Dear Client and potential Timberland Investor, 

We have all experienced market cycles in the past, however the current situation is particularly severe.  In light of the global financial crisis I wish to offer the following observations of timberland as an investment.

In the timberland business, market cycles are typically characterized by an imbalance between the supply of raw material and the demand for raw material. This is reflected by world pricing for the end products, primarily lumber and paper. We are currently in a situation where global economic weakness has dampened demand for a variety of forest products. To date, markets for lumber (used in homebuilding and remodeling) are particularly hard-hit, due to the weak housing market in a number of countries. The problem is compounded by a lack of credit in the world’s financial markets. Consequently, forest industry is curtailing wood purchases, land acquisitions and capital improvements, to preserve cash. These actions will cause continued near-term pricing weakness in the fundamental timberland resource: land and trees.

However timberland is both a long-term investment and a unique one. Trees continue to grow annually in size, weight, and value. As I watch the financial news on CNN, in my house, the pine trees in my front yard have gotten larger, regardless of whether the news is good or bad.  Similarly with a large timberland investment the trees continue to grow and we can store these trees "on the stump".  When prices do recover and the trees are harvested, we plant more.

If you are considering additional investments in the timberland resource or are a prospective investor, over the next year you can expect to find singular opportunities to buy timberland assets during a period in which "cash will be king". Competition for timberland from buyers who typically use leverage to purchase timberland will be largely absent. Forest industries who are preserving cash will not be adding to their current holdings and in some cases will be selling their timberland to raise cash.

You have perhaps heard the expression "invest in land, as they are not making any more of it". We recommend investing in timberland because it produces an essential raw material which grows over time and which can be harvested in a sustainable manner. Moreover, trees are good for the environment.

To steward these assets RMK Timberland Group employs a team of natural resource professionals who work hard to protect, manage, and maximize the forest on a sustainable basis. Lately it seems as though each day brings a new unpleasant financial surprise involving a firm or individual, previously trusted with the assets of their customers. With RMK Timberland Group investors can rest assured knowing that they are invested with natural resource professionals in an asset that is uncomplicated. We buy land and trees, plant trees, harvest trees, and plant again. At any time during the investment term, we can show clients their timberland, along with the legal documents supporting the ownership of those assets. We can introduce them to the committed professionals who will talk with them in an intelligent, straightforward and informed way about their investments. Simply put, there are no shadows, or surprises behind the curtain.

Where there may be temporary performance declines, they can be clearly explained as they will either be due to movement in fundamental market prices for the land and the trees, or natural causes. Although not pleasant, these types of events are straightforward and understandable. They are not opaque financial failures that few can explain and fewer still understand.

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 I have mentioned.

We are experiencing difficult times. In many cases the effects of the crisis are being felt personally as individuals suffer due to the bad judgment, or even deceit, by the institutions and managers who were formerly trusted with significant financial responsibility. At RMK Timberland we take comfort in the knowledge that we know what we are about, what we are managing, and how to manage it. We have confidence in the fundamental natural resource we have been educated in our entire careers, and look forward to managing that resource and delivering the best performance we can regardless of the larger global economic circumstances.

Kindest regards,

Charlie Daniel,
President RMK Timberland