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<pre>IRR means 'Internal Rate of Return' which is the actual economic return
earned by an investment over its useful life. This is obtained from
calculations including the NPV 'Net Present Value'. No, I havent the
foggiest what it all means but I bet somewhere there are the words
'based on current market trends' or 'based on data supplied' etc. Its
like another olive coy stating 'projected rate of return 25.6% p.a.',
maybe before management fees are taken out & also including 90% tax
deduction.

I do know of one of my suppliers who is in the trucking industry telling
me that his accountant has invested in his own olive farm by the
Hawkesbury River in Sydney. Definitely the wrong place etc. Who's going
to do his farm work? Maybe he read the 'low maintenance/dual purpose/oil
strike' spiel! Accountants are notorious for being good at reducing
your tax liability but being less than good as investment advisors.

Roger Farquhar

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<pre>Brian,
I am sure that what you say is correct but I dont think it is
particularly relevant to these large tax driven companies. Production of
olive oil is a side issue, the main source of income is from investment
ie they harvest the investor. How else could you return over 25% pa from
day one?

Roger Farquhar

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<pre>Happy New Year!!!

In California, we have limited partnerships. The General partner is often a
"company" and the Limited partners are the "investors". It used to be that
many of these were tax driven (still so to some extent). I'm sure the adage
that evolved from many of those limited partnerships will apply "down under"
to the olive oil business - "in the beginning, the general partner has all
of the knowledge and the limited partners have all of the money. In the end,
the limited partners have all of the knowledge and the general partner has
all of the money."

Steve Sibbett
U.C. Farm Advisor
Phone - office 559.733.6486
Mobil 559.280.0666
FAX 559.734.2708

-----Original Message-----
From: Roger Farquhar [mailto:rogfarlandsc@ozemail.com.au]
Sent: Friday, December 29, 2000 10:32 AM
To: OliveOil@egroups.com
Subject: [OliveOil] re: investment in Australian Olives


Brian,
I am sure that what you say is correct but I dont think it is
particularly relevant to these large tax driven companies. Production of
olive oil is a side issue, the main source of income is from investment
ie they harvest the investor. How else could you return over 25% pa from
day one?

Roger Farquhar

[Non-text portions of this message have been removed]



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<pre>I was not seeking help on IRR although thanks for those who
explained it as Internal Rate of Return but a rather more subtle point.
The oil yield is estimated at 1067 litre per ha at maturity. This is at
22% of fresh yield. They go on to say a 5% reduction in oil yield would
reduce the IRR from 6 to 4% As an oil yield of 20% seems more
realisitic this would I assume be a 10% reduction in the oil yield and
hence a reduction in the IRR to 2%. Add to this the normal variability
of 5% in oil yields from one year to the next and some years the return
on the project will be well and truely negative.

Cheers Brian Chatterton
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