Investment in forestry is free from corporation tax, income tax and capital gains tax. The fund hopes to pay an increasing income in anticipation of greater demand for timber.
The initial yield on the fund is 7 per cent, which is tax-free. This represents a yield to basic-rate taxpayers of 8.75 per cent, and 11.6 per cent to higher-rate taxpayers. If investors keep the cash in the fund for two years it becomes free from inheritance tax.
Colin Les-Millais, director of FIM, said: 'We generate the income through the felling of the timber.' The price of timber rose by 12 per cent over the year to September 1993. Prices of timber are 45 per cent below their peak in 1988.
Mr Les-Millais anticipates that the total return on the fund, which will be wound up in 2004, will be pounds 148 for every pounds 100 invested.
The trust plans to raise a maximum of pounds 1.25m for investment in two plantations based in Dyfed in Wales.
FIM is predicting that increases in both the timber price and the number of trees chopped down will push up the income paid by the fund to 29 per cent as the trust nears its winding-up date. The trust has already agreed a contract with the UK's biggest sawmillers, to sell its first two years' of timber at advantageous prices.
Minimum investment in the fund is pounds 10,000 with multiples of pounds 1,000. Charges are 6 per cent.
Richard Crosbie Dawson, director of FIM, said: 'This is a long-term play on the timber price, based on the fact that if you believe economic growth is going to accelerate, then demand will increase.' He said that the Government was considering privatising the Forestry Commission, which could raise up to pounds 750m.