FEA Timberlands Fund

Regular income stream through quarterly distributions hedged against inflation with rents adjusted annually;

Investments in rural property have a low volatility of returns due to the fixed nature of rental income which is hedged against inflation;

Portfolio diversification into a sector with a low or negative correlation with shares, listed property and fixed interest;

Low fund expenses due to Triple Net leases requiring tenants to pay all property maintenance, taxes and operating expenses;

Access to a highly experienced and successful rural property manager with 23 years experience; and

Type of Investment

The FEA Timberlands Fund (Fund) is an open unlisted unit trust.

Overview

The Fund invests in highly productive agricultural properties and aims to lease that land to quality agribusiness operators on a long-term basis with income payable quarterly and structured to increase in line with inflation. Initially, FEA Plantations Limited (FEA Plantations) will be the sole tenant.

Investment Objective

The objective of the Fund is to provide Investors with a return which exceeds its benchmark (see below) through a mix of quarterly income distributions and capital growth over the long term.

Investment Strategy

The Fund aims to maintain a geographically diverse portfolio of high quality primary production land that offers reliable income streams and potential for capital growth.
Properties targeted will have the key attributes of high rainfall and deep fertile soils suitable for plantation forestry and other high productive value agricultural activities.
The Fund will invest in the land only and will not be involved in primary production operations. It will also have minimal investment in primary infrastructure.

Distributions

Distributions will be paid quarterly. A minimum distribution rate of 8% per annum (based on a $1.00 Unit price) is anticipated for the period to from 1 July 2008 to 30 June 2009.

Distribution Reinvestment

An optional distribution reinvestment plan will be available to Investors.

Benchmark Return

The Fund seeks to achieve a benchmark return to Investors equal to the Bond Rate plus 3% calculated on a rolling 3-year basis.
Prospective Investors should note this is not a forecast of the Fund’s performance, but a benchmark that FEA Plantations uses as a guide when making investments and measuring the overall performance of the Fund on a Total Return basis. FEA Plantations’ Performance Fee is linked to the achievement of this benchmark.
Returns will be delivered through a mix of capital growth and quarterly income distributions.

Minimum Investment

 The minimum investment amount is $10,000, and thereafter increments of $1,000.

Superannuation Funds Eligible

Superannuation funds may invest in the Fund where the mandate of the superannuation fund permits.

Initial Portfolio

The Fund’s Initial Portfolio currently consists of two properties in northern Tasmania and six in northern New South Wales. These assets have an independent assessed value of $9.60 million.

Fund Size and this Initial Offer

This initial Offer is intended to raise funds to assist in building the portfolio to a value of $20 million by 30 June 2009.

Unit Pricing

For the first six months from the date of the PDS, Units will be issued at $1.00 per Unit plus an adjustment for any accrued income at the date the Unit price is calculated.
After this time, the Unit price will be based on the net assets of the Fund, including accrued distributions and adjusted for transaction and other costs.
The Unit price will typically be calculated on the last day of the month or the following Business Day and Units will be issued monthly.

Liquidity

An investment in the Fund should be considered not liquid. The Fund is not ‘liquid’ as defined by the Corporations Act and, therefore, Investors will not have a right to redeem their Units.
There is no established secondary market or other redemption facility for Units in the Fund. However, FEA Plantations intends to make withdrawal offers to Investors on an annual basis. It is anticipated that the offers will be made for an amount equal to 5% of the New Asset Value of the Fund calculated at the time of the withdrawal offer.
FEA Plantations anticipates making the first withdrawal offer in the third full year of the Fund’s operation (2010/11 financial year) and will keep Investors updated should this position change.

There are fees and costs that apply to an investment in the Fund which are detailed in full in Section 8, Page 37 of the PDS.

To fund the acquisition of the Initial Portfolio, Forest Enterprises Australia (FEA) has provided the Fund with a loan in the amount of $1.83 million. This results in a Loan to Value Ratio (LVR) of 20%. As subscriptions are received by the Fund, this interim funding will be repaid. Additional debt funding may be used to facilitate the acquisition of further properties.
FEA Plantations intends to target a long-term average LVR of 10% for the Fund, ranging from 0-40%. Any borrowings are non-recourse to Investors.

There is no closing date for the Offer. It is intended that the Fund will remain open to raise funds on an ongoing basis.