Annual Financial Report

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 £15.7 million (30 June 2016: £38.7 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 £24.0 million (year ended 30 June 2016: £16.2 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 30 June 2017	Year ended 30 June 2016	% change
NAV (£000s)	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	£24.0m	£16.2m	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 liabilities (£000s)3	16,164	40,475	(60.0%)

The 2017 NAV is presented after deduction of £24.0 million of redemption payments.

Total annual return	Year ended 30 June 2017	Year ended 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 Trust Index	9.2%	-8.3%

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 £0.9 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 £24.0 million capital to shareholders by means of two capital redemptions: £18.4 million on 17 February 2017 and £5.6 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 €735 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 €7.45 million

-       Agnadello was sold in November 2016 for €23.2 million (at JV level)

-       Rothenburg was sold in January 2017 for €22.02 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 valuation1
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 % of income	30 June 2016 % 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	£12.31m	£46.79m
Borrowings2	£0.00m	£15.02m
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 £189,000 (€214,944) (30 June 2016: £206,418 (€248,381)). 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 £18.4 million and £5.6 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.

	Board of Directors		Audit Committee		Management 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) Limited	1,077,310	4.60%

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 £12.31 million (€14.0 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
		£	£
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 £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 £18,000 per annum payable to the Chairman and £13,500 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
		£	£
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 £11,270 (2016: £19,364). Total fees paid to Directors of the Group were £74,282 (2016: £91,364).

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 Refer to the Audit Committee Report and accounting policy notes 2b and 2d	Basis: On 26 April 2013 an Extraordinary General Meeting was held at which the shareholders approved proposals for a managed wind-down of the Group.  Accordingly, the Board of Directors have prepared the financial statements on a basis other than going concern reflecting an orderly managed wind-down of the Group and the continuing measurement of the investment property at fair value. Risk: There is a risk that the Board of Directors may not be able to achieve the 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.	Our audit procedures included: Evaluating managements’ wind-down strategy: We held discussions with the Board of Directors and the Investment Manager to understand the ongoing wind-down programme. We obtained and evaluated the Group’s going concern assessment and post year end cash flow forecast and reviewed key assumptions and significant inputs therein. Assessing disclosures: We considered the Group’s going concern accounting policies and disclosures in notes 2b and 2d for compliance with IFRS.
Valuation of Investment Property Investment Properties £12.3m (2016 £37.0m) Refer to the Audit Committee Report, accounting policy notes 2d and 2l and disclosure note 9	Basis: The Group’s investment property accounted for 78.6% of the Group’s net assets as at 30 June 2017.  The fair value of the investment property as at 30 June 2017 was assessed by the Investment Manager and the Board of Directors based on an independent valuation prepared by Knight Frank LLP (the “Group’s Valuer”). Risk: As highlighted in the Audit Committee Report, the valuation of the Group’s investment property is a significant area of judgment and requires subjective assumptions to be made. Determination of the fair value of the investment property is considered a significant audit risk due to the magnitude of the balance and the subjective nature of the valuation.	Our procedures included: Controls Evaluation: We tested the design and implementation of the control in relation to the Investment Manager’s review of the valuation prepared by the Group’s Valuer. Evaluating experts engaged by management: We assessed the competence, capabilities and objectivity of the Group’s Valuer. We also assessed their independence by considering the scope of their work and the terms of their engagement. Evaluating assumptions and inputs used in the valuation: We critically assessed the valuation prepared by the Group’s Valuer by evaluating the appropriateness of the valuation methodology and assumptions used, including undertaking discussions on key findings with the Group’s Valuer and challenging the assumptions used based on market information, with the 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 £465,000, determined with reference to a benchmark of Group net assets of £15,665,000, of which it represents approximately 3% (2016: 3%).

We reported to the Audit Committee any corrected or uncorrected identified misstatements exceeding £23,000, 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	£000s		£000s
	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 investment properties			(589)		(320)
	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 (pence)			7	(1.92)		2.08

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2017

				Year ended		Year ended
				30 June 2017		30 June 2016
			Notes	£000s		£000s
(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 profit or loss				1,896		4,111
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 reserve	Hedging reserve	Distributable reserve	Foreign currency reserve	Total
	Notes	£000s	£000s	£000s	£000s	£000s
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 reserve	Hedging reserve	Distributable reserve	Foreign currency reserve	Total
	Notes	£000s	£000s	£000s	£000s	£000s
Balance at 1 July 2015 as restated		(41,898)	(762)	85,049	6,978	49,367
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	£000s		£000s
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		£000s		£000s
Operating activities
	(Loss)/profit before tax			(855)		1,571
	Adjustments for:
	Loss/(gain) on valuation and disposals of a subsidiary and investment properties			1,370		(476)
	Shares in loss of joint venture	11		40		321
	Gain on financial instruments	20		(55)		(521)
	Decrease/(increase) in trade and other receivables			305		(473)
	(Decrease)/increase in provisions	16		(754)		887
	(Decrease)/increase in trade and other payables			(417)		371
	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 investment properties	9		25,362		33,488
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 liabilities			(11)		-
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 year			8,806		8,078
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 £189,000 (30 June 2016: £206,418). 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 £189,000 (30 June 2016: £206,418).

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:

Subsidiaries	Country of incorporation	Date of incorporation	Ownership interest %	Principal activities
Property Trust Luxembourg 1 S.à r.l (in liquidation)	Luxembourg	20 July 2005	100	Holding Company
Property Trust Luxembourg 2 S.à r.l.	Luxembourg	24 November 2005	100	Holding Company
Property Trust Luxembourg 3 S.à r.l.	Luxembourg	2 June 2006	100	Holding Company

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:

Subsidiaries	Country of incorporation	Ownership interest %
Property Trust Luxembourg 2 S.à r.l.
Property Trust Rothenburg 1 S.à r.l.	Luxembourg	100
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 £1,200 (2016: £1,200). 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 £25,000 (2016: £25,000)

(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 £145,000 (2016: Â£145,000).

4. Gross rental income

Gross rental income for the year ended 30 June 2017 amounted to £1.70 million (30 June 2016: £3.94 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
										£000s		£000s
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
										£000s		£000s
Administration fees										(188)		(284)
General expenses										(621)		(694)
Audit fees										(142)		(167)
Legal and professional fees										(160)		(218)
Directors' fees										(74)		(91)
Insurance fees										(64)		(14)
Liquidation costs										17		(12)
Sponsor's fees										(25)		(25)
Investment management fees										(255)		(311)
Performance fee										583		(721)
Total										(929)		(2,537)

Each of the Directors receives a fee of £13,500 (2016: £13,500) and the Chairman receives a fee of £18,000 (2016: £18,000).

The aggregate remuneration and benefits in kind of the Directors in respect of the Company's year ended
30 June 2017 amounted to £63,012 (2016: £72,000) in respect of the Company and £74,282 (2016: £91,364) in respect of the Group.

6. Net finance cost

										30 June 2017		30 June 2016
										£000s		£000s
Interest (loss)/income from bank deposits										(49)		1
Interest income from JV partners										97		248
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 £0.9 million (2016: net profit of £1.4 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
						£000s		£000s
Fair value of investment properties at beginning of year						37,023		58,778
Opening fair value of assets sold during the year						(24,724)		(28,020)
Fair value adjustments						(781)		798
Foreign exchange translation						792		5,467
Fair value of investment properties at the end of the year						12,310		37,023
Investment properties classified held for sale (note 10)						-		(6,191)
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 €7.45 million (£6.41 million);

-       Rothenburg (Rothenburg, Germany) competed in January 2017. Sales price achieved was €22.02 million (£18.95 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 sqm p.a	n/a	n/a	179.95€
-range	n/a	n/a	179.95€	179.95€
-weighted average	n/a	n/a	179.95€	179.95€
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 sqm p.a	41.08€	132.11€	179.95€
-range	37.5-44.02€	132.11€	179.95€	37.5€-179.95€
-weighted average	41.50€	132.11€	179.95€	113.79€
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 points	n/a	n/a	Decrease of €0.70 million
Decrease of 50 basis points	n/a	n/a	Increase of €0.80 million

2016 sensitivity

Movement	Industrial	Retail	Leisure
Increase of 50 basis points	Decrease of €1.08 million	Decrease of €1.4 million	Decrease of €0.80 million
Decrease of 50 basis points	Increase of €1.21 million	Increase of €1.60 million	Increase of €0.90 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
										£000s		£000s
Current assets										1,322		20,965
Current liabilities										(38)		(17,183)
Net assets (100%)										1,284		3,782
Group's share of net assets (50%)										50%		50%
Group's share of net assets										642		1,891
Loan balances due to joint venture partners										-		8,383
Carrying amount of interest in joint venture										642		10,274

Summarised Consolidated Income Statement

										30 June 2017		30 June 2016
										£000s		£000s
Net rental and related income										568		1,460
Valuation losses on investment property										-		(1,271)
Loss on disposals of investment properties										(387)		-
Total administrative and other expenses										(180)		(157)
Other income										-		1
Financial expenses										(202)		(486)
Loss before tax										(201)		(453)
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
								£000s		£000s
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
										£000s		£000s
Tax receivable (witholding, corporate and income)										119		367
Investment property sold receivable										-		282
Other receivables										681		347
VAT receivable										91		24
Management fee receivable										-		156
Rent receivable										14		116
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
										£000s		£000s
Investment manager's fee										111		165
Property manager's fee										-		37
Tax payable (income, transfer, capital and other)										751		888
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 fees										-		79
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

£000s

£000s

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 €17.96 million (£14.9 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, £2.59 million (€2.95m) and £2.80 million (€3.18m) 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 €23.2 million. The disposal of Rothenburg was completed in January 2017 for a total sales price of €22.02 million.

As a result of this sales progress the Group was able to fully discharge the remaining balance of its debt facility of £9.54 million (€10.85m).

As at 30 June 2017, all bank loans have been fully repaid.

15. Long-term loans

30 June 2017

30 June 2016

£000s

£000s

Non-current liabilities

Loan due to third party

-

111

Total

-

111

16. Provisions

										30 June 2017		30 June 2016
										£000s		£000s
Non-current
Provision for performance fees										310		893
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
										£000s		£000s
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
								£000s		£000s		£000s
Investment property								-		-		-
Tax value of loss carry forwards recognised								-		-		-
Tax liabilities								-		-		-
								30 June 2016
								Assets		Liabilities		Net
								£000s		£000s		£000s
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 £nil (€nil) (2016: £nil (€nil)).

Movement in temporary differences

						Recognised in		Foreign
						income		exchange
				1st July 2016		statement		translation		30 June 2017
				£000s		£000s		£000s		£000s
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 2015		statement		translation		30 June 2016
				£000s		£000s		£000s		£000s
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
						£000s				£000s
Shares of no par value issued and fully paid				23,402,881		100,000		57,577,470		100,000

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 date			Capital Returned		Shares 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 £15.67 million (2016: £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
							£000s		£000s
Hedging reserve recycled to consolidated income statement							-		(762)
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 £0.6 million (2016: £1.8 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								£000s		£000s		£000s
Cash and cash equivalents								3,846		-		3,846
Rent receivable								14		-		14
Trade and other receivables								925		-		925
Total								4,785		-		4,785
								Within
								one year		1-3 years		Total
As at 30 June 2016								£000s		£000s		£000s
Cash and cash equivalents								8,806		-		8,806
Rent receivable								116		-		116
Trade and other receivables								1,057		-		1,057
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 months		3-12 months		1-3 years
												Total
As at 30 June 2017						£000s		£000s		£000s		£000s
Trade and other payables						1,573		-		-		1,573
Total						1,573		-		-		1,573
						Less than 3 months		3-12 months		1-5 years
												Total
As at 30 June 2016						£000s		£000s		£000s		£000s
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 £14.9 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 £16.26 million (€19.57 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 £0.762 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: £1.28 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

£

£

£

£

Non-current

Interest rate swaps

-

-

-

66

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

£000s

£000s

£000s

Liabilities measured at fair value

Interest rate swaps and caps

-

-

-

Total

-

-

-

Level 1

Level 2

Level 3

30 June 2016

£000s

£000s

£000s

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 financial position		Fixed rate		Floating rate 3 months or less
						£000s		£000s		£000s
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 financial position		Fixed rate		Floating rate 3 months or less
						£000s		£000s		£000s
Financial assets
Cash and cash equivalents						8,806		-		8,806
Total						8,806		-		8,806
Financial liabilities
Current portion of long-term loans						14,907		-		14,907
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

£000s

£000s

£000s

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/decrease

Effect on equity

in Euro

and income

exchange rate

£000s

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
										£000s		£000s
Balance at beginning of financial year										-		(762)
Movement on cash flow hedges:
	Interest rate swaps									-		762
Net change in fair value of hedges										-		762
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

£000s

£

Net Asset Value reported to London Stock Exchange

15,832

67.65p

Adjustment on the income tax of Property Trust Rothenburg 1 S.à r.l.

(329)

(1.40)p

Other adjustments

162

0.69p

Net Assets Attributable to Shareholders per Financial Statements

15,665

66.94p

NAV per

Ordinary

NAV

Share

30 June 2016

£000s

£

Net Asset Value reported to London Stock Exchange

39,627

68.82p

Write down of Receivable from Sale of Fürth

(212)

(0.37)p

Fair value adjustment on the Tothenburg asset

(81)

(0.14)p

Adjustment for sales costs Dasing

(155)

(0.27)p

Write off deferred tax relating to Curno property

(55)

(0.10)p

Adjustment on deferred taxes relating to Rothenburg property

(351)

(0.61)p

Other adjustments

(79)

(0.13)p

Net Assets Attributable to Shareholders per Financial Statements

38,694

67.20p

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 £145,000 (30 June 2016: £145,000) of which £nil (30 June 2016: £nil) 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 £0.25 million (30 June 2016: £0.31 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 £0.09million on all sales (30 June 2016: £0.14 million). During the year, a provision for the performance fee was reversed/(increased) by £0.58 million (2016: £0.72 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 (€2,800).

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
^st 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