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AXA Property Trust Ld25 October 2006 AXA PROPERTY TRUST LIMITEDPRELIMINARY PROFIT ANNOUNCEMENT These are not the Company's statutory financial statements. All figures are based on audited financial statements. Chairman's Statement Introduction This is the first annual report of AXA Property Trust Limited ("the Company"). Iam pleased that the period since flotation in May 2005 has been successful forthe Company. As at 30 June 2006 AXA Real Estate Investment Managers UK Limited(the "Real Estate Adviser") had invested £76,598,000 across Europe. As at 30September 2006 the sum of committed funds (completed, contracted and optionedassets) amounted to some £115,885,000, representing the commitment of asubstantial proportion of the Company's total funds available for investment(including 35% gearing). Overall, the Group has generated a net profit of £2,955,000 in the 57 weekperiod to 30 June 2006. Excluding one-off formation costs, net profit was£4,220,000. After deduction of one-off costs incurred as part of the set-up andinvestment phase, net asset value at 30 June 2006 was £98,870,000 (98.87 penceper ordinary share). Portfolio Formation Through its European network of offices, the Real Estate Adviser has reviewedover £7 billion of prospective property purchases in Continental Europe and theUK during the reporting period. The Investment Manager, AXA Investment ManagersUK Limited (the "Investment Manager"), has focussed on selecting a portfoliowhich meets the objectives of the Company in providing the target income yield,offering value and potential for growth. With the advantage of unrivalled access to local markets I believe the Companyhas been able to build a quality tailor-made portfolio, rather than one whichinvolves commitment to a single existing portfolio. Diversification is beingachieved through differing lot sizes, spread through countries and regionswithin countries, further spread across types of sector and sub sector (forexample, retail both in and out of town), across types of tenant and bydiffering lease lengths. The Investment Manager does not believe risk weightedreturns will be enhanced through simple diversification over nationalboundaries. I am very pleased to report that as at 30 June 2006 the Company has achieved aportfolio current rental yield before property expenses and acquisition costs of8.1% (current rental yield after property and acquisition costs of circa 6.8%).I believe that this can be primarily attributed to the Real Estate Adviser'sunderstanding of local markets. In the Real Estate Adviser's view, the rentalincome can be considered to be well secured both in terms of duration and wellrated tenant credentials. As the weight of money in the Continental propertyinvestment markets has continued to build over the last 18 months, tradingprices have risen and yields have fallen, providing, in the Investment Manager'sview, strong potential for capital appreciation on the acquired portfolio. Dividend The Company has paid dividends for the reporting period amounting to £5,000,000,representing a cumulative annualised dividend yield of 4.53% of the issue pricefor the reporting period to 30 June 2006. This is slightly below thedistribution target in the Company's prospectus for the financial period to 30June 2006 of around 5.0%. The lower dividend yield reflects a slightly slowerrate of investment than initially anticipated together with lower yields on cashdeposits than assumed in the Prospectus. The outlook for future dividends is positive as the Company becomes fullyinvested and the benefits of gearing are reflected in returns. In addition, theCompany will benefit from the attractive income yields on the propertyinvestments already completed as well as potential future indexation and rentalgrowth. Summary and Prospects As noted in the Investment Manager's Report, the Board has recently decided toapprove a modest increase in gearing to 45%, providing an estimated potentialtotal fund size of £160,660,000. The Company will continue to build on itssuccessful acquisition programme, taking advantage of attractive acquisitionopportunities potentially available, particularly in Continental markets. I believe that the property market, especially in selected parts of ContinentalEurope, has good prospects in the next financial year. Compared to the UK thereare higher yields available, the weight of money overhanging the market islikely to persist over the year and rental markets appear to be graduallystrengthening. None of these markets is however, immune to global economicforces and geo-political events, but rental flows backed by strong corporatetenants are likely to underwrite returns. I am confident of the Company's prospects for the next twelve months with thepotential for value enhancement of the existing portfolio through activeportfolio management, coupled with a sound income base and a good marketbackground. Charles Hunter Chairman Investment Manager's Report Investment Manager AXA Real Estate Investment Managers UK Limited (the "Real Estate Adviser") is awholly owned, indirect subsidiary of AXA Real Estate Investment Managers S.A.,which is in turn a wholly owned subsidiary of AXA Investment Managers S.A. AXA Real Estate Investment Managers S.A. is a specialist in European real estateinvestment management with over €30 billion of real estate assets undermanagement, of which the Real Estate Adviser manages approximately €10.5billion. Real Estate Market For the reporting period to 30 June 2006 most real estate markets across Europehave shown significant positive performance, primarily as a result of yieldcompression. The European investment market remained buoyant, with the stronginflow of debt and equity into real estate forcing property yields furtherdownwards, especially in Germany, Spain, and France. Although there is still a considerable amount of capital committed to realestate investments, market sentiment and performance may ease in 2007,particularly should investors choose to realise their capital gains. However, asoccupier demand increases on the back of the improving European economy andsupply continues to lag, we expect rental growth in 2007 to improve further. In terms of sector performance and outlook, the second half of 2006 has seen anupturn in consumer demand, with household consumption and retail sales growthimproving across European markets. We expect this growth to continue over theshort to medium term in selected Western European countries, particularlyGermany and France. We also expect growth to continue in the medium to long termacross Central and Eastern Europe. Whilst there is still considerable shopping centre and retail park stock in thedevelopment pipeline we expect further rental growth and yield compression inselected markets. In particular, we expect prime locations in medium size andsmall cities in Germany to experience rental and capital growth. Althoughinvestment opportunities remain limited, shopping centres are particularlyattractive due to the above average growth in retail sales and the potential forfurther capital growth in retail warehouses. In line with the improving European economy, there has been a gradual increasein demand for industrial real estate, particularly for distribution warehouses.Overall, the industrial sector has delivered substantial returns and we expectthat the sector will continue to perform strongly again this year, withperformance largely driven by yield compression. Although some office markets remain oversupplied, service sector take-up hasimproved across all major cities, resulting in a decrease in overall vacancyrate and modest rental growth. We expect occupier demand to increase moderatelyacross selected financial centres over the second half of the year particularlyin Germany. Investment Activity AXA Property Trust Limited was launched on 23 May 2005 raising equity of£100,000,000. The net equity was invested in certificates of deposit untilsuitable investment properties were identified and acquired. During the reporting period, the Real Estate Adviser reviewed information onover £7 billion of property in the industrial, office, retail and leisure sectors incountries across Continental Europe and the UK. As at 30 June 2006 the Group hadcompleted on eleven real estate purchases valued at £77,442,000, with a further£15,589,000 of assets contracted and £3,435,000 under option. The portfolio'sgross initial rental yield on purchase of such completed assets as at 30 June2006 was 8.1%. As at 30 September 2006, the Group had achieved a 4.7% capital appreciation onpurchase price (1.1% on purchase price plus acquisition costs) on the assetsowned as at 30 June 2006. Between 1 July and 30 September 2006 the Group completed on two furthertransactions at a gross initial yield of 7.7%, bringing the total value ofcompleted assets to £97,269,000. As at 30 September 2006, the total committedinvestment (completed, contracted and optioned) was £115,885,000, with a grossinitial yield of 7.8%. With gearing of 35% (providing an estimated total potential fund size of£138,030,000), the Investment Manager is pleased to confirm that as at 30September 2006 the remaining £22,145,000 has been allocated to specificinvestments by putting a number of target properties under offer. Property Portfolio at 30 June 2006 Property Country Sector Market Gross Net % of total Value rental rental assets yield yield2 (less (1) current £'000s liabilities) SS Bergamina,Agnadello Italy Industrial 20,809 7.5% 7.1% 21.0%PhoenixCentre, Furth Germany Retail 18,244 7.2% 6.5% 18.5%Smakterweg,Venray Netherlands Industrial 7,259 8.3% 7.4% 7.3%RuednitzerChaussee,Bernau Germany Retail 6,650 8.5% 7.6% 6.7%Keyser Center,Antwerp Belgium Retail 5,531 6.7% 6.3% 5.6%FrankfurterStrasse,Wurzburg Germany Retail 3,940 7.1% 6.3% 4.0%Burgermeister-Hess-Strasse,Muhldorf am Inn Germany Retail 3,837 7.2% 6.3% 3.9%LandshuterStrasse,Moosburg Germany Retail 3,457 7.1% 6.4% 3.5%EppingerStrasse,Kraichtal Germany Retail 3,187 7.2% 6.4% 3.2%Die Weidenbach, Altenstadt -Lindheim Germany Retail 2,765 7.2% 6.4% 2.8%BraunschweigerStrasse,Berlin Germany Retail 1,763 7.6% 6.6% 1.8% Total propertyportfolio 77,442 7.5% 6.8% 78.3% Other noncurrent assetsand netcurrent assets 21,428 21.7% Total assetsless currentliabilities 98,870 100.0% Note 1: Gross rental yield excludes property and acquisition costs Note 2: Net rental yield excludes property costs and includes acquisition costsand an estimated 5% of gross rent as property operating costs. Geographical Analysis at 30 June 2006 by market value Germany 57%Italy 27%Netherlands 9%Belgium 7% Within Germany, the portfolio's regional risk profile (at 30 June 2006) was67.2% of German assets in Bavaria, 13.6% in Hessia, 4.0% in Berlin and 15.2% inBrandenburg. Sector Distribution at 30 June 2006 by market value Retail 64%Industrial 36% The Investment Manager believes that the Group's covenant profile is strong,with the majority of tenants rated Grade A or B. The effective unexpired leaselength weighted by rental income for completed transactions as at 30 June 2006was 5.7 years. By 30 September 2006, this had improved to 8.2 years on completedtransactions. Rental income from Grade A covenants increased from 62.5% to 67.7%between 30 June 2006 and 30 September 2006. Vacant space in the portfolio on 30June 2006, measured using market rent, represented 0.6% of the total grossrental income at 30 June 2006. Covenant Strength Analysis at 30 June 2006 Grade A 62.5% Nationally and internationally recognised companiesGrade B 15.6% Regionally recognised companiesGrade C 21.3% Locally recognised companiesVacant 0.6% Calculated using market rent Financing On 1 September 2006 the Board approved the Investment Manager's recommendationto increase the Company's gearing from up to 35% to up to 45% of the value ofthe Company's property portfolio, representing an increase in debt ofapproximately £24,000,000 and an estimated potential total fund size of£160,660,000 (after estimated acquisition costs). The increased gearing iswithin the 50% maximum limit outlined in the Company's Prospectus. Thisincreased gearing provides the Company with further opportunity to benefit fromyield compression generated by potential European rental growth and the highlevel of funds available for investment in the European and UK market. TheCompany will utilise the increased funding to continue to identify and purchasestock which shows income and capital growth in the context of a risk managedportfolio. A Company hedging programme is being implemented in the short term to providemedium term protection against exchange rate fluctuations that may arise as aresult of investing the Sterling equity into Euro denominated assets. The keyfeature of the programme is an exchange of future net cash flows from Euro toSterling for a five year period. The hedge will not be taken for the full amountof anticipated cash flows to allow for variations arising from the unpredictablenature of such forward estimates. The status of interest rate, currency andequity hedging will be regularly reviewed by the Investment Manager to adjustfor variables such as property valuations and predicted cash flows. Outlook The modest increase in the Company's gearing will allow the Company to makefurther investment across Europe and thereby benefit from anticipated yieldcompression. Board of Directors Charles Hunter (Chairman) is a non executive director of a number oforganisations involved in property investment, including, PIL Group Ltd, ProtegoReal Estate Funds plc and is on the Advisory Board of Schroder Exempt PropertyUnit Trust. He is also a trustee of St Monica Trust. He has around 30 years ofexperience in property investment, principally in UK commercial property. Duringthis time, he was the Head of Property Investment of Insight Investment(formerly Clerical Medical Investment Group) and also was the Property Directorof the investment management subsidiaries of The National Mutual of Australasiagroup in the United Kingdom. Charles is a Fellow of the Royal Institution ofChartered Surveyors and a member of the Investment Property Forum. He isresident in the United Kingdom. Richard Ray is Managing Director of AXA Real Estate Investment Managers BelgiumS.A. (AXA REIM). He has around 25 years of property experience, especially withthe commercial real estate markets in Belgium and in other parts of Europe.Prior to joining AXA, he was the Head of Investment at ATIS REAL August ThouardS.A. From 1987 to 2000, he worked with CB Richard Ellis S.A. (formerly RichardEllis S.A.), first as an Investment and Valuation Surveyor and then as a Managerin the Investment Department. In 1994, Richard was appointed Director ofInvestment, Valuation and Research. He is a member of the Royal Institution of Chartered Surveyors and certified as a"Titulaire" of the Belgian Institut Professionel de l'immobilier (Real EstateInstitute). He is resident in Belgium. Stephane Monier has over 15 years of experience in fixed income, foreignexchange markets and asset allocation. Mr Monier is currently the ChiefInvestment Officer for European Fixed Income at Fortis Investments responsiblefor various sectors including money market, government bonds and corporatebonds. Prior to joining Fortis he was Head of Fixed Income and Currency in theAbu Dhabi Investment Authority (ADIA) and he spent seven years in JP MorganInvestment Management as a Fixed Income Manager both in London and Paris.Stephane has a Masters Degree in Science from INAPG (Paris) and a Masters Degreein International Finance from HEC Graduate School of Business (Jouy en Josas)(France). He is also a CFA charterholder. He is resident in the United Kingdom. John Marren is a Director of Northern Trust International Fund AdministrationServices (Guernsey) Limited (formerly Guernsey International Fund ManagersLimited) where he is Head of Real Estate Fund Administration. Prior to joiningNorthern Trust International Fund Administration Services (Guernsey) Limited in1992, he worked for KPMG in Guernsey where he was responsible for the audit of aportfolio of entities in the Finance Industry. John currently holds a number ofnon-executive board appointments in fund management and investment companiesincluding several real estate funds. He has a Bachelor of Commerce Degree fromUniversity College Galway in Ireland, is a Fellow of the Institute of CharteredAccountants in Ireland and a Member of the Institute of Bankers in Ireland. Heis resident in Guernsey. Gavin Farrell is qualified as a Solicitor of the Supreme Court of England andWales, a French Avocat and an Advocate of the Royal Court of Guernsey. He is apartner at Ozannes, Advocates & Notaries Public, in Guernsey and specialises ininternational and structured finance and collective investment schemes. Gavinholds a number of directorships in investment and captive insurance companies.He is resident in Guernsey. Report of the Directors The Directors present their report and audited financial statements of the Groupand parent Company for the period from incorporation on 5 April 2005 to 30 June2006. Principal Activity AXA Property Trust Limited (the "Company") is a Guernsey registered closed-endedproperty investment company listed on the London Stock Exchange. Trading in theCompany's ordinary shares commenced on 18 April 2005. Results and Dividends The results for the period are set out in the attached accounts. The Company has paid quarterly dividends related to the period ended 30 June2006 as follows: Payment date Rate per ShareFirst interim 25 August 2005 0.45p Second interim 30 November 2005 1.10p Third interim 28 February 2006 1.00p Fourth interim 24 May 2006 1.00p A further dividend of £1,450,000 (1.45 pence per share) was approved on 4 August2006. The ex-dividend date was 16 August 2006 and the payment date was 4September 2006. Listing Requirements Throughout the period until 30 June 2005 the Company complied with theconditions applicable to property investment companies set out in paragraphs21.27(e) to 21.27(i) of the Listing Rules in effect at that time. On 1 July2005, new Listing Rules were brought into effect. The Company considers that ithas, since that date, complied (and intends to continue to comply) with theconditions applicable to property investment companies set out in paragraph15.5.15R of the new Listing Rules, save as disclosed below. At the time of acquisition and at year end, the value of each of the propertiesin Agnadello and Furth exceeded 15% of gross assets of the company (which atthat time did not include gearing as the company had not drawn down on its loanfacility with Calyon Corporate and Investment Bank), the maximum permitted underthe UKLA Listing Rules. The ongoing investment programme and the disposal of 50%of the shareholding in the subsidiary holding the Agnadello asset have reducedthe percentage value of both properties to below the 15% maximum. Directors The Directors who held office during the period as at 30 June 2006 were: C. J. Hunter (Chairman) - appointed 5 April 2005G. J. Farrell - appointed 5 April 2005R. G. Ray - appointed 5 April 2005J. M. Marren - appointed 5 April 2005S. C. Monier - appointed 5 April 2005 The directors have no interest in the shares of the Company. Mr Marren is a director of the Administrator, Northern Trust International FundAdministration Services (Guernsey) Limited. Mr Farrell is a partner of the Company's legal advisers, Ozannes, Advocates andNotaries Public. Mr Ray is Managing Director of AXA Real Estate Investment Manager Belgium S.A. Mr Hunter and Mr Ray are also directors of the three direct subsidiaries of AXAProperty Trust Limited. Biographical details of each of the Directors are shown above. In accordancewith the Company's Articles of Association each Director will retire at theAnnual General Meeting, being the first such meeting following his appointmentand, being eligible, offers himself for re-election. As stated under CorporateGovernance below, an evaluation of the performance of individual Directors wasnot carried out during the period but will be undertaken during the next year.However, the Board believes that the performance of each Director continues tobe effective and demonstrates commitment to the role. During the period theDirectors of the Company received the following emoluments in the form of fees: C. J. Hunter £22,082G. J. Farrell £16,562R. G. Ray £16,562J. M. Marren £16,562S. C. Monier £16,562 ------------ £88,330 The Directors of the subsidiaries Property Trust Netherlands 1 B.V., PropertyTrust Luxembourg 1, Property Trust Sarl Luxembourg 2 Sarl and Property TrustLuxembourg 3 Sarl received total emoluments amounting to £7,218, resulting intotal fees paid to Directors of the Group of £95,548. Management AXA Investment Managers UK Limited (the "Investment Manager") providesmanagement services to the Company. A summary of the contract between theCompany and the Investment Manager in respect of management services provided isgiven in Note 3 to the accounts. Since the period end, the Board has reviewedthe appropriateness of the Investment Manager's appointment. In carrying out thereview the Board considered the investment performance of the Company during itsfirst accounting period and the capability and resources of the InvestmentManager to deliver satisfactory investment performance. It also considered thelength of the notice period of the investment management contract and the feespayable to the Investment Manager, together with the standard of the otherservices provided. Following this review, it is the Directors' opinion that thecontinuing appointment of the Investment Manager on the terms agreed is in theinterests of shareholders as a whole. Significant Shareholdings Shareholders with holdings more than 3 per cent. of the issued ordinary sharesof the Company as at 16 October 2006 were as follows: Number of shares Percentage of share capitalHSBC Global Custody Nominee (UK) Limited 36,147,123 36.15Nutraco Nominees Limited 14,120,863 14.12Morgan Stanley Quilter Nominees Limited 7,959,079 7.96Nortrust Nominees Limited 4,583,837 4.58Chase Nominees Limited 5,160,419 5.16 Statement of Directors' Responsibilities The Directors are responsible for preparing financial statements for eachfinancial period which give a true and fair view of the state of affairs of theCompany as at the end of the financial period and of the total profit or loss ofthe Company for that period. In preparing those financial statements theDirectors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether applicable accounting standards have been followed, subjectto any material departures disclosed and explained in the financial statements;and • prepare the financial statements on a going concern basis unless it isinappropriate to presume that the Company will continue in business. The Directors are responsible for keeping proper accounting records whichdisclose with reasonable accuracy at any time the financial position of theCompany and to enable them to ensure that the financial statements have beenproperly prepared in accordance with The Companies (Guernsey) Law, 1994. They are also responsible for safeguarding the assets of the Company and hencefor taking reasonable steps for the prevention and detection of fraud and otherirregularities. Corporate Governance Introduction As a closed-ended investment company registered in Guernsey, the Company iseligible for exemption from the requirements of the Combined Code (the "Code")issued by the Financial Reporting Council but must disclose whether or not itcomplies with the corporate governance regime of its country of incorporationand the significant ways in which its actual practice differs from the Code. Inthe absence of a formal corporate governance regime in its country ofincorporation, the Board has put in place a framework for corporate governancewhich it believes is suitable for an investment company and which enables theCompany voluntarily to comply with the main requirements of the Code, which setsout principles of good governance and a code of best practice. Arrangements in respect of corporate governance have therefore been made by theBoard, which it believes are appropriate for the Company. Except as disclosed inthe following paragraphs, the Company complied throughout the period with theprovisions of the Code. Since all the Directors are non-executive the provisionsof the Code in respect of Directors' remuneration are not relevant to theCompany except in so far as they relate to non-executive Directors. In view of its non-executive nature and the requirement of the Articles ofAssociation that all Directors retire by rotation at least every three years,the Board considers that it is not appropriate for the Directors to be appointedfor a specified term as recommended by Code provision A.7.2, for a SeniorIndependent Director to be appointed as recommended by Code provision A.3.3, norfor there to be a Nomination Committee as recommended by Code provision A.4.1. In addition, the Board did not consider it appropriate to carry out anevaluation of the Board, Committees and individual Directors during the firstaccounting period and the Company is therefore not able to provide thedisclosure recommended by Code provision A.6.1. However, an evaluation will beundertaken during the coming year. The Board consists solely of non-executive Directors of which Mr Hunter isChairman. With the exception of Mr Ray all Directors are considered by the Boardto be independent of the Company's Manager. New Directors receive an induction from the Managers and Secretary on joiningthe Board, and all Directors receive other relevant training as necessary. The Company has no executive directors or employees. All matters, includingstrategy, investment and dividend policies, gearing, and corporate governanceprocedures, are reserved for the approval of the Board of Directors. The Boardcurrently meets at least quarterly and receives full information on theCompany's investment performance, assets, liabilities and other relevantinformation in advance of Board meetings. The Audit Committee, which was formed on 1 September 2006, chaired by Mr Marren,operates within clearly defined terms of reference and comprises all theDirectors except for Mr Ray. The duties of the Audit Committee in dischargingits responsibilities include reviewing the Annual and Interim Accounts, thesystem of internal controls, and the terms of the appointment of the auditorstogether with their remuneration. It is also the forum through which the auditors report to the Board of Directorsand meets at least twice yearly. The first meeting was held on 1 September 2006.The objectivity of the auditors is reviewed by the Audit Committee which alsoreviews the terms under which the external auditors are appointed to performnon-audit services. The Committee reviews the scope and results of the audit,its cost effectiveness and the independence and objectivity of the auditors,with particular regard to non-audit fees. Such fees amounted to £8,953 for theCompany for the period ended 30 June 2006 and related to a review of the interimfinancial information and services in connection with the launch of the Companywhich are normal practice. Notwithstanding such services the Audit Committeeconsiders KPMG Channel Islands Limited to be independent of the Company and thatthe provision of such non-audit services is not a threat to the objectivity andindependence of the conduct of the audit. The Management Engagement Committee, chaired by Mr Hunter, comprises the fullBoard, except for Mr Ray, and reviews the appropriateness of the InvestmentManager's continuing appointment together with the terms and conditions thereofon a regular basis. The Management Engagement Committee held its first meetingon 1 September 2006. The table below sets out the number of Board meetings held during the periodfrom the Company's launch to 30 June 2006 and the number of meetings attended byeach Director. Board of Directors Audit Committee Management Engagement Committee Held Attended Held Attended Held Attended C. J. 25 12 - - - -HunterG. J. 25 19 - - - -FarrellR. G. Ray 25 14 - - - -J. M. 25 18 - - - -MarrenS. C. 25 7 - - - -Monier The Audit Committee meeting was attended by Mr Marren (Chairman), Mr Hunter,Mr Farrell and Mr Monier, and Mr Ray who was invited to attend as an observer. The Management Engagement Committee on 1 September 2006 was attended byMr Marren, Mr Hunter, Mr Farrell and Mr Monier. Individual directors may, at the expense of the Company, seek independentprofessional advice on any matter that concerns them in the furtherance of theirduties. The Company maintains appropriate Directors' and Officers' liabilityinsurance. After making enquiries, and bearing in mind the nature of theCompany's business and assets, the Directors consider that the Company hasadequate resources to continue in operational existence for the foreseeablefuture. For this reason, they continue to adopt the going concern basis inpreparing the accounts. Internal Controls The Board is responsible for the Company's system of internal control and forreviewing its effectiveness. The Board has therefore established an ongoingprocess designed to meet the particular needs of the Company in managing therisks to which it is exposed, consistent with the guidance provided by theTurnbull Committee. Such review procedures have been in place throughout the financial period and upto the date of approval of the Annual Report, and the Board is satisfied withtheir effectiveness. By their nature these procedures can provide reasonable,but not absolute, assurance against material misstatement or loss. At each Boardmeeting the Board monitors the investment performance of the Company incomparison to its stated objective and against comparable companies. The Boardalso reviews the Company's activities since the last Board meeting to ensurethat the Investment Manager adheres to the agreed investment policy and approvedinvestment guidelines and, if necessary, approves changes to such policy andguidelines. In addition, at each quarterly Board meeting the Board receivesreports from the Secretary in respect of compliance matters and duties performedon behalf of the Company. The Board has reviewed the need for an internal audit function. The Board hasdecided that the systems and procedures employed by the Investment Manager andthe Secretary, including their internal audit functions, provide sufficientassurance that a sound system of internal control which safeguards the Company'sassets is maintained. An internal audit function specific to the Company istherefore considered unnecessary. Relations with Shareholders The Board welcomes shareholders' views and places great importance oncommunication with its shareholders. The Board receives regular reports on theviews of shareholders and the Chairman and other Directors are available to meetshareholders if required. The Annual General Meeting of the Company provides aforum for shareholders to meet and discuss issues with the Directors andInvestment Manager of the Company. Directors' Authority to Buy Back Shares The authority of the Company to make market purchases of up to 14.99 per cent.of the issued Ordinary Share Capital was renewed by way of a Special Resolutionat the Annual General Meeting held on 5 October 2006 until the earlier of theAnnual General Meeting in 2007 and 31 December 2007. Any buy back of shares willbe made subject to Guernsey law and within guidelines established from time totime by the Board (which will take into account the income and cash flowrequirements of the Company) and the making and timing of any buy backs will beat the absolute discretion of the Board. Purchase of Shares will only be madethrough the market for cash at prices below the prevailing Net Asset Value ofthe Shares where the Directors believe such purchase will enhance Shareholdervalue. Such purchases will also only be made in accordance with the rules of the UKListing Authority which set a cap on the price that the Company can pay. The Company passed a special resolution to cancel the amount standing to thecredit of its share premium account on 13 April 2005. On 24 June 2005 the RoyalCourt of Guernsey confirmed the reduction of capital by way of cancellation ofthe Company's and Group's share premium account. The amount cancelled, being£100 million, has been credited as a distributable reserve established in theCompany's books of account and shall be available as distributable profits to beused for all purposes permitted under Guernsey law, including the payment ofdividends. Auditors KPMG Channel Islands Limited have expressed their willingness to continue inoffice as auditors and a resolution proposing their re-appointment will besubmitted at the Annual General Meeting. Charles Hunter John MarrenChairman Director25 October 2006 25 October 2006 Independent Auditors Report We have audited the Group and parent Company financial statements (the"financial statements") of AXA Property Trust Limited (the "Company") for theperiod ended 30 June 2006 which comprise the consolidated and Company incomestatements, the consolidated and Company balance sheets, the consolidated andCompany cash flow statements, the consolidated and Company statements of changesin equity and the related notes. These financial statements have been preparedunder the accounting policies set out therein. This report is made solely to the Company's members, as a body, in accordancewith section 64 of The Companies (Guernsey) Law, 1994. Our audit work has beenundertaken so that we might state to the Company's members those matters we arerequired to state to them in an auditor's report and for no other purpose. Tothe fullest extent permitted by law, we do not accept or assume responsibilityto anyone other than the Company and the Company's members as a body, for ouraudit work, for this report, or for the opinions we have formed. Respective Responsibilities of Directors and Auditors The Directors are responsible for preparing the Directors' Report and thefinancial statements in accordance with applicable Guernsey law andInternational Financial Reporting Standards as set out in the Statement ofDirectors' Responsibilities above. Our responsibility is to audit the financial statements in accordance withrelevant legal and regulatory requirements and International Standards onAuditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a trueand fair view and are properly prepared in accordance with The Companies(Guernsey) Law, 1994. We also report to you if, in our opinion, the Company hasnot kept proper accounting records, or if we have not received all theinformation and explanations we require for our audit. We read the Directors' Report and consider the implications for our report if webecome aware of any apparent misstatements within it. We read the other information accompanying the financial statements and considerwhether it is consistent with those statements. We consider the implications forour report if we become aware of any apparent misstatements or materialinconsistencies with the financial statements. Basis of Audit Opinion We conducted our audit in accordance with International Standards on Auditing(UK and Ireland) issued by the Auditing Practices Board. An audit includesexamination, on a test basis, of evidence relevant to the amounts anddisclosures in the financial statements. It also includes an assessment of thesignificant estimates and judgements made by the Directors in the preparation ofthe financial statements, and of whether the accounting policies are appropriateto the Company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information andexplanations which we considered necessary in order to provide us withsufficient evidence to give reasonable assurance that the financial statementsare free from material misstatement, whether caused by fraud or otherirregularity or error. In forming our opinion we also evaluated the overalladequacy of the presentation of information in the financial statements. Opinion In our opinion the financial statements: • give a true and fair view, in accordance with International FinancialReporting Standards, of the state of the Group's and the Company's affairs as at30 June 2006 and of the Group's and the Company's profit for the period thenended; and • have been properly prepared in accordance with the Companies (Guernsey)Law, 1994. KPMG Channel Islands LimitedChartered AccountantsGuernsey25 October 2006 Income Statement Consolidated and Company Income Statements for the period from 5 April 2005 to30 June 2006 Notes Group Company £'000s £'000sGross rental income 4 1,864 -Service charge income 79 -Property operating expenses (190) -Net rental and related income 1,753 - Net interest income from certificates on deposit andbank deposits 3,750 3,721Interest income from loans to subsidiaries - 1,588Foreign exchange gains on loans granted tosubsidiaries - 458Net investment income 3,750 5,767 Valuation gains on investment properties 701 -Valuation losses on investment properties (414) -Net valuation gains on investment property 287 - Distribution income 18 - 7,478 Formation expenses (1,265) (1,019)Investment management fees (208) -Administrative expenses 5 (1,330) (362)Total expenses (2,803) (1,381) Other income 10 10 Net operating profit before net financingincome/(costs) 2,997 11,874 Profit before tax 2,997 11,874 Income tax expense 12 (42) - Profit for the period 2,955 11,874Basic and diluted profit per ordinary share (pence) 0.0295 The accompanying notes form an integral part of these financial statements. Statement of Changes in Equity Consolidated Statement of Changes in Equity for the period from 5 April 2005 to30 June 2006 Share Revaluation Revenue Distributable Foreign Total premium reserve reserve reserve exchange reserve £'000s £'000s £'000s £'000s £'000s £'000s Note 16 Note 16 Note 16Balance at 5 - - - - - -April 2005 Movementsduring theperiod:Sharepremium 100,000 - - - - 100,000on issueCancellationof sharepremium (100,000) - - 100,000 - -Placing fees - - - (981) - (981)Net profitfor - 287 2,668 - - 2,955the periodDividends - - (2,668) (882) - (3,550)paidForeignexchangetranslationgains - - - - 446 446 Balance at30 - 287 - 98,137 446 98,870June 2006 Statement of Changes in Equity for the Company for the period from 5 April 2005to 30 June 2006 Share Capital Revenue Distributable Foreign Total premium reserve reserve reserve exchange reserve £'000s £'000s £'000s £'000s £'000s £'000s Note 16 Note 16 Note 16Balance at 5 - - - - - -April 2005 Movementsduring theperiod: Sharepremium 100,000 - - - - 100,000on issueCancellationof sharepremium (100,000) - - 100,000 - -Placing fees - - - (981) - (981)Distributionincome - 7,478 - - - 7,478Net profitfor - - 4,396 - - 4,396the periodDividends - - (3,550) - - (3,550)paid Balance at30 - 7,478 846 99,019 - 107,343June 2006 Share capital has not been included in the Statement of Changes in Equity as theshares were issued at no par value. The accompanying notes form an integral part of these financial statements. Balance Sheet Consolidated and Company Balance Sheets as at 30 June 2006 Group Company Note £'000s £'000sNon-current assets Investment properties 7 77,442 -Property, plant and equipment 3 -Investment in subsidiary undertakings 19 - 1,646Intra group loans receivable 18 - 94,243Other assets 7 344 171Deferred tax assets 12 349 - Current assetsCash and cash equivalents 8 22,077 2,187Intra group loans receivable 18 - 7,581Trade and other receivables 9 6,095 1,616 Total assets 106,310 107,444 Current liabilitiesTrade and other payables 10 7,075 101 Non-current liabilitiesDeferred tax liability 12 365 - Total liabilities 7,440 101 Net Assets 98,870 107,343 EquityShare capital 13 - -Reserves 16 98,870 107,343 Total equity 98,870 107,343 Number of ordinary shares 100,000 Net asset value per ordinary share (pence) 14 98.87 This preliminary profit announcement was approved by the Board of Directors on25 October 2006. The accompanying notes form an integral part of these financial statements. Statement of Cash Flows Statement of Cash Flows for the period from 5 April 2005 to 30 June 2006 Group Company £'000s £'000s Operating activitiesNet profit for the period 2,997 11,874Adjustments for:Unrealised gain on revaluation of investment property (287) -Unrealised gain on revaluation of loans to fair value - (7,478)Foreign exchange loss - 19Increase in trade and other receivables (1,133) (1,616)Increase in trade and other payables 1,265 101Investment income (2,769) (3,056)Bank interest (694) (665) Net cash outflow from operating activities (621) (821) Investing activitiesInvestment in subsidiaries - (1,646)Investment income received 3,056 3,056Interest paid (18) -Interest received 712 664Tax paid (17) -Acquisition of investment properties (76,598) -Acquisition of other investments (173) -Acquisition of certificates of deposit (167,000) (167,000)Proceeds from sale of certificates of deposit 167,000 167,000Loans to subsidiaries - (94,346)Other (5) - Net cash outflow from investing activities (73,043) (92,272) Financing activitiesProceeds from the issue of shares 100,000 100,000Finance costs (171) (171)Issue costs (981) (981)Dividends paid (3,550) (3,550) Net cash inflow from financing activities 95,298 95,298 Effect of exchange rate fluctuations on cash held 443 (18) Increase in cash and cash equivalents 22,077 2,187 Cash and cash equivalents at start of period - - Cash and cash equivalents at 30 June 2006 22,077 2,187 The accompanying notes form an integral part of these financial statements. Notes to the Financial Statements Notes to the Financial Statements for the Period from 5 April 2005 to 30 June2006 1. Operations AXA Property Trust Limited (the "Company") is a limited liability, closed-endedinvestment company incorporated in Guernsey. The Company invests in commercialproperties in Europe which are held through its subsidiaries. The ConsolidatedFinancial Statements of the Company for the period ended 30 June 2006 comprisethe Financial Statements of the Company and its subsidiaries (together referredto as the "Group"). 2. Principal Accounting Policies (a) Statement of compliance The Consolidated Financial Statements have been prepared in accordance withInternational Financial Reporting Standards ("IFRS") issued by, or adopted by,the International Accounting Standards Board (the "IASB"), interpretationsissued by the International Financial Reporting Standards Committee, applicablelegal and regulatory requirements of Guernsey Law and the Listing Rules of theUK Listing Authority. (b) Basis of preparation The preparation of Financial Statements in conformity with IFRS requiresmanagement to make judgement, estimates and assumptions that affect theapplication of policies and the reported amounts of assets and liabilities,income and expenses. The estimates and associated assumptions are based onhistorical experience and various other factors that are believed to bereasonable under the circumstances, the results of which form the basis ofmaking judgements about carrying values of assets and liabilities that are notreadily apparent from other sources. Actual results may differ from theseestimates. (c) Foreign currency translation (i) Functional and presentation currency The Company's functional currency is Sterling and the subsidiaries functionalcurrency is Euro. The presentation currency of the Company and the Group isSterling. (ii) Foreign currency transactions Transactions in foreign currencies are translated to Sterling at the spotforeign exchange rate ruling at the date of the transaction. Monetary assets andliabilities denominated in foreign currencies at the balance sheet date aretranslated to Sterling at the foreign exchange rate ruling at that date. Foreignexchange differences arising on translation are recognised in the incomestatement. Non-monetary assets and liabilities that are measured at historicalcost in a foreign currency are translated using the exchange rate at the date ofthe transaction. Non-monetary assets and liabilities denominated in foreigncurrencies that are stated at fair value are translated to Sterling at foreignexchange rates ruling at the dates the fair value was determined. (iii) Financial statements of foreign operations The assets and liabilities of foreign operations arising on consolidation aretranslated to Sterling at the foreign exchange rates ruling at the balance sheetdate. The income and expenses of foreign operations are translated to Sterlingat an average rate. Foreign exchange differences arising on retranslation arerecognised as a separate component of equity. (d) Basis of consolidation (i) Subsidiaries Subsidiaries are those entities, including special purpose entities, controlledby the Company. Control exists when the Company has the power, directly orindirectly, to govern the financial and operating policies of an entity so as toobtain benefits from its activities. The Company owns 100% of the issued sharecapital of Property Trust Luxembourg 1 Sarl, Property Trust Luxembourg 2 Sarl,and Property Trust Luxembourg 3 Sarl, companies incorporated in Luxembourg whoseprincipal business is that of an investment holding company and propertycompany. The consolidated results of these subsidiaries are included in theconsolidated financial statements. Subsidiaries are consolidated from the dateon which control is transferred to the Group and cease to be consolidated fromthe date on which control is transferred out of the Group. Subsidiaries areaccounted for at cost less impairment in the Company's financial statements. (ii) Transactions eliminated on consolidation. Intra group balances and any unrealised gains and losses arising from intragroup transactions are eliminated in preparing the consolidated financialstatements. (e) Income recognition Income from certificates of deposit and interest income from banks andsubsidiaries are recognised on an effective yield basis. Rental income from investment property leased out under operating leases isrecognised in the income statement on a straight-line basis over the term of thelease. (f) Expenses Expenses are accounted for on an accruals basis. Service costs for service contracts entered into by the Group acting as theprincipal are recorded when such services are rendered. The Group is entitled torecover such costs from the tenants of the investment properties. The recoveryof costs is recognised as service income on an accrual basis. (g) Formation and placing expenses Formation and placing expenses include fees arising from the establishment ofthe Company, the offer for subscription and admission. These include theSponsor's fee, set up costs, legal and accounting fees and any other initialexpenses. An amount equal to two per cent. of the subscription proceeds has beenaccrued to meet the expenses. Any excess will be settled by the InvestmentManager. The Investment Manager will be reimbursed for any formation and initialexpenses paid above the initial expenses provision by way of commission for hisservices. A total balance of £1,019,000 has been expensed to the incomestatement in respect of formation expenses for the Company (£1,265,000 for theGroup). Placing expenses are the expenses incurred in the raising of sharecapital. Placing expenses amounted to £981,000 and have been set off against thespecial distributable reserve. (h) Cash and cash equivalents Cash and cash equivalents comprises cash balances and call deposits carried atcost. Cash equivalents are short term, highly liquid investments that arereadily convertible to known amounts of cash and which are subject to aninsignificant risk of changes in value. (i) Dividends Dividends are recognised as a liability in the period in which they becomeobligations of the Company. All dividends are paid as interim dividends. Interimdividends are recognised when paid. Final dividends are recognised once they areapproved by shareholders. (j) Provisions A provision is recognised in the balance sheet when the Group has a legal orconstructive obligation as a result of a past event, and it is probable that anoutflow of economic benefits will be required to settle the obligation. (k) Investment properties Investment properties are those which are held to earn rental income and capitalappreciation and are recognised as such once all material conditions in theexchanged purchase contracts are satisfied. They are initially recognised atcost, being the fair value of consideration given, including transaction costsand any acquisition costs directly attributable to the acquisition of theproperty. Acquisition costs incurred on exchanged but not completed contractsare recognised as other assets in the balance sheet. Acquisition costs onproperties under offer which had not exchanged by 30 June 2006 are expensed inthe income statement. After initial recognition, investment properties are measured at fair valueusing the fair value model with unrealised gains and losses recognised in theconsolidated income statement. Realised gains and losses upon disposal ofproperties are recognised in the consolidated income statement. Quarterlyvaluations are carried out by Knight Frank LLP, external independent valuers inaccordance with the RICS Appraisal and Valuation Standards. The properties havebeen valued on the basis of open market value, which is the estimated amount forwhich a property should exchange on the date of valuation in an arm's-lengthtransaction. Valuations reflect, where appropriate, the types of tenants actually inoccupation or responsible for meeting lease commitments or likely to be inoccupation after letting of vacant accommodation and the market's generalperception of their creditworthiness, the allocation of maintenance andinsurance responsibilities between lessor and lessees, and the remainingeconomic life of the property. It has been assumed that whenever rent reviews orlease renewals are pending with anticipated reversionary increases, all noticesand where appropriate counter notices have been served validly and within theappropriate time. Properties are leased out under operating leases and classified as investmentproperty. (l) Short term investments Certificates of deposit are measured at fair value which is market value, allhaving a maturity of less than one year. Certificates of deposit are recognisedon acquisition and shown in current assets on the balance sheet, they arederecognised on disposal with any realised gains or losses being included on theincome statement. Income from certificates of deposit is recognised on aneffective yield basis. (m) Impairment The carrying amounts of the Group's assets, other than investment property, arereviewed at each balance sheet date to determine whether there is any indicationof impairment. If any such indication exists, the asset's recoverable amount isestimated. An impairment loss is recognised whenever the carrying amount of anasset exceeds its estimated recoverable amount. Impairment losses are recognisedin the income statement. (n) Segmental reporting The Directors are of the opinion that the Group is engaged in a single segmentof business being the property investment business. It operates in a singlegeographical segment (Europe) and the properties are let mainly to commercialentities. (o) Intercompany loans Loans between the parent Company and its subsidiaries that are not at a marketrate of interest are initially recognised at fair value based on an estimatedmarket rate with the resultant gain or loss being recognised initially in theCompany's income statement. Subsequently, these are measured at amortised coston an effective yield basis. Interest on these loans will accrue to the Companyat the market rate on an effective yield basis over the term of the loans. SeeNote 18 for more details of these loans. (p) Taxation The Company has obtained exempt company status in Guernsey under the terms ofthe Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 and accordingly issubject to an annual fee of £600. The Directors intend to conduct the Group'saffairs such that it continues to remain eligible for exemption. The Company's subsidiaries are subject to income tax on any income arising oninvestment properties, after deduction of debt financing costs and otherallowable expenses. However, when a subsidiary owns a property located in acountry other than its country of residence the taxation of the income isdefined in accordance with the double taxation treaty signed between the countrywhere the property is located and the residence country of the subsidiary. Income tax on the profit or loss for the year comprises current tax. Current taxis the expected tax payable on the taxable income for the year as determinedunder local tax law, using tax rates enacted or substantially enacted at thebalance sheet date, and any adjustment to tax payable in respect of previousperiods. Deferred income tax is provided using the liability method, providing fortemporary differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amount used for taxation purposes. Theamount of deferred tax provided is based on the expected manner of realisationor settlement of the carrying amount of assets and liabilities, using tax ratesenacted or substantially enacted at the balance sheet date. Deferred tax assetsare recognised only to the extent that it is probable that future taxableprofits will be available against which the asset is utilised. Details ofcurrent tax and deferred tax assets and liabilities are disclosed in note 12. 3. Material Agreements (i) AXA Investment Managers UK Limited has been appointed as the InvestmentManager of the Group pursuant to an Investment Management Agreement dated 18April 2005. The Investment Manager will be responsible for advising the Group onthe overall management of the Group's investments and for managing the Group'sinvestments in fixed income instruments in accordance with the Group'sinvestment objective and policy, subject to the overall supervision of theDirectors. Under the terms of the Investment Management agreement, theInvestment Manager will be entitled to a management fee of 90 basis points perannum of gross assets together with reasonable expenses payable quarterly inarrears, save for the first accounting period ended 30 June 2006 during whichthe investment management fee will be calculated based on the property portfoliovalue which does not excludes the value of fixed income instruments held by theCompany during its first financial period. The management fee shall be reducedby an amount equal to the fees payable to the Real Estate Adviser by theproperty subsidiaries such that the total fees payable by the Group to theInvestment Real Estate Adviser and Investment Manager will not exceed 90 basispoints per annum. The Investment Management Agreement may not be terminated by either the Companyor the manager without cause prior to the second anniversary of the InvestmentManagement Agreement. Thereafter, either party may terminate the InvestmentManagement Agreement on not less than twelve months' notice in writing. (ii) UBS Limited has been appointed as the Sponsor. The Sponsor's fee is 20basis points per annum of gross assets calculated as at 30 September and payableon 30 December annually in arrears, save for the Company's first financialperiod ending 30 June 2006 during which the Sponsor's fee will be 20 basispoints per annum of the property portfolio value which excludes the value offixed income instruments held by the Company. (iii) Northern Trust International Fund Administration Services (Guernsey)Limited has been appointed as Administrator, Secretary and Registrar pursuant tothe Administration Agreement dated 13 April 2005. The administrator will beentitled to receive a fixed fee of £65,000 per annum plus a variable fee whichis dependent on additional work carried out by the Administrator for the Companyfrom time to time. In addition, the Administrator shall be entitled to bereimbursed for all reasonable out of pocket expenses incurred in the performanceof its duties. (iv) HSBC Global Investors has been appointed as Custodian in respect of theCompany's fixed income investments. 4. Gross Rental Income Gross rental income for the period ended 30 June, 2006 amounted to £1,864,000.The Group leases out all of its investment property under operating leases. 5. Administrative Expenses and Directors' Fees 30 June 2006 30 June 2006 Group Company £'000s £'000sDirectors' fees (96) (88)Insurance fees (10) (10)Administration fees (120) (105)Audit fees (179) (18)Acquisition costs (347) -Legal and professional fees (435) (114)General expenses (143) (27)Administrative expenses as at 30 June 2006 (1,330) (362) Each of the Directors receives a fee of £15,000 per annum from the Company. TheChairman receives a fee of £20,000 per annum. The aggregate remuneration andbenefits in kind of the directors in respect of the Company's accounting periodending on 30 June 2006 amounted to £88,330 in respect of the Company and £95,548in respect of the Group. 6. Dividends Dividend pay date No. of Ordinary Shares Rate pence 30 June 2006 Company £'000s 25 August 2005 100,000,000 0.45 45030 November 2005 100,000,000 1.10 1,10028 February 2006 100,000,000 1.00 1,00024 May 2006 100,000,000 1.00 1,000Total dividends paid at30 June 2006 3,550 A further dividend of £1,450,000 (1.45 pence per share) was approved on 4 August2006. The ex-dividend date was 16 August 2006 and the payment date was 4September 2006. 7. Investment Properties Investment properties are stated at fair value, which is determined based onvaluations performed by Knight Frank LLP as at 30 June 2006, on the basis ofopen market value, supported by market evidence, in accordance with the RICSAppraisal and Valuation Standards. 30 June 2006 Group £'000s Cost of investment properties at beginning of period -Additions during the period at cost 77,152Disposal proceeds during the period -Cost of investment properties at 30 June 2006 77,152 Unrealised profit 287Foreign exchange translation 3Market value of investment properties at 30 June 2006 77,442 Investment properties comprise a number of commercial properties that are leasedto third parties. There were four contracts to purchase investment property exchanged in theperiod which were not completed at 30 June 2006. Related acquisition coststotalled £173,000 in relation to these contracts which is shown in other assetson the balance sheet. The portfolio in the Investment Manager's Report shows theproperties acquired by the Group. A fee of £171,000 has been incurred in setting up a loan facility with CalyonCorporate and Investment Bank and has been shown in other assets in the balancesheet. This fee will be amortised over the length of the facility. 8. Cash and Cash Equivalents 30 June 2006 30 June 2006 Group £'000s Company £'000s Bank balances 20,197 307Call deposits 1,880 1,880Cash and cash equivalents at 30 June 2006 22,077 2,187 9. Trade and Other Receivables 30 June 2006 30 June 2006 Group £'000s Company £'000sVAT receivable 4,291 -Other assets 938 -Rent receivable 617 -Prepayments 203 10Accrued income 46 -Intragroup loan interest - 1,606Trade and other receivables at 30 June 2006 6,095 1,616 10. Trade and Other Payables 30 June 2006 30 June 2006 Company £'000s Group £'000s Amounts due on completion ofproperty purchase contracts 3,116 -Property acquisition costs 2,413 -Initial expenses 370 -Investment manager fee 225 -Legal and professional fees 207 -Other 195 80Rent prepaid 185 -Audit fee 168 17VAT payable 154 -Tax 25 -Administration and CompanySecretarial fees 9 -Directors' fees 8 4Trade and other payables at 30June 2006 7,075 101 11. Long Term Loan On 3 April 2006, the Company entered into a loan facility from Calyon Corporateand Investment Bank totalling £56,343,000 (€81,500,000). As at 30 June 2006,there were no drawdowns. Loans drawndown on the facility will be secured overthe shares in the Company's subsidiaries, Property Trust Luxembourg 1 Sarl,Property Trust Luxembourg 2 Sarl and Property Trust Luxembourg 3 Sarl. 12. Taxation Reconciliation of 30 June 2006effective tax rate Group £'000s Profit beforetax 2,997 Effect of:Current tax -Italy 15Current tax -Netherlands 11Deferred taxcharge 16Tax chargeincurredduring theyear 42 Payment onaccount (17)Taxation (paidinadvance)/payable 25 Assets 2006 Liabilities Net 2006 2006Recognised deferred £'000s £'000s £'000stax and liabilitiesInvestmentproperty 129 (365) (236)Tax value ofloss carryforwardsrecognised 220 - 220Taxassets/liabilities 349 (365) (16) Movement in Balance at Recognised in Recognised Balance attemporary beginning of income statement in equity end of perioddifferences period Investmentproperty - (236) - (236)Tax value ofloss carryforwardsrecognised - 220 - 220Taxassets/liabilities - (16) - (16) 13. Share Capital Shares of no par value issued and fully paid Number of shares Share premium £'000sReceived on the placing of shares 100,000,000 100,000Conversion to special distributablereserve - (100,000) 100,000,000 - On 24 June 2005 the Royal Court of Guernsey confirmed the reduction of capitalby way of cancellation of the Company's share premium account. The amountcancelled, being £100,000,000, has been credited as a distributable reserveestablished in the Company's books of account and shall be available asdistributable profits to be used for all purposes permitted under Guernsey law,including the payment of dividends. 14. Net Asset Value per Ordinary Share The net asset value per ordinary share at 30 June 2006 is based on the netassets attributable to the ordinary shareholders of £98,870,000 and on100,000,000 ordinary shares in issue at the balance sheet date. 15. Financial Instruments The Group's investment objective is to secure attractive Sterling based totalreturns for shareholders through a combination of dividends and capitalappreciation from European properties (including the United Kingdom). The Groupaims to achieve this investment objective by investing in commercial propertiesacross Europe (including the United Kingdom) which are predominately freeholdand in the following segments of the commercial property market: office, retail,industrial and other sectors, including leisure and hotels. The Group's financial instruments comprise bank deposits, certificates ofdeposit, cash, receivables and payables that arise directly from its operations. The main risks arising from the Group's financial instruments are market risk,credit risk, liquidity risk, interest risk and currency risk. Market risk Property and property related assets are inherently difficult to value due tothe individual nature of each property. As a result, valuations are subject touncertainty. There is no assurance that the estimates resulting from thevaluation process will reflect the actual sales price even where a sale occursshortly after the valuation date. Rental income and the market value forproperties are generally affected by overall conditions in the local economy,such as growth in Gross Domestic Product, employment trends, inflation andchanges in interest rates. Changes in Gross Domestic Product may also impactemployment levels, which in turn may impact the demand for premises.Furthermore, movements in interest rates may affect the cost of financing forreal estate companies. Both rental income and property values may be affected by other factors specificto the real estate market, such as competition from other property owners, theperceptions of prospective tenants of the attractiveness, convenience and safetyof properties, the inability to collect rents because of the bankruptcy or theinsolvency of tenants, the periodic need to renovate, repair and release spaceand the costs thereof, the costs of maintenance and insurance, and increasedoperating costs. The Investment Manager addresses this risk through a selectiveinvestment process, credit evaluations of tenants, on going monitoring oftenants and through effective management of the properties. The Directors monitor the market value of investment properties throughindependent valuations carried out on a quarterly basis by Knight Frank LLP. Credit risk Credit risk arises when an issuer or counterparty is unable or unwilling to meeta commitment that it has entered into with the Group. In the event of a defaultby an occupational tenant, the Group will suffer a rental income shortfall andincur additional costs, including legal expenses, in maintaining, insuring andre-letting the property. The Group has a credit policy in place and creditevaluations are performed on all tenants. At the balance sheet date there wereno concentrations of credit risk. Liquidity risk The Group may encounter liquidity risk when realising assets or otherwiseraising funds to meet financial commitments. Investments in property arerelatively illiquid, however, the Group has mitigated this risk by investing indesirable properties in strong locations. Interest rate riskFloating rate financial assets comprise the cash balances which bear interest atrates based on bank base rates. The Group had not engaged in any borrowings atthe balance sheet date. However, since drawing down debt at a floating interestrate on 11 September 2006 the Group is exposed to the risk of interest ratefluctuations. The Group, based on the advice of the Investment Manager, hashedged against interest rate risk. Interest re-pricing Effective Total per Fixed Floating interest rate balance sheet rate rate 3 months or less % £'000s £'000s £'000sGroup:Cash and cashequivalents 2.29 22,077 - 22,077Total Group 22,077 - 22,077 Company:Interest bearing loansand borrowings:Back to backloans 6.08 60,592 - 60,592Mezzanine loans 9.75 33,537 33,537 -Workingcapital andVAT loans 1.00 4,569 4,569 -Low interestloans 0.50 2,988 2,988 -Total Company 101,686 41,094 60,592 The Company balance above of £101,686,000 is disclosed in the balance sheet innon-current and current intra group loan receivables, which also include currentaccount loans of £138,000 on which there was no interest. Foreign currency risk The European subsidiaries will invest in properties using currencies other thanSterling, the Company's functional and presentational currency, and the balancesheet may be significantly affected by movements in the exchange rates of suchcurrencies against Sterling. The Company will review and manage currencyexposure on an appropriate basis and will hedge foreign exchange risk inrelation to income and equity. 16. Reserves (a) Revaluation reserves Revaluation reserves of the Group arose from the revaluation gain on properties. (b) Capital reserves Capital reserves of the Company arose on the fair value adjustment of loans tosubsidiaries granted at rates higher than prevailing market interest rates. (c) Distributable reserves Distributable reserves arose from the cancellation of the share premium accountpursuant to the special resolution passed at the Extraordinary General Meetingon 13 April 2005 and approved by the Royal Court of Guernsey on 24 June 2005. (d) Foreign exchange reservesForeign exchange reserves arose as a result of the translation of the financialstatements of foreign operations, the functional and presentation currency ofwhich is not Sterling. 17. Related Party Transactions The Directors are responsible for the determination of the Company's investmentobjective and policy and have overall responsibility for the Group's activitiesincluding the review of investment activity and performance. Mr Hunter and Mr Ray form the majority of the Directors of its subsidiaries,Property Trust Luxembourg 1 Sarl, Property Trust Luxembourg 2 Sarl and PropertyTrust Luxembourg 3 Sarl and are able to control the investment policy of theLuxembourg subsidiaries to ensure it conforms with the investment policy of theCompany. Mr Ray is also a Managing Director of AXA Real Estate InvestmentManagers Belgium S.A. Mr Farrell, a Director of the Company, is also a partner in Ozannes, theGuernsey legal advisers to the Company. The total charge to the income statementduring the period in respect of Ozannes legal fees was £6,930 which was settledin full during the period. Mr Marren, a Director of the Company, is also a Director of Northern TrustInternational Fund Administration Services (Guernsey) Limited ("NorthernTrust"), the Administrator, Secretary and Registrar for the Company. The totaladministration fees charged to the income statement in respect of Northern Trustadministration fees is £104,952 for the period, of which £26,618 remainedpayable at the period end. During the period, the Company made various loans to its subsidiaries, of whichdetails are disclosed in Note 18. 18. Intercompany Loans The Company made various loans to the subsidiaries as follows: (a) Mezzanine loans Included in non-current receivables from subsidiaries are loans for the purposeof property acquisition amounting to £25,997,000 with a fair value of£33,537,000. The difference of £7,540,000 between the fair value of these loansand their settlement values is recognised as distribution income in theCompany's income statement. These are unsecured and bear interest at the couponrate of 9.75% per annum, their repayable dates ranging between 2015 and 2016.Based on the Company's accounting policies the difference between the fair valueof the loans and their settlement amounts is recognised at the date of thegranting of the loans as distribution income in the Company's income statement. (b) Back to back loans Included in non-current loan receivable from subsidiaries are loans for thepurpose of property acquisition amounting to £60,592,000. These are unsecuredand bear interest at Euribor plus 2.75% per annum, their repayable dates rangingbetween 2015 and 2016. (c) Low interest loans Included in current loan receivables from subsidiaries are loans for the purposeof property acquisition amounting to £2,988,000. These are unsecured and bearinterest at the coupon rate of 0.5% per annum and are repayable within less thanone year. (d) Working capital loans Included in non-current loan receivables from subsidiaries are loans for thepurpose of working capital amounting to £175,000 with a fair value of £113,000.The difference of £62,000 between the fair value of these loans and theirsettlement values is recognised in the Company's income statement. These areunsecured and bear interest at the coupon rate of 1% per annum, their repayabledates ranging between 2015 and 2016. (e) VAT loans Included in current loan receivables from subsidiaries are loans for the purposeof working capital amounting to £4,456,000. These are unsecured and bearinterest at the coupon rate of 1% per annum and are repayable within less thanone year. (f) Current accounts Included in current loan receivables from subsidiaries are short term loansamounting to £138,000. These do not bear interest and are repayable within sixmonths. 19. Group Entities AXA Property Trust Limited, the Company, is the parent of the Group. It wasincorporated in Guernsey on 5 April 2005. The Company owns the followingsubsidiaries: Directly owned by the Company at 30 June 2006 Subsidiaries Investment in Country of Date of Ownership Principal Subsidiaries £ Incorporation Incorporation Interest % Activities PropertyTrustLuxembourg 1Sarl 920,169 Luxembourg 20-July-05 100 Holding CompanyPropertyTrustLuxembourg 2Sarl 708,607 Luxembourg 24-Nov-05 100 Holding CompanyPropertyTrustLuxembourg 3Sarl 17,283 Luxembourg 2-Jun-06 100 Holding CompanyTotal Cost 1,646,059 Owned by Property Trust Luxembourg 1 Sarl and Property Trust Luxembourg 2 Sarl Country of Incorporation Ownership Interest %Property Trust Luxembourg 1 SarlProperty Trust Karben Sarl Luxembourg 100Property Trust TreuchtlingenSarl Luxembourg 100Property TrustAltenstadt-Lindheim Sarl Luxembourg 100Property Trust Wurzburg Sarl Luxembourg 100Property Trust Moosburg Sarl Luxembourg 100Property Trust Muhldorf Sarl Luxembourg 100Property Trust Berlin 1 Sarl Luxembourg 100Property Trust Furth Sarl Luxembourg 100Property Trust Berlin 4 Sarl Luxembourg 100Property Trust Netherlands 1B.V. Netherlands 100Keyser Center N.V. Belgium 0.05Property Trust Luxembourg 2 SarlProperty Trust Bernau Sarl Luxembourg 100Property Trust Rothenburg 1Sarl Luxembourg 100Property Trust Rothenburg 2Sarl Luxembourg 100Property Trust Investment 1Sarl Luxembourg 100Property Trust Investment 2Sarl Luxembourg 100Property Trust Investment 3Sarl Luxembourg 100Property Trust Investment 4Sarl Luxembourg 100Keyser Center N.V. Belgium 99.95Property Trust Agnadellos.r.l. Italy 100 Property Trust Luxembourg 3 Sarl Property Trust Investment 5 Sarl and Property Trust Investment 6 Sarl wereincorporated in Luxembourg on 6 October 2006. Both subsidiaries are wholly ownedby Property Trust Luxembourg 3 Sarl. 20. Contingent Liabilities (a) Acquisitions of a further three real estate assets were contracted prior tothe year end. The transactions are expected to be completed on payment of thepurchase prices as follows: (S) £3,960,000 (€5,700,000) retail property in Berlin, Germany (completionestimated February 2007); (S) £6,400,000 (€9,200,000) retail property in Karben, Germany (completionestimated November 2006); (S) £5,300,000 (€7,600,000) retail property in Treuchtlingen, Germany(completion estimated November 2006). On successful completion of these contracts, the Group will be liable to payfees to property agents amounting to approximately £216,000 (€313,000). (b) If certain tenant-related conditions to the sale of the Dasing property(described below) are fulfilled, contingent liabilities amounting to a maximumof £190,000 (€275,000) will be payable to the vendor by 2010 by Property TrustInvestment 3 Sarl, a subsidiary of the holding company Property Trust Luxembourg 2 Sarl. (c) In connection with the acquisition of Keyser Center N.V., contingentconsideration of up to £23,000 (€33,000) will be due to the vendor should vacantspace in the property be let by 19 May 2008. (d) Prior to its acquisition by Property Trust Luxembourg 2 Sarl, Keyser CenterN.V. was engaged in legal action against the trustee in bankruptcy of a formertenant which had entered liquidation. Keyser Center N.V. may be required to paypart of the £171,000 (€248,000) received through the exercise of the tenant'sbank guarantee to the trustee. An agreement has been provisionally reached withthe trustee to repay £16,000 (€23,000). Up to £68,000 (€98,000) of any paymentto the trustee will be recoverable from the vendor, which reflects the portion-of the purchase price that has been held in escrow. (e) As foreseen in the sale and purchase contract entered into by Property TrustLuxembourg 2 Sarl to acquire Multiplex s.r.l., an adjustment of £129,000(€187,000) to the preliminary purchase price will be paid to the vendor by 25October 2006. 21. Post Balance Sheet Events (a) On 11 September 2006, the Company drew down £6,913,000 (€10,000,000) under adebt facility agreement with Calyon Corporate and Investment Bank. The agreementprovides a Euro facility of €81,500,000 for a term of five years at an annualinterest rate of Euribor plus 0.8%. The loan is secured on the shares of theCompany's direct subsidiaries. The Company has put in place hedging to cover theinterest rate exchange risks arising from the third party debt. On 17 October 2006, the Company entered into a four year interest rate swap tohedge the interest rate risk on the £6,913,000 (•-10,000,000) drawn down underthe loan facility with Calyon Corporate and Investment Bank. Under the terms ofthe swap, the rate payable on the nominal amount of £6,913,000 is 3.85% perannum. The swap is effective from 31 October 2006 and terminates 30 July 2010.At the same date, the Company purchased an interest rate cap to hedge the oneyear period from 30 July 2010 at a Euribor strike price of 4.5%. Together, theinterest rate swap and cap provide a full five year hedge for the loan, withflexibility with respect to refinancing opportunities in the final year. (b) The purchase price of £2,973,000 (€4,300,000) for the acquisition of theretail property in Kraichtal, Germany was paid on completion of the transactionon 3 July 2006. (c) The acquisition of a logistics warehouse in Dasing, Germany, which wascontracted on 9 June 2006, was completed on 15 September 2006 by the payment of£7,614,000 (€11,013,000) cash to the vendor. For the purposes of theacquisition, the Company invested the following into Property Luxembourg 2 Sarl:£138,000 (€200,000) share capital, a loan of £4,937,000 (€7,141,000) at Euriborplus 2.75% margin with a ten year term, a loan of £362,000 (€523,000) at a fixedrate of 0.5% with a one year term and a loan of £2,825,000 (€4,087,000) at afixed rate of 9.75% with a ten year term. Property Trust Luxembourg 2 Sarlinvested share capital of £3,324,000 (€4,808,000) and a loan of £4,937,000(€7,141,000) into Property Trust Investment 3 Sarl. Property Trust Investment 3Sarl, which holds the Dasing property, was renamed Property Trust Dasing Sarl on14 September 2006. (d) On 19 July 2006, the Group acquired the Italian company Multiplex 1 s.r.l.for a total consideration of £11,555,000 (€16,714,000), representing a purchaseprice of £6,219,000 (€8,996,000) and a debt contribution of £5,336,000(€7,718,000). Multiplex 1 s.r.l. owns the freehold to a nine screen cinemacomplex located in Bergamo, Italy. Property Trust Luxembourg 2 Sarl invested£5,336,000 (€7,719,000) debt into Multiplex 1 s.r.l. The Company providedrelated party loans to finance the acquisition to Property Trust Luxembourg 2Sarl as follows: a loan of £5,336,000 (€7,719,000) at Euribor plus 2.75% marginwith a ten year term, a loan of £843,000 (€1,220,000) at a fixed rate of 0.5%with a one year term and a loan of £5,555,000 (€8,036,000) at a fixed rate of9.75% with a ten year term. (f) At 30 June 2006, the subsidiary Property Trust Investment 2 Sarl wascontracted to acquire a retail property in Bonn, Germany for £7,259,000(€10,500,000). Environmental due diligence identified potential contamination onthe site and on 5 July the subsidiary withdrew from the transaction, withoutincurring any penalties or other obligations, as permitted under the terms ofthe sale and purchase agreement. (g) The disposal of 50% of the Group's shareholding in the Italian subsidiaryProperty Trust Agnadello s.r.l. was completed on 16 October 2006. The 50%interest in Property Trust Agnadello s.r.l., which holds a logistics warehousein Agnadello, Italy, was acquired by European Added Value Fund Sarl, asubsidiary of European Added Value Fund Limited Partnership ("EAVF"). The sale price of £1,626,000 (€2,352,000) represented 50% of the totalunderlying property value of £20,809,000 (€30,100,000), after taking intoaccount 50% of the Euro-denominated debt of £22,265,000 (€32,206,000) and 50% ofthe other net assets of £4,708,000 (€6,810,000) of Property Trust Agnadellos.r.l. Under the terms of the transaction, within two months of the completiondate, 50% of the intra group loan provided by Property Trust Luxembourg 2 Sarlto Property Trust Agnadello s.r.l. will be replaced by financing from EAVF. The Manager of EAVF is Partnership Incorporations Limited, which has appointedAXA Real Estate Investment Managers UK Limited as Property Adviser. AXA RealEstate Investment Managers UK Limited acts as Real Estate Adviser to theCompany. The transaction was at arms length and the sale price representedmarket value. The underlying property value was confirmed by Knight Frank LLP,independent valuers to the Company. A partial disposal was envisaged when this property was acquired to meet theReal Estate Adviser's strategy of diversifying risk in terms of single assets,tenants and location. (h) On 6 October 2006 two companies, Property Trust Investment 5 Sarl andProperty Trust Investment 6 Sarl, were incorporated in Luxembourg as whollyowned subsidiaries of Property Trust Luxembourg 3 Sarl. This information is provided by RNS The company news service from the London Stock Exchange
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Worsley Inv Ltd Information
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Worsley Investors is an Investment Trust
To provide Shareholders with an attractive level of absolute long-term return, principally through the capital appreciation and exit of undervalued British quoted securities of smaller companies.
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| Date | Source | Headline | |
|---|---|---|---|
| 27th Mar 2024 | 10:54 am | RNS | Director/PDMR Shareholding |
| 1st Mar 2024 | 9:03 am | RNS | Net Asset Value(s) |
| 21st Dec 2023 | 6:11 pm | RNS | Director/PDMR Shareholding |
| 14th Dec 2023 | 7:00 am | RNS | Half-year Report |
| 29th Nov 2023 | 7:00 am | RNS | Net Asset Value(s) |
| 25th Sep 2023 | 11:20 am | RNS | Director/PDMR Shareholding |
| 13th Sep 2023 | 3:04 pm | RNS | Result of AGM |
| 30th Aug 2023 | 7:00 am | RNS | Net Asset Value(s) |
| 21st Aug 2023 | 11:36 am | RNS | Notice of AGM |
| 5th Jul 2023 | 7:00 am | RNS | Annual Report for the period ended 31 March 2023 |
| 30th May 2023 | 10:04 am | RNS | Net Asset Value(s) |
| 1st Mar 2023 | 7:00 am | RNS | Net Asset Value(s) |
| 13th Feb 2023 | 9:00 am | RNS | Change of Registered Office |
| 19th Jan 2023 | 12:36 pm | RNS | Director/PDMR Shareholding |
| 10th Jan 2023 | 1:09 pm | RNS | Holding(s) in Company |
| 15th Dec 2022 | 7:00 am | RNS | Half-year Report |
| 18th Nov 2022 | 7:00 am | RNS | Net Asset Value(s) |
| 10th Nov 2022 | 4:40 pm | RNS | Second Price Monitoring Extn |
| 10th Nov 2022 | 4:35 pm | RNS | Price Monitoring Extension |
| 9th Nov 2022 | 7:00 am | RNS | Holding(s) in Company |
| 12th Oct 2022 | 4:41 pm | RNS | Second Price Monitoring Extn |
| 12th Oct 2022 | 4:36 pm | RNS | Price Monitoring Extension |
| 4th Oct 2022 | 4:40 pm | RNS | Second Price Monitoring Extn |
| 4th Oct 2022 | 4:36 pm | RNS | Price Monitoring Extension |
| 22nd Sep 2022 | 4:44 pm | RNS | Result of AGM |
| 12th Sep 2022 | 12:24 pm | RNS | Director/PDMR Shareholding |
| 9th Sep 2022 | 4:04 pm | RNS | Holding(s) in Company |
| 2nd Sep 2022 | 4:41 pm | RNS | Second Price Monitoring Extn |
| 2nd Sep 2022 | 4:36 pm | RNS | Price Monitoring Extension |
| 30th Aug 2022 | 7:00 am | RNS | Net Asset Value(s) |
| 23rd Aug 2022 | 4:15 pm | RNS | Notice of AGM |
| 10th Aug 2022 | 11:51 am | RNS | Director/PDMR Shareholding |
| 8th Aug 2022 | 11:48 am | RNS | Director/PDMR Shareholding |
| 18th Jul 2022 | 7:00 am | RNS | Annual Report for the period ended 31 March 2022 |
| 7th Jun 2022 | 6:01 pm | RNS | Net Asset Value(s) |
| 19th May 2022 | 3:28 pm | RNS | Director/PDMR Shareholding |
| 12th May 2022 | 2:51 pm | RNS | Director/PDMR Shareholding |
| 2nd Mar 2022 | 5:06 pm | RNS | Net Asset Value(s) |
| 16th Dec 2021 | 7:00 am | RNS | Half-year Report |
| 7th Dec 2021 | 5:45 pm | RNS | Acquisition of Praxis Fund Services by Sanne Group |
| 5th Nov 2021 | 1:22 pm | RNS | Net Asset Value(s) |
| 17th Aug 2021 | 7:00 am | RNS | Net Asset Value(s) |
| 21st Jul 2021 | 7:00 am | RNS | Notice of AGM |
| 25th Jun 2021 | 7:00 am | RNS | Annual Report for the period ended 31 March 2021 |
| 12th May 2021 | 7:00 am | RNS | Net Asset Value(s) |
| 26th Apr 2021 | 7:00 am | RNS | Curno cinema update |
| 17th Mar 2021 | 7:00 am | RNS | Half-year Report |
| 9th Feb 2021 | 7:00 am | RNS | Net Asset Value(s) |
| 8th Dec 2020 | 3:28 pm | RNS | Result of AGM |
| 4th Nov 2020 | 7:00 am | RNS | Net Asset Value(s) |
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