Interim Results

AXA Property Trust Ld 15 March 2007 To: Company Announcements Date: 15 March 2007 AXA Property Trust Limited Interim Report and Accounts for the six month period ended 31 December 2006 Chairman's Statement Your Company, AXA Property Trust Limited, continues to make good progress in acquiring quality property in accordance with its objectives. As at 31 December 2006 AXA Real Estate Investment Managers UK Limited (the 'Real Estate Adviser') had completed the purchase of properties in 15 separate locations across Europe at a cost of Â£99.5 million. The sum of committed funds (completed, contracted and optioned assets) amounted to some Â£120 million, representing the commitment of a substantial proportion of the total funds available to AXA Property Trust Group ('the Group') for investment (including 45% gearing). There are further properties under offer to the value of Â£28 million and the Group is close to completing the investment of its total funds. Over the half year the Real Estate Adviser has examined, through its European network of offices, over Â£3 billion of potential acquisitions, continuing the highly selective process of constructing a robust portfolio, designed to meet the objectives of the Company in providing the target income yield and offering value and potential for growth. During the six month period the Group has acquired Â£32.4 million of assets and disposed of a 50% share in a single lot industrial property in Italy. The portfolio is well diversified through differing lot sizes, spread through countries and regions within countries, further spread across types of sector and sub sector, across different types of tenant and lease lengths. As at 31 December 2006, the Group had achieved a net running portfolio yield of 7.2%, a gross yield of nearly 8.0%. This can be primarily attributed to the Real Estate Adviser's understanding of local markets. The rental income can be considered to be well secured both in terms of duration and well rated tenant credentials. As the weight of money in the Continental property investment markets has continued to build over the last six months, trading prices have risen and yields have fallen, providing, in the view of AXA Investment Managers UK Limited (the 'Investment Manager'), strong potential for capital appreciation on the acquired portfolio. Results (See note 1) Overall, the Group has generated a net profit of Â£3.3 million in the six month period to 31 December 2006. The valuation uplift excluding foreign exchange translation movements during the half year was 3.7% on the properties held over the whole six month period. Excluding one-off formation costs incurred as part of the set up and investment phase, net profit was Â£3.9 million. Taking into account the valuation gains and one-off costs, Net Asset Value at 31 December 2006 was Â£97.17 million (97.17 pence per ordinary share). The sterling Net Asset Value was affected by currency movements as the equity is currently not hedged. The Group has hedged its interest rate exposure on its borrowing and its foreign currency exposure on its income stream. Dividend The Company has paid dividends relating to the six month period to 31 December 2006 of Â£2.25 million, representing a cumulative annualised dividend yield of 4.5% of the issue price. This is slightly below the distribution target in the Company's prospectus of around 5.0%. The lower dividend yield reflects the impact of one-off costs incurred as the Company moves towards full investment without the benefit as yet of a fully-invested income stream. Once fully invested, I believe the outlook for future dividends is positive as the Group benefits from the attractive income yields on the property investments already completed, as well as potential future indexation and rental growth. Prospects I believe the fundamentals of Continental European property markets are strong and continue to attract flows of global capital. The powerful German economy is showing some growth and interest rates are low. In contrast, the UK commercial property market is widely viewed as having peaked in the final quarter of 2006. I believe these conditions enhance the prospects for the Group's well constructed portfolio. Acquisition of stock in the market is becoming more competitive but the Real Estate Adviser's established presence in local markets gives the Group a clear edge. With the potential for value enhancement of the existing portfolio through active portfolio management, coupled with a sound income base and a good market background, I am enthusiastic about the future of your Company. Charles Hunter Chairman 13 March 2007 Note 1 Past performance is not a guide to future returns. Investment Manager's Report Investment Manager AXA Investment Managers UK Limited (the 'Investment Manager') is the UK subsidiary of AXA Investment Managers, a dedicated asset manager within the AXA Group. AXA Investment Managers is an innovative and fast-growing multi-expertise investment manager with â‚¬847 million of revenues, â‚¬485 billion of assets under management and 2,600 employees in 18 countries as at 31 December 2006. AXA Real Estate Investment Managers UK (the 'Real Estate Adviser') is part of AXA REIM, which is a fully owned subsidiary of AXA Investment Managers. AXA REIM is a specialist in European real estate investment management with approximately â‚¬35 billion of real estate assets under management in 15 European countries as at 31 December 2006, of which AXA REIM UK manages approximately â‚¬10.5 billion. Real Estate Market For the reporting period to 31 December 2006 most real estate markets across Europe have shown significantly positive performance. This was largely driven by price growth, resulting from increased competition for stock as investor demand for real estate escalated. Looking ahead, we expect rental growth in 2007 to further improve, as occupier demand increases on the back of the improving European economy and supply continues to lag behind. The European investment market remains buoyant, with strong inflows of debt and equity into real estate likely to drive further capital growth. Retail The second half of 2006 saw an upturn in consumer demand, with household consumption and retail sales growth improving across European markets. We expect this growth to continue over the short to medium term in selected Western European countries, particularly Germany and France. Tenant demand is increasingly focusing on good quality property and regional centres including the larger shopping centres. Office Demand for offices is expected to remain mainly positive, with supply rising only modestly in most locations, the exceptions being Copenhagen, Central Europe and Spain. Rental growth is expected across most regions. Industrial In line with the improving European economy, the second half of 2006 saw increased demand for industrial real estate, particularly for distribution warehouses. We expect this to continue and this will increasingly translate into greater demand for industrial investments within investors' property portfolios. Investment Activity During the reporting period, the Real Estate Adviser reviewed information on over Â£3 billion of property in the industrial, office, retail and leisure sectors in countries across Continental Europe and the UK. By 31 December 2006 the Group had completed 15 real estate purchases valued at Â£100.1 million, with a further Â£17.2 million (including acquisition costs) worth of assets contracted and Â£3.4 million under option. The portfolio as at 31 December 2006 was acquired at a price of Â£104.9 million plus acquisition costs of Â£4.7 million, giving a gross purchase price of Â£99.5 million (after accounting for the disposal of 50% of Agnadello (Â£10.1 million)). The portfolio was independently valued at Â£100.1 million as at 31 December 2006. The Board approved an increase in gearing from 35% to 45% which gives a new total fund size of Â£160 million. With Â£120 million of investments already completed, contracted or under option, Â£40 million remains to invest, of which Â£28 million is already under offer. Property Portfolio at 31 December 2006 Property Country Sector Market Current Current % of total value gross net assets rental rental yield1 yield2 Â£'000s (less current liabilities) Phoenix Centre, Furth Germany Retail 18,293 7.66% 6.86% 15.3% Via Lega Lombarda, Curno Italy Leisure 12,465 6.98% 6.50% 10.4% SS Bergamina, Agnadello Italy Industrial 10,140 7.67% 7.21% 8.4% Am Birkfeld, Dasing Germany Industrial 7,560 8.78% 8.12% 6.3% Smakterweg, Venray Netherlands Industrial 7,344 9.49% 8.36% 6.1% Bahnhofstrasse, Karben Germany Retail 7,034 7.61% 6.78% 5.9% Rudnitzer Chaussee, Bernau Germany Retail 6,805 9.81% 8.76% 5.7% Keyser Center, Antwerp Belgium Retail 5,781 7.62% 7.15% 4.8% Nurnberger Strasse, Treuchtlingen Germany Retail 5,323 7.80% 6.99% 4.4% Frankfurter Strasse, Wurzburg Germany Retail 4,110 7.75% 6.84% 3.4% Burgermeister- Hess-Strasse, Muhldorf am Inn Germany Retail 3,942 7.90% 6.93% 3.3% Landshuter Strasse, Moosburg Germany Retail 3,504 8.05% 7.23% 2.9% Eppinger Strasse, Kraichtal Germany Retail 3,213 7.77% 6.89% 2.7% Die Weidenbach, Altenstadt-Lin dheim Germany Retail 2,863 7.80% 6.92% 2.4% Braunschweiger Strasse, Berlin Germany Retail 1,758 7.84% 6.73% 1.5% Total property portfolio 100,135 7.95% 7.20% 83.5% Other non current assets and net current assets 19,795 16.5% Total assets less current liabilities 119,930 100% Note 1: Gross rental yield excludes property and acquisition costs. Note 2: Net rental yield includes acquisition costs and an estimated 5% of gross rent as property operating costs. Note 3: Note 2 to the Financial Statements lists those assets acquired after 31 December 2006. Source: AXA Investment Managers UK Limited Geographic Analysis at 31 December 2006 by market value Germany 64% Italy 23% Netherlands 7% Belgium 6% Within Germany, the portfolio's regional profile was 66% of German assets in Bavaria, 20% in Hessia,11% in Brandenburg and 3% in Berlin. Sector Distribution at 31 December 2006 by market value Retail 69% Industrial 21% Leisure 10% Source: AXA Investment Managers UK Limited Covenant Strength Analysis at 31 December 2006 Grade A 61.9% Nationally and internationally recognised companies Grade B 18.5% Regionally recognised companies Grade C 19.0% Locally recognised companies Vacant 0.6% Calculated using market rent The Group's covenant profile is strong, with the majority of tenants rated Grade A or B. The weighted average effective unexpired lease length for completed transactions as at 31 December 2006 was 7.9 years (5.7 years at 30 June 2006). Rental income from Grade A covenants represents 61.9% of income and has a weighted average unexpired lease length of 9.2 years. Vacant space in the portfolio as at 31 December 2006, measured using market rent, represented 0.6% of the total gross rental income. Financing The Company continues to draw down its five year loan facility denominated in Euros and will increase gearing to 45% of the value of the Group's property portfolio to bring the total investible size to approximately Â£160 million (after estimated acquisition costs). The interest rate risk is hedged via interest rate swaps for four years and interest rate caps in the fifth year. In the quarter to 31 March 2007, cross currency swaps were executed to hedge 80% of Euro cash flow over the next five years. 20% of cash flow remains floating to provide flexibility reflecting the potential variability of cash flow. The Board has opted not to hedge the net investment in Euros ('Euro equity') at this stage. The status of interest rate, currency and equity hedging is regularly reviewed by the Investment Manager to adjust for variables such as property valuations and predicted cash flows. Outlook The modest increase in the Company's gearing will allow the Company to make further investment across Europe and thereby benefit from anticipated capital growth. Independent Review Report Independent review report of KPMG Channel Islands Limited to AXA Property Trust Limited on the Interim Financial Statements for the six month period ended 31 December 2006 Introduction We have been engaged by the Company to review the financial information set out on pages 10 to 18 and we have read the other information contained in this interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report is made solely to the Company in accordance with the terms of our engagement contained within our engagement letter dated 26 January 2007. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this review report and for no other purposes. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this review report, or for the conclusions we have reached. Directors' Responsibilities This Interim Report, including the financial information contained therein, is the responsibility of and has been approved by the Directors. The Directors are responsible for preparing this Consolidated Interim Report ensuring that the accounting policies and presentation applied to the interim figures are consistent with those applied in preparing the preceding period financial statements except where any changes, and the reasons for them, are disclosed. The accounting policies that have been adopted in preparing the financial information are consistent with those that the Directors currently intend to use in the next annual financial statements. There is, however, a possibility that the Directors may determine that some changes to these policies are necessary when preparing the full financial statements. Review Work Performed We have reviewed the accompanying Consolidated Statement of Assets and Liabilities of AXA Property Trust Limited at 31 December 2006, and the related Consolidated Statements of Income, Changes in Equity and Cash Flows for the period then ended. We conducted our review in accordance with the guidance contained in Bulletin 1999/4 'Review of interim financial information' issued by the Auditing Practices Board. A review consists principally of making enquiries of management and applying analytical procedures to the financial information and underlying data and based thereon, assessing whether the accounting policies and have been consistently applied unless otherwise disclosed. A review is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review Conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the period ended 31 December 2006. KPMG Channel Islands Limited Guernsey 13 March 2007 Consolidated Income Statement (Unaudited) For the period from 1 July 2006 to 31 December 2006 ----------------------------- ------ ----------- ------------ 1 July 2006 to 5 April 2005 to 31 December 2006 31 December 2005 ----------------------------- ------ ----------- ------------ Note Group Group Â£000s Â£000s ----------------------------- ------ ----------- ------------ ------ ----------- ------------ Gross rental income 3,435 116 ----------------------------- ------ ----------- ------------ Service charge income 244 - ----------------------------- ------ ----------- ------------ Property operating expenses (458) - ----------------------------- ------ ----------- ------------ Net rental and related income 3,221 116 ----------------------------- ------ ----------- ------------ Net interest income from certificates of deposit and bank deposits 56 2,728 ----------------------------- ------ ----------- ------------ Other (28) - ----------------------------- ------ ----------- ------------ Foreign exchange gains 16 - ----------------------------- ------ ----------- ------------ Net investment income 44 2,728 ----------------------------- ------ ----------- ------------ Valuation gains on investment properties 2,766 - ----------------------------- ------ ----------- ------------ Valuation losses on investment properties (404) (330) ----------------------------- ------ ----------- ------------ Net valuation gains on investment property 2,362 (330) ----------------------------- ------ ----------- ------------ Formation expenses (115) (1,061) ----------------------------- ------ ----------- ------------ Investment management fees (414) - ----------------------------- ------ ----------- ------------ Administrative expenses 3 (1,071) (246) ----------------------------- ------ ----------- ------------ Total expenses (1,600) (1,307) ----------------------------- ------ ----------- ------------ Other income 5 10 ----------------------------- ---- ----------- ------------ Net operating profit before net financing income 4,032 1,217 ----------------------------- ----- ----------- ------------ Profit before tax 4,032 1,217 ----------------------------- ------ ----------- ------------ Income tax expense (686) (1) ----------------------------- ------ ----------- ------------ Profit for the period 3,346 1,216 ----------------------------- ------ ----------- ------------ Basic and diluted profit per Ordinary Share (pence) 3.35 1.22 ----------------------------- ------ ----------- ------------ Consolidated Statement of Changes in Equity (Unaudited) For the period from 1 July 2006 to 31 December 2006 Revaluation Revenue Distributable Foreign Total reserve reserve reserve exchange reserve Â£000s Â£000s Â£000s Â£000s Â£000s Balance at 1 July 2006 287 - 98,137 446 98,870 Movements during the period Net unrealised gain on revaluation of properties 2,362 - - - 2,362 Net profit for the period - 984 - - 984 Fair value of effective portion of hedges 109 - - - 109 Other reserve - 39 - - 39 Dividends paid - (1,023) (1,677) - (2,700) Foreign exchange translation losses - - - (2,492) (2,492) Balance at 31 December 2006 2,758 - 96,460 (2,046) 97,172 For the period from 5 April 2005 to 31 December 2005 Share Revenue Distributable Foreign Total premium reserve reserve exchange reserve Â£000s Â£000s Â£000s Â£000s Â£000s Balance at 5 - - - - - April 2005 Movements during the period Share premium on issue 100,000 - - - 100,000 Cancellation of share premium (100,000) - 100,000 - - Placing fees - - (981) - (981) Net unrealised gain on revaluation of properties - (330) - - (330) Net profit for the period - 1,546 - - 1,546 Dividends paid - (1,216) (334) - (1,550) Foreign exchange translation losses - - - 78 78 Balance at 31 December 2005 - - 98,685 78 98,763 Consolidated Statement of Assets and Liabilities (Unaudited) As at 31 December 2006 -------------------- --------- ---------- ----------- ----------- Note 31 December 2006 31 December 2005 30 June 2006 Group Group Group Â£000s Â£000s Â£000s -------------------- --------- ---------- ----------- ----------- Non-current assets -------------------- --------- ---------- ----------- ----------- Investment properties 5 100,135 33,860 77,442 -------------------- --------- ---------- ----------- ----------- Non-current receivable 7 10,850 - - -------------------- --------- ---------- ----------- ----------- Derivative financial instruments 109 - - -------------------- --------- ---------- ----------- ----------- Goodwill 1,268 - - -------------------- --------- ---------- ----------- ----------- Other assets 319 21 347 -------------------- --------- ---------- ----------- ----------- Deferred tax assets 589 - 349 -------------------- --------- ---------- ----------- ----------- Current assets -------------------- --------- ---------- ----------- ----------- Cash and cash equivalents 5,939 5,119 22,077 -------------------- --------- ---------- ----------- ----------- Short term investments - 82,747 - -------------------- --------- ---------- ----------- ----------- Trade and other receivables 8 4,259 1,595 6,095 -------------------- --------- ---------- ----------- ----------- Total assets 123,468 123,342 106,310 -------------------- --------- ---------- ----------- ----------- -------------------- --------- ---------- ----------- ----------- Current liabilities -------------------- --------- ---------- ----------- ----------- Trade and other payables 9 3,538 24,579 7,075 -------------------- --------- ---------- ----------- ----------- Non-current liabilities --------- ---------- ----------- ----------- -------------------- Deferred tax liability 3,893 - 365 -------------------- --------- ---------- ----------- ----------- Long term loan 18,865 - - -------------------- --------- ---------- ----------- ----------- Total liabilities 26,296 24,579 7,440 -------------------- --------- ---------- ----------- ----------- Net assets 97,172 98,763 98,870 -------------------- --------- ---------- ----------- ----------- -------------------- --------- ---------- ----------- ----------- Equity -------------------- --------- ---------- ----------- ----------- Share capital - - - -------------------- --------- ---------- ----------- ----------- Reserves 97,172 98,763 98,870 -------------------- --------- ---------- ----------- ----------- Total equity 97,172 98,763 98,870 -------------------- --------- ---------- ----------- ----------- -------------------- --------- ---------- ----------- ----------- Number of Ordinary Shares 100,000 100,000 100,000 -------------------- --------- ---------- ----------- ----------- Net Asset Value per Ordinary Share (pence) 97.17 98.76 98.87 -------------------- --------- ---------- ----------- ----------- Consolidated Statement of Cash Flows (Unaudited) For the period from 1 July 2006 to 31 December 2006 ----------------------------------- ---------- ----------- 1 July 2006 to 5 April 2005 to 31 December 2006 31 December 2005 Group Group Â£000s Â£000s ----------------------------------- ---------- ----------- Operating activities ----------------------------------- ---------- ----------- Profit before tax 4,032 1,217 ----------------------------------- ---------- ----------- Adjustments for: ----------------------------------- ---------- ----------- Unrealised (gain)/loss on revaluation of investment property (2,362) 327 ----------------------------------- ---------- ----------- (Increase)/decrease in trade and other receivables 1,954 (73) ----------------------------------- ---------- ----------- Increase in trade and other payables 3,908 1,693 ----------------------------------- ---------- ----------- Investment income (220) (1,468) ----------------------------------- ---------- ----------- Bank interest 165 (55) ----------------------------------- ---------- ----------- Other 45 2 ----------------------------------- ---------- ----------- Net cash inflow from operating activities 7,522 1,643 ----------------------------------- ---------- ----------- ----------------------------------- ---------- ----------- Investing activities ----------------------------------- ---------- ----------- Interest paid (45) - ----------------------------------- ---------- ----------- Interest received 192 - ----------------------------------- ---------- ----------- Tax paid (654) - ----------------------------------- ---------- ----------- Acquisition of investment properties (28,293) (11,321) ----------------------------------- ---------- ----------- Proceeds from disposal of subsidiaries 1,585 - ----------------------------------- ---------- ----------- Acquisition of property, plant and equipment - (3) ----------------------------------- ---------- ----------- Loan receivables (10,850) - ----------------------------------- ---------- ----------- Goodwill (1,268) - ----------------------------------- ---------- ----------- Acquisition of certificates of deposits - (152,000) ----------------------------------- ---------- ----------- Proceeds from sale of certificates of deposit - 69,250 ----------------------------------- ---------- ----------- Net cash outflow from investing activities (39,333) (94,074) ----------------------------------- ---------- ----------- ----------------------------------- ---------- ----------- Financing activities ----------------------------------- ---------- ----------- Proceeds from the issue of shares - 100,000 ----------------------------------- ---------- ----------- Calyon loan facility 18,865 - ----------------------------------- ---------- ----------- Issue costs - (981) ----------------------------------- ---------- ----------- Dividends paid (2,700) (1,550) ----------------------------------- ---------- ----------- Net cash inflow from financing activities 16,165 97,469 ----------------------------------- ---------- ----------- ----------------------------------- ---------- ----------- Effect of exchange rate fluctuations on cash held (492) 81 ----------------------------------- ---------- ----------- (Decrease)/increase in cash and cash equivalents (16,138) 5,119 ----------------------------------- ---------- ----------- Cash and cash equivalents at start of period 22,077 - ----------------------------------- ---------- ----------- Cash and cash equivalents at 31 December 2006 5,939 5,119 ----------------------------------- ---------- ----------- Notes to the Unaudited Financial Statements For the period 1 July 2006 to 31 December 2006 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 interim Consolidated Financial Statements of the Company for the six month period ended 31 December 2006 comprise the financial statements of the Company and its subsidiaries (together referred to as the 'Group'). 2. Principle Accounting Policies (a) Statement of compliance The Interim Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') issued by, or adopted by, the International Accounting Standards Board (the 'IASB'), interpretations issued by the International Financial Reporting Standards Committee, applicable legal and regulatory requirements of Guernsey Law and the Listing Rules of the UK Listing Authority. (b) Basis of preparation The same accounting policies and methods of computation have been applied to the Interim Consolidated Financial Statements as in the annual financial statements at 30 June 2006, except for accounting policies developed in relation to new items in the current period. These new policies are detailed below and are intended for use in future financial statements of the Group. (c) Basis of consolidation of Joint Ventures The Group's interests in jointly controlled entities are accounted for by proportionate consolidation. The Group combines its share of the Joint Ventures' individual income and expenses, assets and liabilities and cash flows on a line-by-line basis with similar items in the Group's financial statements. The Group recognises the portion of gains or losses on the sale of assets by the Group to the Joint Venture. The Group does not recognise its share of profits or losses from the Joint Venture that result from the Group's purchase of assets from the Joint Venture until it resells the assets to an independent party. However, a loss on the transaction is recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets, or an impairment loss. (d) Goodwill Goodwill arising on the acquisition of a subsidiary or a jointly controlled entity represents the excess of the cost of acquisition over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary or jointly controlled entity recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. (e) Hedge accounting The Group designates certain hedging instruments, which include derivatives, embedded derivatives and non-derivatives in respect of foreign currency and interest rate risk, as either fair value hedges, cash flow hedges, or hedges of net investments in foreign operations. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges. At the inception of the hedge relationship the entity documents the relationship between the hedging instrument and hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument that is used in a hedging relationship is highly effective in offsetting changes in fair values or cash flows of the hedged item. Movements in the hedging reserve in equity are detailed in the statement of changes in equity. Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss immediately, together with any changes in the fair value of the hedged item that is attributable to the hedged risk. Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. The adjustment to the carrying amount of the hedged item arising from the hedged risk is recognised in profit or loss from that date. Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are deferred in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss as part of other expenses or other income. Amounts deferred in equity are recycled in profit or loss in the periods when the hedged item is recognised in profit or loss. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability. Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Any cumulative gain or loss deferred in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is recognised immediately in profit or loss. 3. Administrative Expenses and Directors' Fees ------------------------------ ------------ ------------ 1 July 2006 to 5 April 2005 to 31 December 2006 31 December 2005 ------------------------------ ------------ ------------ Group Group ------------------------------ ------------ ------------ Â£000s Â£000s ------------------------------ ------------ ------------ Directors' fees 47 48 ------------------------------ ------------ ------------ Administration fees 92 51 ------------------------------ ------------ ------------ Audit fees 174 34 ------------------------------ ------------ ------------ Acquisition costs 168 - ------------------------------ ------------ ------------ Legal and professional fees 228 73 ------------------------------ ------------ ------------ General Expenses 362 40 ------------------------------ ------------ ------------ Total 1,071 246 ------------------------------ ------------ ------------ Each of the Directors of the Company receives a fee of Â£15,000 per annum from the Company. The Chairman receives a fee of Â£20,000 per annum. The aggregate remuneration and benefits in kind of the Directors in respect of the period ending 31 December 2006 amounted to Â£40,000 in respect of the Company and Â£46,773 in respect of the Group. 4. Dividends ---------------- ----------- ------- ------------ ------------ No. of Ordinary Rate 1 July 2006 to 1 April 2005 to shares pence 31 December 31 December 2006 2005 Group Group Â£000s Â£000s ---------------- ----------- ------- ------------ ------------ Dividend paid 25 August 2005 100,000 0.45 - 450 ---------------- ----------- ------- ------------ ------------ Dividend paid 30 November 2005 100,000 1.10 - 1,100 ---------------- ----------- ------- ------------ ------------ Dividend paid 4 September 2006 100,000 1.45 1,450 - ---------------- ----------- ------- ------------ ------------ Dividend paid 15 December 2006 100,000 1.25 1,250 - ---------------- ----------- ------- ------------ ------------ Total 2,700 1,550 ---------------- ----------- ------- ------------ ------------ A further dividend of Â£1,000,000 (1.00 pence per share) was approved by the Board of Directors on 8 February 2007. The ex-dividend date was 14 February 2007 and the payment date was 28 February 2007. 5. Investment Properties ------------------------- ----------- ----------- -------- 31 December 2006 31 December 2005 30 June 2006 Group Group Group Â£000s Â£000s Â£000s ------------------------- ----------- ----------- -------- Cost of investment properties at beginning of period 77,152 - - ------------------------- ----------- ----------- -------- Additions during the period at cost 32,447 34,190 77,152 ------------------------- ----------- ----------- -------- Disposal proceeds during the period (10,140) - - ------------------------- ----------- ----------- -------- Cost of investment properties at end of period 99,459 34,190 77,152 ------------------------- ----------- ----------- -------- Unrealised profit 2,645 (330) 287 ------------------------- ----------- ----------- -------- Foreign exchange translation (1,969) - 3 ------------------------- ----------- ----------- -------- Total market value of investment properties at end of period 100,135 33,860 77,442 ------------------------- ----------- ----------- -------- 6. Joint Ventures On 16 October 2006 the Group disposed of 50% of the equity in the Italian subsidiary Property Trust Agnadello s.r.l. which holds a logistics warehouse in Agnadello, Italy. The equity was acquired by European Added Value Fund Sarl, a subsidiary of European Added Value Fund Limited ('EAVF'). The Manager of EAVF is Partnership Incorporations Limited, which has appointed AXA Real Estate Investment Managers UK Limited to act as Real Estate Adviser to the EAVF. The transaction was at arms length, at no gain or loss and the sale price represented market value. The underlying property value was confirmed by Knight Frank LLP, independent valuers to the Company. The Group continues to hold a 50% share of the Joint Venture, with equivalent voting power in the entity at 31 December 2006. The Group is entitled to a proportionate share of the rental income received and bears a proportionate share of the outgoings. 7. Non-Current Receivables ------------------------- ----------- ----------- ---------- 31 December 31 December 30 June 2006 2005 2006 Group Group Group Â£000s Â£000s Â£000s ------------------------- ----------- ----------- ---------- Loans receivable from Joint Venture party ----------- ----------- ---------- ------------------------- Back to back loan 8,700 - - ------------------------- ----------- ----------- ---------- VAT loan 2,150 - - ------------------------- ----------- ----------- ---------- Total 10,850 - - ------------------------- ----------- ----------- ---------- 8. Trade and Other Receivables -------------------------- ----------- ----------- -------- 31 December 2006 31 December 2005 30 June 2006 -------------------------- ----------- ----------- -------- Group Group Group -------------------------- ----------- ----------- -------- Â£000s Â£000s Â£000s -------------------------- ----------- ----------- -------- VAT receivable 2,610 41 4,291 -------------------------- ----------- ----------- -------- Rent receivable 457 21 617 -------------------------- ----------- ----------- -------- Prepayments 279 11 203 -------------------------- ----------- ----------- -------- Other receivables 856 - 938 -------------------------- ----------- ----------- -------- Accrued income 57 1,522 46 -------------------------- ----------- ----------- -------- Total 4,259 1,595 6,095 -------------------------- ----------- ----------- -------- 9. Trade and Other Payables -------------------------- ----------- ----------- -------- 31 December 2006 31 December 2005 30 June 2006 Group Group Group Â£000s Â£000s Â£000s -------------------------- ----------- ----------- -------- Property acquisition costs 1,037 760 2,413 -------------------------- ----------- ----------- -------- Investment Manager fee 588 10 225 -------------------------- ----------- ----------- -------- Other 563 57 195 -------------------------- ----------- ----------- -------- VAT payable 502 - 154 -------------------------- ----------- ----------- -------- Audit fee 252 34 168 -------------------------- ----------- ----------- -------- Legal and professional fees 209 - 207 -------------------------- ----------- ----------- -------- Tax 120 917 25 -------------------------- ----------- ----------- -------- Interest payable on Calyon loan 120 - - -------------------------- ----------- ----------- -------- Administration and company secretarial fees 102 34 9 -------------------------- ----------- ----------- -------- Amounts due on completion of property purchase contracts 41 22,128 3,116 -------------------------- ----------- ----------- -------- Directors' fees 4 20 8 -------------------------- ----------- ----------- -------- Initial expenses - 467 370 -------------------------- ----------- ----------- -------- Rent prepaid - 152 185 -------------------------- ----------- ----------- -------- Total 3,538 24,579 7,075 -------------------------- ----------- ----------- -------- 10. Related Party Transactions Mr Farrell, a director of the Company, is also a partner of Ozannes, the Guernsey legal advisers to the Company. The total charge to the Income Statement during the period in respect of Ozannes legal fees was Â£2,230 which was settled in full during the period. Mr Marren, a director of the Company, is also a director of Northern Trust International Fund Administration Services (Guernsey) Limited ('Northern Trust'), the Administrator, Secretary and Registrar for the Company. The total administration fees charged to the Income Statement in respect of Northern Trust administration fees was Â£82,179 for the period, of which Â£51,504 remained payable at the period end. 11. Post Balance Sheet Events (a) Between 14 February and 5 March 2007 the Company entered into three cross currency swaps with National Australia Bank Limited to hedge quarterly Euro to Sterling cash flows of Â£12.2 million (â‚¬18.0 million) in total over the next five years. (b) Following the disposal of 50% of the Group's shareholding in Property Trust Agnadello s.r.l. on 16 October 2006, the refinancing of the company was completed on 3 January 2007. Property Trust Agnadello s.r.l. drew down Â£15.8 million (â‚¬23.5 million) in long term loans from Calyon which was used in conjunction with surplus cash to repay Â£16.3 million (â‚¬24.3 million) of internal loans. The Â£15.8 million loan comprised a five year facility of â‚¬18.0 million plus a three year VAT loan of â‚¬5.5 million. Of the remaining Â£5.3 million (â‚¬7.9 million) internal loan, half was assigned to the Joint Venture partner, European Added Value Fund Limited Partnership. (c) The Group acquired the following real estate assets after the balance sheet date, financed through internal loans of cash held by the Company: Location Sector Acquiring entity Acquisition Consideration date Â£000s Kraichtal, Germany Vacant site Property Trust Kraichtal 31 January 79 for Sarl 2007 construction of retail outlet Dresden, Germany Retail - Car Property Trust Investment 4 28 February 1,927 showroom Sarl (renamed Property Trust 2007 Dresden Sarl on 27 February 2007) Kothen, Retail - DIY Property Trust Investment 5 28 February 2,637 Germany Sarl (renamed Property Trust 2007 Kothen Sarl on 27 February 2007) 12. Contingent Liabilities (a) Acquisitions of a further two real estate assets were contracted prior to the year end. The transactions are expected to be completed on payment of the purchase prices as follows: Â£7,304,000 (â‚¬10,800,000) for a retail property in Montabaur-Heiligenroth, Germany (completion estimated 30 March 2007); and Â£3,840,000 (â‚¬5,678,000) for a retail property in Berlin (completion estimated 31 May 2007). On successful completion of these contracts, the Group will be liable to pay fees to property agents amounting to approximately Â£232,000 (â‚¬344,000). (b) The retail outlet at Kraichtal in Germany referred to in Note 11 is to be constructed by the tenant. On completion (estimated 31 May 2007), the Group will be liable to acquire the new building for an estimated consideration of Â£338,000 (â‚¬500,000). Corporate Information: Directors (All non-executive) C. J. Hunter (Chairman) G. J. Farrell R. G. Ray J. M. Marren S. C. Monier Registered Office 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 7 Newgate Street London EC1A 7NX United Kingdom Sponsor and Broker UBS Limited 1 Finsbury Avenue London EC2M 2PP United Kingdom Administrator, Secretary and Registrar Northern Trust International Fund Administration Services (Guernsey) Limited P.O. Box 255 Trafalgar Court Les Banques St Peter Port Guernsey GY1 3QL Channel Islands Auditor KPMG Channel Islands Limited 20 New Street Guernsey GY1 4AN All Enquiries: The Company Secretary Northern Trust International Fund Administration Services (Guernsey) Limited Trafalgar Court Les Banques St Peter Port Guernsey GY1 3QL Tel: 01481 745529 Fax: 01481 745085 This information is provided by RNS The company news service from the London Stock Exchange

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