Consolidated Unaudited Financial Statements

AXA Property Trust Limited

To                    Company Announcements
Date                 31 October 2018
Company          AXA Property Trust Limited
Subject             Unaudited Consolidated Financial Statements

Following the announcement made by the Company on 19^th October 2018, the Directors are pleased to present the Unaudited Financial Statements for the year ending 30 June 2018, together with abbreviated notes to the financial statements.   Audited financial statements will be presented following the completion of the Company’s annual audit for the same period. This will include additional information and may require financial adjustments in order to show a true and fair view.

Key Financial Information (Unaudited)

As at 30 June 2018

• Sterling currency Net Asset Value (“NAV”) was £10.7 million (30 June 2017: £15.7 million)

• NAV was 45.68 pence per share (30 June 2017: 66.94 pence)
• Share price¹ was 38.40 pence per share (30 June 2017: 61.25 pence)

For the year ended 30 June 2018

• Loss was 21.16 pence per share (year ended 30 June 2017: loss was 1.92 pence per share), principally arising from the change in value of the Company’s remaining property asset
• No dividends were paid relating to the year
• No redemption of shares were made during the year (year ended 30 June 2017: £24.0 million)

Performance Summary (Unaudited)

	Year ended 30 June 2018	Year ended 30 June 2017	% change
NAV (£000s)	10,690	15,665	(31.8)%
NAV per share	45.68p	66.94p	(31.8)%
Loss per share	(21.16)p	(1.92)p	533.3%
Share redemptions paid	nil	£24.0m	(100)%
Share price1	38.40p	61.25p	(37.3)%
Share price discount to NAV	15.9%	8.5%	87.5%
Total assets less current liabilities (£000s)	10,899	16,164	(32.6)%

The 2018 NAV is presented without any deduction of redemption payments.

Total annual return	Year ended 30 June 2018	Year ended 30 June 2017
NAV Total Return2	(37.3)%	2.5%
Share price Total Return
- AXA Property Trust	(15.6)%	23.0%
- FTSE All Share Index	9.0%	18.1%
- FTSE Real Estate Investment Trust Index	9.8%	9.2%

Past performance is not a guide to future performance.

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

² 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

Property Portfolio at 30 June 2018

Investment	Country	Sector	Net Yield on Valuation1
Curno, Bergamo	Italy	Leisure	16.31%

 ¹ Source - external independent valuers to the Company, Knight Frank LLP. 

Consolidated Income Statement

For the year ended 30 June 2018 (Unaudited)

				For the year ended		For the year ended
				30 June 2018		30 June 2017
			Notes	£000s		£000s
	Gross rental income		2	1,312		1,704
	Service charge income			-		127
	Property operating expenses			(143)		(251)
Net rental and related income				1,169		1,580
	Valuation loss on investment properties		7	(4,527)		(781)
	Impairment of financial assets			-		(589)
	General and administrative expenses		3	(741)		(929)
Operating loss				(4,099)		(719)
	Net gain on financial instruments			-		55
	Share in loss of a joint venture		8	(127)		(40)
	Net finance cost		4	(14)		(151)
Loss before tax				(4,240)		(855)
Income tax expense			12	(711)		(67)
Loss for the year				(4,951)		(922)
Basic and diluted loss per ordinary share (pence)			5	(21.16)		(1.92)

The accompanying notes on the following pages form an integral part of these unaudited Financial Statements

Consolidated Statement of Changes in Equity

For the year ended 30 June 2018 (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 year	(4,951)	-	-	(4,951)
Other comprehensive loss	-	-	(24)	(24)
Balance at 30 June 2018	(46,362)	44,853	12,199	10,690

For the year ended 30 June 2017 (Audited)

	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
Share redemptions	-	(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

The accompanying notes on the following pages form an integral part of these unaudited Financial Statements

Consolidated Statement of Financial Position

For the year ended 30 June 2018 (Unaudited)

			30 June 2018		30 June 2017
		Notes	£000s		£000s
Non-current assets
	Investment properties	7	7,871		12,310
Current assets
	Cash and cash equivalents		3,406		3,846
	Trade and other receivables	9	370		788
	Investment in joint venture	8	165		642
Total assets			11,812		17,586
Current liabilities
	Trade and other payables	10	913		1,422
Non-current liabilities
	Provisions	11	209		499
Total liabilities			1,122		1,921
Net assets			10,690		15,665
	Reserves		10,690		15,665
Total equity			10,690		15,665
Number of ordinary shares		13	23,402,881		23,402,881
Net asset value per ordinary share (pence)		14	45.68		66.94

The accompanying notes on the following pages form an integral part of these unaudited Financial Statements

Consolidated Statement of Cash Flows

For the year ended 30 June 2018 (Unaudited)

			Year ended		Year ended
			30 June 2018		30 June 2017
		Notes	£000s		£000s
Operating activities
	Loss before tax		(4,240)		(855)
	Adjustments for:
	Loss on valuation and disposals of a subsidiary and investment properties		4,527		1,370
	Shares in loss of joint venture	8	127		40
	Gain on financial instruments		-		(55)
	Decrease in trade and other receivables		443		305
	Decrease in provisions		(290)		(754)
	Decrease in trade and other payables		(301)		(417)
	Net finance cost	4	14		151
Net cash generated from/(used in) operations			280		(215)
	Interest income received		-		97
	Interest paid		(14)		(334)
	Tax (paid)/received		(944)		44
Net cash outflow from operating activities			(678)		(408)
Investing activities
	Investment in joint ventures		400		-
	Repayments of joint ventures loan		-		8,383
	Proceeds from disposals of a subsidiary and investment properties	7	-		25,362
Net cash inflow from investing activities			400		33,745
Financing activities
	Redemption of shares	13	-		(24,003)
	Bank loan facility repaid		-		(15,018)
	Decrease in derivative financial liabilities		-		(11)
Net cash used in financing activities			-		(39,032)
	Effects of exchange rate fluctuations		(162)		735
Decrease in cash and cash equivalents			(440)		(4,960)
	Cash and cash equivalents at start of the year		3,846		8,806
Cash and cash equivalents at the year end			3,406		3,846

The accompanying notes on the following pages form an integral part of these unaudited Financial Statements

Notes to the Consolidated Financial Statements

For the year ended 30 June 2018 (Unaudited)

1. Operations

AXA Property Trust Limited (the "Company") is a limited liability, closed-ended investment company incorporated in Guernsey. Under its original investment objectives the Company invested in commercial properties in Europe which were  held through its subsidiaries. Following shareholder approval in 2013 the Company’s investment objectives changed to a managed wind-down, with the realisation of assets in a prudent manner and the repatriation of sales proceeds to shareholders. The Unaudited Consolidated Financial Statements (the “Financial Statements”) of the Company for the year ended 30 June 2018 comprise the Financial Statements of the Company and its subsidiaries (together referred to as the "Group").

2. Gross rental income

Gross rental income for the year ended 30 June 2018 amounted to £1.31 million (30 June 2017: £1.70 million). The Group leases out its investment property under an operating lease which is structured in accordance with local practices in Italy. The lease benefits from indexation.

Minimum Lease Payments (based on leases in place as at 30 June 2018)

			30 June 2018		30 June 2017
			£000s		£000s
0-1 year			1,284		1,277
1-5 years			6,420		6,385
5 + years			616		1,892

3. General and administrative expenses

	30 June 2018		30 June 2017
	£000s		£000s
Administration fees	(173)		(188)
General expenses	(257)		(621)
Audit fees	(181)		(142)
Legal and professional fees	(33)		(160)
Directors' fees	(74)		(74)
Insurance fees	(62)		(64)
Liquidation costs	36		17
Sponsor's fees	(25)		(25)
Investment management fees	(282)		(255)
Performance fee	310		583
Total	(741)		(929)

Each of the Directors receives a fee of £13,500 (30 June 2017: £13,500) and the Chairman receives a fee of £18,000 (30 June 2017: £18,000). The aggregate remuneration and benefits in kind of the Directors in respect of the Company's year ended 30 June 2018 amounted to £58,500 (30 June 2017: £63,012) in respect of the Company and £73,827 (30 June 2017: £74,282) in respect of the Group.

Investment management fees for the year ending 30 June 2018 include adjustments from previous years. 

4. Net finance cost

			30 June 2018		30 June 2017
			£000s		£000s
Interest loss from bank deposits			(14)		(49)
Interest income from JV partners			-		97
Finance costs			-		(199)
Total			(14)		(151)

5. Basic and diluted loss per Share

The basic and diluted loss per share for the Group is based on the net loss for the year of £4.95 million (30 June 2017: net loss of £0.92 million) and the weighted average number of Ordinary Shares in issue during the year of 24,402,881 (30 June 2017: 48,025,516).

6. 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, 2017 and 2018.

7. Investment properties

			30 June 2018		30 June 2017
			£000s		£000s
Fair value of investment properties at beginning of year			12,310		37,023
Opening fair value of assets sold during the year			-		(24,724)
Fair value adjustments			(4,527)		(781)
Foreign exchange translation			88		792
Fair value of investment properties at the end of the year			7,871		12,310

The remaining property held by the Company has been valued on the basis of 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.

8. 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. In 2017, the property was sold. 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 2018		30 June 2017
	£000s		£000s
Current assets	431		1,322
Current liabilities	(102)		(38)
Net assets (100%)	329		1,284
Group's share of net assets	50%		50%
Group's share of net assets	165		642
Loan balances due to joint venture partners	-		-
Carrying amount of interest in joint venture	165		642

Summarised Consolidated Income Statement

			30 June 2018		30 June 2017
			£000s		£000s
Net rental and related (expense)/income			(2)		568
Loss on disposals of investment properties			-		(387)
Total administrative and other expenses			(251)		(180)
Financial expenses			-		(202)
Loss before tax			(253)		(201)
Income tax gain			-		121
Loss for the year			(253)		(80)
Group's share of loss for the year			(127)		(40)

Summarised Consolidated Statement of Comprehensive Income

			30 June 2018		30 June 2017
			£000s		£000s
Loss for the year			(253)		(80)
Total comprehensive loss for the year			(253)		(80)
Group's share of loss for the year			(127)		(40)

9. Trade and other receivables

			30 June 2018		30 June 2017
			£000s		£000s
Other receivables			250		681
VAT receivable			84		59
Rent receivable			11		14
Prepayments			25		34
Total			370		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.

10. Trade and other payables

			30 June 2018		30 June 2017
			£000s		£000s
Investment manager's fee			-		111
Tax payable (income, transfer, capital and other)			424		632
Legal and professional fees			13		29
Audit fee			124		221
Other			352		429
Total			913		1,422

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.

11. Provisions

			30 June 2018		30 June 2017
			£000s		£000s
Non-current
Provision for performance fees			-		310
Provision for wind-down costs			153		189
Other provisions			56		-
Total			209		499

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 3).

12. Taxation

			30 June 2018		30 June 2017
			£000s		£000s
Effect of:
Current tax
Luxembourg			(550)		(1)
Italy			(161)		(188)
Germany			-		(152)
Total current tax			(711)		(341)
Deferred tax
Investment property			-		274
Total deferred tax			-		274
Tax charge during the year			(711)		(67)

 The Parent Company is exempt from Guernsey taxation.

13. Share capital

	30 June 2018		30 June 2017
	Number of shares	Share Premium £000s	Number of shares	Share Premium £000s
Shares of no par values issued and fully paid	23,402,881	100,000	23,402,881	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. 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 8 December 2017 to make market purchases of up to 14.99% of its Ordinary Shares until the conclusion of the next AGM or 31 December 2018, 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	3,688,894
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
	48,084,878	76,597,199

14. Net asset value per ordinary share

The Net Asset Value per Ordinary Share at 30 June 2018 is based on the net assets attributable to the ordinary shareholders of £10,69 million (30 June 2017: £15.67 million ) and on 23,402,881 (30 June 2017: 23,402,881) ordinary shares in issue at the Consolidated Statement of Financial Position date.

15. 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 a 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 was 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 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 2017: £145,000) of which £nil (30 June 2017: £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 £0.24 million (30 June 2017: £0.25 million) were expensed to the Consolidated Income Statement. No transaction fees were expensed in 2018 (30 June 2017: £0.09 million). During the year, a provision for the performance fee was reversed/(increased) by £0.31 million (30 June 2017: £0.58 million). The amount had been provided under the terms of the Investment Management Agreement.

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

16. Commitments

As at 30 June 2018 the Company has no commitments.

17. Subsequent events

These Financial Statements were approved for issuance by the Board on 31 October 2018.

In August 2018 the Board issued a Shareholder Circular (“the Circular”) with proposals and recommendations to:

        1.   put the Company into voluntarily liquidation in accordance with the Companies Law,

        2.   appoint Linda Johnson and Ashley Paxton of KPMG Channel Islands Limited as Liquidators, and

        3.   cancel the admission of its shares to the Official List of the UK Listing Authority and to trading on the Main Market of the London Stock Exchange (the “Proposals”).

The decision to recommend the voluntary liquidation of the Company followed  the managed wind-down of the Company which was approved by Shareholders in 2013 through a change in its investment policy and objective with the intention of realising all remaining assets and returning the proceeds to the shareholders in an orderly manner. As a result, there is now only one asset remaining in the portfolio, the property in Curno, Italy. As the managed wind-down has reached an advanced stage, plans for the final winding-up and liquidation were confirmed in an announcement on 22 June 2018 and were subsequently set out in detail in the Circular.

The Circular included a review of the Company’s operating cost structure having regard to the uncertain prospects of achieving a sale of the Curno property and the reducing rental income. As a result of this analysis the Board considered there were significant cost savings that would be achieved.

It was also explained within the Circular that no financial statements of the Company or updated NAV would be prepared for the financial year ended 30 June 2018 or subsequent years once the liquidation was approved. This was re-confirmed on 30 August 2018 when the Company released unaudited financial information for the period ending 30 June 2018. In expectation of the Proposals being approved, the existing auditor to the Company, KPMG Channel Islands Limited, gave notice of their resignation, contingent upon the Proposals being passed by letter dated 5 July 2018.

An EGM was scheduled for 7 September 2018, at which shareholders were due to vote on the Proposals. The EGM took place as scheduled, but it was adjourned until 21 September 2018 following the attendance of representatives of shareholders accounting for approximately 30% of the voting rights who expressed their intention to vote against the Proposals, which required 75% approval of those voting in order to be passed.

The Adjourned EGM took place on 21 September 2018. However, the Proposals were not approved. A single shareholder came to hold a 29.8% interest in the Company prior to the Adjourned EGM. At the Adjourned EGM, the Proposals were supported by shareholders representing 38.3% of the issued shares of the Company, amounting to 56.2% of those voting at the Adjourned EGM. However, the shareholder holding shares representing 29.8% of the Company voted against the Proposals and effectively blocked them as a 75% majority was required.

The Directors have consulted with the shareholder who voted against the Proposals.  As indicated in the Company’s announcement issued on 5 October 2018, the shareholder has indicated a wish to present an alternative plan for the continuation of the Company with a different investment policy and objective. The Directors note that any proposal to amend the investment policy and objective of the Company would require shareholder approval.

The Directors believe that such a potential proposal, if put forward, would be a significant change from the Company's current investment policy and objective, which was approved by more than 75% of those Shareholders voting at the EGM in October 2013 and which remains in place. The Board therefore remains committed to continue with the Company's current realisation strategy, in particular with respect to the lease negotiations at Curno and the property’s subsequent disposal.  The Company will also continue to make distributions at the earliest opportunity.

At the same time and in view of the fact that plans for the significant cost savings identified in the Circular have been affected whilst the Company remains listed, the Board and its advisors will continue to review the Company’s ongoing operating cost structure to identify and implement expense reductions where possible.

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