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Investing in Forestryas an Asset Class ANDREW G . STEELChief Executive OfficerThe TREEDOM Groupandrew.steel@treedom.com
Investment Advisor to the Asia Renewable Resources FundForestry Consultancy & Project ManagementPlantation Management & Lu...
Agenda• What is Forestry and theScience of Forestry?• Forestry then…and now• Forestry in Asia• Forestry as an Asset Class ...
‘Forestry is the science, art, and craft of sustainably managing, using,conserving, and repairing forests and other like r...
1. Formal forestry practices weredeveloped by the Visigoths in the 7thcentury for the preservation of oak andpine forests2...
Forestry in the 21st Century Research on forestecosystems managementand genetic improvementof tree species Development o...
Our Corporate SocialResponsibility ProgramAt Treedom, we take action against climatechange by planting native trees andref...
Forestry in Asia1. Plantation Project Cost – low costof land and labour2. Productivity – faster rates ofgrowth due to idea...
•Low cost of concessional land meansattractive returns are even achievable•Last frontiers of natural forest timber havebee...
Forestry as an Asset Class• Institutional investors particularly in the UShave been aware of the attributes of forestryinv...
Returns of theForestry sector,measured by theUS listed S&PGlobal Timberand ForestryIndex Fundtrading on theNASDAQSource:St...
Weyerhauser Co.Over 6 million acres of timberlands – continual growth over28 years•Non-REIT Timber Business - Minerals and...
Rayonier Inc.Global forest products company with $6.8B market capForest Resources•2.7 million acres of timberland in the U...
Correlation between house prices andthe lumber industry in North America
Home prices in the UK over thelast 30 yearsSource: M&G Halifax
Timberland Returns: 40+ yearsIn the UK, the averageannualized return for the IPD(Investment PropertyDatabank) UK Forestry ...
SET ListedHome and Office Products Index 5 Year ChartSource: Efinancethai.comAs can be seen from the chart this index has ...
SET ListedAgro and Food Industry Index 5 Year ChartSource: Efinancethai.comReflecting the benefits of a diversified commod...
SET ListedPaper and Printing Materials Index 15 Year ChartSource: Efinancethai.comReturns in this index are also quite rem...
Why Forestry?EDUCATIONTRANSPARENCYBUREAUCRACYOVERALL COSTSEXPERIENCECORRUPTIONLACK OF EXPERTS• Increased investments from ...
Asia Renewable Resources Fund(ARRF)TRANSPARENCYEXPERIENCECORRUPTION• Luxembourg domiciled and regulated• SICAV SIF Fund• A...
THANK YOUANDREW G . STEELChief Executive OfficerThe TREEDOM Groupandrew.steel@treedom.com
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20130513.1 investing in forestry as an asset class

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Investing in Forestry as an Asset Class
- What is Forestry and the Science of Forestry?
- Forestry then…and now
- Forestry in Asia
- Forestry as an Asset Class and Market Analysis
- Why is Forestry so important?

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  • The Treedom Group of Companies offers expertise in forestry consultancy, plantation management, forestry products sales, forestry asset management and environmental welfare through reforestation projects.
  • Alternate colours on text
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  • Negative real returns ......
  • 32 points in June in just under a year hitting 49.69 – nearly 50% growth inside ayear
  • Transcript of "20130513.1 investing in forestry as an asset class"

    1. 1. Investing in Forestryas an Asset Class ANDREW G . STEELChief Executive OfficerThe TREEDOM Groupandrew.steel@treedom.com
    2. 2. Investment Advisor to the Asia Renewable Resources FundForestry Consultancy & Project ManagementPlantation Management & Luxury Aromatic Oil ProducerCharitable Objectives; Reforestation & EnvironmentalEducationThe Treedom Group
    3. 3. Agenda• What is Forestry and theScience of Forestry?• Forestry then…and now• Forestry in Asia• Forestry as an Asset Class andMarket Analysis• Why is Forestry so important?
    4. 4. ‘Forestry is the science, art, and craft of sustainably managing, using,conserving, and repairing forests and other like resources to meet thegoals and values of societies’• Commonly practiced in plantations and natural stands• Goal: to create continual and sustainable environmental supply andservice• Twenty first century  more focus on “socially acceptable” systems inaddition to sustainability• Silviculture and Modern ForestryWhat is Forestry?Forest ecosystems have come to be seen as the mostimportant component of the biosphere
    5. 5. 1. Formal forestry practices weredeveloped by the Visigoths in the 7thcentury for the preservation of oak andpine forests2. Systematic management of forests for asustainable yield of timber is said tohave begun in the German states in the14th century, and 16th century Japan3. Schools of forestry were establishedbeginning in the late 18th century4. The enactment and evolution of forestlaws and binding regulations occurredin most Western nations in the 20thcenturyA Brief History of Forestry
    6. 6. Forestry in the 21st Century Research on forestecosystems managementand genetic improvementof tree species Development of bettermethods for planting,protecting, thinning,controlled burning, felling,extracting, and processing Reforestation Third party certificationsystems
    7. 7. Our Corporate SocialResponsibility ProgramAt Treedom, we take action against climatechange by planting native trees andreforesting areas that have been destroyedthrough illegal logging, development, andagriculture through our Plant A Tree Today(PATT) Foundation.
    8. 8. Forestry in Asia1. Plantation Project Cost – low costof land and labour2. Productivity – faster rates ofgrowth due to ideal climate andsoils3. Price – Increasing demand anddeclining supplies due toenvironmental andsocio/economic changes i.e.global warming and the rise ofChina and India.
    9. 9. •Low cost of concessional land meansattractive returns are even achievable•Last frontiers of natural forest timber havebeen largely logged out (reduced supply)•Global concern over rainforest destructionand a demand for certification andsustainable forest management models areon the rise•Fast-growing, high quality and responsiblymanaged plantation estates emerging as thebasis for the future of the industryChanging Dynamics
    10. 10. Forestry as an Asset Class• Institutional investors particularly in the UShave been aware of the attributes of forestryinvestments and so far have putapproximately $60-70 billion into forestry• “Forestry remains, a good diversifier if timesturn out well, a brilliant store of value shouldinflation unexpectedly run away, and ahistorically excellent defensive investmentshould the economy unravel”- JeremyGrantham, US investment manager GMO• Low Correlation with other asset class
    11. 11. Returns of theForestry sector,measured by theUS listed S&PGlobal Timberand ForestryIndex Fundtrading on theNASDAQSource:Stockcharts.comReturns of the Forestry sector
    12. 12. Weyerhauser Co.Over 6 million acres of timberlands – continual growth over28 years•Non-REIT Timber Business - Minerals and other non-qualifying activities•Wood Products - Lumber, OSB, Engineered Wood Products,Distribution•Weyerhaeuser Real Estate Company (WRECO) - Single-Family Homebuilding - Land Development•Cellulose Fibers - Specialty Absorbent Pulp
    13. 13. Rayonier Inc.Global forest products company with $6.8B market capForest Resources•2.7 million acres of timberland in the U.S. and New Zealand−Sawlogs, pulpwood, log trading, hunting and recreationPerformance Fibers•Global leader in cellulose specialties market−Leading positions in acetate, ethers and high-strength viscose markets
    14. 14. Correlation between house prices andthe lumber industry in North America
    15. 15. Home prices in the UK over thelast 30 yearsSource: M&G Halifax
    16. 16. Timberland Returns: 40+ yearsIn the UK, the averageannualized return for the IPD(Investment PropertyDatabank) UK Forestry indexfor 10 years is 10.4%.In the United Statesmeanwhile, the NationalCouncil of Real EstateFiduciaries in the United States(NCREIF), timber returns since1987 through 2010 haveaveraged 15% a year.
    17. 17. SET ListedHome and Office Products Index 5 Year ChartSource: Efinancethai.comAs can be seen from the chart this index has hada three-fold increase in returns underpinned bythe solid performances in property relatedcompanies such as Modern form.FANCY: FANCY WOOD INDUSTRIES PUBLICCOMPANY LIMITEDIFEC: INTER FAR EAST ENGINEERING PUBLICCOMPANY LIMITEDMODERN: MODERNFORM GROUP PUBLICCOMPANY LIMITED: Riding the property wave upthis company has produced solid returns asreflected in the share priceROCK : ROCKWORTH PUBLIC COMPANY LIMITED
    18. 18. SET ListedAgro and Food Industry Index 5 Year ChartSource: Efinancethai.comReflecting the benefits of a diversified commodities exposure this indexhas proved more than resilient despite general commodities pricescoming off the highs as reflected in the worldwide (ContinuousCommodities Index)PRG : PATUM RICE MILL AND GRANARY PUBLIC COMPANY LIMTEDSTA : SRI TRANG AGRO-INDUSTRY PUBLIC COMPANY LIMITED:Despite a retreat in the share price the company is still showing positivereturn on equity and net profit marginsTLUXE : THAILUXE ENTERPRISES PUBLIC COMPANY LIMITEDTRUBB : THAI RUBBER LATEX CORPORATION (THAILAND) PUBLIC CO.,LTD.UPOIC : UNITED PALM OIL INDUSTRY PUBLIC COMPANY LIMITEDUVAN : UNIVANICH PALM OIL PUBLIC COMPANY LIMITED:Reflecting the benefits of a diversified commodities exposure this companyhas proven that good returns are possible despite stagnant palm oil prices.UVAN has maintained solid ROE and NPMs for the past four years.CPI : CHUMPORN PALM OIL INDUSTRY PUBLIC COMPANY LIMITED
    19. 19. SET ListedPaper and Printing Materials Index 15 Year ChartSource: Efinancethai.comReturns in this index are also quite remarkable given the factthat two large paper producing companies in Thailand whichare not listed, Double A Paper and Siam Cement Paper, arehighly profitable companies that would no doubt boost theperformance of this index were it listed in it.TCP : THAI CANE PAPER PUBLIC COMPANY LIMITEDUTP : UNITED PAPER PUBLIC COMPANY LIMITEDIn Summary:You can see given the performance of the relevant indexes thepotentials of forestry as an asset class particularly if listed onthe exchange are significant. This is compelling reason thatforestry is a must have a place in any investment portfolio.
    20. 20. Why Forestry?EDUCATIONTRANSPARENCYBUREAUCRACYOVERALL COSTSEXPERIENCECORRUPTIONLACK OF EXPERTS• Increased investments from large institutionalinvestors  Forestry is now a widelyaccepted asset class• Returns enhanced by diversification of plantspecies• Stable returns and low correlation totraditional financial assets• Ideally located to meet the needs of growingmarkets: China and India• World consumption of timber and forestryrelated products estimated to rise more than50% by 2030- UN Food and AgricultureOrganization
    21. 21. Asia Renewable Resources Fund(ARRF)TRANSPARENCYEXPERIENCECORRUPTION• Luxembourg domiciled and regulated• SICAV SIF Fund• Asset Class: Renewable Resources, primarilyforestry• Objective: To provide good growth potentialvia a portfolio of diversified forestry assetswhilst protecting the interests of investors,local communities and the environment• Investment Horizon: Liquidity monthly, longterm, 5 years plus“Invest in a Green & Sustainable Economy”
    22. 22. THANK YOUANDREW G . STEELChief Executive OfficerThe TREEDOM Groupandrew.steel@treedom.com
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