MANAGED investment schemes have gone into meltdown as the financial crisis, drought and poor returns bite.

MIS giant Timbercorp is looking to sell 40,000ha of plantation timber, 2700ha of olive groves, and 380ha of almond plantations, along with 18,000 megalitres of water.

The sale follows a $19 million loss the company sustained on table grapes earlier this year.

Timbercorp intends to withdraw from MIS projects next year, but has left its options open for 2010.

Timbercorp shares are just one cent above their all-time low, while MIS rival Great Southern's shares have slumped from $1.50 in May to 19c.

The receivers are already carving up the remains of MIS operator Environinvest, also known as Primary Yield.

But while Timbercorp and Great Southern are blaming the financial crisis for their woes, the whole sector is struggling, with growing investor anger at poor returns and ever-rising costs.

One industry analyst said some investors had simply had enough, rescinding ownership of their trees and leaving the MIS operator to cover the ongoing costs.

"They get sick of throwing good money after bad," the source said.

"With almonds it's the cost of water, with trees (blue-gum plantations) it's poor yields."

MIS operator Great Southern forecast yields of 250 cubic metres a hectare in its offers to investors during the past decade.

But recent announcements to the Australian Stock Exchange show those yields have slumped to 135-160 cubic metres a hectare.

Tasmanian accountant John Lawrence, who has analysed Great Southern's financial reports, said woodlots that cost investors $3000 in 1998 were now worth just $2576.

Great Southern's preliminary annual report, released this week, shows it has been forced to write off $57 million in bad debt and is desperate for cash.

The company is now trying to convince investors to hand over ownership of their trees in six forestry and two cattle projects in return for Great Southern shares.

The deal, called Project Transform, will give Great Southern access to much-needed income from the harvested timber to keep afloat.

But investors will have to swap their woodlots for shares valued at 50 cents each, when the current ASX price is a mere 19 cents.

Great Southern spokesman David Ikin said the price had to be high enough to gain the approval of existing shareholders.

He said the company had independent advice that if all eight projects were converted into shares the price would climb back up to 73 cents.

Great Southern's annual report warns: "If Project Transform does not result in a successful outcome or should the 2009 MIS sales result be low, or the sale of assets not proceed, then there is significant uncertainty whether the Group will continue as a going concern."

Timbercorp has issued a similar warning stating that if the sales and debt reduction do not proceed as planned, there is "material uncertainty in relation to the group continuing as a going concern".

This would force Timbercorp to renegotiate with financiers or pursue alternative funding, the report said.

Timbercorp spokesman Matt Trewin said the company was simply "retiring some debt" in order to be "financially prudent" in the economic climate.

Timbercorp plans to sell the land and water on the agreement it remains the manager of the trees, continues to be the harvester of the pulp, continues to manage the almonds and Boundary Bend continues to manage the olives.

Profit would be lower next year due to the absence of MIS income, but would increase as Timbercorp's plantation timber and olive groves came to maturity, Mr Trewin said.

But economist and chairman of Sustainable Agricultural Communities Australia Rob Belcher cast doubt on the idea Timbercorp's plantation timber would be lucrative for the company - he said the world was "already awash" with timber for pulp, adding the financial crisis would likely see demand for paper drop.

"Why is there still an MIS 2020 vision for timber when the 2008 vision is looking so grim?" Mr Belcher asked.

Valuer and accountant Sam Paton said more than $6 billion of tax payers' money had been diverted into the MIS sector in the past decade.

"Yet there have been no audits by government on whether the trees are being grown in the right areas, or on yields and an industry business review," Mr Paton said.