Palace Capital PLC

("Palace Capital" or the "Company")

RESPONSE TO LAKESTREET CAPITAL'S ANNOUNCEMENT

Palace Capital confirms it received a valid requisition notice (the "Notice of Requisition") on Saturday 3^rd January 2026 from Lakestreet Capital Partners ("Lakestreet") (via Aurora Nominees Limited), seeking to appoint Christian Kappelhoff-Wulff and Valentin Pierburg to the Board and remove the current Executive Chairman Steven Owen with immediate effect.

Accordingly, the Board will convene a general meeting to consider Lakestreet's proposals (the "Requisitioned General Meeting"). A circular, including the notice of the Requisitioned General Meeting, will be posted to shareholders in due course in accordance with the requirements of the Companies Act 2006.

On 5 January 2026, Lakestreet published an announcement which included a number of comments about Steven Owen's remuneration, which are inaccurate and misleading and reflect clear misunderstandings about Palace Capital's recent corporate history which is summarised below.

Since Palace Capital's managed wind down strategy was announced in July 2022, the Company has sold over £160 million of assets, repaid all bank debt (£95.4m as at 30 June 2022) and returned over £64 million in cash to shareholders. Dividends paid to shareholders since July 2022 total approximately £18.7 million, which will increase to £19.4 million at the end of January 2026.

The Company now has only five investment properties remaining, which were valued at £41.3 million as at 30 September 2025. Two of these assets (Halifax and Leamington Spa) are under offer, and a third asset (Exeter) is being marketed for sale and is also expected to go under offer in the coming weeks. 

The remaining two assets (Northampton and Newcastle) require the completion of ongoing asset management activities, including material capital expenditure at Newcastle, in order to appeal to potential purchasers. In addition, nine apartments remain at Hudson Quarter in York, together with a ground rent freehold interest, valued at £4.2 million as at 30 September 2025, although two of these apartments are currently under offer which, if the disposals are completed, will reduce the number of apartments remaining to seven.

The Company has made significant progress to date on reducing administrative expenses as the portfolio reduces in size following disposals. The Company has closed its head office and reduced its headcount from an average of seven directors and nine employees for the year ending March 2022 to two directors and two employees. Directors' fees have also been reduced significantly as a consequence.

Recurring administrative expenses at HY26 were reduced by a further £0.3 million compared to HY 25. Other, ongoing cost reduction measures, when fully implemented, are expected to result in annualised administrative expenses of c.£0.7 million from the first quarter of 2026. As part of this process, as previously disclosed, the Board is also reviewing its composition.

Detailed response to Lakestreet Capital's comments

Board costs significantly reduced

The cost of the Board has reduced significantly since Steven Owen became Chairman, the Board having been reduced from seven directors to two.  The sales of the properties at Halifax, Leamington Spa and Exeter have not yet completed therefore comparing the current cost with a future position is misleading.  As has already been announced, the composition of the Board is currently under review as part of ongoing cost reduction measures and to reflect the expected disposals of Halifax, Leamington Spa and Exeter. The figure of £0.7 million noted above in relation to annualised administrative expenses includes a significant reduction in the cost of the Board. Disclosing a ratio to net income does not reflect the strategy of the Company to wind down and return capital to shareholders.

Steven Owen's remuneration supported by over 90% of shareholders at the last three AGMs

To compare Steven Owen's remuneration as Executive Chairman with the remuneration of the previous five non-executive directors is misleading as these were all non-executive roles. There were previously three executive directors in addition to the non-executives. The executive directors' remuneration for the year ended 31 March 2022 was as follows: Chief Executive - £590,675 (of which £303,000 was salary) Property Director - £453,565 (of which £229,500 was salary), Chief Financial Officer - £148,723 (of which £61,973 was salary reflecting his appointment during the year).

The Remuneration Committee, chaired by Mark Davies as the sole Non-Executive Director, with assistance and advice from its independent remuneration advisors, Korn Ferry, determines salary and remuneration. Shareholders have been consulted on remuneration and are asked to vote on the Remuneration Report annually at the AGM. The Executive Chairman does not set his own salary or remuneration.

Steven Owen joined the Board as Non-Executive Chairman on 1 January 2022 at an annual fee of £110,000. In June 2022 he assumed the role of Interim Executive Chairman and was appointed Executive Chairman in July 2023 effectively combining the role of Chairman and CEO. Therefore, he has acted in an Executive capacity for over three and a half years of the four years that he has served on the Board.

Since November 2023, Steven Owen has been the only Executive Director of the Company and has been directing and implementing the strategy, and since June 2025 has been one of only two employees with senior executive roles in the Company.

At the Company's AGMs held over the last three years, shareholders have approved the Remuneration Report with an overwhelming >90% majority in favour.

Executive headcount has reduced significantly

As Steven Owen is an executive member of staff he is included in the head count numbers. The Company's employees now comprise the Executive Chairman working with the Head of Property and a part time Finance Manager.  In addition, Mark Davies is the Senior Independent Non-Executive Director who is Chair of both the Remuneration and Audit Committees. The Company also retains the services of an external part time company secretary.

Short Term Incentive Plan received 97.5% of the votes in favour at the July 2023 AGM

The Short Term Incentive Plan ("STIP") was introduced in 2023 following extensive shareholder consultation by the Senior Independent Director ("SID") with shareholders representing over 45% of the then register. The STIP received 97.5% of the votes in favour at the July 2023 AGM. Shareholders at the time complimented the Company for the alignment of executive remuneration with the return of capital strategy.

At the same time as the STIP was implemented, it was agreed that Steven Owen would not receive an annual bonus. An illustration of the potential amounts payable if the strategy was successfully implemented was included with the 2023 AGM notice when the STIP was proposed, ensuring that shareholders had visibility on what was being proposed.

The STIP was created for the benefit of all employees. Reallocations of lapsed awards for leavers were made to senior executives, not just Steven Owen, to reflect their performance, the need to retain them to implement the strategy and for taking on additional responsibilities following the departures of other employees.

Steven Owen's 12 month notice period is market standard for executive directors

This notice period was introduced in July 2023 when Mr Owen was appointed Executive Chairman, reflecting his importance to the implementation of the strategy. His appointment and re-election have been approved by shareholders at the 2023 AGM and subsequently at the 2024 and 2025 AGMs. 

The notice period of 12 months is considered to be market standard for executive directors and applies to both parties and reflects the Company's policy on notice periods for senior executives for many years prior to Steven Owen's appointment.

Extension of the financial year of Palace Capital from 31 March 2026 to 30 September 2026 to reduce administrative costs

As stated in the HY26 interim results announcement, the FY26 year end was extended by six months to 30 September 2026 to provide strategic flexibility and optionality and facilitate further administrative cost reductions (including the significant level of audit fees likely to be incurred for the FY26 audit notwithstanding the reduction in size of the portfolio). As a comparison, the audit fee for the FY25 accounts was £169,000. If the remaining assets were to be disposed of in time, then there may not be a need for a FY26 audit as the Company may be in the process of being wound up and the remaining cash distributed to shareholders. The decision to extend the year end was a Board decision and is unconnected to Steven Owen's remuneration package.  As stated above, Steven Owen's remuneration package is disclosed annually in the Directors' Remuneration Report and the STIP and Remuneration Policy were approved by shareholders by a vote of 97.5% and 97.7% respectively in favour at the 2023 AGM.  The Company strongly refutes any suggestion that there has been an attempt to delay or obscure information regarding Steven Owen's remuneration package, or to extend his tenure on the Board.

Over 90% of shareholder votes supported the re-election of Steven Owen at the Annual General Meeting in 2025, 2024 and 2023.

It is inaccurate for Lakestreet to say that Steven Owen received significant NO and ABSTAIN votes with regards to his re-election. Voting detail is provided below.

* Clarified that 91% intended to vote FOR following administrative error from shareholder

Asset sales progressing well, led by Palace Capital's property experts

As stated in the HY26 interim results announcement, the appropriate timing for the disposal of the Northampton property was unlikely to be before the end of the first quarter of 2026 and would be subject to market conditions at that time, as there are asset management initiatives to be completed.  As also set out in that announcement, further lettings of the vacant space at the Newcastle property are required in order to increase the occupancy from 61% as at September 2025 and extend the WAULT prior to the asset being ready for sale. The Company is pleased to note that occupancy has increased under the management agreement with Orega and this trend will need to be further established before a sale can be contemplated.  In the Company's view this is unlikely to be before the second quarter of 2026. The Board and management consider that to sell prematurely, whilst being achievable at any price, would not maximise value for shareholders.

Lakestreet's statement does not accurately reflect Palace Capital's successful wind-down of the Company, which has been carried out solely in accordance with the wishes of shareholders (as evidenced by the strong support received by the Board at the Company's AGMs) in a difficult UK property market.

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