Taliesin Property Fund Limited : Publication of circular and prospectus

Taliesin Property Fund Limited

Publication of circular & prospectus

Introduction

Further to the Company's announcement on 9 July 2013, the Company is todaypublishing a circular ("Circular") and Notice of Extraordinary General Meeting in respect of a proposed placing of up to 30 million ZDP Shares. The Issue will comprise an Initial Placing of up to 15 million ZDP Shares at a price of 100p per ZDP Share and further placings pursuant to a Placing Programme of up to 30 million ZDP Shares in aggregate (less the number of ZDP Shares issued pursuant to the Initial Placing) at the applicable Placing Programme Price.

The Issue is conditional upon the Company obtaining Shareholder approval at the Extraordinary General Meeting for the creation of the new class of ZDP Shares through the adoption of the New Articles and the disapplication of the pre-emption rights contained in the Company's Articles. In addition, the Board is seeking the authority to buy-back up to 14.99 per cent. of the ZDP Shares issued pursuant to the Initial Placing and the Placing Programme.

The Chairman's Letter in respect of the proposals, as contained in the Circular, is set out below.

Terms used and not defined in this announcement bear the meaning given to them in the Circular to be published today.

At the same time, the Company is today publishing aprospectus(the "Prospectus"), following approval by theUK Listing Authority, in respect of the Issue. A copy of the Prospectus will be submitted to the National Storage Mechanism and will shortly be available on the Company's website: http://www.taliesinberlin.com.

Chairman's Letter

"Dear Shareholder

Proposed creation of a new class of ZDP Shares through the adoption of new Memorandum and Articles of Association, disapplication of pre-emption rights and authority to buy-back ZDP Shares

Introduction

In the Company's annual report and accounts for the year ended 31 December 2012 the Chairman stated that a key priority is to manage and invest in the recently acquired portfolio in order to raise rents and improve valuations. To pay for this, while the Company expects to be able to refinance some of its existing portfolio in the next few years, it will be necessary to raise additional finance in order to undertake refurbishment and to build out loft space throughout the Portfolio. The Board has therefore been exploring alternative ways of raising finance and has decided to proceed with an issue of a new class of ZDP Shares. The Issue will comprise an Initial Placing of up to 15 million ZDP Shares at a price of 100p per ZDP Share and further placings pursuant to a Placing Programme of up to 30 million ZDP Shares in aggregate (less the number of ZDP Shares issued pursuant to the Initial Placing) at the applicable Placing Programme Price.

The Directors intend to apply the Net Proceeds of the Initial Placing to repay any amounts still outstanding under the ?6 million of the Company's short-term loans, with the balance, together with the Net Proceeds of any further issues of ZDP Shares pursuant to the Placing Programme, to be used to undertake refurbishment and to build out loft space throughout the Portfolio or otherwise in making investments in accordance with the Company's investment objective and policy.

The Issue is conditional upon the Company obtaining Shareholder approval to the creation of the new class of ZDP Shares through the adoption of the New Articles and the disapplication of the pre-emption rights contained in the Company's Articles. In addition, the Board is seeking the authority to buy-back up to 14.99 per cent. of the ZDP Shares issued pursuant to the Initial Placing and the Placing Programme.

An Extraordinary General Meeting to consider the Proposals, further details of which are set out below, is to be held on 3 September 2013 at 11.00 a.m. and is convened by the formal notice of Extraordinary General Meeting set out at the end of this document.

The Proposals

The Proposals are as follows:

Creation of a new class of ZDP Shares through the adoption of New Articles

The Company is proposing to create a new class of ZDP Shares which will be used to raise additional finance in order to undertake refurbishment and to build out loft space throughout the Portfolio.

The ZDP Shares are designed to provide a predetermined Final Capital Entitlement which ranks behind any loan facilities or other borrowings of the Company but in priority to the Ordinary Shares. The key features of the ZDP Shares are as follows:

Repayment Date and Final Capital Entitlement

The ZDP Shares will have a repayment date of 30 September 2018 and a Final Capital Entitlement of 144.28p per ZDP Share on the ZDP Repayment Date. The Final Capital Entitlement will rank in priority to the capital entitlements of the Ordinary Shares but there is no assurance that the Final Capital Entitlement of the ZDP Shares will be repaid in full on the ZDP Repayment Date as it is not a guaranteed or secured repayment amount.

Income

The ZDP Shares will carry no rights to receive dividends out of the revenue or any other profits of the Company.  However, in accordance with the rights attaching to the ZDP Shares the Company will not pay a dividend or make any distribution in respect of the Ordinary Shares unless immediately following such payment, the Cover Test (being Cover of not less than 1.5 times) is met.

Voting

The ZDP Shares will not normally carry the right to vote at general meetings of the Company, although they carry the right to vote as a class on certain proposals which would be likely to materially affect their position.

Full details of the rights attaching to the ZDP Shares are set out in Part 2 of this document.

The Company proposes to raise up to £15 million through the Initial Placing of ZDP Shares at 100p per ZDP Share, the net proceeds of which would be used to repay ?6 million of short-term loans on which interest at the rate of 14 per cent. per annum is payable.

The costs of the Initial Placing are dependent on subscriptions received but, assuming the Initial Placing of 15 million ZDP Shares is fully subscribed, would be approximately 4 per cent. of the Gross Proceeds.

The Initial Placing is conditional, inter alia, on minimum Gross Proceeds of £7.0 million being raised and is not being underwritten.

Following the Initial Placing, the Company may raise additional funds through the placing of further ZDP Shares pursuant to the Placing Programme. The price at which Further Placing Shares will be issued pursuant to the Placing Programme will be determined by the Company and will not be less than the Accrued Capital Entitlement per ZDP Share at the time of allotment. The net proceeds of any further issues under the Placing Programme and the balance of the net proceeds of the Initial Placing will be used to make investments in accordance with the Company's investing policy.

No ZDP Shares will be issued under the Placing Programme if the Cover would be less than 1.5 times,

taking into account the effect of the proposed allotment of the relevant ZDP Shares.

In connection with the proposed Issue, the Company, the Investment Adviser and Westhouse have entered into the Placing Agreement. Under the Placing Agreement, Westhouse, as agent for the Company, has agreed to use its reasonable endeavours to procure subscribers for the ZDP Shares pursuant to the Issue.

In order to create the ZDP Shares and implement the Issue, the Company will be required to adopt the New Articles. The New Articles are required to be adopted so that the rights attaching to the ZDP Shares, as set out in Part 2 of this document, are provided for. The New Articles will be on display at the registered office of the Company from the date of this document until the end of the Extraordinary General Meeting.

Disapplication of pre-emption rights

Although the issue of the Initial Placing ZDP Shares pursuant to the Initial Placing will not be subject to the pre-emption provisions contained in the Company's existing Articles (as the pre-emption rights only apply to the issue of further shares of a class which is already in issue), in order to allot Further Placing Shares under the Placing Programme on a non-preemptive basis, it is necessary to disapply the pre-emption rights that are conferred by Articles 2.10 to 2.17 of the existing Articles. Article 2.18 of the existing Articles provides, in summary, that pre-emption rights shall not apply to an allotment where the allotment has been authorised by a special resolution provided that such authority is granted for a period of time as the special resolution permits. Resolution 2 which will be proposed at the Extraordinary General Meeting will disapply the pre-emption rights in respect of the allotment of up to 30 million ZDP Shares pursuant to the Issue, and this authority will expire at the annual general meeting of the Company to be held in 2014.

Authority to repurchase ZDP shares

The Company is also proposing to take authority to make market purchases of ZDP Shares representing up to 14.99 per cent. of the ZDP Shares issued under the Issue.

Repurchases of ZDP Shares will be made at the discretion of the Board, and will only be made in the market at prices below their Accrued Capital Entitlement (unless the Directors determine that a purchase at a higher price is in the interests of Shareholders as a whole), as and when market conditions are considered by the Board to be appropriate. In addition, the price will not exceed the higher of (i) 5 per cent. above the average of the middle market quotations (as derived from the Daily Official List of the London Stock Exchange) for the 5 consecutive dealing days ending on the dealing day immediately preceding the date on which the purchase is made and (ii) the higher of the price quoted for (a) the last independent trade of, or (b) the highest current independent bid for, any number of ZDP Shares on the trading venue where the purchase is carried out.

This authority will expire at the annual general meeting of the Company to be held in 2014.

Amendment to Investment Advisory Agreement

Pursuant to an amendment agreement dated 13 August 2013, the Company and the Investment Adviser have agreed to amend certain terms of the Investment Advisory Agreement which will reduce the advisory fee from 2 per cent. to 1.75 per cent. of the Adjusted Net Asset Value per annum and increase the notice period from 6 months to 12 months.

Furthermore, the Company and Taliesin Deutschland have entered into an amendment agreement dated 13 August 2013 to reduce the fees payable under the Property Acquisition and Management Agreement to zero. Previously the Property Acquisition and Management Agreement included an asset management fee equal to 2.5 per cent. of the aggregate contractual rentals due each month from the properties and investments held by the Group, together with an acquisition fee equal to 0.5 per cent. of the purchase price of any property acquired by any company in the Group.

The amendments to the Investment Advisory Agreement and the Property Acquisition and Management Agreements (together the Agreements) are considered, in aggregate, to be a related party transaction pursuant to the AIM Rules. Accordingly, the Directors of the Company, with the exception of Mark Smith who as a director of the Investment Adviser is not considered independent for the purposes of this transaction, consider, having consulted with Westhouse, the amendments to the terms of the Agreements to be fair and reasonable insofar as the Shareholders are concerned.

Extraordinary General Meeting

The Proposals are conditional on the approval by Shareholders of the Resolutions to be proposed at the Extraordinary General Meeting of the Company which has been convened for 3 September 2013:

? Resolution 1 will allow the Company to create the new ZDP Shares through the adoption of the New Articles which will set out the rights attaching to the ZDP Shares (as set out in Part 2 of this document);

? Resolution 2 will disapply the pre-emption rights conferred by the Articles in respect of the allotment of the ZDP Share pursuant to the Issue; and

? Resolution 3 will grant the Company authority to purchase up to 14.99 per cent. of the ZDP Shares

issued under the Issue.

Each of the Resolutions are to be proposed at the Extraordinary General Meeting as special resolutions. The Board is recommending Shareholders to vote in favour of all Resolutions to be proposed at the Extraordinary General Meeting. However, only Resolutions 1 and 2 must be approved for the new class of ZDP Shares to be created and for the Issue to be implemented.

All Shareholders are entitled to attend and vote at the Extraordinary General Meeting. All Shareholders present in person or by proxy shall upon a show of hands have one vote and upon a poll shall have one vote in respect of every Ordinary Share held. In order to ensure that a quorum is present at the Extraordinary General Meeting, it is necessary for two Shareholders entitled to vote to be present, whether in person or by proxy (or, if a corporation, by a representative).

Action to be taken

Set out at the end of this document is a notice convening the Extraordinary General Meeting to be held at Elizabeth House, 9 Castle Street, St Helier, Jersey JE2 3RT on 3 September 2013 at 11.00 a.m.

Shareholders will find enclosed with this document a Form of Proxy for use in connection with the

Extraordinary General Meeting. Whether or not you intend to be present at the Extraordinary General Meeting, you are requested to complete and return the Form of Proxy so as to reach the offices of Capita Registrars, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU by no later than at 11.00 a.m. on 2 September 2013. The Company will also accept Forms of Proxy deposited in accordance with the Articles of Association.

Completion and return of a Form of Proxy will not, however, prevent you from attending at the Extraordinary General Meeting and voting in person if you should wish to do so.

Recommendation

Your Directors unanimously consider that the Proposals to be put forward at the Extraordinary General Meeting are in the best interests of the Company and its Shareholders as a whole. Accordingly, your Directors unanimously recommend Shareholders to vote in favour of all the Resolutions as they intend to do so in respect of their own beneficial shareholdings totalling 128,920 Ordinary Shares (representing in aggregate 3.08 per cent. of the Ordinary Shares in issue).

Yours faithfully

Nigel Le Quesne

(Chairman)"

Expected timetable

For further information, please contact:

Taliesin Property Fund Limited

Mark Smith, Director

01534 700 000

Westhouse Securities Limited

Corporate Finance: Alastair Moreton / Hannah Young / Darren Vickers 020 7601 6118