The Australian Forestry Industry An investment perspective

1. The Australian Forestry IndustryAn investment perspective

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3. Agenda • Lonsec Agribusiness Research • Who are we? • What do we do? • History of forestry investment • Key drivers of investment • Investors & investment vehicles • Past performance • Current industry position • Resource & ownershipoverview • Taxation update • The future of forestry investment • Opportunities • Threats • What are we likely to see? • North East Victoria • Considerations for further investment

4. Lonsec Who are we? • Stockbroking • Listed and Unlisted Investment Research What do we do? • Agribusiness Research • Industry Outlooks • Sector Specific, demand & supply fundamentals • Manager Profiles • Broader business analysis & rating • Detailed Research reports • Product specific assessment • Investment tools • Cash Flow Calculator • Case Studies • Research into industry issues – e.g. forestry

5. Lonsec The Agribusiness team

6. History of forestry investment Key Drivers of Investment • Industry level • Deep global market • Management • Technological development • Scale and efficiency • Investor level • Tax effective structures • Risk:return profile • Diversification • Low correlation

7. History of forestry investment Investment Vehicles • Listed • Unlisted • Direct Investor Categories • Retail • Wholesale • Institutional Hypothetical forest fund structure

8. History of forestry investment Past performance • Varied results • Industry-wide issues • Poor site selection • Overstatement of yield expectation • Drought • Early stage technology (genetics, nutrition, pest management) • Positives • Development of genetics, nutrition & harvesting systems • Further investment in research and development • Revised site selection criteria • Improved operational management structure and systems

9. Current industry position Overview • Area • Ownership Source: DAFF Source: DAFF

10. Current industry position Overview • Distribution • Products • Pulpwood • Construction timber • Appearance Grade Timber • Sandalwood Hardwood Softwood Source: DAFF

11. Current industry position Taxation update for MIS • Conditions for deductibility for investors in forestry MIS: • Direct Forestry Expenditure (DFE) of 70% • 18 month establishment rule • 4 year holding period • Other amendments: • Secondary market

12. The future of forestry investment Opportunities • Secondary market • Carbon credits • Renewable energy • Processing and infrastructure Threats • Land availability • Regulatory risks • Climate change • Water policy

13. The future of forestry investment What are we likely to see? • Continued investment through MIS • Greater diversity of investment products • Greater investment through: • Managed funds • Institutional investors • Horizontal and vertical integration

14. North East Victoria Considerations for further investment • Stakeholder objectives • Opportunities for plantation development • Land inventory profile • New land • Second rotation • Land use change • Scalable? • Limitations • Investment in infrastructure and processing facilities • Define demand • Cost analysis • Joint-ventures • Other considerations • Carbon sequestration • Biofuels

15. Recap • Lonsec Agribusiness Research • History of the Australian forestry industry • Current industry position • The future of forestry investment • North East Victoria

16. Lonsec website For more information on: • Australian forestry industry • Manager Profiles • Global supply and demand • Price outlook • Industry issues and developments • Investing in Agribusiness • Investment Opportunities www.lonsec.com.au