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SACRS Spring Conference 2009 May 14, 2009

SACRS Spring Conference 2009 May 14, 2009. S UCCESSFUL S TRATEGIES = RMK T IMBERLAND G ROUP. A R E G I O N S M O R G A N K E E G A N C O M P A N Y. AGENDA. History of Timberland Investments Why the Asset Class? International Timber Global Portfolio Strategy Summary.

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SACRS Spring Conference 2009 May 14, 2009

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  1. SACRS Spring Conference 2009 May 14, 2009 SUCCESSFUL STRATEGIES = RMK TIMBERLAND GROUP A R E G I O N S M O R G A N K E E G A N C O M P A N Y

  2. AGENDA • History of Timberland Investments • Why the Asset Class? • International Timber • Global Portfolio Strategy • Summary

  3. TIMBERLAND INVESTMENT MANAGEMENT History of Timberland Investments We see the forest. And we see the trees.

  4. HISTORY OF TIMBERLAND INVESTMENTS • Institutional Investment in Timberland Dates Back to the 1980’s • Early Investors: • Insurance Companies (Travelers) • Pension Funds (CALPERS) • Institutional Assets in Timberland

  5. 5 COMMERCIAL TIMBERLAND ACRES & OWNERSHIP CANADA: 602 MM ACRES 91% PUBLIC 9% PRIVATE WEST: 203 MM ACRES $365 BILLION 63% PUBLIC 37% PRIVATE N. CENTRAL: 80 MM ACRES $40 BILLION 28% PUBLIC 72% PRIVATE NORTHEAST: 79 MM ACRES $47 BILLION 12% PUBLIC 88% PRIVATE SOUTH: 210 MM ACRES $210 BILLION 10% PUBLIC 90% PRIVATE

  6. TODAY’S INVESTORS • Pension Funds • Foundation/Endowments • Private Investors

  7. TIMBERLAND INVESTMENT MANAGEMENT Why the Asset Class? We see the forest. And we see the trees.

  8. WHY THE ASSET CLASS? • Competitive Historic Returns • Low Volatility of Returns • Portfolio Diversification

  9. ANNUALIZED RETURNS 1.1.87 THROUGH 12.31.07

  10. STANDARD DEVIATION OF RETURNS 1.1.87 THROUGH 12.31.07

  11. CORRELATIONS TO TIMBERLAND 1.1.87 THROUGH 12.31.07

  12. RETURN/RISK (Sharpe Ratio) 1.1.87 THROUGH 12.31.07

  13. Without Timberland With Timberland 13 PORTFOLIO ENHANCEMENT WITH TIMBERLAND EFFICIENT PORTFOLIOS Return Risk

  14. WHY THE ASSET CLASS? • Trees Grow • Growth Adds Value • “Store on the Stump”

  15. SOURCES OF TIMBERLAND RETURN Land (6%) Timber Price Change (33%) Biological Growth (61%) Representative loblolly pine plantation in S. Georgia (Caulfield 1998)

  16. TIMBERLAND INVESTMENT MANAGEMENT Portfolio Strategy We see the forest. And we see the trees.

  17. 17 STAGES IN THE LIFE OF A FOREST GROWTH ESTABLISHED EMERGING MATURE AGE GROWTH GROWTH GROWTH PULPWOOD SAWTIMBER CHIP-N-SAW

  18. TIMBERLAND INVESTMENT MANAGEMENT International Timber We see the forest. And we see the trees.

  19. “FAST GROWING PLANTATION REGION” BECOMING A REAL PRESENCE • “Fast Growing Plantation” Region • Now includes Australia, Argentina, Brazil, Chile, New Zealand, Uruguay, South Africa, Swaziland • Potentially Vietnam, Moçambique & others • Characterized by fast tree growth, low raw material costs, low growing costs, low production costs • Major new investments by global manufacturers in production and processing

  20. CURRENT FAST GROWING PLANTATION REGION COUNTRIES

  21. PLANTATION GROWTH RATES FGP REGION COUNTRIES VS. U.S. SOUTH Source: Caulfield 1998

  22. TWO-YEAR OLD EUCALYPTUS, SOUTH AFRICA

  23. MANUFACTURING FACILITIES 6 Sao Paulo 9 8 6 7 PORT FACILITIES Porto Alegre 5 4 5 3 2 1 2 1 10 4 3 MAJOR MANUFACTURING & PORT FACILITIES

  24. PATULA PINE

  25. SABIE SAWMILL LOGYARD

  26. EUCALYPTUS

  27. PAPER MILL

  28. TIMBERLAND INVESTMENT MANAGEMENT Global Portfolio Strategy We see the forest. And we see the trees.

  29. GLOBAL PORTFOLIO STRATEGY • Expected • MarketsReal Returns • Mature 6-7% • Developing 10-12% • Emerging 15%+

  30. TIMBER INVESTMENT REGIONS

  31. SUMMARY • Long, Successful History by Institutional Investors • Strong Portfolio Characteristics • Ability to Build Portfolios to Meet a Variety of Risk/Return Characteristics

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