Capital Raising, page-63

MIS gowers do have the choice to take delivery of their trees after harvest. But that is simply not practical for the volumes involved. So the MIS growers will use TFC to manage the marketing and sale process. The MIS owned trees are sold through an auction. TFC can purchase through the auction and have done so in the last 2 auctions.

TFC earns fees to harvest, market and sell the MIS growers trees. TFC also benefits from the higher price of its global holdings if it has to bid a higher price at the auction for the smaller quantity of MIS gowers trees.

I believe the motivation for TFC to buy MIS grower's trees are to take advantage of the increase from $US2,800 per kg (book value) to $US4,500 per kg (market price). Also to earn the 12 to 14% from the DCF discount rate. Today's ASX announcement states an IRR of 37% for the buy back.

I also suspect the auditor will require TFC to increase the price used to value TFC's holdings in the FY2016 accounts. So this is probably the last opportunity to purchase MIS's trees at the $US2,800 per kg valuation.

So which MIS growers would sell under this arrangement? I suspect the distressed and the uninformed. Also, some may wish to smooth their taxable income over two financial years.