PROPERTY INVESTMENT PORTFOLIO PLC (An open-ended investment company incorporated in the Isle of Man with registered number C)

Transcription

1 Please note: Dealing in Participating Shares is currently suspended pending further notice THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this document or the action you should take, you are recommended to seek immediately your own advice from an appropriately qualified independent professional adviser. For UK regulatory purposes, this document is issued by the Company in accordance with Article 44 of the FSMA 2000 (Financial Promotion) Order It is directed at Participating Shareholders in the Company and no one else. If you have sold or otherwise transferred all of your Participating Shares in the Company please send this document and the accompanying documents at once to the purchaser or transferee or (if applicable) to the stockbroker, bank or other person through whom the sale or transfer was effected, for onward transmission to the purchaser or transferee. However, such documents should not be distributed, forwarded or transmitted in or into the United States, Canada, Australia or Japan or into any other jurisdiction if to do so would constitute a violation of applicable laws and regulations in such other jurisdiction. PROPERTY INVESTMENT PORTFOLIO PLC (An open-ended investment company incorporated in the Isle of Man with registered number C) Reverse Auction Tender Offer to submit for discounted redemption Participating Shares up to a maximum value of approximately 1.5 million Notice of Class Meeting of the Participating Shareholders to consider the Consent Resolution The Reverse Auction Tender Offer will close at 9.00 a.m. on Friday, 14 October 2011 and will only be available to Participating Shareholders on the Register as at 9.00 a.m. on Wednesday, 5 October Participating Shareholders will find enclosed with this document Discounted Tender Forms for use in connection with the Reverse Auction Tender Offer. Participating Shareholders who wish to redeem their Participating Shares in the Reverse Auction Tender Offer should ensure that their completed Discounted Tender Form(s) and, where applicable, other documents are returned either by post or by hand (during normal business hours only) to the Receiving Agent, IOMA Fund and Investment Management Limited at IOMA House, Hope Street, Douglas, Isle of Man, IM1 1AP before 9.00 a.m. on Friday, 14 October See Part III of this document for further details. If you do not wish to tender any of your Participating Shares for discounted redemption in the Reverse Auction Tender Offer, do not complete or return a Discounted Tender Form. The making of the Reverse Auction Tender Offer is conditional, among other things, upon (i) the passing of the Amendment Resolution by the Founder Shareholders to amend the Articles to allow the Reverse Auction Tender Offer to be made and (ii) the passing of the Consent Resolution by the Participating Shareholders to consent to the variation of rights attaching to Participating Shares. Notice of the Class Meeting to be held at IOMA House, Hope Street, Douglas, Isle of Man, IM1 1AP on Friday, 7 October 2011 at 9.00 a.m. is set out at the end of this document. Whether or not you propose to attend the Class Meeting or tender any Participating Shares for discounted redemption in the Reverse Auction Tender Offer you are requested to return the Form(s) of Proxy for use at the Class Meeting. If you choose not to vote at the Class Meeting this does not preclude you from participating in the Reverse Auction Tender Offer. To be valid, Forms of Proxy must be completed and returned to IOMA House, Hope Street, Douglas, Isle of Man, IM1 1AP in accordance with the instructions printed thereon so as to be received as soon as possible and in any event by 9.00 a.m. on Wednesday, 5 October 2011.

2 CONTENTS Page PART I LETTER FROM THE CHAIRMAN 8 PART II AMENDMENT RESOLUTION AND CONSENT RESOLUTION 13 PART III THE REVERSE AUCTION TENDER OFFER 15 PART IV RECENT COMPANY PERFORMANCE 23 PART V THE PIP EXEMPT TRUST AND THE UNITHOLDERS 27 PART VI RISK FACTORS 29 NOTICE OF CLASS MEETING 31 2

3 EXPECTED TIMETABLE Reverse Auction Tender Offer NAV Calculation Date 30 June 2011 Latest time and date for receipt of the Trust Form (Unitholders only) 9.00 a.m. on Monday, 3 October 2011 Record Date for Reverse Auction Tender Offer 9.00 a.m. on Wednesday, 5 October 2011 Latest time and date for receipt of Forms of Proxy for the Class Meeting 9.00 a.m. on Wednesday, 5 October 2011 Time and date of Class Meeting 9.00 a.m. on Friday, 7 October 2011 Adjourned Class Meeting (if required) 9.00 a.m. on Friday, 14 October 2011 Latest time and date for receipt of Discounted Tender Forms 9.00 a.m. on Friday, 14 October 2011 Settlement of Reverse Auction Tender Offer consideration No later than Friday, 28 October

4 DEFINITIONS The following definitions apply in this document unless the context otherwise requires: Amendment Resolution Articles Class Fund Class Meeting Company Consent Resolution Continuing Shareholders Directors or Board Discounted Tender Form(s) Discounted Tender Price Discounted Tender Offer Closing Date Discount Level Distribution Portfolio Distribution Shares $ Shares (Distribution Portfolio/ Accumulation) $ Shares (Distribution Portfolio/ Income) a special resolution of the Founder Shareholders to amend the Articles, inter alia, to permit the Company to make reverse auction tender offers and to reduce the quorum requirement at class meetings of the Company, as more particularly described in Part II of this document the articles of association of the Company the separate class fund established for each Share Class the class meeting of holders of Participating Shares convened for 9.00 a.m. on Friday, 7 October 2011 (or any adjournment thereof), notice of which is set out at the end of this document Property Investment Portfolio PLC registered in the Isle of Man with company number C a resolution of the Participating Shareholders to be considered at the Class Meeting in the terms set out in the notice of the Class Meeting set out at the end of this document Participating Shareholders who retain Participating Shares after completion of the Reverse Auction Tender Offer the board of directors of the Company the tender form(s) accompanying this document for use by Participating Shareholders in connection with the Reverse Auction Tender Offer the price at which a Participating Share of each Share Class will be redeemed pursuant to the Reverse Auction Tender Offer, calculated as set out in Part III of this document 9.00 a.m. on Friday, 14 October 2011, being the final time and day on which Discounted Tender Forms may be accepted the level of discount, expressed as a whole percentage, applied by a Participating Shareholder to the Net Asset Value of Participating Shares offered by that Participating Shareholder for discounted redemption, subject always to the Minimum Discount Level in accordance with the Prospectus, a portfolio of investments by the Company designed to aim to provide a return weighted more towards income than capital growth the Participating Shares of the Share Classes within the Distribution Portfolio the participating redeemable preference shares of 0.01 each in the capital of the Company designated as Distribution Portfolio Accumulation Shares subscribed for in US Dollars the participating redeemable preference shares of 0.01 each in the capital of the Company designated as Distribution Portfolio Income Shares subscribed for in US Dollars 4

5 $ Shares (Growth Portfolio/ Accumulation) the participating redeemable preference shares of 0.01 each in the capital of the Company designated as Growth Portfolio Accumulation Shares subscribed for in US Dollars $ Shares (Growth Portfolio/Income) the participating redeemable preference shares of 0.01 each in the capital of the Company designated as Growth Portfolio Income Shares subscribed for in US Dollars Shares (Distribution Portfolio/ Accumulation) Shares (Distribution Portfolio/ Income) Shares (Growth Portfolio/ Accumulation) the participating redeemable preference shares of 0.01 each in the capital of the Company designated as Distribution Portfolio Accumulation Shares subscribed for in Euros the participating redeemable preference shares of 0.01 each in the capital of the Company designated as Distribution Portfolio Income Shares subscribed for in Euros the participating redeemable preference shares of 0.01 each in the capital of the Company designated as Growth Portfolio Accumulation Shares subscribed for in Euros Shares (Growth Portfolio/Income) the participating redeemable preference shares of 0.01 each in the capital of the Company designated as Growth Portfolio Income Shares subscribed for in Euros Extraordinary General Meeting the extraordinary general meeting of the Company to be held immediately after the Class Meeting to consider the Amendment Resolution, as referred to in Part II of this document FA 2004 Finance Act 2004 Forms of Proxy Founder Shareholder Founder Shares Growth Portfolio Growth Shares HMRC Income Shares Investment Adviser Minimum Discount Level Net Asset Value or NAV the forms of proxy for use at the Class Meeting a holder of Founder Shares the shares of 1.00 each in the capital of the Company designated as Founder Shares in accordance with the Prospectus, a portfolio of investments by the Company designed to aim to provide a balanced return of income and capital growth the Participating Shares of the Share Classes within the Growth Portfolio Her Majesty s Revenue & Customs in accordance with the Prospectus, Participating Shares in respect of which distributions are intended to be paid every six months Alpha Real Property Investment Advisers LLP the minimum discount level, expressed as a percentage, to the Net Asset Value of Participating Shares on 30 June 2011 at which Participating Shares tendered for discounted redemption may be accepted, being 25 per cent. (twenty five per cent.) the net asset value of the Company, Portfolio, Class Fund or Participating Share (as the context requires) as determined in accordance with the Articles 5

6 Overseas Shareholders Participating Shareholder Participating Shares Portfolio Portfolio Offer Consideration Shares (Distribution Portfolio/ Accumulation) Shares (Distribution Portfolio/ Income) Shares (Growth Portfolio/ Accumulation) those Participating Shareholders with registered addresses outside the United Kingdom, the Channel Islands or the Isle of Man a holder of Participating Shares on the Register on the Record Date or, where applicable, Participating Shares of such Share Class as the context requires and who is entitled to receive and accept the Reverse Auction Tender Offer the Shares (Growth Portfolio/Income); Shares (Growth Portfolio/Accumulation); Shares (Distribution Portfolio/Income); Shares (Distribution Portfolio/Accumulation); Shares (Growth Portfolio/Income); Shares (Growth Portfolio/Accumulation); Shares (Distribution/Income); Shares (Distribution Portfolio/Accumulation); $ Shares (Growth Portfolio/Income); $ Shares (Growth Portfolio/Accumulation); $ Shares (Distribution Portfolio/Income); and $ Shares (Distribution Portfolio/Accumulation), or such of them as the context requires the Growth Portfolio and/or the Distribution Portfolio, as the context requires the maximum aggregate consideration available to Participating Shareholders in the relevant Portfolio, subject to exercise of the Board s discretion to increase the maximum in accordance with paragraphs and of Part III of this document the participating redeemable preference shares of 0.01 each in the capital of the Company designated as Distribution Portfolio Accumulation Shares subscribed for in Pounds Sterling the participating redeemable preference shares of 0.01 in the capital of the Company designated as Distribution Portfolio Income Shares subscribed for in Pounds Sterling the participating redeemable preference shares of 0.01 in the capital of the Company designated as Growth Portfolio Accumulation Shares subscribed for in Pounds Sterling Shares (Growth Portfolio/Income) the participating redeemable preference shares of 0.01 in the capital of the Company designated as Growth Portfolio Income Shares subscribed for in Pounds Sterling Prospectus Qualifying Fund Receiving Agent the prospectus issued by the Company dated 21 January 2008 as amended by addendum dated 31 March 2008 means a qualifying fund as the same is defined in the Collective Investment Schemes (Qualifying Fund) Regulations 2010 IOMA Fund and Investment Management Limited Record Date Wednesday, 5 October 2011 Register the register of members of the Company 6

7 Reverse Auction Tender Offer Share Class Tender Strike Discount Trust Trustee Trust Form Trust Manager Trust Share Class Unitholders the invitation by the Company to Participating Shareholders to tender for a discounted redemption of Participating Shares up to a maximum value of approximately 1.5 million in aggregate (provisionally limited to 777,714 for Growth Shares and 722,286 for Distribution Shares) on the terms and subject to the conditions set out in this document and the relevant Discounted Tender Form each of the twelve classes of Participating Shares or, where applicable, such of them as the context requires the discount percentage determined by the Board to be applied to each Portfolio, applied equally across all Share Classes within each Portfolio the PIP Exempt Trust Capita Trust Company Limited a form of voting instruction and realisation request for Unitholders, as described in paragraph 1 of Part V of this document Alpha Real Property Investment Advisers LLP each of the four share classes of the Trust being, Shares (Growth Portfolio/Income); Shares (Growth Portfolio/Accumulation); Shares (Distribution Portfolio/Income); Shares (Distribution Portfolio/Accumulation) unitholders of the Trust 7

8 PART I LETTER FROM THE CHAIRMAN PROPERTY INVESTMENT PORTFOLIO PLC (An open-ended investment company incorporated in the Isle of Man with registered number C) Directors: M N Grace (Chairman) L A Kearns A R Buckley P P Scales A E Thomas Registered Office: IOMA House Hope Street Douglas Isle of Man IM1 1AP 2 September 2011 Dear Participating Shareholder, Introduction The Board of Property Investment Portfolio plc (the Company ) is pleased to offer to all Participating Shareholders the opportunity to participate voluntarily in the Reverse Auction Tender Offer. The Board is keen to allow the potential for liquidity for those Participating Shareholders who wish to either fully or partially exit their shareholding now, but at a significant discount to prevailing Net Asset Value per Participating Share, as calculated at 30 June 2011, which is to a large extent based on unrealised and illiquid investments. Discounted redemptions under the Reverse Auction Tender Offer may result in an accretion in NAV per Participating Share for Continuing Shareholders though restrictions on liquidity are likely to continue for the foreseeable future and NAV will continue to be affected in the ordinary course by fluctuations in the relevant real estate markets. Whilst the prevailing economic climate and resulting limited liquidity in the Company s portfolio investments still requires the conventional NAV based redemption mechanism (as outlined in the Prospectus) to remain suspended, the Company has limited cash resources available to effect this liquidity event, which will be available to all Participating Shareholders on a voluntary basis. The Board has approved aggregate cash resources of up to approximately 1.5 million to effect discounted redemptions under the Reverse Auction Tender Offer. Should cash resources permit, the Board may consider one or more further similar offers to Continuing Shareholders in the future. The Board continues to monitor the performance of the Company s portfolio investments and seeks to create shareholder value and liquidity where possible. However, in the Board s opinion there remains no current expectation that the economic outlook will alter materially and there is unlikely to be a significant change to the performance and liquidity of the Company s portfolio for the foreseeable future. Therefore the Reverse Auction Tender Offer currently is likely to be the only mechanism available to Participating Shareholders who require immediate liquidity. For the avoidance of doubt, the redemption mechanism detailed in the Prospectus (providing for redemptions at full NAV) is suspended and remains suspended going forward. As notified to Participating Shareholders, the Company is intending to arrange for an orderly wind up over a period currently not expected to be completed until 2014 at the earliest, however, in the opinion of the Board there can be no guarantee that an orderly wind up will be achievable given the exogenous environment or indeed at values at or in excess of the prevailing Net Asset Value per Participating Share, particularly should enforced disposals be required. The Board continues to review this timetable. Background to and reasons for the proposed Reverse Auction Tender Offer The Company is an Isle of Man registered, open-ended investment company and an Isle of Man Qualifying Fund. Its issued share capital is comprised of twelve classes of Participating Shares, six classes in respect of 8

9 each of the Growth and Distribution Portfolios, the different Share Classes in respect of each Portfolio carrying differing risk and return profiles, with exposure to real estate. The Company suspended redemptions of Participating Shares in January It had been hoped by the Board that sufficient liquidity would be restored for the suspension to be lifted within six months. However, with the onset of the financial crisis and the downturn in the property market intensifying during 2009, this proved unachievable. In August 2009 the Company announced it would proceed to arrange an orderly disposal of its investments over a three year period. The Board noted at the time that this period may be extended if the Board considered it to be in the interests of the Participating Shareholders to do so and the current expectation is that this process will not be completed until 2014 at the earliest. By arranging for a winding up over this period of time the Board believes that the Company should be able to obtain a better price for its assets than that which would be achieved through an immediate wind up. During the period since the disposal strategy was announced, the Growth and Distribution Portfolios have increased in value, respectively, by 23.2 per cent. and 22.6 per cent. (taking into account the benefit of capital distributions paid to Participating Shareholders). Despite the improvement in the Company s NAV over the past two years, the prospects for the economy, and in particular the commercial property market, continue to be uncertain. With the exception of prime assets which have appreciated in value rapidly since the trough in the market, most property values remain depressed. The availability of debt finance, a key component to the transactional activity of the market, remains restricted, removing many debt-backed buyers from the market. As a result many property owners, including some of the sub-funds in which the Company has invested, are not able to sell significant quantities of real estate assets, or at least not at values which would represent good value for their investors. As a result property owners are typically seeking to hold their assets for a longer period until capital values recover and liquidity is restored to the property market, and should they have borrowed to finance the acquisition of their assets, owners are typically attempting to extend their debt arrangements accordingly. Given this backdrop the Board and the Investment Adviser believe that the Company s intended realisation programme is not realistically able to be completed before 2014, nor would it be in the interests of Participating Shareholders to do so. The Board and the Investment Adviser are mindful that the Company has suspended redemptions of Participating Shares since January 2008, a period in excess of three and half years. As a result, the Board has approved an alternative 1.5 million liquidity window in the form of a Reverse Auction Tender Offer which will be offered to all Participating Shareholders, with payment by Friday, 28 October 2011 for successful participants. The 1.5 million available to redeem Participating Shares under the terms of the Reverse Auction Tender Offer will be allocated in proportion between the Growth Shares ( 777,714) and the Distribution Shares ( 722,286), those allocations representing the respective contributions of the Portfolios to prevailing NAV as at 30 June The Tender Strike Discount to be applied to a Participating Share within each Portfolio will be determined by an auction process applicable to all Participating Shares (who may participate on a voluntary basis). This will establish for each Portfolio a discount level to NAV per Participating Share in that Portfolio as at 30 June 2011, being the Discounted Tender Price. A full explanation of the Reverse Auction Tender Offer and how the Tender Strike Discount and resulting Discounted Tender Price will be determined is set out in Part III of this document. The current redemption queue for those Participating Shareholders seeking redemption by the Company at NAV will be unaffected by the Reverse Auction Tender Offer. As stated above, the Board confirms that for the foreseeable future dealing in Participating Shares will remain suspended. Given the prevailing suspension for dealing in Participating Shares, the Board believes that the Reverse Auction Tender Offer will provide a meaningful exit opportunity where it is likely that no other exit option is currently available for those Participating Shareholders who wish to exit from the Company immediately, in whole or in part (subject to tender offers from other Participating Shareholders pursuant to the Reverse Auction Tender Offer and the discount at which Participating Shares are tendered). 9

10 The Board believes that offering Participating Shareholders the opportunity for voluntary redemption at a significant discount to prevailing NAV is appropriate and in the best interests of all Participating Shareholders. The proposed mechanism will provide certainty to Participating Shareholders as to (i) the NAV (being NAV as at 30 June 2011) of each Share Class to which the Tender Strike Discount will be applied and (ii) the minimum Discounted Tender Price at which Participating Shares which they successfully tender for discounted redemption will be redeemed. The appropriate method of calculation of NAV varies depending upon the relevant investment and the underlying assets, but as a general principle real estate assets are typically valued on their estimated transfer price assuming a transfer between a willing seller and a willing buyer on an arm s length basis after proper marketing. As detailed above, it is the Board s view that an orderly sale process in line with these valuation principles is likely to take several years and the Board and the Investment Adviser believe the Company s intended realisation programme shall be completed before 2014 at the earliest. The Board believes it is reasonable to assume that a sale of the Company s assets at a significant discount to prevailing NAV would be required in order to realise the portfolio should an enforced disposal programme be required to provide immediate liquidity. Payment of the redemption monies for Participating Shares successfully tendered is expected to be made no later than 28 October Participation in the Reverse Auction Tender Offer The Board believes the Reverse Auction Tender Offer is in the best interests of all Participating Shareholders. Whether or not Participating Shareholders decide to tender their Participating Shares for discounted redemption pursuant to the Reverse Auction Tender Offer will depend, among other things, on their view of the Company s prospects, future liquidity, the economic outlook and the relevant property markets as well as their own individual circumstances, including their tax position. Your participation in the Reverse Auction Tender Offer is not conditional on your participation at the Class Meeting. If you do not wish to participate in the Reverse Auction Tender Offer please do not submit a Discounted Tender Form to the Company. Amendment Resolution The Articles currently do not allow for the redemption of Participating Shares in the manner contemplated by the Reverse Auction Tender Offer. It is proposed, therefore, that the Articles be amended in order to permit the Company to make arrangements from time to time to invite Participating Shareholders to tender Participating Shares for redemption on terms other than those set out in the Prospectus, such as the Reverse Auction Tender Offer. The proposed amendment to the Articles will require the passing of a special resolution by the Founder Shareholders. A full description of the proposed amendments to the Articles is set out in Part II of this document. Consent Resolution The Board has been advised that the amendment to the Articles contemplated in the Amendment Resolution will constitute a variation of the rights attaching to Participating Shares. As a consequence, in order for the Amendment Resolution to be passed and the Reverse Auction Tender Offer to proceed, it will be necessary for Participating Shareholders to resolve to consent to the proposed variation of rights at a separate class meeting of Participating Shareholders. As part of this variation of the rights, the Board also propose removing the requirement of at least one-third of the Participating Shares in issue to be in attendance at the Class Meetings allowing for greater administrative convenience and flexibility in future. The passing of the Amendment Resolution is likely to result in a smaller number of Participating Shareholders constituting a quorum at any future class meetings which may allow the rights attaching to the Participating Shares to be varied more easily in the future. 10

11 Notice of the Class Meeting, together with the form of Consent Resolution proposed, is set out at the end of this document. Details of the quorum requirements and voting procedures at the Class Meeting are set out in Part II of this document. Recommendation regarding the Consent Resolution In view of the factors set out in this letter above your Board unanimously recommends Participating Shareholders to vote in favour of the Consent Resolution. Voting in favour of the Consent Resolution does not oblige you to participate in the Reverse Auction Tender Offer. Director shareholdings No directors of the Company hold any Participating Shares or Founder Shares. Anthony Buckley is both a director of the Company and a member of the Investment Adviser and always abstains from voting in meetings of the Board. Conditionality The Reverse Auction Tender Offer is conditional upon, inter alia, the passing of the Consent Resolution and the Amendment Resolution. Irrevocable Undertakings Certain Participating Shareholders, who in aggregate hold 12 per cent. of the Participating Shares in issue, have provided the Company with irrevocable undertakings to attend at the Class Meeting and vote in favour of the Consent Resolution. The Founder Shareholders have provided the Company with irrevocable undertakings to vote in favour of the Amendment Resolution should the Consent Resolution be passed at the Class Meeting. Principal purposes of this document The principal purposes of this document are (i) to provide you with details of, and to propose, the Consent Resolution; (ii) to set out the background to and reasons for the Reverse Auction Tender Offer; and (iii) to provide details of how the Reverse Auction Tender Offer will be implemented and how Participating Shareholders who wish to do so may apply to participate. For UK regulatory purposes, this document is issued by the Company in accordance with Article 44 of the FSMA 2000 (Financial Promotion) Order It is directed at Participating Shareholders in the Company and no one else. The Trust If you are a Unitholder in the Trust you do not hold shares in the Company directly. The attention of the Trust and Unitholders is therefore drawn to Part V of this document which explains how the Reverse Auction Tender Offer will work in relation to the Trust. Tax Participating in the Reverse Auction Tender Offer will have tax implications on Participating Shareholders. Advice relating only to United Kingdom taxation advice has been received by the Board and is applicable to Participating Shareholders who are (if an individual) domiciled and either resident and/or ordinarily resident in the United Kingdom, or which are (if a company) resident in the United Kingdom, for United Kingdom taxation purposes, and who hold Participating Shares beneficially as an investment. A Participating Shareholder who successfully tenders Participating Shares for discounted redemption should be treated as having made a disposal of those Participating Shares, upon their discounted redemption, for the purposes of the taxation of chargeable gains. This may give rise to a chargeable gain or allowable loss, depending on the Participating Shareholder s personal circumstances and subject to any available exemption or relief. The tax implications are set out more fully in Part III of this document (Part V for Unitholders). Certain Participating 11

12 Shareholders, such as dealers in securities, collective investment schemes, insurance companies and persons acquiring their Participating Shares in connection with their employment may be taxed differently and are not considered. The tax information contained in this document does not constitute legal or tax advice to any Participating Shareholder. If you are in any doubt about your tax position, or if you may be subject to tax in a jurisdiction other than the United Kingdom, you should consult your independent professional adviser. Risk Factors The attention of all Participating Shareholders is drawn to the risk factors set out in Part VI of this document. The attention of Overseas Shareholders is drawn to the paragraph headed Overseas Shareholders in Part III of this document. Participating Shareholders who are in any doubt as to the action they should take should consult an appropriately qualified independent professional adviser. Costs and expenses The costs and expenses incurred in relation to the Reverse Auction Tender Offer are estimated to amount to approximately 115,000 (excluding VAT) in aggregate. These costs and expenses are included in the NAV calculation as at 30 June Appropriate allocation of these costs and expenses between the Company, Property Investment Portfolio ISA and PEP plc and the Trust will be made as determined by the Board and agreed with the board and the trustee of those entities. If you have any enquiries or require additional Discounted Tender Forms, please call client services on Yours faithfully M N Grace Chairman 12

13 PART II AMENDMENT RESOLUTION AND CONSENT RESOLUTION Redemption of Participating Shares Section 46A of the Isle of Man Companies Act 1931 allows for a mechanism whereby capital in the Company can effectively be returned to Participating Shareholders without a winding up or court-sanctioned reduction of capital and without the procedural formalities associated with a buyback out of capital under the Isle of Man Companies Act The terms of redemption of Participating Shares under section 46A are set out in the Articles which currently provide for the redemption of Participating Shares at the option of the holder or (in certain prescribed circumstances) at the option of the Company, in each case at a price based on Net Asset Value. The right of a Participating Shareholder to redeem Participating Shares on this basis has been suspended by the Board since January 2008 and requests for redemption of Participating Shares received by the Board since suspension have not been processed. Amendment of Articles The Articles do not currently allow for the redemption of Participating Shares in the manner contemplated by the Reverse Auction Tender Offer. It is proposed, therefore, that the Articles be amended by the inclusion of the following additional Article 37A to allow the Company to make tender offers to redeem Participating Shares other than in accordance with the terms of the Prospectus (including the Reverse Auction Tender Offer): 37A(1) Subject to this Article 37A the Directors may from time to time put forward proposals to all or any Shareholders of any class or classes of Participating Share to offer to redeem all or any Participating Shares then in issue by agreement with the relevant Shareholder at such times and in accordance with such procedures as the Directors may determine and in consideration of the payment of such redemption price per Participating Share as may be determined by the Directors or in accordance with such procedures and (for the avoidance of doubt) such redemption price may be less than the Net Asset Value per Participating Share for the time being. (2) Any offer pursuant to Article 37A(1) shall be on such terms and subject to such conditions as the Directors may specify. For the avoidance of doubt, the number and/or aggregate value of Participating Shares to be offered for redemption shall be in the absolute discretion of the Directors and the terms of such an offer may stipulate that all and any costs associated therewith will be borne only by those Participating Shareholders whose Participating Shares are redeemed. (3) The provisions of Articles 36(1)(c), (d), (e) and (h) shall apply mutatis mutandis to this Article 37A save that all references to a request for redemption or purchase shall be deemed to be replaced with a redemption or purchase offer. (4) The provisions of Article 36(4) shall apply mutatis mutandis to this Article 37A. In addition, the Directors have determined that it would be in the interests of administrative convenience for the quorum requirement at each meeting of a particular class of shares in the Company to be reduced from the holders of one-third of the shares of such class to two holders of shares of such class. It is therefore proposed that the Articles be amended by deletion of the words but so that the quorum shall be the holders of at least one-third of the shares of the class from the second sentence of Article 17. Amendment Resolution The proposed amendment to the Articles will require the passing of a special resolution by the Founder Shareholders to be taken at an extraordinary general meeting of the Company. Participating Shareholders are not entitled to receive notice of, or to attend or vote at, the extraordinary general meeting. 13

14 Variation of rights attaching to Participating Shares The Board has been advised that the amendment to the Articles contemplated in the Amendment Resolution will constitute a variation of the rights attaching to Participating Shares. The Articles provide that any rights attaching to any class of Participating Shares may be varied with the consent in writing of the holders of three-fourths of the issued share capital of that class, or with the sanction of a resolution passed at a separate general meeting of that class. The Board have been advised that for these purposes Participating Shares may be treated as one class. Consent Resolution In order for the Amendment Resolution to be passed and the Reverse Auction Tender Offer to proceed it will be necessary for Participating Shareholders to resolve to consent to the variation of rights attaching to the Participating Shares ( Consent Resolution ) at a separate class meeting of Participating Shareholders ( Class Meeting ). Notice of the Class Meeting, together with the form of Consent Resolution proposed, is set out at the end of this document. In order to be quorate, holders of at least one-third of the Participating Shares in issue must be in attendance at the Class Meeting (whether in person, by proxy or by duly appointed corporate representative). If a quorum is not present within 30 minutes of the time appointed for the Class Meeting then the meeting will stand adjourned until the same time, date and place the next week; and if a quorum is not present within 15 minutes from the time appointed for the adjourned Class Meeting the Participating Shareholders present will constitute a quorum. On a show of hands every Participating Shareholder who is present at the Class Meeting in person (or in the case of a corporation by a duly authorised corporate representative) will have one vote. On a poll, each Participating Shareholder who is present at the Class Meeting (whether in person, by proxy or by duly authorised corporate representative) will have one vote for every Participating Share held. Participating Shareholders are requested to return the Form(s) of Proxy for use at the Class Meeting using the business reply-paid envelope. To be valid, Forms of Proxy for use at the Class Meeting must be completed and returned in accordance with the instructions printed thereon so as to be received as soon as possible and in any event not later than 48 hours before the time of the Class Meeting, being 9.00 a.m. on Wednesday, 5 October 2011 (or any adjournment thereof). 14

15 PART III THE REVERSE AUCTION TENDER OFFER 1. Introduction and Background 1.1 The Company has announced its intention to offer to all Participating Shareholders a mechanism to realise part or all of their investment by way of a reverse auction tender offer to redeem Participating Shares at a significant discount to prevailing NAV. Further details of this announcement are contained in Part I of this document. The Board has approved aggregate cash resources of up to 1.5 million to effect discounted redemptions under the Reverse Auction Tender Offer. The Discounted Redemption Price per Participating Share will be determined by an auction process which will establish a single Tender Strike Discount for each Portfolio to be applied across all Share Classes of that Portfolio. A full explanation of how the Reverse Auction Tender Offer will work and how the Tender Strike Discount is determined is set out below. 1.2 Part I of this document explains the background to and the reasons for the Reverse Auction Tender Offer. 1.3 The Board believes that the Reverse Auction Tender Offer will provide a meaningful exit opportunity where it is likely that no other exit option is currently available for those Participating Shareholders who wish to exit from the Company immediately, in whole or in part (subject to tender offers from other Participating Shareholders pursuant to the Reverse Auction Tender Offer and the discount at which Participating Shares are tendered). The Board believes that offering Participating Shareholders the voluntary opportunity for redemption at a significant discount to prevailing NAV is appropriate and in the best interests of all Participating Shareholders. The proposed mechanism provides certainty to Participating Shareholders as to (i) the NAV of each Share Class to which the Tender Strike Discount will be applied (being NAV as at 30 June 2011) and (ii) the minimum Discounted Tender Price at which Participating Shares which they successfully tender for discounted redemption will be redeemed. 1.4 Discounted redemptions under the Reverse Auction Tender Offer may result in an accretion in NAV per Participating Share for Continuing Shareholders though restrictions on liquidity are likely to continue for the foreseeable future and NAV will continue to be affected in the ordinary course by fluctuations in the relevant real estate markets. 2. Explanation of how the Reverse Auction Tender Offer will work 2.1 Determining the Tender Strike Discount Participating Shareholders are invited to tender for discounted redemption any or all of their Participating Shares (of any Share Class) at a proposed Discount Level of their choice. The Discount Level is a whole percentage discount to the Net Asset Value of the relevant Participating Share(s) as at 30 June A proposed Discount Level may be any whole percentage but must be a minimum of 25 per cent. (i.e. the Discount Level must be at or broader than 25 per cent.) Any Discounted Tender Forms purporting to propose a Discount Level of less than 25 per cent. will be treated as invalid and will not be taken into account. A Participating Shareholder may propose different Discount Levels for different Participating Shares, whether of the same or different Share Class or Portfolio After the Discounted Tender Offer Closing Date, the Board will determine a single Discount Level for each Portfolio which will be applied to all successfully tendered Participating Shares of all Share Classes in that Portfolio in the Reverse Auction Tender Offer. The applicable Discount Level for a Portfolio will be calculated as follows: 15

16 (a) (b) (c) The Board will first use the broadest Discount Level proposed by any holders of Participating Shares in that Portfolio and will calculate the aggregate cost of discounted redemption of all Participating Shares in that Portfolio offered at that Discount Level. If the aggregate cost at that Discount Level is below the relevant Portfolio Offer Consideration (i.e. 777,714 for the Growth Shares or 722,286 for the Distribution Shares) the Board will reset the mechanism and perform the same calculation based on the next broadest proposed Discount Level for Participating Shares in that Portfolio, with such Discount Level being applied to all Participating Shares in the Portfolio tendered by Participating Shareholders at this Discount Level, together with Participating Shares that had originally been tendered at any broader Discount Level. If necessary, this process shall continue based on progressively narrower Discount Levels until the calculation at a particular Discount Level produces an aggregate cost of discounted redemption of all Participating Shares in that Portfolio tendered at or above that Discount Level which equals or exceeds the Portfolio Offer Consideration, and that Discount Level will be the Tender Strike Discount for the relevant Portfolio Where the aggregate cost of discounted redemption at the Tender Strike Discount exceeds the Portfolio Offer Consideration, the Directors may, at their absolute discretion, determine to increase the relevant Portfolio Offer Consideration to allow all Participating Shareholders who have tendered Participating Shares at the Tender Strike Discount to be redeemed in full. However, where the Directors do not exercise this discretion, priority will be given to those Participating Shareholders tendering at a broader discount than the Tender Strike Discount. Participating Shareholders who have tendered Participating Shares at the Tender Strike Discount will have their shareholdings redeemed pro rata in proportion to the value of Participating Shares offered at the Tender Strike Discount so that the Portfolio Offer Consideration is not exceeded Those Participating Shareholders who have tendered Participating Shares at a Discount Level narrower than the Tender Strike Discount will not have those Participating Shares redeemed in the Reverse Auction Tender Offer If any fractions arise from scaling back in a pro rata discounted redemption, the number of Participating Shares accepted for discounted redemption may, at the discretion of the Directors, be rounded down to the nearest whole number The objective of the mechanism is to give priority of discounted redemption to those Participating Shareholders who tender Participating Shares at the broadest Discount Level whilst returning to Participating Shareholders the relevant Portfolio Offer Consideration and thereby enabling the widest possible participation by Participating Shareholders. Should a scenario arise whereby the application of a narrower Discount Level to all tendered Participating Shares at or above this Discount Level, results only in the partial redemption of Participating Shares that were tendered at a broader Discount Level, then this next broader Discount Level should be the Tender Strike Discount. In this scenario, the aggregate value of the tendered Participating Shares shall fall below the Portfolio Offer Consideration, in accordance with the Directors preference to permit Participating Shares tendered to be redeemed in full at the broadest Discount Level, rather than partially The Directors shall seek to conduct the Reverse Auction Tender Offer in the best interests of the Company as a whole. If the number of Participating Shares offered at a particular Discount Level would account for substantially all of the aggregate Portfolio Offer Consideration, then notwithstanding the aggregate value of Participating Shares offered for discounted redemption at that Discount Level is less than the specific Portfolio Offer Consideration, the Directors may elect to set the relevant Tender Strike Discount at that level rather than at a narrower Discount Level. 16

17 2.2 Illustrative example of the determination of the Tender Strike Discount The information set out below is for illustrative purposes only and does not constitute a forecast or any representation or warranty as to the effects of the Reverse Auction Tender Offer on Participating Shareholders. NAV as at Portfolio Participating Share Class 30 June 2011( ) Distribution Portfolio, Income Distribution Portfolio, Accumulation Tendered Discount Level (in descending order) No. of applicable to the Participating Participating Portfolio relevant Portfolio Shares tendered Share Class Distribution Portfolio 80 per cent. 1,000,000 Shares (Distribution Portfolio/ Accumulation) Distribution Portfolio 65 per cent. 1,250,000 Shares (Distribution Portfolio/Income) Distribution Portfolio 58 per cent. 600,000 Shares (Distribution Portfolio/Income) Distribution Portfolio 40 per cent. 400,000 Shares (Distribution Portfolio/ Accumulation) Distribution Portfolio 35 per cent. 800,000 Shares (Distribution Portfolio/ Accumulation) Distribution Portfolio 25 per cent. 1,000,000 Shares (Distribution Portfolio/Income) Implied weighted Aggregate NAV per Participating Implied Discount Level Participating Share at discount aggregate applied Shares tendered applied ( ) value ( ) 80 per cent. 1,000, , per cent. 2,250, , per cent. 2,850, , per cent. 3,250, , per cent. 4,050, , per cent. 5,050, ,348, Commentary on illustrative example above (a) This example; (aa) considers the determination of the Tender Strike Discount for the Distribution Portfolio only. The aggregate Portfolio Offer Consideration for the Distribution Portfolio is 722,286; (ab) only shows participation in the Reverse Auction Tender Offer across two separate Share Classes; and 17

18 (ac) further assumes that the Participating Shareholders in those two Share Classes have tendered Participating Shares at only six different Discount Levels. (b) (c) In practice, the Directors anticipate that Participating Shareholders in all twelve Share Classes, across both Portfolios, will participate in the Reverse Auction Tender Offer and the Directors expect Participating Shareholders to tender Participating Shares at any percentage Discount Level they deem to be appropriate (subject to the Minimum Discount Level), with the likelihood being that multiple Participating Shareholders across varying Share Classes will tender Participating Shares at the same Discount Levels. The reverse auction mechanism in the above example operates as follows: (ca) (cb) Certain holders of Participating Shares in the Distribution Portfolio have tendered some or all of their Participating Shares (across one or more Share Classes) in a range from the Minimum Discount Level of 25 per cent. to an 80 per cent. discount to the relevant Share Class NAV. These are shown above ordered by broadest Discount Level (80 per cent.) to narrowest Discount Level (25 per cent.). The Board will determine the appropriate Tender Strike Discount by assessing the broadest Discount Level that can be applied to all Participating Shares tendered, applying this Discount Level equally to all tendered shares that were tendered at, or at a greater discount to, the Tender Strike Discount, such that the aggregate cost of discounted redemption of those tendered Participating Shares when the Tender Strike Discount is applied to tendered Participating Shares at their appropriate Share Class NAV is equal to or greater than 722,286 (being the Portfolio Offer Consideration). All Participating Shares that were tendered at a Discount Level broader than the Tender Strike Discount are to be redeemed in full. (cc) In the above example, the Tender Strike Discount is determined at 35 per cent. This was calculated by continuing to aggregate the total cost of tendered Participating Shares at a reducing Discount Level (by Discount Level tendered), applying the Discount Level equally to all Participating Shares, until the Portfolio Offer Consideration was exceeded. (cd) In the example, Participating Shareholders who tendered shares at 25 per cent. Discount Level will not have any Participating Shares accepted in the Reverse Auction Tender Offer. (ce) Those Participating Shareholders who tendered Participating Shares at 35 per cent., being the Tender Strike Discount will only be partially redeemed, given the aggregate value of the Participating Shares tendered at, or above, the Tender Strike Discount exceeds the Portfolio Offer Consideration of 722,286 by a further 235,372. Therefore the 800,000 Participating Shares tendered at 35 per cent. will be scaled back so that the total is 722,286. Participating Shareholders who originally tendered their Participating Shares at a Discount Level broader than 35 per cent. shall receive the 35 per cent. Tender Strike Discount but shall have their Participating Shares redeemed in full. (cf) The Board has discretion to increase the aggregate Portfolio Offer Consideration if it allows the Participating Shareholder who tendered Participating Shares at the Tender Strike Discount to redeem their tendered Participating Shares in full. In this instance, to allow this to happen, the Board, if minded to do so, would increase the aggregate Portfolio Offer Consideration for the Distribution Portfolio to 957,