product disclosure statement/prospectusas the root system on the trees expand, so the fungus...

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P R O D U C T R U L I N G OAK VALLEY TRUFFLE PROJECT ARSN 118 783 243 WATERSHED PREMIUM WINES LTD – RESPONSIBLE ENTITY ACN 089 812 591 AFSL 296166 TRUFFLE PROPERTIES LIMITED ACN 116 228 114 PRODUCT DISCLOSURE STATEMENT/PROSPECTUS O AK V ALLEY T RUFFLE P ROJECT O AK V ALLEY T RUFFLE P ROJECT

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Page 1: PRODUCT DISCLOSURE STATEMENT/PROSPECTUSAs the root system on the trees expand, so the fungus develops in symbiotic ... Terms Payment Option. Refer to page 10. ... from the mycelium,

P

RO D U C

T

RU L I N

G

OAK VALLEY TRUFFLE PROJECT ARSN 118 783 243

WATERSHED PREMIUM WINES LTD – RESPONSIBLE ENTITY ACN 089 812 591 AFSL 296166

TRUFFLE PROPERTIES LIMITED ACN 116 228 114

P R O D U C T D I S C L O S U R E S T A T E M E N T / P R O S P E C T U S

O A K V A L L E Y

T R U F F L E P R O J E C T

O A K V A L L E Y

T R U F F L E P R O J E C T

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Responsible Entity

Watershed Premium Wines Ltd

ACN 089 812 591

Cnr Bussell Highway & Darch Road

Margaret River WA 6285

Directors of Responsible Entity

Geoffrey Thomas Barrett (Managing Director)

Dr Richard Hill (Chair)

Laurence Factor

Peter Charles Sartori

Phillip Henry Dale Fletcher

Manager

Truffle Projects Pty Ltd

ACN 116 228 105

c/- Thomson Fisher & Co

Level 2, 677 Murray Street

West Perth WA 6005

Directors of Truffle Projects Pty Ltd

Walter John Edwards (Managing Director)

Geoffrey Thomas Barrett (Chair)

Dr Nicholas Malajczuk

Truffle Properties Limited

ACN 116 228 114

c/- Thomson Fisher & Co

Level 2, 677 Murray Street

West Perth WA 6005

Directors of Truffle Properties Limited

Walter John Edwards (Managing Director)

Geoffrey Thomas Barrett (Chair)

Dr Nicholas Malajczuk

Project, Watershed Premium Wines Ltd and Truffle

Properties Limited Auditors

RSM Bird Cameron Partners

8 St George’s Terrace

Perth WA 6000

Independent Accountants

RSM Bird Cameron Corporate Pty Ltd

8 St George’s Terrace

Perth WA 6000

Truffle Consultant

Treetec Consulting Pty Ltd

ACN 077 935 203

c/- Thomson Fisher & Co

Level 2, 677 Murray Street

West Perth WA 6005

C O R P O R A T E D I R E C T O R Y

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1

RISKS OF THE INVESTMENT 18

INDEPENDENT EXPERT’S REPORT 21

INDEPENDENT ACCOUNTANT’S REPORT 30

RESPONSIBLE ENTITY AND PROJECT FEES 38

RESPONSIBLE ENTITY 39

COMPLIANCE PLAN 40

DISPUTES RESOLUTION AND COMPLAINTS

HANDLING PROCEDURE 41

MATERIAL CONTRACT DETAILS 42

GLOSSARY OF TERMS 49

ADDITIONAL INFORMATION 52

INSTRUCTIONS FOR LODGEMENT 54

APPLICATION FORM 55

C O N T E N T S

IMPORTANT NOTICE This PDS/Prospectus was lodged with the Australian Securities and Investments Commission (ASIC)

on 24 March 2006 and is both a product disclosure statement under Part 7.9 of the Corporations Act (in relation to the offer

of Trufferies) and a prospectus under Part 6D.2 of the Corporations Act (in relation to the offer of Land Shares). The date of

this PDS/Prospectus is 24 March 2006. Neither ASIC, nor any of its officers, takes any responsibility for the contents of this

PDS/Prospectus. No Land Shares will be allotted or issued on the basis of this PDS/Prospectus later than 23 April 2007.

Participation in the Oak Valley Truffle Project is considered to be speculative. Before deciding to apply for Trufferies and Land

Shares, Applicants should read the entire PDS/Prospectus and seek professional advice that an investment of this type is

appropriate for their particular circumstances.

Neither the Responsible Entity, Truffle Properties Limited nor any other person, firm or corporation associated with this

PDS/Prospectus, guarantees, warrants or underwrites the performance of the Oak Valley Truffle Project or any particular

income or return from the Project.

INTRODUCTION 2

INVESTMENT HIGHLIGHTS 3

ABOUT TRUFFLES 4

MANJIMUP TRUFFLES 6

TRUFFLE INDUSTRY 7

LAND DESCRIPTION 8

RESEARCH & DEVELOPMENT 9

TERMS PAYMENT OPTION 10

DIRECTORS OF THE MANAGER 11

DIRECTORS OF TRUFFLE PROPERTIES LIMITED 11

DIRECTORS OF THE RESPONSIBLE ENTITY 11

FINANCIAL INFORMATION 13

TRUFFLE PROPERTIES LIMITED 14

OFFER DETAILS 15

HOW TO APPLY 16

PROJECT STRUCTURE 17

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2

I N T R O D U C T I O N

This offer invites investors to participate in the planting of 74.8 hectares of oak and hazelnut trees, inoculated with French

Truffle (Tuber melanosporum), at Manjimup in Western Australia,.

The oak and hazelnut trees, to be planted in June 2006, will be fully irrigated and will be cultivated over a number of years

under specific conditions as they grow and mature. As the root system on the trees expand, so the fungus develops in symbiotic

harmony. Eventually the tree and fungus reach a “critical mass” and the “mature” fungus creates fruit bodies; these are the

highly sought after Truffle.

The Oak Valley Trufferie (plantation) will be undertaken on land situated on Seven Day Road, Manjimup. This location is

approximately two kilometres from the Hazel Hill Trufferie. The planting of the Hazel Hill Trufferie was undertaken in 1997

and 1998 and comprises twenty-one hectares of Truffle inoculated oak and hazelnut trees.

Dr Nicholas Malajczuk is the scientific expert who was responsible for establishing the Hazel Hill Trufferie. He is a former

CSIRO scientist with more than twenty-five years experience in studying fungi, including the black truffle fungus.

Wally Edwards has been the Managing Director of Hazel Hill Pty Ltd since its inception.

The Hazel Hill Trufferie has provided an excellent opportunity to continue a scientific study of the truffle fungus with

particular emphasis on studying the commercial production factors and issues. The plantings at Hazel Hill are large enough to

facilitate large scale research.

This is a fully integrated investment opportunity, giving investors participation in the production and sale of Truffles and

ownership in the Land owning entity. Based upon the extensive research that has been undertaken at the Hazel Hill Trufferie

over the past nine years, and the resultant Truffle production, I view the Oak Valley Truffle Project with pride and hold

tremendous enthusiasm for its future. I invite and welcome your participation in this exciting venture.

Yours sincerely

Geoff Barrett

Managing Director, Watershed Premium Wines Ltd (issuer of the Trufferies)

Chairman, Truffle Properties Limited (issuer of the Land Shares)

This is a fully integrated Truffle

investment opportunity in

Manjimup, Western Australia,

providing investors with land

ownership and participation in all

aspects of Truffle production and sale.

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I N V E S T M E N T H I G H L I G H T S

3

A P P L I C A T I O N P R I C E

The Application Money per Investment Parcel, including

GST, is:

Truffle Producer – Management Fees & Rent $9,433.60

Shares – 3,508 shares in Truffle PropertiesLimited at $2 per share $7,016.00

Total Application Price $16,449.60

The number of Investment Parcels on offer is 374.

F I X E D M A N A G E M E N T F E E S

F O R I N I T I A L P E R I O D A N D

Y E A R S 1 – 3

The Management Fees, including GST, for the Initial Period,

Year 1, Year 2 and Year 3 are fixed and are set out below.

Initial Period Year 1 Year 2 Year 3

$8,800 $6,600 $4,180 $2,640

F L E X I B L E I N V E S T M E N T

O P T I O N S

Investors have the choice of either paying cash, obtaining

third party finance or applying, where applicable, for the

Terms Payment Option. Refer to page 10.

I N V I T A T I O N T O B E C O M E A

T R U F F L E P R O D U C E R

By investing in the Oak Valley Truffle Project investors

become truffle producers in one of the world’s most suitable

regions for the production of truffles. Truffles will be

cultivated and harvested and then sold on your behalf by an

experienced team of sales and marketing professionals.

I N V I T A T I O N T O O W N

S H A R E S I N A T R U F F E R I E

Investment also entitles you to hold shares in Truffle

Properties Limited which owns the land on which the

Trufferies are to be established. It is forecast that Truffle

Properties Limited will pay a dividend in Year 1 of the Oak

Valley Truffle Project.

These Land Shares can be held by any entity and may differ

from the investor who produces the Truffles.

A T A X E F F E C T I V E T R U F F L E

I N V E S T M E N T

The initial investment to become a truffle producer, and

future annual management fees and rent, are tax deductible

and have the additional security of an Australian Taxation

Office Product Ruling.

Truffle Projects Pty Ltd director and Truffle expert, Dr Nick Malajczuk, strolling through the Hazel Hill Trufferie with two of his trained Trufflesniffing dogs

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4

The truffle is an edible fungus that grows underground

through a symbiotic relationship with the roots of specific

host trees. When the tree and the fungal filaments reach

maturity, usually after about five years, the fruiting body or

truffle is produced and occurs seasonally thereafter.

Truffles have always existed in their natural habitat in

Europe and are highly-prized. The Greeks and Romans

attributed them as having healing and aphrodisiac powers,

while today they are regarded as the pinnacle of haute

cuisine and are revered by gourmons worldwide.

Truffles can be described as ‘gourmet mushrooms’. They have

a pungent, intense, earthy fragrance and lend a unique

flavour to food. They occur naturally, mainly in France and

Italy, and are sometimes referred to as ‘black gold’ or ‘black

diamonds’ because of their scarcity and worth.

Fresh truffles are available in Europe between December and

February, and the Western Australian production season is

the opposite of the European season offering marketing and

exporting opportunities. The gourmet’s dream of extended

availability of fresh truffle is now a reality.

T R U F F L E G R O W T H

C O N D I T I O N S

In contrast to most edible fungi in the market place, the

truffle fungus grows completely underground, developing

from the mycelium, a network of filaments invisible to the

naked eye. The truffle fungus represents a mushroom that

develops underground. It lives symbiotically in association

with roots of trees, nourishing its tree partner with

minerals, such as phosphorus, while receiving organic

substances such as sugars in return. Only hazelnut and some

oak trees can support the black truffle, which in turn has

limited their distribution to the natural occurrence of the

species to areas of southern Europe. Black truffles grow in

soil that is shallow and free draining. The climate must have

distinct seasons, hot in summer and cold in winter. Only

when these conditions are met will the black truffle grow

and produce its subterranean mushrooms. The French black

Truffle occurs naturally on calcareous soils in France and

limited occurrences in Italy, Spain and Portugal at an

elevation of 100 to 1000 metres between latitude 40°N and

47°N.

T R U F F L E C U L T I V A T I O N

Truffle consumption has been part of French culture since the

middle ages. The folklore of their formation had been

attributed to claps of thunder and to theories not far from the

realm of fairy tales. This contributed to a limited scientific

knowledge on truffle formation until recent times. In fact,

harvest from natural forests had provided the bulk of

production in the nineteenth and early twentieth centuries.

Production estimates of 2000 tonnes per annum have been

made. For this reason, there was limited opportunity for

peasants who were content with the natural harvest of the

truffles to understand truffle production. The two World Wars

destroyed much of the collecting grounds and vegetation

supporting truffles. This resulted in the collapse of the truffle

industry in the 1930’s. Now typically between 50 and 100

tonnes are harvested each year. In 1984, because of the

extremely dry summer, only 10 tonnes were produced. The

decline in truffle production has continued in the twenty-first

century. The reported harvest in 2004 was 8 tonnes.

In the past two decades, knowledge in the cultivation of the

black truffle has resulted in the establishment of artificial

trufferies throughout France and countries in the

Mediterranean. The first artificial trufferie was established in

south western France with transplanted oak seedlings raised

from the base of trees where truffles had been collected in

the past. However, this hit-miss system has now been largely

replaced by raising infected seedlings in controlled

conditions in glasshouses by companies such as Agri-Turf in

France. Understanding the factors leading to the successful

production of truffles under hazel and oak trees has been a

focus of research which led to the successful establishment of

truffieres in countries other than France.

In the northern hemishere including France and Italy many

of the newly established trufferies have been invaded by

other naturally occuring truffle species (there are over 70

different species found in Europe). In the southern

A B O U T T R U F F L E S

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5

Hemisphere there are no commercial truffle species found

naturally. Consequently, monocultures of selected truffles

species can be established.

In 1991, the first black truffles were produced outside

Europe when oak trees inoculated with truffle spores

produced their first crop in Oregon, USA. A 70 hectare

trufferie was established in Texas in 1991. In 1984 the Crop

and Food Research Organisation in New Zealand

commenced work to establish artificial trufferies. The winter

of 1993 saw the first production of commercial truffles in

New Zealand confirming the feasibility of producing them in

the southern Hemisphere. Dr Nicholas Malajczuk

subsequently assisted a private company to establish a

number of small trufferies in Tasmania in 1994. The first

black truffle grown in Australia was dug up in June 1999. It

weighed 125gms. Since this time actual production from

Tasmania is not accurately known. Market intelligence

suggests production quantities have increased spasmodically.

Dr Nick Malajczuk holding the 1kg Truffle that was produced at Hazel Hill in June 2005

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6

Hazel Hill established a twenty-one hectare trufferie in

Manjimup, Western Australia in 1997.

Dr Nick Malajczuk, a former CSIRO research scientist, was

the driving force behind the establishment of this trufferie.

Dr Malajczuk selected Manjimup because of its ideal

summer/winter temperature profile using climate matching

data of truffle producing areas in France. He believed that

hotter summers and mild winters were required for optimum

production.

Over the last three years, the Hazel Hill Trufferie has

produced increasing amounts of truffle. The 2005 harvest

was particularly exciting with the harvest volume increasing

exponentially over the past three years. The most significant

aspects of the harvest were the size of the truffles found and

M A N J I M U P T R U F F L E S

Trained dog sniffing for Truffles at Hazel Hill Truffle being harvested at Hazel Hill in 2005

where they were discovered. The largest truffle found

weighed in at over one kilogram. Also a number of other

truffles were found weighing between three hundred and six

hundred grams. The key factor in producing truffles of this

size and quality has been a specific management treatment to

the areas where these truffles grew.

Truffle Projects Pty Ltd has negotiated with Hazel Hill and

has contracted Dr Nick Malajczuk to provide technical

services and be intimately involved in the Oak Valley Truffle

Project.

The property to be used for this Project is situated in the

same valley, approximately two kilometres west along Seven

Day Road from the Hazel Hill property.

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7

T R U F F L E I N D U S T R Y

Restaurateur and chef of the highly acclaimed Loose Box restaurant, Alain Fabregues, sniffing for Truffles at Hazel Hill in 2005

The Manager believes that the time is right to expand the

plantings of Truffle producing plantations based on the

results being achieved at Hazel Hill and the diminishing

world supply of truffles.

The world market and demand for truffles is huge. World

supply from native areas has steadily declined since World

War II from around one-thousand tonnes to a reported eight

tonnes in 2004.

Traditionally, very little research or science has been applied

to truffle production in Europe. Production is typically from

small scale farmers who take a very “traditional” approach to

the art of production.

The spectacular growth rates being achieved in trial areas at

the Hazel Hill property give enormous encouragement that

commercial truffle production is a reality.

The product is high value and has a fresh shelf life of

approximately four weeks. Air-freight transport is very cost

effective and efficient. The product can also be tinned and

bottled. Second and third class product can also be made in

processed products such as salsas with a considerable increase

in value.

Truffle Projects Pty Ltd have an agreement with Hazel Hill

that will allow a complete and open transfer of information

and knowledge. Dr Nick Malajczuk will continue to consult

to Hazel Hill and continue to expand on his research into

the commercialisation of truffle production. All information

gained at Hazel Hill is available to Truffle Projects Pty Ltd

and will be implemented at the Oak Valley Trufferies.

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L A N D D E S C R I P T I O N

8

The Oak Valley property is situated some ten kilometres

south-west of the Manjimup town site on the corner of

Seven Day Road and Appadene Road.

The property consists of two lots of land, Lot 102 on the

west side of Appadene Road of 86.2 hectares and Lot 11

located on the east side of Appadene Road is 41.8 hectares.

The property currently has eighty-eight hectares of cleared

land with the remaining forty hectares being regrowth karri,

marri, black butt and jarrah forest. The property adjoins

state forest. An application has been made to clear another

twenty hectares of the regrowth forest. This is allowed under

current guidelines and approval is expected.

The property has a one-hundred & fifty mega-litre dam that

is fed from a stream that comes directly from the state forest.

It is also fed by a number of springs on the property. The

water is pristine in quality with no salt.

The 1 kg Truffle harvested at Hazel Hill in June 2005. In thebackground, L-R, Dr Nick Malajczuk, Wally Edwards and AlainFabregues.

Dwelling which is constructed on Lot 102, which will be used as the headquarters for the Manager and will house the laboratory

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9

R E S E A R C H & D E V E L O P M E N T

truffles of this size or quality in all the years I have used

them in France or Australia. They are perfect in terms of

texture and odour”. Alain Fabregues went on to say that he

believes the establishment of a successful truffle production

industry will put Australia on the gourmet map.

Management trials will continue to be expanded on the

Hazel Hill property. In fact, plans are now being made to

further increase the R&D effort on the property with the

full-time employment of the student who has been

conducting his PhD research under Dr Malajczuk.

Truffle Projects Pty Ltd has an agreement to share in all

technology that is developed by Dr Malajczuk at the Hazel

Hill trufferie.

It has taken decades of research to begin to bridge the

shortfall in scientific knowledge in truffle cultivation. The

key focus of this research is finding and understanding the

factors that stimulate the production of fruiting bodies. This

is the absolute key to achieve commercial production and

hence greater economic return.

We are aware that successful production of truffles depends

on suitable climatic and soil conditions. The climatic

conditions have been thoroughly researched and the

Manjimup/Pemberton region of Western Australia is ideal.

Soil conditions in this (and most other regions of Australia)

require a significant shift in pH to alkaline conditions to

provide an ideal truffle growing environment.

Hazel Hill has embarked on an extended program of research

and development over the nine years the trufferie has been

established. During the life of that project, Dr Nicholas

Malajczuk has conducted extensive research into various

factors he believes are critical to understanding what makes

truffles grow.

During this period, Dr Malajczuk has supervised Honours

and PhD student projects that have been sponsored by Hazel

Hill through Murdoch University where Dr Malajczuk has

been appointed an Adjunct Associate Professor. Recently he

was appointed Adjunct Professor of Natural Reseources,

Notre Dame Univerity of Australia. Also, Dr Malajczuk has

continued his own scientific trials to achieve greater

understanding of key factors to enhance the amount and size

of truffles within the Hazel Hill trufferie.

Over the 2005 season, some significant breakthroughs were

made that have created great excitement in the truffle

industry world-wide. In certain locations where Dr

Malajczuk has been conducting different management trials,

some very large truffles were located. The largest was a giant

truffle that weighed more than one kilogram. However,

many more were found weighing between three hundred and

six hundred grams. Not only were these truffles very large,

but they were of absolute top quality.

French Chef Alain Fabregues (MOF) has described these

truffles as “the best I have ever seen. I have never seen The 1 kg Truffle harvested at Hazel Hill in June 2005

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10

Cash/ Finance

The total Application Money per Investment Parcel is

$16,449.60 payable for Investors who invest on or before 31

May 2006 as detailed below:

• $7,016 for the 3,508 Land Shares issued at $2.00

each; plus

• $9,433.60 (including $857.60 GST) for Initial

Management Fees and Rent.

Terms Payment Options

Any Investor who wishes to apply to pay their

Application Money using the Terms Payment Option

described below, must complete the Terms Application

Form contained within this PDS/Prospectus. Acceptance

of the Investor’s Terms Application is conditional upon

the Responsible Entity’s acceptance of the Investor’s

Terms Application before the end of the relevant financial

year.

Terms Payment Option – 1 Year

Upon Application – deposit of $9,016 ($2,000 per Trufferie

and $7,016 for the 3,508 Land Shares)

Monthly instalments – 12 equal monthly payments of

$664.00 per Trufferie (includes interest at 11.5% per

annum)

The 12 monthly instalments cover the balance of the

Application Money per Investment Parcel, interest and a

terms application fee of $50 per Trufferie (inc GST). Stamp

duty may also be payable.

Management Fees and Rent (inc GST) $9,433.60

Land Shares 3,508 x $2.00 $7,016.00

Terms Application Fee (inc GST) $50.00___________

$16,499.60

Less Deposit & Land Shares $9,016.00___________

Terms Amount $7,483.60___________

I N V E S T M E N T F L E X I B I L I T Y

The offer of Land Shares is a distinct and separate offer from

the offer of Trufferies in the Oak Valley Truffle Project.

Hence, the Land Shares can be held in a different name from

the Trufferie owner. Once allotted, the Investment Parcel is

not stapled, so you are able to transfer the Land Shares

separately. It should be noted that while the offer of Land

Shares represents a distinct and separate offer from the offer

of Trufferies they each form an integral part of the

Investment Parcel and therefore cannot be accepted in

isolation.

This is only a summary of the Offer. Prospective investors

should read the whole of this PDS/Prospectus.

T E R M S P A Y M E N T O P T I O N

Dr Nick Malajczuk inspecting a freshly harvested Truffle at HazelHill in 2005

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11

Wally Edwards B.E. M.I.E. (Aust)

Wally Edwards is the Managing Director of Truffle Projects

Pty Ltd and Truffle Properties Limited. He is a civil engineer

and registered builder who has specialised in the field of

irrigation products and systems. Wally has considerable

project management expertise in plantation forestry,

construction and civil engineering projects. Wally has been

the Managing Director of Hazel Hill Pty Ltd since its

inception in 1997. Wally has been an executive member of

the Western Australia Cricket Association (WACA) since

1987, is currently Senior Vice President of the WACA and

was granted life membership in 2003. Wally has also been a

director of Cricket Australia Limited (formerly Australian

Cricket Board) since 1996.

Dr Nicholas Malajczuk B. Sc (Hons) (Forestry) Doctorate

Philosophy

Dr Nicholas Malajczuk is a research scientist who has

worked for CSIRO Forestry and Forest Products for the past

twent five years. He has collaborated and worked in the USA

and France in symbiotic fungi (including Truffles) associated

with forest trees and has conducted research projects

throughout Australia and in the Philippines and China. Nick

is a world authority on edible fungi associated with tree

species as well as horticultural crops. He has published a

number of books on the manipulation of these benficial fingi

for increasing productivity of both trees and fungi. His

knowledge is unique in Australia and he has been intimately

involved in the setting up of the black truffle industry in

Tasmania. He has conducted research on the establishment

of the truffle fungus (Tuber melanosporum) on seedlings of

oak and hazelnut trees and he has supervised and conducted

research into different aspects of the physiology and growth

factors of the black truffle fungus at the Hazel Hill trufferie

over the past nine years.

Geoffrey Thomas Barrett LLB (Hons) B.Com

(Accounting)

Geoff Barrett is the Chair of Truffle Projects Pty Ltd,

Managing Director of the Responsible Entity and is also the

Chair of Truffle Properties Limited. Until 30 June 2002, he

was managing partner of the law firm Garton Smith & Barrett,

advising in relation to managed investments in forestry,

viticulture, wineries, truffles and manufacturing. Prior to

practicing law he had over 18 years experience in banking and

finance. He managed several major banking projects, including

the development and introduction of automated teller

machines. Geoff has previously lectured in International

Taxation Law, International Business Law and Contract Law

and tutored in Corporations Law at Curtin University.

Geoff was responsible for identifying and negotiating the

purchase of the land for all three stages of the Margaret

River Watershed Premium Wine Project, for assembling the

viticulture, winemaking, sales and management team, and

structuring the Watershed Project and its finances. Geoff has

overseen the development of the Margaret River Watershed

Premium Wine Project since its inception. Geoff was

appointed in December 2005 to the executive of the Curtin

University operated Muresk Institute, Western Australia’s

only agriculural college.

D I R E C T O R S O F T R U F F L E

P R O P E R T I E S L I M I T E D

All the persons described above as directors of the Manager

are also directors of Truffle Properties Limited.

D I R E C T O R S O F T H E

R E S P O N S I B L E E N T I T Y

Geoffrey Thomas Barrett LLB (Hons) B.Com

(Accounting)

See above.

Dr Richard Hill M.B. B.S. F.R.A.C.P. B.Com (Econ) Dip

Naut Sc

Dick Hill is the Chair of Watershed Premium Wines Ltd.

From 1981 until March 2002, Dick Hill was the Head of

Gastroenterology at Princess Margaret Hospital, Perth. He is

now a consultant gastroenterologist at Princess Margaret

Hospital and operates a private practice. His qualifications

include a Bachelor of Commerce (Econ) and he has

successfully built and managed a significant investment

portfolio. Dick has been actively involved in the Margaret

River Watershed Premium Wine Project since its inception.

D I R E C T O R S O F T H E M A N A G E R

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Laurence Factor B.Com (Accounting) Grad Dip (Business

Law) M.Com (Business Law) FCPA FCIS

Laurence has a diverse background as a practitioner in

accounting, company secretarialship, planning and

administration with listed companies and as an academic

specialising in corporate law and company secretarial

practice. He has spent approximately half his career in the

manufacturing and distribution industries and half in the

tertiary and professional training sector. He spent

approximately a decade with ASX listed

manufacturer/distributor McPherson’s Ltd based in

Melbourne where he became Group Manager Budgeting and

Planning before being appointed Administration Manager

for Western Australia.

Currently Laurence is a Senior Lecturer in the School of

Business Law at a Perth University. He is a State Councillor,

a past Chairperson of the Western Australian Branch of

Chartered Secretaries Australia (CSA) and a past director of

CICSA Ltd. He has been a member of the Western

Australian Regional Liaison Committee of the Australian

Securities and Investments Commission (ASIC) since 1994

and has been the Joint Chairman and corporate law

spokesperson for the WA Joint Legislation Review

Committee of CPA Australia and CSA. He has been actively

involved in the Margaret River Premium Wine Project since

its inception.

Peter Charles Sartori

Peter has over 20 year experience in retailing, and has in the

last ten years worked exclusively in the liquor industry. In

1993, Peter established and successfully ran his own

independent liquor store, which was sold in 1998. In 1998,

Peter commenced employment as the manager of Liquorama,

a West Australian based group of independent liquor stores.

His responsibilities included the direction of purchasing,

sales and administrative functions for the group.

In 2002, Peter was promoted to State Manager (WA) of

Liquor Services Group Ltd, following the amalgamation of

Liquorama into the national Liquor Services Group Ltd. His

duties encompassed all aspects of general management

including the development and implementation of marketing

strategies for liquor sales in the Giants Liquor Group in

Western Australia. With the recent sale of the Liquor

Services Group, Peter has been appointed WA Business

Manager of Independent Brands Australia. This group

includes all liquor stores operating under the Cellarbrations,

Cheers and Liquorforce banners.

Phillip Henry Dale Fletcher

Phil has been involved in the Australian Liquor Industry for

the past 40 years. He has successfully developed and

marketed wine brands both nationally and internationally.

His experience has been centred on the management of

marketing and sales disciplines driven by the priority to

return profits to stakeholders whilst building value in the

brands and corporate identities.

As an executive director of Amberley Estate Pty Ltd, a

company that he joined in 1990, he created and led the

development of the brands and company sales philosophies

until acquired by Vincor International in March 2004. Phil

was then given the task of integrating the Goundrey and

Amberley sales staff over the period April 2004 to 31 March

2005.

Vista through the rows of hazelnut and oak trees at Hazel Hill

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Management Fees

The Management Fees for the Initial Period, Year 1, Year 2

and Year 3 are fixed at $8,800, $6,600, $4,180 and $2,640

(including GST) per Trufferie. The Management Fees for the

Initial Period are payable on application and each subsequent

year in arrears on 1 June, with the Year 1 Management Fee

being due and payable on 1 June 2007.

Management Fees for Years 4-20 inclusive will increase

annually by either 3% or the Consumer Price Index,

whichever is the greater, refer to page 38, and are payable in

arrears on or before 1 June in each relevant year.

Rent

Rent is fixed for the Initial Period at $633.60 (including

GST) per Trufferie and will increase annually by either 3%

or the Consumer Price Index, whichever is the greater, refer

to page 44, and are payable in arrears on or before 1 June in

each relevant year.

Financial Forecast

It is the Responsible Entity’s opinion that it is important to

include in a PDS a financial forecast, over the life of the

Project, as it is information that may reasonably be expected

to have a material influence on the decision of a reasonable

investor to acquire the investment. The making of a

statement that contains a financial forecast must have

reasonable grounds or it will be misleading under section

728(2) of the Corporations Act. Mere statements by issuers

asserting reasonable grounds for the inclusion of

information, with no verifiable reasons to support such

statements, do not, by themselves, establish reasonable

grounds for prospective financial information. ASIC has set

out in Policy Statement 170 (‘PS 170’) a non-exhaustive list

of factors that may amount to reasonable grounds for stating

prospective financial information which includes, in

paragraph (18) (b):-

‘reliance upon an independent industry expert’s report

which:

(i) is included in the document containing the

prospective financial information;

(ii) sets out the assumptions underlying that

information; and

(iii) makes a positive statement that both the

prospective financial information and its

assumptions are reasonable’

The Independent Expert Report of the Truffle Consultant is

set out on pages 21 to 29

However, PS 170.29 states, among other things, that “ASIC

generally considers that prospective financial information for

a period of more than 2 years may require independent or

objectively verifiable sources of information to establish that

there are reasonable grounds to provide it.” However, an

expert’s report is unlikely to be of assistance in establishing

the existence of reasonable grounds for prospective financial

information where the facts that the expert has relied upon

are unverified or unverifiable.

Further, the longer the period the prospective financial

information relates to, the less likely it is that there are

reasonable grounds for stating it, as the grounds for longer

term prospective financial information become less

verifiable. Given the long term nature of the Project and PS

170, the Responsible Entity has elected not to include a

financial forecast in this PDS/Prospectus.

F I N A N C I A L I N F O R M A T I O N

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On 16 December 2005 Truffle Properties Limited entered

into a Contract of Sale with Daria Josephine Burnett.

Settlement was effected on 15 March 2006. The subject

land is Lot 102 on Deposited Plan 47397 and being the

whole of the land comprised in Certificate of Title

Volume 2616 Folio 415, such land comprising 86.2299

hectares in area and Lot 11 on Diagram 92046 and being

the whole of the land comprised in Certificate of Title

Volume 2156 Folio 98, such land comprising 41.801

hectares in area. The total purchase price for both

properties was $1,700,000.

The directors of Truffle Properties Limited believe that the

Land Share issue price of $2.00 per share is a fair price given

the purchase price and the capital infrastructure to be

constructed on the Land. Under this PDS/Prospectus

1,311,992 ordinary shares are being offered to investors at

an issue price of $2.00 each. In January 2006 1,250,000

ordinary shares were offered under an Offer Information

Statement at $1.00 each to meet the purchase price, plus

stamp duty of $85,500, before ANZ Bank finance of

$706,000. On maximum subscription there will be

2,561,995 ordinary shares on issue in Truffle Properties

Limited and the ANZ Bank finance will be repaid.

Aerial shot of Lots 102 and 11 which are highlighted in bold pink

T R U F F L E P R O P E R T I E S L I M I T E D

Manjimup Shire

Water Supply Dam

Lot 102

Lot 11

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The Responsible Entity and Truffle Properties Limited are

pleased to offer you an opportunity to invest in the truffle

industry.

The Offer under this PDS/Prospectus consists of two

components, Trufferies and Land Shares. For each Trufferie

applied for, an Applicant must also apply for 3,508 Land Shares.

Investors may hold the Trufferie and the Land Shares under

separate names. The two components of the Offer are:

1. To maintain and cultivate Truffle inoculated oak and

hazelnut trees on the Trufferies for the purpose of

harvesting Truffles for sale.

2. To purchase 3,508 Land Shares, at an issue price of

$2.00 per Land Share, for each Trufferie applied for.

T R U F F E R I E S

Upon being allotted a Trufferie, an Applicant will become a

Grower and a party to the Agreements described on pages 42

to 46.

The Land has been divided into 374 uniquely identifiable

Trufferies of 0.2 hectares each. The 374 Trufferies on offer

in this PDS/Prospectus will have approximately 50

hazelnut and 50 oak trees per Trufferie and these will be

planted by the Land Owner in the period 1 June 2006 to

15 June 2006.

W H A T I S T H E

A P P L I C A T I O N M O N E Y ?

The total amount payable per Investment Parcel by an

Applicant who pays cash and is allotted a Trufferie and

Land Shares on or before 31 May 2006 is $16,449.60.

Management Fee (including GST)payable on or before 31 May 2006 $8,800.00

Rent (including GST) payable on orbefore 31 May 2006 $ 633.60

3,508 Land Shares issued at$2.00 per share $ 7,016.00___________

$16,449.60______________________

Note – Management Fees and Rent for Year 1 are due and

payable in arrears on 1 June 2007

O F F E R D E T A I L S

View of the 150 mega litre dam on the Land

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Anyone wishing to be a Grower should complete the

Applications on pages 55 to 56.

Application terms are set out on page 57.

Note that your application is also an offer to be bound to

the Constitution and Rules, the Lease and the Project

Operations Agreement.

For each Trufferie applied for the Applicant must also apply

for 3,508 Land Shares at a cost of $2.00 per Land Share, the

whole of which is payable on Application.

D I F F E R E N T A P P L I C A N T S

The Land Shares may be applied for by the same party

applying for the Trufferie or by different parties. For

example, a self-managed superannuation fund might apply

for the Land Shares while the Applicant for the Trufferie

could be an individual.

All Application Money is payable to the Responsible Entity.

Payment must be made in Australian dollars. Applications

can only be made on the application form included in this

PDS/Prospectus.

T A X A T I O N I M P L I C A T I O N S

A Product Ruling has been issued by the Australian Taxation

Office for the Oak Valley Truffle Project. This Product

Ruling can be viewed at the web-site: http://law.ato.gov.au

G O O D S A N D S E R V I C E S T A X

If you are not registered for GST purposes, then any GST

paid in relation to Project Fees and Rent may represent a tax

deduction. If you are registered for GST purposes, then any

GST paid in relation to Project Fees and Rent may represent

a GST Input Tax Credit. It is recommended that you obtain

independent financial advice in relation to the GST to be

paid on Project Fees and Rent.

F I N A N C E

Applicants may choose to fund their investment themselves

or borrow all or part of the funds required to secure their

investment in the Project from third party financial

institutions. Applicants should seek their own independent

tax and financial advice.

T E R M S P A Y M E N T O P T I O N

Applicants may choose to invest by taking advantage of the

Terms Payment Option as described on page 10.

M I N I M U M S U B S C R I P T I O N

The minimum subscription under this PDS/Prospectus is 50

Trufferies.

O V E R S U B S C R I P T I O N S

There are no oversubscriptions offered under this

PDS/Prospectus.

H O W T O A P P L Y

Average size truffle harvested from Hazel Hill trufferie in 2005

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P R O J E C T S T R U C T U R E

W A T E R S H E DP R E M I U M W I N E S

L T DR e s p o n s i b l e E n t i t y

T R U F F L E P R O J E C T SP T Y L T DM a n a g e r

Sub-contracted by theResponsible Entity to maintain the Trufferies for the Grower,

cultivate and harvest the Truffles,market and sell the Truffles

G R O W E R

Leases Trufferies from TruffleProperties Limited and contractsthe Responsible Entity under theProject Operations Agreement tomaintain the Trufferies, cultivateand harvest the Truffles, market

and sell the Truffles

Receives the Receipts

T R U F F L E P R O P E R T I E SL I M I T E D

Installs irrigation system,purchases, inoculates and plants

oak & hazelnut trees & leasesTrufferies to Growers

Contracted to maintain the Trufferies for the Grower,

cultivate and harvestthe Truffles, market and sell

the Truffles

Agent for Grower

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As with any investment in agriculture, there are inherent

risks in primary production due to matters beyond the

control of the Responsible Entity. In addition the Project is

subject to the commercial risks of a long term venture. So

that Growers may be aware of those risks that may have a

material effect on an investment in this Project, they have

been detailed below. The Responsible Entity will continue to

use all the knowledge and experience available to them to

monitor the risks and implement all necessary procedures to

minimise their effect.

A G R I C U L T U R A L R I S K S

• Drought Risks

A dam with a capacity of 150 mega litres already exists

on the Land this is more than adequate as a water supply

for the oak and hazelnut trees. A licence to double the

capacity has been made with the Water Corporation

• Water availability

The Project will be irrigated with water from an

established dam which is located on Lot 102 and which

provides water all year round.

• Water salinity

There are no salinity issues which arise from the use of

water from the dam. Water quality levels are well within

silviculture standards and will be continually monitored

throughout the life of the Project.

• Flood

Flood is considered a low risk factor for the property.

The survey plan reveals that the property has a

significant valley that drains the entire property. The

majority of the property quickly climbs away from the

valley and 85% of the property is 10 metres or more

above the high water level of the water course.

The valley has a significant fall to the south and the

possibility of the water course flow backing back is

negligible.

Extreme water flows from the headlands of the water

course at worst could only affect a small percentage of

the trufferie on each side of the valley.

• Frost

Frost is not a risk issue for the Project.

Both hazel and oak trees are native to areas that

experience extreme frosts. In fact, a critical selection

criteria for the site was the requirement for frost and

extreme cold in the ripening process for truffles.

• Hail, storm, fire risks

The truffle grows underground in a symbiotic

relationship with oak and hazel trees. The truffle relies

on support from the trees for certain nutrients; therefore,

no truffles can be grown without healthy trees.

Risks from hail, storm and fire are real.

Hail can damage the host trees but is unlikely to destroy

them. Leaf and branch damage is possible; however, this

type of damage will have a negligible effect on truffle

production.

Storm damage can completely remove trees and therefore

is a real risk. The property itself is adjacent to state Karri

and Jarrah forests. These trees are very large and will

work as a shelter for the trees of the trufferie. These

natural wind breaks will assist reduce the potential for

damage.

Fire is a real risk to the truffiere. Potential fire damage

will be managed by the provision of fire breaks and

maintaining the trufferie in a clean and manicured

condition. The trufferie will be fully irrigated. This will

ensure there is no dry fire hazard within the trufferie.

Surrounding bush-land and forest will be subjected to

regular “controlled burns” in low fire risk periods to

reduce the fuel load and hence the risk of a major

uncontrolled bush-fire.

• Pests and disease damage

The potential for disease risk to the oak and hazel trees is

considered low. There are no known diseases that could

cause significant tree fatalities.

Truffles can be attacked by slugs and snails if they are

close to the surface. These pests will be controlled by the

selective use of environmentally friendly pesticides and

herbicides.

R I S K S O F T H E I N V E S T M E N T

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• Truffle Yields

Truffle production in the natural habitat is notorious for

being unreliable and spasmodic.

The Oak Valley Trufferie will be established using all the

current sivicultural and management information to

ensure the truffiere has the best chance to produce

maximum yields.

Major risk factors that are known to affect yields include: -

i) Drought

This factor will be managed by the use of a modern

irrigation system that will water all trees and

surrounding areas for the entire trufferie.

A risk exists that a drought extending for a number of

consecutive years would restrict the amount of water

available for use by the irrigation system.

The Manjimup area is, however, in a very reliable

rainfall zone where the annual average rainfall exceeds

1000mm.

The dam capacity is 150 mega-litres and is filled by

run-off from the state forest and springs on the Oak

Valley property.

ii) Fungal Risks

These include the failure to establish the truffle

fungus on the seedling tree roots due to adverse

environmental conditions, the presence of predator

fungi or disease.

To reduce this risk, the Manager will conduct a

rigorous monitoring program both before the trees

are planted and subsequent to planting.

Investors should be aware there is a risk that truffles

will not be produced in the quantities or time frame

as estimated in this prospectus.

• Events of force majeure.

M A N A G E R I A L

• The ability of the Responsible Entity and other relevant

parties to meet their obligations.

• Default by relevant parties of any of the material

agreements.

• Loss of key staff of the Responsible Entity could impact

on forecast returns. The Managing Director is covered by

key person insurance.

F I N A N C I A L

• Failure to achieve anticipated truffle prices because of

adverse movements in the price for truffles.

• Tax law changes

Any changes to the taxation system during the life of the

Project or any other new significant levies, taxes or

imposts on the Project may affect the Project’s returns.

• Grower defaults

The Responsible Entity will pursue all avenues to ensure

that all Project Fees are received when they fall due.

• Management fees are fixed for the financial years ending

30 June 2006, 2007, 2008 and 2009 and thereafter are

linked to annual changes in the consumer price index or

a 3% increases on the previous year’s management fees,

whichever is the greater. All Management fees are

charged and payable irrespective of income generated.

• No market for the Trufferies.

Recently pruned hazelnut trees at Hazel Hill

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M A R K E T

• Supply fluctuations

World-wide production of the black truffle has varied

between 12 and 40 tonnes annually during the 1990’s.

Market intelligence suggests production over the last few

years has declined below these levels as a series of hot

summers have hit the Mediterranean regions of France

and Spain.

Markets for both fresh and preserved black truffles exist.

It is expected that demand will rise with an increased

supply. Only when supply can be guaranteed from year

to year can new markets, such as Asia and the Middle

East be explored.

The prices for the French black truffle do vary from year to

year but little variation is observed within truffle seasons.

• Demand fluctuations

The value of the Australian currency on the world market

may have an effect on the demand of Australian truffles

in the export arena.

• Quality of Truffles

The Responsible Entity will employ modern sivicultural

techniques and experienced personnel to ensure that the

best quality truffles are produced.

• Adverse change to consumer attitudes to truffle

consumption.

Risks of investing in the Land Shares include the above

risks and:

• Illiquid market for the Land Shares.

Late afternoon during winter 2005 at Hazel Hill

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I N D E P E N D E N T E X P E R T ’ S R E P O R T

Grants Pass Oregon

USA 97528

www.mycorrhizae.com

Directors

Watershed Premium Wines Ltd

PO Box 893

Margaret River WA 6285

7 December 2005

I N T R O D U C T I O N

This report has been prepared for the Oak Valley Truffle

Project by Dr. Mike Amaranthus, President Mycorrhizal

Applications Inc. and adjunct Associate Professor Oregon

State University who has been commissioned to provide an

independent technical assessment of the project and the

project methodology concerning site selection,

establishment, management, risks and anticipated yields. The

project seeks to establish a plantation of hazel (Corylus

avellana) and oaks (Quercus spp.) trees on 75 hectares near

Manjimup in Western Australia to facilitate production of

the French black truffle (Tuber melanosporum).

The president of Mycorrhizal Applications Inc, Dr. Mike

Amaranthus is an expert in soil biology and has over 20

years research experience as a scientist with United States

Department of Agriculture and Oregon State University. Dr.

Amaranthus’s professional expertise includes American and

international research on edible fungi. He has previously

assessed potential truffle producing areas in Australia, New

Zealand, France, Italy, and Spain. Dr. Amaranthus also has

extensive soil biology experience in Australia, Costa Rica,

Mexico, Canada and Thailand. In 1996, he was appointed an

Adjunct Associate Professor at Oregon State and supervises

Masters and PhD students in various aspects of soils and

biology. He has published over 70 research papers in

national and international journals and books. In 1998, he

received the United States Department of Agriculture’s

highest award for scientific achievement.

Dr. Amaranthus has frequently inspected areas to be planted

with hazels and oaks for truffle production and has

participated in assessment of previous plantings of hazels and

oaks for truffle production in Western Australia, Tasmania

and New Zealand. In 1997, Dr. Amaranthus prepared the

expert opinion report for Hazel Hill Pty Ltd which offered

investors the opportunity to invest in Hazel Hill Truffle

Project now an established a plantation of hazel trees

(Corylus avellana) and oaks (Quercas spp.) in Western

Australia. This project is presently producing semi

commercial quantities of the French black truffle (Tuber

melanosporum) in the Manjimup area.

T H E P R O P O S A L

Investors are invited to subscribe for shares and growing lots

for production of the French black truffle in Western Australia.

The growing lots are to be established within a proposed

truffière establishment of 74.8 hectares in the year 2006.

The Project proposes to grow hazel and oak trees for

production of export quality Tuber melanosporum. Recent

reports from another truffiere Hazel Hill in the Manjimup

area with similar soil and site conditions indicates that some

truffle production can occur within 5 years of establishment

and that semi-commercial yields can be achieved within 7

years. Truffle production in west Australia is an emerging

industry with great potential for expansion.

Knowledge regarding the Australian industry and its

prospects is based largely on truffle research and operational

trials conducted by Dr. Nick Malajczuk of Treetec

Consulting. Hazel Hill operations led by Dr. Nick Malajczuk

has recently discovered unique cultural management

programs implemented on parts of the HH truffiere that has

produced exceptional truffle yields. Dr. Nick Malajczuk is a

world leader in growing black truffles and his success and

experience are driving optimistic outlooks for commercial

yields in the industry in west Australia.

B A C K G R O U N D

Truffles first appeared in French cuisine during the

Renaissance, however their appreciation dates back much

earlier to Greek and Roman times. Truffles were recognised

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as early as 1600 BC. Later Roman and Greek writers, such as

the poet Juvenal (AD 60-140) and Plutarch (AD 46-120),

noted the association of water, heat, lightning and truffle

formation. Theophrastus suggested that truffles were always

found in the ground beneath a particular plant suggesting an

association with the roots. Eventually in 1588 spores were

confirmed as the fungal propagule or “seed” by the Italian

philosopher Gianbattista della Porta. In 1868, the French

botanist Gaspard A. Chatin separated truffles into taxonomic

groups and discussed their observed differences. He

suggested that truffles formed symbiotic associations with

trees and tentatively suggested they could be cultivated.

Soon after, in 1885, A.B. Frank documented ectomycorrhiza

in the association between Tuber aestivum (Burgundy truffle)

and plants.

Tuber melanosporum, the French black truffle originates from

the Perigord and Provence regions of France. Scientifically

the species is classified as belonging to the genus Tuber,

family Tuberaceae, order Tuberales, class Discomycetes,

subdivision Ascomycotina, division Eumycota, Fungi

kingdom. Truffles are, in layman’s terms, mushrooms that

grow naturally underground rather than above-ground. A few

truffles other than Tuber melanosporum, are also highly

prized as edibles including Tuber magnatum, the Italian

white truffle. The Italian white truffle differs in its

ecological requirements and has been much more difficult to

produce in a truffière compared to Tuber melanosporum.

Tuber aestivum, Tuber bumale and Tuber uncinatum are also

commercial truffles native to Europe but have far less value

than Tuber melanosporum.

Truffles have a unique aroma and taste that accounts for their

high price. Their flavour can permeate many foods and a little

truffle can go along way in “flavouring” a meal. Truffles come

in a variety of shapes and sizes. On the surface they resemble

a potato and range in size from a pecan to larger than a tennis

ball. A recent truffle from the HH site is considered to be the

largest black truffle ever harvested outside France weighing in

at over a kilo! Internally truffles have a marbled, convoluted

appearance that darkens with age. Tuber melanosporum is black

like coal with a faceted pyramidal surface that gives it the

nickname “Black Diamond”.

In the early 1970’s French researchers successfully colonized

the roots of tree seedlings with truffle spores thus increasing

the chances that the trees would produce truffles. When a

truffle spore comes into contact with one of the fine rootlets

under a hazel or oak, it sends out long, microscopically thin

filaments that wrap around the root. Under magnification

this root tip transforms into branched, swollen, minutely

puzzled surfaces, chestnut coloured appendages on the feeder

root system. The swollen tip is called a mycorrhiza, derived

from the Greek words meaning “fungus root”. It is part of

both truffle and tree.

Like all fungi, truffles are unable to synthesize sugars and

other carbohydrates. The ordinary white button mushrooms

colonize dead plant matter and are grown commercially on

compost. Black truffle fungi are symbiotic and draw their

carbohydrates directly from certain trees before entering a

saprophytic stage. They use this energy to construct

filaments that push through the soil and gather moisture and

nutrients which are, in turn, used to nourish the tree. Many

truffles are quite specific to certain forest, climate and soil

conditions.

The systematic planting of a truffière with trees roots

colonized with the fungus Tuber melanosporum has been

successful in producing truffles. Truffieres established in

Italy, France, Spain, USA, west Australia, New Zealand and

Tasmania are now producing truffles. However, it is

unknown what proportion of the world’s production of

edible truffle species are produced in the “wild” vs managed

truffiere.

Research has demonstrated that while there are various tree

genera which will host Tuber melanosporum, Quercus (oak) and

Corylus (hazel) are preferred for the truffiere. Of these, Corylus

avellana (European hazel) has become the most popular species

because the tree or bush, depending on how it is trained, is

fast growing and the black truffle grows tenaciously on its

roots, which are shallower than the oak’s. Its life expectancy as

a truffle producer is estimated at 30 years and some fruiting of

the truffle can occur as early as four years with production

increasing rapidly during the first 5 years of fruiting. Recent

exponential increases in production at the Hazel Hill,

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Manjimup truffiere between 5 and 7 years indicates such

increases are possible and probable in west Australia. Various

oak species, thought to have an even greater longevity in

producing truffles have also fruited Tuber melanosporum in

west Australia at the Hazel Hill truffiere and will be included

in the planting by Truffle Projects Pty Ltd.

In Europe, Périgord black truffles are available fresh from

November to March with the peak of the season generally

considered to be between January 15 and February 15.

European wholesale prices for T. melanosporum are generally

in the range of $ 600-1200 kg-1 but this varies according to

availability. Demand for Tuber melanosporum in the finest

restaurants continues to grow worldwide and is likely to

inflate prices in the future. This is particularly true during

the period from April to October when fresh black truffles

are not available.

Tuber melanosporum occurs naturally in France, and in parts of

northern Italy and Spain. Estimates of truffle production since

the Napoleonic wars are only approximate. However, estimates

indicate truffle production increased from 1500 tonnes in

1860 to 2000 tonnes in 1890. Other sources indicate a

worldwide production of 1000 tonnes during this period.

Whatever the actual production figures were, they suggest that

harvesting from the wild has declined dramatically over the last

century (see table below). Harvest of the Périgord truffle

ranged from 12 and 40 tonnes annually during the 1990s.

Estimates for production in 2005 have been as low as 8 tonnes.

Such dramatic declines in production point to the need for

increased for production in managed truffieres.

Annual production of the French Black truffle from 1903

to 1975.

Factors that may have contributed to the reduction in the

historic availability of truffles should continue to limit

production from “wild” areas in the future. These include

changes in land use, pollution and climate change. In the

early part of the 20th century, truffle production declined as

a result of the destruction of habitat and other factors

during World War 1 (931 tonnes in 1914 to 166 tonnes in

1919 and similar effects occurred following World War II).

Local land-use changes, such as shifts in urban and rural

living have reduced the habitat for black truffle production.

Historically, Europeans cleared out understory vegetation for

fuel wood which helped maintained habitat for the black

truffle. Management of natural forest areas for truffle

production is rarely practiced in Europe today. Regardless,

current production is estimated to be less than 10% that of

the early twentieth century.

In its native range, Tuber melanosporum grows on basic soils

where rainfall is 600mm to 1500 mm a year. Mean daily

temperatures in winter range from 2oC to 8oC. Mean daily

temperatures in summer range from 16.5oC to 22oC.

Contrary to popular opinion Tuber melanosporum occurs

across a variety of soil physical and chemical properties. In

New Zealand, for example, truffles have been produced on

trees grown on beach sand as well as on basaltic soils. What

is common across natural producing areas is a high soil pH

and abundant available calcium. The desired soil condition

for developing a truffière is a high pH and well aerated

granular soil with a moderate level of organic matter (up to

10 %). Other soil characteristics of European truffières

include high levels of plant available Mg, moderate levels of

P and low level of Na. Although the great majority of

Australian soils are very low in key plant nutrients,

particularly P, this can be readily corrected to recommended

level. Results at Hazel Hill indicate nutrient levels can be

managed that will promote subsequent growth and

development of both mycorrhizal fungus and host plant.

Irrigation is also needed for adequate root development and

prevents extended periods of soil drought.

Truffles are now being successfully grown in truffière in

France, Spain, Italy, New Zealand, West Australia, Tasmania

and the USA. Production in West Australia, at Hazel Hill

0

200

400

600

800

1000

1900 05 10 15 20 25 30 35 40 45 50 55 60 65 70 75

Total pro

duction (To

nnes)

Year

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near Manjimup has increased exponentially in the last 3

years and new insights into promoting fruiting of the truffle

should bolster increased production levels in the foreseeable

future. What is required to produce truffles is the climate,

presence of suitable host species, careful preparation and

maintenance of soil conditions and the scientific expertise to

rigorously monitor the abundance and distribution of the

desired Tuber mycorrhiza and the health of host species.

Optimising truffle production requires both knowledge,

experience and scientific expertise into the factors that

initiate and promote truffle fruiting.

L O C A T I O N O F T R U F F I E R E

A N D S I T E C O N D I T I O N S

The property for the venture is located on land near

Manjimup, Western Australia about 300 km southwest of

Perth. The proposed truffière will be established on

Appadene road, approximately 10 kilometers south west

of the Manjimup townsite. The Project will be located on

soil, site and irrigation conditions similar to an existing

truffière, the Hazel Hill Project. Hazel Hill truffière

comprises 21 ha which were planted to hazels and a

minimum amount of oaks that are now 8 years of age. The

trees were planted at the rate of 600 trees per ha and a

similar management strategy will be applied at the proposed

Truffle Projects Ltd Manjimup site. Recent inspection of the

Hazel Hill site indicates that the hazel and oak trees are

healthy and the corresponding Tuber melanosporum

mycorrhiza are present and actively growing.

S O I L A N D C L I M A T E

The proposed site is gently undulating and over 60% of the

property has been cleared. It has been regularly grazed by

cattle and has good pasture development. The property was

cleared from native forests 60 years earlier.

In contrast to truffle producing areas in Europe, where high

pH soils are common on limestone soils, soils in Manjimup

area tend to have relatively low pHs. The current pH of the

proposed site is approximately 6.0 and it will be necessary to

add approximately 100 tons of lime per hectare to increase

the soil pH to 7.5 to 7.9 for the successful production of

truffles and to reduce the chance of invasion of other

ectomycorrhizal fungi. Frequent monitoring and potential

reapplication of 5-10 tons of lime or hydrated lime per

hectare may be necessary over the course of the

establishment period. Dolomitic lime (calcium magnesium

carbonate) should be used in combination with calcium-only

sources of lime to maintain magnesium levels on cation

exchange sites and prevent magnesium deficiencies. The high

pH in these soils can have a major influence on the reducing

of availability or iron, zinc, manganese, and boron. Like the

Hazel Hill site, great care has to be taken in creating and

maintaining a suitable pH for a truffière while maintaining

the nutrition of the hazel and oak trees. A pH meter can be

used to test soil pH, but many of the other tests can be

carried out only by a well equipped laboratory. Foliar and

soil testing will be necessary bi-annually to monitor the

nutrition of the truffière. A successful testing program is in

place at the Hazel Hill site and should be utilized for the

Truffle Projects Pty Ltd truffière.

The property receives approximately 1100 mm of annual

rainfall occurring predominately in the winter months. The

mean winter temperatures are 10°C and the mean summer

temperatures are 28°C. The surface soil is a loam with

moderate levels of organic matter, well drained and has loose

structure ideally suited for black truffles. The subsurface is a

denser clay loam about .5 meters beneath the surface layer.

The Truffle Projects Pty Ltd site climatic conditions

approximate areas in France, Italy and Spain that produce

black truffle with a combination of cool winters and warm

summers without the extremes of temperatures.

I R R I G A T I O N W A T E R

S U P P L I E S

Water from a dam with a minimum water license of 150

mega litres will secure water for the project. Monitoring of

the sodium content of the water will be implemented

annually to ensure that water is of sufficient quality not to

hamper development of the black truffle fungus.

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P L A N T I N G M A T E R I A L S A N D

I N F E C T I O N P R O C E D U R E S

Treetec Consulting Pty Ltd has been successfully producing

inoculated seedlings of oak and hazel for nearly a decade.

The seedlings produced to date have been well infected with

the black truffle fungus at planting. Treetec Consulting Pty

Ltd has now established a quality control program that

includes ongoing routine molecular genetic testing of

individual truffles used as inoculum in Western Australia.

Furthermore, the Truffle Projects Pty Ltd will use only

Australian grown and genetically tested black truffles as

inoculum, or whole, (not powdered) imported truffles (that

have been DNA tested) to prevent the possibility of

accidental introduction of propagules of undesirable

organisms and non commercial truffles.

T R U F F E R I E

C O N F I G U R A T I O N

The trees, both hazel and oak, will be planted in the winter of

2006 following site preparation. Row width will vary slightly,

but will be 5 metres apart and trees will be spaced 4 metres

apart along the rows giving a stocking of 500 trees per hectare.

Following tree establishment the trufferie will be irrigated,

fertilised and maintained to maximise the growth of the

black truffle fungus for future years.

Checks of black truffle fungus growth and mycorrhizal

development including DNA testing will be undertaken in

the autumn following planting to ensure that conditions are

conducive for fungal growth. Tree survival will be monitored

and will be in-filled during the following spring.

E S T A B L I S H M E N T A N D

M A N A G E M E N T

The trufferie will require regular weed control, consisting of

strip spraying and mechanical slashing and post planting

weed control.

Fertiliser requirements are known for oak and hazel trees and

an adequate fertiliser regime has been developed. Fertiliser

will be applied as both compound fertiliser near the base of

the trees and through the irrigation and liquid fertiliser. A

special fertilizer blend developed at Hazel Hill will be added

to the trees after three years to stimulate the fruiting of the

black truffle fungus.

The strips between the rows will be sown to legumes and

grasses to stabilize the soil and provide evidence of future

brulè development.

Mycorrhizal Application Inc. has reviewed Truffle Projects

Pty Ltd methodologies for the trufferie establishment and

maintenance and concludes that the system used to establish

the black truffle fungus on the roots of hazel and oak in this

Project is appropriate for the achievement of successful

establishment of tree and fungus and subsequent truffle

production.

M O N I T O R I N G

The Project provides for annual inspections by an expert

who reports to the Responsible Entity. These inspections will

focus on trufferie health, insect & weed control. Roots

samples will be taken to observe the development of the

black truffle fungus. DNA testing will be carried out to

ensure that the black truffle fungus is persisting and

developing on the roots of hazel and oak.

M A N A G E M E N T E X P E R T I S E

Mycorrhizal Applications Inc. and Truffle Projects Pty Ltd

executives are professionally qualified and experts in their

field. The Project brings together a mix of long time

experience in successful project management.

The Manager has also acquired the services of experienced

consultants at Treetec Consulting, worldwide experts, to

provide advice on irrigation, fertilisation and truffle

management.

Treetec Consulting has also experience in the training of

truffle seeking dogs and the harvest of truffles.

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T R U F F L E Y I E L D S

Harvests for the purpose of the Financial Forecasts are to

start when the trufferie is 6 years old with peak production

being reached in year 12.

Estimated T. melanosporum yield in kg per hectare for

years 1-12

marketing. These assumptions are consistent with current

industry practices and are considered reasonable.

Mycorrhizal Application’s Inc. assessment of the project’s

methodology for site selection, truffle establishment and

maintenance and management indicate that potential risks to

returns will be minimised, although returns are sensitive to

actual price, yield and taxation treatment.

F E E S

In my opinion the fees payable to the Responsible Entity are

a sufficient and commercially realistic amount to ensure that

the important establishment and maintenance phases are

properly performed. The fees are in accordance with

reasonable standard industry costs and practices.

T H R E A T S T O T R U F F L E

F A R M I N G I N A U S T R A L I A

In Australia, the most significant potential barrier to

producing Tuber melanosporum is via competition and

eventual replacement with mycorrhizal fungi established on

native Eucalyptus tree species. Research by Treetec

Consulting indicates that the mycorrhizal associates of native

Eucalyptus will not colonize hazel seedlings. Monitoring at

Hazel Hill indicates native Eucalyptus mycorrhizal fungi do

not establish on truffiere trees.

However, mycorrhizal seedlings once planted in the field can

be colonized by other non indigenous fungi. Hebeloma and

Scleroderma do occur in west Australia truffieres and there is

risk for various other Tuber species to occur. The single

greatest threat to the truffle industry in Australia is the

deliberate or accidental introduction of the Chinese black

truffle (Tuber indicum), or other related species, that are

considered in the market as greatly inferior to the Périgord

truffle. Substitution of Chinese black for Périgord truffles

continues to occur in Europe and T. indicum has become

established in European truffières as a result of the

inadvertent use of material as inoculum. The economic

consequences of the establishment of T. indicum in Australia

would be most significant: firstly, in undermining the

0

10

20

30

40

50

60

70

80

yr 0-5 yr 6 yr 7 yr 8 yr 9 yr 10 yr 11 yr 12

Research and actual harvest data collected by Treetec

Consulting suggests that a Mediterranean environment such

as that at Manjimup will produce truffles, provided good

quality soils and correct truffle management is available.

Mycorrhizal Application Inc. is of the opinion that the above

table of yield estimates is achievable. The yield best estimates

used by Truffle Projects Pty Ltd are conservative and are

made on reasonable grounds.

H A R V E S T A N D M A R K E T I N G

C O S T S

Harvest costs have been estimated on the basis of costs for

similar labour requirements and the costs of training and

maintaining dogs for truffle harvesting. These cost are

representative and are based on reasonable grounds.

F I N A N C I A L A N A L Y S I S

The financial forecasts are based on assumptions for yield,

length of investment, price of truffles, costs for

establishment, maintenance, land licensing, harvesting and

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confidence of the market, where buyers could no longer be

certain of the fidelity of the product, and; secondly, as an

additional ectomycorrhizal competitor of T. melanosporum.

Tuber aestivum, Tuber brumale and Tuber maculatum have

also demonstrated the ability to invade Tuber melanosporum

truffières in Europe. These Tuber species are currently not

present in west Australia so risks are currently low.

To prevent the introduction of non desirable Tuber species,

Australian Truffle projects Ltd will perform routine molecular

genetic testing of individual truffles used as inoculum in

Western Australia. Given that the identity of some imported

material powder truffle inoculum is uncertain, it will not be

used as inoculum. In my opinion, it would be most desirable

if further truffières were established using only Australian

grown and genetically tested black truffles as inoculum, as

whole imported truffles (that have been tested) to prevent the

possibility of accidental introduction of propagules of

undesirable organisms. Any importation of inoculum into

Australia should require DNA confirmation of individual

sporocarps prior to preparation of inoculum. The provision of

seedlings inoculated with a guaranteed source of inoculum is

an appropriate step toward a sustained yield of target Tuber

species and is the greatest advantage to truffiere development

by Australian Truffle projects Ltd.

Because of the extensive planting of pine and other exotic

mycorrhizal tree species it is impossible to totally eliminate

some invasion of mycorrhizal species into the truffière.

However effort must be taken to insure that Tuber

melanosporum mycorrhiza remain dominant and vigorous.

Some presence of other mycorrhizal fungi may not necessarily

reduce production of truffles by mycorrhizal seedlings. For

example recent observations in New Zealand indicate the

Tuber melanosporum trufferie with the greatest truffle

production (>200 kg/hectare) occurred on a site with a

significant amount of other ectomycorrhiza present. Abundant

fruiting of other mycorrhizal fungi may be an indication of

favourable conditions for Tuber melanosporum as well.

Numerous factors influence the suitability of a site for black

truffle production. Discussions with other researchers

indicate day lengths during various times of the year appear

to have an effect. In the successful locales, average day

length in the summer is approximately fifteen hours, with

the shortest day in winter being about ten hours. Day

lengths in Manjimup approximate these conditions.

The temperature range for a truffière should be a maximum of

about 30°C in the summer and a minimum of 2°C in the

winter. The fungus will survive occasional temperatures as high

as 40°C and as low as -1°C, but sustained temperatures at

these extremes will be detrimental to good growth of the

fungus. Generally hot summers with some precipitation and

cool wet winters are the preferred climate. In areas of naturally

producing trees in France, the average rainfall is about 1250

mm per year. It is important to note, however, that some of

this rain is typically in the hot summer months. Successful

truffière outside of France, such as Hazel Hill, indicate that

supplemental irrigation can provide satisfactory results. These

requirements are critical and the hazel is in particular need of

adequate moisture due to their shallow root systems. As the

trees grow, the water requirements increase, but at the same

time trees shade the ground to provide protection from

evaporation of moisture from the soil. It is also important that

infected trees not be subjected to long periods of saturated

soils; soils are best loose and well drained. All of these

conditions can be realized by cultural practices as indicated by

successful implementation of such program at Hazel Hill.

The low pH of the Manjimup soils must be elevated to the

mid to high 7 levels to support Tuber melanosporum

development. Soils on the project will need to be artificially

amended to attain this level. There are some advantages to

starting with low pH and elevating to high pH at a

particular site. In the lower pH soil, the change induced by

the addition of lime will tend to stifle the locally occurring

fungi, which are accustomed to the more acidic soil. This

activity selects against other mycorrhizas that may have

occupied the site and creates ideal conditions for the

aggressive establishment of the target mycorrhizal fungus

Tuber melanosporum. It may be necessary to add lime

annually to maintain the essential high pH.

Other threats include mycophagy by animals and, indirectly,

pests and diseases of host plants. Bandicoots (Isoodon

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obesulus) have been problematic as truffle thieves in

Tasmania. Vermin proof fencing is would be essential to

limit native animal mycophagy. Also, losses of truffles by

insect damage have occurred in New Zealand and the use of

whole imported truffles as inoculum presents the possibility

of introducing insect pests that feed directly on Tuber spp.,

such as the Truffle flies (Helomiza spp.). In Australia,

collections of native truffles are frequently found to be

infested with larvae of flies and/or beetles, but it remains to

be determined whether fungal utilisation of Australian

insects extends to introduced truffles.

There are also potential threats to the hazel trees themselves,

Among insect pests, big bud mite (Phytoptus avellanae; Acari,

Phytoptidae) may be the most important pest of Corylus

avellana in south-eastern Australia, and is among the most

important of pests of hazel in Europe and North America,

where it causes death of buds and new shoots, but not the

whole plant. Bacterial blight, Xanthomonas campestris pv.

corylina, a serious disease of hazel, was first recorded in

south-eastern Australia in 1980, although it has probably

been present for much longer. For oaks, Oak Mildew, causal

agent Oidium quercinum (Microspharea alphitioides), is

introduced to Australia, but does not appear to overly effect

plant growth. However, more virulent isolates of the fungus,

perhaps in concert with changed environmental conditions,

have caused significant damage and losses of trees in South

Africa and in Europe. and is a major disease of oak seedlings

in Europe. The indigenous Armillaria luteobubalina, that is

an important pathogen in regrowth Eucalyptus forests, has

caused damage to Corylus avellana in Australia and has

potential to cause significant disease where truffle hosts are

planted on land that previously included native vegetation.

In south-eastern and south-western Australia generally, shoot

die-back of Quercus spp. has been observed but the problem

has not been investigated and causal agent/s have not been

identified. In Europe, Phytophthora quercina is believed to be

the principal cause of oak decline and has been isolated from

the roots of Q. robur, Q. petraea, Q.ilex, Q. cerris and Q.

pubescens, that are all preferred hosts for Tuber melanosporum

in truffières. Phytophthora ramorum has is a pathogen of

Rhododendron and Virburnum in Europe, whereas in the

western United States P. ramorum has caused widespread

mortality in a much wider range of host plant families and

genera, including Quercus spp. Whereas the known host

range of P. ramorum does not include oaks of the section

Quercus, that includes Old World species, the aerial biology

and wide host range of P. ramorum may make it a greater

hazard to truffle hosts than P. quercina, in the event of

introduction to Australia.

C O N C L U S I O N

The Project’s projections on returns are based on

assumptions for truffle yield, price, costs for establishment

and maintenance, transport and processing. These

assumptions are consistent with current industry practices

and are considered reasonable. Mycorrhizal Application Inc.

assessment of the Truffle Projects Pty Ltd methodology for

site selection, plantation establishment and maintenance

and management indicates that the Project will be

economically viable and potential risks to returns will be

minimized, although returns are sensitive to price, yield

and taxation treatment. Truffle Projects Pty Ltd projected

yields are considerably less than the New Zealand recent

experience of 240kg per hectare and the projected

wholesale price

into Europe A$1500/kg is less than the values realized

from New Zealand and Tasmanian truffle sales. The base

figure of $1500 per kg is the minimum guaranteed price

that will be paid by Peberye one of the world’s largest

truffle traders.

Truffle farming is in its early stages in various parts of the

world. Because of the time lag between planting the truffière

and truffle production there is insufficient time to

understand all the possible problems in production. Many

truffières are now producing, including nearby Hazel Hill

and it is likely that in the next decades those who were aware

of the tremendous economic potential will benefit greatly

from their foresight. I believe, black truffle production will

occur under hazel and oak if the correct infection procedure

is carried out and attention is paid to, nutrient, water

management, maintaining correct edaphic parameters

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essential for black truffle growth and development and

continual monitoring of possible competitors. New insight

and recent success in triggering truffle fruiting in nearby

Hazel Hill truffiere has created an optimistic outlook for

economic success for Truffle Projects Pty Ltd.

S U M M A R Y

The literature dealing with Perigord black truffle production

suggests that the availability of suitable soils, adequate water

quality and skilled management in the Manjimup

environment is capable of producing good quality truffles

with yields equivalent to those obtained in well managed

trufferies in other countries. Certainly those three

conditions are met by the project that is the subject of this

report. Most importantly, increased understanding of

specific cultural practices and successful implementation of

those practices to trigger fruiting at a nearby truffiere has

created an exceptional opportunity for the proposed

project.

Mike Amaranthus B.Sc. MS, Ph.D.

President Mycorrhizal Applications Inc.

PO Box 1181

Grants Pass, Oregon 97528

[email protected]

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E-mail: [email protected] 8 St Georges Terrace Perth WA 6000

Direct line: 9261 9447 GPO Box R1253 Perth WA 6844

AJG:SET T +61 8 9261 9100 F +61 8 9261 9101

www.rsmi.com.au

24 March 2006

The Directors

Truffle Properties Limited

C/- Thomson Fisher & Co

Level 2

677 Murray Street

WEST PERTH WA 6005

Dear Sirs

I N D E P E N D E N T A C C O U N T A N T ’ S R E P O R T

1 Introduction

1.1 This report has been prepared at the request of the directors of Truffle Properties Limited (“Truffle Properties” or

“the Company”) for inclusion in the Oak Valley Truffle Project 2006 PDS / Prospectus in relation to an offer for

1,311,992 ordinary shares in the Company at an issue price of $2.00 per share to be dated on or about 24 March

2006.

1.2 This report has been prepared in accordance with the general disclosure requirements of the Corporations Act

2001 to assist investors to make an informed assessment of the financial position of the Company.

1.3 The future prospects of the Company, other than the preparation of a pro forma consolidated balance sheet,

assuming completion of the proposed transactions, are not addressed in this report. This report also does not

address the rights attaching to the shares to be issued pursuant to this Prospectus, nor the risks associated with

the investment.

1.4 Prospective applicants may participate by applying for Parcels of 3,508 Shares at a cost of $7,016.

1.5 Prospective applicants are obliged to apply for both a Trufferie and 3,508 shares. It is not possible to apply for

either a Trufferie or Shares separately although the shares can be held in a different name to the Trufferie.

1.6 Pursuant to this Prospectus, 374 Parcels of Shares will be offered to investors. There will be no oversubscriptions

offered.

I N D E P E N D E N T A C C O U N T A N T ’ S R E P O R T

Bird Cameron Corporate Pty Ltd

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2 Scope of Examination

2.1 You have requested RSM Bird Cameron Corporate Pty Ltd to prepare an Independent Accountant’s Report on

the following for the Company:

• audited balance sheet as at 31 December 2005; and

• unaudited proforma balance sheet as at 31 December 2005 assuming completion of the capital raising and the

transactions summarised in note 1(e) to the financial report.

2.2 The financial information has been prepared and presented in accordance with the Australian equivalents to

International Financial Reporting Standards (“A-IFRS”).

2.3 The audit of Truffle Properties for the period ended 31 December 2005 was conducted by RSM Bird Cameron

Partners. The audit report was unqualified.

2.4 Our review has been conducted in accordance with Australian Auditing Standards AUS 902 “Review of Financial

Reports”. We made such enquiries and performed such procedures as we, in our professional judgement,

considered reasonable in the circumstances including:-

• an analytical review of the financial information;

• review of the application of accounting standards and policies;

• examination of financial records; and

• enquiries of management.

2.5 These procedures were substantially less in scope than that would be required in an audit examination conducted

in accordance with Australian Auditing Standards, thus the level of assurance provided is less than that given in

an audit. We have not performed an audit and accordingly, we do not express an audit opinion.

3 Background

3.1 Truffle Properties was incorporated on 14 September 2005 with three $1 shares on issue.

3.2 On 17 December 2005 the Company entered into an Offer and Acceptance to acquire land, being Lots 10 and

11 Appadene Road, Manjimup (“the Land”) for a purchase price of $1,700,000 plus stamp duty of $85,500.

Funding for the Land purchase was provided primarily by a share issue, vendor finance and bank finance.

Settlement took place on 15 March 2006.

3.3 On 19 January 2006 the Company issued an Offer Information Statement for the issue of 1,250,000 ordinary

shares in the Company at an issue price of $1 for each ordinary share. The funds raised from this share issue are

to be used to assist in the acquisition of the land and the repayment of the vendor finance.

3.4 The funds raised from this PDS/ Prospectus share issue are to be used to repay bank borrowings of $706,000 and

to improve the Land through irrigation, road works, drainage and the planting of truffle inoculated Oak and

Hazelnut trees. The improvements have an estimated cost of $1,657,218.

4 Subsequent Events

4.1 Apart from the matters dealt with in this report, having regard to the scope of our work, to the best of our

knowledge and belief, no material transactions or events outside the ordinary business of the Company has come

to our attention that are not otherwise disclosed in this PDS / Prospectus, which require further comment upon

or adjustment to, the information referred to in this report, or which would cause the information in this report

to be misleading.

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5 Opinion on historical and pro forma financial information

5.1 In our opinion, based on our review, which is not an audit, nothing has come to our attention that causes us to

believe that the financial information set out in the Appendix to this report does not present fairly:

5.1.1 the audited balance sheet of the Company as at 31 December 2005; and

5.1.2 the unaudited proforma balance sheet of the Company as at 31 December 2005 adjusted to include funds

proposed to be raised pursuant to the PDS / Prospectus and the completion of the transactions

summarised in Note 1(e) to the financial report.

6 Declaration

6.1 RSM Bird Cameron Corporate Pty Ltd is a licensed investment adviser under the Corporations Act 2001 and is

beneficially owned by the partners of RSM Bird Cameron, a large national firm of chartered accountants.

6.2 Mr A J Gilmour CA is a director and authorised representative of RSM Bird Cameron Corporate Pty Ltd and a

director of RSM Bird Cameron. He has professional qualifications and experience appropriate to the advice

offered.

6.3 RSM Bird Cameron Corporate Pty Ltd has acted as Independent Accountant for the Company but has not been

involved in the preparation of any other part of this Prospectus. Accordingly, we make no representations as to

the completeness and accuracy of the information in any other part of this Prospectus. RSM Bird Cameron

Corporate Pty Ltd has not made and will not make any recommendation, through the issue of this report, to

potential investors of the Company as to the merits of the investment.

6.4 RSM Bird Cameron Corporate Pty Ltd will receive a fee for the preparation of this report based on actual hours

spent on the assignment at normal professional rates. RSM Bird Cameron Partners are the auditors of the

Company and will receive professional fees in relation to the statutory audit of the Company. With the exception

of the above fees, neither Mr A J Gilmour, RSM Bird Cameron Corporate Pty Ltd nor RSM Bird Cameron

Partners will receive any other benefits, either directly or indirectly, from the preparation of this report and have

no pecuniary or other interest which could be regarded as affecting the ability to provide an unbiased opinion in

relation to the proposed transaction.

6.5 RSM Bird Cameron Corporate Pty Ltd has consented to the inclusion of this report in the Prospectus in the

form and context in which it appears. At the date of this report, this consent has not been withdrawn.

Yours faithfully

ANDREW GILMOUR

Director

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Notes Audited Unauditedas at Proforma as at

31 December 31 December2005 2005

$ $

CURRENT ASSETS Cash and cash equivalents 2 470 3,027,056Trade and other receivables 3 15,000 –___________ ___________TOTAL CURRENT ASSETS 15,470 3,027,056___________ ___________

NON CURRENT ASSETS Property, plant and equipment 4 – 1,785,500___________ ___________TOTAL NON CURRENT ASSETS – 1,785,500___________ ___________TOTAL ASSETS 15,470 4,812,556___________ ___________

CURRENT LIABILITIES Payables 5 15,497 15,497Interest bearing liabilities 6 – 1,306,000___________ ___________TOTAL LIABILITIES 15,497 1,321,497___________ ___________NET ASSETS (27) 3,491,059___________ ______________________ ___________

EQUITY Contributed equity 7 3 3,491,089Accumulated losses (30) (30)___________ ___________TOTAL EQUITY (27) 3,491,059___________ ______________________ ___________

The unaudited proforma balance sheet represents the audited balance sheet as at 31 December 2005 adjusted for the

transactions outlined in Note 1(e). The balance sheets should be read in conjunction with the notes to and forming part of the

financial report.

B A L A N C E S H E E T S

A s a t 3 1 D e c e m b e r 2 0 0 5

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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThis financial report has been prepared in accordance with A-IFRS and other mandatory reporting requirements, exceptsome of the disclosure requirements have not been included where the information that would be disclosed is notconsidered relevant nor material to potential investors.

The financial report has been prepared on an accruals basis and is based on historical costs and does not take intoaccount changing money values or, except where stated, current valuations of non current assets. Cost is based on thefair values of the consideration given in exchange for assets.

Reconciliations of the transition from the previous Australian generally accepted accounting principles (“A-GAAP”) toA-IFRS are not required to be disclosed in this report due to the registration of the Company on 14 September 2005.

(a) Income TaxThe liability method of tax-effect accounting is adopted whereby the income tax expense is based on the profitfrom ordinary activities adjusted for any non-assessable or disallowed items.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arisingbetween the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferredincome tax will be recognised from the initial recognition of an asset or liability, excluding a businesscombination, where there is no effect on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised orliability is settled. Deferred tax is credited in the income statement except where it relates to items that may becredited directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be availableagainst which deductible temporary differences can be utilised.

(b) Impairment of assetsAt each reporting date, the group reviews the carrying values of its tangible and intangible assets to determinewhether there is any indication that those assets have been impaired. If such an indication exists, the recoverableamount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to theasset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to theincome statement.

Impairment testing is performed annually for intangible assets with indefinite lives.

Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates therecoverable amount of the cash-generating unit to which the asset belongs.

(c) Cash and cash equivalentsCash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquidinvestments with original maturities of three months or less and bank overdrafts. Bank overdrafts are shownwithin short-term borrowings in current liabilities on the balance sheet.

(d) Goods and Services Tax (GST)Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GSTincurred is not recoverable from the Australian Taxation Office. In these circumstances, the GST is recognised aspart of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in thebalance sheet are shown inclusive of GST.

N O T E S T O T H E F I N A N C I A L R E P O R T

F o r p e r i o d e n d e d 3 1 D e c e m b e r 2 0 0 5

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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(e) Pro forma financial statementsThe pro forma balance sheet has been included for illustrative purposes only. The pro forma balance sheet hasbeen prepared by adjusting the audited balance sheet to reflect the financial effect of the following transactions asif they had occurred at 31 December 2005:

(i) Issue of 1,250,000 fully paid ordinary shares of $1.00 each pursuant to an Offer Information Statementdated 19 January 2006.

(ii) Costs of $120,500 associated with the issue of the ordinary shares pursuant to an Offer InformationStatement dated 19 January 2006 have been set off against capital raised.

(iii) Acquisition of land at a purchase price of $1,700,000 plus stamp duty of $85,500.

(iv) Funding of land acquisition from cash reserves, refundable deposit, bank borrowings of $706,000 andvendor finance of $600,000.

(v) Issue of 1,311,992 fully paid ordinary shares of $2.00 each pursuant to this Prospectus raising$2,623,984.

(vi) Estimated costs of $262,398 associated with this offer have been set off against the capital raised.

Audited UnauditedAs at Proforma As at

31 December 31 December2005 2005

$ $

2. CASHCash at Bank (Note 8) 470 3,027,056___________ ___________

3. RECEIVABLESRefundable deposit relative to land acquisition 15,000 –___________ ___________

4. PROPERTY, PLANT AND EQUIPMENTLand at cost – 1,785,500___________ ___________

5. PAYABLESUnsecured loan from director 15,497 15,497___________ ___________

The unsecured loan from a director isinterest free and repayable on demand.

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Audited UnauditedAs at Proforma As at

31 December 31 December2005 2005

$ $

6. INTEREST BEARING LIABILITIES (CURRENT)Secured(a) Bank loan – 706,000(b) Vendor loan – 600,000___________ ___________

– 1,306,000___________ ___________

(a) The bank loan is secured by a registered first mortgage over the land at Lots 10 and 11 Appadene Road,Manjimup. The loan is an interest only loan repayable in full by 31 July 2006. Interest is fixed at a rate of 7.67%per annum.

(b) The vendor loan is secured by a registered second mortgage over the land at Lots 10 and 11 Appadene Road,Manjimup. The loan is an interest only loan repayable in full by 31 August 2006. The loan balance will bereduced as and when funds are received by the Company under the Offer Information Statement dated 19January 2006. Interest is fixed at a rate of 6% per annum on a daily reducing basis.

7. ISSUED CAPITALNumber

3 As at 31 December 2005 3 3___________ ___________ ___________1,250,000 Fully paid ordinary shares of $1.00 each

issued pursuant to an Offer InformationStatement dated 19 January 2006 – 1,250,000

– Costs associated with 19 January 2006 OfferInformation Statement share issue – (120,500)

1,311,992 Fully paid ordinary shares of $2.00 each issuedpursuant to this Prospectus – 2,623,984

– Costs associated with: this share issue – (262,398)___________ ___________ ___________2,561,995 3 3,491,089___________ ___________ ___________

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Independent UnauditedReview Proforma

Consolidated Consolidatedas at as at

31 December 31 December2005 2005

$ $

8. RECONCILIATION OF CASHNote

Cash balance at 31 December 2005 2 470Funds raised pursuant to Offer Information Statement 1(e)(i) 1,250,000Costs associated with Offer Information Statement capitalRaising 1(e)(ii) (120,500)Acquisition of land 1(e)(iv) (464,500)Funds raised pursuant to this Prospectus 1(e)(v) 2,623,984Capital raising costs pursuant to this Prospectus 1(e)(vi) (262,398)___________Proforma cash position 3,027,056___________

9. RELATED PARTY INFORMATION(a) Names of Directors

The names of directors of Truffle Properties as set out in the Corporate Directory of the Prospectus are:Geoffrey Thomas Barrett Walter John EdwardsNicholas Malajcznk

(b) Directors holdings of shares, director’s remuneration and other directors’ interests are set out in the AdditionalInformation section of this Prospectus

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R E S P O N S I B L E E N T I T Y

Under the Project Operations Agreement, all Management

Fees are paid to the Responsible Entity.

The Responsible Entity will also receive fees for inspections,

the copying of documents and the assignments of Growers’

interests as provided in the Rules and $1,000 or less

remaining on termination.

The Responsible Entity will be indemnified from the

Grower’s Receipts, from and against the Prescribed

Proportion of any expense or liability that may be incurred

by the Responsible Entity in legal proceedings in respect of

the Project, except to the extent that any such expense or

liability is attributable to any breach by the Responsible

Entity of its duties under Section 601FC or elsewhere in the

Corporations Act.

If the Project is taxed pursuant to the Tax Act, the

Responsible Entity will be indemnified from the Prescribed

Proportion of that liability out of the 2006 Grower’s

Receipts.

The Responsible Entity is required to pay for any additional

fees in relation to the Project, including auditor’s fees,

registration and filing fees and the costs of preparing

financial reports.

A N N U A L P R O J E C T F E E S

The Grower must pay annual Project Fees. These annual

Project Fees comprise the annual Management Fee, as

payable under the Project Operations Agreement, and the

annual Rent, as payable under the Lease. For details of the

amounts, refer to table below and page 44.

Invoices for Project Fees will be sent directly to Growers by

Truffle Properties Limited and the Responsible Entity.

Truffle Properties Limited will present a pro forma of the tax

invoices for checking by the Responsible Entity before they

are sent. Each tax invoice will show GST separately.

A Grower’s failure to pay the annual Project Fees may result

in termination of the Grower’s Project Operations Agreement

and the Lease.

Years 4-20

Management Fees for Years 4-20 inclusive will increase

annually by either 3% or the Consumer Price Index,

whichever is the greater and are payable in arrears on or

before 1 June in each relevant year.

O T H E R F E E S

Each Grower must pay the Prescribed Proportion of the costs

of any meeting that may be called.

Each Grower who wishes to copy any document of the

Responsible Entity must pay the fee for the time being

prescribed under Schedule 4 of the Corporations Act.

Each Grower must pay a handling fee of $100 (plus GST)

for any deed of assignment of their interest. The Responsible

Entity reserves the right to index this fee.

R E S P O N S I B L E E N T I T Y A N D P R O J E C T F E E S

Annual Management Fees Per Trufferie Allotted On Or Before 30 June 2006

Years Initial Period 1 2 3 4-20

Management Fee $8,800 $6,600 $4,180 $2,640 See above

(including GST)

Due & Payable On or before On or before On or before On or before See above

30 June 2006 1 June 2007 1 June 2008 1 June 2009

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The Responsible Entity for the Project is Watershed

Premium Wines Ltd. It has the primary responsibility to

operate the management investment scheme and to perform

functions conferred on it by the Corporations Act, the

Constitution and the Compliance Plan. The Responsible

Entity holds an Australian Financial Services Licence.

The Responsible Entity acts in four capacities:

(a) as the party issuing Trufferies under this PDS;

(b) as the Grower’s agent for various purposes in relation to

the Project;

(c) as the head contractor for all services provided to the

Grower pursuant to the Project Operations Agreement;

and

(d) as the bare trustee of Application Money, Project Fees,

Receipts and other money.

In all of its capacities, the Responsible Entity has a statutory

obligation under the Corporations Act to act honestly,

exercise the degree of care and diligence that a reasonable

person would exercise if they were in the Responsible

Entity’s position and act in the best interests of Growers.

Principally, the Responsible Entity must ensure that the

money of the Grower is applied in accordance with the

Constitution and the Agreements. The Responsible Entity is

a party to the Agreements with the right to enforce the

Agreements on behalf of Growers.

Note that the offer of Trufferies in the Project and the offer

of Land Shares are two separate and distinct offers. The

Responsible Entity will only be representing the interests of

Growers in relation to the offer of Trufferies in the Project

and is not and will not be directly or indirectly involved in

the offer of Land Shares under this PDS/Prospectus. Those

parts of this PDS/Prospectus dealing with Land Shares

involve matters between investors and Truffle Properties

Limited.

R E S P O N S I B L E E N T I T Y

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The Responsible Entity has prepared a Compliance Plan for

the scheme as required by the Corporations Act to ensure that

it meets its obligations as a Responsible Entity and that the

rights of Growers are protected. The plan identifies the

various obligations under the Corporations Act, the

Constitution, the Lease and the Project Operations

Agreement, Marketing and Management Agreement that effect

the Responsible Entity, identifies risks of non-compliance and

establishes measures designed to address these risks.

In particular, the Compliance Plan:

• includes measures to ensure the Responsible Entity and

its officers and employees comply with their respective

obligations under sections 601FC to 601FE of the

Corporations Act;

• regulates the Compliance Committee’s duties and

functions, its members and its meetings and activities;

• ensures the Responsible Entity keeps adequate records

and complies with the financial reporting requirements

of the Corporations Act, and appoints the Auditors;

• addresses related party issues and sets out the Disputes

Resolution and Complaints Handling Procedures (see

page 41);

• identifies the Project Property, ensures it is held

separately from the property of the Responsible Entity

and any other scheme; and

• establishes procedures in relation to this PDS/Prospectus,

moneys received under the Constitution, the conduct of

business issues, external service providers, the

appointment of agents to market Trufferies, insurance

and the relationship with the Responsible Entity and the

Land Owner.

C O M P L I A N C E C O M M I T T E E

The Responsible Entity has a Compliance Committee. The

responsibilities of the Compliance Committee are to monitor

to what extent the responsible entity complies with the

Compliance Plan and to report any breaches to the directors

of the responsible entity or in certain cases to ASIC. The

Compliance Committee consists of Brian Millmore, Anne

Yvonne Thoume and Bruce Bentley.

Brian Millmore, B Ec ASIA PNA

Brian Millmore is a compliance professional specialising in

the banking, funds management and financial planning

industries. He has substantial experience in dealing with

regulatory compliance issues, implementing and managing

compliance plans and systems and the development and

management of managed funds in both superannuation and

unit trusts.

Brian is a graduate in Economics and holds a Graduate

Diploma in Applied Finance and Investment and diplomas

in accounting and company secretarial practice

Anne Thoume, B.Tec, MBA

Anne Thoume has extensive experience in the commerce,

banking and the trustee industries. Beginning as a trust

officer, and moving into management of Unit Trusts, she has

acted as both Plantation Manager – Trust and Corporate and

Company Secretary of a major international bank. She has

also worked as a senior executive with Perpetual Trustees

Australia Limited and as general Plantation Manager of a

Singaporean Trust company.

As a former director of Professional Funds Management Pty

Ltd Anne was responsible for the day to day operations and

administration of that company’s trustee and corporate

service division.

Compliance Officer – Bruce Bentley

Bruce Bentley is the Compliance Officer for Watershed

Premium Wines Ltd and is responsible for the day-to-day

maintenance of the compliance requirements in accordance

with the Compliance Plan, the Policy and Procedures

Manual of Watershed Premium Wines Ltd, and the

Corporations Act.

C O M P L I A N C E P L A N

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The Responsible Entity has appointed Bruce Bentley as its

Complaints Officer. The Complaints Officer will be instructed

to receive and deal with any expression of dissatisfaction with

the service offered or provided by the Responsible Entity

whether internal or external, by a Grower or otherwise (a

“Complaint”) as follows:

• the Complaints Officer or other person who received the

Complaint acknowledges the Complaint to the

Complainant within 7 days of its receipt;

• the Complaints Officer notes the details of the person

making the Complaint (the “Complainant”), including

contact details, and the specifics of the Complaint and files

that information in a Complaints File;

• the Complaints Officer explains the Complaint handling

procedures to the Complainant;

• the Complaints Officer enters details of the resolution into

the Complaints File;

• and where appropriate, the Complaints Officer

communicates with the Complainant to ensure that the

Complainant remains satisfied;

• if the Complaint requires investigation or for some other

reason is unable to be so resolved by the Complaints Officer

immediately or expeditiously;

• within 7 days of receipt of any Complaint, the Complaints

Officer is to provide written confirmation to the

Complainant that the Complaint is being investigated in

detail; invite the Complainant to provide any further

documentation, information or other materials or details

the Complainant may have regarding the Complaint;

inform the Complainant that the Complainant will receive

a response to its Complaint within 28 days of the date of

the Complaint;

• within 21 days of receipt of any Complaint, the Complaints

Officer is to conduct a thorough investigation of the

Complaint, to properly consider the Complaint and to

prepare a report detailing the nature of the Complaint; the

services or business practices about which the Complaint is

made; the basis for the Complaint; the results of the

investigation; and a recommendation for action and deliver

that report to the Managing Director of the Responsible

Entity;

• within 28 days of the Complaint being made, the Managing

Director of the Responsible Entity is to review the report

provided by the Complaints Officer and decide as to an

appropriate course of action. Once the Managing Director

has reached a decision in relation to the Complaint that

decision is to be provided to the Complainant together with

the reasons for the decision within 28 days of the Complaint

initially being lodged and a copy thereof is to be added to

information regarding the Complaint on the Complaints

file. At the same time of advising the Complainant of the

outcome of the Complaint the Responsible Entity will also

advise the Complainant that they may complain to Financial

Industry Complaints Service Limited should the

Complainant be unhappy with the outcome of the

Responsible Entity’s complaint handling procedure;

• in the event that the Complainant continues to be

unsatisfied, the Complaints Officer is within 14 days, to

prepare a report for the board of the Responsible Entity and

make arrangements for a meeting of the Board of the

Responsible Entity to be called within a further 21 days to

consider the Complaint and to regularly keep the

Complainant informed of all developments in relation to

the resolution of the Complaint;

• in the event that the Complainant continues to be

unsatisfied 7 days after a meeting of the Board of the

Responsible Entity to consider the Complaint, the

Complaints Officer shall provide the Complainant with

information as to appropriate avenues by which the

Complainant can pursue the Complaint including to invite

the Complainant to arbitrate or to have the Complaint

resolved by Financial Industry Complaints Service Limited;

• if the Complainant remains dissatisfied the Complainant

has the right to complain to the Financial Industry

Complaints Service Limited which is overseen by an

independent Council;

• each Complaint is handled in confidence and without

affecting any legal rights of the Complainant should they

remain dissatisfied. ASIC also has a Freecall Infoline 1300

300 630 which the Complainant may use to make a

complaint and obtain information. Any issues arising from

complaints that have material ramifications for other

Growers shall be reported by the Complaints Officer to the

Responsible Entity and the Compliance Committee.

D I S P U T E S R E S O L U T I O N A N D C O M P L A I N T SH A N D L I N G P R O C E D U R E

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P R I N C I P A L C O N T R A C T S

Upon your application to become a Grower being accepted

by the Responsible Entity by you being allotted one or more

Trufferies, you will contemporaneously acquire your

Grower’s Interest and become a party to the following

contracts:

1. The Constitution;

2. The Lease under which you are leased one or more

Trufferies; and

3. The Project Operations Agreement for Growers under

which you engage the Responsible Entity as an

independent contractor to carry out Truffle Farming on

your Trufferies, planting, cultivating and maintaining

innoculated oak and hazelnut trees, Harvesting Truffles,

marketing and sale of the Truffles.

You will also be automatically bound to the Rules.

Summaries of these contracts and the Rules now follow.

Relevant definitions appear in the Glossary on pages 49 to

51.

Copies of these agreements are available free of charge from

the registered office of Watershed Premium Wines Ltd. If

necessary, prospective applicants should seek independent

professional advice on these agreements.

1 . C O N S T I T U T I O N

The Constitution in relation to the Project offered by this

PDS/Prospectus is the Constitution for Oak Valley Truffle

Project between the Responsible Entity and each several

Grower.

Under the Constitution, you appoint the Responsible Entity

as your sole and exclusive agent for the Project. As your

agent, the Responsible Entity may solely and exclusively do

things in relation to the Project.

On your behalf, the Responsible Entity, as agent for the

Growers may:

• receive and hold the Application Money, Project Fees and

Receipts in the Trust Account (which may be interest

bearing), invest that money (and any interest or

accretions on the Receipts) in any Authorised Investment

(pooled with Authorised Investments made on behalf of

other Growers), use the Application Money and Project

Fees in discharging the Grower’s obligations under the

Agreements and Constitution, and deal with the Receipts

in accordance with the Constitution;

• in relation to the Lease and the Project Operations

Agreement, confirm the Grower as a party, enter

into contracts varying or replacing either to better

achieve the purposes of this PDS/Prospectus, monitor

the performance of Truffle Properties Limited’s

obligations and exercise all rights and powers of the

Grower;

• appoint the Auditors to audit and monitor the records of

the Responsible Entity and pay for any audit from

money in the Trust Account, with each Grower to pay

for the cost and expenses in the Prescribed Proportion

thereof;

• upon termination of the Project, or the passing of a

resolution of Growers supporting the proposed sale or

assignment, sell or assign all right, title and interest of

the Grower in the Project and all remaining interest of

the Grower under the Agreements for money, shares or

other consideration and pay for any such sale and receive

sale proceeds;

• indemnify the Responsible Entity in regard to legal

proceedings and tax liability, commence legal or

arbitration proceedings, receive, collect, pay, settle and

compromise any payments, debts, obligations, judgments

or settlements in relation to the Project, lodge and

withdraw a “subject to claim” caveat against the

certificate of title to the land the subject of the

Trufferies; make elections and complete any GST form;

register the Lease with the Department of Land

Administration and execute any deed, agreement,

certificate or other document and do all other things

necessary or desirable under these powers granted to the

Responsible Entity.

The Responsible Entity may delegate any of its functions

under the Constitution.

M A T E R I A L C O N T R A C T D E T A I L S

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Grower’s Relationships

The Grower does not have any relationship or contract with

any other Growers in the Project and all Growers are

independent. The Grower cannot enforce any rights or

claims of or against any other Grower. The Grower’s

relationship with the Responsible Entity and any other

Grower is not a partnership, joint venture or association and

the Grower is not an agent or legal representative of, and

does not have authority or power to act for, the Responsible

Entity or any other Grower.

Indemnities

The Responsible Entity may be indemnified from and

against any expense or liability incurred by the Responsible

Entity in legal proceedings relating to the Project, except to

the extent that the expense or liability is attributable to a

breach of the duties under Section 601FC or elsewhere in the

Corporations Act. If the Project or the Trust Account is taxed

under the Tax Act, the Responsible Entity may be indemnified

out of Receipts.

The Responsible Entity shall not incur any liability to Growers

for doing or failing to do any act or thing it is required to do,

or is frustrated or prevented from doing, by any law, for acting

on a direction of Growers, or for the failure of any Grower to

obtain a tax deduction. The Responsible Entity may act and

rely upon advice obtained from any Expert but shall not be

liable for anything done in good faith in reliance upon that

advice and shall be indemnified from Receipts and the Trust

Account to the extent of any such liability except to the extent

attributable to its own neglect or default. The Responsible

Entity shall not be responsible for any misconduct, mistake,

error of judgment or want of prudence by any Expert.

The Responsible Entity shall not be liable for anything done

or suffered by other parties, except to the extent that any

loss that is attributable to the Responsible Entity’s own act,

neglect or default. It shall not incur any liability for any

action taken in reliance upon any document reasonably

believed by it to be genuine, authorised and (if applicable)

signed by the persons properly responsible therefor.

Provided the Responsible Entity has not breached its duties

under Section 601FC or elsewhere in the Corporations Act,

it shall not be responsible for any loss, costs, damages or

inconvenience resulting from the exercise or non-exercise of

powers, authorities and discretions under the Constitution,

and except by a special resolution of Growers, or as

permitted under the complaints handling procedures of the

Compliance Plan, no Grower shall interfere with or question

the exercise or non-exercise of the Responsible Entity’s

powers, authorities or discretions.

The remaining terms of the Constitution deal with matters

such as

• Trust Account

• Payment of Project Fees

• Dealing With Receipts

• Other Obligations of the Responsible Entity

• Termination of Project

2 . R U L E S

Acceptance of Applications

Within 2 months after the acceptance of any Application

under this PDS/Prospectus, and, when next accounting to a

Grower after any change in the holding of the Grower in the

Register, the Responsible Entity shall issue to the relevant

Grower a Trufferie statement.

Assignment or Transmissions of Trufferies

No assignment or transmission of any Trufferies may be

registered unless an instrument of transmission or a deed of

assignment in the form set out in the Rules, duly stamped,

has been delivered to the Responsible Entity.

Quorum

No business shall be transacted at any meeting unless a

quorum is present at all times. The quorum necessary for a

meeting of All Growers at which an ordinary resolution is to

be proposed shall be two Growers and for a meeting at

which a special resolution is to be proposed shall be persons

holding or representing by proxy more than 5% of the

number of Trufferies issued to the Growers for whom the

meeting has been called.

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3 . L E A S E ( A N D S U B - L E A S E )

The Lease is entered into between Truffle Properties Limited,

the Responsible Entity and each Grower (as Lessee).

Lease Term

The Lease (and Sub-Lease) is for a Lease Term of slightly

more than 20 years commencing on the date of the

Allotment of the Trufferie to you under this PDS/Prospectus

and expires on 30 June 2026.

Rent Payable

For Growers allotted on or before 31 May 2006 Rent is

$633.60 (including GST) per annum per Trufferie; the first

payment of which is payable on or before 31 May 2006 and

the remaining payments are payable in arrears on 1 June in

each year in a single instalment, Indexed annually from 1

June 2007.

Truffle Properties Limited shall be entitled to interest on

outstanding Rent as simple interest at the Bank Bill Rate

plus seven basis points.

Ownership of Land Improvements

The Grower acknowledges that improvements to be

constructed on the Land, including the Irrigation, are the

property of Truffle Properties Limited.

Grower’s Covenants

The Grower covenants that throughout the Term, the

Grower shall with respect to the Trufferies:

• Pay Rent to Truffle Properties Limited (as Project Fees

under the Constitution).

• Keep accurate records of Rent payments.

• Prepare and cultivate the oak and hazelnut trees.

• Prevent or combat land degradation.

• Tend to the oak and hazelnut trees according to

principles of good siviculture.

• Maintain fences on the Land.

• Keep the Trufferies in good and substantial repair and

condition and repair all damage to roads and fences

resulting from the performance of the Grower’s

obligations under the Lease.

• Do things reasonably required to eradicate rodents,

vermin, noxious weeds, rabbits, kangaroos and pests and

procure pest exterminators for that purpose.

• Comply with the Bush Fires Act, 1954, and take all

proper measures to ensure that any fires which may

occur or threaten the Vines are properly controlled and

supervised.

• Not lodge or register any absolute caveat against the

certificate of title to the land the subject of the

Trufferies

• Within 60 days of the expiration of the Lease Term,

remove from the Trufferies all Truffles, vegetation other

than Vines, plant, equipment and other items brought

onto the Trufferies by or on behalf of the Grower and

leave all roads, paths, oak and hazelnut trees, Irrigation

and fencing. Truffle Properties Limited is legally entitled

to any Truffles not Harvested, any plant, equipment and

items not removed and any produce which grows after

determination of the Lease.

• The Grower shall not use or permit any other persons to

use the Trufferies or any part thereof for any purpose

other than cultivation and Harvesting of Truffles.

Truffle Properties Limited Covenants

Truffle Properties Limited shall let the Grower hold and

enjoy the Trufferies without interruption, shall provide its

consent to the registration of the Lease or the Umbrella

Lease or other instrument on the Land’s certificate of titles,

shall duly pay all taxes, rates and other charges in respect of

the Land and all costs of preparation of the Lease, and shall

provide the Grower or the Responsible Entity, at its own

expense, plans and details necessary to identify the

Trufferies. Truffle Properties Limited will also ensure that

there is sufficient water available to the Grower for the

cultivation of the truffle innoculated oak and hazelnut trees

during the Term.

Reduction in Viability of Trufferies

If there is damage to the Trufferies, or if the Grower, Truffle

Properties Limited and the Responsible Entity agree it is no

longer commercially viable to carry out Truffle Farming on

any of the Trufferies, the Parties may assess and determine

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the extent of the damage or reduction and may either

terminate the obligations created by the Lease or reduce the

Trufferies by the area damaged or no longer viable and

correspondingly reduce the Rent payable in proportion to

the said reduction in the Trufferies.

Termination

Truffle Properties Limited shall be entitled to terminate the

Lease if the Grower is declared bankrupt, goes into

liquidation or has a receiver appointed, or the Grower fails

to perform any covenants or conditions in the Lease or

Project Operations Agreement and the default continues, in

the case of an obligation to pay money, for 14 days, or in

any other case, for three calendar months after receipt by the

Grower of written notice from Truffle Properties Limited

specifying the default and requiring it to be rectified. The

Grower shall be entitled to terminate its obligations under

the Lease if Truffle Properties Limited is in default of any

obligation under the Lease and the default continues for a 3

calendar months after receipt by Truffle Properties Limited

of written notice from the Grower specifying the default and

requesting that it be remedied.

If the rights of the Grower are terminated as a result of

default by the Grower the Grower shall not be entitled to

any compensation in respect of money contributed or

Receipts in respect of the Truffles grown on the Trufferies

pursuant to the Lease.

Prohibited Activities

The Grower shall only use the Trufferies for the planting,

cultivation and maintenance of truffle innoculated oak and

hazelnut trees and the Harvesting of Truffles and shall not do

or permit any nuisance or cause any damage to other Growers,

Truffle Properties Limited or owners of adjoining land.

The Grower shall not erect any buildings or structures, or

use the Trufferies for accommodation, residential,

recreational or illegal purposes, shall not light fires and shall

not store any inflammable, noxious or dangerous chemicals

on the Trufferies or Land in a way which may result in

damage to the Trufferies, the oak and hazelnut trees, any

livestock or other plants and crops or any water reserves.

Assignment

The Grower may only assign the Lease in accordance

with the Constitution and the Rules, and otherwise may

not assign, sub-lease or part with possession of the

Trufferies.

4 . P R O J E C T O P E R A T I O N S

A G R E E M E N T F O R G R O W E R S

The Project Operations Agreement is entered into between

the Responsible Entity and each Grower.

Appointment of Responsible Entity

The Grower engages the Responsible Entity, as an

independent contractor, and not as agent, to carry out

Truffle Farming, identify and Harvest the Truffles, marketing

and sale of the Truffles and carry out the duties and

obligations detailed in the Project Operations Agreement

during the Term.

The Responsible Entity may delegate any of its obligations

created under this Project Operations Agreement to any

other entity but still remains liable for all its obligations.

Term

The Term of the Project Operations Agreement is from the

date of allotment until all Truffles has been sold, Receipts

have been paid to the Grower, and all the necessary accounts

and reports have been given.

Responsible Entity’s Fees

The Responsible Entity will be entitled to the Management

Fees for each Trufferie as are set out on page 13. The Grower

is entitled to 100% of the Net Proceeds from the sale of the

Truffles that are attributable to the production of up to the

equivalent of 70 kilograms per hectare.

The Responsible Entity and the Grower are entitled in the

proportion of 50% to the Responsible Entity and 50% to the

Grower of the Net Proceeds from the sale of the Truffles that

are attributable to the production in excess of 70 kilograms

per hectare.

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If the Grower fails to pay the Responsible Entity’s fees by the

date payable under the Project Operations Agreement, the

Responsible Entity may terminate the Project Operations

Agreement and the Grower must pay interest on the

outstanding amount at the Bank Bill Rate simple interest

plus seven basis points until payment is made.

Truffle Farming

The Responsible Entity agrees to carry out or cause to be

carried out the services and duties set out in the Project

Operation Agreement which are usual or necessary for

carrying on Truffle Farming, including the following, in

accordance with sound viticultural and environmental

practices. These include carrying out any relevant duties or

obligations of the Grower under the Lease and also to:

• Continue the cultivation and maintenance of the

Trufferies pursuant to the Project Operations Agreement.

• Keep current with a reputable insurer a public risk

insurance policy in respect of the Land to cover the

liability of the Grower and such other persons nominated

by the Responsible Entity, in which the limit of public

risk shall be not less than $5,000,000, or such other

amount as the Responsible Entity directs, and insurance

on behalf of the Grower for hail, fire, malicious damage,

lightning and explosions for the Initial Period and Year 1.

• Maintain artesian bore, pumps and irrigation supplies to

ensure the water supply is adequate at all times for

Truffle Farming.

The Responsible Entity and its agents and contractors shall

be allowed full and free access to the Trufferies to fulfill the

Responsible Entity’s obligations in relation to Truffle

Farming. The Responsible Entity shall not use the Trufferies

for any activities prohibited under the Lease (as set out

above), shall comply with all Regulations, Notices, Orders or

By-Laws applying to the Trufferies, and shall at all times give

the proprietors of any Trufferie adjoining the Trufferies

unimpeded use of any existing access roads, pathways or fire-

breaks on the Trufferie. The Responsible Entity shall within

60 days of the expiration of the Term, remove all plant,

equipment and other items brought onto the Trufferies by or

on behalf of the Responsible Entity.

Growers’ Rights

The Grower has the right to inspect any document or

information relevant to Truffle Farming (subject to

confidentiality requirements). The Responsible Entity will

give due consideration to any opinions received in writing

from the Grower, but is not obliged to follow such opinions.

Reports

The Responsible Entity shall provide reports to the Grower

by 31 July of each year summarising details of all Truffles

harvested in the preceding season for the Project and all

Truffles held by the Project as at 30 June in the preceding

financial year.

Termination

The Project Operations Agreement will terminate if the

Responsible Entity or the Grower is declared bankrupt or

goes into liquidation, if the Lease is terminated, if the

Grower fails to pay any amount for longer than 14 days from

notification from the other party of that failure, or if the

Grower or Responsible Entity fails to carry out any

substantial duty under the Project Operations Agreement or

the Lease within 3 months of notification from the other

party of that failure.

Other terms covered in this Agreement deal with

• Planting, cultivation and maintenance of truffle

innoculated oak and hazelnut trees

• Harvest

• Truffle Production, Marketing and Sale

• Costs

O T H E R M A T E R I A L

C O N T R A C T S

1. Standing Offer by Truffle Properties Limited and the

Responsible Entity to enter into the Lease with every person

who becomes a Grower under this PDS/Prospectus.

2. Consultancy Agreement

Agreement between the Responsible Entity and Treetec

Consulting Pty Ltd, dated 23 March 2006, pursuant to which

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Treetec Consulting Pty Ltd agrees to provide the exclusive

services of Dr Nicholas Malajczuk as the Truffle Consultant to

the Responsible Entity and to provide technical support to the

Responsible Entity for a term of ten (10) years.

The remuneration payable under this Consultancy

Agreement has been excised from inspection of copies of the

agreements on the ground of confidentiality pursuant to

ASIC Policy Statement 79; on the ground that disclosure

would result in unreasonable prejudice to the Project.

3. Umbrella Lease

Lease from Truffle Properties Limited to the Responsible

Entity which is to be registered on the title to the Land.

4. Terms Agreement

Parties

The Responsible Entity and each Terms Grower and who has

selected and been approved by the Responsible Entity of one

of the terms payment options on the Terms Application Form.

Principal and Interest Payments

In consideration of Terms Grower applying for the number

of Grower’s Trufferies applied for, the Responsible Entity (on

its behalf and on behalf of the Owner) agrees that the

Management Fees and Rent for the Initial Period may be

paid not as provided in the Project Operations Agreement

and in the Lease but as provided under this Clause. The

Terms Grower agrees to pay to the Responsible Entity and

the Responsible Entity (on its own behalf and on behalf of

the Owner) agrees to accept the Principal, interest at 11.5%

per annum and all other monies owed under the Project

Operation Agreement and the Lease for the Initial Period in

monthly instalments as detailed in the terms payment option

selected by the Terms Grower.

The first monthly instalment is payable as detailed in the

Growers schedule of terms payments. Payments are to be

made by direct debit. The Responsible Entity may charge the

Terms Grower additional interest on overdue amounts at a

rate of 3% per annum calculated on a daily basis from the

due date until payment is received.

Early Repayment of Terms Agreement

If a Terms Grower repays the balance of the Principal, and any

other additional costs early, the Terms Grower also agrees to

pay, whichever is the greater of three months interest charges

or the break costs of the fixed rate funding facility.

Security

The Terms Grower charges in favour of the Responsible

Entity all the Terms Growers rights, title and interest in its

Trufferie(s) and in the Project Operations Agreement and

Lease as security for payment of amounts due under the

Terms Agreement and performance of duties under the

Project Operations Agreement and Lease. No other charge or

security interest may be created by the Terms Grower over

the Trufferies. At the Responsible Entity’s request, a

corporate Grower must register the security and pay the costs

of, and incidental to, stamping and registration.

Terms Grower’s Warranties

The Terms Grower warrants that, amongst other things, it has

the power and authority to enter into the Terms Agreement

and information provided to support its application for

payment terms is complete, correct and not misleading.

Default

The Terms Grower will be in default of the Terms Agreement

if:

(a) it does not pay amounts due under the Terms Agreement

when due;

(b) it fails to comply with the Terms Agreement, Project

Operations Agreement or Lease;

(c) the Terms Grower fails to pay for the Land Shares within

60 days of Allotment or in the event that the Terms

Grower is not the entity that has applied for the Land

Shares, that entity has failed to pay for the Land Shares

within 60 days of Allotment to the Terms Grower;

(d) it becomes bankrupt, enters liquidation, has a receiver

appointed to its undertaking or enters into a repayment

or compromise arrangement with any of its creditors;

(e) the security granted to the Responsible Entity becomes

enforceable; or

(f ) any Terms Grower warranty is or becomes false or

misleading.

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Where the Terms Grower is in default the Responsible Entity

may in writing terminate the Terms Agreement whereupon:

(a) the balance payable under the Terms Agreement together

with accrued costs becomes immediately due and

payable; and

(b) the Responsible Entity may:

(i) take legal action;

(ii) take possession of the secured property whereupon

the Terms Grower ceases to be a Grower in the

Project;

(iii) the Terms Grower is entitled to pay for all the

Responsible Entity’s legal costs and expenses on an

indemnity basis for taking any legal action against

the Terms Grower; and

(iv) do anything an owner of the secured property is

entitled to do.

The Terms Grower irrevocably appoints the Responsible

Entity to be its attorney to sign any documents and do any

acts necessary to give effect to enforcement of the security

and to do anything the Terms Grower can do under the

Terms Agreement, Lease or Project Operations Agreement.

Costs and Charges

The Terms Grower is required to pay stamp duty, bank

charges and other statutory financial duties or imposts

imposed on the Terms Agreement.

Assignment

The Responsible Entity may transfer or assign its rights and

obligations under the Terms Agreement.The Terms Grower

may not transfer or assign its rights or obligations under the

Terms Agreement.

Place and Jurisdiction of Law

The Terms Agreement shall be construed and take effect in

accordance with and the rights and obligations of the parties

and shall be governed by the laws of the State of Western

Australia. Each of the parties submits to the jurisdiction of

the courts of the State of Western Australia and it may be

pleaded to bar any action or suit brought in any court in any

other place in the world.

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Agreements means the Lease and the Project Operations

Agreement entered into by the Grower;

AFS Licensee means any person who holds an Australian

Financial Services License;

Allotment means the allocation of the Trufferies to the

Growers under this PDS/Prospectus;

Applicant means any person who has made an Application

for a Trufferie, or Trufferies, and Land Shares;

Application means an application to become a Grower and an

offer to enter into the Lease and the Project Operations

Agreement on the Application for Trufferies, and an

Application for Land Shares, included in this PDS/Prospectus

and as specified in the Instructions for Lodgement;

Application Money is the money payable per Investment

Parcel which is described on page 3;

ASIC means the Australian Securities and Investments

Commission;

Associate has the same meaning as defined in the

Corporations Act;

Auditors means the auditor or firm of auditors for the time

being of the Project and includes any additional or

substituted auditor or firm;

Authorised Investments means:

(a) money;

(b) interest bearing deposits at call or for a term not

exceeding 3 months with or without security with any

bank or cash management fund;

(c) bank accepted and/or bank endorsed bills of exchange

and promissory notes; and

(d) negotiable certificates of deposit issued by or bills of

exchange drawn, accepted or endorsed by any bank;

Bank Bill Rate means the Bank Bill Swap Reference Rate for

90 day bank bills last published in the “Australian Financial

Review”;

Complainant means a person making a Complaint;

Complaint means any expression of dissatisfaction with the

service offered or provided whether internal or external, and

if external, whether by a Grower or otherwise;

Compliance Committee means the Compliance Committee

as required under Section 601JA of the Corporations Act, as

appointed by the Responsible Entity and as established by

Clause 5 of the Compliance Plan;

Compliance Officer means the officer of that name

appointed under the Compliance Plan;

Compliance Plan means the Compliance Plan for the time

being adopted by the board of directors of the Responsible

Entity and lodged and registered with ASIC;

Constitution means the amended Constitution for the Project

so described on pages 42 to 43 of this PDS/Prospectus;

Corporations Act means the Corporations Act 2001;

Gross Proceeds means the sum attributable to the total

proceeds received by the Responsible Entity from the sale of

the Truffles;

Grower means each several person (or in the case of joint

Applicants or successors or permitted assigns, each of those

persons) who becomes a party to the Constitution (as a

Grower) as a result of either:

(a) acceptance by the Responsible Entity of an Application

and an allotment of Trufferies pursuant to the

Application; or

(b) a transmission, assignment or other disposal pursuant to

the Constitution; and who remains registered under the

Constitution as the holder for the time being of any

Trufferies;

Grower’s Prescribed Proportion means the following fraction:

PT

where:

P is the number of Trufferies registered in the name of the

Grower; and

T is the total number of Trufferies registered in the name

of Growers;

G L O S S A R Y O F T E R M S

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GST means the goods and services tax imposed under A

New Tax System (Goods And Services Tax) Act 1999 and all

other acts, statutes or other laws implementing the GST

including all amendments;

Harvest means the identification by trained dogs of the Truffles

on the Trufferies and the extraction of the Truffles and their

delivery to a loading point either on or adjacent to the Land,

whether conducted as one operation or more than one operation;

Harvest Fee means a sum equal to five per cent (5%) of the

Gross Proceeds and is payable to the Responsible Entity for

making all the arrangements for Harvesting, freighting and

making the Truffles available for sale;

Hazel Hill means the 21 hectare trufferie located on Seven

Day Road Manjimup and which was established in 1997 by

Hazel Hill Pty Ltd, ACN 077 946 073;

Indexed means increased or decreased according to changes

in the consumer price index as set out in detail in the

Constitution and the Project Operations Agreement;

Initial Period means the period from and including the date

of Allotment to 30 June 2006;

Input Tax Credit means an input tax credit that a taxpayer

is entitled to for creditable acquisitions and creditable

importations that are attributable to the tax period;

Investment Parcel means one Trufferie and 3,508 Land Shares;

Irrigation means the irrigation pipes and fittings installed

by the Land Owner and required under the Trufferie

Establishment and Maintenance Plan;

Land means all that land described as Lot 102 on Deposited

Plan 47397 and being the whole of the land comprised in

Certificate of Title Volume 2156 Folio 97, such land

comprising 86.2299 hectares in total area; and all that land

described as Lot 11 on Diagram 92046 and being the whole

of the land comprised in Certificate of Title Volume 2616

Folio 415, such land comprising 41.801 hectares in total area;

Land Owner means Truffle Properties Limited

ACN 116 228 114;

Land Shares means ordinary shares in Truffle Properties

Limited;

Lease means the agreement between Truffle Properties

Limited, the Responsible Entity and each individual Grower

pursuant to which Truffle Properties Limited leases one or

more Trufferies to the Grower;

Lease Term means the term of the Lease;

Management Fees means the fees payable by the Grower to

the Responsible Entity in accordance with the Project

Operations Agreement;

Manager means Truffle Projects Pty Ltd ACN 116 228 105,

being the party appointed by the Responsible Entity under

the Marketing & Management Agreement to supervise, carry

out, manage and administer the performance of Truffle

Farming, harvest the Truffles, marketing and sale of the

Truffles between the Manager and the Responsible Entity;

Marketing & Management Agreement means the agreement

for the supervising, carrying out, managing and

administering of the performance of Truffle Farming,

harvesting of the Truffles, marketing and sale of the Truffles

bewteen the Manager and the Responsible Entity;

Net Proceeds means the sum equal to the Gross Proceeds

less the relevant Harvest Fee;

Oak Valley means the Project, the Responsible Entity and

Truffle Properties Limited;

Offer means the offer of Trufferies and the opportunity to

be a Grower and the offer of Land Shares, by virtue of this

PDS/Prospectus;

Offer Information Statement means the offer dated 19 January

2006 by Truffle Properties Limited to invite investors to take up

1,250,000 ordinary shares at an issue price of $1 each;

PDS/Prospectus means this combined product disclosure

statement and prospectus dated 24 March 2006;

Project means Truffle Farming on the Trufferies, harvesting

Truffles, marketing and sale, and the receipt of the proceeds

from the sale of Truffles for the managed investment scheme

Oak Valley Truffle Project ARSN xxx xxx xxx;

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Project Fees means the Application Money, Management Fees,

and interest or expenses payable by the Grower to the

Responsible Entity under the Project Operations Agreement,

and the Rent or other fees, costs, interest or expenses payable by

the Grower to Truffle Properties Limited under the Lease;

Project Operations Agreement means the agreement

entered into by each Grower and the Responsible Entity to

carry out Truffle Farming, harvesting Truffles, marketing and

selling Truffles and carry out the duties and obligations

during the Term;

Project Property means the interest of each Grower in:

(a) the Application Money for Trufferies;

(b) Project Fees;

(c) Receipts;

(d) any other entitlement to money;

(e) the Truffles and any other property which the Grower

acquires directly or indirectly with, or with the proceeds

of, the money described in (a) or (b); and

(f ) income or property derived, directly or indirectly, from

the money or property described in (a), (b), (c), (d) or (e);

Receipts means:

(a) any refunds of Management Fees or other payments made

by the Grower;

(b) the gross proceeds from sale of the Grower’s Truffles;

(c) proceeds from any insurance claims to which the Grower

is entitled;

(d) proceeds of any action, suit or proceeding or settlement

thereof relating to the Project to which the Grower is

entitled;

(e) payments made by a Grower to the Responsible Entity

who elects to sell his or her own Truffles in payment of

outstanding costs and fees prior to the Grower collecting

the Grower’s Truffles;

(f ) receipts from the sale of the Project or all rights of the

Grower in relation to the Project; and

(g) any other receipts in relation to the Project to which the

Grower is entitled;

Register means the register of Growers;

Rent means the rent payable to Truffle Properties Limited by

the Grower under the Lease;

Responsible Entity means Watershed Premium Wines Ltd

ACN 089 812 591 or other Responsible Entity for the time

being under the Constitution, in its capacity as agent for the

Growers whether original, additional or substituted;

Rules means the Rules laid down by the Responsible Entity

under the Constitution as modified or substituted;

Standing Offer means the standing offer referred to on page

46 of this PDS/Prospectus;

Tax Act means the Income Tax Assessment Act, 1936 Cth

and Income Tax Assessment Act, 1997 Cth;

Terms Agreement means the terms agreement entered into

by a 2006 Terms Grower;

Term means the term of the Project Operations Agreement;

Terms Grower means a Grower that has accepted to pay its

Project Fees under the Terms Agreement;

Terms Payment Option means the options for payment of

the Application Money described on page 10;

Trufferie(s) means one of those 374 specified areas of the

Land or other area, each identified individually by a number,

with each Trufferie being 0.02 hectares in size which are to

be leased to the Grower under the Lease;

Truffle means the French black truffle or Tuber

melanosporum to be farmed on the Trufferies;

Truffle Farming means the preparing and cultivating of the

Trufferies, maintaining the truffle innoculated oak and hazelnut

trees as prescribed in the Project Operations Agreement in a

manner consistent with good siviculture standards;

Umbrella Lease means the leases over the Land which have

been or will be registered on the titles of the Land, which is

in favour of the Responsible Entity as agent for the Growers;

Year 1 means the period from and including 1 July 2006 to

30 June 2007;

Year 2 means the period from and including 1 July 2007 to

30 June 2008; and

Year 3 means the period from and including 1 July 2008 to

30 June 2009.

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T H E I S S U E R A N D

P R O M O T E R S

The issuer of the Trufferies is the Responsible Entity. The

promoters of the offer of Land Shares are Truffle Properties

Limited and its directors.

L A B O U R S T A N D A R D S A N D

E N V I R O N M E N T A L , S O C I A L

A N D E T H I C A L

C O N S I D E R A T I O N S

The Responsible Entity does not take into account labour

standards or environmental, social or ethical considerations

for the purpose of selecting, retaining or realising

investments in the Project.

U P D A T I N G I N F O R M A T I O N

I N T H I S P D S

In the event that there is information in this PDS which is

subject to a change that is materially adverse to applicants,

applicants will be informed by a Supplementary PDS.

However, there may be other information which is not

materially adverse to applicants and is subject to change

from time to time. In that event, the updated information

will be made available on the Project website

www.watershedwines.com.au

C O N S E N T S

The following have each given (and have not prior to

lodgement of this PDS/Prospectus with ASIC withdrawn)

their written consent to the inclusion of the reports,

sections, express and implied references and statements

detailed below in the PDS/Prospectus in the form and

context in which each is included, and for the purpose of

Section 729 of the Corporations Act were each involved only

in the preparation of those reports, sections, express and

implied references and statements:

RSM Bird Cameron Corporate Pty Ltd for inclusion of the

Independent Accountant’s Report.

The Responsible Entity for inclusion of all parts of this

PDS/Prospectus, on behalf of Truffle Properties Limited ,

except for the sections headed Independent Accountant’s

Report, Independent Truffle Report and any express or

implied references to those reports throughout the

PDS/Prospectus.

Dr Mike Amaranthus for inclusion of the Independent

Truffle Report and the implied references to the Independent

Truffle Report throughout this PDS/Prospectus.

D I S C L O S U R E

The Responsible Entity will receive Management Fees as set

out in the Project Operations Agreement.

Truffle Properties Limited will benefit from the Project by

the receipt of rent as set out in the Lease.

The following persons hold or control in Truffle Properties

Limited and the Responsible Entity the beneficial interests

directly or indirectly, expressed in percentage terms, in the issued

share capital of those companies set out in the table below.

A D D I T I O N A L I N F O R M A T I O N

Promoter and/or Director Responsible Entity Truffle Properties Limited Manager

Wally Edwards nil nil 20.00%

Geoffrey Thomas Barrett 14.43% 2.34% 20.00%

Ronald George Martin 16.86% 3.90% 7.50%

Richard Hill 13.12% 0.39% 7.50%

Laurence Factor 11.96% nil 7.50%

Peter Charles Sartori 2.93% nil 7.50%

Nicholas Malajczuk nil nil 20.00%

Truffle Properties Limited nil n/a nil

Phillip Henry Dale Fletcher nil nil nil

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53

RSM Bird Cameron Corporate Pty Ltd is to receive fees of

$5,500.

Dr Mike Amaranthus has received $20,000 for the

preparation of the Independent Expert’s Report.

R E G I S T E R S

A Register of Growers for the Oak Valley Truffle Project, and

of Shareholders in Truffle Properties Limited will be

maintained by the Responsible Entity and Truffle Properties

Limited respectively at their registered office sand may be

inspected by any member of the public during normal

business hours.

C O M M I S S I O N

The Responsible Entity and Truffle Properties Limited have

agreed to pay certain commissions to AFS Licensees for

procuring Applications for Trufferies and Shares respectively,

up to 5% of the Application Money (excluding GST), and in

addition the Responsible Entity and Truffle Properties Limited

may compensate AFS Licensees that have provided assistance

of an administrative or marketing nature for the cost of their

support. In addition, the Responsible Entity may also pay up

to 5% of the Management Fee (excluding GST) payable in

relation to the management fees due 1 June 2007.

C O S T S O F T H E I S S U E

The costs of the issue including commissions, fees for

reports, PDS/Prospectus costs and scheme costs are payable

by the Responsible Entity.

E N H A N C E D D I S C L O S U R E

S E C U R I T I E S

Trufferies and Land Shares are enhanced disclosure securities

within Section 111AD of the Corporations Act, and the

Responsible Entity and Truffle Properties Limited is subject

to regular reporting and disclosure obligations. Documents

lodged pursuant to these requirements may be obtained

from, or inspected at, any office of ASIC. Further, the

Responsible Entity and Truffle Properties Limited will

provide a copy of the most recent annual financial report of

the Project / Truffle Properties Limited lodged with ASIC by

the Responsible Entity / Truffle Properties Limited, any half-

year financial report of the Project / Truffle Properties

Limited lodged with ASIC after the lodgment of that annual

financial report and before the date of this PDS/Prospectus,

and any continuous disclsoure notices given in relation to

the Project / Truffle Properties Limited after lodgment of

that annual financial report and before the date of

lodgement of the PDS/Prospectus free of charge as soon as

practicable, and in any event within 5 days, after receiving

the person’s request, to any person who asks for it during the

currency of the PDS/Prospectus.

A P P L I C A T I O N O F T H I S

P D S / P R O S P E C T U S

This PDS/Prospectus has been prepared to comply with the

securities laws of Australia. The offer of Trufferies and Land

Shares contained in this PDS/Prospectus is available to

persons receiving this PDS/Prospectus within Australia.

D I R E C T O R S ’ C O N S E N T T O

I S S U E

For the purposes of Sections 1015B and 720 of the

Corporations Act, each of the directors of the Responsible

Entity and Truffle Properties Limited has given their written

consent to the lodgement of this PDS/Prospectus with ASIC.

S I G N I N G O F

P D S / P R O S P E C T U S

For the purpose of lodgement of this PDS/Prospectus with

ASIC, Geoffrey Thomas Barrett on behalf of the Responsible

Entity and on behalf of Truffle Properties Limited, has

signed this PDS/Prospectus pursuant to Section 351 of the

Corporations Act.

Geoffrey Thomas Barrett

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1. To become an investor, an Application must be submitted. Different entities may apply for Trufferies and Land Shares.

2. If there are different Applicants, each Applicant must be careful to complete a separate Application form.

3. If an Application is lodged by an individual or individuals it must be signed personally.

4. In the case of joint Applicants, all must sign as well as providing their full names, addresses and phone numbers in the

spaces provided.

5. If this Application is lodged by a company it must be executed, under its common seal (if applicable), with its ACN/ABN

and in accordance with its Constitution.

6. Applications may be executed under Power of Attorney. If so signed, the attorney must warrant that the attorney has no

knowledge of any revocation of that power.

7. All application cheques for Investment Parcels should be made payable to “Watershed Premium Wines Ltd” and cheques

crossed “Not Negotiable”.

8. Mail or deliver the Application with the following, where applicable; cheque, Terms Application Form and/or completed

credit card authorisation, to Oak Valley Truffle Project, c/- PO Box 1186, Canning Vale BC, WA 6970 or to any authorised

representative or AFS Licensee for forwarding to the Responsible Entity.

9. This PDS/Prospectus contains information about investing in Land Shares and Trufferies. This PDS/Prospectus should be

read in its entirety before any Application is made. Any person who provides any other person with access to this

Application Form must at the same time and by the same means give that other person access to the PDS/Prospectus. At any

time during the currency of the PDS/Prospectus the Responsible Entity, AFS Licensee or authorised representative, will send

an electronic or paper copy of the PDS/Prospectus, including this Application Form, to any person on request, without

charge. If you wish to receive a copy of this PDS/Prospectus please call us on (08) 9456 3811 or go to

www.watershedwines.com.au

10. PRIVACY DISCLOSURE

The Responsible Entity And Truffle Properties Limited collects information about you in your Application Form for the

purposes of processing your Application and, if Allotment is made, to administer your investment and to report to you. You

agree, by submitting your Application Form, that the Responsible Entity and Truffle Properties Limited may disclose that

information to any independent share registry, to the Responsible Entity and to any other agents, contractors or service

providers including banks and professional advisers. The Corporations Act requires the Responsible Entity and Truffle

Properties Limited to include information about you (including name, address and details of the Trufferies and Land Shares

you hold) in their respective registers. The information contained in the registers must remain there even if you cease to be

a Grower/Shareholder. This information may also be disclosed by the Responsible Entity and Truffle Properties Limited to

any independent share registry, agents, contractors or service providers including banks and professional advisers. We may

use your contact details to let you know of future offers involving the Responsible Entity, but if you do not want to receive

these, please contact the Responsible Entity on (08) 9456 3811. If you do not provide the Responsible Entity or Truffle

Properties Limited with the information requested in the Application Form, your Application may not be processed. You

have a right to seek access to the information the Responsible Entity or Truffle Properties Limited holds about you, and (in

writing) to ask the Responsible Entity or Truffle Properties Limited to correct any information which is held about you and

which you believe is inaccurate, incorrect or out of date.

11. TAX FILE NUMBER

It is not compulsory to give us your TFN. However, if you do not provide the TFN, then to the extent that any taxable

distribution is payable to you, we may be required to withhold tax at the rate of 48.5% or the maximum marginal rate

prevailing at the time plus the Medicare Levy. Instead of giving us your TFN, you may give us your ABN.

I N S T R U C T I O N S F O R L O D G E M E N T

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First Applicant:First Name Middle Surname

Joint applicant:First Name Middle Surname

Company Applicant:

Company ACN/ABN

Contact Details:

Address

City/Suburb State Postcode

Phone (Work) Phone (Home) Facsimile

Mobile Email

ABN Tax File or Exemption Number

If you wish to hold your Land Shares in the name of the Applicant above please tick this box . If you have ticked this boxplease do not complete Part B.

2 . N U M B E R O F T R U F F E R I E S

Cash No. of Trufferies Terms Payment Options No. of Trufferies

3 . M E T H O D O F P A Y M E N T

1. FOR CASH OPTION, PAYMENT OF LAND SHARES OR DEPOSIT FOR TERMS PAYMENT OPTION (1 Year Option Only)

Cheque:

OR

Credit Card – please debit my: Bankcard Mastercard Visa Card

Card number: Expiry date

Debit the amount of $ ______________.

Cardholder’s name: Phone no.:

Cardholder’s Signature Date:

/

P A R T A – T R U F F E R I E ( S ) A P P L I C A T I O N

A F S L I C E N S E E ’ S S T A M P

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First Applicant:First Name Middle Surname

Joint applicant:First Name Middle Surname

Company Applicant:Company ACN/ABN

Contact Details:Address

City/Suburb State Postcode

Phone (Work) Phone (Home) Facsimile

Mobile Email

ABN Tax File or Exemption Number

2 . N U M B E R O F T R U F F E R I E S

No. of Land Shares

For each Trufferie applied for in Part A, you must apply for 3,508 Land Shares

3 . M E T H O D O F P A Y M E N T .

1. PAYMENT OF LAND SHARES

Cheque:

OR

Credit Card – please debit my: Bankcard Mastercard Visa Card

Card number: Expiry date

Debit the sum of $ ______________

Cardholder’s name: Phone no.:

Cardholder’s Signature Date:

/

P A R T B – L A N D S H A R E A P P L I C A T I O N

A F S L I C E N S E E ’ S S T A M P

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4 . T E R M S A N D C O N D I T I O N S

1. I/We the undersigned apply for the number of Trufferies and Land Shares specified above and offers to enter into the Leaseand Project Operations Agreement as a Grower and acknowledges that upon this Application being accepted in whole orpart, I/We will be bound to the Lease and Project Operations Agreement as a Grower.

2. I/We agrees to be bound to the Constitution and the Rules as a Grower in the Project and to the Constitution of TruffleProperties Limited.

3. I/We have read and understood the terms of the PDS/Prospectus and have had the opportunity to seek independentprofessional advice.

4. I/We acknowledge that Watershed Premium Wines Ltd ("Watershed") is not bound to accept my Terms Application (ifapplicable).

5. I/We have not relied on any statements or representations made by any party (including Watershed and its officers, agentsand employees) prior to applying, other than those written representations made in the PDS/Prospectus.

6. I/We acknowledge that I/we have had the opportunity to read the Terms Agreement and seek independent legal advice aboutsame (if applicable).

7. I/We agree to be bound by the terms of the Terms Agreement and the Direct Debit Request Service Agreement (if the TermsPayment Option set out above is selected).

8. I/We acknowledge that the full amount of any application monies is immediately due and payable upon signing thisApplication Form. Terms are offered to approved applicants.

9. I/We declare that I/we intend to continue in the Project until the Project concludes.

P O W E R O F A T T O R N E Y

The Applicant irrevocably appoints a director for the time being of Watershed (“Attorney”) to be his/her Attorney from thedate of this Power ofAttorney to the expiration of the Terms Agreement (“Agreement”).The Attorney may do in the name of the Applicant and on his/her behalf everything necessary or expedient to:(a) execute and deliver the Terms Agreement (if applicable); and(b) complete blanks and make amendments, alternations or additions to the Terms Agreement considered necessary or

desirable by the Attorney; and(c) execute and deliver any other documents or do any acts which are referred to in the Terms Agreement which are ancillary or

related to them or to the transactions contemplated by them, in the absolute discretion of the Attorney; and(d) appoint one or more substitute attorneys to exercise one or more of the powers given to the Attorney and to revoke any of

those appointments and in this Power of Attorney “Attorney” includes a substitute attorney appointed under this clause; and(e) if applicable, stamp and register this Power of Attorney.The Applicant declares all acts, matters and things done by the Attorney in exercising powers under this Power of Attorney willbe as good and valid as if they had been done by the Applicant and agrees to ratify and confirm whatever the Attorney does inexercising powers under this Attorney.The Applicant indemnifies the Attorney against liability, loss, costs, charges or expenses arising from the exercise of powersunder this Power of Attorney.The Applicant declares that a person (including, but not limited to, a firm, body corporate, unincorporated association orauthority) who deals with the Attorney in good faith may accept a written statement signed by the Attorney to the effect thatthis Power of Attorney has not been revoked as conclusive evidence of the fact.The Applicant declares that the Applicant and a person (including, but not limited to, and executor, administrator, successor,substitute or assign) claiming under the Applicant are bound by anything the Attorney does in exercising powers under thisPower of Attorney.

S I G N E D / S E A L E D

IF APPLICANT IS A PERSON:

Signature of First Applicant:

Signature of Joint Applicant:

Name of Witness:

Signature of Witness: Date:

IF APPLICANT IS A COMPANY:

Signature of Director:

Signature of Director/Secretary:

Company Seal: Date:

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P E R S O N A L D E T A I L S – A P P L I C A N T 1 / D I R E C T O R / G U A R A N T O R

Title: Surname: Given names: Date of birth:

Marital status: No. of dependants: Age of dependants:

Address: Postcode: Time in address:

Previous address: Postcode: Time in address:

Drivers licence number: State of issue: Australian resident? Yes No

Business phone number: Home phone number:

Occupation: Name of employer/business:

Employer business address: Postcode:

Employer phone number: Length of current employment: Years Months

Gross annual income $

Self employed? Yes No If Yes, Accountants Name:

Name of previous employer: Position held:

Length with previous employer: Years Months

P E R S O N A L D E T A I L S – A P P L I C A N T 2 / D I R E C T O R / G U A R A N T O R

Title: Surname: Given names: Date of birth:

Marital status: No. of dependants: Age of dependants:

Address: Postcode: Time in address:

Previous address: Postcode: Time in address:

Drivers licence number: State of issue: Australian resident? Yes No

Business phone number: Home phone number:

Occupation: Name of employer/business:

Employer business address: Postcode:

Employer phone number: Length of current employment: Years Months

Gross annual income $

Self employed? Yes No If Yes, Accountants Name:

Name of previous employer: Position held:

Length with previous employer: Years Months

T E R M S A P P L I C A T I O N

P U R P O S E – T R U F F L E B U S I N E S S – O A K V A L L E Y T R U F F L E P R O J E C T

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C O M P A N Y D E T A I L S –

O N L Y T O B E C O M P L E T E D I F A P P L I C A N T I S A C O M P A N Y

Name of company:

Name of trust (if applicable): ACN:

Registered address: Postcode:

Trading address: Postcode:

Telephone number: Facsimile number:

Date of incorporation: / /

Principal activity:

Details of any debenture charges:

Personal guarantees will be required for a company under Terms Application and will be forwarded for execution with theTerms Application.

Particulars to be completed by Directors/Guarantors above

A S S E T S L I A B I L I T I E S

Cheque/Savings Account $ Home mortgage $

Other accounts $ Investment loans $

Other mortgage loans $

Residencs

Address (Estimated Current Market Value) $ Credit Cards Bank/Lmit $

Other property/s Bank/Limit $

Address (Estimated Current Market Value) $ Charge/Store Cards $

Hire Purchase $ Location $

Motor Vehicles

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A S S E T S

Cheque/savings account $ ___________

Other accounts $ ___________

Residence (Estimated Current Market Value)

Address ____________________________

____________________________ $ ___________

Other property/s (Estimated Current Market Value)

Address ____________________________

____________________________ $ ___________

Address ____________________________

____________________________ $ ___________

Location ____________________________ $ ___________

Motor vehicles

Model ____________________________ $ ___________

Model ____________________________ $ ___________

Shares, Bonds, Investments etc $ ___________

Equity in business $ ___________

Other assets (please specify)

1. ___________________________________ $ ___________

2. ___________________________________ $ ___________

3. ___________________________________ $ ___________

4. ___________________________________ $ ___________

5. ___________________________________ $ ___________

Total assets (1) $ ___________

Net assets = (1) less (2) $ ___________

L I A B I L I T I E S

Home mortgage $ ___________

Investment loans $ ___________

Other mortgage loans $ ___________

Credit cards

Bank/Limit ___________________________ $ ___________

Bank/Limit ___________________________ $ ___________

Charge/store cards $ ___________

Hire purchase $ ___________

Other loans (please specify)

1. ___________________________________ $ ___________

2. ___________________________________ $ ___________

3. ___________________________________ $ ___________

4. ___________________________________ $ ___________

5. ___________________________________ $ ___________

Total Liabilities (2) $ ___________

P E R S O N A L S T A T E M E N T O F F I N A N C I A L P O S I T I O N

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I N C O M E ( A V E R A G E M O N T H L Y )

Base salary

Applicant 1 $ ___________

Applicant 2 $ ___________

Other income

Regular overtime $ ___________

Dividends/interest $ ___________

Commission $ ___________

Family Allowance $ ___________

Part-time/casual $ ___________

Rental received $ ___________

Other (please specify)

1. ___________________________________ $ ___________

2. ___________________________________ $ ___________

3. ___________________________________ $ ___________

4. ___________________________________ $ ___________

5. ___________________________________ $ ___________

Total net monthly income (3) $ ___________

Uncommitted monthly income = (3) less (4) $ ___________

E X P E N D I T U R E ( A V E R A G E M O N T H L Y )

Credit commitments

Home mortgage repayments $ ___________

Investment loan repayments $ ___________

Other mortgage repayments $ ___________

Credit cards (3% of total limits) $ ___________

Hire purchase repayments $ ___________

Other loans $ ___________

Other commitments

Rental/board $ ___________

Child maintenance $ ___________

Other (please specify)

1. ___________________________________ $ ___________

2. ___________________________________ $ ___________

3. ___________________________________ $ ___________

4. ___________________________________ $ ___________

5. ___________________________________ $ ___________

Total net monthly expenditure (4) $ ___________

I/We declare that the Terms to be provided to me/us by Watershed Premium Wines Ltd is to be applied only to the Oak Valley

Truffle Project for fees due and payable with respect to Trufferies and that the information provided in respect of me/us

(including any separate personal statement of financial position), is true and correct. I/We have read and understood the

information set out above.

Signature of 1st applicant/director

Dated: / /

Signature of 2nd applicant/director

Dated: / / Company seal

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P R I V A C Y C O N S E N T

Acknowledgement and authority that credit information may be given to a credit reporting agency.

I/We, understand that Section 18E(c) of the Privacy Act allows Watershed Premium Wines Ltd or its agents to give a credit

reporting agency certain personal information about me/us which I/we authorise Watershed Premium Wines Ltd or its agents to

do. The information which may be given to a credit reporting agency is covered by Section 18E(1) of the Privacy Act and

includes:

• Identity particulars as permitted by the Privacy Commissioner’s determination issued under Section 18E(3) of the Privacy

Act;

• The fact that I/we have applied for credit and the amount;

• The fact that Watershed Premium Wines Ltd is a credit provider to me/us;

• Payments which become overdue more than 60 days;

• Advice that payments are no longer overdue;

• Cheques drawn by me/us for at least $100 which Watershed Premium Wines Ltd has dishonoured more than once;

• In specified circumstances, that in the opinion of Watershed Premium Wines Ltd, I/we have committed a serious credit

infringement; and

• That the credit provided to me/us by Watershed Premium Wines Ltd has been discharged.

To enable Watershed Premium Wines Ltd or its agents to access my/our application for personal or commercial credit, I/we

authorise Watershed Premium Wines Ltd or its agents:

• To obtain from a credit reporting agency a credit report containing personal credit information about me/us in relation to

personal credit provided by Watershed Premium Wines Ltd;

• To obtain from a credit reporting agency a credit report containing personal credit information about me/us in relation to

commercial credit provided by Watershed Premium Wines Ltd. This is in accordance with Section 18K(1)(b) of the Privacy

Act;

• To obtain a report containing information about my/our commercial activities or commercial credit worthiness from a

business which provides information about the commercial creditworthiness of a person in relation to personal credit

provided by Watershed Premium Wines Ltd.

This is in accordance with Section 18L(4) of the Privacy Act; and

• To obtain a report from a credit reporting agency and other information in relation to my/our commercial credit activities.

I/We declare that the credit to be provided to me/us by Watershed Premium Wines Ltd is to be applied wholly or

predominantly for business or investment purposes. IMPORTANT: You should not sign this declaration unless the credit is

wholly or predominantly for business or investment purposes. By signing this declaration you may LOSE YOUR

PROTECTION under the Consumer Credit Code.

Signature of 1st applicant/director

Dated: / /

Signature of joint applicant/director

Dated: / / Company seal

Signature of 1st applicant/director

Dated: / /

Signature of joint applicant/director

Dated: / / Company seal

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R E Q U E S T A N D A U T H O R I S E T O D E B I T

Surname or Company Name:

Given Names or ACN/ARBN:

I/we authorise Watershed Premium Wines Ltd trading as Watershed Premium Wines (APCA USER ID: 215829) to arrange forfunds to be debited from my/our account at the financial institution identified below and as prescribed below through the BulkElectronic Clearing System (BECS). The amounts and frequency of the drawings to be subject to and remain in force inaccordance with the Direct Debit Service Agreement.

D E T A I L S O F A C C O U N T T O B E D E B I T E D

Financial Institution Name:

Financial Institution Address:

Suburb: State Postcode

Name of Account:

BSB No: Account No:

Please complete the following boxes. If left blank, Watershed Premium Wines Ltd will complete on your behalf in accordancewith your existing Terms Agreement:

Amount/s to be Debited is stated in the Growers Schedule of Terms Payments being:

Monthly Amount Total of all Payments

Frequency: The last day of every month – starting on the day stated in the Schedule of Terms Payments provided to you.

I N S E R T Y O U R S I G N A T U R E A N D A D D R E S S

By signing below I/we hereby certify that I/we are the authorised signatories to the account named above and have theauthority to enter into the Direct Debit Service Agreement as provided. I/we acknowledge that we have read and understandthe terms and conditions of the Direct Debit Service Agreement.

Signature/s:

Address:

Suburb: State Postcode

Date: / /

O F F I C E U S E O N L Y :

Client Name: Year

Account No: Direct Debit No: Date: / /

Details:

$$

D I R E C T D E B I T R E Q U E S T – T E R M S A G R E E M E N T

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Definitions• Account means the account held at your financial

institution from which we are authorised to arrange forfunds to be debited.

• Agreement means this Direct Debit Service Agreementbetween you and us.

• Business day means a day other than a Saturday or aSunday or a public holiday listed in the State of WesternAustralia.

• Debit day means the day the payment by you to us isdue.

• Debit payment means a particular transaction where adebit is made.

• Direct Debit Request means the Direct Debit Requestbetween us and you.

• Us or we means Watershed Premium Wines Ltd who youhave authorised by signing a direct debit request.

• You means the client who signed the direct debitrequest.

• Your financial institution is the financial institutionwhere you hold the account that you authorised us toarrange to debit.

1. Debiting your account1.1 This service agreement covers drawings by Watershed

Premium Wines Ltd against clients’ nominated accountin all events covered by any written agreement betweenus and you.

1.2 By signing a direct debit request, you have authorised usto arrange for funds to be debited from your account. Ifthe debit day falls on a day that is not a business day, wemay debit your account on the prior business day.

2. Changes by us2.1 We may vary any details of this agreement or a direct

debit request at any time by giving you at least fourteen(14) days written notice.

3. Changes by you3.1 Subject to 3.2 and 3.3, you may change the

arrangements under a direct debit request by contactingus on (08) 9456 3811.

3.2 If you wish to stop or defer a debit payment you mustnotify us in writing at least five (5) business days beforethe next debit day. This notice should be given to us inthe first instance.

3.3 You may also cancel your authority for us to debit youraccount at any time by giving us at least thirty (30) daysnotice in writing before the next debit day, providedalternative arrangements are made for any amountsowing to us. This notice should be given to us in thefirst instance.

4. Your obligations4.1 It is your responsibility to ensure that there are

sufficient cleared funds available in your account toallow a debit payment to be made in accordance withthe direct debit request.

4.2 If there are insufficient cleared funds in your account tomeet a debit payment:(a) you may be charged a fee and/or interest by your

financial institution;

(b) you may also incur fees or charges imposed orincurred by us;

(c) you must arrange for the debit payment to be madeby another method or arrange for sufficient clearedfunds to be in your account by an agreed time sothat we can process the debit payment; and

(d) you should check your account statement to verifythat the amounts debited from your account arecorrect.

5. Dispute5.1 If you believe that there has been an error in debiting

your account, you should notify us directly on (08)9456 3811 or in writing as soon as possible so that wecan resolve your query quickly.

5.2 If we conclude as a result of our investigations that youraccount has been incorrectly debited we will respond toyour query by arranging a credit into your account toadjust your account accordingly. We will also notify youin writing of the amount by which your account hasbeen adjusted.

5.3 If we conclude as a result of our investigations that youraccount has not been incorrectly debited we will respondto your query by providing you with reasons andevidence for this finding.

5.4 Should the error be caused by your financial institutionthis matter will need to be directly resolved between youand your financial institution.

6. AccountsYou should check:(a) with your financial institution whether direct debiting is

available from your account as direct debiting is notavailable on all accounts offered by financialinstitutions; and

(b) your account details which you have provided to us arecorrect by checking them against a recent accountstatement.

7. Confidentiality7.1 We will keep information (including your account details)

in your direct debit request confidential. We will makereasonable efforts to keep any such information that wehave about you secure and to ensure that any of ouremployees or agents who have access to information aboutyou do not make any unauthorised use, modification,reproduction or disclosure of that information.

7.2 We will only disclose information that we have about you:(a) to the extent specifically required by law; or(b) for the purpose of this agreement (including

disclosing information in connection with any queryor claim).

8. Notices8.1 If you wish to notify us in writing about anything

relating to this agreement, you should write toWatershed Premium Wines Ltd, PO Box 1186, CanningVale BC WA 6970.

8.2 We will notify you by sending a notice in the ordinarypost to the address on our records.

8.3 Any notice will be deemed to have been received two (2)business days after it is posted.

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The i s suers of th i s PDS/Prospectus are Watershed Premium Wines Ltd and Truff le Proper t ies Limited

The Manager of the Project i s :

TRUFFLE PROJECTS PTY LTDACN 116 228 105

For fur ther copies of th i s PDS/Prospectus , or to communicate with the Responsib le Ent i ty, contact :

GEOFF BARRETT or BRUCE BENTLEY

PO BOX 893

MARGARET RIVER WA 6285

TEL: (08) 9758 8633 or (08) 9456 3811 FAX: (08) 9757 3999 or (08) 9456 3822

MOBILE: 0409 295 623 (Geoff Barret t ) or 0400 258 963 (Bruce Bent ley)

geof f@watershedwines .com.au bruce@watershedwines .com.au

WEBSITE: www.watershedwines .com.au

O A K V A L L E Y

T R U F F L E P R O J E C T

O A K V A L L E Y

T R U F F L E P R O J E C T