Annual Financial Report

RNS Number : 4692Z

Alpha Pyrenees Trust Limited

16 March 2012

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

ALPHA PYRENEES TRUST POSTS RESULTS FOR THE YEAR ENDED 31 DECEMBER 2011:

INCREASED NET ASSET VALUE OF 37.0p PER SHARE (ADJUSTED)

INCREASED PORTFOLIO VALUATION (+2.7% YEAR-ON-YEAR)

INCREASED WEIGHTED AVERAGE LEASE LENGTH

DIVIDEND MAINTAINED

Alpha Pyrenees Trust Limited, the property company investing primarily in commercial real estate in France, today posts its results for the year from 1 January to 31 December 2011.

The Trust announced adjusted earnings of £3.5 million for the period together with the declaration of a further dividend of 0.9p per share in respect of the fourth quarter. The Trust has paid and declared dividends totaling 3.6p per share for the year to 31 December 2011.

Highlights of the period to 31 December 2011 include:

· Lease extensions and new leases covering approximately 124,780 square metres (48% of the Trust's portfolio by area) achieved since 1 January 2011

· Weighted average lease length increased to 8.8 years to expiry and 5.0 years to next break (6.8 years to expiry and 3.5 years to next break as at 30 June 2011)

· 85% of rental income comes from Grade A tenants

· Portfolio valuations increased by 2.8% in the six months to 31 December 2011 (+2.7% since 31 December 2010)

· Current portfolio valuation yield of 8.3%

· 91% of the Trust's portfolio by value is in France with the French economy having grown by 1.7% in 2011

· Lease rentals are subject to annual indexation; indexation trend improving in France

· NAV (adjusted) of 37.0p per share as at 31 December 2011 (34.0p as at 31 December 2010)

· Adjusted earnings of £3.5 million for the twelve months to 31 December 2011 (adjusted earnings per share of 3.0p)

· Dividend of 0.9p per share declared for the fourth quarter payable on 23 April 2012 and a total of 3.6p per share paid and declared for the year to 31 December 2011

Dick Kingston, Chairman of Alpha Pyrenees Trust, commented:

"Our primary management focus remains on active asset management within the existing portfolio, in particular the extension of lease terms and the letting of vacant units to secure the Trust's income. The Board is pleased to note both the important progress achieved on this front in the current economic climate and the consequent increase in the weighted average lease length of the portfolio The French economy has performed well relative to many other countries in the eurozone and leasing take-up has shown some signs of improvement in both the offices and logistics sectors in France. The Trust's pro-active management approach has identified opportunities to add value at some of the Trust's properties and with this in mind the Board believes that it is sensible to conserve available cash for future investment in such opportunities. The Board has taken into consideration the current market conditions, the trend in rental indexation, progress on leasing and other initiatives that are being pursued and has maintained the dividend of 0.9p per share for the fourth quarter of 2011."

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

"The Trust owns a diversified portfolio of quality-tenanted properties focused primarily on the French property market, which represents 91% of the portfolio by value, in particular the Ile-de-France region around Paris that represents 83% and which remains one of Europe's more stable property markets. Following successful asset management initiatives the December 2011 portfolio valuation has shown a Euro like-for-like increase of 2.7% over the year and the Investment Manager will continue to concentrate on opportunities that exist within the Trust's property portfolio to add value through active asset management."

Contact:

Dick Kingston
Chairman, Alpha Pyrenees Trust Limited
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 2011

Objective

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

The Trust seeks to provide shareholders with 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 of properties spread across different property sectors with a variety of tenants.

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.

ISA/SIPP status

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

Website

www.alphapyreneestrust.com

Financial highlights

	Year ending 31 December 2011	Half year ending 30 June 2011	Year ending 31 December 2010	Half year ending 30 June 2010
Net asset value (adjusted) (£'000)*	43,481	33,740	39,921	40,972
Net asset value per ordinary share (adjusted)*	37.0p	28.7p	34.0p	34.9p
Net asset value per ordinary share	18.5p	15.0p	17.1p	12.7p
Earnings per share (adjusted - basic & diluted)**	3.0p	1.8p	3.6p	1.8p
Earnings per share (basic & diluted)	5.3p	(0.1)p	4.9p	0.1p
Dividend per share (paid)	3.6p	2.7p	3.6p	2.7p

*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 component of the currency swap, the interest rate swap derivatives and deferred tax provisions; full analysis is given in note 10 to the accounts.

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

Chairman's Statement

Management emphasis during the period 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 progress achieved on this front throughout the year, most notably at the Villarceaux-Nozay, Roissy, Champs-sur-Marne and Fresnes properties. Since January 2011 lease extensions or new leases have been achieved on a total of approximately 124,780 square metres representing around 48% of the portfolio by area. Further detail on asset management progress appears in the Property Review section.

In these uncertain times, the French economy has performed well relative to many other countries in the eurozone and leasing take-up has shown some signs of improvement through 2011 in both the office and logistics sectors. The Trust's pro-active management approach, including close contact with our tenants, has identified opportunities to add value at some of the Trust's properties and with this in mind the Board believes that it is sensible to conserve available cash for investment in such opportunities.

Results and dividend

Results for the period show adjusted earnings of £3.5 million and adjusted earnings per share of 3.0p (note 9).

The Trust currently has vacant space with an estimated annual rental value of approximately £2.9 million (€3.5 million) and predicting the timing and level of re-leasing that will be achieved remains difficult in the current economic climate where leasing decisions generally take longer. The Trust's earnings have also been constrained by the strategic decision to retain substantial cash reserves (£12.8 million), which earn a low rate of return at present, in order to maximise the Trust's future flexibility. The Board has taken into consideration the current market conditions, the trend in rental indexation, progress on leasing and other initiatives that are being pursued and has maintained the dividend for the fourth quarter to 31 December 2011.

The dividend of 0.9p for the fourth quarter will be payable to the shareholders on the register as of 30 March 2012 and will be paid on 23 April 2012. This brings the total dividend paid and declared for the year to 31 December 2011 to 3.6p per share.

Revaluation and Net Asset Value

Investment properties are included in the balance sheet at an independent valuation of £254.8 million (€304.0 million) providing an average valuation yield across the portfolio of 8.3% as at 31 December 2011 and showing a 2.7% improvement in value on a Euro like-for-like basis compared to 31 December 2010 (€296.1m).

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, 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 85% of the Trust's rental income.

Following successful asset management initiatives, the weighted average lease length within the portfolio has increased to 8.8 years to expiry and 5.0 years to the next break as at 31 December 2011 (6.8 years to expiry and 3.5 years to next break as at 30 June 2011).

As at 31 December 2011 the adjusted net asset value per ordinary share is 37.0p (note 10); this compares to 34.0p as at 31 December 2010, an increase of 3.0p for the year. The improvement in the year is primarily due to property revaluations.

Portfolio Summary

Country	Property	Sqm	Description	Valuation £m	Valuation €m
France	Villarceaux-Nozay	78,800	Business park	111.0	132.4
France	Aubervilliers	8,750	Offices	18.3	21.8
France	Goussainville	20,500	Warehouse and offices	12.8	15.3
France	Champs-sur-Marne	5,930	Offices	12.8	15.3
France	Aubergenville	27,700	Logistics	9.4	11.2
France	St Cyr L'Ecole	6,340	Offices	8.7	10.4
France	Athis Mons	23,280	Logistics with offices	8.1	9.7
France	Gennevilliers	3,330	Offices with light industrial	8.0	9.6
France	Mulhouse	5,250	Offices	7.4	8.8
France	Roissy-en-France	7,800	Offices and warehouse	7.0	8.3
France	Nîmes	3,100	Offices with retail	7.0	8.3
France	Evreux	14,130	Logistics with offices	6.7	8.0
France	Ivry-sur-Seine	7,420	Warehouse and offices	5.7	6.8
France	Fresnes	6,540	Warehouse and offices	4.9	5.8
France	Vitry-sur-Seine	5,180	Warehouse and offices	4.5	5.4
Spain	Córdoba	16,880	Retail park	14.2	17.0
Spain	Zaragoza	9,520	Warehouses	3.1	3.7
Spain	Alcalá de Guadaíra	5,700	Shopping centre	2.7	3.2
Spain	Écija	5,950	Shopping centre	2.5	3.0
Total		262,100		254.8	304.0

Finance

The Trust has total borrowings of £203.8 million (€243.1 million) as at 31 December 2011 under its facilities with Barclays Bank Plc.

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 - the French (€221.1 million) and Spanish (€22.0 million) borrowings both mature in February 2015.

· 99% of borrowings have 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 115% from February 2012; the Trust's weighted average ICR over the year to 31 December 2011 was 165%.

· On the LTV test date in February 2014, the Trust's LTV should not exceed 87.5% on a country portfolio basis (within the French portfolio the Alcatel-Lucent property at Villarceaux-Nozay should not exceed 85%). The weighted average loan to value covenant is 86.5%. As at 31 December 2011 the Trust has net leverage of 74.9% (taking into account cash of £12.8 million).

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

The Trust holds £12.8 million of cash and un-mortgaged properties with a value of £7.0 million (€8.3 million) as at 31 December 2011.

The Group has used currency derivatives to hedge its planned net invested equity (details provided in Note 20 to the accounts). A total of €163.1m was hedged under derivatives entered into in 2006 and 2007 and priced at the market rates at that time. The hedges expire in October 2013.

Due to the significant fall in the value of the properties over the period since setting the hedges, the current balance sheet has a net Euro exposure when comparing the net invested equity to the hedges transacted. This position causes the net asset value of the Group to improve as the Euro weakens (and vice versa). A sensitivity of this exposure is considered in Note 20 of the accounts.

Market outlook

· Overall leasing activity picked up in France but has remained subdued in Spain over the period and against this backdrop the Trust has achieved lease extensions and new leases on 124,780 square metres (48% of its portfolio) since January 2011.

· Vacancy rates in our principal occupational markets have stabilised and take-up has improved. In the Paris region (Ile-de-France), where the majority of the Trust's portfolio is situated, office vacancy remains low at 6.6% and significant oversupply of new space appears unlikely in the medium term due to the low level of speculative development.

· The Trust's portfolio with 85% of current income from Grade A tenants is significantly insulated from weaker covenants.

· In France, the annualised construction cost index showed positive growth for the seventh consecutive quarter running at 6.8% in the third quarter of 2011, the increase having accelerated during 2011. In Spain, CPI was running at an annualised rate of 2.0% at the end of January 2012, the increase having moderated during 2011.

· The French economy has performed well relative to other economies in Europe with positive growth in GDP of 1.7% for 2011 though this is forecasted to moderate in 2012 and the short term outlook remains subdued.

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

Summary

· The Trust owns a diversified freehold portfolio of properties totalling £254.8 million (€304.0 million) with an average valuation yield of 8.3% at the December valuation.

· The December valuation showed a 2.7% Euro like-for-like increase year-on-year.

· The Trust's leases are subject to annual index-linked rent reviews and the construction cost index is on an improving trend in France.

· 85% of the Trust's rental income comes from Grade A tenants with a strong capacity to pay.

· The Trust's current average lease length has increased over the year to 8.8 years to expiry and 5.0 years to the next break.

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

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

· The Trust's cash reserves of £12.8 million leave it well positioned to redeploy some of the low-returning cash in value added opportunities within the existing portfolio.

Dick Kingston
Chairman
15 March 2012

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, 91% is invested in France and 9% in Spain in terms of capital value.

The valuation of the portfolio as at 31 December 2011 was approximately £254.8 million (€304.0 million) giving an average valuation yield of 8.3% across the French and Spanish portfolios. The portfolio as a whole showed a valuation increase of 2.7% on a Euro like-for-like basis compared to 31 December 2010 and a 2.8% increase compared to 30 June 2011. The year-on-year increase consisted of an increase of 3.0% in the French portfolio (compared to a 0.8% increase in 2010) and a decline of 0.4% in the Spanish portfolio (compared to a 5.1% decline in 2010). In conclusion the French part of the portfolio registered gains over the period, mainly linked to pro-active asset management, whereas the situation in Spain remained broadly stable. The average capital value of the portfolio is approximately £972 (€1,160) per square metre (equivalent to £90 per square foot) and the average rental value is approximately £87 (€104) per square metre per annum (equivalent to £8.08 per square foot). Of the overall portfolio, 83% is located within the Ile-de-France region around Paris. The portfolio has 68% exposure to the French office and business park sector of which 62% of the total portfolio is in the Ile-de-France region. The reinstatement cost of the portfolio buildings has been assessed at approximately £230 million (€274 million) representing 90% of current value.

The Trust's portfolio is diversified across business sectors with 68% in offices and business park property, 24% in warehouses and 8% in retail.

The portfolio benefits from strong credit tenants with 85% of its current rent roll secured by leases to Grade A tenants (large international/national companies or public sector). Examples of those categorised as Grade A are given in the Chairman's Statement.

The portfolio has an overall level of average occupancy of 87% measured by rental income as a percentage of potential total income with vacancy representing 13%.

The weighted average lease length as at 31 December 2011 is 8.8 years to expiry and 5.0 years to next break compared to 6.8 years to expiry and 3.5 years to next break at 30 June 2011 and 57% of the portfolio income derives from leases with more than 5 years until their first break option.

Asset management review

The Investment Manager has continued to concentrate on active asset management and property management initiatives, including investment within the existing portfolio, to secure the Trust's income and we are pleased to report a number of important achievements in the following areas:

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

· letting of vacant units.

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

The Trust has a strong track record of extending leases with existing tenants to new long term lease agreements which both meet tenants' requirements and secure the Trust's income. Notable examples of this include the new long term leases negotiated with Conseil General (Local Authority) at Nîmes in 2010, Exapaq at Fresnes, OCP at Roissy and Alcatel-Lucent at Villarceaux-Nozay since 1 January 2011. The weighted average lease length on the top ten tenants in the portfolio, which account for 77% of total passing rent on the portfolio, is currently 8.7 years to expiry and 5.6 years until the next break option.

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.

France

In addition to the progress reported in the Half Year report, including lease extensions and new leases across the portfolio on approximately 18,200 square metres of office, warehouse and retail space, the following progress has been achieved since 1 January 2011:

Villarceaux-Nozay -Alcatel-Lucent signed a new ten year lease expiring December 2021 having a fixed term of seven years without break option. The new lease extends the period to the first break, and to expiry, by a further three years. Nozay comprises approximately 36 hectares of business park space located close to one of the largest business space centres around Paris, Courtaboeuf business park. Nozay contains campus style offices together with business space and ancillary accommodation totaling approximately 78,800 square metres with over 2,000 car parking spaces.

Champs-sur-Marne - Credit Lyonnais entered into a new 3/6/9 year lease on 4,310 square metres of office space at a market rent from 1 January 2012. On the remainder of the space, Ecole Nationale des Ponts et Chausées ("ENPC") signed a new 2/6/9 year lease from 1 January 2012 on 2,470 square metres of office space. This lease replaces several leases to ENPC and Université de Marne la Vallée covering the same floor area which had expiries between October and December 2011.

Roissy - OCP Repartition signed a new fixed 9 year lease from 1 March 2012 on their 4,735 square metre logistics unit. This has effectively extended their existing fixed lease commitment by seven years and in return the Trust has invested in works to incorporate air conditioning within the warehouse.

Fresnes - In addition to the new fixed 9 year lease from 1 January 2011 signed by Exapaq, part of the La Poste Group, on their 5,230 square metre warehouse unit, a new 4/6/9 year lease was signed with EFP on 105 sqm of office space and Alphaguard extended their lease on 230 square metres of office space until April 2015.

Vitry - Maugein extended their lease until February 2015 on a 330 square metre light industrial unit.

Mulhouse - Alten extended their lease on 275 square metres of office space until January 2015 and have since taken an additional 100 square metres of office space from 1 March 2012.

Goussainville - The lease to MPS who occupied 8,740 square metres of warehouse space was terminated in Q4 2011 and 5,060 square metres of this warehouse space was simultaneously re-let on a new 3/6/9 year lease to Adexcel from November 2011. A new 3/6/9 year lease from 18 January 2012 was signed with Jacquotte on a 1,800 square metre vacant warehouse unit. ITS have extended their lease on a 1,500 square metre warehouse unit to October 2014, Ovalis extended their lease on 440 square metres of office space until April 2015 and Durag extended their lease until February 2013 on 175 square metres of office space.

Evreux - A new 3/6/9 year lease from August 2012 has been signed with logistics company Quadralog on 9,640 square metres of logistics and office space representing approximately three quarters of the space vacated in October 2011 by GlaxoSmithKline following a decision by their wider group to outsource the logistics operations to a third party. Quadralog have a right of first refusal on the balance of the space for potential expansion which is being actively marketed.

Spain

As reported at the mid-year, lease extensions were secured with a number of key tenants including Sprinter at Cordoba and two smaller tenants at the Ecija shopping centre, as well as a number of small new leases being signed at Ecija and Alcala.

Cordoba - McDonalds have extended their lease on a 500 square metre free-standing restaurant unit until December 2012.

Ecija - Burger King and Confecciones el Rubio extended their leases until August 2012 and May 2013 respectively on their 245 and 505 square metre units.

Market overview

France was one of the few eurozone economies to expand at the end of last year with GDP growth moderating to 0.2% in the fourth quarter from 0.3% in the third resulting in total economic growth for the year of 1.7%. Overall GDP growth for 2012 is forecast to reach 0.7% and the economy is generally expected to remain subdued in coming quarters as a result of fiscal tightening in France and its key European trading partners, and continued uncertainty about the resolution of the sovereign debt crisis affecting the wider eurozone.

The unemployment rate for mainland France remains around 9.3% but public sector job cuts and weak private sector job creation are expected to continue to put pressure on the unemployment rate. Linked to this and the wider economic context, household spending is also expected to remain muted and it is anticipated that inflation which was approximately 2% in 2011 will moderate in 2012 as cost-push and domestic demand-driven pressures ease.

In 2011 €15.1 billion was invested in commercial real estate in France representing a year-on-year increase of 29% and investment levels rose to those seen before the financial crisis, excluding the peak years of 2006 and 2007. As a result investment yields on prime properties have remained low across all sectors. Investment in office property was strong accounting for €11.9 billion, a year-on-year increase of 49%, and representing the third highest volume behind 2006 and 2007.

Of the Trust's total property portfolio, 91% is in France, 83% is in the Ile-de-France and 62% is in Ile-de-France office and business park space.

The Economy of Ile-de-France

Paris and the surrounding region, better known as Ile-de-France, accounts for 19% of the French population but contributes 29% of French GDP. It is one of the main players in the global economy and is the largest European metropolitan region by GDP. By GDP the Ile-de-France ranks as the fifth major metropolis in the world after the metropolitan areas of Tokyo, Greater New York, Los Angeles and Osaka.

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

With over 5.3 million jobs, Ile-de-France holds a prominent place in the national economy and many national and international companies have their headquarters in the region because of its high quality as a business location. The Ile-de-France economy remains extremely diverse compared to other cities its size with a large industrial base and one of the most important agricultural areas in France as well as being a pre-eminent global tourist destination

Its economy is more diversified than London (with its emphasis on financial markets) or Los Angeles (film and entertainment) and Paris is not overly dependent on any one industry sector. Even categorizing Ile-de-France as predominantly a services-based economy, its industrial base which accounts for 16% of the region's GDP, remains very important as the region is a major European production centre, which has preserved its competitiveness by increasing its proportion of investment in research and development.

The Property of Ile-de-France

The Paris region remains one of Europe's more stable office markets with office take-up in the Ile-de-France showing a 14% year-on-year increase to reach 2.4 million square metres in 2011. There was letting activity across different size requirements, business sectors and geographic spread with the industrial, banking-insurance, information and communication technologies and transport-logistics-distribution sectors together accounting for 72% of the take-up in 2011.

The average office rent in Ile-de-France has decreased slightly to €298 per square metre per annum as at 1 January 2012 versus €308 per square metre per annum at the start of 2011. The office vacancy rate for the Paris region remains low at 6.6% and is expected to remain stable since there is relatively little in the way of speculative new development taking place at present.

In the logistics sector, national take up was 2.6 million square metres in 2011, a rise of 20% on 2010. The Ile-de-France performed well with take-up of 1.1 million square metres, a year-on-year rise of 44% representing 42% of national take-up. The average transaction appears to be trending downwards with occupiers favouring 5,000 - 10,000 square metre lot sizes as opposed to larger lot sizes of between 20,000 - 50,000 square metres.

Spain

In contrast to France, which reported higher-than-expected growth for the fourth quarter, Spain contracted for the first time in two years. Gross domestic product shrank by 0.3% in the fourth quarter on a quarterly basis after stagnating in the third quarter, However, overall the Spanish economy grew by 0.7% in 2011 compared with a fall of 0.1% in 2010.

There is continuing pressure on the government to enact more austerity measures and these are expected to suppress domestic demand. In addition, despite the government's efforts to reform the labour market, the unemployment rate of just under 23% is expected to remain elevated in 2012. The near term outlook for the Spanish economy remains subdued.

Rental Indexation

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

The trend in rental indexation continues to improve for France. The ICC has shown annualised growth for the last seven published quarters as a result of which the annual indexation base as at Q3 2011, the latest published, increased to 6.8% from 5.0% as at Q2 2011 (1.73% at Q4 2010). From Q1 1980 to Q3 2011 the ICC has shown a long term average compound growth rate of 3.5% per annum and indexation is currently running above this level.

In Spain, CPI was running at an annualised rate of increase of 2.0% as at the end of January 2012 compared to 3.3% in January 2011. This is lower than the average of approximately 2.8% per annum over the past 10 years.

Paul Cable
For and on behalf of the Investment Manager

15 March 2012

Directors

Dick Kingston (aged 64)

Chairman

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

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

Christopher Bennett (aged 46)

Director

Christopher Bennett is a Member of the Royal Institution of Chartered Surveyors, 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 DCG 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 52)

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, Ingenious Media Active Capital Limited, PFB Data Centre Fund Limited and Tetragon Financial Group Limited.

Phillip Rose (aged 52)

Director

Phillip Rose is a Fellow of the Securities Institute and holds a Master of Law degree. He has over 30 years' experience in the real estate, funds management and banking industries in Europe, the USA and Australasia. He has been the Head of Real Estate for ABN AMRO Bank, Chief Operating Officer of European shopping centre investor and developer TrizecHahn Europe, Managing Director of retail and commercial property developer and investor Lend Lease Global Investment and Executive Manager of listed fund General Property Trust.

Phillip is currently CEO of Alpha Real Capital LLP, 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 47)

Director

Serena has over 25 years' experience in financial services, specialising in closed-ended property and private equity funds and fund administration over the last 15 years

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

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

Directors' report

The Directors present their report and financial statements of the Company and the Group for the year ended 31 December 2011.

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.

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 2011 as follows:

	Payment date	Amount per share
Third interim for the prior year	10 January 2011	0.9p
Fourth interim for the prior year	26 April 2011	0.9p
First interim	20 June 2011	0.9p
Second interim	10 October 2011	0.9p

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 2012. 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 23 April 2012; 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 UK Corporate Governance Code ('UK Code'). However, the Directors will take appropriate measures to ensure that the Company complies with the Code to the extent appropriate, taking into account the size of the Company and the nature of its business.

As a company authorised by the Guernsey Financial Services Commission ('GFSC'), the Company is required to follow the principles and guidance set out in the Finance Sector Code of Corporate Governance which was issued by the GFSC on 30 September 2011 and came into effect on 1 January 2012 ('Guernsey Code'). The Company adopted an Adherence document to the Guernsey Code on 15 November 2011.

The Board

The Directors (all of whom were appointed to the Company upon its incorporation) and their interests in shares as at 31 December 2011 are detailed below:

	Number of ordinary shares 2011	Number of ordinary shares 2010
Dick Kingston	5,145	5,000
Christopher Bennett	-	-
David Jeffreys	250,000	250,000
Phillip Rose	1,290,079	1,290,079
Serena Tremlett	23,486	23,341

Changes in the Directors' interests since the year end are as follows: Dick Kingston purchased 193,980 shares, at a price of 25.5p each, on 12 January 2012.

As the Board consists wholly of non-executives directors whose appointments can be terminated at any time without penalty and 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 UK 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 26 April 2012, Phillip Rose, Christopher Bennett and David Jeffreys 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, company secretarial and regulatory report.

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

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. The appraisal reviewed matters such as the performance and composition of the Board (and whether it has an appropriate mix of knowledge, skills and experience), relationships between the Board and the Investment Manager and Administrator, the processes in place and the information provided to the Board and communication between Board members.

Board 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 2011:

Director	Board	Audit Committee	Remuneration Committee	Nomination Committee
Dick Kingston	9	4	1	1
Christopher Bennett	7	n/a	1	1
David Jeffreys	11	4	1	1
Phillip Rose	4	n/a	n/a	1
Serena Tremlett	9	4	1	1

No. of meetings during the year	11	4	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 judgements which they contain.

· To review the consistency of accounting policies and practices.

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

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

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 fill 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 2011 £	Year ending 31 December 2010 £
Dick Kingston	30,000	30,000
Christopher Bennett	20,000	20,000
David Jeffreys	23,000	23,000
Phillip Rose	20,000	20,000
Serena Tremlett	20,000	20,000
Total	113,000	113,000

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 19 February 2012 were as follows:

Name of investor	No. of ordinary shares	% held
Antler Investment Holdings Limited	21,437,393	18.22
Baring Asset Management	7,313,172	6.22
Barclays Stockbrokers	6,648,599	5.65
Charles Stanley	5,879,329	5.00
Henderson Global Investors	5,050,000	4.29
Hargreaves Lansdown	4,673,580	3.97
Rathbone Investment Management	4,489,785	3.82
M&G Investment Management	4,419,450	3.76
TD Waterhouse	4,103,488	3.49
Selftrade	3,866,347	3.29
Investec Wealth & Investment	3,782,043	3.22

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 information of which the Company's auditor is unaware, and they have taken all the steps they ought to have taken as Directors to make themselves aware of any relevant information and to establish that the Company's auditor is aware of that information.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and of the Group and to enable them to ensure that the financial statements comply with the Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the assets of the Company and Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

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

Going Concern

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 at 9 a.m. on 26 April 2012 at Isabelle Chambers, Route Isabelle, St Peter Port, Guernsey. The meeting will be held to receive the Annual Report and Financial Statements, re-elect Directors and propose the reappointment of the auditor and that the Directors be authorised to determine the auditor's remuneration.

Auditor

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

By order of the Board,

David Jeffreys Serena Tremlett

Director Director

Directors' statement pursuant to the Disclosure and Transparency Rules

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

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

· The Chairman's Statement and the Property Review includes a fair review of the development and performance of the business and the position of the Company and Group and note 20 to the financial statements provides a description of the principal risks and uncertainties that they face.

By order of the Board,

David Jeffreys Serena Tremlett

Director Director

Corporate responsibility - benefits, risks and controls

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

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

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

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

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

Independent auditors' report

To the members of Alpha Pyrenees Trust Limited

We have audited the financial statements of Alpha Pyrenees Trust Limited for the year ended 31 December 2011 which comprise the Group and Parent Company Statements of Comprehensive Income, Group and Parent Company Balance Sheets, the Group and Parent Company Cash Flow Statements, the Group and Parent Company Statements of Changes in Equity and the related notes 1 to 20. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

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

Respective responsibilities of the directors and auditor

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

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

Scope of the audit of the financial statements

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

Opinion on the financial statements

In our opinion the financial statements:

· give a true and fair view of the state of the group's and of the parent company's affairs as at 31 December 2011 and of group's profit and the parent company's profit for the year then ended;

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

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

Matters on which we are required to report by exception

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

· proper accounting records have not been kept by the parent company; or

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

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

Justin Marc Hallett ACA

For and on behalf of BDO Limited

Chartered Accountants and Recognised Auditor

Place du Pré

Rue du Pré

St Peter Port

Guernsey

Date: 15 March 2012

Consolidated statement of comprehensive income

		For the year ended 31 December 2011			For the year ended 31 December 2010
	Notes	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000

Income
Revenue	3	25,597	-	25,597	24,972	-	24,972
Property operating expenses		(6,258)	-	(6,258)	(5,725)	-	(5,725)
Net Rental income		19,339	-	19,339	19,247	-	19,247

Expenses
Net change in gains on revaluation of investment properties	12	-	3,689	3,689	-	140	140
Investment Manager's fee		(2,035)	(872)	(2,907)	(1,966)	(842)	(2,808)
Other administration costs	5	(1,215)	-	(1,215)	(1,136)	-	(1,136)

Operating profit/(loss)		16,089	2,817	18,906	16,145	(702)	15,443

Finance income	4	219	2,319	2,538	113	7,759	7,872
Finance costs	6	(12,770)	(2,392)	(15,162)	(12,555)	(4,963)	(17,518)

Profit before taxation		3,538	2,744	6,282	3,703	2,094	5,797

Taxation	7	-	-	-	-	-	-

Profit for the year		3,538	2,744	6,282	3,703	2,094	5,797

Other comprehensive income
Foreign exchange losses on translation of foreign operations (translation reserve)		-	(324)	(324)	-	(910)	(910)

Other comprehensive expense for the year		-	(324)	(324)	-	(910)	(910)

Total comprehensive income for the year		3,538	2,420	5,958	3,703	1,184	4,887

Earnings per share - basic & diluted	9			5.3p			4.9p

Adjusted earnings per share - basic & diluted	9			3.0p			3.6p

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 2011	Notes	2011 £'000	2010 £'000

Non-current assets
Investment properties	12	254,853	253,502
		254,853	253,502
Current assets
Trade and other receivables	13	13,917	14,425
Cash and cash equivalents		12,773	15,541
		26,690	29,966
Total assets		281,543	283,468

Current liabilities
Trade and other payables	14	(4,330)	(2,877)
Bank borrowings	15	(1,633)	(1,673)
		(5,963)	(4,550)

Total assets less current liabilities		275,580	278,918

Non-current liabilities
Financial liabilities at fair value through profit or loss	20	(49,131)	(50,262)
Bank borrowings	15	(201,818)	(205,854)
Rent deposits		(2,834)	(2,769)
Deferred taxation	7	-	-
		(253,783)	(258,885)
Total liabilities		(259,746)	(263,435)

Net assets		21,797	20,033

Equity
Share capital	16	-	-
Share premium account	17	-	2,500
Special reserve	17	113,131	110,592
Translation reserve	17	22,337	22,661
Capital reserve	17	(116,844)	(119,588)
Revenue reserve	17	3,173	3,868

Total equity		21,797	20,033

Net asset value per share	10	18.5p	17.1p
Net asset value per share (adjusted)	10	37.0p	34.0p

The financial statements were approved by the Board of Directors and authorised for issue on 15 March 2012. 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 2011 £'000	For the year ended 31 December 2010 £'000

Operating activities
Profit for the year	6,282	5,797

Adjustments for :
Net change in gains on revaluation of investment properties	(3,689)	(140)
Finance income	(2,538)	(7,872)
Finance costs	15,162	17,518

Operating cash flows before movements in working capital	15,217	15,303

Movements in working capital:
(Increase)/decrease in operating trade and other receivables	(1,252)	2,534
Increase/(decrease) in operating trade and other payables	1,518	(2,785)

Cash generated from operations	15,483	15,052

Interest received	214	113
Swap interest paid	(908)	(802)
Bank loan interest paid and costs	(11,263)	(11,144)
Taxation	-	-

Cash flows from operating activities	3,526	3,219

Investing activities
Capital expenditure	(1,282)	(908)

Cash flows from investing activities	(1,282)	(908)

Financing activities
Currency swap collateral (paid)/received	(340)	1,859
Repayment of borrowings	(298)	(258)
Dividends paid	(4,194)	(4,230)

Cash flows from financing activities	(4,832)	(2,629)


Net decrease in cash and cash equivalents	(2,588)	(318)

Cash and cash equivalents at beginning of year	15,541	16,430
Exchange translation movement	(180)	(571)

Cash and cash equivalents at end of year	12,773	15,541

The accompanying notes are an integral part of this statement.

Consolidated statement of changes in equity

For the year ended 31 December 2010	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 2010	-	2,500	110,462	130	23,571	(121,682)	4,395	19,376
Total comprehensive income for the year	-	-	-	-	(910)	2,094	3,703	4,887
Warrant expiry	-	-	130	(130)	-	-	-	-
Dividends	-	-	-	-	-	-	(4,230)	(4,230)
At 31 December 2010	-	2,500	110,592	-	22,661	(119,588)	3,868	20,033
Note 16, 17

For the year ended 31 December 2011	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 2011	-	2,500	110,592	-	22,661	(119,588)	3,868	20,033
Total comprehensive income for the year	-	-	-	-	(324)	2,744	3,538	5,958
Share premium transfer	-	(2,500)	2,500	-	-	-	-	-
Dividends	-	-	-	-	-	-	(4,233)	(4,233)
Scrip dividend	-	-	39	-	-	-	-	39
At 31 December 2011	-	-	113,131	-	22,337	(116,844)	3,173	21,797
Note 16, 17

The accompanying notes are an integral part of this statement.

Company statement of comprehensive income

	Notes	For the year ended 31 December 2011			For the year ended 31 December 2010
		Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000

Income
Revenue	3	9,185	-	9,185	9,360	-	9,360
Total income		9,185	-	9,185	9,360	-	9,360

Expenses
Investment Manager's fee		(729)	(312)	(1,041)	(666)	(286)	(952)
Other administration costs	5	(492)	-	(492)	(500)	-	(500)
Total expenses		(1,221)	(312)	(1,533)	(1,166)	(286)	(1,452)

Operating profit/(loss)		7,964	(312)	7,652	8,194	(286)	7,908

Finance income	4	97	-	97	49	-	49
Finance costs	6	(1)	(2,719)	(2,720)	-	(7,114)	(7,114)
Movement in impairment of amounts receivable from subsidiary undertakings	20	-	929	929	-	4,044	4,044

Profit/(loss) before taxation		8,060	(2,102)	5,958	8,243	(3,356)	4,887

Taxation	7	-	-	-	-	-	-

Profit/(loss) for the year		8,060	(2,102)	5,958	8,243	(3,356)	4,887

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

Total comprehensive income/(expense) for the year		8,060	(2,102)	5,958	8,243	(3,356)	4,887

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 2011	Notes	2011 £'000	2010 £'000

Non-current assets
Investments in subsidiary undertakings	11	141	141
Amounts receivable from subsidiary undertakings	11	10,032	8,659
		10,173	8,800

Current assets
Trade and other receivables	13	-	53
Amounts receivable from subsidiary undertakings	11	3,022	2,272
Cash and cash equivalents		8,893	9,248
		11,915	11,573

Total assets		22,088	20,373

Current liabilities
Trade and other payables	14	(291)	(340)

Total liabilities		(291)	(340)
Net assets		21,797	20,033

Equity
Share capital	16	-	-
Share premium account	17	-	2,500
Special reserve	17	113,131	110,592
Capital reserve	17	(101,136)	(99,034)
Revenue reserve	17	9,802	5,975

Total equity		21,797	20,033

The financial statements were approved by the Board of Directors and authorised for issue on 15 March 2012. 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 2011 £'000	For the year ended 31 December 2010 £'000

Cash flows from operating activities

Profit for the year	5,958	4,887

Adjustments for :
Finance costs	2,720	7,114
Finance income	(97)	(49)
Interest from subsidiary undertakings	(9,185)	(9,360)
Movement in impairment of amounts receivable from subsidiary undertakings	(929)	(4,044)

Operating cash flows before movements in working capital	(1,533)	(1,452)

Decrease/(increase) in operating trade and other receivables	53	(17)
Decrease in operating trade and other payables	(49)	(39)

Cash generated from operations	(1,529)	(1,508)

Interest paid	(1)	-
Interest received	5,241	4,104
Taxation	-	-

Cash-flows from operating activities	3,711	2,596

Investing activities
Loans repaid	189	1,028

Cash-flows from investing activities	189	1,028

Financing activities
Dividend payments	(4,194)	(4,230)

Cash-flows from financing activities	(4,194)	(4,230)

Net decrease in cash and cash equivalents	(294)	(606)

Cash and cash equivalents at beginning of year	9,248	10,076
Exchange translation movement	(61)	(222)

Cash and cash equivalents at end of year	8,893	9,248

The accompanying notes are an integral part of this statement.

Company statement of changes in equity

For the year ending 31 December 2010	Share capital £'000	Share premium £'000	Special reserve £'000	Warrant reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total equity £'000

At 1 January 2010	-	2,500	110,462	130	(95,678)	1,962	19,376
Total comprehensive income for the year	-	-	-	-	(3,356)	8,243	4,887
Warrant expiry	-	-	130	(130)	-	-	-
Dividends	-	-	-	-	-	(4,230)	(4,230)
At 31 December 2010	-	2,500	110,592	-	(99,034)	5,975	20,033

Note 16, 17

For the year ending 31 December 2011	Share capital £'000	Share premium £'000	Special reserve £'000	Warrant reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total equity £'000

At 1 January 2011	-	2,500	110,592	-	(99,034)	5,975	20,033
Total comprehensive income for the year	-	-	-	-	(2,102)	8,060	5,958
Share premium transfer	-	(2,500)	2,500	-	-	-	-
Dividends	-	-	-	-	-	(4,233)	(4,233)
Scrip dividend	-	-	39	-	-	-	39
At 31 December 2011	-	-	113,131	-	(101,136)	9,802	21,797

Note 16, 17

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. The financial statements were approved and authorised for issue on 15 March 2012 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's interpretations approved by the International Accounting Standards Committee ("IASC") that remain in effect, and to the extent that they have been adopted by the European Union.

a) Adoption of new and revised Standards

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

Revised and amended Standards

IFRS 1: First-time Adoption of International Financial Reporting Standards - Amendments resulting from May 2010 Annual Improvements to IFRSs - for accounting periods commencing on or after 1 January 2011

IFRS 3: Business combinations - Amendments resulting from May 2010 Annual Improvements to IFRSs - for accounting periods commencing on or after 1 July 2010

IFRS 7: Financial Instruments: Disclosures- Amendments resulting from May 2010 Annual Improvements to IFRSs - for accounting periods commencing on or after 1 January 2011

IAS 1: Presentation of Financial Statements - Amendments resulting from May 2010 Annual Improvements to IFRSs - for accounting periods commencing on or after 1 January 2011

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 - Amendments resulting from May 2010 Annual Improvements to IFRSs - for accounting periods commencing on or after 1 July 2010

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

IAS 34: Interim Financial Reporting - Amendments resulting from May 2010 Annual Improvements to IFRSs - for accounting periods commencing on or after 1 January 2011

Interpretations

IFRIC 13 Customer Loyalty Programmes - Amendments resulting from May 2010 Annual Improvements to IFRSs - for accounting periods commencing on or after 1 January 2011

IFRIC 14 IAS 19 - November 2009 amendment with respect to voluntary prepaid contributions - for accounting periods commencing on or after 1 January 2011

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

The adoption of these standards and interpretations has not led to any changes in the Group's accounting policies.

b) Standards and Interpretations in issue and not yet effective

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

IFRS 9: Financial Instruments - for accounting periods commencing on or after 1 January 2015* (mandatory application date amended in December 2011)

IFRS 10: Consolidated Financial Statements - for accounting periods commencing on or after 1 January 2013*

IFRS 11: Joint Arrangements - for accounting periods commencing on or after 1 January 2013*

IFRS 12: Disclosure of Interests in Other Entities - for accounting periods commencing on or after 1 January 2013*

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

Revised and amended Standards

IFRS 1: First-time Adoption of International Financial Reporting Standards - Replacement of 'fixed dates' for certain exceptions with 'the date of transition' to IFRS - for accounting periods commencing on or after 1 July 2011

IFRS 1: First-time Adoption of International Financial Reporting Standards - Additional exemptions for entities ceasing to suffer from severe hyperinflation - for accounting periods commencing on or after 1 July 2011*

IFRS 7: Financial Instruments: Disclosures- Amendments enhancing disclosures about transfers of financial assets - for accounting periods commencing on or after 1 July 2011

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

IFRS 7: Financial Instruments: Disclosures- Amendments requiring disclosures about the initial application of IFRS 9 - for accounting periods commencing on or after 1 January 2015* (or otherwise when IFRS 9 is first applied)

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

IAS 12: Income taxes - Limited scope amendment (recovery of underlying assets) - for accounting periods commencing on or after 1 January 2012*

IAS 19: Employee Benefits - Amended Standard resulting from the Post-Employment Benefits and Termination Benefits projects - for accounting periods commencing on or after 1 January 2013*

IAS 27: Consolidated and Separate Financial Statements - Reissued as IAS 27 Separate Financial Statements (as amended in 2011) - for accounting periods commencing on or after 1 January 2013*

IAS 28: Investments in Associates - Reissued as IAS 28 Investments in Associates and Joint Ventures (as amended in 2011) - for accounting periods commencing on or after 1 January 2013*

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

Interpretations

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine - for accounting periods commencing on or after 1 July 2013*

*Still to be endorsed by the EU

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

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 either at amortised cost or fair value.

In October 2010, the IASB issued the second part of IFRS 9 incorporating new requirements on accounting for financial liabilities and carrying over from IAS 39 the requirements for de-recognition of financial assets and financial liabilities. The standard addressed the issue of volatility in the income statement whereby an entity would choose to measure its own debt at fair value. The standard requires an entity choosing to measure a liability at fair value to present the portion of the change in its fair value due to changes in the entity's own credit risk in the other comprehensive income section of the income statement, rather than within the profit and loss. The standard maintained the requirement to measure other liabilities at amortised cost.

The new standard is mandatory for annual periods beginning on or after 1 January 2015 (mandatory application date, originally 1 January 2013, amended in December 2011).

The principal accounting policies adopted are set out below.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and the subsidiary undertakings controlled by the Company, made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefit from its activities.

The results of subsidiary undertakings acquired or disposed of during the year are included in the consolidated income statement from the effective date of 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 presentational currency

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

b) Transactions and balances

Transactions in currencies other than Sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary assets and liabilities that are carried at fair value and denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Gains and losses arising on retranslation are included in net profit or loss for the year, except for exchange differences arising on non-monetary assets and liabilities where the changes in fair value are recognised directly in equity.

c) Group companies

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

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

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

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

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

The year-end exchange rate used is £1:€1.193 (2010: £1:€1.168) and the average rate for the year used is £1:€1.152 (2010: £1:€1. 166).

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.

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.

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 million in 2011 (2010: £9 million). Please refer to note 20 for further details.

Investment in subsidiaries

Investments in subsidiaries are initially recognised and subsequently carried at cost in the Company's financial statements less, where appropriate, provisions for impairment.

Financial instruments

Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. The Group shall offset financial assets and financial liabilities if the Group has a legally enforceable right to set off the recognised amounts and interests and intends to settle on a net basis.

(a) Financial assets

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

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

(a) (i) Loans and receivables

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

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

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

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

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

This category comprises only 'in the money' financial derivatives. They are carried in the balance sheet at fair value with changes in fair value recognised in the statement of comprehensive income. 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 is based on valuations as described in note 20.

(a) (iii) Derecognition of financial assets

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

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

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

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

(b) Financial liabilities

The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was issued and its characteristics. Although the Group uses derivative financial instruments in economic hedges of 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 is based on the valuations as described in note 20.

(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.

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 20 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

IFRS 7 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 vacant units. 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 2011 was £254.9 million (2010: £253.5 million). Refer to note 12 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 2011 was £nil (2010: £nil). See note 7 for further details.

The Group estimates fair values of derivative contracts based on valuation techniques. These techniques are significantly affected by the assumptions used, including discount rates and estimates of future cash flows. The fair value of derivative contracts at the balance sheet date was £49.1 million liability (2010: £50.3 million liability). See note 20 for further details.

3. Revenue

	Group 2011 £'000	Company 2011 £'000	Group 2010 £'000	Company 2010 £'000
Rental Income	21,099	-	20,604	-
Service and management charges	4,498	-	4,368	-
Interest from subsidiary undertakings (note 20)	-	9,185	-	9,360
Total	25,597	9,185	24,972	9,360

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 11.

No contingent rent is included in the total above (2010: £nil).

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

	2011 £'000	2010 £'000
Within one year	18,549	19,719
In the second to fifth years inclusive	53,361	53,752
After five years	25,850	6,054
Total	97,760	79,525

4. Finance Income

	Group 2011 £'000	Company 2011 £'000	Group 2010 £'000	Company 2010 £'000
Bank interest income	219	97	113	49
Net gains on financial assets and liabilities held at fair value through profit or loss (note 20)	2,319	-	7,759	-
Total	2,538	97	7,872	49

5. Other administration costs

	Group 2011 £'000	Company 2011 £'000	Group 2010 £'000	Company 2010 £'000
Accounts and administrative fees	332	134	341	178
Non-executive Directors fees	113	113	113	113
Auditors' remuneration for audit services	110	55	103	42
Other professional fees	622	190	542	167
Staff costs	38	-	37	-
Total	1,215	492	1,136	500

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

6. Finance costs

	Group 2011 £'000	Company 2011 £'000	Group 2010 £'000	Company 2010 £'000
Interest on bank borrowings	11,229	-	11,092	-
Loan fee amortisation	601	-	615	-
Foreign exchange loss	758	2,719	1,769	7,114
Net losses on financial liabilities held at fair value through profit or loss (note 20)	2,542	-	3,996	-
Other charges	32	1	46	-
Total	15,162	2,720	17,518	7,114

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.

7. Taxation

(a) Taxation on profit on ordinary activities

Company

Group

The Group's tax expense for the year comprises:

	Group 2011 £'000	Group 2010 £'000
Deferred taxation
France	-	-
Spain	-	-
Total	-	-

Tax expense reconciliation
Profit for the year	6,282	5,797
Less: Income not taxable	(19,230)	(20,899)
Add: Expenditure not taxable	12,312	21,220
Add: Un-provided deferred tax asset movement	636	(6,118)
Total	-	-

Tax at domestic rates applicable to profits in the country concerned

Group

2011

£'000

Group

2010

£'000

French taxation at 33.33%

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 2009	(2,481)	21,010	(18,529)	-	-
Release to Income	(1,688)	1,552	136	-	-
At 31 December 2010	(4,169)	22,562	(18,393)	-	-
Release to Income	(3,089)	7,246	(4,157)	-	-
At 31 December 2011	(7,258)	29,808	(22,550)	-	-

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.

	2011 £'000	2010 £'000
Deferred tax liabilities	29,808	22,562
Deferred tax assets	(29,808)	(22,562)
Total	-	-

At the balance sheet date the Company has unused tax losses of £69.6 million (2010: £57.0 million). A deferred tax asset has been recognised in respect of £29.8 million of such losses (2010: £22.6 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.

8. Dividends

Dividend reference period	Shares	Dividend	Paid	Date
Dividend reference period	'000	per share	£
Quarter ending 30 September 2010	117,500	0.9p	1,057,500	10 January 2011
Quarter ending 31 December 2010	117,627	0.9p	1,058,644	26 April 2011
Quarter ending 31 March 2011	117,627	0.9p	1,058,644	20 June 2011
Quarter ending 30 June 2011	117,627	0.9p	1,058,644	10 October 2011
Total			4,233,432

For the quarter ended 30 September 2010 a scrip dividend alternative was granted to investors. Shareholders who opted for the scrip dividend alternative (of £39,265) were issued 127,056 new shares at a price of 30.9p each on 10 January 2011. Shareholders who did not opt received a dividend of £1,018,235 (0.9p per share), which was paid on 10 January 2011.

A quarterly dividend of £1,058,644 (0.9p per share), for the quarter ended 30 September 2011, was paid on 9 January 2012. In accordance with IAS 10, this dividend has not been included in these financial statements.

9. Earnings per share

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

	1 January 2011 to 31 December 2011	1 January 2011 to 30 June 2011	1 January 2010 to 31 December 2010	1 January 2010 to 30 June 2010
Earnings after tax per income statement (£'000)	6,282	(88)	5,797	125
Basic and diluted earnings per share	5.3p	(0.1)p	4.9p	0.1p

Earnings after tax per income statement (£'000)	6,282	(88)	5,797	125
Revaluation (gains)/losses in investment properties (note 12)	(3,689)	924	(140)	2,138
Mark to market of currency swaps (note 20)	(2,319)	6,670	(7,759)	(12,798)
Mark to market of interest rate swaps (note 20)	1,634	(4,499)	3,194	8,271
Interest rate swap - break costs and other loan restructuring costs	-	-	-	30
Investment Manager's fee (capital)	872	439	842	413
Deferred taxation	-	185
Rental guarantee income	-	-	512	355
Foreign exchange losses (note 6)	758	(1,552)	1,769	3,614
Adjusted earnings	3,538	2,079	4,215	2,148
Adjusted earnings per share	3.0p	1.8p	3.6p	1.8p

Weighted average number of ordinary shares (000's)	117,624	117,620	117,500	117,500

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.

10. Net asset value per share

	31 December 2011	30 June 2011	31 December 2010	30 June 2010
Net asset value (£'000)	21,797	17,635	20,033	14,979
Net asset value per share	18.5p	15.0p	17.1p	12.7p

Net asset value (£'000)	21,797	17,635	20,033	14,979
Mark to market of currency hedge*	1,885	1,046	1,277	3,708
Mark to market of interest rate swaps	19,799	14,874	18,611	22,285
Deferred taxation	-	185	-	-
Adjusted net asset value	43,481	33,740	39,921	40,972
Net asset value per share (adjusted)	37.0p	28.7p	34.0p	34.9p

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

11. Investment in subsidiary undertakings

A list of the significant investments in subsidiaries, including the name, country of incorporation and the proportion of ownership interest is given below.

Name of subsidiary undertaking	Class of share	% of class held with voting rights	Country of incorporation	Principal activity

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

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 2011:

	2011 Interest bearing £'000	2011 Non-interest bearing £'000	2011 Total £'000	2010 Interest bearing £'000	2010 Non-interest bearing £'000	2010 Total £'000
Loan	104,495	31,474	135,969	106,757	28,018	134,775
Impairment	(94,463)	(28,452)	(122,915)	(98,098)	(25,746)	(123,844)
Total	10,032	3,022	13,054	8,659	2,272	10,931

	2011 Interest bearing £'000	2011 Non-interest bearing £'000			2011 Total £'000		2010 Interest bearing £'000	2010 Non-interest bearing £'000		2010 Total £'000
Current	-		3,022	3,022		-		2,272	2,272
Non-current	10,032		-	10,032		8,659		-	8,659
Total	10,032		3,022	13,054		8,659		2,272	10,931

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 2011 the weighted average interest rate was 5.47% (2010: 5.47%).

An impairment of £122.9 million (2010: £123.8 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.

12. Investment properties

	2011 £'000	2010 £'000
Market value of investment properties at 1 January	253,502	265,408
Subsequent capital expenditure after acquisition	3,102	908
Fair value adjustment in the year	3,689	140
Effect of foreign exchange	(5,440)	(12,954)
Market value of investment properties at 31 December	254,853	253,502

Valuation per Knight Frank LLP of investment properties	254,853	253,502

The fair value of the Group's investment properties at 31 December 2011 and 31 December 2010 has been arrived at on the basis of valuations carried out at that date by Knight Frank LLP, independent valuers not connected to the Group. The portfolio has been valued on a 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 movement in capital expenditure after acquisition includes a balance for rent incentives of £1.8m (2010: £nil).

The Group has pledged investment properties valued at £247.8 million (€295.6 million) to secure borrowings (note 15).

At 31 December 2011, the Group had un-provided contractual obligations for future repairs and maintenance of £nil (2010: £nil) and £0.3 million (2010: £0.4 million) of future capital requirements.

13. Trade and other receivables

	Group 2011 £'000	Company 2011 £'000	Group 2010 £'000	Company 2010 £'000
Trade receivables	1,779	-	1,894	-
Amounts receivable from Property Managing Agents	1,532	-	2,112	-
Bank interest receivable	5	-	4	-
Prepayments	274	-	218	-
Other debtors	10,327	-	10,197	53

Total	13,917	-	14,425	53

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value. Note 20 provides an ageing of trade receivables along with details of the provision against loans during the year.

Included in other debtors is collateral of £9.4 million (2010: £9.3 million) held with Barclays Bank PLC in relation to the currency swap (note 20).

14. Trade and other payables

	Group 2011 £'000	Company 2011 £'000	Group 2010 £'000	Company 2010 £'000
Trade creditors	1,762	-	347	2
Deferred income	866	-	502	-
Investment Manager's fee payable	680	228	744	308
VAT Payable	283	-	136	-
Accruals	739	63	1,148	30

Total	4,330	291	2,877	340

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.

15. Bank borrowings

	Group 2011 £'000	Company 2011 £'000	Group 2010 £'000	Company 2010 £'000
Current liabilities: Interest payable and bank borrowing	1,633	-	1,673	-
Non-current liabilities: bank borrowing	201,818	-	205,854	-
Total liabilities	203,451	-	207,527	-

The borrowings are repayable as follows:
Interest payable	1,511	-	1,548	-
On demand or within one year	122	-	125	-
In the second to fifth years inclusive	201,818	-	205,854	-
After five years			-	-
	203,451	-	207,527	-

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

	2011 £'000	2010 £'000
Opening balance	205,854	216,280
Amortisation of finance costs	601	615
Deferred finance cost adjustment	-	(78)
Repayment of loan	(173)	(258)
Loan repayable within one year	(122)	(125)
Exchange differences on translation of foreign currencies	(4,342)	(10,580)
Total	201,818	205,854

At 31 December 2011, €221.1 million was outstanding on the French borrowings. Borrowings are secured over the shares in the Company's operating subsidiaries and mortgages over properties with a total value of €268.9 million. The borrowings are to be repaid on 10 February 2015.

At 31 December 2011, €22.0 million was outstanding on the Spanish borrowings, which comprises a balance of € 2.0 million on a floating rate basis (at three month Euribor plus margin) and €20.0 million on a fixed rate. Borrowings are secured over the shares in the Company's operating subsidiaries and mortgages over properties with a total value of €26.9 million. The borrowings are to be repaid on 10 February 2015.

The lender, Barclays Bank PLC, has undertaken a variable to fixed rate swap with a third party to fix the interest rate paid by the Company (note 20). The weighted average rate of interest on all fixed rate loans is 5.26% (2010: 5.26%).

16. Share capital

Authorised share capital

The authorised share capital is unlimited.

Issued and fully paid

	Number of shares
At 1 January 2010	117,500,000
Shares cancelled during the year	-
At 31 December 2010	117,500,000
Shares cancelled during the year	-
Scrip dividend issue	127,056
At 31 December 2011	117,627,056

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

In January 2011, as a result of a scrip dividend offer (note 8), a number of shareholders opted for the alternative which resulted in the issue by the Company of 127,056 new shares at a price of 30.9p each.

17. Reserves

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

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. On the 16 May 2011, following a Board of Directors' meeting, the balance in the share premium account was transferred to the special reserve account.

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 buyback of shares and payment of dividends.

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.

18. Events after the balance sheet date

There were no significant events after the balance sheet date.

19. 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 14.

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

Directors fees	2011 £'000	2010 £'000
Dick Kingston (Chairman)	30	30
Christopher Bennett	20	20
David Jeffreys	23	23
Phillip Rose	20	20
Serena Tremlett	20	20
Total	113	113

Director shareholdings in the Company are detailed in the Director's report.

The following, being partners of the Investment Manager, hold or have an interest in the following shares in the Company at 31 December 2011:

	2011 Number of shares held	2010 Number of shares held
Rockmount Ventures Limited and ARRCO Limited*	21,437,393	20,437,393
Sir John Beckwith	3,472,681	3,472,681
P. Rose**	1,290,079	1,290,079
B. Bauman	459,289	459,289
K. Devon-Lowe	24,650	24,650
R. Armist	7,450	7,450

*Rockmount Ventures Limited became a partner in the investment manager on 23 December 2010. Rockmount Ventures Limited is the parent company of ARRCO Limited. The interest attributed to the two corporate partners represents 21,437,393 shares held by a fellow group company, Antler Investment Holdings Limited.

**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 84,918 (2010: 80,878) 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 year the Company paid Morgan Sharpe Administration Limited fees of £72,980 (2010: £89,900).

20. Financial instruments risk exposure and management

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

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

Principal financial instruments

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

	Financial assets and liabilities carrying value
	Group 2011 £'000	Company 2011 £'000	Group 2010 £'000	Company 2010 £'000
Current financial assets
Trade and other receivables	13,917	-	14,425	53
Cash and cash equivalents	12,773	8,893	15,541	9,248
Amounts receivable from subsidiary undertakings	-	3,022	-	2,272
Total current financial assets	26,690	11,915	29,966	11,573

Non-current financial assets
Amounts receivable from subsidiary undertakings	-	10,032	-	8,659
Total non-current financial assets	-	10,032	-	8,659
Total financial assets	26,690	21,947	29,966	20,232

Current financial liabilities
Trade and other payables (excluding deferred income)	3,464	291	2,375	340
Bank borrowings	1,633	-	1,673	-
Total current financial liabilities	5,097	291	4,048	340

Non-current financial liabilities
Currency swaps	29,332	-	31,651	-
Interest rate swap	19,799	-	18,611	-
Bank borrowings	201,818	-	205,854	-
Rent Deposits	2,834	-	2,769	-
Total non-current financial liabilities	253,783	-	258,885	-
Total financial liabilities	258,880		262,933

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

	Group 2011 £'000	Company 2011 £'000	Group 2010 £'000	Company 2010 £'000
Net change in realised gains or losses on loans and receivables
Interest from subsidiary companies (note 3)	-	9,185	-	9,360
Bank interest income	219	97	113	49
Impairment of trade and other receivables	(151)	-	(373)	-
Movement in impairment of amounts receivable from subsidiary undertakings (note 11)	-	929	-	4,044
Total	68	10,211	(260)	13,453

Net change in unrealised gains and losses on financial assets and liabilities held at fair value though profit or loss
Currency swaps	2,319	-	7,759	-
Interest rate swaps	(1,634)	-	(3,194)	-
Net realised gains and losses on financial assets and liabilities held at fair value through profit or loss
Currency swaps - interest received	7,650	-	7,683	-
Currency swaps - interest paid	(8,558)	-	(8,485)	-
Net expense of currency swaps	(908)	-	(802)	-

Net (loss)/gain on financial assets and liabilities held at fair value through profit or loss	(223)	-	3,763	-

Disclosed as:
Finance costs (note 6)	(2,542)	-	(3,996)	-
Finance income (note 4)	2,319	-	7,759	-
Net (loss)/gain on financial assets and liabilities held at fair value through profit or loss	(223)	-	3,763	-

	Group 2011 £'000	Company 2011 £'000	Group 2010 £'000	Company 2010 £'000
Interest from subsidiary companies	-	9,185	-	9,360
Bank interest income	219	97	113	49
Interest on bank borrowings	(11,229)	-	(11,092)	-
Loan fee amortisation	(601)	-	(615)	-
Total interest (expense)/income	(11,611)	9,282	(11,594)	9,409

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 48.8% (2010:43.2%) of the annual contracted rent as at 31 December 2011. The tenant's next break option is in December 2018. The Group meets with the tenant frequently and monitors its financial performance closely.

The ageing of trade receivables is as follows:

	2011 £'000	2010 £'000
0 to 6 months	2,363	1,894
Over 6 months	-	-
	2,363	1,894

The movement in impairments to trade receivables of £0.2m (2010: £0.4m) is shown on the table above.

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

The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Group's maximum exposure to credit risk without taking into account of the value of rent deposits obtained. Details of the Group's receivables are summarised in note 13 of the financial statements.

The Group policy is to maintain its cash and cash equivalent balances with a reasonable diversity of banks. The Group monitors the placement of cash balances on an ongoing basis and has policies to limit the amount of credit exposure to any financial institution. As at 31 December 2011, the Group had spread its cash across seven financial institutions and had not placed more than 56% in any one bank.

b) Company

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

The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Company's maximum exposure to credit risk. Details of the Company's loans and receivables are summarised in notes 11 and 13 of the financial statements.

Liquidity risk

Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability, but can also increase the risk of losses. The Group and Company has procedures with the object of minimising such losses such as maintaining sufficient cash and other highly liquid current assets and by having in place an adequate amount of committed credit facilities. Cash and cash equivalents are placed with financial institutions on a short term basis reflecting the Group's and Company's desire to maintain a high level of liquidity in order to enable timely completion of investment transactions.

a) Group

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

2011	Within 1 year £'000	1-2 years £'000	2-5 years £'000	Over 5 years £'000	Total £'000	Total carrying amount £'000
Trade and other payables (excluding deferred income)	3,464	-	-	-	3,464	3,464
Rent Deposits	1,112	819	681	222	2,834	2,834
Bank Borrowings	1,633	-	201,818	-	203,451	203,451
Derivative financial instruments at fair value through the profit or loss
- Cash Outflows	6,745	144,899	-	-	151,644	149,510
- Cash Inflows	(6,207)	(116,805)	-	-	(123,012)	(120,178)
	6,747	28,913	202,499	222	238,381	239,081

2010	Within 1 year £'000	1-2 years £'000	2-5 years £'000	Over 5 years £'000	Total £'000	Total carrying amount £'000
Trade and other payables (excluding deferred income)	2,375	-	-	-	2,375	2,375
Rent Deposits	968	342	985	474	2,769	2,769
Bank Borrowings	1,673	-	205,854	-	207,527	207,527
Derivative financial instruments at fair value through the profit or loss
- Cash Outflows	6,914	8,487	148,229	-	163,630	156,940
- Cash Inflows	(6,219)	(7,637)	(116,805)	-	(130,661)	(125,289)
	5,711	1,192	238,263	474	245,640	244,322

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 hedge significant future foreign currency transactions and cash flows to safeguard the equity investments of shareholders against significant adverse movements between Sterling and Euros. Details of the currency swap are as disclosed below.

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.

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

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 €33.0 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 €33.0 million.

At 31 December 2011, a total amount of £9.4 million (€11.2 million) (2010: £9.3 million (€10.9 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 an applicable valuation model.

As described above, 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 provide some hedge on the Euro income generated on these properties, hence the Group considers it appropriate from a risk perspective to review currency exposure on a net assets basis. For illustrative purposes, therefore, the effect of a strengthening of the Euro by 5 cents would decrease Group net assets by £3.8 million (2010: £4.0 million). A weakening of the Euro by 5 cents would increase net assets by £3.5 million (2010: £3.5 million).

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

b) Cash flow and fair value interest rate risk

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

The Company was required under the financing agreements with Barclays Bank PLC to fix the rate at which it 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 Bank PLC was amended and restated. As a result of the amendments, the interest rate swap was broken and a new interest swap agreed for the longer term of the revised loan. Of the loan principal of €22.7m, interest on €20.0m has been fixed using the new swap.

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.

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

For the Group, an increase in 100 basis points in interest rates would result in a post-tax profit of £0.2 million (2010: £0.2 million). A decrease in 100 basis points in interest rates would result in a post tax loss for the period of £0.2 million (2010: £0.2 million).

For the Company, an increase in 100 basis points in interest rates would result in a post-tax profit of £0.1 million (2010: £0.1 million). A decrease in 100 basis points in interest rates would result in a post tax loss for the period of £0.1 million (2010:£0.1 million).

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

c) 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 an applicable valuation model.

· 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 2011	Level 1	Level 2	Level 3	Total
As at 31 December 2011	£'000	£'000	£'000	£'000
Financial liabilities at fair value through profit or loss	-	(49,131)	-	(49,131)
Total	-	(49,131)	-	(49,131)

As at 31 December 2010	Level 1	Level 2	Level 3	Total
As at 31 December 2010	£'000	£'000	£'000	£'000
Financial liabilities at fair value through profit or loss	-	(50,262)	-	(50,262)
Total	-	(50,262)	-	(50,262)

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 2011 and at 31 December 2010 were as follows:

	Group 2011 €'000	Group 2010 €'000
Total borrowings	243,086	243,442
Less: cash and cash equivalents	(15,238)	(18,152)
Net debt	227,848	225,290

Property valuation	304,040	296,090

Net leverage ratio	74.9%	76.1%

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

Registered office:

Isabelle Chambers

Route Isabelle

St Peter Port

Guernsey

Investment Manager:

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

Administrator and secretary:

Morgan Sharpe

Administration Limited

Isabelle Chambers

Route Isabelle

St Peter Port

Guernsey GY1 3TX

Joint brokers:

Numis Securities Limited

10 Paternoster Square
London EC4M 7LT

Peel Hunt LLP

Moor House

120 London Wall

London EC2Y 5ET

Independent valuers:

Knight Frank LLP
55 Baker Street
London W1V 8AN

Auditor:

BDO Limited
PO Box 180
Place du Pré

Rue du Pré
Ruette Braye
St Peter Port
Guernsey GY1 3LL

Tax advisors:

BDO LLP
55 Baker Street
London W1U 7EU

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

Legal advisors in Guernsey:

Carey Olsen
PO Box 98

Carey House
Les Banques
St Peter Port
Guernsey GY1 4BZ

Legal advisors in the UK:

Norton Rose

3 More London Riverside

London SE1 2AQ

Registrar:

Computershare Investor Services (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	16 March 2012	Quarter ended 31 December 2011	28 March 2012	30 March 2012	23 April 2012
Annual Report Published	30 March 2012
Annual General Meeting	26 April 2012
First Interim Management Statement (Qtr 1)	17 May 2012	Quarter ended 31 March 2012	23 May 2012	25 May 2012	18 June 2012
Half Yearly Report	16 August 2012	Quarter ended 30 June 2012	12 September 2012	14 September 2012	8 October 2012
Second Interim Management Statement (Qtr 3)	15 November 2012	Quarter ended 30 September 2012	5 December 2012	7 December 2012	7 January 2013

This information is provided by RNS

The company news service from the London Stock Exchange

END

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