Final Results

AXA Property Trust Ld 16 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, has now largely completed the acquisition of a quality European property portfolio in accordance with its investment objectives. As at 30 June 2007 AXA Real Estate Investment Managers UK Limited (the 'Real Estate Adviser') had completed the purchase of properties in 19 locations across Europe at a gross cost of Â£127.3 million. Two further assets completed in August and September 2007 for a gross price of Â£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 Â£65.6 million, as well as investing Â£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 a highly selective acquisition policy. The result is a portfolio which provides a good income yield, offers value and potential for growth. The portfolio is well positioned across Europe to benefit from improving property market fundamentals. The Group has significant holdings in Germany, where the Real Estate Adviser believes greater growth prospects exist due to economic and property cycles being less advanced than in other 'core' European countries. Diversification has been achieved by selecting properties of differing lot sizes, which are spread through European regions, further diversified across property sectors and by tenant mix. The net portfolio yield is approximately 7.0% (gross 7.8%).(1) This income stream is well secured both in terms of tenant covenant and in duration, with an average unexpired weighted lease length of 7.1 years. Over the year market yield ratings improved significantly. Following the 'credit crunch' and tighter debt markets the Real Estate Adviser reports that the European real estate investment markets are in a state of uncertainty. However, due to the strong fundamentals of the acquired portfolio the Adviser believes the Company will benefit from further growth in the medium term. Results The Group generated a net profit of Â£8.0 million in the financial year to 30 June 2007. The net valuation uplift on properties was 4.2% (Â£7.9 million). Excluding revaluation gains after deferred tax, as well as one-off costs incurred as part of the set-up and investment phase, net profit was Â£4.1 million. Net asset value at 30 June 2007 was Â£99.98 million (99.98 pence per ordinary share). Translation losses reduced net asset value by Â£2.6 million as a result of adverse movements in the Sterling/Euro exchange rate. Since the year end the Sterling/Euro exchange rate has moved in the Company's favour. Dividend The Board has approved four quarterly dividends in respect of the financial year to 30 June 2007 amounting to Â£4.25 million, representing a dividend yield of 4.25% 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 the Euribor interest rate over the past two years, as well as the expensing of a greater proportion of one-off investment costs than envisaged. Now the Company is fully invested it will benefit from the relatively high income yield on the acquired portfolio, a substantive absence of purchase costs, and the start of income growth from indexation and rental growth. While further interest rate hikes are no longer anticipated, financing costs remain higher than expected and are likely to diminish distributable income over the current year. Prospects With a robust investment portfolio in place your Company is now delivering a stable income flow and has good growth prospects. The Real Estate Adviser believes that in contrast to the UK market, values of Continental investments, where there are still capital inflows, are far more likely to grow in the coming year. The Real Estate Adviser's on-the-ground management structure is well able to protect the portfolio income flow and is working to enhance it. They are, as well, working to maximise value enhancement through active management, with a number of promising initiatives in progress. I am confident of your Company's future. Charles Hunter Chairman 15 October 2007 Note 1: A detailed yield analysis is included in the Investment Manager's Report on page 5. Investment Manager's Report Investment Manager AXA Investment Managers UK Limited (the 'Investment Manager') is the UK subsidiary of AXA Investment Managers, a dedicated asset manager within the AXA Group. AXA Investment Managers is an innovative and fast-growing multi-expertise investment manager with â‚¬566 billion of assets under management and 2,800 employees in 19 countries as at 30 June 2007. AXA Real Estate Investment Managers UK Limited (the 'Real Estate Adviser') is part of real estate management arm of AXA Investment Managers S.A. ('AXA REIM'). AXA REIM is a specialist in European real estate investment management with approximately â‚¬41.7 billion of real estate assets under management in 15 European countries as at 30 June 2007, of which the Real Estate Adviser manages approximately â‚¬10.9 billion. Real Estate Market The US sub-prime crisis has increased risk aversion in credit and lending markets since July. This is ultimately expected to reduce the level of debt capital targeting European real estate with the effect of subduing capital growth. However, we expect this to be largely offset by the continuing recovery of rental growth in the medium term. Despite the US sub-prime crisis, the economic outlook for mainland Europe remains quite positive for both 2007 and 2008, according to consensus forecasts. Indeed, the crisis has resulted in a slightly more benign short term interest rate environment as the monetary authorities are keen to avoid aggravating risk aversion in the credit and lending markets by increasing interest rates further at this stage. Overall, the short term outlook remains one of low inflation coupled with sustainable positive economic expansion. The Eurozone area remains one of the more attractive regions for real estate investment in the next one to two years, as interest rates remain relatively low at 4.0% and income yields are still attractive. In addition, there is increasing evidence that economic recovery is being translated into positive rental growth. There also remains an overhang of existing capital in the market from earlier fund raising initiatives (prior to the US sub-prime crisis) which is still targeting real estate and, in particular, the weight of money will continue to support real estate prices in the short term. Retail Continental European retail is expected to deliver solid returns which are likely to be less volatile than for other sectors. Consumer confidence remains fairly buoyant due to relatively strong employment growth across Europe and falling levels of unemployment. In Germany, the now widely recognised economic recovery is attracting much international capital seeking high current income yields. This interest is expected to continue to put downward pressure on yields, leading to capital growth, although at a lower rate than anticipated prior to the US sub-prime crisis. Office The office sector is expected to perform quite favourably during the next few years, as positive rental growth helps boost returns. In particular the German and Dutch office markets look set to continue to recover as both economies strengthen. Increased occupier demand in the first half of 2007, coupled with falling vacancy rates, has put upward pressure on rents. Industrial Industrial income returns are typically a little higher than for the other main sectors. The best performance prospects are expected from high quality logistics parks and distribution centres located near key strategic transport hubs. Industrial returns in Germany could benefit from economic recovery, although rental growth is expected to remain largely flat across Europe as industry strives to cut costs. Investment Activity The Company has now completed the investment of funds at the initial 35% level of gearing. By 30 June 2007 the Group had completed the acquisition of 19 real estate purchases valued at Â£134.1 million. In addition the Group holds a 12% interest in a joint investment which has acquired a Â£210 million Dutch office portfolio. Two further asset transactions after the quarter end at a gross price of Â£4.6 million. The Board has approved a modest increase in gearing to 45% which, together with valuation gains in the portfolio, provides the opportunity to enhance the portfolio's return by making a further property acquisition. The property portfolio as at 30 June 2007 has been acquired at a cost of Â£127.3 million, including acquisition costs of Â£6.3 million. The portfolio was independently valued at Â£134.1 million as at 30 June 2007. The Group plans to develop two sites already held in the portfolio. The sites adjoin 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) ---------- -------- --------- Phoenix Centre, Fuerth Germany Retail 7.66% 6.86% 12.7% --------------- ----------- ----------- ---------- -------- --------- Bahnhofstrasse , Rothenburg Germany Retail 6.94% 6.36% 11.9% --------------- ----------- ----------- ---------- -------- --------- Via Lega Lombarda, 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% --------------- ----------- ----------- ---------- -------- --------- Industriestras se, Montabaur Germany Retail 6.90% 6.07% 4.9% --------------- ----------- ----------- ---------- -------- --------- Rudnitzer Chaussee, Bernau Germany Retail 9.81% 8.75% 4.6% --------------- ----------- ----------- ---------- -------- --------- Keyser Center, Antwerp Belgium Retail 7.17% 6.73% 3.8% --------------- ----------- ----------- ---------- -------- --------- Other - - - - 19.7% --------------- ----------- ----------- ---------- -------- --------- Total Property Portfolio 7.79% 7.03% 88.3% --------------- ----------- ----------- ---------- -------- --------- Porto Kali Investment(3) Netherlands 6.0% --------------- office ----------- ---------- -------- --------- ----------- Other non current assets and net current assets 5.7% ---------------------------------- ---------- -------- --------- Total assets less current liabilities 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 gross rent as property operating costs. Note 3: Porto Kali investment value of Â£9.1 million is a non-current shareholder loan. The Fund investment portfolio has the following geographic, sector and income profile. Geographic Analysis at 30 June 2007 by market value1 Within Germany, properties are located in West Germany and Berlin and split as follows: 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 tenants rated Grade A or B. The weighted effective unexpired lease length for completed transactions as at 30 June 2007 was 7.1 years, with 57.2% of income secured for a 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 space in the portfolio as at 30 June 2007, measured using market rent, represented 5.2% of the total gross rental income. 85% of vacant space within the property portfolio relates to Porto Kali, a 'working' portfolio with a focus on capital value 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 Â£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 the year end the Group completed two further acquisitions for a gross cost of Â£4.6 million (â‚¬6.8 million), thereby increasing gearing to 34.4% (41.2% including Porto Kali external finance). The interest rate risk on the four remaining years of the loan facility is hedged via interest rate swaps for three years and interest rate caps in the final year. Cross currency swaps have been executed to cover quarterly net Euro cash flows to the value of Â£0.6 million (â‚¬0.9 million) for five years. Further currency hedging will be put in place in the coming months, with 20% of the Group's net Euro cash flow left floating to provide flexibility, reflecting the potential variability of cash flow. The status of interest rate, currency and equity hedging is regularly reviewed by the Investment Manager to adjust for variables such as property valuations and predicted cash flows. To date the net investment in Euros ('Euro equity') has not been hedged against exchange rate fluctuations. The Board is currently closely evaluating this position. Outlook The principal investment phase of the Company's life is now complete. Going forward, the Investment Manager will concentrate on asset management initiatives intended to add value to the property portfolio and positively impact net asset value. The opportunity to selectively buy additional properties will be possible if the Group 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 reinvestment opportunities and the ability to realise maximum value of the current property portfolio. Due to the strong fundamentals of the acquired portfolio we remain confident that the Company will benefit from growth over the coming year. Board of Directors Charles Hunter (Chairman) is a non executive director of a number of organisations involved in property investment, including, PIL Group Limited, Protego Real Estate Funds plc and is on the Supervisory Board of Schroder Exempt Property Unit Trust. He is also a trustee of St Monica Trust. He has around 30 years of experience in property investment, principally in UK commercial property. During this time, he was the Head of Property Investment of Insight Investment (formerly Clerical Medical Investment Group) and also was the Property Director of the investment management subsidiaries of The National Mutual of Australasia group in the United Kingdom. Mr Hunter is a Fellow of the Royal Institution of Chartered Surveyors and a member of the Investment Property Forum. 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 commercial real estate markets in Belgium and in other parts of Europe. Prior to joining AXA, he was the Head of Investment at ATIS REAL August Thouard S.A. From 1987 to 2000, he worked with CB Richard Ellis S.A. (formerly Richard Ellis S.A.), first as an Investment and Valuation Surveyor and then as a Manager in the Investment Department. In 1994, Mr Ray was appointed Director of Investment, Valuation and Research. He is a member of the Royal Institution of Chartered Surveyors and certified as a 'Titulaire' of the Belgian Institut Professionel de l'immobilier (Real Estate Institute). He is resident in Belgium. Stephane Monier has over 15 years of experience in fixed income, foreign exchange markets and asset allocation. Mr Monier is currently the Chief Investment Officer for European Fixed Income at Fortis Investments responsible for various sectors including money market, government bonds and corporate bonds. Prior to joining Fortis he was Head of Fixed Income and Currency in the Abu Dhabi Investment Authority (ADIA) and he spent seven years in JP Morgan Investment Management as a Fixed Income Manager both in London and Paris. Mr Monier has a Masters Degree in Science from INAPG (Paris) and a Masters Degree in 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 Administration Services (Guernsey) Limited where he is Head of Client Servicing. Prior to joining Northern Trust International Fund Administration Services (Guernsey) Limited in 1992, he worked for KPMG in Guernsey where he was responsible for the audit of a portfolio of entities in the finance industry. Mr Marren currently holds a number of non-executive board appointments in fund management and investment companies including several real estate funds. He has a Bachelor of Commerce Degree from University College Galway in Ireland, is a Fellow of the Institute of Chartered Accountants in Ireland and a Member of the Institute of Bankers in Ireland. He is resident in Guernsey. Gavin Farrell is qualified as a Solicitor of the Supreme Court of England and Wales, a French Avocat and an Advocate of the Royal Court of Guernsey. He is a partner at Ozannes, Advocates & Notaries Public in Guernsey and specialises in international and structured finance and collective investment schemes. Mr Farrell holds a number of directorships in investment and captive insurance companies. He is resident in Guernsey. Report of the Directors The Directors present their report and audited Financial Statements of the Group and Company for the year ended 30 June 2007. Principal Activity AXA Property Trust Limited (the 'Company') is a Guernsey registered closed-ended property investment company listed on the London Stock Exchange. Trading in the Company'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 2007 as 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 Â£1,000,000 (1.00 pence per share) was approved on 2 August 2007. The ex-dividend date was 8 August 2007 and the payment date was 29 August 2007. Listing Requirements The Company considers that throughout the year it has complied (and intends to continue to comply) with the conditions applicable to property investment companies 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 Fund Administration 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 AXA Property Trust Limited. Biographical Details of each of the Directors are shown on page 9. An evaluation of the performance of individual Directors was carried out during the year which concluded that the Board is performing satisfactorily in the six areas reviewed: Board composition and meeting process, Board information, training, Board dynamics, Board accountability and effectiveness and an evaluation of the Chairman. During the year the Directors of the Company received the following emoluments in the form of fees: C. J. Hunter Â£20,000 G. J. Farrell Â£15,000 R. G. Ray Â£15,000 J. M. Marren Â£15,000 S. C. Monier Â£15,000 Â£80,000 The Directors of the subsidiaries of the Group received emoluments amounting to Â£17,718 (2006: Â£7,218). Total fees paid to Directors of the Group were Â£97,718 (2006:Â£95,548). Management AXA Investment Managers UK Limited (the 'Investment Manager') provides management services to the Company. A summary of the contract between the Company and the Investment Manager in respect of the management services provided is given in note 3 to the accounts. During the year, the Board has reviewed the appropriateness of the Investment Manager's appointment. In carrying out the review the Board considered the investment performance of the Company during its accounting year and the capability and resources of the Investment Manager to deliver satisfactory investment performance. It also considered the length of the notice period of the investment management contract and the fees payable to the Investment Manager, together with the standard of the other services provided. Following this review, it is the Directors' opinion that the continuing appointment of the Investment Manager on the terms agreed is in the interests of shareholders as a whole. Significant Shareholdings Shareholders with holdings more than 3% of the issued ordinary shares of the Company 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 in accordance with applicable law and International Financial Reporting Standards. Company law requires the Directors to prepare Financial Statements for each financial year which give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these 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 to any material departures disclosed and explained in the Financial Statements; and n prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies (Guernsey) Law 1994. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Corporate Governance Introduction As a closed-ended investment company registered in Guernsey, the Company is eligible for exemption from the requirements of the Combined Code on Corporate Governance (the 'Code') issued by the Financial Reporting Council, but must disclose whether or not it complies with the corporate governance regime of its country of incorporation and the significant ways in which its actual practices differ from the Code. In the absence of a formal corporate governance regime in its country of incorporation, the Board has put in place a framework for corporate governance which it believes is suitable for an investment company and which enables the Company voluntarily to comply with the main requirements of the Code, which sets out principles of good governance and a code of best practice. Arrangements in respect of corporate governance have therefore been made by the Board, which it believes are appropriate for the Company. Except as disclosed in the following two paragraphs, the Company complied throughout the period with the provisions of the Code. Since all the Directors are non-executive the provisions of the Code in respect of Directors' remuneration are not relevant to the Company except in so far as they relate to non-executive Directors. The Company does not have a remuneration committee. In view of its non-executive nature and the requirement of the Articles of Association that all Directors retire by rotation at least every three years, the Board considers that it is not appropriate for the Directors to be appointed for a specified term as recommended by Code provision A.7.2, or for a Senior Independent Director to be appointed as recommended by Code provision A.3.3, or for 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 is Chairman. With the exception of Mr Ray all Directors are considered by the Board to be independent of the Company's Investment Manager. New Directors receive an induction from the Managers and Secretary on joining the Board, and all directors receive other relevant training as necessary. The Company has no executive directors or employees. All matters, including strategy, investment and dividend policies, gearing, and corporate governance procedures, are reserved for the approval of the Board of Directors. The Board currently meets at least quarterly and receives full information on the Company's investment performance, assets, liabilities and other relevant information in advance of Board meetings. The Audit Committee, chaired by Mr Marren, operates within clearly defined terms of reference and comprises all the Directors except Mr Ray. The duties of the Audit Committee in discharging its responsibilities include reviewing the Annual and Interim Accounts, the system of internal control and the terms of the appointment of the auditors together with their remuneration. It is also the forum through which the auditors report to the Board of Directors and meets at least twice yearly. The objectivity of the auditors is reviewed by the Audit Committee which also reviews the terms under which the external auditors are appointed to perform non-audit services. The Committee reviews the scope and results of the audit, its cost effectiveness and the independence and objectivity of the auditors, with particular regard to non-audit fees. Such fees amounted to Â£28,427 (2006: Â£8,953) for the Company for the year ended 30 June 2007 and related to a review of the interim financial information which is normal practice. Notwithstanding such services the Audit Committee considers KPMG Channel Islands Limited to be independent of the Company and that the provision of such non-audit services is not a threat to the objectivity and independence of the conduct of the audit. The Management Engagement Committee, chaired by Mr Hunter, comprises the full Board, except Mr Ray, and reviews the appropriateness of the Investment Manager's continuing appointment together with the terms and conditions thereof on a regular basis. The table below sets out the number of Board meetings held during the year ended 30 June 2007 and the number of meetings attended by each Director. Individual Directors may, at the expense of the Company, seek independent professional advice on any matter that concerns them in the furtherance of their duties. The Company maintains appropriate Directors' and Officers' liability insurance. After making enquiries, and bearing in mind the nature of the Company's business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the accounts. Internal Controls The Board is responsible for the Company's system of internal control and for reviewing its effectiveness. The Board has therefore established an ongoing process designed to meet the particular needs of the Company in managing the risks to which it is exposed, consistent with the guidance provided by the Turnbull Committee. Such review procedures have been in place throughout the financial year and up to the date of approval of the Annual Report, and the Board is satisfied with their effectiveness. By their nature these procedures can provide reasonable, but not absolute, assurance against material misstatement or loss. At each Board meeting the Board monitors the investment performance of the Company in comparison to its stated objective and against comparable companies. The Board also reviews the Company's activities since the last Board meeting to ensure that the Investment Manager adheres to the agreed investment policy and approved investment guidelines and, if necessary, approves changes to such policy and guidelines. In addition, at each quarterly Board meeting, the Board receives reports from the Secretary in respect of compliance matters and duties performed on behalf of the Company. The Board has reviewed the need for an internal audit function. The Board has decided that the systems and procedures employed by the Investment Manager and the Secretary, including their internal audit functions, provide sufficient assurance that a sound system of internal control, which safeguards the Company's assets, is maintained. An internal audit function specific to the Company is therefore considered unnecessary. Relations with Shareholders The Board welcomes shareholders' views and places great importance on communication with its shareholders. The Board receives regular reports on the views of shareholders and the Chairman and other Directors are available to meet shareholders if required. The Annual General Meeting of the Company provides a forum for shareholders to meet and discuss issues with the Directors and Investment 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 the issued ordinary share capital was renewed by way of a Special Resolution at the Annual General Meeting held on 5 October 2006 until the earlier of the Annual General Meeting in 2007 and 31 December 2007. Any buy back of shares will be made subject to Guernsey law and within guidelines established from time to time by the Board (which will take into account the income and cash flow requirements of the Company) and the making and timing of any buy backs will be at the absolute discretion of the Board. Purchases of shares will only be made through the market for cash at prices below the prevailing net asset value of the shares where the Directors believe such purchases will enhance shareholder value. Such purchases will also only be made in accordance with the rules of the UK Listing 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 the credit of its share premium account on 13 April 2005. On 24 June 2005 the Royal Court of Guernsey confirmed the reduction of capital by way of cancellation of the Company's share premium account. The amount cancelled, being Â£100 million, has been credited as a distributable reserve established in the Company's books of account and shall be available as distributable profits to be used for all purposes permitted under Guernsey law, including the payment of dividends. Independent auditors KPMG Channel Islands Limited have expressed their willingness to continue in office as auditors and a resolution proposing their re-appointment will be submitted 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 the year ended 30 June 2007 which comprise the Consolidated and Company Income Statements, the Consolidated and Company Balance Sheets, the Consolidated and Company Cash Flow Statements, the Consolidated and Company Statements of Changes in Equity and the related notes. These Financial Statements have been prepared under the accounting policies set out therein. This report is made solely to the Company's members, as a body, in accordance with section 64 of The Companies (Guernsey) Law, 1994. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit 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 the Financial Statements in accordance with applicable Guernsey law and International Financial Reporting Standards as set out in the Statement of Directors' Responsibilities on page 13. Our responsibility is to audit the Financial Statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the Financial Statements give a true and fair view and are properly prepared in accordance with The Companies (Guernsey) Law, 1994. We also report to you if, in our opinion, the Company has not kept proper accounting records, or if we have not received all the information and explanations we require for our audit. We read the Directors' Report and consider the implications for our report if we become aware of any apparent misstatements within it. We read the other information accompanying the Financial Statements and consider whether it is consistent with those statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies 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 includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Financial Statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the Financial Statements, and of whether the accounting policies are appropriate to the Company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Financial Statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the Financial Statements. Opinion In our opinion the Financial Statements: â€¢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 â€¢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 Â£000s Â£000s Â£000s Â£000s Gross rental income 4 - - 7,607 1,864 ------------- -------- --------- --------- --------- --------- Service charge income - - 772 79 ------------- -------- --------- --------- --------- --------- Property operating expenses - - (1,434) (190) ------------- -------- --------- --------- --------- --------- Net rental and related income - - 6,945 1,753 ------------- -------- --------- --------- --------- --------- Interest income from certificates of 219 3,721 492 3,750 deposit and -------- --------- --------- --------- --------- bank deposits ------------- Interest income from loans to 7,513 1,588 - - subsidiaries -------- --------- --------- --------- --------- ------------- Realised loss on disposal of investments - - (28) - ------------- -------- --------- --------- --------- --------- Net foreign exchange (losses)/gains (2,582) 458 9 - ------------- -------- --------- --------- --------- --------- Net investment income 5,150 5,767 473 3,750 ------------- -------- --------- --------- --------- --------- Gain on derivatives - - 34 - ------------- -------- --------- --------- --------- --------- Valuation gains on investment - - 8,278 701 properties -------- --------- --------- --------- --------- ------------- Valuation losses on investment properties - - (377) (414) ------------- -------- --------- --------- --------- --------- Loss on fair value of financial assets 9 - - (1,016) - ------------- -------- --------- --------- --------- --------- Net valuation gains on investment properties - - 6,919 287 ------------- -------- --------- --------- --------- --------- Distribution gain 2(p), 22 3,946 7,478 - - ------------- -------- --------- --------- --------- --------- Formation expenses - (1,019) - (1,019) ------------- -------- --------- --------- --------- --------- Investment management (167) - (1,084) (208) fees -------- --------- --------- --------- --------- ------------- Sponsor's fees (125) - (125) - ------------- -------- --------- --------- --------- --------- Administrative expenses 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 before tax 7,536 11,874 10,265 2,997 ------------- -------- --------- --------- --------- --------- Income tax expense 16 - - (2,314) (42) ------------- -------- --------- --------- --------- --------- Profit for the year/period 7,536 11,874 7,951 2,955 ------------- -------- --------- --------- --------- --------- Basic and diluted earnings per ordinary share (pence) 7.95 2.95 ------------- -------- --------- --------- --------- --------- The accompanying notes on pages 25 to 40----- form an integral part of these Financial 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 ------------ ----------- ----------- -------- -------- ------------ ------------ -------- Â£000s Â£000s Â£000s Â£000s Â£000s Â£000s Â£000s ------------ ----------- ----------- -------- -------- ------------ ------------ -------- Note 20 Note 20 Note 20 Note 20 ------------ ----------- ----------- -------- -------- ------------ ------------ -------- Balance at 1 July 2006 - - 7,478 - 846 99,019 107,343 ------------ ----------- ----------- -------- -------- ------------ ------------ -------- Movements during the ----------- ----------- -------- -------- ------------ ------------ -------- period: ------------ Net profit for - - 3,946 - 3,590 - 7,536 the year ----------- ----------- -------- -------- ------------ ------------ -------- ------------ Dividends - - - - (4,436) (264) (4,700) paid ----------- ----------- -------- -------- ------------ ------------ -------- ------------ Gain on derivatives - - - 338 - - 338 ------------ ----------- ----------- -------- -------- ------------ ------------ -------- Balance at 30 June 2007 - - 11,424 338 - 98,755 110,517 ------------ ----------- ----------- -------- -------- ------------ ------------ -------- Company Statement of ----------- ----------- -------- -------- ------------ ------------ -------- Changes in Equity for the period from 5 April 2005 to 30 June 2006 ------------ ------------ ----------- ----------- -------- -------- ------------ ------------ -------- Share Revaluation Capital Hedging Revenue Distributable Total ------------ ----------- ----------- -------- -------- ------------ ------------ -------- premium reserve reserve reserve reserve reserve ------------ ----------- ----------- -------- -------- ------------ ------------ -------- Â£000s Â£000s Â£000s Â£000s Â£000s Â£000s Â£000s ------------ ----------- ----------- -------- -------- ------------ ------------ -------- Note 20 Note 20 Note 20 Note 20 ------------ ----------- ----------- -------- -------- ------------ ------------ -------- Balance at 5 - - - - - - - April 2005 ----------- ----------- -------- -------- ------------ ------------ -------- ------------ ------------ ----------- ----------- -------- -------- ------------ ------------ -------- Movements during the ----------- ----------- -------- -------- ------------ ------------ -------- period: ------------ Share premium on issue 100,000 - - - - - 100,000 ------------ ----------- ----------- -------- -------- ------------ ------------ -------- Cancellation of share premium (100,000) - - - - 100,000 - ------------ ----------- ----------- -------- -------- ------------ ------------ -------- Placing fees - - - - - (981) (981) ------------ ----------- ----------- -------- -------- ------------ ------------ -------- Net profit for - - 7,478 - 4,396 - 11,874 the period ----------- ----------- -------- -------- ------------ ------------ -------- ------------ Dividends - - - - (3,550) - (3,550) paid ----------- ----------- -------- -------- ------------ ------------ -------- ------------ ------------ ----------- ----------- -------- -------- ------------ ------------ -------- Balance at 30 June 2006 - - 7,478 - 846 99,019 107,343 ------------ ----------- ----------- -------- -------- ------------ ------------ -------- The accompanying notes on pages 25 to 40 form an integral part of these Financial 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 Â£000s Â£000s Â£000s Â£000s Â£000s Â£000s Â£000s Note 20 Note 20 Note 20 Note 20 Balance at 1 July 2006 - 287 - - 98,137 446 98,870 Movements during the year: Net profit for - 6,919 - 1,032 - - 7,951 the year Fair value of - - 412 - - - 412 derivatives Reserve on acquisition of subsidary - 20 - - - - 20 Dividends - - - (1,032) (3,668) - (4,700) paid Foreign exchange translation losses - - - - (2,574) (2,574) Balance at 30 - 7,226 412 - 94,469 (2,128) 99,979 June 2007 Consolidated Statement of Changes in Equity for the period from 5 April 2005 to 30 June 2006 Share Revaluation Hedging Revenue Distributable Foreign Total premium reserve reserve reserve reserve exchange reserve Â£000s Â£000s Â£000s Â£000s Â£000s Â£000s Â£000s Note 20 Note 20 Note 20 Note 20 Balance at 5 - - - - - - April 2005 Movements during the period: Share premium 100,000 - - - - - 100,000 on issue Cancellation of share (100,000) - - - 100,000 - - premium Placing fees - - - - (981) - (981) Net profit for - 287 - 2,668 - - 2,955 the period Dividends - - - (2,668) (882) - (3,550) paid Foreign exchange translation gains - - - - - 446 446 Balance at 30 - 287 - - 98,137 446 98,870 June 2006 The accompanying notes on pages 25 to 40 form an integral part of these Financial Statements. Balance Sheet Balance Sheets as at 30 June 2007 Company Group 2007 2006 2007 2006 Note Â£000s Â£000s Â£000s Â£000s Non-current assets Investment properties 7 - - 134,111 77,442 Property, plant and - - 2 3 equipment Investment in subsidiary undertakings 23 2,659 1,646 - - Intra group loans 10 137,561 94,243 - - receivable Non-Group loan receivables 11 - - 9,109 - Derivative financial instruments 19 355 - 465 - Other 9 - - - - investments Other assets 7&15 232 171 523 344 Deferred tax 16 - - 975 349 assets Current assets Cash and cash equivalents 12 1,108 2,187 6,158 22,077 Intra group loans 10 5,541 7,581 - - receivable Trade and other 13 3,457 1,616 3,572 6,095 receivables Total assets 150,913 107,444 154,915 106,310 Current liabilities Trade and other 14 582 101 3,941 7,075 payables Non-current liabilities Deferred tax liability 16 - - 3,215 365 Long-term loan 15 39,796 - 47,762 - Derivative financial instruments 19 18 - 18 - Total 40,396 101 54,936 7,440 liabilities Net Assets 110,517 107,343 99,979 98,870 Equity Share capital 17 - - - - Reserves 20 110,517 107,343 99,979 98,870 Total equity 110,517 107,343 99,979 98,870 Number of ordinary 100,000,000 100,000,000 100,000,000 100,000,000 shares Net asset value per 99.98p 98.87p ordinary share The accompanying notes on pages 25 to 40 form an integral part of these Financial 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 Â£000s Â£000s Â£000s Â£000s ----------------- --------- ---------- --------- ---------- Operating activities ----------------- --------- ---------- --------- ---------- Profit before tax 7,536 11,874 10,265 2,997 ----------------- --------- ---------- --------- ---------- Adjustments for: ----------------- --------- ---------- --------- ---------- Unrealised gain on revaluation of investment property and derivatives - - (6,919) (287) ----------------- --------- ---------- --------- ---------- Unrealised gain on revaluation of loans to fair value (3,946) (7,478) - ----------------- --------- ---------- --------- ---------- Decrease/(Increase ) in trade and other receivables (152) (1,616) 1,007 (1,133) ----------------- --------- ---------- --------- ---------- Increase in trade and 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 exchange loss 2,582 19 9 - ----------------- --------- ---------- --------- ---------- Other 36 - 68----- - ----------------- --------- ---------- --------- ---------- ----------------- --------- ---------- --------- ---------- Net cash generated/(absorbe d) from operations (734) (821) 6,488 (621) ----------------- --------- ---------- --------- ---------- Investment income received 5,966 3,056 301 3,056 ----------------- --------- ---------- --------- ---------- Interest paid (460) - (620) (18) ----------------- --------- ---------- --------- ---------- Interest received 219 664 184 712 ----------------- --------- ---------- --------- ---------- Tax paid - - (39) (17) ----------------- --------- ---------- --------- ---------- Net cash inflow from operating activities 4,991 2,899 6,314 3,112 ----------------- --------- ---------- --------- ---------- ----------------- --------- ---------- --------- ---------- Investing activities ----------------- --------- ---------- --------- ---------- Investment in subsidiaries (1,013) (1,646) - - ----------------- --------- ---------- --------- ---------- Acquisition of investment properties - - (57,478) (76,598) ----------------- --------- ---------- --------- ---------- Acquisition of other investments - - (24) (173) ----------------- --------- ---------- --------- ---------- Proceeds from disposal of subsidiary - - 1,583 - ----------------- --------- ---------- --------- ---------- Loans to group companies (37,473) (94,346) - - ----------------- --------- ---------- --------- ---------- Loan to third party - - (9,109) - ----------------- --------- ---------- --------- ---------- Acquisition of certificates of deposit - (167,000) - (167,000) ----------------- --------- ---------- --------- ---------- Proceeds from sale of certificates of deposit - 167,000 - 167,000 ----------------- --------- ---------- --------- ---------- Other - - - (5) ----------------- --------- ---------- --------- ---------- Net cash outflow from investing activities (38,486) (95,992) (65,028) (76,776) ----------------- --------- ---------- --------- ---------- ----------------- --------- ---------- --------- ---------- Financing activities ----------------- --------- ---------- --------- ---------- Proceeds from the issue of shares - 100,000 - 100,000 ----------------- --------- ---------- --------- ---------- Finance costs (98) (171) (217) (171) ----------------- --------- ---------- --------- ---------- Calyon loan facility 39,796 - 47,762 - ----------------- --------- ---------- --------- ---------- Issue costs - (981) - (981) ----------------- --------- ---------- --------- ---------- Dividends paid (4,700) (3,550) (4,700) (3,550) ----------------- --------- ---------- --------- ---------- Net cash inflow from financing activities 34,998 95,298 42,845 95,298 ----------------- --------- ---------- --------- ---------- ----------------- --------- ---------- --------- ---------- Effect of exchange rate fluctuations on cash held (2,582) (18) (50) 443 ----------------- --------- ---------- --------- ---------- ----------------- --------- ---------- --------- ---------- (Decrease)/Increas e in cash and cash equivalents (1,079) 2,187 (15,919) 22,077 ----------------- --------- ---------- --------- ---------- ----------------- --------- ---------- --------- ---------- Cash and cash equivalents at start of year/period 2,187 - 22,077 - ----------------- --------- ---------- --------- ---------- ----------------- --------- ---------- --------- ---------- Cash and cash equivalents at 30 June 2007 1,108 2,187 6,158 22,077 ----------------- --------- ---------- --------- ---------- The accompanying notes on pages 25 to 40 form an integral part of these Financial Statements. Notes to the Financial Statements 1. Operations AXA Property Trust Limited (the 'Company') is a limited liability, closed-ended investment company incorporated in Guernsey. The Company invests in commercial properties in Europe which are held through its subsidiaries. The Consolidated Financial Statements of the Company for the year ended 30 June 2007 comprise the Financial Statements of the Company and its subsidiaries (together referred to as the 'Group'). 2. Significant accounting policies (a) Statement of compliance The Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') issued by, or adopted by, the International Accounting Standards Board (the 'IASB'), interpretations issued by the International Financial Reporting Interpretations Committee, applicable legal and regulatory requirements of Guernsey Law and the Listing Rules of the UK Listing Authority. The following new standards have been issued but are not effective for the year ending 30 June 2007 and have not been adopted early: In August 2005, the IASB issued IFRS 7 Financial Instruments: Disclosures which becomes effective for periods commencing on or after 1 January 2007. The standard requires disclosures about the significance of financial instruments for an entity's financial position and performance. These disclosures incorporate many of the requirements of IAS 32 Financial Instruments: Disclosure and Presentation. IFRS 7 also requires information about the extent to which the entity is exposed to risks arising from financial instruments, and a description of management's objectives, policies and processes for managing those risks. The Group will apply IFRS 7 for its accounting period commencing 1 July 2007. In November 2006, the IASB issued IFRS 8 Operating Segments which becomes effective for periods commencing on or after 1 January 2009. This standard requires disclosure on the financial performance of the Group's operating segments. The Group will apply IFRS 8 for its accounting period commencing 1 July 2009. The Group does not consider that the future adoption of International Financial Reporting Standards, in the form currently available, will have any material impact on the Financial Statements as presented. (b)Basis of preparation The preparation of Financial Statements in conformity with IFRS requires management to make judgement, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. (c)Foreign currency translation (i) Functional and presentation currencies The Company's functional currency is Sterling and the subsidiaries' functional currency is Euro. The presentation currency of the Company and the Group is Sterling. (ii) Foreign currency transactions Transactions in foreign currencies are translated to Sterling at the spot foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Sterling at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Sterling at foreign exchange 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, are translated to Sterling at the foreign exchange rates ruling at the balance sheet date. The income and expenses of foreign operations are translated to Sterling at an average rate. Foreign exchange differences arising on retranslation are recognised as a separate component of equity. (d) Basis of consolidation (i) Subsidiaries Subsidiaries are those entities, including special purpose entities, controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The Company owns 100% of the issued share capital of Property Trust Luxembourg 1 Sarl, Property Trust Luxembourg 2 Sarl, and Property Trust Luxembourg 3 Sarl companies incorporated in Luxembourg whose principal business is that of an investment holding company and property company. The consolidated results of these subsidiaries are included in the consolidated Financial Statements. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Subsidiaries are accounted for at cost less impairment in the Company's Financial Statements. (ii) Transactions eliminated on consolidation. Intra-group balances and any unrealised gains and losses arising from intra-group transactions are eliminated in preparing the consolidated Financial Statements. (iii) Joint ventures The Group's interests in jointly controlled entities are accounted for by proportionate consolidation. The Group combines its share of the joint ventures' individual income and expenses, assets and liabilities and cash flows on a line-by-line basis with similar items in the Group's Financial Statements. The Group recognises the portion of gains or losses on the sale of assets by the Group to the joint venture that is attributable to the other venturers. The Group does not recognise its share of profits or losses from the joint venture that result from the Group's purchase of assets from the joint venture until it resells the assets to an independent party. However, a loss on the transaction is recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets, or an impairment loss. (e) Income recognition Income from certificates of deposit and interest income from banks and subsidiaries are recognised on an effective yield basis. Rental income from investment property leased out under operating leases is recognised in the income statement on a straight-line basis over the term of the lease. 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 the principal are recorded when such services are rendered. The Group is entitled to recover such costs from the tenants of the investment properties. The recovery of 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 of the Company, the offer for subscription and admission. These include the Sponsor's fee, set up costs, legal and accounting fees and any other initial expenses. An amount equal to 2% of the subscription proceeds was accrued to meet the expenses. The excess was settled by the Investment Manager. The Investment Manager will be reimbursed for any formation and initial expenses paid above the initial expenses provision by way of commission for their services. A total balance of Â£nil (2006: Â£1,019 thousand) has been expensed to the income statement in respect of formation expenses for the Company Â£290 thousand (2006: Â£246 thousand) formation expenses were incurred by subsidiaries of the Group (see Note 5). Total formation costs for the Group were Â£290 thousand (2006: Â£1,265 thousand). (h) Cash and cash equivalents Cash and cash equivalents comprises cash balances and call deposits carried at cost. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. (i) Dividends Dividends are recognised as a liability in the period in which they become obligations of the Company. All dividends are paid as interim dividends. Interim dividends are recognised when paid. Final dividends are recognised once they are approved by shareholders. (j) Provisions A provision is recognised in the balance sheet when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow 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 capital appreciation and are recognised as such once all material conditions in the exchanged purchase contracts are satisfied. They are initially recognised at cost, being the fair value of consideration given, including transaction costs and any acquisition costs directly attributable to the acquisition of the property. Acquisition costs incurred on exchanged but not completed contracts are recognised as other assets in the balance sheet. Acquisition costs on properties under offer which had not exchanged by 30 June 2007 are expensed in the income statement. After initial recognition, investment properties are measured at fair value using the fair value model with unrealised gains and losses recognised in the income statement. Realised gains and losses upon disposal of properties are recognised in the income statement. Quarterly valuations are carried out by Knight Frank LLP, external independent valuers in accordance with the RICS Appraisal and Valuation Standards. The properties have been valued on the basis of open market value, which is the estimated amount for which a property should exchange on the date of valuation, in an arm's-length transaction. Valuations reflect, where appropriate, the types of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting of vacant accommodation and the market's general perception of their creditworthiness, the allocation of maintenance and insurance responsibilities between lessor and lessees, and the remaining economic life of the property. It has been assumed that whenever rent reviews or lease renewals are pending with anticipated reversionary increases, all notices and where appropriate counter notices have been served validly and within the appropriate time. Properties are leased out under operating leases and classified as investment property. (l) Investments at fair value through profit or loss An instrument is classified as fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Upon initial recognition, attributable transaction costs are recognised in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value and changes therein are recognised in profit or loss. The investment held in the Porto Kali portfolio has been designated by the Directors as fair value through profit or loss in order to achieve an accounting treatment consistent with the Group's other property investments. (m) Short term investments Certificates of deposits are measured at fair value which is market value, all having a maturity of less than one year. Certificates of deposits are recognised on acquisition and shown in current assets on the balance sheet, they are derecognised on disposal with any realised gains or losses being included on the income statement. (n) Impairment The carrying amounts of the Group's assets, other than investment property, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its estimated recoverable amount. Impairment losses are recognised in the income statement. (o) Segmental reporting The Directors are of the opinion that the Group is engaged in a single segment of business being the property investment business. It operates in a single geographical segment (Europe) and the properties are let mainly to commercial entities. (p) Intercompany loans Loans between the Company and its subsidiaries that are not at a market rate of interest are initially recognised at fair valued based on an estimated market rate, with the resultant gain or loss being recognised initially in the Company's income statement as a distribution gain. Subsequently, these are measured at amortised cost on an effective yield basis. After adjusting for amortisation, interest on these loans will be recognised on an effective yield basis 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 periodic transfers are made from capital to revenue reserve in line with the corresponding amortisation of the loans on an effective yield basis as described above. (q) Taxation The Company has obtained exempt company status in Guernsey under the terms of the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 and accordingly is subject to an annual fee of Â£600. The Directors intend to conduct the Group's affairs such that it continues to remain eligible for exemption. The Company's subsidiaries are subject to income tax on any income arising on investment properties, after deduction of debt financing costs and other allowable expenses. However, when a subsidiary owns a property located in a country other than its country of residence the taxation of the income is defined in accordance with the double taxation treaty signed between the country where 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 tax is the expected tax payable on the taxable income for the year as determined under local tax law, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous periods. Deferred income tax is provided using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the asset is utilised. Details of current tax and deferred tax assets and liabilities are disclosed in note 16. (r) Significant estimates and judgements The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equate to the related actual results. The estimates and assumptions that have significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are related to the Group's property valuation policy. Properties will be valued quarterly by external independent valuers as at the end of each calendar quarter. Their valuations will be reviewed quarterly by the Board. (s) Derivative financial instruments The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational financing and investment activities. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments. Derivative financial instruments are recognised initially at cost which is also deemed to be fair value. Subsequent to initial recognition, derivative financial instruments are stated at fair value. the gain or loss on remeasurement to fair value is recognised immediately in profit or loss. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged. The fair value of the interest rate swaps and cross currency swaps is the estimated amount that the Group would received or pay to terminate the swap at the balance sheet date, taking into account current interest rates and the current creditworthiness of the swap counterparties. (t) Hedge accounting The Group designates certain hedging instruments, which include derivatives and non-derivatives in respect of foreign currency risk, as either fair value hedges, cash flow hedges, or hedges of net investments in foreign operations. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges. Note 19 contains details of the fair values of the derivative instruments used for hedging purposes. Movements in the hedging reserve in equity are also detailed in the statement of changes in equity. Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are deferred in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss as part of other expenses or other income. Amounts deferred in equity are recycled in profit or loss in the periods when the hedged item is recognised in profit or loss. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Any cumulative gain or loss deferred in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that 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 Investment Manager of the Group pursuant to an Investment Management Agreement dated 18 April 2005. The Investment Manager is responsible for advising the Group on the overall management of the Group's investments and for managing the Group's investments in fixed income instruments in accordance with the Group's investment objective and policy, subject to the overall supervision of the Directors. Under the terms of the Investment Management Agreement, the Investment Manager is entitled to a management fee of 90 basis points per annum of gross assets together with reasonable expenses payable quarterly in arrears. The management fee shall be reduced by an amount equal to the fees payable to the Real Estate Adviser by the property subsidiaries such that the total fees payable by the Group to the Investment Real Estate Adviser and Investment Manager will not exceed 90 basis points per annum. The Investment Management Agreement may not be terminated by either the Company or the Investment Manager without cause prior to the second anniversary of the Investment Management Agreement. Thereafter, either party may terminate the Investment Management Agreement on not less than twelve months' notice in writing. (ii) UBS Limited has been appointed as the Sponsor and Broker with a fee of 20 basis 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 to the Administration Agreement dated 13 April 2005. The Administrator is entitled to receive a fixed fee of Â£65,000 per annum plus a variable fee which is dependant on additional work carried out by the Administrator for the Company from time to time. In addition, the Administrator shall be entitled to be reimbursed for all reasonable out of pocket expenses incurred in the performance of its duties. (iv) HSBC Global Investors has been appointed as Custodian in respect of the Company's fixed income investments. 4. Gross rental income Gross rental income for the year ended 30 June 2007 amounted to Â£7,607 thousand (2006: Â£1,864 thousand). The Group leases out all of its investment property under operating leases. 5. Administrative expenses Company Group ----------- ----------- ----------- ----------- ----------- 30 June 2007 30 June 2006 30 June 2007 30 June 2006 ----------- ----------- ----------- ----------- ----------- Â£000s Â£000s Â£000s Â£000s ----------- ----------- ----------- ----------- ----------- Directors' fees 80 88 98 96 ----------- ----------- ----------- ----------- ----------- Insurance expenses 14 10 14 10 ----------- ----------- ----------- ----------- ----------- Administration fees 148 105 272 120 ----------- ----------- ----------- ----------- ----------- Audit fees 83 18 233 179 ----------- ----------- ----------- ----------- ----------- Acquisition costs - - 116 347 ----------- ----------- ----------- ----------- ----------- Subsidiaries' formation costs - - 290 246 ----------- ----------- ----------- ----------- ----------- Legal and professional 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 Â£15,000 per annum from the Company. The chairman receives a fee of Â£20,000 per annum. The aggregate remuneration and benefits in kind of the Directors in respect of the Company's financial year ending on 30 June 2007 amounted to Â£80,000 (2006: Â£88,330) in respect of the Company and Â£97,718 (2006: Â£95,548) in respect of the Group. 6. Dividends Group Dividend pay date No. of Ordinary Shares Rate 30 June 2007 30 June 2006 --------------- ------------ -------- --------- ----------- pence Â£000s Â£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 Â£1 million (1 pence per share) was approved on 2 August 2007. 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 on valuations performed by Knight Frank LLP as at 30 June 2007, on the basis of open market value, supported by market evidence, in accordance with the RICS Appraisal and Valuation Standards. Market Risk Property and property related assets are inherently difficult to value due to the individual nature of each property. As a result, valuations are subject to uncertainty. There is no assurance that the estimates resulting from the valuation process will reflect the actual sales price even where a sale occurs shortly after the valuation date. Rental income and the market value for properties are generally affected by overall conditions in the local economy, such as growth in Gross Domestic Product, employment trends, inflation and changes in interest rates. Changes in Gross Domestic Product may also impact employment levels, which in turn may impact the demand for premises. Furthermore, movements in interest rates may affect the cost of financing for real estate companies. Both rental income and property values may be affected by other factors specific to the real estate market, such as competition from other property owners, the perceptions of prospective tenants of the attractiveness, convenience and safety of properties, the inability to collect rents because of the bankruptcy or the insolvency of tenants, the periodic need to renovate, repair and release space and the costs thereof, the costs of maintenance and insurance, and increased operating costs. The Investment Manager addresses market risk through a selective investment process, credit evaluations of tenants, on going monitoring of tenants and through effective management of the properties. Company Group -------------------- --------- -------- --------- -------- 30 June 30 June 30 June 30 June -------------------- 2007 2006 2007 2006 --------- -------- --------- -------- Â£000s Â£000s Â£000s Â£000s -------------------- --------- -------- --------- -------- Cost of investment properties at beginning --------- -------- --------- -------- -------------------- of year/period - - 77,152 - -------------------- --------- -------- --------- -------- Additions during the period at cost - - 61,147 77,152 -------------------- --------- -------- --------- -------- Disposal during the period - - (10,130) - -------------------- --------- -------- --------- -------- Cost of investment properties - - 128,169 77,152 -------------------- --------- -------- --------- -------- -------------------- --------- -------- --------- -------- Fair value adjustments - - 7,901 287 -------------------- --------- -------- --------- -------- Foreign exchange translation - - (1,959) 3 -------------------- --------- -------- --------- -------- Market value of investment properties - - 134,111 77,442 -------------------- --------- -------- --------- -------- Investment properties comprise a number of commercial properties that are leased to third parties. There was one (2006: four) contract to purchase an investment property exchanged in the period which was not completed at 30 June 2007. Related acquisition costs totalled Â£183 thousand (2006: Â£173 thousand) which is shown in other assets on the balance sheet. The portfolio on page 5 shows the properties acquired by the Group. 8. Joint ventures On 16 October 2006 the Group disposed of 50% of the equity in the Italian subsidiary Property Trust Agnadello s.r.l. which holds a logistics warehouse in Agnadello, Italy. The equity was acquired by European Added Value Fund Sarl, a subsidiary of European Added Value Fund Limited ('EAVF'). The Manager of EAVF is Partnership Incorporations Limited, which has appointed AXA Real Estate Investment Managers UK Limited to act as real estate adviser to EAVF. The transaction was at arms length, at no gain or loss and the sale price represented market value. The underlying property value was confirmed by Knight Frank LLP, independent valuers to the Company. The Group is entitled to a proportionate share of the rental income received and bears a proportionate share of the outgoings. The following amounts are included in the Group Financial Statements as a result of the proportionate consolidation of Property Trust Agnadello Srl: Company Group 30 June 2007 30 June 2006 30 June 2007 30 June 2006 Â£000s Â£000s Â£000s Â£000s Current assets - - 2,162 - -------------------- -------- --------- --------- -------- Non-current assets - - 10,096 - -------------------- -------- --------- --------- -------- Current liabilities - - 271 - -------------------- -------- --------- --------- -------- Non-current liabilities - - 10,568 - -------------------- -------- --------- --------- -------- -------------------- -------- --------- --------- -------- Company Group -------------------- -------- --------- --------- -------- 30 June 2007 30 June 2006 30 June 2007 30 June 2006 -------------------- -------- --------- --------- -------- Â£000s Â£000s Â£000s Â£000s -------------------- -------- --------- --------- -------- Income - - 1,571 - -------------------- -------- --------- --------- -------- Expenses - - 1,271 - -------------------- -------- --------- --------- -------- 9. Other investments Company Group 30 June 30 June 30 June 30 June ------------------- 2007 2006 2007 2006 Â£000s Â£000s Â£000s Â£000s Non-current assets ------------------- -------- --------- ---------- --------- Financial assets designated at fair value -------- --------- ---------- --------- ------------------- through profit or loss - - - - ------------------- -------- --------- ---------- --------- Addition during the year - - 1,016 - ------------------- -------- --------- ---------- --------- Fair value adjustment - - (1,016) - ------------------- -------- --------- ---------- --------- Total - - - - ------------------- -------- --------- ---------- --------- Financial assets designated at fair value through profit or loss includes the 12% share capital held in the holding company of the Dutch office portfolio Porto Kali. 10. Intra group loans receivable Company Group 30 June 2007 30 June 2006 30 June 2007 30 June 2006 Â£000s Â£000s Â£000s Â£000s -------------------- -------- --------- -------- -------- Non-current -------------------- -------- --------- -------- -------- Back to back loans 70,273 60,593 - - -------------------- -------- --------- -------- -------- Mezzanine loans 57,036 33,537 - - -------------------- -------- --------- -------- -------- Working capital loans 44 113 - - -------------------- -------- --------- -------- -------- Profit participating loan 10,208 - - - -------------------- -------- --------- -------- -------- Total 137,561 94,243 - - -------------------- -------- --------- -------- -------- The above include amortisation of fair value gains on mezzanine and working capital loans. Current Low 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 Â£9,109 thousand (â‚¬13,532 thousand) to the holding company of the Porto Kali office portfolio. The loan bears interest at a floating rate of three month Euribor plus 2.25% and is repayable 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 Â£000s Â£000s Â£000s Â£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 Â£000s Â£000s Â£000s Â£000s VAT receivable - - 2,095 4,291 --------------------- -------- -------- -------- -------- Rent receivable - - 139 617 --------------------- -------- -------- -------- -------- Prepayments 12 10 749 203 --------------------- -------- -------- -------- -------- Accrued income - - 292 46 --------------------- -------- -------- -------- -------- Witholding tax receivable - - 119 - --------------------- -------- -------- -------- -------- Intragroup loan interest 3,295 1,606 - - --------------------- -------- -------- -------- -------- Acquisition costs on exchanged contracts 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 Â£000s Â£000s Â£000s Â£000s Amounts due on completion of property ------- -------- -------- -------- ----------------------- purchase contracts - - - 3,116 ----------------------- ------- -------- -------- -------- Property acquisition costs - - 484 2,413 ----------------------- ------- -------- -------- -------- Initial expenses - - - 370 ----------------------- ------- -------- -------- -------- Investment management fee 167 - 1,066 225 ----------------------- ------- -------- -------- -------- Legal and professional 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 and Company Secretarial 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 Â£000s Â£000s Â£000s Â£000s Non-current liabilities -------------------- --------- --------- -------- --------- Secured bank loans 39,796 - 47,705 - -------------------- --------- --------- -------- --------- Loan due to third party - - 57 - -------------------- --------- --------- -------- --------- 39,796 - 47,762 - -------------------- --------- --------- -------- --------- During the year the Group's main loan facility with Calyon Corporate and Investment Bank was increased from â‚¬81.5 million to â‚¬122.0 million. The loan matures 3 April 2011. As at 30 June 2007, the Company had drawn down Â£39,796 thousand (â‚¬59,122 thousand) from the facility. On 26 July 2007, the Company drew down a further â‚¬6,250 thousand. Loans drawn down from the main facility are secured over the shares in the Company's subsidiaries Property Trust Luxembourg 1 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 joint venture Property Trust Agnadello s.r.l. which holds long term bank debts of Â£15,819 thousand (â‚¬23,500 thousand) secured over the property and assets of the joint venture. A fee of Â£190,000 (â‚¬282,000) was incurred in extending the existing loan facility and setting up a new facility for Property Trust Agnadello s.r.l. with Calyon Corporate and Investment Bank. 16. Taxation Group 30 June 2007 30 June 2006 Reconciliation of effective tax rate Â£000s Â£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 deferred tax assets ------- -------- ------- ------- -------- -------- ------------ and liabilities Â£000s Â£000s Â£000s Â£000s Â£000s Â£000s ------------ ------- -------- ------- ------- -------- -------- Investment property 129 (365) (236) 260 (3,195) (2,935) ------------ ------- -------- ------- ------- -------- -------- Loss on fair value of ------- -------- ------- ------- -------- -------- ------------ financial assets - - - 299 - 299 ------------ ------- -------- ------- ------- -------- -------- Gain on derivatives - - - - (20) (20) ------------ ------- -------- ------- ------- -------- -------- Tax value of loss carry ------- -------- ------- ------- -------- -------- ------------ forwards recognised 220 - 220 416 - 416 ------------ ------- -------- ------- ------- -------- -------- Tax assets/ 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 Â£000s Â£000s Â£000s Â£000s ----------------- -------- ---------- ---------- -------- Investment property (236) (2,699) - (2,935) ----------------- -------- ---------- ---------- -------- Loss on fair value of financial assets - 299 - 299 ----------------- -------- ---------- ---------- -------- Gain on derivatives - (20) - (20) ----------------- -------- ---------- ---------- -------- Tax value of loss carry forwards recognised 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 Â£000s Â£000s Â£000s Â£000s ----------------- -------- ---------- ---------- -------- Investment property - (236) - (236) ----------------- -------- ---------- ---------- -------- Tax value of loss carry forwards recognised - 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 Â£000s Â£000s Shares of no par value issued and fully paid ------------- Received on the placing of shares 100,000,000 100,000 100,000,000 100,000 ------------- ----------- ---------- ----------- ---------- Conversion to special distributable reserve (100,000) - (100,000) ------------- ----------- ---------- ----------- ---------- Total 100,000,000 - 100,000,000 - ------------- ----------- ---------- ----------- ---------- On 24 June 2005 the Royal Court of Guernsey confirmed the reduction of capital by way of cancellation of the Company's share premium account. The amount cancelled, being Â£100 million, has been credited as a distributable reserve established in the Company's books of account and shall be available as distributable 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 net assets attributable to the ordinary shareholders of Â£99,979 thousand (2006: Â£98,870 thousand) and on 100,000,000 (2006: 100,000,000) ordinary shares in issue at the balance sheet date. 19. Financial instruments The Group's investment objective is to secure attractive Sterling based total returns for shareholders through a combination of dividends and capital appreciation from European properties (including the United Kingdom). The Group aims to achieve this investment objective by investing in commercial properties across Europe (including the United Kingdom) which are predominately freehold and 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 of deposit, cash, derivative financial instruments receivables and payables that arise directly from its operations. The main risks arising from the Group's financial instruments are market risk, credit risk, liquidity risk, interest risk and currency risk. Credit Risk Credit risk arises when an issuer or counterparty is unable or unwilling to meet a commitment that it has entered into with the Group. In the event of a default by an occupational tenant, the Group will suffer a rental income shortfall and incur additional costs, including legal expenses, in maintaining, insuring and re-letting the property. The Group has a credit policy in place and credit evaluations are performed on all tenants. At the balance sheet date there were no concentrations of credit risk. Liquidity Risk The Group may encounter liquidity risk when realising assets or otherwise raising funds to meet financial commitments. Investments in property are relatively illiquid, however, the Group has mitigated this risk by investing in desirable properties in strong locations. Interest Rate Risk Floating rate financial assets comprise the cash balances which bear interest at rates based on bank base rates. The Group is exposed to interest rate risk as the Group borrows funds under the loan facility with Calyon Corporate and Investment Bank at floating interest rates. The Group manages this risk by using interest rate swaps and caps denominated in Euro. The swaps mature over the next three years following the maturity of the related loans and have swap rates ranging from 3.82% to 4.72%. At 30 June 2007, the Group had interest rate swaps with a notional contract amount of â‚¬77,122 thousand (2006: â‚¬Nil). --All interest rate swap contracts exchanging floating rate interest amounts for fixed rate interest amounts are designated as cash flow hedges in order to reduce the Group's cash flow exposure resulting from variable interest rates on borrowings. The interest rate swaps and the interest payments on the loan occur simultaneously and the amount deferred in equity is recognised in profit or loss over the loan period. Company 30 June 2007 30 June 2006 Cash flow hedges Assets Liabilities Assets Liabilities Â£000s Â£000s Â£000s Â£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 Â£000s Â£000s Â£000s Â£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 30 June 2007 were Â£18,910 thousand (2006: nil). Interest re-pricing Effective interest rate Total as per Fixed rate Floating rate balance sheet 3 months or less % Â£000s Â£000s Â£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 than Sterling, the Company's functional and presentational currency, and the balance sheet may be significantly affected by movements in the exchange rates of such currencies against Sterling. The Company will review and manage currency exposure on an appropriate basis. The Group had hedged foreign currency exposure in respect of Â£0.6 million (â‚¬0.9 million) quarterly interest receipts in Euro over the next five years through the 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 to subsidiaries granted at rates higher than prevailing market interest rates. (c) Hedging reserves Hedging reserves comprise the effective portion of the cumulative net change in the fair value of hedging instruments where the hedged transaction has not yet occurred. (d) Distributable reserves Distributable reserve arose from the cancellation of the share premium account pursuant to the special resolution passed at the Extraordinary General Meeting on 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 Financial Statements of foreign operations, the functional and presentation currency of which is not Sterling. 21. Related party transactions The Directors are responsible for the determination of the Company's investment objective and policy and have overall responsibility for the Group's activities including 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 Property Trust Luxembourg 3 Sarl and are able to control the investment policy of the Luxembourg subsidiaries to ensure it conforms with the investment policy of the Company. Mr Ray is also a Managing Director of AXA Real Estate Investment Managers Belgium S.A. Mr Farrell, a Director of the Company, is also a partner in Ozannes, the Guernsey legal advisers to the Company. The total charge to the income statement during the period in respect of Ozannes legal fees were Â£4,628 (2006: Â£6,930) which was settled during the year. Mr Marren, a Director of the Company, is also a Director of Northern Trust International Fund Administration Services (Guernsey) Limited ('Northern Trust'), the Administrator, Secretary and Registrar for the Company. The total administration fees charged to the income statement in respect of Northern Trust administration fees is Â£147,795 (2006: Â£104,952) for the year of which Â£Nil (2006: Â£20,618) remained payable at the year end. Under the Investment Management Agreement, the Real Estate Adviser's Agreement and local asset management agreements, fees are payable to AXA Real Estate Investment Managers UK (the Real Estate Adviser) and other entities within the AXA Investment Managers Group. As the Real Estate Adviser and local asset managers, these entities are involved in the planning and direction of the Company 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 Â£1,084 thousand (2006: Â£208 thousand) were expensed to the income statement of which Â£1,066 thousand (â‚¬225 thousand) remained payable at the year end. During the year, the Company made various loans to its subsidiaries, of which details 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 purpose of property acquisition amounting to Â£45,744 thousand (2006: Â£25,997 thousand) with a fair value of Â£57,036 thousand (2006: Â£33,537 thousand). The difference of Â£11,453 thousand (2006: Â£7,540 thousand) between the fair value at initial recognition of these loans (Â£57,197 thousand; 2006: â‚¬33,537 thousand) and their settlement value is recognised as a distribution gain in the Company's income statement. These loans are unsecured and bear interest at the coupon rate of 9.75% per annum, their repayable dates ranging between 2015 and 2017. Based on the Company's accounting policies the difference between the fair value of the loans and their settlement amounts is recognised at the date of the granting of the 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 the purpose of property acquisition amounting to Â£70,273 thousand (2006: Â£60,593 thousand). These are unsecured and bear interest at Euribor plus 2.75% per annum, their repayable dates ranging between 2015 and 2017. (c) Low interest loans Included in current loan receivables from subsidiaries are loans for the purpose of property acquisition amounting to Â£5,457 thousand (2006: Â£2,988 thousand). These are unsecured and bear interest at the coupon rate of 0.5% per annum and are repayable within less than one year. (d) Working capital loans Included in non-current loan receivables from subsidiaries are loans for the purpose of working capital amounting to Â£67 thousand (2006: Â£175 thousand) with a fair value of Â£44 thousand (2006: Â£113 thousand). The difference of Â£29 thousand (2006: Â£62 thousand) between the fair value at initial recognition of these loans (Â£38 thousand; 2006: Â£113 thousand) and their settlement values is recognised as a distribution gain in the Company's income statement. These are unsecured and bear interest at the coupon rate of 1.0% per annum, their repayable dates ranging between 2015 and 2016. (e) VAT loans Included in current loan receivables from subsidiaries are loans for the purpose of working capital amounting to Â£Nil (2006: Â£4,456 thousand). These are unsecured and bear interest at the coupon rate of 1.0% per annum and are repayable within less than one year. (f) Current Accounts Included in current loan receivables from subsidiaries are short term loans amounting to Â£84 thousand (2006: Â£138 thousand). These do not bear interest and are repayable within six months. (g) Profit participating loan Included in current loan receivables from subsidiaries are loans for the purpose of investment acquisition amounting to Â£10,208 thousand (2006: Nil). These are unsecured and bear fixed interest at the coupon rate of 1.0% per annum. In addition to the fixed interest, the loan also bear a tracking interest as per the Profit Participation Loan agreement. The loan matures on the 49th anniversary of the loan date. 23. Group entities AXA Property Trust Limited, the Company, is the parent of the Group. It was incorporated in Guernsey on 5 April 2005. The Company owns the following subsidiaries: Directly owned by the Company at 30 June 2007 Subsidiaries Investment in Country of Date of Ownership Principal subsidiaries incorporation incorporation interest % activities Â£000s Property Trust Luxembourg 1 Sarl 1,277 Luxembourg 20 July 2005 100 Holding company Property Trust Luxembourg 2 Sarl 1,231 Luxembourg 24 November 100 Holding 2005 company Property Trust Luxembourg 3 Sarl 151 Luxembourg 2 June 2006 100 Holding company Total 2,659 Owned by Property Trust Luxembourg 1 Sarl, Property Trust Luxembourg 2 Sarl and Property 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 1 Sarl Luxembourg 100 ---------------------------- ------------ ---------- Property Trust Investment 1 Sarl ---------------------------- ------------ ---------- renamed Property Trust Kraichtal Sarl Luxembourg 100 ---------------------------- ------------ ---------- Property Trust Investment 2 Sarl 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 on the site acquired on 31 January 2007 for Â£79 thousand. When construction is completed in 2007, the Group will be liable to acquire the new building for an estimated consideration of Â£228 thousand (â‚¬338 thousand), with a further Â£101 thousand (â‚¬150 thousand) payable on fulfillment of certain tenant-related conditions. The joint venture Property Trust Agnadello s.r.l. is committed to carry out repairs and improvements to enhance the capital value of the building at an estimated cost of Â£1.7 million (â‚¬2.5 million) for which the Group will provide 50% 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 successfully completed on 3 August 2007 for a gross purchase price of approximately Â£4,200 thousand (â‚¬6,200 thousand). The transaction was financed by a draw down on the Company's loan facility which was fully economically hedged through a three year interest rate swap followed by a one year interest rate cap. Property agent's fees of Â£88 thousand (â‚¬130 thousand) were incurred on completion. The acquisition of a real estate asset adjacent to the retail site already owned by the Group in Kraichtal was successfully completed on 1 October 2007 for a gross purchase price of Â£370 thousand (â‚¬550 thousand). On 26 July 2007, the Company drew down a further Â£4,222 thousand (â‚¬6,250 thousand) from its main loan facility with Calyon Corporate and Investment Bank. To hedge the related interest rate risk, the Company executed an interest rate swap 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 currency swaps to hedge the Euro to Sterling foreign exchange risk on â‚¬500 thousand income to be received every quarter to 30 April 2012. On 28 September 2007, the Company reduced the main loan facility with Calyon Corporate and Investment Bank from â‚¬122 million to â‚¬90 million to eliminate surplus capacity. All enquiries to: The Company Secretary Northern Trust International Fund Administration Services (Guernsey) Limited Trafalgar Court Les Banques St Peter Port Guernsey GY1 3QL Tel: 01481 745660 Fax: 01481 745051 This information is provided by RNS The company news service from the London Stock Exchange

Companies

Worsley Investors Limited NPV (WINV)

Thursday, 9th May 2024

COMPANIES COVERED:

RBN AAF HBR

Airtel Africa left investors underwhelmed despite customer growth, Robinson’s share price jumps on profit upgrade and Harbour Energy nudges higher on trading update.

Full Archive

UK 100

Latest directors dealings

10 hours ago SSP Group
10 hours ago Real Estate Investors
11 hours ago WPP
11 hours ago Spectris
11 hours ago Clarkson

All directors dealings today