New Forests Investment StrategiesTimber Plus & Eco Products

Presentation at “Boosting Investments in Biodiversity and Ecosystem Services,” Nyenrode University, Amsterdam

November 11, 2009

David BrandChairman and Managing DirectorNew Forests Pty Ltddbrand@newforests.com.au+61 2 9406 4100www.newforests.com.au

About New Forests

Slide 2

Investment Strategies

Slide 3

Forestry Plus Model: Tarrangower, New South Wales, Australia

Cattle grazing property Returns driven by long-term

timber products with “upside” from carbon credits, biodiversity enhancement, water rights, and possibly renewable energy

Client: Cambium Global Timberland (AIM:TREE)

Slide 4

Forestry Plus Commercial Model

Figures in AU$ Millions (Assume NPV based on 7% discount rate, hypothetical case)

Slide 5

--20

0

20

OriginalInvestment

-20 20

7

RenewableEnergy

Carbon Credits

Timber BiodiversityGrant

0.5

2 1

Water Rights

10.5

PotentialNet Gain

Eco Products Strategy: Central Indiana Mitigation Bank

Wetlands mitigation bank regulated under U.S. Clean Water Act

Restoration of 100 acres of cropland to natural wetlands system

Permitted by U.S. Army Corps of Engineers to produce wetlands mitigation credits for sale to Indiana Department of Transportation

Slide 6

New Forests REDD Project: Papua, Indonesia

Two sites totaling 200,000 hectares

100,000 hectares under license for conversion to oil palm

Project is being implemented under new Indonesian national REDD legislation

Expect 22 million tonnes of carbon credits over 15 years

Slide 7

New Forests Biobank Project:Malua Biobank

Voluntary endangered species bank located in Sabah, Malaysia

Critical habitat for Orangutan, Rhino, Elephant, Sun Bear, Clouded Leopard and many other species

Up to $10 million investment in rehabilitation from logging

Biodiversity Conservation Certificates = 100 sq

Slide 8

Eco Products Commercial Model

Create “eco products” from ecosystem services – e.g. carbon credits, nutrient trading, biodiversity conservation certificates, mitigation banking credits

Embed conservation actions into development or production activities to achieve no net loss

Slide 9

New Forests’ Investment Strategies

Timberland investment model diverging into multiple strategies

Original aim of providing “pure” exposure to timber price volatility is being replaced by a total return emphasis

Over-investment in U.S. timberland has been supported by declining cap rates and real estate price appreciation—these factors are now breaking down

Main opportunities for sound risk-adjusted returns will be outside U.S. and from exposure to emerging eco products markets

Slide 10

Eco Products Driving the Future

Kyoto Protocol largely ignored role of forests in carbon markets

Regional and voluntary markets made progress on resolving issues and now forest carbon will be the next major extension of the global carbon market

Mitigation banking in the U.S. now relatively mature Agribusiness under severe pressure to reduce or

compensate for ecosystem impacts—beef, soy, palm oil are key industries to watch

Market-based solutions now also driving water quantity and water quality policy

Slide 11

Where to Invest for the Future?

Slide 12

Retu

rn (r

eal I

RR)

Size of asset class

Return range

US Carbon

REDD and Biobanking

United States TimberlandAustralia-New Zealand Timberland

Latin American Timberland

Asian Timberland

Mitigation Banking

10%

20%

30%

40%

50%

Australia New Zealand Forest

Fund

Tropical Forest Fund

Eco-Products Fund

Evolution of Forestry Asset Class Returns

Slide 13

Retu

rn (r

eal I

RR)

5%

10%

15%

20%

- 5%

1980 to late

90’s

Late 90’s to 2008

US Timberland

today

-10%

Emerging Timberland

markets

Timberland

Timberland

HBU

CAP Rate

Timberland

CAP Rate / Real

EstateAU

S &

NZ

Asia

Timberland

Timber Plus

(Australia)

Eco Product markets

Net Return

Carbon

Fore

st C

arbo

n

Miti

gatio

n Ba

nkin

g RED

D

New Forests Strategy

Other

Latin

Am

eric

a

30%

Investment Models for a Changing World

Global timber production shifting to southern hemisphere and tropical regions, away from U.S.

Asia leading demand growth Rise of REDD, biobanking, and other conservation finance

could exceed timber asset value Expectation that REDD could be 20% of the global carbon

market by 2030, with 5 billion tonnes per annum in reductions—potentially a $100 billion per annum market with an underlying asset value of $1 trillion

Note that all institutional and private equity investment in forestry to date has been $40 billion

Investment allocation will need to reflect these realities

Slide 14

Conclusions

Past performance of timberland asset class will not be a guide to the future

Timber markets will restructure towards high productivity plantations located in southern hemisphere and tropics

Emerging market timberland and emerging market eco-products will provide main opportunities for capital deployment, diversification for existing timberland investors, and a new round of cap rate compression benefits

Slide 15

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