TIDMAPT
To: Company Announcements
Date: 31 October 2017
Company: AXA Property Trust Limited
Subject: Annual Financial Report
AXA Property Trust Limited
Annual Report and Consolidated Financial Statements for the year ended 30 June
2017
LEI: 213800AF85VEZMDMF931
(Classified Regulated Information, under DTR 6 Annex 1 section 1.1)
The Company has today, in accordance with DTR 6.3.5, released its Annual Report
and Financial Statements for the year ended 30 June 2017.
Key Financial Information
As at 30 June 2017
· Sterling currency Net Asset Value ("NAV") was GBP15.7 million (30 June
2016: GBP38.7 million)
· NAV was 66.94 pence per share (30 June 2016: 67.20 pence)
· Share price1 was 61.25 pence per share (30 June 2016: 55.13 pence)
· Gearing2 was 0% (gross and net) (30 June 2016: 32.1% Gross and 26.6%
Net)
For the year ended 30 June 2017
· Loss was 1.92 pence per share (year ended 30 June 2016: profit was 2.08
pence per share)
· No dividends were paid relating to the year
· Redemption of shares paid during the year were GBP24.0 million (year ended
30 June 2016: GBP16.2 million)
1 Mid market share price (source: Stifel Nicolaus Europe Limited).
2 Gearing is calculated as overall debt, either gross or net of cash (net of
cash allocated to post-quarter distribution, debt repayment and other
commitments) held by the group over property portfolio fair value.
Performance Summary
Year ended Year ended % change
30 June 2017 30 June 2016
NAV (GBP000s) 15,665 38,694 (59.5%)
NAV per share 66.94p 67.20p (0.4%)
(Loss)/Gain per share (1.92)p 2.08p n/a
Share redemptions paid GBP24.0m GBP16.2m 48.1%
Share price1 61.25p 55.13p 11.1%
Share price discount to NAV 8.5% 18.0% n/a
Gearing (gross)2 0% 32.1% (100.0%)
Total assets less current 16,164 40,475 (60.0%)
liabilities (GBP000s)3
The 2017 NAV is presented after deduction of GBP24.0 million of redemption
payments.
Total annual return Year ended Year ended
30 June 2017 30 June 2016
NAV Total Return4 2.5% 11.2%
Share price Total Return
- AXA Property Trust 23.0% 29.6%
- FTSE All Share Index 18.1% 2.2%
- FTSE Real Estate Investment 9.2% -8.3%
Trust Index
Past performance is not a guide to future performance.
1 Mid-market share price (source: Stifel Nicolaus Europe Limited).
2 Gearing is calculated as overall debt, either gross or net of cash held by
the Group over property portfolio at fair value.
3 Includes bank debt classified as a current liability.
4 On a pro-forma basis which includes adjustments to add back any prior NAV
reductions from share redemptions.
Source: AXA Investment Managers UK Limited and Stifel Nicolaus Europe Limited
Chairman's Statement
Three sales were completed during the year at prices slightly below valuation
in accordance AXA Property Trust Limited's (the "Company") agreed disposal
strategy. These transactions were detailed in the Half Year Report and below in
the Investment Managers' Report. The Board regret that since that report no
substantive progress has been made in the sales campaign of the Company's one
remaining asset, the Multiplex cinema outside Bergamo in Northern Italy. This
is despite an ongoing marketing process.
Results
The Company and its subsidiaries (together the "Group") made a total net loss
after tax of GBP0.9 million for the year to 30 June 2017. The Net Asset Value per
share of the Company at 30 June 2017 was 66.94 pence (30 June 2016: 67.20
pence), a 0.4% decrease compared to 30 June 2016.
The mid-market price of the Company's shares on the London Stock Exchange on 30
June 2017 was 61.25 pence (30 June 2016: 55.13 pence), representing a discount
of 8.5% to the Company's NAV at 30 June 2017
(30 June 2016: 18.0%).
Return of Capital to shareholders
No dividends were declared during the period and the dividend policy remains
unchanged.
During the financial year the Company returned GBP24.0 million capital to
shareholders by means of two capital redemptions: GBP18.4 million on 17 February
2017 and GBP5.6 million on 23 June 2017.
Bank Finance and Deleveraging
During the year, the Group repaid the main loan with Crédit Agricole and Crédit
Foncier, leaving the Company with no outstanding external loan.
Prospects
The Manager and the Company's agents continue to pursue all avenues that might
lead to a sale of the remaining property asset. Let to a major film
distribution company it continues to deliver a secure income stream, and
although the investment market for such assets has hitherto been illiquid, the
Board and Manager do not believe it is in the Company's interest to entertain a
"forced sale". The completion of any transaction is now unlikely until the
first half of 2018.The Board has instructed the Investment Manager to identify
and assess all opportunities to minimise the operating expenses whilst
marketing continues. The Board do expect, prior to any sale transaction, to be
able to make a further return of capital to shareholders.
Charles Hunter
Chairman
31 October 2017
Investment Manager's Report
Investment Manager
AXA Investment Managers UK Limited (the "Investment Manager", "AXA IM") is the
UK subsidiary of AXA Investment Managers, a dedicated asset manager within the
AXA Group. AXA Investment Managers is an active, long term, global multi asset
investor with Asset Under Management ("AUM") of EUR735 billion as at 30 June
2017.
AXA Real Estate Investment Managers UK Limited (the "Real Estate Adviser") is
part of the real estate management arm of AXA Investment Managers S.A. ("AXA IM
Real Assets"). AXA IM Real Assets offers a 360° view of real asset markets,
investing in both equity and debt, across different geographies and sectors,
and via private and listed instruments. AXA IM Real Assets compromises about
650 people in 15 offices around the world, operating in over 20 countries.
Source: AXA Investment Managers UK Limited
Fund Manager
Ian Chappell was appointed as the Fund Manager for AXA Property Trust in
November 2015. He has very broad experience across Europe's real estate
markets, having worked through several market cycles over the past 20 years and
transacting and managing real estate assets covering core, core plus and value
added strategies.
Ian graduated from Nottingham Trent University in 1991 and also holds a Master
of Arts from the University of Newcastle Upon Tyne (1992). He was elected as
Member of the Royal Institution of Chartered Surveyors in 1993. Ian is also a
member of AXA IM Real Assets' Executive Committee.
Market Outlook
Eurozone GDP growth accelerated by a seasonally adjusted 0.6%
quarter-on-quarter (q-o-q) in Q1 2017, the fastest rate of growth in two years.
Household consumption and fixed investment were the main drivers, whereas
imports offset exports, with the net result that the external sector provided a
neutral contribution to growth. Among the major Eurozone economies, Spain
remained the strongest performer, with GDP growth reaching 0.8%, followed by
Germany (0.6%), France (0.5%) and Italy (0.4%). In contrast, GDP growth in the
UK slowed to 0.2% in Q1 2017, its weakest quarter since Q1 2016, partly in
response to a rise in inflation and a weakening of growth in the large services
sector. Having increased to 2% in February 2017, harmonised CPI in the Eurozone
had moderated to 1.3% in June, largely because energy prices rises decelerated.
Harmonised CPI in the UK declined from 2.9% in May to 2.6% in June. Growth
appears to have picked up further momentum in the Eurozone in Q2, according to
recent data and surveys that point to rising output and greater confidence.
Despite stronger momentum in the first half of the year, Eurozone GDP is
forecast to grow at around the same rate in 2017 as in 2016 (1.8%). Higher
inflation and political uncertainty - notably as a result of Article 50 being
triggered in March 2017 and elections during the year in the Netherlands,
France, the UK, Germany and, potentially, Italy - are expected to affect
spending by both businesses and households. Consumer spending is expected to
remain a key driver of economic growth but, in the absence of strong wage
growth, higher inflation (forecast to be 1.6% in 2017, after 0.2% in 2016) is
projected to have an overall negative impact on growth. However, exports are
expected to increase, reflecting a strengthening and broadening of the global
recovery. Although there is still considerable disparity in conditions, some
convergence between GDP growth rates in Eurozone countries is expected. While
still low by historical standards, long-term government bond yields are
forecast to rise modestly in 2017, in a continuation of the pattern seen in the
final quarter of 2016. However, increased volatility is expected throughout
2017, given the political risk around the world and the uncertain outlook for
asset purchase tapering and interest rate normalisation.
Italy's GDP growth accelerated from 0.3% quarter-on-quarter (q-o-q) in Q4 2016
to 0.4% in Q1 2017. Growth was driven by an acceleration in inventory building
and household spending, with the latter boosted by a rise in employment and
fall in unemployment; the unemployment rate stood at 11.3% in May 2017, after
peaking at 13% in November 2014. However, fixed investment and net exports
contributed negatively to growth.
Italy's economy faces some severe headwinds and underlying growth momentum is
weak; AXA IM's forecast is for GDP growth of 1.2% in 2017 as a whole, after 1%
in 2016, one of the weakest growth rates in the Eurozone. A key risk is Italy's
fragile banking sector. In June, the European Commission approved the use of
Italian public funds for a precautionary recapitalisation of Monte dei Paschi
di Siena and the liquidation of two failing regional banks. While these plans
will remove bad loans, improve confidence and increase consolidation in Italy's
banking sector, they will also increase public debt, and there is a risk that
other regional banks may yet need aid. There is also a risk that continued
political uncertainty and the government's narrow agenda will constrain
economic growth. General elections are required by early 2018. Matteo Renzi won
back control of the ruling Democratic Party (PD) in an April 2017 primary and
the PD and populist Five Star Movement (M5S) are currently leading national
polls. However, while Forza Italia (FI) and the Northern League (LN) are
currently trailing far behind, their popularity has increased according to
recent polls and candidates from FI and LN won several key municipal elections
in June.
Asset Management Update
During the year the Company completed the sale of the three following assets:
- Dasing was sold in August 2016 for EUR7.45 million
- Agnadello was sold in November 2016 for EUR23.2 million (at JV level)
- Rothenburg was sold in January 2017 for EUR22.02 million
The sole remaining asset comprises the cinema investment in Curno, Italy.
The asset has been continually marketed and although interest had been received
from two prospective parties during the period, neither proceeded to a
successful conclusion. Despite the high level of transaction turnover within
the Italian commercial real estate market, the specialised nature of the asset
and the opening of a new cinema in nearby Orio Center appear to be particular
challenges. The Manager has adjusted the marketing strategy to identify
investors with a known focus to the cinema and leisure sector and this has
resulted in further interest which is now being pursued.
Despite the challenging liquidity constraints, the tenant remains committed to
the location and cash flow generation is strong, with rents paid on time and
there are no unforeseen expenditure requirements.
Property Portfolio at 30 June 2017
Investment name Country Sector Net Yield on valuation
1
Curno, Bergamo Italy Leisure 10.37%
1 Source - external independent valuers to the Company, Knight Frank LLP.
Source: AXA Real Estate Investment Managers UK Limited
Covenant Strength Analysis at 30 June 2017
(based on rental income)
Grade A 100% Creditreform:<199; D&B:A 1
Average unexpired lease length profile (weighted by rental income)
30 June 2017 30 June 2016
Years Years
Grade A 7.5 8.2
Grade B - 8.4
Grade C - 3.9
Average 7.5 8.1
The figures as at end of June 2017 relates to the Multiplex, Curno asset only
whereas figures as at end of June 2016 also include the three assets sold
during the financial year.
The Company's tenant covenant profile is strong. The average rent-weighted
unexpired lease length for the investment portfolio as at 30 June 2017 was 7.5
years.
Lease expiry profile weighted by rental income
Years 30 June 2017 30 June 2016
% of income % of income
Vacant 0.0% 3.7%
0-5 0.0% 38.6%
5-10 100% 29.5%
10+ 0.0% 28.2%
Source: AXA Real Estate Investment Managers UK Limited
Financing
The bank loan from CA-CIB Crédit Agricole and Crédit foncier was fully repaid
in December 2016 prior to the loan maturity, using sales proceeds from
Agnadello transaction. As at 30 June 2017 the Company has no outstanding loan
with banks.
Fund Gearing1 30 June 2017 30 June 2016
Property portfolio GBP12.31m GBP46.79m
Borrowings2 GBP0.00m GBP15.02m
Total gross gearing 0.0% 32.1%
Total net gearing 0.0% 26.6%
1 Fund gearing is included to provide an indication of the overall indebtedness
of the Group and does not relate to any covenant terms in the Group's loan
facilities. Gross gearing is calculated as debt over property portfolio at fair
value including the JV asset at Agnadello. Net gearing is calculated as debt
less unallocated cash over property portfolio at fair value including the JV
asset at Agnadello.
2Borrowings included the main facility, amortised debt issue costs and minority
interests.
AXA Investment Managers UK Limited
31 October 2017
Board of Directors
Charles Hunter (Chairman) has over 30 years of experience in property
investment, principally in UK commercial property. He was Head of Property
Investment of Insight Investment (formerly Clerical Medical Investment Group)
for some nine years and before that Property Director of the investment
management subsidiaries of The National Mutual of Australasia group in the
United Kingdom. He is currently a director of Care South and he was on the
Supervisory Board of Schroder Exempt Property Unit Trust until its conversion
to a PAIF in 2012. 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.
Stephane Monier has over 25 years of investment experience (including asset
allocation, fixed income and foreign exchange). Mr Monier is currently Head of
Investments at Bank Lombard Odier & Cie Ltd. He is responsible for the
investment process and the performance for private clients' portfolios. Mr
Monier joined the Lombard Odier group in 2009 on the institutional side
(Lombard Odier Investment Managers or LOIM). He was initially Global Head of
Fixed Income and Currencies for LOIM and then promoted to Deputy Global Chief
Investment Officer. Prior to joining LOIM, Mr Monier was Global Head of Fixed
Income and Currencies at Fortis Investments from 2006 to 2009 and he also
occupied the very same position at the Abu Dhabi Investment Authority from 1998
to 2006. Prior to Abu Dhabi, Mr Monier spent seven years in JP Morgan
Investment Management as a Fixed Income Manager both in London and Paris from
1991 to 1998. Mr Monier has a Masters Degree in Science from Agrotech (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 Valais, Switzerland.
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
worked for a number of years at Simmons & Simmons in their London and Paris
offices, both in the general corporate and financial services/funds
departments. He then moved to Guernsey in 1999 where he was called as an
Advocate of the Royal Court of Guernsey. Gavin became a partner in 2003 of the
corporate department of Ozannes, then Mourant Ozannes. Gavin left Mourant
Ozannes in November 2016 to establish his own practice Ferbrache & Farrell. His
practice covers general corporate and banking work, funds and the asset
management industry. Gavin holds a number of directorships in investment and
captive insurance companies. He is a resident of Guernsey and has been ranked
as a leading individual in banking, corporate and investment funds by a number
of publications as well as having been elected for a number of years as a Top
Five Global Offshore Funds Lawyers in Who's Who Private Funds.
Stuart Lawson is a Fellow of the Chartered Association of Certified
Accountants. He joined Northern Trust in 1988 working in Fund Administration
and Trust client accounting before being appointed Head of Finance for the
office in 1996 where he established a Risk Management Department. In 2005 he
was appointed Chief Administration Officer for Guernsey with local
responsibility for finance, risk, compliance, corporate services and
communication, and in 2007 he assumed responsibility for Real Estate and
Infrastructure Fund Administration services for the EMEA region. He is
currently a product manager for alternative asset services across the EMEA
region, is a Director of a number of client entities and Chairman of Northern
Trust (Guernsey) Limited. He has 30 years of experience in the Financial
Services Industry and is resident in Guernsey.
Report of Directors
The Directors of the Company present their Annual Report together with the
Group's Audited Consolidated Financial Statements (the "Financial Statements")
for the year ended 30 June 2017. The Directors' Report together with the
Financial Statements give a true and fair view of the financial position of the
Group. They have been prepared properly, in conformity with International
Financial Reporting Standards ("IFRS") as issued by the International
Accounting Standards Board and are in accordance with any relevant enactment
for the time being in force; and are in agreement with the accounting records.
Principal Activity and Status
The Company is an Authorised closed-ended investment company domiciled in
Guernsey and is registered under the provision of The Companies (Guernsey) Law,
2008 and has a premium listing on the official list and trades on the main
market of the London Stock Exchange. Trading in the Company's ordinary shares
commenced on 18 April 2005. The Company and the entities listed in note 2(f) to
the Financial Statements together comprise the "Group".
Going Concern
The discount control provisions established when the Company was launched
required a continuation vote to be proposed to shareholders at the Company's
Annual General Meeting ("AGM") in 2015. As a result of the large discount to
Net Asset Value at which shares were trading there was little chance of raising
new capital. After extensive shareholder consultation, the Board resolved not
to seek continuation of the Company in 2015 and proposed to shareholders that
the Company enter into a managed wind-down. This proposal was approved at an
Extraordinary General Meeting ("EGM") held on 26 April 2013.
In accordance with IFRS, the Financial Statements have been prepared on a
non-going concern basis reflecting the orderly wind-down of the Group.
Accordingly, the going concern basis of accounting is not considered
appropriate. All assets and liabilities continue to be measured in accordance
with IFRS. The Board recognises that the liquidity of certain holdings is
uncertain and the Board will review the most appropriate course of action with
regard to these assets over the coming months. The Directors estimate that the
remaining wind-down costs to be incurred will be approximately GBP189,000 (EUR
214,944) (30 June 2016: GBP206,418 (EUR248,381)). The Board believes that the Group
has sufficient funds available to meet its wind-down costs, day-to-day running
costs and amounts due in terms of its loan facilities.
Viability Statement
In accordance with provision C2.2 of the UK Corporate Governance Code,
published by the Financial Reporting Council, Directors are required to assess
the prospects of the Company over a period longer than the 12 months minimum
required by the "Going Concern" provision. As disclosed in the above section,
the Company is expected to realise its remaining asset over the next 12 months.
Once the sole remaining investment property has been sold the Directors will
propose that the Company enters into a voluntary liquidation.
The Directors have performed a robust assessment, considering each of the
Company's principal risks and uncertainties including those that would threaten
its business model, future performance, solvency or liquidity detailed in the
Corporate Governance Report and how each of these is managed or mitigated. They
have also reviewed the budgeted income and expenditure, forecast cash flows and
asset disposal timetable and approach.
The Directors, having performed the above assessments, have a reasonable
expectation that the Company has sufficient cash and liquid resources to
complete its managed wind down and liquidation in an orderly manner including
paying all associated expenses.
Investment Objective and Investment Policy
The investment objective and investment policy of the Company are as described
in the Investment Objective and Investment Policy section.
Results and Dividends
The results for the year are set out in the Consolidated Income Statement.
Following shareholder approval at the EGM held on 26 April 2013, the Company
will continue the implementation of a managed wind-down.
Although 2017 has been the target for the completion of all disposals, it is
now considered that this will extend into 2018, to reflect the potential delays
attached to the Curno asset. However, the Manager continues to work closely
with the Board on all aspects of the strategy for the portfolio in order to
ensure a timely return of capital to shareholders.
The Company has made timely returns of capital to shareholders whilst balancing
the need to maximise the value from the Company's investments and to provide
for sufficient working capital. A resumption of dividend payments is not
anticipated.
Directors
The Directors who held office during the year and up to the date of this report
were:
C. J. Hunter (Chairman)
G. J. Farrell
S. C. Monier
S. J. Lawson
A. Spaninks*
*Mr Spaninks resigned on 31 October 2016
Mr Hunter is also a Director of the three direct subsidiaries of AXA Property
Trust Limited.
Mr Lawson is a Director of Northern Trust (Guernsey) Limited, the Company's
bankers and member of the same group as the Administrator and Secretary.
Management
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 Financial
Statements. During the year, the Board through the Management Engagement
Committee has reviewed the appropriateness of the Investment Manager's
appointment.
Alternative Investment Fund Managers Directive
The Company does not expect to be required to comply with the AIFM Directive
except to the extent required to permit the marketing of the Company's shares
in EEA Member States. As the Company is in a managed wind down this is unlikely
to occur. If this were to occur the relevant regime remains the national
private placement arrangements in the relevant EEA Member State which may
trigger requisite authorisation, possible changes to the governance structure
of the Company including the appointment of a depositary, and additional
disclosure in the financial statements. Compliance with the AIFM Directive
would be expected to increase management costs, including regulatory and
compliance costs, of impacted investment managers and investment funds.
International Tax Reporting
For purposes of the US Foreign Accounts Tax Compliance Act, the Company
registered with the US Internal Revenue Service ("IRS") as a Guernsey reporting
Foreign Financial Institution ("FFI"), received a Global Intermediary
Identification Number (G0W47U.99999.SL.831), and can be found on the IRS FFI
list.
The Common Reporting Standard ("CRS") is a standard developed by the
Organisation for Economic Co-operation and Development ("OECD") and is a global
approach to the automatic exchange of tax information. Guernsey has now adopted
the CRS which came into effect on 1 January 2016.
The CRS replaced the UK Inter-Governmental Agreement ("IGA") from 1 January
2016. However, it was still necessary to submit the 2014 and 2015 reports for
the UK IGA by 30 June 2016. The first report for CRS was made to the Director
of Income Tax in Guernsey on 23 June 2017.
The Company is subject to Guernsey regulations and guidance based on reciprocal
information sharing inter-governmental agreements which Guernsey has entered
into with the United Kingdom and the United States of America. The Board will
take the necessary actions to ensure that the Company is compliant with
Guernsey regulations and guidance in this regard.
Directors' Authority to Buy Back Shares
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 sets a cap on the price that the Company can pay.
Articles of Incorporation
At an EGM held on 26 April 2013, a special resolution was passed to amend the
Articles of Incorporation. The Board considered that, in light of the managed
wind-down, and in order to facilitate the realisation of the Portfolio by the
end of the first half of 2018, in a manner that achieves a balance between
maximising the value from the Company's investments and making timely returns
of capital to shareholders, it was in the best interests of shareholders and
the Company as a whole to remove the requirement in the current Articles for a
Continuation Resolution to be put to shareholders in 2016, and to make certain
other administrative changes and updates to the current Articles.
At an EGM held on 27 February 2014, a special resolution was passed to amend
the Articles of Incorporation. The Board introduced a mechanism for the
Redemption of Shares at the discretion of the Board prior to the eventual
liquidation of the Company. The purpose of such Redemption Mechanism being to
facilitate the return to shareholders of cash proceeds in a cost-efficient
manner in accordance with the Investment Policy and Objective.
On 17 February 2017 and 23 June 2017, the Company under the mechanism for the
Redemption of Shares purchased and cancelled 25,771,573 and 8,403,016 Shares at
a value of GBP18.4 million and GBP5.6 million respectively.
Details of the property disposals made during the year are disclosed in note 9.
Guernsey Financial Services Commission Code of Corporate Governance
The Board of Directors confirms that, throughout the period covered by the
Financial Statements, the Company complied with the Code of Corporate
Governance issued by the Guernsey Financial Services Commission, to the extent
it was applicable based upon its legal and operating structure and its nature,
scale and complexity.
Independent Auditor
KPMG Channel Islands Limited has expressed their willingness to continue in
office as auditor and a resolution proposing their re-appointment will be
submitted at the forthcoming AGM.
Directors' Responsibilities
The Directors are responsible for preparing the Directors' Report and the
Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under the law they have elected to prepare the Financial
Statements in accordance with IFRS and applicable law.
The Financial Statements are required by law to give a true and fair view of
the state of affairs of the Group and of the profit or loss of the Group for
that period.
In preparing these Financial Statements, the Directors are required to:
§ select suitable accounting policies and apply them consistently;
§ make judgements and estimates which are reasonable and prudent;
§ state whether applicable accounting standards have been followed, subject to
any material departures disclosed and explained in the Financial Statements;
and
§ prepare the Financial Statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business. As
explained in note 2, the Directors do not believe it is appropriate to prepare
these Financial Statements on a going concern basis.
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, 2008. 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.
Disclosure of information to auditors
So far as each Director is aware, all relevant information has been disclosed
to the Company's auditor; and each Director has taken all the steps that he
ought to have taken as a director to make himself aware of any relevant audit
information and to establish that the Company's auditor is aware of that
information.
Directors' Responsibility Statement
We confirm that to the best of our knowledge and in accordance with DTR 4.1.12R
of the Disclosure Guidance and Transparency Rules:
(a) These Financial Statements have been prepared in accordance with IFRS and
give a true and fair view of the assets, liabilities, financial position and
profit or loss of the Company and the undertakings included in the
consolidation as a whole as at and for the year ended 30 June 2017;
(b) These Financial Statements, which include information detailed in the
Chairman's Statement, Investment Manager's Report, Report of the Directors and
Corporate Governance Report provides a fair review of the development and
performance of the Group during the year; and includes a description of the
principal risks and uncertainties that the Group faced as at and for the year
ended 30 June 2017, and
(c) These Financial Statements taken as a whole are fair, balanced and
understandable and provide the information necessary for the shareholders to
assess the Company's performance, business model and strategy.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website, and for
the preparation and dissemination of financial statements. Legislation in
Guernsey governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Signed on behalf of the Board by:
Charles Hunter
Chairman
Stuart Lawson
Director
31 October 2017
Corporate Governance Report
To comply with the UK Listing Regime, the Company must comply with the
requirements of the UK Corporate Governance Code (June 2016) (the "UK Code")
issued by the Financial Reporting Council ("FRC") or explain any departures
therefrom. The Company is also required to comply with the Code of Corporate
Governance issued by the Guernsey Financial Services Commission (the "GFSC
Code").
The Board considers that reporting against the principles and recommendations
of the UK Code provides appropriate information to shareholders. Companies
reporting against the UK Code are deemed to comply with the GFSC Code. The UK
Code is available in the Financial Reporting Council's website, www.frc.org.uk.
The Company has complied with the relevant provisions of the UK Code, except
for the following provisions relating to:
· the role of the Chief Executive;
· Executive Directors' remuneration;
· Senior Independent Director;
· the need for an internal audit function;
· the whistle blowing policy;
· Remuneration Committee; and
· Nomination Committee
For the reasons set out in the UK Code, the Board considers these provisions
are not relevant to the position of the Company as it is an externally managed
investment company. The Company has therefore not reported further in respect
of these provisions.
The Directors are non-executive and the Company does not have employees, hence
no Chief Executive or whistle-blowing policy is required. The Board is
satisfied that any relevant issues can be properly considered by the Board.
There have been no instances of non-compliance, other than those noted above.
However, the Directors have satisfied themselves that the Company's service
providers have appropriate whistle-blowing policies and procedures and have
received confirmation from the service providers that nothing has arisen under
those policies and procedures which should be brought to the attention of the
Board.
Details of compliance are noted in the following sections. The absence of an
Internal Audit function is discussed in the Audit Committee Report.
Composition, Independence and Role of the Board
The Board currently comprises of four non-executive Directors. All the
Directors are considered by the Board to be independent of the Company's
Investment Manager.
The Chairman is Mr Hunter. The Chairman of the Board must be independent for
the purposes of Chapter 15 of the Listing Rules. Mr Hunter is considered
independent because he:
· has no current or historical employment with the Investment Manager; and
· has no current directorships in any other investment funds managed by the
Investment Manager except for the three direct subsidiaries of AXA Property
Trust Limited.
From April 2014 the Chairman, Gavin Farrell and Stephanie Monier have all
served on the Board for over nine years and under the UK Code should be subject
to annual re-election. The Board however, take the view that there is
significant benefit to the Company arising from continuity and experience among
directors and accordingly does not intend to introduce restrictions based on
tenure. The Board believes that shareholders should be given the opportunity to
review membership of the Board on a regular basis. It has therefore, determined
that in performing their role as Directors, the Chairman, Gavin Farrell and
Stephanie Monier do not require to seek annual election.
The Board has overall responsibility for maximising the Company's success by
directing and supervising the affairs of the business and meeting the
appropriate interests of shareholders and relevant stakeholders, while
enhancing the value of the Company and also ensuring protection of investors. A
summary of the Board's responsibilities is as follows:
· statutory obligations and public disclosure;
· strategic direction and financial reporting;
· risk assessment and management including reporting compliance,
governance, monitoring and control; and
· other matters having a material effect on the Company.
The Board is responsible to shareholders for the overall management of the
Company.
The Board needs to ensure that the Annual Report and Financial Statements,
taken as a whole, are fair, balanced and understandable and provide the
information necessary for shareholders to assess the Company's performance,
business model and strategy. In seeking to achieve this, the Directors have set
out the Company's investment objective and policy and have explained how the
Board and its delegated Committees operate and how the Directors review the
risk environment within which the Company operates and set appropriate risk
controls. Furthermore, throughout the Annual Report and Financial Statements
the Board has sought to provide further information to enable shareholders to
better understand the Company's business and financial performance.
The Board's responsibilities for the Annual Report are set out in the
Directors' Responsibility Statement.
The Board is also responsible for issuing half yearly reports, interim
management statements and other price sensitive public reports.
The Board does not consider it appropriate to appoint a Senior Independent
Director because the Directors' are all deemed to be independent by the Company
with the exception of Mr Spaninks until his resignation from the Board. The
Board believes it has a good balance of skills and experience to ensure it
operates effectively. The Chairman is responsible for leadership of the Board
and ensuring its effectiveness.
The Board has engaged external companies to undertake the investment management
and administrative activities of the Company. Documented contractual
arrangements are in place with these companies which define the areas where the
Board has delegated responsibility to them.
The Company holds a minimum of four Board meetings per year to discuss general
management, structure, finance, corporate governance, marketing, risk
management, compliance, asset allocation and gearing, contracts and
performance. The quarterly Board meetings are the principal source of regular
information for the Board enabling it to determine policy and to monitor
performance, compliance and controls which are supplemented by communication
and discussions throughout the year.
A representative of the Investment Manager and Administrator attends each Board
meeting either in person or by telephone thus enabling the Board to fully
discuss and review the Company's operation and performance. Each Director has
direct access to the Investment Manager and Company Secretary and may at the
expense of the Company seek independent professional advice on any matter.
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.
Re-election
There are provisions in the Company's Articles of Incorporation which requires
Directors to seek re-election on a periodic basis. There is no limit on length
of service, nor is there any upper age restriction on Directors.
The Board considers that there is significant benefit to the Company arising
from continuity and experience among directors, and accordingly does not intend
to introduce restrictions based on age or tenure. It does however believe that
shareholders should be given the opportunity to review membership of the Board
on a regular basis.
In accordance with the Company's Articles of Association, at each AGM all
independent Directors who held office at the two previous AGM's and did not
retire shall retire from office and shall be available for re-election.
The Board are of the opinion that the Board members standing for re-election
should be re-elected as they have the right skills and experience to continue
to manage the Company through the managed wind-down process.
Board Diversity
The Board has also given careful consideration to the recommendation of the
Davies Report on "Women on Boards". As recommended in the Davies Report, the
Board has reviewed its composition. However, in view of the Company's managed
wind-down position it believes that the current appointments provide an
appropriate range of skills, experience and diversity.
Board Evaluation and Succession Planning
The Directors consider how the Board functions as a whole taking balance of
skills, experience and length of service into consideration and also reviews
the individual performance of its members on an annual basis.
To enable this evaluation to take place, the Company Secretary will circulate a
detailed questionnaire plus a separate questionnaire for the evaluation of the
Chairman. The questionnaires, once completed, are returned to the Company
Secretary who collates responses, prepares a summary and discusses the Board
evaluation with the Chairman prior to circulation to the remaining Board
members. The performance of the Chairman is evaluated by the other Directors.
On occasions, the Board may seek to employ an independent third party to
conduct a review of the Board.
The Board considers it has a breadth of experience relevant to the Company, and
the Directors believe that any changes to the Board's composition can be
managed without undue disruption. An induction programme has been prepared for
any future Director appointments and all Directors receive other relevant
training as necessary.
Board and Committee Meetings
The table below sets out the number of Board, Audit Committee and Management
Engagement Committee meetings held during the year ended 30 June 2017 and,
where appropriate, the number of such meetings attended by each Director.
Management
Board of Directors Audit Committee Engagement
Committee
Held Attended Held Attended Held Attended
C. J. Hunter 4 4 3 3 1 1
G. J. Farrell 4 4 3 3 1 1
S. C. Monier 4 3 3 2 1 1
S. Lawson 4 4 3 3 1 1
A. Spaninks 1 1 1* 1 - -
* invitee
In addition to the scheduled quarterly Board meetings the Board, or committees
thereof, held 7 ad hoc meetings to deal with matters of an administrative
nature. These meetings were attended by those Directors who were available at
the time.
The Directors who held office during the year and their interest in the shares
of the Company (all of which are beneficial) were:
30 June 2017 30 June 2016
C. J. Hunter* 9,694 0.04% 31,463 0.05%
G. J. Farrell - - - -
S. C. Monier 19,892 0.08% 64,564 0.11%
S. Lawson - - - -
A. Spaninks n/a n/a - -
*Charles Hunter holds 7,345 (2016: 23,840) shares whilst his family holds 2,349
(2016: 7,623).
Committees of the Board
The Board has established Audit and Management Engagement Committees and
approved their terms of reference.
Audit Committee
The Company has established an Audit Committee with formal duties and
responsibilities. The Audit Committee meets formally at least twice a year and
each meeting is attended by the independent external auditor and Administrator.
The Company's Audit Committee is comprised of the entire Board except Mr.
Spaninks. The Audit Committee is chaired by Mr. Lawson.
A report of the Audit Committee detailing its responsibilities and its key
activities is presented in the Audit Committee Report.
Management Engagement Committee
The Management Engagement Committee meets formally at least once a year and is
comprised of the entire Board. Mr. Hunter is Chairman of the Management
Engagement Committee.
The Management Engagement Committee has formal duties and responsibilities. The
function of the Management Engagement Committee is to ensure that the Company's
Management Agreement is competitive and reasonable for the shareholders, along
with the Company's agreements with all other third party service providers
(other than the external auditors).
During the year the Management Engagement Committee has reviewed the services
provided by the Investment Manager as well as the other service providers and
have recommended to the Board that their continuing appointments is in the best
interest of the shareholders. The last meeting was held on 2 December 2016.
Nomination Committee
The Board does not have a separate Nomination Committee. The Board as a whole
fulfils the function of a Nomination Committee. Any proposal for a new Director
will be discussed and approved by the Board.
Remuneration Committee
In view of its non-executive and independent nature, the Board considers that
it is not appropriate for there to be a separate Remuneration Committee as
anticipated by the UK Code because this function is carried out as part of the
regular Board business. A Remuneration Report prepared by the Board is
contained in the Financial Statements.
Terms of Reference
All Terms of Reference for Committees are available from the Administrator upon
request.
Internal Controls
The Board is ultimately responsible for establishing and maintaining the
Company's system of internal controls and for maintaining and reviewing its
effectiveness. The system of internal controls is designed to manage rather
than to eliminate the risk of failure to achieve business objectives and by
their nature can only provide reasonable and not absolute assurance against
misstatement and loss. These controls aim to ensure that assets of the Company
are safeguarded, proper accounting records are maintained and the financial
information for publication is reliable. The Board uses a formal risk
assessment matrix to identify and monitor risks.
The Board has delegated the management of the Company's investment portfolio
and the administration, registrar and corporate secretarial functions including
the independent calculation of the Company's NAV and the production of the
Annual Report and Financial Statements which are independently audited. Whilst
the Board delegates responsibility, it retains accountability for the functions
it delegates and is responsible for the systems of internal control.
Formal contractual agreements have been put in place between the Company and
providers of these services. On an ongoing basis board reports are provided at
each quarterly board meeting from the Investment Manager, Administrator,
Registrar and Company Secretary; and a representative from the Investment
Manager is asked to attend these meetings.
In accordance with Listing Rule 15.6.2 (2) R and having formally appraised the
performance and resources of the Investment Manager, in the opinion of the
Directors their continuing appointment of the Investment Manager on their terms
agreed is in the interests of the Company and the shareholders.
In common with most investment companies, the Company does not have an internal
audit function. All of the Company's management functions are delegated to the
Investment Manager and Administrator which have their own internal audit and
risk assessment functions. As such, an internal audit function specific to the
Company is therefore considered unnecessary.
Principal Risks and Uncertainties
The Board is satisfied that by using the Company's risk matrix in establishing
the Company's system of internal controls while monitoring the Company's
investment objective and policy that the Board has carried out a robust
assessment of the principal risks and uncertainties facing the Company during
its managed wind-down. The principal risks and uncertainties which have been
identified and the steps which are taken by the Board to mitigate them are as
follows:
Investment Risks
The Company is exposed to the risk that its portfolio fails to perform in line
with the Company's objective, if markets move adversely or if the investments
are inappropriately disposed. The Board reviews reports from the Investment
Manager at least once a quarter, paying a particular attention to the disposal
programme and its underlying assumptions and considerations.
Operational Risks
The Company is exposed to the risk arising from any failures of systems and
controls in the operations of the Investment Manager, Administrator and the
Sponsor. The Board and its Committees regularly review reports from the
Investment Manager and the Administrator on their internal controls.
Accounting, Legal and Regulatory Risks
The Company is exposed to the risk that it may fail to maintain accurate
accounting records or fail to comply with requirements of its Prospectus. The
accounting records prepared by the relevant service providers are reviewed by
the Investment Manager. The Administrator, Sponsor and Investment Manager
provide regular updates to the Board on compliance with the Prospectus and
changes in regulation.
Financial Risks
The financial risks, including market, credit, liquidity and interest rate risk
faced by the Company are set out in note 20 of the Financial Statements. These
risks and the controls in place to reduce the risks are reviewed at the
quarterly Board meetings.
Foreign Exchange Risk
The Company is exposed to currency risk given that its investments are
denominated in Euro but the presentation currency of the Company is Pound
Sterling. As a result of the UK's Referendum there has been an increase in the
volatility of the EUR/GBP exchange rate. Although the recent movements in the
currency are favourable for the Company the Investment Manager reports at least
quarterly to the Board on its strategy for managing this risk.
The Board seeks to mitigate and manage these risks through continual review,
policy-setting and enforcement of contractual obligations and will update the
risk assessment matrix to reflect any changes to the control environment.
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 Investment Manager meets with major
shareholders on a regular basis and reports to the Board on these meetings.
Issues of concern can be addressed by any shareholder in writing to the Company
at its registered address. The AGM of the Company provides a forum for
shareholders to meet and discuss issues with the Directors and Investment
Manager of the Company.
In addition, the Company maintains a website which contains comprehensive
information, including regulatory announcements, share price information,
financial reports, investment objectives and strategy and investor contacts.
Significant Shareholdings
As at 16 October 2017, the Company has received of the following interests in
3% or more of the voting rights attaching to the Company's issued shares.
Shares held % of issued
share capital
State Street Nominees Limited 7,816,440 33.40%
Transact Nominees Limited 4,765,708 20.36%
Chase Nominees Limited 1,680,154 7.18%
Credit Suisse Client Nominees (UK) 1,077,310 4.60%
Limited
Signed on behalf of the Board by:
Charles Hunter
Chairman
Stuart Lawson
Director
31 October 2017
Audit Committee Report
Dear Shareholders,
I am pleased to present the Audit Committee's Report for the year ended 30 June
2017, which covers the following topics:
· Responsibilities of the Audit Committee and its key activities during
the year,
· Financial reporting and significant areas of judgement and estimation,
· Independence and effectiveness of the external auditor, and
· Internal control and risk management systems.
As advised previously, the Company has implemented a strategy to wind down the
portfolio and return capital to investors. The Audit Committee's activities
during the year have therefore concentrated on maintaining an appropriate risk
and control environment, providing suitable disclosure of progress and residual
risks in the Financial Statements, ensuring ongoing engagement from service
providers and keeping sufficient liquid funds to meet expenditure for essential
or justified items.
Responsibilities
The Audit Committee reviews and recommends to the Board for approval or
otherwise, the Financial Statements of the Company and is the forum through
which the independent external auditor reports to the Board of Directors. The
independent external auditor and the Audit Committee will meet together without
representatives of either the Administrator or Investment Manager being present
if either considers this to be necessary.
The role of the Audit Committee includes:
1. Monitoring the integrity of the Financial Statements of the Company
covering:
o formal announcements relating to the Company's financial performance,
o significant financial reporting issues and judgements,
o matters raised by the external auditors, and
o appropriateness of accounting policies and practices.
2. Reviewing and considering the UK Code and FRC Guidance on Audit Committees
3. Monitoring the quality and effectiveness of the independent external
auditors which includes:
o meeting regularly to discuss the audit plan and the subsequent findings,
o considering the level of fees for both audit and non-audit work,
o reviewing independence, objectivity, expertise, resources and qualification,
and
o making recommendations to the Board on the appointment, reappointment,
replacement and remuneration.
4. Reviewing the Company's procedures for prevention, detection and reporting
of fraud, bribery and corruption, and
5. Monitoring and reviewing the internal control and risk management systems
of the service providers together with the need for an Internal Audit function.
The Audit Committee's full terms of reference can be obtained by contacting the
Company's Administrator.
Financial Reporting
The Audit Committee's review of the Half Yearly Financial Report and Audited
Annual Report and Financial Statements focused on the following significant
risks;
· investment property portfolio valuation; and
· going concern given the wind-down strategy.
Valuation of Investment Property Portfolio
The Company's sole remaining investment property was fair valued at GBP12.31
million (EUR14.0 million) as at
30 June 2017 and represented the majority of the total assets of the Company.
The remaining investment property comprises the cinema complex in Curno, Italy,
owned via an intermediate holding vehicle. The valuation of this investment is
in accordance with the requirements of IFRS as issued by the International
Accounting Standards Board. The valuation estimate is provided by Knight Frank
LLP, an external independent valuer. The Audit Committee considered the fair
value of the sole remaining investment property held by the Group as at
30 June 2017 to be reasonable based on information provided by the Investment
Manager and Administrator. All valuations are subject to review and oversight
by the Investment Manager.
Going Concern
In accordance with IFRS, the Financial Statements have been prepared on a basis
other than that of a going concern reflecting the orderly wind-down of the
Group. Accordingly, the going concern basis of accounting is no longer
considered appropriate. The sole remaining investment property continues to be
carried at fair value. All other assets and liabilities continue to be measured
in accordance with IFRS.
Audit Findings Report
The independent external auditor reported to the Audit Committee that no
material unadjusted misstatements were found in the course of their work.
Furthermore, the Manager and Administrator confirmed to the Audit Committee
that they were not aware of any material misstatements including matters
relating to the Financial Statements presentation.
Accounting Policies & Practices
The Audit Committee has assessed the appropriateness of the accounting policies
and practices adopted by the Company together with the clarity of disclosures
included in the Financial Statements. Following a review of the presentations
and reports from the Administrator and consulting where necessary with the
independent external auditor, the Audit Committee is satisfied that the
Financial Statements appropriately address the critical judgements and key
estimates (both in respect to the amounts reported and the disclosures). It is
also satisfied that the significant assumptions used for determining the value
of assets and liabilities have been appropriately scrutinised, challenged and
are sufficiently robust.
The Audit Committee advised the Board that this Annual Report and Financial
Statements, taken as a whole, is fair, balanced and understandable.
Risk Management
The Audit Committee continued to consider the process for managing the risk of
the Company and its service providers. Risk management procedures for the
Company are detailed in the Company's risk assessment matrix, and is reviewed
and approved by the Audit Committee on a regular basis. Regular reports are
received from the Investment Manager and Administrator on the Company's risk
evaluation process and reviews.
In the context of the managed wind-down, the key risks which the Audit
Committee has closely monitored are:
· Asset disposal program
· Ongoing liquidity
· Levels of expenditure
· Engagement from service providers
The Audit Committee recognises that the timely disposal of the remaining
property is uncertain and continues to keep under review the most appropriate
course of action with regard to this asset with the aim of maximising
shareholder return.
Through regular briefing sessions and formal bi-annual committee meetings, the
Audit Committee has received the necessary information and confirmation that
activities have been managed and executed in accordance with plans approved by
the Board and established policies and procedures.
Fraud, Bribery and Corruption
The Audit Committee continues to monitor the fraud, bribery and corruption
policies of the Company. The Board receives a confirmation from all service
providers that there have been no instances of fraud or bribery.
The Independent External Auditor
KPMG Channel Islands Limited has been the independent external auditor from the
date of the initial listing on the London Stock Exchange. In the circumstances
of the Company and expected progress with the managed wind-down process, a
change of external auditor is not envisaged given the short remaining life of
the Company.
The independence and objectivity of the external auditor is reviewed by the
Audit Committee which also reviews the terms under which the independent
external auditor is appointed to perform non-audit services. The Audit
Committee has established pre-approval policies and procedures for the
engagement of the auditor to provide audit, assurance and tax services. The
principles on which these are based are that the external auditors may not
provide a service which:
· places them in a position to audit their own work
· creates a mutuality of interest
· results in the external auditor developing close relationships with
service providers of the Company
· results in the external auditor functioning as a manager or employee of
the Company
· puts the external auditor in the role of advocate of the Company
As a general rule, the Company does not utilise external auditors for internal
audit work, secondments or valuation advice. Services which are in the nature
of audit, such as tax compliance, tax structuring, accounting advice, quarterly
reviews and disclosure advice are normally permitted but are subject to prior
approval by the Audit Committee.
The Audit Committee has examined the scope and results of the audit, its cost
effectiveness and the independence and objectivity with particular regard to
non-audit fees, and considers KPMG Channel Islands Limited to be independent of
the Company. The following table summarises the remuneration paid to KPMG
Channel Islands Limited and to other KPMG member firms for audit and non-audit
services provided to the Company during the years ended 30 June 2017 and 30
June 2016.
30 June 2017 30 June 2016
GBP GBP
Statutory audit 144,680 192,103
Total audit fees 144,680 192,103
Non-audit services - -
Total non-audit - -
fees
Performance and Effectiveness
During the year, when considering the effectiveness of the independent external
auditor, the Audit Committee has taken into account the following factors:
· the audit plan presented to them before the audit;
· the post audit findings report including variations from the original
plan;
· changes in audit personnel;
· the independent external auditor's own internal procedures to identify
threats to independence; and
· feedback received from both the Investment Manager and Administrator.
The Audit Committee reviewed and, where appropriate, challenged the audit plan
and the audit findings report of the independent external auditor and concluded
that the audit plan sufficiently identified audit risks and that the audit
findings report indicated that the audit risks were sufficiently addressed with
no significant variations from the audit plan. The Audit Committee considered
reports from the independent external auditors on their procedures to identify
threats to independence and concluded that the procedures were sufficient.
Given that the managed wind down is expected to be substantially complete
within the next 12 months, the Audit Committee will work with the independent
external auditor to keep future costs to a minimum.
Reappointment of External Auditors
Consequent to this review process, the Audit Committee has recommended to the
Board that a resolution be put to the 2017 AGM for the reappointment of KPMG
Channel Islands Limited as independent external auditor. The Board has accepted
this recommendation.
Internal Control and Risk Management Systems
The Company outsources the subsidiary company accounting and financial
statements production to the Investment Manager, and company accounting,
document execution and expense payment to the Administrator. The Audit
Committee considers the following matters in this regard:
· regular operations meetings with service providers,
· reporting to the Audit Committee and Board,
· independent opinion of the external auditor, and
· on-going evaluation of performance.
In addition, the Audit Committee reviews and examines externally prepared
assessments of the control environment in place at the Investment Manager and
the Administrator. No significant failings or weaknesses were identified in
these reports.
The Audit Committee has reviewed the need for an internal audit function and
has decided that the system and procedures employed by the Investment Manager
and the Administrator's internal audit function 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.
In finalising the Financial Statements for recommendation to the Board for
approval, the Audit Committee has satisfied itself that the Financial
Statements taken as a whole are fair, balanced and understandable, and provide
the information necessary for shareholders to assess the Company's performance,
business model and strategy.
A member of the Audit Committee will continue to be available at each AGM to
respond to any shareholder questions on the activities of the Audit Committee.
Stuart Lawson
Chairman, Audit Committee
31 October 2017
Directors' Remuneration Report
Introduction
An ordinary resolution for the approval of the Director's Remuneration Report
will be put to the shareholders at the AGM to be held on 1 December 2017.
Remuneration Policy
All Directors are non-executive and a Remuneration Committee has not been
established. The Board as a whole considers matters relating to the Directors'
remuneration. No advice or services were provided by any external person in
respect of its consideration of the Directors' remuneration.
The Company's policy is that the fees payable to the Directors should reflect
the time spent by the Directors on the Company's affairs and the
responsibilities borne by the Directors and be sufficient to attract, retain
and motivate directors of a quality required to run the Company successfully.
The Chairman of the Board is paid a higher fee in recognition of his additional
responsibilities. The policy is to review fee rates periodically, although such
a review will not necessarily result in any changes to the rates, and account
is taken of fees paid to directors of comparable companies. The Directors of
the Company are remunerated for their services at such a rate as the Directors
determine provided that the aggregate amount of such fees does not exceed GBP
120,000 per annum.
There are no long term incentive schemes provided by the Company and no
performance fees are paid to Directors.
None of the Directors has a service contract with the Company but each of the
Directors is appointed by a letter of appointment which sets out the main terms
of their appointment. Directors hold office until they retire by rotation or
cease to be a director in accordance with the Articles of Incorporation, by
operation of law or until they resign.
Remuneration
Directors are remunerated in the form of fees, payable quarterly in arrears, to
the Director personally. No Directors have been paid additional remuneration
outside their normal Directors' fees and expenses.
The current annual Directors' fees comprise GBP18,000 per annum payable to the
Chairman and GBP13,500 per annum payable to the other Directors.
For the year ended 30 June 2017 and 30 June 2016 Directors' fees incurred were
as follows:
30 June 2017 30 June 2016
GBP GBP
C. J. Hunter 18,000 18,000
G. J. Farrell 13,500 13,500
S. C. Monier 13,500 13,500
S. Lawson 13,500 13,500
A. Spaninks * 4,512 13,500
63,012 72,000
*A Spaninks resigned from the Board on 31 October 2016.
The Directors of the subsidiaries of the Group received emoluments amounting to
GBP11,270 (2016: GBP19,364). Total fees paid to Directors of the Group were GBP74,282
(2016: GBP91,364).
Signed on behalf of the Board by:
Charles Hunter
Chairman
Stuart Lawson
Director
31 October 2017
Investment Objective and Investment Policy
At an EGM of the Company held on 26 April 2013, the shareholders resolved to
amend the Company's investment policy. The amended investment objective and
policy is set out below:
Investment Objective
The Company is managed with the intention of realising all remaining asset in
the Portfolio, in a manner consistent with the principles of prudent investment
management and spread of investment risk, with a view to returning capital
invested to the shareholders in an orderly manner.
Investment Policy
The managed wind-down will be effected with a view to the Company substantially
realising its sole remaining investment property by year end December 2017 in a
manner that achieves a balance between maximising the value from the Company's
investments and making timely returns of capital to shareholders. However, at
present it is considered that the completion of the sale of the Curno asset may
not occur until the first half of 2018.
The Company will cease to make any new investments or undertake capital
expenditure except where necessary in the reasonable opinion of the Manager and
Board to protect or enhance the value of the existing investment or to
facilitate its orderly disposal.
The Company will not undertake new borrowing other than for short-term working
capital purposes.
Any cash received by the Company as part of the realisation process will be
held as cash on deposit and/or cash equivalents.
Shareholders should expect that, under the terms of the Managed Wind-down, the
Board and the Manager will be committed to distributing as much of the
available cash as soon as reasonably practicable having regard to cost
efficiency, debt repayment and working capital requirements. Accordingly, in
order to minimise the administrative burden, shareholders should expect that
returns of cash will be made regularly but not necessarily as soon as cash
becomes available.
Independent Auditor's Report to the Members of AXA Property Trust Limited
Our opinion is unmodified
We have audited the consolidated financial statements (the "financial
statements") of AXA Property Trust Limited (the "Company") and its subsidiaries
(together, the "Group"), which comprise the consolidated statement of financial
position as at 30 June 2017, the consolidated statements of income,
comprehensive income, changes in equity and cash flows for the year then ended,
and notes, comprising significant accounting policies and other explanatory
information. As described in note 2, the financial statements have not been
prepared on a going concern basis.
In our opinion, the accompanying financial statements :
· give a true and fair view of the financial position of the Group as at
30 June 2017, and of the Group's financial performance and the Group's cash
flows for the year then ended;
· are prepared in accordance with International Financial Reporting
Standards (IFRS); and
· comply with the Companies (Guernsey) Law, 2008.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities are described below.
We have fulfilled our ethical responsibilities under, and are independent of
the Group in accordance with, UK ethical requirements including FRC Ethical
Standards as applied to listed entities. We believe that the audit evidence we
have obtained is a sufficient and appropriate basis for our opinion.
Key Audit Matters: our assessment of the risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of
most significance in the audit of the financial statements and include the most
significant assessed risks of material misstatement (whether or not due to
fraud) identified by us, including those which had the greatest effect on: the
overall audit strategy; the allocation of resources in the audit; and directing
the efforts of the engagement team. These matters were addressed in the
context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters. In
arriving at our audit opinion above, the key audit matters were as follows
(unchanged from 2016):
The risk Our response
Going Concern Basis: Our audit procedures
On 26 April 2013 an included:
Refer to the Extraordinary General
Audit Committee Meeting was held at Evaluating managements'
Report and which the wind-down strategy:
accounting policy shareholders approved
notes 2b and 2d proposals for a We held discussions with
managed wind-down of the Board of Directors
the Group. and the Investment
Accordingly, the Manager to understand the
Board of Directors ongoing wind-down
have prepared the programme.
financial statements
on a basis other than We obtained and evaluated
going concern the Group's going concern
reflecting an orderly assessment and post year
managed wind-down of end cash flow forecast
the Group and the and reviewed key
continuing assumptions and
measurement of the significant inputs
investment property therein.
at fair value.
Assessing disclosures:
Risk:
We considered the Group's
There is a risk that going concern accounting
the Board of policies and disclosures
Directors may not be in notes 2b and 2d for
able to achieve the compliance with IFRS.
wind-down in an
orderly manner and if
this was the case
then it would impact
their ability to
continue measuring
the investment
property at fair
value.
Valuation of Basis: Our procedures included:
Investment
Property The Group's Controls Evaluation:
investment property
Investment accounted for 78.6% We tested the design and
Properties GBP12.3m of the Group's net implementation of the
(2016 GBP37.0m) assets as at 30 June control in relation to
2017. the Investment Manager's
Refer to the review of the valuation
Audit Committee The fair value of the prepared by the Group's
Report, investment property Valuer.
accounting policy as at 30 June 2017
notes 2d and 2l was assessed by the Evaluating experts
and disclosure Investment Manager engaged by management:
note 9 and the Board of
Directors based on an We assessed the
independent valuation competence, capabilities
prepared by Knight and objectivity of the
Frank LLP (the Group's Valuer. We also
"Group's Valuer"). assessed their
independence by
Risk: considering the scope of
their work and the terms
As highlighted in the of their engagement.
Audit Committee
Report, the valuation Evaluating assumptions
of the Group's and inputs used in the
investment property valuation:
is a significant area
of judgment and We critically assessed
requires subjective the valuation prepared by
assumptions to be the Group's Valuer by
made. evaluating the
appropriateness of the
Determination of the valuation methodology and
fair value of the assumptions used,
investment property including undertaking
is considered a discussions on key
significant audit findings with the Group's
risk due to the Valuer and challenging
magnitude of the the assumptions used
balance and the based on market
subjective nature of information, with the
the valuation. assistance of our own
real estate specialist.
We agreed significant
inputs into the valuation
such as yields and the
tenancy lease agreement
for consistency with
other audit findings and
observable market
evidence.
Assessing disclosures:
We considered the Group's
investment property
valuation policies and
their application as
described in the notes to
the financial statements
for compliance with IFRS
in addition to the
adequacy of disclosures
in note 9 in relation to
the fair value of the
investment property.
Our application of materiality and an overview of the scope of our audit
Materiality for the financial statements as a whole was set at GBP465,000,
determined with reference to a benchmark of Group net assets of GBP15,665,000, of
which it represents approximately 3% (2016: 3%).
We reported to the Audit Committee any corrected or uncorrected identified
misstatements exceeding GBP23,000, in addition to other identified misstatements
that warranted reporting on qualitative grounds.
Our audit of the Group was undertaken to the materiality level specified above,
which has informed our identification of significant risks of material
misstatement and the associated audit procedures performed in those areas as
detailed above.
Audits for group reporting purposes were performed by a component auditor based
in Luxembourg and by the group audit team in Guernsey. These group procedures
covered 100% of total group revenue, total group profit before taxation, and
total group assets and liabilities.
The audits undertaken for group reporting purposes by the component auditor in
Luxembourg were all performed to a materiality level set by, or agreed with,
the group audit team.
Detailed audit instructions were sent to the component auditor in Luxembourg.
These instructions covered the significant audit areas that should be covered
by these audits (which included the relevant risks of material misstatement
detailed above) and set out the information required to be reported back to the
group audit team. The group audit team visited the component auditor in
Luxembourg. Telephone meetings were also held with the component auditor in
Luxembourg.
We have nothing to report on the other Information in the Annual Report
The directors are responsible for the other information presented in the Annual
Report together with the financial statements. Our opinion on the financial
statements does not cover the other information and we do not express an audit
opinion or any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether, based on our financial statements audit work, the information therein
is materially misstated or inconsistent with the financial statements or our
audit knowledge. Based solely on that work we have not identified material
misstatements in the other information.
Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial statements audit, we
have nothing material to add or draw attention to in relation to:
· the directors' Viability Statement (page 8) concerning the principal
risks, their management, and based on that, the directors' assessment and
expectation of the Company realising its remaining investment property asset
over the next 12 months and the proposed voluntary liquidation thereafter;
· the disclosures in note 2 of the financial statements concerning the use
of a basis of accounting other than going concern.
Corporate governance disclosures
We are required to report to you if:
· we have identified material inconsistencies between the knowledge we
acquired during our financial statements audit and the directors' statement
that they consider that the Annual Report and financial statements taken as a
whole is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group's position and performance,
business model and strategy; or
· the section of the Annual Report describing the work of the Audit
Committee does not appropriately address matters communicated by us to the
Audit Committee.
We are required to report to you if the Corporate Governance Statement does not
properly disclose a departure from the eleven provisions of the 2016 UK
Corporate Governance Code specified by the Listing Rules for our review.
We have nothing to report to you in these respects.
We have nothing to report on other matters on which we are required to report
by exception
We have nothing to report in respect of the following matters where the
Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:
· the Company has not kept proper accounting records; or
· the financial statements are not in agreement with the accounting
records; or
· we have not received all the information and explanations, which to the
best of our knowledge and belief are necessary for the purpose of our audit.
Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out in the Report of Directors,
the directors are responsible for: the preparation of the financial statements
including being satisfied that they give a true and fair view; such internal
control as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or
error; assessing the Group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and using the
going concern basis of accounting unless they either intend to liquidate the
Group or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue our opinion in an auditor's report. Reasonable
assurance is a high level of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of
the financial statements.
A fuller description of our responsibilities is provided on the FRC's website
at www.frc.org.uk/auditorsresponsibilities.
The purpose of this report and restrictions on its use by persons other than
the Company's members as a body
This report is made solely to the Company's members, as a body, in accordance
with section 262 of the Companies (Guernsey) Law, 2008. 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.
Lee C Clark
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors, Guernsey
31 October 2017
Consolidated Income Statement
For the year ended 30 June 2017
Year ended Year ended
30 June 2017 30 June 2016
Notes GBP000s GBP000s
Gross rental income 4 1,704 3,939
Service charge income 127 288
Property operating expenses (251) (1,073)
Net rental and related income 1,580 3,154
Valuation (loss)/gain on investment properties 9 (781) 798
Loss on disposals of a subsidiary and (589) (320)
investment properties
General and administrative expenses 5 (929) (2,537)
Operating (loss)/profit (719) 1,095
Net foreign exchange gain - 1,370
Net gain on financial instruments 20 55 521
Share in loss of a joint venture 11 (40) (321)
Net finance cost 6 (151) (1,094)
(Loss)/profit before tax (855) 1,571
Income tax expense 17 (67) (162)
(Loss)/profit for the year (922) 1,409
Basic and diluted (loss)/profit per ordinary share 7 (1.92) 2.08
(pence)
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2017
Year ended Year ended
30 June 2017 30 June 2016
Notes GBP000s GBP000s
(Loss)/profit for the year (922) 1,409
Other comprehensive income
Hedging reserve recycled to profit or loss 21 - 762
Foreign exchange translation gain 1,896 3,349
Total items that are or may be reclassified to 1,896 4,111
profit or loss
Total comprehensive profit for the year 974 5,520
The accompanying notes form an integral part of these Financial Statements.
Consolidated Statement of Changes in Equity
For the year ended 30 June 2017
Revenue Hedging Distributable Foreign Total
reserve reserve reserve currency
reserve
Notes GBP000s GBP000s GBP000s GBP000s GBP000s
Balance at 1 July 2016 (40,489) - 68,856 10,327 38,694
Share redemptions 18 - - (24,003) - (24,003)
Loss for the year (922) - - - (922)
Other comprehensive income - - - 1,896 1,896
Balance at 30 June 2017 (41,411) - 44,853 12,223 15,665
For the year ended 30 June 2016
Revenue Hedging Distributable Foreign Total
reserve reserve reserve currency
reserve
Notes GBP000s GBP000s GBP000s GBP000s GBP000s
Balance at 1 July 2015 as (41,898) (762) 85,049 6,978 49,367
restated
Share redemptions 18 - - (16,193) - (16,193)
Hedge reserve recycled - 762 - - 762
Profit for the year 1,409 - - - 1,409
Other comprehensive income - - - 3,349 3,349
Balance at 30 June 2016 (40,489) - 68,856 10,327 38,694
The accompanying notes form an integral part of these Financial Statements.
Consolidated Statement of Financial Position
For the year ended 30 June 2017
30 June 2017 30 June 2016
Notes GBP000s GBP000s
Non-current assets
Investment properties 9 12,310 30,832
Current assets
Cash and cash equivalents 3,846 8,806
Trade and other receivables 12 939 1,492
Investment properties held for sale 10 - 6,191
Investment in joint venture 11 642 10,274
Total assets 17,737 57,595
Current liabilities
Trade and other payables 13 1,573 2,213
Short term loans 14 - 14,907
Non-current liabilities
Deferred tax liability 17 - 351
Provisions 16 499 1,253
Long-term loans 15 - 111
Derivative financial instruments 20 - 66
Total liabilities 2,072 18,901
Net assets 15,655 38,694
Reserves 15,665 38,694
Total equity 15,665 38,694
Number of ordinary shares 18 23,402,881 57,577,470
Net asset value per ordinary share (pence) 19 66.94 67.20
By order of the Board
Charles Hunter
Chairman
Stuart Lawson
Director
31 October 2017
The accompanying notes form an integral part of these Financial Statements
Consolidated Statement of Cash Flows
For the year ended 30 June 2017
Year ended Year ended
30 June 2017 30 June 2016
Notes GBP000s GBP000s
Operating activities
(Loss)/profit before tax (855) 1,571
Adjustments for:
Loss/(gain) on valuation and disposals of a 1,370 (476)
subsidiary and investment properties
Shares in loss of joint venture 11 40 321
Gain on financial instruments 20 (55) (521)
Decrease/(increase) in trade and other 305 (473)
receivables
(Decrease)/increase in provisions 16 (754) 887
(Decrease)/increase in trade and other (417) 371
payables
Net finance cost 6 151 1,094
Net foreign exchange gain - (1,370)
Net cash (used in)/generated from operations (215) 1,404
Interest income received 97 249
Interest paid (334) (1,020)
Tax received 44 283
Net cash (outflow)/inflow from operating activities (408) 916
Investing activities
Repayment of joint venture loan 11 8,383 -
Proceeds from disposals of a subsidiary and 9 25,362 33,488
investment properties
Net cash inflow from investing activities 33,745 33,488
Financing activities
Redemption of shares 18 (24,003) (16,193)
Bank loan facility repaid 14 - 15 (15,018) (13,740)
Decrease in derivative financial (11) -
liabilities
Net cash used in financing activities (39,032) (29,933)
Effects of exchange rate fluctuations 735 (3,743)
(Decrease)/Increase in cash and cash equivalents (4,960) 728
Cash and cash equivalents at start of the 8,806 8,078
year
Cash and cash equivalents at the year end 3,846 8,806
The accompanying notes form an integral part of these Financial Statements.
Notes to the Consolidated Financial Statements
For the year ended 30 June 2017
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 (the "Financial Statements") of the Company for the year
ended 30 June 2017 comprise the Financial Statements of the Company and its
subsidiaries (together referred to as the "Group").
2. Significant accounting policies
(a) Basis of preparation
The Financial Statements which show a true and fair view have been prepared in
accordance with International Financial Reporting Standards ("IFRS") which
comprise standards and interpretations issued by the International Accounting
Standards Board ("IASB") and are in compliance with The Companies (Guernsey)
Law, 2008. The Financial Statements have been prepared on a basis other than
that of a going concern, and the accounting policies, presentation and methods
of computation are consistent with this basis, as disclosed in the going
concern paragraph below. The financial statements have been prepared on a
historical cost basis with the exception of investment property and certain
financial instruments which are measured at fair value.
(b) Going concern
The discount control provisions established when the Company was launched
required a continuation vote to be proposed to shareholders at the Company's
Annual General Meeting in 2015. As a result of the large discount to Net Asset
Value at which shares were trading there was little chance of raising new
capital. After extensive shareholder consultation, the Board resolved not to
seek continuation of the Company in 2015 and proposed to shareholders that the
Company enter into a managed wind-down. This proposal was approved at an EGM
held on 26 April 2013.
The Financial Statements have been prepared on a basis other than that of a
going concern reflecting the orderly wind-down of the Group. Accordingly, the
going concern basis of accounting is not considered appropriate. All assets and
liabilities continue to be measured in accordance with IFRS. The Board
recognises that the timely disposal of the sole remaining property is uncertain
and continues to keep under review the most appropriate course of action with
regard to this asset over the coming months with the aim of maximising
shareholder return. As at June 2017, the completion of the sale of the sole
remaining investment property is foreseen in the course of 2018.
The Directors estimate that the wind-down costs will be approximately GBP189,000
(30 June 2016: GBP206,418). The Board believes that the Group has sufficient
funds available to meet its wind-down costs, day-to-day running costs and
amounts due in terms of its loan facilities.
(c) Adoption of new standards and its consequential amendments
Standard, interpretation and amendments to published statements currently
effective
There are no new standards nor amendments effective as of 1 July 2016 that have
had a significant impact on the Group's Financial Statements.
Standards, interpretations and amendments to published statements not yet
effective
There are no accounting standards that have been issued and are not yet
effective that are likely to have an impact on the Financial Statements as the
wind up of the Group is estimated to take place in 2018.
(d) Significant estimates and judgements
The preparation of the Group's Financial Statements requires management to make
judgements, estimates and assumptions that affect the reported amounts of
revenues, expenses, assets and liabilities, and the accompanying disclosures,
and the disclosure of contingent liabilities. Uncertainty about these
assumptions and estimates could result in outcomes that require a material
adjustment to the carrying amount of assets or liabilities affected in future
periods.
(i) Judgements:
In the process of applying the Group's accounting policies, management has made
the following judgements, which have the most significant effect on the amounts
recognised in the Financial Statements:
Functional currency
As disclosed in note 2(e), the Group's functional currency is Sterling and the
subsidiaries' functional currency is the Euro. The Board of Directors considers
that the Parent Company's functional currency is Sterling, as the capital
raised, return on capital and dividends paid by the Parent Company are in
Sterling. The Euro most faithfully represents the economic effect of the
underlying transactions, events and conditions of the subsidiaries. The Euro is
the currency in which the subsidiaries measure their performance and reports
their results.
Going concern
The Financial Statements have been prepared on a non-going concern basis
reflecting the orderly wind-down of the Group. Further discussions of the
Board's decision to wind-down the Group, can be found in note 2(b).
Classification of investment properties as held for sale
The Group has no investment property classified as held for sale. In
establishing whether an investment property may be transferred to held for
sale, the investment property must be available for immediate sale in its
present condition subject only to terms that are usual and customary for sales
of such property and its sale must be highly probable, as discussed in note 2
(o).
Lease classification
The Group has entered into commercial property leases on its investment
property portfolio. The Group has determined, based on an evaluation of the
terms and conditions of the arrangements, such as the lease term not
constituting a substantial portion of the economic life of the commercial
property, that it retains all the significant risks and rewards of ownership of
these properties and accounts for the contracts as operating leases.
(ii) Estimates and assumptions:
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are described below. The Group based its assumptions
and estimates on parameters available when the Financial Statements were
prepared. Existing circumstances and assumptions about future developments,
however, may change due to market changes or circumstances arising which are
beyond the control of the Group. Such changes are reflected in the assumptions
when they occur.
Revaluation of investment properties
The Group carries its investment properties at fair value, with changes in fair
value being recognised in the Consolidated Income Statement.
Properties are valued quarterly by external independent valuers as at the end
of each calendar quarter. Their valuations are reviewed quarterly by the Board.
Quarterly valuations of investment properties are carried out by Knight Frank
LLP, external independent valuers to the Group, in accordance with the Royal
Institution of Chartered Surveyors' ("RICS") Appraisal and Valuation Standards.
The properties have been valued in accordance with the definition of the RICS
Valuation which is defined as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The valuation is based on the highest and
best use of the investment properties.
In view of market instability, the valuers refer to the RICS Valuation
Standards Guidance Note 1 (Valuation Uncertainty). The key assumptions used to
determine the market value of the investment properties are explained further
in note 2(l).
Taxes
Uncertainties exist with respect to the interpretation of complex tax
regulations, changes in tax laws, and the timing and amount of future taxable
income. The Group estimates its tax receivables and liabilities after taking
into account the impact of tax laws and regulation and the timing and amount of
future taxable income.
Deferred tax assets are recognised for unused tax losses to the extent that it
is probable that taxable profit will be available against which the losses can
be utilised. Significant management judgement is required to determine the
amount of the deferred tax asset that can be recognised, based upon timing and
the level of future taxable profits. Details of tax losses recognised as a
deferred tax asset and the amount of unused tax losses held by the Group, refer
to note 17.
Provisions
In determining the provision for wind-down costs, estimates of costs have been
obtained from the Broker, Administrator and other parties involved in the
managed wind-down of the Company. The carrying amount of the provision as at 30
June 2017 was GBP189,000 (30 June 2016: GBP206,418).
Value of financial instruments
The Group held financial instruments that were not quoted in active markets,
such as interest rate swaps. These swaps were valued at their fair value as
communicated by the bank at each quarter end.
(e) Foreign currency translation
(i) Foreign currency transactions
Transactions in foreign currencies are translated to presentation currency at
the spot foreign exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the Consolidated
Statement of Financial Position date are translated to presentation currency at
the foreign exchange rate ruling at that date. Foreign exchange differences
arising on translation are recognised in the Consolidated 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 presentation
currency at foreign exchange rates ruling at the dates the fair value was
determined.
(ii) Exchange differences on foreign operations
The assets and liabilities of foreign operations, arising on consolidation, are
translated to presentation currency at the foreign exchange rates ruling at the
Consolidated Statement of Financial Position date. The income and expenses of
foreign operations are translated to presentation currency at an average rate.
Foreign exchange differences arising on retranslation are recognised in other
comprehensive income and as a separate component of equity.
(f) Basis of consolidation
(i) Subsidiaries
The Financial Statements comprise the Financial Statements of the Company and
its subsidiaries as at 30 June each year. Subsidiaries are fully consolidated
from the date of acquisition, being the date on which the Group obtains
control, and continue to be consolidated until the date when such control
ceases. The Financial Statements of the subsidiaries are prepared for the same
reporting period as the parent company, using consistent accounting policies.
(ii) Transactions eliminated on consolidation
All intra-group balances, transactions and unrealised gains and losses
resulting from intra-group transactions are eliminated in preparing the
Financial Statements.
(iii) Joint ventures
The Group's interest in jointly controlled entities are accounted for using the
equity method. 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
ventures ("Downstream transaction"). The Group recognises 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 ("Upstream transaction"). When downstream transactions provide evidence
of a reduction in the net fair value of the assets sold, or of an impairment
loss of those assets, those losses shall be recognised in full by the investor.
When upstream transactions provide evidence of a reduction in the net fair
value of the assets to be purchased or of an impairment loss of those assets,
the investor shall recognise its share in those losses.
AXA Property Trust Limited, the Company, is the parent of the Group. It was
incorporated in Guernsey on
5 April 2005. The Company owned the following subsidiaries as at the reporting
date:
Ownership
Country of Date of interest
Subsidiaries incorporation incorporation % Principal
activities
Property Trust Luxembourg 20 July 2005 100 Holding Company
Luxembourg 1 S.à r.l (in
liquidation)
Property Trust Luxembourg 24 November 100 Holding Company
Luxembourg 2 S.à r.l. 2005
Property Trust Luxembourg 2 June 2006 100 Holding Company
Luxembourg 3 S.à r.l.
The Manager will seek to merge or wind up redundant holding companies from
planned disposals within a short time frame to avoid ongoing administrative
expenses.
The companies shown in the table below are directly owned by Property Trust
Luxembourg 2 S.à r.l. and Property Trust Luxembourg 3 S.à.r.l. as at the
reporting date:
Ownership interest
%
Subsidiaries Country of
incorporation
Property Trust Luxembourg 2 S.à
r.l.
Property Trust Rothenburg 1 S.à Luxembourg 100
r.l.
Multiplex 1 S.r.l. Italy 100
Property Trust Luxembourg 3 S.à
r.l.
Property Trust Agnadello S.r.l. Italy 50
(g) Income recognition
Interest income from banks is recognised on an effective yield basis.
Rental income from investment property leased out under operating leases is
recognised in the Consolidated Income Statement on a straight-line basis over
the term of the lease. Lease incentives are amortised over the whole lease
term.
(h) Expenses/Other Income
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 charged income on an accrual basis.
(i) Cash and cash equivalents
Cash and cash equivalents comprise 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.
(j) 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.
(k) Provisions
A provision is recognised in the Consolidated Statement of Financial Position
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.
(l) 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. Investment properties are
initially recognised at cost, being the fair value of consideration given,
including associated transaction costs. Any subsequent capital expenditure
incurred in improving investment properties is capitalised in the period during
which the expenditure is incurred and included within the book cost of the
properties.
After initial recognition, investment properties are measured at fair value
using the fair value model with unrealised gains and losses recognised in the
Consolidated Income Statement. Realised gains and losses upon disposal of
properties are recognised in the Consolidated 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 in accordance with the definition of the RICS Valuation which
is defined as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. The valuation is based on the highest and best use of the
investment properties.
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.
Subsequent expenditure is charged to the asset's carrying amount only when it
is probable that future economic benefits associated with the item will flow to
the Group and the cost of the item can be measured reliably. All other repairs
and maintenance costs are charged to the Consolidated Income Statement during
the financial period in which they are incurred.
Investment properties are derecognised when they have been disposed. Where the
Group disposes of a property at fair value in an arm's length transaction, the
carrying value immediately prior to the sale is adjusted to the transaction
price, and the adjustment is recorded in the income statement within gain/
(loss) on disposals of subsidiaries and investment properties.
(m) Leases
The determination of whether an arrangement is, or contains, a lease is based
on the substance of the arrangement at the inception date. The arrangement is
assessed for whether fulfilment of the arrangement is dependent on the use of a
specific asset or assets or the arrangement conveys a right to use the asset or
assets, even if that right is not explicitly specified in an arrangement.
Leases in which the Group does not transfer substantially all the risks and
benefits of ownership of an asset are classified as operating leases. Initial
direct costs incurred in negotiating an operating lease are added to the
carrying amount of the leased asset and recognised over the lease term on the
same basis as rental income. Contingent rents are recognised as revenue in the
period in which they are earned.
(n) Financial instruments
(i) 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.
(ii) Loans and receivables
Loans advanced and other receivables are classified as loans and receivables.
Loans and receivables are carried at amortised cost using the effective
interest rate method, less impairment losses, if any. Gains and losses are
recognised in profit or loss when the loans and receivables are derecognised or
impaired.
(iii) Loans and borrowings
All loans and borrowings were initially recognised at fair value less directly
attributable transaction costs. After initial recognition, interest bearing
loans and borrowings were subsequently measured at amortised cost using the
effective interest method.
(iv) Derivative financial instruments
The Group used derivative financial instruments to hedge its exposure to
interest rate risks arising from financing activities. However, as disclosed in
note 21, hedge accounting for these derivative financial instruments has ceased
to apply.
Derivative financial instruments were recognised initially at cost which is
also deemed to be fair value. Subsequent to initial recognition, derivative
financial instruments were stated at fair value. The gain or loss on
remeasurement to fair value was recognised immediately in profit or loss.
The fair value of interest rate swaps was the estimated amount that the Group
would receive or pay to terminate the swap at the Consolidated Statement of
Financial Position date, taking into account current interest rates and the
current creditworthiness of the swap counterparties.
(v) Derecognition of financial instruments
A financial asset is derecognised when:
- the rights to receive cash flows from the asset have expired;
- the Company retains the right to receive cash flows from the asset, but
has assumed an obligation to pay them in full without material delay to a third
party under a "pass through arrangement"; or
- the Company has transferred substantially all the risks and rewards of
the asset, or has neither transferred nor retained substantially all the risks
and rewards of the asset, but has transferred control of the asset.
A financial liability is derecognised when the obligation under the liability
is discharged or cancelled.
(o) Assets held for sale
Investment property is transferred to assets held for sale when it is expected
that the carrying amount will be recovered principally through sale rather than
from continuing use. For this to be the case, the property must be available
for immediate sale in its present condition subject only to terms that are
usual and customary for sales of such property and its sale must be highly
probable.
For the sale to be highly probable:
- The Board must be committed to a plan to sell the property and an
active programme to locate a buyer and complete the plan must have been
initiated;
- The property must be actively marketed for sale at a price that is
reasonable in relation to its current fair value; and
- The sale should be expected to qualify for recognition as a completed
sale within one year from the date of classification.
On re-classification, an investment property that is measured at fair value
continues to be so measured.
(p) Impairment
The carrying amounts of the Group's assets, other than investment property, are
reviewed at each Consolidated Statement of Financial Position 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 Consolidated Income Statement.
(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 GBP1,200 (2016: GBP1,200). 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 and deferred
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 Consolidated Statement of Financial Position 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 Consolidated Statement of Financial
Position date, except in the case of investment properties, where deferred tax
is provided for the effect of the sale of the properties. 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 17.
(r) Hedge accounting
Prior to January 2013, the Group designated certain hedging instruments, which
included derivatives and non-derivatives in respect of interest rate risk as
cash flow hedges based on the requirements of IAS 39. As the forecast
transaction was no longer expected to occur, hedge accounting was discontinued
prospectively.
(s) Determination and presentation of operating segments
The Board of Directors are charged with setting the Company's investment
strategy in accordance with the Prospectus. They have delegated the day to day
implementation of this strategy to its Investment Manager but retain
responsibility to ensure that adequate resources of the Company are directed in
accordance with their decisions. The investment decisions of the Investment
Manager are reviewed on a regular basis to ensure compliance with the policies
and legal responsibilities of the Board. The Investment Manager has been
given full authority to act on behalf of the Company. Under the terms of the
Investment Management Agreement dated 18 April 2005, subject to the overall
supervision of the Board, the Investment Manager advised on the general
allocation of the assets of the Company between different investments, advised
the Company on its borrowing policy and geared investment position, managed the
investment of the Company's subscription proceeds and short-term liquidity in
fixed income instruments and advised on the use of (and management of)
derivatives and hedging by the Company.
Information presented to the Board by the Investment Manager is based on IFRS.
Whilst the Investment Manager may make the investment decisions on a day to day
basis regarding the allocation of funds to different investments, any changes
to the investment strategy or major allocation decisions have to be approved by
the Board, even though they may be proposed by the Investment Manager. The
Board therefore retains full responsibility as to the major allocations made on
an ongoing basis. The Investment Manager will always act under the terms of the
Prospectus and the Investment Management Agreement dated 18 April 2005 and to
the changes to the investment objective and investment policy approved at an
EGM held on 26 April 2013, which cannot be radically changed without the
approval of the Board of Directors.
The Board has considered the requirements of IFRS 8, 'Operating Segments'. The
Board is of the view that the Group is engaged in a single segment of business,
being investment in properties in Europe. Geographic and Sector analyses of the
segment are included in the Investment Manager's Report.
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. Either party may terminate
the Investment Management Agreement with not less than 12 months' notice in
writing.
In view of the change to the Investment Objective and Policy, the Manager
agreed to amend the Management Fee arrangements with effect from 1 January 2013
in order to provide better alignment with the objective of the Managed
Wind-down, such that the Manager and/or its Associates will receive in
aggregate (refer to note 5 Investment management fees and Performance fee):
- a management fee of 1.10 per cent. of NAV (as opposed to 0.90 per cent.
of gross assets) per annum to be paid quarterly in arrears based on the NAV at
the end of the relevant quarter,
- transaction fees of 0.35 per cent. of the gross sales price achieved on
each asset sale; and
- a performance fee of 12.5 per cent. of cash returned to shareholders in
excess of 90 per cent. of NAV as at 31 December 2012, with threshold percentage
of NAV increasing by 5 per cent. per annum with effect from 1 January 2015
(such that, by way of example, the threshold percent for the 12 month from and
including 1 January 2015 (such that the threshold percentage for the 12 months
from and including 1 January 2015 was 85 per cent of NAV as of 31 December 2012
and increased to 90 per cent from and including January 2016 and so on for each
consecutive year).
This amendment of the management fee was approved by a resolution of the
shareholders on 26 April 2013.
(ii) Stifel Nicolaus Limited (formerly known as Oriel Securities
Limited) is Sponsor and Broker to the Company. Fees incurred in 2017 totalled GBP
25,000 (2016: GBP25,000)
(iii) Northern Trust International Fund Administration Services
(Guernsey) Limited is Administrator, Secretary and Registrar to the Company
pursuant to the Administration Agreement dated 13 April 2005. Fees incurred in
2017 totalled GBP145,000 (2016: GBP145,000).
4. Gross rental income
Gross rental income for the year ended 30 June 2017 amounted to GBP1.70 million
(30 June 2016: GBP3.94 million). The Group leases out all of its investment
property under operating leases and are usually structured in accordance with
local practices in Germany and Italy. All leases benefit from indexation.
Minimum Lease Payments (based on leases in place as at 30 June 2017)
30 June 2017 30 June 2016
GBP000s GBP000s
0-1 year 1,277 3,706
1-5 years 6,385 11,105
5 + years 1,892 15,625
The leasing arrangements are negotiated by the local Asset Managers, who send
recommendations to the Fund Managers and a request for approval.
5. General and administrative expenses
30 June 2017 30 June 2016
GBP000s GBP000s
Administration (188) (284)
fees
General expenses (621) (694)
Audit fees (142) (167)
Legal and professional fees (160) (218)
Directors' fees (74) (91)
Insurance (64) (14)
fees
Liquidation costs 17 (12)
Sponsor's (25) (25)
fees
Investment management fees (255) (311)
Performance fee 583 (721)
Total (929) (2,537)
Each of the Directors receives a fee of GBP13,500 (2016: GBP13,500) and the
Chairman receives a fee of GBP18,000 (2016: GBP18,000).
The aggregate remuneration and benefits in kind of the Directors in respect of
the Company's year ended
30 June 2017 amounted to GBP63,012 (2016: GBP72,000) in respect of the Company and
GBP74,282 (2016: GBP91,364) in respect of the Group.
6. Net finance cost
30 June 2017 30 June 2016
GBP000s GBP000s
Interest (loss)/income from (49) 1
bank deposits
Interest income from JV 97 248
partners
Finance costs (199) (1,343)
Total (151) (1,094)
7. Basic and diluted loss per Share
The basic and diluted gain or loss per share for the Group is based on the net
loss for the year of GBP0.9 million (2016: net profit of GBP1.4 million) and the
weighted average number of Ordinary Shares in issue during the year of
48,025,516 (2016: 67,651,518).
8. Dividends
The Company has suspended dividends from June 2012 in order to prudently manage
its cash and debt positions. No dividends were declared or paid during 2015,
2016 and 2017.
9. Investment properties
30 June 2017 30 June 2016
GBP000s GBP000s
Fair value of investment properties at beginning of 37,023 58,778
year
Opening fair value of assets sold during the (24,724) (28,020)
year
Fair value adjustments (781) 798
Foreign exchange translation 792 5,467
Fair value of investment properties at the end of 12,310 37,023
the year
Investment properties classified held for sale - (6,191)
(note 10)
Net investment properties 12,310 30,832
All investment properties are carried at fair value.
During the year, the following investment properties were sold:
- Dasing (Dasing, Germany) completed on 25 August 2016. Sales price
achieved was EUR7.45 million (GBP6.41 million);
- Rothenburg (Rothenburg, Germany) competed in January 2017. Sales price
achieved was EUR22.02 million (GBP18.95 million).
The properties have been valued on the basis of fair value, which is the price
that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date.
Quarterly valuations are carried out at 31 March, 30 June, 30 September and 31
December by Knight Frank LLP, external independent valuers.
The fair value of investment properties and investment properties held for sale
are analysed by valuation method, according to the levels of the fair value
hierarchy. The different levels have been defined as follows:
Level 1: quoted (unadjusted) prices in active markets for identical assets or
liabilities;
Level 2: inputs other than quoted prices included within Level 1 that are
observable for asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices);
Level 3: inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
The investment property (Curno) is valued via level 3 (2016: investment
properties and investment properties held for sale were valued via level 3 for
Rothenburg and Curno, and via level 2 for Dasing).
The significant assumptions made relating to valuations are set out below:
2017 significant assumptions
2017 Industrial Retail Leisure Total
Gross Estimated rental value per n/a n/a 179.95EUR
sqm p.a
-range n/a n/a 179.95EUR 179.95EUR
-weighted average n/a n/a 179.95EUR 179.95EUR
Net initial yield
-range n/a n/a 8.74% 8.74%
-weighted average n/a n/a 8.74% 8.74%
Reversionary yield
-range n/a n/a 7.62% 7.62%
-weighted average n/a n/a 7.62% 7.62%
True equivalent yield
-range n/a n/a 8.57% 8.57%
-weighted average n/a n/a 8.57% 8.57%
2016 significant assumptions
2016 Industrial Retail Leisure Total
Gross Estimated rental value per 41.08EUR 132.11EUR 179.95EUR
sqm p.a
-range 37.5-44.02EUR 132.11EUR 179.95EUR 37.5EUR-179.95EUR
-weighted average 41.50EUR 132.11EUR 179.95EUR 113.79EUR
Net initial yield
-range 8.43%-10.09% 7.72% 9.78% 7.72%-10.09%
-weighted average 9.56% 7.72% 9.78% 8.89%
Reversionary yield
-range 9.89%-10.43% 6.58% 8.68% 6.58%-10.43%
-weighted average 10.10% 6.58% 8.68% 8.33%
True equivalent yield
-range 10.09%-10.22% 6.88% 9.76% 6.88%-10.22%
-weighted average 10.40% 6.88% 9.76% 8.84%
An increase/decrease in ERV will increase/decrease valuations, while an
increase/decrease to yield decreases/increases valuations. The table below sets
out the sensitivity of the valuation to changes of 50 basis points in yield.
The external valuer has carried out its valuation using the comparative and
investment methods. The external valuer has made the assessment on the basis of
a collation and analysis of appropriate comparable investment and rental
transactions. The market analysis has been undertaken using market knowledge,
enquiries of other agents, searches of property databases, as appropriate and
any information provided to them. The external valuer is adhering to the RICS
Valuation - Professional Standards.
2017 sensitivity
Movement Industrial Retail Leisure
Increase of 50 basis n/a n/a Decrease of EUR0.70
points million
Decrease of 50 basis n/a n/a Increase of EUR0.80
points million
2016 sensitivity
Movement Industrial Retail Leisure
Increase of 50 basis Decrease of EUR1.08 Decrease of EUR1.4 Decrease of EUR0.80
points million million million
Decrease of 50 basis Increase of EUR1.21 Increase of EUR1.60 Increase of EUR0.90
points million million million
10. Investment properties held for sale
As at 30 June 2017, there is no investment property classified as held for sale
(30 June 2016: 1 property (Dasing)).
11. Investment in joint venture
The Group holds a 50% joint venture interest in the equity of the Italian joint
venture Property Trust Agnadello S.r.l. which held a logistics warehouse in
Agnadello, Italy. During the year, Property Trust Agnadello S.r.l. sold its
logistic warehouse. The remaining 50% equity interest is held by European Added
Value Fund S.à r.l., a subsidiary of European Added Value Fund Limited.
The Group's interest in Property Trust Agnadello S.r.l. is accounted for using
the equity method in the Financial Statements, which approximates the lower of
its carrying amount and its fair value less cost to sell.
The following table summarises the financial information of Property Trust
Agnadello S.r.l. which also reconciles the summarised financial information to
the carrying amount of the Group's interest in the joint venture:
Summarised Consolidated Statement of Financial Position
30 June 2017 30 June 2016
GBP000s GBP000s
Current 1,322 20,965
assets
Current liabilities (38) (17,183)
Net assets 1,284 3,782
(100%)
Group's share of net assets (50%) 50% 50%
Group's share of net assets 642 1,891
Loan balances due to joint venture - 8,383
partners
Carrying amount of interest in joint 642 10,274
venture
Summarised Consolidated Income Statement
30 June 2017 30 June 2016
GBP000s GBP000s
Net rental and related income 568 1,460
Valuation losses on investment - (1,271)
property
Loss on disposals of investment (387) -
properties
Total administrative and other (180) (157)
expenses
Other income - 1
Financial expenses (202) (486)
Loss before (201) (453)
tax
Income tax gain/(expense) 121 (189)
Loss for the year (80) (642)
Group's share of loss for the year (40) (321)
Summarised Consolidated Statement of Comprehensive Income
30 June 2017 30 June 2016
GBP000s GBP000s
Loss for the year (80) (642)
Total comprehensive income for the year (80) (642)
Group's share of loss for the year (40) (321)
12. Trade and other receivables
30 June 2017 30 June 2016
GBP000s GBP000s
Tax receivable (witholding, corporate and 119 367
income)
Investment property sold receivable - 282
Other receivables 681 347
VAT 91 24
receivable
Management fee receivable - 156
Rent 14 116
receivable
Accrued income - 129
Prepayments 34 71
Total 939 1,492
The carrying values of trade and other receivables are considered to be
approximately equal to their fair value.
Rent receivable is non-interest bearing and typically due within 30 days.
13. Trade and other payables
30 June 2017 30 June 2016
GBP000s GBP000s
Investment manager's fee 111 165
Property manager's fee - 37
Tax payable (income, transfer, capital 751 888
and other)
Interest payable on loan facility 13 99
Legal and professional fees 29 93
VAT payable 32 13
Audit fee 221 170
Administration and Company Secretarial - 79
fees
Rent prepaid 3 9
Other 413 660
Total 1,573 2,213
Trade and other payables are non-interest bearing and are normally settled on
30-day terms.
The carrying values of trade and other payables are considered to be
approximately equal to their fair value.
14. Short-term loans
30 June 2017 30 June 2016
GBP000s GBP000s
Secured bank loan - 14,907
On 30 June 2016, the main loan facilities were with Crédit Agricole Corporate
and Investment Bank ("Crédit Agricole") and Crédit Foncier de France ("Crédit
Foncier"). On 30 June 2016 the main loan facilities were refinanced and matured
on 31 December 2016.
The outstanding balance of the main loan as at 30 June 2016 was EUR17.96 million
(GBP14.9 million) (before capitalised debt issue costs).
On 30 June 2016, all bank loans were classified as current liabilities as the
facility was due to expire within the next 12 months.
The Group was in compliance with the loan covenants including the Loan to Value
covenant of 60%.
The carrying value of these loans approximated their fair value.
Following the sale of Dasing, GBP2.59 million (EUR2.95m) and GBP2.80 million (EUR3.18m)
of the loan was repaid in August and September 2016, respectively.
In November 2016 the Company completed the sale of the asset in Agnadello,
Italy, with its joint venture partner for a total sales price of EUR23.2 million.
The disposal of Rothenburg was completed in January 2017 for a total sales
price of EUR22.02 million.
As a result of this sales progress the Group was able to fully discharge the
remaining balance of its debt facility of GBP9.54 million (EUR10.85m).
As at 30 June 2017, all bank loans have been fully repaid.
15. Long-term loans
30 June 2017 30 June 2016
GBP000s GBP000s
Non-current
liabilities
Loan due to third - 111
party
Total - 111
16. Provisions
30 June 2017 30 June 2016
GBP000s GBP000s
Non-current
Provision for performance 310 893
fees
Provision for wind-down costs 189 206
Provision for sale Dasing - 154
Total 499 1,253
The variation of the provisions for performance fees and wind-down costs are
included in the general and administrative expenses, in which wind-down costs
are disclosed as "Liquidation costs" (see note 5).
17. Taxation
30 June 2017 30 June 2016
GBP000s GBP000s
Effect of:
Current tax
Luxembourg (1) (12)
Italy (188) (170)
The Netherlands - 116
Germany (152) (280)
Total current tax (341) (346)
Deferred tax
Investment property 274 184
Total deferred tax 274 184
Tax charge during the year (67) (162)
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following items:
30 June 2017
Assets Liabilities Net
GBP000s GBP000s GBP000s
Investment property - - -
Tax value of loss carry forwards - - -
recognised
Tax liabilities - - -
30 June 2016
Assets Liabilities Net
GBP000s GBP000s GBP000s
Investment property - (351) (351)
Tax value of loss carry forwards - - -
recognised
Tax liabilities - (351) (351)
At 30 June 2017, no deferred tax asset has been recognised for unused tax
losses as they are not expected to be utilised.
At 30 June 2017, taxable temporary differences associated with investments in
subsidiaries for which no deferred tax liability had been recognised totalled GBP
nil (EURnil) (2016: GBPnil (EURnil)).
Movement in temporary differences
Recognised in Foreign
income exchange
1st July statement translation 30 June 2017
2016
GBP000s GBP000s GBP000s GBP000s
Investment property (351) 274 77 -
Tax value of loss carry - - - -
forwards recognised
Tax (liabilities)/assets (351) 274 77 -
Recognised in Foreign
income exchange
1st July statement translation 30 June 2016
2015
GBP000s GBP000s GBP000s GBP000s
Investment property (510) 184 (25) (351)
Tax value of loss carry - - - -
forwards recognised
Tax (liabilities)/assets (510) 184 (25) (351)
The Parent Company is exempt from Guernsey taxation.
18. Share capital
30 June 2017 30 June 2016
Number of Share Number of Share
Shares Premium Shares Premium
GBP000s GBP000s
Shares of no par value 23,402,881 100,000 57,577,470 100,000
issued and fully paid
Capital management
The Company's capital is represented by the Ordinary Shares, revaluation
reserves, revenue reserves, hedging reserves, distributable reserves and
foreign exchange reserves. The share premium is included in the distributable
reserve presented in the Consolidated Statement of Changes in Equity. The
capital of the Company is managed in accordance with its investment policy in
pursuit of its investment objective, both of which are set out in the
Investment Objective and Policy section. It is not subject to externally
imposed capital requirements. The Ordinary shares carry rights regarding
dividends, voting, winding-up and redemptions which are detailed in full in the
Company's Memorandum and Articles of Incorporation.
The Company was authorised at the Annual General Meeting ("AGM") on 2 December
2016 to make market purchases of up to 14.99% of its Ordinary Shares until the
conclusion of the next AGM or 31 December 2017, whichever is earlier. Purchases
would only be made at prices below the prevailing Net Asset Value of the shares
where the Directors believe such purchases would enhance shareholder value. In
the Prospectus (issued by the Company on 18 April 2005), the Directors stated
their intention to seek annual renewal of this authority. Share buy backs are
at the discretion of the Board.
Additionally, pursuant to the AGM which took place on 2 December 2016 ("2016
AGM"), the Directors shall not apply and shall be excluded in relation to the
issue of up to an aggregate number of Ordinary Shares as represents less than
10 per cent. of the number of Ordinary Shares admitted to trading on the London
Stock Exchange.
The following redemptions of shares have been done under the mechanism for the
Redemption of Shares as approved at the EGM held on 27 February 2014:
Redemption Capital Shares
date Returned cancelled
19-Mar-14 1,999,957 3,641,580
09-Apr-14 2,099,903 3,823,572
30-Oct-14 1,999,547 3,668,894
14-May-15 1,799,022 3,181,296
20-Jul-15 5,197,083 9,725,084
06-Jan-16 10,996,174 18,382,104
17-Feb-17 18,400,902 25,771,573
23-Jun-17 5,602,290 8,403,016
48,094,878 76,597,119
19. Net asset value per ordinary share
The Net Asset Value per Ordinary Share at 30 June 2017 is based on the net
assets attributable to the ordinary shareholders of GBP15.67 million (2016: GBP
38.69 million) and on 23,402,881 (2016: 57,577,470) ordinary shares in issue at
the Consolidated Statement of Financial Position date.
20. Financial risk management
The table below summarises the amounts recognised in the Consolidated Income
Statement in relation to derivative financial instruments.
30 June 2017 30 June 2016
GBP000s GBP000s
Hedging reserve recycled to consolidated income - (762)
statement
Net gain on derivative instruments 55 1,283
Total gain recognised in Consolidated Income Statement 55 521
The Group is exposed to various types of risk that are associated with
financial instruments. The Group's financial instruments comprise bank
deposits, cash, receivables, loans and payables that arise directly from its
operations. The carrying value of financial assets and liabilities approximate
the fair value.
The main risks arising from the Group's financial instruments are market risk,
credit risk, liquidity risk, interest risk and foreign currency risk. The Board
review and agree policies for managing its risk exposure. These policies are
summarised below.
Market Price 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 ("GDP"), employment trends, inflation
and changes in interest rates. Changes in GDP 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, ongoing monitoring of tenants and through effective management of the
properties.
Market price sensitivity analysis
The sensitivity analysis has been determined based on the exposure to property
valuation risks at the reporting date. Any changes in market conditions will
directly affect the profit or loss reported through the Consolidated Income
Statement. A 5% increase in the value of the direct properties (after deferred
tax) at 30 June 2017 would have increased net assets and income for the year by
GBP0.6 million (2016: GBP1.8 million). A decrease of 5% would have had an equal but
opposite effect. The ratio of cash, cash equivalents and trade and other
receivables to the NAV is 30.5%.
Credit risk
Credit risk refers to the risk that counterparty will default on its
contractual obligations resulting in financial loss to the Group. As at June
2017. the Group has adopted a policy of only dealing with creditworthy
counterparties and obtaining sufficient collateral where appropriate as a means
of mitigating the risk of financial loss from defaults. The Group's and
Company's exposure and the credit-ratings of its counterparties are
continuously monitored and the aggregate value of transactions concluded is
spread amongst approved counterparties.
The credit risk on liquid funds is limited because the counterparties are banks
with high credit-ratings assigned by international credit-ratings agencies. The
Group banks with Barclays Bank plc which has a Fitch rating of A, HSBC Bank plc
with a Fitch rating of AA- and BIL with a Fitch rating of BBB+.
Cash and cash equivalents and trade and other receivables presented in the
consolidated statement of financial position are subject to credit risk with
maturities within one year. The Company's maximum credit exposure is limited to
the carrying amount of financial assets recognised as at the Consolidated
Statement of Financial Position date.
At the reporting date, the carrying amount of the financial assets exposed to
risk were as follows:
Within
one year 1-3 years Total
As at 30 June 2017 GBP000s GBP000s GBP000s
Cash and cash 3,846 - 3,846
equivalents
Rent 14 - 14
receivable
Trade and other 925 - 925
receivables
Total 4,785 - 4,785
Within
one year 1-3 years Total
As at 30 June 2016 GBP000s GBP000s GBP000s
Cash and cash 8,806 - 8,806
equivalents
Rent 116 - 116
receivable
Trade and other 1,057 - 1,057
receivables
Total 9,979 - 9,979
Liquidity risk
Liquidity risk is the risk that the Company will encounter in realising assets
or otherwise raising funds to meet financial commitments in a reasonable
timeframe or at a reasonable price.
The Group invests the majority of its assets in investment properties which are
relatively illiquid, however, the Group has mitigated this risk by investing in
desirable properties in strong locations. The Group prepares forecasts in
advance which enables the Group's operating cash flow requirements to be
anticipated and ensures that sufficient liquidity is available to meet
foreseeable needs and to invest any surplus cash assets safely and profitably.
The Group also monitors the cash position in all subsidiaries to ensure that
any working capital needs are addressed as early as possible.
The Company has continued to suspend the payment of dividends to prudently
manage cash during the wind-down phase.
The table below summarises the maturity profile of the Group's liabilities.
Less than 3 3-12 1-3 years
months months
Total
As at 30 June 2017 GBP000s GBP000s GBP000s GBP000s
Trade and other payables 1,573 - - 1,573
Total 1,573 - - 1,573
Less than 3 3-12 1-5 years
months months
Total
As at 30 June 2016 GBP000s GBP000s GBP000s GBP000s
Interest bearing loans - 14,907 111 15,018
Current portion of long-term
loans
Trade and other payables 1,136 1,077 - 2,213
Derivative financial
instruments
Interest rate swaps and caps 66 - - 66
Total 1,202 15,984 111 17,297
The external loan of GBP14.9 million has been reimbursed using the net rents and
net disposal proceeds received during the year.
Interest rate risk
Floating rate financial assets comprise the cash balances which bear interest
at rates based on bank base rates. Following the repayment of the bank loans
(see note 14), all floating rate financial liabilities have been repaid.
Consequently, the Group exposure to interest rate risk is insignificant as at
30 June 2017.
Previously to this repayment, the Group was exposed to cash flow risk as the
Group borrowed funds under the loan facility with Crédit Agricole and Crédit
Foncier at floating interest rates (see note 14). The Group managed this risk
by using interest rate swaps denominated in Euro. At 30 June 2017, the Group
has no swap contract (30 June 2016: interest rate swaps with a notional
contract amount of GBP16.26 million (EUR19.57 million)).
Following the orderly and managed wind-down of the Group and as discussed in
note 2(b), and the consequent repayment of external loans, hedging reserves of
GBP0.762 million loss deferred in equity related to the interest rate swaps that
were cancelled and settled were recycled to profit or loss for the year ended
30 June 2016. The net gain on interest rate swaps recognized in profit or loss
for the period ended 30 June 2017 was nil (30 June 2016: GBP1.28 million).
The Group had entered into interest rate swaps and caps for the period of the
main loan facility, effective from
1 July 2011 to 1 July 2016, to eliminate floating interest rate risk. Details
of the hedging contracts are below:
Counterparty Contract Rate Notional Amount
Interest Rate Swaps Credit Agricole 2.795% 19.569 million
30 June 2017 30 June 2016
Assets Liabilities Assets Liabilities
GBP GBP GBP GBP
Non-current
Interest rate - - - 66
swaps
Total - - - 66
As at 30 June 2017, the Group has no swap contract since all swap contracts
expired on 30 June 2016 and were not extended.
Cash Flow Hedge
The Group has no swap contract since all swap contracts expired on 30 June 2016
and were not extended.
The interest rate swaps settled on a quarterly basis. The basis of floating
rate was 3-month Euribor which was -0.29% on 30 June 2016. The settlement of
the difference between the fixed and floating rate was made by the Group on a
net basis.
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
re-measurement to fair value is recognised immediately in profit or loss.
The fair value of interest rate swaps is the estimated amount that the Group
would receive or pay to terminate the swap at the Consolidated Statement of
Financial Position date, taking into account current interest rates and the
current creditworthiness of the swap counterparties.
The table below analyses financial instruments carried at fair value, by
valuation method. The different levels have been defined as follows:
Level 1: quoted (unadjusted) prices in active markets for identical assets or
liabilities;
Level 2: inputs other than quoted prices included within Level 1 that are
observable for asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices);
Level 3: inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
Level 1 Level 2 Level 3
30 June 2017 GBP000s GBP000s GBP000s
Liabilities measured at fair
value
Interest rate swaps and caps - - -
Total - - -
Level 1 Level 2 Level 3
30 June 2016 GBP000s GBP000s GBP000s
Liabilities measured at fair
value
Interest rate swaps and caps - 66 -
Total - 66 -
Interest re-pricing
As at 30 June 2017
Total as per
statement of Fixed rate Floating rate
financial 3 months or less
position
GBP000s GBP000s GBP000s
Financial assets
Cash and cash equivalents 3,846 - 3,846
Total 3,846 - 3,846
Financial liabilities
Current portion of long-term - - -
loans
Long-term loans - - -
Total - - -
As at 30 June 2016
Total as per
statement of Fixed rate Floating rate
financial 3 months or less
position
GBP000s GBP000s GBP000s
Financial assets
Cash and cash equivalents 8,806 - 8,806
Total 8,806 - 8,806
Financial liabilities
Current portion of long-term 14,907 - 14,907
loans
Long-term loans 111 111 -
Total 15,018 111 14,907
Foreign currency risk
The European subsidiaries will invest in properties using currencies other than
Sterling (Euros), the Company's functional and presentational currency, and the
Consolidated Statement of Financial Position may be significantly affected by
movements in the exchange rates of such currencies against Sterling.
The following table sets out the total exposure to foreign currency risk and
the net exposure to foreign currency of monetary assets and liabilities based
on notional amounts.
Monetary Monetary Net
assets liabilities exposure
GBP000s GBP000s GBP000s
At 30 June 2017 4,785 (1,573) 3,212
At 30 June 2016 9,979 (16,582) (6,603)
Foreign currency risk sensitivity
The following table demonstrates the sensitivity to potential fluctuations in
the Euro exchange rate (ceteris paribus) of the Group's equity.
Increase/ Effect on
decrease equity
in Euro and income
exchange rate GBP000s
At 30 June 2017 +5% (161)
-5% 161
At 30 June 2016 +5% 333
-5% (333)
21. Reserves
(a) Revaluation reserves
Revaluation reserves of the Group arose from the revaluation of investment
properties, financial assets and derivatives. The amounts in these reserves
have already been recognised through the Consolidated Income Statement and
therefore are an allocation of the results for the year.
(b) Hedging reserves
Hedging reserves comprised the effective portion of the cumulative net change
in the fair value of hedging instruments.
30 June 2017 30 June 2016
GBP000s GBP000s
Balance at beginning of financial year - (762)
Movement on cash flow hedges:
Interest rate swaps - 762
Net change in fair value of - 762
hedges
Balance at end of financial - -
year
Following the decision at the EGM on 26 April 2013, to enter into a managed
wind-down of the Company, the criteria for hedge accounting of the interest
rate swaps were no longer met. Therefore, hedge accounting ceased to apply from
1 January 2013 onwards.
(c) Distributable reserves
Distributable reserves arose from the cancellation of the share premium account
pursuant to the special resolution passed at the EGM on 13 April 2005 and
approved by the Royal Court of Guernsey on 24 June 2005.
(d) Foreign currency reserves
Foreign currency reserves arose as a result of the translation of the Financial
Statements of foreign operations, the functional and presentation currency of
which is not Sterling.
22. NAV Reconciliation
The following is a reconciliation of the NAV per share attributable to ordinary
shareholders as presented in these Financial Statements, using IFRS to the NAV
per share reported to the LSE:
NAV per
Ordinary
NAV Share
30 June 2017 GBP000s GBP
Net Asset Value reported to London Stock Exchange 15,832 67.65p
Adjustment on the income tax of Property Trust (329) (1.40)p
Rothenburg 1 S.à r.l.
Other adjustments 162 0.69p
Net Assets Attributable to Shareholders per Financial 15,665 66.94p
Statements
NAV per
Ordinary
NAV Share
30 June 2016 GBP000s GBP
Net Asset Value reported to London Stock Exchange 39,627 68.82p
Write down of Receivable from Sale of (212) (0.37)p
Fürth
Fair value adjustment on the (81) (0.14)p
Tothenburg asset
Adjustment for sales costs Dasing (155) (0.27)p
Write off deferred tax relating to (55) (0.10)p
Curno property
Adjustment on deferred taxes relating to (351) (0.61)p
Rothenburg property
Other adjustments (79) (0.13)p
Net Assets Attributable to Shareholders per Financial 38,694 67.20p
Statements
23. 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, Chairman of the Company and Mr Spaninks (until his resignation) are
also Directors of the Company's subsidiaries, Property Trust Luxembourg 1 S.à
r.l., Property Trust Luxembourg 2 S.à r.l. and Property Trust Luxembourg 3 S.à
r.l. and were able to control the investment policy of the Luxembourg
subsidiaries to ensure it conforms with the investment policy of the Company.
Mr Lawson, a Director of the Company is also a product manager for alternative
asset services across EMEA region and Chairman of Northern Trust (Guernsey)
Limited, the Company's bankers and member of the same group as the
Administrator and Secretary. The total charge to the Consolidated Income
Statement during the year in respect of Northern Trust administration fees was
GBP145,000 (30 June 2016: GBP145,000) of which GBPnil (30 June 2016: GBPnil) remained
payable at the year end.
Under the Investment Management Agreement, fees are payable to the Investment
Manager, Real Estate Adviser and other entities within the AXA Group. 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 period, fees of GBP0.25 million
(30 June 2016: GBP0.31 million) were expensed to the Consolidated Income
Statement. Following the various asset disposals, transaction fees of 35 bps on
the gross sales price were expensed; totalling GBP0.09million on all sales (30
June 2016: GBP0.14 million). During the year, a provision for the performance fee
was reversed/(increased) by GBP0.58 million (2016: GBP0.72 million). The amount had
been provided under the terms of the Investment Management Agreement.
All the above transactions were undertaken at arm's-length.
24. Commitments
As at 30 June 2017 the Company has no commitment.
25. Subsequent events
These Financial Statements were approved for issuance by the Board on 31
October 2017. Subsequent events have been evaluated until this date.
In September 2017, Property Trust Rothenburg 1 S.à r.l. repurchased all
minority shares held in Einkaufzentrum Rothenburg/Tbr. Besitz GmbH at their
nominal value (EUR2,800).
The liquidation of Property Trust Luxembourg 1 S.à r.l. was completed in
October 2017.
Corporate Information
Directors (All non-executive)
C. J. Hunter (Chairman)
G. J. Farrell
S. C. Monier
S. J. Lawson
A Spaninks (resigned 31/10/2016)
Registered Office
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3QL
Channel Islands
Investment Manager
AXA Investment Managers UK Limited
7 Newgate Street
London EC1A 7NX
United Kingdom
Real Estate Adviser
AXA Real Estate Investment Managers UK Limited
155 Bishopsgate
London EC2M 3XJ
United Kingdom
Sponsor and Broker
Stifel Nicolaus Europe Limited
150 Cheapside
London EC2V 6ET
United Kingdom
Administrator and Secretary
Northern Trust International Fund
Administration Services (Guernsey) Limited
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3QL
Channel Islands
Registrar
Computershare Investor Services (Guernsey) Limited
1st Floor
Tudor House
Le Bordage
St Peter Port
Guernsey GY1 1DB
Channel Islands
Independent Auditor
KPMG Channel Islands Limited
Glategny Court, Glategny Esplanade
St Peter Port
Guernsey GY1 1WR
Channel Islands
END
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October 31, 2017 11:11 ET (15:11 GMT)
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