Kangaroo Island Plantation Timbers : Ineligible Shareholder letter

[Insert shareholder address]

Dear Shareholder

On 12 April 2017, Kangaroo Island Plantation Timbers Ltd (KPT or the Company) announced that it was conducting a fully underwritten accelerated pro-rata non-renounceable entitlement offer to eligible shareholders to subscribe for 4 new KPT shares (New Shares) for every 9 existing KPT shares (Entitlement) held at 7pm on the record date (being 19 April 2017) (Record Date) at an issue price of $2.00 per New Share (Issue Price) (Offer).

The Offer comprises an accelerated pro rata institutional entitlement offer to eligible institutional shareholders (Institutional Entitlement Offer) and a pro rata offer to eligible retail shareholders to participate on the same terms (Retail Entitlement Offer). The Entitlement Offer is non-renounceable, and Retail Offer Entitlements that are not taken up by eligible retail shareholders, together with the Entitlements of ineligible retail shareholders, will form part of the shortfall that, to the extent it is not taken up by other shareholders, will be underwritten by Petra Capital Pty Ltd (ACN 110 952 782) (Petra Capital). Refer to the Offer Booklet lodged with the ASX on 24 April 2017 for more information.

The Entitlement Offer is being made by KPT in accordance with section 708AA of the Corporations Act 2001 (Cth) (Corporations Act) as amended by ASIC Corporations (Non-Traditional Rights Issues) Instrument 2016/84. The Institutional Entitlement Offer and the Retail Entitlement Offer together will raise approximately

$21.4 million.

Documents relating to the Retail Entitlement Offer were lodged with the Australian Securities Exchange (ASX) today and are in the process of being mailed to eligible retail shareholders.

This letter has been sent to you to explain why you are an Ineligible Retail Shareholder (as defined below), as a consequence of which you will not receive any other documents relating to the Retail Entitlement Offer, and to advise you of the features of the process that will be conducted under which the New Shares that would have been offered to you will be offered to other persons. You are not required to do anything in response to this letter.

The Retail Entitlement Offer is being made to eligible retail shareholders on the basis of 4 New Shares for every 9 existing Shares held at 7pm (AEST) on 19 April 2017 (Record Date).

Completion of the Offer ($21.4 million) and previously announced Placement ($12.1 million) will result in an increase in cash in hand to approximately $40 million (before the payment of costs associated with the Offer). Cash on hand at the 31 December 2016 amounted to $6.5 million.

Page | 1

Aurora House Suite 816, 147 Pirie Street, Adelaide SA 5000

T (08) 8227 2482 F (08) 8312 2020

kipt.com.au ACN 091 247 166

The Company intends to apply the funds raised from the Offer and Placement (total $33.5 million) as follows:

The use of funds is estimated based on current assumptions and these assumptions may change.

The Company has entered into a funding agreement with the Commonwealth Bank of Australia (CBA or the Bank). Subject to certain conditions precedent, the Bank will lend up to $57.1 million in total, of which $25 million will be used to part-fund the acquisition of the FIT Estate, in addition to $25 million from the proceeds of the Offer. The Bank will also support 100% of the anticipated construction cost of $25 million to $30 million for the Company's proposed Smith Bay Wharf plus an allowance of approximately $2.1 million for equipment finance and working capital.

Under the transaction documents with FIT, the Company will purchase the entire FIT estate managed by New Forests on Kangaroo Island) for $55 million. The purchase includes the plantation land, the standing timber and the Ballast Head site which had been put forward by New Forests as an alternative site for a timber export facility. A deposit of $5 million was paid to FIT when the purchase was announced in October, 2016.

The estate includes almost 19,000ha of land, of which approximately 10,700 ha is planted with Tasmanian blue gum (E. globulus) in various stages of maturity. The current standing volume of timber is estimated at approximately 2.4 million green tonnes. Thus, the FIT Acquisition effectively quadruples the size of the Company's plantation area and triples its standing timber resource.

The Company announced on 19 February 2017 that its Smith Bay Wharf project had been declared as a Major Development by the South Australian Government. Major Development status (under section 46 of the Development Act) allows the planning decision regarding the Company's proposed deep water wharf at Smith Bay to be determined by the Governor of South Australia, on the advice of the Minister for Planning, rather than at a local government level. Using this development pathway also removes any right of appeal by objectors against development consent.

The Company is committed to working with the South Australian Government to ensure that the benefits of the development to the community are maximised, and that any negative effects are minimised and, where possible, offset. With the assistance of the South Australian Government, the Company will seek to ensure that development consent is secured in a timely manner, with reasonable conditions. The Company is not seeking any direct financial assistance from the South Australian Government.

KPT has determined, pursuant to section 9A(3)(a) of the Corporations Act and ASX Listing Rule 7.7.1(a), that due to the small number of shareholders outside Australia and New Zealand and the cost of complying with the legal and regulatory requirements of each overseas jurisdiction, it would be unreasonable to make offers to shareholders in all countries in connection with the Retail Entitlement Offer. Accordingly, in compliance with section 9A(3)(b) of the Corporations Act and ASX Listing Rule 7.7.1(b), KPT wishes to inform you that it will not be extending the Retail Entitlement Offer to you and you will not be able to subscribe for New Shares under the Retail Entitlement Offer.

Shareholders who are eligible to participate in the Retail Entitlement Offer (Eligible Retail Shareholders) by taking up their Entitlement are shareholders who:

1. are registered as a holder of Shares at 7pm (AEST) on the Record Date;

2. have a registered address in Australia or New Zealand;

3. are not in the United States and are not 'U.S. persons' (as defined under Regulation S under the United States Securities Act 1933, as amended) (U.S. Persons) and are not acting for the account or benefit of U.S. Persons;

4. did not receive an offer to participate in the Institutional Entitlement Offer; and

5. are eligible under all applicable securities laws to receive an offer under the Retail Entitlement Offer.

The Company may (at its absolute discretion) extend the Retail Entitlement Offer to certain institutional shareholders in foreign jurisdictions who did not participate in the Institutional Entitlement Offer (subject to compliance with applicable laws).

Unfortunately, due to the fact that KPT will not be extending the Retail Entitlement Offer to persons with a registered address in your country, you are an Ineligible Retail Shareholder and you will not be able to participate in the Retail Entitlement Offer by subscribing for New Shares, nor will you be sent the Retail Entitlement Offer Booklet relating to the Retail Entitlement Offer.

If you have any questions in relation to any of the above matters, please contact Ms Victoria Allinson on +61 (8) 8227 2482 from 9am to 5pm (AEST) Monday to Friday.

On behalf of the Board of KPT, thank you for your continued interest in Kangaroo Island Plantation Timbers Ltd. Sincerely,

Victoria Allinson Company Secretary

This notice does not constitute an offer to sell, or the solicitation of an offer to buy, any securities in the United States or to, or for the account or benefit of, any 'U.S. Person' (as defined in Regulation S under the United States Securities Act 1933, as amended (Securities Act) (U.S. Persons))). Neither the entitlements nor the New Shares have been or will be registered under the Securities Act and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. Persons, absent registration or an exemption from registration under the Securities Act or pursuant to a transaction not subject to the registration requirements of the Securities Act.

The provision of this document is not, and should not be considered as, financial product advice. The information in this document is general information only, and does not take into account your individual objectives, taxation position, financial situation or needs. If you are unsure of your position, please contact your accountant, tax advisor, stockbroker or other professional advisor.