Annual report pursuant to section 13 and 15(d)

Investment In Magnolia Fund

Investment In Magnolia Fund
12 Months Ended
Sep. 30, 2011
Investment In Magnolia Fund [Abstract]  
Investment In Magnolia Fund

Note 6. Investment in Magnolia Fund

In May 2010, Alico invested $12.2 million to obtain a 39% limited partner equity interest in Magnolia TC 2, LLC ("Magnolia") a Florida limited liability company whose primary business activity is acquiring tax certificates issued by various counties in the State of Florida on properties which have property tax delinquencies. In Florida, such certificates are sold at general auction based on a bid interest rate. If the property owner does not redeem such certificate within two years, which requires the payment of delinquent taxes plus the bid interest, a tax deed can be obtained by the winning bidder who can then force an auctioned sale of the property. Tax certificates hold a first priority lien position.

Revenue is recognized by Magnolia when the interest obligation under the tax certificates it holds becomes a fixed amount. In order to redeem a tax certificate in Florida, a minimum of 5% of the face amount of the certificate (delinquent taxes) must be paid to the certificate holder regardless of the amount of time the certificate has been outstanding. Magnolia recognized the minimum 5% earnings on its tax certificate portfolio in fiscal 2010. Expenses of Magnolia include an acquisition fee of 1%, interest expense, a monthly management fee and other administrative costs.

The investment in Magnolia is accounted for in accordance with the equity method of accounting, whereby the Company records its 39% interest in the reported income or loss of the fund each quarter. Based on the September 30, 2011, unaudited internal financial statements of Magnolia, Alico recorded net investment income of $68 thousand for the year ended September 30, 2011, as compared with investment income of $549 thousand for the year ended September 30, 2010. Magnolia made certain distributions during the year ended September 30, 2011; the Company's share of those distributions was approximately $ 2.5 million.