The Company’s investment strategy is to build a diversified portfolio of timberland properties and timberland-related investments through a research-led ethically and socially responsible investment process designed to identify and acquire timberland, or forestry, or related investment vehicles or structures related to these vehicles.
The strategy is intended to allow the Company to build an optimised timberland portfolio in terms of geographical allocation, age class and species that will maximise after-tax returns while seeking to control volatility and limit downside risk exposure. The Company believes that this approach will generate both income and long term capital appreciation for shareholders.
Different age classes of tree provide harvestable timber over time and diversification by species and geography provide exposure to both different growth rates and different market segments/prices. Harvested land is generally either replanted or allowed to regenerate naturally, as appropriate. Where the Company disposes of its properties they will either be sold as timberlands or, where practicable, for an alternative use which commands a higher price, being the “Highest and Best Use”.
The Company has sought exposure to larger tracts of commercial timberland, as well as reviewing opportunities for smaller tracts or groups of smaller tracts where those opportunities provide higher return potential or exposure to niche markets.
The Company works with market-leading, major timber management groups and experienced local forest managers in the selection, acquisition and management of its timber investments. Because of the broad international mandate of the Company and its ability to work with a diverse spectrum of leading timber managers and investors, the Investment Manager believes that the Company has the opportunity to evaluate and consider participation in both well-known, limited access investments or more exclusive specialist opportunities. This scope allows the Company to analyse and select both partners and investment opportunities that the Investment Manager considers best suit the needs of the shareholders and allows the Company to build a well-diversified portfolio.
Investments in the Portfolio are currently, and will in the future, be made in currencies other than US Dollars and distributions and income from or the proceeds from the disposal of certain investments in the Portfolio will be realised in currencies other than US Dollars. Consequently, the value of non-US Dollar denominated investments in the Portfolio will be affected by currency movements and will fall if the US Dollar appreciates against the currency in which such investments are denominated. Ordinarily the Company will not hedge its non-US Dollar exposures. Under certain circumstances however (e.g. an anticipated asset sale) the Company is empowered to hedge against interest rate risk or currency risk, so the Company may, where appropriate, enter into forward interest rate agreements, spot or forward currency agreements, interest rates and bond futures contracts and interest rate swaps and purchase and enter into put or call options on interest rates or currency rates and put or call options on futures of interest rates or currency rates.
The Company expects to generate cash flow to meet working capital requirements, with any surplus net income potentially to be distributed by way of dividend payments, by the harvest and sale of timber growing on invested properties or investment vehicles, as well as through secondary sources of return from those properties and investment vehicles. Additional sources of return could include, but are not limited to, recreational licences, outsourced utilisation of mineral or water rights, or carbon credits.