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 initial commission 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
Project 2009
ARSN: 136 438 616
FEA Plantations Limited ABN: 44 055 969 429 AFSL No: 243 515
U C T RULIN
G
anagemen
t
al M
nt
14001
OD
Environm
e
N
™
PR
TAXATIO
F ICE
™ A U ST
IA N
. ISO
AL
OF
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Product Disclosure Statement
trust-mark.com®
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Export wood fibre travels from the SmartFibre processing facilities to its adjacent shiploading facility by conveyor
PAGE 2 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
01 THE FUTURE OF FORESTRY INVESTMENT
Contents
SECTION
PAGE
IMPORTANT INFORMATION
4
01 THE FUTURE OF FORESTRY INVESTMENT
6
02 KEY FEATURES OF FEA PLANTATIONS PROJECT 2009
9
03 THE FEA GROUP’S STRATEGY FOR SUCCESS
13
04 THE ADVANTAGES OF FORESTRY INVESTMENT WITH FEA PLANTATIONS
18
05 PROJECT DETAILS
22
06 AN OVERVIEW OF FEA PLANTATIONS PROJECT 2009
24
07 PROJECT FEES
28
08 PROJECT RISKS
31
09 TAXATION
34
10 PROJECT RETURNS
36
11 INDEPENDENT REPORTS
38
12 THE RESPONSIBLE ENTITY
47
13 THE FEA GROUP
48
14 AUSTRALIAN FOREST INDUSTRY OVERVIEW
52
15 ADDITIONAL INFORMATION and SUMMARY OF MATERIAL AGREEMENTS
57
16 GLOSSARY OF TERMS
59
17 HOW TO APPLY and APPLICATION FORM
62
CORPORATE DIRECTORY
71
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 3
01 THE FUTURE OF FORESTRY INVESTMENT
Important Information
The offer contained in this PDS is only made to persons
receiving the PDS within Australia. This PDS will be
available on the FEA website at www.fealtd.com and any
person accessing the electronic version of this PDS for the
purpose of participating in the Project must only access the
information from within Australia.
Any person may obtain a hard copy of this PDS free of
charge by contacting FEA Plantations. Interests will only
be issued under this PDS on receipt of the completed
Application Form.
This PDS was prepared on the basis of information available
to FEA Plantations on 7 May 2009.
F ICE
™
R
™ A U ST
OF
AUSTRALIAN TAXATION OFFICE PRODUCT RULINGS
The Australian Taxation Office (ATO) has
TAXATIO
IA N
N
issued Product Rulings 2009/23, 2009/24,
AL
2009/25, 2009/26 and 2009/27 in respect
of the Project which are applicable for
Investors who enter into the Project on
PR
G
OD
U C T RULIN
or before 30 June 2009 (2009 Investors).
The Product Rulings correspond to
Woodlot Options 1, 2, 3, 4 and 5 respectively.
AUSTRALIAN FOREST GROWERS
FEA is a member of Australian
Forest Growers (AFG),
the national association
representing private forestry
and commercial treegrowing
interests in Australia.
AFG PRUNED STAND CERTIFICATION SCHEME
This scheme provides certification
INISTERED B
that tree pruning has been completed
DM
to acceptable standards. It provides
PRUNED
STAND
confidence to future timber buyers that
CERTIFICATION
a plantation underwent an appropriate
LI
R
AN
G
F O R E ST
pruning regime and that logs should
contain clearwood of a known standard.
All pruned stands in Woodlot Options 2
and 4 will be audited under the scheme.
Y
PAGE 4 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
FEA is also a member of various research organisations and
participates in independent and cooperative research trials
to keep abreast of the latest developments in tree planting,
tree growing and timber harvesting research.
RA
CHANGES
Information contained in this PDS may change from time
to time. If the change is materially adverse to the offer then,
in accordance with the Corporations Act, FEA Plantations
will issue a supplementary PDS. However, if the change is
not materially adverse then a supplementary PDS will not
be issued. Updated information will be available at
www.fealtd.com and, upon request, you will be provided
with a paper copy of any updated information free of
charge.
RESEARCH AND INDUSTRY REPRESENTATION
FEA is a member of the Australian
Plantation Products and Paper Industry
Council (A3P). In April 2009, A3P merged
with Treefarm Investment Managers
Association (TIMA) to consolidate national
representation of Australia’s plantation
forestry, wood and paper industries.
A U ST
The Product Rulings referred to above are rulings on the
applicable taxation laws and are, in no way, expressed or
impliedly, a guarantee or endorsement of the commercial
viability of the Project, the soundness of the Project as an
investment or the commerciality of any fees charged in
relation to the Project. In providing the Product Rulings, the
ATO is in no way endorsing or recommending the Project.
ASIC has not approved or endorsed the offer and takes no
responsibility for the contents of this PDS.
ER S
THE OFFER
This PDS is dated 7 May 2009 and contains an offer to
apply for interests in the FEA Plantations Project 2009 –
ARSN: 136 438 616 (Project).
Any reference to legislative material contained in the PDS
should not be considered to be an official or authorised
version of the relevant legislation. Photographs in this PDS
are not necessarily of assets or property owned by FEA
Plantations and are not assets of the Project.
OW
PARENT COMPANY
Forest Enterprises Australia Limited ABN 47 009 553 548
(FEA) is the parent company of FEA Plantations.
ADDITIONAL INFORMATION
FEA Plantations has lodged with ASIC a compliance plan for
the Project that sets out the procedures it will use to ensure
compliance with the Constitution and Corporations Act.
A
RESPONSIBLE ENTITY
This Product Disclosure Statement (PDS) is issued by FEA
Plantations Limited (FEA Plantations). FEA Plantations has
been issued with an Australian Financial Services Licence
(AFSL), number 243 515.
SUSTAINABLE FOREST MANAGEMENT AT FEA
The three basic principles of sustainable forest management
are ecological, social and economic sustainability.
Ecological sustainability is about protecting the environment
and maintaining biological processes. FEA’s Environmental
Management System (EMS) aims to ensure that all its
operations are managed with ecological sustainability in
mind, including prevention of pollution and compliance with
relevant legislation.
IMPORTANT INFORMATION
Social sustainability is about protecting cultural values
and working within accepted social parameters. FEA’s
‘Stakeholder Communications Policy and Procedure’
manual ensures that the views of a broad range of
stakeholders, including government agencies, tourism
operators, community groups, landowners, neighbours and
the indigenous community are considered in developing
forest management plans. We are committed to the ‘Good
Neighbour Charter for Commercial Forestry in Tasmania’,
under which FEA has committed itself to behaving with
honesty and integrity and following a transparent process
when negotiating with landowners for land purchase, land
lease or share farm activities. We are also committed to
the ‘Forestry and Tourism Protocol Agreement’ which aims
to improve relationships with the previously mentioned
stakeholder groups.
Economic sustainability is about maximising commercial
and employment benefits as far as ecological and social
sustainability allow. FEA aims to achieve economic
sustainability by becoming a vertically integrated forestry
and forest products company focused on value-adding.
We maintain forestry operations in regional communities
in Tasmania, northern New South Wales and South East
Queensland and are developing operations in the Northern
Territory. We employ people across Australia. We aim to
provide value for shareholders, sound investment returns for
investors and meaningful jobs for employees. We procure
services and goods from a range of suppliers and support
the communities within which we operate.
FEA’s commitment to the environment and to sustainable
development is demonstrated through its ‘Environmental
and Sustainable Forest Management Policy’ available at
www.fealtd.com.
GOVERNMENT REGULATION OF ENVIRONMENTAL
STANDARDS
FEA is committed to best practice in environmental
management and employs two full-time forestry staff
as safety and environment coordinators to oversee our
environmental certification schemes.
As proof of its drive for excellence, FEA has also achieved
independently audited certification of its management
systems and field operations. The certification procedure
is based on international standards of both environmental
management and sustainable forest management.
A copy of FEA’s ‘Sustainability Headlines and Future
Directions’ report is also available at www.fealtd.com.
14001
Environm
e
. ISO
ENVIRONMENTAL MANAGEMENT SYSTEM (EMS)
CERTIFICATION
FEA is committed to operating its
anagemen
t
al M
nt
business to meet and potentially achieve
industry best practice. FEA’s forestry
activities operate under Environmental
Management Systems (EMSs) which
trust-mark.com® ensure that all aspects of our forest
operations are managed to minimise
avoidable impacts to the environment.
FEA’s joint venture wood fibre processing and export facility
SmartFibre Pty Ltd (SmartFibre) has held ISO14001-2004
EMS certification since 2006. FEA is currently preparing for
certification of the new state-of-the-art Bell Bay ‘Optimil’
operation.
EMS certification also requires regular follow-up third
party audits to ensure compliance and certified continual
improvement. FEA has passed all the audits conducted since
it was first certified.
CERTIFICATION OF SUSTAINABLE FOREST
MANAGEMENT
FEA’s sustainable forest
management system is
based on the highest world
standards. The Australian
Forestry Standard AS47082007 (AFS) is a nationally
$)6
3()&
endorsed Australian
Standard developed within recognised international
frameworks and the ISO14000 series of environmental
standards. FEA achieved AFS certification of its ‘defined
forest area’ estates in March 2007 (Tasmania) and June 2008
(New South Wales and Queensland). We will work towards
achieving AFS certification for our planned Northern
Territory plantation estate in 2009.
CHAIN-OF-CUSTODY CERTIFICATION
The chain-of-custody standard AS4707-2006 provides an
inventory tracking and control system that follows forest
products from AFS-certified forest to end use. SmartFibre
achieved chain-of-custody certification for woodchip
production in December 2007. FEA is currently preparing for
chain-of-custody certification for timber produced from the
new state-of-the-art Bell Bay ‘Optimil’ operation.
DISCLAIMERS
The information given in this PDS is of a general nature
and has been prepared without taking into account any
Investor’s 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.
An investment in the Project is to be considered speculative.
It should be understood that an investment in a timber
plantation is a long-term investment. If your application is
accepted, you will be an Investor. Returns to Investors will
be subject to risks commonly associated with commercial
plantation forestry.
None of FEA Plantations, its parent FEA, nor 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.
FEA’s EMSs have been certified to the international standard
ISO14001:2004 following an independent audit in 2005
(Tasmania) and 2007 (New South Wales and Queensland)
by Global Mark Pty Ltd. We aim to have ISO14001
accreditation for our EMS for the planned Northern Territory
plantations in 2009.
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 5
01 THE FUTURE OF FORESTRY INVESTMENT
01 THE FUTURE OF FORESTRY INVESTMENT
Aerial view of FEA’s $72 million state-of-the-art Bell Bay sawmill
The Project offers Investors an innovative range of forestry
investment options from the sale of either Eucalypt
hardwood, Radiata pine softwood, high-value African
mahogany hardwood, or a combination of these.
means that Investors are likely to receive higher prices for
their timber at Thinning and Clearfall harvests than they
would achieve if they had invested in projects that sold their
timber solely as pulplogs.
This range of investment options provides the flexibility to
allow Investors to plan for their current financial needs by
choosing the timing of potential future income to suit their
longer-term financial objectives.
OUR EXPERTISE
Many forestry investments are predicated on the basis that all
timber produced will be sold as relatively low-value woodchips.
FEA Plantations aims to maximise returns for Investors by also
recovering sawlogs from its plantations, which should be sold
at a higher price than pulplogs used to produce woodchips.
FEA’s emphasis on maximising higher-value sawlog recovery
The parent company of the Responsible Entity is FEA –
an ASX-listed public company since 2000. FEA is one of
Australia’s foremost vertically-integrated forestry and forest
products companies with a successful 24-year history as a
plantation forestry manager.
The Project is FEA Plantations’ 17th consecutive managed
forestry investment offering. Since its first offering in
1993, over 11,000 investors, representing in excess of
13,000 investments will, after completion of plantation
establishment for FEA Plantations Project 2008, have
more than 72,000 hectares of timber plantations under
management in Tasmania, northern New South Wales and
South East Queensland.
Many of FEA Plantations’ existing plantations have begun
to generate returns to investors and a summary of the
performance is set out below:
• Final Clearfall harvest of FEA Plantations 1993 Project
– its first forestry investment project (The Tasmanian
Forests Trust No 1 ARSN: 093 165 210) - was completed
in June 2008 and investors received a total harvest
return from Thinning and Clearfall in excess of
prospectus projections with a before-tax IRR of 13.3%
and an after-tax IRR1 of 7.3%. Actual sawlog recovery
from the 2008 Clearfall harvest of FEA Plantations 1993
Loading of Eucalyptus nitens logs
PAGE 6 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
01 THE FUTURE OF FORESTRY INVESTMENT
Project was 68%. Actual sawlog recovery for the 1993
Project as a whole, including Thinning, was 48%.
• The final Clearfall harvest of FEA Plantations’ 1994
Project – its second forestry investment project (The
Tasmanian Forests Trust No 2 ARSN: 093 165 505) – is
scheduled to commence during 2009-10.
• In addition, five other projects have produced income for
Investors through their Thinning harvesting programs.
Overall to date, seven projects have been thinned, or are
in the process of being thinned, or Clearfall harvested
on behalf of investors providing income from their
investment.
However, it should be noted that past performance is not
indicative of future performance and FEA Plantations is
not able to guarantee the performance of the plantations
established for the Project nor any financial returns to
Investors.
VERTICAL INTEGRATION
FEA is a large-scale forest products processor and marketer.
Its new $72 million sawmill and processing facility at Bell Bay
in northeast Tasmania was opened in early 2008. FEA is now
Tasmania’s largest plantation sawmiller - initially processing
around 350,000 tonnes per year of timber for its EcoAsh®
and BassPine® products.
During 2007-08, FEA’s jointly owned SmartFibre wood
fibre processing and export facility increased its wood fibre
exports from the previous year’s total of about 285,000
tonnes to over 500,000 tonnes. Suitable sawlogs are
processed by FEA and marketed as FEA-branded sawn
timber. The remaining pulplogs and sawlog residue may be
processed and exported as wood fibre by SmartFibre.
BassPine® structural timber packaged for distribution
1
Before-tax return takes into account 100% tax-deductibility of investors’ costs,
but does not include tax payable on Harvest Proceeds. After-tax return takes into
account 100% tax-deductibility of investors’ costs and includes tax payable on
Harvest Proceeds. Calculations are based on top marginal tax rates.
The view across the SmartFibre wood fibre stockpile to the shiploading berth
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 7
01 THE FUTURE OF FORESTRY INVESTMENT
A NEW INVESTMENT OPTION FROM FEA
Three year old African mahogany trees on M’Oganwo Station
FEA PLANTATIONS PROJECT 2009
– WOODLOT OPTION 4
The Project offers Investors the
opportunity to invest in high-value
African mahogany hardwood.
In 2008, FEA purchased M’Oganwo
Station which is located approximately 230 kilometres south
of Darwin in the Douglas Daly region of the Northern Territory.
This area has important attributes for the cultivation of African
mahogany hardwood including summer rainfall, tropical
monsoonal climate, a plentiful water supply, deep friable soils
and nutrients.
Establishment of Khaya senegalensis, or African mahogany,
plantations at M’Oganwo began in the wet seasons of 200506 and continued through 2006-07 and 2007-08.
Early growth results are very promising, with some trees
in the first planting now reaching over 5 metres in height.
However, existing trees do not form part of the offer under
this PDS and the performance of existing trees does not
necessarily reflect the performance of the trees which will be
planted by the Responsible Entity as part of the Project.
African mahogany hardwood is an evergreen tree native to
Africa. It is found throughout the central equatorial region
from Sudan and Uganda in the east to Senegal, Sierra Leone
and Gambia in the west.
PAGE 8 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
African mahogany plantations have been established in
Australia, Cuba, India, Indonesia, Puerto Rico, Singapore,
South Africa and Vietnam.
Well known as a luxury timber, African mahogany is in high
demand in established international markets. It is used
for high-grade furniture, interior windows and doors, and
external joinery, including timber decking and boat building
and fittings.
As the worldwide supply of luxury timber from native forests
diminishes, supply from plantations is becoming a viable
alternative.
Woodlot Option 4 potentially offers higher harvest returns
than Woodlot Options 1, 2, and 3 although potential
Investors should be aware that African mahogany is not yet
proven as a commercial plantation tree species in Australia.
Therefore, Woodlot Option 4 should be considered as
having additional risks – as it involves growing a timber
species which is currently untested by FEA.
For further information please refer to the Independent
Forester’s Report in Section 11.
01 THE FUTURE OF FORESTRY INVESTMENT
02 KEY FEATURES OF FEA PLANTATIONS PROJECT 2009
This section contains only a summary of the Project. Before deciding whether to participate in the Project,
Investors should read the entire PDS.
INVESTMENT OPTIONS
Woodlot
Option 1
Woodlot
Option 2
®
Woodlot
Option 3
®
Woodlot
Option 4
Woodlot
Option 5
Diversified
Forestry Offer
®
Woodlot size
½ hectare
½ hectare
½ hectare
Timber and
Products
Hardwood
Eucalypt# sawlogs
to manufacture
EcoAsh® sawn
timber and
SmartFibre wood
fibre
Hardwood
Eucalypt# sawlogs
to manufacture
EcoAshclear®
veneer and
high-grade sawn
timber, EcoAsh®
sawn timber and
SmartFibre wood
fibre
Softwood Radiata
pine sawlogs
to manufacture
BassPine® sawn
timber and
SmartFibre wood
fibre
hectare
High-value
African mahogany
hardwood
marketed as Khaya
Mahogany™ sawn
timber for use in
the furniture and
building industries
3
hectares
Combined:
Option 1:
4 Woodlots
Option 2:
1 Woodlot
Option 3:
1 Woodlot
Option 4:
1 Woodlot
Establishment Fee1
$3,450
$3,450
$3,450
$3,450
$23,000
(approximate
5% discount)
Investment Term2
14 years
17 years
26 years
19 years
26 years
Expected Returns –
Thinnings Harvest2
Year 9
Year 9
Years 13 and 18
Year 11
Years 9, 11, 13
and 18
Expected Returns –
Clearfall Harvest2
Year 13
Year 16
Year 25
Year 18
Years 13, 16, 18
and 25
Buy-back Offer3
Not applicable
Not applicable
Year 15
Not applicable
Option 3
Woodlots only
Year 15
Land Sourcing and
Management Fees
No annual
payments
No annual
payments
No annual
payments
No annual
payments
No annual
payments
18% of gross
Harvest Proceeds
18% of gross
Harvest Proceeds
15% of gross
Harvest Proceeds
20% of gross
Harvest Proceeds
Option 1 and 2
Woodlots
18% of gross
Harvest Proceeds
Option 3 Woodlots
15% of gross
Harvest Proceeds
Option 4 Woodlots
20% of gross
Harvest Proceeds
Pruning Fees4
Not applicable
Year 3 $385
Not applicable
Not applicable5
Year 5 $405
Option 2
Woodlots only
Year 7 $430
Year 3 $385
Year 5 $405
Year 7 $430
#
Eucalypt means selected species of the Eucalyptus and Corymbia genera. The species to be planted is identified in the Independent Forester’s Report – please refer to section 11.
The Establishment Fee is not subject to GST
2
The years stated for investment terms, Thinnings and Clearfall harvests are estimates only and will be determined by FEA Plantations based on the market conditions, the advice of the
Independent Forester and the Growth Rates of the plantations.
3
The buy back offer is expected to be made when the trees are around 15 years of age.
4
The pruning fees are not subject to GST and will be increased in accordance with CPI from 31 December 2008.
5
The African mahogany hardwood trees will be pruned up to 3 times during their early growth at no additional cost to the Investor.
1
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 9
02 KEY FEATURES OF FEA PLANTATIONS PROJECT 2009
Looking across a pristine northern Tasmanian waterway to an FEA-managed Eucalypt plantation on the right
FEATURE
SUMMARY
The Responsible
Entity and FEA
The Responsible Entity for the Project is FEA Plantations, a wholly owned subsidiary
of FEA. This is FEA Plantations’ 17th consecutive managed forestry investment since
1993, with around $394 million in investments under management.
FEA was established in 1985 and will have over 72,000 hectares of timber plantations
under management after completion of the plantation establishment for FEA Plantations
Project 2008. FEA also operates a newly commissioned $72 million sawmill and a wood
fibre processing and export facility at Bell Bay in northern Tasmania.
Structure of the
Project
MORE
INFORMATION
Section 12
Section 13
By signing the Application Form, each Investor will become bound by the terms of
the Constitution and will be an Investor in the Project. Each Investor in the Project will
have a beneficial interest in their Woodlot(s), the trees planted on those Woodlots,
the timber generated from the harvesting of the trees on those Woodlots and returns
from the sale of the timber grown on the Woodlots.
Section 06
Term of the
Project
The Project commences on acceptance of the first Investor’s application and, unless
terminated earlier in accordance with the Constitution, concludes on the termination of
the last Investor’s interest in the Project (that is, following distribution to the last Investor
of the proceeds derived from the sale of trees around the time of Clearfall harvest).
Section 05
Risks and
Safeguards
Participation in the Project is a medium to long term investment into commercial
forestry. There are a variety of risks specific to commercial forestry plantations which
apply to this Project. An investment in the Project should be considered speculative.
Detailed information about the known risks and safeguards are disclosed in Section
08 of this PDS.
Section 08
How to Apply
All applications must be made by completing the Application Form on pages 65 - 69
of this PDS.
Section 17
Payment
Options
Applicants can pay the Establishment Fee by cheque or credit card or use a range of
finance options.
Section 17
Dealing with
Applications
Interests are allocated on a first-come, first-served basis. 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.
Investors whose applications are rejected will be refunded their application money
within 30 days and Investors whose applications are accepted will be notified within
30 days of receipt of their application.
Taxation
The ATO has issued Product Rulings 2009/23, 2009/24, 2009/25, 2009/26 and
2009/27 in respect of the Project which are applicable for Investors who enter
into the Project on or before 30 June 2009 (2009 Investors). The Product Rulings
correspond to Woodlot Options 1, 2, 3, 4 and 5 respectively. FEA Plantations has
applied for Product Rulings for Investors who enter the Project after 30 June 2009 but
has not yet received these rulings.
In the income year in which it is paid, the Establishment Fee is generally 100% tax
deductible.
Section 09
Section 11
Pruning fees for Woodlot Options 2 and 5, insurance and interest for finance are
generally 100% tax deductible in the years in which they are incurred.
You should refer to the appropriate ATO Product Ruling and seek independent
taxation advice.
Pooled Harvest
Proceeds
Proceeds of all Project timber sales at Thinning and Clearfall harvests will be pooled.
For details see page 37.
PAGE 10 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
Section 10
02 KEY FEATURES OF FEA PLANTATIONS PROJECT 2009
MORE
INFORMATION
FEATURE
SUMMARY
Floor Price
For Woodlot Options 1 and 2, a Floor Price mechanism is included in the wood
purchase agreement for both sawlogs and pulplogs. This means that the price FEA
will pay for the wood will be the greater of either the prevailing market price at the
time of harvest or the Floor Price.
Insurance
Land Selection
Plantation
Management
Stocking
Guarantee
Investors have the option to insure their Woodlots against loss from fire and other
usual risks if they wish to do so. Alternatively, Investors may ask FEA Plantations to
arrange suitable cover at the Investor’s cost. Additional insurance cover for the full
value of the investment may also be available to enable Investors to insure their
interests for the original amount invested. This level of insurance is compulsory if
obtaining finance for a term longer than two years.
Eucalypt hardwood plantations will be established in regions of Tasmania, northern
New South Wales and South East Queensland that meet FEA Plantations’ own
rigorous conditions for climate, rainfall and soil quality. Radiata pine will primarily
be established in Tasmania while high-value African mahogany hardwood will be
established in the Douglas Daly region of the Northern Territory. Other regions in
Australia with appropriate climate, soils and strategic advantages may be used by
the Responsible Entity for the establishment of Project Woodlots if advice from our
Independent Forester indicates the land is suitable.
FEA Plantations has engaged FEA to perform the management services such as
establishing and maintaining the Project plantations under a head management
agreement. The Woodlots will be managed by a team of experienced professional
forestry managers who operate in accordance with strict health, safety and
environmental procedures. FEA has developed highly professional regimes for site
selection, tree establishment and maintenance.
Section 04
Section 10
Section 06
Section 06
Section 11
Section 06
Section 11
Woodlot Options 1, 2, and 4 – Investors are guaranteed a stocking rate of 90% of
the original 1,200 stems per hectare planted for a period of 3 years from the date the
Investor is registered as the holder of the Woodlot or the commencement of general
insurance cover for the plantations, whichever is the earlier.
Woodlot Option 3 – Investors are guaranteed a stocking rate of 90% of the original
1,330 stems per hectare for a period of 3 years from the date the Investor is
registered as the holder of the Woodlot or the commencement of general insurance
cover for the plantations, whichever is the earlier.
Section 06
Section 11
Woodlot Option 5 – The relevant Stocking Guarantees for the individual options
that make up this offer are applicable to the relevant Woodlots that are allocated to
Investors selecting this option.
Buy-back Offer – FEA Plantations will offer a buy-back of Woodlot Option 3 interests at around 15
years of age. For full details, see Sections 04 and 05 on pages 20 and 23 of this PDS.
Woodlot
Option 3 Only
Independent
Reports
We have obtained the following expert reports to provide information about this
investment and its key variables:
• Independent Forester’s Report;
• Independent Market Report; and
• Independent Taxation Opinion.
Section 04
Section 05
Section 11
Summaries of these opinions are set out in Section 11 of this PDS and full copies are
available at no charge from FEA Plantations.
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 11
01 KEY
02
THE FUTURE
FEATURES
OFOF
FORESTRY
FEA PLANTATIONS
INVESTMENT
PROJECT 2009
FEA PLANTATIONS PROJECT 2009 – FROM SEEDLING TO SAWN TIMBER
1. Land meeting FEA Plantations’ selection criteria for
average annual rainfall and soil quality is chosen and
prepared for plantation establishment.
2. Genetically superior seedlings – with species matched
to appropriate plantation locations – are planted at a highdensity of 1,200 stems per hectare for Eucalypt hardwood
and African mahogany hardwood plantations and 1,330
stems per hectare for Radiata pine softwood plantations.
3. FEA’s own full-time forestry maintenance teams monitor
the control of pests and weeds and oversee tree nutrition
and fertilisation to maximise healthy plantation growth.
4. At around age 9 years (Eucalypt hardwood), 11 years
(African mahogany hardwood) and 13 and 18 years (Radiata
pine softwood), plantations are thinned (where appropriate).
Around half of the trees are selectively harvested, generating
potential income for Investors. The remaining larger trees
are then able to grow unhindered, maximising sawlog
recovery at final harvest.
5. Final Clearfall harvest timing, planned for around age 13
years and 16 years (Eucalypt hardwood), 18 years (African
mahogany hardwood) and 25 years (Radiata pine softwood),
is decided in conjunction with the advice of the Independent
Forester.
6. Sawlogs from existing Tasmanian Eucalypt hardwood
plantations are processed by FEA at Bell Bay and marketed
under its EcoAsh® brand. Radiata pine softwood sawlogs
are also processed by FEA and marketed as BassPine®.
Pulplogs and sawmill residue are processed by SmartFibre for
domestic and export customers. It is anticipated that highvalue African mahogany hardwood logs will be processed
and marketed as Khaya Mahogany™.
PAGE 12 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
03 THE FEA GROUP’S STRATEGY FOR SUCCESS
Dr Trevor Innes, head of the FEA Innovation Unit, was instrumental in the development and testing of EcoAsh®
As a plantation forestry manager for 24 years, FEA has the
experience and expertise to grow trees well, and a track
record of doing so.
What sets FEA apart from many forestry investment
managers is its status as a leading vertically integrated
forestry and forest products company.
FEA is currently Tasmania’s largest plantation sawmiller.
In 2009-10, its Bell Bay sawmill aims to process around
400,000 tonnes of plantation logs to be marketed under
FEA’s EcoAsh® and BassPine® brands. It is FEA’s aim to
increase its timber processing input to at least 500,000
tonnes per annum by 2012-13.
Not only is FEA’s state-of-the-art $72 million facility in Bell
Bay fast, with an operating speed of up to 160 metres per
minute, the latest ‘Optimil’ computerised curved sawing
technology lifts the useable timber recovery from sawlogs.
This simply means more higher-value sawn timber from
every log.
On top of this, FEA’s jointly-owned SmartFibre wood fibre
export facility plans to market around 500,000 tonnes of
wood fibre in 2008-09.
When you invest in forestry with FEA Plantations, you are
growing timber for an established value-adding processor
and marketer. FEA selects plantation land, manages
hardwood and softwood plantations, adds value to the
forest products and sells them under respected brands
through established distribution channels.
For the forestry investor, FEA’s processing capacity creates a
value chain - from plantation to finished product. This value
chain provides the opportunity for FEA to aim to optimise
returns by offering prices for Investors’ wood that reflect the
higher prices FEA is able to realise for value-added, branded
products manufactured from this sustainable plantation timber.
FEA is committed to innovation, research and development
to ensure that the highest possible prices are realised for the
forest products it manages and processes.
Additionally, FEA seeks to maximise both the proportion of
higher-value sawlogs and the production of all log products
to their highest potential end value.
Ultimately, these factors should lead to higher prices for
Investors’ timber, resulting in higher investment returns.
When you invest in forestry with FEA Plantations, you’re not
just growing timber for woodchips, you’re growing timber
for a range of high-value branded products with proven
existing markets.
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 13
03 THE FEA GROUP’S STRATEGY FOR SUCCESS
®
YOUR PLANTATION HARDWOOD
The EcoAsh® product range currently includes:
• Structural timber for building – used for floor and ceiling joists,
studs, plates and roof trusses;
• Wall panelling; and
• Flooring.
EcoAsh® is revolutionary in that it is produced from plantation Eucalypt
hardwood trees as young as 9 years old. A product of considerable
research and development by FEA, EcoAsh® is attractive, strong,
easy to work with and highly price-competitive with comparable
alternatives.
These advantages have seen EcoAsh® readily accepted in the domestic
market – to the extent that demand currently exceeds supply.
®
SELECT GRADE PLANTATION HARDWOOD
EcoAshclear® is a tangible demonstration of how FEA’s forestry
expertise and processing innovation come together to produce higher
value timber products from the same hardwood species used to
produce EcoAsh®.
Final crop trees are normally pruned three times during their early growth.
There is a Thinning at around 9 years and the final pruned crop is Clearfall
harvested at around 16 years, rather than 13 years for EcoAsh®.
This combination produces the larger, relatively knot-free sawlogs required
to produce higher-value appearance-grade EcoAshclear® products.
EcoAshclear® can be used for plywood and laminates or for decorative
veneers. It is also suitable for select-grade flooring, decorative
mouldings and furniture manufacture.
®
YOUR PLANTATION SOFTWOOD
FEA’s Bell Bay processing facility is ramping up towards processing
around 350,000 tonnes of logs into BassPine® products annually.
A comprehensive range of BassPine® sawn and dressed appearance
and structural grade softwood timber products are manufactured,
including environmentally advanced preservative treated timber.
Agents in all Australian states carry a selection of the FEA
BassPine® product range, which currently includes dressed boards,
machine-graded structural timber, treated and untreated decking,
fence palings, pickets and sleepers, and green pallet-grade
material.
PAGE 14 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
03 THE FEA GROUP’S STRATEGY FOR SUCCESS
KHAYA MAHOGANY™
With the introduction of African mahogany hardwood into the
Project, FEA will use its considerable forestry and timber processing
and marketing expertise to maximise returns to Investors from this
high-value timber.
Crop trees will be pruned, at no additional cost to the Investor, up
to three times during their early growth. Thinning will be conducted
at around year 11 and the final pruned crop is Clearfall harvested at
around 18 years.
This combination should produce larger, relatively knot-free sawlogs
needed to produce higher-value appearance-grade Khaya Mahogany™
products.
It is anticipated that African mahogany will be harvested primarily for
sawlogs and after processing will be sold as rough sawn timber into
domestic and export markets.
FEA has considerable experience in value-adding plantation timber.
While the African mahogany hardwood plantations are maturing,
FEA’s timber processing and marketing experts and its Innovation
Unit will explore and aim to develop a range of product and market
opportunities to maximise the potential value of Investors’ Thinnings
and Clearfall harvest returns. However, Investors should note that
Khaya Mahogany is untested by FEA and therefore, is subject to
additional risks.
SMARTPRODUCT – SMARTPARTNER – SMARTVALUE – SMARTCHOICE
FEA produces and markets wood fibre through SmartFibre, an export
wood fibre facility it jointly owns and manages in northern Tasmania.
SmartFibre currently exports plantation hardwood and softwood
woodchips for paper and paperboard production to established
customers in Japan.
During 2007-08, SmartFibre exported over 500,000 tonnes of wood
fibre, filling around 14 shiploads during the year.
In line with FEA’s philosophy of adding value wherever possible,
SmartFibre seeks to achieve premium wood fibre prices through its
product quality, consistency, reputation, branding and environmental
certification.
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 15
03 THE FEA GROUP’S STRATEGY FOR SUCCESS
THE FEA GROUP AT A GLANCE
FEA PLANTATIONS LIMITED
•
•
•
•
FEA PLANTATIONS
Forestry Investments
FEA Plantations has issued
16 prior forestry investment
projects and has more than
72,000 hectares of timber
plantations under management.
Responsible Entity
Project Manager
AFSL holder
Issues PDS
FEA TIMBERLANDS FUND
Unlisted property trust which
owns properties in New South
Wales and Tasmania on which
FEA Plantations will establish
timber plantations.
FOREST ENTERPRISES AUSTRALIA LIMITED
ASX LISTED PUBLIC COMPANY
• Extensive forestry team establishes and
maintains plantations.
• Provides finance to Investors.
• Purchases timber from the Project.
• Operates $72 million Bell Bay sawmill,
processing and treatment facility.
• Processes and markets timber as EcoAsh®
and BassPine® products.
• Custodian for the Project.
• Research and Development in timber
processing.
TASMANIAN PLANTATION
Owns land on which FEA Plantations
establishes plantations.
FORESTRY SERVICES
Separate specialist forestry division
oversees forestry, harvesting and
sale of timber to maximise Investor
returns.
SMARTFIBRE
Processes and markets hardwood
and softwood wood fibre from
timber not suitable for sawlogs.
Also uses waste timber from
sawmill after sawn timber recovery
from sawlogs. Jointly owned by FEA.
PAGE 16 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
03 THE
01 THE
FEAFUTURE
GROUP’S
OFSTRATEGY
FORESTRYFOR
INVESTMENT
SUCCESS
A SOUND TRACK RECORD
1985
FEA is founded and commences land purchases.
1987
FEA begins Eucalypt hardwood plantation establishment in its
own right and on behalf of others.
1993
FEA Plantations offers and establishes its first Eucalypt hardwood
managed forestry investment.
1997
FEA becomes the first forestry company based in Tasmania
to lease land for plantation establishment.
2000
FEA lists on the ASX (ASX:FEA).
2001
First export log shipments from Tasmania to Japan include
plantation Eucalypt hardwood veneer logs.
2002
Thinning of first 1993 managed forestry investment begins.
FEA’s ‘HewSaw’ sawmill is acquired in Tasmania.
2003
SmartFibre wood fibre processing and export facility
commissioned.
2005
FEA launches EcoAsh® sawn plantation hardwood.
2006
Longer-rotation EcoAshclear® investment option introduced
into FEA Plantations Project 2006.
2007
FEA signs a long-term contract to purchase 290,000 tonnes
a year of plantation softwood for its BassPine® product range.
FEA completes a capital raising of $57 million.
Construction of new $72 million Bell Bay sawmill and processing
facility commences.
2008
25-year rotation Radiata pine BassPine® investment option
introduced into FEA Plantations Project 2008.
Bell Bay sawmill officially opened in February.
Final clearfall harvest of FEA’s first forestry investment (1993 Project)
Tasmanian Forests Trust No 1 (ARSN: 093 165 210) completed:
Total harvest yield:
2009
404 tonnes per hectare
Clearfall sawlog yield:
68%
Whole project sawlog yield:
48%
Average annual
growth rate:
27.6 m3/ha/year (10.4%
above initial prospectus
forecast of 25 m3/ha/year)
Total net Harvest Proceeds:
$16,920 per hectare
(including GST)
High-value African mahogany hardwood investment option
introduced into FEA Plantations Project 2009.
The information above regarding Tasmanian Forests Trust No1 ARSN: 093 165 210 is
provided to demonstrate FEA has proven forestry management experience. However,
this information is based on past performance only and is not a representation or a
reliable indicator of the current or future performance of any FEA Plantations’ project.
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 17
04 THE ADVANTAGES OF FORESTRY INVESTMENT WITH FEA PLANTATIONS
Aerial view of an FEA-managed Eucalyptus nitens plantation in northeastern Tasmania
ENHANCE YOUR INVESTMENT PORTFOLIO
FORESTRY EXPERTISE
An FEA Plantations’ forestry investment can offer a range
of financial planning benefits for Investors, including the
potential to build future wealth.
FEA Plantations is wholly owned by FEA. FEA was founded
in 1985 as a specialist plantation forestry manager. Soon
after it began purchasing land and establishing plantations
in its own right as well as on behalf of Investors interested in
being involved in forestry.
The ATO has issued Product Rulings 2009/23, 2009/24,
2009/25, 2009/26 and 2009/27 in respect of the Project
which are applicable for Investors who enter into the Project
on or before 30 June 2009 (2009 Investors). The Product
Rulings correspond to Woodlot Options 1, 2, 3, 4 and 5
respectively.
The investment should provide income at both Thinning
and final Clearfall harvests. The Project provides a range of
investment options, giving Investors the ability to choose
one that offers potential future income streams that suit
their future financial planning needs.
An investment in the Project may also suit Investors who
wish to diversify their portfolio outside of traditional asset
classes such as shares and real estate.
An FEA forestry investment should be considered long-term.
Investors must hold the investment for four years from
the end of the year in which they entered the Project in
order that the Commissioner does not seek to recoup any
prior tax deductions claimed. After this time, they may sell
their interest without having an adverse impact on the tax
deductions previously claimed.
FEA has retained its emphasis on forestry first and foremost.
FEA’s Chief Executive Officer, Andrew White, is a professional
forester, as is the Chairman of FEA Plantations, Tony Cannon.
FEA’s commitment extends to having some 25 professional
foresters as part of a forestry team of approximately 45 staff
who monitor the preparation, establishment and ongoing
maintenance of Investors’ Woodlots.
In addition, FEA retains the services of an independent
professional forester to monitor and report on the health and
wellbeing of the Woodlots to the Manager and Investors.
The key elements of FEA’s forestry strategy are:
LAND SELECTION
For Eucalypt hardwood, Radiata pine softwood and African
mahogany hardwood, FEA selects land with an annual
minimum average rainfall of 800 to 1100 mm or more and
deep, fertile soils within an economic transport distance of a
major wood processing centre. FEA’s current plantations are
located primarily in Tasmania, northern New South Wales
and South East Queensland as the locations fulfil these
essential criteria – particularly rainfall.
SPECIES SELECTION
FEA establishes species that have the potential to produce
higher-value sawn timber as well as wood fibre. In addition
to Pinus radiata and
senegalensis, a range of Eucalypt hardwood species will be
planted after being matched to individual site conditions to
maximise plantation growth rates.
PAGE 18 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
04 THE ADVANTAGES OF FORESTRY INVESTMENT WITH FEA PLANTATIONS
FEA is continually improving the genetic quality of its
seedlings through research, development and trials.
Improved seedling quality is an important factor in delivering
the enhanced growth rates FEA has been achieving. FEA
improves seedling genetics through traditional natural tree
breeding processes and not through gene-modification (GM)
methods.
HIGH-DENSITY PLANTING
FEA plants 1,200 seedlings per hectare for Woodlot Options
1, 2 and 4 and 1,330 seedlings per hectare for Woodlot
Option 3. These high stocking rates provide the opportunity
for Thinning harvests and improve sawlog quality by
encouraging straighter tree growth and fewer smaller
branches.
PRUNING
Woodlot Option 2 Eucalypt hardwood trees are normally
pruned three times during their early growth. Pruning is the
removal of branches while the trees are growing to help
prevent the formation of knots or deformation of the grain.
The result is ‘clearwood’ for the production of EcoAshclear®.
Woodlot Option 4 African mahogany hardwood trees will
also be pruned up to three times in their growth to improve
tree form and reduce side branches. This pruning regime
aims to maximise the quality of sawlogs at Clearfall harvest
and subsequent sawn timber recovery levels.
THINNING HARVEST
Thinning during the plantation Rotation provides potential
early income for Investors. It removes smaller or poorly
formed trees enabling the better performing trees that
remain to attain maximum growth to Clearfall harvest.
Plantations will be thinned where silviculturally and
economically appropriate.
FEA Plantations maximises returns for its Investors by aiming
to recover the highest possible proportion of higher-value
sawlogs at harvest – and by adding further value to these
through processing.
The remaining pulplogs are exported as wood fibre through
FEA’s joint venture SmartFibre wood fibre processing and
export facility to existing overseas customers. SmartFibre
anticipates marketing 500,000 tonnes of wood fibre in
2008-09.
FEA’s emphasis on maximising sawlog recovery and highervalue timber products production means that Investors
are likely to receive much higher prices for their timber at
harvest than if they had invested in projects that sold wood
solely as pulplogs for the production of woodchips.
FEA has entered into a wood purchase agreement with
FEA Plantations in relation to wood grown and harvested
from Project plantations. This agreement provides that
wood must be purchased at a fair and reasonable price
that takes account of proposed end-uses of the wood
and the prevailing market price for those end-users. If FEA
Plantations does not approve the purchase price, it can
seek a higher price from FEA or choose to sell the wood to
another buyer.
For Woodlot Options 1 and 2, a Floor Price mechanism is
included in the wood purchase agreement for both sawlogs
and pulplogs. This means that the price FEA will pay for the
wood will be the greater of either the prevailing market
price at the time of harvest or the Floor Price.
For a summary of the wood purchase agreement see pages 37
and 57.
LONGER ROTATION
By allowing trees to grow several years longer than
hardwood woodchip-only projects, FEA increases the volume
of recoverable sawlogs, thereby enhancing the potential
returns to Investors.
INVENTORY
Plantations are measured at regular intervals to monitor
growth rates and enable FEA to plan remedial works and
future harvesting.
WOOD FLOW MODELLING
FEA’s forestry services team schedules plantation harvesting
so the supply of timber is matched to market needs and
conditions – with the aim of maximising the value of that
timber to the Investor.
For more information please refer to the Independent
Forester’s Report in Section 11.
MAXIMISING INVESTOR RETURNS THROUGH
VALUE-ADDED PROCESSING AND MARKETING
FEA is a vertically-integrated plantation forestry and forest
products company.
Although it has successfully established, maintained and
harvested timber plantations for 24 years, FEA is much more
than just a plantation timber investment manager.
FEA is Tasmania’s largest plantation sawmiller and a leading
Australian forest products processor and marketer. Its new
$72 million state-of-the-art sawmill and processing facility
at Bell Bay in the state’s northeast was opened in early 2008
- initially processing around 350,000 tonnes of timber per
year for EcoAsh® and BassPine® products.
EcoAsh® framing, panels and roof trusses
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 19
04 THE ADVANTAGES OF FORESTRY INVESTMENT WITH FEA PLANTATIONS
SECONDARY MARKETS
FOR FORESTRY INVESTMENTS
New rules enacted by the Australian Government applicable
from 1 July 2007 mean that forestry investors are no longer
required to have an intention to hold their investment
until harvest in order to obtain a tax deduction for their
investment in the Project.
Investors must hold the investment for four years from the
end of the year in which they entered the Project. However,
after this time, they may sell their interest without having
an adverse impact on the tax deductions previously claimed.
For taxation purposes, sale proceeds will be assessable on
revenue account.
The purchaser will not receive a tax deduction for their
acquisition cost, but will be entitled to deductions for
ongoing expenses in relation to the investment if the original
owner would have been entitled to those deductions had
they retained the investment.
However, Investors should note that the Project is an illiquid
investment and it may not be possible to sell or otherwise
dispose of interests in the Project.
BUY-BACK OFFER FOR OPTION 3 WOODLOTS
In light of the longer investment term of Woodlot Option 3,
FEA Plantations (or a related company) will offer a buy-back
of Option 3 Woodlots at around 15 years of age. The offer
will be at a price at least equal to 90% of the current market
value of the Option 3 Woodlots as independently assessed
or verified at the time.
Nothing in this PDS constitutes a buy-back offer to Investors.
Although accepting the buy-back offer when it is made at
around 15 years may suit the financial planning needs of
some Investors, it is expected that the market value
Aerial view of M’Oganwo Station in the Northern Territory
PAGE 20 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
of Option 3 Woodlots at Clearfall harvest at approximately
25 years of age will significantly exceed the market value of
the interests when the buy-back offer is made.
However, the buy-back offers additional flexibility, allowing
Investors a greater opportunity to tailor their investment to
best suit their current and future financial planning needs.
STUMPAGE VERSUS ‘MILL DOOR’
OR ‘FREE ON BOARD’ PRICES
FEA Plantations believes that it is in the best interests of its
Investors to sell the Project timber on a stumpage basis.
Stumpage is the price paid for the timber at the stump. It
excludes harvesting, transport, processing and marketing
costs which are generally borne by the purchaser.
Stumpage prices may take into account factors such as
total timber volume, ease of access and transport distance.
Higher stumpage prices may be achieved for larger trees
with superior wood quality for higher value end uses.
The alternative to selling either sawlogs or pulplogs on a
stumpage basis is to sell them on a ‘mill door’ basis for
sawlogs or a ‘free on board’ (FOB) basis for pulplogs.
Although mill door prices are generally higher, it means that
Investors are responsible for the costs of harvesting and
transporting sawlogs to the ‘sawmill door’.
FOB prices for wood fibre again are generally higher than
stumpage prices, but in this case wood fibre is delivered as
woodchips ‘free on board’ a ship for export. This means that
costs for securing overseas customers, harvesting, transport,
processing and shiploading would need to be met by
Investors in the Project.
Please refer to the Independent Market Report in
Section 11 for further information.
04 THE ADVANTAGES OF FORESTRY INVESTMENT WITH FEA PLANTATIONS
ENVIRONMENTAL BENEFITS
AND GOVERNMENT SUPPORT
Plantation timber is a sustainable, renewable resource.
FEA’s ‘defined forest area’ estate has been independently
certified to the Australian Forestry Standard (AS47082007), which is an internationally recognised standard for
sustainable forest management in Australia. Plantations can
provide a number of environmental benefits:
• Reducing the pressure on harvesting of native forests;
• Helping to repair land degradation (such as salinity,
erosion and rising water tables caused by over-clearing
of native vegetation), improving water quality and
biodiversity in areas of previously cleared land;
• Reducing fire hazard through appropriate management.
Research has shown that, where hardwoods have
been established on formerly cleared agricultural land,
plantation fires will be less intense than in native forest
vegetation types and slower spreading than in fully
cured grasslands; and
• Removing and storing carbon dioxide through
sequestration thereby reducing the levels of this major
greenhouse gas in the atmosphere.
There is a future possibility that forestry investors could
benefit from the trading of Carbon Credits. Should this
occur, Investors in the Project will receive 50% of the net
benefits of any carbon trades which the Responsible Entity
negotiates in relation to Project land, less reasonable costs of
the negotiation and trading process. For more information
please refer to the summary of the Independent Market
Report in Section 11.
The Australian government’s policy statement ‘Plantations
for Australia: The 2020 Vision’ was released in 1997. It was
relaunched in 2002 as a strategy with the support of the
Australian and state governments and the plantation timber
growing and processing industries.
The ‘2020 Vision’ confirms plantations as the preferred
option for future Australian timber supply. It promotes an
increase in plantations from 1 million hectares in 1997 to
3 million hectares by 2020 – a target which it is recognised
will only be achieved through substantial private investment.
Australia’s total plantation area reached 1.87 million
hectares in 2007, comprising 980,200 hectares of softwood
plantations (52.3%), 883,500 hectares of hardwood
plantations (47.2%) and 9,254 hectares of ‘other species’.
According to ‘Australia’s Plantation Log Supply 2005-2049’,
an Australian Government Department of Agriculture,
Fisheries and Forestry report released in 2007 and based
on the National Plantation Inventory, Australia’s annual
plantation log supply tripled from 6 million cubic metres
in 1990 to 18.5 million cubic metres in 2006-07 and is
anticipated to reach 30 million cubic metres from 2010.
Of Australia’s current harvest production of 27 million cubic
metres of timber a year, two-thirds comes from plantations
(2006-07).
HIGH VALUE VERSATILE SPECIES
The plantation species, as well as the sawmilling and
drying techniques developed by FEA at its modern Bell Bay
mill facility, have been carefully selected to produce the
best quality products in either sawntimber for building or
appearance grade applications or for the manufacturing of
paper and paperboard.
A maturing FEA-managed Eucalypt plantation near Lismore, New South Wales
The plantation species are selected for both their timber and
fibre properties and their ability to grow effectively in FEA
preferred and selected regions.
FEA focuses on high value, versatile timber species to
maximise secure markets and the generation of higher
returns for Investors. Plantation grown woodchips have a
higher yield for paper and paperboard manufacturing than
resources supplied from native forests and, as a result, have
been able to attract a price premium.
Sawlogs, because of the growing regime and better value
adding potential, may attract a market price much higher
than pulplogs, from which woodchips are derived. The
growing of quality saw and veneer logs increases the returns
for plantation investors and assists the country to reduce its
growing trade deficit in forest products.
While softwood is the most significant timber species used
for construction, renovating and home extensions, there is a
growing potential to substitute plantation grown hardwood
EcoAsh® ultilising its greater strength to weight ratio.
AUSTRALIA’S COMPETITIVE POSITION
Australia is conveniently located with shorter shipping times
to the major roundwood, solid wood and woodchip markets
of Asia. Japan is the most significant importer of woodchips
in the world, and China is rapidly expanding its timber
processing and furniture manufacturing industries.
In addition, China has a growing demand for construction
timbers, both panels for formwork and solid wood for framing.
Even though Russia is the major supplier of wood into
China and has a closer proximity, its intention to introduce
significant tariffs could create market opportunities for
alternative imports, especially from Australia.
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 21
01 THE FUTURE OF FORESTRY INVESTMENT
05 PROJECT DETAILS
EcoAsh® structural timber prior to labelling and despatch from the sawmill
CHOOSE THE FEA FORESTRY INVESTMENT OPTION THAT BEST SUITS YOUR NEEDS
Investors in the Project are offered the opportunity to acquire interests in five Woodlot Options (or any combination thereof).
The details of each Woodlot Option are set out below.
®
WOODLOT OPTION 1 – ECOASH® SAWN TIMBER AND
SMARTFIBRE WOOD FIBRE
This is our simplest and most ‘traditional’ forestry
investment.
The Establishment Fee is $3,450 per ½ hectare Woodlot.
The only ongoing costs associated with Woodlot Option 1
are insurance, if applicable, which is payable yearly
commencing in the second growing year by Investors
who elect to insure their Woodlots, and the deferred land
sourcing and management fee which is deducted from
the sale proceeds from Woodlot Option 1 trees prior to
distributions being paid to Investors in Woodlot Option 1.
Details of the fees are set out in Section 07 of this PDS.
Under this option, Eucalyptus hardwood plantations will be
established in Tasmania, northern New South Wales and
South East Queensland and maintained for around 13 years.
Where appropriate, plantations will be thinned at
approximately 9 years and it is expected that Investors will
receive a commercial return from the Thinning harvest.
Timber will be sold as both sawlogs for EcoAsh® sawn
timber and pulplogs for SmartFibre wood fibre.
At final Clearfall harvest, the proportion of sawlogs will be
maximised and these will be processed as EcoAsh® sawn
timber. Remaining pulplogs will be processed for SmartFibre
wood fibre. Alternative potential markets will also be
considered at the time of harvest.
Woodlot Option 1 offers simple forestry investment in
proven plantation locations, species, products and markets.
By aiming to maximise higher-value sawlog recovery, FEA
Plantations expects that Investors in Woodlot Option 1
should achieve higher returns than if they had invested in a
project which was intended for 100% pulplog production.
PAGE 22 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
®
WOODLOT OPTION 2 – ECOASHCLEAR® VENEER AND
HIGH-GRADE SAWN TIMBER, PLUS ECOASH® AND
SMARTFIBRE WOOD FIBRE
In essence, Woodlot Option 2 is the same as Woodlot
Option 1 – except that the final crop trees are normally
pruned three times during their growth and are harvested at
around 16 years rather than 13 years.
The Establishment Fee is $3,450 per ½ hectare Woodlot.
The only ongoing costs associated with Woodlot Option 2
are pruning fees, insurance, if applicable, which is payable
yearly commencing in the second growing year by Investors
who elect to insure their Woodlots, and the deferred land
sourcing and management fee which is deducted from
the sale proceeds from Woodlot Option 2 trees prior to
distributions being paid to Investors in Woodlot Option 2.
Details of the fees are set out in Section 07 of this PDS.
When combined with a longer growing time, the pruning
regime should result in a higher proportion of larger trees to
allow production of timber free of knots and with straight,
even grain patterns. The result is ‘clearwood’ for the
production of EcoAshclear®.
Where appropriate, the trees in Woodlot Option 2 will be
thinned at around year 9 and FEA Plantations expects that the
Thinning should result in Investors receiving a commercial return.
At final Clearfall harvest, FEA Plantations will seek to
maximise the sawlogs suitable for higher-value EcoAshclear®
veneer and high-grade sawn timber production. The
maximum proportion of remaining logs will then be sawn
for EcoAsh® timber products, leaving the pulplogs to be
processed and marketed by SmartFibre.
Woodlot Option 2 is a slightly longer-term investment than
Woodlot Option 1. It offers the potential of increased returns
from a proportion of higher-value clearwood sawlogs.
05 PROJECT DETAILS
®
WOODLOT OPTION 3 – BASSPINE® SAWN TIMBER
AND SMARTFIBRE WOOD FIBRE
In this Woodlot Option, FEA Plantations will plant Radiata
pine, which is one of the most popular and accepted
plantation softwood species in Australia. Radiata pine
is suitable for production of the full range of possible
BassPine® products, including structural sawn timber,
engineered timber (such as laminated beams and veneers),
treated pine decking, poles, piles and fence posts.
The Establishment Fee is $3,450 per ½ hectare Woodlot.
The only ongoing costs associated with Woodlot Option 3
are insurance, if applicable, which is payable yearly
commencing in the second growing year by Investors
who elect to insure their Woodlots, and the deferred land
sourcing and management fee which is deducted from
the sale proceeds from Woodlot Option 3 trees prior to
distributions being paid to Investors in Woodlot Option 3.
Details of the fees are set out in Section 07 of this PDS.
Investors should note that Woodlot Option 3 is a longerterm investment than any other Woodlot Option and that
FEA Plantations expects a final Clearfall harvest will occur
about 25 years of age. Commercial Thinnings will be
undertaken at around 13 and 18 years of age, and should
provide Investors with harvest returns. This option may be
suitable for the financial needs of longer term Investors.
Given the longer term of the investment, FEA Plantations
will offer a buy-back of Woodlot Option 3 interests at
around 15 years of age. The terms of the buy-back offer will
be issued when the buy-back offer is made. Nothing in this
PDS constitutes a buy-back offer to Investors.
As with other Woodlot Options, FEA Plantations will aim to
maximise the proportion of higher-value sawlogs recovered
at Clearfall harvest with the objective of also maximising
Investors’ returns. Pulplogs will be processed and marketed
as softwood wood fibre.
WOODLOT OPTION 4 – KHAYA MAHOGANY™
This option offers Investors the opportunity to invest in a
high-grade, high-value luxury timber with significant demand
in established international markets. African mahogany is
an evergreen hardwood tree native to Africa. It is found
throughout the central equatorial region from Sudan and
Uganda in the east to Senegal, Sierra Leone and Gambia in the
west.
Well known as a luxury timber, African mahogany is in high
demand in established international markets. Its uses include
high-grade furniture, interior windows and doors, and external
joinery including timber decking and boat building and fittings.
As the worldwide supply of luxury timber from native forests
diminishes, supply from plantations is becoming a viable
alternative. However, African mahogany is not yet proven as
a commercial plantation tree species in Australia. Therefore,
Woodlot Option 4 should be considered as having additional
risks as it involves growing a timber species which is
currently untested by FEA.
The Establishment Fee is $3,450 per hectare Woodlot. The
only ongoing costs associated with Woodlot Option 4 are
insurance, if applicable, which is payable yearly commencing
in the second growing year by Investors who elect to
insure their Woodlots, and the deferred land sourcing and
management fee which is deducted from the sale proceeds
from Woodlot Option 4 trees prior to distributions being paid
to Investors in Woodlot Option 4.
Details of the fees are set out in Section 07 of this PDS.
Crop trees may be pruned, at no additional cost to the
Investor, up to three times during their early growth with
the intention that the pruning regime should result in a
straighter tree which will be suitable for sawlog production
with the added benefit of production of timber free of knots
and with straight, even grain patterns.
It is expected that a final Clearfall harvest will occur at
around 18 years of age. A Thinning will occur at around 11
years of age and it is anticipated that Investors will receive a
commercial harvest return from the Thinning.
WOODLOT OPTION 5 – DIVERSIFIED FORESTRY OFFER
®
®
®
THIS INNOVATIVE OPTION CREATES A READY-MADE
DIVERSIFIED FORESTRY INVESTMENT PORTFOLIO
It combines 4 x Option 1 Woodlots, 1 x Option 2 Woodlot, 1 x Option 3 Woodlot
and 1 x Option 4 Woodlot at an Establishment Fee of $23,000 - an approximate 5%
discount on the total individual Establishment Fees for these Woodlots.
The ongoing costs are the relevant costs for each Woodlot Option.
This combined Woodlot Option offers the Investor all the benefits of both short and
long-term forestry investment.
Over a total investment term of around 26 years, Thinning and Clearfall harvest
income should be received at six points during the investment.
The buy-back offer for Option 3 Woodlots at around 15 years of age will apply to
the Option 3 Woodlots of Investors in the Diversified Forestry Offer.
FEA PLANTATIONS PROJECT 2009 OFFERS A RANGE OF INVESTMENT OPTIONS
TO PROVIDE FINANCIAL PLANNING FLEXIBILITY
The broad range of forestry investment options offered by FEA Plantations Project 2009 allows Investors to tailor their timber
investment portfolio to suit their current financial planning needs and time future potential income to meet future needs.
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 23
06 AN OVERVIEW OF FEA PLANTATIONS PROJECT 2009
THE STRUCTURE OF THE PROJECT
LAND SELECTION
Applicants become Investors in the Project (and bound by
the Constitution) when their applications are accepted by
FEA Plantations. Each Investor obtains a beneficial interest
in the plantation established by FEA Plantations for the
Project. The beneficial interest to which Investors are entitled
is identifiable as a Woodlot (with the trees growing on each
Woodlot) once the land is secured and the Woodlots are
allocated.
FEA has selected regions of Tasmania, northern New South
Wales, South East Queensland and the Douglas Daly region
of the Northern Territory for the establishment of Project
plantations.
The selected regions meet strict FEA Plantations criteria
including:
• Annual minimum average rainfall of 800 mm to 1100 mm
or more;
• Deep, fertile and well-draining soils suitable for
plantation forestry; and
• Proximity to established transport routes for forest
products to processing infrastructure and ports.
MARYBOROUGH
WONDAI
QLD
KINGAROY
CABOOLTURE
IMBIL
BRISBANE
IPSWICH
URBENVILLE
TENTERFIELD
KYOGLE
CASINO
WYAN
WOODCHIP
EXPORT FACILITY
GOLD COAST
LISMORE
GRAFTON
GLEN INNES
WALCHA
NSW
NUNDLE
QUIRINDI
WYONG
NEWCASTLE
WOODCHIP
EXPORT FACILITY
SYDNEY
NORTHERN NEW SOUTH WALES
AND SOUTH EAST QUEENSLAND
FEA began establishing northern New South Wales
plantations in 2001 and currently manages around
37,000 hectares of Eucalypt hardwood plantations in the
regions.
Northern New South Wales is historically a timber area
with a mild sub-tropical climate, average annual rainfall
of 1000 mm or more, and high-quality fertile soils.
Northern New South Wales has significant existing forest
products processing and marketing capacity.
Softwood and hardwood sawlogs and veneer logs are
supplied to sawmills and plymills at Grafton, Casino,
Lismore, Urbenville and Wyan. Smaller diameter timber
is used for posts and sold to pole and girder markets.
Woodchips from sawmilling and residues are exported
from ports at Brisbane and Newcastle. Some are also
used for hardboard manufacture within Australia.
FEA also establishes and manages Eucalypt hardwood
plantations in South East Queensland in the Wondai and
Kingaroy area and close to the port of Brisbane.
CANBERRA
FEA PLANTATION REGIONS
VIC
SAWMILL
TIMBER PRODUCTS MANUFACTURING
MELBOURNE
PAGE 24 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
06 AN OVERVIEW OF FEA PLANTATIONS PROJECT 2009
TAMAR
HAMPSHIRE
RT
BE
F L
SMEA L B
A SA AY
RT W
FI M
BR IL
E L
O
NP
VO
DE
BU
RN
IE
SM
IT
HT
O
N
TASMANIA
Tasmania provides excellent conditions for the cultivation
of Eucalypt hardwood and Radiata pine softwood for the
Project and there is a significant established history of
success with these species in the region.
LAUNCESTON
Tasmania
All hardwood and softwood plantations located in
Tasmania for this Project will be in reasonable proximity
to existing FEA plantations and FEA’s Bell Bay sawmill for
the production of EcoAsh®, EcoAshclear®, BassPine® and
SmartFibre for the production and export of wood fibre or
other major wood-processing centres.
QUEENSTOWN
TRIABUNNA
NEW NORFOLK
HOBART
HUONVILLE
GEEVESTON
FEA PLANTATION REGIONS
TA ANN VENEER MILL
WOODCHIP MILL
SAWMILL
NORTHERN TERRITORY
African mahogany hardwood plantations will be established
in the Douglas Daly region of the Northern Territory.
DARWIN
JABIRU
KATHERINE
Northern Territory
This location has important attributes for African mahogany
cultivation including summer rainfall, tropical monsoonal
climate, a plentiful water supply and deep friable soils and
nutrients. The establishment of Khaya senegalensis, or
African mahogany, began at M’Oganwo in the wet seasons
of 2005-06 and has continued through 2006-07 and 2007-08.
If required, further suitable plantation locations in the
Northern Territory for the establishment of African mahogany
hardwood will be identified and secured.
FEA PLANTATION REGION
LAND OWNERSHIP
Land for the Project will be owned by a company within
the FEA Group, Tasmanian Plantation Pty Ltd, the FEA
Timberlands Fund, or may be leased from third party owners
under a Forestry Right agreement.
PLANTATION ESTABLISHMENT
Preparation – Soil is first prepared by ripping, mounding or
ploughing to improve tree rooting conditions and ultimately
improve tree growth rates and timber volume.
Seedlings – FEA uses genetically-superior seedlings to
improve tree growth rates and wood properties. Appropriate
Eucalypt hardwood species including Dunn’s white gum
(Eucalyptus dunnii), Spotted gum (Corymbia citriodora ssp.
variegata), Shining gum (Eucalyptus nitens), Sydney blue
gum (Eucalyptus saligna) and Blackbutt (Eucalyptus pilularis)
will be established choosing the best performing species for
specific site conditions. Option 3 Woodlots will be planted
with genetically-improved Radiata pine (Pinus radiata).
In 2008, FEA purchased the necessary capacity for the
establishment of African mahogany (Khaya senegalensis)
plantations, comprising a nursery and a genetics program
including seed stocks.
Planting – Seedlings are planted by hand or machine
with the application of water, polymers and fertilisers as
appropriate. FEA plants to a high density of 1,200 trees per
hectare for Options 1, 2 and 4 and 1,330 trees per hectare
for Woodlot Option 3.
Stocking Guarantee – Woodlot Options 1, 2, and 4 –
Investors are guaranteed a stocking rate of 90% of the
original 1,200 stems per hectare planted for a period of 3
years from the date the Investor is registered as the holder
of the Woodlot or the commencement of general insurance
cover for the plantations, whichever is the earlier.
Woodlot Option 3 – Investors are guaranteed a stocking rate
of 90% of the original 1,330 stems per hectare for a period
of 3 years from the date the Investor is registered as the
holder of the Woodlot, or the commencement of general
insurance cover for the plantations, whichever is the earlier.
Woodlot Option 5 – The relevant Stocking Guarantees for
the individual options that make up this offer are applicable
to the relevant Woodlots that are allocated to Investors
selecting this option.
If necessary for any reason during the stocking guarantee
period, replacement seedlings will be planted at no cost to the
Investor to maintain the minimum stocking density.
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 25
06 AN OVERVIEW OF FEA PLANTATIONS PROJECT 2009
PLANTATION MANAGEMENT
INFORMATION AND REPORTING TO INVESTORS
FEA Plantations has appointed FEA as plantation manager.
When you become an Investor in the Project you will
receive:
• A certificate detailing your investment; and
• Formal advice of monies paid to assist with your tax return.
FEA is the plantation manager for all 17 forestry investments
established by FEA Plantations from its first managed
forestry investment in 1993. Detailed information about FEA
is set out in Sections 03 and 13 of this PDS.
FEA Plantations will oversee on behalf of Investors:
• Land selection and preparation;
• The supply and planting of seedlings;
• Ongoing plantation maintenance including fertilising, pest
and weed control and firebreak maintenance with regular
annual audits and reporting through the plantations’
growth cycle by an independent forestry expert;
• Pruning of Option 2 and 4 Woodlots (including those
Option 2 and 4 Woodlots acquired by Investors who
invest in Woodlot Option 5);
• Harvesting trees to maximise sawlog recovery; and
• The sale of timber grown on the Project plantations for
the highest possible prices.
PLANTATION MAPPING TECHNOLOGY
Sophisticated ‘Geographic Information System’ and
‘Global Positioning System’ technology and aerial
photography is used throughout the land selection, plantation
establishment and ongoing management processes.
Plantations are accurately mapped and a multi-layered
database stores a wide range of information which is used
to generate current maps of all managed areas.
Satellite imagery and aerial photography supplements on-theground inspections and monitoring of plantation progress.
GROWTH RATE MONITORING
Within plantations, measurement plots are established and
data is collected for computer analysis of plantation growth
rates.
Growth formulae are then applied to predict likely volumes
of logs for a range of different end uses at various points
throughout a plantation’s growth cycle.
Ongoing monitoring through the inventory (or treemeasurement) program enhances productivity as it identifies
any underperforming areas of plantations early so that
remedial management action, such as extra fertilisation, can
be undertaken.
PLANNING HARVESTING TO MAXIMISE RETURNS
Inventory data and wood flow modelling software are used
to develop harvesting schedules that match forest products
to current market demand in a way which optimises the
Investor’s harvest return.
Once your Woodlot is planted you will receive:
• A plantation map showing the location of your Woodlot/s.
Each year you will receive:
• Reports from the Project Manager and Independent Forester
on the progress of the Project. These reports will cover:
• Compliance with the Product Ruling and any changes
in tax laws subsequent to it;
• Any significant changes in the market for forest
products;
• Any changes to costs; and
• An audit of Project plantations and reports on
progress, growth, any pests or disease, maintenance
and general management.
• Annual invoices for insurance, if applicable (usually
100% tax deductible) see Section 11;
• For Investors participating in Woodlot Option 2 or
Woodlot Option 5, commonly invoices for 100% tax
deductible pruning fees will be sent in approximately
years three, five and seven;
• Investors are also kept up-to-date on the Project through
regular newsletters, correspondence and information
posted on our website www.fealtd.com; and
• Invitations to attend regular Investor Tours conducted by
FEA staff to monitor the progress of the plantation estate.
After Thinning and Clearfall harvests you will receive:
• Proceeds from the sale of the timber from your Woodlots.
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.
Please read the Independent Forester’s report in Section 11.
THE ROLE OF THE CUSTODIAN
FEA Plantations has appointed FEA as Custodian of the
Project under a custody agreement. The functions of the
Custodian are as follows:
• To receive, hold and then distribute application monies
at the direction of FEA Plantations;
• To receive and then distribute Harvest Proceeds at the
direction of FEA Plantations; and
• To hold all property in safe custody.
FEA Plantations acts in accordance with the Constitution
and the custody agreement in directing the Custodian.
The Custodian acts in accordance with FEA Plantations’
instructions only and is not otherwise bound by the
Constitution.
FEA Plantations pays the Custodian’s fees from its own funds.
A copy of the Constitution can be obtained free of charge
by contacting the compliance officer at FEA Plantations
during business hours on Freecall 1800 600 009 or by
emailing marketing@fealtd.com.
PAGE 26 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
06 AN OVERVIEW OF FEA PLANTATIONS PROJECT 2009
PLANTATION INSURANCE
Investors are able to insure their interest in the Project
by insuring standing timber growing on their allocated
Woodlots against loss or damage by fire and other insurable
risks.
If requested to do so by the Investor, FEA Plantations will
use reasonable endeavours to insure the Investor’s Woodlots,
commencing in the second growing year and coinciding
with expiry of the Stocking Guarantee. FEA Plantations may
charge Investors an administration fee for arranging this
insurance. Refer to Section 07 for more information about
fees and costs. If cover is obtained, the Investor will be
invoiced by FEA Plantations for the cost of the insurance.
The cost and cover of any insurance will be determined
annually.
It should be noted that plantation insurance is typically
subject to a range of exclusions. The extent and nature of
cover will depend on the terms of the particular policy at the
time. No assurance is given that insurance will be available
nor which risks any policy may cover.
PUBLIC LIABILITY INSURANCE
FEA Plantations will maintain a public liability insurance
policy with a limit not less than $10,000,000 to cover the
liability of FEA Plantations and the Investors in respect of
their interests in the plantation areas.
INSURANCE OPTIONS
It is recommended that Investors apply for one of the
following two levels of insurance:
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 Investors and, if selected, then invoicing and
insurance cover will commence during the plantations’
second growing year. The Stocking Guarantee will expire for
all Investors in the Project upon commencement of the first
insurance period.
It is currently estimated that the cost of basic insurance for
newly planted trees will be approximately $7 per Woodlot
(including a 10% administration fee). As the value of the
trees increases 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 under a basic insurance policy
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 Investors to insure their
interests for the original amount invested until the value of
the Woodlots exceeds the value of the initial investment.
This level of insurance, and invoicing, will commence
during the plantations’ second growing year. The Stocking
Guarantee will expire for all Investors in the Project upon
commencement of the first insurance period. (Please refer to
page 25 for details of the Stocking Guarantee.)
It is currently estimated that the premium for this full
replacement cost insurance will be approximately $23 per
Woodlot (including a 10% administration fee). As the value
of the trees increases with time, the insured values and
respective costs to insure may also increase accordingly.
FEA Khaya Mahogany™ seedlings at M’Oganwo Station
The insurance premium may vary over time to reflect the
value of the timber as it changes and the premium rates may
vary from year to year depending upon insurance market
conditions and claims experience.
Full replacement cost insurance is compulsory if obtaining
finance for a term longer than two years.
HOW TO APPLY
Investors are asked to nominate on their Application Form if
they wish to apply for insurance and which insurance 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 no later than 1 month prior to the insurance
expiry date. Any notification will be applied to the following
insurance period.
INSURANCE ARRANGED BY INVESTORS
Investors 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 month prior to the insurance expiry date. If
the terms of cover arranged by an Investor under a finance
agreement are unacceptable to the financier, the Investor
may be invoiced for the cost of any plantation insurance
that FEA Plantations arranges.
IN THE EVENT OF A CLAIM
In the event that an Investor takes out insurance and
makes a successful claim, that Investor 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
Investor receiving an amount for an insurance payout will
cease to be an Investor 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 an Investor following a
successful claim in relation to the insured event. The Investor
will also be liable for any other amounts owing under the
Constitution, which are payable but remain unpaid at the
time the insurance payout is made.
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 27
07 PROJECT FEES
CONSUMER ADVISORY WARNING
By law, prior to setting out the fees and costs payable by Investors, we are obliged to provide 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 long-term returns.
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).
You should consider whether features such as superior investment performance or the provision of better member services justify
higher fees and costs.
You may be able to negotiate to pay lower contribution fees and management costs where applicable. Ask the fund or your
financial adviser.
TO FIND OUT MORE
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 investment1
Woodlot Options 1, 2, 3 and 4
$3,450 per Woodlot
Payable on application
Woodlot Option 5
$23,000 per Unit (7 Woodlots)
Contribution Fee
Nil
Not applicable
Nil
Not applicable
Nil
Not applicable
The fee on each amount contributed to your investment
Withdrawal Fee
The fee on each amount you take out of the investment
Termination Fee
The fee to close your investment
Management Costs - The fees and costs for managing your investment2
Carbon Credits
50% (fifty percent) of the
net 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. The Establishment Fee covers the initial establishment services for the Woodlot/s in the 18 months after the issue of an interest to that Applicant or such other time period as
permitted by the Responsible Entity’s AFSL.
The Establishment Fee is not subject to GST.
2. Additional fees which are not ‘management costs’ within the meaning of the Corporations Act are payable. Refer to ‘land sourcing and management fees’, 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.
PAGE 28 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
07 PROJECT FEES
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 you put in, you will be charged $nil.
PLUS
Nil1
And, for every $50,000 invested in the Project, you will be charged $nil each year.
Nil
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
Management costs
EQUALS
Cost of Fund
What it costs you will also depend on the fees agreed with your financial adviser.
1. Additional fees will apply. These land sourcing and management fees and pruning fees will be charged to Investors. However, they are not ‘management costs’ within the meaning of
the Corporations Act and are, therefore, not included in this table. Please refer to ‘land sourcing and management fees’, 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:
Land sourcing and management fees – Land sourcing and management fees are payable under the Constitution for the work
undertaken by the Responsible Entity in respect of the management and maintenance of the plantation. These fees are deferred
until the harvesting of the trees. The land sourcing and management fees payable to the Responsible Entity are calculated as
18% of the gross Harvest Proceeds for Woodlot Options 1 and 2, 15% of the gross Harvest Proceeds for Woodlot Option 3 and
20% of the gross Harvest Proceeds for Woodlot Option 4. For example, for every $50,000 of Harvest Proceeds, the Responsible
Entity will receive $9,000 for Woodlot Option 1 and 2, $7,500 for Woodlot Option 3 and $10,000 for Option 4.
In the event an Investor’s Options 1 or 2 Woodlots are damaged or destroyed, the land sourcing and management fee payable
will be 18% of the salvaged value, or 18% of any insurance proceeds received by the Investor (as the case may be).
In the event an Investor’s Option 3 Woodlots are damaged or destroyed, the land sourcing and management fee payable will be
15% of the salvaged value, or 15% of any insurance proceeds received by the Investor (as the case may be).
In the event an Investor’s Option 4 Woodlots are damaged or destroyed, the land sourcing and management fee payable will be
20% of the salvaged value, or 20% of any insurance proceeds received by the Investor (as the case may be).
Pruning fees – For Investors who participate in Woodlot Option 2 or 5, pruning fees will be payable when the trees are around
3, 5 and 7 years of age. For Investors in Woodlot Option 5, pruning fees will only apply to the Option 2 Woodlots within the
Woodlot Option 5 Diversified Forestry Offer. The pruning fees payable are summarised in the following table:
PRUNING FEES – WOODLOT OPTIONS 2 OR 5
Year
Fee payable
How and when paid
3
$385
Payable by Investors by June 30 in the year that pruning has been completed.
5
$405
Payable by Investors by June 30 in the year that pruning has been completed.
7
$430
Payable by Investors by June 30 in the year that pruning has been completed.
These pruning fees will be increased in accordance with CPI from 31 December 2008.
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 29
07 PROJECT FEES
Carbon Credits - The Responsible Entity will be entitled to
50% of the net benefits of any Carbon Credits traded by the
Responsible Entity on behalf of Investors. 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 43 and 56.
Insurance – Investors 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 Investor
will be invoiced on 1 June each year for the plantation
insurance that FEA Plantations will arrange on behalf of
Investors. For further information, please refer to page 27.
FEA Plantations will charge Investors a fee of approximately
10% of the amount of the insurance premium. That is, for
an insurance premium of $50,000, FEA Plantations will be
entitled to receive a fee of $5,000.
Rates and Taxes - FEA Plantations 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, Investors will be required to pay
the extra rates, charges and taxes in respect of the assessed
value of the Investors’ 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’s fees, tax agent’s 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 administrative costs of operation of the Project.
If the Responsible Entity decides to on-charge these
expenses in the future, then prior to implementing the
change the Responsible Entity will provide Investors with
30 days notice in writing of its intention to be reimbursed
for expenses and will set out the reasons for this change.
Aerial view of Eucalypt plantations adjacent to a sawmill in northern New South Wales
PAGE 30 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
Taxation - For further information about taxation costs and
deductions, including the treatment of GST, please refer to
Section 09. All fees and charges outlined in this section are
quoted exclusive of GST.
Commissions - FEA Plantations will pay commissions or
brokerage out of its own funds to licensed financial advisers
and other persons permitted under the Corporations Act
to receive them. These payments, which may be up to 8%
of Establishment Fees ($303.60 per Woodlot, including
GST for Woodlot Options 1, 2, 3 and 4) are borne by the
Responsible Entity and are not a direct cost to Investors. It
is a requirement of the Corporations Act that a financial
adviser discloses to Investors any commission received in
respect of the Project.
Marketing Support - FEA Plantations, or another company
within the FEA Group, will provide an additional minimum
of 2% of Establishment Fees ($75.90 per Woodlot, including
GST for Woodlot Options 1, 2, 3 and 4) in marketing
support payments to recipients permitted under the
Corporations Act to receive them. These payments are
borne by the Responsible Entity and are not a direct cost
to Investors. Marketing support payments may include
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. They may also include other
initiatives FEA Plantations may take to encourage sales of
Woodlots through such means as the provision or funding
for conferences, seminars, product training, business
development, marketing materials, industry education,
marketing advice, support staff, consultants, advisers and
other assistance. The maximum amount of marketing
support an adviser may receive from FEA Plantations is
5% of Establishment Fees per Woodlot.
The payment and terms of payment of such brokerage,
commission and marketing support are entirely at FEA
Plantations’ discretion. Investors should always discuss fees
and their benefits with their adviser.
08 PROJECT RISKS
Participation in this Project is a long-term investment in a forestry plantation and a variety of risks are particular to these types of
investments. The following is a summary of risks that have been identified that could affect an 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 11.
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 but are not limited to damage or destruction of trees by fire, flood, frost,
drought, hail, windstorm, disease, fungal pathogens, poor nutrition, insects or animal browsing.
FEA has been purchasing and leasing land for plantation development since 1985 and, as a result, has
considerable experience in the acquisition of plantation land.
Land selected for the Project meets the high standards as outlined in the Independent Forester’s Report on
page 38. 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.
The geographic range of land potentially to be used over Tasmania, New South Wales, Queensland and the
Northern Territory will mitigate some of the climatic risks.
Species will be matched to suit site characteristics to minimise usual significant climatic and agricultural risks.
Fire
There is a risk of fire in the Australian natural environment. This risk is mitigated, in part, by spreading the geographic
location of plantations, locating them primarily in agricultural areas and not in large continuous aggregates.
Recent research has shown that, where hardwood plantations have been established on formerly cleared
agricultural land, plantation fires should be less intense than in native forest vegetation types and slower spreading
than in fully cured grasslands. This assists in reducing the damage to a Project plantation in the event of a fire.
FEA maintains a fleet of fire tenders near its plantations with fire units in each region. FEA reviews its fire plan
and readiness annually and maintains a system of fire breaks, dams and emergency fire fighting protocols.
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. Losses can be
severe at the seedling stage and tend to diminish 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 disease. 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 occurred in Eucalyptus nitens due to
the entry of fungal spores during natural branch shedding or mechanical pruning. This rot may affect the
structural properties of the wood for sawn timber production, but has no significant effect on pulpwood
quality. Eucalyptus nitens has good natural coping systems to prevent spread of the rot radially within the tree.
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 and remedial action taken to minimise damage.
FEA has co-operated with various research organisations and contributes to 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.
A known insect hazard for the Meliaceae family of trees to which African mahogany belongs is tip borer
Hypsila robusta which has been reported in most areas of the Pacific and South East Asia. The insect attacks
the terminal tip causing death of growing tips and resulting in multiple leader development. It is currently
not a major problem but could pose a potential future threat. It is not a known threat to Eucalypt or pine
plantations.
Control of insects other than termites is not currently a large problem for managers of mahogany
plantations. There are means of controlling termites being applied in NT which are dependent upon the
detection and poisoning of termites with bait traps. Incidences of attacks have been low in developed
pasture sites and the issue is well monitored.
Drought
The availability of water and the risk of drought are critical factors in Australian agricultural production and
plantations, like any agricultural crop, can be influenced by extended periods of low rainfall. Typically, low
rainfall results in lower growth rates although short periods of drought may be compensated for by periods
of wet weather across the entire Rotation.
Tree growth is strongly related to site characteristics, particularly depth of soil, soil water storage capacity
and underground water tables. Plantations can access moisture from the soil at depths of several metres,
so the impact of periods of low rainfall can be at least partially off-set by selecting sites with deep soils with
high water storage capacity.
FEA’s rigorous site assessment system establishes soil characteristics and evaluates long-term climatic data.
Under the criteria for the Project, an annual minimum average rainfall of 800 to 1100 mm is required
depending on aspect, soil depth and characteristics. On most existing FEA Plantations’ sites, the long-term
average rainfall is between 800 and 1500 mm per annum.
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 31
08 PROJECT RISKS
GENERAL RISKS OF PLANTATION FORESTRY (continued)
Nutrition
Soil fertility is an important factor in plantation production. FEA has an ongoing monitoring program and
uses tree-symptom analysis and foliar and soil sampling where productivity is less than expected. Additional
fertiliser is applied as necessary after analysis of sample results. FEA engages researchers or consultants for
specialist advice as appropriate.
FEA maintains fertiliser trials across the plantation estates that it manages and fertiliser regimes are
amended as new research adds to our knowledge.
RISKS SPECIFIC TO THE PROJECT
Land
Availability
and Forestry
Rights
At the date of issue of this PDS, a Forestry Right in land for the Project may not have been secured by FEA
Plantations for all land which will be required for the Project. There is a risk that FEA Plantations may breach
its obligations to an Investor if it is not able to secure such land to allocate a Woodlot to that Investor. 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 500 hectares of suitable land and is
negotiating access to a further 5,350 hectares. Based on past experience in sourcing suitable land, FEA
Plantations is confident that sufficient land will be secured for the Project as and when required. FEA
Plantations will continually monitor its land acquisition program and will not accept applications unless it
believes that it can secure the land for each Investor’s Woodlot/s within 15 months after the issue of an
interest to that Applicant or such other time period as permitted by the Responsible Entity’s AFSL.
If sufficient land cannot be secured within this timeframe, FEA Plantations will notify the Investor of a right
to withdraw from the Project. If an Investor elects to withdraw, FEA Plantations will issue a full refund of
application monies within 14 days of an appropriate written request from the Investor.
Failure to
Achieve
Expected
Yields
Plantation productivity can be affected by rainfall conditions, soil types, disease and pests, and will dictate
the harvest yields and the returns ultimately achieved.
FEA follows rigorous site selection protocols to ensure suitable properties are included in the Project and
these, along with FEA’s establishment and management practices, should reduce the risk of failing to
achieve expected yields.
Industry knowledge of the long-term growth rates of African mahogany is currently in its infancy and there
is the risk that current growth rate estimates may not be achieved.
FEA has an ongoing ‘Forest Management and Growth Modelling’ program which will provide continual
improvement in their understanding of and ability to forecast plantation growth rates and expected yields.
Failure to
Achieve
Economic
Prices
It is not possible to predict the prices of forest products over a medium to long term Project of this nature as
they are influenced by many variables, predominantly outside the control of FEA Plantations.
However, FEA is a well-established, large-scale timber supplier and this status places it in a strong position
to maximise prices for Investors’ forest products.
Investors should be aware that African mahogany is not yet proven as a commercial plantation tree species
in Australia. Therefore, Woodlot Option 4 should be considered as having additional risks – as it involves
growing a timber species which is currently untested by FEA.
Discontinuance There are risks in relation to inadequate ground preparation, weed control, planting and species selection. In
of Uneconomic the event that a plantation suffers damage to the extent that it is not economic to nurture the plantation to
Plantations
harvest, the Project (or a particular Investor’s Interest in the Project) will end as at the date of such damage.
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 plantation establishment
and maintenance work which may lower productivity and, in turn, reduce returns to Investors.
FEA minimises this risk by carefully scheduling operations so that as much work as possible is done at times
of the year which will produce the best possible results given local conditions. The geographic spread of
Project properties also acts to limit primary production risks and spread out the operational peaks.
The Independent Forester reviews the performance of FEA and its contractors and reports to Investors
and FEA Plantations annually on whether FEA has met its obligations in relation to the establishment and
maintenance of the plantations.
FEA’s certified Environmental Management Systems (EMSs) include standard operating procedures to cover
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.
Insurance
Investors 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 an Investor’s interest in the Project.
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. FEA Plantations will arrange public
liability insurance of not less than $10,000,000 at no charge to the Investor.
PAGE 32 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
08 PROJECT RISKS
RISKS SPECIFIC TO THE PROJECT (continued)
Limitation
of Investor’s
Liability
The Constitution provides for the limitation of Investor’s liabilities. No assurance is given concerning the
effectiveness of these provisions as their interpretation is subject to the determination of courts.
Financial
Capacity
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 has also been appointed as Custodian 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 Investors after deferred land sourcing and management
fees 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. Investor’s
returns may be affected by 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 its 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 reduce the market price for the timber produce being sold from the Woodlots. This could be
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 over the term of this Project.
Market demand for sawn timber products could also be reduced by the entry of new suppliers or an
oversupply into the market. Presently, however, FEA believes there are reasonable grounds to expect there
will be continuing solid demand for sawlogs and sawn timber over the term of this Project.
By developing a wide range of products and markets across both sawn timber and wood fibre, FEA
reduces the risk associated with reliance on limited products or markets. However, this strategy is subject to
unforeseen changes to markets and the occurrence or existence of unknown risks.
Legislative
Risks
It is possible that legislation affecting plantation forestry could change over the life of the Project and
affect Investors 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.
Regulatory or legislative actions by local, state and federal governments may affect the Investor’s potential
returns. 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 ‘2020 Vision,’ on page 21.
Imposition
of Rates and
Taxes
FEA Plantations and not Investors 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, FEA Plantations will be entitled to be reimbursed
out of the Project for these extra costs.
Lack of
Liquidity in
the Secondary
Market
Investors should be aware that the Responsible Entity is under no obligation to purchase an Investor’s
interests and that no secondary market currently exists for interests in the Project. However, recent changes
to the tax legislation mean an Investor’s tax deductions will be unaffected if the Investor sells his or her
interest after they have been held for a period of at least four years. Any Investor wishing to sell their
interest in the Project should seek appropriate professional advice because a transfer could have income tax
and other implications. This will only be a benefit if, as an Investor, you are able to find a purchaser for your
interest.
For Investors in Woodlot Option 3, FEA Plantations will make a buy-back offer for Option 3 Woodlots at
around 15 years of age.
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 33
09 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,
Investors should obtain their own independent professional
advice to determine the tax treatment applicable to their
particular circumstances.
DIRECT FORESTRY EXPENDITURE
Payments by Investors in the Project are deductible because
the Project satisfied the ‘direct forestry expenditure’ test.
Essentially, this requires that at least 70 percent of the
expenditure (in present value terms) will constitute ‘direct
forestry expenditure’ (DFE), determined against arm’s length
prices. DFE is described as comprising:
ATO PRODUCT RULINGS
(a) expenditures associated with the establishing, planting,
tending and harvesting of trees; and
(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).
The ATO has issued Product Rulings 2009/23, 2009/24,
2009/25, 2009/26 and 2009/27 in respect of the Project
which is applicable for Investors who enter into the Project
on or before 30 June 2009 (2009 Investors).
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 clarifies the ATO’s position
in respect of tax deductions for Investors provided the
Project is carried out in accordance with the details that
were provided to the ATO and which are described in the
Product Rulings, including planting by 31 December 2010.
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 free of
charge from FEA Plantations during business hours by
calling our Freecall number 1800 600 009, by emailing
us at marketing@fealtd.com or downloading from
www.fealtd.com or the ATO website at www.ato.gov.au.
The Product Rulings are rulings on the application of
taxation laws and are 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
the Product Ruling, the ATO is in no way endorsing or
recommending the Project.
TAX DEDUCTIONS
The Product Rulings confirm that the amounts paid
by Investors participating in the Project should be fully
deductible.
For more information, please refer to the Independent
Taxation Opinion on page 45.
PAGE 34 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
SECONDARY MARKETS FOR FORESTRY SCHEME
INTERESTS
The Government has enacted new rules concerning
secondary markets for forestry scheme interests applicable
from 1 July 2007. Because the 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 referred to above,
investors are no longer 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
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.
09 TAXATION
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 of the sale
proceeds 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.
GST
An investment in the Project is unlikely to be subject to GST
as such payments are classified as further consideration for
an investment in a managed investment scheme. Investors
are not considered to be carrying on a business in relation to
an investment in the Project.
PROCEEDS FROM THE SALE OF TIMBER
Proceeds derived by the Investor from the sale of timber will
be assessable as income for taxation purposes.
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
should 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.
An investment in the Project should not constitute a breach
of the sole purpose test provided that the investment is
consistent with the fund’s investment strategy, forms part
of the fund’s balanced portfolio and is maintained solely for
the provision of benefits for each member of the fund in the
circumstances required by the sole purpose test. Whether an
investment in the Project will meet the sole purpose test is
a question of fact which must be determined by the trustee
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 Product Rulings, the rulings
will be withdrawn. A difference will be material if it
results in a tax outcome being different to that set out in
the Product Rulings;
• 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 Rulings that have been issued; and
• Although the Product Rulings deal with the laws enacted
at the time they were issued, later amendments may
impact on them. Any such changes will take precedence
over the application of the Product Rulings and, to that
extent, the Product Rulings will have no effect.
Eucalyptus nitens sawlogs in Tasmania after harvest
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 35
10 PROJECT RETURNS
WHAT RETURNS ON INVESTMENT CAN AN
INVESTOR EXPECT?
Over the life of an Investor’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 an
Investor’s potential return with any certainty. It is for this
reason that the directors of FEA Plantations do not consider
that, in accordance with current ASIC policy, there are
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 section of the PDS contains details about
some of the matters which may affect the returns which
Investors will generate from the Project. This information is
provided to assist Investors 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 Investors
consult their financial and/or taxation adviser and make their
own inquiries as to the suitability of the investment for their
needs.
In considering whether to participate in the Project, Investors
should consider the matters outlined below in conjunction
with the Project risks and taxation issues set out in Sections
08 and 09. Each of these matters will affect the returns that
may be achieved 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; and
• Timing of harvest.
TIMBER YIELD
Timber yield is the total amount of wood products produced
by the plantation, generally measured in terms of volume
(cubic metres).
Average plantation growth rates are normally expressed in
terms of Mean Annual Increment (MAI), which is calculated
by dividing the plantations total timber yield per hectare by
the plantations age in years. This calculation provides a MAI
growth rate in terms of cubic metres per hectare per annum.
MAI may be expressed as an actual or forecast growth rate.
Therefore, the potential timber yield for a plantation can be
calculated by multiplying the MAI (the average growth rate
of the trees at a point in time) by the Rotation length.
As with any primary production, several risks may have an
impact on the final yield and neither FEA Plantations nor any
member of FEA, nor their respective directors or agents gives
any assurance or guarantee regarding the final yield. The
yield will be affected by factors such as climate, site quality,
management techniques, selection of improved seedling
stock, and fertiliser application.
Please refer to the Independent Forester’s Report on page 38
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 endmarkets, Investors may well receive different prices for each
parcel of timber. Market demand, prices and specifications
for timber sales, which all have an impact on the price for
timber, may also vary in the different regions in which FEA
operates. Generally, before harvesting, the Project Manager
will conduct a detailed assessment of the plantations to
determine the best way to maximise returns to Investors.
Timber from the Project is expected to be sold on a
‘stumpage’ basis. Stumpage is the price paid to the Investor
for the timber as a standing crop. It excludes harvesting,
transport, processing and marketing costs which are
generally borne by the purchaser.
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 on page 42
for further information.
PAGE 36 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
10 PROJECT RETURNS
WOOD PURCHASE AGREEMENT
FEA has entered into a wood purchase agreement with FEA
Plantations pursuant to which FEA has agreed to purchase
the timber harvested from the Project.
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 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.
Further, if FEA Plantations considers the conditions for sale
are not favourable, then FEA Plantations can postpone
selling the timber until conditions become more favourable.
For Woodlot Options 1 and 2, a Floor Price mechanism is
included in the wood purchase agreement for both sawlogs
and pulplogs. This means that the price FEA will pay for the
wood will be the greater of either the prevailing market
price at the time of harvest or the Floor Price.
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. Final Clearfall
harvest involves harvesting all of the remaining trees.
TIMBER PROCEEDS POOLED AT HARVEST
All proceeds of timber sales with respect to each Woodlot
option will be pooled. Investors 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 land sourcing and
management fees, which will be deducted from the Harvest
Proceeds before distribution.
As all proceeds of timber sales respective to each Woodlot
option in the Project will be pooled, the risk faced by
individual Investors 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 Woodlot/s, which would cause the
Investor to cease to have an interest in the Project.
INCENTIVE TO MAXIMISE INVESTOR RETURNS
It is in the Responsible Entity’s best interests to maximise
returns to Investors because the deferred land sourcing
and management fees payable under the Constitution are
calculated as a percentage of Harvest Proceeds, and will
be deducted from Harvest Proceeds. Therefore, the greater
the returns to Investors the greater the fees, that the
Responsible Entity will receive.
PRICING INDEPENDENCE
FEA Plantations must act in the best interests of the Investors
and, if there is a conflict, must give priority to the interests
of the Investors. 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.
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.
DISTRIBUTION OF PROCEEDS TO INVESTORS
In general terms, the pooled distribution to Investors will be
calculated as follows:
Timber yield in cubic metres
multiplied by
Average stumpage price per cubic metre
minus
% of Harvest Proceeds
(for deferred land sourcing and management fees)
equals
Net Harvest Proceeds
(after deferred land sourcing and management fees)
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 37
11 INDEPENDENT REPORTS
31 March 2009
The Directors
FEA Plantations Limited
PO Box 733
Launceston Tasmania 7250
INDEPENDENT FORESTER’S REPORT - SUMMARY
Dear Sirs,
This summary report has been prepared for inclusion in a Product Disclosure Statement (PDS) to be issued by FEA Plantations Limited
(FEA Plantations) in relation to FEA Plantations Project 2009 (Project), which comprises the growing of various Eucalypt hardwood species
in Tasmania, New South Wales and Queensland, Radiata pine softwood predominately in Tasmania but potentially in other established
softwood regions, and high-value African mahogany hardwood on a selected site in the Northern Territory.
This is a summary of a more extensive report that is available upon request and at no charge from FEA Plantations. It aims to provide
potential Investors in the Project with an independent assessment from a forestry perspective. It has been prepared in accordance with the
Australian Forest Growers ‘Disclosure Code for Afforestation Managed Investment Schemes’.
QUALIFICATIONS AND EXPERIENCE
The Independent Forester, Mr Gerry Cross (principal consultant of VDFC) has prepared this report drawing on almost 40 years experience of
plantation and forest industry management around the world, including some 33 years experience in all aspects of plantation development
and management in Australia. Mr Cross holds a B.Sc. (Forestry), ANU and is a member of the Institute of Foresters Australia (IFA). He is a
Registered Professional Forester and Deputy Chairman of the Association of Consulting Foresters of Australia Division of IFA.
The opinions in this report are based on published materials and our inspections of FEA Plantations’ current plantations and other plantations
in Tasmania, interstate and overseas.
OVERVIEW OF FEA PLANTATIONS PROJECT 2009
The Project offers five Woodlot options:
Woodlot Option 1 (½ hectare):
A short Rotation (13 years) Eucalypt hardwood regime that will produce pulpwood and unpruned sawlogs;
Woodlot Option 2 (½ hectare):
A high-value pruned Eucalypt hardwood sawlog/pulpwood regime with a 16 year Rotation;
Woodlot Option 3 (½ hectare):
A traditional Radiata pine softwood regime that will yield sawlogs/pulpwood plus other products, in a
25 year Rotation;
Woodlot Option 4 ( hectare)
An African mahogany high-value hardwood sawlog regime, with an 18 year Rotation; and
Woodlot Option 5 (3 hectare)
A diversified forestry offer with four Option 1 Woodlots, one Option 2 Woodlot, one Option 3 Woodlot
and one Option 4 Woodlot for a total of 3 hectares.
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.
CAPABILITY OF THE PLANTATION MANAGER, FEA
FEA, the plantation manager, has demonstrated skill and expertise in Eucalypt hardwood plantation establishment, which can be readily
observed in the level of development, growth and good Silvicultural practice on all the sites currently under their management in Tasmania,
New South Wales and Queensland. The proposed intensive site preparation and follow up maintenance with fertiliser, vermin and insect
control are state-of-the-art practice.
Yields from these plantations will still depend on seasonal conditions; however, the rainfall at these chosen sites is historically relatively high
and dependable. Average growth and yields should be at least comparable with those achieved from the existing estate.
FEA has invested heavily in information technology such as its in-house ‘Geographic Information System’. This allows very accurate definition
of planted areas and links to on-ground ‘Global Positioning System’ surveys and aerial and satellite remote imaging.
FEA has staff members whose roles are solely to monitor the health and maintenance of the plantations and carry out frequent, regular field
inspections. In addition, FEA also has staff with a high level of growth modelling skills for ongoing sampling and inventory of the plantations.
FEA has been upgrading its estate modelling software using a forest industry standard called Woodstock®. This allows complex modelling of
wood flows to a range of markets to optimise wood production, product and financial outcomes.
PLANTATION SITE SELECTION
The specific site characteristics of each property to be used in the Project will be supplied to VDFC as part of the evaluation of land suitability.
The Independent Forester will also inspect properties as part of the review for the Annual Report to Investors and will advise the compliance
committee as to whether the land meets the selection criteria.
PRODUCTIVE CAPACITY
FEA has highly developed land selection criteria and field assessment techniques which are subject to continuous review. This ensures that
the Project land base will be capable of growing a commercially viable plantation in each of the regions of operations.
CLIMATE
Under the criteria produced for the Project, a minimum annual rainfall of about 800 to 1100 mm is required.
On most existing FEA Plantations’ sites, the long-term average rainfall is between 800 and 1500 mm per annum. Similar rainfalls can be
expected for land acquired for this Project.
GEOLOGY AND SOILS
FEA has developed soil selection criteria which ensure that selected land meets the requirements for high growth rates. FEA has extensive
experience applying establishment techniques to match a range of suitable soils.
PLANTATION ESTABLISHMENT AND MANAGEMENT
Species to be planted:
Temperate Regions - Tasmania and New South Wales Northern Tablelands
In these areas, Shining Gum (Eucalyptus nitens) is the preferred plantation species for its rapid growth over the first 12 to 15 years and its
resistance to frost and drought. These sites are similar in terms of rainfall, temperatures and soils and remnant pockets of Shining Gum occur
naturally in these regions of New South Wales.
PAGE 38 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
11 INDEPENDENT REPORTS
Softwood (Pinus radiata) plantings utilising high genetic quality seedlings will be predominately in Tasmania, although other established
softwood regions may be considered.
Subtropical Regions - North Coast New South Wales and Southeast Queensland
The main species used here are Dunn’s White Gum (E. dunnii) and Sydney Blue Gum (E. saligna). To a lesser extent Spotted Gum (Corymbia
citriodora ssp. variegata) and the high-value but site-specific Blackbutt (E. pilularis) may also be established. These are all sub-tropical species
with some or all of their natural distribution occurring within the targeted regions.
Tropical/monsoonal Regions – Northern Territory
There have been plantations of African mahogany (Khaya senegalensis) in the Northern Territory since 1960. Further genetic and planting
trials began in the late 1990’s and with subsequent commercial plantings there are now approximately 4000 hectares of trees established.
This species is well adapted to the monsoonal climate of the Northern Territory and grows naturally in zones where there are 2 to 8 months
of dry season.
IMPROVED GENETIC STOCK
The use of selected seed provenances and seed-orchard sources will increase the expected growth rates and productivity of plantations
established for the Project. Such increases are reported 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.
FEA is establishing its own seed orchards and tree breeding programs, either collaboratively or on its own, for the main species referred to
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 subtropical regions.
There are co-operative programs in the Northern Territory and Queensland for the long term selection of quality African mahogany clonal
material and also collections of quality seed from African countries by FEA and various plantation companies. In the short term, FEA, in
conjunction with the relevant government agencies, is working towards the use of better seed and clonal material for use in new Khaya
senegalensis plantations. FEA has also made its own collections of superior seed from the Republic of Mali in Western Africa.
STOCKING
It is proposed to plant hardwood Eucalypts species and African mahogany at about 1,200 stems per hectare, and softwood Radiata pine
at about 1,330 stems per hectare. This will provide optimal wood volume, Thinning selection and value production under the proposed
Silvicultural regimes.
SITE PREPARATION
FEA has developed a range of site preparation and weed control prescriptions to match the variety of species and site requirements that are
associated with their targeted plantation development regions. These have been proven to promote good early tree survival and growth and
should ensure that plantations established for the Project get away to a good start.
PLANTING
Trees will generally be planted in either spring or autumn in Tasmania and from spring to autumn in New South Wales and Queensland.
Actual planting dates will be determined by soil moisture levels in order to ensure good early survival and uniform establishment. African
mahogany seedlings will be planted at the commencement of the wet season in October through January so that trees will have established
root structures prior to the beginning of the dry season.
FERTILISATION
Trees are fertilised as required to optimise early growth and to outcompete weeds.
Fertiliser regimes are constantly under review in the light of new research, and are tailored to match nutritional requirements especially micro
nutrients and site-specific needs to meet management objectives. Follow-up fertiliser may be applied at canopy closure or after Thinning to
further boost productivity.
REFILL PLANTING
FEA Plantations provides a Stocking Guarantee for three years from the date the Investor is registered as a Woodlot owner or the
commencement of general insurance cover for the plantations, whichever is the earlier. During this period, plantations with less than 90%
survival will be refilled in the first suitable period for replanting. In instances of very poor survival, areas may be totally replanted. The aim of
refill planting is to ensure sufficient stocking to optimise site occupancy (that is, dominance of the trees).
PLANNED SILVICULTURAL REGIMES
Woodlot Option 1 (Eucalypt hardwood)
The proposed Rotation length will average 13 years. Where appropriate, a Thinning will be conducted at around age 9 years. This will remove
approximately every fifth row and thin in-between bays to leave a final stocking of around 450 stems per hectare.
Woodlot Option 2 (Eucalypt hardwood pruned)
The proposed Rotation length will average 16 years. Stem pruning will be conducted in two or three lifts at about age 3, 5 and 7 years. This
will produce about 400 to 450 stems per hectare of better-formed and vigorous trees to grow clearwood (knot free timber). The stand will be
thinned down to about 450 stems per hectare at about age 9 years.
Woodlot Option 3 (Radiata pine softwood)
The proposed Rotation will include a first Thinning at about 13 years of age to reduce stocking to about 450 to 500 stems per hectare.
A second Thinning at about age 18 years would further reduce the stocking to about 300 to 350 stems per hectare, followed by a final
Clearfall harvest at about age 25 years.
Woodlot Option 4 (high-value African mahogany hardwood)
The proposed Rotation length will average 18 years. Stem pruning, conducted at the manager’s expense, will be in two or three lifts at about
age 2, 4 and 6 years. This will produce about 350 to 400 stems per hectare of better-formed and vigorous trees. A commercial thinning is
planned at age 11 to leave about 350 to 400 stems.
Woodlot Option 5 (diversified forestry offer)
This comprises four woodlots of Eucalypt hardwood Woodlot Option 1 and one Woodlot each of Eucalypt hardwood clearwood Woodlot
Option 2, Radiata pine softwood Woodlot Option 3 and high-value African mahogany hardwood Woodlot Option 4 for a total of 3 ha
of plantations. There would be a series of four returns from Thinnings in the various regimes at age 9, 11, 13, and 18 years. Subsequently
then there are four cash returns at the time of Clearfall at age 13, 16, 18 and 25 years. This option provides opportunity for a long term
investment with periodic returns after age 9.
ANTICIPATED GROWTH AND YIELD
Mean annual increment (MAI) is a measure of wood volume production over a given Rotation length expressed as cubic metres per hectare
per year (m3/ha/yr).
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 39
11 INDEPENDENT REPORTS
TASMANIA
The selected sites should enable the achievement of Eucalyptus hardwood yields within a range of 22 to 32m3/ha/yr at Clearfall with a
Thinning at about 9 years.
Radiata pine softwood has been grown in Tasmania for more than fifty years and there is a body of available information on the quality of
soils and the climatic factors under which P. radiata growth rates of 22 m3/ha/yr or better can be achieved.
NEW SOUTH WALES AND QUEENSLAND
FEA has eight years experience of establishment and management of Eucalypt plantations in the New South Wales and Queensland regions. It is
reasonably certain that under the management regimes proposed Project plantations will achieve growth within the range of 22 to 32m3/ha/yr.
Nevertheless, estimating Eucalypt plantation yield in New South Wales and Queensland is speculative, because plantations have not been
grown for long enough to confirm them. However, the reasonable expectation for achievement of this potential is certainly there.
NORTHERN TERRITORY
Recent publications for African mahogany in the Northern Territory indicate that the diameter growth can achieve a base of 2.4 cm in
diameter per growing season. This can translate into an MAI of 11 m3/ha/yr of volume suitable for processing for sawn timber.
ANTICIPATED HARVEST YIELD - WOODLOT OPTION 1 (EUCALYPT HARDWOOD)
I believe that if the proposed establishment and maintenance practices are followed, Woodlot Option 1 plantations will routinely yield an
average of 95 m3/ha from a Thinning at about age 9, followed by 260 m3/ha at final harvest at around 13 years. This equates to an MAI of
approximately 27 m3/ha/yr.
PRODUCT YIELD (m3/ha)
TOTAL YIELD (m3/ha)
10
95
WOODLOT OPTION
HARVEST
AGE PRODUCT
Woodlot Option 1
Thinning
9
Unpruned sawlog
Pulpwood
85
13
Unpruned sawlog
125
Pulpwood
135
Clearfall
Total
260
355
ANTICIPATED HARVEST YIELD - WOODLOT OPTION 2 (EUCALYPT HARDWOOD - PRUNED)
Woodlot Option 2 includes a pruning and Thinning regime over a longer Rotation period of 16 years. The estimated average yield at age 16
is likely to be 335 m3 per hectare, with Thinning at about age 9 resulting in an additional yield of 95 m3/ha. This equates to an MAI of almost
27 m3/ha/yr.
WOODLOT OPTION
HARVEST
AGE PRODUCT
PRODUCT YIELD (m3/ha) TOTAL YIELD (m3/ha)
Woodlot Option 2
Thinning
9
Unpruned sawlog
10
Pulpwood
85
Clearfall
16
Pruned sawlog
121
Unpruned sawlog
80
Pulpwood
134
Total
95
335
430
ANTICIPATED HARVEST YIELD - WOODLOT OPTION 3 (RADIATA PINE SOFTWOOD)
Provided the proposed establishment and maintenance practices are followed, plantations in Woodlot Option 3 are expected to routinely
yield an average of 206 m3 from two Thinnings at ages 13 and 18, followed by 345 m3 at final harvest at about 25 years of age. This equates
to an MAI of approximately 22 m3/ha/yr.
WOODLOT OPTION
HARVEST
AGE PRODUCT
PRODUCT YIELD (m3/ha) TOTAL YIELD (m3/ha)
Woodlot Option 3
First
Thinning
13
Unpruned sawlog
32
Pulpwood
66
Second
Thinning
18
Clearfall
25
Unpruned sawlog
68
Pulpwood
40
Unpruned sawlog
310
Pulpwood
35
Total
98
108
345
551
ANTICIPATED HARVEST YIELD – WOODLOT OPTION 4 (HIGH-VALUE AFRICAN MAHOGANY HARDWOOD)
Based on reported productivity from stands in both the Northern Territory and northern Queensland, the two regions which are in the
homocline for growth of African mahogany hardwood, it is possible to achieve between 10 and 15 m3/ha/yr of log volume suitable for sawing.
WOODLOT OPTION
HARVEST
AGE PRODUCT
PRODUCT YIELD (m3/ha)
TOTAL YIELD (m3/ha)
Woodlot Option 4
Thinning
11
Unpruned sawlog
22.5
22.5
Clearfall
18
Unpruned sawlog and
pruned sawlog
175.5
175.5
Total
198
It should be noted that with all options, it may not be possible to thin 100% of the stands, dependent upon topography, markets, stand
production and a range of other factors. This should not impact on total yield at the end of the Rotation.
PAGE 40 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
11 INDEPENDENT REPORTS
RISKS, FOREST PROTECTION AND INSURANCE
FIRE
Fire is the major risk to plantations, however, the history of areas burnt on FEA plantations thus far suggests that the risk is quite low. Fire
risk is minimised by good road access, adequate firebreak maintenance, weed control, grazing and participation in the volunteer fire brigade
system. FEA has its own tanker units for rapid response. In the Northern Territory there will need to be careful management of fuel loads as
the stands mature as there is potential for serious fires in tall grasses that cure after the wet season. FEA will manage the risk with fire breaks,
mechanical grass mulching, strategic prescribed burning and fire detection and response systems.
BROWSING ANIMALS
There are risks to the plantations from browsing by various animals during the first several seasons. FEA has monitoring systems to detect
and then implement control of browsing in order to minimise loss of growth.
INSECT ATTACK
FEA monitors stands for signs of high insect population which may cause defoliation and inhibit wood growth whilst tree crowns recover.
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.
Control of insects other than termites is not currently a large problem for mahogany plantations. There are means of controlling termites
which are dependent upon the detection and poisoning of termites with bait traps. Incidences of attacks have been low in developed pasture
sites and the issue is well monitored.
A known hazard for the Meliaceae family of trees to which African mahogany belongs is tip borer, Hypsila robusta. This insect pest is
reported in most areas of the Pacific and Southeast Asia. The insect attacks the terminal tip and causes death of growing tips and results in
multiple leader development. It is currently not a major problem but could be a future threat dependent upon the plantation location and its
proximity to native vegetation.
FUNGAL PATHOGENS AND NUTRIENT DEFICIENCIES
These are monitored on a regular basis and appropriate treatments applied when problems are identified. These periodic checks and remedial
works are part of FEA’s routine practice.
WINDSTORM
Windstorms can cause windthrow and are a risk, particularly after Thinning. Investors are currently able to insure against wind damage but
the list of insurable risks and the regions where certain risks are accepted can vary in the insurance policy from year to year. In most cases it
is possible to salvage storm-damaged trees. FEA plans to minimise storm damage by Thinning plantations before the trees exceed a height to
diameter ratio of 100:1, or by avoiding Thinning in high risk plantations entirely.
In the Northern Territory the threat from wind and cyclonic winds is a possible risk that occurs each year. However African mahogany is
shown to be relatively windfirm and the major developments of plantations are several hundred kilometres inland where the level of cyclonic
wind forces commonly has abated due to distance from the coast.
CLIMATE CHANGE
Trees are very adaptable and when planted on deep soils with high moisture holding capability they have great capacity to survive and grow
in periods of quite dry weather with unseasonable dry spells. Such events have been experienced in the recent past and there has been good
growth recorded despite a lower than average rainfall. If such events are repeated then there are impacts on growth but if appropriate soils
and climatic zones are chosen then trees as a crop are very flexible. Eucalypts, Radiata pine and African mahogany all have good flexibility
and capacity to survive so as to be able to grow following severe dry periods.
DISCLAIMER
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 Act, 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 Investors 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
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 41
11 INDEPENDENT REPORTS
31 March 2009
The Directors
FEA Plantations Limited
PO Box 733
Launceston Tasmania 7250
SUMMARY OF INDEPENDENT MARKET REPORT – FEA PLANTATIONS PROJECT 2009
Dear Sirs,
The following report has been prepared for inclusion in a Product Disclosure Statement (PDS) to be issued by FEA Plantations Limited (FEA
Plantations) in relation to FEA Plantations Project 2009 (Project). This report is a summary of a more extensive report that is available on
request at no charge from FEA Plantations.
This report examines the potential end uses and sales of plantation hardwood and softwood products both in Australia and in likely export
destinations and aims to provide potential Investors in the Project with an independent assessment of the forest products market. It has been
prepared in accordance with the Australian Forest Growers ‘Disclosure Code for Afforestation Managed Investment Schemes’.
QUALIFICATIONS AND EXPERIENCE
The Independent Forester, Mr Gerry Cross (principal consultant of VDFC) has prepared this report drawing on almost 40 years experience of
plantation and forest industry management around the world, including some 33 years experience in all aspects of plantation development
and management in Australia. Mr Cross holds a B.Sc. (Forestry), ANU and is a member of the Institute of Foresters Australia (IFA). He is a
Registered Professional Forester and Deputy Chairman of the Association of Consulting Foresters of Australia Division of IFA.
The opinions in this report are based on published materials and our inspections of FEA Plantations’ current plantations and other plantations
in Tasmania, interstate and overseas.
PULPWOOD (WOODCHIP) MARKETS
From 1996 to 2006, world production of paper and paperboard has increased at an average annual rate of 2.5%, increasing output by 80.4
million tonnes, or from 284.3 million tonnes in 1996 to 365.1 million tonnes in 2006.
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 both hardwood and softwood resource will accelerate.
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 that includes FEA as a 50% shareholder. SmartFibre has been exporting woodchips to Japan and other countries since 2003.
SmartFibre has negotiated export sales with north Asian customers for plantation and regrowth hardwood chips. Sales into Japanese markets
continue to grow with its important customer DAIO Paper; gaining important ‘core supplier’ status with Nippon Paper Industries (NPI) and a long
term contract with both NPI and Marusumi Pulp and Paper. There was an increase in the frequency of shipments during the 2007-08 financial
year. SmartFibre re-commenced exporting of softwood chips in January 2007 under a long-term supply contract in the Japanese market.
SOLID WOOD (SAWLOG) MARKETS
EUCALYPT HARDWOOD SAWLOG
Internationally, the native forest hardwood sawn timber supply has been declining by about 2% annually, 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.
RADIATA PINE SOFTWOOD SAWLOG
Australia has been establishing softwood plantations for around 100 years. There are now just over one million hectares of softwood
plantations in Australia. A substantial local softwood sawmilling industry has developed based on this resource. In 2005-06 domestic
production of softwood sawn timber was 3.6 million m3 with a further 0.6 million m3 of sawn wood imported according to ABARE’s
Australian Forest and Wood Products Statistics - Sept and December Quarters 2006. There is definitely potential to replace more imports and
also to expand exports to a growing north Asian market if softwood plantation expansion recommences.
AFRICAN MAHOGANY HARDWOOD SAWLOG
African mahogany hardwood has been a favoured timber in Europe since the 19th century when it was used to supplement the diminishing supplies
of ‘true’ mahogany from tropical America. The wood is of medium density and pleasant appearance with the benefit of being stable and having
good working properties. It has been used extensively in the furniture industry for reproduction furniture, office desks, and cabinet work. It is also
used for interior joinery, boat building, internal fittings, veneers and other purposes where a good quality medium weight hardwood is required.
FEA’S CAPACITY TO SUPPLY SAWLOG MARKETS
During 2008 FEA successfully commissioned its new $72 million ‘Optimil’ sawmill at Bell Bay in north eastern Tasmania. The mill is now
attaining 350,000 tonnes per annum throughput of plantation Radiata pine softwood and plantation Eucalypt hardwood.
EUCALYPT (ECOASH®) HARDWOOD SAWLOG DEVELOPMENT
Over the last three years, FEA has put considerable investment into researching and developing the sawing of young plantation Shining Gum
(E. nitens). Plantation inventory and experience suggest that up to 50% of plantation log volume may be suitable for solid wood processing
through high production sawmills.
FEA has 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 equivalent sizes of softwood, (it is graded to about F17), and the structural sizes can be used for
studs, plates and trusses.
PLANTATION SAWLOGS IN NEW SOUTH WALES AND QUEENSLAND
The five species proposed for planting in the Project in New South Wales and Queensland are mostly recognised as suitable for sawlog as
well as pulpwood. There is high potential for sawlog sales from plantation Eucalypts in both New South Wales and Queensland because
those state governments have made decisions about their native forest resource which make them dependent on a strong plantation
resource for future hardwood sawlog supplies.
PAGE 42 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
11 INDEPENDENT REPORTS
RADIATA PINE SOFTWOOD SAWMILLING
In April 2007, FEA commenced receiving deliveries of approximately 290,000 tonnes per annum of plantation softwood sawlogs from
Taswood Growers under a ten year wood supply agreement.
As a result of this agreement, FEA has invested a significant amount of capital to build a new sawmill at Bell Bay in Tasmania in order to
efficiently process both the increased volume of pine and the expanding EcoAsh® plantation hardwood resource.
AFRICAN MAHOGANY HARDWOOD
African mahogany hardwood timber is an important timber for furniture and indoor decoration, both in the solid and as veneer, high quality
joinery for staircases, panelling and domestic flooring, boat planking and cabins, banisters and handrails.
Although the local regional market is small and the domestic market is in a development phase there have been some indications that there
would be increased interest in quality stable dry product. Similarly, Asian markets have indicated interest in quality product when produced
and it is internationally recognised and traded as a high quality timber species Darwin has a new port facility and could readily service export
with a good road and rail network to move either logs or, preferably, sawn products to and through the port.
STUMPAGE
The value of the saleable part of the tree to 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 production costs such as harvesting, log cartage
to the processing facility, and marketing. The stumpage calculation may take into account factors such as stand volume, access, distance to
mill, individual piece size, and wood quality.
STUMPAGE SUMMARY
In my opinion, average stumpages for products under the 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 have been large demands for timber products in the north Asian region
and growing markets in China and India, the most likely price movements over the longer term should be upward.
WOODLOT OPTION 1 – EUCALYPT HARDWOOD
3
WOODLOT OPTION 3 – RADIATA PINE SOFTWOOD
Stumpage/m
Thinning
Clearfall
Stumpage/m3
Thinning 1
Thinning 2
Clearfall
Pulpwood
$42.00
$45.00
Pulpwood
$11.00
$11.00
$11.00
Sawlog unpruned
$52.50
$56.25
Sawlog small
$30.00
$30.00
$32.00
Sawlog medium
N/A
$48.75
$50.50
Sawlog large
N/A
$69.30
$70.25
Sawlog extra-large
N/A
N/A
$80.55
WOODLOT OPTION 2 – EUCALYPT HARDWOOD PRUNED
Stumpage/m3
Thinning
Clearfall
Pulpwood
$42.00
$45.00
Sawlog unpruned
$52.50
$56.25
Sawlog pruned
N/A
$112.50
WOODLOT OPTION 4 – HIGH-VALUE AFRICAN
MAHOGANY HARDWOOD
Stumpage/m3
Thinning
Clearfall
Pruned Sawlog
$223
$446
OPTIONAL BUY-BACK OFFER
With the advent of secondary markets there now has arisen the possibility that an Investor may exercise the right to avail of the optional
buy-back offer made by FEA after the trees attain 15 years of age in Woodlot Option 3 – Radiata pine softwood sawn timber/pulpwood.
Instead of carrying the investment on beyond the fifteenth year an Investor can request that he be bought out for a price at least equal to
90% of the value derived from an independent valuation assessment of the Woodlot/s at that time. This provides an opportunity to cash
out of the investment at an earlier date at a reasonable price. There are standard procedures for the derivation of the value at the time of the
transaction based on information which can be verified.
The valuation process, conducted in accordance with an Australian Standard for valuing commercial forests, will basically consist of the
following steps:
• Verification of the area in the pool for the Project;
• Review of the inventory process undertaken to determine the current growing stock at the time of proposed buyback
• Detailed analysis of the assumptions made as to market conditions and volumes of log products from the stands and the overall likely
projected yields based on current harvesting and processing options available at the time. An important element of this would be the
verification of current market prices for log products and an estimate on the validity of current and likely future market conditions;
• Analysis of the agreed scenario for the valuation using the assumptions in a reputable growth modeling software package to develop a
final return per hectare for a particular option; and
• A Net Present Value (NPV) for the point in the scenario at which a buy-back is proposed would provide the value for an area. This NPV
would be calculated for an appropriate discount rate.
This NPV would then be used to determine the 90% level value of the purchase. This process would be undertaken and verified by an
Independent Forester and a detailed report of the valuation methodology and the conclusions reached will be supplied to Investors by FEA at
the end of such a process.
CARBON 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. The implementation of the convention was subsequently negotiated at Conferences of
the Parties 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. In November 2007 the new Australian government ratified the Kyoto Protocol and since then has
also issued the Carbon Pollution Reduction Scheme (CPRS) White Paper.
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 Investors on a 50/50 basis.
The likelihood of a favourable position for plantations does seem better under these two proposals. However there is likely to still be a
liability for any volume of carbon harvested, which may substantially limit the true value of trading carbon from a single Rotation plantation
Investors must be aware that, although there is potential to earn returns from the sale of Carbon Credits arising 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 potential Carbon Trading in cash flow projections.
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 43
11 INDEPENDENT REPORTS
CONCLUSION
VDFC considers that in the current market it is reasonable to expect stumpage prices for Eucalypt pulpwood of $42 per m3 for Thinnings and
$45 per m3 for wood generated during Clearfall 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 spiked in price in early 2006 and the
stumpages paid for Radiata pine pulpwood are seeing a similar spike in stumpages of up to $19 per m3 in the Green Triangle region. This
price spike is only expected to last for a limited period and then prices may return to around $11 per m3.
The current premium of 20 to 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 Investors above the price achievable from
sales for woodchip production alone.
The returns to Investors 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.
DISCLAIMER
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, 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 Act, 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 Investors 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, MACF
PAGE 44 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
11 INDEPENDENT REPORTS
Deloitte Growth Solutions Pty Limited
ABN 21 010 764 306
AFSL 244592
ANZ Centre
Level 9
22 Elizabeth Street
Hobart TAS 7000
GPO Box 777
Hobart TAS 7001 Australia
The Directors
FEA Plantations Limited
233B Charles Street
Launceston TAS 7250
DX: 197
Tel: +61 (0) 3 6237 7000
Fax: +61 (0) 6237 7001
www.deloitte.com.au
6 May2009
Dear Directors,
FEA Plantations Project 2009 – Independent Taxation Opinion
This opinion has been prepared at the request of the Directors for inclusion in the FEA Plantations Project 2009 Product
Disclosure Statement (the PDS). We have prepared this opinion considering the information contained in the PDS and
Australian Taxation Office (ATO) Product Rulings PR 2009/23, PR 2009/24, PR 2009/25, PR 2009/26 and PR 2009/27
(the Product Rulings) as at 6 May 2009.
1
Application of ATO Product Rulings
The Product Rulings provide certainty for investors who are accepted into the Project on or after the date of the Product
Rulings and have executed the Project Agreement on or before 30 June 2009. The Product Rulings are legally binding
on the ATO and therefore protect investors from underpaid tax, penalties or interest provided they are within the class of
entities specified by the Product Rulings as ‘Investors’ and comply with the requirements of the Project as published in
the Product Rulings.
2
Carrying on a business
Investors in the Project are not treated as carrying on a business of primary production.
3
Allowable deductions
The Commissioner of Taxation has determined that the Project will satisfy the requirements of subsection 394-10(1) of
the Income Tax Assessment Act 1997 (ITAA 1997) provided the trees are established by 31 December 2010. If the trees
are not established by 31 December 2010 an Invesor cannot deduct an amount under subsection 394-10(1) ITAA 1997.
In Woodlot Options 1, 2, 3, 4 and 5, the Establishment Fees and land sourcing and management fees and in Woodlot
Options 2 and 5 pruning fees paid by Investors in the Project will be allowable deductions in the income year in which
they are incurred under sections 8-5 and 394-10 ITAA 1997, provided no ‘CGT event’ happens to the ‘forestry interest’
of an Investor before 1 July 2013 for Investors who are initial participants.
Deductions will be available under section 8-1 ITAA 1997 for interest paid on loans with financiers specified in the
Product Rulings under a finance package offered in conjunction with the PDS. Deductions for borrowing costs paid to
financiers specified in the Product Rulings under a finance package offered in conjunction with the PDS, such as loan
establishment fees over $100 are available under section 25-25 ITAA 1997 spread over the life of the loan or 5 years
(whichever is shorter).
You should note that losses arising from participation in the Project are not within the scope of the non-commercial
loss provisions of ITAA 1997. Also, interest paid to financiers specified in the Product Rulings under a finance package
offered in conjunction with the PDS does not fall within the scope of the prepayment provisions.
For interest incurred on finance obtained from alternative sources it is recommended that the Investor seek confirmation
from the ATO in the form of a private ruling as to whether the prepayment rules may apply.
Deductions for insurance costs incurred by Investors are not included within the scope of the Product Rulings. Insurance
costs necessarily incurred in gaining assessable income may be generally deuctible under section 8-1 ITAA 1997;
however Investors should seek their own independent taxation advice as to whether insurance costs relating to their
investments in the Project will be deductible in their circumstances.
(continued overleaf)
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 45
11 INDEPENDENT REPORTS
Page 2
30 April 2009
4
Assessable Income
If a ‘CGT event’ happens in relation to the ‘forestry interest’ such as if a ‘forestry interest’ is sold or otherwise
extinguished or if there has been a full or partial Clearfall harvest of the trees grown under the Project (excluding
Thinning), an amount is included in the Investor’s assessable income under sections 6-10, 10-5 and 394-25(2) ITAA
1997. Amounts derived by an Investor in respect of Thinning will be assessable as ordinary income under section 6-5
ITAA 1997.
5
GST
On the basis that, as may be indicated by the Product Rulings issued by the ATO, Investors are not considered to be
carrying on a business in relation to the holding of the investment, fees and charges payable by the Investor are unlikely
to be subject to GST. This would be the case where such payments are classified as further consideration for an interest
in a managed investment scheme.
6
Superannuation funds
The Product Rulings do not address the provisions of the Superannuation Industry (Supervision) Act 1993.
7
Secondary markets for forestry scheme interests
Deductions under Division 394 ITAA 1997 will not be allowable to initial participants if a ‘CGT event’ happens in
relation to the ‘forestry interest’ before 1 July 2013.
8
Tax avoidance
The general anti-avoidance provisions will not be applied to cancel a tax benefit obtained by Investors participating in
the Project.
9
Disclaimer
This opinion is based on the Australian tax law as it applied at the time the PDS was prepared and does not take into
account or anticipate changes in Australian tax law after this time, nor does it take into account the taxation laws of
countries apart from Australia. Investors who are non-residents under Australian tax law should also consider the
taxation consequences under the laws of their country of taxation residence together with any taxation consequences
under Australian law.
All Investors should obtain specific taxation advice relating to their particular circumstances from a suitably qualified
taxation advisor before participating in the Project.
This Taxation Opinion is given by a taxation agent registered under Part VIIA of the Income Tax Assessment Act 1936
and is given in the ordinary course of our activities as such an agent. Taxation is only one of the matters that must be
considered when making a decision on a financial product. Potential Investors should consider taking advice from an
Australian financial services licence holder before making a decision on a financial product.
Yours faithfully,
DELOITTE GROWTH SOLUTIONS PTY LIMITED
Tim Maddock
Director
PAGE 46 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
12 THE RESPONSIBLE ENTITY
FEA Plantations is the Responsible Entity of the Project and this PDS contains its 17th consecutive offering. Since its first offering in
1993, over 11,000 investors representing more than 13,000 investments have invested in excess of $394 million in its managed
investment schemes.
THE RESPONSIBLE ENTITY
DIRECTORS OF FEA PLANTATIONS
FEA Plantations is a wholly owned subsidiary of FEA.
FEA Plantations has overall responsibility to Investors 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 Investors and, if there is a
conflict between the Investors and its own interests, give
priority to the Investor’s interests;
• Treat Investors who hold interests of the same class
equally and, where there are Investors who hold interests
of different classes, treat them all fairly;
• Comply with the Corporations Act, Constitution and the
compliance plan; and
• At all times seek to deal with Investors and all persons
associated with the Project in a fair and ethical manner.
COMPLIANCE
FEA Plantations has adopted a compliance plan which
contains the procedures and processes FEA Plantations will
implement to ensure it complies with its obligations under
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 Investors’ best interest.
The compliance plan will be audited annually to test the
Responsible Entity’s adherence to the requirements of
the compliance plan during the year. 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 compliance
committee monitors adherence to the compliance plan
and the Corporations Act and reports breaches to the
Responsible Entity and, where appropriate, to ASIC.
LABOUR STANDARDS, ENVIRONMENTAL,
SOCIAL AND ETHICAL CONSIDERATIONS
As a wholly owned subsidiary of FEA, FEA Plantations has
the same policies in relation to its investments as they
relate to labour standards, environmental, social and ethical
considerations. Refer to page 4 for more information in
relation to these considerations.
Anthony Maxwell Cannon
B.Sc. (Forestry), ANU, MIFA, MACFA, MAICD
Chairman / 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
B. Bus., CA, CFP, GAICD
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.
Gavin Wilson Wright
CFP, BA (Legal), Grad. Dip. Ed. Admin., GAICD, F.Fin.
Non Executive Director
Gavin is a Certified Financial
Planner with over 20 years of
experience in the financial planning
industry. Gavin has worked in
management positions for financial
planning firms as well as for his
own firm. He was appointed as a director of FEA Plantations
in 2003.
Kerry Christopher Harvey Duncan
LLB, MAICD
Non Executive Director
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.
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 47
01 THE FUTURE OF FORESTRY INVESTMENT
13 THE FEA GROUP
Some of FEA’s staff across Australia
Established in 1985, FEA has grown to become one of the largest plantation managers in Australia, with over 72,000 hectares of
timber plantations under management (after completion of current establishment obligations), spread over Tasmania, New South
Wales and Queensland.
FOREST ENTERPRISES AUSTRALIA LIMITED
FEA is a public company listed on the ASX and holds all of
the shares in FEA Plantations. FEA has been engaged by
FEA Plantations to establish and maintain the Woodlots.
Separately from the Project, FEA provides finance (subject to
application and acceptance) to Investors seeking to purchase
interests in the Project.
FEA was founded in 1985 as a specialist plantation forestry
manager.
FEA is one of Tasmania’s largest forest products processors.
In 2009-10, its Bell Bay sawmill aims to process around
400,000 tonnes of plantation logs to be marketed under
FEA’s EcoAsh® and BassPine® brands. It is FEA’s aim to
increase its timber processing input to at least 500,000
tonnes per annum by 2012-13.
Through its joint venture SmartFibre wood fibre processing
and export facility, it anticipates marketing over 500,000
tonnes of wood fibre in 2008-2009.
What sets FEA apart from many forestry investment
managers is its status as a leading, vertically integrated
forestry and forest products company. That is, FEA selects
plantation land, manages hardwood and softwood
plantations, adds value to the forest products and sells them
under respected brands through established distribution
channels.
FEA Plantations Limited
Forest Enterprises Australia Limited
Listed public company
Operates new plantation based sawmill at Bell Bay
in Tasmania
Holds long term plantation sawlog contract with
Timberlands Pacific Pty Ltd
Provides finance to Investors
Provides forest establishment and management
services to FEA Plantations
Strategic business development
Responsible Entity for 17 forestry managed investment schemes
Responsible Entity for FEA Timberlands Fund
Project Manager
Australian Financial Services Licence (AFSL) Holder
Issues product disclosure statements
SmartFibre Pty Ltd
Export woodchip mill at Bell Bay (50% owned by FEA)
Tasmanian Plantation Pty Ltd
Land owning entity
Custodian of the Project
Research and Development for wood processing
of plantation grown eucalypts
PAGE 48 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
FEA Carbon Pty Ltd
Trial carbon planting for certification
01 THE FUTURE OF FORESTRY
13 THEINVESTMENT
FEA GROUP
FINANCIAL INFORMATION OF
FOREST ENTERPRISES AUSTRALIA LIMITED
As a listed public company, FEA is required to lodge periodic
accounts and other relevant information with the ASX.
Assets of FEA are not assets of the Project. The Project is not
guaranteed by FEA.
A copy of the most recent audited consolidated financial
statements of FEA is available free of charge on request.
Extract of Audited Balance Sheet as at 31 December 2008:
REVENUE
$ million
up 43.5%
Current Assets
155.5
Non Current Assets
478.2
180
160
145.8m
120
101.6m
2004
2003
297.7
2005
2006
PROFIT AFTER TAX
EARNINGS PER SHARE
up 31%
up 29%
up 1%
6.3m
0
4
2.91c
2
0
0.18c
50
40
30
20
49.8c
38.5c 38.0c
15.1%
60.4c
60
18.7%
0.8%
52.8%
6.72c
81.9c
71.1c
70
7.72c
14.9%
29%
0.4m
8
131%
15.5m
10
10
6
NET TANGIBLE ASSETS
80
NTA PER SHARE (cents)
2.3m
0
21.0m
20
RE
11.8c 11.9c
1517%
10.4m
10
119%
22.2m
20
30
2008
up 15%
12
BASIC EARNINGS PER SHARE (cents)
30
37.9%
30.6m
37.3m
77.6%
40
40
34.8%
78.8%
50
48.1m
148%
54.7m
50
PROFIT AFTER TAX ($million)
60
31%
71.7m
2007
FINANCIAL YEAR
EBIT
70
EBIT ($million)
0
21.3%
Net Assets
36.7m
20
19.6%
336.0
40
24.1%
Total Liabilities
55.5m
NTA PER SHARE (cents)
207.9
68.5m
60
57%
Non Current Liabilities
85.1m
80
51%
128.1
REVENUE ($million)
100
Current Liabilities
31.1%
633.7
1.3%
Total Assets
43.5%
140
10
0
2003 2004 2005 2006 2007 2008
2003 2004 2005 2006 2007 2008
2003 2004 2005 2006 2007 2008
2003 2004 2005 2006 2007 2008
FINANCIAL YEAR
FINANCIAL YEAR
FINANCIAL YEAR
FINANCIAL YEAR
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 49
01 THE FEA
13
FUTURE
GROUP
OF FORESTRY INVESTMENT
MANAGEMENT TEAM
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 investors 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 approximately 200 full time staff in the areas of land acquisition, forestry operations, wood processing,
marketing, finance, accounting and corporate and legal administration. FEA employees are based in all Australian states and the
Northern Territory.
Andrew White
Fergus Leicester
B Sc (For), MIFA, MAICD
B Bus (Acc), MBA, FCPA, FCIS, GAICD
Chief Executive Officer
Chief Financial Officer and
Company Secretary
Andrew is 42, has over 20 years
experience in the forestry industry
and has held a number of senior
management roles with major
Western Australian and Tasmanian
forestry companies.
These companies include Gunns Limited, 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.
Chris Barnes
Fergus is 37, and has 15 years
experience in financial and
commercial roles within the
timber industry, including senior
financial management roles at
Boral Timber and Gunns Ltd. Fergus joined FEA in 2005 and
his responsibilities include capital management, corporate
governance, compliance, risk management, information
systems, strategic planning, financial analysis and corporate
administration.
Kristen McPhail
B Ag Sc (Hons), MBA, MIFA
B Econ., Dip FP
General Manager – Plantations
General Manger – Sales and Marketing
Chris is 37, has 9 years experience
in managing forestry plantations
and 6 years experience in
agronomy and weed science.
Chris joined FEA in June 2007 and
is responsible for managing plantation establishment and
maintenance programs across Australia in line with specified
targets and timeframes. He is responsible for building
the land bank to accommodate future plantation growth
requirements as well as ensuring the company adheres to
the strict quality guidelines set down for our plantations.
PAGE 50 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
Kristen is 43 and has 22 years
marketing experience in the
financial services industry. She
joined FEA in 2005 and has held
numerous senior management
roles in the agribusiness industry.
Kristen was a practicing Certified Financial Planner and
chaired the award-winning FPA National Conventions in
Perth and Cairns. Kristen entered the agribusiness industry in
1999. In 2001, she was a WA finalist in the Telstra Business
Women’s Awards.
13 THE FEA GROUP
Mike O’Shea
Doug Massey
MIFA
BA (History), MBA
General Manager –
Business Development (Forestry)
Mike is 53 and has over 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 Mike 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 New
South Wales and Queensland and the development of new
forestry and forest products. Mike will also have a significant
involvement with emerging Carbon Credit markets.
General Manager –
Strategic Development
Doug is 41 and joined FEA in 2005,
working out of SmartFibre’s Tokyo
office marketing woodchips to
overseas customers. Previously Doug
worked with one of Japan’s largest paper manufacturers for
7 years in its Forest Resources Department as Strategy and
Procurement Adviser, also based in Tokyo. Now based in New
South Wales, Doug has a unique skill set combining the ability
to speak Japanese with an in-depth understanding of the
Japanese business culture. These attributes, combined with
a strong practical working knowledge of wood processing,
provides Doug with good credentials to be responsible
for developing strategic projects and to develop market
opportunities for FEA both nationally and internationally.
Andrew Wye
Ken Last
B Sc (For), MBA, MIFA
Dip Accountancy
General Manager – SmartFibre
General Manager – Timber
Andrew is 43 and a professional
forester with over 20 years
experience in a range of
operational and senior
management roles within the
forest 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. Andrew is an active member of the
Institute of Foresters of Australia and holds the position as
Chair of the Tasmanian Division.
Ken is 61 years old and has worked
in the sawmilling industry for the
past 30 years. During that time he
has held the position of Managing
Director at Kauri Timber Company
Ltd and Neville Smith Timber
Industries Pty Ltd. He has served on industry associations
in Tasmania and Victoria and until recently was active in
industry research and development having served on the
executive committee of the Forest and Wood Products
Research and Development Corporation for six years.
Ken is responsible for the new state-of-the-art sawmill
recently commissioned by FEA at Bell Bay.
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 51
14 AUSTRALIAN FOREST INDUSTRY OVERVIEW
GROWING WORLD DEMAND
Global Demand Trends in Forest Products
700
600
Million Tonnes or m3
500
400
300
200
100
0
1970
1980
1990
2000
2005
2006
2010 (e)
Q Sawnwood (M3) Q Wood-based panels (M3) Q Paper and Paperboard (MT)
Source http://faostat.fao.org and IndustryEdge estimates
Global demand for solid wood, manufactured wood
products (such as plywood or particle board) and other
products derived from wood (such as paper, paperboard
and energy) is increasing with a growing population in most
regions of the world and improved standards of living with
rising wealth, especially in emerging countries such as China
and India.
There is a clear relationship between the wealth of a nation
and the quantity of wood and wood products consumed
per capita. Plantations are valuable resources, both from the
perspective as a resource for supplying wood products for
value adding into products including paper and paperboard,
and on environmental grounds for locking up and storing
carbon in wood products in use.
As the population in urban areas increases, especially in
China where the movement of citizens from rural areas
to urban communities is evident, there will be increasing
demand for building materials as well as wood products
such as furniture and flooring.
GLOBAL TIMBER SUPPLY GAP
Global Production of Sawnwood: 2000-2005
The annual world deficit in sawn softwood timber is
predicted to be 35 million tonnes by 2010 and for sawn
hardwood timber it is predicted to be 10 million tonnes.
PAGE 52 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
400
350
Million m3
Between 2004 and 2007, the Centre for International
Forestry Research (CIFOR) has reported exports of plywood
from Indonesia have decreased by nearly 75% and exports
of sawnwood are down by nearly 50%. CIFOR indicates
that the decline has been caused by illegal logging and
unsustainable harvesting of forestry concessions in the
1990s. As a result of the now seriously diminished forestry
resources, CIFOR has also stated that in 2006 the cross
border trade from Kalimantan into Malaysia has decreased
by as much as 70%. The Indonesian government has
requested the Malaysian government to set “harsh
sentences” on Malaysian companies dealing in illegally
shipped timber from Indonesia.
450
300
250
200
150
100
50
0
2000
2001
2002
2003
Year
2004
Q Softwood Q Hardwood
Source: http://faostat.fao.org
2005
2006
14 AUSTRALIAN FOREST INDUSTRY OVERVIEW
GLOBAL PAPER CONSUMPTION TREND
From 1996 to 2006, world production of paper and
paperboard has been increasing at an average annual
rate of 2.5%, increasing output by 80.8 million tonnes, or from
284.3 million tonnes in 1996 to 365.1 million tonnes in 2006.
Global Production of Paper and Paperboard
90
80
70
Million Tonnes
60
50
40
30
20
10
Australia
Chile
South Africa
Spain
UK
Russian Fed
Indonesia
Brazil
Italy
France
Rep of Korea
Sweden
Finland
Germany
Canada
Japan
China
USA
0
Q 1992 Q 2003 Q 2004 Q 2005 Q 2006
Source: http://faostat.fao.org
Global Production of Paper and Paperboard
400
THE ASIA-PACIFIC MARKET
Asia's Consumption of Roundwood
350
300
250
Million m3
Between 1996 and 2006, the apparent consumption of
paper and paperboard in Asia increased at an average
annual rate of 4.7%. This growth is almost twice as fast as
the rate of increase in global supply over the same period.
For Asia, the sharp rise in demand is being driven by China’s
growth in population, literacy and income levels.
200
150
100
300
2006
2005
2004
2003
2002
2001
2000
Year
Q Production Q Imports Q Exports
-100
––– Consumption
Year
Q Production Q Imports Q Exports
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
Source: http://faostat/fao.org
1995
-200
1999
0
1998
-50
1997
100
1996
0
1995
Million Tonnes
50
200
––– Consumption
http://faostat.fao.org
China’s apparent consumption per capita of paper and
paperboard rose at an average annual rate of 6.8%
between 2000 and 2006. Over the same period, China’s
GDP increased at an average rate of 9.6% pa.
In 2006, the average consumption of paper and paperboard
in China was 41.7 kg per capita, while the average for the
world was 54.1 kg per capita. In comparison, the average
per capita consumption for South Korea was 179.3 kg and
for Malaysia was 119.2 kg.
Log consumption in the Asia region has been growing at
an average annual rate of 2.3% for the five years between
2001 and 2006.
Australia’s major Asian trading partners (Japan, China,
Indonesia, Taiwan, Korea and India) will be responsible for
an estimated additional 214 million people between 2007
and 2015.
Between 2005 and 2025, the prediction is the proportion
of Chinese living in urban areas will increase from 44%
(560 million) to 66% (926 million), passing the 1 billion
population level by 2030.
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 53
14 AUSTRALIAN FOREST INDUSTRY OVERVIEW
JAPANESE WOODCHIP MARKETS
CHINA
Japanese Softwood Chip Imports by Country
1.6
1.4
1.2
Thousand BDMT
China’s production of paper and paperboard has increased
from 28.5 million tonnes in 1995 to reach 58.0 million
tonnes in 2006 with an average annual increase of 6.7%, or
a total rise in annual production of 30 million tonnes.
1.0
0.8
0.6
0.4
0.2
0.0
Australia Bazil Canada
New Russia USA
Zealand
Q1997 Q 2004 Q 2005 Q 2006 Q 2007
Fiji
Other
Source: Japan Customs http://www.customs.go.jp/toukei/download/index_d012_e.htm
Japanese Hardwood Chip Imports by Country
5.0
4.5
Thousand BDMT
4.0
3.5
In 2006, with 58 million tonnes, China was the second
largest producer in the world after the USA with 84.3 million
tonnes. Production levels in the USA are not rising, in fact
they are expected to slide in the short-term, while China’s
production levels have been increasing at an average annual
rate of 6.7%.
In 2006, the average consumption of paper and paperboard
in China was 41.7 kg per capita, and is expect to increase
through the economic cycles with rising wealth and literacy.
Continued growth in Chinese consumption will drive the
expansion of the Chinese domestic paper and paperboard
manufacturing base, and as a result greater demand for
woodchips from the Pacific Rim countries such as Australia.
FEA is well positioned to continue previous shipments
of both woodchips and sawnwood from its Tasmanian
operations to the Chinese market. In addition, FEA is in a
position to take advantage of the Chinese and other Asian
demand for peeler (veneer) logs since shipments have
already been made by FEA and will continue to expand as
harvesting increases from FEA plantations.
From 2007, Japan accounts for 77% of the major woodchip
trade in the Asia Pacific region, down from 79% the
previous year. Even though Japan’s imports of hardwood
woodchips increased by 500 thousand tonnes in 2007,
China’s and Taiwan’s imports of hardwood chips combined
increased by 710 thousand tonnes.
Shipping rates and wood fibre costs are the major
factor in determining cost competitiveness. Australia’s
proximity to countries such as China and Japan (when
compared to other major suppliers) provides a competitive
advantage. Australia’s exchange rate is also critical to cost
competitiveness and the recent reduction in the value of
the Australian dollar to the US dollar has improved the cost
competitiveness.
SAWN TIMBER MARKETS
Australia continues to be the major supplier of both
hardwood and softwood woodchips to Japan, accounting
for 37.3% and 44.0% of shipments respectively in 2007.
Australia’s Demand for Sawn Timber: 1996 - 2007
6000
5000
In 2000, shipments from Australia accounted for 37.9% of
softwood woodchips and 28.7% of hardwood woodchips
imports.
For hardwood woodchip shipments to Japan, Australia’s
major competitor is South Africa with 2.0 million tonnes, or
16.9% of the market.
Thousand m3
In 2006, Japan imported 11.8 million tonnes of hardwood
woodchips and 2.5 million tonnes of softwood woodchips.
4000
3000
2000
1000
0
Year
Q Hardwood Q Softwood ––– Consumption
Source: ABARE, Australian Forest & Wood Product Statistics
PAGE 54 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
2007
Source: Japan Customs http://www.customs.go.jp/toukei/download/index_d012_e.htm
AUSTRALIA’S COST COMPETITIVENESS
2006
Other
2005
South
USA
Africa
Q1997 Q 2004 Q 2005 Q 2006 Q 2007
2004
China
2003
Chile
2002
Australia
2001
0.5
2000
1.0
1999
1.5
1998
2.0
1997
2.5
1996
3.0
-
Between 2000 and 2007, China’s economy grew at an
average rate of 9.6% pa, based on growth in GDP. In 2007,
China’s economy was the third largest in the world behind
the USA and Japan.
14 AUSTRALIAN FOREST INDUSTRY OVERVIEW
Over the longer-term, Australia has maintained a trade
deficit for sawn timber, with domestic demand being greater
than local supplies.
Demand for sawn softwood has been increasing at an
average rate of 3.8% pa since 1995, which is approximately
equal to the average rate of increase in Australia’s GDP over
the long-term. The strong growth rate has been achieved
through the domestic building cycles that have occurred in
the intervening years since 1995. However, in the future,
FEA anticipates demand for softwood will be tempered
slightly with the increasing supply of plantation grown
hardwood such as EcoAsh®.
VENEER AND SELECT GRADE SAWN TIMBER
High value timber products, such as decorative veneers,
select grade flooring and mouldings have historically been
sourced from native forests. However, with the investment
and research in producing solid wood products from
expanding pruned hardwood plantations, products such as
EcoAshclear® are increasingly supplying the market for select
grade timbers. Management of hardwood plantations is also
resulting in the production of structural veneers, especially
plywood and laminated veneer lumber (LVL).
Domestic growth in demand for plywood and LVL has been
increasing at an average rate of 9.6% during the twelve
years between 1996 and 2007.
Australia’s Consumption of Plywood and LVL: 1997-2007
600
Thousand m3
Imports
$ million
Sawnwood
Exports
$ million
Balance
of Trade
$ million
492
124
(368)
2,764
991
(1,773)
285
15
(270)
Woodchips
2
1,072
1,070
Roundwood
1
105
104
Wood-based
panels
275
109
(166)
Misc. Forest
Products
583
56
(527)
4,402
2,472
(1,930)
Paper products
Pulp
Total
Source: ABARE, Australian Forest & Wood Product Statistics
The only forestry products for which Australia is a net
exporter are woodchips (almost $1.1 billion in the value of
shipments) and roundwood (logs) that has a value of $104
million. While $124 million of sawnwood is exported each
year, about four times this value is imported, with shipments
reaching $492 million in FY2008.
During the last calendar year, Australia imported over $2.7
billion of paper and paperboard products which equated to
approximately 1.9 million tonnes. The imported volume of
paper and paperboard has been rising at an average rate of
3.5% per year over the past decade.
500
400
300
For 2007, Australia’s roundwood (log) removals were
more than 27 million cubic metres (m3). The volume being
removed from native forests has been diminishing at an
average annual rate of 3.7% between 2000 and 2007.
200
100
Year
Q Production Q Imports Q Exports
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
0
-100
Australia’s Forest Products Trade Deficit – FY 2008
Australia’s Forest Resource Production and Consumption
30
––– Consumption
25
In 2007, Australia’s balance of trade for wood and wood
products was a deficit of $1.8 billion.
10
5
2007
2006
2005
2004
2003
2002
2001
2000
0
1999
The sector employs approximately 81,000 people, which is
6.9% of the manufacturing sector.
15
1998
Even though Australia is a net importer of forest products,
forestry has historically been a major industry and will
remain a significant one with turnover in 2007 reaching
almost $19 billion.
20
1997
AUSTRALIA’S ECONOMY AND ITS FOREST PRODUCTS
SECTOR
Million m3
Source: ABARE and Plywood Association of Australia Pty Ltd
Year
––– Native Forests ––– Hardwood Plantations
––– Softwood Plantations ––– Total
Source: ABARE, Australian Forest & Wood Product Statistics
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 55
14 AUSTRALIAN FOREST INDUSTRY OVERVIEW
However, the volume from softwood plantations has been
increasing at an average rate of 2.2% pa over the same
period and for hardwood plantations starting from a very
small base, the average rate of increase has been 28.7% pa.
The trend for the major Japanese woodchip market towards
plantation grown hardwood woodchips is predicted to
continue due to the higher usable fibre from plantations and
for environmental preferences.
In 2002, when harvesting of hardwood plantations first
produced more 1 million m3 of logs, plantations only
accounted for 10.2% of the domestic hardwood supply.
However, by 2007, the proportional supply from plantations
has increased to 32.2%.
EMERGING ALTERNATIVE FOREST PRODUCT
MARKETS
AUSTRALIA’S PLANTATION ESTATE
With Australia’s trade deficit in forest products remaining
close to $2 billion every year, the Commonwealth
government has been supporting a policy of expanding the
domestic plantation resource. The goal of the policy is to
increase Australia’s plantation estate from 1 million hectares
in 1997 to 3 million hectares by 2020.
In 2007, which is approximately half way through the
period, Australia’s plantation estate has reached 1.903
million hectares, comprising of 883,493 hectares of
hardwood, 1,001,100 hectares of softwood and 9,254
hectares of ‘other species’.
The graph below shows the split between hardwood and
softwood resource by State for 2007.
FEA Plantations has the potential to generate five products
that will have a positive impact in assisting steps being taken
to mitigate climate change. These are:
Bioenergy – the combustion of renewable resources such
as timber and other vegetable matter in the generation
of energy, usually in the form of steam. Since Australia
has ratified the Kyoto Protocol, the Commonwealth
government, as the signatory, is considering joining
a number of other parties in seeking the inclusion of
bioenergy when it replaces the burning of fossil fuels as a
legitimate form of reducing emissions.
Ethanol production – the manufacturing of ethanol from
plantations (especially residues) as a replacement for the use
of petrochemicals in powering transport.
Australia's Plantations 2007
350,000
Wood pellets – there is a strong market for wood pellets in
Europe, and increasingly in North America and Asia.
The burning of wood pellets for heating is recognised
(especially in Europe) as a green form of energy since it is a
renewable resource and not a fossil fuel. Wood pellets are
already being produced in Australia for shipment to Europe,
with plantation species being mixed in the manufacturing
process to achieve the best calorific potential.
300,000
250,000
Hectares
Native forests and plantations are increasingly being
recognised as producers of more products than the
traditional sawnwood and woodchips. With a greater global
focus on climate change and steps to slow or reduce the
consequences of climate change, forests and plantations
have the potential to make significant contributions.
200,000
150,000
100,000
50,000
0
WA
NT
SA
Qld NSW
State / Territory
ACT
Vic
Tas
■ Hardwoods ■ Softwoods
Source: Australia’s Plantations 2008, Department of Agriculture, Fisheries and Forestry,
Bureau of Rural Sciences. Commonwealth of Australia 2008.
REDUCING ACCESS TO AUSTRALIA’S NATIVE
FORESTS
Access to the harvesting of native forests is gradually being
restricted, with greater areas of forests being placed in
reserves.
On a national basis, supplies of both sawlogs and pulpwood
from native forests have been trending down, with the
volume of saw and veneer logs declining at an average
annual rate of 2.7% over the twelve years from 1996 to
2007. For pulpwood, the reduction in supply has been
falling at the slower rate of 0.5% pa over the same period.
The species selected for growing in hardwood plantations
have a greater proportion of available fibre for the
manufacturing of paper and paperboard. As a consequence,
there is an increasing preference for woodchip buyers,
especially in Japan, to source woodchips from plantations.
In 1995, only a quarter of Japan’s hardwood woodchip
imports were sourced from plantations. However, by 2007,
the proportion had increased to more than three quarters.
PAGE 56 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
Power generation from biomass – Similar to bioenergy
whereby timber residues and other renewable vegetative
matter is combusted to produce electricity, with the benefit
being the reduction in the use of fossil fuels such as coal
and oil.
Carbon Trading – the use of forests and plantations to
sequester carbon from the atmosphere, usually taking it in
the form of carbon dioxide.
CARBON CREDIT TRADING
Interest in Carbon Trading has been well documented in
various forms of the media, however, there is currently no
international market or other mechanism for the trading
of Carbon Credits between emitters and forest growers.
There are a number of agreements that have been
reached between two parties but these are more specific
arrangements and not open market trades.
Australia is considering what form policy should take in
developing a Carbon Trading market, with a goal to have
transactions occurring by 2010. Any domestic policy will
need to be in line with international agreements.
Investors should be aware there is no definitive time scale
or policy yet for the trading of carbon, however, there is
clear motivation from the Commonwealth government to
establish such a market and to have it operating within a
couple of years.
15 ADDITIONAL INFORMATION and SUMMARY OF MATERIAL AGREEMENTS
COOLING OFF PERIOD
CONSTITUTION
Investors have a cooling off right under the Corporations Act
2001 when investing in certain financial products, including
managed investment products. This means the product
can be returned within a prescribed cooling off period if an
Investor changes their mind. They will obtain a full refund
of the investment less any adjustments permitted under the
Corporations Act 2001.
The Constitution is the primary document governing the
relationship between the Responsible Entity and Investors
and governs the rights of Investors in the Project.
The prescribed cooling off period is 14 days calculated from
the time the investment is confirmed by us, or the end of
the fifth day after the investment is issued if a confirmation
of the investment is not received.
WOOD PURCHASE AGREEMENT
If an Investor wants to exercise their cooling off rights, then we
must be advised in writing before the cooling off period ends.
The wood purchase agreement provides that the purchase
price for 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. FEA Plantations can only agree to
sell the timber for the purchase price once it has had the
purchase price independently evaluated and approved by an
independent expert.
PERSONAL INFORMATION
When submitting an application, we will be provided with
personal information which we will treat confidentially
and in accordance with the National Privacy Principles. Our
privacy policy is available on our website and provides details
in relation to the collection, use, storing and disclosure of
personal information.
FEA Plantations maintains a register of Investors and
personal information will be accessible in accordance with
the Constitution and the Corporations Act 2001. Investors
may access their 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.
If there is a complaint about any possible breach of privacy
by us, then our Privacy Officer should be contacted at
privacy.officer@fealtd.com or by mail, facsimile or telephone.
DISPUTE RESOLUTION PROCEDURE
Investors have the right to make a formal complaint about
any aspect of the services provided by FEA Plantations. If an
Investor has a complaint, then the following steps should be
taken:
• Tell the financial adviser about the complaint.
• If the complaint is not resolved within three days,
contact the Complaints Officer at FEA Plantations
on (03) 6334 7811 or send the complaint in writing
to us at;
The Complaints Officer
FEA Plantations Limited
PO Box 733
Launceston TAS 7250.
• If there is still not a satisfactory outcome, then consider
lodging a complaint with the Financial Ombudsman
Service on 1300 780 808 or send the compliant in
writing to;
The Financial Ombudsman Service
PO Box 3
Melbourne VIC 3001.
A copy of the Constitution can be obtained free of charge
by contacting the compliance officer at FEA Plantations on
Freecall 1800 600 009 or by emailing marketing@fealtd.com.
FEA has entered into a wood purchase agreement with FEA
Plantations pursuant to which FEA has agreed to purchase
the timber harvested from the Project.
If FEA Plantations 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 timber 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 timber to another buyer. If
FEA Plantations considers the conditions for sale are not
favourable, then FEA Plantations can postpone selling the
timber until conditions become more favourable.
All timber is sold on the stump and the costs of harvesting
and delivery are at the purchaser’s expense.
Either party may terminate the wood purchase agreement if
the other party fails or neglects to perform or observe any of
its obligations contained in the wood purchase agreement
or is otherwise in default of the wood purchase agreement
and the default has continued after notice has been given.
The wood purchase agreement terminates automatically at
the end of the term (the date on which the Project is wound
up).
TAX FILE NUMBERS
The collection, use and disclosure of tax file numbers is
strictly regulated by both the Privacy Act and the tax laws.
You are not required to provide your tax file number to
FEA Plantations. However, if you do not provide your tax
file number to FEA Plantations prior to distributions being
paid (and are not otherwise exempt from the requirement
to provide a tax file number), then FEA Plantations will be
required to deduct tax from your distributions at the highest
marginal tax rate plus the Medicare levy. You should note
that FEA Plantations cannot use or disclose your tax file
number for the purposes of confirming your identity.
• ASIC has a Freecall infoline on 1300 300 630 which
can be used to make a complaint or obtain information
about your rights.
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 57
15 ADDITIONAL INFORMATION and SUMMARY OF MATERIAL AGREEMENTS
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’, a summary of which is included in this PDS. It has
received, or is entitled to receive, fees of $8,745 (ex GST) for
its services.
Deloitte Growth Solutions Pty Limited, has reviewed and
advised on the taxation section of this PDS, has prepared an
‘Independent Taxation Opinion’ for inclusion in this PDS. It
has received, or is entitled to receive fees of $4,000 (ex GST)
for its services.
DISCLOSING ENTITY REPORTING REQUIREMENTS
Once the Project has more than 100 Investors it will be a
disclosing entity subject to additional and regular reporting
and disclosure obligations under the Corporations Act.
Under the Corporations Act, prospective Investors are
entitled to obtain copies of the following information from
FEA Plantations free of charge:
(a) The Project’s most recent annual financial report that has
been lodged with ASIC.
(b) Any half yearly financial report lodged with ASIC after
lodgement of the Annual Report and before the date of
the PDS.
Sawlogs are loaded for transport to Bell Bay, Tasmania
PAGE 58 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
(c) Any continuous disclosure notices given by the scheme
after the lodgement of the annul report and before the
date of the PDS.
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.
DEALING WITH APPLICATIONS
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.
Investors whose applications are accepted will be notified
within 30 days of receipt of their application.
If your application is rejected, then you will be notified, and
have your application money refunded within 30 days of
receipt of your application.
If your application is not immediately accepted or
rejected, then in accordance with the Corporations Act,
FEA Plantations will ensure any application money which
accompanies your application is paid into a trust account
with an Australian authorised deposit-taking institution.
Your application money will be held in this account until
your application is accepted or rejected by FEA Plantations.
Any interest earned on this money will be retained by FEA
Plantations.
16 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. (AS4708:2007)
AFSL
Australian financial services licence (issued under the
Corporations Act) and required to be held by all financial
service providers.
AML/CTF
Anti-Money Laundering and Counter-Terrorism Financing.
AML/CTF Act
The Anti-money Laundering and Counter-terrorism Financing
Act 2006.
Applicant
A person or other entity who submits a valid Application
Form pursuant to this PDS.
Application Form
The application form attached to this PDS, pursuant to
which an Applicant applies for interests in the Project.
ARSN
Australian Registered Scheme Number issued by ASIC for all
registered schemes.
ASIC
Australian Securities and Investments Commission.
ASX
Australian Securities Exchange.
ATO
Australian Taxation Office.
BDMT Bone Dry Metric Tonne
Means one metric tonne of wood fibre without water.
Carbon Credits
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 for
credits that recognise the carbon dioxide equivalent that
has been abated. There may be potential for the carbon
sequestration to receive carbon pollution permits which
can be traded under the Australian Government’s proposed
Carbon Pollution Reduction Scheme.
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 carbon pollution
permit. (Australian Government Pollution Reduction Scheme
– December 2008).
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, 25 years after planting for Woodlot
Option 3 and 18 years after planting for Woodlot Option 4.
Constitution
The constitution that establishes the Project as amended by
any supplementary constitution.
Corporations Act
The Corporations Act 2001 (Commonwealth).
CPI
The All Group Consumer Price Index weighted average
for the eight Australian capital cities as published by the
Australian Bureau of Statistics.
Custodian
Forest Enterprises Australia Limited (ABN 47 009 553 548)
Establishment Fee
The amount payable by an Applicant at the time they submit
an Application Form as set out on page 63.
Eucalypt
Means selected species of the Eucalyptus genera as well
as spotted gum, which was previously categorised as a
members of the Eucalyptus genera but has recently been
reclassified as a member of the Corymbia genera.
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 59
16 GLOSSARY OF TERMS
FEA
Forest Enterprises Australia Limited (ABN 47 009 553 548)
ISO
International Organization for Standardization.
FEA Group
Forest Enterprises Australia Limited and its controlled entities.
JAS-ANZ
Joint Accreditation System for Australia and New Zealand.
FEA Plantations
FEA Plantations Limited (ABN 44 055 969 429).
Mean Annual Increment (MAI)
Refers to the average growth rate of a forest to a point
in time, usually expressed in cubic metres per hectare per
annum over a defined number of years. Because the age
and growth relationship is not linear, half the growth will
not be achieved at half the age.
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.
PDS
Product disclosure statement.
FOB
Free On Board refers to the price of a product on board ship
without service charges such as insurance.
Forestry Right
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).
GST
Goods and Services Tax.
Harvest Proceeds
The total proceeds from the sale of harvested wood, before
deduction of deferred land sourcing and management fees.
Independent Forester
An external expert professional forester who provides
reports to FEA Plantations and Investors 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.
Investor
An investor who contracts with the Responsible Entity
through this PDS to obtain rights to the relevant Project’s
benefits.
IRR
The Internal Rate of Return is the annualised effective
compounded return rate which can be earned on the
invested capital.
PAGE 60 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
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 2009 – ARSN 136 438 616.
Project Manager
The entity 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.
Responsible Entity
Defined under the Corporations Act as the company named
in ASIC’s record of a schemes registration as the responsible
entity (RE). The responsible entity is responsible to the
Investor for all aspects of the Project’s operations. FEA
Plantations is the responsible entity for the Project.
Rotation
The period (in years) in which a tree or stand grows from
planting through to Clearfall.
16 GLOSSARY OF TERMS
Silvicultural
Relating to 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).
Woodlot Option 2
(Includes Option 2 Woodlots)
The growing of pruned Eucalypt hardwood for clearwood
sawlogs, veneer, and wood fibre for sale to both domestic
and export markets, dependent upon markets at the time.
The Project term is expected to be around 16 years. The size
of each Investor’s Woodlot will be approximately ½ hectare.
SmartFibre
SmartFibre Pty Ltd (ABN 33 102 434 042).
Stocking Guarantee
The Responsible Entity provides the Investor with a
stocking guarantee for a period of 3 years from the date
the Investor is registered as the holder of the Woodlots,
or commencement of general insurance cover for the
plantations, whichever is the earlier. The guarantee provides
that if the survival of seedlings is less than 90% of the
original minimum of 1,200 seedlings per hectare for
Woodlot Options 1,2 and 4 or 1,330 seedlings per hectare
for Woodlot Option 3, it will re-instate the plantations with
replacement seedlings at no cost to the Investor, up to the
above mentioned 90%.
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.
Timberlands Fund
The FEA Timberlands Fund ARSN: 126 971 462, a property
fund established and operated by FEA Plantations which
offers investors the opportunity to generate income from the
ownership of high-quality forestry land which is leased by FEA
Plantations for the purposes of establishing timber plantations.
Woodlot Option 3
(Includes Option 3 Woodlots)
The growing of Radiata pine softwood for unpruned
sawlogs, veneer and wood fibre for sale to both domestic
and export markets, dependent upon markets at the time.
The Project term is expected to be around 25 years. The size
of each Investor’s Woodlot will be approximately ½ hectare.
Woodlot Option 4
(Includes Option 4 Woodlots)
The growing of African mahogany hardwood for sawlogs
for sale to both domestic and export markets, depending on
market conditions at the time. The Project term is expected
to be around 18 years. The size of each Investor’s Woodlot
will be approximately hectare.
Woodlot Option 5
(Includes Option 5 Woodlots)
The Woodlot Option comprising a combination of Woodlot
Options 1, 2, 3 and 4, in a fixed ratio of four, one, one
and one Woodlots respectively. The size of each Investor’s
interest will be approximately 3 hectares (7 Woodlots).
Woodlot
A measured area of land comprising approximately a ½
hectare in size for Woodlot Options 1,2 and 3 and hectare
for Woodlot Option 4 woodlots to be established as part of
the Project.
Woodlot Option 1
(Includes Option 1 Woodlots)
The growing of Eucalypt hardwood for both pulp logs 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. The size of each
Investor’s Woodlot will be approximately ½ hectare.
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 61
17 HOW TO APPLY and APPLICATION FORM
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 with any identification
and verification documentation requested by FEA Plantations
or your financial adviser for AML/CTF verification purposes.
Applicants should read the instructions below, prior to
completing an application.
INSTRUCTIONS
BEFORE APPLYING
All Applicants must read the whole of this PDS and the
AML/CTF booklet provided with it carefully before
completing the Application Form attached to this PDS and
ensure that all information requested has been provided.
Any person who passes on the Application Form to another
person must also at the same time and by the same means
give the other person access to the Product Disclosure
Statement and any supplementary document/s.
Please use the checklist on page 64 to ensure your
application is completed correctly.
ASSISTANCE
If you have any questions, please contact your financial
adviser or call one of our Business Services Officers on
Freecall 1800 600 009.
ANTI-MONEY LAUNDERING AND COUNTERTERRORISM FINANCING REQUIREMENTS FOR
WOODLOT APPLICATIONS
You need to provide FEA Plantations or your 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 financial adviser, visiting our
website www.fealtd.com, emailing us at marketing@fealtd.com
or contacting us on Freecall 1800 600 009.
If you are an existing investor (that is, 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 tick the appropriate box
(at the top of the) Application Form attached to this PDS
and supply your existing investment number.
ANTI-MONEY LAUNDERING AND COUNTERTERRORISM FINANCING REQUIREMENTS FOR
FINANCE APPLICATIONS
Please refer to Finance Application Pack for AML/CTF
requirements of any preferred financier. Investors utilising
FEA finance have no additional AML/CTF requirements to
those detailed in this PDS.
PAGE 62 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
TO APPLY
Applicants can apply to FEA Plantations for an interest in
the Project by completing the Application Form on pages
65 – 69. Applicants must:
• complete the documentation using either black or blue
pen and write legibly in block letters;
• ensure the documentation is completed in full, including
the payment details Section on page 67;
• ensure the witness/es inserts their full name and signs
for witnessing any signatures;
• ensure that no correction fluid is used on any investment
documentation;
• ensure any alterations to the investment documentation
are neatly corrected and initialled; and
• return the original signed documentation (facsimiles or
photocopies will not be accepted).
The Application Form 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 2001.
FINANCE
If finance is requested, the entire Finance Application Pack
with original signatures and supporting documentation
must be returned with pages 65-69 of this PDS. Prospective
Investors should note that while finance is available, it does
not form part of the offer under this PDS. Applicants must
review the Finance Application Pack for more information
about finance options.
APPLICATION/DEPOSIT MONIES
Application monies or any deposit payable must be
submitted with the application documentation. Cheques
must be made payable to ‘FEA Plantations Project 2009’ and
crossed ‘Not Negotiable’, or you may pay by credit card (Visa
or MasterCard only) by completing the credit card details in
the Payment Details section on page 67. Please note that
direct bank deposits are not accepted.
LODGING APPLICATIONS
Applications should be mailed to:
FEA Plantations Project 2009
FEA Plantations Limited
PO Box 733
Launceston TAS 7250
For initial processing of Woodlot applications, forms
may also be faxed to (03) 6331 5047 or emailed to
marketing@fealtd.com. Please ensure pages 65 – 69 of
the PDS, with original signatures, are fully completed
and returned to FEA Plantations.
Information regarding the requirements for lodging
finance applications is available in the Finance
Application Pack.
17 HOW TO APPLY and APPLICATION FORM
CORRECT FORMS OF REGISTRABLE NAME
Applications must be in the name of natural persons, companies or other legal entities acceptable to FEA Plantations. At least
one 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.
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 and Mrs Jane Mary Brown
Partnership
Use partner’s personal names
Mr John David Brown and Mrs Jane Mary Brown
Company
Use the company’s full title, not abbreviations
John Smith Pty Ltd, ABN ###########
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 and Mrs Jane Mary Brown as
trustee for the <name of trust>
JOINT APPLICATION OWNERSHIP
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 interest automatically passes to the surviving joint holder.
DECLARATIONS AND ACKNOWLEDGEMENTS BY APPLICANTS
DECLARATIONS BY ALL APPLICANTS
Each Applicant for investment in the Project acknowledges that:
• You have received the PDS in Australia.
• In the case of an individual Applicant (or joint Applicant), you declare that you are 18 years of age or older.
• I/We warrant that I/we have had the opportunity to take advice on the PDS and the Constitution and agree to be bound
whether or not I/we 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 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
an Investor.
• I/We agree to be become a registered Investor bound by the Constitution.
• 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 all relevant
documentation requested in the AML/CTF booklet provided with this PDS.
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 63
17 HOW TO APPLY and APPLICATION FORM
CHECKLIST
Please use the following checklist to ensure your application is completed correctly.
ALL APPLICANTS
Before completing and signing the Application Form, you should read the PDS in full.
APPLICATION FORM
Complete the Application Form
on pages 65-69.
• The Application Form must be signed in front of an independent adult witness
(not a relative), who signs as witnessing Investor/s signature/s.
• Please ensure any alterations are neatly corrected and initialled, and that no
correction fluid has been used.
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 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 an existing investor.
• You do not need to supply any AML/CTF identification and verification
documentation, however, you must tick the appropriate box at the top of the
Application Form and supply your existing investment number.
INSURANCE
Complete checkbox on page 67.
• If you ask us to arrange insurance on your Woodlots then invoicing will
commence during the plantations’ second growing year.
• Please refer to Section 6 for further information
AND
IF MAKING PAYMENT IN FULL
Provide cheque or credit card
details for 100% of application
monies.
• Cheques must be made payable to ‘FEA Plantations Project 2009’ and crossed
‘Not Negotiable’, or
• You may pay by credit card (Visa or MasterCard) by completing the credit card
details in the Payment Details section on page 67. Please note that direct bank
deposits are not accepted.
OR
IF APPLYING FOR FINANCE
FINANCE APPLICATION PACK
Complete the relevant sections
of the Finance Application Pack
and provide any additional
information as requested.
• To obtain a Finance Application Pack contact your financial adviser,
call FEA Plantations on Freecall 1800 600 009, email marketing@fealtd.com
or visit www.fealtd.com. Please refer to Finance Application Pack for AML/CTF
requirements of any preferred financier. Investors utilising FEA finance have no
additional AML/CTF requirements to those detailed in this PDS.
Provide a cheque or credit card
details for deposit monies
(if applicable).
• Please refer to the relevant section of the Finance Application Pack for details of
any deposit that may be payable.
PAGE 64 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
PLEASE NOTE: IF YOU MAKE A MISTAKE, PLEASE CROSS OUT AND INITIAL THE CHANGES. DO NOT USE CORRECTION FLUID
APPLICATION FORM
FEA PLANTATIONS PROJECT 2009
ARSN: 136 438 616
Product Disclosure Statement
Dated: 7 May 2009
FEA Plantations Limited
ABN: 44 055 969 429
Australian Financial
Services Licence
No: 243515
Office Use Only
Date Stamp
Appn No:______________
Inv No:_________________
APPLICANT DETAILS
Are you an existing Investor? If so, please tick the following box:
■ I confirm I am an existing investor with FEA Plantations.
APPLICANT 1
Title
Surname/Company name
APPLICANT 2
Title
Surname/Company name
My existing investment number is:
■■■■■■
■■■■ ■■■■■■■■■■■■■■■■■■■■■■■■■■■
Given names/ACN if a Company
Date of Birth
■■■■■■■■■■■■■■■■■■■■■■■■ / ■■ / ■■■■
Tax File Number or Exemption Code
■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■
■■■■ ■■■■■■■■■■■■■■■■■■■■■■■■■■■
Given names/ACN if a Company
Date of Birth
■■■■■■■■■■■■■■■■■■■■■ ■■ / ■■ / ■■■■
Tax File Number or Exemption Code
■■■■■■■■■■
Trust name (if application is being made on behalf of a trust or superannuation fund)
■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■
The provision of a tax file number is not compulsory.
For further information refer to Section 15 on page 57.
Contact Details
Telephone (Daytime)
Telephone (Work)
■■■■■■■■■■■■ ■■■■■■■■■■■■
Facsimile
Mobile Telephone
■■■■■■■■■■■■■■■■■■■■■■■■■■
Email Address
■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■
Mailing Address
■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■
Suburb/Town
State
Postcode
■■■■■■■■■■■■■■■■■■■■■■■ ■■■ ■■■■
Residential Address (if different from above)
■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■
Suburb/Town
State
Postcode
■■■■■■■■■■■■■■■■■■■■■■■ ■■■ ■■■■
WHOLESALE UNREGISTERED MANAGED INVESTMENT SCHEME
The following check box must be completed by any unregistered managed investment scheme with wholesale clients only
investing in the Project:
confirm and declare we are an unregistered managed investment scheme with wholesale clients only and do not
■ We
make small scale offerings under section 1012E of the Corporations Act.
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 65
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PAGE 66 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
PLEASE NOTE: IF YOU MAKE A MISTAKE, PLEASE CROSS OUT AND INITIAL THE CHANGES. DO NOT USE CORRECTION FLUID
WOODLOTS APPLIED FOR
Number of
Establishment Fee
each Woodlot
(Not subject to GST)
Option
Investment Option
Investment
Per Option
®
x $3,450
$
x $3,450
$
x $3,450
$
x $3,450
$
x $23,000
$
TOTAL ESTABLISHMENT FEE
(A)
$
DEPOSIT (if applicable)
(B)
$
(A) - (B) = (C)
$
Woodlot Option 1
Eucalyptus sawlogs and pulplogs - 14 Years
®
Woodlot Option 2
Eucalyptus pruned veneer logs, sawlogs and pulplogs - 17 Years
®
Woodlot Option 3
Radiata pine sawlogs, veneer and pulplogs - 26 Years
Woodlot Option 4
African mahogany sawlogs – 19 years
Woodlot Option 5
Diversified Forestry Offer – 26 Years
Every Woodlot Option 5 application is an application for 7 Woodlots
(comprised of 4 x Option 1 Woodlots and 1 x Option 2, 3 and 4 Woodlots)
TOTAL FINANCE REQUIRED
PAYMENT OPTIONS
■ Payment in full – Pay the amount at (A) in above section.
– Complete the Finance Application Pack and return the entire Pack with this Application Form along with any
■ Finance
additional information required. Please transfer Total Finance Required (C) to Finance Application Pack.
PAYMENT DETAILS
The below payment options are available for making PAYMENT IN FULL or for a DEPOSIT (if applicable) if applying for FINANCE.
Please select a payment option and complete the details
■ Cheque Please make cheque payable to: ‘FEA Plantations Project 2009’.
■ Visa ■ MasterCard Please debit.
Cardholder’s Name
■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■
Card Number
Expiry Date
■■■■ - ■■■■ - ■■■■ - ■■■■ ■■ / ■■
Signature
✗
INSURANCE
■ Please arrange ‘Full Replacement Cost Insurance’
■ Please arrange ‘Basic Insurance‘
(Available to all Investors and compulsory for finance
applications longer than two years.)
Available for cash Investors and finance applications with
terms less than 3 years
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.
PAYMENT OF INSURANCE
If you ask us to arrange insurance on your Woodlots then invoicing will commence during the plantations’ second growing year.
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 67
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PAGE 68 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
PLEASE NOTE: IF YOU MAKE A MISTAKE, PLEASE CROSS OUT AND INITIAL THE CHANGES. DO NOT USE CORRECTION FLUID
ACKNOWLEDGEMENTS
Applicant statements (All Applicants)
By signing this Application Form, I/We make each of the statements detailed in the Declarations and Acknowledgements by
Applicants Section as set out on page 63.
SIGNATURES - All Applicants to Sign
Executed as a deed on
■■ / ■■ / ■■■■
Individual Applicant/s
Applicant 1
Full Name of Witness (print clearly)
✗
Applicant 2
✗
Witness
✗
Company Applicant/s
Executed in accordance with the companies constitution by:
Director
✗
Director/Secretary
✗
Full name
Full Name
ADVISERS MUST COMPLETE
Adviser Name
■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■
Dealer Group
AFSL No.
■■■■■■■■■■■■■■■■■■■■■■■■■ ■■■■■■
Business/Practice Name
■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■
Address
■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■
Suburb/Town
State
Postcode
■■■■■■■■■■■■■■■■■■■■■■■ ■■■ ■■■■
Telephone
Adviser Stamp
■■ ■■■■ ■■■■
Facsimile
■■ ■■■■ ■■■■
Mobile Telephone
■■■■ ■■■ ■■■
Email Address
■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■
Anti-Money Laundering and Counter-Terrorism Financing
rm the entity holding the AFSL under which I act does not have
■ Ianconfi
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 appropriate
box on the Application Form has been ticked and my existing investment
number has been supplied on page 65.
OR
confirm I have completed the AML/CTF identification and verification
■ Irequirements
for the Investors as required under the customer
Lodging the Application
Applications should be mailed to:
FEA Plantations Project 2009
FEA Plantations Limited
PO Box 733
Launceston TAS 7250
Applications may also be sent by
facsimile to (03) 6331 5047.
Please ensure all pages are faxed and mail
the original signed documentation to FEA
Plantations.
identification management agreement between FEA Plantations and the
entity holding the AFSL under which I act.
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 69
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PAGE 70 FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT
CORPORATE DIRECTORY
RESPONSIBLE ENTITY
TAXATION CONSULTANT
FEA Plantations Limited
ABN 44 055 969 429
Australian Financial Services
Licence Number: 243515
Deloitte Growth Solutions Pty Limited
ABN 21 010 764 306
Level 9, 22 Elizabeth Street
Hobart TAS 7000
HEAD OFFICE
233B Charles Street
Launceston TAS 7250
Postal Address
PO Box 733
Launceston TAS 7250
Phone: (03) 6334 7811
Fax: (03) 6331 5047
Freecall 1800 600 009
Email: marketing@fealtd.com
Web: www.fealtd.com
SOLICITORS
Blake Dawson
ABN 75 304 286 095
Level 26, 181 Williams Street
Melbourne VIC 3000
McMahon Clarke Legal
ABN 29 832 978 575
62 Charlotte Street
Brisbane QLD 4000
INDEPENDENT FORESTRY CONSULTANT
DIRECTORS
Anthony Maxwell Cannon (Chairman)
Gavin Wilson Wright
Michael John Williams
Kerry Christopher Harvey Duncan
PARENT COMPANY, MANAGER AND FINANCIER
Forest Enterprises Australia Limited
ABN 47 009 553 548
233B Charles Street
Launceston TAS 7250
CUSTODIAN
Forest Enterprises Australia Limited
ABN 47 009 553 548
233B Charles Street
Launceston TAS 7250
Van Diemen Forestry Consultants Pty Ltd
ACN 009 577 842
212 Union Road
Surrey Hills VIC 3127
AUDITORS OF THE PROJECT
AND THE RESPONSIBLE ENTITY
Pitcher Partners
Level 19, 15 William Street
Melbourne VIC 3000
AUDITOR OF THE COMPLIANCE PLAN
Pitcher Partners
Level 19, 15 William Street
Melbourne VIC 3000
FEA PLANTATIONS PROJECT 2009 I PRODUCT DISCLOSURE STATEMENT PAGE 71
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FEA Plantations Limited
ABN: 44 055 969 429 AFSL No: 243 515
Registered Office
233B Charles Street, Launceston TAS 7250
PO Box 733, Launceston TAS 7250
Telephone: (03) 6334 7811 Facsimile: (03) 6331 5047 Freecall: 1800 600 009
Email: marketing@fealtd.com Web: www.fealtd.com
FEA Plantations Limited ABN 44 055 969 429 (AFS licence 243515)
233B Charles Street, Launceston TAS 7250
Freecall: 1800 600 009 Facsimilie: (03) 6331 5047
Email: marketing@fealtd.com
Project 2009
ARSN: 136 438 616
Supplementary Product Disclosure Statement
This supplementary product disclosure statement (SPDS) is dated 16 June 2009 and is supplementary to the product disclosure statement dated
7 May 2009 (PDS), issued by FEA Plantations Ltd ABN 44 055 969 429 (AFS licence 243515) (FEA Plantations) in relation to the FEA Plantations
Project 2009 ARSN 136 438 616 (Project). This SPDS must be read together with the PDS.
IMPORTANT NOTICE
For an application for FEA Plantations Project 2009 to be accepted after 16 June 2009, the Acknowledgement on page 5 of this SPDS must be
signed and returned to our office along with the original application for woodlots.
Definitions
Terms defined in the PDS have the same meaning when used in this SPDS.
The purpose of this SPDS
FEA Plantations is issuing this SPDS to provide additional disclosures, as some information in the PDS may have become outdated and changes have
occurred. The purpose of this SPDS is to update the relevant information and incorporate new information into the PDS. All information contained in
this SPDS is deemed to be included in the PDS.
Update on financial position and capacity to meet obligations to establish the plantations
In relation to the disclosure of financial position of both FEA Plantations and its parent company Forest Enterprises Australia Limited (FEA), FEA
Plantations confirms that the financial statements for FEA, as at 31 December 2008, are included in the PDS for the Project.
The table below shows a summary balance sheet statement for FEA Plantations as at 31 December 2008. Prospective Investors should also refer to
recent announcements to the Australian Securities Exchange (ASX) made by FEA. These announcements are available at www.fealtd.com
FEA PLANTATIONS LIMITED
SUMMARY BALANCE SHEET AS AT 31 December 2008
Total Current Assets
$41,606,816
Total Non-Current Assets
$9,410,366
TOTAL ASSETS
$51,017,182
Total Current Liabilities
$11,247,884
Total Non-Current Liabilities
$186
TOTAL LIABILITIES
$11,248,070
NET ASSETS
$39,769,112
FEA Plantations’ financial position and that of its parent company, as described in this SPDS, demonstrate FEA’s capacity to meet existing and
future obligations to Investors in the Project and all projects previously offered by FEA Plantations.
Section 13 (on pages 48 - 51) of the PDS provides background relating to FEA, including specific financial data which was current as at 31
December 2008; as well as historical financial information for the last six financial years. As FEA is an operating company, financial information
about FEA and the FEA Group changes on a regular basis. As FEA has recently updated the market in relation to aspects of its financial
performance, it is important that prospective Investors are also aware of the following, updated information:
• The PDS states that as at 30 June 2008, FEA reported a net profit after tax of $48.1 million. FEA reported a net loss of $4.1 million for the
half year to 31 December 2008.
1
FEA Plantations Limited ABN 44 055 969 429 (AFS licence 243515)
233B Charles Street, Launceston TAS 7250
Freecall: 1800 600 009 Facsimilie: (03) 6331 5047
Email: marketing@fealtd.com
Project 2009
ARSN: 136 438 616
• Notwithstanding difficulties related to the Global Financial Crisis, credit matters and industry specific matters, FEA recently completed a
renegotiation of the terms of its finance facilities with both of its banks. These facilities mature in January 2011, total $245 million (being
$235 million cash advance revolving credit and $10 million working capital) and are not fully drawn.
• In addition to these corporate bank facilities, FEA has also received commitments from two commercial lenders to provide finance (loans)
directly to approved applicants to finance their investment in the Project. These commitments total $95 million and relate to applications
accepted up to 30 June 2009. As FEA has traditionally provided the majority of finance to applicants for previous projects itself, this will
benefit FEA’s cash-flows.
• FEA issued a market update to the ASX on 27 May 2009 which provided an update on various topics including:
• Planting obligations arising from FY08 managed forestry investment sales will be fully completed before 30 June 2009. FEA
Plantations is also now in a position to disclose that it expects to complete establishment of plantations for all sales in the FEA
Plantations “Late Growers” Project 2008 made during FY09.
o FEA noted a lack of certainty as to its FY09 revenue and the expected sales of the Project in FY09. If total sales for FY09 dropped
from $114.5 million (the amount achieved in FY08) to $60 million (the approximate level achieved in each FY06 and FY07), then
FEA estimates a reduction of $7 million of net profit after tax for FY09 (representing approximately 2% of FEA’s net assets as at 31
December 2008).
o The land bank currently secured by FEA is sufficient to establish plantations resulting from the equivalent of approximately $60 million
in new managed forestry investment sales.
As stated on page 33 of the PDS, FEA Plantations is required under its Australian Financial Services Licence (AFSL) to maintain a net tangible asset level
and to meet an access to financial resources requirement. These obligations and FEA Plantations’ working capital requirements are formally monitored
monthly as part of the procedures FEA Plantations has put in place pursuant to the compliance plans for all projects that it currently or has previously
offered. In accordance with the Corporations Act, FEA Plantations’ compliance with the plans is externally audited on an annual basis.
Risks
Section 8 of the PDS notes various risks involved with the Project, which include general risks of plantation forestry; risks specific to the Project;
and other risks. The risks noted on page 33 relating to financial capacity of FEA and/or FEA Plantations should be read in conjunction with
this SPDS. Subscription money paid by prospective Investors in the Project is placed into a trust account pending acceptance of the Investors’
applications. Following acceptance of applications, these funds are transferred into the Project account. FEA Plantations subsequently makes
payments to FEA to fund the establishment of the plantations for the Project. Most of the costs in establishing the Project plantations are
incurred at the commencement of the Project and FEA (as the sub-contracted operator) provides FEA Plantations with regular progress reports
on its operational duties.
Section 8 of the PDS does not disclose any risks that relate to FEA Plantations’ ability to provide for future harvesting costs, as these are
expected to be funded from proceeds received from any purchaser of logs. As set out in the summary of the Wood Purchase Agreement on
page 57 of the PDS, timber for the Project will be sold on the stump and the costs of harvesting and delivery will be at the purchaser’s expense.
This is in accordance with established industry practices. That is, in standard wood sales, the wood buyer/processor meets all harvest and
transport costs, and generally engages contractors at its own cost to fulfil these logistical requirements.
Yields of previous projects
In the PDS on pages 6-7 and page 17, FEA Plantations has provided details of returns from the first managed forestry investment project planted in
1993 (Tasmanian Forests Trust No 1 ARSN 093 165 210). The harvest of this project was completed in June 2008 and investors received a total harvest
return of $16,920 per hectare from Thinning and Clearfall (which is in excess of prospectus projections) with an after-tax IRR of 7.3% per annum. The
1993 project raised approximately $140,000 in investors’ subscription funds with total investments for 44 hectares. Ongoing Lease and Management
fees were payable in relation to an investment in this project. The project site was established on two properties in north-east Tasmania which form
2
FEA Plantations Limited ABN 44 055 969 429 (AFS licence 243515)
233B Charles Street, Launceston TAS 7250
Freecall: 1800 600 009 Facsimilie: (03) 6331 5047
Email: marketing@fealtd.com
Project 2009
ARSN: 136 438 616
part of a significantly larger land and plantation holding managed by FEA. FEA is now in the position to release pre-harvest inventory data from its
second managed forestry investment project planted in 1994 (Tasmanian Forests Trust No 2 ARSN 093 165 505) disclosed in FEA’s Canopy Autumn
2009 newsletter. This project was planted on 158 ha over two properties in north-east Tasmania. Again, these plantations managed on behalf of
investors form part of significantly larger land and plantation holdings managed by FEA.
The Clearfall harvest of plantations in the 1994 project are scheduled to commence in October 2009 and the net harvest proceeds received by the
investors are expected to exceed $17,000 per hectare with an expected post-tax IRR of 6.6% per annum. Clearfall sawlog recovery is estimated at
77% of sawlogs suitable for delivery to FEA’s Bell Bay sawmill for processing into EcoAsh® branded timber. FEA Plantations is satisfied that its preharvest data is sound and accurate and that the expected yields are based on reasonable grounds.
The before-tax return takes into account 100% tax-deductibility of investors’ costs but does not include any tax payable on the Harvest Proceeds. The
after-tax return takes into account 100% tax-deductibility of investors’ costs and includes all tax payable on Harvest Proceeds. Both calculations are
based on top marginal tax rates.
Both the first (1993) and second (1994) projects were originally scheduled to be 15 year projects. The first project was harvested at approximately 14.5
years of age and the second is scheduled to be harvested at 15 years of age.
FEA Plantations has provided thinning harvest incomes to its investors in its next five (1995 – 1999) projects. However, these do not provide a
meaningful indication of total yield and Clearfall harvest incomes because the full area of each plantation could not be thinned for various reasons. It
is also difficult for FEA Plantations to make forecasts on the total harvest incomes to be received by investors in these projects with a reasonable basis
given the period to final harvest and the number of factors and circumstances beyond FEA Plantations’ control that can intervene and impact on actual
net harvest income results. Whilst FEA has an ongoing inventory program and employs highly trained specialists in the forestry sector, there is less
statistical confidence the longer the period from harvest that is required to estimate final returns.
As the plantations mature and reach a growth stage where useful measurements can be relied upon by using the latest available growth modelling,
details are provided in Manager’s Reports to Investors produced on an annual basis.
As also stated in the PDS on pages 7 and 17, any reference to past or current performance referred to in the PDS and, therefore, this SPDS must be
qualified by noting that past performance is not indicative of future performance and FEA Plantations is not able to guarantee the performance of the
plantations established for the Project nor any financial returns to Investors.
Effect of current commercial environment for forestry investment products
As is the case for all agricultural managed investment schemes, the ongoing viability of the Project is dependent upon numerous factors,
including the management ability of the Responsible Entity. The ability of FEA Plantations to manage the Project is dependent on its financial
position, which in turn is dependent on the financial position of its parent company, FEA.
FEA is a public company listed on the ASX and, as such, is subject to a continuous disclosure regime. In order to confirm the financial position
of FEA, potential Investors should consult FEA’s 2008 Annual Report which was lodged with the ASX on 17 October 2008 and is available
at www.fealtd.com or free of charge upon request. We suggest investors monitor FEA’s website and ASX’s respective website for up-to-date
information on FEA’s financial position as relevant announcements are made.
The pie charts below are evidence of FEA shifting its reliance away from a single revenue source of managed forestry investment sales and
moving further towards a fully integrated model with diversified revenue streams. In FY2008, sales of managed forestry investments accounted
for approximately 50% of FEA’s total revenue, as compared with approximately 64% in FY2006. This percentage figure should continue to
decline as FEA grows its Bell Bay saw mill timber processing output.
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FEA Plantations Limited ABN 44 055 969 429 (AFS licence 243515)
233B Charles Street, Launceston TAS 7250
Freecall: 1800 600 009 Facsimilie: (03) 6331 5047
Email: marketing@fealtd.com
Project 2009
ARSN: 136 438 616
2% Interest
4% Annuity
4% Revaluations
17% Revaluations
19% Sale of Timber
18% Sale of Timber
2% Interest
5% Annuity
30% MIS Estab
12% SmartFibre
11% SmartFibre
21% MIS Estab
30% MIS Sales
25% MIS Sales
Note: The above charts include FEA’s 50% share of SmartFibre revenue, not separately recognised in FEA’s accounts, as SmartFibre is equity accounted. Since 30 June 2008,
the company has reassessed its revenue recognition policy relating to deferred lease and management fees. The charts above have been adjusted to take this into account.
Please see note 1(e) of FEA’s FY2009 half year accounts for further details. Please refer to Page 12 FEA’s 2008 Annual Report for a description on the way that MIS revenue is
recognised.
As FEA is already a diversified company, its FY2009 results will depend on factors other than revenue generated by managed investment
schemes operated by FEA Plantations. For example, revaluations of land may have an impact on the overall financial results for FY2009. While
FEA does not expect a revaluation increase in the current financial climate, the overall impact this will have on its FY2009 results cannot be
quantified prior to receipt of our annual independent land valuation reports, as part of our normal fair value reviews.
Consents
The directors of FEA Plantations have consented to the issue of this SPDS.
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 FEA Plantations will provide you with a hard copy of any updated information
upon request.
Application Forms
An Applicant wishing to apply for interests in the Project should continue to use the Application Form for interests accompanied by the PDS.
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FEA Plantations Limited ABN 44 055 969 429 (AFS licence 243515)
233B Charles Street, Launceston TAS 7250
Freecall: 1800 600 009 Facsimilie: (03) 6331 5047
Email: marketing@fealtd.com
Project 2009
ARSN: 136 438 616
IMPORTANT NOTICE
FOR INVESTORS IN FEA PLANTATIONS PROJECT 2009
For an application for FEA Plantations Project 2009 to be accepted after 16 June 2009, 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 2009
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 2009 dated 7 May 2009.
2. The Supplementary Product Disclosure Statement for the FEA Plantations Project 2009 dated 16 June 2009.
I confirm I have read both of these documents prior to signing the attached Application Form.
Signature
Name (please print)
Date
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