Forest Enterprises Australia Proposal

We have received the following from the lawyers for the FEAGG.

On 4 October 2011 the meetings of the 1999 to 2002 Projects were adjourned to a date to be notified to the Growers but no later than 24 January 2012. The meetings were adjourned because of the uncertainty in relation to the status of the leases. On 30 September 2011 the Receivers of FEA commenced legal proceedings in the Supreme Court of Victoria seeking amongst other things declarations that the leases are at an end.  In turn, we expect the Deed Administrators to argue that either the leases remain in place or, if they are terminated, should be re-instated.

The Deed Administrators have said that if the resolutions were passed to appoint Black Tree, they would seek court approval before signing the management agreement with Black Tree. However they consider the application would be pointless and likely to fail without certainty that the leases remain intact. In light of this, they must wait until after the end of the current Supreme Court proceedings.

In the High Court appeal on the offset of rental payments, all parties have filed their material and are waiting for the Court to decide whether to grant leave to appeal.

Growers meetings held in Sydney on August 23^rd adjourned the vote to a date to be fixed. We have now been advised that meetings for the 1999, 2000, 2001 and 2002 schemes will be held in Sydney on Tuesday October 4^th 2011 at the same place and time of day.  

 

All Grower votes previously cast remain valid and the Link voting system is open for any Grower in 1999, 2000, 2001 and 2002 who wish to use it. Please note that there is now an extra Resolution (# 6) to vote on by which Growers will in effect indemnify the FEAGG and the Chair of the meeting against any legal action arising from their efforts to hold a meeting and take a vote. We fully support this action. Voting on Resolution 6 is now available on Link Market Services website. You can contact us to receive instructions on how to vote on this resolution by emailing FEA@blacktreeltd.com.au.

Please note that all votes already cast remain valid for the adjourned meetings however if you wish to change your votes you will be able to do so via Link Market Services website here. You may also send your proxy forms in via fax or mail to Link Market Services. If you need a new proxy form or more information please contact Black Tree Pty Ltd here.

 

As many Growers will be aware, the Administrators of the FEA Group have been advising Growers to wait to hear about a proposal to recapitalise the FEA business by the Rural Funds Management Group (RFM). Black Tree has always been of the view that if such a proposal was put forward and was clearly of greater value to Growers than the Black Tree proposal we would willingly step aside (and indeed provide assistance) to ensure the RFM proposal could be implemented. It now appears clear that RFM has not been able to complete its proposition in a fashion that would be acceptable to Growers. Thus Black Tree’s is now the only proposal still available for Growers to consider. If it is not adopted, it is now highly likely that the projects will be wound up and Growers may be left with very little to show for their investments.

 

SUMMARY OF THE BLACK TREE PROPOSAL

SUBSTITUTION OF MANAGER

As stated in the section titled “Important Notice” on page 4 of the Notices of Adjourned Meeting (see links below or refer to the notice sent to all Growers), the original Black Tree Proposal contemplated the appointment of Black Tree Pty Ltd as the manager of the plantations.  However, to ensure that FEA Growers are not affected by the involvement of that entity in other forestry activities, it is now proposed to appoint a different Black Tree group company – Black Tree Management Pty Ltd in its capacity as the trustee of the Black Tree Management Unit Trust.  Black Tree Management is backed by the same shareholders and directors as Black Tree Pty Ltd and has access to the same staff, contractors and consultants so there will be no material difference by this appointment.  Importantly, there are no changes to the proposed variations to the constitutions that form the basis of the Black Tree proposals.

GROWER CALCULATORS

At the request of many Growers and Advisers, Black Tree previously developed a “Grower Calculator” to help Growers consider the impacts of the changes to the constitutions on their investment in the various FEA projects.  This calculator was never meant to provide a comprehensive assessment of each project and should never have been relied on by Growers to either cast their votes for the Black Tree Proposals or decide whether to continue as members of the respective schemes.  The calculator was withdrawn from circulation on or about 18 April 2011 and any Growers who retain a copy should destroy it. If Growers have relied on this calculator in making a decision, we recommend that they reconsider their decision and seek advice.

COMPLAINTS BY THE RECEIVER

Also, as indicated in the “Important Notice” on page 4 of the Notices of meeting, the Receivers of the FEA group of companies have complained of inadequate disclosure of certain matters.  Black Tree and the FEA Growers Group Inc consider that adequate disclosure is made in the original Explanatory Memorandum and updates on the website and encourages Growers to revisit this information, specifically:

•  the fee disclosure;

• the risk of legal action by the Receivers succeeding in terminating head leases and reversing rent set offs;

• the risk of the scope of the charge held by the Receivers attaching to the interests in the Grower Agreements;

• the risk of inadequate funding by Growers’ contributions;

• the risk of loss of tax deductions;

• the preparation of the Explanatory Memorandum is based on a review of documents provided by the Administrators with reference to external forestry reports (under “Responsibility for information” in page 2 of the original Explanatory Memorandum);

• the status of the plantation trees has not been independently verified; and

• the cost of the Project may be greater than anticipated by Black Tree.

Full details of the Black Tree Proposal are provided in the documents accessible below.