<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
PACIFIC REAL ESTATE INVESTMENT TRUST
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/X/ Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
1,240
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
Preliminary Schedule 14A
-----------------------------------------------------------------------
(3) Filing Party:
Pacific Real Estate Investment Trust
-----------------------------------------------------------------------
(4) Date Filed:
September 22, 1997
-----------------------------------------------------------------------
<PAGE>
PACIFIC
[Stylized Logo]
REAL ESTATE INVESTMENT TRUST
1010 El Camino Real, Suite 210
Menlo Park, CA 94025
(415) 327-7147
FAX (415) 327-8516
December 12, 1997
To the Shareholders of
PACIFIC REAL ESTATE INVESTMENT TRUST:
A Special Meeting of the Shareholders in Lieu of the Annual Meeting of
Pacific Real Estate Investment Trust (the "Trust" or "Pacific REIT") has been
called for January 20, 1998, to consider the (i) election of Trustees; (ii)
approval of appointment of Deloitte & Touche LLP as independent auditors for the
year ending December 31, 1997; (iii) approval of a series of transactions that
will result in the dissolution, termination and liquidation of the Trust (the
"Dissolution" or the "Dissolution Transactions"); and (iv) such other business
as may be brought before the meeting. The Trustees at present know of no other
formal business to be brought before the meeting.
Enclosed with this letter are a Notice of Special Meeting of the
Shareholders in Lieu of the Annual Meeting and a Proxy Statement, which describe
the nominees for Trustee and the Dissolution proposal in detail. Also enclosed
is a form of Proxy being solicited by the Trustees in connection with the
Special Meeting.
The Trustees have unanimously approved the Dissolution proposal, and
recommend that you vote FOR the proposal. YOUR VOTE IS ESSENTIAL TO PROCEEDING
WITH THE DISSOLUTION. THE TRUST'S DECLARATION OF TRUST REQUIRES THE APPROVAL OF
BOTH A MAJORITY OF THE SHAREHOLDERS AND OF THE HOLDERS OF A MAJORITY OF THE
SHARES OUTSTANDING TO PROCEED WITH THE DISSOLUTION. THUS, UNLESS AT LEAST
APPROXIMATELY 1751 SHAREHOLDERS VOTE SHARES CONSTITUTING A MAJORITY OF THE
OUTSTANDING SHARES IN FAVOR OF THE DISSOLUTION, THE TRUST CANNOT BE DISSOLVED.
The Trustees' reasons for determining to proceed with the Dissolution and
the risks associated with the Dissolution Transactions, are discussed in detail
in the attached Proxy Statement.
Please carefully review and consider the Proxy Statement, and complete and
return the enclosed Proxy as soon as possible, whether or not you expect to
attend the Special Meeting. Returning the completed Proxy will not prevent you
from attending and voting in person at the Special Meeting.
<TABLE>
<S> <C>
WILCOX PATTERSON,
[SIG]
PRESIDENT
</TABLE>
<PAGE>
PACIFIC
[Stylized Logo]
REAL ESTATE INVESTMENT TRUST
1010 EL CAMINO REAL, SUITE 210
MENLO PARK, CA 94025
(415) 327-7147
FAX (415) 327-8516
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
IN LIEU OF ANNUAL MEETING
TO BE HELD JANUARY 20, 1998
------------------------
To The Shareholders of
PACIFIC REAL ESTATE INVESTMENT TRUST
NOTICE IS HEREBY GIVEN to the holders of record (the "Shareholders") of
shares of beneficial interest (the "Trust Shares") of Pacific Real Estate
Investment Trust (the "Trust") that a Special Meeting of the Shareholders in
Lieu of the Annual Meeting (the "Special Meeting") will be held on January 20,
1998 at 10:00 a.m. at The Holiday Inn, 625 El Camino Real, Palo Alto,
California, for the following purposes, as more completely described in the
attached Proxy Statement:
1. Election of Trustees.
2. Approval of appointment of Deloitte & Touche LLP as independent auditors
for the year ending December 31, 1997.
3. To approve the dissolution, termination and liquidation of the Trust
through a series of transactions described in the proposed Plan of
Dissolution, Termination and Liquidation, a copy of which is attached as
EXHIBIT A to the accompanying Proxy Statement.
4. To consider and transact such other business as may properly be brought
before the Special Meeting. The Trustees at present know of no other
formal business to be brought before the Special Meeting.
The record holders of Trust Shares as of the close of business on December
12, 1997 will be entitled to notice of the Special Meeting and to vote at the
Special Meeting or any postponement(s) or adjournment(s) of the Special Meeting.
It is anticipated that this Notice and the accompanying Proxy Statement will
first be mailed to Trust Shareholders on or about December 16, 1997.
<TABLE>
<S> <C>
WILCOX PATTERSON,
[SIG]
PRESIDENT
</TABLE>
December 12, 1997
IMPORTANT: WHETHER OR NOT YOU EXPECT TO BE AT THE MEETING, PLEASE FILL IN, DATE
AND SIGN THE ACCOMPANYING PROXY, AND RETURN IT PROMPTLY IN THE ENCLOSED STAMPED
ENVELOPE. YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU ATTEND THE MEETING.
<PAGE>
PACIFIC
[Stylized Logo]
REAL ESTATE INVESTMENT TRUST
1010 EL CAMINO REAL, SUITE 210
MENLO PARK, CA 94025
(415) 327-7147
FAX (415) 327-8516
PROXY STATEMENT
---------------------
SPECIAL MEETING OF SHAREHOLDERS
IN LIEU OF THE ANNUAL MEETING
TO BE HELD JANUARY 20, 1998
------------------------
This Proxy Statement is being furnished by the Trustees to the holders (the
"Shareholders") of shares of beneficial interest (the "Trust Shares") of Pacific
Real Estate Investment Trust, a California real estate investment trust (the
"Trust" or "Pacific REIT"), in connection with solicitation of the accompanying
Proxy by the Trustees of the Trust for use at the Special Meeting of
Shareholders in Lieu of the Annual Meeting to be held on January 20, 1998, at
10:00 a.m., California time, at the Holiday Inn, 625 El Camino Real, Palo Alto,
California, and at any adjournment(s) or postponement(s) thereof (the "Special
Meeting"). At the Special Meeting, Shareholders will consider and vote upon: (i)
the election of Trustees; (ii) approval of appointment of Deloitte & Touche LLP
as independent auditors for the year ending December 31, 1997; (iii) a proposal
to approve a series of transactions resulting in the dissolution, termination
and liquidation of the Trust (the "Dissolution Transactions" or the
"Dissolution") described in the proposed Plan of Dissolution, Termination and
Liquidation, a copy of which is attached hereto as EXHIBIT A (the "Dissolution
Plan"); and (iv) such other business as may be brought before the meeting. The
Trustees at present know of no other formal business to be brought before the
Special Meeting.
This Proxy Statement is dated December 12, 1997 and is first being mailed to
Trust Shareholders on or about December 16, 1997.
1
<PAGE>
AVAILABLE INFORMATION
The Trust is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the SEC.
Such reports, proxy statements and other information filed by the Trust may be
inspected and copied at the public reference facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of
the SEC located at 75 Park Place, New York, New York 10007 and 500 West Madison
Street, Chicago, Illinois 60661. Copies of such material can be obtained from
the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. In addition, certain of the documents filed by
the Trust with the Commission are available through the Commission's Electronic
Data Gathering and Retrieval System ("EDGAR") at www.sec.gov.
The Trust furnishes Shareholders with annual reports containing consolidated
financial statements audited by independent certified public accountants and
with quarterly reports containing unaudited, condensed financial statements for
each of the first three quarters of each fiscal year.
No person is authorized to give any information or to make any
representations other than the information or representations contained herein
and, if given or made, such information or representations should not be relied
upon as having been authorized. This Proxy Statement does not constitute the
solicitation of a proxy in any jurisdiction where, or to any person to whom, it
is unlawful to make such a solicitation. The delivery of this Proxy Statement
shall not, under any circumstances, create any implication that there has been
no change in the affairs of the Trust since the date hereof, or the dates as of
which certain information is set forth herein.
INFORMATION INCORPORATED BY REFERENCE
The Trust's Annual Report on Form 10-K for the fiscal year ended December
31, 1996, Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1997, Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997,
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1997,
Report on Form 8-K dated April 1, 1997, Report on Form 8-K/A dated April 1, 1997
and Report on Form 8-K dated July 9, 1997 (Commission File Number 0-8725), are
hereby incorporated by reference into this Proxy Statement. All documents filed
by the Trust with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this Proxy Statement and prior to the completion
of the vote at the Special Meeting shall be deemed to be incorporated by
reference into this Proxy Statement and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Proxy
Statement.
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS, OTHER THAN
EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE
THEREIN, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY SHAREHOLDER,
TO WHOM THIS PROXY STATEMENT IS DELIVERED, UPON WRITTEN OR ORAL REQUEST TO
PACIFIC REAL ESTATE INVESTMENT
TRUST, SHAREHOLDER RELATIONS, 1010 EL CAMINO REAL, SUITE 210, MENLO PARK,
CALIFORNIA 94025; TELEPHONE NO: (415) 327-7147; FAX: (415) 327-8516. IN ORDER TO
ASSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BEFORE
DECEMBER 23, 1997.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
THE SPECIAL MEETING................................................................... 4
Matters to be Considered at the Special Meeting..................................... 4
Voting Rights....................................................................... 4
Voting Securities and Principal Holders............................................. 5
Costs and Manner of Solicitation.................................................... 5
PROPOSAL 1 ELECTION OF TRUSTEES....................................................... 5
There Is No Nominating Committee.................................................... 6
Officers............................................................................ 7
Board of Trustees and Committees of the Board....................................... 7
Certain Relationships and Related Transactions...................................... 8
PROPOSAL 2 APPOINTMENT OF THE TRUST'S AUDITORS........................................ 9
PROPOSAL 3 APPROVAL OF THE DISSOLUTION TRANSACTIONS................................... 10
Introduction........................................................................ 10
Alternatives Considered by the Board of Trustees.................................... 10
Shareholder Action Proposed......................................................... 11
Description of the Dissolution Plan................................................. 12
Estimate of Fair Market Value of Remaining Trust Assets............................. 13
Description of Certain Long-Term Liabilities........................................ 14
Estimate of Residual Value.......................................................... 16
Federal Income Tax Consequences..................................................... 17
Shareholder Approval Required for the Dissolution Transactions...................... 18
Nonapproval of the Dissolution Plan................................................. 18
Amendment of the Dissolution Plan................................................... 18
Dissenters' Rights.................................................................. 18
Proxy Solicitation Fees and Expenses................................................ 18
Recommendations of the Trustees..................................................... 19
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........................ 20
DISCRETIONARY AUTHORITY............................................................... 20
CERTAIN LEGAL MATTERS................................................................. 20
SHAREHOLDER PROPOSALS................................................................. 20
REPORTS............................................................................... 20
EXHIBIT A PLAN OF DISSOLUTION, TERMINATION AND LIQUIDATION............................ A-1
</TABLE>
3
<PAGE>
THE SPECIAL MEETING OF SHAREHOLDERS
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
This Proxy Statement is being furnished by the Trustees to the Shareholders
of the Trust, in connection with the solicitation by the Trustees of proxies for
use at the Special Meeting which is being held in lieu of the Annual Meeting. At
the Special Meeting, the Shareholders will be asked to consider and vote upon:
(i) the election of Trustees; (ii) approval of appointment of Deloitte & Touche
LLP as independent auditors for the year ending December 31, 1997; (iii) a
Dissolution proposal described in the proposed Dissolution Plan; and (iv) such
other business as may be brought before the meeting. The Trustees at present
know of no other formal business to be brought before the Special Meeting.
VOTING RIGHTS
Each Trust Share is entitled to one vote on the matters to be considered at
the Special Meeting, except for the election of Trustees, in which case each
Shareholder will be entitled to cumulate his or her votes as described below. If
a Shareholder entitled to vote at the Special Meeting has given the Proxy
solicited by this Proxy Statement, unless the Proxy has been previously revoked
(and unless otherwise directed by the Shareholder giving such Proxy), the Proxy
holders will vote the Trust Shares represented by the Proxy at the Special
Meeting FOR the election of the nominated trustees, the approval of the
appointment of Deloitte & Touche LLP, the Dissolution Transactions and otherwise
as the Proxy holders determine in their discretion with respect to all other
matters properly brought before the Special Meeting.
A Shareholder may revoke such Shareholder's Proxy at will at any time prior
to the voting of the Trust Shares covered by the Proxy, by voting in person at
the Special Meeting, by filing with the Secretary of the Trust a duly executed
Proxy bearing a later date, or by delivering to the Secretary of the Trust a
written notice prior to the Special Meeting, stating that such Shareholder
revokes the Proxy.
Votes cast by Proxy or in person at the Special Meeting will be counted by
the person appointed by the Trust to act as Inspector of Elections for the
Special Meeting. The Inspector of Elections will treat Trust Shares represented
by Proxies that reflect abstentions or include "broker non-votes" as Trust
Shares that are present and entitled to vote for purposes of determining the
presence of a quorum at the Special Meeting. Abstentions or "broker non-votes"
do not constitute a vote "for" or "against" any matter. Any unmarked Proxies,
including those submitted by brokers or nominees, will be voted in favor of the
proposals, as indicated in the accompanying Proxy card.
In the election of Trustees, each shareholder shall be entitled to vote on a
cumulative basis. Since five trusteeships will be filled in this election, each
shareholder will be entitled to cast five votes for each share for which the
shareholder is registered as the shareholder of record. For example, if a
shareholder is the record holder of five thousand (5,000) shares, that
shareholder will be entitled to cast twenty five thousand (25,000) votes however
the shareholder sees fit. The shareholder can "cumulate" the shareholder's votes
by casting them all for one candidate, or may distribute the votes among two or
more candidates. The candidates receiving the highest number of votes, up to the
number of trusteeships to be filled in the election, shall be elected as the
Trustees of the Trust. Votes cast by Proxy shall be cumulated at the discretion
of the proxy holder.
The proposal to approve the appointment of Deloitte & Touche LLP as
independent auditors for the year ending December 31, 1997 requires approval by
Shareholders holding a majority of the Trust Shares.
THE DISSOLUTION PROPOSAL REQUIRES APPROVAL BY A MAJORITY OF THE SHAREHOLDERS
OF RECORD AND BY THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES. As of
November 11, 1997, the Trust has 3,601 Shareholders of record holding 3,706,845
Shares. Accordingly, at least 1,801 Shareholders of record holding at least
1,853,423 Shares must vote in favor of the Dissolution Proposal in order to
approve it. If fewer Shareholders vote in favor of approval of the Dissolution
Transactions than the number required for approval, the Special Meeting may be
adjourned
4
<PAGE>
for the purpose of soliciting additional Proxies, or for any other purpose, and,
at any subsequent reconvening of the Special Meeting, all Proxies will be voted
in the same manner as such Proxies would have been voted at the original Special
Meeting (except for any Proxies which have theretofore effectively been revoked
or withdrawn), notwithstanding that they may have been effectively voted on the
same or any other matter at a previous meeting.
No Shareholders of the Trust will have any rights of appraisal or similar
dissenters' rights with respect to the Dissolution Proposal under the Trust's
Amended and Restated Declaration of Trust or the law of the State of California,
the jurisdiction in which the Trust is organized. Therefore, if the Dissolution
Proposal is approved by the required vote, all shareholders must accept their
pro rata share of the net distributable proceeds.
VOTING SECURITIES AND PRINCIPAL HOLDERS
Only Shareholders of the Trust of record at the close of business on
December 8, 1997 will be entitled to vote, in person or by proxy, at the Special
Meeting. On that date, there were 3,706,845 Trust Shares outstanding.
The Trustees are not aware of any beneficial owners of more than 5% of the
outstanding Trust Shares. Trust Shares beneficially owned by all of the Trustees
and officers as a group are as follows:
<TABLE>
<S> <C>
Title of Class of Securities:................. "Shares of Beneficial
Interest" (referred to in
this Proxy Statement as
"Trust Shares")
Amount Beneficially Owned:.................... 107,375 Trust Shares(1)
Percent of Class:............................. 2.90%
</TABLE>
- ------------------------
(1) Includes 21,584 Trust Shares owned by members of a Trustee's family as to
which the Trustee disclaims any beneficial ownership interest.
The Trustees and officers of the Trust have indicated that they intend to
vote their Trust Shares in favor of the Dissolution Transactions.
COSTS AND MANNER OF SOLICITATION
All expenses in connection with this solicitation will be borne by the
Trust. The Trust has engaged D.F. King & Co., Inc. ("D.F. King & Co., Inc.") to
aid in the solicitation of proxies for the Trust. D.F. King will solicit proxies
by mail, telephone, in person or otherwise. The anticipated fees of D.F. King
for such assistance will be $15,000. It is expected that solicitation will also
be made by employees of Menlo Management Company, the Trust's investment advisor
(the "Advisor"), or representatives of the Trust by mail, telephone, in person
or otherwise, without additional compensation. The Trust will also request
brokerage firms, nominees, custodians and fiduciaries to forward proxy material
to the beneficial owners of shares held of record by such persons for the
purpose of obtaining authorization for the execution of proxies. The Trust will
reimburse such persons and the Trust's transfer agent for their reasonable
out-of-pocket expenses in forwarding such material.
PROPOSAL 1
ELECTION OF TRUSTEES
It is proposed to elect a Board of five Trustees to serve for the ensuing
year and until their successors are elected and qualified, for the purpose of
implementing and carrying out the Dissolution Plan. Proxies cannot be voted for
more than the number of nominees named in this Proxy Statement. If the enclosed
form of proxy is properly executed and returned, the shares represented thereby
will be voted for the
5
<PAGE>
election of nominees presented below, and the proxy holders shall in their
discretion cumulate such votes. All of the nominees are currently serving as
Trustees for the Trust, and one was an original Trustee named in the Declaration
of Trust dated April 17, 1963. If for any reason any nominee becomes unable to
serve or will not serve for good cause, which is not now anticipated, the proxy
holders will vote for such substitute nominees as they shall determine. The five
candidates receiving the highest number of votes shall be elected.
The Trustees have regular meetings approximately once a month and special
meetings as required. Twelve regular meetings and three special meetings plus
the annual meeting were held in the calendar year 1996.
NOMINATING COMMITTEE
None.
TRUSTEES
The following table sets forth the current Trustees, each Trustee also being
an Officer and nominee for re-election as Trustee, his principal occupation,
other offices with the Trust, the period which he has served as a Trustee and
Officer of the Trust, and the number of Trust Shares owned, directly or
indirectly, by him on September 30, 1997. No person is known by the Trust to be
the beneficial owner of more than five percent of the Trust's outstanding Trust
Shares. Each person identified in the table has sole voting and investment power
with respect to all Trust Shares shown as beneficially owned by such person,
except as otherwise set forth in the notes to the table. Unless otherwise
indicated, the address of each person listed below is 1010 El Camino Real, Suite
210, Menlo Park, California 94025.
<TABLE>
<CAPTION>
NUMBER OF YEARS NO. OF
AS SHARES PERCENT
TRUSTEE/OFFICER BENEFICIALLY OF
NAME AND PRINCIPAL OFFICES WITH TRUST AGE OF TRUST OWNED CLASS(1)
- ---------------------------------------- --- --------------- ------------ -------
<S> <C> <C> <C> <C>
John H. Hoefer.......................... 81 15 68,003 1.835%
Vice President of the Trust, Private
Investor, Trustee (2)(3)
Harry E. Kellogg........................ 74 34 7,293 .197%
Treasurer of Trust, Investment
Consultant, Private Investor, Trustee
(4)
Wilcox Patterson........................ 56 17 27,900 .753%
President of Trust, Private Investor,
Trustee (5)
William S. Royce........................ 78 17 2,708 .073%
Secretary of the Trust, Management
Consultant, Private Investor, Trustee
(2)(3)(4)
Robert C. Gould (6)..................... 53 12 1,471 .040%
Vice President of the Trust, Real
Estate Manager, Trustee
</TABLE>
- ------------------------
(1) Based on 3,706,845 Trust Shares outstanding as of September 30, 1997.
(2) Member of Audit Committee.
(3) Member of Compensation Committee.
(4) Voting and investment power are shared equally with spouse.
(5) Includes 21,584 Trust Shares owned by members of Mr. Patterson's family as
to which Mr. Patterson disclaims any beneficial ownership interest.
6
<PAGE>
(6) Robert C. Gould served as an Officer of the Trust for three years from 1985
to 1988 prior to his election as a Trustee and Officer in 1989.
Mr. Hoefer is a Rear Admiral, United States Naval Reserve. He was founder of
Hoefer, Dieterich and Brown, Inc., an advertising agency in San Francisco, and
was its Chairman at the time of its merger with Chiat/Day, Inc. in 1979. He was
also a Chairman of Chiat/Day, Inc. (San Francisco). Mr. Hoefer was elected a
Trustee in 1982.
Mr. Kellogg has served as Trustee of the Seattle Retail Clerks Union Pension
Fund, the GEMCO Retail Clerks Union Pension Trust Fund and is the former Vice
President--Finance and Secretary of Leslie Salt Co., a salt production company
with extensive real estate holdings in the San Francisco Bay Area. At Leslie
Salt Co. from which he retired in 1979, Mr. Kellogg was responsible for the
financial, administrative and tax matters of the company. Mr. Kellogg was
elected Executive Vice President of the Trust on December 5, 1978 and was
President from February 22, 1980 to May 7, 1985.
Mr. Patterson is a director of Grove Farm Company, Inc., a sugar plantation
and real estate development corporation located on Kauai in the Hawaiian
Islands. He is also an independent real estate manager and investor. Mr.
Patterson served as Regional Vice President of Northern California Savings and
Loan between April 1979 and September 1980. Prior to that appointment, he served
as a Vice President and Manager of the Menlo Park branch of Northern California
Savings and Loan Association. In these capacities he has gained considerable
experience in real estate financing. Mr. Patterson was elected a Trustee in 1980
and has served as President since 1985.
Mr. Royce is an independent management consultant specializing in business
planning and regional economic development. He retired in 1984 from SRI
International (Stanford Research Institute). He has been an investor in the
Trust since 1964 and was elected a Trustee in 1980. Mr. Royce is also the
treasurer of the Silicon Valley Economic Roundtable.
Mr. Robert C. Gould is President and a Director of Menlo Management Company.
Mr. Gould has previously served as a Vice President and Secretary of the Trust
from 1985 through 1988. Mr. Gould was elected a Trustee and appointed Vice
President on June 27, 1989.
OFFICERS
Wilcox Patterson is the President of the Trust. He was initially elected on
May 7, 1985.
John Hoefer is a Vice President of the Trust. He was initially elected on
June 8, 1988.
Harry E. Kellogg is the Treasurer of the Trust. He has been Treasurer of the
Trust since its inception.
William S. Royce is the Secretary of the Trust. He was initially elected on
June 15, 1988.
Robert C. Gould is a Vice President of the Trust. He was initially elected
on June 27, 1989.
Each officer of the Trust is elected annually for the ensuing year or until
a successor is elected and qualified. There are no family relationships amongst
the Officers and Trustees.
BOARD OF TRUSTEES AND COMMITTEES OF THE BOARD
The Board of Trustees held twelve regular and three special meetings during
1996. No Trustee attended fewer than 75% of the meetings.
The Trust formerly paid each Trustee a fee of $200 per month for continuing
services, $200 for attendance at each Board meeting and $100 for each Committee
meeting attended. Payments have been suspended since June 1997.
7
<PAGE>
Pacific REIT currently employs no full-time executives. All officers are
currently chosen from among the members of the Board of Trustees. All Trustees
are shareholders in the Trust. The President was formerly compensated for his
services at an annual rate of $16,200, as set forth in the table below.
Currently, the President is receiving no compensation for his services. Trustees
received no bonuses, stock options, or other deferred compensation. No officer
currently receives any compensation. The aggregate direct Remuneration paid to
the Trustees and officers in 1996 was $40,100. In June 1997, the Board of
Trustees voted to discontinue all salaries and fees to the officers and
Trustees.
<TABLE>
<CAPTION>
AGGREGATE
DIRECT
NAME AND PRINCIPAL POSITION YEAR REMUNERATION
- --------------------------------------------------------------------- --------- ---------------
<S> <C> <C>
Wilcox Patterson, President.......................................... 1996 $ 16,200
1995 16,600
1994 16,200
</TABLE>
There are no "incentive" plans currently offered by the Trust.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Investment Advisor of the Trust is Russell Collier, a sole proprietor
doing business as Collier Investment. Collier Investment acts as both Investment
Advisor and real estate broker for the Trust. As an Investment Advisor, Collier
Investment advises the Trust and the Trustees regarding the Trust's real estate
investment strategy. Mr. Collier is not affiliated with the Trust. The
Investment Advisor received a total of $50,000 as fees for 1996. As of June 30,
1997, the Investment Advisor received $17,000. The Investment Advisor currently
provides his services at no cost to the Trust.
The Trust's administrative functions are performed by Menlo Management
Company, an independent real estate management organization owned by Robert C.
Gould, a Trustee of the Trust. In 1996 the total administrative fees paid to
Menlo Management Company was $150,000. Cessation of attempts to recapitalize the
Trust and the related disposition of a major portion of the Trust's assets has
reduced the Trust's administrative activity and enabled a reduction of the
administrative fees to a rate of $5,500 per month or $66,000 per year. Menlo
Management Company also provides property management, leasing, development,
financing and real estate brokerage services to the Trust. The total of all fees
earned by Menlo Management Company for 1996 totaled $510,000, and the total for
the first eight months of 1997 was $278,000.
8
<PAGE>
PROPOSAL 2
APPOINTMENT OF THE TRUST'S AUDITORS
Unless otherwise indicated on any proxy, it is intended that the shares
represented by the enclosed proxy will be voted for the appointment of Deloitte
& Touche LLP as independent auditors for the examination of the financial
statements of the Trust for the year ending December 31, 1997. Deloitte & Touche
LLP has served as independent auditors since 1978. The Board of Trustees, on
recommendation of the audit committee, has approved the selection of Deloitte &
Touche LLP as auditors for 1997.
Representatives of Deloitte & Touche LLP are expected to be present at the
Special Meeting to respond to appropriate questions and to make a statement
should they desire to do so.
The Declaration of Trust does not require that shareholders approve the
appointment of independent auditors but the Trustees considered it appropriate
to obtain such approval. If the shareholders vote against the approval, the
Trustees will appoint other independent auditors for 1997. The votes of more
than 50% of the shares voting are required for approval.
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PROPOSAL 3
APPROVAL OF THE DISSOLUTION TRANSACTIONS
INTRODUCTION
The Trustees have adopted the Dissolution Plan for the purpose of
dissolving, terminating and liquidating the Trust. Pursuant to the Dissolution
Plan, the Trustees are soliciting the accompanying Proxy from the Shareholders
of the Trust to approve a proposal to adopt the Dissolution Plan.
Following termination of the previously announced merger agreement with Pan
Pacific Development (U.S.), Inc. and review by investment bankers and the
investment advisor of the Trust, the Trustees failed to identify viable
alternatives for developing the Trust, and have therefore proposed an orderly
liquidation of the assets of the Trust as in the best interests of the
Shareholders. The Trustees and officers of the Trust who own approximately 2.9%
of the outstanding Trust Shares have indicated to the Trust that they intend to
vote all such Trust Shares to approve the Dissolution Plan.
ALTERNATIVES CONSIDERED BY THE BOARD OF TRUSTEES
Prior to recommending Dissolution of the Trust to the Shareholders, the
Trustees explored and considered many alternatives, including those summarized
below.
The fundamental problem besetting the Trust has been the dearth of capital
for real estate during the economic recession which unfolded during the early
1990's and persisted in most economic sectors until 1995. Since its inception in
1963, the Trust had historically relied successfully upon individual California
residents for its capital needs. There had always been adequate capital from
this source to enable the Trust to accomplish its real estate investment program
as well as to provide liquidity to its Shareholders. The prolonged and deep
national recession, which particularly afflicted California from 1991 through
1995, drastically changed this. Access to long-term debt capital dried up
completely at the same time. In order to create positive strategic options
amidst this difficult environment, the Trust engaged Dean Witter Reynolds, Inc.
to act as the Trust's financial advisor to analyze and to make recommendations
regarding the Trust's overall investment strategy in relation to the capital and
real estate markets. By the end of the 1992 Dean Witter recommended that the
Trust list its shares on a national stock exchange, reduce dividend payments in
order to conserve capital, seek private equity investment at a discount price to
cover short-term capital needs, reduce short-term debt and, pending such
listing, reorganize as a self-administered equity trust.
In early 1993, the Trust began to implement this strategy. It suspended
dividends in February 1993 in order to conserve capital. It also initiated
discussions with private equity sources seeking an equity investment adequate to
reduce debt and enable the Trust to grow with a long term goal of positioning
the Trust for a successful national public offering. By Summer of 1993 the
public REIT market had become quite strong and the Trust engaged Montgomery
Securities, Inc. and Oppenheimer and Co., Inc. to act as its underwriters for a
proposed public offering. In the underwriters' opinion there were two critical
elements for a successful national offering: the need to substantially increase
the Trust's property asset base and to obtain shareholder approval for
conversion of the Trust to a self-administered Maryland Corporation. The Trust
immediately began to develop options to purchase ten additional shopping centers
to bring it up to the necessary size. A new Maryland structure for a
self-administered trust was organized. However, during the Fall of 1993 the
market for initial public offerings of real estate investment trusts
deteriorated rapidly due to rising interest rates and a flood of REIT offerings.
Therefore the Trust was forced to postpone its plan for a national public
offering. It then simultaneously embarked on exploring alternative
recapitalization approaches, including sale, merger with another real estate
investment trust, and private equity and debt placements. During the Spring of
1994 the Trust formally engaged the services of Morgan Stanley Realty, Inc.,
investment bankers, to pursue these alternative strategies and to act as advisor
to the Trust.
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Morgan Stanley developed offers of either merger, joint-venture and direct
equity/debt placement during the following months. However, due primarily to the
continuing recession in the California real estate markets, continued reductions
in real estate valuation, and emerging difficulties with several major tenants
at the Trust's properties, all of these proposals were financially unacceptable
to the Trust. As a consequence the Trust determined that it would have to sell
some of its real estate assets in order to reduce debt while continuing to
explore possible equity investment partners. While the Trust did sell two of its
major assets, Lakeshore Plaza Shopping Center and Menlo Center, in 1995 and
1996, respectively, the effort to secure equity investment partners on
acceptable terms was not achieved due chiefly to tenant problems in the Trust's
asset portfolio.
These tenant problems included the loss of several anchor tenants at two of
the Trust's shopping centers. These losses were due primarily to changes in the
retailing industry. The trend towards discount and warehouse type stores and the
growth of predatory market-share tactics amongst "big-box" retailers created
many problems for established retailers. The negative impact of these trends
most gravely affected the Trust at its El Portal Shopping Center in San Pablo
and at Monterey Plaza Shopping Center in San Jose, two of the Trust's major cash
flow generators. At Kings Court Shopping Center, an attractive and very
successful property, complications arising from toxic pollution and a maturing
ground lease effectively prevented equity investors from stepping forward. These
issues emerged against the continuing backdrop of the deepest recession in
California since the 1930's.
In November 1996 the Trust entered into an agreement with Pan Pacific
Development (U.S.) Inc., ("Pan Pacific") whereby the Trust proposed to transfer
its assets and liabilities to a Maryland corporation ("PAC REIT"), and then to
merge a subsidiary of PAC REIT with a subsidiary of Pan Pacific to reduce the
Trust's debt and to acquire additional property with a view to listing on a
national stock exchange. This agreement ultimately failed in March 1997 because
of the above problems. After the failure of these negotiations the Trust sold
one more of its centers (Monterey Plaza Shopping Center) and all of its Notes
Receivable to Pan Pacific in order to reduce debt and put the Trust into a
better cash flow situation. This transaction generated sufficient capital to
eliminate all remaining short term debt and create a positive cash balance. At
this juncture the Trustees concluded that the only feasible way forward was
through liquidation of the Trust's remaining assets.
Throughout this extended period since 1992, the Trust had made many attempts
to resolve its shortage of capital. The scope and intensity of these efforts
embraced the full spectrum of institutional and non-institutional capital
providers as well as potential merger partners. Ultimately, the Trustees, the
investment bankers and financial advisors were unable to identify acceptable
capital sources or merger partners. Such proposals as were forthcoming offered
capital on terms which would value the Trust at less than the estimated
liquidation value of its portfolio of assets. Moreover, the Trustees realized
that if the Trust were simply permitted to continue in existence with its
current remaining asset portfolio, the Trust's funds would likely be consumed in
the course of its business by accounting, legal and other fees relating to
routine corporate filings which must be made by all public companies.
Accordingly, the Board of Trustees determined that the best course to follow
was to dissolve the Trust as promptly as possible in order to realize the
benefit of the liquidation value of its assets. While the Trust will incur
substantial costs in connection with the Liquidation Transactions, the Trust
will be able to also realize the greater liquidation value of the Trust's assets
and avoid future fees and expenses to continue the Trust indefinitely. Moreover,
the shareholders will gain access to their otherwise illiquid investment in the
Trust.
SHAREHOLDER ACTION PROPOSED
At the Special Meeting, the shareholders of the Trust will be asked to vote
on a proposal to adopt the Dissolution Plan, pursuant to which the Trust,
without further action by the Shareholders (except as such action may be
required by law or as the Board of Trustees may deem appropriate), will dissolve
after
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payment of, or provisions for the payment of, legally enforceable obligations of
the Trust. Any remaining assets would be distributed to Shareholders. PURSUANT
TO THE AMENDED AND RESTATED DECLARATION OF TRUST OF THE TRUST AND THE CALIFORNIA
CORPORATION CODE (AND THE REGULATIONS PROMULGATED THEREUNDER), THE APPROVAL OF
BOTH A MAJORITY OF THE SHAREHOLDERS (A "HEAD COUNT" VOTE) AND THE APPROVAL OF
THE HOLDERS OF A MAJORITY OF THE OUTSTANDING TRUST SHARES IS REQUIRED TO ADOPT
THE DISSOLUTION PLAN.
THE TEXT OF THE PLAN IS CONTAINED IN EXHIBIT A ATTACHED HERETO. THE BRIEF
DESCRIPTION OF THE PLAN SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE DISSOLUTION PLAN.
DESCRIPTION OF THE DISSOLUTION PLAN
The Trustees have unanimously adopted a Dissolution Plan providing for the
dissolution, termination and liquidation of the Trust conditioned upon approval
by the Shareholders of the Trust, for which the Proxy described in this Proxy
Statement is being solicited.
The Dissolution Plan contemplates that upon its adoption by the Trust's
Shareholders, payment of, or provision for payment of, any legally enforceable
obligations of the Trust will be made out of the Trust's assets. Thereafter,
remaining assets will be distributed to Shareholders as promptly as possible.
The Dissolution Plan also authorizes the Board of Trustees to abandon the
dissolution of the Trust at any time if the Board of Trustees deems such action
to be in the best interests of the Shareholders.
The following is a summary of the transactions contemplated by the
Dissolution Plan. Reference is made to EXHIBIT A for a complete description of
the terms and conditions thereof.
The Dissolution Plan provides for the dissolution, termination and
liquidation of the Trust pursuant to the applicable provisions of the Amended
and Restated Declaration of Trust and the California Corporations Code (and the
regulations promulgated thereunder). The effective date of the Dissolution Plan
will be the date of its approval by the Shareholders. If the Dissolution Plan is
approved by the Shareholders, the stock transfer books of the Trust will be
closed as of the close of business on a date fixed by the Board of Trustees for
the distribution. Thereafter, no assignments or transfers of the Trust Shares
(except for those occurring by will, intestate succession or operation of law)
will be recorded.
OPERATIONS. Upon the Dissolution Plan becoming effective, the Trust will
cease business operations; except, however, that the Trust will complete the
sale of its remaining assets, the Kings Court Shopping Center, the two parcels
of land in San Pablo, California and Redding, California, and complete the
purchase, redevelopment and sale of the Wanlass Shopping Center property. The
Trust's corporate existence will continue thereafter, but solely for the purpose
of completing work in progress, disposing of its assets, providing for the
satisfaction of its obligations, adjusting and winding up its business and
affairs, and distributing its remaining assets under the Dissolution Plan. No
further approvals by the Shareholders will be obtained. A distribution following
the liquidation of these remaining assets will be conditioned upon setting aside
a sufficient amount of money for the purpose of meeting any residual Trust
obligations or liabilities which it has not otherwise met. These include the
leasehold, financing and environmental and indemnification obligations and
liabilities described below. See "Description of Certain Long-Term Liabilities,"
"Financing Obligations" and "Environmental Obligations."
SHARE CERTIFICATES. At the time of any distribution of assets to the
Shareholders, those Shareholders who have share certificates will be required to
surrender them before they will receive any cash or other assets to which they
are entitled under the Dissolution Plan. This will not be necessary for those
Shareholders who have elected to have their shares held for them by the Transfer
Agent.
If a Shareholder fails to surrender any certificate he has in his
possession, his share of any distribution will be retained until his certificate
is surrendered or until he furnishes an indemnity bond in the event of loss or
destruction of the certificate. No interest will be paid or accrued on the cash
or other assets payable upon surrender of Trust share certificates. The
Shareholders of the Trust will be notified as promptly as
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possible of the effective date of the Dissolution Plan and will be advised as to
the procedure for surrender of their certificates in exchange for any remaining
cash or other assets to which they are entitled.
PAYMENT OF LEGALLY ENFORCEABLE CLAIMS. The Trust will satisfy, or provide
for the satisfaction of, all legally enforceable claims and obligations of the
Trust in an orderly manner. This will include claims arising from the residual
liabilities discussed below. See "Description of Certain Long-Term Liabilities".
CONTINUED INDEMNIFICATION OF TRUSTEES AND OFFICERS. The Trust will also
reserve sufficient assets (or obtain such insurance) as shall be necessary to
provide for the continued indemnification of the Trustees, Officers, Advisors
and Agents of the Trust to the full extent provided by the Declaration of Trust,
any existing indemnification agreements between the Trust and any of such
persons, and applicable law.
DISTRIBUTIONS TO SHAREHOLDERS. It is difficult to determine at this time
with any precision the aggregate net proceeds that may ultimately be available
for distribution to the Trust's shareholders upon liquidation. That amount will
depend upon a variety of factors, including the timing of and the net proceeds
realized from the sale of the Trust's assets, as well as the ultimate amounts of
liquidation-related expenses and other obligations and liabilities that must be
satisfied out of the Trust's assets.
It is also difficult to determine the timing of any such distributions.
Nevertheless, the Trust intends to complete the Dissolution Transactions and
make distributions, if any, within 24 months of the adoption of the Dissolution
Plan by the Shareholders. If necessary, the Trustees may utilize a Liquidating
Trust to complete the liquidation and dissolution of the Trust within the
24-month period.
After satisfaction of all of the Trust's legally enforceable obligations,
remaining assets will be distributed to the Shareholders of the Trust in
accordance with their respective shareholdings. In the event that the Trust were
to make distributions in connection with the Dissolution Transactions to its
Shareholders without payment or adequate provision for payment of the Trust's
liabilities, the Shareholders may be held personally liable up to the amount of
distributions each Shareholder received. Of course, no Shareholder is liable for
any debts of the Trust beyond any amounts the individual Shareholder received as
a distribution.
MAJORITY OF TRUST SHAREHOLDERS BIND MINORITY. If the requisite number of
Shareholders of the Trust approve the Dissolution Transactions, the Trust will
be dissolved, terminated and liquidated, even though individual Trust
Shareholders may have voted against the Dissolution.
TERMINATION OF REIT STATUS. The Trustees shall have the authority to
terminate the Trust's status as a real estate investment trust under Sections
856-860 of the Internal Revenue Code of 1986, as amended, if they determine that
such action would be in the best interests of the Shareholders.
ESTIMATE OF FAIR MARKET VALUE OF REMAINING TRUST ASSETS
The Trust has the following remaining assets as of October 31, 1997: A 40%
general partnership interest in Kingsco, a California general partnership (the
"Kingsco Interest"); an obligation to redevelop and a right to sell the Wanlass
Shopping Center property (the "Wanlass Project"); an undeveloped parcel of land
in San Pablo (the "San Pablo Property"); an undeveloped parcel of land in
Redding (the "Redding Property"); certain promissory notes (the "Notes"); cash
("Cash"); accounts receivable (the "Accounts Receivable"); and other
miscellaneous assets (the "Miscellaneous Assets").
The Trust estimates that the net value of its Kingsco Interest is
approximately $4,013,000. That valuation is based upon the Trust's current
negotiations with a prospective purchaser and is net of the current debt
obligations of the Trust associated with the Kingsco Interest.
The Trust estimates that the net value of the Wanlass Project is
approximately $300,000. That estimate is based upon an estimated development
cost budget and projected net income based on current leases and leases
presently under consideration. The Trust cannot ascertain the fair market value
of the San Pablo
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Property and therefore has not assigned any value to it. The Trust estimates
that the net value of the Redding Property is approximately $200,000. That
estimate is net of any real estate commissions expected to be associated with
the sale of the Redding Property.
The Trust estimates that the aggregate fair market value of its Notes is
approximately $192,000. The Trust has approximately $2,858,000 in cash and
values its accounts receivable at approximately $26,000. Finally, the Trust has
Miscellaneous Assets worth approximately $621,000.
Based upon the foregoing, the Trust estimates that as of October 31, 1997,
the net aggregate fair market value of all its remaining assets is approximately
$8,210,000.
DESCRIPTION OF CERTAIN LONG-TERM LIABILITIES
The Trust has certain long-term obligations and liabilities that will affect
the timing and amount of any distributions to the Trust's Shareholders upon the
liquidation of its assets.
GROUND LEASE OBLIGATIONS. The Trust has long-term obligations under three
separate ground leases: First, the Mt. Shasta shopping center ground lease;
second, the Kings Court shopping center ground lease; and third, the Wanlass
shopping center ground lease. If the Trust is unable to negotiate releases for
its obligations pursuant to the three ground leases, then the Trust must reserve
sufficient assets to satisfy its obligations pursuant to the ground leases.
Although the Trust transferred its interest in the Mount Shasta ground lease
to a third party (the "Current Ground Lessee"), the Trust remains liable for the
Mount Shasta ground lease as a co-obligor. Currently, all lease and tax payments
are actually paid by the Current Ground Lessee. But in the event the Current
Ground Lessee defaults on its obligations to the ground lessor, then the Trust
would have to satisfy the defaulted obligations.
The ground lease requires annual rental payments of the greater of either
$24,000 or eight percent of gross annual rental revenues received from the Mount
Shasta Shopping Center tenants until July 11, 2034. During the year ended
December 31, 1996, the actual ground rental paid to the ground lessor was
$40,211, based on gross annual rents of $504,381.
The Mount Shasta ground lease also requires the payment of property taxes.
During the year ended December 31, 1996, the sum of the actual taxes paid by the
Current Ground Lessee in connection with the Mount Shasta ground lease was
$81,586.
The Mount Shasta ground lease also provides that the dissolution of the
Trust constitutes a default. The Trustees are currently negotiating with the
ground lessor to obtain a waiver of the provision. But in the event that the
ground lessor refuses, the Trust may be liable for the rents to be paid over the
life of the ground lease (less any rents received by the ground lessor from the
Current Ground Lessee or other sub-lessees).
In order to quantify the maximum potential liability of the Trust under the
Mount Shasta ground lease, the Trust assumes that the ground lessor will treat
the dissolution as a default and will be unable to mitigate the damages by
collecting rent on the property. In that event, the base rent of $24,000 might
be owed per year by the Trust, plus taxes. Assuming there was no offsetting
sub-lease income and that the value of the property would likely be ten times
the gross minimum ground rent, the taxes would be approximately 1% of that
value. On that basis, the fourteen years of remaining liability on both rent and
taxes would be approximately $370,000.
As a general partner of Kingsco, a California general partnership, the Trust
is jointly and severally liable for the partnership's rental obligations
pursuant to the Kings Court ground lease, which extends through July 24, 2024.
Kingsco's rental payment obligation for the Kings Court ground lease is the
greater of either $40,000 per year or a percentage of gross rental revenues
received from the shopping center
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tenants. During the year ended December 31, 1996, that actual ground rental paid
to the ground lessor was $177,569, based on gross rents of $1,538,367.
The Kings Court ground lease also requires the ground lessee to pay property
taxes. During the year ended December 31, 1996, the sum of the actual taxes paid
by Kingsco in connection with the Kings Court ground lease was $52,313. The
dissolution of the Trust does not constitute a default under the Kings Court
ground lease.
In order to quantify the maximum potential liability of the Trust under the
Kings Court ground lease, the Trust assumes that there would be no offsetting
sub-lease income and that the base rent of $40,000 would be owed per year. If
there were no offsetting sub-lease income, then the value of the property would
likely be ten times the gross ground rent and the taxes would be approximately
1% of that value. Thus, the remaining liability on both rent and taxes would be
approximately $1,169,665. Of course, the Trust is currently negotiating to sell
its interest in Kings Court and thereby minimize any potential liability.
The Trust is currently obligated pursuant to the Wanlass Shopping Center
ground lease, as amended, to pay $147,872 per year as rental payments, with
adjustments of 4% annually. The ground lease extends through May, 2045. The
lease contains a "put" option, by virtue of which, at any time after a
replacement tenant (per the first amendment to the lease) has commenced payment
of rent under its replacement lease (which is currently estimated to be December
1, 1998), the ground lessor may require that the Trust purchase the real
property in exchange for extinguishing the lease. The terms of the "put" option
indicate a purchase price of ten times the amount of the ground rental in force
at the time of the exercise of the "put" option. The Trust is presently engaged
in completing the development of retail buildings for tenants at this center.
The Wanlass ground lease also requires the ground lessee to pay property
taxes. During the year ended December 31, 1996, the sum of the actual taxes paid
by the Trust in connection with the Wanlass ground lease was $13,529.45.
The Wanlass ground lease also provides that the dissolution of the Trust may
constitute a default. The Trustees are currently negotiating with the ground
lessor to purchase the property, which would result in the termination of the
ground lease and preempt any default under the ground lease. But in the event
that the ground lessor refuses to sell the property, the Trust could be liable
for the rents to be paid over the life of the ground lease (less any rents
received by the ground lessor from any subsequent ground lessees). But it is far
more likely that the ground lessors will agree to sell the property to the
Trust.
As a result, the Trust expects to be relieved of its liability under the
Wanlass ground lease and to make a net profit from the purchase, development and
sale of the Wanlass property of approximately $300,000 (see "Estimate of Fair
Market Value of Remaining Trust Assets").
FINANCING OBLIGATIONS. The Trust is obligated to make subsidy payments to
the owner of Menlo Center as a consequence of the terms under which the Trust
sold the property to its current owner in February, 1996. Under the terms of
this agreement the Trust is required to make up any shortfall in net income
derived from the Menlo Center insofar as such income fails to achieve a minimum
amount of $464,941 per year. In 1996 there was a subsidy payment made of
$37,132. No subsidy payment is expected to be made in 1997. The agreement
obligations expire on February 28, 2000.
Assuming the worst case scenario (an empty building from November 30, 1997
to the end of the term), the liability of the Trust for subsidy payments would
not exceed $1,055,158. The Trust does not expect its liability under the subsidy
agreement to approach that amount.
ENVIRONMENTAL OBLIGATIONS. The Trust may also be liable for certain
environmental claims relating to two of its properties.
The Trust may be liable for a toxic spill caused by a dry cleaning tenant at
one of the Trust's former properties, the El Portal Shopping Center, in San
Pablo, California. The spill probably occurred prior to
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the Trust's acquisition of El Portal in 1976. Although the Trust no longer owns
the El Portal Shopping Center property, the Trust remains potentially liable for
the entire cost of the environmental clean-up. The liability has been quantified
and assessed by professional engineers at approximately $100,000 to $135,000;
however, the Trust and the foreclosing lender on the property are currently
negotiating an agreement to limit the Trust's liability to $100,000. The
remediation work has not been commenced yet. The Trust is currently soliciting
bids for the clean-up work. The Trust has received one bid in the amount of
$134,000 to complete the project. The Trust has not yet determined whether it
may have recourse against third parties for this environmental damage. A second
toxic spill emanating from an adjacent property has affected El Portal. The
spill is presently being remediated and Atlantic-Richfield Company, Inc.
("ARCO") has indicated that it will take responsibility for the costs of
remediation.
The Kings Court Shopping Center has suffered two known toxic spills. One is
from the Exxon gas station which leases a parcel of land on the site. This spill
is presently under remediation in accordance with a remediation plan approved by
the Regional Water Quality Control Board and the County of Santa Clara
Department of Health. Exxon Corporation has agreed to indemnify the Kingsco
Partnership against all clean-up, legal and engineering costs and related fees
arising from this spill.
A second spill from a dry cleaner occurred prior to Kingsco's ownership of
Kings Court Shopping Center. This spill is presently under remediation. The
Reliance Insurance Group ("Reliance") has indicated in writing that it accepts
responsibility with reservations for rejection of the agreement in the event of
subsequent discovery of a cause of non-liability. Reliance is paying for the
costs of remediation and it has taken financial and physical responsibility for
implementing a clean-up plan which has been approved by the Regional Water
Quality Control Board and County of Santa Clara Department of Health.
The Kingsco Partnership is a General Partnership and so the Trust's
liability is shared jointly and severally with the other general partners. The
Trust believes that the terms under which it purchased its partnership interest
will provide financial protection from the co-general partners. However, it is
possible ultimately that the Trust could be held liable for the cost of the
entire clean-up in the event that Reliance Insurance claims that the spill is
not covered by its insurance policy and refuses to pay for the clean-up, and the
co-general partners of Kingsco refuse to or are unable to pay their share of the
costs of the clean-up. The total cost of the clean-up has not yet been
determined, but is estimated to range between $346,000 and $1,211,000.
ESTIMATE OF RESIDUAL VALUE
As described above, the Trust estimates that its remaining assets (see
"Estimate of Fair Market Value of Remaining Trust Assets") are worth
approximately $8,210,000. While the Trust estimates that its long term
liabilities (see "Description of Certain Long-Term Liabilities") could
potentially total (on a worst case scenario basis) as much as $$2,694,823 (or
$0.73 per share), it is highly unlikely that the Trust will in fact incur those
liabilities. In addition, the Trust will incur attorney's fees, accountant's
fees, and proxy solicitation fees in connection with the dissolution, and will
continue to incur its normal costs of operations until it finally winds down its
business.
On that basis, the Trustees estimate that the maximum residual value of the
Trust's net equity would not exceed $2.00 per Share and will probably be less
than this amount.
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FEDERAL INCOME TAX CONSEQUENCES
TAXATION OF THE TRUST. The Trust has elected to qualify as a real estate
investment trust ("REIT") under Sections 856-860 (the "REIT Provisions") of the
Internal Revenue Code of 1986, as amended (the "Code"). Under the REIT
Provisions, an entity that qualifies as a REIT is generally not subject to
federal income tax with respect to income which it distributes to its
Shareholders. If the Dissolution Plan is adopted by the Shareholders, it is
presently contemplated that the Trust will be liquidated in a manner that will
allow the Trust to continue to meet the requirements of the REIT Provisions
until the distribution of all of its assets to the Shareholders (including the
possible transfer of assets to a liquidating trust), although the Plan gives the
Trustees the authority to cause the Trust to discontinue its status as a REIT at
any time if they find it in the best interests of the Shareholders to do so.
In order to maintain its status as a REIT, the Trust must continue to
satisfy various technical requirements imposed by the Code, including
requirements that it derive its gross income from qualified sources, that it
hold qualifying assets, and that it make certain distributions to its
Shareholders. So long as the Trust qualifies for taxation as a REIT, it will not
be subject to federal corporate income taxes on net income that is currently
distributed to the Shareholders because a REIT generally is entitled to a
dividends-paid deduction. The Code also provides that distributions pursuant to
a plan of liquidation that are made 24 months after adoption of the plan of
liquidation will, to the extent of earnings and profits of the REIT for the
taxable year, be treated as dividends for purposes of the dividends-paid
deduction. To minimize federal income taxation of the Trust, therefore, the
Trustees intend to complete the Dissolution Plan within 24 months of its
adoption. If necessary, the Trustees may utilize a Liquidating Trust to complete
the liquidation and dissolution of the Trust within the 24-month period.
TAXATION OF SHAREHOLDERS. The amount of any cash and the fair market value
of any property (including a pro rata share of the fair market value of any
assets that might be contributed to a liquidating trust) distributed to a
Shareholder pursuant to the Dissolution Plan will in general be applied first to
reduce the Shareholder's basis in such Shareholder's Trust Shares. Liquidating
distributions in excess of the Shareholder's basis will be taxed as a capital
gain if the Trust Shares are held by the Shareholder as a capital asset. If the
sum of all liquidating distributions with respect to Trust Shares held as a
capital asset is less than the Shareholder's basis therein, the difference will
constitute a capital loss. A Shareholder's gain or loss on liquidating
distributions will be calculated separately with respect to Trust Shares with
different bases or holding periods.
The taxation of capital gains has been extensively changed pursuant to the
Taxpayer Relief Act of 1997, passed by Congress on July 31, 1997 and signed into
law by the President on August 5, 1997. Generally, the holding periods for
long-term capital assets have been increased and the tax rates for long-term
capital gains have been reduced. After July 28, 1997, sales and exchanges of
most assets, including assets such as the Shares, held for more than 18 months
are subject to a maximum capital gain rate of 20%. For assets held more than 12
months and not more than 18 months, the maximum capital gain rate is 28%.
POSSIBLE USE OF LIQUIDATING TRUST. As noted above, a dividends-paid
deduction for the Trust with respect to liquidating distributions is available
for distributions within 24 months after the adoption of the Dissolution Plan.
In the event that the Trust will not have completed the liquidation of all of
its assets within the required period, it is possible that the Trustees might,
if they determine it to be in the best interests of the Trust and the
Shareholders, contribute the remaining assets of the Trust to a liquidating
trust and distribute to Shareholders beneficial interests in such liquidating
trust. Upon the distribution of beneficial interests in a liquidating trust, the
Shareholders would be required to recognize gain to the extent the fair market
value of such interests exceeded their remaining basis in the Shares. This could
cause a Shareholder to incur a tax liability upon the receipt of the beneficial
interests in the liquidating trust even though the Shareholder would have
received no cash with which to pay such liability.
The Trustees expect that any liquidating trust established with respect to
the assets of the Trust would qualify as a grantor trust under the Code.
Shareholders holding beneficial interests in a grantor trust would
17
<PAGE>
be deemed to own a pro rata portion of the assets of such trust and would be
required to report on their own federal income tax returns their pro rata
portion of any income, gain, deduction or loss realized by the trust. It is
possible that Shareholders that are tax-exempt organizations, including pension
trusts and individual retirement accounts, would realize unrelated business
taxable income if assets contributed to the liquidating trust were encumbered by
debt obligations, such that assets held by the liquidating trust would
constitute debt-financed property under Section 514 of the Code.
THE ABOVE DISCUSSION DOES NOT ATTEMPT TO DISCUSS ALL TAX MATTERS THAT MAY
AFFECT THE TRUST OR THE SHAREHOLDERS IN THE COURSE OF THE LIQUIDATION, NOR TO
CONSIDER VARIOUS FACTS OR LIMITATIONS APPLICABLE TO ANY PARTICULAR SHAREHOLDER.
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISERS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE LIQUIDATION.
SHAREHOLDER APPROVAL REQUIRED FOR THE DISSOLUTION TRANSACTIONS
UNDER THE TRUST'S AMENDED AND RESTATED DECLARATION OF TRUST AND THE
CALIFORNIA CORPORATIONS CODE (AND THE REGULATIONS PROMULGATED THEREUNDER), THE
AFFIRMATIVE VOTE OF BOTH A MAJORITY OF THE SHAREHOLDERS AND THE HOLDERS OF THE
MAJORITY OF THE TRUST SHARES IS REQUIRED FOR APPROVAL OF THE DISSOLUTION
TRANSACTIONS. If approved by the Shareholders, it is anticipated that the
Dissolution Transactions would be completed over a period of two years. The
Dissolution Transactions may be abandoned or amended, either before or after
Shareholder approval has been obtained, if in the opinion of the Trustees,
circumstances arise that make such action advisable.
NONAPPROVAL OF THE DISSOLUTION PLAN
In the event of the failure of the Shareholders to approve the Plan, the
Trust currently intends to continue to transact business as a qualified real
estate investment trust and to consider an alternative course of action. The
Trust would, however, continue its efforts to sell its interest in the Kingsco
general partnership, the two parcels of land in San Pablo, California and
Redding, California, and purchase the Wanlass Shopping Center property so that
the Trust can redevelop and then sell the property. The Trust would then
reinvest the proceeds raised from such sales in other properties that the
Trustees deem appropriate on a going forward basis for the Trust.
AMENDMENT OF THE DISSOLUTION PLAN
The Trustees may amend or modify the Dissolution Plan if they determine such
action to be in the best interests of the Trust or its Shareholders, without the
necessity of further Shareholder approval unless the Trustees determine that
such amendment or modification would materially and adversely affect
Shareholders' interests.
DISSENTERS' RIGHTS
No Shareholders of the Trust will have any rights of appraisal or similar
dissenters' rights with respect to the Dissolution Plan under the Trust's
Amended and Restated Declaration of Trust or the law of the State of California,
the jurisdiction in which the Trust is organized. Therefore, if the Dissolution
Plan is approved by the required vote, all shareholders must accept their pro
rata share of the net distributable proceeds.
PROXY SOLICITATION FEES AND EXPENSES
The Trustees estimate that the Trust will incur approximately $15,000 in
fees of D.F. King & Co., Inc., an independent proxy solicitation services firm
in connection with the Special Meeting. No fees will be paid to any management
personnel who solicit proxies in connection with the Special Meeting.
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<PAGE>
RECOMMENDATIONS OF THE TRUSTEES
THE TRUSTEES HAVE UNANIMOUSLY APPROVED THE DISSOLUTION PLAN AND THE
TRANSACTIONS CONTEMPLATED BY THIS PROPOSAL. THE TRUSTEES HAVE DETERMINED THAT
THE DISSOLUTION PLAN AND THE DISSOLUTION TRANSACTIONS ARE FAIR TO, AND IN THE
BEST INTERESTS OF, THE SHAREHOLDERS AND THE TRUST AND HAVE UNANIMOUSLY RESOLVED
TO RECOMMEND THAT THE SHAREHOLDERS APPROVE THE DISSOLUTION PLAN AND THE
DISSOLUTION TRANSACTIONS. Additionally, the Trustees and officers of the Trust
intend to vote all of the Shares held by them of record in favor of the
Dissolution Plan and Dissolution Transactions. The Trustees considered several
alternatives to the Dissolution. The merits and disadvantages of these
alternatives, and the Trustees' reasons for determining to proceed with the
Dissolution, are discussed more fully above under "Approval of the Dissolution
Transactions--Alternatives Considered by the Board of Trustees."
19
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
As of September 30, 1997, the Trust had 3,601 Shareholders. The following
table sets forth information regarding the beneficial ownership of Trust Shares
by certain of the Trust's executive officers and Trustees and by the Trust's
executive officers and Trustees as a group, as of September 30, 1997. No person
is known by the Trust to be the beneficial owner of more than five percent of
the Trust's outstanding Trust Shares. Each person identified in the table has
sole voting and investment power with respect to all Trust Shares shown as
beneficially owned by such person, except as otherwise set forth in the notes to
the table. Unless otherwise indicated, the address of each person listed below
is 1010 El Camino Real, Suite 210, Menlo Park, California 94025.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME TRUST SHARES TOTAL(1)
- -------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Wilcox Patterson (2)(3)............................................. 27,900 0.753%
John H. Hoefer...................................................... 68,003 1.835%
Robert C. Gould..................................................... 1,471 0.040%
Harry E. Kellogg (3)................................................ 7,293 0.197%
William S. Royce.................................................... 2,708 0.073%
All Executive Officers and Directors as a Group
(five persons).................................................... 107,375 2.898%
</TABLE>
- ------------------------
(1) Based on 3,706,845 Trust Shares outstanding as of September 30, 1997.
(2) Includes 21,584 Trust Shares owned by members of Mr. Patterson's family as
to which Mr. Patterson disclaims any beneficial ownership interest.
(3) Voting and investment powers are shared.
DISCRETIONARY AUTHORITY
While the Notice of the Special Meeting of Shareholders calls for the
transaction of such other business as may properly come before the meeting, the
Trustees have no knowledge of any matters to be presented for action by the
Shareholders other than as set forth above. The enclosed Proxy gives
discretionary authority, however, in the event any additional matters should be
presented.
CERTAIN LEGAL MATTERS
Certain legal matters will be passed upon for the Trust by Gibson, Dunn &
Crutcher LLP, Palo Alto, California. The description of federal income tax
consequences contained in this Proxy Statement under "Federal Income Tax
Considerations" is based upon the opinion of Gibson, Dunn & Crutcher LLP.
SHAREHOLDER PROPOSALS
If any Shareholder that owns one percent or $1,000 in market value of Shares
entitled to vote at the 1998 Annual Meeting of the Shareholders (and who has
owned such Shares for a period of one year) wishes to submit a proposal to be
voted on at the 1998 Annual Meeting, the Shareholder must submit the proposal to
the Trust on or before January 15, 1998 and must be a beneficial owner at that
time.
REPORTS
The Trust will provide a copy of its Annual Report on Form 10-K for the year
ended December 31, 1996, a copy of its Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997, a copy of its Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997, a copy of its Report on Form 8-K dated April
1, 1997, a copy of its Report on Form 8-K/A dated April 1, 1997 and a copy of
its Report
20
<PAGE>
on Form 8-K dated July 9, 1997 to any shareholder who so requests in writing to
the Trust's address first set forth above or by calling (415) 327-7147.
SHAREHOLDERS ARE URGED TO IMMEDIATELY MARK, DATE, SIGN AND RETURN THE ENCLOSED
PROXY IN THE ENVELOPE PROVIDED, TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN
THE UNITED STATES.
BY ORDER OF THE TRUSTEES
[LOGO]
WILCOX PATTERSON,
PRESIDENT
December 12, 1997
Menlo Park, California
21
<PAGE>
EXHIBIT A
PLAN OF DISSOLUTION, TERMINATION AND LIQUIDATION
This Plan of Dissolution, Termination and Liquidation (this "Plan") is for
the purpose of effecting the dissolution, termination and complete liquidation
of PACIFIC REAL ESTATE INVESTMENT TRUST (the "Trust").
1. APPROVAL OF THIS PLAN. In accordance with Article 11 of the Amended and
Restated Declaration of Trust of the Trust, this Plan shall be submitted to the
shareholders of the Trust for approval at the Special Meeting in Lieu of the
Annual Meeting of Shareholders to be held for that purpose. This Plan shall
become effective upon the approval of a majority of the shareholders of the
Trust and the approval of the holders of a majority of the outstanding shares
(the "Effective Date")
2. CESSATION OF BUSINESS. Following approval of this Plan, the Trust shall
not engage in any further business activities, except for the purpose of
completing work in process, including but not limited to the redevelopment of
the Wanlass Shopping Center property, disposing of its assets, providing for
satisfaction of its obligations, adjusting and winding up its business and
affairs, and distributing the proceeds from the disposition of its assets in
accordance with this Plan. The Trustees then in office shall continue in office
solely for that purpose.
3. CONTINUING EMPLOYEES. For the purpose of effecting the liquidation of
the Trust's assets, the Trust shall retain, subject to the pleasure of the Board
of Trustees, such employees as the Board of Trustees deems desirable to
supervise the liquidation.
4. EXPENSES OF LIQUIDATION. The Board of Trustees may provide, from the
assets of the Trust, reasonable funds for payment of the expenses of the
dissolution, termination and liquidation of the Trust, including filing fees and
other expenses relating to the holding of the Special Meeting in Lieu of the
Annual Meeting of Shareholders to consider this Plan and other documentation
required in connection with this Plan, continuation of employees engaged in the
liquidation process, accounting and attorneys' fees and expenses, and other
reasonable fees and expenses incurred in connection with the liquidation
process.
5. PAYMENT OF LEGALLY ENFORCEABLE CLAIMS. The Trust shall satisfy, or
provide for the satisfaction of, all legally enforceable claims and obligations
of the Trust in an orderly manner.
6. PROVISION FOR CONTINUED INDEMNIFICATION OF TRUSTEES AND OFFICERS. The
Trust shall reserve sufficient assets (or obtain such insurance) as shall be
necessary to provide for continued indemnification of the Trustees and officers
of the Trust to the full extent provided by the Declaration of Trust, any
existing indemnification agreements between the Trust and any of such persons,
and applicable law.
7. DISTRIBUTION TO SHAREHOLDERS. After satisfaction of all of the Trust's
legally enforceable obligations, remaining assets will be distributed to the
shareholders of the Trust in accordance with their respective shareholdings.
8. TERMINATION OF REIT STATUS. In the course of liquidation, the Board of
Trustees, acting in its discretion, shall have the authority to terminate the
Trust's election to be taxed as a real estate investment trust under Sections
856-860 of the Internal Revenue Code of 1986, as amended, if it determines that
such action would be in the best interests of the Shareholders.
9. LIQUIDATING TRUST. The Board of Trustees may cause the Trust to create
a liquidating trust (the "Liquidating Trust") and to distribute beneficial
interests in the Liquidating Trust to the Shareholders as part of the
liquidation process. The Liquidating Trust shall be constituted pursuant to a
Liquidating Trust Agreement in such form as the Board of Trustees may approve,
it being intended that the transfer and assignment to the Liquidating Trust
pursuant hereto and the distribution to Shareholders of the beneficial interests
therein shall constitute a part of the final liquidating distribution by the
Trust to the Shareholders
A-1
<PAGE>
of their pro rata interest in the remaining amount of cash and other property
held by or for the account of the Trust. From and after the date of the Trust's
transfer of cash and property to the Liquidating Trust, the Trust shall have no
interest of any character in and to any such cash and property and all of such
cash and property shall thereafter be held by the Liquidating Trust solely for
the benefit of and ultimate distribution of the Shareholders, subject to any
unsatisfied debts, liabilities and expenses.
10. AUTHORIZATION. The Board of Trustees of the Trust, or the trustees of
the Liquidating Trust, and such officers of the Trust as the Board of Trustees
may direct, are hereby authorized to interpret the provisions of this Plan and
are hereby authorized and directed to take such further actions, to execute such
agreements, conveyances, assignments, transfers, certificates and other
documents, as may in their judgment be necessary or desirable in order to wind
up expeditiously the affairs of the Trust and complete the liquidation thereof,
including, without limitation, (i) the execution of any contracts, deeds,
assignments or other instruments necessary or appropriate to sell or otherwise
dispose of, any and all property of the Trust, whether real or personal,
tangible or intangible, (ii) the appointment of other persons to carry out any
aspect of this Plan, (iii) the temporary investment of funds in such medium as
the Board of Trustees may deem appropriate, and (iv) the modification of this
Plan as may be necessary to implement this Plan. The death, resignation or other
disability of any Trustee or officer of the Trust shall not impair the authority
of the surviving or remaining Trustees or officers of the Trust (or any persons
appointed as substitutes therefor) to exercise any of the powers provided for in
this Plan. Upon such death, resignation or other disability, the surviving or
remaining Trustees shall have the authority to fill the vacancy or vacancies so
created, but the failure to fill such vacancy or vacancies shall not impair the
authority of the surviving or remaining Trustees or officers to exercise any of
the powers provided for in this Plan.
11. TERMINATION OF THIS PLAN. The Board of Trustees may, by vote of the
majority of the Trustees then in office, terminate this Plan and revoke the
dissolution of the Trust, whether or not a vote of the shareholders has
previously occurred.
12. DECLARATION OF TRUST. The approval of this Plan of Complete
Liquidation and Termination by the shareholders as provided in paragraph 1
hereof shall constitute the authorization and approval contemplated by Section
11.5 of the Trust's Declaration of Trust for (i) the termination of the Trust,
(ii) the sale of all or substantially all of the Trust Property and (iii) the
amendment of the Declaration of Trust pursuant to Section 11.1 thereof such that
the provisions of this Plan shall supersede and take precedence over any
conflicting provision of the Declaration of Trust. Following such approval by
the shareholders, a certificate or certificates setting forth such approval
shall be recorded or filed pursuant to Section 12.4 of the Declaration of Trust,
which certificate shall constitute evidence of the authorization and approval of
this Plan and of the amendment of the Declaration of Trust as aforesaid.
A-2
<PAGE>
PACIFIC REAL ESTATE INVESTMENT TRUST
1010 EL CAMINO REAL, SUITE 210
MENLO PARK, CALIFORNIA 94025
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES
The undersigned hereby appoints Wilcox Patterson, Harry E. Kellogg and
Robert C. Gould as proxies, each with the power to appoint his substitute, and
hereby authorizes each of them, having authority hereby to act alone, to
represent and to vote, as designated below, all the shares of beneficial
interest ("Trust Shares") of Pacific Real Estate Investment Trust (the "Trust"),
held of record by the undersigned on October 23, 1997, at the Special Meeting of
Shareholders in Lieu of the Annual Meeting to be held on November 20, 1997, at
10:00 a.m. at The Holiday Inn, 625 El Camino Real, Palo Alto, California, or any
postponement or adjournment thereof, on the following proposals.
1. To vote for the election of the following nominees for Trustee listed
below, and to cumulate such votes in their discretion:
J. Hoefer, H. Kellogg, W. Patterson, W. Royce, and R. Gould.
For / / Against / / Abstain / /
For / /, except withheld from the following nominees: _________________ .
2. Approval of appointment of Deloitte & Touche LLP as independent auditors
for the year ending December 31, 1997.
For / / Against / / Abstain / /
3. Proposal to approve the dissolution, termination and liquidation of the
Trust through a series of transactions described in the proposed Plan of
Dissolution, Termination and Liquidation, a copy of which is attached as
EXHIBIT A to the accompanying Proxy Statement.
For / / Against / / Abstain / /
PLEASE SIGN WHERE INDICATED ON THE REVERSE SIDE OF THIS PROXY.
<PAGE>
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and any postponements or
adjournments thereof.
For / / Against / / Abstain / /
THIS PROXY IS SOLICITED BY THE TRUSTEES AND MAY BE REVOKED PRIOR TO
EXERCISE. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IN THE ABSENCE OF DIRECTION, THIS PROXY WILL BE
VOTED "FOR" ITEMS 1, 2 AND 3.
DATED: ___________________________
__________________________________
Signature of Shareholder
__________________________________
Signature (if held jointly)
INSTRUCTIONS (IMPORTANT) Please
sign exactly as name appears
hereon. Executors, Administrators,
Trustees, Guardians and Attorneys
should give full title. If shares
are registered in more than one
name, ALL registered owners should
sign.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE
