Annual report and financial statements

Annual report and financial statements For the year ended 31 December

Contents 1 About the Trust 2 Chairman s statement 3 Property review 5 Directors 6 Directors and corporate governance report 11 Independent auditors report 12 Consolidated statement of comprehensive income 13 Consolidated balance sheet 14 Consolidated cash flow statement 15 Consolidated statement of changes in equity 16 Company statement of comprehensive income 17 Company balance sheet 18 Company cash flow statement 19 Company statement of changes in equity 20 Notes to the financial statements 39 Directors and Trust information 40 Shareholder information

Alpha Pyrenees Trust Limited : Annual report 1 About the Trust Alpha Pyrenees Trust Limited ( the Trust or the Company ) primarily invested 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 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 www.alphapyreneestrust.com

2 Alpha Pyrenees Trust Limited : Annual report Chairman s statement The Investment Manager has been focused on achieving an orderly realisation of the Trust s investment property in a consensual manner in accordance with a formal agreement with Barclays Bank PLC ( Barclays ) and on achieving asset sales to support the settlement of the bank borrowings which now mature on 15 April 2016. The Board notes the progress achieved on this front with the sale of eight properties and a sale of part of a property during the year at prices totalling 123.3 million ( 167.3 million) with the net proceeds from these sales enabling the repayment of bank borrowings totalling 109.0 million ( 150.1 million) as at 31 December. Post balance sheet, the sale of a further three properties in France has been completed at prices totalling 18.4 million ( 24.3 million) and a further repayment of 17.6 million ( 23.3 million) of bank borrowings was made in February 2016. The Investment Manager is now focused on the sale of the Trust s remaining six properties, three of which are located in France and three in Spain. To further this process the Investment Manager continues to focus on 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. Going concern Given the current economic environment and the maturation of the s bank borrowings on 15 April 2016 the Board will continue to seek the support of its lender in an orderly realisation of its remaining six investment properties with a view to winding up the in due course. The accounts are therefore not prepared on a going concern basis. Results and dividend Results for the period show a consolidated loss for the year of 41.3 million (loss of 35.1 pence per share). Earnings have been impacted by a combination of losses on the disposal of investment properties, losses on the revaluation of investment properties, tenants breaks and finance charges. The Trust does not pay dividends. Revaluation and Net Asset Value Finance Commentary The Trust s loan facilities with Barclays have been extended to 15 April 2016. The current interest rates will continue to apply to the facilities during the extension period. Arrangement fees (charged at 2% per annum pro-rated), on the initial and new extensions, will be deferred to the new maturity date and will be payable to the extent that the Trust has sufficient cash funds at that time. As at 31 December, the Trust had total borrowings of 90.4 million ( 122.7 million) under its facilities with Barclays. As at 31 December, the Trust holds cash of 11.4 million, the majority of which is deposited in trapped bank accounts. The facility that was used to finance the settlement of the net currency hedge liability is provided in the form of a Euro denominated loan, including rolled up interest, of 26.2 million; interest is charged quarterly at a margin of 10% above three month Euribor and will be rolled up throughout the term. The Trust is permitted to repay the loan at any time after repayment of the senior secured borrowings ( 96.5 million). There is a cashpooling arrangement over the Trust s cash flows from the whole property portfolio to provide further security to the loan but still providing the Trust with working capital for its operations. The Trust has the support of its lender for an orderly realisation of its remaining property assets and is working under a formal agreement with Barclays to achieve this realisation in a consensual manner. Formal marketing of the Trust s remaining properties has commenced and the Trust will provide further updates on progress in due course. As previously stated, the Board does not expect that there will be any value to return to ordinary shareholders after repayment of the Trust s bank borrowings has taken place to the extent possible. Dick Kingston Chairman 10 March 2016 Investment properties held for sale are included in the consolidated balance sheet at a valuation of 39.3 million ( 53.3 million). The properties at Saint Cyr L Ecole, Champs sur Marne and Ivry-sur- Seine in France and Alcalá de Guadaíra, Écija and Zaragoza in Spain are included at the independent valuation for each property and the properties that were sold post balance sheet, namely, Athis Mons, Aubergenville and Aubervilliers are included at the contracted sale prices as at the balance sheet date. As at 31 December, the net asset value per ordinary share is negative 30.9p primarily reflecting the loss in the year incurred on the sale of a significant portion of the s investment property portfolio.

Alpha Pyrenees Trust Limited : Annual report 3 Property review Portfolio overview Following the sales of eight properties and a sale of part of a property in France and Spain in, as at 31 December the Trust owned six properties in France and three properties in Spain totalling approximately 93,410 square metres (approximately 1.0 million square feet). Following the subsequent sale of three French assets post balance sheet, the Trust owns a residual portfolio of three properties in France and three properties in Spain totalling approximately 33,680 square metres (approximately 362,500 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 nine property portfolio as at 31 December was approximately 39.3 million ( 53.3 million) and the value of the residual six property portfolio at the same date is 21.4 million ( 29.0 million). Property Sales In addition to the sales of the Burger King unit at Ecija ( 187,500) and the Connecta Retail Park at Córdoba ( 15.3 million) reported in the half year report the Trust has successfully completed the following sales: On 8 December the Trust sold a portfolio of properties in France totalling approximately 127,850 square metres for 142.7 million. The properties included in the portfolio were the Trust s largest property, the Villarceaux-Nozay Business Park let to Alcatel-Lucent, and the Trust s properties at Evreux, Goussainville, Roissy-en-France and Nîmes. On 15 December the Trust sold its properties located at Fresnes and Mulhouse in France totalling approximately 11,790 square metres for 9.1 million. Post balance sheet, on 3 February 2016 the Trust sold its properties located at Athis Mons, Aubergenville and Aubervilliers in France totalling approximately 59,730 square metres for 24.3 million. These sales form part of the orderly realisation process supported by the Trust s lender, Barclays Bank PLC ( Barclays ), and the net proceeds from these sales have been used to reduce the Trust s bank borrowings. The remaining properties held by the Trust are being actively marketed and the Trust will provide further updates in due course. Market overview France The French economy grew by 1.1% over compared to 0.2% in. In December, manufacturing output was 1.7% higher year-on-year however the unemployment rate for mainland France in the third quarter of rose slightly to stand at 10.2%. Household spending showed signs of decreasing towards the end of the year but for the year as a whole increased by 1.8% compared to a decrease of 0.2% in. Inflation remains subdued with the growth rate of the Consumer Prices Index standing at 0.2% per annum at the end of December. The property investment market saw approximately 23.4 billion invested in commercial real estate in France in. This volume was boosted by a number of larger transactions including several pan-european portfolios and transactions greater than 100 million represented 64% of the total volume. Traditional French investors represented approximately 60% by volume of the market, with the next largest group being North American investors (18%) followed by British investors (6%). Office investment remained the highest volume sector and accounted for 17.0 billion representing 72% of the total investment in France. Logistics and industrial investment grew to 2.1 billion and retail investment reduced to 4.3 billion. Take-up in the Ile-de-France office market improved in the fourth quarter of and led to a slight improvement in overall take-up in to 2.2 million square metres (+1.0% on ). The average office rent in Ile-de-France has remained broadly stable at 296 per square metre per annum and the office vacancy rate for the Paris region decreased slightly to 6.9%. Although saw an increase in the number of speculative development or redevelopment schemes (28 compared to 14 in ), future new and redeveloped availability appears to be under control as more than half of developments currently underway in the region have already been pre-let. Spain There have been ten consecutive quarters of growth in the Spanish economy and this has resulted in an increase in Gross Domestic Product of 3.5% for. The increase in economic activity combined with reforms to the labour market have resulted in a further decrease in the unemployment rate which stood at 20.9% at the end of the fourth quarter of. The near term outlook for the Spanish economy shows continuing signs of improvement.

4 Alpha Pyrenees Trust Limited : Annual report Property review (continued) Rental indexation On an annual basis, the INSEE Construction Cost Index, applicable to the Trust s leases in France, remained negative for the third quarter and stood at -1.17% for Q3, the latest published annual indexation base. The Spanish Consumer Price Index, applicable to the Trust s leases in Spain, was running at an annualised rate of 0.0% at the end of December having been -1.4% as at the end of January. Sources INSEE/Instituto Nacional de Estadística/CBRE Paul Cable For and on behalf of the Investment Manager 10 March 2016

Alpha Pyrenees Trust Limited : Annual report 5 Directors Dick Kingston Chairman Aged 68 David Jeffreys Director Aged 56 Dick Kingston qualified as a Chartered Accountant and was, until December 2006, an executive director of Slough Estates Plc (now SEGRO Plc) ( Slough ), one of the largest London Stock Exchange listed property companies. He was chairman of their continental European real estate activities for his last three years at Slough and Finance Director there for nine years up to December 2005. Previously he was Financial Controller at Slough for nine years and prior to that was responsible for group financial control at Hawker Siddeley. He was non-executive chairman of listed company Sirius Real Estate Limited and was a non-executive director of Mersey Docks and Harbour Company. David Rowlinson Director Aged 53 David has 30 years experience in the financial services industry. The majority of David s experience has been gained from working in the fiduciary sector in Guernsey. However, he has also worked in Gibraltar and Switzerland and served in a key role working for an investment management company in Guernsey. After playing a major part in establishing a large trust company in Guernsey in 1997 which he left in June 2006, David established Liberation Management Limited ( LML ) in 2007. David is the Managing Director of LML. David has been a full member of the Society of Trust and Estate Practitioners since 1994. Phillip Rose Director Aged 56 Phillip Rose is a Fellow of the Securities Institute and holds a Master of Law degree. He has over 30 years experience in the real estate, funds management and banking industries in Europe, the USA and Australasia. He has been the Head of Real Estate for ABN AMRO Bank, Chief Operating Officer of European shopping centre investor and developer TrizecHahn Europe, Managing Director of retail and commercial property developer and investor Lend Lease Global Investment and Executive Manager of listed fund General Property Trust. David Jeffreys qualified as a Chartered Accountant with Deloitte Haskins and Sells in 1985. 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 Company, David is a director of the following listed companies: Alpha Real Trust Limited, PFB Data Centre Fund Limited and Tetragon Financial Limited. Serena Tremlett Director Aged 51 Serena has over 25 years experience in financial services, specialising in closed-ended property and private equity funds and fund administration over the last 17 years. She is a non-executive director on the listed company boards of Alpha Pyrenees Trust, Alpha Real Trust and those of Stenham Property, 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. Phillip is currently CEO of Alpha Real Capital LLP.

6 Alpha Pyrenees Trust Limited : Annual report Directors and corporate governance report The Directors present their report and financial statements of the Company and the for the year ended 31 December. Principal activities and status Since its incorporation on 16 November 2005, the Company, 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. 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 2005. 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 12. No dividend was paid during the year under review and the Trust does not pay dividends. Corporate governance The Company 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 Company 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 Company, the nature of its business and its entirely non-executive board. The Board Biographies of the Directors are set out on page 5. The Directors interests in shares of the Company 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 710,616 710,616 David Jeffreys 250,000 250,000 Phillip Rose 1,290,079 1,290,079 David Rowlinson - - Serena Tremlett 121,472 121,472 Non-executive Directors are not appointed for specified terms. However, appointments of Board members can be terminated at any time without penalty and the Company 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 Company will take place on 29 April 2016. At this meeting, Phillip Rose and David Rowlinson will retire and submit themselves for re-election. The remainder of the Board recommend their re-appointment. Phillip Rose is a member of the Investment Manager and, under the terms of the Company s Prospectus dated 23 November 2005, submits himself for annual re-election. Individual Directors may seek independent legal advice in relation to their duties on behalf of the Company. 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 Company, including the following: 1) Setting, and continuing to review, the objectives and strategy of the Company, taking into account market conditions. 2) Reviewing the capital structure of the Company 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 Company s performance including net asset value, earnings per share and payment of dividends. 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 acquisitions and disposals, significant capital expenditure and leasing matters and decisions relating to the Company 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 independent agents is regularly monitored by the Board.

Alpha Pyrenees Trust Limited : Annual report 7 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 Company 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. 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 19 30 David Jeffreys 29 30 Phillip Rose 11 30 David Rowlinson 21 30 Serena Tremlett 29 30 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 has established three standing committees, all of which operate under detailed terms of reference, copies of which are available on request from the Company Secretary. Audit Committee The Audit Committee consists of David Jeffreys (Chairman), Dick Kingston, David Rowlinson and Serena Tremlett. The Board is satisfied that David Jeffreys continues to have the requisite recent and relevant financial experience to fulfil his role as Chairman of the Audit Committee. Role of the Committee The role of the Audit Committee, which meets at least twice a year, includes: The engagement, review of the work carried out by and the performance of the Company 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 Company 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 Company 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 Company before submission to the Board. The Audit Committee makes recommendations to the Board which are within its terms of reference and considers any other matters as the Board may from time to time refer to it. Committee meeting attendance Director No of meetings attended No of meetings eligible to attend David Jeffreys 4 4 Dick Kingston 4 4 David Rowlinson 3 4 Serena Tremlett 4 4

8 Alpha Pyrenees Trust Limited : Annual report Directors and corporate governance report (continued) Policy for non audit services The Committee 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, although the Audit Committee considers this annually, reporting its findings to the Board. Nomination Committee The Nomination Committee consists of Serena Tremlett (Chairman), David Jeffreys, Dick Kingston, Phillip Rose and David Rowlinson. The Committee s principal task is 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 arise and it meets at least annually. Committee meeting attendance Director No of meetings attended No of meetings eligible to attend Serena Tremlett 1 1 David Jeffreys 1 1 Dick Kingston 1 1 Phillip Rose 1 1 David Rowlinson 1 1 Remuneration Committee and attendance The Remuneration Committee consists of the independent non-executive Directors being David Jeffreys (Chairman), Dick Kingston, David Rowlinson and Serena Tremlett. The Board has approved formal terms of reference for the Committee and a copy of these is available on request from the Company Secretary. As the Company comprises only non-executive directors, the Committee s main role is to determine their remuneration within the cap set out in the Company s Articles. The Remuneration Committee met once during. Remuneration report The aggregate fees payable to the Directors are limited to 200,000 per annum under the Company s Articles and the annual fees payable to each Director have not changed since the Company s shares were listed in 2005. The fees payable to the Directors are expected to reflect their expertise, responsibilities and time spent on the business of the Company, taking into account market equivalents, the activities and the size of the Company 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 Company: Year ending 31 December Year ending 31 December Dick Kingston 30,000 30,000 David Jeffreys 23,000 23,000 Phillip Rose 20,000 20,000 David Rowlinson 20,000 20,000 Serena Tremlett 20,000 20,000 Total 113,000 113,000 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 Company to meet its financial and other objectives. As the Company 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 Company maintains a risk management framework which considers the non-financial as well as financial risks and this is reviewed by the Audit Committee prior to submission to the Board.

Alpha Pyrenees Trust Limited : Annual report 9 Directors and corporate governance report (continued) Investment management agreement The Company 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 Company as at 19 February 2016 were as follows: Name of investor No. of ordinary shares % held Antler Investment Holdings Limited 21,437,393 18.22 Alpha Real Capital LLP 9,390,800 7.98 Mr Richard M. Peskin 6,000,000 5.10 Mrs Rosemary J. Skelley 5,857,607 4.98 Hargreaves Lansdown Asset Management 5,804,501 4.93 Barclays Wealth Management (UK) 5,175,861 4.40 TD Waterhouse Clients 5,149,369 4.38 Mr J. A. M. Hemming 4,465,000 3.80 Interactive Investor 4,425,767 3.76 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 Company law requires the Directors to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the Company and of the at the end of the year and of the profit or loss of the Company 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; (4) prepare the financial statements on the going concern basis unless it is appropriate to assume that the Company and will not continue in business. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and of the and to enable them to ensure that the financial statements comply with the Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the assets of the Company 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 Company 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 Company s auditor is aware of that information. Going concern During the year, the Board has made progress in the planned orderly realisation of its investment property and consequent repayment of the bank borrowings. Eight properties and a part of a property were sold during the year achieving sale proceeds amounting to 123.3 million ( 167.3 million) which enabled a bank borrowings repayment of 109.0 million ( 150.1 million). Three more properties were sold after the year end for 18.4 million ( 24.3 million). Given the current economic environment and the maturity of the s bank borrowings on 15 April 2016 the Board will continue to seek the support of its lender in an orderly realisation of its remaining six investment properties with a view to winding up the 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 29 April 2016 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. Auditor BDO Limited has expressed its willingness to continue in office as auditor of the Company. By order of the Board, (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; David Jeffreys Director Serena Tremlett Director

10 Alpha Pyrenees Trust Limited : Annual report Directors statement pursuant to the Disclosure and Transparency Rules Each of the Directors, whose names and functions are listed in the Directors Report confirm that, to the best of each person s knowledge and belief: the financial statements, prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the and Company, and the Chairman s Statement and the Property Review includes a fair review of the development and performance of the business and the position of the Company and and notes 21 and 22 to the financial statements provide a description of the principal risks and uncertainties that they face. By order of the Board, Corporate responsibility benefits, risks and controls The Board has reviewed the Company s Corporate Responsibility Policy and considers this to be appropriate for the Company. The Company s policy is as follows: Alpha Pyrenees Trust Limited is committed to delivering sustainable investment returns in a way that delivers positive environmental, social and economic benefits. The Company 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 Company believes that, through the implementation of socially responsible policies, the Company 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. David Jeffreys Director Serena Tremlett Director The Company s standard business process ensures that appropriate environmental reports are obtained as part of the due diligence process for property acquisitions and the Company assesses the accessibility of each property acquisition to public transportation. The Company s managers and appointed agents are required to comply with all relevant laws and regulations affecting the Company 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.

Alpha Pyrenees Trust Limited : Annual report 11 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 company statements of financial position, the consolidated and company statements of comprehensive income, the consolidated and company statements of cash flows, the consolidated and company statements of changes in equity and the related notes 1 to 22. 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, 2008. 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 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 s and of the parent company s affairs as at 31 December and of the 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, 2008. Emphasis of matter Going concern and bank facilities 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 and 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 10 March 2016

12 Alpha Pyrenees Trust Limited : Annual report 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 15,142-15,142 19,398-19,398 Property operating expenses 3 (5,717) - (5,717) (6,148) - (6,148) Net rental income 9,425-9,425 13,250-13,250 Loss on disposal of investment properties 11, 12 - (28,863) (28,863) - (1,400) (1,400) Expenses Losses on revaluation of investment properties 11, 12 - (13,459) (13,459) - (12,416) (12,416) Investment Manager s fee (1,380) (592) (1,972) (1,646) (706) (2,352) Other administration costs 5 (1,203) - (1,203) (1,395) - (1,395) Operating profit/(loss) 6,842 (42,914) (36,072) 10,209 (14,522) (4,313) Finance income 4 1 880 881 4 7,550 7,554 Finance costs 6 (11,832) (51) (11,883) (14,051) (206) (14,257) Loss before taxation (4,989) (42,085) (47,074) (3,838) (7,178) (11,016) Taxation 7-5,783 5,783 - (547) (547) Loss for the year (4,989) (36,302) (41,291) (3,838) (7,725) (11,563) Other comprehensive income/(expense) Items that may be reclassified to profit or loss in subsequent periods: Foreign exchange gains/(losses) on translation of foreign operations (translation reserve) Reclassification of foreign exchange gains/(losses) on translation of foreign operations following disposals - 4,697 4,697 - (456) (456) - (2,735) (2,735) - - - Other comprehensive income/(expense) for the year - 1,962 1,962 - (456) (456) Total comprehensive expense for the year (4,989) (34,340) (39,329) (3,838) (8,181) (12,019) Loss per share - basic & diluted 9 (35.1)p (9.8)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 20 to 38 are an integral part of the financial statements.

Alpha Pyrenees Trust Limited : Annual report 13 Consolidated balance sheet As at 31 December Notes Non-current assets Investment properties 11-89,543-89,543 Current assets Investment properties held for sale 12 39,283 122,637 Trade and other receivables 13 6,940 6,100 Cash and cash equivalents 14 11,363 12,425 57,586 141,162 Total assets 57,586 230,705 Current liabilities Trade and other payables 15 (1,955) (6,032) Financial liabilities at fair value through profit or loss 22 - (948) Bank borrowings 16 (91,311) (212,858) Rent deposits (263) (730) (93,529) (220,568) Total assets less current liabilities (35,943) 10,137 Non-current liabilities Rent deposits (431) (952) Deferred taxation 7 - (6,230) (431) (7,182) Total liabilities (93,960) (227,750) Net (liabilities)/assets (36,374) 2,955 Equity Share capital 17 - - Special reserve 18 113,131 113,131 Translation reserve 18 24,234 22,272 Capital reserve 18 (166,173) (129,871) Revenue reserve 18 (7,566) (2,577) Total equity (36,374) 2,955 Net asset value per share (30.9)p 2.5p The financial statements were approved by the Board of Directors and authorised for issue on 10 March 2016. They were signed on its behalf by: David Jeffreys Director Serena Tremlett Director The accompanying notes on pages 20 to 38 are an integral part of the financial statements.

14 Alpha Pyrenees Trust Limited : Annual report Consolidated cash flow statement Notes For the year ended 31 December For the year ended 31 December Operating activities Loss for the year (41,291) (11,563) Adjustments for : Loss on disposal of investment properties 28,863 1,400 Losses on revaluation of investment properties 13,459 12,416 Deferred taxation (5,783) 547 Finance income (881) (7,554) Finance costs 11,883 14,257 Operating cash flows before movements in working capital 6,250 9,503 Movements in working capital: Decrease/(increase) in operating trade and other receivables 3,539 (2,571) (Decrease)/increase in operating trade and other payables (4,550) 3,158 Cash generated from operations 5,239 10,090 Interest received 1 4 Cash flows from operating activities 5,240 10,094 Investing activities Proceeds from disposal of investment properties 114,087 11,560 Capital expenditure (228) (244) Transfer to cash pooling account 14 (2,700) (7,766) Tenant contribution - (3,719) Cash flows from/(used in) investing activities 111,159 (169) Financing activities Repayment of borrowings (108,980) - Bank loan interest paid and costs (10,419) (10,607) Cash flows used in financing activities (119,399) (10,607) Net decrease in cash and cash equivalents (3,000) (682) Cash and cash equivalents at beginning of year 4,659 5,923 Exchange translation movement (350) (582) Cash and cash equivalents at end of year (note 14) 1,309 4,659 The accompanying notes on pages 20 to 38 are an integral part of the financial statements.

Alpha Pyrenees Trust Limited : Annual report 15 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 22,728 (122,146) 1,261 14,974 Total comprehensive income/(expense) for the year Loss for the year - - - (7,725) (3,838) (11,563) Other comprehensive expense - - (456) - - (456) Total comprehensive expense for the year - - (456) (7,725) (3,838) (12,019) At 31 December - 113,131 22,272 (129,871) (2,577) 2,955 Note 17, 18 For the year ended 31 December Share capital Special reserve Translation reserve Capital reserve Revenue reserve At 1 January - 113,131 22,272 (129,871) (2,577) 2,955 Total equity Total comprehensive income/(expense) for the year Loss for the year - - - (36,302) (4,989) (41,291) Other comprehensive income - - 1,962 - - 1,962 Total comprehensive income/(expense) 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 17, 18 The accompanying notes on pages 20 to 38 are an integral part of the financial statements.

16 Alpha Pyrenees Trust Limited : Annual report Company statement of comprehensive income For the year ended 31 December For the year ended 31 December Revenue Capital Total Revenue Capital Total Notes Income Revenue 3 - - - 7,466-7,466 Total income - - - 7,466-7,466 Expenses Investment Manager s fee (538) (230) (768) (491) (210) (701) Other administration costs 5 (505) - (505) (504) - (504) Total expenses (1,043) (230) (1,273) (995) (210) (1,205) Operating (loss)/profit (1,043) (230) (1,273) 6,471 (210) 6,261 Finance income 4 - - - 3-3 Finance costs 6 (2) (106) (108) (1) (1,084) (1,085) Movement in impairment of amounts receivable from and investments in subsidiary undertakings 21 - (2,209) (2,209) - (17,198) (17,198) (Loss)/profit before taxation (1,045) (2,545) (3,590) 6,473 (18,492) (12,019) Taxation 7 - - - - - - (Loss)/profit for the year (1,045) (2,545) (3,590) 6,473 (18,492) (12,019) Total comprehensive (expense)/income for the year (1,045) (2,545) (3,590) 6,473 (18,492) (12,019) The total column of this statement represents the Company 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 20 to 38 are an integral part of the financial statements.

Alpha Pyrenees Trust Limited : Annual report 17 Company balance sheet As at 31 December Notes Non-current assets Investments in subsidiary undertakings 10-151 Amounts receivable from subsidiary undertakings 10-15 - 166 Current assets Trade and other receivables 13 12 5 Amounts receivable from subsidiary undertakings 10-1,364 Cash and cash equivalents 36 1,801 48 3,170 Total assets 48 3,336 Current liabilities Trade and other payables 15 (683) (381) Total liabilities (683) (381) Net (liabilities)/assets (635) 2,955 Equity Share capital 17 - - Special reserve 18 113,131 113,131 Capital reserve 18 (139,319) (136,774) Revenue reserve 18 25,553 26,598 Total equity (635) 2,955 The financial statements were approved by the Board of Directors and authorised for issue on 10 March 2016. They were signed on its behalf by: David Jeffreys Director Serena Tremlett Director The accompanying notes on pages 20 to 38 are an integral part of the financial statements.

18 Alpha Pyrenees Trust Limited : Annual report Company cash flow statement For the year ended 31 December For the year ended 31 December Cash flows from operating activities Loss for the year (3,590) (12,019) Adjustments for : Finance costs 108 1,085 Finance income - (3) Interest from subsidiary undertakings - (7,466) Movement in impairment of amounts receivable from subsidiary undertakings 2,209 17,198 Operating cash flows before movements in working capital (1,273) (1,205) (Increase)/decrease in operating trade and other receivables (7) 1 Increase in operating trade and other payables 302 46 Cash flows used in operations (978) (1,158) Interest paid (2) (1) Interest received - 3 Interest received from subsidiaries 22 40 Taxation - - Cash flows used in operating activities (958) (1,116) Investing activities Loans advanced (681) (468) Cash flows used in investing activities (681) (468) Net decrease in cash and cash equivalents (1,639) (1,584) Cash and cash equivalents at beginning of year 1,801 3,565 Exchange translation movement (126) (180) Cash and cash equivalents at end of year 36 1,801 The accompanying notes on pages 20 to 38 are an integral part of the financial statements.

Alpha Pyrenees Trust Limited : Annual report 19 Company 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 (118,282) 20,125 14,974 Total comprehensive income/(expense) for the year (Loss)/profit for the year - - (18,492) 6,473 (12,019) Other comprehensive income/(expense) - - - - - Total comprehensive (expense)/income for the year - - (18,492) 6,473 (12,019) At 31 December - 113,131 (136,774) 26,598 2,955 Note 17, 18 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/(expense) for the year Loss for the year - - (2,545) (1,045) (3,590) Other comprehensive income/(expense) - - - - - Total comprehensive expense for the year - - (2,545) (1,045) (3,590) At 31 December - 113,131 (139,319) 25,553 (635) Note 17, 18 The accompanying notes on pages 20 to 38 are an integral part of the financial statements.