Replacement Annual Financial Report

RNS Number : 9341C

Alpha Pyrenees Trust Limited

21 March 2014

ALPHA PYRENEES TRUST LIMITED

RNS Number : 2902C

The following amendment has been made to the 'Annual Financial Report' announcement released on 14 March 2014 at 07:00 under RNS No. 2902C.

One paragraph has been changed in the Directors' and corporate governance report: on the first page of the report, the penultimate paragraph under heading 'The Board', with regards to Directors to retire and submit themselves for re-election at the Annual General Meeting ('AGM'):

Serena Tremlett and Dick Kingston are due to retire and submit themselves for re-election by the shareholders at the upcoming AGM rather than David Rowlinson.

All other details remain unchanged.

14 March 2014

ALPHA PYRENEES TRUST LIMITED
("ALPHA PYRENEES TRUST" OR THE "TRUST" OR THE "COMPANY")

ALPHA PYRENEES TRUST POSTS RESULTS FOR THE YEAR ENDED 31 DECEMBER 2013:

CURRENCY HEDGE TERMINATED AND LIABILITY FINANCED

23,810 SQUARE METRES OF NEW LEASES AND LEASE EXTENSIONS

NET ASSET VALUE 22.8p PER SHARE (ADJUSTED)

Alpha Pyrenees Trust Limited, the property company investing primarily in commercial real estate in France, today posts its results for the year ended 31 December 2013.

The Trust announced adjusted earnings of £0.1 million for the year, representing adjusted earnings per share of 0.1p. The Trust does not currently propose to pay dividends.

Key points for the year to 31 December 2013 include:

· Currency hedge terminated and liability financed to February 2015

· New leases and lease extensions covering 23,810 square metres (9% of the Trust's portfolio by area) achieved since 1 January 2013

· Weighted average lease length of 7.9 years to expiry and 4.0 years to next break following lease extensions

· 83% of rental income derives from Grade A tenants

· 92% of the Trust's portfolio by value is in France; 83% is in the Paris region

· Current portfolio valuation yield of 8.2%

· NAV (adjusted) of 22.8p per share as at 31 December 2013 (31 December 2012: 34.0p)

· Adjusted earnings of £0.1 million for the twelve months to 31 December 2013 (adjusted earnings per share of 0.1p)

Dick Kingston, Chairman of Alpha Pyrenees Trust, commented:

"During the year, the Trust finalised a solution to the settlement of the currency hedge liability that was scheduled for repayment in October 2013. The Investment Manager has continued to focus on active asset management within the existing portfolio with particular emphasis on the extension of lease terms and the letting of vacant units to secure the Trust's income. The Board is pleased to note the important progress achieved on this front in the face of a challenging business climate that has created an environment where generally, the corporate decision making process has been extended and hence the leasing environment is characterised by longer periods to complete new leasing agreements. For the Trust, the reduction in earnings reflects this difficult leasing market."

Paul Cable, Fund Manager, Alpha Real Capital LLP, commented:

"The Trust owns a diversified portfolio of properties focused primarily on the French property market which represents 92% of the total portfolio by value with 83% by value located in the Ile-de-France region which remains one of Europe's most economically important and stable markets. Despite the challenging business environment, since 1 January 2013 new leases or lease extensions were achieved on 23,810 square metres representing around 9% of the portfolio by area and 83% of the Trust's current rent roll is secured by leases to Grade A tenants. The Investment Manager will continue to concentrate on active asset management and property management initiatives to secure the Trust's income and to investigate selective opportunities to add value within the Trust's portfolio."

Contact:

Dick Kingston
Chairman, Alpha Pyrenees Trust Limited
01481 231100

Paul Cable
Fund Manager, Alpha Real Capital LLP
020 7268 0300

For more information on the Trust please visit www.alphapyreneestrust.com.

For more information on the Trust's Investment Manager please visit www.alpharealcapital.com.

FORWARD-LOOKING STATEMENTS

These results contain forward-looking statements which are inherently subject to risks and uncertainties because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements are based on the Board's current view and information known to them at the date of this statement. The Board does not make any undertaking to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Nothing in these results should be construed as a profit forecast.

About the Trust

Objective

Alpha Pyrenees Trust Limited ("the Trust" or "the Company") primarily invests in higher-yielding properties in France, particularly in the Ile-de-France region around Paris, focusing on commercial property in the office, industrial, logistics and retail sectors let to tenants with strong covenants.

The Trust seeks to provide shareholders with regular earnings whilst also having the potential for capital growth in the long term from a combination of rent increases (leases are typically indexed to increase in line with inflation) and active asset management.

The Trust seeks to diversify risk by investing in a portfolio of properties spread across different property sectors with a variety of tenants.

Dividends

The Trust does not currently propose to pay dividends.

Listing

The Trust is a closed-ended Guernsey registered investment company which has been declared under the relevant legislation to be an Authorised Closed-Ended Collective Investment Scheme. Its shares are listed on the Official List of the UK Listing Authority and traded on the London Stock Exchange.

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/SIPP status

The Trust's shares are eligible for Individual Savings Accounts (ISAs) and Self Invested Personal Pensions (SIPPs).

Website

www.alphapyreneestrust.com

Financial highlights

	Year ending 31 December 2013	Half year ending 30 June 2013	Year ending 31 December 2012	Half year ending 30 June 2012
Net asset value (adjusted) (£'000)*	26,834	33,509	39,939	43,718
Net asset value per ordinary share (adjusted)*	22.8p	28.5p	34.0p	37.2p
Net asset value per ordinary share	12.7p	14.7p	17.5p	20.5p
Earnings per share (adjusted - basic & diluted)**	0.1p	0.2p	1.9p	1.1p
Earnings per share (basic & diluted)	(4.7)p	(2.3)p	2.2p	4.8p
Dividend per share (paid during the period)***	0.6p	0.6p	3.0p	2.4p

*The net asset value and net asset value per ordinary share have been adjusted for the fair value movement on revaluation of the interest component of the currency swap (up to maturity in October 2013 at which point this element unwound), the interest rate swap derivatives and 50% of the deferred tax provisions; full analysis is given in note 10 to the accounts.

**The adjusted earnings per share includes adjustments for the effect of the fair value mark-to-market revaluation of the properties, currency swap (settled in October 2013) and interest rate swap derivatives, deferred tax provisions, capital element of investment managers fee, rental guarantee income and foreign exchange gains and losses. A full analysis is given in note 9 to the accounts.

*** This includes dividends paid in relation to prior periods.

Chairman's Statement

During the period, the Trust concentrated on finalising a solution to the settlement of the currency hedge liability that was scheduled for repayment in October 2013 and the Investment Manager has continued to focus on active asset management within the existing portfolio with particular emphasis on the extension of lease terms and the letting of vacant units to secure the Trust's income. The Board is pleased to note the important progress achieved on this front. Since 1 January 2013 new leases or lease extensions were achieved on a total of 23,810 square metres representing around 9% of the portfolio by area. Further detail on asset management progress appears in the Property Review section. The Investment Manager is also investigating selective opportunities to add value within the Trust's portfolio.

Results and dividend

Results for the year show adjusted earnings of £0.1 million and adjusted earnings per share of 0.1p (note 9). The reduction in earnings reflects the difficult leasing market and the consequent level of vacancy that persists in the portfolio.

The challenging business climate has created an environment where generally the corporate decision making process has been extended and hence the leasing environment is characterised by longer periods to complete new leasing agreements. The Trust currently has vacant space with an estimated annual rental value of approximately £3.3 million (€3.9 million) and against this backdrop it is difficult to predict the timing and level of re-leasing that will be achieved. The Trust's earnings have also been constrained by the low interest earned on cash reserves (£5.9 million).

The Trust has not paid any dividends for the year to 31 December 2013 and does not currently propose to pay dividends.

Revaluation and Net Asset Value

Investment properties are included in the balance sheet at an independent valuation of £248.1 million (€297.2 million) providing an average valuation yield across the portfolio of 8.2% as at 31 December 2013. The next revaluation will take place as at 30 June 2014.

The portfolio totals approximately 262,100 square metres (approximately 2.8 million square feet) and many of the tenants are well known companies belonging to large groups with strong covenants such as: Alcatel-Lucent, Aldi, Aviva, BNP Paribas, Dia, Etanco, Furnotel, Husqvarna, Klöckner Group, La Poste, MediaMarkt, McDonalds, Norauto, OCP and Vinci Group. Grade A tenants also include government or quasi-government bodies and together the rent from such tenants accounts for 83% of the Trust's rental income.

The weighted average lease length within the portfolio is currently 7.9 years to expiry and 4.0 years to the next break.

As at 31 December 2013, the adjusted net asset value per ordinary share is 22.8p (31 December 2012: 34.0p per share) (note 10). The decrease in the year is primarily due to the revaluation of investment properties combined with adverse foreign currency movements.

Portfolio Summary

Country	Property	Sqm	Description	Valuation £m	Valuation €m
France	Villarceaux-Nozay	78,800	Business park	110.5	132.3
France	Aubervilliers	8,750	Offices	18.2	21.8
France	Goussainville	20,500	Warehouse and offices	12.3	14.8
France	Champs sur Marne	5,930	Offices	9.9	11.9
France	Aubergenville	27,700	Logistics	9.8	11.7
France	Athis Mons	23,280	Logistics with offices	9.4	11.3
France	St Cyr L'Ecole	6,340	Offices	8.1	9.8
France	Gennevilliers	3,330	Offices with light industrial	7.7	9.2
France	Mulhouse	5,250	Offices	7.6	9.1
France	Roissy-en-France	7,800	Offices and warehouse	7.0	8.4
France	Evreux	14,130	Logistics with offices	6.8	8.1
France	Nîmes	3,100	Offices and retail	6.7	8.1
France	Ivry-sur-Seine	7,420	Warehouse and offices	4.9	5.9
France	Fresnes	6,540	Warehouse and offices	4.8	5.7
France	Vitry-sur-Seine	5,180	Warehouse and offices	4.4	5.3
Spain	Córdoba	16,880	Retail park	13.8	16.5
Spain	Alcalá de Guadaíra	5,700	Shopping centre	2.4	2.9
Spain	Écija	5,950	Shopping centre	2.3	2.7
Spain	Zaragoza	9,520	Warehouses	1.5	1.7
Total		262,100		248.1	297.2

Finance

As previously reported, in November 2013 the Trust concluded an agreement with the currency hedge counterparty, Barclays Bank PLC (or "Barclays"), to finance the settlement of the net currency hedge liability until 10 February 2015, a date coterminus with the current borrowings, also provided by Barclays, which are secured against the Group's property portfolio.

The facility to finance the currency hedge liability is provided in the form of a Euro denominated loan of €25.0m. The Trust is permitted to repay the loan at any time after repayment of the existing secured borrowings. Interest is charged at a margin of 10% above three month Euribor and will be rolled up throughout the term. Barclays has been provided with a charge over the Trust's Nîmes property. A cash pooling arrangement over the Trust's cash flows from the whole property portfolio has been established to provide further security to the loan but still providing the Trust with working capital for its operations. No arrangement fees were incurred.

As part of the arrangements, the loan-to-value covenant on all the Trust's existing secured facilities of €242.4m has been waived.

Going forward the Trust does not currently propose to hedge its equity for movements in foreign currency. The Trust has a substantial natural hedge through the fact that its borrowings are denominated in the same currency as the majority of its assets.

As at 31 December 2013, the Trust has total borrowings of £223.2 million (€267.4 million) under its facilities with Barclays.

The key features of the Trust's borrowings are:

· No loan to value ("LTV") covenant test until maturity in February 2015 on any of the Trust's properties.

· 90% of borrowings have interest rates that are fixed to maturity at a weighted average rate of 5.26% per annum.

· 9% of borrowings have interest rates charged at a margin of 10% above three month Euribor.

· 1% of borrowings have interest rates charged at a margin of 2.65% above three month Euribor.

· Interest cover ratio ("ICR") covenant on the senior borrowings is set at 115% - the Trust's weighted average ICR over the six months to 31 December 2013 was 150%.

Market outlook

· Overall leasing activity in the French and Spanish markets has been subdued over the period reflecting economic conditions but despite this backdrop the Trust has achieved lease extensions and new leases on 23,810 square metres (9% of its portfolio) since 1 January 2013.

· Take-up in our principal occupational markets has been adversely affected by the difficult business climate. However, in the Paris region (Ile-de-France), where 83% of the Trust's portfolio is situated, office vacancy remains at relatively low levels and significant oversupply appears unlikely in the medium term.

· Valuation yields have been stable and investment confidence in our principal market continues.

Summary

· The Trust owns a diversified freehold portfolio of properties totalling £248.1 million (€297.2 million) with an average valuation yield of 8.2% at the December valuation.

· 83% of the Trust's rental income derives from Grade A tenants with a strong capacity to pay.

· The weighted average lease length within the portfolio has increased to 7.9 years to expiry and 4.0 years to the next break.

Dick Kingston
Chairman
13 March 2014

Property review

Portfolio overview

The Trust owns a portfolio of fifteen properties in France and four properties in Spain totalling approximately 262,100 square metres (approximately 2.8 million square feet) of commercial real estate. The properties are generally well let, well located and offer good value accommodation to occupiers. Of the total property portfolio, 92% is invested in France and 8% in Spain in terms of capital value.

The valuation of the portfolio as at 31 December 2013 was approximately £248.1 million (€297.2 million) giving an average valuation yield of 8.2% with the French portfolio producing an average valuation yield of 8.2% and the Spanish portfolio 8.6% respectively. The portfolio as a whole showed a valuation decrease of 2.3% on a Euro like-for-like basis compared to 31 December 2012. This consisted of a decrease of 2.0% in the French portfolio and a decrease of 6.5% in the Spanish portfolio. The average capital value of the portfolio is approximately £947 (€1,134) per square metre (equivalent to £88 per square foot) and the average rental value is approximately £80 (€96) per square metre per annum (equivalent to £7.4 per square foot). Of the overall portfolio, 83% by value is located within the Ile-de-France region around Paris. The portfolio has 68% exposure to the French office and business park sector of which 62% of the total portfolio is in the Ile-de-France region. The reinstatement cost of the portfolio buildings has been assessed at £258 million (€309 million) representing approximately 104% of current value.

The Trust's portfolio is diversified across business sectors with 68% in offices and business park property, 25% in warehouses and 7% in retail.

The portfolio benefits from strong credit tenants with 83% of its current rent roll secured by leases to Grade A tenants (large international/national companies or public sector). Examples of those categorised as Grade A are given in the Chairman's Statement.

The portfolio has an overall level of average occupancy of 84% (unchanged from 31 December 2012) measured by rental income as a percentage of potential total income with vacancy representing 16%.

The weighted average lease length within the portfolio is currently 7.9 years to expiry and 4.0 years to the next break. The top ten tenants by rental value provide 71% of passing rent and have a weighted average lease length of 8.0 years to expiry and 4.9 years to next break.

Asset management review

The Investment Manager maintains close contact with the Trust's tenants to understand their needs and wherever possible to produce solutions which deliver value to both the tenants and investors. We constantly seek to maintain and, where possible, improve the income from each of the Trust's assets and look for opportunities to create income through value-adding refurbishment, extension and reconfiguration.

Over the period we have continued to concentrate on active asset management and property management initiatives to secure the Trust's income and we are pleased to report a number of important achievements since 1 January 2013 in the following areas:

· extending the lease maturity profile of the property portfolio through lease extensions and

· letting of vacant units.

The Investment Manager remains vigilant to ensuring service charges are controlled, the annual level of property costs is closely monitored and additional sources of income are identified.

Since 1 January 2013, new leases and lease extensions covering approximately 23,810 square metres (9% of the Trust's portfolio by area) have been achieved. As detailed in the half year report, new leases and lease extensions covered a total of approximately 16,580 square metres. Since the half year report, new leases and lease extensions covering approximately 7,230 square metres have been completed and these are detailed below.

FRANCE

Vitry - existing tenant, Mediapost extended their lease until March 2017 on their light industrial unit of 895 square metres and a new 3/6/9 year lease from October 2013 was signed with SG Aixin, a painting and decorating company, on a 350 square metre light industrial.

Mulhouse - Eiffage, a leading construction company, agreed a new 3/6/9 year lease on 560 square metres of vacant offices from June 2014 with a break option at the end of the second year and Randstad, a global employment agency, have taken a new 3/6/9 year lease from March 2014 on 390 square metres of vacant offices.

Ivry - JC Decaux the leading outdoor advertising company, has taken a lease to December 2014 on a vacant warehouse unit of 1,190 square metres.

SPAIN

Cordoba - existing tenants, Elefante Azul, McDonalds and Jugetilandia have extended their leases to December 2014, January 2015 and February 2015 respectively on retail units totalling 2,040 square metres.

Alcala - existing tenant Aldi has extended their lease to October 2015 on a 1,225 square metre supermarket unit and Bon Sabor a specialist meat supermarket has signed a new 10 year lease with 2 year rolling break options on a vacant unit of 580 square metres.

Market overview

France

The French economy remained broadly flat in 2013 with little or no growth in gross domestic product. Manufacturing output was 0.9% higher year-on-year. The unemployment rate for mainland France has risen to 10.5% and linked to this and the wider economic context, household spending remains muted. Inflation has moderated further with the growth rate of the Consumer Prices Index standing at 0.7% per annum at the end of December 2013. The economy is expected to remain generally subdued in 2014.

Against this challenging economic background, the investment market remained robust with approximately €15.5 billion invested in commercial real estate in France over the course of 2013 compared to €14.5 billion in 2012. Traditional French investors represented approximately 60% of the market with the next largest group being North American investors representing 12%. Office investment remained the highest volume sector and accounted for €10.4 billion representing 67% of total investment in France. Logistics and industrial investment increased to total €1.5 billion, an increase of 14% on 2012.

Of the Trust's total property portfolio, 92% is in France, 83% is in the Ile-de-France and 62% is in Ile-de-France office and business park space.

The Economy of Ile-de-France

Paris and the surrounding region, better known as Ile-de-France, accounts for about a fifth of the French population but contributes nearly one third of French GDP. It is one of the main players in the global economy and is the largest European region by GDP. By population the Ile-de-France metropolis ranks twentieth globally, but ranked by GDP it is the fifth major metropolis in the world after the metropolitan areas of Tokyo, Greater New York, Los Angeles and Osaka.

In Europe, the only city that can compare to Paris is London and taking the wider metropolitan areas these two regions can be considered broadly similar in GDP terms. However it should be noted that the GDP of these two metropolitan areas far exceeds those of all other European cities, whether considering the Dutch Randstad, the conurbation Rhine-Ruhr and Rhine-Main, Brussels or Berlin.

With over 5.3 million jobs, Ile-de-France holds a prominent place in the national economy and many national and international companies have their headquarters in the region because of its high quality as a business location. The Ile-de-France has the world's third largest concentration of Fortune 500 head offices.

The Ile-de-France economy remains extremely diverse compared to other cities of its size with a large industrial base and one of the most important agricultural areas in France as well as being a pre-eminent global tourist destination.

Its economy is more diversified than London (with its emphasis on financial markets) or Los Angeles (film and entertainment) and Paris is not overly dependent on any one sector. Even categorizing Ile-de-France as predominantly a services-based economy, its industrial base which accounts for 16% of the region's GDP, remains very important as the region is a major European production centre, which has preserved its competitiveness by increasing its proportion of investment in research and development where it ranks as Europe's number one region for R&D expenditure and personnel. All of these activities are supported by an integrated freight and transport network.

Office take-up in the Ile-de-France for 2013 was affected by the poor economic climate and unclear business outlook. In this environment companies have been reluctant to commit to new premises and many have postponed plans to move, instead opting to renegotiate leases with existing landlords. Take-up reached close to 1.85 million square metres, a decline of about 25% over the previous year. However, take up in the fourth quarter of 2013 was the most active for the year and at just over 0.5 million square metres was 15% higher than the preceding quarter. The most active business sectors were the industrial sector (23% of take-up by volume), the finance and insurance sector (19%) the public sector (12%) and the legal and consultancy sector (11%) together accounting for 65% of the total take-up in 2013.

The average office rent in Ile-de-France was broadly stable over the year at €294 per square metre per annum. The office vacancy rate for the Paris region remains low but increased slightly to 7%. On the supply side there will be little speculative development due to the difficulty in finding finance and the risks associated with the current market conditions.

National take-up in the logistics sector reached approximately 2.6 million square metres in 2013, which was 19% above the level in 2012. The largest share of transaction volume took place in Ile-de-France with take-up of 0.5 million square metres, a similar volume to 2012, representing just under 20% of national take-up.

Spain

Gross domestic product contracted by 0.1% overall in 2013. However, in recent quarters there have been more encouraging signs of growth. In Q3 and Q4 2013 gross domestic product showed quarter-on-quarter growth rates of 0.1% and 0.3% respectively and these represented the first quarterly growth rates since Q1 2011. The government's efforts to reform the labour market appear to be starting to have an effect with the unemployment rate having decreased 1% from Q2 2013 to stand at 26% in the fourth quarter of 2013. The near term outlook for the Spanish economy remains subdued.

Rental indexation

After thirteen consecutive quarters of annualised growth, the INSEE Construction Cost Index, applicable to the Trust's leases in France, turned negative as at Q2 2013 (-1.74%) and the annual indexation base as at Q3 2013 stood at -2.18%. The Spanish Consumer Price Index, applicable to the Trust's leases in Spain, was running at an annualised rate of increase of 0.3% as at the end of December 2013.

Paul Cable
For and on behalf of the Investment Manager
13 March 2014

Directors

Dick Kingston (aged 66)

Chairman

Dick Kingston qualified as a Chartered Accountant and was, until December 2006, an executive director of Slough Estates Plc (now SEGRO Plc) ("Slough"), one of the largest London Stock Exchange listed property companies. He was chairman of their continental European real estate activities for his last three years at Slough and Group Finance Director there for nine years up to December 2005. Previously he was Group Financial Controller at Slough for nine years and prior to that was responsible for group financial control at Hawker Siddeley Group.

He was non-executive chairman of listed company Sirius Real Estate Limited and was a non-executive director of Mersey Docks and Harbour Company.

David Rowlinson (aged 51)

Director

David has 30 years' experience in the financial services industry. The majority of David's experience has been gained from working in the fiduciary sector in Guernsey. However, he has also worked in Gibraltar and Switzerland and served in a key role working for an investment management company in Guernsey.

After playing a major part in establishing a large trust company in Guernsey in 1997 which he left in June 2006, David established Liberation Management Limited ("LML") in 2007. David is the Managing Director of LML.

David has been a full member of The Society of Trust and Estate Practitioners since 1994.

David Jeffreys (aged 54)

Director

David Jeffreys qualified as a Chartered Accountant with Deloitte Haskins and Sells in 1985. He works as an independent non-executive director to a number of Guernsey based investment fund companies and managers and is a Guernsey resident.

From 2007 until 2009 David was the Managing Director of EQT Funds Management Limited, the Guernsey management office of the EQT group of private equity funds. He was previously the Managing Director of Abacus Fund Managers (Guernsey) Limited between 1993 and 2004, a third party administration service provider to primarily corporate and fund clients.

In addition to the Company, David is a director of the following listed companies: Alpha Real Trust Limited, Ingenious Media Active Capital Limited, PFB Data Centre Fund Limited and Tetragon Financial Group Limited.

Phillip Rose (aged 54)

Director

Phillip Rose is a Fellow of the Securities Institute and holds a Master of Law degree. He has over 30 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 retail and commercial property developer and investor Lend Lease Global Investment and Executive Manager of listed fund General Property Trust.

Phillip is currently CEO of Alpha Real Capital LLP and is a member of the Management Committee of the Hermes Property Unit Trust and its Audit Committee.

Serena Tremlett (aged 49)

Director

Serena has over 25 years' experience in financial services, specialising in closed-ended property and private equity funds and fund administration over the last 17 years.

She is a non-executive director on the listed company boards of Alpha Pyrenees Trust, Alpha Real Trust, Ingenious Media Active Capital and those of Stenham Property, in addition to various unlisted property and private funds and general partners. Serena was previously company secretary (and a director) of Assura Group, at that time a FTSE 250 company listed on the London Stock Exchange, investing in primary healthcare property and ran Assura's Guernsey head office.

Prior to working for Assura, Serena was head of Guernsey property funds at Mourant International Finance Administration (now State Street) for two years and worked for Guernsey International Fund Managers (now Northern Trust) for seven years where she sat on a number of listed and unlisted fund boards. Since 2008, Serena is co-founder and managing director of Morgan Sharpe Administration, a specialist closed-ended fund administrator.

Directors' and corporate governance report

The Directors present their report and financial statements of the Company and the Group for the year ended 31 December 2013.

Principal activities and status

Since its incorporation on 16 November 2005, the Company, an authorised closed-ended Guernsey registered investment company, has carried on the business of a property investment company, investing in commercial property in France and Spain.

Its shares are listed on the Official List of the UK Listing Authority and have been traded on the London Stock Exchange since 29 November 2005.

Business review, results and dividends

The Chairman's statement contains a review of the Group's business for the year.

The results for the year are set out in the financial statements.

One dividend has been paid during the year under review as follows:

	Payment date	Amount per share
Third interim for the prior year	7 January 2013	0.6p

The Trust does not currently propose to pay further dividends.

Corporate governance

The Company is authorised by the Guernsey Financial Services Commission ('GFSC') and for this reason is required to follow the principles and guidance set out in the Finance Sector Code of Corporate Governance issued by the GFSC and effective from 1 January 2012 ('Guernsey Code').

As a Guernsey registered company, the Company is not required to comply with The UK Corporate Governance Code ('UK Code'). However, the Directors do take into consideration the UK Code in determining its governance procedures whilst also taking into account the size of the Company, the nature of its business and its entirely non-executive board.

The Board

Biographies of the Directors are set out above.

The Directors' interests in shares of the Company as at 31 December 2013 are set out below and there have been no changes in such interests up to the current date:

	Number of ordinary shares 2013	Number of ordinary shares 2012
Dick Kingston	710,616	199,125
David Jeffreys	250,000	250,000
Phillip Rose	1,290,079	1,290,079
David Rowlinson	-	-
Serena Tremlett	121,472	23,486

Non-executive Directors are not appointed for specified terms. However, appointments of Board members can be terminated at any time without penalty and the Company's Articles of Association ("Articles") require each Director to retire and submit himself/herself to re-election by the shareholders at every third year. In addition, the Board believes that continuity and experience adds to its strength.

The Annual General Meeting of the Company will take place on 25 April 2014. At this meeting, Phillip Rose, Serena Tremlett and Dick Kingston will retire and submit themselves for re-election. The remainder of the Board recommend their re-appointment. Phillip Rose is a member of the Investment Manager and, under the terms of the Company's Prospectus dated 23 November 2005, submits himself for annual re-election.

Individual Directors may seek independent legal advice in relation to their duties on behalf of the Company.

Senior Independent Director

The Board has appointed David Jeffreys as its Senior Independent Director and has agreed that he will be available for discussions with shareholders independently of his peers, to the extent appropriate.

Operations of the Board

The Board's primary role is to review matters which are of strategic importance to the Company, including the following:

1) Setting, and continuing to review, the objectives and strategy of the Company, taking into account market conditions.

2) Reviewing the capital structure of the Company including gearing.

3) Appointing the Investment Manager, administrator and other appropriately skilled service providers; monitoring their effectiveness and performance through regular reports and meetings.

4) Reviewing the Company's performance including net asset value, earnings per share and payment of dividends.

The Board considers these matters at its quarterly meetings and at an additional annual strategy session.

The Board meets at least four times per annum and on an ad-hoc basis to consider specific issues reserved for decision by the Board including all potential acquisitions and disposals, significant capital expenditure and leasing matters and decisions relating to the Company's financial gearing.

Certain matters relating to the implementation of strategy are delegated either to the Investment Manager or the administrator but the performance of such delegation by these independent agents is regularly monitored by the Board.

At the Board's quarterly meetings it considers papers circulated in advance including reports provided by the Investment Manager and the administrator in its capacity as Company Secretary. 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 a quarterly compliance, company secretarial and regulatory report.

Together, these reports enable the Board to assess the success with which the Group's strategy is being implemented, consider any relevant risks (such as the general economic climate) and to consider how they should be properly managed.

Board and Director appraisals

The Board carries out an annual review of its composition and performance (including the performance of individual Directors) and that of its standing committees. Such appraisal includes reviewing the performance and composition of the Board (and whether it has an appropriate mix of knowledge, skills and experience), the relationships between the Board and the Investment Manager and administrator, the processes in place and the information provided to the Board and communication between Board members.

Board meeting attendance

The table below shows the attendance at quarterly Board meetings during the year to 31 December 2013:

Director	No of meetings attended	No of meetings eligible to attend
Dick Kingston	8	12
David Jeffreys	11	12
Phillip Rose	4	12
David Rowlinson	8	12
Serena Tremlett	12	12

Directors' and officers' insurance

An appropriate level of Directors' and Officers' insurance is maintained whereby Directors are indemnified against liabilities to third parties to the extent permitted by Guernsey company law.

Board Committees

The Board has established three standing committees, all of which operate under detailed terms of reference, copies of which are available on request from the Company Secretary.

Audit Committee

The Audit Committee consists of David Jeffreys (Chairman), Dick Kingston, David Rowlinson and Serena Tremlett. The Board is satisfied that David Jeffreys continues to have the requisite recent and relevant financial experience to fulfil his role as Chairman of the Audit Committee.

Role of the Committee

The role of the Audit Committee, which meets at least twice a year, includes:

· The engagement, review of the work carried out by and the performance of the Company's external auditor.

· To monitor and review the independence, objectivity and effectiveness of the external auditor.

· To develop and apply a policy for the engagement of the external audit firm to provide non-audit services.

· To assist the Board in discharging its duty to ensure that financial statements comply with all legal requirements.

· To review the Company's financial reporting and internal control policies and to ensure that the procedures for the identification, assessment and reporting of risks are adequate.

· To review regularly the need for an internal audit function.

· To monitor the integrity of the Company's financial statements, including its annual and half year reports and announcements relating to its financial performance, reviewing the significant financial reporting issues and judgements which they contain.

· To review the consistency of accounting policies and practices.

· To review and challenge where necessary the financial results of the Company before submission to the Board.

The Audit Committee makes recommendations to the Board which are within its terms of reference and considers any other matters as the Board may from time to time refer to it.

Committee meeting attendance

Director	No of meetings attended	No of meetings eligible to attend
David Jeffreys	4	4
Dick Kingston	3	4
David Rowlinson	2	4
Serena Tremlett	4	4

Policy for non audit services

The Committee has adopted a policy for the provision of non-audit services by its external auditor, BDO Limited and reviews and approves all material non-audit related services in accordance with the need to ensure the independence and objectivity of the external auditor. No services, other than audit-related ones, were carried out by BDO Limited during 2013.

Internal audit

The Board relies upon the systems and procedures employed by the Investment Manager and the administrator which are regularly reviewed and are considered to be sufficient to provide it with the required degree of comfort. Resulting from this and the fact that the Group only has one employee, the Board continues to believe that there is no need for an internal audit function, although the Audit Committee considers this annually, reporting its findings to the Board.

Nomination Committee

The Nomination Committee consists of Serena Tremlett (Chairman), David Jeffreys, Dick Kingston, Phillip Rose and David Rowlinson.

The Committee's principal task is to review the structure, size and composition of the Board in relation to its size and position in the market and to make recommendations to fill Board vacancies as they arise and it meets at least annually.

Committee meeting attendance

Director	No of meetings attended	No of meetings eligible to attend
Serena Tremlett	1	1
David Jeffreys	1	1
Dick Kingston	1	1
Phillip Rose	1	1
David Rowlinson	-	1

Remuneration Committee and attendance

The Remuneration Committee consists of the independent non-executive Directors being David Jeffreys (Chairman), Dick Kingston, David Rowlinson and Serena Tremlett.

The Board has approved formal terms of reference for the Committee and a copy of these is available on request from the Company Secretary.

As the Company comprises only non-executive directors, the Committee's main role is to determine their remuneration within the cap set out in the Company's Articles. The Remuneration Committee met once during 2013.

Remuneration report

The aggregate fees payable to the Directors are limited to £200,000 per annum under the Company's Articles and the annual fees payable to each Director have not changed since the Company's shares were listed in 2005. The fees payable to the Directors are expected to reflect their expertise, responsibilities and time spent on the business of the Company, taking into account market equivalents, the activities and the size of the Company and market conditions. Under their respective appointment letters, each director is entitled to an annual fee together with a provision for reimbursement for any reasonable out of pocket expenses.

During the year the Directors received the following emoluments in the form of fees from the Company:

	Year ending 31 December 2013 £	Year ending 31 December 2012 £
Dick Kingston	30,000	30,000
Christopher Bennett	-	12,554
David Jeffreys	23,000	23,000
Phillip Rose	20,000	20,000
David Rowlinson	20,000	13,333
Serena Tremlett	20,000	20,000
Total	113,000	118,887

Internal control and risk management

The Board understands its responsibility for ensuring that there are sufficient, appropriate and effective systems, procedures, policies and processes for internal control of financial, operational, compliance and risk management matters in place in order to manage the risks which are an inherent part of business. Such risks are managed rather than eliminated in order to permit the Company to meet its financial and other objectives.

As the Company has only one employee, the Board reviews the internal procedures of both its Investment Manager and its administrator upon which it is reliant. The Investment Manager has a schedule of matters which have been delegated to it by the Board and upon which it reports to the Board on a quarterly basis. These matters include quarterly management accounts and reporting both against key financial performance indicators and its peer group. Further, a compliance report is produced by the administrator for the Board on a quarterly basis.

The Company maintains a risk management framework which considers the non-financial as well as financial risks and this is reviewed by the Audit Committee prior to submission to the Board.

Investment management agreement

The Company has 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. The Investment Manager is also responsible to the Board for all issues relating to property asset management.

Substantial shareholding

Shareholders with holdings of more than 3 per cent of the issued ordinary shares of the Company as at 20 February 2014 were as follows:

Name of investor	No. of ordinary shares	% held
Antler Investment Holdings Limited	21,437,393	18.22
Alpha Real Capital LLP	9,400,000	7.99
Hargreaves Lansdown Asset Management	7,525,014	6.40
Barclays Wealth Management (UK)	6,586,766	5.60
TD Direct Investing	5,912,497	5.03
Mrs Rosemary J. Skelley	5,857,607	4.98
Investec Wealth & Investment	4,400,618	3.74

On 28 February 2014, the Company announced that Mr Richard Peskin reached a 5.10% shareholding (6,000,000 ordinary shares).

Shareholder relations

The Board places high importance on its relationship with its shareholders, with members of the Investment Manager's Investment Committee making themselves available for meetings with key shareholders and sector analysts. Reporting of these meetings and market commentary is received by the Board on a quarterly basis to ensure that shareholder communication fulfils the needs of being useful, timely and effective. One or more members of the Board and the Investment Manager will be available at the Annual General Meeting to answer any questions that shareholders attending may wish to raise.

Directors' Responsibilities 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 year.

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 Company and Group will not continue in business.

So far as each of the Directors are aware, there is no relevant information of which the Company's auditor is unaware, and they have taken all the steps they ought to have taken as Directors to make themselves aware of any relevant information and to establish that the Company's auditor is aware of that information.

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, 2008. They are also responsible for safeguarding the assets of the Company and Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors confirm that they have complied with the above requirements in preparing the financial statements.

Going concern

The Group's existing borrowing facilities with Barclays Bank PLC terminate on 10 February 2015 and this represents a significant medium-term liability. This creates a material uncertainty that could cast significant doubt about the Group and Company's ability to continue as a going concern. However, whilst recognising this uncertainty, the Board has a reasonable expectation that a combination of realising equity in selective asset sales, combined with the potential availability of alternative financing options, will support the settlement of the bank borrowings as they mature in February 2015. Therefore, the Board believes it is appropriate to continue to prepare the Group and Company financial statements on a going concern basis.

Annual General Meeting

The AGM will be held in Guernsey at 9 a.m. on 25 April 2014 at Old Bank Chambers, La Grande Rue, St Martin's, Guernsey. The meeting will be held to receive the Annual Report and Financial Statements, re-elect Directors and propose the reappointment of the auditor and that the Directors be authorised to determine the auditor's remuneration.

Auditor

BDO Limited has expressed its willingness to continue in office as auditor of the Company.

By order of the Board,

David Jeffreys Serena Tremlett

Director Director

Directors' statement pursuant to the Disclosure and Transparency Rules

Each of the Directors, whose names and functions are listed in the Directors Report confirm that, to the best of each person's knowledge and belief:

· The financial statements, prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group and Company, and

· The Chairman's Statement and the Property Review includes a fair review of the development and performance of the business and the position of the Company and Group and note 21 to the financial statements provides a description of the principal risks and uncertainties that they face.

By order of the Board,

David Jeffreys Serena Tremlett

Director Director

Corporate responsibility - benefits, risks and controls

The Board has reviewed the Company's Corporate Responsibility Policy and considers this to be appropriate for the Company. The Company's policy is as follows:

Alpha Pyrenees is committed to delivering sustainable investment returns in a way that delivers positive environmental, social and economic benefits. The Company recognises that the way in which buildings are designed, built, managed and occupied, significantly influences their impact on the environment and affected communities and it seeks to manage these issues.

The Company believes that through the implementation of socially responsible policies the Company can manage effectively our sustainability related risks, associated with, for example, climate change (more severe and regular floods, increasing storm damage costs and rising energy prices), site contamination and remediation, use of hazardous materials, waste management (rising landfill and disposal costs) and local community relations.

The Company's standard business process ensures that appropriate environmental reports are obtained as part of the due diligence process for property acquisitions and the Company assesses the accessibility of each property acquisition to public transportation.

The Company's managers and appointed agents are required to comply with all relevant laws and regulations affecting the Company's business, and managers are expected to be aware of the environmental issues associated with property investment including environmental health and safety legislation, energy use, pollution and waste management.

Independent auditors' report

To the members of Alpha Pyrenees Trust Limited

We have audited the financial statements of Alpha Pyrenees Trust Limited for the year ended 31 December 2013 which comprise the Group and Parent Company Balance Sheets, the Group and Parent Company Statements of Comprehensive Income, the Group and Parent Company Statements of Cash Flows, the Group and Parent Company Statements of Changes in Equity and the related notes 1 to 22. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

This report is made solely to the Company's members, as a body, in accordance with Section 262 of the Companies (Guernsey) Law, 2008. Our audit work is undertaken so that we might state to the Parent Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Parent Company and the Parent Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of the directors and auditor

As explained more fully in the Directors' Responsibilities Statement within the Directors' Report, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council's (FRC's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's and Parent Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non‑financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent misstatements or inconsistencies we consider the implications for our report.

Opinion on the financial statements

In our opinion the financial statements:

· give a true and fair view of the state of the Group's and of the Parent Company's affairs as at 31 December 2013 and of the Group's loss and the Parent Company's loss for the year then ended;

· have been properly prepared in accordance with IFRSs as adopted by the European Union; and

· have been properly prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.

Emphasis of matter

In forming our opinion on the financial statements, which is not qualified, we have considered the adequacy of the disclosures made in note 2 to the financial statements concerning the Group and Company's ability to continue as a going concern.

As disclosed in note 2 the Group's borrowings are due for repayment on 10 February 2015. Should the strategy of realising equity in selective asset sales, combined with the potential availability of alternative financing options not be completed as planned, then the Group would require continued financing facilities beyond that date. This indicates the existence of a material uncertainty which may cast doubt about the Group and Company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group and Company were unable to continue as a going concern.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:

· proper accounting records have not been kept by the Parent Company; or

· the financial statements are not in agreement with the accounting records; or

· we have failed to obtain all the information and explanations, which, to the best of our knowledge and belief, are necessary for the purposes of our audit.

.......................................................

Richard Michael Searle FCA

For and on behalf of BDO Limited

Chartered Accountants and Recognised Auditor

Place du Pré

Rue du Pré

St Peter Port

Guernsey

Date: 13 March 2014

Consolidated statement of comprehensive income

		For the year ended 31 December 2013			For the year ended 31 December 2012
	Notes	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000

Income
Revenue	3	22,699	-	22,699	22,909	-	22,909
Property operating expenses		(6,502)	-	(6,502)	(6,143)	-	(6,143)
Net rental income		16,197	-	16,197	16,766	-	16,766

Expenses
Net change in losses on revaluation of investment properties	12	-	(6,934)	(6,934)	-	(1,366)	(1,366)
Investment Manager's fee		(1,933)	(828)	(2,761)	(1,879)	(805)	(2,684)
Other administration costs	5	(1,229)	-	(1,229)	(1,316)	-	(1,316)

Operating profit/(loss)		13,035	(7,762)	5,273	13,571	(2,171)	11,400

Finance income	4	23	8,778	8,801	88	8,146	8,234
Finance costs	6	(12,933)	(5,444)	(18,377)	(11,461)	(862)	(12,323)

Profit/(loss) before taxation		125	(4,428)	(4,303)	2,198	5,113	7,311

Taxation	7	-	(1,273)	(1,273)	-	(4,714)	(4,714)

Profit/(loss) for the year		125	(5,701)	(5,576)	2,198	399	2,597

Other comprehensive income
Foreign exchange gains/(losses) on translation of foreign operations (translation reserve)		-	680	680	-	(289)	(289)

Other comprehensive income/(expense) for the year		-	680	680	-	(289)	(289)

Total comprehensive income/(expense) for the year		125	(5,021)	(4,896)	2,198	110	2,308

Earnings per share - basic & diluted	9			(4.7)p			2.2p

Adjusted earnings per share - basic & diluted	9			0.1p			1.9p

The total column of this statement represents the Group's statement of comprehensive income, 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. All income is attributable to the equity holders of the parent company. There are no non-controlling interests.

The accompanying notes are an integral part of the financial statements.

Consolidated balance sheet

As at 31 December 2013	Notes	2013 £'000	2012 £'000

Non-current assets
Investment properties	12	236,920	249,043
		236,920	249,043
Current assets
Assets held for sale	13	11,194	-
Trade and other receivables	14	4,244	11,832
Cash and cash equivalents		5,923	8,400
		21,361	20,232
Total assets		258,281	269,275

Current liabilities
Trade and other payables	15	(2,810)	(2,350)
Financial liabilities at fair value through profit or loss	21	-	(23,809)
Bank borrowings	16	(1,707)	(1,459)
Rent deposits		(1,057)	(905)
		(5,574)	(28,523)

Total assets less current liabilities		252,707	240,752

Non-current liabilities
Financial liabilities at fair value through profit or loss	21	(8,825)	(16,683)
Bank borrowings	16	(221,745)	(197,393)
Rent deposits		(1,094)	(1,386)
Deferred taxation	7	(6,069)	(4,714)
		(237,733)	(220,176)
Total liabilities		(243,307)	(248,699)

Net assets		14,974	20,576

Equity
Share capital	17	-	-
Special reserve	18	113,131	113,131
Translation reserve	18	22,728	22,048
Capital reserve	18	(122,146)	(116,445)
Revenue reserve	18	1,261	1,842

Total equity		14,974	20,576

Net asset value per share	10	12.7p	17.5p
Net asset value per share (adjusted)	10	22.8p	34.0p

The financial statements were approved by the Board of Directors and authorised for issue on 13 March 2014. They were signed on its behalf by:

David Jeffreys Serena Tremlett

Director Director

The accompanying notes are an integral part of the financial statements.

Consolidated cash flow statement

	For the year ended 31 December 2013 £'000	For the year ended 31 December 2012 £'000

Operating activities
(Loss)/profit for the year	(5,576)	2,597

Adjustments for :
Net change in losses on revaluation of investment properties	6,934	1,366
Deferred taxation	1,273	4,714
Finance income	(8,801)	(8,234)
Finance costs	18,377	12,323

Operating cash flows before movements in working capital	12,207	12,766

Movements in working capital:
Increase/(decrease) in operating trade and other receivables	176	(85)
Decrease in operating trade and other payables	(192)	(1,315)

Cash generated from operations	12,191	11,366

Interest received	18	92
Currency swap interest paid	(787)	(361)
Bank loan interest paid and costs	(11,204)	(10,586)
Taxation	-	-

Cash flows from operating activities	218	511

Investing activities
Capital expenditure	(945)	(1,277)
Tenant incentive contribution	-	(1,207)

Cash flows used in investing activities	(945)	(2,484)

Financing activities
Currency swap collateral received	8,530	1,587
Loan advanced net of arrangement costs	20,354	-
Currency swap settlement	(29,525)	-
Repayment of borrowings	(250)	(278)
Dividends paid	(706)	(3,529)

Cash flows used in financing activities	(1,597)	(2,220)

Net decrease in cash and cash equivalents	(2,324)	(4,193)

Cash and cash equivalents at beginning of year	8,400	12,773
Exchange translation movement	(153)	(180)

Cash and cash equivalents at end of year	5,923	8,400

The accompanying notes are an integral part of the financial statements.

Consolidated statement of changes in equity

For the year ended 31 December 2012	Share capital £'000	Special reserve £'000	Translation reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total equity £'000

At 1 January 2012	-	113,131	22,337	(116,844)	3,173	21,797

Total comprehensive (expense)/income for the year	-	-	(289)	399	2,198	2,308
Dividends	-	-	-	-	(3,529)	(3,529)

At 31 December 2012	-	113,131	22,048	(116,445)	1,842	20,576

Note 17, 18

For the year ended 31 December 2013	Share capital £'000	Special reserve £'000	Translation reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total equity £'000

At 1 January 2013	-	113,131	22,048	(116,445)	1,842	20,576

Total comprehensive income/(expense) for the year	-	-	680	(5,701)	125	(4,896)
Dividends	-	-	-	-	(706)	(706)

At 31 December 2013	-	113,131	22,728	(122,146)	1,261	14,974

Note 17, 18

The accompanying notes are an integral part of the financial statements.

Company statement of comprehensive income

	Notes	For the year ended 31 December 2013			For the year ended 31 December 2012
	Notes	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000

Income
Revenue	3	8,515	-	8,515	8,139	-	8,139
Total income		8,515	-	8,515	8,139	-	8,139

Expenses
Investment Manager's fee		(661)	(283)	(944)	(619)	(265)	(884)
Other administration costs	5	(422)	-	(422)	(472)	-	(472)
Total expenses		(1,083)	(283)	(1,366)	(1,091)	(265)	(1,356)

Operating profit/(loss)		7,432	(283)	7,149	7,048	(265)	6,783

Finance income	4	17	2,504	2,521	65	-	65
Finance costs	6	(2)	-	(2)	(2)	(3,305)	(3,307)
Movement in impairment of amounts receivable from subsidiary undertakings	21	-	(14,564)	(14,564)	-	(1,233)	(1,233)

Profit/(loss) before taxation		7,447	(12,343)	(4,896)	7,111	(4,803)	2,308

Taxation	7	-	-	-	-	-	-

Profit/(loss) for the year		7,447	(12,343)	(4,896)	7,111	(4,803)	2,308

Other comprehensive income
Other comprehensive income for the year		-	-	-	-	-	-

Total comprehensive income/(expense) for the year		7,447	(12,343)	(4,896)	7,111	(4,803)	2,308

The total column of this statement represents the Company's statement of comprehensive income, 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 the financial statements.

Company balance sheet

As at 31 December 2013	Notes	2013 £'000	2012 £'000

Non-current assets
Investments in subsidiary undertakings	11	141	141
Amounts receivable from subsidiary undertakings	11	8,023	10,727
		8,164	10,868

Current assets
Trade and other receivables	14	6	18
Amounts receivable from subsidiary undertakings	11	3,574	3,858
Cash and cash equivalents		3,565	6,128
		7,145	10,004

Total assets		15,309	20,872

Current liabilities
Trade and other payables	15	(335)	(296)

Total liabilities		(335)	(296)

Net assets		14,974	20,576

Equity
Share capital	17	-	-
Special reserve	18	113,131	113,131
Capital reserve	18	(118,282)	(105,939)
Revenue reserve	18	20,125	13,384

Total equity		14,974	20,576

The financial statements were approved by the Board of Directors and authorised for issue on 13 March 2014. They were signed on its behalf by:

David Jeffreys Serena Tremlett

Director Director

The accompanying notes are an integral part of the financial statements.

Company cash flow statement

	For the year ended 31 December 2013 £'000	For the year ended 31 December 2012 £'000

Cash flows from operating activities

(Loss)/profit for the year	(4,896)	2,308

Adjustments for :
Finance costs	2	3,307
Finance income	(2,521)	(65)
Interest from subsidiary undertakings	(8,515)	(8,139)
Movement in impairment of amounts receivable from subsidiary undertakings	14,564	1,233

Operating cash flows before movements in working capital	(1,366)	(1,356)

Decrease/(increase) in operating trade and other receivables	12	(18)
Increase in operating trade and other payables	39	5

Cash used in operations	(1,315)	(1,369)

Interest paid	(2)	(2)
Interest received	369	1,308
Taxation	-	-

Cash flows used in operating activities	(948)	(63)

Investing activities
Loans (advanced)/repaid	(778)	980

Cash flows (used in)/from investing activities	(778)	980

Financing activities
Dividend payments	(706)	(3,529)

Cash flows used in financing activities	(706)	(3,529)

Net decrease in cash and cash equivalents	(2,432)	(2,612)

Cash and cash equivalents at beginning of year	6,128	8,893
Exchange translation movement	(131)	(153)

Cash and cash equivalents at end of year	3,565	6,128

The accompanying notes are an integral part of the financial statements.

Company statement of changes in equity

For the year ended 31 December 2012	Share capital £'000	Special reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total equity £'000

At 1 January 2012	-	113,131	(101,136)	9,802	21,797

Total comprehensive income/(expense) for the year	-	-	(4,803)	7,111	2,308
Dividends	-	-	-	(3,529)	(3,529)

At 31 December 2012	-	113,131	(105,939)	13,384	20,576

Note 17, 18

For the year ended 31 December 2013	Share capital £'000	Special reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total equity £'000

At 1 January 2013	-	113,131	(105,939)	13,384	20,576

Total comprehensive income/(expense) for the year	-	-	(12,343)	7,447	(4,896)
Dividends	-	-	-	(706)	(706)

At 31 December 2013	-	113,131	(118,282)	20,125	14,974

Note 17, 18

The accompanying notes are an integral part of the financial statements.

1. General information

The Company is a limited liability, closed-ended investment company incorporated in Guernsey. The address of the registered office is given below. The nature of the Group's operations and its principal activities are set out in the Chairman's statement. The financial statements were approved and authorised for issue on 13 March 2014 and signed by David Jeffreys and Serena Tremlett on behalf of the Board.

2. Significant accounting policies

A summary of the principal accounting policies is set out below. The policies have been consistently applied to all years presented unless otherwise stated.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the accounting policies. The areas involving a high degree of judgement or complexity or areas where the assumptions and estimates are significant to the financial statements are disclosed in this note.

Going concern

Basis of preparation

These financial statements have been prepared in accordance with IFRS, which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), and International Accounting Standards and Standards Interpretations Committee's 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.

a) Adoption of new and revised Standards

A number of standards and interpretations issued by the IASB and the International Financial Reporting Interpretations Committee are effective for the current year. These were:

New Standards

IFRS 13: Fair Value Measurement - for accounting periods commencing on or after 1 January 2013

IAS 28: Investments in Associates and Joint Ventures - amended by Investment Entities - for accounting periods commencing on or after 1 January 2013

Revised and amended Standards

IFRS 7: Financial Instruments: Disclosures- Amendments enhancing disclosures about offsetting of financial assets and financial liabilities - for accounting periods commencing on or after 1 January 2013 and interim periods within those periods

IAS 1: Presentation of Financial Statements - Amendments to revise the way other comprehensive income is presented - for accounting periods commencing on or after 1 July 2012

In May 2012, the IASB issued improvements to IFRS, which became effective for accounting periods commencing on or after 1 January 2013. These covered amendments to five standards.

Other than as detailed below, the adoption of these standards and interpretations has not led to any changes in the Group's accounting policies.

IFRS 13 Fair Value Measurement

IFRS 13 sets out the framework for determining the measurement of fair value and the disclosure of information relating to fair value measurement, when fair value measurements and/or disclosures are required or permitted by other IFRSs.

As a result, the guidance and requirements relating to fair value measurement that were previously located in other IFRSs have now been relocated to IFRS 13.

While there has been some rewording of the previous guidance, there are few changes to the previous fair value measurement requirements. Instead, IFRS 13 is intended to clarify the measurement objective, harmonise the disclosure requirements, and improve consistency in application of fair value measurement.

IFRS 13 did not materially affect any fair value measurements of the Group's assets or liabilities, with changes being limited to presentation and disclosure, and therefore has no effect on the Group's financial position or performance.

In addition, IFRS 13 is to be applied prospectively and therefore comparative disclosures have not been presented.

See significant accounting estimates and judgements below for more details and further references related to fair value measurement.

b) Standards and Interpretations in issue and not yet effective

At the date of authorisation of these financial statements, the following standards and interpretations, which have not been applied in these financial statements, were in issue but not yet effective:

IFRS 9: Financial Instruments - no stated effective date*

Revised and amended Standards

IFRS 10: Consolidated Financial Statements - amended by Investment Entities- for accounting periods commencing on or after 1 January 2014

IFRS 11: Joint Arrangements - amended by Investment Entities - for accounting periods commencing on or after 1 January 2014

IFRS 12: Disclosure of Interests in Other Entities - amended by Investment Entities - for accounting periods commencing on or after 1 January 2014

IFRS 7: Financial Instruments: Disclosures- Amendments requiring disclosures about the initial application of IFRS 9 - effective when IFRS 9 is applied*.

IAS 27: Separate Financial Statements - amended by Investment Entities - for accounting periods commencing on or after 1 January 2014

IAS 32: Financial Instruments: Presentation - Amendments to application guidance on the offsetting of financial assets and financial liabilities - for accounting periods commencing on or after 1 January 2014

IAS 36: Impairment of Assets - Amendments for Recoverable Amount Disclosures for Non-Financial Assets - for accounting periods commencing on or after 1 January 2014

IAS 39: Financial Instruments: Recognition and Measurement - Amendments for Novation of Derivatives and Continuation and Hedge Accounting - effective when IFRS 9 is applied*.

*Still to be endorsed by the EU

In December 2013, the IASB issued further improvements to IFRS, which will become effective for accounting periods commencing on or after 1 July 2014. These cover amendments to nine standards.

The Directors anticipate that, with the exception of IFRS 9, the adoption of these standards and interpretations in future periods will not have a material impact on the financial statements of the Group.

IFRS 9 aims to replace those parts of IAS 39, which relate to the classification and measurement of financial instruments. The main requirement of IFRS 9 is the classification of financial assets into two separate categories: 1) financial assets measured at fair value and 2) financial assets measured at amortised cost. The assessment to establish the most appropriate category is performed at initial recognition. The main parameters that management should consider for this assessment are the Company and Group's business model for managing financial instruments and the related cash flows' characteristics. With regards to financial liabilities IFRS 9 stays broadly in line with IAS 39. IFRS 9 requires one impairment method which would replace the various different methods indicated by IAS 39 that arise from the different categories' classification. At the time of adoption of the new standard only the Company's intercompany loans and the Company and Group's receivables will be classified under the two categories explained above and there is no expectation of changes in measurement for those financial instruments.

The new standard contains no stated effective date.

The principal accounting policies adopted are set out below.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and the subsidiary undertakings controlled by the Company, 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 benefit from its activities.

The results of subsidiary undertakings acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal as appropriate.

When necessary, adjustments are made to the financial statements of subsidiary undertakings to bring the accounting policies used into line with those used by the Group.

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 statement of comprehensive income.

Revenue recognition

Rental income from investment property leased out under an operating lease is recognised in the statement of comprehensive income 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 on 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. Upon early termination of a lease by the lessee, the receipt of a surrender premium, net of dilapidations and non-recoverable outgoings relating to the lease concerned, is immediately recognised as revenue.

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. All other leases are classified as operating leases.

Foreign currencies

a) Functional and presentational currency

Items included in the financial statements of each of the Group entities are measured in the currency of the primary economic environment in which the entity operates (the "functional currency"). The consolidated financial statements are presented in Sterling, which is the Company's functional and presentational currency.

b) Transactions and balances

Transactions in currencies other than 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 that are carried at fair value and denominated in foreign currencies are 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 year, except for exchange differences arising on non-monetary assets and liabilities where the changes in fair value are recognised directly in equity.

c) Group companies

The results and financial position of all the Group entities that have a functional currency which differs from the presentational currency are translated into the presentational currency as follows:

(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet;

(ii) income and expenses for each statement of comprehensive income are translated at the average exchange rate prevailing in the period; and

(iii) all resulting exchange differences are recognised as a separate component of equity.

On consolidation, the exchange differences arising from the translation of the Company's net investment in foreign entities are taken to equity. When a foreign operation is sold, such exchange differences are recognised in the statement of comprehensive income as part of the gain or loss on sale.

The year-end exchange rate used is £1:€1.198 (2012: £1:€ 1.222) and the average rate for the year used is £1:€1.178 (2012: £1:€1.233).

Operating profit

a) Company

Operating profit includes interest income from subsidiary entities, as reduced by administrative expenses and excludes the movement on impairment of loans from subsidiaries, finance costs and finance income.

b) Group

Operating profit includes net gains or losses on revaluation of investment properties, as reduced by administrative expenses and property operating costs and excludes finance costs and finance income.

Expenses

All expenses are accounted for on an accruals basis and include fees and other expenses paid to the administrator, the Investment Manager and the Directors. In respect of the analysis between revenue and capital items presented within the statement of comprehensive income, all expenses have been presented as revenue items except as follows:

(i) expenses which are incidental to the acquisition of an investment property or development property are included within the cost of that property

(ii) a proportion of the Investment Manager's fee is charged to the capital column in the statement of comprehensive income in order to reflect the Directors' estimated long-term view of the nature of the investment return of the Group.

Borrowing costs

Borrowing costs directly attributable to the acquisition or construction of property are added to the costs of those assets until such time as the assets are substantially ready for their intended use. The capitalisation rate is arrived at by reference to the actual rate payable on borrowing obtained for a targeted property, or, with regard to an acquisition financed out of general borrowings, to the average rate. All other borrowing costs are recognised in the statement of comprehensive income in the period in which they are incurred.

Taxation

The Company is exempt from Guernsey taxation on income derived outside of Guernsey and bank interest earned in Guernsey. 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 Group is liable to foreign tax arising on activities in the overseas subsidiaries. The company has subsidiary operations in Luxembourg, Belgium, France and Spain.

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 statement of comprehensive income 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 tax rates that have been enacted or substantially enacted by the balance sheet date.

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 year when the liability is settled or the asset realised. Deferred tax is charged or credited in the statement of comprehensive income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with within equity.

Dividends

Dividends are recognised as a liability in the Group's financial statements in the period in which they become obligations of the Company.

Fair value measurement

The Group measures certain financial instruments such as derivatives, and non-financial assets such as investment property, at fair value at the end of each reporting period, using recognised valuation techniques and following the principles of IFRS 13. In addition, fair values of financial instruments measured at amortised cost are disclosed in the financial statements.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

· in the principal market for the asset or liability

· in the absence of a principal market, in the most advantageous market for the asset or liability.

The Group must be able to access the principal or the most advantageous market at the measurement date. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs significant to the fair value measurement as a whole:

· Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities

· Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

· Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

Investment property

Investment property, which is property held to earn rentals and/or for capital appreciation, is initially recognised at cost being the fair value of consideration given including related transaction costs. After initial recognition at cost, investment properties are carried at their fair values based on half yearly professional valuations made by Knight Frank LLP. The valuations are in accordance with standards complying with the Royal Institution of Chartered Surveyors Approval and Valuation manual and the International Valuation Standards Committee.

Gains or losses arising from changes in fair value of investment property are included in the statement of comprehensive income in 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.

Transfers are made from investment property when, and only when, there is a change in use, evidenced by commencement of owner occupation or commencement of development with a view to sale.

Assets held for sale

Assets are classified as held for sale if their carrying amount will be recovered by sale rather than by continuing use in the business. For this to be the case, the asset must be available for immediate sale in its present condition, management must be committed to and have initiated a plan to sell the asset which, when initiated, was expected to result in a completed sale within twelve months. Property assets that are classified as held for sale are measured at fair value in accordance with IAS 40 Investment Property.

Rental guarantees

Rental guarantees received for vacant space acquired in a property acquisition are shown as receivables from the date of the acquisition of the relevant property and are excluded from the acquisition cost. Income received in relation to the guarantees is credited against the receivable. The receivable is impaired for any subsequent letting of the vacant space during the rental guarantee period.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, which is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of the Company.

For management purposes, the Group is organised into one main operating segment, which invests in commercial property located in Europe. All of the Group's activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based upon analysis of the Group as one segment. The financial results from this segment are equivalent to the financial statements of the Group as a whole.

All of the Group's revenue is from entities that are incorporated in Europe.

All of the Group's non-current assets are located in Europe.

Revenue from one tenant, Alcatel-Lucent, amounted to £9.6 million in 2013 (2012: £8.9 million). Please refer to note 21 for further details.

Investment in subsidiaries

Investments in subsidiaries are initially recognised and subsequently carried at cost in the Company's financial statements 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.

(a) Financial assets

The Group's financial assets fall into the categories discussed below, with the allocation depending to an extent on the purpose for which the asset was acquired. Although the Group uses derivative financial instruments in economic hedges of currency and interest rate risk, it does not hedge account for these transactions. The Group has not classified any of its financial assets as held to maturity or as available for sale.

Unless otherwise indicated, the carrying amounts of the Group's financial assets are a reasonable approximation of their fair values.

(a) (i) Loans and receivables

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through rental leases with tenants (e.g. trade receivables and cash and cash equivalents), but also incorporate other types of contractual monetary assets. They are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition or issue and subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

The effect of discounting on these financial instruments is not considered to be material.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms of the receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, such impairments directly reduce the carrying amount of the impaired asset and are recognised against the relevant income category in the statement of comprehensive income.

Cash and cash equivalents are carried at cost and consist of cash in hand and short term deposits in banks with an original maturity of three months or less.

(a) (ii) Fair value through profit or loss

This category comprises only 'in the money' financial derivatives. They are carried in the balance sheet at fair value with changes in fair value recognised in the statement of comprehensive income.

The fair value of the Group's derivatives is based on valuations as described in note 21.

(a) (iii) Derecognition of financial assets

A financial asset (in whole or in part) is derecognised either:

· when the Group has transferred substantially all the risks and rewards of ownership; or

· when it has neither transferred nor retained substantially all the risks and rewards and when it no longer has control over the asset or a portion of the asset; or

· when the contractual right to receive cash flow has expired.

(b) Financial liabilities

The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was issued and its characteristics. Although the Group uses derivative financial instruments in economic hedges of interest rate risk, it does not hedge account for these transactions.

Unless otherwise indicated, the carrying amounts of the Group's financial liabilities are a reasonable approximation of their fair values.

(b) (i) Fair value through profit or loss

This category comprises only 'out-of-the-money' financial derivatives. They are carried in the balance sheet at fair value with changes in fair value recognised in the statement of comprehensive income.

The fair value of the Group's derivatives is based on the valuations as described in note 21.

(b) (ii) Financial liabilities measured at amortised cost

Other financial liabilities include the following items:

· Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method.

· Bank borrowings are initially recognised at fair value net of attributable transaction costs incurred. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method.

(b) (iii) Derecognition of financial liabilities

A financial liability (in whole or in part) is derecognised when the Group has extinguished its contractual obligations, it expires or is cancelled. Any gain or loss on derecognition is taken to the statement of comprehensive income.

Financial instruments issued by the Company are treated as equity only to the extent that they do not meet the definition of a financial liability. The Company's ordinary shares are classified as equity instruments. For the purposes of the disclosures given in note 21 the Company considers all its share capital, share premium and all other reserves as equity. The Company is not subject to any externally imposed capital requirements.

(d) Effective interest rate method

The effective interest method is a method of calculating the amortised cost of a financial asset or liability and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments (including all fees or amounts paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset or liability, or, where appropriate, a shorter period.

Significant accounting estimates and judgements

The Directors make estimates and assumptions concerning the future. The resulting accounting estimate will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

(a) Investment property

The gross property value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Transaction costs normally borne by the seller are not deducted in arriving at gross property value, in accordance with IAS 40. The fair value is calculated by deducting the costs normally borne by the purchaser from the gross property value. Fair value is not intended to represent the liquidation value of the property, which would be dependent upon the price negotiated at the time of sale less any associated selling costs. The fair value is largely based on estimates using property appraisal techniques and other valuation methods. Such estimates are inherently subjective and actual values can only be determined in a sales transaction.

The fair value of the investment properties as at 31 December 2013 was £236.9 million (2012: £249.0 million). Refer to note 12 for further details.

Property assets held for sale are measured at fair value. The Board determines that a property is available for sale where it is intended and expected to sell within one year from the date of classification as held for sale.

The fair value of the properties held for sale as at 31 December 2013 was £11.2 million (2012: nil). Refer to note 13 for further details.

(b) Income and deferred taxes

The Group is subject to income and capital gains taxes in numerous jurisdictions. Significant judgement is required in determining the total provision for income and deferred taxes. There are many transactions and calculations for which the ultimate tax determination and timing of payment is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded such differences will impact the income and deferred tax provisions in the period in which the determination is made.

The Group's deferred tax liability as at 31 December 2013 was £6.1 million (2012: £4.7 million). See note 7 for further details.

The Directors estimate fair values of derivative contracts based on valuation techniques. These techniques are significantly affected by the assumptions used, including discount rates and estimates of future cash flows. The fair value of derivative contracts at the balance sheet date was £8.8 million liability (2012: £40.5 million liability). See note 21 for further details.

3. Revenue

	Group 2013 £'000	Company 2013 £'000	Group 2012 £'000	Company 2012 £'000
Rental income	18,239	-	18,649	-
Service and management charges	4,460	-	4,260	-
Interest from subsidiary undertakings (note 21)	-	8,515	-	8,139
Total	22,699	8,515	22,909	8,139

Interest from subsidiary undertakings arises from financial assets classified as loans and receivables, has been calculated using the effective interest rate method and arises on loans that have been impaired as detailed in note 11.

The Group leases out its investment property solely 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, using the exchange rate prevailing at the balance sheet date, the Group had contracted with tenants for the following future minimum lease payments:

	2013 £'000	2012 £'000
Within one year	17,268	17,519
In the second to fifth years inclusive	53,482	53,267
After five years	4,831	17,152
Total	75,581	87,938

4. Finance income

	Group 2013 £'000	Company 2013 £'000	Group 2012 £'000	Company 2012 £'000
Bank interest income	23	17	88	65
Foreign exchange gains	447	2,504	-	-
Net gains on financial assets and liabilities held at fair value through profit or loss (note 21)	8,331	-	8,146	-
Total	8,801	2,521	8,234	65

5. Other administration costs

	Group 2013 £'000	Company 2013 £'000	Group 2012 £'000	Company 2012 £'000
Accounts and administrative fees	345	128	333	143
Non-executive Directors' fees	113	113	119	116
Auditors' remuneration for audit services	115	51	102	48
Other professional fees	617	130	726	165
Staff costs	39	-	36	-
Total	1,229	422	1,316	472

The Group has one employee. The Directors are the only key management personnel of the Group.

6. Finance costs

	Group 2013 £'000	Company 2013 £'000	Group 2012 £'000	Company 2012 £'000
Interest on bank borrowings	11,431	-	10,500	-
Loan fee amortisation	678	-	569	-
Foreign exchange loss	-	-	862	3,305
Net losses on financial liabilities held at fair value through profit or loss (note 21)	6,231	-	361	-
Other charges	37	2	31	2
Total	18,377	2	12,323	3,307

Other than net losses on financial liabilities held at fair value through profit or loss, finance costs arise on financial liabilities measured at amortised cost using the effective interest rate method. No other losses have been recognised in respect of financial liabilities at amortised cost other than those disclosed above.

7. Taxation

(a) Taxation on profit on ordinary activities

Company

The Company is exempt from Guernsey taxation on income derived outside of Guernsey and bank interest earned in Guernsey. 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 Group is liable to foreign tax arising on activities in the overseas subsidiaries. The Company has subsidiary operations in Luxembourg, Belgium, France and Spain.

Group

The Group's tax expense for the year comprises:

	Group 2013 £'000	Group 2012 £'000
Deferred taxation
France	(6,069)	(4,714)
Spain	-	-
Total	(6,069)	(4,714)

Tax expense reconciliation
(Loss)/profit for the year	(4,303)	7,311
Less: income not taxable	(16,731)	(20,268)
Add: expenditure not taxable	7,415	11,662
Add: un-provided deferred tax asset movement	31,828	15,439
Total	18,209	14,144

Tax at domestic rates applicable to profits in the country concerned

Group

2013

£'000

Group

2012

£'000

French taxation at 33.33%

(6,069)

(4,714)

Spanish taxation at 30%

(b) Deferred taxation

The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon.

	Revaluation of investment properties £'000	Accelerated tax depreciation £'000	Tax losses £'000	Interest rate swap £'000	Total £'000
At 31 December 2011	(7,258)	29,808	(22,550)	-	-
Release to income	10,052	(10,435)	16,424	(1,897)	14,144
At 31 December 2012	2,794	19,373	(6,126)	(1,897)	14,144
Release to income	8,269	11,471	(2,208)	677	18,209
At 31 December 2013	11,063	30,844	(8,334)	(1,220)	32,353

Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes available for offset against future profits.

	2013 £'000	2012 £'000
Deferred tax liabilities	41,907	22,167
Deferred tax assets	(9,554)	(8,023)
Total	32,353	14,144

At the balance sheet date the Company has unused tax losses of £124.9 million (2012: £97.8 million). A deferred tax asset has been recognised in respect of £8.3 million of such losses (2012: £6.1 million). Due to the unpredictability of future taxable profits, the Directors believe it is not prudent to recognise deferred tax assets in respect of the revaluation of investment properties and the interest rate swap.

The French unused tax losses can be carried forward indefinitely. The Spanish unused tax losses can be carried forward for 18 years.

8. Dividends

Dividend reference period	Shares	Dividend	Paid	Date
Dividend reference period	'000	per share	£
Quarter ended 30 September 2012	117,627	0.6p	705,762	7 January 2013

The Trust did not pay any dividend for any period after 30 September 2012 and no further dividends are currently proposed.

9. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

	1 January 2013 to 31 December 2013	1 January 2013 to 30 June 2013	1 January 2012 to 31 December 2012	1 January 2012 to 30 June 2012
Earnings after tax per income statement (£'000)	(5,576)	(2,672)	2,597	5,606
Basic and diluted earnings per share	(4.7p)	(2.3)p	2.2p	4.8p

Earnings after tax per income statement (£'000)	(5,576)	(2,672)	2,597	5,606
Revaluation (gains)/losses in investment properties (note 12)	6,934	1,025	1,366	598
Mark to market of currency swaps (note 21)	5,444	6,987	(5,524)	(5,569)
Mark to market of interest rate swaps (note 21)	(8,331)	(4,623)	(2,622)	(1,502)
Investment Manager's fee (capital)	828	425	805	413
Deferred taxation	1,273	730	4,714	340
Foreign exchange (gains)/losses (note 4)	(447)	(1,622)	862	1,390
Adjusted earnings	125	250	2,198	1,276
Adjusted earnings per share	0.1p	0.2p	1.9p	1.1p

Weighted average number of ordinary shares (000's)	117,627	117,627	117,627	117,627

The adjusted earnings are presented to provide what the Directors believe is a more appropriate assessment of the operational income accruing to the Group's activities. Hence, the Company adjusts basic earnings for income and costs which are not of a recurrent nature or which may be more of a capital nature.

10. Net asset value per share

	31 December 2013	30 June 2013	31 December 2012	30 June 2012
Net asset value (£'000)	14,974	17,347	20,576	24,118
Net asset value per share	12.7p	14.7p	17.5p	20.5p

Net asset value (£'000)	14,974	17,347	20,576	24,118
Mark to market of currency hedges*	-	541	323	1,711
Mark to market of interest rate swaps	8,825	12,789	16,683	17,549
Deferred taxation**	3,035	2,832	2,357	340
Adjusted net asset value	26,834	33,509	39,939	43,718
Net asset value per share (adjusted)	22.8p	28.5p	34.0p	37.2p

Number of ordinary shares (000's)	117,627	117,627	117,627	117,627

* The mark to market of the currency hedges necessarily included both a movement in relation to currency fluctuation and a movement due to relative future interest rates. For the purpose of providing an adjusted net asset value the element of valuation in relation to the interest rates was included as an adjustment; the instruments were held to maturity at which point this element unwound. The currency hedges' contracts terminated in October 2013.

**The net asset value and net asset value per ordinary share have been adjusted by 50% of the deferred tax provision. An asset realisation could potentially include the sale of an SPV with latent deferred tax liabilities for which a potential purchaser would expect some form of discount from the purchase price of the related property.

The adjusted net assets are presented to provide what the Directors believe is a more relevant assessment of the Group's net asset position. The Directors have determined that certain fair value and accounting adjustments may not be realisable in the longer term.

11. 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 with voting rights	Country of incorporation	Principal activity

Alpha Pyrenees Luxembourg SARL*	Ordinary	100%	Luxembourg	Holding company
Alpha Pyrenees Luxembourg No 2 SARL	Ordinary	100%	Luxembourg	Holding company
Alpha Pyrenees Belgium SA	Ordinary	100%	Belgium	Holding company
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 Nozay SARL	Ordinary	100%	France	Holding company
Alpha Pyrenees Nozay SCI	Ordinary	100%	France	Property investment
Alpha Pyrenees Nîmes SARL	Ordinary	100%	France	Property investment
Alpha Pyrenees Spain SLU	Ordinary	100%	Spain	Property investment
Alpha Pyrenees Alcalá SLU	Ordinary	100%	Spain	Property investment
Alpha Pyrenees Ècija SLU	Ordinary	100%	Spain	Property investment

* In October 2013, Alpha Pyrenees Luxembourg SARL merged with Alpha Pyrenees Trust Finance Company Limited, the Guernsey based finance company of the Group.

The Group's investment properties are held by its subsidiary undertakings.

The Company has made the following loans to its subsidiary undertakings as at 31 December 2013:

	2013 Interest bearing £'000	2013 Non-interest bearing £'000	2013 Total £'000	2012 Interest bearing £'000	2012 Non-interest bearing £'000	2012 Total £'000
Loans	103,978	46,331	150,309	102,040	36,693	138,733
Impairment	(95,955)	(42,757)	(138,712)	(91,313)	(32,835)	(124,148)
Total	8,023	3,574	11,597	10,727	3,858	14,585

	2013 Interest bearing £'000	2013 Non-interest bearing £'000			2013 Total £'000		2012 Interest bearing £'000	2012 Non-interest bearing £'000		2012 Total £'000
Current	-		3,574	3,574		-		3,858	3,858
Non-current	8,023		-	8,023		10,727		-	10,727
Total	8,023		3,574	11,597		10,727		3,858	14,585

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 2013 the weighted average interest rate was 5.50% (2012: 5.47%).

An impairment of £138.7 million (2012: £124.1 million) has been made against amounts receivable from subsidiary undertakings to reflect the current mark to market impact of the interest rate derivatives and property valuations which have arisen within the Group subsidiaries.

12. Investment properties

	2013 £'000	2012 £'000
Fair value of investment properties at 1 January	249,043	254,853
Subsequent capital expenditure after acquisition	945	1,277
Rent incentive movement	(30)	324
Fair value adjustment in the year	(6,934)	(1,366)
Effect of foreign exchange	5,090	(6,045)
Transfer to assets held for sale	(11,194)	-
Fair value of investment properties at 31 December	236,920	249,043

The fair value of the Group's investment properties at 31 December 2013 and 31 December 2012 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 portfolio has been valued on a fair value basis as defined by the Royal Institution of Chartered Surveyors Appraisal and Valuation Standards ("RICS").

The approved RICS definition of fair value is the "the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date."

The Group has pledged investment properties valued at £236.9 million (€283.8 million) (2012: £242.3 million (€296.1 million)) to secure borrowings (note 16).

At 31 December 2013, the Group had un-provided contractual obligations for future repairs and maintenance of £nil (2012: £nil) and £nil (2012: £0.8 million) of future capital requirements.

13. Assets held for sale

	2013 £'000	2012 £'000
Assets held for sale at 1 January	-	-
Transfer from investment properties	11,194	-
Assets held for sale at 31 December	11,194	-

Assets held for sale represent the fair value of properties that have been actively marketed for disposal at the balance sheet date.

The Group has pledged assets held for sale valued at £11.2 million (€13.4 million) (2012: nil) to secure borrowings (note 16).

14. Trade and other receivables

	Group 2013 £'000	Company 2013 £'000	Group 2012 £'000	Company 2012 £'000
Trade receivables	1,311	-	1,118	-
Amounts receivable from Property Managing Agents	1,442	-	1,884	-
Prepayments	1,032	6	737	-
Other debtors	459	-	8,093	18
Total	4,244	6	11,832	18

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value. Note 21 provides an ageing of trade receivables along with details of the provision against loans during the year.

The collateral held with Barclays Bank PLC, previously recorded as other debtors, has been applied in the settlement of the currency hedge liability in October 2013. The amount applied was £8.5 million (at 31 December 2012 the collateral balance was £7.5 million).

15. Trade and other payables

	Group 2013 £'000	Company 2013 £'000	Group 2012 £'000	Company 2012 £'000
Trade creditors	310	42	175	-
Deferred income	695	-	527	-
Investment Manager's fee payable	680	217	692	237
VAT payable	332	-	288	-
Accruals	793	76	668	59
Total	2,810	335	2,350	296

Trade creditors and accruals primarily comprise amounts outstanding for trade purchases and ongoing costs. The Group has financial risk management policies in place to ensure that all payables are paid within the credit time frame.

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.

16. Bank borrowings

	Group 2013 £'000	Company 2013 £'000	Group 2012 £'000	Company 2012 £'000
Current liabilities: interest payable and bank borrowing	1,707	-	1,459	-
Non-current liabilities: bank borrowing	221,745	-	197,393	-
Total liabilities	223,452	-	198,852	-

The borrowings are repayable as follows:
Interest payable	1,707	-	1,417	-
On demand or within one year	-	-	42	-
In the second to fifth years inclusive	221,745	-	197,393	-
After five years	-	-	-	-
	223,452	-	198,852	-

Movements in the Group's non-current bank borrowings is analysed as follows:

	2013 £'000	2012 £'000
Opening balance	197,393	201,818
Loan advanced	20,829	-
Deferred finance costs	(898)	-
Amortisation of finance costs	678	569
Repayment of loan	(208)	(156)
Loan repayable within one year	-	(42)
Exchange differences on translation of foreign currencies	3,951	(4,796)
Total	221,745	197,393

At 31 December 2013, €221.1 million (2012: €221.1 million) was outstanding on the French borrowings. Borrowings are secured over the shares in the Company's operating subsidiaries and mortgages over properties with a total value of €273.4 million. The borrowings are to be repaid on 10 February 2015.

At 31 December 2013, €21.3 million (2012: €21.7 million) was outstanding on the Spanish borrowings, which comprises a balance of €1.4 million on a floating rate basis (at three month Euribor plus margin) and €20.0 million on a fixed rate. Borrowings are secured over the shares in the Company's operating subsidiaries and mortgages over properties with a total value of €23.8 million. The borrowings are to be repaid on 10 February 2015.

The lender, Barclays Bank PLC, has undertaken a variable to fixed rate swap with a third party to fix the interest rate paid by the Company (note 21). The weighted average rate of interest on all fixed rate loans is 5.26% (2012: 5.26%).

In October 2013, the Company agreed with Barclays Bank PLC an early termination of the currency swaps, which liability was £29.5 million (€34.7 million). As of that date, a total amount of £8.5 million (€10.0 million) was deposited as collateral with Barclays Bank PLC to support the swaps. After offsetting the collateral, the final settlement liability for the Company with Barclays Bank PLC, was £21.0 million (€24.7 million). The Company reached agreement with Barclays Bank PLC in October 2013 to finance the outstanding currency hedges liability through to 10 February 2015, a date coterminous with the current borrowings, also provided by Barclays Bank PLC, which are secured against the Group's property portfolio.

The finance is provided in the form of a Euro denominated loan, which contract was formalised on 19 November 2013, of £20.8 million (€25.0 million), including accrued interest since 11 October 2013. This is shown as a loan advanced in the table above.

The Company has the ability to repay the loan at any time after repayment of the existing secured borrowings. Interest is charged at a margin of 10% above three month Euribor and will be rolled up throughout the term. Barclays Bank PLC has been provided with a charge over the Group's Nîmes property. A cash pooling arrangement over the Group's cash-flows from the whole property portfolio has been established to provide further security to the loan but which provides the Company with working capital for its operations. No arrangement fees have been incurred. As part of the arrangements, the loan-to-value covenants on all the Group's existing secured facilities of €242.4m have been waived.

17. Share capital

Authorised share capital

The Company's authorised share capital is unlimited.

Issued and fully paid

	Number of shares
At 1 January 2012	117,627,056
Shares cancelled/issued during the year	-
At 31 December 2012	117,627,056
Shares cancelled/issued during the year	-
At 31 December 2013	117,627,056

The Company has one class of shares which carry no right to fixed income. All ordinary shares have nil par value.

18. Reserves

The movements in the reserves for the Group and the Company are shown above.

Special reserve

On 9 December 2005, the Royal Court of Guernsey confirmed the reduction of the Company's capital by way of cancellation of the amount standing to the credit of its share premium account on that date. The amount was transferred to the special reserve. The special reserve is a distributable reserve to be used for all purposes permitted under Guernsey company law, including the buyback of shares and payment of dividends.

Translation reserve

The translation reserve contains exchange differences arising on consolidation of the Group's overseas operations. These amounts may subsequently be reclassified to profit or loss.

Capital reserve

The capital reserve contains gains and losses on the disposal of investment properties, and increases and decreases in the fair value of the Group's investment properties and currency swap 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 buyback of shares and payment of dividends.

19. Events after the balance sheet date

There were no significant events after the balance sheet date.

20. 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.

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; the performance fee is subject to a three year high watermark with a minimum threshold of 100 pence. Details of the investment management fees for the current accounting period are shown on the face of the statement of comprehensive income and any balances outstanding are disclosed separately in note 15.

The Directors of the Company received fees for their services as detailed below.

Directors fees	2013 £'000	2012 £'000
Dick Kingston (Chairman)	30	30
Christopher Bennett*	-	13
David Jeffreys	23	23
Phillip Rose	20	20
David Rowlinson**	20	13
Serena Tremlett	20	20
Total	113	119

*Christopher Bennett resigned on 16 August 2012.

**David Rowlinson was appointed on 1 May 2012; he is a director of Antler Investment Holdings Limited ("Antler") and the managing director of Liberation Management Limited, which is a trustee of the Rockmount Purpose Trust that indirectly is a partner of Alpha Real Capital LLP.

Serena Tremlett is also the Managing Director and a major shareholder of Morgan Sharpe Administration Limited, the Company's administrator and secretary. During the year the Company paid Morgan Sharpe Administration Limited fees of £81,000 (2012: £83,540).

Directors' shareholdings in the Company are detailed in the Directors' and corporate governance report.

The following, being partners of the Investment Manager, hold or have an interest in the following shares in the Company at 31 December 2013:

	2013 Number of shares held	2012 Number of shares held
Rockmount Ventures Limited and ARRCO Limited***	21,437,393	21,437,393
P. Rose****	1,290,079	1,290,079
B. Bauman	544,809	544,809
B. Frith	229,078	229,078
K. Devon-Lowe	108,650	24,650
R. Armist	7,450	7,450

***Rockmount Ventures Limited is the parent company of ARRCO Limited. The interest attributed to the two corporate partners represents 21,437,393 shares held by a fellow group company, Antler.

****Phillip Rose is the CEO and a partner of the Investment Manager.

At 31 December 2013, Alpha Real Capital LLP, the Investment Manager of the Company, held 9,400,000 shares in the Company (31 December 2012: 4,400,000).

Paul Cable, being the Investment Manager's Fund Manager responsible for the Trust's investments, holds 84,918 (2012: 84,918) shares in the Company.

21. Financial instruments risk exposure and management

In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.

There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.

Principal financial instruments

The principal financial instruments used by the Group and Company, from which financial instrument risk arises, are as follows:

	Financial assets and liabilities carrying value
	Group 2013 £'000	Company 2013 £'000	Group 2012 £'000	Company 2012 £'000
Current financial assets
Trade and other receivables (excluding prepayments)	3,212	-	11,095	18
Cash and cash equivalents	5,923	3,565	8,400	6,128
Amounts receivable from subsidiary undertakings	-	3,574	-	3,858
Total current financial assets	9,135	7,139	19,495	10,004

Non-current financial assets
Amounts receivable from subsidiary undertakings	-	8,023	-	10,727
Total non-current financial assets	-	8,023	-	10,727
Total financial assets	9,135	15,162	19, 495	20,731

Current financial liabilities
Trade and other payables (excluding deferred income)	2,115	335	1,823	296
Currency swaps	-	-	23,809	-
Bank borrowings	1,707	-	1,459	-
Rent deposits	1,057	-	905	-
Total current financial liabilities	4,879	335	27,996	296

Non-current financial liabilities
Interest rate swap	8,825	-	16,683	-
Bank borrowings	221,745	-	197,393	-
Rent deposits	1,094	-	1,386	-
Total non-current financial liabilities	231,664	-	215,462	-
Total financial liabilities	236,543	335	243,458	296

Net changes in realised and unrealised gains or losses on financial instruments can be summarised as follows:

	Group 2013 £'000	Company 2013 £'000	Group 2012 £'000	Company 2012 £'000
Net change in realised gains or losses on loans and receivables
Interest from subsidiary companies (note 3)	-	8,515	-	8,139
Bank interest income	23	17	88	65
Impairment of trade and other receivables	(238)	-	(133)	-
Movement in impairment of amounts receivable from subsidiary undertakings (note 11)	-	(14,564)	-	(1,233)
Total	(215)	(6,032)	(45)	6,971

Net change in unrealised gains and losses on financial assets and liabilities held at fair value though profit or loss
Currency swaps	-	-	5,524	-
Interest rate swaps	8,331	-	2,622	-
Net realised gains and losses on financial assets and liabilities held at fair value through profit or loss
Currency swaps	(5,444)	-	-	-
Currency swaps - interest received	7,401	-	7,637	-
Currency swaps - interest paid	(8,188)	-	(7,998)	-
Net expense of currency swaps	(6,231)	-	(361)	-

Net gain/(loss) on financial assets and liabilities held at fair value through profit or loss	2,100	-	7,785	-

Disclosed as:
Finance costs (note 6)	(6,231)	-	(361)	-
Finance income (note 4)	8,331	-	8,146	-
Net gain/(loss) on financial assets and liabilities held at fair value through profit or loss	2,100	-	7,785	-

	Group 2013 £'000	Company 2013 £'000	Group 2012 £'000	Company 2012 £'000
Interest from subsidiary companies	-	8,515	-	8,139
Bank interest income	23	17	88	65
Interest on bank borrowings	(11,431)	-	(10,500)	-
Loan fee amortisation	(678)	-	(569)	-
Total interest (expense)/income	(12,086)	8,532	(10,981)	8,204

General objectives, policies and processes

The Board has overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function.

The overall objective of the Board is to set polices that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. The above financial risk management policies apply equally to the Group and the Company. Further details regarding these policies are set out below.

Credit risk

Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the balance sheet date.

a) Group

The Group's credit risk principally arises from cash and cash equivalents as well as credit exposures with respect to tenants including other receivables. In the event of a default by an occupational tenant, the Group will suffer a rental shortfall and incur additional costs in maintaining, insuring and re-letting the property until it is re-let. General economic conditions may affect the financial stability of tenants and prospective tenants and/or demand for and value of real estate assets. 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.

Alcatel-Lucent is the largest tenant within the portfolio representing 52.1% (2012: 52.8%) of the annual contracted rent as at 31 December 2013. The tenant's next break option is in December 2018. The Group meets with the tenant frequently and monitors its financial performance closely.

The ageing of trade receivables is as follows:

	2013 £'000	2012 £'000
0 to 6 months	1,311	1,118
Over 6 months	-	-
	1,311	1,118

The movement in impairments to trade receivables of £0.2m (2012: £0.1m) is shown on the table above.

There are no other impairment losses on any other financial assets other than loans and receivables as mentioned above.

The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Group's maximum exposure to credit risk without taking into account the value of rent deposits obtained. Details of the Group's receivables are summarised in note 14 of the financial statements.

The Group policy is to maintain its cash and cash equivalent balances with a reasonable diversity of banks. The Group monitors the placement of cash balances on an ongoing basis and has policies to limit the amount of credit exposure to any financial institution. As at 31 December 2013, the Group had spread its cash across seven financial institutions and had not placed more than 60% in any one bank.

b) Company

The Company's credit risk principally arises from cash and cash equivalents and amounts receivable from subsidiaries. The Company follows the same Group policy with regards to diversification of banking arrangements. Amounts receivable from subsidiaries are of mainly a long term nature and the loans are monitored on a regular basis.

An impairment of £138.7 million (2012: £124.1 million) has been made against amounts receivable from subsidiary undertakings to reflect the current mark to market impact of the currency and interest rate derivatives and property valuations which have arisen within the Group's subsidiaries (note 11).

The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Company's maximum exposure to credit risk. Details of the Company's loans and receivables are summarised in notes 11 and 14 of the financial statements.

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 and Company have developed procedures with the object of minimising such losses such as maintaining sufficient cash and other highly liquid current assets and by having in place 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 and Company's desire to maintain a high level of liquidity in order to enable timely completion of investment transactions.

a) Group

The following table illustrates the contractual maturity analysis of the Group's financial liabilities and derivative financial assets and liabilities that must be settled gross based, where relevant, on balance sheet interest rates and exchange rates prevailing at the balance sheet date.

2013	Within 1 year £'000	1-2 years £'000	2-5 years £'000	Over 5 years £'000	Total £'000	Total carrying amount £'000
Trade and other payables (excluding deferred income)	2,115	-	-	-	2,115	2,115
Rent deposits	1,057	271	373	450	2,151	2,151
Bank borrowings	1,707	221,745	-	-	223,452	223,452
Derivative financial instruments at fair value through profit or loss
- Cash outflows	-	-	-	-	-	-
- Cash inflows	-	-	-	-	-	-
	4,879	222,016	373	450	227,718	227,718

2012	Within 1 year £'000	1-2 years £'000	2-5 years £'000	Over 5 years £'000	Total £'000	Total carrying amount £'000
Trade and other payables (excluding deferred income)	1,823	-	-	-	1,823	1,823
Rent deposits	905	446	309	631	2,291	2,291
Bank borrowings	1,459	-	197,393	-	198,852	198,852
Derivative financial instruments at fair value through profit or loss
- Cash outflows	139,910	-	-	-	139,910	139,315
- Cash inflows	(115,341)	-	-	-	(115,341)	(115,506)
	28,756	446	197,702	631	227,535	226,775

b) Company

The Company only has trade payables and other payables which are payable within one year.

Market risk

a) Foreign exchange risk

The Group operates in Europe and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to Sterling and Euros. Foreign exchange risk arises from future commercial transactions, recognised monetary assets and liabilities and net investments in foreign operations.

The Group had entered into currency swaps to hedge foreign currency transactions and cash flows to safeguard the equity investments of shareholders against significant adverse movements between Sterling and Euros.

The currency swaps' contracts, due to terminate on 16 October 2013, were closed earlier, on 11 October 2013, following agreement with Barclays Bank PLC. Details of the currency swaps are disclosed below.

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 would have paid Barclays Bank PLC €130.1 million and Barclays Bank PLC would have paid Alpha Finance £87.6 million on 16 October 2013. Quarterly payments were made 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 paid Alpha Finance an amount equal to 7 per cent per annum on £87.6 million and Alpha Finance paid Barclays Bank PLC an amount equal to 6 per cent per annum on €130.1 million.

On 18 January 2007, Alpha Finance entered into a further currency swap with Barclays Bank PLC. Under the terms of this swap, Alpha Finance would have paid Barclays Bank PLC €33.0 million and Barclays Bank PLC would have paid Alpha Finance £21.6 million on 16 October 2013. Quarterly payments were made 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 paid Alpha Finance an amount equal to 7 per cent per annum on £21.6 million and Alpha Finance paid Barclays Bank PLC an amount equal to 5.9725 per cent per annum on €33.0 million.

On 11 October 2013, the date of an agreed early termination of the currency swaps, the Euro / Sterling exchange rate was £1:€1.176; consequently, the liability for Alpha Finance with Barclays Bank PLC was £29.5 million (€34.7 million). As of that date, a total amount of £8.5 million (€10.0 million) (2012: £7.5 million (€9.2 million)) was deposited as collateral with Barclays Bank PLC to support both the 13 October 2006 and 18 January 2007 swaps. After offsetting the collateral, the net settlement liability for Alpha Finance with Barclays Bank PLC, was £21.0 million (€24.7 million).

In October 2013, the Group reached agreement with Barclays Bank PLC to finance the outstanding hedge liability through to 10 February 2015, a date coterminous with the current borrowings, also provided by Barclays Bank PLC, which are secured against the Group's property portfolio. The finance is provided in the form of a Euro denominated loan, which was signed and drawndown on 19 November 2013, of £20.8 million (€25.0 million), including interest accruing on the deferral of the settlement from 11 October 2013. Further information on this loan has been given in Note 16 above.

The Group's policy is, where possible, to allow Group entities to settle liabilities denominated in their functional currency (primarily Euros or Sterling) with the cash generated from their own operations in that currency.

As the property portfolio is acquired and mortgaged in Euros the Group considers it appropriate from a risk perspective to review currency exposure on a net assets basis. For illustrative purposes, therefore, the effect of a strengthening of the Euro by 5 cents would increase Group net assets by £0.7 million (2012: decrease by £3.8 million). A weakening of the Euro by 5 cents would decrease net assets by £0.6 million (2012: increase by £3.5 million).

As the Company impairs its large intercompany loan book to reflect the underlying net asset value of its Group companies, the overall net asset sensitivity of the Company to foreign currency movements is the same as the Group's above.

b) Cash flow and fair value interest rate risk

The Group's principal interest rate risk arises from long-term borrowings; the Group has interest rate swaps as disclosed below.

The Company was required under the financing agreements with Barclays Bank PLC to fix the rate at which it borrowed over the duration of each loan. The Company has agreed a fixed interest rate with Barclays Bank PLC at each loan draw-down.

Barclays Bank PLC has undertaken a variable to fixed rate swap with a third party. The Company is not party to the swap agreement but via the financing agreement the Company has all the risks and rewards of the swap as, should the loan be repaid early, the Company would be required to pay the swap break costs or, alternatively accrue a swap benefit as a capital reduction depending on the value of the underlying swap at that point in time.

On 16 December 2009, the Spanish bank loan with Barclays Bank PLC was amended and restated. As a result of the amendments, the interest rate swap was broken and a new interest swap agreed for the longer term of the revised loan. Of the loan principal of €22.7m, interest on €20.0m has been fixed using the new swap.

Note 22 details how the interest rate swaps are valued.

The Group's cash flow is periodically monitored by the Group's management.

For the Group, an increase of 100 basis points in interest rates would result in additional post-tax profit of £0.1 million (2012: £0.1 million). A decrease in 100 basis points in interest rates would result in a post tax loss for the period of £0.1 million (2012: £0.1 million).

For the Company, an increase of 100 basis points in interest rates would result in additional post-tax profit of £0.1 million (2012: £0.1 million). A decrease in 100 basis points in interest rates would result in a post tax loss for the period of £0.1 million (2012: £0.1 million).

The sensitivity analyses above are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated - for example, change in interest rate and change in market values.

c) 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.

d) Capital risk management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio and takes action where appropriate. The key focus is the net leverage ratio which is shown below.

The net leverage ratios at 31 December 2013 and at 31 December 2012 were as follows:

	Group 2013 €'000	Group 2012 €'000
Total borrowings	267,400	242,746
Less: cash and cash equivalents	(7,096)	(10,265)
Net debt	260,304	232,481

Property valuation	297,240	304,330

Net leverage ratio	87.6%	76.4%

The Company has no borrowings; all borrowings are by subsidiaries within the Group.

e) Fair values

The following methods and assumptions are used to estimate fair values:

· Cash and short-term deposits, trade receivables, trade payables, and other current liabilities approximate their carrying amounts due to the short-term maturities of these instruments.

· The fair value of floating rate borrowings is estimated by discounting future cash flows using rates currently available for debt of similar terms and remaining maturities.

· The fair value of fixed rate borrowings is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. The fair value approximates their carrying values gross of unamortised transaction costs.

As a result the carrying values less impairment provision of loans and receivables and financial liabilities measured at amortised cost are approximate to their fair values.

Note 22 contain details regarding the fair value measurement of the interest rate swaps.

22. Fair value measurement

IFRS 13 requires disclosure of the fair value measurement of the Group's assets and liabilities, the related valuation techniques, the valuations' recurrence and the inputs used to assess and develop those measurements.

The Group discloses fair value measurements by level of the following fair value measurement hierarchy:

· Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

· Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

· Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

The level in the fair value hierarchy within which the asset or liability is categorised is determined on the basis of the lowest input that is significant to the fair value measurement. Assets and liabilities are classified in their entirety into one of the three levels.

Investment properties and interest rate swaps are valued on a recurring basis: investment properties are valued half yearly and interest rate swaps are valued quarterly.

The fair value of the derivative interest rate swap contracts is determined by reference to the mid-point of the yield curves prevailing on the reporting date and represent the net present value of the differences between the contracted rate and the valuation rate when applied to the projected balances to the period from the reporting date to the contracted expiry date.

The Group's valuers derive the fair value by applying the methodology and valuation guidelines as set out by the Royal Institution of Chartered Surveyors in the United Kingdom in accordance with IAS 40. This approach is based on discounting the future net income receivable from properties to arrive at the net present value of that future income stream. Future net income comprises the rent secured under existing leases, less any known or expected non-recoverable costs and the current market rent attributable to vacant units. The consideration basis for this calculation excludes the effects of any taxes on the net income. The discount factors used to calculate fair value are consistent with those used to value similar properties, with comparable leases in each of the respective markets. A decrease in the net rental income or an increase in the discount rate will decrease the fair value of the investment property.

The following table shows an analysis of the fair values of assets and liabilities recognised in the balance sheet by level of the fair value hierarchy described above:

31 December 2013	Assets and liabilities measured at fair value
	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Assets measured at fair value
Investment properties	-	-	236,920	236,920

Assets for which fair values are disclosed
Assets held for sale	-	-	11,194	11,194
Trade and other receivables	-	4,244	-	4,244

Liabilities measured at fair value
Interest rate swap	-	(8,825)	-	(8,825)

Liabilities for which fair values are disclosed
Current
Trade and other payables	-	(2,810)	-	(2,810)
Bank borrowings	-	(1,707)	-	(1,707)
Rent deposits	-	(1,057)	-	(1,057)

Non-current
Bank borrowings	-	(221,745)	-	(221,745)
Rent deposits	-	(1,094)	-	(1,094)

The Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

There were no transfers between level 1 and level 2 fair value measurements and no transfers into or out of level 3 fair value measurements during the year ended 31 December 2013.

The fair value of investment properties is based on unobservable inputs and it is therefore disclosed as level 3. The following methods, assumptions and inputs were used to estimate fair values of investment properties:

Class of investment properties	Carrying amount / fair value '000	Area (square meters)	Valuation technique	Significant unobservable inputs	Range	Weighted average
Europe	£248,114 (€297,240)	262,100	Income capitalisation	Gross ERV per sqm p.a.	€21 / €219	€93.7
				Net initial yield	(2.1%) / 8.9%	6.5%
				Reversionary yield	5.2% / 11.3%	7.7%
				Gross equivalent yield	6.6% / 10.0%	8.2%

The Directors assessed at the balance sheet date whether the Group's investment properties are being exploited according to their highest and best use and they are satisfied that this is the case.

Company

The Company did not have any financial assets or financial liabilities at fair value through profit or loss.

Directors and Trust information

Directors

Dick Kingston (Chairman)
David Jeffreys
Phillip Rose David Rowlinson
Serena Tremlett

Registered office

Old Bank Chambers

La Grande Rue

St Martin's

Guernsey GY4 6RT

Investment Manager

Alpha Real Capital LLP
1b Portland Place
London W1B 1PN

Administrator and secretary

Morgan Sharpe

Administration Limited

Old Bank Chambers

La Grande Rue

St Martin's

Guernsey GY4 6RT

Broker

Peel Hunt LLP

Moor House

120 London Wall

London EC2Y 5ET

Independent valuers

Knight Frank LLP
55 Baker Street
London W1U 8AN

Auditors

BDO Limited
Place du Pré

Rue du Pré
St Peter Port
Guernsey GY1 3LL

Tax advisors

BDO LLP
55 Baker Street
London W1U 7EU

Deloitte LLP
Hill House
1 Little New Street
London EC4A 3TR

Legal advisors in Guernsey

Carey Olsen
PO Box 98

Carey House
Les Banques
St Peter Port
Guernsey GY1 4BZ

Legal advisors in the UK

Norton Rose

3 More London Riverside

London SE1 2AQ

Registrar

Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St Helier
Jersey JE1 1ES

Shareholder information

Dividends

Ordinary dividends, if declared, are paid quarterly. 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 from 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.

Investment Manager

The Company is advised by Alpha Real Capital LLP which is authorised and regulated by the Financial Conduct Authority in the United Kingdom.

Financial Calendar

Financial reporting	Reporting/Meeting dates
Annual results announcement	14 March 2014
Annual report published	4 April 2014
Annual General Meeting	25 April 2014
First Interim Management Statement (Qtr 1)	16 May 2014
Half year report	15 August 2014
Second Interim Management Statement (Qtr 3)	14 November 2014

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR EFLFLZXFEBBD

Companies

Alpha Group International (ALPH)

Friday, 1st November 2024

COMPANIES COVERED:

AML BOO RKT

Reckitt Benckiser shares jump notably on a US legal ruling in favour of a subsidiary company, Boohoo appoints a new CEO – likely to the chagrin of Frasers Group – and Aston Martin gives back some of its recent gains.

Full Archive

UK 100

Latest directors dealings

All directors dealings today