FWIW the profile of a very significant percentage of 'investors' in MIS schemes will be of considerable significance now.
Whilst there was a large percentage that bought large bundles of MIS units for use in legitimate tax planning, a larger number (and probably the majority) bought units because they couldn't afford to meet their immediate tax liabilities.
For this reason they didn't give a toss about the projected returns (although these made them feel much more relaxed about the amazingly improbable investment they were making.
These 'investors' were typically young professionals often operating as contractors earning large amounts and with corresponding expensive lifestyles. Everything was either rented (apartment) or on lease (car, plasma, holidays etc etc). When the tax tax bill arrived they had no cash and no substantial assets to borrow against.
There were also a few who bought because they felt they were investing in agriculture (and some of these liked the returns supposedly on offer also.)
Lets have a look what happened.
Some schemes offered up to 18% compound over the life of the scheme. To access this the high income 'investor' could borrow as much as 100% of the money required often (for all intents and purposes) secured against the MIS units themselves.
This meant if they bought enough they could effectively write off their current tax problem (though effectively defering it into future years as repayments fell due on the principal and interest, although some schemes allowed for some or all of the principle to be repayed at term).
They could also further borrow in some cases to meet ongoing management fees. (also tax deductible).
Many of these people will be early casualties of the jobs downturn.
As far as an investment goes, well I have seen schemes were the effective fees whern properly calculated could amount to as much as 70% of the principle invested! What rate do you need to be earning in those just to get the capital back?
GTP set the mark recently by using shareholder funds to top up several of their early bluegum scheme returns - but what choice did they have? Clearly the smell of burnt investors wasn't exactly going to encourage new investors to follow them in no matter what spin about 'early varieties', and' new more efficent land selection and viticulture processes' the management spun.
With regard TIM's ability to go corporate farming - don't hold your breathe. Just watch PAG if you want to see how the good operators are going and without the benefit of MIS behind which TIM could hide its gold plated expenditure on both management and the projects then there is little or no hope of TIM entering that space.
The risk would also be devolving from the MIS unit holders to te corporate entity.
Many forget that operational risk all sat with the investors up until now. That time is over - were TIM to go corporate farming you can bet these days that no investor would go near it less TIM was wearing the risk.
Game over.
Personal opinion of course but please feel free to disagree.
TIM Price at posting:
17.5¢ Sentiment: LT Sell Disclosure: Not Held
