Dear Client and potential Timberland Investor,

The global recession of the last several years has been particularly severe, reinforcing the wisdom of asset diversification in the investor's portfolio, and market and regional diversification within an asset class. In our targeted investment regions, the US and Europe have been hit particularly hard; Latin America much less so. As the world economy continues to recover from the global financial crisis, I would like to offer the following observations about timberland as an investment.

In the timberland business, market cycles are typically characterized by an imbalance between the supply and demand for raw material and the currency exchange rates at which the products trade in the marketplace. We are in a situation where global economic weakness has dampened demand for a variety of forest products, especially those coming from large-diameter trees such as sawtimber and veneer. Prices have declined for a variety of species. Markets for lumber (used in homebuilding and remodeling) were particularly hard-hit, due to the weak housing market in many countries. This was compounded by a lack of credit in the world's financial markets. These factors caused a pronounced near-term pricing weakness in the fundamental timberland resources: land and trees. As we move into 2011, there are encouraging signs in a number of markets, but we still expect the recovery to move in fits and starts.

One of the more promising indicators of gradual recovery in the solid wood markets is the demand growing out of China for lumber and wood-derived building materials, and the gradual, albeit slow, recovery in the US housing market. However, foreign exchange rate imbalances continue to hinder more rapid growth in this sector and other sectors in the forest industry worldwide, depending on the source and destination of the product flow.

As we hear so often at meetings and from timberland investment professionals, timberland is indeed both a long-term and unique investment. Trees grow over time in size and value regardless of economic conditions. Between 2008 and 2010, we scaled back timber sales as transactions in the Western Hemisphere slowed considerably, and in some regions nearly came to a complete halt. However, the trees continued to grow, and we resumed in early to mid-2010, selling wood into the market as we experienced recovery region by region.

More positively, the severe economic crisis led to a number of timberland acquisition opportunities over the past several years. Many of our investors took advantage of properties being sold by owners who were overleveraged, or needed cash. If you are considering additional investments in timberland or are a prospective investor, you can expect to find opportunities to buy timberland in the regions where RMK Timberland Group operates.

Sales of timberland will, on the average be smaller than in the past. The large US forest industry that has fed the acquisition machine for many years is now largely divested or has converted to timber REITs. Non-US transactions are typically smaller than those that have closed in the US, with possible exceptions of several in Australia and Brazil. Setting aside the expected resolution of Brazil's "AGU" foreign ownership edict, we expect fewer large timberland transactions originating from the Brazil forest industry as credit loosens and their margins stabilize or increase.

We remain committed to timberland because it produces an essential raw material that grows and can be harvested in a sustainable manner – trees are good for the environment.

To steward these assets, RMK Timberland Group employs a team of natural resource professionals who protect, manage, and maximize value from the forest on a sustainable basis. With RMK Timberland Group, investors can rest assured knowing that they are invested with trustworthy natural resource professionals in a very straightforward asset. We buy land and trees, plant trees, harvest trees, and plant again. A unique characteristic of timberland is that at any time during the investment term, clients can see and literally walk through their timberland, review the legal documents supporting the ownership of those assets, and talk with informed, and committed professionals who manage these assets.

When there are temporary performance declines, they can be clearly explained since they will result from documented market price changes for the land and trees, or from natural causes. Although not pleasant, such events or conditions are fully transparent, and can be readily explained and understood.

Similarly, investment success comes in the form of the continued growth of the trees, the long-term price appreciation of land and of the products produced by the land, all in the hands of the experienced team of natural resource professionals mentioned above.

We continue to emerge from some very difficult times. In the future we will see new market recoveries and weaknesses. However as an investor you can take comfort in the knowledge that we know who we work for, what our responsibilities are, what we are managing, and how to manage it. We have confidence in the fundamental natural resource to which we have devoted our entire careers and your financial resources, and look forward to managing and stewarding those resources, delivering the best performance we can regardless of the larger global economic circumstances.

Kindest regards,

Charlie
President RMK Timberland Group