The valuation of the MIS lots are the same as TFC uses for its...

The valuation of the MIS lots are the same as TFC uses for its own holdings. It is based on the survival rate, the oil yield per tree, $US2,800 per kg of oil and a discount rate of 12 to 14%. The early MIS failures of the first 2 or 3 year of plantings were compensated. (I can't remember, either the higher selling price of the oil or some gifted trees to make up the PDS projected return). TFC learned that some trees were not good hosts for the sandalwood and stopped using them. They also improved their horticulture practices based on learnings. So after that initial period the survival rates have been steadily improving. Thankfully, my 2008 investment has survival of 80%.

The MIS growers have an option to not pay their annual grower fees in exchange for reduced ownership. I believe this is materially financially inferior to paying your fees.

To me, the real issue is that TFC is buying the MIS lots at $US2,800 per kg when the market price is $US4,350 to $US4,500 per kg. Furthermore, the value is discounted at 12 to 14% (depending on time to harvest). TFC will reap the benefit of the higher selling price of the oil plus earn the 12 to 14% per year to harvest.

While this is attractive, I do not believe this is the major part of TFC's business. I believe it will add a little cream to the more material parts that will bring home the bacon.