TIDMALPH

RNS Number : 1914H

Alpha Pyrenees Trust Limited

09 March 2018

9 March 2018

ALPHA PYRENEES TRUST LIMITED

("ALPHA PYRENEES TRUST" or the "COMPANY")

ALPHA PYRENEES TRUST POSTS RESULTS FOR THE YEARED 31 DECEMBER 2017

Alpha Pyrenees Trust Limited, the property company invested primarily in commercial real estate in France, today posts its results for the period from 1 January to 31 December 2017.

For further information:

   Serena Tremlett, Chairman, Alpha Pyrenees Trust Limited             01481 231100 
   Paul Cable, Fund Manager, Alpha Real Capital LLP                       020 7391 4700 

For more information on the Company, please visit www.alphapyreneestrust.com.

FORWARD-LOOKING STATEMENTS

This trading update contains 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 update. 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 this trading update should be construed as a profit forecast.

About the Trust

Alpha Pyrenees Trust Limited ("the Trust" or "the Group" or "the Company") primarily invested in properties in France, particularly in the Ile-de-France region around Paris, focusing on commercial property in the office, industrial, logistics and retail sectors let to tenants with strong covenants. The Trust is pursuing an orderly realisation of its investment property and has the support of its lender in this process.

Dividends

The Trust does not pay dividends.

Listing

The Trust is a closed-ended Guernsey registered investment company which has been declared under the relevant legislation to be an Authorised Closed-Ended Collective Investment Scheme. Its shares are listed on the Official List of the UK Listing Authority and traded on the London Stock Exchange.

Management

The Trust's Investment Manager is Alpha Real Capital LLP ("the Investment Manager"). Control of the Trust rests with the non-executive Guernsey-based Board of Directors.

ISA/SIPP status

The Trust's shares are eligible for Individual Savings Accounts (ISAs) and Self Invested Personal Pensions (SIPPs).

Website

www.alphapyreneestrust.com

Chairman's Statement

The Investment Manager has been focused on achieving asset sales to support the settlement of the bank borrowings which mature on 31 October 2018. The Board notes the progress achieved on this front during the year with the sale of a further two properties in France at prices totalling GBP4.9 million (EUR5.5 million) and the remaining two properties in Spain at prices totalling GBP1.0 million (EUR1.2 million) with the net proceeds being used to partially repay bank borrowings. The Investment Manager is focused on selling the Trust's remaining property asset, St Cyr L'Ecole, located in France, in a consensual manner in accordance with a formal agreement with Barclays Bank PLC ("Barclays"). To further this process the Investment Manager continues to undertake active asset management for St. Cyr, with particular emphasis on the letting of vacant space to enhance property income and the marketability of the property (see property review section). The Board is aware of the risks and uncertainties that the Company and Group are facing whilst pursuing this final property sale and provide further detail on these in notes 19 and 20 to the financial statements.

Going concern

During the year, the Board has made further progress in the planned orderly realisation of its investment properties and subsequent partial repayment of the bank borrowings. The maturity date of the remaining bank borrowings is 31 October 2018. The Trust has the support of its lender for the sale of its remaining property with a view to winding up the Trust's group in due course. The accounts are therefore not prepared on a going concern basis.

Results

Results for the year to 31 December 2017 show a consolidated loss of GBP12.4 million (loss of 10.5 pence per share). The loss primarily reflects the losses on disposal of investment properties during the year and the finance costs.

Revaluation and Net Asset Value

The remaining investment property held for sale is included in the consolidated balance sheet at a valuation of GBP5.9 million (EUR6.7 million) as assessed by the independent valuers (note 10). As at 31 December 2017, the net asset value per ordinary share is negative 63.5p (31 December 2016: negative 50.2p): the movement in the year primarily reflecting the loss in the year, losses on revaluation and sale of properties and adverse foreign exchange movement.

Brexit

In June 2016, the "Brexit" Referendum was held, in which the United Kingdom voted to leave the European Union. The Board considers that this event will not have any material adverse impact on the realisation of the Trust's remaining property.

Finance Commentary

Following net repayments in the period of GBP5.8 million (EUR6.6 million), as at 31 December 2017 the Trust had principal borrowings of GBP77.0 million (EUR86.8 million) under its facilities with Barclays.

The current interest rates will continue to apply to the facilities until maturity and the 2% extension fees (per annum pro-rated), charged on the initial and all extensions up to 15 April 2016, are deferred to the maturity date and will be payable to the extent that the Trust has sufficient cash funds at that time (note 14). No additional fee was charged on the latest extension to 31 October 2018.

There is a cash-pooling arrangement in place which provides the Trust with working capital for its operations.

Formal marketing of the Trust's remaining property is ongoing and the results of the marketing process to date indicate that, although there is no certainty that a transaction will take place, if it does, the price achieved is most likely to be lower than the valuation at 31 December 2017. The Trust will provide further updates on progress in due course.

As the Board has previously stated, the sale process will not result in any return to ordinary shareholders after repayment of the Trust's bank borrowings, to the extent that this is possible, has taken place.

Serena Tremlett

Chairman

8 March 2018

Property review

Portfolio overview

The Trust owns one property in France (St Cyr L'Ecole) of approximately 6,340 square metres of commercial real estate. This is a vacant property, which, although well located and offering good value accommodation to occupiers, suffers from weak tenant demand at the present time.

The valuation of St Cyr L'Ecole as at 31 December 2017 was GBP5.9 million (EUR6.7 million).

Property Sales

On 30 March 2017 and 23 May 2017 respectively, the Trust sold its properties located at Champs sur Marne and Ivry-sur-Seine in France totalling approximately 13,350 square metres for a total of GBP4.9 million (EUR5.5 million).

On 12 and 21 December 2017 respectively, the Trust sold its properties located at Alcalá de Guadaíra and Écija in Spain totalling approximately 11,650 square metres for a total of GBP1.0 million (EUR1.2 million).

These sales form part of the orderly realisation process supported by the Trust's lender, Barclays, and the net proceeds from these sales have been used in the reduction of the Trust's bank borrowings.

The remaining property held by the Trust is being actively marketed and the Trust will provide further updates on the result of the marketing process in due course.

Paul Cable

For and on behalf of the Investment Manager

8 March 2018

Directors

David Jeffreys (aged 58)

Director

David Jeffreys qualified as a Chartered Accountant with Deloitte Haskins and Sells in 1985. He works as an independent non-executive 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 two listed entities, Alpha Real Trust Limited and Tetragon Financial Group Limited, and a number of other unlisted entities.

Serena Tremlett (aged 53)

Director

Serena has over 25 years' experience in financial services, specialising in closed-ended property and private equity funds and fund administration over the last 19 years.

She is a non-executive director on the listed company board of Alpha Real Trust Limited in addition to various unlisted property and private funds and general partners. Serena was previously company secretary (and a director) of Assura Group, 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. In 2008, Serena co-founded Morgan Sharpe Administration Limited, a specialist closed-ended fund administrator which was sold to Estera, a leading provider of fiduciary and administration services in April 2017 and is now known as Estera Administration (Guernsey) Limited. Serena remains its managing director.

Directors' and corporate governance report

The Directors present their report and financial statements of the Company and the Group for the year ended 31 December 2017.

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. The Trust is pursuing an orderly realisation of its investment property and has the support of its lender in this process.

Its shares are listed on the Official List of the UK Listing Authority and have been traded on the London Stock Exchange since 29 November 2005.

Business review, results and dividends

The Chairman's statement above contains a review of the Group's business for the year.

The results for the year are set out in the financial statements below.

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 (re-issued in 2016 effective from 1 April 2016 year ends onwards) ('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 current Directors are set out above.

The Directors' interests in shares of the Company as at 31 December 2017 are set out below and there have been no changes in such interests up to the current date:

 
                            Number of          Number of 
                      ordinary shares    ordinary shares 
                                 2017               2016 
------------------  -----------------  ----------------- 
 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 
 

* resigned on 3 June 2016

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 27 April 2018.

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 and earnings per share. 

The Board considers these matters at its quarterly meetings.

The Board meets at least four times per annum and on an ad-hoc basis to consider specific issues reserved for decision by the Board including all potential disposals, significant capital expenditure and leasing matters and decisions relating to the 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 agents is regularly monitored by the Board.

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 Group's portfolio and key asset management initiatives. 

-- Transactional activity undertaken over the previous quarter and being contemplated for the future.

   --      The Group'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 Group'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 is aware of the ongoing requirement to evaluate its performance, composition (and whether it has an appropriate mix of knowledge, skills and experience) and the ongoing relationships between with the Investment Manager and Administrator, together with the information provided to and communication between Board members.

A decision has been taken by the remaining members of the Board that a formal process is not required at this stage of the Company's life, however the Board will continue to self assess on an ongoing basis keeping in mind that evaluation of the Board's performance and relationships is central to good corporate governance.

At the June 2016 Board meeting, the Board considered its composition in terms of size and cost to manage the completion of the sales process described above. As a result of these considerations, David Rowlinson, Phillip Rose and Dick Kingston resigned from the Board, effective 3 June 2016. David Jeffreys and Serena Tremlett, who have been with the Company since inception, continue as Directors and the Board will take responsibility going forward for matters previously dealt with by its sub-committees.

Board meeting attendance

The table below shows the attendance at Board meetings during the year to 31 December 2017:

 
 Director            No. of       No. of 
                     meetings    meetings 
                     attended    eligible 
                                 to attend 
-----------------  ----------  ----------- 
 David Jeffreys        10           10 
-----------------  ----------  ----------- 
 Serena Tremlett       10*          10 
 

* two meetings were attended by Serena Tremlett's alternate Director: Mel Torode.

Directors' and officers' insurance

An appropriate level of Directors' and Officers' insurance is maintained whereby Directors are indemnified against liabilities to third parties to the extent permitted by Guernsey company law.

Board Committees

The Board had established three standing committees, all of which operated under detailed terms of reference, copies of which are available on request from the Company Secretary. Following the decisions taken at the June 2016 Board meeting, the Board Committees were dissolved. Responsibilities of the Board Committees have been taken over by the two remaining non-executive Directors.

Audit Committee

The Audit Committee had consisted of David Jeffreys (Chairman), Dick Kingston, David Rowlinson and Serena Tremlett.

Role of the Committee

The role of the Audit Committee, which met at least twice a year, included:

-- The engagement, review of the work carried out by and the performance of the 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 made recommendations to the Board which were within its terms of reference and considered any other matters as the Board might have referred to it.

Policy for non audit services

The Board has adopted a policy for the provision of non-audit services by its external auditor, BDO Limited and reviews and approves all material non-audit related services in accordance with the need to ensure the independence and objectivity of the external auditor. No services, other than audit-related ones, were carried out by BDO Limited during 2017.

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 Group only has one employee, the Board continues to believe that there is no need for an internal audit function.

Nomination Committee

The Nomination Committee had consisted of Serena Tremlett (Chairman), David Jeffreys, Dick Kingston, Phillip Rose and David Rowlinson.

The Committee's principal task was to review the structure, size and composition of the Board in relation to its size and position in the market and to make recommendations to fill Board vacancies as they arose and it met at least annually.

Remuneration Committee and attendance

The Remuneration Committee had consisted of the independent non-executive Directors being David Jeffreys (Chairman), Dick Kingston, David Rowlinson and Serena Tremlett.

The Board approved formal terms of reference for the Committee and a copy of these is available on request from the Company Secretary.

As the Company comprises only non-executive directors, the Committee's main role was to determine their remuneration within the cap set out in the Company's Articles.

Remuneration report

The fees payable to the Directors were limited to GBP200,000 per annum in aggregate under the Company's Articles and the annual fees payable to each Director had not changed since the Company's shares were listed in 2005 to the June 2016 Board meeting. At that meeting, the Board was reduced to two non-executive Directors with their fees being reduced to GBP40,000 per annum in aggregate. The fees payable to the Directors are expected to reflect their expertise, responsibilities and time spent on the business of the 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 ended     Year ended 
                      31 December    31 December 
                             2017           2016 
                              GBP            GBP 
------------------  -------------  ------------- 
 Dick Kingston*                 -         15,000 
------------------  -------------  ------------- 
 David Jeffreys            20,000         21,500 
------------------  -------------  ------------- 
 Phillip Rose*                  -         10,000 
------------------  -------------  ------------- 
 David Rowlinson*               -         10,000 
------------------  -------------  ------------- 
 Serena Tremlett           20,000         20,000 
------------------  -------------  ------------- 
 Total                     40,000         76,500 
 

* resigned on 3 June 2016

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 Board.

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 sale and managing 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 9 February 2018 were as follows:

 
 Name of investor                       No.   % held 
                                of ordinary 
                                     shares 
----------------------------  -------------  ------- 
 Antler Investment 
  Holdings Limited               21,437,393    18.22 
----------------------------  -------------  ------- 
 Alpha Global Property 
  Securities Fund Pte. 
  Ltd                             9,390,800     7.98 
----------------------------  -------------  ------- 
 Peel Hunt                        9,002,977     7.65 
----------------------------  -------------  ------- 
 Mr K. Dhana                      7,095,960     6.03 
----------------------------  -------------  ------- 
 Interactive Investor             6,741,973     5.73 
----------------------------  -------------  ------- 
 Mr Richard M. Peskin             6,000,000     5.10 
----------------------------  -------------  ------- 
 Mrs Rosemary J. Skelley          5,857,607     4.98 
----------------------------  -------------  ------- 
 Halifax Share Dealing 
  Clients                         5,499,273     4.68 
----------------------------  -------------  ------- 
 Hargreaves Lansdown 
  Asset Management                4,628,425     3.93 
----------------------------  -------------  ------- 
 Barclays Wealth Management 
  (UK)                            4,355,336     3.70 
 

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 Group at the end of the year and of the profit or loss of the Company and the Group for that year.

In preparing those financial statements, the Directors are required to:

   (1)   select suitable accounting policies and then apply them consistently; 
   (2)   make judgements and estimates that are reasonable and prudent; 

(3) state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

(4) prepare the financial statements on the going concern basis unless it is appropriate to assume that the Company and Group will not continue in business (as detailed in the going concern paragraph below and in note 2 of the financial statements, these financial statements have not been prepared on a going concern basis).

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and of the Group 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 Group 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 further progress in the planned orderly realisation of its investment properties and subsequent partial repayment of the bank borrowings. The maturity date of the remaining bank borrowings is 31 October 2018. The Trust has the support of its lender for the sale of its remaining property with a view to winding up the Trust's group in due course. The accounts are therefore not prepared on a going concern basis.

Annual General Meeting

The AGM will be held in Guernsey at 9 a.m. on 27 April 2018 at Old Bank Chambers, La Grande Rue, St Martin's, Guernsey. The meeting will be held to receive the Annual Report and Financial Statements, re-elect Directors and propose the reappointment of the auditor and that the Directors be authorised to determine the auditor's remuneration.

Independent auditor

BDO Limited has expressed its willingness to continue in office as auditor of the Company.

By order of the Board,

David Jeffreys

Director

Directors' statement pursuant to the Disclosure and Transparency Rules

Each of the Directors, whose names and functions are listed in the Directors' and corporate governance report, confirm that, to the best of each person's knowledge and belief:

-- the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU ('IFRS') in accordance with the requirements of the London Stock Exchange, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and Company, and

-- the Chairman's statement and the property review include a fair review of the development and performance of the business and the position of the Company and Group and notes 19 and 20 to the financial statements provide a description of the principal risks and uncertainties that they face.

By order of the Board,

David Jeffreys

Director

Corporate responsibility - benefits, risks and controls

The Board has reviewed the 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 managing its property 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.

The Company's standard business process ensured that appropriate environmental reports were obtained as part of the due diligence process for property acquisitions and the Company assessed the accessibility of each property 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.

Independent auditors' report

To the members of Alpha Pyrenees Trust Limited

Opinion

We have audited the financial statements of Alpha Pyrenees Trust Limited (the 'parent company') and its subsidiaries ('the group) for the year ended 31 December 2017 which comprise the Consolidated and Company Statements of Comprehensive Income, the Consolidated and Company Statements of Financial Position, the Consolidated and Company Statements of Cash Flows, the Consolidated and Company Statements of Changes in Equity and notes to the financial statements, including a summary of significant accounting policies. 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.

In our opinion, the financial statements:

-- give a true and fair view of the state of the group's and of the parent company's affairs as at 31 December 2017 and of the group's loss and parent company's profit for the year then ended;

-- have been properly prepared in accordance with International Financial Reporting Standards as adopted by the EU; and

-- have been properly prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Use of our report

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 has been undertaken so that we might state to the 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 company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Emphasis of Matter - financial statements prepared on a basis other than that of a going concern

We draw attention to the disclosures made in note 2 to the financial statements which explains that it is the intention of the Board to sell the group's remaining investment property with a view to winding up the group in due course. As a consequence, the financial statements have therefore been prepared on a basis other than that of a going concern. Our opinion is not modified in this respect of this matter.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 
 Key Audit Matter                  Audit Response 
--------------------------------  ------------------------------------ 
 Property Valuation                We evaluated the competence 
  (note 10)                         of the external valuer, 
                                    Knight Frank, which included 
  Property valuations               consideration of their 
  are a highly subjective           qualifications and expertise. 
  area as the valuer                We read the terms of engagement 
  will make judgements              with the group to determine 
  as to property yields,            whether there were any 
  quality of tenants                matters that might have 
  and other variables               affected their objectivity 
  to arrive at the current          or may have imposed scope 
  open market value                 limitations upon their 
  of the remaining property.        work. We found no evidence 
                                    to suggest that the objectivity 
  Any input inaccuracies            of the valuer in their 
  or unreasonable bases             performance of the valuations 
  used in the valuation             was compromised. 
  judgements (such as 
  in respect of estimated           We have read the valuation 
  rental value and yield            report for the remaining 
  profile applied) could            property, discussed the 
  result in a material              basis of the property 
  misstatement of the               valuation with valuer 
  group statement of                to understand the process 
  comprehensive income              undertaken by them and 
  and the group statement           we confirmed that valuation 
  of financial position.            had been prepared in accordance 
                                    with professional valuation 
                                    standards and IFRS. 
 
                                    We have considered the 
                                    reasonableness of the 
                                    inputs used by Knight 
                                    Frank in the valuation, 
                                    such as the terms of void 
                                    periods, rent free periods 
                                    and other assumptions 
                                    that impact the value. 
--------------------------------  ------------------------------------ 
 Disposal of subsidiary 
  entities (note 9)                  We agreed the calculation 
                                     of the reclassification 
  Two subsidiaries,                  of foreign exchange gains 
  Alpha Pyrenees Spain               on translation of foreign 
  SLU and Alpha Pyrenees             operations on disposal 
  Athis Mons SCI, were               to audited figures going 
  liquidated during                  back to the date of incorporation 
  the year. For such                 of the two subsidiaries. 
  disposals, IFRS requires 
  any foreign currency               We also reviewed the disclosure 
  translation reserve                made in the financial 
  to be recycled through             statements in respect 
  the statement of comprehensive     of the disposals to ensure 
  income. This is a                  compliance with the requirements 
  material figure to                 of IFRS. 
  the financial statements 
  and requires analysis 
  of the results of 
  the subsidiaries disposed 
  of from the date of 
  their incorporation. 
--------------------------------  ------------------------------------ 
 

Our application of materiality

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.

For planning, we considered materiality to be the level by which misstatements individually or in aggregate, including omissions, could influence the economic decisions of the relevant users. Based on our professional judgment, we determined materiality for the group financial statements as a whole to be GBP102,600 (2016: GBP222,000), which is based on a level of 1% of total assets held for the majority of the year, and we determined materiality for the parent company financial statements as a whole to be GBP5,130 (2016: GBP11,000). We considered total assets to be the most appropriate benchmark due to the nature of the group being an investment property fund.

Performance materiality for the group has been set at GBP71,820 (2016: GBP155,400) which is 70% of materiality. This has been set based upon the control environment in place, the directors assessment of risk and our past experience of adjustments.

International Standards on Auditing (UK) also allow the auditor to set a lower materiality for particular classes of transaction, balances or disclosures for which misstatements of lesser amounts than materiality for the financial statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. In this context, we set a lower level of materiality to apply to rental income and sensitive fees including investment management fees, directors' fees, property operating expenses, administration fees, audit fees and legal fees. We determined materiality for these areas to be GBP10,530.

Component materiality has been set for the components which are significant to the group financial statements. Materiality for these components has been set at GBP67,000 (2016: GBP165,000).

We agreed with the Board of Directors that we would report all audit differences in excess of GBP5,130 (2016: GBP11,000).

An overview of the scope of our audit

We tailored the scope of our audit taking into account the nature of the group's and parent company's investments, involvement of the Investment Manager and the company's Administrator, the accounting and reporting environment and the industry in which the group and parent company operates.

This assessment took into account the likelihood, nature and potential magnitude of any misstatement. As part of this risk assessment we considered the group's and parent company's interaction with the Investment Manager and the company's Administrator. We assessed the control environment in place at the Investment Manager and the company's Administrator to the extent that it was relevant to our audit. Following this assessment, we applied professional judgement to determine the extent of testing required over each balance in the financial statements.

The parent company and each subsidiary form separate components of the group. The parent company and the significant component, Alpha Pyrenees Offices SCI have both been subject to a full scope audits. Alpha Pyrenees Athis Mons SCI, Alpha Pyrenees Alcala SLU and Alpha Pyrenees Ecija SLU have had specific procedures performed on them. We have performed desktop reviews on all the remaining subsidiaries, as they are not significant to the group.

The audit work on Alpha Pyrenees Offices SCI and the specific procedures on Alpha Pyrenees Athis Mons SCI, Alpha Pyrenees Alcala SLU and Alpha Pyrenees Ecija SLU were completed by the component auditors and reviewed by us. In addition to the work performed by the component auditors, we have performed audit procedures on all key risk areas.

Other information

The Directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

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.

Responsibilities of Directors

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 and for such internal control as the Directors determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the group's and parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located at the Financial Reporting Council's ("FRC's") website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

We were appointed by the board of directors on 22 November 2006 to audit the financial statements for the year ending 31 December 2006 and subsequent financial periods. The period of total uninterrupted engagement is 12 years, covering the years ended 31 December 2006 to 31 December 2017.

The non-audit services prohibited by the FRC's Ethical Standard were not provided to the group or the parent company and we remain independent of the group and the parent company in conducting our audit.

Our audit opinion is consistent with the additional report to the board of directors.

The engagement director on the audit resulting in this independent auditor's report is Richard Searle.

.......................................................

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

Date: 8 March 2018

Consolidated statement of comprehensive income

 
                                          For the year ended               For the year ended 
                                           31 December 2017                 31 December 2016 
---------------------------------  -------------------------------  ------------------------------- 
                                     Revenue    Capital      Total    Revenue    Capital      Total 
                            Notes    GBP'000    GBP'000    GBP'000    GBP'000    GBP'000    GBP'000 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 Income 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 Revenue                        3        413          -        413      1,033          -      1,033 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 Property operating 
  expenses                      3      (827)          -      (827)    (1,241)          -    (1,241) 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 Net rental expense                    (414)          -      (414)      (208)          -      (208) 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 Losses on disposal 
  of investment 
  properties held 
  for sale                     10          -    (5,398)    (5,398)          -    (1,461)    (1,461) 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 Gains on disposal 
  of subsidiaries                          -      1,531      1,531          -        676        676 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 Losses on revaluation 
  of investment 
  properties held 
  for sale                     10          -      (966)      (966)          -    (7,268)    (7,268) 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 Expenses 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 Investment Manager's 
  fee                          18      (747)          -      (747)      (867)          -      (867) 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 Other administration 
  costs                         4      (395)          -      (395)      (948)          -      (948) 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 Operating loss                      (1,556)    (4,833)    (6,389)    (2,023)    (8,053)   (10,076) 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 Finance costs                  5    (5,324)      (672)    (5,996)    (5,462)       (17)    (5,479) 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 Loss before 
  taxation                           (6,880)    (5,505)   (12,385)    (7,485)    (8,070)   (15,555) 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 Taxation                       6          -          -          -          -          -          - 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 Loss for the 
  year                               (6,880)    (5,505)   (12,385)    (7,485)    (8,070)   (15,555) 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 Other comprehensive 
  income/(loss) 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 Items that may 
  be reclassified 
  to profit or 
  loss in subsequent 
  periods: 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 Foreign exchange 
  losses on translation 
  of foreign operations 
  (translation 
  reserve)                                 -    (1,691)    (1,691)          -    (6,498)    (6,498) 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 Reclassification 
  of foreign exchange 
  gains on translation 
  of foreign operations 
  following disposals                      -    (1,531)    (1,531)          -      (676)      (676) 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 Other comprehensive 
  loss for the 
  year                                     -    (3,222)    (3,222)          -    (7,174)    (7,174) 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 Total comprehensive 
  loss for the 
  year                               (6,880)    (8,727)   (15,607)    (7,485)   (15,244)   (22,729) 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 Loss per share 
  - basic & diluted             8                          (10.5)p                          (13.2)p 
 

The total column of this statement represents the Group'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 are an integral part of the financial statements.

Consolidated balance sheet

 
                                    Notes        2017        2016 
  As at 31 December 2017                      GBP'000     GBP'000 
---------------------------------  ------  ----------  ---------- 
 
 Current assets 
---------------------------------  ------  ----------  ---------- 
 Investment properties held 
  for sale                             10       5,945      16,824 
---------------------------------  ------  ----------  ---------- 
 Trade and other receivables           11         228         685 
---------------------------------  ------  ----------  ---------- 
 Restricted cash                       12       2,313       3,897 
---------------------------------  ------  ----------  ---------- 
 Cash and cash equivalents             12         788       1,213 
---------------------------------  ------  ----------  ---------- 
                                                9,274      22,619 
---------------------------------  ------  ----------  ---------- 
 
 Current liabilities 
---------------------------------  ------  ----------  ---------- 
 Trade and other payables              13     (1,165)     (1,294) 
---------------------------------  ------  ----------  ---------- 
 Bank borrowings                       14    (82,629)     (2,889) 
---------------------------------  ------  ----------  ---------- 
 Liabilities directly associated 
  with investment properties                    (190)       (257) 
---------------------------------  ------  ----------  ---------- 
                                             (83,984)     (4,440) 
---------------------------------  ------  ----------  ---------- 
 
 Non-current liabilities 
---------------------------------  ------  ----------  ---------- 
 Bank borrowings                       14           -    (77,282) 
---------------------------------  ------  ----------  ---------- 
 
 Net liabilities                             (74,710)    (59,103) 
---------------------------------  ------  ----------  ---------- 
 
 Equity 
---------------------------------  ------  ----------  ---------- 
 Share capital                         15           -           - 
---------------------------------  ------  ----------  ---------- 
 Special reserve                       16     113,131     113,131 
---------------------------------  ------  ----------  ---------- 
 Translation reserve                   16      13,838      17,060 
---------------------------------  ------  ----------  ---------- 
 Capital reserve                       16   (179,748)   (174,243) 
---------------------------------  ------  ----------  ---------- 
 Revenue reserve                       16    (21,931)    (15,051) 
---------------------------------  ------  ----------  ---------- 
 
 Total equity                                (74,710)    (59,103) 
---------------------------------  ------  ----------  ---------- 
 
 Net asset value per share                    (63.5)p     (50.2)p 
 

The financial statements were approved by the Board of Directors and authorised for issue on 8 March 2018. They were signed on its behalf by:

David Jeffreys

Director

The accompanying notes are an integral part of the financial statements.

Consolidated cash flow statement

 
                                         Notes        For the        For the 
                                                   year ended     year ended 
                                                  31 December    31 December 
                                                         2017           2016 
                                                      GBP'000        GBP'000 
--------------------------------------  ------  -------------  ------------- 
 
 Operating activities 
--------------------------------------  ------  -------------  ------------- 
 Loss for the year                                   (12,385)       (15,555) 
--------------------------------------  ------  -------------  ------------- 
 
    Adjustments for : 
--------------------------------------  ------  -------------  ------------- 
    Losses on disposal of investment 
     properties held for sale                           5,398          1,461 
--------------------------------------  ------  -------------  ------------- 
    Gains on disposal of subsidiaries                 (1,531)          (676) 
--------------------------------------  ------  -------------  ------------- 
    Losses on revaluation of 
     investment properties held 
     for sale                                             966          7,268 
--------------------------------------  ------  -------------  ------------- 
    Finance costs                                       5,996          5,479 
--------------------------------------  ------  -------------  ------------- 
 
 Operating cash flows before 
  movements in working capital                        (1,556)        (2,023) 
--------------------------------------  ------  -------------  ------------- 
 
    Movements in working capital: 
--------------------------------------  ------  -------------  ------------- 
    Movement in trade and other 
     receivables                                          707          1,013 
--------------------------------------  ------  -------------  ------------- 
    Movement in trade and other 
     payables                                           (250)        (1,454) 
--------------------------------------  ------  -------------  ------------- 
 
 Cash flows used in operating 
  activities                                          (1,099)        (2,464) 
--------------------------------------  ------  -------------  ------------- 
 
 Investing activities 
--------------------------------------  ------  -------------  ------------- 
    Proceeds from disposal 
     of investment properties                           5,120         25,319 
--------------------------------------  ------  -------------  ------------- 
 
 Cash flows from investing 
  activities                                            5,120         25,319 
--------------------------------------  ------  -------------  ------------- 
 
 Financing activities 
--------------------------------------  ------  -------------  ------------- 
    Repayment of borrowings                           (5,781)       (28,702) 
--------------------------------------  ------  -------------  ------------- 
    Bank loan interest paid 
     and costs                                           (65)        (1,385) 
--------------------------------------  ------  -------------  ------------- 
    Restricted cash movement                12          1,706          7,412 
--------------------------------------  ------  -------------  ------------- 
 
 Cash flows used in financing 
  activities                                          (4,140)       (22,675) 
--------------------------------------  ------  -------------  ------------- 
 
 Net (decrease)/increase 
  in cash and cash equivalents                          (119)            180 
--------------------------------------  ------  -------------  ------------- 
 
 Cash and cash equivalents 
  at beginning of year                                  1,213          1,309 
--------------------------------------  ------  -------------  ------------- 
    Exchange translation movement                       (306)          (276) 
--------------------------------------  ------  -------------  ------------- 
 
 Cash and cash equivalents 
  at end of year (note 12)                                788          1,213 
 

The accompanying notes are an integral part of the financial statements.

Consolidated statement of changes in equity

 
 For the year           Share       Special    Translation   Capital     Revenue    Total 
  ended 31 December      capital     reserve    reserve       reserve     reserve    equity 
  2016                   GBP'000     GBP'000    GBP'000       GBP'000     GBP'000    GBP'000 
---------------------  ----------  ---------  ------------  ----------  ---------  --------- 
 
 At 1 January 
  2016                          -    113,131        24,234   (166,173)    (7,566)   (36,374) 
---------------------  ----------  ---------  ------------  ----------  ---------  --------- 
 
 Total comprehensive 
  loss for the 
  year 
---------------------  ----------  ---------  ------------  ----------  ---------  --------- 
 Loss for the 
  year                          -          -             -     (8,070)    (7,485)   (15,555) 
---------------------  ----------  ---------  ------------  ----------  ---------  --------- 
 Other comprehensive 
  loss                          -          -       (7,174)           -          -    (7,174) 
---------------------  ----------  ---------  ------------  ----------  ---------  --------- 
 Total comprehensive 
  loss for the 
  year                          -          -       (7,174)     (8,070)    (7,485)   (22,729) 
---------------------  ----------  ---------  ------------  ----------  ---------  --------- 
 
 At 31 December 
  2016                          -    113,131        17,060   (174,243)   (15,051)   (59,103) 
---------------------  ----------  ---------  ------------  ----------  ---------  --------- 
 
 Note 15, 16 
 
 
 For the year           Share       Special    Translation   Capital     Revenue    Total 
  ended 31 December      capital     reserve    reserve       reserve     reserve    equity 
  2017                   GBP'000     GBP'000    GBP'000       GBP'000     GBP'000    GBP'000 
---------------------  ----------  ---------  ------------  ----------  ---------  --------- 
 
 At 1 January 
  2017                          -    113,131        17,060   (174,243)   (15,051)   (59,103) 
---------------------  ----------  ---------  ------------  ----------  ---------  --------- 
 
 Total comprehensive 
  loss for the 
  year 
---------------------  ----------  ---------  ------------  ----------  ---------  --------- 
 Loss for the 
  year                          -          -             -     (5,505)    (6,880)   (12,385) 
---------------------  ----------  ---------  ------------  ----------  ---------  --------- 
 Other comprehensive 
  loss                          -          -       (3,222)           -          -    (3,222) 
---------------------  ----------  ---------  ------------  ----------  ---------  --------- 
 Total comprehensive 
  loss for the 
  year                          -          -       (3,222)     (5,505)    (6,880)   (15,607) 
---------------------  ----------  ---------  ------------  ----------  ---------  --------- 
 
 At 31 December 
  2017                          -    113,131        13,838   (179,748)   (21,931)   (74,710) 
---------------------  ----------  ---------  ------------  ----------  ---------  --------- 
 
 Note 15, 16 
 

The accompanying notes are an integral part of the financial statements.

Company statement of comprehensive income

 
                                             For the year                     For the year 
                                                 ended                            ended 
                                              31 December                      31 December 
                                                 2017                             2016 
------------------------  -------  -------------------------------  ------------------------------- 
                                     Revenue    Capital      Total    Revenue    Capital      Total 
                                     GBP'000    GBP'000    GBP'000    GBP'000    GBP'000    GBP'000 
                            Notes 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 Expenses 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 Investment Manager's 
  fee                          18      (747)          -      (747)      (867)          -      (867) 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 Other administration 
  costs                         4      (203)          -      (203)      (458)          -      (458) 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 Total expenses                        (950)          -      (950)    (1,325)          -    (1,325) 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 Operating loss                        (950)          -      (950)    (1,325)          -    (1,325) 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 Finance costs                  5          -        (1)        (1)        (1)       (18)       (19) 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 Movement in impairment 
  of amounts receivable 
  from and investments 
  in subsidiary                9, 
  undertakings                 19          -      1,095      1,095          -      1,208      1,208 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 (Loss)/profit 
  before taxation                      (950)      1,094        144    (1,326)      1,190      (136) 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 Taxation                       6          -          -          -          -          -          - 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 (Loss)/profit 
  for the year                         (950)      1,094        144    (1,326)      1,190      (136) 
------------------------  -------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 Total comprehensive 
  (loss)/income 
  for the year                         (950)      1,094        144    (1,326)      1,190      (136) 
 

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 are an integral part of the financial statements.

Company balance sheet

 
                                Notes        2017        2016 
  As at 31 December 2017                  GBP'000     GBP'000 
-----------------------------  ------  ----------  ---------- 
 
 Current assets 
-----------------------------  ------  ----------  ---------- 
 Trade and other receivables       11          13          15 
-----------------------------  ------  ----------  ---------- 
 Cash and cash equivalents         12           3           1 
-----------------------------  ------  ----------  ---------- 
                                               16          16 
-----------------------------  ------  ----------  ---------- 
 
 Total assets                                  16          16 
-----------------------------  ------  ----------  ---------- 
 
 Current liabilities 
-----------------------------  ------  ----------  ---------- 
 Trade and other payables          13       (643)       (787) 
-----------------------------  ------  ----------  ---------- 
 
 Total liabilities                          (643)       (787) 
-----------------------------  ------  ----------  ---------- 
 
 Net liabilities                            (627)       (771) 
-----------------------------  ------  ----------  ---------- 
 
 Equity 
-----------------------------  ------  ----------  ---------- 
 Share capital                     15           -           - 
-----------------------------  ------  ----------  ---------- 
 Special reserve                   16     113,131     113,131 
-----------------------------  ------  ----------  ---------- 
 Capital reserve                   16   (137,035)   (138,129) 
-----------------------------  ------  ----------  ---------- 
 Revenue reserve                   16      23,277      24,227 
-----------------------------  ------  ----------  ---------- 
 
 Total equity                               (627)       (771) 
 

The financial statements were approved by the Board of Directors and authorised for issue on 8 March 2018. They were signed on its behalf by:

David Jeffreys

Director

The accompanying notes are an integral part of the financial statements.

Company cash flow statement

 
                                    Note        For the        For the 
                                             year ended     year ended 
                                            31 December    31 December 
                                                   2017           2016 
                                                GBP'000        GBP'000 
---------------------------------  -----  -------------  ------------- 
 
 Operating activities 
---------------------------------  -----  -------------  ------------- 
 
 Profit/(loss) for the 
  year                                              144          (136) 
---------------------------------  -----  -------------  ------------- 
 
    Adjustments for : 
---------------------------------  -----  -------------  ------------- 
    Finance costs                                     1             19 
---------------------------------  -----  -------------  ------------- 
  Movement in impairment 
   of amounts receivable 
   from subsidiary undertakings                 (1,095)        (1,208) 
---------------------------------  -----  -------------  ------------- 
 
 Operating cash flows before 
  movements in working capital                    (950)        (1,325) 
---------------------------------  -----  -------------  ------------- 
 
    Movement in operating 
     trade and other receivables                      3            (3) 
---------------------------------  -----  -------------  ------------- 
    Movement in operating 
     trade and other payables                     (144)            104 
---------------------------------  -----  -------------  ------------- 
 
 Cash flows used in operations                  (1,091)        (1,224) 
---------------------------------  -----  -------------  ------------- 
 
    Interest paid                                     -            (1) 
---------------------------------  -----  -------------  ------------- 
 
 Cash flows used in operating 
  activities                                    (1,091)        (1,225) 
---------------------------------  -----  -------------  ------------- 
 
 Investing activities 
---------------------------------  -----  -------------  ------------- 
    Current account loans 
     repaid                            9          1,093          1,194 
---------------------------------  -----  -------------  ------------- 
 
 Cash flows from investing 
  activities                                      1,093          1,194 
---------------------------------  -----  -------------  ------------- 
 
 Net increase/(decrease) 
  in cash and cash equivalents                        2           (31) 
---------------------------------  -----  -------------  ------------- 
 
 Cash and cash equivalents 
  at beginning of year                                1             36 
---------------------------------  -----  -------------  ------------- 
 Exchange translation movement                        -            (4) 
---------------------------------  -----  -------------  ------------- 
 
 Cash and cash equivalents 
  at end of year                                      3              1 
 

The accompanying notes are an integral part of the financial statements.

Company statement of changes in equity

 
 For the year ended     Share       Special    Capital     Revenue    Total 
  31 December 2016       capital     reserve    reserve     reserve    equity 
                         GBP'000     GBP'000    GBP'000     GBP'000    GBP'000 
---------------------  ----------  ---------  ----------  ---------  --------- 
 
 At 1 January 2016              -    113,131   (139,319)     25,553      (635) 
---------------------  ----------  ---------  ----------  ---------  --------- 
 
 Total comprehensive 
  income/(loss) for 
  the year 
---------------------  ----------  ---------  ----------  ---------  --------- 
 Income/(loss) for 
  the year                      -          -       1,190    (1,326)      (136) 
---------------------  ----------  ---------  ----------  ---------  --------- 
 Total comprehensive 
  income/(loss) for 
  the year                      -          -       1,190    (1,326)      (136) 
---------------------  ----------  ---------  ----------  ---------  --------- 
 
 At 31 December 2016            -    113,131   (138,129)     24,227      (771) 
---------------------  ----------  ---------  ----------  ---------  --------- 
 
 Note 15, 16 
 
 
 For the year ended     Share       Special    Capital     Revenue    Total 
  31 December 2017       capital     reserve    reserve     reserve    equity 
                         GBP'000     GBP'000    GBP'000     GBP'000    GBP'000 
---------------------  ----------  ---------  ----------  ---------  --------- 
 
 At 1 January 2017              -    113,131   (138,129)     24,227      (771) 
---------------------  ----------  ---------  ----------  ---------  --------- 
 
 Total comprehensive 
  income/(loss) for 
  the year 
---------------------  ----------  ---------  ----------  ---------  --------- 
 Income/(loss) for 
  the year                      -          -       1,094      (950)        144 
---------------------  ----------  ---------  ----------  ---------  --------- 
 Total comprehensive 
  income/(loss) for 
  the year                      -          -       1,094      (950)        144 
---------------------  ----------  ---------  ----------  ---------  --------- 
 
 At 31 December 2017            -    113,131   (137,035)     23,277      (627) 
---------------------  ----------  ---------  ----------  ---------  --------- 
 
 Note 15, 16 
 

The accompanying notes are an integral part of the financial statements.

Notes to the financial statements

1. General information

The Company is a limited liability, closed-ended investment company incorporated in Guernsey. The address of the registered office is given below. The nature of the Group's operations and its principal activities are set out in the Chairman's statement above. The financial statements were approved and authorised for issue on 8 March 2018 and signed by David Jeffreys on behalf of the Board.

2. Significant accounting policies

A summary of the principal accounting policies is set out below. The policies have been consistently applied to all years presented.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the accounting policies. The areas involving a high degree of judgement or complexity or areas where the assumptions and estimates are significant to the financial statements are disclosed in this note.

Basis of preparation

These financial statements have been prepared in accordance with IFRS, which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), and International Accounting Standards and Standards Interpretations Committee's interpretations approved by the International Accounting Standards Committee ("IASC") that remain in effect, and to the extent that they have been adopted by the European Union.

Going concern

During the year, the Board has made further progress in the planned orderly realisation of its investment properties and subsequent partial repayment of the bank borrowings. The maturity date of the remaining bank borrowings is 31 October 2018. The Trust has the support of its lender for the sale of its remaining property with a view to winding up the Trust's group in due course. The accounts are therefore not prepared on a going concern basis.

a) Adoption of new and revised Standards

A number of new standards and interpretations issued by the IASB and the International Financial Reporting Interpretations Committee are effective for the current year. The adoption of these standards has not led to any changes in the Group's accounting policies; an exception is represented by the Disclosure Initiative Amendments to IAS7: this amendment requires disclosure of changes in liabilities arising from financing activities (see note 14).

b) Standards and Interpretations in issue and not yet effective

At the date of authorisation of these financial statements, there were a number of standards and interpretations, which have not been applied in these financial statements that were in issue but not yet effective. These are either not relevant to the Company and Group or, given the orderly disposal of its remaining investment property and intended winding up of the Company and Group, are not expected to have a significant impact.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and the subsidiary undertakings controlled by the Company, made up to 31 December each year. Control is achieved where the Company has power over the investee, exposure or rights, to variable returns from its involvement with the investee and the ability to use its power to affect the amount of the investor's returns.

The results of subsidiary undertakings acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal as appropriate.

When necessary, adjustments are made to the financial statements of subsidiary undertakings to bring their accounting policies used into line with those used by the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Presentation of statement of comprehensive income

In order to better reflect the activities of an investment company and in accordance with guidance issued by the Association of Investment Companies ("AIC"), supplementary information, which analyses the statement of comprehensive income between items of a revenue and capital nature, has been presented alongside the Company and Group's statements of comprehensive income.

Revenue recognition

Rental income from investment property leased out under an operating lease is recognised in the statement of comprehensive income on a straight line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the net consideration for the use of the property and are therefore also recognised on the same straight line basis. Rental revenues are accounted for on an accruals basis. Therefore, deferred revenue generally represents advance payments from tenants. Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the Group and the amount of revenue can be measured reliably. Upon early termination of a lease by the lessee, the receipt of a surrender premium is immediately recognised as revenue.

The Company's interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable. Provisions against recoverability of interest income are recognised as an expense within the movement in impairment of amounts receivable from subsidiary undertakings.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Foreign currencies

a) Functional and presentation currency

Items included in the financial statements of each of the Group entities are measured in the currency of the primary economic environment in which the entity operates (the "functional currency"). The consolidated financial statements are presented in Sterling, which is the Company's functional and presentation currency.

b) Transactions and balances

Transactions in currencies other than the functional currency of the Group's entity involved are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Gains and losses arising on retranslation are included in net profit or loss for the year.

c) Group companies

The results and financial position of all the Group entities that have a functional currency which differs from the presentation currency are translated into the presentation currency as follows:

(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of the balance sheet;

(ii) income and expenses for each statement of comprehensive income are translated at the average exchange rate prevailing in the period; and

(iii) all resulting exchange differences are recognised as a separate component of equity.

On consolidation, the exchange differences arising from the translation of the Company's net investment in foreign entities are taken to other comprehensive income. When a foreign operation is sold, such exchange differences are recognised in the statement of comprehensive income as part of the gain or loss on sale.

The year-end exchange rate used is GBP1:EUR1.127 (2016: GBP1:EUR1.169) and the average rate for the year used is GBP1:EUR1.142 (2016: GBP1:EUR1.226).

Operating profit

a) Company

Operating profit includes interest income from subsidiary entities, as reduced by Investment Manager's fees and administrative expenses and excludes the movement on impairment of loans from and investments in subsidiaries, finance costs and finance income.

b) Group

Operating profit includes net gains or losses on revaluation of investment properties and net gains or losses on disposal of investment properties and subsidiaries, as reduced by administrative expenses and property operating costs and excludes finance costs and finance income.

Expenses

All expenses are accounted for on an accruals basis and include fees and other expenses paid to the administrator, the Investment Manager and the Directors.

In respect of the analysis between revenue and capital items presented within the statement of comprehensive income, all expenses have been presented as revenue items except:

(i) realised gains or losses from disposal of investment properties and subsidiaries and unrealised gains or losses on revaluation of investment properties;

   (ii)            foreign exchange losses. 

Taxation

The Company is exempt from Guernsey taxation on income derived outside of Guernsey and bank interest earned in Guernsey. A fixed annual fee of GBP1,200 (2016: GBP1,200) is payable to the States of Guernsey in respect of this exemption. No charge to Guernsey taxation arises on capital gains. The Group is liable to foreign tax arising on activities of the overseas subsidiaries. The Company has subsidiary operations in Luxembourg, Belgium, France and Spain.

The tax expense represents the sum of the tax currently payable and deferred tax.

Fair value measurement

The Group measures certain non-financial assets such as investment property held for sale, at fair value at the end of each reporting period, using recognised valuation techniques and following the principles of IFRS 13. In addition, fair values of financial instruments measured at amortised cost are disclosed in the financial statements.

Fair value is 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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

   --      in the principal market for the asset or liability, or 

-- in the absence of a principal market, in the most advantageous market for the asset or liability.

The Group must be able to access the principal or the most advantageous market at the measurement date. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs significant to the fair value measurement as a whole:

-- Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

-- Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

-- Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

Investment property held for sale

Investment property, which was property held to earn rentals and/or for capital appreciation, was initially recognised at cost being the fair value of consideration given including related transaction costs. As from prior year, the Group investment properties are all classified as held for sale. Investment properties are classified as held for sale if their carrying amount will be recovered by sale rather than by continuing use in the business. For this to be the case, the property must be available for immediate sale in its present condition, management must be committed to and have initiated a plan to sell the property which, when initiated, was expected to result in a completed sale within twelve months. Property assets that are classified as held for sale are measured at fair value based on half yearly professional valuations made by Knight Frank LLP, in accordance with IAS 40 Investment Property. The valuations are in accordance with standards complying with the Royal Institution of Chartered Surveyors Appraisal and Valuation manual and the International Valuation Standards Committee.

Gains or losses arising from changes in the fair value of investment property held for sale are included in the statement of comprehensive income in the period in which they arise. Properties were treated as acquired when the Group assumed the significant risks and returns of ownership and are treated as disposed of when these are transferred to the buyer.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, which is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of the Company.

For management purposes, the Group is organised into one main operating segment, which invests in commercial property located in Europe. Accordingly, all significant operating decisions are based upon analysis of the Group as one segment. The financial results from this segment are equivalent to the financial statements of the Group as a whole.

All of the Group's revenue is from entities that are incorporated in Europe.

The Group does not have non-current assets at the balance sheet date (2016: none).

With the exception of cash and cash equivalents and restricted cash, which are located in Europe and Guernsey, all of the Group's current assets are located in Europe only.

Investment in subsidiaries

Investments in subsidiaries are initially recognised and subsequently carried at cost in the Company's financial statements less, where appropriate, provisions for impairment.

Financial instruments

Financial assets and financial liabilities are recognised on the Company and Group's balance sheet when the Company and Group become a party to the contractual provisions of the instrument. The Company and Group shall offset financial assets and financial liabilities if the Company and Group has a legally enforceable right to set off the recognised amounts and interests and intends to settle on a net basis.

(a) Financial assets

The Company and Group's financial assets fall into the categories discussed below, with the allocation depending to an extent on the purpose for which the asset was acquired. The Company and Group have not classified any of its financial assets as held to maturity or as available for sale.

Unless otherwise indicated, the carrying amounts of the Company and Group's financial assets are a reasonable approximation of their fair values.

(i) Loans and receivables

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through rental leases with tenants (e.g. trade receivables and cash and cash equivalents) but also incorporate other types of contractual monetary assets. They are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition or issue and subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

The effect of discounting on these financial instruments is not considered to be material.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Company and Group will be unable to collect all of the amounts due under the terms of the receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, such impairments directly reduce the carrying amount of the impaired asset and are recognised against the relevant income category in the statement of comprehensive income.

Cash and cash equivalents are carried at cost and consist primarily of short term deposits in banks with an original maturity of three months or less.

Restricted cash is carried at cost and relates to trapped cash held on the cash pooling account controlled by Barclays.

(ii) Derecognition of financial assets

A financial asset (in whole or in part) is derecognised either:

-- when the Company and Group has transferred substantially all the risks and rewards of ownership; or

-- when it has neither transferred nor retained substantially all the risks and rewards and when it no longer has control over the asset or a portion of the asset; or

   --      when the contractual right to receive cash flow has expired. 

(b) Financial liabilities

The Company and Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was issued and its characteristics.

Unless otherwise indicated, the carrying amounts of the Company and Group's financial liabilities are a reasonable approximation of their fair values.

(i) Financial liabilities measured at amortised cost

Other financial liabilities include the following items:

-- Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method.

-- Bank borrowings are initially recognised at fair value net of attributable transaction costs incurred. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method.

(ii) Derecognition of financial liabilities

A financial liability (in whole or in part) is derecognised when the Company and Group has extinguished its contractual obligations, it expires or is cancelled. Any gain or loss on derecognition is taken to the statement of comprehensive income.

(c) Share capital

Financial instruments issued by the Company are treated as equity only to the extent that they do not meet the definition of a financial liability. The Company's ordinary shares are classified as equity instruments. For the purposes of the disclosures given in note 19 the Company considers all its share capital, share premium and all other reserves as equity. The Company is not subject to any externally imposed capital requirements.

(d) Effective interest rate method

The effective interest rate method is a method of calculating the amortised cost of a financial asset or liability and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments (including all fees or amounts paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset or liability, or, where appropriate, a shorter period.

Significant accounting estimates and judgements

The Directors make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Investment property

The gross property value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Transaction costs normally borne by the seller are not deducted in arriving at gross property value, in accordance with IFRS 13. The fair value is calculated by deducting the costs normally borne by the purchaser from the gross property value. Fair value is not intended to represent the liquidation value of the property, which would be dependent upon the price negotiated at the time of sale less any associated selling costs. The fair value is largely based on estimates using property appraisal techniques and other valuation methods. Such estimates are inherently subjective and actual values can only be determined in a sales transaction.

Investment properties held for sale are measured at fair value. The Board determines that a property is available for sale where it is intended and expected to sell within one year from the date of classification as held for sale.

The fair value of the Group's investment properties held for sale as at 31 December 2017 was GBP5.9 million (2016: GBP16.8 million). Refer to note 10 for further details.

3. Revenue

 
                                      Group    Company      Group    Company 
                                       2017       2017       2016       2016 
                                    GBP'000    GBP'000    GBP'000    GBP'000 
--------------------------------  ---------  ---------  ---------  --------- 
 Rental income                          280          -        375          - 
--------------------------------  ---------  ---------  ---------  --------- 
 Other income                             -          -        357          - 
--------------------------------  ---------  ---------  ---------  --------- 
 Service and management charges         133          -        301          - 
--------------------------------  ---------  ---------  ---------  --------- 
 Total                                  413          -      1,033          - 
 

At 31 December 2017, the Group recognised non recoverable property operating expenditure as follows:

 
                                           2017       2016 
                                        GBP'000    GBP'000 
------------------------------------  ---------  --------- 
 Service charge income                      133        301 
------------------------------------  ---------  --------- 
 Property operating expenditure           (827)    (1,241) 
------------------------------------  ---------  --------- 
 Non recoverable property operating 
  expenditure                             (694)      (940) 
 

Property operating expenses relating to investment properties that did not generate any rental income were GBP0.3 million (2016: GBP0.5 million).

Revenue from one tenant in Spain, Fitness 4 All, amounted to GBP0.1 million (2016: Fitness 4 All for GBP0.1 million). Total revenue from tenants located in France amounted to GBP0.2 million (2016: GBP0.5 million) and total revenue from tenants located in Spain amounted to GBP0.2 million (2016: GBP0.2 million).

The Group leased out its investment property solely under operating leases. Leases were typically for terms of standard institutional 3/6/9 years in France and 5 + 5 years in Spain. At the balance sheet date, the Group owns only one vacant property, St. Cyr l'Ecole, located in France, so it has no contracted rent with tenants and hence no future minimum lease payments are expected for the foreseeable future:

 
                                                2017       2016 
                                             GBP'000    GBP'000 
----------------------------------------  ----------  --------- 
 Within one year                                   -        256 
----------------------------------------  ----------  --------- 
 In the second to fifth years inclusive            -      1,053 
----------------------------------------  ----------  --------- 
 After five years                                  -      1,968 
----------------------------------------  ----------  --------- 
 Total                                             -      3,277 
 

4. Other administration costs

 
                                   Group    Company      Group    Company 
                                    2017       2017       2016       2016 
                                 GBP'000    GBP'000    GBP'000    GBP'000 
-----------------------------  ---------  ---------  ---------  --------- 
 Accounts and administrative 
  fees                               187         74        265        126 
-----------------------------  ---------  ---------  ---------  --------- 
 Non-executive Directors' 
  fees                                40         40         77         77 
-----------------------------  ---------  ---------  ---------  --------- 
 Auditors' remuneration 
  for audit services                  57         35         70         37 
-----------------------------  ---------  ---------  ---------  --------- 
 Other professional 
  fees                               107         54        532        218 
-----------------------------  ---------  ---------  ---------  --------- 
 Staff costs                           4          -          4          - 
 Total                               395        203        948        458 
-----------------------------  ---------  ---------  ---------  --------- 
 

The Group has one employee. The Directors are the only key management personnel of the Group.

5. Finance costs

 
                                   Group    Company      Group    Company 
                                    2017       2017       2016       2016 
                                 GBP'000    GBP'000    GBP'000    GBP'000 
-----------------------------  ---------  ---------  ---------  --------- 
 Interest on bank borrowings       5,236          -      5,134          - 
-----------------------------  ---------  ---------  ---------  --------- 
 Loan fee amortisation                60          -        276          - 
-----------------------------  ---------  ---------  ---------  --------- 
 Foreign exchange loss               672          1         17         18 
-----------------------------  ---------  ---------  ---------  --------- 
 Other charges                        28          -         52          1 
-----------------------------  ---------  ---------  ---------  --------- 
 Total                             5,996          1      5,479         19 
 

Other than net losses on financial liabilities held at fair value through profit or loss, finance costs arise on financial liabilities measured at amortised cost using the effective interest rate method.

6. Taxation

(a) Taxation on profit on ordinary activities

Group

The Group's tax position for the year comprises:

 
                                           Group      Group 
                                            2017       2016 
                                         GBP'000    GBP'000 
-------------------------------------  ---------  --------- 
 Deferred taxation 
-------------------------------------  ---------  --------- 
 France                                        -          - 
-------------------------------------  ---------  --------- 
 Spain                                         -          - 
-------------------------------------  ---------  --------- 
 Total                                         -          - 
-------------------------------------  ---------  --------- 
 
 Tax expense reconciliation 
-------------------------------------  ---------  --------- 
 Loss for the year                      (12,385)   (15,555) 
-------------------------------------  ---------  --------- 
 
 Loss for the year at the tax rate 
  of 33.33%                              (4,128)    (5,184) 
-------------------------------------  ---------  --------- 
 Less: income not taxable                  (591)      (359) 
-------------------------------------  ---------  --------- 
 Add: expenditure not taxable              1,431      2,957 
-------------------------------------  ---------  --------- 
 Add: un-provided deferred tax asset 
  movement                                 3,288      2,586 
-------------------------------------  ---------  --------- 
 Tax charge                                    -          - 
 

Tax at domestic rates applicable to profits in the country concerned

 
                                Group      Group 
                                 2017       2016 
                              GBP'000    GBP'000 
--------------------------  ---------  --------- 
 French taxation at 33.33%          -          - 
--------------------------  ---------  --------- 
 Spanish taxation at 25%            -          - 
 

(b) Deferred taxation

The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon.

 
                                  Revaluation of          Accelerated tax   Tax losses   Interest rate swap      Total 
                           investment properties             depreciation      GBP'000              GBP'000    GBP'000 
                                         GBP'000 
 
                                                                  GBP'000 
-----------------------  -----------------------  -----------------------  -----------  -------------------  --------- 
 At 31 December 2015                    (13,775)                   13,833         (58)                    -          - 
-----------------------  -----------------------  -----------------------  -----------  -------------------  --------- 
 Charged/(credited) to 
  profit or loss                           7,415                  (7,479)           64                    -          - 
-----------------------  -----------------------  -----------------------  -----------  -------------------  --------- 
 Charged/(credited) to 
  other comprehensive 
  income                                 (1,854)                    1,860          (6)                    -          - 
-----------------------  -----------------------  -----------------------  -----------  -------------------  --------- 
 At 31 December 2016                     (8,214)                    8,214            -                    -          - 
-----------------------  -----------------------  -----------------------  -----------  -------------------  --------- 
 Charged/(credited) to 
  profit or loss                           2,591                  (2,591)            -                    -          - 
-----------------------  -----------------------  -----------------------  -----------  -------------------  --------- 
 Charged/(credited) to 
  other comprehensive 
  income                                 (1,642)                    1,642            -                    -          - 
-----------------------  -----------------------  -----------------------  -----------  -------------------  --------- 
 At 31 December 2017                     (7,265)                    7,265            -                    -          - 
 

At the balance sheet date the Group has unused tax losses of GBP211.0 million (2016: GBP170.6 million). Due to the unpredictability of future taxable profits, the Directors believe it is not prudent to recognise deferred tax assets in respect of the losses.

The French unused tax losses of GBP101.6 million (2016: GBP89.7 million), Belgian unused tax losses of GBP0.2 million (2016: GBP0.9 million), Spanish unused tax losses of GBP12.5 million (2016: GBP29.9 million) and unused tax losses in Luxembourg of GBP96.7 million (2016: GBP50.1 million) can be carried forward indefinitely.

7. Dividends

The Company does not pay dividends.

8. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

 
                                      1 January      1 January 
                                             to             to 
                                    31 December    31 December 
                                           2017           2016 
--------------------------------  -------------  ------------- 
 Losses after tax per statement 
  of comprehensive income 
  (GBP'000)                            (12,385)       (15,555) 
--------------------------------  -------------  ------------- 
 Basic and diluted losses 
  per share                             (10.5)p        (13.2)p 
--------------------------------  -------------  ------------- 
 Weighted average number 
  of ordinary shares (000's)            117,627        117,627 
 

9. Investment in subsidiary undertakings

A list of the significant investments in subsidiaries, including the name, country of incorporation and the proportion of ownership interest is given below.

 
 Name of subsidiary               Class   % of class          Country     Principal 
  undertaking                  of share    held with               of      activity 
                                              voting    incorporation 
                                              rights 
---------------------------  ----------  -----------  ---------------  ------------ 
 Alpha Pyrenees Luxembourg     Ordinary         100%       Luxembourg       Holding 
  SARL                                                                      company 
---------------------------  ----------  -----------  ---------------  ------------ 
 Alpha Pyrenees Belgium        Ordinary         100%          Belgium       Holding 
  SA                                                                        company 
---------------------------  ----------  -----------  ---------------  ------------ 
 Alpha Pyrenees Athis          Ordinary         100%           France       Holding 
  Mons SARL                                                                 company 
---------------------------  ----------  -----------  ---------------  ------------ 
 Alpha Pyrenees Offices        Ordinary         100%           France       Holding 
  SARL                                                                      company 
---------------------------  ----------  -----------  ---------------  ------------ 
 Alpha Pyrenees Offices        Ordinary         100%           France      Property 
  SCI                                                                    investment 
---------------------------  ----------  -----------  ---------------  ------------ 
 Alpha Pyrenees Alcalá    Ordinary         100%            Spain      Property 
  SLU                                                                    investment 
---------------------------  ----------  -----------  ---------------  ------------ 
 Alpha Pyrenees Ècija     Ordinary         100%            Spain      Property 
  SLU                                                                    investment 
 

The Group's investment properties are held by its subsidiary undertakings.

During the year, Alpha Pyrenees Spain SLU and Alpha Pyrenees Athis Mons SCI, both property investment companies, were dissolved.

The Company has made the following loans to its subsidiary undertakings as at 31 December 2017:

 
                    2017            2017        2017        2016            2016        2016 
                Interest    Non-interest       Total    Interest    Non-interest       Total 
                 bearing         bearing                 bearing         bearing 
                 GBP'000         GBP'000                 GBP'000         GBP'000 
                                             GBP'000                                 GBP'000 
------------ 
 Loans           110,528          76,071     186,599     106,557          68,590     175,147 
------------  ----------  --------------  ----------  ----------  --------------  ---------- 
 Impairment    (110,528)        (76,071)   (186,599)   (106,557)        (68,590)   (175,147) 
------------  ----------  --------------  ----------  ----------  --------------  ---------- 
 Total                 -               -           -           -               -           - 
 

The loans are denominated in Euros, unsecured and are subject to a range of interest rates, fixed for the term of the relevant loan. At 31 December 2017 the weighted average interest rate was 5.17% (2016: 4.81%).

A total impairment of GBP186.6 million (2016: GBP175.1 million) has been made against amounts receivable from subsidiary undertakings to reflect the current mark to market impact of the property valuations which have arisen within the Group subsidiaries and that Barclays has first charge over all investment properties held for sale.

During the year, the Company received GBP1,093,000 (2016: GBP1,194,000) as loan repayment from subsidiaries, as shown in the cash flow statement under investing activities: this is due to the cash release mechanism of the cash pooling account controlled by Barclays (see note 12) and impacts the Company's statement of comprehensive income through the movement in impairment of amounts receivable from and investments in subsidiary undertakings.

The Company's investment in subsidiaries is also fully impaired.

10. Investment properties held for sale

 
                                            2017       2016 
                                         GBP'000    GBP'000 
-------------------------------------  ---------  --------- 
 Investment properties held 
  for sale at 1 January                   16,824     39,283 
-------------------------------------  ---------  --------- 
 Subsequent capital expenditure                -          - 
  after acquisition 
-------------------------------------  ---------  --------- 
 Disposals                              (10,159)   (19,891) 
-------------------------------------  ---------  --------- 
 Movement in rent incentives/initial 
  costs                                    (230)      (280) 
-------------------------------------  ---------  --------- 
 Fair value adjustment in 
  the year                                 (966)    (7,268) 
-------------------------------------  ---------  --------- 
 Effect of foreign exchange                  476      4,980 
-------------------------------------  ---------  --------- 
 Investment properties held 
  for sale at 31 December                  5,945     16,824 
 

Investment properties held for sale represent the fair value of properties that have been actively marketed for disposal at the balance sheet date.

The fair value of the Group's investment properties held for sale at 31 December 2017 and 31 December 2016 (with the exception of Ivry in France, which was valued by the Directors at its selling price), has 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 Appraisal and Valuation Standards ("RICS").

The approved RICS definition of fair value is "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."

During the year, the Group sold two properties in France and two properties in Spain: Ivry for GBP2.6 million (EUR2.9 million) and Champs sur Marne for GBP2.3 million (EUR2.6 million) in France and Alcalá de Guadaíra for GBP0.6 million (EUR0.7 million) and Écija for GBP0.4 million (EUR0.5 million) in Spain.

At 31 December 2017, the Group has pledged one investment property held for sale valued at GBP5.9 million (EUR6.7 million) (2016: GBP16.8 million (EUR19.7 million)) to secure borrowings (note 14).

No provision is made for potential disposal costs as these will be contingent upon ultimate realisation values and specific arrangements that may be agreed.

Formal marketing of the Trust's remaining property is ongoing and the results of the marketing process to date indicate that, although there is no certainty that a transaction will take place, if it does, the price achieved is most likely to be lower than the valuation at 31 December 2017. The Trust will provide further updates on progress in due course.

11. Trade and other receivables

 
                                 Group    Company      Group    Company 
                                  2017       2017       2016       2016 
                               GBP'000    GBP'000    GBP'000    GBP'000 
---------------------------  ---------  ---------  ---------  --------- 
 Trade receivables                  14          -         53          - 
---------------------------  ---------  ---------  ---------  --------- 
 Amounts receivable from 
  Property Managing Agents          59          -         34          - 
---------------------------  ---------  ---------  ---------  --------- 
 Prepayments                        39         13         41         11 
---------------------------  ---------  ---------  ---------  --------- 
 Other receivables                  22          -        438          4 
---------------------------  ---------  ---------  ---------  --------- 
 VAT receivable                     94          -        119          - 
---------------------------  ---------  ---------  ---------  --------- 
 Total                             228         13        685         15 
 

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value. Note 19 provides an ageing of trade receivables.

12. Cash and cash equivalents

Cash and cash equivalents included in the cash flow statement comprise the following balance sheet amounts:

 
                                   Group    Company      Group    Company 
                                    2017       2017       2016       2016 
                                 GBP'000    GBP'000    GBP'000    GBP'000 
-----------------------------  ---------  ---------  ---------  --------- 
 Cash at bank in the balance 
  sheet                            3,101          3      5,110          1 
-----------------------------  ---------  ---------  ---------  --------- 
 Cash balance held on the 
  cash pooling account           (2,313)          -    (3,897)          - 
-----------------------------  ---------  ---------  ---------  --------- 
 Cash and cash equivalents           788          3      1,213          1 
 

The cash balance held on the cash pooling account is subject to certain restrictions; accordingly this balance has not been classified as cash and cash equivalents for the purposes of the cash flow statement.

In November 2013, the Group entered into a cash pooling arrangement with Barclays over the Group's cash-flows from the whole property portfolio in order to provide further security to Barclays but which provides the Group and the Company with working capital for its operations. The resulting cash pooling account is controlled by Barclays and a cash release mechanism is in place whereby cash is released by Barclays following review of the Group's working capital budget, which is updated quarterly.

13. Trade and other payables

 
                            Group    Company      Group    Company 
                             2017       2017       2016       2016 
                          GBP'000    GBP'000    GBP'000    GBP'000 
----------------------  ---------  ---------  ---------  --------- 
 Trade payables                90         19        277        128 
----------------------  ---------  ---------  ---------  --------- 
 Deferred income                4          -        241          - 
----------------------  ---------  ---------  ---------  --------- 
 Investment Manager's 
  fee payable                 596        596        627        627 
----------------------  ---------  ---------  ---------  --------- 
 VAT payable                    8          -          3          - 
----------------------  ---------  ---------  ---------  --------- 
 Accruals                     467         28        146         32 
----------------------  ---------  ---------  ---------  --------- 
 Total                      1,165        643      1,294        787 
 

Trade payables 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.

14. Bank borrowings

 
                                    Group    Company      Group    Company 
                                     2017       2017       2016       2016 
                                  GBP'000    GBP'000    GBP'000    GBP'000 
------------------------------  ---------  ---------  ---------  --------- 
 Current liabilities: 
  interest payable and 
  bank borrowings                  82,629          -      2,889          - 
------------------------------  ---------  ---------  ---------  --------- 
 Non-current liabilities:               -          -     77,282          - 
  bank borrowings 
------------------------------  ---------  ---------  ---------  --------- 
 Total liabilities                 82,629          -     80,171          - 
------------------------------  ---------  ---------  ---------  --------- 
 
 The borrowings are repayable 
  as follows: 
------------------------------  ---------  ---------  ---------  --------- 
 Interest payable                   5,645          -      2,889          - 
------------------------------  ---------  ---------  ---------  --------- 
 On demand or within one           76,984          -          -          - 
  year 
------------------------------  ---------  ---------  ---------  --------- 
 In the second to fifth                 -          -     77,282          - 
  years inclusive 
------------------------------  ---------  ---------  ---------  --------- 
 After five years                       -          -          -          - 
------------------------------  ---------  ---------  ---------  --------- 
                                   82,629          -     80,171          - 
 

During the year, the Group sold four investment properties at prices totalling GBP5.9 million (EUR6.7 million) with the net proceeds from these sales contributing to bank borrowings repayments of GBP5.8 million (EUR6.6 million).

At 31 December 2017, GBP77.0 million (EUR86.8 million) (2016: GBP77.3 million (EUR90.3 million)) was outstanding on all borrowings. Borrowings are secured over the shares in the Company's operating subsidiaries and mortgages over properties with a total value of GBP5.9 million (EUR6.7 million) (2016: GBP16.8 million (EUR19.7 million)).

The weighted average rate of interest at 31 December 2017 on all fixed rate loans is 5.17% (2016: 5.19%) and 9.62% (2016: 9.59%) on floating rate loans.

The repayment date of all borrowings is 31 October 2018.

Extension fees of 2% (per annum pro-rated) are charged on all borrowings from 10 February 2015: these are deferred to the new maturity date and will be payable to the extent that the Group has sufficient cash funds at that time. No additional fee was charged on the latest extensions to 31 October 2016 and to 31 October 2018. As at 31 December 2017, the Board considers it probable, based on cash flow forecasts, that there will be insufficient cash funds to settle this amount and hence this represents a contingent liability of EUR6.3 million (GBP5.6 million), which has not been recognised in these financial statements.

The table below sets out an analysis of net debt and the movements in net debt for the year ended 31 December 2017.

 
                                   Other assets                           Liabilities from 
                                                                        financing activities 
-------------------------  ---------------------------  ---------------------------------------------------  --------- 
                            Restricted cash       Cash   Borrowings due within 1     Borrowings due after 1      Total 
                                    GBP'000    GBP'000                      year                       year    GBP'000 
                                                                         GBP'000                    GBP'000 
-------------------------  ----------------  ---------  ------------------------  -------------------------  --------- 
 Net debt as at 1 January 
  2016                               10,054      1,309                  (91,311)                          -   (79,948) 
-------------------------  ----------------  ---------  ------------------------  -------------------------  --------- 
 Cash flows                         (7,412)        180                    30,343                          -     23,111 
-------------------------  ----------------  ---------  ------------------------  -------------------------  --------- 
 Non cash movements 
-------------------------  ----------------  ---------  ------------------------  -------------------------  --------- 
 Foreign exchange 
  adjustments                         1,255      (276)                  (13,793)                          -   (12,814) 
-------------------------  ----------------  ---------  ------------------------  -------------------------  --------- 
 Loan fee amortisation 
  and other costs                         -          -                     (276)                          -      (276) 
-------------------------  ----------------  ---------  ------------------------  -------------------------  --------- 
 Interest charge                          -          -                   (5,134)                          -    (5,134) 
-------------------------  ----------------  ---------  ------------------------  -------------------------  --------- 
 Transfer to borrowings 
  after 1 year                            -          -                    77,282                   (77,282)          - 
-------------------------  ----------------  ---------  ------------------------  -------------------------  --------- 
 Net debt as at 31 
  December 2016                       3,897      1,213                   (2,889)                   (77,282)   (75,061) 
-------------------------  ----------------  ---------  ------------------------  -------------------------  --------- 
 Cash flows                         (1,706)      (119)                        65                      5,781      4,021 
-------------------------  ----------------  ---------  ------------------------  -------------------------  --------- 
 Non cash movements 
-------------------------  ----------------  ---------  ------------------------  -------------------------  --------- 
 Foreign exchange 
  adjustments                           122      (306)                     (170)                    (2,838)    (3,192) 
-------------------------  ----------------  ---------  ------------------------  -------------------------  --------- 
 Loan fee amortisation 
  and other costs                         -          -                         -                       (60)       (60) 
-------------------------  ----------------  ---------  ------------------------  -------------------------  --------- 
 Interest charge                          -          -                   (5,236)                          -    (5,236) 
-------------------------  ----------------  ---------  ------------------------  -------------------------  --------- 
 Capitalised interest                     -          -                     2,585                    (2,585)          - 
-------------------------  ----------------  ---------  ------------------------  -------------------------  --------- 
 Transfer to borrowings 
  after 1 year                            -          -                  (76,984)                     76,984          - 
-------------------------  ----------------  ---------  ------------------------  -------------------------  --------- 
 Net debt as at 31 
  December 2017                       2,313        788                  (82,629)                          -   (79,528) 
-------------------------  ----------------  ---------  ------------------------  -------------------------  --------- 
 

15. Share capital

Authorised share capital

The Company's authorised share capital is unlimited.

Issued and fully paid

 
                                              Number of 
                                                 shares 
-----------------------------------------  ------------ 
 At 31 December 2015                        117,627,056 
-----------------------------------------  ------------ 
 Shares cancelled/issued during the year              - 
-----------------------------------------  ------------ 
 At 31 December 2016                        117,627,056 
-----------------------------------------  ------------ 
 Shares cancelled/issued during the year              - 
-----------------------------------------  ------------ 
 At 31 December 2017                        117,627,056 
 

The Company has one class of shares which carry no right to fixed income. All ordinary shares have nil par value.

16. Reserves

The movements in the reserves for the Group and the Company are shown above.

Special reserve

On 9 December 2005, the Royal Court of Guernsey confirmed the reduction of the Company's capital by way of cancellation of the amount standing to the credit of its share premium account on that date. The amount was transferred to the special reserve. The special reserve is a distributable reserve to be used for all purposes permitted under Guernsey company law, including the buyback of shares and payment of dividends.

Translation reserve

The translation reserve contains exchange differences arising on consolidation of the Group's overseas operations. These amounts may subsequently be reclassified to profit or loss.

Capital reserve

The capital reserve contains gains and losses on the disposal of investment properties, and increases and decreases in the fair value of the Group's investment properties and currency swap derivative financial instruments, together with expenses allocated to capital.

Revenue reserve

Any surplus arising from net profit after tax is taken to this reserve, which may be utilised for the buyback of shares and payment of dividends.

17. Events after the balance sheet date

Part of the sale's proceeds of the Ecija property in Spain were used to repay borrowings in January 2018 for GBP0.3 million (EUR0.3 million).

18. Related party transactions

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. Alpha Real Capital LLP is the Investment Manager to the Company under the terms of the Investment Manager Agreement and is thus considered a related party of the Company.

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

Following the disposal of the majority of the property portfolio, the Board has agreed, in line with the consensual sales programme established with Barclays, a monthly fee reflecting the need for the Investment Manager to maintain adequate resources to complete the disposal of the remaining properties and winding up of the Group. This fee is separately disclosed on the face of the statement of comprehensive income. The consensual sales programme requires 30% of fees earned by the Investment Manager to be deferred and only released when sales milestones have been achieved. The outstanding balance for Investment Manager's fees as at 31 December 2017 is GBP596,000 (31 December 2016: GBP627,000).

The Directors of the Company received fees for their services as detailed below.

 
 Directors               2017       2016 
  fees                GBP'000    GBP'000 
------------------  ---------  --------- 
 Dick Kingston**            -         15 
------------------  ---------  --------- 
 David Jeffreys            20         22 
------------------  ---------  --------- 
 Phillip Rose**             -         10 
------------------  ---------  --------- 
 David Rowlinson*           -         10 
------------------  ---------  --------- 
 Serena Tremlett 
  (Chairman)               20         20 
------------------  ---------  --------- 
 Total                     40         77 
 

*David Rowlinson is a director of Antler Investment Holdings Limited ("Antler") and the managing director of Liberation Management Limited, which is a trustee of the Rockmount Purpose Trust that indirectly is a partner of Alpha Real Capital LLP. As such he was considered to be in a position in which he was able to exercise significant influence over the Investment Manager. David Rowlinson resigned as Director of the Company with effective date 3 June 2016.

** Resigned with effective date 3 June 2016

Serena Tremlett is the Managing Director of Estera Administration (Guernsey) Limited ('EAGL'), the Company's administrator and secretary. EAGL was formerly Morgan Sharpe Administration Limited, which was purchased by Estera on 28 April 2017. Serena is a minority shareholder of EAGL's parent company. During the period the Company paid Estera fees of GBP48,000 (31 December 2016: GBP81,000).

During the year, in addition to the Directors' fees above, David Jeffreys and Serena Tremlett received GBP1,000 (2016: GBP1,750) and GBP6,500 (2016: GBP3,750) respectively for their position as Directors of Company's subsidiaries.

Directors' shareholdings in the Company are detailed in the Directors' and corporate governance report.

The following, being partners of the Investment Manager, hold or have an interest in the following shares in the Company at 31 December 2017:

 
                              2017           2016 
                         Number of      Number of 
                       shares held    shares held 
-------------------  -------------  ------------- 
 Rockmount 
  Ventures Limited 
  and ARRCO 
  Limited**             21,437,393     21,437,393 
-------------------  -------------  ------------- 
 P. Rose***              1,290,079      1,290,079 
-------------------  -------------  ------------- 
 B. Bauman                 544,809        544,809 
-------------------  -------------  ------------- 
 B. Frith                  229,078        229,078 
-------------------  -------------  ------------- 
 K. Devon-Lowe             108,650         24,650 
 

**Rockmount Ventures Limited is the parent company of ARRCO Limited. The interest attributed to the two corporate partners represents 21,437,393 shares held by a related party, Antler. As such these companies are considered to be in a position in which they are able to exercise significant influence over the Investment Manager.

***Phillip Rose is the CEO and a partner of the Investment Manager.

Alpha Global Property Securities Fund Pte. Ltd, a wholly owned subsidiary of ARC registered in Singapore, holds 9,390,800 (31 December 2016: 9,390,800) shares in Alpha Pyrenees Trust Limited.

Paul Cable, being the Investment Manager's Fund Manager responsible for the Company's investments, holds 84,918 (2016: 84,918) shares in the Company.

19. Financial instruments risk exposure and management

In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.

There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.

Principal financial instruments

The principal financial instruments used by the Group and Company, from which financial instrument risk arises, are as follows:

 
                                    Financial assets and liabilities 
                                              carrying value 
-----------------------------  ------------------------------------------ 
                                   Group    Company      Group    Company 
                                    2017       2017       2016       2016 
                                 GBP'000    GBP'000    GBP'000    GBP'000 
-----------------------------  ---------  ---------  ---------  --------- 
 Current financial 
  assets 
-----------------------------  ---------  ---------  ---------  --------- 
 Trade and other receivables 
  (excluding prepayments 
  and VAT)                            95          -        525          4 
-----------------------------  ---------  ---------  ---------  --------- 
 Restricted cash                   2,313          -      3,897          - 
-----------------------------  ---------  ---------  ---------  --------- 
 Cash and cash equivalents           788          3      1,213          1 
-----------------------------  ---------  ---------  ---------  --------- 
 Total current financial 
  assets                           3,196          3      5,635          5 
-----------------------------  ---------  ---------  ---------  --------- 
 
 Current financial 
  liabilities 
-----------------------------  ---------  ---------  ---------  --------- 
 Trade and other payables 
  (excluding deferred 
  income)                          1,161        643      1,053        787 
-----------------------------  ---------  ---------  ---------  --------- 
 Bank borrowings                  82,629          -      2,889          - 
-----------------------------  ---------  ---------  ---------  --------- 
 Liabilities directly 
  associated with investment 
  properties held for 
  sale                               190          -        257          - 
-----------------------------  ---------  ---------  ---------  --------- 
 Total current financial 
  liabilities                     83,980        643      4,199        787 
-----------------------------  ---------  ---------  ---------  --------- 
 
 Non-current financial 
  liabilities 
-----------------------------  ---------  ---------  ---------  --------- 
 Bank borrowings                       -          -     77,282          - 
-----------------------------  ---------  ---------  ---------  --------- 
 Total non-current                     -          -     77,282          - 
  financial liabilities 
-----------------------------  ---------  ---------  ---------  --------- 
 Total financial liabilities      83,980        643     81,481        787 
-----------------------------  ---------  ---------  ---------  --------- 
 

Net changes in realised and unrealised gains or losses on financial instruments can be summarised as follows:

 
                                    Group    Company      Group    Company 
                                     2017       2017       2016       2016 
                                  GBP'000    GBP'000    GBP'000    GBP'000 
-----------------------------  ----------  ---------  ---------  --------- 
 Net change in realised 
  gains or losses on 
  loans and receivables 
-----------------------------  ----------  ---------  ---------  --------- 
 Movement in impairment 
  of amounts receivable 
  from and investments 
  in subsidiary undertakings            -      1,095          -      1,208 
-----------------------------  ----------  ---------  ---------  --------- 
 Total                                  -      1,095          -      1,208 
 
 
                                   Group    Company      Group    Company 
                                    2017       2017       2016       2016 
                                 GBP'000    GBP'000    GBP'000    GBP'000 
-----------------------------  ---------  ---------  ---------  --------- 
 Bank interest income                  -          -          -          - 
-----------------------------  ---------  ---------  ---------  --------- 
 Interest on bank borrowings     (5,235)          -    (5,134)          - 
-----------------------------  ---------  ---------  ---------  --------- 
 Loan fee amortisation              (60)          -      (276)          - 
-----------------------------  ---------  ---------  ---------  --------- 
 Total interest expense          (5,295)          -    (5,410)          - 
-----------------------------  ---------  ---------  ---------  --------- 
 

General objectives, policies and processes

The Board has overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function.

The overall objective of the Board is to set polices that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. The above financial risk management policies apply equally to the Group and the Company. Further details regarding these policies are set out below.

Credit risk

Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the balance sheet date.

a) Group

The Group's credit risk principally arises from cash and cash equivalents as well as credit exposures with respect to tenants including other receivables. In the event of a default by an occupational tenant, the Group will suffer a rental shortfall and incur additional costs in maintaining, insuring and re-letting the property until it is re-let. General economic conditions may affect the financial stability of tenants and prospective tenants and/or demand for and value of real estate assets. A property advisor monitors the tenants in order to anticipate and minimise the impact of default by occupational tenants. Where possible, tenants' risk is mitigated through rental guarantees.

At year end, the Group only owns one vacant property so there are no tenants left in the portfolio (in 2016 Fitness 4 All was the largest tenant within the portfolio representing 27.0% of the annual contracted rent).

At 31 December 2017, trade and other receivables past due but not impaired amounted to nil (2016: GBP0.1 million).

The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Group's maximum exposure to credit risk without taking into account the value of rent deposits obtained. Details of the Group's receivables are summarised in note 11 of the financial statements.

The Group policy is to maintain its cash and cash equivalent balances with a reasonable diversity of banks. The Board monitors the placement of cash balances on an ongoing basis and has policies to limit the amount of credit exposure to any financial institution. As at 31 December 2017, the Group had spread its cash across four financial institutions and had placed circa 75% in one bank, this mainly representing cash held on the cash pooling account (note 12).

b) Company

The Company's credit risk principally arises from cash and cash equivalents and amounts receivable from subsidiaries. The Company follows the same Group policy with regards to diversification of banking arrangements. Amounts receivable from subsidiaries are of mainly a long term nature and the loans are monitored on a regular basis.

An impairment of GBP186.6 million (2016: GBP175.1 million) has been made against amounts receivable from subsidiary undertakings to reflect the current mark to market impact of the investment properties valuations, loss realised on investment properties disposals, which have arisen within the Group's subsidiaries (note 9) and the fact that Barclays has first charge over all investment properties held for sale.

 
                          2017       2016 
                         Total      Total 
                       GBP'000    GBP'000 
------------------- 
 Impairment at 
  1 January            175,147    146,923 
-------------------  ---------  --------- 
 Movement              (1,095)    (1,208) 
-------------------  ---------  --------- 
 Effect of foreign 
  exchange              12,547     29,432 
-------------------  ---------  --------- 
 Impairment at 
  31 December          186,599    175,147 
-------------------  ---------  --------- 
 

The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Company's maximum exposure to credit risk. Details of the Company's loans and receivables are summarised in notes 9 and 11 of the financial statements.

Liquidity risk

Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability, but can also increase the risk of losses. The Group and Company have developed procedures with the object of minimising such losses such as maintaining sufficient cash and other highly liquid current assets and by having in place an adequate amount of committed credit facilities. Cash and cash equivalents are placed with financial institutions on a short term basis reflecting the Group's and Company's desire to maintain a level of liquidity in order to enable timely payments to creditors.

The cash balance held on the cash pooling account is subject to certain restrictions; accordingly this balance has not been classified as cash and cash equivalents for the purposes of the cash flow statement (note 12).

The cash pooling account is controlled by Barclays and a cash release mechanism is in place whereby cash is released by Barclays following review of the Group's working capital budget, which is updated quarterly. This allows the Group to settle its liabilities for working capital requirements in a timely manner.

a) Group

The following table illustrates the contractual maturity analysis of the Group's financial liabilities based, where relevant, on interest rates and exchange rates prevailing at the balance sheet date.

 
  2017                                                           Within 1 year   1-2 years      Total   Carrying value 
                                                                       GBP'000     GBP'000    GBP'000          GBP'000 
--------------------------------------------------------------  --------------  ----------  ---------  --------------- 
 Trade and other payables (excluding deferred income)                    1,161           -      1,161            1,161 
--------------------------------------------------------------  --------------  ----------  ---------  --------------- 
 Liabilities directly associated with investment properties 
  held for sale                                                            190           -        190              190 
--------------------------------------------------------------  --------------  ----------  ---------  --------------- 
 Bank borrowings                                                        87,623           -     87,623           82,629 
--------------------------------------------------------------  --------------  ----------  ---------  --------------- 
                                                                        88,974           -     88,974           83,980 
--------------------------------------------------------------  --------------  ----------  ---------  --------------- 
 
 
  2016                                                           Within 1 year   1-2 years      Total   Carrying value 
                                                                       GBP'000     GBP'000    GBP'000          GBP'000 
--------------------------------------------------------------  --------------  ----------  ---------  --------------- 
 Trade and other payables (excluding deferred income)                    1,053           -      1,053            1,053 
--------------------------------------------------------------  --------------  ----------  ---------  --------------- 
 Liabilities directly associated with investment properties 
  held for sale                                                            257           -        257              257 
--------------------------------------------------------------  --------------  ----------  ---------  --------------- 
 Bank borrowings                                                         2,889      87,181     90,070           80,171 
--------------------------------------------------------------  --------------  ----------  ---------  --------------- 
                                                                         4,199      87,181     91,380           81,481 
--------------------------------------------------------------  --------------  ----------  ---------  --------------- 
 

Given the current economic environment and the maturity of the Group's bank borrowings on 31 October 2018 the Board will continue to seek the support of its lender for the sale of its remaining investment property with a view to winding up the Group in due course. The financial statements are therefore not prepared on a going concern basis.

b) Company

The Company only has trade payables and other payables which are payable within one year.

Market risk

a) Foreign exchange risk

The Group operates in Europe and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to Euros. Foreign exchange risk arises from future commercial transactions, recognised monetary assets and liabilities and net investments in foreign operations.

The Group's policy is, where possible, to allow Group entities to settle liabilities denominated in their functional currency (primarily Euros or Sterling) with the cash generated from their own operations in that currency.

As the property portfolio was acquired and mortgaged in Euros the Board considers it appropriate from a risk perspective to review currency exposure on a net assets basis. For illustrative purposes, therefore, the effect of a strengthening of the Euro by 5 cents would decrease Group net liabilities by GBP0.3 million (2016: decrease by GBP0.8 million). A weakening of the Euro by 5 cents would increase net liabilities by GBP0.3 million (2016: increase by GBP0.7 million).

As the Company impairs its large intercompany loan book to reflect the underlying net asset value of its Group companies, the overall net asset sensitivity of the Company to foreign currency movements is the same as the Group's above.

b) Cash flow and fair value interest rate risk

The Group's principal interest rate risk arises from borrowings.

The Group's cash flow is regularly monitored by the Group's management.

For the Group, an increase of 100 basis points in interest rates would result in an increased post-tax loss of GBP0.3 million (2016: GBP0.3 million). A decrease in 100 basis points in interest rates would result in a reduced post-tax loss for the period of GBP0.3 million (2016: GBP0.3 million).

For the Company, in line with prior year, an increase or decrease of 100 basis points in interest rates would not result in a significant change of post-tax loss.

The sensitivity analyses above are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated - for example, change in interest rate and change in market values.

c) Capital risk management

The Group's objectives when managing capital had been to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

As stated in note 2, the Group is not a going concern and the Board will continue to seek the support of its lender in an orderly realisation of its remaining one investment property in order to repay borrowings and with a view to winding up the Group in due course.

Consistent with others in the industry, the Board monitors capital on the basis of the gearing ratio in the currency in which properties and associated borrowings are held and takes action where appropriate.

The Company has no borrowings; all borrowings are by subsidiaries within the Group.

d) Fair values

The following methods and assumptions are used to estimate fair values:

-- Cash and short-term deposits, trade receivables, trade payables and other current liabilities approximate their carrying amounts due to the short-term maturities of these instruments.

-- The fair value of floating rate borrowings is calculated by discounting future cash flows using rates currently available for debt of similar terms and remaining maturities. The carrying value does not approximate fair value.

-- The fair value of fixed rate borrowings is estimated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. The carrying value does not approximate fair value.

-- The fair value of the floating rate and fixed rate borrowings approximates GBP7.9 million (note 20).

20. Fair value measurement

IFRS 13 requires disclosure of the fair value measurement of the Group's assets and liabilities, the related valuation techniques, the valuations' recurrence and the inputs used to assess and develop those measurements.

The Group discloses fair value measurements by level of the following fair value measurement hierarchy:

   --      Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). 

-- Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

-- Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

The level in the fair value hierarchy within which the asset or liability is categorised is determined on the basis of the lowest input that is significant to the fair value measurement. Assets and liabilities are classified in their entirety into one of the three levels.

Investment properties held for sale are valued on a recurring basis: half yearly.

The Group's valuers derive the fair value by applying the methodology and valuation guidelines as set out by the Royal Institution of Chartered Surveyors in the United Kingdom in accordance with IAS 40. This approach is based on discounting the future net income receivable from properties to arrive at the net present value of that future income stream. Future net income comprises the rent secured under existing leases, less any known or expected non-recoverable costs and the current market rent attributable to vacant units. The consideration basis for this calculation excludes the effects of any taxes on the net income. The discount factors used to calculate fair value are consistent with those used to value similar properties with comparable leases in each of the respective markets. A decrease in the net rental income or an increase in the discount rate will decrease the fair value of the investment property.

In December 2016, the Ivry property had been valued by the Directors at its selling price, this being the best approximation to its fair value at year end.

The following table shows an analysis of the fair values of assets and liabilities recognised in the balance sheet by level of the fair value hierarchy described above:

 
                    Assets and liabilities measured 
                              at fair value 
 --------------------------------------------------------------------- 
                                Level      Level      Level     Total 
                                   1          2         3 
                              ---------  ---------  --------  -------- 
 31 December 2017              GBP'000    GBP'000    GBP'000   GBP'000 
----------------------------  ---------  ---------  --------  -------- 
 Assets measured at 
  fair value 
----------------------------  ---------  ---------  --------  -------- 
 Investment properties 
  held for sale                       -          -     5,945     5,945 
----------------------------  ---------  ---------  --------  -------- 
 
 Liabilities for which 
  fair values are disclosed 
----------------------------  ---------  ---------  --------  -------- 
 Current 
----------------------------  ---------  ---------  --------  -------- 
 Bank borrowings (note 
  19 d))                              -          -   (7,919)   (7,919) 
----------------------------  ---------  ---------  --------  -------- 
 
 Total                                -          -   (1,974)   (1,974) 
----------------------------  ---------  ---------  --------  -------- 
 
 
                     Assets and liabilities measured 
                               at fair value 
 ----------------------------------------------------------------------- 
                                Level      Level      Level      Total 
                                   1          2          3 
                              ---------  ---------  ---------  --------- 
 31 December 2016              GBP'000    GBP'000    GBP'000    GBP'000 
----------------------------  ---------  ---------  ---------  --------- 
 Assets measured at 
  fair value 
----------------------------  ---------  ---------  ---------  --------- 
 Investment properties 
  held for sale                       -          -     16,824     16,824 
----------------------------  ---------  ---------  ---------  --------- 
 
 Liabilities for which 
  fair values are disclosed 
----------------------------  ---------  ---------  ---------  --------- 
 Current 
----------------------------  ---------  ---------  ---------  --------- 
 Bank borrowings (note 
  19 d))                              -          -    (2,889)    (2,889) 
----------------------------  ---------  ---------  ---------  --------- 
 Non current 
----------------------------  ---------  ---------  ---------  --------- 
 Bank borrowings (note 
  19 d))                              -          -   (18,179)   (18,179) 
----------------------------  ---------  ---------  ---------  --------- 
 
 Total                                -          -    (4,244)    (4,244) 
----------------------------  ---------  ---------  ---------  --------- 
 

The Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

There were no transfers between level 1 and level 2 fair value measurements.

Movements in level 3 of the fair value measurements, during the year ended 31 December 2017 can be summarised as follows:

 
                                      2017      2016 
-------------------------------- 
                                   GBP'000   GBP'000 
--------------------------------  --------  -------- 
 At 1 January                       16,824    39,283 
--------------------------------  --------  -------- 
 Subsequent capital expenditure 
  after acquisition                      -         - 
--------------------------------  --------  -------- 
 Disposals                         (4,892)  (18,496) 
--------------------------------  --------  -------- 
 Loss recognised in profit or 
  loss                             (5,267)   (1,395) 
--------------------------------  --------  -------- 
 Rent incentives movement            (230)     (280) 
--------------------------------  --------  -------- 
 Fair value adjustment               (966)   (7,268) 
--------------------------------  --------  -------- 
 Effect of foreign exchange            476     4,980 
--------------------------------  --------  -------- 
 At 31 December                      5,945    16,824 
--------------------------------  --------  -------- 
 

The fair value of investment properties is based on unobservable inputs and it is therefore disclosed as level 3. The following methods, assumptions and inputs were used to estimate fair values of investment properties:

 
 31 December 2017 
-------------------------------------------------------------------------------------------------------------------------- 
 Class of            Carrying              Area     Valuation technique            Significant      Range/value   Weighted 
 investment          amount /   (square meters)                            unobservable inputs                     average 
 properties        fair value 
                         '000 
--------------  -------------  ----------------  ----------------------  ---------------------  ---------------  --------- 
                                                                          Gross ERV per sqm p. 
 Europe              GBP5,945             6,340   Income capitalisation                     a.   EUR50 / EUR150       n/a* 
                   (EUR6,700) 
 ----------------------------  ----------------  ----------------------  ---------------------  ---------------  --------- 
                                                                             Net initial yield           (1.7)%        n/a 
 ----------------------------  ----------------  ----------------------  ---------------------  ---------------  --------- 
                                                                            Reversionary yield            13.6%        n/a 
 ----------------------------  ----------------  ----------------------  ---------------------  ---------------  --------- 
                                                                              Gross equivalent            10.0%        n/a 
                                                                                         yield 
 

* not applicable since only one property in portfolio

 
 31 December 2016 
-------------------------------------------------------------------------------------------------------------------------- 
 Class of            Carrying              Area     Valuation technique            Significant            Range   Weighted 
 investment          amount /   (square meters)                            unobservable inputs                     average 
 properties        fair value 
                         '000 
--------------  -------------  ----------------  ----------------------  ---------------------  ---------------  --------- 
                                                                          Gross ERV per sqm p. 
 Europe             GBP14,363            23,920   Income capitalisation                     a.   EUR36 / EUR150   EUR105.7 
                  (EUR16,790) 
--------------  -------------  ----------------  ----------------------  ---------------------  ---------------  --------- 
                                                                             Net initial yield    (8.1)% / 0.1%     (3.0)% 
--------------  -------------  ----------------  ----------------------  ---------------------  ---------------  --------- 
                                                                            Reversionary yield    12.2% / 14.8%      13.1% 
--------------  -------------  ----------------  ----------------------  ---------------------  ---------------  --------- 
                                                                              Gross equivalent 
                                                                                         yield    10.0% / 11.5%      10.6% 
--------------  -------------  ----------------  ----------------------  ---------------------  ---------------  --------- 
 
 Europe              GBP2,461             7,420           Selling price                      -                -          - 
                   (EUR2,877) 
 

The Directors assessed at the balance sheet date whether the Group's investment properties are being exploited according to their highest and best use and they are satisfied that this is the case.

Property risk

The majority of properties have been valued by an independent third party (see note 10) and the fair value has been arrived at on the basis of a sale between a willing buyer and willing seller. Should the Group be required to dispose of its investment properties not as a willing seller the sale proceeds could vary.

In 2016, one investment property was valued based upon the agreed selling price.

Liabilities for which fair value is disclosed

The fair value of the Group's borrowings has been determined by reference to what will be realised in an orderly wind up of the Group and hence the amount that will be repaid.

Company

The Company did not have any financial assets or financial liabilities at fair value through profit or loss.

Directors and Trust information

 
 Directors                Independent valuers    Legal advisors 
  Serena Tremlett          Knight Frank LLP       in Guernsey 
  (Chairman)               55 Baker Street        Carey Olsen 
  David Jeffreys           London W1U 8AN         PO Box 98 
                                                  Carey House 
                                                  Les Banques 
                                                  St Peter Port 
                                                  Guernsey GY1 4BZ 
 Registered office        Independent auditor    Legal advisors 
  Old Bank Chambers        BDO Limited            in the UK 
  La Grande Rue            Place du Pré,     Norton Rose 
  St Martin's              Rue du Pré        3 More London Riverside 
  Guernsey GY4 6RT         St Peter Port          London SE1 2AQ 
                           Guernsey GY1 3LL 
 Investment Manager       Tax advisors           Registrar 
  Alpha Real Capital       BDO LLP                Computershare Investor 
  LLP                      55 Baker Street        Services (Jersey) 
  Level 6, 338 Euston      London W1U 7EU         Limited 
  Road                     Deloitte LLP           Queensway House 
  London NW1 3BG           Hill House             Hilgrove Street 
                           1 Little New Street    St Helier 
                           London EC4A 3TR        Jersey JE1 1ES 
 Administrator and 
  secretary 
  Estera Administration 
  (Guernsey) Limited 
  (formerly Morgan 
  Sharpe 
  Administration 
  Limited) 
  Old Bank Chambers 
  La Grande Rue 
  St Martin's 
  Guernsey GY4 6RT 
 

Shareholder information

Share price

The Company's Ordinary Shares are listed on the London Stock Exchange.

Change of address

Communications with shareholders are mailed to the addresses held on the share register. In the event of a change of address or other amendment, please notify the Company's Registrar under the signature of the registered holder.

Investment Manager

The Company is advised by Alpha Real Capital LLP which is authorised and regulated by the Financial Conduct Authority in the United Kingdom.

Financial Calendar

 
 Financial reporting                       Reporting/Meeting dates 
----------------------------------------  ------------------------ 
 Annual results announcement                    9 March 2018 
----------------------------------------  ------------------------ 
 Annual report published                        29 March 2018 
----------------------------------------  ------------------------ 
 Annual General Meeting                         27 April 2018 
----------------------------------------  ------------------------ 
 First trading update statement (Qtr 1)          8 June 2018 
----------------------------------------  ------------------------ 
 Half year report                                10 Aug 2018 
----------------------------------------  ------------------------ 
 Second trading update statement (Qtr 3)         9 Nov 2018 
 

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR SSUFWAFASEDD

(END) Dow Jones Newswires

March 09, 2018 02:00 ET (07:00 GMT)

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