I would not give a fig for the simplicity this side of complexity, but I would give my life for the simplicity on the other side of complexity.

- Oliver Wendell Holmes
 

The Manager bought for Flat Rock Forests Trust a company called Manawatu Forests Limited which owned small portions of the Manawatu Forests.  A shelf company, Manuka Holdings Limited, was acquired and used to purchase the balance of the Manawatu Forests estate.  According to LINZ documents, this purchase was made for Flat Rock.

Next, the Manager bought 2,200 ha of bare land, mostly on credit, from a Kai Iwi farmer in the name of a soon-to-be-but-not-yet registered company, Medlicott Forest Limited.  The name of Manawatu Forests Limited was changed to Medlicott Forest Limited.  Then, in the Trust’s Annual Return for 31 March 95 it says, “Medlicott Forest Limited (previously known as Manawatu Forests Limited)”.  However, most of the Manawatu Forests estate assets were not assets of Manawatu Forests Limited and were NOT turned over to the Trust.

FRFT began planting Medlicott’s bare land in 94, but the job was never completed.  The receiver’s 97 sales brochure said of Medlicott that 1,151 acres were planted, with a further 400 available for planting.  (That seems to leave out the 480 ha of pines planted in 94.)

The Trust’s small freehold portions of Pukehou (on the Kapiti coast) were harvested, sectioned, and presumably sold, though unitholders were never told disposal details or amounts.  The property had a view, and access to Highway 1.  The land was valued by Wall Arlidge Limited March 93 at $92,000.[1]  They said the land was subject to a forestry right and would be worth even more when the trees were gone (although the FRFT annual return for 95 reports that 10 ha of harvested Pukehou land had been replanted).

Valuer Gerald H Smith said, “A 32.5 ha block in the Otaki locality would be keenly sought after if available for sale to a wide range of interests.”  He said 3.5 ha was in the $8,000-to-$10,000/ha range and the rest was in the $900-to-$2,500/ha range.  He also said, “…my valuation is $92,000 as follows:”  The “as follows” part was omitted.  Note 12 “Contingent Liabilities” in the March 93 prospectus reported that the trust had entered into an agreement to sell 7.75 ha of bare land (possibly a part of the $8,000-10,000/ha range?) for $8,000.  The Trust was to pay the cost of subdivision estimated to be $2,000.  No explanation for this action was given.  Data downloaded from Terranet indicated 32.9718 ha were transferred in Jul 96 for $8,000.  Two other titles were issued at the time: 48B/131 and 48B/132.  The PriceWaterhouse summary analysis sent to all unitholders did not mention this forest.  Nor did the full review.

Miscellaneous information:

	Manuka Holdings Limited was a shelf company acquired in June 92.  Directors were Adrian Kenneth Burr, Mark Edward John Riddiford, Donald Hugh Simcock and Ross Edward Green; secretary was Alan John McDougall.
	In January 93, New Zealand Forests Limited (99% owned by a nominee company, presumably acting for Flat Rock Forests Trust [FRFT], and 1% by Reidy) bought 100% of the shares of a company called Manawatu Forests Limited (MFL).[2]
	In Mar 93, the Manager produced a prospectus for FRFT which said, “Manawatu Forests Limited owns forests forming part of the Manawatu (Pukehou and Aokautere) forests while the Trust owns directly the other part of the forest along with the Pukehou land.”  Arbor valued the Aokautere (9.2ha) and Pukehou (24.3ha) forests at $63 and $89 thousand, respectively.  (Unfortunately, they cost the trust $196,925.)  Within note 4 of the prospectus financial statements, it says, “The Manawatu Forests comprise a block at Otaki (Pukehou Forest) owned outright by the Trust and the Aokautere Forest block over which the Trust holds forestry rights.  Ownership [is]…held through 100% shareholding in the company Manawatu Forests Limited.”
	Don Simcock and Steve Reidy were appointed directors of MFL in April 93.  The May 93 AR shows the company had 37,480 ordinary shares each worth $1 and no debt.
	In May 93, Manuka Holdings increased nominal capital from 100 ordinary shares of $1.00 each to 1000 ordinary shares of $1.00 each.
	Manuka’s 30 June 93 AR shows Burr owned half the ordinary shares; New Zealand Forests Holdings Limited (NZFHL), a company owned by NZEB, owned 40%; seven Simcock and related parties owned one share each, as did the Riddifords.  Timber Holdings Limited (THL [the 2nd one], a company owned by the Riddifords and Sloane), owned 9 shares.
	In July 93, Manuka Holdings acquired a shelf company named Quantum Holdings Limited.
	On 13 August 93 a stumpage agreement between Manuka Holdings, Quantum Developments, and ITT Rayonier was apparently signed.  [See next item.]
	On 16 August 93, Manuka Holdings executed an “all moneys” mortgage to Westpac for the Manawatu Forest Estate, and specified six parcels in the Aokautere Forest (of roughly 151, 146, 169, 81, 65 and 86 ha), and the Himatangi (100ha) and Parewanui (196ha) Forests.  On the same day, it executed a debenture over the same assets with Westpac.  The bank consented to the forestry right dated 16 August 93 contained within a cutting agreement and associated transfer between Manuka, Quantum, and AMP and a stumpage agreement between Manuka, Quantum, and ITT Rayonier dated 13 August 93.  However, it waived its right to trees and timber growing in 10 compartments of the Aokautere Forest (of 34, 30, 60, 14, 46, 25, 14, 42, 12, and 8 ha), one compartment of the Parewanui Forest (6 ha), and three compartments from the Himatangi Forest (of 21, 7, and 8 ha).
	A memorandum of transfer dated 13 August 93 grants a profit a prendre in gross to AMP over the first five parcels (151, 146, 169, 81, and 65 ha).  This was amended by hand to 16 August and to a forestry right only.  AMP acknowledges the right is granted subject to the terms of an agreement for purchase of the Land under which all pulplogs are to be sold to Carter Holt Harvey Forests Limited.  The address given for AMP was the address of NZEB; the memo was signed by AMP Perpetual Trust’s trust services manager, G E Leather.
	On 16 August 93, Quantum Developments executed an “all moneys” mortgage of six parcels of Manawatu Forest Estate’s Shannon Forest (of roughly 219 and 372 ha, 5577m2, 1 and 9 ha) and Pukehou Forest (of roughly 3, 30, and 36 ha).  It exempted small compartments of the Shannon Forest (2, 34, 26, 19, and 12 ha) and compartments of the Pukehou Forest (17, 19, and 22 ha), though it looked to me as if, in three instances, the compartments being exempted appeared larger than the parcels themselves.
	On 16 August 93, Quantum Developments executed a debenture to Westpac against “the Manawatu Forest Estate.”  It exempted the same compartments of the Shannon Forest (93ha) from cutting and the same parts of the Pukehou Forest (58ha) from stumpage as had the mortgage immediately preceding it.
	On 16 August 93, Manuka Holdings resolved to issue redeemable preference shares to Adrian Kenneth Burr.  He received 1,000 “allotted for a consideration other than cash” which satisfied “indebtedness of the company to the subscriber to the extent of $1,000,000”.  The nominal value of each share was $1.00.
	On 15 November 93, Ross Edward Green resigned as Manuka director and lawyer Mark Andrew Taylor took his place.
	In Feb 94, the vendors of Manuka agreed to the purchase by FRFT of all shares of Manuka Holdings for $11.1million.  The vendors were Burr (50%), the nominee company presumably acting for Flat Rock (25%), the Riddifords and David James Underwood (12.5%), and the Riddifords and Sloane (12.5%).
	Countrywide agreed to a $5 million overdraft to cover the purchase of Manuka, Wilanda, and to provide working capital.  In return, they received a mortgage over forest assets of the Trust, excluding Manuka assets, and a mortgage over shares in Manuka Holdings.  FRFT’s net valuation (per Forme Consulting 30 September 93) was $13,349,935.  If to this was added Wilanda Down’s valuation (per Groome Poyry) of $1,362,262 and Manuka Holdings forests valuation (per Groome Poyry December 93) of $23,730,000, the result was a Trust whose gross value was $38,442,197.  35% of that could be borrowed (the “borrowing limitation”), or $13,454,769.  Manuka already had a term loan from Westpac for $5.1 million that the Trust was to assume.  (Apparently Flat Rock Forest Trust had no debt at that point.)  That meant $8,354,769 remained to be borrowed.
	Quantum Development Limited’s 29 March 94 Annual Return (filed July 7) showed Manuka Holdings Limited had transferred 8 shares on 3 May 94 (one month and five days in the future), although the schedule lists nine: one each (presumably from) the Riddifords, and seven (one each) presumably from Simcock and related individuals.  The four directors and the secretary resigned and were replaced by two Malaysians and a lawyer.
	FRFT’s AR as of 31/3/94 (which was dated 24 June) shows net forest purchases of $8,307,326.  Comparing the “Forests owned by Flat Rock” with the March 93 prospectus, it appears that: Flat Rock Forest stayed the same (85 ha of which 75 was planted in forests; all 75 ha were listed, though the Trust supposedly owned only 77.25% at that point (actually, it appears it may have owned none at that point). Francis Creek stayed the same (184 ha land planted with 107.7 ha forest; the 97 sales brochure said 43.3 ha of newly planted land, 40 ha unplanted). Rocky River stayed the same (91 of 140 ha is planted, though the 97 sales brochure said 100 ha total; the full PW review said 87ha are planted). Pukehou stayed the same (23.4 of its 32 ha were planted; page 2 of the AR94 says 24 ha were sold as a cutting right). Aokautere increased from 9.2 ha to 217 ha (which the full PW review said cost $3.1 million, and was worth only $1.69 million); no mention was made of this increase in the “Highlights of the 1993-94 Financial Year” except in the list at the bottom of the last page.  Nor was any mention made of Manuka Holdings Limited. Lawrence stayed the same (a 22.8 ha forestry right, though it dropped to 19.5 ha in the 97 sales brochure). Matauri Mara stayed the same (240.9 ha planted of 378 ha total, though it dropped to 221 ha in the 97 sales brochure; the full PW review said cost $1.24 million, and worth $1.863 million). Otaika, a 31.1 ha forestry right in Whangarei, was added.  (The full PW review said 25.9 ha; cost $312,000, worth $331,000.) Shannon, an 88.7 ha forestry right in Shannon, was added.  (The full PW review said 86.3 ha; cost $2.381 million, worth $765,000.) Wilanda Downs, a 58.1 ha forestry right in the Southland, was added.  (The 97 brochure said was 46.4 ha; cost $1.441 million, worth $589,000.)
	Manawatu Forests Limited’s AR 94 showed an unsatisfied charge to Countrywide Bank dated 4 April 94, though no charge with that date was on file.  [See the 11 May 94 entry below.]
	On 22 April 94, a Term Loan Agreement and Facility Agreement between AMP Perpetual (presumably acting for Flat Rock) and Countrywide was signed.
	A debenture of all assets of Manawatu Forests Limited to Countrywide was executed 22 April 94.
	A forestry right against the first three of the six Aokautere parcels (146, 151, and 169 ha) was registered to AMP (signed by Goodchild) on 22 April 94 subject to the 16 August 93 “all moneys” mortgage between Westpac and Manuka Holdings over Manawatu assets.
	On 3 May 94, according to Ernslaw One’s 31 March 95 AR, that company acquired the entire share capital of Manuka Holdings Limited for $12.397 million in cash.  As part of the deal, they took over a $63,000 bank overdraft, a Westpac loan for $5.1 million, and “creditors and accruals” amounting to $250,000.  Ernslaw appeared to have bought only five of the six Aokautere parcels, but all five of the Shannon parcels.  The four Manuka directors and one secretary resigned and were replaced by the new owners.
	Manawatu Forests Limited’s 11 May 94 AR showed an indebtedness of $2 million.
	On 15 June 94, M H Stead of Rudd Watts & Stone (AMP’s lawyers) effected the discharge of AMP’s forestry right over certain Manawatu assets due to "substitute security" being provided.
	On 27 June 94, AMP released the forestry right over the first five Aokautere parcels.  This was replaced the same day by a forestry right over the first three parcels only, subject to the 16 August 93 Westpac debenture over all six parcels.
	Manuka Holdings 29 June 94 AR shows 1,000 ordinary shares worth $1,000 each, and 1,000 redeemable preference shares worth $1,000 each, all but one of which were owned by Ernslaw One; one share was owned by an individual.  The company had debt of $4.8 million.
	On 29 July 94, a company reportedly named Medlicott Forest Limited purchased 2,200 ha of bare land at Maungaporau Station from farmer John Larnach Medlicott and accountant Denis Cecil Woods.  The sale price was $1,050,000.  A priority sum of $700,000 to Medlicott and Woods was secured by a mortgage on the property, covenanted by AMP, subject to the forestry right mortgage held by Waimea Holdings (owned by AMP acting for FRFT).  The Trust reported in the AR for the year ended 31 March 95 that the purchase price was $1.232 million.
	On 2 August 94, the name of the company Manawatu Forests Limited was changed to Medlicott Forest Limited.
	On 5 August 94, Reidy resigned as director and chief executive officer of Medlicott Forest Limited and Anthony Francis Hassed took his place as director and general manager.
	On 11 August 94, a mortgage over land and a second debenture secured by all assets was filed between Medlicott and Countrywide.
	Quantum Developments 14 March 95 AR showed Manuka Holdings owned 99 shares and Leng one.
	Medlicott’s AR filed 9 May 95 showed two debentures and one mortgage unsatisfied.  However, the company’s indebtedness managed to drop to zero.  Furthermore, there were now 37,440 ordinary A shares reportedly worth $37,440 each and 300 ordinary B shares worth $300 each.  Obviously, the share value for ordinary A shares should have been $1 (or else the company would have been worth $1.4 billion).  From whence came the 300 ordinary B shares?  Where did 40 of the ordinary A shares go?  Were the ordinary B shares worth $300 in total?  Or $900,000?
	On 25 July 95, Quantum Developments signed a debenture with Westpac covering all assets which was subject to the 16 August 93 debenture between Manuka and Westpac covering six Aokautere parcels plus the Himatangi and Parewanui Forests.  It was also subject to the 16 August 93 debenture between Quantum and Westpac covering all assets.
	On 30 September 95, Quantum merged with Manuka Holdings.  It retained the name Manuka Holdings.
	Ernslaw One Limited’s Notes to the Financial Statements for the year ended 31 March 96, reads, “Ernslaw One Limited is the plaintiff in proceedings involving the acquisition of shares in Manuka Holdings Limited.  The defendants in the action are the vendors of the shares and the claim amounts to $720,000.”  (What was the problem?  Who won?  If Ernslaw One Limited prevailed, where did the money come from to pay this claim?)
	On 31 March 96, Manuka Holdings merged with Ernslaw One, taking the latter’s name.  Ernslaw One is registered in Auckland; it owns more than $300 million worth of forests, is directed by Malaysians, and is primarily (79%) owned by a company (Callander Limited) registered in Liberia.   They have recently begun felling the Manawatu Forest.

[1]     The 31 March 93 financial statements for FRFT (the only set ever filed) shows that Wall Arlidge had valued Pukehou land at $68,681.

[2]     Though mentioned in various legal documents, Manawatu Forests Limited is not listed on the Companies Office computer.

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