Frequently Asked Questions
"Why invest in forestry with Forest Enterprises?"
The choice of company you invest with is most important. You should be looking for a company with a proven track record of adding value for their investors. As the first direct forestry investment company established in New Zealand, our record of providing quality investments speaks for itself.
You can find out more information in About Forest Enterprises and/or Our Forestry Investments.
"Can I sell before harvest?"
Yes you can! Forest Enterprises has operated a secondary market for many years and never failed to find a buyer for an investment at a price acceptable to both buyer and seller. Increasing numbers of investors are investing with a view to selling prior to harvest. You can find out more information on our secondary market here.
"When are you too old to invest in forestry?"
In our opinion, no one is too old to invest in forestry! Forestry investment is a long-term investment, but need not be for 25 to 30 years as your investment is saleable on our secondary market. Many parents and grandparents appreciate the longer term of the investment as being ideally suited to an investment for their children or grandchildren.
You can find out more information here.
"Will there be a surplus of wood when my trees are harvested?"
During the late 1970s and early 1980s, the annual planting rate in New Zealand was between 50,000 and 60,000 hectares, a level to which we only returned in 1993. As the total forest estate increases, production will also increase, however New Zealand’s contribution to the world market is very small and represents only a fraction of the projected increased demand for high quality wood in Pacific Asia alone.
You can find out more information here.
"Are the trees insured?"
Yes! Your forest is insured against fire until harvest and also the negative effects of wind, including toppling and associated remedial work, during the vulnerable years to age 12.
"What about pests and disease?"
Because the New Zealand forest industry is our third largest export earner it is of national importance and responsibility for protecting the forest estate falls to a number of government agencies. If the forest resource is threatened, the government acts, as demonstrated recently when some parts of suburban Auckland were aerial and ground sprayed.
Pests and diseases spread relatively slowly in forests, and it can take many years before any impact is felt. This gives the industry and the government a reasonable time period to eradicate or control any problem.
The forest insurance policy does not cover pests and disease.
"What tree stock is used?"
We use the best possible and most appropriate tree stock for each particular forest, taking into account the individual site, tree stock availability and the cost-benefit from an investment perspective. The test is always whether the tree stock used can be converted into the highest investor return.
"Am I truly protected by limited liability?"
Yes, you are in our company based investments as you invest by purchasing shares in a limited liability company, not a partnership. Your liability is only for what you have invested, including any outstanding Calls requested but not yet paid. You have no personal liability for any unpaid Calls of other investors. You can find out more here.
"Is there any risk of a claim under the
Treaty of Waitangi?"
We asked our Solicitors, Simpson Grierson, to review the implications on our forestry investments of potential Maori claims under the Treaty of Waitangi. Their answer was unqualified. As the land is private land, it is legally protected from any Maori claims to the Waitangi Tribunal. You can download and read a copy of their Treaty Opinion as a PDF file below.
Treaty Opinion (270KB)
We recommend you download this file to your computer. To do
this right-click on the file, select 'Save as' and save to your P.C. When
the download is complete open the saved file. (You will need Adobe Acrobat
Reader to view PDF files. If you need details on how to get Adobe Acrobat
Reader click here)
"Who owns the land?"
Investors collectively own the freehold title to the land, together with the tree crop. Ownership of the land is both profitable and also eliminates an annual rental commitment or sharing of the harvest proceeds. You can find out more information here.
"What happens after the trees are harvested?"
The areas harvested will be replanted the following winter. At the conclusion of harvest, most (if not all) of the land will have been replanted. The original investors (or their family) will then have the choice of reinvesting using their share of the proceeds from the sale of the land and the replanted trees.
"How will I actually be paid, and what about the tax?"
Under current taxation law, the investment company will pay company tax on the harvest proceeds and the investors will be paid a fully imputed dividend (with tax having been paid at 33 cents in the dollar). Provided your marginal tax rate is no more than 33 cents in the dollar, no further tax will be payable. Those investors on a lesser marginal tax rate who have paid income or other tax, may be entitled to a tax refund!
"Will the amount I pay increase over time?"
Yes it will. The figures set out in the information you received when investing are projections based on a number of assumptions and the actual costs at that time. Even with low inflation, costs will increase. All factors being equal, what you will pay in the future will represent the same buying power as the cost indicated in the relevant Investment Statement.
It's important to remember three things. Firstly, Forest Enterprises has been in the business since 1972 and we know what all operations actually cost. Secondly, our credibility is on the line, and we are highly motivated to perform within budget. Thirdly, if inflation increases the costs (which are concentrated in the early years), it will also increase the returns. You can find out more about calls here.
"How can I pay the Calls?"
You can pay your Calls by cheque, by EasyCall (our direct debit payment option), by charging to your VISA or MasterCard, or by transfer from your bank account to Trustees Executors Ltd (the investment trustee) bank account. For further information on call payment options click here.
"Is there a lump-sum full payment option?"
No, we do not offer a lump-sum full payment option. The main reason why is that forestry is by nature a contributory investment. A crop of trees is planted, intensively tended during the first 10 years (the pruning and thinning) then managed through until harvest over a 25 to 30 year period.
The only way the future cashflow requirement to pay for this work can be converted into a lump sum is by 'guessing' future inflation, real cost movements relative to inflation, interest and taxation rates. It is not possible to accurately guess these variables over the 25 to 30 year life of a forest.
The consequence of an incorrect lump sum calculation will inevitably disadvantage you the investor, which is the main reason why Forest Enterprises does not offer this option.
Other reasons against a lump sum option …
Even assuming someone could accurately guess the variables and arrive at a lump sum amount, there are other major reasons against lump sum full payment of your forestry investment.
Shift in Control from You to the Manager
Your strongest negotiating lever is your money. If you have fully paid your investment you have little negotiating power and the Forest Manager (the Manager) is in a strong position. Prudent investment practice should always empower you the investor, not the Manager.
Temptation on the Manager to Spend the Funds Available
With lots of money in the bank during the early years, the Manager might be tempted to spend it on the forest e.g. 'put in that extra track', and generally to spend more than anticipated in the original budget. Investors can only restrain the Manager if he has to justify any additional expenditure and this is best achieved when he has to ask you to pay for it.
Pressure on the Manager to Cut Corners
If in the latter years of the investment the remaining funds are insufficient to complete the work originally intended, the Manager will be under extreme pressure to reduce expenditure by cutting corners. Doing so will inevitably compromise forest quality, and consequently investment return. This is not in your best interests.
Locking into a Forest Management Regime
A lump sum calculation can only be attempted if fixed assumptions are made, including forest management regime assumptions. Consequently a change in forestry management to accommodate new and recommended developments that could enhance your forest and your return would probably not be possible. This is also not in your best interests.
Management of the Resulting Cash Fund
Full payment of a substantial future cashflow creates a large cash fund that must be managed professionally, which in itself creates an unnecessary investment risk.