Phaunos Five Year Strategy Outline

8 December 2016

2

Phaunos Five Year Strategy Outline

1. Phaunos Overview

2. The Case for Timberland

3. Portfolio Update

4. 2017 Continuation Vote

5. Stafford’s Capability

Contents

Above: P. Taeda logs ready for transport, US South,

Cover Image: P. Taeda and Sawmill, Uruguay

Phaunos overview

3

A listed global timberland company1

Interests in 150,000ha of sustainable

plantations2

US$ 299.4m¹ NAV of timberland

assets 3

Restructured fund with 85% of assets

classed lower or medium risk, higher

risk assets sold

6

Total portfolio debt at 1% of NAV4

Annual timber harvest of 2.2 million m35

¹ As at 30 June 2016

Performance review: Stafford scorecard

4

Stabilise Net Asset Value

Provide Income

Lower Annual Costs

Net Cash Flow

Improve Share Price

Lower Portfolio Debt

Re-balance Risk Profile

Share Buybacks

NAV per share: US$ 0.54, up

10.2%¹

US$ 1.6 million declared, with

further dividends envisaged

Costs US$ 7.2m, down 46% ²

Positive net cash flow in 2015 &

expected for 2016

Share price up 17.9% YTD ³

Portfolio debt reduced from 20% to

1% of NAV

85% lower and medium risk assets,

up from 64% since appointment

18.4 million shares acquired

through buybacks ⁴

¹ As at 30 June 2016 versus 31 December 2015² 2016 revised budget, versus 2015 actual³ Year to Date 2016 versus 31 December 2015⁴ Year to Date 2016

The case for continuation

5

Revenues

Potential to Improve NAV

Wood Flows Increasing

Share Price Increasing

Management

Potential to Increase Yield

Continue focus on high-quality assets. Target yield of 3-5% p.a.

Low Cost Base Achieved

Platform for increasing yield from low cost base

Global Market Access

Increase focus on key mature markets including US & Australia

Increase share price through regular yield, share buy backs and NAV growth

Revenue increases supported by wood flows & market access

2014 2022

Non-yielding Yielding

Support NAV growth through improved market access and re-investment

US$ 2.0bn timberland FUM2, leverage off Stafford’s proprietary deal flow

Portfolio wood flows increasing, supported by positive supply & demand fundamentals

20221

2011 20161

20161 2025

20161

20161

¹ Manager estimate2 as at 30 September 2016

The Case for Timberland

Douglas Fir, Oregon, USA

• Timberland displays highest correlation with inflation of major real asset classes

• Provides protection in periods of uncertainty, growth in periods of economic expansion

-0.25

0

0.25

0.5

0.75

Corr

ela

tio

n c

oeff

icie

nt

The case for timberland - part 1

7

NAV Growth, Timber Revenues

• Typical expected returns include:− 3-5% p.a. from capital growth− 3-5% p.a. from harvesting income− 1-2% alpha from Stafford approach

• Gradual sale of underlying assets provide annuity style capital returns

Stable Returns, Low Volatility

• Timberland has lower volatility than major equity markets

• Biological growth provides appreciation in periods of weak macro-economic conditions

• Downside protection through NAV growth and high barrier to entry

• Consistent log demand leads to stable log prices

Inflation Protection

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

1996 1999 2002 2005 2008 2011 2014

% R

etu

rn p

.a.

IncomeAppreciationDepreciationS&P 500

NCREIF Timberland v S&P 500 ¹ Generic Timberland Fund Accumulated

Cash Flows

Correlation with Inflation by Asset class²

-

200

400

600

800

2017 2019 2021 2023 2025 2027 2029

Net Asset Value Distribution – Harvesting

Distribution – Asset Realisation

¹ Source: NCREIF, S&P Dow Jones Indices LLC; ² NCREIF et. al.

• Global demand to grow at ~1% p.a.

• Reductions in Chinese harvest quotas and Canadian production

• Shortage of new planting since 1990s to support growth in demand

• 2.3Mha (94%) certified and increasing¹

• Stafford actively working with managers to implement ESG² practices

• 208,000 ha (and increasing) of areas perpetually reserved for conservation

The case for timberland - part 2

8

Sustainable Investment Favourable Supply & Demand

• Timberland provides diversification for real asset portfolios

• Appreciating assets

• Low regulatory and political risk

• Provision of essential products

• Access to large-scale land holdings

Diversification Benefits

Low volatility

Consistent NAV growth

Broad-hectare land ownership

Globally traded commodity

Timberland

Timberland Agriculture Core Infra.

Non-core Infra. Real Estate

Major wood product import/export nations

Responsible

Renewable

SustainableNet importing nation

Net exporting nation

¹ Across the entire Stafford estate; ² Environment, Social and Governance

Market conditions – Steady demand growth

9

• In 2010 China’s wood supply deficit was predicted to increase 55%...it increased by 65%

• Further increase expected through ongoing urbanisation and increase in consumption based products

China’s demand for wood imports continues to increase…

China’s increasing wood deficit ¹

0

50

100

150

200

250

300

2000 2005 2010 2015a 2020f 2025f

Mill

ion c

ubic

metr

es (

RW

E)

Solidwood markets

Pulp and Paper Markets

• Period of overbuilding in 2000-7, substantial underbuilding since

• Net home deficit increasing

Undersupply in US housing market

US housing deficit ²

−1.4m

-2

-1

0

1

2

3

2000 2003 2006 2009 2012 2015

US

housin

g s

urp

lus / d

eficit (

mill

.)

Surplus/Deficit (1.35M average)

Actual US Housing starts

Long-term average

• Global demand has grown at ~1% p.a. for past 2 decades

• Increasing global wealth and urbanisation expected to support this trend

Global consumption continues to increase

Global roundwood consumption ³

1.4

1.5

1.6

1.7

1.8

1.9

2.0

1995 2000 2005 2010 2015

Industr

ial ro

undw

ood p

roductio

n

(Bill

ion m

3)

+1% p.a

Source: ¹ RISI; ² NAHB; ³ UN FAO

a Actual; f Forecast

Market conditions – Limited new supply

10

• Shortage of new planting since 1990s to support growth in demand

• New Zealand harvest of 29.5Mm3, approaching forecast peak supply of 33-34Mm3 per annum

Southern hemisphere peak plantation supply approaching

0

5

10

15

20

25

30

35

1988 1998 2008 2018 2028 2038 2048

Harv

est V

olu

me (

mill

ion u

nits/y

ear)

New Zealand wood supply ²

• Phased reduction of commercial harvest of government owned forest

• Anticipated to reduce domestic softwood supply by 20Mm3

• Imported timber expected to offset this reduction

China’s softwood harvest quotas have been reduced

Softwood reduction under 13th 5-year Plan ¹

0 20 40 60 80

13

th12

th

Soft

woo

d

Harvest quota (Mm³ p.a.)

– 20Mm3 p.a

Source: 1 Manager estimate; ² NZ DPI; ³ Wood Markets Group

Estimate

• Canadian available wood fibre down almost 30% from 2003 peak levels

• Combination of historical over-cutting and mountain pine beetle damage to limit future supply

0

20

40

60

80

100

120

2000 2005 2010 2015 2020

Mill

ion m

3

Canada fibre supply declining

Canada available wood fibre ³

Estimate

Portfolio Update

P. radiata, New Zealand

Phaunos: A listed global timberland company

12

• Is cash positive and ungeared

• Provides a low cost access to timberland

• Provides liquidity in an illiquid asset class

• Retail and institutional access to timberland

• Is a sustainable investment

Phaunos…

• Has 12 years experience in timberland investment management

• US$ 2.0bn timberland FUM, 84 transactions, 157 underlying timberland assets

• Achieved 11% IRR (US$) on 54 secondary and co-investment transactions

• Has access to proprietary deal flow through secondaries and co-investments

Stafford…

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Phaunos timberland overview

13

¹ USD, unaudited NAV as at 30 June 2016² Cash held by parent: US$ 39.6m (13%) as at 30 June 2016

299.4mPortfolio NAV¹

85%Medium or lower risk assets

7

Underlying investments

Phaunos Investments²

Asia-PacificNorth America Latin America

US NE

<1%

US PNW

5%

Uruguay

16%

Brazil

21%

NZ

45%

Softwood species Hardwood species Eucalyptus species Teak, Tropical & Exotic timber

P. Radiata, Sth. Pine, D. Fir Maple, Oak E. globulus, E. grandis Teak, African Mahogany, Sandalwood

Key

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

10% Percentage

of NAV

Phaunos investment

-30

-20

-10

0

10

20

Cashflo

w v

alu

e (

US

D m

)

0.40

0.45

0.50

0.55

US

$ p

er

share

Phaunos turnaround

14

• Positive cash position forecast for 2016

• Achieved sustainable cost base of US$ 7.2m

Revenue

Planting

Silviculture

Net Position

Operating

Corporate

Costs

• 17.9% increase year-to-date• Supported by ongoing

share buyback programme, US$ 7.6m to date²

Share price

Growth (YTD)

Share buy-back

Stafford

appointed

manager

34%

37%

35%

35%29%

24%

0

0.2

0.4

0.6

0.8

1

2011Dec

2012Dec

2013Dec

2014Dec

2015Dec

2016SepEst.

US

$ p

er

share

• Discount to NAV reduced 5% from 29% to 24% since the beginning of 2016

NAV per Share

Share price

Discount to NAV/share

Stafford

appointed

manager

Discount to NAV per share Reducing

1• NAV per share increase

from US$ 0.49 to US$ 0.54¹• NAV expected to increase

as assets mature

Dec 2

015 N

AV

Ju

n 2

016 N

AV

Net movements in

Equity, Income & Fair Value

Unrealised FX

Uplift from share buy back

NAV per Share Increasing Cost Reductions, Positive Revenue Position

Share Price Increasing

0.33

0.38

0.43

Jan 16 Mar 16 Jun 16 Sep 16

US

$ p

er

share

¹ 30 June 2016 unaudited NAV per share ² Representing 3.4% of share capital

3 4

2

2016 Financial Guidance

Item

Actuals

Dec 2015

US$ m

Budget

Dec 2016

US$ m

Manager’s Estimate

Dec 2016

US$ m

NAV 278.8 310 – 325 1

NAV per share (US$/share) 0.49 0.57 – 0.59 1

Cash inflows 17.2 8.3 9.6

Cash outflows (13.3) (7.7) (7.2)

Net cash flow 3.9 0.6 2.4

Proceeds on sale of non current assets 6.7 24.6 25.9

Share buy-backs & dividends – – (8.9) 3

Cash held at year end 4 25.6 50.8 45.0 2

1 Manager’s estimate, subject to final year-end valuations and foreign exchange movements and changes in issued capital2 Excluding provision for further share buybacks 3 Actual amount spent on share buy backs and dividends declared YTD 2016 4 Across all entities

15

2017 Continuation Vote

E. urograndis, Brazil

Continuation vote

17

Wind-up of the fund and return proceeds to shareholders

• Anticipate up to 3-year liquidation period

• NAV represents fair value, liquidation would impact prices with potential discount to NAV on distressed sales

• Fixed liquidation costs including management fee and sale incentive fees, estimated to be between 4-6% of NAV

Liquidate

The current portfolio is

• Self-sustaining following turnaround

• Cash positive with growing and sustainable yields

• Post-continuation management fee, 0.75% p.a. of market capitalisation

• A low cost entry to timberland

Maintain

Re-invest cash into high yield assets

• Improve fund diversification and yield

• Target new investments with 3-5% p.a. yield, 3-5% p.a. NAV growth and 1-2% p.a. from Stafford approach

• Access to proprietary Stafford deal flow to the benefit of Phaunos

Diversify

The Phaunos AGM due to be held in 2017 will contain a continuation vote

The Board intends to propose a resolution for the continuation of the Company for a further five years

The choices are:

A. Maintain portfolio, with potential to diversify

B. Liquidate the fund

Option 1 - Continuation Option 2 - Liquidation

• Net cash flow of US$ 2.4m forecast for 2016

• Looking ahead, Stafford estimates the current portfolio can provide sustainable net cash flow of US$ 5m to 11m in addition to capital appreciation

• Cashflow can be improved by further diversification

-30

-25

-20

-15

-10

-5

0

5

10

2011 2012 2013 2014 2015 2016f

Net cash flo

w (

US

$ m

illio

n)

• Sustainable revenue outlook is supported by increasing wood flows

• Five year continuation will allow

– Improved negotiating power

– Decrease in price from service providers

1.5

1.7

1.9

2.1

2.3

2.5

2.7

2.9

2012-2016 ¹

2017 2018 2019 2020 2021 2022 2023 2024 2025

Volu

me (

mill

ion m

3)

Continuing operations

18

Cash flow positive Wood flows increasing

Estimate

Annual harvest

Trend line (2016-25)

2017-22

Estimate

Post-Continuation Vote

Post-Continuation

Vote

¹ Average annual harvest across Phaunos’ estate between 2012 and 2016. Forecast annual harvest as per 2015 independent property appraisals

High

Low

-30

-20

-10

0

10

20

30

40

2011 2012 2013 2014 2015 2016f

Cashflo

w v

alu

e &

opera

tin

g p

rofit (U

S$ m

illio

n)

• Stafford have reduced annual operating costs to base levels

• We anticipate revenues of between US$ 13m and US$ 18m from the current portfolio. This translates to

a net cash flow of between US$ 5m and US$ 11m or 2% to 3% p.a. of NAV

• On a restructured portfolio a target yield of 3% to 5% p.a. is achievable through the sale of non-yielding

assets and re-investment into higher yielding assets

Potential to increase earnings off a low cost base

19

High

Low

Net Position: Actual, Higher case, Lower case

Revenue: Actual, Higher case, Lower case

Costs: Actual, Estimate

Estimate

Current

Portfolio

Diversified

Portfolio

Post-Continuation Vote

Re-balancing portfolio yield

20

2014

High Risk, High Debt, No Yield

20221

Low Risk, Low Debt, Higher Yield

20161

Balanced Risk, Low Debt, Low Yield

• The majority of the higher risk and cashflow negative assets identified for sale in 2014 have been

sold at around NAV or above

• Opportunistic selling of remaining low-yield assets to be re-invested into higher-yield assets

• Stafford has access to mature, yielding assets through its secondary and co-investment deal flow

• Investment in yielding assets will assist the portfolio to achieve yields of 3% to 5% p.a.

YieldingNot

Yielding

95%Yielding

74%Yielding

54%Yielding

Net Loss US$ 6.6m Net Income US$ 2.4m1 Current portfolio, Net Income US$ 5 - 11m1

Diversified portfolio, Net Income US$ 11 - 19m1

1 Manager’s estimate

21

Nov

2016 Beyond

2018

Future PortfolioCurrent Portfolio

Potential to diversify market spread

-

50

100

150

200

250

300

350

US

$ M

illio

n

Declared dividend

Working capital

reserveUS$ 15m

US$ 1.6m

Available for

re-investmentUS$ 30m

Cash

Held¹

Existing

Investments

New Investments

Mature timberland,

higher yield, lower risk

Existing

Investments

• Reduce exposure to Brazilian biomass markets

• Increase exposure to US housing and renovation markets

Secondaries, co-investments & separate accounts

Opportunistic Investments

¹ Cash held at Nov 2016 across all entities

represents US$ 47.5m or 16% of the 30 June 2016

unaudited NAV

Stafford’s Capability

Mixed Hardwood, Michigan, USA

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Stafford Timberland overview

23

¹ USD, as at 30 September 2016

2.0bnTimberland FUM¹

84Timberland fund investments completed

157

Underlying assets

Global Investments

Asia-PacificNorth America Latin America

US South

US NEUS LakesUS PNW

Chile

Uruguay

Brazil

Cent. Am

Canada

Australia

NZ

Softwood species Hardwood species Eucalyptus species Teak, Tropical & Exotic timber

P. Radiata, Sth. Pine, D. Fir Maple, Oak E. globulus, E. grandis Teak, African Mahogany, Sandalwood

Key

Stafford office

Relative

percentage

of NAV

Examples of Stafford timberland investments

24

New Zealand softwood

Asset:Long term hold, 6% cash yield, 8% NAV growth since inception

Key markets:

NZ sawn timber, NZ panel production & Asian log exports

Australia softwood

Asset:Long term hold, 4% cash yield, 6% NAV growth since inception

Key markets:

Australian sawn-timber,Asia log exports & panel production

US softwoodUS hardwood

Asset:

Medium term hold, 2% cash yield, 11% NAV growth off discounted secondary entry price

Key markets:

US home construction, packaging and US industrial uses

Asset:

Medium term hold, 2% cash yield, 11% NAV growth off discounted secondary entry price

Key markets:

US hardwood sawn timber, export sawn-timber & paper production

Stafford has unique access to high-quality timberland assets

• 12 years’ experience of managing global timberland funds supported by a strong track record

• Team of 18 professionals based in Asia-Pacific, Europe, North & South America

• Management experience in all key timberland regions and species

Stafford Timberland deal flow

25

¹ USD² Since inception to 30 June 2016. Across 54 secondary and co-investment transactions³ 1 January 2007 to 6 December 2016

11%Secondary & Co-Investment IRR ¹,²

13Investments closed past 2 years

157m

10 year average invested per year¹,³

Experienced Manager

• Investing in high quality timber assets acquired on attractive terms

• Expanding deal flow though secondary opportunities

• Stafford’s extensive network allows us to access unique proprietary deals, often in the secondary market

Proprietary Deal Flow

$

0

10

20

30

40

50

60

70

80

90

2008 2009 2010 2011 2012 2013 2014 2015

Num

ber

of deals

revie

wed

Opportunities Reviewed by Stafford

Separate Account

Co-investment

Secondary

0.0

0.5

1.0

1.5

2.0

2.5

Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Dec-14 Jun-16

Fu

nds U

nder

Managem

ent (U

S$ b

n)

Stafford Timberland

Phaunos

Funds Under Management

• Stafford has delivered the Phaunos turnaround strategy presented in 2014

• Phaunos is now cash positive, benefiting from a low cost base and increasing wood flows

• Potential re-rating of share price can be driven by sustainable dividends and NAV growth

• Phaunos is an environmentally responsible investment

• Log price growth expected through steady demand growth and limited new supply

• Stafford has the deal flow, experience and knowledge to expand the company

Our vision is for Phaunos to be a…

Globally diversified, listed, timberland fund, with potential to provide yields of 3-5% p.a. and NAV

growth of 3-5% p.a.¹, managed in accordance with ESG best practice²

Summary

26

¹ Stafford estimates the existing portfolio could yield between 2-3% of NAV increasing to 3-5% of NAV through the sale of non-yielding assets and re-investment into higher yielding assets. ² ESG – Environmental, Social and Corporate Governance – is vital component of the management thesis of Phaunos, meeting best practice is essential to the ongoing success of the company.

Appendix

Key Dates & Information

28

Nov ‘16

Jan ‘17

May ‘17

Feb ’17

Dec ‘16

Mar ‘17

Jun ‘17

Apr ‘17

Jul ‘17

Dec ‘165-year strategy plan released

Early Apr ‘17Shareholders contacted to confirm voting details

Apr ‘17Publish Annual Report

June ‘17Phaunos AGMContinuation Vote

May ‘17AGM Notice & Voting forms sent

Investor

meetings

Investor

meetings

FY 2016

Annual Audit

Investor

meetings

Continuation

Vote

Dec ‘16Year-end

Contact InformationStafford Capital Partners Limited

24 Old Bond Street, London, W1S 4AW

P: +44 (0) 20 7535 4915

E: info@phaunostimber.com

Disclaimer

29

• Stafford Capital Partners Limited ("Stafford") is distributing this strategy presentation in its capacity as manager of Phaunos Timber Fund Limited (the "Company") The Company is a

Guernsey domiciled Authorised Closed-ended investment scheme pursuant to section 8 of the Protection of Investors (Bailiwick of Guernsey) Law 1987, as amended and rule 6.02 of the

Authorised Closed-ended Investment Schemes Rules 2008 published by the Guernsey Financial Services Commission. The Ordinary Shares of the Company are admitted to the Official List

of the UK Listing Authority and to trading on the London Stock Exchange’s main market.

• In distributing this presentation Stafford is relying on the fact that all recipients are qualified investors' within the meaning of section 86(7) of Financial Services and Markets Act 2000

(“FSMA”) who are also (i) investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (''FPO"); or (ii) high

net worth companies within the meaning of Article 49 of the FPO; or.(iii) members of the Company within the meaning of Article 43(2) of the FPO; or (iv) certified high net worth individuals

within the meaning of Article 48 of the FPO; or (v) certain sophisticated investors within the meaning of Article 50(1) of the FPO (each a "relevant person"). Persons who do not fall within any

of these definitions should not rely on this document nor take any action upon it. The document is only exempt if it is distributed to these exempt categories of recipients. This document has

not been approved as a financial promotion or otherwise by a person who is authorised under FSMA for the purposes of section 21 of FSMA and rules made under such legislation or any

other applicable securities laws of any other territory. Approval will be required unless the recipient of this promotion is a relevant person. This presentation has not been, and will not be,

reviewed or approved by the Financial Conduct Authority ("FCA") or any other authority or regulatory body.

• Stafford is issuing this strategy presentation exclusively as manager of the Company and will not be responsible to anyone other than the Company for providing regulatory and legal

protections afforded to customers (as defined in the rules of the FCA) nor for providing advice in relation to the contents of this document on any matter, transaction or arrangement referred

to in it. None of Stafford nor the Company, nor any of their respective directors, officers or employees makes any representation or warranty, express or implied, as to the accuracy or

completeness of the information or reasonableness of any opinions contained in this strategy presentation .

• Stafford is authorised and regulated by the FCA, but has not authorised the contents of, or any part of, this document for the purposes of Section 21 of FMSA. To the fullest extent permitted

by law, none of Stafford nor the Company (nor their respective members, directors, officers, employees, agents or representatives) nor any other person accepts any liability whatsoever for

any errors, omissions or inaccuracies in such information or opinions or for any loss, cost or damage suffered or incurred howsoever arising, directly or indirectly, from any use of this

document or its contents or otherwise in connection with the subject matter of this document. The contents of this strategy presentation are not to be construed as legal, financial or tax

advice. This document should not be distributed in whole or in part to other parties.

• This strategy presentation is being supplied to shareholders and other relevant persons and solely for their information and does not constitute or contain any invitation or offer to any person

to subscribe for, otherwise acquire, or dispose of any Ordinary Shares in the Company or advise persons to do so in any jurisdiction. This strategy presentation does not constitute a

recommendation regarding the Ordinary Shares of the Company.

• Some statements contained in this presentation are or may be forward-looking statements, including without limitation any forecasts or projections. Actual results may differ from those

expressed in such statements, depending on a variety of factors. Any forward-looking information contained in this strategy presentation has been prepared on the basis of a number of

assumptions, only some of which are set out in the presentation , which may prove to be incorrect, and accordingly, actual results may vary.

• For the avoidance of doubt, nothing in this strategy presentation is intended to constitute a profit forecast.

• The value of any investment may fall over time and you may receive back less than you invested.

• Stafford Capital Partners Limited is incorporated in England under registered number 04752750 and its registered office is at 4th Floor, 24 Old Bond Street, London, W1S 4AW, England.