the hammerson scrip dividend scheme

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THE HAMMERSON SCRIP DIVIDEND SCHEME

THIS LETTER IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in any doubt as to the action you should take, you are recommended to seek your own personal financial advice immediately from your stockbroker, bank manager, solicitor, accountant, fund manager or other appropriate independent financial adviser, who is authorised under the Financial Services and Markets Act 2000 if you are in the United Kingdom, or, if not, from another appropriately authorised independent financial adviser. If you have sold or otherwise transferred all of your Hammerson plc shares, please forward this letter to the purchaser or transferee, or to the bank, stockbroker or other agent through whom the sale or transfer was effected.

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5 September 2016 Dear Shareholder THE HAMMERSON SCRIP DIVIDEND SCHEME The Company announced its half-year results for the six months ended 30 June 2016 on 25 July 2016 and declared an interim dividend of 10.1p (the "Interim Dividend") which will be treated entirely as a Property Income Distribution ("PID") and will be paid on 10 October 2016 to shareholders on the Company register at the close of business on 26 August 2016. We also announced that the Company would again be offering shareholders the opportunity to participate in the Hammerson Scrip Dividend Scheme (the "Scheme") and the purpose of this letter is to set out to shareholders the key elements of the Scheme, which was first offered to shareholders on Hammerson's 2015 final dividend ("2015 Final Dividend"). Shareholders who elect to participate in the Scheme will, for the Interim Dividend, receive new Ordinary Shares in Hammerson plc instead of cash, and the entire dividend will be treated as a PID, net of withholding tax where appropriate. Shareholders who do not elect to participate will receive the dividend in cash. Scrip dividends enable shareholders to increase their holding in the Company in a simple, cost effective way. At the same time, the Company retains the cash in the business that would otherwise be paid out as a dividend. Shares issued pursuant to the Scheme will carry the same voting rights as existing Ordinary Shares and will rank equally with the existing Ordinary Shares in all respects. The price at which the Interim Dividend will be converted into new Ordinary Shares is 579.0p, as announced to the London Stock Exchange on 2 September 2016 (the "Scrip Reference Share Price"). This announcement also appears on the Company's website, www.hammerson.com/investors. The appendices to this letter show: •

a worked example of how a PID scrip dividend is calculated;

•

the expected timetable for the Interim Dividend; and

•

an overview of the essential tax characteristics of scrip dividend alternatives for UK resident shareholders.

ACTION REQUIRED BY SHAREHOLDERS Whether you elect to participate in the Scheme will depend on your personal circumstances and tax position. You are advised to study the Guide (as defined below) carefully and if you are in any doubt about what course of action to take, you should consult an independent financial adviser. Shareholders holding shares in certificated form: •

If you wish to elect for the scrip dividend, please find enclosed your personalised Mandate Form to complete and sign. This Mandate Form must be returned in the envelope provided to the Company's Registrars, Capita Asset Services, by no later than 17:00 on 19 September 2016. Alternatively you are able to elect online via www.capitashareportal.com by the same deadline. You will then receive this and any future dividends to which the Scheme applies as a scrip dividend.

•

Mandate Forms will only be accepted in relation to an entire holding of Ordinary Shares, other than where a shareholder is acting as a nominee holding its Ordinary Shares on behalf of more than one beneficial owner where the Company may, at its discretion, permit that shareholder to grant a Mandate for a particular dividend in respect of a lesser number than their full holding.

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Please note that a valid Mandate Form previously given by shareholders for Hammerson's 2015 final dividend will apply to all future Scheme dividends unless the Mandate is revoked. Accordingly, such shareholders will not need to re-elect to participate in the Scheme for the Interim Dividend. Any shareholder wishing to elect for the scrip dividend who did not previously elect to participate in the Scheme must complete a Mandate Form. Shareholders holding shares in uncertificated form in CREST: •

If you wish to receive the scrip dividend you will need to make an election by means of the CREST election procedure. Such elections are required for each application of the Scheme and, therefore, a specific election is required for the Interim Dividend. The CREST election must be made by no later than 17:00 on 19 September 2016. You should contact your CREST sponsor who will be able to take appropriate action on your behalf.

•

Shareholders whose holdings are in uncertificated form in CREST may make elections in respect of part of their holdings.

•

If you do not wish to receive a scrip dividend no further action is required. You will receive a cash dividend in respect of the Interim Dividend.

BUYING ADDITIONAL ORDINARY PARTICIPATE IN THE SCHEME

SHARES

AFTER

MAKING

AN

ELECTION

TO

If a shareholder buys Ordinary Shares prior to the Ex-dividend Date for a dividend, that shareholder may be entitled to the Scheme dividend ("Scheme Dividend") on those Ordinary Shares and in these circumstances they are advised to contact the stockbroker or other agent through whom the purchase is made without delay so as to ensure that the purchased shares are registered promptly in their name. Any additional Ordinary Shares which a shareholder buys, and which are registered in their name in the Company's Register of Members prior to the Record Date for any Scheme Dividend to which they are entitled, will be covered by any valid election that they have made in relation to that Scheme Dividend and accordingly they will receive new Ordinary Shares, instead of cash dividends, for their entire holding of new Ordinary Shares. SELLING PART OF A SHAREHOLDING AFTER MAKING AN ELECTION TO PARTICIPATE IN THE SCHEME If a shareholder sells any of their Ordinary Shares prior to the Ex-dividend Date for any dividend, they may not be entitled to the Scheme Dividend on those Ordinary Shares and they are advised to contact their stockbroker or other agent through whom the sale was effected without delay as there may be a claim for the cash amount of the Scheme Dividend by the purchaser. If a shareholder sells part of their shareholding prior to the Record Date for a Scheme Dividend and such sale is registered in the Company's Register of Members prior to the applicable Record Date, any valid election that they have made to participate in the Scheme in relation to the Scheme Dividend will apply only to such shareholder's remaining Ordinary Shares. DIVIDEND REINVESTMENT PLAN (THE "DRIP") As the Company is offering the Scheme, the DRIP has been suspended. Participation in the DRIP does not confer automatic participation in the Scheme and so participants in the DRIP who wish to receive the scrip dividend will need to elect to participate in the Scheme by the applicable election process described above. SECONDARY LISTING IN SOUTH AFRICA The Company secured a secondary listing of all of its Ordinary Shares on the Main Board of the Johannesburg Stock Exchange ("JSE") with effect from the commencement of trade on Thursday 1

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September 2016 ("Secondary Listing"). Any shares purchased on the JSE after the Secondary Listing are ex-dividend and therefore not entitled to the Interim Dividend. However, shareholders who held shares in the Company as at 26 August 2016 and who migrate all or a portion of their shareholding to the JSE following the Secondary Listing are entitled to the Interim Dividend. Shareholders who are entitled to receive the Interim Dividend may elect to receive new Ordinary Shares (which will be listed on the London Stock Exchange ("LSE")) pursuant to the Scheme. FURTHER INFORMATION A Guide to the Hammerson Scrip Dividend Scheme dated 7 March 2016 (the "Guide") setting out the detailed terms and conditions of the Scheme is also available on the Company's website, www.hammerson.com/investors and includes details of the Scheme's application to shareholders holding in CREST. Applications will be made for the scrip dividend shares to be admitted to listing on the Official List of the UK Listing Authority and to trading on the LSE's Main Market for listed securities. Subject to both admissions, the new shares will be issued and new share certificates posted to shareholders holding shares in certificated form. Shareholders holding shares in CREST will have their CREST accounts credited directly. Application will also be made to the JSE for the listing on the JSE of the equivalent number of new shares that will be listed on the LSE pursuant to the Scheme. Shareholders should note that there is no guarantee that the Company will apply the Scheme to any particular future dividend. In addition, due to its status as a Real Estate Investment Trust ("REIT"), the Company is obliged to pay a certain level of distributions as PIDs, which are subject to particular tax treatment in the hands of Shareholders. When a dividend is announced, the Company will advise whether the Scheme is to apply to that dividend and, if so, the relevant details and timetable for that application of the Scheme, including whether that dividend is a PID or nonPID. Information on the Hammerson Scrip Dividend Scheme is available on the Company's website, www.hammerson.com/investors. If you have any questions about the procedure for participation, please call Capita Asset Services on +44 371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 am – 5.30 pm (GMT), Monday to Friday excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes. Alternatively, you can write to Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU.

David Tyler Chairman

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APPENDIX 1 WORKED EXAMPLE OF A PID SCRIP DIVIDEND Shareholders' entitlements to new shares for PID dividends to which the Hammerson Scrip Dividend Scheme applies (a " PID Scheme Dividend") are calculated by taking the amount of cash dividend to which they are entitled, (i.e. the number of Hammerson Ordinary Shares held by that shareholder at the Record Date for that Scheme Dividend multiplied by the cash value of that dividend per share), plus any residual cash balance held over from a previous Share Dividend (a "Cash Balance"), deducting 20% withholding tax where this is required by law, and dividing it by the Scrip Reference Share Price. Shareholders' entitlements to new shares for PID Scheme Dividends will be calculated gross of withholding tax where valid elections have been made demonstrating that withholding tax does not apply. For the purposes of the Interim Dividend, no shareholder will have any residual cash balance. The Scrip Reference Share Price is calculated by taking the average of the middle market quotations for Hammerson Ordinary Shares on the London Stock Exchange as derived from the Daily Official List for the day on which the Ordinary Shares are first quoted "ex" the relevant dividend and the four subsequent dealing days. The Scrip Reference Share Price for the Interim Dividend is 579.0p, as announced by the Company on 2 September 2016. The number of shares a shareholder would receive is calculated as follows: (shares held at the Record Date x 80 per cent of the dividend cash value per share) Scrip Reference Share Price Fractions of Ordinary Shares cannot be allotted and any resulting Cash Balances for shareholders who hold Ordinary Shares in certificated form will be carried forward, without interest, and included in the calculation of the next PID Scheme Dividend payment. Resulting balances will, however not be carried forward for shareholders who hold Ordinary Shares in uncertificated form. Such shareholders will receive any resulting balance in cash on the relevant Dividend Payment Date. By way of example, assuming the following: •

withholding tax applies;

•

a Scheme Dividend with a cash value of 10.1p per Ordinary Share;

•

a shareholder who holds 1,000 Ordinary Shares; and

•

a Scrip Reference Share Price of 579.0p

The shareholder would be entitled to a total amount of cash dividend of £80.80 (i.e. 1,000 Ordinary Shares multiplied by the 10.1p cash value of the Scheme Dividend minus 20 per cent. withholding tax). The total cash value to be applied towards new shares for that shareholder would therefore be £80.80. The number of new shares that the shareholder would receive pursuant to the Scheme would be calculated as follows: (1,000 x 10.1p x 80%)

= 13.96

579.0p

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The shareholder would be entitled to 13 new shares (i.e. 13.96 rounded down to the nearest whole number) with a total value of £75.27 based on the Scrip Reference Share Price of 579.0p. A residual Cash Balance of £5.53, being the total cash value to be applied for the shareholder (£80.80) less the value of the new shares at the PID Scrip Reference Share Price (£75.27), would then either be carried forward and applied to the next Scheme Dividend of the same type in respect of shareholders who hold their Ordinary Shares in certificated form, or paid in cash in respect of shareholders holding in CREST.

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APPENDIX 2 EXPECTED TIMETABLE FOR THE INTERIM DIVIDEND

DATE

EVENT

25 August 2016

Ex-dividend Date

25 August to 1 September 2016 (inclusive)

Scrip Reference Share Price calculation dates

26 August 2016

Record Date

2 September 2016

Scrip Reference Share Price announcement date

19 September 2016

Last date for Capita Asset Services to receive Mandates from shareholders holding certificated shares electing to participate in the Scheme Last date for shareholders holding uncertificated shares on CREST to elect to participate in the Scheme

10 October 2016

Dividend Payment Date Expected date of issue, admission and first day of dealings in the new shares on the LSE Expected date of listing on the JSE of the equivalent number of new shares that will be listed on the LSE pursuant to the Scheme.

POSSIBLE NUMBER OF NEW SHARES TO BE ISSUED IN RESPECT OF THE INTERIM DIVIDEND Based on the Scrip Reference Share Price of 579.0p, if all shareholders were to elect to take up their full entitlement to new shares under the Scheme in respect of the Interim Dividend, approximately 13.8 million new Ordinary Shares would be issued, representing an increase of 1.7% in the issued share capital of the Company (excluding treasury shares) and the total cost of the Interim Dividend if paid wholly in cash would be approximately £80 million.

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APPENDIX 3 SUMMARY OF THE TAX TREATMENT OF DIVIDENDS FOR UK SHAREHOLDERS The following is a general overview of the tax treatment for UK resident shareholders who hold their shares as an investment. It does not consider the laws or practices of countries other than the UK; nor does it consider the position of certain types of shareholder such as dealers in securities, persons acquiring shares in connection with an office or employment, insurance companies and collective investment schemes who may be taxed differently. A fuller tax summary is contained in a Guide to the Hammerson Scrip Dividend Scheme (the "Guide") available on the Company's website, www.hammerson.com/investors. A shareholder's tax position will depend upon their personal circumstances. The following overview is not a complete analysis of all potential tax consequences arising from the payment of a dividend. If you are in any doubt as to your tax position or you are subject to tax in a jurisdiction outside the UK, you should consult an appropriate professional adviser before taking any action. A.

PID SCRIP DIVIDEND

When the Company offers a scrip dividend alternative as a PID, the tax position is as follows: i)

Withholding tax: Subject to certain exceptions (where valid elections have been made) the Company is required to withhold tax at source at the rate of 20% from its PIDs.

ii)

Individual Shareholders: Individuals subject to basic rate income tax will have no further income tax to pay as the 20% tax withheld will fully discharge their income tax liability. Those subject to higher rate income tax will be liable to pay tax at 40% on the gross income (with credit for the 20% tax withheld at source) and those subject to additional rate income tax will be liable to pay tax at 45% on the gross income (again with credit for the 20% tax withheld at source). Those not liable to tax may be entitled to claim repayment of some or all of the tax withheld. Individuals should not be charged capital gains tax on receipt of a PID.

iii)

Corporate Shareholders: Will generally be liable to pay corporation tax on their PID. If income tax is withheld at source, the tax withheld can be set against the shareholder's corporation tax liability. Corporate Shareholders may receive a PID without withholding tax.

B.

PID CASH DIVIDEND

Where the relevant Scheme Dividend is paid as a PID and a UK resident does not elect to receive new shares, the tax position is similar to receipt of a scrip dividend as a PID, as set out in A above.

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