AXA PROPERTY TRUST LTD - Half Year Report

To:                    Company Announcements
Date:                26 February 2015
Company:         AXA Property Trust Limited
Subject:            Half Year Report

AXA Property Trust Limited

AXA Property Trust Limited has today, in accordance with DTR 6.3.5, released its Half Year Report and Condensed Consolidated Financial Statements for the six months ended 31 December 2015. The Half Year Report and Condensed Consolidated Financial Statements will shortly be available from the Company's website retail.axa-im.co.uk/axa-property-trust

Key Financial Information

For the six months ended 31 December 2015

• Sterling currency Net Asset Value (“NAV”) increased to £60.24 million on a pro-forma basis before deduction of share redemptions paid (£47.14 million after deduction of redemption paid).
• Profit was 1.65 pence per share
• No dividends were paid relating to the period
• Redemptions of shares paid during the period were £5.2 million (2014: £3.8 million)

As at 31 December 2015

• NAV was 62.06 pence per share (30 June 2015: 57.61 pence)
• Share price¹ was 54.50 pence per share (30 June 2015: 44.75 pence)
• Gearing² was 37.1% (gross) and 28.2% (net) (30 June 2015: 35.7% and 31.1%)

Performance Summary

	Six month ended 31 December 2015	Six month ended 30 June 2015	% change
NAV per share	62.06p	57.61p	7.73%
Gains per share	1.65p	8.63p	n/a
Share redemptions paid	£5.2m	£3.8m	n/a
Share price1	54.50p	44.75p	21.79%
Share price discount to NAV	12.2%	22.3%	n/a
Gearing (gross)2	37.1%	35.7%	n/a
Total assets less current liabilities (£000s)3	64,706	66,910	(3.29%)

   

Total return	Six month period 31 December 2015	Six month period 30 December 2014
NAV Total Return4	(4.5)%	3.6%
Share price Total Return
- AXA Property Trust	24.5%	4.2%
- FTSE All Share Index	-2.0%	(0.4%)
- FTSE Real Estate Investment Trust Index	3.9%	12.3%

Source: AXA Investment Managers UK Limited and Stifel Nicolaus Europe Limited.

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 deductions from share redemptions.

Past performance is not a guide to future performance. The value of investments can go down as well as up.
You may not get back the original amount invested.

Chairman’s Statement

The Investment Manager has continued its steady progress in the disposal of the holdings of AXA Property Trust Limited (the “Company”). The shopping centre at Fuerth Bavaria was sold for € 34 million some 36% in excess of valuation at the time of the commencement of the Company’s disposal strategy in 2013. The industrial property at Venray Netherlands was sold in December 2015 for €6.6m, some 23 % below the 2013 valuation, after an extensive and lengthy marketing process with little serious interest.

Results

The Company and its subsidiaries (together the “Group”) made a total net profit after tax of £1.3 million for the period to 31 December 2015. The Net Asset Value (“NAV”)  per share of the Company at 31 December 2015 was 62.06 pence (30 June 2015: 57.61 pence), an increase 7.7% compared to 30 June 2015.

The Company's net property yield on current market valuation (after acquisition and operating costs) as at 31 December 2015 was 8.8% (30 June 2015: 9.0%). A detailed yield analysis is included in the Investment Manager’s Report.

The mid-market price of the Company’s shares on the London Stock Exchange on 31 December was 54.50 pence (30 June 2015: 44.75 pence),  representing a discount of 12.2% to the Company’s NAV at 30 June 2015 (30 June 2015: 22.3%).

Return of Capital to Shareholders

No dividends were declared during the period and the dividend policy remains unchanged.

During the period. the Company returned £5.2 million to Shareholders by means of a capital redemption on 30 July 2015. An additional post closing capital redemption of £11.0 million was paid to investors on 6 January 2016.

Bank Finance and Deleveraging

The Group continues to comply with the 60% loan-to-value (“LTV”) covenant of the main loan facility with Crédit Agricole and Crédit Foncier. Further repayments are made as assets are sold under the disposal programme. At 31 December 2015 the total bank debt stood at £14.76 million (€31.07 million) (before capitalised debt issue costs) with an LTV of 50.7%. The loan is due to mature on 1 July 2016.

Prospects

Following the sale of the industrial property at Dasing Bavaria, due to complete by April, the Company’s remaining holdings will consist of the shopping centre at Rothenburg, also in Bavaria, a multiplex cinema complex outside Bergamo Lombardy and a 50% share in a distribution warehouse east of Milan.

While no real estate transaction is certain until it is done, the Board and Manager are quite confident of a good disposal of the German property. The two Italian properties are intrinsically sound but their disposal is much less certain in context of the sub sector property markets in Italy. Nevertheless we remain certain that a steady, persistent and targeted marketing process is worthwhile and in the Company’s interest, rather than a “forced sale” approach.

Charles Hunter
Chairman
26 February 2016

 

Investment Manager’s Report

AXA Investment Managers UK Limited (the “Investment Manager”, “AXA IM”) is the UK subsidiary of AXA Investment Managers, a dedicated asset manager within the AXA Group. AXA Investment Managers is an innovative and fast-growing multi-expertise investment manager with €669 billion of assets under management and over 2,500 employees, at 30 September 2015.

AXA Real Estate Investment Managers UK Limited (the “Real Estate Adviser”) is part of the real estate management arm of AXA Investment Managers S.A. (“AXA IM Real Assets”). AXA IM Real Assets offers a 360° view of real asset markets, investing in both equity and debt, across different geographies and sectors, and via private and listed instruments with over €62 billion of assets under management and about 600 staff, operating in 23 countries as at 31 December 2015.

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

German Retail

The German seasonally-adjusted harmonised unemployment rate remained steady at 4.5% in November, staying at its lowest level since 1981 for the fourth consecutive month. This also fed through into German consumer strength. Q4 2015 saw a repeatedly solid development in German real retail sales, up 2.3% in November 2015 compared to November 2014. Retail  take-up in the last quarter of 2015 was the strongest of the year with 150,700 sqm. Over the year lease contracts for 525,700 sqm were closed, 10% below last year’s take-up. At the same time the absolute number of contracts increased to the highest level in five years. Prime rents in Munich’s prime pitch, the most expansive of the German markets, have remained stable over the fourth quarter at €360/sq m/month and  remained also unchanged over the year according to JLL. High Street rents in 2015 saw an increase of 6.7% in Berlin and 1.8% in Hamburg and remained stable in the other top German retail markets.

Overall, in 2015 German retail investment volume doubled according to CBRE to around €18.1bn, with especially large portfolio disposals causing substantial investment turnover. International investors dominated the German retail investment market. Net prime yields are still in decline, with both shopping centres and retail parks reporting yield compression. Prime high street yields fell by 10bps in all German markets in Q4 2015 with the exception of Munich where they remained stable at 3.5%.  The strongest decline over the year was registered in Hamburg (30bps).

German Logistics

The high demand from the industrial sector, a continuation of the trend to outsource as well as the strong dynamics in the e-commerce sector led to another positive year in the German logistics market. As a result take-up in Germany was reported as the highest level ever recorded, 5% above the previous record figures of 2011. Overall letting transactions of 6.1m sq m in the German warehouse and logistics market were closed in 2015.

Large-scale lettings drove the market with the largest five lettings accounting for more than 10% of the overall take-up. By far the most active individual tenant was BMW who leased 400,000 sq m of space in three different locations. Sector wise, the Transport and Logistics sector was the most active (38%), while the retail sector accounted for 29%, closely followed by the production sector (28%). Take-up in the Top-5 markets increased by 20% in comparison to 2014, but there were large disparities within individual markets. While Dusseldorf, Berlin and Hamburg all recorded strong improvements of above 25%, Munich’s performance was 15% short of the 2014 figures.

Even though demand is persistently strong, prime rents registered among the major five logistics hubs (Berlin, Dusseldorf, Frankfurt, Hamburg and Munich) remained largely stable in 2015. The only increases were recorded in Munich, where prime rents increased by 3.8% to €6.75/sq m/month and Berlin, which saw rental growth of 4.3% up to €4.80 sq m/month.

A total of €4.1bn was invested into German logistics in 2015, exceeding the volume observed in 2014 by 4%. It was mostly foreign investors that invested into the German logistics market, generating 63% of the overall transaction volume. According to Colliers, prime yields in the top 7 German markets stood at 5.4% in Q4 2015, down 100 basis points from Q4 2014.

Italian Logistics
The Italian market is continuing to benefit from the country’s economic recovery and  its central location along the European logistics corridor. It is especially the north of Italy, (Lombardy and Emilia Romagna), which are facing strong industrial take-up. Q4 prime rents remained stable QoQ and grew by 4.2% YoY in Milan, while remaining stable in Rome. As at Q4 2015, prime rents stand at €52.00/sq m/year in Rome and at 50/sq m/year in Milan. Investments into the logistics sector improved reaching a yearly volume of €399 million, up 4% YoY according to CBRE.  Q4 2015 saw another fall in prime yields, declining by 25bps in Milan and by 35bps in Rome, reaching a level of 6.9% in both Milan and Rome according to JLL. Yields are thus down 60bps and 110bps in Milan and Rome respectively, reflecting increased demand from international investors.

Asset Management Update

During the quarter two assets were sold:

• Fuerth was sold in November 2015
• Venray was sold in December 2015

As at the end of the quarter, all assets, with the exception of Rothenburg were on the market available for sale.

Property Portfolio at 31 December 2015

Investment name	Country	Sector	Net Yield on valuation1	% of total Property Portfolio 2
Rothenburg ob der Tauber	Germany	Retail	8.34%	38.40%
Curno, Bergamo	Italy	Leisure	9.05%	27.80%
Bergamina, Agnadello	Italy	Industrial	9.79%	20.85%
Am Birkfeld, Dasing	Germany	Industrial	8.66%	12.95%

¹ Net yield on valuation is gross rental income over valuation

² Source - external independent valuers to the Company, Knight Frank LLP.

Details of all properties in the portfolio are available on the Company’s website http://retail.axa-im.co.uk/axa-property-trust, under -  Portfolio - Our Presence.

Source: AXA Real Estate Investment Managers UK Limited

Geographical Analysis at 31 December 2015 by Fair Value

Germany	51%
Italy	49%

Sector Analysis at 31 December 2015 by Fair Value

Retail	38%
Industrial	34%
Leisure	28%

Source: AXA Real Estate Investment Managers UK Limited

Covenant Strength Analysis at 31 December 2015

(based on rental income)

Grade A	28.7%	Creditreform:<199; D&B:A 1
Grade B	61.0%	Creditreform:200-249; D&B:B,C,D 1,2
Grade C	6.9%	Creditreform:>250; D&B: D + 3,4
Vacant	3.4%

Average unexpired lease length profile (weighted by rental income)

	31 December 2015	31 December 2014
	Years	Years
Grade A	9.2	8.1
Grade B	9.4	4.0
Grade C	2.9	5.5
Average	8.8	6.0

The Company’s tenant covenant profile is strong, with 28.7% of tenants rated Grade A, indicating a high credit rating score. Rental income from Grade A covenants has a weighted unexpired lease length of 9.2 years. The average rent-weighted unexpired lease length for the investment portfolio as at 31 December 2015 was 8.8 years. Vacant space in the portfolio on 31 December 2015, measured using estimated market rent, represented 3.4% of the total gross rental income.

Lease expiry profile weighted by rental income

	% of income (31 December 2015)	% of income (31 December 2014)
Vacant	3.4%	0.4%
<1	1.0%	4.3%
<2	6.7%	3.9%
<3	3.3%	20.2%
<4	22.2%	13.7%
<5	1.2%	11.1%
5-10	34.6%	16.3%
10-15	0.0%	31.1%
15+	27.7%	0%

Source: AXA Real Estate Investment Managers UK Limited

Fund Gearing1	31 December 2015	30 June 2015
Property portfolio (£ million)	42.42	67.69
Borrowings (£ million)	15.72	24.16
Total gross gearing	37.1%	35.7%
Total net gearing	28.2%	31.1 %

¹ Fund gearing is included to provide an indication of the overall indebtedness of the Group and does not relate to any covenant terms in the Group’s loan facilities. Gross gearing is calculated as debt over property portfolio at fair value including the JV asset at Agnadello. Net gearing is calculated as debt less cash (net of cash allocated to post-quarter distribution and other commitments) over property portfolio at fair value including the JV asset at Agnadello.

Gross LTV Covenants2	31 December 2015	30 June 2015	Maximum
Main loan facility	50.7%	41.0%	60.0%

² Gross LTV is calculated as debt over property portfolio at fair value (bank valuation).

The Group has remained in compliance with the loan covenants on both facilities. As assets are sold the related allocated loan amounts will be repaid, as required under the main loan facility agreement. There are no other scheduled repayments prior to maturity under the agreement.

Of the £21.6 million cash held by the Group including the cash in the Agnadello JV at 31 December 2015, £3.2 million was held in bank accounts pledged to the financing banks.

Interest Cover Ratio3 at 31 December 2015	Historic	Minimum	Projected	Minimum
Main loan facility covenant	334%	200%	258%	185.0%

³ Interest Cover Ratio is calculated as net financing expense payable as a percentage of gross rental income less movement in arrears. Net rental income headroom is based on projected interest cover.

At 31 December 2015, the Group had taken on £15.76 million (€21.38 million) of debt (before considering debt issue costs and minority intrests) relating to the main facility which was 100% hedged by interest rate swaps at 2.795% plus a margin of 2.4%

Portfolio Outlook

The implementation of the orderly wind down of the portfolio agreed by Shareholders at the EGM in April 2013 is progressing.

The preparation for sale of the remaining assets continues, with lease re-gears and extensions being negotiated with existing tenants where possible all to improve the level of income and marketability of individual assets. All the assets are now being brought to market except Rothenburg that will be on the Market during the first quarter of the calendar year. The Company sold two assets during the half financial year: Fuerth in Germany and Venray in the Netherland.

The Manager continues to work closely with the Board on all aspects of the strategy for the portfolio in order to ensure a timely return of capital to Shareholders.

Board of Directors

Charles Hunter (chairman) has over 30 years of experience in property investment, principally in UK commercial property. He was Head of Property Investment of Insight Investment (formerly Clerical Medical Investment Group) for some nine years and before that Property Director of the investment management subsidiaries of The National Mutual of Australasia group in the United Kingdom. He is currently a director of Care South and he was on the Supervisory Board of Schroder Exempt Property Unit Trust until its conversion to a PAIF in 2012.  Mr Hunter is a Fellow of the Royal Institution of Chartered Surveyors and a member of the Investment Property Forum. He is resident in the United Kingdom.

Stuart Lawson is a Fellow of the Association of Chartered Certified Accountants. He joined Northern Trust in 1988 working in Fund Administration and Trust client accounting before being appointed Head of Finance for the office in 1996 where he established a Risk Management Department. In 2005 he was appointed Chief Administration Officer for Guernsey with local responsibility for finance, risk, compliance, corporate services and communication, and in 2007 he assumed responsibility for Real Estate and Infrastructure Fund Administration services for the EMEA region. He is currently head of Regulatory and Market Change in Guernsey, is a Director of a number of client entities and Chairman of Northern Trust (Guernsey) Limited. He has 30 years of experience in the Financial Services Industry and is resident in Guernsey.

Stéphane Monier has over 20 years of investment experience (including asset allocation, fixed income and foreign exchange). Mr Monier is currently Chief Investment Officer at Lombard Odier Europe SA. He is responsible for the investment process and the performance for private clients’ portfolios in Europe. Mr Monier joined the Lombard Odier group in 2009 on the institutional side (Lombard Odier Investment Managers or LOIM). He was initially Global Head of Fixed Income and Currencies for LOIM and then promoted to Deputy Global Chief Investment Officer. Prior to joining LOIM, Mr Monier was Global Head of Fixed Income and Currencies at Fortis Investments from 2006 to 2009 and he also occupied the very same position at the Abu Dhabi Investment Authority from 1998 to 2006. Prior to Abu Dhabi, Mr Monier spent seven years in JP Morgan Investment Management as a Fixed Income Manager both in London and Paris from 1991 to 1998. Mr Monier has a Masters Degree in Science from Agrotech (Paris) and a Masters Degree in International Finance from HEC Graduate School of Business (Jouy?-?en?-?Josas) (France). He is also a CFA charterholder. He is resident in the United Kingdom.

Gavin Farrell is qualified as a Solicitor of the Supreme Court of England and Wales, a French Avocat and an Advocate of the Royal Court of Guernsey. He is a Partner at Mourant Ozannes, Advocates & Notaries Public in Guernsey, having worked previously at Simmons and Simmons, both in Paris and London, and specialises in international and structured finance and collective investment schemes. Mr Farrell holds a number of directorships in investment and captive insurance companies. He is resident in Guernsey.

Alphons Spaninks joined AXA IM Real Assets in 2005 and currently holds the position as Local Head of Transactions & Asset Management, based in Amsterdam. Mr Spaninks was promoted to Regional Head Benelux and Nordics in 2008, responsible for Assets under Management of over €2bn and managing a team of professionals in Stockholm and Brussels. After a full integration of the AXA Belgium real estate platform into AXA Real Estate, his focus is on the Dutch market again since mid 2014. He has over 20 years of experience in commercial functions within various real estate companies. Prior to joining AXA IM Real Assets, Mr Spaninks worked for AZL Vastgoed as Director of Asset Management. Prior to that, he was Regional Director at MOG, a Dutch Property Management company where he began his career as a Property Manager. Mr Spaninks holds a Masters of Science Degree in Building from the Technical University of Eindhoven and a Masters Degree in Real Estate from ASRE (Amsterdam) and is a member of Royal Institution of Chartered Surveyors. He is resident in the Netherlands.

Directors’ Responsibility Statement

We confirm that to the best of our knowledge:

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

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

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

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

By order of the Board

Charles Hunter                                       Stuart Lawson
Chairman                                              Director
26 February 2016                                   26 February 2016

Condensed Half Year Consolidated Income Statement

For the six months ended 31 December 2015 (unaudited)

					Six month period ended 31 December 2015	Six month period ended 31 December 2015
				Notes	£000s	£000s
	Gross rental income			3	2 392	2 737
	Service charge income				283	270
	Property operating expenses				(755)	(810)
Net rental and related income					1 920	2 197
	Valuation profit on investment properties			6	1 318	1 823
	Gain on disposals of a subsidiary and investment properties				1 058
	Impairment gain				37	-
	General and administrative expenses			4	(2 380)	(970)
Operating profit					1 953	3 050
	Net foreign exchange loss				(326)	(277)
	Net gain on financial instruments			12	403	394
	Share in (losses)/profit of a joint venture				(311)	1 356
	Net finance cost				(519)	(1 117)
Profit/(loss) before tax					1 200	3 406
Income tax					109	(366)
Profit for the period					1 309	3 039
Basic and diluted loss per ordinary share (pence)					1.65	3.42

The accompanying notes below form an integral part of these condensed half year financial statements

Condensed Half Year Consolidated Statement of Comprehensive Income
For the six months ended 31 December 2015 (unaudited)

				Six month	Six month
				period ended	period ended
				31 December 2015	31 December 2014
			Notes	£000s	£000s
Profit for the year				1 309	3 040
Other comprehensive income
Hedging reserve recycled to profit or loss				527	132
Foreign exchange translation gain/(loss)				1 136	(1 345)
Total items that are or may be reclassified to profit or loss				1 663	(1 213)
Total comprehensive income for the period				2 972	1 827

Condensed Half Year Consolidated Statement of Changes in Equity

For the six months ended 31 December 2015 (unaudited)

			Revaluation reserve	Hedging reserve	Revenue reserve	Distributable reserve	Foreign currency reserve	Total
		Notes	£000s	£000s	£000s	£000s	£000s	£000s
Balance at 1 July 2015			(44 800)	(4 338)	6 478	85 049	6 978	49 367
Share redemption					-	(5 197)	-	(5 197)
Net profit for the period			1 409	-	(100)	-	-	1 309
Other comprehensive income			-	527	-	-	1 136	1 663
Total comprehensive income for the period			1 409	527	(100)	-	1 136	2 972
Balance at 31 December 2015			(43 391)	(3 811)	6 378	79 852	8 114	47 142

For the six months ended 31 December 2014 (unaudited)

		Revaluation reserve	Hedging reserve	Revenue reserve	Distributable reserve	Foreign currency reserve	Total
	Notes	£000s	£000s	£000s	£000s	£000s	£000s
Balance at 1 July 2014		(50 641)	(4 618)	4 576	88 848	12 263	50 428
Share redemption		-	-	-	(2 000)	-	(2 000)
Net profit for the period		3 573	-	(534)	-	-	3 039
Other comprehensive income		-	132	-	-	(1 345)	(1 213)
Total comprehensive income for the period		3 573	132	(534)	-	(1 345)	1 826
Balance at 31 December 2014		(47 068)	(4 486)	4 042	86 848	10 918	50 254

The accompanying notes below form an integral part of these condensed half year financial statements

Condensed Half Year Consolidated Statement of Financial Position

As at 31 December 2015 (unaudited)

			31 December 2015	30 June 2015
		Notes	£000s	£000s
Non-current assets
	Investment properties	6	21 851	23 886
	Deferred tax assets		22	86
Current assets
	Cash and cash equivalents		21 543	8 078
	Trade and other receivables	9	1 939	888
	Investment properties held for sale	6/7	11 792	34 892
	Investment in joint venture held for sale	8	8 961	9 053
Total assets			66 108	76 883
Current liabilities
	Trade and other payables	10	1 402	1 582
	Current portion of long-term loans		-	7 971
Non-current liabilities
	Deferred tax liability		626	596
	Provisions		904	367
	Long-term loans	11	15 717	16 189
	Derivative financial instruments	12	317	811
Total liabilities			18 966	27 516
Net assets			47 142	49 367
	Share capital		-	-
	Reserves		47 142	49 367
Total equity			47 142	49 367
Number of ordinary shares			75 959 574	85 684 658
Net asset value per ordinary share (pence)			62.06	57.61

The accompanying notes below form an integral part of these condensed half year financial statements

By order of the Board


Charles Hunter                                                   Stuart Lawson
Chairman                                                          Director
26 February 2016                                               26 February 2016

Condensed Half Year Consolidated Statement of Cash Flows
 

For the six months ended 31 December 2015 (unaudited)

				Six month period ended	Six month period ended
				31 December 2015	31 December 2014
		Notes		£000s	£000s
Operating activities
	Profit before tax			1 200	3 405
	Adjustments for:
	Profit on valuation and disposals of a subsidiary and investment properties	6		(2 376)	(1 823)
	Shares in profits/(losses) of joint venture	8		311	(1 356)
	Gain on financial instruments	12		(403)	(394)
	(Decrease)/Increase in trade and other receivables			(1 013)	441
	Decrease in provisions			537	-
	Increase in trade and other payables			(432)	(552)
	Net finance cost			519	1 117
	Net foreign exchange loss			326	277
Net cash generated from operations (used in)/generated from				(1 331)	1 115
	Interest income received			132	81
	Interest paid			(696)	(486)
	Tax received			370	68
Net cash (outflow)/inflow from operating activities				(1 525)	778
Investing activities
	Capital expenditure on completed investment properties		6	-	(20)
	Proceeds from disposals of a subsidiary and investment properties			29 938	5 820
Net cash inflow from investing activities				29 938	5 800
Financing activities
	Redemption of shares		5	(5 197)	(2 000)
	Bank loan facility repaid		11	(9 666)	(2 781)
Net cash outflow from financing activities				(14 863)	(4 781)
	Effects of exchange rate fluctuations			(85)	(114)
Increase in cash and cash equivalents				13 465	1 683
	Cash and cash equivalents at start of the period			8 078	3 008
Cash and cash equivalents at the period end				21 543	4 691

The accompanying notes form an integral part of these condensed half year financial statements.

Notes to the Condensed Half Year Consolidated Financial Statements

1.     Operations

AXA Property Trust Limited (the "Company") is a limited liability, closed-ended investment company incorporated in Guernsey. The Company invests in commercial properties in Europe which are held through its subsidiaries. The Condensed Half Year Consolidated Financial Statements of the Company for six month ended 31 December 2015 comprise the financial statements of the Company and its subsidiaries (together referred to as the "Group").

2.     Significant accounting policies

(a)  Statement of compliance

The Condensed Half Year Consolidated Financial Statements have been prepared in accordance with the Disclosure Transparency Rules of the Financial Conduct Authority and with IAS 34, ‘Interim Financial Reporting’. They do not include all the information required for the full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 June 2015, which were prepared under full International Financial Reporting Standard (“IFRS”) requirements as issued by the International Accounting Standards Board.

(b)  Basis of preparation

The same accounting policies and methods of computation have been applied to the Condensed Half Year Consolidated Financial Statements as in the Annual Report and Consolidated Financial Statements for the year ended 30 June 2015. The presentation of the Condensed Half Year consolidated Financial Statements is consistent with the Annual Report and Consolidated Financial Statements.

(c)  Determination and presentation of operating segments

The Board has considered the requirements of IFRS 8, ‘Operating Segments’. The Board is of the view that the Company 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 on page 5. The conclusion remains unchanged from the consolidated financial statements for the year ended 30 June 2015.

(d)  Going concern

The discount control provisions established when the Company was launched required a continuation vote to be proposed to Shareholders at the Company's Annual General Meeting in 2015. As a result of the large discount to Net Asset Value at which shares were trading there was little chance of raising new capital. After extensive shareholder consultation, the Board resolved not to seek continuation of the Company in 2015 and proposed to Shareholders that the Company enter into a managed wind-down. This proposal was approved at an EGM held on 26 April 2013.

The Condensed Half Year Consolidated Financial Statements have been prepared on a non-going concern basis reflecting the orderly wind-down of the Group. Accordingly, the going concern basis of accounting is not considered appropriate. All assets and liabilities continue to be measured in accordance with IFRS. The Board recognises that the timely disposal of properties is uncertain and continues to keep under review the most appropriate course of action with regard to these assets over the coming months with the aim of maximising shareholder return whilst taking account of the target exit date of December 2015. As at December 2015 the completion of all sales is foreseen in the course of 2016.

The Directors estimate that the wind-down costs will be approximately £252,950 (30 June 2015: £194,272). 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.

3.     Gross rental income

Gross rental income for the six months ended 31 December 2015 amounted to £2.39 million (31 December 2014: £2.74 million). The Group leases out all of its investment property under operating leases and are usually structured in accordance with local practices in Germany, Italy and The Netherlands. All leases benefit from indexation.

Minimum Lease Payments (based on leases in place at 31 December 2014)

	31 December 2015	30 June 2015
	Rental income  (£000s)	Rental income  (£000s)
0-1 year	5,098	8,589
1-5 years	16,226	23,909
5+ years	23,854	15,401

4.     General and administrative expenses

				Six month period ended	Six month period ended
				31 December 2015	31 December 2014
				£000s	£000s
Administration fees				(136)	(153)
General expenses				(605)	(320)
Audit fees				(86)	(98)
Legal and professional fees				(78)	(95)
Directors' fees				(45)	(46)
Insurance fees				(18)	(19)
Liquidation costs				(59)	-
Sponsor's fees				(639)	(13)
Investment management fees				(235)	(226)
Performance fee				(479)	-
Total				(2 380)	(970)

The general expenses include the fees in relation to the disposals of the period (broker, transaction fees).

5.     Share capital redemptions

The company returned £5,197,083 on 30 July 2015 to Shareholder by means of a capital redemption reaching £13.1m cumulated capital return to shareholders as at 31 December 2015. The number of ordinary shares was reduced by 9,725,084 to 75,959,574 (30 June 2015: 85,684,658).

6.     Investment properties

						31 December 2015	30 June 2015
						£000s	£000s
Fair value of investment properties at beginning of period/year						23 886	67 351
Capital expenditure during the period/year						-	19
Disposals during the period/year						(29 149)	(10 503)
Fair value adjustments						1 318	4 431
Foreign exchange translation						2 697	(8 846)
Investment properties transferred to held for sale						23 099	(28 566)
Fair value of investment properties at the end of the period/year						21 851	23 886
Investment properties classified held for sale						11 792	34 892
Total investment properties						33 643	58 778

All investment properties are carried at fair value.

7.     Investment properties held for sale

As at 31 December 2015, the Group classified the Curno property as held for sale (31 December 2014: 4 properties).

8.     Joint venture held for sale

The Group holds a 50% joint venture interest in the equity of the Italian joint venture Property Trust Agnadello S.r.l. which holds a logistics warehouse in Agnadello, Italy. The remaining 50% equity interest is held by European Added Value Fund S.à r.l., a subsidiary of European Added Value Fund Limited.

The Group’s interest in Property Trust Agnadello S.r.l. is accounted for using the equity method in the consolidated financial statements, which approximates the lower of its carrying amount and its fair value less cost to sell.

The following table summarises the financial information of Property Trust Agnadello S.r.l. which also reconciles the summarised financial information to the carrying amount of the Group’s interest in the joint venture:

Summarised Consolidated Statement of Financial Position

			31 December 2015	30 June 2015
			£000s	£000s
Current assets			18 266	18 469
Current liabilities			(14 916)	(14 637)
Net assets (100%)			3 350	3 832
Group's share of net assets (50%)			50%	50%
Group's share of net assets			1 675	1 916
Loan balances due to joint venture partners			7 286	7 137
Carrying amount of interest in joint venture			8 961	9 053

Summarised Consolidated Income Statement

					Six month period ended 31 December 2015	Six month period ended 31 December 2014
					£000s	£000s
Net rental and related income					699	782
Valuation (loss)/profit on investment property					(864)	2 216
Total administrative and other expenses					(79)	(93)
Other income					-	2
Financial expenses					(238)	(308)
(Loss)/Profit before tax					(482)	2 599
Income tax (expense)/Income					(140)	113
Profit/(loss) for the period					(622)	2 712
Group's share of profit/(loss) for the period					(311)	1 356

Summarised Consolidated Statement of Comprehensive Income

			Six month period ended 31 December 2015	Six month period ended 31 December 2014
			£000s	£000s
(Loss)/profit for the period			(622)	2 712
Total comprehensive income for the period			(622)	2 712
Group's share of comprehensive income for the period			(311)	1 356

9.     Trade and other receivables

					31 December 2015	30 June 2015
					£000s	£000s
Tax receivable (withholding, corporate and income)					416	505
Investment property sold receivable					-	13
Other receivables					1 004	92
VAT receivable					282	67
Rent receivable					-	45
Accrued income					193	140
Prepayments					44	26
Total					1 939	888

The carrying value of trade and other receivables are considered to be approximately equal to their fair value. Rent receivable is non-interest bearing and typically due within 30 days.

10.        Trade and other payables

				31 December 2015	30 June 2015
				£000s	£000s
Investment manager's fee				158	196
Property manager's fee				27	21
Tax payable (income, transfer, capital and other)				754	581
Interest payable on loan facility				103	148
Legal and professional fees				43	56
VAT payable				-	35
Audit fee				97	151
Administration and Company Secretarial fees				103	70
Directors' fees				7	6
Sponsor's fees				13	6
Rent prepaid and other payables				97	312
Total				1 402	1 582

Trade and other payables are non-interest bearing and are normally settled on 30-day terms. 

The carrying values of trade and other payables are considered to be approximately equal to their fair value.

11.    Long-term loans

The main loan facility is with Crédit Agricole Corporate and Investment Bank (“Crédit Agricole”) and Crédit Foncier de France (“Crédit Foncier”).

The outstanding balance of the main loan (including current portion) as at 31 December 2015 was €21.34 million (£15.71 million) (30 June 2015: €34.50 million (£24.16 million) (before capitalised debt issue costs) as a result of the partial loan repayments following the various asset disposals during the period.

12.        Financial risk management

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

				Sixth month	Sixth month
				period ended	period ended
				31 December 2015	31 December 2014
				£000s	£000s
Hedging reserve recycled to consolidated income statement				527	132
Current year fair value movement of ineffective hedges				(124)	262
Total gain recognised in the Consolidated Income Statement				403	394

The Group is exposed to various types of risk that are associated with financial instruments.  The Group's financial instruments comprise bank deposits, cash, derivative financial instruments, receivables, loans and payables that arise directly from its operations. The carrying value of financial assets and liabilities approximate the fair value.

The main risks arising from the Group's financial instruments are market risk, credit risk, liquidity risk, interest risk and currency risk.  The Board review and agree policies for managing its risk exposure. These policies are summarised below.

Market Price Risk

Property and property related assets are inherently difficult to value due to the individual nature of each property. As a result, valuations are subject to uncertainty. There is no assurance that the estimates resulting from the valuation process will reflect the actual sales price even where a sale occurs shortly after the valuation date. Rental income and the market value for properties are generally affected by overall conditions in the local economy, such as growth in Gross Domestic Product (“GDP”), employment trends, inflation and changes in interest rates. Changes in GDP may also impact employment levels, which in turn may impact the demand for premises. Furthermore, movements in interest rates may affect the cost of financing for real estate companies.

Both rental income and property values may be affected by other factors specific to the real estate market, such as competition from other property owners, the perceptions of prospective tenants of the attractiveness, convenience and safety of properties, the inability to collect rents because of the bankruptcy or the insolvency of tenants, the periodic need to renovate, repair and release space and the costs thereof, the costs of maintenance and insurance, and increased operating costs. The Investment Manager addresses market risk through a selective investment process, credit evaluations of tenants, ongoing monitoring of tenants and through effective management of the properties.

Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group.  The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate as a means of mitigating the risk of financial loss from defaults. The Group’s and Company’s exposure and the credit-ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties.

The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-ratings agencies.

Cash and cash equivalents and trade and other receivables presented in the Consolidated Statement of Financial Position are subject to credit risk with maturities within one year.

Liquidity risk

Liquidity risk is the risk that the Company will encounter in realising assets or otherwise raising funds to meet financial commitments in a reasonable timeframe or at a reasonable price.

The Group invests the majority of its assets in investment properties which are relatively illiquid, however, the Group has mitigated this risk by investing in desirable properties in strong locations. The Group prepares forecasts in advance which enables the Group's operating cash flow requirements to be anticipated and ensures that sufficient liquidity is available to meet foreseeable needs and to invest any surplus cash assets safely and profitably. The Group also monitors the cash position in all subsidiaries to ensure that any working capital needs are addressed as early as possible.

The Company has continued to suspend the payment of dividends to prudently manage cash during the wind-down phase.

Interest rate risk

Floating rate financial assets comprise the cash balances which bear interest at rates based on bank base rates. The Group is exposed to cash flow risk as the Group borrows funds under the loan facility with Crédit Agricole and Crédit Foncier at floating interest rates. The Group manages this risk by using interest rate swaps and caps denominated in Euro. At 31 December 2015, the Group had interest rate swaps with a notional contract amount of £16.9 million (€22.9 million) (30 June 2015: £24.44 million (€34.50 million).

All interest rate swap contracts exchanging floating rate interest amounts for fixed rate interest amounts are designated as cash flow hedges in order to reduce the Group’s cash flow exposure resulting from variable interest rates on borrowings. The interest rate swaps and the interest payments on the loan occur simultaneously and the amount deferred in equity is recognised in profit or loss over the loan period.

The Group has entered into interest rate swaps and caps for the period of the main loan facility, effective from 1 July 2011 to 1 July 2016, to eliminate floating interest rate risk. Details of the hedging contracts are below:

	Counterparty	Contract Rate	Notional Amount
Interest Rate Swaps	Crédit Agricole	2.795%	€22.90 million

Foreign currency risk

The European subsidiaries will invest in properties using currencies other than Sterling, the Company's functional and presentational currency, and the Consolidated Statement of Financial Position may be significantly affected by movements in the exchange rates of such currencies against Sterling. The Group will review and manage currency exposure in accordance with its hedging strategy.

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
31 December 2015				£000s	£000s	£000s
Liabilities measured at fair value
Interest rate swaps and caps				-	317	-
Total				-	317	-
				Level 1	Level 2	Level 3
30 June 2015				£000s	£000s	£000s
Liabilities measured at fair value
Interest rate swaps and caps				-	811	-
Total				-	811	-

The Group uses derivative financial instruments to hedge its exposure to interest rate risks arising from financing activities. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.

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 loss on remeasurement to fair value is recognised immediately in profit or loss. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged.

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.

13.      Related party transactions

The Directors are responsible for the determination of the Company's investment objective and policy and have overall responsibility for the Group's activities including the review of investment activity and performance.

Mr Hunter, Chairman of the Company and Mr Spaninks, a Director of the Company, formed the majority of the Directors of its subsidiaries, Property Trust Luxembourg 1 S.à r.l., Property Trust Luxembourg 2 S.à r.l. and Property Trust Luxembourg 3 S.à r.l. and were able to control the investment policy of the Luxembourg subsidiaries to ensure it conforms with the investment policy of the Company until Mr Spaninks resignation from the Boards of Property Trust Luxembourg 1 S.à r.l., Property Trust Luxembourg 2 S.à r.l. and Property Trust Luxembourg 3 S.à r.l. on 11 October 2013.

Mr Farrell, a Director of the Company, is also a Partner in Mourant Ozannes, the Guernsey legal advisers to the Company. The total charge to the Consolidated Income Statement during the period in respect of Mourant Ozannes legal fees was nil (2014: nil).

Mr Lawson, a Director of the Company, was a Director of the Administrator and Secretary, Northern Trust International Fund Administration Services (Guernsey) Limited until 13 December 2013, when Mr Lawson became a Director of Northern Trust (Guernsey) Limited, the Company’s bankers and member of the same group as the Administrator and Secretary. The total charge to the Consolidated Income Statement during the year in respect of Northern Trust administration fees was £72,500 (31 December 2014: £72,500) of which £nil (31 December 2014: £36,250) remained payable at the year end.

Under the Investment Management Agreement, fees are payable to the Investment Manager, Real Estate Adviser and other entities within the AXA Group. These entities are involved in the planning and direction of the Company and Group, as well as controlling aspects of their day to day activity, subject to the overall supervision of the Directors. During the period, fees of £0.24 million (31 December 2014: £0.23 million) were expensed to the Consolidated Income Statement. Following the two asset disposals, transaction fees of 35 bps on the gross sales price were expensed; totaling £0.14 million on all sales (31 December 2014: £0.03 million). During the period, a provision for the performance fee was increased by £0.48 million The amount had been provided under the terms of the Investment Management Agreement.

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

14.      Commitments

Guarantees

The Company has provided mortgages over the properties in favour of the lenders, Crédit Agricole and Crédit Foncier, as security for the main loan facility.

15    Subsequent events

These financial statements were approved for issuance by the Board on 26 February 2016. Subsequent events have been evaluated until this date.

Capital redemption

A capital redemption of £11.0 million was approved by the directors with a redemption date of 6 January 2016.

Corporate Information

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

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
P.O. Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3QL
Channel Islands

Registrar
Computershare Investor Services (Guernsey) Limited
3^rd Floor
Natwest House
Le Truchot
St Peter Port
Guernsey
GY1 1WD
Channel Islands

Independent Auditor
KPMG Channel Islands Limited
Glategny Court, Glategny Esplanade
St Peter Port
Guernsey
GY1 1WR
Channel Islands
 

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