Amuri Hills Forest Partnership
AGM - Accounts
23 July 2001

Notice of Annual General Meeting


The 2001 AGM of the Partnership will be held at our office, Leinster House (above the 'Little India' restaurant), 158 Leinster Rd beginning at 3.30 pm on Tuesday the 7th of August 2001.
The formal business of the AGM will be :-

a) To receive and consider the financial statements and Auditor's report for the Partnership's year ending 31 December 2000; and

b) To discuss and consider the previous and current years' Work Schedules and Budgets, together with any reports of the Forestry Consultant and Management Committee;

c) Election or re-election of the Management Committee.
If you wish to stand for the Committee you should attend the meeting in person or by proxy.


If you are not able to, or do not wish to attend the AGM, but would like to delegate your right to vote or speak to another person, you may do so in accordance with clause 3 of Schedule 1 to the Partnership Deed. (There is a copy of the Deed in your copy of the Prospectus). Please post or fax or email proxies to me at our office at least 48 hours in advance of the AGM.

2000 Accounts & Tax Credits

Enclosed is a copy of the latest audited financial statements. You should have already received your Taxable Loss & RWT Certificate and you will note the same figures are listed at the back of the financial statements.

General Review

Rationale behind Pruning and Thinning Radiata

Your investment in timber plantations is now six years old and so they have moved from the first stage, the establishment phase to the next, the juvenile growth period. For the Radiata portion this is the time to begin pruning and thinning. The Douglas-fir will not be pruned, only thinned but not for many years yet.
Your five stands had a reasonable growth season only partly limited by the latest drought. The southerly storm in October and a North-westerly one in the early autumn did no significant damage, unlike in other places.
When we last wrote we sent you a copy of this year's budget and last year's actual expenditure, including notes on these. You may have seen a sum set aside last year for assessment and one this year for the first pruning lift of the site 'HF2' at Hopefield Station. This is the first of your three Radiata pine stands to be ready for pruning.
Assessment was carried out by Peter Evans, a registered Forestry Consultant with Wrightson Forest Services. The other two Radiata sites - Leslie Hills and Glens of Tekoa were surveyed too and his report advised they should be ready to start pruning later next year. They should be assessed further before then.
This is broadly in line with the original predictions in the prospectus six years ago. Hopefield is slightly ahead of predictions and the others slightly behind. The data shows that the trees have a larger diameter than the model predicted but are a little shorter. So taking that into account we can adjust the details of pruning and thinning over the next few years. Leslie Hills and Glens of Tekoa have a significant amount of variation from higher to lower altitude and from more sheltered to more exposed, so that will be taken into account too.
Pre-silviculture assessment involves making measurements of tree size and spacing at a sufficient number of sample points within the forest stand to arrive at a statistically defensible average tree height, diameter and stocking rate for a given area. This is then run through the same computer software initially used to predict growth and volume and the likely timing and intensity of pruning and thinning required to produce the optimum return. As well as this analysis, the fully stocked area of the stand is measured and mapped from an aerial photograph.
The cost of this work pays dividends because getting the timing of pruning, which is a value adding operation, wrong, and or misjudging the area you are pruning, can greatly alter the downstream return per hectare. As with the decision to carry out pruning at all, it is not a question so much of making losses if you do not do it, rather it is an exercise aimed at maximising the return on all money invested by the Partners to date. There is still a positive return for growing good trees without adding value by pruning, or where it is done but not well or fully. But where a stand has good growth and form, the rate of return can be more than doubled by carrying out these operations and doing them on time and to a scientifically determined degree.
It is true that CHH have said they will not prune even their best stands of Radiata in future because they do not think their cost of capital justifies it. Instead they plan to use processing technology to add value to their knotty timber and simply concentrate on growing that as fast and as cheaply as possible. Although some think this is yet another mistake to add to their past ones, as a multi-level forestry company with significant down-stream processing capacity they could add value at a greater rate than nature will do it for them. In theory at least.
Smaller 'single purpose' growers like us are still very much advised to aim for the quality end of the Radiata log market rather than compete with the larger forest owners growing cheap logs. Therefore we should add as much value to our trees as we can.
That strategy is still as much supported by current log prices as it has been in the past. Over the last six years you have no doubt heard 'log prices' reported as 'high' or 'low' regularly, and now the media like the phrase 'the wall of wood' meaning the increasing harvest volume of Radiata available in NZ over the next decade or two. We also regularly hear some large company complain of poor log prices being to blame for their losses or for profits being down. However what are usually being described are the mid to low grade logs that still form the bulk of the NZ harvest. There is still a large supply of them being cut for sale to Korea and Japan where they are used for low value purposes. These lower grades compete with other cheaper softwoods on the world market and naturally prices and volumes ebb and flow quite considerably. But mostly it's a buyer's market.
You will be pleased to know that those lower grades are not what your partnership is aiming to grow to any significant degree. Nearly 90% of the net return your regimes are aiming for is from the pruned portion of the tree, usually the first 5 to 7 metres, and the next log above that. Good pruned logs are in a high value end use, more stable market so demand at good prices is more sustained. The same is true for high quality saw-logs, which are principally the larger ones with small knots. These are sought after for top grade framing timber.

Silvicultural Budgets - 2001 to 2004

Accordingly over the next few years the Partnership will require further investment totalling about $3,000 per unit to prune and thin all the Radiata that warrants this treatment. Per hectare, the cost of pruning and thinning will be similar to that predicted and will be spread over four years, much as predicted. But the total further investment required will be less than in the original projection. This is because the total fully stocked area warranting full pruning and thinning is less than the original estimate of the maximum possible area based on the amount of planting. The original total cost forecasts were of course based on the possible maximum fully stocked area.


There is a valuation of the Radiata stands scheduled in the Forestry Plan but yet to be carried out. This is because not all of the area has been fully assessed and mapped for pruning and thinning yet. As referred to above this will be completed next year so we recommend only then should we ask the Forestry Consultant to value the Partnership's stands, including the Douglas-fir ones. It is necessary to have a measurement of the fully stocked area in order to do a credible valuation, but to incur that expense solely for a valuation is not justified There are different ways to approach the valuation of immature forests and quite different figures can be defended. Obviously that is not of much utility and could be a waste of money. However an approximate value arrived at by a simple method is useful at this stage to be confident the insurance value of the Partnership's assets is not too high or too low.

If you have any queries about anything, or want more information, please don't hesitate to contact me at any time.

Charles Etherington
Manager for the Partnership Committee

Warren Forestry Ltd, New Zealand forestry investment provider
Warren Forestry Ltd, New Zealand forestry investment providerWarren Forestry Ltd, New Zealand forestry investment providerWarren Forestry Ltd, New Zealand forestry investment provider