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CITY OF CLEARWATER EMPLOYEES PENSION PLAN - TIMBER MANAGERE SEARCHCity of Clearwater Employees' Pension Plan Timber Manager — Search September 15, 2010 Presented By: John J. Griffith, JD, CPC, AIF— Senior Investment Consultant Eric W. Bailey, CFA — Managing Principal 102 W. Whiting Street, Suite 400, Tampa, FL 33602-S140 Tel: 813/218-5000 Wells Fargo Advisors Financial Network, LLC (WFAFN), Member NASD & SIPC. CapTrust Financial Advisors is a separate entity from WFAFN. Correlation Table Comparative Performance Fund Comparison Tables Forest Investment Associates Hancock Timber Molpus Woodlands Group RMK Timber Timbervest Appendix 2 1 �� � � 5 6 7 � 9 Correlation Matrix: Returns vs. Barclays Capital Intermediate U.S. Government/Credit July 2000 - June 2010 (1) (2) (3) (4) (5) (6) 1) NCREJF - Timberland Returns 1.00 2) S&P500 -0.06 1.00 3) Russell 1000 -0.06 1.00 4) Russell 2000 -0.13 0.94 5) Wilshire 5000 -0.06 1.00 6) FTSE Nareit Real Estate 50 -0.14 0.71 7) NCRE]F-OEDC Realestate Index 0.32 0.13 8) Barclays Capital U.S. Aggregate 0.05 -0.37 9) Barclays Capital Intermediate U.S. GovernmenUGedit 0.05 -0.39 -0.39 -0.41 -0.40 -0.06 ��) �8) �9) Please refer to important disclosures on the final two pages of this presentation 3 -0.11 0.98 1.00 50 40 30 � � � 20 x 10 -10 1 year 3 years 5 years � NCREIF - Timberland Returns 0 S&P 500 � Russell 1000 0 Russell 2000 1 year NCREIF - Tunbcrland Rctums -�j.(�Q sx�P soo 14.43 Russell 1000 1 �j.2,G� xu55eu a000 21.48 w�t�r� s000 15.68 FTSE Nareit Real F,state 50 rj2,.2,% NCRL.IF-OEDC Realestate Indes _�j , 9 g Barclays Capital U.S. A�egate 9. �jQ Barclavs Capital Inte�mediate U.S. Govemtnent/Credit g,28 Please refer to important disclosures on the final two pages of this presentation 3 years 6.09 -9.81 -9.54 -8.60 -9.36 -8.87 -10.98 7.55 698 7 years 10 years 15 years O FTSE Nareit Real Estate 50 • NCREIF-OEDC Realestate Irxiex • Barclays Capital U.S. Aggregate � Marl�t Benchmark Barcla�s Capital Ir�ermediate U.S. Go�'nrr�ntlCretlit 5 years 7 years 10 years 9.85 10.22 7.13 -0.79 2.84 -1.59 -0.56 3.29 -1.22 0.37 5.83 3.00 -0.28 3.75 -0.78 -0.07 8.05 9.51 -0.21 3.68 4.87 5.54 4.96 C.47 5.26 4.42 6.06 4 20 y=ears 15 years 839 6.24 6.47 6.63 6.43 N/A 7.53 6.39 5.98 20 years 11.48 7.67 7.93 8.15 7.87 N/A 5.47 7.14 6.67 � 1 � � m 2009 2008 2007 2006 2005 • NCREIF - Ti rrberland Returns � S&P 500 • Russdl 1000 2004 O FTSE Nareit Real Estate 50 • NCREIF-0EDC Realestate Index • Bardays Capital U.S. Aggregate 2003 2002 2001 2000 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 vcxr,u� - T;r„eertana xerums -4.76% 9.52% 18.43% 13.68% 19.35% 11.20% 7.66% 1.88% -5.25% 4.41% s&n soo 26.46% -37.00% 5.49% 15.79% 491% 10.88% 28.68% -22.10% -11.88% -9.11 % R��s�ll io�� 28.43% -37.60% 5.77% 15.46% 6.27% 11.40% 29.89% -21.65% -12.45% _� ��% xusse�� z000 27.17% -33.79% -1.57% 18.37% 4.55% 18.33% 47.25% -20.48% 2.49% -3.02% w�t,�e s000 28.30% -37.23% 5.62% 15.77% 6.38% 12.48% 31.64% -20.86% -10.97% -10.89% FTSe �ar�;� x�� r�:sra�e so 27.62% -37.31% -16.34% 35.64% 11.44% 34.98% 35.51% 1.87% 12.08% 28.67% NcxF,u�-oFncx���s�rein�3� -29.76% -10.00% 1596% 16.32% 21.40% 13.07% 9.28% 5.�4% 5.63% 14.28% sar�ta>5 c�p�t�t U.s. A;���r� 5.93% 5.24% 696% 4.33% 2.43% 4.34% 4.11% 10.27% 8.42% 11.63% sar�ass cap+r� in�e�,ea�a�e u.s. G��e�,a,��/crea+� 5.24% 5.08% 7.40% 4.07% 1.57% 3.04% 430% 9.82% 8.98% 10.10% Please refer to important disclosures on the final two pages of this presentation 5 � . . .-. .. - Torest Investment Associates 250 iVlill.ion � 3.2 Billion 1986 � 48 Hancock Timber 200-500 Million 8.4 Billion 1985 373 Molpus Woodlands Group 400 Million 929 Million 1905 67 RMK Timber 375 Million 2 Billion 1981 41 Timbervest 350 Million 1.6 Billion 1995 43 • • - . . Forest Investment Associates - Dec 2010 10 Years 3 Years Hancock Timber - March 2011 15 Years 3 Years Molpus Woodlands Group Oct 2010 Apxi12012 10 Years 2 Years RMK Timbex Sep 2010 June 2011 12 Years 3 YeaYs Timbervest - Dec 2010 10 Years 3 Years � - -. - ' Forest Investment Associates 5 Million 3-4% 6-10% 0-25%* Hancock Timber 5 Million 3-5% 6-10% 0-35% Molpus Woodlands Group 2 Million 2-4% 8-12% 0-10%** RNIK Timber*** 5 Million 3-5% / 7-12% 8-12% / 10-15% - Timbervest 1 Million 2-4% 8% - * Forest Investment Associates has indicated that the will not use leverage, however, the offering documents allow for 25% leverage **Molpus Woodlands Group has indicated that their use of leverage is a temporary facility used to close transactions or cover overhead cost ***RMK Timber detail show A shares- U.S. Fund detail first followed by B-shares Non-U.S. Fund 6 -�• .. � �• • - ' - - � •�- I'orest Investment Associates X - - - - Hancock Timber X X X - - Molpus Woodlands Group X - - - - RMK Timber* X X X X X Timbervest X - - - - . - -- -- - - Forest Investment Associates 100 bps 20% over 7% Accounting / Legal / Initial Research Hancock Timber 95 bps 20% over 7% - Molpus Woodlands Group 100 bps 15% over 7% Admin / Accounting / Acquisirion / Disposition/ Legal / Harvest Supervision RMK Timber 100 bps / 125 bps 20% over 6% / 20% over 10% Accounting / Legal Timbervest 100 bps 20% over 8% Accounting / Legal *RMK Timber has two share classes offered by the fund, A shares are the U.S. Investments, B-shares are the Non-U.S. investments. Investors designate the percentage allocation to either share class. Firm Name Forest Investment Associates Year Founded 1986 Product Name Timber Partners II City, State Atlanta ,Georgia Website forestinvestcom Employees 48 Firm Assets 3.24 Billion . . , •- Fund Size (�Mill) 250 Commitments 108 Minimum Investment 5 Million Investment Period 10 years Extension Period 3 y�ears First Close Oct 2009 Final Close (before) Dec 2010 Capital Call 0-30% Leverage (per PPN� 0-25% Anricipated Yield 3-4% Target Return 6-10% Properties 5-8 Forest Investment Associates (FIA) was farmed in 1986 after the firm's principals pioneered institutional timberland investments in the early 1980s while at the First National Bank of Atlanta (later Wachovia Bank). FIA's long history and experience in timberland investment management have positioned the firm as a leading timberland investment organization. Each member of our firm contributes to all client accounts. Of FIA's 48 employees, nearly half hold undergraduate or graduate degrees in forestry, including the majority of the senior management team. The �ve members of FIA's senior management team have over 100 years of collective forestry experience and an average tenure with FIA of more than 16 years. FIA principals pioneered timberland as an institutional asset class and this experience level gives us an advantage over other timberland investment managers with less exposure to different market situations. FIA is organized as a limited partnership, Forest Investment Associates L.P., with a corporate general partner, Forest Investment Associates, LLC, which owns 70°/o of the partnership interests. The remaining 30% is owned by limited partners who provided the firm's start-up capital in 1986. The general partner is owned 100% by Forest Investment Associates, Inc. an S-Corporation which is owned by its employees distributed broadly among 36 employee shareholders. FIA is not an affiliate or a subsidiary of a larger organization. • - . '- Harvest 35-40% Leasing 5% Resale of Land 15-25% Mitigation banks 0-5% Biological growth 50-65% O ther- - The Fund's goal is to build a timberland portfolio that is geographically diverse, acquiring quality timberland properties at attractive prices throughout the U.S. as opportuniYies arise. Timberland ownership patterns and disposition trends may result in acquisition opportunities that are disproportionately concentrated in one or more regions of the U.S. The General Partner believes that a diverse portfolio can be achieved by investing in one or more, but less than all, of the significant timber-producing regions of the U.S., and will also focus on other diversification factors such as age proiiles and species. Building a portfolio diversiiied by age and species will allow the Fund to consistently have a supply of timber that is commercially maYure, ready to be sold into strong markets, and positioned to respond to changes in product demand. When considering a potential investment opporYunity, our Real Estate Transaction Team first collects timber inventories, mapping data, and environmental site assessments. We then review this information for overall quality of the property. Specifically, we review a property's geographic location relative to timber markets, quality of the timber and soils, topography, amount of operable land, quality of the road system, and drainage networks. This information is then used to determine a preliminary value for the property and to assess the suitability of the property for our clients' porYfolios in terms of geographic, age-class, and species diversification. FIA foresters make on-site visits to assess the quality of the information compiled in the initial review. Based on assessments from the field review, FIA conducts a detailed property income analysis. FIA creates models that examine operational and cost constraints and uses realistic timber prices for the subject area to ensure operational feasibility of FIA management. This assessment is compiled into a presentation for FIA's Investment Committee.A range of values is determined under multiple scenarios (management and timber pricing) and presented to the Investment Committee as part of the detailed report, which also addresses the properties' attributes, location and markets. FIA's investment decision process is handled through the Investment Committee, which has overall responsibility for all client investments. Members of the Investment Committee include all senior managers of the firm, who meet once a month and on an as needed basis. If, in the judgment of the Investment Committee, the property has a logical fit within a client's portfolio and meets the return objectives established for cash flow and total return, then the Investment Committee establishes pricing conditions and term parameters within which the Real Estate Transaction Team negotiates an agreement with the seller. The Transaction Team keeps the Investment Committee informed of its progress as the negotiations proceed, and the Investment Committee may meet subsequent times to consider new developments, if required. Third-party assistance — FIA uses various third-parries to conduct due diligence. Our due diligence includes Phase I environmental assessments, endangered species assessments, complete tifle work (including mineral ownership), timber inventorv verification cruises and full. third-nartv narrative annraisals. Pacific Northwest Northeast and Lake States South Douglas Fir and Western Hemlock Black Cherry, Maple, Red oak, Yellow Birch Loblollv Pine 10-40% FIA acquires pYOperty in a size range that is not dominatied by large 10-30% investors. The strategy looks to negotiate purchases instead of enter into auctions over properties which tend to be more efficient. The properties thath they buy should have good exit characteristics with a high number of 40-70% mills and paper supply manufactures within range of the properry. Over all the pxoperties are looked at through a DCT approach. If FIA is able to model out a return greater than 7% based on just the timber growth then the property will be considered for investment. 10-40% 10-30% 40-70% l��illions 100+ 75-100 50-75 40-50 30-40 20-30 15-20 10-15 5-10 2.5-5 1-2.5 10 % ZJ°�a 50% 25% Thousands 100K+ 75K-100K 50K-75K 30K-50K 20K-30K 15K-20K 10K-15K 7,500-10,000 5,000-7,500 3,000-5,000 2,000-3,000 % 8°/> 50% 33% 9% The Fee Brief illustrated above is intended as a summary of the fees disclosed by the manager and should not be considered as a full disclosure of all potential fees or cost associated with the investment fund. Please refer to the offering documents and term sheets priar to investment for a full disclosure of the fees and cost associated with Y11e investment fund. 11 Firm Name Hancock Timber Group Year Tounded 1985 Product Name Hancock Timberland XI City, State Boston, MA Website htrg.com Employees 373 Firm Assets 8.4 Billion . . , .- Fund Size (�Mill) 200-500 Commitments - Minimum Investment 5 Million Investment Period 15 years Extension Period 3 y�ears First Close - Final Close March 2011 Capital Call 5-35% Leverage (per PPN� 0-35% Anricipated Yield 3-5% Target Return 6-10% Properties 5-7 Forest Investment Associates (FIA) was formed in 1986 after the firm's principals Hancock Timber Resource Group was established in 1985. We are a division of Hancock Natural Resource Group, Inc., a registered investment adviser and wholly owned subsidiary of Manulife Financial Corporation. 1985 Hancock Timber Resource Group established in Boston as business unit of John Hancock Mutual Life Insurance Co.; developed first commingled timberland fund with investments in the US South and US Pacific Northwest 1986 Began managing separate accounts for institutional investors 1993 Completed first non-US investment (Canada) 1995 Hancock Natural Resource Group formed as independent subsidiary of John Hancock—Hancock Timber Resource Group and Hancock Agricultural Investment Group 1998 Completed first investment in Australia; formed Hancock Victorian Plantations 1999 Established Hancock Natural Resource Group Australia Pty 2002 All North American timberland holdings independently certified according to the Sustainable Forestry InitiativeOO Standard 2004 Completed first investment in New Zealand; established Hancock Forest Management NZ; all Australian holdings certified under Forest Stewardship Council requirements; Manulife Financial Corp. purchases John Hancock Financial Services 2005 Certified New Zealand holdings under FSC requirements; acquired Prudential Timber Investments, Inc.; completed largest institutional investor acquisition of timberland (376,000 hectares in 3 US regions and New Zealand) 2006 Acquired 494,000 acres in New Zealand making HTRG the largest private timberland owner in that country 2007 North American farests are recertified as being managed according to the Sustainable Forestry Initiative0 Standard 12 • - . '- Harvest 9�+% Leasing 2% Resale of Land - Mitigation banks 1% Easements/Energy/ 5% Materials We focus our acquisition efforts on purchasing large properties to obtain "wholesale discount pricing," avoiding auctions if possible, and favoring complex deals. Through a regular, rigorous portfolio review process (including a formal hold-sell analysis of every property), we actively manage the portfolios we have constructed. We manage each individua] property to maximize investor returns. We then exit properties by parceling them into smaller units to obtain higher market value. We believe that geographic diversification within the timberland portfolio is particularly important. Good empirical evidence demonstrates that returns from timberland in the different investable regions of the world are only poorly correlated. Even though wood products are transported long distances, logs for domestic consumption are not. The high cost of transporting logs means that regional timber markets respond to fairly local supply and demand conditions. For example, a timberland investment in Australia will respond to domestic demand in Australia and export demand to Asia. There is no reason to believe, however, that either factor will be strongly correlated with timber or timberland prices in the US South, for example. This lack of interregional correlation structure suggests that a risk- efficient portfolio consists of investments in multiple regions. Hancock Timber Resource Group investment strategy begins with diligent portfolio design. We do not ascribe to a single approach to timberland investment. Instead, we seek to understand the investor's risk/return objectives and design a portfolio that is likely to meet or exceed those objectives. Once we are clear on portfolio objectives, we implement our investment strategy. For acquisitions, we focus on large opportunities. In total, we have coinpleted more than $9.4 billion in acquisitions. Our experience and research indicate that each 1 percent increase in deal size results in about a 0.15 percent reduction in the per-acre cost. 13 U.S. Canada Australia New Zealand Brazil Chili Canada Uruguay Douglas Fir Loblolly� Pine Eucalyptus Western Hemlock Hoop pine 50% 0-50% 0-50% 0-50% 0-50% 0-50% 0-50% 0-50% The Hancock Timbexland XI looks to invest 50% of the fund in properties outside of the U.S.. Hancock looks at Timber investing differently than most TIMO's because Hancock is the largest domestic timberland investment manager they tend to focus on large tracks of land which they claim are purchasable at a discount Hancock claims that smaller tracks of land sell for a pYemium per acre and part of their wind down straeegy is to divide the properties into small more affordable lots. The strategy focuses on the timberland harvesting as the primary driver of returns. l��illions 100+ 75-100 50-75 40-50 30-40 20-30 15-20 10-15 5-10 2.5-5 1-2.5 14 % Thousands 100I�+ 75K-100K 50K-75K 30K-50I� 20K-30K 15K-20K 10K-15I� 7,500-10,000 5,000-7,500 3,000-5,000 2,000-3,000 % Management Fees: 0.95% annual management fee on the amount invested in timberland or if less, the appraised value Incentive fees: 20% incentive fee for performance in excess of 7% real internal rate of return. The fee will be calculated after the sale of the last timberland investment or if sooner, upon registration under the U.S. Securities Act of 1933, winding up of Hancock Timberland XI or termination of the Advisory Agreement and based on appraised value. Administrative fees: N/A. We do not charge acquisition, disposition or fees on commitment. Auditing/ accounting Fees: N/A Legal Fees: N/A Other Fees: N/A The Fee Brief illustrated above is intended as a summary of the fees disclosed by the manager and should not be considered as a full disclosure of all potential fees or cost associated with the investment fund. Please refer to the offering documents and term sheets priar to investment for a full disclosure of the fees and cost associated with Y11e investment fund. 15 Firm Name The Molpus Woodlands Group Year Founded 1905 Product Name Molpus Woodlands Fund III, L.P. City, State Jackson, Mississippi Website Molpus.com Employees 67 Firm Assets ($Mill) 929 Fund Size (�Mill) 400 Commitments ($Mill) 80 Minimum Investment 2 Million Investment Period 10 years Extension Period 2 years First Close Oct 2010 Final Close (before) April 2012 Capital Call 0-100% Leverage (bridge loan) 10% Anticipated Yield 2-4% Target Return 8-12% Properties 5-10 The Molpus legacy dates to 1905 when two mercantile clerks (one of whom was Richard H. Molpus, the grandfather of Dick Molpus) formed a parmership to create the Henderson-Molpus Mercantile Store, the predecessor to Molpus Lumber Company ("MLC"). Under the leadership of Richard H. Molpus, the son of the original founder, MLC continued its growth and eventually became the lOth largest independently owned lumber manufacturer in the United States. In 1911, the company opened a small lumberyard consisting of a dry kiln and planer mill. By the start of World War II, the company had its first sawmill and contracted with the U.S. government to construct ammunition boxes. The company then expanded to create the Molpus Hardwood Company ("MHC"), formed in 1969 to utilize hardwood timber in the area. In 1974, MHC opened a facility in Morton, Mississippi, which became one of the nation's largest and most technologically advanced sawmills of its time. In the 1980s, Molpus ended an era of manufacturing when it sold its lumber-producing assets to large, integrated forest products companies. However, Molpus continued to operate as Molpus Forest Products, which functioned as a wood dealer operating multiple wood yards where timber was merchandized and sold to manufacturers throughout the world. In 1996, Molpus was established by Dick Molpus as a TIMO with its executive office in Jacicson, Mississippi. Molpus' operational headquarters is in Hattiesburg, Mississippi. Molpus serves the timber management needs of its clients, which include endowments, pension funds and family offices, from 11 additional offices throughout the United States, each staffed with foresters and forestry technicians. The Firm also manages a tree nursery in Elberta, Alabama, and the Wild Fork Tree Orchard in Monroe County, Alabama, where tree seeds are harvested. 16 Molpus believes that it is fully differentiated from its peers given the following characteristics: • Fully Independent and Fully Vertically Integrated Team: Molpus is an independent, privately held firm that focuses solely on timberland The Firm has no activity or focus on any other areas of the timber value chain, like logging or milling. The Firm is not affiliated with a larger asset manager and does not manage funds in other asset classes. The Firm is represented by a strong and diverse team of 48 investment and forestry experts with unique and deep timberland backgrounds and regional knowledge. All functional areas of forestry management are handled "in-house," including farestry, biometrics, soil analysis, geographic information systems, seedling production and other functional areas that add significant value to the investment as opposed to hiring contractors that are paid by the service hour or on an acre basis. Molpus believes that it employs more foresters per acre than any TIMO in its peer group. • Disciplined Acquisition and Disposition Processes: The Team is highly disciplined and creates value by utilizing cross-functional acquisition teams who not only have the resources to know more about the asset (in many cases, more than the seller) but are also ultimately tied to the long-term outcome of the investment via the underwriting assumptions and performance of each acquisition. The use of leverage has been limited and utilized only in cases of direction by separate account clienis. In addition, apart from a standard timber harvesting and disposition analysis, Molpus employs an extensive proprietary analysis of the and component of every timberland investment. The purpose of this analysis is to determine the existing and forecasted land uses that are suitable for each property and estimate the current and future value associated with those uses. • Sophisticated Proprietary Resources: The Firm has developed a full scope of proprietary resources (e.g., systems and software to economically assess silviculture inputs) to evaluate opportunities and improve overall timberland investment performance. The Firm has also developed a cross-platform diagnostic system, supplemented with hand-held devices, that allows foresters and forestry technicians to niinbly access real-time information about the forest and take advantage of short-term opportunities such as increased mill demand or new product markets. Additionally, Molpus's technology allows for exacting standards of tree analysis and tree counting, which provide better quality information and imnrove decision-makin�. 17 South Northeast Appalachian Great Lakes Loblolly Pine Slash Pine So. Yellow Pines Northern Conifers Red Oaks White Oaks Sweetgum Hard Maple Birches 70% 10% 10% 10% 34% 2% 3% 1% 13% 8% 8% 7% 3% Molpus rypically targets biological growth as the main driver for their timberland investments. During the property acquisition phase Molpus generates a base case return assumption which uses biological growth as the primary returns assumption. The fund is expect to invest 25-200 million in any given transaction with an acreage target per investment between 25,000- 200,000 acres. l��illions 100+ 75-100 50-75 40-50 30-40 20-30 15-20 10-15 5-10 2.5-5 1-2.5 18 % 1-100% 1-100% 1-100°/a 1-100% 1-100% 1-100% Thousands 100K+ 75K-100K 50K-75K 30K-50K 20K-30K 15K-20K 10K-15K 7,500-10,000 5,000-7,500 3,000-5,000 2,000-3,000 % 1-100% 1-100% 1-100`% 1-100% 1-100% Management Fees: 1.00% per annum based on called capital through 36 months after Final Closing and 1% of Fair Market Value thereafter. Incentive fees: 15% over a 7% annual preferred return (cash-on-cash) Auditing/ accounting Fees The Fund will be responsible for all auditing/accounting fees. Administrative fees: �2.50 per acre per year, which pays for the forestry planning employees and support staff employed by� Molpus, such as accounrants and computer support. Other Fees: * See below for Forestry Costs which Molpus provides as part of fully vertically-integrated management structure. The Fund will contract with Molpus to oversee the forestry activities of the Fund and to provide support in evaluating acquisitions, including, but without limitation to, conducting due diligence reviews, evaluating land sales for higher and better uses, and providing silvicultural management, maintenance and harvesting activities. Molpus' management fee shall be paid through the Management Fee paid to the General Partner by the Fund, and Molpus' incentive fee shall be paid through the General Parmer's carried interest allocation, in each case unless and until the General Partner is removed as general partner of the Fund. In the event of the General Partner's removal, the Fund shall be responsible for payment of Molpus' management fee and incentive fee. The costs associated with these forest-�y services will be Fund expenses to be paid by the Fund from cash flow or from capital contributions made by Limited Parmers. Forestry services costs included the following: Harvesting Supervision: 7% of harvesting revenues. Acquisition Fee — 1% of acguisition value. Disposirion Fees — 3% of gross sales price on higher and bettier use (HBU) transactions. Other costs: Other direct expenses are billed at cost with no markup. These are typically services that the Fund contracts, such as bulldozer work on roads, and fire lanes, painting landlines, spraying and helicopter fertilizing operauons. Also, forestry employees of Molpus or its affiliates may supervise these activities. Such supervisory services are billed to the Fund at cost. The General Partner believes these direct expenses have historically cost about �10.00 per acre per year. The Fee Brief illustrated above is intended as a summary of the fees disclosed by the manager and should not be considered as a full disclosure of all potential fees or cost associated with the investment fund. Please refer to the offering documents and term sheets priar to investment for a full disclosure of the fees and cost associated with Y11e investment fund. 19 Firm Name RMK Timberland Group Year Founded 1981 Product Name R1VII� Global Timberland Fund City, State Salem, NC Website rmktimberland.com Employees 41 Firm Assets ($Bill) 2 Billion Fund Size (�Mill) 375 Commitments ($Mill) 135 Minimum Investment 5 Million Investment Period 12 years Extension Period 3 years First Close Oct 2010 F�inal Close (before) June 2011 Capieal Call 0-30% Leverage 0 Anticipated Yield 3-5% / 7-12% Target Reeurn 8-12% / 10-15% Properties 8-12 � RMK Timberland Group operates as a business unit of Regions Morgan Keegan Trust, the trust and asset management arm of Regions Bank, an Alabama chartered commercial bank. Based in Atlanta, Georgia, the group was created in 1981 and was a pioneer in timberland investing when it started one of the first commingled timberland funds for institutional investars. Initially the group was formed at the First National Bank of Atlanta. This became Wachovia, which later named the group Evergreen Timberland Investment Management. In May 2004 the group was purchased by Regions Financial Corporation from Wachovia Corporation and renamed the RMK Timberland Group. Regions Financial merged with AmSouth Bancorporation in 2006, and continues to be known as Regions Financial Corporation. 20 • - . '- Biological Growth 35-50% Real Appreciation in 10-15% prices F.fficiencies in 20-25% Management, Harvesting, transport, merchandising Appreciation from the 10-15% compression of discount rates in emerging geographies RMK Timberland Group is a portfolio driven organization, not a deal driven organization. Our approach begins by understanding the objectives of the fund. Many of our portfolios use a balanced growth strategy designed to invest in a timberland portfolio that balances the investment goals of competitive returns, liquidity and reduced risks. Once the objectives are understood by our Portfolio Manager, we then create an overall acquisition strategy based on investment return-risk characteristics of individual timberland investment regions, and the age class distribution of the forests acquired within those regions. Timber product prices differ across geographic market areas and tend to have a low correlation with one another. Properly diversifying a portfolio mitigates portfolio volatility. Depending on market conditions at any given time, some age classes may be emphasized. For example, under current market conditions, our portfolios are more heavily weighted to younger trees in the emerging and established age classes to take full advantage of the benefits of biological growth. On acquisitions we work locally, establishing strategic partnerships for the sale of timber products and for the acquisition of timberlands for our client's portfolio. We only occasionally participate in a bid sale preferring to use our networks and local relationships to locate buying opportunities which we can negotiate on a private basis. Once acquired we actively manage our clients' timberlands. We conduct regular analyses of whether to hold or sell assets and are positioned with our HBU (higher and better use) staff and third party arrangements to sell at the greatest value for our client. 21 ,. - �� US- Appalachian 9% US-Lake States 4% US-Southeast 7% Brazil 25% Uruguay 8% Other South Amer. 23% Europe 12% South Africa 12% .- - - Hardwood 60% Softwood 40% � The current focus of land acquisition domestically is on distressed sellers. RMK has identified publically traded REITs, integrated paper manufacturers and over levered companies that are selling timber assets at discounted prices. The acquisition team looks to enter into negotiations over assets rather than participate in the auction market where prices are more efficient. Additionally, RMK is looking to invest in those areas that were not as heavily impacted by the recent real-estate bubble. Additionally, the strategy tends to build portfolios weighted towards younger trees that are faster growing as the market is more focused on pulp woods than saw timber. l��illions 100+ 75-100 50-75 40-50 30-40 20-30 15-20 10-15 5-10 2.5-5 1-2.5 22 % 10% 20% ZJ% 25% 10% 5�% 5% Thousands 100K+ 75K-100K 50K-75K 30K-50K 20K-30K 15K-20K 10K-15K 7,500-10,000 5,000-7,500 3,000-5,000 2,000-3,000 % 0%, 0% 0% 10% 25% ZJ��o 25% 10% 5% Management Fee: A Shares — annual management fee of 1.00% of the fair market value of the Fund's assets, charged quarterly in arrears. B Shares — annual management fee of 1.25% of the fair market value of the Fund's assets, charged quarterly in arrears. Incentive Fee: A Shares — 20% of the Funds' earnings, net of expenses, in excess of an annualized 6% real rate of return. B Shares — 20% of the Funds' earnings, net of expenses, in excess of an annualized 10% real rate of return. Administrative Fees: None. Auditing/ accounting Fees: We have an internal accounting group, and all of those accounting expenses are covered by our management fees. Audit expenses are paid out of the Fund. Legal Fees: Legal expenses are paid out of the Fund. Other Fees: N/A. Acquisition/Disposition Fees: there are no transaction fees The Fee Brief illustrated above is intended as a summary of the fees disclosed by the manager and should not be considered as a full disclosure of all potential fees or cost associated with the investment fund. Please refer to the offering documents and term sheets priar to investment for a full disclosure of the fees and cost associated with Y11e investment fund. 23 Firm Name Timberoest Year Founded 1995 Product Name Timbervest Parmers III, L.P. CitS�, State Atlanta, Georgia Website timbervest.net Emplo��ees 43 Firm Assets ($Bill) 1.6 Fund Size (�Mill) 350 Commitments ($Mill) 142 Minimum Investment 1 Million Investment Period 10 vears Extension Period 3 years I'irst Close May 2010 Final Close Dec 2010 Capital Call 20-25% Leverage 0 Anticipated Yield 2-4% Target Return 8% Properties 20-25 Timbervest was established in 1995 as a limited liability company and is headquartered in Atlanta, Georgia. The firm is a registered investment adviser under the Investment Advisers Act of 1940. Timbervest provides professional timberland and timberland related investment and management services for investors. As of June 30, 2010, the firm manages approximately $1.6 billion in assets with timberland investments totaling approximately 825,000 acres across 21 states. Timbervest was previously known as Timberland Investment Services, prior to a name change in 2000, but does not have any predecessor organizations or subsidiary relationships with any other organizations. The Managing Partners commenced employment with Timbervest from 2002 through 2004 and previously owned a minority equity position in the firm. On January 1, 2005, the Managing Partners acquired 100% ownership of the firm and continue to own 100°/o of the firm today. Since the current Managing Partners took control in 2005, the firm has grown from two clients to hundreds of clients, increased assets under management by approximately $1.2 billion, increased staff from approximately ll to 43, opened several regional offices, and successfully launched and currently manages five commingled funds. 24 . Harvest 10-40% Leasing 1-5% Resale of Land 15-30% Mitigation Banks - Land Enhancements 0-10% Orher- Acrive 5-25% Management Other-Biological Growth 40-70% Other-Value Increase 10-25% Other- Acquisition 10-20% /Disposition Timbervest's timberland investment strategy materially differs from most other TIMOs and has always been focused on relatively smaller investments and a diverse portfolio. As a result of this constant focus, Timbervest has established what we believe to be one of the broadest and deepest pools of relationships in the industry. Timbervest's relationships range from industry, corporate, finance, consultant, brokerage, professional, conservation, federal, state, and family to individual, and Timbervest sources prospective investments from all of these relationships. Timbervest is not reliant, nor focused on, large industry deals being run by the large investment banking firms. Instead, Timbervest uses its significant network to source deals that are "off the radar" of most, if not all, institutional timberland investors. Timbervest's typical competition for deals is from local mill operators, local loggers, and occasionally other TIMOs and high net worth individuals. Timbervest's investment philosophy is to (i) capitalize on the sectors of the timberland markets that present the least efficiency and the most opportunity, (ii) generate attractive risk-adjusted returns with low correlations to the equity and debt markets, (iii) maintain a portfolio with a strong value proposition, and (iv) generally provide a superior timberland investment vehicle. Timbervest's investment strategy is focused on timberland properties (i) located only in the United States, (ii) non-contiguous in structure and generally within the 3,000 to 30,000 acre size range, with the average size being approximately 8,000 acres, (iii) with significant biological growth and income potential, (iv) diverse in geographic locale, botanical species, and age classification, (v) in locations where the Fund perceives value from changing micro-market conditions, (vi) with characteristics which allow for value creation from an active management regime, and (vii) in locations with strong or growing demand for property. 25 Timbervest looks to buy properry that is in smaller acreage than what other TIMO's would look at. The advantage of buying small tracks according to Timbervest is that there are naturally more buyers and sellers of small tracks of land and at disposition Timbervest can look beyond the TIMO industry for buyers of the properry. Generally Timbervest will transact in land sizes of 3,000 ro 30,000 acres with an average purchase size of 8,000 acres. Like many of the other TIMO's Timbervest enters into negotiations over properties and generally tries to avoid the open auction process. l��illions 100+ 75-100 50-75 40-50 30-40 20-30 15-20 10-15 5-10 2.5-5 1-2.5 26 % 0%, 0% < 1% 1% 5% 10% 15% 1 �% 30% 15% 10% Thousands 100K+ 75K-100K 50K-75K 30K-50K 20K-30K 15K-20K 10K-15K 7,500-10,000 5,000-7,500 3,000-5,000 2,000-3,000 % Timbervest charges a quarterly management fee as compensation for its services as manager equal to twenty-five basis points (.25%) of: (i) fox the pexiod from the first closing to the expirarion of the investment period, the aggregate commitmentis; and (ii) for the period from and after the expiration of the investment period, the then fair market value of assets. The management fee is payable quarterly in arrears. In addition, the General Partner receives 20% of the return after the investors have received a return of all contributions and an 8% net annualized return. There is no catch-up and due to the incentive fee structure, no need for a claw back right for the investors. Auditing/ accounting Tees: Normal outside audie and accounting fees are charged ro the Fund Legal Fees: Normal outside legal fees are charged to the Fund. However, Timbervest uses in-house counsel as much as possible to reduce legal costs to the Fund.. The Fee Brief illustrated above is intended as a summary of the fees disclosed by the manager and should not be considered as a full disclosure of all potential fees or cost associated with the investment fund. Please refer to the offering documents and term sheets priar to investment for a full disclosure of the fees and cost associated with Y11e investment fund. 27 The NCREIF Timberland Index: is a quarterly time series composite return measure of investment performance of a large pool of individual timber properties acquired in the private market for investment purposes only. All properties in the Timberland Index have been acquired, at least in part, on behalf of tax-exempt institutional investors - the great majority being pension funds. As such, all properties are held in a fiduciary environment. The FTSE NAREIT Real Estate 50: Is an Index comprised of the 50 largest U.S. REITs. S&P 500: A broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. This index does not contain the 500 largest companies or the most expensive stocks traded in the US. While many of the stocks are among the largest, this index also includes many relatively small companies. This index consists of approximately 380 industrial, 40 utilit��, 10 transportation, and 70 financial companies listed on the US market exchanges. It is a capitalization-weighted index (stock price times number of shares outstanding), calculated on a total return basis with dividend reinvested. Russell 1000: The 10001argest companies in the Russell 3000 index, based on market capitalization. Russell 1000 Growth: A segment of the Russell 1000 with a greater-than-average growth orientation. Companies in this index have higher price-to-book and price-to-earnings ratios, lower dividend yields and higher forecasted growth values than the Russell 1000 Growth index. Russell 1000 Value: Represents a segment of the Russell 1000 with a less-than-average growth orientation. Companies in this index have low price-to book and price-to-earnings ratios, higher dividend y�ields and lower forecasted growth values than the Russell 1000 Growth index. Russell Mid-Cap: This index consists of the bottom 800 securities in the Russell 1000 as ranked by total market capitalization, and represents over 35% of the Russell 1000 total market cap. Russell Mid-Cap Growth: The Russell Mid-cap Growth Index offers investors access to the mid-cap growth segment of the U.S. equity universe. The Russell Midcap Growth Index is constructed to provide a comprehensive and unbiased barometer of the mid-cap growth market. Based on ongoing empirical research of investment manager behavior, the methodology used to determine growth probability approximates the aggregate mid-cap growth manager's opportunity set. 28 Russell Mid-Cap Value: Measures the performance of the Russell 3000 Index extended to include micro-cap securities of the Russell Micro-cap Index. The index represents approximately 99% of the U.S. Equity� Market. As of the latest reconstitution, the average market capitalization was approximately �3.8 billion; the median market capitalization was approximately $612 million. The index had a total market capitalization range of appro�mately $368.5 billion to �67.3 million. Russell 2000: the 2000 smallest companies in the Russell 3000 index. Russell 2000 Growth: A segment of the Russell 2000 with a greater-than-average growth orientation. Companies in this index have higher price-to book and price-to-earnings ratios, lower dividend yields and higher forecasted growth values than the Russell 2000 Va1ue index. Russell 2000 Value: A segment of the Russell 2000 with a less-than-average growth orientation. Companies in this index have low price-to-book and price-to-earnings ratios, higher dividend yields and lower forecasted growth values than the Russell 2000 Growth index. Russell 2500: This index consists of the bottom 500 stocks in the Russell 1000 (as ranked by market capitalization) and all of the stocks in the Russell 2000. This index is intended to be used as a measure of sma11 to medium�small stock performance. Russell 2500 Growth: A segment of the Russell 2500 with a greater-than-average growth orientation. Companies in this index have higher price-to book and price-to-earnings ratios, lower dividend yields and higher forecasted growth values than the Russell 2500 Value index. Russell 2500 Value: A segment of the Russell 2500 with a less-than-average growth orientation. Companies in this index have low price-to-book and price-to-earnings ratios, higher dividend yields and lower forecasted growth values than the Russell 2500 Growth index. Russell 3000: is composed of the 3,000 largest U.S. securities, as determined by total market capitalization. Russell 3000 Growth: This index measures the performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values. The stocks in this index are also members of either the Russell 1000 Growth or the Russell 2000 Growth indexes. 29 Russell 3000 Value: This index measures the performance of those Russell 3000 Index companies with lower price-to-book ratios and lower forecasted growth values. The stocks in this index are also members of either the Russell 1000Value or the Russell 2000 Value indexes. MSCI EAFE: A market capitalization-weighted index representing all of the MSCI developed ma�kets outside North America. It comprises 20 of the 22 countries in the MSCI World. These 20 countries include the 14 European countries in the MSCI Europe and the 6 Pacific countries in the MSCI Pacific. This index is created by aggregating the 20 different country indexes, all of which are created separately. MSCI World: A free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. As of June 2007 the MSCI World Index consisted of the following 23 developed market country indices: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States. MSCI World ex U.S.: The MSCI World index excluding the U.S. portion of the index. MSCI All Country World Index: a free float-adjusted market capitalization weighted index that is designed to measure the equiry market performance of developed and emerging markets. As of January 2009 the MSCI ACWI consisted of 46 country� indices comprising 23 developed and 23 emerging market country indices. The developed market country indices included are: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Netherlands, New Lealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States. The emerging market country indices included are: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey. MSCI All Country World Index ex U.S.: The MSCI All Country World Index excluding the U.S. portion of the index. MSCI Emerging Markets Free (EMF): A market capitalization-weighted index representing 2 of the emerging markets in the world. Several factors are used to designate whether a country is considered to be emerging vs. developed, the most common of which is Gross Domestic Product Per Capita. The "Free" aspect indicates that this index includes only securities that are allowed to be purchased by global investors. This index is created by aggregating the 26 different country indexes, all of which are created separately. 30 Barclays Capital U.S. Aggregate Bond: This index is made up of the Barclays Capital U.S. Government/Credit, the Mortgage-Backed Securities, and the Asset-Backed Securities indices. All issues in the index are rated investment grade or higher, have at least on year maturity, and have an outstanding par value of at least $100 million. Barclays Capital U.S. Government/Credit: This index includes all bonds that are in the Barclays Capital U.S. Government Bond and the Barclays Capital U.S. Credit Bond inclices. Barclays Capital U.S. Government/Credit Intermediate: All bonds by the Barclays Capital U.S. Government/Credit Bond index with maturities of 1 to 10 years. Barclays Capital Municipal Bond: This market capitalization-weighted index includes investment grade tax-exempt bonds and is classified into four main sectors General Obligarion, Revenue, Insured, and Pre-refunded. To be included in this index, the original transaction size of a bond must have been greater than $50 million. Barclays Capital U.S. Treasury Index: This index includes public obligations of the U.S. Treasury. Treasury bills are excluded by the maturity constraint, but are part of a separate Short Treasury Index. In addition, certain special issues, such as state and local government series bonds (SLGs), as well as U.S. Treasury TIPS, are excluded. STRIPS are excluded from the index because their inclusion would result in double-counting. Securities in the Index roll up to the U.S. Aggregate, U.S. Universal and Global Aggregate Indices. Barclays Capital U.S. TIPS: This index measures the performance of U.S. Treasury Inflation Protection Securities. Merrill Lynch Convertibles: The convertible securities used in this index span all corporate sectors and must have a par amount outstanding of �25 million or more. The maturity must be at least on year. The coupon range must be equal to or greater than zero and all equity of bonds are included. E�cluded from this index are preferred equity redemption stocks. When the component bonds of this index convert into common stock, the converted securities are dropped from the index. Merrill Lynch Corp/Govt 1-3 Years A or Better: An unmanaged index of government and corporate fixed-rate debt issues with maturities between one and 3 years. 31 Merrill Lynch High Yield Master: Market capitalization weighted index providing a broad-based measure of bonds in the US domestic bond market rated below investment grade, but not in default. Includes only issues with a credit rating of BB1 or below as rated by Mood}�'s and/or S&P, at least $100 million in face value outstanding and a remaining term to final maturity equal to or greater than one year. Dow Wilshire REIT: A measurement of equity REITs and Real Estate operating Companies. No special-purpose or health care REITs are included. It is a market capitalization weighted index for which returns are calculated monthly using buy and hold methodology; it is rebalanced monthl�T. The NFI-ODCE: short for NCREIF Fund Index - Open End Diversified Core Equity, is the first of the NCREIF Fund Database products and is an index of investment returns reporting on both a historical and current basis the results of 26 open-end commingled funds pursuing a core investment strategy, some of which have performance histories dating back to the 1970s. The NFI-ODCE Index is capitalization-weighted and is reported gross of fees. Measurement is time-weighted. NCREIF will calculate the overall aggregated Index return. 32 Alpha: A risk-adjusted measure of 'excess return' on an investment That is, it measures an active manager's performance in excess of a benchmark index or 'risk-free' investment. An alpha of 1.0 means the manager outperformed the market 1.0%. A positive alpha is the extra return awarded to the investor for taking addirional risk xather than accepting the market retuYn. Batting Average: The percent of periods the manager has beaten the benchmark. A high average for the fund (e.g. over 50) is desirable, indicating the fund has beaten the policy frequently. Beta: A measure of systematic risk, or the sensirivity of a manager to movemenes in the benchmark. A beta of 1 implies that you can e�pect the movement of a manager's return series to match that of the benchmark used to measure beta. Down Market Capture Ratio: A measure of a manager's performance in down markets. A down-market is defined as those periods (months or quarters) in which market return is less than 0. It tells you what percentage of the down-market was captured by the manager. Information Ratio: The Information Ratio measures the consistency with which a manager beats a benchmark. Mgr: "Mgr" refers to a short-hand for "Managers" referenced in the universe comparison pages to note the number of managers comprising the universe R-squared: The R-Squared (R2) of a manager versus a benchmark is a measure of how closely related the variance of the manager returns and the variance of the benchmark returns are. Sharpe Ratio: The Sharpe Rario is a risk-adjusted measure of return which uses standard deviadon to represent risk. It is calculated by subtracting the risk-free xate from the raee of retiurn for a portfolio and dividing the result by the standard devia�ion of the portfolio retiurns. Standard Deviation: Standard deviation of return measures the average deviations of a return series from its mean, and is often used as a measure of risk. A large standard deviation implies that there have been large swings in the return series of the manager. Tracking Error: A divergence between the price behavior of a position or a portfolio and the price behavior of a benchmark. Treynor Ratio: The Treynor Ratio is a risk-adjusted measure of return which uses beta to represent risk. It is calculated by subtracung the risk-free rate from the rate of return for a portfolio and dividing the result by the portfolio's beta value. Up Market Capture Ratio: A measure of a manager's performance in up markets. An up-market is defined as those periods (months or quarters) in which market return is greater than 0. It tells you what percentage of the up-market was captured by the manager. 33 This material is for information only and for the use of the recipient. It is not to be reproduced or copied or made available to others. Any opinions expressed are our current opinions onl�r. Assumptions, opinions and estimates constitute CapTrust's judgment as of the date of this material and are subject to change without notice. Wl�ile the information contained herein is from sources believed reliable, we do not represent that it is accurate or complete and it should not be relied upon as such. CapTrust accepts no liability for loss arising from the use of this material. Separately managed account results represent historical gross performance with no gross deduction for investment management fees and assume reinvestment of dividends and income and capital appreciation. Expenses that may include management fees will reduce individual returns. Results may represent a composite of numerous accounts; you must refer to the disclosure document of a manager to determine the composition of the numbers reported. Mutual funds are offered by prospectus only. Please Yefer to a current mutual fund prospectus for further information about a specific mutual fund. Mutual fund results represent historical net performance. As a result, the reader should be aware that the omission of separate account managers' management fees in this report, all else being equal, may Yesult in better performance returns relative to comparable mutual funds that have presented net performance returns. Separately managed account information is obtained from the Zephyr manager database. Mutual fund information is obtained from the Morningstar mutual fund database. Hedge fund information is obtained from the Barclays hedge fund database. Dollar amounts are estimates and are provided by= CapTrust Financial Advisors as examples. CapTrust cannot guarantee that the data is free from errors as the dollar values are subject to financial market conditions and will change as the values of the shares of the underlying funds/assets fluctuate in response to prevailing financial market conditions. Past performance is no guarantee of future performance. 34 CapTrust Financial Advisors' registration as an investment adviser with the U.S. Securiries and Exchange Commission became effective on March 12, 2007. CapTrust Financial Advisors merged with Schott Group Investment Consulting on November 1, 2007. Prior to March 12, 2007 for CapTrust and November 1, 2007, for the Schott Group Investment Consultants, the consultants of both CapTrust and Schott Group Investment Consulting were investment advisors under the Wachovia Securities Financial Network, LLC ("Wachovia"). AfteY March 12, 2007 for CapTrust and November 1, 2007 for Schott Group Investment Consulting, the majority of client engagements have been contracted under the CapTrust Financial Advisors investment advisor registration. CapTrust Financial Advisors supervises the activities of all consultants in its employment and continues to provide analytic and consulting services to clients engaged under both the current CapTrust Financial Advisor service contract and the Wells Fargo Advisers Financial Network, LLC (formerly, Wachovia Securities Financial Network) service contract. The Wells Fargo Advisors Financial Network, LLC is an investment advisor under the Registered Investment Advisor Act of 1940. Client contacts offered as references or as representative clients may be contracted under either the CapTrust Financial Advisors investment advisor registration or the Wells Fargo Advisers Financial Network, LLC registration. CapTrust's representation(s) with respect to the number of clients, accounts, and/or assets it advises includes all of CapTrust's investment advisory clients and clients of Wells Fargo whereby CapTrust consultants advise the client as a registered representative of Wells Fargo. Additional information about these relationships is available upon request. Insight — Independence — Integrity CapTrust Advisors, LLC is a registered investment advisor with the SEC. CapTrust is not a legal or tax advisor. 35