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Capital Properties Shareholder Letter

01 February 2006

Dear Capital Properties Shareholder

AMP Property Portfolio Investments Limited (“AMP Property Portfolio”) Takeover Offer for Capital Properties New Zealand Limited (“Capital Properties”)

Since the Independent Directors of Capital Properties last wrote to you on 1 December 2005 a number of significant events have occurred.

- AMP Property Portfolio has further extended the closing date of its offer to 26 February 2006, which is the final closing date. AMP Property Portfolio cannot extend its offer beyond this date.

- AMP Property Portfolio has announced that it has acceptances which would give it 88.2% of the voting rights in Capital Properties.

- The Board of Capital Properties has announced the results of the business review foreshadowed in AMP Property Portfolio's offer document. A copy of the announcement is enclosed with this letter. The Independent Directors recommend that you read the announcement carefully, and draw your attention to the following key points:

- Capital Properties' dividend policy has been changed. Capital Properties will move from paying out close to 100% of net earnings as dividends to a lower payout ratio in the range of 40%-60%. It is also intended that dividends will be paid six monthly rather than quarterly.

- The amount and payment dates of remaining dividends for the year ending 31 March 2006, and dividends for the nine months ending 31 December 2006 (Capital Properties' new balance date), will be determined following the closure of AMP Property Portfolio's takeover offer.

AMP Property Portfolio’s holding in Capital Properties is now such that the Independent Directors believe it is likely that AMP Property Portfolio will reach a 90% holding under the current offer. AMP Property Portfolio could then move to acquire the remaining shares compulsorily at the offer price of $1.48 per share. Under this process the key procedural steps are:

- AMP Property Portfolio would give notice that it had reached 90%.

- Within 30 days of that notice, AMP Property Portfolio would send a notice (known as an "Acquisition Notice") to shareholders who have not accepted the offer. The Acquisition Notice would state that shareholders must sell their shares to AMP Property Portfolio at the offer price of $1.48 per share, and would be accompanied by a transfer form.

- Shareholders have 21 days after the sending of the Acquisition Notice to return the transfer form.

- If a shareholder sends back the transfer form within the required time, AMP Property Portfolio must pay the offer price to the shareholder within 7 days of receiving the transfer form.

- If a shareholder fails to send back the transfer form within the required time, AMP Property Portfolio may obtain their shares anyway, by paying the offer price to Capital Properties. Capital Properties would hold the offer price on trust for the relevant shareholder until it is claimed, or until the time at which legal procedures for handling unclaimed money apply.

There are two important points for shareholders to note with respect to the compulsory acquisition process under the AMP Property Portfolio offer.

- There is no provision under which shareholders can receive more than the offer price of $1.48 per share.

- Compulsory acquisition will result in delayed payment of the offer price relative to acceptance of the offer now.

In light of the above, the Independent Directors recommend that shareholders who expect AMP Property Portfolio to reach the 90% threshold and move to compulsory acquisition should consider accepting the offer now. If compulsory acquisition occurs, all shareholders must sell, but voluntary acceptance means shareholders will receive payment for their Capital Properties shares earlier.

While the Independent Directors believe it is likely that AMP Property Portfolio will reach the 90% threshold necessary to invoke compulsory acquisition, the possibility of a failure to reach the threshold cannot be ruled out. If AMP Property Portfolio does fail to reach the 90% threshold, shares in Capital Properties are likely to remain quoted on the New Zealand Stock Market.

However, liquidity in the shares is likely to be reduced relative to historical levels and, as noted in earlier letters, it is likely that the share price could trade below the $1.48 offer price for some time into the future. Consequently, for those shareholders contemplating the sale of their shares in the near future, acceptance of the offer may represent a higher value outcome than holding the shares and accruing dividends and capital growth over the short to medium term.

The Independent Directors have not changed their view that Capital Properties shares are worth more than the price offered by AMP Property Portfolio.

Yours sincerely Michael Cashin
James Ogden Independent Directors' Committee Capital Properties New Zealand Limited Capital Properties New Zealand Limited Level 11, The Bayleys Building Cnr Brandon Street & Lambton Quay PO Box 1690, Wellington New Zealand

5 January 2006


The board of Capital Properties New Zealand Limited announced today that it had completed its review of the Capital Properties business following the takeover by AMP Property Portfolio Investments Ltd becoming unconditional. This review was foreshadowed in AMP Property Portfolio’s offer document which indicated that, if AMP Property Portfolio received sufficient acceptances to give it more than 50% of the voting rights in Capital Properties, AMP Property Portfolio would seek majority representation on the Capital Properties board and support the Capital Properties board in conducting a rigorous review of the existing assets, operations, policies (including distribution policies) and capital structure of Capital Properties.

As an outcome of the review the Capital Properties board today announced the Company’s dividend policy would be amended to place greater emphasis on growth in underlying assets per share and less emphasis on dividend yield. Consistent with this, it has been resolved to move from the Company’s previous practice of paying out close to 100% of net earnings to a lower payout ratio in the range of 40%-60%. It is also intended that dividends will be paid six monthly rather than quarterly, as has been the Company’s practice in the past.

Chairman of the Capital Properties board, Murray Gribben said, “With the focus remaining firmly on the creation of shareholder wealth, the board has recognised that, with a number of potentially significant developments coming up over the next 3-5 years, it makes sense to retain a portion of our earnings to assist in the funding of these opportunities.”

Mr Gribben said that the resulting stronger balance sheet would provide greater capacity to resource the Company’s commitment to serving government sector accommodation requirements in Wellington, where the Company is working on a number of significant development and refurbishment opportunities. Mr. Gribben noted that the board would be taking the opportunity to review the Company’s dividend policy on a six monthly basis, taking into consideration the Company’s growth opportunities, retained earnings and earnings outlook.

The Company also announced that financial reporting legislation requires the Company to move from a 31 March balance date to a 31 December balance date, consistent with the balance date of its controlling shareholder AMP Property Portfolio Investments Limited. The move to a December balance date will occur after the annual accounts are prepared for the year ending 31 March 2006, with the following set of annual accounts being for the nine month period to 31 December 2006. It is currently intended that, after 31 December 2006, dividends will be paid each year on or about 30 September for the six months ending 30 June and on or about 31 March for the six months ending 31 December.

On 16 September 2005, the Company paid a first quarter gross dividend of 2.5 cents per share made up of 2.00 cents cash and 0.50 cents imputation credits. The quantum and payment dates for remaining dividends for the year ending 31 March 2006, and the nine months ending 31 December 2006, will be determined following the closure of AMP Property Portfolio’s takeover offer.

AMP Property Portfolio’s Offer has been extended and declared unconditional, and now closes at 11.59pm on 13 January 2006. As at 4 January 2006, AMP Property Portfolio had received acceptances which would give it 84.77% of the voting rights in Capital Properties. Effective 4 January 2006, Capital Properties has been excluded from the New Zealand Stock Market benchmark NZSX 50 index, due to the reduction in the Company’s free float market capitalisation. Capital Properties remains listed on the NZSX and continues to hold a place in the NZSX Property Sector Index.

The board of Capital Properties now comprises existing directors Murray Gribben, Michael Cashin and James Ogden and newly appointed non-independent directors Rob Morrison and Stewart McRobie. Mr Gribben is Head of Alternative Assets for AMP Capital Investors (New Zealand) Limited and a non-independent director.

Mr Morrison is Director of Asian Investments, AMP Capital Investors Australia and Mr McRobie is the New Zealand General Manager of Finance for AMP Financial Services. Mr Cashin and Mr Ogden continue as independent directors and comprise the Independent Directors’ Committee for the purposes of the AMP Property Portfolio takeover offer.


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