Worsley Inv Ltd Regulatory News (WINV)

14 May 2008 07:00

To: Company Announcements

Date: 14 May 2008

Company: AXA Property Trust Limited

Subject: Interim Management Statement

INTERIM MANAGEMENT STATEMENT - Three months to 31 March 2008

To the members of Axa Property Trust Limited

This is the Company's second interim management statement for the year ending 30 June 2008.

The Company's objective is to secure attractive Sterling-based total returns for shareholders through a combination of dividends and capital appreciation from investment in commercial property in Europe.

Total net profit was £3.32 million (3.32 pence per share) for the nine months to 31 March, including a -£0.28 million loss for the three months to 31 March, which can be analysed as follows:

Net property income improved this quarter as a result of lower property costs and increases in rental income, partly due to indexation. There was an unrealised loss on revaluation of property and investments of £1.61 million (0.9%). The Company's running gross rental income yield on the valuation at 31 March 2008 was 7.18%.

The Net Asset Value increased by £5.09 million on the NAV at 31 December 2007. The increase can be analysed as follows:

Share Price and Discount to Net Asset Value

As at close of business on 31 March 2008 (the last business day of the month), the mid market price of the Company's shares on the London Stock Exchange was 70.75 pence, representing a discount of 38.1% on the Company's Net Asset Value at 31 March 2008.

As at close of business on 12 May 2008, the mid market price of the Company's shares was 71.50 pence, representing a discount of 37.4% on the Company's Net Asset Value at 31 March 2008.

Dividends

The second interim dividend of 1.00 pence per share in respect of the year ended 30 June 2008 was declared on 13 February 2008 and paid on 29 February 2008. The third interim dividend of 1.00 pence per share was declared 7 May 2008 to be paid 30 May 2008.

Net investment hedging

As part of its net investment or equity hedging strategy, the Company purchased two forwards on 21 February 2008 and 22 April 2008 for the Sterling equivalent of €40 million each. The forwards have a maturity date of 2015 which coincides with the earliest possible date for termination of the Company, as foreseen in the Company's Prospectus at launch.

The purpose of the hedging instrument is to reduce volatility in the Company's Net Asset Value arising from fluctuations in the Euro/Sterling exchange rate, as well as "locking in" significant foreign exchange gains the Company has experienced in recent months as a result of the favourable foreign exchange movements. 

The Board will continue to keep the status of equity hedging under review and expects to enter into further transactions in the coming months to increase the proportion of hedged equity to around 80%.

Gearing

On 28 March 2008, the Company made a final €15 million draw down on its loan

facility with Calyon Corporate and Investment Bank. Based on the portfolio valuation at 31 March 2008, total gearing was 44.7% excluding the 12% interest in the Porto Kali Dutch office portfolio and 47.2% including Porto Kali. 

The purpose of the draw down is to secure financing for future capital expenditure on the logistics warehouse in Agnadello in Italy and the retail park in Fuerth in Germany prior to the expiry of the availability period of the loan facility on 1 April 2008. The Directors are of the view that the financing terms under the existing loan facility are favourable compared to those terms that could potentially be achieved in the next six to 18 months, with the added advantage of certainty.

The cash has been invested in fixed term deposits which will be realised as required for the capital expenditure programme.

The Company's loans with Calyon are fully hedged via interest rate swaps and caps to April 2011 when the loan facility expires.

STRATEGY AND MARKET

Country Allocation at 31 March 2008

The portfolio is being actively managed to create value and enhance the Company's Net Asset Value and future dividend. 

On-going property initiatives aim to enhance the portfolio's income stream and capital values through lease re-structuring, as well as the development project at Fuerth. The portfolio also benefits from rental indexation. The Fund continues to maintain its focus on cost control at portfolio and corporate level. 

The Board believes that the Company is well positioned as the portfolio, concentrated in Germany, is largely "core", having well-secured income flows delivering some 7% income yield. Valuation corrections are expected in some Continental European markets, such as Paris and Madrid, which witnessed the strongest yield compression in the years preceding summer 2007. However, outward yield movement across the continent is expected to be more modest than the severe movements experienced in the UK. The Board believes, therefore, that portfolio capital values are moderately protected from a potential weakening in market values that might impact more secondary properties or properties located in overpriced markets.

Material Events

Except for those noted above, the Board of the Company is not aware of any significant event or transaction which occurred between 31 March 2008 and the date of the publication of this Statement which would have a material impact on the financial position of the Company. 

This statement has been produced to comply with the requirements of the Disclosure and Transparency Rules issued by the UKLA and should not be relied upon by any other party or for any other purpose.

Further information on the Company is available on the Investment Manager's website: http://www.axa-im.co.uk. Please follow the prompts to 'Literature' and then 'Factsheets' or 'Report and Accounts'.

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