of 7.8% between 2000 and 2005. Over the same five year period,
GDP in China rose at an average rate of 9.5% pa. China’s current
consumption of approximately 46 kg/capita is well below the
world average of 55 kg/capita and more developed countries in
the same region such as South Korea (176 kg/capita).
Global production of forest products: 1970 - 2010(e)
SAWNWOOD (Mm3)
WOOD-BASED PANELS (Mm3)
PAPER & PAPERBOARD (Mt)
600
500
Million Tonnes
400
300
200
100
0
1970
1980
1990
2000
2005
2010(e)
SOURCE: FAO (FAOSTAT) 2006 and IndustryEdge Research estimates 2007
Paper & Paperboard Consumption (Kg Per Capita)
Correlation Between GDP & Paper Consumption
350
250
200
150
USA
Germany
Canada
New Zealand
Indonesia
China
Sweden
Japan
India
UK
Switzerland
Rep. of Korea
France
Malaysia
100
50
South Africa
Brazil
10,000
20,000
30,000
GDP Per Capita (Purchase Price Parity - $US)
SOURCE: FAO (FAOSTAT) 2006, GeoHive Population data and World Development Indicators Database 2007
14
Finland
Australia
300
40,000
50,000
THE ASIA-PACIFIC MARKET
JAPANESE WOODCHIP MARKET
Log consumption in the Asian region has risen by 3.2% per annum
over the previous five years (2001 - 2005), along with population
and living standards.
Japan is the world’s largest export market for Woodchips and
accounts for about 86% of this trade in the Asia-Pacific region
(2006). Australia has been Japan’s major long-term Hardwood
Woodchip supplier and currently represents about 34% of
these imports. In 2006, Japan imported 11.3 million tonnes of
Woodchips. The major competitors to Australia are Chile and
South Africa, and to a lesser extent, China, Vietnam and other
countries in south-east Asia.
It is expected that a large proportion of the timber produced
from this Project may be exported to Asia. Australia’s major Asian
trading partners (Japan, China, Indonesia, Taiwan, Korea and India)
will be responsible for an estimated additional 215 million of the
world’s population by 2015, with most of this growth in urban
areas. In addition, gross domestic product is increasing rapidly in
these Asian economies.
Australia’s share of the Japanese Softwood import market has
risen from 24.7% in 1996 to 42% in 2006.
Japanese Hardwood Chip Imports by Country: 1997 - 2006
1997
2000
2003
2006
4.0
3.5
Million BDMT
3.0
2.5
2.0
1.5
1.0
0.5
r
he
Ot
il
Vi
et
Br
na
az
m
a
in
Ch
Ch
So
ut
h
Af
ile
a
ric
A
US
Au
str
ali
a
0
SOURCE: Japan Customs and IndustryEdge Research 2007
Japanese Softwood Chip Imports by Country: 1997 - 2006
1997
2000
2003
2006
1.6
1.4
1.0
0.8
0.6
0.4
0.2
r
he
Ot
ia
ss
Ru
i
Fij
il
az
Br
da
na
ala
Ze
Ne
w
Ca
nd
A
US
str
ali
a
0
Au
Million BDMT
1.2
SOURCE: Japan Customs and IndustryEdge Research 2007
15
3. AUST RALIAN FOREST INDUST RY OVERVIEW
CHINA
CONSUMPTION
60
50
40
30
20
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
0
-10
SOURCE: FAO (FAOSTAT) 2008
China – Total Pulp & Paper Imports: 1990 - 2005
RECOVERED PAPER
PULP
PAPER & PAPERBOARD
40
35
Million Tonnes
30
25
20
15
10
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
0
1992
5
1991
Shipping distance is one of the main determinants of cost
competitiveness in the Woodchip trade, along with wood fibre
cost. Australia’s proximity to Japan and China, relative to the
other major suppliers, Chile and South Africa, provides it with a
significant competitive advantage. Exchange rates are also critical
and the recent rise in the exchange rate between the Australian
dollar and the US dollar has reduced this cost competitiveness.
EXPORTS
10
FEA’s joint venture Woodchip export mill at Bell Bay in northern
Tasmania has already sold shipments of Hardwood Woodchips
to China. FEA has also exported both sawn timber from its FEA
Timber sawmill and peeler (Veneer) logs to Chinese buyers
using the larger logs from its eucalyptus nitens plantation
harvesting operations.
AUSTRALIA’S COST
COMPETITIVENESS
IMPORTS
70
1990
Its production of paper and paperboard products has almost
doubled from 28.5 million tonnes in 1995 to 54.1 million tonnes
in 2005. China is now the second largest producer of paper
and paperboard in the world behind the United States. China’s
consumption is already more than 40 kg per head per year.
Further demand is expected to require substantial increases
in China’s papermaking capacity. This could lead to increased
demand for Woodchips from Pacific Rim countries such
as Australia.
PRODUCTION
80
Million Tonnes
Between 1985 and 2005, China’s economy grew at an average
rate of 9.5% GDP, making it among the fastest growing economies
in the world and now the fourth largest.
Paper & Paperboard in China: 1990 - 2005
SOURCE: FAO (FAOSTAT) 2008
Shipping Times to JAPAN
The graph ‘Shipping Times to Japan’ shows the relative shipping
times between Japan’s southern port of Nagoya and the major
export ports of Australia in comparison to the shipping times from
the export ports of Chile and South Africa.
FROM AUSTRALIA
FROM CHILE
FROM SOUTH AFRICA
35
30
Days
25
20
15
10
5
SOURCE: IndustryEdge Research 2007
16
SOUTH AFRICA
CHILE
QLD-Brisbane
NSW-Newcastle
NSW-Eden
TAS-Triabunna
TAS-Tamar
TAS-Burnie
VIC-Portland
VIC-Geelong
WA-Bunbury
WA-Albany
0
SAWN TIMBER MARKETS
Australia’s Consumption
of Sawn Timber: 1996 - 2006
Economic and population growth have not only a direct impact on
paper consumption but also an indirect impact on consumption
of sawn wood and panels through demand for domestic and
commercial building construction.
AUSTRALIA’S ECONOMY & ITS
FOREST PRODUCTS SECTOR
Australia produces a wide range of quality timber products and is also
expected to continue as one of the major exporters of Woodchips.
The turnover of Australia’s forestry and forest products sector
is approximately $19 billion or 5.3% of manufacturing sales
and service income. The forest products industry group is a
CONSUMPTION
4,000
3,000
2,000
0
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
(1,000)
SOURCE: ABARE Australian Forest and Wood Products Statistics 2007
Australia’s Consumption
of Plywood & LVL: 1996 - 2006
PRODUCTION
IMPORTS
EXPORTS
CONSUMPTION
600
Thousand m3
500
400
300
200
100
0
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
-100
1996
Pruned Sawlogs to be produced from plantations established
under this Project will target the high value timber markets of
structural Veneers (plywood and laminated Veneer lumber
(LVL)), decorative Veneers, as well as select grade flooring and
mouldings. It is proposed that these products will be marketed
under FEA’s brand name EcoAshclear®. Australian consumption of
plywood and LVL products has grown at 10% per annum during
the 10 year period to 2006.
EXPORTS
1,000
The primary use for Sawlogs in Australia is the production of
structural sawn timber for the building construction markets.
Demand for sawn timber is correlated with new housing and
household renovation demand. Consumption of sawn timber in
Australia has grown 25% over the 10 years to 2006. Softwood
sawn timber growth largely reflects its replacement of native
Hardwood in structural house framing. The competitive features
of EcoAsh® plantation Hardwood as discussed in section 4, ‘FEA’s
Strategy’, provide an excellent opportunity to tap into this growth
market alongside plantation Softwood timber.
VENEER & SELECT GRADE
SAWN TIMBER
IMPORTS
5,000
Thousand m3
The supply of sawn Hardwood, including eucalypt, produced almost
entirely from native forests declined at an average rate of about
1.3% per annum for the decade to 2005/06. In contrast, sawn
Softwood production increased about 3.8% per annum over the
same period. Over this period, sawn Hardwood prices have risen
relative to sawn Softwood and to Pulpwood-based products such
as wood panels.
PRODUCTION
6,000
SOURCE: ABARE Australian Forest and Wood Products Statistics and Plywood
Association of Australia Statistics 2007
major regional employer with around 7% of Australia’s total
manufacturing employment (ABS 2005/06).
Australia had a $1.9 billion trade deficit in wood and wood
products in 2006/07, indicating a continuing strong demand for
imports. Paper and paperboard are the main contributors to this
deficit. Australia imported 2.2 million tonnes of paper, pulp and
paperboard during this period, about 40% more than the quantity
imported 10 years earlier. The table below summarises Australia’s
international trade in forest products for the 2007 financial year:
Australia’s Forest Products Trade Deficit – Year Ended 30 June 2007
Sawnwood
Paper products
Pulp
Imports
Exports
$418m
$145m
$2,271m
$651m
$265m
$12m
Woodchips
$1.5m
$950m
Roundwood
$0.6m
$117m
Wood-based panels
$279m
$123m
Paper manufactures & recovered paper
$472m
$287m
Miscellaneous forest products
$568m
$67m
$4,275m
$2,352m
Total
SOURCE: ABARE Australian Forest & Wood Products Statistics 2007
17
3. AUST RALIAN FOREST INDUST RY OVERVIEW
AUSTRALIA’S FOREST RESOURCE
PRODUCTION & CONSUMPTION
EMERGING ALTERNATIVE
FOREST PRODUCT MARKETS
Australia’s roundwood removals have grown about 3% per
annum between 1995 and 2006 to be currently around 27
million m3. The graph ‘Australian Log Harvesting’ below shows
how plantation forestry has also grown to dominate Australia’s
forestry and forest products industries, which have a combined
annual turnover value of $19 billion. The graph also shows that
native Hardwood log harvesting still accounts for about 69% of
the national Hardwood harvest.
Increasing world debate over global warming, increasing interest
in sustainable energy sources, and rising fuel prices in recent
times has focused more attention on the future role that forest
products and plantations will have in the commercial solutions to
these significant economic and environmental issues. FEA, as part
of its strategic planning process, is evaluating the potential of the
following market opportunities:
Bioenergy.
Ethanol production.
AUSTRALIA’S PLANTATION ESTATE
Power generation from biomass.
Australia’s growing trade deficit for forestry and forest products of
currently $1.9 billion (2006/07) is one of the key drivers behind
the federal government’s national forestry policy to increase the
nation’s plantation estate to 3 million hectares by the year 2020.
Australia’s total plantation estate grew by over 78,000 hectares
in 2006 to be nearly 1.82 million hectares. The graph ‘Total
Hardwood & Softwood Plantations’ below shows the states and
categories making up Australia’s plantation estate.
REDUCING ACCESS TO
AUSTRALIA’S NATIVE FORESTS
To date, most export Woodchips have come from native forests.
This source is becoming increasingly restricted as a result of
the implementation of changes to forestry policy in each state
and changes to state government policies and pressures due
to changing community attitudes to logging native forests. The
proportion of plantation Hardwood in Japanese Hardwood fibre
imports has increased from an estimated 24% in 1995 to about
78% in 2005. The proportion of plantation Hardwood sourced from
eucalypt plantations has also increased. This trend points to the
increasing importance of eucalypt plantations as a fibre resource
and confirms that the replacement of native forest sources for
Hardwood Woodchip supplies is gaining pace.
Carbon trading.
CARBON CREDIT TRADING
The implications for the potential future sale of Carbon Credits are
not yet fully understood, but there is a possibility that Growers in
plantation forestry could benefit one day from trading of Carbon
Credits should it become commercially feasible to create such
credits. FEA Plantations has determined that Growers in these
Projects will receive 50% of the benefits of any carbon trades
negotiated on their behalf by FEA Plantations, less reasonable
costs associated with the negotiation and trading process.
Investors must be aware that, although there may be potential
to earn returns from the sale of Carbon Credits in Australia in the
future, there may be only limited (if any) potential to do so during
the term of the Project. FEA Plantations suggests that investors
would be exercising appropriate caution in not including any
potential income from Carbon Credits trading in an evaluation of
this Project.
For more information, please refer to the ‘Independent Market
Report’ in section 13.
Australian Log Harvesting
1995 - 2006
PLANTATION
HARDWOOD
PLANTATION
SOFTWOOD
HARDWOODS
25
250,000
20
200,000
Hectares
300,000
15
10
100,000
2006
2005
2004
2003
2002
2001
2000
1999
0
1998
0
1997
50,000
1996
SOFTWOODS
150,000
5
SOURCE: ABARE Australian Forest and Wood Products Statistics 2006
18
TOTAL
30
1995
Million m3
NATIVE
HARDWOOD
Total hardwood & softwood
plantations 2006
VIC
WA
NSW
TAS
QLD
SOURCE: DAFF – Australia’s Plantations 2007
SA
NT
ACT
4. FEA’S
STRATEGY
FEA’s Strategy
Adding Value to the Resource
Brand Building & Market Development
Innovation, Research & Development
Growing Trees for Diversified End-Markets & Higher Value
Investing in Tasmania
Investing in Northern NSW & South-East Queensland
In the Australian Hardwood and Softwood plantation sector, FEA is
growing an environmentally sustainable, and increasingly versatile timber resource.
Value-adding technologies are now being progressively enhanced and new
markets are being developed. FEA believes that utilising the various grades
of logs from Hardwood and Softwood plantations, and marketing them
to a range of markets and end uses, will potentially benefit Growers.
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4. FEA’S ST RATEGY
FEA has evolved into one of Australia’s leading fully integrated
forestry and forest products companies and anticipates
opportunities in the forest products sector for those who are
prepared to learn, specialise and innovate. Becoming a vertically
integrated forestry and forest products company presents
business opportunities, which may have been over-looked
without such integration.
In the Australian Hardwood and Softwood plantation sector, FEA is
growing an environmentally sustainable and increasingly versatile
timber resource. Value-adding technologies are now being
progressively enhanced and new markets are being developed. FEA
believes that utilising the various grades of logs from Hardwood and
Softwood plantations, and marketing them to a range of markets
and end uses will potentially benefit Growers.
ADDING VALUE TO THE RESOURCE
The FEA Group currently operates two timber processing facilities
at the Port of Launceston at Bell Bay in northern Tasmania:
FEA Timber operates a sawmill utilising the latest small diameter
log technology and during March 2008 it commissioned a new
$70 million sawmill and processing facility.
SmartFibre is a joint venture export wood fibre facility.
These mills are integrated with FEA Timber’s sawmill residual
chips being transferred to the wood fibre export mill. This
typifies FEA’s diversified end-market approach to processing and
marketing plantation trees. Further processing possibilities are
being evaluated in northern NSW and at the Port of Brisbane in
anticipation of the first blocks of the northern Hardwood plantation
estate reaching maturity over the next several years.
FEA’s STRATEGY
Vertically Integrate & Value-Add
FEA is involved in selecting the land, growing the trees,
raising plantation establishment capital via managed forestry
investments, value adding the resource and developing brands
and distribution channels.
Specialise
We believe FEA’s specialised eucalypt forestry experience and
growing capacity in Hardwood and Softwood processing can
potentially deliver improved returns to Growers. FEA Timber’s
development of EcoAsh® and BassPine® is a clear example
of this.
Create an Independent Resource
FEA’s forest products business growth is dependent on access
to plantation resources with well defined qualities. Stewardship
of this resource base is critical to developing new markets and
processes for plantations.
Learn & Innovate
Continued innovation and the ability to differentiate require a
learning culture at all operational levels. The FEA Group was the
first in Australia to use the ‘Hewsaw’ technology for eucalypts on
a commercial scale. It was also the first to import a compression
kiln drying facility into Australia.
Build Marketing & Distribution Capability
Establishing sales channels, building brands and being close to our
customers, should provide the scale and capacity to potentially
influence prices and take advantage of new and emerging markets.
20
FEA Timber, Bell Bay & Plantation
Sawmill Technology
FEA’s wholly owned subsidiary, FEA Timber, was established
in 2002 with the acquisition of a sawmill based on specialised
Finnish designed ‘Hewsaw’ technology. The ‘Hewsaw’ is designed
to process small diameter logs into sawn timber in a single pass,
efficiently and accurately. Originally established at Bell Bay to process
long Rotation plantation pine logs, the process of using ‘Hewsaw’
technology has been further developed and customised by FEA
Timber to process plantation eucalypts. FEA Timber has created a
potentially higher value end-market for Growers’ plantation trees
which were originally destined for wood fibre markets.
Traditional native forest and plantation Hardwood sawmilling
technologies require slower grown, substantially older trees of
at least 25 - 40 years of age to produce stable structural sawn
timber. The ‘Hewsaw’ uses a chipper canter and multiple rip saws,
cutting simultaneously, to help release internal tension in young
eucalypt logs in a single pass – this in turn reduces ‘springing’ or
bending/distortion of the sawn board.
In 2007, FEA Timber secured a 10 year Softwood log purchase
agreement (supplying 290,000 Cubic Metres per annum) with
Taswood Growers, the owners of the majority of Tasmania’s radiata
pine plantation estate.
FEA Timber is currently expanding its sawmill operations at Bell
Bay with the construction of a new mill on a nearby 80 hectare site
which will incorporate new multi species sawmilling technology
from Canada. This expansion will have further automation and valueadding functionality and production capacity in excess of 650,000
tonnes per annum to efficiently process the substantial increase in
log supply arising from the new Softwood agreement and growth in
FEA’s maturing Hardwood plantation estate.
EcoAsh, Your Plantation Hardwood®
EcoAsh® is the brand behind the range of innovative sawn timber
products produced by FEA Timber from fast grown eucalypt
plantation trees as young as 9 years of age.
The young fast grown plantation eucalypts used in producing
EcoAsh® represent a relatively new timber resource, with
sawing and building characteristics different to what is currently
considered traditional resources, such as long Rotation pine and
native Hardwoods. For this reason, FEA Timber has undertaken
over the past four years, extensive testing and benchmarking
of EcoAsh® by external timber engineering professionals. To this
end, the production of span tables and trial results with nailguns, gluing, gang-nailing, treatments and timber stains have
been important in providing builders with the confidence in the
competitiveness of EcoAsh’s features. Importantly EcoAsh® is sold
consistent with AS/NZS 4063:1992.
FEA Timber continues to trial and test EcoAsh® in new applications
and in 2006 began in-house testing in a recently constructed onsite laboratory employing its own timber engineer. The purpose
is to better understand the natural variations within the EcoAsh®
range to optimise the production and marketing of a wide range
of products to different market segments. The current range of
usage of EcoAsh® in products include:
Structural framing – floor & ceiling joists, studs, plates and roof
truss applications.
Wall panelling.
Flooring.
Treated decking.
EcoAshclear® & Hardwood Veneer
Since 2006, FEA Plantations’ projects have included a second
investment option, EcoAshclear®, which provides Growers with
the opportunity to participate in the market for pruned Hardwood
logs used in the production of structural Veneers (plywood and
laminated Veneer lumber) and decorative Veneers, select grade
flooring, decorative mouldings and furniture timber.
EcoAshclear® is yet another example of the FEA Group’s persistent
drive to extract potential higher value from the plantation resource
it manages.
BassPine® Complements the Product Range
The securing of a large diameter Softwood log supply in 2007 and
the completion of the current sawmill expansion and technology
upgrade in early 2008, will provide FEA Timber with one of the
most diverse and complete sawn timber product ranges of any
Australian producer – Softwood and Hardwood, structural and
decorative. Such scale, advanced processing technology and
product range is likely to deliver distribution leverage and lower
production costs.
SmartFibre Woodchips
The FEA Group currently produces and markets its wood fibre
products through SmartFibre, an export wood fibre facility located
at Bell Bay in northern Tasmania.
Established as a joint venture operation in 2003, SmartFibre exports
eucalypt Hardwood and also Softwood Woodchips to pulp and
paper manufacturing customers in Japan and China. SmartFibre
wood fibre products are used to produce paper and paperboard
products. SmartFibre has forward supply agreements with Japanese
customers for both Hardwood and Softwood Woodchips.
The SmartFibre mill currently produces and exports about 300,000
- 400,000 tonnes of wood fibre per annum. The FEA Group believes
that this volume will increase in coming years as plantations mature
and wood processing scale increases.
SmartFibre sources its wood fibre supplies from FEA Timber’s
plantation sawmill residues, eucalypt plantations managed by
FEA for project Growers, FEA’s own plantations, state government
plantations, private tree farmers, native forest regrowth and other
sawmilling operations in Tasmania.
21
4. FEA’S ST RATEGY
BRAND BUILDING &
MARKET DEVELOPMENT
INNOVATION, RESEARCH
& DEVELOPMENT
It is the FEA Group’s view that the forest products sector has
traditionally been characterised as a commodity, price driven based
business environment. Core to the FEA Group’s forest products
growth strategy is to sell products on differentiation rather than
price whenever possible. Importantly, the FEA Group’s innovation
in its plantation management, investment products and sawn
timber value adding has presented an opportunity for the FEA
Group to lead and differentiate itself in the market. The FEA Group’s
branding strategy is aimed at establishing and maintaining that
differentiation awareness in the market place and using it to obtain
potential price premiums and customer loyalty.
Innovation is important in providing a competitive advantage for the
FEA Group in the forest products sector. EcoAsh® plantation Hardwood
is an example of FEA being the first in Australia to commercially
produce structural sawn timber from young fast grown plantation
eucalypts utilising Finnish ‘Hewsaw’ technology.
The FEA Group’s Leading Brand Names
FEA Plantations
Setting the Standard in Managed Forestry Investments
EcoAsh®
Your Plantation Hardwood
EcoAshclear®
Select Grade Plantation Hardwood
BassPine®
Your Plantation Softwood
SmartFibre
SmartProduct – SmartPartner – SmartValue – SmartChoice
22
The FEA Group has also developed its own seed production
program for its major species and is now sourcing part of its seed
supplies from its own family tested seed orchards. Each year
additional trials comparing superior tree selections are established
to ensure continual improvement of the genetic potential of seed
used in nurseries supplying our plantation program. In addition,
its recent investment in a timber technology laboratory, further
demonstrates the FEA Group’s willingness to develop its products
and knowledge.
FEA’s Versatile Forestry Strategy Contains the Following Key Elements
Land
Selection
FEA targets land with average minimum annual rainfall of between 800 - 1100 mm and soils which are fertile
and have deep soil profiles. Land quality is crucial to the successful growing of plantations.
Species
Selection
FEA plants species that have the potential to produce both Woodchip for pulp and paper and Sawlogs for
sawn timber production.
Matching of different species to appropriate sites assists FEA with its targeted Growth Rates – site conditions
will always vary.
High Density
Stocking Rates
FEA’s standard stocking rates are targeted at 1,200 - 1,300 stems per hectare. A higher stocking provides
an opportunity for a Thinning harvest, and a quality plantation following Thinning, that can be ‘grown
to maturity’.
Thinning
Removing some trees at the appropriate time enables the best trees to grow larger while potentially
providing an early income from the Thinning harvest. Larger trees at Clearfall harvest potentially provide
opportunities for higher value end-market applications.
Longer
Rotation
FEA’s forestry investment Woodlot Option 1 (Hardwood structural sawn timber and Pulpwood), targets
a Rotation length of approximately 13 years. Woodlot Option 2 (Hardwood Veneer & select grade sawn
timber), targets a Rotation length of approximately 16 years. Woodlot Option 3 (Softwood structural and
select grade sawn timber) will use a 25 year Rotation regime.
Wood Flow
Modelling &
Forest Products
Inventory
FEA measures, models and schedules the harvesting of its managed estates with the aim of maximising
forest product value of each plantation coupe – ‘smoothing’ wood flows assists in managing and providing
a long-term sustainable resource to potential markets.
GROWING TREES FOR DIVERSIFIED END-MARKETS & HIGHER VALUE
One of the FEA Group’s key differentiating attributes in the forestry managed investment sector is its focus on creating diversified endmarkets for Growers’ trees and consequently working to improving their marketing opportunities and ability to attract potential price
premiums over pulp logs. FEA’s Silviculture practices are designed to produce trees that enable value-adding alternatives to Woodchips.
INVESTING IN TASMANIA
The FEA Group’s Tasmanian forestry and forest products operations, which includes over 20,000 hectares of eucalypt plantations under
management, take advantage of the following:
Natural
Environment
Tasmania’s cool temperate climate with relatively consistent rainfall, good land quality, plus relatively low
fire and drought risk make it one of the best forest growing regions in Australia.
Infrastructure
Tasmania has a highly developed forest industry infrastructure including:
4 export Woodchip ports and stockpile facilities.
4 export log ports.
Established harvesting and log transport contractor resource.
Export
Markets
Tasmania is currently Australia’s largest Hardwood Woodchip export state. Most of Tasmania’s Pulpwood is
exported to the leading Japanese, Chinese, Korean and Taiwanese pulp and paper manufacturers.
Domestic
Markets
Tasmania’s domestic wood processing operations include:
2 pulp mills and 3 paper mills.
In excess of 50 Hardwood sawmills (predominantly native).
A particle board mill.
3 Softwood sawmills.
Veneer mills (including 1 newly established rotary Veneer mill and another under construction).
5 export Woodchip loading facilities.
In addition, a world scale Kraft pulp mill is proposed for construction at Bell Bay.
Political
Environment
Tasmania’s forestry industry receives bipartisan state and federal government support. An internationally
recognised Forest Practices Code operates effectively within the state.
23
4. FEA’S ST RATEGY
INVESTING IN NORTHERN NEW SOUTH WALES
& SOUTH-EAST QUEENSLAND
FEA began researching new Australian mainland regions to expand its forestry operations in 2000 and settled upon northern New South
Wales and south-east Queensland because these sub-tropical high rainfall regions have the potential for excellent Growth Rates.
Natural
Environment
Sub-tropical climate, high annual rainfall regions, with fertile cleared agricultural land, and the potential to
match the Growth Rates of Tasmania. Historical rainfall figures show that the region offers better protection
against severe drought than some other temperate regions.
Sub-tropical Hardwood species grown in these regions have higher fibre density, attractive to pulp & paper
makers. The main species planted include Spotted Gum (a renowned sawmilling timber), Dunn’s White Gum
and Sydney Blue Gum.
Infrastructure
Brisbane/Newcastle catchment infrastructure includes:
Woodchip export facilities are located at Brisbane and Newcastle. These ports are approximately
3 shipping days closer to Asian export markets than Bell Bay (TAS) and Albany (WA).
Established harvesting and transport contractor resource.
Good transport infrastructure including an extensive rail network and identified B double truck routes.
Export
Markets
Currently Softwood Woodchips are exported out of Brisbane and Hardwood Woodchips are exported from
Newcastle.
Domestic
Markets
Northern New South Wales has a well-established Hardwood based processing industry. There are over 70
sawmills in the region ranging from conventional large log diameter Hardwood mills to modern small log
diameter sawmills. Pole treatment plants and a Veneer mill also operate in the region.
The New South Wales state government has introduced extensive industry restructuring packages to
upgrade and modernise traditional sawmills due to the harvesting of native forests being phased out
or restricted.
Queensland’s market for sawn timber products is predicted to grow at about 3% per annum from 1.1
million m3 to 1.55 million m3 by 2020. New dwellings growth in south-east Queensland is projected to be
43,000 units between 2006 and 2009. The Queensland forest industry estimates that an additional 120,000
hectares of plantations (Softwood & Hardwood) will need to be established to meet this increased demand.
The Queensland government is committed to phasing out native forest harvesting on public land by 2024.
The Queensland government and the state’s biggest power producers are also considering a range of
renewable energy projects that could form potential markets for plantation wood.
Political
Environment
Both New South Wales and Queensland state governments have restricted native forest harvesting on public
land and are facilitating the development of plantation industries.
Plantations established in New South Wales are subject to a ‘Plantations Code of Practice’ under the Plantations
and Reafforestation Act 1999 (NSW).
Queensland is currently developing a ‘Plantation Code of Practice’ which may be in place by the end of 2008.
24
5. THE
OFFER
Term of Project
Summary of Investment Options
How to Apply
Payment Options
This PDS offers Growers the opportunity to participate in the growing
of Hardwood and Softwood timber plantations located in Tasmania, northern
New South Wales and south-east Queensland. For each investment, you are offered
four Woodlot investment options with the intended use, period to harvest and
ongoing costs varying depending on the investment option selected.
25
5.
The offer
TERM OF PROJECT
The Project commences on acceptance of the first Grower’s
application and concludes upon final harvest of the trees and sale
of the produce.
The approximate term for each Woodlot investment option is
expected to be as follows:
Investment Option
Estimated Time
of Final Harvest
Timber from the Project is expected to be sold on a ‘stumpage’
basis. Stumpage is the price paid to the Grower for the timber as
a standing crop. It excludes harvesting, transport, processing and
marketing costs which are generally borne by the buyer.
For more information, please refer to the ‘Independent Forester’s
Report’ & ‘Independent Market Report’ in section 13.
Lease and Maintenance Fees
There are no ongoing lease or maintenance fees payable during
the course of the Project. These fees will be deducted from the
Harvest Proceeds and will total 15% (plus GST) of the Harvest
Proceeds. Refer to section 7 for full details of the applicable fees.
Woodlot Option 1 – Eucalyptus
Hardwood grown for sale as unpruned
Sawlog and Pulpwood.
13 years
after planting
Woodlot Option 2 – Eucalyptus
Hardwood grown for sale as pruned and
unpruned Sawlog, Veneer and Pulpwood.
16 years
after planting
Woodlot Option 2 – Eucalyptus Hardwood
grown for sale as pruned and unpruned
Sawlog, Veneer and Pulpwood
Woodlot Option 3 – Radiata pine
Softwood grown for sale as unpruned
Sawlog and Pulpwood.
25 years
after planting
Summary
Woodlot Option 4 – Diversified forestry
offer, being a combination of Woodlot
Options 1, 2 and 3 in a fixed ratio of four,
one and two Woodlots respectively.
25 years
after planting
Some additional time allowance may be required to allow the
establishment operations to be completed under optimal seasonal
conditions and for Clearfall harvesting.
Eucalyptus Hardwood trees will be planted and maintained for
approximately 16 years before being sold as potentially higher
value products such as clear, select grade sawn timber and
Veneer, as well as Pulpwood, dependent upon markets at the
time. It is anticipated that the trees that will form part of the
final harvest will be pruned two or three times during the first
six years to produce knot free Hardwood logs. The size of each
Grower’s Woodlot will be approximately ½ hectare.
Establishment Fee
An Establishment Fee of $3,465 (incl GST) per Woodlot is payable.
SUMMARY OF
INVESTMENT OPTIONS
When completing the ‘Application Form & Power of Attorney’
investors have a choice of four Woodlot options. Investors may
choose to apply for Woodlots in one or all options.
The four options are summarised below:
Woodlot Option 1 – Eucalyptus Hardwood grown
for sale as unpruned Sawlog and Pulpwood
Summary
Eucalyptus Hardwood trees will be planted and maintained for
approximately 13 years before being sold as unpruned Sawlogs
and Pulpwood, dependent upon markets at the time. It is the
intention of the Project Manager to maximise the portion of
harvests that are sold as Sawlogs. The size of each Grower’s
Woodlot will be approximately ½ hectare.
It is expected that there will be two harvests. The first harvest
or Thinning will occur at around nine years of age. The second
and final harvest is anticipated at around 16 years of age. The
period to Thinning and final harvest is estimated based on FEA’s
experience, with the timing of Thinning and final harvest to be
determined by the Project Manager having regard to factors such
as Growth Rates and market demand.
Timber from the Project is expected to be sold on a ‘stumpage’
basis. Stumpage is the price paid to the Grower for the timber as
a standing crop. It excludes harvesting, transport, processing and
marketing costs which are generally borne by the buyer.
For more information, please refer to the ‘Independent Forester’s
Report’ & ‘Independent Market Report’ in section 13.
Lease and Maintenance Fees
Establishment Fee
There are no ongoing rent or maintenance fees payable during
the course of the Project. These fees will be deducted from the
Harvest Proceeds and will total 15% (plus GST) of the Harvest
Proceeds. Refer to section 7 for full details of the applicable fees.
An Establishment Fee of $3,465 (incl GST) per Woodlot is payable.
Pruning Fees
Harvests
Pruning fees of $396, $418 & $440 (incl GST) per Woodlot will be
payable by Growers in approximately years two, four and six and
will be indexed in line with inflation. The fees will be payable by
Growers by June 30 in the year that Pruning has been completed.
The exact timing of each Pruning will be determined by the
Project Manager having regard to the Growth Rate of the trees.
Refer to section 7 for full details of the applicable fees.
It is expected that there will be two harvests. The first harvest
or Thinning will occur at around nine years of age. The second
and final harvest is anticipated at around 13 years of age. The
period to Thinning and final harvest is estimated based on FEA’s
experience, with the timing of Thinning and final harvest to be
determined by the Project Manager having regard to factors such
as Growth Rates and market demand.
26
Harvests
Woodlot Option 3 – Radiata pine
Softwood grown for sale as unpruned
Sawlog and Pulpwood
Harvests
It is expected that harvests will occur during five (5) periods, set
out as follows:
Years of
Harvest
Woodlot
Option 1
Woodlot
Option 2
Woodlot
Option 3
Year 9
Thinning
Thinning
–
Year 13
Clearfall
–
Thinning
Year 16
–
Clearfall
–
Establishment Fee
Year 18
–
–
Thinning
An Establishment Fee of $3,465 (incl GST) per Woodlot is payable.
Year 25
–
–
Clearfall
Summary
Radiata pine trees will be planted and maintained for approximately
25 years before being sold as Sawlogs for production of potentially
higher value products, such as high quality Softwood sawn timber,
as well as Pulpwood, dependent upon markets at the time. The
size of each Grower’s Woodlot will be approximately ½ hectare.
Harvests
It is expected that there will be three harvests. The first two
harvests or Thinnings will occur at around 13 & 18 years of age
respectively. The third and final harvest is anticipated to occur
at around 25 years of age. The period to Thinnings and final
harvest is an estimate based on FEA’s experience, with the timing
determined by the Project Manager having regard to factors such
as Growth Rates and market demand.
Timber from the Project is expected to be sold on a ‘stumpage’
basis. Stumpage is the price paid to the Grower for the timber as
a standing crop. It excludes harvesting, transport, processing and
marketing costs which are generally borne by the buyer.
For more information, please refer to the ‘Independent Forester’s
Report’ & ‘Independent Market Report’ in section 13.
Lease and Maintenance Fees
There are no ongoing lease or maintenance fees payable during
the course of the Project. These fees will be deducted from the
Harvest Proceeds and will total 10% (plus GST) of the Harvest
Proceeds. Refer to section 7 for full details of the applicable fees.
Woodlot Option 4 – Diversified forestry offer,
being a combination of Woodlot Options 1,
2 and 3 in a fixed ratio of four, one and two
Woodlots respectively
Summary
The trees will be sold on a stumpage basis with the trees standing
on the stump. The Harvest Proceeds do not include the costs
of harvesting, transport and processing. These costs are the
responsibility of the purchaser of the wood.
For more information, please refer to the ‘Independent Forester’s
Report’ & ‘Independent Market Report’ in section 13.
Lease and Maintenance Fees
There are no ongoing rent or maintenance fees payable during
the course of the Project. These fees will be deducted from the
Harvest Proceeds, according to the fees charged on the individual
investment options.
Pruning Fees
One Woodlot out of every seven (Woodlot Option 2) will be
pruned. In respect of this Woodlot, Pruning fees of $396, $418 &
$440 (incl GST) per Woodlot in approximately years two, four and
six will be payable by Growers by June 30 in the year that Pruning
has been completed. These fees will be indexed in line with
inflation. The exact timing of each Pruning will be determined
by the Project Manager having regard to the Growth Rate of
the trees.
Refer to section 7 for full details of the applicable fees.
This investment option requires the acquisition of seven Woodlots,
in a fixed combination of Woodlot Options 1, 2 & 3 as follows:
Investment Option
The period to Thinnings and final harvest is an estimate based on
FEA’s experience, with the timing of Thinning and final harvest to
be determined by the Project Manager having regard to factors
such as Growth Rates and market demand.
NUMBER of Woodlots
Woodlot Option 1
4
Woodlot Option 2
1
Woodlot Option 3
2
Total
7
Establishment Fee
An Establishment Fee of $23,100 (incl GST) per investment unit
is payable, which represents a discount of approximately 5%
on the Establishment Fee payable if the Woodlots are acquired
individually.
HOW TO APPLY
Applications to become a Grower are made by completing the
‘Application Form & Power of Attorney’ contained on pages
107 - 109, applying for one or more Woodlots and paying the
Establishment Fee. When completing the application form, you
will be required to select the required Woodlot option. Refer to
section 17 for full details on how to apply.
PAYMENT OPTIONS
Applicants can either pay the full Establishment Fee by way of
cheque or credit card payment, or apply to fund the investment via
a range of competitive finance options.
For a summary of the finance options available, please contact your
financial adviser or FEA for further information, or visit our website
at www.fealtd.com.
For the full terms and conditions of finance available via this
PDS, please refer to the loan finance documentation, including
the relevant summary of Loan Agreement, summary of Deed of
Guarantee and indemnity and acknowledgment and consent under
the Privacy Act, contained in section 16 of this PDS.
27
28
6. HOW
THE PROJECT
WORKS
The Process
The Structure of the Project
Land Selection
Plantation Establishment
Plantation Management
Project Structure
Technology in the Process
Information &
Reporting to Growers
The Role of the
Independent Forester
The Role of
the Custodian
Insurance
The offer contained in this PDS relates to the acquisition of
interests in the Project by investors. The Project is a registered
managed investment scheme and FEA Plantations holds an AFSL
authorising it to operate the Project. The Project provides a structure
for the conduct of a business in commercial forestry. As a Grower you will
engage FEA Plantations to establish and maintain your Woodlots.
29
6.
How the project works
THE PROCESS
Land will be selected, which must meet specified criteria before
it is included for use in the Project.
1
The land will be prepared for planting by cultivating the soil to
improve conditions for root establishment.
5
6
9 Depending on the investment option selected, the plantations
10
The trees will be planted, to a minimum of 1,200 seedlings
per hectare.
will be grown for a further period.
30
2
Maintenance of the trees will include pest and weed control,
the application of fertiliser, maintenance of firebreaks and regular
inspections.
Prior to final harvesting, the Project Manager, in conjunction
with the Independent Forester, will examine the plantations and
make a decision on how best to schedule and segregate the logs
to maximise returns to Growers.
3
Quality seedlings will be sourced to maximise timber growth
and density.
7
Each year in June, Growers will receive reports from the
Independent Forester and the Project Manager that summarise
the progress of the plantations in the Project.
11
Tasmania has a well-established timber processing industry
dedicated to the Woodchip trade, pulp and paper production,
sawmilling and board manufacture. In New South Wales and
Queensland there has been substantial new investment in industry
restructuring and rationalisation, while the area of public native
forests available for harvesting in these regions has been reduced.
4
The trees are generally planted in Spring and Autumn in Tasmania
and Summer and Autumn in northern New South Wales and southeast Queensland to ensure optimum establishment and growth.
8
The Thinning of plantations will occur, with about half of the
trees harvested and the proceeds from the sale paid to Growers.
12
At the present time, there are potentially higher value markets
for sawn timber produced from plantations, which can be processed
through facilities such as FEA Timber’s Bell Bay sawmill.
31
6.
How the project works
THE STRUCTURE OF THE PROJECT
PLANTATION ESTABLISHMENT
Investors will become Growers in the Project when their respective
applications are accepted by FEA Plantations.
Trees will be planted on your Woodlots in accordance with the
Woodlot option selected and FEA Plantations will use reasonable
endeavours to ensure the trees are planted at the best time
of year and within 12 months of the date your application is
accepted. Procedures used for your Woodlots will vary with the
nature of the land and the type of trees being grown.
Upon execution of the ‘Application Form & Power of Attorney’, a
Grower will enter into two agreements with the Responsible Entity:
Management Agreement – An agreement under which you
engage FEA Plantations to establish and maintain the Woodlots on
your behalf and to harvest and market your timber for the highest
overall price the Responsible Entity can achieve taking into account
log volumes, log categories, distribution and market demand. By
signing the ‘Application Form & Power of Attorney’, you are taken to
have signed a management agreement under which you appoint
FEA Plantations as Project Manager for the Project.
Forestry Right Lease Deed – A lease of a Forestry Right over
identifiable allotments of land, called Woodlots. Upon signing
the ‘Application Form & Power of Attorney’, each Grower will be
deemed to have signed their own Forestry Right lease deed.
These agreements will be binding once they are signed by FEA
Plantations. Full copies of both documents are located in section
16 of this PDS. Applicants should read the terms of the Forestry
Right lease deed and management agreement in full before
applying for Woodlots in the Project.
LAND SELECTION
FEA Plantations carefully assesses and selects fertile land that
must meet particular criteria before it is used in the Project. It
considers selected regions of Tasmania, northern NSW and southeast Queensland to be ideal for the growing of eucalypts, and
Tasmania predominantly for the growing of Softwoods (Pinus
radiata), although other regions in Australia with suitable climate,
soils and strategic advantages may be considered for the Project
if advice from our Independent Forester approves their inclusion.
All plantations in this Project will be close to existing plantations
that FEA Plantations has established or manages. It is anticipated
that all properties chosen will be at least 20 hectares in size (or
next to another development to ensure commercial viability); in an
area with a mild climate and uniform rainfall throughout the year;
above low-lying flat land prone to flooding; near major arterial
routes; and convenient to major ports with loading facilities.
The federal government’s statement ‘Plantations for Australia: The
2020 Vision’ (page 12) identified large areas of land as available for
plantation development in these areas, much of which is suitable
for tree farming. Already about 247,000 hectares in Tasmania,
345,000 hectares in NSW and 232,000 hectares in Queensland are
under both Softwood and Hardwood Plantations (December 2006).
Regional forest agreements and other strategies supported at state
and federal levels such as the ‘2020 Vision’ are aimed at removing
impediments to a major expansion of this planted area.
Usually the soil will be prepared by ripping, mounding or
ploughing so that it will be suitable for the fast growth of tree
roots. This increases wood volume and improves water retention
and soil conservation.
The seedlings are usually either planted by hand or by using
planting machines that may also apply water, polymers and/
or fertilisers concurrently. Planting normally occurs during Spring
and Autumn in Tasmania and Summer and Autumn in northern
New South Wales and south-east Queensland. Warm temperatures
and usually consistent generous rainfall in these seasons assists
optimum establishment.
We source frost-hardy seedlings with superior genetics to maximise
timber growth and density. Appropriate species for each site will
be selected with regard to climate, soil and site factors and after
taking advice from the Independent Forester.
FEA is committed to improving the genetic quality of its seed
through research, development and technical trials. Improved
seed is a key factor in the enhanced Growth Rates, which FEA has
been achieving. Weed suppression, fertilising and land preparation
techniques will also contribute to superior performance.
In its research & development program for its own grafted seed
orchards, FEA has three species under breeding programs. The
most advanced work is with its main temperate-climate plantation
species, Shining Gum (Eucalyptus nitens). FEA has also established
trials on its own land in collaboration with major research
institutions to improve the genetic make-up of trees and to make
superior selections of all the species it uses.
Each half hectare Woodlot will contain a minimum of 600 seedlings.
For more information, please refer to the ‘Independent Forester’s
Report’ in section 13.
Location of Plantations
The Woodlots in the Project will be located on plantations in
Tasmania, northern New South Wales or south-east Queensland,
although other regions in Australia which the Responsible
Entity determines are suitable may be used for the Project. The
geographic range of land to be used in the Project may mitigate
some climatic risk factors. Where Growers apply for a large number
of Woodlots, FEA Plantations will endeavour to plant Grower’s
Woodlots in more than one location so they are distributed in
geographically diverse regions. For more information, please
refer to the ‘Independent Forester’s Report’ in section 13.
Land Ownership
It is intended that plantations will be developed on land over
which FEA Plantations will have a Forestry Right granted by the
land owner to enter the land and use it for the Project. The land
will be either owned by a company in the FEA Group or leased
from third party property owners by way of the Forestry Right,
which gives FEA Plantations a legal right to plant, cultivate,
manage and harvest trees on that land and to sever, take away
and sell the forest produce. It is this Forestry Right that FEA
Plantations will lease to each Grower in respect of the number of
Woodlots allocated to him or her.
Stocking Guarantee
The Responsible Entity provides the Grower with a Stocking
Guarantee for a period of two years from the date the Grower
is registered as the holder of the Woodlots. The guarantee
provides that if the survival of seedlings is less than 90% of
the original minimum of 600 seedlings per Woodlot, it will reinstate the plantations with replacement seedlings up to the
above mentioned 90%. This replanting will be done even though
the planting failures may not have been caused by any action
attributable to the Project Manager.
After the expiry of the Stocking Guarantee, it is recommended
Growers maintain satisfactory insurance cover on the trees. For
further information on insurance, please refer to page 35.
32
PLANTATION MANAGEMENT
Mapping, Technology and Inventory
On behalf of each Grower, FEA Plantations has appointed FEA as
Project Manager, although FEA Plantations will remain responsible
to Growers for obligations under the management agreement
which include:
FEA has a mapping protocol to ensure that plantation boundaries
are accurately recorded. The mapping of each plantation is
maintained on our geographic information system, which is a
multi-layered database that can be used to produce maps and
store a wide range of information on any area managed.
Establishing your Woodlots, including preparing the land
for planting.
Supplying, distributing and planting the seedlings.
Ongoing maintenance including fertilising, pest and weed
control, maintenance of firebreaks and regular inspections.
Pruning, which is anticipated to take place three times for Woodlot
Option 2 and a proportion of Woodlot Option 4, before the trees
reach about 6 years of age.
Harvesting of the trees in accordance with the Woodlot
option selected.
Selling the trees as your agent in accordance with the terms of
the management agreement and Wood Purchase Agreement.
FEA is the Project Manager for each of the 15 plantation projects
established by FEA Plantations since 1993 and, therefore, has a
detailed understanding of timber production capabilities based
on actual performance. The Woodlots will be managed by a team
of experienced and professional forestry managers who operate
in accordance with strict health, safety and environmental
procedures and who have developed highly professional regimes
of site selection, tree establishment and maintenance.
FEA surveys each plantation on the ground using globalpositioning-system technology based on linkages to satellites.
The company commissions its own aerial spot photography of
each plantation and buys rights to scenes from recent satellite
imagery. This allows a visual overview of all plantations and a
review of their progress.
Plantations are sampled by establishing measurement plots
across each site to assess Growth Rates. The trees within the
sample plots are measured and the data entered electronically
into portable recorders to be downloaded back at the office.
Data is collected at different ages and is matched to current
wood processing specifications. The trees are modelled using a
growth formula to predict volumes of logs for different end-uses
at different ages.
This information can be used to develop harvesting schedules that
match product availability, recoverable volumes and productivity
of the plantation. The accuracy of these predictions is continually
being calibrated by comparing inventory calculations with actual
recovered volumes.
Our inventory or tree measurement program also helps us to
boost production where possible. If current inventory and staff
monitoring show that individual plantation coupes are performing
below expectations, they are assessed as to their likely response
to various management alternatives, including extra fertiliser.
project Structure
Esta
blis
hm
en
tF
ee
FEA
s
Esta
blis
hm
en
t Fe
es
FEA
or External
Financier
33
6.
How the project works
Technology in the Process
more tha
n
1200mm
ra
infaLl p.a
.
t
basal
Satellite imagery
1 region Assessment
Selection of land for plantations starts with the ‘big
picture’. Regions with suitable climate, soils and
strategic advantages have been identified.
2
property assessment
Specific property assessments in these regions begin
with background satellite and aerial imagery. This is
integrated with relevant data, including rainfall and soil
overlays on our Geographic Information System.
nitens
Aerial photo
1991
Aerial photo
1992
4
3
planning
Aerial photo’s assist plantation
planning and layout.
woodlots
The allocation of Woodlots is based on
Global Positioning System (GPS) surveys.
7 POST harvest
& replanting
Aerial photo
December
2004
Aerial photo
April 2002
5
thinning
Growth Assessment & Thinning
Aerial and satellite images of the property capture
many aspects of the plantation progress.
34
Satellite imagery
April 2004
6
Monitoring
These images assist in planning, Woodlot allocation,
growth assessment, Thinning, health monitoring,
final harvest and replanting.
INFORMATION & REPORTING TO
GROWERS
Upon becoming a Grower, you will receive:
A certificate setting out details of the investment.
A formal advice of application monies paid to assist with
preparation of your income tax return.
Following planting of your trees, you will receive:
A plantation map showing the location of your Woodlots.
Annual reports from the Project Manager and the Independent
Forester, describing the progress of the Project.
Annual invoices for insurance if you choose to insure your
trees or are required to do so under a financing arrangement.
Pruning invoices in approximately years two, four and six, if
you choose Woodlot Option 2 or Woodlot Option 4.
Proceeds from the sale of your timber following harvest of
your trees.
Annual reports from the Project Manager and the Independent
Forester will cover:
Compliance with the arrangement as described in the
Product Ruling.
Compliance with any changes to the tax laws subsequent to
the issue of the Product Ruling.
Any significant changes to the market that may impact product
marketing.
Any changes to costs.
An audit of plantations within the Project and a report on the
plantations with respect to the general state of the plantations
in the Project, measurements of growth, pests or disease,
maintenance requirements, general management practices
and impacts of fire.
Apart from the above reports, Growers will be kept up-to-date
with developments in the Project through such means as regular
newsletters, FEA’s website and general correspondence.
As the owner of the trees, you will be free to visit your Woodlots
and to monitor their progress during the life of the Project.
Please contact us if you wish to view your Woodlots as part of
a scheduled Grower’s tour provided by FEA staff. Naturally, any
travel expenses would be at your own cost.
THE ROLE OF THE
INDEPENDENT FORESTER
The Independent Forester is an integral part of the Project
and must report to FEA Plantations annually in writing on
the progress of the trees established as part of the Project.
The Independent Forester does an inspection and audit
of a sample of plantations within the Project each year
and will inspect all plantations within the Project on a
rotational basis.
A copy of the report will be made available to the Compliance
Committee and will also be forwarded by FEA Plantations to
Growers in June each year.
The reports provide details of work carried out during the previous
year and advises whether FEA Plantations has carried out services
under the management agreement in a proper and efficient
manner. The Independent Forester also advises whether the Project
is on schedule having regard to all relevant circumstances.
In addition to the inspection and reporting role, the Independent
Forester also verifies that the choice of species is appropriate,
confirms the suitability of each planting region, confirms the
adequacy of the stocking levels after planting and provides other
advice and assistance as required.
The Independent Forester has also provided a report for inclusion
in this PDS (refer section 13).
THE ROLE OF THE CUSTODIAN
FEA Plantations has appointed a Custodian for the Project. The
Custodian’s major functions under the Custodian agreement are to:
Receive and hold application monies until they are distributed
by the Custodian at the direction of FEA Plantations.
Receive all Harvest Proceeds and disburse them at the direction
of FEA Plantations.
Hold relevant property, including all executed Grower
agreements in safe custody.
FEA Plantations will at all times act in accordance with the
provisions of the Constitution in directing the Custodian to perform
those functions listed above. The Custodian is obliged to act in
accordance with the instructions of FEA Plantations only and is not
otherwise bound by the provisions of the Constitution.
FEA Plantations will pay all the Custodian’s fees and expenses out of
its own funds. A summary of the Custodian agreement is included
in section 16 of this PDS. The Custodian has had no involvement in
the preparation of any part of this PDS (other than the particular
references to the Custodian). The Custodian expressly disclaims and
takes no responsibility for any other part of this PDS.
INSURANCE
The Responsible Entity on behalf of Growers will use reasonable
endeavours to effect insurance of the plantations within the Project,
noting the interests of the Growers.
Public Liability Insurance
The Responsible Entity will maintain a public liability insurance
policy to cover the liability of FEA Plantations and the Growers in
respect of their interests in the plantation areas. The limit of the
public liability insurance will not be less than $10,000,000.
Plantation Insurance
Growers are responsible for insurance to cover the standing timber
in the plantations against loss or damage by fire and other risks as
included in the insurance policy for their Woodlots. If requested,
FEA Plantations will use its best endeavours to arrange plantation
insurance cover annually for a Grower’s interest in the Project. If
the Responsible Entity is able to obtain such cover, the Grower
must re-imburse the Responsible Entity for the proportionate cost
thereof upon demand from the Responsible Entity. The current
2007/08 insurance policy provides coverage against damage to
plantations by fire, lightning and windstorm.
The cost of any insurance and the nature of cover available will be
determined on an annual basis by the state of the insurance market
at the time the cover is sought. It should be noted that insurance
cover of this nature is typically subject to a range of exclusions and
the extent and nature of the coverage will depend on terms of the
particular policy at the time. No assurance is given that insurance
will be available nor which risks any insurance policy may cover.
35
6.
How the project works
Insurance Options
How to Apply for Insurance
It is recommended that Growers apply for one of the following
two levels of insurance:
Growers are asked to nominate on their ‘Application Form &
Power of Attorney’ if they wish to apply for insurance and which
option they wish to apply for. Such a nomination shall be applied
to each year’s insurance arrangements (where such insurance is
reasonably available) unless the Responsible Entity is notified
to the contrary by 1 September in each year. Any notification
will be applied to the following 1 October - 30 September
insurance period.
Basic Insurance – This level of insurance covers the standing
timber in the plantations against loss or damage by fire and
other risks as included in the insurance policy and is optional for
Growers after the expiry of the Stocking Guarantee (page 32).
Currently we estimate the cost of this basic insurance for newly
planted trees will be approximately $3 per Woodlot (incl GST and
a 10% administration fee). As the value of the trees increase with
time, the insured values and respective costs to insure are also
expected to increase accordingly.
Full Replacement Cost Insurance – In the early years of the
Project, insurance recoveries are unlikely to equal the full amount
of application monies paid. For the period that the value of
the trees is less than the full amount of the application price,
additional insurance coverage may be available to enable Growers
to insure their interests for the original amount invested until the
value of the Woodlots exceeds the value of the initial investment.
Currently we estimate the cost of this full replacement cost
insurance will be approximately $20 per Woodlot (incl GST and a
10% administration fee). As the value of the trees increase with
time, the insured values and respective costs to insure may also
increase accordingly.
The insurance premium may increase to reflect the value of the
timber as it increases and the premium rates may vary from
year to year depending upon insurance market conditions and
claims experience.
36
Growers have the option to arrange the insurance cover themselves
and must provide evidence of the insurance coverage to FEA
Plantations on terms acceptable to it, no later than 1 September
each year. If the terms of cover arranged by a Grower under a
finance agreement are unacceptable to the financier, the Grower
may be invoiced for the cost of any plantation insurance that
FEA Plantations arranges. The Grower will be invoiced on 1 June
each year for each plantation insurance period (1 October - 30
September), which FEA Plantations arranges on behalf of Growers.
In the Event of a Claim
In the event that a Grower takes out insurance and makes a successful
claim, that Grower will be entitled to the proceeds of the insurance in
their own right and the insurance proceeds will not form part of the
pool. The Grower receiving an amount for an insurance payout will
cease to be a Grower in the Project in respect of the Woodlots for
which recovery is made. In this event, any fees which are calculated
as a percentage of Harvest Proceeds will instead be calculated as the
relevant percentage of the insurance proceeds received by a Grower
following a successful claim in relation to the insured event. The
Grower will also be liable for any other amounts owing under the
Forestry Right lease deed, management agreement or Constitution,
which are payable but remain unpaid at this time.
7. PROJECT
FEES
Consumer Advisory Warning
Fees and Other Costs
Additional Explanation of Fees and Costs
This section of the PDS sets out the fees and costs payable
by investors in the Project. However, it is important that investors
read the whole PDS before deciding whether to invest.
37
7. PROJECt FEES
Consumer Advisory Warning
By law, prior to setting out the fees and costs payable by investors, we are obliged to provide you with the following ‘Consumer
Advisory Warning’ which is standardised and applies to all managed investment product offerings. It is not specific to information about
fees and charges in the Project.
Did You Know?
Small differences in both investment performance and
fees and costs can have a substantial impact on your longterm returns.
You may be able to negotiate to pay lower contribution
fees and management costs where applicable. Ask the
fund or your financial adviser.
For example, total annual fees and costs of 2% of your
fund balance rather than 1% could reduce your financial
return by up to 20% over a 30-year period (for example,
reduce it from $100,000 to $80,000).
To Find Out More
You should consider whether features such as superior
investment performance or the provision of better member
services justify higher fees and costs.
If you would like to find out more, or see the impact of
the fees based on your own circumstances, the Australian
Securities and Investments Commission (ASIC) website
(www.fido.asic.gov.au) has a managed investment fee
calculator to help you check out different fee options.
Note: FEA Plantations is of the view that some of the information in this prescribed warning is not relevant to the Project and generally applies to
equity funds and superannuation products. The warning refers to ‘your fund balance’, however, there is no concept of ‘your fund balance’ in the Project,
nor is the duration of the Project a 30 year period. Nor are there any fees or costs in the Project that can be negotiated. Finally, the ASIC website
referred to above does not allow for a comparison of fees for agricultural managed investment schemes like the Project.
Fees and other costs
This section shows fees and other costs that you may be charged. These fees and costs may be deducted from your money, from the
returns on your investment or the fund assets as a whole. Taxes and insurance costs are set out in another part of this document. You
should read all the information about fees and costs because it is important to understand their impact on your investment.
TYPE OF FEE OR COST
AMOUNT
HOW AND WHEN
Fees when your money moves in or out of the Project
Establishment Fee
The fee to open your investment
Woodlot Options 1, 2 & 3
$3,465 per Woodlot1
Payable on application
Woodlot Option 4
$23,100 per Woodlot1
Contribution Fee
Nil
Not applicable
Withdrawal Fee
Nil
Not applicable
Termination Fee
Nil
Not applicable
The fee on each amount contributed to
your investment
The fee on each amount you take out of
the investment
The fee to close your investment
Management Costs – The fees and costs for managing your investment2
Carbon Credits
50% (fifty percent) of the proceeds
from the sale of Carbon Credits3
Paid from the Project within 30 days of
receipt of the proceeds from the sale
Nil
Not applicable
Service Fees
Investment Servicing Fee
The fee for changing
investment options
1.This fee covers the initial establishment services for the Woodlots in the 1st year following investment.
2.Additional fees which are not ‘management costs’ within the meaning of the Corporations Act are payable. Refer to ‘management fees’, ‘rent’ and
‘Pruning fees’ in the additional explanation of fees and costs.
3. While there are markets emerging for the trading of Carbon Credits, it is unclear whether the Project will be eligible to create Carbon Credits, nor
whether it will be feasible to do so.
38
Example of Annual Fees and Costs
This table gives an example of how the fees and costs for the Project can affect your investment over a one-year
period. You should use this table to compare this product with other similar managed agribusiness investment
products. By law, it must be based on a $50,000 investment, however because we do not offer fractions of
Woodlots, it is not possible to subscribe to exactly $50,000.
EXAMPLE
BALANCE OF $50,000 with a contribution of $5,000 during the second year of the Project
Contribution
Fees
Nil
For every additional $5,000 an investor puts in, you will be charged $nil.
PLUS
Management
Costs
Nil1
And, for every $50,000 invested in the Project, you will be charged $nil each year.
EQUALS
Cost of Fund
If you had an investment of $50,000 at the beginning of the year and you put in
an additional $5,000 during a year, you will be charged $nil.2
What it costs you will also depend on the fees agreed with your financial adviser.
1.Additional fees will apply. These management fees, rental payments and Pruning fees will be charged to Growers.
However, they are not ‘management costs’ within the meaning of the Corporations Act and are therefore not included
in this table. Please refer to ‘management fees’, ‘rent’ and ‘Pruning fees’ in the additional explanation of fees and costs.
2.Please note it will not be possible to make ongoing investments into the Project, and therefore, this aspect of the example
is not relevant for your investment.
Additional Explanation of Fees and Costs
Management Fees
Management fees are payable under the management agreement for the work undertaken by the Responsible
Entity in respect of the management and maintenance of the Woodlots. The management fees payable are
deferred until harvesting the trees. The management fees payable to the Responsible Entity are calculated as
3% of the Harvest Proceeds. For example, for every $50,000 of Harvest Proceeds, the Responsible Entity will
receive $1,500.
In the event a Grower’s Woodlots are damaged or destroyed, the management fees payable will be 3% of the
salvaged value, or 3% of any insurance proceeds received by the Grower (as the case may be).
Rent
Rent is payable under the Forestry Right lease and the rental payments are deferred until harvesting of the trees.
The rent payable to the Responsible Entity is calculated as follows:
Woodlot Option 1
12% of the
Harvest Proceeds
For example, for every $50,000 of Harvest Proceeds,
the Responsible Entity will receive $6,000.
Woodlot Option 2
12% of the
Harvest Proceeds
For example, for every $50,000 of Harvest Proceeds,
the Responsible Entity will receive $6,000.
Woodlot Option 3
7% of the
Harvest Proceeds
For example, for every $50,000 of Harvest Proceeds,
the Responsible Entity will receive $3,500.
In the event a Grower’s Woodlots are damaged or destroyed, the rent payable to the Responsible Entity is
calculated on the same terms as set out in the table above and will be a percentage of the salvaged value or
alternatively, as a percentage of any insurance proceeds received by the Grower (as the case may be).
39
7. PROJECt FEES
Pruning Fees
For Growers who participate in Woodlot Option 2 or Woodlot Option 4, Pruning fees will be payable in years two,
four and six. The Pruning fees payable are summarised in the following table:
Year
Fee payable
How and when paid
2
$396 per Woodlot
Payable by Growers by June 30 in the year that Pruning
has been completed.
4
$418 per Woodlot
Payable by Growers by June 30 in the year that Pruning
has been completed.
6
$440 per Woodlot
Payable by Growers by June 30 in the year that Pruning
has been completed.
These Pruning fees will be increased in accordance with CPI from 31 December 2007.
Carbon Credits
Taxation
The Responsible Entity will be entitled to 50% of the benefits of
any Carbon Credits traded by the Responsible Entity on behalf
of Growers. For example, for every $50,000 generated from the
sale of Carbon Credits, the Responsible Entity will be entitled to
receive $25,000. For further information, please refer to pages
18 & 84.
For further information about taxation costs and deductions,
including the treatment of GST, please refer to sections 8 & 13.
Insurance
Growers are responsible for insurance to cover the standing
timber in their Woodlots against loss or damage by fire and other
risks. The Responsible Entity will assist in arranging insurance,
if requested to do so. The availability and cost of insurance will
depend on the state of the insurance market at the time cover is
sought. The Grower will be invoiced on 1 June each year for the
plantation insurance that FEA Plantations will arrange on behalf of
Growers. For further information, please refer to page 35.
Rates and Taxes
FEA will be responsible for all rates, charges and land taxes
incurred from the ownership of Woodlots unless the basis of
these charges is changed to include the land value plus the value
of trees growing on the land. In such circumstances, Growers will
be required to pay the extra rates, charges and taxes in respect of
the assessed value of the Growers’ trees. No existing precedents
exist and the actual cost may be variable.
Expense Recoveries
Under the Constitution, the Responsible Entity is entitled to be
reimbursed for any costs or expenses incurred on behalf of
the Project. These include, but are not limited to, custody fees,
registry charges, accounting fees, bank fees, legal fees, the cost
of preparation and printing of annual reports, postage, audit fees,
consultant fees, tax agent fees, Compliance Committee costs
and the costs of preparing and administering the Compliance
Plan. However, as at the date of this PDS, the Responsible Entity
intends to meet all of the costs of operation of the Project. If the
Responsible Entity decides to charge the fees in the future, then
prior to implementing the change the Responsible Entity will
provide Growers with 30 days notice in writing of its intention
to be reimbursed for expenses and will set out the reasons for
this change.
40
Commissions
FEA Plantations may pay commissions or brokerage out of its
own funds to licensed financial advisers, financial planners and
other persons permitted under the Corporations Act to receive
them. These payments may be upfront, ongoing or a combination
of both and are borne by the Responsible Entity and are not a
direct cost to Growers. The total commissions may be up to 8% of
establishment fees ($277 per Woodlot, including GST for Woodlot
Options 1, 2 & 3). It is a requirement of the Corporations Act that a
financial adviser discloses to investors any commission (including
upfront and ongoing) received in respect of the Project.
FEA Plantations, or another company within the FEA Group may also
provide additional support for reimbursement of and allowance for
expenses related to promotional and administrative costs together
with costs of training and education of financial planners in FEA
Plantations’ products. It may also take other steps to encourage
sales of Woodlots through such means as the provision or funding
of conferences, seminars, product training, business development,
marketing materials, industry education, marketing advice, support
staff, consultants, advisers and other assistance.
The payment and terms of payment of such brokerage or
commission are entirely at FEA Plantations’ discretion. Growers
should always discuss fees and their benefits with their adviser.
GST
All fees and charges outlined in this section are quoted inclusive
of GST. Where applicable, the fees include an allowance for input
tax credits. For the purposes of this example, we have assumed
Growers are entitled to a full input tax credit. However, the GST
application to your investment will depend on your particular
circumstances. For example, if you are not registered for GST, then
you will not be entitled to any input tax credits and will have to
pay the full GST amount. We recommend you obtain your own tax
advice before investing.
8. TAXATION
ATO Product Rulings
The 12 Month Prepayment Rule
Amendment to Law Concerning the Taxation of Plantation Forestry
Secondary Markets for Forestry Scheme Interests
Goods and Services Tax (GST)
Proceeds from the Sale of Timber
Self Managed Superannuation Funds
Other Limitations
The ATO has issued Product Ruling No’s PR 2008/31, PR 2008/32,
PR 2008/33 and PR 2008/34 in respect of the FEA Plantations Project 2008,
which are applicable for Growers who enter into the Project on or before 30 June
2008. We anticipate that Product Rulings will be issued in due course that confirm the
tax treatment for post 30 June 2008 investors is identical to that of pre 1 July 2008
Growers. However, in the event that such Product Rulings are not issued for post 30 June
Growers, no applications will be accepted pursuant to the PDS after 30 June 2008.
41
8.
Taxation
The commentary provided in this section is general commentary
only and does not purport, nor is it intended, to be taxation
advice in relation to your investment. Before making a choice as
to whether to participate in the Project, Growers should obtain
their own independent professional advice to determine the tax
treatment applicable to their particular circumstances.
ATO Product Rulings
The ATO has issued Product Rulings No.’s PR 2008/31, PR 2008/32,
PR 2008/33 & PR 2008/34 corresponding to Woodlot Options
1, 2, 3 & 4 respectively. The Product Rulings are applicable for
Growers who enter into the Project on or before 30 June 2008
(2008 Growers). The significance of each Product Ruling to the
Project is as follows:
Investment Option
Product Ruling Number
Woodlot Option 1
PR 2008/31
Woodlot Option 2
PR 2008/32
Woodlot Option 3
PR 2008/33
Woodlot Option 4
PR 2008/34
We anticipate that Product Rulings will be issued in due course
that confirm the tax treatment for post 30 June 2008 investors
(2009 Growers) is identical to that of 2008 Growers. However,
unless and until such Product Rulings are issued, no applications
will be accepted pursuant to the PDS after 30 June 2008.
A Product Ruling is a binding public ruling under the Taxation
Administration Act 1953 in relation to the effect of the income
tax law on an investment project. The Product Rulings issued for
the Project guarantee tax deductions for Growers provided the
Project is carried out in accordance with the details that were
provided to the ATO and which are described in the relevant
Product Rulings. The Product Rulings also describe the taxation
treatment of income derived from the Project.
Applicants should read the relevant Product Rulings in their
entirety. The Product Rulings can be obtained from FEA Plantations
during business hours by calling our freecall number 1800 600 009,
by emailing the company at marketing@fealtd.com, or
downloading the Product Rulings directly from the ATO website
at www.ato.gov.au.
The Product Rulings are a ruling on the application of taxation
laws and is in no way expressly or impliedly a guarantee or
endorsement of the commercial viability of the Project, of the
soundness or endorsement of the Project as an investment,
or the reasonableness or commerciality of any fees charged in
connection with the Project. In providing Product Rulings, the ATO
is in no way endorsing or recommending the Project.
Tax Deductions
The Product Rulings confirm that the Establishment Fee for each
Woodlot should be deductible to Growers in the Project. If a
Grower is registered for GST, and is entitled to an input tax credit,
the deductible amount needs to be adjusted down for GST input
tax credits to which the Grower is entitled.
The Product Rulings also include the exercise of the Commissioner’s
discretion for a loss to be allowed in the year in which it is incurred
(the non-commercial loss provisions of the ‘Tax Law’).
42
Whilst a Product Ruling only covers the income year in which it
is issued, and two subsequent years, Growers will typically be
entitled to deductions for any ongoing annual costs in the years
in which they are incurred. These costs would include insurance
and interest on loans.
For more information, please refer to the ‘Independent Taxation
Opinion’ on page 86.
The 12 Month Prepayment Rule
Growers are entitled to claim an immediate tax deduction for
certain prepaid expenditure incurred, in respect of services
provided within the following 12 months of expenditure being
made. The prepayment must relate to seasonally dependent
agronomic activities that occur during this period. The services
included in the Establishment Fee meet this definition. To obtain
an immediate tax deduction under the 12 month rule, the
activities must be completed within 12 months after the day
when the first seasonally dependent agronomic activity for the
planting commences and by the end of the following income
year. The rule does not apply to prepaid expenditure on seasonally
dependent agronomic activities that take place outside the initial
12 month establishment period.
The 12 month rule allows the Responsible Entity to complete
the establishment of Woodlots, including acquisition of land
and seedlings and preparation of land, over a period of up to 12
months, whilst still allowing Growers a deduction in the year of
payment. The Responsible Entity confirms its intention to complete
the establishment of Woodlots within this 12 month period.
AMENDMENT TO LAW
CONCERNING THE TAXATION
OF PLANTATION FORESTRY
Effective from 1 July 2007, the law relating to the taxation
arrangements for forestry managed investment schemes (MIS)
has been amended. Investors in forestry MIS will still be entitled to
full deductibility of their expenditure, providing certain conditions
are met.
(b) notional amounts reflecting the market value of goods,
services or the use of land provided by the forestry manager
of the scheme, for establishing, planting, tending and
harvesting of trees.
The deduction is provided by way of a separate statutory provision
(section 394-10 of the Income Tax Assessment Act 1997 ) rather
than the general deduction provision (section 8-1) that has applied
previously. Thus it will no longer be necessary for taxpayers to
demonstrate that they are ‘carrying on a business’ in order to
access the specific deduction.
The specific deduction will do away with the need for the 12
month prepayment rule, while still enabling plantations to be
established in a seasonally appropriate manner.
The ATO’s Product Rulings program will still be used to provide
certainty to investors, and to scrutinise and regulate the industry,
which has been the case for almost a decade.
The new arrangement was intended to take effect from 1 July
2007, but on 27 March 2007 the Tax Commissioner announced
a transitional period for the implementation of these new laws,
during which both regimes (section 8-1 and section 394-10) will
run in parallel. In particular, the ATO will continue to allow tax
deductions under both section 8-1 (based on the ATO’s previous
view of the law that investors could claim deductions for carrying
on a business), and also under the new taxation arrangements,
until 30 June 2008.
The ATO’s previous interpretation of the taxation laws was
confirmed in Taxation Ruling TR 2000/8. However, that ruling has
been replaced by a new ruling TR 2007/8 which provides the
ATO’s new interpretation that investors are not in fact carrying
on a business when investing in an agribusiness MIS. TR 2007/8
confirms the new interpretation will not apply until 1 July 2008.
The government has enacted new rules concerning secondary
markets for forestry scheme interests, applicable from 1 July 2007.
Because the new rules are new, it may take some time for their
full effect to be understood. In the meantime, however, some
guidance may be taken from the Explanatory Memorandum to
the Bill which introduced these changes.
In summary, the Explanatory Memorandum noted that:
Under the ATO’s previous interpretation of the law (as set out
in the ATO’s Taxation Ruling TR 2000/8, investors in forestry
schemes were required to hold their interest until harvest. Failure
to do so may have raised an inference that they were not carrying
on a business and caused the disallowance of deductions claimed
under the scheme.
Under the amendments to the law, investors are not required to
have an intention to hold their investment until harvest in order to
obtain a deduction under Division 394. They must, however, hold
the interest for four years from the end of the year in which they
entered the scheme.
Under a related amendment to the law, investors may then sell
their interest subject to the four year holding rule. Sale proceeds
will be assessable to them on revenue account. The purchaser
will not get a deduction for their acquisition cost under Division
394, but will be entitled to a deduction for ongoing expenses in
relation to the scheme, if the original owner would have been
entitled to those deductions had they retained the investment.
Sale proceeds for secondary investors will be assessable on
revenue account to the extent that they have claimed deductions
under the scheme, with the balance being on capital account.
The implications may be different for investors who are in the
business of trading in such investments.
The government anticipates that increasing the liquidity of forestry
scheme investments will increase their relative attractiveness.
AL
IA N
TAXATIO
N
OF
FICE
Growers who intend to sell their interests
before harvest should note that they
may not be covered by PR 2008/31,
PR 2008/32, PR 2008/33 & PR 2008/34.
R
(a) expenditures associated with the establishing, planting,
tending and harvesting of trees; and
SECONDARY MARKETS FOR
FORESTRY SCHEME INTERESTS
• AU S
T
Investor’s expenditure in a forestry MIS will be deductible in the
year it is incurred, provided it can be demonstrated to the ATO that
at least 70 per cent of the expenditure (in present value terms)
will constitute ‘direct forestry expenditure’ (DFE), determined
against arm’s length’ prices. DFE is described as comprising:
•
PR
OD
UCT RULIN
G
43
8.
Taxation
Under subsection 82KZMGA of the Income Tax Assessment Act
1936, where a CGT event happens to a Grower’s interest within this
four year period, a deduction for the Establishment Fee will not
be allowable. Growers are required to include the market value
of the CGT asset at the time of the CGT event, or the decrease in
market value of that asset as a result of the CGT event, in their
assessable income for that year.
GOODS AND SERVICES TAX (GST)
The costs associated with the Project, as outlined in this PDS,
are stated as GST-inclusive amounts unless otherwise indicated.
Growers properly registered for GST should be able to claim an
input tax credit for the GST component of the costs. Accordingly,
the net outlay for registered Growers should decrease.
Registered Growers will also have certain compliance obligations,
including the lodgement of periodical Business Activity
Statements. For registered Growers who are able to claim an input
tax credit for the GST component of costs incurred in respect of
the Project, an income tax deduction will not be available for the
GST element. Growers who are not registered for GST will have no
entitlement to claim input tax credits on the fees charged under
the Project. Furthermore, unregistered Growers will not have to
deal with GST compliance matters. It is expected that unregistered
Growers will be able to claim the GST inclusive amount in respect
of expenditure that is otherwise deductible for tax purposes.
Proposed Changes to GST
The ATO has released a draft GST ruling, GSTR 2008/D1 concerning
the GST implications associated with a typical agricultural
managed investment scheme. In brief the draft ruling, which is
not binding until finalised, treats each Grower as an investor in a
trust, rather than a person carrying on an enterprise. The Grower’s
investment is input taxed and hence there is no input tax credit
entitlement for the investment.
The ATO has advised that it will not commence to apply this view
until a final ruling is released and subject to the outcome and
resolution of a test case on income tax issues (i.e. those set out
in TR 2007/8), and a further transitional period to allow for any
information technology, product disclosure, systems and process
changes.
Growers should consult a professional tax adviser to confirm the
position in respect of the Grower’s specific circumstances.
PROCEEDS FROM THE
SALE OF TIMBER
Proceeds derived by the Grower from the sale of timber will be
assessable as income for taxation purposes.
44
SELF MANAGED
SUPERANNUATION FUNDS
In order for a superannuation fund to be a complying fund, its
trustee must ensure that the fund does not breach the provisions
of the Superannuation Industry (Supervision) Act 1993 (SISA
1993). One of the requirements that trustees must be aware
of under SISA 1993 is the sole purpose test. Broadly, this test
requires the fund to be maintained solely for the purpose of
providing benefits to members of the fund, on or after the earlier
of each member’s:
retirement from any business, trade, profession, vocation,
calling, occupation or employment in which the member was
engaged;
attainment of an age not less than the prescribed age; or
death.
Whether an investment in the Project will meet the sole purpose
test is a question of fact which must be determined based on the
specific circumstances of each prospective investing fund.
Trustees of investing superannuation funds should note that Product
Rulings do not address the provisions of the SISA 1993. The ATO
gives no assurance that the product is an appropriate investment
for a superannuation fund. Trustees of superannuation funds are
advised that no consideration is given in Product Rulings as to
whether investment in the relevant product may contravene the
provisions of SISA 1993, and in particular the sole purpose test.
It is recommended that trustees obtain their own independent
professional advice concerning the application of the sole purpose
test based on their fund’s specific circumstances, before investing
in the Project.
OTHER LIMITATIONS
Investors should also note the following.
Where the ATO becomes aware of, or is made aware of a
scheme being carried out in a materially different way to the
scheme set out in the relevant Product Ruling, the ruling will
be withdrawn. A difference will be material if it results in a tax
outcome being different to that set out in the Product Ruling.
Both the implementer of the scheme and entities participating
in that scheme are responsible for ensuring that the scheme
is carried out in accordance with the Product Ruling that has
been issued.
Although each Product Ruling deals with the laws enacted at
the time it was issued, later amendments may impact on it.
Any such changes will take precedence over the application of
the relevant Product Ruling and, to that extent, that Product
Ruling will have no effect.
9. PROJECT
RETURNS
& RISKS
What Returns on Investment can a Grower Expect?
Main Factors Influencing Returns
Distribution of Proceeds to Growers
Timber Proceeds Pooled at Harvest
Incentive to Maximise Grower Returns
Pricing Independence
Project Risks
Project Safeguards
Over the life of a Grower’s investment, a number of significant variables may impact
in a material way on investment returns. Many of these variables are outside the control
of FEA Plantations. Further, unanticipated events that affect returns may occur,
and anticipated events that affect returns may not occur as expected. Accordingly,
it is not possible to accurately forecast a potential return with any certainty.
45
9.
PROJECT RETURNS & RISKS
WHAT RETURNS ON INVESTMENT
CAN A GROWER EXPECT?
Over the life of a Grower’s investment, a number of significant
variables may impact in a material way on investment returns.
Many of these variables are outside the control of FEA Plantations.
Further, unanticipated events that affect returns may occur, whilst
anticipated events that affect returns may not occur as expected.
Accordingly, it is not possible to accurately forecast a Grower’s
potential return with any certainty. It is for this reason, the
directors of FEA Plantations do not consider that in accordance
with current ASIC policy, it has reasonable grounds to include such
forecasts in this PDS.
None of FEA Plantations, its directors, or any other person, firm or
corporation involved with issuing this PDS gives any assurance or
guarantee whatsoever in respect of the future success or future
returns of the Project.
The following information is provided to assist Growers in making
their own assessment of the merits of investing in the Project.
In providing this information, FEA Plantations has relied on the
information provided by the Independent Forester.
In determining the suitability of the Project and considering the
potential returns, it is recommended that Growers consult their
financial and/or taxation advisers and make their own inquiries
as to the suitability of the investment for their needs.
In considering whether to participate in the Project, Growers should
consider the matters outlined below in conjunction with the risks
and taxation issues set out in sections 8, 9 & 13. Each of these
matters will affect the returns you may achieve from the Project.
MAIN FACTORS
INFLUENCING RETURNS
The main variables that can affect the financial performance of
the Project are the:
Amount of timber or timber yield from the plantations,
including the proportion of each wood product produced.
Price achieved at harvest for each product.
Timing of harvest.
Timber Yield
Timber yield is calculated by multiplying mean annual increment
(MAI), which is – the average growth of the trees to a point in
time (usually measured in Cubic Metres per hectare per year), by
the Rotation length as measured in years.
As with any primary production, several risks may have an impact
on the final yield and neither FEA Plantations nor any member
of the FEA Group, their respective directors or agents gives any
assurance or guarantee regarding the final yield. The yield will be
affected by factors such as site quality, management techniques,
selection of improved seedling stock, and fertiliser application.
Please refer to the ‘Independent Forester’s Report’ in section 13
for further information.
Timber Price
The trees will be harvested progressively and the timber sold
for the highest price obtainable. Because the timber may be
harvested at different times and sold to different end-markets,
Growers may well receive different prices for each parcel of
46
timber. Market demand, prices and specifications for timber sales
may also vary in the different regions in which FEA operates.
Generally, before harvest the Project Manager will conduct a
detailed assessment of the plantations to determine the best way
to maximise returns to Growers.
Timber from the Project is expected to be sold on a stumpage
basis. Stumpage is the price paid to the Grower for the timber as
a standing crop. It excludes harvesting, transport, processing and
marketing costs, which are generally borne by the buyer.
Actual prices received for the wood may well differ from those shown
in the ‘Independent Forester’s Report’ or anywhere else. Marketing
options for the timber from the plantations may change over the life
of the Project. FEA Plantations makes no forecast as to the availability
of alternative markets or the percentages of product that may be
used in alternative markets, or percentages of Sawlog sold.
Stumpage prices for timber harvested in the Project are paid in
Australian dollars and fluctuate according to factors including
movements in costs, haulage distances, market demand and the
FOB price paid for export Woodchips.
Please refer to the ‘Independent Market Report’ in section 13 for
further information.
Wood Purchase Agreement
FEA has entered into a Wood Purchase Agreement with FEA
Plantations as agent for the Growers.
The Wood Purchase Agreement provides that the purchase price
for the timber must be a fair and reasonable price per tonne,
taking into account the proposed end-use of the timber and the
prices being paid by other purchasers in the respective states.
If FEA Plantations, acting on behalf of Growers, does not approve
the purchase price and delivers to FEA an alternative offer in
writing to purchase on the same general terms and conditions
as the offer from FEA, but at a higher price, FEA has the option to
purchase the wood for the higher price specified. If FEA fails to
agree to the higher price or decides not to purchase the wood,
FEA Plantations may sell the wood to another buyer.
Investors in Woodlot Options 1 & 2 will have the added benefit
of a Floor Price mechanism, provided for in the Wood Purchase
Agreement. The Floor Price mechanism provides that FEA will pay
Growers the greater of either the prevailing market price at the time
of harvest or the price determined by applying the Floor Price.
Woodlot Options 1 & 2 – The Floor Price Mechanism
The Floor Price applies to both wood sold as Pulpwood and Sawlogs. The respective Floor Price for the sale of wood from Woodlot
Option 1 and Woodlot Option 2 after Thinning and Clearfall are set out below:
Floor Price – Option 1
Thinning
Clearfall
Pulpwood
0.35 x FOB Bell Bay Price
0.39 x FOB Bell Bay Price
1.20 x Pulpwood Price @ Thinning
1.20 x Pulpwood Price @ Clearfall
Floor Price – Option 2
Thinning
Clearfall
Pulpwood
0.35 x FOB Bell Bay Price
0.39 x FOB Bell Bay Price
Unpruned
1.20 x Pulpwood Price @ Thinning
1.20 x Pulpwood Price @ Clearfall
Pruned
n/a
2 x Pulpwood Price @ Clearfall
Sawlogs
Unpruned
Sawlogs
An example of the respective Floor Price calculations, where the FOB Bell Bay Price is determined to be $95.28 (i.e. $198.50 x 0.48
estimated dry fibre) is set out below:
Floor price – Option 1
Thinning
Clearfall
Pulpwood
$33.35
$37.16
$40.02
$44.59
Floor Price – Option 2
Thinning
Clearfall
Pulpwood
$33.35
$37.16
Unpruned
$40.02
$44.59
Pruned
n/a
$74.32
Sawlogs
Unpruned
Sawlogs
A summary of the Wood Purchase Agreement is provided on page 100.
47
9.
PROJECT RETURNS & RISKS
Timing of Harvest
Harvests are scheduled to occur at different stages after planting
depending on the Woodlot option selected. Thinning involves
removing some trees from the plantation which increases the
spacing and, therefore, the amount of light, water and soil
available to the remaining trees. The intended result is to achieve
larger final tree sizes that allow options for adding higher value
to be pursued.
The exact timing of harvest and the decision on which blocks and
which trees will be thinned, will be determined by FEA Plantations
based on market conditions, the advice of the Independent
Forester and the Growth Rates of the plantations.
The speed with which FEA will be able to harvest and sell Growers’
timber will affect the total returns and the timing of returns that
Growers may achieve from the Project.
DISTRIBUTION OF PROCEEDS
TO GROWERS
In general terms, the pooled distribution to Growers will be
calculated as follows:
Harvest Proceeds
(timber yield in Cubic Metres x average
stumpage price per Cubic Metre)
Less
% of Harvest Proceeds
(for deferred management fees and rent)
=
Net Harvest Proceeds
(after deferred management fees and rent)
48
TIMBER PROCEEDS
POOLED AT HARVEST
All proceeds of timber sales with respect to each Woodlot option
will be pooled. Growers will share in the proceeds for each pool
based on the number of Woodlots owned as a percentage of the
total number of Woodlots in the relevant option, less their share
of the management and Forestry Right lease fees, which will be
deducted from the Harvest Proceeds before distribution.
As all proceeds of timber sales relating to each Woodlot option
will be pooled, the risk faced by individual Growers from
losses and partial damage resulting from diseases, pests and
the impact of weather and climatic events on their individual
Woodlots will be minimised. This is provided that damage
has not resulted in the total destruction of the Woodlots,
which would cause the Grower to cease to have an interest in
the Project.
INCENTIVE TO MAXIMISE
GROWER RETURNS
It is in the Responsible Entity’s best interests to maximise returns
to Growers, because all fees payable under the Forestry Right
lease and the management agreement are deferred and will
be deducted from Harvest Proceeds. Therefore, the greater the
returns to Growers, the greater the fees that the Responsible
Entity will receive.
PRICING
INDEPENDENCE
FEA Plantations must act in the best interests of the Growers
and, if there is a conflict, must give priority to the interests of
the Growers. With respect to sales of timber produce made to
date from earlier projects, FEA Plantations has obtained an
independent evaluation of the adequacy of the market prices
being offered by purchasers, whether linked to the Responsible
Entity or otherwise.
PROJECT RISKS
Participation in this Project is a long-term venture in commercial forestry and a variety of risks are peculiar to these types of investments.
The following is a summary of risks that have been identified that could affect your investment in the Project. Prospective investors
should note that this is not intended to be an exhaustive list of the risks faced. FEA Plantations works pro-actively to manage and
mitigate these risks where possible. For further information on risks, please refer to the ‘Independent Forester’s Report’ in section 13.
General Risks of Plantation Forestry
Primary
Production Risk
Plantation forestry, as with any farming venture, has inherent risks of exposure to seasonal and climatic
fluctuations. Risks include damage or destruction of trees by fire, flood, frost, drought, hail, windstorm,
disease, fungal pathogens, poor nutrition, insects or animal browsing.
The land selected for the Project meets the high standards as outlined in the ‘Independent Forester’s
Report’ in section 13. In particular, the minimum rainfall requirements will be matched to geology, soil
characteristics and soil depth to ensure that only sites in relatively high rainfall regions with inherent fertility
and deep soils are used.
FEA has been purchasing and leasing land for plantation development since 1985 and as a result has
considerable experience in acquisition of plantation land.
The geographic range of land to be used in the Project, potentially over three states, will mitigate some of
the climatic risks.
Species will be matched to suit site characteristics, which are evaluated to ensure that the likelihood of the
usual significant climatic and agricultural risks are minimised.
Insects, Pests
and Diseases
Browsing or other damage by insects (such as chrysomelid and psyllid in eucalypts and sirex wood-wasp in
pine) and animals (such as wallaby and possum) can cause damage and losses to plantations. These losses
can be particularly severe at the seedling stage and they diminish to a degree as the trees become more
advanced. Fungal infestations such as mycosphaerella and quambalaria in eucalypts and dothistroma in
pine are the main cause of loss of production from diseases. Large-scale death of older trees is rare, though
weaker individuals may be lost. Small and isolated instances of a type of white-rot have been known to
occur in E.nitens, due to entry of fungal spores during natural branch shedding or the mechanical Pruning
process, which may affect the structural properties of the wood for sawn timber production. However, this
rot has no significant effect on Pulpwood quality and E.nitens has good natural coping systems to prevent
spread of the rot within the trunk of the tree.
The plantations are routinely inspected and during periods of high risk, a strategic surveillance program is
used to monitor the build up of agents, which may cause damage or loss. Appropriate remedial action is
taken to minimise damage.
FEA has co-operated with various research organisations and is a contributor in some joint industry projects
to study control techniques for specific animal, insect or disease problems. It is able to engage researchers
and consultants for advice in specialist areas when specific unusual problems occur.
Nutrition
Soil fertility is an important factor in plantation production. FEA has an ongoing monitoring program and
uses foliar and soil sampling where productivity is less than expected.
Additional fertiliser is applied to plantations as deemed necessary after analysis of sample results. In some
cases, FEA engages researchers or consultants for specialist advice as appropriate.
Fertiliser regimes are changing as new research adds to our knowledge in this area. FEA has its own
fertiliser trials for monitoring fertiliser options across the plantation estates that it manages.
Drought
FEA recognises that as the world’s driest inhabited continent, water usage and drought are unavoidable
elements of agricultural production in Australia. Plantations, like any agricultural crop, can be influenced by
extended periods of low rainfall. Typically, low rainfall events result in slower Growth Rates and short periods
of drought can often be compensated for by periods of wet weather across the Rotation length of the trees.
Tree growth is strongly related to site characteristics, particularly depth of soil, soil water storage capacity
and the presence of underground water tables. Plantations are known to access moisture from the soil at
depths of up to ten metres. Therefore, the impact of periods of low rainfall can be at least partially off-set
by carefully selecting sites that have deep soils with high water storage capacity.
FEA has a rigorous site assessment system that establishes soil characteristics and evaluates long-term
climatic data. Under the criteria produced for the Project, a minimum annual rainfall of about 800-1100mm
is required for suitable tree growth depending on aspect, soil depth and characteristics. On most existing
FEA sites, the long-term average rainfall is between 800 and 1100mm per annum. To ensure a buffer
against short-term water deficits, FEA rejects sites that do not meet average annual rainfall requirements,
have shallow soils or poor water storage capacity.
Existing projects managed by FEA have not been significantly affected by the current drought, and will
continue to be closely monitored.
49
9.
PROJECT RETURNS & RISKS
General Risks of Plantation Forestry
Fire
There is a risk of fire in the Australian natural environment. The relatively high rainfall areas in which
the plantations are located, plus their dispersed locations, will reduce the risk of significant losses. Most
plantations are in agricultural areas and not in large continuous aggregates.
FEA maintains a fleet of fire tenders near its plantations in Tasmania and has several units in northern New
South Wales. Each year, FEA reviews its fire plan and readiness and maintains a system of fire breaks, dams
and emergency fire fighting protocols.
Risks Specific To The Project
Land Availability
and Forestry
Rights
At the date of issue of this PDS, a Forestry Right in land to be used for the purposes of the Project may not
have been secured by FEA Plantations for all Woodlots potentially required for the Project. There is a risk that
FEA Plantations may breach its obligations to a Grower if a Forestry Right in land for lease to that Grower
is not secured. FEA Plantations reserves the right to reject applications in the event of subscriptions to the
Project exceeding the expected available land.
However, at the date of this PDS, FEA Plantations has secured approximately 3,100 hectares of suitable land
and is currently negotiating access to a further 6,700 hectares. FEA Plantations’ identification and acquisition
of land suitable for purchase or leasing in Tasmania, south-east Queensland and northern New South Wales
is an ongoing process. Based on experience in sourcing suitable land in the past, FEA Plantations is confident
that enough land will be secured for inclusion in the Project as and when required to meet planting dates.
FEA Plantations will continually review its progress in land acquisition and will not accept applications unless
it believes that it can secure the land within 9 months of issuing an interest in the Project.
If a lease of a Forestry Right is not granted to a Grower within 9 months after the issuing of an interest in
the Project, FEA Plantations will notify the Grower of a right to withdraw from the Project. If a Grower elects
to withdraw, FEA Plantations will issue a full refund of application monies within 14 days of an appropriate
written request from the Grower.
Failure to
Achieve
Expected Yields
Plantation productivity will dictate the yields to be achieved from harvesting, which will impact on the
returns ultimately achieved. Plantation productivity can be affected dramatically by rainfall conditions, soil
types, disease and pests.
FEA undertakes rigorous site selection techniques to ensure suitable properties are included in the Project.
FEA’s site selection, establishment and management practices should help reduce the risk of failing to
achieve expected yields.
Failure to
Achieve
Economic Prices
It is not possible to predict the price of timber over a medium to long-term Project of this nature. This is
because such forecasts would involve the consideration of a large number of variables, many of which are
outside the control of FEA Plantations. The eventual price achieved will depend on a range of factors, largely
outside the control of FEA Plantations.
However, FEA is a long established public company and the scale of operations and long-term capacity to
supply should provide a relatively strong negotiating position.
Discontinuance
of Uneconomic
Plantations
There are risks in relation to inadequate ground preparation, weed control, planting and species selection.
In the event that a plantation (or a particular Grower’s Woodlots) suffers damage to the extent that it is not
economic to nurture the plantation to harvest, the management agreement and Forestry Right lease deed
will end as at the date of such destruction.
Site Selection
and Plantation
Management
Variables
FEA is very experienced at site selection, plantation establishment and maintenance. However, natural
factors such as lack of or excessive rainfall, can impact on the timing and effectiveness of all plantation
establishment works. This may reduce the effectiveness of plantation operations and lower potential
productivity which may, in turn, reduce returns to Growers.
FEA minimises this risk by careful scheduling of operations so that as much work as possible is done at
times of the year which will produce the best possible results given the scale of operations, equipment and
trained labour available in each region. The geographic spread of the properties included in the Project also
acts to limit these primary production risks and spread out the operational peaks.
The Independent Forester reviews the performance of FEA and its contractors through an audit of the
plantations in the Project and reports to the Growers and FEA Plantations annually on whether FEA has met
its obligations under the management agreement.
FEA’s certified Environmental Management System (EMS) includes standard operating procedures to cover,
for example, land and timber acquisition procedures and forestry operations. These procedures aim to
ensure all aspects of these site selection and plantation activities (including those of contractors engaged by
FEA), comply with relevant legislative and company policy requirements and meet the standards specified
within the EMS.
50
Risks Specific To The Project
Insurance
Growers are responsible for insurance to cover the standing timber in their Woodlots against loss or damage
by fire and other risks as included in the insurance policy. If requested, FEA Plantations will use its best
endeavours to arrange plantation insurance cover annually for a Grower’s interest in the Project. It should
be noted that insurance cover of this nature is typically subject to a range of exclusions and the extent and
nature of the coverage will depend on terms of the particular policy at the time.
Limitation
of Growers’
Liability
The management agreement and Constitution include provisions for the limitation of Growers’ liabilities.
No assurance is given concerning the effectiveness of these provisions as their interpretation is subject to
the determination of courts.
FEA Plantations will arrange public liability insurance of not less than $10,000,000 at no charge to the Grower.
Financial
Capacity
As with all such afforestation projects, there is a risk that FEA Plantations and/or FEA may not be sufficiently
financially sound to see the Project through to completion.
The ability of FEA Plantations to manage the Project is dependent upon a secure financial position and
liquidity. FEA Plantations is required under its AFSL to maintain a minimum net tangible asset level and to
meet an access to financial resources requirement.
FEA Plantations is a wholly owned subsidiary of FEA. FEA Plantations has also engaged an independent
Custodian as its agent to receive all application monies and the Harvest Proceeds from the sale of wood
from the Woodlots. The Custodian makes the disbursements of Harvest Proceeds to Growers after deferred
management fees and rent have been paid.
Other Risks
Price of
Woodchips and
Sawn Timber
Changes in the international economy may affect the value and demand for timber products.
Other factors that may affect Growers’ returns are the exchange rate of the Australian dollar, advances in
technology, changes in government policy, and the comparative costs for timber harvesting, delivery and
processing.
Export sales of Hardwood Woodchips have been made in Australian dollars into the major market of Japan
and price reviews have not been based on relative exchange rates. Australia has been exporting into this
market for over 35 years, and while all trade has been cyclical, the Japanese market has been a consistent
purchaser of Australian Woodchips.
Australia has a competitive advantage compared with its current major export competitors of Chile and
South Africa due to our proximity to Japan. The number of sailing days from Australian ports to Japan is
significantly less, which reduces freight costs to Japanese mills.
A reduced demand or increase in supply of Woodchips and/or paper and paperboard into east Asian
countries could negatively impact on the market price for the timber produce being sold from the Woodlots.
This could occur as a result of an economic downturn or technological advances that result in reduced paper
and paperboard usage. Presently however, there is an expectation of continuing improvement in demand
for paper due to increases in population and also the growth of gross domestic product of developing
economies in the east Asian regions.
Market demand for sawn timber products could also be impacted by reduced demand through the
introduction of alternative suppliers or an over supply into the market. Presently however, FEA believes
there are reasonable grounds to expect there will be solid demand for Sawlogs due to increasing demand
for wood fibre and sawn timber. The FEA Group has been sawing logs produced from the plantations it
is currently harvesting and the FEA Group is developing these markets further so as not to be dependent
solely upon sales of export Woodchips. This expected demand is subject to unforeseen changes to the
markets and the occurrence or existence of unknown risks.
To further safeguard Woodlot Option 1 and Woodlot Option 2 Growers, the Project includes a Floor Price
mechanism. This feature will operate to protect Growers against any material increases in cartage, harvesting
and processing costs which might occur in the future.
51
9.
PROJECT RETURNS & RISKS
Other Risks
Legislative Risks
It is possible that legislation affecting plantation forestry could change over the life of the Project in such a
way as to affect Growers adversely. In particular, the tax rules could change even though a Product Ruling
has been obtained for this Project. Once an interest in the Project has been obtained, the Product Ruling will
continue to apply to the investment after the Product Ruling’s expiry, subject to the terms of the ruling.
There is always a risk that the rate of GST will increase beyond the current rate of 10%. If that happens, any
unpaid Establishment Fee and any other ongoing fees will be adjusted to reflect the changed rate.
Actions by local, state and federal governments may affect the Growers’ return on investment by way of
regulation or legislation. Governments, particularly the Australian government, have expressed support
for the development of tree farms as an alternative to harvesting native forest. Governments and industry
introduced a strategy in 1997, which was revised in 2002, to substantially increase the area of plantation
forestry in Australia by 2020. See ‘Vision 2020’ on page 12.
Imposition of
Rates and Taxes
FEA Plantations and not Growers will be responsible for all existing rates, charges and land taxes on
Woodlots. The only exception is if the basis of the charges is changed to include the land value plus the
value of trees growing on the land. In these circumstances, the Grower will be required to pay these extra
costs in respect of the amount FEA Plantations is liable for or incurs because of the Growers’ trees.
Lack of
Secondary
Market
Growers should be aware that the Responsible Entity is under no obligation to purchase Growers’ interests
and that no secondary market currently exists for interests in the Project. However, as part of the Federal
Budget 2007/08 it was announced that the government will allow investors in forestry managed investment
schemes to trade their interests once they have been held by the initial investor for a period of at least four
years. Any Grower wishing to sell their interest in the Project should seek appropriate professional advice
because a transfer could have income tax and other implications.
Project Safeguards
FEA Plantations works actively to manage and mitigate the above risks where possible. The following safeguards
have been established to minimise those risks.
Safeguards
52
Further Information
Assignment of Interests
Page 66
Compliance Plan
Page 55
Constitution
Page 92
Custodian
Page 35
Geographic Diversity
Page 32
Independent Forester
Page 35
Insurance
Page 35
Pricing Independence
Page 48
Protection Against Adverse Dealings
Page 32
Risk Management
Page 65
Stocking Guarantee
Page 32
Timber Proceeds Pooled at Harvest
Page 48
Wood Purchase Agreement
Page 46
10. THE RESPONSIBLE
ENTITY AND COMPLIANCE
COMMITTEE
The Responsible Entity
Directors of FEA Plantations
Compliance Committee
FEA Plantations is the Responsible Entity of the
Project and this PDS contains its 16th consecutive
offering, since its first offering in 1993.
53
10.
THE RESPONSIBLE ENTITY AND COMPLIANCE COMMITTEE
THE RESPONSIBLE ENTITY
FEA Plantations is the Responsible Entity of the Project and this PDS
contains its 16th consecutive offering. Since its first offering in 1993,
over 8,500 investors have invested resulting in over 50,000 hectares
of Hardwood eucalyptus plantations under management, spread
across properties in Tasmania, New South Wales and Queensland.
FEA Plantations is a wholly owned subsidiary of FEA.
FEA Plantations has overall responsibility to Growers for the
operation and management of the Project. It may appoint agents
for any purpose including a Custodian to hold the Project property,
and it may delegate its duties to other persons to perform on its
behalf (including other member companies of the FEA Group).
However, the Responsible Entity remains responsible for the
actions and omissions of any agent.
As Responsible Entity, FEA Plantations has duties under the
Constitution and the Corporations Act which include amongst
other things, an obligation to:
Act in the best interests of Growers and, if there is a conflict
between the Growers and its own interests, give priority to
the Growers’ interests.
Treat Growers who hold interests of the same class equally,
and where there are Growers who hold interests of different
classes, treat them all fairly.
Comply with the Constitution and Compliance Plan.
Report to ASIC, breaches of the Corporations Act in relation to
the Project which have had, or are likely to have, a materially
adverse effect on the interests of Growers.
At all times seek to deal with Growers and all persons
associated with the Project in a fair and ethical manner.
DIRECTORS OF FEA PLANTATIONS
Anthony Maxwell Cannon
Gavin Wilson Wright
B.Sc. (Forestry), ANU, MIFA, MACFA, MAICD
CFP, BA (Legal), Grad. Dip. Ed. Admin., GAICD, F.Fin.
Chairman / Executive Director
Non Executive Director
Tony Cannon is a science graduate
in forestry from the Australian
National University and has been
involved in establishing eucalypt
plantations since 1979. Tony is one
of the founders of the FEA Group, is
a director of FEA and is involved in
a number of forestry organisations
in an executive capacity at state
and national level.
Michael John Williams
Kerry Christopher Harvey Duncan
B. Bus., CA, CFP, GAICD
LLB, MAICD
Non Executive Director
Non Executive Director
Michael is a Registered Tax Agent,
Liquidator and Auditor and has been
a partner of Camerons Accountants
and Advisors since 1987. He was
first appointed as a director of FEA
Plantations in 1996 and is also
currently a director of FEA.
54
Gavin is a Certified Financial Planner
with over 20 years of experience
in the financial planning industry.
Gavin has worked in management
positions in financial planning
firms as well as for his own firm.
He was appointed as a director of
FEA Plantations in 2003.
Until a few years ago, Kerry was
a partner of an Australian and
international law firm where
he spent 22 years in a career
spanning 38 years. He is a senior
commercial and corporate lawyer
and consultant with more than
17 years involvement with the
financial product and financial
services industry having advised
both public trustee companies and funds managers on strategic,
business and legal issues including compliance with the legislative
and regulatory requirements for managed investment schemes
registered under the Corporations Act. He was appointed as a
director of FEA Plantations in 2005.
COMPLIANCE COMMITTEE
In order to monitor compliance with the Compliance Plan and
other statutory obligations, a Compliance Committee has been
established by FEA Plantations. The Compliance Committee meets
on a quarterly basis and is comprised of three members, two of
whom must be external as defined in the Corporations Act.
the Constitution and the Corporations Act. The Compliance Plan
establishes processes designed to systematically deal with
compliance issues in key areas of the Project so as to deliver
outcomes in the Growers’ best interest. Copies of the Compliance
Plan are available to any Grower by contacting FEA Plantations at
its head office during business hours.
The Compliance Committee’s Functions
Audit of the Compliance Plan
The broad functions of the Compliance Committee are to:
Monitor to what extent the Responsible Entity complies
with the Compliance Plan and to report on its findings to the
Responsible Entity.
Report to the Responsible Entity any breach or potential breach
of the Act involving the Project or the provisions included in
the Constitution of which the Compliance Committee becomes
aware.
Monitor and assess actions taken by the Responsible Entity in
respect of any breach.
Report to ASIC if the Compliance Committee is of the view that
the Responsible Entity has not taken, or does not propose to
take, appropriate action to deal with a matter reported.
To assess on at least an annual basis whether the relevant
Compliance Plan is adequate, to report to the Responsible
Entity on the assessment and to make recommendations to
the Responsible Entity about any changes that it considers
should be made to the Compliance Plan.
Compliance Plan
FEA Plantations has established and implements a Compliance
Plan which contains the procedures and processes FEA Plantations
will implement to ensure it complies with its obligations under
Pitcher Partners are currently the auditors of the Compliance
Plan and will report on their findings on an annual basis. This
will involve testing of our adherence to the requirements of the
Compliance Plan during the year.
Compliance Officer
The Compliance Officer will ensure adequate internal systems and
controls have been implemented to make certain compliance with
the Corporations Act, the Constitution, the AFSL and internal and
industry standards are achieved. These duties include promoting
a compliance culture within the organisation and to external
service providers.
The Compliance Officer assesses any identified breaches of the
Compliance Plan. According to their seriousness, the breaches
are either internally rectified, reported to the Compliance
Committee alone, reported to both the Compliance Committee
and Board of FEA Plantations, the company’s auditors, and
ASIC. Under the Compliance Plan, the Compliance Officer is
also responsible for assessing educational requirements and
ensuring that the Compliance Committee members undertake
any requisite training when necessary. The Compliance Officer
also periodically reports to the committee on the extent to
which the business meets its obligations.
Members of the Compliance Committee
External Members
Ross Frederick James Waining
B.Sc. (For), Dip. For. (Aust.
Forestry School)
Nigel Scott Dawkins
B.Bus. (Acc), C.A.
Mr Waining is a retired professional forester who worked in the forest industry between
1962 and 1997 in Tasmania and New South Wales. He has also been a board member of the
Cooperative Research Centre for Temperate Hardwood Forestry, Forest Industry Association
of Tasmania and Private Forests Tasmania. Since his retirement, he has until recently, been a
board member of the Tasmanian Forest Practices Board and also the Chairman of the Forest
Practices Advisory Council. He is a member of the Australian Compliance Institute.
Mr Dawkins is a member of the Institute of Chartered Accountants and has been in
professional accounting practice since 1976. He has operated his own private practice
since 1992. He is experienced in all areas of public accounting, provides advice to a wide
variety of industries and was previously Chairman of the Cultural Industries Council, which
contributes to state government industry strategies. He is a member of the Australian
Compliance Institute.
Internal Member
Kerry Christopher Harvey Duncan
LLB, MAICD
Kerry is a Director of FEA Plantations.
Please refer to the previous page for a summary of his experience.
55
56
11. THE
FEA GROUP
Forest Enterprises Australia
Corporate Governance
Research & Industry Representation
Labour Standards, Environmental, Social & Ethical Considerations
Established in 1985, the FEA Group has grown to become one
of the largest plantation managers in Australia, with over 50,000
hectares of Hardwood eucalyptus plantations under management,
spread over Tasmania, New South Wales and Queensland.
57
11.
THE FEA GROUP
The FEA Group’s strategic vision is to continue to grow as a
premier plantation based vertically integrated forestry and forest
products company, to develop a substantial independent private
resource and to develop the processing and marketing capacity to
maximise returns to Growers and shareholders.
FOREST ENTERPRISES AUSTRALIA
FEA is a public company listed on the Australian Securities Exchange
and holds all of the shares in FEA Plantations.
FEA has been engaged by FEA Plantations to establish and
maintain the Woodlots on behalf of Growers who participate
in this Project and other plantation schemes conducted by
FEA Plantations.
Separately from this Project offer, FEA provides finance (subject
to application and acceptance) to Growers seeking to purchase
interests issued in the Project.
Experienced Management
An outstanding management team supports the FEA board and
its subsidiary companies.
The staff are an integrated team of professionals who believe
firmly in the job they are doing. All staff clearly understand
FEA’s objective to establish more plantations efficiently and to
maximise returns to Growers who have invested in projects
operated by FEA Plantations. Staff are actively encouraged to
further develop their industry-based education and to contribute
by way of innovation and/or processes designed to maximise
performance in all areas of our operations.
The FEA Group employs over 150 full time staff in the areas
of land acquisition, forestry operations, wood processing,
marketing, finance, accounting and corporate and legal
administration. The employees are based in Tasmania,
Victoria, New South Wales, Queensland, Western Australia &
South Australia.
FEA Plantations Ltd
FOREST ENTERPRISES AUSTRALIA LTD
Listed Public Company
Provides Finance to Growers
Provides Forest Management Services
to FEA Plantations
Party to Wood Purchase Agreement
Responsible Entity
Project Manager
AFSL Holder
Issues PDS
fea timber pty ltd
Sawmill
SmartFibre pty ltd
Export Woodchip Mill (50% share)
tasmanian plantation pty ltd
Land Owning Entity
58
Senior Management Team
Andrew White
Andrew Wye
B. Sc. (For), MIFA, MAICD
B. Sc. (For), MBA, MIFA
Chief Executive Officer
General Manager, SmartFibre
Andrew is 41 and has over 20 years experience in the forestry industry and has held a
number of senior management roles with
major Tasmanian forestry companies. These
companies include Gunns Ltd, Boral Timber Tasmania and Wesfarmers/
Bunnings. Since joining FEA in 2003 as CEO, Andrew has developed his
vision for the company and commenced implementation of the processes
to achieve a vertically integrated forestry and forest products company
through innovation and technology.
Andrew is 42 and a professional forester with
over 20 years experience in a range of operational and senior management roles within
the forestry industry in Tasmania and New
Zealand. Andrew joined FEA in 2004 and manages the SmartFibre joint
venture between FEA and ITC. Andrew also provides oversight for wood
supply for FEA operations in Tasmania and NSW. He is an active member
of the Institute of Foresters of Australia and holds the position as Chair of
the Tasmanian Division.
Fergus Leicester
Chris Barnes
B. Bus. (Acc), MBA, FCPA, FCIS, GAICD
B. Ag. Sc. (Hons), MBA, MAIAST
Chief Financial Officer &
Company Secretary
General Manager,
Plantation Operations
Fergus is 36 and has 14 years experience in
financial and commercial roles within the
timber industry, including senior financial
management roles at Boral Timber and Gunns Ltd. He joined FEA in 2005
and his responsibilities include capital management, corporate governance, compliance, risk management, information systems, strategic
planning, financial analysis and corporate administration.
Chris is 36 and has 8 years experience in
managing eucalypt and pine forestry plantations and 5 years experience with agronomy
and weed science. Previously the Plantation Manager for Gunns Ltd,
Chris joined FEA in June 2007 and is responsible for managing plantation establishment and maintenance programs across the eastern states
of Australia in line with specified targets and timeframes. Chris is also
responsible for ensuring FEA’s land acquisition program secures high
quality land that supports FEA’s future plantation growth requirements.
Additionally, Chris is also responsible for adhering to the strict quality
guidelines set down for our plantations.
Kristen McPhail
Mike O’Shea
B. Ec., Dip FP
MIFA
General Manager, Sales & Marketing
General Manager, Business
Development (Forestry)
Kristen is 42 and has 20 years marketing experience in the financial services industry. Kristen
was a practicing Certified Financial Planner
prior to being Chairman of the award-winning
Financial Planning Association’s 1994 and 1998 National Conventions
in Perth and Cairns. Kristen entered the agribusiness industry with
Norgard Clohessy Equity in 1999 as the highly-visible focal point for their
marketing and business development, resulting in the company winning
the No. 1 position in the BRW FAST 100 survey in 2000. In 2001, Kristen
was a WA finalist in the Telstra Business Women’s Awards and joined
Sylvatech in 2003 as National Marketing Manager. Having joined FEA in
2005, Kristen is responsible for marketing, sales and distribution of our
managed investment schemes.
Mike is 52 and has 30 years experience in
forestry, having held a number of senior
management roles at Environmental Consulting
International, Hazell Bros Group, North Forest Products and Gunns Ltd.
Mike joined FEA in 2005 as the General Manager of Forestry Operations.
In 2007 he was appointed to his current role as General Manager of
Business Development (Forestry). Mike is responsible for the development and implementation of a sawn timber and wood fibre processing
capacity within NSW and Queensland and the development of new
forestry and forest products. Mike will also have a significant involvement with emerging Carbon Credit markets.
Ross Barlow
Doug Massey
MBA
BA (History), MBA
General Manager, FEA Timber
General Manager, Strategic Development
Ross is 49 and has 18 years senior management experience in heavy manufacturing
and 10 years in wood products with Carter
Holt Harvey and Rayonier. Ross joined FEA in
November 2006 and his current role focuses on managing the timber
mill operation at Bell Bay in Tasmania. Ross is also responsible for implementing the company’s growth strategy through the mill expansion
project at the newly acquired former Carter Holt Harvey site also located
at Bell Bay. As part of the growth strategy, Ross is also required to grow
market opportunities both nationally and internationally.
Doug is 41 and joined FEA two years ago
working out of our Tokyo office in Japan
with the joint venture company SmartFibre
marketing Woodchips to overseas customers.
Previously Doug worked with Daio Paper Corporation for seven years
as a specialist strategy and procurement adviser, also based in Tokyo.
Doug has a unique skill set combining the need to speak Japanese with
a knowledge and understanding of the Japanese culture. These attributes combined with a strong practical working knowledge of wood
processing, provides Doug with good marketing credentials to operate in
the Pacific basin. Now based in Australia, Doug is responsible for developing strategic joint venture projects with trading houses to grow market
opportunities for FEA both nationally and internationally.
59
11.
THE FEA GROUP
Financial Information of
Forest Enterprises Australia
As at 19 March 2008, the company had a market capitalisation of
approximately $231M.
As a listed public company, FEA is required to lodge periodic
accounts and other relevant information with the Australian
Securities Exchange.
As at 30 June 2007, the company had net tangible assets of
approximately $288M and achieved a profit of $21.5M after tax
for the full financial year.
Extract of Audited Balance Sheet as at 30 June 2007:
$ million
Current Assets
133.2
Non Current Assets
309.5
Total Assets
442.7
Current Liabilities
112.8
Non Current Liabilities
41.8
Total Liabilities
154.6
Net Assets
288.1
The assets of FEA do not form part of the offer contained in this
PDS and are not assets of the Project.
australia
A copy of the most recent audited consolidated financial
statements of FEA is available on request.
FEA Plantations’ Plantation Estate
QLD
The following map sets out the general areas of existing
plantations established to date by FEA Plantations.
WONDAI
KINGAROY
BRiSBAne
KYOGLE
CASINO
NSW
LISMORE
GRAFTON
PORT
MACQUARIE
NEWCASTLE
WALCHA
cAnBeRRA
GOLD COAST
SyDney
VIC
BU
TAS
RN
IE
DE
VO
NP
OR
BE
T
LL
BA
Y
SM
ITH
TO
N
MeLBouRne
HAMPSHIRE
LAunceSton
legend
PLAntAtion ReGionS
citieS/toWnS
QUEENSTOWN
tasmania
TRIABUNNA
NEW NORFOLK
HoBARt
HUONVILLE
60
CORPORATE GOVERNANCE
The FEA Group is committed to ensuring that its policies and
practices reflect good governance in line with an overriding
responsibility to act honestly, fairly and diligently.
FEA Plantations has deliberately established a culture of
compliance into its system of corporate governance. The company
takes an active approach that goes beyond mere compliance by
following best practices, both existing and emerging. Directors
and management believe that achievement of high standards
can have a positive impact for the business, its Growers and
shareholders.
FEA Plantations holds an AFSL authorising it to operate its forestry
managed investment schemes and the company carries out
procedures set out in a comprehensive compliance manual to
ensure it complies with stringent financial, reporting and other
conditions of its AFSL.
FEA Plantations’ external advisers, including its auditors,
periodically review statutory and regulatory reports and
procedures in all areas of the business to confirm that they have
met (and have adequate systems and processes to comply with)
statutory obligations. This review incorporates a compliance audit
and reviews by an independent auditor. Policies and procedures
regarding important statutory obligations are made known to all
relevant staff. Regular checks and reviews required in the AFSL
compliance manual are also conducted. Finally, the company’s
systems of governance have been designed to ensure that
directors know their responsibilities and meet them effectively.
Each year, FEA Plantations is subject to review by external research
houses that assess and rate its corporate governance. Its Board
and management believe that its reputation will be enhanced
through constant striving for best practice.
RESEARCH & INDUSTRY
REPRESENTATION
FEA is a member of TIMA (Treefarm Investment
Managers Australia), the industry association for
the plantation investment industry. FEA is also a
member of various research organisations allowing
it to keep abreast of the latest developments
in tree planting, tree growing and timber
harvesting research.
FEA has research trials planted on a number of properties in each
state in which it operates. These are often co-operative trials with
a number of research organisations. In addition, FEA contributes
to combined industry research on specific areas of interest, aimed
at improving plantation productivity.
LABOUR STANDARDS,
ENVIRONMENTAL, SOCIAL &
ETHICAL CONSIDERATIONS
As one of Australia’s leading plantation managers, FEA is
committed to achieving a sustainable and environmentally sound
business. FEA’s commitment to the environment and to sustainable
development is demonstrated through our ‘Environmental and
Sustainable Forest Management Policy’, which is available on
our website. The three basic principles of Sustainable Forest
Management (SFM) are:
Ecological sustainability.
Social sustainability.
Economic sustainability.
61
THE FEA GROUP
Ecological Sustainability
Social sustainability is about protecting cultural values and
working within acceptable social norms. FEA achieve this
through our ‘Stakeholder Communication Policy and Procedures’,
which ensure the views of identified stakeholders (e.g. relevant
government agencies, tourism operators, community groups
indigenous communities, landowners and neighbours) are
considered in the development of our forest management plans.
The policy facilitates our commitments to the ‘Good Neighbour
Charter’ for Tree Farming in Tasmania and the ‘Forestry & Tourism
Protocol’ Agreement, which aim to improve relationships with
these stakeholders. Copies of these agreements are available on
our website.
Economic Sustainability
Economic sustainability is about optimising the benefits of income,
employment, and goods and services within the constraints of
ecological and social sustainability. FEA has demonstrated this
though its strategy to become a vertically integrated forestry and
forest products company with a focus on value added
products
AFS/01-21-09
such as EcoAsh®, EcoAshclear®, and BassPine®.
FEA ensures that the rights and responsibilities of employees are
defined through our ‘Employee Manual’ and through adherence
to the Forestry (Fair Contracts Code) Act 2001 in Tasmania, which
provides standards for contractual agreements with forestry
service providers such as tree planting and harvesting contractors.
FEA field staff operate under a ‘Forest Safety Management
System’, which is aligned with the recognised Australian
standard, AS 4801.
All FEA contractors are required to operate under their own ‘Safety
Management Systems’.
Environmental Management System Certification
The international standard for accreditation
of management systems developed
by the International Organization for
Standardization (ISO) is ISO 14001. FEA’s
Environmental Management Systems for
trust-mark.com®
forestry operations in Tasmania, New
South Wales and Queensland have been certified to the ISO
14001:2004 standard by independent third-party auditors.
anagemen
t
al M
nt
14001
Social Sustainability
FEA ensures its systems for achieving sustainable forest
management comply with best practices by seeking independent
third party certification against internationally accepted standards.
. ISO
Ecological sustainability is about protection of the environment
and maintaining biological processes. FEA ensure this through
its Environmental Management System. The Environmental
Management System is a management framework that
ensures that all aspects of our operations are identified and
managed to ensure protection of the environment, including
prevention of pollution and compliance with environmental
legislation (e.g. the Forest Practices Act in Tasmania, the
Plantations and Reafforestation Act in New South Wales, and the
Integrated Planning Act and the Vegetation Management Act in
Queensland).
Environmental & Sustainable Forest
Management Certification
Environ
me
11.
Sustainable Forest Management Certification
FEA achieved independent third party
certification against the Australian Forestry
Standard (AFS) for its Tasmanian forest
estate in March 2007 and is aiming to
achieve certification of the mainland
AFS/01-21-09
PEFC/21-23-09
estate by June 2008. The AFS incorporates
assessment criteria that have been internationally agreed and
certification provides assurance that wood products are sourced
from forests managed sustainably under strict environmental,
economic and social standards.
International recognition of national certification
schemes is an emerging issue. Two principal
international initiatives are the Programme
for the Endorsement of Forest Certification
schemes (PEFC) and the Forest Stewardship
PEFC/21-23-09
Council (FSC). Both these schemes offer an
umbrella for the recognition of schemes such as the AFS. The AFS
has already received mutual recognition by the PEFC, the world’s
largest certification scheme, with over 200 million hectares of
certified forests based on 23 national forest certification schemes.
These national schemes build upon the international processes
for the promotion of sustainable forest management, with the
mechanisms supported by 149 world governments and covering
85% of the world’s forest area.
Chain-of-Custody (CoC) Certification
Although AFS certification provides the forest manager with
assurance that wood products leaving the ‘forest gate’ have been
managed sustainably, sawmillers and other processors need proof
that the products they sell have indeed come from such forests and
not been blended with non certified products on the way.
The CoC standard, AS4707-2006, provides an inventory tracking and
control system that follows forest products from AFS certified forest
to end use.
FEA’s joint venture operation SmartFibre achieved CoC certification
in December 2007.
62
12. ADDITIONAL
INFORMATION
Australian Financial Services Licence
Complaints Handling Procedures
Minimum Subscription
Cooling Off Right
Privacy & Register of Growers
Disclosing Entity Reporting Requirements
Risk Management
Anti-Money Laundering and Counter-Terrorism Financing
Plantation Valuation
Removal of Responsible Entity
Particulars of Interests
Consents
Secondary Market
Formation & Issue Expenses
Litigation
Other Costs Reasonably Incurred
As required by the Corporations Act, a dispute resolution
process is in place to ensure appropriate and prompt
resolution of any Grower complaints. Growers have the
right to make a formal complaint about any aspect of
the services they receive as an investor in the Project.
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12.
ADDITIONAL INFORMATION
Australian Financial
Services Licence
FEA Plantations has been issued with an AFSL by ASIC, which
authorises the company to:
Provide general financial product advice for interests in its
own managed investment schemes.
Deal in a financial product by issuing, applying for, acquiring,
varying or disposing of a financial product in respect of its own
managed investment schemes.
Operate managed investment schemes related to direct real
property and forestry.
Complaints Handling Procedures
As required by the Corporations Act, a dispute resolution process
is in place to ensure appropriate and prompt resolution of any
Grower complaints. Growers have the right to make a formal
complaint about any aspect of the services they receive as an
investor in the Project. If a Grower has a complaint about the
service provided, the following steps should be undertaken:
1.Contact your adviser and tell your adviser about your complaint.
2. If your complaint is not satisfactorily resolved within three days,
please contact the complaints officer at FEA Plantations on (03)
6334 7811 or put your complaint in writing and send it to us at:
The Complaints Officer
FEA Plantations Ltd
PO Box 733
Launceston, Tasmania 7250
We will try to resolve your complaint quickly and fairly.
3. If you still do not get a satisfactory outcome, you have the right to
lodge a complaint with the Financial Industry Complaints Service
on 1300 780 808 or you may put your complaint in writing and
send it to:
Financial Industry Complaints Service
PO Box 579
Collins Street
West Melbourne, Victoria 8007
We are a member of this external dispute resolution scheme.
4.ASIC has a freecall Infoline on 1300 300 630 which you may use to
make a complaint and/or obtain information about your rights.
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Minimum Subscription
There is no minimum subscription that must be reached for the
Project or for any Woodlot option in the Project. The Responsible
Entity is able to operate the Project regardless of the number of
interests issued.
Cooling Off Right
You have a ‘cooling off right’ under the Corporations Act when you
invest in certain financial products, including managed investment
products. This means that you can return these products within
a prescribed cooling off period if you change your mind. You will
obtain a full refund of your investment less any adjustments
permitted under the Corporations Act.
The prescribed cooling off period is 14 days calculated from:
the time your investment is confirmed by us; or
the end of the fifth day after your investment is issued to you,
if you do not receive confirmation of your investment.
Applicants should be aware that because they will sign the
management agreement via the execution of the ‘Application Form
& Power of Attorney’, the management agreement will be a binding
contract once it is signed by FEA Plantations (on its own behalf). As
soon as the management agreement has been executed by both
parties, this cooling off right will be extinguished, notwithstanding
that the period referred to above may not have expired. It is expected
that the execution of the management agreement by FEA Plantations
will occur immediately after an application is accepted, although
FEA Plantations may execute at any time up to and including
30 June 2008 (for Growers who apply on or before that date), and
up to and including 30 June 2009 (for Growers who apply between
1 July 2008 and 30 June 2009).
If you want to exercise your ‘cooling off right’, you must tell us
in writing by letter, facsimile transmission or email before the
cooling off period ends.
Privacy & Register of Growers
FEA has a privacy policy statement with regard to the collection, use,
storing and disclosure of your personal information.
When you submit an application for Woodlots under this PDS, you
will be providing FEA Plantations with your personal information.
This will be treated confidentially and in accordance with the
National Privacy Principles as defined in the Privacy Act.
We will only collect information that is necessary for us to
establish, maintain and keep you informed about the progress
of your Woodlots. If you do not provide us with the information
requested in the ‘Application Form & Power of Attorney’ we will be
unable to allocate Woodlots to you. If the information is incorrect
or incomplete we will be unable to keep you informed about the
progress of your Woodlots or to provide other information that
may be important to you.
FEA Plantations maintains a register of Growers and information
about you will be accessible in accordance with the Constitution
and Corporations Act. You may access and update your own
personal information at any time by emailing or writing to us.
We will not charge a fee for this service unless we incur costs in
providing the information to you.
We will not share any personal information with third parties unless:
You have consented.
The purpose for which it is used or disclosed is related to the
primary purpose for which the information was collected and
you would reasonably expect us to do so.
The use or disclosure is in circumstances related to the public
interest such as law enforcement or public or individual health
or safety.
The disclosure is authorised by law.
Should you not wish to receive any marketing information
from our companies you may advise us by mail or email at
marketing@fealtd.com. If you have a complaint about any
possible breach of privacy by us, then you should contact our
Privacy Officer at privacy.officer@fealtd.com or by mail, facsimile
or telephone.
Disclosing Entity Reporting
Requirements
Once the Project has 100 Growers who subscribe under this
PDS, it becomes a disclosing entity and is subject to additional
and regular reporting and disclosure obligations under the
Corporations Act.
Under the Corporations Act, Applicants are entitled to obtain from
FEA Plantations copies of the following:
The Project’s most recent annual financial report that has been
lodged with ASIC.
Any half year financial report lodged with ASIC after the lodgement of the annual report and before the date of the PDS.
Any continuous disclosure notices given by the scheme after the
lodgement of that annual report and before the date of the PDS.
Upon request, FEA Plantations will provide a copy of the documents
free of charge as soon as practicable after a request is received
but, in any event, within 5 days.
Risk Management
As part of FEA Plantations’ requirements under its AFSL, FEA
Plantations has established a risk management system to comply
with the ‘Australian Risk Management Standard’. This process
involved producing a compliance manual, which rates risks and
establishes procedures to monitor and mitigate these risks. The
process is subject to an annual review and our auditors have within
the last 12 months conducted a full risk management review.
Anti-money Laundering and
Counter-Terrorism Financing
In 2006, the federal government enacted the Anti-Money
Laundering and Counter-Terrorism Financing Act 2006 (AML/
CTF Act). The purpose of this legislation is to enable Australia’s
financial sector to maintain international business relationships,
to detect and prevent money laundering and terrorism financing
by meeting the needs of law enforcement agencies and to bring
Australia into line with international standards.
Why does this legislation affect us?
We are a ‘reporting entity’ pursuant to the AML/CTF Act and as
such must meet stringent investor identification and verification
requirements based on a risk based approach.
This means that prior to units in the Project being issued, we
must be ‘reasonably satisfied’ that you exist and you are who
you claim to be.
What do you need to do?
You need to provide us or your dealer or financial adviser with the
identification information required pursuant to the AML/CTF Act.
You will be requested to provide the information set out in the
AML/CTF booklet which details all the information required to be
provided by you. A copy of our AML/CTF booklet is provided with
this PDS and is also available by contacting your dealer/financial
adviser, visiting our website at www.fealtd.com, or contacting us
on freecall 1800 600 009. We, or your dealer/financial adviser,
may also request additional information in order to ensure
compliance with the new legislation.
What will we do with the information you give
to us?
We will maintain all information collected from investors in a
secure manner in accordance with the AML/CTF Act and relevant
privacy principles. We will only disclose information about you
where we reasonably consider that it is required to do so by the
laws of Australia. This means that identification information may
be disclosed to government or law enforcement agencies. We
may also disclose this information to other entities involved with
the Project to the extent that this information is required to fulfil
that entity’s AML/CTF obligations.
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12.
ADDITIONAL INFORMATION
Plantation Valuation
Secondary Market
FEA has been a contributor to the development of the ‘Australian
Forest Valuation Standard’, which has been developed through the
Association of Consulting Foresters of Australia (ACFA) a division
of the Institute of Foresters of Australia. FEA Plantations Chairman,
Tony Cannon is a member of ACFA. In addition, FEA Plantations
may use either the AFG insurance scales or the Accounting
Standards, called SGARA (Self-Generating and Regenerating
Assets), whichever is the most appropriate.
Growers should be aware that the Responsible Entity is under no
obligation to purchase Growers’ interests and that no established
secondary market currently exists for interests in the Project.
However, Growers are free to assign their interests in the Project,
subject to the conditions set out in the Constitution.
Removal of Responsible Entity
The Responsible Entity can be removed and replaced with another
appropriately licensed company if Growers pass extraordinary
resolutions to that effect at a meeting of the Project Growers.
An extraordinary resolution requires the support of at least
50% of all Growers in the Project who are entitled to vote on
the resolution.
Particulars of Interests
Other than as set out below or elsewhere in this PDS, no expert
or any person named in this PDS as performing any functions,
nor any firm in which any expert or such person is a partner or
employee has, or has had within the two years before the date of
this PDS, any interest in the formation or promotion of the Project,
in any property proposed to be acquired in connection with the
formation or promotion of the Project, or in the offer of interests
in the Project.
Van Diemen Forestry Consultants Pty Ltd has prepared an
‘Independent Forester’s Report’ and ‘Independent Market Report’,
which is included in this PDS. It has received, or is entitled to
receive, fees of $8,460 for its services.
McMahon Clarke Legal, the solicitors to FEA Plantations, have
reviewed and advised on the documents establishing and
governing the Project plus the terms of this PDS. They are entitled
to receive fees of $52,500 for their services.
KPMG Chartered Accountants, have reviewed and advised on
the taxation section of this PDS, has prepared an ‘Independent
Taxation Opinion’ for inclusion in this PDS and assisted with the
preparation of the Product Ruling application. They are entitled to
receive fees of $3,400 for their services.
Consents
Each of the above experts:
Is limited in their involvement in the preparation of this PDS to
the preparation of the reports set out within it.
Has given and not withdrawn their consent to the inclusion
of their report in this PDS and advises that the giving of their
consent to the inclusion of their report in this PDS should not
be taken as an endorsement of the Project.
Gives no assurances or guarantees whatsoever in respect
of the successful operational performance of, or return from
the Project.
66
As part of the 2007/08 Federal Budget, it was announced that
the government would allow investors in forestry MIS to trade
their interests once they have been held by the initial investor for
a period of four years. The four year restriction will apply only to
the initial investors in a scheme. This measure applies to interests
in pre-existing schemes, meaning that taxpayers who invested
in a forestry MIS prior to 1 July 2003 will be able to trade their
interests from 1 July 2007.
Any Grower wishing to sell or transfer their interest in the
Project should seek appropriate professional advice first, because
any transfer could have income tax and other implications.
FEA Plantations will assist with preparation of the necessary
documentation to effect the transfer subject to any legal fees,
administration costs and stamp duty being met by the Grower.
Formation & Issue Expenses
All expenses for the formation of this Project and the issue of
interests (including legal, accounting and expert’s fees), together
with all commissions, duties, advertising and charges associated
with registration of the Project will be paid by FEA Plantations,
and will not be reimbursed by Growers.
Litigation
FEA Plantations is not aware of any litigation pending or threatened
at the date of this PDS which affects the Project.
Other Costs Reasonably
Incurred
FEA Plantations may seek reimbursement of its costs from
Growers for any Project related litigation and the cost of holding
any Grower meetings. Costs, charges and expenses recoverable
from Growers will be incurred on one of two bases. They may
be incurred on a ‘per Grower’ basis (regardless of the number of
Woodlots acquired), which will be allocated evenly to each Grower.
Alternatively, they may be incurred on a ‘per Woodlot’ basis (fees
which vary based on the number of Woodlots acquired), which
will be allocated to Growers based on the number of Woodlots
they acquire. FEA Plantations will bear the costs for any stamp
duty or registration of the Power of Attorney.
13. INDEPENDENT
REPORTS
Independent Forester’s Report
Independent Market Report
Independent Taxation Opinion
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68
VDFC
Forestry Consultants
A.C.N.: 009 577 842
212 Union Road
SURREY HILLS, VICTORIA
AUSTRALIA 3127
Phone: 03 9888 4922 Fax: 03 9888 4924
Mobile: 0418 130 499
Email: vdfc@bigpond.net.au
INDEPENDENT FORESTER’S REPORT
6 March 2008
The Directors
FEA Plantations Ltd
PO Box 733
Launceston Tasmania 7250
Dear Sirs,
The following report has been prepared for inclusion in a Product Disclosure Statement (PDS) to be issued by FEA Plantations Ltd (FEA Plantations)
in relation to the offer of interests in the FEA Plantations Project 2008 (the Project) to the public for the growing of eucalypts in Tasmania,
New South Wales and Queensland and Softwoods (Pinus radiata), predominately in Tasmania, but potentially in other established Softwood
regions. Van Diemen Forestry Consultants Pty Ltd (VDFC) has only been involved in the preparation of the Independent Forester’s Report and
Independent Market Report and in no other part of this PDS.
1. Consultants Experience, Qualifications & Skills
VDFC provides this report based on the experience of their principal consultant, Mr Gerry Cross, which spans almost 40 years in plantation and
forest industry management around the world, including some 33 years in the Australian industry. The intention of the report is to provide
potential investors in the Project with an independent assessment from a forestry perspective.
Mr Cross has a comprehensive knowledge of the eucalypt and Softwood plantation industry in Australia and the organisations involved
in this proposal. This report is prepared in accordance with the Australian Forest Growers ‘Disclosure Code for Afforestation Managed
Investment Schemes’.
Mr Cross’s qualifications are:
Bachelor of Science (Forestry) from the Australian National University.
Member of the Institute of Foresters of Australia (IFA).
Registered Professional Forester registered as a General Practising Forester.
Chairman of the Association of Consulting Foresters of Australia Division of IFA.
Member of Australian Forest Growers.
Member of the National Association of Forest Industries.
Member of a Victorian Panel for the Accreditation of Forest Practitioners to advise local government on forest practices.
His silvicultural experience has included intensive plantation management including site selection, soil surveys, and development of fertilising
and maintenance programs to maximise productivity and sustainability. In addition, Mr Cross has been involved in the harvest of logs from most
plantation and forest types and in the supply of these logs to the full range of types of timber processing plants in many countries.
2. Project Overview
Investors are invited to enter into a Forestry Right lease deed for a minimum of one Woodlot and a management agreement with FEA Plantations
for the establishment and maintenance of the Woodlot and the lease of a Forestry Right over the land on which it is to be situated.
Each Woodlot covers 0.5 hectare (ha). Woodlots will be aggregated in Tasmania, NSW or Queensland near other large plantation estates.
FEA Plantations has established over 41,300 hectares of eucalypt plantations for various clients in Tasmania, NSW and Queensland from 1987
to June 2007. These plantations have been examined and in my opinion have been established in a professionally competent manner and are
being well managed to achieve the full potential of the sites. The total estate will increase to in excess of 50,000 hectares by June 2008. FEA
Plantations’ parent company Forest Enterprises Australia Ltd (FEA) also has experience in managing radiata pine plantations through several
small private holdings in Tasmania, which it has maintained for many years.
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13.
INDEPENDENT FORESTER’S REPORT
VDFC Forestry Consultants
FEA Plantations, the Responsible Entity, has engaged FEA to manage the Project. The proposed plantations will be established on land selected
by FEA based on a detailed land evaluation protocol. The sites will be prepared for planting and the trees will be mainly planted in spring and
autumn in Tasmania and from spring to autumn in NSW and Queensland. These dates are in silvicultural alignment with the growth cycles
of both eucalyptus and radiata pine. In all cases planting dates will also be determined by soil moisture levels in order to ensure good early
survival and uniform establishment.
FEA has developed a highly professional regime of site selection, tree establishment, annual maintenance, inventory, protection and community
relations. This regime should ensure good establishment and care of the plantations during the proposed Rotation period.
Seedlings are produced by ‘state of the art’ specialised tree nurseries growing under contract to FEA. In addition, FEA co-operates in forest
research projects with other plantation owners to maintain high standards of plantation management.
3. Qualifications and Capacity of the Plantation Manager, FEA
The management company FEA, has demonstrated skill and expertise in eucalypt plantation establishment, which can be readily observed
in the level of development, growth and good silvicultural practice on all the sites under their management in Tasmania, NSW and
Queensland. In particular, the proposed intensive site preparation and follow up maintenance with fertiliser, vermin and insect control are
‘state of the art’ practice.
From our observations we are confident that FEA will continue to use the best practices and to act in accordance with the standards prescribed
in the Forestry Right lease deed and management agreement.
Yields from these plantations will still depend on seasonal conditions; however, the rainfall at these chosen sites is historically reliable, and
hence growth and yields seem assured for Growers if events follow historical patterns.
FEA’s rationale for the plantations it manages is to develop aggregations of resource big enough to supply mills that are in turn big enough to
process the logs economically for domestic and international markets, either as their sole resource or in conjunction with other developments.
FEA has invested heavily in information technology in areas such as its in house Geographic Information System (GIS). This allows very accurate
definition of planted areas and links to on ground GPS surveys and aerial and satellite remote imaging.
FEA has been increasing its ability to measure and monitor the progress of the plantations under management. Staff members have been
appointed whose roles are solely to monitor the health and maintenance of the plantations and carry out frequent, regular field inspections. In
addition, FEA has engaged people with a high level of growth modelling skills to carry out ongoing sampling and inventory of the plantations.
Based on its inventory program, FEA has been upgrading its estate modelling software using a forest industry standard called Woodstock. This
allows very complicated modelling of wood flows to a range of markets and can be used to run a range of scenarios aimed at optimising wood
production, product and financial outcomes.
Recognising the increasing scale of harvesting in Grower plantations, FEA has recently appointed a dedicated Wood Supply Manager in Tasmania
to coordinate the harvest program.
FEA operates under an Environmental Management System (EMS), which has been certified to a standard recognised by JAS-ANZ as ISO
14001:2004. FEA achieved certification to ISO 14001:2004 in December 2005 (Tasmania) and September 2007 (Mainland). An independent third
party auditor verifies and carries out regular post certification reviews of the EMS.
In addition to ensuring protection of the environment through its EMS, FEA is also committed to managing forests on a sustainable basis. In
March 2007, FEA achieved certification of its Tasmanian forest estate against the Australian Forestry Standard. The Australian Forestry Standard
AS 4708 - 2007 is a nationally endorsed Australian Standard, developed within the recognised international frameworks of the Montreal Process
Criteria and Indicators (1995) and the ISO 14000 series of environmental standards, but which takes account of local operating conditions. FEA
aims to achieve certification of its Mainland forest estate by June 2008.
To complete environmental certification of the Pulpwood supply chain, FEA’s 50% owned subsidiary, SmartFibre Pty Ltd (SmartFibre) achieved
AFS Chain of Custody certification in December 2007. This provides a guarantee to Woodchip export customers that SmartFibre’s products come
from sustainably managed forests.
4. Plantation Site Characteristics
4.1 Productive Capacity
The criteria used for selection of the land, and the field techniques used in applying them have been reviewed. These criteria and techniques
will ensure that land used will be capable of growing a commercially viable plantation with an average yield of about 355m3 gross wood
volume per hectare over a 13 year Rotation with Thinning at about 9 years as in Woodlot Option 1. As an alternative, Woodlot Option 2 yields an
average of 430m3/ha over a 16 year Rotation with two or three Pruning lifts over the first six years and commercial Thinning at about year 9,
followed by final harvest at about age 16. FEA Plantations’ Softwood option, offered for the first time this year as Option 3, will yield an average
of 550m3/ha over a 25 year Rotation with two commercial Thinnings at years 13 and 18.
The specific characteristics and details of each block of land to be used in the Project will be supplied to VDFC as part of the evaluation of
the land’s suitability. The Independent Forester will also inspect each block as part of annual inspections and will confirm to the Compliance
Committee that the land complies with the selection criteria.
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VDFC Forestry Consultants
4.2 Climate
Trees show best growth in a mild climate with uniform rainfall over the year. This is needed so that, for most of the year, rainfall exceeds
evaporation. Under the criteria produced for the Project, a minimum annual rainfall of about 800 - 1100mm per annum is required for suitable
tree growth, depending on aspect, soil depth and characteristics.
On most existing FEA Plantations’ sites, the long-term average rainfall is between 800 - 1200mm per annum. Adherence to similar high
standards can be expected for land selected on properties which adjoin or match the existing sites.
The eastern seaboard of Australia is currently experiencing a drought, which has built up over the past five years but rainfall levels recorded
match those of earlier recorded droughts. A review of 100 years of rainfall records for current plantation sites shows that historically these
droughts have ended with a transition back to wetter climatic conditions. It is my considered opinion that if soils with appropriate qualities are
chosen and appropriate site preparation made prior to establishment of plantations then there are no problems that cannot be overcome using
professional judgement and expertise to achieve a result over time. In this five year period there have been technological improvements made
to planting techniques to enhance survival of trees.
There have been successful plantations established over the past five years by a number of professional plantation managers, including FEA
Plantations. There is a reasonable expectation that such organisations can continue to operate successfully as the weather cycle moves through
into a wetter period.
4.3 Geology and Soils
The high rates of tree growth targeted for FEA plantations have been achieved on well rained soils derived from granitic, basaltic or sedimentary
bedrock. These geological parent materials are often found in similar land systems with soil deep enough (about a metre) to store adequate
water, above an impermeable layer. This is needed so that the trees will not just survive but will thrive and grow to maturity. The soils must
be inherently fertile or have developed a ‘bank’ of fertility due to prior pasture or crop management, which has entailed regular applications
of fertiliser. In particular, the soils must not be subject to prolonged waterlogging.
FEA has developed soil selection techniques based on suitability for forestry, which ensures that the land selected meets all the criteria for high
Growth Rates. All sites are systematically examined for soil depth and drainage. FEA has extensive experience in selecting land and applying
establishment techniques to match the range of suitable soils. These techniques are being constantly upgraded as a result of research and
assessment of results on the ground.
As well as management history, the size and location of sites are important selection criteria. Each property must be a minimum of 20 hectares
or, if smaller, be near other developments to ensure commercial viability. Similarly, the properties are generally within 100 - 150 km from
potential ports and/or likely processing centres in order to provide economic returns after taking account of log haulage costs.
4.4 Assessment of Net Plantable Area
The gross area of land selected for plantation development must be reduced by certain areas which are unsuitable for plantation establishment,
due to rock outcrops, swamps, or telephone and powerline easements. Other reductions are due to steepness, streamside or landscape
management reserves, reserves to protect historical, botanical and other special values, wildlife corridors, roads, firebreaks, and areas reserved
for other reasons.
5. Plantation Establishment and Maintenance
5.1 Species to be Planted
5.1.1 Temperate Regions (Tasmania, & NSW Northern Tablelands)
Shining Gum (Eucalyptus nitens) is the preferred plantation species in much of Tasmania because of its rapid growth over the first 12 - 15
years and its resistance to frost and drought. Shining Gum is also planted on the southern parts of the NSW land base that FEA is using, on
the high altitude areas on top of the Great Divide. These sites are similar in terms of rainfall, temperatures and soils to many Tasmanian sites.
Outlying remnant pockets of Shining Gum occur naturally within this region. FEA uses seed-orchard seed predominantly from selected Victorian
provenances to grow seedlings of this species. Based on progeny trials of the families included in the seed orchards, FEA is able to increase
selection pressure for characteristics such as growth and wood density to improve the genetic gains from this species. FEA is now using seed
from its own tree breeding program, which should provide gains over its previous supplies.
Softwood (Pinus radiata) seedlings will be grown from seed with known high quality genetic properties. The seedlings will be grown at proven
forestry nurseries. Seedling specifications will ensure that only hardy, healthy seedlings are used in the project. Softwood plantings will be
predominately in Tasmania, although other established Softwood regions may be considered.
5.1.2 Subtropical Regions (North Coast NSW and South-East Queensland)
In NSW and Queensland, the main species used are Dunn’s White Gum (E. dunnii) and Spotted Gum (Corymbia citriodora ssp. variegata). To a
lesser extent, Sydney Blue Gum (E. saligna) is also being planted on a commercial scale. Minor areas of Flooded Gum (E. grandis) and Blackbutt
(E. pilularis) may also be planted. These are all sub-tropical species and some or all of their natural distribution occurs within the region where
planting is occurring.
The main site characteristic defining planting distribution is often the likelihood of frost. Dunn’s White Gum has been shown to be a very
adaptable species and is frequently planted in lower sites where cold air drainage and therefore frost may be an issue. Spotted Gum is planted
on less frost prone sites with good soil drainage and it has a high level of drought resistance once established.
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13.
INDEPENDENT FORESTER’S REPORT
VDFC Forestry Consultants
Spotted Gum is recognised as a very high quality timber and members of its botanical grouping are the highest volume native Hardwood
harvested in Queensland representing about 60% of the harvest for Sawlogs. The other species listed are recognised as important native forest
sawmilling species with the exception of Dunn’s White Gum, which has a naturally limited distribution. Sawing trials in NSW with 9 year old
plantation material of this species have been promising and further trials are under way.
Tests of pulping properties of all the species have been carried out and are available in a number of reports. The properties of young trees are
very suitable for Pulpwood productivity; given that they have high pulp yields and that the trees are harvested while their wood densities are
in the preferred range for commercial Pulpwood.
The use of selected seed provenances and seed-orchard sources will further increase the expected Growth Rates and productivity of the
Project’s plantations. Such increases are reported both orally and in published literature to be from 5% to more than 20% (in the case of superior
seed-orchard sources) for improvement in the key characteristic of wood volume yield.
Seed orchard seed is used for the sub-tropical species where available and suitable. To date, seed orchard seed has been mainly available for
Dunn’s White Gum. Selected provenances or regional seed sources are generally used for the other species. FEA is establishing its own seed
orchards and breeding programs, either collaboratively or on its own for the main species used above. A number of progeny trials linked to the
breeding program have been established. In addition, the company has an extensive range of species trials established since 2001 in the region.
As stock for new Corymbia hybrids become available this will be used in NSW and Queensland on sites formerly planted with Spotted Gum. This
will provide a greater degree of resistance to a fungus infestation, which can be a problem with this species.
5.2 Stocking
It is proposed to plant eucalypts at about 1200 stems per hectare and Softwoods (radiata pine) at about 1330 stems per hectare. This stocking
will provide optimal wood volume and value production under the proposed silvicultural regime.
5.3 Site Preparation
Site preparation will vary with the slope and the degree of cultivation possible, but the prescription will be as follows:
Any harvesting or vegetation debris may be pushed into windrows on first Rotation (1R) and second Rotation (2R) sites.
On 1R sites the debris may be burned. This is followed with cultivation by ripping and mounding the planting lines parallel to the contour
with a Savannah bedding plough.
The plough forms ridges along the contour that improve water retention and aggregation of topsoil to improve tree growth. Additional
cultivation may be used to ensure a fine cultivated bed devoid of air pockets.
The mounds will be sprayed before planting with a knockdown and residual herbicide spray mix to minimise germination of weeds
after planting.
On the steeper sites and on 2R sites, spot cultivation is usually performed. This entails sweeping aside harvest debris and pulling up a
mound with an excavator equipped with a cultivator. Before planting, herbicide is sprayed to control weeds. Spot cultivation is done to a
set planting number per hectare and quality controlled to ensure stocking rates.
Where necessary, post planting weed control is usual on the mounds or between the rows. In Tasmania, there is usually no need for weed
control beyond the second season, as E. nitens will usually close canopy soon afterwards. Multiple inter-row applications may be necessary
on some former pasture sites, particularly in the semi-tropical areas of northern NSW and southeast Queensland, because of the different
weed species and the warmer climate.
The methods proposed have been well proven and are suitable to promote early growth and maintain control of the site by the trees to
optimise growth.
5.4 Fertiliser Regime
Trees will be fertilised as required to achieve satisfactory growth. Normally this will require an initial application of 200g per plant of standard
analysis NPK fertiliser mix or its equivalent. However, on some former pasture sites with histories of heavy fertiliser application, additional
fertiliser can be detrimental to the form and early stability of the trees.
Strategic use of fertilisers boosts early growth and gains early control of the site, preventing weeds from competing with the developing trees.
Fertiliser regimes are constantly under review in the light of new research, and are tailored to match nutritional requirements and site specific
needs to meet management objectives. Follow up fertiliser may be applied at canopy closure or after Thinning to boost production further.
5.5 Refilling Provisions
FEA Plantations provides a Stocking Guarantee for the first two years from the date the Grower is registered as a Woodlot owner. During this
period, plantations with less than 90% survival will be refilled in the first winter or spring. If necessary, the area will be totally replanted. These
prescriptions provide adequate stocking in the plantations to ensure good use of the sites.
5.6 Roading
Because most of the selected plantation sites can be classed as agricultural land, tracks will be put in for planting and maintenance access only.
There are usually well formed farm, logging or local government roads which provide basic access to most of the property. This internal road
network may need to be upgraded at the time of harvesting to allow orderly transport of logs.
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5.7 Silvicultural Regime for Each Option
5.7.1 Woodlot Option 1 (Eucalypt Hardwood)
The proposed Rotation length is an average of 13 years. At about 9 years on suitable terrain it is also planned to remove approximately every
fifth row and conduct a Thinning of the remaining trees to leave a final stocking of around 450 stems/ha. Thinning will yield predominately
Pulpwood plus a small proportion of Sawlog. Final Clearfall harvest will yield Pulpwood plus a larger proportion of unpruned Sawlog.
5.7.2 Woodlot Option 2 (Eucalypt Hardwood Pruned)
The proposed Rotation length is an average of 16 years, with Thinning at about 9 years of age with Pruning in two or three sessions at about
2, 4 and 6 years on about 400 - 450 stems/ha of better formed and vigorous trees to gain a proportion of Clearwood (knot free timber) from
the stand. Thinned down to about 450 stems/ha at about 9 years as for Woodlot Option 1, the stand will be grown on to generate both pruned
and unpruned Sawlogs at the end of the Rotation for solid wood products, as well as Pulpwood.
Pruning will be based on the development of individual stands so that the proportion of knot free timber that can be sawn from the bottom
log of each tree will be optimised. The monitoring of the pruned trees will be by use of the standards published in Australian Forest Growers’
(AFG) Pruned Trees Certification Scheme. Pruned stands will be audited and certified by forestry workers trained and accredited by AFG as
capable of carrying out audits of pruned stands as Pruning takes place. This will provide management practices that demonstrate the proportion
of Clearwood being produced, and therefore will allow the calculation of Clearwood proportions prior to harvest scheduling that optimises the
value of the Clearwood Sawlogs.
5.7.3 Woodlot Option 3 (Softwood)
The proposed Rotation will include a first Thinning at about 13 years of age, reducing the trees down to about 450 - 500 stems/ha, a second
Thinning at about 18 years, reducing the trees down to about 300 - 350 stems/ha, and a final Clearfall harvest at about 25 years of age. The first
Thinning will produce mainly Pulpwood and some small Sawlogs. The second Thinning will produce mainly small and medium sized unpruned
Sawlogs and some Pulpwood. Clearfall will produce mainly medium and large sized unpruned Sawlogs and a small amount of Pulpwood.
5.8 Anticipated Growth Yields
Mean annual increment (MAI) is a measure of the average production of a site over a given Rotation length in years expressed as Cubic Metres
per hectare per year (m3/ha/yr). The figures used here are based on an average MAI of 27 for eucalypt and 22 for Softwood over the spread
of sites to be used.
The proposed Tasmanian eucalypt plantation sites are near established E. nitens plantations which are achieving good growth in similar soils
with minimum average annual rainfall of about 800 - 1100mm for Woodlot Option 1, with a Rotation of about 13 years. Assuming intensive site
preparation and the fertilisation regime proposed, combined with the quality of chosen sites and the expected good follow up maintenance,
these stands are likely to achieve yields within a range of 22 to 32m3/ha/yr with a Thinning at about 9 years.
In particular, control of insect defoliation will ensure that Growth Rates are maintained to maximise yields.
The yield estimates here are based on planting about 1200 stems per hectare and on conservative use of predictions from the Tasmanian Farm
Forestry Toolbox, which is a publicly available modelling system for stand productivity contributed to by several research organisations. VDFC
have also used actual yield data reported from current Thinning and final harvesting operations in E. nitens stands in northeast Tasmania.
In fact, growth of up to 38m3/ha/yr has been recorded for some stands of eucalypts across northern Tasmania.
There are no long established eucalypt plantation programs in the NSW and Queensland regions planted by FEA Plantations, but many of the
chosen sites are in regions where highly productive native forest grows on similar soils. The agricultural soils and climatic factors of the chosen
sites plus about 800 mm+ annual rainfall and high solar insolation, plus results from early growth plots for these new plantations, make it
reasonably certain that under the management regimes proposed they too will achieve a Growth Rate range of 22 to 32m3/ha/yr.
Published reviews of some NSW plantations based on inventory data on 1 - 4 year old eucalypt plantations indicate that those on better sites
with good soils and rainfall are capable of achieving MAI’s in the range of 44m3/ha/yr at age 8 - 10, tailing off to 27m3/ha/yr by age 25. This
should give an MAI over the 13 year Rotation of close to or in excess of 27m3/ha/yr. These results very much depend on the use of good site
quality land such as those FEA Plantations has acquired to date in this region.
This estimate of eucalypt plantation yields is speculative, because no one has yet been in the business long enough in these Mainland regions
to confirm them. However, the reasonable expectation for achievement of this potential is certainly there.
Pinus radiata has been grown in Tasmania for more than fifty years and there is a body of information available on the quality of soils and the
climatic factors for sites on which P. radiata Growth Rates of 22 m3/ha/yr MAI or better can be achieved. As long as the sites chosen match the
known performance criteria of earlier successful sites then the production capacity of 22 m3/ha/yr is capable of achievement by a competent
plantation manager such as FEA.
5.8.1 Anticipated Yield at Harvest – Woodlot Option 1 (Eucalypt Hardwood)
I believe that the plantations in Woodlot Option 1 will routinely yield an average 260m3/ha at 13 years of age for final harvest, preceded
by about another 95m3/ha of Thinnings if the proposed establishment and maintenance practices are followed. This equates to an MAI of
approximately 27m3/ha/yr.
The Thinning may yield Pulpwood, piles and posts for preservative treatment and unpruned Sawlog, and the final harvest should yield
unpruned Sawlog and Pulpwood. Although much past emphasis in plantations has been placed on growing for a single product, namely
Pulpwood, FEA is now processing small diameter logs for solid wood products such as structural grade sawn timber from both Thinning and
final harvest of stands.
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Table 1
Woodlot
Option
Option 1
Harvest
Age
Thinning
9
Clearfall
13
Product
Product Yield
(m3/ha)
Unpruned Sawlog
6
Pulpwood
89
Unpruned Sawlog
117
Pulpwood
143
Total
5.8.2
Total Yield
(m3/ha)
95
260
355
Anticipated Yield at Harvest – Woodlot Option 2 (Eucalypt Hardwood Pruned)
Woodlot Option 2, with a Pruning and Thinning regime and a longer Rotation period of 16 years, will yield a similar mix of products on Thinning
as Woodlot Option 1, but on final harvesting will produce both pruned (for rotary peeling or higher quality sawn timber production) and
unpruned Sawlogs as well as Pulpwood.
The estimated average yield at age 16 is likely to be 335m3 per hectare, also with Thinning at about age 9 resulting in an additional yield of
95 m3/ha.
Table 2
Woodlot
Option
Option 2
Harvest
Age
Thinning
9
Clearfall
16
Product
Product Yield
(m3/ha)
Unpruned Sawlog
6
Pulpwood
89
Pruned Sawlog
110
Unpruned Sawlog
74
Pulpwood
151
Total
Total Yield
(m3/ha)
95
335
430
5.8.3 Anticipated Yield at Harvest – Woodlot Option 3 (Softwood)
The plantations in Woodlot Option 3 will routinely yield an average 345m3 at 25 years of age for final harvest, preceded by about another 206m3
of Thinnings, if the proposed establishment and maintenance practices are followed. This equates to an MAI of approximately 22 m3/ha/yr.
The first Thinning will produce mainly Pulpwood and some small unpruned Sawlogs. The second Thinning will produce mainly small and
medium sized unpruned Sawlogs and some Pulpwood. Clearfall will produce mainly medium and large sized unpruned Sawlogs and a small
amount of Pulpwood.
Table 3
Woodlot
Option
Option 3
Total
74
Harvest
Age
First Thinning
13
Second Thinning
18
Clearfall
25
Product
Product Yield
(m3/ha)
Unpruned Sawlog
32
Pulpwood
66
Unpruned Sawlog
68
Pulpwood
40
Unpruned Sawlog
310
Pulpwood
35
Total Yield
(m3/ha)
98
108
345
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VDFC Forestry Consultants
5.9 Production of Solid Eucalypt Plantation Timber
In addition to production of traditional Softwood plantation sawn timber, FEA Timber Pty Ltd (FEA Timber), the wholly owned sawmilling
subsidiary of FEA, has developed sawmilling and further processing techniques which are generating strong, stable and ecologically sustainable
Hardwood products for framing and joinery that have found strong market acceptance. It has established a new standard for plantation grown
Hardwood, PGH 20, based on an engineering rating of the timber. Following the recommended span tables under this standard, FEA Timber’s
kiln dried plantation eucalypt EcoAsh® branded timber can be used in rafters, floor joists, floor bearers and structural trusses.
These new uses are providing an alternative market for small Hardwood plantation logs and giving Growers an opportunity for improved returns
from thinned stands.
Woodlot Option 2, however, offers additional value adding of the stand from the proposed Pruning. Pruned trees provide an opportunity
for selling a higher grade of Sawlogs for producing peeled or sliced Veneer and/or for appearance grade sawn timber. These logs could be
processed domestically into Veneer or sawn timber or exported for the same purposes. Domestically, such processing would mesh with FEA’s
existing and future integrated milling and Woodchip export operations.
FEA should be able to pay a competitive market price for these Sawlogs or alternatively negotiate the same with other potential purchasers and
these financial returns passed on to Growers.
6 Risks, Forest Protection and Insurance
6.1 Fire
Fire is the main risk. From the history of area lost on FEA plantations, this risk is quite low. Good access is ensured by the network of roads
and firebreaks proposed, and this minimises risk. The fire risk is further reduced by programs of weed control, grazing, adequate firebreak
maintenance and participation in the volunteer fire brigade system. To ensure fire preparedness, FEA has tankers plus mobile slip on tanker
units for rapid response to provide early control and to limit the spread of any fire.
FEA has a comprehensive company fire plan and contractor standby system for the fire risk periods in each of the three states in which
plantations are managed. These company fire plans are updated annually and are circulated to other forest managers and landowners to allow
close and effective co-operation in the event that a fire does occur.
Co-operation between adjoining owners in fire patrols and aerial surveillance during periods of high hazard also minimises the potential
for losses.
Fire insurance will be the Grower’s responsibility.
VDFC advises Growers to carefully weigh up the cost of insurance against the risks, and to carry insurance for establishment and clean up of the
site in the event of a fire until the age at which trees can be commercially salvaged after fire, which is around age 7.
There have been very few large losses of eucalypt plantations to fire in the past 13 years in Tasmania. The fact that the plantations managed by
FEA are, for the most part, in relatively small parcels also lessens the risk of large losses. Also, other forest owners with managed plantations
are reasonably close by, which means that there are other interested parties who will join in the surveillance and assist in the rapid initial
response in the event of a fire.
In NSW, Hardwood plantation losses due to fire have not been great, even though the fire season has been severe at times due to El Nino
events. There is also a risk of damage from fires lit to generate ‘green pick’ in spring on nearby grazing properties. In 2002, when there were
200 fires in the north-coast NSW region, only one small plantation owned by Forests NSW (FNSW) was lost. In 2006, part of one FEA Plantations’
plantations in NSW (about 180 hectares) of 30 month old trees was affected by wildfire. In this instance, all insured Growers whose Woodlots
were destroyed received full insurance payouts by the insurer.
FNSW ensures that its fire management guidelines are implemented on each plantation. These specify, among other things, the width of
internal and external roads and breaks and the number of water points. FEA also implements similar standards for protective measures.
Farms or FNSW properties surround the plantation sites, and the proximity of FNSW reduces the risk. When fires do occur the vigilance
of FNSW and of the Rural Fire Service personnel ensures rapid early deployment of fire control units and swift control of fires that might
threaten plantations.
FEA has its own equipment and experienced staff. In addition, all company vehicles are equipped with direct communication with other major
land managers and the fire service in this region. A policy of prompt attendance and control of any fires reduces any potential for losses.
In Queensland, the Forestry Plantations Queensland (FPQ) has provided details of the history of fires over 10 years. The native hoop pine and
Hardwood plantation area burnt is reported as only 132.9 hectares from 14 fires, with most of that burned in two years of three and five fires
in which 67.5 hectares and 39.3 hectares were burned respectively. This is mainly in hoop pine plantations as the Queensland Hardwood
Plantations have only developed any significant area in the past seven years.
Plantations of exotic pine have suffered 374 fires and a total area of 8301 hectares burned in 10 years, with the peak numbers of fires being 87
and 63 in 2001 and 2002 respectively and a loss of 5047 hectares burned in 1994.
In all areas, most fires are lit by human agency, e.g. in rural fire escapes and arson, but their spread is minimised by a rapid early response
policy. FNSW and FPQ have very large estates with many neighbours. The areas managed by FEA are smaller and largely surrounded by farms.
Both the risk profile and the specific likelihood of arson are diminished with fire surveillance and an active good neighbour policy.
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6.2 Browsing Animals
There are risks to the plantations from browsing by various animals during the first several seasons. FEA has systems for monitoring to detect
and then implement control of browsing in order to minimise loss of growth from these risks.
6.3 Insect Attack
Insect defoliation is another risk. FEA monitors stands for signs of high insect population which may cause defoliation and inhibit growth of
wood while the tree grows back a new crown. This monitoring is done from both the ground and the air. When beetle, autumn gum moth,
psyllid or sirex attack warrants action, the stand is sprayed with a suitable registered control substance from the ground or air under strict
environmental guidelines.
6.4 Fungal Pathogens and Nutrient Deficiencies
Fungal pathogens and nutrient deficiencies are monitored on a regular basis and appropriate treatments with fungal sprays and/or fertiliser
treatments will be applied when problems are identified. These periodic checks and remedial works are part of FEA’s routine practice.
6.5 Windstorm
Windstorms that cause windthrow is also a risk, particularly soon after Thinning. Growers are currently able to insure against windstorm damage
and in most cases it is possible to salvage most storm damaged trees. FEA plans to minimise storm damage by trying to thin plantations before
the trees exceed a height to diameter ratio of 100:1, or by avoiding Thinning of high windthrow risk plantations entirely. FEA Plantations has had
one such event in August 2007 where a severe windstorm, preceded by heavy rains, damaged approximately 30 hectares of recently thinned
9 year old plantation in Tasmania. All timber affected by this event was able to be salvage harvested.
7. Qualifications and Disclaimer
The opinions in this report are based on published materials and our inspections of FEA’s plantations and other plantations in Tasmania and
interstate, as well as experience with plantations and processing markets for plantation products in other countries.
VDFC has acted as independent consultant forester to the Project and has no financial interest in it. VDFC is independent of FEA Plantations
and has provided opinions on this Project as the independent forestry consultant and in no other capacity. VDFC has used some information
provided by FEA in this report. Although this information has been checked for reasonableness and accuracy, a range of factors can affect the
results achieved. Neither VDFC nor its employees are responsible for the production of this PDS, or take responsibility for omission or error in
any matter in the PDS not referred to in this report, or guarantee the performance of the Project because of the risks attendant on investments
of this nature. VDFC does not accept responsibility for updating the information contained in this report after the date of production.
In accordance with regulation 7.6.01(u) of the Corporations Regulations 2001, VDFC makes the following disclosures:
(i) VDFC has been retained by FEA Plantations to prepare the Independent Forester’s Report and Independent Market Report for inclusion in
the Product Disclosure Statement. The total remuneration for this engagement was at standard professional fee rates.
(ii) VDFC also provides consultant services to FEA Plantations on behalf of Growers to ensure that the plantation maintenance and protection
is done to an expected professional standard.
(iii) VDFC does not make any direct investment in FEA Plantations or its business interests and has no commercial interest in the financial
products being offered other than as a service provider to FEA Plantations.
(iv) VDFC does not hold an Australian Financial Services Licence and is not operating under such a licence in providing this report.
Yours faithfully
Van Diemen Forestry Consultants Pty Ltd
G.J. Cross B. Sc. (For), RPF, MIFA, MACFA
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VDFC
Forestry Consultants
A.C.N.: 009 577 842
212 Union Road
SURREY HILLS, VICTORIA
AUSTRALIA 3127
Phone: 03 9888 4922 Fax: 03 9888 4924
Mobile: 0418 130 499
Email: vdfc@bigpond.net.au
INDEPENDENT MARKET REPORT
6 March 2008
The Directors
FEA Plantations Ltd
PO Box 733
Launceston Tasmania 7250
Dear Sirs,
The following report has been prepared for inclusion in a Product Disclosure Statement (PDS) to be issued by FEA Plantations Ltd (FEA Plantations),
in relation to the offer of interests in the FEA Plantations Project 2008 (the Project) to the public for the growing of Hardwood and Softwood
plantations targeting Pulpwood and sawn timber product markets. Van Diemen Forestry Consultants Pty Ltd (VDFC) has only been involved in
the preparation of the Independent Forester’s Report and Independent Market Report and in no other part of this PDS.
A critical element of the success of a plantation investment is the likely saleability of, demand for and price fetched by the products grown and
harvested. Over the last 6 years, FEA Plantations’ parent company Forest Enterprises Australia Ltd (FEA) has become a fully integrated forest
products operation with a high technology plantation sawmill and an export Woodchip mill, both located at Bell Bay in northern Tasmania. In
2004/05 it also achieved sales of plantation logs into export markets for Veneer peeling. This report examines the current potential end uses
and sales of plantation Hardwood and Softwood products, both in Australia and in likely export destinations.
1. Consultants Experience, Qualifications & Skills
VDFC provides this report based on the experience of their principal consultant, Mr Gerry Cross, which spans almost 40 years in plantation and
forest industry management around the world, including some 33 years in the Australian industry. The intention of the report is to provide
potential investors in the Project with an independent assessment from a forestry perspective.
Mr Cross has a comprehensive knowledge of the eucalypt and Softwood plantation industry in Australia and the organisations involved
in this proposal. This report is prepared in accordance with the Australian Forest Growers ‘Disclosure Code for Afforestation Managed
Investment Schemes’.
Mr Cross’s qualifications are:
Bachelor of Science (Forestry) from the Australian National University.
Member of the Institute of Foresters of Australia (IFA).
Registered Professional Forester registered as a General Practising Forester.
Chairman of the Association of Consulting Foresters of Australia Division of IFA.
Member of Australian Forest Growers.
Member of the National Association of Forest Industries.
Member of a Victorian Panel for the Accreditation of Forest Practitioners to advise local government on forest practices.
His silvicultural experience has included intensive plantation management including site selection, soil surveys, and development of fertilising
and maintenance programs to maximise productivity and sustainability. In addition, Mr Cross has been involved in the harvest of logs from most
plantation and forest types and in the supply of these logs to the full range of types of timber processing plants in many countries.
2. Pulpwood (Woodchip) Markets
From 1995 to 2005, world production of paper and paperboard grew at an average annual rate of 2.3% from 282 million tonnes to 354 million tonnes.
Wood pulp made from Woodchips is the most important raw fibre material for paper making and accounts for about 50% of the paper industry’s
total raw material consumption. Recovered paper represents an increasing share of the total but, as the differential between market demand
and supply of recovered paper tightens the need for Hardwood and Softwood will accelerate.
Non wood sources of fibre are mainly based on agricultural waste and are mainly used for paper making in developing countries. Non wood
fibres make up a relatively small percentage of total world pulp production, and are normally associated with relatively small scale and lower
quality pulp and paper production.
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According to the Food and Agriculture Organization (FAO), the demand for paper and paperboard in Asia has increased by 4.1% per annum
for the period 1995 to 2005. The largest increases are in uses of paperboard grades for packaging of exported goods, while consumption of
newsprint and writing paper is rising with increased levels of literacy and commerce. There is a demonstrated strong correlation between
increased GDP and increased paper and paperboard consumption.
2.1 Eucalypt Woodchips
Japan
Japan accounts for over 86% of the volume of Pacific Rim international Woodchip trade. Imports increased from 46% of the supply to Japanese
paper mills in 1980 to 70% in 2005, and Japan is the main buyer of Australian Woodchips. Australia has maintained its position as the largest
seller of Hardwood chips to Japan, supplying about 34% of Japan’s Hardwood chip imports from 2002 to 2005, despite a reversal in price ranking
over the last four years that has turned Australia from the lowest cost major producer of Hardwood chips to one of the highest. The Japanese
paper companies have traditionally bought in AUD from Australia, but in $US from our competitors. The increase in the AUD against the $US
over recent years has reduced Australia’s competitiveness.
However, Japan’s sources of supply have also been changing. Whereas the USA was the largest exporter to Japan in 1999, the import of
Hardwood chips from the USA has now almost ended as the US moved to supplying its own domestic pulp and paper mills. South Africa has
become the second largest supplier of Hardwood to the Japan market, but resource limitation, changing exchange rates and distance are
likely to mean that South Africa’s recent large increase in market share is unsustainable. Other sources such as Vietnam have increased their
contribution in recent times but there are moves to process chips to pulp in Vietnam.
A major feature has been the shift from native forest fibre to plantation fibre, which accounted for about 24% of demand in 1995, 50% in 2001
and 71% in 2004. In addition, there has been a rapid increase in the proportion of eucalyptus in Japanese Hardwood chip imports, from 48%
in 1997 to 77% in 2004. This has involved a range of eucalypt species.
It is important that exporters have long-term relationships with their Japanese customers, and such companies should maintain sales. The
overall volume of imports is not likely to regain the peak of 14.4 million bone dry metric tonnes (BDMT) in 2000, which fell to 14.0 million BDMT
in 2004. However, the increasing proportions of plantation Hardwood and regrowth eucalypt in the mix of supplies to Japanese mills should be
encouraging to Australian Hardwood plantation growers. The overall Hardwood volume imported by Japan in 2006 was 11.1 million BDMT of
which Australia contributed 3.9 million BDMT, which was comprised of nearly all eucalyptus and largely plantation or regrowth.
China
The Chinese paper market is reported as growing at an average of 9.6% a year and shortfalls of 10 million tonnes of paper for its current needs
were forecast in 2005. Such a shortfall translates into a 30 - 40 million tonne shortfall in Woodchip requirements. Several reliable commentators
on the Chinese market, such as China International Business, indicate that the Chinese demand for pulp and Pulpwood cannot be satisfied
internally before 2025 and that, until 2015, there will be a fibre deficiency in China.
There has been a rapid increase in imports of recycled paper from sources such as the USA, Europe and Japan – from 0.9 million tonnes in 1995
to 12.3 million tonnes in 2004. Domestic recycling has also become more important, but it is still below world averages and there are quality
problems with some domestic fibre for recycling as a larger proportion than elsewhere is from non wood sources.
Production of pulp from non wood sources is proportionately declining because of environmental and quality issues. The expansion of China’s
paper production with construction of new high speed paper mills necessitate the use of larger volumes of wood based virgin pulp with
sufficient high tensile strength to operate at efficient production speeds. This is forecast to see an increase by China in use of wood pulp in
paper making from a level of 22% in 2005 to 29% by 2020. The Chinese paper industry is still in a growth phase as the annual consumption is
45 kg/capita compared to other mature markets where consumption is in the order of 220 kg/capita. There are some 13 paper manufacturing
projects in the development or planning stages in China with start-ups in 2007 through 2010. Increases in production are forecast from 13
million tonnes of wood pulp consumption in 2005 to 40 million tonnes of wood pulp consumption by 2020 in order to service this growth in
consumption. Forecasts are that 20 million tonnes of this volume will be imported and the remainder will be domestic production.
Indonesia
Another significant emerging market is the Indonesian paper industry, which has built several world scale mills in recent years. These are now
reportedly short of resource and likely to continue so for some time.
The Indonesian paper industry may be seeking reliable supplies, and there is considerable uncertainty about the ability of Indonesian plantation
programs to fill the need. There is also uncertainty about how long the major pulp mills will continue to have access to native forest. This makes
the supply/demand situation in Indonesia very unclear and may provide a sales opportunity. Large exports have been made in recent years
from Tasmania to at least one of the major pulp and paper mills in Indonesia.
India
With 16% of the world’s population, over 1 billion people, India only uses about 1% of the world’s paper production. The Indian industry has about
400 paper mills for which non wood fibre and recovered paper are important sources of supply, making up about 70% of the raw material.
Paper demand in India has increased by about 5.4% a year over the last decade, and this rate is predicted to increase considerably through to
2020. Paper usage is only about 5 kg per head per year compared with China where the rate is now over 42 kg. The per head consumption for
the world is 55kg and Australia is some 208kg (2004/05). India currently has a shortfall in production of just under a million tonnes of the total
consumed in India annually. This shortfall is currently made up from imports of finished product. Any increase in domestic consumption of paper
requires construction of additional production capacity and additional import of either Pulpwood or finished pulp. Existing paper manufacturers
are chasing plantation resource in neighbouring south-east Asian countries.
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VDFC Forestry Consultants
The main problem for Woodchip exports to India is that there are only two or three mills with the capacity and scale to use such imports.
They are all several hundred kilometres inland in central-southern India. In the current market, lack of suitable port and internal transport
infrastructure make chip imports by these mills uneconomic. However, if the Indian economy continues to develop, and given the link between
gross domestic product and paper usage, India may become an important market for either Woodchips or wood pulp in the medium to longterm. The most likely scenario in the short term is for an increase in the import of processed wood pulp into India.
Recent predictions suggest that within 25 years India may be the world’s third largest economy, after the USA and China. There is a potential
market for either Pulpwood or more likely pulp and Australia with its developed expertise in plantations and efficient pulp production offers
opportunities for successful joint projects with India.
Australia
Australia is a net importer of pulp and paper. According to Australian Bureau of Agriculture and Resource Economics statistics, the net trade
deficit in paper and paperboard, paper manufactures and pulp for 2005/06 is about AUD 1.9 billion.
There have been important developments in Australian Pulpwood markets. Reviews of the potential for pulp mills based on the Western
Australian resource and the future resource in the Green Triangle of south-eastern South Australia and western Victoria are in progress. There is
a pulp mill based on plantation Hardwood and the Bleached Chemi-Thermo-Mechanical Pulp (BCTMP) process proposed for the Green Triangle
at Penola and this is only at planning approval stage. There is already a plantation Hardwood chip export operation operating out of Portland
in south-western Victoria.
The Tasmanian resource of plantation Hardwood, Softwood and native forest regrowth is sufficient to support a domestic pulp mill as well as
some export. In 2006, a major Tasmanian based forestry company submitted an integrated impact statement to the state government for a
proposed world scale bleached kraft pulp mill development in northern Tasmania. This is now approved by the Tasmanian state government
and, at the time of writing, awaits final approval from the Federal Minister for the Environment.
Based on current proposals, at least one world scale pulp mill should have been constructed in Australia by the time the Project plantations
mature. All are intended to use plantation eucalypt wood. Hence there may be additional domestic as well as export sales options at the time
of harvest. Furthermore, the Chinese market is also forecast to be likely to buy bleached kraft Hardwood pulp in preference to Woodchips. The
combination of domestic plants and strong export demand for both Pulpwood and pulp should provide competitive prices for Growers. When
enough volume is available it should attract a premium for competing domestic and export sales because Australia has a volume advantage
and is close to developing markets.
In Western Australia, where a large area of plantation is coming into production, two new plants producing export Woodchips came on stream
in 2002/03 and a further two new plants during 2006. At least one other export processing plant is in advanced planning stages.
There are export Woodchip operations at Brisbane and Newcastle, which may develop further with the influx of plantation Hardwood chips.
The Brisbane operation uses Softwood Pulpwood and residues produced from Softwood plantations north of Brisbane. At least one other
company is also involved in establishing eucalypt plantations in the Brisbane region with the aim of exporting Hardwood Woodchips from the
same port.
Rail transport of Woodchips to Brisbane from mills in south-east Queensland and northern NSW is feasible and logical. Alternative infrastructure
suitable for the exporting of Woodchips exists at this port.
2.2 Softwood (Pine) Woodchips
Australian exporters of Softwood chips have been active in the Japanese market for two decades and Australia is the current major supplier to the
Japanese with 42% of the market of 2.4 million BDMT in 2006. This is a combination of radiata pine, Caribbean pine and slash pine sources.
As well as export opportunities, the proposed Tasmanian Kraft pulp mill which, at the time of writing, is at final stages of approval, is also
a likely market for pine Woodchips and would provide another competitive market for this resource. This may be of value to Growers if the
Australian dollar exchange rate continued to appreciate and priced Australian Softwood out of the market in Japan which is the main buyer for
Softwood chips.
2.3 FEA’s Capacity to Supply Pulpwood Markets – SmartFibre Pty Ltd
SmartFibre Pty Ltd (SmartFibre) operates a modern Woodchip mill and export facility at Bell Bay in Tasmania under the ownership of a joint
venture, including FEA as 50% shareholder. SmartFibre has been exporting Woodchips to Japan and other countries since 2003.
This operation provides an alternative export outlet for Growers’ timber. SmartFibre has negotiated export sales with North Asian customers for
plantation and regrowth Hardwood chips. The appreciation of the AUD has meant that sales into China have ceased, but the company continued
to make shipments during the 2006 financial year into Japanese markets. There has been an increase in the frequency of shipments during the
2007 financial year.
SmartFibre re-commenced exporting of Softwood chips in January 2007 and has recently finalised a long-term supply contract into the Japanese market.
2.4 Stumpage
The value of the saleable part of the tree by the forest grower is known as the ‘stumpage’. This is the residual dollar value per Cubic Metre of
the tree standing on the stump, after deduction from a mill door or wharf gate price of all costs such as marketing, harvesting and cartage of
the logs to a mill for processing.
The stumpage calculation may take into account factors such as stand volume, access, distance to mill, individual tree size and wood quality.
There may be a range of products and mill door prices for logs from any plantation harvest.
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2.5 Eucalypt Pulpwood Prices
E. nitens is renowned for production of high quality fibre for pulping by chemical methods. Whereas stumpage paid for managed native forest
Pulpwood currently varies from between $5 and $18 per tonne for private property wood to $22 per tonne for Pulpwood from state forest
(when road tolls of up to $4.80 per tonne are included), a range of $21 to $33 per tonne has at times been paid for E. nitens Thinnings in northeast Tasmania. For Clearfall volumes, E. nitens stumpages of $25 to $35 per tonne are reported.
Prior to the 2008 price increase for Woodchips, stumpages of $12 to $33 per tonne ($35/m3) were being paid for plantation grown E. globulus
(Blue Gum) in Western Australia. In South Australia, Clearfall stumpage rates of $22 to $30 per tonne ($32/m3) have been reported for
plantation E. globulus. These differential rates are based on distance from the port of Portland in Victoria.
In NSW, only limited volumes of young plantation resource are available. Current sales are mainly from plantations of Blackbutt and Rose
(flooded) Gum, which are 38 or more years old and more closely resemble native forest. Some of the Pulpwood residue from the harvest of
these early eucalypt plantations is exported via Newcastle.
There are positive factors, which will influence Free on Board (FOB) wood fibre exports from the Port of Brisbane and consequently stumpages
from wood from northern NSW and south-east Queensland. These include the three days shorter shipping time from Brisbane to Japan
compared to WA and Tasmania and the substantially higher wood densities of the sub-tropical tree species grown in these northern regions.
The suitability for Pulpwood of the five species that have been planted in NSW and Queensland in the Project to date has been supported
positively by CSIRO research on pulping qualities published in 2001.
2.5.1 Eucalypt Pulpwood ‘Plantation Price Premium’
The current average stumpage for plantation Hardwood Pulpwood destined for Woodchip production is estimated to be $42/m3 for Thinnings
from trees about 9 years old and $45/m3 for final harvest. The older trees from final harvesting have a higher density and yield more pulp as
well as having a larger log piece size at Clearfall and a lower harvesting cost. These prices are based on the premium that can be achieved for
export shipments of solely plantation Woodchips, or other chips that yield higher wood fibre, known as E54 and EP sales.
The high pulp yields from young wood in plantations and regrowth native forest, plus the uniformity of resource and low chemical costs (due
to the higher brightness of the material), compared with older wood in native forest, indicates a premium may be paid for young wood. This
could generate stumpages in the order of $42 - $45 per m3.
This is seen to some extent in the BDMT FOB price of $177 (2006) achieved for regrowth combined with plantation Woodchips from Tasmania (E54
grade) and the $189 for certified plantation chips from Western Australia, compared with $162 for lower quality native forest chips. In 2006, there
was a premium of 9.6% per BDMT FOB for higher quality export Woodchips from Tasmania. Price increases of approximately 10% were subsequently
achieved for the 2008 calendar year, resulting in plantation prices of $207.40/BDMT for Western Australia and $198.50/BDMT for Tasmania.
However, there are discounts or variables to price which are based on species, distance to port or mill, extraction method, handling costs, wood
quality (including when related to age), volume availability and market conditions.
For Thinnings, $42/m3 ($40.01/tonne) is at the high end of the present range of prices for Tasmanian Pulpwood, because most shipments from
Tasmania are of both regrowth and plantation wood with a mix of yields and quality. This has been due to the limited supply of plantation
eucalypt. In these cases processors have not been paying the higher stumpages that are feasible when a premium is received for plantation
only shipments. In most areas, the supply has now been increasing exponentially and the market demand for export as well as the potential
domestic pulp mill demand is also firming as a market.
However, $45/m3 ($42.86/tonne) is being achieved as mill door stumpage for a large parcel of E. nitens final harvest. Such higher prices should
become more common because enough plantation wood is now available to supply either an entire mill or a consistent export volume. The
increasing area of Hardwood plantation maturing annually, now makes large export sales routine possibilities in both Tasmania and WA and
smaller volumes are being exported from the Green Triangle. The offshore markets have competed vigorously for log volume by increased
stumpages even though there has been little or no increase in the export prices of plantation eucalypt chips. There should be an improved local
market with the development of a Tasmanian world scale size kraft pulp mill with potentially better stumpages.
Annual volume yields in 2006 of eucalypt plantation Pulpwood from private property in Tasmania are 0.97 million tonnes, and these make up
most of the Hardwood plantation Pulpwood harvested. The unpruned Sawlog processed by FEA Timber Pty Ltd (FEA Timber), a wholly owned
subsidiary of FEA, is included in these volumes. In the past two years, minor yields of plantation Hardwood Sawlogs have been harvested, their
specification matching that of conventional ‘category 3’ Sawlog from native forests. Forecasts for the period 2006 - 2031 are for Pulpwood
yields from private Hardwood Plantations to quadruple to 3.6 million tonnes and for plantation Sawlog (conventional specification) and Veneer
log volumes to reach 50,000 m3 a year by 2022.
3. Solid Wood (Sawlog) Markets
3.1 Eucalypt Sawlog
Internationally, native forest Hardwood sawn timber supply has been declining annually by about 2%, principally because of a shrinking native
forest resource base. Countries such as Brazil are increasingly transferring to eucalypt plantations for Hardwood timber and developing markets
for their own plantation grown eucalypt in the USA and even Australia.
In Australia, the apparent consumption of native forest Hardwood has been declining by about 4% a year over the last decade for similar
reasons – partly offset by a large rise in imports of sawn Hardwood (9% in 2000/01, 11% in 2003/04 and 11% in 2004/05). Such rises may
not continue, and the outlook depends mainly on the level of home building approvals. Recent reports on the increases in population growth
indicate that when investment confidence rises there is consumer demand for housing and, if land price and availability is resolved, then there
should be a lift in housing construction activity.
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3.2 Softwood (Pine) Sawlog
Australia has been establishing Softwood plantations for around 100 years. Following a major expansion in the post second world war period,
the rate of plantation establishment has slowed since the late 1970’s, when the Commonwealth ceased to fund the states for Softwood
plantation establishment. There are now just over a million hectare’s (ha) of Softwood plantation in Australia. There has been a substantial
local Softwood sawmilling industry develop based on this resource and in 2005/06 the Australian annual production of sawn timber was 3.6
million Cubic Metres and there were also 0.6 million Cubic Metres of coniferous sawn wood imported for that year as published by ABARE in the
Australian Forest and Wood Products Statistics Sept and December quarters of 2006. There is definitely a potential to replace imports and also
to expand exports to a growing North Asian market if plantations were expanded.
3.3 FEA’s Capacity to Supply Sawlog Markets – FEA Timber
3.3.1 Eucalypt (EcoAsh®) Sawlog Development
Over the last three years FEA has put considerable investment into researching and developing the sawing of young plantation E. nitens.
Plantation inventory and experience indicate that up to 40% of log volume may be suitable for solid wood processing through specialist high
production small log sawmills.
In 2002, the company bought one such mill, a HewSaw manufactured in Finland which can handle small diameter logs of either eucalypt or
Softwood. FEA Timber has realised this mill’s potential to process unpruned fast grown eucalypts and has developed markets under the brand
name EcoAsh® for this sawn material when kiln dried.
This high quality product is extremely competitive with both native forest Hardwood and plantation pine. FEA Timber has been selling EcoAsh®
to several major building supply retailers throughout Tasmania and is beginning sales into interstate markets. Some of the logs for this
production have come from Thinnings sold on behalf of Growers in the first six projects managed by FEA Plantations.
During 2005, FEA Timber registered a Plantation Grown Hardwood (PGH20) structural grading standard for EcoAsh® in accordance with AS/NZ
40432 (1992). The timber is harder and stronger than Softwood, size for size (it is graded to about F17), and the structural sizes can be used for
studs, plates and trusses. The timber can be used with nail guns and nail plates.
FEA Timber has installed two Italian conventional drying kilns, and will be installing Australia’s first compression kiln, which is expected to
significantly reduce the drying time for Hardwood timber. In addition, FEA has installed further processing and moulding equipment that is enabling
it to enter the high end of the value-adding chain with products such as EcoAsh® flooring and mouldings that generate higher revenue.
In the flooring market, FEA Timber is well positioned to benefit from the endeavours of already well established sawmilling companies that have promoted
the warmth, charm and durability of Hardwood flooring. Both Hardwood and Softwood flooring are available, but Hardwood has the advantages of
greater durability, deeper colours and being grown sustainably in Australia. A tongue and groove product has already been developed which has proved
to be consistent in colour and aesthetically pleasing. EcoAsh® lining panels and furniture components are also under development.
As a natural extension of its production of perfect round poles, FEA Timber is developing products for the decking and pergola markets and
other external uses. The timber is fully responsive to the required preservative treatment.
Although this report does not attempt to provide any assurance as to the success or otherwise of any investment opportunity, it does suggest
that Growers may benefit through product diversification that is enhanced by the use of new technology such as the HewSaw.
3.3.2 Plantation Sawlogs in NSW and Queensland
The five species proposed for planting in the Project in NSW and Queensland, are mostly recognised as suitable for Sawlog as well as Pulpwood.
FEA Plantations intends to concentrate on two species or their close relatives: Corymbia citriodora var. variegata (CCV) (Spotted Gum) and
E. dunnii (Dunn’s White Gum). CCV is endemic to southern Queensland and parts of northern NSW, while E. dunnii is endemic to the approximate
region where FEA is establishing plantations in northern NSW. A new Corymbia hybrid has been released which is based on Spotted Gum and
Corymbia torelliana. This is a hybrid specially developed for use in plantations and it is said to be resistant to damaging fungal species attack.
Market demand is met not so much by growing particular species, but by meeting the practical applications for which the species have been
selected. Both CCV, the new hybrid and E. dunnii have been selected for the potential quality of their solid wood in value added applications.
CCV and the new hybrid have light coloured sapwood and dark heartwood, and the grain is straight and interlocked. Although commercial
areas have only recently been established in plantations, CCV has been a valuable timber when harvested from native forests. It works easily
and is a preferred timber for bridge construction, pit props, tool handles, framing, flooring and case construction. With appropriate site specific
research and market development, the outlook for CCV as a plantation species is favourable. It is very closely related to C. maculata (also known
as Spotted Gum), which has proved to be one of the 10 most successful Australian Hardwoods grown around the world. There is considerable
research effort into hybridisation between the closely related species in this group.
Eucalyptus dunnii has proved to be a successful plantation species for growing in north-eastern NSW, with more than 8000 hectare’s already
planted by Forests NSW in the belief that the timber will prove to be of commercial value and generate satisfactory returns. This is 40% of
Forests NSW Hardwood Plantations in the region.
Although E. dunnii has not yet been identified by the Australian Hardwood Network as a species currently yielding commercial solid wood products, a
recently commissioned research report has concluded that it ‘shows good potential for producing sawn timber’. This report was based on sawing trials
of 10 year old plantation logs. In addition the report concluded that E. dunnii might be able to be genetically improved for better performance.
There is high potential for Sawlog sales from plantation eucalypts in both NSW and Queensland because those state governments have made
decisions about their native forest which make their states dependent on a strong plantation resource for future Hardwood Sawlog supplies.
Sawmills in the NSW north coast region are successfully processing small diameter Sawlogs from regrowth and plantations. Because several
have received industry restructure grants from the state government, they have suitable modern sawmilling machinery plus value-adding
equipment to produce finished products.
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In south-east Queensland, where FEA Plantations has planted sites in the Kingaroy and South Burnett regions, some mills have been modified to
handle relatively small native forest logs with standard twin-edger breaking-down machinery. Although these mills may not have the high volume
capability of purpose built small log mills, they illustrate the potential for using small logs to produce acceptable sawn timber for the local market.
The main species sawn in these mills are closely related and have similar wood properties to the major species being planted by FEA Plantations
in the region on behalf of Growers, and local sawmillers have shown considerable interest in the potential logs from those plantings. Reasons
include reduced supply from state forests and reduced log supplies linked to the Western Regional Forest Agreement.
3.3.3 FEA Timber Softwood (Pine) Sawmilling
FEA Timber had been processing radiata pine Sawlogs sourced from Taswood Growers since 2002. Taswood Growers is a joint venture between
Forestry Tasmania and GMO Renewable Resources managed formerly by Rayonier Australia Pty Ltd and more recently by Timberlands Pty Ltd.
In April 2007, FEA Timber commenced taking approximately 290,000 tonnes per annum of Softwood Sawlogs from Taswood Growers under a
ten year wood supply agreement.
As a result of this agreement, FEA is investing a significant amount of capital to upgrade facilities at their existing site at Bell Bay in Tasmania
in order to efficiently process both the increased volume of pine and the expanding EcoAsh® plantation Hardwood resource. This investment
also includes the construction of a new state-of-the-art sawmill on a recently acquired 85 hectare freehold industrial site at Bell Bay. The site
is in close proximity to FEA’s existing 11 hectare sawmill. The new sawmill expansion will be at a cost of approximately $72M and the new
north-American saw line will allow FEA to process the full range of Softwood and eucalypt plantation logs.
3.4 Eucalypt Sawlog Pricing
Unpruned Tasmanian plantation Sawlogs, and logs for the production of peeled Veneer, have fetched 20 - 30% more than Pulpwood from the
same coupes under standard management regimes as provided for in Woodlot Option 1 in the PDS.
Our research provides evidence that similar prices are achievable for wood from plantings in NSW and Queensland. Prime native forest Sawlog
and Veneer stumpages in NSW range from $70 to $140/m3 from private native forests. Residual logs, which are lower in grade, range from $25
to $40/m3 from the same forests. The most recent reported NSW stumpage for small plantation grown Sawlogs from Thinnings in 2003/04 was
$25/m3 and current prices are approximately $22 per Cubic Metre. As plantations mature and the availability of native forest Hardwood Sawlogs
diminishes it is probable that plantation Sawlog prices delivered into purpose built sawmills such as the FEA Timber sawmill will generate
Sawlog mill door prices from clearfelling of thinned stands at premium stumpage levels.
In neighbouring Asian countries there are established and expanding markets for Hardwood, and diminishing volumes of Hardwood cut. This
presents an export market opportunity for sawn plantation Hardwood products as well as the existing domestic market, which is not fully
supplied with Hardwood products.
3.4.1 Eucalypt Sawlog ‘Clearwood Price Premium’
Clearwood is that part of a Sawlog, which is clear of knots and other appearance defects, sometimes known as ‘features’. It is generally viewed
as producing the most valuable timber because of its appearance as well as its strength and reliability for more intricate uses.
In the management regime provided for under Woodlot Option 2, selected trees will be pruned or have all their branches removed in order
to leave a clear stem at least 6 m long. By doing this, as well as researching and developing improved processing and drying techniques, FEA
Timber can position itself to supply the lucrative market for mouldings and furniture grade products, which requires Pruning from a very early
stage to produce Clearwood, because mouldings from heavily ‘featured’ timber are of little value.
Although a further price premium for a pruned EcoAshclear® log over a standard EcoAsh® log is likely, it is difficult to quantify because each
specific Clearwood use would need to be investigated. However, to demonstrate the extent of premium pricing for value-added products, we
have charted prices for kiln-dried flooring.
RETAIL PRICE RANGES FOR FLOORING
BY NSW SPECIES (2006)
Low Feature (approximates Clearwood/Select)
Medium Feature
High Feature (EcoAsh Standard)
$2,500
AUD/m
3
$2,000
$1,500
$1,000
$500
$0
Brush Box
Tallow Wood
SOURCE: Adapted from Timber Market Survey 2006
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Sydney Blue Gum
Blackbutt
Ash
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The chart shows the range of prices for six species of timber used for flooring. The vertical bars represent three market prices.
The top of each bar depicts the price for Clearwood, which attracts the best price for the species.
The middle mark on each bar depicts the average price for each species.
The lowest mark shows the base price for the more ‘featured’ timber of that species.
(nb: The term ‘ash’ is a common name for a variety of eucalypt species, and in the NSW context it does not refer specifically to the species grown by FEA Plantations.)
Although the chart is only relevant to flooring in NSW, it shows that there is already a premium price paid for Clearwood over standard grades
of each species.
EcoAshclear® would target furniture-grade ‘clear of defect’ products, mouldings such as architraves and ‘appearance grade’ flooring products,
which would typically command retail prices in the order of $1,200 - $1,400/m3. Kiln dried structural grade Hardwood commands a retail price
of $650 - $940/m3 depending on grade and presentation.
Returns for Growers can already be expected to improve considerably from production of Sawlogs rather than pulplogs, even though medium
sized Sawlogs are grown over a longer period than pulp logs and more plantation management is needed. The above table illustrates the
potential for further increased margins for Growers and processors if Clearwood is produced.
The above assessment of the potential for a Clearwood premium is partly based on a review of native forest Hardwood Sawlog prices. For
plantation Sawlogs the only relevant Hardwood experience is the current premium being paid for eucalypt Sawlog supplied to the FEA Timber
mill at Bell Bay, as against Pulpwood.
It is therefore reasonable to review prices for similar grades of plantation Softwood logs (mainly radiata pine) in Australian and New Zealand.
The Australian Pine Log Price Index (APLPI) is published bi-annually using data from the major grower organisations marketing Softwood logs
in eastern and southern Australia. It is based on net stumpage not including transport or harvest costs. The latest index published in September
2007 refers to stumpage prices in the six months to June 2007. The size of the unpruned Sawlogs produced from Woodlot Option 1 will fall in
the range of small and intermediate Sawlogs as listed in the APLPI. Small Sawlogs are less than 24cm in small end diameter under bark (SEDUB)
while intermediate Sawlogs are 24 - 31.9cm SEDUB.
In the June 2007 index, the weighted average net stumpage for small pine Sawlogs was $34.89/m3 and for intermediate logs $46.06/m3. The
average of these two classes of logs was $40.23/m3. This can be used as a guide to a fair current price for standard unpruned eucalypt Sawlogs
of about this SEDUB size range, given that the main product is structural grade timber competing for many of the same uses as the plantation
Softwood.
The APLPI does not include Clearwood (pruned) logs, which are the type that Woodlot Option 2 is aimed at producing. The most relevant
published guide to prices for pruned pine Sawlogs is the Ministry of Agriculture and Forestry statistics produced quarterly in New Zealand. The
12 quarter median price for P2 (medium diameter) pruned logs with a SEDUB range from 30 to 39.9cm for domestic NZ logs was AUD$100 on
a mill door delivered basis. After average harvest and transport costs are deducted this equates to stumpage of about $75/m3.
These data suggest that these Clearwood plantation Softwood logs have about twice the value of the unpruned logs. The prices can vary both
up and down with factors such as wood quality, species, defect characteristics, harvest cost, transport cost, further processing options, licence
and access fees and variations in sales contracts. In turn, other details can impact on each of the factors listed.
The proportion of a pruned eucalypt plantation that can be sold as Clearwood logs has been estimated at about 20% of the final harvest volume
at 16 years with a further approximate 20% of unpruned Sawlog.
Growers and processors increasingly depend on each other to achieve maximum returns. Although there is no certainty on future pricing, based
on current examples, it is reasonable to expect premium pricing for pruned (clear) plantation eucalypt Sawlogs to be at least double lower
unpruned log market prices.
3.4.2 Eucalypt Sawlog – Peeler Logs
For some years, FEA have been trialling shipments from northern Tasmania of unpruned eucalypt plantation logs to Asian markets for rotary
peeling to produce Veneers for use in plywood. These ‘peeler’ logs are achieving a 20% margin over Pulpwood prices for logs delivered on a
wharf gate basis at Bell Bay.
This export market is still in a development phase. Shipments have been in commercial quantities but must be considered trials. Margins may
increase when more suitable logs become continually available as the volumes from more mature eucalypt plantations increase.
Peeler logs exported to China and other Asian markets in the recent past have been used to make structural plywood for building formwork.
This requires the log to be turned on a lathe to produce thin laminate which are glued together in layers to generate strength in plywood or
laminated Veneer lumber.
There is also now a domestic manufacturer of plywood, Ta Ann, established at Southwood in Southern Tasmania. Based on a guaranteed long-term
supply of logs from managed regrowth stands, the Malaysian company has committed to build two rotary Veneer plants in Tasmania. The first mill in
southern Tasmania is now operational. The second rotary Veneer mill is to be built at Smithton in north-west Tasmania. While both mills will initially use
native forest regrowth logs there is potential to also supply plantation Hardwood logs to be used in these mills. The availability of pruned eucalyptus
logs with a low internal diameter over pruned stubs will generate better recovery and offer an alternative for either rotary peeled ply laminate or sliced
Veneer. Such logs will be highly desirable to Veneer or rotary ply producers and attract a premium stumpage price between AUD $110 to $133.
In the same region as FEA Plantations’ sites in northern NSW there is a Veneer mill at Grafton that has significant export markets and pays a
premium for suitable Hardwood logs. Native forest Peeler Logs less than 40cm in diameter can be valued at up to $140/m3 delivered to the
mill door, which is a better than average price for such logs as Sawlogs, depending on transport distance. Uniform pruned plantation Hardwood
Peeler Logs would be a very valuable resource for a rotary ply mill.
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3.5 Softwood (Pine) Sawlog Pricing
Softwood Sawlogs delivered to sawmills in eastern Australia are in strong demand and most sawmills are seeking to expand their volume to reduce unit
production costs. As pine Sawlogs generated from this Project are coming on stream, sawmills in reasonable proximity to the resource should be able to
match prices close to what is reported in the Australian Pine Log Price Index as at March 2007. Prices for Sawlog from small logs in first and second Thinnings
are discounted to take account of the lower density in young pine which limits the end uses to which sawn product from these logs may be directed. The low
density timber is most often used for packaging grades, fence palings and landscaping timbers which are often in the lower price bracket sawn materials.
3.6 Stumpage Summary
In my opinion, based on assessments above, average stumpages for products under FEA Plantations’ proposed project should be in the order of
values listed in the tables below. These values will move with market forces that apply at the date of harvest. As there are large demands for
timber products in the north Asian region and growing markets in China and India, the most likely moves should be upward.
Option 1 – Eucalypt
Stumpage/m3
Option 2 – Eucalypt Pruned
Thinning
Clearfall
Pulpwood
$42.00
$45.00
Sawlog unpruned
$52.50
$56.25
Sawlog pruned
Stumpage/m3
Thinning
Clearfall
Pulpwood
$42.00
$45.00
Sawlog unpruned
$52.50
$56.25
N/A
$112.50
Option 3 – Softwood (Pine)
Stumpage/m3
Thinning 1
Thinning 2
Clearfall
Pulpwood
$11.00
$11.00
$11.00
Sawlog small
$30.00
$30.00
$30.00
Sawlog medium
N/A
$48.75
$48.75
Sawlog large
N/A
$69.30
$69.30
Sawlog extra-large
N/A
N/A
$83.50
4. Carbon Credits Trading
The potential for Carbon Trading began with the Rio Earth Summit in 1992 and the signing by all the major developed nations of the United
Nations Framework Convention on Climate Change (UNFCCC). Details for implementation of the convention were subsequently negotiated at
Conferences of the Parties (COPs), and at the third such conference in Kyoto in 1997 thirty nine developed nations agreed to make reductions
in emissions between 2008 and 2012 under the Kyoto Protocol.
Although they had signed the Kyoto Protocol, in 2002 both Australia and the United States indicated their intention not to ratify the protocol,
which would make it legally binding.
Since 1997, many nations and sub-national jurisdictions have established various types of greenhouse gas abatement programs, however there are
currently only two emissions trading schemes in operation that allow for the generation and trading of greenhouse gas emission ‘offsets’, the NSW
Greenhouse Gas Abatement Scheme (NSW GGAS), which started in 2003 and the European Union Emissions Trading Scheme, which started in 2005.
Of these, the only scheme of relevance to the planting of trees in Australia is the GGAS, which allows for the generation of abatement
certificates from areas of reforestation planted after 1990. However this only applies to forests planted in NSW.
Investors should be aware that these NSW carbon sequestration certificates require that the Abatement Certificate Provider only generate
certificates that correspond to the minimum carbon stocks that will be maintained for 100 years.
In June 2007, the Australian government released a task group report on emissions trading and correspondingly committed to the establishment
of a national emissions trading scheme by 2012. In the reports released to date, there is strong indication that reforestation projects will be
included within the Australian Emissions Trading Scheme, however the exact rules and requirements are yet to be specified. There has also
been a revised Australian Standard (AS4978.1-2006) released in November 2006. This is titled Quantification, monitoring and reporting of
greenhouse gases in forest projects Part 1: Afforestation and reforestation.
It is understood that most of the first Rotation plantations on former agricultural land to be developed under this PDS are likely to meet the definition
of reforestation since 1990 and FEA Plantations states that any net returns from this source would be shared with Growers on a 50/50 basis.
Investors must be aware that, although there is potential to earn returns from the sale of Carbon Credits from the Project, this is by no means
certain. VDFC is of the opinion, based on publicly available information, that an investor would be exercising appropriate caution in not including
any revenue from Carbon Trading in cashflow projections.
5. Conclusion
VDFC considers that in the current market it is reasonable to expect stumpage prices for eucalypt Pulpwood of $42/m3 for Thinnings and $45/m3
for final harvest. There may be some volatility in prices once sufficient volumes are available for sales that comprise shipments of only premium
quality or only plantation Woodchips. Softwood pine chips have spiked in price in early 2006 and the stumpages paid for radiata Pulpwood are
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seeing a similar spike to stumpages of up to $19/m3 in the Green Triangle. This price spike is only expected to last for approximately six months
and then prices may return to around $11/m3.
The possible advent of a world class kraft pulp mill in northern Tasmania could also generate higher pressure on resources and increase returns
to Growers.
The current premium of 20 - 30% for standard unpruned Hardwood Sawlogs and Peeler Logs comes at an early stage in the development of
the markets for these products and as volumes and margins increase, it may increase. Clearwood Sawlogs from pruned stands may fetch a
stumpage about double that for unpruned Sawlogs.
FEA has invested in a range of value-adding options that may increase the stumpage received by Growers above the price achievable from
sales for Woodchip production alone.
The returns to Growers will depend upon a range of factors such as international prices for plantation Hardwood chips, prices for domestic and
export logs, demand for sawn Hardwood, Australian dollar exchange rates, and harvesting and processing costs. However, this Project has the
potential to meet its financial objectives if the marketing strategy outlined above is implemented and the trees are planted on good land with
sound forestry management as outlined in my Independent Forester’s Report.
6. Qualifications and Disclaimer
The opinions in this report are based on published materials and our inspections of FEA’s plantations and other plantations in Tasmania and
interstate, as well as experience with plantations and processing markets for plantation products in other countries.
VDFC has acted as independent consultant forester to the Project and has no financial interest in it. VDFC is independent of FEA Plantations
and has provided opinions on this Project as the independent forestry consultant and in no other capacity. VDFC have used some information
provided by FEA in this report. Although this information has been checked for reasonableness and accuracy, a range of factors can affect the
results achieved. Neither VDFC nor its employees are responsible for the production of this PDS, or take responsibility for omission or error in
any matter in the PDS not referred to in this report, or guarantee the performance of the Project because of the risks attendant on investments
of this nature. VDFC does not accept responsibility for updating the information contained in this report after the date of production.
In accordance with regulation 7.6.01(u) of the Corporations Regulations 2001, VDFC makes the following disclosures:
(i) VDFC has been retained by FEA Plantations to prepare the Independent Forester’s Report and Independent Market Report for inclusion in
the Product Disclosure Statement. The total remuneration for this engagement was at standard professional fee rates.
(ii) VDFC also provides consultant services to FEA Plantations on behalf of Growers to ensure that the plantation maintenance and protection
is done to an expected professional standard.
(iii) VDFC does not make any direct investment in FEA Plantations or its business interests and has no commercial interest in the financial
products being offered other than as a service provider to FEA Plantations.
(iv) VDFC does not hold an Australian Financial Services Licence and is not operating under such a licence in providing this report.
Yours faithfully
Van Diemen Forestry Consultants Pty Ltd
G.J. Cross B. Sc. (For), RPF, MIFA, MACFA
References:
1. Australian Pine Log Price Index June 2007, prepared by KPMG for selected pine growers.
2. Private Forests Tasmania Annual Report 2006/07, at http://www.privateforests.tas.gov.au/.
3. Australian forests and wood products statistics Sept - December quarters 2006 May 2007.
4. Australian Bureau of Agriculture and Resource Economics, Canberra. http://www.abareconomics.com/interactive/foreststatistics_2006/pdf/AFWPS05_Sept_Dec.pdf
5. National Forests and Timber, February 2005, p1, published by VDFC.
6. National Forests and Timber, November - December 2005, p1, published by VDFC.
7. Paper Loop Inc., October 2004, fibre / wood products.
8. International Pulpwood Resources and Trade Conference, Melbourne, 25 February - 1 March 2007, Wood Resources International, Dana Ltd and Pike & Co.
9. UNFCC Montreal Conference adopts ‘rule book’ of Kyoto Protocol Montreal November 30 2005.
10. China International Business, “Papering over the cracks”, 1 September 2005, at http://www.cityweekend.com.cn/en/Beijing/cib/2005_09/papering-over-the-cracks.html
11. MAF Indicative Log Prices by quarter, 1992 - Sept 2007, at http://www.maf.govt.nz/forestry/statistics/logprices/index.html
12. Timber Market Survey 2006, prepared for Forests NSW by URS Forestry.
13. Forest & Wood Strategic Review 2005: a comprehensive analysis of the Australian forest and wood products industry, IndustryEdge Pty Ltd.
14. Market Information Report on the Australian Forestry Industry, IndustryEdge, 2006.
15. Wood and Paper Products Markets in China, ABARE Current Issues, March 2002, produced for Forest and Wood Products Research & Development Corporation.
16. “India and China next major forest industry markets”, media release from Federal Minister for Agriculture, Fisheries and Forestry, Peter McGauran MHR, 20 November 2005.
17. Overview of the Australian Sawn Timber Market, IndustryEdge, October 2005.
18. Nova Science in the News: “Carbon currency – The credits and debits of carbon emissions”, http://www.science.org.au/nova/054/054box02.htm (and 054/box01.htm).
19. Growing Trees for Carbon Credits: A Guide for Landowners, NSW Department of Primary Industries and Forests, at http://www.forest.nsw.gov.au/publication/forest_
facts/growing_trees/default.asp.
20. Prospects for Hardwood Fibre in India, S. Walker, Midway Pty Ltd, North Shore, Geelong Victoria AFG Conference October 2006 (full copy of report at
http:/www.gottsteintrust.org).
21. Emerging opportunities for Australia in India’s Paper and Paperboard Market, U. N. Bhati and Raghbendra Jha, AFG Conference Launceston, October 2006.
85
13.
INDEPENDENT Taxation Opinion
Level 8
45 Murray Street
Hobart TAS 7000
GPO Box 1231M
Hobart TAS 7001
Australia
ABN: 20 238 520 534
Telephone: +61 3 6230 4000
Facsimile: +61 3 6230 4050
DX: 135 Hobart
Internet: www.kpmg.com.au
INDEPENDENT TAXATION OPINION
26 March 2008
The Directors
FEA Plantations Ltd
233b Charles Street
Launceston TAS 7250
Dear Directors
FEA Plantations Project 2008 – Tax Opinion
In our opinion, section 8 headed ‘Taxation’ in the Product Disclosure Statement (PDS) dated 19 March 2008 for the FEA Plantations Project 2008
(the Project), provides a correct summary of the main Australian income tax implications for a Grower participating in the Project, where the
circumstances of that Grower are such that the Product Ruling would apply to them. The Australian Taxation Office (ATO) has issued Product
Rulings PR 2008/31, PR 2008/32, PR 2008/33 and PR 2008/34 in connection with the Project, for Growers who enter the Project on or before
30 June 2008 (2008 Growers).
We have provided below further detailed commentary and guidance in respect of the Project relating to the ATO Product Rulings issued, Goods
and Services Tax and Growers who enter the Project on or after 1 July 2008 (2009 Growers).
Scope of Product Ruling
Importantly, a Product Ruling does not amount to a guarantee as to the commercial viability of the investment. In a Product Ruling, the
Commissioner of Taxation sets out his opinion on the way in which the tax laws will apply to certain Growers who take part in the Project.
A Product Ruling is legally binding on the Commissioner insofar as, when determining the amount of tax payable as a result of the arrangement
considered in the Product Ruling, the Commissioner must apply his views of the law as expressed in the Product Ruling. However:
A Product Ruling is only binding on the Commissioner to the extent to which the Project is implemented as outlined in the Product Ruling;
and
The Commissioner can withdraw a Product Ruling at any time. If such a withdrawal occurs then the Product Ruling will only apply to
arrangements that began to be carried out before the withdrawal.
Classes of person to which the ruling applies
Growers are only permitted to rely upon the conclusions in a Product Ruling provided that:
They fall within the class of persons identified in the Product Ruling as being persons to whom it applies; and
They carry out the Project in a manner identical to the arrangement identified in the Product Ruling.
Classes of persons
A Product Ruling generally outlines the classes of persons to whom it applies and in the case of Product Rulings PR 2008/31, PR 2008/32, PR 2008/33
and PR 2008/34, each is limited to Growers who are initial participants in the Project, and who enter the Project on or before 30 June 2008.
Each Product Ruling lists classes of persons to whom the ruling does not apply. This includes (but is not limited to) associates of FEA Plantations
Ltd, Growers who are accepted into the investment after 30 June 2008, and Growers who finance their participation in the Project through loans
other than from Forest Enterprises Australia Limited as described in paragraphs 74 to 83 of the relevant Product Ruling.
Arrangements
As indicated above, a Product Ruling will only apply to persons who enter into the Project in accordance with the arrangement as outlined in
the Product Ruling. Growers who depart from these arrangements will not be afforded protection by the Product Ruling.
Tax treatment of payments under the Product Rulings
The Product Rulings confirm the following:
86
Growers will be entitled to a tax deduction for the full amount of the Establishment Fee in the year in which it is incurred.
Growers will also be entitled to a deduction for interest costs on loans with Forest Enterprises Australia Limited in the year in which it is incurred.
Insurance premiums paid by Growers will be deductible in the financial years in which they are incurred.
Growers who prepay more than $1,000 of insurance (i.e those who acquire more than the minimum allocation in the Project) must
determine their insurance deduction entitlements in accordance with the formula set out in the relevant ruling.
Growers who prepay interest will not be covered by the Product Ruling. A prepayment of interest will occur where an amount is paid by a
Grower for interest for a period that extends beyond the income year in which the relevant expense is incurred.
Growers who incur non-commercial losses arising from their participation in the Project may offset those losses against the Growers’ other
assessable income in the financial year in which the losses arise for the financial years ending on the earlier of:
• for Growers who choose Woodlot Option 1, 30 June 2021;
• for Growers who choose Woodlot Option 2, 30 June 2024; or
• for Growers who choose Woodlot Option 3 or Woodlot Option 4, 30 June 2033.
The gross sales proceeds from the Project attributable to the Grower’s produce, less any GST payable on those proceeds, will be assessable
income of the Grower.
A deduction is not available for the Establishment Fee paid by Growers where a CGT event happens to their interest before 1 July 2012.
Such Growers are required to include the market value of the CGT asset at the time of the CGT event, or the decrease in market value of
that asset as a result of the CGT event, in their assessable income for that year.
The ruling does not consider the availability of concessions to taxpayers who qualify as small business entities (as defined in section 328110 of the Income Tax Assessment Act 1997).
Goods and Services Tax (GST)
Growers will need to decide whether or not they will, or must, register for GST purposes. If Growers do register for GST, they will be entitled to
an input tax credit for the GST included in the fees paid by them, subject (amongst other things) to Growers holding a valid tax invoice at the
time that they lodge their Business Activity Statements (BAS) to claim this credit. In this instance, however, Growers will only be entitled to
claim a tax deduction for the GST exclusive amount of any such fees.
Growers who are registered for GST will need to account to the Australian Taxation Office for GST when they sell their timber and they will
need to lodge regular BAS for each tax period whilst they remain registered. Growers should take their own advice as to whether or not they
should, or must, register for GST.
2009 Growers
We understand that FEA Plantations Ltd has, or will shortly, apply for Product Rulings concerning 2009 Growers. We have been instructed that
no applications will be accepted for such Growers pursuant to the PDS unless and until those Product Rulings confirm that the tax treatment for
2009 Growers is materially the same to that of 2008 Growers.
Assuming that such a Product Ruling issues, and that that Product Ruling applies to the same class of Growers, we confirm that our comments
in this letter concerning the application of the Product Rulings to 2008 Growers, would apply equally to the application of the expected Product
Rulings to 2009 Growers1.
The GST position for 2009 Growers is likely to be the same as for 2008 Growers, provided that the Commissioner of Taxation has not finalised
GSTR 2008/D1 before 2009 Growers are accepted into the Project. Growers should obtain advice from their tax adviser concerning the relevant
GST implications to their own circumstances at the time of their investment.
Disclaimer
KPMG’s comments are provided for general information purposes only and are not intended to be relied on as professional advice. Our opinion
is based on the relevant law at the date of this report. Potential Growers should note that this position may be affected by subsequent
amendments to the law, or by judicial review. Potential Growers should be aware that the levels and basis of taxation can change and should
take independent professional advice, having regard to their particular circumstances, prior to making the investment.
In addition, KPMG’s tax practice is not licensed to provide financial product advice under the Corporations Act and taxation is only one of the
matters that must be considered when making a decision on a financial product. Potential Growers should consider taking advice from an
Australian Financial Services Licence holder before making a decision on a financial product.
KPMG has not been involved in any other aspect of the PDS, except for the comments on pages 41 to 44 concerning taxation. Nothing in this
report should be taken as an endorsement of the Project or a recommendation by KPMG of any participation in the offer by any intending
investors. KPMG gives no assurance or guarantee whatsoever in respect of the future success or financial returns associated with the interest
being offered pursuant to this PDS.
Yours faithfully
KPMG
1 Except that references in our opinion to 2008 should be read as references to 2009.
87
14. glossary of terms
In this PDS, the following words have the
corresponding meaning, unless the context
requires otherwise.
AFG
Australian Forest Growers, formed in 1969,
is the national association representing and
promoting private forestry and commercial
growing interests in Australia.
AFS
Australian Forestry Standard. The Australian
Forestry Standard AS 4708 (Int) - 2003 is
a nationally endorsed Interim Australian
Standard developed with the recognised
international frameworks of the Montreal
Process criteria and Indicators (1995) and the
ISO 14000 series of environmental standards,
but which takes account of local operating
conditions. For further information, refer to
page 62.
AFSL
Australian Financial Services Licence (issued
under the Corporations Act), required to be
held by all financial service providers.
AML/CTF
Anti-Money Laundering and CounterTerrorism Financing.
AML/CTF Act
The Anti-Money Laundering and CounterTerrorism Financing Act 2006.
Applicant
A person or other entity who submits a
valid ‘Application Form & Power of Attorney’
pursuant to this PDS.
Application Form &
Power of Attorney
The application form attached to this PDS
pursuant to which an Applicant applies for
Woodlots in the Project and executes a
management agreement and a Forestry
Right lease deed, and that empowers
FEA Plantations and each of its officers to
represent and act on behalf of Growers for
certain purposes.
ARSN
Australian Registered Scheme Number
issued by ASIC for all registered schemes.
ASIC
FEA
The term ‘Carbon Credits’ is interchangeable
with Greenhouse Gas Abatement Certificates
(GAC’s). Projects that either reduce the emission
of greenhouse gases to the atmosphere or
increase the removal of greenhouse gas from
the atmosphere may potentially be eligible
as GAC’s that recognise the carbon dioxide
equivalent that has been abated.
Forest Enterprises Australia Ltd
(ACN 009 553 548).
Carbon Trading
The concept whereby emitters of greenhouse
gases can offset emissions by investing
in projects that either reduce emissions or
increase removals of greenhouse gases in
respect of the atmosphere. In Australia at
this time, the recognised term for such a
commodity is a Greenhouse Gas Abatement
Certificate.
Clearfall
The final cutting down or logging of the
trees from the plantation, projected to occur
approximately 13 years after planting for
Woodlot Option 1, 16 years after planting for
Woodlot Option 2 and 25 years after planting
for Woodlot Option 3.
Clearwood
Wood showing no (or negligible) defects
caused by knots, resin pockets or mechanical
damage and usually displaying straight and
even grain patterns. Clearwood in small
amounts is found in all trees. Pruning is often
used to increase the amount of clearwood.
Compliance Plan
The compliance plan for the Project which
describes how the Responsible Entity will
operate within the law and the Constitution.
FEA Group
Forest Enterprises Australia Ltd and its
controlled entities.
FEA Plantations
FEA Plantations Ltd (ACN 055 969 429).
FEA Timber
FEA Timber Pty Ltd (ACN 056 534 558).
Floor Price
The minimum purchase price for the sale of
wood from Woodlot Option 1 and Woodlot
Option 2, provided for in terms of the Wood
Purchase Agreement.
FOB
Free On Board, refers to the price of a product
on board ship without service charges such
as insurance.
FOB Bell Bay Price
The price used to calculate the Floor Price
payable for the sale of Wood from Option 1
and Option 2 Woodlots, FOB and expressed
in Green Metric Tonnes (GMT), and calculated
as P x DF, where P = The average price of
Australian Hardwood plantation Woodchip
exports at the time of Thinning or Clearfall
harvest published by FEA’s joint venture Bell
Bay Woodchip export mill in BDMT, and DF
= The estimated fraction of dry fibre, which
for the purposes of the Wood Purchase
Agreement is 0.48.
Forest Practices Code
The constitution that establishes the Project.
Guidelines and standards used in planning
forest operations to ensure environmental
protection.
Corporations Act
Forestry Right
Constitution
CPI
A legal right over land to plant, tend and
harvest a crop of trees on that land, together
with any ancillary rights (eg constructing and
using roads, tracks, culverts, buildings, etc).
The Consumer Price Index compiled by the
Australian Bureau of Statistics.
Greenhouse Gas Abatement
Certificates (GAC’s)
The Corporations Act 2001
(Commonwealth).
Cubic Metre (m3)
The usual measure of timber volume
in Australia.
Refer definition for Carbon Credits.
Grower
Australian Securities and Investments
Commission.
Custodian
Tasmanian Perpetual Trustees Ltd.
An investor who contracts with the
Responsible Entity through this PDS to obtain
rights to the relevant Project’s benefits.
ATO
Deed of Guarantee
Growth Rate
The deed of guarantee and indemnity
entered between the Guarantor and FEA as
described in section 16 of the PDS.
The amount of timber grown in terms of
wood volume per hectare per annum,
usually expressed as MAI.
Environmental
Management System
GST
The EMS is a management framework which
ensures that all aspects of FEA’s operations are
identified and managed to ensure protection
of the environment. The EMS process ensures
a cycle of continual improvement. ISO 14001 is
the recognised international standard for EMS.
Guarantor
Australian Taxation Office.
Average Comparative Price
The average price paid by FEA or other major
plantation timber purchasers to other major
plantation timber suppliers over the two
preceding years for wood of the same or similar
species, quality and quantity as the wood in the
region or state in which the plantation is located
(disregarding prices paid for wood where the
volume levels are not material or where the
terms of the sale were not at arms length).
BDMT
Bone dry metric tonne.
88
Carbon Credits
Establishment Fee
The amount payable by an Applicant at the
time they submit an ‘Application Form &
Power of Attorney’ as set out on page 107.
Goods and Services Tax.
Where applicable, the Guarantor/s named in
the ‘Application Form & Power of Attorney’.
Hardwood
Timber from broad-leaved trees, irrespective
of physical hardness.
Hardwood Plantations
Plantations of Hardwood species.
Harvest Proceeds
Pruning
Vision 2020
The total proceeds from the sale of harvested
wood, before deduction of deferred
management fees and rent.
The removal of branches usually with hand
held equipment (eg shears or saws) while the
tree is still growing to eliminate or prevent
the formation of knots and deformation of
the grain in the wood subsequently grown.
A strategy to grow Clearwood.
Wood from logs which are grown to produce
pulp or from parts of trees not suitable
for other products such as sawn timber or
Veneer.
The national plantations strategy, known
as Plantations for Australia: The 2020
Vision, supported in partnership by the
commonwealth government, all state and
territory governments, and the forest industry’s
three national representative bodies – National
Association of Forest Industries, Australian
Plantation Products and Paper Industry Council
and Australian Forest Growers. The Vision
includes a nominal target of a trebling of the
national plantation estate by the year 2020 to
around 3 million hectares.
Responsible Entity
Woodchips
Loan Agreement
Defined under the Corporations Act as the
company named in ASIC’s record of a schemes
registration as the responsible entity (RE).
The RE is responsible to the Grower for all
aspects of the Project’s operations. FEA
Plantations is the RE for the Project.
The agreement entered between eligible
Growers and FEA as described in section 16 of
this PDS.
Rotation
Wood in the form of small pieces and
generated either by chipping whole logs or
as a by-product of the manufacture of sawn
timber and plywood. Used in the manufacture
of pulp and paper and various composite
panel products such as MDF, particle board
and hardboard.
The period (in years) in which a tree or stand
grows from planting through to Clearfall.
Mean Annual Increment (MAI)
Sawlogs
Refers to the average Growth Rate of a forest
to a point in time, usually expressed in Cubic
Metres per hectare per annum over n years.
Because the age and growth relationship
is not linear, half the growth will not be
achieved at half the age.
Logs suitable for processing into sawn timber.
Straightness, diameter, and size of knots are
major considerations.
Independent Forester
An expert professional forester who reports
to FEA Plantations and Growers on the land
and progress of the trees. The Independent
Forester does not hold an equity or financial
interest in the Responsible Entity or any of its
associated entities.
ISO
International Organization for
Standardization.
JAS-ANZ
Joint Accreditation System for Australia and
New Zealand.
Pulpwood
Silviculture
Board manufactured from wood fibre. It
is used in a wide range of applications in
construction and furniture.
The tending of forest crops based on the
knowledge of forest science; including
the management of all aspects of the
establishment, composition and growth
of forests (excluding harvesting and
subsequent operations).
PDS
SmartFibre
Product disclosure statement.
SmartFibre Pty Ltd (ACN 102 434 042).
Peeler Log
Softwood
A log suitable for the production of Veneers
by rotary peeling in a lathe.
Timber of coniferous trees, irrespective of
physical hardness.
Power of Attorney
Stocking Guarantee
A formal agreement that empowers FEA
Plantations to represent and act on behalf of
Growers for certain purposes as set out on
page 106.
The Responsible Entity provides the Grower
with a Stocking Guarantee for a period of two
years from the date the Grower is registered
as the holder of the Woodlots. The guarantee
provides that if the survival of seedlings is
less than 90% of the original minimum of
600 seedlings per Woodlot, it will re-instate
the plantations with replacement seedlings
up to the above mentioned 90%.
Medium Density Fibreboard (MDF)
Privacy Act
The Privacy Act 1988 (Commonwealth).
Product Ruling
The product ruling system is explained in the
ATO’s product ruling PR 2007/71. A product
ruling provides potential investors certainty by
confirming the tax benefits that are available,
provided the arrangement is carried out in
accordance with information provided to the
ATO by the Applicant and described in the
‘Arrangement’ part of the product ruling. The
product ruling provides no assurance that the
product is commercially viable, the charges
reasonable or the projected returns will be
achieved. Product rulings are prospective only
and include a specified date on which they
are withdrawn or cease to have effect.
Project
The managed investment scheme known as
FEA Plantations Project 2008.
Project Manager
The person responsible for the day to day
management of the Project. If this function
is outsourced by the Responsible Entity,
the Responsible Entity retains responsibility
to the investors for the actions of the
project manager.
Thinning
The selective removal of some of the trees
from a plantation or forest so that the
remaining trees have a greater opportunity
to grow.
TIMA
Treefarm Investment Managers Australia is
a self-funded organisation representing the
interests of managed investment plantation
companies and many thousands of smallscale growers. TIMA’s main focus is national
plantations policy and the provisions of
Corporations Law and tax law that govern
the managed investments sector.
Woodlot
A measured area of land comprising
approximately a ½ hectare in size, to be
established as part of the Project.
Woodlot Option 1
The growing of eucalyptus Hardwood for
both Pulpwood and unpruned Sawlogs, for
sale to both domestic and export markets,
dependent upon markets at the time. The
Project term is expected to be around
13 years after planting. The size of each
Grower’s Woodlot will be approximately
½ hectare.
Woodlot Option 2
The growing of pruned eucalyptus Hardwood
for Clearwood Sawlogs, Veneer, unpruned
Sawlogs and Pulpwood, for sale to both
domestic and export markets, dependent
upon markets at the time. The Project term
is expected to be around 16 years after
planting. The size of each Grower’s Woodlot
will be approximately ½ hectare.
Woodlot Option 3
The growing of radiata pine for unpruned
Sawlogs and Pulpwood, for sale to both
domestic and export markets, dependent
upon markets at the time. The Project term
is expected to be around 25 years after
planting. The size of each Grower’s Woodlot
will be approximately ½ hectare.
Woodlot Option 4
The Woodlot option selected in the
‘Application Form & Power of Attorney’
comprising a combination of Woodlot Option
1, 2 & 3, in a fixed ratio of four, one and
two Woodlots respectively. The size of each
Grower’s Woodlot will be approximately 3.5
hectares (7 Woodlots).
Wood Purchase Agreement
The agreement for the sale of wood between
FEA and FEA Plantations as agent for and
attorney of a Grower.
Veneer
A thin slice or peeling of wood, which is used
to make panel products.
89
15. Frequently asked questions
Set out below are some of the more
commonly asked questions in relation to an
investment by a Grower in this PDS.
The Manager
Why invest with
FEA Plantations?
Established in 1985, the FEA Group has
grown to become one of the largest
plantation managers in Australia, with over
50,000 hectares of Hardwood eucalyptus
plantations, spread over Tasmania, New
South Wales and Queensland and around
$280M in investments under management.
This is FEA Plantations’ 16th consecutive
Project since 1993. For further information,
refer to sections 10 & 11.
The Project
How do I apply for Woodlots?
Information on how to apply is outlined in
section 17.
What happens if I default on
my commitments?
To protect the interests of all Growers in the
Project, where a Grower has not paid any
amounts required under the agreements,
FEA Plantations or any other indebted party
will have options available to it including, but
not limited to, terminating the agreements,
taking possession of or selling the Grower’s
interest in the Project or taking legal
action against the Grower to recover the
outstanding monies.
What insurance for the trees is
available?
There are two levels of insurance which
Growers may apply for:
Basic insurance – insurance to cover the
standing timber in the plantations against
loss or damage by fire and other risks as
included in the insurance policy. This level of
insurance is optional for Growers, following
the expiry of the Stocking Guarantee.
Full Replacement Cost Insurance – In
the early years of the Project, insurance
recoveries are unlikely to equal the full
amount of application monies paid. The
value of the trees increases with time and
the insured values and respective costs to
insure are expected to increase accordingly.
For the period that the value of the trees is
less than the full amount of the application
price, additional ‘Full Replacement Cost
Insurance’ coverage may be available to
enable Growers to insure their interests for
the original amount invested, until the value
of the Woodlots exceeds the value of the
initial investment. Growers electing to take
90
finance longer than 1 year must note that full
insurance coverage is normally compulsory
during the currency of the loan.
For further information, refer page 35.
Are there any ongoing costs
with the Project?
The only ongoing costs are insurance and
Pruning (Woodlot Option 2 and a proportion
of Woodlot Option 4), which are invoiced
annually in June. For further information,
refer pages 26 & 35.
There are no ongoing lease or management
fees payable throughout the Project. The
fees payable under the Forestry Right lease
deed and the management agreement are
deferred and will be deducted from Harvest
Proceeds as set out on pages 26 & 27.
Can I inspect my trees?
Yes, Grower visits to inspect Woodlots are
encouraged. If you wish to take part in an
organised tour provided by staff of FEA,
please contact us to find out when the
next tour is scheduled. Travel expenses will
naturally be the responsibility of Growers.
Can I sell or transfer my
investment?
Provided you are not in default of any
agreement, then you have the right to assign
or transfer your interest in the Project at any
time, subject to the requirements of the
Constitution and the Corporations Act. For
further information, refer page 66.
Is there any mortgage or
other form of security taken
over my investment?
It is intended that a FEA Plantations’ Forestry
Right will be registered over all land planted
under the Project. The Forestry Right is
granted by the landowner to FEA Plantations
and vests in FEA Plantations a legal right to
establish, maintain and harvest the trees
which are attached to the land. The Forestry
Right is registered as an encumbrance on
the land title, ensuring that all subsequent
dealings with the land are subject to the
entitlements contained in it. FEA Plantations
will lease its Forestry Right to Growers on
the terms of a Forestry Right lease deed in
respect of the number of Woodlots allocated
to them.
How will I be charged
for leasing the land and
managing the plantations?
The Forestry Right lease fees and management
fees will be deducted via a percentage
deduction from the Harvest Proceeds,
according to the fees charged on the individual
investment options. However, if Woodlots are
damaged or destroyed, the Forestry Right
lease fees and management fees will be
deducted via a percentage deduction of the
salvaged value or insurance proceeds received
by the Grower in respect of the insured event,
as the case may be. For further information,
refer pages 36, 39, 94 & 98.
How will I know how my
Woodlot is performing?
The Independent Forester will inspect a
sample of the plantations annually to ensure
that the Woodlots are being maintained in
accordance with good Silvicultural practice.
The Independent Forester will receive
information on works undertaken on all
plantations during each financial year.
Following each inspection and audit, the
Independent Forester will prepare a report
for FEA Plantations, which will be provided
to all Growers.
Is it possible to finance the
investment?
Yes. For a summary of the finance options
available, please refer to the ‘Finance
Summary’ available by contacting FEA during
normal business hours, or visit our website at
www.fealtd.com.
For the full terms and conditions of finance
available via this PDS, please refer to the
loan finance documentation, including the
relevant Loan Agreement, summary of Deed of
Guarantee and indemnity and acknowledgment
and consent under the Privacy Act, contained in
section 16 of this PDS.
What is a Forestry Right?
A Forestry Right is a contractual agreement
entered into with a landowner giving FEA
Plantations a right to establish, maintain and
harvest the trees on the Woodlot during the
term of the agreement.
What is the duration of the
investment?
It is anticipated that the duration of the
Project will be 14 years for Woodlot Option
1, 17 years for Woodlot Option 2, and 26
years for Woodlot Option 3 & Woodlot Option
4. The estimated growth periods are 13, 16
& 25 years, with an allowance made for
planting and harvesting.
What is the minimum
investment?
For Woodlot Options 1, 2 & 3, the minimum
investment is one Woodlot, costing $3,465
(Establishment Fee of $3,150 plus GST of
$315). For Woodlot Option 4, the minimum
investment is seven Woodlots, costing
$23,100 (Establishment Fee of $21,000 plus
GST of $2,100).
What are my payment
options?
Investors can either pay the full Establishment
Fee by way of cheque or credit card or apply
for finance. For further details, refer to
page 27.
When will my Woodlots be
planted?
Growers who are accepted into the Project
on or before 30 June 2008 – we will use
reasonable endeavours to complete the
establishment services within 12 months
and by no later than 30 June 2009.
Growers who are accepted into the Project
after 30 June 2008 – we will use reasonable
endeavours to ensure the trees are planted
within 12 months of the date of your
application acceptance date and by no later
than 30 June 2010.
Who owns the land the trees
are planted on?
The land is either owned by a company in the
FEA Group or leased from third party property
owners by way of a Forestry Right.
Will my Woodlots be
separately identifiable?
Yes, digital mapping will be used to divide
the land into ½ hectare Woodlots and
Growers will receive a map detailing where
their Woodlots are located.
Is this an environmentally
friendly investment?
All forest operations are governed by the
relevant state Forestry Codes of Practice and
practice plans are written for each operation.
This ensures that environmental issues are
addressed prior to an operation taking
place. All of FEA’s operations are managed
in accordance with FEA’s Environmental
Management System. FEA’s Environmental
Management Systems (EMS) operating in
Tasmania, NSW and Queensland have been
certified to the ISO 14001:2004 standard by
independent third-party auditors. In addition
to ensuring protection of the environment
through its EMS, FEA is also committed to
managing forests on a sustainable basis.
In March 2007, FEA achieved certification
of its Tasmanian forest estate against the
Australian Forestry Standard. The Australian
Forestry Standard AS 4708 (Int) - 2003 is
a nationally endorsed Interim Australian
Standard developed with the recognised
international frameworks of the Montreal
Process criteria and Indicators (1995) and the
ISO 14000 series of environmental standards,
but which takes account of local operating
conditions. For further information, refer to
page 61.
Tax Deductibility
Is there an ATO opinion about
the tax deduction available
from this investment?
The ATO has issued Product Ruling No.’s
PR 2008/31, PR 2008/32, PR 2008/33
& PR 2008/34 in respect of the Project
corresponding to Woodlot Options 1, 2, 3
& 4 respectively. The Product Rulings are
applicable for Growers who enter into the
Project on or before 30 June 2008. The
Product Rulings confirm the deductibility of
all Project costs in respect of those Growers.
We anticipate that Product Rulings will be
issued in due course which confirm that the
tax treatment for post 30 June 2008 investors
is identical to that of pre 1 July 2008 investors.
However, in the event that Product Rulings
are not issued, no applications for interests
will be accepted pursuant to the PDS after
30 June 2008.
Growers should seek their own taxation
advice in relation to this issue. For further
information, refer to pages 41 & 86.
The Product Rulings can be obtained free of
charge from FEA Plantations during business
hours, by ringing our free call number
1800 600 009, by emailing the company
at marketing@fealtd.com, or downloading
the Product Rulings directly from the ATO
website at www.ato.gov.au.
What are the GST implications
of investing?
The GST component in respect of applications
is expected to be either tax deductible, or
may be claimed as a GST input tax credit,
depending on the individual circumstances.
Growers registered for GST should be able
to claim an input tax credit for the GST
component. Growers who are not registered
for GST will have no entitlement to claim
input tax credits on the fees charged under
the Project and it is expected that for
unregistered Growers, the GST component
will be tax deductible. Growers are advised to
consult a professional tax adviser to confirm
their position in respect of their specific
circumstances. For further information, refer
to pages 41 & 86.
What assessable income
and taxation outcomes do
I face when my investment
matures?
Proceeds derived by the Grower from the
sale of timber will be assessable for taxation
purposes. For further information, refer to
page 44.
What is a Product Ruling?
A Product Ruling is a binding public ruling
under the Taxation Administration Act 1953,
in relation to the effect of the income tax
law on a project. It guarantees Growers
tax deductions for specific costs incurred in
investing in a project, provided the Project
is carried out in accordance with the details
provided to the ATO and which are described
in the Product Ruling.
Project Returns
How is my wood sold?
FEA has entered into a ‘Wood Purchase
Agreement’ to purchase Growers’ timber at
harvest and pay the prevailing market price
at the time of harvest, taking into account
the proposed end-use of the timber and
the prices being paid by other purchasers
in the respective states. If FEA breaches this
agreement and fails to purchase the timber,
then the Responsible Entity will use its best
endeavours to sell the timber for the best
price it can obtain.
Is my return guaranteed?
FEA Plantations makes no guarantee as to
returns and has not included a forecast of
returns in the PDS. It is difficult to accurately
forecast financial returns to Growers over the
term of a project of this nature. FEA Plantations
does not consider that in accordance with
ASIC policy, it has reasonable grounds to
include such forecasts in the PDS. This is
because such forecasts would involve the
consideration of a large number of variables,
many of which are outside the control of
FEA Plantations. Anticipated events that
affect returns may not occur as expected
and unanticipated events may also occur. For
further information, refer page 46.
What is pooling?
All proceeds from harvesting and sale of the
timber grown in the Project will be pooled
irrespective of the location of individual
Woodlots. The distributions to Growers will
be based on the number of Woodlots owned
as a percentage of the total number of
Woodlots in the relevant option.
When should I receive income
from the Project?
Growers should receive payments for
timber sold following Thinning/s, which
are expected to occur at different stages,
depending on the Woodlot option selected.
Growers should also receive payments
following the final harvest. For further
information, refer pages 26 & 27.
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16. Project agreements
OVERVIEW
The Project was registered by ASIC as a managed investment scheme
on 28 February 2008. The material agreements which relate to the
establishment of the Project are as follows:
In particular, the Constitution provides for Growers to have the
following rights:
Constitution.
Management agreement.
The right to attend and vote at Grower meetings.
Forestry Right lease deed.
The right to transfer a Grower’s Woodlot.
The right to distributions of income from the Project.
The right to participate in a winding up of the Project.
These documents have been lodged with ASIC. A summary of the
Constitution follows. Terms defined in the Constitution have the
same meaning when used in this PDS. As this is a summary only,
any intending Applicant who wishes to gain a full knowledge of the
contents of the Constitution should review the entire document.
Copies of these documents are available for inspection at the
registered office of FEA Plantations during normal business hours. The
Responsible Entity will also provide a copy of each document to any
person who requests a copy (free of charge).
The management agreement and Forestry Right lease deed, which
prospective Applicants will execute via signing the ‘Application
Form & Power of Attorney’, are set out in full in this section. It is
recommended the relevant documents are read in full before applying
for Woodlots in the Project.
Prospective Applicants should seek independent professional advice
on these agreements if necessary.
DATE OF ISSUE OF GROWER
AGREEMENTS
The timing of the execution of the relevant agreements by FEA
Plantations (following the execution by a Grower signing the ‘Application
Form & Power of Attorney’) is outlined in the following table:
Completion of
management
agreement
Completion of
Forestry Right
lease deed
26 March 2008 30 June 2008
On or before
30 June 2008
Within 9 months of
issue of management
agreement and no later
than 31 March 2009
1 July 2008 30 June 2009
On or before
30 June 2009
Within 9 months of
issue of management
agreement and no later
than 31 March 2010
Application
Accepted
The Responsible Entity in its absolute discretion, may determine to
vary the above dates without notice and reserves the right to refuse
any investment application in whole or in part, some applications but
not others, or all applications without giving reasons.
Fees and charges payable to the Responsible Entity are payable under
the management agreement and the Forestry Right lease agreement
and are set out in section 7 of this PDS.
MANAGEMENT AGREEMENT
This Agreement is dated
and made between FEA Plantations
Limited ACN 055 969 429 (Manager) and the Grower named in the
application form into which this agreement is incorporated (Grower).
Whereas:
(a) The Grower has been or is to be granted a lease of a Forestry
Right in relation to land (Land) from the Manager or its nominee
and is desirous of carrying on forestry operations and developing
plantations of Trees on the Land.
(b) The Manager is the Responsible Entity of the Project.
(c) The Grower is desirous of engaging the Manager to establish
a plantation of tree seedlings on the Land and to manage and
maintain the plantation upon the terms and conditions of this
Agreement.
(d) The terms of this Agreement follow:
1. Establishment services
The Manager will as a contractor (and not as an agent), subject to
the reasonable directions of the Grower, provide to the Grower the
Plantation Establishment Services as hereinafter described. The
Plantation Establishment Services means the preparation of the Land
for planting and the planting of the Land with Trees in accordance with
good silvicultural practice, and without limiting the generality of the
foregoing Plantation Establishment Services, includes the following:
(a) The completion of all preparatory work necessary for the planting
of seedlings on the Land including all ploughing and vermin
control deemed necessary by the Manager.
(b) The supply and planting of healthy seedlings to an average density
per hectare appropriate to the soil and climatic circumstances of
the Land.
(c) The control of weeds and other vegetation which might inhibit
the growth of the seedlings on the Land.
SUMMARY OF THE CONSTITUTION
2. Time for Plantation Establishment Services
The following is a summary description of certain clauses in the
Constitution. The Constitution must be referred to for full legal terms
and effect.
(a) The Plantation Establishment Services will be commenced as
soon as practicable after the Agreement Commencement Date.
The Constitution can be obtained free of charge by contacting the
Compliance Officer, FEA Plantations during business hours, by ringing
our freecall number 1800 600 009 or by emailing the company at
marketing@fealtd.com.
92
The Constitution is the primary document governing the relationship
between the Growers and the Responsible Entity. It contains extensive
provisions about the legal obligations of the parties and the rights
and powers of each.
(b) The Manager will use its best endeavours to complete all Plantation
Establishment Services within 12 months of the day when the first
seasonally dependent agronomic activity commences and at the
latest, by the end of the income year following the year in which
the Grower’s application was accepted, PROVIDED HOWEVER that
the Manager will not be liable to the Grower for its failure to
complete the Plantation Establishment Services within these
time periods where such failure is occasioned by any reasons or
cause beyond the control of the Manager.
3. Management Services
The Manager must, subject to the reasonable directions of the Grower,
provide to the Grower the Management Services. The Management
Services means the tending and rearing of the seedlings and the
management and maintenance of the plantation established on
the Land in accordance with good silvicultural practice, and without
limiting the generality of the foregoing Management Services,
includes the following:
(a) The replanting of any seedlings which die during the first 2
years after the date the Grower is registered as the holder of the
Woodlot/s to be established on the Land to 90% of the average
initial planting density.
(b) The general maintenance of the plantation including control of
weeds, suckers, vermin or other pests which may impede the
growth of the seedlings.
(c) Pruning of the Trees (if the Grower holds an Option 2 Woodlot
or Option 4 Unit). In these circumstances, the Trees which are to
be grown as Option 2 Woodlots (all Option 2 Woodlot Trees and
the proportion of the Option 4 Unit Trees which, in accordance
with the terms of the Disclosure Document, are to be grown as
Option 2 Woodlots) will be pruned three times prior to the Trees
reaching six years of age, or such number of times and by the
time determined by the Responsible Entity, acting in accordance
with good silvicultural practice.
(d) The maintenance in good condition and repair of all fire breaks
and access roads in and about the Land.
(e) The application of fertiliser to the Land in such form and in such
quantities as to maintain satisfactory growth.
(f) The provision of an annual written report in relation to the
progress of the plantations in the Project during the Term of the
Project.
(g) The provision of advice and assistance to the Grower generally
in relation to the thinning and pruning of the plantation and
the general management thereof in accordance with the best
practices of the forestry industry.
(d) It is anticipated that Trees will be harvested in respect of each
Woodlot Option as follows:
(i) Option 1 Woodlots – thinning will begin when the Trees are
approximately 9 years old and Clear Felling will occur when
the Trees are approximately 13 years old.
(ii) Option 2 Woodlots – thinning will begin when the Trees are
approximately 9 years old and Clear Felling will occur when
the Trees are approximately 16 years old.
(iii) Option 3 Woodlots – thinning will begin when the Trees
are approximately 13 years old & again when the Trees are
approximately 18 years old and Clear Felling will occur when
the Trees are approximately 25 years old.
(iv) Option 4 Units – those Trees grown as Option 1 Woodlot
Trees will be harvested in accordance with clause 5(d)
(i), those Trees grown as Option 2 Woodlot Trees will be
harvested in accordance with clause 5(d)(ii), and those Trees
grown as Option three Woodlot Trees will be harvested in
accordance with clause 5(d)(iii).
6. Marketing
(a) The Grower hereby irrevocably and unconditionally appoints the
Manager as its sole agent to market and sell the Trees growing on
the Land and any harvested forest purchase from the Trees in a
proper and competent manner, subject to clause 6(c) below. The
Grower acknowledges the Trees and harvested produce will be
sold on a stumpage basis.
(b) The Manager shall retain out of the thinnings and Clear Felling
proceeds the pro rata amount of disbursements reasonably
incurred by the Manager as agent for the Grower in such thinnings
and Clear Felling.
(c) The Grower authorises the Manager to act as the Grower’s agent for
the purpose of negotiating and making at the maximum practicable
price available, sales of the Grower’s harvested Trees (on a stumpage
basis) and entering into any agreement for sale of those harvested
Trees, including the wood purchase agreement entered between the
Manager and Forest Enterprises Australia Ltd.
(d) The Manager agrees that it will use all reasonable endeavours to
obtain the best return for Growers.
4. Term of Agreement
7. Carbon Credits
This Agreement shall take effect on the Agreement Commencement
Date and shall remain in force until the completion of the sale of
all Trees harvested after Clear Felling of the Trees on the Land and
the receipt and dealing with all proceeds therefrom, unless this
Agreement is terminated earlier pursuant to clause 14 or 15 of
this Agreement.
The Grower irrevocably and unconditionally appoints the Manager
as its sole agent to market and sell any Carbon Credits and to pay
to the Grower 50% of the benefits (after costs associated with the
due diligence and negotiation) from any carbon trades negotiated
by the Manager. The Manager is entitled to retain the remaining
50% of such benefits (after costs associated with the due diligence
and negotiation) as a fee for its services in relation to the carbon
trade, in addition to any other fee that it is entitled to receive under
this Agreement. All costs associated with the due diligence and
negotiation process undertaken by the Manager in respect of the sale
of any Carbon Credits will be borne equally between the Manager
and the Grower.
5. Harvesting
(a) The Grower authorises the Manager to decide when it is
appropriate to thin the Woodlots.
(b) Thinning of the Woodlots must be consistent with good
silvicultural practice.
(c) The Grower also authorises the Manager to decide when it is
appropriate to carry out the Clear Felling of the Trees, and as
agent for the Grower to make all arrangements for felling,
snigging, loading, cartage, roading, insurance and all other steps
involved in harvesting the Trees. These duties must be carried
out and performed in a manner consistent with good silvicultural
practice. The Manager must, as agent for the Grower, pay all
disbursements required to carry out the harvest.
8. Insurance
The Manager will arrange public liability insurance to a limit of not less
than $10,000,000 at no charge to the Grower. The Manager will use
reasonable endeavours to arrange plantation insurance against the
risks of fire and windstorm at an economic cost but does not covenant
to do so. If the Manager does not do so the Grower acknowledges
that it bears these risks and that it would be prudent for the Grower to
insure against those risks. If the Manager is able to obtain such cover
93
16.
Project Agreements
the Grower must reimburse the Manager for the proportionate cost
thereof upon demand from the Manager.
9. Agricultural risk
It is hereby acknowledged that no warranties either express (or insofar
as the same may be excluded, implied) are given by the Manager in
respect of the growth or survival rate of seedlings and the Manager
shall not be liable for any damage to the plantation by insects,
disease, fire, flood, frost, lightning, storm, tempest, Uncontrolled
Event or other cause beyond the control of the Manager.
10. Liability
To the full extent permitted by the laws of the Commonwealth of
Australia and any State or Territory of Australia having jurisdiction, the
Manager will not be liable for any special, indirect or consequential
damages arising under or pursuant to this Agreement.
11. Establishment Fee
(a) Option 1 Growers, Option 2 Growers and Option 3 Growers must
pay an Establishment Fee at the time of application in the sum of
$3,465 per Woodlot (GST inclusive).
(b) Growers who hold an Option 4 Unit must pay an Establishment
Fee at the time of application in the sum of $23,100 per unit
(GST inclusive).
12. Management Fee
(a) The Management Fee is the amount which the Manager
determines is the Grower’s proportionate share of 3% of the
GST inclusive Gross Harvest Proceeds for all plantations of the
Growers in the Project. This fee is payable from the relevant
Proceeds Fund.
(b) In the event of a Salvage Harvest, the Management Fee is
the amount which the Manager determines is the Grower’s
proportionate share of 3% of the GST inclusive proceeds of the
salvaged value for all applicable plantations of Growers in the
Project. This fee is payable from the relevant Proceeds Fund.
(c) In the event insurance proceeds are paid to a Grower in respect
of any of the Grower’s Woodlots, the Management Fee is the
amount which the Manager determines is 3% of the insurance
proceeds received by the Grower in respect of the insured
event.
(d) The Grower must pay the following pruning fees per Woodlot
within 30 days of invoice:
Option 1
Woodlot
Option 2
Woodlot
Option 3
Woodlot
Option 4
Unit
First pruning
N/A
$396
N/A
$396
Second pruning
N/A
$418
N/A
$418
Third pruning
N/A
$440
N/A
$440
These fees are inclusive of GST and will increase in accordance
with the following formula:
A=BxC
D
Where:
A = the new pruning fee
B = the pruning fee referred to in the table above
C = the CPI for the period immediately prior to the scheduled
date of pruning, and
D = the CPI as at 31 December 2007.
94
(e) If the Grower defaults in payment of the fees, or this Agreement
terminates before harvesting the Trees on the Grower’s
plantation, the fee is payable as a liquidated debt by the Grower
to the Manager upon demand and the Manager has a lien over
and in respect of the Trees and Gross Harvest Proceeds of the
Grower in relation to the Trees on the Grower’s Land as security
for this obligation.
(f) The Responsible Entity must first apply the Management Fees
towards payment of any accrued or outstanding rental amounts
due under the Forestry Right Deed.
(g) In the event this Agreement is terminated in accordance with
any clause under this Agreement, the Manager is not required
to refund any part of the Management Fee paid by the Grower
and is entitled to recover from the Grower any amounts due and
payable at that time.
13. Other Expenses
The Grower must pay, in addition to the Management Fee, the
insurance premium relating to their investments, as provided for in
Schedule 3 of the Constitution.
14. Default by the Grower
(a) If the Grower contravenes any provision of this Agreement, and
such contravention is not remedied within thirty (30) days of its
occurrence, or if the Grower has entered into a Forestry Right
Lease Deed with the Manager and such Forestry Right Lease
Deed is subsequently terminated as a result of a contravention by
the Grower or if the Grower is in default under the terms of the
Constitution, then the Manager may terminate this Agreement
and seek immediate payment of all monies due hereunder
notwithstanding and without prejudice to any other action or
remedy it might have.
(b) The Manager is irrevocably and unconditionally appointed by
the Grower, as its agent to, for and on its behalf in its absolute
discretion, assign and transfer the benefit of this Agreement for
the best price reasonably obtainable, or manage and harvest
the Trees, and in either case retain out of any sale price or net
proceeds of harvest any amounts then due and owing by the
Grower to the Manager.
(c) If any default by the Grower includes any monetary sum,
compensation for the loss of use of that sum shall be by way of
interest thereon at the rate of fifteen per cent (15%) per annum,
compounding annually, from the due date of payment until
the actual date of receipt. This is specifically agreed upon as a
genuine pre estimate of damage and not a fine or penalty.
15. Damage or destruction
(a) In the event that the Grower’s Woodlots suffer damage to the
extent that it is not economic to nurture the Woodlots to harvest,
this Agreement shall come to an end as at the date of such
destruction; thereafter neither party shall have any obligation
to the other except the Grower’s obligation to pay deferred fees
owing under clause 12 of this Agreement shall crystallise on the
date of destruction and thereupon become due and payable.
(b) If destruction is effected by a series of connected events,
destruction shall be deemed to have occurred at the time at
which it was no longer economically viable to continue nurturing
the Trees towards harvest.
(c) In the event that part only of a Grower’s Woodlot is rendered
uneconomic (as determined by the Responsible Entity) by virtue
of destruction of Trees, the area remaining shall be substituted
in the Register of Growers, and Management Fees in respect
thereof shall abate pro rata according to the extent of the
Woodlot remaining.
(d) In determining the apportionment of areas between destroyed
and surviving portions of the Woodlot, and the consequential
abatement of Management Fees, the principles of equity and
good conscience and natural justice shall be applied in preference
to technical provisions of the common law.
19. Amendment
(e) Without limiting the effect of the foregoing provisions of this
clause 15, in the event that the Grower’s Woodlots suffer damage
or destruction to the extent that it is not economic to nurture the
Woodlots to harvest, the Responsible Entity may determine in its
complete discretion, to undertake a Salvage Harvest of the Trees.
Where a Salvage Harvest occurs, the affected Grower’s Interest
comes to an end at the same time this Agreement comes to an
end as described in clauses 15(a) and 15(b) above, subject only
to any rights the Grower has to an entitlement to a share of the
income distribution attributable to the Grower from the proceeds
of sale of the salvaged Trees and any rights of the Grower under
the Constitution.
20. Disputes
(f) For the avoidance of any doubt, reference in this clause 15 to the
damage or destruction of Woodlots does not include a reference
to the destruction of Trees caused as a result of the normal
harvesting of Trees during thinning or final harvest.
16. Assignment
The Manager shall be entitled to assign the benefit of this Agreement
to any other person which shall covenant to the Manager to be
bound by the terms and conditions of this Agreement in place of the
Manager. The Grower can only assign the benefit of the Agreement
with the consent of the Manager, which cannot be unreasonably
withheld in the case of a suitable person.
17. Legal relationships
(a) The relationship between the Manager and the Grower is not
intended to be, shall not be deemed to be, and shall not be
treated as, a partnership, a joint venture, or an association nor
shall they or either of them for any purpose be or be deemed
or treated in any way whatsoever to be liable or responsible
under this Agreement as partners or joint venturers or persons
in association.
(b) Nothing in this Agreement is, or is intended to be, or shall be
deemed to be or give rise to a contract or association between the
Growers or otherwise give rise to any mutual rights or obligations
between Growers and each Grower shall take and enjoy all its
rights titles and benefits and shall incur all its liabilities and
obligations under this Agreement severally and independently of
each other Grower.
(c) No Grower is, or is intended to be, or shall be deemed to be the
partner, agent, associate or the legal trustee of any other Grower
whether for the purpose of this Agreement or otherwise, nor
shall any Grower have any authority or power to act for or to
undertake any obligation or responsibility or incur any liability on
behalf of any other Grower.
(d) The quantification of the Management Fees by reference to
the Gross Harvest Proceeds is not intended to, and shall not be
deemed to constitute a partnership, joint venture or association
of any kind between any Grower and the Manager, other than
that of contractor and contractee, and where so designated in
this Agreement, for the limited purposes there stated, principal
and agent. It is specifically acknowledged by the parties that the
quantification represents a genuine pre estimate of the future
value of the annual Management Fees otherwise payable, duly
adjusted for normal economic contingencies.
18. Stamp duty
Any liability to stamp duty payable hereon or hereunder or arising
as a result of this Agreement or on the payments hereunder shall be
borne and paid by the Manager.
No variation modification or amendment of this Agreement shall
have any force or effect whatsoever unless made by an instrument in
writing duly executed by the parties hereto.
In the event of any dispute or disagreement between the Manager
and the Grower, such dispute or disagreement shall be resolved
in accordance with the mechanism provided in the Constitution to
which this Agreement is a Schedule.
21. Proper law
This Agreement shall be governed and construed and shall take effect
in accordance with the laws of the state of Queensland.
22. Notices
All notices and notifications required to be given hereunder shall be
given in writing and may be signed by the parties or their solicitors
and may be delivered or sent by prepaid mail addressed to the parties
at their address set down herein or by fax and any such notices shall
in the case of delivery be deemed to have been served at the time of
delivery and in case of posting at the expiration of two (2) days after
posting prepaid or if faxed at the time indicated by the transmission
confirmation slip of the sender’s machine.
23. Access to Grower’s plantations
The Grower irrevocably authorises the Manager and its employees
and agents to enter upon and remain upon the Land the subject of
the Grower’s Forestry Right Lease Deed to:
(a) Provide the Plantation Establishment Services and Management
Services contemplated by this Agreement.
(b) Come onto the Grower’s Land for the purposes of controlling and
minimising undergrowth, pests and weeds on the property. This
clause 23(b) survives termination of this Agreement.
24. Goods and Services Tax (GST)
(a) The parties acknowledge and agree that any Management Fee
payable under or in connection with this Agreement has been
agreed upon as inclusive of any GST that may be payable as a
result of the supply of the services made as consideration for
the Management Fees at the rate of 10%. If the rate of GST
increases, it is agreed that the amount of the Management Fee
shall increase by the amount of the further GST payable.
(b) For the purposes of this agreement, all terms defined in the A
New Tax System (Goods and Services Tax) Act 1999 (GST Act)
have the meanings given to those terms in the GST Act.
25. Management Agreement is
legally enforceable
The parties acknowledge that there is good consideration for their
respective rights and obligations under this Agreement and the terms
of this Agreement are binding upon them.
The Grower is deemed to have signed this Agreement at the time the
Grower executes the Application Form & Power of Attorney contained
in the Disclosure Document for the Project.
Schedule 1—Dictionary
Except as otherwise defined below, words used in this Agreement
have the same meaning as in the Constitution.
Agreement
This management agreement including all of
its annexures, schedules and recitals.
Agreement
Commencement
Date
The date on which this Agreement is executed
by the parties.
95
16.
Project Agreements
Clear Felling
The final cutting down or logging of the
trees from the plantation, projected to occur
approximately 13 years after planting for
Option 1 Woodlots, 16 years after planting for
Option 2 Woodlots and 25 years after planting
for Option 3 Woodlots.
(l) The defined terms in Schedule 1 have the meaning given them in
that schedule except where the context otherwise requires.
FORESTRY RIGHT LEASE DEED
Constitution
The constitution of the Project.
Establishment
Fee
The establishment fee payable by the Grower
to the Manager in accordance with clause 11 of
this Agreement.
Forestry
Right Deed
Any deed under which the Responsible Entity
has been granted a Forestry Right to use the
Land for forestry purposes as set out in that
deed.
Land
Means the Woodlot or Woodlots shown in blue
on the grid plan annexed to the Forestry Right
Lease Deed and allocated by the Responsible
Entity to the Grower in accordance with the
Product Disclosure Statement.
(b) The Grower wishes to carry on a commercial forestry business on
the Land.
The management fee payable by the Grower
to the Manager in accordance with clause 12 of
this Agreement.
(d) The terms of this Deed follow:
Management
Services
The management services described in clause
3 of this Agreement.
1.1 Definitions
Plantation
Establishment
Services
The plantation establishment services
described in clause 1 of this Agreement.
Project
FEA Plantations Project 2008.
Term
The term of the Project as described in clause
3 of the Constitution.
Trees
The trees, whether as seedlings prior to
planting or growing or grown trees, which
are situated on a particular Grower’s Woodlot
during the term of the relevant Forestry Right
Lease Deed and this Agreement.
Management
Fee
Schedule 2—Rules for interpretation
In this Agreement unless the context indicates a contrary intention:
(a) Words denoting any gender include all genders.
(b) The singular number includes the plural and vice versa.
(c) References to any legislation includes any legislation which
amends or replaces that legislation.
(d) A person includes their executors, administrators, successors,
substitutes (for example, persons taking by novation) and assigns.
(e) A person includes companies and corporations and vice versa.
This Deed is dated
and made between FEA Plantations
Limited ACN 055 969 429 (Responsible Entity) and the Grower
named in the Application Form & Power of Attorney into which this
agreement is incorporated (Grower).
Whereas:
(a) The Responsible Entity has been granted the Forestry Right under
the Forestry Right Deed and is entitled to lease its Forestry Right
in the Land to the Grower.
(c) The Responsible Entity has agreed to lease and the Grower has
agreed to take, a lease of the Responsible Entity’s Forestry Right
to use the Land on the terms contained in this Deed.
1. Definitions and interpretation
In this Deed, unless the context otherwise requires:
Authorised User means the manager appointed under the
Management Agreement or any person authorised by the manager.
Carbon Sequestration by a tree or forest means the process by which
the tree or forest absorbs carbon dioxide from the atmosphere.
Carbon Sequestration Right means a right conferred on a person (by
agreement or otherwise) to the legal, commercial or other benefit
(whether present or future) of Carbon Sequestration by any existing
or future tree or forest on the land.
Constitution means the constitution deed for the establishment of
the FEA Plantations Project 2008, as amended from time to time.
Deed means this deed as amended supplemented or varied from
time to time.
Forestry Right means the right granted to the Responsible Entity
under a Forestry Right Deed to carry out in, over or through the Land,
the activities specified therein and to enter into the Land for the
purposes of the forestry right.
Forestry Right Deed means any deed under which the Responsible
Entity has been granted a Forestry Right to use the Land for forestry
purposes as set out in that deed.
Gross Harvest Proceeds
the Constitution.
has
the
same
meaning
as
in
(f) Except in the dictionary, headings do not affect the interpretation
of this Agreement.
Harvest means the cutting down and removal of all the Plantation
Crop from the Land and “Harvesting” and “Harvested” have
corresponding meanings.
(g) The construction least favourable to the party responsible
for drafting the Agreement will not be adopted against that
party merely because that party put forward the first draft of
this Agreement.
Land means the Woodlot or Woodlots shown in blue on the grid plan
annexed to this Deed and allocated by the Responsible Entity to the
Grower in accordance with the Product Disclosure Statement.
(h) Words in italics provide an explanation or example of the intended
operation of the particular clause in question and may be used to
resolve any dispute about that clause.
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(k) A reference to any thing includes the whole or each part of it.
Management Agreement has the same meaning as in the
Constitution.
Option 1 Woodlot has the same meaning as in the Constitution.
(i) Amounts of money are expressed in Australian dollars unless
otherwise expressly stated.
Option 2 Woodlot has the same meaning as in the Constitution.
(j) A reference to a document includes any variation or replacement
of it.
Option 4 Unit has the same meaning as in the Constitution.
Option 3 Woodlot has the same meaning as in the Constitution.
Product Disclosure Statement has the same meaning as in the
Constitution.
(ii) Take away and sell or otherwise dispose of the Plantation
Crop as permitted under the Constitution.
Plantation Crop means any form of agricultural crop or crops of trees
planted and tended on the Land during the Term.
(iii) Generally do all things which may be usual or necessary to
carry on a commercial forestry undertaking including, but
not limited to, irrigating, fertilising and controlling pests.
Project has the same meaning as in the Constitution.
Rent has the same meaning as in the Constitution.
Salvage Harvest has the same meaning as in the Constitution.
Salvaged Value has the same meaning as in the Constitution.
Term means the period commencing on the date of allocation of the
Land to the Grower by the Responsible Entity until the clear fall of
trees or the expiry of 30 years from the date the Land is allocated,
whichever is the earlier.
(iv) The proportionate benefit of the sale of any Carbon
Sequestration Right or carbon credit in connection with the
Land dealt with by the Responsible Entity under clause 7 of
the Management Agreement but otherwise excluding any
Carbon Sequestration Right that is not connected to the Land
even though it is deemed to be or is part of the Responsible
Entity’s Forestry Right.
Woodlot Option has the same meaning as in the Constitution.
(b) The Grower must not use the Land for any other purpose
and agrees that the rights granted pursuant to this Deed are
subject to the terms and conditions of the Constitution and the
Management Agreement.
1.2 Interpretation
2.2 Enforceable covenants
In the interpretation of this deed, unless the context otherwise
requires:
The Responsible Entity and the Grower acknowledge and agree
that the rights granted in this Deed to the Grower are covenants
enforceable by each party against the other pursuant to this Deed.
Woodlot has the same meaning as in the Constitution.
(a) Singular includes plural and vice versa.
(b) Any gender includes every gender.
3. The Grower’s covenants
(c) References to people includes corporations, associations,
partnership, governmental authorities and other legal entities.
3.1 Little interference
(d) Headings are used for convenience only and are to be
disregarded.
(e) Where any word or phrase is given a defined meaning any other
grammatical form of that word or phrase has a corresponding
meaning.
(f) A reference to legislation includes an amendment of or
substitution for it and a regulation or statutory instrument issued
under it.
(g) Unless stated otherwise, one word or provision does not limit the
effect of another.
(h) Reference to the whole includes part.
(i) All obligations are taken to be required to be performed properly
and punctually.
1.3 Governing law
This Deed is governed by the law of the State where the Land is
situated.
1.4 Future liability
This Deed is binding on the parties and their respective successors
in title and shall be enforceable by and against the parties or
those successors.
1.5 Joint and several liability
If any party consists of more than one person then the liability of
those persons in all respects under this Instrument shall be joint and
several liability.
2. Grant of lease
2.1 Grant
(a) The Responsible Entity grants to the Grower and the Grower
takes from the Responsible Entity for the Term, a lease of the
Responsible Entity’s Forestry Right over the Land including the
right for the Authorised User to have the use and benefit of the
Forestry Right as it pertains to the Land and including the right
(with or without vehicles, farming equipment and machinery) at
all times to:
(i) Go onto the Land and the exclusive right to use the Land
for the purposes of planting, tending, growing, cultivating,
maintaining and Harvesting the Plantation Crop.
In exercising its rights under this Deed, the Grower must cause as little
nuisance, disturbance or annoyance to neighbours as is reasonably
practicable having regard to normal forestry practices.
3.2 Chemicals or dangerous substances
The Grower must not use or store any chemical, inflammable, noxious
or dangerous substances on the Land, other than where reasonably
necessary for any use incidental to the Grower’s activities on the Land
permitted under this Deed.
3.3 Buildings
The Grower must not erect any buildings or other structures on
the Land.
3.4 Insurance
(a) The Responsible Entity will arrange public liability insurance to a
limit of $10,000,000 at no charge to the Grower.
(b) The Responsible Entity will use reasonable endeavours to arrange
plantation insurance against the risks of fire and windstorm at an
economic cost but does not covenant to do so. If the Responsible
Entity does not do so the Grower acknowledges that it bears these
risks and that it would be prudent for the Grower to insure against
those risks. If the Responsible Entity is able to obtain such cover the
Grower must reimburse the Responsible Entity for the proportionate
cost thereof upon demand from the Responsible Entity.
3.5 Permit Responsible Entity to enter
The Grower must at all times permit the Responsible Entity, its
contractors and employees to enter the Land with or without
vehicles, equipment and machinery. The Responsible Entity must
give the Grower reasonable notice of its intended entry onto the
Land and the Responsible Entity will at all times endeavour to
cause as little inconvenience as practicable to the Grower’s forestry
activities. The Grower must co-operate with the Responsible Entity
in allowing the Responsible Entity to carry out inspections, surveys
and other related activities.
3.6 Control of fires
The Grower must take all measures reasonably within the power of
the Grower to ensure that any fires which may occur or be lit on the
Land are properly controlled and supervised.
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16.
Project Agreements
3.7 Indemnity
The Grower indemnifies the Responsible Entity from and against all
losses, damages, costs, claims and liabilities the Responsible Entity
may suffer or incur arising out of or in connection with:
(a) The exercise by the Grower of its rights under this Deed.
(b) The negligent acts or omissions or wilful misconduct of the
Grower, its employees and contractors.
4. Mutual covenants
4.1 Execution of documents
Each party promptly must execute all documents and do all other
things that the other of them from time to time reasonably requires
to effect, perfect or complete the provisions of this Deed.
4.2 Costs
The Responsible Entity must pay the costs of and incidental to the
preparation execution and stamping of this Deed including stamp
duty on this Deed.
7% of the insurance proceeds received by the
Grower in respect of the insured event.
Option 4
Unit
12% of the insurance proceeds received by the
Grower in respect of the insured event relating to
those Woodlots which are Option 1 Woodlots and
Option 2 Woodlots; and
7% of the insurance proceeds received by the
Grower in respect of the insured event relating to
those Woodlots which are Option 3 Woodlots.
(e) The Responsible Entity may retain the Rent from the Gross
Harvest Proceeds of the Project.
(f) If the Grower defaults in payment of the Rent or this Deed
terminates before Harvesting the Grower’s Plantation Crop on the
Land, then the Rent is payable as a liquidated debt by the Grower
to the Responsible Entity upon demand and the Responsible Entity
has a lien over and in respect of the Plantation Crop and Gross
Harvest Proceeds of the Grower as security for this obligation.
5. Rent
(g) The Responsible Entity must first apply the Rent towards payment
of any accrued or outstanding rental amounts due under the
Forestry Right Deed.
(a) The Grower must pay the Rent to the Responsible Entity in
accordance with the Constitution.
6. Goods and Services Tax
(b) The Rent per Woodlot Option is as follows:
Option 1
Woodlot
12% of the Grower’s proportionate share of the GST
inclusive Gross Harvest Proceeds.
Option 2
Woodlot
12% of the Grower’s proportionate share of the GST
inclusive Gross Harvest Proceeds.
Option 3
Woodlot
7% of the Grower’s proportionate share of the GST
inclusive Gross Harvest Proceeds.
Option 4
Unit
12% of the Grower’s proportionate share of the GST
inclusive Gross Harvest Proceeds in respect of those
Woodlots which are Option 1 Woodlots and Option 2
Woodlots; and
7% of the Grower’s proportionate share of the GST
inclusive Gross Harvest Proceeds in respect of those
Woodlots which are Option 3 Woodlots.
(c) In the event of a Salvage Harvest, the Rent per Woodlot Option is
as follows:
Option 1
Woodlot
12% of the Grower’s proportionate share of the GST
inclusive salvaged value.
Option 2
Woodlot
12% of the Grower’s proportionate share of the GST
inclusive salvaged value.
Option 3
Woodlot
7% of the Grower’s proportionate share of the GST
inclusive salvaged value.
Option 4
Unit
12% of the Grower’s proportionate share of the
GST inclusive salvaged value in respect of those
Woodlots which are Option 1 Woodlots and Option 2
Woodlots; and
7% of the Grower’s proportionate share of the
GST inclusive salvaged value in respect of those
Woodlots which are Option 3 Woodlots.
(d) In the event insurance proceeds are paid to a Grower in respect
of any of the Grower’s Woodlots, the Rent payable by the
Grower per Woodlot Option is as follows:
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Option 3
Woodlot
Option 1
Woodlot
12% of the insurance proceeds received by the
Grower in respect of the insured event.
Option 2
Woodlot
12% of the insurance proceeds received by the
Grower in respect of the insured event.
(a) The parties acknowledge and agree that any Rent payable
under or in connection with this Deed has been agreed upon as
inclusive of any GST that may be payable as a result of the supply
of the lease of the Forestry Right made as consideration for the
rent, at the rate of 10%. If the rate of GST increases, it is agreed
that the amount of the Rent shall increase by the amount of the
further GST payable.
(b) For the purposes of this Deed, all terms defined in the A New
Tax System (Goods and Services Tax) Act 1999 (GST Act) have the
meanings given to those terms in the GST Act.
7. Damage or destruction
(a) In the event that a Grower’s Plantation Crop suffers damage to
the extent that it is not economic to nurture the Plantation Crop
to Harvest, this Deed shall come to an end as at the date of such
destruction; thereafter neither party shall have any obligation
to the other except the Grower’s obligation to pay deferred rent
owing under clause 5 of this Deed shall crystallise on the date of
destruction and there upon become due and payable.
(b) If destruction is effected by a series of connected events,
destruction shall be deemed to have occurred at the time at
which it was no longer economically viable to continue nurturing
the Plantation Crop towards Harvest.
(c) In the event that part only of a Grower’s Plantation Crop is
rendered uneconomic (as determined by the Responsible Entity)
by virtue of destruction of trees, the area of the Land occupied
by the remaining Plantation Crop shall be substituted in the
register of Growers as the Land and the fees in respect thereof
shall abate pro rata according to the extent of the Plantation
Crop remaining.
(d) In determining the apportionment of Land between destroyed
and surviving portions of the Plantation Crop, and the
consequential abatement of the Fees the principles of equity and
good conscience and natural justice shall be applied in preference
to technical provisions of the common law. In the event of any
disagreement, the disagreement shall be referred to arbitration
in accordance with the provisions of the Commercial Arbitration
Act 1990 (Qld).
(e) Without limiting the effect of the foregoing provisions of this
clause 7, in the event that the Grower’s Plantation Crop suffers
damage or destruction to the extent that it is not economic to
nurture the Plantation Crop to harvest, the Responsible Entity
may determine in its complete discretion, to undertake a Salvage
Harvest of the Trees. Where a Salvage Harvest occurs, the affected
Grower’s Interest comes to an end at the same time this Deed
comes to an end as described in clauses 7(a) and 7(b) above,
subject only to any rights the Grower has to an entitlement to a
share of the income distribution attributable to the Grower from
the proceeds of sale of the salvaged Trees and any rights of the
Grower under the Constitution.
(f) For the avoidance of any doubt, reference in this clause 7 to
the damage or destruction of a Grower’s Plantation Crop does
not include a reference to the destruction of Trees caused as
a result of the normal harvesting of Trees during thinning or
final harvest.
8. Power of attorney
Where this Deed is executed by an attorney on behalf of a party the
attorney declares that:
(a) The power of attorney has come into effect.
(b) The attorney has had no notice of the revocation of the power
of attorney.
(c) The execution of this Deed is a lawful exercise of the powers
granted by the power of attorney.
9. Assignment, letting and sub-licensing
The Grower must not during the Term, let, assign, transfer, licence or
in any other way deal with any or all of its rights or obligations under
this Deed without the prior written consent of the Responsible Entity,
which consent, subject to payment of the Responsible Entity’s costs,
shall not be unreasonably withheld. However, nothing in this clause
prevents the Grower from engaging contractors to grow, cultivate,
maintain and Harvest the Plantation Crop pursuant to the Grower’s
rights under this Deed.
10. Termination
10.1 Grower’s default
The Responsible Entity may terminate this Deed with immediate
effect if the Grower is in material default of any of the Grower’s
obligations under this Deed and has failed to rectify the breach within
a reasonable period after the Responsible Entity has served a written
notice on the Grower requesting the breach be rectified.
10.2 Effect of termination
Any termination of the rights granted and obligations created by this
Deed pursuant to this clause will be without prejudice to any rights
acquired by either party pursuant to this Deed prior to termination.
10.3 Remedy default
The Responsible Entity is entitled (but not obliged) to remedy any
default by the Grower under this Deed which the Grower fails to
remedy within a reasonable period after receiving a notice to do so,
and whenever the Responsible Entity does so, the Grower must pay to
the Responsible Entity on demand, all costs and expenses reasonably
incurred by the Responsible Entity in remedying the default.
11. Miscellaneous
11.1 Severance
If any part of this Deed is, or becomes, void or unenforceable that part
is or will be, severed from this Deed to the intent that all parts that
are not, or do not become, void or unenforceable remain in full force
and effect and are unaffected by that severance.
11.2 Modification
No modification or amendment of this Deed will be valid or binding
unless made in writing and duly executed by the parties.
11.3 Further assurances
The parties must execute and do all such acts and things as is
necessary or desirable in order to implement and give full effect to
the provisions and purposes of this Deed.
11.4 Dealings by Responsible Entity
The Grower will not require this Deed or its title and interest in the
Land under this Deed to be registered under any applicable land
law permitting registration. If the Responsible Entity wishes to sell,
transfer, licence, mortgage, charge or otherwise dispose of the
Forestry Right, the Responsible Entity may do so providing that the
Responsible Entity first arranges (at the Responsible Entity’s cost) for
each other party to the transaction to enter into a deed in favour of
the Grower by which that other party agrees to comply with and be
bound by the terms of this Deed as if that other party was named in
this Deed as Responsible Entity.
11.5 Caveats
The Grower must not lodge a caveat in respect of its interest under
this Deed.
12. Assignment
To the extent permitted by law, the Responsible Entity is entitled to
assign the benefit of this Deed to any other person, provided the
assignee covenants to the Responsible Entity to be bound by the
terms and conditions of this Deed in place of the Responsible Entity.
The Grower can only assign the benefit of this Deed with the consent
of the Responsible Entity, which cannot be unreasonably withheld in
the case of a suitable person.
13. Condition precedent
(a) The provisions of this Deed have no operation until this Deed has
been signed by all parties, dated and has all outstanding details
completed, notwithstanding it may already have been signed by
one of the parties to the Deed.
(b) This Deed is of no force or effect until the Forestry Right Deed
between the relevant landowner and the Responsible Entity has
been signed.
14. Grower deemed to have signed
The Grower is deemed to have signed this Deed at the time the
Grower executes the Application Form & Power of Attorney contained
in the Product Disclosure Statement for the Project.
OTHER RELEVANT AGREEMENTS
Other agreements relevant to the Project, but which are not lodged
with ASIC are summarised below.
SUMMARY OF THE
FORESTRY RIGHT DEED
The following is a summary description of certain clauses in the
Forestry Right deed. The Forestry Right deed must be referred to for
full legal terms and effect. If you wish to view the full contents of the
Forestry Right deed (or receive a copy free of charge), then please
contact our head office during normal business hours.
Forestry Right
Pursuant to the terms of each Forestry Right deed, the landowner
grants FEA Plantations a Forestry Right over land to enable FEA
Plantations to use the land for the purposes of operating the Project.
The Forestry Right entitles FEA Plantations to use and sublease the
land for use by Growers in the Project for the purposes of commercial
forestry operations.
Pursuant to the Forestry Right Deed, FEA Plantations obtains a
registrable interest in land.
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16.
Project Agreements
Fees
SUMMARY OF LOAN AGREEMENT
FEA Plantations must pay the Forestry Right fee annually plus any
applicable GST. The fee will be reviewed annually in accordance
with CPI.
Forest Enterprises Australia Ltd can provide eligible Growers with
finance pursuant to the ‘Loan Agreement’.
Term
The Forestry Right deed has an initial term of 30 years and may
continue on a month to month basis after this term unless terminated
by one month’s notice in writing. FEA Plantations has an option to
renew for an additional 30 years.
FEA Plantations’ obligations
The Forestry Right deed sets out FEA Plantations’ obligations relating
to the use, maintenance and repair of the land.
SUMMARY OF THE
CUSTODIAN AGREEMENT
SUMMARY OF DEED OF
GUARANTEE AND INDEMNITY
Where a company applicant wishes to enter a Loan Agreement with
FEA, this ‘Deed of Guarantee and Indemnity’ is made in consideration
of, among other things, FEA agreeing, at the request of the Guarantor,
to provide financial accommodation under the Loan Agreement to the
borrower named in the ‘Application Form & Power of Attorney’.
FEA Plantations has appointed Tasmanian Perpetual Trustees Ltd as
Custodian to hold the relevant assets of the Project pursuant to the
terms of the Custodian agreement. The Custodian’s major functions
are set out in the Custodian agreement and include:
Under the ‘Deed of Guarantee and Indemnity’:
(a) Receiving and holding money paid by Applicants.
(b) if any of those amounts are not recovered from the borrower or are
not recovered from the Guarantor on the footing of a guarantee,
the Guarantor unconditionally and irrevocably indemnifies FEA
against any claim, action, damage, loss, liability, cost, charge,
expense, outgoing or payment suffered, paid or incurred by FEA
in relation to the non-payment or non-recovery of the borrowed
funds, interest and costs.
(b) Receiving all income.
(c) Holding relevant property in safe custody.
FEA Plantations also has obligations under the Custodian agreement,
such as placing the relevant Project assets into the control of the
Custodian and indemnifying the Custodian in respect of any liability
the Custodian may incur in the performance of its duties as agent, or
by acting in accordance with FEA Plantations’ directions.
The Custodian will receive the following fee as well as reimbursement
for out of pocket expenses to be paid from the assets of the Project:
(a) An initial fee of $20,000 for processing applications from up to
1,500 Growers.
(b) A further amount of $1,000 per each additional 100 Growers.
(c) A fee of $500 per project per annum with a total minimum in
each year of not less than $3,000.
(d) A fee of $5,000 for administering proceeds of Thinnings.
(e) A fee of $50,000 for administering proceeds of final harvest.
(f) A termination fee of $50,000.
SUMMARY OF THE WOOD
PURCHASE AGREEMENT
The Responsible Entity has entered into the ‘Wood Purchase
Agreement’ to sell all timber from the Project, on behalf of Growers,
to FEA upon harvest.
Pursuant to the ‘Wood Purchase Agreement’, the purchase price for
the timber must be a fair and reasonable price per tonne and in any
event must not be less than the Average Comparative Price or the
relevant Floor Price.
If you wish to view the full contents of the ‘Wood Purchase Agreement’
(or receive a copy free of charge), then please contact our head office
during normal business hours.
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If you wish to obtain finance to pay for the monies and fees owed
to the Responsible Entity for obtaining an interest in the Project,
then please contact our head office during normal business hours
to obtain a full copy of the ‘Loan Agreement’ (containing full legal
terms and effects).
(a) the Guarantor unconditionally and irrevocably guarantees to FEA
the payment on time of all borrowings, interest, fees and costs
under the Loan Agreement; and
If you wish to view the full contents of the ‘Deed of Guarantee and
Indemnity’, or receive a copy free of charge, then please contact our
head office during normal business hours.
ACKNOWLEDGMENT AND CONSENT
UNDER THE PRIVACY ACT
This is an application for credit from FEA. The Privacy Act 1988 (Cth)
regulates the manner in which private sector organisations exchange
and use personal and credit information about individuals. Since we
need to exchange and use personal and credit information about
Applicants and their guarantors in relation to the application for
credit, completion of this form ensures compliance with the Act. All
individual borrowers and guarantors will need to sign and date the
consents and acknowledge that this consent remains in force until the
loan/s to which they relate are repaid.
IF I AM A BORROWER
Notice and Acknowledgment that Credit Information
may be Given to a Credit Reporting Agency
I understand that the Privacy Act allows you to give a credit reporting
agency certain personal information about me which I authorise you
to do. The information which may be given to an agency is covered
by the Act and includes:
Such permitted particulars about me which allow me to be
identified.
The fact that I have applied for credit and the amount.
The fact that you are a credit provider to me.
Payments which become overdue at least sixty (60) days and for
which collection action has commenced.
Advice that payments are no longer overdue.
The fact that you have drawn a cheque for $100 or more which
has been dishonoured more than once.
Notice and Authority to Give
Information to Guarantors
In specified circumstances, that in your opinion I have committed
a serious credit infringement.
That the credit you provided to me has been repaid/discharged.
I authorise you to give any guarantor or proposed guarantor, credit
information or any record that has any bearing on my credit worthiness,
credit standing, credit history or credit capacity in connection with
such credit facilities, including a copy or summary of the guaranteed
loan agreement, a copy of any formal demand made by you under
the terms of the agreement and, if the guarantor asks, a copy of the
latest account statement for the guaranteed loan.
Authority to Obtain Certain Information
I authorise you and any agent of yours that is deemed to be a credit
provider pursuant to the Act:
To obtain from a credit reporting agency a credit report containing
information about my personal credit worthiness to assess my
application for credit.
To obtain a report containing information about my commercial
activities or commercial credit worthiness from any business which
provides information about the commercial credit worthiness of
persons for the purpose of assessing my application for credit.
To obtain from a credit reporting agency a credit report containing
information about my personal credit worthiness for the purpose
of the collection of overdue payments in respect of credit which
you have provided to me.
When you are performing tasks reasonably necessary to the
provision and management of securitised loans, to obtain from a
credit reporting agency a credit report containing personal credit
information about me for the securitisation purposes permitted
by the Act.
Authority to Exchange Information
with Other Credit Providers
Authority to Obtain and Verify Personal Details
I authorise and consent to you obtaining personal information about
me to verify my personal details in this application. Without limitation,
you may collect personal information from my employers, financial
advisers and/or accountants. I acknowledge that upon the supply of
my personal information as provided herein and upon you collecting
personal information about me from other sources as authorised
herein by me, I acknowledge:
1. That I can contact FEA at 233B Charles Street Launceston in
Tasmania.
2. I am able to gain access to that information.
3. That the purposes for which personal and credit information is
collected is contained in this acknowledgment and consent.
4. That the organisations to which that information will be disclosed
are disclosed in this acknowledgment and consent, but for
these purposes are extended to your debt collectors, subsidiary
companies, agents and lawyers.
credit providers named in the credit application;
5. The Corporations Act 2001, ASIC and other regulatory bodies
from time to time require the said particular information to
be collected which is in accordance with the National Privacy
Principles pursuant to the Privacy Act 1988 (Cth).
participants in a securitisation scheme in which you are involved
that are regarded as credit providers due to the effect of s11B
(4A) and (4B) of the Act;
6. That if I fail to provide all or part of the information as requested,
that you may refuse to extend credit to me and/or allocate the
Woodlots applied for.
the credit provider in any such securitisation scheme;
any agent of yours that is deemed to be a credit provider pursuant
to s11B (5) of the Act; and
I acknowledge that the above consents, instructions and authorities
endure until the loan agreement to which they relate is at an end.
any credit provider that may be named in a personal or
commercial credit report issued by a credit reporting agency or a
commercial reporting agency respectively;
In accordance with the Privacy Act, I authorise you to give to and
obtain from:
information about my personal or commercial credit arrangements.
I understand this information can include any information about my
credit worthiness, credit standing, credit history or credit capacity
that credit providers are allowed to give or receive from each other
under the Act.
Purposes for which the Authority to Exchange
Information with Other Credit Providers is Provided
I understand the information may be given and used for purposes
that include the following:
IF I AM A GUARANTOR
Notice and Acknowledgment that Credit Information
may be Given to a Credit Reporting Agency
I understand that the Privacy Act allows you to give a credit reporting
agency certain personal information about me which I authorise you
to do. The information which may be given to an agency is covered
by the Act and includes:
Such permitted particulars about me which allows me to
be identified.
The fact that I have offered to act as a guarantor in respect of the
loan enquired for by the borrower.
To assess an application by me for credit.
The fact that I have failed to pay an amount due by me as
guarantor where, amongst other things:
To assist me avoid defaulting on my credit obligations.
–
To notify other credit providers of a default by me.
I have received notice of default by the Borrower and have
not paid for 60 days after that notice; and
To assess my credit worthiness.
–
To assess my position if I fall into arrears.
You have, in addition to that notice, commenced action to
recover the amount due from me.
Where the information is given to participants in a securitisation
scheme, for the purpose of assessing the risk in purchasing any
credit facility given to or applied for and/or the risk in undertaking
credit enhancement of any such facility.
Cheques drawn by me for $100 or more which have been
dishonoured more than once.
In specified circumstances, that in your opinion I have committed
a serious credit infringement.
101
16.
Project Agreements
This information may be given before, during or after the assessment
is made of whether to accept the application of the borrower or me
as guarantor for the borrower.
Notifying a failure by me to observe my obligations as
guarantor.
Allowing another credit provider to ascertain the status of my
obligations to the Financier where I am in default with one or
more other credit providers.
Generally assessing my credit worthiness.
Authority to Obtain Certain Information
I authorise you and any agent of yours that is deemed to be a credit
provider pursuant to the Act:
To obtain from a credit reporting agency a credit report about
me containing personal credit information to assess whether to
accept me as guarantor for credit applied for or provided to the
borrower.
Where you are performing tasks reasonably necessary to the
provision and management of securitised loans, I authorise you
to obtain from a credit reporting agency a credit report about
me containing personal credit information for the securitisation
purposes permitted by the Act.
To obtain information about my commercial activities or credit
worthiness from a provider that provides information about the
commercial credit worthiness of persons for the purposes of
assessment to accept or otherwise, me as guarantor for credit
applied for by the borrower.
Authority to Exchange Information
with other Credit Providers
In accordance with the Privacy Act, I authorise you to give to and obtain
from any of my credit providers and/or parties to a securitisation
scheme that are providers due to the effect of s11B (4A) and (4B) of
the Act, any record relevant to my credit worthiness, credit history,
credit standing or credit capacity for the purposes of:
102
Assessing the application of the Borrower and whether to accept
me or otherwise as guarantor for credit applied for or provided to
the borrower.
For any purpose relevant to the subsequent management of the
credit guaranteed by me.
For the purposes of the assessment of the risk in purchasing any
credit facility given to or provided for by the borrower from you
and/or the risk in undertaking credit enhancement of such a
credit facility.
I understand the information exchanged can include any information
about my personal and/or commercial credit worthiness, credit
standing, credit history or credit capacity which the Privacy Act allows
credit providers to give to or receive from each other.
Authority to Obtain Guarantor Information
I acknowledge that upon the supply of my personal information as
provided herein and upon you collecting personal information about
me from other sources as authorised herein by me, I acknowledge:
1. That I can contact FEA at 233B Charles Street Launceston in
Tasmania.
2. I am able to gain access to that information.
3. That the purposes for which the information is collected is
contained in this acknowledgment and consent.
4. That the organisations to which that information will be disclosed
are disclosed in this acknowledgment and consent, but for
these purposes are extended to your debt collectors, subsidiary
companies, agents and lawyers.
5. The Corporations Act 2001, ASIC and other regulatory bodies
from time to time require the said particular information to
be collected which is in accordance with the National Privacy
Principles pursuant to the Privacy Act 1988 (Cth).
6. That if I fail to provide all or part of the information as requested,
that you may refuse to accept the guarantee by me or extend
credit to the borrower and/or allocate the Woodlots applied for
by the borrower.
I acknowledge that the above consents, instructions and authorities
endure until the loan agreement to which they relate is at an end.
17. HOW
TO APPLY
Instructions
Checklist
Declarations and Acknowledgements by Applicants
Application Form & Power of Attorney
Direct Debit Authority
Applications to participate in the Project may only be made by completing the application form attached to
this PDS and forwarding it to FEA Plantations, along with any identification and verification documentation
requested by FEA Plantations or your financial adviser for AML/CTF verification purposes.
Applicants should read the ‘Instructions’ on page 104 and complete the ‘Checklist’ on page 105, prior to
completing an application.
If you have any questions, please either call your financial adviser or one of our Business Services Officers
on freecall 1800 600 009.
When completed, the application must be returned to:
FEA Plantations Project 2008
FEA Plantations Ltd
PO Box 733
Launceston, Tasmania 7250
Applications may also be faxed to FEA Plantations on: (03) 6331 5047. Please ensure all pages are faxed and
forward the original signed documentation to FEA Plantations.
103
INSTRUCTIONS
Before Applying
To Apply
All Applicants must read the whole of this PDS and the AML/
CTF booklet provided with it carefully before completing the
application form, and ensure that all information requested has
been provided.
Applicants can apply to FEA Plantations for an interest in the Project
by completing the ‘Application Form & Power of Attorney’ on pages
107 - 109. Applicants must:
Any person who passes on the ‘Application Form & Power of Attorney’
to another person (prior to investment) must also at the same time
and by the same means give the other person access to the Product
Disclosure Statement and any supplementary documents.
Assistance
Please use the checklist on page 105 to ensure your application is
completed correctly. A guide to completing the application forms
can be obtained from FEA Plantations or from our website at
www.fealtd.com. If you have any questions, please either call
your financial adviser or one of our Business Services Officers on
freecall 1800 600 009.
Anti-Money Laundering and
Counter-Terrorism Financing
104
Complete the documentation using either black or blue pen and
write legibly.
Ensure the documentation is completed in full, including the
payment details section on page 108.
Ensure any witness inserts their full name and signs for witnessing
any signatures.
Ensure any alterations to the investment documentation are
neatly corrected and initialled.
Ensure that no correction fluid is used on any investment
documentation.
Return the original signed documentation; facsimiles or
photocopies will not be accepted.
The ‘Application Form & Power of Attorney’ must be signed
personally or by the Applicant’s authorised attorney, or
where the application is by a company, must be executed in
accordance with the requirements of the Corporations Act.
Application/Deposit Monies
You need to provide FEA Plantations or your dealer/financial
adviser with the identification information required pursuant to the
AML/CTF Act. You will be requested to provide the information
set out in the AML/CTF booklet which details all the information
required to be provided by you. A copy of our AML/CTF booklet
is provided with this PDS and is also available by contacting your
dealer/financial adviser, visiting our website at www.fealtd.com, or
contacting us on freecall 1800 600 009.
Application monies or any deposit payable, must be submitted with the
application documentation. Cheques must be made payable to ‘TPTL – FEA
Plantations Project 2008’ and crossed ‘Not Negotiable’, or you may pay by
credit card (Visa & Mastercard only) by completing the credit card section
on page 108. Please note that direct bank deposits cannot be accepted.
If you are an existing investor (i.e., you have previously invested
in an FEA Plantations’ project) you do not need to provide any
AML/CTF identification and verification documentation, however you
must complete the ‘Existing Investor’ checkbox on page 107.
FEA Plantations Project 2008
FEA Plantations Ltd
PO Box 733
Launceston, Tasmania 7250
Correct forms of registrable name
Joint Application Ownership
Applications must be in the name of natural persons, companies or
other legal entities acceptable to FEA Plantations. At least one full
given name and surname is required for each natural person. The
name of the beneficial or any other non registrable name may be
included by way of a fund or trust designation if completed exactly as
described in the examples of registrable names below.
Joint holdings will be deemed to be joint tenants unless FEA Plantations
are notified in writing by the Applicants. With joint tenancy, on the
death of one joint holder, ownership of the Woodlot automatically
passes to the surviving joint holder.
Lodging Applications
Type of Investor
Instruction
Correct Form
Individual
Use given names in full, not initials
Mr John David Brown
Joint Holdings
Use full and complete names
Mr John David Brown & Mrs Jane Mary Brown
Partnership
Use partners’ personal names
Mr John David Brown & Mrs Jane Mary Brown
Company
Use the company’s full title, not
abbreviations
John Smith Pty Ltd, ACN XXX XXX XXX
Superannuation Funds
Use the name of the trustee of the fund
John Smith Pty Ltd as trustee of <Super Fund a/c>
Trusts
Use the trustee company name or
personal name
John Smith Pty Ltd as trustee for the <name of trust>
or
Mr John David Brown & Mrs Jane Mary Brown as trustee for
the <name of trust>
CHECKLIST
Before completing and signing the application form, you should read the PDS and the AML/CTF booklet provided with it in full. Please ensure
any alterations are neatly corrected and initialled, and that no correction fluid has been used. Please use the following checklist to ensure your
application is completed correctly.
PAYMENT IN FULL
Complete the ‘Application Form & Power of
Attorney’ on pages 107 - 109.
The form must be signed in front of an independent adult witness (not a relative),
who must sign as witnessing your signature/s.
Provide the AML/CTF identification and verification
documentation set out in the AML/CTF booklet.
If you are an existing investor, you do not need to provide any AML/CTF
identification and verification documentation, however you must complete the
‘Existing Investor’ checkbox on page 107. Please refer to the checklist below to
ensure your application is completed correctly.
Complete the ‘Direct Debit Authority’ on page 111.
Required for annual insurance premiums (if applicable).
Provide a ‘Cheque’ or ‘Credit Card’ details for 100%
of application monies.
Cheques must be made payable to ‘TPTL – FEA Plantations Project 2008’ and
crossed ‘Not Negotiable’, or you may pay by,
Credit card (Visa & Mastercard) by completing the credit card section on page 108.
1 YEAR INTEREST FREE FINANCE, or PRINCIPAL & INTEREST FINANCE FROM FEA < $100,000
Complete the ‘Application Form & Power of
Attorney’ on pages 107 - 109.
The form must be signed in front of an independent adult witness (not a relative),
who must sign as witnessing your signature/s.
Provide the AML/CTF identification and verification
documentation set out in the AML/CTF booklet.
If you are an existing investor, you do not need to provide any AML/CTF
identification and verification documentation, however you must complete the
‘Existing Investor’ checkbox on page 107. Please refer to the checklist below to
ensure your application is completed correctly.
Complete the ‘Direct Debit Authority’ on page 111.
Required for loan repayments and annual insurance premiums (if applicable).
Provide a ‘Cheque’ or ‘Credit Card’ details for
deposit monies, if applicable.
Cheques must be made payable to ‘TPTL – FEA Plantations Project 2008’ and
crossed ‘Not Negotiable’, or you may pay by,
Credit card (Visa & Mastercard) by completing the credit card section on page 108.
(Payment of a deposit is optional for this option)
OTHER PRINCIPAL & INTEREST FINANCE – Includes FEA Finance Applications of $100,000 or more
Complete the ‘Application Form & Power of
Attorney’ on pages 107 - 109.
The form must be signed in front of an independent adult witness (not a relative),
who must sign as witnessing your signature/s.
Provide the AML/CTF identification and verification
documentation set out in the AML/CTF booklet.
If you are an existing investor, you do not need to provide any AML/CTF
identification and verification documentation, however you must complete the
‘Existing Investor’ checkbox on page 107. Please refer to the checklist below to
ensure your application is completed correctly.
Complete the ‘Direct Debit Authority’ on page 111.
Required for annual insurance premiums.
Complete the ‘Finance Application’ pack.
To obtain a ‘Finance Application’ pack, please contact either your financial adviser
or alternatively contact us on freecall 1800 600 009.
Applicants should ensure that additional information requested in conjunction
with the ‘Finance Application’ is provided.
Provide a ‘Cheque’ or ‘Credit Card’ details for
deposit monies, if applicable.
(Payment of a deposit may be required depending on
which finance application is being used)
Cheques must be made payable to ‘TPTL – FEA Plantations Project 2008’ and
crossed ‘Not Negotiable’, or you may pay by,
Credit card (Visa & Mastercard) by completing the credit card section on page 108.
ANTI-MONEY LAUNDERING AND COUNTER-TERRORISM FINANCING
If investing through a financial adviser.
Please provide your financial adviser with the material listed in section 2.2 of
the AML/CTF booklet along with any identification and verification materials your
financial adviser requests from you.
If you are investing directly.
Please provide the material listed in section 2.3 of the AML/CTF booklet along
with AML/CTF identification and verification documentation set out in section 3 of
the AML/CTF booklet.
If you are an existing Investor.
You do not need to provide any AML/CTF identification and verification
documentation, however you must complete the ‘Existing Investor’ checkbox on
page 107.
105
Declarations and Acknowledgements by Applicants
Declarations and Acknowledgements by
all Applicants
Declarations by Guarantors of Finance
Each Applicant for investment in the Project acknowledges and/or warrants
that:
•
You are 18 years of age or older and have read and understood – ‘Deed
of Guarantee and Indemnity’ contained in Section 16 and agree to be
bound by those terms as the ‘Guarantor’ in favour of FEA, in respect of the
finance provided to the loan applicant.
•
Each director of the company applicant has read and understood – ‘If I
am a Guarantor’ in Acknowledgment and Consent under the Privacy Act
contained in Section 16 and agrees that FEA may obtain, use and disclose
credit information on the terms set out in that document until the loan
agreement to which it relates is at an end.
•
You are an Australian Resident.
•
In the case of an Individual Applicant (or Joint Applicant), you declare that
you are 18 years of age or older.
•
You have had the opportunity to take advice on the PDS, Project
agreements and the Power of Attorney, and agree to be bound whether
or not you have read them in full.
•
You have obtained any advice that you required from a tax or other
financial adviser to the effect that this investment is suitable for you.
•
If the Applicant is a company or a trust, every person signing this
‘Application Form & Power of Attorney’ agrees to be bound and liable as
if an individual Applicant and warrants that the company or trust has the
capacity to enter into the Project and the obligations of a Grower.
•
•
•
•
You agree to become a registered Grower bound by the Constitution and
irrevocably appoint FEA Plantations and each of its officers jointly and
severally as my/our attorney in accordance with the terms and conditions
of the Power of Attorney contained below.
That by executing this ‘Application Form & Power of Attorney’ you are
deemed to have signed, and have agreed to be bound by the terms of
the management agreement and Forestry Right lease deed which are
set out in full in section 16 of this PDS. You should ensure you have read
each of these agreements in full prior to signing the ‘Application Form &
Power of Attorney’.
By signing this ‘Application Form & Power of Attorney’ you hereby
authorise FEA Plantations and its directors, officers and employees to
date and complete the terms of the management agreement and Forestry
Right lease deed.
FEA Plantations, as soon as reasonably practical after acceptance of this
application, is then required to sign the management agreement and
Forestry Right lease deed and allocate specific Woodlots and attach
annexures identifying the allocated Woodlots to the signed Forestry Right
lease deed. FEA Plantations has nine months within which to complete
and sign the Forestry Right lease deed.
•
Once the management agreement and Forestry Right lease deed have
been completed, dated and counter signed by FEA Plantations, they
become valid and binding agreements.
•
FEA Plantations is instructed upon acceptance of this application,
to immediately commence the plantation establishment services
under the management agreement, and you authorise it to expend
funds accordingly.
•
You have provided your dealer/financial adviser with all documentation
requested by them for AML/CTF investor identification and verification
purposes, or if you are investing directly in the Project you have provided
us with all relevant documentation requested in the AML/CTF booklet
provided with this PDS.
Declarations by Finance Applicants
Each Guarantor for finance from FEA acknowledges that:
Power of Attorney
I/We, the person named in the ‘Applicant Details’ on the ‘Application Form &
Power of Attorney’ (‘Applicant’) appoint FEA Plantations and each of its officers
jointly and severally (‘Attorney’) to be my/our attorney and in my/our name
and on my/our behalf and as my/our act and deed on the terms and conditions
set out below to:
(a) Complete and date the management agreement and a Forestry Right
lease deed which each Grower signs by signing this ‘Application Form &
Power of Attorney’.
(b) Vary, replace or cancel the Project agreements in respect of my/our
Woodlots and execute under hand or under seal and deliver (which
delivery may be conditional or unconditional) any document which
effects or evidences the variation, replacement or cancellation.
(c) Make, do and sign all acts, deeds and things which in the Attorney’s
opinion is necessary, expedient or incidental to or in any way relates to:
(i) any document referred to in paragraphs (a) and (b);
(ii) any transaction contemplated by any document referred to in
paragraphs (a) or (b); and
(iii) attend to the registration and stamping (if necessary) of this Power
of Attorney and with the power to instruct the attorney’s solicitors to
assist them in this regard.
(d) Do anything which ought to be done by the Applicant under, or to give
effect to, any Project agreement to which it is a party.
Terms and Conditions of Power of Attorney
By granting the Power of Attorney to the Attorney you do so on the following
terms and conditions:
1.
2. The Applicant indemnifies and keeps indemnified the Attorney against
any claim, demand, cost, charge, damage, loss and expense suffered or
incurred, however arising, consequent upon the lawful exercise of the
power granted. The Attorney’s exercise of the power does not involve any
assumption of personal liability by, or representation of the validity of this
Power of Attorney by the Attorney.
3.
Each applicant for finance from FEA acknowledges that:
•
If FEA accepts the application for loan finance, it will make the loan
available on the terms and conditions in the Loan Agreement, a copy of
which you have obtained from FEA and read and understood.
•
The application for loan finance is subject to FEA’s normal credit
approval process and FEA may request further information in assessing
the application.
•
In the case of individual applicants, you have read and understood – ‘If I
am a Borrower’ in Acknowledgment and Consent under the Privacy Act
contained in Section 16 and agree that FEA may obtain, use and disclose
credit information on the terms set out in that document until the Loan
Agreement to which it relates is at an end.
Statement about Purpose of Loan
You declare that the credit that may be provided to you by the credit provider
is to be applied wholly or predominantly for business or investment purposes,
namely participation in the Project. You should not sign these declarations
unless the loan is wholly or predominantly for business or investment
purposes. By signing this declaration you may lose your protection under the
Consumer Credit Code.
106
The Applicant undertakes to ratify and confirm every lawful exercise of
the power by the Attorney.
This Power of Attorney is irrevocable and remains in full force and effect
until termination of the Project pursuant to the Constitution.
4. Any person or corporation dealing with the Attorney in good faith may
accept a written statement signed by the Attorney to the effect that this
Power of Attorney has come into effect and has not been revoked as
conclusive evidence of that fact.
5. The authorisation in writing by the Attorney of any variations, replacements
or cancellations to Project agreements may be done by facsimile or any
other written form.
6. This Power of Attorney is made under, and to be construed in accordance
with, the laws of the state of Queensland.
7.
FEA Plantations is responsible for the cost of registering and stamping this
Power of Attorney in all jurisdictions in which it must be registered and
stamped to ensure its validity or enforceability.
8. The Attorney may, and where required by applicable law will, register
this instrument.
9.
Words and expressions given a defined meaning in the PDS in relation to
the Project or the Constitution have the same meaning in the Power of
Attorney, unless the context otherwise requires.
Application Form & Power of Attorney
FEA PLANTATIONS PROJECT 2008
ARSN: 129 750 296
Product Disclosure Statement
Dated: 19 March 2008
FEA Plantations Ltd
ABN: 44 055 969 429
Australian Financial Services Licence
No: 243515
Office Use Only
Advisers
Appn No:______________
Please complete
section on page 110
Inv No:________________
Instructions when completing applications – If any mistakes, please cross out and initial the changes. No correction fluid is to be used.
APPLICANT DETAILS
Are you an existing investor? If so, please complete the following existing investor checkbox:
I confirm I am an existing investor with FEA Plantations and have previously invested in a project for which FEA Plantations
was the Responsible Entity. My existing investment number is: _ _ _ – _ _ _
If Applicant is an Individual or Joint Applicant
Surname: Mr Mrs Ms Miss Dr
Surname: Mr Mrs Ms Miss Dr
Given Names
Given Names
Date of Birth
Date of Birth
d d / M M / Y Y Y Y ABN
ABN
d d
/
M M
/
Y Y Y Y
Name of trust (if trustee)
If Applicant is a Company
Name of Company
ABN/ACN
Name of Trust (if trustee)
Contact Details (All Applicants to Complete)
Residential Address
Suburb / Town
State
Suburb / Town
State
Postcode
Mailing Address (if different)
Telephone (Daytime Contact)
Facsimile
Mobile
Postcode
Email
WoodlotS APPLIED FOR
Investment Option
Number of each
Woodlot Option
Establishment
Fee (Incl GST)
Investment
Per Option
Woodlot Option 1 – Eucalyptus Hardwood grown for sale as
unpruned Sawlog and Pulpwood (14 Years).
x $3,465 =
$
Woodlot Option 2 – Eucalyptus Hardwood grown for sale as pruned
and unpruned Sawlog, Veneer and Pulpwood (17 Years).
x $3,465 =
$
Woodlot Option 3 – Radiata pine Softwood grown for sale as
unpruned Sawlog and Pulpwood (26 Years).
x $3,465 =
$
Woodlot Option 4 – Diversified forestry offer, being a combination
of Woodlot Options 1, 2 and 3 in a fixed ratio of four, one and two
Woodlots respectively (26 Years).
x $23,100 =
$
(A)
$
TOTAL
107
PAYMENT OPTIONS
PAYMENT IN FULL – Pay amount at (A) above
1 YEAR INTEREST FREE FINANCE FROM FEA
Total Investment Amount
Enter amount at (A) above
(A)
$
Deposit Enclosed with Application
Optional
(B)
$
(A - B)
$
Total Finance Sought
PRINCIPAL & INTEREST FINANCE FROM FEA – For Finance Applications less than $100,000
Total Investment Amount
Enter amount at (A) above
(A)
$
Deposit Enclosed with Application
Optional
(B)
$
(A - B)
$
Total Finance Sought
Please select required loan term from the following available options:
Investment Options
3 Years P & I
@ 8.5%
5 Years P & I
@ 9.0%
7 Years P & I
@ 9.5%
10 Years P & I
@ 10.0%
12 Years P & I
@ 10.5%
15 Years P & I
@ 11.0%
Woodlot Option 1
Woodlot Option 2
Woodlot Option 3
Woodlot Option 4
OTHER PRINCIPAL & INTEREST FINANCE – Includes FEA Finance Applications of $100,000 or more
You must complete a separate ‘Finance Application’ – available on request.
Total Investment Amount
Enter amount at (A) above
(A)
$
Deposit Enclosed with Application
Refer ‘Finance Application’ for details
(B)
$
Total Finance Sought
Transfer amount to ‘Finance Application’
(A - B)
$
PAYMENT DETAILS
Please select payment method, and complete the details (if applicable). Please note that this section only relates to monies paid with the
application. A separate authority is required for loan repayments if applying for finance.
No Payment
‘1 Year Interest Free’ or ‘Principal & Interest’ Finance, where no deposit is being paid.
Cheque
Please make cheque payable to: ‘TPTL – FEA Plantations Project 2008’ for the full amount at (A) or the deposit
amount at (B) if applying for finance, and cross the cheque ‘Not Negotiable’.
Visa
Please debit the full amount at (A) or the deposit amount at (B) if applying for finance:
Mastercard
Cardholder’s Name
or
Card Number
–
Cardholder’s Signature
✗
108
–
–
Expiry Date
/
INSURANCE
FEA Plantations will use reasonable endeavours to arrange insurance cover in respect of fire, and other usual risks for a Growers’ interest in
Woodlots and the Project, but no assurance is given that insurance will be available. Please refer to page 35 for further information.
Please arrange ‘Full Replacement Cost Insurance’
Please arrange ‘Basic Insurance‘
(Available to all investors and compulsory for finance
applications longer than 1 year)
(Available for cash investors and 1 year finance
applications only)
Please tick this box if you wish FEA Plantations to make
arrangements for ‘Full Replacement Cost Insurance’ on
your Woodlots.
Please tick this box if you wish FEA Plantations to make
arrangements for ‘Basic Insurance’ on your Woodlots.
WHOLESALE UNREGISTERED MANAGED INVESTMENT SCHEME
The following checkbox must be completed by any unregistered managed investment scheme with wholesale clients only investing in the Project:
We confirm and declare we are an unregistered managed investment scheme with wholesale clients only and we do not make small
scale offerings under section 1012E of the Corporations Act.
ACKNOWLEDGMENTS
Applicant Statements (All Applicants)
By signing this ‘Application Form & Power of Attorney’, I/we make each of the ‘Declarations and Acknowledgements by all Applicants’ set out on
page 106.
Finance Applicant Statements (Only applies when applying for finance via this PDS)
I/We make each of the ‘Declarations by Finance Applicants’ set out on page 106.
Guarantors of Finance Statements (Only applies when a company is applying for finance via this PDS)
Each director of a company finance applicant that has applied for finance makes the ‘Declarations by Guarantors of Finance’ set out on page 106.
SIGNATURES – All Applicants and Guarantor(s) to Sign
Executed as a Deed on d d / M M / Y
Y Y Y
Individual Applicant/s
Applicant 1
Full Name of Witness (print clearly)
✗
Applicant 2
✗
Witness
✗
Company Applicant/s
Executed in accordance with the company’s Constitution by:
Director
✗
Director/Secretary
✗
Full Name
Full Name
Guarantor/s of Company Applicant/s
(Only Applies to Directors, when Company is Applying for Finance via this PDS)
Guarantor 1
Full Name of Witness (print clearly)
✗
Guarantor 2
✗
Witness
✗
109
ADVISERS MUST COMPLETE
Adviser Name
Dealer Group
AFSL No
Business / Practice Name
Address
Suburb / Town
Telephone
Facsimile
State
Mobile
Postcode
Email
Anti-Money Laundering and Counter-Terrorism Financing
I confirm the entity holding the AFSL under which I act does not have an AML/CTF customer identification management agreement with
FEA Plantations, therefore I confirm I have forwarded to FEA Plantations all documentation I have obtained during the course of completing
my identification and verification requirements pursuant to the AML/CTF Act, or if the investors have previously invested in a project for
which FEA Plantations was the Responsible Entity, I confirm the ‘Existing Investor’ checkbox on page 107 has been completed.
OR
I confirm I have completed the AML/CTF identification and verification requirements for the investors as required under the customer
identification management agreement between FEA Plantations and the entity holding the AFSL under which I act.
For further information on the AML/CTF identification and verification requirements, please refer to pages 65 & 104.
Post your Application to:
FEA Plantations Project 2008
FEA Plantations Ltd
PO Box 733
Launceston, Tasmania 7250
Adviser Stamp
Dealer Group: Wealth Focus Pty Ltd
PO Box 760
Manly
NSW 1655
Tel 1300 55 98 69
NOTES
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110
Direct Debit Authority
Office Use Only
FEA Plantations Ltd
ABN: 44 055 969 429
Australian Financial Services Licence
No: 243515
FEA PLANTATIONS PROJECT 2008
ARSN: 129 750 296
Product Disclosure Statement
Dated: 19 March 2008
Inv No.:_ ____________________________
Amount $:___________________________
Start:_ ______________________________
For annual insurance premiums, or when applying for finance via this PDS, and a
separate finance pack has not been completed.
Date d d
/
M M
/
Finish:_ _____________________________
Y Y
Applicant Details
Surname or Company Name Given Names or ACN
Authority for Payments via Direct Debit From Bank Account
I/We, the person/s named below request and authorise:
FEA Plantations Ltd (ABN 44 055 969 429)
Forest Enterprises Australia Ltd (ABN 47 009 553 548)
APCA User ID No 069104
APCA User ID No 068063 (strike out this paragraph only if
no loan finance is sought from FEA)
to arrange for funds to be debited from my/our Bank account at the Financial Institution identified below and as prescribed through the Bulk
Electronic Clearing System (BECS). By signing this direct debit authority, you acknowledge having read and understood the terms and conditions
governing the debit agreement as set out in this authority and in the Service Agreement on the following page.
Financial Institution Name
Account Name
BSB No (eg 067-999)
Account Number
–
Signature of Account Holder
Signature of Account Holder
✗
✗
Authority for Payments via Direct Debit from Credit Card
I/We, the person/s named below request and authorise:
FEA Plantations Ltd (ABN 44 055 969 429)
Forest Enterprises Australia Ltd (ABN 47 009 553 548)
(strike out this paragraph only if no loan finance is sought from FEA)
to arrange for funds to be debited from my/our Credit Card account identified below.
By signing this direct debit authority, you acknowledge having read and understood the terms and conditions governing the debit agreement
as set out in this authority and in the Service Agreement on the following page.
Credit Card Type
Visa Mastercard
Cardholder’s Name
Card Number
–
–
–
Expiry Date
/
Cardholder’s Signature
✗
111
Direct Debit Authority – Service Agreement
Debiting your Account
By signing a Direct Debit Authority, you authorise us to arrange
for funds to be debited from your account. You should refer to
the direct debit request and this agreement for the terms of the
arrangement between you and us.
We will only arrange for funds to be debited from your account
as authorised in the direct debit request.
The authority covers all amounts we may debit you in connection
with the Project, including annual insurance premiums, and if
finance is being sought, loan repayments.
Your Responsibilities
It is your responsibility to:
Ensure your account details are checked against a recent
statement from your financial institution. If in doubt, you should
check with your financial institution before completing this
drawing authority.
Ensure that sufficient funds are available in the nominated
account to meet a drawing on its due date.
Ensure that the authorisation given to us to draw on the
nominated account, is identical to the account signing instruction
held by the financial institution, where your account is held.
Advise us if the nominated account is closed or transferred.
Arrange with us a suitable alternative payment method if
these drawing arrangements are cancelled or altered, either by
yourselves or by your nominated financial institution.
Pay us any fee or charge we may incur as a result of a drawing
not being accepted by your financial institution.
Our Commitment to You
We will advise you in writing concerning all details of the drawing
arrangements (amount; frequency; commencement; term) at
least 14 days prior to the first drawing.
Where the due date falls on a non-business day, we will draw the
amount on the next business day.
We will not change the amount or frequency of drawings without
your prior approval.
We will keep all information pertaining to your nominated
account, private and confidential, other than in dealing with
your financial institution in the event of an alleged incorrect or
wrongful debit.
We reserve the right to cancel the drawing arrangements if
3 or more drawings are returned unpaid by your nominated
financial institution and to arrange with you an alternative
payment method.
Your Rights
112
You may terminate this agreement at any time by giving us
written notice. Such notice should be received by us at least 5
business days prior to the due date of the next drawing. Any
notice will be deemed to have been received two business days
after it is posted.
You may stop or defer a drawing under this agreement by giving
us written notice. Such notice should be received by us at least 5
business days prior to the due date of the next drawing.
You may request a change to the drawing amount and/or
frequency of the agreed drawings by giving us written notice.
Such notice should be received by us at least 5 business days
prior to the due date of the next drawing.
Any requests for termination, deferment or alteration to the
direct debit arrangements should be directed to us at Post Office
Box 733, Launceston, Tasmania, 7250.
Where you consider that a drawing has been initiated incorrectly,
you should call our customer information line on 1800 600 009.
We will respond to your claim within 3 business days:
–
If we conclude that your account has been incorrectly
debited we will respond to your claim by arranging for your
financial institution to adjust your account (including interest
and charges) accordingly. We will also notify you in writing
of the amount by which your account has been adjusted.
–
If we conclude as a result of our investigations that your
account has not been incorrectly debited, we will respond to
your claim by providing you with reasons and any evidence
for this finding.
Confidentiality
We will keep any information (including your account details) in
your direct debit request confidential. We will make reasonable
efforts to keep any such information that we have about you
secure and to ensure that any of our employees or agents
who have access to information about you do not make any
unauthorised use, modification, reproduction or disclosure of that
information.
We will only disclose information that we have about you to the
extent specifically required by law or for the purposes of this
agreement (including disclosing information in connection with
any query or claim).
Definitions
Account means the bank account or credit card facility held at your
financial institution from which we are authorised to arrange for
funds to be debited.
Business Day refers to days on which banks are open for business in
Launceston, excluding Saturday, Sunday and public holidays.
Us or we means Forest Enterprises Australia Ltd ABN 47 009 553 548
or FEA Plantations Ltd ABN 44 055 969 429, as the context requires.
You means the Applicant who signed the direct debit authority.
Your financial institution is the financial institution where you hold the
account or credit card facility that you have authorised us to arrange
to debit.
SETTING THE
STANDARD IN
FEA has evolved into one of Australia’s leading fully integrated forestry
and forest products companies and anticipates opportunities in the forest
products sector for those who are prepared to learn, specialise and innovate.
MANAGED
FORESTRY
INVESTMENTS
18. CORPORATE DIRECTORY
Responsible Entity
Directors
Taxation Advisers
FEA Plantations Ltd
ABN 44 055 969 429
Anthony Maxwell Cannon (Chairman)
Gavin Wilson Wright
Michael John Williams
Kerry Christopher Harvey Duncan
KPMG, Chartered Accountants
ABN: 20 238 520 534
Australian Financial Services
Licence Number: 243515
Head Office
Compliance Committee
233b Charles Street,
Launceston, Tasmania 7250
Ross Frederick James Waining
Nigel Scott Dawkins
Kerry Christopher Harvey Duncan
Postal Address
PO Box 773
Launceston, Tasmania 7250
Phone: (03) 6334 7811
Fax: (03) 6331 5047
Freecall 1800 600 009
Email: marketing@fealtd.com
Web: www.fealtd.com
Parent Company,
Manager and Financier
Forest Enterprises Australia Ltd
ABN 47 009 553 548
233b Charles Street
Launceston, Tasmania 7250
Custodian
Tasmanian Perpetual Trustees Ltd
ABN 97 009 475 629
23 Paterson Street
Launceston, Tasmania 7250
Australian Financial Services
Licence Number: 234630
Solicitors
McMahon Clarke Legal
ABN 29 832 978 575
62 Charlotte Street
Brisbane, Queensland 4000
Level 8, 45 Murray Street
Hobart, Tasmania 7000
Independent Forestry
Consultant
Van Diemen Forestry Consultants Pty Ltd
ACN 009 577 842
212 Union Road
Surrey Hills, Victoria 3127
Auditors of the Scheme
and the Responsible Entity
Pitcher Partners
Level 19, 15 William Street
Melbourne, Victoria 3000
Auditor of the
Compliance Plan
Peter Anthony Jose
C/- Pitcher Partners
Level 19, 15 William Street
Melbourne, Victoria 3000
113
PRODUC T DISCLOSURE STATEMENT
FEA
PLANTATIONS
PROJECT 2008
Setting the standard in managed forestry investments
FEA Plantations Ltd
ABN: 44 055 969 429
AFSL No: 243 515
ABN: 44 055 969 429 – AFSL No: 243 515 – ARSN: 129 750 296
Registered OFFICE
• AU S
T
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•
PR
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UCT RULIN
anagemen
t
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nt
14001
Freecall: 1800 600 009
Web: www.fealtd.com
TAXATIO
FICE
Facsimile: (03) 6331 5047
Email: marketing@fealtd.com
IA N
OF
Telephone: (03) 6334 7811
AL
. ISO
PO Box 733, Launceston, Tasmania 7250
Environ
me
233B Charles Street, Launceston, Tasmania 7250
G
trust-mark.com®
AFS/01-21-09
AFS/01-21-09
PEFC/21-23-09
PEFC/21-23-09
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