This document discusses forest management and timber markets from a global investment perspective. It notes that while global market dynamics are important to understand, they have not significantly changed typical management strategies in different regions. The largest market for most U.S. timberland owners remains the domestic U.S. market. International exports play a bigger role in the Pacific Northwest compared to the U.S. South. Diversification remains a primary benefit of timberland investments.

1. FOREST MANAGEMENT AND MARKETING IN
A GLOBAL INVESTMENT ENVIRONMENT
Southeastern Regional Forest Landowner Conference
Valdosta, GA
Marc Walley
October 28, 2014

2. CONFIDENTIAL | 1
OUTLINE
 Timberland investments “101”
 Global markets and management implications
 What matters most and what matters less?

3. 2
FOREST INVESTMENT ASSOCIATES (FIA)
 Registered investment adviser founded in 1986
 HQ and main office in Atlanta
 Field offices across U.S. and in South America
 2.4 million acres in 21 states and Brazil
 54 employees – 25 are foresters
 Employee-owned, entrepreneurial firm
 Recognized for high standards and strong
culture
 Company logo – The Broad Arrow

4. 3
FIA OPERATIONAL FOOTPRINT
The areas highlighted represent counties / countries in which FIA’s existing clients own timberland.
As of June 30, 2014
Location Acres
AL 123,765
AR 118,537
CA 43,725
FL 209,383
GA 322,440
LA 7,155
ME 61,898
MO 2,691
MS 202,764
NC 224,916
NH 750
NY 4,205
OR 68,618
PA 81,550
SC 276,811
TN 100
TX 199,601
VA 162,059
WA 31,244
WI 63,350
WV 21,670
Brazil 144,595
Grand Total 2,371,826
2,371,826 Acres Under Management

5. 4
WHY TIMBER?
Benefits of a timberland investment
 Asset Diversification
 Don’t put all your eggs in one basket
 Risk Reduction
 Minimize volatility of portfolio returns
 “Real” Rate of Return
 Inflation hedge
 Biological Growth
 Trees don’t read the Wall Street Journal

6. 5
MANAGEMENT OBJECTIVE AND STRATEGIES
Maximize long-term total return
 Manage for optimal biological growth
 Utilize intensive forestry with proven economics
 Maximize cash flow from effective marketing and timing of timber
sales
 Maximize cash flow through secondary sources of income besides
timber sales
 Capitalize on alternative use options and land sales when such
opportunities yield greater returns than traditional timberland
management

7. | 6
GLOBAL WOOD SUPPLY – SOURCE AND SPECIES
Understanding global wood sources and species is key to understanding markets
U.S. PNW: Douglas
fir, Hemlock
Canada: Spruce
fir
U.S. Northeast:
Black cherry,
Maple, Red oak
U.S. South:
Loblolly pine
Brazil & Uruguay:
Loblolly pine,
New
Zealand:
Radiata pine
SE Asia: Acacia,
various tropical
Canada: Douglas
fir, Hemlock
Chile: Radiata
pine, Eucalyptus
Australia: Eucalyptus
Radiata pine,
Eucalyptus

8. | 7
Understanding global wood flow is key to understanding markets
China continues to be a leading
importer of logs and finished products,
but Japan, Korea, and India are viable
markets
The United States is an important
exporter to both Asian markets (from
Pacific Northwest) and Europe (from
the U.S. South)
Brazil, New Zealand and Chile may
continue to grow market share at the
expense of countries such as Russia,
Canada, and parts of Africa
GLOBAL WOOD FLOW TRENDS

9. 8
MANAGEMENT AND MARKETS IN THE SOUTH
 Diverse markets for both large and small timber
 Mostly domestic demand and local processing
 Limited but growing export demand
 Given the long-term nature of forest investments our management regimes will
not change significantly, however …
 Generally rotations are shorter
 Thinning is customary
 Pellet demand has positively impacted Atlantic seaboard markets
 Market uncertainty in the future means we need to maximize our options
 Decisions to sell sawlogs to a domestic producer or exporter or to sell pulpwood
for pulp production or pellets depends more on the buyers in the
marketplace at the time of harvest than our management regime
 Certification can be an important factor for procurement organizations

10. MANAGEMENT AND MARKETS IN THE PACIFIC NORTHWEST (PNW)
9
 Market is driven almost exclusively by sawlog demand
 Domestic markets are very good – bigger sawmills than in the South
 Export log markets are well-established and important
 Management regimes have changed
 Shorter rotations – 40 years today vs “old growth” mentality of past
 Development of small-log sawmills
 Commercial thinning is still not customary
 Generally less intensive management than in the South
 Understanding the cyclical nature of PNW export markets is important
 Selling timber below 2,500 feet elevation west of I-5 in 4th and 1st quarter
can yield significant premiums
 Certification is less a factor in the PNW


11. SIZE OF U.S. MARKET DOMINATES FOREST PRODUCTS DEMAND
| 10

12. | 11
WHERE ARE THE WORLD’S TIMBERLAND INVESTMENTS?
Market Value by Geography ($MM)
US South
US Northwest
Australia & New Zealand
South & Central America
US Northeast
US Appalachia
Canada
US Lake States
Other
0 5,000 10,000 15,000 20,000 25,000
Source: Timberlink

13. 12
Where have we been?
Housing starts plumetted …
2,500
2,000
1,500
1,000
500
0
Housing Starts, ‘000
Source: U.S. Department of Commerce
Average Total Starts (SAAR)

14. 13
Resulting in collapse of forest products consumption …
Source: Forest Economic Advisers (FEA)
Residential down 78%

15. And timber prices followed lumber production … down!
$50
$45
$40
$35
$30
$25
$20
14
20
19
18
17
16
15
14
13
12
11
10
PST Stumpage Prices $/Ton
Southern Lumber Production BBF
Lumber Production Southern Stumpage
Source: FEA, TimberMart South

16. The Canadian pine beetle epidemic will constrain supply
15
• An unprecedented pine beetle epidemic in Canada has wiped out millions of acres of forest
• 55% of the standing lodge pole pine timber in western Canada as of 2000 is now dead
• 30%+ of U.S. lumber demand is met from Canadian supply, the single largest non-U.S. source
• Additional Canadian supply constraints due to reduction of allowable annual cut in eastern provinces
Volume of Live Canadian Lodgepole Pine Affected Area
1350
1200
1050
900
750
600
450
300
150
0
1999
2004
2009
2014
2019
Millions of Square Meters
|
Live Trees in 2000
Today
Source: Biodivcanada.ca

17. 16
Southern lumber production to exceed previous peak
CONFIDENTIAL |
Source: FEA
25
20
15
10
5
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Billion Board Feet (BBF)
US South Lumber
Production
US South Peak Lumber
Production
~19 BBF

18. 30%
27%
24%
21%
18%
15%
12%
| 17
US West Coast Log Demand
The West Coast Log Demand Will Be Increasingly Driven by Domestic Demand
Source: FEA
9%
6%
3%
0%
10
9
8
7
6
5
4
3
2
1
0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Billion Board Feet (BBF)
Other
Pulp
Log Exports
Plywood
Lumber
Exports Share of Harvests

19. CONFIDENTIAL | 18
SUMMARY
 There are multiple benefits to timberland investments,
the primary one being diversification
 Global market dynamics have not dramatically
changed forest management and marketing strategies
 International markets are more important in the PNW
than in the South
 The most important market for U.S. timberland owners
is the U.S. market