Monday 21 December 2009

First Timbercorp Distribution Received

I just noticed that the liquidators of Timbercorp had deposited $4,803 into my credit union account on Friday. Looking at the KordaMentha (liquidators) website I learned that this was payment of the 1st distribution ($1,601 per Lot) to be made in relation to the sale proceeds received by KordaMentha for the Grower Investors' trees (sold on 30 September). A final distribution (expected to be $543 per Lot) is due to be made in the first quarter of 2010. This means that the total amount of income generated by my Timbercorp investment will be around $6,432. My total investment was an initial up-front payment of around $10,500 in 1999 plus approx. $9,000 spent on annual insurance, land rental and management fees since 1999 -- adding up to around $19,500 (not adjusted for inflation). The distribution is therefore around 35c in the dollar, or around 10c in the dollar if you adjust for inflation and opportunity cost. I had hoped the sale proceeds would result in a larger payout to the 1999 Investors, as the amount was supposed to be proportional to the value (age) of the trees), but a plot of total distribution vs. year of investment shows that the payout amount doesn't correlate to the age of the trees as much as I had expected (as usual I seemed to have managed to pick the worst possible year to invest in a 'dud' investment).

While the basic idea of diversifying my investment portfolio into agribusiness investments was sound, it turned out that this investment was driven mostly by the up-front tax deduction available to investors, and suffered from huge management and promotion costs (IE. fees and bonuses paid to financial advisers) that were more in line with life insurance products than your typical investment fund.

One consolation is that I wouldn't have done especially well investing in a listed agribusiness company such as Wesfarmers, and would have done almost as badly if I'd put my money into a supposedly 'safe' agribusiness such as the Australian Wheat Board. And I could have lost even more if I'd invested the money in a company in 1999 (unless I'd picked Google or one of the other exceptions).

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1 comment:

Unknown said...

I'm feeling even more bummed.... I had a loan of $2850 for each of the lots in the 1999 rotation... and as we are only getting 1601 + a max of 503, I can expect a bill!

That really sucks... but I guess I will never be trusting financial advisors again. More interested in fees and kickbacks than in actually giving me sound advice.