To:
Company Announcements
Date:
31 October 2017
Company: AXA
Property Trust Limited
Subject:
Annual Financial Report
AXA Property Trust Limited
Annual Report and Consolidated Financial Statements for the year
ended 30 June 2017
LEI: 213800AF85VEZMDMF931
(Classified Regulated Information, under DTR 6 Annex 1 section
1.1)
The Company has today, in accordance with DTR 6.3.5, released
its Annual Report and Financial Statements for the year ended
30 June 2017.
Key Financial Information
As at 30 June
2017
· Sterling currency Net Asset
Value (“NAV”) was £15.7 million (30 June
2016: £38.7 million)
· NAV was 66.94 pence per share (30
June 2016: 67.20 pence)
· Share price1 was
61.25 pence per share (30 June 2016: 55.13
pence)
· Gearing2 was 0%
(gross and net) (30 June 2016: 32.1%
Gross and 26.6% Net)
For the year ended 30 June 2017
· Loss was 1.92 pence per share (year ended 30 June 2016: profit was 2.08 pence per share)
· No dividends were paid relating
to the year
· Redemption of shares paid during
the year were £24.0 million (year ended 30
June 2016: £16.2 million)
1 Mid market share price (source: Stifel Nicolaus
Europe Limited).
2 Gearing is calculated as overall debt, either gross
or net of cash (net of cash allocated to post-quarter distribution,
debt repayment and other commitments) held by the group over
property portfolio fair value.
Performance Summary
|
Year
ended
30 June 2017 |
Year
ended
30 June 2016 |
%
change |
NAV (£000s) |
15,665 |
38,694 |
(59.5%) |
NAV per share |
66.94p |
67.20p |
(0.4%) |
(Loss)/Gain per
share |
(1.92)p |
2.08p |
n/a |
Share redemptions
paid |
£24.0m |
£16.2m |
48.1% |
Share
price1 |
61.25p |
55.13p |
11.1% |
Share price discount
to NAV |
8.5% |
18.0% |
n/a |
Gearing
(gross)2 |
0% |
32.1% |
(100.0%) |
Total assets less
current liabilities (£000s)3 |
16,164 |
40,475 |
(60.0%) |
The 2017 NAV is presented after deduction of £24.0 million of
redemption payments.
Total annual
return |
Year
ended
30 June 2017 |
Year
ended
30 June 2016 |
NAV Total
Return4 |
2.5% |
11.2% |
Share price Total
Return |
|
|
- AXA Property
Trust |
23.0% |
29.6% |
- FTSE All Share
Index |
18.1% |
2.2% |
- FTSE Real Estate
Investment Trust Index |
9.2% |
-8.3% |
Past performance is not a guide to
future performance.
1 Mid-market share price (source: Stifel Nicolaus
Europe Limited).
2 Gearing is calculated as overall debt, either gross
or net of cash held by the Group over property portfolio at fair
value.
3 Includes bank debt classified as a current
liability.
4 On a pro-forma basis which includes adjustments to
add back any prior NAV reductions from share redemptions.
Source: AXA Investment Managers UK Limited and Stifel
Nicolaus Europe Limited
Chairman’s Statement
Three sales were completed during the year at prices slightly
below valuation in accordance AXA Property Trust Limited’s (the
“Company”) agreed disposal strategy. These transactions were
detailed in the Half Year Report and below in the Investment
Managers’ Report. The Board regret that since that report no
substantive progress has been made in the sales campaign of the
Company’s one remaining asset, the Multiplex cinema outside Bergamo
in Northern Italy. This is despite
an ongoing marketing process.
Results
The Company and its subsidiaries (together the “Group”) made a
total net loss after tax of £0.9 million for the year to
30 June 2017. The Net Asset Value per
share of the Company at 30 June 2017
was 66.94 pence (30 June 2016: 67.20
pence), a 0.4% decrease compared to 30 June 2016.
The mid-market price of the Company’s shares on the London Stock
Exchange on 30 June 2017 was
61.25 pence (30 June 2016: 55.13
pence), representing a discount of 8.5% to the Company’s NAV
at 30 June 2017
(30 June 2016: 18.0%).
Return of Capital to shareholders
No dividends were declared during the period and the dividend
policy remains unchanged.
During the financial year the Company returned £24.0 million
capital to shareholders by means of two capital redemptions: £18.4
million on 17 February 2017 and £5.6
million on 23 June 2017.
Bank Finance and Deleveraging
During the year, the Group repaid the main loan with Crédit
Agricole and Crédit Foncier, leaving the Company with no
outstanding external loan.
Prospects
The Manager and the Company’s agents continue to pursue all
avenues that might lead to a sale of the remaining property asset.
Let to a major film distribution company it continues to deliver a
secure income stream, and although the investment market for such
assets has hitherto been illiquid, the Board and Manager do not
believe it is in the Company’s interest to entertain a “forced
sale”. The completion of any transaction is now unlikely until the
first half of 2018.The Board has instructed the Investment Manager
to identify and assess all opportunities to minimise the operating
expenses whilst marketing continues. The Board do expect, prior to
any sale transaction, to be able to make a further return of
capital to shareholders.
Charles
Hunter
Chairman
31 October 2017
Investment Manager’s Report
Investment Manager
AXA Investment Managers UK Limited (the “Investment Manager”,
“AXA IM”) is the UK subsidiary of AXA Investment Managers, a
dedicated asset manager within the AXA Group. AXA Investment
Managers is an active, long term, global multi asset investor with
Asset Under Management (“AUM”) of €735 billion as at 30 June 2017.
AXA Real Estate Investment Managers UK Limited (the “Real Estate
Adviser”) is part of the real estate management arm of AXA
Investment Managers S.A. (“AXA IM Real Assets”). AXA IM Real Assets
offers a 360° view of real asset markets, investing in both equity
and debt, across different geographies and sectors, and via private
and listed instruments. AXA IM Real Assets compromises about 650
people in 15 offices around the world, operating in over 20
countries.
Source: AXA Investment Managers UK Limited
Fund Manager
Ian Chappell was appointed as the
Fund Manager for AXA Property Trust in November 2015. He has very broad experience
across Europe's real estate
markets, having worked through several market cycles over the past
20 years and transacting and managing real estate assets covering
core, core plus and value added strategies.
Ian graduated from Nottingham Trent
University in 1991 and also holds a Master of Arts from the
University of Newcastle Upon Tyne
(1992). He was elected as Member of the Royal Institution of
Chartered Surveyors in 1993. Ian is also a member of AXA IM Real
Assets' Executive Committee.
Market Outlook
Eurozone GDP growth accelerated by a seasonally adjusted 0.6%
quarter-on-quarter (q-o-q) in Q1 2017, the fastest rate of growth
in two years. Household consumption and fixed investment were the
main drivers, whereas imports offset exports, with the net result
that the external sector provided a neutral contribution to growth.
Among the major Eurozone economies, Spain remained the strongest performer, with
GDP growth reaching 0.8%, followed by Germany (0.6%), France (0.5%) and Italy (0.4%). In contrast, GDP growth in the
UK slowed to 0.2% in Q1 2017, its weakest quarter since Q1 2016,
partly in response to a rise in inflation and a weakening of growth
in the large services sector. Having increased to 2% in
February 2017, harmonised CPI in the
Eurozone had moderated to 1.3% in June, largely because energy
prices rises decelerated. Harmonised CPI in the UK declined from
2.9% in May to 2.6% in June. Growth appears to have picked up
further momentum in the Eurozone in Q2, according to recent data
and surveys that point to rising output and greater confidence.
Despite stronger momentum in the first half of the year,
Eurozone GDP is forecast to grow at around the same rate in 2017 as
in 2016 (1.8%). Higher inflation and political uncertainty -
notably as a result of Article 50 being triggered in March 2017 and elections during the year in
the Netherlands, France, the UK, Germany and, potentially, Italy - are expected to affect spending by
both businesses and households. Consumer spending is expected to
remain a key driver of economic growth but, in the absence of
strong wage growth, higher inflation (forecast to be 1.6% in 2017,
after 0.2% in 2016) is projected to have an overall negative impact
on growth. However, exports are expected to increase, reflecting a
strengthening and broadening of the global recovery. Although there
is still considerable disparity in conditions, some convergence
between GDP growth rates in Eurozone countries is expected. While
still low by historical standards, long-term government bond yields
are forecast to rise modestly in 2017, in a continuation of the
pattern seen in the final quarter of 2016. However, increased
volatility is expected throughout 2017, given the political risk
around the world and the uncertain outlook for asset purchase
tapering and interest rate normalisation.
Italy's GDP growth accelerated
from 0.3% quarter-on-quarter (q-o-q) in Q4 2016 to 0.4% in Q1 2017.
Growth was driven by an acceleration in inventory building and
household spending, with the latter boosted by a rise in employment
and fall in unemployment; the unemployment rate stood at 11.3% in
May 2017, after peaking at 13% in
November 2014. However, fixed
investment and net exports contributed negatively to growth.
Italy's economy faces some
severe headwinds and underlying growth momentum is weak; AXA IM’s
forecast is for GDP growth of 1.2% in 2017 as a whole, after 1% in
2016, one of the weakest growth rates in the Eurozone. A key risk
is Italy’s fragile banking sector. In June, the European Commission
approved the use of Italian public funds for a precautionary
recapitalisation of Monte dei Paschi di Siena and the liquidation
of two failing regional banks. While these plans will remove bad
loans, improve confidence and increase consolidation in Italy’s
banking sector, they will also increase public debt, and there is a
risk that other regional banks may yet need aid. There is also a
risk that continued political uncertainty and the government’s
narrow agenda will constrain economic growth. General elections are
required by early 2018. Matteo Renzi
won back control of the ruling Democratic Party (PD) in an
April 2017 primary and the PD and
populist Five Star Movement (M5S) are currently leading national
polls. However, while Forza Italia (FI) and the Northern League
(LN) are currently trailing far behind, their popularity has
increased according to recent polls and candidates from FI and LN
won several key municipal elections in June.
Asset Management Update
During the year the Company completed the sale of the three
following assets:
- Dasing was sold in
August 2016 for €7.45 million
- Agnadello was sold in
November 2016 for €23.2 million (at
JV level)
- Rothenburg was sold in
January 2017 for €22.02 million
The sole remaining asset comprises the cinema investment in
Curno, Italy.
The asset has been continually marketed and although interest
had been received from two prospective parties during the period,
neither proceeded to a successful conclusion. Despite the high
level of transaction turnover within the Italian commercial real
estate market, the specialised nature of the asset and the opening
of a new cinema in nearby Orio Center appear to be particular
challenges. The Manager has adjusted the marketing strategy to
identify investors with a known focus to the cinema and leisure
sector and this has resulted in further interest which is now being
pursued.
Despite the challenging liquidity constraints, the tenant
remains committed to the location and cash flow generation is
strong, with rents paid on time and there are no unforeseen
expenditure requirements.
Property Portfolio at 30 June 2017
Investment
name |
Country |
Sector |
Net
Yield on valuation1 |
Curno, Bergamo |
Italy |
Leisure |
10.37% |
1 Source - external independent valuers to the
Company, Knight Frank LLP.
Source: AXA Real Estate Investment Managers UK Limited
Covenant Strength Analysis at
30 June 2017
(based on rental income)
Grade A |
100% |
Creditreform:<199; D&B:A
1 |
Average unexpired lease length profile
(weighted by rental income)
|
30 June 2017 |
30 June 2016 |
|
Years |
Years |
Grade A |
7.5 |
8.2 |
Grade B |
- |
8.4 |
Grade C |
- |
3.9 |
Average |
7.5 |
8.1 |
The figures as at end of June 2017
relates to the Multiplex, Curno asset only whereas figures as at
end of June 2016 also include the
three assets sold during the financial year.
The Company’s tenant covenant profile is strong. The average
rent-weighted unexpired lease length for the investment portfolio
as at 30 June 2017 was 7.5 years.
Lease expiry profile weighted by
rental income
Years |
30 June
2017
% of income |
30 June
2016
% of income |
Vacant |
0.0% |
3.7% |
0-5 |
0.0% |
38.6% |
5-10 |
100% |
29.5% |
10+ |
0.0% |
28.2% |
Source: AXA Real Estate Investment Managers UK Limited
Financing
The bank loan from CA-CIB Crédit Agricole and Crédit foncier was
fully repaid in December 2016 prior
to the loan maturity, using sales proceeds from Agnadello
transaction. As at 30 June 2017 the
Company has no outstanding loan with banks.
Fund
Gearing1 |
30
June 2017 |
30
June 2016 |
Property
portfolio |
£12.31m |
£46.79m |
Borrowings2 |
£0.00m |
£15.02m |
Total gross
gearing |
0.0% |
32.1% |
Total net gearing |
0.0% |
26.6% |
1 Fund gearing is included to provide an
indication of the overall indebtedness of the Group and does not
relate to any covenant terms in the Group’s loan facilities. Gross
gearing is calculated as debt over property portfolio at fair value
including the JV asset at Agnadello. Net gearing is calculated as
debt less unallocated cash over property portfolio at fair value
including the JV asset at Agnadello.
2Borrowings included the main facility,
amortised debt issue costs and minority interests.
AXA Investment Managers UK Limited
31 October 2017
Board of Directors
Charles Hunter (Chairman)
has over 30 years of experience in property investment, principally
in UK commercial property. He was Head of Property Investment of
Insight Investment (formerly Clerical Medical Investment Group) for
some nine years and before that Property Director of the investment
management subsidiaries of The National Mutual of Australasia group
in the United Kingdom. He is
currently a director of Care South and he was on the Supervisory
Board of Schroder Exempt Property Unit Trust until its conversion
to a PAIF in 2012. Mr Hunter is a Fellow of the Royal Institution
of Chartered Surveyors and a member of the Investment Property
Forum. He is resident in the United
Kingdom.
Stephane Monier has over
25 years of investment experience (including asset allocation,
fixed income and foreign exchange). Mr Monier is currently Head of
Investments at Bank Lombard Odier & Cie Ltd. He is responsible
for the investment process and the performance for private clients’
portfolios. Mr Monier joined the Lombard Odier group in 2009 on the
institutional side (Lombard Odier Investment Managers or LOIM). He
was initially Global Head of Fixed Income and Currencies for LOIM
and then promoted to Deputy Global Chief Investment Officer. Prior
to joining LOIM, Mr Monier was Global Head of Fixed Income and
Currencies at Fortis Investments from 2006 to 2009 and he also
occupied the very same position at the Abu Dhabi Investment
Authority from 1998 to 2006. Prior to Abu
Dhabi, Mr Monier spent seven years in JP Morgan Investment
Management as a Fixed Income Manager both in London and Paris from 1991 to 1998. Mr Monier has a
Masters Degree in Science from Agrotech (Paris) and a Masters Degree in International
Finance from HEC Graduate School of Business (Jouy en Josas)
(France). He is also a CFA
charterholder. He is resident in Valais, Switzerland.
Gavin Farrell is qualified
as a Solicitor of the Supreme Court of England and Wales, a French Avocat and an Advocate of the
Royal Court of Guernsey. He worked
for a number of years at Simmons & Simmons in their
London and Paris offices, both in the general corporate
and financial services/funds departments. He then moved to
Guernsey in 1999 where he was
called as an Advocate of the Royal Court of Guernsey. Gavin became a partner in 2003 of
the corporate department of Ozannes, then Mourant Ozannes. Gavin
left Mourant Ozannes in November 2016
to establish his own practice Ferbrache & Farrell. His practice
covers general corporate and banking work, funds and the asset
management industry. Gavin holds a number of directorships in
investment and captive insurance companies. He is a resident of
Guernsey and has been ranked as a
leading individual in banking, corporate and investment funds by a
number of publications as well as having been elected for a number
of years as a Top Five Global Offshore Funds Lawyers in Who's Who
Private Funds.
Stuart Lawson is a Fellow
of the Chartered Association of Certified Accountants. He joined
Northern Trust in 1988 working in Fund Administration and Trust
client accounting before being appointed Head of Finance for the
office in 1996 where he established a Risk Management Department.
In 2005 he was appointed Chief Administration Officer for
Guernsey with local responsibility
for finance, risk, compliance, corporate services and
communication, and in 2007 he assumed responsibility for Real
Estate and Infrastructure Fund Administration services for the EMEA
region. He is currently a product manager for alternative asset
services across the EMEA region, is a Director of a number of
client entities and Chairman of Northern Trust (Guernsey) Limited. He has 30 years of
experience in the Financial Services Industry and is resident in
Guernsey.
Report of Directors
The Directors of the Company present their Annual Report
together with the Group’s Audited Consolidated Financial Statements
(the “Financial Statements”) for the year ended 30 June 2017. The Directors’ Report together with
the Financial Statements give a true and fair view of the financial
position of the Group. They have been prepared properly, in
conformity with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board
and are in accordance with any relevant enactment for the time
being in force; and are in agreement with the accounting
records.
Principal Activity and Status
The Company is an Authorised closed-ended investment company
domiciled in Guernsey and is
registered under the provision of The Companies (Guernsey) Law, 2008 and has a premium listing
on the official list and trades on the main market of the London
Stock Exchange. Trading in the Company's ordinary shares commenced
on 18 April 2005. The Company and the
entities listed in note 2(f) to the Financial Statements together
comprise the “Group”.
Going Concern
The discount control provisions established when the Company was
launched required a continuation vote to be proposed to
shareholders at the Company's Annual General Meeting (“AGM”) in
2015. As a result of the large discount to Net Asset Value at which
shares were trading there was little chance of raising new capital.
After extensive shareholder consultation, the Board resolved not to
seek continuation of the Company in 2015 and proposed to
shareholders that the Company enter into a managed wind-down. This
proposal was approved at an Extraordinary General Meeting (“EGM”)
held on 26 April 2013.
In accordance with IFRS, the Financial Statements have been
prepared on a non-going concern basis reflecting the orderly
wind-down of the Group. Accordingly, the going concern basis of
accounting is not considered appropriate. All assets and
liabilities continue to be measured in accordance with IFRS. The
Board recognises that the liquidity of certain holdings is
uncertain and the Board will review the most appropriate course of
action with regard to these assets over the coming months. The
Directors estimate that the remaining wind-down costs to be
incurred will be approximately £189,000 (€214,944) (30 June 2016: £206,418 (€248,381)). The Board
believes that the Group has sufficient funds available to meet its
wind-down costs, day-to-day running costs and amounts due in terms
of its loan facilities.
Viability Statement
In accordance with provision C2.2 of the UK Corporate Governance
Code, published by the Financial Reporting Council, Directors are
required to assess the prospects of the Company over a period
longer than the 12 months minimum required by the “Going Concern”
provision. As disclosed in the above section, the Company is
expected to realise its remaining asset over the next 12 months.
Once the sole remaining investment property has been sold the
Directors will propose that the Company enters into a voluntary
liquidation.
The Directors have performed a robust assessment, considering
each of the Company’s principal risks and uncertainties including
those that would threaten its business model, future performance,
solvency or liquidity detailed in the Corporate Governance Report
and how each of these is managed or mitigated. They have also
reviewed the budgeted income and expenditure, forecast cash flows
and asset disposal timetable and approach.
The Directors, having performed the above assessments, have a
reasonable expectation that the Company has sufficient cash and
liquid resources to complete its managed wind down and liquidation
in an orderly manner including paying all associated expenses.
Investment Objective and Investment
Policy
The investment objective and investment policy of the Company
are as described in the Investment Objective and Investment Policy
section.
Results and Dividends
The results for the year are set out in the Consolidated Income
Statement. Following shareholder approval at the EGM held on
26 April 2013, the Company will
continue the implementation of a managed wind-down.
Although 2017 has been the target for the completion of all
disposals, it is now considered that this will extend into 2018, to
reflect the potential delays attached to the Curno asset. However,
the Manager continues to work closely with the Board on all aspects
of the strategy for the portfolio in order to ensure a timely
return of capital to shareholders.
The Company has made timely returns of capital to shareholders
whilst balancing the need to maximise the value from the Company’s
investments and to provide for sufficient working capital. A
resumption of dividend payments is not anticipated.
Directors
The Directors who held office during the year and up to the date
of this report were:
C. J. Hunter (Chairman)
G. J. Farrell
S. C. Monier
S. J. Lawson
A. Spaninks*
*Mr Spaninks resigned on 31 October
2016
Mr Hunter is also a Director of the three direct
subsidiaries of AXA Property Trust Limited.
Mr Lawson is a Director of Northern Trust (Guernsey) Limited, the Company’s bankers and
member of the same group as the Administrator and Secretary.
Management
The Investment Manager provides management services to the
Company. A summary of the contract between the Company and the
Investment Manager in respect of the management services provided
is given in note 3 to the Financial Statements. During the year,
the Board through the Management Engagement Committee has reviewed
the appropriateness of the Investment Manager's appointment.
Alternative Investment Fund Managers
Directive
The Company does not expect to be required to comply with the
AIFM Directive except to the extent required to permit the
marketing of the Company’s shares in EEA Member States. As the
Company is in a managed wind down this is unlikely to occur. If
this were to occur the relevant regime remains the national private
placement arrangements in the relevant EEA Member State which may
trigger requisite authorisation, possible changes to the governance
structure of the Company including the appointment of a depositary,
and additional disclosure in the financial statements. Compliance
with the AIFM Directive would be expected to increase management
costs, including regulatory and compliance costs, of impacted
investment managers and investment funds.
International Tax Reporting
For purposes of the US Foreign Accounts Tax Compliance Act, the
Company registered with the US Internal Revenue Service (“IRS”) as
a Guernsey reporting Foreign
Financial Institution (“FFI”), received a Global Intermediary
Identification Number (G0W47U.99999.SL.831), and can be found on
the IRS FFI list.
The Common Reporting Standard (“CRS”) is a standard developed by
the Organisation for Economic Co-operation and Development (“OECD”)
and is a global approach to the automatic exchange of tax
information. Guernsey has now
adopted the CRS which came into effect on 1
January 2016.
The CRS replaced the UK Inter-Governmental Agreement (“IGA”)
from 1 January 2016. However, it was
still necessary to submit the 2014 and 2015 reports for the UK IGA
by 30 June 2016. The first report for
CRS was made to the Director of Income Tax in Guernsey on 23 June
2017.
The Company is subject to Guernsey regulations and guidance based on
reciprocal information sharing inter-governmental agreements which
Guernsey has entered into with the
United Kingdom and the United States of America. The Board will
take the necessary actions to ensure that the Company is compliant
with Guernsey regulations and
guidance in this regard.
Directors' Authority to Buy Back
Shares
Any buy back of shares will be made subject to Guernsey law and within guidelines established
from time to time by the Board (which will take into account the
income and cash flow requirements of the Company) and the making
and timing of any buy backs will be at the absolute discretion of
the Board. Purchases of shares will only be made through the market
for cash at prices below the prevailing Net Asset Value of the
shares where the Directors believe such purchases will enhance
shareholder value.
Such purchases will also only be made in accordance with the
rules of the UK Listing Authority which sets a cap on the price
that the Company can pay.
Articles of Incorporation
At an EGM held on 26 April 2013, a
special resolution was passed to amend the Articles of
Incorporation. The Board considered that, in light of the managed
wind-down, and in order to facilitate the realisation of the
Portfolio by the end of the first half of 2018, in a manner that
achieves a balance between maximising the value from the Company's
investments and making timely returns of capital to shareholders,
it was in the best interests of shareholders and the Company as a
whole to remove the requirement in the current Articles for a
Continuation Resolution to be put to shareholders in 2016, and to
make certain other administrative changes and updates to the
current Articles.
At an EGM held on 27 February
2014, a special resolution was passed to amend the Articles
of Incorporation. The Board introduced a mechanism for the
Redemption of Shares at the discretion of the Board prior to the
eventual liquidation of the Company. The purpose of such Redemption
Mechanism being to facilitate the return to shareholders of cash
proceeds in a cost-efficient manner in accordance with the
Investment Policy and Objective.
On 17 February 2017 and
23 June 2017, the Company under the
mechanism for the Redemption of Shares purchased and cancelled
25,771,573 and 8,403,016 Shares at a value of £18.4 million and
£5.6 million respectively.
Details of the property disposals made during the year are
disclosed in note 9.
Guernsey Financial Services Commission
Code of Corporate Governance
The Board of Directors confirms that, throughout the period
covered by the Financial Statements, the Company complied with the
Code of Corporate Governance issued by the Guernsey Financial
Services Commission, to the extent it was applicable based upon its
legal and operating structure and its nature, scale and
complexity.
Independent Auditor
KPMG Channel Islands Limited has expressed their willingness to
continue in office as auditor and a resolution proposing their
re-appointment will be submitted at the forthcoming AGM.
Directors’ Responsibilities
The Directors are responsible for preparing the Directors’
Report and the Financial Statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under the law they have elected
to prepare the Financial Statements in accordance with IFRS and
applicable law.
The Financial Statements are required by law to give a true and
fair view of the state of affairs of the Group and of the profit or
loss of the Group for that period.
In preparing these Financial Statements, the Directors are
required to:
§ select suitable accounting policies and apply them
consistently;
§ make judgements and estimates which are reasonable and
prudent;
§ state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the Financial Statements; and
§ prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business. As explained in note 2, the Directors do not
believe it is appropriate to prepare these Financial Statements on
a going concern basis.
The Directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the Financial Statements comply with the Companies (Guernsey) Law, 2008. They are also responsible
for safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
Disclosure of information to
auditors
So far as each Director is aware, all relevant information has
been disclosed to the Company’s auditor; and each Director has
taken all the steps that he ought to have taken as a director to
make himself aware of any relevant audit information and to
establish that the Company’s auditor is aware of that
information.
Directors’ Responsibility
Statement
We confirm that to the best of our knowledge and in accordance
with DTR 4.1.12R of the Disclosure Guidance and Transparency
Rules:
(a) These Financial Statements have been prepared in accordance
with IFRS and give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the
undertakings included in the consolidation as a whole as at and for
the year ended 30 June 2017;
(b) These Financial Statements, which include information
detailed in the Chairman's Statement, Investment Manager's Report,
Report of the Directors and Corporate Governance Report provides a
fair review of the development and performance of the Group during
the year; and includes a description of the principal risks and
uncertainties that the Group faced as at and for the year ended
30 June 2017, and
(c) These Financial Statements taken as a whole are fair,
balanced and understandable and provide the information necessary
for the shareholders to assess the Company’s performance, business
model and strategy.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website, and for the preparation and dissemination of
financial statements. Legislation in Guernsey governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Signed on behalf of the Board by:
Charles Hunter
Chairman
Stuart Lawson
Director
31 October
2017
Corporate Governance Report
To comply with the UK Listing Regime, the Company must comply
with the requirements of the UK Corporate Governance Code
(June 2016) (the “UK Code”) issued by
the Financial Reporting Council (“FRC”) or explain any departures
therefrom. The Company is also required to comply with the Code of
Corporate Governance issued by the Guernsey Financial Services
Commission (the “GFSC Code”).
The Board considers that reporting against the principles and
recommendations of the UK Code provides appropriate information to
shareholders. Companies reporting against the UK Code are deemed to
comply with the GFSC Code. The UK Code is available in the
Financial Reporting Council’s website, www.frc.org.uk.
The Company has complied with the relevant provisions of the UK
Code, except for the following provisions relating to:
· the role of the Chief
Executive;
· Executive Directors’
remuneration;
· Senior Independent Director;
· the need for an internal audit
function;
· the whistle blowing policy;
· Remuneration Committee; and
· Nomination Committee
For the reasons set out in the UK Code, the Board considers
these provisions are not relevant to the position of the Company as
it is an externally managed investment company. The Company has
therefore not reported further in respect of these provisions.
The Directors are non-executive and the Company does not have
employees, hence no Chief Executive or whistle-blowing policy is
required. The Board is satisfied that any relevant issues can be
properly considered by the Board. There have been no instances of
non-compliance, other than those noted above. However, the
Directors have satisfied themselves that the Company’s service
providers have appropriate whistle-blowing policies and procedures
and have received confirmation from the service providers that
nothing has arisen under those policies and procedures which should
be brought to the attention of the Board.
Details of compliance are noted in the following sections. The
absence of an Internal Audit function is discussed in the Audit
Committee Report.
Composition, Independence and Role of
the Board
The Board currently comprises of four non-executive Directors.
All the Directors are considered by the Board to be independent of
the Company’s Investment Manager.
The Chairman is Mr Hunter. The Chairman of the Board must be
independent for the purposes of Chapter 15 of the Listing Rules. Mr
Hunter is considered independent because he:
· has no current or historical
employment with the Investment Manager; and
· has no current directorships in any other
investment funds managed by the Investment Manager except for the
three direct subsidiaries of AXA Property Trust Limited.
From April 2014 the Chairman,
Gavin Farrell and Stephanie Monier have all served on the Board
for over nine years and under the UK Code should be subject to
annual re-election. The Board however, take the view that there is
significant benefit to the Company arising from continuity and
experience among directors and accordingly does not intend to
introduce restrictions based on tenure. The Board believes that
shareholders should be given the opportunity to review membership
of the Board on a regular basis. It has therefore, determined that
in performing their role as Directors, the Chairman, Gavin Farrell and Stephanie Monier do not require to seek annual
election.
The Board has overall responsibility for maximising the
Company’s success by directing and supervising the affairs of the
business and meeting the appropriate interests of shareholders and
relevant stakeholders, while enhancing the value of the Company and
also ensuring protection of investors. A summary of the Board’s
responsibilities is as follows:
· statutory obligations and public
disclosure;
· strategic direction and
financial reporting;
· risk assessment and management
including reporting compliance, governance, monitoring and control;
and
· other matters having a material
effect on the Company.
The Board is responsible to shareholders for the overall
management of the Company.
The Board needs to ensure that the Annual Report and Financial
Statements, taken as a whole, are fair, balanced and understandable
and provide the information necessary for shareholders to assess
the Company’s performance, business model and strategy. In seeking
to achieve this, the Directors have set out the Company’s
investment objective and policy and have explained how the Board
and its delegated Committees operate and how the Directors review
the risk environment within which the Company operates and set
appropriate risk controls. Furthermore, throughout the Annual
Report and Financial Statements the Board has sought to provide
further information to enable shareholders to better understand the
Company’s business and financial performance.
The Board’s responsibilities for the Annual Report are set out
in the Directors’ Responsibility Statement.
The Board is also responsible for issuing half yearly reports,
interim management statements and other price sensitive public
reports.
The Board does not consider it appropriate to appoint a Senior
Independent Director because the Directors’ are all deemed to be
independent by the Company with the exception of Mr Spaninks until
his resignation from the Board. The Board believes it has a good
balance of skills and experience to ensure it operates effectively.
The Chairman is responsible for leadership of the Board and
ensuring its effectiveness.
The Board has engaged external companies to undertake the
investment management and administrative activities of the Company.
Documented contractual arrangements are in place with these
companies which define the areas where the Board has delegated
responsibility to them.
The Company holds a minimum of four Board meetings per year to
discuss general management, structure, finance, corporate
governance, marketing, risk management, compliance, asset
allocation and gearing, contracts and performance. The quarterly
Board meetings are the principal source of regular information for
the Board enabling it to determine policy and to monitor
performance, compliance and controls which are supplemented by
communication and discussions throughout the year.
A representative of the Investment Manager and Administrator
attends each Board meeting either in person or by telephone thus
enabling the Board to fully discuss and review the Company’s
operation and performance. Each Director has direct access to the
Investment Manager and Company Secretary and may at the expense of
the Company seek independent professional advice on any matter.
Individual Directors may, at the expense of the Company, seek
independent professional advice on any matter that concerns them in
the furtherance of their duties. The Company maintains appropriate
Directors’ and Officers’ liability insurance.
Re-election
There are provisions in the Company’s Articles of Incorporation
which requires Directors to seek re-election on a periodic basis.
There is no limit on length of service, nor is there any upper age
restriction on Directors.
The Board considers that there is significant benefit to the
Company arising from continuity and experience among directors, and
accordingly does not intend to introduce restrictions based on age
or tenure. It does however believe that shareholders should be
given the opportunity to review membership of the Board on a
regular basis.
In accordance with the Company’s Articles of Association, at
each AGM all independent Directors who held office at the two
previous AGM’s and did not retire shall retire from office and
shall be available for re-election.
The Board are of the opinion that the Board members standing for
re-election should be re-elected as they have the right skills and
experience to continue to manage the Company through the managed
wind-down process.
Board Diversity
The Board has also given careful consideration to the
recommendation of the Davies Report on “Women on Boards”. As
recommended in the Davies Report, the Board has reviewed its
composition. However, in view of the Company’s managed wind-down
position it believes that the current appointments provide an
appropriate range of skills, experience and diversity.
Board Evaluation and Succession
Planning
The Directors consider how the Board functions as a whole taking
balance of skills, experience and length of service into
consideration and also reviews the individual performance of its
members on an annual basis.
To enable this evaluation to take place, the Company Secretary
will circulate a detailed questionnaire plus a separate
questionnaire for the evaluation of the Chairman. The
questionnaires, once completed, are returned to the Company
Secretary who collates responses, prepares a summary and discusses
the Board evaluation with the Chairman prior to circulation to the
remaining Board members. The performance of the Chairman is
evaluated by the other Directors. On occasions, the Board may seek
to employ an independent third party to conduct a review of the
Board.
The Board considers it has a breadth of experience relevant to
the Company, and the Directors believe that any changes to the
Board’s composition can be managed without undue disruption. An
induction programme has been prepared for any future Director
appointments and all Directors receive other relevant training as
necessary.
Board and Committee Meetings
The table below sets out the number of Board, Audit Committee
and Management Engagement Committee meetings held during the year
ended 30 June 2017 and, where
appropriate, the number of such meetings attended by each
Director.
|
Board of Directors |
Audit Committee |
Management Engagement Committee |
|
Held |
Attended |
Held |
Attended |
Held |
Attended |
C. J. Hunter |
4 |
4 |
3 |
3 |
1 |
1 |
G. J. Farrell |
4 |
4 |
3 |
3 |
1 |
1 |
S. C. Monier |
4 |
3 |
3 |
2 |
1 |
1 |
S. Lawson |
4 |
4 |
3 |
3 |
1 |
1 |
A. Spaninks |
1 |
1 |
1* |
1 |
- |
- |
* invitee
In addition to the scheduled quarterly Board meetings the Board,
or committees thereof, held 7 ad hoc meetings to deal with matters
of an administrative nature. These meetings were attended by those
Directors who were available at the time.
The Directors who held office during the year and their interest
in the shares of the Company (all of which are beneficial)
were:
|
|
|
30
June 2017 |
30
June 2016 |
C. J.
Hunter* |
9,694 |
0.04% |
31,463 |
0.05% |
G. J. Farrell |
- |
- |
- |
- |
S. C. Monier |
19,892 |
0.08% |
64,564 |
0.11% |
S. Lawson |
- |
- |
- |
- |
A. Spaninks |
n/a |
n/a |
- |
- |
*Charles Hunter holds
7,345 (2016: 23,840) shares whilst his family holds 2,349 (2016:
7,623).
Committees of the Board
The Board has established Audit and Management Engagement
Committees and approved their terms of reference.
Audit Committee
The Company has established an Audit Committee with formal
duties and responsibilities. The Audit Committee meets formally at
least twice a year and each meeting is attended by the independent
external auditor and Administrator. The Company’s Audit Committee
is comprised of the entire Board except Mr. Spaninks. The Audit
Committee is chaired by Mr. Lawson.
A report of the Audit Committee detailing its responsibilities
and its key activities is presented in the Audit Committee
Report.
Management Engagement Committee
The Management Engagement Committee meets formally at least once
a year and is comprised of the entire Board. Mr. Hunter is Chairman
of the Management Engagement Committee.
The Management Engagement Committee has formal duties and
responsibilities. The function of the Management Engagement
Committee is to ensure that the Company’s Management Agreement is
competitive and reasonable for the shareholders, along with the
Company’s agreements with all other third party service providers
(other than the external auditors).
During the year the Management Engagement Committee has reviewed
the services provided by the Investment Manager as well as the
other service providers and have recommended to the Board that
their continuing appointments is in the best interest of the
shareholders. The last meeting was held on 2
December 2016.
Nomination Committee
The Board does not have a separate Nomination Committee. The
Board as a whole fulfils the function of a Nomination Committee.
Any proposal for a new Director will be discussed and approved by
the Board.
Remuneration Committee
In view of its non-executive and independent nature, the Board
considers that it is not appropriate for there to be a separate
Remuneration Committee as anticipated by the UK Code because this
function is carried out as part of the regular Board business. A
Remuneration Report prepared by the Board is contained in the
Financial Statements.
Terms of Reference
All Terms of Reference for Committees are available from the
Administrator upon request.
Internal Controls
The Board is ultimately responsible for establishing and
maintaining the Company’s system of internal controls and for
maintaining and reviewing its effectiveness. The system of internal
controls is designed to manage rather than to eliminate the risk of
failure to achieve business objectives and by their nature can only
provide reasonable and not absolute assurance against misstatement
and loss. These controls aim to ensure that assets of the Company
are safeguarded, proper accounting records are maintained and the
financial information for publication is reliable. The Board uses a
formal risk assessment matrix to identify and monitor risks.
The Board has delegated the management of the Company’s
investment portfolio and the administration, registrar and
corporate secretarial functions including the independent
calculation of the Company’s NAV and the production of the Annual
Report and Financial Statements which are independently audited.
Whilst the Board delegates responsibility, it retains
accountability for the functions it delegates and is responsible
for the systems of internal control.
Formal contractual agreements have been put in place between the
Company and providers of these services. On an ongoing basis board
reports are provided at each quarterly board meeting from the
Investment Manager, Administrator, Registrar and Company Secretary;
and a representative from the Investment Manager is asked to attend
these meetings.
In accordance with Listing Rule 15.6.2 (2) R and having formally
appraised the performance and resources of the Investment Manager,
in the opinion of the Directors their continuing appointment of the
Investment Manager on their terms agreed is in the interests of the
Company and the shareholders.
In common with most investment companies, the Company does not
have an internal audit function. All of the Company’s management
functions are delegated to the Investment Manager and Administrator
which have their own internal audit and risk assessment functions.
As such, an internal audit function specific to the Company is
therefore considered unnecessary.
Principal Risks and Uncertainties
The Board is satisfied that by using the Company’s risk matrix
in establishing the Company’s system of internal controls while
monitoring the Company’s investment objective and policy that the
Board has carried out a robust assessment of the principal risks
and uncertainties facing the Company during its managed wind-down.
The principal risks and uncertainties which have been identified
and the steps which are taken by the Board to mitigate them are as
follows:
Investment Risks
The Company is exposed to the risk that its portfolio fails to
perform in line with the Company’s objective, if markets move
adversely or if the investments are inappropriately disposed. The
Board reviews reports from the Investment Manager at least once a
quarter, paying a particular attention to the disposal programme
and its underlying assumptions and considerations.
Operational Risks
The Company is exposed to the risk arising from any failures of
systems and controls in the operations of the Investment Manager,
Administrator and the Sponsor. The Board and its Committees
regularly review reports from the Investment Manager and the
Administrator on their internal controls.
Accounting, Legal and Regulatory
Risks
The Company is exposed to the risk that it may fail to maintain
accurate accounting records or fail to comply with requirements of
its Prospectus. The accounting records prepared by the relevant
service providers are reviewed by the Investment Manager. The
Administrator, Sponsor and Investment Manager provide regular
updates to the Board on compliance with the Prospectus and changes
in regulation.
Financial Risks
The financial risks, including market, credit, liquidity and
interest rate risk faced by the Company are set out in note 20 of
the Financial Statements. These risks and the controls in place to
reduce the risks are reviewed at the quarterly Board meetings.
Foreign Exchange Risk
The Company is exposed to currency risk given that its
investments are denominated in Euro but the presentation currency
of the Company is Pound Sterling. As a result of the UK’s
Referendum there has been an increase in the volatility of the
EUR/GBP exchange rate. Although the recent movements in the
currency are favourable for the Company the Investment Manager
reports at least quarterly to the Board on its strategy for
managing this risk.
The Board seeks to mitigate and manage these risks through
continual review, policy-setting and enforcement of contractual
obligations and will update the risk assessment matrix to reflect
any changes to the control environment.
Relations with Shareholders
The Board welcomes shareholders’ views and places great
importance on communication with its shareholders. The Board
receives regular reports on the views of shareholders and the
Chairman and other Directors are available to meet shareholders if
required. The Investment Manager meets with major shareholders on a
regular basis and reports to the Board on these meetings. Issues of
concern can be addressed by any shareholder in writing to the
Company at its registered address. The AGM of the Company provides
a forum for shareholders to meet and discuss issues with the
Directors and Investment Manager of the Company.
In addition, the Company maintains a website which contains
comprehensive information, including regulatory announcements,
share price information, financial reports, investment objectives
and strategy and investor contacts.
Significant Shareholdings
As at 16 October 2017, the Company
has received of the following interests in 3% or more of the voting
rights attaching to the Company’s issued shares.
|
Shares
held |
% of issued
share capital |
State Street Nominees Limited |
7,816,440 |
33.40% |
Transact Nominees Limited |
4,765,708 |
20.36% |
Chase Nominees Limited |
1,680,154 |
7.18% |
Credit Suisse Client Nominees (UK)
Limited |
1,077,310 |
4.60% |
Signed on behalf of the Board by:
Charles Hunter
Chairman
Stuart Lawson
Director
31 October 2017
Audit Committee Report
Dear Shareholders,
I am pleased to present the Audit Committee’s Report for the
year ended 30 June 2017, which covers
the following topics:
· Responsibilities of the Audit
Committee and its key activities during the year,
· Financial reporting and
significant areas of judgement and estimation,
· Independence and effectiveness
of the external auditor, and
· Internal control and risk
management systems.
As advised previously, the Company has implemented a strategy to
wind down the portfolio and return capital to investors. The Audit
Committee’s activities during the year have therefore concentrated
on maintaining an appropriate risk and control environment,
providing suitable disclosure of progress and residual risks in the
Financial Statements, ensuring ongoing engagement from service
providers and keeping sufficient liquid funds to meet expenditure
for essential or justified items.
Responsibilities
The Audit Committee reviews and recommends to the Board for
approval or otherwise, the Financial Statements of the Company and
is the forum through which the independent external auditor reports
to the Board of Directors. The independent external auditor and the
Audit Committee will meet together without representatives of
either the Administrator or Investment Manager being present if
either considers this to be necessary.
The role of the Audit Committee includes:
1. Monitoring the integrity of the Financial
Statements of the Company covering:
o formal announcements relating to the Company’s financial
performance,
o significant financial reporting issues and
judgements,
o matters raised by the external auditors, and
o appropriateness of accounting policies and
practices.
2. Reviewing and considering the UK Code and FRC
Guidance on Audit Committees
3. Monitoring the quality and effectiveness of the
independent external auditors which includes:
o meeting regularly to discuss the audit plan and the
subsequent findings,
o considering the level of fees for both audit and
non-audit work,
o reviewing independence, objectivity, expertise,
resources and qualification, and
o making recommendations to the Board on the appointment,
reappointment, replacement and remuneration.
4. Reviewing the Company’s procedures for
prevention, detection and reporting of fraud, bribery and
corruption, and
5. Monitoring and reviewing the internal control and
risk management systems of the service providers together with the
need for an Internal Audit function.
The Audit Committee’s full terms of reference can be obtained by
contacting the Company’s Administrator.
Financial Reporting
The Audit Committee’s review of the Half Yearly Financial Report
and Audited Annual Report and Financial Statements focused on the
following significant risks;
· investment property portfolio
valuation; and
· going concern given the
wind-down strategy.
Valuation of Investment Property
Portfolio
The Company’s sole remaining
investment property was fair valued at £12.31 million (€14.0
million) as at
30 June 2017 and represented the
majority of the total assets of the Company. The remaining
investment property comprises the cinema complex in Curno,
Italy, owned via an intermediate
holding vehicle. The valuation of this investment is in accordance
with the requirements of IFRS as issued by the International
Accounting Standards Board. The valuation estimate is provided by
Knight Frank LLP, an external independent valuer. The Audit
Committee considered the fair value of the sole remaining
investment property held by the Group as at
30 June 2017 to be reasonable based
on information provided by the Investment Manager and
Administrator. All valuations are subject to review and oversight
by the Investment Manager.
Going Concern
In accordance with IFRS, the Financial Statements have been
prepared on a basis other than that of a going concern reflecting
the orderly wind-down of the Group. Accordingly, the going concern
basis of accounting is no longer considered appropriate. The sole
remaining investment property continues to be carried at fair
value. All other assets and liabilities continue to be measured in
accordance with IFRS.
Audit Findings Report
The independent external auditor reported to the Audit Committee
that no material unadjusted misstatements were found in the course
of their work. Furthermore, the Manager and Administrator confirmed
to the Audit Committee that they were not aware of any material
misstatements including matters relating to the Financial
Statements presentation.
Accounting Policies &
Practices
The Audit Committee has assessed the appropriateness of the
accounting policies and practices adopted by the Company together
with the clarity of disclosures included in the Financial
Statements. Following a review of the presentations and reports
from the Administrator and consulting where necessary with the
independent external auditor, the Audit Committee is satisfied that
the Financial Statements appropriately address the critical
judgements and key estimates (both in respect to the amounts
reported and the disclosures). It is also satisfied that the
significant assumptions used for determining the value of assets
and liabilities have been appropriately scrutinised, challenged and
are sufficiently robust.
The Audit Committee advised the Board that this Annual Report
and Financial Statements, taken as a whole, is fair, balanced and
understandable.
Risk Management
The Audit Committee continued to consider the process for
managing the risk of the Company and its service providers. Risk
management procedures for the Company are detailed in the Company’s
risk assessment matrix, and is reviewed and approved by the Audit
Committee on a regular basis. Regular reports are received from the
Investment Manager and Administrator on the Company’s risk
evaluation process and reviews.
In the context of the managed wind-down, the key risks which the
Audit Committee has closely monitored are:
· Asset disposal program
· Ongoing liquidity
· Levels of expenditure
· Engagement from service
providers
The Audit Committee recognises that the timely disposal of the
remaining property is uncertain and continues to keep under review
the most appropriate course of action with regard to this asset
with the aim of maximising shareholder return.
Through regular briefing sessions and formal bi-annual committee
meetings, the Audit Committee has received the necessary
information and confirmation that activities have been managed and
executed in accordance with plans approved by the Board and
established policies and procedures.
Fraud, Bribery and Corruption
The Audit Committee continues to monitor the fraud, bribery and
corruption policies of the Company. The Board receives a
confirmation from all service providers that there have been no
instances of fraud or bribery.
The Independent External Auditor
KPMG Channel Islands Limited has been the independent external
auditor from the date of the initial listing on the London Stock
Exchange. In the circumstances of the Company and expected progress
with the managed wind-down process, a change of external auditor is
not envisaged given the short remaining life of the Company.
The independence and objectivity of the external auditor is
reviewed by the Audit Committee which also reviews the terms under
which the independent external auditor is appointed to perform
non-audit services. The Audit Committee has established
pre-approval policies and procedures for the engagement of the
auditor to provide audit, assurance and tax services. The
principles on which these are based are that the external auditors
may not provide a service which:
· places them in a position to
audit their own work
· creates a mutuality of
interest
· results in the external auditor
developing close relationships with service providers of the
Company
· results in the external auditor
functioning as a manager or employee of the Company
· puts the external auditor in the
role of advocate of the Company
As a general rule, the Company does not utilise external
auditors for internal audit work, secondments or valuation advice.
Services which are in the nature of audit, such as tax compliance,
tax structuring, accounting advice, quarterly reviews and
disclosure advice are normally permitted but are subject to prior
approval by the Audit Committee.
The Audit Committee has examined the scope and results of the
audit, its cost effectiveness and the independence and objectivity
with particular regard to non-audit fees, and considers KPMG
Channel Islands Limited to be independent of the Company. The
following table summarises the remuneration paid to KPMG Channel
Islands Limited and to other KPMG member firms for audit and
non-audit services provided to the Company during the years ended
30 June 2017 and 30 June 2016.
|
|
30 June
2017 |
30 June
2016 |
|
|
£ |
£ |
Statutory audit |
|
144,680 |
192,103 |
Total audit fees |
|
144,680 |
192,103 |
|
|
|
|
Non-audit services |
|
- |
- |
Total non-audit fees |
|
- |
- |
Performance and Effectiveness
During the year, when considering the effectiveness of the
independent external auditor, the Audit Committee has taken into
account the following factors:
· the audit plan presented to them
before the audit;
· the post audit findings report
including variations from the original plan;
· changes in audit personnel;
· the independent external
auditor’s own internal procedures to identify threats to
independence; and
· feedback received from both the
Investment Manager and Administrator.
The Audit Committee reviewed and, where appropriate, challenged
the audit plan and the audit findings report of the independent
external auditor and concluded that the audit plan sufficiently
identified audit risks and that the audit findings report indicated
that the audit risks were sufficiently addressed with no
significant variations from the audit plan. The Audit Committee
considered reports from the independent external auditors on their
procedures to identify threats to independence and concluded that
the procedures were sufficient.
Given that the managed wind down is expected to be substantially
complete within the next 12 months, the Audit Committee will work
with the independent external auditor to keep future costs to a
minimum.
Reappointment of External
Auditors
Consequent to this review process, the Audit Committee has
recommended to the Board that a resolution be put to the 2017 AGM
for the reappointment of KPMG Channel Islands Limited as
independent external auditor. The Board has accepted this
recommendation.
Internal Control and Risk Management
Systems
The Company outsources the subsidiary company accounting and
financial statements production to the Investment Manager, and
company accounting, document execution and expense payment to the
Administrator. The Audit Committee considers the following matters
in this regard:
· regular operations meetings with
service providers,
· reporting to the Audit Committee
and Board,
· independent opinion of the
external auditor, and
· on-going evaluation of
performance.
In addition, the Audit Committee reviews and examines externally
prepared assessments of the control environment in place at the
Investment Manager and the Administrator. No significant failings
or weaknesses were identified in these reports.
The Audit Committee has reviewed the need for an internal audit
function and has decided that the system and procedures employed by
the Investment Manager and the Administrator’s internal audit
function provide sufficient assurance that a sound system of
internal control, which safeguards the Company’s assets, is
maintained. An internal audit function specific to the Company is
therefore considered unnecessary.
In finalising the Financial Statements for recommendation to the
Board for approval, the Audit Committee has satisfied itself that
the Financial Statements taken as a whole are fair, balanced and
understandable, and provide the information necessary for
shareholders to assess the Company’s performance, business model
and strategy.
A member of the Audit Committee will continue to be available at
each AGM to respond to any shareholder questions on the activities
of the Audit Committee.
Stuart Lawson
Chairman, Audit Committee
31 October 2017
Directors’ Remuneration Report
Introduction
An ordinary resolution for the approval of the Director’s
Remuneration Report will be put to the shareholders at the AGM to
be held on 1 December 2017.
Remuneration Policy
All Directors are non-executive and a Remuneration Committee has
not been established. The Board as a whole considers matters
relating to the Directors’ remuneration. No advice or services were
provided by any external person in respect of its consideration of
the Directors’ remuneration.
The Company’s policy is that the fees payable to the Directors
should reflect the time spent by the Directors on the Company’s
affairs and the responsibilities borne by the Directors and be
sufficient to attract, retain and motivate directors of a quality
required to run the Company successfully. The Chairman of the Board
is paid a higher fee in recognition of his additional
responsibilities. The policy is to review fee rates periodically,
although such a review will not necessarily result in any changes
to the rates, and account is taken of fees paid to directors of
comparable companies. The Directors of the Company are remunerated
for their services at such a rate as the Directors determine
provided that the aggregate amount of such fees does not exceed
£120,000 per annum.
There are no long term incentive schemes provided by the Company
and no performance fees are paid to Directors.
None of the Directors has a service contract with the Company
but each of the Directors is appointed by a letter of appointment
which sets out the main terms of their appointment. Directors hold
office until they retire by rotation or cease to be a director in
accordance with the Articles of Incorporation, by operation of law
or until they resign.
Remuneration
Directors are remunerated in the form of fees, payable quarterly
in arrears, to the Director personally. No Directors have been paid
additional remuneration outside their normal Directors’ fees and
expenses.
The current annual Directors’ fees comprise £18,000 per annum
payable to the Chairman and £13,500 per annum payable to the other
Directors.
For the year ended 30 June 2017
and 30 June 2016 Directors’ fees
incurred were as follows:
|
|
30 June
2017 |
30 June
2016 |
|
|
£ |
£ |
C. J. Hunter |
|
18,000 |
18,000 |
G. J. Farrell |
|
13,500 |
13,500 |
S. C. Monier |
|
13,500 |
13,500 |
S. Lawson |
|
13,500 |
13,500 |
A. Spaninks * |
|
4,512 |
13,500 |
|
|
63,012 |
72,000 |
*A Spaninks resigned from the Board on 31
October 2016.
The Directors of the subsidiaries of the Group received
emoluments amounting to £11,270 (2016: £19,364). Total fees paid to
Directors of the Group were £74,282 (2016: £91,364).
Signed on behalf of the Board by:
Charles Hunter
Chairman
Stuart Lawson
Director
31 October 2017
Investment Objective and Investment
Policy
At an EGM of the Company held on 26 April
2013, the shareholders resolved to amend the Company’s
investment policy. The amended investment objective and policy is
set out below:
Investment Objective
The Company is managed with the intention of realising all
remaining asset in the Portfolio, in a manner consistent with the
principles of prudent investment management and spread of
investment risk, with a view to returning capital invested to the
shareholders in an orderly manner.
Investment Policy
The managed wind-down will be effected with a view to the
Company substantially realising its sole remaining investment
property by year end December 2017 in
a manner that achieves a balance between maximising the value from
the Company’s investments and making timely returns of capital to
shareholders. However, at present it is considered that the
completion of the sale of the Curno asset may not occur until the
first half of 2018.
The Company will cease to make any new investments or undertake
capital expenditure except where necessary in the reasonable
opinion of the Manager and Board to protect or enhance the value of
the existing investment or to facilitate its orderly disposal.
The Company will not undertake new borrowing other than for
short-term working capital purposes.
Any cash received by the Company as part of the realisation
process will be held as cash on deposit and/or cash
equivalents.
Shareholders should expect that, under the terms of the Managed
Wind-down, the Board and the Manager will be committed to
distributing as much of the available cash as soon as reasonably
practicable having regard to cost efficiency, debt repayment and
working capital requirements. Accordingly, in order to minimise the
administrative burden, shareholders should expect that returns of
cash will be made regularly but not necessarily as soon as cash
becomes available.
Independent Auditor’s Report to the
Members of AXA Property Trust Limited
Our opinion is unmodified
We have audited the consolidated financial statements (the
“financial statements”) of AXA Property Trust Limited (the
“Company”) and its subsidiaries (together, the “Group”), which
comprise the consolidated statement of financial position as at
30 June 2017, the consolidated
statements of income, comprehensive income, changes in equity and
cash flows for the year then ended, and notes, comprising
significant accounting policies and other explanatory information.
As described in note 2, the financial statements have not been
prepared on a going concern basis.
In our opinion, the accompanying
financial statements :
· give a true and fair view of the
financial position of the Group as at 30
June 2017, and of the Group’s financial performance and the
Group’s cash flows for the year then ended;
· are prepared in accordance with
International Financial Reporting Standards (IFRS); and
· comply with the Companies
(Guernsey) Law, 2008.
Basis for
Opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities are described below. We have fulfilled our ethical
responsibilities under, and are independent of the Group in
accordance with, UK ethical requirements including FRC Ethical
Standards as applied to listed entities. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion.
Key Audit Matters:
our assessment of the risks of material misstatement
Key audit matters are those matters that, in our professional
judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters. In
arriving at our audit opinion above, the key audit matters were as
follows (unchanged from 2016):
|
The risk |
Our response |
Going Concern
Refer to the Audit Committee Report and accounting policy notes
2b and 2d |
Basis:
On 26 April 2013 an Extraordinary General Meeting was held at which
the shareholders approved proposals for a managed wind-down of the
Group. Accordingly, the Board of Directors have prepared the
financial statements on a basis other than going concern reflecting
an orderly managed wind-down of the Group and the continuing
measurement of the investment property at fair value.
Risk:
There is a risk that the Board of Directors may not be able to
achieve the wind-down in an orderly manner and if this was the case
then it would impact their ability to continue measuring the
investment property at fair value. |
Our audit procedures included:
Evaluating managements’ wind-down strategy:
We held discussions with the Board of Directors and the Investment
Manager to understand the ongoing wind-down programme.
We obtained and evaluated the Group’s going concern assessment and
post year end cash flow forecast and reviewed key assumptions and
significant inputs therein.
Assessing disclosures:
We considered the Group’s going concern accounting policies and
disclosures in notes 2b and 2d for compliance with IFRS. |
Valuation of Investment Property
Investment Properties £12.3m (2016 £37.0m)
Refer to the Audit Committee Report, accounting policy notes 2d
and 2l and disclosure note 9 |
Basis:
The Group’s investment property accounted for 78.6% of the Group’s
net assets as at 30 June 2017.
The fair value of the investment property as at 30 June 2017 was
assessed by the Investment Manager and the Board of Directors based
on an independent valuation prepared by Knight Frank LLP (the
“Group’s Valuer”).
Risk:
As highlighted in the Audit Committee Report, the valuation of the
Group’s investment property is a significant area of judgment and
requires subjective assumptions to be made.
Determination of the fair value of the investment property is
considered a significant audit risk due to the magnitude of the
balance and the subjective nature of the valuation. |
Our procedures included:
Controls Evaluation:
We tested the design and implementation of the control in relation
to the Investment Manager’s review of the valuation prepared by the
Group’s Valuer.
Evaluating experts engaged by management:
We assessed the competence, capabilities and objectivity of the
Group’s Valuer. We also assessed their independence by considering
the scope of their work and the terms of their engagement.
Evaluating assumptions and inputs used in the
valuation:
We critically assessed the valuation prepared by the Group’s Valuer
by evaluating the appropriateness of the valuation methodology and
assumptions used, including undertaking discussions on key findings
with the Group’s Valuer and challenging the assumptions used based
on market information, with the assistance of our own real estate
specialist.
We agreed significant inputs into the valuation such as yields and
the tenancy lease agreement for consistency with other audit
findings and observable market evidence.
Assessing disclosures:
We considered the Group’s investment property valuation policies
and their application as described in the notes to the financial
statements for compliance with IFRS in addition to the adequacy of
disclosures in note 9 in relation to the fair value of the
investment property. |
Our application of
materiality and an overview of the scope of our audit
Materiality for the financial statements as a whole was set at
£465,000, determined with reference to a benchmark of Group net
assets of £15,665,000, of which it represents approximately 3%
(2016: 3%).
We reported to the Audit Committee any corrected or uncorrected
identified misstatements exceeding £23,000, in addition to other
identified misstatements that warranted reporting on qualitative
grounds.
Our audit of the Group was undertaken to the materiality level
specified above, which has informed our identification of
significant risks of material misstatement and the associated audit
procedures performed in those areas as detailed above.
Audits for group reporting purposes were performed by a
component auditor based in Luxembourg and by the group audit team in
Guernsey. These group procedures
covered 100% of total group revenue, total group profit before
taxation, and total group assets and liabilities.
The audits undertaken for group reporting purposes by the
component auditor in Luxembourg
were all performed to a materiality level set by, or agreed with,
the group audit team.
Detailed audit instructions were sent to the component auditor
in Luxembourg. These instructions
covered the significant audit areas that should be covered by these
audits (which included the relevant risks of material misstatement
detailed above) and set out the information required to be reported
back to the group audit team. The group audit team visited
the component auditor in Luxembourg. Telephone meetings were also held
with the component auditor in Luxembourg.
We have nothing to report on the other
Information in the Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not cover
the other information and we do not express an audit opinion or any
form of assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material
misstatements in the other information.
Disclosures of
principal risks and longer-term viability
Based on the knowledge we acquired during our financial
statements audit, we have nothing material to add or draw attention
to in relation to:
· the directors’ Viability
Statement (page 8) concerning the principal risks, their
management, and based on that, the directors’ assessment and
expectation of the Company realising its remaining investment
property asset over the next 12 months and the proposed voluntary
liquidation thereafter;
· the disclosures in note 2 of the
financial statements concerning the use of a basis of accounting
other than going concern.
Corporate
governance disclosures
We are required to report to you if:
· we have identified material
inconsistencies between the knowledge we acquired during our
financial statements audit and the directors’ statement that they
consider that the Annual Report and financial statements taken as a
whole is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s
position and performance, business model and strategy; or
· the section of the Annual Report
describing the work of the Audit Committee does not appropriately
address matters communicated by us to the Audit Committee.
We are required to report to you if the Corporate Governance
Statement does not properly disclose a departure from the eleven
provisions of the 2016 UK Corporate Governance Code specified by
the Listing Rules for our review.
We have nothing to report to you in these respects.
We have nothing to
report on other matters on which we are required to report by
exception
We have nothing to report in respect of the following matters
where the Companies (Guernsey)
Law, 2008 requires us to report to you if, in our opinion:
· the Company has not kept proper
accounting records; or
· the financial statements are not
in agreement with the accounting records; or
· we have not received all the
information and explanations, which to the best of our knowledge
and belief are necessary for the purpose of our audit.
Respective responsibilities
Directors’
responsibilities
As explained more fully in their statement set out in the Report
of Directors, the directors are responsible for: the preparation of
the financial statements including being satisfied that they give a
true and fair view; such internal control as they determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error;
assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and
using the going concern basis of accounting unless they either
intend to liquidate the Group or to cease operations, or have no
realistic alternative but to do so.
Auditor’s
responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor’s report. Reasonable assurance is a
high level of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The purpose of
this report and restrictions on its use by persons other than the
Company’s members as a body
This report is made solely to the Company’s members, as a body,
in accordance with section 262 of the Companies (Guernsey) Law, 2008. Our audit work has been
undertaken so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s report and
for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
Company and the Company’s members, as a body, for our audit work,
for this report, or for the opinions we have formed.
Lee C Clark
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors,
Guernsey
31 October 2017
Consolidated Income Statement
For the year ended 30 June 2017
|
|
|
|
Year
ended |
|
Year
ended |
|
|
|
|
30
June 2017 |
|
30 June
2016 |
|
|
|
Notes |
£000s |
|
£000s |
|
|
|
|
|
|
|
|
Gross
rental income |
4 |
1,704 |
|
3,939 |
|
Service
charge income |
|
127 |
|
288 |
|
Property
operating expenses |
|
(251) |
|
(1,073) |
|
|
|
|
|
|
|
Net
rental and related income |
|
1,580 |
|
3,154 |
|
|
|
|
|
|
|
|
Valuation
(loss)/gain on investment properties |
9 |
(781) |
|
798 |
|
Loss on
disposals of a subsidiary and investment properties |
|
(589) |
|
(320) |
|
General
and administrative expenses |
5 |
(929) |
|
(2,537) |
|
|
|
|
|
|
|
Operating (loss)/profit |
|
(719) |
|
1,095 |
|
|
|
|
|
|
|
|
Net
foreign exchange gain |
|
- |
|
1,370 |
|
Net gain
on financial instruments |
20 |
55 |
|
521 |
|
Share in
loss of a joint venture |
11 |
(40) |
|
(321) |
|
Net
finance cost |
6 |
(151) |
|
(1,094) |
|
|
|
|
|
|
|
(Loss)/profit before tax |
|
(855) |
|
1,571 |
|
|
|
|
|
|
|
Income
tax expense |
17 |
(67) |
|
(162) |
|
|
|
|
|
|
|
(Loss)/profit for the year |
|
(922) |
|
1,409 |
|
|
|
|
|
|
|
Basic and
diluted (loss)/profit per ordinary share (pence) |
7 |
(1.92) |
|
2.08 |
Consolidated Statement of
Comprehensive Income
For the year ended 30 June 2017
|
|
|
|
Year
ended |
|
Year
ended |
|
|
|
|
30
June 2017 |
|
30 June
2016 |
|
|
|
Notes |
£000s |
|
£000s |
|
|
|
|
|
|
|
(Loss)/profit for the year |
|
(922) |
|
1,409 |
Other
comprehensive income |
|
|
|
|
Hedging
reserve recycled to profit or loss |
21 |
- |
|
762 |
Foreign
exchange translation gain |
|
1,896 |
|
3,349 |
Total
items that are or may be reclassified to profit or
loss |
|
1,896 |
|
4,111 |
|
|
|
|
|
|
|
Total
comprehensive profit for the year |
|
974 |
|
5,520 |
The accompanying notes form an integral part of these Financial
Statements.
Consolidated Statement of Changes in
Equity
For the year ended 30 June 2017
|
|
Revenue reserve |
Hedging reserve |
Distributable reserve |
Foreign currency reserve |
Total |
|
Notes |
£000s |
£000s |
£000s |
£000s |
£000s |
|
|
|
|
|
|
|
Balance at 1 July
2016 |
|
(40,489) |
- |
68,856 |
10,327 |
38,694 |
Share redemptions |
18 |
- |
- |
(24,003) |
- |
(24,003) |
Loss for the year |
|
(922) |
- |
- |
- |
(922) |
Other comprehensive
income |
|
- |
- |
- |
1,896 |
1,896 |
|
|
|
|
|
|
|
Balance at 30 June
2017 |
|
(41,411) |
- |
44,853 |
12,223 |
15,665 |
For the year ended 30 June 2016
|
|
Revenue reserve |
Hedging reserve |
Distributable reserve |
Foreign currency reserve |
Total |
|
Notes |
£000s |
£000s |
£000s |
£000s |
£000s |
|
|
|
|
|
|
|
Balance at 1 July
2015 as restated |
|
(41,898) |
(762) |
85,049 |
6,978 |
49,367 |
Share redemptions |
18 |
- |
- |
(16,193) |
- |
(16,193) |
Hedge reserve
recycled |
|
- |
762 |
- |
- |
762 |
Profit for the
year |
|
1,409 |
- |
- |
- |
1,409 |
Other comprehensive
income |
|
- |
- |
- |
3,349 |
3,349 |
|
|
|
|
|
|
|
Balance at 30 June
2016 |
|
(40,489) |
- |
68,856 |
10,327 |
38,694 |
The accompanying notes form an integral part of these Financial
Statements.
Consolidated Statement of Financial
Position
For the year ended 30 June 2017
|
|
|
30
June 2017 |
|
30 June
2016 |
|
|
Notes |
£000s |
|
£000s |
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
Investment
properties |
9 |
12,310 |
|
30,832 |
|
|
|
|
|
|
Current
assets |
|
|
|
|
|
Cash and cash
equivalents |
|
3,846 |
|
8,806 |
|
Trade and other
receivables |
12 |
939 |
|
1,492 |
|
Investment properties
held for sale |
10 |
- |
|
6,191 |
|
Investment in joint
venture |
11 |
642 |
|
10,274 |
|
|
|
|
|
|
Total
assets |
|
17,737 |
|
57,595 |
|
|
|
|
|
|
Current
liabilities |
|
|
|
|
|
Trade and other
payables |
13 |
1,573 |
|
2,213 |
|
Short term loans |
14 |
- |
|
14,907 |
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
Deferred tax
liability |
17 |
- |
|
351 |
|
Provisions |
16 |
499 |
|
1,253 |
|
Long-term loans |
15 |
- |
|
111 |
|
Derivative financial
instruments |
20 |
- |
|
66 |
|
|
|
|
|
|
Total
liabilities |
|
2,072 |
|
18,901 |
|
|
|
|
|
|
Net
assets |
|
15,655 |
|
38,694 |
|
|
|
|
|
|
|
Reserves |
|
15,665 |
|
38,694 |
|
|
|
|
|
|
Total
equity |
|
15,665 |
|
38,694 |
|
|
|
|
|
|
Number of
ordinary shares |
18 |
23,402,881 |
|
57,577,470 |
|
|
|
|
|
|
Net
asset value per ordinary share (pence) |
19 |
66.94 |
|
67.20 |
By order of the Board
Charles Hunter
Chairman
Stuart Lawson
Director
31 October 2017
The accompanying notes form an integral part of these Financial
Statements
Consolidated Statement of Cash
Flows
For the year ended 30 June 2017
|
|
|
|
Year
ended |
|
Year
ended |
|
|
|
|
30
June 2017 |
|
30 June
2016 |
|
|
Notes |
|
£000s |
|
£000s |
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
(Loss)/profit before
tax |
|
|
(855) |
|
1,571 |
|
Adjustments for: |
|
|
|
|
|
|
Loss/(gain) on
valuation and disposals of a subsidiary and investment
properties |
|
|
1,370 |
|
(476) |
|
Shares in loss of
joint venture |
11 |
|
40 |
|
321 |
|
Gain on financial
instruments |
20 |
|
(55) |
|
(521) |
|
Decrease/(increase) in
trade and other receivables |
|
|
305 |
|
(473) |
|
(Decrease)/increase in
provisions |
16 |
|
(754) |
|
887 |
|
(Decrease)/increase in
trade and other payables |
|
|
(417) |
|
371 |
|
Net finance cost |
6 |
|
151 |
|
1,094 |
|
Net foreign exchange
gain |
|
|
- |
|
(1,370) |
Net
cash (used in)/generated from operations |
|
(215) |
|
1,404 |
|
|
|
|
|
|
|
|
Interest income
received |
|
|
97 |
|
249 |
|
Interest paid |
|
|
(334) |
|
(1,020) |
|
Tax received |
|
|
44 |
|
283 |
Net
cash (outflow)/inflow from operating activities |
|
(408) |
|
916 |
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
Repayment of joint
venture loan |
11 |
|
8,383 |
|
- |
|
Proceeds from
disposals of a subsidiary and investment properties |
9 |
|
25,362 |
|
33,488 |
Net
cash inflow from investing activities |
|
33,745 |
|
33,488 |
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
Redemption of
shares |
18 |
|
(24,003) |
|
(16,193) |
|
Bank loan facility
repaid |
14 -
15 |
|
(15,018) |
|
(13,740) |
|
Decrease in derivative
financial liabilities |
|
|
(11) |
|
- |
|
|
|
|
|
|
|
Net
cash used in financing activities |
|
(39,032) |
|
(29,933) |
|
|
|
|
|
|
|
|
Effects of
exchange rate fluctuations |
|
735 |
|
(3,743) |
(Decrease)/Increase in cash and cash equivalents |
|
(4,960) |
|
728 |
|
|
|
|
|
|
|
|
Cash and cash
equivalents at start of the year |
|
|
8,806 |
|
8,078 |
Cash
and cash equivalents at the year end |
|
3,846 |
|
8,806 |
The accompanying notes form an integral part of these Financial
Statements.
Notes to the Consolidated Financial
Statements
For the year ended 30 June 2017
1. Operations
AXA Property Trust Limited (the "Company") is a limited
liability, closed-ended investment company incorporated in
Guernsey. The Company invests in
commercial properties in Europe
which are held through its subsidiaries. The Consolidated Financial
Statements (the “Financial Statements”) of the Company for the year
ended 30 June 2017 comprise the
Financial Statements of the Company and its subsidiaries (together
referred to as the "Group").
2. Significant accounting policies
(a) Basis of preparation
The Financial Statements which show a true and fair view have
been prepared in accordance with International Financial Reporting
Standards (“IFRS”) which comprise standards and interpretations
issued by the International Accounting Standards Board (“IASB”) and
are in compliance with The Companies (Guernsey) Law, 2008. The Financial Statements
have been prepared on a basis other than that of a going concern,
and the accounting policies, presentation and methods of
computation are consistent with this basis, as disclosed in the
going concern paragraph below. The financial statements have been
prepared on a historical cost basis with the exception of
investment property and certain financial instruments which are
measured at fair value.
(b) Going concern
The discount control provisions established when the Company was
launched required a continuation vote to be proposed to
shareholders at the Company's Annual General Meeting in 2015. As a
result of the large discount to Net Asset Value at which shares
were trading there was little chance of raising new capital. After
extensive shareholder consultation, the Board resolved not to seek
continuation of the Company in 2015 and proposed to shareholders
that the Company enter into a managed wind-down. This proposal was
approved at an EGM held on 26 April
2013.
The Financial Statements have been prepared on a basis other
than that of a going concern reflecting the orderly wind-down of
the Group. Accordingly, the going concern basis of accounting is
not considered appropriate. All assets and liabilities continue to
be measured in accordance with IFRS. The Board recognises that the
timely disposal of the sole remaining property is uncertain and
continues to keep under review the most appropriate course of
action with regard to this asset over the coming months with the
aim of maximising shareholder return. As at June 2017, the completion of the sale of the sole
remaining investment property is foreseen in the course of
2018.
The Directors estimate that the wind-down costs will be
approximately £189,000 (30 June 2016:
£206,418). The Board believes that the Group has sufficient funds
available to meet its wind-down costs, day-to-day running costs and
amounts due in terms of its loan facilities.
(c) Adoption of new standards
and its consequential amendments
Standard, interpretation and
amendments to published statements currently effective
There are no new standards nor amendments effective as of
1 July 2016 that have had a
significant impact on the Group’s Financial Statements.
Standards, interpretations and
amendments to published statements not yet effective
There are no accounting standards that have been issued and are
not yet effective that are likely to have an impact on the
Financial Statements as the wind up of the Group is estimated to
take place in 2018.
(d) Significant estimates and
judgements
The preparation of the Group’s Financial Statements requires
management to make judgements, estimates and assumptions that
affect the reported amounts of revenues, expenses, assets and
liabilities, and the accompanying disclosures, and the disclosure
of contingent liabilities. Uncertainty about these assumptions and
estimates could result in outcomes that require a material
adjustment to the carrying amount of assets or liabilities affected
in future periods.
(i) Judgements:
In the process of applying the Group’s accounting policies,
management has made the following judgements, which have the most
significant effect on the amounts recognised in the Financial
Statements:
Functional currency
As disclosed in note 2(e), the Group’s functional currency is
Sterling and the subsidiaries’ functional currency is the Euro. The
Board of Directors considers that the Parent Company’s functional
currency is Sterling, as the capital raised, return on capital and
dividends paid by the Parent Company are in Sterling. The Euro most
faithfully represents the economic effect of the underlying
transactions, events and conditions of the subsidiaries. The Euro
is the currency in which the subsidiaries measure their performance
and reports their results.
Going concern
The Financial Statements have been prepared on a non-going
concern basis reflecting the orderly wind-down of the Group.
Further discussions of the Board’s decision to wind-down the Group,
can be found in note 2(b).
Classification of investment
properties as held for sale
The Group has no investment property classified as held for
sale. In establishing whether an investment property may be
transferred to held for sale, the investment property must be
available for immediate sale in its present condition subject only
to terms that are usual and customary for sales of such property
and its sale must be highly probable, as discussed in note 2(o).
Lease classification
The Group has entered into commercial property leases on its
investment property portfolio. The Group has determined, based on
an evaluation of the terms and conditions of the arrangements, such
as the lease term not constituting a substantial portion of the
economic life of the commercial property, that it retains all the
significant risks and rewards of ownership of these properties and
accounts for the contracts as operating leases.
(ii) Estimates and
assumptions:
The key assumptions concerning the future and other key sources
of estimation uncertainty at the reporting date, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are described below. The Group based its assumptions and estimates
on parameters available when the Financial Statements were
prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or
circumstances arising which are beyond the control of the Group.
Such changes are reflected in the assumptions when they occur.
Revaluation of investment
properties
The Group carries its investment properties at fair value, with
changes in fair value being recognised in the Consolidated Income
Statement.
Properties are valued quarterly by external independent valuers
as at the end of each calendar quarter. Their valuations are
reviewed quarterly by the Board.
Quarterly valuations of investment properties are carried out by
Knight Frank LLP, external independent valuers to the Group, in
accordance with the Royal Institution of Chartered Surveyors’
(“RICS”) Appraisal and Valuation Standards. The properties have
been valued in accordance with the definition of the RICS Valuation
which is defined as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The valuation
is based on the highest and best use of the investment
properties.
In view of market instability, the valuers refer to the RICS
Valuation Standards Guidance Note 1 (Valuation Uncertainty). The
key assumptions used to determine the market value of the
investment properties are explained further in note 2(l).
Taxes
Uncertainties exist with respect to the interpretation of
complex tax regulations, changes in tax laws, and the timing and
amount of future taxable income. The Group estimates its tax
receivables and liabilities after taking into account the impact of
tax laws and regulation and the timing and amount of future taxable
income.
Deferred tax assets are recognised for unused tax losses to the
extent that it is probable that taxable profit will be available
against which the losses can be utilised. Significant management
judgement is required to determine the amount of the deferred tax
asset that can be recognised, based upon timing and the level of
future taxable profits. Details of tax losses recognised as a
deferred tax asset and the amount of unused tax losses held by the
Group, refer to note 17.
Provisions
In determining the provision for wind-down costs, estimates of
costs have been obtained from the Broker, Administrator and other
parties involved in the managed wind-down of the Company. The
carrying amount of the provision as at 30
June 2017 was £189,000 (30 June
2016: £206,418).
Value of financial instruments
The Group held financial instruments that were not quoted in
active markets, such as interest rate swaps. These swaps were
valued at their fair value as communicated by the bank at each
quarter end.
(e) Foreign currency
translation
(i) Foreign currency transactions
Transactions in foreign currencies are translated to
presentation currency at the spot foreign exchange rate ruling at
the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the Consolidated Statement of
Financial Position date are translated to presentation currency at
the foreign exchange rate ruling at that date. Foreign exchange
differences arising on translation are recognised in the
Consolidated Income Statement. Non-monetary assets and liabilities
that are measured at historical cost in a foreign currency are
translated using the exchange rate at the date of the transaction.
Non-monetary assets and liabilities denominated in foreign
currencies that are stated at fair value are translated to
presentation currency at foreign exchange rates ruling at the dates
the fair value was determined.
(ii) Exchange differences on foreign
operations
The assets and liabilities of foreign operations, arising on
consolidation, are translated to presentation currency at the
foreign exchange rates ruling at the Consolidated Statement of
Financial Position date. The income and expenses of foreign
operations are translated to presentation currency at an average
rate. Foreign exchange differences arising on retranslation are
recognised in other comprehensive income and as a separate
component of equity.
(f) Basis of
consolidation
(i)
Subsidiaries
The Financial Statements comprise the Financial Statements of
the Company and its subsidiaries as at 30 June each year.
Subsidiaries are fully consolidated from the date of acquisition,
being the date on which the Group obtains control, and continue to
be consolidated until the date when such control ceases. The
Financial Statements of the subsidiaries are prepared for the same
reporting period as the parent company, using consistent accounting
policies.
(ii) Transactions
eliminated on consolidation
All intra-group balances, transactions and unrealised gains and
losses resulting from intra-group transactions are eliminated in
preparing the Financial Statements.
(iii) Joint
ventures
The Group’s interest in jointly controlled entities are
accounted for using the equity method. The Group recognises the
portion of gains or losses on the sale of assets by the Group to
the joint venture that is attributable to the other ventures
(“Downstream transaction”). The Group recognises its share of
profits or losses from the joint venture that result from the
Group’s purchase of assets from the joint venture until it resells
the assets to an independent party (“Upstream transaction”). When
downstream transactions provide evidence of a reduction in the net
fair value of the assets sold, or of an impairment loss of those
assets, those losses shall be recognised in full by the investor.
When upstream transactions provide evidence of a reduction in the
net fair value of the assets to be purchased or of an impairment
loss of those assets, the investor shall recognise its share in
those losses.
AXA Property Trust Limited, the Company, is the parent of the
Group. It was incorporated in Guernsey on
5 April 2005. The Company owned the
following subsidiaries as at the reporting date:
Subsidiaries |
Country of incorporation |
Date of incorporation |
Ownership interest
% |
Principal activities |
Property Trust
Luxembourg 1 S.à r.l (in liquidation) |
Luxembourg |
20 July 2005 |
100 |
Holding
Company |
Property Trust
Luxembourg 2 S.à r.l. |
Luxembourg |
24 November 2005 |
100 |
Holding
Company |
Property Trust
Luxembourg 3 S.à r.l. |
Luxembourg |
2 June 2006 |
100 |
Holding
Company |
The Manager will seek to merge or wind up redundant holding
companies from planned disposals within a short time frame to avoid
ongoing administrative expenses.
The companies shown in the table below are directly owned by
Property Trust Luxembourg 2 S.à r.l. and Property Trust Luxembourg
3 S.à.r.l. as at the reporting date:
Subsidiaries |
Country of incorporation |
Ownership interest
% |
Property Trust
Luxembourg 2 S.à r.l. |
|
|
Property Trust
Rothenburg 1 S.à r.l. |
Luxembourg |
100 |
Multiplex 1
S.r.l. |
Italy |
100 |
Property Trust
Luxembourg 3 S.à r.l. |
|
|
Property Trust
Agnadello S.r.l. |
Italy |
50 |
(g) Income recognition
Interest income from banks is recognised on an effective yield
basis.
Rental income from investment property leased out under
operating leases is recognised in the Consolidated Income Statement
on a straight-line basis over the term of the lease. Lease
incentives are amortised over the whole lease term.
(h) Expenses/Other Income
Expenses are accounted for on an accruals basis.
Service costs for service contracts entered into by the Group
acting as the principal are recorded when such services are
rendered. The Group is entitled to recover such costs from the
tenants of the investment properties. The recovery of costs is
recognised as service charged income on an accrual basis.
(i) Cash and cash
equivalents
Cash and cash equivalents comprise cash balances and call
deposits carried at cost. Cash equivalents are short-term, highly
liquid investments that are readily convertible to known amounts of
cash and which are subject to an insignificant risk of changes in
value.
(j) Dividends
Dividends are recognised as a liability in the period in which
they become obligations of the Company. All dividends are paid as
interim dividends. Interim dividends are recognised when paid.
Final dividends are recognised once they are approved by
shareholders.
(k) Provisions
A provision is recognised in the Consolidated Statement of
Financial Position when the Group has a legal or constructive
obligation as a result of a past event, and it is probable that an
outflow of economic benefits will be required to settle the
obligation.
(l) Investment
properties
Investment properties are those which are held to earn rental
income and capital appreciation and are recognised as such once all
material conditions in the exchanged purchase contracts are
satisfied. Investment properties are initially recognised at cost,
being the fair value of consideration given, including associated
transaction costs. Any subsequent capital expenditure incurred in
improving investment properties is capitalised in the period during
which the expenditure is incurred and included within the book cost
of the properties.
After initial recognition, investment properties are measured at
fair value using the fair value model with unrealised gains and
losses recognised in the Consolidated Income Statement. Realised
gains and losses upon disposal of properties are recognised in the
Consolidated Income Statement. Quarterly valuations are carried out
by Knight Frank LLP, external independent valuers, in accordance
with the RICS Appraisal and Valuation Standards. The properties
have been valued in accordance with the definition of the RICS
Valuation which is defined as the price that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The valuation is based on the highest and best use of the
investment properties.
Valuations reflect, where appropriate, the types of tenants
actually in occupation or responsible for meeting lease commitments
or likely to be in occupation after letting of vacant accommodation
and the market's general perception of their creditworthiness, the
allocation of maintenance and insurance responsibilities between
lessor and lessees, and the remaining economic life of the
property. It has been assumed that whenever rent reviews or lease
renewals are pending with anticipated reversionary increases, all
notices and where appropriate counter notices have been served
validly and within the appropriate time.
Subsequent expenditure is charged to the asset’s carrying amount
only when it is probable that future economic benefits associated
with the item will flow to the Group and the cost of the item can
be measured reliably. All other repairs and maintenance costs are
charged to the Consolidated Income Statement during the financial
period in which they are incurred.
Investment properties are derecognised when they have been
disposed. Where the Group disposes of a property at fair value in
an arm’s length transaction, the carrying value immediately prior
to the sale is adjusted to the transaction price, and the
adjustment is recorded in the income statement within gain/(loss)
on disposals of subsidiaries and investment properties.
(m) Leases
The determination of whether an arrangement is, or contains, a
lease is based on the substance of the arrangement at the inception
date. The arrangement is assessed for whether fulfilment of the
arrangement is dependent on the use of a specific asset or assets
or the arrangement conveys a right to use the asset or assets, even
if that right is not explicitly specified in an arrangement.
Leases in which the Group does not transfer substantially all
the risks and benefits of ownership of an asset are classified as
operating leases. Initial direct costs incurred in negotiating an
operating lease are added to the carrying amount of the leased
asset and recognised over the lease term on the same basis as
rental income. Contingent rents are recognised as revenue in the
period in which they are earned.
(n) Financial instruments
(i) Investments at fair value through profit or loss
An instrument is classified as fair value through profit or loss
if it is held for trading or is designated as such upon initial
recognition. Upon initial recognition, attributable transaction
costs are recognised in profit or loss when incurred. Financial
instruments at fair value through profit or loss are measured at
fair value and changes therein are recognised in profit or
loss.
(ii) Loans and receivables
Loans advanced and other receivables are classified as loans and
receivables. Loans and receivables are carried at amortised cost
using the effective interest rate method, less impairment losses,
if any. Gains and losses are recognised in profit or loss when the
loans and receivables are derecognised or impaired.
(iii) Loans and borrowings
All loans and borrowings were initially recognised at fair value
less directly attributable transaction costs. After initial
recognition, interest bearing loans and borrowings were
subsequently measured at amortised cost using the effective
interest method.
(iv) Derivative financial instruments
The Group used derivative financial instruments to hedge its
exposure to interest rate risks arising from financing activities.
However, as disclosed in note 21, hedge accounting for these
derivative financial instruments has ceased to apply.
Derivative financial instruments were recognised initially at
cost which is also deemed to be fair value. Subsequent to initial
recognition, derivative financial instruments were stated at fair
value. The gain or loss on remeasurement to fair value was
recognised immediately in profit or loss.
The fair value of interest rate swaps was the estimated amount
that the Group would receive or pay to terminate the swap at the
Consolidated Statement of Financial Position date, taking into
account current interest rates and the current creditworthiness of
the swap counterparties.
(v) Derecognition of financial instruments
A financial asset is derecognised when:
- the rights to receive cash flows from
the asset have expired;
- the Company retains the right to
receive cash flows from the asset, but has assumed an obligation to
pay them in full without material delay to a third party under a
“pass through arrangement”; or
- the Company has transferred
substantially all the risks and rewards of the asset, or has
neither transferred nor retained substantially all the risks and
rewards of the asset, but has transferred control of the asset.
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled.
(o) Assets held for sale
Investment property is transferred to assets held for sale when
it is expected that the carrying amount will be recovered
principally through sale rather than from continuing use. For this
to be the case, the property must be available for immediate sale
in its present condition subject only to terms that are usual and
customary for sales of such property and its sale must be highly
probable.
For the sale to be highly probable:
- The Board must be
committed to a plan to sell the property and an active programme to
locate a buyer and complete the plan must have been initiated;
- The property must be
actively marketed for sale at a price that is reasonable in
relation to its current fair value; and
- The sale should be
expected to qualify for recognition as a completed sale within one
year from the date of classification.
On re-classification, an investment property that is measured at
fair value continues to be so measured.
(p) Impairment
The carrying amounts of the Group's assets, other than
investment property, are reviewed at each Consolidated Statement of
Financial Position date to determine whether there is any
indication of impairment. If any such indication exists, the
asset's recoverable amount is estimated. An impairment loss is
recognised whenever the carrying amount of an asset exceeds its
estimated recoverable amount. Impairment losses are recognised in
the Consolidated Income Statement.
(q) Taxation
The Company has obtained exempt company status in Guernsey under the terms of the Income Tax
(Exempt Bodies) (Guernsey)
Ordinance, 1989 and accordingly is subject to an annual fee of
£1,200 (2016: £1,200). The Directors intend to conduct the Group's
affairs such that it continues to remain eligible for
exemption.
The Company's subsidiaries are subject to income tax on any
income arising on investment properties, after deduction of debt
financing costs and other allowable expenses. However, when a
subsidiary owns a property located in a country other than its
country of residence the taxation of the income is defined in
accordance with the double taxation treaty signed between the
country where the property is located and the residence country of
the subsidiary.
Income tax on the profit or loss for the year comprises current
and deferred tax. Current tax is the expected tax payable on the
taxable income for the year as determined under local tax law,
using tax rates enacted or substantially enacted at the
Consolidated Statement of Financial Position date, and any
adjustment to tax payable in respect of previous periods.
Deferred income tax is provided using the liability method,
providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the
amount used for taxation purposes. The amount of deferred tax
provided is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities, using
tax rates enacted or substantially enacted at the Consolidated
Statement of Financial Position date, except in the case of
investment properties, where deferred tax is provided for the
effect of the sale of the properties. Deferred tax assets are
recognised only to the extent that it is probable that future
taxable profits will be available against which the asset is
utilised.
Details of current tax and deferred tax assets and liabilities
are disclosed in note 17.
(r) Hedge accounting
Prior to January 2013, the Group
designated certain hedging instruments, which included derivatives
and non-derivatives in respect of interest rate risk as cash flow
hedges based on the requirements of IAS 39. As the forecast
transaction was no longer expected to occur, hedge accounting was
discontinued prospectively.
(s) Determination and
presentation of operating segments
The Board of Directors are charged with setting the Company’s
investment strategy in accordance with the Prospectus. They have
delegated the day to day implementation of this strategy to its
Investment Manager but retain responsibility to ensure that
adequate resources of the Company are directed in accordance with
their decisions. The investment decisions of the Investment Manager
are reviewed on a regular basis to ensure compliance with the
policies and legal responsibilities of the Board. The
Investment Manager has been given full authority to act on behalf
of the Company. Under the terms of the Investment Management
Agreement dated 18 April 2005,
subject to the overall supervision of the Board, the Investment
Manager advised on the general allocation of the assets of the
Company between different investments, advised the Company on its
borrowing policy and geared investment position, managed the
investment of the Company’s subscription proceeds and short-term
liquidity in fixed income instruments and advised on the use of
(and management of) derivatives and hedging by the Company.
Information presented to the Board by the Investment Manager is
based on IFRS.
Whilst the Investment Manager may make the investment decisions
on a day to day basis regarding the allocation of funds to
different investments, any changes to the investment strategy or
major allocation decisions have to be approved by the Board, even
though they may be proposed by the Investment Manager. The Board
therefore retains full responsibility as to the major allocations
made on an ongoing basis. The Investment Manager will always act
under the terms of the Prospectus and the Investment Management
Agreement dated 18 April 2005 and to
the changes to the investment objective and investment policy
approved at an EGM held on 26 April
2013, which cannot be radically changed without the approval
of the Board of Directors.
The Board has considered the requirements of IFRS 8, ‘Operating
Segments’. The Board is of the view that the Group is engaged in a
single segment of business, being investment in properties in
Europe. Geographic and Sector
analyses of the segment are included in the Investment Manager’s
Report.
3. Material agreements
(i) AXA Investment Managers UK Limited has been appointed as the
Investment Manager of the Group pursuant to an Investment
Management Agreement dated 18 April
2005. The Investment Manager is responsible for advising the
Group on the overall management of the Group's investments and for
managing the Group's investments in fixed income instruments in
accordance with the Group's investment objective and policy,
subject to the overall supervision of the Directors. Under the
terms of the Investment Management Agreement, the Investment
Manager is entitled to a management fee of 90 basis points per
annum of gross assets together with reasonable expenses payable
quarterly in arrears. The management fee shall be reduced by an
amount equal to the fees payable to the Real Estate Adviser by the
property subsidiaries such that the total fees payable by the Group
to the Investment Real Estate Adviser and Investment Manager will
not exceed 90 basis points per annum. Either party may terminate
the Investment Management Agreement with not less than 12 months’
notice in writing.
In view of the change to the Investment Objective and Policy,
the Manager agreed to amend the Management Fee arrangements with
effect from 1 January 2013 in order
to provide better alignment with the objective of the Managed
Wind-down, such that the Manager and/or its Associates will receive
in aggregate (refer to note 5 Investment management fees and
Performance fee):
- a management fee of 1.10
per cent. of NAV (as opposed to 0.90 per cent. of gross assets) per
annum to be paid quarterly in arrears based on the NAV at the end
of the relevant quarter,
- transaction fees of 0.35
per cent. of the gross sales price achieved on each asset sale;
and
- a performance fee of 12.5
per cent. of cash returned to shareholders in excess of 90 per
cent. of NAV as at 31 December 2012,
with threshold percentage of NAV increasing by 5 per cent. per
annum with effect from 1 January 2015
(such that, by way of example, the threshold percent for the 12
month from and including 1 January
2015 (such that the threshold percentage for the 12 months
from and including 1 January 2015 was
85 per cent of NAV as of 31 December
2012 and increased to 90 per cent from and including
January 2016 and so on for each
consecutive year).
This amendment of the management fee was approved by a
resolution of the shareholders on 26 April
2013.
(ii) Stifel Nicolaus
Limited (formerly known as Oriel Securities Limited) is Sponsor and
Broker to the Company. Fees incurred in 2017 totalled £25,000
(2016: £25,000)
(iii) Northern Trust
International Fund Administration Services (Guernsey) Limited is Administrator, Secretary
and Registrar to the Company pursuant to the Administration
Agreement dated 13 April 2005. Fees
incurred in 2017 totalled £145,000 (2016: £145,000).
4. Gross rental income
Gross rental income for the year ended 30
June 2017 amounted to £1.70 million (30 June 2016: £3.94 million). The Group leases
out all of its investment property under operating leases and are
usually structured in accordance with local practices in
Germany and Italy. All leases benefit from indexation.
Minimum Lease Payments (based on leases in place as at
30 June 2017)
|
|
|
|
|
|
|
|
|
|
30
June 2017 |
|
30 June
2016 |
|
|
|
|
|
|
|
|
|
|
£000s |
|
£000s |
0-1 year |
|
|
|
|
|
|
|
|
|
1,277 |
|
3,706 |
1-5 years |
|
|
|
|
|
|
|
|
|
6,385 |
|
11,105 |
5 + years |
|
|
|
|
|
|
|
|
|
1,892 |
|
15,625 |
The leasing arrangements are negotiated by the local Asset
Managers, who send recommendations to the Fund Managers and a
request for approval.
5. General and administrative
expenses
|
|
|
|
|
|
|
|
|
|
30
June 2017 |
|
30 June
2016 |
|
|
|
|
|
|
|
|
|
|
£000s |
|
£000s |
Administration fees |
|
|
|
|
|
|
|
|
(188) |
|
(284) |
General
expenses |
|
|
|
|
|
|
|
|
(621) |
|
(694) |
Audit fees |
|
|
|
|
|
|
|
|
|
(142) |
|
(167) |
Legal and
professional fees |
|
|
|
|
|
|
|
(160) |
|
(218) |
Directors'
fees |
|
|
|
|
|
|
|
(74) |
|
(91) |
Insurance fees |
|
|
|
|
|
|
|
|
|
(64) |
|
(14) |
Liquidation costs |
|
|
|
|
|
|
|
17 |
|
(12) |
Sponsor's fees |
|
|
|
|
|
|
|
|
|
(25) |
|
(25) |
Investment
management fees |
|
|
|
|
|
|
|
(255) |
|
(311) |
Performance fee |
|
|
|
|
|
|
|
583 |
|
(721) |
Total |
|
|
|
|
|
|
|
|
|
(929) |
|
(2,537) |
Each of the Directors receives a fee of £13,500 (2016: £13,500)
and the Chairman receives a fee of £18,000 (2016: £18,000).
The aggregate remuneration and benefits in kind of the Directors
in respect of the Company's year ended
30 June 2017 amounted to £63,012
(2016: £72,000) in respect of the Company and £74,282 (2016:
£91,364) in respect of the Group.
6. Net finance cost
|
|
|
|
|
|
|
|
|
|
30
June 2017 |
|
30 June
2016 |
|
|
|
|
|
|
|
|
|
|
£000s |
|
£000s |
Interest
(loss)/income from bank deposits |
|
|
|
|
|
|
|
(49) |
|
1 |
Interest
income from JV partners |
|
|
|
|
|
|
|
97 |
|
248 |
Finance costs |
|
|
|
|
|
|
|
|
|
(199) |
|
(1,343) |
Total |
|
|
|
|
|
|
|
|
|
(151) |
|
(1,094) |
7. Basic and diluted loss per
Share
The basic and diluted gain or loss per share for the Group is
based on the net loss for the year of £0.9 million (2016: net
profit of £1.4 million) and the weighted average number of Ordinary
Shares in issue during the year of 48,025,516 (2016:
67,651,518).
8. Dividends
The Company has suspended dividends from June 2012 in order to prudently manage its cash
and debt positions. No dividends were declared or paid during 2015,
2016 and 2017.
9. Investment properties
|
|
|
|
|
|
30
June 2017 |
|
30 June
2016 |
|
|
|
|
|
|
£000s |
|
£000s |
Fair
value of investment properties at beginning of year |
|
|
37,023 |
|
58,778 |
Opening
fair value of assets sold during the year |
|
|
|
(24,724) |
|
(28,020) |
Fair value
adjustments |
|
|
|
|
(781) |
|
798 |
Foreign
exchange translation |
|
|
|
792 |
|
5,467 |
Fair
value of investment properties at the end of the year |
|
|
12,310 |
|
37,023 |
|
|
|
|
|
|
|
|
|
Investment
properties classified held for sale (note 10) |
|
|
|
- |
|
(6,191) |
|
|
|
|
|
|
|
|
|
Net
investment properties |
|
|
|
12,310 |
|
30,832 |
All investment properties are carried at fair value.
During the year, the following investment properties were
sold:
- Dasing (Dasing,
Germany) completed on 25 August 2016. Sales price achieved was €7.45
million (£6.41 million);
- Rothenburg (Rothenburg,
Germany) competed in January 2017. Sales price achieved was €22.02
million (£18.95 million).
The properties have been valued on the basis of fair value,
which is the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market
participants at the measurement date. Quarterly valuations are
carried out at 31 March, 30 June, 30
September and 31 December by Knight Frank LLP, external independent
valuers.
The fair value of investment properties and investment
properties held for sale are analysed by valuation method,
according to the levels of the fair value hierarchy. The different
levels have been defined as follows:
Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities;
Level 2: inputs other than quoted prices included within Level 1
that are observable for asset or liability, either directly (i.e.
as prices) or indirectly (i.e. derived from prices);
Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
The investment property (Curno) is valued via level 3 (2016:
investment properties and investment properties held for sale were
valued via level 3 for Rothenburg and Curno, and via level 2 for
Dasing).
The significant assumptions made relating to valuations are set
out below:
2017 significant assumptions
2017 |
Industrial |
Retail |
Leisure |
Total |
Gross Estimated rental value per
sqm p.a |
n/a |
n/a |
179.95€ |
|
-range |
n/a |
n/a |
179.95€ |
179.95€ |
-weighted average |
n/a |
n/a |
179.95€ |
179.95€ |
Net initial yield |
|
|
|
|
-range |
n/a |
n/a |
8.74% |
8.74% |
-weighted average |
n/a |
n/a |
8.74% |
8.74% |
Reversionary yield |
|
|
|
|
-range |
n/a |
n/a |
7.62% |
7.62% |
-weighted average |
n/a |
n/a |
7.62% |
7.62% |
True equivalent yield |
|
|
|
|
-range |
n/a |
n/a |
8.57% |
8.57% |
-weighted average |
n/a |
n/a |
8.57% |
8.57% |
2016 significant assumptions
2016 |
Industrial |
Retail |
Leisure |
Total |
Gross Estimated rental value per
sqm p.a |
41.08€ |
132.11€ |
179.95€ |
|
-range |
37.5-44.02€ |
132.11€ |
179.95€ |
37.5€-179.95€ |
-weighted average |
41.50€ |
132.11€ |
179.95€ |
113.79€ |
Net initial yield |
|
|
|
|
-range |
8.43%-10.09% |
7.72% |
9.78% |
7.72%-10.09% |
-weighted average |
9.56% |
7.72% |
9.78% |
8.89% |
Reversionary yield |
|
|
|
|
-range |
9.89%-10.43% |
6.58% |
8.68% |
6.58%-10.43% |
-weighted average |
10.10% |
6.58% |
8.68% |
8.33% |
True equivalent yield |
|
|
|
|
-range |
10.09%-10.22% |
6.88% |
9.76% |
6.88%-10.22% |
-weighted average |
10.40% |
6.88% |
9.76% |
8.84% |
An increase/decrease in ERV will increase/decrease valuations,
while an increase/decrease to yield decreases/increases valuations.
The table below sets out the sensitivity of the valuation to
changes of 50 basis points in yield.
The external valuer has carried out its valuation using the
comparative and investment methods. The external valuer has made
the assessment on the basis of a collation and analysis of
appropriate comparable investment and rental transactions. The
market analysis has been undertaken using market knowledge,
enquiries of other agents, searches of property databases, as
appropriate and any information provided to them. The external
valuer is adhering to the RICS Valuation – Professional
Standards.
2017 sensitivity
Movement |
Industrial |
Retail |
Leisure |
Increase of 50 basis points |
n/a |
n/a |
Decrease of €0.70 million |
Decrease of 50 basis points |
n/a |
n/a |
Increase of €0.80 million |
2016 sensitivity
Movement |
Industrial |
Retail |
Leisure |
Increase of 50 basis points |
Decrease of €1.08 million |
Decrease of €1.4 million |
Decrease of €0.80 million |
Decrease of 50 basis points |
Increase of €1.21 million |
Increase of €1.60 million |
Increase of €0.90 million |
10. Investment properties held for
sale
As at 30 June 2017, there is no
investment property classified as held for sale (30 June 2016: 1 property (Dasing)).
11. Investment in joint venture
The Group holds a 50% joint venture interest in the equity of
the Italian joint venture Property Trust Agnadello S.r.l. which
held a logistics warehouse in Agnadello, Italy. During the year, Property Trust
Agnadello S.r.l. sold its logistic warehouse. The remaining 50%
equity interest is held by European Added Value
Fund S.à r.l., a subsidiary of European Added Value Fund
Limited.
The Group’s interest in Property Trust Agnadello S.r.l. is
accounted for using the equity method in the Financial Statements,
which approximates the lower of its carrying amount and its fair
value less cost to sell.
The following table summarises the financial information of
Property Trust Agnadello S.r.l. which also reconciles the
summarised financial information to the carrying amount of the
Group’s interest in the joint venture:
Summarised Consolidated Statement of
Financial Position
|
|
|
|
|
|
|
|
|
|
30
June 2017 |
|
30 June
2016 |
|
|
|
|
|
|
|
|
|
|
£000s |
|
£000s |
Current assets |
|
|
|
|
|
|
|
|
|
1,322 |
|
20,965 |
Current
liabilities |
|
|
|
|
|
|
|
(38) |
|
(17,183) |
Net
assets (100%) |
|
|
|
|
|
|
|
|
1,284 |
|
3,782 |
Group's
share of net assets (50%) |
|
|
|
|
|
|
|
50% |
|
50% |
Group's
share of net assets |
|
|
|
|
|
|
|
642 |
|
1,891 |
Loan
balances due to joint venture partners |
|
|
|
|
|
|
|
- |
|
8,383 |
Carrying amount of interest in joint venture |
|
|
|
|
|
|
|
642 |
|
10,274 |
Summarised Consolidated Income
Statement
|
|
|
|
|
|
|
|
|
|
30
June 2017 |
|
30 June
2016 |
|
|
|
|
|
|
|
|
|
|
£000s |
|
£000s |
Net rental
and related income |
|
|
|
|
|
|
|
568 |
|
1,460 |
Valuation
losses on investment property |
|
|
|
|
|
|
|
- |
|
(1,271) |
Loss on
disposals of investment properties |
|
|
|
|
|
|
|
(387) |
|
- |
Total
administrative and other expenses |
|
|
|
|
|
|
|
(180) |
|
(157) |
Other income |
|
|
|
|
|
|
|
|
|
- |
|
1 |
Financial
expenses |
|
|
|
|
|
|
|
(202) |
|
(486) |
Loss before tax |
|
|
|
|
|
|
|
|
|
(201) |
|
(453) |
Income tax
gain/(expense) |
|
|
|
|
|
|
|
121 |
|
(189) |
Loss for
the year |
|
|
|
|
|
|
|
(80) |
|
(642) |
Group's
share of loss for the year |
|
|
|
|
|
|
|
(40) |
|
(321) |
Summarised Consolidated Statement of
Comprehensive Income
|
|
|
|
|
|
|
|
30
June 2017 |
|
30 June
2016 |
|
|
|
|
|
|
|
|
£000s |
|
£000s |
Loss for the year |
|
|
|
|
|
|
|
(80) |
|
(642) |
Total
comprehensive income for the year |
|
|
|
|
|
(80) |
|
(642) |
Group's share of
loss for the year |
|
|
|
|
|
|
|
(40) |
|
(321) |
12. Trade and other receivables
|
|
|
|
|
|
|
|
|
|
30
June 2017 |
|
30 June
2016 |
|
|
|
|
|
|
|
|
|
|
£000s |
|
£000s |
Tax
receivable (witholding, corporate and income) |
|
|
|
|
119 |
|
367 |
Investment
property sold receivable |
|
|
|
|
|
|
|
- |
|
282 |
Other
receivables |
|
|
|
|
|
|
|
681 |
|
347 |
VAT receivable |
|
|
|
|
|
|
|
|
|
91 |
|
24 |
Management
fee receivable |
|
|
|
|
|
|
|
- |
|
156 |
Rent receivable |
|
|
|
|
|
|
|
|
|
14 |
|
116 |
Accrued
income |
|
|
|
|
|
|
|
- |
|
129 |
Prepayments |
|
|
|
|
|
|
|
|
|
34 |
|
71 |
Total |
|
|
|
|
|
|
|
|
|
939 |
|
1,492 |
The carrying values of trade and other receivables are
considered to be approximately equal to their fair value.
Rent receivable is non-interest bearing and typically due within
30 days.
13. Trade and other payables
|
|
|
|
|
|
|
|
|
|
30
June 2017 |
|
30 June
2016 |
|
|
|
|
|
|
|
|
|
|
£000s |
|
£000s |
Investment
manager's fee |
|
|
|
|
|
|
|
111 |
|
165 |
Property
manager's fee |
|
|
|
|
|
|
|
- |
|
37 |
Tax
payable (income, transfer, capital and other) |
|
|
|
|
|
|
751 |
|
888 |
Interest
payable on loan facility |
|
|
|
|
|
|
|
13 |
|
99 |
Legal and
professional fees |
|
|
|
|
|
|
|
29 |
|
93 |
VAT payable |
|
|
|
|
|
|
|
|
|
32 |
|
13 |
Audit fee |
|
|
|
|
|
|
|
|
|
221 |
|
170 |
Administration and Company Secretarial fees |
|
|
|
|
|
|
|
- |
|
79 |
Rent prepaid |
|
|
|
|
|
|
|
|
|
3 |
|
9 |
Other |
|
|
|
|
|
|
|
|
|
413 |
|
660 |
Total |
|
|
|
|
|
|
|
|
|
1,573 |
|
2,213 |
Trade and other payables are non-interest bearing and are
normally settled on 30-day terms.
The carrying values of trade and other payables are considered
to be approximately equal to their fair value.
14. Short-term loans
|
|
|
|
|
|
|
|
|
|
30
June 2017 |
|
30 June
2016 |
|
|
|
|
|
|
|
|
|
|
£000s |
|
£000s |
Secured
bank loan |
|
|
|
|
|
|
|
- |
|
14,907 |
On 30 June 2016, the main loan
facilities were with Crédit Agricole Corporate and Investment Bank
(“Crédit Agricole”) and Crédit Foncier de France (“Crédit Foncier”). On 30 June 2016 the main loan facilities were
refinanced and matured on 31 December
2016.
The outstanding balance of the main loan as at 30 June 2016 was €17.96 million (£14.9 million)
(before capitalised debt issue costs).
On 30 June 2016, all bank loans
were classified as current liabilities as the facility was due to
expire within the next 12 months.
The Group was in compliance with the loan covenants including
the Loan to Value covenant of 60%.
The carrying value of these loans approximated their fair
value.
Following the sale of Dasing, £2.59 million (€2.95m) and £2.80
million (€3.18m) of the loan was repaid in August and September 2016, respectively.
In November 2016 the Company
completed the sale of the asset in Agnadello, Italy, with its joint venture partner for a
total sales price of €23.2 million. The disposal of Rothenburg was
completed in January 2017 for a total
sales price of €22.02 million.
As a result of this sales progress the Group was able to fully
discharge the remaining balance of its debt facility of £9.54
million (€10.85m).
As at 30 June 2017, all bank loans
have been fully repaid.
15. Long-term loans
|
|
|
|
|
|
|
|
|
|
30
June 2017 |
|
30 June
2016 |
|
|
|
|
|
|
|
|
|
|
£000s |
|
£000s |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
|
|
|
|
Loan due
to third party |
|
|
|
|
|
|
|
- |
|
111 |
Total |
|
|
|
|
|
|
|
|
|
- |
|
111 |
16. Provisions
|
|
|
|
|
|
|
|
|
|
30
June 2017 |
|
30 June
2016 |
|
|
|
|
|
|
|
|
|
|
£000s |
|
£000s |
Non-current |
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for performance fees |
|
|
|
|
|
|
|
310 |
|
893 |
Provision
for wind-down costs |
|
|
|
|
|
|
|
189 |
|
206 |
Provision
for sale Dasing |
|
|
|
|
|
|
|
- |
|
154 |
Total |
|
|
|
|
|
|
|
|
|
499 |
|
1,253 |
The variation of the provisions for performance fees and
wind-down costs are included in the general and administrative
expenses, in which wind-down costs are disclosed as “Liquidation
costs” (see note 5).
17. Taxation
|
|
|
|
|
|
|
|
|
|
30
June 2017 |
|
30 June
2016 |
|
|
|
|
|
|
|
|
|
|
£000s |
|
£000s |
Effect of: |
|
|
|
|
|
|
|
|
|
|
|
|
Current tax |
|
|
|
|
|
|
|
|
|
|
|
|
Luxembourg |
|
|
|
|
|
|
|
|
|
(1) |
|
(12) |
Italy |
|
|
|
|
|
|
|
|
|
(188) |
|
(170) |
The
Netherlands |
|
|
|
|
|
|
|
- |
|
116 |
Germany |
|
|
|
|
|
|
|
|
|
(152) |
|
(280) |
Total
current tax |
|
|
|
|
|
|
|
(341) |
|
(346) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax |
|
|
|
|
|
|
|
|
|
|
|
|
Investment
property |
|
|
|
|
|
|
|
274 |
|
184 |
Total
deferred tax |
|
|
|
|
|
|
|
274 |
|
184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
charge during the year |
|
|
|
|
|
|
|
(67) |
|
(162) |
Recognised deferred tax assets and
liabilities
Deferred tax assets and liabilities are attributable to the
following items:
|
|
|
|
|
|
|
|
30 June 2017 |
|
|
|
|
|
|
|
|
Assets |
|
Liabilities |
|
Net |
|
|
|
|
|
|
|
|
£000s |
|
£000s |
|
£000s |
Investment
property |
|
|
|
|
|
|
- |
|
- |
|
- |
Tax value
of loss carry forwards recognised |
|
|
|
|
|
- |
|
- |
|
- |
Tax
liabilities |
|
|
|
|
|
|
|
- |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 June 2016 |
|
|
|
|
|
|
|
|
Assets |
|
Liabilities |
|
Net |
|
|
|
|
|
|
|
|
£000s |
|
£000s |
|
£000s |
Investment
property |
|
|
|
|
|
|
- |
|
(351) |
|
(351) |
Tax value
of loss carry forwards recognised |
|
|
|
|
|
- |
|
- |
|
- |
Tax
liabilities |
|
|
|
|
|
|
|
- |
|
(351) |
|
(351) |
At 30 June 2017, no deferred tax
asset has been recognised for unused tax losses as they are not
expected to be utilised.
At 30 June 2017, taxable temporary
differences associated with investments in subsidiaries for which
no deferred tax liability had been recognised totalled £nil (€nil)
(2016: £nil (€nil)).
Movement in temporary differences
|
|
|
|
|
|
Recognised in |
|
Foreign |
|
|
|
|
|
|
|
|
income |
|
exchange |
|
|
|
|
|
|
1st
July 2016 |
|
statement |
|
translation |
|
30
June 2017 |
|
|
|
|
£000s |
|
£000s |
|
£000s |
|
£000s |
Investment
property |
|
(351) |
|
274 |
|
77 |
|
- |
Tax value
of loss carry forwards recognised |
|
- |
|
- |
|
- |
|
- |
Tax
(liabilities)/assets |
|
(351) |
|
274 |
|
77 |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognised in |
|
Foreign |
|
|
|
|
|
|
|
|
income |
|
exchange |
|
|
|
|
|
|
1st
July 2015 |
|
statement |
|
translation |
|
30
June 2016 |
|
|
|
|
£000s |
|
£000s |
|
£000s |
|
£000s |
Investment
property |
|
(510) |
|
184 |
|
(25) |
|
(351) |
Tax value
of loss carry forwards recognised |
|
- |
|
- |
|
- |
|
- |
Tax
(liabilities)/assets |
|
(510) |
|
184 |
|
(25) |
|
(351) |
The Parent Company is exempt from Guernsey taxation.
18. Share capital
|
|
|
|
30 June 2017 |
|
30 June 2016 |
|
|
|
|
Number of |
|
Share |
|
Number of |
|
Share |
|
|
|
|
Shares |
|
Premium |
|
Shares |
|
Premium |
|
|
|
|
|
|
£000s |
|
|
|
£000s |
|
|
|
|
|
|
|
|
|
|
|
Shares of
no par value issued and fully paid |
|
23,402,881 |
|
100,000 |
|
57,577,470 |
|
100,000 |
Capital management
The Company’s capital is represented by the Ordinary Shares,
revaluation reserves, revenue reserves, hedging reserves,
distributable reserves and foreign exchange reserves. The share
premium is included in the distributable reserve presented in the
Consolidated Statement of Changes in Equity. The capital of the
Company is managed in accordance with its investment policy in
pursuit of its investment objective, both of which are set out in
the Investment Objective and Policy section. It is not subject to
externally imposed capital requirements. The Ordinary shares carry
rights regarding dividends, voting, winding-up and redemptions
which are detailed in full in the Company’s Memorandum and Articles
of Incorporation.
The Company was authorised at the Annual General Meeting (“AGM”)
on 2 December 2016 to make market
purchases of up to 14.99% of its Ordinary Shares until the
conclusion of the next AGM or 31 December
2017, whichever is earlier. Purchases would only be made at
prices below the prevailing Net Asset Value of the shares where the
Directors believe such purchases would enhance shareholder value.
In the Prospectus (issued by the Company on 18 April 2005), the Directors stated their
intention to seek annual renewal of this authority. Share buy backs
are at the discretion of the Board.
Additionally, pursuant to the AGM which took place on
2 December 2016 (“2016 AGM”), the
Directors shall not apply and shall be excluded in relation to the
issue of up to an aggregate number of Ordinary Shares as represents
less than 10 per cent. of the number of Ordinary Shares admitted to
trading on the London Stock Exchange.
The following redemptions of shares have been done under the
mechanism for the Redemption of Shares as approved at the EGM held
on 27 February 2014:
Redemption date |
|
|
Capital Returned |
|
Shares
cancelled |
19-Mar-14 |
|
|
1,999,957 |
|
3,641,580 |
09-Apr-14 |
|
|
2,099,903 |
|
3,823,572 |
30-Oct-14 |
|
|
1,999,547 |
|
3,668,894 |
14-May-15 |
|
|
1,799,022 |
|
3,181,296 |
20-Jul-15 |
|
|
5,197,083 |
|
9,725,084 |
06-Jan-16 |
|
|
10,996,174 |
|
18,382,104 |
17-Feb-17 |
|
|
18,400,902 |
|
25,771,573 |
23-Jun-17 |
|
|
5,602,290 |
|
8,403,016 |
|
|
|
48,094,878 |
|
76,597,119 |
19. Net asset value per ordinary
share
The Net Asset Value per Ordinary Share at 30 June 2017 is based on the net assets
attributable to the ordinary shareholders of £15.67 million (2016:
£38.69 million) and on 23,402,881 (2016: 57,577,470) ordinary
shares in issue at the Consolidated Statement of Financial Position
date.
20. Financial risk management
The table below summarises the amounts recognised in the
Consolidated Income Statement in relation to derivative financial
instruments.
|
|
|
|
|
|
|
30
June 2017 |
|
30 June
2016 |
|
|
|
|
|
|
|
£000s |
|
£000s |
Hedging
reserve recycled to consolidated income statement |
|
|
|
- |
|
(762) |
Net gain
on derivative instruments |
|
|
|
|
55 |
|
1,283 |
Total
gain recognised in Consolidated Income Statement |
55 |
|
521 |
The Group is exposed to various types of risk that are
associated with financial instruments. The Group's financial
instruments comprise bank deposits, cash, receivables, loans and
payables that arise directly from its operations. The carrying
value of financial assets and liabilities approximate the fair
value.
The main risks arising from the Group's financial instruments
are market risk, credit risk, liquidity risk, interest risk and
foreign currency risk. The Board review and agree policies for
managing its risk exposure. These policies are summarised
below.
Market Price Risk
Property and property related assets are inherently difficult to
value due to the individual nature of each property. As a result,
valuations are subject to uncertainty. There is no assurance that
the estimates resulting from the valuation process will reflect the
actual sales price even where a sale occurs shortly after the
valuation date. Rental income and the market value for properties
are generally affected by overall conditions in the local economy,
such as growth in Gross Domestic Product (“GDP”), employment
trends, inflation and changes in interest rates. Changes in GDP may
also impact employment levels, which in turn may impact the demand
for premises. Furthermore, movements in interest rates may affect
the cost of financing for real estate companies.
Both rental income and property values may be affected by other
factors specific to the real estate market, such as competition
from other property owners, the perceptions of prospective tenants
of the attractiveness, convenience and safety of properties, the
inability to collect rents because of the bankruptcy or the
insolvency of tenants, the periodic need to renovate, repair and
release space and the costs thereof, the costs of maintenance and
insurance, and increased operating costs. The Investment Manager
addresses market risk through a selective investment process,
credit evaluations of tenants, ongoing monitoring of tenants and
through effective management of the properties.
Market price sensitivity analysis
The sensitivity analysis has been determined based on the
exposure to property valuation risks at the reporting date. Any
changes in market conditions will directly affect the profit or
loss reported through the Consolidated Income Statement. A 5%
increase in the value of the direct properties (after deferred tax)
at 30 June 2017 would have increased
net assets and income for the year by £0.6 million (2016: £1.8
million). A decrease of 5% would have had an equal but opposite
effect. The ratio of cash, cash equivalents and trade and other
receivables to the NAV is 30.5%.
Credit risk
Credit risk refers to the risk that counterparty will default on
its contractual obligations resulting in financial loss to the
Group. As at June 2017. the Group has
adopted a policy of only dealing with creditworthy counterparties
and obtaining sufficient collateral where appropriate as a means of
mitigating the risk of financial loss from defaults. The Group’s
and Company’s exposure and the credit-ratings of its counterparties
are continuously monitored and the aggregate value of transactions
concluded is spread amongst approved counterparties.
The credit risk on liquid funds is limited because the
counterparties are banks with high credit-ratings assigned by
international credit-ratings agencies. The Group banks with
Barclays Bank plc which has a Fitch rating of A, HSBC Bank plc with
a Fitch rating of AA- and BIL with a Fitch rating of BBB+.
Cash and cash equivalents and trade and other receivables
presented in the consolidated statement of financial position are
subject to credit risk with maturities within one year. The
Company’s maximum credit exposure is limited to the carrying amount
of financial assets recognised as at the Consolidated Statement of
Financial Position date.
At the reporting date, the carrying amount of the financial
assets exposed to risk were as follows:
|
|
|
|
|
|
|
|
Within |
|
|
|
|
|
|
|
|
|
|
|
one year |
1-3
years |
|
Total |
As at
30 June 2017 |
|
|
|
|
|
£000s |
£000s |
|
£000s |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
|
|
|
|
3,846 |
- |
|
3,846 |
Rent receivable |
|
|
|
|
|
|
|
14 |
- |
|
14 |
Trade and
other receivables |
|
|
|
|
925 |
- |
|
925 |
Total |
|
|
|
|
|
|
|
4,785 |
- |
|
4,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within |
|
|
|
|
|
|
|
|
|
|
|
one year |
1-3
years |
|
Total |
As at
30 June 2016 |
|
|
|
|
|
£000s |
£000s |
|
£000s |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
|
|
|
|
8,806 |
- |
|
8,806 |
Rent receivable |
|
|
|
|
|
|
|
116 |
- |
|
116 |
Trade and
other receivables |
|
|
|
|
1,057 |
- |
|
1,057 |
Total |
|
|
|
|
|
|
|
9,979 |
- |
|
9,979 |
Liquidity risk
Liquidity risk is the risk that the Company will encounter in
realising assets or otherwise raising funds to meet financial
commitments in a reasonable timeframe or at a reasonable price.
The Group invests the majority of its assets in investment
properties which are relatively illiquid, however, the Group has
mitigated this risk by investing in desirable properties in strong
locations. The Group prepares forecasts in advance which enables
the Group's operating cash flow requirements to be anticipated and
ensures that sufficient liquidity is available to meet foreseeable
needs and to invest any surplus cash assets safely and profitably.
The Group also monitors the cash position in all subsidiaries to
ensure that any working capital needs are addressed as early as
possible.
The Company has continued to suspend the payment of dividends to
prudently manage cash during the wind-down phase.
The table below summarises the maturity profile of the Group’s
liabilities.
|
|
|
|
|
|
Less
than 3 months |
|
3-12
months |
|
1-3
years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
As at
30 June 2017 |
|
|
|
£000s |
|
£000s |
|
£000s |
|
£000s |
Trade and
other payables |
|
|
|
1,573 |
|
- |
|
- |
|
1,573 |
Total |
|
|
|
|
|
1,573 |
|
- |
|
- |
|
1,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 3 months |
|
3-12 months |
|
1-5 years |
|
|
|
|
|
|
|
|
|
|
|
Total |
As at
30 June 2016 |
|
|
|
£000s |
|
£000s |
|
£000s |
|
£000s |
Interest
bearing loans |
|
|
|
- |
|
14,907 |
|
111 |
|
15,018 |
Current
portion of long-term loans |
|
|
|
|
|
|
|
|
|
|
Trade and
other payables |
|
|
|
1,136 |
|
1,077 |
|
- |
|
2,213 |
Derivative financial instruments |
|
|
|
|
|
|
|
|
|
|
Interest
rate swaps and caps |
|
|
|
66 |
|
- |
|
- |
|
66 |
Total |
|
|
|
|
|
1,202 |
|
15,984 |
|
111 |
|
17,297 |
The external loan of £14.9 million has been reimbursed using the
net rents and net disposal proceeds received during the year.
Interest rate risk
Floating rate financial assets comprise the cash balances which
bear interest at rates based on bank base rates. Following the
repayment of the bank loans (see note 14), all floating rate
financial liabilities have been repaid. Consequently, the Group
exposure to interest rate risk is insignificant as at 30 June 2017.
Previously to this repayment, the Group was exposed to cash flow
risk as the Group borrowed funds under the loan facility with
Crédit Agricole and Crédit Foncier at floating interest rates (see
note 14). The Group managed this risk by using interest rate swaps
denominated in Euro. At 30 June 2017, the Group has no swap
contract (30 June 2016: interest rate
swaps with a notional contract amount of £16.26 million (€19.57
million)).
Following the orderly and managed wind-down of the Group and as
discussed in note 2(b), and the consequent repayment of external
loans, hedging reserves of £0.762 million loss deferred in equity
related to the interest rate swaps that were cancelled and settled
were recycled to profit or loss for the year ended 30 June 2016. The net gain on interest rate swaps
recognized in profit or loss for the period ended 30 June 2017 was nil (30
June 2016: £1.28 million).
The Group had entered into interest rate swaps and caps for the
period of the main loan facility, effective from
1 July 2011 to 1 July 2016, to
eliminate floating interest rate risk. Details of the hedging
contracts are below:
|
|
|
|
Counterparty |
Contract Rate |
Notional Amount |
Interest Rate
Swaps |
|
|
|
Credit Agricole |
2.795% |
19.569
million |
|
|
|
|
|
|
30 June 2017 |
|
30 June 2016 |
|
|
|
|
|
|
Assets |
|
Liabilities |
|
Assets |
|
Liabilities |
|
|
|
|
|
|
£ |
|
£ |
|
£ |
|
£ |
Non-current |
|
|
|
|
|
|
|
|
|
|
|
|
Interest
rate swaps |
|
|
|
|
- |
|
- |
|
- |
|
66 |
Total |
|
|
|
|
|
- |
|
- |
|
- |
|
66 |
As at 30 June 2017, the Group has
no swap contract since all swap contracts expired on 30 June 2016 and were not extended.
Cash Flow Hedge
The Group has no swap contract since all swap contracts expired
on 30 June 2016 and were not
extended.
The interest rate swaps settled on a quarterly basis. The basis
of floating rate was 3-month Euribor which was -0.29% on
30 June 2016. The settlement of the
difference between the fixed and floating rate was made by the
Group on a net basis.
Derivative financial instruments are recognised initially at
cost which is also deemed to be fair value. Subsequent to initial
recognition, derivative financial instruments are stated at fair
value. The gain or loss on re-measurement to fair value is
recognised immediately in profit or loss.
The fair value of interest rate swaps is the estimated amount
that the Group would receive or pay to terminate the swap at the
Consolidated Statement of Financial Position date, taking into
account current interest rates and the current creditworthiness of
the swap counterparties.
The table below analyses financial instruments carried at fair
value, by valuation method. The different levels have been defined
as follows:
Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities;
Level 2: inputs other than quoted prices included within Level 1
that are observable for asset or liability, either directly (i.e.
as prices) or indirectly (i.e. derived from prices);
Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
|
|
|
|
|
|
|
|
Level
1 |
|
Level
2 |
|
Level
3 |
30 June
2017 |
|
|
|
|
|
|
£000s |
|
£000s |
|
£000s |
Liabilities measured at fair value |
|
|
|
|
|
|
|
|
|
|
Interest
rate swaps and caps |
|
|
|
|
|
- |
|
- |
|
- |
Total |
|
|
|
|
|
|
|
- |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level
1 |
|
Level
2 |
|
Level
3 |
30 June
2016 |
|
|
|
|
|
|
£000s |
|
£000s |
|
£000s |
Liabilities measured at fair value |
|
|
|
|
|
|
|
|
|
|
Interest
rate swaps and caps |
|
|
|
|
|
- |
|
66 |
|
- |
Total |
|
|
|
|
|
|
|
- |
|
66 |
|
- |
Interest re-pricing
|
|
|
|
As at 30 June 2017 |
|
|
|
|
|
|
Total
as per |
|
|
|
|
|
|
|
|
|
|
statement of financial position |
|
Fixed
rate |
|
Floating rate
3 months or less |
|
|
|
|
|
|
£000s |
|
£000s |
|
£000s |
Financial assets |
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
|
|
3,846 |
|
- |
|
3,846 |
Total |
|
|
|
|
|
3,846 |
|
- |
|
3,846 |
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
Current
portion of long-term loans |
|
|
|
- |
|
- |
|
- |
Long-term
loans |
|
|
|
- |
|
- |
|
- |
Total |
|
|
|
|
|
- |
|
- |
|
- |
|
|
|
|
As at 30 June 2016 |
|
|
|
|
|
|
Total
as per |
|
|
|
|
|
|
|
|
|
|
statement of financial position |
|
Fixed
rate |
|
Floating rate
3 months or less |
|
|
|
|
|
|
£000s |
|
£000s |
|
£000s |
Financial assets |
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
|
|
8,806 |
|
- |
|
8,806 |
Total |
|
|
|
|
|
8,806 |
|
- |
|
8,806 |
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities |
|
|
|
|
|
|
|
|
Current
portion of long-term loans |
|
|
|
14,907 |
|
- |
|
14,907 |
Long-term
loans |
|
|
|
|
111 |
|
111 |
|
- |
Total |
|
|
|
|
|
15,018 |
|
111 |
|
14,907 |
Foreign currency risk
The European subsidiaries will invest in properties using
currencies other than Sterling (Euros), the Company's functional
and presentational currency, and the Consolidated Statement of
Financial Position may be significantly affected by movements in
the exchange rates of such currencies against Sterling.
The following table sets out the total exposure to foreign
currency risk and the net exposure to foreign currency of monetary
assets and liabilities based on notional amounts.
|
|
|
|
|
|
|
|
Monetary |
|
Monetary |
|
Net |
|
|
|
|
|
|
|
|
assets |
|
liabilities |
|
exposure |
|
|
|
|
|
|
|
|
£000s |
|
£000s |
|
£000s |
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 June
2017 |
|
|
|
|
|
4,785 |
|
(1,573) |
|
3,212 |
At 30 June
2016 |
|
|
|
|
|
9,979 |
|
(16,582) |
|
(6,603) |
Foreign currency risk sensitivity
The following table demonstrates the sensitivity to potential
fluctuations in the Euro exchange rate (ceteris paribus) of the
Group’s equity.
|
|
|
|
|
|
|
|
|
|
Increase/decrease |
|
Effect on equity |
|
|
|
|
|
|
|
|
|
|
in
Euro |
|
and
income |
|
|
|
|
|
|
|
|
|
|
exchange rate |
|
£000s |
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 June
2017 |
|
|
|
|
|
|
|
+5% |
|
(161) |
|
|
|
|
|
|
|
|
|
|
-5% |
|
161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 June
2016 |
|
|
|
|
|
|
|
+5% |
|
333 |
|
|
|
|
|
|
|
|
|
|
-5% |
|
(333) |
21. Reserves
(a) Revaluation reserves
Revaluation reserves of the Group arose from the revaluation of
investment properties, financial assets and derivatives. The
amounts in these reserves have already been recognised through the
Consolidated Income Statement and therefore are an allocation of
the results for the year.
(b) Hedging reserves
Hedging reserves comprised the effective portion of the
cumulative net change in the fair value of hedging instruments.
|
|
|
|
|
|
|
|
|
|
30
June 2017 |
|
30
June 2016 |
|
|
|
|
|
|
|
|
|
|
£000s |
|
£000s |
Balance at
beginning of financial year |
|
|
|
|
|
|
- |
|
(762) |
Movement on cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
Interest
rate swaps |
|
|
|
|
|
|
|
- |
|
762 |
Net change
in fair value of hedges |
|
|
|
|
|
|
|
- |
|
762 |
Balance
at end of financial year |
|
|
|
|
|
|
|
- |
|
- |
Following the decision at the EGM on 26
April 2013, to enter into a managed wind-down of the
Company, the criteria for hedge accounting of the interest rate
swaps were no longer met. Therefore, hedge accounting ceased to
apply from 1 January 2013
onwards.
(c) Distributable reserves
Distributable reserves arose from the cancellation of the share
premium account pursuant to the special resolution passed at the
EGM on 13 April 2005 and approved by
the Royal Court of Guernsey on
24 June 2005.
(d) Foreign currency reserves
Foreign currency reserves arose as a result of the translation
of the Financial Statements of foreign operations, the functional
and presentation currency of which is not Sterling.
22. NAV Reconciliation
The following is a reconciliation of the NAV per share
attributable to ordinary shareholders as presented in these
Financial Statements, using IFRS to the NAV per share reported to
the LSE:
|
|
|
|
|
|
|
|
|
|
|
|
NAV
per |
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary |
|
|
|
|
|
|
|
|
|
|
NAV |
|
Share |
30 June
2017 |
|
|
|
|
|
|
|
|
|
£000s |
|
£ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset
Value reported to London Stock Exchange |
|
|
|
|
|
|
15,832 |
|
67.65p |
Adjustment
on the income tax of Property Trust Rothenburg 1 S.à r.l. |
|
|
|
|
(329) |
|
(1.40)p |
Other
adjustments |
|
|
|
|
|
|
|
162 |
|
0.69p |
Net
Assets Attributable to Shareholders per Financial
Statements |
|
|
|
15,665 |
|
66.94p |
|
|
|
|
|
|
|
|
|
|
|
|
NAV
per |
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary |
|
|
|
|
|
|
|
|
|
|
NAV |
|
Share |
30 June
2016 |
|
|
|
|
|
|
|
|
|
£000s |
|
£ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Asset
Value reported to London Stock Exchange |
|
|
|
|
|
|
39,627 |
|
68.82p |
Write down
of Receivable from Sale of Fürth |
|
|
|
|
|
|
|
(212) |
|
(0.37)p |
Fair value
adjustment on the Tothenburg asset |
|
|
|
|
|
|
|
(81) |
|
(0.14)p |
Adjustment
for sales costs Dasing |
|
|
|
|
|
|
|
(155) |
|
(0.27)p |
Write off
deferred tax relating to Curno property |
|
|
|
|
|
|
|
(55) |
|
(0.10)p |
Adjustment
on deferred taxes relating to Rothenburg property |
|
|
|
|
|
|
(351) |
|
(0.61)p |
Other
adjustments |
|
|
|
|
|
|
|
(79) |
|
(0.13)p |
Net
Assets Attributable to Shareholders per Financial
Statements |
|
|
|
38,694 |
|
67.20p |
23. Related party transactions
The Directors are responsible for the determination of the
Company's investment objective and policy and have overall
responsibility for the Group's activities including the review of
investment activity and performance.
Mr Hunter, Chairman of the Company and Mr Spaninks (until
his resignation) are also Directors of the Company’s subsidiaries,
Property Trust Luxembourg 1 S.à r.l., Property Trust Luxembourg 2
S.à r.l. and Property Trust Luxembourg 3 S.à r.l. and were able to
control the investment policy of the Luxembourg subsidiaries to ensure it conforms
with the investment policy of the Company.
Mr Lawson, a Director of the Company is also a product
manager for alternative asset services across EMEA region and
Chairman of Northern Trust (Guernsey) Limited, the Company’s bankers and
member of the same group as the Administrator and Secretary. The
total charge to the Consolidated Income Statement during the year
in respect of Northern Trust administration fees was £145,000
(30 June 2016: £145,000) of which
£nil (30 June 2016: £nil) remained
payable at the year end.
Under the Investment Management Agreement, fees are payable to
the Investment Manager, Real Estate Adviser and other entities
within the AXA Group. These entities are involved in the planning
and direction of the Company and Group, as well as controlling
aspects of their day to day activity, subject to the overall
supervision of the Directors. During the period, fees of £0.25
million (30 June 2016: £0.31 million)
were expensed to the Consolidated Income Statement. Following the
various asset disposals, transaction fees of 35 bps on the gross
sales price were expensed; totalling £0.09million on all sales
(30 June 2016: £0.14 million). During
the year, a provision for the performance fee was
reversed/(increased) by £0.58 million (2016: £0.72 million). The
amount had been provided under the terms of the Investment
Management Agreement.
All the above transactions were undertaken at arm’s-length.
24. Commitments
As at 30 June 2017 the Company has
no commitment.
25. Subsequent events
These Financial Statements were approved for issuance by the
Board on 31 October 2017. Subsequent
events have been evaluated until this date.
In September 2017, Property Trust
Rothenburg 1 S.à r.l. repurchased all minority shares held in
Einkaufzentrum Rothenburg/Tbr. Besitz GmbH at their nominal value
(€2,800).
The liquidation of Property Trust Luxembourg 1 S.à r.l. was
completed in October 2017.
Corporate Information
Directors (All non-executive)
C. J. Hunter (Chairman)
G. J. Farrell
S. C. Monier
S. J. Lawson
A Spaninks (resigned 31/10/2016)
Registered Office
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3QL
Channel Islands
Investment Manager
AXA Investment Managers UK Limited
7 Newgate Street
London EC1A 7NX
United Kingdom
Real Estate Adviser
AXA Real Estate Investment Managers UK Limited
155 Bishopsgate
London EC2M 3XJ
United Kingdom
Sponsor and Broker
Stifel Nicolaus Europe Limited
150 Cheapside
London EC2V 6ET
United Kingdom
Administrator and Secretary
Northern Trust International Fund
Administration Services (Guernsey)
Limited
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3QL
Channel Islands
Registrar
Computershare Investor Services (Guernsey) Limited
1st Floor
Tudor House
Le Bordage
St Peter Port
Guernsey GY1 1DB
Channel Islands
Independent Auditor
KPMG Channel Islands Limited
Glategny Court, Glategny Esplanade
St Peter Port
Guernsey GY1 1WR
Channel Islands