Property funds – a further update  28 November 2007

Following our announcement of 20 November, we now have a further update on the property funds. As you may have seen in the press, Schroders and M&G have announced large drops in their property fund prices. They have also said some investors will have to wait to withdraw money from their investments.

Media comment has added fuel to this issue and has encouraged many investors to reduce their exposure to commercial property. This has affected all our property funds and outflows from the Zurich AL and the Sterling Property funds are now at a level that has caused us to change their pricing basis to outflow. As a result, on Tuesday 27 November 2007 these fund prices fell by approximately 5.3%. This move is an accepted way of dealing with this situation and other companies’ funds have done the same in recent months.

Consequently, where investors choose to leave the property funds, they will now receive their share of the value of the property less selling costs. This is so they will not burden those remaining invested in the fund with more than their fair share of costs. We hope these changes will encourage investors to maintain their long-term commitment to property. We have no plans to restrict investors’ access to their funds and will continue to manage cash in the funds to meet investors’ requirements.

In addition, prices fell by a further 1.7% following a revaluation of the underlying property assets by the funds’ independent valuers.

Investment in commercial property is known for periods of strong growth followed by downward adjustments. Commercial property fund prices have fallen over the last three months after a ten-year period of sustained double-digit growth. Although commercial property values remain under short-term pressure, these mark-downs may present a buying opportunity for the longer-term investor.

Please see the Questions and answers for more information. Please contact your adviser if you need advice. We strongly recommend you speak to your adviser before taking any action.