Last checked at 16 Oct 2007 07:00
AXA Property Trust Ld16 October 2007 To: RNS Date: 16 October 2007 From: AXA Property Trust Limited Results in respect of the Year Ended 30 June 2006 AXA Property Trust Limited Report & Accounts for the year ended 30 June 2007 Chairman's Statement I am very pleased to report that your Company, AXA Property Trust Limited, hasnow largely completed the acquisition of a quality European property portfolioin accordance with its investment objectives. As at 30 June 2007 AXA Real EstateInvestment Managers UK Limited (the "Real Estate Adviser") had completed thepurchase of properties in 19 locations across Europe at a gross cost of £127.3million. Two further assets completed in August and September 2007 for a grossprice of £4.6 million. During the year to 30 June 2007, the Company and its subsidiaries (together the"Group") acquired properties at a gross cost of £65.6 million, as well asinvesting £10.1 million in a 12.0% interest in a Dutch office portfolio joint investment.The Real Estate Adviser has, through its network of European offices, adopted ahighly selective acquisition policy. The result is a portfolio which provides agood income yield, offers value and potential for growth. The portfolio is well positioned across Europe to benefit from improvingproperty market fundamentals. The Group has significant holdings in Germany,where the Real Estate Adviser believes greater growth prospects exist due toeconomic and property cycles being less advanced than in other 'core' Europeancountries. Diversification has been achieved by selecting properties ofdiffering lot sizes, which are spread through European regions, furtherdiversified across property sectors and by tenant mix. The net portfolio yield is approximately 7.0% (gross 7.8%).(1) This incomestream is well secured both in terms of tenant covenant and in duration, with anaverage unexpired weighted lease length of 7.1 years. Over the year market yield ratings improved significantly. Following the "creditcrunch" and tighter debt markets the Real Estate Adviser reports that theEuropean real estate investment markets are in a state of uncertainty. However,due to the strong fundamentals of the acquired portfolio the Adviser believesthe Company will benefit from further growth in the medium term. Results The Group generated a net profit of £8.0 million in the financial year to 30June 2007. The net valuation uplift on properties was 4.2% (£7.9 million).Excluding revaluation gains after deferred tax, as well as one-off costsincurred as part of the set-up and investment phase, net profit was £4.1million. Net asset value at 30 June 2007 was £99.98 million (99.98 pence per ordinaryshare). Translation losses reduced net asset value by £2.6 million as a resultof adverse movements in the Sterling/Euro exchange rate. Since the year end theSterling/Euro exchange rate has moved in the Company's favour. Dividend The Board has approved four quarterly dividends in respect of the financial yearto 30 June 2007 amounting to £4.25 million, representing a dividend yield of4.25% of the issue price. This is below the distribution target of around 5.0%.The lower yield reflects higher financing costs as a result of increases in theEuribor interest rate over the past two years, as well as the expensing of agreater proportion of one-off investment costs than envisaged. Now the Companyis fully invested it will benefit from the relatively high income yield on theacquired portfolio, a substantive absence of purchase costs, and the start ofincome growth from indexation and rental growth. While further interest ratehikes are no longer anticipated, financing costs remain higher than expected andare likely to diminish distributable income over the current year. Prospects With a robust investment portfolio in place your Company is now delivering astable income flow and has good growth prospects. The Real Estate Adviser believes that in contrast to the UK market, values ofContinental investments, where there are still capital inflows, are far morelikely to grow in the coming year. The Real Estate Adviser's on-the-ground management structure is well able toprotect the portfolio income flow and is working to enhance it. They are, aswell, working to maximise value enhancement through active management, with anumber of promising initiatives in progress. I am confident of your Company'sfuture. Charles Hunter Chairman 15 October 2007 Note 1: A detailed yield analysis is included in the Investment Manager's Reporton page 5. Investment Manager's Report Investment Manager AXA Investment Managers UK Limited (the "Investment Manager") is the UKsubsidiary of AXA Investment Managers, a dedicated asset manager within the AXAGroup. AXA Investment Managers is an innovative and fast-growing multi-expertiseinvestment manager with €566 billion of assets under management and 2,800employees in 19 countries as at 30 June 2007. AXA Real Estate Investment Managers UK Limited (the "Real Estate Adviser") ispart of real estate management arm of AXA Investment Managers S.A. ("AXA REIM").AXA REIM is a specialist in European real estate investment management withapproximately €41.7 billion of real estate assets under management in 15European countries as at 30 June 2007, of which the Real Estate Adviser managesapproximately €10.9 billion. Real Estate Market The US sub-prime crisis has increased risk aversion in credit and lendingmarkets since July. This is ultimately expected to reduce the level of debtcapital targeting European real estate with the effect of subduing capitalgrowth. However, we expect this to be largely offset by the continuing recoveryof rental growth in the medium term. Despite the US sub-prime crisis, theeconomic outlook for mainland Europe remains quite positive for both 2007 and2008, according to consensus forecasts. Indeed, the crisis has resulted in aslightly more benign short term interest rate environment as the monetaryauthorities are keen to avoid aggravating risk aversion in the credit andlending markets by increasing interest rates further at this stage. Overall, theshort term outlook remains one of low inflation coupled with sustainablepositive economic expansion. The Eurozone area remains one of the more attractive regions for real estateinvestment in the next one to two years, as interest rates remain relatively lowat 4.0% and income yields are still attractive. In addition, there is increasingevidence that economic recovery is being translated into positive rental growth.There also remains an overhang of existing capital in the market from earlierfund raising initiatives (prior to the US sub-prime crisis) which is stilltargeting real estate and, in particular, the weight of money will continue tosupport real estate prices in the short term. Retail Continental European retail is expected to deliver solid returns which arelikely to be less volatile than for other sectors. Consumer confidence remainsfairly buoyant due to relatively strong employment growth across Europe andfalling levels of unemployment. In Germany, the now widely recognised economicrecovery is attracting much international capital seeking high current incomeyields. This interest is expected to continue to put downward pressure onyields, leading to capital growth, although at a lower rate than anticipatedprior to the US sub-prime crisis. Office The office sector is expected to perform quite favourably during the next fewyears, as positive rental growth helps boost returns. In particular the Germanand Dutch office markets look set to continue to recover as both economiesstrengthen. Increased occupier demand in the first half of 2007, coupled withfalling vacancy rates, has put upward pressure on rents. Industrial Industrial income returns are typically a little higher than for the other mainsectors. The best performance prospects are expected from high quality logisticsparks and distribution centres located near key strategic transport hubs.Industrial returns in Germany could benefit from economic recovery, althoughrental growth is expected to remain largely flat across Europe as industrystrives to cut costs. Investment Activity The Company has now completed the investment of funds at the initial 35% levelof gearing. By 30 June 2007 the Group had completed the acquisition of 19 realestate purchases valued at £134.1 million. In addition the Group holds a 12%interest in a joint investment which has acquired a £210 million Dutch officeportfolio. Two further asset transactions after the quarter end at a gross priceof £4.6 million. The Board has approved a modest increase in gearing to 45% which, together withvaluation gains in the portfolio, provides the opportunity to enhance theportfolio's return by making a further property acquisition. The propertyportfolio as at 30 June 2007 has been acquired at a cost of £127.3 million,including acquisition costs of £6.3 million. The portfolio was independentlyvalued at £134.1 million as at 30 June 2007. The Group plans to develop two sites already held in the portfolio. The sitesadjoin existing retail units and development was envisaged at acquisition. Investment Name Country Sector Current Current % of total--------------- ----------- ----------- Gross -Net assets (less Rental Rental current Yield (1) Yield (2) liabilities) ---------- -------- ---------PhoenixCentre, Fuerth Germany Retail 7.66% 6.86% 12.7%--------------- ----------- ----------- ---------- -------- ---------Bahnhofstrasse, Rothenburg Germany Retail 6.94% 6.36% 11.9%--------------- ----------- ----------- ---------- -------- ---------Via LegaLombarda,Curno Italy Leisure 6.98% 6.59% 8.5%--------------- ----------- ----------- ---------- -------- ---------SS Bergamina,Agnadello Italy Industrial 7.67% 7.20% 7.0%--------------- ----------- ----------- ---------- -------- ---------Am Birkfeld,Dasing Germany Industrial 8.75% 7.83% 5.3%--------------- ----------- ----------- ---------- -------- ---------Smakterweg,Venray Netherlands Industrial 9.49% 8.36% 5.0%--------------- ----------- ----------- ---------- -------- ---------Bahnhofstrasse, Karben Germany Retail 7.61% 6.75% 4.9%--------------- ----------- ----------- ---------- -------- ---------Industriestrasse, Montabaur Germany Retail 6.90% 6.07% 4.9%--------------- ----------- ----------- ---------- -------- ---------RudnitzerChaussee,Bernau Germany Retail 9.81% 8.75% 4.6%--------------- ----------- ----------- ---------- -------- ---------Keyser Center,Antwerp Belgium Retail 7.17% 6.73% 3.8%--------------- ----------- ----------- ---------- -------- ---------Other - - - - 19.7%--------------- ----------- ----------- ---------- -------- ---------Total PropertyPortfolio 7.79% 7.03% 88.3%--------------- ----------- ----------- ---------- -------- ---------Porto KaliInvestment(3) Netherlands 6.0%--------------- office ----------- ---------- -------- --------- -----------Other noncurrent assetsand netcurrent assets 5.7%---------------------------------- ---------- -------- ---------Total assetsless currentliabilities 100.0%---------------------------------- ---------- -------- --------- Note 1: Gross rental yield excluding property and acquisition costs Note 2: Net rental yield includes acquisition costs and an estimated 5% of grossrent as property operating costs. Note 3: Porto Kali investment value of £9.1 million is a non-current shareholderloan. The Fund investment portfolio has the following geographic, sector and incomeprofile. Geographic Analysis at 30 June 2007 by market value1 Within Germany, properties are located in West Germany and Berlin and split asfollows: 64.2% in Bavaria, 14.3% in Hessia, 7.7% in Rhineland-Palatinate, 7.2%in Brandburg, 2.8% in Saxony Anhalt, 2.0% in Saxony and 1.8% in Berlin. Sector distribution at 30 June 2007 by market value1 The Group's tenant covenant profile is strong, with the majority of tenantsrated Grade A or B. The weighted effective unexpired lease length for completedtransactions as at 30 June 2007 was 7.1 years, with 57.2% of income secured fora term of over five years. Rental income from Grade A covenants represents 66.6%of income and has a weighted unexpired lease length of 9.5 years. Vacant spacein the portfolio as at 30 June 2007, measured using market rent, represented5.2% of the total gross rental income. 85% of vacant space within the propertyportfolio relates to Porto Kali, a 'working' portfolio with a focus on capitalvalue growth rather than rental income. Covenant Strength Analysis at 30 June 2007 Grade A 66.5% Nationally and internationally recognised companies Grade B 14.7% Regionally recognised companies Grade C 13.5% Locally recognised companies Vacant 5.2% Calculated using market rent Financing At 30 June 2007, the Group had drawn £47.8 million of its loan facilities,resulting in gearing at 32.3% of the value of the Group's property portfolio(39.7% including its share of the external financing in Porto Kali). After theyear end the Group completed two further acquisitions for a gross cost of £4.6million (€6.8 million), thereby increasing gearing to 34.4% (41.2% includingPorto Kali external finance). The interest rate risk on the four remaining years of the loan facility ishedged via interest rate swaps for three years and interest rate caps in thefinal year. Cross currency swaps have been executed to cover quarterly net Eurocash flows to the value of £0.6 million (€0.9 million) for five years. Furthercurrency hedging will be put in place in the coming months, with 20% of theGroup's net Euro cash flow left floating to provide flexibility, reflecting thepotential variability of cash flow. The status of interest rate, currency andequity hedging is regularly reviewed by the Investment Manager to adjust forvariables such as property valuations and predicted cash flows. To date the net investment in Euros ("Euro equity") has not been hedged againstexchange rate fluctuations. The Board is currently closely evaluating thisposition. Outlook The principal investment phase of the Company's life is now complete. Goingforward, the Investment Manager will concentrate on asset management initiativesintended to add value to the property portfolio and positively impact net asset value. The opportunity to selectively buy additional properties will be possible if theGroup maintains its 45% gearing and the portfolio market value increases.Finally, the Group may undertake selective disposals from within the portfolio,dependent upon the identification of sufficiently attractive reinvestmentopportunities and the ability to realise maximum value of the current propertyportfolio. Due to the strong fundamentals of the acquired portfolio we remain confidentthat the Company will benefit from growth over the coming year. Board of Directors Charles Hunter (Chairman) is a non executive director of a number oforganisations involved in property investment, including, PIL Group Limited,Protego Real Estate Funds plc and is on the Supervisory Board of Schroder ExemptProperty Unit Trust. He is also a trustee of St Monica Trust. He has around 30years of experience in property investment, principally in UK commercialproperty. During this time, he was the Head of Property Investment of InsightInvestment (formerly Clerical Medical Investment Group) and also was theProperty Director of the investment management subsidiaries of The NationalMutual of Australasia group in the United Kingdom. Mr Hunter is a Fellow of theRoyal Institution of Chartered Surveyors and a member of the Investment PropertyForum. He is resident in the United Kingdom. Richard Ray is Managing Director of AXA Real Estate Investment Managers Belgium S.A. He has around 25 years of property experience, especially in the commercialreal estate markets in Belgium and in other parts of Europe. Prior to joiningAXA, he was the Head of Investment at ATIS REAL August Thouard S.A. From 1987 to2000, he worked with CB Richard Ellis S.A. (formerly Richard Ellis S.A.), firstas an Investment and Valuation Surveyor and then as a Manager in the InvestmentDepartment. In 1994, Mr Ray was appointed Director of Investment, Valuation andResearch. He is a member of the Royal Institution of Chartered Surveyors andcertified as a "Titulaire" of the Belgian Institut Professionel de l'immobilier(Real Estate Institute). 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. MrMonier 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 where he is Head of Client Servicing. Prior tojoining Northern Trust International Fund Administration Services (Guernsey)Limited in 1992, he worked for KPMG in Guernsey where he was responsible for theaudit of a portfolio of entities in the finance industry. Mr Marren currentlyholds a number of non-executive board appointments in fund management andinvestment companies including several real estate funds. He has a Bachelor ofCommerce Degree from University College Galway in Ireland, is a Fellow of theInstitute of Chartered Accountants in Ireland and a Member of the Institute ofBankers in Ireland. He is 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. MrFarrell holds a number of directorships in investment and captive insurancecompanies. He is resident in Guernsey. Report of the Directors The Directors present their report and audited Financial Statements of the Groupand Company for the year ended 30 June 2007. 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 year ended 30 June 2007as follows: Payment date Rate per Share---------------------------------------- First interim 4 September 2006 1.45p---------------------------------------- Second interim 15 December 2006 1.25p---------------------------------------- Third interim 28 February 2007 1.00p---------------------------------------- Fourth interim 25 May 2007 1.00p---------------------------------------- A further dividend of £1,000,000 (1.00 pence per share) was approved on 2 August2007. The ex-dividend date was 8 August 2007 and the payment date was 29 August2007. Listing Requirements The Company considers that throughout the year it has complied (and intends tocontinue to comply) with the conditions applicable to property investmentcompanies set out in paragraph 15.5.15R of the new Listing Rules. Directors The Directors who held office during the year as at 30 June 2007 were: C. J. Hunter (Chairman) G. J. Farrell R. G. Ray J. M. Marren S. C. Monier 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 Guernsey legal advisers, Ozannes,Advocates and Notaries 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 on page 9. An evaluationof the performance of individual Directors was carried out during the year whichconcluded that the Board is performing satisfactorily in the six areas reviewed:Board composition and meeting process, Board information, training, Boarddynamics, Board accountability and effectiveness and an evaluation of theChairman. During the year the Directors of the Company received the followingemoluments in the form of fees: C. J. Hunter £20,000 G. J. Farrell £15,000 R. G. Ray £15,000 J. M. Marren £15,000 S. C. Monier £15,000 £80,000 The Directors of the subsidiaries of the Group received emoluments amounting to£17,718 (2006: £7,218). Total fees paid to Directors of the Group were £97,718(2006:£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 the management servicesprovided is given in note 3 to the accounts. During the year, the Board hasreviewed the appropriateness of the Investment Manager's appointment. Incarrying out the review the Board considered the investment performance of theCompany during its accounting year and the capability and resources of theInvestment Manager to deliver satisfactory investment performance. It alsoconsidered the length of the notice period of the investment management contractand the fees payable to the Investment Manager, together with the standard ofthe other services provided. Following this review, it is the Directors' opinionthat the continuing appointment of the Investment Manager on the terms agreed isin the interests of shareholders as a whole. Significant Shareholdings Shareholders with holdings more than 3% of the issued ordinary shares of theCompany as at 30 September 2007 were as follows: Number of shares Percentage of share capital --------------------- --------------------- --------HSBC Global Custody Nominee(UK) Limited 33,777,184 33.77--------------------- --------------------- --------Nutraco Nominees Limited 14,124,938 14.12--------------------- --------------------- --------Quilter Nominees Limited 10,707,745 10.70--------------------- --------------------- --------Nortrust Nominees Limited 4,891,725 4.89--------------------- --------------------- --------Chase Nominees Limited 4,682,946 4.68--------------------- --------------------- --------Ferlim Nominees Limited 4,096,765 4.09--------------------- --------------------- -------- Statement of Directors' Responsibilities The Directors are responsible for preparing the Financial Statements inaccordance with applicable law and International Financial Reporting Standards. Company law requires the Directors to prepare Financial Statements for eachfinancial year which give a true and fair view of the state of affairs of theCompany and of the profit or loss of the Company for that period. In preparingthese Financial Statements, the Directors are required to: n select suitable accounting policies and apply them consistently; n make judgments and estimates which are reasonable and prudent; n state whether applicable accounting standards have been followed, subject toany material departures disclosed and explained in the Financial Statements; and n prepare the Financial Statements on the going concern basis unless it isinappropriate to presume that the Company will continue in business. The Directors are responsible for keeping proper accounting records thatdisclose with reasonable accuracy at any time the financial position of theCompany and enable them to ensure that the Financial Statements comply with theCompanies (Guernsey) Law 1994. They are also responsible for safeguarding theassets of the Company and hence for taking reasonable steps for the preventionand detection of fraud and other irregularities. Corporate Governance Introduction As a closed-ended investment company registered in Guernsey, the Company iseligible for exemption from the requirements of the Combined Code on CorporateGovernance (the "Code") issued by the Financial Reporting Council, but mustdisclose whether or not it complies with the corporate governance regime of itscountry of incorporation and the significant ways in which its actual practicesdiffer from the Code. In the absence of a formal corporate governance regime inits country of incorporation, the Board has put in place a framework forcorporate governance which it believes is suitable for an investment company andwhich enables the Company voluntarily to comply with the main requirements ofthe Code, which sets out principles of good governance and a code of bestpractice. 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 two paragraphs, the Company complied throughout the period withthe provisions of the Code. Since all the Directors are non-executive theprovisions of the Code in respect of Directors' remuneration are not relevant tothe Company except in so far as they relate to non-executive Directors. TheCompany does not have a remuneration committee. 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, or for a SeniorIndependent Director to be appointed as recommended by Code provision A.3.3, orfor there to be a Nomination Committee as recommended by Code provision A.4.1. 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 Investment 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, chaired by Mr Marren, operates within clearly defined termsof reference and comprises all the Directors except Mr Ray. The duties of theAudit Committee in discharging its responsibilities include reviewing the Annualand Interim Accounts, the system of internal control and the terms of theappointment of the auditors together with their remuneration. It is also the forum through which the auditors report to the Board of Directorsand meets at least twice yearly. The objectivity of the auditors is reviewed bythe Audit Committee which also reviews the terms under which the externalauditors are appointed to perform non-audit services. The Committee reviews thescope and results of the audit, its cost effectiveness and the independence andobjectivity of the auditors, with particular regard to non-audit fees. Such feesamounted to £28,427 (2006: £8,953) for the Company for the year ended 30 June2007 and related to a review of the interim financial information which isnormal practice. Notwithstanding such services the Audit Committee considersKPMG Channel Islands Limited to be independent of the Company and that theprovision 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 Mr Ray, and reviews the appropriateness of the InvestmentManager's continuing appointment together with the terms and conditions thereofon a regular basis. The table below sets out the number of Board meetings held during the year ended30 June 2007 and the number of meetings attended by each Director. 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 year 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 theCompany's assets, is maintained. An internal audit function specific to theCompany is therefore 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% of theissued ordinary share capital was renewed by way of a Special Resolution at theAnnual General Meeting held on 5 October 2006 until the earlier of the AnnualGeneral Meeting in 2007 and 31 December 2007. Any buy back of shares will bemade subject to Guernsey law and within guidelines established from time to timeby the Board (which will take into account the income and cash flow requirementsof the Company) and the making and timing of any buy backs will be at theabsolute discretion of the Board. Purchases of shares will only be made throughthe market for cash at prices below the prevailing net asset value of the shareswhere the Directors believe such purchases will enhance shareholder value. 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 share premium account. The amount cancelled, being £100 million,has been credited as a distributable reserve established in the Company's booksof account and shall be available as distributable profits to be used for allpurposes permitted under Guernsey law, including the payment of dividends. Independent 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 Marren Chairman Director 15 October 2007 15 October 2007 Independent Auditors Report We have audited the Group and parent company Financial Statements (the"Financial Statements") of AXA Property Trust Limited (the "Company") for theyear ended 30 June 2007 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 on page 13. 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 theFinancial Statements give a true and fair view and are properly prepared inaccordance with The Companies (Guernsey) Law, 1994. We also report to you if, inour opinion, the Company has not kept proper accounting records, or if we havenot received all the information 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 Financial Reporting Standards, of the state of the Group's and the Company's affairs as at 30 June 2007 and of the Group's and the Company's profit for the period then ended; and •have been properly prepared in accordance with the The Companies (Guernsey) Law, 1994. KPMG Channel Islands Limited Chartered Accountants Guernsey 15 October 2007 Income Statement Company and Consolidated Income Statements for the Year ended 30 June 2007 Company Group Period from Period from Year ended 5 April 2005 Year ended 5 April 2005 ------------- -------- --------- to --------- to 30 June 2007 30 June 2006 30 June 2007 30 June 2006 Note £000s £000s £000s £000s Gross rentalincome 4 - - 7,607 1,864------------- -------- --------- --------- --------- ---------Service chargeincome - - 772 79------------- -------- --------- --------- --------- ---------Propertyoperatingexpenses - - (1,434) (190)------------- -------- --------- --------- --------- ---------Net rental andrelated income - - 6,945 1,753------------- -------- --------- --------- --------- --------- Interestincomefromcertificatesof 219 3,721 492 3,750deposit and -------- --------- --------- --------- ---------bank deposits-------------Interestincomefrom loans to 7,513 1,588 - -subsidiaries -------- --------- --------- --------- ----------------------Realised losson disposal ofinvestments - - (28) -------------- -------- --------- --------- --------- ---------Net foreignexchange(losses)/gains (2,582) 458 9 -------------- -------- --------- --------- --------- ---------Net investmentincome 5,150 5,767 473 3,750------------- -------- --------- --------- --------- --------- Gain onderivatives - - 34 -------------- -------- --------- --------- --------- ---------Valuationgainson investment - - 8,278 701properties -------- --------- --------- --------- ----------------------Valuationlosses oninvestmentproperties - - (377) (414)------------- -------- --------- --------- --------- ---------Loss on fairvalue offinancialassets 9 - - (1,016) -------------- -------- --------- --------- --------- ---------Net valuationgains oninvestmentproperties - - 6,919 287------------- -------- --------- --------- --------- --------- Distributiongain 2(p), 22 3,946 7,478 - -------------- -------- --------- --------- --------- --------- Formationexpenses - (1,019) - (1,019)------------- -------- --------- --------- --------- ---------Investmentmanagement (167) - (1,084) (208)fees -------- --------- --------- --------- ----------------------Sponsor's fees (125) - (125) -------------- -------- --------- --------- --------- ---------Administrativeexpenses 5 (571) (362) (1,926) (1,576)------------- -------- --------- --------- --------- ---------Finance costs (697) - (938) -------------- -------- --------- --------- --------- ---------Total expenses (1,560) (1,381) (4,073) (2,803)------------- -------- --------- --------- --------- --------- Other income - 10 1 10------------- -------- --------- --------- --------- --------- Profit beforetax 7,536 11,874 10,265 2,997------------- -------- --------- --------- --------- --------- Income taxexpense 16 - - (2,314) (42)------------- -------- --------- --------- --------- --------- Profit for theyear/period 7,536 11,874 7,951 2,955------------- -------- --------- --------- --------- ---------Basic anddilutedearnings perordinary share(pence) 7.95 2.95------------- -------- --------- --------- --------- --------- The accompanying notes on pages 25 to 40----- form an integral part of theseFinancial Statements. Statement of Changes in Equity Company Statement of Changes in Equity for the Year ended 30 June 2007 Share Revaluation Capital Hedging Revenue Distributable Total ------------ ----------- ----------- -------- -------- ------------ ------------ -------- premium reserve reserve reserve reserve reserve ------------ ----------- ----------- -------- -------- ------------ ------------ -------- £000s £000s £000s £000s £000s £000s £000s ------------ ----------- ----------- -------- -------- ------------ ------------ -------- Note 20 Note 20 Note 20 Note 20 ------------ ----------- ----------- -------- -------- ------------ ------------ --------Balance at 1July 2006 - - 7,478 - 846 99,019 107,343------------ ----------- ----------- -------- -------- ------------ ------------ -------- Movementsduring the ----------- ----------- -------- -------- ------------ ------------ --------period:------------Net profitfor - - 3,946 - 3,590 - 7,536the year ----------- ----------- -------- -------- ------------ ------------ --------------------Dividends - - - - (4,436) (264) (4,700)paid ----------- ----------- -------- -------- ------------ ------------ --------------------Gain onderivatives - - - 338 - - 338------------ ----------- ----------- -------- -------- ------------ ------------ -------- Balance at 30June 2007 - - 11,424 338 - 98,755 110,517------------ ----------- ----------- -------- -------- ------------ ------------ -------- CompanyStatement of ----------- ----------- -------- -------- ------------ ------------ --------Changes inEquity forthe periodfrom 5 April2005 to 30June 2006------------ ------------ ----------- ----------- -------- -------- ------------ ------------ -------- Share Revaluation Capital Hedging Revenue Distributable Total ------------ ----------- ----------- -------- -------- ------------ ------------ -------- premium reserve reserve reserve reserve reserve ------------ ----------- ----------- -------- -------- ------------ ------------ -------- £000s £000s £000s £000s £000s £000s £000s ------------ ----------- ----------- -------- -------- ------------ ------------ -------- Note 20 Note 20 Note 20 Note 20 ------------ ----------- ----------- -------- -------- ------------ ------------ --------Balance at 5 - - - - - - -April 2005 ----------- ----------- -------- -------- ------------ ------------ -------------------- ------------ ----------- ----------- -------- -------- ------------ ------------ --------Movementsduring the ----------- ----------- -------- -------- ------------ ------------ --------period:------------Share premiumon issue 100,000 - - - - - 100,000------------ ----------- ----------- -------- -------- ------------ ------------ --------Cancellationof sharepremium (100,000) - - - - 100,000 ------------- ----------- ----------- -------- -------- ------------ ------------ --------Placing fees - - - - - (981) (981)------------ ----------- ----------- -------- -------- ------------ ------------ --------Net profitfor - - 7,478 - 4,396 - 11,874the period ----------- ----------- -------- -------- ------------ ------------ --------------------Dividends - - - - (3,550) - (3,550)paid ----------- ----------- -------- -------- ------------ ------------ -------------------- ------------ ----------- ----------- -------- -------- ------------ ------------ --------Balance at 30June 2006 - - 7,478 - 846 99,019 107,343------------ ----------- ----------- -------- -------- ------------ ------------ -------- The accompanying notes on pages 25 to 40 form an integral part of theseFinancial Statements. Statement of Changes in Equity Consolidated Statement of Changes in Equity for the Year ended 30 June 2007 Share Revaluation----- Hedging Revenue Distributable Foreign Total premium reserve reserve reserve reserve exchange reserve £000s £000s £000s £000s £000s £000s £000s Note 20 Note 20 Note 20 Note 20Balance at 1July 2006 - 287 - - 98,137 446 98,870 Movementsduringthe year:Net profitfor - 6,919 - 1,032 - - 7,951the yearFair valueof - - 412 - - - 412derivativesReserve onacquisitionof subsidary - 20 - - - - 20Dividends - - - (1,032) (3,668) - (4,700)paidForeignexchangetranslationlosses - - - - (2,574) (2,574) Balance at30 - 7,226 412 - 94,469 (2,128) 99,979June 2007 ConsolidatedStatement ofChanges inEquity forthe periodfrom 5 April2005 to 30June 2006 Share Revaluation Hedging Revenue Distributable Foreign Total premium reserve reserve reserve reserve exchange reserve £000s £000s £000s £000s £000s £000s £000s Note 20 Note 20 Note 20 Note 20Balance at 5 - - - - - -April 2005 Movementsduringthe period:Sharepremium 100,000 - - - - - 100,000on issueCancellationofshare (100,000) - - - 100,000 - -premiumPlacing 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 The accompanying notes on pages 25 to 40 form an integral part of theseFinancial Statements. Balance Sheet Balance Sheets as at 30 June 2007 Company Group 2007 2006 2007 2006 Note £000s £000s £000s £000sNon-currentassetsInvestmentproperties 7 - - 134,111 77,442Property,plant and - - 2 3equipmentInvestment insubsidiaryundertakings 23 2,659 1,646 - -Intra grouploans 10 137,561 94,243 - -receivableNon-Group loanreceivables 11 - - 9,109 -Derivativefinancialinstruments 19 355 - 465 -Other 9 - - - -investmentsOther assets 7&15 232 171 523 344Deferred tax 16 - - 975 349assets Current assetsCash and cashequivalents 12 1,108 2,187 6,158 22,077Intra grouploans 10 5,541 7,581 - -receivableTrade andother 13 3,457 1,616 3,572 6,095receivables Total assets 150,913 107,444 154,915 106,310 CurrentliabilitiesTrade andother 14 582 101 3,941 7,075payables Non-currentliabilitiesDeferred taxliability 16 - - 3,215 365Long-term loan 15 39,796 - 47,762 -Derivativefinancialinstruments 19 18 - 18 - Total 40,396 101 54,936 7,440liabilities Net Assets 110,517 107,343 99,979 98,870 EquityShare capital 17 - - - -Reserves 20 110,517 107,343 99,979 98,870 Total equity 110,517 107,343 99,979 98,870 Number ofordinary 100,000,000 100,000,000 100,000,000 100,000,000shares Net assetvalue per 99.98p 98.87pordinary share The accompanying notes on pages 25 to 40 form an integral part of theseFinancial Statements. Chairman Director 15 October 2007 15 October 2007 Statement of Cash Flows Statement of Cash Flows for the year ended 30 June 2007 Company Group ----------------- --------- ---------- --------- ---------- Period from Period from Year ended 5 April 2005 to Year ended 5 April 2005 to 30 June 2007 30 June 2006 30 June 2007 30 June 2006 £000s £000s £000s £000s ----------------- --------- ---------- --------- ----------Operating activities----------------- --------- ---------- --------- ----------Profit before tax 7,536 11,874 10,265 2,997----------------- --------- ---------- --------- ----------Adjustments for:----------------- --------- ---------- --------- ----------Unrealised gain onrevaluation ofinvestmentproperty andderivatives - - (6,919) (287)----------------- --------- ---------- --------- ----------Unrealised gain onrevaluation ofloans to fairvalue (3,946) (7,478) ------------------ --------- ---------- --------- ----------Decrease/(Increase) in trade andother receivables (152) (1,616) 1,007 (1,133)----------------- --------- ---------- --------- ----------Increase in tradeand other payables 245 101 1,612 1,265----------------- --------- ---------- --------- ----------Investment income (7,513) (3,056) (184) (2,769)----------------- --------- ---------- --------- ----------Bank interest (219) (665) (307) (694)----------------- --------- ---------- --------- ----------Interest expense 697 - 937 ------------------ --------- ---------- --------- ----------Foreign exchangeloss 2,582 19 9 ------------------ --------- ---------- --------- ----------Other 36 - 68----- ------------------ --------- ---------- --------- ---------- ----------------- --------- ---------- --------- ---------- Net cashgenerated/(absorbed) from operations (734) (821) 6,488 (621)----------------- --------- ---------- --------- ----------Investment incomereceived 5,966 3,056 301 3,056----------------- --------- ---------- --------- ----------Interest paid (460) - (620) (18)----------------- --------- ---------- --------- ----------Interest received 219 664 184 712----------------- --------- ---------- --------- ----------Tax paid - - (39) (17)----------------- --------- ---------- --------- ----------Net cash inflowfrom operatingactivities 4,991 2,899 6,314 3,112----------------- --------- ---------- --------- ---------- ----------------- --------- ---------- --------- ----------Investing activities----------------- --------- ---------- --------- ----------Investment insubsidiaries (1,013) (1,646) - ------------------ --------- ---------- --------- ----------Acquisition ofinvestmentproperties - - (57,478) (76,598)----------------- --------- ---------- --------- ----------Acquisition ofother investments - - (24) (173)----------------- --------- ---------- --------- ----------Proceeds fromdisposal ofsubsidiary - - 1,583 ------------------ --------- ---------- --------- ----------Loans to groupcompanies (37,473) (94,346) - ------------------ --------- ---------- --------- ----------Loan to thirdparty - - (9,109) ------------------ --------- ---------- --------- ----------Acquisition ofcertificates ofdeposit - (167,000) - (167,000)----------------- --------- ---------- --------- ----------Proceeds from saleof certificates ofdeposit - 167,000 - 167,000----------------- --------- ---------- --------- ----------Other - - - (5)----------------- --------- ---------- --------- ----------Net cash outflowfrom investingactivities (38,486) (95,992) (65,028) (76,776)----------------- --------- ---------- --------- ---------- ----------------- --------- ---------- --------- ----------Financing activities----------------- --------- ---------- --------- ----------Proceeds from theissue of shares - 100,000 - 100,000----------------- --------- ---------- --------- ----------Finance costs (98) (171) (217) (171)----------------- --------- ---------- --------- ----------Calyon loanfacility 39,796 - 47,762 ------------------ --------- ---------- --------- ----------Issue costs - (981) - (981)----------------- --------- ---------- --------- ----------Dividends paid (4,700) (3,550) (4,700) (3,550)----------------- --------- ---------- --------- ----------Net cash inflowfrom financingactivities 34,998 95,298 42,845 95,298----------------- --------- ---------- --------- ---------- ----------------- --------- ---------- --------- ----------Effect of exchangerate fluctuationson cash held (2,582) (18) (50) 443----------------- --------- ---------- --------- ---------- ----------------- --------- ---------- --------- ----------(Decrease)/Increase in cash and cashequivalents (1,079) 2,187 (15,919) 22,077----------------- --------- ---------- --------- ---------- ----------------- --------- ---------- --------- ----------Cash and cashequivalents atstart ofyear/period 2,187 - 22,077 ------------------ --------- ---------- --------- ---------- ----------------- --------- ---------- --------- ----------Cash and cashequivalents at 30June 2007 1,108 2,187 6,158 22,077----------------- --------- ---------- --------- ---------- The accompanying notes on pages 25 to 40 form an integral part of theseFinancial Statements. Notes to the Financial Statements 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 year ended 30 June 2007 comprise theFinancial Statements of the Company and its subsidiaries (together referred toas the "Group"). 2. Significant 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 Interpretations Committee,applicable legal and regulatory requirements of Guernsey Law and the ListingRules of the UK Listing Authority. The following new standards have been issued but are not effective for the yearending 30 June 2007 and have not been adopted early: In August 2005, the IASB issued IFRS 7 Financial Instruments: Disclosures whichbecomes effective for periods commencing on or after 1 January 2007. Thestandard requires disclosures about the significance of financial instrumentsfor an entity's financial position and performance. These disclosuresincorporate many of the requirements of IAS 32 Financial Instruments: Disclosureand Presentation. IFRS 7 also requires information about the extent to which theentity is exposed to risks arising from financial instruments, and a descriptionof management's objectives, policies and processes for managing those risks. TheGroup will apply IFRS 7 for its accounting period commencing 1 July 2007. In November 2006, the IASB issued IFRS 8 Operating Segments which becomeseffective for periods commencing on or after 1 January 2009. This standardrequires disclosure on the financial performance of the Group's operatingsegments. The Group will apply IFRS 8 for its accounting period commencing 1July 2009. The Group does not consider that the future adoption of International FinancialReporting Standards, in the form currently available, will have any materialimpact on the Financial Statements as presented. (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 currencies 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 fromintra-group transactions are eliminated in preparing the consolidated FinancialStatements. (iii) Joint ventures The Group's interests in jointly controlled entities are accounted for byproportionate consolidation. The Group combines its share of the joint ventures'individual income and expenses, assets and liabilities and cash flows on aline-by-line basis with similar items in the Group's Financial Statements. TheGroup recognises the portion of gains or losses on the sale of assets by theGroup to the joint venture that is attributable to the other venturers. TheGroup does not recognise its share of profits or losses from the joint venturethat result from the Group's purchase of assets from the joint venture until itresells the assets to an independent party. However, a loss on the transactionis recognised immediately if the loss provides evidence of a reduction in thenet realisable value of current assets, or an impairment loss. (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. Lease incentives are amortised over the whole lease term. (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 2% of the subscription proceeds was accrued to meetthe expenses. The excess was settled by the Investment Manager. The InvestmentManager will be reimbursed for any formation and initial expenses paid above theinitial expenses provision by way of commission for their services. A totalbalance of £nil (2006: £1,019 thousand) has been expensed to the incomestatement in respect of formation expenses for the Company £290 thousand (2006:£246 thousand) formation expenses were incurred by subsidiaries of the Group(see Note 5). Total formation costs for the Group were £290 thousand (2006:£1,265 thousand). (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 2007 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 theincome statement. Realised gains and losses upon disposal of properties arerecognised in the income statement. Quarterly valuations are carried out byKnight Frank LLP, external independent valuers in accordance with the RICSAppraisal and Valuation Standards. The properties have been valued on the basisof open market value, which is the estimated amount for which a property shouldexchange on the date of valuation, in an arm's-length transaction. 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) Investments at fair value through profit or loss An instrument is classified as fair value through profit or loss if it is heldfor trading or is designated as such upon initial recognition. Upon initialrecognition, attributable transaction costs are recognised in profit or losswhen incurred. Financial instruments at fair value through profit or loss aremeasured at fair value and changes therein are recognised in profit or loss. The investment held in the Porto Kali portfolio has been designated by theDirectors as fair value through profit or loss in order to achieve an accountingtreatment consistent with the Group's other property investments. (m) Short term investments Certificates of deposits are measured at fair value which is market value, allhaving a maturity of less than one year. Certificates of deposits 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. (n) 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. (o) 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. (p) Intercompany loans Loans between the Company and its subsidiaries that are not at a market rate ofinterest are initially recognised at fair valued based on an estimated marketrate, with the resultant gain or loss being recognised initially in theCompany's income statement as a distribution gain. Subsequently, these aremeasured at amortised cost on an effective yield basis. After adjusting foramortisation, interest on these loans will be recognised on an effective yieldbasis over the term of the loans. See note 22 for more detail of these loans.Distribution gains are initially allocated to the capital reserve and periodictransfers are made from capital to revenue reserve in line with thecorresponding amortisation of the loans on an effective yield basis as describedabove. (q) 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 of current tax and deferred tax assets and liabilities are disclosed innote 16. (r) Significant estimates and judgements The Group makes estimates and assumptions concerning the future. The resultingaccounting estimates will, by definition, seldom equate to the related actualresults. The estimates and assumptions that have significant risk of causingmaterial adjustment to the carrying amounts of assets and liabilities within thenext financial year are related to the Group's property valuation policy.Properties will be valued quarterly by external independent valuers as at theend of each calendar quarter. Their valuations will be reviewed quarterly by theBoard. (s) Derivative financial instruments The Group uses derivative financial instruments to hedge its exposure to foreignexchange and interest rate risks arising from operational financing andinvestment activities. In accordance with its treasury policy, the Group doesnot hold or issue derivative financial instruments for trading purposes.However, derivatives that do not qualify for hedge accounting are accounted foras trading instruments. Derivative financial instruments are recognised initially at cost which is alsodeemed to be fair value. Subsequent to initial recognition, derivative financialinstruments are stated at fair value. the gain or loss on remeasurement to fairvalue is recognised immediately in profit or loss. However, where derivativesqualify for hedge accounting, recognition of any resultant gain or loss dependson the nature of the item being hedged. The fair value of the interest rate swaps and cross currency swaps is theestimated amount that the Group would received or pay to terminate the swap atthe balance sheet date, taking into account current interest rates and thecurrent creditworthiness of the swap counterparties. (t) Hedge accounting The Group designates certain hedging instruments, which include derivatives andnon-derivatives in respect of foreign currency risk, as either fair valuehedges, cash flow hedges, or hedges of net investments in foreign operations.Hedges of foreign exchange risk on firm commitments are accounted for as cashflow hedges. Note 19 contains details of the fair values of the derivative instruments usedfor hedging purposes. Movements in the hedging reserve in equity are alsodetailed in the statement of changes in equity. Cash flow hedge The effective portion of changes in the fair value of derivatives that aredesignated and qualify as cash flow hedges are deferred in equity. The gain orloss relating to the ineffective portion is recognised immediately in profit orloss as part of other expenses or other income. Amounts deferred in equity are recycled in profit or loss in the periods whenthe hedged item is recognised in profit or loss. However, when the forecasttransaction that is hedged results in the recognition of a non-financial assetor a non-financial liability, the gains and losses previously deferred in equityare transferred from equity and included in the initial measurement of the costof the asset or liability. Hedge accounting is discontinued when the Group revokes the hedgingrelationship, the hedging instrument expires or is sold, terminated, orexercised, or no longer qualifies for hedge accounting. Any cumulative gain orloss deferred in equity at that time remains in equity and is recognised whenthe forecast transaction is ultimately recognised in profit or loss. When aforecast transaction is no longer expected to occur, the cumulative gain or lossthat was deferred in equity is recognised immediately in profit or loss. 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 is responsible for advising the Group on theoverall 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 is entitled to a management fee of 90 basis points per annumof gross assets together with reasonable expenses payable quarterly in arrears.The management fee shall be reduced by an amount equal to the fees payable tothe Real Estate Adviser by the property subsidiaries such that the total feespayable by the Group to the Investment Real Estate Adviser and InvestmentManager will not exceed 90 basis points per annum. The Investment Management Agreement may not be terminated by either the Companyor the Investment Manager without cause prior to the second anniversary of theInvestment Management Agreement. Thereafter, either party may terminate theInvestment Management Agreement on not less than twelve months' notice inwriting. (ii) UBS Limited has been appointed as the Sponsor and Broker with a fee of 20basis points per annum of gross assets payable annually in arrears. (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 is entitledto receive a fixed fee of £65,000 per annum plus a variable fee which isdependant 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 year ended 30 June 2007 amounted to £7,607 thousand(2006: £1,864 thousand). The Group leases out all of its investment propertyunder operating leases. 5. Administrative expenses Company Group----------- ----------- ----------- ----------- ----------- 30 June 2007 30 June 2006 30 June 2007 30 June 2006 ----------- ----------- ----------- ----------- ----------- £000s £000s £000s £000s ----------- ----------- ----------- ----------- -----------Directors' fees 80 88 98 96----------- ----------- ----------- ----------- -----------Insurance expenses 14 10 14 10----------- ----------- ----------- ----------- -----------Administrationfees 148 105 272 120----------- ----------- ----------- ----------- -----------Audit fees 83 18 233 179----------- ----------- ----------- ----------- -----------Acquisition costs - - 116 347----------- ----------- ----------- ----------- -----------Subsidiaries'formation costs - - 290 246----------- ----------- ----------- ----------- -----------Legal andprofessional fees 167 114 662 435----------- ----------- ----------- ----------- -----------General expenses 79 27 241 143----------- ----------- ----------- ----------- ----------- Total 571 362 1,926 1,576 ----------- ----------- ----------- ----------- ----------- 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 financial yearending on 30 June 2007 amounted to £80,000 (2006: £88,330) in respect of theCompany and £97,718 (2006: £95,548) in respect of the Group. 6. Dividends GroupDividend pay date No. of Ordinary Shares Rate 30 June 2007 30 June 2006--------------- ------------ -------- --------- ----------- pence £000s £000s --------------- ------------ -------- --------- -----------25 August 2005 100,000,000 0.45 - 450--------------- ------------ -------- --------- -----------30 November 2005 100,000,000 1.10 - 1,100--------------- ------------ -------- --------- -----------28 February 2006 100,000,000 1.00 - 1,000--------------- ------------ -------- --------- -----------24 May 2006 100,000,000 1.00 - 1,000--------------- ------------ -------- --------- -----------4 September 2006 100,000,000 1.45 1,450 ---------------- ------------ -------- --------- -----------15 December 2006 100,000,000 1.25 1,250 ---------------- ------------ -------- --------- -----------28 February 2007 100,000,000 1.00 1,000 ---------------- ------------ -------- --------- -----------25 May 2007 100,000,000 1.00 1,000 ---------------- ------------ -------- --------- ----------- Total 4,700 3,550 --------------- ------------ -------- --------- ----------- A further dividend of £1 million (1 pence per share) was approved on 2 August2007. The ex-dividend date was 8 August 2007 and the payment date was 29 August 2007. 7. Investment properties Investment properties are stated at fair value, which is determined based onvaluations performed by Knight Frank LLP as at 30 June 2007, on the basis ofopen market value, supported by market evidence, in accordance with the RICSAppraisal and Valuation Standards. 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 market risk through aselective investment process, credit evaluations of tenants, on going monitoringof tenants and through effective management of the properties. Company Group -------------------- --------- -------- --------- -------- 30 June 30 June 30 June 30 June -------------------- 2007 2006 2007 2006 --------- -------- --------- -------- £000s £000s £000s £000s -------------------- --------- -------- --------- --------Cost of investment properties atbeginning --------- -------- --------- ----------------------------of year/period - - 77,152 --------------------- --------- -------- --------- --------Additions duringthe period at cost - - 61,147 77,152-------------------- --------- -------- --------- --------Disposal duringthe period - - (10,130) --------------------- --------- -------- --------- --------Cost of investmentproperties - - 128,169 77,152-------------------- --------- -------- --------- -------- -------------------- --------- -------- --------- --------Fair valueadjustments - - 7,901 287-------------------- --------- -------- --------- --------Foreign exchangetranslation - - (1,959) 3-------------------- --------- -------- --------- --------Market value ofinvestmentproperties - - 134,111 77,442-------------------- --------- -------- --------- -------- Investment properties comprise a number of commercial properties that are leasedto third parties. There was one (2006: four) contract to purchase an investment property exchangedin the period which was not completed at 30 June 2007. Related acquisition coststotalled £183 thousand (2006: £173 thousand) which is shown in other assets onthe balance sheet. The portfolio on page 5 shows the properties acquired by theGroup. 8. Joint ventures On 16 October 2006 the Group disposed of 50% of the equity in the Italiansubsidiary Property Trust Agnadello s.r.l. which holds a logistics warehouse inAgnadello, Italy. The equity was acquired by European Added Value Fund Sarl, asubsidiary of European Added Value Fund Limited ("EAVF"). The Manager of EAVF isPartnership Incorporations Limited, which has appointed AXA Real EstateInvestment Managers UK Limited to act as real estate adviser to EAVF. Thetransaction was at arms length, at no gain or loss and the sale pricerepresented market value. The underlying property value was confirmed by KnightFrank LLP, independent valuers to the Company. The Group is entitled to a proportionate share of the rental income received andbears a proportionate share of the outgoings. The following amounts are includedin the Group Financial Statements as a result of the proportionate consolidationof Property Trust Agnadello Srl: Company Group 30 June 2007 30 June 2006 30 June 2007 30 June 2006 £000s £000s £000s £000sCurrent assets - - 2,162 --------------------- -------- --------- --------- --------Non-current assets - - 10,096 --------------------- -------- --------- --------- --------Currentliabilities - - 271 --------------------- -------- --------- --------- --------Non-currentliabilities - - 10,568 --------------------- -------- --------- --------- -------- -------------------- -------- --------- --------- -------- Company Group -------------------- -------- --------- --------- -------- 30 June 2007 30 June 2006 30 June 2007 30 June 2006 -------------------- -------- --------- --------- -------- £000s £000s £000s £000s -------------------- -------- --------- --------- --------Income - - 1,571 --------------------- -------- --------- --------- --------Expenses - - 1,271 --------------------- -------- --------- --------- -------- 9. Other investments Company Group 30 June 30 June 30 June 30 June ------------------- 2007 2006 2007 2006 £000s £000s £000s £000s Non-current assets------------------- -------- --------- ---------- ---------Financial assets designated at fairvalue -------- --------- ---------- ----------------------------through profit or loss - - - -------------------- -------- --------- ---------- ---------Addition duringthe year - - 1,016 -------------------- -------- --------- ---------- ---------Fair valueadjustment - - (1,016) -------------------- -------- --------- ---------- --------- Total - - - - ------------------- -------- --------- ---------- --------- Financial assets designated at fair value through profit or loss includes the12% share capital held in the holding company of the Dutch office portfolioPorto Kali. 10. Intra group loans receivable Company Group 30 June 2007 30 June 2006 30 June 2007 30 June 2006 £000s £000s £000s £000s -------------------- -------- --------- -------- --------Non-current-------------------- -------- --------- -------- --------Back to back loans 70,273 60,593 - --------------------- -------- --------- -------- --------Mezzanine loans 57,036 33,537 - --------------------- -------- --------- -------- --------Working capitalloans 44 113 - --------------------- -------- --------- -------- --------Profitparticipating loan 10,208 - - --------------------- -------- --------- -------- -------- Total 137,561 94,243 - - -------------------- -------- --------- -------- -------- The above include amortisation of fair value gains on mezzanine and workingcapital loans. CurrentLow interest loans 5,457 2,988 - -VAT loans - 4,455 - -Current accounts 84 138 - - Total 5,541 7,581 - - 11. Non-Group loan receivables During the year the Group made a long-term loan of £9,109 thousand (€13,532thousand) to the holding company of the Porto Kali office portfolio. The loanbears interest at a floating rate of three month Euribor plus 2.25% and isrepayable by the tenth anniversary of the commencement date. 12. Cash and cash equivalents Company Group 30 June 2007 30 June 2006 30 June 2007 30 June 2006 £000s £000s £000s £000s Bank balances 1,108 306 5,838 20,197-------------------- --------- --------- -------- ---------Call deposits - 1,881 320 1,880-------------------- --------- --------- -------- --------- Total 1,108 2,187 6,158 22,077 -------------------- --------- --------- -------- --------- 13. Trade and other receivables Company Group 30 June 30 June 30 June 30 June --------------------- 2007 2006 2007 2006 £000s £000s £000s £000s VAT receivable - - 2,095 4,291--------------------- -------- -------- -------- --------Rent receivable - - 139 617--------------------- -------- -------- -------- --------Prepayments 12 10 749 203--------------------- -------- -------- -------- --------Accrued income - - 292 46--------------------- -------- -------- -------- --------Witholding taxreceivable - - 119 ---------------------- -------- -------- -------- --------Intragroup loaninterest 3,295 1,606 - ---------------------- -------- -------- -------- --------Acquisition costs on exchangedcontracts not yet -------- -------- -------- -----------------------------completed(Note2(k)) - - - 938--------------------- -------- -------- -------- --------Other receivables 150 - 178 ---------------------- -------- -------- -------- -------- Total 3,457 1,616 3,572 6,095 --------------------- -------- -------- -------- -------- 14. Trade and other payables Company Group 30 June 30 June 30 June 30 June ----------------------- 2007 2006 2007 2006 £000s £000s £000s £000sAmounts due on completion ofproperty ------- -------- -------- -------------------------------purchase contracts - - - 3,116----------------------- ------- -------- -------- --------Propertyacquisition costs - - 484 2,413----------------------- ------- -------- -------- --------Initial expenses - - - 370----------------------- ------- -------- -------- --------Investmentmanagement fee 167 - 1,066 225----------------------- ------- -------- -------- --------Legal andprofessional fees 16 - 358 207----------------------- ------- -------- -------- --------Other 8 80 361 195----------------------- ------- -------- -------- --------Rent prepaid - - 181 185----------------------- ------- -------- -------- --------Audit fee 30 17 174 168----------------------- ------- -------- -------- --------VAT payable - 750 154----------------------- ------- -------- -------- --------Tax - - 51 25----------------------- ------- -------- -------- --------Administration andCompanySecretarial fees - - 72 9----------------------- ------- -------- -------- --------Directors' fees - 4 2 8----------------------- ------- -------- -------- --------Interest payable 236 - 318 ------------------------ ------- -------- -------- --------Sponsor fees 125 - 124 ------------------------ ------- -------- -------- -------- Total 582 101 3,941 7,075 ----------------------- ------- -------- -------- -------- 15. Long term Loan Company Group 30 June 2007 30 June 2006 30 June 2007 30 June 2006 £000s £000s £000s £000s Non-current liabilities-------------------- --------- --------- -------- ---------Secured bank loans 39,796 - 47,705 --------------------- --------- --------- -------- ---------Loan due to thirdparty - - 57 --------------------- --------- --------- -------- --------- 39,796 - 47,762 - -------------------- --------- --------- -------- --------- During the year the Group's main loan facility with Calyon Corporate andInvestment Bank was increased from €81.5 million to €122.0 million. The loanmatures 3 April 2011. As at 30 June 2007, the Company had drawn down £39,796thousand (€59,122 thousand) from the facility. On 26 July 2007, the Company drewdown a further €6,250 thousand. Loans drawn down from the main facility aresecured over the shares in the Company's subsidiaries Property Trust Luxembourg1 Sarl, Property Trust Luxembourg 2 Sarl and Property Trust Luxembourg 3 Sarl.In addition to the main loan facility, the Group has a 50% interest in the jointventure Property Trust Agnadello s.r.l. which holds long term bank debts of£15,819 thousand (€23,500 thousand) secured over the property and assets of thejoint venture. A fee of £190,000 (€282,000) was incurred in extending the existing loanfacility and setting up a new facility for Property Trust Agnadello s.r.l. withCalyon Corporate and Investment Bank. 16. Taxation Group 30 June 2007 30 June 2006Reconciliation of effective tax rate £000s £000s---------------------------------- -------- --------Effect of:---------------------------------- -------- --------Current tax - Luxembourg 1 ----------------------------------- -------- --------Current tax - Italy 61 15---------------------------------- -------- --------Current tax - Netherlands 14 11---------------------------------- -------- --------Current tax - Belgium - ----------------------------------- -------- --------Current tax - Germany 14 ----------------------------------- -------- --------Deferred tax charge 2,224 16---------------------------------- -------- --------Tax charge incurred during the year 2,314 42---------------------------------- -------- -------- ---------------------------------- -------- --------Payment on account (39) (17)---------------------------------- -------- --------Taxation (paid in advance)/payable 2,275 25---------------------------------- -------- -------- 2006 2007 Assets Liabilities Net Assets Liabilities Net Recognised deferredtax assets ------- -------- ------- ------- -------- --------------------and liabilities £000s £000s £000s £000s £000s £000s------------ ------- -------- ------- ------- -------- --------Investment property 129 (365) (236) 260 (3,195) (2,935)------------ ------- -------- ------- ------- -------- --------Loss on fair valueof ------- -------- ------- ------- -------- --------------------financial assets - - - 299 - 299------------ ------- -------- ------- ------- -------- --------Gain on derivatives - - - - (20) (20)------------ ------- -------- ------- ------- -------- --------Tax value of losscarry ------- -------- ------- ------- -------- --------------------forwards recognised 220 - 220 416 - 416------------ ------- -------- ------- ------- -------- --------Taxassets/ 349 (365) (16) 975 (3,215) (2,240)(liabilities) ------- -------- ------- ------- -------- ------------------- 1 July Recognised Recognised 30 June 2006 in income in 2007 statement equity Movement in temporary differences £000s £000s £000s £000s----------------- -------- ---------- ---------- --------Investment property (236) (2,699) - (2,935)----------------- -------- ---------- ---------- --------Loss on fair value of financialassets - 299 - 299----------------- -------- ---------- ---------- --------Gain on derivatives - (20) - (20)----------------- -------- ---------- ---------- --------Tax value of loss carry forwardsrecognised 220 196 - 416----------------- -------- ---------- ---------- --------Tax assets/(liabilities) (16) (2,224) - (2,240)----------------- -------- ---------- ---------- -------- ----------------- -------- ---------- ---------- -------- Balance Recognised Balance 5 April income Recognised 30 June 2005 statement in equity 2006 Movement in temporary differences £000s £000s £000s £000s----------------- -------- ---------- ---------- --------Investment property - (236) - (236)----------------- -------- ---------- ---------- --------Tax value of loss carry forwardsrecognised - 220 - 220----------------- -------- ---------- ---------- --------Tax assets/(liabilities) - (16) - (16)----------------- -------- ---------- ---------- -------- 17. Share capital 30 June 30 June 2007 2006 Number of Share Number of Share ------------- Shares Premium Shares Premium £000s £000s Shares of no par valueissued and fully paid -------------Received onthe placing ofshares 100,000,000 100,000 100,000,000 100,000------------- ----------- ---------- ----------- ----------Conversion tospecialdistributablereserve (100,000) - (100,000)------------- ----------- ---------- ----------- ---------- Total 100,000,000 - 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 million, 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. 18. Net asset value per ordinary share The net asset value per ordinary share at 30 June 2007 is based on the netassets attributable to the ordinary shareholders of £99,979 thousand (2006:£98,870 thousand) and on 100,000,000 (2006: 100,000,000) ordinary shares inissue at the balance sheet date. 19. 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, derivative financial instruments receivables and payables thatarise 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. 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 Risk Floating rate financial assets comprise the cash balances which bear interest atrates based on bank base rates. The Group is exposed to interest rate risk asthe Group borrows funds under the loan facility with Calyon Corporate andInvestment Bank at floating interest rates. The Group manages this risk by usinginterest rate swaps and caps denominated in Euro. The swaps mature over the nextthree years following the maturity of the related loans and have swap ratesranging from 3.82% to 4.72%. At 30 June 2007, the Group had interest rate swapswith a notional contract amount of €77,122 thousand (2006: •Nil). --All interest rate swap contracts exchanging floating rate interest amounts forfixed rate interest amounts are designated as cash flow hedges in order toreduce the Group's cash flow exposure resulting from variable interest rates onborrowings. The interest rate swaps and the interest payments on the loan occursimultaneously and the amount deferred in equity is recognised in profit or lossover the loan period. Company 30 June 2007 30 June 2006 Cash flow hedges Assets Liabilities Assets Liabilities £000s £000s £000s £000s Non-current Interest rate swaps 355 - - - Cross currency swaps - 18 - - Total 355 18 - - Group 30 June 2007 30 June 2006 Assets Liabilities Assets Liabilities £000s £000s £000s £000s Non-current Interest rate swaps 465 - - - Cross currency swaps - 18 - - Total 465 18 - - The notional principal amounts of the outstanding cross currency swaps at 30June 2007 were £18,910 thousand (2006: nil). Interest re-pricing Effective interest rate Total as per Fixed rate Floating rate balance sheet 3 months or less % £000s £000s £000s Group: Financial assets Non-Group loan receivable 6.40 9,109 9,109 - Cash and cash equivalents 0.75-5.25 6,158 - 6,158 Total 15,267 9,109 6,158 Financial liabilities Long term loans 4.81 47,762 - 47,762 Total 47,762 - 47,762 Company: Financial assets Interest bearing loans and borrowings Back to back loans 7.05 70,273 - 70,273 Mezzanine loans 6.61-7.18 57,036 57,036 - Working capital 1.00 44 44 - Low interest loans 0.50 5,457 5,457 - Profit participating loan 1.00 10,208 10,208 Total 143,018 72,745 70,273 Financial liabilities Long term loans 4.81-4.96 39,796 - 39,796 Total 39,796 - 39,796 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. The Group had hedged foreign currency exposure in respect of £0.6 million (€0.9million) quarterly interest receipts in Euro over the next five years throughthe use of cross currency swaps. 20. Reserves (a) Revaluation reserves Revaluation reserves of the Group arose from the revaluation gain on properties,financial assets and derivatives. (b) Capital reserves Capital reserves of the Company arose from fair value adjustment of loans tosubsidiaries granted at rates higher than prevailing market interest rates. (c) Hedging reserves Hedging reserves comprise the effective portion of the cumulative net change inthe fair value of hedging instruments where the hedged transaction has not yetoccurred. (d) Distributable reserves Distributable reserve 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. (e) Foreign exchange reserves Foreign exchange reserve arose as a result of the translation of the FinancialStatements of foreign operations, the functional and presentation currency ofwhich is not Sterling. 21. 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 were £4,628 (2006: £6,930)which was settled during the year. 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 £147,795 (2006: £104,952) for the year of which £Nil(2006: £20,618) remained payable at the year end. Under the Investment Management Agreement, the Real Estate Adviser's Agreementand local asset management agreements, fees are payable to AXA Real EstateInvestment Managers UK (the Real Estate Adviser) and other entities within theAXA Investment Managers Group. As the Real Estate Adviser and local assetmanagers, these entities are involved in the planning and direction of theCompany and Group, as well as controlling aspects of their day to day activity,subject to the overall supervision of the Directors. During the year, fees of£1,084 thousand (2006: £208 thousand) were expensed to the income statement ofwhich £1,066 thousand (€225 thousand) remained payable at the year end. During the year, the Company made various loans to its subsidiaries, of whichdetails are disclosed in Note 22. 22. 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 £45,744 thousand (2006: £25,997 thousand)with a fair value of £57,036 thousand (2006: £33,537 thousand). The differenceof £11,453 thousand (2006: £7,540 thousand) between the fair value at initialrecognition of these loans (£57,197 thousand; 2006: €33,537 thousand) and theirsettlement value is recognised as a distribution gain in the Company's incomestatement. These loans are unsecured and bear interest at the coupon rate of9.75% per annum, their repayable dates ranging between 2015 and 2017. Based onthe Company's accounting policies the difference between the fair value of theloans and their settlement amounts is recognised at the date of the granting ofthe loans as distribution gain 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 £70,273 thousand (2006: £60,593thousand). These are unsecured and bear interest at Euribor plus 2.75% perannum, their repayable dates ranging between 2015 and 2017. (c) Low interest loans Included in current loan receivables from subsidiaries are loans for the purposeof property acquisition amounting to £5,457 thousand (2006: £2,988 thousand).These are unsecured and bear interest at the coupon rate of 0.5% per annum andare repayable within less than one year. (d) Working capital loans Included in non-current loan receivables from subsidiaries are loans for thepurpose of working capital amounting to £67 thousand (2006: £175 thousand) witha fair value of £44 thousand (2006: £113 thousand). The difference of £29thousand (2006: £62 thousand) between the fair value at initial recognition ofthese loans (£38 thousand; 2006: £113 thousand) and their settlement values isrecognised as a distribution gain in the Company's income statement. These areunsecured and bear interest at the coupon rate of 1.0% per annum, theirrepayable dates ranging between 2015 and 2016. (e) VAT loans Included in current loan receivables from subsidiaries are loans for the purposeof working capital amounting to £Nil (2006: £4,456 thousand). These areunsecured and bear interest at the coupon rate of 1.0% per annum and arerepayable within less than one year. (f) Current Accounts Included in current loan receivables from subsidiaries are short term loansamounting to £84 thousand (2006: £138 thousand). These do not bear interest and are repayable within sixmonths. (g) Profit participating loan Included in current loan receivables from subsidiaries are loans for the purposeof investment acquisition amounting to £10,208 thousand (2006: Nil). These areunsecured and bear fixed interest at the coupon rate of 1.0% per annum. Inaddition to the fixed interest, the loan also bear a tracking interest as perthe Profit Participation Loan agreement. The loan matures on the 49thanniversary of the loan date. 23. 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 2007 Subsidiaries Investment in Country of Date of Ownership Principal subsidiaries incorporation incorporation interest % activities £000s PropertyTrustLuxembourg 1Sarl 1,277 Luxembourg 20 July 2005 100 Holding company PropertyTrustLuxembourg 2Sarl 1,231 Luxembourg 24 November 100 Holding 2005 company PropertyTrustLuxembourg 3Sarl 151 Luxembourg 2 June 2006 100 Holding company Total 2,659 Owned by Property Trust Luxembourg 1 Sarl, Property Trust Luxembourg 2 Sarl andProperty Trust Luxembourg 3 Sarl Country of Ownership Interest ---------------------------- Incorporation % ------------ ----------Property Trust Luxembourg 1 Sarl---------------------------- ------------ ----------Property Trust Karben Sarl Luxembourg 100---------------------------- ------------ ----------Property Trust Treuchtlingen Sarl Luxembourg 100---------------------------- ------------ ----------Property Trust Altenstadt Sarl Luxembourg 100---------------------------- ------------ ----------Property Trust Wuerzburg Sarl Luxembourg 100---------------------------- ------------ ----------Property Trust Moosburg Sarl Luxembourg 100---------------------------- ------------ ----------Property Trust Muehldorf Sarl Luxembourg 100---------------------------- ------------ ----------Property Trust Berlin 1 Sarl Luxembourg 100---------------------------- ------------ ----------Property Trust Fuerth Sarl Luxembourg 100---------------------------- ------------ ----------Property Trust Berlin 4 Sarl Luxembourg 100---------------------------- ------------ ----------Property Trust Netherlands 1 B.V. Netherlands 100---------------------------- ------------ ----------Keyser Center N.V. Belgium 0.05---------------------------- ------------ ---------- ---------------------------- ------------ ----------Property Trust Luxembourg 2 Sarl---------------------------- ------------ ----------Property Trust Bernau Sarl Luxembourg 100---------------------------- ------------ ----------Property Trust Rothenburg 1Sarl Luxembourg 100---------------------------- ------------ ----------Property Trust Investment 1 Sarl---------------------------- ------------ ----------renamed Property TrustKraichtal Sarl Luxembourg 100---------------------------- ------------ ----------Property Trust Investment 2Sarl Luxembourg 100---------------------------- ------------ ----------renamed Property Trust Montabauer Sarl ----------------------------Property Trust Investment 3 Sarl---------------------------- ------------ ----------renamed Property Trust Dasing Sarl Luxembourg 100---------------------------- ------------ ----------Property Trust Investment 4 Sarl Luxembourg 100---------------------------- ------------ ----------renamed Property Trust Dresden Sarl---------------------------- ------------ ----------Keyser Center N.V. Belgium 99.95---------------------------- ------------ ----------Property Trust Agnadello s.r.l. Italy 50---------------------------- ------------ ----------Multiplex 1 S.r.l Italy 100---------------------------- ------------ ---------- ---------------------------- ------------ ----------Property Trust Luxembourg 3 Sarl---------------------------- ------------ ----------Property Trust Investment 5 Sarl Luxembourg 100---------------------------- ------------ ----------renamed Property Trust Koethen Sarl---------------------------- ------------ ----------Property Trust Investment 6 Sarl Luxembourg 100---------------------------- ------------ ----------renamed Property Trust Kali Sarl---------------------------- ------------ ---------- 24. Commitments A retail outlet at Kraichtal in Germany is to be constructed by the tenant onthe site acquired on 31 January 2007 for £79 thousand. When construction iscompleted in 2007, the Group will be liable to acquire the new building for anestimated consideration of £228 thousand (€338 thousand), with a further £101thousand (€150 thousand) payable on fulfillment of certain tenant-relatedconditions. The joint venture Property Trust Agnadello s.r.l. is committed to carry outrepairs and improvements to enhance the capital value of the building at anestimated cost of £1.7 million (€2.5 million) for which the Group will provide50% of the funding. Payment is anticipated in early 2008. 25. Post balance sheet events The acquisition of a real estate asset in Berlin, Germany was successfullycompleted on 3 August 2007 for a gross purchase price of approximately £4,200thousand (€6,200 thousand). The transaction was financed by a draw down on theCompany's loan facility which was fully economically hedged through a three yearinterest rate swap followed by a one year interest rate cap. Property agent'sfees of £88 thousand (€130 thousand) were incurred on completion. The acquisition of a real estate asset adjacent to the retail site already ownedby the Group in Kraichtal was successfully completed on 1 October 2007 for agross purchase price of £370 thousand (€550 thousand). On 26 July 2007, the Company drew down a further £4,222 thousand (€6,250thousand) from its main loan facility with Calyon Corporate and Investment Bank.To hedge the related interest rate risk, the Company executed an interest rateswap for three years and an interest rate cap for the final year of the loan. In August and September 2007, the Company executed additional cross currencyswaps to hedge the Euro to Sterling foreign exchange risk on €500 thousandincome to be received every quarter to 30 April 2012. On 28 September 2007, the Company reduced the main loan facility with CalyonCorporate and Investment Bank from €122 million to €90 million to eliminatesurplus capacity. All enquiries to: The Company SecretaryNorthern Trust International Fund Administration Services (Guernsey) LimitedTrafalgar CourtLes BanquesSt Peter PortGuernsey GY1 3QL Tel: 01481 745660Fax: 01481 745051 This information is provided by RNS The company news service from the London Stock Exchange
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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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