Annual Financial Report

RNS Number : 8306I

Alpha Pyrenees Trust Limited

19 March 2010

 



19 March 2010

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

ALPHA PYRENEES TRUST POSTS RESULTS FOR THE YEAR ENDED 31 DECEMBER 2009:

NET ASSET VALUE IS 31.9p PER SHARE (ADJUSTED)

FRENCH ECONOMY HAS RETURNED TO GROWTH 

VALUATIONS STABILISING AND OUTLOOK IMPROVING

Alpha Pyrenees Trust Limited, the property company investing in commercial real estate in France and Spain, today posts its results for the year from 1 January to 31 December 2009.

The Trust announced adjusted earnings of £4.6 million for the year. A dividend of 0.9p per share in respect of its fourth quarter has already been announced.

Highlights of the period to 31 December 2009 include:

·      French economy returned to growth in the second quarter of 2009

·      Valuations stabilising and outlook improving

·      Current portfolio valuation yield of 8.7%

·      84% of rental income comes from Grade A tenants

·      No loan to value covenant tests on any of the Trust's properties until February 2014; interest cover ratio covenant of 110% (average interest cover in 2009 of 171%)

·      99% of borrowings fixed long term at a weighted average interest rate of 5.26% per annum to maturity in February 2015

·      Lease extensions and new leases covering approximately 52,000 square metres (20% of the Trust's portfolio by area) achieved since 1 January 2009

·      Weighted average lease length of 7.7 years to expiry and 4.3 years to next break

·      NAV (adjusted) of 31.9p per share as at 31 December 2009

·      Adjusted earnings of £4.6 million for the twelve months to 31 December 2009 (adjusted earnings per share of 4.0p)

·      Dividends totalling 7p per share paid during the year to 31 December 2009

·      Rebased quarterly dividend of 0.9p per share declared for the fourth quarter payable on 1 April 2010

Dick Kingston, Chairman of Alpha Pyrenees Trust, commented:

"The Board is pleased with the progress that has been achieved during the year in further improving and extending the terms of the Trust's finances through to maturity in February 2015 and with these changes the Trust is now in a position to consider redeploying low-returning cash into higher-yielding property investment with consequent benefits to the Trust's earnings. Management emphasis during the year 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 and the Board is pleased to note the considerable progress achieved on this front against the background of difficult economic conditions. The Board recognizes it is desirable to broadly align dividends with adjusted earnings and took the decision to pay a dividend of 0.9p per share for the third quarter of 2009 and to maintain the dividend at this level for the fourth quarter to 31 December 2009."

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

"The Trust owns a diversified portfolio of quality-tenanted properties focused on the French property market which represents 90%of the portfolio by value. The Trust holds £16.4m of cash and following the improvements achieved in the Trust's finances and the more positive outlook now prevalent in the French market the Investment Manager is actively considering suitable investment opportunities. The Trust's property portfolio contains numerous opportunities to add value through active management and these opportunities are being pursued." 

Contact:

Dick Kingston
Chairman, Alpha Pyrenees Trust 
01481 735540

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. 

ALPHA PYRENEES TRUST LIMITED

Results for the year ended 31 December 2009

Trust summary and objective

Objective

Alpha Pyrenees Trust Limited ("the Trust" or "the Company" or "Alpha Pyrenees") invests in commercial property in France and Spain with inflation-indexed rents that will provide an income return to investors as well as the potential for capital growth.

Dividends

Dividends are paid quarterly.

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 ("the Board").

ISA/PEP/SIPP status

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

Financial highlights

	Year ending 31 December 2009	Half year ending 30 June 2009	Year ending 31 December 2008 (restated)	Half year ending 30 June 2008 (restated)
Net asset value (adjusted) (£'000)*	37,461	51,990	73,310	103,954
Net asset value per ordinary share (adjusted)*	31.9p	44.2p	62.4p	88.5p
Net asset value per ordinary share	16.5p	26.3p	55.5p	88.0p
Earnings per share (adjusted - basic & diluted)**	4.0p	2.1p	4.7p	2.9p
Earnings per share (basic & diluted)	(26.9)p	(17.5)p	(54.4)p	(13.4)p
Dividend per share (paid)	7.0p	3.5p	6.6p	3.1p

*
The net asset value and net asset value per ordinary share have been adjusted for the fair value mark-to-market revaluation of the interest rate component of the currency swap and the interest rate swap derivatives and deferred tax provisions; full analysis is given in note 13 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 and interest rate swap derivatives and the deferred tax provisions and rental guarantee income. The adjusted earnings per share are now stated after adjustment for foreign exchange gains and losses and prior year disclosures have been restated; full analysis is given in note 12 to the accounts.

Chairman's Statement

Objectives

The Trust invests in higher-yielding properties in France and Spain, focusing on commercial property in the office, industrial, logistics and retail sectors.

The Trust seeks to provide shareholders with a regular, secure dividend stream 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 spread of properties across different property sectors with a variety of tenants.

Finance

The Board is pleased to note the progress that has been achieved in further improving and extending the terms of the Trust's finances through to maturity in February 2015.

Following the changes announced in December 2009, the key features of the Trust's borrowings are:

·      No loan to value ("LTV") covenant test until February 2014 on any of the Trust's properties.

·      Long term maturities - French (€221 million) and Spanish (€22.7 million) borrowings mature in February 2015.

·      99% of borrowings has interest rates that are fixed to maturity at a weighted average rate of 5.26% per annum.

·      Interest cover ratio ("ICR") covenant is set at 110% - the Trust's weighted average ICR over the twelve months to 31 December 2009 was 171%.

·      On the first LTV test date in February 2014, the Trust's LTV should not exceed 87.5% on a country portfolio basis (with the exception of the Alcatel-Lucent property where it should not exceed 85%). The weighted average loan to value covenant is 86.5%. As at 31 December 2009 the Trust has net leverage of 76.4% (taking into account cash of £16.4 million).

·      The French and Spanish borrowings are independent and are not cross-collateralised.

Prior to these changes, the Spanish loan had a maturity of February 2013 and the extension of the term allows the Trust to benefit from a gradual recovery in Spanish property values in the medium term. The cost to the Trust of undertaking the extension of the fixed rate was €1.8 million which was principally the cost of re-setting the underlying swap to market. There were no other fees payable to the bank under these new arrangements.

The Trust holds £16.4 million of cash and un-mortgaged properties with a value of £6.7 million (€7.4 million) as at 31 December 2009.

Currency hedge instruments are in place that significantly protect the conversion of the shareholders' original equity back to Sterling.

Management activity

Through 2008 and 2009 the Trust adopted a cautious approach and there have been no further acquisitions or additional debt incurred since December 2007. However, with the changes to the Spanish and French loans detailed above, the Trust is now in a position to consider redeploying low-returning cash into higher yielding property investment with consequent benefits to the Trust's earnings. As a consequence, the Investment Manager is now actively considering suitable investment opportunities and it is the Board's current intention that any acquisitions will be made on an un-geared basis.

Management emphasis during the year 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, most notably at the Athis Mons, Cordoba, Nimes and Goussainville properties. During the year lease extensions or new leases were achieved on a total of approximately 42,000 square metres representing around 16% of the portfolio by area. Following the end of the year, further lettings were achieved on a total of approximately 10,000 square metres representing approximately 4% of the portfolio by area. Further detail on asset management progress appears in the Property Review section.

Results and dividend

Results for the period show adjusted earnings of £4.6 million and adjusted earnings per share of 4.0p (note 12).

The effects of the "Credit Crunch" and recession have created a more challenging leasing environment for the Trust characterised by higher vacancy and generally longer re-leasing periods. Despite significant asset management initiatives, lease extensions and new leasing in the period, the Trust currently has vacant space with an estimated rental value of approximately £2.3 million (€2.6 million) per annum and predicting the timing and level of re-leasing that will be achieved remains challenging. The Trust's earnings have also been constrained by the strategic decision to retain substantial cash reserves (£16.4 million), which earn an unusually low rate of return at present, in order to maximise the Trust's future flexibility, including the ability to take advantage of investment opportunities now that market conditions are stabilising.

The Board has taken into consideration the above changes in market conditions and progress on leasing and other initiatives that are currently being pursued. The Board recognises it is desirable to broadly align dividends with adjusted earnings and with all these considerations in mind took the decision to pay a dividend of 0.9p per share for the third quarter of 2009 and has decided to maintain the dividend for the fourth quarter to 31 December 2009.  This is equivalent to a dividend rate of 3.6p per share on an annualised basis.

The dividend of 0.9p for the fourth quarter will be payable to the shareholders on the register as of 19 March 2010 and will be paid on 1 April 2010.

Revaluation and Net Asset Value

Investment properties are included in the balance sheet at an independent valuation of £265.8 million (€295.3 million) providing an average valuation yield across the portfolio of 8.7% as at 31 December 2009 (8.2% 31 December 2008).

The Euro like-for-like declines in portfolio valuations have demonstrated a slowing trend over recent quarters. The quarterly decline as at 30 June 2009 was 4.3%, as at 30 September 2009 it was 2.4% and as at 31 December 2009 it was 0.6%.

The portfolio totals approximately 262,000 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, BNP Paribas, Carrefour, Credit Lyonnais, Dai Nippon Printing, GlaxoSmithKline, Husqvarna, Klöckner Group, La Poste, MediaMarkt, McDonalds, Norauto, OCP, Plastic Omnium, Saint Gobain, and Vinci Group. Grade A tenants also include government or quasi-government bodies and together the rent from such tenants accounts for 84% of the Trust's rental income.

The weighted average lease length within the portfolio is currently 7.7 years to expiry and 4.3 years to the next break.

The adjusted net asset value per ordinary share is 31.9p (note 13); this compares to 62.4p as at 31 December 2008, a decrease of 30.5p for the year. The movement is mainly due to revaluation of the Trust's investment portfolio which showed a decrease in value of £30.8 million (approximately 26.2p per share) as at 31 December 2009 compared to 31 December 2008.

Portfolio Summary

Country	Property	Sqm		Description	Valuation  £m	Valuation €m
France	Villarceaux-Nozay	78,800		Business park	110.7	123.0
France	Aubervilliers	8,750		Offices	17.6	19.5
France	Goussainville	20,500		Warehouse and offices	14.4	16.0
France	Champs-sur-Marne	5,930		Offices	13.1	14.5
France	St Cyr L'Ecole	6,340		Offices	10.5	11.7
France	Athis Mons	23,280		Logistics with offices	10.0	11.1
France	Aubergenville	27,700		Logistics	9.8	10.9
France	Mulhouse	5,250		Offices	9.1	10.1
France	Evreux	14,130		Logistics with offices	8.6	9.6
France	Gennevilliers	3,330		Offices with light industrial	7.8	8.7
France	Roissy-en-France	7,800		Offices and warehouse	7.1	7.9
France	Nimes	3,100		Offices with retail	6.7	7.4
France	Ivry-sur-Seine	7,420		Warehouse and offices	6.0	6.7
France	Fresnes	6,540		Warehouse and offices	4.5	5.0
France	Vitry-sur-Seine	5,180		Warehouse and offices	4.3	4.8
Spain	Córdoba	16,880		Retail park	15.5	17.2
Spain	Zaragoza	9,520		Warehouses	3.7	4.1
Spain	Écija	5,950		Shopping centre	3.2	3.6
Spain	Alcalá de Guadaíra	5,700		Shopping centre	3.2	3.5
Total		262,100			265.8	295.3

Market outlook

·      Although leasing activity in the French and Spanish markets has reduced over the period, reflecting difficult economic conditions, the Trust has, nevertheless, achieved lease extensions and new leases on 52,000 square metres (20% of its portfolio by area) since 1 January 2009.

·      In the Paris region, where the majority of the Trust's portfolio is situated, office vacancy remains low at 6.8% and significant oversupply appears to be unlikely in the medium term.

·      In France, the quarter-on-quarter construction cost index returned to growth in the third quarter of 2009. In Spain, CPI was running at an annualised rate of 1% at the end of January 2010.

·      There is an increased risk of tenant defaults in the current difficult economic environment, although the Trust's portfolio with 84% of current income from Grade A tenants is significantly insulated from weaker covenants.

·      The French economy has been one of the best performing in Europe with recovery starting in the second quarter of 2009.

·      Valuation yields are showing signs of stabilising and there are increasing signs that investment confidence is returning.

·      Opportunities currently exist to purchase good quality property investments in France in the yield range of 7% to 8.5%.

Summary

·      The Trust is well positioned to generate strong cashflows from its high-yielding, quality-tenanted property portfolio.

·      The Trust owns a diversified freehold portfolio of well let, well located properties totalling £265.8 million (€295.3 million) with an average valuation yield of 8.7% at the December valuation.

·      84% of the Trust's rental income comes from Grade A tenants with a strong capacity to pay.

·      The Trust's current average lease length is 7.7 years to expiry and 4.3 years to the next break.

·      99% of debt is fixed at a weighted average interest rate of 5.26% per annum to maturity in 2015.

·      There are no LTV covenant tests on any of the Trust's borrowings before February 2014.

·      The outlook for property investment in the Trust's markets shows signs of improving.

·      The Trust's cash reserves of £16.4 million leave it well positioned to take advantage of opportunities and the Investment Manager is now actively considering suitable opportunities to redeploy low-returning cash into higher yielding property investment.

Dick Kingston
Chairman
18 March 2010

Property review

Portfolio overview

The Trust owns a portfolio of fifteen properties in France and four properties in Spain totalling approximately 262,000 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, 90% is invested in France and 10% in Spain in terms of capital value.

The valuation of the portfolio as at 31 December 2009 was approximately £265.8 million (€295.3 million) giving an average valuation yield of 8.7% with the French portfolio producing an average valuation yield of 8.7% and the Spanish portfolio 8.5% respectively. The portfolio as a whole showed a valuation decline of 10.4% on a Euro like-for-like basis compared to 31 December 2008. This decline consisted of a decline of 8.6% in the French portfolio and a decline of 24.7% in the Spanish portfolio.  The larger percentage decline in Spain reflects the comparative weakness of the Spanish economy and the harsher conditions experienced in the property market there compared to the relative stability of the French market. The Euro like-for-like declines in portfolio valuations have demonstrated a slowing trend over recent quarters. The quarterly decline as at 30 June 2009 was 4.3%, as at 30 September 2009 it was 2.4% and as at 31 December 2009 it was 0.6%.

The average capital value of the portfolio is approximately £1,014 (€1,127) per square metre (equivalent to £94 per square foot) and the average rental value is approximately £86 (€96) per square metre per annum (equivalent to £8 per square foot). Of the overall portfolio, 81% is located within the Ile-de-France region around Paris. The portfolio has 66% exposure to the French office and business park sector of which 60% of the total portfolio is in the Ile-de-France region. The reinstatement cost of the portfolio buildings has been assessed at approximately £247 million (€274 million) representing 93% of current value.

The Trust's portfolio is diversified across business sectors with 66% in offices and business park property, 26% in warehouses and 8% in retail.

The portfolio benefits from strong credit tenants with 84% 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 also enjoys a high level of occupancy with rental income comprising 88% of potential total income; income from rental guarantees, with duration ranging from three to twelve months represents 2% of the potential total income; and vacancy representing 10%. 

The weighted average lease length as at 31 December 2009 is 7.7 years to expiry and 4.3 years to next break, including rent guarantees.

Asset management review

The Investment Manager has continued to concentrate on active asset management and property management initiatives and we are pleased to report a number of important achievements since 1 January 2009 in the following areas:

·      increasing the maturity profile of the Trust's leases through lease extensions, and

·      letting of vacant units.

France

At the Trust's Nimes property, a new lease has been signed with the Conseil General du Gard on approximately 2,780 square metres of office accommodation from 1 January 2010. This is equivalent to a 5 year extension of their lease commitment and in return the Trust is undertaking works to the staff restaurant. This lease extension has resulted in an uplift in the property value in excess of the costs of the works.

At the Trust's Athis Mons property, comprising 23,280 square metres of logistics warehousing, the tenant , Point P (Saint Gobain Group), had a break option as at 30 November 2009. The lease has been successfully extended for a further three years from that date in line with the market rent.

At Vitry, a new 3/6/9 year lease was signed with Maugein Freres on a 330 square metre warehouse unit from 1 January 2009. This tenant replaced another company, Controle Actionneur, which occupied the unit subject to a six month rolling break and is in addition to the new 3/6/9 year lease that was signed with Societe des Cendres on a 525 square metre warehouse unit from 12 January 2009. A new 3/6/9 year lease has been signed with Go Sport on a 370 square metre vacant warehouse unit from 8 September 2009.

At Ivry-sur-Seine, the lease to Plastic Omnium on a 1,190 square metre warehouse unit has been extended until 30 April 2013.

At Fresnes, the lease to Exaflor on a 245 square metre warehouse/office unit has been extended to 30 August 2013.

At the Trust's Aubervilliers property, a new 3/6/9 year lease was signed with d'Haussy on 125 square metres of vacant office accommodation from 1 August 2009.

The Trust has also let approximately 1,125 square metres of vacant office space at its Aubervilliers property to Klöckner Information Services ("KIS") on a 2 year lease from 22 February 2010. KIS was recently created by the consolidation of the I.T. departments of the Klöckner Group. Existing tenant, Klöckner Distribution Industrielle ("KDI") occupy 5,535 square metres at Aubervilliers and the letting of the additional space results in KDI/KIS occupying 76% of the property with other tenants at the property being New Steel and d'Haussy.

At Goussainville, a new 3/6/9 year lease was signed by Business Computer System on a 615 square metre warehouse unit from 1 December 2009.

The Trust has also let approximately 8,760 square metres of warehouse and office space at its Goussainville property to existing tenant, Maintenance Partner Solutions France ("MPS"), on a new 9 year term with a fixed term of 6 years from 8 February 2010 at a market rent with upwards only rent indexation pegged to the INSEE Cost of Construction Index. MPS previously occupied 3,325 square metres on a 3/6/9 year lease expiring on 14 February 2010. The new space comprises 6,340 square metres of warehouse space and 2,420 square metres of office space. The letting of the additional vacant space results in MPS occupying 43% of the property. MPS was previously a subsidiary of international courier company, UPS.

Concerted efforts continue to be made by The Trust's Investment Manager to re-let the vacant 6,340 square metre office property at St Cyr and active leads are being followed up at present. St Cyr represents around 4.0% of the portfolio by value and 2.4% by floor area.

Spain

A programme of lease extensions has been undertaken at the Connecta Retail Park in Cordoba during the year. In addition to the lease extensions reported in the Half Year report relating to McDonalds, Elefante Azul, Norauto, UCC and DIA, the lease to Sprinter has had the next tenant's break option extended to 27 September 2011 and there remains 23 years unexpired on the lease. During the year a vacant unit of 205 square metres within the retail park was let to restaurant operator, El Meson de Bien Comer on a new 5 year lease from 1 April 2009. The total space covered by these new lease arrangements is 8,600 square metres and represents 51% of the space in the centre. As a result of these initiatives the park's overall lease profile has improved significantly.

At Alcala, the lease to Confecciones el Rubio on a 1,370 square metre retail unit has had the next break option extended to 1 June 2012 and a new 5 year lease has been signed with restaurant operator La Hacienda Mexicana on a 215 square metre unit.

As previously reported, Tratinox ceased occupation of the Trust's Zaragoza property in early July 2009 and an active marketing campaign to re-lease the property is in progress.

The Trust maintains a close relationship with all its tenants and is in regular discussions to establish their potential needs for lease extensions and building extensions at the properties they occupy.

Strong attention continues to be given to ensuring service charges are spent effectively, the annual level of property costs is closely monitored and additional sources of income are identified. There has been particular success in this regard on the Spanish retail assets where significant service charge savings have been achieved.

Market overview

The occupational property markets in France and Spain have felt the effects of the recession and are characterised at present by higher vacancy, longer re-leasing periods and a downward trend in rental values and indexation. These trends are more marked in Spain where the economic conditions remain more challenging than in France.

France

A lesser reliance on volatile exports, a relatively sound consumer sector and supportive fiscal policy has meant that France has moved out of its relatively modest recession with positive quarterly growth in GDP from the second quarter of 2009 onwards. A gain of 0.6% in fourth quarter GDP means that France is growing faster than other major European economies and after a 0.3% overall contraction in GDP in 2009, there is forecast growth of 2% for 2010.

Prospects for the consumer sector still look comparatively good with a high household saving rate and low household debt.

Of the total property portfolio, 90% is invested in France, 81% in the Ile-de-France  and 60% in Ile-de-France office and business park space.

Despite the economic slowdown across the eurozone, the Paris region remains one of Europe's more stable office markets. During 2009 take-up in the Ile-de-France reached the forecasted level of 1.8 million square metres of which 550,000 square metres were transacted in the fourth quarter. Although the year's take-up was 24% down compared to 2008 (2.4 million square metres), the fourth quarter take-up was 12.5% higher than in the same quarter of 2008 and there was letting activity across different lot sizes, business sectors and geographic spread.

The trend in prime office rents peaked in July 2008 and has continued to decline; this remains more marked in central Paris and less evident in other office sectors, such as those the Trust operates in, which offer occupiers the opportunity to cut costs and occupy good quality buildings. The average rent in the Ile-de-France for new, redeveloped or renovated space was €303 per square metre per annum at 1 January 2010, virtually stable in the fourth quarter but 6% lower than at the start of 2009.

The vacancy rate in the Paris region remains low at 6.8%. Future pipeline supply of new or redeveloped space has fallen throughout the year and is now 37% lower compared to 1 January 2009 due to many developers putting a halt on construction starts. Consequently the medium term prospects do not signal the emergence of significant over-supply.

Spain

The Spanish economy is one of the few eurozone economies that remain in recession and the unemployment rate has increased rapidly to 18.1% and could peak at over 20% in 2010 causing household income to decline. The result of this is that Spain looks set to lag behind its neighbours in the eurozone and after a GDP contraction of around 4% for 2009 the economy is now expected to shrink another 1.5% in 2010.

Rental Indexation

The Trust's rents in France are pegged to the INSEE Construction Cost Index ("ICC") and in Spain to the Spanish Consumer Price Index ("CPI").

In France the ICC produced an annualised increase of 3.32% for the fourth quarter of 2008 and 0.4% for the first quarter of 2009 following which it turned negative for the second and third quarters of 2009. The quarter-on-quarter trend has shown progressively smaller declines since the fourth quarter of 2008 and returned to positive growth of 0.3% in the third quarter of 2009.

From Q1 1980 to the present day the index has shown a long term average compound growth rate of 3.3% per annum.

In Spain, the CPI was running at an annualised rate of -1.0% as at 30 June 2009 but this had reversed to an annualised rate of increase of 1.0% at the end of January 2010.

Paul Cable
For and on behalf of the Investment Manager

18 March 2010

Directors

Dick Kingston (aged 62)

Chairman

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

Christopher Bennett (aged 44)

Director

Christopher Bennett is a Member of the Royal Institution of Chartered Surveyors, and also has an MBA from Cranfield University and a BA in Law & Economics from Durham University.  He is a Jersey resident and is Managing Director of Dominion Real Estate, a real estate administration business which he co-founded in 2005.  He was previously with The Royal Bank of Scotland International in Jersey, where he spent five years in real estate finance.  Prior to working for The Royal Bank of Scotland International he worked for Mutual Finance (an associate company of Rotch Property Group) for 18 months, was a self-employed property consultant for six years and spent three years in the residential agency sector.   His property experience includes property management, development, appraisal, planning and agency in addition to finance, in both commercial and residential markets.

Christopher is a director of Medicx Fund Limited, a property investment company which is listed on the Official List.

David Jeffreys (aged 50)

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 Tiger Property Trust Limited, Argo Real Estate Opportunities Fund Limited, Ingenious Media Active Capital Limited, PFB Data Centre Fund Limited and Tetragon Financial Group Limited.

Phillip Rose (aged 50)

Director

Phillip Rose is a Fellow of the Securities Institute and holds a Master of Law degree.  He has over 25 years' experience in the real estate, funds management and banking industries in Europe, the USA and Australasia. He has been the Head of Real Estate for ABN AMRO Bank, Chief Operating Officer of European shopping centre investor and developer TrizecHahn Europe, Managing Director of 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, a non executive director of London office and retail property investor Great Portland Estates Plc and a member of its Audit Committee. He is also a member of the Management Committee of the Hermes Property Unit Trust and its Audit Committee.

Serena Tremlett (aged 45)

Director

Serena Tremlett has over 20 years' experience in financial services, specialising in closed-ended property and private equity funds and fund administration over the last 13 years. 

She is a Guernsey resident and Managing Director of Morgan Sharpe Administration, a third party fund administrator which was acquired by her and her team by way of management buy-out in April 2008 and is a non-executive director on Alpha Pyrenees Trust, Alpha Tiger Property Trust, Ingenious Media Active Capital and NewRiver Retail in addition to various unlisted funds and general partners.

Serena was previously company secretary (and formerly director) of Assura Group, a company listed on the London Stock Exchange investing in primary healthcare property, pharmacy and medical businesses and ran Assura's Guernsey head office.

Prior to working for Assura, Serena was head of Guernsey property funds at Mourant Guernsey 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.

Directors' report

The Directors present their report and financial statements of the Company and the Group for the year ended 31 December 2009.

Principal activities and status

During the year the Company carried on business as a property investment company, investing in commercial property in France and Spain.

The Company is an Authorised closed-ended Guernsey registered investment company which was incorporated on 16 November 2005.  Its shares are listed on the Official List of the UK Listing Authority and have been traded on the London Stock Exchange since their listing on 29 November 2005.

Business review

A review of the business during the year is contained in the Chairman's statement above.

Results and dividend

The results for the year are set out in the financial statements. The Company has paid quarterly dividends during the year ended 31 December 2009 as follows:

	Payment date	Amount per share
Third interim for the prior year	12 January 2009	1.75p
Fourth interim for the prior year	27 April 2009	1.75p
First interim	22 June 2009	1.75p
Second interim	12 October 2009	1.75p

It is the policy of the Directors to declare and pay all dividends as interim dividends and therefore they do not recommend a final dividend for the current year.

The third interim dividend of 0.9p per share was paid on 9 January 2010. In accordance with IAS 10 this dividend has not been included in these financial statements.

It is intended to distribute a fourth interim dividend of 0.9p per share on 1 April 2010; this dividend has also not been included in these financial statements.

Corporate governance

As a Guernsey registered company, the Company is not required to comply with the Combined Code. However, the Directors will take appropriate measures to ensure that the Company complies with the Combined Code to the extent appropriate and taking into account the size of the Company and the nature of its business. The Company complies with the corporate governance obligations which apply to Guernsey registered companies.

The Board

The Directors (all of whom were appointed to the Company upon its incorporation) and their interests in shares as at 31 December 2009 are detailed below:

	Number of ordinary shares 2009	Number of ordinary shares 2008
Dick Kingston	5,000	5,000
Christopher Bennett	-	-
David Jeffreys	5,000	5,000
Phillip Rose	1,250,079	600,000
Serena Tremlett	5,000	5,000

There have been no changes in the Directors interests since the year end.

As the Board consists wholly of non-executives whose appointments can be terminated at any time without penalty and also as the Company's Articles of Association require each Director to retire and submit himself to re-election every three years, the Board has chosen not to comply with the Code's recommendation for directors only to be appointed for a specific period.  In addition, the Board believes that continuity and experience adds to its strength. 

At the Annual General Meeting of the Company which will take place on 30 June 2010, Christopher Bennett, David Jeffreys and Phillip Rose will retire and submit themselves for re-election.  The remainder of the Board recommend their re-appointment and a biography of each is included in the Notice of the Annual General Meeting.  Phillip Rose is a member of the Investment Manager and therefore required to submit himself for annual re-election.

The Board has determined that its role is to consider and determine the following principal matters which it considers are of strategic importance to the Company:

1)    Review the overall objectives for the Company and set the Company's strategy for fulfilling those objectives within an appropriate risk framework

2)    Consider any shifts in strategy that it considers may be appropriate in light of market conditions;

3)    Review the capital structure of the Company including consideration of any appropriate use of gearing for the Company;

4)    Appoint the Investment Manager, Administrator and other appropriately skilled service providers and monitor their effectiveness through regular reports and meetings;

5)    Review key elements of the Company's performance including Net Asset Value, Earnings per share and payment of dividends.

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 normally meets four times per annum and as required, from time to time, 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, the purpose of all of which is to ensure the long-term success of the Company for its shareholders. 

Certain matters relating to the implementation of the Company's 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 and company secretarial report.

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

In between its regular quarterly meetings, the Board has also met on a number of occasions during the year to approve all material transactions and for other strategic matters.

Board Appraisal and Evaluation

The Board has undertaken an appraisal in the form of a review by the Senior Independent Director (or, in the case of his review, by a member of the Nomination Committee) of the discharge by each of the Directors of his duties and responsibilities as a Director.  In addition to the appraisal, an evaluation of the overall performance of the Board and its standing committees has been conducted to review such matters as the composition of the Board (and whether it has an appropriate mix of skills and experience), contribution by individual directors and efficient/effective use of the Board's time at its quarterly meetings.

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.

Board and Committee Meeting Attendance

The table below shows the attendance at Board and other Committee meetings during the year to 31 December 2009:

Director	Board	Audit committee	Remuneration Committee	Nomination Committee
Dick Kingston	9	5	1	1
Christopher Bennett	9	n/a	1	1
David Jeffreys	10	5	1	1
Phillip Rose	3	n/a	n/a	1
Serena Tremlett	12	5	1	1
No. of meetings during the year	12	5	1	1

Individual Directors may seek independent legal advice in relation to their duties on behalf of the Company which also maintains an appropriate level of directors' and officers' liability insurance on the Board's behalf.

Board Committees

Audit Committee

The Audit Committee consists of David Jeffreys (Chairman), Dick Kingston 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 auditors

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

·      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-yearly reports and announcements relating to its financial performance, reviewing the significant financial reporting issues and judgments 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.

Policy for Non Audit Services

The Committee has adopted a policy for the provision of non-audit services by its external auditors, 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 auditors. No non-audit related services were performed by BDO Limited in the current year.

Internal Audit

The Group has only one employee and therefore the Board is reliant 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, the Board continues to believe that there is no need for an internal audit function, although it continues to monitor such need annually.

Nomination Committee

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

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 fulfil Board vacancies as they arise and it meets at least annually.

Remuneration Committee

The Remuneration Committee consists of the independent non-executive Directors being David Jeffreys (Chairman), Christopher Bennett, Dick Kingston 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 has no executive directors, the Committee's main role is to determine the remuneration of the non-executive Directors within the cap set out in the Company's Articles of Association; it meets at least annually.

Remuneration Report

The aggregate fees payable to the Directors are limited to £200,000 per annum under the Company's Articles of Association 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.

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

	Year ending 31 December 2009 £	Year ending 31 December 2008 £
Dick Kingston	30,000	30,000
Christopher Bennett	20,000	20,000
David Jeffreys	20,000	20,000
Phillip Rose	20,000	20,000
Serena Tremlett	20,000	20,000
Total	110,000	110,000

Appointment Letters

There are no service contracts in existence between the Company and any Director, but each of the Directors was appointed by a letter of appointment which sets out the main terms of his appointment. Each such appointment letter provides for an annual fee and a provision to be reimbursed for any reasonable out of pocket expenses. The appointment letters state that a Director shall remain in office unless he resigns, becomes bankrupt or otherwise prohibited by the law from acting as a director or is removed from his office by the Board or the members of the Company. The appointment letters do not provide for compensation upon early termination of appointment.

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 15 March 2010 were as follows:

Name of investor	No. of ordinary shares	% held
Antler Property Investments	20,437,393	17.39%
Invesco Perpetual	8,171,700	6.95%
Baring Asset Management	7,362,581	6.27%
Rathbone Investment Management	5,678,376	4.83%
Legal & General Investment Management	5,188,836	4.42%
Charles Stanley	5,180,622	4.41%
Rensburg Sheppards Investment Management	4,221,537	3.59%
Barclays Stockbrokers	3,938,637	3.35%
UBS Global Asset Management	3,895,432	3.32%

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' Responsibility Statement

Company law requires the Directors to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the Company and of the Group at the end of the year and of the profit or loss of the Company and the Group for that 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 audit information of which the Company's auditor is unaware, and have taken all the steps they ought to have taken as a Director 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

After making enquiries, and bearing in mind the nature of the Company's business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the accounts.

Annual General Meeting

The AGM will be held in Guernsey on 30 June 2010.

Auditors

BDO Limited (formerly BDO Novus Limited) has expressed their willingness to continue in office as auditors and a resolution to reappoint them will be proposed at the forthcoming Annual General Meeting.

By order of the Board,

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 loss 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 26 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 Group and Parent Company financial statements ("the financial statements") of Alpha Pyrenees Trust Limited for the year ended 31 December 2009, which comprise the Consolidated and Company Statements of Comprehensive Income, Consolidated and Company Balance Sheets, Consolidated and Company Cash Flow Statements, Consolidated and Company Statements of Changes in Equity and the related notes 1 to 26. These financial statements have been prepared under International Financial Reporting Standards as adopted by the European Union and in accordance with the accounting policies as set out below.

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 Company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of the directors and auditors

As described in the Directors' Responsibility Statement within the Directors' Report, the Company's Directors are responsible for the preparation of the financial statements in accordance with applicable law and International Financial Reporting Standards ("IFRS") and for being satisfied that they give a true and fair view.

Our responsibility is to audit the financial statements in accordance with the relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies (Guernsey) Law, 2008. We also report to you if, in our opinion, the Directors' Report is not consistent with the financial statements, if the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if the information specified by law is not disclosed.

We read the other information included in the Annual Report and consider whether it is consistent with the audited financial statements. This other information comprises only the Trust Summary and Objective, Financial Highlights, Chairman's Statement, Property Review, Directors, Directors' Report, Directors Statement pursuant to the Disclosure and Transparency Rules and Corporate Responsibility Statement. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.

Basis of opinion

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Company's circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

Opinion

In our opinion:

·      The Group financial statements give a true and fair view, in accordance with IFRS, of the state of the Group's affairs at 31 December 2009 and of its loss for the year then ended.

·      The Parent Company's financial statements give a true and fair view, in accordance with IFRS, of the state of the Company's affairs at 31 December 2009 and of its loss for the year then ended.

·      The financial statements have been properly prepared in accordance with the Companies (Guernsey) Law, 2008.

BDO Limited
Chartered Accountants
Place du Pré, Rue du Pré, St Peter Port, Guernsey
18 March 2010       

Consolidated statement of comprehensive income

		For the year ended 31 December 2009			For the year ended 31 December 2008
	Notes	Revenue £'000	Capital £'000	Total £'000	Revenue  £'000	Capital £'000	Total £'000
Income
Revenue	3	25,942	-	25,942	24,392	-	24,392
Property operating expenses		(5,499)	-	(5,499)	(6,139)	-	(6,139)
Net Rental income		20,443	-	20,443	18,253	-	18,253
Expenses
Net change in losses on revaluation of investment properties	15	-	(30,759)	(30,759)	-	(35,825)	(35,825)
Investment Manager's fee		(2,145)	(919)	(3,064)	(2,421)	(1,038)	(3,459)
Other administration costs	7	(1,201)	-	(1,201)	(1,456)	-	(1,456)
Operating profit/(loss)		17,097	(31,678)	(14,581)	14,376	(36,863)	(22,487)
Finance income	4	167	8,508	8,675	10,416	-	10,416
Finance costs	8	(13,463)	(12,266)	(25,729)	(10,911)	(46,727)	(57,638)
(Loss)/profit before taxation		3,801	(35,436)	(31,635)	13,881	(83,590)	(69,709)
Taxation	10	-	-	-	-	5,623	5,623
(Loss)/profit for the year		3,801	(35,436)	(31,635)	13,881	(77,967)	(64,086)
Other comprehensive income
Foreign exchange (losses)/gains on translation of foreign operations (translation reserve)		-	(6,025)	(6,025)	-	21,655	21,655
Other comprehensive income for  the year		-	(6,025)	(6,025)	-	21,655	21,655
Total comprehensive income/(loss) for the  year		3,801	(41,461)	(37,660)	13,881	(56,312)	(42,431)
Earnings per share  - basic & diluted	12			(26.9)p			(54.4)p
Adjusted earnings per share  - basic & diluted	12			4.0p			4.7p

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 minority interests.

The accompanying notes are an integral part of this statement.

Consolidated balance sheet

As at 31 December 2009	Notes	2009 £'000	2008 £'000
Non-current assets
Investment properties	15	265,408	319,793
Financial assets at fair value through profit or loss	17	84	-
		265,492	319,793
Current assets
Trade and other receivables	18	19,506	20,512
Cash and cash equivalents		16,430	23,501
		35,936	44,013
Total assets		301,428	363,806
Current liabilities
Trade and other payables	19	(5,834)	(2,684)
Bank borrowings	20	(1,633)	(1,769)
		(7,467)	(4,453)
Total assets less current liabilities		293,961	359,353
Non-current liabilities
Financial liabilities at fair value through profit or loss	17	(55,708)	(57,566)
Bank borrowings	20	(216,280)	(233,189)
Rent deposits		(2,597)	(3,337)
		(274,585)	(294,092)
Total liabilities		(282,052)	(298,545)
Net assets		19,376	65,261
Equity
Share capital	21	-	-
Share premium account	22	2,500	2,500
Special reserve	22	110,462	110,462
Warrant reserve	22	130	130
Translation reserve	22	23,571	29,596
Capital reserve	22	(121,682)	(86,246)
Revenue reserve	22	4,395	8,819
Total equity		19,376	65,261
Net asset value per share	13	16.5p	55.5p
Net asset value per share (adjusted)	13	31.9p	62.4p

The financial statements were approved by the Board of Directors and authorised for issue on 18 March 2010. They were signed on its behalf by:

David Jeffreys                                                                                                        Serena Tremlett

Director                                                                                                                   Director

The accompanying notes are an integral part of this statement.

Consolidated cash flow statement

	For the year ended 31 December 2009 £'000	For the year ended 31 December 2008 £'000
Operating activities
Loss for the year	(31,635)	(64,086)
Adjustments for :
Net change in losses on revaluation of investment properties	30,759	35,825
Deferred taxation	-	(5,623)
Finance  income	(8,675)	(10,416)
Finance costs	25,729	57,638
Operating cash flows before movements in working capital	16,178	13,338
Movements in working capital:
(Increase)/decrease in operating trade and other receivables	(2,668)	2,500
Increase/(decrease) in operating trade and other payables	2,554	(2,485)
Cash generated from operations	16,064	13,353
Interest received	167	1,262
Swap interest paid	(1,155)	(93)
Bank loan interest paid and costs	(11,553)	(10,693)
Taxation		-
Cash flows from operating activities	3,523	3,829
Investing activities
Capital expenditure	(743)	(2,553)
Cash flows from Investing activities	(743)	(2,553)
Financing activities
Share buyback	-	(8,189)
Currency  swap collateral received/(paid)	1,922	(6,388)
Interest rate swap break costs	(1,567)	-
Dividends paid	(8,225)	(7,788)
Cash flows from financing activities	(7,870)	(22,365)
Net decrease in cash and cash equivalents	(5,090)	(21,089)
Cash and cash equivalents at beginning of year	23,501	34,430
Exchange translation movement	(1,981)	10,160
Cash and cash equivalents at end of year	16,430	23,501

The accompanying notes are an integral part of this statement.

Consolidated statement of changes in equity

For the year ended 31 December 2008	Share capital £'000	Share premium £'000	Special reserve £'000	Warrant reserve £'000	Translation reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total equity £'000
At 1 January 2008	-	2,500	118,251	130	7,941	(8,279)	2,726	123,269
Total comprehensive income for the  year	-	-	-	-	21,655	(77,967)	13,881	(42,431)
Dividends	-	-	-	-	-	-	(7,788)	(7,788)
Share buy back	-	-	(7,789)	-	-	-	-	(7,789)
At 31 December 2008	-	2,500	110,462	130	29,596	(86,246)	8,819	65,261
Note 22, 23

For the year ended 31 December 2009	Share capital £'000	Share premium £'000	Special reserve £'000	Warrant reserve £'000	Translation reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total equity £'000
At 1 January 2009	-	2,500	110,462	130	29,596	(86,246)	8,819	65,261
Total comprehensive income for the  year	-	-	-	-	(6,025)	(35,436)	3,801	(37,660)
Dividends	-	-	-	-	-	-	(8,225)	(8,225)
At 31 December 2009	-	2,500	110,462	130	23,571	(121,682)	4,395	19,376
Note 22, 23

The accompanying notes are an integral part of this statement.

Company statement of comprehensive income

	Notes	For the year ended 31 December 2009			For the year ended 31 December 2008
		Revenue  £'000	Capital £'000	Total £'000	Revenue  £'000	Capital £'000	Total £'000
Income
Revenue	3	9,602	-	9,602	10,711	-	10,711
Total income		9,602	-	9,602	10,711	-	10,711
Expenses
Investment Manager's fee		(830)	(356)	(1,186)	(931)	(399)	(1,330)
Other administration costs	7	(593)	-	(593)	(782)	-	(782)
Total expenses		(1,423)	(356)	(1,779)	(1,713)	(399)	(2,112)
Operating profit/(loss)		8,179	(356)	7,823	8,998	(399)	8,599
Finance income	4	48	-	48	756	38,042	38,798
Finance costs	8	(1)	(11,833)	(11,834)	(5)	-	(5)
Movement in Impairment of amounts receivable from subsidiary undertakings	5	-	(33,698)	(33,698)	-	(94,190)	(94,190)
(Loss)/profit for the year		8,226	(45,887)	(37,661)	9,749	(56,547)	(46,798)
Taxation	10	-	-	-	-	-	-
Profit/(loss) for the year		8,226	(45,887)	(37,661)	9,749	(56,547)	(46,798)
Other comprehensive income		-			-	-	-
Other comprehensive income for  the year		-	-	-	-	-	-
Total comprehensive (loss)/income for the  year		8,226	(45,887)	(37,661)	9,749	(56,547)	(46,798)

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 this statement.

Company balance sheet

As at 31 December 2009	Notes	2009 £'000	2008 £'000
Non-current assets
Investments in subsidiary undertakings	14	141	141
Amounts receivable from subsidiary undertakings	14	7,385	36,836
		7,526	36,977
Current assets
Trade and other receivables	18	36	13
Amounts receivable from subsidiary undertakings	14	2,117	8,413
Cash and cash equivalents		10,076	19,932
		12,229	28,358
Total assets		19,755	65,335
Current liabilities
Trade and other payables	19	(379)	(73)
Total liabilities		(379)	(73)
Net assets		19,376	65,262
Equity
Share capital	21	-	-
Share premium account	22	2,500	2,500
Special reserve	22	110,462	110,462
Warrant reserve	22	130	130
Capital reserve	22	(95,678)	(49,791)
Revenue reserve	22	1,962	1,961
Total equity		19,376	65,262

The financial statements were approved by the Board of Directors and authorised for issue on 18 March 2010. They were signed on its behalf by:

David Jeffreys                                                                                                        Serena Tremlett

Director                                                                                                                   Director

The accompanying notes are an integral part of this statement.

Company cash flow statement

	For the year ended  31 December 2009	For the year ended  31 December 2008
Cash flows from operating activities
Loss for the year	(37,661)	(46,798)
Adjustments for :
Finance costs	11,834	5
Finance income	(48)	(38,798)
Interest from subsidiary undertakings	(9,602)	(10,711)
Impairment of amounts receivable from subsidiary undertakings	33,698	94,190
Operating cash flows before movements in working capital	(1,779)	(2,112)
(Increase)/decrease  in operating trade and other receivables	(23)	1,741
(Increase)/decrease in operating trade and other payables	306	(234)
Cash generated from operations	(1,496)	(605)
Interest paid	(1)	-
Interest received	3,195	6,433
Taxation	-	-
Cash-flows from operating activities	1,698	5,828
Investing activities
Loans (advanced)/repaid	(1,798)	10,651
Cash-flows from investing activities	(1,798)	10,651
Financing activities
Share buyback	-	(8,189)
Dividend payments	(8,225)	(7,788)
Cash-flows from financing activities	(8,225)	(15,977)
Net (decrease)/increase in cash and cash equivalents	(8,325)	502
Cash and cash equivalents at beginning of year	19,932	10,726
Exchange translation movement	(1,531)	8,704
Cash and cash equivalents at end of year	10,076	19,932

The accompanying notes are an integral part of this statement.

Company statement of changes in equity

For the year ending 31 December 2008	Share capital £'000	Share  premium £'000	Special reserve £'000	Warrant reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total equity £'000
At 1 January 2008	-	2,500	118,251	130	6,756	-	127,637
Total comprehensive income for the  year	-	-	-	-	(56,547)	9,749	(46,798)
Dividends	-	-	-	-	-	(7,788)	(7,788)
Share buyback	-	-	(7,789)	-	-	-	(7,789)
At 31 December 2008	-	2,500	110,462	130	(49,791)	1,961	65,262
Note 22,23

For the year ending 31 December 2009	Share capital £'000	Share  premium £'000	Special reserve £'000	Warrant reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total equity £'000
At 1 January 2009	-	2,500	110,462	130	(49,791)	1,961	65,262
Total comprehensive income for the  year	-	-	-	-	(45,887)	8,226	(37,661)
Dividends	-	-	-	-	-	(8,225)	(8,225)
At 31 December 2009	-	2,500	110,462	130	(95,678)	1,962	19,376
Note 22,23

The accompanying notes are an integral part of this statement.

Notes to 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 above. The financial statements were approved and authorised for issue on 18 March 2010 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.

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 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 International Financial Reporting Interpretations Committee are effective for the current year. These were:

New Standards

IFRS 8: Operating Segments - for accounting periods commencing on or after 1 January 2009

Revised and amended Standards

IFRS 2: Share-based Payment - Amendment relating to vesting conditions and cancellations - for accounting periods commencing on or after 1 January 2009

Amendment: IFRS 7: 'Improving disclosures about financial instruments' - for accounting periods commencing on or after 1 January 2009

IAS 1: Presentation of Financial Statements - Comprehensive revision including requiring a statement of comprehensive income - for accounting periods commencing on or after 1 January 2009

IAS 1: Presentation of Financial Statements - Amendments relating to disclosure of puttable instruments and obligations arising on liquidation - for accounting periods commencing on or after 1 January 2009

IAS 1: Presentation of Financial Statements - Amendments resulting from May 2008 Annual Improvements to IFRS - for accounting periods commencing on or after 1 January 2009

IAS 16: Property, Plant and Equipment Amendments resulting from May 2008 Annual Improvements to IFRS - for accounting periods commencing on or after 1 January 2009

IAS 19: Employee Benefits Amendments resulting from May 2008 Annual Improvements to IFRS - for accounting periods commencing on or after 1 January 2009

IAS 20: Government Grants and Disclosure of Government Assistance Amendments resulting from May 2008 Annual Improvements to IFRS - for accounting periods commencing on or after 1 January 2009

IAS 23: Borrowing Costs - Amendments resulting from May 2008 Annual Improvements to IFRS - comprehensive revision to prohibit immediate expensing - for accounting periods commencing on or after 1 January 2009

IAS 23: Borrowing Costs - Amendments resulting from May 2008 Annual Improvements to IFRS - for accounting periods commencing on or after 1 January 2009

IAS 27: Consolidated and Separate Financial Statements - Amendments relating to cost of an investment on first time adoption - for accounting periods commencing on or after 1 January 2009

IAS 27: Consolidated and Separate Financial Statements - Amendments resulting from May 2008 Annual Improvements to IFRS - for accounting periods commencing on or after 1 January 2009

IAS 28: Investments in Associates - Amendments resulting from May 2008 Annual Improvements to IFRS - for accounting periods commencing on or after 1 January 2009

IAS 29: Financial Reporting in Hyperinflationary Economies - Amendments resulting from May 2008 Annual Improvements to IFRS - for accounting periods commencing on or after 1 January 2009

IAS 31: Interests in Joint Ventures - Amendments resulting from May 2008 Annual Improvements to IFRS - for accounting periods commencing on or after 1 January 2009

IAS 32: Financial Instruments: Presentation - Amendments relating to puttable instruments and obligations arising on liquidation - for accounting periods commencing on or after 1 January 2009

IAS 36: Impairment of assets - Amendments resulting from May 2008 Annual Improvements to IFRS - for accounting periods commencing on or after 1 January 2009

IAS 38: Intangible Assets - Amendments resulting from May 2008 Annual Improvements to IFRS - for accounting periods commencing on or after 1 January 2009

IAS 39: Financial Instruments: Recognition and Measurement - Amendments for embedded derivatives when reclassifying financial instruments - for accounting periods ending on or after 30 June 2009.

IAS 39: Financial Instruments: Recognition and Measurement - Amendments resulting from May 2008 Annual Improvements to IFRS - for accounting periods commencing on or after 1 January 2009

IAS 40: Investment Property - Amendments resulting from May 2008 Annual Improvements to IFRS - for accounting periods commencing on or after 1 January 2009

IAS 41: Agriculture - Amendments resulting from May 2008 Annual Improvements to IFRS - for accounting periods commencing on or after 1 January 2009

Interpretations

IFRIC 13: Customer Loyalty Programmes - for accounting periods commencing on or after 1 July 2008

IFRIC 15: Agreements for the Construction of Real Estate - for accounting periods commencing on or after 1 January 2009

IFRIC 16: Hedges of a Net investment in a Foreign Operation - for accounting periods commencing on or after 1 October 2008

The adoption of these standards and interpretations has not led to any changes in the Groups accounting policies, except as follows:

IFRS 8, 'Operating Segments' (effective from 1 January 2009): This standard requires disclosure of information about the Group's operating segments and replaced the requirement to determine business and geographical reporting segments of the Group. For management purposes, the Group is organised into one business unit. The Group determined that this operating segment was the same as the business and geographical segment previously identified under IAS 14, 'Segment Reporting'.

IAS 1 (revised), 'Presentation of Financial Statements' (effective from 1 January 2009): The revised standard prohibits the presentation of items of income and expenses (that is, 'non-owner changes in equity') in the statement of changes in equity, requiring 'non-owner changes in equity' to be presented separately from owner changes in equity. All non-owner changes in equity will be required to be shown in a performance statement, but entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). Application of IAS 1 (revised) did not impact on the net assets of income for the year ended 31 December 2009. Apart from formatting and the titles of the primary statements there have been no other changes.

Amendment: IFRS 7, 'Improving disclosures about financial instruments': The IASB published amendments to IFRS 7 in March 2009. The amendment requires enhanced disclosures about fair value measurements and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a three-level fair value measurement hierarchy. In addition to that, the amendment clarifies that the maturity analysis of liabilities should include issued financial guarantee contracts at the maximum amount of the guarantee in the earliest period in which the guarantee could be called; and secondly requires disclosure of remaining contractual maturities of financial derivatives if the contractual maturities are essential for an understanding of the timing of the cash flows. The entity has to disclose a maturity analysis of financial assets it holds for managing liquidity risk, if that information is necessary to enable users of its financial statements to evaluate the nature and extent of liquidity risk. The adoption of the amendment results in additional disclosures but does not have an impact on profit or earnings per share.

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 2: Share-based Payment - Amendments relating to group cash-settled share-based payment transactions - for accounting periods commencing on or after 1 January 2010*

IFRS 2: Share-based Payment - Amendments resulting from April 2009 Annual Improvements*

IFRS 3: Business Combinations - Comprehensive revision on applying the acquisition method - for accounting periods commencing on or after 1 July 2009

IFRS 5: Non-current Assets Held for sale and Discontinued Operations - Amendments resulting from May 2008 Annual Improvements to IFRSs - for accounting periods commencing on or after 1 July 2009

IFRS 5: Non-current Assets Held for Sale and Discontinued Operations - Amendments resulting from April 2009 Annual Improvements to IFRSs - for accounting periods commencing on or after 1 January 2010*

IFRS 8: Operating Segments - Amendments resulting from April 2009 Annual Improvements to IFRSs- for accounting periods commencing on or after 1 January 2010*

IFRS 9: Financial Instruments - Classification and Measurement - for accounting periods commencing on or after 1 January 2013*

IAS 1: Presentation of Financial Statements - Amendments resulting from April 2009 Annual Improvements to IFRSs - for accounting periods commencing on or after 1 January 2010*

IAS 7: Statement of Cash Flows- Amendments resulting from April 2009 Annual Improvements IFRSs - for accounting periods commencing on or after 1 January 2010*

IAS 17: Leases- Amendments resulting from April 2009 Annual Improvements to IFRSs - for accounting periods commencing on or after 1 January 2010*

IAS 24: Related Party Disclosures - Revised definition of related parties - for accounting periods commencing on or after 1 January 2011*

IAS 27: Consolidated and Separate Financial Statements - Consequential amendments arising from amendments to IFRS 3 - for accounting periods commencing on or after 1 July 2009

IAS 28: Investments in Associates - Consequential amendments arising from amendments to IFRS 3 - for accounting periods commencing on or after 1 July 2009

IAS 31: Interests in Joint Ventures - Consequential amendments arising from amendments to IFRS 3 - for accounting periods commencing on or after 1 July 2009

IAS 32: Financial Instruments: Presentation- Amendments relating to classification of rights issues - for accounting periods commencing on or after 1 January 2010

IAS 36: Impairment of Assets- Amendments resulting from April 2009 Annual Improvements to IFRSs- for accounting periods commencing on or after 1 January 2010*

IAS 39: Financial Instruments: Recognition and Measurement - Amendments for eligible hedged items - for accounting periods commencing on or after 1 July 2009

IAS 39: Financial Instruments: Recognition and Measurement - Amendments resulting from April 2009 Annual Improvements to IFRSs - for accounting periods commencing on or after 1 January 2010*

Interpretations

IFRIC 14 IAS 19 - November 2009 amendment with respect to voluntary prepaid contributions is effective for annual periods beginning on or after 1 January 2011*

IFRIC 17: Distributions of Non-cash Assets to Owners - for accounting periods commencing on or after 1 July 2009

IFRIC 18: Transfers of Assets from Customers - for accounting periods commencing on or after 1 July 2009

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments - for accounting periods commencing on or after 1 July 2010*

*Still to be endorsed by the EU

The Directors anticipate that with the exception of IFRS 3, IAS 27 and 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.

Revised IFRS 3, Business Combinations and complementary Amendments to IAS 27 'Consolidated and separate financial statements' (both effective for accounting periods beginning on or after 1 July 2009):  This revised standard and the amendments are still to be endorsed by the EU.  The revised IFRS 3 and amendments to IAS 27 arise from a joint project with the Financial Accounting Standards Board (FASB), the US standards setter, and result in IFRS being largely converged with the related, recently issued, US requirements.  There are certain very significant changes to the requirements of IFRS, and options available, if accounting for business combinations.  The Group is currently assessing the impact of IFRS 3 on the Financial Statements.

In November 2009, the IASB issued the first part of IFRS 9 relating to the classification and measurement of financial assets. IFRS 9 will ultimately replace IAS 39. The standard requires an entity to classify its financial assets on the basis of the entity's business model for managing the financial assets and the contractual cash flow characteristics of the financial asset, and subsequently measures the financial assets as either at amortised cost or fair value. The new standard is mandatory for annual periods beginning on or after 1 January 2013.

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.

In prior years, investment properties have been acquired through subsidiary undertakings. In the opinion of the Directors, these transactions did not meet the definition of a business combination as set out in IFRS 3 "Business Combinations". Accordingly the transactions were not accounted for as business acquisitions and instead the financial statements reflect the substance of the transactions, which is considered to be the purchases of investment properties and associated net assets.

The results of subsidiary undertakings acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisitions 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 presentation 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 to equity.

c) Group companies

The results and financial position of all the Group entities that have a functional currency which differs from the presentation currency are translated into the presentation 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 net investment in foreign entities are taken to shareholders' 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:€1.111 (2008: £1:€1.027) and the average rate for the year used is £1:€1.123 (2008: £1:€1.260).

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 income.

Expenses

All expenses are accounted for on an accruals basis and include fees and other expenses paid to the Administrators, 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:

Expenses which are incidental to the acquisition of an investment property or development property are included within the cost of that property. 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 acquired 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 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.

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 quarterly 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. When the Group redevelops an existing investment property for continued future use as an investment property, the property remains an investment property and is not reclassified.

Transfers are made to investment property when there is a change in use, evidenced by the end of owner occupation, commencement of an operating lease to another party or completion of construction or development.

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.

For a transfer from investment property to owner occupied property, the deemed cost of property for subsequent accounting is its fair value at the date of change in use. If the property occupied by the Group as an owner occupied property becomes an investment property, the Group accounts for such property in accordance with the treatment under IAS 16  Property, Plant and Equipment up to the date of change in use. For a transfer from development to investment property, any difference between the fair value of the property at that date and its previous carrying amount is recognised in the statement of comprehensive income. When the Group completes the construction or development of a self-constructed investment property, any difference between the fair value of the property at that date and its previous carrying amount is recognised in the statement of comprehensive income.

Rental Guarantees

Rental guarantees received for vacant space acquired in a property acquisition are shown as debtors 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 debtor. The debtor 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 £9.7 million in 2009 (£8.0 million: 2008). Please refer to note 26 for further details.

Share-based payments

The Group makes equity-settled share-based payments to certain advisers and service providers. Equity-settled share-based payments are measured at fair value as at the date of grant. The fair value determined at grant date is expensed on a straight line basis over the vesting period, based on the Group's estimate of the number of instruments that will eventually vest.

Investment in subsidiaries

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. Other than these derivative financial instruments, the Group does not have any assets held for trading nor has it designated any other financial assets as being at fair value through profit or loss.

The fair value of the Group's derivatives are based on valuations as described in note 17.

(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 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 currency and 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. Other than derivative financial instruments, the Group does not have any liabilities held for trading nor has it designated any other financial liabilities as being at fair value through profit or loss.

The fair value of the Group's derivatives are based on the valuations as described in note 17.

(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 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 Company or 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.

(c) Share Capital

Financial instruments issued by the Group 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 Group 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 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 on points 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.

(e) Fair value measurement hierarchy

Effective 1 January 2009, the Group adopted the amendment to IFRS 7 for financial instruments that are measured in the statement of financial position at fair value. This requires disclosure of 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 financial asset or financial liability is categorised is determined on the basis of the lowest input that is significant to the fair value measurement. Financial assets and financial liabilities are classified in their entirety into one of the three levels.

Significant accounting estimates and judgements

The Group makes 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 amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction without deduction for any associated transfer taxes, sales taxes, or other costs normally borne by the seller. 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 as outlined below. Such estimates are inherently subjective and actual values can only be determined in a sales transaction.

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 future vacancy years.  The consideration basis for this calculation excludes the effects of any taxes. 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.

The fair value of the investment property as at 31 December 2009 was £265.8 million (2008:£ 320.9 million). Refer to note 15 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 deferred tax liability as at 31 December 2009 was £nil (2008: £nil). See note 10 for further details.

(c) Fair value of derivative contracts

The Group estimates fair values of derivative contracts based on valuation techniques employed by the contractual counter party. 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 £55.6 million liability (2008: £57.6 million liability). See note 17 for further details.

3. Revenue

	Group 2009 £'000	Company 2009 £'000	Group 2008 £'000	Company 2008 £'000
Rental Income	21,993	-	19,670	-
Service and management charges	3,949	-	4,722	-
Interest from subsidiary undertakings (note 5 & note 9)	-	9,602	-	10,711
Total	25,942	9,602	24,392	10,711

The above interest income arises from financial assets classified as loans and receivables and has been calculated using the effective interest rate method.

The interest from subsidiary companies arises on loans that have been impaired as detailed in note 14.

No contingent rent is included in the total above (2008: £nil).

The Group leases out all of its investment property under operating leases. Leases are typically for terms of standard institutional 3/6/9 years in France and 5 + 5 years in Spain.  At the balance sheet date, using the exchange rate prevailing at the balance sheet date, the Group had contracted with tenants for the following future minimum lease payments:

	2009 £'000	2008 £'000
Within one year	21,972	24,127
In the second to fifth years inclusive	60,321	64,729
After five years	15,842	24,844
Total	98,135	113,700

4. Finance Income

	Group 2009 £'000	Company 2009 £'000	Group 2008 £'000	Company 2008 £'000
Bank interest income (note 5 & note 9)	167	48	1,262	756
Foreign exchange gains	-	-	9,154	38,042
Net gains on financial assets held at fair value through profit and loss (note 6)	8,508	-	-	-
Total	8,675	48	10,416	38,798

The above interest income arises from financial assets classified as loans and receivables (including cash and cash equivalents) and has been calculated using the effective interest rate method.

5. Net gains or losses on loans and receivables

	Group 2009 £'000	Company 2009 £'000	Group 2008 £'000	Company 2008 £'000
Interest from subsidiary companies (note 3)	-	9,602	-	10,711
Bank interest income (note 4)	167	48	1,262	756
Impairment of trade and other receivables	(302)	-	(200)	-
Impairment of amounts receivable from subsidiary undertakings (note 14)	-	(33,698)	-	(94,190)
Total	(135)	(24,048)	1,062	(82,723)

6. Net gains and losses on financial assets and liabilities at fair value through profit and loss

	Group 2009 £'000	Company 2009 £'000	Group 2008 £'000	Company 2008 £'000
Net change in unrealised appreciation on financial assets and liabilities held at fair value though profit or loss
Currency swaps	8,424	-	-	-
Interest rate swaps	84	-	-	-
Net change in unrealised depreciation on financial assets and liabilities held at fair value through profit or loss
Currency swaps	-	-	(37,915)	-
Interest rate swaps	(7,223)	-	(8,812)	-
Net realised gains and losses on financial assets and liabilities held at fair value through profit or loss
Currency swaps - interest received	7,650	-	7,800	-
Currency swaps - interest paid	(8,805)	-	(7,893)	-
Net expense of currency swaps	(1,155)	-	(93)	-
Interest rate swaps - break costs	(1,567)	-	-	-
Net loss on financial assets and liabilities at fair value through profit or loss	(1,437)	-	(46,820)	-
Disclosed as:
Finance costs (note 8)	(9,945)	-	(46,820)	-
Finance income (note 4)	8,508	-	-	-
Net loss on financial assets and liabilities at fair value through profit or loss	(1,437)	-	(46,820)	-

On 16 December 2009, the Spanish bank loan with Barclays plc was amended and restated. As a result of the amendments, the interest rate swap relating to the Spanish borrowings was broken and a new interest swap agreed for the longer term of the revised loan. Of the loan principal of €22.7m, €20m has been fixed using the new swap.

7. Other administration costs

	Group 2009 £'000	Company 2009 £'000	Group 2008 £'000	Company 2008 £'000
Accounts and administrative fees	323	171	311	188
Non-executive Directors fees	110	110	110	110
Auditors' remuneration for audit services	106	47	113	51
Other professional fees	625	265	902	433
Staff costs	37	-	16	-
Depreciation	-	-	4	-
Total	1,201	593	1,456	782

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

8. Finance costs

	Group 2009 £'000	Company 2009 £'000	Group 2008 £'000	Company 2008 £'000
Interest on bank borrowings (note 9)	11,586	-	10,350	-
Borrowing costs capitalised	-	-	(181)	-
Loan fee amortisation (note 9)	666	-	615	-
Loan fee expensed on de-recognition of financial liability following amendment and restatement of borrowings	473	-	-	-
Foreign exchange loss	3,003	11,833	-	-
Net losses on financial liabilities at fair value through the profit and loss (note 6)	9,945	-	46,820	-
Other charges	56	1	34	5
Total	25,729	11,834	57,638	5

The above 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. In accordance with the Group's accounting policies certain borrowing costs were capitalised in the prior year by applying a capitalisation rate of 5.55% to expenditure incurred on such assets.

9. Total interest income and total interest expense on financial assets and financial liabilities not at fair value through profit and loss

	Group 2009 £'000	Company 2009 £'000	Group 2008 £'000	Company 2008 £'000
Interest from subsidiary companies (note 3)	-	9,602	-	10,711
Bank interest income (note 4)	167	48	1,262	756
Interest on bank borrowings (note 8)	(11,586)	-	(10,350)	-
Loan fee amortisation  (note 8)	(666)	-	(615)	-
Total interest (expense)/ income	(12,085)	9,650	(9,703)	11,467

10. 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 2009 £'000	Group 2008 £'000
Deferred taxation
France	-	(5,623)
Spain	-	-
Total	-	(5,623)
Tax expense reconciliation
Loss for the year	(31,635)	(69,709)
Less: Income not taxable	(24,147)	(19,627)
Add: Expenditure not taxable	15,578	42,419
Add: Un-provided deferred tax asset movement	40,204	30,379
Total	-	(16,538)

Tax at domestic rates applicable to profits in the country concerned

	Group 2009 £'000	Group 2008 £'000
French taxation at 33.33%	-	(5,623)
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  2007	2,815	7,343	(4,805)	270	5,623
Release to Income	(3,794)	3,222	(4,781)	(270)	(5,623)
At  31 December  2008	(979)	10,565	(9,586)	-	-
Release to Income	(1,502)	10,445	(8,943)	-	-
At  31 December  2009	(2,481)	21,010	(18,529)	-	-

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.

	2009 £'000	2008 £'000
Deferred tax liabilities	21,010	10,565
Deferred tax assets	(21,010)	(10,565)
Total	-	-

At the balance sheet date the Company has unused tax losses of £57 million (2008: £28.2 million). A deferred tax asset has been recognised in respect of £21million of such losses (2008: £10.6 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 15 years.

11. Dividends

Dividend reference period	Shares	Dividend	Paid	Date
	'000	per share	£
Quarter ending 30 September 2008	117,500	1.75p	2,056,250	12 January 2009
Quarter ending 31 December 2008	117,500	1.75p	2,056,250	27 April 2009
Quarter ending 31 March 2009	117,500	1.75p	2,056,250	22 June 2009
Quarter ending 30 June 2009	117,500	1.75p	2,056,250	12 October 2009
Total			8,225,000

A quarterly dividend of £1,057,000 (0.9p per share) for the quarter ended 30 September 2009 was paid on 9 January 2010. In accordance with IAS 10; this dividend has not been included in these financial statements.

It is also intended to distribute a dividend of 0.9p per share for the final quarter of 2009; this dividend has also not been included in these financial statements.

12. Earnings per share

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

	1 January 2009 to 31 December 2009	1 January 2009 to 30 June 2009	1 January 2008 to 31 December 2008 (restated)*	1 January 2008 to 30 June 2008 (restated)*
Earnings per income statement (£'000)	(31,635)	(20,522)	(64,086)	(15,832)
Basic and diluted earnings per share	(26.9)p	(17.5)p	(54.4)p	(13.4)p
Earnings per income statement (£'000)	(31,635)	(20,522)	(64,086)	(15,832)
Revaluation (gains)/losses in investment properties	30,759	22,861	35,825	14,443
Mark to market of currency swaps	(8,424)	(14,399)	37,915	11,082
Mark to market of interest rate swaps	8,706	8,976	8,812	(4,981)
Interest rate swap - break costs and other loan restructuring costs	473	-	-	-
Deferred taxation	-	-	(5,623)	(392)
Investment Manager's fee (capital)	919	460	1,038	527
Rental guarantee income	844	483	851	358
Foreign exchange losses\(gains)	3,003	4,639	(9,154)	(1,825)
Adjusted earnings	4,645	2,498	5,578	3,380
Adjusted earnings per share	4.0p	2.1p	4.7p	2.9p
Weighted average number of ordinary shares (000's)	117,500	117,500	117,863	118,231

* The adjusted earnings per share have been restated to adjust earnings for the effect of foreign exchange gains and losses which are not regarded as being of a recurrent nature.

The adjusted earnings are presented to provide what the Company believes 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.

The Group has the following instruments which could potentially dilute basic earnings per share in the future:

	31 December 2009	31 December 2008
Warrants	6,375,000	6,375,000
Options	1,275,000	2,550,000

Further details on warrants and options are given in note 23.

13. Net asset value per share

	31 December 2009	30 June 2009	31 December 2008	30 June 2008
Net asset value  (£'000)	19,376	30,941	65,261	103,420
Net asset value per share	16.5p	26.3p	55.5p	88.0p
Net asset value (£'000)	19,376	30,941	65,261	103,420
Mark to market of currency hedge*	1,871	4,012	(1,683)	1,234
Mark to market of interest rate swaps	16,214	17,037	9,732	(5,963)
Deferred taxation	-	-	-	5,263
Adjusted net asset value	37,461	51,990	73,310	103,954
Net asset value per share (adjusted)	31.9p	44.2p	62.4p	88.5p
Number of ordinary shares (000's)	117,500	117,500	117,500	117,500

* The mark to market of the currency hedge necessarily includes 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 is included as an adjustment; the intention is to hold the instruments to maturity at which point this element will have unwound.

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

14. 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 Trust Finance Company Limited	Ordinary	100%	Guernsey	Finance 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 Nimes 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

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 2009:

	2009 Interest bearing £'000	2009 Non-interest bearing £'000	2009 Total £'000	2008 Interest bearing £'000	2008 Non-interest bearing £'000	2008 Total £'000
Loan	112,234	25,156	137,390	119,418	20,021	139,439
Impairment	(104,472)	(23,416)	(127,888)	(80,666)	(13,524)	(94,190)
Total	7,762	1,740	9,502	38,752	6,497	45,249

	2009 Interest bearing £'000	2009 Non-interest bearing £'000	2009 Total £'000	2008 Interest bearing £'000	2008 Non-interest bearing £'000	2008 Total £'000
Current	377	1,740	2,117	1,916	6,497	8,413
Non-current	7,385	-	7,385	36,836	-	36,836
Total	7,762	1,740	9,502	38,752	6,497	45,249

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 2009 the weighted average interest rate was 5.38% (2008: 5.39%).

An impairment of £127.9 million (2008: £94.2 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 subsidiaries.

15. Investment properties

	2009 £'000	2008 £'000
Market value of investment properties at 1 January	319,793	270,946
Transfer from Development properties	-	4,550
Subsequent capital expenditure after acquisition	785	1,041
Fair value adjustment in the year	(30,759)	(35,825)
Effect of foreign exchange	(24,411)	79,081
Market value of investment properties at 31 December	265,408	319,793
Valuation per Knight Frank LLP of investment properties	265,815	320,940
Adjustment for rental guarantees	(407)	(1,147)
Market value of investment properties at 31 December	265,408	319,793

The fair value of the Group's investment properties at 31 December 2009 and 31 December 2008 has been arrived at on the basis of valuations carried out at that date by Knight Frank LLP, independent valuers not connected to the Group. The valuation basis has been market value as defined by the Royal Institution of Chartered Surveyors Approval and Valuations Standards.

The approved RICS definition of market value is the "estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion."

The Group has pledged investment properties valued at £259.1 million (€287.9 million) to secure borrowings (note 20).

At 31 December 2009, the group had un-provided contractual obligations for future repairs and maintenance of £nil (2008: £nil) and £0.51 million (2008: £1.7 million) of future capital requirements.

16. Categories of financial assets and liabilities

		Financial assets at fair value through P/L				Loans and receivables
	Notes	Group 2009 £'000	Company 2009 £'000	Group 2008 £'000	Company 2008 £'000	Group 2009 £'000	Company 2009 £'000	Group 2008 £'000	Company 2008 £'000
Current financial assets
Trade and other receivables	18	-	-	-	-	19,506	36	20,512	13
Cash and cash equivalents		-	-	-	-	16,430	10,076	23,501	19,932
Amounts receivable from subsidiary undertakings	14	-	-	-	-	-	2,117	-	8,413
Total current financial assets		-	-	-	-	35,936	12,229	44,013	28,358
Non-current financial assets
Interest rate swap	17	84	-	-	-	-	-	-	-
Amounts receivable from subsidiary undertakings	14	-	-	-	-	-	7,385	-	36,836
Total non-current financial assets		84	-	-	-	-	7,385	-	36,836
Total financial assets		84	-	-	-	35,936	19,614	44,013	65,194

		Financial liabilities at fair value through P/L				Financial liabilities measured at amortised cost
	Notes	Group 2009 £'000	Company 2009 £'000	Group 2008 £'000	Company 2008 £'000	Group 2009 £'000	Company 2009 £'000	Group 2008 £'000	Company 2008 £'000
Current financial liabilities
Trade and other payables (excluding deferred income)	19	-	-	-	-	2,536	379	2,160	73
Bank borrowings	20	-	-	-	-	1,633	-	1,769	-
Total current financial liabilities		-	-	-	-	4,169	379	3,929	73
Non-current financial liabilities
Currency swaps	17	39,410	-	47,834	-	-	-	-	-
Interest rate swap	17	16,298	-	9,732	-	-	-	-	-
Bank borrowings	20	-	-	-	-	216,280	-	233,189	-
Rent Deposits		-	-	-	-	2,597	-	3,337	-
Total non-current financial liabilities		55,708	-	57,566	-	218,877	-	236,526	-
Total financial liabilities		55,708	-	57,566	-	223,046	379	240,455	73

The Company has pledged, as part of the security package on the bank borrowings, a number of subsidiary bank accounts and shares.

17. Financial assets and liabilities held at fair value through the profit or loss

	Group 2009 £'000	Company 2009 £'000	Group 2008 £'000	Company 2008 £'000
Non-current assets
Interest rate swaps	84	-	-	-
Non-current liabilities
Currency swap  - a	(30,925)	-	(37,643)	-
Currency swap  - b	(8,485)	-	(10,191)	-
Interest rate swaps	(16,298)	-	(9,732)	-
	(55,708)	-	(57,566)	-
Total	(55,624)	-	(57,566)	-

Interest rate swap

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

The bank 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 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, €20m has been fixed using the new swap. The cost of resetting the interest rate swap was €1.8 million. The total cost consists of €1.3 million unrealised losses as at 31 December 2008 and a €0.5 million current year movement in the valuation to the final cost paid (see note 6).

The interest rate swaps are valued by reference to the bank's redemption notice of amounts due if the Company repaid it's borrowings at the balance sheet date; the Directors consider this to represent its fair value.

Currency swap

The Group uses currency derivatives to hedge significant future foreign currency transactions and cash flows to safeguard the equity investments of shareholders against significant adverse movements between Sterling and Euros.

a) On 13 October 2006, Alpha Pyrenees Trust Finance Company Limited ("Alpha Finance"), a wholly owned subsidiary of the Company, entered into a currency swap with Barclays Bank Plc. Under the terms of this agreement, Alpha Finance will pay Barclays Bank Plc €130.1 million and Barclays Bank Plc will pay Alpha Finance £87.6 million on 16 October 2013. ln addition, there are quarterly periodic payments in February, May, August and October of each year starting on 16 February 2007 and ending 16 October 2013. On these dates Barclays Bank Plc will pay Alpha Finance an amount equal to 7 per cent per annum on £87.6 million and Alpha Finance will pay Barclays Bank Plc an amount equal to 6 per cent per annum on €130.1 million.

b) On 18 January 2007, Alpha Finance entered into a further currency swap with Barclays Bank Plc. Under the terms of this swap, Alpha Finance will pay Barclays Bank Plc €33 million and Barclays Bank Plc will pay Alpha Finance £21.6 million on 16 October 2013. In addition, there are quarterly periodic payments in February, May, August and November of each year starting on 16 February 2007 and ending on 16 October 2013. On these dates Barclays Bank Plc will pay Alpha Finance an amount equal to 7 per cent per annum on £21.6 million and Alpha Finance will pay Barclays Bank Plc an amount equal to 5.9725 per cent per annum on €33 million.

 At 31 December 2009, a total amount of £11.8 million (€13.1 million) (2008: £14.8 million (€15.2 million)) had been deposited as collateral with Barclays Bank Plc to support both the 13 October 2006 and 18 January 2007 swaps.

The fair value of the currency swap contracts is determined by reference to the valuation process carried out by the contractual counterparty.

18. Trade and other receivables

	Group 2009 £'000	Company 2009 £'000	Group 2008 £'000	Company 2008 £'000
Trade receivables	1,612	-	1,660	-
Amounts receivable from Property Managing Agents	3,655	-	1,438	-
Bank interest receivable	4	-	25	-
Prepayments	843	-	664	-
Rental guarantees	537	-	1,504	-
Other debtors	12,855	36	15,221	13
Total	19,506	36	20,512	13

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value. Note 26 provides an ageing of trade receivables along with details of the provision against loans during the year.

Rental guarantees are contractual agreements specifically referred to in the relevant property sale and purchase agreements under which the vendor provides a guarantee (normally by way of an escrowed bank account deposit) for units within the acquired property which are vacant at the time of acquisition. There have been no acquisitions during the year. Income of £0.8 million was received in 2009 (2008: £0.9 million) in relation to existing rent guarantees.

Included in other debtors is collateral of £11.8 million (2008: £14.8 million) held with Barclays Bank Plc in relation to the currency swap (note 17).

19. Trade and other payables

	Group 2009 £'000	Company 2009 £'000	Group 2008 £'000	Company 2008 £'000
Trade creditors	230	-	751	-
Deferred income	3,298	-	524	-
Investment Manager's fee payable	389	322	160	34
VAT Payable	54	-	53	-
Accruals	1,863	57	1,196	39
Total	5,834	379	2,684	73

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 payables approximates to their fair value.

20. Bank borrowings

	Group 2009 £'000	Company 2009 £'000	Group 2008 £'000	Company 2008 £'000
Current liabilities: Interest payable	1,633	-	1,769	-
Non-current liabilities - Bank borrowing	216,280	-	233,189	-
Total liabilities	217,913	-	234,958	-
The borrowings are repayable as follows:
Interest payable	1,633	-	1,769	-
On demand or within one year	-	-	-	-
In the second to fifth years inclusive	-	-	21,410	-
After five years	216,280	-	211,779	-
	217,913	-	234,958	-

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

	2009 £'000	2008 £'000
Opening balance	233,189	176,033
Amortisation of finance costs	666	615
Net movement on loan restructuring	51	-
Exchange differences on translation of foreign currencies	(17,626)	56,541
Total	216,280	233,189

At 31 December 2009, €221 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 €259.5 million. The borrowings are to be repaid on 10 February 2015.

On 16 December 2009, the Spanish bank loan was amended and restated. The loan principal is unchanged at €22.7 million but with €2.7 million on a floating rate basis (at three month Euribor plus margin) and €20 million on a fixed rate. The term of the loan was extended and the repayment date is now 10 February 2015.   Loans are secured over the shares in the Company's operating subsidiaries and mortgages over properties with a total value of €28.4 million.

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 17). The weighted average rate of interest on all fixed rate loans is 5.26% (2008: 5.26%).

21. Share capital

Authorised share capital

The authorised share capital is unlimited

Issued and fully paid

	Number of shares
At 1 January 2008	127,000,000
Shares cancelled during the year	(9,500,000)
At 1 January 2009	117,500,000
Shares cancelled during the year	-
At 31 December 2009	117,500,000

The Company carries one class of shares which carry no right to fixed income. All ordinary shares have nil par value. There have been no shares issued during the year.

In January 2008 9.5 million shares were purchased by the Company for cancellation at an average price of 82p per share. The cost of the share buybacks have been taken against reserves.

22. Reserves

The movements in the reserves for the Group and the Company are shown above in the statements of changes in equity.

Share premium account

On 10 July 2006 the Company issued 2,500,000 ordinary shares of no par value at a premium of £1 per share.

Special reserve

On 9 December 2005, the Royal Court of Guernsey confirmed the reduction of capital by way of cancellation of the amount standing to the credit of its share premium account on that date. The amount 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 buy- back of shares and payment of dividends.

Warrant reserve

The warrant reserve contains the fair value of share-based payments in respect of the warrants issued to the Investment Manager but not exercised (note 23).

Translation reserve

The translation reserve contains exchange differences arising on consolidation of the Group's overseas operations.

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 buy-back of shares and payment of dividends.

23. Share based payments

a) Warrants

During 2005, the Company issued warrants to the Investment Manager pursuant to which it has been granted the right to subscribe for 6,375,000 ordinary shares in the company at an exercise price of £1 per share. Such warrants can be exercised at any time up to and including 29 November 2010. The warrant instrument provides that the holder of the warrant may from time to time transfer all or some of its warrants to third parties. No warrants have been exercised, since grant date, leaving 6,375,000 warrants outstanding and available for exercise. The weighted average exercise price of outstanding warrants at 31 December 2009 was £1 (2008: £1) with a weighted average remaining contractual life of 1 year.

b) Incentive options

In order to incentivise the Investment Manager, the Company had granted options to it to acquire up to 3,825,000 ordinary shares. The options vest in three tranches of equal amounts over a three year period ending on the third, fourth and fifth anniversaries of admission of the shares to the Official List of the UKLA (29 November 2005) subject to a cumulative shareholder return performance criteria of 10% per annum (50% vesting) and 12% per annum (100% vesting) having been met over a period of the preceding three years for each tranche respectively. Once vested the options are exercisable during the subsequent seven year period.

Details of the share options outstanding during the year are as follows:

Number of options	Expiry	Price
1,275,000	29 November 2017	100p

	2009 Number of options	2008 Number of options
Outstanding at 1 January	2,550,000	3,825,000
Expired during the year	(1,275,000)	(1,275,000)
Outstanding at 31 December	1,275,000	2,550,000

The second tranches of options issued at float have lapsed as the cumulative shareholder return criteria were not met.

The weighted average exercise price of outstanding options at 31 December 2009 was £1 (2008: £1) with a weighted average remaining contractual life of 7 years.

c) Share based payments

The Company recognised no share based payment expenses for the year end 2009 (2008: £nil).

24. Events after the balance sheet date

There were no significant events after the balance sheet date.

25. 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 19.

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

Directors fees	2009 £'000	2008 £'000
Dick Kingston (Chairman)	30	30
Christopher Bennett	20	20
David Jeffreys	20	20
Phillip Rose	20	20
Serena Tremlett	20	20
Total	110	110

During the year Alpha Global Property Securities Fund Pte Limited, being a wholly owned subsidiary of the Investment Manager, distributed its co-investment shares in the Company directly to the members of the Investment Manager. At year end Alpha Global Property Securities Fund Pte Limited held no shares (2008:1,490,000) in the Company.

The following, being partners of the Investment Manager, hold or have an interest in the following shares in the Company at 31 December 2009:

	2009 Number of shares held	2008 Number of shares held
ARRCO Limited*	10,137,393	n/a
Sir John Beckwith	3,435,681	2,143,600
P. Rose	1,250,079	600,000
B. Bauman	164,764	105,455
IPGL Property Funds Ltd	150,490	0
M. Johnson	118,591	26,400
S. Wilson	36,759	5,000
R. Armist	7,450	0

*ARRCO Limited's interest includes 10,137,393 shares held by a fellow group company, Antler Investment Holdings Limited. ARRCO Limited became a partner of the Investment Manager in June 2009 and was not a partner at the beginning of the year.

Phillip Rose is the CEO and a partner of the Investment Manager. Paul Cable, being the Investment Manager's Fund Manager responsible for the Trust's investments, holds 75,768 (2008: 30,193) shares in Alpha Pyrenees Trust Limited.

Serena Tremlett is also the Managing Director and a major shareholder of Morgan Sharpe Administration Limited, the Company's administrator and secretary. During the period the Company paid Morgan Sharpe Administration Limited fees of £89,700 (2008: £78,000).

26. 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 of 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:

·      Amounts receivable from subsidiary undertakings

·      Trade and other receivables

·      Cash and cash equivalents

·      Trade and other payables

·      Rental deposits

·      Derivative financial instruments

·      Bank borrowings

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 counter parties 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 43.3% (2008:40.5%) of the annual contracted rent. The tenants next break option is in December 2015.  The Group meets with the tenant frequently and monitors their financial performance closely.

The ageing of trade receivables is as follows:

	2009 £'000	2008 £'000
0 to 6 months	1,612	1,660
Over 6 months	-	-
	1,612	1,660

At the end of the year trade receivables of £0.5 million have been provided against (2008: £0.2 million).

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

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 2009, the Group had spread its cash across 8 financial institutions and had not placed more than 40% in 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 £127.9 million (2008: £94.2 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 subsidiaries (note 14).

c) Maximum exposure

The Group's and Company's maximum exposure to credit risk by class of financial instrument is shown below:

	Group 2009 £'000	Group 2009 £'000	Company 2009 £'000	Company 2009 £'000	Group 2008 £'000	Group 2008 £'000	Company 2008 £'000	Company 2008 £'000
	Carrying Value	Maximum Exposure	Carrying Value	Maximum Exposure	Carrying Value	Maximum Exposure	Carrying Value	Maximum Exposure
Amounts owed by subsidiary undertakings	-	-	9,502	9,502	-	-	45,249	45,249
Trade and other receivables	19,506	19,506	36	36	20,512	20,512	13	13
Cash and cash equivalents	16,430	16,430	10,076	10,076	23,501	23,501	19,932	19,932
Financial assets at fair value through profit or loss	84	84	-	-	-	-	-	-
Total	36,020	36,020	19,614	19,614	44,013	44,013	65,194	65,194

Collateral is held to mitigate credit risk of trade receivables in the form of rental deposits and rental guarantees, in the event of non payment of rental income by tenants.

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 has procedures with the object of minimising such losses such as maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of committed credit facilities. Cash and cash equivalents are placed with financial institutions on a short term basis reflecting the Group's 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.

2009	Within 1 year £'000	1-2 years £'000	2-5 years £'000	5-10 years £'000	Over 10 years £'000	Total £'000
Trade and other payables (excluding deferred income)	2,536	-	-	-	-	2,536
Rent Deposits	374	1,044	1,021	65	93	2,597
Bank Borrowings	1,633	-	-	216,280	-	217,913
Derivative financial instruments at fair value through the profit or loss
-       Cash Outflows	7,171	8,631	150,960	-	-	166,762
-       Cash Inflows	(6,221)	(7,451)	(113,680)	-	-	(127,352)
	5,493	2,224	38,301	216,345	93	262,456
2008	Within 1 year £'000	1-2 years £'000	2-5 years £'000	5-10 years £'000	Over 10 years £'000	Total £'000
Trade and other payables (excluding deferred income)	2,160	-	-	-	-	2,160
Rent Deposits	399	22	16	1,650	1,250	3,337
Bank Borrowings	1,769	-	21,410	211,779	-	234,958
Derivative financial instruments at fair value through the profit or loss
-       Cash Outflows	9,241	8,885	149,377	-	-	167,503
-       Cash Inflows	(7,462)	(7,128)	(105,079)	-	-	(119,669)
	6,107	1,779	65,724	213,429	1,250	288,289

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 has entered into currency swaps to safeguard the equity investments of shareholders against significant adverse movements between Sterling and Euros. Details of the currency swap are as disclosed in note 17.

The tables below summarise the Group's and Company's exposure to foreign currency risk at 31 December 2009 and 31 December 2008. The Group's and Company's assets and liabilities at carrying amounts are included in the table, categorised by the currency at their carrying amount.

	Group 2009 £'000	Group 2009 £'000	Group  2009 Total £'000	Company 2009 £'000	Company 2009 £'000	Company 2009 Total £'000
	€	£		€	£
Current financial assets
Trade and other receivables	19,470	36	19,506	-	36	36
Cash and cash equivalents	15,715	715	16,430	9,362	714	10,076
Amounts receivable from subsidiary undertakings	-	-	-	2,117	-	2,117
Non-current financial assets
Amounts receivable from subsidiary undertakings	-	-	-	7,385	-	7,385
Interest rate swaps	84	-	84	-	-	-
Total financial assets	35,269	751	36,020	18,864	750	19,614
Current financial liabilities
Trade and other payables (excluding deferred income)	(2,157)	(379)	(2,536)	-	(379)	(379)
Bank borrowings	(1,633)	-	(1,633)	-	-	-
Non-current financial liabilities
Currency swaps	(39,410)	-	(39,410)	-	-	-
Interest rate swaps	(16,298)	-	(16,298)
Bank borrowings	(216,280)	-	(216,280)	-	-	-
Rent deposits	-	-	-	-	-	-
Total financial liabilities	(275,778)	(379)	(276,157)	-	(379)	(379)
Net balance sheet currency position	(240,509)	372	(240,137)	18,864	371	19,235

	Group 2008 £'000	Group 2008 £'000	Group  2008 Total £'000	Company 2008 £'000	Company 2008 £'000	Company 2008 Total £'000
	€	£		€	£
Current financial assets
Trade and other receivables	20,499	13	20,512	-	13	13
Cash and cash equivalents	23,499	2	23,501	19,931	1	19,932
Amounts receivable from subsidiary undertakings	-	-	-	8,413	-	8,413
Non-current financial assets
Amounts receivable from subsidiary undertakings	-	-	-	36,836	-	36,836
Total financial assets	43,998	15	44,013	65,180	14	65,194
Current financial liabilities
Trade and other payables (excluding deferred income)	(2,087)	(73)	(2,160)	-	(73)	(73)
Bank borrowings	(1,769)	-	(1,769)	-	-	-
Non-current financial liabilities
Currency swaps	(47,834)	-	(47,834)	-	-	-
Interest rate swaps	(9,732)	-	(9,732)
Bank borrowings	(233,189)	-	(233,189)	-	-	-
Rent deposits	(3,337)	-	(3,337)	-	-	-
Total financial liabilities	(297,948)	(73)	(298,021)	-	(73)	(73)
Net balance sheet currency position	(253,950)	(58)	(254,008)	65,180	(59)	65,121

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 described in Note 17, currency swap derivatives have been entered into to protect, to an extent, the Sterling equity invested from fluctuations in the Euro exchange rate. As the property portfolio is acquired and mortgaged in Euros the swap is designed to provide some certainty on the net equity invested and also provide some hedge on the Euro income generated on these properties. The Group, therefore, considers it appropriate from a risk perspective to review an exposure on the net current assets and cash not forming part of the invested equity. For illustrative purposes, therefore, the effect of a strengthening of the Euro by 5 cents would increase Group net current assets by £1.5 million (2008: £2 million). A weakening of the Euro by 5 cents would decrease net Group assets by £1.4 million (2008: £1.9 million).

On a Company only level the foreign exchange sensitivities are necessarily greater given the large intercompany loan book. However a provision of £127.9 million (2008: £94.2 million) has been made against intercompany loans to reflect the current mark to market impact on the currency hedge and property valuations. For illustrative purposes, a strengthening of the Euro by 5 cents would increase the Company net assets by £0.9 million (2008: £3.3 million). A weakening of the Euro by 5 cents would decrease the Company net assets by £0.8 million (2008: £3 million).

b) Cash flow and fair value interest rate risk

The Group's and Company's interest rate risk arises from the following financial assets and liabilities.

Interest Rate Profile As at 31 December 2009 Weighted average interest rate
	Group 2009 %	Group 2009 £'000	Company 2009 %	Company 2009 £'000
Financial assets at fair value through profit or loss
Derivative financial assets
Non-interest bearing	-	84	-	-
Loans and receivables
Trade and other receivables
Non-interest bearing	-	7,679	-	36
Variable	0.41%	11,827	-	-
Loans and receivables
Cash and cash equivalents
Non-interest bearing	-	3,901	-	-
Variable	0.20%	12,529	0.25%	10,076
Loans and receivables
Amounts receivable from subsidiary undertakings
Non-interest bearing	-	-	-	25,156
Fixed	-	-	5.38%	112,234
Financial liabilities at fair value through profit or loss
Derivative financial liabilities
Fixed -payable	5.99%	166,762	-	-
Fixed - receivable	7.00%	127,352	-	-
Financial liabilities carried at amortised cost
Bank borrowings
Non-interest bearing	-	1,633	-	-
Fixed	5.26%	213,850	-	-
Variable	3.37%	2,430
Financial liabilities carried at amortised cost
Trade and other payables
Non-interest bearing	-	5,834	-	379
Rent deposits
Non-interest bearing	-	2,597	-	-

Amounts receivable from subsidiary undertakings has been shown gross of the provision as interest continues to be calculated on the full balance outstanding.

Interest Rate Profile As at 31 December 2008 Weighted average interest rate
	Group 2008 %	Group 2008 £'000	Company 2008 %	Company 2008 £'000
Loans and receivables
Trade and other receivables
Non-interest bearing	-	5,722	-	13
Variable	2.35%	14,790	-	-
Loans and receivables
Cash and cash equivalents
Non-interest bearing	-	941	-	-
Variable	1.71%	22,560	1.64%	19,932
Loans and receivables
Amounts receivable from subsidiary undertakings
Non-interest bearing	-	-	-	20,021
Fixed	-	-	5.39%	119,418
Financial liabilities at fair value through profit or loss
Derivative financial liabilities
Fixed -payable	5.99%	158,801	-	-
Fixed - receivable	7.00%	109,284	-	-
Financial liabilities carried at amortised cost
Bank borrowings
Non-interest bearing	-	1,769	-	-
Fixed	5.26%	233,189	-	-
Financial liabilities carried at amortised cost
Trade and other payables
Non-interest bearing	-	2,684	-	73
Rent deposits
Non-interest bearing	-	3,337	-	-

Amounts receivable from subsidiary undertakings has been shown gross of the provision as interest continues to be calculated on the full balance outstanding.

The Group interest rate risk arises from long-term borrowings; the Group has interest rate swaps as disclosed in note 17.Further details concerning the derivative financial liabilities are provided in note 17.

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

For the Group, an increase in 100 basis points in interest yields would result in a post-tax profit of £0.3 million (2008: £0.4 million). A decrease in 100 basis points in interest yields would result in a post tax loss for the period of £0.3 million (2008: £0.4 million).

For the Company, an increase in 100 basis points in interest yields would result in a post-tax profit of £0.1 million (2008: £0.2 million). A decrease in 100 basis points in interest yields would result in a post tax loss for the period of £0.1 million (2008:£0.2 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) Fair value estimation

The following methods and assumptions were 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 or 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.

·      The fair value of the currency swap contracts is determined by reference to the valuation process carried out by the contractual counterparty.

·      The fair value of the derivative interest rate swap contracts are determined by reference to the bank's redemption notice of amounts due if the Company repaid its borrowings at the balance sheet date.

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.

The following table shows an analysis of the fair values of financial instruments recognised in the balance sheet by level of the fair value hierarchy: (see Note 2, financial instruments (e)).

As at 31 December 2009	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Financial assets at fair value through profit or loss	-	84	-	84
Financial liabilities at fair value through profit or loss	-	(55,708)	-	(55,708)
Total	-	(55,624)	-	(55,624)

As at 31 December 2008	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Financial assets at fair value through profit or loss	-	-	-	-
Financial liabilities at fair value through profit or loss	-	(57,566)	-	(57,566)
Total	-	(57,566)	-	(57,566)

Company

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

d) 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.

e) 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 2009 and at 31 December 2008 were as follows:

	Group 2009  €'000	Group 2008  €'000
Total borrowings	243,743	243,743
Less: cash and cash equivalents	(18,253)	(24,136)
Net debt	225,490	219,607
Property valuation	295,320	329,605
Net leverage ratio	76.4%	66.6%

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

Directors and Trust information
Directors: Dick Kingston (Chairman) Christopher Bennett David Jeffreys Phillip Rose Serena Tremlett	Joint brokers: Numis Securities Limited 10 Paternoster Square London EC4M 7LT KBC Peel Hunt Limited 111 Old Broad Street London EC2U 1PH	Deloitte & Touche LLP Hill House 1 Little New Street London EC4A 3TR
Registered office: Isabelle Chambers Route Isabelle St Peter Port Guernsey	Independent valuers: Knight Frank LLP 55 Baker Street London W1V 8AN	Legal advisors in Guernsey: Carey Olsen PO Box 98 Carey House Les Banques St Peter Port Guernsey GY1 4BZ
Investment Manager: Alpha Real Capital LLP 1b Portland Place London W1B 1PN	Auditors: BDO Limited PO Box 180 Place du Pré Rue du Pré Ruette Braye St Peter Port Guernsey GY1 3LL	Legal advisors in the UK: Norton Rose 3 More London Riverside London SE1 2AQ
Administrator and Secretary: Morgan Sharpe Administration Limited Isabelle Chambers Route Isabelle St Peter Port Guernsey GY1 3TX	Tax advisors: BDO LLP 55 Baker Street London W1U 7EU	Registrar: Computershare Investor Services (Channel Islands) Limited Ordnance House 31 Pier Road St Helier Jersey  JE4 8PW

Shareholder information

Dividends

Ordinary dividends 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 Services Authority in the United Kingdom.

Financial Calendar

Financial reporting	Reporting/Meeting dates	Dividend period	Ex-dividend date	Record date	Payment date
Annual Results Announcement	19 March 2010	Quarter ended 31 December 2009	17 March 2010	19 March 2010	1 April 2010
Annual Report Published	31 March 2010
Annual General Meeting	30 June 2010
First Interim Management Statement (Qtr 1)	17 May 2010	Quarter ended 31 March  2010	26 May 2010	28 May 2010	21 June 2010
Half Yearly Report	13 August 2010	Quarter ended 30 June  2010	15 September 2010	17 September 2010	11 October 2010
Second Interim Management Statement (Qtr 3)	18 November 2010	Quarter ended 30 September 2010	8 December 2010	10 December 2010	10 January 2011

 

END

 

 

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