Final Results
Alpha Pyrenees Trust Limited
28 February 2007
28 February 2007
ALPHA PYRENEES TRUST LIMITED
('ALPHA PYRENEES TRUST' OR THE 'TRUST')
ALPHA PYRENEES TRUST POSTS PRELIMINARY FINAL RESULTS:
NET ADJUSTED PROFIT AFTER TAX OF £4.472 MILLION
PROPOSED DIVIDEND OF 2.5p PER SHARE (5p per share for the period to December 2006)
DIVIDEND EXPECTED TO RISE TO 6p in 2007
Alpha Pyrenees Trust, the property company investing in commercial real estate in France and Spain, today posts its
results covering the period from its inception on 16 November 2005 to 31 December 2006.
The Trust announced an adjusted net profit after tax of £4.472 million and a further dividend of 2.5p per share,
making a total of 5p per share for the period to 31 December 2006.
Highlights of the period to 31 December 2006 include:
• The Trust has invested €270 million in property acquisitions at an average yield of 7.2%, which will
provide a rent roll in excess of €19 million.
• Alcatel-Lucent Business Park was acquired for €124.5 million on a yield of 7.3%.
• The Trust has established a diversified portfolio of offices, industrial, logistics and retail properties in
France and Spain totalling over 187,000 square metres (2 million square feet).
• Adjusted earnings of 3.7p per share.
• Proposed dividend of 2.5p for the six months to 31 December, making 5p for the Trust's first year,
equivalent to a return of 5% at the flotation price.
• Board's current intention to recommend that the dividend be increased to not less than 6p in respect of
the year to 31 December 2007, equivalent to a yield of 6% at the flotation price.
• The Trust's equity has been substantially (approximately 90%) hedged to October 2013, protecting
shareholders from future currency fluctuations.
Richard Kingston, Chairman of Alpha Pyrenees Trust, commented:
'The Trust has fully invested its equity and is approaching 50% of its target asset portfolio. The Trust is
well-positioned to grow earnings and dividends through utilising its committed finance facilities to acquire
additional properties, on yields significantly above the Trust's finance costs. Against the background of the
acquisitions made to date, the Board has recommended a dividend of 2.5p per share making a total dividend of 5p per
share for the period to 31 December 2006. It is also the current intention of the Board to recommend a dividend of
not less than 6p per share in respect of the year to 31 December 2007. As the Trust continues to make further
progress on acquisitions, the Board will review the forecast dividend with a view to achieving the target dividend of
7p per annum when fully invested.'
Phillip Rose, CEO of Alpha Real Capital (Investment Manager to the Trust), commented:
'The Trust has invested in a diversified portfolio of properties in France and Spain, which includes tenants
from many well-known groups such as Alcatel-Lucent, Credit Lyonnais, Novartis, Carrefour, Aldi, GlaxoSmithKline, La
Poste, MediaMarkt, Saint Gobain and Vinci Group. With a strong rent roll, annually indexed rents linked to inflation,
and the capacity to make further earnings enhancing acquisitions, the Trust is well-placed to grow both earnings and
dividends.'
Contact:
Richard Kingston
Chairman, Alpha Pyrenees Trust
01481 715 601
Phillip Rose,
CEO, Alpha Real Capital
020 7591 1609
Neither this announcement nor any copy of it may be taken or distributed into the United States of America or
distributed or published, directly or indirectly, in the United States of America. Any failure to comply with this
restriction may constitute a violation of US securities law. The securities referred to herein have not been and will
not be registered under the US Securities Act of 1933, as amended (the 'Securities Act'), and may not
be offered or sold in the United States to or for the benefit of US persons unless they are registered under the
Securities Act or pursuant to an available exemption there from. No public offering of securities is being made in
the United States. The distribution of this announcement and information contained herein may be restricted by law in
other jurisdictions and therefore persons into whose possession this announcement or information contained herein
comes should inform themselves about and observe any such restrictions.
NOTES:
ABOUT ALPHA REAL CAPITAL
Alpha Real Capital is a value-adding international property fund management group with operations in both the French
and Spanish real estate markets. Alpha Real Capital was established by Phillip Rose and Sir John Beckwith.
Phillip Rose has 25 years experience in the real estate, funds management and banking industries in Europe, the USA
and Australasia. He has been Head of Real Estate for ABN AMRO bank, Chief Operating Officer of European shopping
centre investor and developer TrizecHahn Europe (where he was responsible for a €1 billion European investment and
development programme from 1999-2000), Managing Director of Lend Lease Global Investment where, during his tenure from
1994 to 1999, he was responsible for managing European property investments and Executive Manager of listed fund
General Property Trust. He is currently a non-executive director of Great Portland Estates and a member of the
Management Committee of the Hermes Property Unit Trust.
Sir John Beckwith has been involved in property investment and other investment for his entire working life. He
founded London & Edinburgh Trust PLC ('LET') in 1971 where he was Chairman and Chief Executive Officer
and developed it into one of the top ten listed real estate companies in the UK. Following the sale of LET, he
established Pacific Investments through which he co-founded a number of successful asset management businesses,
including Liontrust Asset Management and Thames River Capital.
Alpha Real Capital is the Investment Manager to Alpha Pyrenees. Alpha Real Capital's European Funds Director,
Paul Cable, is Fund Manager, Alpha Pyrenees Trust. Paul Cable has 27 years experience in the real estate and banking
industries in the UK, Europe and the Far East and was previously responsible for Sir John Beckwith's property
investment activities in France and Spain for six years.
Further information is available at www.alphapyreneestrust.com including contact details for Alpha Real Capital's UK,
French and Spanish offices.
ABOUT ALPHA PYRENEES TRUST
Alpha PyreneesTrust is a Guernsey registered closed-ended investment company investing in French and Spanish
commercial real estate.
Investment Strategy
The Trust strategy is to invest in a diversified portfolio of properties in France and Spain, focusing on commercial
property in the industrial, logistics, office and retail sectors. Alpha Real Capital believes that there will be
capital growth opportunities in the portfolio through income growth, active asset management and yield compression.
Directors
The Directors of the Company, all of whom are non-executive, are responsible for the implementation of the investment
policy of the Company and the overall supervision of the Group's activities. The Board consists of:
Richard Kingston (Chairman)
Christopher Bennett
David Jeffreys
Phillip Rose
Serena Tremlett
Richard Kingston was an executive director of Slough Estates Plc, one of the largest London Stock Exchange listed
property companies. He was responsible for Group Finance at Slough Estates Plc for nine years, and chairman of their
continental European real estate activities. He was a non-executive director of Mersey Docks and Harbour Company and
is a qualified Chartered Accountant.
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Alpha Pyrenees Trust Limited
Preliminary results
For the period 16 November 2005 to 31 December 2006
These are not the Company's statutory Financial Statements.
All figures are based on audited Financial Statements.
Trust summary and objective
Alpha Pyrenees Trust Limited ('the Trust' or 'the Company') was launched on 29 November 2005. Its shares are listed
on the Official List of the UK Listing Authority and traded on the London Stock Exchange.
The Trust is a closed-ended Guernsey registered investment company.
Objective
The Trust has been formed in order to invest in commercial property in France and Spain, and provide an income return
to investors as well as the potential for capital growth.
Capital structure
The Trust was launched with initial shareholder equity of £125 million. This equity, together with an additional £2.5
million of equity raised, has been invested and future acquisitions will be progressively financed with bank debt
until debt levels reach their targeted level of approximately 75% of property cost.
Management
The Trust's Investment Manager is Alpha Real Capital LLP ('the Investment Manager'). Control of the Trust rests with
the non-executive Guernsey-based Board of Directors.
ISA/PEP status
The Trust's shares are eligible for both Individual Savings Accounts (ISAs) and Personal Equity Plan (PEP) transfers,
and can continue to be held in existing PEPs.
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Financial highlights
31 December 2006
Net asset value (adjusted) (£'000) 116,750
Net asset value per ordinary share (adjusted)* 91.6p
Ordinary share price 95.25p
Dividend per share (period to date) 5.0p
Earnings per share (adjusted - basic & diluted)** 3.7p
IFRS earnings per share - basic & diluted (1.7p)
* The net asset value and net asset value per ordinary share at 31 December 2006 has been adjusted for the unrealised
loss on revaluation of the currency hedge. The Group will not make a gain or loss on the currency hedge if it is held
until maturity date, which is the current intention of the Group.
** Adjusted for capital items included in the consolidated income statement. There is no material difference between
the basic and diluted EPS calculations - see note 7.
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Chairman's statement
The Trust invests in higher-yielding properties in France and Spain, focusing on commercial property in the
industrial, logistics, office and retail sectors. Alpha Real Capital LLP is the Investment Manager to the Trust.
The Trust's objective is to invest in properties that can provide shareholders with a regular, secure dividend stream
whilst also having the potential for capital growth from a combination of rent increases (all of our leases are
typically indexed to increase in line with inflation), yield compression and active management.
The Trust seeks to diversify risk by investing in a geographic spread of properties across different property sectors
with a variety of tenants.
Investment activity
The Trust's portfolio has grown to over 187,000 square metres (approximately 2 million square feet) as shown in the
table below.
The total cost of acquisitions to date has been €270 million which will provide the Trust with an average yield of
7.2% and a rent roll of €19 million. Further details of these acquisitions are provided in the Property Review.
Portfolio summary
Country Property Sqm Description Status Valuation €m
Spain Alcala de Guadaira 5,700 Shopping centre Completed 7.6
Spain Cordoba 16,880 Retail park Completed 21.8
Spain Ecija 5,950 Shopping centre Completed 7.1
Spain Zaragoza 9,520 Warehouses Completed 7.8
France Athis Mons 23,280 Logistics Completed 14.0
France Evreux 14,130 Warehouses with offices Completed 11.5
France Fresnes 6,540 Warehouse and offices Completed 6.1
France Ivry-sur-Seine 7,420 Warehouse and offices Completed 7.6
France Vitry-sur-Seine 5,180 Warehouse and offices Completed 6.2
France Gennevilliers 3,330 Offices and light Completed 11.0
industrial
France Champs sur Marne 5,930 Offices Completed 16.8
France St Cyr L'Ecole 6,340 Offices Completed 17.5
France Villarceaux-Nozay 77,180 Business park Completed 127.0
Total 187,380 262.0
Your Board is particularly pleased to report the acquisition of the Alcatel-Lucent Business Park at Nozay, which
provides a 12 year income stream (with no break before year 9) on a yield of 7.3%. The business park is leased to
Alcatel-Lucent, a global group with a €20 billion market capitalisation.
The re-classification of the Trust's listing on the Official List of the UK Listing Authority under Chapter 15 of the
Listing Rules to Chapter 14 has provided enhanced flexibility and more closely aligned the Trust with the recently
introduced legislation relating to REITs in the UK. In particular, this new flexibility has enabled the Trust to
acquire a 100% interest in the Alcatel-Lucent business park and enables it to purchase similar business parks or other
larger assets in the future.
In line with our strategy, many of the tenants in the Trust's properties are well known companies belonging to groups
with strong covenants such as Credit Lyonnais, Alcatel-Lucent, Novartis, Carrefour, Aldi, GlaxoSmithKline, La Poste,
MediaMarkt, Saint Gobain and Vinci Group.
The Trust's pipeline of potential property acquisitions continues to be healthy.
Results and dividend
Results for the period show an adjusted profit after interest and tax of £4.5 million or 3.7p per share.
The adjusted net asset value per share is 91.6p, reflecting start up costs and property acquisition costs.
Properties held at 31 December 2006 are shown in the balance sheet at an independent valuation of £176.5 million,
which does not include acquisition costs.
Against the background of the acquisitions made to date, the Board proposes to declare a dividend of 2.5p per share,
giving a total dividend of 5p per share in respect of the period to 31 December 2006. The dividend of 2.5p for the
period to 31 December 2006 will be payable to the shareholders on the register as of 2 April 2007 and will be paid on
23 April 2007.
It is the current intention of the Board to recommend a dividend of not less than 3p in respect of the forthcoming six
months to 30 June 2007 and the six months to 31 December 2007, making an expected total dividend of at least 6p for
the year to 31 December 2007.
Finance
The Trust has drawn down borrowings of €124 million at the year end under the €364 million facility with Barclays
Bank. Interest rates have been fixed to February 2015 at an average rate of 5.05%. It is currently anticipated that
the gearing level will be around 75% of cost of the portfolio once fully invested.
A currency hedge instrument has been put into place that will significantly protect the conversion of the
shareholders' original equity back to Sterling together with the anticipated dividend on that equity. The hedge is for
€163 million for the period to October 2013 and was fixed at a rate of €1.49 to the pound.
Market outlook
We continue to see attractive opportunities for investing, particularly in the French property market. Generally,
property market conditions remain favourable with improving tenant demand, declining vacancy rates and increasing
signs of rental growth. Investment yields are compressing and this trend is expected to continue.
Summary
The factors underlying the Trust's investment strategy continue to offer a compelling investment case:
• higher yields are available on properties targeted by the Trust in France and Spain relative to other markets
such as the UK
• finance is available at rates which are typically well below investment yields on our target properties
• tenant leases are typically inflation indexed, providing the opportunity for year-on-year income growth
• potential exists for capital growth from a combination of rental growth, active asset management and yield
compression.
As the Trust continues to make further progress on acquisitions, the Board will review the forecast dividend
with a view to achieving the target payment of 7p per annum when fully invested.
Richard Kingston
Chairman
28 February 2007
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Property review
Investment highlights
The Trust has completed thirteen acquisitions to date in France and Spain involving a total cost of €270 million (€256
million plus deferred consideration of €14 million). The average yield to cost on these acquisitions is 7.2%. The
Trust now owns over 187,000 square metres (approximately 2 million square feet) of commercial real estate.
Of the total property portfolio, 83% is invested in France and 17% in Spain in terms of capital value. The Trust has
achieved diversification across the sectors with 66% in offices and business park property, 20% in warehouses and 14%
in retail. It has also achieved a significant geographical diversification with assets in Paris (Ile-de-France),
Normandy, Seville, Cordoba and Zaragoza.
Portfolio review
As reported in the Interim Report, for the period to 30 June 2006 the Trust had agreed the acquisition of nine
properties for a combined price of approximately €87 million.
These properties have a total area of approximately 95,000 square metres and include five warehouse, office and
logistics buildings in France and three retail centres and a warehouse property in Spain.
The highlights of the period to 31 December 2006 were the acquisition of a portfolio of three modern office properties
in suburban Paris and the Alcatel-Lucent business park in the Ile-de-France for a combined price of approximately €169
million.
On 20 October 2006 the Trust completed the acquisition of two office properties in Champs sur Marne and St Cyr L'Ecole
and completed the acquisition of the third property in Gennevilliers on 30 November 2006. Total consideration was
approximately €44 million. The portfolio of three properties totals an area of 15,600 square metres. All have good car
parking facilities and are close to communication links.
The offices enjoy 100% occupancy and are well let to a number of good quality tenants including Credit Lyonnais,
Syngenta, Universite de Marne-la-Vallee and Ecole Nationale des Ponts et Chaussees. The buildings are all modern,
having been completed within the last five years and provide the Trust with a yield of around 7%.
On 22 December 2006 the Trust and IPGL Fund Investments Limited ('IPGL') completed the acquisition of the Alcatel-
Lucent Business Park through a sale and leaseback transaction. The total consideration agreed for this strategically
located, high quality asset was €124.5 million of which €110.5 million was paid on closing and €14 million will be
paid on completion of new buildings, anticipated by December 2007. The Trust's 77% share of the acquisition was
approximately €95.9 million.
Following the re-classification of the Trust's listing to a company listed under Chapter 14 of the Listing Rules of
the UK Listing Authority, together with the amendment of the Trust's investment policy as approved by the shareholders
at the EGM on 5 February 2007, the Trust acquired IPGL's 23% interest on 15 February 2007. The property is now wholly
owned by the Trust.
The business park benefits from excellent main road infrastructure giving direct access to and from Paris via the A10
motorway or the RN118 from the west of Paris. The site is approximately 5 km from the Courtaboeuf business park, a
well established business area of 3.5 million square metres. It hosts over 100 companies and 24,500 people (including
the headquarters of major IT companies Microsoft and Hewlett Packard). Saclay-Scientipole is approximately 15 km to
the north west. This area brings together the R&D centres of several major corporations (e.g. Danone, Thomson CSF, Air
Liquide), the Motorola headquarters, a university and several of France's 'grandes ecoles'.
The business park provides approximately 77,000 square metres of office, warehouse and research and development
accommodation spread across 20 buildings. The buildings are of good specification and quality and 70% of the space is
either new or has been subject to extensive refurbishment since 2005. The total site area is approximately 36 hectares
and there are 1,820 car parking spaces.
Alcatel-Lucent has signed a 12 year lease with a minimum fixed term of 9 years. The rent will be approximately €8.5
million per annum initially, rising to €9.6 million per annum on the earlier of the completion of the new buildings or
1 January 2008. The rent will be subject to annual indexation and the property is currently producing a rental yield
of approximately 7.3%. The cost of completion of the construction works is covered by bank guarantees and the deferred
payment.
Asset management continues to be a key focus.
During 2006 notable events within the portfolio included the opening of the 4,550 square metre MediaMarkt store on the
Connecta Retail Park in Cordoba as planned in October 2006. The store is trading strongly and is of strategic
importance to the rest of the park as an anchor tenant attracting new tenants and increasing footfall.
At the Las Torres Shopping Centre in Ecija, the quality of the tenant covenant has been enhanced; Supersol the
operator of a 1,760 square metre supermarket unit has been replaced by DIA, part of Carrefour Group, which is also a
tenant on the Trust's Cordoba retail park.
A pro-active stance is being taken in developing additional income sources, such as ATM's and vending machines in all
the retail assets. Strong attention is being given to ensuring service charges are spent effectively and the annual
level of property costs is controlled.
Market overview
France
France showed real GDP growth of 2.2% for 2006 (1.2% for 2005). This rate of growth, the fastest for six years, is
currently forecast to be maintained during the period to the end of 2008.
The consumer sector looks set to continue to underpin growth in 2007. Consumer confidence is still high, as yet
unaffected by the rise in interest rates, and is supported by a rise in real disposable income.
Unemployment levels fell from 9.5% to 8.5% during 2006, the lowest level for six years, and with inflation below the
ECB's 2% target, economic sentiment remains positive.
As a result of the improving economy, rental markets performed well in 2006. The robust office market saw total
letting activity reaching a record of 2.8 million square metres of take up, an increase of 36% compared to 2005. This
led to a decrease in supply, to 3.1 million square metres, coupled with an increase in rental values.
The performance of property as an investment is further strengthened by rental indexation linked to the National
Institute for Statistics and Economic Studies ('INSEE') Cost of Construction Index that is currently running at over
6% on an annualised basis.
Spain
Spain continued to show strong growth in its economy with forecast real GDP growth of 3.8% for 2006 (3.5% for 2005).
Unemployment levels fell from 8.9% to 8.5% during 2006. Together with a growth in income per capita and a strong
labour market this is helping to support consumer demand.
Retailers are benefiting from this consumer confidence and as a result operator demand for units remains strong
especially in the retail warehouse sector, a format that is proving increasingly popular with consumers.
Rents in the industrial market continue to display the gentle upward trend of recent years.
Outlook
The Trust is seeing a continuing flow of investments and is concentrating its efforts on identifying larger single lot
investments and portfolio transactions as demonstrated by those concluded in the second half of 2006.
Good progress has been achieved during 2006 and we look forward to reporting further progress on acquisitions over the
forthcoming months.
Paul Cable
For and on behalf of the Investment Manager
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Directors
Richard Kingston (aged 59)
Chairman
Richard Kingston was, until December 2006, an executive director of Slough Estates Plc, one of the largest London
Stock Exchange listed property companies. He was chairman of their continental European real estate activities and
previously was responsible for Group Finance for nine years. He was a non-executive director of Mersey Docks and
Harbour Company and is a qualified Chartered Accountant.
Christopher Bennett (aged 41)
Director
Christopher Bennett is Managing Director of Dominion Real Estate Limited, a Jersey based fund administration business.
Previously he held senior positions in real estate finance with Royal Bank of Scotland International and Mutual
Finance Limited.
David Jeffreys (aged 47)
Director
David Jeffreys qualified as a Chartered Accountant with Deloitte Haskins and Sells. He was Managing Director of Abacus
Fund Managers (Guernsey) Limited between 1993 and 2004. Currently he carries out a number of consultancy assignments
as well as being a director of a number of investment funds.
Phillip Rose (aged 47)
Director
Phillip Rose has 25 years experience in the real estate, funds management and banking industries in Europe, the USA
and Australasia. He has been the Head of Real Estate for ABN AMRO Bank, Chief Operating Officer of European shopping
centre investor and developer TrizecHahn Europe, Managing Director of Lend Lease Global Investment and Executive
Manager of listed fund General Property Trust.
Phillip is currently a non executive director of Great Portland Estates Plc and a member of the Management Committee
of the Hermes Property Unit Trust.
Serena Tremlett (aged 42)
Director
Serena Tremlett is company secretary of Assura Group Limited, a FTSE 250 company investing in primary healthcare
property, pharmacy and related medical businesses. She was previously the Head of Guernsey Property Funds at Mourant
Guernsey Limited where she sat on the board of a number of property and other investment funds.
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Directors' report
The Directors present their report and Financial Statements of the Company and the Group for the period from
incorporation on 16 November 2005 to 31 December 2006.
Principal activities
The Company is a Guernsey registered investment company and during the period carried on business as a property
investment company.
Business review
A review of the business during the period is contained in the Chairman's statement.
Results and dividend
The results for the period are set out in the Financial Statements.
The Company has declared and paid an interim dividend and proposes to declare a dividend in respect of the period to
31 December 2006.
Directors
The directors, who served during the period are detailed below:
Appointed
Richard Kingston - Chairman 16 Nov 2005
Christopher Bennett 16 Nov 2005
David Jeffreys 16 Nov 2005
Phillip Rose 16 Nov 2005
Serena Tremlett 16 Nov 2005
At each annual general meeting of the Company, one third by number of the directors shall retire from office in
accordance with the Articles of Association.
By virtue of his position as CEO of the Investment Manager, Phillip Rose in his capacity as a Director is subject to
annual re-election by the Shareholders.
A retiring director shall be eligible for reappointment.
No director shall be required to vacate his office at any time by reason of the fact that he has attained any specific
age.
Directors' interests
Directors who held office during the period and had interests in the shares of the Company as at 31 December 2006
were:
Number of ordinary shares
Richard Kingston 5,000
David Jeffreys 5,000
Phillip Rose 250,000
Serena Tremlett 5,000
Directors' remuneration
During the period the directors received the following emoluments in the form of fees from Group companies:
£
Richard Kingston 33,780
Christopher Bennett 22,520
David Jeffreys 22,520
Phillip Rose 22,520
Serena Tremlett 25,407
Total 126,747
Management
The Investment Manager provides investment advisory services to the Company and property advisory, property management
and monitoring services to those members of the Group which acquire properties, in each case in accordance with the
investment objective and investment policy and restrictions of the Group.
Directors' responsibility statement
Company law requires the directors to prepare Financial Statements for each financial year, which give a true and fair
view of the state of affairs of the Company and of the Group at the end of the year and of the profit or loss of the
Company and the Group for that period.
In preparing those Financial Statements, the directors are required to:
(1) select suitable accounting policies and then apply them consistently;
(2) make judgements and estimates that are reasonable and prudent;
(3) state whether applicable accounting standards have been followed, subject to any material departures disclosed
and explained in the Financial Statements;
(4) prepare the Financial Statements on the going concern basis unless it is appropriate to assume that the Group
will not continue in business.
The Directors confirm that they have complied with the above requirements in preparing the Financial Statements.
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any
time the financial position of the Company and of the Group and to enable them to ensure that the Financial Statements
comply with the Companies (Guernsey) Law, 1994. They are also responsible for safeguarding the assets of the Group and
hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Auditors
BDO Novus Limited have expressed their willingness to continue in office as auditors and a resolution to reappoint
them will be proposed at the forthcoming Annual General Meeting.
By order of the Board,
Director
David Jeffreys
Director
Serena Tremlett
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Corporate governance
Guernsey does not have its own corporate governance regime and, as a Guernsey registered company, the Company is not
required to comply with the Combined Code on Corporate Governance, issued by the Financial Reporting Council. However
it is the Company's policy to comply with best practice on good corporate governance including taking measures to
ensure the Company complies with the Combined Code to the extent appropriate. The Board's arrangements in respect of
corporate governance are explained in the paragraphs that follow.
Role of the Board
The Board has determined that its role is to consider and determine the following principal matters which it considers
are of strategic importance to the Company:
1) Review the overall objectives for the Company and set the Company's strategy for fulfilling those objectives
within an appropriate risk framework;
2) Consider any shifts in strategy that it considers may be appropriate in light of market conditions;
3) Review the capital structure of the Company including consideration of any appropriate use of gearing both for
the Company and in any joint ventures in which the Company may invest from time to time;
4) Appoint the Investment Manager, Administrator and other appropriately skilled service providers and monitor
their effectiveness through regular reports and meetings;
5) Review key elements of the Company's performance including Net Asset Value and payment of dividends.
Board Decisions
At board meetings, the Board ensures that all the strategic matters are considered and resolved by the Board. Certain
issues associated with implementing the Company's strategy are delegated either to the Investment Manager or the
Administrator. Such delegation is over minor incidental matters and the Board continually monitor the services
provided by these independent agents. The Board considers there are implementation matters that are significant enough
to be of strategic importance and should be reserved solely for the Board (e.g. all acquisitions, all disposals,
significant capital expenditure, leasing and decisions affecting the Company's financial gearing).
Board Meetings
The Board meets at least quarterly and as required from time to time to consider specific issues reserved for decision
by the Board including all potential acquisitions.
At the Board's quarterly meetings it considers papers circulated in advance including reports provided by the
Investment Manager and the Administrator. The Investment Manager's report comments on:
• The French and Spanish property markets including recommendations for any changes in strategy that the Investment
Manager considers may be appropriate;
• Performance of the Group's portfolio and key asset management initiatives;
• Transactional activity undertaken over the previous quarter and being contemplated for the future;
• The Group's financial position including relationships with bankers and lenders.
The Administrator provides the compliance report.
These reports enable the Board to assess the success with which the Group's property strategy and other associated
matters are being implemented and also consider any relevant risks and to consider how they should be properly
managed.
The Board also considers reports provided from time to time by its various service providers reviewing their internal
controls.
The table below shows the attendance at quarterly Board or semi-annual Audit Committee meetings during the period to
31 December 2006:
Director Board Audit committee
Richard Kingston - Chairman 4 2
Christopher Bennett 4 n/a
David Jeffreys 4 2
Phillip Rose 4 n/a
Serena Tremlett 4 2
No. of meetings during the period 4 2
In between its regular quarterly meetings, the Board has also met on a number of occasions during the period to
approve all transactions and for other matters.
Committees of the Board
The Board has operated an Audit Committee throughout the period under review and on 21 February 2007 constituted a
Remuneration Committee and a Nomination Committee.
The Audit Committee
The Audit Committee meets not less than twice a year and if required meetings can also be attended by the Investment
Manager, the Administrator and the Independent Auditors.
The Audit Committee is responsible for reviewing the half-year and annual Financial Statements before their submission
to the Board. In addition, the Audit Committee is specifically charged under its terms of reference to advise the
Board on the terms and scope of the appointment of the auditors (including remuneration), the independence and
objectivity of the auditors, and reviewing with the auditors the results and effectiveness of the audit.
Members of the Audit Committee may also, from time to time meet with the Company's valuer to discuss the scope and
conclusions of their work.
The Remuneration Committee
The Remuneration Committee, chaired by David Jeffreys, comprises the full Board and is required to consider the terms
and remuneration of the Company's directors and employees.
The Nomination Committee
The Nomination Committee, chaired by Serena Tremlett, comprises the full Board and is convened for the purpose of
considering the appointment of additional directors as and when considered appropriate.
Investment management agreement
The Company has entered into an agreement with the Investment Manager. This sets out the Investment Manager's key
responsibilities which include proposing a property investment strategy to the Board, identifying property investments
to recommend for acquisition and arranging appropriate lending facilities to facilitate the transaction. The
Investment Manager is also responsible to the Board for all issues relating to property asset management.
Shareholder relations
Shareholder communications are a high priority of the Board. Members of the Investment Manager's Investment Committee
make themselves available at all reasonable times to meet with key shareholders and sector analysts. Feedback from
these sessions is provided by the Investment Manager at the quarterly Board meetings.
In addition, the Board is also kept fully appraised of all market commentary on the Company by the Investment Manager
and other professional advisors including its brokers.
Through this process the Board seeks to monitor investor relations and to ensure that the Company's communication
programme is effective.
The Chairman and the Investment Manager will be available at the Annual General Meeting to answer any questions that
shareholders attending may wish to raise.
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Consolidated income statement
For the period from 16 November 2005 to 31 December 2006 Revenue Capital Total
Notes £'000 £'000 £'000
Revenue
Gross rental income 3 2,405 - 2,405
Other income 411 - 411
Interest receivable 4,324 - 4,324
Total income 7,140 - 7,140
Expenses 4
Property costs (501) - (501)
Professional fees (241) - (241)
Investment Manager's fee (1,288) (269) (1,557)
Non executive directors' fees (127) - (127)
Other costs (346) - (346)
Total expenses (2,503) (269) (2,772)
Losses on foreign currency exchange (45) - (45)
Finance costs (120) - (120)
Unrealised loss on revaluation of equity hedge - (1,668) (1,668)
Unrealised loss on revaluation of investment property - (5,250) (5,250)
Net profit (loss) before taxation 4,472 (7,187) (2,715)
Taxation 5 - - -
Profit (loss) for the period 4,472 (7,187) (2,715)
Attributable to
Equity holders of the parent 4,499 (6,607) (2,108)
Minority interest (27) (580) (607)
Earnings per share - basic & diluted 7 3.68p (1.73p)
The total column of this statement represents the Group's Income Statement, prepared in accordance with IFRS. The
revenue and capital columns are supplied as supplementary information permitted under IFRS. All items in the above
statement derive from continuing operations.
The accompanying notes are an integral part of this statement.
----------------------------------------------------------------------------------------------------------------------
Consolidated balance sheet
As at 31 December 2006 Notes £'000
Non-current assets
Investment properties 9 176,509
Finance lease receivable 368
Property, plant and equipment 21
176,898
Current assets
Trade and other receivables 10 27,084
Cash and cash equivalents 18,575
45,659
Total assets 222,557
Current liabilities
Trade and other payables 13 (17,922)
Total assets less current liabilities 204,635
Non-current liabilities
Interest bearing bank loans 11 (81,808)
Rent deposits (1,285)
Unrealised loss on derivative contracts (1,668)
(84,761)
Net assets 119,874
Equity
Share capital 14 -
Share premium account 15 2,500
Special reserve 15 119,362
Warrant reserve 15 130
Translation reserve 15 (1,614)
Capital reserve 15 (6,607)
Revenue reserve 15 1,311
Equity attributable to the equity holders of the parent 115,082
Minority interest 4,792
Total equity 119,874
The accompanying notes are an integral part of this statement.
----------------------------------------------------------------------------------------------------------------------
Consolidated cash flow statement
For the period from 16 November 2005 to 31 December 2006 Notes £'000
Cash flows from operating activities
Loss before taxation (2,715)
Adjustments for:
Increase in operating trade and other receivables (2,651)
Increase in operating trade and other payables 2,022
Unrealised loss on financial derivative 1,668
Unrealised loss on property valuation 5,250
Net cash inflow from operating activities 16 3,574
Cash flows from investing activities
Payments to acquire investment properties (185,711)
Net cash outflow from investing activities (185,711)
Cash flows from financing activities
Proceeds from issue of ordinary share capital 127,500
Issue costs (5,408)
New bank loans raised 81,808
Dividends paid (3,188)
Net cash inflow from financing activities 200,712
Net increase in cash and cash equivalents 18,575
Cash and cash equivalents at beginning of year -
Cash and cash equivalents at end of year 18,575
The accompanying notes are an integral part of this statement.
----------------------------------------------------------------------------------------------------------------------
Consolidated statement of changes in equity
For the period from Share Share Special Warrant Translation Capital Revenue Minority Total
16 November 2005 to capital premium reserve reserve reserve reserve reserve interest reserves
31 December 2006
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Changes in equity for the
period
Foreign exchange losses - - - - (1,614) - - - (1,614)
on translation of foreign
operations
Loss for the period - - - - - (7,187) 4,472 - (2,715)
Total recognised income - - - - (1,614) (7,187) 4,472 - (4,329)
and expense for the
period
Transfer to minority - - - - - 580 27 (607) -
interest
Dividends - - - - - - (3,188) - (3,188)
Issue of share capital - 127,500 - - - - - - 127,500
Share issue costs - (5,508) - - - - - - (5,508)
Transfer to special - (119,362) 119,362 - - - - - -
reserve
Share based payments - (130) - 130 - - - - -
Minority interest - - - - - - - 5,399 5,399
At 31 December 2006 - 2,500 119,362 130 (1,614) (6,607) 1,311 4,792 119,874
Note 14, 15
The accompanying notes are an integral part of this statement.
----------------------------------------------------------------------------------------------------------------------
Company income statement
For the period from 16 November 2005 to 31 December 2006 Revenue Capital Total
Notes £'000 £'000 £'000
Revenue
Bank interest receivable 4,100 - 4,100
Income from subsidiary undertakings 2,328 - 2,328
Total income 6,428 - 6,428
Expenses
Professional fees (966) - (966)
Audit fees (37) - (37)
Investment Manager's fee (727) (269) (996)
Non-executive directors' fees (127) - (127)
Insurance costs (22) - (22)
Travel costs (39) - (39)
Administration costs (121) - (121)
Total expenses (2,039) (269) (2,308)
Losses on foreign currency exchange (45) (1,663) (1,708)
Finance costs (2) - (2)
Net profit (loss) before taxation 4,342 (1,932) 2,410
Taxation 5 - - -
Profit (loss) for the period 4,342 (1,932) 2,410
The total column of this statement represents the Company's Income Statement, prepared in accordance with IFRS. The
revenue and capital columns are supplied as supplementary information permitted under IFRS. All items in the above
statement derive from continuing operations.
The accompanying notes are an integral part of this statement.
----------------------------------------------------------------------------------------------------------------------
Company balance sheet
As at 31 December 2006 Notes £'000
Non-current assets
Investments in subsidiary undertakings 8 77
Amounts receivable from subsidiary undertakings 8 90,023
Property, plant and equipment 21
90,121
Current Assets
Trade and other receivables 10 34
Amounts receivable from subsidiary undertakings 8 25,490
Cash and cash equivalents 6,941
32,465
Total assets 122,586
Current liabilities
Trade and other payables 13 (1,372)
Net assets 121,214
Equity
Share capital 14 -
Share premium account 15 2,500
Special reserve 15 119,362
Warrant reserve 15 130
Capital reserve 15 (1,932)
Revenue reserve 15 1,154
Total equity 121,214
The accompanying notes are an integral part of this statement.
----------------------------------------------------------------------------------------------------------------------
Company cash flow statement
For the period from 16 November 2005 to 31 December 2006 Notes £'000
Cash flows from operating activities
Net profit before taxation 2,410
Adjustments for:
Increase in operating trade and other receivables (1,826)
Increase in operating trade and other payables 1,238
Unrealised foreign exchange translation loss 1,663
Net cash inflow from operating activities 16 3,485
Cash flows from investing activities
Payments to acquire subsidiaries (77)
Purchase of property, plant and equipment (21)
Loans advanced (115,350)
Net cash outflow from investing activities (115,448)
Cash flows from financing activities
Proceeds from issue of ordinary share capital 127,500
Issue costs (5,408)
Dividend payments (3,188)
Net cash inflow from financing activities 118,904
Net increase in cash and cash equivalents 6,941
Cash and cash equivalents at beginning of period -
Cash and cash equivalents at end of period 6,941
The accompanying notes are an integral part of this statement.
----------------------------------------------------------------------------------------------------------------------
Company statement of changes in equity
For the period from Share Share Special Warrant Capital Revenue Total
16 November 2005 to capital premium reserve reserve reserve reserve reserves
31 December 2006
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Changes in equity for the
period
Profit for the period - - - - (1,932) 4,342 2,410
Total recognised income and - - - - (1,932) 4,342 2,410
expense for the period
Dividends - - - - - (3,188) (3,188)
Issue of share capital - 127,500 - - - - 127,500
Share issue costs - (5,508) - - - - (5,508)
Transfer to special reserve - (119,362) 119,362 - - - -
Share based payments - (130) - 130 - - -
At 31 December 2006 - 2,500 119,362 130 (1,932) 1,154 121,214
Note 14, 15
The accompanying notes are an integral part of this statement.
----------------------------------------------------------------------------------------------------------------------
Notes to the Preliminary Results
For the period from 16 November 2005 to 31 December 2006
1. General information
The Company is a limited liability, closed-ended investment company incorporated in Guernsey. The address of the
registered office is given in the 'Directors and Trust information' section of this announcement. The nature of the
Group's operations and its principal activities are set out in the Chairman's statement. The Financial Statements were
authorised for issue on 28 February 2007 by David Jeffreys and Serena Tremlett on behalf of the Board.
These Financial Statements are presented in pounds Sterling as this is the currency in which the funds were raised and
in which investors are seeking a return. The Company's functional currency is Sterling and the subsidiaries'
functional currency is Euros. The presentation currency of the Company and the Group is Sterling. The subsidiaries are
included in the consolidated Financial Statements in accordance with note 2.
2. Significant accounting policies
A summary of the principal accounting policies, all of which have been applied consistently throughout the period, is
set out below.
Basis of accounting
The Financial Statements of the Group have been prepared in accordance with International Financial Reporting
Standards ('IFRS'), which comprise standards and interpretations approved by the International Accounting Standards
Board ('IASB '), and International Accounting Standards and Standards Interpretations Committee interpretations
approved by the International Accounting Standards Committee ('IASC') that remain in effect, and to the extent that
they have been adopted by the European Union.
The Financial Statements have been prepared on the historical cost basis, except for the revaluation of investment
properties, and the mark to market of debt and derivative instruments. The principal accounting policies adopted are
set out below.
Basis of consolidation
The consolidated Financial Statements incorporate the Financial Statements of the Company and entities controlled by
the Company (and its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the
power to govern the financial and operating policies of an investee entity so as to obtain benefits from its
activities. All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Presentation of income statement
In order to better reflect the activities of an investment company and in accordance with guidance issued by the
Association of Investment Companies ('AIC'), supplementary information which analyses the income statement between
items of a revenue and capital nature has been presented alongside the income statement.
Revenue recognition
Rental income from investment property leased out under an operating lease is recognised in the income statement on a
straight line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the net
consideration for the use of the property and are therefore also recognised in the same straight line basis. Rental
revenues are accounted for on an accruals basis. Therefore, deferred revenue generally represents advance payments
from tenants. Revenue is recognised when it is probable that the economic benefits associated with the transaction
will flow to the Group and the amount of revenue can be measured reliably.
When property is let out under a finance lease, the Group recognises a receivable at an amount equal to net investment
in the lease at inception of the lease. Rentals received are accounted for as payments of principal and finance income
as appropriate. Minimum lease payments receivable on finance leases are apportioned between finance income and
reduction of the outstanding receivable. Finance income is allocated to each period during the lease term so as to
produce a constant periodic rate of interest on the remaining net investment in the finance lease. Contingent rents,
being those lease payments that are not fixed at the inception of a lease, for example turnover rents, are recorded as
income in the periods in which they were earned.
Interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate
applicable.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee.
Foreign currencies
Transactions in currencies other than pounds Sterling are recorded at the rates of exchange prevailing on the dates of
the transactions. At each Balance Sheet date, monetary assets and liabilities that are denominated in foreign
currencies are retranslated at the rates prevailing on the Balance Sheet date. Non-monetary assets and liabilities are
carried at fair value that are denominated in foreign currencies and translated at the rates prevailing at the date
when the fair value was determined. Gains and losses arising on retranslation are included in net profit or loss for
the period, except for exchange differences arising on non-monetary assets and liabilities where the changes in fair
value are recognised directly to equity.
On consolidation, the assets and liabilities of the Group's overseas operations are translated at exchange rates
prevailing on the Balance Sheet date. Income and expenses are translated at the average exchange rates for the period
unless exchange rates fluctuate significantly. Exchange differences arising, if any, are classified as equity and
transferred to the Group's translation reserve.
Expenses
All expenses are accounted for on an accruals basis and include those of the Administrators, the Investment Manager
and the Directors. In respect of the analysis between revenue and capital items, presented within the income
statement, all expenses have been presented as revenue items except as follows:
• Expenses which are incidental to the acquisition of an investment property are included within the cost of that
investment property;
• A proportion of the Investment Manager's fee is charged to capital and in order to reflect the Directors'
estimated long-term view of the nature of the investment return of the Group.
Taxation
The Company is exempt from Guernsey taxation on income derived outside of Guernsey and bank interest earned in
Guernsey under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989. A fixed annual fee of £600 is payable to the
States of Guernsey in respect of this exemption. No charge to Guernsey taxation arises on capital gains.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported
in the income statement because it excludes items of income and expense that are taxable or deductible in other years
and it further excludes items that are never taxable or deductible. The Group's liability for current tax is
calculated using prevailing tax rates.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and
liabilities in the Financial Statements and the corresponding tax bases used in the computation of taxable profit, and
is accounted for using the Balance Sheet liability method. Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable
profits will be available against which deductible timing differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is
no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or
the asset realised. Deferred tax is charged or credited in the income statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also dealt within equity.
Dividends
Dividends are recognised as a liability in the period in which they become obligations of the Company. Interim
dividends are recognised as a liability in the period in which they are paid. Final dividends are recognised once they
are approved by Shareholders.
Investment property
Investment property, which is property held to earn rentals and/or for capital appreciation, is measured initially at
cost including related transaction costs. After initial recognition at cost, investment properties are carried at
their fair values based on a semi annual professional valuation made by Knight Frank LLP.
Gains or losses arising from changes in fair value of investment property are included in the income statement for the
period in which they arise. Properties are treated as acquired when the Group assumes the significant risks and
returns of ownership and as disposed of when these are transferred to the buyer.
Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment of business being property investment
business. It operates in a single geographical segment (Europe) and the properties are let to commercial entities.
Share-based payments
The Group makes equity-settled share-based payments to certain advisers and service providers. Equity-settled
share-based payments are measured at fair value as at the date of grant. The fair value determined at grant date is
expensed on a straight line basis over the vesting period, based on the Group's estimate of the number of instruments
that will eventually vest.
Investment in subsidiaries
Investment in subsidiaries are stated at cost less, where appropriate, provisions for impairment.
Financial instruments
Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party
to the contractual provisions of the instrument. The Group shall offset financial assets and financial liabilities if
the Group has a legally enforceable right to set off the recognised amounts and interests and intends to settle on a
net basis.
Trade and other receivables
Trade and other receivables do not carry any interest and are short-term in nature and are accordingly stated at their
nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.
Cash and cash equivalents
Cash in banks and short term deposits that are held to maturity are carried at cost. Cash and cash equivalents consist
of cash in hand and short term deposits in banks with an original maturity of three months or less.
Financial liabilities and equity instruments
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements
to which they relate. An equity instrument is any contract that evidences a residual interest in the asset of the
Group after deducting all of its liabilities. Financial liabilities and equity instruments are recorded at the
proceeds received, net of issue costs.
Interest bearing bank loans and borrowings
Interest bearing bank loans are recorded at the proceeds received, net of attributable transaction costs. Finance
charges, including premiums payable on settlement or redemption and direct issue costs are accounted for on an
accruals basis in the income statement using the effective interest method and are added to the carrying amount of the
instrument to the extent that they are not settled in the period in which they arise.
Trade and other payables
Trade payables and other payables are non interest-bearing and are stated at their nominal value.
Derivative financial instruments and hedge 'derivatives'
Derivatives are recognised at fair value. The gain or loss on re-measurement to fair value is recognised immediately
in the income statement unless the derivatives qualify for hedge accounting, in which case recognition depends on the
nature of the item being hedged.
3. Gross rental income
Gross rental income for the period ended 31 December 2006 amounted to £2.4 million.
The Group leases out all of its investment property under operating leases. Leases are typically for terms of standard
institutional 3/6/9 years in France and 5 + 5 years in Spain.
At the Balance Sheet date, the Group had contracted with tenants for the following future minimum lease payments:
€'000
Within one year 17,769
In the second to fifth years inclusive 56,600
After five years 58,078
Total 132,447
4. Expenses
Group Revenue Capital Total
£'000 £'000 £'000
Property costs of let property 501 - 501
Professional fees
Auditors' remuneration for audit services 62 - 62
Other professional fees 179 - 179
Investment management fees 1,288 269 1,557
Directors' fees 127 - 127
Accounting and administration fees 195 - 195
Insurance costs 45 - 45
Travel costs 40 - 40
Other expenses 66 - 66
Total 2,503 269 2,772
An outline of the investment management agreement is provided in note 17. The Group has one employee. The Directors
are the only key management personnel of the Group. Amounts payable to associates of BDO Novus Limited by the Company
and its subsidiary undertakings in respect of non-audit services were £175,000.
5. Taxation
The Group is liable to French income tax at approximately 34% and Spanish income tax at approximately 35% arising on
the activities of the Group's operations in France and Spain. There is no current or deferred tax expense arising on
the results of the Group for the period. The Group has unprovided deferred tax assets arising on unutilised losses
within the French and Spanish operations.
As of 31 December 2006 the Group had unprovided deferred tax asset amounting to £1.588m.
6. Dividends
£'000
Amounts recognised as distributions to equity holders in the period:
Interim dividend for the period from 16 November 2005 to 30 June 2006 of 2.5p per share 3,188
Proposed dividend for the period from 1 July 2006 to 31 December 2006 of 2.5p per share 3,188
The proposed dividend will be paid after the balance sheet date and accordingly
has not been included as a liability in these Financial Statements.
7. Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
Revenue Capital Total
Earnings (£'000)
Earnings for the purposes of basic and diluted 4,499 (6,607) (2,108)
earnings per share being net profit attributable to
equity holders of the parent.
Number of shares (000's)
Weighted average number of ordinary shares for 122,098 122,098
the purposes of basic earnings per share
Basic earnings per share 3.68p (1.73p)
Since the average price of the shares over the period is in excess of the exercise price the warrants are dilutive,
however the effect is so small that there is no difference between basic and diluted earnings per share.
8. Investment in subsidiary undertakings
A list of the significant investments in subsidiaries, including the name, country of incorporation and the proportion
of ownership interest is given below.
Name of subsidiary undertaking Class of share % of class held Country of Principal
incorporation activity
Alpha Pyrenees Luxembourg SARL Ordinary 100% Luxembourg Holding company
Alpha Pyrenees Belgium SA Ordinary 100% Belgium Holding company
Alpha Pyrenees Trust Finance Company Ordinary 100% Guernsey Finance company
Limited
Alpha Pyrenees Evreux SARL Ordinary 100% France Holding company
Alpha Pyrenees Evreux SCI Ordinary 100% France Property
investment
Alpha Pyrenees Athis Mons SARL Ordinary 100% France Holding company
Alpha Pyrenees Athis Mons SCI Ordinary 100% France Property
investment
Alpha Pyrenees Offices SARL Ordinary 100% France Holding company
Alpha Pyrenees Offices SCI Ordinary 100% France Property
investment
Alpha Pyrenees Spain SLU Ordinary 100% Spain Property
investment
Alpha Pyrenees Nozay SARL Ordinary 77% France Holding company
Alpha Pyrenees Nozay SCI Ordinary 77% France Property
investment
Alpha Pyrenees Nozay LP n/a 77% UK Holding company
Alpha Pyrenees Nozay GP Limited Ordinary 100% UK General partner
ID Trust Management SARL Ordinary 77% Luxembourg Holding company
In addition to its investment in the shares of subsidiaries, the Company has made loans to the following as at 31
December 2006.
Name of subsidiary undertaking Interest bearing Non interest Total
£'000 bearing £'000
£'000
Alpha Pyrenees Luxembourg SARL 100,114 15,399 115,513
The loans are denominated in Euros, unsecured and are subject to a range of interest rates, fixed for the term of the
relevant loan. At 31 December 2006 the average interest rate was 5.228%. Loans amounting to €16.6 million, in addition
to bearing interest, carry a profit share entitlement of 20% of the EBITDA in the relevant subsidiary.
9. Investment properties
£'000
Acquisitions during the period at cost 181,699
Fair value adjustment in the period (5,250)
Effect of foreign exchange 60
Market value of investment properties at 31 December 176,509
2006
The fair value of the Group's investment properties at 31 December 2006 has been arrived at on the basis of valuations
carried out at that date by Knight Frank LLP, independent valuers not connected to the Group. The valuation basis has
been market value as defined by the RICS Red Book.
The approved RICS definition of market value is the 'estimated amount for which a property should exchange on the date
of valuation between a willing buyer and a willing seller in an arms length transaction after proper marketing wherein
the parties had each acted knowledgeably, prudently and without compulsion.'
The Group has pledged a number of its investment properties to secure banking facilities granted to the Group.
10. Trade and other receivables
Company Group
£'000 £'000
Trade debtors - rent receivables from tenants - 612
Deferred costs 34 127
Other debtors - 17,712
VAT recoverable - 8,448
Bank interest receivable - 185
Total 34 27,084
11. Interest bearing bank loans
On 21 December 2006, the Group entered into a loan facility with Barclays Bank Plc totalling €364 million and a VAT
facility totalling €40 million. The loan facility is to be repaid on 10 February 2015, and any VAT loans drawn, 24
months from the date of the agreement. As at 31 December 2006, the total funds drawn down totalled €124 million, which
left €240 million available to draw down.
Loans drawn down on the facility are secured over the shares in the Company's operating subsidiaries and mortgages
over properties with a total value of €183.8 million.
The interest rate on the loans drawn to date is a fixed rate on a quarterly basis from 10 February 2007 for a period
of 8 years at a rate of 4.20% plus a margin of 85 basis points, giving a total rate of 5.05%.
All of the Group's borrowings have a maturity of over five years. The fair value of the Group's borrowings are not
significantly different to those disclosed in the Balance Sheet.
12. Derivative financial instruments
Currency swap
The Group uses currency derivatives to hedge significant future transactions and cash flows to safeguard the equity
investments of shareholders against significant adverse movements between Sterling and Euros.
On 13 October 2006, Alpha Pyrenees Trust Finance Company Limited ('Alpha Finance'), a wholly owned subsidiary of the
Company, entered into a currency swap with Barclays Bank Plc. Under the terms of this agreement, Alpha Finance will
pay Barclays Bank Plc €130.1 million and Barclays Bank Plc will pay Alpha Finance £87.6 million on 16 October 2013. In
addition, there are quarterly periodic payments in February, May, August and October of each year starting on 16
February 2007 and ending 16 October 2013. On these dates Barclays Bank Plc will pay Alpha Finance an amount equal to 7
per cent per annum on £87.6 million and Alpha Finance will pay Barclays Bank Plc an amount equal to 6 per cent per
annum on €130.1 million. An amount of £2 million had been pledged as collateral to Barclays Bank Plc to support this
swap.
On 18 January 2007, Alpha Finance entered into a further currency swap with Barclays Bank Plc. Under the terms of this
swap, Alpha Finance will pay Barclays Bank Plc €33 million and Barclays Bank Plc will pay Alpha Finance £21.6 million
on 16 October 2013. In addition, there are quarterly periodic payments in February, May, August and November of each
year starting on 16 February 2007 and ending on 16 October 2013. On these dates Barclays Bank Plc will pay Alpha
Finance an amount equal to 7 per cent. per annum on £21.6 million and Alpha Finance will pay Barclays Bank Plc an
amount equal to 5.9725 per cent per annum on €33 million. A total amount of €7.5 million has been pledged as
collateral to Barclays Bank Plc to support both the 13 October 2006 and 18 January 2007 swaps.
13. Trade and other payables
Company Group
2006 2006
£'000 £'000
Trade creditors 44 86
Investment property acquisition costs payable - 6,155
Deferred property acquisition costs 9,373
Investment Manager's fee payable - 520
Accruals 1,328 1,788
Total 1,372 17,922
14. Share capital
£'000
Authorised share capital is not limited -
Issued share capital
127.5 million ordinary shares of no par value -
The Company has one class of ordinary shares which carry no right to fixed income. -
15. Reserves
Share premium account
On 9 December 2005 the Royal Court of Guernsey confirmed the reduction of capital by way of cancellation of the amount
standing to the credit of its share premium account on that date. The amount cancelled was credited to the special
reserve.
On 10 July 2006 the Company issued a further 2,500,000 ordinary shares of no par value at a premium of £1 per share.
Special reserve
The special reserve is a distributable reserve to be used for all purposes permitted under Guernsey company law,
including the buy back of shares and payment of dividends.
Warrant reserve
The warrant reserve contains the fair value of share-based payments in respect of the warrants issued to the
Investment Manager but not exercised.
Translation reserve
The translation reserve contains exchange differences arising on consolidation of the Group's overseas operations.
Capital reserve
The capital reserve would contain gains and losses on the disposal of investment properties, and does contain
increases and decreases in the fair value of the Group's investment properties and derivative financial instruments,
together with expenses allocated to capital.
Revenue reserve
Any surplus arising from net profit after tax is taken to this reserve, which may be utilised for the buy back of
shares and payment of dividends.
16. Interest paid and received
Company Group
2006 2006
£'000 £'000
Interest paid (2) (20)
Interest received 4,100 4,139
Total 4,098 4,119
17. Related party transactions
Parties are considered to be related if one party has the ability to control the other party or exercise significant
influence over the other party in making financial or operational decisions. Alpha Real Capital LLP is the Investment
Manager to the Company under the terms of the Investment Manager Agreement and is thus considered a related party of
the Company.
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
During the period the Group acquired a property in France from a wholly owned subsidiary of Pacific Investments II
Limited, a company controlled by Sir John Beckwith. Sir John Beckwith also controls the Investment Manager and holds
2,600,000 shares in the Trust directly or through connected persons. The details of this transaction were included
within the Trust's listing prospectus and within the related party circular issued to all shareholders in advance of
the acquisition. The acquisition was approved by shareholders at an Extraordinary General Meeting. Included within the
same circular (and approved by shareholders), was the subscription by Sir John Beckwith and connected persons to
2,500,0000 new shares in the Trust. These shares were issued on 10 July 2006 and brought Sir John Beckwith's and
connected persons' total holdings to 5,100,000 shares in the Trust of which 1,490,000 are held by the Investment
Manager.
The Investment Manager is entitled to receive a fee from the Group at an annual rate of 1 per cent of the gross assets
of the Group, payable quarterly in arrears. The Investment Manager is also entitled to receive an annual performance
fee calculated with reference to total shareholder return ('TSR'), whereby the fee is 20 per cent of any excess over
an annualised TSR of 12 per cent and then a further 15 per cent of any excess over 20 per cent. Details of the
investment management fees for the current accounting period are given in note 4 and £520,000 was payable at the
balance sheet date.
The Investment Manager has also been issued warrants and granted options over the Company's ordinary share capital,
further details of which are provided in note 20.
The Directors of the Company received fees for their services and further details are provided in the Directors'
Report. The total charge to the income statement during the period was £127,000.
The Investment Manager received payment of £300,000 in respect of time costs and expenses incurred by the Investment
Manager in connection with the initial placing and admission to The Official List of the UK Listing Authority and
negotiations in respect of the initial investments of the Group.
Alpha Real Capital Singapore Pte Limited, being a wholly owned subsidiary of the Investment Manager held 1,490,000
shares in the Company.
The following, being partners of the Investment Manager held the following shares in the Company at 31 December 2006.
Number of shares held
P. Rose 250,000
M. Johnson 26,400
B. Bauman 50,000
S. Wilson 5,000
Phillip Rose is the CEO and partner of the Investment Manager. Paul Cable, being the Investment Manager's Fund Manager
responsible for the Trust's investments, held 20,000 shares in Alpha Pyrenees Trust Limited.
18. Net asset value per share
2006
Net asset value (£'000) 115,082
Number of ordinary shares at 31 December 2006 (000's) 127,500
Net asset value per share 90.3p
Net asset value adjusted for unrealised movement on revaluation of currency hedge (£'000) 116,750
Number of ordinary shares at 31 December 2006 (000's) 127,500
Net asset value per share adjusted for unrealised movement on revaluation of currency hedge 91.6p
The net asset value per ordinary share at 31 December 2006 is based on the net assets attributable to the ordinary
shareholders of £115.1 million (being total net asset value of £119.9 million less minority interest £4.8 million) on
127,500,000 ordinary shares in issue at the Balance Sheet date.
The Group will not make a loss or gain on the currency hedge if it is held until the maturity date, which is the
current intention of the Group.
19. Events after the balance sheet date
On 13 February 2007 the Company reclassified its listing on the Official List from that of a property investment
company listed under Chapter 15 of the Listing Rules of the UK Listing Authority ('UKLA') to that of an overseas
company listed under Chapter 14 of the UKLA Listing Rules. Shareholders approved the re-classification at an
Extraordinary General Meeting held on 5 February 2007.
On 15 February 2007, the Company exercised a call option to acquire the minority interest in Alpha Pyrenees Nozay LP
from IPGL. The Company now owns 100% of a 77,180 square metre business park on the outskirts of Paris.
20. Share based payments
Warrants
The Company has issued warrants to the Investment Manager pursuant to which it has been granted the right to subscribe
for 6,375,000 ordinary shares in the company at an exercise price of £1 per share. Such warrants can be exercised at
any time up to and including 29 November 2010. The warrant instrument provides that the holder of the warrant may from
time to time transfer all or some of its warrants to third parties.
The fair value of the warrants at grant date has been measured as £130,043 using an appropriate option pricing model.
In light of the immaterial amount of the fair value the directors do not consider it worthwhile to disclose the
assumptions used in determining this fair value.
Incentive options
In order to incentivise the Investment Manager, the Company has granted options to it to acquire up to 3,825,000
ordinary shares. The options vest in three tranches of equal amounts over a three year period ending on the third,
fourth and fifth anniversaries of admission of the shares to the Official List of the UKLA subject to a cumulative
shareholder return performance criteria of 10% per annum (50% vesting) and 12% per annum (100% vesting) having been
met over a period of the preceding three years for each tranche respectively.
Once vested the options are exercisable during the subsequent seven year period.
Number of options Expiry Price
1,275,000 29 November 2015 100p
1,275,000 29 November 2016 100p
1,275,000 29 November 2017 Average share
price on the 20
trading days
prior to
31 December 2007
The directors have assessed the fair value of the option granted and consider it to be immaterial in relation to the
activities of the Company and its Group.
21. Financial instruments
Financial risk factors
The Group is exposed to interest rate risk, credit risk, liquidity risk and currency risk arising from the financial
instruments it holds. The risk management policies employed by the Group to manage these risks are discussed below.
Interest rate risk
The Group's exposure to interest rate risk relates to the Group's long-term debt obligations. Interest rate risk is
the risk that the value of financial instruments will fluctuate due to changes in market interest rates. Borrowings
issued at variable rates expose the Group to cash flow risk. Borrowings issued at fixed rates expose the Group to fair
value interest rate risk. The Group monitors its interest rate risk on an on-going basis.
Credit risk
Credit risk arises when a failure by counter parties to discharge their obligations could reduce the amount of future
cash inflows from financial assets on hand at the balance sheet date. In the event of a default by an occupational
tenant, the Group will suffer a rental shortfall and incur additional costs, including legal expenses in maintaining,
insuring and re-letting the property until it is re-let. A property advisor monitors the tenants in order to
anticipate, and minimise the impact of, default by occupational tenants. Where possible, tenants risk is mitigated
through rental guarantees.
General economic conditions may affect the financial stability of tenants and prospective tenants and/or demand for
and value of real estate assets. In the event of a default by a tenant or the expiry of a lease, the Group will suffer
rental shortfall and incur additional costs, including legal expenses, in maintaining, insuring and re-letting the
property.
With respect to credit risk arising from other financial assets of the Group, which comprise cash and cash
equivalents, the Group's exposure to credit risk arises from default of the counterparty with a maximum exposure equal
to the carrying value of these instruments. The Group policy is to maintain its cash and cash equivalent balances with
five financial institutions. The Group monitors the placement of cash balances on an ongoing basis.
Liquidity risk
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched
position potentially enhances profitability, but can also increase the risk of losses. The Group has procedures with
the object of minimising such losses as maintaining sufficient cash and other highly liquid current assets and by
having available an adequate amount of committed credit facilities. Cash and cash equivalents are placed with
financial institutions on a short term basis reflecting the Group's desire to maintain a high level of liquidity in
order to enable timely completion of investment transactions.
Currency risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange
rates. Currency risk arises when the future commercial transactions and recognised assets and liabilities are
denominated in a currency that is not the Group's measurement currency. The Group is exposed to foreign exchange risk
arising from various currency exposures primarily with respect to Euro and Sterling. The Group now hedges its Euro/
Sterling currency position. The Board monitors the exchange rate fluctuations on an on-going basis.
Fair value estimation
The fair value of the Group's financial assets and liabilities approximate their carrying amounts on the balance sheet
date.
Growth in rental income and defaults
Income growth may not continue at a consistent rate. Future income is dependent on, amongst other things, the Group
negotiating suitable rent levels when compared to associated financing costs.
----------------------------------------------------------------------------------------------------------------------
Directors and Trust information
Directors:
Richard Kingston (Chairman)
Christopher Bennett
David Jeffreys
Phillip Rose
Serena Tremlett
Registered office:
First Floor
Dorey Court
Admiral Park
St Peter Port
Guernsey GY1 6HJ
Investment Manager:
Alpha Real Capital LLP
124 Sloane Street
London SW1X 9BW
Administrator and secretary:
Mourant Guernsey Limited
First Floor
Dorey Court
Admiral Park
St Peter Port
Guernsey GY1 6HJ
Broker:
Cenkos Securities Limited
6.7.8. Tokenhouse Yard
London EC2R 7AS
Independent valuers:
Knight Frank LLP
20 Hanover Square
London W1S 1HZ
Corporate advisors:
Kinmont Limited
6 Arlington Street
London SW1A 1RE
Auditors:
BDO Novus Limited
PO Box 180
Elizabeth House
Ruette Braye
St Peter Port
Guernsey GY1 3LL
Tax advisers:
Deloitte & Touche LLP
Hill House
1 Little New Street
London EC4A 3TR
BDO Stoy Hayward LLP
8 Baker Street
London W1U 3LL
Legal advisors in Guernsey:
Carey Olsen
7 New Street
St Peter Port
Guernsey GY1 4BZ
Legal advisors in the UK:
Norton Rose
Kempson House
Camomile Street
London EC3A 7AN
Bankers in Guernsey:
Royal Bank of Scotland International Limited
Royal Bank Place
1 Glategny Esplanade
St Peter Port
Guernsey GY1 4BQ
Bankers in London:
Barclays Capital
5 The North Colonnade
Canary Wharf
London E14 4BB
Registrar:
Computershare Investor Services (Channel Islands) Limited
Ordnance House
31 Pier Road
St Helier
Jersey JE4 8PW
----------------------------------------------------------------------------------------------------------------------
Shareholder information
Dividends
Ordinary dividends are paid in October (interim) and April. Shareholders who wish to have dividends paid directly into
a bank account rather than by cheque to their registered address can complete a mandate form for this purpose.
Mandates may be obtained form the Group's Registrar. Where dividends are paid directly to shareholders' bank accounts,
dividend vouchers are sent directly to shareholders' registered addresses.
Share Price
The Trust's Ordinary Shares are listed on the
London Stock Exchange.
Change of address
Communications with shareholders are mailed to the addresses held on the share register. In the event of a change of
address or other amendment, please notify the Trust's Registrar under the signature of the registered holder.
Financial calendar
31 December 2006 Financial year end
28 February 2007 Preliminary results announced
March 2007 Report and accounts published
23 April 2007 Dividend paid
30 April 2007 AGM
This information is provided by RNS
The company news service from the London Stock Exchange
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