Business UpdateAug 2011

PRT Growing Services Ltd.

Forward Looking Statements

This business update contains forward-looking statements that involve risks and uncertainties. These forward-looking statements relate to, among other things, expectations for customer orders; the outlook for the forest industry, US and Asian housing markets, and future reforestation programs; and other statements that are not historical fact. Risks and uncertainties include, but are not limited to, future commodity prices and exchange rates, agricultural risks, our ability to grow and supply products in accordance with defined specifications, customer credit risks, and other risks identified from time to time in the Fund’s annual report, and annual information return. These risks and uncertainties may cause actual results to differ materially from the expectations expressed herein. As such, readers are cautioned to not to place undue reliance on forward-looking statements.

 

Forward-looking statements are based on current expectations and neither the Fund nor PRT assumes any obligation to update such information to reflect later events or developments, except as required by law.

PRT – The Legal Stuff

• The largest producer of container grown forest seedlings in North America

• 23 year operating history – over 2 billion seedlings grown

• Annually contracted production

• 181 million seedlings in 2011 – 153 core forestry; approximately 190 million expected in 2011.

• 13 nursery sites; over 375 employees

• Market leader in key market regions

PRT – Company Profile

• Multiple locations - reduces risks

• Most diverse range of growing climates and species

• Contract delivery reliability rating is high

• Extensive experience with container growing

• Largest producer

scale economies

capacity to handle large customer needs

Attract and retain the best people

PRT Oregon

PRT Corporate Office

PRT Campbell River

PRT SummitPRT Red Rock

PRT Beaverlodge

PRT Coldstorage

PRT Dryden

PRT Coldstorage

PRT Kirkland Lake

PRT HarropPRT Armstrong

PRT Coldstream

PRT

Cold storage

PRT Vernon

Competitive Advantage

Contracted Revenue System

Customers contract with PRT before sowing seedlings

Annual take-or-pay service contracts, with progress payments

Approximately one-third of seedling volume is from multi-year contracts

Diverse customer base

Typically 600 – 700* million seedlings planted per year in Canada

* Note that national statistics are not available for 2010 which reflects further impact of the recession of the forest industry which began at the end of 2008. In 2009 the report indicates that planting fell by approximately 6% over 2007 in PRT’s core Canadian markets. The seedlings planted total shown above in 2008 includes a 26% increase in planting by the province of Quebec for that year.

Source: National Forestry Database Program & Management Estimates

Harvested Area Seedling Demand

In PRT’s Canadian market region – there is typically a two year lag between harvest and replanting – this is demonstrated below

Seedling Demand – lag between harvest and replanting

Source: National Forestry Database Program & Management Estimates

Dominant Market Position in Key Forestry Markets

* Management Estimates

Geographically Diversified Markets

More Stable Pricing versus Forest Industry

PRT Annual Contracted Seedling Blocks Volume (000’s)

- Excludes effect of mid period acquisitions

Historically Increasing Volume as a Result of Growth Strategies

PRT Annual Contracted Seedling Blocks Volume (000’s)

US Housing Market

Collapse

Revenue and EBITDA History

Operating Income Before Site Consolidation Charges

Financial Performance

Higher energy prices and F/X US Housing

Market Collapse

Low and predictable capital maintenance requirements

Maintenance and Sustaining Capital Expenditures as a Percentage of Revenue (10 year history)

Efficient Long-Term Assets

Dec. 31, 2010 June 30, 2011

Net working capital* $6.9 $8.8

Total assets $47.4 $50.3

LTD & equivalent $ 1.5 $ 1.3

Equity $40.1 $41.8

Term Debt: equity ratio 0.037:1 0.031:1

Millions of dollars

Financial Position – PRT Inc.Maintaining Low Leverage in Current Cycle - Capacity for Growth as Markets Recover

*excludes current portion of term debt.

Key Risks

• Forest Industry customers – financial (credit) risk

• US housing market Are we starting to see a rebound? Timing/pace of recovery is uncertain

• Asian markets – sustainability

• Expansion into new markets – timing and profitability

Managing Financial (Credit) Risk

• Credit risk management includes: credit policy progress payments contract language protection possession of trees

• Layers of protection through government – unique aspects of protection arising from public land tenures in Canada forest company reforestation obligation with attachment

to tenures Ontario trust funds PRT’s experience with past forest company bankruptcies

• Historical losses are extremely low (0.05% of total revenue since 1997)

• Market recovery from cyclical lows

• Entry into new market areas

Exploit PRT’s reliability and technology advantages

• Backlog in reforestation exists

Under-stocked plantations, pine beetle and fire damage

• Industry consolidation – industry currently fragmented

• Responses to climate change Biofuels Carbon sequestration Green up projects

Key Growth Opportunities

Increasing demand from Pacific Rim offsets lower US Seedling Demand

0.5

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1.5

2

2.5

3

100

150

200

250

300

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Se

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PRT Seedling Order Forecast vs. Housing Starts Equiv.(US+Cda+China Equiv.)

PRT Orders Starts

A US Housing Recovery Will Drive Later Seedling Demand

Million U.S. Starts

APA Forecast 2009 2010 2011Single Family 445,100 525,000 800,000Multifamily 108,900 90,000 135,000 Total 554,000 615,000 935,000

Forecasts (000) 2010 2011

RISI (4/26/’10) 720 1,040

FEA* (4/8/’10) 702 1,029

Freddie Mac (5/11/’10) 680 1,100

RBC* (4/17/’10) 661 884

NAR* (5/10/‘10) 659 980

Wells Fargo (4/24/’10) 650 760

NAHB (4/23/’10) 646 991

WWPA (3/8/’10) 618 719

APA (4/1/‘10) 615 935

Average 660 940

*FEA: Forest Economic Advisors.

*NAR: National Assoc. of Realtors.

*RBC: Royal Bank of Canada

Updated May 2010 APA U.S. Housing ForecastSingle Family & Multifamily Only*

Market Expansion Opportunities

Increasing Reforestation Backlog in BC • The MPB has destroyed 692 million

cubic meters of merchantable Pine (51%) to date.

• 56% is expected to be destroyed by 2016

1980

1985

Increasing Concerns over Climate Change

• Diversify markets to take advantage of emerging opportunities

PRT Promotional Products initiative

PRT Energy Crops: carbon sequestration and offset projects

• Undervalued Assets - Trading at a significant discount to fair value

• Earnings are cyclically depressed

• Positive free cash flow through cycle

• Restructuring and cost reduction efforts mostly complete

• Strong financial & operational risk management strategies in place

Diversified production locations Reduced US currency exposure Forward natural gas buying program Term debt reduced to extremely low levels Interest rates fixed on term debt

Compelling Valuation

• Solid competitive position – industry leader

• Experienced management team

• Proven track record in business – 23years and over 2 billion trees

• Contracted cash flow with low maintenance and capital expenditures

• Managing balance sheet – very low leverage

• Results impacted by the unprecedented cyclical downturn in the forest industry

• Poised for significant growth opportunities as markets recover

Summary