2018 SFI Public Summary Report. The Forestland Group, LLC Sustainable Forestry Initiative (SFI) Forest Management Standard [ ]

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1 2018 SFI Public Summary Report The Forestland Group, LLC Sustainable Forestry Initiative (SFI) Forest Management Standard [ ] Date: February 15, 2019 Project Scope and Objectives PricewaterhouseCoopers LLP ( PwC ) completed a single-site Maintenance Assessment on The Forestland Group, LLC s ( TFG or the Company ) forest management on the company s two properties in Ontario. The forest management activities are managed by a contract land manager (Prentiss & Carlisle) from offices in Sault Ste. Marie, ON. The Lead Assessor was James Lucas, EMS (LA). The audit team was accompanied by TFG s Regional Director s for Ontario, Dave Fehringer, as well as other TFG and Prentiss & Carlisle ( P&C ) staff. The primary objective of the assessment was to assess the Company s SFI management system and to evaluate the Company s implementation of the SFI Standard in the field. TFG Description The Forestland Group LLC was formed in 1995 as an independent timberland investment management organization ( TIMO ) with the intent of emphasizing the acquisition of naturally regenerating hardwood and some softwood forests. TFG manages the forest resources for its affiliated Heartwood Forestland Funds across 3.1 million acres in 24 states and 4 countries. The regional teams working in conjunction with local forestry consulting firms are responsible for the daily, on ground management activities and property oversight. Description of the Forest Lands Quercus Algoma Forest Lands The Quercus Algoma property is comprised of 147,882 acres of surface and partial minerals ownership located in the central Algoma District of Ontario, Canada, approximately 50 miles north of Sault Ste. Marie. The property is entirely contiguous, except for the Canadian National Railroad ROW that traverses the property north to south, and contains numerous beautiful lakes and rivers. Approximately 200 cabin leases are located primarily on the lakes and rivers and most are recreational, however there are a few commercial tourist camps or trapper s cabins. The Algoma property is dominated by the Northern Hardwood cover type, which here consists primarily of Sugar (Hard) Maple, Yellow Birch, Red (Soft) Maple, along with several minor components such as White Birch and upland conifers (White Spruce and Balsam Fir). Other prominent forest types include Intolerant Hardwoods, primarily Aspen and White Birch; Lowland Conifers, Black Spruce, Tamarack, Cedar; and Mixedwood which is a combination of Intolerant Hardwoods and Upland/Lowland Conifers. Quality hardwood products, primarily in Hard Maple and Yellow Birch, are the focus of timber (1)

2 management. Low white-tailed deer density allows for excellent hardwood regeneration. Much of the current timber value exists in stands with poor road access, so road planning and construction are major focus for managers. Garden River Forestlands The HFF VIII Garden River Forestlands property is comprised of 14,866 acres of surface ownership located in the southern Algoma District of Ontario, Canada, adjacent to the city of Sault Ste. Marie at its NE boundary. The property is entirely contiguous, but has several outparcels within its boundary. The Hiawatha Highlands Conservancy lies adjacent to the west and features extensive ski-snowshoe-hiking trail systems. Garden River First Nation (GRFN) Reservation is adjacent to the south, east and northeast. The Garden River Forestlands property is dominated by the Northern Hardwood cover type, which here consists primarily of Sugar (Hard) Maple, Yellow Birch, Red (Soft) Maple, along with several minor components such as White Birch and upland conifers (White Spruce and Balsam Fir). Other prominent forest types include Intolerant Hardwoods, primarily Aspen and White Birch; Lowland Conifers, Black Spruce, Tamarack, Cedar; and Mixedwood which is a combination of Intolerant Hardwoods and Upland/Lowland Conifers. Quality hardwood products, primarily in Hard Maple and Yellow Birch, are the focus of timber management. Low white-tailed deer density allows for excellent hardwood regeneration. Much of the current timber value exists in stands with poor road access, so road planning and construction are a major focus for managers. Indicators All of the indicators in the SFI Forest Management Standard were within the scope of the assessment, except for Objective 13, since none of the land managed by the Company is public land. There were no substitute indicators. Assessment Process The Assessment was conducted from October 9-12, The Lead Assessor conducted interviews and reviewed appropriate documentation to assess policies and procedures, and tested the implementation of SFI program requirements at the Prentiss & Carlisle offices in Sault Ste. Marie, ON. In total, the assessment team spent 1.5 days in the office and 1.5 days conducting on-site field assessments. A total of 4 sites on the Algoma property were visited including 3 completed harvesting operations and road construction sites and one silviculture site. Due to heavy rains and unpassable river crossings, the potential field activities were limited to one of two road systems for the Algoma property. The Garden River property was also visited via an older road system which passed through the Hiawatha Highlands Conservation Area which was an adjacent landowner. There have been no forestry activities on the Garden River property since TFG purchased the lands. The audit report was dated February 15, Summary of Conformance, Findings, and Good Management Practices FOREST MANAGEMENT SFI Forest Management Objective Objective 1. Forest Management Planning To ensure forest Evidence of Conformity ON SFI Indicators, Algoma and Garden River 10 Year Management Plans, GIS maps, Inventory information and records, Woodstock and modelling records, Timber Harvest Proposal & Appendix B documents for various harvest operations in ON, KBM Wildlife Analysis.

3 management plans include long-term sustainable harvest levels and measures to avoid forest conversion Summary: TFG and their land managers in ON have inventories based on cruising and permanent sample plots on all properties. Growth modelling was conducted to calculate the AAC for each property and determine the annual number of operable acres. For the Algoma and Garden River properties, TFG has classified the land base into large planning compartments and the forest types are divided into 5 categories - intolerant hardwoods (A), tolerant hardwoods (M), pine (P), spruce-fir (SU), & lowland conifer (SL). The dominant forest stand types across the Algoma property is tolerant hardwoods. Both the Algoma and Garden River properties have recently completed full inventories including carbon. Harvest levels are closely monitored and growth exceeds drawdowns for Algoma. No recent harvesting has taken place on Garden River. GIS updates for depletions are done on a quarterly basis by P&C's office in Bangor, Maine. The GIS runs on ArcInfo and it has all relevant layers including roads, streams, cutblocks, all water, steep slopes, visuals and HCVF s. TFG relies on natural regeneration which does not result in forest conversion. Objective 2. Forest Health and Productivity To ensure longterm forest productivity, carbon storage and conservation of forest resources through prompt reforestation, afforestation, minimized chemical use, soil conservation, and protecting forests from damaging agents. ON SFI Indicators, Algoma and Garden River 10 Year Management Plans, Timber Harvest Proposal & Appendix B documents for various harvest operations, green up and stand regeneration targets. Summary: TFG specifies silviculture systems in the "workbook" timber development proposal for each harvest unit including regeneration plans, basal area targets or other treatments. Silviculture systems include selection, shelterwood and clear cut harvest systems, all regeneration is natural with the exception of a small planted area near the Creekside log reload site. The protection of advanced regeneration during harvest activities is stressed with contractors and was evident in the field audits. Regeneration is assessed in post-harvest field evaluations and during scheduled inventories. At a minimum, inspections for satisfactory regeneration response will occur at the close of a harvest unit and during the subsequent mid-term and long-term post-harvest inspections. Deficiencies in regeneration will be mitigated as necessary promptly following inspection reporting. Herbicide has not been used to date in Ontario but is an option. TFG currently does not use pesticides on The World Health Organization (WHO) type 1A and 1B pesticide list or pesticides banned by the Stockholm Convention on Persistent Organic Pollutants. Soils information is documented from Provincial information sources and field assessments. Season of harvest as well as selection of harvesting equipment addresses soil productivity and drainage issues. TFG have addressed historical disturbance regimes for each property in their management plans and manage these issues through field monitoring and communicating with government agencies when issues arise. There is no use of prescribed fire on any of TFG s properties and contractors and government help with fire preparedness and suppression if it occurs. There were no minor nonconformities was identified related to this Objective. One Opportunity for Improvement was identified related to this Objective: With minor exceptions, TFG employs natural regeneration for its reforestation strategies. At present, a number of stands that TFG has harvested are coming up for stocking surveys. TFG may wish to formalize the silviculture survey program including detailing the survey process and the mechanism which triggers surveys and the procedure to regenerate any areas which might fall below minimum stocking levels specified by TFG.

4 Objective 3. Protection and Maintenance of Water Resources To protect the water quality of rivers, streams, lakes, wetlands and other water bodies through meeting or exceeding best management practices. ON SFI Indicators, Algoma and Garden River 10 Year Management Plans, TFG Policies & Procedures, Pre-work, harvest inspections and close-outs for various harvest units, P&C SOP's & field guide for activities, Timber Harvest Proposal & Appendix B documents for various harvest operations, Ontario BMP Guidebook, GIS maps, various contracts, Algoma Strategic Access Plan. Summary: TFG uses the Ontario BMP's for Forest Operations in Northern ON & MB and Crown forestry regulations as their basis of management. The guidelines give the basis of harvest block, roads and stream crossings management including requirements for stream/shoreline management zones (SMZ's) and road building and maintenance practices. Contracts cover legal compliance and there is a defined process of work instruction and monitoring including a pre-work conference, active inspections and close-outs. P&C have created a BMP manual, which covers harvest operations (fire, fuel, spills), log quality, flagging colors and buffers which are covered with their contractors annually and required to be on site with all operators. GIS information includes all riparian areas and features (both perennial and intermittent are flagged and protected with 20 or 5 m buffers) and a Forest Operations Policy Manual includes policy for SMZ marking in accordance with BMP's. Two minor nonconformities were identified related to this Objective: TFG has created an inventory of bridges in the GIS but there has been no assessment of their condition as described in the action plan in an Opportunity for Improvement from the Registration Assessment. TFG committed to timely close-out of harvest sites including a final review by the TFG property manager. A review of five sites was done during the 2018 Maintenance Assessment. Of those sites, at least two were not closed out in a timely)manner. This was an Opportunity for Improvement in the Registration Assessment and has been raised to a Minor-non-conformity during the A1 Assessment. Two Opportunities for Improvement were identified related to this Objective: During the assessment there were two occasions where riparian buffers had been compromised by feller buncher harvests. While P&C field staff had identified these issues prior to the assessment and discussed it with the operator. TFG may wish to encourage all contractors to install spatial technology in all feller bunchers to help ensure that buffers or any boundaries are not compromised. While in general, inspection reports reflected the conditions of the harvest operations in the field, in two instances, issues that should have been documented in inspection reports (riparian buffer entry & trees cut outside harvest boundary) were not recorded. The issues were known by the supervising forester and had been identified and discussed with the contractors prior to the field assessment. Objective 4. Conservation of Biological Diversity To manage the quality and distribution of wildlife habitats and contribute to the conservation of biological diversity by developing and implementing stand-and ON SFI Indicators, Algoma and Garden River 10 Year Management Plans, TFG Policies & Procedures, Pre-work, harvest inspections and close-outs for various harvest units, P&C SOP's & field guide for activities, Timber Harvest Proposal & Appendix B documents for various harvest operations in ON, Ontario BMP Guidebook, GIS maps, various contracts, Algoma Strategic Access Plan, HCVF Planning & Assessment Document, ON Wildlife Habitat Assessment - KBM Group. Summary: TFG s approach to management and conservation of biological diversity is detailed in their property management plans and appendices including HCVF and wildlife assessments. TFG have conducted reviews of Provincial Natural Heritage databases and key species in Ontario include: Wood turtle on the Batchawana River, a number of nesting sites for water birds as well some protected plant communities. TFG have implemented guidelines for identifying and conserving bat habitat including a decision making tool for singletree

5 landscape-level measures that promote a diversity of types of habitat and successful stages, and the conservation of forest plants and animals, including aquatic species, as well as threatened and endangered species, Forests with Exceptional Conservation Value, old-growth forests and ecologically important sites. retention. The ON MNR has recently conducted Wood Turtle surveys the Algoma property. None were found but TFG has voluntarily implemented a conservation program which includes seasonal (winter only) harvest restrictions on identified habitat areas. No "old growth" sites for the properties have been defined by TFG but areas for conservation and protection have been identified and it should be noted that all of the TFG properties border on protected areas such as parks and reserves, which are recognized as representative sample areas by TFG. Targets for retention and CWD are specified in Management Plans and discussed within block specific timber harvest proposals. Management plans state that unique legacy trees should not be cut. TFG has demonstrated a good knowledge of research and plans to use research (particularly around climate change) in forest management decisions and new information is incorporated into Project Checklists. Objective 5. Management of Visual Quality and Recreational Benefits To manage the visual impact of forest operations and provide recreational opportunities for the public. ON SFI Indicators, Algoma and Garden River 10 Year Management Plans, TFG Policies & Procedures, P&C SOP's & field guide for activities, Timber Harvest Proposal & Appendix B documents for various harvest operations in ON, Ontario BMP Guidebook, GIS maps. Summary: This Objective was not reviewed in The following observations were documented in For the most part, TFG practices partial cutting including shelterwood and other retention harvests. Most of the ON properties are remote, so visual issues are few. TFG demonstrated that they take visual management into account when designing harvest units and use a variety of techniques such as choice of silviculture system, positioning of leave areas and block boundary design and the use of green up with adjacent units. TFG have a variety of recreational uses on their properties including: leased hunting and fishing camps, trap lines, walking and hiking and snow mobile trails and the use of some lakes for boating. Objective 6. Protection of Special Sites To manage lands that are geologically or culturally important in a manner that takes into account their unique qualities. ON SFI Indicators, Algoma and Garden River 10 Year Management Plans, TFG Policies & Procedures, P&C SOP's & field guide for activities, Timber Harvest Proposal & Appendix B documents for various harvest operations, Ontario BMP Guidebook, GIS maps. Summary: The TFG GIS runs on ARC INFO and have all relevant layers including roads, streams, cutblocks, all water, steep slopes, visuals and HCVF s. If TFG identifies special sites in their review of current information, stakeholder review or on-site, the feature will be managed according as per TFG s policy on cultural resources. This management will include TFG working with the appropriate agency/stakeholder to develop and implement a plan of protection for the cultural resource. Objective 7. Efficient Use of Fiber Resources To minimize waste ON SFI Indicators, Pre-work, harvest inspections and close-outs for various harvest units, Timber Harvest Proposal & Appendix B documents for various harvest operations.

6 and ensure the efficient use of fiber resources. Summary: TFG contracts specify merchantable top diameter limit and specifications for biomass harvest if appropriate. Contractors are provided harvest product specifications and utilization in the field is reviewed by foresters and documented on inspection forms. Where possible, TFG sells or gives away firewood and tops and limbs are used in the woods to protect harvest trails and corridors. Objective 8. Recognize and Respect Indigenous Peoples Rights To recognize and respect Indigenous Peoples rights and traditional knowledge. ON SFI Indicators, KBM Report on First Nations, Letters to Garden River and Batchawana First Nations, TFG Policies & Procedures, P&C SOP's & field guide for activities, Timber Harvest Proposal & Appendix B documents for various harvest operations. Summary: TFG has a written policy acknowledging a commitment to recognize and respect the rights of Indigenous Peoples. TFG has commissioned a local consultant to identify and review First Nations within the areas of all ON properties. It has used this report as a basis from which to solicit input from various local First Nations in it s property management including identifying any sites of cultural importance. TFG is currently in discussions with the Garden Lake First Nation to identify cooperative approaches to provide access of the TFG property and to support the FN as appropriate. Objective 9. Legal and Regulatory Compliance To comply with applicable federal, provincial, state, and local laws and regulations. ON SFI Indicators, TFG & P&C Employee Handbook, Pre-work, harvest inspections and closeouts for various harvest units, Timber Harvest Proposal & Appendix B documents for various harvest operations. Summary: All regions are aware of the pertinent legislation which cover each operation and TFG has made the decision to voluntarily comply with Provincial legislation covering Crown lands for both ON. Local staff are registered with their specific professional bodies in the Province and are kept abreast of any legislative changes through that affiliation. Safety is covered both in TFG and P&C Employee Handbooks & P&C as well as the Forest Operations Policy Manual. Objective 10. Forestry Research, Science and Technology To invest in forestry research, science and technology, upon which sustainable forest management decisions are based and broaden the awareness of climate change impacts on forests, wildlife and biological diversity. Evidence: Interviews with TFG land managers and Prentice & Carlisle staff foresters in Ontario ("ON"), ON SFI Indicators, Records of financial support for forestry research and initiatives, records and publications, stakeholder consultation records and records of staff participation in various committees and professional associations. Summary: This Objective was not reviewed in The following observations were documented in TFG provides in-kind support in key forestry research and technical support cooperatives, such as forest health, productivity, and ecosystem functions. Staff review and share a variety of national & international publications focused on climate change and carbon storage and are active in professional forestry associations and educational initiatives. As TFG s presence in ON is relatively new, it s efforts to support research is evolving but includes efforts to engage local community colleges and to tap into research done by the ON SIC.

7 Objective 11. Training and Education To improve the implementation of sustainable forestry practices through appropriate training and education programs. ON SFI Indicators, employee/contractor training records, TFG and P&C Roles and Responsibilities Policies, contractor training packages. Summary: TFG Policies & Procedures have been updated for SFI and the P&C contract has a roles and responsibilities table within it. TFG and P&C staff take a variety of training and courses focused on forest land management throughout the year. TFG s logging and road building contractors have had the ON Core and specialized equipment training. P&C have developed a good set of training materials for ON BMP s and other key parts of the SFI program such as safety, T&E species and invasive species and delivered this training to logging contractors in the Spring of TFG has joined the SFI SIC in ON. Objective 12. Community Involvement and Landowner Outreach To broaden the practice of sustainable forestry through public outreach, education and involvement, and to support the efforts of SFI Implementation Committees. ON SFI Indicators, TFG and P&C Roles and Responsibilities Policies, meeting minutes for the SFI SIC s in ON. Summary: TFG ON have participated in some outreach continue to review opportunities now that they have joined the ON SIC. Recent efforts include continued engagement with the Garden River Conservation Area and participation in an Open House put on by the SSM Conservation Authority Objective 13. Public Land Management Responsibilities To participate and implement sustainable forest management on public lands. Objective 14. Communications and Public Reporting To increase transparency and to annually report progress on conformance with the SFI Forest Management Standard. Evidence: N/A. Summary: Currently, TFG does not have forest management responsibilities on public lands. ON SFI Indicators, PWC TFG SFI Public Summary Reports Summary: A public summary report is prepared as part of the audit and submitted to SFI for posting on its website. As TFG was only certified for a few days in 2017, the 2018 SFI Public Summary report will be the first sent in to SFI for TFG.

8 Objective 15. Management Review and Continual Improvement To promote continual improvement in the practice of sustainable forestry by conducting a management review and monitoring performance. ON SFI Indicators, Annual Management Review dated November 12, Summary: In preparation for their registration assessment, TFG documented an SFI system for this audit including detailed procedures and policies. Ate the time of the assessment, TFG had not conducted a Management Review as required by the SFI Standard. It was completed subsequent to the assessment and provided to PwC. There was one major nonconformity was identified related to this Objective. TFG had conducted an annual Management Review focused on efforts to continually improve conformance to the SFI Standard. This finding was an OFI in the initial Registration Assessment but was raised to a Major Non-conformance as it is a required element of the Standard. Subsequent to the completion of the assessment, TFG completed the required Management Review and provided a copy to PwC. This finding was closed at that time. There were no Opportunities for Improvement identified related to this Objective. Specific Good management practices are noted below: The provision of skid bridges to contractors by TFG is good effort to help protect soil and water at crossings across the properties. The contractor training program including T&E species Jeopardy and overall BMP expectations which were developed by TFG was very well done and comprehensive. Efforts to map wood turtle habitat and voluntarily imposing seasonal harvest restrictions to identified habitat areas are beyond legal requirements for ON and a good effort to protect potential wood turtle habitat. Conclusion The Forestland Group has achieved conformance with the requirements of the Sustainable Forestry Initiative (SFI) Forest Management Standard [ ]. The Certificate can be can be obtained by contacting Dr. Alex Finkral, Chief Forester of The Forestland Group at (919)