What percentage liquidity does the fund have?

The fund aims to hold around 5% liquidity in cash or under liquidity management. There is a redemption routine whereby the investor whishing to redeem must surrender a redemption notice 90 days prior to one of the four redemption dates (each quarter) in order to receive funds within 30 days after the dealing date. Both this built-in notice period and the liquidity strategy is an important part of being able to manage redemptions with investments in slow-moving assets. If there are massive redemptions in a short period of time the fund may use credit lines or simply harvest to produce cash.

What is the relationship with luxembourg?

The fund currently has one share classes – Class D – listed on the Luxembourg Stock Exchange.

WHO conducts the valuations of the brazilian plantations?

In Brazil there is a system of licensing of agro-foresters called CREA. Only CREA-licensed foresters conduct the bi-annual valuations of the plantations in Brazil based on standing timber volume and using a six-month average price for the timber.

Where are the fund holdings in the baltic states located?

The Baltic holdings are located in eastern Latvia.

Where exactly are the platations in brazil located?

The plantations are located in the north of Brazil, in Santo Antônio do Tauá in the state of Pará. See map. Closest shipping port is Belem, usually referred to as ”the port to the Amazon” which is only one hour away.

What exactly do the returns come from?

Clearly it is not feasible to conduct valuations of the fund holdings on a monthly basis. Yet, the fund is monthly traded so there must be some kind of input to the monthly valuation. This was one of the focal points when creating the fund – to find a measure to reflect the biological growth. Since the biological growth is most notable in tropical timber, both in terms of volume and value, we sought to make agreements with local forest management companies in Brazil whereby they manage the plantations and agree to pay a fixed annual income that is conservatively set far below the biological rate, which is around 10-15% per annum depending on tree age range. About half of the plantatons are managed under such an arrangement, so even though not fully, but at least partially the biological growth is reflected monthly.
The other half are valued twice a year. For the holdings in natural forestry in the Baltic States there is no such equivalent to the fixed rate contract, largely because it is much more predictable with a plantation, so these holdings are just valued once a year.

Does the fund own forest directly?

In Brazil there is an abundancy of land and the fund management does not foresee any significant increase in land prices in the areas where the plantations are. Therefore it makes more sense to lease the land on long term leases, thereby the fund own the actual trees on the land but not the land itself. In the Baltic States the fund owns land via Baltic Forest AB (publ), a Swedish public company with fully owned local subsidiaries. In the Baltic States the increase in land prices over the last 20 years has been two digits anually, which is why it makes sense to own the land.

How many investors are there and who is the typical investor?

We cannot see exactly how many underlying investors the fund has since many of them are invested via insurance companies or custodian companies. There are however a large number of direct retail investors too from all over the world; Sweden, Norway, Switzerland, South America, Japan and Dubai being the most prominent.

How big is the fund?

Fund size is normally measured as AUM, Asets under Management. The fund has been in a state of AUM growth since 2013 and as per December 2017 has an AUM of approximately 39MEUR. Net AUM growth (after redemptions) is approximately 0.5-1MEUR per month.

Do you have a green-field approach to forestry?

Many large long-term investors in forestry apply a pure green-field approach. They buy either non-cultivated land (meadows, fallow land) or farm land and prepare the land and plant it with tree plants of the most appropriate species for the soil. This is usually a good long-term proposition, but it has a few down-sides which make this strategy unfit for a fund like JOFF: 1) It requires early investments into land preparation and buying plants 2) Plants are fragile the first years for all kinds of physical impact from wild animals, wind, snow and especially vulnerable to vermin 3) Depending on country and species the time to final harvest may well be upwards of 60 years. Due to the above reasons the Fund has chosen to not implement a pure green-field approach, but instead go for already planted areas in Brazil or natural forest in the Baltic States with a mix of fellow land, farm land and mixed natural forest.

Do you plant uncultivated areas?

Despite the above general strategy described the Fund does plant uncultivated areas in its current holdings in Latvia. This is driven from a value-adding focus as the EU contribution for forestation projects in Latvia is very generous, see table below. It almost compensates for the cost that adds volume and value over time as it adds more standing timber volume.

EU Subsidies in Latvia

Planting fellow land: 70 % of cost covered by EU-subsidies.

Gray Alder Replacement (harvest of low productive alder and planting of high productive spruce and birch): 70 % of cost covered by EU-subsidiesPre-commercial thinning: 140 EUR/ha. Cost 150 EUR/ha. Gives better volume growth

Do you buy natural forest and cut it all down?

No. We follow the forest management plans as approved by local authorities. In Brazil this means we harvest at 25 years of age, at earliest, and in Latvia we harvest – if prices are deemed to be good – those segments (specie/age) that we are eligible to do according to the forest plan.

Were the Brazilian plantations once created by cutting rain forest down?

No. The current plantation holdings in Brazil were all created from fallow land after WWII by Japanese immigrants who brought a new specie with them – teak. The plantations have thus been run several cycles already. Had they not been planted way back they might well be fallow land still, hence the plantations have added carbon sequestration.


Are the plantations in Brazil FSC-certified?

No. The reason for this is purely financial. It is simply too expensive and the cost to certify is not outweighed by the price premium. What´s important is that we deal only with plantation teak. Natural teak, especially from Myanmar, which implemented an export ban on natural teak last year, is something that has come under environmental scrutiny the last years.


Are the natural forests in Latvia FSC certified?

No, not currently. The forests and forest management measures comply with the requirements for FSC-certification, but thus far we have not seen any demand for this from the investor community.  If needed, we can apply for FSC-certification.


Describe how you practice sustainable forest management?

The easiest way to describe our forest management idea is that we buy forested land, tag along the biological growth for a number of years, harvest fully (Brazil) or partially (Latvia) and reforest the land leaving it (if we choose) forested. All work done locally is done through local forest management companies employing local wrok force paying them industry-standard wages. This is sustainable and responsible in every aspect of the word.