Half-year Report

AXA PROPERTY TRUST LIMITED
LEI: 213800AF85VEZMDMF931
(Classified Regulated Information, under DTR 6 Annex 1 section 1.2)

Key Financial Information

As at 31 December 2017

-      Sterling currency Net Asset Value (“NAV”) was £14.9 million (30 June 2017: £15.7 million)

-      NAV was 63.69 pence per share (30 June 2017: 66.94 pence)

-      Share price¹ was 57.88 pence per share (30 June 2017: 61.25 pence per share)

For the six months ended 31 December 2017

-      Loss was 4.24 pence per share (31 December 2016: loss was 0.58 pence per share)

-      No dividends or redemptions of shares were paid during the period (31 December 2016: none)

¹ Mid market share price (source: Stifel Nicolaus Europe Limited).

Performance Summary

	Six months ended 31 December 2017	Year ended 30 June 2017	% change
NAV (£000s)	14,906	15,665	(4.8)%
NAV per share	63.69p	66.94p	(4.8)%
Loss per share	(4.24)p	(1.92)p	(120)%
Share redemptions paid	-	£24.0m	n/a
Share price1	57.88p	61.25p	(5.5)%
Share price discount to NAV	9.1%	8.5%	n/a
Total assets less current liabilities (£000s)2	15,171	16,164	(6.1)%

Total return	Six month period 31 December 2017	Six month period 31 December 2016
NAV Total Return3	(4.8)%	2.6%
Share price Total Return
- AXA Property Trust	(5.5)%	12.5%
- FTSE All Share Index	6.8%	12.0%
- FTSE Real Estate Investment Trust Index	8.6%	5.4%

Past performance is not a guide to future performance.

¹ Mid-market share price (source: Stifel Nicolaus Europe Limited).

² Includes bank debt classified as a current liability.

³ 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

AXA Property Trust Limited’s (the “ Company”) remaining property holding is a multiplex cinema near Bergamo in Northern Italy. Its value, fundamentally, lies in a contracted rent flow of €1.5 million p.a payable by UCI Italy Ltd for a remaining 7 year term, plus the reversionary value at the end of that term. The independent valuation as at December 2017 was €13.2 million but a thorough marketing campaign over some years has not elicited any sustained interest at all from buyers. As the Investment Managers report the prospects of an open market sale are weaker and there is the prospect  of a lease renegotiation with the tenant. The outturn may have an impact on valuation. Any liquidation of the asset is likely, therefore, to take a considerable time and the Board are reviewing how the costs of the running the Company can be minimised.

Results

The Company and its subsidiaries (together the “Group”) made a total net loss after tax of £1.0 million for the period to 31 December 2017. The Net Asset Value per share of the Company at 31 December 2017 was 63.69 pence (30 June 2017: 66.94 pence), a 4.8% decrease compared to 30 June 2017.

The mid-market price of the Company’s shares on the London Stock Exchange on 31 December 2017 was 57.88 pence, representing a discount of 9.1% to the Company’s NAV at 31 December 2017.

Return of Capital to Shareholders

No return of capital was declared during the period and the dividend policy remains unchanged.

Charles Hunter
Chairman
21 March 2018

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 innovative and fast-growing multi-expertise investment manager managing €645 billion in assets as at 30 September 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 with more than €71 billion of assets under management and about 650 people operating in 20 countries as at 30 June 2017.

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 25 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.

Market Outlook

Eurozone GDP growth remained stable at a seasonally adjusted 0.7% quarter-on-quarter (q-o-q) in Q3 2017, the fastest rate of growth since Q1 2015. Among the major Eurozone economies, Germany and Spain were the strongest performers, with quarterly GDP growth of 0.8%, followed by France (0.6%) and Italy (0.4%). Having increased to 2% year-on-year (y-o-y) in February 2017, harmonised CPI in the Eurozone had moderated to 1.4% by December, largely because energy price rises decelerated.

While still low by historical standards, long-term government bond yields are forecast to rise over the next few years, in a continuation of the pattern seen since the final quarter of 2016.

Italy's GDP growth accelerated from 0.3% q-o-q in Q2 2017 to 0.4% in Q3. Gross fixed investment made the largest contribution to growth, followed by household consumption and net trade. Fixed investment accelerated to 3% q-o-q and growth in household spending accelerated to 0.3% q-o-q, although growth in government expenditure decelerated to 0.1%. Exports grew by 1.6% q-o-q, while imports rose by a slower 1.2%. The annual growth rate accelerated to 1.7%, its highest level since Q1 2011. Having risen to 2% in April 2017, HICP inflation fell back to 1% in December.

Having surprised on the upside in 2017, AXA IM Research expects the positive momentum to last into 2018, forecasting GDP growth of 1.6%. They expect consumer spending growth to be driven by job creation boosting purchasing power in a low inflation environment; falling unemployment reducing precautionary savings; and the effects of the improving housing market. Financial conditions should continue to foster corporate investment, although the outlook remains fragile, as lending to non-financial corporates is still volatile. However, government consumption is likely to be very limited, as the country aims to reduce its deficit. Lack of external competitiveness also prevents Italy from extensively benefiting from recovering international trade.

With the exception of the reform of the banking sector (which contributed to an easing of credit and reduced NPLs) and labour market reforms, progress elsewhere has been rather limited. The fragmented political landscape is not supportive. In advance of the general election to be held in March 2018, polls were pointing to a three-way race as at Q4 2017; the right-wing coalition (Forza Italia, Northern League and Brothers of Italy) ahead with around 35% of the votes, followed by the Five Star Movement (M5S - c.27%) and the Democratic Party (PD - c.25%). In combination with the new electoral law adopted in Autumn 2017, there is expected to be a hung parliament (the law is based on one-third of seats allocated on a first-past-the post system and two-thirds on a proportional basis). There is a very low chance that an anti-establishment coalition (M5S, Northern League and Brothers of Italy) will be formed and reach absolute majority in the Lower House.

Asset Management Update

The sole remaining asset comprises the cinema investment in Curno.

Following several months of pursuing interest with a potential buyer, the likelihood of a sale is weaker, given that trading prospects at the property appear to have been impacted by the competing new cinema at Orio del Serio, also operated by UCI. The tenant has communicated its poor trading results and would appear to be targeting a renegotiation of the contracted rent to reflect a lower operating base. Further information will be sought from them to determine the extent of the operating downturn, whether this is temporary, or a sign of a longer term correction. Once this is received, an appropriate strategy will be implemented.

Property Portfolio at 31 December 2017

Investment	Country	Sector	Net Yield on valuation1
Curno, Bergamo	Italy	Leisure	11.00%

¹ Net yield on valuation is Gross rental income over valuation.                  

Source: External independent valuers to the Company, Knight Frank LLP. 

Weighted Average Lease Term

31 December 2017	7.0 years
30 June 2017	7.5 years

Covenant Strength Analysis at 31 December 2017

Creditreform:	<199
Dun & Badstreet:	A1

Source: AXA Real Estate Investment Managers UK Limited

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.

Directors’ Responsibility Statement

We confirm that to the best of our knowledge:

-      the Condensed Half Year Consolidated Financial Statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting; and

-      this Half Year Report provides a fair review of the information required by:

a)     DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the Condensed Half Year Consolidated Financial Statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

b)    DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could materially affect the financial position or performance of the entity.

Signed on behalf of the Board by:

Charles Hunter
Chairman
21 March 2018

Stuart Lawson
Director
21 March 2018

 

Condensed Half Year Consolidated Income Statement
For the six months ended 31 December 2017 (unaudited)

					Six month period ended		Six month period ended
					31 December 2017		31 December 2016
				Notes	£000s		£000s
		Gross rental income		3	663		1,397
		Service charge income			-		142
		Property operating expenses			(169)		(153)
	Net rental and related income				494		1,386
		Valuation loss on investment properties		6	(710)		(677)
		Loss on disposals of a subsidiary and investment properties			-		(646)
		General and administrative expenses		4	(315)		(406)
	Operating loss				(531)		(343)
		Net foreign exchange gain			-		285
		Net gain on financial instruments		12	-		63
		Share in (loss)/profit of a joint venture		8	(1)		50
		Net finance cost			(11)		(186)
	Loss before tax				(543)		(131)
		Income tax expense			(449)		(204)
	Loss for the period				(992)		(335)
	Basic and diluted loss per ordinary share (pence)				(4.24)		(0.58)

Condensed Half Year Consolidated Statement of Comprehensive Income
For the six months ended 31 December 2017 (unaudited)

					Six month period ended		Six month period ended
					31 December 2017		31 December 2016
					£000s		£000s
	Loss for the period				(992)		(335)
	Other comprehensive income
	Hedging reserve recycled to profit or loss				-		-
	Foreign exchange translation gain				232		1,330
	Total items that are or may be reclassified  to profit or loss				232		1,330
	Total comprehensive (loss)/profit for the period				(760)		995

Condensed Half Year Consolidated Statement of Changes in Equity
For the six months ended 31 December 2017 (unaudited)

				Revenue reserve	Distributable reserve	Foreign currency reserve	Total
				£000s	£000s	£000s	£000s
Balance at 1 July 2017				(41,411)	44,853	12,223	15,665
Loss for the period				(992)	-	-	(992)
Other comprehensive income				-	-	232	232
Balance at 31 December 2017				(42,403)	44,853	12,455	14,905

For the six months ended 31 December 2016 (unaudited)

				Revenue reserve	Distributable reserve	Foreign currency reserve	Total
				£000s	£000s	£000s	£000s
Balance at 1 July 2016				(40,489)	68,856	10,327	38,694
Loss for the period				(335)	-	-	(335)
Other comprehensive income				-	-	1,330	1,330
Balance at 31 December 2016				(40,824)	68,856	11,657	39,689

Condensed Half Year Consolidated Statement of Financial Position
As at 31 December 2017 (unaudited)

				31 December 2017		30 June 2017
			Notes	£000s		£000s
Non-current assets
	Investment properties		6	11,782		12,310
Current assets
	Cash and cash equivalents			3,033		3,846
	Trade and other receivables		9	368		788
	Investment in joint venture held for sale		8	649		642
Total assets				15,832		17,586
Current liabilities
	Trade and other payables		10	662		1,422
Non-current liabilities
	Provisions		11	265		499
Total liabilities				927		1,921
Net assets				14,905		15,665
	Reserves			14,905		15,665
Total equity				14,905		15,665
Number of ordinary shares				23,402,881		23,402,881
Net asset value per ordinary share (pence)				63.69		66.94

By order of the Board

Charles Hunter
Chairman
21 March 2018

Stuart Lawson
21 March 2018
Director
 

Condensed Half Year Consolidated Statement of Cash Flow
For the six months ended 31 December 2017 (unaudited)

				Six month period ended		Six month period ended
				31 December 2017		31 December 2016
		Notes		£000s		£000s
Operating activities
	Loss before tax			(543)		(131)
	Adjustments for:
	Loss on valuation and disposals of a subsidiary and investment properties	6		710		1,323
	Shares in loss/(profit) of joint-venture	8		1		(50)
	Gain on financial instruments	12		-		(63)
	Decrease/(increase) in trade and other receivables	9		615		(273)
	Decrease in provisions	11		(234)		(367)
	(Increase)/decrease in trade and other payables	10		(477)		3,584
	Net finance cost			11		186
	Net foreign exchange gain			-		(285)
Net cash generated from operations				83		3,924
	Interest income received			-		97
	Interest paid			(10)		(382)
	Tax paid			(927)		(1,256)
Net cash (outflow)/inflow from operating activities				(854)		2,383
Investing activities
	Investment in joint-ventures			-		8,383
	Proceeds from disposals of a subsidiary and investment properties			-		7,450
Net cash inflow from investing activities				-		15,833
Financing activities
	Bank loan facility repaid			-		(14,907)
Net cash used in financing activities				-		(14,907)
	Effects of exchange rate fluctuations			41		(2,154)
(Decrease)/increase in cash and cash equivalents				(813)		1,155
	Cash and cash equivalents at start of the period			3,846		8,806
Cash and cash equivalents at the period end				3,033		9,961

The accompanying notes form an integral part of these condensed Half Year Financial Statements.

Notes to the Condensed Half Year Consolidated Financial Statements

For the period ended 31 December 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 Condensed Half Year Consolidated Financial Statements of the Company for six month ended 31 December 2017 comprise the financial statements of the Company and its subsidiaries (together referred to as the "Group").

2. Significant accounting policies

(a)   Statement of compliance

The Condensed Half Year Consolidated Financial Statements have been prepared in accordance with the Disclosure Transparency Rules of the Financial Conduct Authority and with IAS 34, ‘Interim Financial Reporting’. They do not include all the information required for the full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 June 2017, which were prepared under full International Financial Reporting Standard (“IFRS”) requirements as issued by the International Accounting Standards Board.

(b)   Basis of preparation

The same accounting policies and methods of computation have been applied to the Condensed Half Year Consolidated Financial Statements as in the Annual Report and Consolidated Financial Statements for the year ended 30 June 2017 expect for following captions:

-       Trade and other receivables

-       Trade and other payables

for which VAT and taxes payables and receivables have been netted off both in Balance Sheet and corresponding notes for December 2017 figures and comparatives figures.

The presentation of the condensed Half Year Consolidated Financial Statements is consistent with the Annual Report and Consolidated Financial Statements.

(c)   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 Condensed Half Year Consolidated 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 timely disposal of properties is uncertain and continues to keep under review the most appropriate course of action with regard to these assets over the coming months with the aim of maximising shareholder return. As at 31 December 2017, the completion of all sales is foreseen in the course of 2018.

The Directors estimate that the wind-down costs will be approximately £164,637 (30 June 2017: £189,000). The Board believes that the Group has sufficient funds available to meet its wind-down costs and day-to-day running costs.

3. Gross rental income

Gross rental income for the six months ended 31 December 2017 amounted to £0.7 million (31 December 2016: £1.40 million). The Group leases out all of its investment property under operating leases and are usually structured in accordance with local practices in Italy. All leases benefit from indexation.

Minimum Lease Payments (based on leases in place as at 31 December 2017)

	Rental income	Rental income
	31 December 2017	30 June 2017
	£000s	£000s
0-1 year	1,277	1,277
1-5 years	6,383	6,385
5+ years	1,245	1,892

4. General and administrative expenses

	Six month	Six month
	period ended	period ended
	31 December 2017	31 December 2016
	£000s	£000s
Administration fees	(89)	(99)
General expenses	(93)	(146)
Audit fees	(82)	(89)
Legal and professional fees	(10)	(145)
Director's fees	(35)	(41)
Insurance fees	(30)	(30)
Liquidation costs	24	2
Sponsor's fees	(13)	(13)
Investment management fees*	(197)	(57)
Performance fee	210	212
Total	(315)	(406)

*Investment management fees for the period ended 31 December 2017 include £107k adjustments related to previous years.

5. Share capital redemptions

No share redemption took place during the period.

6. Investment properties

	31 December 2017	30 June 2017
	£000s	£000s
Fair value of investment properties at beginning of the period/year	12,310	37,023
Opening fair value of assets sold during the year	-	(24,724)
Fair value adjustments	(710)	(781)
Foreign exchange translation	182	792
Fair value of investment properties at the end of the period/year	11,782	12,310
Total investment properties	11,782	12,310

All investment properties are carried at fair value.

In accordance with IFRS accounting standards, the valuation attributed to the property in Curno is before any allowance or deduction of capital gains tax due on sale. The extent of these taxes will depend upon whether the asset is sold directly, in which case full capital gains tax on the chargeable gain is due, or within the existing corporate structure, in which case the extent of the net price adjustment will depend upon commercial negotiations between the Company and the buyer. In either case it is expected the impact will be a reduction in net proceeds.

7. Investment properties held for sale

As at 31 December 2017, there is no investment property classified as held for sale (30 June 2017: none).

8. Investment in Joint ventures held for sale

The Group holds a 50% joint venture interest in the equity of the Italian joint venture Property Trust Agnadello S.r.l. which was holding a logistics warehouse in Agnadello, Italy. On 15 November 2016, Property Trust Agnadello S.r.l. completed the sale of its asset for a total sale price of £23.2 million.

The Group’s interest in Property Trust Agnadello S.r.l. is accounted for using the equity method in the consolidated 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	31 December 2017	30 June 2017
	£000s	£000s
Current assets	1,343	1,322
Current liabilities	(45)	(38)
Net assets (100%)	1,298	1,284
Group's share of net assets (in percent)	50%	50%
Group's share of net assets	649	642
Loan balances due to joint-venture partners	-	-
Carrying amount of interest in joint-venture	649	642
Summarised Consolidated Income Statement	Six month	Six month
	period ended	period ended
	31 December 2017	31 December 2016
	£000s	£000s
Net rental and related income	-	633
Valuation loss on investment property	-	(506)
Total administrative and other expenses	(2)	(184)
Other income	-	234
Financial expenses	-	(192)
Loss before tax	(2)	(15)
Income tax gain	-	115
(Loss)/profit for the period	(2)	100
Group's share of (loss)/profit for the period	(1)	50
Summarised Consolidated Statement of Comprehensive Income	Six month	Six month
	period ended	period ended
	31 December 2017	31 December 2016
	£000s	£000s
(Loss)/profit for the period	(2)	100
Total comprehensive (loss)/income for the period	(2)	100
Group's share of comprehensive (loss)/income for the period	(1)	50

9. Trade and other receivables

	31 December 2017	30 June 2017
	£000s	£000s
Other receivables	2	681
Management fee receivable	84	-
VAT receivable	104	59
Rent receivable	11	14
Prepayments	167	34
Total	368	788

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. 

The comparative trade and other receivables have been amended as the tax has been netted with note 10 trade and other payables.

10. Trade and other payables

	31 December 2017		30 June 2017
	£000s		£000s
Investment manager's fee accrued	66		111
Tax payable (income, transfer, capital and other)	198		632
Interest payable on loan facility	-		13
Legal and professional fees accrued	19		29
Audit fee accrued	96		221
Rent prepaid	1		3
Other payables	282		413
Total	662		1,422

The carrying values of trade and other payables are considered to be approximately equal to their fair value. Trade and other payables are non-interest bearing and are normally settled on 30-day terms.

The comparative trade and other payables have been amended as the tax has been netted with note 9 trade and other receivables.

.

11. Provisions

	31 December 2017	30 June 2017
	£000s	£000s
Provision for performance fees	100	310
Provision for wind-down costs	165	189
Total	265	499

12. Financial risk management

The table below summarises the amounts recognised in the Consolidated Income Statement in relation to derivative financial instruments.

	Six month		Six month
	period ended		period ended
	31 December 2017		31 December 2016
	£000s		£000s
Current year fair value movement of ineffective hedges	-		63
Total gain recognised in the Consolidated Income Statement	-		63

The Group is exposed to various types of risk that are associated with financial instruments.  The Group's financial instruments comprise cash, receivables 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 and 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.

Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group.  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.

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.

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.

Foreign currency risk

The European subsidiaries will invest in properties using currencies other than Sterling, 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 Group reviews and manage currency exposure in accordance with its hedging strategy.

13. 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 is also Director 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 is 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 service 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 from June to December 2017 in respect of Northern Trust administration fees was £72,500 (31 December 2016: £72,500) of which nil (31 December 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 £0.2 million (31 December 2016: £0.02 million) were expensed to the Consolidated Income Statement. During the six months period, the provision for performance fees was reversed by£ 0.2 million. The amount had been provided under the terms of the Investment Management Agreement.

All the above transactions were undertaken at arm’s-length.

14. Commitments

As at 31 December 2017, the Company has no commitment.

15. Subsequent events

No material subsequent events to report.

Corporate Information

Directors (All non-executive)
C. J. Hunter (Chairman)
G. J. Farrell
S. C. Monier
S. J. Lawson

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