January 2015

Scott KetchumGeneral ManagerHancock Forest ManagementNorthern Inland Division

Hancock Natural Resource Group Report to:State of Idaho Joint Economic Outlook and Revenue Assessment Committee

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Hancock Natural Resource GroupOverview

* As of June 30, 2014

Hancock Timber Resource Group

Founded in 1985; subsidiary of Manulife Financial Corporation

Global portfolio: USD 12.1 billion / 6.4 million acres*– US, Canada, Australia, New Zealand, Chile and Brazil – World’s largest timberland investment manager – Managing assets outside the US since 1992

– Hancock Agricultural Investment Group

– $2.1 billion in investments in high quality farm ground

– 235,000 acres in US., 6,000 acres Australia, 1,000 acres Canada

– 14,000 acres in Idaho (alfalfa, potatoes, corn/soy beans, wheat)

– Hancock Renewable Energy Group

– Focused on investments in the Renewable energy sector (wood pellets)

– $320 million dollar investment in North Carolina plant and export facility (2015)

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Approximately 311 investment clients located in United States, Canada, Europe, Australia, New Zealand, and Japan

Timberlands

2013 harvested 22 million m³ logs (8.5 billion board feet), planted 50 million trees

Sustainable forest management certified by SFI or FSC

Region Acres Hectares % of AreaUS South 2,350,000 951,000 37%US Northwest /Canada

1,610,000 652,000 25%

Australia 1,447,000 585,000 23%New Zealand 765,000 310,000 12%Chile 122,000 50,000 2%Brazil 1,700 700 <1%

6,424,000 2,600,000 100%

Global timberland manager

* As of June 2014

Hancock Timber Resource Group

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HTRG has a Diverse Client Base

USD9.9Billion NIV

317Clients Type of Organization

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

NIV Number

Investment Manager

Foundation/Endowment

High Net Worth

Corporate

Pension Plans

Northern Inland Timberlands Approximately 700,000 acres

Mixed conifer forest of Douglas Fir,

Western Larch, Grand Fir, Ponderosa

Pine, and a small component of high

value Red Cedar (also alpine fir, western

hemlock, mountain hemlock, western white

pine, lodge pole pine and spruce)

In Idaho roughly 140,000 acres under

management.

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Idaho Idaho is a good place to do business and a great place to invest in

and manage timberland.

– High quality timberlands exhibiting moderate growth rates.– Mature market place with state of the art milling infrastructure.

□ Extremely important not only to our lands in Idaho but we also sell significant percentages of our harvests from NEWA and NEOR into the Idaho markets.

– Stable timber supply well mixed between private, state, and federal suppliers.– Idaho has well designed forest practice regulations

□ Excellent balance between strong environmental stewardship and operational flexibility.

– Idaho Department of Lands does an excellent job of protecting private forests from fire as well works in partnership with Industry to navigate the often difficult and confusing nexus of federal EPA regulations.

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Impacts of Forest Products Industry on Idaho

Forest products industry in Idaho created 11,740 direct jobs in 2014 up 2% from 2013.– An additional 10,621 indirect jobs are also created.

Equates to $429 million in wages and salaries up 1.7% form 2013– Average salary is $56,800, 37% higher than the Idaho average

□ Most come with full benefits.□ 1.7% of all state wages.

2014 Industry Revenue $2.6 billion up 4.5% over 2013.– 2015 expectations are expected to exceed 2014.

For every $1 of value exported out of state of primary wood products it generates $0.6 of sales in other industries.

– 90% of primary wood and 56% of primary paper products are exported yearly.

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North American Lumber and Structural Panel Market Outlook

The Outlook is Good!– GDP growth approaching normal levels– Lowering of Unemployment– High Housing Affordability– Access to Financing Improving.

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US Economy Growth Back to Trend LevelReal GDP Growth, Annualized Percent Change

-9%-8%-7%-6%-5%-4%-3%-2%-1%0%1%2%3%4%5%6%7%8%9%

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Source: BEA, RISI

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14%

15%

16%

17%

18%

19%

20%

-7-6-5-4-3-2-1012345

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14

2014

Job Growth Continues to Improve Along with the Quality of Jobs Change in US Total Payroll Employment, Millions and Share of Part Time Employment (Right Hand Scale)

Source: BLS

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Affordability Is Down But Not Out: Housing Is Still Very AffordableHousing Affordability Index, Monthly, Not Seasonally Adjusted

0.0

50.0

100.0

150.0

200.0

250.0

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

11

Source: National Association of Realtors

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Mortgage Lending Standards Are EasingAverage FICO Scores for Approved Loans and Loan-to-Value (Right Hand Scale)

Source: Fannie Mae12

62%64%66%68%70%72%74%76%78%

680690700710720730740750760770

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Timber Industry in Idaho Strongly linked to National Housing Starts.

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40%

50%

60%

70%

80%

90%

0.0

0.5

1.0

1.5

2.0

2.5

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Single-Family Multifamily Single-Family Share (R)

Yearly housing starts (million units)

Source: BEA, RISI

Demand for North American Softwood Lumber: Will Return to 1990’s Level by Mid-Decade

-100

1020304050607080

Demand for North American Softwood LumberUS CanadianNet Export Avg (1990s)

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Influence of Standing Inventory on Inland Log Market

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Risks

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Demand– Economy Stalls Due to Outside Shocks– Housing market remains flat or worse– Exports more price sensitive than estimated

Supply– Too much (Eastern Canada, US South)

A Couple Closing Observations

Applaud the efforts of the Idaho Department of lands.– Forged constructive partnerships with industry.– Provide adequate regulator oversight minimizing the hindrance of

operational needs while still vigorously protecting the environment.

Much of the actual logging and hauling that takes place in Idaho is done by relatively small harvest and haul contractors.– The global financial crisis has been hard on this sector of our industry.– Their continual survival is vital for the timber industry to prosper. It is

important that Idaho maintains an encourages an environment where these small businesses can prosper.

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