Annual report and financial statements

Transcription

1 Annual report and financial statements For the year ended 31 December

2 Contents 1 About the Trust 2 Chairman s statement 3 Property review 4 Directors 5 Directors and corporate governance report 10 Independent auditors report 11 Consolidated statement of comprehensive income 12 Consolidated balance sheet 13 Consolidated cash flow statement 14 Consolidated statement of changes in equity 15 statement of comprehensive income 16 balance sheet 17 cash flow statement 18 statement of changes in equity 19 Notes to the financial statements 37 Directors and Trust information

3 Alpha Pyrenees Trust Limited : Annual report 1 About the Trust Alpha Pyrenees Trust Limited ( the Trust or the ) primarily invested in properties in France, particularly in the Ile-de-France region around Paris, focusing on commercial property in the office, industrial, logistics and retail sectors let to tenants with strong covenants. The Trust is pursuing an orderly realisation of its investment property and has the support of its lender in this process. Dividends The Trust does not pay dividends. Listing The Trust is a closed-ended Guernsey registered investment company which has been declared under the relevant legislation to be an Authorised Closed-Ended Collective Investment Scheme. Its shares are listed on the Official List of the UK Listing Authority and traded on the London Stock Exchange. Management The Trust s Investment Manager is Alpha Real Capital LLP ( the Investment Manager ). Control of the Trust rests with the non-executive Guernsey-based Board of Directors. ISA /SIPP status The Trust s shares are eligible for Individual Savings Accounts (ISAs) and Self Invested Personal Pensions (SIPPs). Website

4 2 Alpha Pyrenees Trust Limited : Annual report Chairman s statement The Investment Manager has been focused on achieving asset sales to support the settlement of the bank borrowings which now mature on 31 October The Board notes the progress achieved on this front during the year with the sale of a further three properties in France at prices totalling 19.8 million ( 24.3 million) and a property in Spain for 0.3 million ( 0.4 million) with the net proceeds being used to partially repay bank borrowings. The Investment Manager is focused on achieving an orderly realisation of the Trust s remaining five property assets, three of which are located in France and two in Spain, in a consensual manner in accordance with a formal agreement with Barclays Bank PLC ( Barclays ). To further this process the Investment Manager continues to undertake active asset management within the remaining portfolio with particular emphasis on the letting of vacant units to enhance property income and the marketability of the property (see property review section). The Board is aware of the risks and uncertainties that the and are facing whilst pursuing the properties orderly realisation plan and provide further detail on these in notes 20 and 21 to the financial statements. Going concern During the year, the Board has made further progress in the planned orderly realisation of its investment properties and subsequent repayment of the bank borrowings. The maturity date of the remaining bank borrowings is 31 October The Trust has the support of its lender for an orderly realisation of its remaining five investment properties with a view to winding up the Trust s group in due course. The accounts are therefore not prepared on a going concern basis. Results Results for the year to 31 December show a consolidated loss of 15.6 million (loss of 13.2 pence per share). The remaining portfolio is substantially vacant property and hence the loss reflects this, the revaluation at the end of the year and losses made on sales during the year. Revaluation and Net Asset Value Investment properties held for sale are included in the consolidated balance sheet at a valuation of 14.3 million ( 16.8 million) as assessed by the independent valuers, with the exception of Ivry that is valued at its selling price ( 2.5 million, 2.9 million) (note 11). As at 31 December, the net asset value per ordinary share is negative 50.2p (31 December : negative 30.9p): the movement in the year primarily reflecting the loss in the year, losses on revaluation of properties and adverse foreign exchange movement. Brexit During the year, the Brexit Referendum was held, in which the United Kingdom voted to leave the European Union. The Board considers that this event will not have any material adverse impact on the orderly realisation of the Trust s remaining properties. Finance Commentary It was announced on 31 October that the Trust s loan facilities with Barclays had been extended and the maturity date of all its borrowings is 31 October Following net repayments in the year of 28.7 million ( 35.2 million), as at 31 December the Trust had total borrowings of 77.4 million ( 90.5 million) under its facilities with Barclays. The current interest rates will continue to apply to the facilities during the extension period and the 2% extension fees (per annum pro-rated), charged on the initial and all extensions up to 15 April, are deferred to the new maturity date and will be payable to the extent that the Trust has sufficient cash funds at that time. No additional fee was charged on the latest extension. There is a cash-pooling arrangement over the Trust s cash flows from the remaining property portfolio to provide further security to the loan but still providing the Trust with working capital for its operations. Formal marketing of the Trust s remaining properties is ongoing and the results of the marketing process to date indicate that, although there is no certainty that transactions will take place, if they do, the prices achieved are most likely to be lower than the valuation at 31 December. The Trust will provide further updates on progress in due course. As the Board has previously stated, the sales process will not result in any return to ordinary shareholders after repayment of the Trust s bank borrowings, to the extent that this is possible, has taken place. Serena Tremlett Chairman 9 March 2017

5 Alpha Pyrenees Trust Limited : Annual report 3 Property review Portfolio overview The Trust owns three properties in France (St Cyr L Ecole, Champs-sur-Marne and Ivry-sur-Seine) and two properties in Spain (Alcalá de Guadaíra and Écija) totalling approximately 31,090 square metres (approximately 334,600 square feet) of commercial real estate. While the properties are generally well located and offer good value accommodation to occupiers, the properties suffer from weak tenant demand at the present time coupled with a high level of vacancy. The valuation of the five property portfolio as at 31 December was approximately 16.8 million ( 19.7 million). Property Sales On 3 February the Trust sold its properties located at Athis Mons, Aubergenville and Aubervilliers in France totalling approximately 59,730 square metres for 19.8 million ( 24.3 million). On 28 December the Trust sold its warehouse property located at Zaragoza in Spain totalling approximately 2,590 square metres for 0.3 million ( 0.4 million). The above sales form part of the orderly realisation process supported by the Trust s lender, Barclays, and the net proceeds from them has been used in the reduction of the Trust s bank borrowings. Post year end, following signing of a conditional contract for a 2.5 million ( 2.9 million) sale of the Ivry property, the representative of the local authority where the property is located has exercised its pre-emption rights to purchase that property at the same price. The remaining properties held by the Trust are being actively marketed and the Trust will provide further updates on the results of the marketing process in due course. Paul Cable For and on behalf of the Investment Manager 9 March 2017

6 4 Alpha Pyrenees Trust Limited : Annual report Directors David Jeffreys Director Aged 57 Serena Tremlett Director Aged 52 David Jeffreys qualified as a Chartered Accountant with Deloitte Haskins and Sells in He works as an independent nonexecutive director to a number of Guernsey based investment fund companies and managers and is a Guernsey resident. From 2007 until 2009 David was the Managing Director of EQT Funds Management Limited, the Guernsey management office of the EQT group of private equity funds. He was previously the Managing Director of Abacus Fund Managers (Guernsey) Limited between 1993 and 2004, a third party administration service provider to primarily corporate and fund clients. In addition to the, David is a director of two listed entities, Alpha Real Trust Limited and Tetragon Financial Limited, and a number of other unlisted entities. Serena has over 25 years experience in financial services, specialising in closed-ended property and private equity funds and fund administration over the last 18 years. She is a non-executive director on the listed company board of Alpha Real Trust Limited in addition to various unlisted property and private funds and general partners. Serena was previously company secretary (and a director) of Assura, at that time a FTSE 250 company listed on the London Stock Exchange, investing in primary healthcare property and ran Assura s Guernsey head office. Prior to working for Assura, Serena was head of Guernsey property funds at Mourant International Finance Administration (now State Street) for two years and worked for Guernsey International Fund Managers (now Northern Trust) for seven years where she sat on a number of listed and unlisted fund boards. Since 2008, Serena is co-founder and managing director of Morgan Sharpe Administration, a specialist closedended fund administrator.

7 Alpha Pyrenees Trust Limited : Annual report 5 Directors and corporate governance report The Directors present their report and financial statements of the and the for the year ended 31 December. Principal activities and status Since its incorporation on 16 November 2005, the, an authorised closed-ended Guernsey registered investment company, has carried on the business of a property investment company, investing in commercial property in France and Spain. The Trust is pursuing an orderly realisation of its investment property and has the support of its lender in this process. Its shares are listed on the Official List of the UK Listing Authority and have been traded on the London Stock Exchange since 29 November Business review, results and dividends The Chairman s statement on page 2 contains a review of the s business for the year. The results for the year are set out in the financial statements, commencing on page 11. The Trust does not pay dividends. Corporate governance The is authorised by the Guernsey Financial Services Commission ( GFSC ) and for this reason is required to follow the principles and guidance set out in the Finance Sector Code of Corporate Governance issued by the GFSC and effective from 1 January 2012 ( Guernsey Code ). As a company with a standard listing on the London Stock Exchange, the is not required to comply with the UK Corporate Governance Code ( UK Code ). However, the Board does take into consideration the UK Code in determining its governance procedures whilst also taking into account the size of the, the nature of its business and its entirely non-executive board. The Board Biographies of the current Directors are set out on page 4. The Directors interests in shares of the as at 31 December are set out below and there have been no changes in such interests up to the current date: Number of ordinary shares Number of ordinary shares Dick Kingston* 710, ,616 David Jeffreys 250, ,000 Phillip Rose* 1,290,079 1,290,079 David Rowlinson* - - Serena Tremlett 121, ,472 Non-executive Directors are not appointed for specified terms. However, appointments of Board members can be terminated at any time without penalty and the s Articles of Association ( Articles ) require each Director to retire and submit himself/herself to re-election by the shareholders at every third year. In addition, the Board believes that continuity and experience adds to its strength. The Annual General Meeting of the will take place on 28 April Individual Directors may seek independent legal advice in relation to their duties on behalf of the. Senior Independent Director The Board has appointed David Jeffreys as its Senior Independent Director and has agreed that he will be available for discussions with shareholders independently of his peers, to the extent appropriate. Operations of the Board The Board s primary role is to review matters which are of strategic importance to the, including the following: 1) Setting, and continuing to review, the objectives and strategy of the, taking into account market conditions. 2) Reviewing the capital structure of the including gearing. 3) Appointing the Investment Manager, administrator and other appropriately skilled service providers; monitoring their effectiveness and performance through regular reports and meetings. 4) Reviewing the s performance including net asset value and earnings per share. The Board considers these matters at its quarterly meetings. The Board meets at least four times per annum and on an ad-hoc basis to consider specific issues reserved for decision by the Board including all potential disposals, significant capital expenditure and leasing matters and decisions relating to the s financial gearing. Certain matters relating to the implementation of strategy are delegated either to the Investment Manager or the administrator but the performance of such delegation by these agents is regularly monitored by the Board. * resigned on 3 June (see page 6)

8 6 Alpha Pyrenees Trust Limited : Annual report Directors and corporate governance report (continued) At the Board s quarterly meetings it considers papers circulated in advance including reports provided by the Investment Manager and the administrator in its capacity as Secretary. The Investment Manager s report comments on: The French and Spanish property markets including recommendations for any changes in strategy that the Investment Manager considers may be appropriate. Performance of the s portfolio and key asset management initiatives. Transactional activity undertaken over the previous quarter and being contemplated for the future. The s financial position including relationships with bankers and lenders.the administrator provides a quarterly compliance, company secretarial and regulatory report. Together, these reports enable the Board to assess the success with which the s strategy is being implemented, consider any relevant risks (such as the general economic climate) and to consider how they should be properly managed. Board and Director appraisals The Board carries out an annual review of its composition and performance (including the performance of individual Directors) and that of its standing committees. Such appraisal includes reviewing the performance and composition of the Board (and whether it has an appropriate mix of knowledge, skills and experience), the relationships between the Board and the Investment Manager and administrator, the processes in place and the information provided to the Board and communication between Board members. At the June Board meeting, the Board considered its composition in terms of size and cost to manage the completion of the sales process described above. As a result of these considerations, David Rowlinson, Phillip Rose and Dick Kingston have resigned from the Board, effective 3 June. David Jeffreys and Serena Tremlett, who have been with the since inception, will continue as Directors and the Board will take responsibility going forward for matters previously dealt with by its sub-committees. Board meeting attendance The table below shows the attendance at Board meetings during the year to 31 December : Director No of meetings attended No of meetings eligible to attend Dick Kingston 2 4 David Jeffreys Phillip Rose 2 4 David Rowlinson 2 4 Serena Tremlett Directors and officers insurance An appropriate level of Directors and Officers insurance is maintained whereby Directors are indemnified against liabilities to third parties to the extent permitted by Guernsey company law. Board Committees The Board had established three standing committees, all of which operated under detailed terms of reference, copies of which are available on request from the Secretary. Following the decisions taken at the June Board meeting, the Board Committees were dissolved. Responsibilities of the Board Committees have been taken over by the two remaining non-executive Directors. Audit Committee The Audit Committee had consisted of David Jeffreys (Chairman), Dick Kingston, David Rowlinson and Serena Tremlett. Role of the Committee The role of the Audit Committee, which met at least twice a year, included: The engagement, review of the work carried out by and the performance of the s external auditor. To monitor and review the independence, objectivity and effectiveness of the external auditor. To develop and apply a policy for the engagement of the external audit firm to provide non-audit services. To assist the Board in discharging its duty to ensure that financial statements comply with all legal requirements. To review the s financial reporting and internal control policies and to ensure that the procedures for the identification, assessment and reporting of risks are adequate. To review regularly the need for an internal audit function. To monitor the integrity of the s financial statements, including its annual and half year reports and announcements relating to its financial performance, reviewing the significant financial reporting issues and judgements which they contain. To review the consistency of accounting policies and practices. To review and challenge where necessary the financial results of the before submission to the Board. The Audit Committee made recommendations to the Board which were within its terms of reference and considered any other matters as the Board might have referred to it.

9 Alpha Pyrenees Trust Limited : Annual report 7 Directors and corporate governance report (continued) Committee meeting attendance During the year, the committee met with all members in attendance once prior to its dissolution. Policy for non audit services The Board has adopted a policy for the provision of non-audit services by its external auditor, BDO Limited and reviews and approves all material non-audit related services in accordance with the need to ensure the independence and objectivity of the external auditor. No services, other than audit-related ones, were carried out by BDO Limited during. Internal audit The Board relies upon the systems and procedures employed by the Investment Manager and the administrator which are regularly reviewed and are considered to be sufficient to provide it with the required degree of comfort. Resulting from this and the fact that the only has one employee, the Board continues to believe that there is no need for an internal audit function. Nomination Committee The Nomination Committee had consisted of Serena Tremlett (Chairman), David Jeffreys, Dick Kingston, Phillip Rose and David Rowlinson. The Committee s principal task was to review the structure, size and composition of the Board in relation to its size and position in the market and to make recommendations to fill Board vacancies as they arose and it met at least annually. Committee meeting attendance The committee met at least once annually but did not meet during the year prior to its dissolution. Remuneration Committee and attendance The Remuneration Committee had consisted of the independent non-executive Directors being David Jeffreys (Chairman), Dick Kingston, David Rowlinson and Serena Tremlett. The Board approved formal terms of reference for the Committee and a copy of these is available on request from the Secretary. As the comprises only non-executive directors, the Committee s main role was to determine their remuneration within the cap set out in the s Articles. The Remuneration Committee met once during, prior to its dissolution, with all members in attendance. Remuneration report The fees payable to the Directors were limited to 200,000 per annum in aggregate under the s Articles and the annual fees payable to each Director had not changed since the s shares were listed in 2005 to the June Board meeting. At that meeting, the Board was reduced to two nonexecutive Directors with their fees being reduced to 40,000 per annum in aggregate. The fees payable to the Directors are expected to reflect their expertise, responsibilities and time spent on the business of the, taking into account market equivalents, the activities and the size of the and market conditions. Under their respective appointment letters, each director is entitled to an annual fee together with a provision for reimbursement for any reasonable out of pocket expenses. During the year the Directors received the following emoluments in the form of fees from the : Year ending 31 December Year ending 31 December Dick Kingston* 15,000 30,000 David Jeffreys 21,500 23,000 Phillip Rose* 10,000 20,000 David Rowlinson* 10,000 20,000 Serena Tremlett 20,000 20,000 Total 76, ,000 * resigned on 3 June (see page 6) Internal control and risk management The Board understands its responsibility for ensuring that there are sufficient, appropriate and effective systems, procedures, policies and processes for internal control of financial, operational, compliance and risk management matters in place in order to manage the risks which are an inherent part of business. Such risks are managed rather than eliminated in order to permit the to meet its financial and other objectives. As the has only one employee, the Board reviews the internal procedures of both its Investment Manager and its administrator upon which it is reliant. The Investment Manager has a schedule of matters which have been delegated to it by the Board and upon which it reports to the Board on a quarterly basis. These matters include quarterly management accounts and reporting against key financial performance indicators. Further, a compliance report is produced by the administrator for the Board on a quarterly basis. The maintains a risk management framework which considers the non-financial as well as financial risks and this is reviewed by the Board.

10 8 Alpha Pyrenees Trust Limited : Annual report Directors and corporate governance report (continued) Investment management agreement The has an agreement with the Investment Manager. This sets out the Investment Manager s key responsibilities, which include proposing a property investment strategy to the Board, identifying property investments to recommend for acquisition or sale and arranging appropriate lending facilities. The Investment Manager is also responsible to the Board for all issues relating to property asset management. Substantial shareholding Shareholders with holdings of more than three per cent of the issued ordinary shares of the as at 10 February 2017 were as follows: Name of investor No. of ordinary shares % held Antler Investment Holdings Limited 21,437, Alpha Global Property Securities Fund Pte. Ltd 9,390, Hargreaves Lansdown Asset Management 6,426, TD Waterhouse Clients 6,125, Mr Richard M. Peskin 6,000, Mrs Rosemary J. Skelley 5,857, Winterflood Securities 5,040, Halifax Share Dealing Clients 4,783, Mr J. A. M. Hemming 4,465, Interactive Investor 4,259, Barclays Wealth Management (UK) 3,830, Shareholder relations The Board places high importance on its relationship with its shareholders, with members of the Investment Manager s Investment Committee making themselves available for meetings with key shareholders and sector analysts. Reporting of these meetings and market commentary is received by the Board on a quarterly basis to ensure that shareholder communication fulfils the needs of being useful, timely and effective. One or more members of the Board and the Investment Manager will be available at the Annual General Meeting to answer any questions that shareholders attending may wish to raise. Directors Responsibilities Statement law requires the Directors to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the and of the at the end of the year and of the profit or loss of the and the for that year. In preparing those financial statements, the Directors are required to: (1) select suitable accounting policies and then apply them consistently; (2) make judgements and estimates that are reasonable and prudent; (3) state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; (4) prepare the financial statements on the going concern basis unless it is appropriate to assume that the and will not continue in business (as detailed in the going concern paragraph below and in note 2 of the financial statements, these financial statements have not been prepared on a going concern basis). The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the and of the and to enable them to ensure that the financial statements comply with the Companies (Guernsey) Law, They are also responsible for safeguarding the assets of the and and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors confirm that they have complied with the above requirements in preparing the financial statements. So far as each of the Directors is aware, there is no relevant information of which the s auditor is unaware, and they have taken all the steps they ought to have taken as Directors to make themselves aware of any relevant information and to establish that the s auditor is aware of that information. Going concern During the year, the Board has made further progress in the planned orderly realisation of its investment properties and subsequent repayment of the bank borrowings. The maturity date of the remaining bank borrowings is 31 October The Trust has the support of its lender for an orderly realisation of its remaining five investment properties with a view to winding up the Trust s group in due course. The accounts are therefore not prepared on a going concern basis. Annual General Meeting The AGM will be held in Guernsey at 9 a.m. on 28 April 2017 at Old Bank Chambers, La Grande Rue, St Martin s, Guernsey. The meeting will be held to receive the Annual Report and Financial Statements, re-elect Directors and propose the reappointment of the auditor and that the Directors be authorised to determine the auditor s remuneration. Independent auditor BDO Limited has expressed its willingness to continue in office as auditor of the. By order of the Board, David Jeffreys Director

11 Alpha Pyrenees Trust Limited : Annual report 9 Directors statement pursuant to the Disclosure and Transparency Rules Each of the Directors, whose names and functions are listed in the Directors and corporate governance report, confirm that, to the best of each person s knowledge and belief: the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU ( IFRS ) in accordance with the requirements of the London Stock Exchange, give a true and fair view of the assets, liabilities, financial position and profit or loss of the and, and the Chairman s statement and the property review include a fair review of the development and performance of the business and the position of the and and notes 20 and 21 to the financial statements provide a description of the principal risks and uncertainties that they face. By order of the Board, David Jeffreys Director Corporate responsibility benefits, risks and controls The Board has reviewed the s Corporate Responsibility Policy and considers this to be appropriate for the. The s policy is as follows: Alpha Pyrenees Trust Limited is committed to managing its portfolio in a way that delivers positive environmental, social and economic benefits. The recognises that the way in which buildings are designed, built, managed and occupied, significantly influences their impact on the environment and affected communities and it seeks to manage these issues. The believes that, through the implementation of socially responsible policies, the can manage effectively our sustainability related risks, associated with, for example, climate change (more severe and regular floods, increasing storm damage costs and rising energy prices), site contamination and remediation, use of hazardous materials, waste management (rising landfill and disposal costs) and local community relations. The s standard business process ensures that appropriate environmental reports are obtained as part of the due diligence process for property acquisitions and the assesses the accessibility of each property acquisition to public transportation. The s managers and appointed agents are required to comply with all relevant laws and regulations affecting the s business, and managers are expected to be aware of the environmental issues associated with property investment including environmental health and safety legislation, energy use, pollution and waste management.

12 10 Alpha Pyrenees Trust Limited : Annual report Independent auditors report To the members of Alpha Pyrenees Trust Limited We have audited the financial statements of Alpha Pyrenees Trust Limited for the year ended 31 December which comprise the Consolidated and Statements of Comprehensive Income, the Consolidated and Balance Sheets, the Consolidated and Cash Flow Statements, the Consolidated and Statements of Changes in Equity and the related notes 1 to 21. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. This report is made solely to the company s members, as a body, in accordance with Section 262 of the Companies (Guernsey) Law, Our audit work is undertaken so that we might state to the parent company s members those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the parent company and the parent company s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of the directors and auditor As explained more fully in the Directors Responsibilities Statement within the Directors Report, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group s and parent company s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent misstatements or inconsistencies we consider the implications for our report. Opinion on the financial statements In our opinion the financial statements: give a true and fair view of the state of the group s and of the parent company s affairs as at 31 December and of the group s loss and the parent company s loss for the year then ended; have been properly prepared in accordance with IFRSs as adopted by the European Union; and have been properly prepared in accordance with the requirements of the Companies (Guernsey) Law, Emphasis of matter going concern We draw attention to the disclosures made in note 2 to the financial statements which explains that it is the intention of the Board to seek an orderly disposal of the s investment property with a view to winding up the in due course. As a consequence, the financial statements have therefore been prepared on a basis other than that of a going concern. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion: proper accounting records have not been kept by the parent company; or the financial statements are not in agreement with the accounting records; or we have failed to obtain all the information and explanations, which, to the best of our knowledge and belief, are necessary for the purposes of our audit. Richard Michael Searle FCA For and on behalf of BDO Limited Chartered Accountants and Recognised Auditor Place du Pré, Rue du Pré, St Peter Port, Guernsey 9 March 2017

13 Alpha Pyrenees Trust Limited : Annual report 11 Consolidated statement of comprehensive income Notes For the year ended 31 December For the year ended 31 December Revenue Capital Total Revenue Capital Total Income Revenue 3 1,033-1,033 15,142-15,142 Property operating expenses 3 (1,241) - (1,241) (5,717) - (5,717) Net rental (expense)/income (208) - (208) 9,425-9,425 Losses on disposal of investment properties held for sale 11 - (1,461) (1,461) - (28,863) (28,863) Gains on disposal of subsidiaries Losses on revaluation of investment properties held for sale 11 - (7,268) (7,268) - (13,459) (13,459) Expenses Investment Manager s fee 19 (867) - (867) (1,380) (592) (1,972) Other administration costs 5 (948) - (948) (1,203) - (1,203) Operating (loss)/profit (2,023) (8,053) (10,076) 6,842 (42,914) (36,072) Finance income Finance costs 6 (5,462) (17) (5,479) (11,832) (51) (11,883) Loss before taxation (7,485) (8,070) (15,555) (4,989) (42,085) (47,074) Taxation ,783 5,783 Loss for the year (7,485) (8,070) (15,555) (4,989) (36,302) (41,291) Other comprehensive income/(loss) Items that may be reclassified to profit or loss in subsequent periods: Foreign exchange (losses)/gains on translation of foreign operations (translation reserve) Reclassification of foreign exchange gains on translation of foreign operations following disposals - (6,498) (6,498) - 4,697 4,697 - (676) (676) - (2,735) (2,735) Other comprehensive (loss)/income for the year - (7,174) (7,174) - 1,962 1,962 Total comprehensive loss for the year (7,485) (15,244) (22,729) (4,989) (34,340) (39,329) Loss per share - basic & diluted 9 (13.2)p (35.1)p The total column of this statement represents the s statement of comprehensive income, prepared in accordance with IFRS as adopted by the European Union. The revenue and capital columns are supplied as supplementary information permitted under IFRS. All items in the above statement derive from continuing operations. All income is attributable to the equity holders of the parent company. There are no non-controlling interests. The accompanying notes on pages 19 to 36 are an integral part of the financial statements.

14 12 Alpha Pyrenees Trust Limited : Annual report Consolidated balance sheet As at 31 December Notes Current assets Investment properties held for sale 11 16,824 39,283 Trade and other receivables ,940 Restricted cash 13 3,897 10,054 Cash and cash equivalents 13 1,213 1,309 22,619 57,586 Current liabilities Trade and other payables 14 (1,294) (1,955) Bank borrowings 15 (2,889) (91,311) Liabilities directly associated with investment properties held for sale (257) (694) (4,440) (93,960) Non-current liabilities Bank borrowings 15 (77,282) - Net liabilities (59,103) (36,374) Equity Share capital Special reserve , ,131 Translation reserve 17 17,060 24,234 Capital reserve 17 (174,243) (166,173) Revenue reserve 17 (15,051) (7,566) Total equity (59,103) (36,374) Net asset value per share (50.2)p (30.9)p The financial statements were approved by the Board of Directors and authorised for issue on 9 March They were signed on its behalf by: David Jeffreys Director The accompanying notes on pages 19 to 36 are an integral part of the financial statements.

15 Alpha Pyrenees Trust Limited : Annual report 13 Consolidated cash flow statement Notes For the year ended 31 December For the year ended 31 December Operating activities Loss for the year (15,555) (41,291) Adjustments for : Losses on disposal of investment properties held for sale 1,461 28,863 Gains on disposal of subsidiaries (676) - Losses on revaluation of investment properties held for sale 7,268 13,459 Deferred taxation - (5,783) Finance income - (881) Finance costs 5,479 11,883 Operating cash flows before movements in working capital (2,023) 6,250 Movements in working capital: Movement in trade and other receivables 1,013 3,539 Movement in trade and other payables (1,454) (4,550) Cash flows (used in)/from operations (2,464) 5,239 Interest received - 1 Cash flows (used in)/from operating activities (2,464) 5,240 Investing activities Proceeds from disposal of investment properties 25, ,087 Capital expenditure - (228) Restricted cash movement 13 7,412 (2,700) Cash flows from investing activities 32, ,159 Financing activities Repayment of borrowings (28,702) (108,980) Bank loan interest paid and costs (1,385) (10,419) Cash flows used in financing activities (30,087) (119,399) Net increase/(decrease) in cash and cash equivalents 180 (3,000) Cash and cash equivalents at beginning of year 1,309 4,659 Exchange translation movement (276) (350) Cash and cash equivalents at end of year (note 13) 1,213 1,309 The accompanying notes on pages 19 to 36 are an integral part of the financial statements.

16 14 Alpha Pyrenees Trust Limited : Annual report Consolidated statement of changes in equity For the year ended 31 December Share capital Special reserve Translation reserve Capital reserve Revenue reserve Total equity At 1 January - 113,131 22,272 (129,871) (2,577) 2,955 Total comprehensive income/(loss) for the year Loss for the year (36,302) (4,989) (41,291) Other comprehensive income - - 1, ,962 Total comprehensive income/(loss) for the year - - 1,962 (36,302) (4,989) (39,329) At 31 December - 113,131 24,234 (166,173) (7,566) (36,374) Note 16, 17 For the year ended 31 December Share capital Special reserve Translation reserve Capital reserve Revenue reserve At 1 January - 113,131 24,234 (166,173) (7,566) (36,374) Total equity Total comprehensive income/(loss) for the year Loss for the year (8,070) (7,485) (15,555) Other comprehensive loss - - (7,174) - - (7,174) Total comprehensive loss for the year - - (7,174) (8,070) (7,485) (22,729) At 31 December - 113,131 17,060 (174,243) (15,051) (59,103) Note 16, 17 The accompanying notes on pages 19 to 36 are an integral part of the financial statements.

17 Alpha Pyrenees Trust Limited : Annual report 15 statement of comprehensive income For the year ended 31 December For the year ended 31 December Revenue Capital Total Revenue Capital Total Notes Expenses Investment Manager s fee 19 (867) - (867) (538) (230) (768) Other administration costs 5 (458) - (458) (505) - (505) Total expenses (1,325) - (1,325) (1,043) (230) (1,273) Operating loss (1,325) - (1,325) (1,043) (230) (1,273) Finance costs 6 (1) (18) (19) (2) (106) (108) Movement in impairment of amounts receivable from and investments in subsidiary undertakings 20-1,208 1,208 - (2,209) (2,209) (Loss)/profit before taxation (1,326) 1,190 (136) (1,045) (2,545) (3,590) Taxation (Loss)/profit for the year (1,326) 1,190 (136) (1,045) (2,545) (3,590) Total comprehensive (loss)/income for the year (1,326) 1,190 (136) (1,045) (2,545) (3,590) The total column of this statement represents the s statement of comprehensive income, prepared in accordance with IFRS as adopted by the European Union. The revenue and capital columns are supplied as supplementary information permitted under IFRS. All items in the above statement derive from continuing operations. The accompanying notes on pages 19 to 36 are an integral part of the financial statements.

18 16 Alpha Pyrenees Trust Limited : Annual report balance sheet As at 31 December Notes Current assets Trade and other receivables Cash and cash equivalents Total assets Current liabilities Trade and other payables 14 (787) (683) Total liabilities (787) (683) Net liabilities (771) (635) Equity Share capital Special reserve , ,131 Capital reserve 17 (138,129) (139,319) Revenue reserve 17 24,227 25,553 Total equity (771) (635) The financial statements were approved by the Board of Directors and authorised for issue on 9 March They were signed on its behalf by: David Jeffreys Director The accompanying notes on pages 19 to 36 are an integral part of the financial statements.

19 Alpha Pyrenees Trust Limited : Annual report 17 cash flow statement For the year ended 31 December For the year ended 31 December Operating activities Loss for the year (136) (3,590) Adjustments for: Finance costs Movement in impairment of amounts receivable from subsidiary undertakings (1,208) 2,209 Operating cash flows before movements in working capital (1,325) (1,273) Movement in operating trade and other receivables (3) (7) Movement in operating trade and other payables Cash flows used in operations (1,224) (978) Interest paid (1) (2) Interest received from subsidiaries - 22 Cash flows used in operating activities (1,225) (958) Investing activities Current account loans repaid/(advanced) 1,194 (681) Cash flows from/(used in) investing activities 1,194 (681) Net decrease in cash and cash equivalents (31) (1,639) Cash and cash equivalents at beginning of year 36 1,801 Exchange translation movement (4) (126) Cash and cash equivalents at end of year 1 36 The accompanying notes on pages 19 to 36 are an integral part of the financial statements.

20 18 Alpha Pyrenees Trust Limited : Annual report statement of changes in equity For the year ended 31 December Share capital Special reserve Capital reserve Revenue reserve Total equity At 1 January - 113,131 (136,774) 26,598 2,955 Total comprehensive income/(loss) for the year Loss for the year - - (2,545) (1,045) (3,590) Other comprehensive income/(loss) Total comprehensive loss for the year - - (2,545) (1,045) (3,590) At 31 December - 113,131 (139,319) 25,553 (635) Note 16, 17 For the year ended 31 December Share capital Special reserve Capital reserve Revenue reserve Total equity At 1 January - 113,131 (139,319) 25,553 (635) Total comprehensive income/(loss) for the year Income/(loss) for the year - - 1,190 (1,326) (136) Other comprehensive income/(loss) Total comprehensive income/(loss) for the year - - 1,190 (1,326) (136) At 31 December - 113,131 (138,129) 24,227 (771) Note 16, 17 The accompanying notes on pages 19 to 36 are an integral part of the financial statements.

21 Alpha Pyrenees Trust Limited : Annual report 19 Notes to the financial statements For the year ended 31 December 1. General information The is a limited liability, closed-ended investment company incorporated in Guernsey. The address of the registered office is given on page 37. The nature of the s operations and its principal activities are set out in the Chairman s statement on page 2. The financial statements were approved and authorised for issue on 9 March 2017 and signed by David Jeffreys on behalf of the Board. 2. Significant accounting policies A summary of the principal accounting policies is set out below. The policies have been consistently applied to all years presented. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the accounting policies. The areas involving a high degree of judgement or complexity or areas where the assumptions and estimates are significant to the financial statements are disclosed in this note. Basis of preparation These financial statements have been prepared in accordance with IFRS, which comprise standards and interpretations approved by the International Accounting Standards Board ( IASB ), and International Accounting Standards and Standards Interpretations Committee s interpretations approved by the International Accounting Standards Committee ( IASC ) that remain in effect, and to the extent that they have been adopted by the European Union. Going concern During the year, the Board has made further progress in the planned orderly realisation of its investment properties and subsequent repayment of the bank borrowings. The maturity date of the remaining bank borrowings is 31 October The Trust has the support of its lender for an orderly realisation of its remaining five investment properties with a view to winding up the Trust s group in due course. The financial statements are therefore not prepared on a going concern basis. a) Adoption of new and revised Standards A number of new standards and interpretations issued by the IASB and the International Financial Reporting Interpretations Committee are effective for the current year. The adoption of these standards has not led to any changes in the s accounting policies. b) Standards and Interpretations in issue and not yet effective At the date of authorisation of these financial statements, there were a number of standards and interpretations, which have not been applied in these financial statements that were in issue but not yet effective. These are either not relevant to the and or, given the orderly disposal of investment properties and intended wind up of the and, are not expected to have a significant impact. Basis of consolidation The consolidated financial statements incorporate the financial statements of the and the subsidiary undertakings controlled by the, made up to 31 December each year. Control is achieved where the has power over the investee, exposure or rights, to variable returns from its involvement with the investee and the ability to use its power to affect the amount of the investor s returns. The results of subsidiary undertakings acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal as appropriate. When necessary, adjustments are made to the financial statements of subsidiary undertakings to bring their accounting policies used into line with those used by the. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Presentation of statement of comprehensive income In order to better reflect the activities of an investment company and in accordance with guidance issued by the Association of Investment Companies ( AIC ), supplementary information, which analyses the statement of comprehensive income between items of a revenue and capital nature, has been presented alongside the and s statement of comprehensive income. Revenue recognition Rental income from investment property leased out under an operating lease is recognised in the statement of comprehensive income on a straight line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the net consideration for the use of the property and are therefore also recognised on the same straight line basis. Rental revenues are accounted for on an accruals basis. Therefore, deferred revenue generally represents advance payments from tenants. Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the and the amount of revenue can be measured reliably. Upon early termination of a lease by the lessee, the receipt of a surrender premium is immediately recognised as revenue. The s interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable. Provisions against recoverability of interest income are recognised as an expense within the movement in impairment of amounts receivable from subsidiary undertakings. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

22 20 Alpha Pyrenees Trust Limited : Annual report Notes to the financial statements (continued) For the year ended 31 December 2. Significant accounting policies (continued) Foreign currencies a) Functional and presentation currency Items included in the financial statements of each of the entities are measured in the currency of the primary economic environment in which the entity operates (the functional currency ). The consolidated financial statements are presented in Sterling, which is the s functional and presentation currency. b) Transactions and balances Transactions in currencies other than the functional currency of the s entity involved are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Gains and losses arising on retranslation are included in net profit or loss for the year. c) companies The results and financial position of all the entities that have a functional currency which differs from the presentation currency are translated into the presentation currency as follows: (i) (ii) (iii) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet; income and expenses for each statement of comprehensive income are translated at the average exchange rate prevailing in the period; and all resulting exchange differences are recognised as a separate component of equity. On consolidation, the exchange differences arising from the translation of the s net investment in foreign entities are taken to other comprehensive income. When a foreign operation is sold, such exchange differences are recognised in the statement of comprehensive income as part of the gain or loss on sale. The year-end exchange rate used is 1: (: 1: 1.357) and the average rate for the year used is 1: (: 1: 1.377). Operating profit a) Operating profit includes interest income from subsidiary entities, as reduced by Investment Manager s fees and administrative expenses and excludes the movement on impairment of loans from and investments in subsidiaries, finance costs and finance income. b) Operating profit includes net gains or losses on revaluation of investment properties and net gains or losses on disposal of investment properties and subsidiaries, as reduced by administrative expenses and property operating costs and excludes finance costs and finance income. Expenses All expenses are accounted for on an accruals basis and include fees and other expenses paid to the administrator, the Investment Manager and the Directors. In respect of the analysis between revenue and capital items presented within the statement of comprehensive income, all expenses have been presented as revenue items except: (i) (ii) realised gains or losses from disposal of investment properties and subsidiaries and unrealised gains or losses on revaluation of investment properties; foreign exchange losses. Taxation The is exempt from Guernsey taxation on income derived outside of Guernsey and bank interest earned in Guernsey. A fixed annual fee of 1,200 (: 1,200) is payable to the States of Guernsey in respect of this exemption. No charge to Guernsey taxation arises on capital gains. The is liable to foreign tax arising on activities of the overseas subsidiaries. The has subsidiary operations in Luxembourg, Belgium, France and Spain. The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible timing differences can be utilised.