AXA Property Trust Limited
LEI Number: 213800AF85VEZMDMF931
(The “Company”)
NOTICE OF EGM AND
CIRCULAR
10 June 2019
Further to the Company’s announcements on 3 April 2019 and 18 April
2019 regarding a change of investment policy and a change of
name (the “Proposals”), the Company on Friday 7th
June 2019 posted a circular to
shareholders (the “Circular”) seeking approval at an extraordinary
general meeting (the “EGM”) for such changes.
BACKGROUND
Following consultation with Shareholders, the Board is pleased
to propose that AXA Property Trust Limited become an investor in
undervalued British quoted securities. In connection with this,
Worsley Associates LLP ("Worsley") has been appointed
as the Company's new investment advisor.
The Board believes that, if implemented, the new investment
policy will provide an attractive alternative to the Company's
current policy of winding-down its portfolio and distributing the
realisation proceeds to Shareholders.
Worsley's investment strategy allies the taking of influential
holdings in British quoted securities of smaller companies priced
at a deep discount to their intrinsic value (as determined by a
comprehensive and robust research process) with the employment of
activism as necessary to drive highly favourable outcomes. UK small
cap activism is a specialist discipline and Worsley has very few
competitors, none of which have comparable experience. The UK
environment is highly favourable for activism, with minority
shareholders enjoying a multitude of advantageous rights and
protections not generally available in other jurisdictions. There
are more than 1,000 smaller companies whose shares trade on the
London Stock Exchange and they receive relatively limited attention
from market participants, with the result that deep value
opportunities routinely present themselves across all market
cycles.
Worsley has an absolute return focus and believes that the
acquisition of a portfolio of investments at a large discount to
estimated values provides a margin of safety which can
substantially mitigate the likelihood of an overall permanent loss
of capital.
The Board believes that Worsley’s appointment as the Company's
investment advisor will provide an excellent basis from which to
launch the proposed new investment policy. In particular, Worsley
has:
· a proven ability to undertake
transactions, providing know-how and dependability of
execution;
· a successful investment track
record, underpinned by proven operating and technical expertise;
and
· a differentiated and rigorous
approach to listed equity investments through its activist equity
strategy.
THE PROPOSALS
Subject to Shareholder approval, it is proposed that:
(i) the New Investment Objective and Policy be
adopted with immediate effect; and
(ii) the Company's name be changed from "AXA Property
Trust Limited" to "Worsley Investors Limited".
The Proposals are subject to the approval of Shareholders, and
the Circular contains Notice of the Extraordinary General Meeting,
to be held on 28 June 2019, at which
the Resolutions to approve the Proposals will be considered.
NEW INVESTMENT OBJECTIVE AND
POLICY
Under the Proposals, the New Investment Objective and Policy
would be adopted in the place of the current investment policy of
managed wind-down, as approved at an extraordinary general meeting
of the Company on 26 April 2013.
New Investment Objective
The Company’s investment objective is to provide Shareholders
with an attractive level of absolute long-term return, principally
through the capital appreciation and exit of undervalued
securities. The existing real estate asset of the Company will be
realised in an orderly manner, that is with a view to optimising
the disposal value of such asset.
New Investment Policy
The Company aims to meet its objectives through investment
primarily, although not exclusively, in a diversified portfolio of
securities and related instruments of companies listed or admitted
to trading on a stock market in the British Isles (defined as the
United Kingdom of Great Britain and Northern Ireland; (ii) the Republic of Ireland; (iii) the Bailiwicks of
Guernsey and Jersey; and (iv) the Isle of
Man). The majority of such companies will also be domiciled
in the British Isles. Most of these companies will have smaller to
mid-sized equity market capitalisations (the definition of which
may vary from market to market, but will in general not exceed £600
million). It is intended to secure influential positions in such
British quoted securities with the deployment of activism as
required to achieve the desired results.
The Company and its subsidiary undertakings (“the Group”) may
make investments in listed and unlisted equity and equity-related
securities such as convertible bonds, options and warrants. The
Group may also use derivatives, which may be exchange traded or
over-the-counter.
The Group may also invest in cash or other instruments including
but not limited to: short, medium or long term bank deposits in
Sterling and other currencies, certificates of deposit and the full
range of money market instruments; fixed and floating rate debt
securities issued by any corporate entity, national government,
government agency, central bank, supranational entity or mutual
society; futures and forward contracts in relation to any other
security or instrument in which the Group may invest; put and call
options (however, the Group will not write uncovered call options);
covered short sales of securities and other contracts which have
the effect of giving the Group exposure to a covered short position
in a security; and securities on a when-issued basis or a forward
commitment basis.
The Company pursues a policy of diversifying its risk. Save for
the Curno Asset until such time as it is realised, the Company
intends to adhere to the following investment restrictions:
· not more than 30 per cent. of
the Gross Asset Value at the time of investment will be invested in
the securities of a single issuer (such restriction does not,
however, apply to investment of cash held for working capital
purposes and pending investment or distribution in near cash
equivalent instruments including securities issued or guaranteed by
a government, government agency or instrumentality of any EU or
OECD Member State or by any supranational authority of which one or
more EU or OECD Member States are members);
· the value of the four largest
investments at the time of investment will not constitute more than
75 per cent of Gross Asset Value;
· the value of the Group’s
exposure to securities not listed or admitted to trading on any
stock market will not exceed in aggregate 35 per cent. of the Net
Asset Value;
· the Group may make further
direct investments in real estate but only to the extent such
investments will preserve and/or enhance the disposal value of its
existing real estate asset. Such investments are not expected to be
material in relation to the portfolio as a whole but in any event
will be less than 25 per cent. of the Gross Asset Value at the time
of investment. This shall not preclude its subsidiaries from making
such investments for operational purposes;
· the Company will not invest
directly in physical commodities, but this shall not preclude its
subsidiaries from making such investments for operational
purposes;
· investment in the securities,
units and/or interests of other collective investment vehicles will
be permitted up to 40 per cent. of the Gross Asset Value, including
collective investment schemes managed or advised by the Investment
Advisor or any company within the Group; and
· the Company must not invest more
than 10 per cent. of its Gross Asset Value in other listed
investment companies or listed investment trusts, save where such
investment companies or investment trusts have stated investment
policies to invest no more than 15 per cent. of their gross assets
in other listed investment companies or listed investment
trusts.
The percentage limits above apply to an investment at the time
it is made. Where, owing to appreciation or depreciation, changes
in exchange rates or by reason of the receipt of rights, bonuses,
benefits in the nature of capital or by reason of any other action
affecting every holder of that investment, any limit is breached by
more than 10 per cent., the Investment Advisor will, unless
otherwise directed by the Board, ensure that corrective action is
taken as soon as practicable.
Borrowing and Leverage
The Group may engage in borrowing (including stock borrowing),
use of financial derivative instruments or other forms of leverage
provided that the aggregate principal amount of all borrowings
shall at no point exceed 50 per cent. of Net Asset Value. Where the
Group borrows, it may, in order to secure such borrowing, provide
collateral or security over its assets, or pledge or charge such
assets.
CHANGE TO THE COMPANY'S NAME
If the New Investment Objective and Policy is adopted the
Company’s name will no longer be appropriate and in light of that
the Board is proposing that the name be changed from "AXA Property
Trust Limited" to "Worsley Investors Limited".
BENEFITS OF THE PROPOSALS
The Directors believe that the Proposals are in the best
interests of Shareholders and represent a better alternative to the
current plan of liquidation and distribution for the following
reasons:
· the successful business and
investment track records of Worsley combined with the proposed New
Investment Objective and Policy afford the prospect of generating
superior risk adjusted returns for Shareholders over the longer
term;
· there is no guarantee that the
Company will be able to realise the Curno Asset in the next one to
two years at a price which represents best value for Shareholders
and the New Investment Objective and Policy provides time for the
Company to realise such asset without the pressure of requiring
such realisation under its current investment policy, which may
reduce the Company’s negotiating position with counterparties;
and
· the New Investment Objective and
Policy will avoid the incurrence of the costs of a formal
liquidation.
In light of the above, the Board considers that implementing the
Proposals is in the best interests of the Company and the
Shareholders as a whole.
CURNO
Despite concerted efforts since April
2013 to complete an orderly realisation of the Company’s
assets, the Company has not been able to dispose of all of them as
quickly as originally anticipated at prices which represent best
value to Shareholders and the Company continues to hold one
property asset, a multiplex cinema complex, located in Curno,
Italy, the sole tenant of which is
UCI Nord Est S.r.L. (“UCI”).
After an extensive period of negotiation with UCI, which
followed it having raised trading concerns, a new lease contract
was signed on 13 December 2018. As at
31 December 2018, the Company’s
independent asset valuer, Knight Frank LLP, valued the Curno Asset
at €9.5 million, and this was adopted in the Company’s consolidated
accounts for the period then ended.
The marketing process commenced in 2015 and, having failed to
elicit sustained interest from buyers, was deferred during 2018
whilst the lease terms were renegotiated. AXAIM in January resumed
marketing and approached a targeted list of investor groups
considered likely investors for this asset size.
Were the Company to retain its existing strategy of a managed
wind-down it would be likely to continue to be regarded as a forced
seller of the Curno Asset and its ability to hold this investment
for longer to achieve better value would remain diminished. The
impact on the value achieved for Shareholders from continuing
with the realisation strategy would therefore be likely to be
significantly negative.
By removing the necessity to liquidate the Company’s assets in a
short time frame, the Board believes that it ought to be possible
to extract a better valuation for the Curno Asset than its current
carrying value.
The Group plans to retain the Curno Asset until a disposal can
be effected at a price which the Board believes properly reflects
its prospects.
CONCLUSION
The Board unanimously considers that the Proposals are in the
best interests of the Company and its Shareholders as a whole. The
Directors intend to vote their own beneficial holdings in favour of
the Resolutions in respect of their aggregate holding of 6,188,380
Shares (representing approximately 29.8 per cent. of the total
voting rights in the Company). Irrevocable undertakings or written
indications of intent to vote in favour of Resolutions have been
received from Shareholders representing, in aggregate, a further
15.2 per cent. of the Company's issued share capital.
Defined terms used in this
announcement have the meanings given in the Circular unless the
context otherwise requires.
Enquiries:
Blake Nixon (Director)
Tel: 020 38732288
Shore Capital (Financial Adviser and Broker)
Robert Finlay
Tel: 020 76016100
Northern Trust International Fund Administration Services
(Guernsey) Limited
The Company Secretary
Trafalgar Court,
Les Banques
St Peter Port
Guernsey
GY1 3QL
Tel: 01481
745001