Worsley Inv Ltd Regulatory News (WINV)

To: Company Announcements

Date: 29 August 2013

Company: AXA Property Trust Limited

Subject: Net Asset Value 30 June 2013 (Unaudited)

CORPORATE SUMMARY

- The Company's unaudited Consolidated Net Asset Value at 30 June 2013 was £59.83 million (59.83 pence per share), a decrease of £0.65 million since 31 March 2013 when the NAV was £60.48 million (60.48 pence per share).

- The Company and its subsidiaries made a loss after tax of -£3.68 million in the twelve month period to 30 June 2013;

- Good progress continues to be made with sales across the Company in the implementation of the wind down strategy of the Company's portfolio. The sale of the asset at Dresden, Germany, has been successfully completed for £1.80 million (EUR2.1 million), whilst the sale of the asset at Braunschweiger Strasse in Berlin, Germany, has been notarised with completion is expected 30 August 2013 for £1.40 million (EUR1.63m). An offer has also been accepted for the retail gallery Keyser Center in Antwerp, Belgium and the disposal is expected to be completed during the second half of September. The Advisor has also agreed sales at Karben, Köthen and Montabaur (all in Germany).

- The dividend remains suspended since the announcement on 21 August 2012 in order to prudently manage cash and debt. The dividend policy was reviewed prior to the Extraordinary General Meeting ("EGM") held on 26 April 2013 at which the Board's proposal in relation to a managed wind down of the Company was approved by Shareholders. The dividend policy remains unchanged and instead the Board and Investment manager are working towards a return of capital to Shareholders.

PORTFOLIO UPDATE

Country Allocation at 30 June 2013 (by value)

Country % of portfolio

Germany 66%

Italy 21%

Netherlands 7%

Belgium 6%

Sector Allocation at 30 June 2013 (by value)

Sector % of portfolio

Retail 67%

Industrial 21%

Leisure 12%

At Fürth a fire inspection report has been commissioned and delivered confirming the divisibility and necessary measures for the unit previously occupied by Edeka. At the same time good progress continues to be made to complete the first major letting for the unit with a major international retailer agreeing to take 1,500m2 for a ten year period. Meanwhile the tenant operating the sports bar has agreed to extend their lease by a further ten years (from January 2014) at the same rental level in return for two months' rent free. The operator of the Japanese restaurant has also agreed to extend their lease by five years to November 2023 at the same rental level in return for three months' rent free.

At Wurzburg the main tenant REWE (76% of the passing rent) has agreed to extend their existing lease by a further five years to March 2016 at the same level of rent in return for a EUR5k contribution to re-paint the property's facade.

The Advisor has signed a new six year lease to March 2019 at Venray in the Netherlands with XEROX. Under the new lease the tenant will pay rent of EUR846k (a 15% discount of the previous rent) in return for the renovation of the roof and the heating and cooling systems for a total cost of EUR745k.

MARKET UPDATE

Our expectations for GDP in 2013 have marginally reduced since the end of 2012. No longer is net export growth the obvious driver in the immediate future. Although falling net disposable income (as a result of raised taxes, rising unemployment and depressed earnings) has been depressing consumer spending since the end of 2010, there are some signs that it is now stabilising and we expect a recovery in the second half of 2013. Business investment has continued to be deferred until more positive signs of a recovery are observed and we expect this should start turning positive towards the end of next year.

The divide between southern and northern Europe is expected to continue in the medium term. The three major southern European countries are expected to register the lowest economic growth with the three-year average falling below zero, as a result of further rises in unemployment, and falls in income and household consumption.

European inflation is projected to be lower than previously expected, as 2013's monthly rates have been low or negative (deflationary), reflecting low spending as well as static oil prices. Indeed, much of the annual rate is due to rises in indirect taxes over the last 12 months. As these wash out of the index, the rate will fall to a low point before starting to gradually rise again as spending increases.

Despite the reduction of the risk of a eurozone breakup as a result of ECB's determination to support the currency, there are still risks to the resolution of the eurozone crisis.

The dependence of the German economic growth on exports, in particular to the eurozone, will have a limiting effect on its growth in 2013. However, we expect that the recovery of global trade, as well as the improving eurozone economies, will boost exports from 2014 onwards and lead to faster economic growth in Germany.

Italy's outlook has deteriorated, as the impact of the austerity measures and rising unemployment is proving more severe than previously expected. We expect GDP to continue to decline in 2013 followed by growth, albeit subdued, in 2014.

With the eurozone unemployment rate hitting a record high of over 12% and annual inflation dropping to 1.2% in April 2013, the ECB cut its rate from 0.75% to 0.5% in May. Since then the Federal Reserve has indicated that QE3 will gradually be phased down, commencing later this year and completing in mid-2014. This is tantamount to an interest rate crisis and that is exactly how the bond markets have reacted. As a result, given the continuing weakness of the European economies, we do not expect an interest rate rise in the BoE base rate until Q3 2015.

The most significant political risk to our forecasts is represented by the September 2013 German general elections. Prior to that, any dissent on European matters will be relatively subdued. After that, there may be changes, although it is difficult to see the direction in which they may change.

OUTLOOK FOR 2013

OUTLOOK FOR RETAIL SECTOR

As expected, the first half of 2013 has represented a continuation of the difficult 2012 for retailers. Retail spending growth remains generally weak, even in those markets perceived as having stronger consumers. Whilst consumer confidence and retail sales appear to be showing some tentative signs of improvement, we expect austerity programmes and low disposable income growth to keep consumers circumspect regarding consumption for the second half of the year.

We have become marginally more optimistic about the European retail sector. However we are acutely aware of the continued divergence between the strongest and weakest markets, with Germany firmly in the former where we expect the largest increases in rental values between 2013-2015. This reflects a further strengthening of demand by international retailers for space in what is, by European standards, a market with a relatively-low penetration of international brands.

In Germany, occupier demand, which drove rental value growth to over 10% in 2012, continues to be particularly strong in Hamburg and Munich, reflecting their higher-income catchment populations.

Whilst we have a positive outlook for Germany, we are cautious on a number of other markets. In particular, the Nordic markets of Finland, Norway and Sweden and the central European markets where the economic recovery has been deferred, particularly following a sharper than expected downturn in consumption in Poland.

OUTLOOK FOR LOGISTICS SECTOR

Global trade growth recovered in Q4 2012 (0.9% quarter on quarter), but the contribution from the European economies remains weak, with imports limited by austerity measures that continue to depress domestic demand. Although some economies (e.g. Spain, Ireland, Greece) have been able to reduce labour costs and regain some competitiveness, export growth is expected to remain below the historic trend rate. Global trade is forecast to improve in 2013 by 4% (JLL, European Industrial Occupier Conditions, Feb 2013), but that is still below the longer-term average of 6%, and the benefits for most European economies will be relatively small.

Construction output has been below the ten year average level for almost four years and vacancy rates in the German markets, Rotterdam, Helsinki and Brussels have dropped below 5%. New supply continues to be demand-driven, with only 3% of the space currently under construction in Europe being speculative. While there is some, limited, speculative development in the UK (16% of total new supply), Poland (11%) and Germany (5%) (JLL, European Industrial Occupier Conditions, Feb 2013), the risk of oversupply remains low, as overall construction levels have fallen further in UK (-46%) and Poland (-44%) or have remained stable in Germany (+3%) compared to the previous year.

We expect Grade-A, well-located assets in the relatively strong economies of Poland and the Nordics to outperform over the next three years because of stronger foreign and domestic demand. However, the continued deterioration in the outlook for the southern European economies makes these logistics markets vulnerable to further rental value falls, even in the strongest locations.

OUTLOOK FOR INVESTMENT MARKET

Given that many analysts have regarded the previous low yields in the bond markets as being evidence in itself that they are over-priced, the Federal Reserve's statements are being perceived as signalling the bottoming-out of the yield cycle. In this phase of the economic cycle, prime property yields have become linked with bond yields, for the simple reason that investors have (realistically) not been factoring in any growth from improving tenant demand, at least in the short-to-medium term. For that reason, we are particularly wary of sub-4% transactions that appear to have cyclical growth as their pricing rationale - although there is always an occasional exception.

A liquidity premium has, in our opinion, been priced into the current market pricing of secondary or non-prime property. But, with the high levels of demand for prime property, their yields are below the long-term averages and there is no room for a liquidity premium. This leaves them vulnerable in the short term to investors seeking to lock in their gains of the last few years.

With the strong falls in prime yields in the main European markets, the gap between prime and secondary yields has increased over the last two years. While this gap is in most markets higher than at any point in the last five years, it is rather the result of inward yield shifts in the prime markets than outward yield movements in the secondary markets due to a lack of transactions in this segment (the UK is the exception). With increasing investor interest in higher-risk investments, true pricing (e.g. higher secondary yield levels) should become more evident in the majority of the European markets with expected yield rises between 2013 and 2015. Total returns for prime property are expected to outperform secondary in all three main sectors in 2013/2014. As secondary property is, unlike prime, not priced off bonds, the expected increase in ten-year government bond yields will have a larger impact on the pricing for prime, with an expected outperformance of secondary total returns on prime from 2015 onwards.

CONSOLIDATED PERFORMANCE SUMMARY

Source: Datastream; AXA Real Estate

Total net loss was -£3.68 million (-3.68 pence per share) for the twelve months to 30 June 2013, including £1.92 million of "revenue" profit (excluding capital items such as revaluation of property) and -£5.60 million "capital" loss analysed as follows:

NET ASSET VALUE

The Company's unaudited Consolidated Net Asset Value per share as at 30 June 2013 was 59.83 pence (60.48 pence as at 31 March 2013), a decrease of 0.65 pence.

The Net Asset Value attributable to the Ordinary Shares is calculated under International Financial Reporting Standards. It includes all current year income after the deduction of dividends paid prior to 30 June 2013.

The £0.65 million decrease in Net Asset Value over the quarter ended 30 June 2013 can be analysed as follows: 

On a like-for-like basis the Euro valuation of the property portfolio decreased by 1.42% to EUR132.0 million for the quarter. In Sterling currency terms, the property valuation was £111.2 million (including the effects of valuation movements, capital expenditure and foreign exchange movements). The £/EUR foreign exchange rate applied to the Company's Euro investments in its subsidiary companies at 30 June 2013 was 1.167 (31 March 2013: 1.183). 

SHARE PRICE AND DISCOUNT TO NET ASSET VALUE

As at close of business on 30 June 2013, the mid market price of the Company's shares on the London Stock Exchange was 37.50 pence, representing a discount of 37.3% on the Company's Net Asset Value at 30 June 2013.

As at close of business on 28 August 2013, the mid market price of the Company's shares was 39.38 pence, representing a discount of 34.2% on the Company's Net Asset Value at 30 June 2013.

FUND GEARING

*Portfolio value based on the Company's independent valuation

Fund net gearing increased by 0.1 percentage points over the quarter to 42.3% as at 30 June 2013.

Fund gearing is included to provide an indication of the overall indebtedness of the Company and does not relate to any covenant terms in the Company's loan facilities. Gross gearing is calculated as debt over property portfolio at fair value. Net gearing is calculated as debt less cash over property portfolio at fair value.

As the wind down progresses, the level of gearing will continue to decrease as proceeds from sales are used to reduce debt over the next 12 to 18 months.

LOAN FACILITIES

As at 30 June 2013, the loan-to-value ratio on the main facility was 47.4% based on the Company's independent valuation of the property portfolio.

A further prepayment was made subsequent to 30 June 2013 as a result of the disposal of the asset at Dresden, Germany, resulting in a new loan balance of EUR55.92 million and LTV of 47.1%.

Interest Cover Ratio (ICR) is calculated as net financing expense payable as a percentage of net rental income less movement in arrears. Net rental income headroom is based on projected interest cover.

CASH POSITION AND CAPITAL EXPENDITURE

The Company and its subsidiaries held total cash of £3.99 million (EUR4.66 million) at 30 June 2013.

The anticipated capital expenditure over the next twelve months is £1.10 million (EUR1.28 million).

MATERIAL EVENTS

Except for those noted above, the Board of the Company is not aware of any significant event or transaction which occurred between 30 June 2013 and the date of the publication of this Statement which would have a material impact on the financial position of the Company.

Company website:

http://www.axapropertytrust.com

All Enquiries:

Investment Manager 

AXA Investment Managers UK Limited

Broker Services

7 Newgate Street

London EC1A 7NX

Tel: +44 (0)20 7003 2345Email: broker.services@axa-im.com

Broker

Oriel Securities Limited

Neil Winward

Tel: +44 (0)20 7710 7600

Company Secretary

Northern Trust International Fund Administration Services (Guernsey) Limited

Trafalgar Court

Les Banques

St Peter Port

GY1 3QL

Tel: +44 (0)1481 745604

Fax: +44 (0)1481 745085