Alpha Group International Regulatory News (ALPH)

18 Mar 2008 07:56

Alpha Pyrenees Trust Limited18 March 2008 Consolidated statement of changes in equity For the period from Share Share Special Warrant Translation Capital Revenue Minority Total16 November 2005 to capital premium reserve reserve reserve reserve reserve interest reserves31 December 2006 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Changes in equity forthe period Foreign exchange losses - - - - (1,614) - - - (1,614)on translation offoreign operations Loss for the period - - - - - (6,607) 4,499 (607) (2,715) Total recognised income - - - - (1,614) (6,607) 4,499 (607) (4,329)and expense for theperiod Dividends - - - - - - (3,188) - (3,188) Issue of share capital - 127,500 - - - - - - 127,500 Share issue costs - (5,508) - - - - - - (5,508) Transfer to special - (119,362) 119,362 - - - - - -reserve Share based payments - (130) - 130 - - - - - Net liabilities - - - - - - - 5,399 5,399attributable to minorityinterest At 31 December 2006 - 2,500 119,362 130 (1,614) (6,607) 1,311 4,792 119,874 Note 20, 21 For the year ended 31 Share Share Special Warrant TranslationCapital Revenue Minority TotalDecember 2007 capital premium reserve reserve reserve reserve reserve interest reserves £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2007 - 2,500 119,362 130 (1,614) (6,607) 1,311 4,792 119,874 Foreign exchange losses - - - - 9,555 - - - 9,555on translation offoreign operations (Loss)/ profit for the - - - - (1,672) 7,717 - 6,045year Total recognised income - - - - 9,555 (1,672) 7,717 - 15,600and expense for the year Dividends - - (711) - - - (6,302) - (7,013) Share buy back - - (400) - - - - - (400) Acquisition of minority - - - - - - - (4,792) (4,792)interest At 31 December 2007 - 2,500 118,251 130 7,941 (8,279) 2,726 - 123,269 Note 20, 21 The accompanying notes are an integral part of this statement. Company income statement For the year ended For the period 16 November 31 December 2007 2005 to 31 December 2006 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Notes IncomeRevenue 3 5,272 - 5,272 2,328 - 2,328Total income 5,272 - 5,272 2,328 - 2,328 ExpensesAdministration costs 6 (2,129) (262) (2,391) (2,039) (269) (2,308)Total expenses (2,129) (262) (2,391) (2,039) (269) (2,308) Operating profit 3,143 (262) 2,881 289 (269) 20 Finance income 4 2,008 8,950 10,958 4,100 - 4,100Finance costs 7 (3) - (3) (47) (1,663) (1,710) Profit/(loss) before taxation 5,148 8,688 13,836 4,342 (1,932) 2,410 Taxation 8 - - - - - - Profit (loss) for the year/ 5,148 8,688 13,836 4,342 (1,932) 2.410period The total column of this statement represents the Company'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. Company balance sheetAs at 31 December 2007 Notes For the year ended For the period 16 31 December 2007 November 2005 to 31 December 2006 £'000 £'000Non-current assetsInvestments in subsidiary undertakings 12 141 77Property, plant and equipment 16 21Amounts receivable from subsidiary undertakings 12 103,457 90,023 103,614 90,121 Current AssetsTrade and other receivables 17 1,754 34Amounts receivable from subsidiary undertakings 12 12,331 25,490Cash and cash equivalents 10,726 6,941 24,811 32,465 Total assets 128,426 122,586 Current liabilitiesTrade and other payables 18 (788) (1,372) Total liabilities (788) (1,372)Net assets 127,637 121,214 EquityShare capital 20 - -Share premium account 21 2,500 2,500Special reserve 21 118,251 119,362Warrant reserve 21 130 130Capital reserve 21 6,756 (1,932)Revenue reserve 21 - 1,154 Total equity 127,637 121,214 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 this statement. David Jeffreys Serena TremlettDirector Director Company cash flow statement Notes For the year ended For the period from 31 December 2007 16 November 2005 to 31 December 2006Cash flows from operating activities Profit for the year/period 13,836 2,410 Adjustments for : Finance costs 3 1,710Finance income (10,958) (4,100)Interest from subsidiary companies (5,272) (2,328) Operating cash flows before movements in (2,391) (2,308)working capital (Increase)/decrease in operating trade and (1,757) 457 other receivables Increase in operating trade and other payables 66 1,238 Cash generated from operations (4,082) (613) Interest paid - (2)Interest received 5,134 4,100Taxation - - Cash-flows from operating activities 1,052 3,485 Investing activities Investment in subsidiaries (63) (77) Purchase of property, plant and equipment - (21) Loans repaid/(advanced) 8,226 (115,350) Cash-flows from investing activities 8,163 (115,448) Financing activities Proceeds from issue of ordinary share capital - 127,500 Issue costs - (5,408) Dividend payments (7,013) (3,188) Cash-flows from financing activities (7,013) 118,904 Net increase in cash and cash equivalents 2,202 6,941 Cash and cash equivalents at beginning of year/period 6,941 -Exchange translation movement 1,583 - Cash and cash equivalents at end of year/period 10,726 6,941 The accompanying notes are an integral part of this statement. Company statement of changes in equity For the period from Share Share Special Warrant Capital Revenue Total16 November 2005 to capital premium reserve reserve reserve reserve reserves31 December 2006 £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 16 November 2005 - - - - - - - Profit for the period - - - - (1,932) 4,342 2,410 Total recognised - - - - (1,932) 4,342 2,410income and expense forthe period Dividends - - - - - (3,188) (3,188)Issue of share capital - 127,500 - - - - 127,500Share issue costs - (5,508) - - - - (5,508)Transfer to special - (119,362) 119,362 - - - -reserveShare based payments - (130) - 130 - - - At 31 December 2006 - 2,500 119,362 130 (1,932) 1,154 121,214 Note 20,21 For the period ending Share Share Special Warrant Capital Revenue Total31 December 2007 capital premium reserve reserve reserve reserve reserves £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2007 - 2,500 119,362 130 (1,932) 1,154 121,214 Profit for the year - - - - 8,688 5,148 13,836 Total recognised income - - - - 8,688 5,148 13,836and expense for theyear Dividends - - (711) - - (6,302) (7,013)Share buy-back - - (400) - - - (400) At 31 December 2007 - 2,500 118,251 130 6,756 - 127,637 Note 20,21 The accompanying notes are an integral part of this statement. Notes to the financial statements 1. General information The Company is a limited liability, closed-ended investment company incorporatedin Guernsey. The address of the registered office is given below. The nature ofthe Group's operations and its principal activities are set out in theChairman's statement. The Financial Statements were approved and authorised forissue on 18 March 2008 and signed by David Jeffreys and Serena Tremlett onbehalf of the Board. 2. Significant accounting policies A summary of the principal accounting policies, all of which have been appliedconsistently throughout the year, is set out below. Basis of preparation The Financial Statements of the Group have been prepared in accordance withIFRS, which comprise standards and interpretations approved by the InternationalAccounting Standards Board ("IASB"), and International Accounting Standards andStandards Interpretations Committee interpretations approved by theInternational Accounting Standards Committee ("IASC") that remain in effect, andto the extent that they have been adopted by the European Union. a) Adoption of new and revised Standards In the current year, the Group has adopted IFRS7 Financial Instruments:Disclosures which is effective for annual reporting periods beginning on orafter 1 January 2007, and the related amendment to IAS 1 Presentation ofFinancial Statements. The impact of the adoption of IFRS7 and the changes to IAS1 has been to expand the disclosures provided in these financial statementsregarding the Group's financial instruments and management of capital (see note25). Four Interpretations issued by the International Financial ReportingInterpretations Committee are effective for the current year. These are : IFRIC7 Applying the Restatement Approach under IAS29, Financial Reporting inHyperinflationary Economies: IFRIC 8 Scope of IFRS 2: IFRIC 9 Reassessment ofEmbedded Derivatives; and IFRIC 10 Interim Financial Reporting and Impairment.The adoption of these Interpretations has not led to any changes in the Groupsaccounting policies. b) Standards and Interpretations in issue and not yet effective At the date of authorisation of these financial statements, the followingstandards and interpretations, which have not been applied in these financialstatements, were in issue but not yet effective:- New Standards IFRS 8: Operating segments - for accounting periods commencing on or after 1 January 2009. Revised and amended standards IFRS 2: Share based payments - for accounting periods commencing on or after 1 January 2009. IFRS 3: Business Combinations - for accounting periods commencing on or after 1 July 2009. IAS 1: Presentation of Financial Statements - for accounting periods commencing on or after 1 January 2009. IAS 23: Borrowing costs - for accounting periods commencing on or after 1 January 2009. IAS 27: Consolidated and Separate Financial Statements - for accountingperiods commencing on or after 1 July 2009. IAS 32: Financial Instruments:Presentation - for accounting periodscommencing on or after 1 January 2009. Interpretations IFRIC 11: IFRS 2 - Group and Treasury Share Transactions - for accounting periods commencing on or after 1 March 2007. IFRIC 12: Service Concession Arrangements - for accounting periodscommencing on or after 1 January 2008. IFRIC 13: Customer Loyalty Programmes - for accounting periodscommencing on or after 1 July 2008. IFRIC 14: IAS 19- The limit on a Defined Benefit Asset, Minimum FundingRequirements and their Interaction - for accounting periods commencingon or after 1 January 2008. The Directors anticipate that the adoption of these standards andinterpretations in future periods will not have material impact on the financialstatements of the Group. The principal accounting policies adopted are set outbelow. Basis of consolidation The consolidated financial statements incorporate the financial statements ofthe Company and the special purpose vehicles (SPVs) controlled by the company,made up to 31 December each year. Control is achieved where the Company has thepower to govern the financial and operating policies of an investee entity so asto obtain benefit from its activities. Investment properties have been acquired through SPVs. In the opinion of theDirectors, these transactions did not meet the definition of a businesscombination as set out in IFRS 3 "Business Combinations". Accordingly thetransactions have not been accounted for as business acquisitions and insteadthe financial statements reflect the substance of the transactions, which isconsidered to be the purchases of investment properties and associated netassets. The results of SPVs acquired or disposed of during the year are included in theconsolidated income statement from the effective date of acquisitions or up tothe effective date of disposal as appropriate. When necessary, adjustments are made to the financial statements of SPVs tobring the accounting policies used into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated onconsolidation. Presentation of income statement In order to better reflect the activities of an investment company and inaccordance with guidance issued by the Association of Investment Companies ("AIC"), supplementary information which analyses the income statement between itemsof a revenue and capital nature has been presented alongside the incomestatement. Revenue recognition Rental income from investment property leased out under an operating lease isrecognised in the income statement on a straight line basis over the term of thelease. Lease incentives granted are recognised as an integral part of the netconsideration for the use of the property and are therefore also recognised onthe same straight line basis. Rental revenues are accounted for on an accrualsbasis. Therefore, deferred revenue generally represents advance payments fromtenants. Revenue is recognised when it is probable that the economic benefitsassociated with the transaction will flow to the Group and the amount of revenuecan be measured reliably. When property is let out under a finance lease, the Group recognises areceivable at an amount equal to net investment in the lease at inception of thelease. Rentals received are accounted for as payments of principal and financeincome as appropriate. Minimum lease payments receivable on finance leases areapportioned between finance income and reduction of the outstanding receivable.Finance income is allocated to each period during the lease term so as toproduce a constant periodic rate of interest on the remaining net investment inthe finance lease. Contingent rents, being those lease payments that are notfixed at the inception of a lease, for example turnover rents, are recorded asincome in the periods in which they are earned. Interest income is accrued on a time basis, by reference to the principaloutstanding and the effective interest rate applicable. Leasing Leases are classified as finance leases whenever the terms of the lease transfersubstantially all the risks and rewards of ownership to the lessee. All otherleases are classified as operating leases. Foreign currencies a) Functional and presentation currency Items included in the financial statements of each of the Group entities aremeasured in the currency of the primary economic environment in which the entityoperates (the "functional currency"). The consolidated financial statements arepresented in pounds Sterling, which is the Company's functional andpresentational currency b) Transactions and balances Transactions in currencies other than pounds Sterling are recorded at the ratesof exchange prevailing on the dates of the transactions. At each Balance Sheetdate, monetary assets and liabilities that are denominated in foreign currenciesare retranslated at the rates prevailing on the Balance Sheet date. Non-monetaryassets and liabilities are carried at fair value that are denominated in foreigncurrencies and translated at the rates prevailing at the date when the fairvalue was determined. Gains and losses arisprofiting on retranslation areincluded in net profit or loss for the year, except for exchange differencesarising on non-monetary assets and liabilities where the changes in fair valueare recognised directly to equity. c) Group companies The results and financial position of all the Group entities that have afunctional currency different from the presentation currency are translated intothe presentation currency as follows: (i) assets and liabilities for each balance sheet presented aretranslated at the closing rate at the date of the balance sheet; (ii) income and expenses for each income statement are translated atthe average exchange rate prevailing in the period; and; (iii) all resulting exchange differences are recognised as a separatecomponent of equity. On consolidation, the exchange differences arising from the translation of thenet investment in foreign entities are taken to shareholders' equity. When aforeign operation is sold, such exchange differences are recognised in theincome statement as part of the gain or loss on sale. The year-end exchange rate used is £1:€1.357 (2006: £1:€1.484) and the averagerate for the year used is £1:€1.462 (2006: £1:€1.466) Operating a) Company Operating profit includes interest income from subsidiary entities, as reducedby administrative expenses and excludes finance costs and finance income. b) Group Operating profit includes net gains or losses on revaluation of investmentproperties, as reduced by administrative expenses and property operating costsand excludes finance costs and income. Expenses All expenses are accounted for on an accruals basis and include those of theAdministrators, the Investment Manager and the Directors. In respect of theanalysis between revenue and capital items, presented within the incomestatement, all expenses have been presented as revenue items except as follows: Expenses which are incidental to the acquisition of an investment property areincluded within the cost of that investment property and; a proportion of theInvestment Manager's fee is charged to the capital column in the IncomeStatement in order to reflect the Directors' estimated long-term view of thenature of the investment return of the Group. Borrowing costs Borrowing costs directly attributable to the acquisition or construction ofproperty are added to the costs of those assets until such time as the assetsare substantially ready for their intended use. All other borrowing costs arerecognised in the income statement in the period in which they are incurred. Taxation The Company is exempt from Guernsey taxation on income derived outside ofGuernsey and bank interest earned in Guernsey under the Income Tax (ExemptBodies) (Guernsey) Ordinance, 1989. A fixed annual fee of £600 is payable to theStates of Guernsey in respect of this exemption. No charge to Guernsey taxationarises on capital gains. The Group is liable to foreign tax arising onactivities in the overseas subsidiaries. The company has subsidiary operationsin Luxembourg, Belgium, France and Spain. The tax expense represents the sum of the tax currently payable and deferredtax. The tax currently payable is based on taxable profit for the year. Taxableprofit differs from net profit as reported in the income statement because itexcludes items of income and expense that are taxable or deductible in otheryears and it further excludes items that are never taxable or deductible. TheGroup's liability for current tax is calculated using prevailing tax rates. Deferred tax is the tax expected to be payable or recoverable on differencesbetween the carrying amount of assets and liabilities in the financialstatements and the corresponding tax bases used in the computation of taxableprofit, and is accounted for using the Balance Sheet liability method. Deferredtax liabilities are generally recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible timing differencescan be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and reduced to the extent that it is no longer probable that sufficienttaxable profits will be available to allow all or part of the asset to berecovered. Deferred tax is calculated at the tax rates that are expected toapply in the year when the liability is settled or the asset realised. Deferredtax is charged or credited in the income statement, except when it relates toitems charged or credited directly to equity, in which case the deferred tax isalso dealt within equity. Dividends Dividends are recognised as a liability in the group's financial statements inthe period in which they become obligations of the Company. Investment property Investment property, which is property held to earn rentals and/or for capitalappreciation, is initially recognised at cost being the fair value ofconsideration given including related transaction costs. After initialrecognition at cost, investment properties are carried at their fair valuesbased on quarterly professional valuations made by Knight Frank LLP. Thevaluations are in accordance with standards complying with the Royal Institutionof Chartered Surveyors Approval and Valuation manual and the InternationalValuation Standards Committee. Gains or losses arising from changes in fair value of investment property areincluded in the income statement for the period in which they arise. Propertiesare treated as acquired when the Group assumes the significant risks and returnsof ownership and as disposed of when these are transferred to the buyer. Whenthe Group redevelops an existing investment property for continued future use asan investment property, the property remains an investment property and is notreclassified. Transfers are made to investment property when there is a change in use,evidenced by the end of owner occupation, commencement of an operating lease toanother party or completion of construction or development. Transfers are made from investment property when, and only when, there is achange in use, evidenced by commencement of owner occupation or commencement ofdevelopment with a view to sale. For a transfer from investment property to owner occupied property, the deemedcost of property for subsequent accounting is its fair value at the date ofchange in use. If the property occupied by the Group as an owner occupiedproperty becomes an investment property, the Group accounts for such property inaccordance with the treatment under IAS 16 Property, Plant and Equipment up tothe date of change in use. For a transfer from development to investmentproperty, any difference between the fair value of the property at that date andits previous carrying amount is recognised in the income statement. When theGroup completes the construction or development of a self-constructed investmentproperty, any difference between the fair value of the property at that date andits previous carrying amount is recognised in the income statement. Rental Guarantees Rental guarantees received for vacant space acquired in a property acquisitionare shown as debtors from the date of the acquisition of the relevant propertyand are excluded from the acquisition cost. Income received in relation to theguarantees is credited against the debtor. The debtor is impaired for anysubsequent letting of the vacant space during the rental guarantee period. Development Property Development property which comprises buildings under construction includescapitalised interest where applicable and is carried at cost or, if lower, netrealisable value. Cost includes all directly attributable third partyexpenditure incurred. Segmental reporting The Directors are of the opinion that the Group is engaged in a single segmentof business being property investment business. It operates in a singlegeographical segment (Europe) and the properties are let to commercial entities. Share-based payments The Group makes equity-settled share-based payments to certain advisers andservice providers. Equity-settled share-based payments are measured at fairvalue as at the date of grant. The fair value determined at grant date isexpensed on a straight line basis over the vesting period, based on the Group'sestimate of the number of instruments that will eventually vest. Investment in subsidiaries Investments in subsidiaries are initially recognised and subsequently carried atcost in the Company's financial statements less, where appropriate, provisionsfor impairment. Financial instruments Financial assets and financial liabilities are recognised on the Group's balancesheet when the Group becomes a party to the contractual provisions of theinstrument. The Group shall offset financial assets and financial liabilities ifthe Group has a legally enforceable right to set off the recognised amounts andinterests and intends to settle on a net basis. (a)Financial assets The Group's financial assets fall into the categories discussed below, with theallocation depending to an extent on the purpose for which the asset wasacquired. Although the Group uses derivative financial instruments in economichedges of currency and interest rate risk, it does not hedge account for thesetransactions. The Group has not classified any of its financial assets as heldto maturity or as available for sale. Unless otherwise indicated, the carrying amounts of the Group's financial assetsare a reasonable approximation of their fair values. (a)(i) Loans and receivables These assets are non-derivative financial assets with fixed or determinablepayments that are not quoted in an active market. They arise principally throughrental leases with tenants (e.g. trade receivables and cash and cashequivalents), but also incorporate other types of contractual monetary assets.They are initially recognised at fair value plus transaction costs that aredirectly attributable to the acquisition or issue and subsequently carried atamortised cost using the effective interest rate method, less provision forimpairment. The effect of discounting on these financial instruments is not considered to bematerial. Impairment provisions are recognised when there is objective evidence (such assignificant financial difficulties on the part of the counterparty or default orsignificant delay in payment) that the Group will be unable to collect all ofthe amounts due under the terms receivable, the amount of such a provision beingthe difference between the net carrying amount and the present value of thefuture expected cash flows associated with the impaired receivable. For tradereceivables, such impairments directly reduce the carrying amount of theimpaired asset and are recognised against the relevant income category in theincome statement. Cash in banks and short term deposits are carried at cost and consist of cash inhand and short term deposits in banks with an original maturity of three monthsor less. (a)(ii) Fair value through profit or loss This category comprises only 'in the money' interest rate derivatives. They arecarried in the balance sheet at fair value with changes in fair value recognisedin the income statement. Other than these derivative financial instruments, theGroup does not have any assets held for trading nor has it designated any otherfinancial assets as being at fair value through profit or loss. The fair value of the Group's interest rate derivatives is based on valuationsas described in note 16. (a) (iii) De-recognition of financial assets A financial asset (in whole or in part) is derecognised either: • when the group has transferred substantially all the risks and rewardsof ownership; or • when it has transferred nor retained substantially all the risks andrewards and when it no longer has control over the asset or a portion of theasset; or • when the contractual right to receive cash flow has expired. (b) Financial liabilities The Group classifies its financial liabilities into one of two categories,depending on the purpose for which the liability was issued and itscharacteristics. Although the Group uses derivative financial instruments ineconomic hedges of currency and interest rate risk, it does not hedge accountfor these transactions. Unless otherwise indicated, the carrying amounts of the Group's financialliabilities are a reasonable approximation of their fair values. (b)(i)Fair value through profit or loss This category comprises only 'out-of-the-money currency swap derivatives'. Theyare carried in the balance sheet at fair value with changes in fair valuerecognised in the income statement. Other than currency swap derivativefinancial instruments, the Group does not have any liabilities held for tradingnor has it designated any other financial liabilities as being at fair valuethrough profit or loss. (b)(ii) Financial liabilities measured at amortised cost Other financial liabilities include the following items: • Trade payables and other short-term monetary liabilities, which areinitially recognised at fair value and subsequently carried at amortised costusing the effective interest method. • Bank borrowings are initially recognised at fair value net ofattributable transaction costs incurred. Such interest bearing liabilities aresubsequently measured at amortised cost using the effective interest ratemethod. (b) (iii) De-recognition of financial liabilities A financial liability (in whole or in part) is derecognised when the Company orGroup has extinguished its contractual obligations, it expires or is cancelled.Any gain or loss on de-recognition is taken to the income statement. (c) Share Capital Financial instruments issued by the Group are treated as equity only to theextent that they do not meet the definition of a financial liability. TheCompany's ordinary shares are classified as equity instruments. For the purposesof the disclosures given in Note 25 the Group considers all its share capital,share premium and all other reserves as equity. The Company is not subject toany externally imposed capital requirements. (d) Effective interest method The effective interest method is a method of calculating the amortised cost of afinancial asset or liability and of allocating interest income or expense overthe relevant period. The effective interest rate is the rate that exactlydiscounts estimated future cash receipts or payments (including all fees onpoints paid or received that form an integral part of the effective interestrate, transaction costs and other premiums or discounts) through the expectedlife of the financial asset or liability, or, where appropriate, a shorterperiod. Significant accounting estimates and judgements The Group makes estimates and assumptions concerning the future. The resultingaccounting estimate will, by definition, seldom equal the related actualresults. The estimates and assumptions that have a significant risk of causing amaterial adjustment to the carrying amounts of assets and liabilities within thenext financial year are discussed below. Estimates and judgements are continually evaluated and are based on historicalexperience and other factors, including expectations of future events that arebelieved to be reasonable under the circumstances. (a) Investment property The gross property value is the amount for which an asset could be exchangedbetween knowledgeable, willing parties in an arm's length transaction withoutdeduction for any associated transfer taxes, sales taxes, or other costsnormally borne by the seller. Transaction costs normally borne by the seller arenot deducted in arriving at gross property value, in accordance with IAS 40. Thefair value is calculated by deducting the costs normally borne by the purchaserfrom the gross property value. Fair value is not intended to represent theliquidation value of the property, which would be dependent upon the pricenegotiated at the time of sale less any associated selling costs. The fair valueis largely based on estimates using property appraisal techniques and othervaluation methods as outlined below. Such estimates are inherently subjectiveand actual values can only be determined in a sales transaction. The Group's valuers derive the fair value by applying the methodology andvaluation guidelines as set out by the Royal Institution of Chartered Surveyorsin the United Kingdom in accordance with IAS 40. This approach is based ondiscounting the future net income receivable from properties to arrive at thenet present value of that future income stream. Future net income comprises therent secured under existing leases, less any known or expected non-recoverablecosts and the current market rent attributable to future vacancy years. Theconsideration basis for this calculation excludes the effects of any taxes. Thediscount factors used to calculate fair value are consistent with those used tovalue similar properties, with comparable leases in each of the respectivemarkets. (b) Business combinations Significant judgement is required when determining the appropriate method ofaccounting for acquisitions of shares of a company owning property. During the year the Group acquired 100% of the issued share capital of FTI SCI.In the opinion of the Directors, the special purpose vehicle which itself ownsthe investment property (the property at Nimes) does not qualify as a businesscombination under the definition of IFRS 3 as the acquired entity did not carryout any trade other than the ownership/operation of the property. Accordinglythis has been accounted for as a direct purchase of investment property andassociated net assets. It is possible that an alternative interpretation would result in goodwillarising on the acquisition of the investment property owning company. (c) Income and deferred taxes The Group is subject to income and capital gains taxes in numerousjurisdictions. Significant judgement is required in determining the totalprovision for income and deferred taxes. There are many transactions andcalculations for which the ultimate tax determination and timing of payment isuncertain during the ordinary course of business. The Group recognisesliabilities for anticipated tax issues based on estimates of whether additionaltaxes will be due. Where the final tax outcome of these matters is differentfrom the amounts that were initially recorded such differences will impact theincome and deferred tax provisions in the period in which the determination ismade. (d) Fair value of derivative contracts The Group estimates fair values of derivative contracts by reference to currentmarket conditions compared to the terms of the contracts using the results of anappraisal process carried out by the contract counterparty. 3. Revenue Group Company Group Company 2007 2007 2006 2006 £'000 £'000 £'000 £'000Rental Income 13,681 - 2,405 -Service and management charges 2,428 - 411 -Interest from subsidiary companies - 5,272 - 2,328Total 16,109 5,272 2,816 2,328 The above interest income arises from financial assets classified as loans andreceivables and has been calculated using the effective interest rate method. 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 Franceand 5 + 5 years in Spain. At the Balance Sheet date, using the exchange rateprevailing at the balance sheet date, the Group had contracted with tenants forthe following future minimum lease payments: 2007 2006 £'000 £'000Within one year 17,944 11,974In the second to fifth years inclusive 51,981 38,140After five years 32,875 39,136Total 102,800 89,250 4. Finance Income 2007 2007 2006 2006 £'000 £'000 £'000 £'000 Group Company Group CompanyBank interest 1,128 425 4,324 4,100Foreign exchange gains 1,500 10,533 - -Net gains on financial assets held at 754 - - -fair value through profit and loss (note 5)Total 3,382 10,958 4,324 4,100 The above interest income arises from financial assets classified as loans andreceivables (including cash and cash equivalents) and has been calculated usingthe effective interest rate method. 5. Net gains and losses on financial assets and liabilities at fair valuethrough profit and loss 2007 2007 2006 2006 £'000 £'000 £'000 £'000 Group Company Group CompanyNet change in unrealised appreciationon financial assets held at fair valuethough profit or lossInterest rate swap 754 - - -Net change in unrealised depreciationson financial liabilities held at fairvalue through profit or lossCurrency swaps (8,251) - (1,668) -Net realised gains on financialliabilities held at fair value throughprofit or lossCurrency swaps - interest received 7,597 - - -Currency swaps - interest paid (6,818) - - -Net income from currency swaps 779 - - - Net loss on financial assets and (6,718) - (1,668) -liabilities at fair value throughprofit or loss 6. Administration costs 2007 2007 2006 2006 £'000 £'000 £'000 £'000 Group Company Group CompanyInvestment manager fees 2,610 875 1,557 996Accounts and administrative fees 199 115 195 121Non-executive Directors fees 110 110 127 127Auditors' remuneration for audit services 78 58 62 37Other professional fees 908 1,233 315 1,027Staff costs 11 - 11 -Depreciation 4 - 4 -Total 3,920 2,391 2,271 2,308 The Group has one employee. The Directors are the only key management personnelof the Group. 7. Finance costs 2007 2007 2006 2006 £'000 £'000 £'000 £'000 Group Company Group CompanyBank loan interest (gross) 5,541 - 106 -Interest capitalised (141) - - -Loan fee amortisation 270 - 3 -Foreign exchange loss - - 45 1,708Net losses on financial liabilities at 7,472 - 1,668 -fair value through the profit and loss (note 5)Other charges 38 3 11 2Total 13,180 3 1,833 1,710 The above finance costs arise on financial liabilities measured at amortisedcost using the effective interest rate method. In accordance with the Group'saccounting policies certain borrowing costs have been capitalised, as disclosedin note 14. 8. Taxation (a) Taxation on profit on ordinary activities Company The Company is exempt from taxation under the provisions of the Income Tax(Exempt Bodies) (Guernsey) Ordinance, 1989. Group The Group's tax expense for the year comprises: 2007 2006 £'000 £'000 Group GroupDeferred taxationFrance 5,623 -Spain - - 5,623 -Tax expense reconciliationProfit/(loss) for the year/period 11,668 (2,715)Less: Income not taxable (6,669) (6,613)Add: Expenditure not taxable 13,749 2,513Add: Un-provided deferred tax asset movement (2,210) 6,815Total 16,538 - Tax at domestic rates applicable to profits in the country concerned 2007 2006 £'000 £'000 Group GroupFrench taxation at 34% 5,623 -Spanish taxation at 35% - - (b) Deferred taxation The following are the major deferred tax liabilities and assets recognised bythe Group and movements thereon. Revaluation of Accelerated tax Tax Losses Interest rate Total Investment depreciation swap Properties £'000 £'000 £'000 £'000 £'000 At 16 November 2005 - - - - -Charge to Income (1,561) 3,201 (1,640) - -At 31 December 2006 (1,561) 3,201 (1,640) - -Charge to Income 4,376 4,142 (3,165) 270 5,623At 31 December 2007 2,815 7,343 (4,805) 270 5,623 Certain deferred tax assets and liabilities have been offset. The following isthe analysis of the deferred tax balances (after offset) for financial reportingpurposes available for offset against future profits. 2007 2006 £'000 £'000Deferred tax liabilities 10,428 3,200Deferred tax assets (4,805) (3,200) 5,623 - At the balance sheet date the company has unused tax losses of £17.5 million(2006:£10.9 million) .A deferred tax asset has been recognised in respect of£14.1 million of such losses (2006: £4.8 million). Due to the unpredictabilityof future taxable profits the Directors believe it is not prudent to recognisedeferred tax assets in respect of the remaining losses. 9. Dividends The Company now pays dividends quarterly. Dividends paid during the year were£3,187,500 (2.5 pence per share) in relation to the period ended 31 December2006 and £3,825,000 (3 pence per share) in relation to the six months to June2007. A quarterly dividend of £1,905,000 (1.5 pence per share) for the quarterended 30 September 2007 was paid in January 2008; this dividend has not beenincluded in these Financial Statements. It is intended to distribute anotherdividend of 1.5 pence per share for the final quarter of 2007 taking the totaldividend for the year to 6 pence per share for 2007; this dividend has not beenincluded in these Financial Statements. In December 2007, 500,000 shares werebought back by the Company with an additional tranche of 9.5 million purchasedin January 2008. 10. Earnings per share The calculation of the basic and diluted earnings per share is based on thefollowing data: 1 January 2007 1 January 2007 16 November 2005 16 November 2005 to to to to 30 June 2006 31 December 30 June 2007 31 December 2006 2007Earnings per income statement 6,045 9,487 (2,108) 2,106Basic earnings per share 4.7p 7.4p (1.7p) 1.7p Earnings per income statement 6,045 9,487 (2, 108) 2,106Revaluation gains/(losses) in (12,231) (8,313) 5,250 -investment propertiesMark to market of currency swaps 8,251 1,813 1,668 -Mark to market of interest (754) (2,756) - -rate swapsDeferred taxation 5,623 2,640 - -Investment Manager's fee (capital) 783 346 269 19Rental guarantee income 292 - - -Minority interest (capital) - - (580) -Adjusted earnings 8,009 3,217 4,499 2,125Adjusted earnings per share 6.3p 2.5p 3.7p 1.7p Weighted average number of 127,486 127,500 122,098 125,000ordinary shares The adjusted earnings are presented to provide what the Company believes is amore appropriate assessment of the operational income accruing to the Group'sactivities. Hence, the Company adjusts basic earnings for income and costs whichare not of a recurrent nature or which may be more of a capital nature. The Group has the following instruments which could potentially dilute basicearnings per share in the future: 31 December 2007 31 December 2006Warrants 6,375,000 6,375,000Options 3,825,000 3,825,000 The Company purchased 500,000 ordinary shares for cancellation on 20 December2007. In January 2008, a further 9,500,000 shares were bought back forcancellation. 11. Net asset value per share 31 December 30 June 2007 31 December 2006 30 June 2006 2007Net asset value (£'000) 123,269 121,300 115,082 121,846Net asset value per share 97.1p 95.1p 90.3p 97.5p Net asset value (£'000) 123,269 121,300 115,082 121,846Mark to market of currency hedge* (994) 3,496 1,668 -Mark to market of interest rate swaps (813) (2,756) - -Deferred taxation 5,623 2,640 - -Adjusted net asset value 127,085 124,680 116,750 121,846Net asset value per share (adjusted) 100.1p 97.8p 91.6p 97.5p Number of ordinary shares (000's) 127,000 127,500 127,500 125,000 * The mark to market of the currency hedge necessarily includes both a movementin relation to currency fluctuation and also a movement due to relative futureinterest rates. For the purpose of providing an adjusted net asset value theelement of valuation in relation to the interest rates is included as anadjustment; the intention is to hold the instruments to maturity at which pointthis element will have unwound. The adjusted net assets are presented to provide what the Company believes is amore relevant assessment of the Group's net asset position. The Company hasdetermined that certain fair value and accounting requirements may not berealisable in the longer term. 12. 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 givenbelow.Name of subsidiary undertaking Class of share % of class Country of Principal held with incorporation activity voting rights Alpha Pyrenees Luxembourg SARL Ordinary 100% Luxembourg Holding companyAlpha Pyrenees Luxembourg No 2 SARL Ordinary 100% Luxembourg Holding companyAlpha Pyrenees Belgium SA Ordinary 100% Belgium Holding companyAlpha Pyrenees Trust Finance Ordinary 100% Guernsey FinanceCompany Limited companyAlpha Pyrenees Evreux SARL Ordinary 100% France Holding companyAlpha Pyrenees Evreux SCI Ordinary 100% France Property investmentAlpha Pyrenees Athis Mons SARL Ordinary 100% France Holding companyAlpha Pyrenees Athis Mons SCI Ordinary 100% France Property investmentAlpha Pyrenees Offices SARL Ordinary 100% France Holding companyAlpha Pyrenees Offices SCI Ordinary 100% France Property investmentAlpha Pyrenees Spain SLU Ordinary 100% Spain Property investmentAlpha Pyrenees Alcala SLU Ordinary 100% Spain Property investmentAlpha Pyrenees Ecija SLU Ordinary 100% Spain Property investmentAlpha Pyrenees Nozay SARL Ordinary 100% France Holding companyAlpha Pyrenees Nozay SCI Ordinary 100% France Property investmentAlpha Pyrenees Aubergenville SARL Ordinary 100% France Property investmentFTI SCI Ordinary 100% France Property investment On 15 February 2007, the Company exercised a call option to acquire the minorityinterest in Alpha Pyrenees Nozay LP from IPGL. The Company now owns 100% of a77,180 square metre business park on the outskirts of Paris. The Group'sinvestment properties are held by its subsidiary undertakings and the Companyhas made loans to the following as at 31 December 2007. 2007 2007 2007 2006 2006 2006 Interest Non-interest Total Interest Non-interest Total bearing bearing £'000 bearing bearing £'000 £'000 £'000 £'000 £'000Current 2,625 9,706 12,331 10,091 15,399 25,490Non-current 103,457 - 103,457 90,023 - 90,023Total 106,082 9,706 115,788 100,114 15,399 115,513 The loans are denominated in Euros, unsecured and are subject to a range ofinterest rates, fixed for the term of the relevant loan. At 31 December 2007 theweighted average interest rate was 5.23% (2006:5.23%). Loans amounting to £39.2m(2006:£16.6m), in addition to bearing interest, carry a profit share entitlementof 20% of the EBITDA in the relevant subsidiary. 13. Investment properties 2007 2006 £'000 £'000Market value of investment properties at 1 January 176,509 -Acquisitions during the year/period at cost 62,158 181,699Adjustment for rental guarantees recognised as debtors (2,082) -Fair value adjustment in the year/period 12,231 (5,250)Effect of foreign exchange 22,130 60Market value of investment properties at 31 December 270,946 176,509 Valuation per Knight Frank LLP of investment properties 271,897 176,509Adjustment for rental guarantees (951) -Market value of investment properties at 31 270,946 176,509December The fair value of the Group's investment properties at 31 December 2007 and 31December 2006 has been arrived at on the basis of valuations carried out at thatdate by Knight Frank LLP, independent valuers not connected to the Group. Thevaluation basis has been market value as defined by the Royal Institution ofChartered Surveyors Approval and Valuations Standards. The approved RICS definition of market value is the "estimated amount for whicha property should exchange on the date of valuation between a willing buyer anda willing seller in an arm's length transaction after proper marketing whereinthe parties had each acted knowledgeably, prudently and without compulsion." The Group has pledged a number of its investment properties to secure bankingfacilities granted to the Group (note 19). 14. Development Property 2007 2006 £'000 £'000At 1 January - -Development costs incurred in year/period 2,233 -Borrowing cost capitalised 33 -Effect of foreign exchange 175 -At 31 December 2,441 - 15. Categories of financial assets and liabilities Financial assets at fair value Loans and receivables through P/L Notes Group Company Group Company Group Company Group Company 2007 2007 2006 2006 2007 2007 2006 2006 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Current financialassetsTrade and other 17 - - - - 17,623 1,754 27,084 34receivablesCash and cash - - - - 34,430 10,726 18,575 6,941equivalentsAmounts 12 - - - - - 12,331 - 25,490receivable fromsubsidiaryundertakingsTotal current - - - - 52,053 24,811 45,659 32,465financial assets Non-currentfinancial assetsInterest rate 16 813 - - - - - - -swapAmounts 12 - - - - - 103,457 - 90,023receivable fromsubsidiaryundertakingsTotal non-current 813 - - - - 103,457 - 90,023financial assets Total financial 813 - - - 52,053 128,268 45,659 122,488assets Financial liabilities at fair value Financial liabilities measured at through P/L amortised cost Notes Group Company Group Company Group Company Group Company 2007 2007 2006 2006 2007 2007 2006 2006 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Current financialliabilitiesTrade and other 18 - - - - 5,722 788 17,761 1,372payables (excludingdeferred income)Bank borrowings 19 1,073 - 124 -Total current - - - - 6,795 788 17,885 1,372financial liabilities Non-current financialliabilitiesCurrency swaps 16 9,919 - 1,668 - - - - -Bank borrowings 19 - - - - 176,033 - 81,808 -Rent Deposits - - - - 2,292 - 1,285 -Total 9,919 - 1,668 - 178,325 - 83,093 -non-currentfinancialliabilitiesTotal financial 9,919 - 1,668 - 185,120 788 100,978 1,372liabilities The Company has pledged, as part of the security package on the bank borrowings,a number of subsidiary bank accounts and shares. 16. Financial assets and liabilities held at fair value through the profit or loss Group Company Group Company 2007 2007 2006 2006 £'000 £'000 £'000 £'000Non-current assetsInterest rate swaps 813 - - -Non-current liabilitiesCurrency swap - a (7,412) - (1,668) -Currency swap - b (2,507) - - - (9,919) - (1,668) -Total (9,106) - (1,668) - Interest rate swap The Company is required under the financing agreements with Barclays to fix therate at which it borrows over the duration of each loan. The Company has agreeda fixed interest rate with Barclays Bank plc at each loan draw-down. The bank has undertaken a variable to fixed rate swap with a third party. TheCompany is not party to the swap agreement but via the financing agreement theCompany has all the risks and rewards of the swap as should the loan be repaidearly the company would be required to pay the swap break costs or,alternatively accrue a swap benefit as a capital reduction depending on thevalue of the underlying swap at that point in time. The interest rate swap is valued by reference to the bank's redemption notice ofamounts due if the Company repaid it's borrowings at the balance sheet date; theDirectors consider this to represent fair value. Currency swap The Group uses currency derivatives to hedge significant future foreign currencytransactions and cash flows to safeguard the equity investments of shareholdersagainst significant adverse movements between Sterling and Euros. a) On 13 October 2006, Alpha Pyrenees Trust Finance Company Limited ("AlphaFinance"), a wholly owned subsidiary of the Company, entered into a currencyswap with Barclays Bank Plc. Under the terms of this agreement, Alpha Financewill pay Barclays Bank Plc €130.1 million and Barclays Bank Plc will pay AlphaFinance £87.6 million on 16 October 2013. ln addition, there are quarterlyperiodic payments in February, May, August and October of each year starting on16 February 2007 and ending 16 October 2013. On these dates Barclays Bank Plcwill pay Alpha Finance an amount equal to 7 per cent per annum on £87.6 millionand Alpha Finance will pay Barclays Bank Plc an amount equal to 6 per cent perannum on €130.1 million. b) On 18 January 2007, Alpha Finance entered into a further currency swap withBarclays Bank Plc. Under the terms of this swap, Alpha Finance will pay BarclaysBank Plc €33 million and Barclays Bank Plc will pay Alpha Finance £21.6 millionon 16 October 2013. In addition, there are quarterly periodic payments inFebruary, May, August and November of each year starting on 16 February 2007 andending on 16 October 2013. On these dates Barclays Bank Plc will pay AlphaFinance an amount equal to 7 per cent per annum on £21.6 million and AlphaFinance will pay Barclays Bank Plc an amount equal to 5.9725 per cent per annumon €33 million. A total amount of €7.5 million has been pledged as collateral to Barclays BankPlc to support both the 13 October 2006 and 18 January 2007 swaps. The fair value of the currency swap contracts is determined by reference to thevaluation process carried out by the contractual counterparty. 17. Trade and other receivables Group Company Group Company 2007 2007 2006 2006 £'000 £'000 £'000 £'000Trade receivables 5,132 - 612 -Bank interest receivable 50 - 185 -Prepayments 231 19 127 34Rental guarantees 1,929 - - -Other debtors 10,281 1,735 17,712 -VAT recoverable - - 8,448 - Total 17,623 1,754 27,084 34 During the year trade receivables over six months old of £163k have beenprovided against. The provision is recognised in the income statement. Thedirectors consider that the carrying amount of trade and other receivablesapproximates to their fair value. Note 25 on credit risks provides an ageing oftrade receivables. Rental guarantees are contractual agreements specifically referred to in therelevant property sale and purchase agreements under which the vendor provides aguarantee (normally by way of an escrowed bank account deposit) for units withinthe acquired property which are currently vacant. During the year the Groupbooked a total of £2.2m of guarantees against which £0.3m of income has beenreceived. Included in other debtors is collateral of £5.5 million (2006: £2.1 million)held with Barclays Bank plc in relation to the currency swap (note 16). 18. Trade and other payables Group Company Group Company 2007 2007 2006 2006 £'000 £'000 £'000 £'000Trade creditors 2,343 196 49 44Deferred income 2,339 - 37Property acquisition costs payable 1,535 - 6,155 -Investment Manager's fee payable 134 - 520 -VAT Payable 672 - - -Share buy back 400 - - -Accruals 638 592 1,664 1,328Deferred property acquisition costs - - 9,373 - Total 8,061 788 17,798 1,372 Trade creditors and accruals primarily comprise amounts outstanding for tradepurchases and ongoing costs. The group has financial risk management policies inplace to ensure that all payables are paid within the credit time frame. Thedirectors consider that the carrying amount of trade payables approximates totheir fair value. 19. Bank borrowings Group Company Group Company 2007 2007 2006 2006 £'000 £'000 £'000 £'000Current liabilities: Interest payable 1,073 - 124 -Non-current liabilities - Bank 176,033 - 81,808 -borrowingTotal liabilities 177,106 - 81,932 - The borrowings are repayable as follows:Interest payable 1,073 - 124 -On demand or within one year - - - -In the second to fifth years inclusive - - - -After five years 176,033 - 81,808 - 177,106 - 81,932 - Further loans of €120.1 million have been drawn-down during the year against theFrench loan facility (which was entered into on 21 December 2006). Borrowingsare secured over the shares in the Company's operating subsidiaries andmortgages over properties with a total value of €321.7 million representing aloan to value of 68.7%. The loan facility is to be repaid on 10 February 2015. On 21 December 2007, the Group entered into a new loan facility for financingSpanish properties totalling €22.7m. The total facility was drawn-down beforeyear end. Loans drawn down on the facility are secured over the shares in theCompany's operating subsidiaries and mortgages over properties with a totalvalue of €30.7 million representing a loan to value of 74%. The loan facility isto be repaid on 10 February 2013. The interest rates on the loans drawn to date are fixed rates for the durationof each loan. The weighted average interest rate at the balance sheet date was5.24% (2006:5.05%). 20. Share capital Number of sharesAt 1 January 2007 127,500,000Shares cancelled during the year (500,000)At 31 December 2007 127,000,000 The authorised share capital is unlimited. The Company carries one class ofshares which carry no right to fixed income. All ordinary shares have nil parvalue. There have been no shares issued during the year. The company purchased 500,000 shares on 21 December 2007 for cancellation at anaverage price of 80 pence per share. The cost of the share buy-back has beentaken against reserves. In January 2008 a further 9.5m shares were purchased bythe Company for cancellation at an average price of 82 pence per share. 21. Reserves The movements in the reserves for the Group and the Company are shown in thestatements of changes in equity above. Share premium account On 10 July 2006 the Company issued 2,500,000 ordinary shares of no par value ata premium of £1 per share. Special reserve On 9 December 2005, the Royal Court of Guernsey confirmed the reduction ofcapital by way of cancellation of the amount standing to the credit of its sharepremium account on that date. The amount was transferred to the special reserve.The special reserve is a distributable reserve to be used for all purposespermitted under Guernsey company law, including the buy- back of shares andpayment of dividends. Warrant reserve The warrant reserve contains the fair value of share-based payments in respectof the warrants issued to the Investment Manager but not exercised. Translation reserve The translation reserve contains exchange differences arising on consolidationof the Group's overseas operations. Capital reserve The capital reserve contains gains and losses on the disposal of investmentproperties, and increases and decreases in the fair value of the Group'sinvestment properties and currency swap derivative financial instruments,together with expenses allocated to capital. Revenue reserve Any surplus arising from net profit after tax is taken to this reserve, whichmay be utilised for the buy-back of shares and payment of dividends. 22. Share based payments a) Warrants > During 2005, the Company issued warrants to the Investment Manager pursuant towhich it has been granted the right to subscribe for 6,375,000 ordinary sharesin the company at an exercise price of £1 per share. Such warrants can beexercised at any time up to and including 29 November 2010. The warrantinstrument provides that the holder of the warrant may from time to timetransfer all or some of its warrants to third parties. No warrants have beenexercised during the year. The weighted average exercise price of outstandingwarrants at 31 December 2007 was £1 (2006: £1) with a weighted average remainingcontractual life of 3 years. The fair value of the warrants at grant date was measured as £130,043. b) Incentive options In order to incentivise the Investment Manager, the Company has granted optionsto it to acquire up to 3,825,000 ordinary shares. The options vest in threetranches of equal amounts over a three year period ending on the third, fourthand fifth anniversaries of admission of the shares to the Official List of theUKLA subject to a cumulative shareholder return performance criteria of 10% perannum (50% vesting) and 12% per annum (100% vesting) having been met over aperiod of the preceding three years for each tranche respectively. Once vested the options are exercisable during the subsequent seven year period. Number of options Expiry Price1,275,000 29 November 2015 100p1,275,000 29 November 2016 100p1,275,000 29 November 2017 100p The directors have assessed the fair value of the option granted and consider itto be immaterial in relation to the activities of the Company and its Group. Theweighted average exercise price of outstanding options at 31 December 2007 was£1 (2006: £1) with a weighted average remaining contractual life of 9 years. c) Share based payments The Company recognised no sare basehd payment expenses for the year end 2007(2006: £130,043). As noted above the Company recognised a charge in 2006 for thewarrants issued to the Investment Manager; this charge was taken to the Sharepremium account. 23. Events after the balance sheet date In January 2008 the Company bought back a further 9,500,000 shares forcancellation at an average price of 82 pence per share; this taking the total to10,000,000 in all. There is no current intention to buy-back further shares. 24. Related party transactions Parties are considered to be related if one party has the ability to control theother party or exercise significant influence over the other party in makingfinancial or operational decisions. Alpha Real Capital LLP is the InvestmentManager to the Company under the terms of the Investment Manager Agreement andis thus considered a related party of the Company. Transactions between the Company and its subsidiaries, which are relatedparties, have been eliminated on consolidation and are not disclosed in thisnote. The Investment Manager is entitled to receive a fee from the Group at an annualrate of 1 per cent of the gross assets of the Group, payable quarterly inarrears. The Investment Manager is also entitled to receive an annualperformance fee calculated with reference to total shareholder return ("TSR"),whereby the fee is 20 per cent of any excess over an annualised TSR of 12 percent and then a further 15 per cent of any excess over 20 per cent. Details ofthe investment management fees for the current accounting period are shown innote 6 and any balances outstanding are disclosed separately in note 18. The Directors of the Company received fees for their services and furtherdetails are provided in the Directors' Report. The total charge fees are shownin note 6 and separately disclosed in the Director's report. Alpha Real Capital Singapore Pte Limited, being a wholly owned subsidiary of theInvestment Manager, held 1,490,000 shares at year end in the Company. The following, being partners of the Investment Manager holds the followingshares in the Company at 31 December 2007. Number of shares heldSir John Beckwith 2,143,600P. Rose 375,000B. Bauman 50,000M. Johnson 26,400S. Wilson 5,000 Phillip Rose is the CEO and a partner of the Investment Manager. Paul Cable,being the Investment Manager's Fund Manager responsible for the Trust'sinvestments, holds 20,000 shares in Alpha Pyrenees Trust Limited. 25. Financial instruments risk exposure and management In common with all other businesses, the Group is exposed to risks that arisefrom its use of financial instruments. This note describes the Group'sobjectives, policies and processes for managing those risks and the methods usedto measure them. Further quantitative information in respect of these risks ispresented throughout these financial statements. There have been no substantive changes in the Group's exposure to financialinstrument risks, its objectives, policies and processes for managing thoserisks of the methods used to measure them from previous periods unless otherwisestated in this note. Principal financial instruments The principal financial instruments used by the Group and Company, from whichfinancial instrument risk arises, are as follows: • Amounts receivable from subsidiary undertakings • Trade and other receivables • Cash and cash equivalents • Trade and other payables • Rental deposits • Derivative financial instruments • Bank borrowings General objectives, policies and processes The Board has overall responsibility for the determination of the Group's riskmanagement objectives and policies and, whilst retaining ultimate responsibilityfor them, it has delegated the authority for designing and operating processesthat ensure the effective implementation of the objectives and policies to theGroup's finance function. The overall objective of the Board is to set polices that seek to reduce risk asfar as possible without unduly affecting the Group's competitiveness andflexibility. The above financial risk management policies apply equally to theGroup and the Company. Further details regarding these policies are set outbelow: Credit risk Credit risk arises when a failure by counter parties to discharge theirobligations could reduce the amount of future cash inflows from financial assetson hand at the balance sheet date. a) Group The Group's credit risk principally arises from cash and cash equivalents aswell as credit exposures with respect to tenants including other receivables. Inthe event of a default by an occupational tenant, the Group will suffer a rentalshortfall and incur additional costs, including legal expenses in maintaining,insuring and re-letting the property until it is re-let. General economicconditions may affect the financial stability of tenants and prospective tenantsand/or demand for and value of real estate assets. A property advisor monitorsthe tenants in order to anticipate, and minimise the impact of, default byoccupational tenants. Where possible, tenants risk is mitigated through rentalguarantees. The Group policy is to maintain its cash and cash equivalent balances with areasonable diversity of banks. The Group monitors the placement of cash balanceson an ongoing basis and has policies to limit the amount of credit exposure toany financial institution. Trade receivables that are less than six months past due are not consideredimpaired. The ageing of trade receivables is as follows: 2007 2006 £'000 £'0000 to 6 months 5,132 612Over 6 months - - 5,132 612 A significant element of the debt is owed by third party managing agents (CBRE/Cushman and Wakefield) as part of the regular cycle of collecting debts fromtenants; these amounts represent cash received by the agent not yet remitted tothe relevant companies and are in this respect very secure and remitted justafter the year end. b) Company The Company's credit risk principally arises from cash and cash equivalents andamounts receivable from subsidiaries. The Company follows the same Group policywith regards to diversification of banking arrangements. Amounts receivable fromsubsidiaries are of mainly a long term nature and the loans are monitored on aregular basis. c) Maximum exposure The Group's and Company's maximum exposure to credit risk by class of financialinstrument is shown below: Group Group Company Company Group Group Company Company 2007 2007 2007 2007 2006 2006 2006 2006 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Carrying Maximum Carrying Maximum Carrying Maximum Carrying Maximum Value Exposure Value Exposure Value Exposure Value ExposureAmounts owed by - - 115,788 115,788 - - 115,513 115,513subsidiary undertakings Trade and other 17,623 15,331 1,754 1,754 27,084 25,799 34 34receivablesCash and cash equivalents 34,430 34,430 10,726 10,726 18,575 18,575 6,941 6,941Financial assets at fair 813 813 - - - - - -value through profit or lossTotal 52,866 50,574 128,268 128,268 45,659 44,374 122,488 122,488 Liquidity risk Liquidity risk is the risk that arises when the maturity of assets andliabilities does not match. An unmatched position potentially enhancesprofitability, but can also increase the risk of losses. The Group and Companyhas procedures with the object of minimising such losses such as maintainingsufficient cash and other highly liquid current assets and by having availablean adequate amount of committed credit facilities. Cash and cash equivalents areplaced with financial institutions on a short term basis reflecting the Group'sand Company's desire to maintain a high level of liquidity in order to enabletimely completion of investment transactions. a) Group The following table illustrates the contractual maturity analysis of the Group'sfinancial liabilities and derivative financial assets and liabilities that mustbe settled gross based, where relevant, on balance sheet interest rates andexchange rates prevailing at the balance sheet date. Within 1 year 1-2 years 2-5 years 5-10 years Over 10 years Total2007 £'000 £'000 £'000 £'000 £'000 £'000Trade and other 5,722 - - - - 5,722payables (excludingdeferred income)Rent Deposits 435 229 504 1,124 - 2,292Bank Borrowings 1,073 - - 176,033 - 177,106Derivative financialinstruments at fairvalue through theprofit or loss- Cash Outflows 7,172 6,847 18,849 98,356 - 131,224- Cash Inflows (7,482) (7,097) (19,325) (87,401) - (121,305) 6,920 (21) 28 188,112 - 195,039 2006Trade and other 17,761 - - - - 17,761payables( excludingdeferred income)Rent Deposits 244 129 282 630 - 1,285Bank Borrowings 124 - - 81,808 - 81,932Derivative financialinstruments at fairvalue through theprofit or loss- Cash Outflows 2,595 5,087 14,043 76,267 97,992- Cash Inflows (2,960) (5,745) (15,465) (72,154) (96,324) 17,764 (529) (1,140) 86,551 - 102,646 b) Company The Company only has trade payables and other payables which are payable withinone year. Market risk a) Foreign exchange risk The Group operates in Europe and is exposed to foreign exchange risk arisingfrom various currency exposures, primarily with respect to Sterling and Euros.Foreign exchange risk arises from future commercial transactions, recognisedmonetary assets and liabilities and net investments in foreign operations. The group has entered into currency swaps to safeguard the equity investments ofshareholders against significant adverse movements between Sterling and Euros.Details of the currency swap are as disclosed in note 16. The tables below summarise the Group's and Company's exposure to foreigncurrency risk at 31 December 2007 and 31 December 2006. The Group's andCompany's assets and liabilities at carrying amounts are included in the table,categorised by the currency at their carrying amount. Notes Group Group Group Company Company Company 2007 2007 2007 2007 2007 2007 Total Total £'000 £'000 £'000 £'000 £'000 £'000 • £ • £Current financial assetsTrade and other 17 15,869 1,754 17,623 - 1,754 1,754receivablesCash and cash 28,920 5,510 34,430 5,758 4,968 10,726equivalentsAmounts receivable 12 - - - 12,331 - 12,331from subsidiaryundertakings Non-current financialassetsInterest rate swaps 16 813 - 813 - - -Amounts receivable 12 - - - 103,457 - 103,457from subsidiaryundertakings Total financial 45,602 7,264 52,866 121,546 6,722 128,268assets Current financialliabilitiesTrade and other 18 5,074 648 5,722 268 520 788payables (excludingdeferred income)Bank borrowings 19 1,073 - 1,073 - - - Non-current financialliabilitiesCurrency swaps 16 9,919 - 9,919 - - -Bank borrowings 19 176,033 - 176,033 - - -Rent deposits 2,292 - 2,292 - - -Total financial 194,391 648 195,039 268 520 788liabilities Net balance sheet (148,789) 6,616 (142,173) 121,278 6,202 127,480currency position Notes Group Group Group Company Company Company 2006 2006 2006 2006 2006 2006 Total Total £'000 £'000 £'000 £'000 £'000 £'000 • £ • £Current financial assetsTrade and other 17 27,050 34 27,084 - 34 34receivablesCash and cash 12,166 6,409 18,575 532 6,409 6,941equivalentsAmounts receivable 12 - - - 25,490 25,490from subsidiaryundertakings Non-current financialassetsAmounts receivable 12 - - - 90,023 - 90,023from subsidiaryundertakings Total financial 39,216 6,443 45,659 116,045 6,443 122,488assets Current financialliabilitiesTrade and other 18 15,430 2,331 17,761 - 1,372 1,372payables (excludingdeferred income)Bank borrowings 19 124 - 124 - - - Non-current financialliabilitiesCurrency swaps 16 1,668 - 1,668 - - -Bank borrowings 19 81,808 - 81,808 - - -Rent deposits 1,285 - 1,285 - - -Total financial 100,315 2,331 102,646 - 1,372 1,372liabilities Net balance sheet (61,099) 4,112 (56,987) 116,045 5,071 121,116currency position The Group's policy is, where possible, to allow group entities to settleliabilities denominated in their functional currency (primarily Euros orSterling) with the cash generated from their own operations in that currency. As described in Note 16, a currency swap derivative has been entered into toprotect, to an extent, the sterling equity invested from fluctuations in theEuro exchange rate. As the property portfolio is acquired and mortgaged in Eurosthe swap is designed to provide some certainty on the net equity invested andalso provide some hedge on the Euro income generated on these properties. TheGroup, therefore, considers it appropriate from a risk perspective to review anexposure on the net current assets and cash not forming part of the investedequity. For illustrative purposes, therefore, the effect of a strengthening ofthe Euro by 5 cents would increase Group net current assets by £1.5 million(2006: £0.8 million). A weakening of the Euro by 5 cents would decrease netGroup assets by £1.4 million (2006: £0.8 million). On a Company only level the foreign exchange sensitivities are necessarilygreater given the large intercompany loan book. For illustrative purposes, astrengthening of the Euro by 5 cents would increase the Company net assets by£4.6m (2006: £4m). A weakening of the Euro by 5 cents would decrease the Companynet assets by £4.3 million (2006:£3.8 million). b)Cash flow and fair value interest rate risk The Group's and Company's interest rate risk arises from the following financialassets and liabilities. Interest Rate Profile Weighted average interest rate Group Group Company CompanyAs at 31 December 2007 2007 2007 2007 2007 % £'000 % £'000Financial assets at fair valuethrough profit or lossDerivative financial assetsNon-interest bearing - 813 - - Loans and receivablesTrade and other receivablesNon-interest bearing - 9,223 - 1,754Variable 4.36% 8,400 - Cash and cash equivalentsNon-interest bearing - 1,249 -Variable 3.88% 33,181 4.50% 10,726 Amounts receivable fromsubsidiariesNon-interest bearing - 13,439Fixed 5.23% 103,457 Financial liabilities at fairvalue through profit or lossDerivative financialliabilitiesFixed -payable 5.99% 120,192 - -Fixed - receivable 7.00% 109,200 - - Financial liabilities carriedat amortised costBank borrowingsNon-interest bearing 1,073Fixed 5.24% 176,033 - - Financial liabilities carriedat amortised costTrade and other payablesNon-interest bearing - 5,722 - 788 Rent depositsNon-interest bearing - 2,292 Interest Rate Profile Weighted average interest rate Group Group Company CompanyAs at 31 December 2006 2006 2006 2006 2006 % £'000 % £'000 Loans and receivablesTrade and other receivablesNon-interest bearing - 15,526 - 34Variable 4.00% 11,558 Cash and cash equivalentsNon-interest bearing - 1,549 -Variable 4.21% 17,026 5.32% 6,941 Amounts receivable fromsubsidiariesNon-interest bearing - 16,358Fixed 5.23% 100,114 Financial liabilities at fairvalue through profit or lossDerivative financialliabilitiesFixed -payable 6.00% 87,668 - -Fixed - receivable 7.00% 87,600 Financial liabilities carriedat amortised costBank borrowingsNon-interest bearing 124 - -Fixed 5.05% 81,808 - - Financial liabilities carriedat amortised costTrade and other payablesNon-interest bearing - 17,761 - 1,372 Rent depositsNon-interest bearing - 1,285 The Group irest rate risknte arises from long-term borrowings; the group has aninterest rate swap as disclosed in note 16. Further details concerning the derivative financial liabilities (currency swaps)are detailed in note 16. The Group's cash flow is periodically monitored by the Group's management. For the Group, an increase in 100 basis points in interest yields would resultin a post-tax profit of £0.4 million (2006: £0.3 million). A decrease in 100basis points in interest yields would result in a post tax loss for the periodof £0.4 million (2006:£0.3 million). For the Company, an increase in 100 basis points in interest yields would resultin a post-tax profit of £0.1 million (2006: £0.1 million). A decrease in 100basis points in interest yields would result in a post tax loss for the periodof £0.1 million (2006:£0.1 million). The sensitivity analyses above are based on a change in an assumption whileholding all other assumptions constant, In practice, this is unlikely to occur,and changes in some of the assumptions may be correlated - for example,change in interest rate and change in market values. Growth in rental income and defaults Income growth may not continue at a consistent rate. Future income is dependenton, amongst other things, the Group negotiating suitable rent levels whencompared to associated financing costs. c)Capital risk management The Group's objectives when managing capital are to safeguard the Group'sability to continue as a going concern in order to provide returns forshareholders and benefits for other stakeholders and to maintain an optimalcapital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust theamount of dividends paid to shareholders, return capital to shareholders, issuenew shares or sell assets to reduce debt. Consistent with others in the industry, the Group monitors capital on the basisof the gearing ratio. This ratio is calculated as net debt divided by totalcapital. Net debt is calculated as total borrowings as shown in the consolidatedbalance sheet less cash and cash equivalents. Total capital is calculated asequity, as shown in the consolidated balance sheet, plus net debt. During 2007, the Group's strategy, which was unchanged from 2006, was tomaintain a gearing ratio at around or below 70%. The gearing ratios at 31December 2007 and at 31 December 2006 were as follows: Group Group 2007 2006 £'000 £'000Total borrowings 176,033 81,808Less: cash and cash (34,430) (18,575)equivalentsNet debt 141,603 63,233Total equity 123,269 119,874Total capital 264,872 183,107 Gearing ratio 53.5% 34.5% The Company has no borrowings; all borrowings are within the Group. Directors and Trust information Directors: Broker: Legal advisors in Guernsey: Dick Kingston (Chairman) Cenkos Securities Limited Carey OlsenChristopher Bennett 6.7.8. Tokenhouse Yard 7 New StreetDavid Jeffreys London EC2R 7AS St Peter PortPhillip Rose Guernsey GY1 4BZSerena Tremlett KBC Peel Hunt Limited Legal advisors in the UK:Registered office: 111 Old Broad Street Norton RoseSecond Floor London EC2U 1PH 3 More London RiversideAlbert House Independent valuers: London SE1 2AQSouth Esplanade Knight Frank LLP 20 Hanover SquareSt Peter Port London W1S 1HZ Bankers in Guernsey:Guernsey Corporate advisors: Royal Bank of Scotland International Limited Kinmont Limited Royal Bank Place 6 Arlington Street 1 Glategny EsplanadePrior to 1 March 2008: London SW1A 1RE St Peter Port Guernsey GY1 4BQFirst Floor Auditors: Bankers in London:Dorey Court BDO Novus Limited PO Box 180 Barclays CapitalAdmiral Park Elizabeth House 5 The North Colonnade Ruette Braye Canary WharfSt Peter Port St Peter Port London E14 4BB Guernsey GY1 3LLGuernsey Registrar: Tax advisers:Investment Manager: Computershare Investor Services (Channel Islands) Limited Deloitte & Touche LLP Ordnance HouseAlpha Real Capital LLP Hill House 31 Pier Road124 Sloane Street 1 Little New Street St HelierLondon SW1X 9BW London EC4A 3TR Jersey JE4 8PW Administrator and Secretary: BDO Stoy Hayward LLP 55 Baker StreetAssura Administration Ltd London W1U 7EUSecond FloorAlbert HouseSouth EsplanadeSt Peter PortGuernseyGY1 3TX Prior to 1 March 2008: Mourant Guernsey LimitedFirst FloorDorey CourtAdmiral ParkSt Peter PortGuernseyGY1 6HJ Shareholder information Dividends Ordinary dividends are paid quarterly. Shareholders who wish to have dividendspaid directly into a bank account rather than by cheque to their registeredaddress can complete a mandate form for this purpose. Mandates may be obtainedfrom the Group's Registrar. Where dividends are paid directly to shareholders'bank accounts, dividend vouchers are sent directly to shareholders' registeredaddresses. Share Price The Trust's Ordinary Shares are listed on the London Stock Exchange. Change of address Communications with shareholders are mailed to the addresses held on the shareregister. In the event of a change of address or other amendment, please notifythe Trust's Registrar under the signature of the registered holder. Investment Manager The Company is advised by Alpha Real Capital LLP which is authorised andregulated by the Financial Services Authority in the United Kingdom. Financial Calendar Financial reporting Other key dates Dividend period Ex-dividend date Record date Payment datePreliminary 18 March 2008 1 October - 26 March 2008 28 March 2008 21 April 2008announcement and 31 December 2007dividend declared Publication of annual 4 April 2008report Annual General Meeting 30 April 2008 First Interim 15 May 2008 1 January - 18 June 2008 20 June 2008 14 July 2008Management Statement 31 March 2008(quarter 1) Half Yearly Report 15 August 2008 1 April - 17 September 2008 19 September 2008 13 October 2008 30 June 2008 This information is provided by RNS The company news service from the London Stock Exchange