Phaunos Timber Fund has reached agreement by mutual consent to terminate its investment management agreement with FourWinds Capital Management with immediate effect.
The company has established a new subsidiary, Phaunos Boston, through which it intends to manage its assets.
The majority of the employees of the FourWinds Capital Management group (the FWCM Group) who have been responsible to date for the day to day management of the company’s portfolio of assets will be offered employment with Phaunos Boston with immediate effect.
The subsidiary will initially be led by Mason Browne, formerly director of timber operations at FourWinds. Property management of the company’s wholly owned assets will continue to be carried out by local management teams in the countries in which they operate.
The company has agreed to rent the existing office space, computers, telephones and supporting infrastructure used by the employees transferring to it from the FWCM Group for a period of three months, at commercial rates. Phaunos Boston plans to move to new premises within that time.
The board has entered into a consultancy agreement with Stafford Timberland to provide a review of the company’s timber assets in close consultation with Browne and his colleagues. Stafford Timberland, which is authorised and regulated by the Financial Conduct Authority in the UK, is a global timberland investment organisation that manages approximately USD1.4bn in timber assets worldwide on behalf of institutional investors. The board expects to announce the results of Stafford Timberland’s review with the company’s annual results for the year ended 31 December 2013, in April 2014.
In connection with the early termination of the investment management agreement with FourWinds Capital Management it has been agreed that, in lieu of management fees foregone in respect of the 36 month notice period in the investment management agreement, as compensation in respect of certain additional historical and/or ongoing and/or fixed costs and expenses of the FWCM Group related to the provision of investment management services pursuant to the investment management agreement and in respect of the provision of certain transitional services by the FWCM Group to the company and Phaunos Boston, the amount of compensation which will be paid to FourWinds Capital Management will be approximately USD4.2m. Of this, USD2m has been prepaid in advance under the existing terms of the investment management agreement, leaving a balance to pay of USD2.2m.
The board anticipates that the changes to the company’s management arrangements announced today will result in the running costs of the company being reduced by at least USD2.5m during the first 12 months of operation.