To:
Company Announcements
Date:
22 October 2015
Company: AXA
Property Trust Limited
Subject:
Annual Financial Report
AXA Property Trust Limited
Annual Report and Consolidated Financial Statements for the year
ended 30 June 2015
Key Financial Information
For the year ended 30 June
2015
- Sterling currency Net Asset Value (“NAV”) increased to £57.27
million on a pro-forma basis before deduction of share redemptions
paid (€49.37 million after deduction of redemption paid).
- Profit was 8.63 pence per
share
- No dividends were paid relating to the year
- Redemption of shares paid during the year were £3.8 million
(2014: £4.1 million)
As at 30 June 2015
- NAV was 57.61 pence per share
(30 June 2014: 54.5 pence)
- Share price1 was 44.75 pence per
share (30 June 2014: 41.50 pence)
- Gearing2 was 35.7% (gross) and 31.1% (net)
(30 June 2014: 39.2% and 34.6%)
Performance Summary
|
Year ended
30 June 2015 |
Year ended
30 June 2014 |
% change |
NAV (£000s) |
49,367 |
50,428 |
(2.10%) |
NAV per share |
57.61p |
54.50p |
5.71% |
Gains/(Losses) per share |
8.63p |
(2.44p) |
n/a |
Share redemptions paid |
£3.8m |
£4.1m |
(7.32%) |
Share price2 |
44.75p |
41.50p |
7.83% |
Share price discount to NAV |
22.3% |
23.9% |
n/a |
Gearing (gross) 3 |
35.7% |
39.2% |
n/a |
Total assets less current
liabilities (£000s)4 |
66,910 |
82,185 |
(18.84%) |
The 2015 NAV is presented after deduction of £7.9m of redemption
payments. If these are added back, the movement compared to 2014
would be 4.15%.
Total return |
Year ended
30 June 2015 |
Year ended
30 June 2014 |
NAV Total
Return1 |
5.43% |
(7.92%) |
Share price Total
Return |
|
|
- AXA Property
Trust |
10.5% |
14.3% |
- FTSE All Share
Index |
2.6% |
13.1% |
- FTSE Real Estate
Investment Trust Index |
19.5% |
23.9% |
Past performance is not a guide to future performance.
1 On a pro-forma basis which includes adjustments to add
back any prior NAV reductions from share redemptions.
2 Mid-market share price (source: Stifel Nicolaus Europe
Limited).
3 Gearing is calculated as overall debt, either gross or
net of cash (net of £5.2 million of post-quarter
distribution) held by the Group over property portfolio at fair
value.
4 Includes bank debt classified as a current
liability.
Source: AXA Investment Managers UK Limited and Stifel Nicolaus
Europe Limited
Chairman’s Statement
Over the year AXA Property Trust Limited (the “Company”) has
sold four assets and returned to Shareholders proceeds of £3.8
million (and since the year end returned a further £5.2 million).
The Board and Investment Manager are pleased with the progress
being made with the liquidation of the portfolio. Meeting a better
market, some good prices have been achieved and the patient
approach, enhancing assets and timing marketing, appears to be
bearing fruit.
Results
The Company and its subsidiaries (together the “Group”) made a
total net profit after tax of £7.7 million for the year to
30 June 2015. Excluding the £4.4
million revaluation profit on investment properties, the Group made
a profit of £3.3 million. The Net Asset Value (“NAV”) of the
Company at 30 June 2015 was £49.37
million (30 June 2014: £50.43
million), a decrease of £1.06 million (2.10%) since 30 June 2014. This decrease was mainly explained
by the return of capital to shareholders (- £3.8 million),
the revaluation of investment properties (+£4.4 million) and Fx
impact (-£5.3 million).
The Company's net property yield on current market valuation
(after acquisition and operating costs) as at 30 June 2015 was 9.00% (30
June 2014: 7.53%). A detailed yield analysis is included in
the Investment Manager’s Report.
The mid-market price of the Company’s shares on the London Stock
Exchange on 30 June 2015 was
44.75 pence (30 June 2014: 41.50
pence), representing a discount of 22.3% to the Company’s
NAV at 30 June 2015 (30 June 2014: 23.9%).
Return of Capital to Shareholders
No dividends were declared during the period and the dividend
policy remains unchanged.
The Company returned £2.0m to Shareholders by means of a capital
redemption on 30 October 2014 and a
further £1.8m on 14 May 2015. An
additional post closing capital redemption of £5.2 million paid to
investors on 30 July 2015.
Bank Finance and Deleveraging
The Group continues to comply with the 60% loan-to-value (“LTV”)
covenant of the main loan facility with Crédit Agricole and Credit
Foncier. Further repayments are made as assets are sold under the
disposal programme. At 30 June 2015
the total bank debt stood at £24.44 million (€34.50 million)
(before capitalised debt issue costs) with an LTV of 41.0%. The
loan is due to mature on 1 July
2016.
Prospects
The Board believes that the prospect of achieving a complete
disposal of the remaining portfolio in the next year is good.
As the Investment Managers reports, conditions in the European
property markets have been improving but the wider economic and
markets background continues to be uncertain. The Investment
Managers believes good prices can be obtained for the remaining six
properties, with no need for “forced sale”.
The Fund Manager
AXA Investment Managers have informed the Board that after eight
years as Senior Fund Manager, Martin McGuire has resigned his
position at AXA Investment Managers and will leave the organisation
on 27th November 2015. The Board
wishes to thank Martin for his considerable contribution to the
management of the Company over this time and wish him well in his
future career. The Fund Manager responsibility will pass to Ian
Chappell who is a Senior Fund Manager at AXA Investment Managers.
Ian is a Member of the Royal Institution of Chartered Surveyors and
joined AXA Investment Managers in 2007. He has over 20 years’
experience of the European real estate markets and has a detailed
knowledge and understanding of both the Company and portfolio.
There is not expected to be any material change in the conduct of
the orderly wind down of the portfolio
Charles Hunter
Chairman
22 October 2015
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 with €694 billion of assets under management and
over 2,500 employees, at 30 June
2015.
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 Real Estate”). AXA Real Estate is a
specialist in European real estate investment management with over
€60 billion of assets under management and over 500 staff,
operating in 23 countries as at 30 June
2015.
Source: AXA Investment Managers UK Limited
Fund Manager
Martin McGuire has headed the AXA Property Trust Fund Management
team since December 2007. He is a
Chartered Surveyor and Senior European Fund Manager at AXA Real
Estate. He has over 30 years of experience in commercial property
with a significant proportion of this in Continental European
property. Mr McGuire lived for five years in Brussels where he
worked for Jones Lang Wootton. In 1985 he joined Standard Life and
led their expansion into the Continental European markets where he
managed the investment and development programme over many years
taking the exposure to in excess of €1.5 billion and was Fund
Manager of the Standard Life Investments’ €800 million European
Property Growth Fund. Latterly he was Investment Director at
Standard Life Investments and managed the £2 billion Unit Linked
Life Fund. He holds a degree in Land Economy from the University of
Aberdeen and also an Investment Management Certificate. He is
resident in the United Kingdom.
Market Outlook
German Retail
The performance of monthly retail sales support the view that
consumption remains a strong pillar of the German economy as they
continued to increase in May 2015 by
0.5%. One of the main reasons behind the recent rise in retail
sales had been the positive effect of falling oil prices, leading
to enhanced spending on other items. As oil prices are likely
to firm over the coming months, this effect could weaken.
In the first half of 2015, investments in German retail soared
up to €9.8bn. Volumes have more than doubled in comparison to H1
2014. Portfolio sales contributed strongly to the overall
investment volume and were responsible for 65% of all sales. Also
regional centres and second-tier cities have gained in popularity
which reflects the higher risk affinity of investors. High street
investment volumes were boosted by the takeover of 43 Galeria
Kaufhof department stores by Canada based Hudson’s Bay Company.
Prime yields have remained flat in all markets with the
exception of Munich and Hamburg, where yields fell by 10bps and
9bps respectively. Yields in all German markets are at their lowest
level on record. Prime rents have been flat over the last quarter
in all markets.
Italian Industrial
The take-up of industrial spaces in Italy in Q2 2015 reached
204,650 sq m, an increase of almost 250% on the previous quarter
and a 1% decrease on same period of 2014. Quarterly take-up
involved existing buildings and no pre-let transactions have been
recorded. With 27% of quarterly take-up, 3PL operators were once
again the most active occupiers, followed by retailers which are
increasingly gaining influence as a driver of demand. Milan and its
clusters continued to be the regions with the strongest letting
activity. Overall, prime rents increased in the first quarter to
€50/sq m/year in Milan, up from €48/sq m/year of the previous
quarter, according to CBRE. In the second quarter of 2015, no
significant investment transactions have been recorded in the
Logistics sector. Half-yearly volume remained slightly below €
90m.
Netherlands Logistics
In the Netherlands, the industrial market is continuing to
benefit most from the country’s economic recovery, due to its
central location along the European logistics corridor. The Central
and East Brabant and Limburg regions, which are focused on European
distribution and high-tech sectors, continue to benefit from
cheaper rents and good accessibility to the rest of Europe.
Occupiers are actively looking to relocate to more modern
facilities with good accessibility but overall demand growth looks
set to remain weak over the next few quarters, given the current
uncertainty in the Eurozone. Following strong growth along the
European corridor (up 4.2% in Rotterdam) in the first quarter,
prime rents have remained stable in the second quarter of 2015 at
€75/sq m/year. The investment market has, however, been revived in
the second quarter, with €408m invested into industrial property,
which represents a 8% year-on-year increase. While anticipated
improvement in demand had pushed prime yields down in Q1 2015,
prime yields remained stable in Q2 2015. In Amsterdam and
Rotterdam, they now stand at 6%.
Asset Management Update
The sales of the following assets were completed during the
year:
- Koethen
- Altenstadt-Lindheim
- Kraichtal
- Wuerzburg
Except for Rothenburg, all remaining assets held by the Group
were actively marketed for sale during the year. The sale of Fuerth
was notarised on the 29 September
2015.
Property Portfolio at 30 June
2015
Investment name |
Country |
Sector |
Net Yield on
valuation1,2 |
% of total Property
Portfolio |
Phoenix
Center,Fürth |
Germany |
Retail |
6.87% |
34.80% |
Rothenburg ob der
Tauber |
Germany |
Retail |
10.19% |
19.98% |
Curno, Bergamo |
Italy |
Leisure |
9.05% |
16.75% |
Bergamina,
Agnadello |
Italy |
Industrial |
9.53% |
13.19% |
Am Birkfeld,
Dasing |
Germany |
Industrial |
7.21% |
8.69% |
Smakterweg,
Venray |
Netherlands |
Industrial |
34.53% |
6.59% |
1 Net yield on valuation is based on the current
market valuation after deduction of property-specific acquisition
costs and operating costs.
2 Source - external independent valuers to the
Company, Knight Frank LLP.
Details of all properties in the portfolio are available on the
Company’s website retail.axa-im.co.uk/axa-property-trust under,
Portfolio - Our Presence.
Source: AXA Real Estate Investment Managers UK Limited
Geographical Analysis at 30 June
2015 by Fair Value
Germany |
63% |
Italy |
30% |
The Netherlands |
7% |
Source: AXA Real Estate Investment Managers UK Limited
Sector Analysis at 30 June 2015 by
Fair Value
Retail |
55% |
Industrial |
28% |
Leisure |
17% |
Source: AXA Real Estate Investment Managers UK Limited
Covenant Strength Analysis at 30 June
2015
(based on rental income)
Grade A |
22.0% |
Creditreform:<199; D&B:A
1 |
Grade B |
46.6% |
Creditreform:200-249; D&B:B,C,D
1,2 |
Grade C |
28.9% |
Creditreform:>250; D&B: D +
3,4 |
Vacant |
2.5% |
|
Average unexpired lease length profile (weighted by rental
income)
|
30 June 2015 |
30 June 2014 |
|
Years |
Years |
Grade A |
8.0 |
7.9 |
Grade B |
4.1 |
2.9 |
Grade C |
4.9 |
4.7 |
Average |
5.2 |
5.6 |
The Company’s tenant covenant profile is strong, with 22.0% of
tenants rated Grade A, indicating a high credit rating score.
Rental income from Grade A covenants has a weighted unexpired lease
length of 8.0 years. The average rent-weighted unexpired lease
length for the investment portfolio as at 30
June 2014 was 7.9 years. Vacant space in the portfolio on
30 June 2015, measured using
estimated market rent, represented 2.5% of the total gross rental
income.
Lease expiry profile weighted by rental income
|
% of income (30 June 2015) |
% of income (30 June 2014) |
Vacant |
2.5% |
4.5% |
<1 |
5.2% |
4.0% |
<2 |
3.7% |
18.6% |
<3 |
20.7% |
3.1% |
<4 |
23.9% |
17.7% |
<5 |
3.3% |
13.8% |
5-10 |
35.2% |
13.1% |
10-15 |
5.5% |
25.2% |
15+ |
0% |
0% |
Source: AXA Real Estate Investment Managers UK Limited
Fund Gearing1 |
30 June 2015 |
30 June 2014 |
Property portfolio (£
million) |
67.69 |
82.64 |
Borrowings (£ million) |
24.16 |
32.39 |
Total gross gearing |
35.7% |
39.2% |
Total net gearing |
31.1 % |
34.6 % |
1 Fund gearing is included to provide an
indication of the overall indebtedness of the Group and does not
relate to any covenant terms in the Group’s loan facilities. Gross
gearing is calculated as debt over property portfolio at fair value
including the JV asset at Agnadello. Net gearing is calculated as
debt less cash (net of £5.2m distributed post-quarter) over
property portfolio at fair value including the JV asset at
Agnadello.
Gross LTV Covenants2 |
30 June 2015 |
30 June 2014 |
Maximum |
Main loan facility |
41.0% |
45.1% |
60.0% |
2 Gross LTV is calculated as debt over property
portfolio at fair value.
The Group has remained in compliance with the loan covenants on
both facilities. As assets are sold the related allocated loan
amounts will be repaid, as required under the main loan facility
agreement. There are no other scheduled repayments prior to
maturity under the agreement.
Of the £8.29 million cash held by the Group including the cash
in the Agnadello JV at 30 June 2015,
£1.5 million was held in bank accounts pledged to the financing
banks.
Interest Cover
Ratio3 at 30 June 2015 |
Historic |
Minimum |
Projected |
Minimum |
Net rental income
headroom |
Main loan facility
covenant |
300.2% |
200.0% |
314.8% |
185.0% |
41.2% |
3 Interest Cover Ratio is calculated as net financing
expense payable as a percentage of gross rental income less
movement in arrears. Net rental income headroom is based on
projected interest cover.
At 30 June 2015, the Group had
taken on £24.44 million (€34.50 million) of debt (before
considering unamortised debt issue costs) relating to the main
facility which was 100% hedged by interest rate swaps at 2.795%
plus a margin of 2.4%
Portfolio Outlook
The implementation of the orderly wind down of the portfolio agreed
by Shareholders at the EGM in April
2013 is progressing.
The preparation for sale of the remaining assets continues, with
lease re-gears and extensions being negotiated with existing
tenants where possible all to improve the level of income and
marketability of individual assets. Where no such initiatives are
appropriate all the assets except Rothenburg are now being brought
to market with the sale completion of four assets during the
financial year: Koethen, Wurzburg, Altenstadt Lindheim and
Kraichtal. Rothenburg is currently undergoing preparation for sale
and will be brought to market by calendar year end 2015.
The Manager continues to work closely with the Board on all
aspects of the strategy for the portfolio in order to ensure a
timely return of capital to Shareholders.
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 20 years of investment experience
(including asset allocation, fixed income and foreign exchange). Mr
Monier is currently Chief Investment Officer at Lombard Odier
Europe SA. He is responsible for the investment process and the
performance for private clients’ portfolios in Europe. 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 the United Kingdom.
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 is a Partner at Mourant Ozannes, Advocates
& Notaries Public in Guernsey, having worked previously at
Simmons and Simmons, both in Paris and London, and specialises in
international and structured finance and collective investment
schemes. Mr Farrell holds a number of directorships in investment
and captive insurance companies. He is resident in Guernsey.
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 head of Regulatory and Market Change in
Guernsey, 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.
Alphons Spaninks joined AXA Real Estate in 2005 as a Senior
Asset and Transaction Manager. Since 2006, he has been responsible
for managing the Dutch office which currently has a team of five.
The Assets under Management in The Netherlands are currently circa
€500m. Mr Spaninks was promoted to Regional Head Benelux and
Scandinavia in 2008, responsible for Assets under Management of
over €2bn and managing a team of professionals in Stockholm and
Brussels. He has almost 20 years of experience in commercial
functions within various real estate companies. Prior to joining
AXA Real Estate, Mr Spaninks worked for AZL Vastgoed as Director of
Asset Management. Prior to that, he was Regional Director at MOG, a
Dutch Property Management company where he began his career as a
Property Manager. Mr Spaninks holds a Masters of Science Degree in
Building from the Technical University of Eindhoven and a Masters
Degree in Real Estate from ASRE (Amsterdam) and is a member of
Royal Institution of Chartered Surveyors. He is resident in the
Netherlands.
Report of the Directors
The Directors of Company present their Annual Report together
with the Group’s Audited Consolidated Financial Statements (the
“Financial Statements”) for the year ended 30 June 2015. The Directors’ Report together with
the Financial Statements give a true and fair view of the financial
position of the Group. They have been prepared properly, in
conformity with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board
and are in accordance with any relevant enactment for the time
being in force; and are in agreement with the accounting
records.
Principal Activity and Status
The Company is an Authorised Closed-ended investment company
domiciled in Guernsey and is registered under the provision of The
Companies (Guernsey) Law, 2008 and has a premium listing on the
official list and trades on the main market of the London Stock
Exchange. Trading in the Company's ordinary shares commenced
on 18 April 2005. The Company and the
entities listed in note 2(f) to the Financial Statements together
comprise the “Group”.
Going Concern
The discount control provisions established when the Company was
launched required a continuation vote to be proposed to
Shareholders at the Company's Annual General Meeting (“AGM”) in
2015. As a result of the large discount to Net Asset Value at which
shares were trading there was little chance of raising new capital.
After extensive shareholder consultation, the Board resolved not to
seek continuation of the Company in 2015 and proposed to
Shareholders that the Company enter into a managed wind-down. This
proposal was approved at an Extraordinary General Meeting (“EGM”)
held on 26 April 2013.
In accordance with IFRS, the Financial Statements have been
prepared on a non-going concern basis reflecting the orderly
wind-down of the Group. Accordingly, the going concern basis of
accounting is not considered appropriate. All assets and
liabilities continue to be measured in accordance with IFRS. The
Board recognises that the liquidity of certain holdings is
uncertain and the Board will review the most appropriate course of
action with regard to these assets over the coming months. The
Directors estimate that the wind-down costs will be approximately
£194,272 (€ 274,216) (30 June 2014:
£253,208 (€316,216)). The Board believes that the Group has
sufficient funds available to meet its wind-down costs, day-to-day
running costs and amounts due in terms of its loan facilities.
Investment Objective and Investment Policy
The investment objective and investment policy of the Company
are as described in the Financial Statements.
Results and Dividends
The results for the year are set out in the Consolidated Income
Statement. Following Shareholder approval at the EGM held on
26 April 2013, the Company will
continue the implementation of a Managed Wind-down. December 2015 remains the target for the
completion of all sales, however at present it is considered that
the completion of the sale of certain assets may not occur until
early 2016. The Company has made timely returns of capital to
Shareholders whilst balancing the need to maximise the value from
the Company’s investments and to provide for sufficient working
capital. A resumption of dividend payments is not anticipated.
Directors
The Directors who held office during the year and as at the date of
this report were:
C. J. Hunter (Chairman)
G. J. Farrell
S. C. Monier
S. J. Lawson
A. Spaninks
Mr Lawson is a Director of Northern Trust (Guernsey) Limited,
the Company’s bankers and member of the same group as the
Administrator and Secretary..
Mr Farrell is a Partner of the Company's Guernsey legal
advisers, Mourant Ozannes, Advocates and Notaries Public.
Mr Hunter is also a Director of the three direct subsidiaries of
AXA Property Trust Limited.
Mr. Spaninks is the AXA Real Estate Investment Regional Head of
Benelux and Scandinavia.
Management
The Investment Manager provides management services to the
Company. A summary of the contract between the Company and the
Investment Manager in respect of the management services provided
is given in note 3 to the Financial Statements. During the year,
the Board through the Management Engagement Committee has reviewed
the appropriateness of the Investment Manager's appointment.
Alternative Investment Fund Managers Directive
he Company does not expect to be required to comply with the
AIFM Directive. In the unlikely circumstance that the Company
markets its shares in EEA member states, the relevant regime
remains the national private placement arrangement which may
trigger requisite authorisation, possible changes to the governance
structure of the Company including the appointment of a depositary,
and additional disclosure in the financial statements. The AIFM
Directive is likely to increase management costs, including
regulatory and compliance costs. The Company will seek to minimise
this impact where possible.
Foreign Account Tax Compliance Act
For purposes of the US Foreign Accounts Tax Compliance Act, the
Company registered with the US Internal Revenue Service (“IRS”) as
a Guernsey reporting Foreign Financial Institution (“FFI”) in
December 2013, received a Global
Intermediary Identification Number (G0W47U.99999.SL.831), and can
be found on the IRS FFI list under the link
http://apps.irs.gov/app/fatcaFfiList/flu.jsf.
The Company is subject to Guernsey regulations and guidance
based on reciprocal information sharing inter-governmental
agreements which Guernsey has entered into with the United Kingdom
and the United States of America. The Board will take the necessary
actions to ensure that the Company is compliant with Guernsey
regulations and guidance in this regard.
Directors' Authority to Buy Back Shares
Any buy back of shares will be made subject to Guernsey law and
within guidelines established from time to time by the Board (which
will take into account the income and cash flow requirements of the
Company) and the making and timing of any buy backs will be at the
absolute discretion of the Board. Purchases of shares will
only be made through the market for cash at prices below the
prevailing Net Asset Value of the shares where the Directors
believe such purchases will enhance shareholder value.
Such purchases will also only be made in accordance with the
rules of the UK Listing Authority which sets a cap on the price
that the Company can pay.
Articles of Incorporation
At an EGM held on 26 April 2013, a
special resolution was passed to amend the Articles of
Incorporation. The Board considered that, in light of the Managed
Wind-down, and in order to facilitate the realisation of the
Portfolio by year end December 2015,
in a manner that achieves a balance between maximising the value
from the Company's investments and making timely returns of capital
to Shareholders, it was in the best interests of Shareholders and
the Company as a whole to remove the requirement in the current
Articles for a Continuation Resolution to be put to Shareholders in
2015, and to make certain other administrative changes and updates
to the current Articles.
At an EGM held on 27 February
2014, a special resolution was passed to amend the Articles
of Incorporation. The Board introduced a mechanism for the
Redemption of Shares at the discretion of the Board prior to the
eventual liquidation of the Company. The purpose of such Redemption
Mechanism being to facilitate the return to Shareholders of cash
proceeds in a cost-efficient manner in accordance with the
Investment Policy and Objective.
On 30 October 2014 and
14 May 2015, the Company under the
mechanism for the Redemption of Shares purchased and cancelled
3,668,894 and 3,181,089 Shares at a value of £1,999,547 and
£1,799,022 respectively. A further capital redemption of £5.2
million was approved by the directors on 6
July 2015, with a redemption date of 20 July 2015 and payment date of 30 July 2015.
Independent auditor
KPMG Channel Islands Limited has expressed their willingness to
continue in office as auditor and a resolution proposing their
re-appointment will be submitted at the forthcoming AGM.
Directors’ Responsibilities
The Directors are responsible for preparing the Directors’ Report
and the Financial Statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under the law they have elected
to prepare the Financial Statements in accordance with IFRS and
applicable law.
The Financial Statements are required by law to give a true and
fair view of the state of affairs of the Group and of the profit or
loss of the Group for that period.
In preparing these Financial Statements, the Directors are
required to:
- select suitable accounting policies and apply them
consistently;
- make judgements and estimates which are reasonable and
prudent;
- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the Financial Statements; and
- prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business. As explained in note 2, the Directors do not
believe it is appropriate to prepare these Financial Statements on
a going concern basis.
The Directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the Financial Statements comply with the Companies (Guernsey) Law,
2008. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Disclosure of information to auditors
So far as each Director is aware, all relevant information has
been disclosed to the Company’s auditor.
Directors’ Responsibility Statement
We confirm that to the best of our knowledge and in accordance
with DTR 4.1.12R of the Disclosure and Transparency Rules:
(a) These Financial Statements have been prepared in accordance
with IFRS and give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the
undertakings included in the consolidation as a whole as at and for
the year ended 30 June 2015;
(b) These Financial Statements, which include information
detailed in the Chairman's Statement, Investment Manager's,
Directors' Report and Corporate Governance Report provide a fair
review of the development and performance of the Group during the
year; and includes a description of the principal risks and
uncertainties that the Group faced as at and for the year ended
30 June 2015, and
(c) These Financial Statements taken as a whole are fair,
balanced and understandable and provide the information necessary
for the shareholders to assess the Company’s performance, business
model and strategy.
Signed on behalf of the Board by:
Charles
Hunter
Stuart Lawson
Chairman
Director
22 October
2015
22 October
2015
Corporate Governance Report
To comply with the UK Listing Regime, the Company must comply
with the requirements of the UK Corporate Governance Code (the “UK
Code”) or explain any departures therefrom. The Company also seek
to comply with the Code of Corporate Governance issued by the
Guernsey Financial Services Commission (the “GFSC Code”).
The Board recognises the importance of a sound corporate
governance culture that meets the listing requirements. The Board
considers that reporting against the principles and recommendations
of the UK Code provides appropriate information to Shareholders.
Companies reporting against the UK Code are deemed to comply with
the GFSC Code.
The UK Code is available in the Financial Reporting Council’s
website, www.frc.org.uk. The FRC issued a revised UK Code in
September 2014, for reporting periods
beginning on or after 1 October 2014.
The Board have not early adopted the revised code.
The Company has complied with the relevant provisions of the UK
Code, except for the following:
The UK Corporate Governance Code includes provisions relating
to:
- the role of the Chief Executive;
- Executive Directors’ remuneration;
- the need for an internal audit function; and
- the whistle blowing policy
For the reasons set out in the UK Code, the Board considers
these provisions are not relevant to the position of the Company as
it is an externally managed investment company. The Company has
therefore not reported further in respect of these provisions.
The Directors are non-executive and the Company does not have
employees, hence no Chief Executive or whistle-blowing policy is
required. The Board is satisfied that any relevant issues can be
properly considered by the Board. There have been no instances of
non-compliance, other than those noted above. However the Directors
have satisfied themselves that the Company’s service providers have
appropriate whistle-blowing policies and procedures and have
received confirmation from the service providers that nothing has
arisen under those policies and procedures which should be brought
to the attention of the Board.
Details of compliance are noted in the following pages. The
absence of an Internal Audit function is discussed in the Audit
Committee Report.
Composition, Independence and Role of the Board
The Board currently comprises of five non-executive Directors.
With the exception of Mr Spaninks, all Directors are considered by
the Board to be independent of the Company’s Investment
Manager.
The Chairman is Mr Hunter. The Chairman of the Board must be
independent for the purposes of Chapter 15 of the Listing Rules. Mr
Hunter is considered independent because he:
- has no current or historical employment with the Investment
Manager; and
- has no current directorships in any other investment funds
managed by the Investment Manager except for the three direct
subsidiaries of AXA Property Trust Limited.
The Board has overall responsibility for maximising the
Company’s success by directing and supervising the affairs of the
business and meeting the appropriate interests of shareholders and
relevant stakeholders, while enhancing the value of the Company and
also ensuring protection of investors. A summary of the Board’s
responsibilities is as follows:
- statutory obligations and public disclosure;
- strategic direction and financial reporting;
- risk assessment and management including reporting compliance,
governance, monitoring and control; and
- other matters having a material effect on the Company.
The Board is responsible to Shareholders for the overall
management of the Company
Composition, Independence and Role of the Board
(continued)
The Board needs to ensure that the Annual Report and Financial
Statements, taken as a whole, are fair, balanced and understandable
and provide the information necessary for shareholders to assess
the Company’s performance, business model and strategy. In seeking
to achieve this, the Directors have set out the Company’s
investment objective and policy and have explained how the Board
and its delegated Committees operate and how the Directors review
the risk environment within which the Company operates and set
appropriate risk controls. Furthermore, throughout the Annual
Report and Financial Statements the Board has sought to provide
further information to enable shareholders to better understand the
Company’s business and financial performance.
The Board’s responsibilities for the Annual Report are set out
in the Directors’ Responsibility Statement.
The Board is also responsible for issuing half yearly reports,
interim management statements and other price sensitive public
reports.
The Board does not consider it appropriate to appoint a Senior
Independent Director because the Directors’ are all deemed to be
independent by the Company except Mr Spaninks. The Board believes
it has a good balance of skills and experience to ensure it
operates effectively. The Chairman is responsible for leadership of
the Board and ensuring its effectiveness.
The Board has engaged external companies to undertake the
investment management and administrative activities of the Company.
Documented contractual arrangements are in place with these
companies which define the areas where the Board has delegated
responsibility to them.
The Company holds a minimum of four Board meetings per year to
discuss general management, structure, finance, corporate
governance, marketing, risk management, compliance, asset
allocation and gearing, contracts and performance. The quarterly
Board meetings are the principal source of regular information for
the Board enabling it to determine policy and to monitor
performance, compliance and controls which are supplemented by
communication and discussions throughout the year.
A representative of the Investment Manager and Administrator
attends each Board meeting either in person or by telephone thus
enabling the Board to fully discuss and review the Company’s
operation and performance. Each Director has direct access to the
Investment Manager and Company Secretary and may at the expense of
the Company seek independent professional advice on any matter.
Individual Directors may, at the expense of the Company, seek
independent professional advice on any matter that concerns them in
the furtherance of their duties. The Company maintains appropriate
Directors’ and Officers’ liability insurance.
Re-election
There are provisions in the Company’s Articles of Incorporation
which requires Directors to seek re-election on a periodic basis.
There is no limit on length of service, nor is there any upper age
restriction on Directors.
The Board considers that there is significant benefit to the
Company arising from continuity and experience among directors, and
accordingly does not intend to introduce restrictions based on age
or tenure. It does however believe that shareholders should be
given the opportunity to review membership of the Board on a
regular basis.
In accordance with the Company’s Articles of Association, at
each AGM all independent Directors who held office at the two
previous AGM’s and did not retire shall retire from office and
shall be available for re-election.
Mr. Spaninks is the AXA Real Estate Investment Regional Head of
Benelux and Scandinavia. As a non-independent Director, Mr.
Spaninks is available for re-election at each AGM. At the Company’s
upcoming AGM, and Mr Spaninks will retire from office and shall be
available for re-election.
The Board are of the opinion that the Board members standing for
re-election should be re-elected as they have the right skills and
experience to continue to manage the Company through the managed
wind-down process.
Board diversity
The Board has also given careful consideration to the
recommendation of the Davies Report on “Women on Boards”. As
recommended in the Davies Report, the Board has reviewed its
composition. However, in view of the Company’s managed wind-down
position it believes that the current appointments provide an
appropriate range of skills, experience and diversity.
Board evaluation and succession planning
The Directors consider how the Board functions as a whole taking
balance of skills, experience and length of service into
consideration and also reviews the individual performance of its
members on an annual basis.
To enable this evaluation to take place, the Company Secretary
will circulate a detailed questionnaire plus a separate
questionnaire for the evaluation of the Chairman. The
questionnaires, once completed, are returned to the Company
Secretary who collates responses, prepares a summary and discusses
the Board evaluation with the Chairman prior to circulation to the
remaining Board members. The performance of the Chairman is
evaluated by the other Directors. On occasions, the Board may seek
to employ an independent third party to conduct a review of the
Board.
The Board considers it has a breadth of experience relevant to
the Company, and the Directors believe that any changes to the
Board’s composition can be managed without undue disruption. An
induction programme has been prepared for any future Director
appointments and all Directors receive other relevant training as
necessary.
Board and committee meetings
The table below sets out the number of Board, Audit Committee and
Management Engagement Committee meetings held during the year ended
30 June 2015 and, where appropriate,
the number of such meetings attended by each Director.
|
Board of Directors |
Audit Committee |
Management Engagement Committee |
|
Held |
Attended |
Held |
Attended |
Held |
Attended |
C. J. Hunter |
4 |
4 |
2 |
2 |
1 |
1 |
G. J. Farrell |
4 |
4 |
2 |
2 |
1 |
1 |
S. C. Monier |
4 |
3 |
2 |
2 |
1 |
1 |
S. Lawson |
4 |
4 |
2 |
2 |
1 |
1 |
A. Spaninks |
4 |
4 |
2 |
1* |
1 |
1* |
* invitee
In addition to the scheduled quarterly Board meetings the Board,
or committees thereof, held 6 ad hoc meetings to deal with matters
of an administrative nature. These meetings were attended by those
Directors who were available at the time.
The Directors who held office during the year and their interest
in the shares of the Company (all of which are beneficial)
were:
|
|
|
30 June
2015 |
30 June
2014 |
C. J.
Hunter* |
26,892 |
0.03% |
29,043 |
0.03% |
G. J. Farrell |
- |
- |
- |
- |
S. C. Monier |
72,830 |
0.08% |
78,653 |
0.09% |
S. Lawson |
- |
- |
- |
- |
A. Spaninks |
- |
- |
- |
- |
*Charles Hunter holds 26,892 (2014: 29,043) shares
whilst his family holds 8,599 (2014: 9,287).
Committees of the Board
The Board has established Audit and Management Engagement
Committees and approved their terms of reference.
Audit Committee
The Company has established an Audit Committee with formal duties
and responsibilities. The Audit Committee meets formally at least
twice a year and each meeting is attended by the independent
external auditor and Administrator. The Company’s Audit Committee
is comprised of the entire Board except Mr. Spaninks. The Audit
Committee is chaired by Mr. Lawson.
A report of the Audit Committee detailing its responsibilities and
its key activities is presented.
Management Engagement Committee
The Management Engagement Committee is comprised of the entire
Board except Mr. Spaninks. Mr. Hunter is Chairman of the Management
Engagement Committee. The Management Engagement Committee meets
formally at least once a year.
The Management Engagement Committee has formal duties and
responsibilities. The function of the Management Engagement
Committee is to ensure that the Company’s Management Agreement is
competitive and reasonable for the shareholders, along with the
Company’s agreements with all other third party service providers
(other than the external auditors).
During the year the Management Engagement Committee has reviewed
the services provided by the Investment Manager as well as the
other service providers and have recommended to the Board that
their continuing appointments is in the best interest of the
Shareholders.
Nomination Committee
The Board does not have a separate Nomination Committee. The Board
as a whole fulfils the function of a Nomination Committee. Any
proposal for a new Director will be discussed and approved by the
Board.
Remuneration Committee
In view of its non-executive and independent nature, the Board
considers that it is not appropriate for there to be a separate
Remuneration Committee as anticipated by the UK Code because this
function is carried out as part of the regular Board business. A
Remuneration Report prepared by the Board is contained in the
Financial Statements.
Terms of Reference
All Terms of Reference for Committees are available from the
Administrator upon request.
Internal Controls
The Board is ultimately responsible for establishing and
maintaining the Company’s system of internal controls and for
maintaining and reviewing its effectiveness. The system of internal
controls is designed to manage rather than to eliminate the risk of
failure to achieve business objectives and by their nature can only
provide reasonable and not absolute assurance against misstatement
and loss. These controls aim to ensure that assets of the Company
are safeguarded, proper accounting records are maintained and the
financial information for publication is reliable. The Board uses a
formal risk assessment matrix to identify and monitor risks.
The Board has delegated the management of the Company’s investment
portfolio and the administration, registrar and corporate
secretarial functions including the independent calculation of the
Company’s NAV and the production of the Annual Report and Financial
Statements which are independently audited. Whilst the Board
delegates responsibility, it retains accountability for the
functions it delegates and is responsible for the systems of
internal control.
Formal contractual agreements have been put in place between the
Company and providers of these services. On an ongoing basis board
reports are provided at each quarterly board meeting from the
Investment Manager, Administrator, Registrar, Sponsor and Broker
and Company Secretary; and a representative from the Investment
Manager is asked to attend these meetings.
In accordance with Listing Rule 15.6.2 (2) R and having formally
appraised the performance and resources of the Investment Manager,
in the opinion of the Directors their continuing appointment of the
Investment Manager on their terms agreed is in the interests of the
Company and the Shareholders.
In common with most investment companies, the Company does not have
an internal audit function. All of the Company’s management
functions are delegated to the Investment Manager and Administrator
which have their own internal audit and risk assessment functions.
An internal audit function specific to the Company is therefore
considered unnecessary.
Principal Risks and Uncertainties
Investment Risks
The Company is exposed to the risk that its portfolio fails to
perform in line with its investment objective and policy if markets
move adversely or if the Investment Manager fails to comply with
the investment policy. The Board reviews reports from the
Investment Manager at the quarterly Board meetings, with a focus on
the performance of the portfolio in line with its investment
policy.
Operational Risks
The Company is exposed to the risk arising from any failures of
systems and controls in the operations of the Investment Manager,
Administrator and the Sponsor. The Board and its Committees
regularly review reports from the Investment Manager and the
Administrator on their internal controls.
Accounting, Legal and Regulatory Risks
The Company is exposed to the risk that it may fail to maintain
accurate accounting records or fail to comply with requirements of
its Prospectus. The accounting records prepared by the relevant
service providers are reviewed by the Investment Manager. The
Administrator, Sponsor and Investment Manager provide regular
updates to the Board on compliance with the Prospectus and changes
in regulation.
Financial Risks
The financial risks, including market, credit, liquidity and
interest rate risk faced by the Company are set out in Note 21 of
the Financial Statements. These risks and the controls in place to
reduce them are reviewed at the quarterly Board meetings.
Relations with Shareholders
The Board welcomes shareholders’ views and places great importance
on communication with its shareholders. The Board receives regular
reports on the views of shareholders and the Chairman and other
Directors are available to meet shareholders if required. The
Investment Manager meets with major shareholders on a regular basis
and reports to the Board accordingly. Issues of concern can be
addressed by any shareholder in writing to the Company at its
registered address. The AGM of the Company provides a forum for
shareholders to meet and discuss issues with the Directors and
Investment Manager of the Company.
In addition the Company maintains a website which contains
comprehensive information, including regulatory announcements,
share price information, financial reports, investment objectives
and strategy and investor contacts.
Significant Shareholdings
As at 21 September 2015, the Company
has received of the following interests in 3% or more of the voting
rights attaching to the Company’s issued shares.
|
Shares held |
% of issued share capital |
State Street Nominees Limited |
26,370,331.00 |
34.72 |
Transact Nominees Limited |
12,738,599.00 |
16.77 |
Chase Nominees Limited |
5,363,714.00 |
7.06 |
HSBC Global Custody Nominee (UK)
Limited |
3,231,928.00 |
4.25 |
Credit Suisse Client Nominees (UK)
Limited |
2,957,940.00 |
3.89 |
Signed on behalf of the Board by:
Charles
Hunter
Stuart Lawson
Chairman
Director
22 October
2015
22 October 2015
Audit Committee Report
Dear Shareholders,
I am pleased to present the Audit Committee’s Report for the
year ended 30 June 2015, which covers
the following topics:
- Responsibilities of the Audit Committee and its key activities
during the year,
- Financial reporting and significant areas of judgement and
estimation,
- Independence and effectiveness of the external auditor,
and
- Internal control and risk management systems.
As advised previously, the Company has implemented a strategy to
wind down the portfolio and return capital to investors. The Audit
Committee’s activities during the year have therefore concentrated
on maintaining an appropriate risk and control environment,
providing suitable disclosure of progress and residual risks in the
Financial Statements, ensuring ongoing engagement from service
providers and keeping sufficient liquid funds to meet expenditure
for essential or justified items.
Responsibilities
The Audit Committee reviews and recommends to the Board for
approval or otherwise, the Financial Statements of the Company and
is the forum through which the independent external auditor reports
to the Board of Directors. The independent external auditor and the
Audit Committee will meet together without representatives of
either the Administrator or Investment Manager being present if
either considers this to be necessary.
The role of the Audit Committee includes:
- Monitoring the integrity of the Financial Statements of the
Company covering:
- formal announcements relating to the Company’s financial
performance,
- significant financial reporting issues and judgements,
- matters raised by the external auditors, and
- appropriateness of accounting policies and practices.
- Reviewing and considering the UK Code and FRC Guidance on Audit
Committees
- Monitoring the quality and effectiveness of the independent
external auditors which includes:
- meeting regularly to discuss the audit plan and the subsequent
audit report,
- considering the level of fees for both audit and non-audit
work,
- reviewing independence, objectivity, expertise, resources and
qualification, and
- making recommendations to the Board on the appointment,
reappointment, replacement and remuneration.
- Reviewing the Company’s procedures for prevention, detection
and reporting of fraud, bribery and corruption, and
- Monitoring and reviewing the internal control and risk
management systems of the service providers together with the need
for an Internal Audit function
The Audit Committee’s full terms of reference can be obtained by
contacting the Company’s Administrator.
Financial Reporting
The Audit Committee’s review of the Half Yearly Financial Report
and Audited Annual Report and Financial Statements focused on the
following significant risks:
- investment property portfolio valuation; and
- going concern given the wind-down strategy
Valuation of investment property portfolio
The Company's property investment portfolio had a fair value of
£67.69 million as at 30 June 2015 and
represented the majority of the total assets of the Company. The
investments are all commercial real estate across Europe owned via
intermediate holding vehicles and a joint venture. The valuation of
the investments is in accordance with the requirements of IFRS as
issued by the International Accounting Standards Board. During the
year the audit committee have reviewed the independent valuations
received and compared them to offers received during the sales
program, discussed them with the investment manager's staff with
specific knowledge of the relevant market, and sought explanations
of any variances. The Audit Committee considered the
fair value of the investments directly or indirectly held by the
Group as at 30 June 2015 to be
reasonable based on information provided by the Investment Manager,
Administrator and the independent external property valuers. All
prices are subject to review and oversight by the Investment
Manager.
Going concern
In accordance with IFRS, the 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 no longer considered appropriate. Investment
properties continue to be carried at fair value. All other assets
and liabilities continue to be measured in accordance with
IFRS.
Audit Findings Report
The independent external auditor reported to the Audit Committee
that no material misstatements were found in the course of their
work. Furthermore, the Manager and Administrator confirmed to the
Audit Committee that they were not aware of any material
misstatements including matters relating to the Financial
Statements presentation.
Accounting Policies & Practices
The Audit Committee has assessed the appropriateness of the
accounting policies and practices adopted by the Company together
with the clarity of disclosures included in the Financial
Statements. Following a review of the presentations and reports
from the Administrator and consulting where necessary with the
independent external auditor, the Audit Committee is satisfied that
the Financial Statements appropriately address the critical
judgements and key estimates (both in respect to the amounts
reported and the disclosures). It is also satisfied that the
significant assumptions used for determining the value of assets
and liabilities have been appropriately scrutinised, challenged and
are sufficiently robust.
The Audit Committee advised the Board that this Annual Report and
Financial Statements, taken as a whole, is fair, balanced and
understandable.
Risk Management
The Audit Committee continued to consider the process for managing
the risk of the Company and its service providers. Risk management
procedures for the Company are detailed in the Company’s risk
assessment matrix, and is reviewed and approved by the Audit
Committee on a regular basis. Regular reports are received from the
Investment Manager and Administrator on the Company’s risk
evaluation process and reviews.
In the context of the Managed Wind-down, the key risks which the
Audit Committee has closely monitored are:
- Asset disposal program
- Ongoing liquidity
- Levels of expenditure
- Engagement from service providers
Through regular briefing sessions and formal committee meetings,
the Audit Committee has received the necessary information and
confirmation that activities have been managed and executed in
accordance with plans approved by the Board and established
policies and procedures.
Fraud, Bribery and Corruption
The Audit Committee continues to monitor the fraud, bribery and
corruption policies of the Company. The Board receives a
confirmation from all service providers that there have been no
instances of fraud or bribery.
The Independent External Auditor
KPMG Channel Islands Limited has been the independent external
auditor from the date of the initial listing on the London Stock
Exchange. In the circumstances of the Company and expected progress
with the managed wind-down process, a change of external auditor is
not envisaged given the short remaining life.
The independence and objectivity of the external auditor is
reviewed by the Audit Committee which also reviews the terms under
which the independent external auditor is appointed to perform
non-audit services. The Audit Committee has established
pre-approval policies and procedures for the engagement of the
auditor to provide audit, assurance and tax services. The
principles on which these are based are that the external auditors
may not provide a service which:
- places them in a position to audit their own work
- creates a mutuality of interest
- results in the external auditor developing close relationships
with service providers of the Company
- results in the external auditor functioning as a manager or
employee of the Company
- puts the external auditor in the role of advocate of the
Company
As a general rule, the Company does not utilise external
auditors for internal audit work, secondments or valuation advice.
Services which are in the nature of audit, such as tax compliance,
tax structuring, accounting advice, quarterly reviews and
disclosure advice are normally permitted but are subject to prior
approval by the Audit Committee.
The Audit Committee has examined the scope and results of the
audit, its cost effectiveness and the independence and objectivity
with particular regard to non-audit fees, and considers KPMG
Channel Islands Limited to be independent of the Company. The
following table summarises the remuneration paid to KPMG Channel
Islands Limited and to other KPMG member firms for audit and
non-audit services provided to the Company during the years ended
30 June 2015 and 30 June 2014.
|
|
30 June 2015 |
30 June 2014 |
|
|
£ |
£ |
Statutory audit |
|
172,149 |
216,842 |
Total audit fees |
|
172,149 |
216,842 |
|
|
|
|
Non-audit services |
|
- |
49,426 |
Total non-audit fees |
|
- |
49,426 |
The non-audit services work in 2014 was an independent review of
the Interim Report. This work was not undertaken in 2015 since in
the opinion of the Directors, the cost exceeded the perceived
benefit to the company.
Performance and effectiveness
During the year, when considering the effectiveness of the
independent external auditor, the Audit Committee has taken into
account the following factors:
- the audit plan presented to them before the audit;
- the post audit report including variations from the original
plan;
- changes in audit personnel;
- the independent external auditor’s own internal procedures to
identify threats to independence; and
- Feedback received from both the Investment Manager and
Administrator.
The Audit Committee reviewed and, where appropriate, challenged
the audit plan and the audit findings report of the independent
external auditor and concluded that the audit plan sufficiently
identified audit risks and that the audit findings report indicated
that the audit risks were sufficiently addressed with no
significant variations from the audit plan. The Audit Committee
considered reports from the independent external auditors on their
procedures to identify threats to independence and concluded that
the procedures were sufficient.
Reappointment of external auditors
Consequent to this review process, the Audit Committee has
recommended to the Board that a resolution be put to the 2015 AGM
for the reappointment of KPMG Channel Islands Limited as
independent external auditor. The Board has accepted this
recommendation.
Internal control and risk management systems
The Company outsources the subsidiary company accounting and
financial statements production to the Investment Manager, and
company accounting, document execution and expense payment to the
Administrator. The Audit Committee considers the following matters
in this regard:
- regular operations meetings with service providers,
- reporting to the Audit Committee and Board,
- independent opinion of the external auditor, and
- on-going evaluation of performance.
In addition, the Audit Committee reviews and examines externally
prepared assessments of the control environment in place at the
Investment Manager and the Administrator. No significant failings
or weaknesses were identified in these reports.
The Audit Committee has reviewed the need for an internal audit
function and has decided that the system and procedures employed by
the Investment Manager and the Administrator’s internal audit
function provide sufficient assurance that a sound system of
internal control, which safeguards the Company’s assets, is
maintained. An internal audit function specific to the Company is
therefore considered unnecessary.
In finalising the Financial Statements for recommendation to the
Board for approval, the Audit Committee has satisfied itself that
the Financial Statements taken as a whole are fair, balanced and
understandable, and provide the information necessary for
shareholders to assess the Company’s performance, business model
and strategy.
A member of the Audit Committee will continue to be available at
each AGM to respond to any shareholder questions on the activities
of the Audit Committee.
Stuart Lawson,
Chairman, Audit Committee
22 October 2015
Directors’ Remuneration Report
Introduction
An ordinary resolution for the approval of the Director’s
Remuneration Report will be put to the shareholders at the AGM to
be held on 3 December 2015.
Remuneration policy
All Directors are non-executive and a Remuneration Committee has
not been established. The Board as a whole considers matters
relating to the Directors’ remuneration. No advice or services were
provided by any external person in respect of its consideration of
the Directors’ remuneration.
The Company’s policy is that the fees payable to the Directors
should reflect the time spent by the Directors on the Company’s
affairs and the responsibilities borne by the Directors and be
sufficient to attract, retain and motivate directors of a quality
required to run the Company successfully. The Chairman of the Board
is paid a higher fee in recognition of his additional
responsibilities. The policy is to review fee rates periodically,
although such a review will not necessarily result in any changes
to the rates, and account is taken of fees paid to directors of
comparable companies. The Directors of the Company are remunerated
for their services at such a rate as the Directors determine
provided that the aggregate amount of such fees does not exceed
£120,000 per annum.
There are no long term incentive schemes provided by the Company
and no performance fees are paid to Directors.
None of the Directors has a service contract with the Company
but each of the Directors is appointed by a letter of appointment
which sets out the main terms of their appointment. Directors hold
office until they retire by rotation or cease to be a director in
accordance with the Articles of Incorporation, by operation of law
or until they resign.
Remuneration
Directors are remunerated in the form of fees, payable quarterly in
arrears, to the Director personally. No Directors have been paid
additional remuneration outside their normal Directors’ fees and
expenses.
At a Board meeting of the Company held on 22 February 2012, the Board resolved to reduce
their Directors’ fees by 10% for 12 months with effect from
1 April 2012. At a Board meeting of
the Company held on 13 June 2013, the
Board resolved to continue to maintain the 10% reduction in
fees.
The current annual Directors’ fees comprise £18,000 per annum
payable to the Chairman and £13,500 per annum payable to the other
Directors.
For the year ended 30 June 2015
and 30 June 2014 Directors’ fees
incurred were as follows:
|
|
30 June
2015 |
30 June
2014 |
|
|
£ |
£ |
C. J. Hunter |
|
18,000 |
18,000 |
G. J. Farrell |
|
13,500 |
13,500 |
S. C. Monier |
|
13,500 |
13,500 |
S. Lawson |
|
13,500 |
13,500 |
A. Spaninks |
|
13,500 |
13,500 |
|
|
72,000 |
72,000 |
The Directors of the subsidiaries of the Group received
emoluments amounting to £19,985 (2014: £21,039). Total fees paid to
Directors of the Group were £91,985 (2014: £93,039).
Signed on behalf of the Board by:
Charles
Hunter
Stuart Lawson
Chairman
Director
22 October
2015
22 October 2015
Investment Objective and Investment Policy
At an EGM of the Company held on 26 April
2013, the Shareholders resolved to amend the Company’s
investment policy. The amended investment objective and policy is
set out below:
Investment Objective
The Company is managed with the intention of realising all
remaining assets in the Portfolio, in a manner consistent with the
principles of prudent investment management and spread of
investment risk, with a view to returning capital invested to the
Shareholders in an orderly manner.
Investment Policy
The Managed Wind-down will be effected with a view to the Company
realising its investments by year end December 2015 in a manner that achieves a balance
between maximising the value from the Company’s investments and
making timely returns of capital to Shareholders. However at
present it is considered that the completion of the sale of certain
assets may not occur until early 2016.
The Company will cease to make any new investments or undertake
capital expenditure except where necessary in the reasonable
opinion of the Manager and Board to protect or enhance the value of
any existing investments or to facilitate orderly disposals.
Any cash received by the Company as part of the realisation
process, following repayment of the allocated loan amounts and any
additional payments required under the loan facilities but prior to
its distribution to Shareholders, will be held by the Company as
cash on deposit and/or as cash equivalents.
The Company will not undertake new borrowing other than for
short-term working capital purposes.
Shareholders should expect that, under the terms of the Managed
Wind-down, the Board and the Manager will be committed to
distributing as much of the available cash as soon as reasonably
practicable having regard to cost efficiency and working capital
requirements. Accordingly, in order to minimise the administrative
burden, Shareholders should expect that returns of cash will be
made regularly but not necessarily as soon as cash becomes
available.
Independent Auditor’s Report to the Members of AXA Property
Trust
Limited
Opinions and conclusions arising from our audit
Opinion on financial statements
We have audited the consolidated financial statements (the
“financial statements”) of AXA Property Trust Limited (the
“Company”) and its subsidiaries (together, the “Group”) for the
year ended 30 June 2015 which
comprise the Consolidated Income Statement, the Consolidated
Statement of Comprehensive Income, the Consolidated Statement of
Changes in Equity, the Consolidated Statement of Financial
Position, the Consolidated Statement of Cash Flows and the related
notes. The financial reporting framework that has been applied in
their preparation is applicable law and International Financial
Reporting Standards as issued by the International Accounting
Standards Board (the “IASB”). As described in Note 2, the
financial statements have been prepared on a non-going concern
basis. In our opinion, the financial statements:
- give a true and fair view of the state of the Group’s affairs
as at 30 June 2015 and of its profit
for the year then ended;
- have been properly prepared in accordance with International
Financial Reporting Standards as issued by the IASB; and
- comply with the Companies (Guernsey) Law, 2008.
Our assessment of risks of material misstatement
The risks of material misstatement detailed in this section of this
report are those risks that we have deemed, in our professional
judgement, to have had the greatest effect on: the overall audit
strategy; the allocation of resources in our audit; and directing
the efforts of the engagement team. Our audit procedures
relating to these risks were designed in the context of our audit
of the financial statements as a whole. Our opinion on the
financial statements is not modified with respect to any of these
risks, and we do not express an opinion on these individual
risks.
In arriving at our audit opinion above on the financial
statements, the risks of material misstatement that had the
greatest effect on our audit were as follows:
Going concern
Refer to the Audit Committee Report and Note 2 Significant
accounting policies
- The risk – On 26 April 2013 an
Extraordinary General Meeting was held at which the shareholders
approved proposals for a managed wind-down of the Group.
Accordingly, the Board of Directors have prepared the financial
statements on a non-going concern basis reflecting an orderly
managed wind-down of the Group and the continuing measurement of
the investment property portfolio at fair value. There is a
risk that the Board of Directors may not be able to achieve the
wind-down in an orderly manner and if this was the case then it
would impact their ability to continue measuring the investment
property portfolio at fair value.
- Our response – Our audit procedures with respect to going
concern included, but were not limited to, holding discussions with
the Board of Directors and Investment Manager to understand the
ongoing wind-down programme; and obtaining and evaluating the
Group’s going concern assessment, post year-end cash flow forecasts
and loan covenant certificates.
We also considered the going concern disclosure in Note 2 for
compliance with International Financial Reporting Standards as
issued by the IASB.
Valuation of investment properties (£23,886,000), investment
properties held for sale (£34,892,000) and investment property held
indirectly through investment in joint venture held for sale
(£9,053,000)
Refer the Audit Committee Report, Note 2 Significant accounting
policies, Note 9 Investment properties, Note 10 Investments
properties held for sale and Note 11 Joint venture/Joint venture
held for sale.
- The risk – The Group’s direct investment property portfolio
accounted for 76.5% of the Group’s total assets as at 30 June 2015 and the investment in joint venture
held for sale accounted for a further 11.8% of total assets. The
fair value of the direct and indirect investment property portfolio
(together, the “investment property portfolio”) as at 30 June 2015 was assessed by the Board of
Directors based on independent valuations prepared by the Group’s
external property valuer. As highlighted in the Audit
Committee Report, the valuation of the Group’s investment property
portfolio, given it represents the majority of the total assets of
the Group and requires the use of significant judgement, is a
significant area of our audit.
- Our response – Our audit procedures with respect to the Group’s
investment property portfolio included, but were not limited to,
testing the design and implementation of certain relevant controls;
evaluating the competence, objectivity and independence of the
external property valuer; we assessed the appropriateness of the
valuation methodologies and assumptions used based on sales offers
received as at year end and subsequent to year end, market
knowledge and market data, which included undertaking discussions
on key findings with the external property valuer and challenging
the assumptions used, with the assistance of our own real estate
specialists where deemed appropriate. We compared key inputs
to the valuations such as rental income, yields, occupancy and
tenancy contracts for consistency with other audit findings.
We also considered the Group’s investment properties valuation
policies and their application as described in Note 2 for
compliance with International Financial Reporting Standards as
issued by the IASB in addition to the adequacy of disclosures in
Notes 9, 10 and 11 in relation to investment properties, investment
properties held for sale and joint venture/joint venture held for
sale.
Our application of materiality and an overview of the scope of
our audit
Materiality is a term used to describe the acceptable level of
precision in financial statements. Auditing standards
describe a misstatement or an omission as “material” if it could
reasonably be expected to influence the economic decisions of users
taken on the basis of the financial statements. The auditor
has to apply judgement in identifying whether a misstatement or
omission is material and to do so the auditor identifies a monetary
amount as “materiality for the financial statements as a
whole”.
The materiality for the financial statements as a whole was set
at £1,200,000. This has been calculated using a percentage of
the Group’s net assets (of which it represents approximately 2.4%),
which we believe is the most appropriate benchmark as net assets is
considered as the prime indicator of potential returns to members
in a managed wind-down situation.
We agreed with the audit committee to report to it all corrected
and uncorrected misstatements we identified through our audit with
a value in excess of £60,000, in addition to other audit
misstatements below that threshold that we believe warranted
reporting on qualitative grounds.
Whilst AXA Property Trust Limited is a Guernsey company, the
Group’s operations are located in Luxembourg, Germany, Italy and
The Netherlands. The Company owns three Luxembourg holding
entities through which the Group’s operations are owned.
The group audit team performed the audit of AXA Property Trust
Limited as a standalone entity. Audits for group reporting
purposes were performed by the component auditors in Luxembourg
(the “sub-group audit team”) on the sub-consolidations of each the
three Luxembourg holding entities with the assistance of sub-group
component auditors in Germany, Italy and The Netherlands (the
“sub-group component auditors”). The combined effect of this
approach covered 100% of group net rental and related income; 100%
of group profit before tax; and 100% of group total assets and
total liabilities.
The audits undertaken for group reporting purposes were all
performed to materiality levels set by, or agreed with, the group
audit team. These materiality levels were set individually
for each component/ sub-group component and ranged from £300,000 to
£600,000.
The group audit team sent detailed instructions to the sub-group
audit team; and the sub-group audit team sent detailed instructions
to the sub-group component auditors. Both sets of
instructions covered the significant areas that should be covered
by the audit (which included the relevant risks of material
misstatement detailed above) and set out the information required
to be reported back to the group audit team/ sub-group audit
team. The group audit team exercised oversight of the work of
the sub-group audit team and its oversight of the work of the
sub-group component auditors through a combination of visiting
Luxembourg to review the work performed by the sub-group audit team
and holding telephone meetings with the sub-group audit team in
order to challenge the work they performed.
Our assessment of materiality has informed our identification of
significant risks of material misstatement and the associated audit
procedures performed in those areas as detailed above.
Whilst the audit process is designed to provide reasonable
assurance of identifying material misstatements or omissions it is
not guaranteed to do so. Rather we plan the audit to determine the
extent of testing needed to reduce to an appropriately low level
the probability that the aggregate of uncorrected and undetected
misstatements does not exceed materiality for the financial
statements as a whole. This testing requires us to conduct
significant depth of work on a broad range of assets, liabilities,
income and expense as well as devoting significant time of the most
experienced members of the audit team, in particular the
Responsible Individual, to subjective areas of the accounting and
reporting process.
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the Group’s circumstances and have been consistently
applied and adequately disclosed; the reasonableness of significant
accounting estimates made by the Board of Directors; and the
overall presentation of the financial statements. In
addition, we read all the financial and non-financial information
in the Annual Report to identify material inconsistencies with the
audited financial statements and to identify any information that
is apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent
material misstatements or inconsistencies we consider the
implications for our report.
Matters on which we are required to report by
exception
Under International Standards on Auditing (UK and Ireland) we
are required to report to you if, based on the knowledge we
acquired during our audit, we have identified other information in
the Annual Report that contains a material inconsistency with
either that knowledge or the financial statements, a material
misstatement of fact, or that is otherwise misleading.
In particular, we are required to report to you if:
we have identified material inconsistencies between the knowledge
we acquired during our audit and the directors’ statement that they
consider that the Annual Report and financial statements taken as a
whole is fair, balanced and understandable and provides the
information necessary for members to assess the Company’s
performance, business model and strategy; or
- the Audit Committee Report does not appropriately address
matters communicated by us to the audit committee.
Under the Companies (Guernsey) Law, 2008, we are required to
report to you if, in our opinion:
- the Company has not kept proper accounting records; or
- the financial statements are not in agreement with the
accounting records; or
- we have not received all the information and explanations,
which to the best of our knowledge and belief are necessary for the
purpose of our audit.
Under the Listing Rules we are
required to review the part of the Corporate Governance Statement
relating to the Company’s compliance with the ten provisions of the
UK Corporate Governance Code specified for our review.
We have nothing to report in respect
of the above responsibilities.
Scope of report and responsibilities
The purpose of this report and
restrictions on its use by persons other than the Company’s members
as a body
This report is made solely to the Company’s members, as a body,
in accordance with section 262 of the Companies (Guernsey) Law,
2008 and, in respect of any further matters on which we have agreed
to report, on terms we have agreed with the Company. Our
audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s members, as a
body, for our audit work, for this report, or for the opinions we
have formed.
Respective responsibilities of
directors and auditor
As explained more fully in the Directors’ Responsibilities
Statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view. Our responsibility is to audit, and express an
opinion on, the financial statements in accordance with applicable
law and ISAs (UK and Ireland). Those standards require us to
comply with the UK Ethical Standards for Auditors.
Lee C Clark
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
Glategny Court, Glategny Esplanade
St Peter Port
Guernsey
GY1 1WR
22 October 2015
The maintenance and integrity of the AXA Property Trust Limited
website is the responsibility of the Board of Directors; the work
carried out by the auditors does not involve consideration of these
matters and, accordingly, the auditors accept no responsibility for
any changes that may have occurred to the financial statements or
audit report since they were initially presented on the
website.
Legislation in Guernsey governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Consolidated Income Statement
For the year ended 30 June
|
|
|
Year
ended |
|
Year
ended |
|
|
|
30 June
2015 |
|
30 June
2014 |
|
|
Notes |
£000s |
|
£000s |
|
|
|
|
|
|
Gross
rental income |
4 |
5,738 |
|
7,714 |
Service
charge income |
|
504 |
|
659 |
Property
operating expenses |
|
(1,536) |
|
(2,271) |
Net rental and related
income |
|
|
4,706 |
|
6,102 |
|
|
|
|
|
|
Valuation
profit/(loss) on investment properties |
9 |
4,431 |
|
(2,242) |
Gain/(loss) on disposals of a subsidiary and investment
properties |
|
1,503 |
|
(474) |
General
and administrative expenses |
5 |
(1,381) |
|
(2,738) |
Operating
profit |
|
9,261 |
|
648 |
|
|
|
|
|
|
Net
foreign exchange loss |
|
(603) |
|
(148) |
Net
gain/(loss) on financial instruments |
21 |
479 |
|
(308) |
Share in
profit of a joint venture |
11 |
1,455 |
|
176 |
Net
finance cost |
6 |
(1,807) |
|
(2,568) |
Profit/(loss) before tax |
|
8,783 |
|
(2,200) |
|
|
|
|
|
|
Income tax
expense |
18 |
(1,040) |
|
(190) |
Profit/(loss) for the year |
|
7,743 |
|
(2,390) |
|
|
|
|
|
|
Basic and
diluted profit per ordinary share (pence) |
7 |
8.63 |
|
(2.44) |
|
|
|
|
|
|
Consolidated Statement of Comprehensive Income |
For the
year ended 30 June 2015 |
|
|
|
Year
ended |
|
Year
ended |
|
|
|
30 June
2015 |
|
30 June
2014 |
|
|
Note |
£000s |
|
£000s |
|
|
|
|
|
|
Profit/(loss) for the period |
|
7,743 |
|
(2,390) |
Other
comprehensive income/(loss) |
|
|
|
|
Items that are or may
be reclassified to profit or loss |
|
|
|
|
|
Hedging reserve
recycled to profit or loss |
|
22 |
280 |
|
1,005 |
Foreign exchange
translation loss |
|
|
(5,285) |
|
(3,307) |
Other
comprehensive loss |
|
(5,005) |
|
(2,302) |
|
|
|
|
|
|
Total
comprehensive profit /(loss) for the year |
|
2,738 |
|
(4,692) |
Consolidated Statement of Changes in Equity |
For the
year ended 30 June 2015 |
|
|
|
|
|
|
|
|
|
Revenue
reserve |
Hedging
reserve |
Distributable reserve |
Foreign
currency reserve |
Total |
|
Notes |
£000s |
£000s |
£000s |
£000s |
£000s |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 July
2014 |
|
(46,065) |
(4,618) |
88,848 |
12,263 |
50,428 |
Share redemption |
19 |
- |
- |
(3,799) |
- |
(3,799) |
Net profit for the
year |
|
7,743 |
- |
- |
- |
7,743 |
Other comprehensive
income/(loss) |
22 |
- |
280 |
- |
(5,285) |
(5,005) |
Total
comprehensive income for the year |
7,743 |
280 |
- |
(5,285) |
2,738 |
|
|
|
|
|
|
|
Balance at 30 June
2015 |
|
(38,322) |
(4,338) |
85,049 |
6,978 |
49,367 |
|
|
|
|
|
|
|
For the
year ended 30 June 2014 |
|
|
Revenue
reserve |
Hedging
reserve |
Distributable reserve |
Foreign
currency reserve |
Total |
|
|
£000s |
£000s |
£000s |
£000s |
£000s |
|
|
|
|
|
|
|
Balance at 1 July
2013 |
|
(43,675) |
(5,623) |
92,948 |
15,570 |
59,220 |
Share redemption |
|
- |
- |
(4,100) |
- |
(4,100) |
Net loss for the
year |
19 |
(2,390) |
- |
- |
- |
(2,390) |
Other comprehensive
income/(loss) |
22 |
- |
1,005 |
- |
(3,307) |
(2,302) |
Total comprehensive
loss for the year |
|
(2,390) |
1,005 |
(4,100) |
(3,307) |
(8,792) |
|
|
|
|
|
|
|
Balance at 30 June
2014 |
|
(46,065) |
(4,618) |
88,848 |
12,263 |
50,428 |
The accompanying form an integral part
of these Consolidated Financial Statements.
Consolidated Statement of Financial Position |
For the
year ended 30 June 2015 |
|
|
|
|
|
|
|
|
|
30 June
2015 |
|
30 June
2014 |
|
|
Notes |
£000s |
|
£000s |
Non-current assets |
|
|
|
|
|
Investment
properties |
9 |
23,886 |
|
67,351 |
|
Investment in joint
venture |
11 |
- |
|
9,543 |
|
Deferred tax
assets |
18 |
86 |
|
26 |
Current
assets |
|
|
|
|
|
Cash and cash
equivalents |
|
8,078 |
|
3,008 |
|
Trade and other
receivables |
13 |
888 |
|
1,870 |
|
Investment properties
held for sale |
9 |
34,892 |
|
6,326 |
|
Investment in joint
venture held for sale |
11 |
9,053 |
|
- |
Total
assets |
|
76,883 |
|
88,124 |
Current
liabilities |
|
|
|
|
|
Trade and other
payables |
14 |
1,582 |
|
2,100 |
|
Current portion of
long-term loans |
15 |
7,971 |
|
3,586 |
Non-current
liabilities |
|
|
|
|
|
|
Deferred tax
liability |
18 |
596 |
|
269 |
|
Provisions |
17 |
367 |
|
1,156 |
|
Long-term loans |
16 |
16,189 |
|
28,802 |
|
Derivative financial
instruments |
21 |
811 |
|
1,783 |
Total
liabilities |
|
27,516 |
|
37,696 |
|
|
|
|
|
|
Net
assets |
|
49,367 |
|
50,428 |
|
Share capital |
|
- |
|
- |
|
Reserves |
|
49,367 |
|
50,428 |
Total
equity |
|
49,367 |
|
50,428 |
|
|
|
|
|
|
Number of
ordinary shares |
19 |
85,684,658 |
|
92,534,848 |
|
|
|
|
|
|
Net asset
value per ordinary share (pence) |
20 |
57.61 |
|
54.50 |
The accompanying notes form an integral
part of these Consolidated Financial Statements.
By order of the Board
Charles
Hunter
Stuart Lawson
Chairman
Director
22 October
2015
22 October 2015
Consolidated Statement of Cash Flows |
For the
year ended 30 June 2015 |
|
|
|
|
Year
ended |
|
Year
ended |
|
|
|
|
30 June
2015 |
|
30 June
2014 |
|
|
Notes |
|
£000s |
|
£000s |
|
|
|
|
|
|
|
Operating
activities |
|
|
|
|
|
|
Profit/(loss) before
tax |
|
|
8,784 |
|
(2,200) |
|
Adjustments for: |
|
|
|
|
|
|
Profit/(loss) on
valuation and disposals of a subsidiary and investment
properties |
|
|
(5,934) |
|
2,716 |
|
Shares in
profits/(losses) of joint venture |
11 |
|
(1,455) |
|
(176) |
|
(Gain)/loss on
financial instruments |
21 |
|
(479) |
|
308 |
|
Increase/(decrease) in
trade and other receivables |
|
|
897 |
|
(260) |
|
Increase/(decrease) in
provisions |
|
|
(789) |
|
436 |
|
Increase in trade and
other payables |
|
|
(602) |
|
54 |
|
Net finance cost |
6 |
|
1,807 |
|
2,568 |
|
Net foreign exchange
loss |
|
|
603 |
|
148 |
Net cash
generated from operations |
|
2,832 |
|
3,594 |
|
|
|
|
|
|
|
|
Interest income
received |
|
|
288 |
|
349 |
|
Interest paid |
|
|
(1,681) |
|
(2,597) |
|
Tax paid |
|
|
(792) |
|
(270) |
Net cash
flow from operating activities |
|
647 |
|
1,076 |
|
|
|
|
|
|
|
Investing
activities |
|
|
|
|
|
|
Capital expenditure on
completed investment properties |
9 |
|
(19) |
|
(611) |
|
Proceeds from
disposals of a subsidiary and investment properties |
9 |
|
11,902 |
|
21,521 |
Net cash
flow from investing activities |
|
11,883 |
|
20,910 |
|
|
|
|
|
|
|
Financing
activities |
|
|
|
|
|
|
Redemption of
shares |
19 |
|
(3,799) |
|
(4,100) |
|
Finance costs |
|
|
(27) |
|
54 |
|
Bank loan facility
repaid |
16,17 |
|
(4,956) |
|
(16,893) |
Net cash
outflow from financing activities |
|
(8,782) |
|
(20,939) |
|
Effects of
exchange rate fluctuations |
|
1,322 |
|
(1,733) |
Decrease
in cash and cash equivalents |
|
5,070 |
|
(687) |
|
Cash and cash
equivalents at start of the year |
|
|
3,008 |
|
3,694 |
Cash and
cash equivalents at the year end |
|
8,078 |
|
3,008 |
The accompanying notes form an integral
part of these Consolidated Financial Statements.
Notes to the Consolidated Financial Statements
For the year ended 30 June 2015
1. Operations
AXA Property Trust Limited (the "Company") is a limited
liability, closed-ended investment company incorporated in
Guernsey. The Company invests in commercial properties in Europe
which are held through its subsidiaries. The Consolidated Financial
Statements of the Company for the year ended 30 June 2015 comprise the financial statements of
the Company and its subsidiaries (together referred to as the
"Group").
2. Significant accounting policies
(a) Basis of preparation
The Consolidated Financial Statements which show a true and fair
view have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) which comprise standards and
interpretations approved by the International Accounting Standards
Board (“IASB”) and are in compliance with The Companies (Guernsey)
Law, 2008. The Financial Statements have been prepared on a
non-going concern basis, and the accounting policies, presentation
and methods of computation are consistent with this basis, as
disclosed in the going concern paragraph below. €
(b) Going concern
The discount control provisions established when the Company was
launched required a continuation vote to be proposed to
Shareholders at the Company's Annual General Meeting in 2015. As a
result of the large discount to Net Asset Value at which shares
were trading there was little chance of raising new capital. After
extensive shareholder consultation, the Board resolved not to seek
continuation of the Company in 2015 and proposed to Shareholders
that the Company enter into a managed wind-down. This proposal was
approved at an EGM held on 26 April
2013.
The 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 whilst taking account of the target exit date of
December 2015. December 2015 remains the target for the
completion of all sales, however at present it is considered that
the completion of the sale of certain assets may occur early
2016.
The Directors estimate that the wind-down costs will be
approximately £194,272 (€274,216). The Board believes that the
Group has sufficient funds available to meet its wind-down costs,
day-to-day running costs and amounts due in terms of its loan
facilities.
(c) Adoption of new standards and its consequential
amendments
Standards, interpretations and amendments to published
statements currently effective
There are no new standards, interpretations and amendments to
published statements effective as of 1 July
2014 that have a significant impact on the Group’s
Consolidated Financial Statements.
Standards, interpretations and amendments to published
statements not yet effective
At the reporting date of Group’s Consolidated Financial
Statements, the following standard, which was in issue but not yet
effective has not been applied in these Consolidated Financial
Statements:
- IFRS 9 Financial
Instruments (Effective 1 January
2018) – as the Group will not be in existence, it does not
intend to early adopt the standard.
(d) Significant estimates and judgements
The preparation of the Group’s Consolidated Financial Statements
requires management to make judgements, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities, and the accompanying disclosures, and the disclosure
of contingent liabilities. Uncertainty about these assumptions and
estimates could result in outcomes that require a material
adjustment to the carrying amount of assets or liabilities affected
in future periods.
(i)
Judgements:
In the process of applying the Group’s accounting policies,
management has made the following judgements, which have the most
significant effect on the amounts recognised in the Consolidated
Financial Statements:
Functional currency
As disclosed in note 2(e), the Group’s functional currency is
Sterling and the subsidiaries’ functional currency is the Euro. The
Board of Directors considers that the Parent Company’s functional
currency is Sterling, as the capital raised, return on capital and
dividends paid by the Parent Company are in Sterling. The Euro most
faithfully represents the economic effect of the underlying
transactions, events and conditions of the subsidiaries. The Euro
is the currency in which the subsidiaries measure their performance
and reports their results.
Going concern
The Consolidated Financial Statements have been prepared on a
non-going concern basis reflecting the orderly wind-down of the
Group. Further discussions of the Board’s decision to wind-down the
Group, can be found in note 2(b).
Classification of investment
properties as held for sale
The Group has classified certain investment properties as held
for sale. In establishing whether an investment property maybe
transferred to held for sale, the investment property must be
available for immediate sale in its present condition subject only
to terms that are usual and customary for sales of such property
and its sale must be highly probable, as discussed in note 2(o).
Lease classification
The Group has entered into commercial property leases on its
investment property portfolio. The Group has determined, based on
an evaluation of the terms and conditions of the arrangements, such
as the lease term not constituting a substantial portion of the
economic life of the commercial property, that it retains all the
significant risks and rewards of ownership of these properties and
accounts for the contracts as operating leases.
(ii) Estimates
and assumptions
The key assumptions concerning the future and other key sources
of estimation uncertainty at the reporting date, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are described below. The Group based its assumptions and estimates
on parameters available when the Consolidated Financial Statements
were prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or
circumstances arising which are beyond the control of the Group.
Such changes are reflected in the assumptions when they occur.
Revaluation of investment
properties
The Group carries its investment properties at fair value, with
changes in fair value being recognised in the Consolidated Income
Statement.
Properties
are valued quarterly by external independent valuers as at the end
of each calendar quarter. Their valuations are reviewed quarterly
by the Board.
Quarterly valuations of investment properties are carried out by
Knight Frank LLP, external independent valuers to the Group, in
accordance with the Royal Institution of Chartered Surveyors’
(“RICS”) Appraisal and Valuation Standards. The properties have
been valued in accordance with the definition of the RICS Valuation
which is defined as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The valuation
is based on the highest and best use of the investment
properties.
In view of market instability, the valuers refer to the RICS
Valuation Standards Guidance Note 1 (Valuation Uncertainty). The
key assumptions used to determine the market value of the
investment properties are explained further in note 2(l).
Taxes
Uncertainties exist with respect to the interpretation of
complex tax regulations, changes in tax laws, and the timing and
amount of future taxable income. The Group estimates its tax
receivables and liabilities after taking into account the impact of
tax laws and regulation and the timing and amount of future taxable
income.
Deferred tax assets are recognised for unused tax losses to the
extent that it is probable that taxable profit will be available
against which the losses can be utilised. Significant management
judgement is required to determine the amount of the deferred tax
asset that can be recognised, based upon timing and the level of
future taxable profits. Details of tax losses recognised as a
deferred tax asset and the amount of unused tax losses held by the
Group, refer to note 18.
Provisions
In determining the provision for wind-down costs, estimates of
costs have been obtained from the Broker, Administrator and other
parties involved in the managed wind-down of the Company. The
carrying amount of the provision as at 30
June 2015 was £194,272 (€ 274,216).
Value of financial instruments
The Group hold financial instruments that are not quoted in
active markets, such as interest rate swaps.
(e) Foreign currency translation
(i) Foreign currency transactions
Transactions in foreign currencies are translated to
presentation currency at the spot foreign exchange rate ruling at
the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the Consolidated Statement of
Financial Position date are translated to presentation currency at
the foreign exchange rate ruling at that date. Foreign exchange
differences arising on translation are recognised in the
Consolidated Income Statement. Non-monetary assets and liabilities
that are measured at historical cost in a foreign currency are
translated using the exchange rate at the date of the transaction.
Non-monetary assets and liabilities denominated in foreign
currencies that are stated at fair value are translated to
presentation currency at foreign exchange rates ruling at the dates
the fair value was determined.
(ii) Financial statements of foreign operations
The assets and liabilities of foreign operations, arising on
consolidation, are translated to presentation currency at the
foreign exchange rates ruling at the Consolidated Statement of
Financial Position date. The income and expenses of foreign
operations are translated to presentation currency at an average
rate. Foreign exchange differences arising on retranslation are
recognised in other comprehensive income and as a separate
component of equity.
(f) Basis of consolidation
(i) Subsidiaries
The consolidated financial statements comprise the financial
statements of the Company and its subsidiaries as at 30 June each
year. Subsidiaries are fully consolidated from the date of
acquisition, being the date on which the Group obtains control, and
continue to be consolidated until the date when such control
ceases. The financial statements of the subsidiaries are prepared
for the same reporting period as the parent company, using
consistent accounting policies.
ii) Transactions eliminated on
consolidation
All intra-group balances, transactions and unrealised gains and
losses resulting from intra-group transactions are eliminated in
preparing the consolidated financial statements.
(iii) Joint ventures
The Group’s interest in jointly controlled entities are
accounted for using the equity method. The Group recognises the
portion of gains or losses on the sale of assets by the Group to
the joint venture that is attributable to the other ventures
(“Downstream transaction”). The Group recognises its share of
profits or losses from the joint venture that result from the
Group’s purchase of assets from the joint venture until it resells
the assets to an independent party (“Upstream transaction”). When
downstream transactions provide evidence of a reduction in the net
fair value of the assets sold, or of an impairment loss of those
assets, those losses shall be recognised in full by the investor.
When upstream transactions provide evidence of a reduction in the
net fair value of the assets to be purchased or of an impairment
loss of those assets, the investor shall recognise its share in
those losses.
AXA Property Trust Limited, the Company, is the parent of the
Group. It was incorporated in Guernsey on 5 April 2005.
The Company owned the following subsidiaries as at the reporting
date:
|
Investment
in subsidiaries
£000s |
Country of
incorporation |
Date of
incorporation |
Ownership
interest % |
Principal
activities |
Property Trust
Luxembourg 1 S.à r.l. |
1,292 |
Luxembourg |
20 July 2005 |
100 |
Holding company |
Property Trust
Luxembourg 2 S.à r.l. |
1,251 |
Luxembourg |
24 November 2005 |
100 |
Holding company |
Property Trust
Luxembourg 3 S.à r.l. |
152 |
Luxembourg |
2 June 2006 |
100 |
Holding company |
|
2,695 |
|
|
|
|
The Manager will seek to merge or wind up redundant holding
companies from planned disposals within a short time frame to avoid
ongoing administrative expenses.
Owned directly by 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. as at the reporting date:
|
Country of incorporation |
Ownership interest % |
Property Trust Luxembourg 1 S.à
r.l. |
|
|
Property Trust Altenstadt S.à
r.l. |
Luxembourg |
100 |
Property Trust Fürth S.à r.l. |
Luxembourg |
100 |
Property Trust Netherlands 1
B.V. |
Netherlands |
100 |
|
|
|
Property Trust Luxembourg 2 S.à
r.l. |
|
|
Property Trust Rothenburg 1 S.à
r.l. |
Luxembourg |
100 |
Property Trust Kraichtal S.à
r.l. |
Luxembourg |
100 |
Property Trust Dasing S.à r.l. |
Luxembourg |
100 |
Multiplex 1 S.r.l. |
Italy |
100 |
|
|
|
Property Trust Luxembourg 3 S.à
r.l. |
|
|
Property Trust Agnadello S.r.l. |
Italy |
50 |
Property Trust Kali S.à r.l. |
Luxembourg |
100 |
(g) Income recognition
Interest income from banks is recognised on an effective yield
basis.
Rental income from investment property leased out under
operating leases is recognised in the Consolidated Income Statement
on a straight-line basis over the term of the lease. Lease
incentives are amortised over the whole lease term.
(h) Expenses/Other Income
Expenses are accounted for on an accruals basis.
Service costs for service contracts entered into by the Group
acting as the principal are recorded when such services are
rendered. The Group is entitled to recover such costs from the
tenants of the investment properties. The recovery of costs is
recognised as service charged income on an accrual basis.
(i) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call
deposits carried at cost. Cash equivalents are short-term, highly
liquid investments that are readily convertible to known amounts of
cash and which are subject to an insignificant risk of changes in
value.
(j) Dividends
Dividends are recognised as a liability in the period in which
they become obligations of the Company. All dividends are paid as
interim dividends. Interim dividends are recognised when paid.
Final dividends are recognised once they are approved by
shareholders.
(k) Provisions
A provision is recognised in the Consolidated Statement of
Financial Position when the Group has a legal or constructive
obligation as a result of a past event, and it is probable that an
outflow of economic benefits will be required to settle the
obligation.
(l) Investment properties
Investment properties are those which are held to earn rental
income and capital appreciation and are recognised as such once all
material conditions in the exchanged purchase contracts are
satisfied. Investment properties are initially recognised at cost,
being the fair value of consideration given, including associated
transaction costs. Any subsequent capital expenditure incurred in
improving investment properties is capitalised in the period during
which the expenditure is incurred and included within the book cost
of the properties.
After initial recognition, investment properties are measured at
fair value using the fair value model with unrealised gains and
losses recognised in the Consolidated Income Statement. Realised
gains and losses upon disposal of properties are recognised in the
Consolidated Income Statement. Quarterly valuations are carried out
by Knight Frank LLP, external independent valuers, in accordance
with the RICS Appraisal and Valuation Standards. The properties
have been valued in accordance with the definition of the RICS
Valuation which is defined as the price that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The valuation is based on the highest and best use of the
investment properties.
Valuations reflect, where appropriate, the types of tenants
actually in occupation or responsible for meeting lease commitments
or likely to be in occupation after letting of vacant accommodation
and the market's general perception of their creditworthiness, the
allocation of maintenance and insurance responsibilities between
lessor and lessees, and the remaining economic life of the
property. It has been assumed that whenever rent reviews or lease
renewals are pending with anticipated reversionary increases, all
notices and where appropriate counter notices have been served
validly and within the appropriate time.
Subsequent expenditure is charged to the asset’s carrying amount
only when it is probable that future economic benefits associated
with the item will flow to the Group and the cost of the item can
be measured reliably. All other repairs and maintenance costs are
charged to the Consolidated Income Statement during the financial
period in which they are incurred.
Investment properties are derecognised when they have been
disposed. Where the Group disposes of a property at fair value in
an arm’s length transaction, the carrying value immediately prior
to the sale is adjusted to the transaction price, and the
adjustment is recorded in the income statement within gain/(loss)
on disposals of subsidiaries and investment properties.
(m) Leases
The determination of whether an arrangement is, or contains, a
lease is based on the substance of the arrangement at the inception
date. The arrangement is assessed for whether fulfilment of the
arrangement is dependent on the use of a specific asset or assets
or the arrangement conveys a right to use the asset or assets, even
if that right is not explicitly specified in an arrangement.
Leases in which the Group does not transfer substantially all
the risks and benefits of ownership of an asset are classified as
operating leases. Initial direct costs incurred in negotiating an
operating lease are added to the carrying amount of the leased
asset and recognised over the lease term on the same basis as
rental income. Contingent rents are recognised as revenue in the
period in which they are earned.
(n) Financial instruments
(i) Investments at fair value through profit or loss
An instrument is classified as fair value through profit or loss
if it is held for trading or is designated as such upon initial
recognition. Upon initial recognition, attributable transaction
costs are recognised in profit or loss when incurred. Financial
instruments at fair value through profit or loss are measured at
fair value and changes therein are recognised in profit or
loss.
(ii) Loans and receivables
Loans advanced and other receivables are classified as loans and
receivables. Loans and receivables are carried at amortised cost
using the effective interest rate method, less impairment losses,
if any. Gains and losses are recognised in profit or loss when the
loans and receivables are derecognised or impaired.
(iii) Loans and borrowings
All loans and borrowings are initially recognised at fair value
less directly attributable transaction costs. After initial
recognition, interest bearing loans and borrowings are subsequently
measured at amortised cost using the effective interest method.
(iv) Derivative financial instruments
The Group uses derivative financial instruments to hedge its
exposure to interest rate risks arising from financing activities.
However, as disclosed in Note 22, hedge accounting for these
derivative financial instruments ceased to apply .
Derivative financial instruments are recognised initially at
cost which is also deemed to be fair value. Subsequent to initial
recognition, derivative financial instruments are stated at fair
value. The gain or loss on remeasurement to fair value is
recognised immediately in profit or loss.
The fair value of interest rate swaps is the estimated amount
that the Group would receive or pay to terminate the swap at the
Consolidated Statement of Financial Position date, taking into
account current interest rates and the current creditworthiness of
the swap counterparties.
(v) Derecognition of financial instruments
A financial asset is derecognised when:
-
the rights to receive cash flows from the asset have expired;
- the Company retains the
right to receive cash flows from the asset, but has assumed an
obligation to pay them in full without material delay to a third
party under a “pass through arrangement”; or
- the Company has
transferred substantially all the risks and rewards of the asset,
or has neither transferred nor retained substantially all the risks
and rewards of the asset, but has transferred control of the
asset.
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled.
(o) Assets held for sale
Investment property is transferred to assets held for sale when
it is expected that the carrying amount will be recovered
principally through sale rather than from continuing use. For this
to be the case, the property must be available for immediate sale
in its present condition subject only to terms that are usual and
customary for sales of such property and its sale must be highly
probable.
For the sale to be highly probable:
- The Board must be
committed to a plan to sell the property and an active programme to
locate a buyer and complete the plan must have been initiated;
- The property must be
actively marketed for sale at a price that is reasonable in
relation to its current fair value; and
- The sale should be
expected to qualify for recognition as a completed sale within one
year from the date of classification.
As the Company’s investment properties are expected to be
realised through sale on uncertain dates in the future expected by
the end of 2015, the Company has applied judgement in classifying
investment properties as held for sale. On re-classification, an
investment property that is measured at fair value continues to be
so measured.
(p) Impairment
The carrying amounts of the Group's assets, other than
investment property, are reviewed at each Consolidated Statement of
Financial Position date to determine whether there is any
indication of impairment. If any such indication exists, the
asset's recoverable amount is estimated. An impairment loss is
recognised whenever the carrying amount of an asset exceeds its
estimated recoverable amount. Impairment losses are recognised in
the Consolidated Income Statement.
(q) Taxation
The Company has obtained exempt company status in Guernsey under
the terms of the Income Tax (Exempt Bodies) (Guernsey) Ordinance,
1989 and accordingly is subject to an annual fee of £1,200 (2014:
£600). The Directors intend to conduct the Group's affairs such
that it continues to remain eligible for exemption.
The Company's subsidiaries are subject to income tax on any
income arising on investment properties, after deduction of debt
financing costs and other allowable expenses. However, when a
subsidiary owns a property located in a country other than its
country of residence the taxation of the income is defined in
accordance with the double taxation treaty signed between the
country where the property is located and the residence country of
the subsidiary.
Income tax on the profit or loss for the year comprises current
and deferred tax. Current tax is the expected tax payable on the
taxable income for the year as determined under local tax law,
using tax rates enacted or substantially enacted at the
Consolidated Statement of Financial Position date, and any
adjustment to tax payable in respect of previous periods.
Deferred income tax is provided using the liability method,
providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the
amount used for taxation purposes. The amount of deferred tax
provided is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities, using
tax rates enacted or substantially enacted at the Consolidated
Statement of Financial Position date, except in the case of
investment properties, where deferred tax is provided for the
effect of the sale of the properties. Deferred tax assets are
recognised only to the extent that it is probable that future
taxable profits will be available against which the asset is
utilised.
Details of current tax and deferred tax assets and liabilities
are disclosed in note 18.
(r) Hedge accounting
Prior to 1 January 2013, the Group
designated certain hedging instruments, which included derivatives
and non-derivatives in respect of foreign currency exposure and
interest rate risk as cash flow hedges. Based on the requirements
of IAS 39, as the forecast transaction was no longer expected to
occur, hedge accounting was discontinued prospectively.
(s) Determination and presentation of operating
segments
The Board of Directors is charged with setting the Company’s
investment strategy in accordance with the Prospectus. They have
delegated the day to day implementation of this strategy to its
Investment Manager but retain responsibility to ensure that
adequate resources of the Company are directed in accordance with
their decisions. The investment decisions of the Investment Manager
are reviewed on a regular basis to ensure compliance with the
policies and legal responsibilities of the Board. The
Investment Manager has been given full authority to act on behalf
of the Company. Under the terms of the Investment Management
Agreement dated 18 April 2005,
subject to the overall supervision of the Board, the Investment
Manager advised on the general allocation of the assets of the
Company between different investments, advised the Company on its
borrowing policy and geared investment position, managed the
investment of the Company’s subscription proceeds and short-term
liquidity in fixed income instruments and advised on the use of
(and management of) derivatives and hedging by the Company.
Information presented to the Board by the Investment Manager is
based on IFRS.
Whilst the Investment Manager may make the investment decisions
on a day to day basis regarding the allocation of funds to
different investments, any changes to the investment strategy or
major allocation decisions have to be approved by the Board, even
though they may be proposed by the Investment Manager. The Board
therefore retains full responsibility as to the major allocations
made
on an ongoing basis. The Investment Manager will always act under
the terms of the Prospectus and the Investment Management Agreement
dated 18 April 2005 and to the
changes to the investment objective and investment policy approved
at an EGM held on 26 April 2013,
which cannot be radically changed without the approval of the Board
of Directors.
The Board has considered the requirements of IFRS 8, ‘Operating
Segments’. The Board is of the view that the Group is engaged in a
single segment of business, being investment in properties in
Europe. Geographic and Sector analyses of the segment are included
in the Investment Manager’s Report .
3. Material agreements
(i) AXA Investment Managers UK Limited has been appointed as the
Investment Manager of the Group pursuant to an Investment
Management Agreement dated 18 April
2005. The Investment Manager is responsible for advising the
Group on the overall management of the Group's investments and for
managing the Group's investments in fixed income instruments in
accordance with the Group's investment objective and policy,
subject to the overall supervision of the Directors. Under the
terms of the Investment Management Agreement, the Investment
Manager is entitled to a management fee of 90 basis points per
annum of gross assets together with reasonable expenses payable
quarterly in arrears. The management fee shall be reduced by an
amount equal to the fees payable to the Real Estate Adviser by the
property subsidiaries such that the total fees payable by the Group
to the Investment Real Estate Adviser and Investment Manager will
not exceed 90 basis points per annum. Either party may terminate
the Investment Management Agreement with not less than 12 months’
notice in writing.
In view of the change to the Investment Objective and Policy,
the Manager agreed to amend the Management Fee arrangements with
effect from 1 January 2013 in order
to provide better alignment with the objective of the Managed
Wind-down, such that the Manager and/or its Associates will receive
in aggregate (refer to note 5 Investment management fees and
Performance fee):
- a management fee of 1.10
per cent. of NAV (as opposed to 0.90 per cent. of gross assets) per
annum to be paid quarterly in arrears based on the NAV at the end
of the relevant quarter,
- transaction fees of 0.35
per cent. of the gross sales price achieved on each asset sale;
and
- a performance fee of 12.5
per cent. of cash returned to Shareholders in excess of 90 per
cent. of NAV as at 31 December 2012,
with threshold percentage of NAV increasing by 5 per cent per annum
with effect from 1 January 2015 (such that the threshold
percentage for the 12 months from and including 1 January 2015 was 85 per cent of NAV as at
31 December 2012 and increased
to 90 per cent from and including 1 January
2016 and so on for each consecutive year).
This amendment of the management fee was approved by a
resolution of the Shareholders on 26 April
2013.
(ii) Stifel Nicolaus Limited (formerly known as Oriel Securities
Limited) is Sponsor and Broker to the Company.
Fees incurred in 2015 totalled £25,000 (2014: £53,623)
(iii) Northern Trust
International Fund Administration Services (Guernsey) Limited is
Administrator, Secretary and Registrar to the Company pursuant to
the Administration Agreement dated 13 April
2005. Fees incurred in 2015 totalled £145,000
(2014: £175,000).
4. Gross rental income
Gross rental income for the year ended 30
June 2015 amounted to £5.74 million (2014: £7.71 million).
The Group leases out all of its investment property under operating
leases and are usually structured in accordance with local
practices in Germany, Italy and The Netherlands. All leases
benefit from indexation.
Minimum Lease Payments (based on leases in place as at
30 June 2015)
|
30 June 2015 |
30 June 2014 |
|
Rental income
(£000s) |
Rental income
(£000s) |
0-1 year |
8,589 |
7,705 |
1-5 years |
23,909 |
20,794 |
5+ years |
15,401 |
15,257 |
5. General and administrative expenses
|
|
|
|
|
|
|
|
|
|
30 June
2015 |
|
30 June
2014 |
|
|
|
|
|
|
|
|
|
|
£000s |
|
£000s |
Administration fees |
|
|
|
|
|
|
|
|
(292) |
|
(398) |
General expenses |
|
|
|
|
|
|
|
|
|
(975) |
|
(678) |
Audit fees |
|
|
|
|
|
|
|
|
|
(172) |
|
(266) |
Legal and
professional fees |
|
|
|
|
|
|
|
(151) |
|
(314) |
Directors' fees |
|
|
|
|
|
|
|
|
|
(92) |
|
(93) |
Insurance fees |
|
|
|
|
|
|
|
|
|
(38) |
|
(38) |
Liquidation costs |
|
|
|
|
|
|
|
|
|
59 |
|
(13) |
Sponsor's fees |
|
|
|
|
|
|
|
|
|
(25) |
|
(54) |
Investment
management fees |
|
|
|
|
|
|
|
(426) |
|
(461) |
Performance fee |
|
|
|
|
|
|
|
|
|
731 |
|
(423) |
Total |
|
|
|
|
|
|
|
|
|
(1,381) |
|
(2,738) |
At a Board meeting of the Company held on 22 February 2012, the Board resolved to reduce
their Directors’ fees by 10% for 12 months with effect from
1 April 2012. At a Board meeting of
the Company held on 13 June 2013, the
Board resolved to continue to maintain the 10% reduction in fees.
As such, each of the Directors receives a fee of £13,500
(2014: £13,500) and the Chairman receives a fee of £18,000 (2014:
£18,000).
The aggregate remuneration and benefits in kind of the Directors
in respect of the Company's year ended 30
June 2014 amounted to £72,000 (2014: £72,000) in respect of
the Company and £91,985 (2014: £93,039) in respect of the
Group.
6. Net finance cost
|
|
|
|
|
|
|
|
|
|
30 June
2015 |
|
30 June
2014 |
|
|
|
|
|
|
|
|
|
|
£000s |
|
£000s |
Interest
income from bank deposits |
|
|
|
|
|
|
|
- |
|
3 |
Interest
income from JV partners |
|
|
|
|
|
|
|
288 |
|
345 |
Finance costs |
|
|
|
|
|
|
|
|
|
(2,095) |
|
(2,916) |
Total |
|
|
|
|
|
|
|
|
|
(1,807) |
|
(2,568) |
7. Basic and diluted loss per Share
The basic and diluted gain or loss per share for the Group is
based on the net profit for the year of £7.74 million (2014: net
loss of £2.39 million) and the weighted average number of Ordinary
Shares in issue during the year of 89,682,623 (2014:
98,092,929).
8. Dividends
The Company has suspended dividends from June 2012 for the short-term in order to
prudently manage its cash and debt positions. No dividends were
declared or paid during 2014 and 2015.
9. Investment properties
|
|
|
|
|
|
|
|
|
|
|
30 June
2015 |
|
30 June
2014 |
|
|
|
|
£000s |
|
£000s |
Fair value
of investment properties at beginning of year |
67,351 |
|
78,130 |
Capital
expenditure during the year |
|
19 |
|
611 |
Disposals
during the year |
|
(10,503) |
|
- |
Fair value
adjustments |
|
|
4,431 |
|
(2,242) |
Foreign
exchange translation |
|
(8,846) |
|
(2,822) |
Investment properties
transferred from / (to) held for sale |
|
|
|
(28,566) |
|
(6,326) |
Fair value
of investment properties at the end of the year |
23,886 |
|
67,351 |
|
|
|
|
|
|
|
Investment
properties classified held for sale (note 10) |
|
34,892 |
|
6,326 |
|
|
|
|
|
|
|
Total
investment properties |
|
58,778 |
|
73,677 |
All investment properties are carried at fair value.
Investment properties comprise a number of commercial properties
that are leased to third parties.
During the year, the following investment properties were
sold:
- Frankfurter Strasse
(Wuerzburg, Germany) completed in August
2014. Sales price achieved was €5.35 million (£3.8
million).
- Elsdorfer Weg (Koethen,
Germany) completed in October 2014.
Sales price achieved was €2.15 million (£1.5 million)
- Die Weidenbach (Lindheim
(Altenstadt), Germany) completed in May
2015. Sales price achieved was €4.25 million (£3.0
million)
- Eppinger Strasse
(Kraichtal, Germany) completed in June
2015. Sales price achieved was €5.6 million (£4.0
million).
The properties have been valued on the basis of fair value,
which is the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market
participants at the measurement date. Quarterly valuations are
carried out at 31 March, 30 June, 30
September and 31 December by Knight Frank LLP, external independent
valuers.
The fair value of investment properties and investment
properties held for sale are analysed by valuation method,
according to the levels of the fair value hierarchy. The different
levels have been defined as follows:
Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities;
Level 2: inputs other than quoted prices included within Level 1
that are observable for asset or liability, either directly (i.e.
as prices) or indirectly (i.e. derived from prices);
Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
All investment properties and investment properties held for
sale are valued via a level 3 valuation.
The significant assumptions made relating to valuations are set
out below:
2015 Assumptions:
2015 |
Industrial |
Retail |
Leisure |
Total |
Gross Estimated rental value per sqm
p.a. |
€ 42.0 |
€ 121.60 |
€ 180.00 |
€ 64.79 |
-range |
€ 37.50-44.00 |
€ 108.00-141.00 |
€ 180.00 |
€ 26.00-180.00 |
-weighted average |
€ 41.40 |
€ 121.36 |
€ 180.00 |
€ 109.14 |
Net initial yield |
|
|
|
|
-range |
7.21%-9.53% |
6.87%-10.19% |
9.05% |
6.87%-10.19% |
-weighted average |
8.60% |
8.05% |
9.05% |
8.35% |
Reversionary yield |
|
|
|
|
-range |
9.20%-9.58% |
6.54%-8.42% |
8.03% |
6.54%-9.58% |
-weighted average |
9.35% |
7.29% |
8.03% |
7.96% |
True equivalent yield |
|
|
|
|
-range |
9.41%-9.85% |
6.82%-9.07% |
9.03% |
6.82%-9.85% |
-weighted average |
9.59% |
7.68% |
9.03% |
8.41% |
An increase/decrease in ERV will increase/decrease valuations,
while an increase/decrease to yield decreases/increases valuations.
The table below sets out the sensitivity of the valuation to
changes of 50 basis points in yield.
2015 sensitivity:
Movement |
Industrial |
Retail |
Leisure |
Increase of 50 basis points |
Decrease of €1.0 million |
Decrease of €3.35 million |
Decrease of €1.0 million |
Decrease of 50 basis points |
Increase of €1.1 million |
Increase of €3.85 million |
Increase of €0.85 million |
2014 Assumptions:
2014 |
Industrial |
Retail |
Leisure |
Total |
Gross Estimated rental
value per sqm p.a. |
€ 31 |
€
113 |
€
180 |
€
64.36 |
-range |
€
33-54 |
€
26-300 |
€
180 |
€
26-300 |
-weighted average |
€
42.75 |
€
112.72 |
€
180 |
€
72.04 |
Net initial yield |
|
|
|
|
-range |
4.87%-10.75% |
7.51%-10.68% |
9.05% |
4.87%-10.75% |
-weighted average |
8.78% |
8.50% |
9.05% |
8.66% |
Reversionary
yield |
|
|
|
|
-range |
9.19%-10.37% |
7.83%-10.35% |
8.03% |
7.83%-10.37% |
-weighted average |
9.98% |
8.66% |
8.03% |
8.91% |
True equivalent
yield |
|
|
|
|
-range |
9.24%-10.60% |
8.11%-11.25% |
9.07% |
8.11%-11.25% |
-weighted average |
10.28% |
9.08% |
9.07% |
9.40% |
2014 sensitivity:
Movement |
Industrial |
Retail |
Leisure |
Increase of 50 basis points |
Decrease of €1.35 million |
Decrease of €3.25 million |
Decrease of €0.8 million |
Decrease of 50 basis points |
Increase of €1.6 million |
Increase of €3.78 million |
Increase of €1.0 million |
Venray is excluded from 2015 calculations as it is now valued as
a site value plus the residual lease income.
10. Investment properties held for
sale
As at 30 June 2015, the Group
classified the Fuerth property in Germany and Curno property in
Italy as investment properties held for sale (2014: Venray property
in The Netherlands). As at 30 June
2015, the Venray asset has been reclassified as investment
property as the IFRS 5 criteria is not met.
11. Joint venture / Joint venture 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
holds a logistics warehouse in Agnadello, Italy. 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 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
|
|
|
|
|
|
30 June
2015 |
|
30 June
2014 |
|
|
|
|
|
|
£000s |
|
£000s |
Non-current
assets |
|
|
|
|
|
- |
|
17,937 |
Current assets |
|
|
|
|
|
18,469 |
|
1,635 |
Non-current liabilities |
|
|
|
|
- |
|
(8,473) |
Current
liabilities |
|
|
|
|
(14,637) |
|
(9,829) |
Net assets
(100%) |
|
|
|
|
3,832 |
|
1,270 |
Group's
share of net assets (50%) |
|
|
|
50% |
|
50% |
Group's
share of net assets |
|
|
|
1,916 |
|
635 |
Loan
balances due to joint venture partners |
|
|
|
7,137 |
|
8,908 |
Carrying
amount of interest in joint venture |
|
|
|
9,053 |
|
9,543 |
Summarised Consolidated Income Statement
|
|
|
|
|
|
30 June
2015 |
|
30 June
2014 |
|
|
|
|
|
|
£000s |
|
£000s |
Net rental
and related income |
|
|
|
1,512 |
|
1,839 |
Valuation
gains /(losses) on investment property |
|
|
|
2,117 |
|
(167) |
Total
administrative and other expenses |
|
|
|
(172) |
|
(239) |
Other income |
|
|
|
|
|
5 |
|
7 |
Financial
expenses |
|
|
|
|
|
(568) |
|
(773) |
Profit/(loss) before tax |
|
|
|
|
2,896 |
|
667 |
Income tax
expense |
|
|
|
|
16 |
|
(315) |
Profit/(loss) for the year |
|
|
|
2,910 |
|
352 |
Group's
share of profit/(loss) for the year |
|
|
|
1,455 |
|
176 |
|
|
|
|
|
|
|
|
|
Summarised
Consolidated Statement of Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
30 June
2015 |
|
30 June
2014 |
|
|
|
|
|
|
£000s |
|
£000s |
Loss for the year |
|
|
|
|
|
2,910 |
|
352 |
Total
comprehensive income for the year |
|
|
|
2,910 |
|
352 |
Group's
share of comprehensive income for the year |
|
|
|
1,455 |
|
176 |
12. Other investments
Financial assets designated at fair value through profit or loss
includes a 12% equity investment held in the holding company of the
Dutch office portfolio Porto Kali. The investment was acquired for
£1.02 million on 22 June 2007. At
30 June 2015, the fair value of the
investment was nil (2014: nil) as the portfolio of underlying
entities reported negative net assets. The investment Porto Kali
Holdings B.V and its subsidiaries is under administration.
13. Trade and other receivables
|
|
|
|
|
|
|
|
|
|
30 June
2015 |
|
30 June
2014 |
|
|
|
|
|
|
|
|
|
|
£000s |
|
£000s |
Tax
receivable (witholding, corporate and income) |
|
|
|
|
|
|
|
505 |
|
588 |
Investment
property sold receivable |
|
|
|
|
|
|
|
13 |
|
14 |
Other receivables |
|
|
|
|
|
|
|
|
|
92 |
|
234 |
VAT receivable |
|
|
|
|
|
|
|
|
|
67 |
|
330 |
Rent receivable |
|
|
|
|
|
|
|
|
|
45 |
|
37 |
Accrued income |
|
|
|
|
|
|
|
|
|
140 |
|
611 |
Prepayments |
|
|
|
|
|
|
|
|
|
26 |
|
56 |
Total |
|
|
|
|
|
|
|
|
|
888 |
|
1,870 |
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.
14. Trade and other payables
|
|
|
|
|
|
|
|
|
|
30 June 2015 |
|
30 June 2014 |
|
|
|
|
|
|
|
|
|
|
£000s |
|
£000s |
Investment
manager's fee |
|
|
|
|
|
|
|
196 |
|
215 |
Property
manager's fee |
|
|
|
|
|
|
|
|
21 |
|
43 |
Tax
payable (income, transfer, capital and other) |
|
|
|
|
|
|
|
581 |
|
416 |
Interest
payable on loan facility |
|
|
|
|
|
|
|
148 |
|
224 |
Legal and
professional fees |
|
|
|
|
|
|
|
56 |
|
108 |
VAT payable |
|
|
|
|
|
|
|
|
|
35 |
|
- |
Audit fee |
|
|
|
|
|
|
|
|
|
151 |
|
156 |
Administration and Company Secretarial fees |
|
|
|
|
|
|
|
70 |
|
123 |
Rent prepaid |
|
|
|
|
|
|
|
|
|
56 |
|
166 |
Directors' fees |
|
|
|
|
|
|
|
|
|
6 |
|
10 |
Sponsor's fees |
|
|
|
|
|
|
|
|
|
6 |
|
6 |
Other |
|
|
|
|
|
|
|
|
|
256 |
|
633 |
Total |
|
|
|
|
|
|
|
|
|
1,582 |
|
2,100 |
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.
15. Current portion of long-term loans
|
|
|
|
|
|
|
|
|
|
30 June
2015 |
|
30 June
2014 |
|
|
|
|
|
|
|
|
|
|
£000s |
|
£000s |
Secured bank loan |
|
|
|
|
|
|
|
|
|
7,971 |
|
3,586 |
Two assets are classified in current assets as held for sale as
at 30 June 2015 (refer to note 10),
and the related bank loan totalling £7.97 million (€11.25 million)
has been classified as a current liability.
16. Long-term loans
|
|
|
|
|
|
|
|
|
|
30 June
2015 |
|
30 June
2014 |
|
|
|
|
|
|
|
|
|
|
£000s |
|
£000s |
Non-current liabilities |
|
|
|
|
|
|
|
|
|
|
Secured bank loan |
|
|
|
|
|
|
|
|
|
16,099 |
|
28,705 |
Loan due
to third party |
|
|
|
|
|
|
|
90 |
|
97 |
Total |
|
|
|
|
|
|
|
|
|
16,189 |
|
28,802 |
The main loan facility is with Crédit Agricole Corporate and
Investment Bank (“Crédit Agricole”) and Crédit Foncier de France
(“Crédit Foncier”).
The outstanding balance of the main loan (including current
portion) as at 30 June 2015 was
€34.50 million (2014: €41.49 million) (before capitalised debt
issue costs) as a result of the partial loan repayments following
the various asset disposals during the year.
The Group is in compliance with the loan covenants including the
Loan to Value covenant of 60%.
Other terms of the main loan facility at 30 June 2015 are:
Expiry date |
1 July 2016 |
LTV to expiry |
60% |
3-month Euribor |
0.20% |
Margin |
2.40% |
All-in rate swap |
5.326% |
Arrangement
fee |
1.00% |
Amortisation |
None |
The facility is secured through both mortgages and through share
pledges on the property vehicles and their holding companies.
The carrying value of these loans approximates their fair
value.
17. Provisions
|
|
|
|
|
|
|
|
|
|
30 June
2015 |
|
30 June
2014 |
|
|
|
|
|
|
|
|
|
|
£000s |
|
£000s |
Provision
for performance fees |
|
|
|
|
|
|
|
173 |
|
903 |
Provision
for wind-down costs |
|
|
|
|
|
|
|
194 |
|
253 |
Total |
|
|
|
|
|
|
|
|
|
367 |
|
1,156 |
18. Taxation
|
|
|
|
|
|
|
|
|
|
30 June
2015 |
|
30 June
2014 |
|
|
|
|
|
|
|
|
|
|
£000s |
|
£000s |
Effect of: |
|
|
|
|
|
|
|
|
|
|
|
|
Current tax |
|
|
|
|
|
|
|
|
|
|
|
|
Luxembourg |
|
|
|
|
|
|
|
|
|
12 |
|
(1) |
Italy |
|
|
|
|
|
|
|
|
|
158 |
|
178 |
The Netherlands |
|
|
|
|
|
|
|
|
|
89 |
|
(65) |
Germany |
|
|
|
|
|
|
|
|
|
314 |
|
91 |
Total current tax |
|
|
|
|
|
|
|
|
|
573 |
|
203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax |
|
|
|
|
|
|
|
|
|
|
|
|
Investment
property |
|
|
|
|
|
|
|
|
467 |
|
(13) |
Total deferred
tax |
|
|
|
|
|
|
|
|
|
467 |
|
(13) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax charge
during the year |
|
|
|
|
|
|
|
1,040 |
|
190 |
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the
following items:
|
|
|
|
30 June 2015 |
|
|
|
|
Assets |
|
Liabilities |
|
Net |
|
|
|
|
£000s |
|
£000s |
|
£000s |
Investment
property |
|
- |
|
(596) |
|
(596) |
Tax value
of loss carry forwards recognised |
|
86 |
|
- |
|
86 |
Tax
assets/(liabilities) |
|
|
|
86 |
|
(596) |
|
(510) |
|
|
|
|
30 June 2014 |
|
|
|
|
Assets |
|
Liabilities |
|
Net |
|
|
|
|
£000s |
|
£000s |
|
£000s |
Investment
property |
|
- |
|
(269) |
|
(269) |
Tax value
of loss carry forwards recognised |
|
26 |
|
- |
|
26 |
Tax
assets/(liabilities) |
|
|
|
26 |
|
(269) |
|
(243) |
At 30 June 2015, the Group had
unused tax losses amounting to £1.5 million (€2.1 million) (2014:
£12.8 million (€16 million)) for which no deferred tax asset has
been recognised as they are not expected to be utilised.
At 30 June 2015, taxable temporary
differences associated with investments in subsidiaries for which
no deferred tax liability had been recognised totalled £nil (€nil)
(2014: £nil (€nil)).
Movement in temporary differences
|
|
|
|
|
Recognised in |
Foreign |
|
|
|
|
|
|
income |
exchange |
|
|
|
|
|
1 July
2014 |
statement |
translation |
30 June
2015 |
|
|
|
|
£000s |
£000s |
£000s |
£000s |
Investment
property |
|
|
(269) |
(467) |
140 |
(596) |
Tax value
of loss carry forwards recognised |
|
26 |
- |
60 |
86 |
Tax
assets/(liabilities) |
|
|
(243) |
(467) |
200 |
(510) |
|
|
|
|
|
Recognised in |
Foreign |
|
|
|
|
|
|
income |
exchange |
|
|
|
|
|
1 July
2013 |
statement |
translation |
30 June
2014 |
|
|
|
|
£000s |
£000s |
£000s |
£000s |
Investment
property |
|
|
(390) |
(13) |
134 |
(269) |
Tax value
of loss carry forwards recognised |
|
37 |
- |
(11) |
26 |
Tax
assets/(liabilities) |
|
|
(353) |
(13) |
123 |
(243) |
The Parent Company is exempt from Guernsey taxation.
19. Share capital
|
30 June 2015 |
|
30 June 2014 |
|
Number of
Shares |
|
Share
Premium |
|
Number of
Shares |
|
Share
Premium |
|
|
|
£000s |
|
|
|
£000s |
|
|
|
|
|
|
|
|
Shares of no par value
issued and fully paid |
85,684,658 |
|
100,000 |
|
92,534,848 |
|
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 do not
have any special rights attached to the shares.
The Company was authorised at the Annual General Meeting (“AGM”)
on 4 December 2014 to make market
purchases of up to 14.99% of its Ordinary Shares until the
conclusion of the next AGM or 31 December
2015, 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
4 December 2014 (“2014 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 March 2014 |
£
1,999,957 |
3,641,580 |
09 April 2014 |
£
2,099,903 |
3,823,572 |
30 October 2014 |
£
1,999,547 |
3,668,894 |
14 May 2015 |
£
1,799,022 |
3,181,296 |
|
£
7,898,429 |
14,315,342 |
20. Net asset value per ordinary share
The Net Asset Value per Ordinary Share at 30 June 2015 is based on the net assets
attributable to the ordinary shareholders of £49.37 million (2014:
£50.43 million) and on 85,684,658 (2014: 92,534,848) ordinary
shares in issue at the Consolidated Statement of Financial Position
date.
21. Financial risk management
The table below summarises the amounts recognised in the
Consolidated Income Statement in relation to derivative financial
instruments.
|
|
|
|
|
30 June
2015 |
|
30 June
2014 |
|
|
|
|
|
£000s |
|
£000s |
Hedging
reserve recycled to consolidated income statement |
|
|
280 |
|
1,005 |
Current
year fair value movement of ineffective hedges |
|
|
(759) |
|
(697) |
Total (loss)/gain
recognised in the Consolidated Income Statement |
|
|
|
|
(479) |
|
308 |
The Group is exposed to various types of risk that are
associated with financial instruments. The Group's financial
instruments comprise bank deposits, cash, derivative financial
instruments, receivables, loans and payables that arise directly
from its operations. The carrying value of financial assets and
liabilities approximate the fair value.
The main risks arising from the Group's financial instruments
are market risk, credit risk, liquidity risk, interest risk and
currency risk. The Board review and agree policies for
managing its risk exposure. These policies are summarised
below.
Market Price Risk
Property and property related assets are inherently difficult to
value due to the individual nature of each property. As a result,
valuations are subject to uncertainty. There is no assurance that
the estimates resulting from the valuation process will reflect the
actual sales price even where a sale occurs shortly after the
valuation date. Rental income and the market value for properties
are generally affected by overall conditions in the local economy,
such as growth in Gross Domestic Product (“GDP”), employment
trends, inflation and changes in interest rates. Changes in GDP may
also impact employment levels, which in turn may impact the demand
for premises. Furthermore, movements in interest rates may affect
the cost of financing for real estate companies.
Both rental income and property values may be affected by other
factors specific to the real estate market, such as competition
from other property owners, the perceptions of prospective tenants
of the attractiveness, convenience and safety of properties, the
inability to collect rents because of the bankruptcy or the
insolvency of tenants, the periodic need to renovate, repair and
release space and the costs thereof, the costs of maintenance and
insurance, and increased operating costs. The Investment Manager
addresses market risk through a selective investment process,
credit evaluations of tenants, ongoing monitoring of tenants and
through effective management of the properties.
Market price sensitivity analysis
The sensitivity analysis has been determined based on the
exposure to property valuation risks at the reporting date. Any
changes in market conditions will directly affect the profit or
loss reported through the Consolidated Income Statement. A 5%
increase in the value of the direct properties (after deferred tax)
at 30 June 2015 would have increased
net assets and income for the year by £2.35 million (2014: £2.95
million). A decrease of 5% would have had an equal but opposite
effect.
Credit risk
Credit risk refers to the risk that a 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 and derivative financial
instruments is limited because the counterparties are banks with
high credit-ratings assigned by international credit-ratings
agencies. As at 30 June 2014 and
2015, the Group banks with Barclays Bank plc which has a Fitch
rating of F1, HSBC Bank plc with a Fitch rating of F1+ and BIL with
a Fitch rating of A-.
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.
The table below summarises the maturity profile of the Group’s
liabilities.
|
|
|
|
|
|
Less than 3 months |
|
3-12 months |
|
1-3 years |
|
|
|
|
|
|
|
|
|
|
|
Total |
As at 30
June 2015 |
|
|
|
|
£000s |
|
£000s |
|
£000s |
|
£000s |
Interest
bearing loans |
|
|
|
|
- |
|
- |
|
16,189 |
|
16,189 |
Current
portion of long-term loans |
|
|
|
- |
|
7,971 |
|
- |
|
7,971 |
Trade and
other payables |
|
|
|
- |
|
1,582 |
|
- |
|
1,582 |
Derivative
financial instruments |
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
|
|
|
- |
|
- |
|
811 |
|
811 |
Total |
|
|
|
|
|
- |
|
9,973 |
|
17,000 |
|
26,973 |
|
|
|
|
|
|
Less than 3 months |
|
3-12 months |
|
1-3 years |
|
|
|
|
|
|
|
|
|
|
|
Total |
As at 30
June 2014 |
|
|
|
|
£000s |
|
£000s |
|
£000s |
|
£000s |
Interest
bearing loans |
|
|
|
|
- |
|
- |
|
28,802 |
|
28,802 |
Current
portion of long-term loans |
|
|
|
- |
|
3,586 |
|
- |
|
3,586 |
Trade and
other payables |
|
|
|
1,469 |
|
631 |
|
- |
|
2,100 |
Derivative
financial instruments |
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
|
|
|
- |
|
- |
|
1,783 |
|
1,783 |
Total |
|
|
|
|
|
1,469 |
|
4,217 |
|
30,585 |
|
36,271 |
Interest rate risk
Floating rate financial assets comprise the cash balances which
bear interest at rates based on bank base rates. The Group is
exposed to cash flow risk as the Group borrows funds under the loan
facility with Crédit Agricole and Crédit Foncier at floating
interest rates. The Group manages this risk by using interest rate
swaps and caps denominated in Euro. At 30
June 2014, the Group had interest rate swaps with a notional
contract amount of £24.44 million (€34.50million) (2014: £32.43
million (€40.50 million).
Following the orderly and managed wind-down of the Group and as
discussed in Note 22b, and the consequent repayment of external
loans, hedging reserves of £0.28 million loss deferred in equity
related to the interest rate swaps that were cancelled and settled
during the year were recycled to profit or loss for the period
ended 30 June 2015 (2014: £0.74
million loss). Current movement of fair value amounting to £0.76
million gain due to the ineffectiveness of hedge accounting of
interest rate swaps is recognized in profit or loss for the period
ended 30 June 2015 (2014: £0.70
million gain).
The Group has entered into interest rate swaps and caps for the
period of the main loan facility, effective from 1 July 2011 to 1 July
2016, to eliminate floating interest rate risk. Details of
the hedging contracts are below:
|
Counterparty |
Contract Rate |
Notional Amount |
Interest Rate Swaps |
Crédit Agricole |
2.795% |
€34.50 million |
|
|
|
|
|
|
Company |
|
|
|
|
|
|
30 June 2015 |
|
30 June 2014 |
|
|
|
|
|
|
Assets |
|
Liabilities |
|
Assets |
|
Liabilities |
|
|
|
|
|
|
£000s |
|
£000s |
|
£000s |
|
£000s |
Non-current |
|
|
|
|
|
|
|
|
|
|
|
|
Interest
rate swaps and caps |
|
|
|
- |
|
811 |
|
- |
|
1,783 |
Total |
|
|
|
|
|
- |
|
811 |
|
- |
|
1,783 |
The following table details the notional principal amounts, fair
values and maturity profiles of the remaining items of interest
rate swap contracts outstanding as at the reporting date.
|
|
Average contracted fixed |
|
Notional principal |
|
|
|
|
|
|
interest rate |
|
amount |
|
Fair value |
|
|
30 June
2015 |
|
30 June
2014 |
|
30 June
2015 |
|
30 June
2014 |
|
30 June
2015 |
|
30 June
2014 |
|
|
% |
|
% |
|
€000s |
|
€000s |
|
£000s |
|
£000s |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
rate swaps and caps |
|
|
|
|
|
|
|
|
|
|
2 - 5 years |
|
2.795% -
3.50% |
2.795% - 3.50% |
|
34.497 |
|
40,500 |
|
(811) |
|
(1,783) |
The interest rate swaps settle on a quarterly basis. The basis
of floating rate is 3-month Euribor which at the year-end was
-0.014% (2014: 0.207%). The Group will settle the difference
between the fixed and floating rate on a net basis.
Interest re-pricing
As at 30 June 2015
|
|
|
|
|
Total as
per |
|
|
|
|
|
|
|
Effective
interest rate |
|
statement
of financial position |
|
Fixed
rate |
|
Floating
rate
3 months or less |
|
|
|
% |
|
£000s |
|
£000s |
|
£000s |
Financial assets |
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
|
8,078 |
|
- |
|
8,078 |
Total |
|
|
|
|
8,078 |
|
- |
|
8,078 |
|
|
|
|
|
|
|
|
|
|
Financial
liabilities |
|
|
|
|
|
|
|
|
Current
portion of long-term loans |
3.14% |
|
7,971 |
|
- |
|
7,971 |
Long-term loans |
|
|
3.09% -
5.0% |
|
16,189 |
|
90 |
|
16,099 |
Total |
|
|
|
|
24,160 |
|
90 |
|
24,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 30 June 2014 |
|
|
|
|
|
Total as
per |
|
|
|
|
|
|
|
Effective
interest rate |
|
statement
of financial position |
|
Fixed
rate |
|
Floating
rate
3 months or less |
|
|
|
% |
|
£000s |
|
£000s |
|
£000s |
Financial assets |
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
|
3,008 |
|
- |
|
3,008 |
Total |
|
|
|
|
3,008 |
|
- |
|
3,008 |
|
|
|
|
|
|
|
|
|
|
Financial
liabilities |
|
|
|
|
|
|
|
|
Current
portion of long-term loans |
3.14% |
|
3,586 |
|
- |
|
3,586 |
Long-term loans |
|
|
3.09% -
5.0% |
|
28,802 |
|
97 |
|
28,705 |
Total |
|
|
|
|
32,388 |
|
97 |
|
32,291 |
Foreign currency risk
The European subsidiaries 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 following table sets out the total exposure to foreign
currency risk and the net exposure to foreign currency of monetary
assets and liabilities based on notional amounts.
|
|
|
|
|
|
|
|
Monetary |
|
Monetary |
|
Net |
|
|
|
|
|
|
|
|
assets |
|
liabilities |
|
exposure |
|
|
|
|
|
|
|
|
£000s |
|
£000s |
|
£000s |
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 June 2015 |
|
|
|
|
|
|
|
8,350 |
|
(25,742) |
|
(17,392) |
At 30 June 2014 |
|
|
|
|
|
|
|
4,878 |
|
(34,488) |
|
(29,610) |
Foreign currency risk sensitivity
The following table demonstrates the sensitivity to potential
fluctuations in the Euro exchange rate (ceteris paribus) of the
Group’s equity.
|
|
|
|
|
|
|
|
|
|
Increase/decrease |
|
Effect
on equity |
|
|
|
|
|
|
|
|
|
|
in
Euro |
|
and
income |
|
|
|
|
|
|
|
|
|
|
exchange
rate |
|
£000s |
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 June 2015 |
|
|
|
|
|
|
|
|
|
+5% |
|
860 |
|
|
|
|
|
|
|
|
|
|
-5% |
|
(860) |
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 June 2014 |
|
|
|
|
|
|
|
|
|
+5% |
|
1,481 |
|
|
|
|
|
|
|
|
|
|
-5% |
|
(1,481) |
Derivative financial instruments are recognised initially at
cost which is also deemed to be fair value. Subsequent to initial
recognition, derivative financial instruments are stated at fair
value. The gain or loss on remeasurement to fair value is
recognised immediately in profit or loss.
The fair value of interest rate swaps is the estimated amount
that the Group would receive or pay to terminate the swap at the
Consolidated Statement of Financial Position date, taking into
account current interest rates and the current creditworthiness of
the swap counterparties.
Derecognition of financial instruments
A financial asset is derecognised when:
-
the rights to receive cash flows from the asset have expired;
- the Company retains the
right to receive cash flows from the asset, but has assumed an
obligation to pay them in full without material delay to a third
party under a “pass through arrangement”; or
- the Company has
transferred substantially all the risks and rewards of the asset,
or has neither transferred nor retained substantially all the risks
and rewards of the asset, but has transferred control of the
asset.
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled.
The table below analyses financial instruments carried at fair
value, by valuation method. The different levels have been
defined as follows:
Level 1: quoted (unadjusted) prices in active
markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included
within Level 1 that are observable for asset or liability, either
directly (i.e. as
prices) or indirectly (i.e. derived from prices);
Level 3: inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
|
|
|
|
|
|
|
|
Level
1 |
|
Level
2 |
|
Level
3 |
30 June
2015 |
|
|
|
|
|
|
£000s |
|
£000s |
|
£000s |
Liabilities measured at fair value |
|
|
|
|
|
|
|
|
|
|
Interest
rate swaps and caps |
|
|
|
|
|
- |
|
811 |
|
- |
Total |
|
|
|
|
|
|
|
- |
|
811 |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level
1 |
|
Level
2 |
|
Level
3 |
30 June
2014 |
|
|
|
|
|
|
£000s |
|
£000s |
|
£000s |
Liabilities measured at fair value |
|
|
|
|
|
|
|
|
|
|
Interest
rate swaps and caps |
|
|
|
|
|
- |
|
1,783 |
|
- |
Total |
|
|
|
|
|
|
|
- |
|
1,783 |
|
- |
The Group had the following derivative contracts outstanding as
at the reporting dates:
|
|
|
|
|
|
30 June 2015 |
|
|
|
|
|
|
|
|
Fixed
interest |
|
Notional
amount |
|
Fair
value |
Counterparty |
|
|
|
Settlement date |
|
rate |
|
€000s |
|
£000s |
Interest
rate swaps |
|
|
|
|
|
|
|
|
|
|
|
Crédit
Agricole Corporate & Investment Bank |
|
|
|
01/07/2016 |
2.795% |
|
39,497 |
|
(811) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 June 2014 |
|
|
|
|
|
|
|
|
Fixed
interest |
|
Notional
amount |
|
Fair
value |
Counterparty |
|
|
|
Settlement date |
|
Fixed
interest rate |
|
€000s |
|
£000s |
Interest
rate swaps |
|
|
|
|
|
|
|
|
|
|
|
Crédit
Agricole Corporate & Investment Bank |
|
|
|
01/07/2016 |
2.795% |
|
40,500 |
|
(1,783) |
22. Reserves
(a) Revaluation reserves
Revaluation reserves of the Group arose from the revaluation of
investment properties, financial assets and derivatives. The
amounts in these reserves have already been recognised through the
Consolidated Income Statement and therefore are an allocation of
the results for the year.
(b) Hedging reserves
Hedging reserves comprise the effective portion of the cumulative
net change in the fair value of hedging instruments.
|
|
|
|
|
|
|
|
|
|
30 June
2015 |
|
30 June
2014 |
|
|
|
|
|
|
|
|
|
|
£000s |
|
£000s |
Balance at
the beginning of financial year |
|
|
|
|
|
|
|
(4,618) |
|
(5,623) |
Movement
on cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
Interest rate
swaps |
|
|
|
|
|
|
|
|
280 |
|
741 |
|
Cross currency
swaps |
|
|
|
|
|
|
|
|
- |
|
264 |
Net change in fair
value of hedges |
|
|
|
|
|
|
|
|
|
280 |
|
1,005 |
Balance at end of
financial year |
|
|
|
|
|
|
|
|
|
(4,338) |
|
(4,618) |
Following the decision at the EGM on 26
April 2013, to enter into a managed wind down of the
Company, the criteria for hedge accounting of the interest rate
swaps are no longer met. The loan is expected to be fully settled
following the last asset disposal (likely to be during the first
quarter of calendar year 2016), whereas the interest rate swaps
mature 1 July 2016. The critical
terms of the hedge and the hedged item are no longer deemed to
match and hedge accounting ceased to apply from 1 January 2013 onwards.
(c) Distributable reserves
Distributable reserves arose from the cancellation of the share
premium account pursuant to the special resolution passed at the
EGM on 13 April 2005 and approved by
the Royal Court of Guernsey on 24 June
2005.
(d) Foreign currency reserves
Foreign currency reserves arose as a result of the translation of
the financial statements of foreign operations, the functional and
presentation currency of which is not Sterling.
23. NAV Reconciliation
The following is a reconciliation of the NAV per share
attributable to ordinary shareholders as presented in these
financial statements, using IFRS to the NAV per share reported to
the LSE:
|
|
|
|
|
|
NAV
per |
|
|
|
|
|
|
Ordinary |
|
|
|
|
NAV |
|
Share |
|
|
|
|
£000s |
|
£ |
|
|
|
|
|
|
|
Net Asset
Value reported to London Stock Exchange |
|
49,463 |
|
57.73 |
Adjustment
on Property Trust Netherlands 1 B.V. |
|
(96) |
|
(0.12) |
Net Assets
Attributable to Shareholders per Financial Statements |
|
49,367 |
|
57.61 |
24. Related party transactions
The Directors are responsible for the determination of the
Company's investment objective and policy and have overall
responsibility for the Group's activities including the review of
investment activity and performance.
Mr Hunter, Chairman of the Company and Mr Spaninks, a Director
of the Company, formed the majority of the Directors of its
subsidiaries, Property Trust Luxembourg 1 S.à r.l., Property Trust
Luxembourg 2 S.à r.l. and Property Trust Luxembourg 3 S.à r.l. and
were able to control the investment policy of the Luxembourg
subsidiaries to ensure it conforms with the investment policy of
the Company until Mr Spaninks resignation from the Boards of
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. on 11 October 2013.
Mr Farrell, a Director of the Company, is also a Partner in
Mourant Ozannes, the Guernsey legal advisers to the Company. The
total charge to the Consolidated Income Statement during the period
in respect of Mourant Ozannes legal fees was nil (2014: £2,145), of
which £nil (2014: £nil) remained payable at the year end.
Mr Lawson, a Director of the Company, was a Director of the
Administrator and Secretary, Northern Trust International Fund
Administration Services (Guernsey) Limited until 13 December 2013, when he became a Director 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 (2014:
£175,000) of which £nil (2014: £36,250) 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 year, fees of £0.43
million (2014: £0.46 million) were expensed to the Consolidated
Income Statement. Following the various asset disposals,
transaction fees of 35 bps were paid on the gross sales price;
totalling £0.04 million on all sales (2014: £0.08 million). During
the year, a provision for the performance fee was reversed by
-£0.73 (2014: +£0.42 million). The amount had been provided under
the terms of the Investment Management Agreement.
All the above transactions were undertaken at arm’s-length.
25. Commitments
Guarantees
The Company has provided mortgages over the properties in favour
of the lenders, Crédit Agricole and Crédit Foncier, as security for
the main loan facility.
26. Subsequent events
These financial statements were approved for issuance by the
Board on 22 October 2015. Subsequent
events have been evaluated until this date.
Sales
A binding offer of Furth was notarised on the 29 September 2015.
Capital redemption
A capital redemption of £5.2 million was approved by the
directors, with a redemption date of 20 July
2015 and payment date of 30 July
2015.
Fund Management
As mentioned in the Chairman’s Statement Martin McGuire, Fund
Manager, has resigned his position at AXA Investment Managers and
will leave that organisation on 27th
November 2015. His role will be taken on by Ian Chappell,
Senior Fund Manager, with effect from that date.
Corporate Information
Directors (All non-executive)
C. J. Hunter (Chairman)
G. J. Farrell
S. C. Monier
S. J. Lawson
A. Spaninks
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
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
P.O. Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3QL
Channel Islands
Registrar
Computershare Investor Services (Guernsey) Limited
3rd Floor
Natwest House
Le Truchot
St Peter Port
Guernsey
GY1 1WD
Channel Islands
Independent Auditor
KPMG Channel Islands Limited
Glategny Court, Glategny Esplanade
St Peter Port
Guernsey
GY1 1WR
Channel Islands