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28 February 2007 ALPHA PYRENEES TRUST LIMITED ALPHA PYRENEES TRUST POSTS PRELIMINARY FINAL RESULTS: NET ADJUSTED PROFIT AFTER TAX OF £4.472 MILLION PROPOSED DIVIDEND OF 2.5p PER SHARE (5p per share for the period to December 2006) DIVIDEND EXPECTED TO RISE TO 6p in 2007
Alpha Pyrenees Trust, the property company investing in commercial real estate in France and Spain, today posts its results covering the period from its inception on 16 November 2005 to 31 December 2006. The Trust announced an adjusted net profit after tax of £4.472 million and a further dividend of 2.5p per share, making a total of 5p per share for the period to 31 December 2006. Highlights of the period to 31 December 2006 include:
Richard Kingston, Chairman of Alpha Pyrenees Trust, commented: “The Trust has fully invested its equity and is approaching 50%
of its target asset portfolio. The Trust is well-positioned to grow
earnings and dividends through utilising its committed finance facilities to
acquire additional properties, on yields significantly above the
Trust’s finance costs. Against the background of the acquisitions
made to date, the Board has recommended a dividend of 2.5p per share making a
total dividend of 5p per share for the period to 31 December 2006. It
is also the current intention of the Board to recommend a dividend of not
less than 6p per share in respect of the year to 31 December 2007. As
the Trust continues to make further progress on acquisitions, the Board will
review the forecast dividend with a view to achieving the target dividend of
7p per annum when fully invested.” Phillip Rose, CEO of Alpha Real Capital (Investment Manager to the Trust), commented: “The Trust has invested in a diversified portfolio of properties in France and Spain, which includes tenants from many well-known groups such as Alcatel-Lucent, Credit Lyonnais, Novartis, Carrefour, Aldi, GlaxoSmithKline, La Poste, MediaMarkt, Saint Gobain and Vinci Group. With a strong rent roll, annually indexed rents linked to inflation, and the capacity to make further earnings enhancing acquisitions, the Trust is well-placed to grow both earnings and dividends.”
Contact: Richard Kingston
Neither this announcement nor any copy of it may be taken or distributed into the United States of America or distributed or published, directly or indirectly, in the United States of America. Any failure to comply with this restriction may constitute a violation of US securities law. The securities referred to herein have not been and will not be registered under the US Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States to or for the benefit of US persons unless they are registered under the Securities Act or pursuant to an available exemption there from. No public offering of securities is being made in the United States. The distribution of this announcement and information contained herein may be restricted by law in other jurisdictions and therefore persons into whose possession this announcement or information contained herein comes should inform themselves about and observe any such restrictions.
NOTES: ABOUT ALPHA REAL CAPITAL Alpha Real Capital is a value-adding international property fund management group with operations in both the French and Spanish real estate markets. Alpha Real Capital was established by Phillip Rose and Sir John Beckwith. Phillip Rose has 25 years experience in the real estate, funds management and banking industries in Europe, the USA and Australasia. He has been Head of Real Estate for ABN AMRO bank, Chief Operating Officer of European shopping centre investor and developer TrizecHahn Europe (where he was responsible for a €1 billion European investment and development programme from 1999-2000), Managing Director of Lend Lease Global Investment where, during his tenure from 1994 to 1999, he was responsible for managing European property investments and Executive Manager of listed fund General Property Trust. He is currently a non-executive director of Great Portland Estates and a member of the Management Committee of the Hermes Property Unit Trust. Sir John Beckwith has been involved in property investment and other investment for his entire working life. He founded London & Edinburgh Trust PLC (“LET”) in 1971 where he was Chairman and Chief Executive Officer and developed it into one of the top ten listed real estate companies in the UK. Following the sale of LET, he established Pacific Investments through which he co-founded a number of successful asset management businesses, including Liontrust Asset Management and Thames River Capital. Alpha Real Capital is the Investment Manager to Alpha Pyrenees. Alpha Real Capital’s European Funds Director, Paul Cable, is Fund Manager, Alpha Pyrenees Trust. Paul Cable has 27 years experience in the real estate and banking industries in the UK, Europe and the Far East and was previously responsible for Sir John Beckwith’s property investment activities in France and Spain for six years. Further information is available at www.alphapyreneestrust.com including contact details for Alpha Real Capital’s UK, French and Spanish offices.
ABOUT ALPHA PYRENEES TRUST Alpha PyreneesTrust is a Guernsey registered closed-ended investment company investing in French and Spanish commercial real estate.
Investment Strategy The Trust strategy is to invest in a diversified portfolio of properties in France and Spain, focusing on commercial property in the industrial, logistics, office and retail sectors. Alpha Real Capital believes that there will be capital growth opportunities in the portfolio through income growth, active asset management and yield compression.
Directors The Directors of the Company, all of whom are non-executive, are responsible for the implementation of the investment policy of the Company and the overall supervision of the Group’s activities. The Board consists of: Richard Kingston (Chairman) Richard Kingston was an executive director of Slough Estates Plc, one of the largest London Stock Exchange listed property companies. He was responsible for Group Finance at Slough Estates Plc for nine years, and chairman of their continental European real estate activities. He was a non-executive director of Mersey Docks and Harbour Company and is a qualified Chartered Accountant.
Alpha Pyrenees Trust Limited Preliminary results For the period 16 November 2005 to 31 December 2006 These
are not the Company's statutory Financial Statements. <hr size=2 width="100%" align=center> Trust summary and objective Alpha Pyrenees Trust Limited (“the Trust” or “the Company”) was launched on 29 November 2005. Its shares are listed on the Official List of the UK Listing Authority and traded on the London Stock Exchange. The Trust is a closed-ended Guernsey registered investment company. Objective The Trust has been formed in order to invest in commercial property in France and Spain, and provide an income return to investors as well as the potential for capital growth. Capital structure The Trust was launched with initial shareholder equity of £125 million. This equity, together with an additional £2.5 million of equity raised, has been invested and future acquisitions will be progressively financed with bank debt until debt levels reach their targeted level of approximately 75% of property cost. Management The Trust’s Investment Manager
is Alpha Real Capital LLP (“the Investment Manager”). Control of the Trust
rests with ISA/PEP status The Trust’s shares are eligible for both Individual Savings Accounts (ISAs) and Personal Equity Plan (PEP) transfers, and can continue to be held in existing PEPs. Financial highlights
* The net asset value and net asset value per ordinary share at 31 December 2006 has been adjusted for the unrealised loss on revaluation of the currency hedge. The Group will not make a gain or loss on the currency hedge if it is held until maturity date, which is the current intention of the Group. ** Adjusted for capital items included in the consolidated income statement. There is no material difference between the basic and diluted EPS calculations - see note 7. Chairman’s statement The Trust invests in higher-yielding properties in France and Spain, focusing on commercial property in the industrial, logistics, office and retail sectors. Alpha Real Capital LLP is the Investment Manager to the Trust. The Trust’s objective is to invest in properties that can provide shareholders with a regular, secure dividend stream whilst also having the potential for capital growth from a combination of rent increases (all of our leases are typically indexed to increase in line with inflation), yield compression and active management. The Trust seeks to diversify risk by investing in a geographic spread of properties across different property sectors with a variety of tenants. Investment activity The Trust’s portfolio has grown to over 187,000 square metres (approximately 2 million square feet) as shown in the table below. The total cost of acquisitions to date has been €270 million which will provide the Trust with an average yield of 7.2% and a rent roll of €19 million. Further details of these acquisitions are provided in the Property Review.
Your Board is particularly pleased to report the acquisition of the Alcatel-Lucent Business Park at Nozay, which provides a 12 year income stream (with no break before year 9) on a yield of 7.3%. The business park is leased to Alcatel-Lucent, a global group with a €20 billion market capitalisation. The re-classification of the Trust’s listing on the Official List of the UK Listing Authority under Chapter 15 of the Listing Rules to Chapter 14 has provided enhanced flexibility and more closely aligned the Trust with the recently introduced legislation relating to REITs in the UK. In particular, this new flexibility has enabled the Trust to acquire a 100% interest in the Alcatel-Lucent business park and enables it to purchase similar business parks or other larger assets in the future. In line with our strategy, many of the tenants in the Trust’s properties are well known companies belonging to groups with strong covenants such as Credit Lyonnais, Alcatel‑Lucent, Novartis, Carrefour, Aldi, GlaxoSmithKline, La Poste, MediaMarkt, Saint Gobain and Vinci Group. The Trust’s pipeline of potential property acquisitions continues to be healthy. Results and dividend Results for the period show an adjusted profit after interest and tax of £4.5 million or 3.7p per share. The adjusted net asset value per share is 91.6p, reflecting start up costs and property acquisition costs. Properties held at 31 December 2006 are shown in the balance sheet at an independent valuation of £176.5 million, which does not include acquisition costs. Against the background of the acquisitions made to date, the Board proposes to declare a dividend of 2.5p per share, giving a total dividend of 5p per share in respect of the period to 31 December 2006. The dividend of 2.5p for the period to 31 December 2006 will be payable to the shareholders on the register as of 2 April 2007 and will be paid on 23 April 2007. It is the current intention of the Board to recommend a dividend of not less than 3p in respect of the forthcoming six months to 30 June 2007 and the six months to 31 December 2007, making an expected total dividend of at least 6p for the year to 31 December 2007. Finance The Trust has drawn down borrowings of €124 million at the year end under the €364 million facility with Barclays Bank. Interest rates have been fixed to February 2015 at an average rate of 5.05%. It is currently anticipated that the gearing level will be around 75% of cost of the portfolio once fully invested. A currency hedge instrument has been put into place that will significantly protect the conversion of the shareholders’ original equity back to Sterling together with the anticipated dividend on that equity. The hedge is for €163 million for the period to October 2013 and was fixed at a rate of €1.49 to the pound. Market outlook We continue to see attractive opportunities for investing, particularly in the French property market. Generally, property market conditions remain favourable with improving tenant demand, declining vacancy rates and increasing signs of rental growth. Investment yields are compressing and this trend is expected to continue. Summary The factors underlying the Trust’s investment strategy continue to offer a compelling investment case:
As the Trust continues to make
further progress on acquisitions, the Board will review the forecast dividend
Richard Kingston Property review Investment highlights The Trust has completed thirteen acquisitions to date in France and Spain involving a total cost of €270 million (€256 million plus deferred consideration of €14 million). The average yield to cost on these acquisitions is 7.2%. The Trust now owns over 187,000 square metres (approximately 2 million square feet) of commercial real estate. Of the total property portfolio, 83% is invested in France and 17% in Spain in terms of capital value. The Trust has achieved diversification across the sectors with 66% in offices and business park property, 20% in warehouses and 14% in retail. It has also achieved a significant geographical diversification with assets in Paris (Ile-de-France), Normandy, Seville, Córdoba and Zaragoza. Portfolio review As reported in the Interim Report, for the period to 30 June 2006 the Trust had agreed the acquisition of nine properties for a combined price of approximately €87 million. These properties have a total area of approximately 95,000 square metres and include five warehouse, office and logistics buildings in France and three retail centres and a warehouse property in Spain. The highlights of the period to 31 December 2006 were the acquisition of a portfolio of three modern office properties in suburban Paris and the Alcatel-Lucent business park in the Ile-de-France for a combined price of approximately €169 million. On 20 October 2006 the Trust completed the acquisition of two office properties in Champs sur Marne and St Cyr L’Ecole and completed the acquisition of the third property in Gennevilliers on 30 November 2006. Total consideration was approximately €44 million. The portfolio of three properties totals an area of 15,600 square metres. All have good car parking facilities and are close to communication links. The offices enjoy 100% occupancy and are well let to a number of good quality tenants including Credit Lyonnais, Syngenta, Université de Marne-la-Vallée and Ecole Nationale des Ponts et Chaussées. The buildings are all modern, having been completed within the last five years and provide the Trust with a yield of around 7%. On 22 December 2006 the Trust and IPGL Fund Investments Limited (“IPGL”) completed the acquisition of the Alcatel‑Lucent Business Park through a sale and leaseback transaction. The total consideration agreed for this strategically located, high quality asset was €124.5 million of which €110.5 million was paid on closing and €14 million will be paid on completion of new buildings, anticipated by December 2007. The Trust’s 77% share of the acquisition was approximately €95.9 million. Following the re-classification of the Trust’s listing to a company listed under Chapter 14 of the Listing Rules of the UK Listing Authority, together with the amendment of the Trust’s investment policy as approved by the shareholders at the EGM on 5 February 2007, the Trust acquired IPGL’s 23% interest on 15 February 2007. The property is now wholly owned by the Trust. The business park benefits from excellent main road infrastructure giving direct access to and from Paris via the A10 motorway or the RN118 from the west of Paris. The site is approximately 5 km from the Courtaboeuf business park, a well established business area of 3.5 million square metres. It hosts over 100 companies and 24,500 people (including the headquarters of major IT companies Microsoft and Hewlett Packard). Saclay-Scientipôle is approximately 15 km to the north west. This area brings together the R&D centres of several major corporations (e.g. Danone, Thomson CSF, Air Liquide), the Motorola headquarters, a university and several of France’s “grandes écoles”. The business park provides approximately 77,000 square metres of office, warehouse and research and development accommodation spread across 20 buildings. The buildings are of good specification and quality and 70% of the space is either new or has been subject to extensive refurbishment since 2005. The total site area is approximately 36 hectares and there are 1,820 car parking spaces. Alcatel-Lucent has signed a 12 year lease with a minimum fixed term of 9 years. The rent will be approximately €8.5 million per annum initially, rising to €9.6 million per annum on the earlier of the completion of the new buildings or 1 January 2008. The rent will be subject to annual indexation and the property is currently producing a rental yield of approximately 7.3%. The cost of completion of the construction works is covered by bank guarantees and the deferred payment. Asset management continues to be a key focus. During 2006 notable events within the portfolio included the opening of the 4,550 square metre MediaMarkt store on the Connecta Retail Park in Cordoba as planned in October 2006. The store is trading strongly and is of strategic importance to the rest of the park as an anchor tenant attracting new tenants and increasing footfall. At the Las Torres Shopping Centre in Ecija, the quality of the tenant covenant has been enhanced; Supersol the operator of a 1,760 square metre supermarket unit has been replaced by DIA, part of Carrefour Group, which is also a tenant on the Trust’s Cordoba retail park. A pro-active stance is being taken in developing additional income sources, such as ATM’s and vending machines in all the retail assets. Strong attention is being given to ensuring service charges are spent effectively and the annual level of property costs is controlled. Market overview France France showed real GDP growth of 2.2% for 2006 (1.2% for 2005). This rate of growth, the fastest for six years, is currently forecast to be maintained during the period to the end of 2008. The consumer sector looks set to continue to underpin growth in 2007. Consumer confidence is still high, as yet unaffected by the rise in interest rates, and is supported by a rise in real disposable income. Unemployment levels fell from 9.5% to 8.5% during 2006, the lowest level for six years, and with inflation below the ECB’s 2% target, economic sentiment remains positive. As a result of the improving economy, rental markets performed well in 2006. The robust office market saw total letting activity reaching a record of 2.8 million square metres of take up, an increase of 36% compared to 2005. This led to a decrease in supply, to 3.1 million square metres, coupled with an increase in rental values. The performance of property as an investment is further strengthened by rental indexation linked to the National Institute for Statistics and Economic Studies (“INSEE”) Cost of Construction Index that is currently running at over 6% on an annualised basis. Spain Spain continued to show strong growth in its economy with forecast real GDP growth of 3.8% for 2006 (3.5% for 2005). Unemployment levels fell from 8.9% to 8.5% during 2006. Together with a growth in income per capita and a strong labour market this is helping to support consumer demand. Retailers are benefiting from this consumer confidence and as a result operator demand for units remains strong especially in the retail warehouse sector, a format that is proving increasingly popular with consumers. Rents in the industrial market continue to display the gentle upward trend of recent years. Outlook The Trust is seeing a continuing flow of investments and is concentrating its efforts on identifying larger single lot investments and portfolio transactions as demonstrated by those concluded in the second half of 2006. Good progress has been achieved during 2006 and we look forward to reporting further progress on acquisitions over the forthcoming months. Paul Cable Directors Richard Kingston (aged 59) Chairman Richard Kingston was, until December 2006, an executive director of Slough Estates Plc, one of the largest London Stock Exchange listed property companies. He was chairman of their continental European real estate activities and previously was responsible for Group Finance for nine years. He was a non-executive director of Mersey Docks and Harbour Company and is a qualified Chartered Accountant. Christopher Bennett (aged 41) Director Christopher Bennett is Managing Director of Dominion Real Estate Limited, a Jersey based fund administration business. Previously he held senior positions in real estate finance with Royal Bank of Scotland International and Mutual Finance Limited. David Jeffreys (aged 47) Director David Jeffreys qualified as a Chartered Accountant with Deloitte Haskins and Sells. He was Managing Director of Abacus Fund Managers (Guernsey) Limited between 1993 and 2004. Currently he carries out a number of consultancy assignments as well as being a director of a number of investment funds. Phillip Rose (aged 47) Director Phillip Rose has 25 years experience in the real estate, funds management and banking industries in Europe, the USA and Australasia. He has been the Head of Real Estate for ABN AMRO Bank, Chief Operating Officer of European shopping centre investor and developer TrizecHahn Europe, Managing Director of Lend Lease Global Investment and Executive Manager of listed fund General Property Trust. Phillip is currently a non executive director of Great Portland Estates Plc and a member of the Management Committee of the Hermes Property Unit Trust. Serena Tremlett (aged 42) Director Serena Tremlett is company secretary of Assura Group Limited, a FTSE 250 company investing in primary healthcare property, pharmacy and related medical businesses. She was previously the Head of Guernsey Property Funds at Mourant Guernsey Limited where she sat on the board of a number of property and other investment funds. Directors’ report The Directors present their report and Financial Statements of the Company and the Group for the period from incorporation on 16 November 2005 to 31 December 2006. Principal activities The Company is a Guernsey registered investment company and during the period carried on business as a property investment company. Business review A review of the business during the period is contained in the Chairman’s statement. Results and dividend The results for the period are set out in the Financial Statements. The Company has declared and paid an interim dividend and proposes to declare a dividend in respect of the period to 31 December 2006. Directors The directors, who served during the period are detailed below:
At each annual general meeting of the Company, one third by number of the directors shall retire from office in accordance with the Articles of Association. By virtue of his position as CEO of the Investment Manager, Phillip Rose in his capacity as a Director is subject to annual re-election by the Shareholders. A retiring director shall be eligible for reappointment. No director shall be required to vacate his office at any time by reason of the fact that he has attained any specific age. Directors’ interests Directors who held office during the period and had interests in the shares of the Company as at 31 December 2006 were:
Directors’ remuneration During the period the directors received the following emoluments in the form of fees from Group companies:
Management The Investment Manager provides investment advisory services to the Company and property advisory, property management and monitoring services to those members of the Group which acquire properties, in each case in accordance with the investment objective and investment policy and restrictions of the Group. Directors’ responsibility statement Company law requires the directors to prepare Financial Statements for each financial year, which give a true and fair view of the state of affairs of the Company and of the Group at the end of the year and of the profit or loss of the Company and the Group for that period. In preparing those Financial Statements, the directors are required to: (1) select suitable accounting policies and then apply them consistently; (2) make judgements and estimates that are reasonable and prudent; (3) state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the Financial Statements; (4) prepare the Financial Statements on the going concern basis unless it is appropriate to assume that the Group will not continue in business. The Directors confirm that they have complied with the above requirements in preparing the Financial Statements. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and of the Group and to enable them to ensure that the Financial Statements comply with the Companies (Guernsey) Law, 1994. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Auditors BDO Novus Limited have expressed their willingness to continue in office as auditors and a resolution to reappoint them will be proposed at the forthcoming Annual General Meeting. By order of the Board,
Corporate governance Guernsey does not have its own corporate governance regime and, as a Guernsey registered company, the Company is not required to comply with the Combined Code on Corporate Governance, issued by the Financial Reporting Council. However it is the Company’s policy to comply with best practice on good corporate governance including taking measures to ensure the Company complies with the Combined Code to the extent appropriate. The Board’s arrangements in respect of corporate governance are explained in the paragraphs that follow. Role of the Board The Board has determined that its role is to consider and determine the following principal matters which it considers are of strategic importance to the Company: 1) Review the overall objectives for the Company and set the Company’s strategy for fulfilling those objectives within an appropriate risk framework; 2) Consider any shifts in strategy that it considers may be appropriate in light of market conditions; 3) Review the capital structure of the Company including consideration of any appropriate use of gearing both for the Company and in any joint ventures in which the Company may invest from time to time; 4) Appoint the Investment Manager, Administrator and other appropriately skilled service providers and monitor their effectiveness through regular reports and meetings; 5) Review key elements of the Company’s performance including Net Asset Value and payment of dividends. Board Decisions At board meetings, the Board ensures that all the strategic matters are considered and resolved by the Board. Certain issues associated with implementing the Company’s strategy are delegated either to the Investment Manager or the Administrator. Such delegation is over minor incidental matters and the Board continually monitor the services provided by these independent agents. The Board considers there are implementation matters that are significant enough to be of strategic importance and should be reserved solely for the Board (e.g. all acquisitions, all disposals, significant capital expenditure, leasing and decisions affecting the Company’s financial gearing). Board Meetings The Board meets at least quarterly and as required from time to time to consider specific issues reserved for decision by the Board including all potential acquisitions. At the Board’s quarterly meetings it considers papers circulated in advance including reports provided by the Investment Manager and the Administrator. The Investment Manager’s report comments on:
The Administrator provides the compliance report. These reports enable the Board to assess the success with which the Group’s property strategy and other associated matters are being implemented and also consider any relevant risks and to consider how they should be properly managed. The Board also considers reports provided from time to time by its various service providers reviewing their internal controls. The table below shows the attendance at quarterly Board or semi-annual Audit Committee meetings during the period to 31 December 2006:
In between its regular quarterly meetings, the Board has also met on a number of occasions during the period to approve all transactions and for other matters. Committees of the Board The Board has operated an Audit Committee throughout the period under review and on 21 February 2007 constituted a Remuneration Committee and a Nomination Committee. The Audit Committee The Audit Committee meets not less than twice a year and if required meetings can also be attended by the Investment Manager, the Administrator and the Independent Auditors. The Audit Committee is responsible for reviewing the half-year and annual Financial Statements before their submission to the Board. In addition, the Audit Committee is specifically charged under its terms of reference to advise the Board on the terms and scope of the appointment of the auditors (including remuneration), the independence and objectivity of the auditors, and reviewing with the auditors the results and effectiveness of the audit. Members of the Audit Committee may also, from time to time meet with the Company’s valuer to discuss the scope and conclusions of their work. The Remuneration Committee The Remuneration Committee, chaired by David Jeffreys, comprises the full Board and is required to consider the terms and remuneration of the Company’s directors and employees. The Nomination Committee The Nomination Committee, chaired by Serena Tremlett, comprises the full Board and is convened for the purpose of considering the appointment of additional directors as and when considered appropriate. Investment management agreement The Company has entered into an agreement with the Investment Manager. This sets out the Investment Manager’s key responsibilities which include proposing a property investment strategy to the Board, identifying property investments to recommend for acquisition and arranging appropriate lending facilities to facilitate the transaction. The Investment Manager is also responsible to the Board for all issues relating to property asset management. Shareholder relations Shareholder communications are a high priority of the Board. Members of the Investment Manager’s Investment Committee make themselves available at all reasonable times to meet with key shareholders and sector analysts. Feedback from these sessions is provided by the Investment Manager at the quarterly Board meetings. In addition, the Board is also kept fully appraised of all market commentary on the Company by the Investment Manager and other professional advisors including its brokers. Through this process the Board seeks to monitor investor relations and to ensure that the Company’s communication programme is effective. The Chairman and the Investment Manager will be available at the Annual General Meeting to answer any questions that shareholders attending may wish to raise. Consolidated income statement
The total column of this statement represents the Group’s Income Statement, prepared in accordance with IFRS. The revenue and capital columns are supplied as supplementary information permitted under IFRS. All items in the above statement derive from continuing operations. The accompanying notes are an integral part of this statement. Consolidated balance sheet
The accompanying notes are an integral part of this statement. Consolidated cash flow statement
The accompanying notes are an integral part of this statement. Consolidated statement of changes in equity
The accompanying notes are an integral part of this statement. Company income statement
The total column of this statement represents the Company’s Income Statement, prepared in accordance with IFRS. The revenue and capital columns are supplied as supplementary information permitted under IFRS. All items in the above statement derive from continuing operations. The accompanying notes are an integral part of this statement. Company balance sheet
The accompanying notes are an integral part of this statement. Company cash flow statement
The accompanying notes are an integral part of this statement. Company statement of changes in equity
The accompanying notes are an integral part of this statement. Notes to the Preliminary Results For the period from 16 November 2005 to 31 December 2006 1. General information The Company is a limited liability, closed-ended investment company incorporated in Guernsey. The address of the registered office is given in the "Directors and Trust information" section of this announcement. The nature of the Group’s operations and its principal activities are set out in the Chairman’s statement. The Financial Statements were authorised for issue on 28 February 2007 by David Jeffreys and Serena Tremlett on behalf of the Board. These Financial Statements are presented in pounds Sterling as this is the currency in which the funds were raised and in which investors are seeking a return. The Company’s functional currency is Sterling and the subsidiaries’ functional currency is Euros. The presentation currency of the Company and the Group is Sterling. The subsidiaries are included in the consolidated Financial Statements in accordance with note 2. 2. Significant accounting policies A summary of the principal accounting policies, all of which have been applied consistently throughout the period, is set out below. Basis of accounting The Financial Statements of the Group have been prepared in accordance with International Financial Reporting Standards ("IFRS"), which comprise standards and interpretations approved by the International Accounting Standards Board (“IASB”), and International Accounting Standards and Standards Interpretations Committee interpretations approved by the International Accounting Standards Committee (“IASC”) that remain in effect, and to the extent that they have been adopted by the European Union. The Financial Statements have been prepared on the historical cost basis, except for the revaluation of investment properties, and the mark to market of debt and derivative instruments. The principal accounting policies adopted are set out below. Basis of consolidation The consolidated Financial Statements incorporate the Financial Statements of the Company and entities controlled by the Company (and its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Presentation of income statement In order to better reflect the activities of an investment company and in accordance with guidance issued by the Association of Investment Companies (“AIC”), supplementary information which analyses the income statement between items of a revenue and capital nature has been presented alongside the income statement. Revenue recognition Rental income from investment property leased out under an operating lease is recognised in the income statement on a straight line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the net consideration for the use of the property and are therefore also recognised in the same straight line basis. Rental revenues are accounted for on an accruals basis. Therefore, deferred revenue generally represents advance payments from tenants. Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the Group and the amount of revenue can be measured reliably. When property is let out under a finance lease, the Group recognises a receivable at an amount equal to net investment in the lease at inception of the lease. Rentals received are accounted for as payments of principal and finance income as appropriate. Minimum lease payments receivable on finance leases are apportioned between finance income and reduction of the outstanding receivable. Finance income is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining net investment in the finance lease. Contingent rents, being those lease payments that are not fixed at the inception of a lease, for example turnover rents, are recorded as income in the periods in which they were earned. Interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. Foreign currencies Transactions in currencies other than pounds Sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At each Balance Sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the Balance Sheet date. Non-monetary assets and liabilities are carried at fair value that are denominated in foreign currencies and translated at the rates prevailing at the date when the fair value was determined. Gains and losses arising on retranslation are included in net profit or loss for the period, except for exchange differences arising on non‑monetary assets and liabilities where the changes in fair value are recognised directly to equity. On consolidation, the assets and liabilities of the Group’s overseas operations are translated at exchange rates prevailing on the Balance Sheet date. Income and expenses are translated at the average exchange rates for the period unless exchange rates fluctuate significantly. Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Expenses All expenses are accounted for on an accruals basis and include those of the Administrators, the Investment Manager and the Directors. In respect of the analysis between revenue and capital items, presented within the income statement, all expenses have been presented as revenue items except as follows:
Taxation The Company is exempt from Guernsey taxation on income derived outside of Guernsey and bank interest earned in Guernsey under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989. A fixed annual fee of £600 is payable to the States of Guernsey in respect of this exemption. No charge to Guernsey taxation arises on capital gains. The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using prevailing tax rates. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the Financial Statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the Balance Sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible timing differences can be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt within equity. Dividends Dividends are recognised as a liability in the period in which they become obligations of the Company. Interim dividends are recognised as a liability in the period in which they are paid. Final dividends are recognised once they are approved by Shareholders. Investment property Investment property, which is property held to earn rentals and/or for capital appreciation, is measured initially at cost including related transaction costs. After initial recognition at cost, investment properties are carried at their fair values based on a semi annual professional valuation made by Knight Frank LLP. Gains or losses arising from changes in fair value of investment property are included in the income statement for the period in which they arise. Properties are treated as acquired when the Group assumes the significant risks and returns of ownership and as disposed of when these are transferred to the buyer. Segmental reporting The Directors are of the opinion that the Group is engaged in a single segment of business being property investment business. It operates in a single geographical segment (Europe) and the properties are let to commercial entities. Share-based payments The Group makes equity-settled share-based payments to certain advisers and service providers. Equity-settled share-based payments are measured at fair value as at the date of grant. The fair value determined at grant date is expensed on a straight line basis over the vesting period, based on the Group’s estimate of the number of instruments that will eventually vest. Investment in subsidiaries Investment in subsidiaries are stated at cost less, where appropriate, provisions for impairment. Financial instruments Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument. The Group shall offset financial assets and financial liabilities if the Group has a legally enforceable right to set off the recognised amounts and interests and intends to settle on a net basis. Trade and other receivables Trade and other receivables do not carry any interest and are short-term in nature and are accordingly stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. Cash and cash equivalents Cash in banks and short term deposits that are held to maturity are carried at cost. Cash and cash equivalents consist of cash in hand and short term deposits in banks with an original maturity of three months or less. Financial liabilities and equity instruments Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements to which they relate. An equity instrument is any contract that evidences a residual interest in the asset of the Group after deducting all of its liabilities. Financial liabilities and equity instruments are recorded at the proceeds received, net of issue costs. Interest bearing bank loans and borrowings Interest bearing bank loans are recorded at the proceeds received, net of attributable transaction costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs are accounted for on an accruals basis in the income statement using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. Trade and other payables Trade payables and other payables are non interest-bearing and are stated at their nominal value. Derivative financial instruments and hedge “derivatives” Derivatives are recognised at fair value. The gain or loss on re-measurement to fair value is recognised immediately in the income statement unless the derivatives qualify for hedge accounting, in which case recognition depends on the nature of the item being hedged. 3. Gross rental income Gross rental income for the period ended 31 December 2006 amounted to £2.4 million. The Group leases out all of its investment property under operating leases. Leases are typically for terms of standard institutional 3/6/9 years in France and 5 + 5 years in Spain. At the Balance Sheet date, the Group had contracted with tenants for the following future minimum lease payments:
4. Expenses
An outline of the investment management agreement is provided in note 17. The Group has one employee. The Directors are the only key management personnel of the Group. Amounts payable to associates of BDO Novus Limited by the Company and its subsidiary undertakings in respect of non-audit services were £175,000. 5. Taxation The Group is liable to
French income tax at approximately 34% and Spanish income tax at approximately
35% arising on the activities of the Group’s operations in France and Spain.
There is no current or deferred tax expense arising on the results of the
Group for the period. The Group has unprovided deferred tax assets arising on
unutilised losses within the French and Spanish operations. 6. Dividends
7. Earnings per share The calculation of the basic and diluted earnings per share is based on the following data:
Since the average price of the shares over the period is in excess of the exercise price the warrants are dilutive, however the effect is so small that there is no difference between basic and diluted earnings per share. 8. Investment in subsidiary undertakings A list of the significant investments in subsidiaries, including the name, country of incorporation and the proportion of ownership interest is given below.
In addition to its investment in the shares of subsidiaries, the Company has made loans to the following as at 31 December 2006.
The loans are denominated in Euros, unsecured and are subject to a range of interest rates, fixed for the term of the relevant loan. At 31 December 2006 the average interest rate was 5.228%. Loans amounting to €16.6 million, in addition to bearing interest, carry a profit share entitlement of 20% of the EBITDA in the relevant subsidiary. 9. Investment properties
The fair value of the Group’s investment properties at 31 December 2006 has been arrived at on the basis of valuations carried out at that date by Knight Frank LLP, independent valuers not connected to the Group. The valuation basis has been market value as defined by the RICS Red Book. The approved RICS definition of market value is the “estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.” The Group has pledged a number of its investment properties to secure banking facilities granted to the Group. 10. Trade and other receivables
11. Interest bearing bank loans On 21 December 2006, the Group entered into a loan facility with Barclays Bank Plc totalling €364 million and a VAT facility totalling €40 million. The loan facility is to be repaid on 10 February 2015, and any VAT loans drawn, 24 months from the date of the agreement. As at 31 December 2006, the total funds drawn down totalled €124 million, which left €240 million available to draw down. Loans drawn down on the facility are secured over the shares in the Company’s operating subsidiaries and mortgages over properties with a total value of €183.8 million. The interest rate on the loans drawn to date is a fixed rate on a quarterly basis from 10 February 2007 for a period of 8 years at a rate of 4.20% plus a margin of 85 basis points, giving a total rate of 5.05%. All of the Group’s borrowings have a maturity of over five years. The fair value of the Group’s borrowings are not significantly different to those disclosed in the Balance Sheet. 12. Derivative financial instruments Currency swap The Group uses currency derivatives to hedge significant future transactions and cash flows to safeguard the equity investments of shareholders against significant adverse movements between Sterling and Euros. On 13 October 2006, Alpha Pyrenees Trust Finance Company Limited (“Alpha Finance”), a wholly owned subsidiary of the Company, entered into a currency swap with Barclays Bank Plc. Under the terms of this agreement, Alpha Finance will pay Barclays Bank Plc €130.1 million and Barclays Bank Plc will pay Alpha Finance £87.6 million on 16 October 2013. ln addition, there are quarterly periodic payments in February, May, August and October of each year starting on 16 February 2007 and ending 16 October 2013. On these dates Barclays Bank Plc will pay Alpha Finance an amount equal to 7 per cent per annum on £87.6 million and Alpha Finance will pay Barclays Bank Plc an amount equal to 6 per cent per annum on €130.1 million. An amount of £2 million had been pledged as collateral to Barclays Bank Plc to support this swap. On 18 January 2007, Alpha Finance entered into a further currency swap with Barclays Bank Plc. Under the terms of this swap, Alpha Finance will pay Barclays Bank Plc €33 million and Barclays Bank Plc will pay Alpha Finance £21.6 million on 16 October 2013. In addition, there are quarterly periodic payments in February, May, August and November of each year starting on 16 February 2007 and ending on 16 October 2013. On these dates Barclays Bank Plc will pay Alpha Finance an amount equal to 7 per cent. per annum on £21.6 million and Alpha Finance will pay Barclays Bank Plc an amount equal to 5.9725 per cent per annum on €33 million. A total amount of €7.5 million has been pledged as collateral to Barclays Bank Plc to support both the 13 October 2006 and 18 January 2007 swaps. 13. Trade and other payables
14. Share capital
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