RESPONSE TO GLAUCUS, page-20

I'm afraid that's based on a misunderstanding of how the MIS works.

There are 317 lots in the TFS2002 project, meaning that the equity interest of one lot is valued at ~$43k on the balance sheet. Of course in the prospectus, growers were told to expect about $150k after harvest fees!

These interests were sold for a list price of $9350 originally, with discounts for multiple lots. That's the $2.5m of grower contributions in the accounts..

However crucially, this excluded the management fees and rents payable by the grower over the course of the project life. In the original prospectus, there was the option to pay these fees upfront for $11k, pay them over the life of the project, or just to pay the land rent and defer the management fee in return for 25% of the gross sale proceeds.

That means if the assumptions about realised price is correct and each lot will receive $43k after harvest, then the return to someone buying one lot was:

Pay upfront = 5.5% pa
pay over the course = 2.1%pa
defer management = 6.1% pa

By contrast, since 1 Jan 2003 you could have had 5.5%pa buying aussie government bonds, 11%pa buying the ASX200 or 10 gazillion percent investing in property, and you wouldn't have had to rely on TFS raising capital to pay back earlier investors.