Key Post Investment in Irish Forestry Funds

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There's a few people looking for Xmas trees in the Good deals/Bad deals forum if that's any help!

Too quiet in the forest

I see there hasn't been any action in this forum since December last. I have received the marketing literature for the 10th Plan and notice that Declan Kennedy (who made a contribution to the debate some time ago) is no longer a Director. What concerns me is the fact that there doesn't seem to be any hard information from anyone who successfully exited the system by selling some or all of their shares. Any comments?

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Out of curiousity, I signed up for their email notifications of shares for sale, and got one email (over a 6+ month period) offering about 4 batches of shares for sale. The email gives contact details of the sellers, but no prices are specified.

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Might just mean that most investors are very happy to hold for the long term. Admirable I'd say.

-Rd

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I bought some shares in a different forestry fund in 1999 which was named Premier Irish Forestry Fund based at Cashel, Co Tipperary. Anybody come across them ? Come to think of it, I haven't heard anything from them in an age !!

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Interesting how Declan has never again contributed on AAM(at least not openly) despite great curiosty about both these Funds and also his latest venture ie. the Augusta property funds. What is he hiding from??

Forestry Fund

None of the funds have ever matured so no one really knows what the final retun will be!

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Hi Sunnyday ,

I am a forestry fund shareholder , now I seem to be on the mailing list for the Augusta property funds , always wondered where they got my address from.

Has anyone checked in the woods for Declan ?

Re: Forestry Fund

I am a forestry fund shareholder , now I seem to be on the mailing list for the Augusta property funds , always wondered where they got my address from.

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Well now you know! Wonder if that carrying over of investor information somehow intruded on our right to privacy???

Re: Key Post: Investment in Irish Forestry Funds

Asked a friend of the family who just retired from Coillte what he thought of the Forestry Funds and his exact words were "run away as fast as you can." Not exactly a ringing endorsement.

Re: Key Post: Investment in Irish Forestry Funds

Hi eamon, as a (small) investor in Irish Forestry Funds, I'd be very interested in hearing why he says that.

eD

Re: Key Post: Investment in Irish Forestry Funds

Intriguing. Why not let us know more? What are his concerns?

Re: Key Post: Investment in Irish Forestry Funds

That's all he said. My father worked in forestry years ago and I thought the forestry fund might be a good thing to invest in. We had some knowledge of the industry and contacts still working in Coillte. We thought it would be an environmentally sound investment offering a reasonable rate of return. Our man, who worked in forestry all his life, most recently in management, dismissed the funds out of hand. He didn't elaborate.Like any other investment, it's best to do lots of homework and not rely on the promoter's glossy brochures and promises of high returns.

Re: Key Post: Investment in Irish Forestry Funds

This man's views would be shared by most (if not all) people in the domestic forestry industry (except perhaps those with vested interests).

Anyone who has invested in the forestry funds should ask themselves in the first instance why

- investment in the Forestry Funds is predicated on the issue to investors of non-voting, preference shares rather than the more conventional structure of ordinary, voting shares.

- the ordinary shares in the various Funds are controlled by the promoters, who happen to have substantial contracts with the Funds for supply of management services etc.

- investors have not received (or do not stand to receive) any portion of the Funds' substantial annual income from State forestry premiums on the Funds' forest property portfolio.

Re: Key Post: Investment in Irish Forestry Funds

ubiquitous said:

investors have not received (or do not stand to receive) any portion of the Funds' substantial annual income from State forestry premiums on the Funds' forest property portfolio.

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As I understand it, the receipt of these EU and government grants and premia funds is one of the main attractions of the Forestry Funds. Are you saying such premia are not recognised as income by the funds?

It seems to me from looking at the annual accounts of the various funds (or at least the two in which I have a small investment) that these grants and premia are added to the profit and loss account every year. My understanding is that investors do stand to receive the benefit of these grants etc. when the company is wound up and liquidated at the end of the investment period.

The audited accounts of the various plans can be accessed [broken link removed]

Perhaps I'm misinterpreting these accounts? Entirely possible.

I share the concerns listed above, by the way, about the fact that investors have no voting rights and therefore can't have a say in making sure that the forestry management contracts are put out to tender (e.g.) on the open market.

Re: Key Post: Investment in Irish Forestry Funds

extopia said:

As I understand it, the receipt of these EU and government grants and premia funds is one of the main attractions of the Forestry Funds. Are you saying such premia are not recognised as income by the funds?

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I'm careful not to say anything specific without having studied the accounts in detail but my (possibly simplistic) understanding is that

- the purchase of the land on which the trees are planted is financed by the investors' initial investments (as one would expect)

- the planting of the land is 100% grant-aided by the State so there is no cost to the fund or its investors.

- this 100% grant aid also covers the first four years maintenance of the plantations

- the annual forestry premiums are being eaten up in total by the management fees and other running costs (a large element of which is being paid to entities owned or controlled by the promoters or people close to them).

Professional forestry people would say in general that, 4 years after planting, a forest plantation is fully established and that incidental costs of management and insurance are small. Hence an investor in receipt of annual forestry premiums (even the 'non-farmer' rate receivable by the Funds) should expect to enjoy a significant 'dividend' on the investment, arising from the difference between the amount of the premium and the annual management costs.

In the case of the Funds, one would expect that if the management fees and running costs had been subjected to independent tendering process, these costs would have been expected to approximate to the median rates in the industry (or a tad lower when the benefits of economies of scale are taken into account). On this basis, the annual premium income should significantly exceed the running costs.

This appears not to be the case in relation to the Funds, and investors should ask themselves why they are not enjoying such a 'dividend'.

Unfortunately as they only have non-voting preference shares, they have no formal mechanism to hold management to account on this and other issues.

I share the concerns listed above, by the way, about the fact that investors have no voting rights and therefore can't have a say in making sure that the forestry management contracts are put out to tender (e.g.) on the open market.

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I would actually be more worried by the absence of any shareholder influence over the timing and operation of the process of disposal of the forest properties at the conclusion of the investment term.

Re: Key Post: Investment in Irish Forestry Funds

Interesting comments, thanks.

Re: Key Post: Investment in Irish Forestry Funds

What about the "growth" dividend - the trees are growing each year, aren't they ?

I thought that the overall profitability of these schemes were based on this and the favourable tax treatment and not just on the "subsidies"/forest premias. I did investigate the schemes but wasn't convinced enough to actually put any money up.
Over the long term ie 20-30 years I think timber/forestry investment makes sense as part of a diversified portfolio but it is very difficult to find suitable methods of investing in this asset class. Either you have to buy a land, plant and wait or invest in schemes such as these. Apart from the US, a lot of timber land is publicly owned (eg Canada) or held by private companies and not tradeable on a market.

However I found that the IFS scheme wasn't transparent enough to my liking and didn't invest.

Re: Key Post: Investment in Irish Forestry Funds

Once again - interesting comments.

I invested the minimum (IR£500) in two successive 30-year funds, as it seemed an interesting and relatively risk-free way of investing - as well as being moderately 'ethical'.

I might gather together some of the points raised and put them to the managers of the funds (or invite them to respond here).

eD

Re: Key Post: Investment in Irish Forestry Funds

How do you reckon that it's "relatively risk free" unless you actually mean that the loss of €500 x 2 would represent a small risk to you personally?

As mentioned before forestry is not necessarily environmentally friendly due to the damage that certain intensive forestry (in particular coniferous plantations) can do to the environment. No investment is ethical if it does not make the charges and operation clear to the investor. Not saying that this is necessarily the case here but worth bearing in mind.