A Forest Enterprises investment is a professionally structured investment in New Zealand radiata pine forestry. Our investment structure incorporates checks and balances to protect investors’ interests, like any other professionally managed investment.

Forest Enterprises is the only forest investment company which uses the Limited Partnership investment structure with its key investor benefits. Our Limited Partnerships are registered Managed Investment Schemes (MIS) under the Financial Markets Conduct Act 2013.

The Limited Partnership

When you invest in a Forest Enterprises forestry investment you become a shareholder in a Limited Partnership (LP) which owns a radiata pine plantation forest. The Limited Partnership structure is ideally suited to investment funds. It provides the protection of limited liability, tax efficiency and a transferable asset, plus it provides investors with decision making rights and control over your investment.

Keep reading to learn more about the Limited Partnership structure.

Limited liability means that investors (Limited Partners) are only liable to the extent of their capital contributions (funds invested), plus any other obligations expressed in the Limited Partnership Agreement. The number of shareholders a Limited Partnership has does not impact liability, as the legal documentation ensures that every investor has the same rights and obligations.

Limited Partnerships are a form of partnership involving General Partners, (who are liable for all the debts and liabilities of the partnership) and Limited Partners (who are liable to the extent of their capital contribution to the partnership). You become a shareholder of the Limited Partnership, and also in the General Partner which is the active manager, responsible for the day-to-day management of the Limited Partnership and its business.

Of the 61 forestry investments managed by Forest Enterprises, 49 are Managed Investment Schemes (MIS) registered under the Financial Markets Conduct Act 2013. This includes all of our Limited Partnership investments. Property investment such as forestry (land and trees) is a common type of MIS.

Our forestry MIS are structured so that investors –

  • take part in the investment by contributing money in return for shares in the Scheme
  • meet on going Calls to the Scheme to pay for the costs of the business and operation of the Scheme
  • have rights to participate in, or receive, financial benefits produced principally by the efforts of the Manager in managing the forest and managing the administration of the Scheme, and
  • do not have day-to-day control over the operation of the business but have the right to be consulted or to give reasonable directions to the Manager

With the status of a MIS comes additional investor protections than those for equity investments and debt investments. These include Supervisor overview and custodianship of the assets away from the manager. As well as the annual financial audit, Forest Enterprises’ investments have always included an annual forest audit.

A Statement of Investment Policy and Objectives (SIPO) articulates the investment’s purpose and establishes the foundation for the accountability of the Manager. It is an excellent overview of the mechanics of our forestry investments including the checks and balances that are incorporated into the structure. The SIPO, governing documents and annual investment reports for each Scheme are available to read and download from the Companies Office Disclose Register (search by Scheme Name).

Among other benefits, the Limited Partnership structure importantly provides investors with decision making rights, so that investors retain control of their investment at all times and no material changes can be made without investors’ prior approval.

Although your investment is a managed investment scheme, and Forest Enterprises is the manager, there are a number of key decisions which can only be made by the Investors. Some decisions are prescribed by legislation as investor decisions, some we have chosen to be made by investors as a feature of our forestry investments.

This guide to Investor Decision Making provides more information, including a schedule of investor decisions.

Forest Enterprises Limited is licensed under the Financial Markets Conduct Act 2013 to manage Managed Investment Schemes (excluding managed funds) which are primarily invested in forestry assets. The day to day management of the forest and the administration of the investment is undertaken by Forest Enterprises as Manager.

The MIS manager is required to exercise skill, and provide expertise and decision-making in managing the forest and administering the investment, while investors have an oversight role. In that situation, the MIS manager plays the principal role in producing the financial benefits. This separation of powers and duties add to the investors’ limited liability.

All our fees are at arm’s length and transparent. There are no free shares nor subsidised ownership of the land, nor any other schemes that unfairly remunerate us as forest manager, investment manager or promoter.

The investment’s Deed of Scheme Management sets out the powers and duties of the Manager (and the Supervisor), outlining the extent (and limitations) of our responsibilities to investors in managing the investment. Investors retain the right to be consulted or to give reasonable directions to the Manager, and there is also provision for removing the Manager and Supervisor.

More information about our role as Manager on our Managing the Investment page.

The Supervisor is a central component of investing in New Zealand. The role of the Supervisor includes independent oversight and supervision of the investment, to ensure that the Manager is carrying out its duties according to both the legislation and the investment’s governing documents, and that the interests of the investor is being protected at all times. The Supervisor of Forest Enterprises’ investments is Trustees Executors Limited.

The Supervisor is authorised under a limited Power of Attorney act on behalf of investors, to attend to all the procedural and statutory requirements of the operation of the MIS. Investor control is assisted by the supervision input of Trustees Executors, together with comprehensive reporting from the manager, plus the annual financial and forestry audits. As further protection for investors, Trustees Executors holds all Investor’ funds until required for authorised expenditure or distribution of harvest dividends.

Learn more about the role of the Supervisor on our Managing the Investment page.

We have ensured tax-deductibility is achieved by using the Limited Partnership investment structure. Under New Zealand tax law, the investors (Limited Partners) of the Limited Partnership are the point at which the taxation consequences of the forestry business crystallise. Consequentially, all investors must hold a New Zealand Inland Revenue tax number, and account to Inland Revenue for their share of the annual profit or loss from the forestry business.

For most years during the term of your forestry investment before harvest, you will be entitled to a share of the investment’s tax losses. With the introduction of carbon lease rental income, and for forests that are harvesting, there may also be some tax payable.

We provide investors with annual Tax Details Statements in May each year, detailing their tax payable/losses for the tax year ended 31 March. In addition, the annual Financial Statements contain reference to the tax payable/loss for that investment. You can read and download the latest annual Financial Statements for our MIS Limited Partnership on the Companies Office Disclose Register (search by Scheme Name).

A carbon lease arrangement is in place for the carbon in Post-1989 areas of forest, leased in return for an annual rental. This means that the income for each Post-1989 forest is generally sufficient to cover the investment’s annual expenditure and there are no Calls.

The carbon lease passes all rights and liabilities in respect of the Post-1989 Forest carbon asset in the investors’ forest to the leasee in return for the annual rental. Investors’ risk profile, rights and obligations as forestry investors remain essentially the same, including the ability to harvest as scheduled in the normal commercial manner. Most importantly, at harvest the leasee will be responsible for meeting the harvest liabilities (repaying the carbon), not the investors as forest owner.

Built-in control and protection

When you invest in forestry with Forest Enterprises, you become a joint owner of an asset (land and trees), and you participate as an investor. As Forest and Investment Manager, we ensure that your investment is protected, that forest activity is undertaken to the highest standards, and that you are kept fully informed on all matters. In addition to the Limited Partnership investment structure, the key elements of our investor protections are land ownership, independent audits, regular reporting, forest visits, and the ability to sell before harvest.

Ownership of the land is a key feature of a Forest Enterprises investment. Investors in the Limited Partnerships invest directly into the ownership of the land as well as the tree crop through their shares in the Limited Partnership, collectively with the other investors in their forest. This gives greater control and profitability, plus the security of knowing the forest is there to visit as the trees grow in size and value. With a direct investment, investors are closely involved with their forest and participate in decision making.

If the land is not owned by the investors, the landowner must be paid for its use. This can be by annual rental or by sharing the proceeds of the harvest. In other words, the initial capital investment is replaced by either an annual expense or a reduction in future return. Not owning the land means more risk; you don’t have absolute control over one very important input into the investment, rental may become excessive, or the profit share may become disproportional.

Under the Financial Markets Conduct Act 2013, there is a requirement for the Supervisor (or its appointed custodian) to be registered on the title to the land and to hold the land in trust for the Limited Partnership, as an investor protection.

Independent forest audits have been a feature of Forest Enterprises investments long before they were mandated for our industry. A forest audit is undertaken each year to check that the forest is being correctly managed and at harvest delivers the full value. Forme Consulting Group is the independent forest auditor for Forest Enterprises’ Limited Partnership investments.

Also each year, an independent financial audit is undertaken by Staples Rodway of each Forest Enterprises-managed investment.

Learn more about the auditors on our Managing the Investment page.

Core to our philosophy is being open and transparent with information, beyond what is required of us by law or industry regulation.

We have always provided annual investment reports for each Forest Enterprises investment, with analysis and financial information including fees, next year’s budget and cashflow. The Annual Report and the annual Financial Report are the investment’s primary statutory reporting documents.

We provide full and frank reporting on key milestones such as harvest activity and regulatory changes. Such special reports are prepared when any material change or matter impacting the investment needs to be reported to investors and Supervisor. Investors also receive regular Forestry Updates by email with information of a general nature, plus Client Updates which are communications specific to an investment or an important investment related matter on which all investors should be informed.

This reporting is an important element of investment monitoring, and is consistent with the nature of a forestry MIS. Investors’ role is not as passive as in a managed fund, and investors are required to make decisions by resolution on material matters impacting their forest owning business.

The Supervisor receives copies of all Forest Enterprises investor communications.

Read more about reporting and communication on our Managing the investment page.

A notable feature of forestry investment is its long term nature, making it an excellent choice for a balanced investment portfolio. However, we understand the importance to investors of the option to liquidate before harvest should their personal circumstances change.

We facilitate the sale and purchase of shares in Forest Enterprises investments on behalf of existing investors by co-ordinating an open tender process. This creates the opportunity for our clients to liquidate their investment prior to harvest, and for new or existing investors to buy into an established Forest Enterprises investment with a shorter timeframe to harvest.

Regular reporting is no substitute for being able to meet and talk with the people looking after your assets. Approximately every five years we invite investors to an organised forest visit and informal meeting, providing investors with the opportunity to get up close to their forest and meet fellow investors. Our investors appreciate this personal level of engagement and accountability, as Forest Enterprises staff explain the work being undertaken in the forest and answers their questions.

As our investments approach harvest, the pre-harvest forest visit becomes an even more important part of our communication with investors. The complexities and opportunities presented by the proposed harvest plan is more substantial business and the meetings are therefore more formal, usually with a presentation by Forest Enterprises. We have filmed recent presentations and made them available online to ensure all investors are able to participate and stay informed.

Find more information about Forest Visits is on our Managing the Investment page.

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Our Customer Services Manager Merv Jones is on hand to answer any query from new and existing clients.
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