Sunday 15 September 2019

Management firms hold €3m in forestry fees

 

Companies that ran a portfolio of Irish forestry funds have earned millions of euro from work they carried out for investment schemes which last week left many Irish investors disappointed with returns after they were sold a decade early. Photo: Roger Jones
Companies that ran a portfolio of Irish forestry funds have earned millions of euro from work they carried out for investment schemes which last week left many Irish investors disappointed with returns after they were sold a decade early. Photo: Roger Jones

Fearghal O'Connor

Companies that ran a portfolio of Irish forestry funds have earned millions of euro from work they carried out for investment schemes which last week left many Irish investors disappointed with returns after they were sold a decade early.

Four companies linked to directors of the Irish forestry investment schemes have combined shareholder funds on their balance sheets of close to €3m.

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A 4,074-hectare forestry portfolio linked to 18 funds with 12,400 Irish investors was sold in May for a total of at least €55m, financial accounts show. The funds were liquidated earlier this month and thousands of shareholders received cheques last week for about €1,100 per share, sparking a flurry of complaints.

Returns were far below what had been projected when shares in the 30-year funds were sold in the 1990s. For example, one share in the Second Irish Forestry Fund cost IR£500 (€635) and it was projected by the promoters that it could be worth over €38,000 when the trees were to be felled 30 years later. But in May, Veon, the administrator of the fund, agreed to sell the now roughly 20-year-old forests to Axa.

Administration and forestry management work for the funds was largely carried out by three companies: Veon Limited, Forest Enterprises Ltd and IFS Asset Managers Ltd.

All 18 funds each paid tens of thousands a year in fees to the firms. Newly released accounts for each fund show a combined total of almost €700,000 alone was paid over in management fees in the year before the sale in May. A further €986,000 was paid during the year to auditors for 'non-audit' work, on top of standard audit fees paid to Deloitte.

Paul Brosnan and Trevor McHugh, the now former directors of the forestry funds since the sale, are also directors of the management companies. McHugh told the Sunday Independent that fees were disclosed to investors from the beginning and were standard for the work incurred.

Accounts to the end of 2017 showed combined shareholders' funds at the management companies of just over €1.5m. Shareholder funds at a fourth company, of which Brosnan and McHugh are directors, stood at €1.3m at the end of 2017.

This company, IFS Irish Forestry Services Limited, is the ultimate controlling company for the other management firms, and it is controlled by Brosnan and McHugh, stated the accounts. In 2016, it received a more than €400,000 dividend from one of the subsidiary companies.

Director fees at Veon and Forest Enterprises amounted to over €270,000 in 2017, while IFS Asset Managers' accounts ran a defined contribution pension plan for its directors.

McHugh said the decision to sell the fund was made due to threats to the forestry market that could not have been foreseen.

He said: "Nobody lost money here. Everybody got their money back and made a profit on this. I acknowledge there are disappointed people. But others are contacting us with the opposite point of view and acknowledging that we got them a positive return, that there were risks in the future and that we've locked in a profit for them."

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