ALPHA PYRENEES TRUST POSTS RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2013:

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1 16 August 2013 ALPHA PYRENEES TRUST LIMITED ( ALPHA PYRENEES TRUST OR THE TRUST OR THE COMPANY ) ALPHA PYRENEES TRUST POSTS RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2013: 16,580 SQUARE METRES OF NEW LEASES AND LEASE EXTENSIONS NET ASSET VALUE 28.5p PER SHARE (ADJUSTED) 72% OF PORTFOLIO INCOME DERIVES FROM LEASES WITH MORE THAN 5 YEARS UNTIL THE NEXT BREAK OPTION Alpha Pyrenees Trust Limited, the property company investing primarily in commercial real estate in France, today posts its results for the half year from 1 January to. The Trust announced adjusted earnings of 0.3 million for the period, representing adjusted earnings per share of 0.2p. The Trust does not currently propose to pay dividends. Highlights of the half year to include: New leases and lease extensions covering 16,580 square metres (6.3% of the Trust s portfolio by area) achieved since 1 January 2013 Weighted average lease length of 8.3 years to expiry and 4.5 years to next break 72% of portfolio income derives from leases with more than 5 years until the next break 83% of rental income derives from Grade A tenants Lease rentals are subject to annual indexation; rental indexation remains positive 92% of the Trust s portfolio by value is in France; 83% is in the Paris region Current portfolio valuation yield of 8.2% 99% of borrowings are fixed at a weighted average interest rate of 5.26% per annum to maturity in February 2015 NAV (adjusted) of 28.5p per share as at (31 December 2012: 34.0p) Adjusted earnings of 0.3 million for the six months to (adjusted earnings per share of 0.2p) The Trust does not currently propose to pay dividends Dick Kingston, Chairman of Alpha Pyrenees Trust, commented: The Trust is currently in discussions with its bank in relation to a solution for settling the currency hedges in October 2013 and will report upon the outcome of those discussions once concluded. Management emphasis during the period has continued to focus on active asset management within the Trust s portfolio with particular emphasis on the extension of lease terms and the letting of vacant units. The Board is pleased to note that further progress has been achieved on this front, in the face of a challenging business climate which has created an environment where, generally, the tenant decision making process is extended and there are prolonged periods to complete new leasing agreements. For the Trust, the reduction in earnings reflects this difficult leasing market.

2 Paul Cable, Fund Manager, Alpha Real Capital LLP, commented: The Trust owns a diversified portfolio of properties focused primarily on the French property market which represents 92% of the total portfolio by value with 83% by value located in the Ile-de-France region which remains one of Europe s most economically important and stable markets. Despite the challenging business environment, since 1 January new leases or lease extensions were achieved on 16,580 square metres representing around 6.3% of the portfolio by area and 83% of the Trust s current rent roll is secured by leases to Grade A tenants. The Trust s leases are subject to annual index-linked rent reviews and indexation remains positive in the Trust s markets. The Investment Manager will continue to concentrate on active asset management and property management initiatives, to secure the Trust s income and add value. Contact: Dick Kingston Chairman, Alpha Pyrenees Trust Limited Paul Cable Fund Manager, Alpha Real Capital LLP For more information on the Trust please visit For more information on the Trust s Investment Manager please visit FORWARD-LOOKING STATEMENTS These results contain forward-looking statements which are inherently subject to risks and uncertainties because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements are based on the Board s current view and information known to them at the date of this statement. The Board does not make any undertaking to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Nothing in these results should be construed as a profit forecast. Alpha Pyrenees Trust Limited is advised by Alpha Real Capital LLP, which is authorised and regulated by the Financial Services Authority in the United Kingdom Registered office Old Bank Chambers La Grande Rue St Martin s Guernsey GY4 6RT

3 About the Trust Objective Alpha Pyrenees Trust Limited ( the Trust or the Company or Alpha Pyrenees ) primarily invests in higher-yielding 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 seeks to provide shareholders with a regular earnings stream whilst also having the potential for capital growth in the long term from a combination of rent increases (leases are typically indexed to increase in line with inflation) and active asset management. The Trust seeks to diversify risk by investing in a portfolio of properties spread across different property sectors with a variety of tenants. Dividends The Trust does not currently propose to 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 nonexecutive 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 Financial highlights Half year ending Year ending 31 December 2012 Half year ending 30 June 2012 Net asset value (adjusted) ()* 33,509 39,939 43,718 Net asset value per ordinary share 28.5p 34.0p 37.2p (adjusted)* Net asset value per ordinary share 14.7p 17.5p 20.5p Earnings per share (adjusted - basic & 0.2p 1.9p 1.1p diluted)** Earnings per share (basic & diluted) (2.3)p 2.2p 4.8p Dividend per share (paid during the period)*** 0.6p 3.0p 2.4p *The net asset value and net asset value per ordinary share have been adjusted for the fair value mark-to-market revaluation of the interest component of the currency swap, the interest rate swap derivatives and 50% of the deferred tax provisions; full analysis is given in note 10 to the accounts. **The adjusted earnings per share includes adjustments for the effect of the fair value mark-to-market revaluation of the properties, currency swap and interest rate swap derivatives, deferred tax provisions, capital element of investment manager s fee, rental guarantee income and foreign exchange gains and losses. A full analysis is given in note 9 to the accounts. *** This includes dividends paid in relation to prior periods. 1

4 Chairman s Statement During the period, the Investment Manager has continued to focus on active asset management within the existing portfolio with particular emphasis on the extension of lease terms and the letting of vacant units to secure the Trust s income. The Board is pleased to note that despite the challenging business climate further progress has been achieved on this front. Since 1 January 2013, new leases or lease extensions were achieved on a total of 16,580 square metres representing around 6.3% of the portfolio by area. Further detail on asset management progress appears in the Property Review section. The Investment Manager is also investigating selective opportunities to add value within the Trust s portfolio. Against the backdrop of the economic climate, leasing take-up has continued and despite the reversal in growth in the French economy, vacancy levels in our principal occupational markets have been broadly stable. Results and dividend Results for the period show adjusted earnings of 0.3 million and adjusted earnings per share of 0.2p (note 9). The reduction in earnings reflects the difficult leasing market and the consequent level of vacancy that persists in the portfolio. The challenging business climate has created an environment where generally the corporate decision making process is extended and hence the leasing environment is characterised by both some postponement of relocation decisions and prolonged periods to complete new leasing agreements. The Trust currently has vacant space with an estimated annual rental value of approximately 3.5 million ( 4.1 million) and against this backdrop it remains difficult to predict the timing and level of re-leasing that will be achieved. The Trust s earnings have also been constrained by the strategic decision to retain substantial cash reserves ( 6.5 million), which earn a low rate of return at present. The Board evaluates a number of factors when considering dividends. These include the current economic conditions and progress on leasing, the current level of occupancy within the portfolio, the requirement to settle any currency hedges liability that exists in October 2013 and the need to maximise the Trust s future flexibility. No dividend was paid for the first quarter of 2013 and the Trust does not currently propose to pay dividends. Revaluation and Net Asset Value Investment properties are included in the balance sheet at an independent valuation of million ( million) providing an average valuation yield across the portfolio of 8.2% as at. The next independent revaluation will take place as at 31 December The portfolio totals approximately 262,100 square metres (approximately 2.8 million square feet) and many of the tenants are well known companies belonging to large groups with strong covenants such as: Alcatel-Lucent, Aldi, Aviva, BNP Paribas, Dia, Etanco, Furnotel, Husqvarna, Klöckner Group, La Poste, MediaMarkt, McDonalds, Norauto, OCP, Sprinter and Vinci Group. Grade A tenants also include government or quasi-government bodies and together the rent from such tenants accounts for 83% of the Trust s rental income. The weighted average lease length within the portfolio is currently 8.3 years to expiry and 4.5 years to the next break. As at, the adjusted net asset value per ordinary share is 28.5p (31 December 2012: 34.0p per share) (note 10). The decrease in the period is primarily due to the fair value movement of the property portfolio, an increase in the deferred tax provision and the appreciation of the Euro and the consequent net movements on currency hedges. 2

5 Portfolio Summary Country Property Sqm Description Valuation m Valuation m France Villarceaux-Nozay 78,800 Business park France Aubervilliers 8,750 Offices France Goussainville 20,500 Warehouse and offices France Champs sur Marne 5,930 Offices France Aubergenville 27,700 Logistics France Athis Mons 23,280 Logistics with offices France St Cyr L Ecole 6,340 Offices France Gennevilliers 3,330 Offices with light industrial France Mulhouse 5,250 Offices France Roissy-en-France 7,800 Offices and warehouse France Nimes 3,100 Offices and retail France Evreux 14,130 Logistics with offices France Ivry-sur-Seine 7,420 Warehouse and offices France Fresnes 6,540 Warehouse and offices France Vitry-sur-Seine 5,180 Warehouse and offices Spain Córdoba 16,880 Retail park Spain Zaragoza 9,520 Warehouses Spain Écija 5,950 Shopping centre Spain Alcalá de Guadaíra 5,700 Shopping centre Total 262, Finance The Trust has total borrowings of million ( million) as at under its facilities with Barclays Bank PLC. The key features of the Trust s borrowings are: The French ( million) and Spanish ( 21.5 million) borrowings mature in February % of borrowings have interest rates that are fixed to maturity at a weighted average rate of 5.26% per annum. Interest cover ratio ( ICR ) covenant is set at 115% - the Trust s weighted average ICR over the six months to 30 June 2013 was 148%. The next loan to value ( LTV ) covenant test will be in February 2014 and at that time the Trust s LTV should not exceed 87.5% on a country portfolio basis - as at the Trust has net leverage of 77.4% (taking into account cash of 6.5 million). The French and Spanish borrowings are independent and are not cross-collateralised. The Trust holds 6.5 million of cash and un-mortgaged property with a value of 7.0 million ( 8.2 million) as at. 3

6 The Trust has used currency derivatives to hedge its planned net invested equity. A total of million was hedged under derivatives entered into in 2006 and 2007 and priced at market rates at that time. The fair value of the currency hedges as at 30 June 2013 is a liability of 30.8 million ( 36.0 million). The bank held 9.0 million ( 10.5 million) at the period end, recognised within other debtors in the consolidated balance sheet, as collateral against the hedges liability under existing arrangements. The Trust is currently in discussions with its bank in relation to a solution for settling the currency hedges in October 2013 and will report upon the outcome of those discussions once concluded. As part of this process the Trust is considering selective asset sales (including the potential sale of its un-mortgaged Nîmes property) and utilising existing cash resources. Market outlook Overall leasing activity in the French and Spanish markets has been subdued over the period reflecting economic conditions but despite this backdrop the Trust has achieved lease extensions and new leases on 16,580 square metres (6.3% of its portfolio) since 1 January Take-up in our principal occupational markets has continued but at lower levels due to the difficult business climate. In the Paris region (Ile-de-France), where 83% of the Trust s portfolio is situated, office vacancy remains broadly stable and significant oversupply appears unlikely in the medium term. In France, the annualised construction cost index showed growth for the thirteenth consecutive quarter, running at approximately 1.8% in the first quarter of In Spain, CPI was running at an annualised rate of 2.1% as at June Valuation yields have been stable and investment confidence in our principal market continues. Summary The Trust owns a diversified freehold portfolio of properties totalling million ( million) with an average valuation yield of 8.2% at the June valuation. The Trust s leases are subject to annual index-linked rent reviews and rental indexation remains positive. 83% of the Trust s rental income derives from Grade A tenants with a strong capacity to pay. The Trust s current average lease length is 8.3 years to expiry and 4.5 years to the next break. 99% of borrowings are fixed at a weighted average interest rate of 5.26% per annum to maturity in February The Trust does not currently propose to pay dividends. The Trust is in discussions with its bank in relation to a solution for settling the currency hedges in October Dick Kingston Chairman 15 August

7 Property review Portfolio overview The Trust owns a portfolio of fifteen properties in France and four properties in Spain totalling approximately 262,100 square metres (approximately 2.8 million square feet) of commercial real estate. The properties are generally well let, well located and offer good value accommodation to occupiers. Of the total property portfolio, 92% is invested in France and 8% in Spain in terms of capital value. The valuation of the portfolio as at was approximately million ( million) giving an average valuation yield of 8.2% with the French portfolio producing an average valuation yield of 8.1% and the Spanish portfolio 8.6% respectively. The portfolio as a whole showed a small valuation decrease of 0.2% on a Euro like-for-like basis compared to 31 December This consisted of a decrease of 0.1% in the French portfolio and a decline of 1.4% in the Spanish portfolio. The average capital value of the portfolio is approximately 992 ( 1,159) per square metre (equivalent to 92 per square foot) and the average rental value is approximately 86 ( 100) per square metre per annum (equivalent to 8.0 per square foot). Of the overall portfolio, 83% by value is located within the Ile-de-France region around Paris. The portfolio has 68% exposure to the French office and business park sector of which 62% of the total portfolio is in the Ile-de-France region. The reinstatement cost of the portfolio buildings has been assessed at million ( million) representing approximately 90% of current value. The Trust s portfolio is diversified across business sectors with 68% in offices and business park property, 25% in warehouses and 7% in retail. The portfolio benefits from strong credit tenants with 83% of its current rent roll secured by leases to Grade A tenants (large international/national companies or public sector). Examples of those categorised as Grade A are given in the Chairman s Statement. The portfolio has an overall level of average occupancy of 84% as measured by rental income as a percentage of potential total income with vacancy representing 16%. The weighted average lease length is 8.3 years to expiry and 4.5 years to next break and 72% of the portfolio income derives from leases with more than five years until the first break option. Asset management review The Investment Manager maintains close contact with the Trust s tenants to understand their needs and wherever possible to produce solutions which deliver value to both the tenants and investors. We constantly seek to maintain and, where possible, improve the income from each of the Trust s assets and look for opportunities to create income through value-adding refurbishment, extension and reconfiguration. Over the period we have continued to concentrate on active asset management and property management initiatives to secure the Trust s income and we are pleased to report a number of important achievements since 1 January 2013 in the following areas: extending the lease maturity profile of the property portfolio through lease extensions and letting of vacant units. Since 1 January 2013, new leases and lease extensions covering approximately 16,580 square metres (6.3% of the Tust s portfolio by area) have been achieved. As detailed in the annual report, lease extensions and new leases were achieved totalling 8,190 square metres. Since the annual report was published, lease extensions were achieved on eight leases in Spain, including Dia at Cordoba, totalling approximately 1,965 square metres and a new lease signed on 1,100 square metres with Crimasa at Ecija as detailed below. In France in the same period, further new leases and lease extensions covering approximately 5,325 square metres have been completed as detailed below. FRANCE Goussainville A new 3/6/9 year lease starting in April 2013 was signed with VIP, a mail order company, on 3,060 square metres of vacant warehouse space; a new 3/6/9 year lease starting in March 2013 was signed with ASTS, a security company, on 440 square metres of vacant office space; and a new 3/6/9 year lease starting in August 2013 was signed with BFEA, a vehicle inspection company, on 195 square metres of vacant office space. 5

8 Ivry a new 6/9 year lease starting in July 2013 was signed with SCO, a builder s merchant, on 890 square metres of vacant warehouse space. Vitry a new 3/6/9 year lease starting in June 2013 was signed with Crete & Laurent, a painting and decorating business, on 500 square metres of vacant warehouse space. Fresnes existing tenant, Exaflor extended their lease on a 240 square metre warehouse unit until January SPAIN Ecija a new year lease from November 2013 has been signed with gym operator, Crimasa, on 1,100 square metres. GENERAL The Investment Manager remains vigilant to ensuring service charges are spent effectively, the annual level of property costs is closely monitored and additional sources of income are identified. Market overview France After a flat 2012, the French economy slipped into a shallow recession with the first quarter of 2013 showing negative growth in gross domestic product of 0.2% following a similar decline in the fourth quarter of In the second quarter of this year gross domestic product returned to modest growth of 0.5% driven by stronger domestic demand. However, the unemployment rate for mainland France has risen to 10.2% and inflation has moderated further with the growth in the Consumer Price Index standing at 0.9% per annum at the end of June. Against this challenging economic background, slightly over 5.7 billion was invested in standard commercial real estate in France over the first half of 2013, a 5% decline over the same period in French investors represented approximately 62% of the market with the next largest group being North American investors representing 14%. Office investment remained the highest volume sector representing 67% of total investment in France. The recovery in investment in logistics and industrial property evident in 2012 has continued in the first half of 2013 with investment of 900 million (16% of the total volume) which is 2.5 times higher than the first half of 2012 with demand maintained for portfolio investments. Of the Trust s total property portfolio, 92% is in France, 83% is in the Ile-de-France and 62% is in Ile-de-France office and business park space. The Economy of Ile de France Paris and the surrounding region, better known as Ile-de-France, accounts for 19% of the French population but contributes 29% of French GDP. It is one of the main players in the global economy and is the largest European region by GDP. By population the Ile-de-France metropolis ranks twentieth globally, but ranked by GDP it is the fifth major metropolis in the world after the metropolitan areas of Tokyo, Greater New York, Los Angeles and Osaka. In Europe, the only city that can compare to Paris is London and taking the wider metropolitan areas these two regions can be considered broadly similar in GDP terms. However it should be noted that the GDP of these two metropolitan areas far exceeds those of all other European cities, whether considering the Dutch Randstad, the conurbation Rhine-Ruhr and Rhine-Main, Brussels or Berlin. With over 5.3 million jobs, Ile-de-France holds a prominent place in the national economy and many national and international companies have their headquarters in the region because of its high quality as a business location. The Ile-de-France has the world s third largest concentration of Fortune 500 head offices. The Ile-de-France economy remains extremely diverse compared to other cities of its size with a large industrial base and one of the most important agricultural areas in France as well as being a pre-eminent global tourist destination. Its economy is more diversified than London (with its emphasis on financial markets) or Los Angeles (film and entertainment) and Paris is not overly dependent on any one sector. Even categorizing Ile-de-France as predominantly a services-based economy, its industrial base which accounts for 16% of the region s GDP, remains very important as the region is a major European production centre. The Ile-de-France has preserved its competitiveness by increasing its proportion of investment in research and development where it ranks as Europe s number one region for R&D expenditure and personnel. All of these activities are supported by an integrated freight and transport network. 6

9 However, due to the difficult business environment and continuing economic uncertainty, occupiers appear to be adopting a wait and see policy and over the first half of 2013 office take-up in the Ile-de-France amounted to approximately 833,000 square metres which represents a decline of 19% over the same period in The most active business sectors were the industrial sector (26% of take-up by volume), the finance and insurance sector (19%), the legal and consultancy sector (14%) and the public sector (13%) together accounting for 72% of the take-up in the first half of The average office rent in Ile-de-France was broadly stable over the first half of the year at 293 per square metre per annum. The office vacancy rate for the Paris region has risen slightly to 6.7% but a large increase in future supply appears unlikely due to the caution shown by developers, investors and bankers towards speculative developments. Take-up in the logistics sector in France was also affected by the business climate with national take up reaching just over 1.0 million square metres in the first half of 2013, 8% above the same period in 2012 when figures were particularly low. The largest share of transaction volume took place in Ile-de-France with take-up of 0.25 million square metres representing a quarter of national take-up. Spain The Spanish economy remains in recession as gross domestic product shrank by 0.5% in the first quarter of 2013 and an estimated 0.1% in the second quarter when the year on year growth rate was -1.7% compared to the same quarter in Spain has continued the process of fiscal consolidation through the continuation of austerity measures and these have suppressed domestic demand. In addition, despite the government s efforts to reform the labour market, the unemployment rate has increased to 27% in the second quarter of The near term outlook for the Spanish economy remains subdued. Rental indexation Rental indexation remains positive for both France and Spain. The INSEE Construction Cost Index, applicable to the Trust s leases in France, has shown annualised growth for the last thirteen published quarters and the annual indexation base as at Q stood at 1.79% (0.06% Q4 2012). The Spanish Consumer Price Index, applicable to the Trust s leases in Spain, was running at an annualised rate of increase of 2.1% as at June Paul Cable For and on behalf of the Investment Manager 15 August

10 Independent review report To the members of Alpha Pyrenees Trust Limited Introduction We have been engaged by the Company to review the condensed set of financial statements in the half year report for the six months ended which comprises the consolidated statement of comprehensive income, consolidated balance sheet, consolidated cash flow statement, consolidated statement of changes in equity and related notes. We have read the other information contained in the half year financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. Directors responsibilities The half year financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half year financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom s Financial Services Authority. As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half year financial report have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting as adopted by the European Union. Our responsibility Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half year report based on our review. This report, including the conclusion, has been prepared for, and only for, the Company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, Review of Interim Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half year financial report for the six months to is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom s Financial Services Authority. Emphasis of matter going concern In forming our conclusion on the half year financial report, which is not qualified, we have considered the adequacy of the disclosure made in note 2 to the financial statements concerning the Group s ability to continue as a going concern. As disclosed in note 2 the Group has currency hedge contracts, with a fair value at of 30.8 million, which are due to terminate on 16 October The conditions disclosed in note 2 to the financial statements indicate the existence of a material uncertainty which, in the event of a strategy not being realised to settle the currency swap derivatives in October 2013, may cast doubt about the Group s ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern. BDO Limited Chartered Accountants Place du Pré Rue du Pré St Peter Port Guernsey 15 August

11 Condensed consolidated statement of comprehensive income Notes For the six months ended (unaudited) Revenue Capital Total For the six months ended 30 June 2012 (unaudited) Revenue Capital Total Income Revenue 3 11,096-11,096 11,502-11,502 Property operating expenses (3,000) - (3,000) (2,760) - (2,760) Net rental income 8,096-8,096 8,742-8,742 Expenses Net change in losses on revaluation of 11 - (1,025) (1,025) - (598) (598) investment properties Investment Manager s fee (991) (425) (1,416) (963) (413) (1,376) Other administration costs (667) - (667) (688) - (688) Operating profit/(loss) 6,438 (1,450) 4,988 7,091 (1,011) 6,080 Finance income ,245 6, ,071 7,126 Finance costs 5 (6,213) (6,987) (13,200) (5,870) (1,390) (7,260) Profit/(loss) before taxation 250 (2,192) (1,942) 1,276 4,670 5,946 Taxation 7 - (730) (730) - (340) (340) Profit/(loss) for the period 250 (2,922) (2,672) 1,276 4,330 5,606 Other comprehensive income Items that may be reclassified to profit or loss in subsequent periods: Foreign exchange gains/(losses) on translation of foreign operations (translation reserve) (462) (462) Other comprehensive income/(expense) for the period (462) (462) Total comprehensive income/(expense) for the period 250 (2,773) (2,523) 1,276 3,868 5,144 (Loss)/earnings per share - basic & diluted 9 (2.3)p 4.8p Adjusted earnings per share - basic & diluted 9 0.2p 1.1p All items in the above statement derive from continuing operations. The accompanying notes below are an integral part of this statement. 9

12 Condensed consolidated balance sheet Notes (unaudited) 31 December 2012 (audited) Non-current assets Investment properties , ,043 Current assets Trade and other receivables 12 14,860 11,832 Cash and cash equivalents 6,454 8,400 21,314 20,232 Total assets 281, ,275 Current liabilities Trade and other payables 13 (4,234) (2,350) Financial liabilities at fair value through profit or loss 15 (30,796) (23,809) Bank borrowings 14 (1,541) (1,459) Rent deposits (1,025) (905) (37,596) (28,523) Total assets less current liabilities 243, ,752 Non-current liabilities Financial liabilities at fair value through profit or loss 15 (12,789) (16,683) Bank borrowings 14 (206,552) (197,393) Rent deposits (1,255) (1,386) Deferred taxation 7 (5,664) (4,714) (226,260) (220,176) Total liabilities (263,856) (248,699) Net assets 17,347 20,576 Equity Share capital Special reserve 113, ,131 Translation reserve 22,197 22,048 Capital reserve (119,367) (116,445) Revenue reserve 1,386 1,842 Total equity 17,347 20,576 Net asset value per share p 17.5p Net asset value per share (adjusted) p 34.0p The half-year financial statements were approved by the Board of Directors and authorised for issue on 15 August David Jeffreys Director Serena Tremlett Director The accompanying notes below are an integral part of this statement. 10

13 Condensed consolidated cash flow statement For the six months ended (unaudited) For the six months ended 30 June 2012 (unaudited) Operating activities (Loss)/profit for the period (2,672) 5,606 Adjustments for : Net change in losses on revaluation of investment properties 1, Deferred taxation Finance income (6,270) (7,126) Finance costs 13,200 7,260 Operating cash flows before movements in working capital 6,013 6,678 Movements in working capital: Increase in operating trade and other receivables (1,582) (944) Increase in operating trade and other payables 1, Cash generated from operations 6,304 6,450 Interest received Currency swap interest paid (466) (263) Bank loan interest paid and costs (5,396) (5,289) Taxation - - Cash flows from operating activities Investing activities Capital expenditure (527) (854) Tenant incentive contribution - (1,188) Cash flows from investing activities (527) (2,042) Financing activities Currency swap collateral (paid)/received (1,146) 1,745 Repayment of borrowings (138) (203) Dividends paid (706) (2,823) Cash flows from financing activities (1,990) (1,281) Decrease in cash and cash equivalents (2,056) (2,367) Cash and cash equivalents at beginning of period 8,400 12,773 Exchange translation movement 110 (264) Cash and cash equivalents at end of period 6,454 10,142 The accompanying notes below are an integral part of this statement. 11

14 Condensed consolidated statement of changes in equity For the six months ended 30 June 2013 (unaudited) Share capital Special reserve Translation reserve Capital reserve Revenue reserve Total reserves At 1 January ,131 22,048 (116,445) 1,842 20,576 Total comprehensive income/(expense) for the period (2,922) 250 (2,523) Dividends (706) (706) At - 113,131 22,197 (119,367) 1,386 17,347 For the six months ended 30 June 2012 (unaudited) Share capital Special reserve Translation reserve Capital reserve Revenue reserve Total reserves At 1 January ,131 22,337 (116,844) 3,173 21,797 Total comprehensive income/(expense) for the period - - (462) 4,330 1,276 5,144 Dividends (2,823) (2,823) At 30 June ,131 21,875 (112,514) 1,626 24,118 The accompanying notes below are an integral part of this statement. 12

15 Notes to the financial statements 1. General information The Company is a limited liability, closed-ended investment company incorporated in Guernsey, which has been declared under the relevant legislation to be an Authorised Closed-Ended Collective Investment Scheme. The Group comprises the Company and its subsidiaries. The Group invests in commercial property in France and Spain with inflation-indexed rents that will provide an income return to investors as well as potential for capital growth. These financial statements are presented in pounds Sterling as this is the currency in which the funds are raised and in which the investors are seeking a return. The Company s functional currency is Sterling and the subsidiaries currency is Euros. The presentational currency of the Group is Sterling. The period-end exchange rate used is 1: (December 2012: 1: 1.222) and the average rate for the period used is 1: (June 2012: 1: 1.215). 2. Significant accounting policies The unaudited condensed financial information included in the half year report for the six months ended, have been prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom s Financial Services Authority and International Accounting Standard (IAS) 34, Interim Financial Reporting as adopted by the European Union. The half year report should be read in conjunction with the Group s annual report and financial statements for the year ended 31 December 2012, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The condensed consolidated financial statements should be read in conjunction with the Group s annual financial statements for the year ended 31 December 2012, which are available on the Company s website ( The accounting policies adopted and methods of computation followed in these condensed financial statements are consistent with those applied in the preparation of the Group s annual consolidated financial statements for the year ended 31 December 2012, except for the adoption of new standards effective 1 January 2013 as described below. IAS 1 Presentation of items of other comprehensive income Amendments to IAS 1. The amendments to IAS 1 introduce a grouping of items presented in other comprehensive income. Items that could be reclassified to profit or loss at a future point in time, such as exchange differences on translation of foreign operations, now have to be presented separately from items that will never be reclassified. The amendments affect presentation only and have no impact on the Group s financial position or performance. IFRS 13 fair value measurement IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The application of IFRS 13 has not materially impacted the fair value measurements carried out by the Group. IFRS 13 also requires specific disclosure in fair value, some of which replace existing disclosure requirements in other standards, including IFRS 7 Financial Instruments: Disclosures. Some of these disclosures are specifically required for financial instruments by IAS A(j), thereby affecting the interim condensed consolidated financial statements period. The Group provides these disclosures in note 15. The directors considered all other relevant new standards, amendments and interpretations to existing standards effective for the half year report for the six months ended and determined that they have no impact in the annual consolidated financial statements of the Group or the interim condensed financial statements of the Group. The interim condensed financial statements are made up from 1 January 2013 to, and have been prepared under the historical cost convention as modified by the revaluation of investment properties and the mark to market of derivative instruments. The preparation of the interim condensed financial statements requires Directors to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the date of the condensed interim financial statements. If in the future such estimates and assumptions, which are based on the Directors best judgement at the date of the interim condensed financial statements, deviate from actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change. Going concern The currency hedge contracts, used to hedge the Groups planned net invested equity, terminate on 16 October At current exchange rates this represents a significant short-term liability. The Group has used currency derivatives to hedge its planned net invested equity. A total of million was hedged under derivatives entered into in 2006 and 2007 and priced at market rates at that time. The fair value of the currency hedges as at 30 June 2013 is a liability of 30.8 million ( 36.0 million). The bank held 9.0 million ( 10.5 million) at the period end, recognised within other debtors in the consolidated balance sheet, as collateral against the hedges liability under existing arrangements. The Group is currently in discussions with its bank in relation to a solution for settling the currency hedges in October 2013 and will report upon the outcome of those discussions once concluded. As part of this process the Group is considering selective asset sales (including the potential sale of its un-mortgaged Nîmes property) and utilising existing cash resources. 13

16 Given the circumstance outlined above material uncertainty exists that could cast significant doubt about the Company's ability to continue as a going concern. However, whilst recognising these uncertainties, the Board has reasonable expectation that a combination of realising equity in selective asset sales, combined with the potential availability of alternative financing options, will support the settlement of the current hedge as it matures in October. Therefore, the Board believes it is appropriate to continue to prepare the Group and Company financial statements on a going concern basis. 3. Revenue 1 January 2013 to 1 January 2012 to 30 June 2012 Rental income 9,048 9,747 Service charge income 2,048 1,755 Total 11,096 11, Finance income 1 January 2013 to 1 January 2012 to 30 June 2012 Bank interest income Foreign exchange gain 1,622 - Net gains on financial liabilities at fair value through profit or loss (note 6) 4,623 7,071 Total 6,270 7, Finance costs 1 January 2013 to 1 January 2012 to 30 June 2012 Interest on bank borrowings 5,439 5,302 Loan fee amortisation Foreign exchange loss - 1,390 Net losses on financial liabilities at fair value through profit or loss (note 6) 7, Other charges Total 13,200 7,260 14

17 6. Net gains and losses on financial assets and liabilities at fair value through profit or loss Net change in unrealised gains and losses on financial assets and liabilities held at fair value through profit or loss 1 January 2013 to 1 January 2012 to 30 June 2012 Currency swaps (6,987) 5,569 Interest rate swap 4,623 1,502 Net realised gains and losses on financial assets and liabilities held at fair value through profit or loss Currency swaps interest received 4,315 4,302 Currency swaps interest paid (4,780) (4,565) Net expense from currency swaps (465) (263) Net (loss)/gain on financial assets and liabilities held at fair value through profit or loss (2,829) 6,808 Disclosed as: Finance costs (note 5) (7,452) (263) Finance income (note 4) 4,623 7,071 Net (loss)/gain on financial assets and liabilities held at fair value through profit or loss (2,829) 6, Taxation The Company is exempt from Guernsey taxation on income derived outside Guernsey and bank interest earned in Guernsey. A fixed annual fee of 600 is payable to the States of Guernsey in respect of this exemption. No charge to Guernsey taxation arises on capital gains. Deferred taxation has been calculated in accordance with IFRS. The Group is currently liable to French income tax at 33.33% and Spanish income tax at 30% arising on the activities of the Group s operations in France and Spain. 8. Dividends Dividend reference period Shares Dividend Paid Date 000 per share Quarter ending 30 September ,627, p 705,762 7 January 2013 The Trust did not pay a dividend for the quarters ended 31 December 2012 and 31 March 2013 and does not currently propose to pay dividends. 15

18 9. Earnings per share The calculation of the basic and diluted earnings per share is based on the following data: Earnings after tax per income statement () 1 January 2013 to 1 January 2012 to 31 December January 2012 to 30 June 2012 (2,672) 2,597 5,606 Basic and diluted earnings per share (2.3)p 2.2p 4.8p Earnings after tax per income statement () (2,672) 2,597 5,606 Revaluation losses in investment properties 1,025 1, Mark to market of currency swaps 6,987 (5,524) (5,569) Mark to market of interest rate swaps (4,623) (2,622) (1,502) Investment Manager s fee (capital) Deferred taxation 730 4, Foreign exchange (gains)/losses (1,622) 862 1,390 Adjusted earnings () 250 2,198 1,276 Adjusted earnings per share 0.2p 1.9p 1.1p Weighted average number of ordinary shares (000 s) 117, , ,627 The adjusted earnings are presented to provide what the Company believes is a more appropriate assessment of the operational income accruing to the Group s activities. Hence, the Company adjusts basic earnings for income and costs which are not of a recurrent nature or which may be more of a capital nature. 10. Net asset value per share 31 December 2012 Net asset value () 17,347 20,576 Net asset value per share 14.7p 17.5p Net asset value () 17,347 20,576 Mark to market of currency hedge* Mark to market of interest rate swaps 12,789 16,683 Deferred taxation** 2,832 2,357 Adjusted net asset value 33,509 39,939 Net asset value per share (adjusted) 28.5p 34.0p Number of ordinary shares (000 s) 117, ,627 * The mark to market of the currency hedge necessarily includes both a movement in relation to currency fluctuation and a movement due to relative future interest rates. For the purpose of providing an adjusted net asset value the element of valuation in relation to the interest rates is included as an adjustment; the intention is to hold the instruments to maturity at which point this element will have unwound. **The net asset value and net asset value per ordinary share have been adjusted by 50% of the deferred tax provision. A property exit could potentially include the sale of an SPV with latent deferred tax for which a potential purchaser would expect some form of discount from the purchase price of the property. The adjusted net assets are presented to provide what the Company believes is a more relevant assessment of the Group s net asset position. The Company has determined that certain fair value and accounting requirements, as adjusted in the above table, may not be realisable in the longer term. 16

19 11. Investment properties 31 December 2012 Fair value of investment properties at 1 January 249, ,853 Subsequent capital expenditure after acquisition 527 1,277 Rent incentive movement Fair value adjustment in the period/year (1,025) (1,366) Effect of foreign exchange 11,289 (6,045) Fair value of investment properties at 30 June/31 December 259, ,043 The fair value of the Group s investment properties at 31 December 2012 and have been arrived at on the basis of valuations carried out at that date by Knight Frank LLP, independent valuers not connected to the Group. The portfolio has been valued on a fair value basis as defined by the Royal Institution of Chartered Surveyors Approval and Valuations Standards ( RICS ). The approved RICS definition of fair value is the the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. At, the Group had un-provided contractual obligations for future repairs and maintenance of nil (December 2012: nil) and 0.6 million (December 2012: 0.8 million) of future capital requirements. 12. Trade and other receivables 31 December 2012 Trade receivables 2,373 1,118 Amounts receivable from Property Managing Agents 1,921 1,884 Bank interest receivable 1 - Prepayments 1, Other debtors 9,500 8,093 Total 14,860 11,832 The Directors consider that the carrying amount of trade and other receivables approximates to their fair value. Included in other debtors is collateral of 9.0 million ( 10.5 million) (December 2012: 7.5 million ( 9.2 million)) held with Barclays Bank PLC in relation to the currency swap (note 15). 13. Trade and other payables 31 December 2012 Trade creditors 1, Deferred income 1, Investment Manager s fee payable VAT payable Accruals Total 4,234 2,350 Trade creditors and accruals primarily comprise amounts outstanding for trade purchases and ongoing costs. The Group has financial risk management policies in place to ensure that all payables are paid within the credit time frame. The Directors consider that the carrying amount of trade and other payables approximates to their fair value. 17

20 14. Bank borrowings 31 December 2012 Current liabilities: interest payable and bank borrowing 1,541 1,459 Non-current liabilities: bank borrowing 206, ,393 Total liabilities 208, ,852 The borrowings are repayable as follows: Interest payable 1,541 1,417 On demand or within one year - 42 In the second to fifth years inclusive 206, ,393 After five years , ,852 Movement in the Group's bank borrowings is analysed as follows: 1 January 2013 to 1 January 2012 to 31 December 2012 Opening balance 197, ,818 Amortisation of finance costs Repayment of loan (138) (156) Exchange differences on translation of foreign currencies 8,962 (4,796) Total 206, , Financial assets and financial liabilities at fair value through profit or loss Current liabilities 31 December 2012 Currency swap - a (24,081) (18,500) Currency swap - b (6,715) (5,309) Non-current liabilities Interest rate swaps (12,789) (16,683) Total (43,585) (40,492) Interest rate swap The Company is required under the financing agreements with Barclays Bank PLC to fix the rate at which it borrows over the duration of each loan. The Company has agreed a fixed interest rate with Barclays Bank PLC at each loan draw-down. The bank has undertaken a variable to fixed rate swap with a third party. The Company is not party to the swap agreement but via the financing agreement the Company has all the risks and rewards of the swap as, should the loan be repaid early, the Company would be required to pay the swap break costs or, alternatively accrue a swap benefit as a repayment reduction depending on the value of the underlying swap at that point in time. The fair value of the interest rate swaps is determined by reference to an applicable valuation model. Currency swap The Group uses currency derivatives to hedge significant future foreign currency transactions and cash flows to safeguard the equity investments of shareholders against significant adverse movements between Sterling and Euros. a) On 13 October 2006, Alpha Pyrenees Trust Finance Company Limited ( Alpha Finance ), a wholly owned subsidiary of the Company, entered into a currency swap with Barclays Bank PLC. Under the terms of this agreement, Alpha Finance will pay Barclays Bank PLC million and Barclays Bank PLC will pay Alpha Finance 87.6 million on 16 October ln addition, there are quarterly periodic payments in February, May, August and October of each year starting on 16 February 2007 and ending 16 October On these dates Barclays Bank PLC will pay Alpha Finance an amount equal to 7 per cent per annum on 87.6 million and Alpha Finance will pay Barclays Bank PLC an amount equal to 6 per cent per annum on million. 18