Circ re proposals

Primary Health Properties PLC
26 October 2006




26 October 2006



                 Primary Health Properties PLC (the "Company")
 Circular to Shareholders in relation to the proposed amendment to the terms of
                         the Management Agreement


The Independent Directors (being the directors of the Company other than Harry
Hyman and James Hambro) announce that the Company wishes to seek Shareholder
approval to the amendment to the terms of the existing management agreement (the
"Management Agreement") between the Company, Nexus PHP Management Limited ("
Nexus") and J O Hambro Capital Management Limited "JOHCML") (the "Proposals") by
means of the execution of a deed of variation (the "Deed of Variation").

The Independent Directors believe that it is important to continue to
incentivise Nexus and JOHCML (the "Joint Managers").  The Independent Directors
have carefully considered the methods of incentivising the Joint Managers in the
light of those methods operated by comparable property companies listed in the
United Kingdom. The Independent Directors consider that amending the Management
Agreement to facilitate changing from a share based payment in the form of
management options to cash based incentive arrangements in the form of a
performance incentive fee is the most appropriate. The share based payments
described in the Management Options Agreement dated 17 September 2003 ceased
when the management options were exercised on 21 September 2006 and the
Independent Directors believe that it is important to continue to incentivise
Nexus and JOHCML. On balance, the Independent Directors believe that the
continued incentivisation of the Joint Managers is in the interests of the
Shareholders.


Background

Pursuant to the terms of the Management Agreement, the Joint Managers are
responsible for managing all aspects of the Group for an annual fee of 1 per
cent. of the first £50 million of the gross assets of the Group and thereafter
0.75 per cent.

In addition to the fees they receive for acting as managers, Nexus and JOHCML
were granted management options over 1.6 million Shares (representing 6.59 per
cent. of the current fully diluted issued share capital of the Company) (the "
Management Options").  In addition, the Deed of Variation acknowledges that the
management agreement was novated to Nexus on 14 February 2005, and updates the
directors' fees payable to the Joint Managers in line with current levels.
Lastly, the Deed of Variation acknowledges that the Management Options were
exercised in full on 21 September 2006 and, accordingly, the Management Option
agreements are spent.

The Joint Managers have been instrumental in managing the Group's asset
portfolio.  The assets have increased from £15.6 million, at the time of the
Company's launch in 1996 to £71.3 million as at 30 June 2006 and the basic net
asset value per share has increased from 97.3p to 314.5p as at 30 June 2006,
with a corresponding fully diluted net asset value per share of 305.1p and an
adjusted fully diluted net asset value per share of 392.4p.  All 30 June 2006
figures are derived from the Group's Annual Report for the year ended 30 June
2006. All 1996 figures quoted herein are extracted without material adjustment
from the Group's audited accounts for the period from incorporation on 16 March
1995 and ended 30 June 1996.  The adjusted fully diluted net asset value
excludes deferred taxation.


Parties interested in the Resolutions

•  Harry Hyman is the Managing Director of the Company and chief
executive and founder of Nexus and with his family interests has a 70.4 per
cent. beneficial interest in the capital of Nexus Structured Finance Limited
(the parent company of Nexus).  Consequently Harry Hyman is a related party as
defined in the UK Listing Rules;

•  James Hambro is a Director of the Company and the chairman of
JOHCML and has a 13.12 per cent. beneficial interest in the capital of J O
Hambro Capital Management Group Limited (the holding company of JOHCML) and is
trustee of family trusts which are interested in 9.89 per cent. of the issued
share capital, aggregating 23.0 per cent. of the issued share capital of that
company.

•  As both are Directors of the Company, they are deemed to be
related parties for the purposes of Listing Rule 11.1.4(2) and as such will
benefit from the proposed Performance Incentive in favour of the Joint Managers.

•  Under the Management Agreement as originally executed, the
Company appointed Nexus Property Management Services Ltd and JOHCML as joint
managers in 1996.  Nexus and JOHCML continue to be responsible for managing all
aspects of the Company on a day-to-day basis as the Company has no employees of
its own other than its Directors.  Consequently, any contracts between either
JOHCML or Nexus and the Company, are deemed to be with Nexus and JOHCML jointly.


Due to Nexus and JOHCML's joint interest in the Management Agreement and their
directors' interests in the Company, Nexus and JOHCML are deemed as jointly
having the ability to exercise significant influence over the Company.

Accordingly, the proposed amendment to the terms of the Management Agreement by
means of the Deed of Variation is a transaction with parties that are either
related parties under the Listing Rules (LR 11.1.4R), or parties that can
exercise significant influence over the Company (LR 11.1.4R (4)) and, as such,
requires the prior approval of the Shareholders.


Amendment to the Management Agreement

The Management Agreement is to be amended subject to shareholders' approval by
means of a Deed of Variation providing for the creation of a performance
incentive fee (the "Performance Incentive") whereby the Joint Managers will be
entitled to 15% of any performance in excess of an 8% per annum increase in the
Company's "Total Return" (such "Total Return" being derived from the audited
accounts for the financial year ending on 30 June (or on such other date as
shall be the accounting reference date of the Company) in the year immediately
preceding the proposed date of payment and, on the basis of those financial
statements, the "Total Return" being determined by calculating the change in the
net asset value per Share, on a fully diluted basis, and after adjustment for
any increase or reduction in the issued share capital of the Company, and after
adding back gross dividends paid per Share).


Further the Deed of Variation notes the following:

• following on from the novation of the Management Agreement by Nexus
  Property Management Services Limited to Nexus, Nexus is now a Joint Manager;

• the current fees payable to the Company's directors, which fees have
  been increased in line with the provisions of the Management Agreement since 
  the date the Management Agreement was originally executed; and

• following on from the exercise in full of the Management Options, the
  provisions of the Management Option agreements are spent.


Extraordinary General Meeting ("EGM")

The Circular setting out the details of the Proposals together with the Notice
of the Extraordinary General Meeting is expected to be posted to the
Shareholders of the Company today.  The Extraordinary General Meeting is to be
held immediately following the Annual General Meeting to be held at 10.30 am on
16 November 2006, Ground Floor, Ryder Court, 14 Ryder Street, London SW1Y 6QB .




                      This information is provided by RNS
            The company news service from the London Stock Exchange