Phaunos Timber Fund Limited Meeting with DWS 13 September 2018
Background • • Phaunos Timber Fund Limited (the Company ) launched in December In August 2017, at a general meeting of the Company, shareholders 2006 to invest in a diversified portfolio of timberland and timber-related approved a revised investment objective and policy to implement a investments. The Investment Manager at launch was FourWinds Capital managed wind-down of the portfolio Management ( FWCM ) • Each of the Directors that were in place resigned following the general • In December 2013, the Company terminated the management meeting agreement with FWCM • The existing directors were all appointed in H2 2017 with the mandate • The Board engaged Stafford Capital Partners Limited ( Stafford ) to to dispose of the asset portfolio and return capital to shareholders provide a review of the Company’s assets and the results were published • in June 2014 Since then the Company received a firm cash offer from Stafford at US$0.49 per share as well as a possible all-stock offer from CatchMark at • Following the review, Stafford were appointed as investment manager US$0.57 per share and sought to turn around the Company's performance including the • sale of the higher risk assets Stafford’s offer was rejected and the Company is currently evaluating CatchMark’s offer • In June 2017, at the Company’s AGM, a resolution that the Company • continue for a further five years was not approved by shareholders In the meantime the Company is progressing with the disposal of its asset portfolio and announced on 5 September 2018 that it had opened • In July 2017, Stafford announced its intention to step down as manager a virtual dataroom to bidders for the Matariki and Latam assets with effect from February 2018 1,2 Phaunos NAV per share vs share price % Discount(-) / Premium (+) 10 FourWinds Stafford Stafford 1.1 Stafford Price (US$) appointment 0 appointed resignation tendered terminated -10 0.9 -20 0.7 -30 -40 0.5 -50 0.3 -60 NAV Event Share Price Discount 1 Please note that the NAV does not take into account the Indicative Bids received for assets which are subject to a sales process under the Asset Realisation Process 2 The graph shows the Going Concern NAV from 30 May 2008 to 31 December 2016. With effect from 31 December 2016 the NAV was prepared on a break-up basis to reflect the wind-down 2 status of the Company
Portfolio Overview Matariki 74% of Portfolio Value (PV) LatAm Portfolio 18% of PV New Zealand Brazil / Uruguay • The Company holds a 23.01% interest • 100% interest in Eucateca (Eucalyptus), Brazil • One of the largest and highest quality − 7,500 plantable hectares in Mato Grosso − Most standing timber ready for harvest forestry assets in New Zealand with • 100% interest in Eucateca (Teak), Brazil approximately 120,000 plantable hectares − 1,700 plantable hectares of teak plantation of FSC certified plantations − All trees planted in 2009 • Radiata Pine is the dominant species grown • 100% interest in Mata Mineira, Brazil • Mainly serves New Zealand, China, South − 9,650 plantable hectares of fast-growing, Korea, Japan and India Eucalyptus forest in Minas Gerais • 82% EBITDA CAGR since 2015, driven by • 100% interest in Pradera Roja, Uruguay significant growth in export demand − 3,000 plantable hectares of mostly Eucalyptus − Half cutting rights sold for next five years GreenWood Tree Farm Fund 4% of PV Aurora Forestal 5% of PV US - Fund Interest Uruguay • The fund is in liquidation with three remaining • The Company holds a 23.57% interest assets • Integrated business comprising 11,000 − an outstanding loan note receivable plantable hectares of pine forestland and a − a parcel of timberland in Portland, Oregon sawmill with production capacity of − a pending legal claim, substantially settled approximately 225,000 m3 per annum 3
Asset Realisation Process Asset Realisation Range of US$0.54 – US$0.60 per share ▪ The Asset Realisation Process was formally launched in late 2017 covering the entire portfolio ▪ Matariki and the LatAm Portfolio reflecting 92% of the portfolio value are subject to an asset sale process managed by Pöyry Capital ▪ The Asset Realisation Range reflects bids received in late June 2018 and subsequently confirmed in late July and early August this year, all in US dollars ▪ All bidders have been provided with preliminary information including information memoranda, appraisal reports and other relevant forestry and financial information ▪ All bidders are highly credible and well-capitalised international investors in timber assets ▪ All bidders for Matariki are experienced in dealing with the New Zealand Overseas Investment Office and have a detailed understanding of what is required to effectively navigate the consent process ▪ The Asset Realisation Process is expected to be substantially complete by Q3 2019 ▪ Aurora Forestal (5% of Portfolio Value) and GreenWood Tree Farm Fund (4% of Portfolio Value) are subject to separate disposal/liquidation processes, respectively ▪ On 27 July 2018, the Company’s interest in NTP was realised at marginally above its reported NAV as at 31 December 2017 The Board of Phaunos is committed to returning all sales proceeds from the Asset Realisation Process as they are received, after allowing for cash reserves to wind-down the Company 4
Asset Realisation Process (cont.) Matariki (74% of Portfolio Value) LatAm Portfolio (18% of Portfolio Value) ▪ ▪ Process letters for phase 2 sent to selected bidders and Selected bidders have been provided with access to a access provided to a virtual data room virtual data room ▪ ▪ Site visits to commence soon Phase 2 to include site visits, inventory checks and meetings with local forest management and operators ▪ Binding offers due in early November ▪ Completion of disposal expected between Q4 2018 to ▪ Timing subject to consent from New Zealand Overseas Q1 2019 Investment Office and Rayonier claims (see later) ▪ Completion of Matariki disposal estimated between Q1 2019 and Q3 2019 Aurora Forestal (5% of Portfolio Value) GreenWood Tree Farm Fund (4% of Portfolio Value) ▪ ▪ The disposal of this asset is subject to a separate The Company has exercised its right to initiate a voluntary exit pursuant to the shareholder agreement liquidation procedure ▪ ▪ GTFF is currently in the process of realising the The Company is also in discussions with the majority remaining three assets in the portfolio shareholder to negotiate a disposal of its interest ▪ ▪ Expressions of interest and/or non-binding bids have The negotiations are progressing well and various been received for all assets in the portfolio options are being explored to effect an exit 5
Stafford Offer – timeline to date 1 3 July 5 June Possible all cash offer Firm cash offer for Phaunos Stafford announced a possible all cash offer of US$0.49 for Stafford announced an all cash offer of US$0.49, valuing Phaunos’ entire issued and to the entire issued and to be issued share capital of Phaunos be issued share capital at approximately US$244.2 million 14 August 31 July Phaunos publish Rejection of Stafford’s Offer Publication of Offer Document Board publish their Response Circular stating that they believe the Stafford Stafford publish their offer document containing the terms of offer undervalues Phaunos and recommend shareholders to take no action the Offer and acceptance conditions 21 August 22 August First Closing Date Stafford announce Extension of Offer Valid acceptances of 14.21% received by first closing date. Second closing date set for 5 September, terms of the offer remain unchanged 6 September 5 September Second Closing Date Stafford announce Second Extension of Offer Valid acceptances of 14.24% received by second closing date. Third closing date set for 13 September, terms of the offer remain unchanged 1 6 Further information, including all documents relating to the offer by Stafford can be found at http://www.phaunostimber.com/offer-from-stafford/
Stafford’s Offer The Updated Asset Realisation Range, Reject Stafford’s Offer – Extract Maximum Value based on Indicative Bids received in The Board believe that Stafford’s Offer undervalues Phaunos and that US dollars, represents a 10% to 22% there is significant upside from the Asset Realisation Process compared upside to Stafford’s Offer to Stafford’s Offer. Accordingly, the Board have recommended that shareholders should take no action in relation to Stafford’s Offer US$0.60 Stafford’s Offer Stafford have offered US$0.49 per share This values the Company below the updated asset realisation range of US$0.54 US$0.54-US$0.60 and therefore the Board strongly believes that Stafford’s Offer does not provide an attractive exit opportunity for Shareholders and that the Asset Realisation Process is the best strategy for maximising shareholder value over a reasonable timeframe US$0.49 Next steps 13 September Next closing date Stafford’s Updated Asset 15 September Latest date for Stafford to revise their offer Offer Realisation 29 September Latest date for the offer to be declared Range unconditional as to acceptances 7
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