Alpha Group International Regulatory News (ALPH)

18 Mar 2008 07:02

Alpha Pyrenees Trust Limited18 March 2008 18 March 2008 ALPHA PYRENEES TRUST LIMITED("ALPHA PYRENEES TRUST"; OR THE "TRUST") ALPHA PYRENEES TRUST POSTS RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007: NET ADJUSTED PROFIT AFTER INTEREST AND TAX UP 78% TO £8.0 MILLION (6.3p pershare) NET ASSET VALUE PER SHARE (ADJUSTED) UP 9.3% TO 100.1p DIVIDEND EXPECTED TO RISE BY 17% TO 7p FOR 2008, PAID QUARTERLY STRONG BALANCE SHEET WITH NET GEARING OF UNDER 60% Alpha Pyrenees Trust Limited, the property company investing in commercial realestate in France and Spain, today posts its results covering the year from 1January 2007 to 31 December 2007. The Trust announced an adjusted profit after interest and tax of £8 million anda further dividend of 1.5p per share in respect of its fourth quarter, making atotal of 6p per share for the year to 31 December 2007. It is the Board'scurrent intention to further increase the dividend by 17% to 7p per share inrespect of the year to 31 December 2008 payable quarterly. Highlights of the period to 31 December 2007 include: • Dividend up 20% to 6p per share • EPS (adjusted) up 70% to 6.3p per share • NAV (adjusted) up 9.3% to 100.1p per share compared to 31 December 2006 • Portfolio yielding 7.0% on current valuation • 80% of portfolio income comes from Grade A tenants • Leases are subject to annual indexation • Total borrowings of £180m and a portfolio value of £274m (66% overall loan to value). • Net gearing (after cash) is under 60% • All debt fixed at weighted average interest rate of 5.2% p.a. to maturities between 2013 (9% of debt) and 2015 (91%) Dick Kingston, Chairman of Alpha Pyrenees Trust, commented: "The Board intends to pay a further dividend of 1.5p per share making atotal dividend of 6p per share for the period to 31 December 2007. It is alsothe current intention of the Board to pay a dividend of 7p per share in respectof the year to 31 December 2008 which will be payable quarterly. In the light ofthe current uncertainty in the banking markets, the Trust has adopted a moredefensive financial position and the Trust's overall net gearing (takinginto account cash) is currently under 60%. This leaves the Trust well positionedto take advantage of value-enhancing opportunities as they arise." Paul Cable, Fund Manager, Alpha Real Capital, commented: "The Trust owns a diversified portfolio of quality-tenanted properties inFrance and Spain totaling £274 million (€372 million) which yields 7%. Allthe Trust's leases are subject to annual indexation and continue to showhealthy levels of rental increase. There are a number of asset managementopportunities to further enhance rental income and the Trust has the resourcesto take advantage of these opportunities." Contact: Dick KingstonChairman, Alpha Pyrenees Trust01481 735540 Paul CableFund Manager, Alpha Real Capital020 7591 1635 Neither this announcement nor any copy of it may be taken or distributed intothe United States of America or distributed or published, directly orindirectly, in the United States of America. Any failure to comply with thisrestriction may constitute a violation of US securities law. The securitiesreferred to herein have not been and will not be registered under the USSecurities Act of 1933, as amended (the "Securities Act"), and maynot be offered or sold in the United States to or for the benefit of US personsunless they are registered under the Securities Act or pursuant to an availableexemption there from. No public offering of securities is being made in theUnited States. The distribution of this announcement and information containedherein may be restricted by law in other jurisdictions and therefore personsinto whose possession this announcement or information contained herein comesshould inform themselves about and observe any such restrictions. NOTES: ABOUT ALPHA PYRENEES TRUST The Trust is a Guernsey registered closed-ended investment company investing inFrench and Spanish commercial real estate. Investment Strategy The Trust's strategy is to invest in a diversified portfolio of propertiesin France and Spain, focusing on commercial property in the office, industrial, logistics, and retail sectors. Alpha Real Capital believes that there will be capital growth opportunities in the portfolio through income growth and active asset management. For more information on Alpha Pyrenees please visit www.alphapyreneestrust.com Directors The Directors of the Company, all of whom are non-executive, are responsible forthe implementation of the investment policy of the Company and the overallsupervision of the Group's activities. The Board consists of: Dick Kingston (Chairman)Christopher BennettDavid JeffreysPhillip RoseSerena Tremlett Dick Kingston was an executive director of Slough Estates Plc (now SEGRO Plc),one of the largest London Stock Exchange listed property companies. He wasresponsible for Group Finance at Slough Estates Plc for nine years, and chairmanof their continental European real estate activities. He was a non-executivedirector of Mersey Docks and Harbour Company and is a qualified CharteredAccountant. ABOUT ALPHA REAL CAPITAL Alpha Real Capital is a co-investing international real estate fund manager withoperations in the French and Spanish real estate markets. Alpha Real Capital was established by Sir John Beckwith and Phillip Rose and is jointly owned by them, members of the Alpha management team and Michael Spencer. Alpha Real Capital is the Investment Manager to Alpha Pyrenees Trust. Alpha RealCapital's European Funds Director, Paul Cable, is Fund Manager, Alpha Pyrenees Trust. For more information on Alpha Real Capital please visit www.alpharealcapital.com-------------------------------------------------------------------------------- Alpha Pyrenees Trust Limited Results for the year ended 31 December 2007 Trust summary and objective Objective Alpha Pyrenees Trust Limited ("the Trust" or "the Company" or "Alpha Pyrenees")typically invests in commercial property in France and Spain withinflation-indexed rents that will provide an income return to investors as wellas the potential for capital growth. Dividends Dividends are paid quarterly and the Company's objective is to pay a total of 7pence per share each year from 2008 onwards. Listing The Trust is a closed-ended Guernsey registered investment company. Its sharesare listed on the Official List of the UK Listing Authority and traded on theLondon Stock Exchange. Management The Trust's Investment Manager is Alpha Real Capital LLP ("the InvestmentManager"). Control of the Trust rests with the non-executive Guernsey-basedBoard of Directors. ISA/PEP/SIPP status The Trust's shares are eligible for Individual Savings Accounts (ISAs), PersonalEquity Plans (PEPs) and Self Invested Personal Pensions (SIPPs). Financial highlights Year ending Half year ending Period 15 November 2005 to 31 December 31 December 2007 30 June 2007 2006Net asset value (adjusted) (£'000)* 127,085 124,680 116,750Net asset value per ordinary share 100.1p 97.8p 91.6p(adjusted)*Net asset value per ordinary share 97.1p 95.1p 90.3pDividend per share (proposed and paid) 6.0p 3.0p 5.0pEarnings per share (adjusted - 6.3p 2.5p 3.7pbasic & diluted)**Earnings per share (basic & diluted) 4.7p 7.4p (1.7p) *The net asset value and net asset value per ordinary share have been adjustedfor the fair value mark-to-market revaluation of the currency swap and interestrate swap derivatives and the deferred tax provisions; full analysis is given innote 11 to the accounts. **The adjusted earnings per share includes adjustments for the effect of the fairvalue mark-to-market revaluation of the currency swap and interest rate swapderivatives and the deferred tax provisions and rental guarantee income; fullanalysis is given in note 10 to the accounts. Chairman's Statement Objectives The Trust invests in higher-yielding properties in France and Spain, focusing oncommercial property in the office, industrial, logistics, and retail sectors.Alpha Real Capital LLP is the Investment Manager to the Trust. The Trust seeks to provide shareholders with a regular, secure dividend streamwhilst also having the potential for capital growth from a combination of rentincreases (our leases are typically indexed to increase in line with inflation)and active asset management. The Trust seeks to diversify risk by investing in a geographic spread ofproperties across different property sectors with a variety of tenants. Investment activity The Board is pleased with the substantial progress the Trust has made to date.With recent acquisitions the portfolio has grown to approximately 260,000 squaremetres (approximately 2.77 million square feet) as shown in the table below.Further details of these acquisitions are provided in the Property Review andthe individual property profiles. The total cost of the portfolio to date is approximately £268 million (€364million) including all acquisition costs and the valuation of these assets iscurrently approximately £274 million (€372 million). The annualised rent roll of£19 million per annum (€26 million per annum) provides the Trust with an averageyield of 7.0% at current valuation. Many of the tenants in the Trust's properties are well known companies belongingto groups with strong covenants such as Credit Lyonnais, Alcatel-Lucent,Carrefour, Aldi, GlaxoSmithKline, La Poste, MediaMarkt, Saint Gobain, BNPParibas, Konica Minolta, UPS, and Vinci Group. Prime tenants also includegovernment or quasi-government bodies and together the rent from such tenantsaccounts for 80% of the Trust's income. Results and dividend Results for the period show an adjusted profit after interest and tax of £8million (note 10). The adjusted EPS is 6.3 pence per share (note 10), anincrease of 70% on the prior period reflecting the progress made in acquiringproperties on attractive yields. Against the background of the acquisitions made to date, the Board intends topay a dividend of 1.5p per share in respect of its fourth quarter (1 October to31 December 2007) giving a total dividend of 6p per share in respect of the yearto 31 December 2007. This dividend will be payable to the shareholders on theregister as of 26 March 2008 and will be paid on 21 April 2008. The Group has borrowed a further £88 million (€120 million) during the yearbringing total bank debt to £180 million (€244 million) against the currentvalue of mortgaged properties of £259 million (€352 million). The overall netgearing (taking into account cash) is under 60%. It is the Board's current intention to pay a dividend of 7 pence in respect ofthe year to 31 December 2008. Revaluation and Net Asset Value Investment properties held at 31 December 2007 are shown in the balance sheet atan independent valuation of £272 million (€369 million). Development property of£2 million (€3 million) is shown at cost. The adjusted net asset value per ordinary share is up to 100.1p (note 11); thiscompares to 91.6p as at 31 December 2006, an increase of 8.5p for the year or9.3%. This demonstrates the relative strength of the French market and thequality of the Trust's portfolio. Portfolio Summary Country Property Sqm Description Valuation £m Valuation •m France Villarceaux-Nozay 77,180 Business park 104.6 142.0 France Aubervilliers 8,750 Offices 19.5 26.4 France Goussainville 20,500 Warehouse and offices 16.7 22.7 France St Cyr L'Ecole 6,340 Offices 13.2 17.9 France Champs sur Marne 5,930 Offices 13.6 18.5 France Athis Mons 23,280 Logistics with 10.5 14.3 offices France Aubergenville 27,700 Logistics 9.9 13.4 France Evreux 14,130 Logistics with 9.0 12.2 offices France Mulhouse* 5,250 Offices 8.1 11.0 France Gennevilliers 3,330 Offices with light 8.1 11.0 industrial France Roissy-en-France 7,800 Offices and warehouse 7.5 10.2 France Nimes 3,100 Offices and retail 6.5 8.8 France Ivry-sur-Seine 7,420 Warehouse and offices 6.1 8.3 France Vitry-sur-Seine 5,180 Warehouse and offices 4.6 6.3 France Fresnes 6,540 Warehouse and offices 4.9 6.7 Spain Cordoba 16,880 Retail park 16.9 22.9 Spain Zaragoza 9,520 Warehouses 5.7 7.8 Spain Ecija 5,950 Shopping centre 4.7 6.4 Spain Alcala de Guadaira 5,700 Shopping centre 4.1 5.5 Total 260,480 274.2 372.3 * Part of the Mulhouse property represents a development of a new officebuilding which is expected to be completed in July 2008; the table aboveincludes this development property at cost. Finance In the light of the current uncertainty in the banking markets, the Trust hasadopted a more conservative policy and the portfolio benefits from a 66% loan tovalue ; the overall net gearing (taking into account cash) is under 60%. TheTrust continues to place great emphasis on the safety of its financing with allinterest rates having been fixed on all borrowings, and a robust safety marginis being maintained with regard to bank loan covenants. As noted above, the Trust has total borrowings of £180 million (€244 million) asat 31 December 2007 under its facilities with Barclays Bank plc and all loansare secured on its properties. Interest rates on all borrowings have been fixedto February 2015 (February 2013 for Spanish borrowings) at a weighted averagerate of 5.2%. The key financing covenants are that the loan to value of mortgaged propertydoes not exceed 87.5% (85% in relation to the Alcatel property) and that theinterest cover ratio does not fall below 110%; the next loan to value testingdate is December 2011 for the French facility (annually for the Alcatelproperty) and February 2010 for the Spanish facility. The Trust is comfortablyperforming against these requirements and is well within its loan covenantratios. Currency hedge instruments are in place that significantly protect theconversion of the shareholders' original equity back to Sterling together withthe anticipated dividend on that equity. The hedges total €163 million and werefixed at an average rate of €1.49 to the pound. Share Buy Back The Trust commenced a share buy back programme of its ordinary shares on 20December 2007 and completed this programme on 17 January 2008. The total cost ofthe 10 million ordinary shares purchased was £8.2 million and these shares havebeen cancelled. During the reporting period the Trust acquired 500,000 shareswith the remainder being purchased in January 2008. The number of sharesrepurchased represented 7.8% of the issued share capital prior to thecommencement of the programme. Market outlook The Trust continues to see attractive opportunities for investing, particularlyin the French property market where conditions remain favourable with strongtenant demand, low vacancy rates and continuing signs of rental growth. Uncertainty in financial markets has led to an investor preference for a morecautious approach to gearing by property companies. In response to thecontinuing uncertainty in financial markets, the Trust has adopted a moredefensive financial position and its net gearing is currently below 60%. Thisleaves the Trust well positioned to take advantage of value enhancingopportunities that may arise. Summary • The Trust is well positioned to deliver a strong flow of cash dividends to its investors from its high-yielding, quality-tenanted property portfolio: • The Trust owns a diversified freehold portfolio of properties totalling £274 million (€372 million) which yields 7.0%. • All the Trust's leases are subject to annual index-linked rent reviews which continue to show healthy levels of increase. The Trust's property markets continue to enjoy low vacancy and rising rents. • Over 80% of the Trust's rental income comes from grade A tenants with an excellent capacity to pay. • The Trust's average lease length is over 4.6 years. • All debt fixed at weighted average interest of 5.2% p.a. to maturities between 2013 (9% of debt) and 2015 (91%). • Net gearing is below 60% and the Trust has robust loan to value covenants at 85% or higher. The Board accordingly confirms it is its intention to pay a dividend of 7 pencein respect of the current year to 31 December 2008. Dick KingstonChairman17 March 2008 Property review Investment highlights The Trust has completed nineteen acquisitions to date in France and Spaininvolving a cost of approximately £268 million (€364 million) includingacquisition costs. The valuation of this portfolio as at 31 December 2007 showeda total of approximately £274 million (€372 million) demonstrating that allacquisition costs have been more than absorbed through increases in value. Ofparticular note in this regard, the properties that were purchased at Roissy enFrance and Goussainville were acquired at a total cost of approximately £21.4million (€29 million) and valued soon after at year end at £24.2 million (€32.9million). The Trust's portfolio produced an average yield on current valuationof 7.0% on an annualised income of approximately £19 million (€26 million) perannum as at 31 December 2007. Of the total portfolio 63% by value was the subject of indexation as at 1January 2008. An average 5% increase was implemented on those leases. Thisincreased the annualised income to £19.7 million (€26.75 million) and producesan average yield on current valuation of 7.2%. This excludes the estimatedrental value of vacancy that is not covered by guarantee which is approximately£663,227 (€900,000) per annum. The Trust now owns approximately 260,000 square metres (approximately 2.77million square feet) of commercial real estate and has continued its investmentpolicy of identifying properties that are well let, well located and offer goodvalue. The average value of the portfolio to date is approximately £1,050(€1,430) per square metre (equivalent to £98 per square foot) and the averagerent is £76 (€103) per square metre per annum (equivalent to £7 per square foot)and this is for a portfolio that has 64% exposure to the French office andbusiness park sector. The reinstatement cost of these buildings has beenassessed at £198.2 million (€269 million) representing 72% of current value. Of the total property portfolio, 89% is invested in France and 11% in Spain interms of capital value. The Trust has achieved diversification across thesectors with 64% in offices and business park property, 27% in warehouses and 9%in retail. The Trust has a significant geographical diversification with assetsin Paris (Ile-de-France), Normandy, Nimes, Mulhouse, Seville, Cordoba andZaragoza. The portfolio benefits from strong credit tenants with 80% of its stabilisedrent roll secured by leases to Grade A tenants (large international/nationalcompanies or public sector). The portfolio also enjoys high levels of occupancy with rental income comprising93% of the potential total income and income from rental guarantees in excess oftwelve months' duration comprising 4% of the potential total income. As at 31December 2007 the weighted average lease length of the portfolio is 4.6 years. Portfolio review As reported in the Interim Report for the period to 30 June 2007 the Trust hadcompleted the acquisition of fifteen properties and agreed the acquisition oftwo properties for a total cost of approximately £246.9 million (€335 million).Since that date the Trust has completed the acquisitions of the two propertiesat Mulhouse and Aubervilliers, and acquired a further two properties for acombined cost of approximately £21.4 million (€29 million) and has increased itsexposure to warehouses in the Ile-de-France. On 5 July 2007 the Trust completed the acquisition of the modern office buildingin Mulhouse, in the Alsace region of Eastern France. Mulhouse is close to theGerman and Swiss borders, approximately 115 kilometres to the south ofStrasbourg. The property is located within a development zone about half akilometre south east of the city centre and close to transportation links. Theacquisition price was approximately £8.9 million (€12.1 million) for the 5,250square metre building in two phases and tenants include BNP Paribas and Societed'Equipement de la Region Mulhousienne (the local development agency) on leasesexpiring in 2014. The investment will provide a yield of 7%. On 21 September 2007 Alpha Pyrenees completed the acquisition of the modernoffice building in Aubervilliers, Ile-de-France. The property is located in the"Seine-Saint-Denis" department which adjoins Paris and is situated to the southof Aubervilliers in an urban development zone comprising residential, offices,light industrial and retail space. Transportation links are good with roadaccess via the A86 motorway and the boulevard Peripherique linking Paris toAubervilliers. The acquisition price was approximately £19.2 million (€26million) for the 8,750 square metre building which is fully income producingwith 72% of the income coming from international metal distribution companyKlockner Distribution Industrielle (KDI) on an indexed lease until December 2013without a break. KDI is a subsidiary of Klockner & Co AG which is represented infourteen countries worldwide and generated sales of £4.1 billion (€5.5 billion)in 2006 The investment provides an initial yield of 7%. On 14 December 2007 the Trust completed the acquisition of two mixed useproperties totalling 28,300 square metres in Roissy en France and Goussainville,in the "Val d'Oise" department, Ile-de-France. The Roissy en France property is situated within the Paris Nord II area. Thisarea incorporates campus style offices, light industrial and a shopping centre.Communications are very good with road access via the A1 motorway which linksParis to Lille and serves Roissy-Charles de Gaulle airport situated 5km away.Roissy-Charles de Gaulle is France's main international airport and was Europe'snumber one airport in terms of cargo traffic in 2006. The acquisition price was£7.3 million (€9.9 million) and the property totals an area of approximately7,800 square metres comprising offices, warehousing and logistics with good carparking facilities. The property is let to Konica Minolta (38% of income) on anindexed lease expiring in December 2011 and pharmaceutical distributor, OCP (62%of income) on an indexed lease expiring in June 2014. The Goussainville property is situated in the Parc GIP Charles de Gaulle area.This area incorporates offices, retail and warehouses. There are goodcommunications with road access via the RN17 which links to the A1 and A104motorways linking Paris and Lille and serving Roissy-Charles de Gaulle airportsituated 10km away. The acquisition price was £12.5 million (€17 million) andthe property totals an area of approximately 20,500 square metres comprisingoffices and warehousing with good external and internal car parking facilities.The property is 76% let on indexed leases and four major tenants, Maintenancepart (subsidiary of UPS), Tekelec Temex, Alpheios and Oakley Europe account fortwo thirds of the current income. The property has approximately 27% of thetotal area vacant and includes an undeveloped site and therefore offers theopportunity to considerably increase income through active asset management, asdiscussed further in the asset management section below. These two investments provide an initial yield of 7.1% on current income withthe prospect of enhanced income returns once the vacant space at Goussainvillehas been let. Asset management continues to be a key focus and we set out below a case studyfor the Alcatel-Lucent sale and leaseback transaction demonstrating what hasbeen achieved over the last twelve months. Alcatel-Lucent, Villarceaux-Nozay - Case Study In December 2006 the Trust acquired from Alcatel-Lucent a site totalling 36hectares housing business park space containing campus style offices togetherwith research and development space, ancillary accommodation and car parking.The acquisition was made in partnership with IPGL who took a 23% interest. Thisinterest was acquired from IPGL on 15 February 2007 and the site became whollyowned by the Trust. The acquisition price paid to Alcatel-Lucent was £91.7 million (€124.5 million)payable as €110.5 million in December 2006 and £10.3 million (€14 million)deferred consideration on completion of building works. Alcatel-Lucent signed alease for 12 years with a fixed period of 9 years at an initial rent ofapproximately £6.3 million (€8.5 million) per annum rising to £7.1 million (€9.6million) per annum on the earlier of the completion of the new buildings or 1January 2008. Upon acquisition the property produced a rental yield of 7.3% oncost and the rent is subject to annual indexation. The Trust partnered with Alcatel-Lucent in the creation of additionalaccommodation which would allow an increase in the personnel on site from 1,500to over 3,000 at completion thereby creating one of Alcatel-Lucent's principalbusiness centres worldwide providing some 77,180 sqm of accommodation togetherwith over 2000 car parking spaces. To achieve this a major redevelopment of the site was undertaken over a twelvemonth period consisting of the following: • Renovation and restructuring of 28,000 sqm of existing space principallyin the Copernic and Newton buildings to create offices and laboratoriesinvolving a total investment of £13.3 million (€18 million). This work wascompleted on programme and the properties were handed over to Alcatel-Lucent on27 June 2007. • A further £13.3 million (€18 million) of new construction work was alsoundertaken consisting of: o Huygens building: 7,600 sqm of office spaceo New restaurant facility for the entire business parko New Security Lodgeo Installation of a new access control systemo Renovation of existing parking areas and the creation of additional parking areas. The cost of completion of the construction works was covered by bank guaranteesand the deferred payment and the new buildings were completed on programme andhanded over to Alcatel-Lucent on 20 November 2007. At this time the deferredconsideration was paid to Alcatel-Lucent and the revised rent became payable. The rent was indexed as from 1 January 2008 and now stands at £7.4 million (€10million) per annum representing a 5% increase and the property was valued at 31December 2007 at £104.6 million (€142 million), an increase of £12.9 million(€17.5 million) over acquisition price. Asset management initiatives Other asset management initiatives during 2007 included: At Evreux, the tenant GlaxoSmithKline has increased its commitment to theproperty through substantial investment in creating a new "stock picking" systemover ground and mezzanine levels. To improve management efficiency a number ofservice contracts have been devolved to be managed directly by the tenant attheir request and this reflects our close working relationship with the tenants. At Champs sur Marne the principal tenant, Credit Lyonnais, has increased itscommitment to the property by investing in separating out some of the building'sM&E services at their own expense during 2007. At Ivry-sur-Seine, the remaining vacant space was leased to Distripaq forexpansion of their existing operations and they now occupy a total of 1,630 sqm.We are currently investigating the installation of additional car parking spaceson an under-utilised area of the site. Such spaces will increase the rentalincome. At Nimes the extension and modification works to the staff restaurant have beencompleted and the Conseil General du Gard is now paying an additional rent toreflect these works. At Mulhouse, development of the 1,915 square metre Phase II office building hasreached roof level with all windows and doors installed and is on programme forcompletion in July 2008. This space is covered by a two year rent guarantee fromcompletion and marketing of the space is being actively pursued. The Goussainville property is the Trust's most recent purchase and offers anumber of opportunities for active asset management. - The 20,500 sqm mixed warehouse and office complex is currently beingre-branded as "alpha Park" to refresh the marketing of the vacant space. - 50% of the vacant space should be readily relettable, increasing theyield on cost to around 8%. The space is being actively marketed and initialdiscussions are underway with interested parties. - The remaining vacant space, comprising pure office units and a mixedunit will also be leased up over time, further improving the yield. - In addition there is an undeveloped site adjoining the property in theTrust's ownership and we are in discussions with the local authority regardingthe development rights where a turnkey development project could be undertaken. As reported at the Interim, at Connecta Retail Park in Cordoba the 4,550 squaremetre MediaMarkt anchor store is trading strongly and is a major influence onthe number of visitors and the sales performance of the park. The influence ofthis store is demonstrated by the current works being undertaken to improve theentrance and exit to the park from the main road and to implement a newcirculation system in the car park to improve access and traffic flow at peaktimes. The 1,030 square metres Hogaria store opened in August 2007 and VisionLabopened their 200 square metre unit in September 2007. Strong attention continues to be given to ensuring service charges are spenteffectively, the annual level of property costs is controlled and additionalsources of income are identified. Market overview France The current news on the French economy remains broadly encouraging. The nationalmeasure of industrial confidence remains consistent with solid industrialproduction growth and the average annual growth rate in consumer spending onmanufactured goods has remained strong and broadly in line with the averagerates witnessed throughout 2007. In line with other major euro-zone economiesthere are signs of a growth in inflation. The Budget for 2008 included tax cuts amounting to €9 billion which are expectedto boost the economy. Despite pressure from other major euro-zone countries on France to reducegovernment expenditure and bring their finances into balance, government policyis likely to remain supportive and this is likely to help the French economy tooutgrow many of its neighbours this year. GDP growth is forecast to grow at 2%for 2008 (1.9% in 2007). Nearly 90% of the Trust's portfolio is in France and 58 % is in Ile de Franceoffices and business park space. Paris remains one of Europe's most dynamic office markets. Annual take up of 2.7million square metres was recorded in the Paris Ile de France office marketduring 2007. While this is slightly lower than the record figure in 2006 (2.9million square metres) this is still one of the highest totals ever recorded.Take-up in the fourth quarter was 675,000 square metres which shows nosignificant slowing in activity despite the increase in economic uncertaintyresulting from turmoil in the banking markets. The Ile de France market continues to be a solid market with a strong level ofdemand from small and medium sized occupiers and a positive net absorptionestimated to be 530,000 square metres in 2007. This strength is expected to helpletting activity remain high in 2008 with forecasts of between 2.4 million and2.6 million square metres. The vacancy rate in the Paris region remains low at4.9%. The French industrial market is one of the most mature in Europe and France'sposition between the Iberian peninsula and the rest of continental Europe and asa gateway to the United Kingdom means that it is a strategic location forpan-European as well as domestic distribution. Currently the Paris region is oneof the most significant logistics hubs with nearly a third of all logisticsstock in France. Occupier demand is likely to remain strong and combined with abalanced supply is likely to put some upward pressure on rents. Spain The Spanish economy ended 2007 on a high note recording a 0.8% increase in GDPover the final quarter and an increase of 3.5% over the year, well ahead ofother major euro-zone economies. However, the outlook for the Spanish economy ismore uncertain with household spending, annual investment spending andconstruction investment growth all decreasing towards the end of 2007. Againstthis government spending growth remained healthy and net trade made acontribution to growth. GDP growth is anticipated to slow to 1.8% in 2008. Retailers benefited from strong consumer demand overall during 2007. This maymoderate over the coming year but the retail warehouse sector continues toexpand due to its popularity with consumers and retailers alike resulting fromlower cost accommodation and the accessibility of these parks. Zaragoza, to the west of Barcelona, is emerging as a key centre for logisticsactivity, due to excellent communications and direct connections to the centralregion and elsewhere. Demand remains buoyant and with controlled supply, rents in the Spanishwarehouse market should experience further rental growth. Outlook The current turmoil in the banking markets has introduced a greater degree ofuncertainty with regard to investment markets generally. Despite this andgeneral increases in banking margins, finance remains available at attractivelong term fixed interest rates as swap rates have decreased from their high inmid 2007. The Trust has adopted a prudent policy towards lower levels of borrowing withinthe portfolio at present and has the resources to take advantage of valueenhancing opportunities as they arise. Paul CableFor and on behalf of the Investment Manager 17 March 2007 Directors Dick Kingston (aged 60) Chairman Dick Kingston was, until December 2006, an executive director of Slough EstatesPlc (now SEGRO Plc), one of the largest London Stock Exchange listed propertycompanies. He was chairman of their continental European real estate activitiesand previously was responsible for Group Finance for nine years. He was anon-executive director of Mersey Docks and Harbour Company and is a qualifiedChartered Accountant. Christopher Bennett (aged 42) Director Christopher Bennett is Managing Director of Dominion Real Estate Limited, aJersey based fund administration business and is a Chartered Surveyor.Previously he held senior positions in real estate finance with Royal Bank ofScotland International and Mutual Finance Limited. David Jeffreys (aged 48) Director David Jeffreys qualified as a Chartered Accountant with Deloitte Haskins andSells. He was Managing Director of Abacus Fund Managers (Guernsey) Limitedbetween 1993 and 2004. Currently he carries out a number of consultancyassignments as well as being a director of a number of investment funds. Phillip Rose (aged 48) Director Phillip Rose has 25 years experience in the real estate, funds management andbanking industries in Europe, the USA and Australasia. He has been the Head ofReal Estate for ABN AMRO Bank, Chief Operating Officer of European shoppingcentre investor and developer TrizecHahn Europe, Managing Director of Lend LeaseGlobal Investment and Executive Manager of listed fund General Property Trust. Phillip is currently CEO of Alpha Real Capital LLP, a non executive director ofGreat Portland Estates Plc and a member of the Management Committee of theHermes Property Unit Trust. Serena Tremlett (aged 43) Director Serena Tremlett is company secretary of Assura Group Limited, a company listedon the London Stock Exchange investing in primary healthcare property, pharmacyand related medical businesses. She was previously the Head of Guernsey PropertyFunds at Mourant Guernsey Limited where she sat on the board of a number ofproperty and other investment funds. Directors' report The Directors present their report and financial statements of the Company andthe Group for the year ended 31 December 2007. Status The Company was founded on 29 November 2005. Its shares are listed on theOfficial List of the UK Listing Authority and are traded on the London StockExchange. On 13 February 2007 the company reclassified its listing on the Official Listfrom that of a property investment company listed under Chapter 15 of theListing Rules of the UK Listing Authority ("UKLA") to that of an overseascompany listed under Chapter 14 of the UKLA Listing Rules. Shareholders approvedthe re-classification at an Extraordinary General meeting held on 5 February2007. The company is a closed-ended Guernsey registered investment company. Principal activities During the year the Company carried on business as a property investmentcompany, investing in commercial property in France and Spain. Business review A review of the business during the year is contained in the Chairman'sstatement. Results and dividend The results for the year are set out in the financial statements. The Company has declared and paid interim dividends of 3 pence per share for thehalf year ended 30 June 2007 and has paid a further 1.5 pence per share inJanuary 2008 for the quarter ended 30 September 2007. The Company proposes todeclare a dividend of 1.5 pence per share in respect of the final quarter of theyear (payable 21 April 2008). This brings the total dividend in respect of thefinancial year ended 31 December 2007 to 6 pence per share (2006: 5 pence pershare) Directors The directors, all of whom were non-executive, who served during the year, aredetailed below: AppointedDick Kingston - Chairman 16 Nov 2005Christopher Bennett 16 Nov 2005David Jeffreys 16 Nov 2005Phillip Rose 16 Nov 2005Serena Tremlett 16 Nov 2005 At each annual general meeting of the Company, one third by number of thedirectors shall retire from office in accordance with the Articles ofAssociation. By virtue of his position as CEO of the Investment Manager, Phillip Rose in hiscapacity 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 thefact that he has attained any specific age. The biographies of the Directors are detailed above. The Board considers that there is a balance of skills and experience within theBoard and each of the Directors contributes effectively. Directors' interests The following Directors had interests in the shares of the Company at 31December: Number of ordinary shares Number of ordinary shares 2007 2006Dick Kingston 5,000 5,000Christopher Bennett - -David Jeffreys 5,000 5,000Phillip Rose 375,000 250,000Serena Tremlett 5,000 5,000 There have been no changes in the Directors' interests since the year end. Directors' remuneration During the year the directors received the following emoluments in the form offees from Group companies: Year ending 15 November 2005 to 31 December 2007 31 December 2006 £ £Dick Kingston 30,000 33,780Christopher Bennett 20,000 22,520David Jeffreys 20,000 22,520Phillip Rose 20,000 22,520Serena Tremlett 20,000 25,407Total 110,000 126,747 The company's Articles of Association limit the aggregate fees payable to theDirectors at £200,000 per annum. Directors' and officers' liability insurance cover is in place in respect of theDirectors. There are no service contracts in existence between the Company and anyDirectors, but each of the Directors was appointed by a letter of appointmentwhich sets out the main terms of his appointment. Substantial shareholding Shareholders with holdings of more than 3 per cent of the issued ordinary sharesof the Company as at 10 March 2008 were as follows: Name of investor No. of ordinary % held sharesINVESCO Asset Management Limited 22,795,790 19.4%Antler Property Corporation plc 7,000,000 5.96%MassMutual Financial 6,020,287 5.12%Jupiter Asset Management Limited 5,574,717 4.74%Rathbone Investment Management Limited 5,565,550 4.74%Legal and General Investment Management Limited 5,540,177 4.72%(UK)UBS Global Asset Management Limited 4,467,235 3.80%Rensburg Sheppards Investment Management Limited 4,046,560 3.44% Share buy-back On 20 December 2007 the Company, pursuant to its authority granted by theshareholders, purchased 500,000 shares for cancellation at an average price of80 pence per share. In January 2008, the Company purchased a further 9,500,000shares at an average price of 82 pence per share for cancellation. Management The Investment Manager provides investment advisory services to the Company andproperty advisory, property management and monitoring services to those membersof the Group which acquire properties, in each case in accordance with theinvestment objective and investment policy and restrictions of the Group. Directors' responsibility statement Company law requires the directors to prepare Financial Statements for eachfinancial year, which give a true and fair view of the state of affairs of theCompany and of the Group at the end of the year and of the profit or loss of theCompany 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, subjectto any material departures disclosed and explained in the Financial Statements; (4) prepare the Financial Statements on the going concern basis unless it isappropriate to assume that the Company and Group will not continue in business. The Directors are responsible for keeping proper accounting records whichdisclose with reasonable accuracy at any time the financial position of theCompany and of the Group and to enable them to ensure that the financialstatements comply with the Companies (Guernsey) Law, 1994. They are alsoresponsible for safeguarding the assets of the Company and Group and hence fortaking reasonable steps for the prevention and detection of fraud and otherirregularities. The Directors confirm that they have complied with the above requirements inpreparing the Financial Statements. Corporate Governance A statement of Corporate Governance is included below. Going Concern After making enquiries, and bearing in mind the nature of the Company's businessand assets, the Directors consider that the Company has adequate resources tocontinue in operational existence for the foreseeable future. For this reason,they continue to adopt the going concern basis in preparing the accounts. Annual General Meeting The AGM will be held in Guernsey on 30 April 2008. Auditors BDO Novus Limited has expressed their willingness to continue in office asauditors and a resolution to reappoint them will be proposed at the forthcomingAnnual General Meeting. By order of the Board, David Jeffreys Serena TremlettDirector Director Corporate governance Guernsey does not have its own corporate governance regime and, as a Guernseyregistered company, the Company is not required to comply with the Combined Codeon Corporate Governance, issued by the Financial Reporting Council. However itis the Company's policy to comply with best practice on good corporategovernance including taking measures to ensure the Company complies with theCombined Code to the extent appropriate. The Board's arrangements in respect ofcorporate governance are explained in the paragraphs that follow: Role of the Board The Board has determined that its role is to consider and determine thefollowing principal matters which it considers are of strategic importance tothe Company: 1) Review the overall objectives for the Company and set the Company'sstrategy for fulfilling those objectives within an appropriate risk framework; 2) Consider any shifts in strategy that it considers may be appropriate inlight of market conditions; 3) Review the capital structure of the Company including consideration ofany appropriate use of gearing both for the Company and in any joint ventures inwhich the Company may invest from time to time; 4) Appoint the Investment Manager, Administrator and other appropriatelyskilled service providers and monitor their effectiveness through regularreports and meetings; 5) Review key elements of the Company's performance including Net AssetValue and payment of dividends. Board Decisions At board meetings, the Board ensures that all the strategic matters areconsidered and resolved by the Board. Certain issues associated withimplementing the Company's strategy are delegated either to the InvestmentManager or the Administrator. Such delegation is over minor incidental mattersand the Board continually monitors the services provided by these independentagents. The Board considers there are implementation matters that aresignificant enough to be of strategic importance and should be reserved solelyfor the Board (e.g. all acquisitions, all disposals, significant capitalexpenditure, 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 considerspecific issues reserved for decision by the Board including all potentialacquisitions. At the Board's quarterly meetings it considers papers circulated in advanceincluding reports provided by the Investment Manager and the Administrator. TheInvestment Manager's report comments on: • The French and Spanish property markets including recommendations forany changes in strategy that the Investment Manager considers may beappropriate; • Performance of the Group's portfolio and key asset managementinitiatives; • Transactional activity undertaken over the previous quarter and beingcontemplated for the future; • The Group's financial position including relationships with bankers andlenders. The Administrator provides the compliance report. These reports enable the Board to assess the success with which the Group'sproperty strategy and other associated matters are being implemented and alsoconsider any relevant risks and to consider how they should be properly managed. The Board also considers reports provided from time to time by its variousservice providers reviewing their internal controls. In between its regular quarterly meetings, the Board has also met on a number ofoccasions during the year to approve all transactions and for other matters. Committees of the Board The Board has operated an Audit Committee throughout the year under review andon 21 February 2007 constituted a Remuneration Committee and a NominationCommittee. The Audit Committee The Audit Committee is chaired by Dick Kingston and comprises David Jeffreys andSerena Tremlett. The Audit Committee meets not less than twice a year and ifrequired meetings can also be attended by the Investment Manager, theAdministrator and the Independent Auditors. The Audit Committee is responsible for reviewing the half-year and annualFinancial Statements before their submission to the Board. In addition, theAudit Committee is specifically charged under its terms of reference to advisethe Board on the terms and scope of the appointment of the auditors (includingremuneration), the independence and objectivity of the auditors, and reviewingwith the auditors the results and effectiveness of the audit. Members of the Audit Committee may also, from time to time, meet with theCompany's valuer to discuss the scope and conclusions of their work. The Remuneration Committee The Remuneration Committee, chaired by David Jeffreys, comprises the full Boardand is required to consider the terms and remuneration of the Company'sdirectors and employees. The Nomination Committee The Nomination Committee, chaired by Serena Tremlett, comprises the full Boardand is convened for the purpose of considering the appointment of additionaldirectors as and when considered appropriate. The table below shows the attendance at Board and other Committee meetingsduring the year to 31 December 2007: Director Board Audit Remuneration Nomination committee Committee CommitteeDick Kingston 11 3 1 1Christopher Bennett 14 - 1 1David Jeffreys 17 3 1 1Phillip Rose 13 - 1 1Serena Tremlett 15 3 1 1 No. of meetings during the 19 3 1 1year Investment management agreement The Company has entered into an agreement with the Investment Manager. This setsout the Investment Manager's key responsibilities which include proposing aproperty investment strategy to the Board, identifying property investments torecommend for acquisition and arranging appropriate lending facilities tofacilitate the transaction. The Investment Manager is also responsible to theBoard for all issues relating to property asset management. Shareholder relations Shareholder communications are a high priority of the Board. Members of theInvestment Manager's Investment Committee make themselves available at allreasonable times to meet with key shareholders and sector analysts. Feedbackfrom these sessions is provided by the Investment Manager at the quarterly Boardmeetings. In addition, the Board is also kept fully appraised of all market commentary onthe Company by the Investment Manager and other professional advisors includingits brokers. Through this process the Board seeks to monitor investor relations and to ensurethat the Company's communication programme is effective. The Chairman and the Investment Manager will be available at the Annual GeneralMeeting to answer any questions that shareholders attending may wish to raise. Independent auditors' report To the members of Alpha Pyrenees Trust Limited We have audited the Group and parent company financial statements ("theFinancial Statements") of Alpha Pyrenees Trust Limited for the year ended 31December 2007, which comprise the Consolidated and Company Income Statement,Consolidated and Company Balance Sheet, Consolidated and Company Cash FlowStatement, Consolidated and Company Statement of Changes in Equity and therelated notes 1 to 25. These Financial Statements have been prepared underInternational Financial Reporting Standards in accordance with the accountingpolicies as set out below. This report is made solely to the Company's members, as a body, in accordancewith Section 64 of the Companies (Guernsey) Law, 1994. Our audit work isundertaken so that we might state to the Company's members those matters we arerequired to state to them in an auditors' report and for no other purpose. Tothe fullest extent permitted by law we do not accept or assume responsibility toanyone other than the Company and the Company's members as a body, for our auditwork, for this report, or for the opinions we have formed. Respective responsibilities of the directors and auditors As described in the Directors' Responsibility Statement within the Directors'Report, the Company's directors are responsible for the preparation of theFinancial Statements in accordance with applicable law and InternationalFinancial Reporting Standards ("IFRS"). Our responsibility is to audit the Financial Statements in accordance with therelevant legal and regulatory requirements and International Standards onAuditing (UK and Ireland). We report to you our opinion as to whether the Financial Statements give a trueand fair view and are properly prepared in accordance with the Companies(Guernsey) Law, 1994. We also report to you if, in our opinion, the Directors'Report is not consistent with the Financial Statements, if the Company has notkept proper accounting records, if we have not received all the information andexplanations we require for our audit, or if the information specified by law isnot disclosed. We read the other information included in the Annual Report and consider whetherit is consistent with the audited Financial Statements. This other informationcomprises only the Trust Summary and Objective, Financial Highlights, Chairman'sStatement, Property Review, Directors, Directors' Report and CorporateGovernance. We consider the implications for our report if we become aware ofany apparent misstatements or material inconsistencies with the FinancialStatements. Our responsibilities do not extend to any other information. Basis of opinion We conducted our audit in accordance with International Standards on Auditing(UK and Ireland) issued by the Auditing Practices Board. An audit includesexamination, on a test basis, of evidence relevant to the amounts anddisclosures in the Financial Statements. It also includes an assessment of thesignificant estimates and judgements made by the Directors in the preparation ofthe Financial Statements, and of whether the accounting policies are appropriateto the Company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information andexplanations which we considered necessary in order to provide us withsufficient evidence to give reasonable assurance that the Financial Statementsare free from material misstatement, whether caused by fraud or otherirregularity or error. In forming our opinion we also evaluated the overalladequacy of the presentation of information in the Financial Statements. Opinion In our opinion: • The Group Financial Statements give a true and fair view, in accordancewith IFRS, of the state of the Group's affairs at 31 December 2007 and of itsprofit for the year then ended. • The Parent Company Financial Statements give a true and fair view, inaccordance with IFRS, of the state of the Company's affairs at 31 December 2007and of its profit for the year then ended. • The Financial Statements have been properly prepared in accordance withthe Companies (Guernsey) Law, 1994. BDO Novus LimitedChartered AccountantsElizabeth House, St Peter Port, Guernsey17 March 2007 Consolidated income statement For the year ended 31 December For the period 16 November 2007 2005 to 31 December 2006 Revenue Capital Total Revenue Capital Total Notes £'000 £'000 £'000 £'000 £'000 £'000 IncomeRevenue 3 16,109 - 16,109 2,816 - 2,816Net change in gains/ 13 - 12,231 12,231 - (5,250) (5,250)(losses) on revaluationof investmentpropertiesTotal income 16,109 12,231 28,340 2,816 (5,250) (2,434) ExpensesProperty operating (2,954) - (2,954) (501) - (501)expensesAdministration costs 6 (3,137) (783) (3,920) (2,002) (269) (2,271) Total operating (6,091) (783) (6,874) (2,503) (269) (2,772)expenses Operating profit 10,018 11,448 21,466 313 (5,519) (5,206) Finance income 4 2,628 754 3,382 4,324 - 4,324Finance costs 7 (4,929) (8,251) (13,180) (165) (1,668) (1,833) Net profit/ (loss) 7,717 3,951 11,668 4,472 (7,187) (2,715)before taxation Taxation 8 - (5,623) (5,623) - - - Profit (loss) for the 7,717 (1,672) 6,045 4,472 (7,187) (2,715)period year/period Attributable to Equity holders of 7,717 (1,672) 6,045 4,499 (6,607) (2,108) the parent Minority interest - - - (27) (580) (607) Earnings per share - basic & diluted 10 4.7p (1.7p) The total column of this statement represents the Group's income statement,prepared in accordance with IFRS. The revenue and capital columns are suppliedas supplementary information permitted under IFRS. All items in the abovestatement derive from continuing operations. The accompanying notes are an integral part of this statement. Consolidated balance sheetAs at 31 December 2007 Notes 2007 2006 £'000 £'000 Non-current assetsInvestment properties 13 270,946 176,509Development properties 14 2,441 -Finance leases - 368Financial assets at fair value through profit or 16 813 -lossProperty, plant and equipment 17 21 274,217 176,898Current assetsTrade and other receivables 17 17,623 27,084Cash and cash equivalents 34,430 18,575 52,053 45,659Total assets 326,270 222,557 Current liabilitiesTrade and other payables 18 (8,061) (17,798)Bank borrowings 19 (1,073) (124) (9,134) (17,922) Total assets less current liabilities 317,136 204,511 Non-current liabilitiesFinancial liabilities at fair value through profit 16 (9,919) (1,668)or lossBank borrowings 19 (176,033) (81,808)Rent deposits (2,292) (1,285)Deferred taxation 8 (5,623) - (193,867) (84,761)Total liabilities (203,001) (102,683) Net assets 123,269 119,874 EquityShare capital 20 - -Share premium account 21 2,500 2,500Special reserve 21 118,251 119,362Warrant reserve 21 130 130Translation reserve 21 7,941 (1,614)Capital reserve 21 (8,279) (6,607)Revenue reserve 21 2,726 1,311 Equity attributable to the equity holders of the 123,269 115,082parent Minority interest - 4,792 Total equity 123,269 119,874 Net asset value per share 11 97.1p 90.3pNet asset value per share (adjusted) 11 100.1p 91.6p The Financial Statements were approved by the board of directors and authorisedfor issue on 17 March 2008. The accompanying notes are an integral part of thisstatement. David Jeffreys Serena TremlettDirector Director Consolidated cash flow statement Notes For the year ended For the period 31 December 2007 from 16 November 2005 to 31 December 2006 £'000 £'000 Operating activitiesProfit/(loss) for the year/period 6,045 (2,715) Adjustments for :Net change in gains/losses on revaluation of (12,231) 5,250investment propertiesDeferred taxation 5,623 -Finance income (3,882) (4,324)Finance costs 13,180 1,833 Operating cash flows before movements in working 8,735 44capital Movements in working capital: Increase in operating trade and other (7,799) (2,696) receivables Increase in operating trade and other payables 4,297 1,902 Cash generated from operations 5,233 (750) Interest received 1,628 4,324Swap interest received 779 -Bank loan interest paid and costs (4,840) -Taxation - - Cash flows from operating activities 2,800 3,574 Investing activities Purchase of investment properties and capital (60,474) (185,711) expenditureDevelopment of property (2,233) - Cash flows from Investing activities (62,707) (185,711) Financing activities Proceeds from issue of ordinary share capital - 127,500 Issue costs - (5,408) Increase in borrowings 79,961 81,808 Dividends paid (7,013) (3,188) Cash flows from financing activities 72,948 200,712 Net increase in cash and cash equivalents 13,041 18,575 Cash and cash equivalents at beginning of year/ 18,575 -periodExchange translation movement 2,814 - Cash and cash equivalents at end of year/period 34,430 18,575 The accompanying notes are an integral part of this statement. 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